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Brady Corporation Reports Fiscal 2019 Third Quarter Results and Increases its Fiscal 2019 EPS Guidance

  • Diluted EPS increased 32.7 percent to $0.65 in the third quarter of fiscal 2019 compared to $0.49 in the same quarter of the prior year.
  • Income before income taxes increased 10.8 percent to $41.0 million in the third quarter of fiscal 2019 compared to $37.0 million in the third quarter of fiscal 2018.
  • Sales for the quarter ended April 30, 2019 decreased 2.9 percent.  Organic revenues increased 2.4 percent in the third quarter of fiscal 2019.
  • Diluted EPS guidance for the full year ending July 31, 2019 was increased to a range of $2.35 to $2.40 from the previous range of $2.25 to $2.35.

MILWAUKEE, May 23, 2019 (GLOBE NEWSWIRE) -- Brady Corporation (BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2019 third quarter ended April 30, 2019. 

Quarter Ended April 30, 2019 Financial Results:
Income before income taxes increased 10.8 percent, finishing at $41.0 million for the third quarter of fiscal 2019 compared to $37.0 million for the third quarter of fiscal 2018.

Net income for the quarter ended April 30, 2019, was $34.8 million compared to $26.0 million in the same quarter last year.  Net income was impacted by a reduced income tax rate of 15.1 percent primarily due to certain audit settlements in the current quarter.

Earnings per diluted Class A Nonvoting Common Share were $0.65 for the third quarter of fiscal 2019, compared to $0.49 in the same quarter last year. 

Sales for the quarter ended April 30, 2019 decreased 2.9 percent, which consisted of organic sales growth of 2.4 percent, a decrease in sales of 3.8 percent from foreign currency translation, and a decline in sales of 1.5 percent from the divestiture of a business during the fourth quarter of fiscal 2018.  Sales for the quarter ended April 30, 2019 were $289.7 million compared to $298.4 million in the same quarter last year.  By segment, sales increased 0.9 percent in Identification Solutions and decreased 12.2 percent in Workplace Safety, which consisted of organic sales growth of 4.0 percent in Identification Solutions and an organic sales decline of 1.6 percent in Workplace Safety.

Nine-Month Period Ended April 30, 2019 Financial Results:
Income before income taxes increased 10.1 percent, finishing at $117.6 million for the nine-month period ended April 30, 2019, compared to $106.8 million in the same period last year.

Net income for the nine-month period ended April 30, 2019 was $94.6 million compared to $56.1 million in the same period last year.  During the nine-month period ended April 30, 2019, net income was impacted by a reduced income tax rate of 19.5 percent primarily due to certain audit settlements in the current quarter.  The prior nine-month period ended April 30, 2018 was impacted by tax charges of $21.1 million primarily related to the passage of the U.S. Tax Cuts and Jobs Act of 2017. 

Earnings per diluted Class A Nonvoting Common Share were $1.78 for the nine-month period ended April 30, 2019, compared to $1.07 in the same period last year.  During the nine-month period ended April 30, 2018, earnings per diluted Class A Nonvoting Common Share were reduced by approximately $0.40 from tax charges primarily related to the enactment of U.S. tax legislation.

Sales for the nine-month period ended April 30, 2019 decreased 1.3 percent, which consisted of organic sales growth of 3.1 percent, a decrease in sales of 2.8 percent from foreign currency translation, and a decline in sales of 1.6 percent from the divestiture of a business during the fourth quarter of fiscal 2018.  Sales for the nine-month period ended April 30, 2019 were $865.4 million compared to $876.4 million in the same period last year.  By segment, sales increased 2.1 percent in Identification Solutions and decreased 9.7 percent in Workplace Safety, which consisted of organic sales growth of 4.4 percent in Identification Solutions and an organic sales decline of 0.2 percent in Workplace Safety.

Commentary:
“Our continued focus on organic sales growth through the development of innovative new products that generate value for our customers and solve their problems while providing strong customer service is working as we posted our eighth consecutive quarter of organic sales growth,” said Brady’s President and Chief Executive Officer, J. Michael Nauman.  “Organic sales growth along with the execution of sustainable efficiency gains throughout our SG&A structure is once again the driver of our year-over-year pre-tax income growth.  We remain committed to our investments in automation in our manufacturing facilities, our digital presence, and in the development of innovative new products.  We’re taking actions today that we believe will result in continued long-term improvement in our financial results and will drive shareholder value.”

