BRADY CORP - FORM 8-K - EX-99.1 - SECOND QUARTER FISCAL 2020 PRESS RELEASE - February 20, 2020

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EXHIBIT 99.1


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


Brady Corporation Reports Fiscal 2020 Second Quarter Results and Increases its Fiscal 2020 EPS Guidance

•
Income before income taxes increased 15.4 percent to $42.4 million in the second quarter of fiscal 2020 compared to $36.7 million in the same quarter of the prior year.
•
Diluted EPS increased 12.7 percent to $0.62 in the second quarter of fiscal 2020 compared to $0.55 in the same quarter of the prior year.
•
Sales for the quarter declined 2.0 percent. Organic sales declined 1.2 percent and the impact of foreign currency translation decreased sales by 0.8 percent.
•
Diluted EPS guidance for the full year ending July 31, 2020 was increased to a range of $2.55 to $2.65 from the previous range of $2.50 to $2.60.

MILWAUKEE (February 20, 2020) -- Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2020 second quarter ended January 31, 2020.
 
Quarter Ended January 31, 2020 Financial Results:
Income before income taxes increased 15.4 percent to $42.4 million for the quarter ended January 31, 2020, compared to $36.7 million in the same quarter last year.
Net income for the quarter ended January 31, 2020 increased 14.8 percent to $33.6 million compared to $29.2 million in the same quarter last year. Earnings per diluted Class A Nonvoting Common Share were $0.62 for the second quarter of fiscal 2020, compared to $0.55 in the same quarter last year.
Sales for the quarter ended January 31, 2020 declined 2.0 percent, which consisted of an organic sales decline of 1.2 percent and a decrease of 0.8 percent from foreign currency translation. Sales for the quarter ended January 31, 2020 were $276.7 million compared to $282.4 million in the same quarter last year. By segment, sales declined 1.8 percent in Identification Solutions and declined 2.6 percent in Workplace Safety, which consisted of organic sales declines of 1.3 percent in Identification Solutions and 1.0 percent in Workplace Safety.

Six-Month Period Ended January 31, 2020 Financial Results:
Income before income taxes increased 9.6 percent to $83.9 million for the six-month period ended January 31, 2020, compared to $76.6 million for the six-month period ended January 31, 2019.
Net income for the six-month period ended January 31, 2020 increased 18.7 percent to $71.1 million compared to $59.9 million in the same period last year. Earnings per diluted Class A Nonvoting Common Share were $1.32 for the six-month period ended January 31, 2020 compared to $1.13 in the same six-month period last year. Net income




and earnings per share during 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 in the first quarter of fiscal 2020.
Sales for the six-month period ended January 31, 2020 declined 2.1 percent, which consisted of an organic sales decline of 0.8 percent and a decrease of 1.3 percent from foreign currency translation. Sales for the six-month period ended January 31, 2020 were $563.6 million compared to $575.6 million in the same period last year. By segment, sales declined 1.6 percent in Identification Solutions and declined 3.4 percent in Workplace Safety, which consisted of organic sales declines of 0.7 percent in Identification Solutions and 0.9 percent in Workplace Safety.

Commentary:
“This quarter marks our 18th consecutive quarter of year-on-year pre-tax income growth,” said Brady’s President and Chief Executive Officer, J. Michael Nauman. “Global demand for industrial products has declined in many markets which led to a modest decrease in organic sales this quarter. Our investments in developing innovative new products and our relentless focus on executing sustainable efficiency gains throughout our manufacturing facilities and SG&A structure enabled Brady to once again post solid financial results in a challenging industrial economic environment. Our investments in new products and our focus on efficiency gains has enabled us to deliver improved financial results over the last four years and positions us well for strong revenue and earnings growth as our end markets recover from the recent macro-economic weakness.”
“In the first half of this year we increased our gross profit margin, decreased selling, general and administrative expenses, increased earnings, and increased net cash provided by operating activities all while continuing to invest in our future. This solid financial performance combined with a balance sheet that provides significant flexibility for future investments and to return funds to our shareholders, puts Brady in a strong financial position,” said Brady’s Chief Financial Officer, Aaron Pearce.

Fiscal 2020 Guidance:
The Company is increasing its full year fiscal 2020 earnings per diluted Class A Nonvoting Common Share guidance from its previous range of $2.50 to $2.60 to a range of $2.55 to $2.65. Included in this guidance is organic sales growth of approximately flat to slightly positive, a full-year income tax rate of approximately 20 percent, and depreciation and amortization of approximately $25 million. The Company expects to continue capturing efficiency gains in its manufacturing facilities and in selling, general and administrative expenses. Capital expenditures are expected to approximate $35 million during the year ending July 31, 2020. This guidance is based upon foreign currency exchange rates as of January 31, 2020.

