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 September 30, 2001
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 12, 2001 18,411,213
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-
BARNES GROUP INC.
FORM 10-Q INDEX
For the Quarterly Period ended September 30, 2001
DESCRIPTION PAGES
- ----------- -----
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Income
for the three months ended and nine months
ended September 30, 2001 and 2000 3
Condensed Consolidated Balance Sheets as
of September 30, 2001 and December 31, 2000 4-5
Consolidated Statements of Cash Flows
for the nine months ended September 30,
2001 and 2000 6
Notes to Consolidated Financial
Statements 7-11
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 12-16
ITEM 3. Quantitative and Qualitative Disclosure
About Market Risk 16
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 17
Signatures 17
-2-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
-------------------- -------------------
2001 2000 2001 2000
-------- -------- -------- --------
Net sales $186,500 $190,570 $585,214 $552,041
Cost of sales 125,178 123,550 391,630 362,715
Selling and admin-
istrative expenses 49,702 50,058 154,771 140,471
-------- -------- -------- --------
174,880 173,608 546,401 503,186
-------- -------- -------- --------
Operating income 11,620 16,962 38,813 48,855
Other income 958 973 3,699 3,350
Interest expense 3,848 4,008 12,567 10,250
Other expenses 1,127 1,151 3,429 2,742
-------- -------- -------- --------
Income before income
taxes 7,603 12,776 26,516 39,213
Income taxes 1,901 3,441 6,629 11,372
-------- -------- -------- --------
Net income $ 5,702 $ 9,335 $ 19,887 $ 27,841
======== ======== ======== ========
Per common share:
Net income
Basic $ .31 $ .50 $ 1.07 $ 1.50
Diluted .30 .49 1.05 1.48
Dividends .20 .20 .60 .59
Average common shares
outstanding
Basic 18,481,546 18,601,009 18,536,308 18,551,378
Diluted 18,998,071 18,870,208 18,949,447 18,759,413
See accompanying notes.
-3-
BARNES GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS September 30, December 31,
2001 2000
--------- ------------
(Unaudited)
Current assets
Cash and cash equivalents $ 37,934 $ 23,303
Accounts receivable, less allowances
(2001-$3,246; 2000-$2,720) 115,839 107,434
Inventories
Finished goods 48,877 59,665
Work-in-process 15,909 13,605
Raw materials and supplies 16,661 15,244
-------- --------
81,447 88,514
Deferred income taxes and prepaid
expenses 25,939 22,097
-------- --------
Total current assets 261,159 241,348
Deferred income taxes 7,635 15,010
Property, plant and equipment 407,562 400,319
Less accumulated depreciation 252,042 236,553
-------- --------
155,520 163,766
Goodwill 161,877 155,667
Other assets 62,379 61,150
-------- --------
Total assets $648,570 $636,941
======== ========
See accompanying notes.
-4-
BARNES GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY September 30, December 31,
2001 2000
--------- ------------
(Unaudited)
Current liabilities
Notes payable $ 5,082 $ 6,896
Accounts payable 70,581 59,767
Accrued liabilities 61,313 60,183
Current portion long-term debt 1,459 --
-------- --------
Total current liabilities 138,435 126,846
Long-term debt 232,021 230,000
Accrued retirement benefits 67,253 67,686
Other liabilities 10,329 11,076
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 54,680 51,845
Treasury stock at cost,
2001-3,625,512 shares
2000-3,430,411 shares (76,724) (69,181)
Retained earnings 247,868 239,266
Accumulated other comprehensive income (25,512) (20,817)
-------- --------
Total stockholders' equity 200,532 201,333
-------- --------
Total liabilities and stockholders'
equity $648,570 $636,941
======== ========
See accompanying notes.
