- Sales of $321 million, up 36% from last year; Organic Sales
up 31%
- Operating Income of $38.5 million; Adjusted Operating Income
of $39.2 million, up 41% from last year
- Operating Margin of 12.0%; Adjusted Operating Margin of
12.2%, up 40 bps from last year
- GAAP EPS of $0.48; Adjusted EPS of $0.45, up 67% from last
year’s $0.27
- 2021 Sales Growth Expectation Increased to 13% to 14% with
Organic Sales Growth of 11% to 12%
- 2021 Adjusted EPS Outlook of $1.83 to $1.98; Up 12% to 21%
from 2020 Adjusted EPS of $1.64
Barnes Group Inc. (NYSE: B), a global provider of highly
engineered products, differentiated industrial technologies, and
innovative solutions, today reported financial results for the
second quarter of 2021.
“With robust orders and sales growth for both Industrial and
Aerospace in the second quarter, Barnes Group continues to
demonstrate significant recovery as some of the impacts of the
global pandemic diminish. With a strong book-to-bill of 1.3 times,
total Company backlog improved 12% from the first quarter and is at
its highest level since the end of 2019,” said Patrick J. Dempsey,
President and Chief Executive Officer of Barnes Group Inc.
“Supported by this backlog, our 2021 sales growth expectation
remains solid. Coupled with ongoing investments in innovation and
other sales initiatives, we look forward to sustaining an upward
trend of good growth and improving performance,” added Dempsey.
Second Quarter 2021 Highlights
Second quarter 2021 net sales of $321 million were up 36% from
$236 million in the prior year period, with organic sales (1)
increasing 31% as the Company sees continuing improvement in many
of its end markets. Foreign exchange had a positive impact on sales
of 5%. On a sequential basis, sales improved 6% from the first
quarter of 2021. Operating income was $38.5 million versus $10.1
million a year ago and operating margin was 12.0% versus 4.3% last
year. Excluding restructuring charges of $0.7 million this year and
$17.7 million in the prior year period, adjusted operating income
of $39.2 million was up 41% and adjusted operating margin of 12.2%
was up 40 bps from a year ago.
Interest expense was $4.5 million, an increase of $0.6 million
from the prior year quarter due to a higher average interest rate,
offset in part by lower average borrowings. Other expense was $1.3
million, up $0.2 million from a year ago.
The Company's effective tax rate for the second quarter of 2021
was 25.3% compared with 89.0% in the second quarter of 2020 and
37.6% for the full year 2020. The decrease in the second quarter
2021 effective tax rate from the full year 2020 rate is primarily
due to the absence of tax expense related to the completed sale of
the Seeger business in 2020, a net benefit related to certain
foreign tax matters in the current year quarter, and a favorable
mix in earnings based on tax jurisdictions.
Net income for the second quarter was $24.5 million, or $0.48
per diluted share, compared to $0.6 million, or $0.01 per diluted
share, a year ago. On an adjusted basis, net income per share of
$0.45 was up 67% from $0.27 a year ago. Adjusted net income per
diluted share in the second quarter of 2021 excludes $0.01 of
restructuring charges and a net foreign tax benefit of $0.04, while
the second quarter of 2020 excludes $0.26 of restructuring
charges.
Year-to-date 2021 cash provided by operating activities was
$85.7 million versus $123.2 million in the prior year period. Free
cash flow was $68.2 million compared to $103.4 million last year.
Capital expenditures were $17.6 million, down $2.2 million from a
year ago.
Segment Performance and End Market
Outlook
Industrial
Second quarter sales were $235 million, up 42% from $165 million
in the prior year period. Organic sales increased 35% reflecting
volume increases from strengthening end markets. Favorable foreign
exchange increased sales by $12.4 million, or 7%. On a sequential
basis, total Industrial sales increased 7% from the first quarter
of 2021.
Operating profit in the second quarter was $27.3 million versus
an operating loss of $0.3 million in the prior year period.
