- Sales of $288 million, down 4%;
Organic Sales down 7%
- Operating Margin of 14.4%; Adjusted
Operating Margin of 14.7%, down 20 bps
- Diluted EPS of $0.53, up 2%;
Adjusted Diluted EPS of $0.54, up 2%
- 2016 Adjusted Diluted EPS Guidance
Unchanged at $2.43 to $2.58; up 2% to 8% from $2.38 in
2015
- Updates OEM Sales per Aircraft for
Airbus A320neo with LEAP Engines
- Earnings Conference Call and Webcast
to be held tomorrow, April 26, 2016 at 8:30 a.m. ET
Barnes Group Inc. (NYSE: B), an international industrial and
aerospace manufacturer and service provider, today reported
financial results for the first quarter of 2016.
Net sales of $288 million were down 4% from $301 million in the
prior year period. Foreign exchange negatively impacted sales by
1%, while the Thermoplay and Priamus acquisitions collectively
contributed $12.1 million. Organic sales (1) decreased 7%. Net
Income for the first quarter was $28.8 million, or $0.53 per
diluted share, compared to $29.1 million, or $0.52 per diluted
share, last year. On an adjusted basis, net income was $0.54 per
diluted share, up 2% from $0.53 a year ago. Adjusted diluted net
income in the first quarter of 2016 excludes costs related to a
contract termination dispute of $0.01 per share, while last year’s
first quarter excludes the impact of Männer short-term purchase
accounting adjustments of $0.01 per share.
A table reconciling 2016 and 2015 non-GAAP adjusted results
presented in this release to the Company’s GAAP results is included
at the end of this press release.
“Barnes Group achieved first quarter financial performance that
was in-line with our expectations. The Industrial segment delivered
sequential sales improvement over the last quarter, while each of
its SBUs delivered sequential orders improvement,” said Patrick J.
Dempsey, President and Chief Executive Officer of Barnes Group Inc.
“At the Aerospace segment, we continue to experience a transitional
year as we move from legacy engine programs to new programs, the
latter of which is producing good order intake and an increase in
backlog. Overall, we continue to believe that, while the second
half of 2015 foreshadows a slower growth environment for the
current year, the business investments we’ve made and the cost
actions we’ve taken position us well for a good year in 2016,”
added Dempsey.
Industrial
- First quarter 2016 sales were $195.2
million, down 3% from $200.3 million in the same period last year.
Unfavorable foreign exchange reduced sales by approximately $2.9
million, or 1%. Organic sales decreased by 7% in the quarter,
primarily driven by lingering soft transportation and tool &
die end-markets in Asia and industrial end-markets in North
America, though partially offset by continued strength in personal
care end-markets of our Molding Solutions business. For the
quarter, the recently acquired Thermoplay and Priamus businesses
together contributed $12.1 million in sales.
- Operating profit in the first quarter
was $29.6 million, compared to $31.0 million in the prior year
period. The decline in operating profit was driven by the reduced
sales volumes, offset in part by favorable productivity. Excluding
Männer short-term purchase accounting adjustments last year,
operating profit was down 7% from an adjusted $31.8 million a year
ago. Operating margin was 15.2%, down 70 bps from an adjusted 15.9%
last year.
Aerospace
- First quarter 2016 sales were $93.1
million, down 7% from $100.2 million in the same period last year.
The decline was primarily driven by lower Aerospace original
equipment manufacturing (“OEM”) and aftermarket maintenance, repair
and overhaul (“MRO”) sales, though partially offset by higher spare
parts sales.
- Operating profit was $11.9 million for
the first quarter of 2016, compared to $12.9 million in the prior
year period. The operating profit decrease was primarily due to
lower profit on reduced sales volumes in the OEM business,
unfavorable productivity, and $0.8 million in costs related to a
contract termination dispute. Excluding the contract termination
costs, adjusted operating profit was $12.7 million, down 2% from a
year ago. Adjusted operating margin was 13.6%, up 70 bps from last
year.
- Aerospace backlog was $592 million at
the end of the first quarter of 2016, up 9% year-over-year and up
4% sequentially from year-end 2015.
