Barnes Group Inc. Reports Fourth Quarter and Full Year 2007 Financial Results

Business Wire, Feb 15, 2008

Barnes Industrial's global focus continues to provide balanced and consistent results. European businesses continued to generate strong revenue growth as the markets remained healthy during the fourth quarter. Conversely, North American businesses continued to face organic growth challenges, particularly in the transportation end markets, including North American heavy duty truck, and telecom and electronics. Lower sales within the precision valves business were negatively impacted by continued pricing pressures in the compressor market due to the decline in consumer home product sales, coupled with a continued customer shift to low-cost countries and the associated localization of suppliers.

The general industrial end markets including tool-and-die and energy performed well during the quarter and the European businesses continued to record strong orders. In addition, backlog is at record level within these businesses.

Barnes Industrial's fourth quarter 2007 operating profit of $14.1 million includes product rationalization and realignment activities, primarily at certain engineered springs locations, to further improve operations for sustainable, profitable growth. The activities resulted in a $2.6 million pre-tax expense. In addition, the Company expects to incur realignment costs of approximately $2.2 million pre-tax or $1.7 million after-tax, in 2008 or later which is expected to be offset by related savings. These realignment costs relate primarily to pension settlement costs, relocation costs and equipment transfer costs.

Fourth quarter 2007 operating profit was positively impacted primarily from increased sales within the nitrogen gas products and retention rings businesses, as well as productivity improvements within engineered springs.

Total Company

Revenues - The Company reported net sales of $358.9 million in the fourth quarter of 2007, an increase of $30.1 million or approximately 9 percent, over the fourth quarter of 2006. The sales increase reflected approximately $19.4 million of organic sales growth primarily at Barnes Aerospace. International sales were favorably impacted by the strength of their currencies as local currency sales translated into reported U.S. dollar sales of approximately an additional $10.7 million in 2007.

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Cost of Sales and S&A - Cost of sales increased approximately 10 percent in the fourth quarter of 2007 compared with the same period in 2006, primarily as a result of higher sales levels. The increase in cost of sales was slightly higher than the percentage increase in sales and resulted in a slight reduction in gross margin, to approximately 37 percent. The reduction in gross profit margin was driven primarily by the costs associated with Project Catalyst within Barnes Distribution. The lower gross profit margin was offset in part by increased sales in the Barnes Aerospace businesses and at Barnes Industrial, driven primarily by sales within certain higher margin businesses and operational efficiencies.