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Barnes Group Inc. (NYSE: B), an international aerospace and industrial manufacturer and service provider, today reported financial results for the second quarter of 2013. Net sales from continuing operations increased 24% to $267.4 million from $215.3 million in the second quarter of 2012, driven largely by the sales contribution of the Synventive business. Income from continuing operations in the current quarter included a tax charge of $16.6 million, or $0.30 per diluted share, associated with the April 16, 2013 U.S. Tax Court’s unfavorable decision arising out of an IRS audit for the tax years 2000 through 2002. Including this tax item, income from continuing operations for the second quarter was $9.2 million, or $0.17 per diluted share. Excluding the impact of the U.S. Tax Court’s decision, adjusted diluted earnings per share from continuing operations for the second quarter of 2013 was $0.47, up 34% from $0.35 per diluted share a year ago. A table reconciling the non-GAAP adjusted results presented in this release to our GAAP results is included at the end of this press release.
On April 22, 2013, the Company completed the sale of its Barnes Distribution North America (BDNA) business to MSC Industrial Direct Co., Inc. for the purchase price of $550 million and received cash of $540 million, net of working capital adjustments and transaction costs. In the second quarter of 2013, the Company recorded a gain on sale of $194 million, net of tax, representing the sales price less the asset value of BDNA and net of transaction-related costs. For the second quarter of 2013, the Company’s income from discontinued operations was $200 million, which includes both the gain on sale of BDNA, and net operating results for BDNA during the period.
“Sustained execution of our growth strategy allowed us to increase sales and expand operating margins during the quarter,” said Patrick J. Dempsey, President and Chief Executive Officer of Barnes Group Inc. “Despite some challenging end-markets, our Industrial segment delivered solid organic growth and improved margin performance.” Dempsey continued, “In our Aerospace segment, backlogs are strong, commercial end-markets remain favorable, and the aftermarket showed signs of improvement from the prior quarter.”
($ millions; except per share data)
Three months ended June 30,
Six months ended June 30,
% of Sales
Income from Continuing Operations
Income from Continuing Operations Per Diluted Share
Income from Discontinued Operations Per Diluted Share
Net Income Per Diluted Share
NM = Not Meaningful
Second quarter 2013 sales were $96.8 million, up 3% from $93.8 million in the same period last year. A sales increase in original equipment manufacturing (“OEM”) was partially offset by lower sales in the aftermarket business. Within the aftermarket business, repair and overhaul sales were down while spare part sales were essentially flat to last year.
Operating profit of $15.2 million for the second quarter of 2013 was up 17% from the prior year period of $13.0 million. Operating profit benefited from the impact of higher OEM sales and better productivity, partially offset by a lower profit contribution from the aftermarket business given lower sales.
Second quarter 2013 sales were $170.6 million, up 40% from $121.5 million in the same period last year. The increase was driven by the Synventive acquisition’s sales contribution and organic sales growth of 5%, inclusive of favorable pricing, offset by unfavorable foreign exchange of $0.5 million.
Operating profit of $20.9 million for the second quarter of 2013 was up 64% from the prior year period of $12.7 million driven by the profit contribution of Synventive and the profit impact of higher organic sales.
Interest expense increased to $3.2 million, up from $2.4 million last year primarily as a result of a higher average borrowing rate in the current quarter. During the second quarter of 2013, borrowings were substantially reduced as proceeds from the BDNA sale were used to reduce debt.
The Company’s effective tax rate from continuing operations for the second quarter of 2013 is 71.6% and was adversely impacted by a tax charge of $16.6 million associated with the April 16, 2013 U.S. Tax Court Decision. Absent that item, the Company’s effective tax rate from continuing operations for the second quarter of 2013 was 20.5% compared to 16.3% in the second quarter of 2012 and 13.5% for the full year 2012. The remaining effective tax rate increase in the second quarter 2013 versus the full year 2012 rate was mainly due to several discrete foreign tax related items in 2012, an increase in the Company’s effective tax rate in Sweden, and a projected mix of earnings attributable to higher-taxing jurisdictions.
On July 23, 2013, the Company’s Board of Directors increased the quarterly cash dividend 10 percent to $0.11 per share of common stock. The dividend increase will raise the annualized dividend payout to $0.44 per share of common stock.
Updated 2013 Outlook
Barnes Group now expects 2013 revenue from continuing operations to grow 17% to 19% from 2012. Excluding $10.5 million pre-tax of non-recurring costs associated with the Company’s CEO transition recorded in the first quarter, adjusted operating margins are expected to be in the range of 13.5% to 14% for 2013. GAAP earnings per diluted share from continuing operations are anticipated to be in the range of $1.43 to $1.53.