BRC - Earnings call transcript Q4 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2019 Brady Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference may be recorded.

I would now like to turn the call over to Ann Thornton, Chief Accounting Officer.

begin. may You

Ann Thornton

www.bradycorp.com/investors. morning XXXX Good for to Brady website the morning's Thank quarter and earnings fiscal at our on fourth are slides conference Corporation call you. located welcome call. this The

and SEC statement. Please identifying of We will begin release Words uncertainties, important comments and significantly is during this just this prepared without It's Also, and remarks please such make morning results. few was this a XXXX as expected call, may news of forward-looking may, in were a note rebroadcast believe, the risk anticipate and that consent which number Risk fiscal we as forecast is Corporation note Brady's well. factors on which this about forward-looking Brady could that copyrighted by that morning Form to slide subject our may note forward-looking factors our the three. words information. expect, examples noted teleconference be to with in not Brady. XX-K, impact will, are information filed various

will We call recording on broadcasting be the Internet. it this and

Q&A such, being participation to constitute recorded. As your your consent will session the in

call Officer, the Brady's turn now Chief Executive to I'll and Michael President over Nauman.

Michael Nauman

and you, XXXX morning we for fourth thank released quarter Good Thank Ann. joining morning our all you us. This financial results.

a have year. proud to lot this We of be

we our we’re pipeline new rebuilt processes, to investment manufacturing our efficiencies operational driving and improve throughout in focused to R&D continue our We our organization.

in increased profits. of increased sales, and expenses this organic All has reduced resulted SG&A

our recognized million gain our focus quarter and product organic last the which ninth of driven sale. sales consistent strategy. on by a marks and business sold development our fourth during quarter This $X.X new We year’s growth of that straight execution of quarter on was

quarterly The of consistent pre-tax and increased solve as Brady are ensure improve improve milestone. income set our be throughout of hitting for When term. that years products three takes I’m as proud take this consecutive profit deal develop incredibly profit which that a of pretax marks exclude not importantly, priorities, and today decisions performing our this they one-time our ability entire XXth the on we the team customer's right to quarter great to which operational most gain, of long XX% to deliver should that the improvement. we problems for new efficiencies at business are to well the for the drive innovative businesses our actions are focus to

growth in growth business, quarter, of Organic organic sales come sales growing Solutions X.X% and almost sales line. U.S. line from product end by care we're posted our grew Identification in every growth of launched the this pleased organic most X.X% our products digits to new this quarter. that some mid-single which I'm was markets major this strongest product exciting and driven continues We've health to the quarter report the

quarter. R&D this Our sales the pay in sales WPS we quarter. investments to force beginning organic product Organic declined are this line the both improve sales in as and healthcare and off X.X% profit in

quarter showed XX% digit business of improvement WPS as American rate decreased from approximately North to Our last its decline quarter. this decline mid-single

digital change. we new last digital sales we customer enhance to take experienced our by improving, time and quarterly still base new prior how initial build to our our well will discussed the platform, conference we working platform the digital to actions we our see, is During to took to moving two platform platform back a are level calls, but this

our quarter, business then June, improvements July. month May in track on trends as We believe saw that the and we're was toughest positive return again WPS this in There America's the to business growth. and are right in sales profitable the we with

ahead to and believe profit XXXX. looking sustainable for place, of will trend blocks organic the building start be fundamental fiscal the what sales in a sales With we improvements we're in organic of growth

straight quarterly progress, improvement our I We've for people before. and the up drive ever years not actions business see is of on we've healthcare four and business workplace us success. pretax more made in growth Brady safety easy, income that energy challenge our delivered. incredible future and taken set team We've in than our but took returned to the will

sales sustainable challenging, profit last cost structure engine gains The that believe to invest efficiency well future several taking revenue reduce our us the industrial and and economy been we position over growth. but in years we've drive the to actions our is organic for

by future on ensure the continue will our that the success We in focus taking action today term. to long

over call financial our to Aaron discuss safety about workplace provide the identification and solutions, specific I'll turn now return commentary Aaron? to results. our I'll businesses. to then

Aaron Pearce

Michael. number of consisted of currency of finalized X.X% organic which which you, from the quarter translation, Sales decrease everyone. And on our year. The a fourth Thank of in of financial review good foreign the and a sale X.X% Runelandhs X.X% three. starts the business last from morning, decrease of million we $XXX.X were fourth quarter, in slide growth sales

