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Brady Corporation

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Brady Corporation Reports Fiscal 2021 Second Quarter Results and Announces its Fiscal 2021 EPS Guidance

  • Income before income taxes and losses of unconsolidated affiliate was $39.4 million in the second quarter of fiscal 2021 compared to $42.4 million in the same quarter of the prior year.
  • Diluted EPS was $0.59 in the second quarter of fiscal 2021 compared to $0.62 in the same quarter of the prior year.
  • Sales for the quarter declined 3.9 percent. Organic sales declined 6.3 percent and the impact of foreign currency translation increased sales by 2.4 percent.
  • Net cash provided by operating activities was $36.1 million in the second quarter of fiscal 2021 compared to $14.3 million in the second quarter of the prior year.
  • Diluted EPS guidance for the full year ending July 31, 2021 announced at a range of $2.48 to $2.58, which equates to EPS guidance for the second half of fiscal 2021 of $1.25 to $1.35.

MILWAUKEE, Feb. 18, 2021 (GLOBE NEWSWIRE) -- Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2021 second quarter ended January 31, 2021.

Quarter Ended January 31, 2021 Financial Results:

Income before income taxes and losses of unconsolidated affiliate decreased 7.0 percent to $39.4 million for the quarter ended January 31, 2021, compared to $42.4 million in the same quarter last year.  

Net income for the quarter ended January 31, 2021 declined 8.0 percent to $30.9 million compared to $33.6 million in the same quarter last year. Earnings per diluted Class A Nonvoting Common Share were $0.59 for the second quarter of fiscal 2021, compared to $0.62 in the same quarter last year.

Sales for the quarter ended January 31, 2021 declined 3.9 percent, which consisted of an organic sales decline of 6.3 percent and an increase of 2.4 percent from foreign currency translation. Sales for the quarter ended January 31, 2021 were $265.8 million compared to $276.7 million in the same quarter last year. By segment, sales declined 5.4 percent in Identification Solutions and increased 0.4 percent in Workplace Safety, which consisted of an organic sales decline of 6.9 percent in Identification Solutions and an organic sales decline of 4.8 percent in Workplace Safety.

Six-Month Period Ended January 31, 2021 Financial Results:

Income before income taxes and losses of unconsolidated affiliate decreased 2.7 percent to $81.6 million for the six-month period ended January 31, 2021, compared to $83.9 million for the same period last year.

Net income for the six-month period ended January 31, 2021 declined 9.4 percent to $64.3 million compared to $71.1 million for the same period last year. Earnings per diluted Class A Nonvoting Common Share were $1.23 for the six-month period ended January 31, 2021, compared to $1.32 for the same period last year. Net income and earnings per diluted Class A Nonvoting Common Share for 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.

Sales for the six-month period ended January 31, 2021 declined 3.6 percent, which consisted of an organic sales decline of 5.6 percent and an increase of 2.0 percent from foreign currency translation. Sales for the six months ended January 31, 2021 were $543.1 million compared to $563.6 million in the same period last year. By segment, sales declined 6.6 percent in Identification Solutions and increased 5.2 percent in Workplace Safety, which consisted of an organic sales decline of 7.6 percent in Identification Solutions and organic sales growth of 0.4 percent in Workplace Safety.

Commentary:

“Our operations are running globally as we continue to do our part to supply products to first responders, healthcare providers, transportation, food processing and many other critical industries,” said Brady’s President and Chief Executive Officer, J. Michael Nauman. “Our outlook has improved and to supplement organic sales growth, we are investing in sales, marketing and new product development that will help accelerate growth in the back half of this fiscal year and into the future.   We are also actively investigating acquisitions that complement our strategic growth initiatives.   Brady is in a strong financial position and we are using this strong financial position to set ourselves up for strong growth as we exit from the pandemic.”

“Brady continues to generate strong cash flow and has a very strong balance sheet. As of January 31, 2021, we had $277.6 million of cash on hand and no outstanding debt,” said Brady’s Chief Financial Officer, Aaron Pearce. “We generated $36.1 million of cash flow from operating activities this quarter, which was an increase of 153 percent compared to last year’s second quarter. Positively impacting our cash flow this quarter were benefits from improved working capital management and a reduction in incentive-based compensation payments when compared to the second quarter of last year. This quarter, we also returned $12.3 million to our shareholders in the form of dividends and share buybacks. Although the economy is still challenged, we do expect the general trend of improving economic conditions to continue over the next several quarters. Regardless of what happens with the macro economy, Brady’s strong balance sheet and cash generation position us well for future financial success.”

