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, 1998
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
May 7, 1998 - 20,281,216
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
--- ---
-1-
<PAGE>
<TABLE>
BARNES GROUP INC.
FORM 10-Q INDEX
For the Quarterly period ended March 31, 1998
<CAPTION>
DESCRIPTION PAGES
----------- -----
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements
of Income for the three months ended
March 31, 1998 and 1997 3
Consolidated Balance Sheets as
of March 31, 1998 and December 31, 1997 4-5
Consolidated Statements of Cash Flows
for the three months ended March 31,
1998 and 1997 6
Notes to Consolidated Financial
Statements 7-8
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-11
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to Vote of
Security Holders 11
ITEM 6. Exhibits and Reports on Form 8-K 12
Signatures 12
</TABLE>
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<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME
Three months ended March 31, 1998 and 1997
(Dollars in thousands, except per share data)
(Unaudited)
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Net sales $168,916 $158,133
Cost of sales 111,358 102,946
Selling and administrative expenses 38,178 38,383
-------- --------
149,536 141,329
-------- --------
Operating income 19,380 16,804
Other income 1,196 920
Interest expense 1,125 1,288
Other expenses 505 247
-------- --------
Income before income taxes 18,946 16,189
Income taxes 7,105 6,071
-------- --------
Net income $ 11,841 $ 10,118
======== ========
Per common share:
Net income:
Basic $ .59 $ .50
Diluted .58 .49
Dividends .17 .15
Average common shares outstanding 20,173,149 20,085,390
</TABLE>
[FN]
See accompanying notes.
-3-
<PAGE>
<TABLE>
BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
ASSETS March 31, December 31,
1998 1997
-------- -----------
(Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 40,429 $ 32,530
Accounts receivable, less allowances
(1998-$2,833; 1997-$3,061) 98,317 91,757
Inventories
Finished goods 30,421 30,519
Work-in-process 19,740 17,369
Raw materials and supplies 15,186 13,194
-------- --------
65,347 61,082
Deferred income taxes and prepaid
expenses 17,559 17,648
-------- --------
Total current assets 221,652 203,017
Deferred income taxes 22,849 24,083
Property, plant and equipment 342,584 334,836
Less accumulated depreciation 206,380 201,006
-------- --------
136,204 133,830
Goodwill 18,636 18,773
Other assets 27,917 28,275
-------- --------
Total assets $427,258 $407,978
======== ========
</TABLE>
[FN]
See accompanying notes.
-4-
<PAGE>
<TABLE>
BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY March 31, December 31,
1998 1997
--------- -----------
(Unaudited)
<S> <C> <C>
Current liabilities
Notes payable $ 8,759 $ 2,437
Accounts payable 44,498 37,776
Accrued liabilities 45,105 46,966
Guaranteed ESOP obligation-current 2,800 2,746
-------- --------
Total current liabilities 101,162 89,925
Long-term debt 60,000 60,000
Guaranteed ESOP obligation 1,484 2,205
Accrued retirement benefits 67,209 67,486
Other liabilities 6,575 7,503
Stockholders' equity
Common stock-par value $0.01 per share
Authorized: 60,000,000 shares
Issued: 22,037,769 shares
stated at par value 220 220
Additional paid-in capital 48,211 47,007
Retained earnings 192,288 183,857
Accumulated other comprehensive income (16,336) (15,841)
Treasury stock at cost,
1998-1,807,818 shares
1997-1,875,111 shares (29,271) (29,433)
Guaranteed ESOP obligation (4,284) (4,951)
-------- --------
Total stockholders' equity 190,828 180,859
-------- --------
Total liabilities and stockholders'
equity $427,258 $407,978
======== ========
</TABLE>
[FN]
See accompanying notes.
-5-
<PAGE>
<TABLE>
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 1998 and 1997
(Dollars in thousands)
(Unaudited)
<CAPTION>
1998 1997
Operating Activities: ------- -------
<S> <C> <C>
Net income $11,841 $10,118
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 7,110 6,785
Loss (gain) on sale of property, plant
and equipment 3 (137)
Changes in assets and liabilities:
Accounts receivable (6,609) (13,825)
Inventories (4,252) (1,766)
Accounts payable 6,702 5,803
Accrued liabilities (1,877) (2,779)
Deferred income taxes 1,772 411
Other (169) (1,348)
------- -------
Net Cash Provided by Operating Activities 14,521 3,262
Investing Activities:
Proceeds from sale of property, plant
and equipment 70 766
Capital expenditures (8,832) (9,161)
Other (473) (506)
------- -------
Net Cash Used by Investing Activities (9,235) (8,901)
Financing Activities:
Net increase in notes payable 6,395 2,056
Proceeds from the issuance of common stock 1,669 3,848
Common stock repurchases (1,560) --
Dividends paid (3,373) (3,020)
------- -------
Net Cash Provided by Financing Activities 3,131 2,884
Effect of exchange rate changes on cash flows (518) (99)
------- -------
Increase (decrease) in cash and cash equivalents 7,899 (2,854)
Cash and cash equivalents at beginning of period 32,530 23,986
------- -------
Cash and cash equivalents at end of period $40,429 $21,132
======= =======
</TABLE>
[FN]
See accompanying notes.
