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Barnes Group Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: October 28, 2011 11:54AM
Barnes Group Inc. (B) filed Quarterly Report for the period ended 2011-09-30.
Highlight of Business Operations:The Logistics and Manufacturing Services segment reported sales of $151.6 million in the third quarter of 2011, a 9.1% increase from the third quarter of 2010. Organic sales improved by $10.5 million, while the positive impact of foreign currency translation increased sales by approximately $2.2 million as the U.S. dollar weakened against foreign currencies primarily in Europe and Canada. In the first nine months of 2011, this segment reported sales of $456.9 million, a 10.7% increase from the
Sales at Precision Components were $176.6 million in the third quarter of 2011, a 14.7% increase from the third quarter of 2010, and $524.0 million in the first nine months of 2011, a 17.4% increase from the first nine months of 2010. These increases were due primarily to organic sales increases of $17.9 million in the third quarter of 2011 and $61.3 million in the first nine months of 2011. The organic sales growth was primarily driven by increases in the industrial manufacturing businesses based in North America and Europe reflecting improvements in the transportation industry, including automotive. Sales in the aerospace OEM business also improved as compared to 2010. The positive impact of foreign currency translation increased sales by approximately $4.7 million in the third quarter of 2011 and $16.3 million in the first nine months of 2011 as the U.S. dollar weakened against foreign currencies primarily in Europe and Brazil.
Cash used for financing activities in the first nine months of 2011 included a net decrease in borrowings of $11.9 million compared to a net increase in borrowings of $1.4 million in the comparable 2010 period. The 2011 period reflects the redemption of the remaining $92.5 million principal amount of the 3.75% Convertible Notes including a $9.8 million premium paid on conversion for those notes surrendered for conversion. The redemption, including the premium, was funded by borrowings under the revolving credit facility. Total cash used to pay dividends was $13.2 million in both the 2011 and 2010 periods. Proceeds from the issuance of common stock increased $23.0 million in the 2011 period from the 2010 period primarily as a result of higher stock option exercises in the 2011 period. Cash outflow associated with the the Company's stock repurchase program increased by $13.4 million over the 2010 period. In addition, cash used by financing activities in the 2011 period was partially offset by an $8.6 million excess tax benefit recorded for current year tax deductions related to employee stock plan activity in the current year and prior years.
Cost of sales in the first nine months of 2011 increased 14.9% from the 2010 period. The percentage increase in cost of sales was slightly higher than the percentage increase in sales, resulting in a slight decrease in overall gross profit margin from 36.4% in the 2010 period to 36.1% in the 2011 period. Selling and administrative expenses in the first nine months of 2011 increased 5.8% from the first nine months of 2010; however, as a percentage of sales decreased from 28.3% in the first nine months of 2010 to 26.2% in the first nine months of 2011. The increase in selling and administrative expenses was primarily driven by the increase in sales as well as higher employee related costs and additional costs associated with strategic initiatives. As a result, operating income in the first nine months of 2011 increased 40.7% from the first nine months of 2010 and operating income margin improved from 8.0% to 9.9%.
The Company maintains borrowing facilities with banks to supplement internal cash generation. At September 30, 2011, $286.1 million was borrowed at an average interest rate of 1.46% under the Company's $500.0 million borrowing facility which matures in September 2016. As of September 30, 2011, the Company had borrowed $4.0 million under its short-term bank credit lines. At September 30, 2011, the Company's total borrowings are comprised of approximately 17% fixed rate debt and approximately 83% variable rate debt compared to approximately 42% fixed rate debt and approximately 58% variable rate debt as of December 31, 2010. Beginning in the second quarter of 2011, the Company's percentage of variable rate debt increased as a result of the expiration of the interest rate swap agreements in March 2011 and the redemption of the 3.75% Convertible Notes with borrowings under the variable rate credit facility.
Stocks Discussed: B,