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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
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\n
FORM 8-K
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\n
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 20, 2019
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\n
BRADY CORPORATION
(Exact name of registrant as specified in its charter)
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\n
Commission File Number 1-14959
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Wisconsin
 
39-0971239
(State of
Incorporation)
 
(IRS Employer
Identification No.)
\n
6555 West Good Hope Road
Milwaukee, Wisconsin 53223
(Address of Principal Executive Offices and Zip Code)
(414) 358-6600
(Registrant’s Telephone Number)
\n
 
 
 
\n
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:
\n
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
\n
\n
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
\n
\n
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
\n
\n
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
\n
\n
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
\n
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. ¨


\n


\n
Item 2.02
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
\n

On November 21, 2019, Brady Corporation (the “Company”) issued a press release announcing its fiscal 2020 first 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.

\n
Item 5.07
SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
\n

On November 20, 2019, at the Company’s Annual Shareholders’ Meeting, the holders of all of the 3,538,628 shares of the Company’s Class B Common Stock voted unanimously in favor of electing the following persons to serve as the Company’s directors until the next annual meeting of shareholders and until their successors have been elected:

Patrick W. Allender
Gary S. Balkema
David S. Bem
Elizabeth P. Bruno
Nancy L. Gioia
Conrad G. Goodkind
Frank W. Harris
J. Michael Nauman
Bradley C. Richardson
Michelle E. Williams

\n
Item 7.01
REGULATION FD DISCLOSURE
\n

On November 21, 2019, the Company hosted a conference call related to its fiscal 2020 first 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.
\n
Item 9.01
FINANCIAL STATEMENTS AND EXHIBITS
\n
 
(d) Exhibits
\n
EXHIBIT NUMBER
DESCRIPTION
99.1
99.2
\n



\n


\nSIGNATURE
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.
 
\n
 
 
BRADY CORPORATION
 
 
 
Date: November 21, 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 2020 First Quarter Results and Increases its Fiscal 2020 EPS Guidance

\n
•
Income before income taxes increased 4.2 percent to $41.6 million in the first quarter of fiscal 2020 compared to $39.9 million in the same quarter of the prior year.
\n
•
Diluted EPS increased 20.7 percent to $0.70 in the first quarter of fiscal 2020 compared to $0.58 in the same quarter of the prior year. Diluted EPS in the first quarter of fiscal 2020 was impacted by a reduced income tax rate of 9.8 percent primarily due to a favorable tax audit settlement and tax benefits from equity-based compensation.
\n
•
Sales for the quarter decreased 2.1 percent. Organic sales decreased 0.4 percent and the impact of foreign currency translation decreased sales by 1.7 percent.
\n
•
Diluted EPS guidance for the full year ending July 31, 2020 was increased to a range of $2.50 to $2.60 from the previous range of $2.45 to $2.55.
\n

MILWAUKEE (November 21, 2019)--Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its\n fiscal 2020 first quarter ended October 31, 2019.
 
Quarter Ended October 31, 2019 Financial Results:
Income before income taxes increased 4.2 percent to $41.6 million for the quarter ended October 31, 2019, compared to $39.9 million in the same quarter last year.
Net income for the quarter ended October 31, 2019 increased 22.4 percent to $37.5 million compared to $30.6 million in the same quarter last year. Earnings per diluted Class A Nonvoting Common Share were $0.70 for the first quarter of fiscal 2020, compared to $0.58 in the same quarter last year. Net income and earnings per diluted Class A Nonvoting Common Share were impacted by a reduced income tax rate of 9.8 percent primarily due to a favorable tax audit settlement and tax benefits from equity-based compensation.
Sales for the quarter ended October 31, 2019 decreased 2.1 percent, which consisted of an organic sales decline of 0.4 percent and a decrease of 1.7 percent from foreign currency translation. Sales for the quarter ended October 31, 2019 were $286.9 million compared to $293.2 million in the same quarter last year. By segment, sales decreased 1.4 percent in Identification Solutions and decreased 4.2 percent in Workplace Safety, which consisted of organic sales declines of 0.2 percent in Identification Solutions and 0.8 percent in Workplace Safety.





