Barnes Group Inc. Reports First Quarter 2013 Financial Results

  Barnes Group Inc. Reports First Quarter 2013 Financial Results

  *Quarterly Net Sales from Continuing Operations of $264 million, up 18%
  *Quarterly Operating Margin of 9.5%; up 250 bps to 13.5% on an Adjusted
    Basis
  *Quarterly Diluted EPS from Continuing Operations down 13% to $0.28;
    Adjusted Quarterly Diluted EPS from Continuing Operations up 25% to $0.40
  *2013 EPS from Continuing Operations Guidance Updated to $1.71 to $1.86 per
    diluted share; Up 20% to 30% to $1.83 to $1.98 on an Adjusted Basis

Business Wire

BRISTOL, Conn. -- April 26, 2013

Barnes Group Inc. (NYSE: B), an international aerospace and industrial
manufacturer and service provider, today reported financial results for the
first quarter of 2013. Net sales from continuing operations increased 18% to
$263.5 million from $222.8 million in the first quarter of 2012, driven by the
sales contribution of the Synventive business. Income from continuing
operations for the first quarter was down 12% to $15.4 million, or $0.28 per
diluted share, from $17.6 million, or $0.32 per diluted share, a year ago.
Income from continuing operations in the current quarter included $10.5
million pre-tax, or $0.12 per diluted share, of non-recurring CEO transition
costs associated with the modification of outstanding equity awards granted to
the Company’s former President & CEO. Excluding this item, adjusted diluted
earnings per share from continuing operations was $0.40 for the first quarter
of 2013, up 25% from last year. A table reconciling the non-GAAP adjusted
results presented in this release to our GAAP results is included at the end
of this press release.

“Barnes Group delivered a solid first quarter of performance to begin the
year,” said Patrick J. Dempsey, President and Chief Executive Officer of
Barnes Group Inc. “We’ve continued to drive margin expansion through the
successful execution of our corporate strategy to deliver sustainable
profitable growth.” Dempsey continued, “As we realign into two business
segments, we are excited about the intensified focus on our manufacturing and
engineering capabilities and the opportunity to accelerate our pipeline of
growth initiatives and new product introductions. Building on this positive
momentum, we expect continued sales and profitability expansion for the year.”

                              
($ millions; except per share  Three months ended March 31,
data)
Unaudited                       2013       2012      Change
                                                                       
Net Sales                       $263.5      $222.8     $40.8     18.3     %
                                                                          
Operating Income                $25.0       $24.6      $0.3      1.4      %
% of Sales                      9.5     %   11.0   %             (1.5)    pts.
                                                                          
Income from Continuing          $15.4       $17.6      ($2.2)    (12.3)   %
Operations
                                                                          
Net Income                      $13.5       $22.2      ($8.7)    (39.3)   %
                                                                          
Income from Continuing          $0.28       $0.32      ($0.04)   (12.5)   %
Operations Per Diluted Share
                                                                          
(Loss) Income from
Discontinued Operations Per     ($0.04)     $0.08      ($0.12)
Diluted Share
                                                                          
Net Income Per Diluted Share   $0.24     $0.40    ($0.16)  (40.0)  %

Aerospace

  *First quarter 2013 sales were $98.0 million, up 1% from $97.3 million in
    the same period last year. An increase in aerospace original equipment
    manufacturing (“OEM”) sales was largely offset by declines in aftermarket
    repair and overhaul and spare parts sales.
  *Operating profit of $10.3 million for the first quarter of 2013 was down
    18% from the prior year period of $12.7 million. The decrease was driven
    by non-recurring CEO transition costs of $3.9 million allocated to the
    segment. The profit benefit of higher sales in the OEM business was
    partially offset by the profit detriment of lower sales in the aftermarket
    repair and overhaul and spare parts businesses. Excluding the CEO
    transition costs, adjusted operating margin in the quarter was 14.5%, up
    150 bps.