-5-
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 2001 and 2000
(Dollars in thousands)
(Unaudited)
2001 2000
------- -------
Operating Activities:
Net income $19,887 $27,841
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 28,067 26,196
Loss (gain) on sale of property,
plant and equipment 100 (2,255)
Changes in assets and liabilities:
Accounts receivable (10,689) (13,920)
Inventories 299 (4,704)
Accounts payable 11,385 (7,672)
Accrued liabilities (2,642) 6,228
Deferred income taxes 9,160 1,248
Other (13,751) (10,540)
------- -------
Net Cash Provided by Operating Activities 41,816 22,422
Investing Activities:
Proceeds from sale of property, plant
and equipment 378 2,736
Capital expenditures (15,981) (19,800)
Business acquisitions (43)(104,655)
Other (3,987) (1,767)
------- -------
Net Cash Used by Investing Activities (19,633)(123,486)
Financing Activities:
Net (decrease) increase in notes payable (2,002) 29,165
Payments on long-term debt (25,000) --
Proceeds from the issuance of long-term debt 24,900 90,000
Proceeds from the issuance of common stock 2,322 3,645
Common stock repurchases (8,214) (8,073)
Dividends paid (11,128) (10,952)
Proceeds from sale of debt swap 13,766 --
------- -------
Net Cash (Used) Provided by Financing Activities (5,356) 103,785
Effect of exchange rate changes on cash flows (2,196) (1,545)
------- -------
Increase in cash and cash equivalents 14,631 1,176
Cash and cash equivalents at beginning of period 23,303 43,632
------- -------
Cash and cash equivalents at end of period $37,934 $44,808
======= =======
See accompanying notes.
-6-
Notes to Consolidated Financial Statements:
1. Summary of Significant Accounting Policies
------------------------------------------
The accompanying unaudited condensed consolidated balance
sheet and consolidated statements of income and cash flows
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. The December 31, 2000 balance sheet was
derived from audited financial statements. The financial
statements 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, 2000. 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, 2001 are not necessarily indicative of
the results that may be expected for the year ending
December 31, 2001.
The Company's policy for classifying cash flows from
derivatives is to report the cash flows consistent with the
underlying instrument.
2. Accounting Change
-----------------
The Company adopted Statement of Financial Accounting
Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities", as amended, on January
1, 2001. The standard requires that all derivative
instruments be recorded on the balance sheet at fair value.
The accounting for changes in the fair value depends on how
the derivative is used and designated. In accordance with
the transition provisions of SFAS 133, the Company recorded
a $0.4 million gain on January 1, 2001, which was entirely
offset by a loss recorded on the re-measurement of
underlying balance sheet items. There was no transition
adjustment to other comprehensive income.
The Company is exposed to fluctuations in interest rates,
foreign currency exchange rates and commodity price changes.
These financial exposures are monitored and managed by the
Company as an integral part of its risk management program.
The Company uses financial instruments to reduce its cost of
debt and to hedge its exposure to fluctuations in interest
rates and foreign currency exchange rates. The Company does
not use derivatives to manage commodity exposures or for
speculative or trading purposes.
-7-
Notes to Consolidated Financial Statements Continued:
Interest Rate Exposures: The Company's long-term debt
portfolio consists of fixed rate and variable rate
instruments and is managed to reduce the overall cost of
borrowing and mitigate fluctuations in interest rates.
Interest rate fluctuations result in changes in the market
value of the Company's fixed rate debt. As part of managing
its debt portfolio, in July 2001, the Company entered into
an interest rate exchange agreement to convert its 9.34%
fixed rate Notes to variable rate debt. This interest rate
contract is a fair value hedge, which is effective in
offsetting fluctuations in the fair value of the debt
instrument. The gains and losses on the interest rate
contract are recorded to earnings and are offset by gains
and losses recorded on the re-measurement of the underlying
debt.
In March 2001, the Company sold its $70 million cross-
currency debt swap. The accumulated adjustment to the
carrying value of the debt is being amortized in accordance
with terms of the underlying debt.
Foreign Currency Exposures: The Company has manufacturing,
sales and distribution facilities around the world and thus
makes investments and conducts business transactions
denominated in various currencies. Foreign currency
commitment and transaction exposures are managed at the
operating units as an integral part of their businesses in
accordance with corporate policy that addresses acceptable
levels of foreign currency risk. The Company uses foreign
currency forward exchange contracts to hedge certain of
these risks. These contracts qualify as fair value hedges of
unrecognized firm commitments or cash flow hedges of
anticipated transactions. The Company does not hedge its
foreign currency net investment exposure.
