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Barnes Group Inc (B)
Q2 2017 Earnings Conference Call
July 27, 2017 08:30 AM ET
William Pitts - Director of Investor Relations
Patrick Dempsey - President and CEO
Chris Stephens - SVP of Finance and CFO
Josh Chan - Baird
Christopher Glynn - Oppenheimer
Bhupender Bohra - Jefferies
Myles Walton - Deutsche Bank
Edward Marshall - Sidoti & Company
Matt Summerville - Alembic Global Advisors
Pete Skibitski - Drexel Hamilton
Previous Statements by B
» Barnes Group's (B) CEO Patrick Dempsey on Q1 2017 Results - Earnings Call Transcript
» Barnes Group's (B) CEO Patrick Dempsey on Q4 2016 Results - Earnings Call Transcript
» Barnes Group's (B) CEO Patrick Dempsey on Q3 2016 Results - Earnings Call Transcript
» Barnes Group' (B) CEO Patrick Dempsey on Q2 2016 Results - Earnings Call Transcript
Thank you. William Pitts, Director of Investor Relations, please go ahead.
Thank you, Emily. Good morning, everyone and thank you for joining us for our second quarter 2017 earnings call. With me are Barnes Group's President and CEO, Patrick Dempsey and Senior Vice President of Finance and Chief Financial Officer, Chris Stephens.
If you have not received a copy of our earnings press release, you can find it on the Investor Relations section of our corporate website at BGINC.com. During our call, we will be referring to the earnings release supplement slides, which are also posted on our website. Our discussion today includes certain non-GAAP financial measures, which provide additional information we believe is helpful to investors. These measures have been reconciled to the related GAAP measures in accordance with SEC regulations. You will find a reconciliation table on our website as part of our press release and in the Form 8-K submitted to the SEC.
Certain statements we make on today's call, both during the opening remarks and during the question-and-answer session, may be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. Please consider the risks and uncertainties that are mentioned in today's call and are described in our periodic filings with the Securities and Exchange Commission. These filings are available through the Investor Relations section of our corporate website at BGINC.com.
We will now open today's call in our usual fashion with remarks from Patrick, followed by a review of our second quarter results and an updated 2017 outlook from Chris. After that, we will open up the call for questions. Patrick?
Thanks, Bill and good morning, everyone. Barnes Group continued to post strong total and organic sales growth in the second quarter, providing us with excellent top line results for the first half of 2017. We generated a 11% organic sales growth with double-digit organic growth in each segment for the second consecutive quarter. Adjusted operating income grew 16% compared to a year ago with adjusted operating margin coming in at 15.6%. And for the first time, we ended the quarter with total backlog in excess of $1 billion.
During the second quarter, we realized a substantial tax benefit via consolidation of several Swiss legal entities, providing approximately $0.12 of EPS benefit in the quarter. Chris will provide some color on this later on. Including the tax item, adjusted diluted earnings per share were $0.81 in the quarter, up 29%. As we continue our transformation, I feel very good about the progress we've made over the last five years. I'm confident in our profitable growth strategy and our team's ability to execute it. Our current portfolio has been reshaped to capitalize on favorable macro trends, supporting the end markets in which we operate, whether they be industrial, transportation or aerospace. The tangible proof is in the organic revenue growth we are delivering. In addition, the operating profit and margin trends have shown great progress.
Let me now talk about our business segment performance in the quarter, beginning with industrial. Industrial continues its impressive streak of consecutive quarterly sales growth, now reaching seven quarters as sales increased 23% compared to a year ago. Roughly speaking, organic growth reflects half of the increase, while our recent acquisitions of Gammaflux and FOBOHA account for the remainder. The end markets served by molding solutions and nitrogen gas products remain strong and industrial end markets for our engineered components business continued to show improvement.
At molding solutions, sales increased almost 50% over last year’s second quarter, while organic sales grew 20%. Automotive model changes driving our Synventive business remained strong, providing for good order intake and sales growth well into double digits. Other molding solutions markets such as medical, personal care and packaging are likewise favorable. As we spoke to last quarter, our mold business had been relatively slow, but our expectations remain positive. In the second quarter, we customer orders open up and the release of many more projects that have been awaiting customer approval. Accordingly, Männer sales and orders climbed well into the double digit. Performance in our molding solutions business overall has been excellent. The team has done a great job building the business from its inception with the Synventive acquisition in 2012. From that initial entry into plastic injection molding, five other powerful brands have been added. The strategic importance of this part of our portfolio is significant. One of the more recent acquisitions is our FOBOHA business, which enhances our position as a leading global supplier of complex molding systems. As we mentioned at the time of acquisition, this is a great IT-based technology driven business. Nonetheless, we fully expected a near-term dampening of operating margins as we work through the integration process and bring the business up to the level of our expectations. The lumpy nature of mold sales was also evident this quarter as FOBOHA saw an almost 50% sequential improvement in revenues.