BRISTOL, Conn. -- Barnes Group Inc. reported financial results for the second quarter 2012. Net sales decreased 2 percent to $293.4 million from $297.8 million in the second quarter of 2011. Organic sales were up 1 percent in the quarter, offset by a 3 percent negative impact from foreign exchange. Income from continuing operations for the second quarter was up 9 percent to $24.8 million, or $0.45 per diluted share, from $22.7 million, or $0.41 per diluted share, a year earlier.
“Although the ongoing economic environment remains uncertain, we nonetheless generated solid year-over-year earnings per share and order growth in the quarter, while total backlog rose to another record level,” said Gregory F. Milzcik, Barnes Group Inc. President and Chief Executive Officer. “Even with modest organic sales growth in the quarter, Barnes Group expanded operating margins in each of its segments.”
($ millions; except per share data) |
| Three months ended June 30, |
| Six months ended June 30, | ||||||||||||||||||||
Unaudited | 2012 |
|
| 2011 |
|
| Change | 2012 |
|
| 2011 |
|
| Change | ||||||||||
Net Sales | $293.4 |
| $297.8 |
| ($4.4) |
| (1.5) |
| % | $596.5 |
| $587.4 |
| $9.1 |
| 1.5 |
| % | ||||||
Operating Income | $34.1 | $33.8 | $0.4 | 1.0 | % | $67.1 | $64.5 | $2.6 | 4.1 | % | ||||||||||||||
% of Sales | 11.6 | % | 11.3 | % | 0.3 | pts. | 11.3 | % | 11.0 | % | 0.3 | pts. | ||||||||||||
Income from Continuing Operations | $24.8 | $22.7 | $2.1 | 9.1 | % | $47.8 | $42.9 | $4.8 | 11.3 | % | ||||||||||||||
Net Income | $24.8 | $22.3 | $2.5 | 11.2 | % | $47.0 | $41.4 | $5.6 | 13.6 | % | ||||||||||||||
| ||||||||||||||||||||||||
Income from Continuing Operations Per Diluted Share | $0.45 | $0.41 | $0.04 | 9.8 | % | $0.86 | $0.77 | $0.09 | 11.7 | % | ||||||||||||||
| ||||||||||||||||||||||||
Loss from Discontinued Operations Per Diluted Share | $0.00 | ($0.01) | $0.01 | ($0.01) | ($0.03) | $0.02 | ||||||||||||||||||
| ||||||||||||||||||||||||
Net Income Per Diluted Share |
| $0.45 |
|
| $0.40 |
|
| $0.05 |
| 12.5 |
| % |
| $0.85 |
|
| $0.74 |
|
| $0.11 |
| 14.9 |
| % |
| ||||||||||||||||||||||||
Aerospace
- Aerospace net sales of $93.8 million were down $1.0 million, or 1 percent, from last year’s second quarter. A slight increase in Aerospace original equipment manufacturing sales and continued strong levels of aftermarket repair and overhaul sales were more than offset by a sales decline in aftermarket spare parts.
- Operating profit decreased 1 percent to $14.7 million driven by the profit impact of lower sales volumes and a shift in mix. Operating margin improved slightly to 15.7 percent, versus 15.6 percent last year.
Industrial
- Industrial net sales of $110.2 million were down $3.8 million, or 3 percent compared to the second quarter of 2011. Organic sales increased by $2.7 million, or 2 percent during the quarter, but were more than offset by the unfavorable foreign exchange impact of $6.5 million.
- Operating profit increased 2 percent to $11.2 million, as a result of the profit impact from higher organic sales at some of the Industrial businesses and lower incentive compensation costs, partially offset by increased pension costs. Operating margins improved 60 basis points to 10.2 percent as the Company continues its focus on margin expansion.
Distribution
- Distribution net sales were $91.9 million, up slightly from the second quarter of 2011. Organic sales improved by $1.0 million, while foreign exchange negatively impacted sales by $0.9 million.
- Operating profit increased 3 percent from last year, to $8.2 million. Operating margins improved 20 basis points to 8.9 percent due to lower incentive compensation expense and higher productivity, partially offset by higher pension costs.
Additional Information
- Interest expense of $2.4 million was relatively flat compared to the second quarter of 2011. During the quarter, the Company entered into five-year interest rate swap agreements which converted the interest on the first $100 million of the Company's one-month LIBOR based borrowings from a variable rate to a fixed rate.
- The Company’s effective tax rate for the second quarter of 2012 was 21.5 percent, compared to 26.9 percent in the second quarter of 2011. Last year’s second quarter effective tax rate included the recognition of $1.8 million of discrete tax expense related to tax adjustments for earlier years.
Updated 2012 Outlook
- Barnes Group is updating its 2012 guidance, which excludes the impact of the announced Synventive acquisition. The Company now expects lower revenue growth of 3 to 5 percent due to the impact of foreign exchange and lower aerospace spare parts sales in the first half of the year. Operating margins are forecasted to be approximately 12 percent, while earnings from continuing operations per diluted share are now expected to be in the range of $1.78 to $1.88, up 9 to 15 percent from 2011.
Announced Synventive Acquisition
On July 16, 2012 the Company announced it had entered into an agreement to acquire privately held Synventive Molding Solutions, a leading designer and manufacturer of highly engineered and customized solutions, components, and services, for complex injection molding applications. Milzcik added, “Synventive is an excellent strategic fit for Barnes Group. It possesses intellectual property based capabilities that provide us with an exceptional opportunity to establish a new growth platform; one that includes highly engineered solutions, a leading market position, a strong global presence and solid profitability.”
The Synventive acquisition is expected to be dilutive to 2012 earnings per share due to the impact of purchase accounting and accretive in 2013. The transaction is expected to be financed with cash on hand and additional borrowings under the Company’s credit agreement and is anticipated to close in August 2012.
Conference Call
Barnes Group Inc. will conduct a conference call with investors to discuss second quarter 2012 results at 8:30 a.m. EST today, July 27, 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) 679-8018 in the U.S. or (617) 213-4845 outside of the U.S. (request the Barnes Group Earnings Call), Participant Code: 60265170.
In addition, the call will be recorded and available for playback beginning at 12:00 p.m. (EST) on Friday, July 27, 2012 by dialing (617) 801-6888, Passcode: 31238588.
About Barnes Group
Founded in 1857, Barnes Group Inc. (NYSE:B) is an international aerospace and industrial manufacturing and service provider, serving a wide range of end markets and customers. The products and services provided by Barnes Group are used in far-reaching applications that provide transportation, communication, manufacturing and technology to the world. Barnes Group’s approximately 4,400 dedicated employees, at more than 50 locations worldwide, are committed to achieving consistent and sustainable profitable growth. For more information, visit www.BGInc.com.