A webcast regarding Brady’s fiscal 2020 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, 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 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, 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 January 31,
 
Six months ended January 31,
 
2020
 
2019
 
2020
 
2019
Net sales
$
276,665

 
$
282,426

 
$
563,612

 
$
575,622

Cost of goods sold
137,538

 
142,616

 
283,080

 
289,273

Gross margin
139,127

 
139,810

 
280,532

 
286,349

Operating expenses:
 
 
 
 
 
 
 
Research and development
10,517

 
11,074

 
21,484

 
22,400

Selling, general and administrative
87,366

 
92,706

 
176,913

 
187,297

Total operating expenses
97,883

 
103,780

 
198,397

 
209,697


 
 
 
 
 
 
 
Operating income
41,244

 
36,030

 
82,135

 
76,652


 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Investment and other income
1,760

 
1,377

 
3,140

 
1,360

Interest expense
(647
)
 
(717
)
 
(1,348
)
 
(1,429
)

 
 
 
 
 
 
 
Income before income taxes
42,357

 
36,690

 
83,927

 
76,583


 
 
 
 
 
 
 
Income tax expense
8,804

 
7,463

 
12,876

 
16,719


 
 
 
 
 
 
 
Net income
$
33,553

 
$
29,227

 
$
71,051

 
$
59,864


 
 
 
 
 
 
 
Net income per Class A Nonvoting Common Share:
 
 
 
 
 
 
 
Basic
$
0.63

 
$
0.56

 
$
1.33

 
$
1.14

Diluted
$
0.62

 
$
0.55

 
$
1.32

 
$
1.13

Dividends
$
0.22

 
$
0.21

 
$
0.44

 
$
0.43

 
 
 
 
 
 
 
 
Net income per Class B Voting Common Share:
 
 
 
 
 
 
 
Basic
$
0.63

 
$
0.56

 
$
1.32

 
$
1.13

Diluted
$
0.62

 
$
0.55

 
$
1.31

 
$
1.11

Dividends
$
0.22

 
$
0.21

 
$
0.42

 
$
0.41

 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
53,320

 
52,532

 
53,232

 
52,366

Diluted
53,827

 
53,206

 
53,781

 
53,082





BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
 
January 31, 2020
 
July 31, 2019
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
289,803

 
$
279,072

Accounts receivable—net
151,511

 
158,114

Inventories
120,788

 
120,037

Prepaid expenses and other current assets
18,889

 
16,056

Total current assets
580,991

 
573,279

Property, plant and equipment—net
112,782

 
110,048

Goodwill
410,455

 
410,987

Other intangible assets
33,580

 
36,123

Deferred income taxes
7,120

 
7,298

Operating lease assets
49,117

 
—

Other assets
21,753

 
19,573

Total
$
1,215,798

 
$
1,157,308

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
51,233

 
$
64,810

Accrued compensation and benefits
38,561

 
62,509

Taxes, other than income taxes
7,703

 
8,107

Accrued income taxes
6,075

 
6,557

Current operating lease liabilities
14,901

 
—

Other current liabilities
48,590

 
49,796

Current maturities on long-term debt
49,627

 
50,166

Total current liabilities
216,690

 
241,945

Long-term operating lease liabilities
36,993

 
—

Other liabilities
62,191

 
64,589

Total liabilities
315,874

 
306,534

Stockholders’ equity:
 
 
 
Common stock:
 
 
 
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 49,810,101 and 49,458,841 shares, respectively
513

 
513

Class B voting common stock—Issued and outstanding, 3,538,628 shares
35

 
35

Additional paid-in capital
329,263

 
329,969

Retained earnings
685,758

 
637,843

Treasury stock—1,451,386 and 1,802,646 shares, respectively of Class A nonvoting common stock,
at cost
(43,155
)
 
(46,332
)
Accumulated other comprehensive loss
(72,490
)
 
(71,254
)
Total stockholders’ equity
899,924

 
850,774

Total
$
1,215,798

 
$
1,157,308






BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
 
Six months ended January 31,
 
2020
 
2019
Operating activities:
 
 
 
Net income
$
71,051

 
$
59,864

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
11,672

 
11,909

Stock-based compensation expense
5,384

 
7,805

Deferred income taxes
1,272

 
4,423

Other
1,664

 
1,279

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
6,209

 
2,562

Inventories
(1,311
)
 
