Delivers Strong Aerospace Results and Solid Company-wide Book-to-Bill
- Sales of $312 million, up 4% versus the prior year period; Organic Sales up 6%
- Operating Margin of 10.0%; Adjusted Operating Margin of 10.2%, down 50 bps from a year ago
- GAAP EPS of $0.40; Adjusted EPS of $0.41, up 8% versus the prior year period
- Forecasts 2022 Organic Sales Growth of +8% to +10%
- Expects 2022 Adjusted EPS of $2.20 to $2.40; Up 13% to 24% from 2021 Adjusted EPS of $1.94
Barnes Group Inc. (NYSE: B), a global provider of highly engineered products, differentiated industrial technologies, and innovative solutions, today reported financial results for the first quarter of 2022.
“Sustained recovery in aero-related end markets provided tailwind for Barnes Aerospace which delivered over 20% sales growth compared to last year, while expanding adjusted operating margin by 300 basis points. Barnes Industrial sales were down 1% organically for the quarter led by softer automotive and general industrial markets, and margins were impacted by inflationary headwinds, supply chain challenges, and COVID-related operational disruptions,” said Julie K. Streich, Interim Chief Executive Officer and Senior Vice President Finance and Chief Financial Officer of Barnes. “Customer demand remained healthy as indicated by a Company-wide book-to-bill ratio of 1.15x, and our team’s multipronged approach to mitigate the impacts of the current macro-environment should support improved performance as the year progresses,” added Streich.
First Quarter 2022 Highlights
First quarter 2022 net sales of $312 million were up 4% from $302 million in the prior year period, with organic sales (1) increasing 6%. Foreign exchange had a negative impact of 2%. Operating income was $31.1 million versus $32.4 million a year ago. Operating margin decreased 70 bps to 10.0%. Excluding $0.7 million of restructuring charges in the current year quarter, adjusted operating income was $31.8 million, down 2%, and adjusted operating margin was 10.2%, down 50 bps from a year ago.
Interest expense for the first quarter of 2022 was $3.6 million, a decrease of $0.4 million from the prior year primarily due to the benefit of lower average borrowings. Other expense was $1.6 million, up $0.2 million from a year ago.
The Company’s effective tax rate was 21.0% compared with 28.1% a year ago with the decrease largely due to an increase in projected earnings in low tax jurisdictions and the absence of additional tax expense related to the Global Intangible Low Income Tax recorded in last year’s first quarter.
Net income for the first quarter was $20.5 million, or $0.40 per diluted share, compared to $19.4 million, or $0.38 per diluted share, a year ago. On an adjusted basis, which excludes $0.01 of restructuring charges in the current year period, net income per share of $0.41 was up 8% from a year ago.
First quarter cash used by operating activities was $9.3 million versus cash provided from operating activities of $35.6 million in the prior year primarily due to paid incentive compensation and an increase in working capital in the current year period. Free cash flow was a use of $16.7 million compared to a source of $27.8 million last year. Capital expenditures were $7.4 million, down from $7.9 million a year ago.
Segment Performance
Industrial
First quarter sales were $212 million, down 4% from $220 million in the prior year period. Organic sales decreased 1% while unfavorable foreign exchange lowered sales by 3%. Operating profit was $14.7 million, down 31% from $21.3 million in the prior year period. Excluding $0.3 million in current year restructuring charges, adjusted operating profit of $15.0 million was down 29% from the prior year and adjusted operating margin of 7.1% was down 260 bps. The decrease in adjusted operating profit was primarily driven by broad based inflation, supply chain challenges, and lower productivity primarily driven by COVID-related absenteeism and shutdowns.
Aerospace
First quarter sales were $101 million, up 23% from $82 million last year, benefitting from ongoing recovery in aerospace end markets. Aerospace original equipment manufacturing (“OEM”) sales increased 18%, while aftermarket sales increased 34% compared to the prior year period.
Operating profit was $16.4 million in the first quarter, up 48% from $11.1 million in the prior year period. Excluding $0.4 million of restructuring costs this year, adjusted operating profit of $16.7 million was up 51% from a year ago. The increase in adjusted operating profit was driven by the contribution of higher sales volumes, offset in part by unfavorable productivity due to COVID-related absenteeism and supply chain challenges. Adjusted operating margin was 16.6%, up 300 bps from 13.6% last year.
