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

  • Income before income taxes increased 15.4 percent to $42.4 million in the second quarter of fiscal 2020 compared to $36.7 million in the same quarter of the prior year.
  • Diluted EPS increased 12.7 percent to $0.62 in the second quarter of fiscal 2020 compared to $0.55 in the same quarter of the prior year.
  • Sales for the quarter declined 2.0 percent.  Organic sales declined 1.2 percent and the impact of foreign currency translation decreased sales by 0.8 percent.
  • Diluted EPS guidance for the full year ending July 31, 2020 was increased to a range of $2.55 to $2.65 from the previous range of $2.50 to $2.60.

MILWAUKEE, Feb. 20, 2020 (GLOBE NEWSWIRE) -- Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2020 second quarter ended January 31, 2020.

Quarter Ended January 31, 2020 Financial Results:

Income before income taxes increased 15.4 percent to $42.4 million for the quarter ended January 31, 2020, compared to $36.7 million in the same quarter last year.

Net income for the quarter ended January 31, 2020 increased 14.8 percent to $33.6 million compared to $29.2 million in the same quarter last year.  Earnings per diluted Class A Nonvoting Common Share were $0.62 for the second quarter of fiscal 2020, compared to $0.55 in the same quarter last year.

Sales for the quarter ended January 31, 2020 declined 2.0 percent, which consisted of an organic sales decline of 1.2 percent and a decrease of 0.8 percent from foreign currency translation.  Sales for the quarter ended January 31, 2020 were $276.7 million compared to $282.4 million in the same quarter last year.  By segment, sales declined 1.8 percent in Identification Solutions and declined 2.6 percent in Workplace Safety, which consisted of organic sales declines of 1.3 percent in Identification Solutions and 1.0 percent in Workplace Safety.

Six-Month Period Ended January 31, 2020 Financial Results:

Income before income taxes increased 9.6 percent to $83.9 million for the six-month period ended January 31, 2020, compared to $76.6 million for the six-month period ended January 31, 2019.

Net income for the six-month period ended January 31, 2020 increased 18.7 percent to $71.1 million compared to $59.9 million in the same period last year.  Earnings per diluted Class A Nonvoting Common Share were $1.32 for the six-month period ended January 31, 2020 compared to $1.13 in the same six-month period last year.  Net income and earnings per share during the six-month period ended January 31, 2020 were impacted by a reduced income tax rate of 15.3 percent primarily due to a favorable tax audit settlement and tax benefits from equity-based compensation in the first quarter of fiscal 2020. 

Sales for the six-month period ended January 31, 2020 declined 2.1 percent, which consisted of an organic sales decline of 0.8 percent and a decrease of 1.3 percent from foreign currency translation.  Sales for the six-month period ended January 31, 2020 were $563.6 million compared to $575.6 million in the same period last year.  By segment, sales declined 1.6 percent in Identification Solutions and declined 3.4 percent in Workplace Safety, which consisted of organic sales declines of 0.7 percent in Identification Solutions and 0.9 percent in Workplace Safety.

Commentary:

“This quarter marks our 18th consecutive quarter of year-on-year pre-tax income growth,” said Brady’s President and Chief Executive Officer, J. Michael Nauman.  “Global demand for industrial products has declined in many markets which led to a modest decrease in organic sales this quarter.  Our investments in developing innovative new products and our relentless focus on executing sustainable efficiency gains throughout our manufacturing facilities and SG&A structure enabled Brady to once again post solid financial results in a challenging industrial economic environment.  Our investments in new products and our focus on efficiency gains has enabled us to deliver improved financial results over the last four years and positions us well for strong revenue and earnings growth as our end markets recover from the recent macro-economic weakness.”

“In the first half of this year we increased our gross profit margin, decreased selling, general and administrative expenses, increased earnings, and increased net cash provided by operating activities all while continuing to invest in our future.  This solid financial performance combined with a balance sheet that provides significant flexibility for future investments and to return funds to our shareholders, 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 $2.50 to $2.60 to a range of $2.55 to $2.65.  Included in this guidance is organic sales growth of approximately flat to slightly positive, a full-year income tax rate of approximately 20 percent, and depreciation and amortization of approximately $25 million.  The Company expects to continue capturing efficiency gains in its manufacturing facilities and in selling, general and administrative expenses.  Capital expenditures are expected to approximate $35 million during the year ending July 31, 2020.  This guidance is based upon foreign currency exchange rates as of January 31, 2020.

