Barnes Group (B)
Q2 2012 Earnings Call
July 27, 2012 8:30 am ET
Gregory F. Milzcik - Chief Executive Officer, President, Executive Director and Ex-Officio Member of Executive Committee
Christopher J. Stephens - Chief Financial Officer and Senior Vice President of Finance
Patrick J. Dempsey - Chief Operating Officer and Senior Vice President
Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division
Edward Marshall - Sidoti & Company, LLC
Matt J. Summerville - KeyBanc Capital Markets Inc., Research Division
Holden Lewis - BB&T Capital Markets, Research Division
Christopher Glynn - Oppenheimer & Co. Inc., Research Division
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Good day, ladies and gentlemen, and welcome to the Barnes Group Second Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded for replay purposes. And I would now like to turn the conference over to your host for today, Mr. William Pitts, Director of Investor Relations. Please proceed, sir.
Thank you. Good morning, everyone, and thank you for joining us today. With me this morning is Barnes Group President and CEO, Greg Milzcik; Senior Vice President of Finance and Chief Financial Officer, Chris Stephens; and Senior Vice President and Chief Operating Officer, Patrick Dempsey.
If you have not received a copy of our earnings press release, you can find it on the Investor Relations section of our corporate website at bginc.com. During our call, we will be referring to the earnings release supplement slides, which are also posted on our website.
I want to remind everybody that certain statements we make on today's call, both during the opening remarks and during the question-and-answer session, may be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. Please consider the risks and uncertainties that are mentioned in today's call and are described in our periodic filings with the Securities and Exchange Commission. These filings are available through the Investor Relations section of our corporate website at bginc.com.
Today's call will begin with customary opening remarks from Greg, including comments about our recently announced agreement to acquire Synventive Molding Solutions, followed by a more detailed review of quarterly results and an updated outlook discussion by Chris. After that, we will open up the call for questions.
At this time, I will turn the call over to Barnes Group's President and CEO, Greg Milzcik.
Gregory F. Milzcik
Thanks, Bill, and good morning. Barnes Group delivered expanded operating income and improved margins in each of our segments during the second quarter in a business environment which remains uncertain and cautious. We believe these conditions will prevail for an extended period of time, and we are adapting to the climate.
Revenues in the quarter were impacted by a number of factors, including foreign exchange loss, planned attrition of underperforming accounts in our Distribution business and an ongoing economic conditions.
However, we expect improved performance in the second half of 2012 based on our current orders trends and existing backlog.
Net sales of $293 million were down 2% from last year, although organic sales growth was up modestly.
In our 2 manufacturing segments, Aerospace and Industrial, we saw a 6% sequential growth and a 29% year-over-year growth in backlog. Total backlog for Barnes Group is now at a record $642 million, up more than $145 million from last year's second quarter.
Before my usual operating review, I would like to say a few words regarding our recently announced agreement to acquire Synventive Molding Solutions, our largest acquisition ever.
Please refer to Slide 2 of our earnings supplement. Synventive is a leading designer and manufacturer of highly engineered and customized solutions, components and services with a complex injection molding applications, and is an excellent strategic fit for Barnes Group. We expect global demand for Synventive's products and services to grow substantially in the future, adding a suite of products and solutions for customers, and this market is expected to speed our global growth and enhance our profitability. It possesses intellectual property-based capabilities, which provide us with an exceptional opportunity to establish a new growth platform, one that includes highly engineered solutions, a leading market position, a stronger global presence and solid profitability.
In addition, the teams and corporate cultures at both Barnes Group and Synventive are closely aligned, sharing the same values in terms of business practices, lean manufacturing techniques and technological innovations in the product, systems and services that we bring into market. Later in our prepared remarks, Chris will touch upon some of the additional details of this transaction.
Now turning our attention back to our second-quarter performance. In Aerospace, what we see reflects much of the same observations coming out of the recent Farnborough Air Show, as well as the recent commentary from several industry participants. Our Aerospace business reflects the general outlook for commercial aviation. Strong orders for our original equipment manufacturing business go back up 39% year-over-year to a record $526 million. This certainly telegraphs a stronger second half as the ramp-up in the aircraft production moves forward. We feel confident that commercial aircraft production over the next several years should show meaningful growth. Continued strong orders taken by aircraft manufacturers, along with the introduction of new aircraft technologies, provide additional data points to support this belief. We feel we're on the right aircraft platforms and we continue our efforts to secure additional content on both existing and future aircraft platforms.