EX-99.1 2 exhibit991-financialsx2019.htm THIRD QUARTER FISCAL 2019 PRESS RELEASE
EXHIBIT 99.1
For More Information:
Investor contact: Ann Thornton 414-438-6887
Media contact: Kate Venne 414-358-5176
Brady Corporation Reports Fiscal 2019 Third Quarter Results and Increases its Fiscal 2019 EPS Guidance

• | Diluted EPS increased 32.7 percent to $0.65 in the third quarter of fiscal 2019 compared to $0.49 in the same quarter of the prior year.

• | Income before income taxes increased 10.8 percent to $41.0 million in the third quarter of fiscal 2019 compared to $37.0 million in the third quarter of fiscal 2018.

• | Sales for the quarter ended April 30, 2019 decreased 2.9 percent. Organic revenues increased 2.4 percent in the third quarter of fiscal 2019.

• | Diluted EPS guidance for the full year ending July 31, 2019 was increased to a range of $2.35 to $2.40 from the previous range of $2.25 to $2.35.

MILWAUKEE (May 23, 2019)--Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2019 third quarter ended April 30, 2019.
Quarter Ended April 30, 2019 Financial Results:
Income before income taxes increased 10.8 percent, finishing at $41.0 million for the third quarter of fiscal 2019 compared to $37.0 million for the third quarter of fiscal 2018.
Net income for the quarter ended April 30, 2019, was $34.8 million compared to $26.0 million in the same quarter last year. Net income was impacted by a reduced income tax rate of 15.1 percent primarily due to certain audit settlements in the current quarter.
Earnings per diluted Class A Nonvoting Common Share were $0.65 for the third quarter of fiscal 2019, compared to $0.49 in the same quarter last year.
Sales for the quarter ended April 30, 2019 decreased 2.9 percent, which consisted of organic sales growth of 2.4 percent, a decrease in sales of 3.8 percent from foreign currency translation, and a decline in sales of 1.5 percent from the divestiture of a business during the fourth quarter of fiscal 2018. Sales for the quarter ended April 30, 2019 were $289.7 million compared to $298.4 million in the same quarter last year. By segment, sales increased 0.9 percent in Identification Solutions and decreased 12.2 percent in Workplace Safety, which consisted of organic sales growth of 4.0 percent in Identification Solutions and an organic sales decline of 1.6 percent in Workplace Safety.

Nine-Month Period Ended April 30, 2019 Financial Results:
Income before income taxes increased 10.1 percent, finishing at $117.6 million for the nine-month period ended April 30, 2019, compared to $106.8 million in the same period last year.
Net income for the nine-month period ended April 30, 2019 was $94.6 million compared to $56.1 million in the same period last year. During the nine-month period ended April 30, 2019, net income was impacted by a reduced income tax rate of 19.5 percent primarily due to certain audit settlements in the current quarter. The prior nine-month period ended April 30, 2018 was impacted by tax charges of $21.1 million primarily related to the passage of the U.S. Tax Cuts and Jobs Act of 2017.
Earnings per diluted Class A Nonvoting Common Share were $1.78 for the nine-month period ended April 30, 2019, compared to $1.07 in the same period last year. During the nine-month period ended April 30, 2018, earnings per diluted Class A Nonvoting Common Share were reduced by approximately $0.40 from tax charges primarily related to the enactment of U.S. tax legislation.
Sales for the nine-month period ended April 30, 2019 decreased 1.3 percent, which consisted of organic sales growth of 3.1 percent, a decrease in sales of 2.8 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 nine-month period ended April 30, 2019 were $865.4 million compared to $876.4 million in the same period last year. By segment, sales increased 2.1 percent in Identification Solutions and decreased 9.7 percent in Workplace Safety, which consisted of organic sales growth of 4.4 percent in Identification Solutions and an organic sales decline of 0.2 percent in Workplace Safety.
Commentary:
“Our continued focus on organic sales growth through the development of innovative new products that generate value for our customers and solve their problems while providing strong customer service is working as we posted our eighth consecutive quarter of organic sales growth,” said Brady’s President and Chief Executive Officer, J. Michael Nauman. “Organic sales growth along with the execution of sustainable efficiency gains throughout our SG&A structure is once again the driver of our year-over-year pre-tax income growth. We remain committed to our investments in automation in our manufacturing facilities, our digital presence, and in the development of innovative new products. We’re taking actions today that we believe will result in continued long-term improvement in our financial results and will drive shareholder value.”
“Our balance sheet and cash position are strong. We have over $238 million of cash on hand and are in a net cash position of $188.1 million at April 30, 2019,” said Brady’s Chief Financial Officer, Aaron Pearce. “We generated $52.7 million of cash flow from operating activities this quarter, we invested $5.4 million in capital expenditures, and we returned $11.2 million to our shareholders in the form of dividends. Our balance sheet provides significant flexibility to invest in growth opportunities while returning cash to our shareholders through dividends and opportunistic share buybacks.”

