Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world
leader in identification solutions, today reported its financial
results for its fiscal 2021 second quarter ended January 31, 2021.
Quarter Ended January 31, 2021 Financial
Results:
Income before income taxes and losses of unconsolidated
affiliate decreased 7.0 percent to $39.4 million for the quarter
ended January 31, 2021, compared to $42.4 million in the same
quarter last year.
Net income for the quarter ended January 31, 2021 declined 8.0
percent to $30.9 million compared to $33.6 million in the same
quarter last year. Earnings per diluted Class A Nonvoting Common
Share were $0.59 for the second quarter of fiscal 2021, compared to
$0.62 in the same quarter last year.
Sales for the quarter ended January 31, 2021 declined 3.9
percent, which consisted of an organic sales decline of 6.3 percent
and an increase of 2.4 percent from foreign currency translation.
Sales for the quarter ended January 31, 2021 were $265.8 million
compared to $276.7 million in the same quarter last year. By
segment, sales declined 5.4 percent in Identification Solutions and
increased 0.4 percent in Workplace Safety, which consisted of an
organic sales decline of 6.9 percent in Identification Solutions
and an organic sales decline of 4.8 percent in Workplace
Safety.
Six-Month Period Ended January 31, 2021 Financial
Results:
Income before income taxes and losses of unconsolidated
affiliate decreased 2.7 percent to $81.6 million for the six-month
period ended January 31, 2021, compared to $83.9 million for the
same period last year.
Net income for the six-month period ended January 31, 2021
declined 9.4 percent to $64.3 million compared to $71.1 million for
the same period last year. Earnings per diluted Class A Nonvoting
Common Share were $1.23 for the six-month period ended January 31,
2021, compared to $1.32 for the same period last year. Net income
and earnings per diluted Class A Nonvoting Common Share for 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.
Sales for the six-month period ended January 31, 2021 declined
3.6 percent, which consisted of an organic sales decline of 5.6
percent and an increase of 2.0 percent from foreign currency
translation. Sales for the six months ended January 31, 2021 were
$543.1 million compared to $563.6 million in the same period last
year. By segment, sales declined 6.6 percent in Identification
Solutions and increased 5.2 percent in Workplace Safety, which
consisted of an organic sales decline of 7.6 percent in
Identification Solutions and organic sales growth of 0.4 percent in
Workplace Safety.
Commentary:
“Our operations are running globally as we continue to do our
part to supply products to first responders, healthcare providers,
transportation, food processing and many other critical
industries,” said Brady’s President and Chief Executive Officer, J.
Michael Nauman. “Our outlook has improved and to supplement organic
sales growth, we are investing in sales, marketing and new product
development that will help accelerate growth in the back half of
this fiscal year and into the future. We are also
actively investigating acquisitions that complement our strategic
growth initiatives. Brady is in a strong financial
position and we are using this strong financial position to set
ourselves up for strong growth as we exit from the pandemic.”
“Brady continues to generate strong cash flow and has a very
strong balance sheet. As of January 31, 2021, we had $277.6 million
of cash on hand and no outstanding debt,” said Brady’s Chief
Financial Officer, Aaron Pearce. “We generated $36.1 million of
cash flow from operating activities this quarter, which was an
increase of 153 percent compared to last year’s second quarter.
Positively impacting our cash flow this quarter were benefits from
improved working capital management and a reduction in
incentive-based compensation payments when compared to the second
quarter of last year. This quarter, we also returned $12.3 million
to our shareholders in the form of dividends and share buybacks.
Although the economy is still challenged, we do expect the general
trend of improving economic conditions to continue over the next
several quarters. Regardless of what happens with the macro
economy, Brady’s strong balance sheet and cash generation position
us well for future financial success.”
Fiscal 2021 Guidance:
The Company expects earnings per diluted Class A Nonvoting
Common Share to range from $2.48 to $2.58 for the full fiscal year
ending July 31, 2021. This equates to diluted earnings per share in
the range of $1.25 to $1.35 in the second half of the fiscal year
ending July 31, 2021. The Company also expects organic sales growth
to be in the mid-single digits in the second half of fiscal 2021.
This guidance is based on foreign currency exchange rates as of
January 31, 2021 and assumes a continued economic recovery.
A webcast regarding Brady’s fiscal 2021 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, 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.bradyid.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 and subsequent Form 10-Q filings.
