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

  • Organic revenues increased 2.3 percent in the second quarter of fiscal 2019.
  • Earnings before income taxes increased 4.8 percent to $36.7 million in the second quarter of fiscal 2019 compared to $35.0 million in the same quarter of the prior year.
  • Earnings per diluted Class A Nonvoting Common Share were $0.55 in the second quarter of fiscal 2019 compared to $0.08 in the same quarter of the prior year.  Results in the same quarter of the prior year were reduced by approximately $0.40 due to income tax charges primarily related to U.S. tax legislation that was enacted in December 2017.
  • Diluted EPS guidance for the full year ending July 31, 2019 was increased to a range of $2.25 to $2.35 from the previous range of $2.20 to $2.30.

MILWAUKEE, Feb. 21, 2019 (GLOBE NEWSWIRE) -- Brady Corporation (BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2019 second quarter ended January 31, 2019.

Quarter Ended January 31, 2019 Financial Results:
Earnings before income taxes increased 4.8 percent to $36.7 million for the quarter ended January 31, 2019, compared to $35.0 million in the same quarter last year.

Net earnings for the quarter ended January 31, 2019 were $29.2 million compared to $4.3 million in the same quarter last year.  Net earnings during the prior year quarter ended January 31, 2018 were reduced by $21.1 million due to income tax charges primarily related to the passage of the U.S. Tax Cuts and Jobs Act of 2017. 

Net earnings per diluted Class A Nonvoting Common Share were $0.55 for the second quarter of fiscal 2019 compared to $0.08 in the same quarter last year.  The impact on income tax expense for the prior year quarter ended January 31, 2018 from tax charges primarily related to the enactment of the U.S. tax legislation was a reduction in earnings per diluted share of approximately $0.40. 

Sales for the quarter ended January 31, 2019 decreased 1.9 percent, which consisted of organic sales growth of 2.3 percent, a decrease in sales of 2.6 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 quarter ended January 31, 2019 were $282.4 million compared to $287.8 million in the same quarter last year.  By segment, sales increased 1.3 percent in Identification Solutions and decreased 10.0 percent in Workplace Safety, which consisted of organic sales growth of 3.6 percent in Identification Solutions and an organic sales decline of 0.9 percent in Workplace Safety.

Six-Month Period Ended January 31, 2019 Financial Results:
Earnings before income taxes increased 9.7 percent to $76.6 million for the six-month period ended January 31, 2019, compared to $69.8 million for the six-month period ended January 31, 2018.

Net earnings for the six-month period ended January 31, 2019 were $59.9 million compared to $30.1 million for the six-month period ended January 31, 2018.  Net earnings during the prior year six-month period ended January 31, 2018 were reduced by $21.1 million due to income tax charges primarily related to the enactment of the U.S. tax legislation. 

Net earnings per diluted Class A Nonvoting Common Share were $1.13 for the six-month period ended January 31, 2019 compared to $0.57 in the same six-month period last year.  The impact on income tax expense for the prior six-month period ended January 31, 2018 from tax charges primarily related to the enactment of the U.S. tax legislation was a reduction in diluted EPS of approximately $0.40.

Sales for the six-month period ended January 31, 2019 decreased 0.4 percent, which consisted of organic sales growth of 3.5 percent, a decrease in sales of 2.2 percent from foreign currency translation, and a reduction in sales of 1.7 percent from the divestiture of a business during the fourth quarter of 2018.  Sales for the six-month period ended January 31, 2019 were $575.6 million compared to $577.9 million in the same six-month period last year.  By segment, sales increased 2.7 percent in Identification Solutions and decreased 8.3 percent in Workplace Safety, which consisted of organic sales growth of 4.6 percent in Identification Solutions and 0.6 percent in Workplace Safety.

Commentary:
“Our investment in the development of innovative, high-quality products is paying off as we continue to grow organic sales and improve our new product pipeline.  This organic growth, combined with our focus on driving efficiencies throughout our factories and our selling, general, and administrative structure are driving our pre-tax profit improvements,” said Brady’s President and Chief Executive Officer, J. Michael Nauman.  “Our focus is on a consistent set of priorities, which are to continue to invest in innovative new products to grow organic sales, to invest in automation in our manufacturing facilities, to drive sustainable efficiencies throughout our operations and SG&A structure, and to improve our underperforming businesses.  We remain committed to taking actions today that we believe will result in continued long-term improvement in our financial results.”

