Email Alerts Signup

Email Address *
Mailing Lists *






 
Enter the code shown above.

Investor Contact

William E. Pitts, CPA

Director, Investor Relations

Barnes Group Inc. Reports Second Quarter 2017 Financial Results

07/28/2017
  • Sales of $364 million, up 19%; Organic Sales up 11%
  • Operating Margin of 15.7%; Adjusted Operating Margin of 15.6%, down 40 bps
  • Diluted EPS of $0.82, up 34%; Up 29% to $0.81 on an Adjusted Basis
  • 2017 Expected Sales Growth of 14% to 15%; Organic Sales Growth of 9% to 10%
  • 2017 Expected Adjusted Net Income of $2.80 to $2.90 per Diluted Share; up 11% to 15% from 2016 Adjusted Net Income of $2.53 per Diluted Share

BRISTOL, Conn.--(BUSINESS WIRE)-- Barnes Group Inc. (NYSE: B), a global industrial and aerospace manufacturer and service provider, today reported financial results for the second quarter 2017.

Second quarter 2017 net sales of $364 million were up 19% from $307 million in the prior year period driven by strong organic sales growth (1) of 11% and acquisition sales of 8%. Foreign exchange unfavorably impacted sales by approximately 1%. Net income for the second quarter was $45.0 million, or $0.82 per diluted share, compared to $33.2 million, or $0.61 per diluted share, a year ago. During the quarter, the Company merged several Swiss legal entities which generated a net tax benefit of approximately $6.3 million, or $0.12 per diluted share. On an adjusted basis, net income was $0.81 per diluted share, up 29% from $0.63 last year. Adjusted diluted net income per share in the second quarter of 2017 excludes restructuring actions which provided a net benefit of $0.03 and FOBOHA short-term purchase accounting adjustments of $0.02 in our Industrial Segment. Second quarter 2016 adjusted diluted net income per share excludes costs related to a contract termination dispute of $0.02 in our Aerospace Segment.

A table reconciling 2017 and 2016 non-GAAP adjusted results presented in this release to the Company’s GAAP results is included at the end of this press release.

“As a result of growth investments made during the ongoing transformation of our business, Barnes Group continues to deliver strong organic sales,” said Patrick J. Dempsey, President and Chief Executive Officer of Barnes Group Inc. “The portfolio reshaping allows us to take advantage of current favorable end markets. While accelerated growth can occasionally dampen near term margins, the business is well situated to continue its upward trend of long term profitability,” added Dempsey.

Industrial

  • Second quarter 2017 sales were $251.8 million, up 23% from $204.5 million in the prior year period. Organic sales increased by 12%, primarily driven by continuing strength in our Nitrogen Gas Products and Molding Solutions businesses. Unfavorable foreign exchange reduced sales by approximately $1.8 million, or 1%, while the FOBOHA and Gammaflux businesses collectively contributed $24.7 million, or 12%, in acquisition sales.
  • Operating profit in the second quarter was $37.4 million, up 7% from $34.8 million in the prior year period, benefitting from the profit impact of increased organic sales volumes, partially offset by higher costs incurred on certain programs within Engineered Components. The second quarter of 2017 includes restructuring actions related to two plant consolidations which provided a net benefit of $1.7 million and FOBOHA short-term purchase accounting adjustments of $1.2 million. Excluding these items, adjusted operating profit of $36.9 million was up 6% from $34.8 million a year ago. Adjusted operating margin was 14.7%, down 230 bps, driven by lower productivity from Engineered Components and a low margin contribution from the FOBOHA business.

Aerospace

  • Second quarter 2017 sales were $112.7 million, up 10% from $102.2 million in the same period last year. Aerospace original equipment manufacturing (“OEM”) sales increased due to the continuing ramp of new engine programs. In the aftermarket business, maintenance, repair and overhaul (“MRO”) sales and spare parts sales were both up significantly as compared to a year ago.
  • Operating profit was $19.7 million for the second quarter of 2017, compared to $12.6 million in the prior year period, reflecting the profit impact from higher sales volumes, productivity benefits and the absence of contract termination dispute charges of $1.6 million taken last year, partially offset by price deflation and increased employee related expenses. Excluding the contract termination dispute costs last year, adjusted operating profit was up 39% from $14.2 million a year ago. Operating margin of 17.5% was up 360 bps from an adjusted 13.9% a year ago.
  • Aerospace backlog was $683 million at the end of the second quarter of 2017, up 4% compared to a year ago and down 1% sequentially from the first quarter of 2017.

