Barnes Group Inc. Reports Third Quarter 2009 Financial Results
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-- Revenues of $260.3 million for the third quarter 2009
-- Third quarter 2009 diluted EPS of $0.20, including restructuring charges
-- Year-to-date 2009 cash from operating activities improved 51% from the
prior year period
-- Debt-to-Capital ratio improved to 35% as debt declined 23% from year-end
2008 to $360.7 million
BRISTOL, Conn.--(BUSINESS WIRE)-- Barnes Group Inc. (NYSE: B), a diversified global manufacturer and logistical services company, today reported financial results for the third quarter 2009. The Company reported income from continuing operations of $10.9 million, or $0.20 per diluted share, compared to $29.2 million, or $0.52 per diluted share in the prior year period. Included in the third quarter 2009 results are $3.4 million pre-tax ($1.7 million after-tax) of restructuring charges. Barnes Group's third quarter 2009 sales totaled $260.3 million, down 22 percent from $333.8 million in the third quarter of 2008.
Barnes Group generated $125.7 million in cash from operations for the first nine months of 2009, reflecting an improvement of 51 percent over the prior year period level of $83.2 million. Cash flow generation driven by working capital improvements helped reduce debt to $360.7 million, a decline of 23 percent from year-end 2008. As a result, the Company's third quarter 2009 debt-to-capital ratio improved to 35%. The Company's September 30, 2009 total debt covenant ratio of 3.26 times was appreciably below the required level of 4.0 times. On December 31, 2009 the ratio requirement decreases to 3.75 times.
($ millions; Three months ended September 30, Nine months ended September 30, except per share 2009 2008 Change 2009 2008 Change data) Net Sales $ 260.3 $ 333.8 ($73.5 ) (22.0 ) % $ 777.7 $ 1,096.7 ($319.0 ) (29.1 ) % Operating $ 14.6 $ 42.6 ($28.1 ) (65.8 ) % $ 49.2 $ 145.2 ($96.1 ) (66.1 ) % Income % of Sales 5.6 % 12.8 % - (7.2 ) pts. 6.3 % 13.2 % - (6.9 ) pts. Income from $ 10.9 $ 29.2 ($18.3 ) (62.8 ) % $ 32.8 $ 98.2 ($65.4 ) (66.6 ) % Continuing Operations % of Sales 4.2 % 8.8 % - (4.6 ) pts. 4.2 % 9.0 % - (4.8 ) pts. Net Income $ 10.9 $ 27.8 ($16.9 ) (60.8 ) % $ 32.8 $ 93.7 ($60.9 ) (65.0 ) % % of Sales 4.2 % 8.3 % - (4.1 ) pts. 4.2 % 8.5 % - (4.3 ) pts. Income from Continuing Operations $ 0.20 $ 0.52 ($0.32 ) (61.5 ) % $ 0.61 $ 1.73 ($1.12 ) (64.7 ) % Per Diluted Share Net Income Per $ 0.20 $ 0.49 ($0.29 ) (59.2 ) % $ 0.61 $ 1.65 ($1.04 ) (63.0 ) % Diluted Share
"We have not yet seen the sustained signs of a turnaround in the global economy. The challenges posed in the third quarter were similar to what we have seen for the preceding six months in many of our end markets. However, we are optimistic about the prospects for economic improvement in 2010, so we continue to pursue internal initiatives we feel are essential to positioning Barnes Group for the future," said Gregory F. Milzcik, President and Chief Executive Officer, Barnes Group Inc. "During the quarter we strengthened our balance sheet through substantial debt reductions driven by working capital improvements and made strategic investments in people and processes to maximize our competitive position for sustainable long-term growth.
"We are confident that we have positioned Barnes Group well to participate fully in a market recovery as conditions normalize. We are encouraged by the stabilizing trends we are seeing in our transportation and industrial manufacturing businesses and optimistic for an anticipated rebound in aerospace activity in the second half of 2010. We are committed to strengthening our capital structure, pursuing strategic revenue growth, and controlling costs as we navigate near-term economic challenges to maximize the value we bring to our customers and stockholders," Milzcik added.
