B Barnes Group Inc

Barnes Group Inc. (NYSE: B), a diversified global manufacturer and logistical services company, today reported financial results for the second quarter 2010. The Company reported net income of $14.8 million, or $0.26 per diluted share, compared to $10.4 million, or $0.19 per diluted share in the second quarter of 2009. Barnes Group’s second quarter 2010 sales totaled $281.9 million, an increase of 10.5 percent from $255.2 million in the second quarter of 2009.

($ millions; exceptper share data)

  Three months ended June 30,   Six months ended June 30,

 

2010   2009   Change 2010   2009   Change Net Sales $ 281.9 $ 255.2 $ 26.7     10.5 % $ 560.0 $ 517.4 $ 42.7   8.2 % Operating Income $ 23.7 $ 14.1 $ 9.5 67.4 % $ 43.3 $ 34.6 $ 8.7 25.3 % % of Sales 8.4 % 5.5 % - 2.9 pts. 7.7 % 6.7 % - 1.0 pt. Net Income $ 14.8 $ 10.4 $ 4.4 41.9 % $ 26.7 $ 21.9 $ 4.7 21.7 % % of Sales 5.3 % 4.1 % - 1.2 pts. 4.8 % 4.2 % - 0.6 pts.   Net Income Per Diluted Share   $ 0.26     $ 0.19     $ 0.07     36.8 %   $ 0.47     $ 0.41     $ 0.06   14.6 %  

“We continue to benefit from improved economic conditions, particularly within our industrial and automotive manufacturing businesses,” said Gregory F. Milzcik, President and Chief Executive Officer, Barnes Group Inc. “Double-digit sales growth coupled with a continued focus on an efficient cost structure through lean initiatives has provided a 67 percent improvement to our operating profit this quarter.

“Economic growth, along with a continuation of strong order rates, should allow us to build upon our success,” said Milzcik. “However, we continue to remain cautious. While the level of activity within our distribution and aerospace aftermarket businesses improves, the rate of growth is slow. As a result, our outlook for the full year 2010 remains the same with full year diluted earnings per share in the range of $0.90 to $1.10, based on current and anticipated market conditions.”

Logistics and Manufacturing Services

• Second quarter 2010 sales at Logistics and Manufacturing Services were $138.5 million, an increase of 1 percent from $136.6 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 decline in sales compared to the same period last year. In addition, the aerospace aftermarket business continued to experience the adverse effects of ongoing deferred maintenance and lower aircraft utilization, though sequential activity improved slightly. Foreign exchange negatively impacted second quarter 2010 sales by $1.2 million.
• Operating profit was $10.2 million, compared with $12.5 million in the second quarter of 2009. Operating profit was driven lower primarily by reduced sales volumes in the higher margin aerospace aftermarket businesses and increased personnel costs, including the investments in additional sales personnel, in the distribution businesses. Partially offsetting these declines was the impact of the lower cost structures resulting from previous actions, primarily in the distribution businesses, and the beneficial impact of higher sales in the distribution businesses. Operating margin was 7.3 percent compared to 9.1 percent in the prior year.

Precision Components

• Second quarter 2010 sales at Precision Components were $146.6 million, up 22 percent from $120.3 million in the same period last year. Year-over-year sales growth continued to be driven by improved market demand primarily from increases in 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 declined compared to the second quarter of 2009 due to lower military sales. Foreign exchange negatively affected sales by $0.6 million in the second quarter. Order rates within Precision Components businesses experienced a significant increase over the prior year and outpaced sales for the third consecutive quarter, as increased activity levels within all three key end markets, transportation, industrial, and aerospace original equipment manufacturing, improved.
• Operating profit for the second quarter of 2010 increased significantly to $13.5 million, as compared with $1.7 million in the second quarter of 2009. The higher operating profit was due primarily to the higher sales levels in 2010, lower cost structures resulting from previous actions, and initiatives focused on cost savings and cost containment. Operating margin was 9.2 percent compared to 1.4 percent in the prior year.

