Brady Corporation Reports Fiscal 2020 Third Quarter Results and Withdraws Fiscal 2020 Financial Guidance

  • Income before income taxes was $22.2 million in the third quarter of fiscal 2020 compared to $41.0 million in the same quarter of the prior year. Income before income taxes includes non-cash impairment charges of $13.8 million in the third quarter of fiscal 2020.
  • Diluted EPS was $0.26 in the third quarter of fiscal 2020 compared to $0.65 in the same quarter of the prior year. Non-cash impairment charges reduced diluted EPS by approximately $0.21 in the third quarter of fiscal 2020. Diluted EPS in the third quarter of fiscal 2020 was also negatively impacted by an income tax rate of 38.5 percent.
  • Sales for the quarter declined 8.2 percent. Organic sales declined 6.0 percent and the impact of foreign currency translation decreased sales by 2.2 percent.
  • During the third quarter of fiscal 2020, we returned $64.1 million to shareholders through share repurchases and $11.3 million in the form of dividends.
  • Due to the evolving and uncertain impact of the COVID-19 pandemic, the Company is withdrawing its previously communicated fiscal 2020 financial guidance.

MILWAUKEE, May 21, 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 third quarter ended April 30, 2020. 

Quarter Ended April 30, 2020 Financial Results:
Income before income taxes declined 45.9 percent to $22.2 million for the quarter ended April 30, 2020, compared to $41.0 million in the same quarter last year. Income before income taxes for the quarter ended April 30, 2020 was reduced by non-cash impairment charges of $13.8 million primarily related to the write down of certain of the tangible and intangible assets in the Company’s Workplace Safety segment. These non-cash impairment charges were primarily driven by sales and profitability reductions and reduced forecasts for future sales and profitability growth in the WPS North American business.

Net income for the quarter ended April 30, 2020 declined 60.8 percent to $13.6 million compared to $34.8 million in the same quarter last year. Earnings per diluted Class A Nonvoting Common Share were $0.26 for the third quarter of fiscal 2020, compared to $0.65 in the same quarter last year. Diluted EPS for the quarter ended April 30, 2020 was reduced by non-cash impairment charges of approximately $0.21 per share.

Sales for the quarter ended April 30, 2020 declined 8.2 percent, which consisted of an organic sales decline of 6.0 percent and a decline of 2.2 percent from foreign currency translation. Sales for the quarter ended April 30, 2020 were $265.9 million compared to $289.7 million in the same quarter last year. By segment, sales declined 9.7 percent in Identification Solutions and declined 3.9 percent in Workplace Safety, which consisted of an organic sales decline of 8.2 percent in Identification Solutions and organic sales growth of 0.2 percent in Workplace Safety.

Nine-Month Period Ended April 30, 2020 Financial Results:
Income before income taxes declined 9.8 percent to $106.1 million for the nine-month period ended April 30, 2020, compared to $117.6 million for the nine-month period ended April 30, 2019. Income before income taxes was reduced by non-cash impairment charges of $13.8 million for the nine-month period ended April 30, 2020.

Net income for the nine-month period ended April 30, 2020 declined 10.5 percent to $84.7 million compared to $94.6 million in the same period last year. Earnings per diluted Class A Nonvoting Common Share were $1.58 for the nine-month period ended April 30, 2020, compared to $1.78 in the same period last year. Diluted EPS was reduced by non-cash impairment charges of approximately $0.21 per share for the nine-month period ended April 30, 2020.

Sales for the nine-month period ended April 30, 2020 declined 4.1 percent, which consisted of an organic sales decline of 2.5 percent and a decline of 1.6 percent from foreign currency translation. Sales for the nine-month period ended April 30, 2020 were $829.6 million compared to $865.4 million in the same period last year. By segment, sales declined 4.3 percent in Identification Solutions and declined 3.6 percent in Workplace Safety, which consisted of organic sales declines of 3.2 percent in Identification Solutions and 0.5 percent in Workplace Safety.

Commentary:
“During these challenging times, as a highly-innovative essential business, Brady is more focused than ever on doing our part to serve the front-line workers and other essential companies with the products and services they need to help fight this global pandemic,” said Brady’s President and Chief Executive Officer, J. Michael Nauman. “Brady’s operations are up and running all around the globe producing products that are going to first responders, healthcare providers, food processing, transportation and many other critical industries. Our foremost focus has been on the safety of our employees as well as supporting our customers with the highest level of service that they have come to expect from Brady. This quarter, we saw strong demand for our products through the first half of March and then demand declined in late March and April as a result of the challenging macro environment. Demonstrating the strength of Brady, even in this tough environment, we posted cash flow from operating activities well in excess of net income.”

