Bio-Rad Laboratories, Inc. (NYSE: BIO and BIOb), was founded in 1952 in Berkeley, California. The company was initially engaged in the development and production of specialty chemicals used in biochemical, pharmaceutical, and other life science research applications. Today, Bio-Rad manufactures and supplies life science research, healthcare, analytical chemistry, and other markets with products and systems used to separate complex chemical and biological materials and to identify, analyze, and purify their components[1].
Bio-Rad operates in two industry segments: Life Science Research and Clinical Diagnostics. Both segments operate worldwide. Bio-Rad’s customers include hospitals, universities, major research institutions, and biotechnology and pharmaceutical companies. Bio-Rad’s headquarters are in Hercules, California. The company has offices and facilities worldwide and more than 6,500 employees. Bio-Rad had revenues of more than $1.7 billion in 2008. The company has been listed on the New York Stock Exchange since October 24, 2008. Before that, Bio-Rad was listed on the American Stock Exchange.


Barnes Group (B) makes parts used in a range of manufacturing and industrial applications, from parts for jet engines to mechanical springs. The company's customers are found in markets ranging from farm equipment to medical devices and include General Electric, Rolls-Royce, and the U.S. Department of Defense.

The company's international exposure is larger than its international sales, because a good portion of Barnes Group's sales to its biggest client, GE, are destined for international end markets even though they are booked as domestic sales.[1] General Electric and its affiliates accounted for 21% of the company’s total sales in 2009.[2]

A number of Barnes Group's major customers operate in the transportation and aerospace markets, exposing the firm to two cyclical industries[3]. Lower consumer demand for the products of Barnes Group's customers means lower production levels and less demand for the parts used to make those products. Barnes Group is making efforts to limit its exposure to lower margin businesses in the auto industry. Demand for airplanes has remained strong in spite of the tougher economic environment and rising fuel costs.

Barnes Group has a large backlog ($428 million at the end of 2009) which partially insulates the company from economic shocks.[2]

Company Overview

The products and services provided by Barnes Group are critical components for far-reaching applications in transportation, communication, manufacturing and technology.

Business and Financial Metrics
Contents
1 Company Overview
1.1 Business and Financial Metrics
1.2 Business Segments[2]
1.2.1 Logistics and Manufacturing Services
1.2.2 Precision Components
2 Trends and Forces
2.1 Barnes Group's sales are affected by the strength of the dollar
2.2 Barnes Group's major customers operate in cyclical industries
2.3 Barnes Group faces client concentration issues
3 Competition
4 References
First Quarter 2010 Results[4]

Barnes reported net income of $11.8 million, or $0.21 per diluted share, compared to $11.5 million, or $0.22 per diluted share in the first quarter of 2009. Barnes Group's first quarter 2010 sales totaled $278.1 million, an increase of 6 percent from $262.2 million in the first quarter of 2009.

Business Segments[2]
Barnes Group has two business segments: Logistics and Manufacturing Services and Precision Components.

Logistics and Manufacturing Services
Logistics and Manufacturing Services provides value-added logistical support and repair services, including inventory management, technical sales, and supply chain solutions for maintenance, repair, operating, and production supplies and services. Repair services provided include the manufacturing of spare parts for the refurbishment and repair of highly engineered components and assemblies for commercial and military aviation

Products and services from this segment are available in more than 32 countries.

The aerospace aftermarket business competes with aerospace original equipment manufacturers (“OEMs”), service centers of major commercial airlines and other independent service companies for the repair and overhaul of turbine engine components.

In 2009 sales by Logistics and Manufacturing Services to its largest customer, General Electric Company, accounted for approximately 16% of its total sales and sales to its next two largest customers accounted for approximately 8% of its total sales.