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 $2.25 to $2.35 to a range of $2.35 to $2.40. Included in this guidance is organic sales growth of approximately 3.0 percent, a fourth quarter income tax rate in the mid-20 percent range, depreciation and amortization expense of approximately $24 million, and capital expenditures of approximately $28 to $30 million during the year ending July 31, 2019. This guidance is based upon foreign exchange rates as of April 30, 2019.
A webcast regarding Brady’s fiscal 2019 third 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.

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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.

BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Dollars in thousands, except per share data)

| Three months ended April 30, |  | Nine months ended April 30,
| 2019 |  | 2018 |  | 2019 |  | 2018
Net sales | $ | 289,745 |  |  | $ | 298,421 |  |  | $ | 865,367 |  |  | $ | 876,352 |
Cost of goods sold | 143,996 |  |  | 147,339 |  |  | 433,269 |  |  | 435,513 |
Gross margin | 145,749 |  |  | 151,082 |  |  | 432,098 |  |  | 440,839 |
Operating expenses: |  |  |  |  |  |  |
Research and development | 11,437 |  |  | 11,678 |  |  | 33,837 |  |  | 33,512 |
Selling, general and administrative | 94,691 |  |  | 101,695 |  |  | 281,988 |  |  | 299,411 |
Total operating expenses | 106,128 |  |  | 113,373 |  |  | 315,825 |  |  | 332,923 |
Operating income | 39,621 |  |  | 37,709 |  |  | 116,273 |  |  | 107,916 |
Other income (expense): |  |  |  |  |  |  |
Investment and other income | 2,065 |  |  | 31 |  |  | 3,425 |  |  | 1,303 |
Interest expense | (708 | ) |  | (761 | ) |  | (2,137 | ) |  | (2,453 | )
Income before income taxes | 40,978 |  |  | 36,979 |  |  | 117,561 |  |  | 106,766 |
Income tax expense | 6,197 |  |  | 10,979 |  |  | 22,916 |  |  | 50,657 |
Net income | $ | 34,781 |  |  | $ | 26,000 |  |  | $ | 94,645 |  |  | $ | 56,109 |
Net income per Class A Nonvoting Common Share: |  |  |  |  |  |  |
Basic | $ | 0.66 |  |  | $ | 0.50 |  |  | $ | 1.80 |  |  | $ | 1.09 |
Diluted | $ | 0.65 |  |  | $ | 0.49 |  |  | $ | 1.78 |  |  | $ | 1.07 |
Dividends | $ | 0.21 |  |  | $ | 0.21 |  |  | $ | 0.64 |  |  | $ | 0.62 |
Net income per Class B Voting Common Share: |  |  |  |  |  |  |
Basic | $ | 0.66 |  |  | $ | 0.50 |  |  | $ | 1.79 |  |  | $ | 1.07 |
Diluted | $ | 0.65 |  |  | $ | 0.49 |  |  | $ | 1.76 |  |  | $ | 1.05 |
Dividends | $ | 0.21 |  |  | $ | 0.21 |  |  | $ | 0.62 |  |  | $ | 0.61 |
Weighted average common shares outstanding (in thousands): |  |  |  |  |  |  |
Basic | 52,766 |  |  | 51,747 |  |  | 52,499 |  |  | 51,628 |
Diluted | 53,480 |  |  | 52,729 |  |  | 53,215 |  |  | 52,610 |

BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

| April 30, 2019 |  | July 31, 2018
| (Unaudited) |  |
ASSETS |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 238,432 |  |  | $ | 181,427 |
Accounts receivable—net | 162,094 |  |  | 161,282 |
Inventories | 119,895 |  |  | 113,071 |
Prepaid expenses and other current assets | 18,746 |  |  | 15,559 |
Total current assets | 539,167 |  |  | 471,339 |
Property, plant and equipment—net | 99,491 |  |  | 97,945 |
Goodwill | 412,378 |  |  | 419,815 |
Other intangible assets | 38,135 |  |  | 42,588 |
Deferred income taxes | 7,068 |  |  | 7,582 |
Other | 19,638 |  |  | 17,662 |
Total | $ | 1,115,877 |  |  | $ | 1,056,931 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |
Current liabilities: |  |  |
Accounts payable | $ | 64,584 |  |  | $ | 66,538 |
Wages and amounts withheld from employees | 52,849 |  |  | 67,619 |
Taxes, other than income taxes | 7,886 |  |  | 8,318 |
Accrued income taxes | 4,378 |  |  | 3,885 |
Other current liabilities | 48,169 |  |  | 44,567 |
Total current liabilities | 177,866 |  |  | 190,927 |
Long-term obligations | 50,303 |  |  | 52,618 |
Other liabilities | 63,164 |  |  | 61,274 |
Total liabilities | 291,333 |  |  | 304,819 |
Stockholders’ equity: |  |  |
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 49,284,372 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 | 330,051 |  |  | 325,631 |
Retained earnings | 612,474 |  |  | 553,454 |
Treasury stock—1,977,115 and 2,867,870 shares, respectively of Class A nonvoting common stock, at cost | (50,083 | ) |  | (71,120 | )
Accumulated other comprehensive loss | (68,446 | ) |  | (56,401 | )
Total stockholders’ equity | 824,544 |  |  | 752,112 |
Total | $ | 1,115,877 |  |  | $ | 1,056,931 |

BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)

| Nine months ended April 30,
| 2019 |  | 2018
Operating activities: |  |  |
Net income | $ | 94,645 |  |  | $ | 56,109 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
Depreciation and amortization | 17,836 |  |  | 19,047 |
Non-cash portion of stock-based compensation expense | 10,311 |  |  | 7,581 |
Deferred income taxes | 3,796 |  |  | 26,501 |
Changes in operating assets and liabilities: |  |  |
Accounts receivable | 332 |  |  | (10,710 | )
Inventories | (9,254 | ) |  | (7,790 | )
Prepaid expenses and other assets | (2,204 | ) |  | 480 |
Accounts payable and accrued liabilities | (19,176 | ) |  | (133 | )
Income taxes | 616 |  |  | (1,863 | )
Net cash provided by operating activities | 96,902 |  |  | 89,222 |
Investing activities: |  |  |
Purchases of property, plant and equipment | (17,528 | ) |  | (14,755 | )
Other | (1,810 | ) |  | (197 | )
Net cash used in investing activities | (19,338 | ) |  | (14,952 | )
Financing activities: |  |  |
Payment of dividends | (33,488 | ) |  | (32,110 | )
Proceeds from exercise of stock options | 20,333 |  |  | 10,011 |
Proceeds from borrowing on credit facilities | 13,637 |  |  | 17,439 |
Repayment of borrowing on credit facilities | (13,568 | ) |  | (69,012 | )
Other | (5,185 | ) |  | (3,622 | )
Net cash used in financing activities | (18,271 | ) |  | (77,294 | )
Effect of exchange rate changes on cash | (2,288 | ) |  | (17 | )
Net increase (decrease) in cash and cash equivalents | 57,005 |  |  | (3,041 | )
Cash and cash equivalents, beginning of period | 181,427 |  |  | 133,944 |
Cash and cash equivalents, end of period | $ | 238,432 |  |  | $ | 130,903 |

