Bristol, CT - Barnes Group Inc., an international aerospace and industrial manufacturer and service provider, reported financial results for the third quarter of 2013. Net sales from continuing operations increased 16% to $269.5 million from $232.5 million in the third quarter of 2012, driven by the sales contribution of the Synventive business and organic sales growth of 5%.
Income from continuing operations for the third quarter was $21.4 million, or $0.39 per diluted share, up 30% from $0.30 in the prior year period. On an adjusted basis, income from continuing operations was up 8% from $0.36 per diluted share a year ago. Last year’s adjusted diluted earnings from continuing operations excluded the impact of $5.1 million pre-tax, or $0.06 per diluted share, of short-term purchase accounting adjustments and transaction costs related to the acquisition of Synventive. A table reconciling the 2012 non-GAAP adjusted results presented in this release to our GAAP results is included at the end of this press release. In the current quarter, income from continuing operations includes an $8.6 million pre-tax inventory valuation charge related to exchange engine parts within the Aerospace repair and overhaul business.
On October 1, 2013 the Company announced it had entered into a definitive agreement to acquire privately held Männer, a leader in high precision mold-making, valve gate hot runner systems, and system solutions for the medical/pharmaceutical, packaging, and personal care/health care industries. The acquisition is anticipated to close on October 31, 2013. Following the closing, Männer will operate as a business unit within Barnes Group’s Industrial Segment.
“During the third quarter we continued to execute our growth strategy of focusing on differentiated products and processes. We announced the pending acquisition of Männer, a recognized brand name and premium supplier of complex, highly-engineered molds and hot runner systems. Männer’s end markets are a good complement to those of our existing industrial businesses” said Patrick J. Dempsey, President and Chief Executive Officer of Barnes Group Inc. “Additionally, we delivered strong performance in our Industrial segment and solid sales growth in our Aerospace OEM business, while our results in the Aerospace aftermarket did not meet our expectations,” continued Dempsey.
| ($ millions; except per share data) | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
| Unaudited | 2013 | 2012 | Change | 2013 | 2012 | Change | ||||||||||||||||||||||||
| Net Sales | $269.5 | $232.5 | $37.0 | 15.9 | % | $800.4 | $670.6 | $129.9 | 19.4 | % | ||||||||||||||||||||
| Operating Income | $28.0 | $22.5 | $5.5 | 24.7 | % | $89.1 | $72.9 | $16.3 | 22.3 | % | ||||||||||||||||||||
| % of Sales | 10.4 | % | 9.7 | % | 0.7 | pts. | 11.1 | % | 10.9 | % | 0.2 | pts. | ||||||||||||||||||
| Income from Continuing Operations | $21.4 | $16.0 | $5.4 | 33.4 | % | $46.0 | $53.1 | ($7.1) | (13.4) | % | ||||||||||||||||||||
| Net Income | $20.9 | $18.5 | $2.4 | 13.1 | % | $243.7 | $65.5 | $178.2 | NM | |||||||||||||||||||||
| Income from Continuing Operations Per Diluted Share | $0.39 | $0.30 | $0.09 | 30.0 | % | $0.84 | $0.97 | ($0.13) | (13.4) | % | ||||||||||||||||||||
| (Loss) Income from Discontinued Operations Per Diluted Share | ($0.01) | $0.04 | ($0.05) | NM | $3.60 | $0.22 | $3.38 | NM | ||||||||||||||||||||||
| Net Income Per Diluted Share | $0.38 | $0.34 | $0.04 | 11.8 | % | $4.44 | $1.19 | $3.25 | NM | |||||||||||||||||||||
| NM = Not Meaningful | ||||||||||||||||||||||||||||||
Aerospace
- Third quarter 2013 sales were $101.7 million, up 3% from $98.4 million in the same period last year. A sales increase in original equipment manufacturing (“OEM”) was partially offset by declines in aftermarket repair and overhaul and spare parts sales.
- Operating profit of $7.2 million for the third quarter of 2013 was down 49% from the prior year period of $14.1 million. Operating profit benefited from the impact of higher OEM sales and lower employee related costs, offset by an $8.6 million inventory valuation charge related to exchange engine parts within the aftermarket repair and overhaul business, lower aftermarket sales, and higher new product introduction costs to support future growth programs.
Industrial
- Third quarter 2013 sales were $167.7 million, up 25% from $134.1 million in the same period last year. The increase was driven by Synventive’s sales contribution, organic sales growth of 6%, and favorable foreign exchange of $0.5 million.
- Operating profit of $20.9 million for the third quarter of 2013 was up $12.5 million from the prior year period driven by the profit contribution of Synventive, the profit impact of higher organic sales, and productivity improvements. During the 2012 period, operating profit was negatively impacted by $5.1 million of short-term purchase accounting adjustments and transaction costs related to the acquisition of Synventive.
Additional Information
- Interest expense decreased to $2.4 million, down from $3.2 million in the prior year period primarily as a result of lower average borrowings in the current quarter as a portion of the proceeds from the Barnes Distribution North America sale were used to reduce debt.
- The Company’s effective tax rate from continuing operations for the third quarter of 2013 was 15.8% compared with 12.7% in the third quarter of 2012 and 13.5% for full year 2012. The effective tax rate increase in the third quarter 2013 versus the full year 2012 rate was mainly due to several discrete foreign tax related items in 2012 and an increase in the Company’s effective tax rate in Sweden, partially offset by a projected change in earnings attributable to higher-taxing jurisdictions.
Updated 2013 Outlook
Barnes Group is updating its 2013 guidance, which excludes the future impact of the announced Männer acquisition. The Company now expects 2013 revenue from continuing operations to grow approximately 16% 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 12.5% to 13.0% for 2013. GAAP earnings per diluted share from continuing operations are anticipated to be in the range of $1.33 to $1.38.
Full-Year 2013 adjusted earnings per diluted share from continuing operations are anticipated to be in the range of $1.75 to $1.80, up 15% to 18% from 2012’s adjusted diluted earnings per share from continuing operations of $1.52. Adjusted earnings per share from continuing operations exclude the non-recurring CEO transition costs ($0.12 per share) and the tax charge as a result of the U.S. Tax Court’s unfavorable ruling ($0.30 per share).
As a result of the Tax Court decision, the Company expects cash flows to be negatively impacted by approximately $13 million in the fourth quarter of 2013. Excluding this item and the impact from the sale of BDNA, 2013 adjusted cash conversion is anticipated to be greater than 100% of net income.
