Brady Corporation Reports Fiscal 2020 Fourth Quarter Results

Rhea-AI Summary

Brady Corporation reported its fiscal 2020 fourth quarter results, revealing a 14.7% decline in sales to $251.7 million compared to the previous year. Income before taxes dropped 26.0% to $34.9 million, and diluted EPS fell to $0.53 from $0.68. Yearly sales totaled $1.08 billion, down 6.8%, with significant declines in the Identification Solutions segment. Positive trends were noted in Workplace Safety, with a 10.8% growth in organic sales. The company maintained a strong financial position with $217.6 million in cash and no debt.

Positive

• Workplace Safety segment sales increased 10.8% organically.
• Strong cash flow of $141.0 million and healthy cash position of $217.6 million.

Negative

• Sales declined 14.7% in Q4 compared to last year.
• Income before income taxes dropped 26.0% to $34.9 million.

• Income before income taxes and losses of unconsolidated affiliate was $34.9 million in the fourth quarter of fiscal 2020 compared to $47.1 million in the same quarter of the prior year. 
• Diluted EPS was $0.53 in the fourth quarter of fiscal 2020 compared to $0.68 in the same quarter of the prior year. 
• Sales for the quarter declined 14.7 percent.  Organic sales declined 13.7 percent and the impact of foreign currency translation decreased sales by 1.0 percent.

MILWAUKEE, Sept. 16, 2020 (GLOBE NEWSWIRE) -- Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2020 fourth quarter ended July 31, 2020.

Quarter Ended July 31, 2020 Financial Results:

Income before income taxes and losses of unconsolidated affiliate declined 26.0 percent to $34.9 million for the quarter ended July 31, 2020, compared to $47.1 million in the same quarter last year.

Net income for the quarter ended July 31, 2020 declined 24.4 percent to $27.7 million compared to $36.6 million in the same quarter last year.  Earnings per diluted Class A Nonvoting Common Share were $0.53 for the fourth quarter of fiscal 2020, compared to $0.68 in the same quarter last year.

Sales for the quarter ended July 31, 2020 declined 14.7 percent, which consisted of an organic sales decline of 13.7 percent and a decline of 1.0 percent from foreign currency translation.  Sales for the quarter ended July 31, 2020 were $251.7 million compared to $295.3 million in the same quarter last year.  By segment, sales declined 22.8 percent in Identification Solutions and increased 9.7 percent in Workplace Safety, which consisted of an organic sales decline of 21.7 percent in Identification Solutions and organic sales growth of 10.8 percent in Workplace Safety.

Year Ended July 31, 2020 Financial Results:

Income before income taxes and losses of unconsolidated affiliate declined 14.4 percent to $140.9 million for the year ended July 31, 2020, compared to $164.6 million for the year ended July 31, 2019.  Income before income taxes and losses of unconsolidated affiliate was reduced by non-cash impairment charges of $13.8 million for the year ended July 31, 2020.

Net income for the year ended July 31, 2020 declined 14.4 percent to $112.4 million compared to $131.3 million last year.  Earnings per diluted Class A Nonvoting Common Share were $2.11 for the year ended July 31, 2020, compared to $2.46 last year.  Diluted EPS was reduced by non-cash impairment charges of approximately $0.21 for the year ended July 31, 2020.

Sales for the year ended July 31, 2020 declined 6.8 percent, which consisted of an organic sales decline of 5.4 percent and a decline of 1.4 percent from foreign currency translation.  Fiscal 2020 sales were $1.08 billion compared to $1.16 billion last year.  By segment, sales declined 9.1 percent in Identification Solutions and declined 0.3 percent in Workplace Safety, which consisted of an organic sales decline of 8.0 percent in Identification Solutions and organic sales growth of 2.3 percent in Workplace Safety.

Commentary:

“We are more focused than ever on doing our part to serve the front-line workers and other essential companies with the products and services they need to help fight this global pandemic.  Our foremost focus has been on the safety of our employees and supporting the needs of our customers with the high-quality products and services that they have come to expect from Brady,” said Brady’s President and Chief Executive Officer, J. Michael Nauman.  “This quarter, we saw demand in our Identification Solutions business begin to improve in June and July from the lows experienced in April and May; while our Workplace Safety business had a strong quarter with organic sales increasing more than 10% compared to last year.  Growth in our Workplace Safety business was primarily driven by increased sales of safety and identification products directly related to the COVID-19 pandemic, including social distancing and personal hygiene signage.  We remain focused on investing in new products, building on our positive momentum, and executing sustainable efficiencies throughout Brady.  We believe that our ongoing investments in new product development combined with the much improved financial results in our Workplace Safety business and the improving sequential sales trends in our Identification Solutions business will make Brady an even stronger company when industrial end-market demand returns.”