(6,602
)
Prepaid expenses and other assets
(2,621
)
 
(2,310
)
Accounts payable and accrued liabilities
(39,777
)
 
(35,334
)
Income taxes
(436
)
 
592

Net cash provided by operating activities
53,107

 
44,188

 
 
 
 
Investing activities:
 
 
 
Purchases of property, plant and equipment
(13,100
)
 
(12,127
)
Other
(3,406
)
 
(452
)
Net cash used in investing activities
(16,506
)
 
(12,579
)
 
 
 
 
Financing activities:
 
 
 
Payment of dividends
(23,136
)
 
(22,263
)
Proceeds from exercise of stock options
4,686

 
18,498

Payments for employee taxes withheld from stock-based awards
(7,733
)
 
(3,362
)
Proceeds from borrowing on credit facilities
—

 
5,737

Repayment of borrowings on credit facilities
—

 
(5,688
)
Other
134

 
(2,973
)
Net cash used in financing activities
(26,049
)
 
(10,051
)
 
 
 
 
Effect of exchange rate changes on cash
179

 
(776
)
 
 
 
 
Net increase in cash and cash equivalents
10,731

 
20,782

Cash and cash equivalents, beginning of period
279,072

 
181,427

 
 
 
 
Cash and cash equivalents, end of period
$
289,803

 
$
202,209






BRADY CORPORATION AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited; Dollars in thousands)
 
Three months ended January 31,
 
Six months ended January 31,
2020
 
2019
 
2020
 
2019
NET SALES
 
 
 
 
ID Solutions
$
205,362

 
$
209,205

 
$
420,349

 
$
427,304

Workplace Safety
71,303

 
73,221

 
143,263

 
148,318

Total
$
276,665

 
$
282,426

 
$
563,612

 
$
575,622

 
 
 
 
 
SALES INFORMATION
 
 
 
 
ID Solutions
 
 
 
 
Organic
(1.3
)%
 
3.6
 %
 
(0.7
)%
 
4.6
 %
Currency
(0.5
)%
 
(2.3
)%
 
(0.9
)%
 
(1.9
)%
Total
(1.8
)%
 
1.3
 %
 
(1.6
)%
 
2.7
 %
Workplace Safety
 
 
 
 
Organic
(1.0
)%
 
(0.9
)%
 
(0.9
)%
 
0.6
 %
Currency
(1.6
)%
 
(3.3
)%
 
(2.5
)%
 
(2.9
)%
Divestitures
—
 %
 
(5.8
)%
 
—
 %
 
(6.0
)%
Total
(2.6
)%
 
(10.0
)%
 
(3.4
)%
 
(8.3
)%
Total Company
 
 
 
 
Organic
(1.2
)%
 
2.3
 %
 
(0.8
)%
 
3.5
 %
Currency
(0.8
)%
 
(2.6
)%
 
(1.3
)%
 
(2.2
)%
Divestitures
—
 %
 
(1.6
)%
 
—
 %
 
(1.7
)%
Total
(2.0
)%
 
(1.9
)%
 
(2.1
)%
 
(0.4
)%
 
 
 
 
 
SEGMENT PROFIT
 
 
 
 
ID Solutions
$
40,655

 
$
37,857

 
$
83,098

 
$
79,419

Workplace Safety
5,455

 
4,661

 
10,612

 
10,202

Total
$
46,110

 
$
42,518

 
$
93,710

 
$
89,621

SEGMENT PROFIT AS A PERCENT OF NET SALES
 
 
 
 
ID Solutions
19.8
 %
 
18.1
 %
 
19.8
 %
 
18.6
 %
Workplace Safety
7.7
 %
 
6.4
 %
 
7.4
 %
 
6.9
 %
Total
16.7
 %
 
15.1
 %
 
16.6
 %
 
15.6
 %

 
Three months ended January 31,
 
Six months ended January 31,
2020
 
2019
 
2020
 
2019
Total segment profit
$
46,110

 
$
42,518

 
$
93,710

 
$
89,621

Unallocated amounts:
 
 
 
 
 
 
 
Administrative costs
(4,866
)
 
(6,488
)
 
(11,575
)
 
(12,969
)
Investment and other income
1,760

 
1,377

 
3,140

 
1,360

Interest expense
(647
)
 
(717
)
 
(1,348
)
 
(1,429
)
Income before income taxes
$
42,357

 
$
36,690

 
$
83,927

 
$
76,583




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