Barnes Group Inc. Reports First Quarter 2014 Financial Results

  Barnes Group Inc. Reports First Quarter 2014 Financial Results

  *Quarterly Net Sales of $312 million, up 18%; Organic Sales up 4%
  *Quarterly Operating Margin of 11.3%; Adjusted Operating Margin up 20 bps
    to 13.7%
  *Quarterly Diluted EPS from Continuing Operations up 46% to $0.41; Adjusted
    Quarterly Diluted EPS from Continuing Operations up 25% to $0.50
  *2014 EPS from Continuing Operations Guidance Updated to $1.98 to $2.08 per
    diluted share; On an Adjusted Basis, $2.20 to $2.30 per diluted share, up
    20% to 26%

Business Wire

BRISTOL, Conn. -- April 25, 2014

Barnes Group Inc. (NYSE: B), an international industrial and aerospace
manufacturer and service provider, today 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       Three months ended March 31,
share data)
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          $22.8        $15.4         $7.3      47.4 %
Operations
Net Income                      $22.8        $13.5         $9.3      68.9 %
                                                                          
Income from Continuing
Operations Per Diluted          $0.41        $0.28         $0.13     46.4 %
Share
                                                                          
Loss from Discontinued
Operations Per Diluted          $0.00        ($0.04)       $0.04     NM
Share
                                                                          
Net Income Per Diluted        $0.41     $0.24      $0.17   70.8 %
Share
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.

Conference Call

Barnes Group Inc. will conduct a conference call with investors to discuss
first quarter 2014 results at 8:30 a.m. EDT today, April 25, 2014. 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) 713-4209 in the U.S. or (617) 213-4863 outside of the
U.S. (request the Barnes Group Earnings Call), Participant Code: 89146396.

In addition, the call will be recorded and available for playback until
Friday, May 9, 2014 by dialing (617) 801-6888; Passcode: 36091403.

About Barnes Group

Founded in 1857, Barnes Group Inc. (NYSE: B) is an international industrial
and aerospace 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 4,300
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 forward-looking statements as defined in the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
often address our expected future operating and financial performance and
financial condition, and often contain words such as "anticipate," "believe,"
"expect," "plan," "strategy," "estimate," "project," and similar terms. 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. These include, among others: difficulty maintaining relationships
with employees, including unionized employees, customers, distributors,
suppliers, business partners or governmental entities; potential strikes or
work stoppages; difficulties leveraging market opportunities; changes in
market demand for our products and services; rapid technological and market
change; the ability to protect intellectual property rights; introduction or
development of new products or transfer of work; higher risks in international
operations and markets; the impact of intense competition; and other risks and
uncertainties described in documents filed with or furnished to the Securities
and Exchange Commission ("SEC") by the Company, including, among others, those
in the Management's Discussion and Analysis of Financial Condition and Results
of Operations and Risk Factors sections of the Company's filings. The risks
and uncertainties described in our periodic filings with the SEC include,
among others, uncertainties relating to conditions in financial markets;
currency fluctuations and foreign currency exposure; future financial
performance of the industries or customers that we serve; our dependence upon
revenues and earnings from a small number of significant customers; a major
loss of customers; inability to realize expected sales or profits from
existing backlog due to a range of factors, including insourcing decisions,
material changes, production schedules and volumes of specific programs; the
impact of government budget and funding decisions; changes in raw material or
product prices and availability; integration of acquired businesses including
the Männer business; restructuring costs or savings including those related to
the planned closure of production operations at the Company’s facility in
Saline, Michigan; the continuing impact of strategic actions, including
acquisitions, divestitures, restructurings, or strategic business
realignments, and our ability to achieve the financial and operational targets
set in connection with any such actions; the outcome of pending and future
legal, governmental, or regulatory proceedings and contingencies and uninsured
claims; future repurchases of common stock; future levels of indebtedness; and
numerous other matters of a global, regional or national scale, including
those of a political, economic, business, competitive, environmental,
regulatory and public health nature. 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,
                                    2014             2013             % Change
                                                                      
Net sales                           $ 312,099        $ 263,545        18.4
                                                                      
Cost of sales                         214,557          177,715        20.7
Selling and administrative           62,418         60,875        2.5
expenses
                                                                      
                                     276,975        238,590       16.1
                                                                      
Operating income                      35,124           24,955         40.7
                                                                      
Operating margin                      11.3       %     9.5        %
                                                                      
Interest expense                      3,319            4,357          (23.8  )
Other expense (income), net          234            966           (75.8  )
                                                                      
Income from continuing operations     31,571           19,632         60.8
before income taxes
                                                                      
Income taxes                         8,819          4,199         NM
                                                                      
Income from continuing operations     22,752           15,433         47.4
                                                                      
Loss from discontinued                -                (1,961     )   NM
operations, net of income taxes
                                                    