“Brady is financially strong. As of April 30, 2020, we had $238.9 million of cash and less than $50 million of debt, putting Brady in an enviable net cash position of $190 million. This quarter, we generated $42.8 million of cash flow from operating activities. Our strong cash generation and our strong balance sheet allows us to continue to execute our capital allocation strategy which involves continuing to invest in ROI-positive capital expenditures; to pay a strong dividend; to buyback our shares in an opportunistic manner; and to, of course, continue to invest in innovation, in sales-generating resources, in efficiency actions, and in actions that improve customer service,” said Brady’s Chief Financial Officer, Aaron Pearce.

Fiscal 2020 Financial Guidance Withdrawn:
Due to the uncertainty around the duration and depth of the economic contraction caused by the COVID-19 pandemic, the Company is withdrawing its previously communicated full-year fiscal 2020 financial guidance, which was provided on February 20, 2020.

A webcast regarding Brady’s fiscal 2020 third 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: adverse impacts of the COVID-19 pandemic or other pandemics; 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 April 30, Nine months ended April 30, 
  2020   2019   2020   2019  
Net sales$265,943  $289,745  $829,555  $865,367  
Cost of goods sold 136,416   143,996   419,496   433,269  
Gross margin 129,527   145,749   410,059   432,098  
Operating expenses:        
Research and development 9,814   11,437   31,298   33,837  
Selling, general and administrative 83,223   94,691   260,136   281,988  
Impairment charges 13,821      13,821     
Total operating expenses 106,858   106,128   305,255   315,825  
         
Operating income 22,669   39,621   104,804   116,273  
         
Other income (expense):        
Investment and other income 112   2,065   3,252   3,425  
Interest expense (628)  (708)  (1,976)  (2,137) 
         
Income before income taxes 22,153   40,978   106,080   117,561  
         
Income tax expense 8,520   6,197   21,396   22,916  
         
Net income$13,633  $34,781  $84,684  $94,645  
         
Net income per Class A Nonvoting Common Share:        
Basic$0.26  $0.66  $1.60  $1.80  
Diluted$0.26  $0.65  $1.58  $1.78  
Dividends$0.22  $0.21   0.65  $0.64  
         
Net income per Class B Voting Common Share:        
Basic$0.26  $0.66  $1.58  $1.79  
Diluted$0.26  $0.65  $1.57  $1.76  
Dividends$0.22  $0.21  $0.64  $0.62  
         
Weighted average common shares outstanding:        
Basic 52,607   52,766   53,023   52,499  
Diluted 52,972   53,480   53,512   53,215  
         



BRADY CORPORATION AND SUBSIDIARIES   
CONSOLIDATED BALANCE SHEETS   
(Dollars in thousands)   
    
 April 30, 2020 July 31, 2019
 (Unaudited)  
ASSETS   
Current assets:   
Cash and cash equivalents$238,880  $279,072 
Accounts receivable—net 145,133   158,114 
Inventories 124,575   120,037 
Prepaid expenses and other current assets 22,502   16,056 
Total current assets 531,090   573,279 
Property, plant and equipment—net 111,383   110,048 
Goodwill 404,039   410,987 
Other intangible assets 23,444   36,123 
Deferred income taxes 7,006   7,298 
Operating lease assets 41,553    
Other assets 21,827   19,573 
Total$1,140,342  $1,157,308 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable$58,819  $64,810 
Accrued compensation and benefits 41,591   62,509 
Taxes, other than income taxes 7,667   8,107 
Accrued income taxes 8,101   6,557 
Current operating lease liabilities 14,381    
Other current liabilities 48,473   49,796 
Current maturities on long-term debt 48,927   50,166 
Total current liabilities 227,959   241,945 
Long-term operating lease liabilities 32,348    
Other liabilities 59,433   64,589 
Total liabilities 319,740   306,534 
Stockholders’ equity:   
Common stock:   
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 48,431,617 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 330,968   329,969 
Retained earnings 688,079   637,843 
Treasury stock—2,829,870 and 1,802,646 shares, respectively, of Class A nonvoting common stock, at cost (106,751)  (46,332)
Accumulated other comprehensive loss (92,242)  (71,254)
Total stockholders’ equity 820,602   850,774 
Total$1,140,342  $1,157,308 
    