$XX.X compared fourth million finished at $XX income to million quarter. Net year's in last

year's you of on by the sale If last increased have onetime a XX.X%. income would gain exclude business, would net

EPS last gain the quarter. this Runelandhs year, last Diluted of year's $X.XX was diluted $X.XX quarter, increased XX.X% onetime quarter. EPS share to EPS year, The this fourth last compared by per increased excluding this in from so $X.XX sale

increase is area, flow quarter year, Cash compared be of fourth more from and focus were never a $XX.X than million this continues to $XX.X hallmark strong. of million the ending generation, which last Cash to an Brady of XX%. activities in operating quarter a

you'll our quarterly number slide trends. sales find On four,

organic business with X.X% business of WPS while an to sales grow organic Our decline growth our nicely experienced Identification quarter. sales of this Solutions continues X.X%

find margin Turning to our five, slide you'll number trending. profit gross

quarter, quarter. gross fourth consistent was which Our margin this last with profit XX.X% was year's

focus efficiencies of and facilities. process both We these continue all but WPS, on constant see offsetting and price through IDS successful our manufacturing pressure we've cost selected to our in and been in improvements, increases increases across

SG&A the on we gain quarter SG&A million Last this SG&A the trending. was have in outlines exclude quarter. sale $XX.X this was of number to million our decrease expense Slide we quarter. business. gain, million $X.X of $X.X If a $XX.X compared a reduced million would reported last year’s this SG&A six by

throughout due was drive currency and decrease third Approximately, the against two translation, businesses. this one and our thirds currencies to to U.S. process other as efficiency was major decrease the foreign of efforts dollar ongoing of strengthened the most improvements gains our to due

in quarter of this to year's of sales decreased expense year, from Excluding sales fourth of the onetime gain last fourth XX.X% last the quarter in SG&A XX.X% quarter.

and of million $XX.X in quarter $XX.X you'll decreased research year seven, the from to to trending million development, Turning which our slide investments number the in fourth quarter. last find this of

were the for we're disciplined effectively on to the impact of full same and while to last XXXX R&D We focused committed remain development efficient compared the R&D year making foreign effective. investment fiscal time, our Excluding product expenses at to year. that is ensure flat currency, decisions new spend

income. outlines number trending of pretax the Slide eight quarterly

Excluding sustainable last on indication the business pretax organic income year's from sale sales and a million driving of efficiency million is that quarter, to This to on the last $XX.X an our by compared $XX.X year. focus gain is fourth XX% working. growth gains we increased

to quarterly in increase last gain income added after this you'll increased diluted find Runelandhs The year number fourth our onetime our last XX.X%. Turning from to year's diluted quarter for nine, year, and trends EPS, $X.XX business this tax $X.XX to trends. EPS an sale slide adjusting $X.XX EPS our of of

to $XX activities of flow number compared to flow year. $XX.X was generated $XX.X Slide $XX.X same million quarter. quarterly of fourth compared cash year's million million cash our from million cash And details the XX quarter operating generation. in in last We last free

net generate We XXX% for from full cash of operating activities to income. in income the year, flow excess fiscal continue cash net and flow of was

million quarter, We also form invested million $XX.X in of we this dividends in shareholders capital to expenditures. the and returned $XX.X our

larger quarter's and we've as been actively as productivity. drive equipment to increase efficiencies than CapEx upgrading was machinery and more capabilities, both our as to This add well normal

with also of These makes facilities are in to moved manufacturing historically long quarter, the intend manufacturing own purchase instead facilities completed sense we we've leased. for or construction it where of and This we to that several term lease. forward financial the the be

the our our our investment increasing outlines debt the end with position of We expenditures along structure the again year, our trending consistently capital cash ability net net our cash highlights increased generate position our XX increasing while number this which Slide cash in by quarter. at of strong and flow. million $XXX dividends, to

XXst. position $XXX.X of in finished July on million the We net a cash year

Our debt our May outstanding credit. in of placements million recently of borrowings year, have consists euro scheduled private we on of for denominated no next repayment and line a renewed $XX

patient. with consistent disciplined to approach Our allocation and are capital we is

opportunities capital throughout to efficiency organic First, capability resources, development, investments includes IT our cash fund economic we generating our to expenditures new efficiency sales in which in and capital product enhancing use cycle, expenditures, facilities. automation and and sales the improvements, increase funding

