Barnes Group Inc. : Reports First Quarter 2012 Financial Results
04/27/2012| 06:35am US/Eastern
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0
Quarterly Net Sales of $303 million, up 5%
Quarterly Operating Margins expand to 10.9%, up 30 bps
Quarterly Diluted EPS from Continuing Operations of $0.41, up 14%
Affirms 2012 EPS from Continuing Operations guidance of $1.78 to
$1.93 per diluted share
Barnes Group Inc. (NYSE: B), an international aerospace and industrial
manufacturing and service provider, today reported financial results for
the first quarter 2012. Net sales grew 5 percent to $303.1 million from
$289.6 million in the first quarter of 2011. Income from continuing
operations for the first quarter was up 14 percent to $23.0 million, or
$0.41 per diluted share, from $20.2 million, or $0.36 per diluted share,
a year earlier.
In the first quarter of 2012, the Company changed its organizational
structure to align its strategic business units into three reportable
business segments: Aerospace, Industrial and Distribution. All
previously reported financial information has been adjusted on a
retrospective basis to reflect the segment realignment.
"Barnes Group's first quarter results were a solid start to the year and
in line with our expectations," said Gregory F. Milzcik, Barnes Group
Inc. President and Chief Executive Officer. "We generated organic sales
growth in each of our three operating segments, our backlog is strong
and our end markets remain favorable. The overall performance creates an
outlook that allows us to affirm our 2012 guidance expectation of record
diluted earnings per share before all of our end markets fully recover."
($ millions; except per share data)
Three months ended March 31,
2012
2011
Change
Net Sales
$303.1
$289.6
$13.5
4.7
%
Operating Income
$33.0
$30.7
$2.3
7.5
%
% of Sales
10.9
%
10.6
%
0.3 pts.
Income from Continuing Operations
$23.0
$20.2
$2.8
13.7
%
Net Income
$22.2
$19.1
$3.1
16.4
%
Income from Continuing Operations Per Diluted Share
$0.41
$0.36
$0.05
13.9
%
Loss from Discontinued Operations Per Diluted Share
($0.01
)
($0.02
)
$0.01
Net Income Per Diluted Share
$0.40
$0.34
$0.06
17.6
%
Aerospace
First quarter 2012 net sales were $97.3 million, up 7 percent from
$90.6 million in the same period last year with both the aftermarket
and original equipment manufacturing businesses experiencing sales
growth. In particular, the aerospace aftermarket business continued to
see strong volumes of repair and overhaul activity.
Operating profit increased 4 percent to $14.2 million, from $13.7
million in the first quarter of 2011. The increase was primarily
driven by the profit impact of higher sales volumes, mostly offset by
increased management fees related to Revenue Sharing Programs (RSPs)
and an unfavorable sales mix.
Industrial
Sales at Industrial were $115.3 million in the first quarter of 2012,
up approximately 4 percent from $111.4 million in the same period last
year. The sales growth was primarily driven by increases in the
industrial manufacturing businesses based in North America which
reflected continued improvement in the transportation industry,
including automotive. The impact of foreign exchange decreased net
sales by approximately $0.8 million.
Operating profit in the first quarter of 2012 was $10.1 million, a
decrease of 8 percent from $11.0 million in the first quarter last
year. The decline was primarily driven by higher costs associated with
investments in new product introductions, a shift in sales mix to
lower margin products and the outsourcing of certain manufacturing
processes. Partially offsetting these declines was the profit impact
of higher sales levels in the first quarter of 2012.
Distribution
First quarter 2012 net sales were $93.4 million, up 4 percent from
$89.9 million in the same period last year. Sales growth was driven by
the continued strengthening of our North American distribution
end-markets. The impact of foreign exchange decreased net sales by
approximately $0.2 million.
Segment operating profit increased 43 percent to $8.7 million, from
$6.1 million in the first quarter of 2011 primarily as a result of the
beneficial profit impact of higher sales volumes and lower cost
structures. The operating profit increase was partially offset by an
unfavorable sales mix of lower margin products.
Additional Information
Interest expense decreased $1.3 million in the first quarter of 2012
to $2.4 million primarily as a result of the redemption of the 3.75%
Convertible Notes in 2011 and the maturity of interest rate swaps in
place during the first quarter of 2011. The redemption of the 3.75%
Convertible Notes, which were funded with the variable rate credit
facility, resulted in a higher percentage of the Company's outstanding
debt being carried at a lower average interest rate.
