- Sales of $357 million, up 15%;
Organic Sales up 8%
- Operating Margin of 13.4%; Adjusted
Operating Margin of 13.6%, down 380 bps
- Diluted EPS of $0.65, down 3%; Down
7% to $0.66 on an Adjusted Basis
- 2017 Expected Sales Growth of 15.5%
to 16.5%; Organic Sales Growth of 10.5% to 11.5%
- 2017 Expected Adjusted Net Income of
$2.84 to $2.89 per Diluted Share; up 12% to 14% from 2016 Adjusted
Net Income of $2.53 per Diluted Share
Barnes Group Inc. (NYSE: B), a global provider of highly
engineered products, differentiated industrial technologies, and
innovative solutions, today reported financial results for the
third quarter 2017.
Third quarter 2017 net sales of $357 million were up 15% from
$312 million in the prior year period driven by strong organic
sales growth (1) of 8% and acquisition sales of 5%. Foreign
exchange favorably impacted sales by approximately 2%. Net income
for the third quarter was $35.3 million, or $0.65 per diluted
share, compared to $36.8 million, or $0.67 per diluted share, a
year ago. On an adjusted basis, net income was $0.66 per diluted
share, down 7% from $0.71 last year. Adjusted diluted net income
per share in the third quarter of 2017 excludes restructuring
actions and FOBOHA short-term purchase accounting adjustments, both
within our Industrial Segment, which collectively amounted to
$0.01. Third quarter 2016 adjusted diluted net income per share
excludes $0.03 of FOBOHA short-term purchase accounting adjustments
and transaction costs in our Industrial Segment and a $0.01 charge
related to a contract termination dispute 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.
“The ongoing execution of our growth strategy to create superior
value for customers through highly-engineered products and
innovative solutions continues to generate strong organic orders
and sales growth in both our Industrial and Aerospace segments,”
said Patrick J. Dempsey, President and Chief Executive Officer of
Barnes Group Inc. “When driving innovative product and process
developments some operational challenges are to be expected,
usually accompanied by temporary additional costs as we are
experiencing in our Associated Spring business. While we are
addressing those at present, our sustained order strength,
favorable end markets, and record backlog position us well as we
close 2017 and move into 2018,” added Dempsey.
Industrial
- Third quarter 2017 sales were $240.4
million, up 15% from $208.7 million in the prior year period.
Organic sales increased by 6%, primarily driven by continuing
strength in our Nitrogen Gas Products and Molding Solutions
businesses. Favorable foreign exchange increased sales by
approximately $5.1 million, or 2%, while the FOBOHA and Gammaflux
businesses collectively contributed $14.5 million, or 7%, in
acquisition sales.
- Operating profit in the third quarter
was $29.3 million, down 16% from $35.0 million in the prior year
period, as continuing higher costs incurred on certain programs
within Engineered Components were only partially offset from the
profit benefit of increased sales. The third quarter of 2017
includes FOBOHA short-term purchase accounting adjustments of
approximately $0.5 million and restructuring actions related to two
previously announced plant consolidations which cost $0.3 million.
Excluding these items, adjusted operating profit of $30.1 million
was down 18% from $36.7 million a year ago. Adjusted operating
margin was 12.5%, down 510 bps, driven by lower productivity from
Engineered Components and a low margin contribution from the FOBOHA
business.
Aerospace
- Third quarter 2017 sales were $116.8
million, up 14% from $102.8 million in the same period last year.
Aerospace original equipment manufacturing (“OEM”) sales increased
14% due to the continuing ramp of new engine programs. In the
aftermarket business, sales increased 13% as maintenance, repair
and overhaul (“MRO”) and spare parts sales were both up as compared
to a year ago.
- Operating profit was $18.5 million for
the third quarter of 2017, up 10% as compared to $16.9 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 $0.6 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 6% from $17.5 million a year
ago while operating margin of 15.8% was down 120 bps from an
adjusted 17.0% a year ago.