And dividends. second, shareholders focus on form cash we of our in the to returning

increased In dividend dividend fact to year full our we we yesterday, our consecutive as per announced of increases, year XXth $X.XX annual share.

our dividends, cash opportunistic opportunities have we share in returns where strong repurchases. we improve cash we investments organic After disciplined synergistic believe then use a we funding and deploy and manner through acquisitions our for to shareholder

Overall, our cash strong. generation is

value sheet shareholders is our Our capital. through of and long the driving on focused for balance allocation we're strong, disciplined

fiscal back financial XX. fiscal which number XXXX, take results our is slide at year look the to moving Before let's XXXX for full guidance, EPS a our on

year, the for X.X% the our X.X% full increased the year. of each from This We you XX.X%. income sale and grew quarter GAAP Runelandhs organically by by increased if in we and business, profit recorded exclude then we organic grew pretax gain pre-tax sales our

structure Identification structure address North and the organic product expect of WPS digital the returned platform and actions benefits line care the year cost from to we change health business, to cost our next growth. see business We the took Solutions our America of to realignment. We

in a -- expense million focused marking year, of executing SG&A of XX.X% to process and recorded this is $XX.X quarter this year, decreased as healthy $XX.X decrease which to the profit We by sales. on a evidenced improvements, percent margin expense increased million of remain our SG&A decreased was consecutive sustainable we fourth gross

due generated which and from as net to net led as of borrowing a expense $XXX.X in XXXX generation reduced expense to approximately investment items costs, fiscal income equates million well of to strong to We turning increased earnings non-operating activities, strong balance net XXXX our from result a of in as cash million our sheet. also operating flow fiscal of a cash $X.X benefit income. This XXX%

were Our balance sheet results strong. fiscal XXXX strong is and our

on economy, are growth our innovation to and will We we drive our in that focus improve the actions our into we've health positive of all to fiscal global to our line growth business taken us sustainable XXXX. WPS believe weakness to momentum through to maintain enable return but Americas industrial product seeing the an care businesses increased in

we're We our believe, as to which taking success. our us guidance, brings the execution XXXX XX. long today term summarized actions slide to which on is fiscal remains ensure number right critical, always, But

$X.XX earnings end year per fiscal the to diluted share in expect July We A range to $X.XX for Nonvoting XXXX. Class common from XXst

driven our SG&A structure. EPS growth approximately to Our in organic efficiency continued X.X% manufacturing with gains of sales be growth will and both along our by X.X%, facilities

to $XX We our of million. rate capital tax Depreciation million, approximately and XX% approximate be in range. expect to expense the we and low anticipate $XX amortization income expenditures

exchange excess We currency sheet. rates also the strength headwind This as a of be income in to of non-operating dollar. realize XXst of guidance July to the continue result balance expense which interest strong U.S. as due is expect on based our a continue to to foreign of

any anticipating GAAP. that are on not from fully restructuring expense based items or guidance. We're excluding we're financial time with in one accordance not any U.S. this charges, This results and guidance is income

I'll Michael? divisional Q&A. now over closing over turn call cover to the to to provide comments, Michael before call results, and turning back the some our to

Michael Nauman

currency growth X.X% you, Slide for X.X% quarter with X.X% the number foreign financial sales XX results at organic Aaron. business. fourth our IDS this decreased translation quarter. while summarizes of sales Identification sales Solutions prior by finishing Thank increased million $XXX.X

all in but lines, organically regions. the identification. majority Organic key sales product They in safety and also facility digits increased growth of our three in in the increased low strongest single the

as increased our growth I to quarter. to earlier, pipeline are the I'm our sales to our mid-single added force digits we've improvements. sales well in the sales this As organic as report line made product profit organic in to products mentioned pleased identification additions result new starting product we've The that and healthcare

but most We momentum we in been will year. digits major finished We're carry next into digits in the an lines geographies Europe, reduction quarter. low the IDS we product fiscal Europe sales quarter economy, across growth there's to mid-single and sales in that product Organic XXXX digit single with increasing believe low rate, rate increased this positive quarter. in overall single slow last in caused which lines most our to this industrial the saw from

