Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world
leader in identification solutions, today reported its financial
results for its fiscal 2021 first quarter ended October 31, 2020.
Quarter Ended October
31, 2020
Financial Results:Income before
income taxes and losses of unconsolidated affiliate increased 1.6
percent to $42.2 million for the quarter ended October 31, 2020,
compared to $41.6 million in the same quarter last
year.
Net income for the quarter ended October 31, 2020 declined 10.7
percent to $33.5 million compared to $37.5 million in the same
quarter last year. Earnings per diluted Class A Nonvoting Common
Share were $0.64 for the first quarter of fiscal 2021, compared to
$0.70 in the same quarter last year. Net income and earnings per
diluted Class A Nonvoting Common Share in the first quarter of last
year were positively impacted by a reduced income tax rate of 9.8
percent primarily due to a favorable tax audit settlement and tax
benefits from equity-based compensation.
Sales for the quarter ended October 31, 2020 declined 3.4
percent, which consisted of an organic sales decline of 4.9 percent
and an increase of 1.5 percent from foreign currency translation.
Sales for the quarter ended October 31, 2020 were $277.2 million
compared to $286.9 million in the same quarter last year. By
segment, sales declined 7.8 percent in Identification Solutions and
increased 9.8 percent in Workplace Safety, which consisted of an
organic sales decline of 8.4 percent in Identification Solutions
and organic sales growth of 5.5 percent in Workplace Safety.
Commentary:“We experienced a
steady improvement in sales volumes as the global economy slowly
healed throughout our first quarter. Sales improved in each of the
last six months and we expanded our customer base in our Workplace
Safety business by providing the high-quality products and the
service levels that our customers have come to expect,” said
Brady’s President and Chief Executive Officer, J. Michael Nauman.
“This quarter, we saw demand in our Identification Solutions
business improve while our Workplace Safety business had another
strong quarter with organic sales increasing more than 5 percent.
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. Even with the negative impacts from the
COVID-19 pandemic, we increased pre-tax income this quarter as a
result of our focus on executing sustainable efficiency gains. Our
ongoing investments in sales, marketing, and new product
development combined with our reduced cost structure position us to
drive substantial profit improvements when demand increases in
industrial end-markets.”
“Brady is financially strong and continues to generate
significant cash flow. As of October 31, 2020, we had $256.3
million of cash on hand and no outstanding debt,” said Brady’s
Chief Financial Officer, Aaron Pearce. “We generated $62.8 million
of cash flow from operating activities this quarter, which was an
increase of 61.8 percent compared to last year’s first quarter, and
we returned $14.1 million to our shareholders in the form of
dividends and share buybacks. We are generating operating cash flow
in excess of net income and we have a balance sheet that allows us
to make the investments necessary to drive future revenue and
earnings growth while paying a solid dividend. Although we are
seeing some reduction in demand for products specifically designed
to help in the fight of COVID-19 and there are macro-economic
challenges caused by additional government lockdowns that will
impact our financial results for the quarter ending January 31,
2021, Brady’s strong balance sheet and cash generation position us
extremely well for future financial success as industrial
production improves.”
A webcast regarding Brady’s fiscal 2021 first 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
414-438-6887Media contact: Kate Venne 414-358-5176
