Barnes Group Inc. Announces Record Third Quarter Financial Results

-- 11th consecutive quarter of double-digit sales growth

-- Third quarter net income $0.70 per diluted share; $0.55 per diluted share from current period operations, a 38 percent increase over the prior-year quarter

-- Full-year 2005 estimated adjusted net income per diluted share raised to $2.15 - $2.20

Barnes Group Inc. (NYSE: B) today announced financial results forthe quarter ended September 30, 2005. Net sales for the third quarter2005 were $271.5 million, up 11 percent from $243.9 million in thethird quarter 2004. Net income increased 81 percent to $17.4 million,or $0.70 per diluted share, in the third quarter of 2005 from $9.6million, or $0.40 per diluted share, in the third quarter of 2004. Netincome from operations, excluding retroactive tax benefits and apositive out-of-period adjustment related to accounts payable, wouldhave been $13.7 million, or $0.55 per diluted share(1), a 42 percentincrease from $9.6 million, or $0.40 per diluted share, in thecomparable year-ago quarter.

Included in Barnes Group's third quarter results were retroactivetax benefits of multi-year Pioneer Status granted by the SingaporeMinistry of Trade and Industry, for the production of aircraft enginecomponents for original equipment manufacturers (OEMs) and the spareparts market. The tax benefits include approximately $1.1 million, or$0.04 per diluted share for the first half of 2005, and approximately$1.5 million, or $0.06 per diluted share, for the periods prior toJanuary 1, 2005, for a total retroactive tax benefit of approximately$2.6 million or $0.10 per diluted share. A second item is anout-of-period $1.8 million favorable pre-tax adjustment related toaccounts payable. The related after-tax impact is approximately $1.1million, or $0.05 per diluted share.(1)

Operating income grew 47 percent to $22.6 million for the thirdquarter 2005 from $15.4 million in the third quarter of the prioryear. Operating income, excluding the positive adjustment related toaccounts payable, was $20.8 million(1), a 36 percent increase, from$15.4 million in the third quarter 2004.

"This marks the 11th consecutive quarter in which Barnes Group hasposted double-digit sales growth over the comparable prior yearquarter," said Edmund M. Carpenter, President and Chief ExecutiveOfficer, Barnes Group Inc. "We had a strong third quarter with solidgrowth in all three business segments, as the organization continuesto focus on reducing operational costs and improving after-taxoperating results."

"Considering the strong first three quarters and current marketconditions, we are increasing our full-year 2005 estimate of dilutedearnings per share to $2.15 - $2.20. This excludes the benefits fromthe gain on the sale of NASCO in the second quarter, retroactivePioneer Status tax benefits and the positive adjustment related toaccounts payable," Carpenter continued.

Sales at Barnes Distribution were a record $114.0 million for thequarter ended September 30, 2005, up 7 percent, or $7.0 million, from$107.0 million in the quarter ended September 30, 2004, including $2.1million from the Toolcom acquisition, which was announced in August2005. Sales from Corporate Accounts and Tier II were up 10 percent and39 percent, respectively, for the third quarter of 2005, compared tothe third quarter of 2004.

Barnes Distribution reported operating profit of $8.6 million.Excluding the accounts payable adjustment, operating profit would havebeen $6.8 million(1), up 17% in the third quarter, compared with $5.8million in the year-ago quarter. The increase in operating profit wasprimarily driven by higher sales volume and the beneficial effects ofthe distribution network's increased operational effectiveness.

"Barnes Distribution continues to realize benefits from itsstrategic sales focus and distribution network investments," said A.Keith Drewett, President, Barnes Distribution. "As the operationalimprovements and global sourcing capabilities accelerate, we expect toimprove profitability and expand the range of products and services weoffer our customers."

Sales at Associated Spring were $100.2 million for the thirdquarter of 2005, up 14 percent from $88.3 million in the third quarterof 2004. Specialty operations including Nitrogen Gas Products andSeeger-Orbis Retaining Rings continued strong sales growth. BarnesPrecision Valve contributed an incremental $6.1 million to AssociatedSpring's sales in the third quarter of 2005.