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 January 31, |
|
Six months ended January 31, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
|
Net
sales |
$ |
265,838 |
|
|
$ |
276,665 |
|
|
$ |
543,065 |
|
|
$ |
563,612 |
|
|
Cost of
goods sold |
|
136,316 |
|
|
|
137,538 |
|
|
|
278,115 |
|
|
|
283,080 |
|
|
Gross margin |
|
129,522 |
|
|
|
139,127 |
|
|
|
264,950 |
|
|
|
280,532 |
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Research and development |
|
9,876 |
|
|
|
10,517 |
|
|
|
20,079 |
|
|
|
21,484 |
|
|
Selling, general and administrative |
|
82,234 |
|
|
|
87,366 |
|
|
|
165,271 |
|
|
|
176,913 |
|
|
Total
operating expenses |
|
92,110 |
|
|
|
97,883 |
|
|
|
185,350 |
|
|
|
198,397 |
|
|
|
|
|
|
|
|
|
|
|
Operating
income |
|
37,412 |
|
|
|
41,244 |
|
|
|
79,600 |
|
|
|
82,135 |
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
|
|
|
|
Investment and other income |
|
2,036 |
|
|
|
1,760 |
|
|
|
2,191 |
|
|
|
3,140 |
|
|
Interest expense |
|
(51 |
) |
|
|
(647 |
) |
|
|
(157 |
) |
|
|
(1,348 |
) |
|
|
|
|
|
|
|
|
|
|
Income
before income taxes and losses of unconsolidated affiliate |
|
39,397 |
|
|
|
42,357 |
|
|
|
81,634 |
|
|
|
83,927 |
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense |
|
8,206 |
|
|
|
8,804 |
|
|
|
16,788 |
|
|
|
12,876 |
|
|
|
|
|
|
|
|
|
|
|
Income
before losses of unconsolidated affiliate |
|
31,191 |
|
|
|
33,553 |
|
|
|
64,846 |
|
|
|
71,051 |
|
|
Equity in
losses of unconsolidated affiliate |
|
(331 |
) |
|
|
— |
|
|
|
(505 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Net
income |
$ |
30,860 |
|
|
$ |
33,553 |
|
|
$ |
64,341 |
|
|
$ |
71,051 |
|
|
|
|
|
|
|
|
|
|
|
Net income
per Class A Nonvoting Common Share: |
|
|
|
|
|
|
|
|
Basic |
$ |
0.59 |
|
|
$ |
0.63 |
|
|
$ |
1.24 |
|
|
$ |
1.33 |
|
|
Diluted |
$ |
0.59 |
|
|
$ |
0.62 |
|
|
$ |
1.23 |
|
|
$ |
1.32 |
|
|
Dividends |
$ |
0.22 |
|
|
$ |
0.22 |
|
|
$ |
0.44 |
|
|
$ |
0.44 |
|
|
|
|
|
|
|
|
|
|
|
Net income
per Class B Voting Common Share: |
|
|
|
|
|
|
|
|
Basic |
$ |
0.59 |
|
|
$ |
0.63 |
|
|
$ |
1.22 |
|
|
$ |
1.32 |
|
|
Diluted |
$ |
0.59 |
|
|
$ |
0.62 |
|
|
$ |
1.21 |
|
|
$ |
1.31 |
|
|
Dividends |
$ |
0.22 |
|
|
$ |
0.22 |
|
|
$ |
0.42 |
|
|
$ |
0.42 |
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
52,018 |
|
|
|
53,320 |
|
|
|
52,020 |
|
|
|
53,232 |
|
|
Diluted |
|
52,282 |
|
|
|
53,827 |
|
|
|
52,288 |
|
|
|
53,781 |
|
|
|
|
|
|
|
|
|
|
|
BRADY CORPORATION AND SUBSIDIARIES |
|
|
|
CONSOLIDATED BALANCE SHEETS |
|
|
|
(Dollars in
thousands) |
|
|
|
|
|
|
|
|
January 31, 2021 |
|
July 31, 2020 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Current
assets: |
|
|
|
Cash and cash equivalents |
$ |
277,588 |
|
|
$ |
217,643 |
|
Accounts receivable, net of allowance for credit losses of $7,450
and $7,157, respectively |
|
154,052 |
|
|
|
146,181 |
|
Inventories |
|
122,922 |
|
|
|
135,662 |
|
Prepaid expenses and other current assets |
|
12,774 |
|
|
|
9,962 |
|
Total current assets |
|
567,336 |
|
|
|
509,448 |
|
Property,
plant and equipment—net |
|
122,088 |
|
|
|
115,068 |
|
Goodwill |
|
420,726 |
|
|
|
416,034 |