Fiscal 2021 Guidance:

The Company expects earnings per diluted Class A Nonvoting Common Share to range from $2.48 to $2.58 for the full fiscal year ending July 31, 2021. This equates to diluted earnings per share in the range of $1.25 to $1.35 in the second half of the fiscal year ending July 31, 2021. The Company also expects organic sales growth to be in the mid-single digits in the second half of fiscal 2021. This guidance is based on foreign currency exchange rates as of January 31, 2021 and assumes a continued economic recovery.

A webcast regarding Brady’s fiscal 2021 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, 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.bradyid.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 and subsequent Form 10-Q filings.

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 INCOME                
(Unaudited; Dollars in thousands, except per share data)                
                 
  Three months ended January 31,   Six months ended January 31,  
    2021       2020       2021       2020    
Net sales $ 265,838     $ 276,665     $ 543,065     $ 563,612    
Cost of goods sold   136,316       137,538       278,115       283,080    
Gross margin   129,522       139,127       264,950       280,532    
Operating expenses:                
Research and development   9,876       10,517       20,079       21,484    
Selling, general and administrative   82,234       87,366       165,271       176,913    
Total operating expenses   92,110       97,883       185,350       198,397    
                 
Operating income   37,412       41,244       79,600       82,135    
                 
Other income (expense):                
Investment and other income   2,036       1,760       2,191       3,140    
Interest expense   (51 )     (647 )     (157 )     (1,348 )  
                 
Income before income taxes and losses of unconsolidated affiliate   39,397       42,357       81,634       83,927    
                 
Income tax expense   8,206       8,804       16,788       12,876    
                 
Income before losses of unconsolidated affiliate   31,191       33,553       64,846       71,051    
Equity in losses of unconsolidated affiliate   (331 )     —       (505 )     —    
                 
Net income $ 30,860     $ 33,553     $ 64,341     $ 71,051    
                 
Net income per Class A Nonvoting Common Share:                
Basic $ 0.59     $ 0.63     $ 1.24     $ 1.33    
Diluted $ 0.59     $ 0.62     $ 1.23     $ 1.32    
Dividends $ 0.22     $ 0.22     $ 0.44     $ 0.44    
                 
Net income per Class B Voting Common Share:                
Basic $ 0.59     $ 0.63     $ 1.22     $ 1.32    
Diluted $ 0.59     $ 0.62     $ 1.21     $ 1.31    
Dividends $ 0.22     $ 0.22     $ 0.42     $ 0.42    
                 
Weighted average common shares outstanding:                
Basic   52,018       53,320       52,020       53,232    
Diluted   52,282       53,827       52,288       53,781    
                 


BRADY CORPORATION AND SUBSIDIARIES      
CONSOLIDATED BALANCE SHEETS      
(Dollars in thousands)      
       
  January 31, 2021   July 31, 2020
  (Unaudited)    
ASSETS      
Current assets:      
Cash and cash equivalents $ 277,588     $ 217,643  
Accounts receivable, net of allowance for credit losses of $7,450 and $7,157, respectively   154,052       146,181  
Inventories   122,922       135,662  
Prepaid expenses and other current assets   12,774       9,962  
Total current assets   567,336       509,448  
Property, plant and equipment—net   122,088       115,068  
Goodwill   420,726       416,034  
Other intangible assets   19,809       22,334  
Deferred income taxes   8,261       8,845  
Operating lease assets   38,849       41,899  
Other assets   30,813       28,838  
Total $ 1,207,882     $ 1,142,466  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 67,483     $ 62,547  
Accrued compensation and benefits   52,098       41,546  
Taxes, other than income taxes   8,518       8,057  
Accrued income taxes   9,393       8,652  
Current operating lease liabilities   16,534       15,304  
Other current liabilities   47,518       49,782  
Total current liabilities   201,544       185,888  
Long-term operating lease liabilities   27,134       31,982  
Other liabilities   59,869       61,524  
Total liabilities   288,547       279,394  
Stockholders’ equity:      
Common stock:      
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 48,486,758 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   334,077       331,761  
Retained earnings   745,960       704,456  
Treasury stock—2,774,729 and 2,804,533 shares, respectively, of Class A nonvoting common stock, at cost   (109,789 )     (107,216 )
Accumulated other comprehensive loss   (51,461 )     (66,477 )
Total stockholders’ equity   919,335       863,072  
Total $ 1,207,882     $ 1,142,466  
       


