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Barnes Group Inc (NYSE:B)
Q2 2019 Earnings Call
Jul 26, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is Sharon[Phonetic] and I will be your conference operator today. At this time, I would like to welcome everyone to the Barnes Group, Inc. Second Quarter 2019 Earnings Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.

Bill Pitts, Director of Investor Relations, you may begin your conference.

William Pitts -- Director of Investor Relations

Thank you, Sharon. Good morning everyone and thank you for joining us for our second quarter 2019 earnings call.

With me are Barnes Group's President and Chief Executive Officer, 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 Securities and Exchange Commission. Be advised that 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 SEC. These filings are available through the Investor Relations section of our corporate website at bginc.com.

Let me now turn over the call to Patrick for opening remarks, then Chris will provide a review of our second quarter results and our updated 2019 outlook. After that, we'll open up the call for questions. Patrick?

Patrick J. Dempsey -- President & Chief Executive Officer

Thank you, Bill and good morning everyone. During the second quarter, we saw the continuation of several market trends that were present in the first quarter, which had both a favorable and unfavorable impact on our performance. At aerospace business performance remained strong and our expectation for the near to medium term has again improved. At industrial many of our global end markets remained soft[Phonetic] with lingering trade uncertainties causing customers to postpone new projects. Accordingly, our near-term expectation for industrial is now slightly lower. For Barnes Group second quarter revenues declined 1% with organic sales down 4%. Adjusted operating income declined 9% while adjusted operating margin was 15.7%, down 130 basis points. Adjusted earnings per share were $0.75, down $0.15 from a year ago.

However, keep in mind that last year's second quarter had an $0.08 EPS benefit related to favorable discrete tax adjustments. As we execute our strategy, we remain squarely focused on transforming our business portfolio by increasing the level of differentiated industrial technologies and intellectual property. Supplementing the portfolio evolution has been an enterprisewide deep integration of the Barnes Enterprise System to drive productivity improvement, and as a result lift margins higher. While our overall margin and earning trends have been favorable. In the current climate we are not immune from the influence of softening end markets and existing geopolitical challenges. That said, our team is fully committed and energized, to deliver performance regardless of the cycle. Our leadership team has taken and will continue to take proactive steps to offset current headwinds to a range of different go-to-market strategies seeking to opportunistically increased market share and launched new innovative products and services. All these activities are focused on driving top line improvement . At the same time equally intense emphasis has been placed on cost management across all of our businesses to ensure alignment with current market demand. Our commitment to our long-term growth strategy remains steadfast building a world-class company focused on growth oriented, high-margin businesses will allow us to produce the greatest value for our various stakeholders over the long-term. Combined with our relentless pursuit of being a consistent generator of strong cash flows, we are driving ongoing strategic organic and acquisitive investments to secure the future. As such, we are confident that we're on the right path for the long-term and believe that we are well positioned as the markets improved.

Let's now move to a discussion on our second quarter performance beginning with industrial, were total sales were down 6% and organic sales declined 11% . Certainly today's industrial environment is challenging given the multitude of factors. We've seen global trade uncertainty and evolving environmental regulations drive customers to defer the launch of new programs.This is especially true in auto where the industry is simultaneously impacted a decrease in global production levels. Such pressures are reflected in the generally defining manufacturing TMI trends in Europe, China and to a lesser extent, North America. That said, our general industrial business is providing some resistance to current conditions with organic sales, or organic orders up slightly in the quarter. At Molding Solutions sales declined 16% over last year's second quarter with organic sales declining 12% impacting our second quarter revenues by about $8 million where mold push outs that are now expected to ship in the second half.

Demand from -- for automotive hot runners was particularly soft and order activity reflected the same on a year-over-year basis. However, we did see sequential improvement quarter-over-quarter where orders and sales up mid single digits, and high-single digits, respectively. Our expectation for this part of Molding Solutions has been lowered although, we do expect continued sequential improvement in Q3 and Q4 as program launches start to pick up in the second half, which we are starting to see in North America. Our molds business is seeing solid demand in global medical markets while packaging and personal care have softened somewhat. More backlog levels are healthy and support our significant sequential growth forecast for the third and fourth quarters.

For molding solutions overall, we now anticipate full year organic growth to be down mid-single digits as compared to a record 2018. At Force & Motion Control organic orders were down high single-digits and organic sales were down low-double digits. The Tool & Die Market continues to see global softness, especially in Europe and Asia, while general industrial markets are proven to be more resilient, particularly in North America. We see positive indications that the Tool & Die market has bottomed and anticipate some sequential improvement as we progressed through the second half. For 2019 we continue to forecast organic growth to be approximately flat to 2018.

At Engineered Components, organic sales declined, high-single digits and orders declined low single digits, driven by lingering weakness in auto production end markets. While global auto production remains at a relatively high level, we now expect 2019 production to be down approximately 4% with China, Europe and North America all seen a reduction. Consistent with our prior view our 2019 organic growth outlook for Engineered Components is to be down low-single digit. At Automation we've seen lower than anticipated first half revenues and now expect sales of approximately $60 million for 2019. While automation markets and the demand for all parts is slowed year-to-date we continue to see this business has a great growth, high-margin opportunity for Barnes Group over the long-term. Our global growth initiatives are ongoing and leveraging customer relationships through our Molding Solutions business, especially in China are progressing . We've seen high levels of quoting activity, but the transition from quote to orders is currently more protracted as market uncertainties translate into customer programs been deferred.