Associated Spring's operating profit increased 55 percent to $6.6million in the quarter ended September 30, 2005, compared with $4.3million in the comparable quarter last year. Driving this improvementwas the increase in profit contribution from specialty operations,partially offset by higher than anticipated domestic operating costs.

"In the third quarter, Associated Spring's specialty operationscontinued to generate strong top and bottom line growth," said GregoryF. Milzcik, President, Associated Spring. "We continue to be focusedon profitable sales, and improvements to the operational effectivenessof our domestic legacy spring business."

Sales at Barnes Aerospace were a record $59.3 million for thequarter ended September 30, 2005, up 15 percent from $51.7 million inthe quarter ended September 30, 2004. Sales were up in the OEM andaftermarket segments 9 percent and 36 percent, respectively, in thethird quarter 2005, compared to the third quarter 2004. Orders weredown slightly to $69.8 million in the third quarter from $73.1 millionin the prior-year quarter. Backlog increased 46 percent to $255.7million at September 30, 2005, compared to $174.9 million in theyear-ago quarter.

Operating profit at Barnes Aerospace grew 36 percent to $7.4million in the third quarter, from $5.5 million in the third quarterof 2004. The increase in operating profit was driven by higher salesvolume and an increased percentage of higher margin aftermarketactivity.

"Barnes Aerospace continued its strong results with record sales,operating profit and backlog in the third quarter of 2005," saidPatrick Dempsey, President, Barnes Aerospace. "This was a balancedquarter with growth in both the OEM and aftermarket businesses.Focusing on leveraging our products and technologies, Barnes Aerospacecontinues to provide positive financial results."

William C. Denninger, Barnes Group Inc.'s Chief Financial Officer,commented, "We continued to strengthen our balance sheet during thethird quarter 2005 with a successful $100 million, 3.75 percentconvertible senior subordinated debt offering. And, our debt tocapitalization ratio at quarter-end of 42 percent was at the low endof our targeted range, even after using $36.0 million in cash for theToolcom and Service Plus Distributions (SPD) acquisitions and foraerospace aftermarket RSP payments during the quarter."

For the nine months ended September 30, 2005, Barnes Group netsales were $825.8 million, up 11 percent from $743.1 million in thecomparable period in 2004. Net income increased 60 percent to $48.9million, or $2.02 per diluted share, for the nine months endedSeptember 30, 2005, from $30.5 million, or $1.28 per diluted share, inthe year-ago period. Net income, excluding the gain on the sale ofNASCO, retroactive tax benefits and the positive out-of-periodadjustment related to accounts payable, was $42.2 million, or $1.74per diluted share(1), a 38 percent increase from $30.5 million, or$1.28 per diluted share in the comparable year-ago period.

Barnes Group will conduct a conference call with investors todiscuss third quarter results at 9:30 a.m. EDT today. A web cast ofthe live 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 with2004 sales of $994.7 million: 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 springs and aglobal supplier of retaining rings, reed valves, shock discs, andinjection-molded plastic components; and Barnes Aerospace, amanufacturer and repairer of highly engineered assemblies andcomponents for commercial and military aircraft engines, airframes,and land-based industrial gas turbines. Over 5,900 dedicated employeesat more than 60 locations worldwide contribute to Barnes Group Inc.'ssuccess.

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.

(1) Please reference the Non-GAAP Financial Measure Reconciliationat the end of this press release.
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
Unaudited


Three months ended September 30,
2005 2004 % Change
------------ ------------
As restated,
note 1

Net sales $ 271,518 $ 243,928 11.3

Cost of sales (see note 2) 172,070 159,379 8.0
Selling and administrative
expenses 76,824 69,187 11.0
------------ ------------
248,894 228,566 8.9
------------ ------------

Operating income 22,624 15,362 47.3
Operating margin 8.3% 6.3%

Other income (see note 3) 532 313 69.9
Interest expense 4,387 3,757 16.8
Other expenses 174 363 (52.0)
------------ ------------