Industrial

  *First quarter 2013 sales were $165.5 million, up 32% from $125.5 million
    in the same period last year. The increase was driven by Synventive’s
    sales contribution in the current quarter. Organic sales, which benefited
    from favorable pricing, increased by 1%. Foreign exchange was an
    unfavorable 1%.
  *Operating profit of $14.6 million for the first quarter of 2013 increased
    $2.6 million from last year driven by the profit contribution of the
    Synventive business, productivity improvements, and favorable pricing.
    These benefits were partially offset by non-recurring CEO transition costs
    of $6.6 million allocated to the segment. Excluding the CEO transition
    costs, adjusted operating margin in the quarter was 12.8%, up 330 bps.

Additional Information

  *Interest expense increased $2.0 million from 2012, to $4.4 million,
    primarily as a result of higher borrowings which were used to fund the
    acquisition of Synventive.
  *The Company’s effective tax rate from continuing operations for the first
    quarter of 2013 was 21.4% compared with 17.8% in the first quarter of 2012
    and 13.5% for full year 2012. The increase in the first quarter 2013
    effective tax rate versus the full year 2012 rate was mainly due to
    several discrete foreign tax related items in 2012, an increase in the
    Company’s effective tax rate in Sweden, and a projected mix of earnings
    attributable to higher-taxing jurisdictions.

Updated 2013 Outlook

Barnes Group now expects 2013 revenue from continuing operations to grow 17%
to 20% from 2012. GAAP Earnings per diluted share from continuing operations
are anticipated to be in the range of $1.71 to $1.86. This guidance includes
the impacts from the sale of Barnes Distribution North America which closed on
April 22, 2013, and the Company’s previously announced CEOtransition.

Excluding $10.5 million pre-tax, or $0.12 per share, in non-recurring costs
associated with the Company’s CEO transition, adjusted operating margins are
expected to be approximately 14%. Adjusted earnings per diluted share are
anticipated to be in the range of $1.83 to $1.98, up 20% to 30% from 2012’s
adjusted diluted earnings per share from continuing operations of $1.52.

On April 16, 2013, the U.S. Tax Court rendered an unfavorable decision against
the Company, rejecting the Company’s objections to a $16.5 million tax
adjustment arising out of an IRS audit for the tax years 2000 through 2002 and
imposing penalties. The Company is currently evaluating its options, including
appealing the decision. The Company’s guidance does not include any impact on
expected earnings or cash flows as a result of the court’s decision.

The Company expects cash flows to be negatively impacted by approximately $13
million in the third quarter of 2013 as a result of the decision. In addition,
in the second quarter of 2013, following the Company’s evaluation, the Company
could record an income tax charge of up to approximately $20 million and a
reduction in its deferred tax assets to reflect the utilization of a portion
of the Company’s net operating loss carryforwards.

Conference Call

Barnes Group Inc. will conduct a conference call with investors to discuss
first quarter 2013 results at 8:30 a.m. EDT today, April 26, 2013. 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: 98096483.

In addition, the call will be recorded and available for playback beginning at
12:00 p.m. (EDT) on Friday, April 26, 2013 by dialing (617) 801-6888,
Passcode: 54181297.

About Barnes Group

Founded in 1857, Barnes Group Inc. (NYSE: B) is an international aerospace and
industrial manufacturer 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 3,700
dedicated employees, at more than 60 locations worldwide, are committed to
achieving consistent and sustainable profitable growth. For more information,
visit www.BGInc.com.