BRADY CORPORATION AND SUBSIDIARIES |
|
|
|
|
CONSOLIDATED STATEMENTS OF EARNINGS |
|
|
|
|
(Unaudited;
Dollars in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
Three months ended October 31, |
|
|
|
2020 |
|
|
|
2019 |
|
|
Net
sales |
$ |
277,227 |
|
|
$ |
286,947 |
|
|
Cost of
goods sold |
|
141,799 |
|
|
|
145,542 |
|
|
Gross margin |
|
135,428 |
|
|
|
141,405 |
|
|
Operating
expenses: |
|
|
|
|
Research and development |
|
10,203 |
|
|
|
10,967 |
|
|
Selling, general and administrative |
|
83,037 |
|
|
|
89,547 |
|
|
Total
operating expenses |
|
93,240 |
|
|
|
100,514 |
|
|
|
|
|
|
|
Operating
income |
|
42,188 |
|
|
|
40,891 |
|
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
Investment and other income |
|
155 |
|
|
|
1,380 |
|
|
Interest expense |
|
(106 |
) |
|
|
(701 |
) |
|
|
|
|
|
|
Income
before income taxes and losses of unconsolidated affiliate |
|
42,237 |
|
|
|
41,570 |
|
|
|
|
|
|
|
Income tax
expense |
|
8,582 |
|
|
|
4,072 |
|
|
|
|
|
|
|
Income
before losses of unconsolidated affiliate |
|
33,655 |
|
|
|
37,498 |
|
|
Equity in
losses of unconsolidated affiliate |
|
(174 |
) |
|
|
— |
|
|
|
|
|
|
|
Net
income |
$ |
33,481 |
|
|
$ |
37,498 |
|
|
|
|
|
|
|
Net income
per Class A Nonvoting Common Share: |
|
|
|
|
Basic |
$ |
0.64 |
|
|
$ |
0.71 |
|
|
Diluted |
$ |
0.64 |
|
|
$ |
0.70 |
|
|
Dividends |
$ |
0.22 |
|
|
$ |
0.22 |
|
|
|
|
|
|
|
Net income
per Class B Voting Common Share: |
|
|
|
|
Basic |
$ |
0.63 |
|
|
$ |
0.69 |
|
|
Diluted |
$ |
0.62 |
|
|
$ |
0.68 |
|
|
Dividends |
$ |
0.20 |
|
|
$ |
0.20 |
|
|
|
|
|
|
|
Weighted
average common shares outstanding: |
|
|
|
|
Basic |
|
52,021 |
|
|
|
53,143 |
|
|
Diluted |
|
52,292 |
|
|
|
53,736 |
|
|
|
|
|
|
|
BRADY CORPORATION AND SUBSIDIARIES |
|
|
|
|
CONSOLIDATED BALANCE SHEETS |
|
|
|
|
(Dollars in
thousands) |
|
|
|
|
|
|
|
|
|
|
October 31, 2020 |
|
July 31, 2020 |
|
|
(Unaudited) |
|
|
|
ASSETS |
|
|
|
|
Current
assets: |
|
|
|
|
Cash and cash equivalents |
$ |
256,333 |
|
|
$ |
217,643 |
|
|
Accounts receivable, net of allowance for credit losses of $7,704
and $7,157, respectively |
|
156,735 |
|
|
|
146,181 |
|
|
Inventories |
|
120,220 |
|
|
|
135,662 |
|
|
Prepaid expenses and other current assets |
|
11,489 |
|
|
|
9,962 |
|
|
Total current assets |
|
544,777 |
|
|
|
509,448 |
|
|
Property,
plant and equipment—net |
|
119,960 |
|
|
|
115,068 |
|
|
Goodwill |
|
412,718 |
|
|
|
416,034 |
|
|
Other
intangible assets |
|
20,910 |
|
|
|
22,334 |
|
|
Deferred
income taxes |
|
8,976 |
|
|
|
8,845 |
|
|
Operating
lease assets |
|
41,013 |
|
|
|
41,899 |
|
|
Other
assets |
|
27,353 |
|
|
|
28,838 |
|
|
Total |
$ |
1,175,707 |
|
|
$ |
1,142,466 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts payable |
$ |
62,907 |
|
|
$ |
62,547 |
|
|
Accrued compensation and benefits |
|
55,410 |
|
|
|
41,546 |
|
|
Taxes, other than income taxes |
|
8,497 |
|
|
|
8,057 |
|
|
Accrued income taxes |
|
10,707 |
|
|
|
8,652 |
|
|
Current operating lease liabilities |
|
16,097 |
|
|
|
15,304 |
|
|
Other current liabilities |
|
51,343 |
|
|
|
49,782 |
|
|
Total current liabilities |
|
204,961 |
|
|
|
185,888 |
|
|
Long-term
operating lease liabilities |
|
29,951 |
|
|
|
31,982 |
|
|
Other
liabilities |
|
60,394 |
|
|
|
61,524 |
|
|
Total liabilities |
|
295,306 |
|
|
|
279,394 |
|
|
Stockholders’ equity: |
|
|
|
|
Common stock: |
|
|
|
|
Class A nonvoting common stock—Issued 51,261,487 shares, and
outstanding 48,497,649 and 48,456,954 shares, respectively |
|
513 |
|
|
|
513 |
|
|
Class B voting common stock—Issued and outstanding, 3,538,628
shares |
|
35 |
|
|
|
35 |
|
|
Additional paid-in capital |
|
332,121 |
|
|
|
331,761 |
|
|
Retained earnings |
|
726,546 |
|
|
|
704,456 |
|
|
Treasury stock—2,763,838 and 2,804,533 shares, respectively, of
Class A nonvoting common stock, at cost |
|
(109,146 |
) |
|
|
(107,216 |
) |
|