- Aerospace backlog was $718 million at
the end of the third quarter of 2017, up 13% compared to a year ago
and up 5% sequentially from the second quarter of 2017.
Additional Information
- Interest expense increased $0.7 million
to $3.7 million in the third 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 third quarter was 19.1% compared with 23.6% in the third
quarter of 2016 and 25.7% for the full year 2016. The primary
driver of the third quarter’s lower tax rate is the settlement of
tax audits along with the closure of tax years for various tax
jurisdictions.
2017 Updated Outlook
Barnes Group now expects 2017 total revenue growth of 15.5% to
16.5% with organic revenue growth of 10.5% to 11.5% 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 approximately 15%. Adjusted earnings from
continuing operations are expected to be in the range of $2.84 to
$2.89 per diluted share, up 12% to 14% from 2016’s adjusted diluted
earnings per share of $2.53. Further, the Company anticipates
capital expenditures in the range of $55 to $60 million and cash
conversion of approximately 100% of net income. For 2017, the
effective tax rate is expected to be approximately 22%.
Conference Call Information
Barnes Group Inc. will conduct a conference call with investors
to discuss third quarter 2017 results at 8:30 a.m. ET today,
October 27, 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 (866) 393-4306 in the U.S. or (734)
385-2616 outside of the U.S.; Conference ID 66363146. 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, October 27, 2017 until
11:59 p.m. (ET) on Friday, November 3, 2017, by dialing (404)
537-3406; Conference ID 66363146.
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 GroupBarnes 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 StatementsThis 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; product liabilities; 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 September 30, Nine
months ended September 30,
2017
2016
% Change
2017
2016
% Change Net sales $ 357,156 $ 311,561 14.6 $
1,063,451 $ 906,586 17.3 Cost of sales 236,016 198,600 18.8
692,355 582,028 19.0 Selling and administrative expenses
73,354 61,144 20.0 210,423
183,754 14.5 309,370
259,744 19.1 902,778 765,782
17.9 Operating income 47,786 51,817 (7.8 ) 160,673 140,804
14.1 Operating margin 13.4 % 16.6 % 15.1 % 15.5 %
Interest expense 3,748 3,020 24.1 10,638 8,826 20.5 Other expense
(income), net 357 621 (42.5 )
773 24 NM Income before income taxes
43,681 48,176 (9.3 ) 149,262 131,954 13.1 Income taxes
8,348 11,348 (26.4 ) 30,599
33,066 (7.5 ) Net income $ 35,333
$ 36,828 (4.1 ) $ 118,663 $ 98,888 20.0
Common dividends $ 7,518 $ 6,994 7.5 $ 22,042
$ 20,444 7.8 Per common share: Net
income: Basic $ 0.65 $ 0.68 (4.4 ) $ 2.19 $ 1.82 20.3 Diluted 0.65
0.67 (3.0 ) 2.17 1.81 19.9 Dividends 0.14 0.13 7.7 0.41 0.38 7.9
Weighted average common shares outstanding: Basic 54,066,509
54,206,064 (0.3 ) 54,140,551 54,206,798 (0.1 ) Diluted 54,570,677
54,572,315 (0.0 ) 54,649,723 54,643,739 0.0 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, 2017 2016 %
Change 2017 2016 % Change Net sales
Industrial $ 240,390 $ 208,748 15.2 $ 719,556 $ 608,534 18.2
Aerospace 116,767 102,816 13.6 343,899 298,055 15.4
Intersegment sales (1 ) (3 ) (4 ) (3 )
Total net sales $ 357,156 $ 311,561 14.6 $
1,063,451 $ 906,586 17.3 Operating profit
Industrial $ 29,308 $ 34,958 (16.2 ) $ 100,154 $ 99,445 0.7
Aerospace 18,478 16,859 9.6
60,519 41,359 46.3 Total
operating profit $ 47,786 $ 51,817 (7.8 ) $ 160,673
$ 140,804 14.1 Operating margin
Change
Change Industrial 12.2 % 16.7 % (450 ) bps. 13.9 %
16.3 % (240 ) bps. Aerospace 15.8 % 16.4 % (60
) bps. 17.6 % 13.9 % 370 bps. Total operating
margin 13.4 % 16.6 % (320 ) bps. 15.1 % 15.5 % (40 ) bps.
