Brady Corporation Reports Fiscal 2020 Fourth Quarter Results

  • Income before income taxes and losses of unconsolidated affiliate was $34.9 million in the fourth quarter of fiscal 2020 compared to $47.1 million in the same quarter of the prior year. 
  • Diluted EPS was $0.53 in the fourth quarter of fiscal 2020 compared to $0.68 in the same quarter of the prior year. 
  • Sales for the quarter declined 14.7 percent.  Organic sales declined 13.7 percent and the impact of foreign currency translation decreased sales by 1.0 percent.

MILWAUKEE, Sept. 16, 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 fourth quarter ended July 31, 2020.

Quarter Ended July 31, 2020 Financial Results:

Income before income taxes and losses of unconsolidated affiliate declined 26.0 percent to $34.9 million for the quarter ended July 31, 2020, compared to $47.1 million in the same quarter last year.

Net income for the quarter ended July 31, 2020 declined 24.4 percent to $27.7 million compared to $36.6 million in the same quarter last year.  Earnings per diluted Class A Nonvoting Common Share were $0.53 for the fourth quarter of fiscal 2020, compared to $0.68 in the same quarter last year.

Sales for the quarter ended July 31, 2020 declined 14.7 percent, which consisted of an organic sales decline of 13.7 percent and a decline of 1.0 percent from foreign currency translation.  Sales for the quarter ended July 31, 2020 were $251.7 million compared to $295.3 million in the same quarter last year.  By segment, sales declined 22.8 percent in Identification Solutions and increased 9.7 percent in Workplace Safety, which consisted of an organic sales decline of 21.7 percent in Identification Solutions and organic sales growth of 10.8 percent in Workplace Safety.

Year Ended July 31, 2020 Financial Results:

Income before income taxes and losses of unconsolidated affiliate declined 14.4 percent to $140.9 million for the year ended July 31, 2020, compared to $164.6 million for the year ended July 31, 2019.  Income before income taxes and losses of unconsolidated affiliate was reduced by non-cash impairment charges of $13.8 million for the year ended July 31, 2020.

Net income for the year ended July 31, 2020 declined 14.4 percent to $112.4 million compared to $131.3 million last year.  Earnings per diluted Class A Nonvoting Common Share were $2.11 for the year ended July 31, 2020, compared to $2.46 last year.  Diluted EPS was reduced by non-cash impairment charges of approximately $0.21 for the year ended July 31, 2020.

Sales for the year ended July 31, 2020 declined 6.8 percent, which consisted of an organic sales decline of 5.4 percent and a decline of 1.4 percent from foreign currency translation.  Fiscal 2020 sales were $1.08 billion compared to $1.16 billion last year.  By segment, sales declined 9.1 percent in Identification Solutions and declined 0.3 percent in Workplace Safety, which consisted of an organic sales decline of 8.0 percent in Identification Solutions and organic sales growth of 2.3 percent in Workplace Safety.

Commentary:

“We are 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.  Our foremost focus has been on the safety of our employees and supporting the needs of our customers with the high-quality products and services that they have come to expect from Brady,” said Brady’s President and Chief Executive Officer, J. Michael Nauman.  “This quarter, we saw demand in our Identification Solutions business begin to improve in June and July from the lows experienced in April and May; while our Workplace Safety business had a strong quarter with organic sales increasing more than 10% compared to last year.  Growth in our Workplace Safety business was primarily driven by increased sales of safety and identification products directly related to the COVID-19 pandemic, including social distancing and personal hygiene signage.  We remain focused on investing in new products, building on our positive momentum, and executing sustainable efficiencies throughout Brady.  We believe that our ongoing investments in new product development combined with the much improved financial results in our Workplace Safety business and the improving sequential sales trends in our Identification Solutions business will make Brady an even stronger company when industrial end-market demand returns.”

“Brady is financially strong.  As of July 31, 2020, we had $217.6 million of cash and no outstanding debt,” said Brady’s Chief Financial Officer, Aaron Pearce.  “We generated $141.0 million of cash flow from operating activities this year, we invested $27.3 million in capital expenditures, we returned $45.8 million to our shareholders in the form of dividends, and we returned $64.5 million to our shareholders in the form of share buybacks.  Our strong cash generation and balance sheet allow us to continue to execute our capital allocation strategy which involves investing to grow our organic business, paying a strong dividend, buying back our shares in an opportunistic manner, and investing in acquisitions that are consistent with our strategies.  Brady’s strong balance sheet and cash generation positions us well for future financial success.”

