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, 2000
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For transition period from
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to
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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 10, 2000 - 18,462,206
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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BARNES GROUP INC.
FORM 10-Q INDEX
For the Quarterly period ended March 31, 2000
DESCRIPTION PAGES
- ----------- -----
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements
of Income for the three months ended
March 31, 2000 and 1999 3
Consolidated Balance Sheets as
of March 31, 2000 and December 31, 1999 4-5
Consolidated Statements of Cash Flows
for the three months ended March 31,
2000 and 1999 6
Notes to Consolidated Financial
Statements 7-9
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-13
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to Vote of
Security Holders 13
ITEM 6. Exhibits and Reports on Form 8-K 14
Signatures 14
-2-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME
Three months ended March 31, 2000 and 1999
(Dollars in thousands, except per share data)
(Unaudited)
2000 1999
-------- --------
Net sales $173,007 $162,248
Cost of sales 116,318 109,540
Selling and administrative expenses 40,970 37,883
-------- --------
157,288 147,423
-------- --------
Operating income 15,719 14,825
Other income 1,396 2,418
Interest expense 2,778 1,012
Other expenses 714 412
-------- --------
Income before income taxes 13,623 15,819
Income taxes 4,223 5,853
-------- --------
Net income $ 9,400 $ 9,966
======== ========
Per common share:
Net income:
Basic $ .51 $ .50
Diluted .50 .50
Dividends .19 .18
Average common shares outstanding
Basic 18,598,578 19,763,158
Diluted 18,753,019 19,971,417
See accompanying notes.
-3-
BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS March 31, December 31,
2000 1999
--------- ----------
(Unaudited)
Current assets
Cash and cash equivalents $ 43,873 $ 43,632
Accounts receivable, less allowances
(2000-$3,691; 1999-$3,329) 106,324 91,701
Inventories
Finished goods 42,904 39,573
Work-in-process 13,511 12,861
Raw materials and supplies 12,047 13,917
-------- --------
68,462 66,351
Deferred income taxes and prepaid
expenses 17,563 17,501
-------- --------
Total current assets 236,222 219,185
Deferred income taxes 23,113 23,797
Property, plant and equipment 370,817 368,191
Less accumulated depreciation 227,086 223,086
-------- --------
143,731 145,105
Goodwill 88,037 88,562
Other assets 40,743 39,633
-------- --------
Total assets $531,846 $516,282
======== ========
See accompanying notes.
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BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY March 31, December 31,
2000 1999
--------- -----------
(Unaudited)
Current liabilities
Notes payable $ 33,922 $ 12,136
Accounts payable 55,201 57,458
Accrued liabilities 45,656 46,426
-------- --------
Total current liabilities 134,779 116,020
Long-term debt 140,000 140,000
Accrued retirement benefits 66,301 66,973
Other liabilities 11,076 12,675
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 50,228 49,786
Treasury stock at cost,
2000-3,605,473 shares
1999-3,187,242 shares (70,027) (63,893)
Retained earnings 224,208 218,388
Accumulated other comprehensive income (24,939) (23,887)
-------- --------
Total stockholders' equity 179,690 180,614
-------- --------
Total liabilities and stockholders'
equity $531,846 $516,282
======== ========
See accompanying notes.
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BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 2000 and 1999
(Dollars in thousands)
(Unaudited)
2000 1999
------- -------
Operating Activities:
Net income $ 9,400 $ 9,966
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 8,304 7,412
(Gain) loss on sale of property,
plant and equipment (36) 110
Changes in assets and liabilities:
Accounts receivable (14,950) (6,706)
Inventories (2,298) 744
Accounts payable (2,076) 2,085
Accrued liabilities (600) (7,112)
Deferred income taxes 58 108
Other (2,592) (2,501)
------- -------
Net Cash (Used) Provided by Operating Activities (4,790) 4,106
Investing Activities:
Proceeds from sale of property, plant
and equipment 166 140
Capital expenditures (6,120) (5,180)
Other (382) (452)
------- -------
Net Cash Used by Investing Activities (6,336) (5,492)
Financing Activities:
Net increase in notes payable 21,793 10,364
Proceeds from the issuance of common stock 334 268
Common stock repurchases (6,582) (4,121)
Dividends paid (3,534) (3,557)
------- -------
Net Cash Provided by Financing Activities 12,011 2,954
Effect of exchange rate changes on cash flows (644) (1,513)
------- -------
Increase in cash and cash equivalents 241 55
Cash and cash equivalents at beginning of period 43,632 40,206
------- -------
Cash and cash equivalents at end of period $43,873 $40,261
======= =======
See accompanying notes.
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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, 1999. 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, 2000 are not necessarily
indicative of the results that may be expected for the year
ending December 31, 2000.
2. 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. The resulting translation gains and losses are
reflected in accumulated other comprehensive income within
stockholders' equity.
The effect of translation losses reduced comprehensive income
by $1.1 million in the first quarter of 2000 and by $4.9
million in the comparative 1999 period.
