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Brady Corporation Reports Fiscal 2022 Second Quarter Results and Updates Fiscal 2022 Guidance

  • Sales for the quarter increased 19.6 percent. Organic sales increased 13.1 percent.
  • Income before income taxes increased 6.7 percent to $42.0 million in the second quarter of fiscal 2022 compared to $39.4 million in the second quarter of fiscal 2021. Income Before Income Taxes Excluding Amortization* increased 12.4 percent to $45.8 million in the second quarter of fiscal 2022 compared to $40.8 million in the second quarter of fiscal 2021.
  • Diluted EPS in the second quarter of fiscal 2022 increased 10.2 percent to $0.65 compared to $0.59 in the same quarter of the prior year. Diluted EPS Excluding Amortization* increased 14.8 percent to $0.70 in the second quarter of fiscal 2022 compared to $0.61 in the same quarter of the prior year.
  • Earnings per diluted Class A Common Share guidance for the full year ending July 31, 2022 adjusted to a range of $3.00 to $3.15, excluding after-tax amortization expense and $2.78 to $2.93 on a GAAP basis.

MILWAUKEE, Feb. 17, 2022 (GLOBE NEWSWIRE) -- Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2022 second quarter ended January 31, 2022.

Quarter Ended January 31, 2022 Financial Results:
Sales for the quarter ended January 31, 2022 increased 19.6 percent, which consisted of an organic sales increase of 13.1 percent, an increase of 8.6 percent from acquisitions and a decrease of 2.1 percent from foreign currency translation. Sales for the quarter ended January 31, 2022 were $318.1 million compared to $265.8 million in the same quarter last year. By segment, sales increased 26.1 percent in Identification Solutions and increased 2.0 percent in Workplace Safety, which consisted of an organic sales increase of 16.0 percent in Identification Solutions and an organic sales increase of 5.2 percent in Workplace Safety.

Income before income taxes and losses of unconsolidated affiliate increased 6.7 percent to $42.0 million for the quarter ended January 31, 2022, compared to $39.4 million in the same quarter last year. Income Before Income Taxes Excluding Amortization* for the quarter ended January 31, 2022 was $45.8 million, an increase of 12.4 percent compared to the second quarter of last year.

Net income for the quarter ended January 31, 2022 was $33.8 million compared to $30.9 million in the same quarter last year. Earnings per diluted Class A Nonvoting Common Share were $0.65 for the second quarter of fiscal 2022, compared to $0.59 in the same quarter last year. Net Income Excluding Amortization* for the quarter ended January 31, 2022 was $36.7 million and Diluted EPS Excluding Amortization* for the quarter ended January 31, 2022 was $0.70.

Six-Month Period Ended January 31, 2022 Financial Results:
Sales for the six-month period ended January 31, 2022 increased 17.8 percent, which consisted of an organic sales increase of 10.0 percent, an increase of 8.5 percent from acquisitions and a decrease of 0.7 percent from foreign currency translation. Sales for the six months ended January 31, 2022 were $639.5 million compared to $543.1 million in the same period last year. By segment, sales increased 25.8 percent in Identification Solutions and decreased 3.1 percent in Workplace Safety, which consisted of an organic sales increase of 14.6 percent in Identification Solutions and an organic sales decline of 2.0 percent in Workplace Safety.

Income before income taxes and losses of unconsolidated affiliate increased 6.3 percent to $86.7 million for the six months ended January 31, 2022, compared to $81.6 million in the same period last year. Income Before Income Taxes Excluding Amortization* for the six months ended January 31, 2022 was $94.3 million, an increase of 11.8 percent compared to the same period of last year.

Net income for the six-month period ended January 31, 2022 was $68.9 million compared to $64.3 million in the same period last year. Earnings per diluted Class A Nonvoting Common Share were $1.32 for the six months ended January 31, 2022, compared to $1.23 in the same period last year. Net Income Excluding Amortization* for the six months ended January 31, 2022 was $74.6 million and Diluted EPS Excluding Amortization* for the six months ended January 31, 2022 was $1.43.