Income before income taxes 18,595 11,555 60.9

Income taxes (see note 4) 1,241 1,965 (36.9)
------------ ------------

Net income $ 17,354 $ 9,590 81.0
============ ============

Per common share:
Net income - basic $ 0.73 $ 0.41 78.0
Net income - diluted 0.70 0.40 75.0
Dividends 0.22 0.20 10.0


Average common shares
outstanding - basic 23,697,410 23,139,339 2.4
- diluted 24,660,478 23,779,636 3.7


Nine months ended September 30,
2005 2004 % Change
------------ ------------
As restated,
note 1

Net sales $ 825,768 $ 743,107 11.1

Cost of sales (see note 2) 526,572 485,718 8.4
Selling and administrative
expenses 231,618 208,504 11.1
------------ ------------
758,190 694,222 9.2
------------ ------------

Operating income 67,578 48,885 38.2
Operating margin 8.2% 6.6%

Other income (see note 3) 10,064 1,719 NM
Interest expense 12,892 11,263 14.5
Other expenses 716 621 15.3
------------ ------------

Income before income taxes 64,034 38,720 65.4

Income taxes (see note 4) 15,165 8,216 84.6
------------ ------------

Net income $ 48,869 $ 30,504 60.2
============ ============

Per common share:
Net income - basic $ 2.08 $ 1.32 57.6
Net income - diluted 2.02 1.28 57.8
Dividends 0.62 0.60 3.3


Average common shares
outstanding - basic 23,497,229 23,080,477 1.8
- diluted 24,248,899 23,842,586 1.7


NM - Not meaningful

Notes:

1) Restated to reflect the retroactive adjustment of changing the
method of valuing certain U.S. inventories from LIFO to FIFO.

2) Third quarter 2005 cost of sales includes a $1,814 ($1,141 after
tax, or $0.05 diluted EPS) positive adjustment related to accounts
payable. Refer to page 8, Note 1).

3) Year to date 2005 other income includes the $8,892 gain ($4,030
after tax, or $0.17 diluted EPS) on the sale of the NASCO
investment in April.

4) Third quarter 2005 taxes include a $2,553 benefit ($0.10 diluted
EPS) of which $1,473 ($0.06 diluted EPS) relates to prior years,
related to being granted Pioneer tax status in Singapore.



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


Three Months Ended September 30,
----------------------------------
2005 2004 % Change
---------- ---------- ----------
As restated,
note 1
Net sales

Barnes Distribution $ 113,959 $ 106,960 6.5

Associated Spring 100,249 88,265 13.6

Barnes Aerospace 59,301 51,724 14.6

Intersegment sales (1,991) (3,021) 34.1
---------- ----------

Total net sales $ 271,518 $ 243,928 11.3
========== ==========

Operating profits

Barnes Distribution (note 2) $ 8,588 $ 5,798 48.1

Associated Spring 6,634 4,274 55.2

Barnes Aerospace 7,449 5,464 36.3
---------- ----------

Total operating profit 22,671 15,536 45.9

Interest income 469 264 77.7

Interest expense (4,387) (3,757) 16.8

Other income (expense) (note 3) (158) (488) 67.6
---------- ----------

Income before income taxes $ 18,595 $ 11,555 60.9
========== ==========


Nine Months Ended September 30,
----------------------------------
2005 2004 % Change
---------- ---------- ----------
As restated,
note 1
Net sales

Barnes Distribution $ 340,906 $ 320,597 6.3

Associated Spring 321,283 276,426 16.2

Barnes Aerospace 171,237 154,480 10.8

Intersegment sales (7,658) (8,396) 8.8
---------- ----------

Total net sales $ 825,768 $ 743,107 11.1
========== ==========

Operating profits

Barnes Distribution (note 2) $ 21,081 $ 14,739 43.0

Associated Spring 26,631 19,965 33.4

Barnes Aerospace 20,073 15,067 33.2
---------- ----------

Total operating profit 67,785 49,771 36.2

Interest income 903 816 10.7

Interest expense (12,892) (11,263) 14.5

Other income (expense) (note 3) 8,238 (604) NM
---------- ----------

Income before income taxes $ 64,034 $ 38,720 65.4
========== ==========

NM - Not meaningful

Notes:

1) Restated to reflect the retroactive adjustment of changing the
method of valuing certain U.S. inventories from LIFO to FIFO.