Logistics and Manufacturing Services
-- Third quarter 2009 sales at Logistics and Manufacturing Services were
$131.3 million, down 22 percent from $168.7 million in the same period
last year. The decline in sales was driven by softness in the
transportation and industrial markets throughout North America and
Europe. Additionally, sales declines in the aftermarket aerospace market
were driven by lower aircraft utilization and deferred maintenance
activities. Foreign exchange negatively impacted sales by $1.8 million
in the third quarter.
-- Operating profit was $11.9 million, compared with $23.5 million in the
third quarter of 2008. Operating profit was driven lower primarily by
the reduced sales volumes in each of the businesses due to current
macroeconomic conditions on our end-markets. Operational and
productivity initiatives implemented in 2008 and throughout 2009 to
align the cost structure with sales volumes continued to provide
beneficial results that partially offset the adverse profit impact of
declining sales.
Precision Components
-- Third quarter 2009 sales at Precision Components were $130.0 million,
down 23 percent from $168.4 million in the same period last year. The
industrial manufacturing businesses in North America and Europe reported
significant sales declines primarily resulting from the global recession
and were most impacted by the recession's effect on the transportation
industry, most notably automotive. Additionally, sales decreased in the
aerospace original equipment manufacturing business as customers reduced
inventory and lowered production levels across the commercial engine
portfolio. Foreign exchange adversely affected sales by $0.6 million in
the third quarter.
-- Operating profit for the third quarter of 2009 was $2.7 million,
compared with $19.1 million in the third quarter of 2008. The profit
impact of lower sales volumes was partially offset by the benefits of
cost reduction actions, including personnel reductions and plant
consolidations, taken in 2008 and early in 2009.
-- Included in Precision Components third quarter 2009 results are $3.4
million (pre-tax) for restructuring charges taken during the third
quarter. These actions included the moving of operations of the
Burlington, Ontario, Canada facility and the previously idled Monterrey,
Mexico facility. The assets and related work of these facilities will be
transferred to other operations within the United States to provide a
more cost effective manufacturing footprint and improved competitive
advantage. The actions are expected to be completed by March 2010.
Additional Information
-- Other income, net of other expenses, increased $1.1 million in the third
quarter of 2009 compared to the same period of 2008 primarily as a
result of a $1.5 million gain on the repurchase of certain convertible
notes. Year-to-date, other income, net of other expenses increased $4.3
million, as a result of a $3.8 million gain on the repurchase of certain
convertible notes.
-- The Company's effective tax rate from continuing operations for the
first nine months of 2009 was 5.1 percent. Included in the year-to-date
tax expense is a $1.6 million tax benefit related to the third quarter
2009 restructuring actions. Changes to the Company's tax rate are
largely based on changes in the projected mix of income between taxing
jurisdictions.
Conference Call
The Company will conduct a conference call with investors to discuss third quarter 2009 results at 8:30 a.m. EDT today, October 30, 2009. A webcast of the live call and an archived replay will be available on the Barnes Group investor relations link at www.BGInc.com.
Barnes Group Inc. (NYSE: B) is a diversified global manufacturer and logistical services company focused on providing precision component manufacturing and operating service support. Founded in 1857, 4,900 dedicated employees at more than 60 locations worldwide are committed to achieving consistent and sustainable profitable growth. For more information, visit www.BGInc.com. Barnes Group, the Critical Components People.
This release may contain certain forward-looking statements as defined in the Private Securities Litigation and Reform Act of 1995. Forward-looking statements are made based upon management's good faith expectations and beliefs concerning future developments and their potential effect upon the Company and can be identified by the use of words such as "anticipated," "believe," "expect," "plans," "strategy," "estimate," "project," and other words of similar meaning in connection with a discussion of future operating or financial performance. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed in the forward-looking statements. The risks and uncertainties, which are described in our periodic filings with the Securities and Exchange Commission, include, among others, uncertainties arising from the behavior of financial markets; future financial performance of the industries or customers that we serve; changes in market demand for our products and services; integration of acquired businesses; changes in raw material prices and availability; our dependence upon revenues and earnings from a small number of significant customers; uninsured claims; and numerous other matters of global, regional or national scale, including those of a political, economic, business, competitive, regulatory and public health nature. The Company assumes no obligation to update our forward-looking statements.
