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 September 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
November 10, 1996 - 6,680,005
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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<PAGE>
<TABLE>
BARNES GROUP INC.
FORM 10-Q INDEX
For the Quarterly period ended September 30, 1996
<CAPTION>
DESCRIPTION PAGES
----------- -----
<S> <S>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Income
for the nine months and third quarter
ended September 30, 1996 and 1995 3
Consolidated Balance Sheets as of
September 30, 1996 and December 31, 1995 4-5
Consolidated Statements of Cash Flows
for the nine months ended September 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
</TABLE>
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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 Nine months ended
September 30, September 30,
------------------ -----------------
1996 1995 1996 1995
-------- -------- --------- -------
<S> <C> <C> <C> <C>
Net sales $147,080 $141,679 $449,775 $451,290
Cost of sales 94,897 91,856 290,957 288,974
Selling and admin-
istrative expenses 37,506 38,694 118,465 123,230
-------- -------- -------- --------
132,403 130,550 409,422 412,204
-------- -------- -------- --------
Operating income 14,677 11,129 40,353 39,086
Other income 1,024 992 3,077 3,344
Interest expense 1,323 1,367 3,911 4,259
Other expenses 556 422 1,419 1,952
-------- -------- -------- --------
Income before income
taxes 13,822 10,332 38,100 36,219
Income taxes 5,114 4,071 14,097 14,270
-------- -------- -------- --------
Net income $ 8,708 $ 6,261 $ 24,003 $ 21,949
======== ======== ======== ========
Per common share:
Net income $ 1.31 $ .95 $ 3.62 $ 3.36
Dividends .45 .40 1.35 1.20
Average common shares
outstanding 6,664,079 6,581,479 6,630,051 6,532,708
<FN>
See accompanying note.
</TABLE>
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<TABLE>
BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
ASSETS September 30, December 31,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 21,438 $ 17,868
Accounts receivable, less allowances
(1996-$2,940; 1995-$3,635) 95,665 86,086
Inventories
Finished goods 31,115 28,541
Work-in-process 17,812 16,222
Raw materials and supplies 16,774 11,986
-------- --------
65,701 56,749
Deferred income taxes and prepaid
expenses 13,812 12,113
-------- --------
Total current assets 196,616 172,816
Deferred income taxes 24,598 24,308
Property, plant and equipment 316,765 297,832
Less accumulated depreciation 188,012 174,962
-------- --------
128,753 122,870
Goodwill 19,587 20,028
Other assets 24,005 21,527
-------- --------
Total assets $393,559 $361,549
======== ========
<FN>
See accompanying note.
</TABLE>
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<PAGE>
<TABLE>
BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY September 30, December 31,
1996 1995
------------ -----------
(Unaudited)
<S> <C> <C>
Current liabilities
Notes payable $ 6,851 $ 509
Accounts payable 33,588 31,839
Accrued liabilities 47,565 42,840
Guaranteed ESOP obligation-current 2,490 2,348
-------- --------
Total current liabilities 90,494 77,536
Long-term debt 70,000 70,000
Guaranteed ESOP obligation 5,605 7,491
Accrued retirement benefits 69,237 68,824
Other liabilities 7,914 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 27,972 27,360
Retained earnings 151,134 136,092
Foreign currency translation
adjustments (11,095) (10,656)
Treasury stock at cost,
1996-674,395 shares
1995-791,205 shares (25,344) (29,853)
-------- --------
158,404 138,680
Guaranteed ESOP obligation (8,095) (9,839)
-------- --------
Total stockholders' equity 150,309 128,841
-------- --------
Total liabilities and stockholders'
equity $393,559 $361,549
======== ========
<FN>
See accompanying note.
