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, 1997
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 11, 1997 - 20,287,400
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, 1997
<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, 1997 and 1996 3
Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1996 4-5
Consolidated Statements of Cash Flows
for the nine months ended September 30,
1997 and 1996 6
Notes to Consolidated Financial
Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-11
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 11
Signatures 11
</TABLE>
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<PAGE>
<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,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $158,538 $147,080 $482,538 $449,775
Cost of sales 105,341 94,897 319,530 290,957
Selling and admin-
istrative expenses 37,061 37,506 112,585 118,465
-------- -------- -------- --------
142,402 132,403 432,115 409,422
-------- -------- -------- --------
Operating income 16,136 14,677 50,423 40,353
Other income 1,621 1,024 3,743 3,077
Interest expense 1,178 1,323 3,703 3,911
Other expenses 347 556 900 1,419
-------- -------- -------- --------
Income before income
taxes 16,232 13,822 49,563 38,100
Income taxes 6,087 5,114 18,586 14,097
-------- -------- -------- --------
Net income $ 10,145 $ 8,708 $ 30,977 $ 24,003
======== ======== ======== ========
Per common share:
Net income $ .50 $ .44 $ 1.53 $ 1.21
Dividends .16 .15 .48 .45
Average common shares
outstanding 20,302,282 19,992,237 20,232,625 19,890,153
<FN>
See accompanying notes.
</TABLE>
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<PAGE>
<TABLE>
BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
ASSETS September 30, December 31,
1997 1996
--------- --------
(Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 36,466 $ 23,986
Accounts receivable, less allowances
(1997-$2,797; 1996-$3,158) 94,904 88,060
Inventories
Finished goods 32,896 30,285
Work-in-process 18,082 17,730
Raw materials and supplies 14,360 16,927
-------- --------
65,338 64,942
Deferred income taxes and prepaid
expenses 15,986 13,310
-------- --------
Total current assets 212,694 190,298
Deferred income taxes 22,863 23,575
Property, plant and equipment 335,587 320,604
Less accumulated depreciation 200,059 189,533
-------- --------
135,528 131,071
Goodwill 19,016 19,441
Other assets 27,085 25,571
-------- --------
Total assets $417,186 $389,956
======== ========
<FN>
See accompanying notes.
</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,
1997 1996
-------- --------
(Unaudited)
<S> <C> <C>
Current liabilities
Notes payable $ 2,263 $ 1,767
Accounts payable 38,444 30,363
Accrued liabilities 45,252 46,152
Guaranteed ESOP obligation-current 2,693 2,540
-------- --------
Total current liabilities 88,652 80,822
Long-term debt 70,000 70,000
Guaranteed ESOP obligation 2,912 4,951
Accrued retirement benefits 68,533 69,085
Other liabilities 7,330 7,934
Stockholders' equity
Common stock-par value $.01 per share
Authorized: 60,000,000 shares
Issued: 22,037,769 shares stated at 220 15,737
Additional paid-in capital 46,227 28,347
Retained earnings 177,818 156,698
Foreign currency translation
adjustments (13,743) (10,087)
Treasury stock at cost,
1997-1,787,093 shares
1996-2,046,009 shares (25,158) (26,040)
Guaranteed ESOP obligation (5,605) (7,491)
-------- --------
Total stockholders' equity 179,759 157,164
-------- --------
Total liabilities and stockholders'
equity $417,186 $389,956
======== ========
<FN>
See accompanying notes.
</TABLE>
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<PAGE>
<TABLE>
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months ended September 30, 1997 and 1996
(Dollars in thousands)
(Unaudited)
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Operating activities:
Net income $30,977 $24,003
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 21,033 20,507
Gain on sale of property, plant and
equipment (267) (499)
Translation losses 121 260
Changes in assets and liabilities:
Accounts receivable (7,395) (10,040)
Inventories (1,147) (10,796)
Accounts payable 8,523 1,773
Accrued liabilities (1,761) 4,758
Deferred income taxes 180 (1,033)
Other liabilities and assets (3,311) (2,261)
------- -------
Net cash provided by operating activities 46,953 26,672
Investing activities:
Proceeds from sale of property, plant
and equipment 1,412 1,339
Capital expenditures (26,253) (25,073)
Other (1,213) (403)
------- -------
Net cash used by investing activities (26,054) (24,137)
Financing activities:
Net increase in notes payable 580 6,400
Proceeds from the issuance of common stock 6,507 4,362
Payments to acquire treasury stock (4,518) --
Dividends paid (9,805) (8,961)
------- -------
Net cash (used) provided by financing activities (7,236) 1,801
Effect of exchange rate changes on cash flows (1,183) (766)
------- -------
Increase in cash and cash equivalents 12,480 3,570
Cash and cash equivalents at beginning of period 23,986 17,868
------- -------
Cash and cash equivalents at end of period $36,466 $21,438
======= =======
<FN>
See accompanying notes.
