B Barnes Group Inc

Barnes Group Inc. (NYSE: B), a diversified global manufacturer and logistical services company, today reported financial results for the fourth quarter and full year 2009. The Company reported income from continuing operations of $6.2 million, or $0.11 per diluted share, compared to a loss of $5.5 million, or negative $0.10 per diluted share in the fourth quarter of 2008. Included in the fourth quarter 2009 results are $1.3 million after-tax of severance and plant consolidation charges as compared to $14.3 million for severance and plant consolidation charges and a provision for deferred tax assets taken in the fourth quarter of 2008. Barnes Group’s fourth quarter 2009 sales totaled $256.5 million, down 3 percent from $265.4 million in the fourth quarter of 2008.

For the full year 2009, Barnes Group achieved sales of $1.0 billion, down 24 percent from 2008. Income from continuing operations for the full year 2009 was $39.0 million and earnings per diluted share were $0.72, compared to income from continuing operations in 2008 of $92.7 million or $1.66 per diluted share.

Barnes Group generated $143.5 million in cash from operations for the 12 months of 2009, reflecting an improvement of 28 percent over the prior year period level of $111.8 million. Cash flow generation, driven by significant working capital reductions, helped reduce debt to $351.5 million, a decline of 25 percent from year-end 2008. As a result, the Company’s debt-to-capital ratio at December 31, 2009 improved to 34 percent. The Company’s December 31, 2009 total debt covenant ratio of 3.10 times was below 3.75 times, the level required under the Company’s revolving credit agreement.

“Reflecting on our year-long focus on cost control and cash management, I am extremely proud of our accomplishments. We were able to strengthen our balance sheet through effective working capital management and debt reduction. Rigorous cost control, working capital reductions, and alignment of capital spending with anticipated demand helped us generate cash well beyond our goals during this difficult year,” said Gregory F. Milzcik, President and Chief Executive Officer, Barnes Group Inc.

“Our 2009 results were affected most by the decline in our revenues due to the global economic downturn’s impact on our end markets. We believe the steps we took to deal with the recession have effectively adjusted our cost structure to enhance our profitability at lower volumes and provide incremental profits on revenue gains. Throughout 2010, we will continue to focus on maintaining our financial discipline, as we shift the Company’s attention toward profitable sales growth. Our efforts will enable us to successfully transition from the depressed market conditions of 2009 to more favorable conditions this year and further growth in 2011,” Milzcik added.

  ($ millions; except   Three months ended December 31,   Twelve months ended December 31, per share data) 2009     2008     Change 2009     2008     Change Net Sales $256.5 $265.4 ($8.9)   (3.4) % $1,034.2 $1,362.1 ($327.9)   (24.1) % Operating Income $11.4 $2.7 $8.6 316.7 % $60.5 $147.9 ($87.4) (59.1) % % of Sales 4.4 % 1.0 % - 3.4 pts. 5.9 % 10.9 % - (5.0) pts.

Income (Loss) fromContinuing Operations

$6.2 ($5.5) $11.7 NM $39.0 $92.7 ($53.7) (57.9) % % of Sales 2.4 % (2.1) % - 4.5 pts. 3.8 % 6.8 % - (3.0) pts. Net Income (Loss) $6.2 ($11.1) ($17.3) NM $39.0 $82.6 ($43.6) (52.8) % % of Sales 2.4 % (4.2) % - 6.6 pts. 3.8 % 6.1 % - (2.3) pts.  

Income (Loss) fromContinuing OperationsPer Diluted Share

$0.11 ($0.10) $0.21 NM $0.72 $1.66 ($0.94) (56.6) %  

Net Income (Loss) PerDiluted Share

  $0.11     ($0.21)     $0.32   NM     $0.72     $1.48     ($0.76)   (51.4) % NM = Not meaningful

