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

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