“Brady’s cash position and balance sheet remain strong.  At January 31, 2019 we had over $200 million of cash on hand and are in a net cash position of $150.6 million,” said Brady’s Chief Financial Officer, Aaron Pearce.  “During the quarter, we continued our commitment of investing back into our business to drive organic sales growth by increasing our investment in new machinery, equipment, and facilities by 31.1 percent when compared to the same quarter in the prior year.  We invested over $11 million in research and development and remain on track to increase research and development spend by approximately 6 percent for the year ending July 31, 2019.  We also returned $11.2 million to our shareholders in the form of dividends and repurchased $1.3 million of stock in the quarter.  Our balance sheet provides flexibility to invest in growth opportunities to drive long-term value for our shareholders.”

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 $2.20 to $2.30 to a range of $2.25 to $2.35.  Included in this guidance is organic sales growth of 3.0 percent to 5.0 percent, a full-year income tax rate of 22 percent to 24 percent, and depreciation and amortization expense of approximately $26 million.  The Company expects to achieve efficiency gains in its manufacturing facilities and in selling, general and administrative expenses while continuing to increase investments in research and development.  Capital expenditures are anticipated to be approximately $30 million to $35 million during the year ending July 31, 2019.  This guidance is based upon foreign currency exchange rates as of January 31, 2019.

A webcast regarding Brady’s fiscal 2019 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, 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 EARNINGS                              
(Unaudited; Dollars in thousands, except per share data)                              
                               
  Three months ended January 31,   Six months ended January 31,
  2019   2018   2019   2018
Net sales $ 282,426     $ 287,780     $ 575,622     $ 577,931  
Cost of products sold   142,616       144,088       289,273       288,174  
Gross margin   139,810       143,692       286,349       289,757  
Operating expenses:                              
Research and development   11,074       11,314       22,400       21,834  
Selling, general and administrative   92,706       97,582       187,297       197,716  
Total operating expenses   103,780       108,896       209,697       219,550  
                               
Operating income   36,030       34,796       76,652       70,207  
                               
Other income (expense):                              
Investment and other income   1,377       1,056       1,360       1,272  
Interest expense   (717 )     (829 )     (1,429 )     (1,692 )
                               
Earnings before income taxes   36,690       35,023       76,583       69,787  
                               
Income tax expense   7,463       30,750       16,719       39,678  
                               
Net earnings $ 29,227     $ 4,273     $ 59,864     $ 30,109  
                               
Net earnings per Class A Nonvoting Common Share:                              
Basic $ 0.56     $ 0.08     $ 1.14     $ 0.58  
Diluted $ 0.55     $ 0.08     $ 1.13     $ 0.57  
Dividends $ 0.21     $ 0.21     $ 0.43     $ 0.42  
                               
Net earnings per Class B Voting Common Share:                              
Basic $ 0.56     $ 0.08     $ 1.13     $ 0.57  
Diluted $ 0.55     $ 0.08     $ 1.11     $ 0.56  
Dividends $ 0.21     $ 0.21     $ 0.41     $ 0.40  
                               
Weighted average common shares outstanding (in thousands):                              
Basic   52,532       51,698       52,366       51,569  
Diluted   53,206       52,719       53,082       52,551  
                               

 

BRADY CORPORATION AND SUBSIDIARIES              
CONSOLIDATED BALANCE SHEETS              
(Dollars in thousands)              
               
  January 31, 2019   July 31, 2018
    (Unaudited)          
ASSETS              
Current assets:              
Cash and cash equivalents $ 202,209     $ 181,427  
Accounts receivable—net   161,981       161,282  
Inventories   118,519       113,071  
Prepaid expenses and other current assets   18,973       15,559  
Total current assets   501,682       471,339  
Property, plant and equipment—net   99,378       97,945  
Goodwill   417,240       419,815  
Other intangible assets   39,652       42,588  
Deferred income taxes   7,076       7,582  
Other   18,312       17,662  
Total $ 1,083,340     $ 1,056,931  
LIABILITIES AND STOCKHOLDERS’ EQUITY              
Current liabilities:              
Accounts payable $ 60,504     $ 66,538  
Wages and amounts withheld from employees   41,510       67,619  
Taxes, other than income taxes   7,145       8,318  
Accrued income taxes   4,426       3,885  
Other current liabilities   50,103       44,567  
Total current liabilities   163,688       190,927  
Long-term obligations   51,610       52,618  
Other liabilities   64,661       61,274  
Total liabilities   279,959       304,819  
Stockholders’ equity:              
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 49,101,192 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   328,978       325,631  
Retained earnings   588,918       553,454  
Treasury stock—2,160,295 and 2,867,870 shares, respectively, of Class A nonvoting common stock, at cost   (54,498 )     (71,120 )
Accumulated other comprehensive loss   (60,565 )     (56,401 )
Total stockholders’ equity   803,381       752,112  
Total $ 1,083,340     $ 1,056,931  
               