Logistics and Manufacturing Services

• Fourth quarter 2009 sales at Logistics and Manufacturing Services were $128.6 million, down 12 percent from $146.0 million in the same period last year. The decline in sales was driven primarily by softness in the markets served throughout North America. Additionally, sales declines in the aftermarket aerospace market were primarily driven by lower aircraft utilization and deferred maintenance. Foreign exchange positively impacted sales by $4.5 million in the fourth quarter.
• Operating profit of $5.2 million for the fourth quarter of 2009 was down 5 percent compared to the prior year period. Operating profit for the fourth quarter and full year 2008 includes the impact of discrete actions of $5.3 million (pre-tax) related primarily to workforce reductions. Operating profit was driven lower primarily by the reduced sales volumes in our businesses due to the decline in macroeconomic conditions in our end-markets. Operational and productivity initiatives implemented in 2008 and throughout 2009 to align the cost structure with sales volumes provided beneficial results, tempering the adverse profit impact of declining sales.
• Full year 2009 sales at Logistics and Manufacturing Services were $539.1 million, down 22.1 percent from $691.8 million in 2008. Foreign exchange adversely affected sales by $12.0 million for the full year. Full year operating profit was $44.0 million, down 44 percent from $79.1 million in 2008. The decline in operating profit was driven by the profit impact of the lower sales volume in each of the segment’s businesses due to the impact of the economic conditions on the end-markets served. Partially offsetting these declines was the positive impact of operational and productivity actions taken in the prior year.

Precision Components

• Fourth quarter 2009 sales at Precision Components were $129.9 million, up 7 percent from $121.8 million in the same period last year. The end markets within our businesses, particularly transportation, showed improvement from a year ago and overall orders for the fourth quarter of 2009 outpaced sales as production began to stabilize throughout the quarter. Foreign exchange positively affected sales by $4.5 million in the fourth quarter.
• Operating profit for the fourth quarter of 2009 was $6.2 million, compared with an operating loss of $3.0 million in the fourth quarter of 2008. Included in the fourth quarter 2009 results are $3.6 million (pre-tax) of severance and plant consolidation charges compared to $7.5 million (pre-tax) of costs related to similar actions taken during the fourth quarter of 2008. The improvement in operating profit was driven by cost savings and cost containment initiatives taken in 2008 and throughout 2009 to address deteriorating market conditions as well as a higher level of sales activity.
• Full year 2009 sales at Precision Components were $501.5 million, down 27 percent from $683.0 million in 2008. Foreign exchange adversely affected sales by $5.6 million for the full year. Full year operating profit in 2009 was down 76 percent to $16.6 million, from the 2008 operating profit of $68.5 million. The decline in operating profit for the full year was attributable to the sharp declines in demand within the transportation and industrial end-markets and the impact of employee reductions and facility consolidations taken throughout 2009 to address the market deterioration. Partially offsetting the operating profit reduction were the favorable impacts of prior year initiatives focused on cost savings and cost containment.

Additional Information

• For the full year 2009, other income, net of other expenses increased $4.4 million, compared to the prior year, as a result of a $3.8 million gain on the repurchase of certain convertible subordinated notes.
• The Company’s effective tax rate from continuing operations for 2009 was 2.4 percent compared with 22.1 percent in 2008. The decrease in the 2009 effective tax rate from 2008 was due primarily to the higher concentration of profits in lower taxing jurisdictions and the absence of profitability in higher tax jurisdictions.

2010 Outlook

“With our actions to drive improved profitability and cash flow performance implemented, and what we believe to be the early signs of a recovery emerging, the Company’s targeted earnings for the full year 2010, based on current market conditions, are $0.85 to $1.05 per diluted share,” said Christopher J. Stephens, Jr., Senior Vice President, Finance and Chief Financial Officer, Barnes Group Inc.

“We believe that our actions to reduce costs and drive improved cash flow performance, together with some recovery in the economy, will benefit us in 2010. Earnings per share are expected to increase in the range of 20 percent to 45 percent with sales growth expected to be in the range of approximately 5 percent. Our efforts remain focused on the underlying fundamentals of our business with an emphasis on profitable sales growth and improved operational efficiencies. The Company is stable, our balance sheet has improved, and we are well positioned for the long term,” added Stephens.

