Bristol, CT - Barnes Group Inc. reported financial results for the fourth quarter and full year 2013.
Fourth quarter 2013 net sales increased 13% to $291.1 million from $258.2 million in last year’s fourth quarter, driven by organic sales growth of 5% and sales contribution from the recently acquired Männer business. Income from continuing operations for the fourth quarter was $26.3 million, or $0.47 per diluted share, down 4% from $0.49 in the prior year period. On an adjusted basis, income from continuing operations was $0.57, up 14% from $0.50 per diluted share a year ago. Adjusted diluted earnings from continuing operations excludes the impact of short-term purchase accounting adjustments and transaction costs which were $7.3 million pre-tax, or $0.10 per diluted share in the fourth quarter of 2013 related to the Männer acquisition, and $0.8 million pre-tax, or $0.01 per diluted share in the fourth quarter of 2012 related to the Synventive acquisition.
For the full year, Barnes Group generated net sales of $1,092 million, up 18% from last year; organic sales growth was 4%. Income from continuing operations was $72.3 million, or $1.31 per diluted share, compared to $79.8 million, or $1.44 per diluted share in 2012. For 2013, income from continuing operations included $7.3 million pre-tax, or $0.10 per diluted share, of short-term purchase accounting adjustments and transaction costs related to the acquisition of Männer, $10.5 million pre-tax, or $0.12 per diluted share, of non-recurring CEO transition costs, and a tax charge of $16.4 million, or $0.30 per diluted share, 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. Income from continuing operations in 2012 included $5.9 million pre-tax, or $0.08 per diluted share, of short-term purchase accounting adjustments and acquisition transaction costs related to the acquisition of Synventive. Excluding these items, adjusted diluted earnings per share from continuing operations was $1.83 for 2013, up 20% from $1.52 for 2012.
A table reconciling 2012 and 2013 non-GAAP adjusted results presented in this release to our GAAP results is included at the end of this press release.
“2013 was a year of significant transformation for Barnes Group. With the disposition of our Distribution business and the addition of Männer, we’re squarely focused on driving growth and profitability through differentiated manufacturing and service capabilities,” said Patrick J. Dempsey, President and Chief Executive Officer of Barnes Group Inc. “The solid operational results achieved this year continue to validate the strategic plan that we’ve been executing. Our Aerospace segment is well positioned to deliver on a favorable OEM market and to take advantage of a recovering aerospace after-market. And our Industrial segment generated 4% organic sales growth and improved profitability in 2013,” added Dempsey. “As we exit 2013 with positive momentum, a record level of backlog, and favorable end-markets, we feel good about the prospects for continued profitable growth in 2014.”
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- Fourth quarter 2013 sales were $183.7 million, up 17% from $157.1 million in the same period last year. The increase was driven by organic sales growth of 4%, Männer’s sales contribution, and favorable foreign exchange of $1.4 million.
- Operating profit of $15.5 million for the fourth quarter of 2013 was down 4% from $16.2 million from the prior year period. Industrial operating profit in this year’s fourth quarter includes the impact of $7.3 million of short-term purchase accounting adjustments and transaction costs related to the Männer acquisition. Last year’s fourth quarter included $0.8 million of costs of a similar nature related to the acquisition of Synventive. Excluding these acquisition related expenses, adjusted operating profit at Industrial was $22.8M, up 34%, driven by the profit contribution of Männer, the profit impact of higher organic sales, and productivity improvements. Adjusted operating margin was 12.4%, up 160 bps from last year.
- Full year 2013 sales were $687.6 million, up 28% or $149.2 million over 2012. Organic sales increased by $22 million, while acquisition related sales from Synventive and Männer contributed $127 million.
- Full year 2013 operating profit was $71.9 million, up 46% from 2012 primarily benefiting from the profit contribution of the acquired Synventive and Männer businesses, the profit impact from increased organic sales, favorable pricing and productivity improvements. Operating profit in 2013 was negatively impacted by $7.3 million in short-term purchase accounting adjustments and transaction costs related to the Männer acquisition, and CEO transition costs of $6.6 million allocated to the segment during the first quarter of 2013. Last year, operating profit was negatively impacted by $5.9 million in short-term purchase accounting adjustments and transaction costs related to the Synventive acquisition. Excluding these items, adjusted operating margin increased to 12.5%, up 230 bps.
- Fourth quarter 2013 sales were $107.4 million, up 6% from $101.1 million in the same period last year. Sales growth in original equipment manufacturing (“OEM”) was partially offset by a decline in aftermarket spare parts sales while aftermarket repair and overhaul sales were essentially flat to last year.
- Operating profit of $18.6 million for the fourth quarter of 2013 was up 3% from the prior year period of $18.1 million. Operating profit benefited from the impact of higher OEM sales, lower employee related costs, primarily reduced incentive compensation, and the absence of an inventory valuation adjustment within the aftermarket repair and overhaul business taken last year, offset in part by lower aftermarket sales. Operating margin for the fourth quarter of 2013 was 17.3%, down 60 bps.
- Full year 2013 sales were $404.0 million, up 3% from $390.5 million in 2012. The increase was primarily from sales growth in the OEM, partially offset by declines in the aftermarket repair and overhaul and spare parts businesses.
- Full year 2013 operating profit decreased 11% to $51.3 million from $57.9 million last year. Operating profit benefited from higher sales in the OEM manufacturing business and lower employee related costs, primarily reduced incentive compensation. Operating profit was negatively impacted by an $8.6 million inventory valuation charge taken in the third quarter related to exchange engine parts within the aftermarket repair and overhaul business, the profit impact of lower sales in the highly profitable aftermarket RSP spare parts business, increased costs of new product introductions, and CEO transition costs of $3.9 million allocated to the segment during the first quarter of 2013. Full year operating margin decreased to 12.7%, down 210 bps. Excluding the impact of the allocated CEO transition costs, adjusted Aerospace operating margin was 13.7%.
- Aerospace backlog increased to a record $554 million at the end of 2013, up 1% over last year-end and up 9% from the third quarter of 2013.
- Interest expense increased $0.9 million to $13.1 million in 2013 primarily as a result of a higher average interest rate, offset in part by lower average borrowings for the year.
- The Company’s effective tax rate from continuing operations was 32.8% in 2013 compared with 13.5% in 2012. Included in the 2013 income tax is a charge of $16.4 million associated with the April 16, 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 2013 adjusted effective tax rate is 17.5%. The adjusted effective tax rate increase in 2013 versus last year’s rate was mainly due to a change in earnings attributable to higher-taxing jurisdictions, an increase in the Company’s effective tax rate in Sweden and the absence of several discrete foreign tax related items in 2012.
Barnes Group expects 2014 total revenue to grow 14% to 17%, 5% to 8% 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 $2.02 to $2.17 per diluted share. Excluding additional Männer short-term purchase accounting adjustments in 2014, adjusted diluted earnings per share from continuing operations are anticipated to be in the range of $2.15 to $2.30, up 18% to 26% from 2013’s adjusted diluted earnings per share of $1.83. Further, the Company expects capital expenditures of approximately $60 million and cash conversion to be approximately 100% of net income.
“Significant portfolio transformation, as well as organic investment within our existing businesses, is allowing us to deliver continued profitable growth,” said Christopher J. Stephens, Jr., Senior Vice President, Finance and Chief Financial Officer, Barnes Group Inc. “In addition, 2013’s financial performance and solid cash flow have allowed us to position our balance sheet to support this growth and to be ready for further growth investments and acquisition opportunities.”