Barnes (US:B)2023-07-28 16:44Financial Data and Key Metrics Changes - Second quarter sales were $339 million, up 6% from the prior year, with organic sales increasing 5% [12] - Adjusted operating income was $43.5 million, up 8% from $40.1 million a year ago, with an adjusted operating margin of 12.8%, up 30 basis points [12] - Net income was $17.4 million or $0.34 per diluted share, compared to a net loss of $39.6 million or negative $0.78 per diluted share a year ago [12] - Adjusted net income per share was $0.58, up 4% from $0.56 a year ago [12] - Interest expense increased to $6.5 million, up $3.2 million due to a higher average interest rate [13] - Cash provided by operating activities was $42 million, compared to $9 million in the prior year [19] Business Line Data and Key Metrics Changes - Industrial segment sales were $217 million, up 2% from the prior year, with organic sales also increasing approximately 2% [14] - Aerospace segment sales were $122 million, up 12% from a year ago, with OEM sales growing 8% and aftermarket sales growing by 18% [16] - Molding Solutions organic orders increased 6%, while organic sales decreased 2% [15] - Automation organic orders were down 3%, while organic sales increased 5% [16] Market Data and Key Metrics Changes - Organic orders for industrial were flat compared to a year ago, with a book-to-bill ratio of approximately 1.1 times [6] - Aerospace market remains favorable, with ongoing production rate increases by Boeing and Airbus [7] - OEM orders were down 18% in the quarter, attributed to the lumpiness of order patterns [17] Company Strategy and Development Direction - The company is focused on integrating, consolidating, and rationalizing its operations to improve core business execution [5] - A pending acquisition of MB Aerospace is expected to enhance the aerospace segment, with regulatory approval anticipated before the end of the year [9][10] - The company is redirecting sales efforts to build a strong commercial pipeline and improve customer acquisition [7] Management's Comments on Operating Environment and Future Outlook - Management noted productivity challenges in aerospace facilities due to new employee hiring and training, which are expected to be addressed in the second half of the year [24] - The company anticipates organic sales growth of 7% to 9% for the year, with adjusted operating margin between 12.5% and 13.5% [20] - Management expressed confidence in the aerospace segment's recovery, supported by strong customer feedback and operational performance [40] Other Important Information - The effective tax rate for the second quarter was 22.5%, compared to negative 27.1% in the year-ago period [13] - Free cash flow was $21 million, compared to a negative $5 million last year [19] Q&A Session Questions and Answers Question: Can you expand on the productivity issues in aerospace? - Management explained that productivity challenges arose from new employee hiring and training inefficiencies in some facilities, which are being actively addressed [24] Question: What is the magnitude of pricing in industrial? - Management indicated that pricing adjustments have been made to offset inflationary pressures, and they expect to continue managing pricing carefully [26][27] Question: Can you describe the industrial portfolio composition? - Management stated that they are actively assessing the strategy and composition of the industrial portfolio, focusing on higher growth markets [34][35] Question: What is the outlook for OEM growth? - Management expressed confidence in OEM growth, citing a healthy market and strong customer partnerships, despite some productivity challenges [41][42]