- Net Sales of $318 million, up 18%;
Organic Sales up 8%
- Operating Margin of 16.0%; Adjusted
Operating Margin of 16.5%, up 610 bps
- Diluted EPS from Continuing
Operations of $0.62; Adjusted Diluted EPS from Continuing
Operations of $0.64, up 64%
- 2014 EPS from Continuing Operations
Guidance Increased to $2.10 to $2.15 per diluted share; On an
Adjusted Basis, $2.30 to $2.35 per diluted share, up 26% to
28%
Barnes Group Inc. (NYSE: B), an international industrial and
aerospace manufacturer and service provider, today reported
financial results for the third quarter 2014. Net sales of $317.7
million were up 18% from $269.5 million in the third quarter of
2013, driven by the sales contribution from the acquired Männer
business and strong organic sales growth of 8%. Income from
continuing operations for the third quarter was $34.3 million, or
$0.62 per diluted share, compared to $21.4 million, or $0.39 per
diluted share in the prior year period. In the third quarter of
2013, income from continuing operations included an $8.6 million
pre-tax inventory valuation charge related to exchange engine parts
within the Aerospace repair and overhaul business. On an adjusted
basis, income from continuing operations was $0.64 per diluted
share, up 64% from $0.39 a year ago. Third quarter 2014 adjusted
diluted earnings from continuing operations exclude the impact of
Männer short-term purchase accounting adjustments of $0.9 million
pre-tax, or $0.01 per diluted share, and costs related to the close
of production operations at Associated Spring’s Saline, Michigan
facility which were $0.5 million pre-tax, or $0.01 per diluted
share.
A table reconciling 2013 and 2014 non-GAAP adjusted results
presented in this release to our GAAP results is included at the
end of this press release.
“Barnes Group produced an excellent quarter of financial
performance driven by continued margin expansion and strong revenue
growth,” said Patrick J. Dempsey, President and Chief Executive
Officer of Barnes Group Inc. “Our Industrial and Aerospace Segments
each delivered high-single digit organic growth and orders in the
quarter were solid which supports an improved outlook for 2014 and
positive momentum heading into 2015,” added Dempsey.
Industrial
- Third quarter 2014 sales were $207.2
million, up 24% from $167.7 million in the same period last year.
The Männer business, acquired in October 2013, provided $29.6
million of the sales increase while unfavorable foreign exchange
negatively impacted sales by $1.8 million. Industrial’s organic
sales grew 7% over the prior year period.
- Operating profit of $33.2 million in
the third quarter was up 59% from $20.9 million in the prior year
period. Operating profit benefited from the contribution of Männer
and higher organic sales, and was partially offset by $0.9 million
of pre-tax Männer short-term purchase accounting adjustments and
$0.5 million of pre-tax restructuring charges related to the
closure of production operations at the Saline, Michigan facility.
Excluding the acquisition related expenses and Saline closure
costs, adjusted operating profit was $34.6 million, up 66%.
Adjusted operating margin was 16.7%, up 430 bps from last year’s
operating margin of 12.4%.
Aerospace
- Third quarter 2014 sales were $110.4
million, up 9% from $101.7 million in the same period last year.
Increased sales from original equipment manufacturing ("OEM")
business were partially offset by lower sales in the aftermarket
repair and overhaul ("MRO") business. Aerospace spare part sales
were flat on a year-over-year basis.
- Operating profit was $17.7 million for
the third quarter of 2014 as compared to $7.2 million for the prior
year period. Operating profit benefited from the contributions of
increased sales in the OEM business, higher profits in the MRO
business and the absence of the $8.6 million inventory valuation
charge taken in last year’s third quarter. These benefits were
partially offset by increased employee related costs. Operating
margin was 16.0% in the quarter, compared to 7.0% a year ago.
- Aerospace backlog was $511 million at
the end of the third quarter, down 3% from the second quarter of
2014.