The Company's effective tax rate for the first quarter of 2012 was
22.9 percent, compared to 24.2 percent in the first quarter of 2011
and 21.7 percent for the full year 2011. The increase in the first
quarter 2012 effective tax rate from the full year 2011 rate was
primarily driven by the projected shift of income to higher-taxing
jurisdictions, partially offset by the impact of a decrease in the
planned repatriation of a portion of current year foreign earnings to
the U.S.
2012 Outlook
Barnes Group is affirming its guidance for 2012. The Company expects
revenue to grow 6 to 9 percent from 2011, operating margins to be
approximately 12 percent, and earnings from continuing operations per
diluted share are forecasted to be in the range of $1.78 to $1.93, up 9
to 18 percent from 2011.
Conference Call
Barnes Group Inc. will conduct a conference call with investors to
discuss first quarter 2012 results at 8:30 a.m. EST today, April 27,
2012. 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) 680-0892 in the
U.S. or (617) 213-4858 outside of the U.S. (request the Barnes Group
Earnings Call), Participant Code: 85371500.
In addition, the call will be recorded and available for playback
beginning at 12:00 p.m. (EST) on Friday, April 27, 2012 by dialing (617)
801-6888, Passcode: 10561780.
About Barnes Group
Founded in 1857, Barnes Group Inc. (NYSE:B) is an international
aerospace and industrial manufacturing 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 50 locations worldwide, are committed to achieving consistent
and sustainable profitable growth. For more information, visit www.BGInc.com.
Forward-Looking Statements
This release contains certain forward-looking statements as defined in
the Private Securities Litigation Reform Act of 1995. Forward-looking
statements are made based upon management's good faith expectations and
beliefs concerning future developments and their potential effect upon
the Company and can be identified by the use of words such as
"anticipated," "believe," "expect," "plans," "strategy," "estimate,"
"project," and other words of similar meaning in connection with a
discussion of future operating or financial performance. These
forward-looking statements are subject to risks and uncertainties that
may cause actual results to differ materially from those expressed in
the forward-looking statements. The risks and uncertainties described in
our periodic filings with the Securities and Exchange Commission,
include, among others, uncertainties arising from the current or
worsening conditions in financial markets; future financial performance
of the industries or customers that we serve; changes in market demand
for our products and services; integration of acquired businesses;
restructuring costs or savings; the impact of the divestiture in 2011 of
our Barnes Distribution Europe businesses and any other future strategic
actions, including acquisitions, joint ventures, divestitures,
restructurings, or strategic business realignments, and our ability to
achieve the financial and operational targets set in connection with any
such actions; introduction or development of new products or transfer of
work; changes in raw material or product prices and availability;
foreign currency exposure; our dependence upon revenues and earnings
from a small number of significant customers; a major loss of customers;
the outcome of pending and future claims or litigation or governmental,
regulatory proceedings, investigations, inquiries, and audits; uninsured
claims and litigation; outcome of contingencies; future repurchases of
common stock; future levels of indebtedness; and numerous other matters
of 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 March 31,
2012
2011
% Change
Net sales
$
303,096
$
289,590
4.7
Cost of sales
201,781
190,910
5.7
Selling and administrative expenses
68,302
67,963
0.5
270,083
258,873
4.3
Operating income
33,013
30,717
7.5
Operating margin
10.9
%
10.6
%
Interest expense
2,368
3,655
(35.2
)
Other expense (income), net
853
408
NM
Income from continuing operations before income taxes
29,792
26,654
11.8
Income taxes
6,818
6,457
5.6
Income from continuing operations
22,974
20,197
13.7
Loss from discontinued operations, net of income taxes
(767
)
(1,125
)
31.8
Net income
$
22,207
$
19,072
16.4
Common dividends
$
5,459
$
4,351
25.5
Per common share:
Basic:
Income from continuing operations
$
0.42
$
0.37
13.5
Loss from discontinued operations, net of income taxes
(0.01
)
(0.02
)
50.0
Net income
$
0.41
$
0.35
17.1
Diluted:
Income from continuing operations
$
0.41
$
0.36
13.9
Loss from discontinued operations, net of income taxes
(0.01
)
(0.02
)
50.0
Net income
$
0.40
$
0.34
17.6
Dividends
0.10
0.08
25.0
Weighted average common shares outstanding:
Basic
54,805,636
54,715,953
0.2
Diluted
55,455,579
55,603,892
(0.3
)
BARNES GROUP INC.