“Our balance sheet and cash position are strong.  We have over $238 million of cash on hand and are in a net cash position of $188.1 million at April 30, 2019,” said Brady’s Chief Financial Officer, Aaron Pearce.  “We generated $52.7 million of cash flow from operating activities this quarter, we invested $5.4 million in capital expenditures, and we returned $11.2 million to our shareholders in the form of dividends.  Our balance sheet provides significant flexibility to invest in growth opportunities while returning cash to our shareholders through dividends and opportunistic share buybacks.”

Fiscal 2019 Guidance:
The Company is increasing its full year fiscal 2019 Earnings per diluted Class A Nonvoting Common Share guidance from its previous range of $2.25 to $2.35 to a range of $2.35 to $2.40.  Included in this guidance is organic sales growth of approximately 3.0 percent, a fourth quarter income tax rate in the mid-20 percent range, depreciation and amortization expense of approximately $24 million, and capital expenditures of approximately $28 to $30 million during the year ending July 31, 2019.  This guidance is based upon foreign exchange rates as of April 30, 2019.

A webcast regarding Brady’s fiscal 2019 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, 2018, employed approximately 6,200 people in its worldwide businesses.  Brady’s fiscal 2018 sales were approximately $1.17 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; Brady’s ability to retain large customers; 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; Brady’s ability to execute facility consolidations and maintain acceptable operational service metrics; 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; Brady’s ability to meet certain financial covenants required by our debt agreements; 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, 2018.

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 April 30,   Nine months ended April 30,
    2019       2018       2019       2018  
Net sales $   289,745     $   298,421     $   865,367     $   876,352  
Cost of goods sold    143,996        147,339        433,269        435,513  
Gross margin    145,749        151,082        432,098        440,839  
Operating expenses:              
Research and development    11,437        11,678        33,837        33,512  
Selling, general and administrative    94,691        101,695        281,988        299,411  
Total operating expenses    106,128        113,373        315,825        332,923  
               
Operating income     39,621        37,709        116,273        107,916  
               
Other income (expense):              
Investment and other income    2,065        31        3,425        1,303  
Interest expense    (708 )      (761 )      (2,137 )      (2,453 )
               
Income before income taxes    40,978        36,979        117,561        106,766  
               
Income tax expense    6,197        10,979        22,916        50,657  
               
Net income $   34,781     $   26,000     $   94,645     $   56,109  
               
Net income per Class A Nonvoting Common Share:              
Basic  $   0.66     $   0.50     $   1.80     $   1.09  
Diluted  $   0.65     $   0.49     $   1.78     $   1.07  
Dividends $   0.21     $   0.21     $   0.64     $   0.62  
               
Net income per Class B Voting Common Share:              
Basic  $   0.66     $   0.50     $   1.79     $   1.07  
Diluted  $   0.65     $   0.49     $   1.76     $   1.05  
Dividends $   0.21     $   0.21     $   0.62     $   0.61  
               
Weighted average common shares outstanding (in thousands):              
Basic    52,766        51,747        52,499        51,628  
Diluted    53,480        52,729        53,215        52,610  
               

 

BRADY CORPORATION AND SUBSIDIARIES      
CONSOLIDATED BALANCE SHEETS      
(Dollars in thousands)      
       
  April 30, 2019   July 31, 2018
  (Unaudited)    
ASSETS      
Current assets:      
Cash and cash equivalents $   238,432     $   181,427  
Accounts receivable—net    162,094        161,282  
Inventories    119,895        113,071  
Prepaid expenses and other current assets    18,746        15,559  
  Total current assets    539,167        471,339  
Property, plant and equipment—net    99,491        97,945  
Goodwill    412,378        419,815  
Other intangible assets    38,135        42,588  
Deferred income taxes    7,068        7,582  
Other    19,638        17,662  
Total $   1,115,877     $   1,056,931  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $   64,584     $   66,538  
Wages and amounts withheld from employees    52,849        67,619  
Taxes, other than income taxes    7,886        8,318  
Accrued income taxes    4,378        3,885  
Other current liabilities    48,169        44,567  
  Total current liabilities    177,866        190,927  
Long-term obligations    50,303        52,618  
Other liabilities    63,164        61,274  
  Total liabilities    291,333        304,819  
Stockholders’ equity:      
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 49,284,372 and 48,393,617 shares, respectively    513        513  
Class B voting common stock—Issued and outstanding, 3,538,628 shares    35        35  
Additional paid-in capital    330,051        325,631  
Retained earnings    612,474        553,454  
Treasury stock—1,977,115 and 2,867,870 shares, respectively, of Class A nonvoting common stock, at cost    (50,083 )      (71,120 )
Accumulated other comprehensive loss    (68,446 )      (56,401 )
  Total stockholders’ equity    824,544        752,112  
Total $   1,115,877     $   1,056,931  
       