\n


Commentary:
“This quarter marks our 17th consecutive quarter of year-on-year pre-tax earnings growth. Our investment in innovative new products to provide increased value to our customers while executing efficiencies throughout our manufacturing facilities and SG&A structure continue to drive our improved financial results,” said Brady’s President and Chief Executive Officer, J. Michael Nauman. “We see signs of a weakening industrial economic environment, which makes our commitment to the execution of sustainable efficiency gains throughout our businesses essential this fiscal year. Our priorities for fiscal 2020 are consistent with what has allowed us to deliver improved financial results the last four years, which we believe position us well for strong revenue and earnings growth as our end markets recover from the recent macro-economic weakness.”
“Cash provided by operating activities was $38.8 million this quarter and we finished in a net cash position of nearly $245 million at October 31, 2019, an increase of $107 million since October 31, 2018. Our balance sheet continues to provide significant flexibility for future investment and to return funds to our shareholders, which 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 $2.45 to $2.55 to a range of $2.50 to $2.60 due to a reduction in its income tax rate. Included in this guidance is organic sales growth of approximately 1.5 to 2.5 percent, a full-year income tax rate of approximately 20 percent, and depreciation and amortization of approximately $25 million. The Company expects to achieve efficiency gains in its manufacturing facilities and in selling, general and administrative expenses. Capital expenditures are expected to be approximately $35 million during the year ending July 31, 2020. This guidance is based upon foreign currency exchange rates as of October 31, 2019.

A webcast regarding Brady’s fiscal 2020 first 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.





\n


###

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 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.






\n


BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Dollars in thousands, except per share data)
\n
 
Three months ended October 31,
 
2019
 
2018
Net sales
$
286,947

 
$
293,196

Cost of goods sold
145,542

 
146,657

Gross margin
141,405

 
146,539

Operating expenses:
 
 
 
Research and development
10,967

 
11,326

Selling, general and administrative
89,547

 
94,591

Total operating expenses
100,514

 
105,917


 
 
 
Operating income
40,891

 
40,622


 
 
 
Other income (expense):
 
 
 
Investment and other income (expense)
1,380

 
(17
)
Interest expense
(701
)
 
(712
)

 
 
 
Income before income taxes
41,570

 
39,893


 
 
 
Income tax expense
4,072

 
9,256


 
 
 
Net income
$
37,498

 
$
30,637


 
 
 
Net income per Class A Nonvoting Common Share:
 
 
 
Basic
$
0.71

 
$
0.59

Diluted
$
0.70

 
$
0.58

Dividends
$
0.22

 
$
0.21

 
 
 
 
Net income per Class B Voting Common Share:
 
 
 
Basic
$
0.69

 
$
0.57

Diluted
$
0.68

 
$
0.56

Dividends
$
0.20

 
$
0.20

 
 
 
 
Weighted average common shares outstanding:
 
 
 
Basic
53,143

 
52,201

Diluted
53,736

 
52,958

\n


\n


BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
\n
 
October 31, 2019
 
July 31, 2019
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
295,093

 
$
279,072

Accounts receivable—net
162,561

 
158,114

Inventories
119,612

 
120,037

Prepaid expenses and other current assets
16,642

 
16,056

Total current assets
593,908

 
573,279

Property, plant and equipment—net
112,565

 
110,048

Goodwill
411,328

 
410,987

Other intangible assets
34,860

 
36,123

Deferred income taxes
7,447

 
7,298

Operating lease assets
52,233

 
—

Other assets
18,881

 
19,573

Total
$
1,231,222

 
$
1,157,308

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
59,385

 
$
64,810

Accrued compensation and benefits
63,794

 
62,509

Taxes, other than income taxes
8,885

 
8,107

Accrued income taxes
6,790

 
6,557

Current operating lease liabilities
14,857

 
—

Other current liabilities
52,092

 
49,796

Current maturities on long-term debt
50,144

 
50,166

Total current liabilities
255,947

 
241,945

Long-term operating lease liabilities
40,124

 
—

Other liabilities
58,616

 
64,589

Total liabilities
354,687

 
306,534

Stockholders’ equity:
 
