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Brady Corporation Reports Fiscal 2021 First Quarter Results

  • Income before income taxes and losses of unconsolidated affiliate increased by 1.6 percent to $42.2 million in the first quarter of fiscal 2021 compared to $41.6 million in the same quarter of the prior year.  
  • Diluted EPS was $0.64 in the first quarter of fiscal 2021 compared to $0.70 in the same quarter of the prior year. Diluted EPS in the first quarter of fiscal 2020 was positively 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.
  • Cash flow from operating activities was up 61.8 percent to $62.8 million in the first quarter of fiscal 2021 compared to $38.8 million in the same quarter of the prior year.
  • Sales for the quarter declined 3.4 percent. Organic sales declined 4.9 percent and the impact of foreign currency translation increased sales by 1.5 percent.

MILWAUKEE, Nov. 19, 2020 (GLOBE NEWSWIRE) --  Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2021 first quarter ended October 31, 2020.

Quarter Ended October 31, 2020 Financial Results:
Income before income taxes and losses of unconsolidated affiliate increased 1.6 percent to $42.2 million for the quarter ended October 31, 2020, compared to $41.6 million in the same quarter last year.  

Net income for the quarter ended October 31, 2020 declined 10.7 percent to $33.5 million compared to $37.5 million in the same quarter last year. Earnings per diluted Class A Nonvoting Common Share were $0.64 for the first quarter of fiscal 2021, compared to $0.70 in the same quarter last year. Net income and earnings per diluted Class A Nonvoting Common Share in the first quarter of last year were positively 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, 2020 declined 3.4 percent, which consisted of an organic sales decline of 4.9 percent and an increase of 1.5 percent from foreign currency translation. Sales for the quarter ended October 31, 2020 were $277.2 million compared to $286.9 million in the same quarter last year. By segment, sales declined 7.8 percent in Identification Solutions and increased 9.8 percent in Workplace Safety, which consisted of an organic sales decline of 8.4 percent in Identification Solutions and organic sales growth of 5.5 percent in Workplace Safety.

Commentary:
“We experienced a steady improvement in sales volumes as the global economy slowly healed throughout our first quarter. Sales improved in each of the last six months and we expanded our customer base in our Workplace Safety business by providing the high-quality products and the service levels that our customers have come to expect,” said Brady’s President and Chief Executive Officer, J. Michael Nauman. “This quarter, we saw demand in our Identification Solutions business improve while our Workplace Safety business had another strong quarter with organic sales increasing more than 5 percent. Growth in our Workplace Safety business was primarily driven by increased sales of safety and identification products directly related to the COVID-19 pandemic, including social distancing and personal hygiene signage. Even with the negative impacts from the COVID-19 pandemic, we increased pre-tax income this quarter as a result of our focus on executing sustainable efficiency gains. Our ongoing investments in sales, marketing, and new product development combined with our reduced cost structure position us to drive substantial profit improvements when demand increases in industrial end-markets.”

“Brady is financially strong and continues to generate significant cash flow. As of October 31, 2020, we had $256.3 million of cash on hand and no outstanding debt,” said Brady’s Chief Financial Officer, Aaron Pearce. “We generated $62.8 million of cash flow from operating activities this quarter, which was an increase of 61.8 percent compared to last year’s first quarter, and we returned $14.1 million to our shareholders in the form of dividends and share buybacks. We are generating operating cash flow in excess of net income and we have a balance sheet that allows us to make the investments necessary to drive future revenue and earnings growth while paying a solid dividend. Although we are seeing some reduction in demand for products specifically designed to help in the fight of COVID-19 and there are macro-economic challenges caused by additional government lockdowns that will impact our financial results for the quarter ending January 31, 2021, Brady’s strong balance sheet and cash generation position us extremely well for future financial success as industrial production improves.”

A webcast regarding Brady’s fiscal 2021 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, 2020, employed approximately 5,400 people in its worldwide businesses. Brady’s fiscal 2020 sales were approximately $1.08 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, ” “continue” 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: adverse impacts of the novel coronavirus (“COVID-19”) pandemic or other pandemics; decreased demand for our products; our ability to compete effectively or to successfully execute our strategy; Brady’s ability to develop technologically advanced products that meet customer demands; raw material and other cost increases; difficulties in protecting our websites, networks, and systems against security breaches; 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; potential write-offs of Brady’s goodwill and other intangible assets; changes in tax legislation and tax rates; 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, 2020.

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.

For More Information:
Investor contact: Ann Thornton 414-438-6887
Media contact: Kate Venne 414-358-5176


BRADY CORPORATION AND SUBSIDIARIES        
CONSOLIDATED STATEMENTS OF EARNINGS        
(Unaudited; Dollars in thousands, except per share data)        
         
  Three months ended October 31,  
    2020       2019    
Net sales $ 277,227     $ 286,947    
Cost of goods sold   141,799       145,542    
Gross margin   135,428       141,405    
Operating expenses:        
Research and development   10,203       10,967    
Selling, general and administrative   83,037       89,547    
Total operating expenses   93,240       100,514    
         
Operating income   42,188       40,891    
         
Other income (expense):        
Investment and other income   155       1,380    
Interest expense   (106 )     (701 )  
         
Income before income taxes and losses of unconsolidated affiliate   42,237       41,570    
         
Income tax expense   8,582       4,072    
         
Income before losses of unconsolidated affiliate   33,655       37,498    
Equity in losses of unconsolidated affiliate   (174 )        
         
Net income $ 33,481     $ 37,498    
         
Net income per Class A Nonvoting Common Share:        
Basic $ 0.64     $ 0.71    
Diluted $ 0.64     $ 0.70    
Dividends $ 0.22     $ 0.22    
         