Additional Information
- The Company's effective tax rate from
continuing operations for the third quarter of 2014 was 28.1%
compared with 15.8% in the third quarter of 2013 and 32.8% for the
full year 2013. Included in the full year 2013 income tax is a
charge of approximately $16 million associated with the April 2013
U.S. Tax Court’s unfavorable decision. Excluding this charge, the
full year 2013 adjusted effective tax rate was 17.5%. The effective
tax rate increase in 2014 over the adjusted full year 2013 rate is
due to a projected mix of earnings attributable to higher-taxing
jurisdictions, the expiration of certain tax holidays, and the
increase in planned repatriation of a portion of current foreign
earnings to the U.S.
2014 Updated Outlook
Barnes Group now expects 2014 total revenue to grow 15% to 16%,
5% to 6% on an organic basis, and forecasts adjusted operating
margins of approximately 15.5%. GAAP earnings from continuing
operations are expected to be in the range of $2.10 to $2.15 per
diluted share. Excluding Männer short-term purchase accounting
adjustments and the Saline closure costs, adjusted diluted earnings
per share from continuing operations are anticipated to be in the
range of $2.30 to $2.35, up 26% to 28% from 2013’s adjusted diluted
earnings per share of $1.83. Further, the Company continues to
expect capital expenditures of approximately $60 million and cash
conversion to be approximately 100% of net income.
Conference Call
Barnes Group Inc. will conduct a conference call with investors
to discuss third quarter 2014 results at 8:30 a.m. EDT today,
October 24, 2014. A webcast of the live call and an archived replay
will be available on the Barnes Group investor relations link at
www.BGInc.com. The conference is also available by direct dial at
(888) 680-0879 in the U.S. or (617) 213-4856 outside of the U.S.
(request the Barnes Group Earnings Call), Participant Code:
44759175.
In addition, the call will be recorded and available for
playback until Friday, October 31, 2014 by dialing (617) 801-6888;
Passcode: 34810509.
About Barnes Group
Founded in 1857, Barnes Group Inc. (NYSE: B) is an international
industrial and aerospace manufacturer and service provider, serving
a wide range of end markets and customers. The products and
services provided by Barnes Group are used in far-reaching
applications that provide transportation, communication,
manufacturing and technology to the world. Barnes Group’s
approximately 4,400 dedicated employees, at more than 60 locations
worldwide, are committed to achieving consistent and 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," "strategy," "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 international
operations and markets; the impact of intense competition; 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
risks and uncertainties described in our periodic filings with the
SEC include, among others, 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 insourcing
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 including the
Männer business; restructuring costs or savings including those
related to the closure of production operations at the Company’s
facility in Saline, Michigan; the continuing impact of 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. The Company
assumes no obligation to update our forward-looking statements.
BARNES GROUP INC.CONSOLIDATED STATEMENTS OF
INCOME(Dollars in thousands, except per share
data)(Unaudited) Three months ended September
