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Brady Corporation

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Brady Corporation Reports Fiscal 2020 First Quarter Results and Increases its Fiscal 2020 EPS Guidance

  • Income before income taxes increased 4.2 percent to $41.6 million in the first quarter of fiscal 2020 compared to $39.9 million in the same quarter of the prior year.
  • Diluted EPS increased 20.7 percent to $0.70 in the first quarter of fiscal 2020 compared to $0.58 in the same quarter of the prior year. Diluted EPS in the first quarter of fiscal 2020 was impacted by a reduced income tax rate of 9.8 percent primarily due to a favorable tax audit settlement and tax benefits from equity-based compensation.
  • Sales for the quarter decreased 2.1 percent. Organic sales decreased 0.4 percent and the impact of foreign currency translation decreased sales by 1.7 percent.
  • Diluted EPS guidance for the full year ending July 31, 2020 was increased to a range of $2.50 to $2.60 from the previous range of $2.45 to $2.55.

MILWAUKEE, Nov. 21, 2019 (GLOBE NEWSWIRE) -- Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2020 first quarter ended October 31, 2019.

Quarter Ended October 31, 2019 Financial Results:

Income before income taxes increased 4.2 percent to $41.6 million for the quarter ended October 31, 2019, compared to $39.9 million in the same quarter last year.

Net income for the quarter ended October 31, 2019 increased 22.4 percent to $37.5 million compared to $30.6 million in the same quarter last year. Earnings per diluted Class A Nonvoting Common Share were $0.70 for the first quarter of fiscal 2020, compared to $0.58 in the same quarter last year. Net income and earnings per diluted Class A Nonvoting Common Share were impacted by a reduced income tax rate of 9.8 percent primarily due to a favorable tax audit settlement and tax benefits from equity-based compensation.

Sales for the quarter ended October 31, 2019 decreased 2.1 percent, which consisted of an organic sales decline of 0.4 percent and a decrease of 1.7 percent from foreign currency translation. Sales for the quarter ended October 31, 2019 were $286.9 million compared to $293.2 million in the same quarter last year. By segment, sales decreased 1.4 percent in Identification Solutions and decreased 4.2 percent in Workplace Safety, which consisted of organic sales declines of 0.2 percent in Identification Solutions and 0.8 percent in Workplace Safety.

Commentary:

“This quarter marks our 17th consecutive quarter of year-on-year pre-tax earnings growth. Our investment in innovative new products to provide increased value to our customers while executing efficiencies throughout our manufacturing facilities and SG&A structure continue to drive our improved financial results,” said Brady’s President and Chief Executive Officer, J. Michael Nauman. “We see signs of a weakening industrial economic environment, which makes our commitment to the execution of sustainable efficiency gains throughout our businesses essential this fiscal year. Our priorities for fiscal 2020 are consistent with what has allowed us to deliver improved financial results the last four years, which we believe position us well for strong revenue and earnings growth as our end markets recover from the recent macro-economic weakness.” 

“Cash provided by operating activities was $38.8 million this quarter and we finished in a net cash position of nearly $245 million at October 31, 2019, an increase of $107 million since October 31, 2018. Our balance sheet continues to provide significant flexibility for future investment and to return funds to our shareholders, which puts Brady in a strong financial position,” said Brady’s Chief Financial Officer, Aaron Pearce.

Fiscal 2020 Guidance:

The Company is increasing its full year fiscal 2020 earnings per diluted Class A Nonvoting Common Share guidance from its previous range of $2.45 to $2.55 to a range of $2.50 to $2.60 due to a reduction in its income tax rate. Included in this guidance is organic sales growth of approximately 1.5 to 2.5 percent, a full-year income tax rate of approximately 20 percent, and depreciation and amortization of approximately $25 million. The Company expects to achieve efficiency gains in its manufacturing facilities and in selling, general and administrative expenses. Capital expenditures are expected to be approximately $35 million during the year ending July 31, 2020. This guidance is based upon foreign currency exchange rates as of October 31, 2019.

A webcast regarding Brady’s fiscal 2020 first quarter financial results will be available at www.bradycorp.com/investors beginning at 9:30 a.m. central time today.

