UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM l0-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 March 31, 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
May 9, 1994 - 6,321,702
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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<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BARNES GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three months ended March 31, 1994 and 1993
(Dollars in thousands, except per share data)
(Unaudited)
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Net sales $142,102 $126,996
Cost of sales 90,702 81,145
Selling and administrative expenses 42,602 40,989
Plant closings and restructurings -- 3,400
-------- --------
133,304 125,534
-------- --------
Operating income 8,798 1,462
Other income 1,120 1,021
Interest expense 1,380 1,291
Other expenses 380 679
-------- --------
Income before income taxes 8,158 513
Income taxes 3,263 195
-------- --------
Net income $ 4,895 $ 318
======== ========
Per common share:
Net Income $ .78 $ .05
Dividends .35 .35
Average common shares outstanding 6,296,121 6,224,967
<FN>
See accompanying notes.
</TABLE>
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<TABLE>
BARNES GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<CAPTION>
ASSETS March 31, December 31,
1994 1993
-------- -----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 18,048 $ 24,129
Accounts receivable, less allowances
(1994 - $2,430; 1993 - $2,217) 91,202 77,651
Inventories
Finished goods 25,404 25,527
Work-in-process 14,273 17,117
Raw materials and supplies 7,539 7,847
-------- --------
47,216 50,491
Deferred income taxes and prepaid
expenses 17,028 16,469
-------- --------
Total current assets 173,494 168,740
Deferred income taxes 22,349 22,277
Property, plant and equipment 261,902 256,606
Less accumulated depreciation 157,474 153,563
-------- --------
104,428 103,043
Goodwill, net 21,054 21,201
Other assets 17,645 18,035
-------- --------
$338,970 $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 March 31, December 31,
1994 1993
-------- -----------
<S> <C> <C>
Current liabilities
Notes and overdrafts payable $ 15,837 $ 10,553
Accounts payable 27,853 27,165
Accrued liabilities 38,720 42,003
Guaranteed ESOP obligation - current 2,048 2,008
-------- --------
Total current liabilities 84,458 81,729
Long-term debt 70,000 70,000
Guaranteed ESOP obligation 11,520 12,011
Deferred income taxes and other
liabilities 12,608 12,369
Accrued retirement benefits 66,095 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 28,526 28,745
Retained earnings 110,405 107,668
Foreign currency translation
adjustments (7,634) (6,464)
Treasury stock at cost,
1994 - 1,035,830 shares
1993 - 1,052,440 shares (39,177) (39,818)
-------- --------
107,857 105,868
Guaranteed ESOP obligation (13,568) (14,019)
-------- --------
94,289 91,849
-------- --------
$338,970 $333,296
======== ========
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months ended March 31, 1994 and 1993
(Dollars in thousands)
(Unaudited)
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Operating Activities
Net income $ 4,895 $ 318
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 6,545 6,120
Gain on sale of property, plant and equipment (9) (33)
Translation losses 316 309
Changes in operating assets and liabilities:
Accounts receivable (13,256) (7,638)
Inventories 2,999 (1,822)
Accounts payable and accrued liabilities (3,217) 450
Deferred income taxes 13 (1,103)
Other liabilities and assets 329 (929)
------- -------
Net Cash Used by Operating Activities (1,385) (4,328)
Investing Activities
Proceeds from sale of property,
plant and equipment 933 325
Capital expenditures (7,322) (5,558)
Other (931) (746)
------- -------
Net Cash Used by Investing Activities (7,320) (5,979)
Financing Activities
Net increase (decrease) in notes and
overdrafts payable 5,284 (4,947)
Proceeds from the issuance of common stock 393 381
Dividends paid (2,203) (2,179)
------- -------
Net Cash Provided (Used) by Financing
Activities 3,474 (6,745)
Effect of exchange rate changes on cash flows (850) (151)
------- -------
Decrease in cash and cash equivalents (6,081) (17,203)
Cash and cash equivalents at beginning of period 24,129 39,068
------- -------
Cash and cash equivalents at end of period $18,048 $21,865
======= =======
<FN>
See accompanying notes.
</TABLE>
<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 three-month period ended
March 31, 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 McDonnell Douglas was terminating for default an
$8.2 million contract with the company's Flameco division. In the
fourth quarter 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.
<PAGE>
Item 2. Management's Discussion and Analysis
Sales
-----
For the first quarter 1994 net sales were $142.1 million, a gain of 12%
from the 1993 level of $127.0 million. The improvement was a result of
sales increases reported by the Associated Spring and Bowman Distribution
groups, partially offset by a sales decline at the Aerospace group.
Associated Spring's sales in 1994 were up 18% to $67.6 million, over a
strong 1993 first quarter of $57.5 million. Virtually every operating unit
reported sales improvements. Sales gains were made in electronics and
other industrial markets, but the strong sales performance was due
primarily to increased sales of engine and transmission parts for cars and
trucks.
Bowman Distribution's sales for the first quarter of 1994 rose 13% to $54.3
million from a depressed sales level of $48.1 million reported in the same
1993 period. Both Bowman U.S. and Bowman Europe reported sales increases
over the prior year, and while Bowman Canada's sales in local currency
increased, a weakening in the Canadian dollar exchange rate caused a small
decline in sales as reported in U.S. dollars.