Forward-Looking Statements

This press release contains certain forward-looking statements as defined in
the Private Securities Litigation Reform Act of 1995. Forward-looking
statements are made based upon management's good faith expectations and
beliefs concerning future developments and their potential effect upon the
Company and can be identified by the use of words such as "anticipated,"
"believe," "expect," "plans," "strategy," "estimate," "project," and other
words of similar meaning in connection with a discussion of future operating
or financial performance. 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. The risks and uncertainties
described in our periodic filings with the Securities and Exchange Commission
(“SEC”) include, among others, uncertainties arising from the current or
worsening conditions in financial markets; future financial performance of the
industries or customers that we serve; changes in market demand for our
products and services; inability to realize expected sales or profits from
existing backlog; integration of acquired businesses; restructuring costs or
savings; the impact of the divestiture of the Barnes Distribution North
America business to MSC Industrial Direct Co., Inc.; the impact of the
acquisition in 2012 of the Synventive Molding Solutions business; the impact
of the divestiture in 2011 of our Barnes Distribution Europe businesses; and
any other future strategic actions, including acquisitions, joint ventures,
divestitures, restructurings, or strategic business realignments, and our
ability to achieve the financial and operational targets set in connection
with any such actions; introduction or development of new products or transfer
of work; changes in raw material or product prices and availability; foreign
currency exposure; our dependence upon revenues and earnings from a small
number of significant customers; a major loss of customers; the impact of the
U.S. Tax Court's unfavorable decision related to an IRS audit for the tax
years 2000 through 2002 rendered on April 16, 2013; the outcome of pending and
future claims or litigation or governmental, regulatory proceedings,
investigations, inquiries, and audits; uninsured claims and litigation;
outcome of contingencies; future repurchases of common stock; future levels of
indebtedness; numerous other matters of global, regional or national scale,
including those of a political, economic, business, competitive,
environmental, regulatory and public health nature; and other risks and
uncertainties described more fully in documents filed with or furnished to the
SEC by the Company, including the Management's Discussion and Analysis of
Financial Condition and Results of Operations and Risk Factors sections of the
Company's filings with the SEC. The Company assumes no obligation to update
our forward-looking statements.


BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
                                                                
                                  Three months ended March 31,
                                   2013           2012 ^(1)     % Change 
                                                                    
Net sales                         $ 263,545        $ 222,795        18.3
                                                                    
Cost of sales                       177,715          160,421        10.8
Selling and administrative         60,875         37,756        61.2
expenses
                                                                    
                                   238,590        198,177       20.4
                                                                    
Operating income                    24,955           24,618         1.4
                                                                    
Operating margin                    9.5        %     11.0       %
                                                                    
Interest expense                    4,357            2,368          84.0
Other expense (income), net        966            859           12.5
                                                                    
Income from continuing              19,632           21,391         (8.2     )
operations before income taxes
                                                                    
Income taxes                       4,199          3,801         10.5
                                                                    
Income from continuing              15,433           17,590         (12.3    )
operations
                                                                    
(Loss) income from discontinued     (1,961     )     4,617          NM
operations, net of income taxes
                                                  
Net income                        $ 13,472        $ 22,207        (39.3    )
                                                                    
Common dividends                  $ 5,443         $ 5,459         (0.3     )
                                                                    
Per common share:
                                                                    
Basic:
Income from continuing            $ 0.29           $ 0.33           (12.1    )
operations
(Loss) income from discontinued    (0.04      )    0.08          NM
operations, net of income taxes
Net income                        $ 0.25          $ 0.41          (39.0    )
                                                                    
Diluted:
Income from continuing            $ 0.28           $ 0.32           (12.5    )
operations
(Loss) income from discontinued    (0.04      )    0.08          NM
operations, net of income taxes
Net income                        $ 0.24          $ 0.40          (40.0    )
                                                                    
Dividends                           0.10             0.10           -
                                                                    
Weighted average common shares
outstanding:
Basic                               54,739,465       54,805,636     (0.1     )
Diluted                             55,524,560       55,455,579     0.1
                                                                    
NM - Not Meaningful
                                                                    

Notes:
(1) Results for 2012 have been adjusted on a retrospective basis to reflect
the BDNA discontinued operations.


BARNES GROUP INC.
OPERATIONS BY REPORTABLE BUSINESS SEGMENT
(Dollars in thousands)
(Unaudited)
                                                               
                         Three months ended March 31,
                          2013        2012 ^(1)    % Change 
Net sales
                                                                    
Aerospace                $ 98,045      $ 97,250        0.8
                                                                    
Industrial                 165,502       125,545       31.8
                                                                    
Intersegment sales        (2      )    -            NM
                                                                    
Total net sales          $ 263,545    $ 222,795      18.3
                                                                    
Operating profit
                                                                    
Aerospace                $ 10,346      $ 12,654        (18.2    )
                                                                    
Industrial                14,609      11,964       22.1
                                                                    
Total operating profit   $ 24,955     $ 24,618       1.4
                                                                    
Operating margin                                       Change
                                                                    
Aerospace                  10.6    %     13.0      %   (240     )   bps.
                                                                    
Industrial                8.8     %    9.5       %   (70      )   bps.
                                                                    
Total operating margin     9.5     %     11.0      %   (150     )   bps.
                                                                    
NM - Not Meaningful
                                                                    

Notes:
(1) Results for 2012 have been adjusted on a retrospective basis to reflect
the impact of the BDNA discontinued operations, including a reallocation of
corporate overhead expenses, and the segment realignment.


BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
                                                        
                                                           
                                             March 31,     December 31,
                                             2013          2012
Assets
Current assets
Cash and cash equivalents                    $ 99,872      $  86,356
Accounts receivable                            226,744        253,202
Inventories                                    179,142        226,220
Deferred income taxes                          12,968         33,906
Assets held for sale                           241,311        -
Prepaid expenses and other current assets     17,682        18,856
                                                           
Total current assets                           777,719        618,540
                                                           
                                                           
Deferred income taxes                          46,955         29,961
Property, plant and equipment, net             213,840        233,097
Goodwill                                       439,240        579,905
Other intangible assets, net                   375,663        383,972
Other assets                                  22,191        23,121
                                                           
Total assets                                 $ 1,875,608   $  1,868,596
                                                           
Liabilities and Stockholders' Equity
Current liabilities
Notes and overdrafts payable                 $ 12,539      $  3,795
Accounts payable                               85,227         99,037
Accrued liabilities                            72,786         96,364
Liabilities held for sale                      23,809         -
Long-term debt - current                      53,781        699
                                                           
Total current liabilities                      248,142        199,895
                                                           
Long-term debt                                 604,370        642,119
Accrued retirement benefits                    158,455        159,103
Deferred income taxes                          47,809         48,707
Other liabilities                              18,437         18,654
                                                           
Total stockholders' equity                    798,395       800,118
                                                           
Total liabilities and stockholders' equity   $ 1,875,608   $  1,868,596
                                                              


BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
                                                                
                                                                   
                                                  Three months ended March 31,
                                                    2013          2012    
Operating activities:
Net income                                        $  13,472        $ 22,207
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization                        16,499          13,063
Amortization of convertible debt discount            582             537
Gain on disposition of property, plant and           (54      )      (97     )
equipment
Stock compensation expense                           12,657          2,100
Withholding taxes paid on stock issuances            (720     )      (683    )
Loss on the sale of businesses                       -               767
Changes in assets and liabilities:
Accounts receivable                                  (16,347  )      (1,512  )
Inventories                                          (968     )      1,091
Prepaid expenses and other current assets            (235     )      (2,272  )
Accounts payable                                     7,144           (672    )
Accrued liabilities                                  (16,679  )      (29,379 )
Deferred income taxes                                485             3,852
Long-term retirement benefits                        801             (2,708  )
Other                                               1,020         25      
                                                                   
Net cash provided by operating activities            17,657          6,319
                                                                   
Investing activities:
Proceeds from disposition of property, plant         44              135
and equipment
Payments related to the sale of businesses, net      -               (363    )
Capital expenditures                                 (10,050  )      (7,281  )
Other                                               (1,420   )     (1,418  )
                                                                   
Net cash used by investing activities                (11,426  )      (8,927  )
                                                                   
Financing activities:
Net change in other borrowings                       8,737           (6,688  )
Payments on long-term debt                           (6,245   )      (13,135 )
Proceeds from the issuance of long-term debt         21,000          49,000
Proceeds from the issuance of common stock           2,677           3,324
Common stock repurchases                             (12,856  )      (11,141 )
Dividends paid                                       (5,443   )      (5,459  )
Excess tax benefit on stock awards                   506             1,227
Other                                               (53      )     (65     )
                                                                   
Net cash provided by financing activities            8,323           17,063
                                                                   
Effect of exchange rate changes on cash flows       (1,038   )     529     
                                                                   
Increase in cash and cash equivalents                13,516          14,984
                                                                   
Cash and cash equivalents at beginning of           86,356        62,505  
period
                                                                   
Cash and cash equivalents at end of period        $  99,872       $ 77,489  
                                                                             


BARNES GROUP INC.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(Dollars in thousands)
(Unaudited)
                                                               
