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"With the financial results we generated in the first quarter, 2004 is off to a strong start, and the momentum improved as we progressed through the quarter," said Edmund M. Carpenter, Barnes Group Inc.'s president and CEO. "Profitability at Barnes Distribution came in a bit ahead of our previous indications, even as the distribution center integration continued to move along, while sales growth at both Barnes Aerospace and Associated Spring significantly exceeded that of their primary end markets," Carpenter added.
Sales at Barnes Distribution were $106.5 million for the quarter ended Mar. 31, 2004, up $12.7 million, or 14%, from $93.8 million in the quarter ended March 31, 2003. Excluding $10.4 million of incremental sales from the Feb. 6, 2003 acquisition of Kar Products and the positive effect of foreign currency translation, organic sales were essentially flat. Barnes Distribution generated operating profit of $4.3 million in the first quarter of 2004, compared with operating profit of $3.2 million in the first quarter of 2003.
The improvement in operating profit was driven primarily by the incremental contribution from Kar Products and synergistic savings recognized from the Kar integration. Partially offsetting these improvements were integration costs of approximately $1.2 million, primarily for temporary labor, overtime and additional freight, as well as a slight reduction in gross margin versus the 2003 period.
"With the distribution center integration now behind us in the U.S., we are focused on driving our fill rates back to the pre-integration level. Although we made significant progress in that regard during the first quarter, more work remains to be done. In our Canadian operations, we remain on schedule for the opening of a new distribution center in the Ontario province during the month of May," Carpenter stated. "Our strategic growth initiatives continued to generate solid gains, as sales from newly-opened national accounts, e-commerce platforms and Tier 2 relationships with other industrial distributors climbed to $6.4 million in the first quarter, up from $3.6 million a year ago," Carpenter added.
Sales at Associated Spring were $93.5 million for the quarter ended March 31, 2004, up 10 percent from $85.1 million in the quarter ended March 31, 2003. Foreign currency translation positively impacted sales in the first quarter of 2004 by approximately $3.0 million. The increase in sales reflected growth in all market segments, particularly in heavy truck, where sales grew 24 percent and nitrogen gas products, where sales, net of foreign currency translation effect, grew approximately 13 percent.
Associated Spring's operating profit was $7.4 million for the first quarter of 2004, down from $7.6 million in the first quarter of 2003. Operating profit was negatively impacted in the 2004 period by increased spending on lean initiatives, overtime and other measures to address capacity issues in two North American plants, a slight reduction in gross margin, and higher medical and pension expenses. These negatives were partially offset by the profit contribution from the increased organic sales volume.
Carpenter commented, "This marked the first quarter in recent memory that we can report organic sales growth in all of Associated Spring's market segments. In addition to heavy truck and nitrogen gas springs, we also saw modest sales growth in products for light vehicles, even as North American production was flat. And for the first time since 2000, we saw growth in our telecomm and electronics product segment, which we are hopeful is indicative of a potential turn in those sectors."