The market expects Barnes Group (B) to deliver a year-over-year decline in earnings on higher revenues when it reports results for the quarter ended March 2024. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates.The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on ...

Core Viewpoint - Barnes Group Inc. has underperformed due to weaknesses in the Industrial segment, rising operating costs, and increasing debt levels, which are expected to hinder earnings in the upcoming quarters [1] Business Weakness - The Industrial segment is facing challenges from weak motion control solutions and automation businesses, with shipment delays and lagging orders being significant concerns [2] - In Q4 2023, the Aerospace segment's adjusted operating margin fell by 360 basis points year-over-year due to long-term intangible amortization from the MB Aerospace acquisition [2] - Organic sales in Motion Control Solutions and Automation businesses decreased by 10% and 7%, respectively, in the same period [2] - Factors such as higher-than-expected transformation costs, a slowdown in the U.S. economy, geopolitical instability, and labor productivity challenges are likely to negatively impact performance [2] Steep Costs - The cost of sales increased by 44% year-over-year in 2023, driven by high raw material and labor costs [3] - Selling and administrative expenses rose by 4.5% during the same period, which could adversely affect margins and profitability if costs continue to escalate [3] High Debt - Barnes ended Q4 2023 with long-term debt of $1.3 billion, a significant increase from $569.6 million at the end of 2022 [4] - Interest expenses rose to $23.6 million in Q4 compared to $4.4 million in the previous year, primarily due to the MB Aerospace acquisition [4] - The increase in interest expense contributed to a 21% year-over-year decline in adjusted earnings per share in Q4 [4] Southbound Estimate Revisions - The Zacks Consensus Estimate for Barnes' 2024 earnings has been revised downward by 1.2% in the past 60 days [4] Price Performance - Shares of Barnes have declined by 13.3% over the past year, contrasting with the industry's growth of 29.9% [4]

Barnes Group Inc. (B) recently announced that it has completed the expansion of its Maintenance, Repair and Overhaul (MRO) facility based in East Granby, CT.The Barnes Aerospace East Granby facility is engaged in performing complex repairing of cases, diffusers, frames, bearing housings and rotating hardware across various military and commercial engine platforms for the aerospace and industrial gas turbine markets.As noted, the facility is certified by the U.S. Federal Aviation Administration, the Civil Av ...

Barnes Group Inc. (B) recently announced the completion of the sale of its Associated Spring and Hänggi businesses to One Equity Partners for $175 million, out of which payment of $21 million will be made after the transfer of certain foreign assets. This deal was announced in January 2024.Headquartered in New York, One Equity Partners is a middle-market private equity company that invests in the industrial, technology and healthcare sectors in North America and Europe. The company has assets under manageme ...

Group 1: Manufacturing Sector Outlook - The U.S. manufacturing sector has reported its first expansionary reading in March 2024 after a year of contraction, indicating a potential turnaround in the economy [2][3] - China's manufacturing PMI also showed its first expansionary reading since Q3 2023, suggesting a synchronized recovery between the U.S. and China [3] Group 2: Stock Performance and Projections - Analysts favor stocks like Stanley Black & Decker Inc. (SWK), Crane (CR), and Flowserve Co. (FLS) for their expected earnings growth in the manufacturing sector [2][6] - Stanley Black & Decker is projected to have a 37% EPS growth, significantly higher than the industry average, with potential for the stock to return to its all-time high of $225 [6] - Crane is expected to achieve a 17.7% EPS growth, with a forward P/E ratio of 24x, indicating strong market confidence [6] - Flowserve is anticipated to see a 17.3% EPS increase, also surpassing the industry average, with institutional support from firms like Vanguard Group [6] Group 3: Economic Influences - A potential decrease in the dollar index due to anticipated interest rate cuts by the Federal Reserve could enhance the attractiveness of American exports [4] - Lower interest rates may stimulate demand in sectors like aerospace, benefiting companies like Crane and indirectly supporting stocks like Boeing [8] Group 4: Investment Trends - Analysts project an average EPS growth of 14.4% for the industrial and manufacturing sectors over the next 12 months, guiding investors towards companies poised for economic growth [5] - Warren Buffett has begun investing in homebuilding stocks, anticipating a construction boom in the U.S. [7]

Part I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Barnes Group Inc. is a global manufacturer focused on scaling Aerospace and rationalizing Industrial operations - Barnes Group Inc. focuses on three strategic priorities: driving core business execution, scaling its Aerospace business, and integrating, consolidating, and rationalizing its Industrial business[8](index=8&type=chunk)[9](index=9&type=chunk)[10](index=10&type=chunk) - The company completed the acquisition of MB Aerospace in Q3 2023, significantly expanding its global aerospace business with diverse capabilities[9](index=9&type=chunk)[122](index=122&type=chunk) - In January 2024, Barnes Group announced the sale of its Associated Spring and Hänggi businesses (within the MCS unit) for **$175 million**, aligning with its Industrial rationalization strategy[11](index=11&type=chunk)[123](index=123&type=chunk) Key Customer Sales Concentration (2023) | Segment | Largest Customer Sales | Next Four Largest Customers Sales | Total Top 5 Customers Sales | |:-----------|:-----------------------|:----------------------------------|:----------------------------| | Aerospace | 49% (GE) | 15% | 64% | | Industrial | N/A | N/A | 10% | - As of December 31, 2023, the Company had approximately **6,500 employees** worldwide, with **25% in Asia-Pacific**, **45% in Europe, Middle East, and Africa**, and **30% in the Americas**[17](index=17&type=chunk) [Item 1A. Risk Factors](index=8&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse risks from customer dependence, competitive markets, global operations, indebtedness, and acquisitions - Dependence on a small number of significant customers, with GE accounting for **21% of total sales** and **49% of Aerospace's net sales** in 2023, poses a significant risk[35](index=35&type=chunk) Order Backlog (in millions USD) | Segment | December 31, 2023 | December 31, 2022 | |:-----------|:------------------|:------------------| | Aerospace | $1,257.3 | $750.1 | | Industrial | $272.9 | $270.2 | | Total | $1,530.2 | $1,020.3 | - Approximately **50% of the consolidated year-end backlog** is expected to be recognized during 2024[38](index=38&type=chunk) - The company faces risks from highly competitive markets, the need for continuous product innovation, and potential obsolescence of products due to new technologies[42](index=42&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) - Global operations expose the company to geopolitical risks (e.g., Russia-Ukraine war, Red Sea freight disruptions), regulatory complexities, and foreign currency fluctuations[53](index=53&type=chunk)[55](index=55&type=chunk)[65](index=65&type=chunk)[126](index=126&type=chunk) - Significant indebtedness (**$1,290.8 million** at Dec 31, 2023) and potential goodwill impairment (Automation reporting unit had a **$68.2 million charge** in 2022) are key financial risks[81](index=81&type=chunk)[84](index=84&type=chunk)[136](index=136&type=chunk) - The acquisition of MB Aerospace and other strategic initiatives carry integration risks, potential for unexpected costs, and challenges in realizing anticipated synergies[92](index=92&type=chunk)[93](index=93&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) [Item 1B. Unresolved Staff Comments](index=20&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report - No unresolved staff comments[100](index=100&type=chunk) [Item 1C. Cybersecurity](index=21&type=section&id=Item%201C.