B Barnes Group Inc

Barnes Group Inc. (NYSE: B), a diversified global manufacturer and logistical services company, today reported financial results for the third quarter 2010. The Company reported net income of $15.1 million, or $0.27 per diluted share, compared to $10.9 million, or $0.20 per diluted share in the third quarter of 2009. Barnes Group’s third quarter 2010 sales totaled $289.9 million, an increase of 11.4 percent from $260.3 million in the third quarter of 2009.

($ millions; exceptper share data)

  Three months ended September 30,   Nine months ended September 30, 2010   2009   Change 2010   2009   Change Net Sales $289.9 $260.3 $29.6   11.4% $849.9 $777.7 $72.2   9.3% Operating Income $24.8 $14.6 $10.3 70.6% $68.2 $49.2 $19.0 38.7% % of Sales 8.6% 5.6% - 3.0 pts. 8.0% 6.3% - 1.7 pts. Net Income $15.1 $10.9 $4.2 38.7% $41.8 $32.8 $9.0 27.3% % of Sales 5.2% 4.2% - 1.0 pts. 4.9% 4.2% - 0.7 pts. Net Income Per Diluted Share   $0.27     $0.20     $0.07   35.0%     $0.75     $0.61     $0.14   23.0%    

“Continued improvements in the current economic climate, particularly within our industrial and automotive end markets, led to double-digit sales growth for the second consecutive quarter,” said Gregory F. Milzcik, President and Chief Executive Officer, Barnes Group Inc. “This increase in sales, paired with our continued focus on maintaining an efficient cost structure and productivity, contributed to a meaningful improvement to our third quarter operating profit.

“We also experienced continued growth in our backlog and strong order rates, which position us well to build upon our success as we move into the fourth quarter,” Milzcik said. “While we are seeing strong growth in Precision Components and increased activity within our distribution and aerospace aftermarket businesses, we continue to remain cautious. Our 2010 diluted earnings per share guidance has been tightened to $0.95 to $1.00 given current and anticipated market conditions.”

Logistics and Manufacturing Services

• Third quarter 2010 sales at Logistics and Manufacturing Services were $138.9 million, an increase of 5.8 percent from $131.3 million in the same period last year. The increase in sales was driven primarily by revenue growth in the North American distribution businesses as macro-economic conditions, including industrial production, continued to improve. The European-based distribution business experienced a slight decline in sales compared to the same period last year mainly due to the negative impact of foreign exchange. Aerospace aftermarket reported an increase in sales over the prior year period reflecting modest improvement in maintenance, repair and overhaul activity and new product introduction. Foreign exchange negatively impacted third quarter 2010 sales by $1.5 million.
• Operating profit was $10.8 million, compared with $11.9 million in the third quarter of 2009. This primarily results from increased personnel costs related to expanding the sales force and improving productivity in the distribution businesses. Operating profit was also impacted by higher product and freight costs. Higher sales helped partially offset the impact of these trends. Operating margin was 7.8 percent compared to 9.0 percent in the prior year.

Precision Components

• Order rates within Precision Components experienced an increase over the prior year and outpaced sales for the fourth consecutive quarter. Third quarter 2010 sales were $154.0 million, up 18.4 percent from $130.0 million in the same period last year. Year-over-year sales growth continued to be driven by improved market demand primarily from the industrial manufacturing businesses in North America and Europe and from improvements in the transportation industry, including automotive. Sales in the aerospace original equipment manufacturing business were relatively flat compared to the third quarter of 2009. Foreign exchange negatively affected sales by $1.2 million in the third quarter.
• Operating profit for the third quarter of 2010 increased significantly to $14.0 million, as compared with $2.7 million in the third quarter of 2009. The higher operating profit was due primarily to the increase in 2010 sales levels, as well as a lower fixed cost structure, and a focus on lean initiatives to improve operating efficiency. Sales gains helped offset higher personnel costs and expenses associated with increases in new product introductions. Included in Precision Components third quarter 2009 results are $3.4 million (pre-tax) for restructuring charges related to moving operations in two facilities that provided a more cost effective manufacturing footprint. Operating margin was 9.1 percent compared to 2.1 percent in the prior year.