Aerospace OEM backlog ended the first quarter at $716 million, up 5% sequentially from December 2021. The Company expects to convert approximately 45% of this backlog to revenue over the next 12 months.
Balance Sheet and Liquidity
Barnes’ balance sheet and liquidity profile remain well-positioned and supportive of ongoing investments in growth initiatives. The Company has liquidity of $75 million in cash and approximately $510 million available under the revolving credit facility, subject to covenants which would have allowed $206 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 2.4 times at quarter end.
Updated 2022 Outlook
With solid first quarter orders, Barnes continues to expect 2022 organic sales growth of 8% to 10% and negative foreign exchange of approximately 2%. Adjusted operating margin is now forecasted to be in the range of 12.5% to 13.5%, down slightly from our prior view given ongoing supply chain and inflationary pressures. Adjusted earnings are expected to be in the range of $2.20 to $2.40 per diluted share, up 13% to 24% from 2021’s adjusted earnings of $1.94 per share. The updated adjusted earnings per share forecast is $0.05 lower at the high end of our previous range reflecting the macroeconomic headwinds in our Industrial segment. 2022 adjusted earnings per share are anticipated to exclude a $0.03 impact related to residual restructuring activities. The Company forecasts capital expenditures of between $50 and $55 million and cash conversion of greater than 100% of net income. The effective tax rate for 2022 is expected to be approximately 24% to 25%.
Conference Call Information
Barnes will conduct a conference call with investors to discuss first quarter 2022 results at 8:30 a.m. ET today, April 29, 2022. The public may access the conference through a live audio webcast available on the Investor Relations section of Barnes’ website at www.barnesgroupinc.com.
The conference is also available by direct dial at (888) 510-2379 in the U.S. or (646) 960-0691 outside of the U.S.; Conference ID 1137078. 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, April 29, 2022, until 11:59 p.m. (ET) on Friday, May 6, 2022, by dialing (647) 362-9199; Conference ID 1137078.
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
Barnes Group Inc. (NYSE: B) pioneers technologies to help change the world. Employees across the globe are dedicated to Persistent Ingenuity™ – advancing what’s possible and delivering to the highest standards. We serve a wide range of end markets and customers, including healthcare, automation, packaging, aerospace, mobility, and manufacturing, delivering breakthrough products and services to shape a more inclusive and sustainable world. For more information, visit www.barnesgroupinc.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: the Company’s ability to manage economic, business and geopolitical conditions, including global price inflation and shortages impacting the availability of materials; the duration and severity of the COVID-19 pandemic, including its impacts across our business on demand, supply chains, operations and liquidity; failure to successfully negotiate collective bargaining agreements or potential strikes, work stoppages or other similar events; 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; challenges associated with the introduction or development of new products or transfer of work; higher risks in global operations and markets; the impact of intense competition; the physical and operational risks from natural disasters, severe weather events, climate change which may limit accessibility to sufficient water resources, outbreaks of contagious diseases and other adverse public health developments; war, terrorism and other international conflicts; the failure to achieve anticipated cost savings and benefits associated with workforce reductions and restructuring actions; currency fluctuations and foreign currency exposure; impacts from goodwill impairment and related charges; 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; changes or uncertainties in laws, regulations, rates, policies or interpretations that impact the Company’s business operations or tax status, including those that address climate change, environmental, health and safety matters, and the materials processed by our products or their end markets; fluctuations in the pricing or availability of raw materials, freight, transportation, utilities and other items required by our operations; labor shortages or other business interruptions at transportation centers, shipping ports, our suppliers’ facilities or our facilities; disruptions in information technology systems, including as a result of cybersecurity attacks or data security breaches; the ability to hire and retain senior management and qualified personnel; the continuing impact of prior acquisitions and divestitures, and any other future strategic actions, 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 litigation and governmental proceedings; the impact of actual, potential or alleged defects or failures of our products or third-party products within which our products are integrated, including product liabilities, product recall costs and uninsured claims; future repurchases of common stock; future levels of indebtedness; 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.