 
 
Common stock:
 
 
 
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 49,764,799 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
327,241

 
329,969

Retained earnings
663,808

 
637,843

Treasury stock—1,496,688 and 1,802,646 shares, respectively of Class A nonvoting common stock, at cost
(43,779
)
 
(46,332
)
Accumulated other comprehensive loss
(71,283
)
 
(71,254
)
Total stockholders’ equity
876,535

 
850,774

Total
$
1,231,222

 
$
1,157,308

\n



\n


BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
\n
 
Three months ended October 31,
 
2019
 
2018
Operating activities:
 
 
 
Net income
$
37,498

 
$
30,637

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
5,634

 
5,960

Non-cash portion of stock-based compensation expense
3,618

 
4,965

Deferred income taxes
1,009

 
2,164

Other
1,533

 
218

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(4,362
)
 
(6,709
)
Inventories
249

 
(3,125
)
Prepaid expenses and other assets
(1,404
)
 
(2,197
)
Accounts payable and accrued liabilities
(5,193
)
 
(14,288
)
Income taxes
266

 
1,193

Net cash provided by operating activities
38,848

 
18,818

 
 
 
 
Investing activities:
 
 
 
Purchases of property, plant and equipment
(7,724
)
 
(6,009
)
Other
527

 
337

Net cash used in investing activities
(7,197
)
 
(5,672
)
 
 
 
 
Financing activities:
 
 
 
Payment of dividends
(11,533
)
 
(11,096
)
Proceeds from exercise of stock options
3,411

 
13,001

Payments for employee taxes withheld from stock-based awards
(7,269
)
 
(2,937
)
Proceeds from borrowing on credit facilities
—

 
5,737

Repayment of borrowings on credit facilities
—

 
(2,269
)
Other
65

 
(1,772
)
Net cash (used in) provided by financing activities
(15,326
)
 
664

 
 
 
 
Effect of exchange rate changes on cash
(304
)
 
(3,061
)
 
 
 
 
Net increase in cash and cash equivalents
16,021

 
10,749

Cash and cash equivalents, beginning of period
279,072

 
181,427

 
 
 
 
Cash and cash equivalents, end of period
$
295,093

 
$
192,176

\n



\n


BRADY CORPORATION AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited; Dollars in thousands)
\n
 
Three months ended October 31,
2019
 
2018
NET SALES
ID Solutions
$
214,987

 
$
218,100

Workplace Safety
71,960

 
75,096

Total
$
286,947

 
$
293,196

 
SALES INFORMATION
ID Solutions
Organic
(0.2
)%
 
5.7
 %
Currency
(1.2
)%
 
(1.7
)%
Total
(1.4
)%
 
4.0
 %
Workplace Safety
Organic
(0.8
)%
 
2.2
 %
Currency
(3.4
)%
 
(2.6
)%
Divestitures
—
 %
 
(6.2
)%
Total
(4.2
)%
 
(6.6
)%
Total Company
Organic
(0.4
)%
 
4.7
 %
Currency
(1.7
)%
 
(2.0
)%
Divestitures
—
 %
 
(1.7
)%
Total
(2.1
)%
 
1.0
 %
 
SEGMENT PROFIT
ID Solutions
$
42,443

 
$
41,562

Workplace Safety
5,157

 
5,541

Total
$
47,600

 
$
47,103

 
SEGMENT PROFIT AS A PERCENT OF NET SALES
ID Solutions
19.7
 %
 
19.1
 %
Workplace Safety
7.2
 %
 
7.4
 %
Total
16.6
 %
 
16.1
 %
\n

\n
 
Three months ended October 31,
2019
 
2018
Total segment profit
$
47,600

 
$
47,103

Unallocated amounts:
 