Excluding $0.2 million of restructuring costs in this year’s second
quarter and $15.8 million last year, adjusted operating profit was
$27.5 million versus $15.5 million a year ago. The increase in
adjusted operating profit was driven by the contribution of higher
sales volumes and the benefit of 2020 cost actions, offset in part
by higher personnel costs, primarily incentive compensation, and
costs incurred in support of segment growth initiatives. Adjusted
operating margin was 11.7%, up 230 bps from a year ago.
Aerospace
Second quarter sales were $86 million, up 23% from $71 million
last year, benefitting from improving original equipment
manufacturing (“OEM”), while the aerospace aftermarket business
continues to be impacted by lingering effects of the global
pandemic. Aerospace OEM sales increased 37%, while aftermarket
sales decreased 2%. On a sequential basis, Aerospace sales
increased 6% from the first quarter of 2021.
Operating profit was $11.3 million, up 8% from $10.4 million in
the prior year period. Excluding $0.4 million of restructuring
costs in this year’s second quarter and $1.9 million last year,
adjusted operating profit was $11.7 million, down 5% from last
year’s $12.4 million. The decrease in adjusted operating profit was
driven by higher incentive compensation and unfavorable mix.
Adjusted operating margin was 13.5%, down 400 bps from a year
ago.
Aerospace OEM backlog ended the second quarter at $694 million,
up 16% from March 2021. The Company expects to ship approximately
40% of this backlog over the next 12 months.
Balance Sheet and
Liquidity
Barnes Group’s balance sheet position and liquidity profile
remain supportive of ongoing investments in growth initiatives. The
Company has liquidity of $91 million in cash and approximately $451
million available under the revolving credit facility, subject to
covenants which would have allowed $204 million under our current
credit agreements. With respect to the balance sheet, our “Debt to
EBITDA” ratio, as defined in our credit agreements, was
approximately 2.9 times at quarter end, down from 3.1 times at the
end of the first quarter 2021.
Updated 2021 Outlook
Barnes Group now expects 2021 organic sales to be up 11% to 12%,
up from the prior 10% to 12% expectation. Foreign exchange is
anticipated to have an approximate 2% favorable impact on 2021
sales, while divested revenues will have an approximate negative 1%
impact. Operating margin is forecasted to be approximately 13%.
Adjusted earnings per share are now expected to be in the range of
$1.83 to $1.98, up 12% to 21% from 2020’s adjusted earnings per
share of $1.64 and reflective of an increase at the lower end of
our prior range of $1.78 to $1.98. Further, the Company continues
to forecast capital expenditures of approximately $50 million and
an effective tax rate of approximately 30% for 2021. Cash
conversion in now expected to be greater than 110% of net
income.
Conference Call
Information
Barnes Group Inc. will conduct a conference call with investors
to discuss second quarter 2021 results at 8:30 a.m. ET today, July
30, 2021. 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 (844) 884-8225 in the U.S. or (647) 689-4194
outside of the U.S.; Conference ID 6987911. 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, July 30, 2021 until 11:59
p.m. (ET) on Friday, August 6, 2021, by dialing (416) 621-4642;
Conference ID 6987911.
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
Barnes Group Inc. (NYSE: B) is a global provider of highly
engineered products, differentiated industrial technologies, and
innovative solutions, serving a wide range of end markets and
customers. Its specialized products and services are used in
far-reaching applications including aerospace, transportation,
manufacturing, automation, healthcare, and packaging. The skilled
and dedicated employees of Barnes Group around the globe are
committed to the highest performance standards and achieving
consistent, sustainable profitable growth. Barnes Group is
committed to corporate accountability and furthering environmental,
social and governance principles as evidenced by our listing as one
of America’s Most Responsible Companies by Newsweek. 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," "estimate," "project," "continue," "will," "should," “may,”
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, customers, distributors, suppliers,
business partners or governmental entities; failure to successfully
negotiate collective bargaining agreements or potential strikes,
work stoppages or other similar events; difficulties leveraging
market opportunities; changes in market demand for our products and
services; rapid technological and market change; the ability to
protect and avoid infringing upon intellectual property rights;
introduction or development of new products or transfer of work;
higher risks in global operations and markets; the impact of
intense competition; acts of terrorism, cybersecurity attacks or
intrusions that could adversely impact our businesses; the impacts
of the COVID-19 pandemic on our business, including on demand,
supply chains, operations and our ability to maintain sufficient
liquidity throughout the unknown duration and severity of the
pandemic; the failure to achieve anticipated cost savings and
benefits associated with workforce reductions and restructuring
actions; 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 changes in customer sourcing decisions,
material changes, production schedules and volumes of specific
programs; the impact of government budget and funding decisions;
government tariffs, trade agreements and trade policies; the impact
of new or revised tax laws and regulations; the adoption of laws,
directives or regulations that impact the materials processed by
our products or their end markets; changes in raw material or
product prices and availability; disruptions in information
technology systems, including as a result of cybersecurity or data
security breaches; the continuing impact of prior acquisitions and
divestitures; and any other future 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
ability to achieve social and environmental performance goals; the
outcome of pending and future legal, governmental, or regulatory
proceedings and contingencies; product liabilities 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, social, economic,
business, competitive, environmental, regulatory and public health
nature; 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 Company assumes no obligation to update its
forward-looking statements.
