Barnes Group Inc. (NYSE: B), a diversified global manufacturer
and logistics services company, today reported financial results
for the fourth quarter and full year 2011. Fourth quarter 2011
sales totaled $283.3 million, up 9.7% from $258.2 million in the
fourth quarter of 2010. Income from continuing operations was $23.8
million or $0.43 per diluted share, up 86% from the fourth quarter
of 2010.
During the fourth quarter of 2011, Barnes Group completed the
sale of its Barnes Distribution Europe (BDE) businesses which were
comprised of the Company's European KENT, Toolcom and BD France
distribution businesses and reported within the Company's Logistics
and Manufacturing Services segment. The financial results of BDE,
including the loss on sale for the periods presented, have been
segregated and treated as discontinued operations for reporting
purposes. For the year, the loss from discontinued operations, net
of tax, was $26.9 million, or ($0.48) per diluted share. The loss
on sale of $26.1 million includes a non-cash goodwill impairment
charge of $16.8 million.
For the full year 2011, Barnes Group generated sales of $1,169
million, up 13.7%. Income from continuing operations was $91.6
million, or $1.64 per diluted share, compared to $54.0 million, or
$0.96 per diluted share in 2010.
“Barnes Group’s fourth quarter results cap a strong year of
performance for our Company,” said Gregory F. Milzcik, Barnes Group
Inc. President and Chief Executive Officer. “We generated solid
organic growth with meaningful margin flow-through leading to an
expansion in operating margins to 10.9%, up 250 basis points for
the year. Coupled with our continuing focus on profitable growth
and improved productivity, we delivered a 70% increase in income
from continuing operations for 2011. In addition, we exit 2011
having achieved strong fourth quarter earnings per share from
continuing operations, and a healthy backlog of $582 million, up
21% from 2010.”
($ millions; except per share data)
Three months ended
December 31, Twelve months ended December
31, 2011 2010
Change 2011 2010
Change Net Sales $ 283.3 $ 258.2 $ 25.1 9.7 % $
1,169.4 $ 1,028.6 $ 140.7 13.7 % Operating Income $ 28.9 $
19.8 $ 9.0 45.5 % $ 127.6 $ 86.4 $ 41.2 47.6 % % of Sales 10.2 %
7.7 % 2.5 pts. 10.9 % 8.4 % 2.5 pts. Income from Continuing
Operations $ 23.8 $ 12.8 $ 11.0 85.6 % $ 91.6 $ 54.0 $ 37.6 69.6 %
Net Income $ 0.1 $ 11.5 ($11.5 ) (99.4 ) % $ 64.7 $ 53.3 $ 11.4
21.5 % Income from Continuing Operations Per Diluted Share $
0.43 $ 0.23 $ 0.20 87.0 % $ 1.64 $ 0.96 $ 0.68 70.8 % Loss
from Discontinued Operations Per Diluted Share ($0.43 ) ($0.02 )
($0.41 ) ($0.48 ) ($0.01 ) ($0.47 ) Net Income Per Diluted
Share $ 0.00 $ 0.21
($0.21 ) $ 1.16
$ 0.95 $ 0.21
Logistics and Manufacturing Services
- Fourth quarter 2011 sales were $122.0
million, up 10% from $110.7 million in the same period last year.
The increase in sales was driven by strong organic sales growth in
our aerospace aftermarket business. Foreign exchange had a minimal
impact on fourth quarter 2011 sales.
- Operating profit of $15.7 million for
the fourth quarter of 2011 was up 65% compared to prior year period
of $9.5 million. Operating profit benefited from the impact of
higher sales and additional productivity improvements, partially
offset by higher management fees related to our aerospace
aftermarket Revenue Sharing Programs (RSPs) and increased employee
related costs.
- Full year 2011 sales were $492.9
million, up 11% from $443.9 million in 2010. The increase was
primarily due to strong organic sales growth in our aerospace
aftermarket and North American Distribution businesses. Foreign
exchange positively impacted sales by $3.2 million in 2011.
- Full year 2011 operating profit
increased 65% to $64.8 million from 2010 primarily due to the
profit impact of higher sales volumes. Also contributing to the
increase in operating profit were productivity improvements,
including the favorable impact of a lower cost structure in the
North American Distribution business. Segment operating profit
increases were partially offset by higher employee related costs
and management fees related to RSPs.
Precision Components
- Fourth quarter 2011 sales were $163.6
million, up 9% from $149.5 million in the same period last year.