BRADY CORPORATION AND SUBSIDIARIES    
CONSOLIDATED STATEMENTS OF CASH FLOWS    
(Unaudited; Dollars in thousands)    
 Nine months ended April 30, 
  2020   2019  
Operating activities:    
Net income$84,684  $94,645  
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 17,731   17,836  
Stock-based compensation expense 7,180   10,311  
Deferred income taxes (309)  3,796  
Impairment charges 13,821     
Other 1,698   1,372  
Changes in operating assets and liabilities:    
Accounts receivable 9,019   332  
Inventories (7,439)  (9,254) 
Prepaid expenses and other assets (5,653)  (2,204) 
Accounts payable and accrued liabilities (26,609)  (20,548) 
Income taxes 1,790   616  
  Net cash provided by operating activities 95,913   96,902  
     
Investing activities:    
Purchases of property, plant and equipment (21,616)  (17,528) 
Other (4,419)  (1,810) 
  Net cash used in investing activities (26,035)  (19,338) 
     
Financing activities:    
Payment of dividends (34,447)  (33,488) 
Proceeds from exercise of stock options 5,212   22,468  
Payments for employee taxes withheld from stock-based awards (7,832)  (4,348) 
Purchase of treasury stock (64,113)  (3,182) 
Proceeds from borrowing on credit facilities    13,637  
Repayment of borrowing on credit facilities    (13,568) 
Other 133   210  
  Net cash used in financing activities (101,047)  (18,271) 
     
Effect of exchange rate changes on cash (9,023)  (2,288) 
     
Net (decrease) increase in cash and cash equivalents (40,192)  57,005  
Cash and cash equivalents, beginning of period 279,072   181,427  
     
Cash and cash equivalents, end of period$238,880  $238,432  
     



BRADY CORPORATION AND SUBSIDIARIES        
SEGMENT INFORMATION        
(Unaudited; Dollars in thousands)        
         
 Three months ended April 30, Nine months ended April 30, 
  2020   2019   2020   2019  
NET SALES        
ID Solutions$193,169  $213,979  $613,518  $641,283  
Workplace Safety 72,774   75,766   216,037   224,084  
Total$265,943  $289,745  $829,555  $865,367  
         
SALES INFORMATION        
ID Solutions        
Organic (8.2)%  4.0%  (3.2)%  4.4% 
Currency (1.5)%  (3.1)%  (1.1)%  (2.3)% 
Total (9.7)%  0.9%  (4.3)%  2.1% 
Workplace Safety        
Organic 0.2%  (1.6)%  (0.5)%  (0.2)% 
Currency (4.1)%  (5.3)%  (3.1)%  (3.7)% 
Divestiture %  (5.3)%  %  (5.8)% 
Total (3.9)%  (12.2)%  (3.6)%  (9.7)% 
Total Company        
Organic (6.0)%  2.4%  (2.5)%  3.1% 
Currency (2.2)%  (3.8)%  (1.6)%  (2.8)% 
Divestiture %  (1.5)%  %  (1.6)% 
Total (8.2)%  (2.9)%  (4.1)%  (1.3)% 
         
SEGMENT PROFIT        
ID Solutions$36,401  $39,892  $119,499  $119,311  
Workplace Safety 4,379   6,099   14,991   16,301  
Total$40,780  $45,991  $134,490  $135,612  
SEGMENT PROFIT AS A PERCENT OF NET SALES        
ID Solutions 18.8%  18.6%  19.5%  18.6% 
Workplace Safety 6.0%  8.0%  6.9%  7.3% 
Total 15.3%  15.9%  16.2%  15.7% 
         
         
 Three months ended April 30, Nine months ended April 30, 
  2020   2019   2020   2019  
Total segment profit$40,780  $45,991  $134,490  $135,612  
Unallocated amounts:        
Administrative costs (4,290)  (6,370)  (15,865)  (19,339) 
Impairment charges (13,821)  -   (13,821)  -  
Investment and other income 112   2,065   3,252   3,425  
Interest expense (628)  (708)  (1,976)  (2,137) 
Income before income taxes$22,153  $40,978  $106,080  $117,561  
         


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

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