 
 
Administrative costs
(6,709
)
 
(6,481
)
Investment and other income (expense)
1,380

 
(17
)
Interest expense
(701
)
 
(712
)
Income before income taxes
$
41,570

 
$
39,893

\n



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\n
\n\n
Brady Corporation F’20 Q1 Financial Results November 21, 2019
\n

\n\n

 
\n
\n\n
\n\n
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\n 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 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.
\n

\n\n

 
\n
\n\n
\n\n
Q1 F’20 Financial Summary 3 • Sales were $286.9M in Q1 of F’20 compared with $293.2M in Q1 of F’19. – Organic sales decreased 0.4%. – Foreign currency translation decreased sales 1.7%. • Gross profit margin of 49.3% in Q1 of F’20 compared with 50.0% in Q1 of F’19. • SG&A expense of $89.5M (31.2% of sales) in Q1 of F’20 compared with $94.6M (32.3% of sales) in Q1 of F’19. • R&D expense of $11.0M (3.8% of sales) in Q1 of F’20 compared with $11.3M (3.9% of sales) in Q1 of F’19. • Income before income taxes of $41.6M in Q1 of F’20 compared with $39.9M in Q1 of F’19. • Income tax rate of 9.8% in Q1 of F’20 compared with 23.2% in Q1 of F’19. • Net income per Class A Diluted Nonvoting Common Share of $0.70 in Q1 of F’20 compared with $0.58 in Q1 of F’19.
\n

\n\n

 
\n
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\n\n
Sales Overview 4 SALES (millions of USD) $305 $298 $297 $295 $295 $293 $290 $290 $288 $287 $285 $282 $275 $265 $255 Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Q4 F'19 Q1 F'20 Organic Sales 1.7% 3.2% 3.2% 2.5% 4.7% 2.3% 2.4% 1.7% (0.4%) Q1 F’20 SALES: Q1 F’20 SALES COMMENTARY: • 0.4% decrease in organic sales: • ID Solutions – Organic sales increased in the Americas and decreased in Europe and Asia. • ID Solutions – Organic sales decreased 0.2%. • Workplace Safety – The rate of organic sales decline • Workplace Safety – Organic sales decreased lessened in North America. 0.8%. • Foreign currency translation had a negative impact on • 1.7% decrease due to foreign currency translation. sales in the quarter.
\n

\n\n

 
\n
\n\n
\n\n
Gross Profit Margin 5 GROSS PROFIT & GPM% (millions of USD) 50.6% 50.3% 50.3% 49.9% 50.0% 49.6% 49.5% 49.6% $151 49.3% 50% $147 $150 $146 $147 $146 $147 $144 $140 $141 45% $125 $100 40% Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Q4 F'19 Q1 F'20 Q1 F’20 – GROSS PROFIT MARGIN: • Gross profit margin of 49.3% compared to 50.0% in Q1 of F’19. • Costs increased in certain areas including personnel and raw materials. • We continue to invest in automation and manufacturing efficiencies to offset cost increases.
\n

\n\n

 
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SG&A Expense 6 SG&A EXPENSE AND SG&A EXPENSE AS A % of SALES (millions of USD) $110 34.5% 33.9% 34.1% 35% 32.8% 32.7% $102 32.3% $100 33% $100 $98 30.6% 31.2% 30.2% $95 $95 $93 30% $91 $90 $89 $90 28% $80 25% Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Q4 F'19 Q1 F'20 Q1 F’20 – SG&A EXPENSE: • SG&A expense was $89.5M (31.2% of sales) in Q1 of F’20 compared to $94.6M (32.3% of sales) in Q1 of F’19. • Approximately two-thirds of the decrease in SG&A expense was due to on-going efficiency gains and approximately one-third of the decrease was due to foreign currency translation. • We continue to drive sustainable efficiency gains in administrative expenses and non-customer facing selling expenses while investing in sales-generating resources.
\n