Overall, our full-year outlook for the industrial segment has been trimmed. We now anticipate a low single-digit organic revenue decline, forecasted adjusted operating margin is expected to be approximately 12% to 13% likewise, down from our prior view. Moving to Aerospace and with the same opening statement as last quarter's call, excellent execution and strong industry fundamentals have provided another quarter of record revenues and operating profit. Total sales were up 10% with OEM growth of 11% and aftermarket growth of 8%. Operating margin in the segment was once again very strong at 21.4%, up 110 basis points from a year ago.

In the first half, one of the most discussed industry topics has been the grounding of the Boeing 737 MAX. We continue to monitor the situation closely, but don't envision the delayed return to flight is having any meaningful impact on our OEM business in the near-term. In fact in our OEM business, our OEM business is solidly positioned through 2020, reflecting good program execution and a healthy backlog level. Currently, our team is primarily working toward filling 2021 and 2022 production. In the aftermarket, the demand for MRO services and spare parts, especially on programs like the CFM56 remain healthy. And our 2019 aftermarket outlook has again been improved. For the full year we've increased our revenue and margin outlook with aerospace sales growth in the high single digits and with operating margins of approximately 21% to 22%. OEM sales growth continues to be forecasted in the high single digits. In aftermarket MRO growth is now anticipated to be up mid to high-single digits and spare parts up high-single digits bode incrementally better than our first quarter outlook.

So in summary, the second quarter of 2019 was a clean operating quarter with sales volume in the key driver for both industrial and aerospace performance, lower sales at industrial have weighed on our performance. However, the team has taken the necessary top and bottom line actions to mitigate the impact where possible and to drive overall productivity. We'll continue to monitor market conditions closely, and we'll take further actions as warranted. At aerospace increased volumes and solid execution have helped to deliver outstanding sales and margin performance. And we continue to see solid fundamentals for that portion of our portfolio. Importantly investments in organic growth and value-enhancing acquisitions will be sought out to better position the portfolio for long-term growth as industrial end markets recover. Our near-term emphasis is on ensuring that we are well positioned to power forward as conditions improve.

Now let me turn the call over to Chris for a discussion on the financial details.

Christopher J. Stephens -- Senior Vice President of Finance and Chief Financial Officer

Thank you, Patrick, and good morning everyone. Let me begin with highlights of our second quarter results on Slide 4 of our supplement and then move to a discussion on our updated outlook for 2019. For the second quarter sales were $372 million, down 1% over the prior year period. Organic sales declined 4% and FX had a negative impact of 2%.The IGS and Gimatic businesses contributed a positive 5% of acquisition sales. Operating income was $57 million, down 11% .Excluding $1.4 million of Gimatic short-term purchase accounting adjustments adjusted operating income declined 9% to $58.3 million and adjusted operating margin was 15.7%, down 130 basis points. Interest expense was $5.4 million up $1.3 million from a year ago, due to an increase in average outstanding debt as a result of the Gimatic acquisition partially offset by a lower average interest rate.

With respect to taxes, the company's effective tax rate was 24.5% for the second quarter of 2019, compared with 15.9% for the prior year period. In the second quarter of last year an $0.08 per share tax benefit from the reversal of certain international valuation allowances and a $0.03 per share tax benefit of U.S. tax reform adjustments contributed to lower end -- to the lower-than-usual tax rate. Partially offsetting these items in the current period was the benefit of a foreign tax holiday granted late in 2018.

Net income was $37.6 million or $0.73 per diluted share, compared to $49.4 million or $0.93 per diluted share a year ago. Excluding $0.02 of Gimatic short-term purchase accounting adjustments in the quarter, adjusted net income per share was $0.75, down 17%. With respect to share count, our second quarter average diluted shares outstanding was 51.7 million shares. Under the 2019 stock repurchase authorization, we repurchased 900,000 shares at a cost of approximately $50 million in the second quarter leaving 4.1 million shares, available for repurchase. Year-to-date cash provided by operating activities was $108 million versus $89 million a year ago, primarily driven by working capital improvements.

Free cash flow which we define as operating cash flow less capital expenditures was $83 million compared to $64 million last year. Year-to-date, capex was $25 million, up approximately $1 million over the first half of last year. With respect to the balance sheet, our debt to EBITDA ratio was 2.7 times, up slightly from the end of our first quarter -- under our existing debt covenants additional borrowings of approximately $289 million of senior debt would be allowed.

Moving now to our segment performance, beginning with industrial. For the second quarter sales were $233 million, down 6% from last year. Organic sales decreased 11%, due in large part to ongoing softness in our automotive end markets. Unfavorable FX decreased sales by 3% while IGS and Gimatic contributed 7% of acquisition revenues. Operating profit was $27.4 million, down 28% primarily driven by the profit impact of lower organic sales volume and short-term purchase accounting adjustments. Overall a clean quarter with the lower sales volumes having the greatest impact. Excluding Gimatic short-term purchase accounting adjustments in the current quarter adjusted operating profit of $28.8 million was down 25% and adjusted operating margin was 12.3%, down 310 basis points. However, on a sequential basis, adjusted operating margin was up 180 basis points from 10.5% in the first quarter and we anticipate further improvements as we progress through the second half of 2019.