BRADY CORPORATION AND SUBSIDIARIES        
CONSOLIDATED STATEMENTS OF CASH FLOWS        
(Unaudited; Dollars in thousands)        
  Six months ended January 31,  
    2021       2020    
Operating activities:        
Net income $ 64,341     $ 71,051    
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization   11,421       11,672    
Stock-based compensation expense   5,471       5,384    
Deferred income taxes   (3,866 )     1,272    
Equity in losses of unconsolidated affiliate   505       —    
Other   121       1,664    
Changes in operating assets and liabilities:        
Accounts receivable   (4,157 )     6,209    
Inventories   15,018       (1,311 )  
Prepaid expenses and other assets   (2,436 )     (2,621 )  
Accounts payable and accrued liabilities   11,990       (39,777 )  
Income taxes   481       (436 )  
       Net cash provided by operating activities   98,889       53,107    
         
Investing activities:        
Purchases of property, plant and equipment   (14,511 )     (13,100 )  
Other   (1,881 )     (3,406 )  
      Net cash used in investing activities   (16,392 )     (16,506 )  
         
Financing activities:        
Payment of dividends   (22,837 )     (23,136 )  
Proceeds from exercise of stock options   471       4,686    
Payments for employee taxes withheld from stock-based awards   (2,638 )     (7,733 )  
Purchase of treasury stock   (3,593 )     —    
Other   (231 )     134    
     Net cash used in financing activities   (28,828 )     (26,049 )  
         
Effect of exchange rate changes on cash   6,276       179    
         
Net increase in cash and cash equivalents   59,945       10,731    
Cash and cash equivalents, beginning of period   217,643       279,072    
         
Cash and cash equivalents, end of period $ 277,588     $ 289,803    
         


BRADY CORPORATION AND SUBSIDIARIES                
SEGMENT INFORMATION                
(Unaudited; Dollars in thousands)                
                 
  Three months ended January 31,   Six months ended January 31,  
    2021       2020       2021       2020    
NET SALES                
ID Solutions $ 194,227     $ 205,362     $ 392,419     $ 420,349    
Workplace Safety   71,611       71,303       150,646       143,263    
Total $ 265,838     $ 276,665     $ 543,065     $ 563,612    
                 
SALES INFORMATION                
ID Solutions                
Organic   (6.9 )%     (1.3 )%     (7.6 )%     (0.7 )%  
Currency   1.5 %     (0.5 )%     1.0 %     (0.9 )%  
Total   (5.4 )%     (1.8 )%     (6.6 )%     (1.6 )%  
Workplace Safety                
Organic   (4.8 )%     (1.0 )%     0.4 %     (0.9 )%  
Currency   5.2 %     (1.6 )%     4.8 %     (2.5 )%  
Total   0.4 %     (2.6 )%     5.2 %     (3.4 )%  
Total Company                
Organic   (6.3 )%     (1.2 )%     (5.6 )%     (0.8 )%  
Currency   2.4 %     (0.8 )%     2.0 %     (1.3 )%  
Total   (3.9 )%     (2.0 )%     (3.6 )%     (2.1 )%  
                 
SEGMENT PROFIT                
ID Solutions $ 39,000     $ 40,655     $ 79,279     $ 83,098    
Workplace Safety   3,463       5,455       11,451       10,612    
Total $ 42,463     $ 46,110     $ 90,730     $ 93,710    
SEGMENT PROFIT AS A PERCENT OF NET SALES                
ID Solutions   20.1 %     19.8 %     20.2 %     19.8 %  
Workplace Safety   4.8 %     7.7 %     7.6 %     7.4 %  
Total   16.0 %     16.7 %     16.7 %     16.6 %  
                 
                 
  Three months ended January 31,   Six months ended January 31,  
    2021       2020       2021       2020    
Total segment profit $ 42,463     $ 46,110     $ 90,730     $ 93,710    
Unallocated amounts:                
Administrative costs   (5,051 )     (4,866 )     (11,130 )     (11,575 )  
Investment and other income   2,036       1,760       2,191       3,140    
Interest expense   (51 )     (647 )     (157 )     (1,348 )  
Income before income taxes and losses of unconsolidated affiliate $ 39,397     $ 42,357     $ 81,634     $ 83,927    
                 

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


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Source: Brady Corporation

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