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 June 30, 1999
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
August 12, 1999 - 19,372,296
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 June 30, 1999
<CAPTION>
DESCRIPTION PAGES
- ----------- -----
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Income
for the three months and six months
ended June 30, 1999 and 1998 3
Consolidated Balance Sheets as of
June 30, 1999 and December 31, 1998 4-5
Consolidated Statements of Cash Flows
for the six months ended June 30,
1999 and 1998 6
Notes to Consolidated Financial
Statements 7-9
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10-16
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 17
Signatures 17
</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 Six months ended
June 30, June 30,
-------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $156,283 $169,151 $318,531 $338,067
Cost of sales 107,280 112,201 216,820 223,559
Selling and admin-
istrative expenses 36,470 50,096 74,353 88,274
-------- -------- -------- --------
143,750 162,297 291,173 311,833
-------- -------- -------- --------
Operating income 12,533 6,854 27,358 26,234
Other income 1,406 1,700 3,824 2,896
Interest expense 901 929 1,913 2,054
Other expenses 276 192 688 697
-------- -------- -------- --------
Income before income
taxes 12,762 7,433 28,581 26,379
Income taxes 4,579 2,787 10,432 9,892
-------- -------- -------- --------
Net income $ 8,183 $ 4,646 $ 18,149 $ 16,487
======== ======== ======== ========
Per common share:
Net income - basic $ .42 $ .23 $ .92 $ .82
- diluted .41 .23 .91 .81
Dividends .19 .17 .37 .33
Average common shares
outstanding 19,576,567 20,222,640 19,669,347 20,198,031
<FN>
See accompanying notes.
</TABLE>
-3-
<PAGE>
<TABLE>
BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
ASSETS June 30, December 31,
1999 1998
-------- -----------
(Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 34,046 $ 40,206
Short-term investments 1,063 2,566
Accounts receivable, less allowances
(1999-$2,653; 1998-$2,413) 91,103 82,809
Inventories
Finished goods 33,105 34,784
Work-in-process 14,880 15,309
Raw materials and supplies 12,931 14,311
-------- --------
60,916 64,404
Deferred income taxes and prepaid
expenses 18,622 17,243
-------- --------
Total current assets 205,750 207,228
Deferred income taxes 24,807 25,136
Property, plant and equipment 353,152 350,793
Less accumulated depreciation 218,078 211,546
-------- --------
135,074 139,247
Goodwill 17,950 18,224
Other assets 29,593 29,069
-------- --------
Total assets $413,174 $418,904
======== ========
<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 June 30, December 31,
1999 1998
--------- -----------
(Unaudited)
<S> <C> <C>
Current liabilities
Notes payable $ 10,891 $ 6,766
Accounts payable 42,645 38,439
Accrued liabilities 39,860 52,934
Guaranteed ESOP obligation-current 750 2,205
-------- --------
Total current liabilities 94,146 100,344
Long-term debt 51,000 51,000
Accrued retirement benefits 67,572 68,129
Other liabilities 10,357 10,757
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 49,730 49,231
Treasury stock at cost,
1999-2,504,175 shares
1998-2,202,417 shares (49,839) (42,893)
Retained earnings 215,245 204,364
Accumulated other comprehensive income (24,507) (20,043)
Guaranteed ESOP obligation (750) (2,205)
-------- --------
Total stockholders' equity 190,099 188,674
-------- --------
Total liabilities and stockholders'
equity $413,174 $418,904
======== ========
<FN>
See accompanying notes.