Precision Components
Precision Components is a global supplier of engineered components for critical applications focused on providing solutions for a diverse industrial, transportation and aerospace customer base. It is equipped to produce virtually every type of precision spring, from fine hairsprings for electronics and instruments to large heavy-duty springs for machinery as well as precision-machined and fabricated components and assemblies for OEM turbine engine, airframe and industrial gas turbine builders throughout the world, and the military. It is also the largest manufacturer and supplier of precision mechanical springs, compressor reed valves and nitrogen gas products based in North America and among the world’s largest manufacturers of precision mechanical products and nitrogen gas products. Precision Components also manufactures high-precision punched and fine-blanked components used in transportation and industrial applications, nitrogen gas springs and manifold systems used to precisely control stamping presses, and retention rings that position parts on a shaft or other axis.


Precision Components competes with a broad base of large and small companies engaged in the manufacture and sale of custom metal components and assemblies while the aerospace manufacturing business competes with both the leading jet engine OEMs and a large number of machining and fabrication companies.

Sales by Precision Components to its largest customer, General Electric, accounted for approximately 27% of its sales in 2009. Sales to its next five largest customers in 2009 accounted for approximately 18% of its total sales.

Trends and Forces

Barnes Group's sales are affected by the strength of the dollar
With 40% of sales coming from outside the U.S., Barnes Group's earnings are greatly impacted by the relative strength of the dollar[5]. Barnes Group owns manufacturing, sales and distribution facilities around the world, and the majority of its foreign operations use the local currency as their functional currency. These include the Brazilian real, British pound sterling, Canadian dollar, Chinese yuan, Euro, Korean won, Mexican peso, Singapore dollar, Swedish krona, Swiss franc and Thai baht. Barnes Group does not engage in speculative currency hedging.

Demand for Barnes Group products internationally is understated because a good portion of Barnes Group's sales to its biggest client, GE, although counting as domestic sales, is actually for end markets that are international. If international sales growth continues to outpace domestic sales growth, a weakening dollar will have favorable results on the company's earnings.

Barnes Group's major customers operate in cyclical industries
A substantial portion of Barnes Group's customers (AirBus, Lockheed Martin (LMT), Volvo, Goodrich Corporation, etc) are found in the transportation and aerospace markets, two generally cyclical industries[6]. When consumer demand is high, production levels rise along with demand for Barnes Group's engineered components. Conversely, when consumer demand is weak, production levels fall along with demand for the parts used to make those goods. In the transportation market, automakers and heavy-duty trucks have seen softer demand as gas prices continue to climb and consumers tighten their spending. This in turn translates into lower demand from auto manufacturers for Barnes Group's products. However, demand for airplanes has remained fairly strong even given the current economic downturn and rising fuel prices, powered mainly by increased demand from countries like China and India.

Barnes Group faces client concentration issues
Although Barnes Group's customer list numbers in the hundreds, a significant portion of its earnings depend on a small number of core customers. General Electric and its affiliates accounted for 21% of the company’s total sales in 2009.[2] Additionally, 20% of BI's sales were to its three largest customers[7]. A loss of any one of these core customers will significantly impair the company's earnings.

Competition

Barnes Group faces numerous competitors in each of its business segments. BA competes with leading jet engine manufacturers and a number of machining and fabrication companies like Ladish (LDSH) and Triumph Group (TGI). BD's competitors include Fastenal Company (FAST), Lawson Products (LAWS), W.W. Grainger (GWW) and MSC Industrial Direct Company (MSM). BI's closest competition is from firms that manufacture and sell custom metal components like NHK Spring and Chuo Spring.

Barnes Group vs. Competitors
Company Revenue (millions USD) Net Income (millions USD) Active Customers Orders Entered Backlog (millions USD) New Orders (millions USD)
Barnes Group $1,440[8] $101[9] $580[10]
Ladish (LDSH) $425[11] $32[12] $611[13] $534[14]
Triumph Group (TGI) $1,151[15] $67[16] $1,278[17]
W.W. Grainger $6,418[18] $420[19]
 
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