Barnes Reports First Quarter 2023 Financial Results
Barnes Group, a global provider of industrial technologies, reported strong Q1 2023 results with net sales of $335 million, a 7% increase year-over-year, driven by 9% organic sales growth. The operating margin stood at 6.9%, while the adjusted operating margin improved to 11.1%, reflecting a 90 basis points increase. GAAP EPS was $0.26, down from $0.40 in the prior year, but adjusted EPS rose 15% to $0.47. The company forecasts organic sales growth of 6% to 8% for 2023, with adjusted EPS expected between $2.15 and $2.30, up 9% to 16% from 2022. CEO Thomas J. Hook highlighted ongoing restructuring efforts aimed at enhancing profitability and cash flow.
- Organic sales growth of 9% in Q1 2023.
- Adjusted operating margin increased to 11.1%, up 90 bps.
- Adjusted EPS rose 15% to $0.47.
- 2023 adjusted EPS guidance of $2.15 to $2.30, 9% to 16% increase from 2022.
- Free cash flow improved to $21.3 million, compared to negative $16.7 million last year.
- GAAP EPS decreased to $0.26 from $0.40 year-over-year.
- Operating income declined to $23.3 million from $31.1 million a year ago.
- Interest expense increased by $1.7 million due to higher average interest rates.
Delivers Strong Orders and Organic Sales, Improved Adjusted Operating Profit Margin
-
Sales of
$335 million 7% versus prior year period; Organic Sales up9% -
Operating Margin of
6.9% ; Adjusted Operating Margin of11.1% , up 90 bps from a year ago -
GAAP EPS of
$0.26 $0.47 15% versus prior year period -
Forecasts 2023 Organic Sales Growth of +
6% to +8% -
2023 Adjusted EPS of
$2.15 $2.30 9% to16% from 2022 Adjusted EPS of$1.98
“Our ‘Top line, Bottom line, Pipeline’ focus is delivering improved financial performance with solid orders, organic sales growth, and improved adjusted operating margin in the first quarter,” said
First Quarter 2023 Highlights
First quarter 2023 net sales of
Interest expense in the first quarter of 2023 was
The Company’s effective tax rate in the first quarter of 2023 was
Net income for the first quarter was
First quarter cash provided by operating activities was
A table reconciling non-GAAP to GAAP financial measures, including forward looking outlook information, is presented at the end of this press release.
Restructuring and Strategic Transformation Related Activities
With a focus on driving Core Business Execution, the Company announced in mid-2022 a significant multi-phase transformation initiative. This comprehensive program targets improved global competitiveness, accelerated revenue growth, institutionalized operational efficiencies, enhanced cash flow, and reduced organizational complexity. Solid progress on previously announced phases is being made and we continue to anticipate
Segment Performance
Industrial
First quarter sales were
Aerospace
First quarter sales were
Aerospace OEM backlog ended the year at
Balance Sheet and Liquidity
Barnes’ balance sheet and liquidity profile remain well-positioned. The Company has liquidity of
2023 Full Year Outlook
Barnes continues to expect organic sales growth of
Conference Call Information
Barnes will conduct a conference call with investors to discuss the first quarter 2023 results at
The conference is also available by direct dial at (888) 510-2379 in the
In addition, the call will be recorded and available for playback from
Note:
(1) Organic sales growth represents the total reported sales increase within the Company’s ongoing business less the impact of foreign currency translation and acquisition and divestitures completed in the preceding twelve months.