Moving to aerospace second quarter results were once again excellent. Record quarterly sales of $138 million were up 10% OEM sales increased 11% and aftermarket sales increased 8% from solid growth in both our MRO and spare parts businesses. Operating profit was $29.5 million, up 16% due to the profit contribution of higher sales volumes. Operating margin of 21.4% was up 110 basis points from 20.3% a year ago.

Once again, a high quality quarter with the aerospace team driving sales leverage to increase margin performance. Aerospace total backlog ended the quarter at $803 million, down 3% compared to a year ago and down 2% sequentially from last quarter. For OEM, specifically, backlog decreased to $791 million from $804 million a quarter ago. In consistent with our Q1 view, we expect to ship approximately 50% of our aerospace backlog over the next 12 months.

Turning to our updated 2019 outlook on Slide 5 of our supplement. We now expect total revenue growth of 3% to 4% with organic sales growth of approximately flat to 1% for the year, which is lower than our previous view. We forecast FX to negatively impact revenues by approximately 1% and acquisitions, revenues to contribute approximately 4% these factors are unchanged . Adjusted operating margin continues to be forecasted in the range of 15.5% to 16%, adjusted EPS is now expected to be in the range of $3.18 to $3.28. Consistent with our prior guidance, we see our full year adjusted EPS split being 45% first half 55% second half. Additionally, given the increased mold deliveries expected in the fourth quarter from Molding Solutions we see the Q3, Q4 EPS split also being approximately 45% and 55%.

A few other outlook items, interest expense is anticipated to be approximately $20 million. The effective tax rate is forecasted to be between 23.5% and 24%. Our capex expectation is approximately $60 million, average diluted shares are forecasted to be between 51 and 52 million shares and cash conversion is now forecasted to be approximately 100% while the cash conversion metric is lower than our prior view and now includes a discretionary $15 million pension contribution, which will be reflected in our operating cash flow in the third quarter. So to end like last quarter, aerospace strength is helping to offset some of the weakness being experienced in our industrial markets. We are focused on protecting margins to the extent possible by driving productivity. At the same time our cash generation remains strong, and we will look to both organic and acquisitive investments for future profitable growth.

Sharon, we will now open the call to questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from Myles Walton with UBS.

Louis Raffetto -- UBS -- Analyst

Good morning, guys. It's Louis Raffetto on from Myles.

Patrick J. Dempsey -- President & Chief Executive Officer

Hey, good morning, Lou.

Louis Raffetto -- UBS -- Analyst

Chris thanks for the color on the pension contribution next quarter that explains a little bit of things. Just wanted to -- you guys it sounds like you're still planning on the second half recovery and base of the shipment of additional molds in 4Q I guess. And so, I mean do you have really good clarity on that or is there still some expectation of sort of end market pick up?

Patrick J. Dempsey -- President & Chief Executive Officer

Lou, this is Patrick relative to the second half as we look out over the next 6 months the mold business is a one of the more solid aspects of that outlook in that we have the backlog already booked and in many instances already in the manufacturing cycle for both Q3 and Q4. So we have a significant sequential ramp in Q3 and Q4 within our molds business but again team is very, very clearly focused on executing to make those shipments happen. The second aspect that's key to that happening is coordination with our customers for validation and that has been closely choreographed as well.

Louis Raffetto -- UBS -- Analyst

Okay, great, thank you very much. And then just if I could ask about the M&A pipeline. I guess you guys still seeing potential further consolidation opportunities within the Gimatic sort of end-market or Gimatic area?

Patrick J. Dempsey -- President & Chief Executive Officer

Yes, we continue to be active in that in that space, as well as in a number of other spaces for our other businesses Molding solutions and Force & Motion Control. So we're actively looking at prospects remaining disciplined in terms of not only our strategic criteria.but also valuations. With that said, the team has been active, and we're looking to continue to invest as we go forward from the strong cash flows that we're generating to both organic and acquisitive opportunities.

Louis Raffetto -- UBS -- Analyst

Great, thank you guys.

Patrick J. Dempsey -- President & Chief Executive Officer

Great, thanks a lot of you.

Operator

Next question comes from Christopher Glynn with Oppenheimer .

Christopher Glynn -- Oppenheimer -- Analyst

Thank you. Good morning.

Patrick J. Dempsey -- President & Chief Executive Officer

Good morning, Chris.

Christopher Glynn -- Oppenheimer -- Analyst

So looking at the flat industrial guide it sort of implies the second-half run rate for industrial revs about $20 million above the average first-half run rate. Just curious if that is all molds for that magnitude step up but and what you have assumed for short cycle volumes?

Patrick J. Dempsey -- President & Chief Executive Officer

Yes. Good question Chris. The molds do make up the majority of the sequential step up, but we do have, and we also built in some optimism in terms of the short cycle businesses, and there what we've seen is particularly within our automotive hot runner business has been sequential improvement from Q1 to Q2. And we believe that as the year progresses, we'll see continued improvement within that business. A reassuring in fact is being that for the first 3 weeks, albeit only is three weeks of July we've seen incremental orders and week over week for the first three weeks building on the trend that we've seen from Q1 to Q2.

Christopher Glynn -- Oppenheimer -- Analyst

Okay. But the hot runners that's part of the long cycle backlog right?

Patrick J. Dempsey -- President & Chief Executive Officer

No. No, the high runners what I referenced was the automotive hot runners and that is very much a short cycle business.

