Brady Corporation (NYSE: 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
414-438-6887Media contact: Kate Venne 414-358-5176
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