In end slowed be markets, digit growth sales Asia, China, single throughout experienced we've such appears certain electronics to our demand low clearly Asian even in in is which growth in China, a Asia and general, automotive decrease India. have organic In economic seen we there rates market. though weakness in in largest and our as

segment $XX.X IDS quarter profit of million XX% year. to fourth fourth quarter increased to the in last the compared

percentage a segment profit sales, year. to XX.X% to last of this improved compared XX.X% As quarter

our This businesses. our organic in lock out launched is continues growth, device connection launched block an accidental but tag cable Our out of battery to part businesses or or to which commercial mechanic, sales battery endanger same We or a cause could quarter. at other new improved performance financial several out, lock the product device due battery electrical driving successfully of vehicle. our that of the is prevents which to of products IDS a combination -- throughout that driving damage the time secured the vehicle, is year be We've while around efficiencies battery safety designed the a maintenance, connection performing be line. to system simple, effective the

similar lock battery designed on also We the out forklifts. product a launched is that to connection

our this We printer also healthcare launched line two models new product in quarter.

speed, printer, patient software. is record with printer, that's a high which a medical desktop [ph] first fully to service integrated easy wristband is and use electronic The

spot printers that second of the medical It's healthcare patient. of addition new Bluetooth R&D allows line, we've the these Wi-Fi past the and is is product several at mobile about products. made over increased our in our the to print The Portico the expanded direct point-of-care and result excited of which I'm of labels printer, to enabled, and professionals investment on bar-coded the a pipeline the years.

ahead that changes F-XX continue manufacturers, will Looking us to be GDP. X%. the processes. environment efficiencies but We'll to to organic confident a will global for in macroeconomic X% sales continue and throughout our invest to we'll grow put manufacturing believe to IDS and XXXX, -- enable to challenging fiscal and expect we between grow we're above we've We place in that grow R&D drive SG&A continue

our workplace Runelandhs review. a currency of slide to last declined organic fourth an decrease from which Turning of WPS consists of number the sales XX, sales you'll of divestiture X.X% find from of safety declines X.X% compared X.X% increase year. foreign to business and of the quarter X.X%

in American and the single Organic business. digits sales in and low Australia businesses, digits North sales mid-single in declined the declined organic in the European

back build But we the experienced in to prior to the us consistent business As time year, in to digital we've previous change and now discussed made platform change. platform seeing we in sales sales. for calls our a to more we're digital the still our initial it take this U.S. will improvements level

business on focused Americas growth. remain sales priorities return to consistent to three We organic WPS

why for we're we're growth reach it's essential to that these a improving First, returning the our to buying the customers whether which exactly possible; industry be focusing this out as they it's online, catalog, way reached, is customers leading experience having is of channels business simple mobile, to to in-person prefer on or combination through websites. so as

this it rather offering us perspective, orders. better serve This helps our solutions are our We're understand for those industry is in is identification not that from customer capable with our grounded needs expanded and of interactions to safety force regulatory just also fulfilling by increasing and dealing our competitors we're full customers an sales expertise customers, knowledge our solutions. a us providing that Second, that better compliance than what expertise to and doing allows complete only and possess. do

customer portfolio profitability loyalty to introducing we sales business of our focusing right one we're our of sustainable our three our products We that and We the American our our believe, growth. the customers the need. improved term. and our believe, is bring value by we're return creates action and to improves orders. to to and customers which priorities, on organic strengths increasing and sales taking ability quickly by long Third, proprietary products product customized We've over customize more that profit these North turn

A will recovery and has been continue be to choppy.

at fiscal sales move this the right quarter, stop sales We the track declined decline then this and We into a -- to year in believe, on Our business need we lesser declined. than we're quarter rate but they return in third the and finish as still to XXXX. the growth. although

business declined be but this in growth sales. saw digits digits we single quarter, that through in improved to but WPS where offset European sales note. this fully enough on the July growth Europe Digital closed decline the a wasn't continue Our we and catalog low the in slowest steadily strong to quarter in positive organically sales quarter the growth mid-single

This low growing decline but this single couple Australian the sales been years, for the to rate this in profit recently entirely Australia still able the of efficiencies. sustainable, due digits We in improve more We growth past in Australia economy operational, to have our slowed. the driving focus sales to quarter appears improvement were had on Organic quarter. the despite profit modest was steadily decline. in

fourth organic and the segment decline million sales The WPS $XX.X XXXX. in segment XXst to of sale $X.X foreign was decline, which the quarter. May in currency was profit to translations closed on last profit business million year's due compared Runelandhs

structure profit segment the sales For approximately and efficiencies the in to in cost expect organic we XXXX, through continued flat through business, fiscal our be improvement we and SG&A. full reduced expect WPS

organic this products. sales. what back throughout growing look proud we've new accomplished. our executing efficiency SG&A We're launching at innovative I'm We're year, structure. I opportunities We're of As

