UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-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, 1996
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 (860) 583-7070
Number of common shares outstanding at
July 31, 1996 - 6,660,553
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>
BARNES GROUP INC.
FORM 10-Q INDEX
For the Quarterly period ended June 30, 1996
<CAPTION>
DESCRIPTION PAGES
----------- -----
<S> <S>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Income
for the six months and second quarter
ended June 30, 1996 and 1995 3
Consolidated Balance Sheets as of
June 30, 1996 and December 31, 1995 4-5
Consolidated Statements of Cash Flows
for the six months ended June 30,
1996 and 1995 6
Note to Consolidated Financial
Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-11
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 12
Signatures 12
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<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------ -----------------
1996 1995 1996 1995
-------- -------- --------- -------
<S> <C> <C> <C> <C>
Net sales $152,604 $150,993 $302,695 $309,611
Cost of sales 98,887 96,227 196,060 197,118
Selling and admin-
istrative expenses 39,295 41,356 80,959 84,536
-------- -------- -------- --------
138,182 137,583 277,019 281,654
-------- -------- -------- --------
Operating income 14,422 13,410 25,676 27,957
Other income 1,103 1,144 2,053 2,351
Interest expense 1,300 1,465 2,588 2,892
Other expenses 482 1,082 863 1,530
-------- -------- -------- --------
Income before income
taxes 13,743 12,007 24,278 25,886
Income taxes 5,085 4,660 8,983 10,199
-------- -------- -------- --------
Net income $ 8,658 $ 7,347 $ 15,295 $ 15,687
======== ======== ======== ========
Per common share:
Net income $ 1.30 $ 1.12 $ 2.31 $ 2.41
Dividends .45 .40 .90 .80
Average common shares
outstanding 6,643,064 6,552,198 6,612,849 6,507,918
<FN>
See accompanying note.
</TABLE>
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<TABLE>
BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
ASSETS June 30, December 31,
1996 1995
-------- ------------
(Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 24,442 $ 17,868
Accounts receivable, less allowances
(1996 $3,091; 1995-$3,635) 94,785 86,086
Inventories
Finished goods 30,901 28,541
Work-in-process 16,377 16,222
Raw materials and supplies 16,754 11,986
-------- --------
64,032 56,749
Deferred income taxes and prepaid
expenses 13,742 12,113
-------- --------
Total current assets 197,001 172,816
Deferred income taxes 24,524 24,308
Property, plant and equipment 309,690 297,832
Less accumulated depreciation 184,763 174,962
-------- --------
124,927 122,870
Goodwill 19,734 20,028
Other assets 24,014 21,527
-------- --------
Total assets $390,200 $361,549
======== ========
<FN>
See accompanying note.
</TABLE>
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<TABLE>
BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, December 31,
1996 1995
-------- ------------
(Unaudited)
<S> <C> <C>
Current liabilities
Notes payable $ 15,930 $ 509
Accounts payable 31,403 31,839
Accrued liabilities 43,318 42,840
Guaranteed ESOP obligation-current 2,442 2,348
-------- --------
Total current liabilities 93,093 77,536
Long-term debt 70,000 70,000
Guaranteed ESOP obligation 6,246 7,491
Accrued retirement benefits 69,585 68,824
Other liabilities 8,098 8,857
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 27,670 27,360
Retained earnings 145,426 136,092
Foreign currency translation
adjustments (11,199) (10,656)
Treasury stock at cost,
1996-685,370 shares
1995-791,205 shares (25,768) (29,853)
-------- --------
151,866 138,680
Guaranteed ESOP obligation (8,688) (9,839)
-------- --------
Total stockholders' equity 143,178 128,841
-------- --------
Total liabilities and stockholders'
equity $390,200 $361,549
======== ========
<FN>
See accompanying note.
</TABLE>
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<TABLE>
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months ended June 30, 1996 and 1995
(Dollars in thousands)
(Unaudited)
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Operating Activities
Net income $15,295 $15,687
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 13,895 13,926
Gain on sale of property, plant and equipment (287) (137)
Translation losses 138 205
Changes in assets and liabilities:
Accounts receivable (9,138) (11,413)
Inventories (9,080) (4,389)
Accounts payable (389) 95
Accrued liabilities 504 (4,323)
Deferred income taxes (925) 2,373
Other liabilities and assets (1,530) (581)
------- -------
Net Cash Provided by Operating Activities 8,483 11,443
Investing Activities
Proceeds from sale of property, plant
and equipment 1,172 501
Capital expenditures (15,130) (16,142)
Other (747) (1,004)
------- -------
Net Cash Used by Investing Activities (14,705) (16,645)
Financing Activities
Net increase (decrease) in notes payable 15,436 (1,641)
Proceeds from the issuance of common stock 3,903 5,220
Dividends paid (5,961) (5,221)
------- -------
Net Cash Provided (Used) by Financing Activities 13,378 (1,642)
Effect of exchange rate changes on cash flows (582) (222)
------- -------
Increase (decrease) in cash and cash equivalents 6,574 (7,066)
Cash and cash equivalents at beginning of period 17,868 22,023
------- -------
Cash and cash equivalents at end of period $24,442 $14,957
======= =======
<FN>
See accompanying note.
