Barnes Group Inc. Announces First Quarter 2006 Financial Results

- Net sales rise 10 percent to a record $300 million

- Net income rises 61 percent; diluted EPS of $0.73, up 52 percent

- Full-year 2006 estimated net income per diluted share raised to$2.55 - $2.65

Barnes Group Inc. (NYSE: B) today announced financial results forthe quarter ended March 31, 2006. Net sales for the first quarter were$299.9 million, up 10 percent from $273.7 million in the first quarterof 2005. Operating income grew 48 percent to $28.1 million in thefirst quarter of 2006, from $19.0 million in the first quarter in theprior year. Net income increased 61 percent to $18.5 million, or $0.73per diluted share, in the first quarter of 2006 compared to $11.5million, or $0.48 per diluted share, in the same period last year.

Periods prior to January 1, 2006 have been restated to reflect thechange in accounting for stock-based compensation in accordance withStatement of Financial Accounting Standards No. 123R (SFAS 123R). Theimpact to the first quarter 2005 was a reduction of pre-tax income by$2.1 million and diluted earnings per share by $0.06.

"Barnes Group had record first quarter sales with organic growthin all three businesses generating strong advances in operating incomeand net income," said Edmund M. Carpenter, President and ChiefExecutive Officer, Barnes Group Inc. "With 13 consecutive quarters ofsignificant increases in sales over the comparable prior year quarter,and strong operating performance by each of the three businesses, wecontinue to demonstrate our ability to achieve our objective ofbalanced, sustainable, profitable growth."

"With the first quarter results exceeding our expectations, we areincreasing our full-year estimate of diluted earnings per share to$2.55 to $2.65, from the previous estimate of $2.50 to $2.60. Wecontinue to expect results to be seasonally impacted, in as much asthe first half of the year is traditionally stronger than the secondhalf of the year, and are cautiously optimistic for continued growthin key end markets and geographies," continued Carpenter.

William C. Denninger, Barnes Group Inc.'s Senior Vice President,Finance and Chief Financial Officer, commented, "We continue to makestrides in improving the financial performance of the Company and ourstrong capital position provides the flexibility for continued growthinvestments."

Sales at Barnes Distribution were a record $124.4 million in thefirst quarter 2006, up 10 percent from $113.6 million in the samequarter a year ago. Driving the sales growth were strong increases inBarnes Distribution Europe and Barnes Distribution Raymond primarilyas a result of the Toolcom and SPD acquisitions, respectively, whichadded $5.9 million in sales in the first quarter. In addition, BarnesDistribution North America's continued growth in Corporate Accounts,up 11 percent, and Tier II, up 37 percent, as well as higher sellingprices added to top line growth.

In the first quarter of 2006, operating profit at BarnesDistribution increased 74 percent to $9.0 million, up from $5.2million for the first quarter 2005. Continued operating profitimprovements reflect higher sales volume and increased gross margins.

"Barnes Distribution made significant progress this quartertowards realizing the benefits of its strategic focus on profitablesales and operational improvements throughout the organization," saidIdelle K. Wolf, President, Barnes Distribution. "Steady execution andcontinued reductions in operating costs are expected to furtherenhance profitability at Barnes Distribution."

Sales at Associated Spring were $111.0 million in the period endedMarch 31, 2006, up 1 percent from $109.5 million in the same quarterlast year. Specialty operations sales were essentially flat from theprior period, while the traditional spring business realized a modestsales improvement. Associated Spring's operating profit for the firstquarter 2006 increased 23 percent to $10.6 million, from $8.6 millionin the first quarter of 2005. The increase in operating profitreflects a continued focus on profitable sales and actions focused onlowering overall operating costs.

"Associated Spring's first quarter results reflect the continuedbenefits of our sales and marketing strategy initiated last year. Theorganization remains committed to profitable growth and improvementsin operational effectiveness of the business while providing highquality products and customer service," said Gregory F. Milzcik,Executive Vice President and Chief Operating Officer, Barnes GroupInc. and President, Associated Spring.

Sales at Barnes Aerospace were $66.9 million in the first quarter2006, up 25% from $53.7 million in the year-ago period as both OEM andaftermarket sales grew. OEM sales increased by 21 percent andaftermarket sales grew by 37 percent.

Barnes Aerospace generated orders of $72.5 million, down from$88.9 million in the prior year which was favorably impacted byapproximately $16 million due to a one-time increase in lead times forcertain raw materials. Commercial OEM orders were $41.0 million,military orders were $8.8 million and industrial gas turbine orderswere $2.1 million in the first quarter 2006. Order backlog was $274.6million, up 2 percent since December 31, 2005.

In the first quarter 2006, operating profit increased 63 percentto $8.5 million from $5.2 million in the first quarter 2005. Drivingthe strong increase in operating profit were higher sales volume andan increased percentage of high margin aftermarket sales.

"Strong end markets in both OEM and aftermarket businesses ledBarnes Aerospace to record results in the first quarter," said PatrickDempsey, President, Barnes Aerospace. "We continue to improveoperations and increase capacity through capital investments andincreased efficiencies achieved through lean manufacturing and SixSigma initiatives, positioning Barnes Aerospace for continued growth."