We around. to we're to product will way our and business turning line healthcare WPS to American our turn grow, on North

Our improving continues are strong, IDS financial to online driving our results, lead and businesses. and consistent efficiencies growing while presence, Australia executing their digital business their is WPS and strategies, Europe their throughout and

of my marks years quarter, completion five Brady. This with

I we've problems financial and sales providing or that not their solve support. improved high meet organization, proud committed products with their quality to results, As I'm made but customers only progress an service, look customer back, and as responsive of our needs with the ongoing through

the employees core well. which to this its simply our results and they're consistent years, what challenge customer at on fundamental organization think growth four is we sales us to focused how made closer get change. organic regularly supporting in react improvement significant I past and to about initiative, in This and more the that able is has profit effective and to over a adapt and better efficient do

take the the working innovative themselves and about years we to do to rate straight our takes accountable development the what been drive new only This processes is eliminating to be are profit our use more I'm IT distractions not do resources, consistent our goal proud to scarce. driver our to has a improvement. certain product situation already being especially common reduces It for systems this ability team for a where for Because in teams need historically of of results. entire automation, deliver and the organization we of pretax level improvement. a level our continues of this next -- Innovation of that to ourselves towards low. competitive is to challenging it making locations unemployment relevant differently, financial of to think we're effectively. Labor how our primary four

Operator, you Q&A. to instructions would like to listeners. start our please I'd provide the

Operator

Bank comes of America Merrill Our you. Thank of Instructions] [Operator question George Lynch. Staphos first from

Your is line open. now

Molly Baum

about I by actually Congrats quarter. question wanted is in Baum George. a on for Molly to just on start asking the Hi. sitting margins This IDS. quick

You efficiency mentioned improvement and gain. process

some Sorry. particularly specific margin quarter. such fourth maybe But really Thank and you your that provide taking can incremental second in in have more of strong that you've fiscal actions detail on you. the the been driven

Michael Nauman

morning. Thank this you, have the to call on Molly. Glad you

but relevant As we only making we experience. in particular our a have avenue focused customers making portfolio, sure as take customer to us to look provide factories not a also really our an we our at are products on very our for forward, go positive strongly

and able products that. it's the through we but be machinery all coming direct sure By to And at between has of in had communications see, machinery do automation, That with future that this starts has on to therefore that, the you a looking get the more the the can right have our doing been inherently we having impact. interfacing, quarter faster our significant and out projects it and definitely to EDI us making customer. as more software road

Molly Baum

Thank my you then, for And question. that. second

we're following that how at for Europe some You slides how to the your talk looking the about, regions trend you assumptions X the you what Asia. and year? in you for both And Can trended it X segment IDS of for growth two in mentioned, through as organic percent to those quarter. expect know guidance when are Thank you. region each

Michael Nauman

Asia, particularly So are lot on to ball, issues it a dynamic obviously, If I had a would crystal you. in give China. there going in I of

I in are of there. action lot there a think pieces

supplier. But sure efficient And I We trade effective will headwinds Asia despite in most to negotiations the as in China best seen. we and we've the think the throughout and world. the well up we're pretty seen, we've are you've prepared at hope the that time make same for our held

an further I significantly We getting been for don't but it's are, planning headwinds, worse. as organization that think

environment. challenging just think, I a it's

Europe flip a there. other Now to we if the hand, pieces we've got of on moving lot

related those again in to Some of pieces situation the are Asia. once

that And Europe, you If of have that the we a you they business. Germany you'll as industrial on a And to having now. right continue heartland -- export look result, a where machinery that will countries of they like ton and impact. take will and equipment, is mightily that the backbone an of impact is see an struggling economy see our are at

again drives a At situation for has market uncertainty The often in got also time, it there. on and the but has deteriorating once the and challenges U.K. we've situation outcome, great that unknown been Europe. effect Brexit same is the

once U.K. if trading as As an are from partner with out EU, literally they example, Germany again example. the take you an a major

our our So good introductions the seeing headwinds, actually some where really them new interacting with quarter. believe, job with very we've overcome proud dynamic, issues and getting the even Italy to faster creates more I is those situations, doing been our issues they're and France is some having a a teams customers able changing products, of I that but really with don't those been to in next have see

Molly Baum

Thank You. I’ll turn it over.