Net income                          $ 22,752        $ 13,472        68.9
                                                                      
Common dividends                    $ 5,971         $ 5,443         9.7
                                                                      
Per common share:
                                                                      
Basic:
Income from continuing operations   $ 0.42           $ 0.29           44.8
Loss from discontinued               -              (0.04      )   NM
operations, net of income taxes
Net income                          $ 0.42          $ 0.25          68.0
                                                                      
Diluted:
Income from continuing operations   $ 0.41           $ 0.28           46.4
Loss from discontinued               -              (0.04      )   NM
operations, net of income taxes
Net income                          $ 0.41          $ 0.24          70.8
                                                                      
Dividends                             0.11             0.10           10.0
                                                                      
Weighted average common shares
outstanding:
Basic                                 54,650,481       54,739,465     (0.2   )
Diluted                               55,972,753       55,524,560     0.8
                                                                      
NM - Not Meaningful
                                                                      

BARNES GROUP INC.
OPERATIONS BY REPORTABLE BUSINESS SEGMENT
(Dollars in thousands)
(Unaudited)
                                                           
                         Three months ended March 31,
                         2014          2013          % Change
Net sales
                                                                 
Industrial               $ 203,888     $ 165,502     23.2
                                                                 
Aerospace                  108,212       98,045      10.4
                                                                 
Intersegment sales        (1      )    (2      )   50.0
                                                                 
Total net sales          $ 312,099    $ 263,545    18.4
                                                                 
Operating profit
                                                                 
Industrial               $ 19,374      $ 14,609      32.6
                                                                 
Aerospace                 15,750      10,346     52.2
                                                                 
Total operating profit   $ 35,124     $ 24,955     40.7
                                                                 
Operating margin                                     Change
                                                                 
Industrial                 9.5     %     8.8     %   70       bps.
                                                                 
Aerospace                 14.6    %    10.6    %   400      bps.
                                                                 
Total operating margin     11.3    %     9.5     %   180      bps.
                                                                 

BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
                                                          
                                                               
                                               March 31,       December 31,
                                               2014            2013
Assets
Current assets
Cash and cash equivalents                      $ 61,411        $  70,856
Accounts receivable                              291,703          258,664
Inventories                                      210,212          211,246
Deferred income taxes                            14,874           18,226
Prepaid expenses and other current assets       19,958          18,204
                                                               
Total current assets                             598,158          577,196
                                                               
                                                               
Deferred income taxes                            869              2,314
Property, plant and equipment, net               307,169          302,558
Goodwill                                         645,604          649,697
Other intangible assets, net                     523,002          534,293
Other assets                                    59,865          57,615
                                                               
Total assets                                   $ 2,134,667     $  2,123,673
                                                               
Liabilities and Stockholders' Equity
Current liabilities
Notes and overdrafts payable                   $ 1,636         $  1,074
Accounts payable                                 98,421           88,721
Accrued liabilities                              129,589          154,514
Long-term debt - current                        56,615          56,009
                                                               
Total current liabilities                        286,261          300,318
                                                               
Long-term debt                                   503,076          490,341
Accrued retirement benefits                      90,319           80,884
Deferred income taxes                            91,250           94,506
Other liabilities                                15,058           16,210
                                                               
Total stockholders' equity                      1,148,703       1,141,414
                                                               
Total liabilities and stockholders' equity     $ 2,134,667     $  2,123,673
                                                               

BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
                                                               
                                                                   
                                                  Three months ended March 31,
                                                  2014             2013
Operating activities:
Net income                                        $  22,752        $ 13,472
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization                        20,782          16,499
Amortization of convertible debt discount            731             582
Loss (gain) on disposition of property, plant        78              (54     )
and equipment
Stock compensation expense                           1,865           12,657
Withholding taxes paid on stock issuances            (463     )      (720    )
Changes in assets and liabilities:
Accounts receivable                                  (32,802  )      (16,347 )
Inventories                                          802             (968    )
Prepaid expenses and other current assets            (2,763   )      (235    )
Accounts payable                                     9,676           7,144
Accrued liabilities                                  (3,131   )      (16,679 )
Deferred income taxes                                3,834           485
Long-term retirement benefits                        (4,964   )      801
Other                                               580           1,020   
                                                                   
Net cash provided by operating activities            16,977          17,657
                                                                   
Investing activities:
Proceeds from disposition of property, plant         382             44
and equipment
Capital expenditures                                 (15,074  )      (10,050 )
Other                                               (467     )     (1,420  )
                                                                   
Net cash used by investing activities                (15,159  )      (11,426 )
                                                                   
