BRISTOL, Conn.--(BUSINESS WIRE)--Barnes Group Inc. (NYSE: B), a global provider of highly engineered products, differentiated industrial technologies, and innovative solutions, today reported financial results for the third quarter of 2019.

“The global industrial environment remains challenging across a number of fronts, requiring our management team to leverage our strengths in innovation, adapting our business approach, and managing our cost structure to effectively compete. This will allow Barnes Group’s transformed portfolio to maximize opportunities irrespective of market conditions,” said Patrick J. Dempsey, President and Chief Executive Officer of Barnes Group Inc. “Continuing strength in our Aerospace business led to another record quarter of segment revenue and operating profit, as both new manufacturing and aftermarket experienced excellent growth. Our content on key strategic programs continues to translate into current performance and positions us very well for the future. At Industrial, despite end market weakness, proactive management actions and leveraging of the Barnes Enterprise System have allowed for sequential and year-over-year improvement in operating margin,” added Dempsey.

Third Quarter 2019 Highlights

Net sales of $373 million in the third quarter were up 1% from $370 million in the prior year period, with organic sales (1) declining 1%. Acquisition sales contributed 4%, while foreign exchange negatively impacted sales by 2%. Operating income was $67.6 million, up 12% from an adjusted $60.6 million in the third quarter of 2018. Operating margin was 18.1%, up 170 bps versus an adjusted operating margin of 16.4% in the prior year period.

Interest expense increased $1.3 million, or 32%, to $5.3 million as a result of higher average borrowings due to the Gimatic acquisition, partially offset by a lower average interest rate.

The Company’s effective tax rate was 23.4% for the third quarter of 2019 compared with 25.6% for the prior year period largely due to a benefit of a foreign tax holiday which was granted in December 2018.

Net income was $45.8 million, or $0.89 per diluted share, compared to $39.1 million, or $0.75 per diluted share, a year ago. Net income per share was up 14% from an adjusted $0.78 a year ago. Third quarter 2018 adjusted net income per share excludes $0.02 of Industrial Gas Springs (IGS) short-term purchase accounting adjustments and $0.01 of acquisition transaction costs, both in the Industrial Segment.

Year-to-date cash provided by operating activities was $161.3 million versus $158.0 million in the prior year period. In the third quarter, the Company made a discretionary $15 million pension contribution which reduced 2019 year-to-date operating cash flow. Free cash flow was $123.6 million compared to $117.8 million last year. Capital expenditures were $37.7 million, down $2.4 million from a year ago.

Segment Performance

Industrial

Third quarter sales were $231.7 million, down 5% from $244.1 million in the prior year period. Organic sales decreased approximately 8% primarily related to lingering softness due to trade uncertainties and slowing global economies. Unfavorable foreign exchange decreased sales by $7.0 million, or 3%, while acquisition revenues from IGS and Gimatic contributed $13.6 million, or 6%.

Operating profit in the third quarter was $34.8 million, up 5% from $33.3 million in the prior year period. Excluding IGS short-term purchase accounting adjustments and acquisition transaction costs in the prior year quarter, operating profit was approximately the same as an adjusted $34.9 million a year ago. Operating margin was 15.0%, up 70 bps from an adjusted 14.3% last year, primarily driven by favorable productivity.

Aerospace

Third quarter 2019 sales were $140.9 million, up 12% from $125.7 million in the same period last year. Aerospace original equipment manufacturing (“OEM”) sales increased 10% due to the ramping of new engine programs while aftermarket sales increased 17% from continuing strength in maintenance, repair and overhaul, and spare parts sales.

Operating profit was $32.7 million for the third quarter of 2019, up 27% from $25.7 million in the prior year period, primarily reflecting the profit impact of higher sales volumes. Operating margin of 23.2% was up 270 bps from 20.5% a year ago.

Aerospace OEM backlog ended the third quarter at $810 million, up 2% from the end of the second quarter of 2019. The Company expects to ship approximately 50% of this backlog over the next 12 months.

Updated 2019 Outlook

Barnes Group now expects flat 2019 total revenue growth, with an organic sales decline of low-single digits, down from our prior expectation of slightly positive organic growth. Foreign exchange is anticipated to negatively impact revenues by approximately 2% for the year, while acquisition revenues are forecasted to provide 4%. Adjusted operating margin is forecasted to be approximately 16.0%, on the high end of our prior expectation. Earnings are now expected to be in the range of $3.10 to $3.15 per diluted share, down from the high end of our prior expectation of $3.10 to $3.20 per diluted share. On an adjusted basis, excluding approximately $0.08 of Gimatic short term purchase accounting adjustments, earnings per share are now expected to be $3.18 to $3.23, down 1% to flat from 2018’s adjusted earnings of $3.22 per share. Further, the Company expects capital expenditures of approximately $55 million and cash conversion of approximately 100% of net income. The effective tax rate for 2019 is expected to be approximately 23.5%.

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. Barnes Group’s skilled and dedicated employees around the globe are committed to the highest performance standards and achieving consistent, sustainable profitable growth. For more information, visit www.BGInc.com.