Additional Information

  • Interest expense increased $0.7 million to $3.5 million in the second quarter of 2017 primarily as a result of a higher average effective interest rate versus a year ago.
  • The Company’s effective tax rate for the second quarter was 15.4% compared with 27.0% in the second quarter of 2016 and 25.7% for the full year 2016. The primary driver of the second quarter’s lower tax rate is the result of merging several legal entities in Switzerland. This allowed the Company to adjust the valuation allowance on previously reserved net operating losses that would have otherwise expired. The impact related to this change is a discrete benefit of approximately $6.3 million in the quarter.

2017 Updated Outlook

Barnes Group now expects 2017 total revenue growth of 14% to 15% with organic revenue growth of 9% to 10% and 5% from acquisition revenues. Foreign exchange is not anticipated to have a meaningful impact for the year. Adjusted operating margins are forecasted to be in the range of 15.5% to 16.0%. Adjusted earnings from continuing operations are expected to be in the range of $2.80 to $2.90 per diluted share, up 11% to 15% from 2016’s adjusted diluted earnings per share of $2.53. Further, the Company anticipates capital expenditures of approximately $55 million and cash conversion greater than 90% of net income. For 2017, the effective tax rate is expected to be approximately 24%.

Conference Call Information

Barnes Group Inc. will conduct a conference call with investors to discuss second quarter 2017 results at 8:30 a.m. ET today, July 28, 2017. The public may access the conference through a live audio webcast available on the Investor Relations section of Barnes Group’s website at www.BGInc.com. The conference is also available by direct dial at (877) 201-0168 in the U.S. or (647) 788-4901 outside of the U.S.; Conference ID 18435286. Supplemental materials will be posted to the Investor Relations section of the Company's website prior to the conference call.

In addition, the call will be recorded and available for playback from 12:00 p.m. (ET) on Friday, July 28, 2017 until 11:59 p.m. (ET) on Friday, August 4, 2017, by dialing (416) 621-4642; Conference ID 18435286.

Note:
(1) Organic sales growth represents the total reported sales increase within the Company’s ongoing businesses less the impact of foreign currency translation and acquisition and divestitures completed in the preceding twelve months.

About Barnes Group
Barnes Group Inc. (NYSE: B) is a global provider of highly engineered products, differentiated industrial technologies, and innovative solutions, serving a wide range of end markets and customers. Its specialized products and services are used in far-reaching applications including aerospace, transportation, manufacturing, healthcare, and packaging. Barnes Group’s skilled and dedicated employees around the globe are committed to the highest performance standards and achieving consistent, sustainable profitable growth. For more information, visit www.BGInc.com.

Forward-Looking Statements
This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements often address our expected future operating and financial performance and financial condition, and often contain words such as "anticipate," "believe," "expect," "plan," "estimate," "project," and similar terms. These forward-looking statements do not constitute guarantees of future performance and are subject to a variety of risks and uncertainties that may cause actual results to differ materially from those expressed in the forward-looking statements. These include, among others: difficulty maintaining relationships with employees, including unionized employees, customers, distributors, suppliers, business partners or governmental entities; failure to successfully negotiate collective bargaining agreements or potential strikes, work stoppages or other similar events; difficulties leveraging market opportunities; changes in market demand for our products and services; rapid technological and market change; the ability to protect intellectual property rights; introduction or development of new products or transfer of work; higher risks in global operations and markets; the impact of intense competition; acts of terrorism, cybersecurity attacks or intrusions that could adversely impact our businesses; uncertainties relating to conditions in financial markets; currency fluctuations and foreign currency exposure; future financial performance of the industries or customers that we serve; our dependence upon revenues and earnings from a small number of significant customers; a major loss of customers; inability to realize expected sales or profits from existing backlog due to a range of factors, including changes in customer sourcing decisions, material changes, production schedules and volumes of specific programs; the impact of government budget and funding decisions; changes in raw material or product prices and availability; integration of acquired businesses; restructuring costs or savings; the continuing impact of prior acquisitions and divestitures; and any other future strategic actions, including acquisitions, divestitures, restructurings, or strategic business realignments, and our ability to achieve the financial and operational targets set in connection with any such actions; the outcome of pending and future legal, governmental, or regulatory proceedings and contingencies and uninsured claims; future repurchases of common stock; future levels of indebtedness; and numerous other matters of a global, regional or national scale, including those of a political, economic, business, competitive, environmental, regulatory and public health nature; and other risks and uncertainties described in documents filed with or furnished to the Securities and Exchange Commission ("SEC") by the Company, including, among others, those in the Management's Discussion and Analysis of Financial Condition and Results of Operations and Risk Factors sections of the Company's filings. The Company assumes no obligation to update its forward-looking statements.