%20Cybersecurity) Barnes Group Inc. maintains a cybersecurity risk management program based on the NIST framework with Board oversight - The company maintains a cybersecurity risk management program based on the NIST Cybersecurity framework[101](index=101&type=chunk) - Key activities include periodic third-party penetration testing, internal user training, tabletop exercises, and annual reviews of critical vendors' cybersecurity positions[102](index=102&type=chunk) - No cybersecurity threat has materially affected the company's business strategy, results of operations, or financial condition to date[103](index=103&type=chunk) - The cybersecurity program is managed by a global internal team, led by the VP, IT, who reports to the Senior VP, CFO, with oversight from the Board of Directors through the Audit Committee[104](index=104&type=chunk)[105](index=105&type=chunk) [Item 2. Properties](index=22&type=section&id=Item%202.%20Properties) Barnes Group Inc. operates a global network of owned and leased manufacturing and non-manufacturing facilities Number of Owned Facilities (December 31, 2023) | Location | Aerospace | Industrial | Other | Total | |:----------------------|:----------|:-----------|:------|:------| | Manufacturing: | | | | | | North America | 5 | 4 | — | 9 | | Europe | 3 | 8 | — | 11 | | Asia | 2 | 1 | — | 3 | | Central & Latin America | — | 2 | — | 2 | | **Total Manufacturing** | **10** | **15** | **—** | **25**| | Non-Manufacturing: | | | | | | North America | — | 1 | 1* | 2 | | **Total Non-Manufacturing** | **—** | **1** | **1** | **2** | Number of Leased Facilities (December 31, 2023) | Location | Aerospace | Industrial | Other | Total | |:----------------------|:----------|:-----------|:------|:------| | Manufacturing: | | | | | | North America | 4 | 2 | — | 6 | | Europe | 2 | 4 | — | 6 | | Asia | 8 | 4 | — | 12 | | **Total Manufacturing** | **14** | **10** | **—** | **24**| | Non-Manufacturing: | | | | | | North America | 2 | 9 | — | 11 | | Europe | 2 | 27 | — | 29 | | Asia | — | 23 | — | 23 | | Central & Latin America | — | 3 | — | 3 | | **Total Non-Manufacturing** | **4** | **62** | **—** | **66**| [Item 3. Legal Proceedings](index=23&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings, not expected to materially affect its financial position - The company is subject to litigation in the ordinary course of business[110](index=110&type=chunk) - Management expects that the outcome of current legal proceedings will not have a material adverse effect on consolidated financial position, cash flows, or results of operations[110](index=110&type=chunk) [Item 4. Mine Safety Disclosures](index=23&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[111](index=111&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=24&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Barnes Group Inc.'s common stock trades on the NYSE, with future dividends subject to financial condition and credit limitations - The Company's common stock is traded on the New York Stock Exchange under the symbol "B"[113](index=113&type=chunk) - As of February 21, 2024, there were approximately **1,533 holders of record** of the Company's common stock[113](index=113&type=chunk) - Payment of future dividends depends on financial condition, results of operations, and limitations from financial covenants under credit facilities or debt indentures[114](index=114&type=chunk) Issuer Purchases of Equity Securities (Q4 2023) | Period | Total Number of Shares Purchased | Average Price Per Share | |:------------------|:---------------------------------|:------------------------| | October 1-31, 2023| 179 | $33.25 | | November 1-30, 2023| 1,073 | $22.22 | | December 1-31, 2023| 685 | $31.68 | | **Total** | **1,937** | **$26.58** | - All equity security acquisitions in Q4 2023 were for income tax withholding upon share issuance from equity compensation plans; no shares were purchased under the publicly announced Repurchase Program in 2023[118](index=118&type=chunk)[144](index=144&type=chunk)[168](index=168&type=chunk) [Item 6. Reserved](index=25&type=section&id=Item%206.%20Reserved) This item is reserved and contains no content [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's Discussion and Analysis covers Barnes Group Inc.'s 2023 financial performance, strategic initiatives, and macroeconomic impacts [Overview](index=26&type=section&id=OVERVIEW) In 2023, Barnes Group Inc. pursued business transformation, acquiring MB Aerospace and planning divestitures, achieving **15.0% net sales growth** and improved operating income - Barnes Group Inc. acquired MB Aerospace Holdings Inc. in August 2023, integrating it into the Aerospace segment to enhance growth opportunities and diversify customer base[122](index=122&type=chunk) - In January 2024, the company announced an agreement to sell its Associated Spring and Hänggi businesses for **$175.0 million**, with proceeds intended for debt reduction from the MB Aerospace acquisition[123](index=123&type=chunk) Consolidated Sales and Operating Income (2023 vs. 2022) | Metric | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | % Change | |:----------------|:--------------------|:--------------------|:----------------------|:---------| | Net Sales | $1,450.9 | $1,261.9 | $189.0 | 15.0% | | Organic Sales | N/A | N/A | $64.5 | 5.1% | | Operating Income| $89.0 | $57.1 | $31.9 | 55.8% | | Operating Margin| 6.1% | 4.5% | 1.6 pp | N/A | - The increase in operating income was largely due to favorable pricing, procurement actions, and the absence of a **$68.2 million goodwill impairment charge** from 2022, partially offset by **$45.8 million in restructuring charges** and **$13.2 million in acquisition/divestiture transaction costs**[124](index=124&type=chunk)[134](index=134&type=chunk)[136](index=136&type=chunk) [Impact of Macroeconomic Trends and Management Actions](index=26&type=section&id=Impact%20of%20Macroeconomic%20Trends%20and%20Management%20Actions) In 2023, the company faced macroeconomic challenges, responding with pricing, cost control, and strategic integration - Macroeconomic challenges in 2023 included labor and supply chain constraints, rising interest rates, and inflationary pressures, leading to increased labor and raw material costs[125](index=125&type=chunk) - Management implemented pricing actions, cost control, and productivity initiatives to mitigate these impacts[126](index=126&type=chunk) - The company is executing a multi-phased initiative to reduce costs and integrate operations, particularly within the Industrial segment, and is focused on integrating the MB Aerospace acquisition in Aerospace[126](index=126&type=chunk)[127](index=127&type=chunk) [Our Business](index=27&type=section&id=Our%20Business) Barnes Group Inc. operates through two global business segments, Aerospace and Industrial, with performance evaluated by various KPIs - The company operates under two global business segments: Aerospace and Industrial[129](index=129&type=chunk) - Key Performance Indicators (KPIs) include employee safety (total recordable incident rate, lost time incident rate), customer metrics (on-time-delivery, quality), and internal effectiveness/productivity (sales effectiveness, global sourcing, operational excellence, cost of quality, days working capital, return on invested capital)[130](index=130&type=chunk) [Key Industry Data](index=27&type=section&id=Key%20Industry%20Data) Management monitors various economic and industry data to gauge sector health and outlook for Aerospace and Industrial - Aerospace segment monitors active aircraft fleet, utilization rates, engine shop visits, airline profitability, aircraft fuel costs, passenger traffic, and OEM orders/backlog[131](index=131&type=chunk) - Industrial segment tracks manufacturing PMI Composite Index, Bureau of Economics Industrial Production Index, worldwide light/heavy-duty vehicle production forecasts, hot runner systems reports, and global GDP growth forecasts[132](index=132&type=chunk) [Results of Operations](index=28&type=section&id=RESULTS%20OF%20OPERATIONS) In 2023, Barnes Group Inc. reported **$1,450.9 million** net sales, a **15.0% increase**, with improved operating income but higher interest expense Net Sales by Segment (in millions USD) | Segment | 2023 | 2022 | Change | % Change | |:-----------|:----------|:----------|:----------|:---------| | Industrial | $842.8 | $832.7 | $10.1 | 1.2% | | Aerospace | $608.1 | $429.2 | $178.9 | 41.7% | | **Total** | **$1,450.9**| **$1,261.9**| **$189.0**| **15.0%**| - Organic sales increased by **$64.5 million (5.1%)**, almost entirely driven by Aerospace (**$64.4 million, 15.0%**); the MB Aerospace acquisition added **$114.5 million** to Aerospace sales[133](index=133&type=chunk) Expenses and Operating Income (in millions USD) | Metric | 2023 | 2022 | Change | % Change | |:--------------------------------|:------------|:------------|:------------|:---------| | Cost of sales | $1,008.8 | $840.0 | $168.8 | 20.1% | | Gross profit | $442.1 | $421.9 | $20.2 | 4.8% | | Gross profit % sales | 30.5% | 33.4% | (2.9 pp) | N/A | | Selling & administrative expenses| $353.1 | $296.6 | $56.5 | 19.1% | | Goodwill impairment charge | — | $68.2 | $(68.2) | NM | | Operating income | $89.0 | $57.1 | $31.9 | 55.9% | | Operating income % sales | 6.1% | 4.5% | 1.6 pp | N/A | - Interest expense increased by **$43.5 million** to **$58.2 million** in 2023, primarily due to bridge loan financing fees (**$9.5 million**) and higher average borrowings related to the MB Aerospace acquisition[137](index=137&type=chunk) - The effective tax rate decreased to **51.9%** in 2023 from **64.7%** in 2022, mainly due to the absence of the non-tax-deductible goodwill impairment charge from 2022[139](index=139&type=chunk) Net Income and EPS (in millions USD, except per share) | Metric | 2023 | 2022 | Change | % Change | |:------------------------|:------|:------|:-------|:---------| | Net income | $16.0 | $13.5 | $2.5 | 18.7% | | Basic EPS | $0.31 | $0.26 | $0.05 | 19.2% | | Diluted EPS | $0.31 | $0.26 | $0.05 | 19.2% | [Financial Performance by Business Segment](index=30&type=section&id=Financial%20Performance%20by%20Business%20Segment) Aerospace sales grew **41.7%** but operating profit declined due to acquisition costs, while Industrial sales were flat with improved operating profit Aerospace Segment Performance (in millions USD) | Metric | 2023 | 2022 | Change | % Change | |:----------------|:--------|:--------|:--------|:---------| | Sales | $608.1 | $429.2 | $178.9 | 41.7% | | Operating profit| $53.0 | $76.2 | $(23.2) | (30.5)% | | Operating margin| 8.7% | 17.7% | (9.0 pp)| N/A | - Aerospace sales growth was driven by volume increases in both OEM and Aftermarket businesses, with the MB Aerospace acquisition contributing **$114.5 million**[145](index=145&type=chunk) - Aerospace operating profit decreased due to **$19.2 million** in short-term purchase accounting adjustments, **$12.2 million** in acquisition transaction costs, **$8.2 million** in increased amortization, and **$7.6 million** in restructuring charges related to MB Aerospace[146](index=146&type=chunk) - Aerospace OEM backlog, including MB Aerospace, was **$1,233.6 million** at December 31, 2023, up **64.5%** from **$750.1 million** in 2022[149](index=149&type=chunk) Industrial Segment Performance (in millions USD) | Metric | 2023 | 2022 | Change | % Change | |:----------------|:--------|:--------|:--------|:---------| | Sales | $842.8 | $832.7 | $10.1 | 1.2% | | Operating profit| $36.0 | $(19.1) | $55.1 | NM | | Operating margin| 4.3% | (2.3)% | 6.6 pp | N/A | - Industrial organic sales were flat, with volume decreases in Motion Control Solutions and Molding Solutions offset by favorable pricing initiatives[152](index=152&type=chunk) - Industrial operating profit improved due to the absence of the **$68.2 million goodwill impairment charge** in 2022 and favorable pricing, partially offset by **$38.3 million in restructuring charges**[153](index=153&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Barnes Group Inc. maintains liquidity through operating cash flows and **$1,650.0 million** in new senior secured financing for the MB Aerospace acquisition - The company believes its ability to generate cash from operations is a financial strength and anticipates sufficient cash from operating activities in 2024[158](index=158&type=chunk) - In August 2023, the company entered into a new Credit Agreement for **$1,650.0 million** in senior secured financing, comprising a **$650.0 million Term Loan Facility** and a **$1,000.0 million Revolving Credit Facility**, to fund the MB Aerospace acquisition and repay existing debt[159](index=159&type=chunk) - At December 31, 2023, consolidated debt obligations totaled **$1,290.8 million**, with **67% fixed-rate** and **33% variable-rate debt**[81](index=81&type=chunk)[174](index=174&type=chunk) - The company was in compliance with all debt covenants (Total Net Leverage Ratio of **3.64** and Interest Coverage Ratio of **3.47**) as of December 31, 2023[165](index=165&type=chunk) Cash Flow Summary (in millions USD) | Activity | 2023 | 2022 | Change | |:--------------------|:----------|:----------|:----------| | Operating activities| $112.4 | $75.6 | $36.9 | | Investing activities| $(767.5) | $(36.0) | $(731.5) |\n| Financing activities| $666.6 | $(64.8) | $731.4 | | **Net Change in Cash**| **$10.9** | **$(30.8)** | **$41.7** | - Investing activities in 2023 included **$718.8 million** for the MB Aerospace acquisition and **$55.7 million** in capital expenditures. Expected capital spending for 2024 is **$70 million**[182](index=182&type=chunk) - The company expects to contribute approximately **$7.1 million** to its defined benefit pension plans in 2024[176](index=176&type=chunk) [Contractual Obligations and Commitments](index=37&type=section&id=Contractual%20Obligations%20and%20Commitments) As of December 31, 2023, Barnes Group Inc. had total contractual obligations and commitments of **$2,428.3 million** Contractual Obligations and Commitments (in millions USD, as of December 31, 2023) | Obligation Type | Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | |:----------------------------------------------|:----------|:-----------------|:----------|:----------|:------------------| | Long-term debt obligations | $1,303.4 | $10.9 | $17.2 | $657.8 | $617.5 | | Estimated interest payments | $557.9 | $98.6 | $195.1 | $178.0 | $86.2 | | Operating lease obligations | $61.0 | $13.0 | $15.7 | $9.2 | $23.1 | | Purchase obligations | $459.3 | $366.2 | $90.7 | $2.4 | — | | Expected pension contributions (2024) | $7.1 | $7.1 | — | — | — | | Expected benefit payments – other postretirement| $17.8 | $2.3 | $4.2 | $3.7 | $7.6 | | Long-term U.S. Tax Reform obligations | $21.7 | — | $21.7 | — | — | | **Total** | **$2,428.3**| **$498.1** | **$344.5**| **$851.1**| **$734.5** | [Other Matters](index=38&type=section&id=Other%20Matters) This section addresses inflation's impact, mitigation strategies, and critical accounting estimates for various financial areas - Inflation impacts labor, equipment, raw materials, freight, and utilities costs, which the company aims to offset through price increases, escalator provisions, and cost-saving initiatives[188](index=188&type=chunk) - Critical accounting estimates include inventory valuation, revenue recognition, business acquisitions, Aerospace Aftermarket Programs, pension and other postretirement benefits, income