Commentary:
“We experienced very strong revenue growth of 19.6 percent this quarter and our investments in sales, marketing, and research and development, combined with our reinvigorated innovative spirit have set the stage for strong future growth. We are transforming Brady into a solution provider that is now growing in excess of GDP and is poised for future sales growth due to the strong foundation and positive momentum resulting from the many investments made over the last five-plus years,” said Brady’s President and Chief Executive Officer, J. Michael Nauman. “Our strong sales growth was driven by our Identification Solutions division which had total sales growth of 26.1 percent this quarter. The three acquisitions completed last year are performing at or above our initial expectations and are helping shift Brady into faster-growing end markets. Our Workplace Safety business returned to organic sales growth this quarter – returning to growth one quarter earlier than originally anticipated. We are experiencing inflation in many areas including wages, freight, utilities, and raw materials, which we expect to continue to pressure our gross profit margins in the short-term. We believe that these gross margin challenges are temporary and once our pricing and efficiency initiatives catch up to cost inflation, our strong sales growth and improved gross profit margins will drive solid bottom-line growth.”

“Brady is financially strong, is experiencing strong revenue growth, and continues to generate strong earnings. We grew sales nearly 20 percent and grew Diluted EPS Excluding Amortization* nearly 15 percent, which represents another very strong quarter,” said Brady’s Chief Financial Officer, Aaron Pearce. “This quarter, we returned $14.5 million to our shareholders in the form of dividends and share buybacks and over the first six months of this year, we returned a total of $45.0 million to our shareholders, which exemplifies our commitment to returning funds to our shareholders. We have a net cash balance of $64.4 million as of January 31, 2022. We believe that Brady’s strong second quarter revenue growth, improving earnings per share, and solid balance sheet position us well for future financial success.”

Fiscal 2022 Guidance:
Brady’s organic revenue growth was 10.0% during the six months ended January 31, 2022, however, inflationary forces compressed Brady’s gross profit margin during this period. Brady expects these cost pressures to continue for at least the short-term before price increases and efficiency actions can fully offset these inflationary forces. As such, we are modifying our Diluted EPS Excluding Amortization* guidance from our original range of $3.12 to $3.32 per share to a range of $3.00 to $3.15 for the full year ending July 31, 2022, which includes a reduction of $0.05 due to the strengthening of the U.S. dollar versus other major currencies. This implies that we expect Diluted EPS Excluding Amortization, to improve by 9% to 15% for the full year ending July 31, 2022 when compared to the adjusted fiscal 2021 diluted earnings per share of $2.75. Also included in our full-year fiscal 2022 guidance are a full-year income tax rate of approximately 20 percent and depreciation and amortization expense ranging from $34 million to $36 million. Capital expenditures, excluding facility purchases are expected to range from $20 million to $25 million during the year ending July 31, 2022. The Company’s fiscal 2022 guidance is based on foreign currency exchange rates as of January 31, 2022 and assumes continued economic growth.

A webcast regarding Brady’s fiscal 2022 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, 2021, employed approximately 5,700 people in its worldwide businesses. Brady’s fiscal 2021 sales were approximately $1.14 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.

* Income Before Income Taxes Excluding Amortization, Net Income Excluding Amortization, and Diluted EPS Excluding Amortization are non-GAAP measures. See appendix for more information on these measures, including reconciliations to the most directly comparable GAAP measures.

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; increased cost of raw materials, labor and freight as well as raw material shortages; increased cost of raw materials, labor and freight as well as raw material shortages; Brady’s ability to properly identify, integrate, and grow acquired companies, and to manage contingent liabilities from divested businesses; difficulties in protecting our websites, networks, and systems against security breaches; risks associated with the loss of key employees; extensive regulations by U.S. and non-U.S. governmental and self-regulatory entities; litigation, including product liability claims; foreign currency fluctuations; potential write-offs of 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 crises and government responses thereto 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, 2021 and in any subsequent filings on Form 10-Q.