</TABLE>
-5-
<PAGE>
<TABLE>
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1999 and 1998
(Dollars in thousands)
(Unaudited)
<CAPTION>
1999 1998
Operating activities: ------- -------
<S> <C> <C>
Net income $18,149 $16,487
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 15,433 14,091
Gain on sale of property, plant
and equipment (576) (98)
Changes in assets and liabilities:
Accounts receivable (8,835) (1,876)
Inventories 2,484 (7,956)
Accounts payable 4,479 4,532
Accrued liabilities (12,595) 3,077
Deferred income taxes 612 (937)
Other (3,505) 6,086
------- -------
Net cash provided by operating activities 15,646 33,406
Investing activities:
Proceeds from sale of property, plant
and equipment 1,096 423
Capital expenditures (12,076) (16,332)
Redemption of short-term investments 1,503 --
Other (773) (813)
------- -------
Net cash used by investing activities (10,250) (16,722)
Financing activities:
Net increase in notes payable 4,124 260
Proceeds from the issuance of common stock 946 2,747
Common stock repurchases (7,817) (6,651)
Dividends paid (7,274) (6,761)
------- -------
Net cash used by financing activities (10,021) (10,405)
Effect of exchange rate changes on cash flows (1,535) (1,676)
------- -------
(Decrease) increase in cash and cash equivalents (6,160) 4,603
Cash and cash equivalents at beginning of period 40,206 32,530
------- -------
Cash and cash equivalents at end of period $34,046 $37,133
======= =======
<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
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, 1998. 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, 1999 are not necessarily
indicative of the results that may be expected for the year
ending December 31, 1999.
2. Property, Plant and Equipment
-----------------------------
Property, plant and equipment are stated at cost.
Depreciation is recorded over estimated useful lives ranging
from 20 to 50 years for buildings and 3 to 17 years for
machinery and equipment. The straight-line method of
depreciation was adopted for all property, plant and equipment
placed into service after March 31, 1999. For property, plant
and equipment placed into service prior to April 1, 1999,
depreciation is provided using accelerated methods. The
change in accounting principle was made to reflect
improvements in the design and durability of machinery and
equipment. Management believes that the straight-line method
results in a better matching of revenues and costs. In
addition, the new method is prevalent in the industries in
which the company operates. The effect of this change on net
income was not material.
3. Comprehensive Income
----------------------
Comprehensive income includes all changes in equity during a
period except those resulting from the investment by and
distributions to owners. For the company, comprehensive
income includes net income and foreign currency translation
adjustments. Foreign currency translation adjustments result
from the foreign operation's assets and liabilities being
translated at the period-end exchange rates and revenues and
-7-
<PAGE>
Notes to Consolidated Financial Statements Continued:
expenses being translated at average rates of exchange. The
resulting translation gains and losses are reflected in
accumulated other comprehensive income within stockholders'
equity.
<TABLE>
Statement of Comprehensive Income
(Dollars in thousands)
(Unaudited)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $ 8,183 $ 4,646 $ 18,149 $ 16,487
Other comprehensive
gain (loss) 405 (2,802) (4,464) (3,297)
-------- -------- -------- --------
Comprehensive income $ 8,588 $ 1,844 $ 13,685 $ 13,190
======== ======== ======== ========
</TABLE>
4. Subsequent Event
----------------
On July 28, 1999, the company announced that it had signed a
definitive agreement to acquire the nitrogen gas springs
business of Teledyne Fluid Systems, of Allegheny Teledyne
Incorporated, for the Associated Spring business segment.
Subject to regulatory review, the acquisition is expected to
be finalized during the third quarter of 1999. The company
plans to finance the purchase through the issuance of long-
term debt, which will result in both higher interest expense
and debt to capital ratios in the future.
5. Information on Business Segments
--------------------------------
The company evaluates the performance of its reportable
segments based on operating profit of the respective
businesses. Segment operating profit was modified to follow
the accounting policies described in the summary of
significant accounting policies footnote included in the
company's 1998 Annual Report. In addition, all corporate
office administrative expenses are allocated to the segments,
exclusive of the costs associated with the accelerated
retirement package for the former president and chief executive
officer.