\n\n

 
\n
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\n\n
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% 3.9% 4.0% 3.8% 3.8% $12.0 3.6% $11.7 $11.7 $11.3 $11.3 $11.4 $11.3 $11.1 $11.0 $10.5 3.5% $10.0 3.0% $8.0 $6.0 2.5% Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Q4 F'19 Q1 F'20 Q1INCREASING F’20 – R&D OUR EXPENSE: INVESTMENT IN RESEARCH & DEVELOPMENT: • Investing in R&D to drive future organic sales growth. • Improved new product pipeline. • Focused on ensuring our R&D spend is efficient and effective.
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\n\n
Income Before Income Taxes 8 INCOME BEFORE INCOME TAXES (millions of USD) $50 $47.1 $45.2 $45 $41.0 $41.6 $39.9 $40 $37.0 $36.7 $34.8 $35.0 $35 $30 $25 $20 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 F'18 F'18 F'18 F'18 F'19 F'19 F'19 F'19 F'20 Year on Year Growth 12.2% 20.4% 20.7% 26.0% 14.8% 4.8% 10.8% 4.1% 4.2% Q1 F’20 - INCOME BEFORE INCOME TAXES: • Income before income taxes was $41.6M in Q1 of F’20 compared to $39.9M in Q1 of F’19. • The increase in pre-tax income was primarily driven by on-going efficiency activities.
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Net Income & Diluted EPS 9 NET INCOME PER CLASS A DILUTED SHARE NET INCOME (millions of USD) $0.70 $0.66 $0.68 $0.65 $40 $36.6 $37.5 $35.0 $34.8 $0.60 $0.58 $0.55 $30.6 $0.49 $0.49 $29.2 $30 $25.8 $26.0 $0.40 $20 $0.20 $10 $0.08 $4.3 $0.00 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 F'18 F'18 F'18 F'18 F'19 F'19 F'19 F'19 F'20 F'18 F'18 F'18 F'18 F'19 F'19 F'19 F'19 F'20 Q1 F’20 – NET INCOME & DILUTED EPS: • Net income was $37.5M in Q1 of F’20 compared to $30.6M in Q1 of F’19. • The income tax rate was 9.8% in Q1 of F’20 compared to 23.2% in Q1 of F’19. The income tax rate in Q1 of F’20 was favorably impacted by the settlement of a tax audit and the positive impact of equity-based compensation activity. • Diluted EPS was $0.70 in Q1 of F’20 compared to $0.58 in Q1 of F’19.
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Cash Generation & Uses 10 CASH FLOW FROM OPERATING ACTIVITIES (millions of USD) CASH FLOWS IN Q1 OF F’20: $70 $65.3 • Cash flow from operating activities was $38.8M in Q1 of F’20 compared to $18.8M in Q1 of F’19. $60 $53.8 $52.7 • Free cash flow* was $31.1M in Q1 of F’20 $50 $46.8 $38.8 compared to $12.8M in Q1 of F’19. $40 $34.7 • The increase in cash flow from operating $30 $25.4 activities was primarily due to the timing of $18.8 $20 annual incentive compensation payments. $10 $7.7 • We returned $11.5M to our shareholders in the form of dividends in Q1 of F’20. $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 F'18 F'18 F'18 F'18 F'19 F'19 F'19 F'19 F'20 (millions of USD) 3 Mos. Ended 3 Mos. Ended Oct. 31, 2019 Oct. 31, 2018 Cash Balance - Beginning of Period $ 279.1 $ 181.4 Cash Flow from Operating Activities 38.8 18.8 Capital Expenditures (7.7) (6.0) Dividends (11.5) (11.1) Debt Borrowings (Repayments) - Net - 3.5 Effect of Exchange Rates on Cash (0.3) (3.1) Other (3.3) 8.7 Cash Balance - End of Period $ 295.1 $ 192.2 * Free Cash Flow is calculated as Net Cash Provided by Operating Activities less Capital Expenditures.