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,
    2022       2021       2022       2021  
Net sales $ 318,055     $ 265,838     $ 639,530     $ 543,065  
Cost of goods sold   168,693       136,316       335,180       278,115  
Gross margin   149,362       129,522       304,350       264,950  
Operating expenses:              
Research and development   13,965       9,876       27,872       20,079  
Selling, general and administrative   92,525       82,234       189,271       165,271  
Total operating expenses   106,490       92,110       217,143       185,350  
               
Operating income   42,872       37,412       87,207       79,600  
               
Other (expense) income:              
Investment and other (expense) income   (578 )     2,036       (35 )     2,191  
Interest expense   (252 )     (51 )     (434 )     (157 )
               
Income before income taxes and losses of unconsolidated affiliate   42,042       39,397       86,738       81,634  
               
Income tax expense   8,227       8,206       17,877       16,788  
               
Income before losses of unconsolidated affiliate   33,815       31,191       68,861       64,846  
Equity in losses of unconsolidated affiliate         (331 )           (505 )
               
Net income $ 33,815     $ 30,860     $ 68,861     $ 64,341  
               
Net income per Class A Nonvoting Common Share:              
Basic $ 0.65     $ 0.59     $ 1.33     $ 1.24  
Diluted $ 0.65     $ 0.59     $ 1.32     $ 1.23  
               
Net income per Class B Voting Common Share:              
Basic $ 0.65     $ 0.59     $ 1.31     $ 1.22  
Diluted $ 0.65     $ 0.59     $ 1.30     $ 1.21  
               
Weighted average common shares outstanding:              
Basic   51,800       52,018       51,887       52,020  
Diluted   52,162       52,282       52,299       52,288  



BRADY CORPORATION AND SUBSIDIARIES      
CONSOLIDATED BALANCE SHEETS      
(Dollars in thousands)      
       
  January 31, 2022   July 31, 2021
  (Unaudited)    
ASSETS      
Current assets:      
Cash and cash equivalents $ 147,407     $ 147,335  
Accounts receivable, net of allowance for credit losses of $7,868 and $7,306 respectively   172,471       170,579  
Inventories   167,456       136,107  
Prepaid expenses and other current assets   12,681       11,083  
Total current assets   500,015       465,104  
Property, plant and equipment—net   126,551       121,741  
Goodwill   601,681       614,137  
Other intangible assets   83,608       92,334  
Deferred income taxes   15,234       16,343  
Operating lease assets   33,710       41,880  
Other assets   26,264       26,217  
Total $ 1,387,063     $ 1,377,756  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 80,611     $ 82,152  
Accrued compensation and benefits   56,510       81,173  
Taxes, other than income taxes   12,141       13,054  
Accrued income taxes   4,783       3,915  
Current operating lease liabilities   16,601       17,667  
Other current liabilities   56,850       59,623  
Total current liabilities   227,496       257,584  
Long-term debt   83,000       38,000  
Long-term operating lease liabilities   20,341       28,347  
Other liabilities   89,658       90,797  
Total liabilities   420,495       414,728  
Stockholders’ equity:      
Common stock:      
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 48,243,347 and 48,528,245 shares, respectively   513       513  
Class B voting common stock—Issued and outstanding, 3,538,628 shares   35       35  
Additional paid-in capital   341,889       339,125  
Retained earnings   833,981       788,369  
Treasury stock—3,018,140 and 2,733,242 shares, respectively, of Class A nonvoting common stock, at cost   (130,911 )     (109,061 )
Accumulated other comprehensive loss   (78,939 )     (55,953 )
Total stockholders’ equity   966,568       963,028  
Total $ 1,387,063     $ 1,377,756  