-8-
<PAGE>
<TABLE>
Notes to Consolidated Financial Statements Continued:
The following tables set forth information about the company's
operations by its three reportable business segments:
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(Dollars in thousands)
Revenues:
<S> <C> <C> <C> <C>
Bowman Distribution $ 58,999 $ 63,457 $118,994 $129,987
Associated Spring 68,510 69,309 134,809 137,790
Barnes Aerospace 31,708 40,519 70,689 78,238
Intersegment sales (2,934) (4,134) (5,961) (7,948)
-------- -------- -------- --------
Total revenue $156,283 $169,151 $318,531 $338,067
======== ======== ======== ========
Operating profit:
Bowman Distribution $ 2,728 $ 9,142 $ 7,583 $ 18,877
Associated Spring 9,057 7,583 15,981 14,780
Barnes Aerospace 2,139 3,988 5,815 7,174
Former CEO retirement
package -- (12,905) -- (12,905)
-------- -------- -------- --------
Total operating profit 13,924 7,808 29,379 27,926
Interest income 172 339 443 698
Interest expense 901 929 1,913 2,054
Other income(expense) (433) 215 672 (191)
-------- -------- -------- --------
Income before income
taxes $ 12,762 $ 7,433 $ 28,581 $ 26,379
======== ======== ======== ========
</TABLE>
-9-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
---------------------
The company's second quarter 1999 sales were $156.3 million, down
8% from $169.2 million in 1998. Operating income was $12.5 million
versus $6.9 million for the comparable 1998 quarter. In the second
quarter of 1998 operating income included a non-recurring charge of
$12.9 million related to the accelerated retirement package of the
company's former president and chief executive officer. The second
quarter 1999 performance reflects sales and profit declines at
Barnes Aerospace and Bowman Distribution. However, Associated
Spring reported a 19% increase in operating profits in the 1999
second quarter on near level year-over-year sales.
The company's 1999 first half sales were $318.5 million, down 6%
from $338.1 million in 1998. The 1999 year-to-date operating
income was $27.4 million versus $26.2 million reported in 1998.
The 1998 year-to-date results include the non-recurring charge
related to the accelerated retirement package of the company's
former president and chief executive officer. The 1999 results
reflect year-over-year sales declines at all three business
segments and operating profit declines at Barnes Aerospace and
Bowman Distribution. The operating profit declines were partially
offset by Associated Spring, which recorded an 8% year-over-year
improvement in operating profit.
Segment Review-Sales and Operating Profit
------------------------------------------
Associated Spring segment sales for the second quarter and six
months ending June 30, 1999 declined slightly versus the comparable
1998 periods. Sales for the 1999 second quarter and first half
were $68.5 million and $134.8 million, respectively. In spite of
lower sales, the second quarter and year-to-date 1999 operating
profits increased to $9.1 million and $16.0 million, respectively,
a 19% and 8% improvement over the comparable 1998 periods. The
improved results are largely attributable to a strong performance
by Associated Spring's largest U.S. plant, stabilization of
international economies, and cost management at Associated Spring's
headquarters.
-10-
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations Continued:
Bowman Distribution's second quarter and year-to-date 1999 segment
sales were $59.0 million and $119.0 million, a 7% and 9% decline
from the comparative 1998 periods. Operating profits in 1999 also
declined in both the second quarter and first half as compared to
1998. The sales and profit shortfalls in 1999 were due to shipment
delays and cancellations resulting from a planned warehouse shutdown
initiated in the first quarter to install a new warehouse
management system at the Elizabethtown, Kentucky facility. This
implementation encountered unanticipated operational as well as
software problems during the system installation which resulted in
shipment delays, cancellations and added costs. Management is
addressing this issue and expects to see improved customer service
levels and warehouse efficiency in the second half of 1999.
Barnes Aerospace's second quarter 1999 segment sales were $31.7
million compared to $40.5 million in 1998 and the year-to-date 1999
segment sales were $70.7 million compared to $78.2 million in 1998.
A direct result of the sales decline was a shortfall in operating
profits in 1999 in both the second quarter and first half compared
to 1998. The 1999 sales and operating profit declines occurred at
Barnes Aerospace's original equipment manufacturing facilities, the
result of significant rescheduling by its customers due to the
slowdown in the aviation industry. This industry slowdown has
resulted in a decrease in new orders for aerospace products and
cancellations or rescheduling of existing orders throughout the
industry and is expected to result in lower manufacturing volumes
in the near term. The 1999 results at Barnes Aerospace's overhaul
and repair facilities kept pace with last year's strong
performance.
Non-Operating Income/Expense
----------------------------
Other income for the first half of 1999 increased over 1998
reflecting a gain on the sale of the recently closed Associated
Spring, Arden, North Carolina facility and net foreign exchange
transaction gains, mainly resulting from the devaluation of the
Brazilian real, in the early part of 1999. The decline in other
income in the second quarter of 1999 compared to 1998 was largely
attributable to lower net foreign exchange gains. Interest expense
and other expenses for both the first half and second quarter of
1999 were comparable to the same periods in 1998.