</TABLE>
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<PAGE>
Note to Consolidated Financial Statements:
1. Summary of Significant Accounting Policies
------------------------------------------
The accompanying unaudited 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, 1995. In
the opinion of management, all adjustments, including normal
recurring accruals considered necessary for a fair
presentation, have been included. Operating results for the
six-month period ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year
ending December 31, 1996.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
---------------------
Sales
-----
The company's 1996 first half sales were $302.7 million, down 2%
from $309.6 million in 1995. Sales at Associated Spring and Bowman
Distribution declined year-over-year while Barnes Aerospace's sales
increased. Second quarter 1996 sales were up slightly to $152.6
million from the 1995 level of $151.0 million reflecting sales gains
at Barnes Aerospace and Associated Spring.
Associated Spring's 1996 first half sales declined by 2% to $144.8
million from $147.3 million in 1995. Second quarter 1996 sales were
$73.0 million, up from $72.4 million a year ago. Sales gains were
reported by Associated Spring's three largest U.S. plants due mainly
to the continued strength in the domestic automotive markets. These
gains were offset, in part, by a softening in its truck brake spring
business.
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<PAGE>
Associated Spring's sales to the electronics market softened in the
second quarter, although 1996 first half sales were well above 1995
levels. In 1996, sales for the distribution units were up slightly
from the same periods last year.
Bowman Distribution's 1996 first half sales were $108.9 million,
down 7% from the 1995 level of $116.6 million. Second quarter 1996
sales also decreased, down 3% to $53.9 million versus $55.6 million
in 1995. Bowman Canada was the only Bowman unit to report improved
sales for both the first six months and second quarter of 1996
compared to 1995.
Barnes Aerospace's 1996 first half sales improved 7% to $49.5
million from 1995 sales of $46.2 million. Second quarter 1996 sales
of $26.0 million increased 12% over 1995 sales of $23.2 million.
Strong sales gains were reported by the group's precision machining
and repair and overhaul units reflecting a strengthening of the
aerospace markets.
Operating Income
----------------
Consolidated operating income for the first half of 1996 was $25.7
million, down 8% from $28.0 million reported in the first half of
1995. In the first quarter of 1996, the company took a pre-tax
charge of $1.3 million related to workforce reductions, primarily at
Bowman Distribution. Apart from the effect of this provision,
operating income decreased 4% in the first six months. Second
quarter 1996 operating income was $14.4 million, up 8% from the
$13.4 million reported in 1995's second quarter.
Associated Spring's operating income decreased in the first half of
1996 compared with 1995 due to lower sales volume and higher
administrative expenses. In the second quarter of 1996, operating
income also declined as the increase in sales volume was not
sufficient to offset the higher levels of administrative expenses.
-8-
<PAGE>
Bowman Distribution's first half 1996 operating income declined
compared to 1995, a result of lower sales volume and the workforce
reduction costs incurred in the first quarter. Second quarter 1996
operating income improved significantly over the comparable 1995
period despite lower sales volume, the result of lower
administrative and selling costs and greater efficiencies in its
U.S. operation.
Barnes Aerospace's operating income declined slightly in the first
half of 1996 versus 1995 due to higher first quarter manufacturing
costs in its Advanced Fabrications business and first quarter start-
up costs at the new Repair and Overhaul facility in Singapore. In
the second quarter of 1996, operating income improved compared to
1995 due to higher sales volumes and improved margins.
Non-operating Income/Expense
----------------------------
Other income for the first half of 1996 was down compared to 1995
primarily due to lower profits from the company's investment in
NASCO, a company jointly owned with NHK Spring Co., Ltd. of Japan.
Interest expense for the first six months of 1996 was lower than in
the comparable 1995 period as a result of both lower interest rates
and lower average debt levels.
Other expenses decreased in 1996 from 1995 primarily due to lower
foreign exchange and translation losses.
Income Taxes
------------
The company's first half 1996 effective tax rate was 2.4 percentage
points lower than in the first half of 1995. This was due to
foreign income, with tax rates lower than the U.S. statutory tax
rate, comprising a larger percentage of consolidated income before
income taxes in 1996 versus 1995.