</TABLE>
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<PAGE>
Notes 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 notes
required by generally accepted accounting principles for
complete financial statements. For additional information,
please refer to the consolidated financial statements and
notes included in the company's Annual Report on Form 10-K for
the year ended December 31, 1996. 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, 1997, are not necessarily indicative of
the results that may be expected for the year ending December
31, 1997.
2. Common Stock
------------
On April 2, 1997, the stockholders approved an amendment to the
company's Restated Certificate of Incorporation providing for
an increase in the number of authorized common shares from 20
million to 60 million and a reduction in the par value of
common and preferred stock from $1.00 to $.01 per share. This
allowed the company to effect a three-for-one stock split for
stockholders of record on April 3, 1997, previously authorized
by the Board of Directors.
All references to shares and per share amounts in the
consolidated financial statements and accompanying notes have
been adjusted retroactively for the three-for-one stock split.
Stockholders' equity at September 30, 1997, reflects the effect
of the stock split and change in par value per share. These
changes reduced the common stock account by $15.5 million and
increased the additional paid-in capital account by a like
amount.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
---------------------
The company's third quarter 1997 sales were up 8% to $158.5 million
compared to $147.1 million in 1996. Operating income increased 10%
to $16.1 million versus 1996 results of $14.7 million. The 1997
first nine months sales were $482.5 million, up 7% from $449.8
million in 1996. The 1997 year-to-date operating income was $50.4
million, an increase of 25% over the $40.4 million reported in 1996.
The 1997 nine month operating margin was 10.4% versus 9.0% in the
comparable 1996 period. The results for 1997 reflect the strong
period-over-period sales and operating income growth in the Barnes
Aerospace businesses. The strong sales and profit performance in
the company's aerospace segment was somewhat offset by the slowdown
among North American automotive manufacturers and its impact on the
company's Associated Spring segment.
Segment Review - Sales and Operating Income
-------------------------------------------
Associated Spring sales for the third quarter and nine months ending
September 30, 1997 increased approximately 2% over both comparable
1996 periods. Sales for the 1997 third quarter were $69.9 million
and $218.4 million year to date. Slower sales growth was reported
due to a slowdown in the domestic automotive market. Operating
income for 1997 declined for the three and nine month periods
compared to 1996, a result of higher manufacturing costs and selling
and administrative expenses.
Bowman Distribution's 1997 third quarter and nine month sales were
$54.1 million and $166.0 million, a 3% increase over the comparable
1996 periods in spite of the UPS strike's negative impact on
shipments. The group's operating income also improved for the
quarter and year-to-date. The gains in sales and operating income
reflect the progress made in cultivating the large, multi-location
customer business in the United States, specifically in the
industrial and transportation markets. Additionally, Bowman
continues to improve profitability in the European market.
Barnes Aerospace sales for the third quarter and first nine months
of 1997 increased in excess of 30% over the same 1996 periods to
$34.8 million and $99.1 million. Very strong gains in operating
income were also reported as the entire group capitalized on the
improved commercial aviation engine and airframe markets.
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<PAGE>
Non-operating Income/Expense
----------------------------
Other income for the third quarter and first nine months of 1997
increased over 1996 primarily due to foreign exchange gains
recognized in 1997, compared to losses recognized in 1996. The 1996
foreign exchange losses were included in other expenses. The
foreign exchange gain in 1997 included $1.1 million related to our
U.S. dollar based investment in Singapore.
Income Taxes
------------
The company's 1997 third quarter and first nine months effective tax
rate was 37.5%, compared to the effective rate of 37.0% in the
comparable 1996 periods. The increase was due to U.S. income, with
income tax rates higher than the foreign tax rates, comprising a
greater percentage of consolidated income before taxes in 1997 as
compared to 1996.
Net Income and Net Income Per Share
-----------------------------------
The consolidated net income for the third quarter of 1997 was $10.1
million, or 50 cents per share, up 17% compared to the third quarter
of 1996 net income of $8.7 million, or 44 cents per share. This is
the most profitable third quarter in the company's history.