About Barnes
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 rising interest rates, global price inflation, and shortages impacting the availability of materials; the duration and severity of the COVID-19 pandemic, and governments’ responses to the pandemic such as regional lockdowns, including their 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; acts of 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-imposed sanctions, 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, energy, 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; the impact of shareholder activism; and other risks and uncertainties described in documents filed with or furnished to the
Category: Earnings
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||
| (Dollars in thousands, except per share data) | |||||||||||
| (Unaudited) | |||||||||||
| Three months ended |
|||||||||||
|
2023 |
|
|
2022 |
|
% Change |
|||||
| Net sales | $ |
335,357 |
|
$ |
312,383 |
|
7.4 |
|
|||
| Cost of sales |
|
226,242 |
|
|
207,190 |
|
9.2 |
|
|||
| Selling and administrative expenses |
|
85,831 |
|
|
74,080 |
|
15.9 |
|
|||
|
312,073 |
|
|
281,270 |
|
11.0 |
|
||||
| Operating income |
|
23,284 |
|
|
31,113 |
|
(25.2 |
) |
|||
| Operating margin |
|
6.9 |
% |
|
10.0 |
% |
|||||
| Interest expense |
|
5,308 |
|
|
3,567 |
|
48.8 |
|
|||
| Other expense (income), net |
|
1,340 |
|
|
1,630 |
|
(17.8 |
) |
|||
| Income before income taxes |
|
16,636 |
|
|
25,916 |
|
(35.8 |
) |
|||
| Income taxes |
|
3,477 |
|
|
5,432 |
|
(36.0 |
) |
|||
| Net income | $ |
13,159 |
|
$ |
20,484 |
|
(35.8 |
) |
|||
| Common dividends | $ |
8,096 |
|
$ |
8,111 |
|
(0.2 |
) |
|||
| Per common share: | |||||||||||
| Net income: | |||||||||||
| Basic | $ |
0.26 |
|
$ |
0.40 |
|
(35.0 |
) |
|||
| Diluted |
|
0.26 |
|
|
0.40 |
|
(35.0 |
) |
|||
| Dividends |
|
0.16 |
|
|
0.16 |
|
- |
|
|||
| Weighted average common shares outstanding: | |||||||||||
| Basic |
|
50,989,169 |
|
|
51,022,417 |
|
(0.1 |
) |
|||
| Diluted |
|
51,264,435 |
|
|
51,168,622 |
|
0.2 |
|
|||
| OPERATIONS BY REPORTABLE BUSINESS SEGMENT | |||||||||||
| (Dollars in thousands) | |||||||||||
| (Unaudited) | |||||||||||
| Three months ended |
|||||||||||
|
2023 |
|
|
2022 |
|
% Change |
|||||
| Net sales | |||||||||||
| Industrial | $ |
218,109 |
|
$ |
211,672 |
|
3.0 |
|
|||
| Aerospace |
|
117,256 |
|
|
100,711 |
|
16.4 |
|
|||
| Intersegment sales |
|
(8 |
) |
|
- |
|
|||||
| Total net sales | $ |
335,357 |
|
$ |
312,383 |
|
7.4 |
|
|||
| Operating profit | |||||||||||
| Industrial | $ |
4,533 |
|
$ |
14,734 |
|
(69.2 |
) |
|||
| Aerospace |
|
18,751 |
|
|
16,379 |
|
14.5 |
|
|||
| Total operating profit | $ |
23,284 |
|
$ |
31,113 |
|
(25.2 |
) |
|||
| Operating margin | Change | ||||||||||
| Industrial |
|
2.1 |
% |
|
7.0 |
% |
(490 |
) |
bps. | ||
| Aerospace |
|
16.0 |
% |
|
16.3 |
% |
(30 |
) |
bps. | ||
| Total operating margin |
|
6.9 |
% |
|
10.0 |
% |
(310 |
) |
bps. | ||
| CONSOLIDATED BALANCE SHEETS | |||||||
| (Dollars in thousands) | |||||||
| (Unaudited) | |||||||
|
|
||||||
| Assets | |||||||
| Current assets | |||||||
| Cash and cash equivalents | $ |
78,684 |
$ |
76,858 |
|||
| Accounts receivable |
|
297,901 |
|
291,883 |
|||
| Inventories |
|
292,671 |
|
283,402 |
|||
| Prepaid expenses and other current assets |
|
84,894 |
|
80,161 |
|||
| Total current assets |
|
754,150 |
|
732,304 |
|||
| Deferred income taxes |
|
13,166 |
|
18,028 |
|||
| Property, plant and equipment, net |
|
321,585 |
|
320,139 |
|||
|
847,821 |
|
835,472 |
||||
| Other intangible assets, net |
|
435,489 |
|
442,492 |
|||
| Other assets |
|
72,158 |
|
65,295 |
|||
| Total assets | $ |
2,444,369 |
$ |
2,413,730 |
|||
| Liabilities and Stockholders' Equity | |||||||