Operator

And Allison our comes next Wells you. Fargo. Thank question from Poliniak of

Your line now open. is

Allison Poliniak

morning. guys. Hi Good

Michael Nauman

Good morning, Allison.

Allison Poliniak

want just test I a to product. new

mentioned quite few know, a new You products growth. of in benefiting a you quite -- your remarks, organic

help obviously of effort been Is into R&D. is, us any it lot benefit there? quantify any growth to market? growth, Is of above color, Just directionally what is it there that point You've a or a way putting

Michael Nauman

forward. figures So should are what significant space. new I two a Those see say printers what move Allison, our you will in is we you know healthcare specifically mentioned

in As you with now the healthcare the ago for an know that think we've been have capabilities I Brady acquisition and made really integrate capabilities we of hoped number a years to has. ourselves positioned

is and by investments that product And is, the don't making. have we reason segments as know the line lines significant and actual varies you so it difference. yes, that quantify we're different for many the many so the and so product that breakouts We a making

capabilities, We've wrapping with talked our our wrapping talking you. and capabilities improving. marketing We've automated for been about out care capabilities But talked we lock now investments. tag integrating about are our we’re health space. talked about into printers making they've out broad wire We've about

But that a internally, to see growth break changes don't product-by-product do rates we a So we our out. fact. as

Allison Poliniak

the there rate run be from is for R&D should And again? XXXX. we a Is just thinking that up dollar good that XX going know another XXXX, go to on a amount, it. then you Got entering fiscal or about

Michael Nauman

You as little, all we that with in up are challenged in being market. areas to the tightening know go expected a area

great We have place significant career and a a are believe yourselves turnover. in way. really great to positive We are work, not challenge we to a a do place seeing

we has a our on the So of think big longevity that impact workforce.

more same is when the little looking is a to roles, it -- fill time, it at are But we challenging.

All our do to specifically work increase key strengths R&D of that we want we expect on. said, that to yes, talent

Allison Poliniak

it. Got

be that range, should thinking this at X% sales So sort of under of keeping just that? we

Michael Nauman

Yes, you can certainly.

Allison Poliniak

Perfect. Thank you.

Michael Nauman

you. Thank

Operator

And next comes question Joe Company. our Mondillo & from you. Sidoti Thank of

Your line now open. is

Joe Mondillo

Hi, good morning everyone.

Michael Nauman

Joe. morning, Good

Joe Mondillo

just products understand, on quarter new are and all as more I add, a are coming that these much wondering as I with Just IDS margin. value itself, far as lot think the out higher on these of

operating growth So higher driving in the and I imagine a that three it then is And sort wondering of really slowing just just quarters. on product was definitely itself how I'm we driving volume. is growth much first the basis because volumes margin actually mix the margin accelerated the that saw, operating year-over-year strong in fourth quarter.

that, on how improvements? versus is based productivity it much So operational,

Michael Nauman

we good growth, But know in three of healthcare products. all we our margins out regions had that if look, specifically. core, was very biggest in a our because the on take impact We have all you impact. Joe, grew an

Joe Mondillo

those product the in healthcare, and that up quarters? those sort give a sales in the the exactly printers added you next of in it the the Can we what few to mix. quarter with sustainable us is quarter. year happened what the spike and Okay. and And two fourth like I way, said, huge Well sort color saw progressed, fourth of happened the more what the over that

Michael Nauman

As you -- sustainable. is of it first all,

are on not and had I in has turn our business growth growing has the do grow. in that we biggest future, part to want in been strong not calls, to IDS Second, margin recall though big had the with and to expect we to the been margins do strength our well. regions And of were regions that space fact. previous around as healthy general healthcare products challenge all a understate healthcare new fact three from a the We as had declining. our because that of of had and expect impact most been the turn significant the the been continue able types do products maintain you for of that to around,

yes. So

Joe Mondillo

perfect. And, Okay.