Net income per Class B Voting Common Share:        
Basic $ 0.63     $ 0.69    
Diluted $ 0.62     $ 0.68    
Dividends $ 0.20     $ 0.20    
         
Weighted average common shares outstanding:        
Basic   52,021       53,143    
Diluted   52,292       53,736    
         


BRADY CORPORATION AND SUBSIDIARIES        
CONSOLIDATED BALANCE SHEETS        
(Dollars in thousands)        
         
  October 31, 2020   July 31, 2020  
  (Unaudited)      
ASSETS        
Current assets:        
Cash and cash equivalents $ 256,333     $ 217,643    
Accounts receivable, net of allowance for credit losses of $7,704 and $7,157, respectively   156,735       146,181    
Inventories   120,220       135,662    
Prepaid expenses and other current assets   11,489       9,962    
Total current assets   544,777       509,448    
Property, plant and equipment—net   119,960       115,068    
Goodwill   412,718       416,034    
Other intangible assets   20,910       22,334    
Deferred income taxes   8,976       8,845    
Operating lease assets   41,013       41,899    
Other assets   27,353       28,838    
Total $ 1,175,707     $ 1,142,466    
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable $ 62,907     $ 62,547    
Accrued compensation and benefits   55,410       41,546    
Taxes, other than income taxes   8,497       8,057    
Accrued income taxes   10,707       8,652    
Current operating lease liabilities   16,097       15,304    
Other current liabilities   51,343       49,782    
Total current liabilities   204,961       185,888    
Long-term operating lease liabilities   29,951       31,982    
Other liabilities   60,394       61,524    
Total liabilities   295,306       279,394    
Stockholders’ equity:        
Common stock:        
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 48,497,649 and 48,456,954 shares, respectively   513       513    
Class B voting common stock—Issued and outstanding, 3,538,628 shares   35       35    
Additional paid-in capital   332,121       331,761    
Retained earnings   726,546       704,456    
Treasury stock—2,763,838 and 2,804,533 shares, respectively, of Class A nonvoting common stock, at cost   (109,146 )     (107,216 )  
Accumulated other comprehensive loss   (69,668 )     (66,477 )  
Total stockholders’ equity   880,401       863,072    
Total $ 1,175,707     $ 1,142,466    
         



BRADY CORPORATION AND SUBSIDIARIES        
CONSOLIDATED STATEMENTS OF CASH FLOWS        
(Unaudited; Dollars in thousands)        
  Three months ended October 31,  
    2020       2019    
Operating activities:        
Net income $ 33,481     $ 37,498    
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization   5,635       5,634    
Stock-based compensation expense   3,574       3,618    
Deferred income taxes   (1,175 )     1,009    
Equity in losses of unconsolidated affiliate   174          
Other   (266 )     1,533    
Changes in operating assets and liabilities:        
Accounts receivable   (11,371 )     (4,362 )  
Inventories   14,758       249    
Prepaid expenses and other assets   (1,398 )     (1,404 )  
Accounts payable and accrued liabilities   17,363       (5,193 )  
Income taxes   2,063       266    
       Net cash provided by operating activities   62,838       38,848    
         
Investing activities:        
Purchases of property, plant and equipment   (9,321 )     (7,724 )  
Other   119       527    
      Net cash used in investing activities   (9,202 )     (7,197 )  
         
Financing activities:        
Payment of dividends   (11,391 )     (11,533 )  
Proceeds from exercise of stock options   160       3,411    
Payments for employee taxes withheld from stock-based awards   (2,617 )     (7,269 )  
Purchase of treasury stock   (2,720 )        
Other   17       65    
     Net cash used in financing activities   (16,551 )     (15,326 )  
         
Effect of exchange rate changes on cash   1,605       (304 )  
         
Net increase in cash and cash equivalents   38,690       16,021    
Cash and cash equivalents, beginning of period   217,643       279,072    
         
Cash and cash equivalents, end of period $ 256,333     $ 295,093    
         


BRADY CORPORATION AND SUBSIDIARIES        
SEGMENT INFORMATION        
(Unaudited; Dollars in thousands)        
         
  Three months ended October 31,  
    2020       2019    
NET SALES        
ID Solutions $ 198,192     $ 214,987    
Workplace Safety   79,035       71,960    
Total $ 277,227     $ 286,947    
         
SALES INFORMATION        
ID Solutions        
Organic   (8.4 )%     (0.2 )%  
Currency   0.6 %     (1.2 )%  
Total   (7.8 )%     (1.4 )%  
Workplace Safety        
Organic   5.5 %     (0.8 )%  
Currency   4.3 %     (3.4 )%  
Total   9.8 %     (4.2 )%  
Total Company        
Organic   (4.9 )%     (0.4 )%  
Currency   1.5 %     (1.7 )%  
Total   (3.4 )%     (2.1 )%  
         
SEGMENT PROFIT        
ID Solutions $ 40,279     $ 42,443    
Workplace Safety   7,988       5,157    
Total $ 48,267     $ 47,600    
SEGMENT PROFIT AS A PERCENT OF NET SALES        
ID Solutions   20.3 %     19.7 %  
Workplace Safety   10.1 %     7.2 %  
Total   17.4 %     16.6 %  
         
         
  Three months ended October 31,  
    2020       2019    
Total segment profit $ 48,267     $ 47,600    
Unallocated amounts:        
Administrative costs   (6,079 )     (6,709 )  
Investment and other income   155       1,380    
Interest expense   (106 )     (701 )  
Income before income taxes and losses of unconsolidated affiliate $ 42,237     $ 41,570    
         


Brady_Logo_Blue_Tall.jpg

Source: Brady Corporation

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