Organic sales growth of $13.7 million was driven by the segment’s
aerospace OEM business and the North American and European
industrial manufacturing businesses which benefited from improved
industrial and transportation end-markets. Foreign exchange
positively affected the quarter’s sales by approximately $0.4
million.
- Operating profit was $13.2 million in
the fourth quarter, up 28% from the same period last year.
Operating profit benefited from higher sales levels combined with
productivity gains and lean initiatives. These improvements were
partially offset by added costs for new product introductions and
the outsourcing of certain manufacturing processes, as well as
higher employee related costs.
- Full year 2011 sales were $687.5
million, up 15% from $595.9 million in 2010. The 2011 organic sales
growth of $74.9 million was primarily driven by the industrial
manufacturing businesses based in North America and Europe
reflecting improvements in the transportation and aerospace
end-markets. The impact of foreign exchange increased sales by
approximately $16.7 million in 2011.
- Full year 2011 operating profit was up
33% to $62.8 million compared to $47.3 million in 2010. Operating
profit improved primarily due to the benefit from higher sales
levels combined with productivity improvements and lean
initiatives. These improvements in operating profit were partially
offset by higher costs associated with investments in new product
introductions and outsourcing of certain manufacturing
processes.
Additional Information
- Interest expense in 2011 decreased $9.7
million from 2010 to $10.3 million as a result of lower average
interest rates and lower debt discount amortization related to the
3.75% Convertible Notes. The lower average interest rates reflect
the significant shift to a higher percentage of variable rate debt
due to the retirement of the 7.80% Notes and the redemption of the
3.75% Convertible Notes, which were funded with the variable rate
credit facility, and the expiration of the interest rate swap
agreements.
- Other expense was $0.4 million in 2011
compared to $2.6 million in 2010, consisting primarily of foreign
exchange transaction losses of $0.2 million in 2011 which decreased
from $1.7 million in 2010.
- The Company’s 2011 effective tax rate
from continuing operations was 21.7%, compared to 15.4% in 2010.
The rate increase was primarily driven by a shift in earnings to
higher-tax jurisdictions and the incremental tax effect of the
repatriation of a portion of current year foreign earnings to U.S.
The company repatriated $17.5 million and $7.5 million in 2011 and
2010, respectively.
2012 Outlook
“During 2011, we experienced improving conditions across our
end-markets and generated a double-digit increase in both orders
and backlog. We expect our positive momentum to continue into 2012,
especially with the strength in the global commercial aerospace
industry. Further, with the sale of BDE, a greater level of
management’s attention can be directed toward expanding our
operations both organically and through acquisitions, bringing new
products and processes to market and growing our geographic reach,”
added Milzcik.
Barnes Group Inc. expects 2012 revenue to grow 6% to 9% from
2011 and forecasts operating margins of approximately 12%. Earnings
from continuing operations per diluted share are forecasted to be
in the range of $1.78 to $1.93, up 9% to 18% from 2011.
“Our improved financial performance and generally favorable
end-markets will allow us to invest further in our businesses. For
2012, we expect capital expenditures to increase to a range of $45
to $50 million and cash conversion of greater than 90%,” said
Christopher J. Stephens, Jr., Senior Vice President, Finance and
Chief Financial Officer, Barnes Group Inc.
Conference Call
Barnes Group Inc. will conduct a conference call with investors
to discuss fourth quarter and full year 2011 results at 8:30 a.m.
EST today, February 17, 2012. A webcast of the live call and an
archived replay will be available on the Barnes Group investor
relations link at www.BGInc.com. The conference is also available
by direct dial at (888) 679-8035 in the U.S. or (617) 213-4848
outside of the U.S. (request the Barnes Group Earnings Call),
Participant Code: 31082129.
In addition, the call will be recorded and available for
playback beginning at 12:00 p.m. (EST) on Friday, February 17, 2012
by dialing (617) 801-6888, Passcode: 17248138.
About Barnes Group
Founded in 1857, Barnes Group Inc. (NYSE:B) is an international
aerospace and industrial components manufacturer and logistics
services company serving a wide range of end markets and customers.
The products and services provided by Barnes Group are critical
components for far-reaching applications that provide
transportation, communication, manufacturing and technology to the
world. Barnes Group’s approximately 4,400 dedicated employees, at
more than 50 locations worldwide, are committed to achieving
consistent and sustainable profitable growth. For more information,
visit www.BGInc.com. Barnes Group, the Critical Components
People.