 

   
 
 
 
 
 
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)













 



Three months ended June 30,
Six months ended June 30,



2017


2016


%
Change


2017


2016


%
Change














 
Net sales

$ 364,493

$ 306,693

18.8

$ 706,295

$ 595,025

18.7













 
Cost of sales


236,506


197,173

19.9


456,339


383,428

19.0
Selling and administrative expenses

  70,847  
  62,060  
14.2

  137,069  
  122,610  
11.8













 



  307,353  
  259,233  
18.6

  593,408  
  506,038  
17.3













 
Operating income


57,140


47,460

20.4


112,887


88,987

26.9













 
Operating margin


15.7 %

15.5 %



16.0 %

15.0 %














 
Interest expense


3,541


2,815

25.8


6,890


5,806

18.7
Other expense (income), net

  394  
  (824 )
NM

  416  
  (597 )
NM













 
Income before income taxes


53,205


45,469

17.0


105,581


83,778

26.0













 
Income taxes

  8,178  
  12,257  
(33.3 )
  22,251  
  21,718  
2.5













 
Net income

$ 45,027  
$ 33,212  
35.6

$ 83,330  
$ 62,060  
34.3













 
Common dividends

$ 7,527  
$ 6,982  
7.8

$ 14,524  
$ 13,450  
8.0













 
Per common share:

























 
Net income:












Basic

$ 0.83

$ 0.61

36.1

$ 1.54

$ 1.14

35.1
Diluted


0.82


0.61

34.4


1.52


1.14

33.3
Dividends


0.14


0.13

7.7


0.27


0.25

8.0













 
Weighted average common shares outstanding:









Basic


54,177,251


54,168,562

0.0


54,178,185


54,207,145

(0.1 )
Diluted


54,722,211


54,642,071

0.1


54,686,172


54,662,389

0.0













 
NM - Not Meaningful

























 

 

   
 
 

 
 
 

BARNES GROUP INC.
OPERATIONS BY REPORTABLE BUSINESS SEGMENT
(Dollars in thousands)
(Unaudited)















 



Three months ended June 30,
Six months ended June 30,



2017
2016

%
Change


2017
2016

%
Change

Net sales





























 
Industrial

$ 251,845

$ 204,540

23.1


$ 479,185

$ 399,786

19.9
















 
Aerospace


112,662


102,153

10.3



227,132


195,240

16.3
















 
Intersegment sales

  (14 )
  -  



  (22 )
  (1 )

















 
Total net sales

$ 364,493  
$ 306,693  
18.8


$ 706,295  
$ 595,025  
18.7
















 
Operating profit





























 
Industrial

$ 37,395

$ 34,843

7.3


$ 70,850

$ 64,487

9.9
















 
Aerospace

  19,745  
  12,617  
56.5


  42,037  
  24,500  
71.6
















 
Total operating profit

$ 57,140  
$ 47,460  
20.4


$ 112,887  
$ 88,987  
26.9
















 
Operating margin





Change




Change















 
Industrial


14.8 %

17.0 %
(220 ) bps.

14.8 %

16.1 %
(130 ) bps.















 
Aerospace

  17.5 %
  12.4 %
510
bps.
  18.5 %
  12.5 %
600
bps.















 
Total operating margin


15.7 %

15.5 %
20
bps.

16.0 %

15.0 %
100
bps.

























 

 

   
 
BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)





 





 



June 30,
2017

 

December 31,
2016

Assets




Current assets




Cash and cash equivalents

$ 104,805
$ 66,447
Accounts receivable


313,491

287,123
Inventories


248,370

227,759
Prepaid expenses and other current assets

  28,483
  27,163





 
Total current assets


695,149

608,492





 





 
Deferred income taxes


31,496

25,433
Property, plant and equipment, net


348,539

334,489
Goodwill


674,785

633,436
Other intangible assets, net


520,061

522,258
Other assets

  16,345
  13,431





 
Total assets

$ 2,286,375
$ 2,137,539





 
Liabilities and Stockholders' Equity




Current liabilities




Notes and overdrafts payable

$ 10,000
$ 30,825
Accounts payable


127,393

112,024
Accrued liabilities


168,362

156,967
Long-term debt - current

  1,887
  2,067





 
Total current liabilities


307,642

301,883





 
Long-term debt


494,222

468,062
Accrued retirement benefits


94,263

109,350
Deferred income taxes


64,770

66,446
Other liabilities


26,206

23,440





 
Total stockholders' equity

  1,299,272
  1,168,358





 
Total liabilities and stockholders' equity

$ 2,286,375
$ 2,137,539





 