30, Nine months ended September 30, 2014
2013 % Change 2014
2013 % Change Net
sales $ 317,659 $ 269,491 17.9 $ 951,832 $ 800,430 18.9 Cost
of sales 206,410 189,488 8.9 632,671 544,615 16.2 Selling and
administrative expenses 60,364 51,972
16.1 187,770 166,679 12.7
266,774 241,460 10.5 820,441
711,294 15.3 Operating income 50,885 28,031
81.5 131,391 89,136 47.4 Operating margin 16.0 % 10.4 % 13.8
% 11.1 % Interest expense 2,435 2,401 1.4 8,558 10,000 (14.4
) Other expense (income), net 741 241
NM 1,768 1,702 3.9 Income from
continuing operations before income taxes 47,709 25,389 87.9
121,065 77,434 56.3 Income taxes 13,407
4,008 NM 33,782 31,426 7.5
Income from continuing operations 34,302 21,381 60.4 87,283
46,008 89.7 (Loss) income from discontinued operations, net
of income taxes (425 ) (476 ) 10.7 (425 ) 197,696 NM
Net income $ 33,877 $ 20,905 62.1 $
86,858 $ 243,704 (64.4 ) Common dividends $
5,988 $ 5,775 3.7 $ 17,925 $ 16,495 8.7
Per common share: Basic: Income from continuing
operations $ 0.63 $ 0.40 57.5 $ 1.60 $ 0.86 86.0 (Loss) income from
discontinued operations, net of income taxes (0.01 )
(0.01 ) - (0.01 ) 3.67 NM Net income $ 0.62
$ 0.39 59.0 $ 1.59 $ 4.53 (64.9 )
Diluted: Income from continuing operations $ 0.62 $ 0.39
59.0 $ 1.57 $ 0.84 86.9 (Loss) income from discontinued operations,
net of income taxes (0.01 ) (0.01 ) - (0.01 )
3.60 NM Net income $ 0.61 $ 0.38 60.5 $
1.56 $ 4.44 (64.9 ) Dividends 0.11 0.11 - 0.33
0.31 6.5 Weighted average common shares outstanding: Basic
54,879,329 53,009,720 3.5 54,756,794 53,818,950 1.7 Diluted
55,509,658 54,304,990 2.2 55,803,370 54,854,456 1.7 NM - Not
Meaningful
BARNES GROUP INC.OPERATIONS BY REPORTABLE
BUSINESS SEGMENT(Dollars in thousands)(Unaudited)
Three months ended September 30, Nine months ended
September 30, 2014 2013
% Change 2014 2013
% Change Net sales Industrial $ 207,230 $
167,747 23.5 $ 623,886 $ 503,809 23.8 Aerospace 110,429
101,744 8.5 327,951 296,622 10.6 Intersegment sales -
- - (5 ) (1 ) NM Total
net sales $ 317,659 $ 269,491 17.9 $ 951,832 $
800,430 18.9 Operating profit Industrial $
33,205 $ 20,874 59.1 $ 81,344 $ 56,406 44.2 Aerospace
17,680 7,157 147.0 50,047
32,730 52.9 Total operating profit $ 50,885 $
28,031 81.5 $ 131,391 $ 89,136 47.4
Operating margin
Change Change Industrial 16.0
% 12.4 % 360 bps. 13.0 % 11.2 % 180 bps. Aerospace
16.0 % 7.0 % 900 bps. 15.3 % 11.0 % 430 bps.
Total operating margin 16.0 % 10.4 % 560 bps. 13.8 % 11.1 %
270 bps. NM - Not Meaningful
BARNES GROUP
INC.CONSOLIDATED BALANCE SHEETS(Dollars in
thousands)(Unaudited)
September 30,2014
December 31,2013
Assets Current assets Cash and cash equivalents $ 63,007 $
70,856 Accounts receivable 282,858 258,664 Inventories 214,291
211,246 Deferred income taxes 31,794 18,226 Prepaid expenses and
other current assets 19,093 18,204 Total
current assets 611,043 577,196 Deferred income taxes
783 2,314 Property, plant and equipment, net 302,882 302,558
Goodwill 613,298 649,697 Other intangible assets, net 570,368
534,293 Other assets 57,587 57,615 Total
assets $ 2,155,961 $ 2,123,673
Liabilities and
Stockholders' Equity Current liabilities Notes and overdrafts
payable $ 25,695 $ 1,074 Accounts payable 95,122 88,721 Accrued
liabilities 175,507 154,514 Long-term debt - current 885
56,009 Total current liabilities 297,209 300,318
Long-term debt 513,215 490,341 Accrued retirement benefits
86,768 80,884 Deferred income taxes 88,350 94,506 Other liabilities
14,748 16,210 Total stockholders' equity 1,155,671