Category: Earnings
| BARNES GROUP INC. | |||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||
| (Dollars in thousands, except per share data) | |||||||||
| (Unaudited) | |||||||||
| Three months ended March 31, | |||||||||
|
2022 |
|
|
2021 |
|
% Change |
|||
| Net sales | $ |
312,383 |
|
$ |
301,629 |
|
3.6 |
|
|
| Cost of sales |
|
207,190 |
|
|
194,696 |
|
6.4 |
|
|
| Selling and administrative expenses |
|
74,080 |
|
|
74,553 |
|
(0.6 |
) |
|
|
281,270 |
|
|
269,249 |
|
4.5 |
|
||
| Operating income |
|
31,113 |
|
|
32,380 |
|
(3.9 |
) |
|
| Operating margin |
|
10.0 |
% |
|
10.7 |
% |
|||
| Interest expense |
|
3,567 |
|
|
3,942 |
|
(9.5 |
) |
|
| Other expense (income), net |
|
1,630 |
|
|
1,463 |
|
11.4 |
|
|
| Income before income taxes |
|
25,916 |
|
|
26,975 |
|
(3.9 |
) |
|
| Income taxes |
|
5,432 |
|
|
7,593 |
|
(28.5 |
) |
|
| Net income | $ |
20,484 |
|
$ |
19,382 |
|
5.7 |
|
|
| Common dividends | $ |
8,111 |
|
$ |
8,104 |
|
0.1 |
|
|
| Per common share: | |||||||||
| Net income: | |||||||||
| Basic | $ |
0.40 |
|
$ |
0.38 |
|
5.3 |
|
|
| Diluted |
|
0.40 |
|
|
0.38 |
|
5.3 |
|
|
| Dividends |
|
0.16 |
|
|
0.16 |
|
- |
|
|
| Weighted average common shares outstanding: | |||||||||
| Basic |
|
51,022,417 |
|
|
50,933,666 |
|
0.2 |
|
|
| Diluted |
|
51,168,622 |
|
|
51,087,688 |
|
0.2 |
|
|
| BARNES GROUP INC. | |||||||||||
| OPERATIONS BY REPORTABLE BUSINESS SEGMENT | |||||||||||
| (Dollars in thousands) | |||||||||||
| (Unaudited) | |||||||||||
| Three months ended March 31, | |||||||||||
|
2022 |
|
|
2021 |
|
% Change |
|||||
| Net sales | |||||||||||
| Industrial | $ |
211,672 |
|
$ |
219,992 |
|
(3.8 |
) |
|||
| Aerospace |
|
100,711 |
|
|
81,642 |
|
23.4 |
|
|||
| Intersegment sales |
|
(0 |
) |
|
(5 |
) |
|||||
| Total net sales | $ |
312,383 |
|
$ |
301,629 |
|
3.6 |
|
|||
| Operating profit | |||||||||||
| Industrial | $ |
14,734 |
|
$ |
21,295 |
|
(30.8 |
) |
|||
| Aerospace |
|
16,379 |
|
|
11,085 |
|
47.8 |
|
|||
| Total operating profit | $ |
31,113 |
|
$ |
32,380 |
|
(3.9 |
) |
|||
| Operating margin | Change | ||||||||||
| Industrial |
|
7.0 |
% |
|
9.7 |
% |
(270 |
) |
bps. | ||
| Aerospace |
|
16.3 |
% |
|
13.6 |
% |
270 |
|
bps. | ||
| Total operating margin |
|
10.0 |
% |
|
10.7 |
% |
(70 |
) |
bps. | ||
| BARNES GROUP INC. | |||||
| CONSOLIDATED BALANCE SHEETS | |||||
| (Dollars in thousands) | |||||
| (Unaudited) | |||||
| March 31, 2022 |
December 31, 2021 |
||||
| Assets | |||||
| Current assets | |||||
| Cash and cash equivalents | $ |
75,255 |
$ |
102,860 |
|
| Accounts receivable |
|
272,345 |
|
262,257 |
|
| Inventories |
|
255,117 |
|
239,655 |
|
| Prepaid expenses and other current assets |
|
83,795 |
|
75,437 |
|
| Total current assets |
|
686,512 |
|
680,209 |
|
| Deferred income taxes |
|
17,883 |
|
21,976 |
|
| Property, plant and equipment, net |
|
335,286 |
|
341,462 |
|
| Goodwill |
|
945,407 |
|
955,370 |
|
| Other intangible assets, net |
|
486,835 |
|
500,246 |
|
| Other assets |
|
83,432 |
|
77,557 |
|
| Total assets | $ |
2,555,355 |
$ |
2,576,820 |
|
| Liabilities and Stockholders' Equity | |||||
| Current liabilities | |||||