   
 
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)





 





 



Six months ended June 30,



2017


2016

Operating activities:




Net income

$ 83,330

$ 62,060
Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization


45,488


38,639
Gain on disposition of property, plant and equipment


(24 )

(286 )
Stock compensation expense


5,494


5,947
Changes in assets and liabilities, net of the effects of acquisitions:




Accounts receivable


(18,304 )

(11,036 )
Inventories


(10,743 )

4,755
Prepaid expenses and other current assets


(642 )

(2,378 )
Accounts payable


15,717


8,014
Accrued liabilities


8,517


8,512
Deferred income taxes


(14,569 )

(536 )
Long-term retirement benefits


(12,533 )

(16,199 )
Other

  663  
  (459 )





 
Net cash provided by operating activities


102,394


97,033





 
Investing activities:




Proceeds from disposition of property, plant and equipment


205


439
Capital expenditures


(27,325 )

(22,987 )
Business acquisitions, net of cash acquired


(8,811 )

(1,546 )
Component Repair Program payments


-


(900 )
Other

  (3,000 )
  -  





 
Net cash used by investing activities


(38,931 )

(24,994 )





 
Financing activities:




Net change in other borrowings


(20,925 )

(2,349 )
Payments on long-term debt


(49,311 )

(127,484 )
Proceeds from the issuance of long-term debt


74,716


99,022
Proceeds from the issuance of common stock


1,148


311
Common stock repurchases


(5,383 )

(8,000 )
Dividends paid


(14,524 )

(13,450 )
Withholding taxes paid on stock issuances


(240 )

(465 )
Other

  (14,451 )
  (2,876 )





 
Net cash used by financing activities


(28,970 )

(55,291 )





 
Effect of exchange rate changes on cash flows

  3,865  
  652  





 
Increase in cash and cash equivalents


38,358


17,400





 
Cash and cash equivalents at beginning of period

  66,447  
  83,926  





 
Cash and cash equivalents at end of period

$ 104,805  
$ 101,326  









 

 

   
 
BARNES GROUP INC.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(Dollars in thousands)
(Unaudited)





 





 



Six months ended June 30,



2017


2016

Free cash flow:









 
Net cash provided by operating activities

$ 102,394

$ 97,033
Capital expenditures

  (27,325 )
  (22,987 )





 
Free cash flow(1)

$ 75,069  
$ 74,046  





 

Notes:

(1) The Company defines free cash flow as net cash provided by operating activities less capital expenditures. The Company believes that the free cash flow metric is useful to investors and management as a measure of cash generated by business operations that can be used to invest in future growth, pay dividends, repurchase stock and reduce debt. This metric can also be used to evaluate the Company's ability to generate cash flow from business operations and the impact that this cash flow has on the Company's liquidity.

 

   


 

 


 

BARNES GROUP INC.
NON-GAAP FINANCIAL MEASURE RECONCILIATION
(Dollars in thousands, except per share data)
(Unaudited)















 



Three months ended June 30,
Six months ended June 30,



2017
2016
% Change
2017
2016
% Change
SEGMENT RESULTS














Operating Profit - Industrial Segment (GAAP)

$ 37,395

$ 34,843


7.3


$ 70,850

$ 64,487

9.9
















 
FOBOHA short-term purchase accounting adjustments


1,193


-





1,793


-



Restructuring actions

  (1,652 )
  -  



  (1,652 )
  -  

















 
Operating Profit - Industrial Segment as adjusted (Non-GAAP) (1)

$ 36,936  
$ 34,843  

6.0


$ 70,991  
$ 64,487  
10.1
















 
Operating Margin - Industrial Segment (GAAP)


14.8 %

17.0 %

(220 ) bps.

14.8 %

16.1 %
(130 ) bps.
Operating Margin - Industrial Segment as adjusted (Non-GAAP) (1)


14.7 %

17.0 %

(230 ) bps.

14.8 %

16.1 %
(130 ) bps.















 
Operating Profit - Aerospace Segment (GAAP)

$ 19,745

$ 12,617


56.5


$ 42,037

$ 24,500

71.6
















 
Contract termination dispute charges

  -  
  1,570  



  -  
  2,386  

















 
Operating Profit - Aerospace Segment as adjusted (Non-GAAP) (1)

$ 19,745  
$ 14,187  

39.2


$ 42,037  
$ 26,886  
56.4
















 
Operating Margin - Aerospace Segment (GAAP)


17.5 %

12.4 %

510
bps.

