BARNES GROUP INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - July 29, 2011

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Barnes Group Inc. / 1

 
 
 
Exhibit 99.1



Barnes Group Inc.
123 Main Street
Bristol, CT 06010

NEWS RELEASE
            
Barnes Group Inc. Reports Second Quarter 2011
Earnings per Diluted Share of $0.40, up 54%

▪
Quarterly Net Sales grew 16% to $328 million
▪
Quarterly Operating Margin expands to 10.2%, a 180 bps improvement
▪
2011 EPS Guidance updated to $1.35 to $1.45 per diluted share, up 42% to 53% from 2010

BRISTOL, Conn., July 29, 2011 - Barnes Group Inc. (NYSE: B), a diversified global manufacturer and logistical services company, today reported financial results for the second quarter 2011. Net sales grew 16 percent to $328.0 million, up from $281.9 million in the second quarter of 2010. Excluding the favorable impact of foreign exchange, net sales were up 12 percent. Net income for the second quarter grew 51 percent to $22.3 million, or $0.40 per diluted share, from $14.8 million, or $0.26 per diluted share, a year earlier.

($ millions; except per share data)
Three months ended June 30,
 
Six months ended June 30,
 
2011
 
2010
 
Change
 
2011
 
2010
 
Change
Net Sales
$
328.0

 
$
281.9

 
$
46.1

16.3
%
 
$
646.7

 
$
560.0

 
$
86.7

15.5
%
Operating Income
$
33.5

 
$
23.7

 
$
9.8

41.6
%
 
$
63.0

 
$
43.3

 
$
19.6

45.3
%
  % of Sales
10.2
%
 
8.4
%
 
 
1.8
pts.
 
9.7
%
 
7.7
%
 
 
2.0
pts.
Net Income
$
22.3

 
$
14.8

 
$
7.5

50.6
%
 
$
41.4

 
$
26.7

 
$
14.8

55.4
%
  % of Sales
6.8
%
 
5.3
%
 
 
1.5
pts.
 
6.4
%
 
4.8
%
 
 
1.6
pts.
Net Income Per Diluted Share
$
0.40

 
$
0.26

 
$
0.14

53.8
%
 
$
0.74

 
$
0.47

 
$
0.27

57.4
%

“Barnes Group's strong financial performance during the second quarter reflects the ongoing benefit of our focus on profitable growth and operating productivity,” said Gregory F. Milzcik, President and Chief Executive Officer. “Double-digit sales growth drove solid operating profit improvement in both of our business segments this quarter, and we expect to see further profitability leverage from incremental sales as our end-markets continue their rebound.”

Logistics and Manufacturing Services

•
The Logistics and Manufacturing Services segment recorded sales of $155.3 million in the second quarter of 2011, up $16.8 million or 12 percent from last year's second quarter. This segment achieved $11.6 million of organic sales growth primarily from aerospace aftermarket and North American distribution businesses. Foreign currency translation positively affected second quarter 2011 net sales by approximately $5.2 million.



Barnes Group Inc. / 2


•
Operating profit at Logistics and Manufacturing Services increased 65 percent to $16.8 million, from $10.2 million in the second quarter of 2010. The increase in profitability was positively impacted by higher sales, improved customer sales mix and further productivity improvements in the North American distribution businesses. The aerospace aftermarket business likewise benefited from operating profit flow-through on higher sales. Operating profit for the segment was partially offset by costs associated with strategic initiatives.

Precision Components

•
The Precision Components segment recorded sales of $175.8 million in the second quarter of 2011, up $29.2 million, a 20 percent increase from last year's second quarter. Organic sales grew $21.0 million in the quarter as a result of increases in the North American and European industrial manufacturing businesses and from better performance in the transportation industry, including automotive. Net sales in the aerospace OEM business also achieved double-digit growth. Foreign currency translation positively affected second quarter 2011 net sales by approximately $8.2 million.

•
Operating profit at Precision Components was $16.7 million, an increase of 24 percent. The operating profit improvement resulted from the beneficial impact of higher sales levels combined with lower cost structures resulting from previous actions and lean initiatives. These improvements were offset in part by incremental expense from higher production levels, unfavorable foreign exchange, and added costs for strategic initiatives.
Additional Information
•
Interest expense decreased $2.6 million from last year's second quarter to $2.4 million. The decrease was a result of a lower average effective interest rate combined with a reduction in debt discount amortization and the maturity of interest rate swap agreements. The lower average interest rate reflects the significant shift from fixed rate debt to lower variable rate debt due to the retirement of senior notes and redemption of the 3.75% convertible notes. Both were funded using the Company's low cost variable rate credit facility.