BARNES GROUP INC.CONSOLIDATED BALANCE
SHEETS(Dollars in thousands)(Unaudited)
September 30,2017
December 31,2016
Assets Current assets Cash and cash equivalents $ 134,471 $
66,447 Accounts receivable 325,189 287,123 Inventories 252,502
227,759 Prepaid expenses and other current assets 31,591
27,163 Total current assets 743,753 608,492
Deferred income taxes 31,942 25,433 Property, plant and
equipment, net 353,945 334,489 Goodwill 685,990 633,436 Other
intangible assets, net 514,331 522,258 Other assets 16,570
13,431 Total assets $ 2,346,531 $ 2,137,539
Liabilities and Stockholders' Equity Current liabilities
Notes and overdrafts payable $ 16,875 $ 30,825 Accounts payable
127,750 112,024 Accrued liabilities 191,889 156,967 Long-term debt
- current 1,689 2,067 Total current
liabilities 338,203 301,883 Long-term debt 497,429 468,062
Accrued retirement benefits 91,803 109,350 Deferred income taxes
64,700 66,446 Other liabilities 24,795 23,440 Total
stockholders' equity 1,329,601 1,168,358 Total
liabilities and stockholders' equity $ 2,346,531 $ 2,137,539
BARNES GROUP INC.CONSOLIDATED STATEMENTS OF CASH
FLOWS(Dollars in thousands)(Unaudited)
Nine months ended September 30,
2017 2016 Operating activities: Net income $
118,663 $ 98,888 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization
68,535 58,949 Gain on disposition of property, plant and equipment
(96 ) (475 ) Stock compensation expense 8,472 8,620 Changes in
assets and liabilities, net of the effects of acquisitions:
Accounts receivable (26,773 ) (18,461 ) Inventories (11,454 ) 4,626
Prepaid expenses and other current assets (2,398 ) (296 ) Accounts
payable 14,134 9,799 Accrued liabilities 28,889 13,028 Deferred
income taxes (18,063 ) 998 Long-term retirement benefits (11,469 )
(16,026 ) Other (677 ) 461 Net cash
provided by operating activities 167,763 160,111
Investing activities: Proceeds from disposition of property,
plant and equipment 401 715 Capital expenditures (41,957 ) (32,920
) Business acquisitions, net of cash acquired (8,922 ) (120,675 )
Component Repair Program payments - (900 ) Other (3,000 )
- Net cash used by investing activities
(53,478 ) (153,780 )
Financing activities: Net change
in other borrowings (14,103 ) (9,321 ) Payments on long-term debt
(60,897 ) (263,578 ) Proceeds from the issuance of long-term debt
89,118 288,982 Proceeds from the issuance of common stock 1,731
2,463 Common stock repurchases (23,300 ) (15,660 ) Dividends paid
(22,042 ) (20,444 ) Withholding taxes paid on stock issuances
(4,851 ) (4,881 ) Other (17,773 ) 3,406
Net cash used by financing activities (52,117 ) (19,033 )
Effect of exchange rate changes on cash flows 5,856
717 Increase (decrease) in cash and cash
equivalents 68,024 (11,985 ) Cash and cash equivalents at
beginning of period 66,447 83,926
Cash and cash equivalents at end of period $ 134,471
$ 71,941
BARNES GROUP
INC.RECONCILIATION OF NET CASH PROVIDED BY OPERATING
ACTIVITIES TO FREE CASH FLOW(Dollars in
thousands)(Unaudited)
Nine months ended September 30, 2017 2016
Free cash flow: Net cash provided by operating
activities $ 167,763 $ 160,111 Capital expenditures (41,957
) (32,920 ) Free cash flow(1) $ 125,806 $
127,191
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 September 30, Nine months ended
September 30, 2017 2016 % Change
2017 2016 % Change
SEGMENT
RESULTS
Operating Profit - Industrial Segment (GAAP) $ 29,308 $
34,958 (16.2 ) $ 100,154 $ 99,445 0.7 Acquisition
transaction costs - 1,178 - 1,178 FOBOHA short-term purchase
accounting adjustments 501 530 2,294 530 Restructuring actions
260 - (1,392 ) -
Operating Profit - Industrial Segment as adjusted
(Non-GAAP) (1) $ 30,069 $ 36,666 (18.0 ) $
101,056 $ 101,153 (0.1 )
Operating Margin -
Industrial Segment (GAAP) 12.2 % 16.7 % (450 ) bps. 13.9 % 16.3
% (240 ) bps.