Forward-Looking Statements
This release may contain certain forward-looking statements as
defined in the Private Securities Litigation 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 described in our periodic
filings with the Securities and Exchange Commission, include, among
others, uncertainties arising from the current or worsening
disruptions in 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;
restructuring costs or savings; the impact of the acquisition of
the BDE businesses by Berner SE and any other future strategic
actions, including acquisitions, joint ventures, divestitures,
restructurings, or strategic business realignments, and our ability
to achieve the financial and operational targets set in connection
with any such actions; introduction or development of new products
or transfer of work; changes in raw material or product prices and
availability; foreign currency exposure; our dependence upon
revenues and earnings from a small number of significant customers;
a major loss of customers; the outcome of pending and future claims
or litigation or governmental, regulatory proceedings,
investigations, inquiries, and audits; uninsured claims and
litigation; outcome of contingencies; future repurchases of common
stock; future levels of indebtedness; 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 December 31, Twelve months ended December
31, 2011 2010 % Change 2011
2010 % Change Net sales $ 283,286 $ 258,170
9.7 $ 1,169,355 $ 1,028,617 13.7 Cost of sales 188,147
171,686 9.6 772,398 678,186 13.9 Selling and administrative
expenses 66,262 66,639 (0.6 )
269,402 264,033 2.0 254,409
238,325 6.7 1,041,800
942,219 10.6 Operating income 28,877 19,845 45.5
127,555 86,398 47.6 Operating margin 10.2 % 7.7 % 10.9 % 8.4
% Interest expense 2,365 4,732 (50.0 ) 10,271 19,984 (48.6 )
Other expense (income), net 167 460
(63.7 ) 395 2,609 (84.9 ) Income
from continuing operations before income taxes 26,345 14,653 79.8
116,889 63,805 83.2 Income taxes 2,586
1,850 39.8 25,316 9,827 NM
Income from continuing operations 23,759 12,803 85.6 91,573
53,978 69.6 Loss from discontinued operations, net of income
taxes (23,693 ) (1,281 ) NM (26,858 ) (700 ) NM
Net income $ 66 $ 11,522 (99.4 ) $
64,715 $ 53,278 21.5 Common dividends $ 5,433
$ 4,302 26.3 $ 18,629 $ 17,461 6.7
Per common share: Basic: Income from continuing
operations $ 0.43 $ 0.23 87.0 $ 1.66 $ 0.97 71.1 Loss from
discontinued operations, net of income taxes (0.43 )
(0.02 ) NM (0.49 ) (0.01 ) NM Net income $ - $
0.21 NM $ 1.17 $ 0.96 21.9 Diluted:
Income from continuing operations $ 0.43 $ 0.23 87.0 $ 1.64 $ 0.96
70.8 Loss from discontinued operations, net of income taxes
(0.43 ) (0.02 ) NM (0.48 ) (0.01 ) NM Net
income $ - $ 0.21 NM $ 1.16 $ 0.95 22.1
Dividends 0.10 0.08 25.0 0.34 0.32 6.3 Weighted
average common shares outstanding: Basic 54,888,879 54,757,849 0.2
55,214,586 55,259,732 (0.1 ) Diluted 55,451,632 55,561,753 (0.2 )
55,931,882 55,925,187 NM
BARNES GROUP INC.
OPERATIONS BY REPORTABLE BUSINESS SEGMENT (Dollars in
thousands) Unaudited
Three months ended December 31, Twelve months
ended December 31, 2011 2010 % Change
2011 2010 % Change Net sales Logistics
and Manufacturing Services $ 122,029 $ 110,745 10.2 $ 492,910 $
443,941 11.0 Precision Components 163,572 149,514 9.4
687,546 595,911 15.4 Intersegment sales (2,315 )
(2,089 ) (10.8 ) (11,101 ) (11,235 ) 1.2
Total net sales $ 283,286 $ 258,170 9.7 $
1,169,355 $ 1,028,617 13.7 Operating profit
Logistics and Manufacturing Services $ 15,702 $ 9,540 64.6 $
64,764 $ 39,140 65.5 Precision Components 13,175
10,305 27.9 62,791 47,258
32.9 Total operating profit 28,877 19,845 45.5
127,555 86,398 47.6 Interest expense 2,365 4,732 (50.0 )
10,271 19,984 (48.6 ) Other expense (income), net 167
460 (63.7 ) 395 2,609
(84.9 ) Income from continuing operations before
income taxes $ 26,345 $ 14,653 79.8 $ 116,889
$ 63,805 83.2
BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
Unaudited
December 31, 2011
December 31, 2010 Assets Current assets Cash and cash
equivalents $ 62,505 $ 13,450 Accounts receivable 200,460 197,715
Inventories 216,520 216,382 Deferred income taxes 28,829 10,449
