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MILWAUKEE, Feb. 21, 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 second quarter ended January 31, 2019.
Quarter Ended January 31, 2019 Financial Results:
Earnings before income taxes increased 4.8 percent to $36.7 million for the quarter ended January 31, 2019, compared to $35.0 million in the same quarter last year.
Net earnings for the quarter ended January 31, 2019 were $29.2 million compared to $4.3 million in the same quarter last year. Net earnings during the prior year quarter ended January 31, 2018 were reduced by $21.1 million due to income tax charges primarily related to the passage of the U.S. Tax Cuts and Jobs Act of 2017.
Net earnings per diluted Class A Nonvoting Common Share were $0.55 for the second quarter of fiscal 2019 compared to $0.08 in the same quarter last year. The impact on income tax expense for the prior year quarter ended January 31, 2018 from tax charges primarily related to the enactment of the U.S. tax legislation was a reduction in earnings per diluted share of approximately $0.40.
Sales for the quarter ended January 31, 2019 decreased 1.9 percent, which consisted of organic sales growth of 2.3 percent, a decrease in sales of 2.6 percent from foreign currency translation, and a decline in sales of 1.6 percent from the divestiture of a business during the fourth quarter of fiscal 2018. Sales for the quarter ended January 31, 2019 were $282.4 million compared to $287.8 million in the same quarter last year. By segment, sales increased 1.3 percent in Identification Solutions and decreased 10.0 percent in Workplace Safety, which consisted of organic sales growth of 3.6 percent in Identification Solutions and an organic sales decline of 0.9 percent in Workplace Safety.
Six-Month Period Ended January 31, 2019 Financial Results:
Earnings before income taxes increased 9.7 percent to $76.6 million for the six-month period ended January 31, 2019, compared to $69.8 million for the six-month period ended January 31, 2018.
Net earnings for the six-month period ended January 31, 2019 were $59.9 million compared to $30.1 million for the six-month period ended January 31, 2018. Net earnings during the prior year six-month period ended January 31, 2018 were reduced by $21.1 million due to income tax charges primarily related to the enactment of the U.S. tax legislation.
Net earnings per diluted Class A Nonvoting Common Share were $1.13 for the six-month period ended January 31, 2019 compared to $0.57 in the same six-month period last year. The impact on income tax expense for the prior six-month period ended January 31, 2018 from tax charges primarily related to the enactment of the U.S. tax legislation was a reduction in diluted EPS of approximately $0.40.
Sales for the six-month period ended January 31, 2019 decreased 0.4 percent, which consisted of organic sales growth of 3.5 percent, a decrease in sales of 2.2 percent from foreign currency translation, and a reduction in sales of 1.7 percent from the divestiture of a business during the fourth quarter of 2018. Sales for the six-month period ended January 31, 2019 were $575.6 million compared to $577.9 million in the same six-month period last year. By segment, sales increased 2.7 percent in Identification Solutions and decreased 8.3 percent in Workplace Safety, which consisted of organic sales growth of 4.6 percent in Identification Solutions and 0.6 percent in Workplace Safety.
Commentary:
"Our investment in the development of innovative, high-quality products is paying off as we continue to grow organic sales and improve our new product pipeline. This organic growth, combined with our focus on driving efficiencies throughout our factories and our selling, general, and administrative structure are driving our pre-tax profit improvements," said Brady's President and Chief Executive Officer, J. Michael Nauman. "Our focus is on a consistent set of priorities, which are to continue to invest in innovative new products to grow organic sales, to invest in automation in our manufacturing facilities, to drive sustainable efficiencies throughout our operations and SG&A structure, and to improve our underperforming businesses. We remain committed to taking actions today that we believe will result in continued long-term improvement in our financial results."