Brady Corporation is an international manufacturer and marketer of complete solutions that identify and protect people, products and places. Brady’s products help customers increase safety, security, productivity and performance and include high-performance labels, signs, safety devices, printing systems and software. Founded in 1914, the Company has a diverse customer base in electronics, telecommunications, manufacturing, electrical, construction, medical, aerospace and a variety of other industries. Brady is headquartered in Milwaukee, Wisconsin and as of July 31, 2019, employed approximately 6,100 people in its worldwide businesses. Brady’s fiscal 2019 sales were approximately $1.16 billion. Brady stock trades on the New York Stock Exchange under the symbol BRC. More information is available on the Internet at www.bradycorp.com.

In this news release, statements that are not reported financial results or other historic information are “forward-looking statements.” These forward-looking statements relate to, among other things, the Company's future financial position, business strategy, targets, projected sales, costs, earnings, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations.

The use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “project” or “plan” or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements by their nature address matters that are, to different degrees, uncertain and are subject to risks, assumptions, and other factors, some of which are beyond Brady’s control, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For Brady, uncertainties arise from: our ability to compete effectively or to successfully execute our strategy; Brady’s ability to develop technologically advanced products that meet customer demands; difficulties in protecting our websites, networks, and systems against security breaches; decreased demand for our products; raw material and other cost increases; extensive regulations by U.S. and non-U.S. governmental and self-regulatory entities; risks associated with the loss of key employees; divestitures and contingent liabilities from divestitures; Brady’s ability to properly identify, integrate, and grow acquired companies; litigation, including product liability claims; foreign currency fluctuations; the impact of the Tax Reform Act and any other changes in tax legislation and tax rates; potential write-offs of Brady’s substantial intangible assets; differing interests of voting and non-voting shareholders; numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive, and regulatory nature contained from time to time in Brady’s U.S. Securities and Exchange Commission filings, including, but not limited to, those factors listed in the “Risk Factors” section within Item 1A of Part I of Brady’s Form 10-K for the year ended July 31, 2019.

These uncertainties may cause Brady's actual future results to be materially different than those expressed in its forward-looking statements. Brady does not undertake to update its forward-looking statements except as required by law.

       
BRADY CORPORATION AND SUBSIDIARIES      
CONSOLIDATED STATEMENTS OF EARNINGS      
(Unaudited; Dollars in thousands, except per share data)      
       
  Three months ended October 31,
    2019       2018  
Net sales $ 286,947     $ 293,196  
Cost of goods sold   145,542       146,657  
Gross margin   141,405       146,539  
Operating expenses:      
Research and development   10,967       11,326  
Selling, general and administrative   89,547       94,591  
Total operating expenses   100,514       105,917  
       
Operating income   40,891       40,622  
       
Other income (expense):      
Investment and other income (expense)   1,380       (17 )
Interest expense   (701 )     (712 )
       
Income before income taxes   41,570       39,893  
       
Income tax expense   4,072       9,256  
       
Net income $ 37,498     $ 30,637  
       
Net income per Class A Nonvoting Common Share:      
Basic $ 0.71     $ 0.59  
Diluted $ 0.70     $ 0.58  
Dividends $ 0.22     $ 0.21  
       
Net income per Class B Voting Common Share:      
Basic $ 0.69     $ 0.57  
Diluted $ 0.68     $ 0.56  
Dividends $ 0.20     $ 0.20  
       
Weighted average common shares outstanding:      
Basic   53,143       52,201  
Diluted   53,736       52,958  


BRADY CORPORATION AND SUBSIDIARIES      
CONSOLIDATED BALANCE SHEETS      
(Dollars in thousands)      
       
  October 31, 2019   July 31, 2019
  (Unaudited)    
ASSETS      
Current assets:      
Cash and cash equivalents $ 295,093     $ 279,072  
Accounts receivable—net   162,561       158,114  
Inventories   119,612       120,037  
Prepaid expenses and other current assets   16,642       16,056  
Total current assets   593,908       573,279  
Property, plant and equipment—net   112,565       110,048  
Goodwill   411,328       410,987  
Other intangible assets   34,860       36,123  
Deferred income taxes   7,447       7,298  
Operating lease assets   52,233       —  
Other assets   18,881       19,573  
Total $ 1,231,222     $ 1,157,308  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 59,385     $ 64,810  
Accrued compensation and benefits   63,794       62,509  
Taxes, other than income taxes   8,885       8,107  
Accrued income taxes   6,790       6,557  
Current operating lease liabilities   14,857       —  
Other current liabilities   52,092       49,796  
Current maturities on long-term debt   50,144       50,166  
Total current liabilities   255,947       241,945  
Long-term operating lease liabilities   40,124       —  
Other liabilities   58,616       64,589  
Total liabilities   354,687       306,534  
Stockholders’ equity:      
Common stock:      
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 49,764,799 and 49,458,841 shares, respectively   513       513  
Class B voting common stock—Issued and outstanding, 3,538,628 shares   35       35  
Additional paid-in capital   327,241       329,969  
Retained earnings   663,808       637,843  
Treasury stock—1,496,688 and 1,802,646 shares, respectively, of Class A nonvoting common stock, at cost   (43,779 )     (46,332 )
Accumulated other comprehensive loss   (71,283 )     (71,254 )
Total stockholders’ equity   876,535       850,774  
Total $ 1,231,222     $ 1,157,308  