-7-
Notes to Consolidated Financial Statements Continued:
3. Information on Business Segments
--------------------------------
The following tables set forth information about the Company's
operations by its three reportable business segments:
For the three months ended March 31, 2000 1999
(Dollars in thousands) -------- --------
Revenues
Associated Spring $ 86,313 $ 66,299
Bowman Distribution 61,087 59,995
Barnes Aerospace 29,290 38,981
Intersegment sales (3,683) (3,027)
-------- --------
Total revenue $173,007 $162,248
======== ========
Operating profit
Associated Spring $ 12,336 $ 6,924
Bowman Distribution 2,914 4,855
Barnes Aerospace 1,109 3,676
-------- --------
Total operating profit 16,359 15,455
Interest income 276 271
Interest expense 2,778 1,012
Other income (expense) (234) 1,105
-------- --------
Income before income taxes $ 13,623 $ 15,819
======== ========
4. Stock Plans
-----------
All U.S. salaried and non-union hourly employees are eligible
to participate in the Company's Guaranteed Stock Plan (GSP).
The GSP provides for the investment of employer and employee
contributions in the Company's common stock. The Company
guarantees a minimum rate of return on certain GSP assets.
This guarantee will only become a liability for the Company if,
and to the extent, the value of the related Company stock
-8-
Notes to Consolidated Financial Statements Continued:
does not cover the guaranteed asset value on the day an
employee withdraws from the plan. At March 31, 2000, the
Company's guarantee was $4.9 million based on the March 31,
2000 Company's stock closing price of $14.50 per share. This
compares to a guarantee of $2.3 million at December 31, 1999
when the closing price per share was $16.31. Based on a May
5, 2000 closing price of $17.56, the guarantee would have been
$1.5 million.
5. Subsequent Event
----------------
On May 11, 2000, the Company announced that it had purchased
substantially all of the assets of Curtis Industries, Inc.
(Curtis), of Mayfield Heights, Ohio, pursuant to an agreement
dated April 27, 2000. Curtis was a subsidiary of Paragon
Corporate Holdings, Inc., a privately held company. Curtis,
with 1999 sales of over $80 million, will be combined with the
Company's Bowman Distribution segment to form Barnes
Distribution. The purchase price of $62.1 million was financed
through an existing long-term credit agreement. The increase
in debt will result in both higher interest expense and debt
to capital ratios in the future.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
---------------------
The Company's first quarter 2000 consolidated sales were a record
$173.0 million, up 6.6% from $162.2 million last year. First
quarter 2000 operating income was up 6.0% to $15.7 million compared
to $14.8 million in the comparable 1999 period. Non-U.S.
operations accounted for 25.4% of total sales during the current
quarter, versus 19.8% a year ago. Operating income margin in both
quarters was 9.1%. These results reflect period-over-period sales
and earnings growth in the Associated Spring segment, offset in
part by a decline in Bowman Distribution earnings and declines in
Barnes Aerospace sales and earnings. The cost of sales and selling
and administrative expenses as a percentage of sales for the first
quarter of both years were approximately the same.
-9-
Management's Discussion and Analysis of Financial Condition and
Results of Operations Continued:
Segment Review - Sales and Operating Profit
-------------------------------------------
Associated Spring segment sales for first quarter 2000 increased
30.2% over the same period last year. Sales were a record $86.3
million versus $66.3 million in 1999. The nitrogen gas springs
business, acquired in the third quarter of 1999, contributed $13.0
million in sales during this year's first quarter. Excluding the
nitrogen gas springs business, sales increased 10.5% period-over-
period, due to strong demand from the telecommunications,
electronics and transportation markets served by Associated Spring.
Operating profit increased 78.2% to $12.3 million in the first
quarter of 2000, largely a result of the higher sales volume. Order
backlog at Associated Spring increased 11.1% to $61.9 million at
March 31, 2000, from $55.7 million at December 31, 1999.
Bowman Distribution segment sales in the first three months of 2000
were $61.1 million, up 1.8% from $60.0 million in 1999, the highest
since the second quarter of 1998. The sales improvement in the
first quarter at Bowman reflects progress made in resolving the
issues related to the 1999 implementation of a fully integrated
business system in North America. The complications encountered
with the new system caused shipment delays and higher costs
throughout 1999. Although the implementation issues related to
this system have not been fully corrected, management continues to
make progress toward a full resolution. Operating profit in 2000's
first quarter declined compared to 1999's first quarter as Bowman
continues to incur additional costs associated with the new
business system.
Barnes Aerospace segment first quarter 2000 sales of $29.3 million
declined 24.9% from 1999, reflecting a soft aerospace market.
However, an encouraging sign is the 7.5% increase in sales order
backlog to $85.9 million at March 31, 2000 from $79.9 million at
December 31, 1999. First quarter 2000 operating profit of $1.1
million decreased from the $3.7 million profit reported last year,
due to a decline in sales volume, partially offset by effective
cost control during the period.