Barnes Aerospace reported $20.4 million of sales, a six percent decline
from the first quarter of 1993 level of $21.7 million on mixed results from
the group's operating units. While the machining business reported a
significant sales erosion, the overhaul and repair as well as the advanced
fabrications businesses, reported increased quarter over quarter sales.
Operating Income
----------------
Consolidated operating income for the first three months of 1994 was $8.8
million, compared to $1.5 million for the first quarter of 1993. The 1993
operating income includes a $3.4 million provision to cover the costs of a
plant consolidation and work force reduction at Barnes Aerospace.
Excluding this charge, 1994 first quarter operating income improved 81%
from the comparative 1993 period.
The Associated Spring sales volume increase contributed significantly to
this improvement. Additionally, the benefits of improved manufacturing
efficiencies and plant consolidations favorably impacted operating costs.
Bowman Distribution's operating income declined slightly in the first
quarter of 1994 compared to the same 1993 period. The gain made in the
North American market was offset by higher costs associated with the
expansion of Bowman's industrial maintenance business in Europe.
Barnes Aerospace, despite the decrease in sales volume, reported first
quarter 1994 operating income compared to a loss in last year's first
quarter. The turnaround is partially a result of consolidating
manufacturing facilities, reducing workforce levels and productivity
improvements.
<PAGE>
Non-operating Income/Expense
----------------------------
Interest expense in 1994 increased slightly due to increased borrowings and
higher interest rates.
The decrease in other expenses in 1994 compared to 1993 was due primarily
to a foreign exchange loss of $0.4 million reported in 1993 compared to a
small gain in 1994 reported in other income.
Cash Flows
----------
In the first quarter of 1994, operating activities used $1.4 million of
cash. Strong earnings after adjustments for depreciation and amortization
were not sufficient to offset the cash required to fund an increase in
accounts receivable. Increased sales at Associated Spring and Bowman
Distribution were the primary reason for the growth in accounts receivable.
Net cash used by operating activities decreased substantially in 1994's
first quarter when compared to 1993's. The improvement primarily reflects
higher 1994 earnings.
Net cash used by investing activities increased $1.3 million in 1994 over
1993 reflecting higher levels of capital expenditures. The major driver of
the capital expenditure increase is Associated Spring, which continues its
strategy of investing in state-of-the-art equipment and technology to
increase its productivity and product quality.
Net cash provided by financing activities in the first quarter of 1994 was
$3.5 million compared to a net use of cash of $6.7 million for the same
period last year. In 1994, the increase in notes and overdrafts payable
funded the cash requirements of both operating and investing activities.
In the first quarter of 1993, notes and overdrafts payable declined as the
company utilized part of the proceeds from the sale of its Pioneer
Distribution business at the end of 1992 to reduce short-term financing.
Liquidity and Capital Resources
-------------------------------
The company's liquidity, measured in terms of working capital, increased
$2.0 million to $89.0 million at March 31, 1994 from the December 31, 1993
level. The current ratio approximated 2.0 at March 31, 1994 and December
31, 1993.
The ratio of interest bearing debt to total capitalization was up slightly
to 31.5% at March 31, 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 March 31, 1994, the Company had $100.0
million of borrowing capacity available under its Revolving Credit
Agreement. In addition, the company maintains approximately $194.0 million
in uncommitted short-term bank credit lines, of which $36.5 million was
borrowed at March 31, 1994. The company believes these credit facilities
coupled with cash generated from operations are adequate for its
anticipated future requirements.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of matters to Vote of Security Holders
-------------------------------------------------
(a) The Annual Meeting of the registrant's stockholders was held on
April 6, 1994. Proxies for the meeting were solicited pursuant
to Regulation 14(a).
(c) (1) The stockholders approved the selection of Price Waterhouse as
the company's independent auditors for 1994. The proposal was
adopted as 5,438,534 shares voted for, 57,679 shares voted
against, 41,005 shares abstained and there were no not voted
shares.
(2) The stockholders acted upon the proposal to amend the company's
1991 Stock Incentive Plan to increase from one year to five years
the termination of an optionee's options after termination of
employment if termination is a result of death or disability, or
if the optionee is age 55 or older upon termination; provided,
however, that (a) if the optionee's employment is terminated
upon the request of the company, the option may be terminated by
the Compensation Committee of the Board of Directors, effective
90 days after the termination of employment, and (b) the
Committee may elect a shorter termination for any specific option
grant. The proposal was adopted as 4,931,912 shares voted for,
524,792 shares voted against, 80,514 shares abstained and there
were no not voted shares.
(3) The stockholders defeated a proposal to limit bonus compensation
to 25% of annual base salary for executive officers. The number
of shares voted for the proposal was 688,532, 4,558,763 shares
voted against, 139,984 shares abstained and 149,939 shares were
not voted.
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 March 31, 1994. The report
was dated March 4, 1994 and addressed the proposal to
stockholders to approve the selection of Price Waterhouse 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 May 12, 1994 By
------------ --------------------------------------
John E. Besser
Senior Vice President-Finance and Law
Date May 12, 1994 By
------------ --------------------------------------
George J. Crowley
Vice President, Controller
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