BRADY CORPORATION AND SUBSIDIARIES      
CONSOLIDATED STATEMENTS OF CASH FLOWS      
(Unaudited; Dollars in thousands)      
  Three months ended October 31,
    2019       2018  
Operating activities:      
Net income $ 37,498     $ 30,637  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization   5,634       5,960  
Non-cash portion of stock-based compensation expense   3,618       4,965  
Deferred income taxes   1,009       2,164  
Other   1,533       218  
Changes in operating assets and liabilities:      
Accounts receivable   (4,362 )     (6,709 )
Inventories   249       (3,125 )
Prepaid expenses and other assets   (1,404 )     (2,197 )
Accounts payable and other liabilities   (5,193 )     (14,288 )
Income taxes   266       1,193  
Net cash provided by operating activities   38,848       18,818  
       
Investing activities:      
Purchases of property, plant and equipment   (7,724 )     (6,009 )
Other   527       337  
Net cash used in investing activities   (7,197 )     (5,672 )
       
Financing activities:      
Payment of dividends   (11,533 )     (11,096 )
Proceeds from exercise of stock options   3,411       13,001  
Payments for employee taxes withheld from stock-based awards   (7,269 )     (2,937 )
Proceeds from borrowing on credit facilities   —       5,737  
Repayment of borrowing on credit facilities   —       (2,269 )
Other   65       (1,772 )
Net cash (used in) provided by financing activities   (15,326 )     664  
       
Effect of exchange rate changes on cash   (304 )     (3,061 )
       
Net increase in cash and cash equivalents   16,021       10,749  
Cash and cash equivalents, beginning of period   279,072       181,427  
       
Cash and cash equivalents, end of period $ 295,093     $ 192,176  


BRADY CORPORATION AND SUBSIDIARIES      
SEGMENT INFORMATION      
(Unaudited; Dollars in thousands)      
       
  Three months ended October 31,
    2019       2018  
NET SALES      
ID Solutions $ 214,987     $ 218,100  
Workplace Safety   71,960       75,096  
Total $ 286,947     $ 293,196  
       
SALES INFORMATION      
ID Solutions      
Organic   (0.2 )%     5.7 %
Currency   (1.2 )%     (1.7 )%
Total   (1.4 )%     4.0 %
Workplace Safety      
Organic   (0.8 )%     2.2 %
Currency   (3.4 )%     (2.6 )%
Divestiture   — %     (6.2 )%
Total   (4.2 )%     (6.6 )%
Total Company      
Organic   (0.4 )%     4.7 %
Currency   (1.7 )%     (2.0 )%
Divestiture   — %     (1.7 )%
Total   (2.1 )%     1.0 %
       
SEGMENT PROFIT      
ID Solutions $ 42,443     $ 41,562  
Workplace Safety   5,157       5,541  
Total $ 47,600     $ 47,103  
SEGMENT PROFIT AS A PERCENT OF NET SALES      
ID Solutions   19.7 %     19.1 %
Workplace Safety   7.2 %     7.4 %
Total   16.6 %     16.1 %
       
       
  Three months ended October 31,
    2019       2018  
Total segment profit $ 47,600     $ 47,103  
Unallocated amounts:      
Administrative costs   (6,709 )     (6,481 )
Investment and other income (expense)   1,380       (17 )
Interest expense   (701 )     (712 )
Income before income taxes $ 41,570     $ 39,893  
       

 

For More Information:

Investor contact:
Ann Thornton
414-438-6887

Media contact:
Kate Venne
414-358-5176

Brady_Logo_Blue_Tall.jpg

Source: Brady Corporation

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