taxes, and stock-based compensation[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk)[193](index=193&type=chunk)[195](index=195&type=chunk)[198](index=198&type=chunk)[200](index=200&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk)[210](index=210&type=chunk) - A one-quarter percentage point decrease in the discount rate on U.S. pension plans would decrease 2024 pre-tax income by approximately **$8.0 million**[202](index=202&type=chunk) - The total valuation allowance for deferred tax assets as of December 31, 2023, was **$41.6 million**, with **$28.5 million** related to the MB Aerospace acquisition[421](index=421&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Barnes Group Inc. is exposed to market risks from interest rates, foreign currency, and commodity prices, using derivatives for hedging - The company's financial results are exposed to market risks from changes in interest rates, foreign currency exchange rates, and commodity prices[212](index=212&type=chunk) - Financial instruments, including interest rate swaps and foreign currency contracts, are used to hedge exposures, not for speculative or trading purposes[212](index=212&type=chunk)[213](index=213&type=chunk)[216](index=216&type=chunk)[357](index=357&type=chunk) - A hypothetical **100 basis point increase** in the interest rate on variable-rate debt would have reduced annual pretax profit by **$4.3 million** in 2023[214](index=214&type=chunk) - A **10% adverse change** in foreign currencies relative to the U.S. dollar at December 31, 2023, would have resulted in a **$2.6 million loss** in the fair value of financial instruments[215](index=215&type=chunk) - Commodity price changes, particularly for high-grade steel, stainless steel, titanium, aluminum, Inconel, Hastelloys, and other specialty metals, are managed through procurement and sales practices[218](index=218&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=45&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Barnes Group Inc.'s audited consolidated financial statements, including notes and the independent auditor's report [Consolidated Statements of Income](index=45&type=section&id=BARNES%20GROUP%20INC.%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME) In 2023, net sales increased to **$1,450.9 million**, operating income rose to **$89.0 million**, and net income was **$16.0 million** Consolidated Statements of Income (in thousands USD) | Metric | 2023 | 2022 | 2021 | |:--------------------------------|:------------|:------------|:------------| | Net sales | $1,450,871 | $1,261,868 | $1,258,846 | | Cost of sales | $1,008,786 | $839,996 | $803,850 | | Selling and administrative expenses| $353,093 | $296,559 | $304,978 | | Goodwill impairment charge | — | $68,194 | — | | Operating income | $88,992 | $57,119 | $150,018 | | Interest expense | $58,171 | $14,624 | $16,209 | | Other expense (income), net | $(2,443) | $4,310 | $5,992 | | Income before income taxes | $33,264 | $38,185 | $127,817 | | Income taxes | $17,268 | $24,706 | $27,944 | | Net income | $15,996 | $13,479 | $99,873 | | Basic EPS | $0.31 | $0.26 | $1.96 | | Diluted EPS | $0.31 | $0.26 | $1.96 | [Consolidated Statements of Comprehensive (Loss) Income](index=46&type=section&id=BARNES%20GROUP%20INC.%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20(LOSS)%20INCOME) In 2023, total comprehensive income was **$41.4 million**, a significant improvement from a **$55.2 million loss** in 2022 Consolidated Statements of Comprehensive (Loss) Income (in thousands USD) | Metric | 2023 | 2022 | 2021 | |:--------------------------------------------------|:------------|:-------------|:-------------| | Net income | $15,996 | $13,479 | $99,873 | | Unrealized (loss) gain on hedging activities, net of tax| $(20,445) | $5,781 | $917 | | Foreign currency translation adjustments, net of tax| $37,952 | $(78,110) | $(60,252) | | Defined benefit pension and other postretirement benefits, net of tax| $7,864 | $3,667 | $29,812 | | **Total other comprehensive income (loss), net of tax**| **$25,371** | **$(68,662)**| **$(29,523)**| | **Total comprehensive income (loss)** | **$41,367** | **$(55,183)**| **$70,350** | [Consolidated Balance Sheets](index=47&type=section&id=BARNES%20GROUP%20INC.%20CONSOLIDATED%20BALANCE%20SHEETS) Total assets increased to **$3,308.0 million** in 2023, primarily due to the MB Aerospace acquisition, with a corresponding rise in liabilities Consolidated Balance Sheets (in thousands USD) | Asset/Liability/Equity Category | December 31, 2023 | December 31, 2022 | |:--------------------------------------------|:------------------|:------------------| | **Assets:** | | | | Cash and cash equivalents | $89,827 | $76,858 | | Accounts receivable, net | $353,923 | $291,883 | | Inventories | $365,221 | $283,402 | | Total current assets | $906,720 | $732,304 | | Property, plant and equipment, net | $402,697 | $320,139 | | Goodwill | $1,183,624 | $835,472 | | Other intangible assets, net | $706,471 | $442,492 | | Total assets | $3,308,014 | $2,413,730 | | **Liabilities:** | | | | Total current liabilities | $396,610 | $305,073 | | Long-term debt | $1,279,962 | $569,639 | | Accrued retirement benefits | $45,992 | $54,352 | | Deferred income taxes | $120,608 | $62,562 | | Total liabilities | $1,945,841 | $1,068,000 | | **Stockholders' Equity:** | | | | Total stockholders' equity | $1,362,263 | $1,346,327 | [Consolidated Statements of Cash Flows](index=48&type=section&id=BARNES%20GROUP%20INC.%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Operating cash flow increased to **$112.4 million** in 2023, while investing activities used **$767.5 million** for the MB Aerospace acquisition Consolidated Statements of Cash Flows (in thousands USD) | Activity | 2023 | 2022 | 2021 | |:--------------------------------------------------|:------------|:------------|:------------| | Net cash provided by operating activities | $112,415 | $75,559 | $167,806 | | Net cash used in investing activities | $(767,521) | $(35,986) | $(29,806) | | Net cash provided by (used in) financing activities| $666,562 | $(64,829) | $(114,666) | | Effect of exchange rate changes on cash flows | $(545) | $(5,525) | $(2,893) | | **Increase (decrease) in cash, cash equivalents and restricted cash**| **$10,911** | **$(30,781)**| **$20,441** | | Cash, cash equivalents and restricted cash at end of year| $92,039 | $81,128 | $111,909 | [Consolidated Statements of Changes in Stockholders' Equity](index=49&type=section&id=BARNES%20GROUP%20INC.%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20STOCKHOLDERS'%20EQUITY) Total stockholders' equity increased to **$1,362.3 million** in 2023, driven by comprehensive income, partially offset by dividends Consolidated Statements of Changes in Stockholders' Equity (in thousands USD) | Metric | December 31, 2023 | December 31, 2022 | December 31, 2021 | |:----------------------------------------------|:------------------|:------------------|:------------------| | Total Stockholders' Equity, beginning of year | $1,346,327 | $1,428,766 | $1,382,677 | | Comprehensive income (loss) | $41,367 | $(55,183) | $70,350 | | Dividends declared ($0.64 per share) | $(32,412) | $(32,376) | $(32,402) | | Residual interest in subsidiary | $(2,381) | — | $2,177 | | Common stock repurchases | — | $(6,721) | $(5,229) | | Employee stock plans | $9,362 | $11,841 | $11,193 | | **Total Stockholders' Equity, end of year** | **$1,362,263** | **$1,346,327** | **$1,428,766** | [Note 1. Summary of Significant Accounting Policies](index=50&type=section&id=1.