Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world
leader in identification solutions, today reported its financial
results for its fiscal 2022 first quarter ended October 31, 2021.
Quarter Ended October 31, 2021 Financial
Results:Income before income taxes and losses of
unconsolidated affiliate increased 5.8 percent to $44.7 million for
the quarter ended October 31, 2021, compared to $42.2 million in
the same quarter last year. Income Before Income Taxes Excluding
Amortization* for the quarter ended October 31, 2021 was $48.5
million, an increase of 11.3 percent compared to the first quarter
of last year.
Net income for the quarter ended October 31, 2021 was $35.0
million compared to $33.5 million in the same quarter last year.
Earnings per diluted Class A Nonvoting Common Share were $0.67 for
the first quarter of fiscal 2022, compared to $0.64 in the same
quarter last year. Net Income Excluding Amortization*
for the quarter ended October 31, 2021 was $38.0 million and
Diluted EPS Excluding Amortization* for the quarter ended October
31, 2021 was $0.72.
Sales for the quarter ended October 31, 2021 increased 16.0
percent, which consisted of an organic sales increase of 7.0
percent, an increase of 8.3 percent from acquisitions and an
increase of 0.7 percent from foreign currency translation. Sales
for the quarter ended October 31, 2021 were $321.5 million compared
to $277.2 million in the same quarter last year. By segment, sales
increased 25.4 percent in Identification Solutions and decreased
7.8 percent in Workplace Safety, which consisted of an organic
sales increase of 13.2 percent in Identification Solutions and an
organic sales decline of 8.6 percent in Workplace Safety.
Commentary: “Our investments in sales,
marketing, and research and development over the last several years
are paying off. These investments, coupled with increased customer
demand, and the acquisitions completed in the fourth quarter of
last year, helped us generate double-digit sales growth this
quarter,” said Brady’s President and Chief Executive Officer, J.
Michael Nauman. “Our strong 16.0 percent year-over-year sales
growth was driven by our Identification Solutions division which
had total sales growth of 25.4 percent this quarter. We remain
excited about the three acquisitions completed last year, which are
performing at or above our initial expectations. Supply chains for
certain components remain tight and we are experiencing inflation
in many areas including wages, freight, utilities, and raw
materials. Even with these inflationary pressures, our gross profit
margin was still an enviable 48.2 percent which was right in line
with the gross profit margin experienced in the fourth quarter of
last year. We believe that these gross margin challenges are
temporary and once our pricing and efficiency initiatives catch up
to the cost inflation, our strong sales growth and improved gross
profit margins will drive significant bottom-line growth.”
“Brady is financially strong and continues to generate
significant cash flow. This quarter, sales grew 16.0 percent and
Diluted EPS Excluding Amortization* grew 9.1 percent, which
represents another very strong quarter,” said Brady’s Chief
Financial Officer, Aaron Pearce. “We have been increasing our
inventory levels to ensure that we can meet the ongoing strong
customer demand and our accounts receivable increased due to the
strong revenue growth we experienced this quarter. This quarter, we
returned $30.5 million to our shareholders in the form of dividends
and buybacks and we have a net cash balance of $90.6 million as of
October 31, 2021. We believe that Brady’s first quarter
financial results combined with our solid balance sheet, position
us well for future financial success.”
Fiscal 2022 Guidance:The Company’s earnings per
diluted Class A Nonvoting Common Share, excluding amortization
guidance for the year ending July 31, 2022 remains unchanged at
$3.12 to $3.32 per share, and earnings per diluted Class A
Nonvoting Common Share on a GAAP basis remains unchanged at $2.90
to $3.10 per share. Included in this guidance is a full-year income
tax rate of approximately 20 percent, depreciation and amortization
expense ranging from $34 million to $36 million, and sales growth
in excess of 12 percent for the year ending July 31, 2022. Capital
expenditures, excluding facility purchases are expected to range
from $20 million to $25 million during the year ending July 31,
2022. The Company’s fiscal 2022 guidance is based on foreign
currency exchange rates as of October 31, 2021 and assumes a
continued economic recovery.
A webcast regarding Brady’s fiscal 2022 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,
2021, employed approximately 5,700 people in its worldwide
businesses. Brady’s fiscal 2021 sales were approximately $1.14
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.