Now I fall. Thank business, tariffs online coming definitely new to ask I wanted regarding this think? of to you. that affect that are do your going also any Is these clarified. that you

Michael Nauman

have do of that China. We business out exports

plus imports multinational in with countries. We're company also China. We into XX have XX locations a

So can be complex. dynamics those

and already we've channel the working of the increases not won't many accepted to those pass local them, is to understand our most they happily, is but of locations our have situation but accepted on right. end locations to reality. to and increases, of have all participants, sourcing mean, significant users. products hard because The as of It are even manufacturing for revenue, make all to are had some and foreseeable our and The the have hope be the lines, They price reason there doesn't we so provide of impacted We news they change won't for that end is light we planning future. though We a an that local good product we this in positive partners dynamics. in overcome to so our local we because capability base. customer some many our type

Joe Mondillo

for it doubled than was And year, I question. and non-operating year-over-year last year, the to in fourth then income was quarter. the great. compared Okay, expecting last higher The

And there? of drivers for wondering, guess think line do is that about there? I XX, of the Just driving we the that terms in terms what in then how guidance, fiscal

Aaron Pearce

that expense. have lines, two we know because interest one relatively you Those by we are Interest consistent the outstanding, which non-operating the income expense, far piece intend debt of as interest In Yes. biggest been it's and the have interest position. we the in May and been because components. basically on of very we our has pay And growing have We're cash at growing, to sheet today. sheet of off of end been a balance enviable year. the balance income it's next

So interest unless to anticipate deploy we will that continue income unless be deploy that it, capital. we strong we

you I into non-operating that look definitely continue forward, to would as F-XX. anticipate So positive be would items

Joe Mondillo

Okay.

that then? interest So that is income other, mainly other income line

Aaron Pearce

correct. That's

Joe Mondillo

a Thanks lot. right. All Okay.

Michael Nauman

Thank you.

Operator

from And Northcoast you. Thank Keith Housum our comes question of next Research.

line open. now Your is

Keith Housum

business. and morning healthcare turnaround the Good congratulations on guys of the

Michael Nauman

you, morning. Thank good Keith

Keith Housum

Absolutely. Good.

consistent investing you guys some with guys you the also buildings investments, like machinery guys in the I new sound investing as So terms past, may is in in in are of but it CapEx you you heard if which well. right, are

In terms some year seeing to in you not? what the some see a anticipation operating that rid that the lower SG&A now of we'll some progress in come -- next decline stories and that online, and the these you front, continue are of your in along payments as get of of are can of

Michael Nauman

reasons, terrific because down reason us us do a particular aren't one, We you're have reluctant in what telling the And buildings, aware, actual this new to lease, people. a our the we going we as landlords, be are soft to those big not we the invest we we and really hit for as properly is -- them as relates road, Keith of more side they to investments. double go building by for couple then advantageous to build because but our three, us customize applications. owning, financially biggest it it our can of buildings as really have we for own Two,

The the about is I've one I than we positive commitment commitment were found buying makes that the years. It they between difference their how is interesting owning it. the new doing the is the really so received positive the and out We It's you're When us pointed have or expected, those we've real. But buildings and comment a XX reasons, financial need you. that's and to been real from correct. is that buildings that leasing leased But not company an and are of absolutely driver out, the building the to dynamic in we we people the people that even the building or manner for who amazing in able frankly we high are much be buildings to treating in way strong when be to I quality want sure comments company. to that them, the make the and that expect. want want we stronger but them, configured building

that well-run, also a making is I you will a are efficient, clean a showing. walking building working just a if And product. effective in have fundamental belief, more that's you better end up that into and

lot to of this. So lot -- a there's there's of a benefits

Just accounting beyond the treatment.

Keith Housum

appreciate guidance. Got through I your you you. walk can that. me I guess And

were know really SG&A this midpoint thinking closed you year. for you at yeah, are like it and EPS you You that it’s improvements because about you out up where X% range year, of are guys kind you know above you're of only especially the the puts are the but takes stepped as the looks

of of kind offsetting what's guess line. some I So to we're more seeing bottom of that SG&A not guidance, the the fall

Aaron Pearce

-- relatively question past. talked with major -- the I major we components we've as what I our it's are mean, about the I that look consistent in the can, can Keith. guidance take at

we're offsetting SG&A profit have the know. you in actually fact, as nearly at continue the happy increases fourth all two gross actually gross this the in previous As throughout as massive cost quarter. of you been gross efficiencies the place we're XX% in quarter fourth well. very quite changes very saw to we've we And where improvements you anticipating We margins the look we put saw last our in have strong not at. in saw And do that we as We're year margins, effectively at and as make margins. in years