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines Barnes Group Inc.'s significant accounting policies, including revenue recognition, goodwill, and derivatives - Revenue is recognized when control of the product or solution is transferred to the customer, generally at a point in time, but an over-time recognition model is used for customized products or work on customer-owned assets[236](index=236&type=chunk) - Goodwill is tested for impairment annually or more frequently if circumstances indicate a reduction in fair value. A non-cash goodwill impairment charge of **$68.2 million** was recorded in 2022 for the Automation reporting unit[242](index=242&type=chunk)[243](index=243&type=chunk) - Aerospace Aftermarket Programs (RSPs and CRPs) are recorded as long-lived intangible assets and amortized as a reduction to revenue based on proportional sales dollars over the program life[245](index=245&type=chunk)[246](index=246&type=chunk) - The company uses derivative instruments to hedge exposure to interest rate and foreign currency fluctuations, not for speculative purposes[249](index=249&type=chunk) - Recently adopted accounting standards include amendments related to income taxes, business combinations, and supplier finance programs. New segment reporting requirements are effective for fiscal years beginning after Dec 15, 2023[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk) [Note 2. Acquisition](index=54&type=section&id=2.%20Acquisition) On August 31, 2023, Barnes Group Inc. acquired MB Aerospace for **$728.4 million**, contributing **$114.5 million** in sales - Barnes Group Inc. completed the acquisition of MB Aerospace Holdings Inc. on August 31, 2023, for an aggregate purchase price of **$728.4 million**[264](index=264&type=chunk)[265](index=265&type=chunk) - The acquisition was funded using cash on hand and borrowings from the company's **$1,000.0 million Revolving Credit Facility** and **$650.0 million Term Loan Facility**[265](index=265&type=chunk) - Acquisition-related costs totaled **$23.8 million** in 2023, including due diligence and transaction costs[267](index=267&type=chunk) - MB Aerospace contributed **$114.5 million** in net sales and an operating loss of **$13.9 million** to the Aerospace segment from the acquisition date through December 31, 2023[268](index=268&type=chunk) Estimated Fair Value of Assets Acquired and Liabilities Assumed (MB Aerospace, in thousands USD) | Category | Amount | |:--------------------------|:----------| | Accounts receivable | $50,715 | | Inventories | $77,914 | | Property, plant & equipment| $80,480 | | Goodwill | $320,883 | | Other intangible assets | $320,000 | | Total Assets Acquired | $878,712 | | Total Liabilities Assumed | $(160,089)|\n| **Net Assets Acquired** | **$718,623**| - Goodwill of **$320.9 million** was allocated to the Aerospace segment, reflecting increased global market access and the acquired workforce[271](index=271&type=chunk) Unaudited Pro Forma Operating Results (in thousands USD) | Metric | 2023 | 2022 | |:----------|:--------------|:--------------| | Net sales | $1,664,652 | $1,544,888 | | Net income| $21,942 | $(77,355) | [Note 3. Revenue](index=57&type=section&id=3.%20Revenue) This note details revenue recognition policies, disaggregated revenue data, and contract balances, with **80%** recognized at point-in-time - Approximately **80% of revenue** is recognized at a point in time, primarily when products are shipped or delivered. Approximately **20%** is recognized over time for customized products or services on customer-owned assets[292](index=292&type=chunk)[293](index=293&type=chunk) Revenue by Product and Services (in thousands USD) | Product and Services | Aerospace 2023 | Industrial 2023 | Total Company 2023 | |:--------------------------------|:---------------|:----------------|:-------------------| | Aerospace OEM | $382,126 | — | $382,126 | | Aerospace Aftermarket | $225,924 | — | $225,924 | | Molding Solutions Products | — | $408,691 | $408,691 | | Motion Control Solutions Products| — | $372,877 | $372,877 | | Automation Products | — | $61,253 | $61,253 | | **Total** | **$608,050** | **$842,821** | **$1,450,871** | Revenue by Geographic Regions (in thousands USD) | Geographic Region | Aerospace 2023 | Industrial 2023 | Total Company 2023 | |:------------------|:---------------|:----------------|:-------------------| | Americas | $430,527 | $364,215 | $794,742 | | Europe | $115,973 | $312,402 | $428,375 | | Asia | $58,419 | $157,949 | $216,368 | | Rest of World | $3,131 | $8,255 | $11,386 | | **Total** | **$608,050** | **$842,821** | **$1,450,871** | Net Contract Assets (in thousands USD) | Metric | December 31, 2023 | December 31, 2022 | Change | % Change | |:------------------------|:------------------|:------------------|:----------|:---------| | Unbilled receivables (contract assets)| $59,652 | $42,423 | $17,229 | 41% | | Contract liabilities | $(42,428) | $(27,857) | $(14,571) | 52% | | **Net contract assets** | **$17,224** | **$14,566** | **$2,658**| **18%** | - As of December 31, 2023, the aggregate amount of transaction price allocated to remaining performance obligations (contracts with original duration > 1 year) was **$526.1 million**, with approximately **75%** expected to be recognized over the next 12 months[309](index=309&type=chunk) [Note 4. Inventories](index=63&type=section&id=4.%20Inventories) Inventories are valued at the lower of cost or net realizable value, totaling **$365.2 million** at year-end 2023 Inventories (in thousands USD, as of December 31) | Category | 2023 | 2022 | |:-------------------------|:------------|:------------| | Finished goods | $104,801 | $105,965 | | Work-in-process | $105,737 | $68,664 | | Raw materials and supplies| $154,683 | $108,773 | | **Total Inventories** | **$365,221**| **$283,402**| [Note 5. Property, Plant and Equipment](index=63&type=section&id=5.%20Property%2C%20Plant%20and%20Equipment) Net property, plant and equipment increased to **$402.7 million** in 2023, with **$52.1 million** in depreciation expense Property, Plant and Equipment, Net (in thousands USD, as of December 31) | Category | 2023 | 2022 | |:--------------------------------|:------------|:------------| | Land | $16,594 | $18,018 | | Buildings | $198,207 | $184,909 | | Machinery and equipment | $816,694 | $704,053 | | Less accumulated depreciation | $(628,798) | $(586,841) | | **Total Property, Plant and Equipment, Net**| **$402,697**| **$320,139**| - Depreciation expense was **$52.1 million** in 2023, **$47.2 million** in 2022, and **$47.6 million** in 2021[312](index=312&type=chunk) [Note 6. Goodwill and Other Intangible Assets](index=64&type=section&id=6.%20Goodwill%20and%20Other%20Intangible%20Assets) Goodwill increased to **$1,183.6 million** due to the MB Aerospace acquisition, with **$63.7 million** in intangible asset amortization Goodwill by Segment (in thousands USD) | Segment | December 31, 2023 | December 31, 2022 | |:-----------|:------------------|:------------------| | Aerospace | $352,352 | $30,786 | | Industrial | $831,272 | $804,686 | | **Total** | **$1,183,624** | **$835,472** | - Goodwill increased by **$320.9 million** in 2023 due to the MB Aerospace acquisition, allocated entirely to the Aerospace segment[317](index=317&type=chunk) - No additional goodwill impairment was recorded in 2023; a **$68.2 million** non-cash impairment charge was recorded in 2022 for the Automation reporting unit[317](index=317&type=chunk) Other Intangible Assets (in thousands USD, as of December 31, 2023) | Category | Gross Amount | Accumulated Amortization | |:--------------------------|:-------------|:-------------------------| | Revenue Sharing Programs | $299,500 | $(176,143) | | Component Repair Programs | $111,839 | $(49,577) | | Customer relationships | $586,189 | $(180,679) | | Patents and technology | $178,433 | $(100,662) | | Trademarks/trade names | $10,949 | $(10,910) | | Other | $26,334 | $(14,857) | | Unamortized intangible assets: Trade names| $55,670 | — | | **Total** | **$1,239,299**| **$(532,828)** | - The MB Aerospace acquisition added **$320.0 million** in intangible assets, including **$249.0 million** in customer relationships, **$55.0 million** in developed technology, and **$16.0 million** in customer backlog[318](index=318&type=chunk) - Amortization of intangible assets was **$63.7 million** in 2023, up from **$45.0 million** in 2022[320](index=320&type=chunk) [Note 7. Accrued Liabilities](index=65&type=section&id=7.