Conference Call

The Company will conduct a conference call with investors to discuss fourth quarter and full year 2009 results at 8:30 a.m. EST today, February 18, 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 more than 60 locations 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; integration of acquired businesses; changes in raw material prices and availability; 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, 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 December 31, Twelve months ended December 31,   2009     2008  

%Change

    2009     2008  

%Change

    Net sales $ 256,469 $ 265,371 (3.4 ) $ 1,034,159 $ 1,362,091 (24.1 )   Cost of sales 167,742 170,023 (1.3 ) 671,110 847,641 (20.8 ) Selling and administrative expenses   77,372     92,623   (16.5 )   302,534     366,510   (17.5 )     245,114     262,646   (6.7 )   973,644     1,214,151   (19.8 )   Operating income 11,355 2,725 NM 60,515 147,940 (59.1 )   Operating margin 4.4 % 1.0 % 5.9 % 10.9 %   Other income 190 162 17.3 4,394 602 NM Interest expense 5,362 6,275 (14.5 ) 22,596 26,606 (15.1 ) Other expenses   810     788   2.8   2,367     2,929   (19.2 )   Income (loss) from continuing operations before income taxes 5,373 (4,176 ) NM 39,946 119,007 (66.4 )   Income taxes (benefit)   (832 )   1,364   NM   945     26,326   (96.4 )   Income (loss) from continuing operations 6,205 (5,540 ) NM 39,001 92,681 (57.9 ) Loss from discontinued operations, net of taxes   -     (5,590 ) NM   -     (10,103 ) NM   Net income (loss) $ 6,205   $ (11,130 ) NM $ 39,001   $ 82,578   (52.8 )   Common Dividends $ 4,380   $ 8,347   (47.5 ) $ 25,600   $ 33,345   (23.2 )   Per common share: Basic: Income (loss) from continuing operations $ 0.11 $ (0.10 ) NM $ 0.72 $ 1.72 (58.1 ) Loss from discontinued operations, net of taxes   -     (0.11 ) NM   -     (0.19 ) NM Net income (loss) $ 0.11   $ (0.21 ) NM $ 0.72   $ 1.53   (52.9 )   Diluted: Income (loss) from continuing operations $ 0.11 $ (0.10 ) NM $ 0.72 $ 1.66 (56.6 ) Loss from discontinued operations, net of taxes   -     (0.11 ) NM   -     (0.18 ) NM Net income (loss) $ 0.11   $ (0.21 ) NM $ 0.72   $ 1.48   (51.4 )   Dividends $ 0.08   $ 0.16   (50.0 ) $ 0.48   $ 0.62   (22.6 ) Average common shares outstanding: Basic 55,118,278 53,047,555 3.9 53,879,976 53,989,034 (0.2 ) Diluted 55,680,735 53,047,555 5.0 54,206,426 55,812,666 (2.9 )   NM - Not meaningful  

Notes:

1) Results for 2008 have been adjusted to reflect the change in the accounting for convertible debt. 2) 2009 year-to-date Other income included a pretax $3,773 gain on the purchase of certain convertible notes and income taxes included the related tax expense of $1,431. 3) 2008 year-to-date Other expenses included a pretax $1,238 transaction loss on the sale of Spectrum Plastics and income taxes included the related tax benefit of $394.     BARNES GROUP INC. OPERATIONS BY REPORTABLE BUSINESS SEGMENT (Dollars in thousands) Unaudited             Three months ended December 31, Twelve months ended December 31,   2009     2008  

%Change

    2009     2008  

%Change

  Net Sales   Logistics and Manufacturing Services $ 128,592 $ 145,990 (11.9 ) $ 539,139 $ 691,769 (22.1 )   Precision Components 129,907 121,795 6.7 501,467 682,991 (26.6 )   Intrasegment sales   (2,030 )   (2,414 ) 15.9   (6,447 )   (12,669 ) 49.1   Total net sales $ 256,469   $ 265,371   (3.4 ) $ 1,034,159   $ 1,362,091   (24.1 )   Operating profit   Logistics and Manufacturing Services $ 5,175 $ 5,434 (4.8 ) $ 43,952 $ 79,137 (44.5 )   Precision Components   6,180     (3,026 ) NM   16,563     68,456   (75.8 )   Total operating profit 11,355 2,408 NM 60,515 147,593 (59.0 )   Interest income 58 151 (61.9 ) 428 565 (24.2 )   Interest expense (5,362 ) (6,275 ) (14.6 ) (22,596 ) (26,606 ) (15.1 )   Other income (expense), net   (678 )   (460 ) 47.4   1,599     (2,545 ) NM   Income (loss) from continuing operations before income taxes $ 5,373   $ (4,176 ) NM $ 39,946   $ 119,007   (66.4 )   NM - Not meaningful  