"Brady's cash position and balance sheet remain strong. At January 31, 2019 we had over $200 million of cash on hand and are in a net cash position of $150.6 million," said Brady's Chief Financial Officer, Aaron Pearce. "During the quarter, we continued our commitment of investing back into our business to drive organic sales growth by increasing our investment in new machinery, equipment, and facilities by 31.1 percent when compared to the same quarter in the prior year. We invested over $11 million in research and development and remain on track to increase research and development spend by approximately 6 percent for the year ending July 31, 2019. We also returned $11.2 million to our shareholders in the form of dividends and repurchased $1.3 million of stock in the quarter. Our balance sheet provides flexibility to invest in growth opportunities to drive long-term value for our shareholders."
Fiscal 2019 Guidance:
The Company is increasing its full year fiscal 2019 earnings per diluted Class A Nonvoting Common Share guidance from its previous range of $2.20 to $2.30 to a range of $2.25 to $2.35. Included in this guidance is organic sales growth of 3.0 percent to 5.0 percent, a full-year income tax rate of 22 percent to 24 percent, and depreciation and amortization expense of approximately $26 million. The Company expects to achieve efficiency gains in its manufacturing facilities and in selling, general and administrative expenses while continuing to increase investments in research and development. Capital expenditures are anticipated to be approximately $30 million to $35 million during the year ending July 31, 2019. This guidance is based upon foreign currency exchange rates as of January 31, 2019.
A webcast regarding Brady's fiscal 2019 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, 2018, employed approximately 6,200 people in its worldwide businesses. Brady's fiscal 2018 sales were approximately $1.17 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; Brady's ability to retain large customers; 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; Brady's ability to execute facility consolidations and maintain acceptable operational service metrics; 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; Brady's ability to meet certain financial covenants required by our debt agreements; 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, 2018.
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 January 31, | Six months ended January 31, | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Net sales | $ | 282,426 | $ | 287,780 | $ | 575,622 | $ | 577,931 | |||||||
| Cost of products sold | 142,616 | 144,088 | 289,273 | 288,174 | |||||||||||
| Gross margin | 139,810 | 143,692 | 286,349 | 289,757 | |||||||||||
| Operating expenses: | |||||||||||||||
| Research and development | 11,074 | 11,314 | 22,400 | 21,834 | |||||||||||
| Selling, general and administrative | 92,706 | 97,582 | 187,297 | 197,716 | |||||||||||
| Total operating expenses | 103,780 | 108,896 | 209,697 | 219,550 | |||||||||||
| Operating income | 36,030 | 34,796 | 76,652 | 70,207 | |||||||||||
| Other income (expense): | |||||||||||||||
| Investment and other income | 1,377 | 1,056 | 1,360 | 1,272 | |||||||||||
| Interest expense | (717 | ) | (829 | ) | (1,429 | ) | (1,692 | ) | |||||||
| Earnings before income taxes | 36,690 | 35,023 | 76,583 | 69,787 | |||||||||||
| Income tax expense | 7,463 | 30,750 | 16,719 | 39,678 | |||||||||||