%20Accrued%20Liabilities) Total accrued liabilities increased to **$221.5 million** in 2023, driven by higher payroll, contract liabilities, and income taxes Accrued Liabilities (in thousands USD, as of December 31) | Category | 2023 | 2022 | |:----------------------------------------|:------------|:------------| | Payroll and other compensation | $45,764 | $32,276 | | Contract liabilities | $42,428 | $27,857 | | Pension and other postretirement benefits| $8,124 | $10,999 | | Accrued income taxes | $49,138 | $29,201 | | Lease liability | $10,894 | $10,209 | | Business reorganizations | $10,276 | $11,000 | | Other | $54,838 | $37,026 | | **Total Accrued Liabilities** | **$221,462**| **$158,568**| [Note 8. Debt and Commitments](index=65&type=section&id=8.%20Debt%20and%20Commitments) Long-term debt increased to **$1,290.8 million** in 2023 due to new **$1,650.0 million** senior secured financing for MB Aerospace Long-Term Debt and Notes and Overdrafts Payable (in thousands USD, as of December 31) | Category | 2023 Carrying Amount | 2022 Carrying Amount | |:------------------------------------------------|:---------------------|:---------------------| | Revolving Credit Facility | $642,988 | $466,672 | | Term Loan Facility | $648,375 | — | | Unamortized deferred financing costs & original issue discount| $(12,532) | — | | 3.97% Senior Notes | — | $100,000 | | Borrowings under lines of credit and overdrafts | $16 | $8 | | Finance leases | $11,999 | $4,404 | | **Total** | **$1,290,846** | **$571,084** | | Less current maturities | $(10,884) | $(1,445) | | **Long-term debt** | **$1,279,962** | **$569,639** | - In August 2023, the company entered into a new Credit Agreement for **$1,650.0 million**, consisting of a **$650.0 million Term Loan Facility** and a **$1,000.0 million Revolving Credit Facility**, to fund the MB Aerospace acquisition and repay the 3.97% Senior Notes[328](index=328&type=chunk)[330](index=330&type=chunk) - The Senior Facilities are guaranteed by wholly-owned domestic subsidiaries and secured by substantially all company assets[331](index=331&type=chunk) - At December 31, 2023, the company was in compliance with all applicable covenants, including a Total Net Leverage Ratio of **3.64** (max 5.50) and an Interest Coverage Ratio of **3.47** (min 3.00)[335](index=335&type=chunk) - Interest paid was **$59.2 million** in 2023, significantly up from **$13.5 million** in 2022, reflecting higher borrowings and interest rates[341](index=341&type=chunk) [Note 9. Business Reorganizations](index=68&type=section&id=9.%20Business%20Reorganizations) Barnes Group Inc. undertook multiple restructuring actions from 2021-2023 to reduce costs and integrate operations, incurring significant charges - The 2021 Actions resulted in **$2.9 million** in pre-tax charges in 2021, primarily for employee severance, with net benefits in subsequent years[342](index=342&type=chunk) - The 2022 Actions, focused on Industrial segment cost reduction and transformation, resulted in **$18.0 million** in pre-tax charges in 2022, including **$11.9 million** for employee termination costs and **$6.1 million** for accelerated depreciation and pension curtailment losses[344](index=344&type=chunk) - In 2023, additional pre-tax charges of **$10.3 million** were recorded for the 2022 Actions, including **$3.8 million** for accelerated depreciation and **$7.3 million** for site consolidation[345](index=345&type=chunk) - The April 2023 Actions, focused on manufacturing footprint optimization, resulted in **$13.8 million** in pre-tax charges in 2023, with **$10.8 million** for employee termination costs[347](index=347&type=chunk) - The September 2023 Actions, including organizational realignment post-MB Aerospace acquisition, resulted in **$7.9 million** in pre-tax charges in 2023 for employee termination costs[350](index=350&type=chunk) [Note 10. Derivatives](index=70&type=section&id=10.%20Derivatives) The company uses derivatives to hedge interest rate and foreign currency exposures, entering new swaps in 2023 for **€150.0 million** and **$600.0 million** - The company uses derivative financial instruments to hedge exposure to fluctuations in interest rates and foreign currency exchange rates, not for speculative or trading purposes[353](index=353&type=chunk)[357](index=357&type=chunk) - In 2023, the company entered into a Euribor Swap for **€150.0 million** and six 2023 Swaps for **$600.0 million** to convert variable-rate borrowings to fixed rates, with maturities ranging from 2026 to 2030[354](index=354&type=chunk) - These interest rate swaps are accounted for as cash flow hedges, with changes in fair value recorded to accumulated other comprehensive income[356](index=356&type=chunk)[357](index=357&type=chunk) - At December 31, 2023, the company's total borrowings were comprised of **67% fixed rate debt** and **33% variable rate debt**, a shift from **34% fixed** and **66% variable** in 2022[174](index=174&type=chunk) [Note 11. Fair Value Measurements](index=71&type=section&id=11.%20Fair%20Value%20Measurements) Fair value measurements for assets and liabilities, primarily derivatives, are categorized into a three-level hierarchy, totaling **$(5.4) million** in 2023 - Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between market participants[360](index=360&type=chunk) - Inputs for fair value measurement are classified into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[360](index=360&type=chunk) Assets and Liabilities Reported at Fair Value (in thousands USD, as of December 31) | Category | 2023 Total | 2023 Level 1 | 2023 Level 2 | 2023 Level 3 | |:------------------------|:-----------|:-------------|:-------------|:-------------| | Asset derivatives | $6,420 | — | $6,420 | — | | Liability derivatives | $(25,885) | — | $(25,885) | — | | Bank acceptances | $12,161 | — | $12,161 | — | | Rabbi trust assets | $1,923 | $1,923 | — | — | | **Total** | **$(5,381)**| **$1,923** | **$(7,304)** | **—** | [Note 12. Pension and Other Postretirement Benefits](index=72&type=section&id=12.%20Pension%20and%20Other%20Postretirement%20Benefits) Pension plan funded status improved to **$0.7 million** overfunded in 2023, with **$7.1 million** expected contributions in 2024 - The funded status of the company's pension plans improved from an underfunded status of **$27.4 million** at December 31, 2022, to a funded status of **$0.7 million** at December 31, 2023[175](index=175&type=chunk) Pension Plan Funded Status (in thousands USD, as of December 31) | Metric | 2023 Total | 2022 Total | |:--------------------------------------|:-----------|:-----------| | Benefit obligation, December 31 | $382,876 | $402,306 | | Fair value of plan assets, December 31| $383,566 | $374,920 | | **(Underfunded) Overfunded status** | **$690** | **$(27,386)**| - Benefit obligations decreased in 2023 due to a plan curtailment (freezing a U.S. defined benefit plan) and increased benefit payments, partially offset by actuarial losses from discount rate changes[369](index=369&type=chunk) Weighted-Average Assumptions for Benefit Obligations (as of December 31) | Assumption | 2023 U.S. Plans | 2023 Non-U.S. Plans | 2022 U.S. Plans | 2022 Non-U.S. Plans | |:---------------------------|:----------------|:--------------------|:----------------|:--------------------| | Discount rate | 5.45% | 3.00% | 5.50% | 3.60% | | Increase in compensation | —% | 2.56% | 3.05% | 2.76% | - The company expects to contribute approximately **$7.1 million** to its various defined benefit pension plans in 2024, with no discretionary contributions planned for U.S. Qualified plans[176](index=176&type=chunk)[388](index=388&type=chunk) Net Periodic Benefit Cost (in thousands USD) | Component | 2023 Pensions | 2023 Other Postretirement | 2022 Pensions | 2022 Other Postretirement | |:--------------------------------|:--------------|:--------------------------|:--------------|:--------------------------| | Service cost | $2,589 | $39 | $5,689 | $77 | | Interest cost | $19,415 | $1,122 | $14,108 | $808 | | Expected return on plan assets | $(30,056) | — | $(28,944) | — | | Amortization of prior service cost| $354 | $10 | $387 | $36 | | Recognized losses/(gains) | $1,643 | $(146) | $12,710 | $(2) | | Curtailment (gain)/loss | $(668) | — | $1,158 | — | | Settlement (gain)/loss | $(656) | — | $(605) | — | | Special termination benefits | — | — | $395 | — | | **Net periodic benefit cost** | **$(7,379)** | **$1,025** | **$4,898** | **$919** | [Note 13. Stock-Based Compensation](index=78&type=section&id=13.