| Notes and overdrafts payable | $ |
978 |
$ |
1,900 |
|
| Accounts payable |
|
134,816 |
|
131,076 |
|
| Accrued liabilities |
|
144,852 |
|
175,583 |
|
| Long-term debt - current |
|
1,702 |
|
1,835 |
|
| Total current liabilities |
|
282,348 |
|
310,394 |
|
| Long-term debt |
|
594,976 |
|
599,932 |
|
| Accrued retirement benefits |
|
75,684 |
|
76,784 |
|
| Deferred income taxes |
|
65,557 |
|
66,704 |
|
| Long-term tax liability |
|
52,114 |
|
52,114 |
|
| Other liabilities |
|
43,646 |
|
42,126 |
|
| Total stockholders' equity |
|
1,441,030 |
|
1,428,766 |
|
| Total liabilities and stockholders' equity | $ |
2,555,355 |
$ |
2,576,820 |
|
| BARNES GROUP INC. | ||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
| (Dollars in thousands) | ||||||
| (Unaudited) | ||||||
| Three months ended March 31, | ||||||
|
2022 |
|
|
2021 |
|
|
| Operating activities: | ||||||
| Net income | $ |
20,484 |
|
$ |
19,382 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation and amortization |
|
22,301 |
|
|
21,992 |
|
| Gain on disposition of property, plant and equipment |
|
(1 |
) |
|
(50 |
) |
| Stock compensation expense |
|
2,534 |
|
|
2,306 |
|
| Changes in assets and liabilities: | ||||||
| Accounts receivable |
|
(10,961 |
) |
|
(7,590 |
) |
| Inventories |
|
(15,154 |
) |
|
78 |
|
| Prepaid expenses and other current assets |
|
(5,809 |
) |
|
(4,882 |
) |
| Accounts payable |
|
4,163 |
|
|
9,121 |
|
| Accrued liabilities |
|
(28,197 |
) |
|
(6,456 |
) |
| Deferred income taxes |
|
2,115 |
|
|
(101 |
) |
| Long-term retirement benefits |
|
(1,862 |
) |
|
(569 |
) |
| Other |
|
1,074 |
|
|
2,381 |
|
| Net cash (used) provided by operating activities |
|
(9,313 |
) |
|
35,612 |
|
| Investing activities: | ||||||
| Proceeds from disposition of property, plant and equipment |
|
60 |
|
|
83 |
|
| Capital expenditures |
|
(7,405 |
) |
|
(7,855 |
) |
| Other |
|
(1,094 |
) |
|
3,758 |
|
| Net cash used by investing activities |
|
(8,439 |
) |
|
(4,014 |
) |
| Financing activities: | ||||||
| Net change in other borrowings |
|
(784 |
) |
|
5,354 |
|
| Payments on long-term debt |
|
(34,918 |
) |
|
(30,933 |
) |
| Proceeds from the issuance of long-term debt |
|
35,000 |
|
|
15,000 |
|
| Proceeds from the issuance of common stock |
|
153 |
|
|
125 |
|
| Dividends paid |
|
(8,111 |
) |
|
(8,104 |
) |
| Withholding taxes paid on stock issuances |
|
(49 |
) |
|
(68 |
) |
| Other |
|
(3,665 |
) |
|
(5,816 |
) |
| Net cash used by financing activities |
|
(12,374 |
) |
|
(24,442 |
) |
| Effect of exchange rate changes on cash flows |
|
137 |
|
|
(2,331 |
) |
| (Decrease) increase in cash, cash equivalents and restricted cash |
|
(29,989 |
) |
|
4,825 |
|
| Cash, cash equivalents and restricted cash at beginning of period |
|
111,909 |
|
|
91,468 |
|
| Cash, cash equivalents and restricted cash at end of period |
|
81,920 |
|
|
96,293 |
|
| Less: Restricted cash, included in Prepaid expenses and other current assets |
|
(4,434 |
) |
|
(6,198 |
) |
| Less: Restricted cash, included in Other assets |
|
(2,231 |
) |
|
(5,195 |
) |
| Cash and cash equivalents at end of period | $ |
75,255 |
|
$ |
84,900 |
|