•
The Company's effective tax rate for the second quarter of 2011 was 27.6 percent, compared to 16.0 percent in the second quarter last year. The increase in the second quarter 2011 effective tax rate was primarily driven by a projected shift in the mix of earnings attributable to higher-taxing jurisdictions, the recognition of a discrete tax expense of $1.8 million related to tax adjustments for prior years, and the effect of an increase in the planned repatriation of a portion of current year earnings to the U.S.

Revised 2011 Outlook
The Company now expects 2011 revenue to grow 12 to 14 percent from 2010, and earnings per diluted share to be in the range of $1.35 to $1.45, up 42 to 53 percent from 2010. Milzcik continued, “Looking forward, we anticipate continued improvement in our end-markets, especially in the aerospace businesses. Coupling a positive demand environment with the ongoing benefits of our focus on profitable growth, we now expect to deliver a higher level of performance for the year.”






Barnes Group Inc. / 3

Conference Call
Barnes Group Inc. will conduct a conference call with investors to discuss second-quarter 2011 results at 8:30 a.m. EST today, July 29, 2011. 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, more than 4,800 dedicated employees at more than 67 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 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, including any associated impact in the event of a failure to reach agreement on the U.S. federal debt ceiling, such as a debt rating downgrade; 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 any 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.


Contact:
Barnes Group Inc.
William Pitts
Director, Planning and Investor Relations
860.583.7070



# # #




Barnes Group Inc. / 4


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,
 
2011
 
2010
 
% Change
 
2011
 
2010
 
% Change
Net sales
$
327,950

 
$
281,892

 
16.3

 
$
646,703

 
$
560,029

 
15.5

 
 
 
 
 
 
 

 

 
 
Cost of sales
207,361

 
177,821

 
16.6

 
410,537

 
355,844

 
15.4

Selling and administrative expenses
87,067

 
80,389

 
8.3

 
173,196

 
160,836

 
7.7

 
294,428

 
258,210

 
14.0

 
583,733

 
516,680

 
13.0

Operating income
33,522

 
23,682

 
41.6

 
62,970

 
43,349

 
45.3

 
 
 
 
 
 
 
 
 
 
 
 
Operating margin
10.2
%
 
8.4
%
 
 
 
9.7
%
 
7.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
2,364

 
4,978

 
(52.5
)
 
6,032

 
10,097

 
(40.3
)
Other expense (income), net
298

 
1,065

 
(72.0
)
 
802

 
1,387

 
(42.2
)
Income before income taxes
30,860

 
17,639

 
75.0

 
56,136

 
31,865

 
76.2

 
 
 
 
 
 
 

 

 
 
Income taxes
8,528

 
2,815

 
NM

 
14,732

 
5,213

 
NM

Net income
$
22,332

 
$
14,824

 
50.6

 
$
41,404

 
$
26,652

 
55.4

 
 
 
 
 
 
 
 
 
 
 
 
Common dividends
$
4,414

 
$
4,390

 
0.5

 
$
8,765

 
$
8,787

 
(0.3
)
 
 
 
 
 
 
 
 
 
 
 
 
Per common share:
 
 
 
 
 
 
 
 
 
 
 
  Net income:
 
 
 
 
 
 
 
 
 
 
 
    Basic
$
0.40

 
$
0.27

 
48.1

 
$
0.75

 
$
0.48

 
56.3

    Diluted
0.40

 
0.26

 
53.8

 
0.74

 
0.47

 
57.4

  Dividends
0.08

 
0.08

 
—

 
0.16

 
0.16

 
—

 
 
 
 
 
 
 

 

 
 
Weighted average common shares outstanding:
 
 
 
 
 
 

 

 
 
    Basic
55,414,347

 
55,546,969

 
(0.2
)
 
55,067,079

 
55,470,721

 
(0.7
)
    Diluted
56,288,447

 
56,339,770

 
(0.1
)
 
55,948,098

 
56,152,953

 
(0.4
)





Barnes Group Inc. / 5


BARNES GROUP INC.
OPERATIONS BY REPORTABLE BUSINESS SEGMENT
(Dollars in thousands)
(Unaudited)

 
Three months ended June 30,
 
Six months ended June 30,
 
2011
 
2010
 
% Change
 
2011
 
2010
 
% Change
Net sales
 
 
 
 
 
 
 
 
 
 
 
   Logistics and Manufacturing Services
$
155,291

 
$
138,460

 
12.2

 
$
305,310

 
$
273,742

 
11.5

   Precision Components
175,804

 
146,604

 
19.9

 
347,376

 
292,385

 
18.8

   Intersegment sales
(3,145
)
 
(3,172
)
 
0.9

 
(5,983
)
 
(6,098
)
 
1.9

Total net sales
$
327,950

 
$
281,892

 
16.3

 
$
646,703

 
$
560,029

 
15.5

 
 
 
 
 
 
 
 
 
 
 
 
Operating profit
 
 
 
 
 
 
 
 
 
 
 