A webcast regarding Brady’s fiscal 2020 second 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 major public health issues and 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 January 31,   Six months ended January 31,  
  2020   2019   2020   2019  
Net sales $ 276,665     $ 282,426     $ 563,612     $ 575,622    
Cost of goods sold   137,538       142,616       283,080       289,273    
Gross margin   139,127       139,810       280,532       286,349    
Operating expenses:                
Research and development   10,517       11,074       21,484       22,400    
Selling, general and administrative   87,366       92,706       176,913       187,297    
Total operating expenses   97,883       103,780       198,397       209,697    
                 
Operating income   41,244       36,030       82,135       76,652    
                 
Other income (expense):                
Investment and other income   1,760       1,377       3,140       1,360    
Interest expense   (647 )     (717 )     (1,348 )     (1,429 )  
                 
Income before income taxes   42,357       36,690       83,927       76,583    
                 
Income tax expense   8,804       7,463       12,876       16,719    
                 
Net income $ 33,553     $ 29,227     $ 71,051     $ 59,864    
                 
Net income per Class A Nonvoting Common Share:                
Basic $ 0.63     $ 0.56     $ 1.33     $ 1.14    
Diluted $ 0.62     $ 0.55     $ 1.32     $ 1.13    
Dividends $ 0.22     $ 0.21       0.44     $ 0.43    
                 
Net income per Class B Voting Common Share:                
Basic $ 0.63     $ 0.56     $ 1.32     $ 1.13    
Diluted $ 0.62     $ 0.55     $ 1.31     $ 1.11    
Dividends $ 0.22     $ 0.21     $ 0.42     $ 0.41    
                 
Weighted average common shares outstanding:                
Basic   53,320       52,532       53,232       52,366    
Diluted   53,827       53,206       53,781       53,082    


BRADY CORPORATION AND SUBSIDIARIES      
CONSOLIDATED BALANCE SHEETS      
(Dollars in thousands)      
       
  January 31, 2020   July 31, 2019
  (Unaudited)    
ASSETS      
Current assets:      
Cash and cash equivalents $ 289,803     $ 279,072  
Accounts receivable—net   151,511       158,114  
Inventories   120,788       120,037  
Prepaid expenses and other current assets   18,889       16,056  
Total current assets   580,991       573,279  
Property, plant and equipment—net   112,782       110,048  
Goodwill   410,455       410,987  
Other intangible assets   33,580       36,123  
Deferred income taxes   7,120       7,298  
Operating lease assets   49,117        
Other assets   21,753       19,573  
Total $ 1,215,798     $ 1,157,308  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 51,233     $ 64,810  
Accrued compensation and benefits   38,561       62,509  
Taxes, other than income taxes   7,703       8,107  
Accrued income taxes   6,075       6,557  
Current operating lease liabilities   14,901        
Other current liabilities   48,590       49,796  
Current maturities on long-term debt   49,627       50,166  
Total current liabilities   216,690       241,945  
Long-term operating lease liabilities   36,993        
Other liabilities   62,191       64,589  
Total liabilities   315,874       306,534  
Stockholders’ equity:      
Common stock:      
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 49,810,101 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   329,263       329,969  
Retained earnings   685,758       637,843  
Treasury stock—1,451,386 and 1,802,646 shares, respectively, of Class A nonvoting common stock, at cost   (43,155 )     (46,332 )
Accumulated other comprehensive loss   (72,490 )     (71,254 )
Total stockholders’ equity   899,924       850,774  
Total $ 1,215,798     $ 1,157,308  