</TABLE>
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<TABLE>
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months ended September 30, 1996 and 1995
(Dollars in thousands)
(Unaudited)
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Operating Activities
Net income $24,003 $21,949
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 20,507 20,483
Gain on sale of property, plant and equipment (499) (297)
Translation losses 260 243
Changes in assets and liabilities:
Accounts receivable (10,040) (7,613)
Inventories (10,796) (3,962)
Accounts payable 1,773 333
Accrued liabilities 4,758 (1,736)
Deferred income taxes (1,033) 3,121
Other liabilities and assets (2,261) (185)
------- -------
Net Cash Provided by Operating Activities 26,672 32,336
Investing Activities
Proceeds from sale of property, plant
and equipment 1,339 1,079
Capital expenditures (25,073) (27,461)
Other (403) (1,368)
------- -------
Net Cash Used by Investing Activities (24,137) (27,750)
Financing Activities
Net increase (decrease) in notes payable 6,400 (6,923)
Proceeds from the issuance of common stock 4,362 5,659
Dividends paid (8,961) (7,854)
------- -------
Net Cash Provided (Used) by Financing Activities 1,801 (9,118)
Effect of exchange rate changes on cash flows (766) (826)
------- -------
Increase (decrease) in cash and cash equivalents 3,570 (5,358)
Cash and cash equivalents at beginning of period 17,868 22,023
------- -------
Cash and cash equivalents at end of period $21,438 $16,665
======= =======
<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
nine month period ended September 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 third quarter 1996 sales were up 4% to $147.1 million
from the 1995 level of $141.7 million reflecting sales gains by all
three operating groups. Sales for the first nine months of 1996
were $449.8 million, compared to $451.3 million in 1995. Sales at
Associated Spring were flat, while Bowman Distribution reported
lower year-over-year sales and Barnes Aerospace's sales increased.
Associated Spring's third quarter sales were $68.9 million, up 4%
from $66.2 million a year ago. For the first nine months of 1996,
sales were $213.7 million compared to $213.5 million in 1995. The
third quarter sales gain reflects the continued strength in the
domestic automotive market, in particular, sport utility vehicles
and light trucks.
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<PAGE>
Associated Spring's sales to the electronics market softened
somewhat in the third quarter, although year-to-date sales remained
above the 1995 level. The group's distribution business reported
1996 sales gains for the third quarter and first nine months over
the same periods last year.
Bowman Distribution's third quarter 1996 sales increased 4% to $52.6
million versus $50.7 million reported in 1995. The quarterly sales
increase reflects gains in its Bowman North America operations where
sales were up 5% over the comparable 1995 periods, primarily the
result of sales to new large accounts and increased penetration of
existing large customers. Sales in Europe for the third quarter
were flat when compared to 1995, but momentum accelerated in its
large account focus as its systems' sales increased 26%. Bowman's
sales for the first nine months of 1996 were $161.6 million, down 3%
from the 1995 level of $167.2 million.
Barnes Aerospace's third quarter 1996 sales of $25.8 million
increased 3% over the $25.0 million reported in 1995 and the first
nine months sales improved 6% to $75.3 million. Sales gains were
reported by the group's repair and overhaul unit for both the
quarter and nine month periods and by the precision machining unit
for the nine month period.
Operating Income
----------------
Consolidated operating income improved significantly over the strong
1995 results. Third quarter 1996 operating income was $14.7
million, up 32% from the $11.1 million reported in 1995's third
quarter. Consolidated operating income for the first nine months of
1996 was $40.4 million, up 3% from 1995's $39.1 million. 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 would have increased 7% in the first nine months of 1996.
Associated Spring's operating income increased significantly in the
third quarter of 1996 compared with 1995 and has kept pace with 1995
on a year-to-date basis. Significant gains in the quarter reflect
cost savings and efficiencies in production costs as well as lower
selling and administrative expenses. Solid operating income
improvements were made by the distribution units and by the
automotive-related manufacturing operations.
-8-
<PAGE>
Bowman Distribution's third quarter 1996 operating income increased
significantly over the comparable 1995 period as higher sales
volume, combined with a lower, more efficient cost structure
contributed to the solid bottom line performance. Bowman's
operating income for the first nine months of 1996 also improved
over 1995, even though sales declined period-to-period.
Barnes Aerospace's operating income declined in both the third
quarter and first nine months of 1996 versus 1995 as cost of sales
and selling and administrative expenses increased at rates in excess
of the increase in sales volume. The increase in operating income
reported by Windsor Airmotive engine repair and overhaul business
was more than offset by the high manufacturing costs in the Advanced
Fabrications business.
Non-operating Income/Expense
----------------------------
Other income for the first nine months of 1996 declined compared to
1995 due primarily to lower profits from the company's investment in
NHK-Associated Spring Suspension Components Inc.("NASCO"), a company
jointly owned with NHK Spring Co., Ltd. of Japan. The year-over-year
decrease in NASCO profits reflects increased costs, primarily
interest, associated with a major capacity expansion to meet
increased customer requirements for automotive suspension springs.