Christopher Glynn -- Oppenheimer -- Analyst

Okay. And then just on the industrial margin in the second quarter was up a couple of percentage points sequentially on actually lower rev. So, just wonder if there is a accounting timing accruals or if that was just reflects your reaction time and execution to the first half revenue levels?

Patrick J. Dempsey -- President & Chief Executive Officer

I think I would give full credit to the leadership team with a view to drive in the Barnes Enterprise System with a view to drive an overall productivity. And so to your point, Chris, what I was pleased with albeit that it was a challenge in top line quarter was the sequential improvement of 180 basis points from Q1 to Q2 in terms of operating margins, and that was a tremendous -- I think credit to the leadership team and industrial.

Christopher Glynn -- Oppenheimer -- Analyst

Yeah, that look good. Hey, last one would be in terms of trade strife does and Synventive's position in China. The second caught up at all in any backlash by U.S. suppliers and in China coming on Synventive mix of the global OEMs for us China, domestics, and if there is any learnings to be gleaned from your answer?

Patrick J. Dempsey -- President & Chief Executive Officer

Well, I think for us within China, we've seen, clearly a slowing down in the market. Recognizing that we serve the auto -- we serve the Chinese market in two areas primarily auto in terms of our hot runners, our Tool & Die business and then thirdly, the medical. What we've seen impact the auto significantly in just the last few months is the implementation and the acceleration of what they call China 6 emissions Regulations and so the regulation itself was supposed to be implemented close to a year from now and a lot of the cities have taken a proactive step and implemented it almost immediately. And with that, what it's created is a lot of inventory in the auto industry that's created this sort of backlog of a sort of a logjam if you like. And so overall, we continue to see signs of continued green shoots within China, but clearly the market there has been under pressure.

Christopher Glynn -- Oppenheimer -- Analyst

So no impact on your position from treatment of U.S. companies are backlash?

Patrick J. Dempsey -- President & Chief Executive Officer

No, we've not seen anything to that effect.

Christopher Glynn -- Oppenheimer -- Analyst

Okay, thank you.

Operator

Your next question comes from Matt Summerville with D.A. Davidson.

Matt Summerville -- D.A. Davidson -- Analyst

Thanks. Just sticking on the hot runner side of the business, can you give us a little bit better sense how much that business was down year-over-year in Q2 and versus '18 for the full year? What sort of in the guide as far as where Synventive shakes out for the year.?

Patrick J. Dempsey -- President & Chief Executive Officer

So our automotive hot runners Matt pretty much went in line with light vehicle vehicle overall within our business. And so what we saw were high teens to the 20s and dependent on which aspect of our business touched automotive.

Matt Summerville -- D.A. Davidson -- Analyst

And then, Patrick, what is your expectation for auto hot runners and for the full year that's in your current guidance? And can you sort of give a little bit more granularity sequentially, first half, second half. I'm just trying to understand how this business sort of bridges because it to me, it sounds like it's pretty key that in fact you see higher revenue in auto hot runners in order to hit the guide for the year in addition to that mold business getting shift in Q4. ?

Patrick J. Dempsey -- President & Chief Executive Officer

You're correct, Matt, it is clearly a factor in that we have built in a sequential improvement in a hot runner business, Q3 to Q4 and again what you've seen is that in terms of our overall guidance for the business we've also split our revenues 45%-55% between Q3 and Q4. So, what, what I am confident in, is that the step-up between from Q2 to Q3 and Q3 to Q4 is reasonable and not overly aggressive with respect and is backed up by some of the improvements we've seen already year today.

Matt Summerville -- D.A. Davidson -- Analyst

If you look at incoming order rates for the industrial business in the second quarter. I believe that's a number you disclosed before if you guys are able to provide that. And then what your book-to-bill was in Q2 in industrial?

Christopher J. Stephens -- Senior Vice President of Finance and Chief Financial Officer

So a book to bill and industrial for Q2 was 1, and incoming organic orders for Q2 and industrial were down low-double digits.

Matt Summerville -- D.A. Davidson -- Analyst

Great, thank you.

Christopher J. Stephens -- Senior Vice President of Finance and Chief Financial Officer

Thank you.

Patrick J. Dempsey -- President & Chief Executive Officer

Thanks, Matt.

Operator

Your next question comes from Pete Skibitski with Alembic Global.

Pete Skibitski -- Alembic Global -- Analyst

Good morning, guys.

Patrick J. Dempsey -- President & Chief Executive Officer

Hey, good morning, Pete.

Christopher J. Stephens -- Senior Vice President of Finance and Chief Financial Officer

Good morning, Pete.

Pete Skibitski -- Alembic Global -- Analyst

Patrick, what are you hearing from your customers in terms of is there a timeframe in which even if the China tariffs stay on maybe assume a worst case, if they just kind of stay on indefinitely. And so what I would think that you know, no matter what production rates are the OEM soft to their model changeovers?

Patrick J. Dempsey -- President & Chief Executive Officer

Yes.

Pete Skibitski -- Alembic Global -- Analyst

But what you drive hot water demand for you. So I'm just wondering, is this year particularly tough comp on the model changeovers or should we expect at some point OEMs just say hey, we're seeing that through the model changeovers even if tariffs stay on. I just want to understand that all kind of dynamic better?