18.5 %

12.5 %
600
bps.
Operating Margin - Aerospace Segment as adjusted (Non-GAAP) (1)       17.5 %     13.9 %     360   bps.     18.5 %     13.8 %   470   bps.















 
CONSOLIDATED RESULTS














Operating Income (GAAP)

$ 57,140

$ 47,460


20.4


$ 112,887

$ 88,987

26.9
















 
FOBOHA short-term purchase accounting adjustments


1,193


-





1,793


-



Contract termination dispute charges


-


1,570





-


2,386



Restructuring actions

  (1,652 )
  -  



  (1,652 )
  -  

















 
Operating Income as adjusted (Non-GAAP) (1)

$ 56,681  
$ 49,030  

15.6


$ 113,028  
$ 91,373  
23.7
















 
Operating Margin (GAAP)


15.7 %

15.5 %

20
bps.

16.0 %

15.0 %
100
bps.
Operating Margin as adjusted (Non-GAAP) (1)       15.6 %     16.0 %     (40 ) bps.     16.0 %     15.4 %   60   bps.















 
Diluted Net Income per Share (GAAP)

$ 0.82

$ 0.61


34.4


$ 1.52

$ 1.14

33.3
















 
FOBOHA short-term purchase accounting adjustments


0.02


-





0.02


-



Contract termination dispute charges


-


0.02





-


0.03



Restructuring actions

  (0.03 )
  -  



  (0.03 )
  -  

















 
Diluted Net Income per Share as adjusted (Non-GAAP) (1)

$ 0.81  
$ 0.63  

28.6


$ 1.51  
$ 1.17  
29.1

                               















 



Full-Year 2016

Full-Year 2017 Outlook



Diluted Net Income per Share (GAAP)

$ 2.48



$ 2.77
to
$ 2.87




















 
Acquisition transaction costs


0.02












FOBOHA short-term purchase accounting adjustments


0.03




0.03






Contract termination dispute charges


0.03












Contract termination arbitration award


(0.03 )











Restructuring actions

  -  


  -
 



















 
Diluted Net Income per Share as adjusted (Non-GAAP) (1)

$ 2.53  


$ 2.80   to
$ 2.90  



















 
                               















 

Notes:
(1) The Company has excluded short-term purchase accounting adjustments related to its FOBOHA acquisition and the net gain from restructuring actions related to the closure and consolidation of two manufacturing facilities within the Industrial segment from its "as adjusted" financial measurements for 2017. The Company has excluded the following from its "as adjusted" financial measurements for 2016: 1) transaction costs related to its FOBOHA acquisition, 2) short-term purchase accounting adjustments related to its FOBOHA acquisition, 3) charges related to the contract termination dispute and 4) operating income related to the contract termination arbitration award and the non-operating interest income awarded. The tax effects of these items were calculated based on the respective tax jurisdiction of each item and range from approximately 21% to 37%. Management believes that these adjustments provide the Company and its investors with an indication of our baseline performance excluding items that are not considered to be reflective of our ongoing results. Management does not intend results excluding the adjustments to represent results as defined by GAAP, and the reader should not consider it as an alternative measurement calculated in accordance with GAAP, or as an indicator of the Company's performance. Accordingly, the measurements have limitations depending on their use.

Source: Barnes Group Inc.

Barnes Group Inc.

William Pitts

Director, Investor Relations

860.583.7070

Upcoming Event

July 27, 2018
Q2 2018 Barnes Group Earnings Conference Call & Webcast
Remind Me Email:  
 

NOTIFICATION: The information provided on this website is for general information only and is subject to the Terms of Use . Some of the content of this website may contain certain forward-looking statements, as defined in the Private Securities Litigation and Reform Act of 1995, about the Company’s financial and operating performance, business plans and prospects. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from the expectations and projections contained in the statements. Investors are encouraged to consider these risks and uncertainties as described within the Company's periodic filings with the Securities and Exchange Commission, which can be accessed here or at www.sec.gov. The Company assumes no obligation to update any forward-looking statements as a result of new information or future events or developments. In addition, some of the content within this website is provided to Barnes Group Inc. from third parties. As such, Barnes Group Inc. makes no representations or endorsements of the accuracy, completeness or timeliness of that third party information.

Powered and implemented by Q4 Web Systems. Quotes delayed at least 20 minutes. Market data provided by Ticker Technologies.