Delivers Topline Growth and Improved Adjusted Operating Profit
& Margin
- Sales of $339 million, up 6% versus prior year period; Organic
Sales up 5%
- Operating Margin of 7.7%; Adjusted Operating Margin of 12.8%,
up 30 bps from a year ago
- GAAP EPS of $0.34; Adjusted EPS of $0.58, up 4% versus prior
year period
- Forecasts 2023 Organic Sales Growth of +7% to +9%
- Maintains 2023 Adjusted EPS Forecast of $2.15 to $2.30; Up 9%
to 16% from 2022 Adjusted EPS of $1.98
Barnes Group Inc. (NYSE: B), a global provider of highly
engineered products, differentiated industrial technologies, and
innovative solutions, today reported financial results for the
second quarter 2023.
“Barnes highest priorities remain delivering topline growth and
improving operational profitability driven by core business
execution and transformational initiatives”, said Thomas J. Hook,
President and Chief Executive Officer of Barnes. “During the second
quarter, we grew revenues, advanced margins, and generated higher
free cash flow as compared to a year ago. While significant work
remains to drive commercial and operational excellence, our efforts
to integrate our businesses, reduce complexity, and generate
enhanced profitability continue to unlock the value embedded in
Barnes,” added Hook.
Second Quarter 2023 Highlights
Second quarter 2023 net sales of $339 million were up 6%
compared to the prior year period, with organic sales (1)
increasing 5%. Foreign exchange had a modest positive impact of
approximately 0.5%. Operating income was $26.0 million versus a
loss of $28.2 million a year ago. Operating margin was 7.7%.
Excluding restructuring & transformation related charges and
acquisition transaction costs in the current year quarter, and a
goodwill impairment charge and restructuring charges a year ago,
adjusted operating income was $43.5 million, up 8%, and adjusted
operating margin was 12.8%, up 30 bps. Acquisition transaction
costs relate to the previously announced pending MB Aerospace
acquisition which is expected to close later this year.
Interest expense in the second quarter of 2023 was $6.5 million,
an increase of $3.2 million from the prior year due to a higher
average interest rate. Other Income was $2.9 million, an increase
of $2.5 million from last year, primarily driven by an increase in
non-operating pension income.
The Company’s effective tax rate in the second quarter of 2023
was 22.5% compared to -27.1% in the year ago period (22.8%
excluding the goodwill impairment charge) and 64.7% for the full
year 2022. The decrease in the second quarter 2023 effective tax
rate from the full year 2022 rate is primarily due to the absence
of a goodwill impairment charge incurred in 2022, which is not tax
deductible for book purposes.
Net income for the second quarter was $17.4 million, or $0.34
per share, compared to a loss of $39.6 million, or -$0.78 per
share, a year ago. On an adjusted basis, net income per share of
$0.58 was up 4% from $0.56 a year ago. Adjusted net income per
share in the second quarter of 2023 excludes $0.19 of restructuring
and transformation related charges and $0.05 of acquisition
transaction costs.
Year-to-date cash provided by operating activities was $42.5
million versus $8.5 million a year ago primarily due to lower paid
incentive compensation and a lower increase in working capital.
Free cash flow was a positive $20.9 million compared to a negative
$5.0 million last year. Capital expenditures were $21.6 million, an
increase of $8.1 million.
A table reconciling non-GAAP to GAAP financial measures,
including forward looking outlook information, is presented at the
end of this press release.
Segment Performance
Industrial
Second quarter sales were $217 million, up 2% from $212 million
in the prior year period. Organic sales increased approximately 2%
while favorable foreign exchange increased sales by approximately
1%. Operating profit was $9.4 million versus a loss of $48.7
million in the prior year period. Excluding restructuring and
transformation related charges of $13.4 million, adjusted operating
profit of $22.8 million was up 17% and adjusted operating margin of
10.5% was up 130 bps. Adjusted operating profit benefited from
positive pricing and favorable productivity.
Aerospace
Second quarter sales were $122 million, up 12% from $109 million
last year. Aerospace original equipment manufacturing (“OEM”) sales
increased 8%, while aftermarket sales increased 18%. Operating
profit was $16.6 million, down 19% from $20.6 million in the prior
year period. Excluding restructuring and transformation related
charges of $0.5 million and acquisition transaction costs of $3.6
million, adjusted operating profit of $20.7 million was flat versus
a year ago. Adjusted operating margin was 17.0%, down 190 bps from
a year ago. Adjusted operating profit and adjusted operating margin
were unfavorably impacted by productivity and product mix within
the OEM business, offset in part by the benefits of higher sales
volumes.