Additional Information
- Interest expense increased $0.3 million
to $3.0 million in the quarter primarily as a result of a higher
average interest rate versus a year ago.
- The Company's effective tax rate for
the first quarter of 2016 was 24.7% compared with 29.2% in the
first quarter of 2015 and 23.2% for the full year 2015. The
increase in the first quarter of 2016 effective tax rate from the
full year 2015 rate is primarily due to the expiration of certain
tax holidays, the absence of the 2015 tax refund of withholding
taxes and the projected change in the mix of earnings attributable
to higher-taxing jurisdictions, partially offset by the decrease in
planned repatriation of a portion of current year foreign earnings
to the U.S.
Updated 2016 Outlook
Barnes Group continues to expect 2016 organic revenue growth of
0% to 2% with total revenue growth of 2% to 4% after consideration
of 1% unfavorable foreign exchange and a positive 3% from
acquisition revenues. Adjusted operating margin is now forecasted
to be in the range of 16% to 16.5%, narrowed slightly from the
Company’s prior outlook of 16% to 17%. Barnes Group continues to
expect adjusted earnings in the range of $2.43 to $2.58 per diluted
share, up 2% to 8% from $2.38 in 2015. Further, the Company
continues to anticipate capital expenditures of approximately $50
million and cash conversion to approximate 100% of net income. For
2016, the effective tax rate is expected to be in the range of 26%
to 27%, modified slightly from the Company’s prior outlook of 27%
to 29%.
OEM Sales per Aircraft Update
The Company has completed a review of the OEM sales per aircraft
of its major programs. The review was undertaken after it was
determined that the LEAP powered A320neo sales per aircraft the
Company had previously provided warranted a change. While the
previous estimate of $400,000 sales per aircraft is accurate for
2016, a range of $200,000 to $250,000 is appropriate for subsequent
years based on current information. A slide providing updated
information will be available in the Earnings Supplement to be
posted on Barnes Group's Investor Relations website on Tuesday,
April 26, 2016, prior to the start of the call.
Updated Conference Call Information
Barnes Group Inc. will conduct a conference call with investors
to discuss the Company’s performance in the first quarter and the
outlook for the business in the full year 2016, including a
discussion of its updated OEM sales per aircraft at 8:30 a.m. ET
tomorrow, April 26, 2016. 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 98676549.
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 Tuesday, April 26, 2016 until
11:59 p.m. (ET) on Tuesday, May 3, 2016, by dialing (404) 537-3406;
Conference ID 98676549.
The Company’s previously announced conference call and webcast
for Friday, April 29, 2016 has been canceled.
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
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 highly engineered
products, differentiated industrial technologies, and innovative
solutions delivered by Barnes Group are used in far-reaching
applications that provide transportation, manufacturing, healthcare
products, and technology to the world. Barnes Group’s skilled and
dedicated employees around the globe 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. Among
others, our sales outlook, backlog, aircraft utilization,
demographics, exchange rate assumptions, sales per aircraft and
guidance are all forward-looking statements. 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; 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 or consistent with projected sales per aircraft
due to a range of factors, including changes in customer sourcing
decisions, materials, material costs, part design, quantity of
parts per engine, percentage of work directed to suppliers, engine
spares, cost schedules, 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; including the
arbitration proceedings involving Triumph Actuation Systems -
Yakima, LLC; future repurchases of common stock; future levels of
indebtedness; 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 March 31,
2016 2015
%Change
Net sales $ 288,332 $ 300,573 (4.1 ) Cost of
sales 186,255 198,355 (6.1 ) Selling and administrative expenses
60,550 58,323 3.8 246,805
256,678 (3.8 ) Operating income 41,527
43,895 (5.4 ) Operating margin 14.4 % 14.6 % Interest
expense 2,991 2,720 10.0 Other expense (income), net 227
81 NM Income before income taxes 38,309