“Brady is financially strong.  As of July 31, 2020, we had $217.6 million of cash and no outstanding debt,” said Brady’s Chief Financial Officer, Aaron Pearce.  “We generated $141.0 million of cash flow from operating activities this year, we invested $27.3 million in capital expenditures, we returned $45.8 million to our shareholders in the form of dividends, and we returned $64.5 million to our shareholders in the form of share buybacks.  Our strong cash generation and balance sheet allow us to continue to execute our capital allocation strategy which involves investing to grow our organic business, paying a strong dividend, buying back our shares in an opportunistic manner, and investing in acquisitions that are consistent with our strategies.  Brady’s strong balance sheet and cash generation positions us well for future financial success.”

A webcast regarding Brady’s fiscal 2020 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, 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.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, ” “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.

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.

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

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,
		2020				2019				2020				2019
Net sales	$	251,744			$	295,278			$	1,081,299			$	1,160,645
Cost of goods sold		133,238				148,698				552,734				581,967
Gross margin		118,506				146,580				528,565				578,678
Operating expenses:
Research and development		9,364				11,331				40,662				45,168
Selling, general and administrative		75,923				89,094				336,059				371,082
Impairment charges		—				—				13,821				—
Total operating expenses		85,287				100,425				390,542				416,250
Operating income		33,219				46,155				138,023				162,428
Other income (expense):
Investment and other income		1,827				1,621				5,079				5,046
Interest expense		(190	)			(693	)			(2,166	)			(2,830	)
Income before income taxes and losses of unconsolidated affiliate		34,856				47,083				140,936				164,644
Income tax expense		6,925				10,470				28,321				33,386
Income before losses of unconsolidated affiliate		27,931				36,613				112,615				131,258
Equity in losses of unconsolidated affiliate		(246	)			-				(246	)			-
Net income	$	27,685			$	36,613			$	112,369			$	131,258
Net income per Class A Nonvoting Common Share:
Basic	$	0.53			$	0.69			$	2.13			$	2.50
Diluted	$	0.53			$	0.68			$	2.11			$	2.46
Dividends	$	0.22			$	0.21			$	0.87			$	0.85
Net income per Class B Voting Common Share:
Basic	$	0.53			$	0.69			$	2.11			$	2.48
Diluted	$	0.53			$	0.68			$	2.10			$	2.45
Dividends	$	0.22			$	0.21			$	0.85			$	0.83
Weighted average common shares outstanding:
Basic		51,983				52,885				52,763				52,596
Diluted		52,389				53,647				53,231				53,323

BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
	July 31, 2020				July 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	217,643			$	279,072
Accounts receivable—net		146,181				158,114
Inventories		135,662				120,037
Prepaid expenses and other current assets		9,962				16,056
Total current assets		509,448				573,279
Property, plant and equipment—net		115,068				110,048
Goodwill		416,034				410,987
Other intangible assets		22,334				36,123
Deferred income taxes		8,845				7,298
Operating lease assets		41,899				—
Other assets		28,838				19,573
Total	$	1,142,466			$	1,157,308
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	62,547			$	64,810
Accrued compensation and benefits		41,546				62,509
Taxes, other than income taxes		8,057				8,107
Accrued income taxes		8,652				6,557
Current operating lease liabilities		15,304				—
Other current liabilities		49,782				49,796
Current maturities on long-term debt		—				50,166
Total current liabilities		185,888				241,945
Long-term operating lease liabilities		31,982				—
Other liabilities		61,524				64,589
Total liabilities		279,394				306,534
Stockholders’ equity:
Common stock:
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 48,456,954 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		331,761				329,969
Retained earnings		704,456				637,843
Treasury stock—2,804,533 and 1,802.646 shares, respectively, of Class A nonvoting common stock, at cost		(107,216	)			(46,332	)
Accumulated other comprehensive loss		(66,477	)			(71,254	)
Total stockholders’ equity		863,072				850,774
Total	$	1,142,466			$	1,157,308

BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
	Year ended July 31,
		2020				2019
Operating activities:
Net income	$	112,369			$	131,258
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		23,437				23,799
Stock-based compensation expense		8,843				12,092
Deferred income taxes		(764	)			7,825
Impairment charges		13,821				—
Equity in losses of unconsolidated affiliate		246				—
Other		2,611				2,347
Changes in operating assets and liabilities:
Accounts receivable		13,902				3,496
Inventories		(13,917	)			(9,922	)
Prepaid expenses and other assets		4,477				368
Accounts payable and accrued liabilities		(26,128	)			(11,903	)
Income taxes		2,080				2,851
Net cash provided by operating activities		140,977				162,211
Investing activities:
Purchases of property, plant and equipment		(27,277	)			(32,825	)
Purchase of equity method investment		(6,000	)			—
Other		(2,842	)			(1,638	)
Net cash used in investing activities		(36,119	)			(34,463	)
Financing activities:
Payment of dividends		(45,756	)			(44,732	)
Proceeds from exercise of stock options		5,511				25,658
Payments for employee taxes withheld from stock-based awards		(9,065	)			(5,651	)
Purchase of treasury stock		(64,514	)			(3,182	)
Proceeds from borrowing on credit facilities		20,697				13,637
Repayment of borrowing on credit facilities		(21,855	)			(13,568	)
Principal payments on debt		(48,672	)			—
Other		134				210
Net cash used in financing activities		(163,520	)			(27,628	)
Effect of exchange rate changes on cash and cash equivalents		(2,767	)			(2,475	)
Net (decrease) increase in cash and cash equivalents		(61,429	)			97,645
Cash and cash equivalents, beginning of period		279,072				181,427
Cash and cash equivalents, end of period	$	217,643			$	279,072
Supplemental disclosures:
Cash paid during the period for:
Interest	$	2,401			$	2,651
Income taxes		29,600				24,335

BRADY CORPORATION AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited; Dollars in thousands)
	Three Months Ended July 31,								Year Ended July 31,
		2020				2019				2020				2019
NET SALES
ID Solutions	$	171,189			$	221,817			$	784,707			$	863,100
Workplace Safety		80,555				73,461				296,592				297,545
Total	$	251,744			$	295,278			$	1,081,299			$	1,160,645
SALES INFORMATION
ID Solutions
Organic		(21.7	)%			3.3	%			(8.0	)%			4.1	%
Currency		(1.1	)%			(1.5	)%			(1.1	)%			(2.1	)%
Total		(22.8	)%			1.8	%			(9.1	)%			2.0	%
Workplace Safety
Organic		10.8	%			(2.6	)%			2.3	%			(0.7	)%
Currency		(1.1	)%			(3.3	)%			(2.6	)%			(3.7	)%
Divestiture		—	%			(1.9	)%			—	%			(4.8	)%
Total		9.7	%			(7.8	)%			(0.3	)%			(9.2	)%
Total Company
Organic		(13.7	)%			1.7	%			(5.4	)%			2.8	%
Currency		(1.0	)%			(1.9	)%			(1.4	)%			(2.6	)%
Divestiture		—	%			(0.5	)%			—	%			(1.3	)%
Total		(14.7	)%			(0.7	)%			(6.8	)%			(1.1	)%
SEGMENT PROFIT
ID Solutions	$	31,140			$	45,642			$	150,639			$	164,953
Workplace Safety		6,028				6,724				21,019				23,025
Total	$	37,168			$	52,366			$	171,658			$	187,978
SEGMENT PROFIT AS A PERCENT OF NET SALES
ID Solutions		18.2	%			20.6	%			19.2	%			19.1	%
Workplace Safety		7.5	%			9.2	%			7.1	%			7.7	%
Total		14.8	%			17.7	%			15.9	%			16.2	%
	Three Months Ended July 31,								Year Ended July 31,
		2020				2019				2020				2019
Total segment profit	$	37,168			$	52,366			$	171,658			$	187,978
Unallocated amounts:
Administrative costs		(3,949	)			(6,211	)			(19,814	)			(25,550	)
Impairment charges		-				-				(13,821	)			-
Investment and other income		1,827				1,621				5,079				5,046
Interest expense		(190	)			(693	)			(2,166	)			(2,830	)
Income before income taxes and losses of unconsolidated affiliate	$	34,856			$	47,083			$	140,936			$	164,644

FAQ

What were Brady Corporation's Q4 fiscal 2020 earnings?

Brady reported diluted EPS of $0.53 for Q4 fiscal 2020, down from $0.68 in the previous year.

How did Brady's sales perform in FY 2020?

In fiscal year 2020, Brady's sales totaled $1.08 billion, representing a 6.8% decline from the previous year.

What is the impact of foreign currency translation on Brady's sales?

Foreign currency translation negatively impacted sales by 1.0% in Q4 fiscal 2020.

What are the future prospects for Brady Corporation?

Brady is focused on investing in new products and believes improved financial results in Workplace Safety will strengthen the company's position.