| Net earnings | $ | 29,227 | $ | 4,273 | $ | 59,864 | $ | 30,109 | |||||||
| Net earnings per Class A Nonvoting Common Share: | |||||||||||||||
| Basic | $ | 0.56 | $ | 0.08 | $ | 1.14 | $ | 0.58 | |||||||
| Diluted | $ | 0.55 | $ | 0.08 | $ | 1.13 | $ | 0.57 | |||||||
| Dividends | $ | 0.21 | $ | 0.21 | $ | 0.43 | $ | 0.42 | |||||||
| Net earnings per Class B Voting Common Share: | |||||||||||||||
| Basic | $ | 0.56 | $ | 0.08 | $ | 1.13 | $ | 0.57 | |||||||
| Diluted | $ | 0.55 | $ | 0.08 | $ | 1.11 | $ | 0.56 | |||||||
| Dividends | $ | 0.21 | $ | 0.21 | $ | 0.41 | $ | 0.40 | |||||||
| Weighted average common shares outstanding (in thousands): | |||||||||||||||
| Basic | 52,532 | 51,698 | 52,366 | 51,569 | |||||||||||
| Diluted | 53,206 | 52,719 | 53,082 | 52,551 |
| BRADY CORPORATION AND SUBSIDIARIES | |||||||
|---|---|---|---|---|---|---|---|
| CONSOLIDATED BALANCE SHEETS | |||||||
| (Dollars in thousands) | |||||||
| January 31, 2019 | July 31, 2018 | ||||||
| (Unaudited) | |||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 202,209 | $ | 181,427 | |||
| Accounts receivable—net | 161,981 | 161,282 | |||||
| Inventories | 118,519 | 113,071 | |||||
| Prepaid expenses and other current assets | 18,973 | 15,559 | |||||
| Total current assets | 501,682 | 471,339 | |||||
| Property, plant and equipment—net | 99,378 | 97,945 | |||||
| Goodwill | 417,240 | 419,815 | |||||
| Other intangible assets | 39,652 | 42,588 | |||||
| Deferred income taxes | 7,076 | 7,582 | |||||
| Other | 18,312 | 17,662 | |||||
| Total | $ | 1,083,340 | $ | 1,056,931 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 60,504 | $ | 66,538 | |||
| Wages and amounts withheld from employees | 41,510 | 67,619 | |||||
| Taxes, other than income taxes | 7,145 | 8,318 | |||||
| Accrued income taxes | 4,426 | 3,885 | |||||
| Other current liabilities | 50,103 | 44,567 | |||||
| Total current liabilities | 163,688 | 190,927 | |||||
| Long-term obligations | 51,610 | 52,618 | |||||
| Other liabilities | 64,661 | 61,274 | |||||
| Total liabilities | 279,959 | 304,819 | |||||
| Stockholders' equity: | |||||||
| Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 49,101,192 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 | 328,978 | 325,631 | |||||
| Retained earnings | 588,918 | 553,454 | |||||
| Treasury stock—2,160,295 and 2,867,870 shares, respectively, of Class A nonvoting common stock, at cost | (54,498 | ) | (71,120 | ) | |||
| Accumulated other comprehensive loss | (60,565 | ) | (56,401 | ) | |||
| Total stockholders' equity | 803,381 | 752,112 | |||||
| Total | $ | 1,083,340 | $ | 1,056,931 |
| BRADY CORPORATION AND SUBSIDIARIES | |||||||
|---|---|---|---|---|---|---|---|
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
| (Unaudited; Dollars in thousands) | |||||||
| Six months ended January 31, | |||||||
| 2019 | 2018 | ||||||
| Operating activities: | |||||||
| Net earnings | $ | 59,864 | $ | 30,109 | |||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 11,909 | 12,840 | |||||
| Non-cash portion of stock-based compensation expense | 7,805 | 5,897 | |||||
| Deferred income taxes | 4,423 | 26,028 | |||||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable | 2,562 | (10,945 | ) | ||||
| Inventories | (6,602 | ) | (4,150 | ) | |||
| Prepaid expenses and other assets | (2,310 | ) | (3,153 | ) | |||
| Accounts payable and other liabilities | (34,055 | ) | (12,695 | ) | |||
| Income taxes | 592 | (1,471 | ) | ||||
| Net cash provided by operating activities | 44,188 | 42,460 | |||||
| Investing activities: | |||||||