Aerospace OEM backlog was $805 million at the end of the second
quarter, up 2% sequentially from March 2023 and up 7% from a year
ago. The Company expects to convert approximately 50% of this
backlog to revenue over the next 12 months.
Balance Sheet and Liquidity
Barnes’ balance sheet and liquidity profile remain
well-positioned. The Company has liquidity of $75 million in cash
and $537 million available under the revolving credit facility,
subject to covenants which would have allowed $154 million under
our current credit agreements. With respect to the balance sheet,
our “Debt to EBITDA” ratio, as defined in our credit agreements,
was approximately 2.56 times at quarter end.
2023 Full Year Outlook
Barnes forecasts organic sales growth of 7% to 9% for 2023 with
adjusted operating margin in the range of 12.5% to 13.5%. Adjusted
earnings are expected to be in the range of $2.15 to $2.30 per
share, up 9% to 16% from 2022’s adjusted earnings of $1.98 per
share, consistent with our previous outlook. 2023 adjusted earnings
per share are anticipated to exclude $0.54 related to the
restructuring and transformation related activities announced to
date and $0.08 related to the pending MB Aerospace acquisition.
Capital expenditures are forecast to be approximately $50 million
and cash conversion to be approximately 100% of net income. The
adjusted effective tax rate for 2023 is expected to be between 24%
and 25%, a reduction from our prior view driven by a change in
geographic profit expectations. Aside from the acquisition
transaction costs noted in our adjusted earnings, our 2023 outlook
excludes any impacts from the pending MB Aerospace acquisition.
Conference Call Information
Barnes will conduct a conference call with investors to discuss
the second quarter 2023 results at 8:30 a.m. ET today, July 28,
2023. The public may access the conference through a live audio
webcast available on the Investor Relations section of Barnes’
website at www.onebarnes.com.
The conference is also available by direct dial at (888)
510-2379 in the U.S. or (646) 960-0691 outside of the U.S.;
Conference ID 1137078. 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, July 28, 2023, until 11:59
p.m. (ET) on Friday August 4, 2023, by dialing (647) 362-9199;
Conference ID 1137078.
Note:
(1) Organic sales growth represents the total reported sales
increase within the Company’s ongoing business less the impact of
foreign currency translation and acquisition and divestitures
completed in the preceding twelve months.
About Barnes
Barnes Group Inc. (NYSE: B) pioneers technologies to help change
the world. Leveraging world-class manufacturing capabilities and
market-leading engineering, we develop advanced processes,
automation solutions and applied technologies for industries
ranging from medical and personal care to mobility, packaging and
aerospace. Customers benefit from our integrated hardware and
software capabilities focused on improving the processing, control,
service and sustainability of engineered plastics, factory
automation technologies and precision components. For more
information, please visit www.onebarnes.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as
amended and 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," "continue," "will," "should," "may,"
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 risks and uncertainties include, among others:
the Company’s ability to manage economic, business and geopolitical
conditions, including rising interest rates, global price inflation
and shortages impacting the availability of materials; the duration
and severity of unforeseen events such as an epidemic or a
pandemic, including their impacts across our business on demand,
supply chains, operations and liquidity; failure to successfully
negotiate collective bargaining agreements or potential strikes,
work stoppages or other similar events; changes in market demand
for our products and services; rapid technological and market
change; the ability to protect and avoid infringing upon
intellectual property rights; challenges associated with the
introduction or development of new products or transfer of work;
higher risks in global operations and markets; the impact of
intense competition; the physical and operational risks from
natural disasters, severe weather events, and climate change which
may limit accessibility to sufficient water resources, outbreaks of
