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 June 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
August 2, 1994 - 6,357,065
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
--- ---
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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 Six months ended
June 30 June 30
------------------ -----------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $143,157 $127,534 $285,259 $254,530
Cost of sales 91,770 80,432 182,472 161,577
Selling and admin-
istrative expenses 41,763 40,342 84,365 81,331
Plant closings and
restructurings -- -- -- 3,400
-------- -------- -------- --------
133,533 120,774 266,837 246,308
-------- -------- -------- --------
Operating income 9,624 6,760 18,422 8,222
Other income 1,142 825 2,263 1,846
Interest expense 1,296 1,290 2,676 2,581
Other expenses 743 963 1,124 1,642
-------- -------- -------- --------
Income before income
taxes 8,727 5,332 16,885 5,845
Income taxes 3,204 2,425 6,467 2,620
-------- -------- -------- --------
Net income $ 5,523 $ 2,907 $ 10,418 $ 3,225
======== ======== ======== ========
Per common share:
Net Income $ .87 $ .47 $ 1.65 $ .52
Dividends .35 .35 .70 .70
Average common shares
outstanding 6,327,109 6,238,915 6,311,701 6,231,979
<FN>
See accompanying notes.
</TABLE>
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<TABLE>
BARNES GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<CAPTION>
ASSETS June 30, December 31,
1994 1993
-------- -----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 16,650 $ 24,129
Accounts receivable, less allowances
(1994 - $2,508; 1993 - $2,217) 92,661 77,651
Inventories
Finished goods 27,732 25,527
Work-in-process 13,922 17,117
Raw materials and supplies 7,798 7,847
-------- --------
49,452 50,491
Deferred income taxes and prepaid
expenses 16,741 16,469
-------- --------
Total current assets 175,504 168,740
Deferred income taxes 22,767 22,277
Property, plant and equipment 267,599 256,606
Less accumulated depreciation 160,724 153,563
-------- --------
106,875 103,043
Goodwill, net 20,907 21,201
Other assets 17,438 18,035
-------- --------
$343,491 $333,296
======== ========
<FN>
See accompanying notes.
</TABLE>
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<TABLE>
BARNES GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, December 31,
1994 1993
-------- ------------
<S> <C> <C>
Current liabilities
Notes and overdrafts payable $ 7,849 $ 10,553
Accounts payable 31,516 27,165
Accrued liabilities 43,079 42,003
Guaranteed ESOP obligation - current 2,088 2,008
-------- --------
Total current liabilities 84,532 81,729
Long-term debt 70,000 70,000
Guaranteed ESOP obligation 10,946 12,011
Deferred income taxes and other
liabilities 11,652 12,369
Accrued retirement benefits 66,368 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 28,129 28,745
Retained earnings 113,756 107,668
Foreign currency translation
adjustments (7,153) (6,464)
Treasury stock at cost,
1994 - 990,873 shares
1993 - 1,052,440 shares (37,442) (39,818)
-------- --------
113,027 105,868
Guaranteed ESOP obligation (13,034) (14,019)
-------- --------
99,993 91,849
-------- --------
$343,491 $333,296
======== ========
<FN>
See accompanying notes.
</TABLE>
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BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months ended June 30, 1994 and 1993
(Dollars in thousands)
(Unaudited)
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Operating Activities
Net income $ 10,418 $ 3,225
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 12,351 12,259
Gain on sale of property, plant and equipment (149) (176)
Translation losses 597 834
Changes in assets and liabilities:
Accounts receivable (14,588) (5,962)
Inventories 969 (3,252)
Accounts payable and accrued liabilities 4,022 3,144
Deferred income taxes 625 139
Other liabilities and assets (42) (2,290)
-------- --------
Net Cash Provided by Operating Activities 14,203 7,921
Investing Activities
Proceeds from sale of property,
plant and equipment 1,338 2,484
Capital expenditures (14,886) (12,090)
Other (1,252) (1,694)
-------- --------
Net Cash Used by Investing Activities (14,800) (11,300)
Financing Activities
Net decrease in notes and overdrafts payable (2,704) (4,099)
Proceeds from the issuance of common stock 1,522 675
Dividends paid (4,419) (4,363)
-------- --------
Net Cash Used by Financing Activities (5,601) (7,787)
Effect of exchange rate changes on cash flows (1,281) (852)
-------- --------
Decrease in cash and cash equivalents (7,479) (12,018)
Cash and cash equivalents at beginning of period 24,129 39,068
-------- --------
Cash and cash equivalents at end of period $ 16,650 $ 27,050
======== ========
<FN>
See accompanying notes.
</TABLE>
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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 six-month period
ended June 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, 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 Jet Die
fabrication unit.