| Purchases of property, plant and equipment | (12,127 | ) | (8,469 | ) | |||
| Other | (452 | ) | (729 | ) | |||
| Net cash used in investing activities | (12,579 | ) | (9,198 | ) | |||
| Financing activities: | |||||||
| Payment of dividends | (22,263 | ) | (21,373 | ) | |||
| Proceeds from exercise of stock options | 17,317 | 9,948 | |||||
| Proceeds from borrowing on credit facilities | 5,737 | 17,439 | |||||
| Repayment of borrowing on credit facilities | (5,688 | ) | (57,314 | ) | |||
| Other | (5,154 | ) | (2,342 | ) | |||
| Net cash used in financing activities | (10,051 | ) | (53,642 | ) | |||
| Effect of exchange rate changes on cash | (776 | ) | 1,763 | ||||
| Net increase (decrease) in cash and cash equivalents | 20,782 | (18,617 | ) | ||||
| Cash and cash equivalents, beginning of period | 181,427 | 133,944 | |||||
| Cash and cash equivalents, end of period | $ | 202,209 | $ | 115,327 |
| BRADY CORPORATION AND SUBSIDIARIES | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SEGMENT INFORMATION | |||||||||||||||
| (Unaudited; Dollars in thousands) | |||||||||||||||
| Three months ended January 31, | Six months ended January 31, | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| NET SALES | |||||||||||||||
| ID Solutions | $ | 209,205 | $ | 206,432 | $ | 427,304 | $ | 416,137 | |||||||
| Workplace Safety | 73,221 | 81,348 | 148,318 | 161,794 | |||||||||||
| Total | $ | 282,426 | $ | 287,780 | $ | 575,622 | $ | 577,931 | |||||||
| SALES INFORMATION | |||||||||||||||
| ID Solutions | |||||||||||||||
| Organic | 3.6 | % | 4.7 | % | 4.6 | % | 3.8 | % | |||||||
| Currency | (2.3 | )% | 3.4 | % | (1.9 | )% | 2.3 | % | |||||||
| Total | 1.3 | % | 8.1 | % | 2.7 | % | 6.1 | % | |||||||
| Workplace Safety | |||||||||||||||
| Organic | (0.9 | )% | (0.5 | )% | 0.6 | % | (1.0 | )% | |||||||
| Currency | (3.3 | )% | 6.1 | % | (2.9 | )% | 4.7 | % | |||||||
| Divestitures | (5.8 | )% | — | % | (6.0 | )% | — | % | |||||||
| Total | (10.0 | )% | 5.6 | % | (8.3 | )% | 3.7 | % | |||||||
| Total Company | |||||||||||||||
| Organic | 2.3 | % | 3.2 | % | 3.5 | % | 2.4 | % | |||||||
| Currency | (2.6 | )% | 4.2 | % | (2.2 | )% | 3.0 | % | |||||||
| Divestitures | (1.6 | )% | — | % | (1.7 | )% | — | % | |||||||
| Total | (1.9 | )% | 7.4 | % | (0.4 | )% | 5.4 | % | |||||||
| SEGMENT PROFIT | |||||||||||||||
| ID Solutions | $ | 37,857 | $ | 34,088 | $ | 79,419 | $ | 69,925 | |||||||
| Workplace Safety | 4,661 | 7,055 | 10,202 | 13,500 | |||||||||||
| Total | $ | 42,518 | $ | 41,143 | $ | 89,621 | $ | 83,425 | |||||||
| SEGMENT PROFIT AS A PERCENT OF NET SALES | |||||||||||||||
| ID Solutions | 18.1 | % | 16.5 | % | 18.6 | % | 16.8 | % | |||||||
| Workplace Safety | 6.4 | % | 8.7 | % | 6.9 | % | 8.3 | % | |||||||
| Total | 15.1 | % | 14.3 | % | 15.6 | % | 14.4 | % | |||||||
| Three months ended January 31, | Six months ended January 31, | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Total segment profit | $ | 42,518 | $ | 41,143 | $ | 89,621 | $ | 83,425 | |||||||
| Unallocated amounts: | |||||||||||||||
| Administrative costs | (6,488 | ) | (6,347 | ) | (12,969 | ) | (13,218 | ) | |||||||
| Investment and other income | 1,377 | 1,056 | 1,360 | 1,272 | |||||||||||
| Interest expense | (717 | ) | (829 | ) | (1,429 | ) | (1,692 | ) | |||||||
| Earnings before income taxes | $ | 36,690 | $ | 35,023 | $ | 76,583 | $ | 69,787 |
For More Information:
Investor contact: Ann Thornton 414-438-6887
Media contact: Kate Venne 414-358-5176
Source: Brady Corporation