BRADY CORPORATION AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited; Dollars in thousands)

| Three months ended April 30, |  | Nine months ended April 30,
| 2019 |  | 2018 |  | 2019 |  | 2018
NET SALES |  |  |  |  |  |  |
ID Solutions | $ | 213,979 |  |  | $ | 212,154 |  |  | $ | 641,283 |  |  | $ | 628,291 |
Workplace Safety | 75,766 |  |  | 86,267 |  |  | 224,084 |  |  | 248,061 |
Total | $ | 289,745 |  |  | $ | 298,421 |  |  | $ | 865,367 |  |  | $ | 876,352 |
SALES INFORMATION |  |  |  |  |  |  |
ID Solutions |  |  |  |  |  |  |
Organic | 4.0 | % |  | 3.7 | % |  | 4.4 | % |  | 3.7 | %
Currency | (3.1 | )% |  | 4.1 | % |  | (2.3 | )% |  | 3.0 | %
Total | 0.9 | % |  | 7.8 | % |  | 2.1 | % |  | 6.7 | %
Workplace Safety |  |  |  |  |  |  |
Organic | (1.6 | )% |  | 1.7 | % |  | (0.2 | )% |  | (0.1 | )%
Currency | (5.3 | )% |  | 7.4 | % |  | (3.7 | )% |  | 5.7 | %
Divestitures | (5.3 | )% |  | — | % |  | (5.8 | )% |  | — | %
Total | (12.2 | )% |  | 9.1 | % |  | (9.7 | )% |  | 5.6 | %
Total Company |  |  |  |  |  |  |
Organic | 2.4 | % |  | 3.2 | % |  | 3.1 | % |  | 2.7 | %
Currency | (3.8 | )% |  | 5.0 | % |  | (2.8 | )% |  | 3.6 | %
Divestitures | (1.5 | )% |  | — | % |  | (1.6 | )% |  | — | %
Total | (2.9 | )% |  | 8.2 | % |  | (1.3 | )% |  | 6.3 | %
SEGMENT PROFIT |  |  |  |  |  |  |
ID Solutions | $ | 39,892 |  |  | $ | 36,970 |  |  | $ | 119,311 |  |  | $ | 106,896 |
Workplace Safety | 6,099 |  |  | 7,537 |  |  | 16,301 |  |  | 21,037 |
Total | $ | 45,991 |  |  | $ | 44,507 |  |  | $ | 135,612 |  |  | $ | 127,933 |
SEGMENT PROFIT AS A PERCENT OF NET SALES |  |  |  |  |  |  |
ID Solutions | 18.6 | % |  | 17.4 | % |  | 18.6 | % |  | 17.0 | %
Workplace Safety | 8.0 | % |  | 8.7 | % |  | 7.3 | % |  | 8.5 | %
Total | 15.9 | % |  | 14.9 | % |  | 15.7 | % |  | 14.6 | %

| Three months ended April 30, |  | Nine months ended April 30,
| 2019 |  | 2018 |  | 2019 |  | 2018
Total segment profit | $ | 45,991 |  |  | $ | 44,507 |  |  | $ | 135,612 |  |  | $ | 127,933 |
Unallocated amounts: |  |  |  |  |  |  |
Administrative costs | (6,370 | ) |  | (6,798 | ) |  | (19,339 | ) |  | (20,017 | )
Investment and other income | 2,065 |  |  | 31 |  |  | 3,425 |  |  | 1,303 |
Interest expense | (708 | ) |  | (761 | ) |  | (2,137 | ) |  | (2,453 | )
Income before income taxes | $ | 40,978 |  |  | $ | 36,979 |  |  | $ | 117,561 |  |  | $ | 106,766 |