Barnes Group Inc. Reports Fourth Quarter And Full Year 2011 Financial Results

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.

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