Operating Margin - Industrial Segment as adjusted
(Non-GAAP) (1) 12.5 % 17.6 % (510 ) bps. 14.0 % 16.6 %
(260 ) bps.
Operating Profit - Aerospace Segment
(GAAP) $ 18,478 $ 16,859 9.6 $ 60,519 $ 41,359 46.3
Contract termination dispute charges - 613
- 2,998
Operating
Profit - Aerospace Segment as adjusted (Non-GAAP) (1) $
18,478 $ 17,472 5.8 $ 60,519 $ 44,357
36.4
Operating Margin - Aerospace Segment (GAAP) 15.8
% 16.4 % (60 ) bps. 17.6 % 13.9 % 370 bps.
Operating Margin -
Aerospace Segment as adjusted (Non-GAAP) (1)
15.8 % 17.0 % (120 ) bps.
17.6 % 14.9 % 270 bps.
CONSOLIDATED RESULTS Operating Income
(GAAP) $ 47,786 $ 51,817 (7.8 ) $ 160,673 $ 140,804 14.1
Acquisition transaction costs - 1,178 - 1,178 FOBOHA short-term
purchase accounting adjustments 501 530 2,294 530 Contract
termination dispute charges - 613 - 2,998 Restructuring actions
260 - (1,392 ) -
Operating Income as adjusted (Non-GAAP) (1) $
48,547 $ 54,138 (10.3 ) $ 161,575 $ 145,510
11.0
Operating Margin (GAAP) 13.4 % 16.6 %
(320 ) bps. 15.1 % 15.5 % (40 ) bps.
Operating Margin as
adjusted (Non-GAAP) (1) 13.6 %
17.4 % (380 ) bps. 15.2 %
16.1 % (90 ) bps.
Diluted Net Income
per Share (GAAP) $ 0.65 $ 0.67 (3.0 ) $ 2.17 $ 1.81 19.9
Acquisition transaction costs - 0.02 - 0.02 FOBOHA short-term
purchase accounting adjustments 0.01 0.01 0.03 0.01 Contract
termination dispute charges - 0.01 - 0.03 Restructuring actions
- - (0.03 ) -
Diluted Net Income per Share as adjusted (Non-GAAP)
(1) $ 0.66 $ 0.71 (7.0 ) $ 2.17 $ 1.87
16.0
Full-Year 2016 Full-Year 2017 Outlook Diluted Net
Income per Share (GAAP) 2.48 $ 2.83 to $ 2.88
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 -
(0.02)
Diluted Net Income per Share as adjusted
(Non-GAAP) (1) $ 2.53 $ 2.84 to $ 2.89
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 19% 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171027005027/en/
Barnes Group Inc.William Pitts, 860-583-7070Director, Investor
Relations
Barnes (NYSE:B)
Historical Stock Chart
From Apr 2024 to May 2024
Barnes (NYSE:B)
Historical Stock Chart
From May 2023 to May 2024