UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM lO-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1994
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For transition period from ____________________
to ____________________
Commission File Number 1-4801
BARNES GROUP INC.
(a Delaware Corporation)
I.R.S. Employer Identification No. 06-0247840
123 Main Street, Bristol, Connecticut 06010
Telephone Number (203) 583-7070
Number of common shares outstanding at
November 8, 1994 - 6,423,238
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
--- ---
<PAGE>
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BARNES GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
<CAPTION>
Three months ended Nine months ended
September 30 September 30
------------------ -----------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $140,261 $123,103 $425,520 $377,633
Cost of sales 89,688 79,259 272,160 240,836
Selling and admin-
istrative expenses 40,401 39,012 124,766 120,343
Plant closings and
restructurings -- -- -- 3,400
-------- -------- -------- --------
130,089 118,271 396,926 364,579
-------- -------- -------- --------
Operating income 10,172 4,832 28,594 13,054
Other income 1,056 957 3,319 2,803
Interest expense 1,320 1,256 3,996 3,837
Other expenses 865 490 1,989 2,132
-------- -------- -------- --------
Income before income
taxes 9,043 4,043 25,928 9,888
Income taxes 3,671 1,276 10,138 3,896
-------- -------- -------- --------
Net income $ 5,372 $ 2,767 $ 15,790 $ 5,992
======== ======== ======== ========
Per common share:
Net Income $ .84 $ .44 $ 2.49 $ .96
Dividends $ .35 $ .35 $ 1.05 $ 1.05
Average common shares
outstanding 6,371,543 6,259,538 6,331,867 6,241,267
<FN>
See accompanying notes.
</TABLE>
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<PAGE>
<TABLE>
BARNES GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<CAPTION>
September 30, December 31,
1994 1993
------------ -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 19,018 $ 24,129
Accounts receivable, less allowances
(1994 - $2,834; 1993 - $2,217) 91,635 77,651
Inventories
Finished goods 27,948 25,527
Work-in-process 17,779 17,117
Raw materials and supplies 8,030 7,847
-------- --------
53,757 50,491
Deferred income taxes and prepaid
expenses 16,591 16,469
-------- --------
Total current assets 181,001 168,740
Deferred income taxes 23,438 22,277
Property, plant and equipment 272,906 256,606
Less accumulated depreciation 164,167 153,563
-------- --------
108,739 103,043
Goodwill, net 20,761 21,201
Other assets 16,972 18,035
-------- --------
$350,911 $333,296
======== ========
<FN>
See accompanying notes.
</TABLE>
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<PAGE>
<TABLE>
BARNES GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<CAPTION>
September 30, December 31,
1994 1993
------------ -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes and overdrafts payable $ 7,019 $ 10,553
Accounts payable 31,387 27,165
Accrued liabilities 45,575 42,003
Guaranteed ESOP obligation - current 2,130 2,008
-------- --------
Total current liabilities 86,111 81,729
Long-term debt 70,000 70,000
Guaranteed ESOP obligation 10,398 12,011
Deferred income taxes and other
liabilities 11,327 12,369
Accrued retirement benefits 66,572 65,338
Stockholders' equity
Common stock - par value $1.00 per share
Authorized: 20,000,000 shares
Issued: 7,345,923 shares
stated at 15,737 15,737
Additional paid-in capital 27,901 28,745
Retained earnings 116,935 107,668
Foreign currency translation
adjustments (5,870) (6,464)
Treasury stock at cost,
1994 - 944,811 shares
1993 - 1,052,440 shares (35,672) (39,818)
-------- --------
119,031 105,868
Guaranteed ESOP obligation (12,528) (14,019)
-------- --------
106,503 91,849
-------- --------
$350,911 $333,296
======== ========
<FN>
See accompanying notes.
</TABLE>
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<TABLE>
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months ended September 30, 1994 and 1993
(Dollars in thousands)
(Unaudited)
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Operating Activities
Net income $ 15,790 $ 5,992
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 18,456 17,895
Gain on sale of property, plant and equipment (176) (443)
Translation losses 490 1,195
Changes in assets and liabilities:
Accounts receivable (15,247) (7,767)
Inventories (3,028) (1,487)
Accounts payable and accrued liabilities 8,695 (965)
Deferred income taxes 81 946
Other liabilities and assets (921) (3,012)
-------- --------
Net Cash Provided by Operating Activities 24,140 12,354
Investing Activities
Proceeds from sale of property,
plant and equipment 2,647 3,604
Capital expenditures (21,913) (17,973)
Other (1,754) (2,292)
-------- ---------
Net Cash Used by Investing Activities (21,020) (16,661)
Financing Activities
Net decrease in notes and overdrafts payable (3,548) (2,870)
Proceeds from the issuance of common stock 3,058 1,046
Dividends paid (6,654) (6,554)
-------- --------
Net Cash Used by Financing Activities (7,144) (8,378)
Effect of exchange rate changes on cash flows (1,087) (2,090)
-------- --------
Decrease in cash and cash equivalents (5,111) (14,775)
Cash and cash equivalents at beginning of period 24,129 39,068
-------- --------
Cash and cash equivalents at end of period $ 19,018 $ 24,293
======== ========
<FN>
See accompanying notes.