Additional Information

• Other income, net of other expenses, decreased $2.0 million in the third quarter of 2010, compared to the same period of 2009 primarily as a result of a $1.5 million gain in 2009 on the repurchase of certain convertible notes. Year-to-date, other income, net of other expenses, decreased $4.8 million, primarily as a result of a $3.8 million gain in 2009 on the repurchase of certain convertible notes.
• The Company’s effective tax rate for the first nine months of 2010 was 17.7 percent compared to 5.1 percent in 2009. Included in the 2009 year-to-date tax expense is a $1.6 million tax benefit related to the third quarter 2009 restructuring actions. Changes to the Company’s tax rate are largely based on changes in the projected mix of income between taxing jurisdictions.
• Barnes Group generated $47.0 million in cash from operations for the first nine months of 2010, compared to $125.7 million in 2009. Cash flow in 2010 includes additional investments in working capital driven by increased customer demand.

Conference Call

The Company will conduct a conference call with investors to discuss third quarter 2010 results at 8:30 a.m. ET today, October 29, 2010. A webcast of the live call and an archived replay will be available on the Barnes Group investor relations link at www.BGInc.com.

Barnes Group Inc. (NYSE:B) is a diversified global manufacturer and logistical services company focused on providing precision component manufacturing and operating service support. Founded in 1857, over 4,800 dedicated employees at locations on four continents worldwide are committed to achieving consistent and sustainable profitable growth. For more information, visit www.BGInc.com. Barnes Group, the Critical Components People.

This release may contain certain forward-looking statements as defined in the Private Securities Litigation and Reform Act of 1995. Forward-looking statements are made based upon management’s good faith expectations and beliefs concerning future developments and their potential effect upon the Company and can be identified by the use of words such as “anticipated,” “believe,” “expect,” “plans,” “strategy,” “estimate,” “project,” and other words of similar meaning in connection with a discussion of future operating or financial performance. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed in the forward-looking statements. The risks and uncertainties, which are described in our periodic filings with the Securities and Exchange Commission, include, among others, uncertainties arising from the behavior of financial markets; future financial performance of the industries or customers that we serve; changes in market demand for our products and services; successful integration of acquired businesses; introduction of new products or transfer of work; changes in raw material prices and availability; foreign currency exposure; our dependence upon revenues and earnings from a small number of significant customers; uninsured claims; and numerous other matters of global, regional or national scale, including those of a political, economic, business, competitive, environmental, regulatory and public health nature. The Company assumes no obligation to update our forward-looking statements.

BARNES GROUP INC. CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data) Unaudited             Three months ended September 30, Nine months ended September 30, 2010 2009 % Change 2010 2009 % Change   Net sales $ 289,901 $ 260,339 11.4 $ 849,930 $ 777,690 9.3   Cost of sales 184,989 170,491 8.5 540,833 503,369 7.4 Selling and administrative expenses   80,079     75,291   6.4   240,915     225,161   7.0     265,068     245,782   7.8   781,748     728,530   7.3   Operating income 24,833 14,557 70.6 68,182 49,160 38.7   Operating margin 8.6 % 5.6 % 8.0 % 6.3 %   Other income 56 1,545 (96.4 ) 290 4,205 (93.1 ) Interest expense 5,177 5,293 (2.2 ) 15,273 17,234 (11.4 ) Other expenses   829     293   NM   2,451     1,558   57.3   Income before income taxes 18,883 10,516 79.6 50,748 34,573 46.8   Income taxes (benefit)   3,779     (373 ) NM   8,992     1,778   NM   Net income $ 15,104   $ 10,889   38.7 $ 41,756   $ 32,795   27.3   Common dividends $ 4,373   $ 4,357   0.4 $ 13,159   $ 21,220   (38.0 )   Per common share: Net income: Basic $ 0.27 $ 0.20 35.0 $ 0.75 $ 0.61 23.0 Diluted 0.27 0.20 35.0 0.75 0.61 23.0 Dividends 0.08 0.08 - 0.24 0.40 (40.0 )   Average common shares outstanding: Basic 55,346,517 54,257,791 2.0 55,428,865 53,462,672 3.7 Diluted 55,839,970 54,563,199 2.3 56,048,170 53,710,453 4.4   Notes: 2009 third quarter Other income included a $1,485 gain on the purchase of certain convertible debt and income taxes included the related tax expense of $563. 2009 year-to-date Other income included a $3,773 gain on the purchase of certain convertible debt and income taxes included the related tax expense of $1,431.   BARNES GROUP INC. OPERATIONS BY REPORTABLE BUSINESS SEGMENT (Dollars in thousands) Unaudited             Three months ended September 30, Nine months ended September 30, 2010 2009 % Change 2010 2009 % Change Net Sales   Logistics and Manufacturing Services $ 138,937 $ 131,309 5.8 $ 412,679 $ 410,546 0.5   Precision Components 154,012 130,041 18.4 446,397 371,560 20.1   Intersegment sales   (3,048 )   (1,011 ) NM   (9,146 )   (4,416 ) NM   Total net sales $ 289,901   $ 260,339   11.4 $ 849,930   $ 777,690   9.3   Operating profit   Logistics and Manufacturing Services $ 10,799 $ 11,871 (9.0 ) $ 29,296 $ 38,777 (24.5 )   Precision Components   14,034     2,686   NM   38,886     10,383   NM   Total operating profit 24,833 14,557 70.6 68,182 49,160 38.7   Interest income 56 54 2.7 211 371 (43.2 )   Interest expense (5,177 ) (5,293 ) (2.2 ) (15,273 ) (17,234 ) (11.4 )   Other income (expense), net   (829 )   1,198   NM   (2,372 )   2,276   NM   Income before income taxes $ 18,883   $ 10,516   79.6 $ 50,748   $ 34,573   46.8   Notes: 2009 third quarter Other income (expense), net included a $1,485 gain on the purchase of certain convertible debt. 2009 year-to-date Other income (expense), net included a $3,773 gain on the purchase of certain convertible debt.   BARNES GROUP INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands) Unaudited      