41,094 (6.8 ) Income taxes 9,461 12,018
(21.3 ) Net income $ 28,848 $ 29,076
(0.8 ) Common dividends $ 6,468 $ 6,571 (1.6 )
Per common share: Net income: Basic $ 0.53 $ 0.53 -
Diluted 0.53 0.52 1.9 Dividends 0.12 0.12 - Weighted average
common shares outstanding: Basic 54,245,728 55,086,882 (1.5 )
Diluted 54,672,773 55,658,797 (1.8 ) NM - Not Meaningful
BARNES GROUP INC. OPERATIONS BY REPORTABLE
BUSINESS SEGMENT (Dollars in thousands)
(Unaudited) Three months ended March 31,
2016 2015
%Change
Net sales Industrial $ 195,246 $ 200,349 (2.5 )
Aerospace 93,087 100,224 (7.1 ) Intersegment sales (1
) - NM Total net sales $ 288,332 $
300,573 (4.1 ) Operating profit Industrial $
29,644 $ 30,979 (4.3 ) Aerospace 11,883
12,916 (8.0 ) Total operating profit $ 41,527
$ 43,895 (5.4 ) Operating margin
Change
Industrial 15.2 % 15.5 % (30 ) bps. Aerospace 12.8 %
12.9 % (10 ) bps. Total operating margin 14.4 % 14.6
% (20 ) bps. NM - Not Meaningful
BARNES GROUP
INC. CONSOLIDATED BALANCE SHEETS (Dollars in
thousands) (Unaudited)
March 31,2016
December 31,2015
Assets Current assets Cash and cash equivalents $ 76,859 $
83,926 Accounts receivable 267,853 261,757 Inventories 211,123
208,611 Deferred income taxes - 24,825 Prepaid expenses and other
current assets 33,166 32,469 Total current
assets 589,001 611,588 Deferred income taxes 22,750
1,139 Property, plant and equipment, net 315,291 308,856 Goodwill
600,303 587,992 Other intangible assets, net 524,577 528,322 Other
assets 24,917 23,969 Total assets $ 2,076,839
$ 2,061,866
Liabilities and Stockholders' Equity
Current liabilities Notes and overdrafts payable $ 8,471 $ 22,680
Accounts payable 95,306 97,035 Accrued liabilities 130,929 131,320
Long-term debt - current 1,588 1,515 Total
current liabilities 236,294 252,550 Long-term debt 493,396
485,711 Accrued retirement benefits 96,871 112,888 Deferred income
taxes 63,549 62,364 Other liabilities 20,046 20,600 Total
stockholders' equity 1,166,683 1,127,753 Total
liabilities and stockholders' equity $ 2,076,839 $ 2,061,866
BARNES GROUP INC. CONSOLIDATED STATEMENTS OF CASH
FLOWS (Dollars in thousands) (Unaudited)
Three months ended
March 31, 2016 2015 Operating activities:
Net income $ 28,848 $ 29,076 Adjustments to reconcile net income to
net cash provided by operating activities: Depreciation and
amortization 18,786 19,122 Gain on disposition of property, plant
and equipment (252 ) (1,334 ) Stock compensation expense 3,011
2,577 Withholding taxes paid on stock issuances (369 ) (488 )
Changes in assets and liabilities: Accounts receivable (4,213 )
(13,777 ) Inventories (153 ) (6,229 ) Prepaid expenses and other
current assets (524 ) (5,944 ) Accounts payable (285 ) 9,921
Accrued liabilities 2,248 (13,493 ) Deferred income taxes 251 3,740
Long-term retirement benefits (16,631 ) (2,878 ) Other (601
) 2,373 Net cash provided by operating
activities 30,116 22,666
Investing activities:
Proceeds from disposition of property, plant and equipment 313
2,010 Capital expenditures (13,297 ) (10,960 ) Business
acquisitions (1,546 ) - Component Repair Program payments (900 ) -
Other - (321 ) Net cash used by
investing activities (15,430 ) (9,271 )
Financing
activities: Net change in other borrowings (14,179 ) 8,425
Payments on long-term debt (69,013 ) (55,821 ) Proceeds from the
issuance of long-term debt 76,503 26,722 Proceeds from the issuance
of common stock 196 4,956 Common stock repurchases (8,000 ) -
Dividends paid (6,468 ) (6,571 ) Excess tax benefit on stock awards
44 914 Other (2,921 ) 10,033 Net cash
used by financing activities (23,838 ) (11,342 ) Effect of
exchange rate changes on cash flows 2,085
(2,470 ) Decrease in cash and cash equivalents (7,067 ) (417
) Cash and cash equivalents at beginning of period
83,926 46,039 Cash and cash equivalents
at end of period $ 76,859 $ 45,622
BARNES GROUP
INC. RECONCILIATION OF NET CASH PROVIDED BY OPERATING
ACTIVITIES TO FREE CASH FLOW (Dollars in thousands)
(Unaudited)
Three months ended March 31, 2016 2015 Free
cash flow: Net cash provided by operating activities $
30,116 $ 22,666 Capital expenditures (13,297 )
(10,960 ) Free cash flow(1) $ 16,819 $ 11,706
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
March 31, 2016 2015 % Change
SEGMENT
RESULTS
Operating Profit - Industrial Segment (GAAP) $ 29,644 $
30,979 (4.3 ) Männer short-term purchase accounting
adjustments - 851
Operating
Profit - Industrial Segment as adjusted (Non-GAAP) (1) $
29,644 $ 31,830 (6.9 )
Operating Margin -
Industrial Segment (GAAP) 15.2 % 15.5 % (30 ) bps.
