Barnes Group Third Quarter Net Income up 21 Percent

Business Wire, Oct 11, 2002

Business Editors

BRISTOL, Conn.--(BUSINESS WIRE)--Oct. 11, 2002

Barnes Group Inc. (NYSE: B):

-- Solid operating results drive earnings growth.

-- Company continues to generate strong free cash flow.

Barnes Group Inc. (NYSE: B) today announced financial results for the quarter ended September 30, 2002. Net sales for the third quarter of 2002 were $196.8 million, up six percent from $186.5 million in the third quarter of 2001. The Company reported net income of $6.9 million, or $0.36 per diluted share, in the third quarter of 2002, compared with net income of $5.7 million, or $0.30 per diluted share, in the year-ago period.

"Our operating management teams have done an excellent job of positioning our three businesses to compete successfully in the current operating environment, as our financial results this quarter attest," said Edmund M. Carpenter, Barnes Group Inc.'s President and C.E.O. "Our strong results are particularly satisfying given that the environment for industrial companies remains quite challenging," Carpenter added.

Sales at Associated Spring were $80.9 million for the quarter ended September 30, 2002, up 24 percent from $65.2 million in the quarter ended September 30, 2001. Top line growth in the most recent period reflected approximately $12.3 million of incremental sales from recent acquisitions, solid demand for nitrogen gas springs, and strong growth in sales of products for the transportation sector. Sales to customers in the telecommunications and electronics industries, however, were off significantly from the year-ago period.

Associated Spring's operating profit was $6.5 million for the third quarter of 2002, compared with operating profit of $5.2 million in the third quarter of 2001. Operating profit growth reflected the higher sales volume and productivity improvements versus the 2001 period.

Carpenter commented, "The three acquisitions we have made since November, 2001 in Associated Spring -- Forward Industries, Seeger-Orbis and Spectrum Plastics -- are all meeting our expectations from both a top and bottom line standpoint. We are also continuing to benefit from higher light vehicle production versus last year. Growth in our nitrogen gas spring product lines also remains solid, with total sales up 17 percent year-over-year and organic sales up about six percent."

Sales at Barnes Aerospace were $45.8 million for the third quarter of 2002, down nine percent from $50.5 million in the third quarter of 2001. Operating profit fell to $1.3 million for the quarter ended September 30, 2002 from $5.0 million in the comparable year-ago period, reflecting the lower sales volume, approximately $0.7 million in severance expense, and higher manufacturing costs aimed at improving productivity. Barnes Aerospace recorded orders of $39 million during the third quarter of 2002; order backlog remained strong at $143 million at September 30, 2002, down approximately 10 percent from record year-end backlog of $159 million at December 31, 2001.

"The growth and customer diversification programs initiated by Barnes Aerospace several years ago are helping to mitigate some of the impact of the current aerospace downturn. Nevertheless, Barnes Aerospace management continued to lower the cost structure of the business during the third quarter through headcount reductions and other actions. All told, the steps that Barnes Aerospace management has taken this year, including a roughly 20 percent reduction in the workforce, should generate substantial cost savings going forward," Carpenter stated.

Sales at Barnes Distribution were $72.0 million for the quarter ended September 30, 2002, down one percent from $73.0 million in the quarter ended September 30, 2001. Barnes Distribution generated operating profit of $2.5 million for the third quarter of 2002, up from operating profit of $1.5 million in the third quarter of 2001. Operating profit benefited from a slightly higher gross profit margin and significantly reduced administrative and warehouse expenses versus the year-ago period, offset in part by the sales volume decline.

"Most of the value drivers behind our acquisition of Curtis Industries in 2000 are now being reflected in Barnes Distribution's operating results. Significantly lower infrastructure costs and an improved gross margin are driving higher profitability, even as top-line growth remains challenged by a general industrial environment that shows little sign of improvement," Carpenter stated. "Barnes Distribution management is continuing to find new ways to drive cost out of the system, and is at the same time aggressively pursuing new avenues for growth," Carpenter added.

"Our free cash flow in the third quarter was very strong at $16 million, bringing the total for the first nine months of this year to approximately $28 million," commented William C. Denninger, Barnes Group Inc.'s Chief Financial Officer. Barnes Group defines free cash flow as cash available before dividends, business acquisitions, share repurchases, and net changes in debt. "In addition to the strong operating performance we delivered this quarter, our net income also benefited from higher foreign currency gains, a lower effective tax rate and elimination of goodwill amortization. These factors were partially offset by higher post-retirement benefit costs," Denninger added.