Patrick J. Dempsey -- President & Chief Executive Officer

Well to that point Pete. What we're seeing right now our model change has been released, even with the hangover the tariff issue and the trade disputes hanging over them. And so to that end, we've seen releases in North America and also releases in China and the releases in China from Western OEs particularly European. And then you have internally, you have the releases that would come from the domestic Chinese which are not impacted by that is the tariff disputes because their domestic production domestic sales.

What we have, what we have clearly outlined in terms of our guidance for the full year is now a consideration that we think that the resolution of the trade disputes are going to be more protracted. And so we're not reliant on a trade resolution to support our guidance as much as we are clearly sensing from the customers, what we're seeing in terms of Q2 and what we've now seen in addition to that begin in Q3, which has been the slow release, albeit at a lower level , but nonetheless, the release of model changes.

Pete Skibitski -- Alembic Global -- Analyst

Got it. Okay. Can you just I'm not being an auto guy. Can you help me understand why China 6 is negatively impacting auto over there?

Patrick J. Dempsey -- President & Chief Executive Officer

Because what happens -- China 6 is the equivalent of the emissions controls that were implemented in Europe, and basically what it is that the OEs where to meet those new standards in the new cars that were being produced. What they thought they had was a year, a year and a half, but they had been given notice for many years, but they thought they still had another year and a half to meet those requirements. What's happened inside of China is that certain large cities and provinces have taken it upon themselves to pull those requirements forward and implemented it or mandated them almost immediately. And with that, what you have is a complete logjam of existing inventory that's now sitting on the dealerships that the dealers are trying to move and of course the issue is that consumer is looking at do they really want to buy a car that has -- doesn't meet the new standards

Pete Skibitski -- Alembic Global -- Analyst

Okay. So they've got non-compliant inventory right now?

Patrick J. Dempsey -- President & Chief Executive Officer

Effectively, but they still -- they still can sell on off the dealers and what they're doing is discounting heavily to make that happen.

Pete Skibitski -- Alembic Global -- Analyst

Okay, OK. Let me switch to some good news. Maybe GE in Paris seemed pretty bullish I thought on the outlook for quite a number of years. I thought -- even into the middle of the next decade for CFM56 shop visits. Are you hearing the same thing from them, does that feel like visibility on the RSP programs, it's kind of extended in terms of time to big shop visits?

Patrick J. Dempsey -- President & Chief Executive Officer

What we use the reference was 2022, 2023 and even now, as we talk to the OEs. And you know that there are two in the CFI CFMI JV what we're now hearing is 2025. So there is a slight expansion there in terms of where the peak is and I think that all bodes very well for Barnes in terms of not only our spare parts business via the RSPs, but also our MRO business via the CRPs.

Pete Skibitski -- Alembic Global -- Analyst

That's great,great news. Okay, thanks guys.

Patrick J. Dempsey -- President & Chief Executive Officer

Thank you.

Operator

Next question comes from Michael Ciarmoli with SunTrust .

Michael Ciarmoli -- SunTrust -- Analyst

Hey, good morning guys. Thanks for taking the questions. Hey, Patrick, Did I -- did I hear you correctly organic industrial incoming orders down low-double digits. Is that a year-over-year, and can you give us any color to that -- did those organic orders worsen sequentially. Just a little color on that, maybe?

Patrick J. Dempsey -- President & Chief Executive Officer

So the -- yes you were correct in what you heard and that I mentioned that our organic orders for Q2 and '19 year-over-year to Q2 2018, were down 12% or low-double digits. They, -- what we saw, if you go back to 2018, we saw a very strong Q1 and Q2 in terms of our Molding Solutions business. And as I've highlighted where we've seen softness within that business has been in the automotive hot runner side for the reasons that I've cited. So sequentially between Q1 and Q2, there was a slight downtick but not insignificant.

Michael Ciarmoli -- SunTrust -- Analyst

Okay. And then just what are the -- what's now the the industrial operating margin outlook for 2019?

Patrick J. Dempsey -- President & Chief Executive Officer

So for 2019. yeah, it's approximately 12% to 13%.

Michael Ciarmoli -- SunTrust -- Analyst

Okay. And then should we think about you kind of talked about initiatives to right size, how should we think about some of those costs are they going to be meaningful. Should we expect that to be a headwind or maybe if you could just quantify if there is going to be any cost associated with some of these ongoing initiatives?

Patrick J. Dempsey -- President & Chief Executive Officer

So I think what I would suggest is the teams are evaluating on an ongoing basis, current market conditions, their outlook relative to those conditions and also looking at whether there is opportunities for to leverage even further the Barnes Enterprise System to drive overall productivity. And so those dialogues have taken place weekly. I would say that at this juncture they are very much in process and none of those have been factored in terms of any significant costs to our guidance. At the same time the benefit of ongoing productivity, normal productivity through the Enterprise System is factored in.

Michael Ciarmoli -- SunTrust -- Analyst

Got it, got it. And then maybe just last one, you guys had the 2020 targets out there. I think you kind of lowered them a little bit earlier in the year. I mean how should we think about progression to 2020. I know you had the organic sales CAGR 3% to 4%. The 17% to 18% operating margin, obviously we've got a little bit of a spot of industrial and weakness here in global softening, but how should we think about those targets now?