* Income Before Income Taxes Excluding Amortization, Net Income
Excluding Amortization, and Diluted EPS Excluding Amortization are
non-GAAP measures. See appendix for more information on these
measures, including reconciliations to the most directly comparable
GAAP measures.
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; adverse impacts from vaccination
mandates issued by U.S. and non-U.S. governmental entities;
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; increased cost of raw materials, labor and
freight as well as raw material shortages; Brady’s ability to
properly identify, integrate, and grow acquired companies, and to
manage contingent liabilities from divested businesses;
difficulties in protecting our websites, networks, and systems
against security breaches; risks associated with the loss of key
employees; extensive regulations by U.S. and non-U.S. governmental
and self-regulatory entities; litigation, including product
liability claims; foreign currency fluctuations; potential
write-offs of 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 crises and
government responses thereto 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, 2021 and in any subsequent filings on Form
10-Q.
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 October 31, |
|
|
2021 |
|
|
|
2020 |
|
Net sales |
$ |
321,475 |
|
|
$ |
277,227 |
|
Cost of goods sold |
|
166,487 |
|
|
|
141,799 |
|
Gross margin |
|
154,988 |
|
|
|
135,428 |
|
Operating expenses: |
|
|
|
Research and development |
|
13,907 |
|
|
|
10,203 |
|
Selling, general and administrative |
|
96,746 |
|
|
|
83,037 |
|
Total operating expenses |
|
110,653 |
|
|
|
93,240 |
|
|
|
|
|
Operating income |
|
44,335 |
|
|
|
42,188 |
|
|
|
|
|
Other income (expense): |
|
|
|
Investment and other income |
|
543 |
|
|
|
155 |
|
Interest expense |
|
(182 |
) |
|
|
(106 |
) |
|
|
|
|
Income before income taxes and losses of unconsolidated
affiliate |
|
44,696 |
|
|
|
42,237 |
|
|
|
|
|
Income tax expense |
|
9,650 |
|
|
|
8,582 |
|
|
|
|
|
Income before losses of unconsolidated affiliate |
|
35,046 |
|
|
|
33,655 |
|
Equity in losses of unconsolidated affiliate |
|
— |
|
|
|
(174 |
) |
|
|
|
|
Net income |
$ |
35,046 |
|
|
$ |
33,481 |
|
|
|
|
|
Net income per Class A Nonvoting Common Share: |
|
|
|
Basic |
$ |
0.67 |
|
|
$ |
0.64 |
|
Diluted |
$ |
0.67 |
|
|
$ |
0.64 |
|
Dividends |
$ |
0.23 |
|
|
$ |
0.22 |
|
|
|
|
|
Net income per Class B Voting Common Share: |
|
|
|
Basic |
$ |
0.66 |
|
|
$ |
0.63 |
|
Diluted |
$ |
0.65 |
|
|
$ |
0.62 |
|
Dividends |
$ |
0.21 |
|
|
$ |
0.20 |
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
Basic |
|
51,973 |
|
|
|
52,021 |
|
Diluted |
|
52,436 |
|
|
|
52,292 |
|
|
|
|
|
BRADY CORPORATION AND SUBSIDIARIES |
|
|
|
CONSOLIDATED BALANCE SHEETS |
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
October 31, 2021 |
|
July 31, 2021 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
157,553 |
|
|
$ |
147,335 |
|
Accounts receivable, net of allowance for credit losses of $7,265
and $7,306, respectively |
|
182,791 |
|
|
|
170,579 |
|
Inventories |
|
152,295 |
|
|
|
136,107 |
|
Prepaid expenses and other current assets |
|
12,452 |
|
|
|
11,083 |