|
Other
intangible assets |
|
19,809 |
|
|
|
22,334 |
|
Deferred
income taxes |
|
8,261 |
|
|
|
8,845 |
|
Operating
lease assets |
|
38,849 |
|
|
|
41,899 |
|
Other
assets |
|
30,813 |
|
|
|
28,838 |
|
Total |
$ |
1,207,882 |
|
|
$ |
1,142,466 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Accounts payable |
$ |
67,483 |
|
|
$ |
62,547 |
|
Accrued compensation and benefits |
|
52,098 |
|
|
|
41,546 |
|
Taxes, other than income taxes |
|
8,518 |
|
|
|
8,057 |
|
Accrued income taxes |
|
9,393 |
|
|
|
8,652 |
|
Current operating lease liabilities |
|
16,534 |
|
|
|
15,304 |
|
Other current liabilities |
|
47,518 |
|
|
|
49,782 |
|
Total current liabilities |
|
201,544 |
|
|
|
185,888 |
|
Long-term
operating lease liabilities |
|
27,134 |
|
|
|
31,982 |
|
Other
liabilities |
|
59,869 |
|
|
|
61,524 |
|
Total liabilities |
|
288,547 |
|
|
|
279,394 |
|
Stockholders’ equity: |
|
|
|
Common stock: |
|
|
|
Class A nonvoting common stock—Issued 51,261,487 shares, and
outstanding 48,486,758 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 |
|
334,077 |
|
|
|
331,761 |
|
Retained earnings |
|
745,960 |
|
|
|
704,456 |
|
Treasury stock—2,774,729 and 2,804,533 shares, respectively, of
Class A nonvoting common stock, at cost |
|
(109,789 |
) |
|
|
(107,216 |
) |
Accumulated other comprehensive loss |
|
(51,461 |
) |
|
|
(66,477 |
) |
Total stockholders’ equity |
|
919,335 |
|
|
|
863,072 |
|
Total |
$ |
1,207,882 |
|
|
$ |
1,142,466 |
|
|
|
|
|
BRADY CORPORATION AND SUBSIDIARIES |
|
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
|
|
|
(Unaudited;
Dollars in thousands) |
|
|
|
|
|
Six months ended January 31, |
|
|
|
2021 |
|
|
|
2020 |
|
|
Operating
activities: |
|
|
|
|
Net income |
$ |
64,341 |
|
|
$ |
71,051 |
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
|
11,421 |
|
|
|
11,672 |
|
|
Stock-based compensation expense |
|
5,471 |
|
|
|
5,384 |
|
|
Deferred income taxes |
|
(3,866 |
) |
|
|
1,272 |
|
|
Equity in losses of unconsolidated affiliate |
|
505 |
|
|
|
— |
|
|
Other |
|
121 |
|
|
|
1,664 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
Accounts receivable |
|
(4,157 |
) |
|
|
6,209 |
|
|
Inventories |
|
15,018 |
|
|
|
(1,311 |
) |
|
Prepaid expenses and other assets |
|
(2,436 |
) |
|
|
(2,621 |
) |
|
Accounts payable and accrued liabilities |
|
11,990 |
|
|
|
(39,777 |
) |
|
Income taxes |
|
481 |
|
|
|
(436 |
) |
|
Net cash provided by
operating activities |
|
98,889 |
|
|
|
53,107 |
|
|
|
|
|
|
|
Investing
activities: |
|
|
|
|
Purchases of property, plant and equipment |
|
(14,511 |
) |
|
|
(13,100 |
) |
|
Other |
|
(1,881 |
) |
|
|
(3,406 |
) |
|
Net cash used in investing
activities |
|
(16,392 |
) |
|
|
(16,506 |
) |
|
|
|
|
|
|
Financing
activities: |
|
|
|
|
Payment of dividends |
|
(22,837 |
) |
|
|
(23,136 |
) |
|
Proceeds from exercise of stock options |
|
471 |
|
|
|
4,686 |
|
|
Payments for employee taxes withheld from stock-based awards |
|
(2,638 |
) |
|
|
(7,733 |
) |
|
Purchase of treasury stock |
|
(3,593 |
) |
|
|
— |
|
|
Other |
|
(231 |
) |
|
|
134 |
|
|
Net cash used in financing
activities |
|
(28,828 |