At September 30, 2001, the fair value of derivatives held by
the Company was a net asset of $2.4 million. During the
nine months ended September 30, 2001, gains or losses
related to hedge ineffectiveness were immaterial.
3. Comprehensive Income
--------------------
Comprehensive income includes all changes in equity during a
period except those resulting from the investment by and
distributions to stockholders. For the Company,
comprehensive income includes net income, foreign currency
translation adjustments, and deferred gains and losses
related to certain derivative instruments. The resulting
gains and losses are reflected in accumulated other
comprehensive income within stockholders' equity.
-8-
Notes to Consolidated Financial Statements Continued:
Statement of Comprehensive Income
(Dollars in thousands)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------- -------------------
2001 2000 2001 2000
-------- -------- -------- --------
Net income $ 5,702 $ 9,335 $ 19,887 $ 27,841
Unrealized losses
on hedging activities (1,493) -- (1,057) --
Foreign currency
translation adjustment (2,832) 3,540 (3,638) 5,078
-------- -------- -------- --------
Comprehensive income $ 1,377 $ 12,875 $ 15,192 $ 32,919
======== ======== ======== ========
4. Debt and Commitments
---------------------
On July 2, 2001, the Company borrowed Yen 3.0 billion, under
its term loan facility with The Development Bank of
Singapore Limited. The term loan is payable in semi-annual
installments of Yen 87.3 million beginning December 1, 2001
with a balloon payment of Yen 2,214.3 million due June 30,
2006. The borrowing has a stated interest rate of 2.15%. In
connection with the Yen borrowing, the Company entered into
a series of forward currency exchange contracts, a form of
derivative, that effectively convert the Yen principal
payments to Singapore Dollar payments. The cost of the
forward contracts is included in interest expense using the
effective interest rate method. Accordingly, the effective
interest rate of the borrowing is 5.5%. Proceeds from this
borrowing were used, in part, to repay borrowings under the
Company's revolving credit agreement.
5. Stock Plans
-----------
Most U.S. salaried and non-union hourly employees are
eligible to participate in the Company's 401(K) plan.
Effective April 1, 2001, the 401(K) plan, previously called
the Barnes Group Inc. Guaranteed Stock Plan (GSP), was
amended and renamed the Retirement Savings Plan (RSP). The
RSP continues to provide for the investment of employer and
employee contributions in the Company's common stock and
also provides other investment alternatives for employee
contributions.
Employee contributions to the RSP for investment in the
Company's common stock after March 31, 2001 are no longer
guaranteed a minimum rate of return. However, the Company
continues to guarantee a minimum rate of return on certain
-9-
Notes to Consolidated Financial Statements Continued:
pre-April 1, 2001 assets of the plan. This guarantee will
become a liability for the Company only if, and to the
extent that, the value of the related Company stock does not
cover the guaranteed asset value when an employee withdraws
from the plan. At September 30, 2001, the Company's
guarantee was $0.2 million based on the Company's September
28, 2001 closing stock price of $21.30 per share.