| Current liabilities | |||||||
| Notes and overdrafts payable | $ |
29 |
$ |
8 |
|||
| Accounts payable |
|
153,362 |
|
145,060 |
|||
| Accrued liabilities |
|
158,121 |
|
158,568 |
|||
| Long-term debt - current |
|
1,484 |
|
1,437 |
|||
| Total current liabilities |
|
312,996 |
|
305,073 |
|||
| Long-term debt |
|
563,943 |
|
569,639 |
|||
| Accrued retirement benefits |
|
48,021 |
|
54,352 |
|||
| Deferred income taxes |
|
63,364 |
|
62,562 |
|||
| Long-term tax liability |
|
39,086 |
|
39,086 |
|||
| Other liabilities |
|
36,411 |
|
36,691 |
|||
| Total stockholders' equity |
|
1,380,548 |
|
1,346,327 |
|||
| Total liabilities and stockholders' equity | $ |
2,444,369 |
$ |
2,413,730 |
|||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
| (Dollars in thousands) | |||||||||
| (Unaudited) | |||||||||
| Three months ended |
|||||||||
|
2023 |
|
|
2022 |
|
||||
| Operating activities: | |||||||||
| Net income | $ |
13,159 |
|
$ |
20,484 |
|
|||
| Adjustments to reconcile net income to net cash provided (used) by operating activities: | |||||||||
| Depreciation and amortization |
|
24,048 |
|
|
22,301 |
|
|||
| Gain on disposition of property, plant and equipment |
|
(55 |
) |
|
(1 |
) |
|||
| Stock compensation expense |
|
2,627 |
|
|
2,534 |
|
|||
| Changes in assets and liabilities: | |||||||||
| Accounts receivable |
|
(2,209 |
) |
|
(10,961 |
) |
|||
| Inventories |
|
(7,062 |
) |
|
(15,154 |
) |
|||
| Prepaid expenses and other current assets |
|
(3,412 |
) |
|
(5,809 |
) |
|||
| Accounts payable |
|
6,450 |
|
|
4,163 |
|
|||
| Accrued liabilities |
|
(636 |
) |
|
(28,197 |
) |
|||
| Deferred income taxes |
|
1,356 |
|
|
2,115 |
|
|||
| Long-term retirement benefits |
|
(3,883 |
) |
|
(1,862 |
) |
|||
| Other |
|
1,832 |
|
|
1,074 |
|
|||
| Net cash provided (used) by operating activities |
|
32,215 |
|
|
(9,313 |
) |
|||
| Investing activities: | |||||||||
| Proceeds from disposition of property, plant and equipment |
|
190 |
|
|
60 |
|
|||
| Capital expenditures |
|
(10,946 |
) |
|
(7,405 |
) |
|||
| Other |
|
(525 |
) |
|
(1,094 |
) |
|||
| Net cash used by investing activities |
|
(11,281 |
) |
|
(8,439 |
) |
|||
| Financing activities: | |||||||||
| Net change in other borrowings |
|
(109 |
) |
|
(784 |
) |
|||
| Payments on long-term debt |
|
(44,343 |
) |
|
(34,918 |
) |
|||
| Proceeds from the issuance of long-term debt |
|
31,208 |
|
|
35,000 |
|
|||
| Proceeds from the issuance of common stock |
|
94 |
|
|
153 |
|
|||
| Dividends paid |
|
(8,096 |
) |
|
(8,111 |
) |
|||
| Withholding taxes paid on stock issuances |
|
(252 |
) |
|
(49 |
) |
|||
| Other |
|
(1,139 |
) |
|
(3,665 |
) |
|||
| Net cash used by financing activities |
|
(22,637 |
) |
|
(12,374 |
) |
|||
| Effect of exchange rate changes on cash flows |
|
1,438 |
|
|
137 |
|
|||
| Decrease in cash, cash equivalents and restricted cash |
|
(265 |
) |
|
(29,989 |
) |
|||
| Cash, cash equivalents and restricted cash at beginning of period |
|
81,128 |
|
|
111,909 |
|
|||
| Cash, cash equivalents and restricted cash at end of period |
|
80,863 |
|
|
81,920 |
|
|||
| Less: Restricted cash, included in Prepaid expenses and other current assets |
|
(2,179 |
) |
|
(4,434 |
) |
|||
| Less: Restricted cash, included in Other assets |
|
- |
|
|
(2,231 |
) |
|||
| Cash and cash equivalents at end of period | $ |
78,684 |
|
$ |
75,255 |
|
|||
| RECONCILIATION OF NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES TO FREE CASH FLOW | ||||||||||
| (Dollars in thousands) | ||||||||||
| (Unaudited) | ||||||||||
| Three months ended |
||||||||||
|
2023 |
|
|
2022 |
|
|||||
| Free cash flow: | ||||||||||
| Net cash provided (used) by operating activities | $ |
32,215 |
|
$ |
(9,313 |