 

BRADY CORPORATION AND SUBSIDIARIES              
CONSOLIDATED STATEMENTS OF CASH FLOWS              
(Unaudited; Dollars in thousands)              
  Six months ended January 31,
  2019   2018
Operating activities:              
Net earnings $ 59,864     $ 30,109  
Adjustments to reconcile net earnings to net cash provided by operating activities:              
Depreciation and amortization   11,909       12,840  
Non-cash portion of stock-based compensation expense   7,805       5,897  
Deferred income taxes   4,423       26,028  
Changes in operating assets and liabilities:              
Accounts receivable   2,562       (10,945 )
Inventories   (6,602 )     (4,150 )
Prepaid expenses and other assets   (2,310 )     (3,153 )
Accounts payable and other liabilities   (34,055 )     (12,695 )
Income taxes   592       (1,471 )
Net cash provided by operating activities   44,188       42,460  
               
Investing activities:              
Purchases of property, plant and equipment   (12,127 )     (8,469 )
Other   (452 )     (729 )
Net cash used in investing activities   (12,579     (9,198
               
Financing activities:              
Payment of dividends   (22,263 )     (21,373 )
Proceeds from exercise of stock options   17,317       9,948  
Proceeds from borrowing on credit facilities   5,737       17,439  
Repayment of borrowing on credit facilities   (5,688 )     (57,314 )
Other   (5,154 )     (2,342 )
Net cash used in financing activities   (10,051 )     (53,642 )
               
Effect of exchange rate changes on cash   (776 )     1,763  
               
Net increase (decrease) in cash and cash equivalents   20,782       (18,617 )
Cash and cash equivalents, beginning of period   181,427       133,944  
               
Cash and cash equivalents, end of period $ 202,209     $ 115,327  
               

 

BRADY CORPORATION AND SUBSIDIARIES                              
SEGMENT INFORMATION                              
(Unaudited; Dollars in thousands)                              
                               
  Three months ended January 31,   Six months ended January 31,
  2019   2018   2019   2018
NET SALES                              
ID Solutions $ 209,205     $ 206,432     $ 427,304     $ 416,137  
Workplace Safety   73,221       81,348       148,318       161,794  
Total $ 282,426     $ 287,780     $ 575,622     $ 577,931  
                               
SALES INFORMATION                              
ID Solutions                              
Organic   3.6 %     4.7 %     4.6 %     3.8 %
Currency   (2.3 )%     3.4 %     (1.9 )%     2.3 %
Total   1.3 %     8.1 %     2.7 %     6.1 %
Workplace Safety                              
Organic   (0.9 )%     (0.5 )%     0.6 %     (1.0 )%
Currency   (3.3 )%     6.1 %     (2.9 )%     4.7 %
Divestitures   (5.8 )%     %     (6.0 )%     %
Total   (10.0 )%     5.6 %     (8.3 )%     3.7 %
Total Company                              
Organic   2.3 %     3.2 %     3.5 %     2.4 %
Currency   (2.6 )%     4.2 %     (2.2 )%     3.0 %
Divestitures   (1.6 )%     %     (1.7 )%     %
Total   (1.9 )%     7.4 %     (0.4 )%     5.4 %
                               
SEGMENT PROFIT                              
ID Solutions $ 37,857     $ 34,088     $ 79,419     $ 69,925  
Workplace Safety   4,661       7,055       10,202       13,500  
Total $ 42,518     $ 41,143     $ 89,621     $ 83,425  
SEGMENT PROFIT AS A PERCENT OF NET SALES                              
ID Solutions   18.1 %     16.5 %     18.6 %     16.8 %
Workplace Safety   6.4 %     8.7 %     6.9 %     8.3 %
Total   15.1 %     14.3 %     15.6 %     14.4 %
                               
                               
  Three months ended January 31,   Six months ended January 31,
  2019   2018   2019   2018
Total segment profit $ 42,518     $ 41,143     $ 89,621     $ 83,425  
Unallocated amounts:                              
Administrative costs   (6,488 )     (6,347 )     (12,969 )     (13,218 )
Investment and other income   1,377       1,056       1,360       1,272  
Interest expense   (717 )     (829 )     (1,429 )     (1,692 )
Earnings before income taxes $ 36,690     $ 35,023     $ 76,583     $ 69,787  
                               

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