%20Stock-Based%20Compensation) Stock-based compensation cost was **$10.2 million** in 2023, with **$24.8 million** in unrecognized costs for unvested awards - Stock-based compensation cost recognized was **$10.2 million** in 2023, **$12.8 million** in 2022, and **$11.5 million** in 2021[398](index=398&type=chunk) - As of December 31, 2023, unrecognized compensation costs related to unvested awards totaled **$24.8 million**, expected to be recognized over a weighted average period of **2.51 years**[398](index=398&type=chunk) Stock Option Awards Summary (2023) | Metric | Number of Shares | Weighted-Average Exercise Price | |:--------------------------------------|:-----------------|:--------------------------------| | Outstanding, January 1, 2023 | 1,852,603 | $37.79 | | Granted | 120,195 | $44.94 | | Forfeited | (67,605) | $54.23 | | **Outstanding, December 31, 2023** | **1,905,193** | **$37.66** | Weighted-Average Black-Scholes Assumptions for Stock Options (excluding performance-vested) | Assumption | 2023 | 2022 | 2021 | |:------------------------|:-------|:-------|:-------| | Risk-free interest rate | 3.85% | 1.98% | 0.55% | | Expected life (years) | 5.5 | 5.5 | 5.5 | | Expected volatility | 41.6% | 40.1% | 40.0% | | Expected dividend yield | 1.20% | 1.22% | 1.23% | - Performance share awards are part of a long-term program assessing company performance relative to the Russell 2000 Index or pre-established goals (TSR, EBITDA growth, ROIC) over a three-year period[408](index=408&type=chunk) [Note 14. Income Taxes](index=81&type=section&id=14.%20Income%20Taxes) In 2023, income before taxes was **$33.3 million**, with an effective tax rate of **51.9%**, and a **$41.6 million** valuation allowance on deferred tax assets Income from Continuing Operations Before Income Taxes (in thousands USD) | Geographic Area | 2023 | 2022 | 2021 | |:----------------|:------------|:------------|:------------| | U.S. | $(61,688) | $(53,088) | $(28,832) | | International | $94,952 | $91,273 | $156,649 | | **Total** | **$33,264** | **$38,185** | **$127,817**| Income Tax Provision (in thousands USD) | Category | 2023 | 2022 | 2021 | |:----------------|:------------|:------------|:------------| | Current | $23,382 | $30,428 | $44,351 | | Deferred | $(6,114) | $(5,722) | $(16,407) | | **Total** | **$17,268** | **$24,706** | **$27,944** | - The effective tax rate was **51.9%** in 2023, compared to **64.7%** in 2022, with key drivers including foreign operations, foreign losses, GILTI, capitalized transaction costs, and tax holidays[422](index=422&type=chunk) - Tax holidays in Singapore, China, and Malaysia provided benefits of **$15.2 million** in 2023, **$11.5 million** in 2022, and **$3.2 million** in 2021[140](index=140&type=chunk)[424](index=424&type=chunk) - The total valuation allowance for deferred tax assets was **$41.6 million** at December 31, 2023, including **$28.5 million** from the MB Aerospace acquisition[421](index=421&type=chunk) - The company is evaluating the impacts of enacted and pending legislation for the OECD Pillar Two Model Rules (global minimum tax of **15%**)[141](index=141&type=chunk)[419](index=419&type=chunk) [Note 15. Common Stock](index=85&type=section&id=15.%20Common%20Stock) No common stock was issued from treasury in 2023, and no shares were repurchased under the program - No shares of common stock were issued from treasury in 2023, 2022, or 2021[430](index=430&type=chunk) - The company repurchased **0 shares** in 2023, **200,000 shares** in 2022 (**$6.7 million cost**), and **100,000 shares** in 2021 (**$5.2 million cost**) under its Repurchase Program[430](index=430&type=chunk) - In 2023, **119,142 shares** were issued from authorized shares for stock option exercises, incentive awards, and the Employee Stock Purchase Plan[430](index=430&type=chunk) [Note 16. Preferred Stock](index=85&type=section&id=16.%20Preferred%20Stock) Barnes Group Inc. had **3,000,000** shares of preferred stock authorized at year-end 2023, with none outstanding - **3,000,000 shares** of preferred stock were authorized at December 31, 2023 and 2022, with none outstanding[431](index=431&type=chunk) [Note 17. Stock Plans](index=85&type=section&id=17.%20Stock%20Plans) The company offers various stock plans, including 401(k), ESPP, and incentive award plans, with **3,717,399 shares** available for future grants - The Retirement Savings Plan (401(k)) allows for employer contributions (50% of employee contributions up to **6% of eligible compensation**), with expense of **$6.8 million** in 2023[432](index=432&type=chunk) - The Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase common stock at **95% of market value**, with **9,979 shares** purchased in 2023[433](index=433&type=chunk) - The 2023 Barnes Group Stock and Incentive Award Plan, which merged with the 2014 Plan, permits the issuance of incentive awards, stock options, and stock appreciation rights[435](index=435&type=chunk) - As of December 31, 2023, there were **3,717,399 shares** available for future grants under the 2023 Plan, and **6,512,031 total maximum shares** reserved for issuance under all stock plans[435](index=435&type=chunk)[438](index=438&type=chunk) [Note 18. Weighted Average Shares Outstanding](index=86&type=section&id=18.%20Weighted%20Average%20Shares%20Outstanding) Basic shares outstanding were **51.1 million** in 2023, with diluted shares at **51.2 million**, reflecting dilutive stock awards Weighted-Average Common Shares Outstanding (in thousands) | Metric | 2023 | 2022 | 2021 | |:--------------------------------------|:---------|:---------|:---------| | Basic | 51,053 | 50,962 | 50,926 | | Dilutive effect of: | | | | | Stock options | 87 | 21 | 75 | | Performance share awards | 66 | 101 | 78 | | **Diluted** | **51,206**| **51,084**| **51,079**| - The calculation of weighted-average diluted shares outstanding excludes anti-dilutive shares (**1,089,449** in 2023)[440](index=440&type=chunk) [Note 19. Leases](index=86&type=section&id=19.%20Leases) Operating lease ROU assets were **$46.8 million** and liabilities **$47.1 million** at year-end 2023, with **$19.3 million** in costs - The company leases manufacturing, distribution, assembly facilities, office space, land, machinery, and equipment, with terms generally ranging from one to five years[441](index=441&type=chunk) Operating Lease ROU Assets and Liabilities (in thousands USD, as of December 31) | Category | 2023 | 2022 | |:--------------------------|:------------|:------------| | ROU assets | $46,780 | $27,054 | | Current lease liability | $10,894 | $10,209 | | Long-term lease liability | $36,197 | $17,128 | | **Total Lease Liabilities**| **$47,091** | **$27,337** | - Operating lease costs were **$19.3 million** in 2023, **$17.1 million** in 2022, and **$17.7 million** in 2021[446](index=446&type=chunk) Operating Lease Term and Discount Rate (as of December 31) | Metric | 2023 | 2022 | 2021 | |:--------------------------------------|:-------|:-------|:-------| | Weighted-average remaining lease term (years)| 7.8 | 5.8 | 5.8 | | Weighted-average discount rates | 5.67% | 3.38% | 3.01% | [Note 20. Changes in Accumulated Other Comprehensive Income by Component](index=88&type=section&id=20.