Net Income and Net Income Per Share
-----------------------------------
Consolidated net income for the first six months of 1996 was $15.3
million, or $2.31 per share, compared to 1995's net income of $15.7
million, or $2.41 per share. The pre-tax workforce reduction charge
-9-
<PAGE>
of $1.3 million recorded in the first quarter of 1996 reduced first
half earnings by 12 cents per share. Net income for the second
quarter of 1996 was $8.7 million, or $1.30 per share, compared to
1995's second quarter net income of $7.3 million, or $1.12 per
share. Both the second quarter 1996 net income and earnings per
share were better than any previous quarter reported by the company.
Financial Condition
-------------------
Cash Flows
----------
In the first half of 1996, operating activities provided $8.5
million of cash flow, $3.0 million lower then in 1995. While cash
generated from earnings, adjusted for non-cash depreciation and
amortization charges, kept pace with 1995, a higher investment was
made in net operating assets in 1996.
Net cash used for investing activities during the first six months
of 1996 was $14.7 million compared to $16.6 million in 1995's first
half. The 1996 capital expenditures were $15.1 million versus $16.1
million in 1995 as the three operating groups continue to invest in
new plant and equipment to expand capacity and improve productivity,
quality and customer service.
In the first half of 1996, net cash provided by financing activities
was $13.4 million versus $1.6 million used in the first half of
1995. The increase in notes payable in 1996 partially funded the
cash needed for investing activities as well as the increase in cash
and cash equivalents. The proceeds from the issuance of common
stock for both periods were higher than normal due to the exercise
of stock options. Dividends per share in the first half of 1996
increased to $.90 cents per share versus $.80 cents per share in the
first half of 1995, resulting in an increase in the amount of
dividends paid.
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<PAGE>
Liquidity and Capital Resources
-------------------------------
The company's liquidity, measured in terms of working capital,
increased $8.6 million to $103.9 million at June 30, 1996 from the
December 31, 1995 level. The current ratio was 2.1 at June 30, 1996
compared to 2.2 at December 31, 1995.
The ratio of interest bearing debt (including the guaranteed ESOP
obligation) to total capitalization was 40% at June 30, 1996
compared to 38% at December 31, 1995. For this calculation, total
capitalization is defined as total interest-bearing debt, including
the guaranteed ESOP obligation, and total stockholders' equity.
During 1996 and 1995, the company maintained long-term debt of $70.0
million, which includes borrowings under its short-term bank credit
lines and the current portion of its long-term notes. At June 30,
1996, the company classified as long-term debt $4.2 million of
borrowing under its lines of credit and $6.2 million of the current
portion of its 9.47% long-term Notes. The company has both the
intent and the ability, through its revolving credit agreement, to
refinance these amounts on a long-term basis. The company intends
to continue this cost effective approach to long-term financing.
The company maintains substantial bank borrowing facilities to
supplement internal cash generation. At June 30, 1996, the company
had $100.0 million of borrowing capacity available under its
revolving credit agreement of which none was borrowed. In addition,
the company had approximately $135.0 million in uncommitted short-
term bank credit lines, of which $12.5 million was in use at June
30, 1996. The interest rate on this borrowing was 5.7%. The company
believes these credit facilities coupled with cash generated from
operations are adequate for its anticipated future requirements.
-11-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended June 30, 1996.
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 13, 1996 By /s/ Douglas P. Hamilton
--------------- -------------------------------------
Douglas P. Hamilton
Senior Vice President-Finance
Date August 13, 1996 By /s/ Francis C. Boyle, Jr.
--------------- -------------------------------------
Francis C. Boyle, Jr.
Assistant Controller
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of Barnes Group Inc. at June 30, 1996, and the
related consolidated statement of income for the six months ended June
30, 1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 24,442
<SECURITIES> 0
<RECEIVABLES> 97,876
<ALLOWANCES> 3,091
<INVENTORY> 64,032
<CURRENT-ASSETS> 197,001
<PP&E> 309,690
<DEPRECIATION> 184,763
<TOTAL-ASSETS> 390,200
<CURRENT-LIABILITIES> 93,093
<BONDS> 76,246
<COMMON> 15,737
0
0
<OTHER-SE> 127,441
<TOTAL-LIABILITY-AND-EQUITY> 390,200
<SALES> 302,695
<TOTAL-REVENUES> 302,695
<CGS> 196,060
<TOTAL-COSTS> 196,060
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 155
<INTEREST-EXPENSE> 2,588
<INCOME-PRETAX> 24,278
<INCOME-TAX> 8,983
<INCOME-CONTINUING> 15,295
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,295
<EPS-PRIMARY> 2.31
<EPS-DILUTED> 2.31
</TABLE>