Prepaid expenses and other current assets 21,680
12,212 Total current assets 529,994 450,208
Deferred income taxes 47,661 42,722 Property, plant and equipment,
net 210,784 218,434 Goodwill 366,104 384,241 Other intangible
assets, net 272,092 290,798 Other assets 13,730
16,854 Total assets $ 1,440,365 $ 1,403,257
Liabilities and Stockholders' Equity Current liabilities
Notes and overdrafts payable $ 12,364 $ 4,930 Accounts payable
92,524 98,191 Accrued liabilities 92,250 86,602 Long-term debt -
current 540 93,141 Total current liabilities
197,678 282,864 Long-term debt 333,148 259,647 Accrued
retirement benefits 152,696 112,886 Other liabilities 34,443 35,741
Total stockholders' equity 722,400 712,119
Total liabilities and stockholders' equity $ 1,440,365 $
1,403,257
BARNES GROUP INC. CONSOLIDATED
STATEMENTS OF CASH FLOWS (Dollars in thousands)
Unaudited Twelve months ended
December 31, 2011 2010 Operating
activities: Net income $ 64,715 $ 53,278 Adjustments to
reconcile net income to net cash from operating activities:
Depreciation and amortization 58,904 52,770 Amortization of
convertible debt discount 2,158 5,727 (Gain) loss on disposition of
property, plant and equipment (379 ) 266 Stock compensation expense
8,319 7,655 Withholding taxes paid on stock issuances (1,124 ) (440
) Loss on the sale of businesses 26,128 - Changes in assets and
liabilities, net of the effects of acquisitions/divestitures:
Accounts receivable (24,707 ) (35,891 ) Inventories (12,384 )
(24,006 ) Prepaid expenses and other current assets 59 (3,139 )
Accounts payable 615 12,466 Accrued liabilities 11,226 11,456
Deferred income taxes 5,386 (1,566 ) Long-term retirement benefits
(18,367 ) (12,135 ) Other 475 (681 )
Net cash provided by operating activities 121,024 65,760
Investing activities: Proceeds from disposition of property,
plant and equipment 3,620 1,498 Proceeds from the sale of
businesses, net of cash sold 22,492 - Investment in restricted cash
(11,664 ) - Capital expenditures (37,082 ) (28,759 ) Business
acquisitions, net of cash acquired (3,495 ) - Other (4,483 )
(3,038 ) Net cash used by investing activities
(30,612 ) (30,299 )
Financing activities: Net change
in other borrowings 7,168 347 Payments on long-term debt (411,661 )
(359,542 ) Proceeds from the issuance of long-term debt 392,390
359,917 Premium paid on convertible debt redemption (9,803 ) -
Proceeds from the issuance of common stock 28,579 5,746 Common
stock repurchases (34,066 ) (28,100 ) Dividends paid (18,629 )
(17,461 ) Excess tax benefit on stock awards 8,056 - Other
(2,229 ) (207 ) Net cash used by financing activities
(40,195 ) (39,300 ) Effect of exchange rate changes on cash
flows (1,162 ) (138 ) Increase (decrease) in
cash and cash equivalents 49,055 (3,977 ) Cash and cash
equivalents at beginning of year 13,450 17,427
Cash and cash equivalents at end of year $ 62,505
$ 13,450
BARNES GROUP INC.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO
FREE CASH FLOW (Dollars in thousands) Unaudited
Twelve months ended December 31,
2011 2010 Free cash flow: Net cash
provided by operating activities $ 121,024 $ 65,760 Capital
expenditures (37,082 ) (28,759 ) Free cash
flow(1) $ 83,942 $ 37,001
Free cash flow to
net income (excluding the loss on the sale of businesses) cash
conversion ratio: Free cash flow (from above) $ 83,942 $
37,001 Net income 64,715 53,278 Add: Loss on the sale of
businesses 26,128 - Net income
(excluding the loss on the sale of businesses) $ 90,843 $
53,278 Free cash flow to net income (excluding the
loss on the sale of businesses) cash conversion ratio 92 % 69 %
(1) The Company defines free cash flow as net cash provided by
operating activities less capital expenditures. The Company
believes that the free cash flow metric is useful to investors and
management as a measure of cash generated by business operations
that can be used to invest in future growth, pay dividends,
repurchase stock and reduce debt. This metric can also be used to
evaluate the Company's ability to generate cash flow from business
operations and the impact that this cash flow has on the Company's
liquidity.
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