                                                                   
                                              Three months ended March 31,
                                                 2013             2012   
Free cash flow:
                                                                   
Net cash provided by operating activities     $   17,657           $ 6,319
Capital expenditures                             (10,050   )       (7,281 )
                                                                   
Free cash flow^(1)                            $   7,607           $ (962   )
                                                                   

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 March 31,
                         2013         2012               %       
                                         ^(1)                 Change
SEGMENT RESULTS
Operating Profit -
Aerospace Segment     $   10,346       $ 12,654               (18.2   )
(GAAP)
                                                                          
CEO transition           3,903        -       
costs
                                                                          
Operating Profit -
Aerospace Segment     $   14,249      $ 12,654              12.6
as adjusted
(Non-GAAP) ^(2)
                                                                          
Operating Margin -
Aerospace Segment         10.6    %      13.0    %            (240    )   bps.
(GAAP)
Operating Margin -
Aerospace Segment         14.5    %      13.0    %            150         bps.
as adjusted
(Non-GAAP) ^(2)
                                                                          
Operating Profit -
Industrial Segment    $   14,609       $ 11,964               22.1
(GAAP)
                                                                          
CEO transition           6,589        -       
costs
                                                                          
Operating Profit -
Industrial Segment    $   21,198      $ 11,964              77.2
as adjusted
(Non-GAAP) ^(2)
                                                                          
Operating Margin -
Industrial Segment        8.8     %      9.5     %            (70     )   bps.
(GAAP)
Operating Margin -
Industrial Segment      12.8    %    9.5     %        330       bps.
as adjusted
(Non-GAAP) ^(2)
                                                                          
CONSOLIDATED
RESULTS
Operating Income      $   24,955       $ 24,618               1.4
(GAAP)
                                                                          
CEO transition           10,492       -       
costs
                                                                          
Operating Income as
adjusted (Non-GAAP)   $   35,447      $ 24,618              44.0
^(2)
                                                                          
Operating Margin          9.5     %      11.0    %            (150    )   bps.
(GAAP)
Operating Margin as
adjusted (Non-GAAP)     13.5    %    11.0    %        250       bps.
^(2)
                                                                          
Diluted Income from
Continuing            $   0.28         $ 0.32                 (12.5   )
Operations per
Share (GAAP)
                                                                          
CEO transition           0.12         -       
costs
                                                                          
Diluted Income from
Continuing
Operations per        $   0.40        $ 0.32                25.0
Share as adjusted
(Non-GAAP) ^(2)
                                                                          
                                                                
                                                                          
                      Full-Year 2012  Full-Year 2013 Outlook
                      ^(1)
Diluted Income from
Continuing            $   1.44         $ 1.71        to     $ 1.86
Operations per
Share (GAAP)
                                                                          
Synventive
short-term purchase       0.07                       -
accounting
adjustments
Synventive
acquisition               0.01                       -
transaction costs
CEO transition           -                       0.12  
costs
                                                                          
Diluted Income from
Continuing
Operations per        $   1.52        $ 1.83       to     $ 1.98    
Share as adjusted
(Non-GAAP) ^(2)
                                                                          
                                                                
                                                                          

Notes:
(1) Results for 2012 have been adjusted on a retrospective basis to reflect
the impact of the BDNA discontinued operations, including a reallocation of
corporate overhead expenses, and the segment realignment.

(2) The Company has excluded short-term purchase accounting adjustments and
transaction costs related to its Synventive acquisition in 2012 and CEO
transition costs associated with the modification of outstanding equity awards
in 2013 from its "as adjusted" financial measurements. On April 16, 2013, the
U.S. Tax Court rendered an unfavorable decision against the Company, rejecting
the Company’s objections to a $16.5 million tax adjustment arising out of an
IRS audit for the tax years 2000 through 2002 and imposing penalties. The
Company is currently evaluating its options, including appealing the decision.
The Company’s guidance does not include any impact on expected earnings or
cash flows as a result of the court’s decision. 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.

Contact:

Barnes Group Inc.
William Pitts
Director, Investor Relations
860-583-7070
 
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