Consolidated net income for the nine month period in 1997 was $31.0
million, or $1.53 per share, up 29% compared to 1996's net income of
$24.0 million, or $1.21 per share. Earnings for the nine month
period in 1997 also set a new high for the company.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128 ("FAS 128"), "Earnings Per Share", requiring
the dual presentation of basic and diluted earnings per share. The
company is required to adopt the provisions of the Statement in the
fourth quarter of 1997. If earnings per share for the quarters had
been computed under the provisions of FAS 128 the results would be:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
Earnings Per Share 1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
As Reported $.50 $.44 $1.53 $1.21
Pro forma:
Basic .50 .44 1.53 1.21
Diluted .49 .43 1.50 1.19
</TABLE>
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<PAGE>
Financial Condition
-------------------
Cash Flows
----------
In the first nine months of 1997, operating activities provided
$47.0 million of cash flow, $20.3 million higher than in 1996.
Improved earnings contributed $7.0 million of the increase, while
the improvement in working capital management in 1997 provided $12.7
million of incremental cash flow compared to 1996.
Net cash used for investing activities during the first three
quarters of 1997 was $26.1 million compared to $24.1 million in
1996. The 1997 increase reflects higher levels of investment in
property, plant and equipment. The company has made a strong
commitment to the future as it begins to purchase new hardware and
software for Bowman Distribution's customer information technologies
systems project. In addition, Associated Spring and Barnes Aerospace
continue to expand capacity and improve productivity, quality and
customer service by investing in new manufacturing equipment and
technology.
During the first nine months of 1997, net cash used by financing
activities was $7.2 million compared to funds provided of $1.8
million in 1996. The fluctuation is primarily attributable to
reduced borrowing in 1997 and $4.5 million of stock repurchases
during 1997. Dividends paid to shareholders increased $0.8 million
in 1997, reflecting a 7% increase in the dividend rate. The
proceeds from the issuance of common stock for both the 1997 and
1996 periods was largely from the exercise of stock options.
Liquidity and Capital Resources
-------------------------------
During 1997 and 1996, the company maintained long-term debt of $70.0
million, comprised, in part, of borrowings under its short-term bank
credit lines backed by its long-term revolving credit agreement. At
September 30, 1997, the company classified as long-term debt $13.4
million of borrowings under its lines of credit and $6.2 million of
the current portion of its long-term debt. 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 considers
this a cost effective way to manage its long-term financing needs.
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<PAGE>
The company maintains substantial bank borrowing facilities to
supplement cash generated internally. At September 30, 1997, the
company had $150.0 million of borrowing capacity available under its
revolving credit agreement of which none was borrowed. In addition,
the company had approximately $130.0 million in uncommitted short-
term bank credit lines, of which $14.0 million was in use at
September 30, 1997. The interest rate on this borrowing was 5.82%.
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
--------------------------------
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K, Item 5, Other Events, were filed
during the quarter ended September 30, 1997.
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 14, 1997 By /s/ Terry M. Murphy
----------------- -------------------------------------
Terry M. Murphy
Senior Vice President-Finance
(the principal financial officer)
Date November 14, 1997 By /s/ Francis C. Boyle, Jr.
----------------- -------------------------------------
Francis C. Boyle, Jr.
Vice President, Controller
(the principal accounting officer)
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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, 1997, and the
related consolidated statement of income for the nine months ended September
30, 1997 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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 36,466
<SECURITIES> 0
<RECEIVABLES> 97,701
<ALLOWANCES> 2,797
<INVENTORY> 65,338
<CURRENT-ASSETS> 212,694
<PP&E> 335,587
<DEPRECIATION> 200,059
<TOTAL-ASSETS> 417,186
<CURRENT-LIABILITIES> 88,652
<BONDS> 72,912
<COMMON> 220
0
0
<OTHER-SE> 179,539
<TOTAL-LIABILITY-AND-EQUITY> 417,186
<SALES> 482,538
<TOTAL-REVENUES> 482,538
<CGS> 319,530
<TOTAL-COSTS> 319,530
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 674
<INTEREST-EXPENSE> 3,703
<INCOME-PRETAX> 49,563
<INCOME-TAX> 18,586
<INCOME-CONTINUING> 30,977
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,977
<EPS-PRIMARY> 1.53
<EPS-DILUTED> 1.53
</TABLE>
