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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 (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