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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
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, 1997. In
the opinion of management, all adjustments, including normal
recurring accruals considered necessary for a fair
presentation, have been included. Operating results for the
three-month period ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the year
ending December 31, 1998.
2. Other Comprehensive Income
--------------------------
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income". This Statement establishes
standards for reporting and displaying comprehensive income
and its components in a full-set of financial statements.
For interim reporting, the Statement requires the disclosure
of total comprehensive income for the periods presented. The
Statement is effective for fiscal periods beginning after
December 15, 1997.
Comprehensive income is defined as "the change in equity of a
business enterprise during a period from transactions and
other events and circumstances from non-owner sources". This
would include net income and "other comprehensive income"
but exclude the sale and repurchases of stock and distribution
of dividends. The only item of "other comprehensive income"
the Company has is foreign currency translation adjustments.
The effect of these adjustments reduced comprehensive income
in the first quarter of 1998 by $0.5 million to $11.3 million
and by $1.7 million to $8.4 million in the comparable 1997
period.
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<PAGE>
3. Segment Disclosure
------------------
Effective January 1, 1998, management responsibility for
Raymond Distribution was transferred from the Associated
Spring Group to the Bowman Distribution Group. Raymond is
engaged in the distribution of industrial products and of
standard stock wire and flat springs manufactured primarily by
Associated Spring. The transfer of Raymond to the Bowman
Group will maximize synergy in the Company's distribution
operations. All references to prior year segment data have
been restated to reflect this transfer.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131,
"Disclosure About Segments of an Enterprise and Related
Information". The Statement is effective for the Company's
1998 annual financial statements and interim periods beginning
in the second year of application. Although management has
not completed its review of the new Standard, it does not
anticipate that adoption of the Standard will have a
significant effect on the Company's reporting segments.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
---------------------
The Company's first quarter 1998 consolidated sales were $168.9
million, up 6.8% from last year's results of $158.1 million.
Operating income increased 15.3% in 1998 to $19.4 million compared
to $16.8 million in 1997. Operating income margin in 1998 was
11.5%, compared to 10.6% in the prior year's first quarter. These
results reflect period-over-period sales and earnings growth in all
three business segments. Consolidated cost of sales as a
percentage of sales was 65.9% in 1998 versus 65.1% in 1997.
Selling and administrative expenses were 22.6% of sales compared to
24.3% in 1997's first quarter.
Segment Review-Sales and Operating Income
------------------------------------------
Associated Spring segment sales for first quarter 1998 increased
3.0% over last year's comparable period. Sales were $68.5 million
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<PAGE>
versus $66.5 million in 1997. Operating income was slightly higher
than last year's strong performance. The group's North American
operations reported solid quarter-over-quarter growth on the
continued strength of the automotive and durable goods markets. The
Mexico operation reported a much improved first quarter having
overcome the operating problems encountered in the second quarter
of 1997. The Singapore operation reported lower sales and profits
primarily due to softer telecommunications and electronics
business.
Bowman Distribution segment sales increased 2.7% to $66.5 million
in the first three months of 1998 versus $64.8 million in 1997 as
nearly all units reported sales gains. All units improved their
operating results over 1997's first quarter. These gains resulted
from the expansion of business with large, multi-location
maintenance, repair and operating supply customers as well as cost
containment within the selling and administrative expense functions.
Barnes Aerospace segment first quarter 1998 sales of $37.7 million,
improved 25.7% over a strong first quarter 1997 sales of $30.0
million. Significant sales gains were reported in both the
original equipment manufacture and overhaul and repair businesses.
This is a result of the strong commercial aviation engine and
airframe markets. Operating income for the group also improved
substantially over the very solid 1997 first quarter results.
Non-Operating Income/Expense
----------------------------
In 1998 and 1997 other income includes $0.7 million and $0.4
million, respectively, from the Company's investment in NASCO and a
small net foreign exchange gain in 1997. Other expenses in 1998
reflect a net foreign exchange loss of $0.2 million.
Income Taxes
------------
The Company's effective tax rate for both the first quarter 1998
and 1997 was 37.5%.