) |
|
|
(26,049 |
) |
|
|
|
|
|
|
Effect of
exchange rate changes on cash |
|
6,276 |
|
|
|
179 |
|
|
|
|
|
|
|
Net increase
in cash and cash equivalents |
|
59,945 |
|
|
|
10,731 |
|
|
Cash and
cash equivalents, beginning of period |
|
217,643 |
|
|
|
279,072 |
|
|
|
|
|
|
|
Cash and
cash equivalents, end of period |
$ |
277,588 |
|
|
$ |
289,803 |
|
|
|
|
|
|
|
BRADY CORPORATION AND SUBSIDIARIES |
|
|
|
|
|
|
|
|
SEGMENT INFORMATION |
|
|
|
|
|
|
|
|
(Unaudited;
Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended January 31, |
|
Six months ended January 31, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
|
NET
SALES |
|
|
|
|
|
|
|
|
ID Solutions |
$ |
194,227 |
|
|
$ |
205,362 |
|
|
$ |
392,419 |
|
|
$ |
420,349 |
|
|
Workplace Safety |
|
71,611 |
|
|
|
71,303 |
|
|
|
150,646 |
|
|
|
143,263 |
|
|
Total |
$ |
265,838 |
|
|
$ |
276,665 |
|
|
$ |
543,065 |
|
|
$ |
563,612 |
|
|
|
|
|
|
|
|
|
|
|
SALES INFORMATION |
|
|
|
|
|
|
|
|
ID
Solutions |
|
|
|
|
|
|
|
|
Organic |
|
(6.9 |
)% |
|
|
(1.3 |
)% |
|
|
(7.6 |
)% |
|
|
(0.7 |
)% |
|
Currency |
|
1.5 |
% |
|
|
(0.5 |
)% |
|
|
1.0 |
% |
|
|
(0.9 |
)% |
|
Total |
|
(5.4 |
)% |
|
|
(1.8 |
)% |
|
|
(6.6 |
)% |
|
|
(1.6 |
)% |
|
Workplace Safety |
|
|
|
|
|
|
|
|
Organic |
|
(4.8 |
)% |
|
|
(1.0 |
)% |
|
|
0.4 |
% |
|
|
(0.9 |
)% |
|
Currency |
|
5.2 |
% |
|
|
(1.6 |
)% |
|
|
4.8 |
% |
|
|
(2.5 |
)% |
|
Total |
|
0.4 |
% |
|
|
(2.6 |
)% |
|
|
5.2 |
% |
|
|
(3.4 |
)% |
|
Total Company |
|
|
|
|
|
|
|
|
Organic |
|
(6.3 |
)% |
|
|
(1.2 |
)% |
|
|
(5.6 |
)% |
|
|
(0.8 |
)% |
|
Currency |
|
2.4 |
% |
|
|
(0.8 |
)% |
|
|
2.0 |
% |
|
|
(1.3 |
)% |
|
Total |
|
(3.9 |
)% |
|
|
(2.0 |
)% |
|
|
(3.6 |
)% |
|
|
(2.1 |
)% |
|
|
|
|
|
|
|
|
|
|
SEGMENT PROFIT |
|
|
|
|
|
|
|
|
ID Solutions |
$ |
39,000 |
|
|
$ |
40,655 |
|
|
$ |
79,279 |
|
|
$ |
83,098 |
|
|
Workplace Safety |
|
3,463 |
|
|
|
5,455 |
|
|
|
11,451 |
|
|
|
10,612 |
|
|
Total |
$ |
42,463 |
|
|
$ |
46,110 |
|
|
$ |
90,730 |
|
|
$ |
93,710 |
|
|
SEGMENT PROFIT AS A PERCENT OF NET SALES |
|
|
|
|
|
|
|
|
ID Solutions |
|
20.1 |
% |
|
|
19.8 |
% |
|
|
20.2 |
% |
|
|
19.8 |
% |
|
Workplace Safety |
|
4.8 |
% |
|
|
7.7 |
% |
|
|
7.6 |
% |
|
|
7.4 |
% |
|
Total |
|
16.0 |
% |
|
|
16.7 |
% |
|
|
16.7 |
% |
|
|
16.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended January 31, |
|
Six months ended January 31, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
|
Total
segment profit |
$ |
42,463 |
|
|
$ |
46,110 |
|
|
$ |
90,730 |
|
|
$ |
93,710 |
|
|
Unallocated
amounts: |
|
|
|
|
|
|
|
|
Administrative costs |
|
(5,051 |
) |
|
|
(4,866 |
) |
|
|
(11,130 |
) |
|
|
(11,575 |
) |
|
Investment and other income |
|
2,036 |
|
|
|
1,760 |
|
|
|
2,191 |
|
|
|
3,140 |
|
|
Interest expense |
|
(51 |
) |
|
|
(647 |
) |
|
|
(157 |
) |
|
|
(1,348 |
) |
|
Income
before income taxes and losses of unconsolidated affiliate |
$ |
39,397 |
|
|
$ |
42,357 |
|
|
$ |
81,634 |
|
|
$ |
83,927 |
|
|
|
|
|
|
|
|
|
|
|
For More Information:Investor contact: Ann Thornton
414-438-6887Media contact: Kate Venne 414-358-5176
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