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Barnes Group Inc. Reports Fourth Quarter And Full Year 2012 Financial Results

Barnes Group Inc. (NYSE: B), an international aerospace and industrial manufacturer and service provider, today reported financial results for the fourth quarter and full year 2012. Fourth quarter 2012 sales totaled $327.4 million, up 16% from $283.3 million in the fourth quarter of 2011, driven primarily by the sales contribution of the Synventive business. Income from continuing operations was $29.8 million or $0.54 per diluted share, up 26% from the fourth quarter of 2011.

For the full year, Barnes Group generated sales of $1,230 million, up 5% from last year. Income from continuing operations was $98.3 million, or $1.78 per diluted share, compared to $91.6 million, or $1.64 per diluted share in 2011. Income from continuing operations in 2012 included $5.9 million pre-tax, or $0.08 per diluted share, of short-term purchase accounting adjustments and acquisition transaction costs. Excluding these acquisition related items, adjusted diluted earnings per share from continuing operations was $1.86 for 2012. A table reconciling these non-GAAP adjusted results to our GAAP results is included at the end of this press release.

“We delivered record fourth quarter Net Income despite lingering challenges in some of our global markets,” said Gregory F. Milzcik, President and Chief Executive Officer of Barnes Group Inc. “We’ve continued to transform our business by executing on our strategy of differentiated product and processes resulting in margin expansion. Even as some of our end-markets continued to reflect top-line softness, we generated improvement in operating margins. In addition, we completed the largest acquisition in the Company’s history with Synventive and we end 2012 with a record year-end backlog of $677 million, up 16% from 2011.” Milzcik continued, “We’re optimistic about 2013, with an expectation of continued growth in sales and profitability and furthering the substantial progress made in 2012.”

 

($ millions; except per share data)

   

Three months ended December 31,

   

Twelve months ended December 31,

Unaudited 2012     2011     Change 2012     2011     Change
Net Sales

$327.4

 

$283.3

 

$44.1

   

15.6

  %

$1,230.0

$1,169.4

 

$60.6

   

5.2

  %
Operating Income

$39.7

 

$28.9

$10.9

37.6

%

$136.6

$127.6

$9.0

7.1

%
% of Sales

12.1

 

%

10.2

%

1.9

pts.

11.1

%

10.9

%

0.2

pts.
Income from Continuing Operations

$29.8

$23.8

$6.0

25.4

%

$98.3

$91.6

$6.7

 

7.3

%
Net Income

$29.7

$0.1

$29.7

NM

 

$95.2

$64.7

$30.5

47.2

%
 
Income from Continuing Operations Per Diluted Share

$0.54

$0.43

$0.11

25.6

%

$1.78

$1.64

$0.14

8.5

 

%
 
Loss from Discontinued Operations Per Diluted Share

$0.00

($0.43)

$0.43

($0.06)

($0.48)

$0.42

 
Net Income Per Diluted Share

$0.54

$0.00

$0.54

NM

 

$1.72

$1.16

$0.56

48.3

%
 

Aerospace

  • Fourth quarter 2012 sales were $101.1 million, up 2% from $99.1 million in the same period last year. An increase in aerospace original equipment manufacturing (“OEM”) sales was largely offset by declines in aftermarket repair and overhaul and spare parts sales.
  • Operating profit of $19.0 million for the fourth quarter of 2012 was up 5% compared to the prior year period of $18.1 million. Profit benefited from higher OEM sales and lower employee related expenses, primarily reduced incentive compensation. Profit was negatively impacted by lower profit from aftermarket repair and overhaul and spare parts sales and an inventory valuation adjustment within the aftermarket repair and overhaul business. Operating margin increased to 18.8%, up 50 bps.
  • Full year 2012 sales were $390.5 million, up 2% from $382.5 million in 2011. The increase was primarily from sales growth in the OEM and aftermarket repair and overhaul businesses, partially offset by a decline in aftermarket spare parts sales.
  • Full year 2012 operating profit increased 1% to $63.3 million. Operating profit benefited from higher sales in the OEM manufacturing business and lower levels of incentive compensation. Operating profit was negatively affected by the profit impact of lower sales in the highly profitable aftermarket RSP spare parts business and an inventory valuation adjustment within the aftermarket repair and overhaul business. Full year operating margin decreased to 16.2%, down 20 bps.

Industrial

  • Fourth quarter 2012 sales were $147.6 million, up $45.1 million or 44% versus the same period last year. Synventive sales of $44 million contributed most of the growth, while organic sales were up 2% and foreign exchange was an unfavorable 1%.
  • Operating profit of $15.2 million for the fourth quarter of 2012 increased $8.4 million from last year driven by the profit contribution of the Synventive business. Operating margin increased to 10.3%, up 370 bps.
  • Full year 2012 sales were $497.0 million, up 13% from $440.5 million in 2011. Synventive provided $60 million of sales, while organic sales increased by $9.9 million. Unfavorable foreign exchange decreased sales by approximately $13.4 million for the year.
  • Full year 2012 operating profit was $43.9 million, up 12% from 2011 primarily benefiting from the profit contribution of the acquired Synventive business. Operating profit was partially offset by $5.9 million in short-term purchase accounting adjustments and transaction costs related to the Synventive acquisition. Excluding the Synventive acquisition related items, adjusted operating margin increased to 10.0%, up 110 bps.

Distribution

  • Fourth quarter 2012 sales of $79.7 million were down 4% compared to the fourth quarter of 2011 as a result of softness in our North American markets and a focus on more profitable accounts.
  • Operating profit of $5.6 million increased 41% from last year primarily due to pricing actions, customer mix, and lower employee related costs, namely incentive compensation. This favorability was partially offset by higher pension costs and the negative profit impact from lower sales volumes. Operating margin increased to 7.0%, up 230 bps.
  • Full year 2012 sales were $350.7 million, down 1% from 2011. Organic sales declined as customers continued to manage costs and inventory levels and as the business focused on more profitable accounts. Foreign exchange decreased sales by $1.1 million.
  • Full year 2012 operating profit was $29.4 million, up 14% from 2011. The profit increase was driven by lower employee related costs, namely incentive compensation, customer mix, and lower cost structures, partially offset by higher pension costs and the impact of lower sales volumes. Operating margin increased to 8.4%, up 110 bps.

Additional Information

  • Interest expense increased $2.0 million from 2011, to $12.2 million, as a result of higher borrowings used to fund the acquisition of Synventive.
  • Other expense in 2012 was $2.7 million, up $2.3 million from last year, primarily driven by foreign exchange losses.
  • The Company’s effective tax rate from continuing operations was 19.2% in 2012 compared with 21.7% in 2011. The 2011 effective tax rate included the recognition of $1.8 million of discrete tax expense related to tax adjustments for earlier years. The 2012 effective tax rate was impacted by the absence of this discrete item, a change in the mix of earnings attributable to higher-taxing jurisdictions, and the impact of a decrease in the repatriation of a portion of current year foreign earnings to the U.S. The Company repatriated $8.0 million and $17.5 million in 2012 and 2011, respectively.

Announced Sale of Barnes Distribution North America

As announced this morning, the Company has entered into a definitive agreement to sell its Barnes Distribution North America business (“BDNA”) to MSC Industrial Direct Co., Inc. for $550 million, subject to certain adjustments. The transaction, which is subject to customary conditions and approvals, is expected to close in late March or early in the second quarter of 2013. The BDNA business had 2012 revenues of approximately $300 million.

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