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Barnes Group Inc. Reports Third Quarter 2012 Financial Results

Barnes Group Inc. (NYSE: B), an international aerospace and industrial manufacturing and service provider, today reported financial results for the third quarter 2012. Net sales increased 2 percent to $306.1 million from $298.6 million in the third quarter of 2011. Sales growth included a 5 percent benefit from the Synventive acquisition, offset by a 1 percent decrease in organic sales and 2 percent from unfavorable foreign exchange. Income from continuing operations for the third quarter was down 17 percent to $20.7 million, or $0.38 per diluted share, from $24.9 million, or $0.44 per diluted share, a year earlier. Income from continuing operations in the current quarter included $5.1 million pre-tax, or $0.06 per diluted share, of short-term purchase accounting adjustments and acquisition transaction costs. Excluding these acquisition related items, adjusted diluted earnings per share from continuing operations was $0.44. A table highlighting adjusted results in the quarter and year-to-date is included at the end of this press release.

“During the quarter, we closed on the Synventive deal, the largest acquisition in Barnes Group’s history and we’re pleased with the initial operating performance delivered by this business. We believe that a growing Synventive, coupled with another record level of aerospace backlog, provides us with positive momentum,” said Gregory F. Milzcik, Barnes Group Inc. President and Chief Executive Officer. “Even with an uncertain near-term economic outlook, our continued investments in growth and our sustained focus on operational efficiencies, lead us to anticipate 2012 to be one of our better earnings years on record.”

($ millions; except per share data)   Three months ended September 30,     Nine months ended September 30,
Unaudited 2012   2011   Change 2012   2011   Change
Net Sales $306.1 $298.6 $7.4   2.5 % $902.6 $886.1 $16.5   1.9 %
Operating Income $29.7 $34.2 ($4.5) (13.2) % $96.8 $98.7 ($1.9) (1.9) %
% of Sales 9.7 % 11.4 % (1.7) pts. 10.7 % 11.1 % (0.4) pts.
Income from Continuing Operations $20.7 $24.9 ($4.2) (16.7) % $68.5 $67.8 $0.7 1.0 %
Net Income $18.5 $23.2 ($4.8) (20.5) % $65.5 $64.6 $0.9 1.3 %
 
Income from Continuing Operations Per Diluted Share $0.38 $0.44 ($0.06) (13.6) % $1.24 $1.21 $0.03 2.5 %
 
Loss from Discontinued Operations Per Diluted Share ($0.04) ($0.03) ($0.01) ($0.05) ($0.06) $0.01
 
Net Income Per Diluted Share   $0.34     $0.41     ($0.07)   (17.1) %     $1.19     $1.15     $0.04   3.5 %

Aerospace

  • Aerospace net sales of $98.4 million were up slightly from last year’s third quarter. An increase in aerospace original equipment manufacturing sales was mostly offset by a decline in aftermarket spare parts sales. Aftermarket repair and overhaul sales were essentially flat compared to a year ago.
  • Operating profit decreased 5 percent to $15.3 million primarily driven by volume mix. The profit impact from lower aftermarket spare parts sales was only partially offset by the profit impact from higher original equipment manufacturing sales. Operating margin declined from 16.4 percent last year to 15.6 percent this year.

Industrial

  • Industrial net sales of $123.8 million were up $11.3 million, or 10 percent, compared to the third quarter of 2011. The Synventive acquisition provided $15.8 million of sales, while organic sales were relatively flat and unfavorable foreign exchange reduced sales by $4.8 million.
  • Operating profit was $7.4 million, a decrease of $2.9 million from the third quarter of 2011. The primary driver of the lower operating profit was the impact of $5.1 million of short-term purchase accounting and transaction costs related to the acquisition of Synventive. During the quarter, lower incentive compensation, partially offset by increased pension costs, benefited operating profit. Reported operating margin was 6.0 percent. Excluding the Synventive acquisition one-time items, adjusted operating margin increased from 9.2 percent last year to 10.1 percent this year.

Distribution

  • Distribution net sales of $85.7 million were down $4.5 million, or 5 percent, compared to the third quarter of 2011 as a result of softness in our North American markets.
  • Operating profit of $6.9 million decreased 11 percent from last year primarily due to the profit impact on lower sales volumes. Lower incentive compensation, partially offset by higher pension costs, provided a net benefit to the quarter. Operating margins decreased 50 basis points to 8.1 percent.

Additional Information

  • Interest expense increased by $1.3 million as a result of higher borrowings which were used to fund the acquisition of Synventive and higher average interest rates.
  • The Company’s effective tax rate for the third quarter of 2012 was 19.0 percent, compared to 24.1 percent in the third quarter of 2011. The decrease in the 2012 effective tax rate from continuing operations was primarily driven by a decrease in the planned repatriation of a portion of current year foreign earnings to the U.S., as well as a projected change in earnings mix attributable to higher-tax jurisdictions.

Updated 2012 Outlook

  • Barnes Group expects revenue growth of 4 to 6 percent and operating margins of approximately 11 percent inclusive of the Synventive acquisition. As a result of a softer third quarter, earnings from continuing operations per diluted share are now expected to be in the range of $1.73 to $1.78. On an adjusted basis, earnings from continuing operations per diluted share are expected to be $1.80 to $1.85.
  • The Synventive acquisition is expected to be neutral to Barnes Group’s full-year 2012 net earnings as additional operating income will be offset by incremental financing costs and approximately $0.07 of short-term purchase accounting adjustments and acquisition transaction costs.

Conference Call

Barnes Group Inc. will conduct a conference call with investors to discuss third quarter 2012 results at 8:30 a.m. (EDT) today, October 26, 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) 679-8033 in the U.S. or (617) 213-4846 outside of the U.S. (request the Barnes Group Earnings Call), Participant Code: 48858657.

In addition, the call will be recorded and available for playback beginning at 12:00 p.m. (EDT) on Friday, October 26, 2012 by dialing (617) 801-6888, Passcode: 62244581.

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