September 30,2010

December 31,2009

Assets Current assets Cash and cash equivalents $ 23,724 $ 17,427 Accounts receivable 189,693 160,269 Inventories 211,902 190,792 Deferred income taxes 9,040 23,630 Prepaid expenses and other current assets   14,577   10,562   Total current assets 448,936 402,680     Deferred income taxes 40,344 30,650 Property, plant and equipment, net 219,755 224,963 Goodwill 381,421 373,564 Other intangible assets, net 294,193 303,689 Other assets   18,964   16,444   Total assets $ 1,403,613 $ 1,351,990   Liabilities and Stockholders' Equity Current liabilities Notes and overdrafts payable $ 8,012 $ 4,595 Accounts payable 97,014 85,588 Accrued liabilities 80,189 73,538 Long-term debt - current   107,322   25,567   Total current liabilities 292,537 189,288   Long-term debt 241,679 321,306 Accrued retirement benefits 106,100 118,693 Other liabilities 36,894 37,990   Stockholders' equity   726,403   684,713   Total liabilities and stockholders' equity $ 1,403,613 $ 1,351,990   BARNES GROUP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Unaudited       Nine months ended September 30, 2010 2009 Operating activities: Net income $ 41,756 $ 32,795 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 38,988 38,558 Amortization of convertible debt discount 4,251 4,558 Loss on disposition of property, plant and equipment 253 813 Gain on repurchase of convertible notes -- (3,773 ) Stock compensation expense 5,619 3,279 Withholding taxes paid on stock issuances (287 ) (610 ) Changes in assets and liabilities: Accounts receivable (27,671 ) 14,694 Inventories (19,492 ) 50,757 Prepaid expenses and other current assets (5,420 ) 4,378 Accounts payable 11,359 4,615 Accrued liabilities 5,906 (3,054 ) Deferred income taxes 4,469 (2,741 ) Long-term retirement benefits (12,155 ) (16,503 ) Other   (579 )   (2,030 )   Net cash provided by operating activities 46,997 125,736   Investing activities: Proceeds from disposition of property, plant and equipment 1,384 981 Capital expenditures (22,463 ) (24,847 ) Other   (2,393 )   (1,737 )   Net cash used by investing activities (23,472 ) (25,603 )   Financing activities: Net change in other borrowings 3,384 (4,861 ) Payments on long-term debt (243,658 ) (181,242 ) Proceeds from the issuance of long-term debt 241,667 94,900 Proceeds from the issuance of common stock 3,871 5,621 Common stock repurchases (9,014 ) (314 ) Dividends paid (13,159 ) (21,220 ) Other   (160 )   (797 )   Net cash used by financing activities (17,069 ) (107,913 )   Effect of exchange rate changes on cash flows   (159 )   1,043     Increase (decrease) in cash and cash equivalents 6,297 (6,737 )   Cash and cash equivalents at beginning of period   17,427     20,958     Cash and cash equivalents at end of period $ 23,724   $ 14,221