Income Taxes
------------
The company's effective tax rate was 36.5% in 1999 as compared to
37.5% in 1998. The lower rate in 1999 was due to lower state taxes
as well as higher foreign income with tax rates lower than the U.S.
statutory tax rate.
-11-
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations Continued:
Net Income and Net Income Per Share
-----------------------------------
Consolidated net income for the second quarter of 1999 and 1998 was
$8.2 million and $4.6 million, respectively. Basic and diluted
earnings per share for the 1999 second quarter were $.42 and $.41
compared to 1998's basic and diluted earnings per share of $.23.
In the second quarter of 1998, earnings included a non-recurring
after-tax charge of $7.7 million, or $.38 per share related to the
accelerated retirement package of the company's former president
and chief executive officer.
Consolidated net income for the first half of 1999 and 1998 was
$18.1 million and $16.5 million, respectively. Basic and diluted
earnings per share for the first six months of 1999 were $.92 and
$.91 compared to 1998's basic and diluted earnings per share,
including the non-recurring charge, of $.82 and $.81, respectively.
There were no adjustments to net income for the purpose of
computing income available to common stockholders for 1999 and
1998. For the purpose of computing diluted earnings per share, the
weighted average number of shares outstanding for the second
quarter of 1999 and 1998 was increased by 263,937 and 339,811,
respectively, and for the first six months of 1999 and 1998 was
increased 236,098 and 360,763, respectively, representing the
potential dilutive effects of stock-based incentive plans.
Financial Condition
-------------------
Cash Flows
----------
Net cash generated by operating activities in the first six months
of 1999 was $15.6 million, compared to $33.4 million in 1998. This
decrease in operating cash flows is primarily related to cash
payments of $7.0 million made in 1999 for the early retirement
package for the former president and chief executive officer which
was expensed and accrued in 1998. These cash payments are
reflected in the decrease in accrued liabilities.
Net cash used for investing activities during the first six months
of 1999 was $10.3 million compared to $16.7 million in 1998's first
half. The decrease in cash used in 1999 compared to 1998 was due
primarily to lower capital spending. This reduction comes after
five years of heavy investment by all three operating Groups to
expand capacity and improve productivity, quality and customer
service.
-12-
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations Continued:
Net cash used by financing activities was $10.0 million in the
first half of 1999 compared to $10.4 million in 1998's first half.
Liquidity and Capital Resources
-------------------------------
During 1999 and 1998, 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 June 30,
1999, the company classified as long-term debt $3.6 million of
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 method of long-term
financing.
As described in the Notes to Consolidated Financial Statements, on
July 28, 1999, the company signed a definitive agreement to acquire
the nitrogen gas springs business of Teledyne Fluid Systems, a
division of Allegheny Teledyne Incorporated. The company plans to
finance this purchase, which is subject to regulatory review,
through the issuance of long-term debt that will result in both
higher future interest costs and debt to capital ratios.
The company maintains substantial bank borrowing facilities to
supplement internal cash generation. At June 30, 1999, the company
had $150.0 million of borrowing capacity under its long-term
revolving credit agreement of which none was borrowed. The company
had $14.0 million in borrowings under uncommitted short-term bank
credit lines at June 30, 1999. The interest rate on this borrowing
was 5.62%. The company believes its credit facilities coupled with
cash generated from operations are adequate for its anticipated
future requirements.
Year 2000 Readiness
--------------------
Background
----------
When the Year 2000 (Y2K) arrives, computer software may not be able
to distinguish between the year 1900 and 2000 and, as a result,
date-based information may not be processed accurately. This
situation has never been experienced, so no one is quite sure of
the consequences or how to completely prevent business disruptions.