3. Contingency
In December, 1991, the company was notified by McDonnell Douglas
Corporation that they 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 first half of 1994 effective tax rate was 38%
compared to 45% for the first six months of 1993. The
percentage of foreign losses, for which there are no tax
benefits, to consolidated income before income taxes was
significantly smaller in 1994 than 1993, resulting in a lower
effective tax rate in 1994. In addition, the effective tax rate
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was positively impacted in 1994 by the higher level of income 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 first half sales were $285.3 million, up 12% from
$254.5 million in 1993. Second quarter 1994 sales were also up 12% to
$143.2 million from the 1993 level of $127.5 million. These results
reflect continued sales gains at Associated Spring and improvements in
Bowman Distribution.
Associated Spring's 1994 first half sales increased 16% to $137.3
million from $118.0 million in 1993. Second quarter sales were $69.8
million, up 15% from a year ago. Growth was driven by increased
penetration of a strong automotive market and by significant increases
in sales to industrial markets, particularly electronics.
Bowman Distribution's 1994 sales were up 12% for both the first half
and second quarter over the same 1993 periods. First half sales in
1994 were $108.9 million versus $96.8 million in 1993, and $54.6
million in the second quarter of 1994 versus $48.7 million in the
second quarter of 1993. The 1994 sales gains were a result of steady
improvement in the Bowman U.S. industrial maintenance supply business.
Barnes Aerospace 1994 first half sales were $39.3 million, down 3%
from 1993 sales of $40.3 million. For the second quarter of 1994,
sales of $18.8 million were slightly ahead of last year. Barnes
Aerospace sales continue to be impacted by soft commercial and
military markets.
Operating Income
----------------
Operating income in 1994 improved substantially over the same 1993
periods. Operating income for the first half of 1993 included a first
quarter charge of $3.4 million for the consolidation of the Aerospace
machining business. After removing the effect of this charge,
operating income for the first half of 1994 increased 59%, to $18.4
million from $11.6 million in 1993. For the second quarter of 1994,
operating income of $9.6 million rose 42% from the prior year level.
Associated Spring sales volume increase, as well as cost reductions
and productivity improvements, contributed substantially to the
increase in operating income. Bowman Distribution's operating income
also improved, the result of higher sales and expense reductions.
Barnes Aerospace, despite slightly lower sales, reported a
significantly reduced operating loss for both the first half and
second quarter when compared to the comparable 1993 period. This is
attributed to the consolidation of manufacturing facilities, workforce
reductions and improvements in manufacturing efficiencies. Of its
three businesses, only Advanced Fabrications reported a year over year
decline in results. Significant efforts are being made to improve the
performance of this business.
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Selling and administrative expenses, expressed as a ratio to sales,
decreased when compared to 1993, a result of the increased sales
volume in 1994 combined with strong expense controls.
Non-operating Income/Expense
----------------------------
Other income increased in the first half of 1994 when compared to 1993
primarily due to higher equity income from NASCO, the company's joint
venture.
The decrease in other expenses in 1994 compared to 1993 was due to
lower foreign exchange losses.
Cash Flows
----------
In the first half of 1994, operating activities provided $14.2 million
of net cash flow. Strong earnings, adjusted for depreciation and
amortization, and a increase in accounts payable and accrued
liabilities more than offset an increase in accounts receivable. The
increase in accounts receivable resulted from sales growth at
Associated Spring and Bowman Distribution. Net cash provided by
operating activities was substantially higher then in the same 1993
period, due primarily to higher earnings.
Net cash used by investing activities in 1994 was $3.5 million higher
then in 1993 due primarily to higher capital expenditures. Associated
Spring's strategy to boost productivity and product quality through
the acquisition of state-of-the-art equipment and technology is the
main driver of the capital expenditure increase.
Net cash used by financing activities in the first half of 1994 was
$5.6 million compared to $7.8 million in 1993. In both years, cash
was used to reduce notes and overdrafts payable and to fund dividend
payments.
Liquidity and Capital Resources
-------------------------------
The company's liquidity, measured in terms of working capital,
increased $4.0 million to $91.0 million at June 30, 1994 from the
December 31, 1993 level. The current ratio approximated 2.1 at June
30, 1994 and December 31, 1993.
The ratio of interest bearing debt to total capitalization was down
slightly to 29.0% at June 30, 1994 from 30.5% at December 31, 1993.
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 June 30, 1994, the company
had $100.0 million of borrowing capacity available under its revolving
credit agreement.
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In addition, the company maintains approximately $200.0 million in
uncommitted short-term bank credit lines, of which $30.8 million was
borrowed at June 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
--------------------------------
One report on Form 8-K, Item 4, Change in Certifying
Accountants, was filed during the quarter ended June 30,
1994. The report was dated April 11, 1994 and addressed the
selection of Price Waterhouse by stockholders as the new
certifying accountants at the April 6, 1994 Annual Meeting.
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 August 8, 1994 By John E. Besser
--------------- ---------------------------
John E. Besser
Senior Vice President
Finance and Law
Date August 8, 1994 By George J. Crowley
--------------- ---------------------------
George J. Crowley
Vice President, Controller
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