 

BRADY CORPORATION AND SUBSIDIARIES      
CONSOLIDATED STATEMENTS OF CASH FLOWS      
(Unaudited; Dollars in thousands)      
  Nine months ended April 30,
    2019       2018  
Operating activities:      
Net income $   94,645     $   56,109  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization    17,836        19,047  
Non-cash portion of stock-based compensation expense    10,311        7,581  
Deferred income taxes    3,796        26,501  
Changes in operating assets and liabilities:      
  Accounts receivable    332        (10,710 )
  Inventories    (9,254 )      (7,790 )
  Prepaid expenses and other assets    (2,204 )      480  
  Accounts payable and other liabilities    (19,176 )      (133 )
  Income taxes    616        (1,863 )
      Net cash provided by operating activities    96,902        89,222  
       
Investing activities:      
Purchases of property, plant and equipment    (17,528 )      (14,755 )
Other    (1,810 )      (197 )
      Net cash used in investing activities    (19,338 )      (14,952 )
       
Financing activities:      
Payment of dividends    (33,488 )      (32,110 )
Proceeds from exercise of stock options    20,333        10,011  
Proceeds from borrowing on credit facilities    13,637        17,439  
Repayment of borrowing on credit facilities    (13,568 )      (69,012 )
Other    (5,185 )      (3,622 )
      Net cash used in financing activities    (18,271 )      (77,294 )
       
Effect of exchange rate changes on cash    (2,288 )      (17 )
       
Net increase (decrease) in cash and cash equivalents    57,005        (3,041 )
Cash and cash equivalents, beginning of period    181,427        133,944  
       
Cash and cash equivalents, end of period $   238,432     $   130,903  
       

 

BRADY CORPORATION AND SUBSIDIARIES              
SEGMENT INFORMATION              
(Unaudited; Dollars in thousands)              
               
  Three months ended April 30,   Nine months ended April 30,
    2019       2018       2019       2018  
NET SALES              
ID Solutions $   213,979     $   212,154     $   641,283     $   628,291  
Workplace Safety     75,766         86,267         224,084         248,061  
Total $   289,745     $   298,421     $   865,367     $   876,352  
               
SALES INFORMATION              
ID Solutions              
Organic   4.0 %     3.7 %     4.4 %     3.7 %
Currency   (3.1 )%     4.1 %     (2.3 )%     3.0 %
Total   0.9 %     7.8 %     2.1 %     6.7 %
Workplace Safety              
Organic   (1.6 )%     1.7 %     (0.2 )%     (0.1 )%
Currency   (5.3 )%     7.4 %     (3.7 )%     5.7 %
Divestitures   (5.3 )%     %     (5.8 )%     %
Total   (12.2 )%     9.1 %     (9.7 )%     5.6 %
Total Company              
Organic    2.4 %     3.2 %     3.1 %     2.7 %
Currency   (3.8 )%     5.0 %     (2.8 )%     3.6 %
Divestitures   (1.5 )%     %     (1.6 )%     %
Total   (2.9 )%     8.2 %     (1.3 )%     6.3 %
               
SEGMENT PROFIT              
ID Solutions $   39,892     $   36,970     $   119,311     $   106,896  
Workplace Safety     6,099         7,537         16,301         21,037  
Total $   45,991     $   44,507     $   135,612     $   127,933  
SEGMENT PROFIT AS A PERCENT OF NET SALES              
ID Solutions   18.6 %     17.4 %     18.6 %     17.0 %
Workplace Safety   8.0 %     8.7 %     7.3 %     8.5 %
Total   15.9 %     14.9 %     15.7 %     14.6 %
               
               
  Three months ended April 30,   Nine months ended April 30,
    2019       2018       2019       2018  
Total segment profit $   45,991     $   44,507     $   135,612     $   127,933  
Unallocated amounts:              
Administrative costs     (6,370 )       (6,798 )       (19,339 )       (20,017 )
Investment and other income     2,065         31         3,425         1,303  
Interest expense     (708 )       (761 )       (2,137 )       (2,453 )
Income before income taxes $   40,978     $   36,979     $   117,561     $   106,766  
               


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