Conference Call

The Company will conduct a conference call with investors to discuss second quarter 2010 results at 8:30 a.m. ET today, August 2, 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 June 30, Six months ended June 30, 2010 2009 % Change 2010 2009 % Change   Net sales $ 281,892 $ 255,201 10.5 $ 560,029 $ 517,352 8.2   Cost of sales 177,821 165,712 7.3 355,844 332,878 6.9 Selling and administrative expenses   80,389     75,343   6.7   160,836     149,871   7.3     258,210     241,055   7.1   516,680     482,749   7.0   Operating income 23,682 14,146 67.4 43,349 34,603 25.3   Operating margin 8.4 % 5.5 % 7.7 % 6.7 %   Other income 18 2,501 (99.3 ) 235 2,659 (91.2 ) Interest expense 4,978 6,004 (17.1 ) 10,097 11,941 (15.4 ) Other expenses   1,083     686   57.9   1,622     1,263   28.4   Income before income taxes 17,639 9,957 77.2 31,865 24,058 32.5   Income taxes (benefit)   2,815     (490 ) NM   5,213     2,152   NM   Net income $ 14,824   $ 10,447   41.9 $ 26,652   $ 21,906   21.7   Common dividends $ 4,390   $ 8,493   (48.3 ) $ 8,787   $ 16,863   (47.9 )   Per common share: Net income: Basic $ 0.27 $ 0.20 35.0 $ 0.48 $ 0.41 17.1 Diluted 0.26 0.19 36.8 0.47 0.41 14.6 Dividends 0.08 0.16 (50.0 ) 0.16 0.32 (50.0 )   Average common shares outstanding: Basic 55,546,969 53,377,592 4.1 55,470,721 53,058,524 4.5 Diluted 56,339,770 53,642,123 5.0 56,152,953 53,277,490 5.4   Note - 2009 second quarter and year-to-date Other income included a $2,288 gain on the purchase of certain convertible debt and income taxes included the related tax expense of $868.   BARNES GROUP INC. OPERATIONS BY REPORTABLE BUSINESS SEGMENT (Dollars in thousands) Unaudited             Three months ended June 30, Six months ended June 30, 2010 2009 % Change 2010 2009 % Change Net Sales   Logistics and Manufacturing Services $ 138,460 $ 136,565 1.4 $ 273,742 $ 279,237 (2.0 )   Precision Components 146,604 120,323 21.8 292,385 241,519 21.1   Intersegment sales   (3,172 )   (1,687 ) (88.0 )   (6,098 )   (3,404 ) (79.1 )   Total net sales $ 281,892   $ 255,201   10.5 $ 560,029   $ 517,352   8.2   Operating profit   Logistics and Manufacturing Services $ 10,173 $ 12,455 (18.3 ) $ 18,497 $ 26,906 (31.3 )   Precision Components   13,509     1,691   NM   24,852     7,697   NM   Total operating profit 23,682 14,146 67.4 43,349 34,603 25.3   Interest income 58 159 (63.4 ) 155 317 (51.0 )   Interest expense (4,978 ) (6,004 ) (17.1 ) (10,097 ) (11,941 ) (15.4 )   Other income (expense), net   (1,123 )   1,656   NM   (1,542 )   1,079   NM   Income before income taxes $ 17,639   $ 9,957   77.2 $ 31,865   $ 24,058   32.5   Note - 2009 second quarter and year-to-date Other income (expense), net included a $2,288 gain on the purchase of certain convertible debt.   BARNES GROUP INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands) Unaudited       June 30, 2010 December 31, 2009 Assets Current assets Cash and cash equivalents $ 14,345 $ 17,427 Accounts receivable 176,543 160,269 Inventories 196,931 190,792 Deferred income taxes 8,173 23,630 Prepaid expenses and other current assets   11,478   10,562   Total current assets 407,470 402,680     Deferred income taxes 45,922 30,650 Property, plant and equipment, net 213,004 224,963 Goodwill 358,930 373,564 Other intangible assets, net 295,585 303,689 Other assets   19,061   16,444   Total assets $ 1,339,972 $ 1,351,990   Liabilities and Stockholders' Equity Current liabilities Notes and overdrafts payable $ 1,855 $ 4,595 Accounts payable 96,223 85,588 Accrued liabilities 75,540 73,538 Long-term debt - current   119,166   25,567   Total current liabilities 292,784 189,288   Long-term debt 224,038 321,306 Accrued retirement benefits 110,733 118,693 Other liabilities 34,107 37,990   Stockholders' equity   678,310   684,713   Total liabilities and stockholders' equity $ 1,339,972 $ 1,351,990   BARNES GROUP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Unaudited       Six months ended June 30, 2010 2009 Operating activities: Net income $ 26,652 $ 21,906 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 26,082 25,783 Amortization of convertible debt discount 2,805 3,284 (Gain) loss on disposition of property, plant and equipment 422 (170 ) Gain on repurchase of convertible notes -- (2,288 ) Stock compensation expense 3,546 1,927 Withholding taxes paid on stock issuances (89 ) (167 ) Changes in assets and liabilities: Accounts receivable (21,868 ) (17,191 ) Inventories (8,674 ) 36,171 Prepaid expenses and other current assets (2,680 ) 1,978 Accounts payable 12,353 (2,677 ) Accrued liabilities 5,351 (3,952 ) Deferred income taxes (1,396 ) (270 ) Long-term retirement benefits (7,389 ) (14,868 ) Other   (2,284 )   (1,573 )   Net cash provided by operating activities 32,831 47,893   Investing activities: Proceeds from disposition of property, plant and equipment 157 343 Capital expenditures (15,060 ) (19,627 ) Other   (1,726 )   (1,216 )   Net cash used by investing activities (16,629 ) (20,500 )   Financing activities: Net change in other borrowings (2,565 ) (5,221 ) Payments on long-term debt (137,493 ) (83,876 ) Proceeds from the issuance of long-term debt 131,400 73,000 Proceeds from the issuance of common stock 3,522 905 Common stock repurchases (4,059 ) (314 ) Dividends paid (8,787 ) (16,863 ) Other   (108 )   (432 )   Net cash used by financing activities (18,090 ) (32,801 )   Effect of exchange rate changes on cash flows   (1,194 )   572     Decrease in cash and cash equivalents (3,082 ) (4,836 )   Cash and cash equivalents at beginning of period   17,427     20,958     Cash and cash equivalents at end of period $ 14,345   $ 16,122