Barnes Group will conduct a conference call with investors todiscuss first quarter results at 4:30 p.m. ET today. A web cast of thelive call, supporting materials and an archived replay will beavailable on the Barnes Group investor relations link atwww.barnesgroupinc.com.

Barnes Group Inc. (www.barnesgroupinc.com) is a diversifiedinternational manufacturer of precision metal components andassemblies and a distributor of industrial supplies, serving a widerange of markets and customers. Founded in 1857 and headquartered inBristol, Connecticut, Barnes Group consists of three businesses with2005 sales of $1.1 billion: Barnes Distribution, an international,full-service distributor of maintenance, repair, operating, andproduction supplies; Associated Spring, one of the world's largestmanufacturers of precision mechanical and nitrogen gas products and aglobal supplier of retaining rings, reed valves, shock discs, andinjection-molded plastic components and assemblies; and BarnesAerospace, a manufacturer and repairer of highly engineered assembliesand components of aircraft engines, airframes, and land-basedindustrial gas turbines. Over 6,000 dedicated employees at more than60 locations worldwide contribute to Barnes Group Inc.'s success. TheCompany has paid cash dividends to stockholders on a continuous basissince 1934.

This release may contain forward-looking statements within themeaning of the Private Securities Litigation Reform Act of 1995. Theseforward-looking statements are subject to risks and uncertainties thatmay cause actual results to differ materially from those expressed inthe forward-looking statements. The risks and uncertainties, which aredescribed in our periodic filings with the Securities and ExchangeCommission, include, among others, uncertainties arising from thebehavior of financial markets; future financial performance of theindustries or customers that we serve; changes in market demand forour products and services; integration of acquired businesses; changesin raw material prices and availability; uninsured claims; andnumerous other matters of global, regional or national scale,including those of a political, economic, business, competitive,regulatory and public health nature. We assume no obligation to updateour forward-looking statements.
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
Unaudited

Three months ended March 31,

2006 2005 % Change
As
Restated
(1)

Net sales $299,851 $273,730 9.5

Cost of sales 190,633 175,748 8.5
Selling and administrative expenses 81,111 78,959 2.7

271,744 254,707 6.7

Operating income 28,107 19,023 47.8

Operating margin 9.4 % 6.9 %

Other income 295 262 12.8

Interest expense 4,387 4,167 5.3
Other expenses 575 369 55.6

Income before income taxes 23,440 14,749 58.9

Income taxes 4,978 3,245 53.4


Net income $ 18,462 $ 11,504 60.5

Per common share:
Net income:
Basic $ .77 $ .49 57.1
Diluted .73 .48 52.1
Dividends .22 .20 10.0

Average common shares outstanding:
Basic 24,127,600 23,300,210 3.6
Diluted 25,377,980 23,917,176 6.1


Footnote:

(1) Periods prior to 1/1/06 restated to reflect the change in
accounting for stock-based compensation in accordance with SFAS
123R.


BARNES GROUP INC.
OPERATIONS BY REPORTABLE BUSINESS SEGMENT
(Dollars in thousands)
Unaudited

Three months ended March 31,

2006 2005 % Change
As
Restated
(1)
Net Sales

Barnes Distribution $124,392 $113,618 9.5

Associated Spring 110,990 109,540 1.3

Barnes Aerospace 66,943 53,653 24.8

Intersegment sales (2,474) (3,081) 19.7

Total net sales $299,851 $273,730 9.5

Operating profit (1)

Barnes Distribution $ 8,953 $ 5,160 73.5

Associated Spring 10,630 8,619 23.3

Barnes Aerospace 8,546 5,244 63.0

Total operating profit 28,129 19,023 47.9

Interest income 240 145 65.5

Interest expense (4,387) (4,167) 5.3

Other net income (expense) (542) (252) NM

Income before income taxes $ 23,440 $ 14,749 58.9


NM- not meaningful

Footnote:

(1) Periods prior to 1/1/06 restated to reflect the change in
accounting for stock-based compensation in accordance with SFAS
123R.


BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Unaudited
March 31, March 31,
2006 2005
As
Restated
(1)
Assets
Current assets
Cash and cash equivalents $ 36,541 $ 38,988
Accounts receivable 171,435 154,580
Inventories 167,095 148,100
Deferred income taxes and prepaid expenses 34,542 39,903

Total current assets 409,613 381,571

Deferred income taxes 24,051 24,912
Property, plant and equipment, net 161,144 161,083
Goodwill 236,559 223,299
Other intangible assets, net 184,849 124,358
Other assets 49,701 53,024

$1,065,917 $968,247

Liabilities and Stockholders' Equity
Current liabilities
Notes payable $ --- $ 5,500
Accounts payable 142,488 146,653
Accrued liabilities 80,974 72,125
Long-term debt-current 39,990 9,322

Total current liabilities 263,452 233,600

Long-term debt 278,713 267,395
Deferred income taxes 11,778 12,482
Other liabilities 93,523 89,995

Stockholders' equity 418,451 364,775

$1,065,917 $968,247

Footnote:

(1) Periods prior to 1/1/06 restated to reflect the change in
accounting for stock-based compensation in accordance with SFAS
123R.