And Michael be as will investing back mentioned into that we well. R&D

rate, you R&D our cost range So the when next in at an expect XX% in look tax we to low see anticipate in our addition R&D as we that year. to be rate year that tax increase this would should

as one be well. U.S. of as for us I’d currency. overall, most strengthen So major to that the is against to This just mention say the a to I item fail continues foreign dollar currencies headwind that continues

if investment R&D back So expense. headwinds our continued the and versus you our major into EPS continued foreign will be would currency

Keith Housum

of the Brady's have kind you. think assumption? historical one Or then process response more thought last still I of guess And always is overall immediate that macro you to that economists? question Is lag quarters. economy there's Thanks. think macro by it's If it Michael, for I kind valid performance a the conversations, the a Okay. two I to

Michael Nauman

Well toward industrial are our a for products large -- lot of backlog. as new used construction, in spaces. new layout, have But building we the don't you a know, the -- used are

a if we history, down would far, the our And of So that during go later last that you as see end the regardless look we of overall the absolutely be economic are we better, at down changing at recession, as do the to stream And the didn't lot moment. we tend correct. upturn, of a do did. revenue find that immune. don't because needed either, We our economy products situation certainly aren't

feel not but have do improvement end said, we ability to now a I predicting of deploying R&D we competition contact continuous you effort we As bigger investment long because of way, don't financially that grow also That to users. recession very a and decline that manner close recession strategy less with and the of our a long our so coming have one think the do this well term recession our you at very I because cycle. and think term, consistent where the a believe way, better than our out of we a in we're when the very see deal way take end I'm a see good, that by asked and a but have little wrong a fundamentally we sharp in we'll know, come for big ourselves out we we as

Keith Housum

you. Thank Great.

Michael Nauman

you. Thank

Operator

follow question Thank Merrill America Bank you. of Lynch. up George a have And of we do Staphos of

is open line now Your

Molly Baum

up. Hey, my thanks for taking follow

first, just two questions. additional The

I terms potentially OSHA changing, tagout up The first are an that regulatory potentially you're of current groups you regulations. you talking saw up talk know one, what of the the some Can lockout in seeing about article trade landscape? come kind of

wanted to that seeing know what just So you're sense. in

just, question And then up follow the second on Joe's IDS. just to you Can again. about

I you the was earlier cost Whether that reduction the of you biggest that Thank about you. SG&A mixed from this, margin what etcetera? improvement benefit or the the sorry know missed if driver And was? highlight talked it healthcare growth

Michael Nauman

Molly. Absolutely. Molly,

start me in space both developing new the products change. the and a Let anticipating lockout leading We're change that tagout. with variety

that and make companies the employees who in that it's sure feel for say space doing lockout world with customers. better area absolutely are an place us we to people a And safer our challenge I every We make and can our a space and leadership and driver the are both day. we darn we fundamentally few in What job is tagout great our even and we're there that. of better that push a

we them. but these come as well if take are well-positioned time, handle about So of we are believe you to changes things do that aware, all

healthcare regional growth. of you have to by the question biggest The our Absolutely, our relates margins. followed our second And element growth. that was

Molly Baum

you. Thank

Michael Nauman

Thank you.

Operator

back answer our does and Michael over Thank remarks. conclude you. closing And gentlemen, would ladies Nauman session. this now to turn I like call to the question and for

Michael Nauman

and We're where much. strategic level continuing I'd and machinery with strong reported a automation expenditures another is XXXX. morning. this to so or SG&A fit in you We capital makes leave generate sites, of strong sense. manufacturing a margins and while our expenses. our financial our upgrade investing it purchasing building We're in improve Thank to in to certain growing you organic comments gross like few concluding year reduce to critical facilities and we're sales

our in have products over development. and several our New years, of R&D investment the pipeline XXXX were last more future we exciting increased results in launched for the products in

grow we're we've to Even tough expect and improve, proud of that team this to momentum financial Our is so we economic far decisions and the grow are earnings. drive the to carry to today this making into term environment, set what efficiencies motivated sales, for organization situation. motivated, us in and beyond. XXXX I'm right and long accomplished to I know up organic

if today, may day. a great participating you always, you have Operator, As Thank call. the disconnect have us. contact you all questions, please for and

Operator

in for conference. you today's concludes This thank participating today's gentlemen, program. and Ladies

may You all disconnect.

Brady (BRC) 6 Sep 192019 Q4 Earnings call transcript