A webcast regarding Brady’s fiscal 2020 fourth 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.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, ” “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.

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.

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

BRADY CORPORATION AND SUBSIDIARIES       
CONSOLIDATED STATEMENTS OF INCOME       
(Unaudited; Dollars in thousands, except per share data)       
        
 Three months ended July 31, Year ended July 31,
  2020   2019   2020   2019 
Net sales$251,744  $295,278  $1,081,299  $1,160,645 
Cost of goods sold 133,238   148,698   552,734   581,967 
Gross margin 118,506   146,580   528,565   578,678 
Operating expenses:       
Research and development 9,364   11,331   40,662   45,168 
Selling, general and administrative 75,923   89,094   336,059   371,082 
Impairment charges       13,821    
Total operating expenses 85,287   100,425   390,542   416,250 
        
Operating income 33,219   46,155   138,023   162,428 
        
Other income (expense):       
Investment and other income 1,827   1,621   5,079   5,046 
Interest expense (190)  (693)  (2,166)  (2,830)
        
Income before income taxes and losses of unconsolidated affiliate 34,856   47,083   140,936   164,644 
        
Income tax expense 6,925   10,470   28,321   33,386 
        
Income before losses of unconsolidated affiliate 27,931   36,613   112,615   131,258 
Equity in losses of unconsolidated affiliate (246)  -   (246)  - 
        
Net income$27,685  $36,613  $112,369  $131,258 
        
Net income per Class A Nonvoting Common Share:       
Basic$0.53  $0.69  $2.13  $2.50 
Diluted$0.53  $0.68  $2.11  $2.46 
Dividends$0.22  $0.21  $0.87  $0.85 
        
Net income per Class B Voting Common Share:       
Basic$0.53  $0.69  $2.11  $2.48 
Diluted$0.53  $0.68  $2.10  $2.45 
Dividends$0.22  $0.21  $0.85  $0.83 
        
Weighted average common shares outstanding:       
Basic 51,983   52,885   52,763   52,596 
Diluted 52,389   53,647   53,231   53,323 
        


BRADY CORPORATION AND SUBSIDIARIES   
CONSOLIDATED BALANCE SHEETS   
(Unaudited; Dollars in thousands)   
    
 July 31, 2020 July 31, 2019
ASSETS   
Current assets:   
Cash and cash equivalents$217,643  $279,072 
Accounts receivable—net 146,181   158,114 
Inventories 135,662   120,037 
Prepaid expenses and other current assets 9,962   16,056 
Total current assets 509,448   573,279 
Property, plant and equipment—net 115,068   110,048 
Goodwill 416,034   410,987 
Other intangible assets 22,334   36,123 
Deferred income taxes 8,845   7,298 
Operating lease assets 41,899    
Other assets 28,838   19,573 
Total$1,142,466  $1,157,308 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable$62,547  $64,810 
Accrued compensation and benefits 41,546   62,509 
Taxes, other than income taxes 8,057   8,107 
Accrued income taxes 8,652   6,557 
Current operating lease liabilities 15,304    
Other current liabilities 49,782   49,796 
Current maturities on long-term debt    50,166 
Total current liabilities 185,888   241,945 
Long-term operating lease liabilities 31,982    
Other liabilities 61,524   64,589 
Total liabilities 279,394   306,534 
Stockholders’ equity:   
Common stock:   
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 48,456,954 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 331,761   329,969 
Retained earnings 704,456   637,843 
Treasury stock—2,804,533 and 1,802.646 shares, respectively, of Class A nonvoting common stock, at cost (107,216)  (46,332)
Accumulated other comprehensive loss (66,477)  (71,254)
Total stockholders’ equity 863,072   850,774 
Total$1,142,466  $1,157,308 
    


