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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
 
 
 
FORM 8-K
 
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 23, 2019
 
 
 
BRADY CORPORATION
(Exact name of registrant as specified in its charter)
 
 
 
Commission File Number 1-14959
 
 
 
Wisconsin
 
39-0971239
(State of
Incorporation)
 
(IRS Employer
Identification No.)
6555 West Good Hope Road
Milwaukee, Wisconsin 53223
(Address of Principal Executive Offices and Zip Code)
(414) 358-6600
(Registrant’s Telephone Number)
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol
Name of each exchange on which registered
Class A Nonvoting Common Stock, par value $0.01 per share
BRC
New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 or the Securities Exchange Act of 1934 (17 CFR 240.12b-2).
Emerging growth company  ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨





Item 2.02
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On May 23, 2019, Brady Corporation (the “Company”) issued a press release announcing its fiscal 2019 third quarter financial results. A copy of the press release is being furnished to the Securities and Exchange Commission as Exhibit 99.1 attached hereto and is incorporated herein by reference.

Item 7.01
REGULATION FD DISCLOSURE

On May 23, 2019, the Company hosted a conference call related to its fiscal 2019 third quarter financial results. A copy of the slides referenced in the conference call, which is also posted on the Corporation’s website, is being furnished to the Securities and Exchange Commission as Exhibit 99.2 attached hereto and is incorporated herein by reference.
Item 9.01
FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits
EXHIBIT NUMBER
DESCRIPTION
99.1
99.2

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
BRADY CORPORATION
 
 
 
 
 
 
Date: May 23, 2019
 
/s/ AARON J. PEARCE
 
 
Aaron J. Pearce
 
 
Chief Financial Officer and Treasurer



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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 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.
