OPERATIONS BY REPORTABLE BUSINESS SEGMENT
(Dollars in thousands)
Unaudited
Three months ended March 31,
2012
2011
% Change
Net sales
Aerospace
$
97,250
$
90,560
7.4
Industrial
115,348
111,430
3.5
Distribution
93,425
89,912
3.9
Intersegment sales
(2,927
)
(2,312
)
(26.6
)
Total net sales
$
303,096
$
289,590
4.7
Operating profit
Aerospace
$
14,218
$
13,683
3.9
Industrial
10,105
10,958
(7.8
)
Distribution
8,690
6,076
43.0
Total operating profit
$
33,013
$
30,717
7.5
Operating margin
Aerospace
14.6
%
15.1
%
Industrial
8.8
%
9.8
%
Distribution
9.3
%
6.8
%
Total operating margin
10.9
%
10.6
%
BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Unaudited
March 31, 2012
December 31, 2011
Assets
Current assets
Cash and cash equivalents
$
77,489
$
62,505
Accounts receivable
205,642
200,460
Inventories
216,906
216,520
Deferred income taxes
27,363
28,829
Prepaid expenses and other current assets
24,623
21,680
Total current assets
552,023
529,994
Deferred income taxes
44,452
47,661
Property, plant and equipment, net
213,060
210,784
Goodwill
372,498
366,104
Other intangible assets, net
269,158
272,092
Other assets
14,227
13,730
Total assets
$
1,465,418
$
1,440,365
Liabilities and Stockholders' Equity
Current liabilities
Notes and overdrafts payable
$
5,719
$
12,364
Accounts payable
92,686
92,524
Accrued liabilities
60,734
92,250
Long-term debt - current
540
540
Total current liabilities
159,679
197,678
Long-term debt
369,550
333,148
Accrued retirement benefits
151,095
152,696
Other liabilities
35,666
34,443
Total stockholders' equity
749,428
722,400
Total liabilities and stockholders' equity
$
1,465,418
$
1,440,365
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Unaudited
Three months ended March 31,
2012
2011
Operating activities:
Net income
$
22,207
$
19,072
Adjustments to reconcile net income to net cash from operating
activities:
Depreciation and amortization
13,063
14,034
Amortization of convertible debt discount
537
610
Gain on disposition of property, plant and equipment
(97
)
(104
)
Stock compensation expense
2,100
2,102
Withholding taxes paid on stock issuances
(683
)
(624
)
Loss on the sale of businesses
767
-
Changes in assets and liabilities:
Accounts receivable
(1,512
)
(25,739
)
Inventories
1,091
1,561
Prepaid expenses and other current assets
(2,272
)
(413
)
Accounts payable
(672
)
120
Accrued liabilities
(29,379
)
(12,518
)
Deferred income taxes
4,869
5,269
Long-term retirement benefits
(3,725
)
(6,636
)
Other
25
(1,385
)
Net cash provided (used) by operating activities
6,319
(4,651
)
Investing activities:
Proceeds from disposition of property, plant and equipment
135
114
Payments related to the sale of businesses
(363
)
-
Capital expenditures
(7,281
)
(12,488
)
Other
(1,418
)
(3,211
)
Net cash used by investing activities
(8,927
)
(15,585
)
Financing activities:
Net change in other borrowings
(6,688
)
(526
)
Payments on long-term debt
(13,135
)
(60,489
)
Proceeds from the issuance of long-term debt
49,000
80,300
Proceeds from the issuance of common stock
3,324
7,759
Common stock repurchases
(11,141
)
-
Dividends paid
(5,459
)
(4,351
)
Excess tax benefit on stock awards
1,227
492
Other
(65
)
(83
)
Net cash provided by financing activities
17,063
23,102
Effect of exchange rate changes on cash flows
529
511
Increase in cash and cash equivalents
14,984
3,377
Cash and cash equivalents at beginning of period
62,505
13,450
Cash and cash equivalents at end of period
$
77,489
$
16,827
BARNES GROUP INC.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO
FREE CASH FLOW
(Dollars in thousands)
Unaudited
Three months ended March 31,
2012
2011
Free cash flow:
Net cash provided (used) by operating activities
$
6,319
$
(4,651
)
Capital expenditures
(7,281
)
(12,488
)
Free cash flow(1)
$
(962
)
$
(17,139
)
(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. William Pitts, 860-583-7070 Director,
Investor Relations
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