Net Income and Net Income Per Share
-----------------------------------
Consolidated net income for the first quarters of 1998 and 1997 was
$11.8 million and $10.1 million, respectively. Basic earnings per
share for 1998 first quarter was $.59 compared to 1997's $.50 per
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<PAGE>
share. On a diluted basis, earnings per share were $.58 in 1998
and $.49 in 1997. This is the Company's best ever quarter in terms
of net income and earnings per share and is the eighth consecutive
quarter of record breaking results.
There were no adjustments to net income for the purpose of
computing income available to common stockholders for the first
quarters of 1998 and 1997, respectively. For purpose of computing
dilutive earnings per share, the weighted average number of shares
outstanding were increased 387,716 and 413,916 for the first
quarters of 1998 and 1997, respectively, representing the potential
dilutive effects of stock-based plans.
Financial Condition
-------------------
Cash Flows
----------
Net cash generated by operating activities in the first three
months of 1998 was a very strong $14.5 million, an increase of
$11.2 million over the first quarter of 1997. In both years,
strong earnings, after adjustments for the non-cash charges for
depreciation and amortization, more than offset the net change in
operating assets and liabilities. The solid increase in cash
generated in 1998 compared to 1997 was enhanced by the Company's
continuing efforts to manage working capital.
Net cash used by investing activities in the first quarter of 1998
was $9.2 million compared to $8.9 million in 1997. During 1998,
all three business segments continued investing in new equipment in
order to improve productivity, quality and customer service.
Net cash provided by financing activities was $3.1 million in the
first quarter of 1998 and $2.9 million in 1997's first quarter.
Additional borrowings to support normal first quarter 1998 short-
term working capital requirements was the reason for the increase
in financing levels.
Liquidity and Capital Resources
-------------------------------
During 1998 and 1997, the Company's long-term debt was comprised,
in part, of borrowings under its short-term bank lines of credit
backed by its long-term revolving credit agreement. At March 31,
1998, the company classified as long-term debt $6.5 million of
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<PAGE>
borrowings 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 of long-term
financing.
The Company maintains substantial bank borrowing facilities to
supplement internal cash generation. At March 31, 1998, the
company had $150.0 million of borrowing capacity under its long-
term revolving credit agreement of which none was borrowed. The
Company had $13.0 million in borrowings under uncommitted short-
term bank credit lines at March 31, 1998. The interest rates on
these borrowing were 5.74%. The Company believes its credit
facilities coupled with cash generated from operations are adequate
for its anticipated future requirements.
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 8, 1998. Proxies for the meeting were
solicited pursuant to Regulation 14 A.
(c) (1) The following directors were elected:
<TABLE>
<CAPTION>
Votes in Votes For Terms
Director Favor Withheld Expiring
-------- ----- -------- --------
<S> <C> <C> <C>
George T. Carpenter 18,280,674 308,234 2001
Donna R. Ecton 18,303,374 285,534 2001
Frank E. Grzelecki 18,270,885 318,023 2001
</TABLE>
(2) The stockholders approved the selection of Price
Waterhouse LLP as the Company's independent accountants
for 1998. The proposal was adopted as 18,282,159 shares
voted for, 190,914 shares voted against, 115,835 shares
abstained and there were no non-votes.
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 27.1 Financial Data Schedule, March 31, 1998
Exhibit 27.2 Financial Data Schedule, Restated 1997
Exhibit 27.3 Financial Data Schedule, Restated 1995 and
1996
(b) Reports on Form 8-K
No reports on Form 8-K, Item 5, Other Events, were filed
during the quarter ended March 31, 1998.
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 14, 1998 By /s/ Terry M. Murphy
------------ -------------------------------------
Terry M. Murphy
Senior Vice President, Finance
(the principal financial officer)
Date May 14, 1998 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 March 31, 1998, and the
related consolidated statement of income for the three months ended March 31,
1998, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 40,429
<SECURITIES> 0
<RECEIVABLES> 101,150
<ALLOWANCES> 2,833
<INVENTORY> 65,347
<CURRENT-ASSETS> 221,652
<PP&E> 342,584
<DEPRECIATION> 206,380
<TOTAL-ASSETS> 427,258
<CURRENT-LIABILITIES> 101,162
<BONDS> 61,484
0
0
<COMMON> 220
<OTHER-SE> 190,608
<TOTAL-LIABILITY-AND-EQUITY> 427,258
<SALES> 168,916
<TOTAL-REVENUES> 168,916
<CGS> 111,358
<TOTAL-COSTS> 111,358
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (68)
<INTEREST-EXPENSE> 1,125
<INCOME-PRETAX> 18,946
<INCOME-TAX> 7,105
<INCOME-CONTINUING> 11,841
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,841
<EPS-PRIMARY> .59<F1>
<EPS-DILUTED> .58<F1>
<FN>
<F1> Basic and diluted earnings per share calculated in accordance with
Statement of Financial Accounting Standards No. 128.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
These schedules contain summary financial information extracted from the
consolidated balance sheets and the consolidated statements of income of
Barnes Group Inc. for the periods presented and is qualified in its
entirety by reference to such financial statements. Earnings per share
have been restated to be in compliance with Statement of Financial
Accounting Standards No. 128 (FAS 128) "Earnings Per Share".