|
Total current assets |
|
505,091 |
|
|
|
465,104 |
|
Property, plant and equipment—net |
|
128,618 |
|
|
|
121,741 |
|
Goodwill |
|
610,836 |
|
|
|
614,137 |
|
Other intangible assets |
|
88,219 |
|
|
|
92,334 |
|
Deferred income taxes |
|
16,377 |
|
|
|
16,343 |
|
Operating lease assets |
|
36,655 |
|
|
|
41,880 |
|
Other assets |
|
24,682 |
|
|
|
26,217 |
|
Total |
$ |
1,410,478 |
|
|
$ |
1,377,756 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
79,497 |
|
|
$ |
82,152 |
|
Accrued compensation and benefits |
|
89,283 |
|
|
|
81,173 |
|
Taxes, other than income taxes |
|
13,061 |
|
|
|
13,054 |
|
Accrued income taxes |
|
5,593 |
|
|
|
3,915 |
|
Current operating lease liabilities |
|
17,129 |
|
|
|
17,667 |
|
Other current liabilities |
|
61,930 |
|
|
|
59,623 |
|
Total current liabilities |
|
266,493 |
|
|
|
257,584 |
|
Long-term debt |
|
67,000 |
|
|
|
38,000 |
|
Long-term operating lease liabilities |
|
23,434 |
|
|
|
28,347 |
|
Other liabilities |
|
89,658 |
|
|
|
90,797 |
|
Total liabilities |
|
446,585 |
|
|
|
414,728 |
|
Stockholders’ equity: |
|
|
|
Common stock: |
|
|
|
Class A nonvoting common stock—Issued 51,261,487 shares, and
outstanding 48,257,592 and 48,528,245 shares, respectively |
|
513 |
|
|
|
513 |
|
Class B voting common stock—Issued and outstanding, 3,538,628
shares |
|
35 |
|
|
|
35 |
|
Additional paid-in capital |
|
340,182 |
|
|
|
339,125 |
|
Retained earnings |
|
811,820 |
|
|
|
788,369 |
|
Treasury stock—3,003,895 and 2,733,242 shares, respectively, of
Class A nonvoting common stock, at cost |
|
(127,986 |
) |
|
|
(109,061 |
) |
Accumulated other comprehensive loss |
|
(60,671 |
) |
|
|
(55,953 |
) |
Total stockholders’ equity |
|
963,893 |
|
|
|
963,028 |
|
Total |
$ |
1,410,478 |
|
|
$ |
1,377,756 |
|
|
|
|
|
BRADY CORPORATION AND SUBSIDIARIES |
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
|
|
(Unaudited; Dollars in thousands) |
|
|
|
|
Three months ended October 31, |
|
|
2021 |
|
|
|
2020 |
|
Operating activities: |
|
|
|
Net income |
$ |
35,046 |
|
|
$ |
33,481 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
|
8,509 |
|
|
|
5,635 |
|
Stock-based compensation expense |
|
4,129 |
|
|
|
3,574 |
|
Deferred income taxes |
|
(625 |
) |
|
|
(1,175 |
) |
Equity in losses of unconsolidated affiliate |
|
— |
|
|
|
174 |
|
Other |
|
(187 |
) |
|
|
(266 |
) |
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable |
|
(13,302 |
) |
|
|
(11,371 |
) |
Inventories |
|
(16,579 |
) |
|
|
14,758 |
|
Prepaid expenses and other assets |
|
(655 |
) |
|
|
(1,398 |
) |
Accounts payable and accrued liabilities |
|
9,499 |
|
|
|
17,363 |
|
Income taxes |
|
1,656 |
|
|
|
2,063 |
|
Net cash provided by operating activities |
|
27,491 |
|
|
|
62,838 |
|
|
|
|
|
Investing activities: |
|
|
|
Purchases of property, plant and equipment |
|
(11,328 |
) |
|
|
(9,321 |
) |
Other |
|
2 |
|
|
|
119 |
|
Net cash used in investing activities |
|
(11,326 |
) |
|
|
(9,202 |
) |
|
|
|
|
Financing activities: |
|
|
|
Payment of dividends |
|
(11,595 |
) |
|
|
(11,391 |
) |
Proceeds from exercise of stock options |
|
151 |
|
|
|
160 |
|
Payments for employee taxes withheld from stock-based awards |
|
(3,339 |
) |
|
|
(2,617 |