6. Information on Business Segments
--------------------------------
The following tables set forth information about the
Company's operations by its three reportable business
segments:
Three months ended Nine months ended
September 30, September 30,
------------------- -------------------
2001 2000 2001 2000
-------- -------- --------- --------
(Dollars in thousands)
(Unaudited)
Revenues:
Associated Spring $ 65,164 $ 79,891 $215,916 $252,356
Barnes Aerospace 50,455 34,719 147,519 94,396
Barnes Distribution 72,979 79,162 229,387 215,615
Intersegment sales (2,098) (3,202) (7,608) (10,326)
-------- -------- -------- --------
Total revenues $186,500 $190,570 $585,214 $552,041
======== ======== ======== ========
Operating profit:
Associated Spring $ 5,219 $ 11,550 $ 20,558 $ 36,394
Barnes Aerospace 5,006 3,183 12,872 6,191
Barnes Distribution 1,468 2,742 6,287 8,000
-------- -------- -------- --------
Total operating profit 11,693 17,475 39,717 50,585
Interest income 222 258 665 807
Interest expense (3,848) (4,008) (12,567) (10,250)
Other expense (464) (949) (1,299) (1,929)
-------- -------- -------- --------
Income before income
taxes $ 7,603 $ 12,776 $ 26,516 $ 39,213
======== ======== ======== ========
-10-
Notes to Consolidated Financial Statements Continued:
7. New Accounting Standards
------------------------
In June 2001, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS)
No. 141, "Business Combinations" and SFAS No. 142, "Goodwill
and Other Intangible Assets". SFAS 141 requires companies to
account for acquisitions entered into after June 30, 2001
using the purchase method and establishes criteria to be
used in determining whether acquired intangible assets are
to be recorded separately from goodwill. SFAS 142 sets forth
the accounting for goodwill and other intangible assets
related to business combinations. Goodwill and other
intangible assets with indefinite lives will no longer be
amortized and instead will be evaluated annually for
impairment by comparing the carrying value to the fair value
at the reporting unit level. Intangible assets with
definitive lives will be amortized over their useful lives.
SFAS 142 is effective January 1, 2002 for the Company.
Management is in the process of analyzing and assessing the
impact of the adoption of these statements. The Company
expects that adoption of SFAS 142 will have a favorable
impact on net income due to the elimination of goodwill
amortization; however, the actual effect on the Company's
consolidated results of operations and financial position is
not determinable at this time.
In August 2001, the Financial Accounting Standards Board
issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", which will be effective
January 1, 2002 for the Company. The Company is currently
reviewing the provisions of SFAS No. 144 to determine the
standard's impact upon adoption.
8. Subsequent events
-----------------
On November 5, 2001, the Company announced that it had
acquired certain assets of Forward Industries, LLC. Forward
Industries designs and manufactures nitrogen gas springs
that are used in the appliance, automotive, heating and
cooling, and electrical industries. The purchase price was
approximately $2.5 million. This bolt-on acquisition will be
integrated with the Company's existing nitrogen gas spring
business.
-11-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
---------------------
Net sales for the third quarter 2001 were $186.5 million,
down two percent from $190.6 million in 2000. The decline in
the third quarter net sales reflected the impact of weak
economic conditions on Associated Spring and Barnes
Distribution, which was largely offset by the strong sales
growth at Barnes Aerospace.
The Company's first nine months sales were $585.2 million,
up 6.0% from $552.0 million in 2000. Net sales growth in the
year-to-date period reflected the sharp rise in sales at
Barnes Aerospace and sales from the Company's recent
acquisitions. This was partially offset by a decline in the
transportation and telecommunications related sales at
Associated Spring and the adverse impact on Barnes
Distribution of economic conditions in the manufacturing and
heavy industrial sectors.
Third quarter operating income was $11.6 million, compared
with $17.0 million in the corresponding 2000 period. The
2001 year-to-date operating income was $38.8 million,
compared with $48.9 million in 2000. These results reflect
lower earnings in the Barnes Distribution segment and
sharply lower sales and earnings in the Associated Spring
segment, partially offset by period-over-period sales and
earnings growth in the Barnes Aerospace segment.
Operating income margin for the third quarter was 6.2%
compared to 8.9% a year ago. This decrease reflects a lower
gross margin of 32.9% compared with 35.2% a year ago,
primarily due to the shift in the overall sales mix away
from the higher gross margin Barnes Distribution business as
well as the impact of lower sales volume on Associated
Spring's gross margin. Total selling and administrative
expenses for the quarter were relatively consistent with the
prior year in total and as a percentage of sales. The
selling expense component increased as a percentage of sales
reflecting a continued strategic investment in sales and
marketing for the purpose of stimulating sales growth in new
businesses and new customers. The administrative expense
component decreased in total reflecting consolidation-driven
cost synergies realized at Barnes Distribution as well as
cost reductions at Associated Spring. These cost reductions
were offset in part by additional costs at Barnes Aerospace.