contagious diseases and other adverse public health developments;
acts of war, terrorism and other international conflicts; the
failure to achieve anticipated cost savings and benefits associated
with workforce reductions and restructuring actions; currency
fluctuations and foreign currency exposure; impacts from goodwill
impairment and related charges; 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; government-imposed sanctions, tariffs, trade
agreements and trade policies; changes or uncertainties in laws,
regulations, rates, policies or interpretations that impact the
Company’s business operations or tax status, including those that
address climate change, environmental, health and safety matters,
and the materials processed by our products or their end markets;
fluctuations in the pricing or availability of raw materials,
freight, transportation, energy, utilities and other items required
by our operations; labor shortages or other business interruptions
at transportation centers, shipping ports, our suppliers’
facilities or our facilities; disruptions in information technology
systems, including as a result of cybersecurity attacks or data
security breaches; the ability to hire and retain senior management
and qualified personnel; the ability to consummate the pending
acquisition of MB Aerospace Group Holdings Limited in a timely
manner or at all, including the ability to obtain required
regulatory approvals, the ability of the parties to satisfy other
conditions to the consummation of such acquisition, and the costs
and other conditions relating to the financing of such transaction;
the continuing impact of prior acquisitions and divestitures, and
any other future strategic actions, and our ability to achieve the
financial and operational targets set in connection with any such
actions; the ability to achieve social and environmental
performance goals; the outcome of pending and future litigation and
governmental proceedings; the impact of actual, potential or
alleged defects or failures of our products or third-party products
within which our products are integrated, including product
liabilities, product recall costs and uninsured claims; future
repurchases of common stock; future levels of indebtedness; the
impact of shareholder activism; 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
(LOSS) (Dollars in thousands, except per share data)
(Unaudited) Three months ended June 30, Six
months ended June 30,
2023
2022
% Change
2023
2022
% Change Net sales
$
338,984
$
321,268
5.5
$
674,341
$
633,651
6.4
Cost of sales
224,625
212,754
5.6
450,868
419,944
7.4
Selling and administrative expenses
88,350
68,507
29.0
174,180
142,587
22.2
Goodwill impairment charge
-
68,194
NM
-
68,194
NM
312,975
349,455
(10.4
)
625,048
630,725
(0.9
)
Operating income (loss)
26,009
(28,187
)
NM
49,293
2,926
1,584.7
Operating margin
7.7
%
-8.8
%
7.3
%
0.5
%
Interest expense
6,512
3,325
95.8
11,819
6,893
71.5
Other expense (income), net
(2,894
)
(403
)
618.1
(1,553
)
1,226
(226.7
)
Income (loss) before income taxes
22,391
(31,109
)
NM
39,027
(5,193
)
NM
Income taxes
5,039
8,443
(40.3
)
8,516
13,875
(38.6
)
Net income (loss)
$
17,352
$
(39,552
)
NM
$
30,511
$
(19,068
)
NM
Common dividends
$
8,099
$
8,081
0.2
$
16,195
$
16,192
0.0
Per common share: Net income (loss): Basic
$
0.34
$
(0.78
)
NM
$
0.60
$
(0.37
)
NM
Diluted
0.34
(0.78
)
NM
0.60
(0.37
)
NM
Dividends
0.16
0.16
-
0.32
0.32
-
Weighted average common shares outstanding: Basic
51,051,780
51,004,375
0.1
51,020,648
51,013,346
0.0
Diluted
51,225,545
51,004,375
0.4
51,245,163
51,013,346
0.5
NM - Not meaningful
BARNES GROUP INC. OPERATIONS
BY REPORTABLE BUSINESS SEGMENT (Dollars in thousands)
(Unaudited) Three months ended June 30, Six
months ended June 30,
2023
2022
% Change
2023
2022
% Change Net sales Industrial
$
216,971
$
212,115
2.3
$
435,079
$
423,787
2.7
Aerospace
122,015
109,153
11.8
239,272
209,864
14.0
Intersegment sales
(2
)
-
(10
)
-
Total net sales
$
338,984
$
321,268
5.5
$
674,341
$
633,651
6.4
Operating profit (loss) Industrial
$
9,429
$
(48,743
)
NM
$
13,962
$
(33,990
)
NM
Aerospace
16,580
20,556
(19.3
)
35,331
36,916
(4.3
)
Total operating profit (loss)
$
26,009
$
(28,187
)
NM
$
49,293
$
2,926
1,584.7
Operating margin
Change Change
Industrial
4.3
%
-23.0
%
2,730
bps.
3.2
%
-8.0
%
1,120
bps. Aerospace
13.6
%
18.8
%
(520
)
bps.
14.8
%
17.6
%
(280
)
bps. Total operating margin
7.7
%
-8.8
%
1,650
bps.