BARNES GROUP INC. CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited) Three months ended June 30, Six
months ended June 30,
2021
2020
%Change
2021
2020
% Change
Net sales
$
321,158
$
235,537
36.4
$
622,787
$
566,207
10.0
Cost of sales
203,168
147,058
38.2
397,864
355,306
12.0
Selling and administrative expenses
79,447
78,364
1.4
154,000
151,472
1.7
282,615
225,422
25.4
551,864
506,778
8.9
Operating income
38,543
10,115
281.0
70,923
59,429
19.3
Operating margin
12.0
%
4.3
%
11.4
%
10.5
%
Interest expense
4,475
3,898
14.8
8,416
8,223
2.3
Other expense (income), net
1,272
1,060
20.0
2,734
2,654
3.0
Income before income taxes
32,796
5,157
536.0
59,773
48,552
23.1
Income taxes
8,305
4,590
80.9
15,900
18,252
(12.9
)
Net income
$
24,491
$
567
NM
$
43,873
$
30,300
44.8
Common dividends
$
8,090
$
8,072
0.2
$
16,194
$
16,205
(0.1
)
Per common share: Net income: Basic
$
0.48
$
0.01
NM
$
0.86
$
0.60
43.3
Diluted
0.48
0.01
NM
0.86
0.59
45.8
Dividends
0.16
0.16
-
0.32
0.32
-
Weighted average common shares outstanding: Basic
50,933,222
50,764,575
0.3
50,933,373
50,912,854
0.0
Diluted
51,102,303
51,008,922
0.2
51,095,198
51,200,967
(0.2
)
NM - Not meaningful
BARNES GROUP INC. OPERATIONS
BY REPORTABLE BUSINESS SEGMENT (Dollars in thousands)
(Unaudited) Three months ended June
30, Six months ended June 30,
2021
2020
% Change
2021
2020
% Change
Net sales Industrial
$
234,679
$
165,031
42.2
$
454,671
$
364,131
24.9
Aerospace
86,485
70,508
22.7
168,127
202,079
(16.8
)
Intersegment sales
(6
)
(2
)
(11
)
(3
)
Total net sales
$
321,158
$
235,537
36.4
$
622,787
$
566,207
10.0
Operating profit (loss)
Industrial
$
27,273
$
(300
)
NM
$
48,568
$
17,625
175.6
Aerospace
11,270
10,415
8.2
22,355
41,804
(46.5
)
Total operating profit
$
38,543
$
10,115
281.0
$
70,923
$
59,429
19.3
Operating margin
Change
Change Industrial
11.6
%
-0.2
%
1,180
bps.
10.7
%
4.8
%
590
bps. Aerospace
13.0
%
14.8
%
(180
)
bps.
13.3
%
20.7
%
(740
)
bps. Total operating margin
12.0
%
4.3
%
770
bps.