Financing activities:
Net change in other borrowings                       559             8,737
Payments on long-term debt                           (26,151  )      (6,245  )
Proceeds from the issuance of long-term debt         39,283          21,000
Payment of assumed liability to Otto Männer          (19,796  )      -
Holding AG
Proceeds from the issuance of common stock           7,262           2,677
Common stock repurchases                             (8,389   )      (12,856 )
Dividends paid                                       (5,971   )      (5,443  )
Excess tax benefit on stock awards                   2,246           506
Other                                               (76      )     (53     )
                                                                   
Net cash (used) provided by financing                (11,033  )      8,323
activities
                                                                   
Effect of exchange rate changes on cash flows       (230     )     (1,038  )
                                                                   
(Decrease) increase in cash and cash                 (9,445   )      13,516
equivalents
                                                                   
Cash and cash equivalents at beginning of           70,856        86,356  
period
                                                                   
Cash and cash equivalents at end of period        $  61,411       $ 99,872  
                                                                   

BARNES GROUP INC.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(Dollars in thousands)
(Unaudited)
                                                              
                                                                   
                                              Three months ended March 31,
                                              2014                 2013
Free cash flow:
                                                                   
Net cash (used) provided by operating         $   16,977           $ 17,657
activities
Capital expenditures                             (15,074   )       (10,050 )
                                                                   
Free cash flow^(1)                            $   1,903           $ 7,607   

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,
                              2014             2013            % Change
SEGMENT RESULTS
Operating Profit -            $   19,374       $ 14,609           32.6
Industrial Segment (GAAP)
                                                                          
Männer short-term purchase        4,901          -
accounting adjustments
Restructuring charges             2,750          -
CEO transition costs             -            6,589  
                                                                          
Operating Profit -
Industrial Segment as         $   27,025      $ 21,198          27.5
adjusted (Non-GAAP) ^(1)
                                                                          
Operating Margin -                9.5     %      8.8    %         70      bps.
Industrial Segment (GAAP)
Operating Margin -
Industrial Segment as             13.3    %      12.8   %         50      bps.
adjusted (Non-GAAP) ^(1)
                                                                          
Operating Profit -            $   15,750       $ 10,346           52.2
Aerospace Segment (GAAP)
                                                                          
CEO transition costs             -            3,903  
                                                                          
Operating Profit -
Aerospace Segment as          $   15,750      $ 14,249          10.5
adjusted (Non-GAAP) ^(1)
                                                                          
Operating Margin -                14.6    %      10.6   %         400     bps.
Aerospace Segment (GAAP)
Operating Margin -
Aerospace Segment as            14.6    %    14.5   %       10     bps.
adjusted (Non-GAAP) ^(1)
                                                                          
CONSOLIDATED RESULTS
Operating Income (GAAP)       $   35,124       $ 24,955           40.7
                                                                          
Männer short-term purchase        4,901          -
accounting adjustments
Restructuring charges             2,750          -
CEO transition costs             -            10,492 
                                                                          
Operating Income as           $   42,775      $ 35,447          20.7
adjusted (Non-GAAP) ^(1)
                                                                          
Operating Margin (GAAP)           11.3    %      9.5    %         180     bps.
Operating Margin as             13.7    %    13.5   %       20     bps.
adjusted (Non-GAAP) ^(1)
                                                                          
Diluted Income from
Continuing Operations per     $   0.41         $ 0.28             46.4
Share (GAAP)
                                                                          
Männer short-term purchase        0.06           -
accounting adjustments
Restructuring charges             0.03           -
CEO transition costs             -            0.12   
                                                                          
Diluted Income from
Continuing Operations per     $   0.50        $ 0.40            25.0
Share as adjusted
(Non-GAAP) ^(1)
                                                                          
                                                                  
                                                                          
                              Full Year 2013   Full-Year 2014 Outlook
Diluted Income from
Continuing Operations per     $   1.31         $ 1.98     to   $  2.08
Share (GAAP)
                                                                          
Männer short-term purchase        0.07                    0.13
accounting adjustments
Männer acquisition                0.03
transaction costs
Restructuring charges             -                       0.09
CEO transition costs              0.12
April 2013 tax court             0.30                      
decision
                                                                          
Diluted Income from
Continuing Operations per     $   1.83        $ 2.20    to   $  2.30
Share as adjusted
(Non-GAAP) ^(1)
                                                             

Notes:

(1) The Company has excluded the following from its "as adjusted" financial
measurements: 1) short-term purchase accounting adjustments related to its
Männer acquisition in 2014, 2) restructuring charges related to the closure of
production operations at the Company's Associated Spring facility located in
Saline, Michigan in 2014, 3) short-term purchase accounting adjustments and
transaction costs related to its Männer acquisition in 2013, 4) CEO transition
costs associated with the modification of outstanding equity awards in 2013
and 5) the tax charge associated with the April 2013 tax court decision in
2013. 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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