Brady Corporation Reports Fiscal 2020 Fourth Quarter Results

Brady Corporation Reports Fiscal 2020 Fourth Quarter Results

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  • 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.

/EIN News/ — 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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