-13-
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations Continued:
General Approach
----------------
The company's intention is to be fully Y2K ready with all of its
critical business systems and critical third party business
relationships by the Year 2000. The process of addressing Y2K
readiness began in early 1997 at each of the company's three
business segments. The company established a primary Y2K project
team led by its chief financial officer and its information
technology (IT) directors. With the assistance of a third party
consultant, the company is using a multi-phase approach to manage
the Y2K readiness project involving assessment of the problem,
remediation and testing. The company is on target to complete its
Y2K readiness project at both its Associated Spring and Barnes
Aerospace businesses by the end of the third quarter of 1999. At
Bowman Distribution the implementation of an enterprise management
system encountered difficulties in the second quarter of 1999 which
have caused a delay in the final implementation until the fourth
quarter of this year.
Assessment
----------
In this phase, the company identifies its critical business systems
and critical third party business relationships, and assesses the
Y2K impact on each one to determine the relative risks of possible
Y2K failures. Based on the risk assessments, priorities are set,
resources are allocated and the plan for the next phase,
remediation, is established. The assessment of the company's
systems is complete, although the monitoring of the readiness of
critical business relationships with suppliers and customers is a
continuous process. In addition, as new IT systems come on line,
they will be assessed as to their Y2K impact on the readiness of
the company's critical systems.
Remediation
-----------
This phase involves the conversion, modification, or replacement of
systems that are not Y2K ready, and the implementation and
integration of new Y2K ready systems. It also involves efforts to
foster Y2K readiness of third parties with which the company has
critical business relationships. This phase is by far the most
complicated, time consuming and costly of the Y2K project. The
completion of remediation or implementation of critical systems for
Barnes Aerospace and Associated Spring was completed during the
second quarter of 1999. For Bowman Distribution, remediation is
expected to be completed by year-end with the new system
implementation.
-14-
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations Continued:
Testing
-------
During this phase, the testing, verification and validation of the
performance, functionality and integration of new, replaced and
converted systems will be conducted. Both Aerospace and Associated
Spring are well into the testing phase, the completion of which is
planned by the end of the third quarter of 1999. Bowman
Distribution expects to complete its testing phase during the
fourth quarter. The fourth quarter will also be used to resolve
unanticipated activities including possible vendor modifications.
Contingency Plans
-----------------
The company is developing contingency plans concurrent with the
remediation and testing phases. When the Y2K readiness risks have
been determined, contingency plans will be finalized to deal with
the most likely worst-case scenarios. Associated Spring and Barnes
Aerospace will have substantially completed this phase by the end
of the third quarter of 1999, with follow-up to occur in the fourth
quarter. Management considers the timing of the implementation of
the Bowman Distribution enterprise management system to be a risk
area for the company. As a result, plans and costs are being
developed to make the existing Bowman Distribution system Y2K ready
by December 1, 1999.
Cost
----
The total expenses specifically associated with the company
becoming Y2K ready are not expected to be material. Because the
company has been in the continuous process of upgrading and
modifying existing IT systems as well as adding new systems in the
ordinary course of doing business, Y2K readiness was incorporated
into the overall strategy to improve and upgrade IT systems. With
the expected implementation of the Bowman enterprise management
system in 1999, the company will have completed a process begun in
1995 of upgrading all of its critical application software. The
costs specific to addressing the Y2K readiness project are those
directly related to upgrading existing systems to be Y2K ready and
costs related to outside consultants assisting with the Y2K
project. These costs have been expensed as they have been incurred
and totaled approximately $0.6 million in 1998 and are expected to
total approximately $1.2 million in 1999. The $1.2 million
estimate does not include the costs of the Bowman contingency plan
to modify the existing system to be Y2K ready by the Year 2000.
-15-
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations Continued:
These Bowman contingency plan costs are currently being finalized
and are not expected to have a significant impact on the company's
consolidated financial statements. A significant portion of the
company's overall IT expense of approximately $11.5 million in 1998
and the estimated $12.4 million in 1999 is either directly or
indirectly used to address Y2K readiness either through software
remediation or implementation. In addition, capitalized IT related
hardware and software expenditures totaled $12.0 million in 1998
and are expected to be $9.0 million in 1999.
Risks
-----
Y2K readiness encompasses a number of factors, which the company
cannot completely control, including its critical business
relationships with third party suppliers and customers. Although
the company is taking steps to minimize the potential adverse
effects of the Y2K issue, any failure by the company, its major
vendors, other material service providers, or its principal
customers to address this issue on an adequate and timely basis
could have a material adverse effect on the company's business,
results of operations, cash flow and financial condition.