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
Unaudited
Three months ended September 30, Nine months ended September 30,
2009 2008 % Change 2009 2008 %
Change
Net sales $ 260,339 $ 333,811 (22.0 ) $ 777,690 $ 1,096,720 (29.1 )
Cost of sales 170,491 208,068 (18.1 ) 503,369 677,618 (25.7 )
Selling and
administrative 75,291 83,130 (9.4 ) 225,161 273,887 (17.8 )
expenses
245,782 291,198 (15.6 ) 728,530 951,505 (23.4 )
Operating 14,557 42,613 (65.8 ) 49,160 145,215 (66.1 )
income
Operating 5.6 % 12.8 % 6.3 % 13.2 %
margin
Other income 1,545 138 NM 4,205 440 NM
Interest 5,293 6,481 (18.3 ) 17,234 20,331 (15.2 )
expense
Other expenses 293 (45 ) NM 1,558 2,141 (27.2 )
Income from
continuing
operations
before income 10,516 36,315 (71.0 ) 34,573 123,183 (71.9 )
taxes
Income taxes (373 ) 7,079 NM 1,778 24,962 (92.9 )
(benefit)
Income from
continuing 10,889 29,236 (62.8 ) 32,795 98,221 (66.6 )
operations
Loss from
discontinued - (1,413 ) NM - (4,513 ) NM
operations,
net of taxes
Net income $ 10,889 $ 27,823 (60.9 ) $ 32,795 $ 93,708 (65.0 )
Common $ 4,357 $ 8,725 (50.1 ) $ 21,220 $ 24,998 (15.1 )
Dividends
Per common
share:
Basic:
Income from
continuing $ 0.20 $ 0.54 (63.0 ) $ 0.61 $ 1.81 (66.3 )
operations
Loss from
discontinued - (0.03 ) NM - (0.08 ) NM
operations,
net of taxes
Net income $ 0.20 $ 0.51 (60.8 ) $ 0.61 $ 1.73 (64.7 )
Diluted:
Income from
continuing $ 0.20 $ 0.52 (61.5 ) $ 0.61 $ 1.73 (64.7 )
operations
Loss from
discontinued - (0.03 ) NM - (0.08 ) NM
operations,
net of taxes
Net income $ 0.20 $ 0.49 (59.2 ) $ 0.61 $ 1.65 (63.0 )
Dividends $ 0.08 $ 0.16 (50.0 ) $ 0.40 $ 0.46 (13.0 )
Average common
shares
outstanding:
Basic 54,257,791 54,491,638 (0.4 ) 53,462,672 54,305,152 (1.6 )
Diluted 54,563,199 56,336,095 (3.1 ) 53,710,453 56,659,318 (5.2 )
NM - Not
meaningful
Notes:
1) Results for 2008 have been adjusted to reflect discontinued operations and the change in the
accounting for convertible debt.
2) 2009 third quarter Other income included a pretax $1,486 gain on the purchase of certain
convertible notes and income taxes included the related tax expense of $564.
3) 2009 year-to-date Other income included a pretax $3,773 gain on the purchase of certain
convertible notes and income taxes included the related tax expense of $1,431.
4) 2008 year-to-date Other expenses included a pretax $1,241 transaction loss on the sale of
Spectrum Plastics and income taxes included the related tax benefit of $395.
BARNES GROUP INC.
OPERATIONS BY REPORTABLE BUSINESS SEGMENT
(Dollars in thousands)
Unaudited
Three months ended September 30, Nine months ended September 30,
2009 2008 % Change 2009 2008 %
Change
Net Sales
Logistics and
Manufacturing $ 131,309 $ 168,742 (22.2 ) $ 410,546 $ 545,778 (24.8 )
Services
Precision 130,041 168,409 (22.8 ) 371,560 561,197 (33.8 )
Components
Intersegment (1,011 ) (3,340 ) 69.7 (4,416 ) (10,255 ) 56.9
sales
Total net $ 260,339 $ 333,811 (22.0 ) $ 777,690 $ 1,096,720 (29.1 )
sales
Operating
profit
Logistics and
Manufacturing $ 11,871 $ 23,467 (49.4 ) $ 38,777 $ 73,702 (47.4 )
Services
Precision 2,686 19,146 (86.0 ) 10,383 71,482 (85.5 )
Components
Total
operating 14,557 42,613 (65.8 ) 49,160 145,184 (66.1 )
profit
Interest 54 137 (60.6 ) 371 414 (10.4 )
income
Interest (5,293 ) (6,481 ) (18.3 ) (17,234 ) (20,331 ) (15.2 )
expense
Other income
(expense), 1,198 46 NM 2,276 (2,084 ) NM
net
Income from
continuing
operations
before income $ 10,516 $ 36,315 (71.0 ) $ 34,573 $ 123,183 (71.9 )
taxes
NM - Not
meaningful
Notes:
1) Results for 2008 have been adjusted to reflect discontinued operations, the segment
realignment and the change in the accounting for convertible debt.
