Bristol, CT - Barnes Group Inc. reported financial results for the first quarter 2014. Net sales increased 18% to $312.1 million from $263.5 million in the first quarter of 2013, driven by organic sales growth of 4% and the sales contribution from the recently acquired Männer business. Income from continuing operations for the first quarter was $22.8 million, or $0.41 per diluted share, up 46% from $0.28 in the prior year period. On an adjusted basis, income from continuing operations was $0.50 per diluted share, up 25% from $0.40 a year ago. First quarter 2014 adjusted diluted earnings from continuing operations exclude the impact of Männer short-term purchase accounting adjustments of $4.9 million pre-tax, or $0.06 per diluted share, and costs related to the close of production operations at Associated Spring’s Saline, Michigan facility which were $2.8 million pre-tax, or $0.03 per diluted share. For the first quarter 2013, adjusted diluted earnings from continuing operations exclude $10.5 million pre-tax, or $0.12 per diluted share, of non-recurring CEO transition costs.
A table reconciling 2013 and 2014 non-GAAP adjusted results presented in this release to our GAAP results is included at the end of this press release.
“Barnes Group’s first quarter performance positions us well for continued profitable growth in 2014,” said Patrick J. Dempsey, President and Chief Executive Officer of Barnes Group Inc. “Our individual businesses had varied starts to the year, yet overall results were solid. Aerospace delivered 10% organic sales growth, and while Industrial’s organic sales were essentially flat, organic orders exceeded 7%. Additionally, the acquired Männer business delivered an excellent quarter. The first quarter performance allows us to affirm our 2014 continuing operations outlook while tightening the expectation towards the top end of the range,” added Dempsey.
| ($ millions; except per share data) | Three months ended March 31, | ||||||||||||||
| Unaudited | 2014 | 2013 | Change | ||||||||||||
| Net Sales | $312.1 | $263.5 | $48.6 | 18.4 | % | ||||||||||
| Operating Income | $35.1 | $25.0 | $10.2 | 40.7 | % | ||||||||||
| % of Sales | 11.3 | % | 9.5 | % | 1.8 | pts. | |||||||||
| Income from Continuing Operations | $22.8 | $15.4 | $7.3 | 47.4 | % | ||||||||||
| Net Income | $22.8 | $13.5 | $9.3 | 68.9 | % | ||||||||||
| Income from Continuing Operations Per Diluted Share | $0.41 | $0.28 | $0.13 | 46.4 | % | ||||||||||
Loss from Discontinued Operations Per Diluted Share | $0.00 | ($0.04) | $0.04 | NM | |||||||||||
| Net Income Per Diluted Share | $0.41 | $0.24 | $0.17 | 70.8 | % | ||||||||||
| NM = Not Meaningful | |||||||||||||||
Industrial
- First quarter 2014 sales were $203.9 million, up 23% from $165.5 million in the same period last year. The Männer business, acquired in October 2013, provided $38 million of the sales increase while favorable foreign exchange provided $0.8 million. Industrial’s organic sales were flat to the prior year period.
- Operating profit of $19.4 million in the first quarter was up 33% from $14.6 million from the prior year period. Operating profit benefited from the profit contribution of Männer and was partially offset by $4.9 million of Männer short-term purchase accounting adjustments and $2.8 million of pre-tax restructuring charges related to the closure of production operations at a facility in Saline, Michigan. Last year’s first quarter included CEO transition costs of $6.6 million that were allocated to the segment. Excluding the acquisition related expenses and the Saline closure costs this year, and the CEO transition costs last year, adjusted operating profit was $27.0 million, up 27%. Adjusted operating margin was 13.3%, up 50 bps from last year’s adjusted operating margin.
Aerospace
- First quarter 2014 sales were $108.2 million, up 10.4% from $98.0 million in the same period last year. Sales increases in the original equipment manufacturing ("OEM") and aftermarket repair and overhaul ("MRO") businesses were partially offset by lower sales in the spare parts business.
- Operating profit of $15.8 million for the first quarter of 2014 was up 52% from the prior year period of $10.3 million. Operating profit benefited from the profit contributions of increased sales in the OEM and MRO businesses, partially offset by lower profits in the spare parts business. Operating margin increased 400 bps from 10.6% in the 2013 period to 14.6% in the 2014 period. Operating profit during the first quarter of 2013 included CEO transition costs of $3.9 million that were allocated to the segment. Excluding this item, operating profit was up 11% and operating margin was up 10 bps from last year’s adjusted results.
- Aerospace backlog was $551 million at the end of the first quarter, up 1% year-over-year, and down 1% from 2013 year-end.
Additional Information
- Interest expense decreased $1.0 million to $3.3 million in 2014 primarily as a result of lower average borrowings for the quarter.
- The Company's effective tax rate from continuing operations for the first quarter of 2014 was 27.9% compared with 21.4% in the first quarter of 2013 and 32.8% for the full year 2013. Included in the 2013 income tax is a charge of $16.4 million associated with the April 2013 U.S. Tax Court’s unfavorable decision arising out of an IRS audit for the tax years 2000 through 2002. Excluding this charge, the full year 2013 adjusted effective tax rate was 17.5%. The effective tax rate increase in 2014 over the adjusted full year 2013 rate is due to a projected mix of earnings attributable to higher-taxing jurisdictions, the expiration of certain tax holidays, and the increase in planned repatriation of a portion of current foreign earnings to the U.S.
2014 Updated Outlook
Barnes Group now expects 2014 total revenue to grow 14% to 17%, 4% to 7% on an organic basis, and forecasts adjusted operating margins in the range of 14.5% to 15.5%. GAAP earnings from continuing operations are expected to be in the range of $1.98 to $2.08 per diluted share. Excluding Männer short-term purchase accounting adjustments and the Saline closure costs, adjusted diluted earnings per share from continuing operations are anticipated to be in the range of $2.20 to $2.30, up 20% to 26% from 2013’s adjusted diluted earnings per share of $1.83. Further, the Company continues to expect capital expenditures of approximately $60 million and cash conversion to be approximately 100% of net income.