Notes:

1) Results for 2008 have been adjusted to reflect the change in the accounting for convertible debt. 2) 2009 year-to-date Other income (expense), net included a $3,773 gain on the purchase of certain convertible debt. 3) 2008 year-to-date Other income (expense), net included a $1,238 transaction loss on the sale of Spectrum Plastics     BARNES GROUP INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands) Unaudited                    

December 31,2009

 

December 31,2008

Assets Current assets Cash and cash equivalents $ 17,427 $ 20,958 Accounts receivable 160,269 173,215 Inventories 190,792 240,805 Deferred income taxes 23,630 27,650 Prepaid expenses and other current assets   10,562   14,881   Total current assets 402,680 477,509     Deferred income taxes 30,650 31,133 Property, plant and equipment, net 224,963 235,035 Goodwill 373,564 361,930 Other intangible assets, net 303,689 316,817 Other assets   16,444   12,931   Total assets $ 1,351,990 $ 1,435,355   Liabilities and Stockholders' Equity Current liabilities Notes and overdrafts payable $ 4,595 $ 8,905 Accounts payable 85,588 80,495 Accrued liabilities 73,538 84,372 Long-term debt - current   25,567   15,386   Total current liabilities 189,288 189,158   Long-term debt 321,306 441,670 Accrued retirement benefits 118,693 164,796 Other liabilities 37,990 41,157   Stockholders' equity   684,713   598,574  

Total liabilities and stockholders' equity

$ 1,351,990 $ 1,435,355  

Notes:

1) Amounts for 2008 have been adjusted to reflect the change in the accounting for convertible debt.     BARNES GROUP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Unaudited                     Twelve months ended December 31,   2009       2008   Operating activities: Net income $ 39,001 $ 82,578 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 51,487 52,403 Amortization of convertible debt discount 5,920 6,465 Loss on disposition of property, plant and equipment 1,177 1,069 Gain on repurchase of convertible notes (3,773 ) - Non-cash stock compensation expense 4,208 5,841 Withholding taxes paid on stock issuances (622 ) (2,580 ) Loss on the sale of Spectrum Plastics - 2,197 Changes in assets and liabilities, net of the effects of acquisitions: Accounts receivable 18,650 26,329 Inventories 53,523 (2,725 ) Prepaid expenses and other current assets 7,056 (3,235 ) Accounts payable 4,149 (44,475 ) Accrued liabilities (10,151 ) (16,054 ) Deferred income taxes (10 ) 13,009 Long-term retirement benefits (27,447 ) (7,581 ) Other   315     (1,433 )   Net cash provided by operating activities 143,483 111,808   Investing activities: Proceeds from disposition of property, plant and equipment 6,808 784 Proceeds from the sale of Spectrum Plastics, net - 5,400 Capital expenditures (30,502 ) (51,869 ) Business acquisitions, net of cash acquired - 47 Revenue Sharing Program payments - (57,500 ) Other   (2,386 )   (3,535 )   Net cash used by investing activities (26,080 ) (106,673 )   Financing activities: Net change in other borrowings (4,504 ) 1,756 Payments on long-term debt (226,906 ) (260,335 ) Proceeds from the issuance of long-term debt 129,600 318,100 Proceeds from the issuance of common stock 6,687 5,171 Common stock repurchases (314 ) (34,209 ) Dividends paid (25,600 ) (33,345 ) Excess tax benefit on stock awards - 1,531 Other   (832 )   (430 )   Net cash used by financing activities (121,869 ) (1,761 )   Effect of exchange rate changes on cash flows   935     (3,016 )   Increase (decrease) in cash and cash equivalents (3,531 ) 358   Cash and cash equivalents at beginning of period   20,958     20,600     Cash and cash equivalents at end of period $ 17,427   $ 20,958    

Notes:

1) Results for 2008 have been adjusted to reflect the change in the accounting for convertible debt.