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Brady Corporation Reports Fiscal 2019 Fourth Quarter Results and Announces its Fiscal 2020 EPS Guidance

September 6, 2019 7:00 AM

MILWAUKEE, Sept. 06, 2019 (GLOBE NEWSWIRE) -- Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2019 fourth quarter ended July 31, 2019.

Quarter Ended July 31, 2019 Financial Results:Income before income taxes was $47.1 million for the fourth quarter of fiscal 2019 compared to $45.2 million for the fourth quarter of fiscal 2018. Income before income taxes included a gain on the sale of the Runelandhs business of $4.7 million in the fourth quarter of fiscal 2018.

Net income for the quarter ended July 31, 2019, was $36.6 million compared to $35.0 million in the same quarter last year. The sale of the Runelandhs business increased net income by $4.7 million in the fourth quarter of fiscal 2018.

Earnings per diluted Class A Nonvoting Common Share were $0.68 for the fourth quarter of fiscal 2019, compared to $0.66 in the same quarter last year. Results were increased in the fourth quarter of fiscal 2018 by approximately $0.09 per diluted Class A Nonvoting Common Share due to the sale of the Runelandhs business.

Sales for the quarter ended July 31, 2019 decreased 0.7 percent, which consisted of organic sales growth of 1.7 percent, a decrease in sales of 1.9 percent from foreign currency translation, and a decline in sales of 0.5 percent from the divestiture of our Runelandhs business during the fourth quarter of fiscal 2018. Sales for the quarter ended July 31, 2019 were $295.3 million compared to $297.5 million in the same quarter last year. By segment, sales increased 1.8 percent in Identification Solutions and decreased 7.8 percent in Workplace Safety, which consisted of organic sales growth of 3.3 percent in Identification Solutions and an organic sales decline of 2.6 percent in Workplace Safety.

Year Ended July 31, 2019 Financial Results:Income before income taxes increased 8.3 percent, finishing at $164.6 million for the year ended July 31, 2019, compared to $152.0 million last year. Fiscal 2018 results include a gain on the sale of the Runelandhs business of $4.7 million.

Net income for the year ended July 31, 2019, was $131.3 million compared to $91.1 million last year. Fiscal 2018 net income was reduced by $21.1 million due to income tax charges primarily related to the enactment of U.S. tax legislation, and was increased by $4.7 million due to the sale of the Runelandhs business.

Earnings per diluted Class A Nonvoting Common Share were $2.46 for the year ended July 31, 2019, compared to $1.73 last year. Fiscal 2018 results were decreased by approximately $0.40 per diluted Class A Nonvoting Common Share due to income tax charges primarily related to the enactment of U.S. tax legislation, and results were increased by approximately $0.09 per diluted Class A Nonvoting Common Share due to the sale of the Runelandhs business.

Sales for the year ended July 31, 2019 decreased 1.1 percent, which consisted of organic sales growth of 2.8 percent, a decrease in sales of 2.6 percent from foreign currency translation, and a decline in sales of 1.3 percent from the divestiture of our Runelandhs business during fiscal 2018. Fiscal 2019 sales were $1.16 billion compared to $1.17 billion last year. By segment, sales increased 2.0 percent in Identification Solutions and decreased 9.2 percent in Workplace Safety, which consisted of organic sales growth of 4.1 percent in Identification Solutions and an organic sales decline of 0.7 percent in Workplace Safety.

Commentary:“Our investment in the development of innovative new products, and our dedication to providing excellent customer service continue to drive positive results as we posted our ninth consecutive quarter of organic sales growth,” said Brady’s President and Chief Executive Officer, J. Michael Nauman. “We have seen signs of a weakening industrial economic environment. However, our previous investments along with strong execution have helped us continue to generate organic sales growth in this difficult environment. Our priorities in fiscal 2020 are to continue to launch high-quality new products while further developing our new product pipeline, continue our positive momentum in improving all of our businesses, and execute sustainable efficiency gains throughout Brady. We believe that our actions today will result in continued improvement in our financial results and long-term value for our shareholders.”