1,141,414 Total liabilities and stockholders' equity
$ 2,155,961 $ 2,123,673
BARNES GROUP INC.CONSOLIDATED STATEMENTS OF CASH
FLOWS(Dollars in thousands)(Unaudited)
Nine months ended September 30, 2014
2013 Operating activities: Net
income $ 86,858 $ 243,704 Adjustments to reconcile net income to
net cash provided by operating activities: Depreciation and
amortization 62,556 44,957 Amortization of convertible debt
discount 731 1,776 Loss (gain) on disposition of property, plant
and equipment 103 (632 ) Stock compensation expense 5,453 16,092
Withholding taxes paid on stock issuances (4,357 ) (2,045 ) Loss
(gain) on the sale of business 1,586 (313,471 ) Changes in assets
and liabilities, net of the effects of divestitures: Accounts
receivable (26,648 ) (11,694 ) Inventories (8,481 ) (405 ) Prepaid
expenses and other current assets (3,074 ) (815 ) Accounts payable
8,237 8,988 Accrued liabilities 8,630 27,784 Deferred income taxes
(6,942 ) (6,603 ) Long-term retirement benefits (6,400 ) 238 Other
3,519 4,700 Net cash provided by
operating activities 121,771 12,574
Investing
activities: Proceeds from disposition of property, plant and
equipment 627 895 (Payments for) proceeds from the sale of business
(1,181 ) 539,116 Change in restricted cash 4,886 - Capital
expenditures (43,594 ) (33,799 ) Component Repair Program payments
(41,000 ) - Other (1,030 ) (1,901 ) Net cash
(used) provided by investing activities (81,292 ) 504,311
Financing activities: Net change in other borrowings 24,663
3,887 Payments on long-term debt (183,673 ) (482,158 ) Proceeds
from the issuance of long-term debt 158,883 178,000 Payment of
assumed liability to Otto Männer Holding AG (19,796 ) - Premium
paid on convertible debt redemption (14,868 ) - Proceeds from the
issuance of common stock 10,323 10,873 Common stock repurchases
(8,389 ) (68,608 ) Dividends paid (17,925 ) (16,495 ) Excess tax
benefit on stock awards 4,625 3,312 Other (185 )
(1,320 ) Net cash used by financing activities (46,342 )
(372,509 ) Effect of exchange rate changes on cash flows
(1,986 ) (447 ) (Decrease) increase in cash
and cash equivalents (7,849 ) 143,929 Cash and cash
equivalents at beginning of period 70,856
86,356 Cash and cash equivalents at end of period $
63,007 $ 230,285
BARNES GROUP INC.RECONCILIATION OF NET CASH
PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW(Dollars
in thousands)(Unaudited) Nine months
ended September 30, 2014
2013 Free cash flow: Net cash provided
by operating activities $ 121,771 $ 12,574 Capital expenditures
(43,594 ) (33,799 ) Free cash flow(1) $ 78,177
$ (21,225 )
Free cash flow to net income cash
conversion ratio (as adjusted): Free cash flow (from
above) $ 78,177 $ (21,225 ) Income tax payments related to the gain
on the sale of BDNA - 95,714 Free cash
flow (as adjusted)(2) 78,177 74,489 Net income 86,858
243,704 Gain on the sale of BDNA, net of income taxes - (194,417 )
April 2013 tax court decision - 16,388
Net income (as adjusted)(2) $ 86,858 $ 65,675
Free cash flow to net income cash conversion ratio (as adjusted)(2)
90 % 113 %
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.
(2) For the purpose of calculating the cash conversion ratio,
the Company has excluded the income tax payments related to the
gain on the sale of BDNA made during the nine months ended
September 30, 2013 from free cash flow and the gain on the sale of
BDNA and the tax charge associated with the April 2013 tax court
decision from net income.
BARNES GROUP INC.