7.3
%
0.5
%
680
bps. NM - Not meaningful
BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
(Unaudited)
June 30, 2023
December 31, 2022
Assets Current assets Cash and cash equivalents
$
74,673
$
76,858
Accounts receivable
311,977
291,883
Inventories
294,872
283,402
Prepaid expenses and other current assets
85,395
80,161
Total current assets
766,917
732,304
Deferred income taxes
12,138
18,028
Property, plant and equipment, net
320,461
320,139
Goodwill
842,152
835,472
Other intangible assets, net
422,922
442,492
Other assets
76,089
65,295
Total assets
$
2,440,679
$
2,413,730
Liabilities and Stockholders' Equity Current
liabilities Notes and overdrafts payable
$
8,011
$
8
Accounts payable
144,137
145,060
Accrued liabilities
181,121
158,568
Long-term debt - current
1,487
1,437
Total current liabilities
334,756
305,073
Long-term debt
564,930
569,639
Accrued retirement benefits
44,852
54,352
Deferred income taxes
61,422
62,562
Long-term tax liability
21,714
39,086
Other liabilities
36,018
36,691
Total stockholders' equity
1,376,987
1,346,327
Total liabilities and stockholders' equity
$
2,440,679
$
2,413,730
BARNES GROUP INC. CONSOLIDATED STATEMENTS OF CASH
FLOWS (Dollars in thousands) (Unaudited)
Six months ended June 30,
2023
2022
Operating activities: Net income (loss)
$
30,511
$
(19,068
)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: Depreciation and amortization
46,913
44,861
(Gain) loss on disposition of property, plant and equipment
(180
)
47
Stock compensation expense
4,832
6,015
Non-cash goodwill impairment charge
-
68,194
Changes in assets and liabilities: Accounts receivable
(18,102
)
(30,232
)
Inventories
(9,743
)
(26,671
)
Prepaid expenses and other current assets
(5,183
)
(5,165
)
Accounts payable
(2,300
)
10,196
Accrued liabilities
16,745
(30,674
)
Deferred income taxes
779
(1,261
)
Long-term retirement benefits
(10,636
)
(1,871
)
Long-term tax liability
(13,029
)
(6,949
)
Other
1,860
1,097
Net cash provided by operating activities
42,467
8,519
Investing activities: Proceeds from disposition of
property, plant and equipment
149
92
Capital expenditures
(21,617
)
(13,523
)
Other
(722
)
(1,645
)
Net cash used by investing activities
(22,190
)
(15,076
)
Financing activities: Net change in other borrowings
7,775
(1,372
)
Payments on long-term debt
(112,927
)
(70,369
)
Proceeds from the issuance of long-term debt
101,208
80,000
Proceeds from the issuance of common stock
189
246
Common stock repurchases
-
(6,721
)
Dividends paid
(16,195
)
(16,192
)
Withholding taxes paid on stock issuances
(376
)
(154
)
Other
(3,764
)
(9,825
)
Net cash used by financing activities
(24,090
)
(24,387
)
Effect of exchange rate changes on cash flows
(466
)
(4,475
)
Decrease in cash, cash equivalents and restricted cash
(4,279
)
(35,419
)
Cash, cash equivalents and restricted cash at beginning of
period
81,128
111,909
Cash, cash equivalents and restricted cash at end of period
76,849
76,490
Less: Restricted cash, included in Prepaid expenses and
other current assets
(2,176
)
(2,122
)
Less: Restricted cash, included in Other assets
-
(2,090
)
Cash and cash equivalents at end of period
$
74,673
$
72,278
BARNES GROUP INC. RECONCILIATION OF NET CASH
PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW (Dollars
in thousands) (Unaudited) Six months ended
June 30,
2023
2022
Free cash flow: Net cash provided by operating
activities
$
42,467
$
8,519
Capital expenditures
(21,617
)
(13,523
)
Free cash flow(1)
$
20,850
$
(5,004
)
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 June
30, Six months ended June 30,
2023
2022
% Change
2023
2022
% Change SEGMENT RESULTS
Operating Profit (Loss) - Industrial Segment (GAAP)
$
9,429
$
(48,743
)
NM
$
13,962
$
(33,990
)
NM
Restructuring/reduction in force and transformation related
charges
13,351
55
25,461
359
Goodwill impairment charge
-
68,194
-
68,194
Operating Profit - Industrial Segment as adjusted
(Non-GAAP) (1)
$
22,780
$
19,506
16.8
$
39,423
$
34,563
14.1
Operating Margin - Industrial Segment (GAAP)
4.3
%
-23.0
%
2,730
bps.
