MSC's Acquisition Of Barnes Completed

Barnes Group Inc. will use the after-tax proceeds from the sale of approximately $400 million will be utilized to reduce debt, buyback common shares, invest in profitable growth initiatives including potential acquisitions, and for general corporate purposes. Barnes Group updates its 2013 full-year guidance to include the impacts of the completed sale of BDNA and the Company’s previously announced CEO transition.

MSC Industrial Direct Co., Inc. Completes Acquisition Of Barnes Distribution North America

Strengthens inventory management solutions, expands product portfolio in fasteners, establishes Canada footprint

Melville, NY-- MSC Industrial Direct Co. announced that it has completed the acquisition of the North American distribution business of Barnes Group Inc. for $550 million, subject to customary working capital adjustments. With this acquisition, MSC extends its inventory management solutions and product offering in fasteners and other high gross margin consumable products, and establishes a significant presence in the Canadian market.

MSC financed the purchase of BDNA utilizing both existing cash and a new credit facility, which was closed simultaneously with the acquisition. The new credit facility includes a fully drawn $250 million term loan and a $400 million revolver, of which $120 million was drawn at closing to fund the acquisition. As previously announced, run-rate cost synergies are expected to reach $15-$20 million by fiscal 2015. The acquisition is expected to be accretive to cash flow and earnings per diluted share ("EPS"), including synergies and excluding transaction and integration costs, by contributing an expected incremental EPS of $0.15-$0.20 and $0.30-$0.40 in fiscal years 2014 and 2015, respectively.

Erik Gershwind, MSC's President and Chief Executive Officer, commented, "The acquisition of BDNA enables us to provide our mutual customers a deeper inventory management solution, a broader product offering and a larger geographic footprint to help them grow their businesses, increase productivity and reduce their MRO inventory costs.  The addition of so many talented associates from BDNA nearly doubles MSC's existing sales force and tremendously strengthens our future growth opportunities."

Headquartered in Cleveland, Ohio, BDNA is a leading distributor of fasteners and other high margin, low cost consumables with a broad distribution footprint throughout the U.S. and Canada.  BDNA has a strong presence with customers across manufacturing, government, transportation and natural resources end-markets. BDNA specializes in lowering the total cost of their customers' inventory management through storeroom organization and vendor managed inventory. The Business services roughly 31,000 customers with nearly 1,400 associates, including over 800 field sales associates, and offers more than 55,000 SKU's of products.  For calendar year 2012, BDNA generated sales of roughly $300 million.

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Barnes Group Completes the Sale of Its Barnes Distribution North America Business, Provides Supplement with 2008 to 2012 Financial Results Adjusted for Discontinued Operations and Segment Realignment, Updates 2013 Full-Year Guidance

Bristol, CT - Barnes Group Inc. has completed the sale of its Barnes Distribution North America business to MSC Industrial Direct Co., Inc. in a cash transaction for approximately $550 million. After-tax proceeds from the sale of approximately $400 million will be utilized to reduce debt, buyback common shares, invest in profitable growth initiatives including potential acquisitions, and for general corporate purposes.

Barnes Distribution North America (BDNA) is an industry leader in logistical support by providing inventory management, technical sales, and supply chain solutions for maintenance, repair, operating and production supplies. With advanced e-commerce capabilities and other technology-based solutions, BDNA offers a diverse range of service options and innovative solutions to meet customers’ individual needs and improve their overall profitability. BDNA, headquartered in Cleveland, Ohio, has approximately 1,400 employees and had 2012 revenues of approximately $300 million.

MSC Industrial Direct is one of the nation's largest distributors of Metalworking and Maintenance, Repair and Operations (MRO) supplies to industrial customers throughout the United States.

Baird served as the exclusive financial advisor to Barnes Group Inc. on the sale of BDNA. McDermott Will & Emery acted as outside legal counsel on the transaction.

Publishes Financial Supplement of Adjusted Financials for 2008 to 2012

The Company today published a supplement of adjusted historical financial results reflecting the move of BDNA to discontinued operations and the re-segmentation of the business into two reportable segments: Aerospace and Industrial.

As addressed in the Company’s fourth quarter and full-year 2012 earnings release on February 22, 2013, Barnes Group will report BDNA as discontinued operations beginning with the first quarter of 2013. BDNA’s financial results had been reported within the Company’s Distribution segment. In addition, the remaining business within the Distribution segment, Associated Spring Raymond, has been realigned into the Company’s Industrial segment.

The supplement has been compiled to provide financial results for 2008 to 2012 in a comparable manner to how current results of operations will be reported and is available on the investor relations, webcasts and presentations section of the Company’s website at www.bginc.com.

Updates 2013 Full-Year Outlook and US Tax Court Decision

In addition, Barnes Group today updates its 2013 full-year guidance to include the impacts of the completed sale of BDNA and the Company’s previously announced CEO transition.

Barnes Group now expects 2013 revenue from continuing operations to grow 17% to 20% from 2012. GAAP earnings per diluted share from continuing operations are anticipated to be in the range of $1.71 to $1.86. Excluding $10.5 million pre-tax, or $0.12 per share, of non-recurring CEO transition costs associated with the modification of outstanding equity awards to the Company’s former President & CEO, adjusted operating margins are expected to be approximately 14%. Adjusted earnings per diluted share are anticipated to be in the range of $1.83 to $1.98, up 20% to 30% from 2012’s adjusted diluted earnings per share from continuing operations of $1.52.

On April 16, 2013, the U.S. Tax Court rendered an unfavorable decision against the Company, rejecting the Company’s objections to a $16.5 million tax adjustment arising out of an IRS audit for the tax years 2000 through 2002 and imposing penalties. The Company is currently evaluating its options, including appealing the decision. The Company’s guidance does not include any impact on expected earnings or cash flow as a result of the court’s decision.

NON-GAAP FINANCIAL MEASURE RECONCILIATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 
    

Full-Year 2012 Actual

  

Full-Year 2013 Outlook

Diluted Income from Continuing Operations per Share (GAAP)

   

$1.44

  

$1.71

  

to

  

$1.86

             

 

Synventive short-term purchase accounting adjustments

   

0.07

     

-

   

Synventive acquisition transaction costs

   

0.01

     

-

   

CEO transition costs

   

-

  

 

 

 

0.12

 

 

 

             

 

Diluted Income from Continuing Operations per Share as adjusted (Non-GAAP)(1)

   

$1.52

  

$1.83

 

 

to

 

 

$1.98

(1) The Company has excluded short-term purchase accounting adjustments and transaction costs related to its Synventive acquisition in 2012 and CEO transition costs associated with the modification of outstanding equity awards in 2013 from its "as adjusted" financial measurements. Management believes that these adjustments provide the Company and its investors with an indication of our baseline performance excluding items that are not considered to be reflective of our ongoing results. 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 performance. Accordingly, the measurements have limitations depending on their use.

About Barnes Group Inc.

Founded in 1857, Barnes Group Inc. (NYSE: B) is an international aerospace and industrial manufacturer and service provider, serving a wide range of end markets and customers. The products and services provided by Barnes Group are used in far-reaching applications that provide transportation, communication, manufacturing and technology to the world. Barnes Group’s approximately 3,700 dedicated employees, at more than 60 locations worldwide, are committed to achieving consistent and sustainable profitable growth. For more information, visit www.BGInc.com.

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