Patrick J. Dempsey -- President & Chief Executive Officer

Yeah Mike, what I would add is that on that given the trade uncertainty and how we're looking at first half, second half and we're focused on the near-term fortunately, just based on what we're seeing in terms of the -- again the trade uncertainties. A little premature to kind of call it out, for purposes of 2020 we're clearly guiding a good ramp up for purpose of the second half feeling pretty confident because most of that second half ramp up is sitting in backlog. So it's a matter of us executing on the Molding Solutions side and our customers accepting those molds in that time period. But I'd say it's a little premature, what we will do is that as we kind of execute 3Q into the fourth quarter we will provide an update accordingly.

Michael Ciarmoli -- SunTrust -- Analyst

Okay, perfect. Thanks guys.

Patrick J. Dempsey -- President & Chief Executive Officer

Thank you.

Christopher J. Stephens -- Senior Vice President of Finance and Chief Financial Officer

Thanks, Mike.

Operator

Next question comes from Edward Marshall with Sidoti & Company.

Edward Marshall -- Sidoti & Company -- Analyst

Hey guys. Good morning.

Patrick J. Dempsey -- President & Chief Executive Officer

Good morning, Ed.

Christopher J. Stephens -- Senior Vice President of Finance and Chief Financial Officer

Good morning, Ed.

Edward Marshall -- Sidoti & Company -- Analyst

So I wanted to ask, I mean looking at the guidance for industrial margin it looks like to get to the midpoint of that range you need about 200 basis points above the first-half pace that's the math, what do you think -- is that the molds business coming in that's driving that margin improvement and just maybe you can talk to that for just a moment?

Patrick J. Dempsey -- President & Chief Executive Officer

Yes. Primarily molds add in that. What we see is a a large piece of the backlog within our industrial business sits within the molds and those molds are very, very much scheduled in terms of both Q3 and Q4 in terms of the fact that we're working closely to meet our customers' requirements. But also, as I mentioned earlier, key that our team executes. So for the most part the margin uptick comes from the fact that it molds constitutes our higher margin business, but also some incremental improvement from our automotive hot runner business, which is also a high margin.

Edward Marshall -- Sidoti & Company -- Analyst

Got it. So aside from the hot runner business in general it looks like, can you, can you go back and talk about maybe what's affecting the molds . I mean it sounds like you're seeing more of a push out and cancellations or outright sluggish demand kind of talk about maybe what's -- what the dynamic is there if you don't mind?

Patrick J. Dempsey -- President & Chief Executive Officer

Yeah. Push outs. Let me define what I think push out means different things I think to different people. For us a push out may be simply the fact that as the final validation of the mold the customer realizes that there is an enhancements that can be made to the final product and as such, what they'll ask for is a slight modification. But if that slight modification takes five days , which for us again is potentially an incremental change order. So we're happy to do it, but it then moves the part from, if it was scheduled to ship at the end of the quarter into the next quarter. So it's a timing issue and what we've seen in our mold business is these dramatic movements quarter-to-quarter, which you -- if you look back at our business over the last few years since we moved into the mold business. There is a major swings quarter-to-quarter, both in terms of orders, and in terms of shipments just because of the nature of the business is a little bit more programmatic in that -- once the customer wants a shipment to molds, they'll ship them all at once and that could be 12 molds, that could be -- multiple molds all at once, but none of the molds can leave until all of them are ready.

Christopher J. Stephens -- Senior Vice President of Finance and Chief Financial Officer

And then what I would add to Patrick's comments is also recognized on a cash side we typically get a good 30% payment upfront at order and then we get cash through the program in terms of execution, roughly around 60%. It's only that last 10% from a cash point of view that we get -- when we recognize the sale and that's. So it's not so much a cash issue for us, it's -- it really is a revenue recognition in the profitability associated with that. And as you heard in the quarter, roughly 8 million of those molds, we anticipated to be shipped in the month of June , which is now just carrying into the second half of the year. So pretty high degree of confidence from the team we status it often open dialogue just understanding where we are in percent complete on those programs. So, and if we didn't have that confidence we wouldn't be guiding the way we are. But we look at that as that ramp going from roughly 45% third quarter from an EPS point of view to 55% in the fourth quarter is how we see it and that's mostly dependent on two pieces of our business both aerospace, the continued strength that of aerospace as well as molds being shipped by year-end.

Edward Marshall -- Sidoti & Company -- Analyst

Got it. And I guess what I'm getting at. I mean, God, I have covered you guys for a long time, but if I look at the Molding Solutions business, I mean that some of your higher margin business down 16% hot runners down, I think you said high teens, maybe 20% high 20s or low 20s and these are significantly high, but the margin in Industrial business is kind of held in there on a relative basis to past recessions or past weaknesses industrial. So, and I guess as these businesses come back, you see kind of improvement. I'm curious if you'd comment you know on a, the differential in the margin from peak to trough that you've seen kind of in the industrial business relative to past cycles? I know that's a lot of questions, but any thoughts you could give would be great.

Christopher J. Stephens -- Senior Vice President of Finance and Chief Financial Officer

A good question.

Patrick J. Dempsey -- President & Chief Executive Officer

Yeah. Well Ed I would highlight that I think what you see in this quarter is an example of the resilience of the portfolio compared to maybe where we would have been 6 ,10 years ago. And so what you're clearly seeing is that there is tremendous flow through in terms of leverage of incremental dollar on the top line. There is that leverage on the upside and then there's the obviously decrement on the downside. So what we've done over the course of the last 6 months has been very diligent in terms of driving through the Barnes Enterprise System . All of the actions that we believe that were necessary for to anticipate softness in these businesses, which we had anticipated just based on global auto and also trade uncertainties. And so one of the disciplines that the teams drive through is why we -- what we refer to as contingency planning, and basically, they have a playbook that says if I see a headwind of plus 5 minus 5 if I see a upside plus 10 a downside the minus 10 what are the actions and what are the initiatives that we're going to drive and what you've seen in Q2, I think is indicative of that whereby we're up 180 basis points sequentially on lower sales.