###

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




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Brady Corporation F’19 Q3 Financial Results May 23, 2019
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Forward-Looking Statements 2 In this presentation, 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.
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Q3 F’19 Financial Summary 3 • Sales were $289.7M in Q3 of F’19 compared with $298.4M in Q3 of F’18. – Organic sales increased 2.4%. – Foreign currency translation decreased sales 3.8%. – Sale of business decreased sales 1.5%. • Gross profit margin of 50.3% in Q3 of F’19 compared with 50.6% in Q3 of F’18. • SG&A expense of $94.7M (32.7% of sales) in Q3 of F’19 compared with $101.7M (34.1% of sales) in Q3 of F’18. • R&D expense of $11.4M (3.9% of sales) in Q3 of F’19 compared with $11.7M (3.9% of sales) in Q3 of F’18. • Income before income taxes increased 10.8% to $41.0M in Q3 of F’19 compared with $37.0M in Q3 of F’18. • Net income was $34.8M in Q3 of F’19 compared with $26.0M in Q3 of F’18. – Reduced income tax rate of 15.1% in Q3 of F’19 compared with 29.7% in Q3 of F’18. • Net income per Class A Diluted Nonvoting Common Share was $0.65 in Q3 of F’19 compared with $0.49 in Q3 of F’18.
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Sales Overview 4 SALES (millions of USD) $305 $298 $297 $295 $293 $289 $290 $290 $288 $285 $282 $276 $275 $265 $255 Q3 F'17 Q4 F'17 Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Organic Sales (1.9%) 3.0% 1.7% 3.2% 3.2% 2.5% 4.7% 2.3% 2.4% Growth Q3 F’19 SALES: Q3 F’19 SALES COMMENTARY: • 2.4% increase in organic sales: • ID Solutions – Organic sales increased in all three regions. • ID Solutions – Organic sales increased 4.0%. • Workplace Safety – Organic sales increased in Europe • Workplace Safety – Organic sales decreased and Australia and declined in North America. 1.6%. • Foreign currency translation had a negative impact on • 3.8% decrease due to foreign currency translation. sales in the quarter. • 1.5% decrease due to the sale of a business.
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Gross Profit Margin 5 GROSS PROFIT & GPM% (millions of USD) 50.7% 50.6% 50.3% 50.3% 49.9% 50.0% 49.7% 49.6% 49.5% $151 50% $150 $146 $147 $147 $144 $144 $146 $140 $140 45% $125 $100 40% Q3 F'17 Q4 F'17 Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Q3 F’19 – GROSS PROFIT MARGIN: • Slight decline in GPM from 50.6% in Q3 of F’18 to 50.3% in Q3 of F’19. • Costs increased in certain areas including freight and personnel. • We continue to invest in automation and manufacturing efficiencies to offset cost increases.
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SG&A Expense 6 SG&A EXPENSE AND SG&A EXPENSE AS A % of SALES (millions of USD) 35.7% 34.1% $110 34.5% 35% 33.4% 33.9% 32.8% $102 32.3% 32.7% $100 33% $100 $98 30.6% $97 $98 $95 $95 $93 30% $91 $90 28% $80 25% Q3 F'17 Q4 F'17 Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Q3 F’19 – SG&A EXPENSE: • SG&A expense was $94.7M (32.7% of sales) in Q3 of F’19 compared to $101.7M (34.1% of sales) in Q3 of F’18. • SG&A expense is down in absolute dollars as a result of foreign currency translation, the sale of a business in the fourth quarter of F’18, and due to on-going efficiency gains. • We continue to drive sustainable efficiency gains in administrative expenses and non-customer facing selling expenses while investing in sales-generating resources.
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R&D Expense 7 R&D EXPENSE AND R&D EXPENSE AS A % of SALES (millions of USD) $14.0 3.9% 3.9% 3.9% 3.9% 3.9% 3.8% 3.9% 4.0% $12.0 3.6% 3.6% $11.7 $11.7 $11.3 $11.3 $11.4 $11.1 $11.0 $10.5 3.5% $10.0 $10.0 3.0% $8.0 $6.0 2.5% Q3 F'17 Q4 F'17 Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Q3INCREASING F’19 – R&D OUR EXPENSE: INVESTMENT IN RESEARCH & DEVELOPMENT: • Investing in R&D to drive future organic sales growth. • Improved new product pipeline. • Anticipate R&D expense for the full fiscal year ending July 31, 2019 to be approximately in line with the prior year.
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Income Before Income Taxes 8 INCOME BEFORE INCOME TAXES (millions of USD) $45.2 $45 $41.0 $39.9 $40 $37.0 $35.9 $36.7 $34.8 $35.0 $35 $30.6 $30 $25 $20 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 F'17 F'17 F'18 F'18 F'18 F'18 F'19 F'19 F'19 Year on Year Growth 3.2% 12.2% 12.2% 20.4% 20.7% 26.0% 14.8% 4.8% 10.8% INCOME BEFORE INCOME TAXES: • Income before income taxes increased 10.8% to $41.0M in Q3 of F’19 compared to $37.0M in Q3 of F’18. • The increase in pre-tax income was primarily driven by organic sales growth and reduced SG&A expenses.
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Net Income & Diluted EPS 9 NET INCOME (millions of USD) NET INCOME PER CLASS A DILUTED SHARE $40 $0.66 $0.65 $35.0 $34.8 $0.58 $0.60 $0.55 $30.6 $29.2 $30 $0.48 $0.49 $0.49 $25.2 $25.8 $26.0 $0.43 $22.6 $0.40 $20 $0.20 $10 $4.3 $0.08 $0 $0.00 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 F'17 F'17 F'18 F'18 F'18 F'18 F'19 F'19 F'19 F'17 F'17 F'18 F'18 F'18 F'18 F'19 F'19 F'19 Q3 F’19 – NET INCOME & DILUTED EPS: • Net income increased to $34.8M in Q3 of F’19 compared to $26.0M in Q3 of F’18. • Diluted EPS increased to $0.65 in Q3 of F’19 compared to $0.49 in Q3 of F’18.