“Our organic sales growth and our focus on operational efficiencies continue to drive profit improvements and strong cash flow,” said Brady’s Chief Financial Officer, Aaron Pearce. “Our net cash position increased by $100.1 million this fiscal year, finishing at $228.9 million at July 31, 2019. We generated $162.2 million of cash from operating activities this year, we invested $32.8 million in capital expenditures, and we returned $47.9 million to our shareholders in the form of dividends and share buybacks. Our balance sheet provides significant flexibility for further investments to drive long-term shareholder value and to return funds to our shareholders.”

Fiscal 2020 Guidance:The Company expects organic sales growth to be approximately 1.5 to 2.5 percent for the year ending July 31, 2020. Brady expects earnings per diluted Class A Nonvoting Common Share to range from $2.45 to $2.55. This guidance is based upon a full-year income tax rate in the low twenties percent range, and depreciation and amortization expense of approximately $25 million. The Company expects to achieve efficiency gains in its manufacturing facilities and in selling, general and administrative expenses while increasing investments in research and development. Capital expenditures are expected to be approximately $35 million during the year ending July 31, 2020. The Company’s fiscal 2020 guidance is based on foreign currency exchange rates as of July 31, 2019.

A webcast regarding Brady’s fiscal 2019 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, 2019, employed approximately 6,100 people in its worldwide businesses. Brady’s fiscal 2019 sales were approximately $1.16 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; raw material and other cost increases; 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; 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; 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, 2019.

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 July 31, Year ended July 31,
2019 2018 2019 2018
Net sales$295,278 $297,499 $1,160,645 $1,173,851
Cost of goods sold 148,698 150,047 581,967 585,560
Gross margin 146,580 147,452 578,678 588,291
Operating expenses:
Research and development 11,331 11,741 45,168 45,253
Selling, general and administrative 89,094 90,931 371,082 390,342
Total operating expenses 100,425 102,672 416,250 435,595
Operating income 46,155 44,780 162,428 152,696
Other income (expense):
Investment and other income 1,621 1,184 5,046 2,487
Interest expense (693) (715) (2,830) (3,168)
Income before income taxes 47,083 45,249 164,644 152,015
Income tax expense 10,470 10,298 33,386 60,955
Net income$36,613 $34,951 $131,258 $91,060
Net income per Class A Nonvoting Common Share:
Basic$0.69 $0.67 $2.50 $1.76
Diluted$0.68 $0.66 $2.46 $1.73
Dividends$0.21 $0.21 $0.85 $0.83
Net income per Class B Voting Common Share:
Basic$0.69 $0.67 $2.48 $1.75
Diluted$0.68 $0.66 $2.45 $1.72
Dividends$0.21 $0.21 $0.83 $0.81
Weighted average common shares outstanding:
Basic 52,885 51,822 52,596 51,677
Diluted 53,647 52,658 53,323 52,524

BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
July 31, 2019 July 31, 2018
ASSETS
Current assets:
Cash and cash equivalents$279,072 $181,427
Accounts receivable—net 158,114 161,282
Inventories 120,037 113,071
Prepaid expenses and other current assets 16,056 15,559
Total current assets 573,279 471,339
Property, plant and equipment—net 110,048 97,945
Goodwill 410,987 419,815
Other intangible assets 36,123 42,588
Deferred income taxes 7,298 7,582
Other 19,573 17,662
Total$1,157,308 $1,056,931
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$64,810 $66,538
Accrued compensation and benefits 62,509 67,619
Taxes, other than income taxes 8,107 8,318
Accrued income taxes 6,557 3,885
Other current liabilities 49,796 44,567
Current maturities on long-term debt 50,166 —
Total current liabilities 241,945 190,927
Long-term obligations, less current maturities — 52,618
Other liabilities 64,589 61,274
Total liabilities 306,534 304,819
Stockholders’ equity:
Common stock:
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 49,458,841 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 329,969 325,631
Retained earnings 637,843 553,454
Treasury stock—1,802,646 and 2,867,870 shares, respectively, of Class A nonvoting common stock, at cost (46,332) (71,120)
Accumulated other comprehensive loss (71,254) (56,401)
Total stockholders’ equity 850,774 752,112
Total$1,157,308 $1,056,931

BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
Year ended July 31,
2019 2018
Operating activities:
Net income$131,258 $91,060
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 23,799 25,442
Non-cash portion of stock-based compensation expense 12,092 9,980
Gain on sale of business, net — (4,666)
Deferred income taxes 7,825 33,656
Other 2,347 (15)
Changes in operating assets and liabilities:
Accounts receivable 3,496 (16,612)
Inventories (9,922) (7,563)
Prepaid expenses and other assets 368 1,747
Accounts payable and other liabilities (11,903) 13,106
Income taxes 2,851 (3,093)
Net cash provided by operating activities 162,211 143,042
Investing activities:
Purchases of property, plant and equipment (32,825) (21,777)
Divestiture of business, net of cash transferred with business — 19,141
Other (1,638) (269)
Net cash used in investing activities (34,463) (2,905)
Financing activities:
Payment of dividends (44,732) (42,873)
Proceeds from exercise of stock options 23,466 12,099
Purchase of treasury stock (3,182) (1,462)
Proceeds from borrowing on credit facilities 13,637 23,221
Repayment of borrowing on credit facilities (13,568) (78,419)
Other (3,249) (3,246)
Net cash used in financing activities (27,628) (90,680)
Effect of exchange rate changes on cash (2,475) (1,974)
Net increase in cash and cash equivalents 97,645 47,483
Cash and cash equivalents, beginning of period 181,427 133,944
Cash and cash equivalents, end of period$279,072 $181,427
Supplemental disclosures:
Cash paid during the period for:
Interest$2,651 $2,976
Income taxes 24,335 33,267

BRADY CORPORATION AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited; Dollars in thousands)
Three Months Ended July 31, Year Ended July 31,
2019 2018 2019 2018
NET SALES
ID Solutions$221,817 $217,796 $863,100 $846,087
Workplace Safety 73,461 79,703 297,545 327,764
Total$295,278 $297,499 $1,160,645 $1,173,851
SALES INFORMATION
ID Solutions
Organic 3.3% 2.4% 4.1% 3.4%
Currency (1.5)% 0.7% (2.1)% 2.3%
Divestiture —% —% —% —%
Total 1.8% 3.1% 2.0% 5.7%
Workplace Safety
Organic (2.6)% 3.0% (0.7)% 0.7%
Currency (3.3)% 1.6% (3.7)% 4.6%
Divestiture (1.9)% (2.3)% (4.8)% (0.6)%
Total (7.8)% 2.3% (9.2)% 4.7%
Total Company
Organic 1.7% 2.5% 2.8% 2.6%
Currency (1.9)% 1.0% (2.6)% 3.0%
Divestiture (0.5)% (0.6)% (1.3)% (0.2)%
Total (0.7)% 2.9% (1.1)% 5.4%
SEGMENT PROFIT
ID Solutions$45,642 $36,515 $164,953 $143,411
Workplace Safety 6,724 10,675 23,025 31,712
Total$52,366 $47,190 $187,978 $175,123
SEGMENT PROFIT AS A PERCENT OF NET SALES
ID Solutions 20.6% 16.8% 19.1% 16.9%
Workplace Safety 9.2% 13.4% 7.7% 9.7%
Total 17.7% 15.9% 16.2% 14.9%
Three Months Ended July 31, Year Ended July 31,
2019 2018 2019 2018
Total segment profit$52,366 $47,190 $187,978 $175,123
Unallocated amounts:
Administrative costs (6,211) (7,076) (25,550) (27,093)
Gain on divestiture - 4,666 - 4,666
Investment and other income 1,621 1,184 5,046 2,487
Interest expense (693) (715) (2,830) (3,168)
Income before income taxes$47,083 $45,249 $164,644 $152,015

For More Information:Investor contact: Ann Thornton 414-438-6887Media contact: Kate Venne 414-358-5176

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Source: Brady Corporation

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