Also included in the 2000 third quarter was a gain of $2.2
million related to the sale of a corporate asset and $1.7
million of one-time consolidation costs in Barnes
Distribution.
-12-
Management's Discussion and Analysis of Financial
Condition and Results of Operations Continued:
While the tragic events of September 11 have created a
roadblock for the stalled domestic economy, management
believes that the cost reduction and other actions that
Associated Spring and Barnes Distribution have executed over
the past year will enable them to effectively manage through
the current economic conditions. In addition, Barnes
Aerospace is taking the appropriate actions necessary to
address near-term disruptions in the commercial aircraft
market.
Segment Review - Sales and Operating Profit
-------------------------------------------
Associated Spring sales for the 2001 third quarter and year-
to-date were $65.2 million and $215.9 million, respectively,
down 18.4% and 14.4% from the comparable 2000 periods. Sales
at Associated Spring continue to be impacted by lower
production rates in the domestic transportation market and
slow sales of telecommunications and electronics products.
The segment's third quarter and year-to-date 2001 operating
profit also decreased substantially to $5.2 million and
$20.6 million, respectively, a 54.8% and 43.5% decrease from
the comparable 2000 periods. This decrease in operating
profits reflects the sales volume decline partly offset by
reductions in operating costs.
Barnes Aerospace reached record sales and operating profits
in the 2001 third quarter. Net sales for the third quarter
and year-to-date 2001 were $50.5 million and $147.5 million,
respectively, up 45.3% and 56.3%, from the comparable 2000
periods. Organic sales were $38.4 million in the third
quarter, up 20.9%, reflecting new customer development and
increased sales to existing customers. Sales from the Kratz-
Wilde/Apex business totaled $12.1 million in the third
quarter, up from $3.0 million a year ago, following the
acquisition of this business in September 2000. Orders were
$52.6 million for the third quarter and order backlog
increased to a record $168.5 million from $144.9 million at
December 31, 2000. Segment operating profit of $5.0 million
for the 2001 third quarter increased 57.3% from last year
while year-to-date operating profit of $12.9 million more
than doubled from the comparable 2000 period. Operating
profit increased as a result of the higher sales volume and
the Kratz-Wilde/Apex acquisition, partially offset by higher
engineering and R&D expenses related to a large number of
new products put into production during the third quarter.
Barnes Distribution third quarter 2001 segment sales were
$73.0 million, down 7.8% from the third quarter of 2000, as
the distribution business continues to be negatively
impacted by the recession in the manufacturing and
industrial sectors. For the year-to-date period, segment
sales were $229.4 million, an increase of 6.4% from the
-13-
Management's Discussion and Analysis of Financial
Condition and Results of Operations Continued:
2000 period. The year-to-date increase reflects incremental
sales from the May 2000 Curtis acquisition. Operating profit
for the third quarter and year-to-date periods decreased to
$1.5 million and $6.3 million, respectively. Operating
profits declined as a result of the lower sales from Barnes
Distribution's organic businesses, particularly at the
Raymond division, partially offset by cost synergies
achieved through the Curtis acquisition.
Non-Operating Income/Expense
----------------------------
Higher other income for the first nine months of 2001
compared to 2000 resulted from incremental foreign exchange
transaction gains of $1.4 million. This increase was
partially offset by lower income from the Company's NASCO
joint venture.
The increase in other expenses in the first nine months of
2001 compared to 2000 was largely attributable to higher
goodwill amortization, a result of the two acquisitions made
in 2000. Interest expense for the year-to-date period also
increased substantially due to the debt service on
acquisition-related debt. Interest expense in the third
quarter was down slightly from the prior year as a result of
lower average interest rates and lower borrowings.
Income Taxes
------------
The Company's effective tax rate for first nine months of
2001 was 25.0% compared to 29.0% in 2000. The lower rate in
2001 is primarily due to a higher percentage of foreign
income in jurisdictions with tax rates lower than the U.S.
statutory tax rate.