%20Changes%20in%20Accumulated%20Other%20Comprehensive%20Income%20by%20Component) AOCI improved to **$(195.1) million** at year-end 2023, driven by foreign currency translation and pension benefits Changes in Accumulated Other Comprehensive Income (in thousands USD, 2023) | Component | Gains and Losses on Cash Flow Hedges | Pension and Other Postretirement Benefit Items | Foreign Currency Items | Total | |:--------------------------------------------------------------------------|:-------------------------------------|:-----------------------------------------------|:-----------------------|:------------| | January 1, 2023 | $5,941 | $(108,640) | $(117,801) | $(220,500) | | Other comprehensive (loss) income before reclassifications | $(16,637) | $7,230 | $37,952 | $28,545 | | Amounts reclassified from accumulated other comprehensive income to income| $(3,808) | $634 | — | $(3,174) | | **Net current-period other comprehensive (loss) income** | **$(20,445)** | **$7,864** | **$37,952** | **$25,371** | | **December 31, 2023** | **$(14,504)** | **$(100,776)** | **$(79,849)** | **$(195,129)**| - Reclassifications out of AOCI to earnings in 2023 included **$5.0 million** (pre-tax) from cash flow hedges (interest rate and foreign exchange contracts) and **$(0.96) million** (pre-tax) from pension and other postretirement benefit items[457](index=457&type=chunk) [Note 21. Information on Business Segments](index=90&type=section&id=21.%20Information%20on%20Business%20Segments) This note provides detailed financial information for the Aerospace and Industrial segments, including sales, operating profit, and assets - Aerospace segment manufactures complex components for turbine engines, nacelles, and structures, and provides MRO services, including through Component Repair Programs (CRPs) and Revenue Sharing Programs (RSPs)[461](index=461&type=chunk) - Industrial segment provides highly-engineered precision components, products, and systems for diverse end-markets like industrial equipment, automation, personal care, packaging, electronics, mobility, and medical devices[465](index=465&type=chunk) Summarized Financial Information by Reportable Business Segment (in millions USD) | Metric | 2023 Aerospace | 2023 Industrial | 2023 Other | 2023 Total Company | |:------------------------|:---------------|:----------------|:-----------|:-------------------| | Sales | $608.1 | $842.8 | — | $1,450.9 | | Operating profit (loss) | $53.0 | $36.0 | — | $89.0 | | Assets | $1,465.3 | $1,685.3 | $157.4 | $3,308.0 | | Depreciation and amortization| $61.6 | $53.7 | $0.5 | $115.8 | | Capital expenditures | $32.8 | $22.4 | $0.6 | $55.7 | Total Net Sales and Long-Lived Assets by Geographic Area (in millions USD) | Category | 2023 Domestic | 2023 International | 2023 Other | 2023 Total Company | |:------------------|:--------------|:-------------------|:-----------|:-------------------| | Sales | $599.9 | $935.1 | $(84.2) | $1,450.9 | | Long-lived assets | $557.9 | $1,833.1 | — | $2,391.0 | - Germany (**$405.8 million**), Italy (**$303.9 million**), Singapore, and Taiwan (**$321.6 million**) represent international countries with long-lived assets exceeding **10%** of the company's total long-lived assets in 2023[472](index=472&type=chunk) [Note 22. Commitments and Contingencies](index=92&type=section&id=22.%20Commitments%20and%20Contingencies) This note outlines product warranties, litigation, and supplier finance programs, with no material adverse effects expected - The company provides product warranties and accrues estimated exposure based on historical experience; liabilities were not material at December 31, 2023 or 2022[473](index=473&type=chunk) - A customer asserted breach of contract and warranty claims in July 2021, which the company disputes and expects will not have a material adverse effect on financial position or liquidity[474](index=474&type=chunk) - The company records loss contingency liabilities when a loss is probable and the amount can be reasonably estimated[475](index=475&type=chunk) - Outstanding obligations related to the Supplier Finance Program were not material at December 31, 2023 or 2022[476](index=476&type=chunk) [Note 23. Subsequent Event](index=93&type=section&id=23.%20Subsequent%20Event) On January 11, 2024, the company agreed to sell its Associated Spring and Hänggi bus

Company Expansion - Barnes Aerospace has announced the addition of a new component repair facility in Singapore, increasing its repair capacity by approximately 50% to meet customer needs in the region [1][2] - The new facility is strategically located in JTC's Seletar Aerospace Park, enhancing Barnes Aerospace's manufacturing and maintenance, repair, and overhaul (MRO) capabilities [2][3] - The expansion is supported by a technology investment program aimed at overhauling and repairing complex high-value fabricated engine cases [1][2] Industry Impact - The expansion reinforces Singapore's position as a leading MRO hub in the Asia-Pacific region, contributing to the growth of the aerospace ecosystem [3][4] - The aerospace industry in Singapore is experiencing strong growth, driven by the recovery in air travel and increased operations by companies in the region [4][5] - Barnes Aerospace's presence in Singapore is expected to foster collaboration among Original Equipment Manufacturers (OEMs) and support the long-term vision for the Asia-Pacific aerospace market [5] Strategic Partnerships - Barnes Aerospace has signed a Memorandum of Understanding (MOU) with the Singapore Economic Development Board (EDB) to facilitate its expansion efforts [3] - The EDB is committed to partnering with aerospace companies to create job opportunities and support their growth plans in Singapore [4][7]

Barnes Group Inc. (B) reported adjusted earnings of 41 cents per share in fourth-quarter 2023, surpassing the Zacks Consensus Estimate of adjusted earnings of 35 cents per share. The bottom line declined 21% year over year due to the increasing cost of sales.Inside the HeadlinesTotal revenues of $415.5 million missed the Zacks Consensus Estimate of $420 million. Nevertheless, the top line increased 32.6% year over year, with organic sales growth of 2%.Barnes reports revenues under two heads, namely Industri ...

Core Insights - Barnes Group reported revenue of $415.54 million for the quarter ended December 2023, reflecting a year-over-year increase of 32.6% [1] - The earnings per share (EPS) for the quarter was $0.41, down from $0.52 in the same quarter last year [1] - The revenue fell short of the Zacks Consensus Estimate by 1.00%, while the EPS exceeded the consensus estimate by 17.14% [1] Financial Performance Metrics - Net Sales in the Industrial segment were $202.85 million, surpassing the average estimate of $198.47 million, but showing a year-over-year decline of 1% [2] - Net Sales in the Aerospace segment reached $212.69 million, which is below the estimated $221.28 million but represents a significant year-over-year increase of 96% [2] - Non-GAAP Operating Income for the Industrial segment was reported at $20.43 million, exceeding the average estimate of $14.02 million [2] - Non-GAAP Operating Income for the Aerospace segment was $27.24 million, slightly below the average estimate of $27.79 million [2] Stock Performance - Over the past month, shares of Barnes Group have returned +18%, outperforming the Zacks S&P 500 composite's +5.3% change [2] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [2]

Barnes Group (B) came out with quarterly earnings of $0.41 per share, beating the Zacks Consensus Estimate of $0.35 per share. This compares to earnings of $0.52 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 17.14%. A quarter ago, it was expected that this aerospace and industrial parts supplier would post earnings of $0.51 per share when it actually produced earnings of $0.19, delivering a surprise of -62.75%.Over the last ...