-10-
Management's Discussion and Analysis of Financial Condition and
Results of Operations Continued:
Non-Operating Income/Expense
----------------------------
The decline in the first quarter 2000 other income is due to lower
foreign exchange gains of $0.2 million compared to $1.3 million in
1999's first quarter. Other income also includes $0.6 million in
both years from the Company's NASCO joint venture.
Interest expense and other expenses increased in the first quarter
of 2000 as a result of the acquisition of the nitrogen gas springs
business in the third quarter of 1999. The increase in interest
expense is due to additional borrowings to finance the acquisition
and the increase in other expense reflects the goodwill
amortization associated with the acquisition.
Income Taxes
------------
The Company's effective tax rate for first quarter 2000 was 31.0%
compared to 37.0% in 1999's first quarter. This decline is due to
lower state taxes, a higher percentage of foreign income with tax
rates lower than the U.S. statutory tax rate, and foreign tax
benefits related to the acquisition of the nitrogen gas springs
business.
Net Income and Net Income Per Share
-----------------------------------
Consolidated net income for the first quarter of 2000 and 1999 was
$9.4 million and $10.0 million, respectively. Due to the lower
average common shares outstanding, basic earnings per share for the
first quarter of 2000 increased to $.51 from $.50 per share last
year. On a diluted basis, earnings per share was $.50 in both 2000
and 1999. For the purposes of computing diluted earnings per
share, the weighted average number of shares outstanding was
increased for the potential dilutive effects of stock-based
incentive plans.
-11-
Management's Discussion and Analysis of Financial Condition and
Results of Operations Continued:
Financial Condition
-------------------
Cash Flows
----------
Net cash used by operating activities in the first three months of
2000 was $4.8 million compared to cash generated in 1999's first
quarter of $4.1 million. In the first quarter of 2000 operating
cash flow was significantly impacted by higher investments in
operating assets and liabilities, which were used to support a
higher level of business activity.
Net cash used by investing activities in the first quarter of 2000
was $6.3 million compared to $5.5 million in 1999. The increase
was a result of higher capital expenditures at the Barnes Aerospace
segment.
Net cash provided by financing activities was $12.0 million in the
first quarter of 2000 and $3.0 million in the comparable period
last year. Higher borrowings were used to finance the incremental
operating activity requirements and a higher level of the Company's
stock repurchases.
Liquidity and Capital Resources
-------------------------------
At March 31, 2000, the Company classified as long-term debt $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 this amount on a long-term basis.
The Company maintains substantial bank borrowing facilities to
supplement internal cash generation. At March 31, 2000, the
Company had $150.0 million of borrowing capacity under its long-
term revolving credit agreement of which $40.0 million was
borrowed. The Company had $16.0 million in borrowings under
uncommitted short-term bank credit lines at March 31, 2000. The
interest rate on this borrowing was 6.79%. The Company believes its
credit facilities coupled with cash generated from operations are
adequate to finance its anticipated future requirements.
-12-
Management's Discussion and Analysis of Financial Condition and
Results of Operations Continued:
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 changes
in worldwide economic and political conditions, currency and
interest rate fluctuations, regulatory and technological changes,
all of which may affect the Company's operations, products and
markets.
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 12, 2000. Proxies for the
meeting were solicited pursuant to Regulation 14 A.
(c)(1) The following directors were elected:
Votes in Votes For Terms
Director Favor Withheld Expiring
-------- ----- -------- --------
Thomas O. Barnes 16,266,426 800,940 2003
Gary G. Benanav 16,283,074 784,292 2003
Robert W. Fiondella 15,850,276 1,217,090 2003
(2) The stockholders approved the Barnes Group Inc.
Employee Stock and Ownership Program. The proposal was
adopted as 10,701,211 shares voted for, 4,476,189 shares
voted against, 217,685 shares abstained and 1,672,281
shares did not vote.
(3) The stockholders approved the selection of
PricewaterhouseCoopers LLP as the Company's independent
accountants for 2000. The proposal was adopted as
16,601,405 shares voted for, 288,378 shares voted against
and 177,583 shares abstained.
-13-
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit
Exhibit 27 Financial Data Schedule, March 31, 2000.
(b) Reports on Form 8-K
A report on Form 8-K dated April 27, 2000 was filed with
the commission on April 28, 2000. This report includes
information under Item 5 concerning the April 27, 2000
announcement of the Company's agreement to acquire Curtis
Industries, Inc. a subsidiary of Paragon Corporate
Holdings, Inc., a privately held company.
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 15, 2000 By /S/ William C. Denninger
------------ -------------------------------------
William C. Denninger
Senior Vice President, Finance
and Chief Financial Officer
(the principal financial officer)
Date May 15, 2000 By /s/ Francis C. Boyle, Jr.
------------ -------------------------------------
Francis C. Boyle, Jr.
Vice President, Controller
(the principal accounting officer)
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