Edward Marshall -- Sidoti & Company -- Analyst

Yeah. it's good to see. I'm curious, we haven't spent a lot of time on aerospace in this call, been a bright spot of your portfolio. As I look forward, I know we've asked this question before, but anything that you can add on the GE9X. I know that's the, that's an engine program that you're working on. I'm curious if you can offer some of the solution that you know of the maybe some of the problems that have been going on with that engine and ultimately do you have any sense as to what your content might be?

Patrick J. Dempsey -- President & Chief Executive Officer

Yeah, we are definitely actively work in the GE9X Ed and it's an area that we're working closely with the OE on. We're not, we're not unfortunately, we're not a part of the solution for the current issue and in that it's not in our, it's not anything we've been involved in. The -- obviously the GE9X we believe will be another great program. In the meantime the 777[Phonetic] continues to get produced at approximately 3.5 a month and that's a solid contributor to us. And where we wouldn't go out with content on the GE9X until it was closer into entry into service, but I have indicated previously that it will not be in the same range as well as the Base GE90 .

Edward Marshall -- Sidoti & Company -- Analyst

And when you say Base GE90 you mean content today or where it started when you first [Indecipherable] the program?

Patrick J. Dempsey -- President & Chief Executive Officer

No, I mean, no just being content today, if you think about the GE90 on the 777 the Base 777 we had it was one of the most successful programs in Barnes with approximately at its peak, $1 million per aircraft. And so what has happened with the GE9X is that the engine was shared through revenue sharing programs. So where pieces of the engine, which were available to us in the past were bought into by large partners. And so that took some of the potential for the same content that we saw in the Base GE90 off of the GE9X.

Edward Marshall -- Sidoti & Company -- Analyst

Got it. And the final question for me is on capital deployment. I mean, Chris, you mentioned earlier that the leverage is kind of heated up a little bit. I guess it's a little bit of the weakness on maybe EBITDA, but you also repurchased 50 million shares or $50 million with the stock in the quarter. I know that's off the $140 million piece last year, but as the stock is kind of fall do you find that there is some opportunistic value in the stock that prompted you to invest $50 million in repurchases?

Christopher J. Stephens -- Senior Vice President of Finance and Chief Financial Officer

No that's good way to look at, I guess I look at it as we typically on an annual basis plan for quantity to generally offset the dilutive impact of what gets issued and what we are looking like, last year we were being opportunistic based on share price. I view it as now as we don't have much of those discussions at the Board level. This buyback was relative to our plan. It was executed on. We are, as we always have been squarely focused on the M&A side as well as the internal growth in terms of capex. Although our capex guidance came down slightly as we look to the full year. We're still committed to organic growth as that number one, number one priority. So, and I would just summarize. It's opportunistic but right now we don't foresee much in the way of share repurchases as we kind of close out -- close out 2019, meaning we've acquired what we feel was appropriate.

Edward Marshall -- Sidoti & Company -- Analyst

Got it. I appreciate your comments, guys. Thanks very much.

Patrick J. Dempsey -- President & Chief Executive Officer

Sure. Thank you.

Operator

Next question comes from Josh Chan with Baird.

Josh Chan -- Robert W. Baird -- Analyst

Good morning, Patrick. Chris and Bill.

Patrick J. Dempsey -- President & Chief Executive Officer

Hey, Josh.

Christopher J. Stephens -- Senior Vice President of Finance and Chief Financial Officer

Good morning.

Josh Chan -- Robert W. Baird -- Analyst

Good morning. My first question is on the industrial business, I mean if you look at the force & motion control and engineered components businesses somewhat of a softness in both businesses there. But your guidance didn't change for the year. So I know we talked about the ramp in the molding business, but is there a ramp assumed in these other two businesses as well?

Patrick J. Dempsey -- President & Chief Executive Officer

Not anything significant. What we've seen in the Force and Motion control business is, as you may recall the force & motion control as we've created that SBU now is comprised 60% tool & die, 40% general industrial and what we've seen in the general industrial within force & motion control and the rest of our industrial businesses is general industrial has held up pretty well. It's offered some resistance to some of the downward pressures that we've seen in some of our other end markets. And so with that we, we basically planned on this remaining pretty level through the rest of the year. On the tool & die side what I would suggest is that we've seen it, we think we've seen the bottom. And so with that, we have some slight incremental improvement Q3 to Q4, but nothing that is -- that challenging in terms of expectations.

Christopher J. Stephens -- Senior Vice President of Finance and Chief Financial Officer

Yeah, pretty steady.

Josh Chan -- Robert W. Baird -- Analyst

Okay. Yeah. That helps, thanks. And on the end markets. I know you broke out growth by each business, but is there any color that you can give us in terms of how geographies performed within the Industrial businesses in the quarter where you saw more softness and may be more resilient in terms of geographically?