Forward-Looking Statements
--------------------------
The company cautions readers that certain factors may affect the
company's results for future fiscal periods. These factors
involve risks and uncertainties that could cause future results
to differ materially from those expressed or implied in any
forward-looking statements made on behalf of the company. For
this purpose, any statement other than one of historical fact may
be considered a forward-looking statement. Some important
factors that could cause actual results to vary materially from
those anticipated in forward-looking statements include economic
and industry volatility, currency and interest rate fluctuations,
regulatory changes and technological changes (including Y2K
issues), all of which may affect the company's operations,
products and markets.
-16-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 18 Independent accountants' preferability letter
regarding change in accounting principles
Exhibit 27 Financial Data Schedule, June 30, 1999
(b) Reports on Form 8-K
A report on Form 8-K dated August 9, 1999 was filed with
the commission on August 11, 1999. This report includes
information under Item 5 concerning the July 28, 1999
announcement of the company's agreement to acquire the
nitrogen gas springs business of Teledyne Fluid Systems, a
business of Allegheny Teledyne Incorporated.
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 16, 1999 By /s/ Francis C. Boyle, Jr.
--------------- -------------------------------------
Francis C. Boyle, Jr.
Vice President, Controller
(the principal financial officer)
Date August 16, 1999 By /s/ John J. Locher
--------------- -------------------------------------
John J. Locher
Vice President, Treasurer
-17-
Exhibit 18
[PwC Letterhead] PricewaterhouseCoopers LLP
One Financial Plaza
Hartford CT 06013
Telephone (860) 240 2000
July 16, 1999
Board of Directors
Barnes Group Inc.
123 Main Street
Bristol, CT 06011
Dear Directors:
We are providing this letter to you for inclusion as an exhibit to
your Form 10-Q filing pursuant to Item 601 of Regulation S-K.
We have been provided a copy of the Company's Quarterly Report on
Form 10-Q for the period ended June 30, 1999. Note 2 therein
describes a change in accounting principle for depreciating
property, plant and equipment from the accelerated method to the
straight line method. It should be understood that the
preferability of one acceptable method of accounting over another
for depreciation has not been addressed in any authoritative
accounting literature, and in expressing our concurrence below we
have relied on management's determination that this change in
accounting principle is preferable. Based on our reading of
management's stated reasons and justification for this change in
accounting principle in the Form 10-Q, and our discussions with
management as to their judgment about the relevant business
planning factors relating to the change, we concur with management
that such change represents, in the Company's circumstances, the
adoption of a preferable accounting principle in conformity with
Accounting Principles Board Opinion No. 20.
We have not audited any financial statements of the Company as of
any date or for any period subsequent to December 31, 1998.
Accordingly, our comments are subject to change upon completion of
an audit of the financial statements covering the period of the
accounting change.
Very truly yours,
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
<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, 1999, and the
related consolidated statement of income for the six months ended June 30,
1999, 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 34,046
<SECURITIES> 1,063
<RECEIVABLES> 93,756
<ALLOWANCES> 2,653
<INVENTORY> 60,916
<CURRENT-ASSETS> 205,750
<PP&E> 353,152
<DEPRECIATION> 218,078
<TOTAL-ASSETS> 413,174
<CURRENT-LIABILITIES> 94,146
<BONDS> 51,000
0
0
<COMMON> 220
<OTHER-SE> 189,879
<TOTAL-LIABILITY-AND-EQUITY> 413,174
<SALES> 318,531
<TOTAL-REVENUES> 318,531
<CGS> 216,820
<TOTAL-COSTS> 216,820
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 336
<INTEREST-EXPENSE> 1,913
<INCOME-PRETAX> 28,581
<INCOME-TAX> 10,432
<INCOME-CONTINUING> 18,149
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,149
<EPS-BASIC> .92<F1>
<EPS-DILUTED> .91<F1>
<FN>
<F1> Basic and diluted earnings per share calculated in accordance with
Statement of Financial Accounting Standards No. 128.
</FN>
</TABLE>
