Barnes Group Inc. (NYSE:B) Files An 8-K Reports Third Quarter 2016 Financial Results

Barnes Group Inc. (NYSE:B), an international industrial and aerospace manufacturer and service provider, today reported financial results for the third quarter of 2016. Net sales of $312 million were up 7% from $291 million in the prior year period driven by organic sales growth of 4% and acquisition revenues of 3%. Net income for the third quarter was $36.8 million, or $0.67 per diluted share, compared to $33.7 million, or $0.61 per diluted share, a year ago. On an adjusted basis, net income was $0.71 per diluted share, up 16% from $0.61 last year. Adjusted diluted net income per share in the third quarter of 2016 excludes $0.03 of FOBOHA short-term purchase accounting adjustments and transaction costs in our Industrial Segment and a $0.01 charge related to a continuing contract termination dispute in our Aerospace Segment. Third quarter 2015 adjusted diluted net income per share excludes $0.03 related to a contract termination dispute in our Aerospace Segment, $0.02 of Thermoplay short-term purchase accounting adjustments and transaction costs in our Industrial Segment, and a $0.05 benefit from a tax refund in the quarter.

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A table reconciling 2016 and 2015 non-GAAP adjusted results presented in this release to the Company’s GAAP results is included at the end of this press release.

“Barnes Group’s financial performance continued to strengthen during the third quarter as sales growth and operational efficiencies from the Barnes Enterprise System benefitted both margins and earnings,” said Patrick J. Dempsey, President and Chief Executive Officer of Barnes Group Inc. “In particular, our Industrial Segment generated solid organic growth and sustained productivity momentum to deliver improved margins,” added Dempsey. “In our Aerospace Segment, we began to see improved performance and ramping volumes on our new engine programs, while we continue to transition from large, declining legacy programs.”

Industrial

Third quarter 2016 sales were $208.7 million, up 10% from $189.1 million in the same period last year. Organic sales increased by 6% in the quarter, primarily driven by strength in our Nitrogen Gas Products and Molding Solutions businesses. Unfavorable foreign exchange reduced sales by approximately $1.1 million, or 1%. For the quarter, the Thermoplay, Priamus, and FOBOHA businesses collectively contributed $9.6 million in acquisition sales.

Operating profit in the third quarter was $35.0 million, up 28% from $27.3 million in the prior year period. The increase was driven by the profit impact of increased organic sales volumes and favorable productivity, offset in part by lower pricing. Excluding FOBOHA short-term purchase accounting adjustments and acquisition costs this year, and similar charges for Thermoplay last year, adjusted operating profit of $36.7 million was up 26% from an adjusted $29.2 million a year ago. Adjusted operating margin was 17.6%, up 220 bps.

Aerospace

Third quarter 2016 sales were $102.8 million, up slightly from $102.3 million in the same period last year. An increase in aftermarket maintenance, repair and overhaul sales (“MRO”) was offset by a decline in aftermarket spare parts sales. The Aerospace original equipment manufacturing sales level (“OEM”) was similar to a year ago.

Operating profit was $16.9 million for the third quarter of 2016, compared to $16.4 million in the prior year period. The operating profit increase reflects lower charges on a contract termination dispute this year versus a year ago, offset by lower pricing and an unfavorable profit mix from reduced spare part sales. Excluding the contract termination dispute charges for both 2016 and 2015, adjusted operating profit was $17.5 million, down 9% from a year ago. Adjusted operating margin was 17.0%, down 180 bps.

Aerospace backlog was $638 million at the end of the third quarter of 2016, up 14% year-over-year and down 3% sequentially from the second quarter of 2016.

Additional Information

Interest expense increased $0.4 million to $3.0 million in the quarter primarily as a result of a higher average interest rate versus a year ago.

The Company’s effective tax rate for the third quarter of 2016 was 23.6% compared with 19.2% in the third quarter of 2015 and 23.2% for the full year 2015. The increase in the third quarter of 2016 effective tax rate from the full year 2015 rate is primarily due to the expiration of certain tax holidays, the absence of the 2015 refund of withholding taxes and the projected change in the mix of earnings attributable to higher-taxing jurisdictions, partially offset by lower planned repatriations of a portion of current year foreign earnings to the U.S and the tax benefits recorded as a result of the new guidance for stock based compensation which was adopted in the 3rd quarter of 2016.

Updated 2016 Outlook

Barnes Group now expects 2016 organic revenue growth to be flat for the year, with total revenue growth of 3.5% to 4.5% after consideration of 1% unfavorable foreign exchange and 5% from acquisition revenues. Adjusted operating margin is forecasted to be approximately 16%. Barnes Group now expects adjusted earnings in the range of $2.48 to $2.53 per diluted share, up 4% to 6% from $2.38 in 2015. Further, the Company now anticipates capital expenditures of between $45 and $50 million and cash conversion to be greater than 100% of net income. For 2016, the effective tax rate expectation is in the range of 25% to 26%.

Conference Call Information

Barnes Group Inc. will conduct a conference call with investors to discuss the Company’s performance in the third quarter and the outlook for the business for the full year 2016 at 8:30 a.m. ET today, October 28, 2016. The public may access the conference through a live audio webcast available on the Investor Relations section of Barnes Group’s website at www.BGInc.com. The conference is also available by direct dial at (877) 201-0168 in the U.S. or (647) 788-4901 outside of the U.S.; Conference ID 63308676. Supplemental materials will be posted to the Investor Relations section of the Company’s website prior to the conference call.

In addition, the call will be recorded and available for playback from 12:00 p.m. (ET) on Friday, October 28, 2016 until 11:59 p.m. (ET) on Friday, November 4, 2016, by dialing (404) 537-3406; Conference ID 63308676.

Note:

(1) Organic sales growth represents the total reported sales increase within the Company’s ongoing businesses less the impact of foreign currency translation and acquisition and divestitures completed in the preceding twelve months.

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 highly engineered products, differentiated industrial technologies, and innovative solutions delivered by Barnes Group are used in far-reaching applications that provide transportation, manufacturing, healthcare, and technology to the world. Barnes Group’s skilled and dedicated employees around the globe are committed to achieving consistent and sustainable profitable growth. For more information, visit www.BGInc.com.

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