2) Third Quarter 2005 includes a $1,814 positive adjustment related to
accounts payable. Refer to page 8, Note (1).

3) Year to date 2005 other income includes the $8,892 gain on the sale
of NASCO investment in April.



BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Unaudited


September 30, September 30,
Assets 2005 2004
-------------- -------------
Current assets As restated,
note 1

Cash and cash equivalents $ 31,489 $ 33,696
Accounts receivable 163,281 146,880
Inventories 158,465 135,565
Deferred income taxes and prepaid
expenses 35,662 35,794
-------------- -------------

Total current assets 388,897 351,935

Deferred income taxes 14,670 16,162
Property, plant and equipment 157,276 159,714
Goodwill 234,084 225,497
Other intangible assets, net 165,894 103,830
Other assets 48,075 59,310
-------------- -------------

Total assets $ 1,008,896 $ 916,448
============== =============

Liabilities and Stockholders' Equity
Current liabilities
Notes payable $ - $ 3,500
Accounts payable 141,746 114,383
Accrued liabilities 80,316 75,185
Long-term debt - current 21,614 7,626
-------------- -------------

Total current liabilities 243,676 200,694

Long-term debt 266,382 270,361
Accrued retirement benefits 84,589 78,657
Other liabilities 18,387 15,212

Stockholders' equity 395,862 351,524
-------------- -------------

Total liabilities and stockholders'
equity $ 1,008,896 $ 916,448
============== =============


Footnote:

1) Restated to reflect the retroactive adjustment of changing the
method of valuing certain U.S. inventories from LIFO to FIFO.



BARNES GROUP INC.
NON-GAAP FINANCIAL MEASURE RECONCILIATION
(Dollars in thousands, except per share data)
Unaudited

Following is a reconciliation of results excluding certain
adjustments to the Company's reported results:


Three months ended September 30,
------------------------------------
%
2005 2004 Change
----------- ----------- ----------
As Restated
Segment results:
Barnes Distribution
Operating profit, as
reported $ 8,588 $ 5,798 48.1
Accounts payable adjustment
(see note 1) (1,814) - NM
----------- -----------
Operating profit, excluding
adjustment $ 6,774 $ 5,798 16.8
=========== ===========

Consolidated Results
Barnes Group Inc.
Cost of sales, as reported $ 172,070 $ 159,379 8.0
Accounts payable adjustment
(see note 1) 1,814 - NM
----------- -----------
Cost of sales, excluding
adjustment $ 173,884 $ 159,379 9.1
=========== ===========

Operating income, as
reported $ 22,624 $ 15,362 47.3
Accounts payable adjustment
(see note 1) (1,814) - NM
----------- -----------
Operating income, excluding
adjustment $ 20,810 $ 15,362 35.5
=========== ===========

Income taxes, as reported $ 1,241 $ 1,965 (36.9)
Accounts payable adjustment
(see note 1) (673) - NM
Singapore tax benefit (see
note 2) 2,553 - NM
Gain on sale of NASCO (see
note 3) - - NM
----------- -----------
Income taxes, excluding
adjustments $ 3,121 $ 1,965 58.8
=========== ===========

Net income, as reported $ 17,354 $ 9,590 81.0
Accounts payable adjustment
(see note 1) (1,141) - NM
Singapore tax benefit (see
note 2) (2,553) - NM
Gain on sale of NASCO (see
note 3) - - NM
----------- -----------
Net income, excluding
adjustments $ 13,660 $ 9,590 42.4
=========== ===========