BRADY CORPORATION AND SUBSIDIARIES      
CONSOLIDATED STATEMENTS OF CASH FLOWS      
(Unaudited; Dollars in thousands)      
  Six months ended January 31,
    2022       2021  
Operating activities:      
Net income $ 68,861     $ 64,341  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization   16,996       11,421  
Stock-based compensation expense   7,170       5,471  
Deferred income taxes   (788 )     (3,866 )
Equity in losses of unconsolidated affiliate         505  
Other   (812 )     121  
Changes in operating assets and liabilities:      
     Accounts receivable   (7,216 )     (4,157 )
     Inventories   (34,360 )     15,018  
     Prepaid expenses and other assets   (1,148 )     (2,436 )
     Accounts payable and accrued liabilities   (25,357 )     11,990  
     Income taxes   982       481  
               Net cash provided by operating activities   24,328       98,889  
       
Investing activities:      
Purchases of property, plant and equipment   (16,440 )     (14,511 )
Other   59       (1,881 )
               Net cash used in investing activities   (16,381 )     (16,392 )
       
Financing activities:      
Payment of dividends   (23,249 )     (22,837 )
Proceeds from exercise of stock options   374       471  
Payments for employee taxes withheld from stock-based awards   (5,025 )     (2,638 )
Purchase of treasury stock   (21,720 )     (3,593 )
Proceeds from borrowing on credit facilities   131,216       19,957  
Repayment of borrowing on credit facilities   (86,216 )     (20,220 )
Other   115       32  
               Net cash used in financing activities   (4,505 )     (28,828 )
       
Effect of exchange rate changes on cash   (3,370 )     6,276  
       
Net increase in cash and cash equivalents   72       59,945  
Cash and cash equivalents, beginning of period   147,335       217,643  
       
Cash and cash equivalents, end of period $ 147,407     $ 277,588  



BRADY CORPORATION AND SUBSIDIARIES              
SEGMENT INFORMATION              
(Unaudited; Dollars in thousands)              
               
  Three months ended January 31,   Six months ended January 31,
    2022       2021       2022       2021  
NET SALES              
ID Solutions $ 244,986     $ 194,227     $ 493,603     $ 392,419  
Workplace Safety   73,069       71,611       145,927       150,646  
Total $ 318,055     $ 265,838     $ 639,530     $ 543,065  
               
SALES INFORMATION              
ID Solutions              
Organic   16.0 %     (6.9 )%     14.6 %     (7.6 )%
Acquisition   11.8 %     %     11.7 %     %
Currency   (1.7 )%     1.5 %     (0.5 )%     1.0 %
Total   26.1 %     (5.4 )%     25.8 %     (6.6 )%
Workplace Safety              
Organic   5.2 %     (4.8 )%     (2.0 )%     0.4 %
Currency   (3.2 )%     5.2 %     (1.1 )%     4.8 %
Total   2.0 %     0.4 %     (3.1 )%     5.2 %
Total Company              
Organic   13.1 %     (6.3 )%     10.0 %     (5.6 )%
Acquisition   8.6 %     %     8.5 %     %
Currency   (2.1 )%     2.4 %     (0.7 )%     2.0 %
Total   19.6 %     (3.9 )%     17.8 %     (3.6 )%
               
SEGMENT PROFIT              
ID Solutions $ 44,129     $ 39,000     $ 92,945     $ 79,279  
Workplace Safety   4,515       3,463       6,808       11,451  
Total $ 48,644     $ 42,463     $ 99,753     $ 90,730  
SEGMENT PROFIT AS A PERCENT OF NET SALES              
ID Solutions   18.0 %     20.1 %     18.8 %     20.2 %
Workplace Safety   6.2 %     4.8 %     4.7 %     7.6 %
Total   15.3 %     16.0 %     15.6 %     16.7 %
               
               
  Three months ended January 31,   Six months ended January 31,
    2022       2021       2022       2021  
Total segment profit $ 48,644     $ 42,463     $ 99,753     $ 90,730  
Unallocated amounts:              
Administrative costs   (5,772 )     (5,051 )     (12,546 )     (11,130 )
Investment and other (expense) income   (578 )     2,036       (35 )     2,191  
Interest expense   (252 )     (51 )     (434 )     (157 )
Income before income taxes and losses of unconsolidated affiliate $ 42,042     $ 39,397     $ 86,738     $ 81,634  