11.4
%
10.5
%
90
bps. NM - Not meaningful
BARNES GROUP INC. CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) (Unaudited)
June 30,2021 December 31,2020 Assets Current
assets Cash and cash equivalents
$
91,134
$
79,145
Accounts receivable
260,203
251,460
Inventories
235,537
238,008
Prepaid expenses and other current assets
77,795
73,732
Total current assets
664,669
642,345
Deferred income taxes
21,899
22,092
Property, plant and equipment, net
357,403
370,947
Goodwill
986,061
1,011,580
Other intangible assets, net
534,836
564,132
Other assets
62,003
65,130
Total assets
$
2,626,871
$
2,676,226
Liabilities and Stockholders' Equity Current
liabilities Notes and overdrafts payable
$
14
$
2,115
Accounts payable
124,458
112,428
Accrued liabilities
180,978
178,560
Long-term debt - current
1,983
2,276
Total current liabilities
307,433
295,379
Long-term debt
654,483
699,868
Accrued retirement benefits
93,633
98,171
Deferred income taxes
76,507
91,668
Long-term tax liability
52,114
59,063
Other liabilities
52,308
49,400
Total stockholders' equity
1,390,393
1,382,677
Total liabilities and stockholders' equity
$
2,626,871
$
2,676,226
BARNES GROUP INC. CONSOLIDATED STATEMENTS OF CASH
FLOWS (Dollars in thousands) (Unaudited)
Six months ended June 30,
2021
2020
Operating activities: Net income
$
43,873
$
30,300
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
44,683
45,258
Gain on disposition of property, plant and equipment
(76
)
(111
)
Stock compensation expense
5,632
5,798
Seeger divestiture charges
-
6,620
Changes in assets and liabilities, net of the effects of
divestitures: Accounts receivable
(12,660
)
89,426
Inventories
89
(32,551
)
Prepaid expenses and other current assets
(3,473
)
(6,607
)
Accounts payable
13,880
(12,401
)
Accrued liabilities
1,721
2,581
Deferred income taxes
(5,101
)
(5,417
)
Long-term retirement benefits
889
(2,730
)
Long-term tax liability
(6,949
)
-
Other
3,213
3,028
Net cash provided by operating activities
85,721
123,194
Investing activities: Proceeds from disposition of
property, plant and equipment
136
230
Proceeds from the sale of businesses, net of cash sold
-
36,879
Capital expenditures
(17,567
)
(19,800
)
Other
2,924
-
Net cash (used) provided by investing activities
(14,507
)
17,309
Financing activities: Net change in other borrowings
(2,184
)
(2,167
)
Payments on long-term debt
(56,502
)
(189,370
)
Proceeds from the issuance of long-term debt
25,000
75,000
Proceeds from the issuance of common stock
210
350
Common stock repurchases
(5,229
)
(15,550
)
Dividends paid
(16,194
)
(16,205
)
Withholding taxes paid on stock issuances
(191
)
(137
)
Other
(3,477
)
(3,531
)
Net cash used by financing activities
(58,567
)
(151,610
)
Effect of exchange rate changes on cash flows
(1,252
)
(1,722
)
Increase (decrease) in cash, cash equivalents and restricted
cash
11,395
(12,829
)
Cash, cash equivalents and restricted cash at beginning of
period
91,468
93,805
Cash, cash equivalents and restricted cash at end of period
102,863
80,976
Less: Restricted cash, included in Prepaid expenses and
other current assets
(6,970
)
-
Less: Restricted cash, included in Other assets
(4,759
)
(6,738
)
Cash and cash equivalents at end of period
$
91,134
$
74,238
BARNES GROUP INC. RECONCILIATION OF NET CASH PROVIDED BY
OPERATING ACTIVITIES TO FREE CASH FLOW (Dollars in
thousands) (Unaudited) Six months ended June
30,
2021
2020
Free cash flow: Net cash provided by operating
activities
$
85,721
$
123,194
Capital expenditures
(17,567
)
(19,800
)
Free cash flow(1)
$
68,154
$
103,394
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 June 30, Six months
ended June 30,
2021
2020
% Change
2021
2020
% Change SEGMENT
RESULTS Operating Profit - Industrial
Segment (GAAP)
$
27,273
$
(300
)
NM
$
48,568
$
17,625
175.6
Restructuring/reduction in force
charges
223
15,766
305
15,766
Seeger divestiture adjustments
-
-
-
2,409
Operating Profit - Industrial
Segment as adjusted (Non-GAAP) (1)
$
27,496
$
15,466
77.8
$
48,873
$
35,800
36.5
Operating Margin - Industrial
Segment (GAAP)
11.6
%
-0.2
%
1,180
bps.