</TABLE>
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<PAGE>
Notes to Condensed Consolidated Financial Statements:
1. Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. They do not include all information and
footnotes required by generally accepted accounting principles
for complete financial statements. For additional information,
please refer to the consolidated financial statements and
footnotes included in the company's Annual Report on Form 10-K
for the year ended December 31, 1993. In the opinion of
management, all adjustments, including normal recurring accruals
considered necessary for a fair presentation, have been
included. All material, non-recurring accruals and adjustments
are disclosed below. Operating results for the nine-month
period ended September 30, 1994 are not necessarily indicative
of the results that may be expected for the year ending December
31, 1994.
2. Plant closings and restructurings
In the first quarter of 1993, the company took a pre-tax charge
of $3.4 million, or 33 cents per share (net of tax benefits),
related to a consolidation in its Aerospace business segment.
The consolidation involved moving the Central Metals Products
division from a leased facility in East Windsor, CT to owned
space at the Windsor Manufacturing division in Windsor, CT and
an associated reduction in the workforce. The charge also
provided for a reduction in employment at its fabrication units.
3. Contingency
In December, 1991, the company was notified that McDonnell
Douglas Corp. was terminating for default an $8.2 million
contract with the company's Flameco division. In the fourth
quarter of 1992, the company wrote off $4.0 million of net
assets related to this contract. The company believes it has
legitimate defenses to the default claim. While no reasonable
estimate of possible loss or range of loss can be made at this
time, management believes that it is unlikely that the ultimate
resolution of this dispute will have a material effect on future
results of operations of the company. In management's opinion,
the ultimate resolution of this dispute, regardless of the
outcome, will not have a material effect on the financial
position of the company.
4. Income Taxes
The company's effective tax rates for the first nine months of
both 1994 and 1993 were approximately 39%. In the third
quarter of 1993, the company recorded a tax benefit of $800,000,
resulting from the revaluation of deferred tax assets retated to
an increase in the federal tax rate applicable to corporations.
Without this tax benefit in 1993, the rate would have been 47%.
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<PAGE>
The 1994 effective rate (39%), compared to the 1993 rate without
the $800,000 tax benefit (47%), was lower primarily because
foreign losses, for which there are no tax benefits, comprise a
much smaller percentage of consolidated income before income
taxes in 1994 than 1993. Also contributing to the lower
effective tax rate in 1994 is a higher level of income in 1994
in certain foreign tax jurisdictions where the tax rate is
lower than the U.S. federal statutory income tax rate.
Item 2. Management's Discussion and Analysis
Sales
-----
The company's 1994 nine months sales were $425.5 million, up 13% from
$377.6 million in 1993. Third quarter 1994 sales were up 14% to
$140.3 million from the third quarter of 1993 level of $123.1
million. These results reflect continued sales gains by
Associated Spring's worldwide operations and at Bowman.
Associated Spring's 1994 first nine month sales increased 18% to
$205.6 million from $174.0 million in 1993. Third quarter sales were
$68.3 million, up 22% from last year's $56.0 million. Sales were
strong in all market sectors, especially transportation and
electronics.
Bowman Distribution's sales were up 11% for the first nine months of
1994 to $162.7 million from 1993's level of $145.9 million. Third
quarter sales were $53.7 million, up 9% from $49.2 million in 1993.
The 1994 sales gains were primarily a result of the progress made
in its U.S. industrial maintenance supply business.
Barnes Aerospace 1994 nine month sales were down slightly to $57.7
million versus $58.4 million in 1993. Third quarter sales improved
however to $18.4 million from $18.1 million in 1993's third quarter.
The Aerospace segment continues to suffer from soft commercial and
military markets.
Operating Income
----------------
Operating income in 1994 improved substantially over the same 1993
periods. 1993's operating income included a first quarter provision
of $3.4 million for the consolidation of the Aerospace machining
business. Eliminating the effect of this provision, operating
income for the first nine months of 1994 increased 74%, to $28.6
million from $16.5 million in 1993. Operating income of $10.2 mil-
lion for the third quarter of 1994 was $5.3 million higher than 1993.