NON-GAAP FINANCIAL MEASURE
RECONCILIATION
(Dollars in thousands, except per share
data)
(Unaudited)
Three months ended September 30, Nine
months ended September 30, 2014
2013 % Change 2014
2013 % Change
SEGMENT
RESULTS
Operating Profit - Industrial Segment (GAAP) $ 33,205 $
20,874 59.1 $ 81,344 $ 56,406 44.2 Männer short-term
purchase accounting adjustments 930 - 7,712 - Restructuring charges
501 - 5,553 - CEO transition costs - -
- 6,589
Operating Profit -
Industrial Segment as adjusted (Non-GAAP) (1) $ 34,636
$ 20,874 65.9 $ 94,609 $ 62,995 50.2
Operating Margin - Industrial Segment (GAAP) 16.0 %
12.4 % 360 bps. 13.0 % 11.2 % 180 bps.
Operating Margin -
Industrial Segment as adjusted (Non-GAAP) (1) 16.7 %
12.4 % 430 bps. 15.2 % 12.5 % 270 bps.
Operating Profit -
Aerospace Segment (GAAP) $ 17,680 $ 7,157 147.0 $ 50,047 $
32,730 52.9 CEO transition costs - -
- 3,903
Operating
Profit - Aerospace Segment as adjusted (Non-GAAP) (1) $
17,680 $ 7,157 147.0 $ 50,047 $ 36,633
36.6
Operating Margin - Aerospace Segment (GAAP) 16.0
% 7.0 % 900 bps. 15.3 % 11.0 % 430 bps.
Operating Margin -
Aerospace Segment as adjusted (Non-GAAP) (1)
16.0 % 7.0 %
900 bps. 15.3 % 12.4 %
290 bps.
CONSOLIDATED
RESULTS
Operating Income (GAAP) $ 50,885 $ 28,031 81.5 $ 131,391 $
89,136 47.4 Männer short-term purchase accounting
adjustments 930 - 7,712 - Restructuring charges 501 - 5,553 - CEO
transition costs - - -
10,492
Operating Income as adjusted
(Non-GAAP) (1) $ 52,316 $ 28,031 86.6 $
144,656 $ 99,628 45.2
Operating Margin
(GAAP) 16.0 % 10.4 % 560 bps. 13.8 % 11.1 % 270 bps.
Operating Margin as adjusted (Non-GAAP) (1)
16.5 % 10.4 %
610 bps. 15.2 % 12.4 %
280 bps.
Diluted Income from Continuing Operations
per Share (GAAP) $ 0.62 $ 0.39 59.0 $ 1.57 $ 0.84 86.9
Männer short-term purchase accounting adjustments 0.01 - 0.10 -
Restructuring charges 0.01 - 0.06 - CEO transition costs - - - 0.12
April 2013 tax court decision - -
- 0.30
Diluted Income from
Continuing Operations per Share as adjusted (Non-GAAP)
(1) $ 0.64 $ 0.39 64.1 $ 1.73 $ 1.26
37.3
Full Year 2013 Full-Year 2014
Outlook Diluted Income from Continuing Operations per Share
(GAAP) $ 1.31 $ 2.10 to $ 2.15 Männer short-term
purchase accounting adjustments 0.07 0.13 Männer acquisition
transaction costs 0.03 - Restructuring charges - 0.07 CEO
transition costs 0.12 - April 2013 tax court decision 0.30
-
Diluted Income from Continuing
Operations per Share as adjusted (Non-GAAP) (1) $ 1.83
$ 2.30 to $ 2.35
Notes:
(1) The Company has excluded the following from its "as
adjusted" financial measurements: 1) short-term purchase accounting
adjustments related to its Männer acquisition in 2014, 2)
restructuring charges related to the closure of production
operations at the Company's Associated Spring facility located in
Saline, Michigan in 2014, 3) short-term purchase accounting
adjustments and transaction costs related to its Männer acquisition
in 2013, 4) CEO transition costs associated with the modification
of outstanding equity awards in 2013 and 5) the tax charge
associated with the April 2013 tax court decision in 2013.
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.
Barnes Group Inc.William PittsDirector, Investor
Relations860-583-7070