) |
Purchase of treasury stock |
|
(18,924 |
) |
|
|
(2,720 |
) |
Proceeds from borrowing on credit facilities |
|
56,200 |
|
|
|
12,971 |
|
Repayment of borrowing on credit facilities |
|
(27,200 |
) |
|
|
(12,988 |
) |
Other |
|
115 |
|
|
|
34 |
|
Net cash used in financing activities |
|
(4,592 |
) |
|
|
(16,551 |
) |
|
|
|
|
Effect of exchange rate changes on cash |
|
(1,355 |
) |
|
|
1,605 |
|
|
|
|
|
Net increase in cash and cash equivalents |
|
10,218 |
|
|
|
38,690 |
|
Cash and cash equivalents, beginning of period |
|
147,335 |
|
|
|
217,643 |
|
|
|
|
|
Cash and cash equivalents, end of period |
$ |
157,553 |
|
|
$ |
256,333 |
|
|
|
|
|
BRADY CORPORATION AND SUBSIDIARIES |
|
|
|
SEGMENT INFORMATION |
|
|
|
(Unaudited; Dollars in thousands) |
|
|
|
|
|
|
|
|
Three months ended October 31, |
|
|
2021 |
|
|
|
2020 |
|
NET SALES |
|
|
|
ID Solutions |
$ |
248,617 |
|
|
$ |
198,192 |
|
Workplace Safety |
|
72,858 |
|
|
|
79,035 |
|
Total |
$ |
321,475 |
|
|
$ |
277,227 |
|
|
|
|
|
SALES INFORMATION |
|
|
|
ID Solutions |
|
|
|
Organic |
|
13.2 |
% |
|
|
(8.4 |
)% |
Acquisition |
|
11.6 |
% |
|
|
— |
% |
Currency |
|
0.6 |
% |
|
|
0.6 |
% |
Total |
|
25.4 |
% |
|
|
(7.8 |
)% |
Workplace Safety |
|
|
|
Organic |
|
(8.6 |
)% |
|
|
5.5 |
% |
Currency |
|
0.8 |
% |
|
|
4.3 |
% |
Total |
|
(7.8 |
)% |
|
|
9.8 |
% |
Total Company |
|
|
|
Organic |
|
7.0 |
% |
|
|
(4.9 |
)% |
Acquisition |
|
8.3 |
% |
|
|
— |
% |
Currency |
|
0.7 |
% |
|
|
1.5 |
% |
Total |
|
16.0 |
% |
|
|
(3.4 |
)% |
|
|
|
|
SEGMENT PROFIT |
|
|
|
ID Solutions |
$ |
48,816 |
|
|
$ |
40,279 |
|
Workplace Safety |
|
2,293 |
|
|
|
7,988 |
|
Total |
$ |
51,109 |
|
|
$ |
48,267 |
|
SEGMENT PROFIT AS A PERCENT OF NET SALES |
|
|
|
ID Solutions |
|
19.6 |
% |
|
|
20.3 |
% |
Workplace Safety |
|
3.1 |
% |
|
|
10.1 |
% |
Total |
|
15.9 |
% |
|
|
17.4 |
% |
|
|
|
|
|
|
|
|
|
Three months ended October 31, |
|
|
2021 |
|
|
|
2020 |
|
Total segment profit |
$ |
51,109 |
|
|
$ |
48,267 |
|
Unallocated amounts: |
|
|
|
Administrative costs |
|
(6,774 |
) |
|
|
(6,079 |
) |
Investment and other income |
|
543 |
|
|
|
155 |
|
Interest expense |
|
(182 |
) |
|
|
(106 |
) |
Income before income taxes and losses of unconsolidated
affiliate |
$ |
44,696 |
|
|
$ |
42,237 |
|
|
|
|
|
GAAP to NON-GAAP MEASURES |
|
|
|
|
(Unaudited; Dollars in Thousands, Except Per Share Amounts) |
|
|
|
|
|
|
In accordance with the U.S. Securities and Exchange Commission’s
Regulation G, the following provides definitions of the non-GAAP
measures used in the earnings release and the reconciliation to the
most closely related GAAP measure. |
|
|
|
|
|
|
Income Before Income Taxes Excluding
Amortization: |
Brady is presenting the non-GAAP measure, "Income Before Income
Taxes Excluding Amortization." This is not a calculation based upon
GAAP. The amounts included in this non-GAAP measure are derived
from amounts included in the Consolidated Financial Statements and
supporting footnote disclosures. We do not view these items to be
part of our ongoing results. We believe this profit measure
provides an important perspective of underlying business trends and
results and provides a more comparable measure from year to year.