Both Associated Spring and Bowman Distribution reported significant
improvements in operating income. Associated Spring benefited
significantly from sales volume increases, gains in manufacturing
productivity and tight control of administrative expenses.
-6-
<PAGE>
Bowman Distribution's improvement in operating income in 1994 result-
ed from higher sales volume and from cost cutting. However, the
cost of expansion of the Bowman System business in Europe continues
to dampen overall segment operating income.
Barnes Aerospace sharply reduced its operating losses in 1994.
Consolidation of manufacturing facilities, workforce reductions and
improvements in manufacturing efficiencies all contribued to the
improvement in operating results. However, new project start-up
expenses and excess costs at its advanced fabrication business
partially offset these gains. Additional measures are being taken to
enhance performance in all of the group's operations.
Consolidated selling and administrative expenses, expressed as a
ratio to sales, decreased in 1994 compared to 1993 as a result of
excellent expence control.
Non-operating Income/Expense
----------------------------
Other income in 1994 increased over 1993 primarily due to an increase
in interest income and an increase in equity income from NASCO, the
company jointly-owned by Barnes Group and NHK Ltd of Japan.
The primary reason for the decrease in other expenses for the first
nine months of 1994 compared to 1993 was lower foreign exchange
losses.
Cash Flows
----------
In the first three quarters of 1994, operating activities provided
$24.1 million of net cash flow, a substantial increase over the $12.4
million provided in the same 1993 period. The improvement was due to
the company's strong earnings in 1994. The higher level of
receivables, payables and accrued liabilities is a result of sales
growth at Associated Spring and Bowman Distribution in 1994.
Net cash used by investing activities in 1994 increased $4.4 million
over 1993 due to increased capital expenditures at Associated
Spring. These expenditures are primarily for state-of-the-art
equipment that will increase both productivity and product quality
and enhance the group's competitiveness in the world market.
Financing activities in both 1994 and 1993 used cash to reduce notes
and overdrafts payable and to fund dividend payments, partially
offset by proceeds from the issuance of common stock.
Liquidity and Capital Resources
-------------------------------
The company's liquidity, measured in terms of working capital,
increased $7.9 million to $94.9 million at September 30, 1994 from
the December 31, 1993 level. The current ratio approximated 2.1 at
September 30, 1994 and December 31, 1993.
The ratio of interest bearing debt to total capitalization was down
slightly to 28% at September 30, 1994 from 31% at December 31, 1993.<PAGE>
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<PAGE>
For this purpose, total capitalization is defined as total interest-
bearing debt, plus deferred income taxes and other long-term
liabilities, accrued retirement benefits and stockholders' equity
excluding the guaranteed ESOP obligation.
The company maintains substantial bank borrowing facilities to
supplement internal cash generation. At September 30, 1994, the
company had $100.0 million of borrowing capacity available under its
revolving credit agreement.
In addition, the company maintains approximately $200.0 million in
uncommitted short-term bank credit lines, of which $26.0 million was
borrowed at September 30, 1994. The company believes these credit
facilities coupled with cash generated from operations are adequate
for its anticipated future requirements.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
No reports on Form 8-K were filed during the quarter ended
September 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Barnes Group Inc.
(Registrant)
Date November 11, 1994 By John E. Besser
----------------- ---------------------------
John E. Besser
Senior Vice President
Finance and Law
Date November 11, 1994 By George J. Crowley
----------------- ---------------------------
George J. Crowley
Vice President, Controller
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 19,018
<SECURITIES> 0
<RECEIVABLES> 91,635
<ALLOWANCES> 2,834
<INVENTORY> 53,757
<CURRENT-ASSETS> 181,001
<PP&E> 272,906
<DEPRECIATION> 164,167
<TOTAL-ASSETS> 350,911
<CURRENT-LIABILITIES> 86,111
<BONDS> 0
<COMMON> 15,737
0
0
<OTHER-SE> 90,766
<TOTAL-LIABILITY-AND-EQUITY> 350,911
<SALES> 425,520
<TOTAL-REVENUES> 425,520
<CGS> 272,160
<TOTAL-COSTS> 272,160
<OTHER-EXPENSES> 124,766
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,996
<INCOME-PRETAX> 25,928
<INCOME-TAX> 10,138
<INCOME-CONTINUING> 15,790
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,790
<EPS-PRIMARY> 2.49
<EPS-DILUTED> 2.49
</TABLE>