) |
||||
| Capital expenditures |
|
(10,946 |
) |
|
(7,405 |
) |
||||
| Free cash flow(1) | $ |
21,269 |
|
$ |
(16,718 |
) |
||||
| 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. | |||||
| NON-GAAP FINANCIAL MEASURE RECONCILIATION | |||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||
| (Unaudited) | |||||||||||||||
| Three months ended |
|||||||||||||||
|
2023 |
|
|
2022 |
|
% Change |
|||||||||
| SEGMENT RESULTS | |||||||||||||||
| Operating Profit - Industrial Segment (GAAP) | $ |
4,533 |
|
$ |
14,734 |
|
|
(69.2 |
) |
||||||
| Restructuring/reduction in force and transformation-related charges |
|
12,110 |
|
|
304 |
|
|||||||||
| Operating Profit - Industrial Segment as adjusted (Non-GAAP) (1) | $ |
16,643 |
|
$ |
15,038 |
|
|
10.7 |
|
||||||
| Operating Margin - Industrial Segment (GAAP) |
|
2.1 |
% |
|
7.0 |
% |
|
(490 |
) |
bps. | |||||
| Operating Margin - Industrial Segment as adjusted (Non-GAAP) (1) |
|
7.6 |
% |
|
7.1 |
% |
|
50 |
|
bps. | |||||
| Operating Profit - Aerospace Segment (GAAP) | $ |
18,751 |
|
$ |
16,379 |
|
|
14.5 |
|
||||||
| Restructuring/reduction in force and transformation-related charges |
|
1,769 |
|
|
354 |
|
|||||||||
| Operating Profit - Aerospace Segment as adjusted (Non-GAAP) (1) | $ |
20,520 |
|
$ |
16,733 |
|
|
22.6 |
|
||||||
| Operating Margin - Aerospace Segment (GAAP) |
|
16.0 |
% |
|
16.3 |
% |
|
(30 |
) |
bps. | |||||
| Operating Margin - Aerospace Segment as adjusted (Non-GAAP) (1) |
|
17.5 |
% |
|
16.6 |
% |
|
90 |
|
bps. | |||||
| CONSOLIDATED RESULTS | |||||||||||||||
| Operating Income (GAAP) | $ |
23,284 |
|
$ |
31,113 |
|
|
(25.2 |
) |
||||||
| Restructuring/reduction in force and transformation-related charges |
|
13,879 |
|
|
658 |
|
|||||||||
| Operating Income as adjusted (Non-GAAP) (1) | $ |
37,163 |
|
$ |
31,771 |
|
|
17.0 |
|
||||||
| Operating Margin (GAAP) |
|
6.9 |
% |
|
10.0 |
% |
|
(310 |
) |
bps. | |||||
| Operating Margin as adjusted (Non-GAAP) (1) |
|
11.1 |
% |
|
10.2 |
% |
|
90 |
|
bps. | |||||
| Diluted Net Income per Share (GAAP) | $ |
0.26 |
|
$ |
0.40 |
|
|
(35.0 |
) |
||||||
| Restructuring/reduction in force and transformation-related charges |
|
0.21 |
|
|
0.01 |
|
|||||||||
| Diluted Net Income per Share as adjusted (Non-GAAP) (1) | $ |
0.47 |
|
$ |
0.41 |
|
|
14.6 |
|
||||||
| Full-Year 2022 | Full-Year 2023 Outlook | ||||||||||||||
| Operating Margin (GAAP) |
|
4.5 |
% |
|
9.5 |
% |
to |
|
10.5 |
% |
|||||
| Restructuring/reduction in force and transformation-related charges |
|
1.6 |
% |
|
|||||||||||
|
5.4 |
% |
- |
||||||||||||
| Operating Margin as adjusted (Non-GAAP) (1) |
|
11.6 |
% |
|
12.5 |
% |
to |
|
13.5 |
% |
|||||
| Diluted Net Income per Share (GAAP) | $ |
0.26 |
|
$ |
1.59 |
|
to |
$ |
1.74 |
|
|||||
| Restructuring/reduction in force and transformation-related charges |
|
0.33 |
|
0.56 |
|||||||||||
| Tax related CEO transition costs |
|
0.06 |
|
- |
|||||||||||
|
1.33 |
|
- |
||||||||||||
| Diluted Net Income per Share as adjusted (Non-GAAP) (1) | $ |
1.98 |
|
$ |
2.15 |
|
to | $ |
2.30 |
|
|||||
| Notes: | ||||||
| (1) The Company has excluded charges related to restructuring/reduction in force actions at certain businesses and business transformation costs (consulting fees related to transformation initiatives) from its "as adjusted" financial measurements for 2023. The Company has excluded the following from its "as adjusted" financial measurements for 2022: 1) charges related to restructuring activities and actions at certain businesses, including |
||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20230427005153/en/
Investors:
Vice President, Investor Relations
860.583.7070
Source:
FAQ
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