The table below provides a reconciliation of the GAAP measure of
Income before income taxes and losses of unconsolidated affiliate
to the non-GAAP measure of Income Before Income Taxes Excluding
Amortization: |
|
|
|
|
|
|
|
|
|
Three months ended October 31, |
|
|
|
|
2021 |
|
|
|
2020 |
|
Income before income taxes and losses of unconsolidated
affiliate (GAAP measure) |
$ |
44,696 |
|
|
$ |
42,237 |
|
|
Amortization expense |
|
|
3,807 |
|
|
|
1,351 |
|
Income Before Income Taxes Excluding Amortization (non-GAAP
measure) |
$ |
48,503 |
|
|
$ |
43,588 |
|
|
|
|
|
|
|
Income Tax Expense Excluding Amortization: |
Brady is presenting the non-GAAP measure, "Income Tax Expense
Excluding Amortization." This is not a calculation based upon GAAP.
The amounts included in this non-GAAP measure are derived from
amounts included in the Consolidated Financial Statements and
supporting footnote disclosures. We do not view these items to be
part of our ongoing results. We believe this measure provides an
important perspective of underlying business trends and results and
provides a more comparable measure from year to year. The table
below provides a reconciliation of the GAAP measure of Income tax
expense to the non-GAAP measure of Income Tax Expense Excluding
Amortization: |
|
|
|
|
|
|
|
|
|
Three months ended October 31, |
|
|
|
|
2021 |
|
|
|
2020 |
|
Income tax expense (GAAP measure) |
$ |
9,650 |
|
|
$ |
8,582 |
|
|
Amortization expense |
|
|
900 |
|
|
|
338 |
|
Income Tax Expense Excluding Amortization (non-GAAP
measure) |
$ |
10,550 |
|
|
$ |
8,920 |
|
|
|
|
|
|
|
Net Income Excluding Amortization: |
Brady is presenting the non-GAAP measure, "Net Income Excluding
Amortization." This is not a calculation based upon GAAP. The
amounts included in this non-GAAP measure are derived from amounts
included in the Consolidated Financial Statements and supporting
footnote disclosures. We do not view these items to be part of our
ongoing results. We believe this measure provides an important
perspective of underlying business trends and results and provides
a more comparable measure from year to year. The table below
provides a reconciliation of the GAAP measure of Net income to the
non-GAAP measure of Net Income Excluding Amortization: |
|
|
|
|
|
|
|
|
|
Three months ended October 31, |
|
|
|
|
2021 |
|
|
|
2020 |
|
Net income (GAAP measure) |
$ |
35,046 |
|
|
$ |
33,481 |
|
|
Amortization expense |
|
|
2,907 |
|
|
|
1,013 |
|
Net Income Excluding Amortization (non-GAAP
measure) |
$ |
37,953 |
|
|
$ |
34,494 |
|
|
|
|
|
|
|
Diluted EPS Excluding Amortization: |
Brady is presenting the non-GAAP measure, "Diluted EPS Excluding
Amortization." This is not a calculation based upon GAAP. The
amounts included in this non-GAAP measure are derived from amounts
included in the Consolidated Financial Statements. We do not view
these items to be part of our ongoing results. We believe this
measure provides an important perspective of underlying business
trends and results and provides a more comparable measure from year
to year. The table below provides a reconciliation of the GAAP
measure of Net income per Class A Nonvoting Common Share to the
non-GAAP measure of Diluted EPS Excluding Amortization (Note that
certain amounts will not foot due to rounding): |
|
|
|
|
|
|
|
|
|
Three months ended October 31, |
|
|
|
|
2021 |
|
|
|
2020 |
|
Net income per Class A Nonvoting Common Share (GAAP
measure) |
$ |
0.67 |
|
|
$ |
0.64 |
|
|
Amortization expense |
|
|
0.06 |
|
|
|
0.02 |
|
Diluted EPS Excluding Amortization (non-GAAP
measure) |
$ |
0.72 |
|
|
$ |
0.66 |
|
|
|
|
|
|
|
For More Information:Investor contact: Ann Thornton
414-438-6887Media contact: Kate Venne 414-358-5176
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