   Logistics and Manufacturing Services
$
16,793

 
$
10,173

 
65.1

 
$
29,803

 
$
18,497

 
61.1

   Precision Components
16,729

 
13,509

 
23.8

 
33,167

 
24,852

 
33.5

Total operating profit
33,522

 
23,682

 
41.6

 
62,970

 
43,349

 
45.3

 
 
 
 
 
 
 
 
 
 
 
 
   Interest expense
2,364

 
4,978

 
(52.5
)
 
6,032

 
10,097

 
(40.3
)
   Other expense (income), net
298

 
1,065

 
(72.0
)
 
802

 
1,387

 
(42.2
)
Income before income taxes
$
30,860

 
$
17,639

 
75.0

 
$
56,136

 
$
31,865

 
76.2





Barnes Group Inc. / 6


BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)

 
June 30, 2011
 
December 31, 2010
Assets
 
 
 
Current assets
 
 
 
  Cash and cash equivalents
$
16,577

 
$
13,450

  Accounts receivable
233,337

 
197,715

  Inventories
229,929

 
216,382

  Deferred income taxes
27,260

 
10,449

  Prepaid expenses and other current assets
12,720

 
12,212

    Total current assets
519,823

 
450,208

 
 
 
 
Deferred income taxes
29,027

 
42,722

Property, plant and equipment, net
227,201

 
218,434

Goodwill
405,972

 
384,241

Other intangible assets, net
286,160

 
290,798

Other assets
17,521

 
16,854

Total assets
$
1,485,704

 
$
1,403,257

 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
Current liabilities
 
 
 
  Notes and overdrafts payable
$
3,873

 
$
4,930

  Accounts payable
106,769

 
98,191

  Accrued liabilities
96,194

 
86,602

  Long-term debt - current
781

 
93,141

    Total current liabilities
207,617

 
282,864

 
 
 
 
Long-term debt
327,730

 
259,647

Accrued retirement benefits
99,942

 
112,886

Other liabilities
38,220

 
35,741

 
 
 
 
Total stockholders' equity
812,195

 
712,119

Total liabilities and stockholders' equity
$
1,485,704

 
$
1,403,257





Barnes Group Inc. / 7


BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)

 
Six months ended June 30,
 
2011
 
2010
Operating activities:
 
 
 
Net income
$
41,404

 
$
26,652

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
  Depreciation and amortization
28,822

 
26,082

  Amortization of convertible debt discount
1,117

 
2,805

  (Gain) loss on disposition of property, plant and equipment
(607
)
 
422

  Stock compensation expense
4,294

 
3,546

  Withholding taxes paid on stock issuances
(664
)
 
(89
)
  Changes in assets and liabilities:
 
 
 
    Accounts receivable
(24,875
)
 
(26,779
)
    Inventories
(9,822
)
 
(8,674
)
    Prepaid expenses and other current assets
22

 
(2,680
)
    Accounts payable
8,051

 
12,353

    Accrued liabilities
6,305

 
5,351

    Deferred income taxes
1,650

 
(1,396
)
    Long-term retirement benefits
(13,762
)
 
(7,389
)
  Other
(1,593
)
 
2,627

Net cash provided by operating activities
40,342

 
32,831

 
 
 
 
Investing activities:
 
 
 
Proceeds from disposition of property, plant and equipment
2,243

 
157

Capital expenditures
(19,342
)
 
(15,060
)
Other
(4,236
)
 
(1,726
)
Net cash used by investing activities
(21,335
)
 
(16,629
)
 
 
 
 
Financing activities:
 
 
 
Net change in other borrowings
(1,363
)
 
(2,565
)
Payments on long-term debt
(275,074
)
 
(137,493
)
Proceeds from the issuance of long-term debt
249,490

 
131,400

Premium paid on convertible debt redemption
(9,803
)
 
—

Proceeds from the issuance of common stock
26,086

 
3,522

Common stock repurchases
—

 
(4,059
)
Dividends paid
(8,765
)
 
(8,787
)
Excess tax benefit on stock awards
3,102

 
—

Other
(131
)
 
(108
)
Net cash used by financing activities
(16,458
)
 
(18,090
)
 
 
 
 
Effect of exchange rate changes on cash flows
578

 
(1,194
)
Increase (decrease) in cash and cash equivalents
3,127

 
(3,082
)
 
 
 
 
Cash and cash equivalents at beginning of period
13,450

 
17,427

Cash and cash equivalents at end of period
$
16,577

 
$
14,345






Barnes Group Inc. / 8


BARNES GROUP INC.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(Dollars in thousands)
(Unaudited)

 
Six months ended June 30,
 
2011
 
2010
Free cash flow:
 
 
 
Net cash provided by operating activities
$
40,342

 
$
32,831

Capital expenditures
(19,342
)
 
(15,060
)
Free cash flow
$
21,000

 
$
17,771

 
 
 
 
Notes:
 
 
 
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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