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Cash Generation & Uses 10 CASH FLOW FROM OPERATING ACTIVITIES (millions of USD) CASH FLOWS IN Q3 OF F’19: $60 • Cash flow from operating activities was $52.7M $52.9 $53.8 $52.7 in Q3 of F’19 compared to $46.8M in Q3 of F’18. $50 $46.8 $37.8 • Free cash flow* was $47.3M in Q3 of F’19 $40 $34.7 compared to $40.5M in Q3 of F’18. $30 $25.4 • Invested $5.4 million in capital expenditures in $18.8 $20 Q3 of F’19. $10 $7.7 • Returned $11.2M to our shareholders in the form of dividends in Q3 of F’19. $0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 F'17 F'17 F'18 F'18 F'18 F'18 F'19 F'19 F'19 % of Net Earnings 168% 210% 134% 181% 180% 154% 54% 87% 152% (millions of USD) 3 Mos. Ended 3 Mos. Ended 9 Mos. Ended 9 Mos. Ended April 30, 2019 April 30, 2018 April 30, 2019 April 30, 2018 Cash Balance - Beginning of Period $ 202.2 $ 115.3 $ 181.4 $ 133.9 Cash Flow from Operating Activities 52.7 46.8 96.9 89.2 Capital Expenditures (5.4) (6.3) (17.5) (14.8) Dividends (11.2) (10.7) (33.5) (32.1) Debt Borrowings (Repayments) - Net - (11.7) - (51.6) Effect of Exchange Rates on Cash (1.5) (1.8) (2.3) - Other 1.6 (0.7) 13.4 6.3 Cash Balance - End of Period $ 238.4 $ 130.9 $ 238.4 $ 130.9 * Free Cash Flow is calculated as Net Cash Provided by Operating Activities less Capital Expenditures.
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Net Cash (Debt) 11 NET CASH (DEBT) (millions of USD) DEBT STRUCTURE (millions of USD) $188 $190 $151 $138 Interest Apr. 30, 2019 July 31, 2018 $140 $129 Rate Balance Balance Private Placements: $90 EUR-den. 2010 Series (10-yr.) 4.24% $ (50.3) $ (52.6) $73 TOTAL DEBT $ (50.3) $ (52.6) $48 $44 $40 $26 Cash and Cash Equivalents 238.4 181.4 NET CASH $ 188.1 $ 128.8 -$10 $(9) -$60 Q3 F'17 Q4 F'17 Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 STRONG BALANCE SHEET: • April 30, 2019 cash = $238.4M and debt = $50.3M. • Net cash increased $37.5M in Q3 of F’19. • Approximately $110M of cash is held in the United States. • Balance sheet provides flexibility for future investments.
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Full-Year F’19 Guidance 12 F’19 Diluted EPS guidance range increased to $2.35 to $2.40. (previous guidance range was $2.25 to $2.35). F’19 Guidance Assumptions: • Full-year organic sales growth of approximately 3%. • Full-year depreciation and amortization expense of approximately $24M. • Fourth quarter income tax expense in the mid-20% range. • Full-year capital expenditures of approximately $28M - $30M.
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Identification Solutions 13 Q3 F’19 vs. Q3 F’18 (millions of USD) Q3 F’19 SUMMARY: • Revenues increased 0.9%: Q3 F’19 Q3 F’18 Change • Organic = +4.0% Sales $ 214.0 $ 212.2 + 0.9% • Fx = - (3.1)% Segment Profit 39.9 37.0 + 7.9% • Organic sales increased in the low-single digits in the Americas and Asia. Segment Profit % 18.6% 17.4% + 120 bps • Organic sales increased in the mid-single digits in Europe. • Segment profit as a percent of sales increased due to ongoing efficiency gains in our operations and SG&A SALES & SEGMENT PROFIT % (millions of USD) structure. $240 20% 19% 19% 18% 17% 18% $230 17% 17% 17% 17% 17% 16% $220 $218 $218 $214 $211 $212 14% $210 $209 $210 $206 OUTLOOK: 12% • Expect F’19 organic sales to grow from 4% to 5%. $200 $197 10% • Anticipate further increases in sales-generating $190 8% investments while continuing to drive efficiency gains throughout the organization. $180 6% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 F'17 F'17 F'18 F'18 F'18 F'18 F'19 F'19 F'19
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Workplace Safety 14 Q3 F’19 vs. Q3 F’18 (millions of USD) Q3 F’19 SUMMARY: • Revenues decreased (12.2%): Q3 F’19 Q3 F’18 Change • Organic = - (1.6%) Sales $ 75.8 $ 86.3 - 12.2% • Fx = - (5.3%) Segment Profit 6.1 7.5 - 19.1% • Divestiture = - (5.3%) Segment Profit % 8.0% 8.7% - 70 bps • Organic sales increased in the low-single digits in Europe and Australia and decreased by approximately 10% in North America. • Segment profit negatively impacted by organic sales SALES & SEGMENT PROFIT % (millions of USD) decline, foreign currency translation, and the sale of the Runelandhs business in the fourth quarter of last 13% 14% fiscal year. $100 12% $95 10% 10% 9% 9% $90 8% 8% 7% 8% 6% $86 6% $85 OUTLOOK: $81 6% $80 $80 $80 $79 $78 4% • Expect F’19 organic sales to be effectively flat. $75 $76 • Anticipate Europe and Australia to continue to $75 $73 2% perform well while our Americas business continues $70 0% to recover. Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 F'17 F'17 F'18 F'18 F'18 F'18 F'19 F'19 F'19
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Investor Relations 15 Brady Contact: Ann Thornton Investor Relations 414-438-6887 Ann_Thornton@bradycorp.com See our web site at www.bradycorp.com
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