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Net Cash 11 NET CASH (millions of USD) DEBT STRUCTURE (millions of USD) $250 $245 $229 Interest Oct. 31, 2019 July 31, 2019 $200 $188 Rate Balance Balance Private Placements: $151 EUR-den. 2010 Series (10-yr.) 4.24% $ (50.1) $ (50.2) $150 $138 $129 TOTAL DEBT $ (50.1) $ (50.2) $100 Cash and Cash Equivalents 295.1 279.1 $73 NET CASH $ 245.0 $ 228.9 $48 $50 $44 $0 Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Q4 F'19 Q1 F'20 STRONG BALANCE SHEET: • October 31, 2019 cash = $295.1M and debt = $50.1M. • Net cash increased $16.1M in Q1 of F’20. • Approximately 56% of our cash is held in the United States. • Balance sheet provides flexibility for future investments.
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Full-Year F’20 EPS Guidance 12 F’20 Diluted EPS guidance range increased to $2.50 to $2.60. (previous guidance range was $2.45 to $2.55). F’20 Guidance Assumptions: • Organic sales growth of approximately 1.5% - 2.5%. • Depreciation and amortization expense of approximately $25M. • Income tax rate of approximately 20%. • Capital expenditures of approximately $35M.
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Identification Solutions 13 Q1 F’20 vs. Q1 F’19 (millions of USD) Q1 F’20 SUMMARY: • Revenues decreased - (1.4%): Q1 F’20 Q1 F’19 Change • Organic = - (0.2%) Sales $ 215.0 $ 218.1 - 1.4% • Fx = - (1.2%) Segment Profit 42.4 41.6 + 2.1% • Organic sales increased in the low-single digits in the Americas, decreased in the low-single digits in Asia, Segment Profit % 19.7% 19.1% + 60 bps and decreased in the mid-single digits in EMEA. • Healthcare identification product line sales were approximately flat. • Segment profit as a percent of sales increased due to SALES & SEGMENT PROFIT % (millions of USD) ongoing efficiency gains in our operations and SG&A 22% 21% structure. $240 20% 19% 20% 18% 19% $230 17% 17% 17% 18% 17% $222 $218 $218 16% $220 $215 $212 $214 $210 14% OUTLOOK: $210 $206 $209 12% • Expect F’20 organic sales to grow from 2% to 3%. $200 10% • Anticipate further investments in innovative new products and efficiencies in operations and our SG&A $190 8% structure. $180 6% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 F'18 F'18 F'18 F'18 F'19 F'19 F'19 F'19 F'20
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Workplace Safety 14 Q1 F’20 vs. Q1 F’19 (millions of USD) Q1 F’20 SUMMARY: • Revenues decreased - (4.2%): Q1 F’20 Q1 F’19 Change • Organic = - (0.8%) Sales $ 72.0 $ 75.1 - 4.2% • Fx = - (3.4%) Segment Profit 5.2 5.5 - 6.9% • Organic sales decreased in the low-single digits in Segment Profit % 7.2% 7.4% - 20 bps North America and Australia and increased modestly in Europe. • North America continues to show improving financial trends. SALES & SEGMENT PROFIT % (millions of USD) • Segment profit negatively impacted by the organic sales decline and foreign currency translation. 13% 14% $120 12% 9% 10% $100 9% 9% 8% 8% 7% 7% 8% $86 6% $80 $81 $80 $80 $75 $76 OUTLOOK: $73 $73 $72 6% 4% • Expect F’20 organic sales to be approximately flat. $60 • Anticipate our North American business to continue 2% to recover. $40 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 F'18 F'18 F'18 F'18 F'19 F'19 F'19 F'19 F'20
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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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