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1997 JAN-01-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 21,132 29,154 36,466
<SECURITIES> 0 0 0
<RECEIVABLES> 104,403 102,442 97,701
<ALLOWANCES> 3,107 2,699 2,797
<INVENTORY> 66,218 66,437 65,338
<CURRENT-ASSETS> 202,921 209,460 212,694
<PP&E> 325,230 332,245 335,587
<DEPRECIATION> 192,919 196,465 200,059
<TOTAL-ASSETS> 403,227 414,095 417,186
<CURRENT-LIABILITIES> 85,502 88,398 88,652
<BONDS> 74,285 73,605 72,912
0 0 0
0 0 0
<COMMON> 220 220 220
<OTHER-SE> 167,126 175,983 179,539
<TOTAL-LIABILITY-AND-EQUITY> 403,227 414,095 417,186
<SALES> 158,133 324,000 482,538
<TOTAL-REVENUES> 158,133 324,000 482,538
<CGS> 102,946 214,189 319,530
<TOTAL-COSTS> 102,946 214,189 319,530
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 123 363 674
<INTEREST-EXPENSE> 1,288 2,525 3,743
<INCOME-PRETAX> 16,189 33,331 49,563
<INCOME-TAX> 6,071 12,499 18,586
<INCOME-CONTINUING> 10,118 20,832 30,977
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 10,118 20,832 30,977
<EPS-PRIMARY> .50<F1> 1.03<F1> 1.53<F1>
<EPS-DILUTED> .49<F1> 1.01<F1> 1.50<F1>
<FN>
<F1>Restated basic and diluted EPS calculated in accordance with FAS 128.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
These schedules contain summary financial information extracted from the
consolidated balance sheets and the consolidated statements of income of
Barnes Group Inc. for the periods presented and is qualified in its
entirety by reference to such financial statements. Earnings per share
have been restated to be in compliance with Statement of Financial
Accounting Standards No. 128 (FAS 128) "Earnings Per Share". In addition,
earnings per share amounts have been restated for the 3-for-1 stock split
effective April, 1997.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS 6-MOS 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1996 JAN-01-1996 JAN-01-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996 JUN-30-1996 SEP-30-1996 DEC-31-1996
<CASH> 17,868 15,780 24,442 21,438 23,986
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 89,721 96,310 97,876 98,605 91,218
<ALLOWANCES> 3,635 3,381 3,091 2,940 3,158
<INVENTORY> 56,749 62,205 64,032 65,701 64,942
<CURRENT-ASSETS> 172,816 184,648 197,001 196,616 190,298
<PP&E> 297,832 303,671 309,690 316,765 320,604
<DEPRECIATION> 174,962 179,844 184,763 188,012 189,533
<TOTAL-ASSETS> 361,549 373,647 390,200 393,559 389,956
<CURRENT-LIABILITIES> 77,536 85,405 93,093 90,494 80,822
<BONDS> 77,491 76,874 76,246 75,605 74,951
0 0 0 0 0
0 0 0 0 0
<COMMON> 15,737 15,737 15,737 15,737 15,737
<OTHER-SE> 113,104 119,240 127,441 134,572 141,427
<TOTAL-LIABILITY-AND-EQUITY> 361,549 373,647 390,200 393,559 389,956
<SALES> 592,509 150,091 302,695 449,775 594,989
<TOTAL-REVENUES> 592,509 150,091 302,695 449,775 594,989
<CGS> 382,150 97,173 196,060 290,957 384,722
<TOTAL-COSTS> 382,150 97,173 196,060 290,957 384,722
<OTHER-EXPENSES> 0 0 0 0 0
<LOSS-PROVISION> 1,577 82 155 234 545
<INTEREST-EXPENSE> 5,274 1,288 2,588 3,911 4,981
<INCOME-PRETAX> 45,450 10,535 24,278 38,100 52,310
<INCOME-TAX> 17,966 3,898 8,983 14,097 19,742
<INCOME-CONTINUING> 27,484 6,637 15,295 24,003 32,568
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 27,484 6,637 15,295 24,003 32,568
<EPS-PRIMARY> 1.40<F1> .34<F1> .77<F1> 1.21<F1> 1.63<F1>
<EPS-DILUTED> 1.38<F1> .33<F1> .76<F1> 1.19<F1> 1.61<F1>
<FN>
<F1>Restated basic and diluted EPS calculated in accordance with FAS 128 and
adjusted for the 3-for-1 stock split.
</FN>
</TABLE>