10.7
%
4.8
%
590
bps.
Operating Margin - Industrial Segment as adjusted
(Non-GAAP) (1)
11.7
%
9.4
%
230
bps.
10.7
%
9.8
%
90
bps.
Operating Profit - Aerospace
Segment (GAAP)
$
11,270
$
10,415
8.2
$
22,355
$
41,804
(46.5
)
Restructuring/reduction in force
charges
439
1,939
449
1,939
Operating Profit - Aerospace Segment
as adjusted (Non-GAAP) (1)
$
11,709
$
12,354
(5.2
)
$
22,804
$
43,743
(47.9
)
Operating Margin - Aerospace Segment
(GAAP)
13.0
%
14.8
%
(180
)
bps.
13.3
%
20.7
%
(740
)
bps.
Operating Margin - Aerospace Segment as adjusted
(Non-GAAP) (1)
13.5
%
17.5
%
(400
)
bps.
13.6
%
21.6
%
(800
)
bps.
CONSOLIDATED RESULTS
Operating Income (GAAP)
$
38,543
$
10,115
281.0
$
70,923
$
59,429
19.3
Restructuring/reduction in force
charges
662
17,705
754
17,705
Seeger divestiture adjustments
-
-
-
2,409
Operating Income as adjusted
(Non-GAAP) (1)
$
39,205
$
27,820
40.9
$
71,677
$
79,543
(9.9
)
Operating Margin (GAAP)
12.0
%
4.3
%
770
bps.
11.4
%
10.5
%
90
bps.
Operating Margin as adjusted (Non-GAAP) (1)
12.2
%
11.8
%
40
bps.
11.5
%
14.0
%
(250
)
bps.
Diluted Net Income per Share
(GAAP)
$
0.48
$
0.01
NM
$
0.86
$
0.59
45.8
Foreign tax matters
(0.04
)
-
(0.04
)
-
Restructuring/reduction in force charges
0.01
0.26
0.01
0.26
Seeger divestiture adjustments
-
-
-
0.13
Diluted Net Income per Share as
adjusted (Non-GAAP) (1)
$
0.45
$
0.27
66.7
$
0.83
$
0.98
(15.3
)
Full-Year
2020 Full-Year 2021 Outlook Diluted Net
Income per Share (GAAP)
$
1.24
$
1.85
to
$
2.00
Seeger divestiture adjustments
0.13
-
Restructuring/reduction in force charges
0.27
0.02
Foreign tax matters
-
(0.04
)
Diluted Net Income per Share
as adjusted (Non-GAAP) (1)
$
1.64
$
1.83
to
$
1.98
NM - Not meaningful
Notes: (1) The Company
has excluded the following from its "as adjusted" financial
measurements for 2021: 1) the impact of certain foreign tax matters
including a benefit related to the Italy tax realignment, partially
offset by a charge related to the UK tax rate and 2) charges
related to restructuring actions at certain businesses. The Company
has excluded the following from its "as adjusted" financial
measurements for 2020: 1) adjustments related to the divestiture of
the Seeger business, including $2.5M reflected within the
Industrial segment's operating profit ($2.4M through the second
quarter of 2020) and $4.2M of tax expense and 2) charges taken in
2020 related to restructuring and workforce reduction actions
implemented across its businesses, including $18.2M reflected
within operating profit ($17.7M in the second quarter) and $1.0M
reflected within other expense (income), net ($0.5M in the second
quarter). The tax charges resulting from the divestiture were
recorded in the first quarter of 2020 following the completion of
the sale. The tax effects of the restructuring actions were
calculated based on the respective tax jurisdictions and
approximated 30%. 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210730005055/en/
Barnes Group Inc. William Pitts Director, Investor Relations
860.583.7070
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