| BARNES GROUP INC. | ||||||
| RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW | ||||||
| (Dollars in thousands) | ||||||
| (Unaudited) | ||||||
| Three months ended March 31, | ||||||
|
2022 |
|
|
2021 |
|
|
| Free cash flow: | ||||||
| Net cash (used) provided by operating activities | $ |
(9,313 |
) |
$ |
35,612 |
|
| Capital expenditures |
|
(7,405 |
) |
|
(7,855 |
) |
| Free cash flow(1) | $ |
(16,718 |
) |
$ |
27,757 |
|
| 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, | |||||||||||
|
2022 |
|
|
2021 |
|
% Change |
|||||
| SEGMENT RESULTS | |||||||||||
| Operating Profit - Industrial Segment (GAAP) | $ |
14,734 |
|
$ |
21,295 |
|
|
(30.8 |
) |
||
| Restructuring/reduction in force charges |
|
304 |
|
|
- |
|
|||||
| Operating Profit - Industrial Segment as adjusted (Non-GAAP) (1) | $ |
15,038 |
|
$ |
21,295 |
|
|
(29.4 |
) |
||
| Operating Margin - Industrial Segment (GAAP) |
|
7.0 |
% |
|
9.7 |
% |
|
(270 |
) |
bps. | |
| Operating Margin - Industrial Segment as adjusted (Non-GAAP) (1) |
|
7.1 |
% |
|
9.7 |
% |
|
(260 |
) |
bps. | |
| Operating Profit - Aerospace Segment (GAAP) | $ |
16,379 |
|
$ |
11,085 |
|
|
47.8 |
|
||
| Restructuring/reduction in force charges |
|
354 |
|
|
- |
|
|||||
| Operating Profit - Aerospace Segment as adjusted (Non-GAAP) (1) | $ |
16,733 |
|
$ |
11,085 |
|
|
51.0 |
|
||
| Operating Margin - Aerospace Segment (GAAP) |
|
16.3 |
% |
|
13.6 |
% |
|
270 |
|
bps. | |
| Operating Margin - Aerospace Segment as adjusted (Non-GAAP) (1) |
|
16.6 |
% |
|
13.6 |
% |
|
300 |
|
bps. | |
| CONSOLIDATED RESULTS | |||||||||||
| Operating Income (GAAP) | $ |
31,113 |
|
$ |
32,380 |
|
|
(3.9 |
) |
||
| Restructuring/reduction in force charges |
|
658 |
|
|
- |
|
|||||
| Operating Income as adjusted (Non-GAAP) (1) | $ |
31,771 |
|
$ |
32,380 |
|
|
(1.9 |
) |
||
| Operating Margin (GAAP) |
|
10.0 |
% |
|
10.7 |
% |
|
(70 |
) |
bps. | |
| Operating Margin as adjusted (Non-GAAP) (1) |
|
10.2 |
% |
|
10.7 |
% |
|
(50 |
) |
bps. | |
| Diluted Net Income per Share (GAAP) | $ |
0.40 |
|
$ |
0.38 |
|
|
5.3 |
|
||
| Restructuring/reduction in force charges |
|
0.01 |
|
|
- |
|
|||||
| Diluted Net Income per Share as adjusted (Non-GAAP) (1) | $ |
0.41 |
|
$ |
0.38 |
|
|
7.9 |
|
||
| Full-Year 2021 | Full-Year 2022 Outlook | ||||||||||
| Diluted Net Income per Share (GAAP) | $ |
1.96 |
|
$ |
2.17 |
|
to | $ |
2.37 |
|
|
| Foreign tax matters |
|
(0.04 |
) |
- |
|||||||
| Restructuring/reduction in force charges |
|
0.02 |
|
0.03 |
|||||||
| Diluted Net Income per Share as adjusted (Non-GAAP) (1) | $ |
1.94 |
|
$ |
2.20 |
|
to | $ |
2.40 |
|
|
| Notes: |
| (1) The Company has excluded charges related to restructuring actions at certain businesses from its "as adjusted" financial measurements for 2022. 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 tax effects of the restructuring actions were calculated based on the respective tax jurisdictions and ranged from approximately 15% to approximately 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/20220429005065/en/
Contacts
Investors:
Barnes Group Inc.
William Pitts
Vice President, Investor Relations
860.583.7070