BRADY CORPORATION AND SUBSIDIARIES   
CONSOLIDATED STATEMENTS OF CASH FLOWS   
(Unaudited; Dollars in thousands)   
 Year ended July 31,
  2020   2019 
Operating activities:   
Net income$112,369  $131,258 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization 23,437   23,799 
Stock-based compensation expense 8,843   12,092 
Deferred income taxes (764)  7,825 
Impairment charges 13,821    
Equity in losses of unconsolidated affiliate 246    
Other 2,611   2,347 
Changes in operating assets and liabilities:   
Accounts receivable 13,902   3,496 
Inventories (13,917)  (9,922)
Prepaid expenses and other assets 4,477   368 
Accounts payable and accrued liabilities (26,128)  (11,903)
Income taxes 2,080   2,851 
Net cash provided by operating activities 140,977   162,211 
    
Investing activities:   
Purchases of property, plant and equipment (27,277)  (32,825)
Purchase of equity method investment (6,000)   
Other (2,842)  (1,638)
Net cash used in investing activities (36,119)  (34,463)
    
Financing activities:   
Payment of dividends (45,756)  (44,732)
Proceeds from exercise of stock options 5,511   25,658 
Payments for employee taxes withheld from stock-based awards (9,065)  (5,651)
Purchase of treasury stock (64,514)  (3,182)
Proceeds from borrowing on credit facilities 20,697   13,637 
Repayment of borrowing on credit facilities (21,855)  (13,568)
Principal payments on debt (48,672)   
Other 134   210 
Net cash used in financing activities (163,520)  (27,628)
    
Effect of exchange rate changes on cash and cash equivalents (2,767)  (2,475)
    
Net (decrease) increase in cash and cash equivalents (61,429)  97,645 
Cash and cash equivalents, beginning of period 279,072   181,427 
    
Cash and cash equivalents, end of period$217,643  $279,072 
    
Supplemental disclosures:   
Cash paid during the period for:   
Interest$2,401  $2,651 
Income taxes 29,600   24,335 
    


BRADY CORPORATION AND SUBSIDIARIES       
SEGMENT INFORMATION       
(Unaudited; Dollars in thousands)       
        
 Three Months Ended July 31, Year Ended July 31,
  2020   2019   2020   2019 
NET SALES       
ID Solutions$171,189  $221,817  $784,707  $863,100 
Workplace Safety 80,555   73,461   296,592   297,545 
Total$251,744  $295,278  $1,081,299  $1,160,645 
        
SALES INFORMATION       
ID Solutions       
Organic (21.7)%  3.3%  (8.0)%  4.1%
Currency (1.1)%  (1.5)%  (1.1)%  (2.1)%
Total (22.8)%  1.8%  (9.1)%  2.0%
Workplace Safety       
Organic 10.8%  (2.6)%  2.3%  (0.7)%
Currency (1.1)%  (3.3)%  (2.6)%  (3.7)%
Divestiture %  (1.9)%  %  (4.8)%
Total 9.7%  (7.8)%  (0.3)%  (9.2)%
Total Company       
Organic (13.7)%  1.7%  (5.4)%  2.8%
Currency (1.0)%  (1.9)%  (1.4)%  (2.6)%
Divestiture %  (0.5)%  %  (1.3)%
Total (14.7)%  (0.7)%  (6.8)%  (1.1)%
        
SEGMENT PROFIT       
ID Solutions$31,140  $45,642  $150,639  $164,953 
Workplace Safety 6,028   6,724   21,019   23,025 
Total$37,168  $52,366  $171,658  $187,978 
SEGMENT PROFIT AS A PERCENT OF NET SALES       
ID Solutions 18.2%  20.6%  19.2%  19.1%
Workplace Safety 7.5%  9.2%  7.1%  7.7%
Total 14.8%  17.7%  15.9%  16.2%
        
        
 Three Months Ended July 31, Year Ended July 31,
  2020   2019   2020   2019 
Total segment profit$37,168  $52,366  $171,658  $187,978 
Unallocated amounts:       
Administrative costs (3,949)  (6,211)  (19,814)  (25,550)
Impairment charges -   -   (13,821)  - 
Investment and other income 1,827   1,621   5,079   5,046 
Interest expense (190)  (693)  (2,166)  (2,830)
Income before income taxes and losses of unconsolidated affiliate$34,856  $47,083  $140,936  $164,644 
        

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