Net income per common share
- diluted, as reported $ 0.70 $ 0.40 75.0
Accounts payable adjustment
(see note 1) (0.05) - NM
Singapore tax benefit (see
note 2) (0.10) - NM
Gain on sale of NASCO (see
note 3) - - NM
----------- -----------
Net income per common share
- diluted, excluding
adjustments $ 0.55 $ 0.40 37.5
=========== ===========


Nine months ended September 30,
------------------------------------
%
2005 2004 Change
----------- ----------- ----------
As Restated
Segment results:
Barnes Distribution
Operating profit, as
reported $ 21,081 $ 14,739 43.0
Accounts payable adjustment
(see note 1) (1,814) - NM
----------- -----------
Operating profit, excluding
adjustment $ 19,267 $ 14,739 30.7
=========== ===========

Consolidated Results
Barnes Group Inc.
Cost of sales, as reported $ 526,572 $ 485,718 8.4
Accounts payable adjustment
(see note 1) 1,814 - NM
----------- -----------
Cost of sales, excluding
adjustment $ 528,386 $ 485,718 8.8
=========== ===========

Operating income, as
reported $ 67,578 $ 48,885 38.2
Accounts payable adjustment
(see note 1) (1,814) - NM
----------- -----------
Operating income, excluding
adjustment $ 65,764 $ 48,885 34.5
=========== ===========

Income taxes, as reported $ 15,165 $ 8,216 84.6
Accounts payable adjustment
(see note 1) (673) - NM
Singapore tax benefit (see
note 2) 1,473 - NM
Gain on sale of NASCO (see
note 3) (4,862) - NM
----------- -----------
Income taxes, excluding
adjustments $ 11,103 $ 8,216 35.1
=========== ===========

Net income, as reported $ 48,869 $ 30,504 60.2
Accounts payable adjustment
(see note 1) (1,141) - NM
Singapore tax benefit (see
note 2) (1,473) - NM
Gain on sale of NASCO (see
note 3) (4,030) - NM
----------- -----------
Net income, excluding
adjustments $ 42,225 $ 30,504 38.4
=========== ===========

Net income per common share
- diluted, as reported $ 2.02 $ 1.28 57.8
Accounts payable adjustment
(see note 1) (0.05) - NM
Singapore tax benefit (see
note 2) (0.06) - NM
Gain on sale of NASCO (see
note 3) (0.17) - NM
----------- -----------
Net income per common share
- diluted, excluding
adjustments $ 1.74 $ 1.28 35.9
=========== ===========

NM - not meaningful

Notes: The Company has presented certain financial measurements,
excluding certain retroactive tax benefits, a positive adjustment
related to accounts payable and the gain on the sale of NASCO as
follows:

1) As part of management's on-going internal control assessment,
during the third quarter of 2005, the Company identified and
recorded an adjustment to accounts payable and cost of sales at
Barnes Distribution. The Company determined that cost of sales was
overstated in prior periods due to inaccuracies in recording
inventory receipts from 2000 through 2005. This overstatement was
corrected in the third quarter of 2005 as a reduction to cost of
sales of $1,814. The after-tax effect of this adjustment was
$1,141. Management concluded that such corrections were
immaterial, both quantitatively and qualitatively, to the 2005
financial statements and to the previously reported results of the
prior years to which they relate.

2) During the third quarter of 2005, the Company was granted Pioneer
tax status in Singapore and recorded retroactive tax benefits of
$2,553 of which $1,473 related to periods prior to January 1, 2005
and $1,080 related to the first half of 2005.

3) During the second quarter of 2005, the Company sold its 45 percent
interest in NHK-Associated Spring Suspension Components Inc.
("NASCO"), resulting in a pre-tax gain of $8,892 and an after-tax
gain of $4,030.

These adjustments represent out-of-period or discrete items and
management believes that providing results excluding these items is
useful to investors. Management does not intend results excluding the
adjustments to represent results as defined by GAAP, and the reader
should not consider it as an alternative measurement calculated in
accordance with GAAP, or as an indicator of the Company's operating
performance. Accordingly, the measurements have limitations depending
on their use.