3.2
%
-8.0
%
1,120
bps.
Operating Margin - Industrial Segment as adjusted
(Non-GAAP) (1)
10.5
%
9.2
%
130
bps.
9.1
%
8.2
%
90
bps.
Operating Profit - Aerospace Segment (GAAP)
$
16,580
$
20,556
(19.3
)
$
35,331
$
36,916
(4.3
)
Restructuring/reduction in force and transformation related
charges
545
71
2,314
425
Acquisition transaction costs
3,559
-
3,559
-
Operating Profit - Aerospace Segment as adjusted
(Non-GAAP) (1)
$
20,684
$
20,627
0.3
$
41,204
$
37,341
10.3
Operating Margin - Aerospace Segment (GAAP)
13.6
%
18.8
%
(520
)
bps.
14.8
%
17.6
%
(280
)
bps.
Operating Margin - Aerospace Segment as adjusted (Non-GAAP)
(1)
17.0
%
18.9
%
(190
)
bps.
17.2
%
17.8
%
(60
)
bps.
CONSOLIDATED
RESULTS Operating Income (Loss) (GAAP)
$
26,009
$
(28,187
)
NM
$
49,293
$
2,926
1,584.7
Restructuring/reduction in force and transformation related
charges
13,896
126
27,775
784
Acquisition transaction costs
3,559
-
3,559
-
Goodwill impairment charge
-
68,194
-
68,194
Operating Income as adjusted (Non-GAAP) (1)
$
43,464
$
40,133
8.3
$
80,627
$
71,904
12.1
Operating Margin (GAAP)
7.7
%
-8.8
%
1,650
bps.
7.3
%
0.5
%
680
bps.
Operating Margin as adjusted (Non-GAAP) (1)
12.8
%
12.5
%
30
bps.
12.0
%
11.3
%
70
bps.
Diluted Net Income (Loss) per Share (GAAP)
$
0.34
$
(0.78
)
NM
$
0.60
$
(0.37
)
NM
Restructuring/reduction in force and transformation related
charges
0.19
-
0.39
0.01
Acquisition transaction costs
0.05
-
0.05
-
Goodwill impairment charge
-
1.34
-
1.34
Diluted Net Income per Share as adjusted (Non-GAAP)
(1)
$
0.58
$
0.56
3.6
$
1.04
$
0.98
6.1
Full-Year 2022 Full-Year 2023 Outlook
Operating Margin (GAAP)
4.5
%
9.4
%
to
10.4
%
Restructuring/reduction in force and transformation related
charges
1.6
%
2.7
%
Acquisition transaction costs
-
0.4
%
Goodwill impairment charge
5.4
%
-
Operating Margin as adjusted (Non-GAAP) (1)
11.6
%
12.5
%
to
13.5
%
Diluted Net Income per Share (GAAP)
$
0.26
$
1.53
to
$
1.68
Restructuring/reduction in force and transformation related
charges
0.33
0.54
Acquisition transaction costs
-
0.08
Tax related CEO transition costs
0.06
-
Goodwill impairment charge
1.33
-
Diluted Net Income per Share as adjusted (Non-GAAP)
(1)
$
1.98
$
2.15
to
$
2.30
NM - Not meaningful
Notes:
(1) The Company has excluded the following from its "as
adjusted" financial measurements for 2023: 1) charges related to
restructuring/reduction in force actions at certain businesses and
business transformation costs (consulting fees related to
transformation initiatives), including $27.8M reflected within
operating profit ($13.9M in the second quarter) and ($1.1M)
reflected within other expense (income), net, for both the
year-to-date and quarter-to-date periods and 2) acquisition
transaction costs related to the planned acquisition of MB
Aerospace. The Company has excluded the following from its "as
adjusted" financial measurements for 2022: 1) charges related to
restructuring actions at certain businesses and 2) the goodwill
impairment charge recorded in the second quarter of 2022 related to
the Automation reporting unit. The tax effects of the restructuring
actions and acquisition actions were calculated based on the
respective tax jurisdictions and ranged from approximately 15% to
approximately 30%. The goodwill impairment charge did not have a
tax effect as it is not deductible for book purposes. 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.
Category: Earnings
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230728407680/en/
Investors: Barnes Group Inc. William Pitts Vice
President, Investor Relations 860.583.7070
Barnes (NYSE:B)
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