GAAP to NON-GAAP MEASURES                      
(Unaudited; Dollars in Thousands, Except Per Share Amounts)                      
                       
In accordance with the U.S. Securities and Exchange Commission’s Regulation G, the following provides definitions of the non-GAAP measures used in the earnings release and the reconciliation to the most closely related GAAP measure.
                       
Income Before Income Taxes Excluding Amortization:                      
Brady is presenting the non-GAAP measure, "Income Before Income Taxes Excluding Amortization." This is not a calculation based upon GAAP. The amounts included in this non-GAAP measure are derived from amounts included in the Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to be part of our ongoing results. We believe this profit measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of the GAAP measure of Income before income taxes and losses of unconsolidated affiliate to the non-GAAP measure of Income Before Income Taxes Excluding Amortization:
                       
  Three months ended January 31,   Six months ended January 31,
  2022   2021   2022   2021
Income before income taxes and losses of unconsolidated affiliate (GAAP measure) $ 42,042   $ 39,397   $ 86,738   $ 81,634
Amortization expense   3,749     1,353     7,556     2,704
Income Before Income Taxes Excluding Amortization (non-GAAP measure) $ 45,791   $ 40,750   $ 94,294   $ 84,338
                       
                       
Income Tax Expense Excluding Amortization:                      
Brady is presenting the non-GAAP measure, "Income Tax Expense Excluding Amortization." This is not a calculation based upon GAAP. The amounts included in this non-GAAP measure are derived from amounts included in the Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to be part of our ongoing results. We believe this measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of the GAAP measure of Income tax expense to the non-GAAP measure of Income Tax Expense Excluding Amortization:
                       
                       
  Three months ended January 31,   Six months ended January 31,
  2022   2021   2022   2021
Income tax expense (GAAP measure) $ 8,227   $ 8,206   $ 17,877   $ 16,788
Amortization expense   887     338     1,787     676
Income Tax Expense Excluding Amortization (non-GAAP measure) $ 9,114   $ 8,544   $ 19,664   $ 17,464
                       
                       
Net Income Excluding Amortization:                      
Brady is presenting the non-GAAP measure, "Net Income Excluding Amortization." This is not a calculation based upon GAAP. The amounts included in this non-GAAP measure are derived from amounts included in the Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to be part of our ongoing results. We believe this measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of the GAAP measure of Net income to the non-GAAP measure of Net Income Excluding Amortization:
                       
                       
  Three months ended January 31,   Six months ended January 31,
  2022   2021   2022   2021
Net income (GAAP measure) $ 33,815   $ 30,860   $ 68,861   $ 64,341
Amortization expense   2,862     1,015     5,769     2,028
Net Income Excluding Amortization (non-GAAP measure) $ 36,677   $ 31,875   $ 74,630   $ 66,369
                       
Diluted EPS Excluding Amortization:                      
Brady is presenting the non-GAAP measure, "Diluted EPS Excluding Amortization." This is not a calculation based upon GAAP. The amounts included in this non-GAAP measure are derived from amounts included in the Consolidated Financial Statements. We do not view these items to be part of our ongoing results. We believe this measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of the GAAP measure of Net income per Class A Nonvoting Common Share to the non-GAAP measure of Diluted EPS Excluding Amortization:
                       
                       
  Three months ended January 31,   Six months ended January 31,
  2022   2021   2022   2021
Net income per Class A Nonvoting Common Share (GAAP measure) $ 0.65   $ 0.59   $ 1.32   $ 1.23
Amortization expense   0.05     0.02     0.11     0.04
Diluted EPS Excluding Amortization (non-GAAP measure) $ 0.70   $ 0.61   $ 1.43   $ 1.27


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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