Barnes Group Second Quarter Net Income Up 26 Percent; Sales Reach Record $209 Million

Business Wire, July 12, 2002

Business Editors

-- Company achieves earnings of $0.45 per diluted share.

-- Acquisitions, nitrogen gas spring and transportation products

fuel growth at Associated Spring.

-- Vendor management, warehouse consolidation benefit Barnes Distribution profitability.

-- Barnes Aerospace orders and backlog remained strong.

Barnes Group Inc. (NYSE: B) today announced financial results for the second quarter ended June 30, 2002. Net sales for the second quarter of 2002 were a record $209.4 million, up five percent from $199.5 million in the second quarter of 2001. The Company reported net income of $8.7 million, or $0.45 per diluted share, in the second quarter of 2002, compared with net income of $6.9 million, or $0.36 per diluted share, in the year-ago period.

"We were pleased with the solid results we achieved in this past quarter. We are beginning to realize the benefits of the aggressive cost reductions and growth investments we have made over the past 18 months, even though the economic recovery has not yet positively impacted all of our end markets," said Edmund M. Carpenter, Barnes Group Inc.'s President and C.E.O. "Our three recent acquisitions - Forward Industries, Seeger-Orbis, and Spectrum Plastics - are also contributing meaningfully to our top line growth," Carpenter continued.

Sales at Associated Spring were a record $88.0 million for the quarter ended June 30, 2002, up 18 percent from $74.8 million in the quarter ended June 30, 2001. Strong sales of both nitrogen gas springs and products for the transportation market, as well as approximately $12.0 million of incremental sales from recent acquisitions, contributed to the top line growth in the most recent period. These positives were somewhat offset by continued lower sales to customers in the telecommunications and electronics industries.

Associated Spring recorded an operating profit of $7.8 million for the second quarter of 2002, compared with an operating profit of $8.2 million in the second quarter of 2001. Included in the 2002 period was an expense of approximately $0.8 million related to the initial purchase price accounting adjustments related to recent acquisitions.

Carpenter commented, "Sales of our nitrogen gas products grew 27 percent year-over-year, and we are continuing to benefit from the upturn in light vehicle production. While the electronics and telecommunications markets have not yet recovered, we are somewhat encouraged by early signs of stability returning to those markets. This, combined with the aggressive cost-cutting measures Associated Spring has undertaken in the past 18 months, contributed to the good profitability we recognized this past quarter. Based on published data, we would expect sales to remain strong in both the nitrogen gas and transportation markets through at least the end of the third quarter. While a full recovery in the electronics and telecommunications markets still appears distant, sales within those sectors have increased sequentially for the last two quarters."

Sales at Barnes Aerospace were $49.4 million for the second quarter of 2002, down two percent from $50.2 million in the second quarter of 2001. Operating profit fell to $2.9 million for the quarter ended June 30, 2002 from $3.9 million in the comparable year-ago period, reflecting higher engineering costs associated with productivity, processing and quality improvements and severance expense. Barnes Aerospace recorded orders of $45 million during the second quarter of 2002; order backlog was $150 million at June 30, 2002, down less than six percent from $159 million at December 31, 2001.

"Barnes Aerospace's ability to diversify its customer base in the past two years has played a critical role in generating a significant level of new orders and sales," Carpenter stated. "The long-term prospects for our aerospace business remain quite solid. Nevertheless, Barnes Aerospace's management team has positioned the business for the current aircraft production forecast, reducing the workforce by approximately 16 percent since the beginning of the year. Management is also being quite careful in this environment by reducing capital expenditures and operating expenses," Carpenter added.

Sales at Barnes Distribution were $74.3 million for the quarter ended June 30, 2002, down four percent from $77.0 million in the quarter ended June 30, 2001. Barnes Distribution generated operating profit of $3.5 million for the second quarter of 2002, up from operating profit of $1.9 million in the second quarter of 2001. Operating profit was positively impacted by a higher gross profit margin and reduced administrative and warehouse expenses versus the year-ago period, partially offset by the sales volume decline.

"The benefits from warehouse consolidation, vendor management and other cost reduction efforts that have been underway for nearly two years at Barnes Distribution were evident in the operating profit growth this past quarter, a significant achievement given that sales were down from a year ago," Carpenter stated. "Barnes Distribution has also improved gross margin levels through substantial purchasing savings, which have in turn positively impacted the overall profitability of the business, and will going forward."