Interest expense for the first three quarters of 1996 was lower than
1995, a result of lower average debt levels.
Other expenses declined year to date 1996 from 1995 due primarily to
lower foreign exchange and translation losses. In the third quarter
of 1996, however, foreign exchange and translation losses increased
compared to 1995's third quarter.
Income Taxes
------------
For the first nine months of 1996, the company's effective tax rate
was 37.0% versus 39.4% in 1995. This lower rate in 1996 was due in
part to foreign losses, without tax benefits, which comprised a
smaller percentage of income before income taxes in 1996 than in
1995. In addition, foreign income, with tax rates lower than the
U.S. statutory tax rate, comprised a larger percentage of
consolidated income before income taxes in 1996 than in 1995.
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<PAGE>
Net Income and Net Income Per Share
-----------------------------------
Consolidated net income for the first nine months of 1996 was $24.0
million, or $3.62 per share, compared to 1995's net income of $21.9
million, or $3.36 per share. Net income for the third quarter of
1996 was $8.7 million, or $1.31 per share, compared to 1995's third
quarter net income of $6.3 million, or 95 cents per share. For both
the third quarter and the first nine months of 1996, net income and
earnings per share were the highest in the company's history. This
marks the second consecutive quarter of all-time record earnings.
Financial Condition
-------------------
Cash Flows
----------
In the first nine months of 1996, operating activities provided
$26.7 million of cash flow, compared to $32.3 million in 1995. The
increase in cash generated from earnings, adjusted for non-cash
depreciation and amortization charges, of $2.1 million, was offset
by the larger investment made in net operating assets in 1996.
Net cash used by investing activities during the first nine months
of 1996 was $24.1 million compared with $27.8 million in 1995. This
was due to the decrease in capital expenditures year-over-year. The
1996 capital expenditures of $25.1 million still represents a
significant reinvestment in each of the businesses, as the company
continues to expand capacity and improve productivity, quality and
customer service.
In 1996, financing activities provided net cash of $1.8 million
versus using $9.1 million in the first nine months of 1995. The
year-over-year change was due primarily to the $6.4 million increase
in notes payable in 1996 versus the $6.9 million pay down of debt in
1995. The proceeds from the issuance of common stock for both
periods resulted from the exercise of stock options. Increased
dividends paid in 1996 reflects an increase in the dividend rate to
$1.35 per share in 1996 compared to $1.20 in 1995.
-10-
<PAGE>
Liquidity and Capital Resources
-------------------------------
The company's liquidity, measured in terms of working capital,
increased $10.8 million to $106.1 million at September 30, 1996
from the December 31, 1995 level. The current ratio was 2.2 at
both September 30, 1996 and December 31, 1995.
The ratio of interest-bearing debt, including the guaranteed
Employee Stock Ownership Plan ("ESOP") obligation, to total
capitalization was 36% at September 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 September
30, 1996, the company classified as long-term debt $7.2 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 September 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 $9.5 million was in use at
September 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 September 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 November 13, 1996 By /s/ Douglas P. Hamilton
----------------- --------------------------------------
Douglas P. Hamilton
Senior Vice President-Finance
Date November 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 September 30, 1996, and the
related consolidated statement of income for the nine months ended September
30, 1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 21,438
<SECURITIES> 0
<RECEIVABLES> 98,605
<ALLOWANCES> 2,940
<INVENTORY> 65,701
<CURRENT-ASSETS> 196,616
<PP&E> 316,765
<DEPRECIATION> 188,012
<TOTAL-ASSETS> 393,559
<CURRENT-LIABILITIES> 90,494
<BONDS> 75,605
<COMMON> 15,737
0
0
<OTHER-SE> 134,572
<TOTAL-LIABILITY-AND-EQUITY> 393,559
<SALES> 449,775
<TOTAL-REVENUES> 449,775
<CGS> 290,957
<TOTAL-COSTS> 290,957
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 234
<INTEREST-EXPENSE> 3,911
<INCOME-PRETAX> 38,100
<INCOME-TAX> 14,097
<INCOME-CONTINUING> 24,003
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,003
<EPS-PRIMARY> 3.62
<EPS-DILUTED> 3.62
</TABLE>