2) 2009 third quarter Other income (expense), net included a $1,486 gain on the
purchase of certain convertible debt.
3) 2009 year-to-date Other income (expense), net included a $3,773 gain on the purchase
of certain convertible debt.
4) 2008 year-to-date Other income (expense), net included a $1,241 transaction loss on
the sale of Spectrum Plastics.
BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Unaudited
September 30, December 31,
2009 2008
Assets
Current assets
Cash and cash equivalents $ 14,221 $ 20,958
Accounts receivable 164,850 173,215
Inventories 193,533 240,805
Deferred income taxes 25,804 27,650
Prepaid expenses and other current assets 13,336 14,881
Total current assets 411,744 477,509
Deferred income taxes 35,472 31,133
Property, plant and equipment, net 234,820 235,035
Goodwill 375,383 361,930
Other intangible assets, net 307,384 316,817
Other assets 13,685 12,931
Total assets $ 1,378,488 $ 1,435,355
Liabilities and Stockholders' Equity
Current liabilities
Notes and overdrafts payable $ 4,212 $ 8,905
Accounts payable 85,980 80,495
Accrued liabilities 79,828 84,372
Long-term debt - current 19,181 15,386
Total current liabilities 189,201 189,158
Long-term debt 337,334 441,670
Accrued retirement benefits 140,403 164,796
Other liabilities 41,525 41,156
Stockholders' equity 670,025 598,575
Total liabilities and stockholders' equity $ 1,378,488 $ 1,435,355
Notes:
1) Amounts for 2008 have been adjusted to reflect the change in the accounting
for convertible debt.
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Unaudited
Nine months ended September 30,
2009 2008
Operating activities:
Net income $ 32,795 $ 93,708
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 38,558 39,675
Loss (gain) on disposition of property, plant 813 (218 )
and equipment
Gain on repurchase of convertible notes (3,773 ) -
Non-cash stock compensation expense 3,279 5,218
Withholding taxes paid on stock issuances (610 ) (2,568 )
Loss on the sale of Spectrum Plastics - 846
Changes in assets and liabilities, net of the
effects of acquisitions:
Accounts receivable 14,260 (10,448 )
Inventories 50,757 (254 )
Prepaid expenses 4,378 (2,853 )
Accounts payable 4,615 (27,023 )
Accrued liabilities (3,054 ) (19,586 )
Deferred income taxes (2,741 ) 9,167
Long-term retirement benefits (16,503 ) (6,800 )
Other 2,962 4,322
Net cash provided by operating activities 125,736 83,186
Investing activities:
Proceeds from disposition of property, plant 981 703
and equipment
Proceeds from the sale of Spectrum Plastics, - 5,127
net
Capital expenditures (24,847 ) (41,982 )
Business acquisitions, net of cash acquired - 47
Revenue Sharing Program payments - (57,500 )
Other (1,737 ) (2,105 )
Net cash used by investing activities (25,603 ) (95,710 )
Financing activities:
Net change in other borrowings (4,861 ) (5,249 )
Payments on long-term debt (181,242 ) (197,770 )
Proceeds from the issuance of long-term debt 94,900 242,100
Proceeds from the issuance of common stock 5,621 4,944
Common stock repurchases (314 ) (1,791 )
Dividends paid (21,220 ) (24,998 )
Excess tax benefit on stock awards - 1,743
Other (797 ) (104 )
Net cash provided (used) by financing (107,913 ) 18,875
activities
Effect of exchange rate changes on cash flows 1,043 (1,333 )
Increase (decrease) in cash and cash (6,737 ) 5,018
equivalents
Cash and cash equivalents at beginning of 20,958 20,600
period
Cash and cash equivalents at end of period $ 14,221 $ 25,618
Notes:
1) Results for 2008 have been adjusted to reflect the change in the accounting
for convertible debt.
Source: Barnes Group Inc.
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