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

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