Accumulated other comprehensive loss |
|
(69,668 |
) |
|
|
(66,477 |
) |
|
Total stockholders’ equity |
|
880,401 |
|
|
|
863,072 |
|
|
Total |
$ |
1,175,707 |
|
|
$ |
1,142,466 |
|
|
|
|
|
|
|
BRADY CORPORATION AND SUBSIDIARIES |
|
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
|
|
|
(Unaudited;
Dollars in thousands) |
|
|
|
|
|
Three months ended October 31, |
|
|
|
2020 |
|
|
|
2019 |
|
|
Operating
activities: |
|
|
|
|
Net income |
$ |
33,481 |
|
|
$ |
37,498 |
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
|
5,635 |
|
|
|
5,634 |
|
|
Stock-based compensation expense |
|
3,574 |
|
|
|
3,618 |
|
|
Deferred income taxes |
|
(1,175 |
) |
|
|
1,009 |
|
|
Equity in losses of unconsolidated affiliate |
|
174 |
|
|
|
— |
|
|
Other |
|
(266 |
) |
|
|
1,533 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
Accounts receivable |
|
(11,371 |
) |
|
|
(4,362 |
) |
|
Inventories |
|
14,758 |
|
|
|
249 |
|
|
Prepaid expenses and other assets |
|
(1,398 |
) |
|
|
(1,404 |
) |
|
Accounts payable and accrued liabilities |
|
17,363 |
|
|
|
(5,193 |
) |
|
Income taxes |
|
2,063 |
|
|
|
266 |
|
|
Net cash provided by
operating activities |
|
62,838 |
|
|
|
38,848 |
|
|
|
|
|
|
|
Investing
activities: |
|
|
|
|
Purchases of property, plant and equipment |
|
(9,321 |
) |
|
|
(7,724 |
) |
|
Other |
|
119 |
|
|
|
527 |
|
|
Net cash used in investing
activities |
|
(9,202 |
) |
|
|
(7,197 |
) |
|
|
|
|
|
|
Financing
activities: |
|
|
|
|
Payment of dividends |
|
(11,391 |
) |
|
|
(11,533 |
) |
|
Proceeds from exercise of stock options |
|
160 |
|
|
|
3,411 |
|
|
Payments for employee taxes withheld from stock-based awards |
|
(2,617 |
) |
|
|
(7,269 |
) |
|
Purchase of treasury stock |
|
(2,720 |
) |
|
|
— |
|
|
Other |
|
17 |
|
|
|
65 |
|
|
Net cash used in financing
activities |
|
(16,551 |
) |
|
|
(15,326 |
) |
|
|
|
|
|
|
Effect of
exchange rate changes on cash |
|
1,605 |
|
|
|
(304 |
) |
|
|
|
|
|
|
Net increase
in cash and cash equivalents |
|
38,690 |
|
|
|
16,021 |
|
|
Cash and
cash equivalents, beginning of period |
|
217,643 |
|
|
|
279,072 |
|
|
|
|
|
|
|
Cash and
cash equivalents, end of period |
$ |
256,333 |
|
|
$ |
295,093 |
|
|
|
|
|
|
|
BRADY CORPORATION AND SUBSIDIARIES |
|
|
|
|
SEGMENT INFORMATION |
|
|
|
|
(Unaudited;
Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
Three months ended October 31, |
|
|
|
2020 |
|
|
|
2019 |
|
|
NET
SALES |
|
|
|
|
ID Solutions |
$ |
198,192 |
|
|
$ |
214,987 |
|
|
Workplace Safety |
|
79,035 |
|
|
|
71,960 |
|
|
Total |
$ |
277,227 |
|
|
$ |
286,947 |
|
|
|
|
|
|
|
SALES INFORMATION |
|
|
|
|
ID
Solutions |
|
|
|
|
Organic |
|
(8.4 |
)% |
|
|
(0.2 |
)% |
|
Currency |
|
0.6 |
% |
|
|
(1.2 |
)% |
|
Total |
|
(7.8 |
)% |
|
|
(1.4 |
)% |
|
Workplace Safety |
|
|
|
|
Organic |
|
5.5 |
% |
|
|
(0.8 |
)% |
|
Currency |
|
4.3 |
% |
|
|
(3.4 |
)% |
|
Total |
|
9.8 |
% |
|
|
(4.2 |
)% |
|
Total Company |
|
|
|
|
Organic |
|
(4.9 |
)% |
|
|
(0.4 |
)% |
|
Currency |
|
1.5 |
% |
|
|
(1.7 |
)% |
|
Total |
|
(3.4 |
)% |
|
|
(2.1 |
)% |
|
|
|
|
|
|
SEGMENT PROFIT |
|
|
|
|
ID Solutions |
$ |
40,279 |
|
|
$ |
42,443 |
|
|
Workplace Safety |
|
7,988 |
|
|
|
5,157 |
|
|
Total |
$ |
48,267 |
|
|
$ |
47,600 |
|
|
SEGMENT PROFIT AS A PERCENT OF NET SALES |
|
|
|
|
ID Solutions |
|
20.3 |
% |
|
|
19.7 |
% |
|
Workplace Safety |
|
10.1 |
% |
|
|
7.2 |
% |
|
Total |
|
17.4 |
% |
|
|
16.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended October 31, |
|
|
|
2020 |
|
|
|
2019 |
|
|
Total
segment profit |
$ |
48,267 |
|
|
$ |
47,600 |
|
|
Unallocated
amounts: |
|
|
|
|
Administrative costs |
|
(6,079 |
) |
|
|
(6,709 |
) |
|
Investment and other income |
|
155 |
|
|
|
1,380 |
|
|
Interest expense |
|
(106 |
) |
|
|
(701 |
) |
|
Income
before income taxes and losses of unconsolidated affiliate |
$ |
42,237 |
|
|
$ |
41,570 |
|
|
|
|
|
|
|
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