Patrick J. Dempsey -- President & Chief Executive Officer

Well, as we go to geographic Josh, I would say that you have to think about it in terms of the end markets themselves, so rather than broad based industrial. But if you look at our industrial business in general and total BI with our revenues are coming about 35% from the Americas, approximately 40% from Europe and 25% from Asia or China predominantly. And so that gives you a flavor of where our revenues have been generated on an approximate basis worldwide. As you think about the end markets we're serving our largest market is light vehicles followed by general industrial, medical, personal care and packaging which we sort of lump together and is driven primarily by the molds business and then we have our tool & die and automation, so there at the end markets, the dominant end markets. When we think about light vehicle we saw in terms of revenues we saw the most pressure in Europe -- was if you think about general industrial we saw in terms of orders we saw an uptick in North America. So again it's a -- in general, it depends on the end market as we're serving, but for the most part, I would say that Europe and Asia saw the most pressure while North America was where we saw the most resilience.

Josh Chan -- Robert W. Baird -- Analyst

All right. Thanks for the call Patrick and thanks for you guys for the time.

Patrick J. Dempsey -- President & Chief Executive Officer

Yeah. Thanks, Josh.

Christopher J. Stephens -- Senior Vice President of Finance and Chief Financial Officer

Thank you.

William Pitts -- Director of Investor Relations

Thank you.

Operator

Your next question comes from Matt Summerville with D.A. Davidson.

Matt Summerville -- D.A. Davidson -- Analyst

Just a couple of quick follow-ups. With respect to that mold push out I believe you saw some of this around this time last year. So to your earlier comments, is this sort of becoming a normal thing that we should just expect to encounter from time to time? And maybe can you give a little more color on what end market or type of application that this particular product might be getting used for?

Patrick J. Dempsey -- President & Chief Executive Officer

Yeah, I do think, Matt, that it is a part and parcel of the business in that. There are always going to be slippages from one quarter to another as it pertains to these molds and it's sort of the nature of the piece[Phonetic]. We coordinate very closely, from a manufacturing standpoint, recognize that the mold itself is probably completed in terms of the manufacturing process in advance of the quarter. At the end of a quarter when we schedule and build that into our guidance.

The issue then becomes right after the manufacturing is complete there is what's known as a validation process and in that validation process, the customers actually coming on size and they witness the first runs of the molds and the quality of the product and the --if the mold is meeting the specifications that they outlined, which for the most part, normally is right on the money. However, in that process they then look to make tweaks or adjustments that they feel is going to improve their overall production rates. And subsequently ask a number of instances to make modifications and in that situation, we will always accommodate it but at the expense sometimes of its shipping in the quarter that we had planned. So it's going to be a common aspect of this business. And along with what I said, which is large spikes in shipments one quarter versus another quarter there's a lot of variation because the molds don't ship one at a time, they usually ship as a group for -- to serve a particular program.

Matt Summerville -- D.A. Davidson -- Analyst

Got it. And then just maybe drill down a little bit further on the strength you saw in medical maybe put some numbers around that. Similarly, the weakness you saw in packaging, personal care and on the latter whether you think that's a blip or more of a discernible change in trend in that business?

Patrick J. Dempsey -- President & Chief Executive Officer

Well, the medical side of our business has been strong for a period of time now. 2018 and 2019. So we've seen continued strength there in terms of the medical end markets and recognize that our specialty in that regard, or medical devices. That are -- unfortunately in high demand, because of certain epidemics and as a human race. That said, the packaging and personal care side of the business. What we've seen there is when I make reference to some of the regulatory requirements that are changing in terms of different parts of the globe, we believe that's affecting packaging at the moment in that, there are clearly regulations that have been contemplated, particularly in Europe as it pertains to single-use plastic and biodegradable plastics and we are actively involved in those discussions and the creation of solutions for those issues. But in the meantime, until there is resolution and there's clarity as to where those regulations are going to come down we see customers pausing to place new orders in terms of new programs.

Matt Summerville -- D.A. Davidson -- Analyst

Got it. And then just finally you mentioned aftermarket in aero was up 8%. Can you give the numbers for how much MRO and RSPs were up please?

Patrick J. Dempsey -- President & Chief Executive Officer

MRO was up 5% and RSPs was up 13%.

Matt Summerville -- D.A. Davidson -- Analyst

Great. Thank you guys.

Patrick J. Dempsey -- President & Chief Executive Officer

You're welcome.

Christopher J. Stephens -- Senior Vice President of Finance and Chief Financial Officer

Thank you, Matt.

Operator

At this time, I will turn the call over to Mr Pitts.

William Pitts -- Director of Investor Relations

Thank you. We would like to thank all of you for joining us this morning . And we look forward to speaking with you next in October with our third quarter 2019 earnings call. Sharon, we will now conclude today's call.

Operator

[Operator Closing Remarks].

Duration: 60 minutes

Call participants:

William Pitts -- Director of Investor Relations

Patrick J. Dempsey -- President & Chief Executive Officer

Christopher J. Stephens -- Senior Vice President of Finance and Chief Financial Officer

Louis Raffetto -- UBS -- Analyst

Christopher Glynn -- Oppenheimer -- Analyst

Matt Summerville -- D.A. Davidson -- Analyst

Pete Skibitski -- Alembic Global -- Analyst

Michael Ciarmoli -- SunTrust -- Analyst

Edward Marshall -- Sidoti & Company -- Analyst

Josh Chan -- Robert W. Baird -- Analyst

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