Operating
Margin - Industrial Segment as adjusted (Non-GAAP) (1)
15.2 % 15.9 % (70 ) bps.
Operating Profit - Aerospace
Segment (GAAP) $ 11,883 $ 12,916 (8.0 ) Contract
termination dispute charges 816 -
Operating Profit - Aerospace Segment as adjusted
(Non-GAAP) (1) $ 12,699 $ 12,916 (1.7 )
Operating Margin - Aerospace Segment (GAAP) 12.8 %
12.9 % (10 ) bps.
Operating Margin - Aerospace Segment as
adjusted (Non-GAAP) (1) 13.6
%
12.9 % 70
bps.
CONSOLIDATED
RESULTS
Operating Income (GAAP) $ 41,527 $ 43,895 (5.4 )
Männer short-term purchase accounting adjustments - 851 Contract
termination dispute charges 816 -
Operating Income as adjusted (Non-GAAP) (1) $
42,343 $ 44,746 (5.4 )
Operating Margin
(GAAP) 14.4 % 14.6 % (20 ) bps.
Operating Margin as adjusted
(Non-GAAP) (1) 14.7 %
14.9 %
(20 ) bps.
Diluted Net Income per Share
(GAAP) $ 0.53 $ 0.52 1.9 Männer short-term purchase
accounting adjustments - 0.01 Contract termination dispute charges
0.01 -
Diluted Net Income per
Share as adjusted (Non-GAAP) (1) $ 0.54 $ 0.53
1.9
Full-Year 2015 Full-Year 2016 Outlook
Diluted Net Income per Share
(GAAP)
$ 2.19 $ 2.38 to $ 2.53 Männer short-term purchase
accounting adjustments 0.02 Restructuring/reduction in force 0.05
0.03 Tax benefit recognized for refund of withholding taxes (0.05 )
Contract termination dispute charges 0.03 0.02 Acquisition
transaction costs 0.02 Thermoplay short-term purchase accounting
adjustments 0.01 Pension lump-sum settlement charge 0.11
Diluted Net Income per Share as
adjusted (Non-GAAP) (1)
$ 2.38 $ 2.43 to $ 2.58
Notes:(1) The Company has excluded
charges related to a contract termination dispute from its "as
adjusted" financial measurements in 2016 and 2015. The
Company has also excluded the following from its "as adjusted"
financial measurements for 2015 only: 1) short-term
purchase accounting adjustments related to its Männer acquisition,
2) restructuring and workforce reduction charges, 3) a tax benefit
recognized related to a refund of withholding taxes that were
previously paid and included in tax expense in prior years, 4)
transaction costs related to its Thermoplay and Priamus
acquisitions, 5) short-term purchase accounting adjustments related
to its Thermoplay acquisition and 6) the pension lump-sum
settlement charge. 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160425006494/en/
Barnes Group Inc.William PittsDirector, Investor
Relations860-583-7070
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