Net Income and Net Income Per Share
-----------------------------------
Consolidated net income for the third quarter of 2001 and
2000 was $5.7 million and $9.3 million, respectively. Basic
and diluted earnings per share for the third quarter of 2001
were $.31 and $.30, respectively, compared with basic and
diluted earnings per share of $.50 and $.49, respectively,
for the third quarter 2000. 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.
-14-
Management's Discussion and Analysis of Financial
Condition and Results of Operations Continued:
Financial Condition
-------------------
Cash Flows
----------
Operating activities are the principal source of cash flow
for the Company, generating $41.8 million in the first nine
months of 2001, compared with $22.4 million in 2000. The
significant increase in operating cash flow was due
primarily to continued improvements in working capital.
Management continues to stress the need for aggressive asset
management and was effective in actively reducing overall
working capital levels during the first nine months of 2001.
Investing activities used $19.6 million in the first nine
months of 2001, compared with $123.5 million for the
comparable period in 2000. The cash used in 2000 includes
$104.7 million for the acquisitions of Curtis and Kratz-
Wilde/Apex. In 2001, funds used for a small bolt-on
acquisition were offset in large part by a purchase price
adjustment received in 2001 on the Kratz-Wilde/Apex
acquisition. Capital expenditures were reduced in 2001 in
response to the economic downturn.
Net cash used by financing activities was $5.4 million in
the first nine months of 2001, compared with net cash
provided by financing activities of $103.8 million in the
comparable period of 2000. Cash generated from the sale of a
cross-currency debt swap is included in 2001. The proceeds
from this sale, combined with strong operating cash flow,
were used in part to fund capital expenditures, pay
dividends and repurchase the Company's stock. In 2000, the
increase in borrowings reflected the issuance of additional
long-term debt to fund the acquisitions of Curtis and Kratz-
Wilde/Apex as well as to supplement cash generated by
operating activities to finance capital expenditures,
dividends and stock repurchases.
Liquidity and Capital Resources
-------------------------------
At September 30, 2001, the Company classified as long-term
debt $8.0 million of borrowings under lines of credit. 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 September 30,
2001, the Company had $150.0 million of borrowing capacity
under its long-term revolving credit agreement of which
-15-
Management's Discussion and Analysis of Financial
Condition and Results of Operations Continued:
$35.0 million was borrowed. This borrowing facility expires
in December 2002. Management intends to negotiate a new
revolving credit agreement in the first quarter of 2002.
The Company had $12.5 million in borrowings under
uncommitted short-term bank credit lines at September 30,
2001. The interest rate on these borrowings averaged 4.01%.
The Company believes its credit facilities coupled with cash
generated from operations are adequate to finance its
anticipated future requirements.
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
actual 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, as defined in the Public Securities Litigation
and Reform Act of 1995. Some factors that could cause
actual results to vary materially from those anticipated in
forward-looking statements include changes in worldwide
economic and political conditions and the timeliness and
effectiveness of the Company's response to such changes,
currency and interest rate fluctuations, regulatory and
technological changes, changes in market demand for the
types of products and services produced and sold by the
Company, the Company's success in identifying and attracting
customers in new markets, the Company's ability to develop
new and enhanced products to meet customers' needs, the
Company's ability to integrate newly acquired businesses,
and to realize projected synergies of acquisitions on
schedule.
Item 3. Quantitative and Qualitative Disclosure About Market
Risk
At September 30, 2001, the result of a hypothetical 1%
increase in the average cost of the Company's variable rate
debt would reduce pretax profit of the Company by $1.1
million on an annual basis. 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, 2000.
-16-
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 10.1 Barnes Group Inc. Executive Deferred
Compensation Plan.
(b) No reports on Form 8-K were filed during the quarter
ended September 30, 2001.
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 15, 2001 By /s/ William C. Denninger
----------------- -------------------------------------
William C. Denninger
Senior Vice President, Finance
and Chief Financial Officer
(the principal financial officer)
Date November 15, 2001 By /s/ Francis C. Boyle, Jr.
----------------- -------------------------------------
Francis C. Boyle, Jr.
Vice President, Controller
(the principal accounting officer)
-17-