BRADY CORPORATION AND SUBSIDIARIES        
CONSOLIDATED STATEMENTS OF CASH FLOWS        
(Unaudited; Dollars in thousands)        
  Six months ended January 31,  
  2020   2019  
Operating activities:        
Net income $ 71,051     $ 59,864    
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization   11,672       11,909    
Stock-based compensation expense   5,384       7,805    
Deferred income taxes   1,272       4,423    
Other   1,664       1,279    
Changes in operating assets and liabilities:        
Accounts receivable   6,209       2,562    
Inventories   (1,311 )     (6,602 )  
Prepaid expenses and other assets   (2,621 )     (2,310 )  
Accounts payable and accrued liabilities   (39,777 )     (35,334 )  
Income taxes   (436 )     592    
Net cash provided by operating activities   53,107       44,188    
         
Investing activities:        
Purchases of property, plant and equipment   (13,100 )     (12,127 )  
Other   (3,406 )     (452 )  
Net cash used in investing activities   (16,506 )     (12,579 )  
         
Financing activities:        
Payment of dividends   (23,136 )     (22,263 )  
Proceeds from exercise of stock options   4,686       18,498    
Payments for employee taxes withheld from stock-based awards   (7,733 )     (3,362 )  
Proceeds from borrowing on credit facilities         5,737    
Repayment of borrowing on credit facilities         (5,688 )  
Other   134       (2,973 )  
Net cash used in financing activities   (26,049 )     (10,051 )  
         
Effect of exchange rate changes on cash   179       (776 )  
         
Net increase in cash and cash equivalents   10,731       20,782    
Cash and cash equivalents, beginning of period   279,072       181,427    
         
Cash and cash equivalents, end of period $ 289,803     $ 202,209    


BRADY CORPORATION AND SUBSIDIARIES                
SEGMENT INFORMATION                
(Unaudited; Dollars in thousands)                
                 
  Three months ended January 31,   Six months ended January 31,  
   2020     2019     2020     2019   
NET SALES                
ID Solutions $ 205,362     $ 209,205     $ 420,349     $ 427,304    
Workplace Safety   71,303       73,221       143,263       148,318    
Total $ 276,665     $ 282,426     $ 563,612     $ 575,622    
                 
SALES INFORMATION                
ID Solutions                
Organic   (1.3 )%     3.6 %     (0.7 )%     4.6 %  
Currency   (0.5 )%     (2.3 )%     (0.9 )%     (1.9 )%  
Total   (1.8 )%     1.3 %     (1.6 )%     2.7 %  
Workplace Safety                
Organic   (1.0 )%     (0.9 )%     (0.9 )%     0.6 %  
Currency   (1.6 )%     (3.3 )%     (2.5 )%     (2.9 )%  
Divestiture   %     (5.8 )%     %     (6.0 )%  
Total   (2.6 )%     (10.0 )%     (3.4 )%     (8.3 )%  
Total Company                
Organic   (1.2 )%     2.3 %     (0.8 )%     3.5 %  
Currency   (0.8 )%     (2.6 )%     (1.3 )%     (2.2 )%  
Divestiture   %     (1.6 )%     %     (1.7 )%  
Total   (2.0 )%     (1.9 )%     (2.1 )%     (0.4 )%  
                 
SEGMENT PROFIT                
ID Solutions $ 40,655     $ 37,857     $ 83,098     $ 79,419    
Workplace Safety   5,455       4,661       10,612       10,202    
Total $ 46,110     $ 42,518     $ 93,710     $ 89,621    
SEGMENT PROFIT AS A PERCENT OF NET SALES                
ID Solutions   19.8 %     18.1 %     19.8 %     18.6 %  
Workplace Safety   7.7 %     6.4 %     7.4 %     6.9 %  
Total   16.7 %     15.1 %     16.6 %     15.6 %  
                 
                 
  Three months ended January 31,   Six months ended January 31,  
   2020     2019     2020     2019   
Total segment profit $ 46,110     $ 42,518     $ 93,710     $ 89,621    
Unallocated amounts:                
Administrative costs   (4,866 )     (6,488 )     (11,575 )     (12,969 )  
Investment and other income   1,760       1,377       3,140       1,360    
Interest expense   (647 )     (717 )     (1,348 )     (1,429 )  
Income before income taxes $ 42,357     $ 36,690     $ 83,927     $ 76,583    

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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