MANAGEMENT'S DISCUSSION AND ANALYSIS BARNES GROUP INC.
SALES
In 1994, the company's sales of $569 million were up 13.3% over 1993. Sales
in 1993 were $502 million, 5% below 1992's level of $529 million. Included
in the 1992 consolidated statement of income was $29 million of sales from
the Pioneer division which was sold at the end of 1992.
Associated Spring's sales for 1994 increased 17% to $272 million, following
an increase of 15% in 1993. All operating units reported solid sales gains.
Sales were strong in all market sectors, especially transportation and
electronics. In North America, increased penetration of a strong automotive
market and increases in sales to industrial markets contributed to the sales
gains. Internationally, the group's Singapore operation continued its
excellent penetration of the electronics industry while Brazil increased its
export sales. The group's distribution business, which markets die springs
and precision stock springs, also reported good sales growth.
Bowman Distribution's 1994 sales were $215 million, up $22 million or 11%
from 1993. Bowman U.S., the group's largest business unit, achieved a sales
increase of 12% over 1993. This sales gain was primarily the result of the
progress made in improving the performance of its field sales organization
and gains in its Custom Service Division. Sales from Bowman's businesses in
Europe also increased 12% mainly because of the expansion in the U.K. of the
Bowman System business. Bowman's Canadian business also showed
year-over-year gains in sales, although this increase was dampened when
converted to U.S. dollars due to a weaker Canadian dollar. Bowman
Distribution's 1993 sales of $193 million were down $45 million from 1992.
As noted above, much of the 1993 sales decline resulted from the sale of
Bowman Distribution's Pioneer division at the end of 1992.
Barnes Aerospace sales were $82 million in 1994, up 7% from 1993, following a
decline of 15% in 1993. Strong gains were reported by the group's Advanced
Fabrications and its Repair and Overhaul businesses. The sales of the
group's Precision Machining business were adversely affected by weakness in
both its commercial and military markets.
OPERATING INCOME
Consolidated operating income in 1994 was $36.6 million, compared to $12.5
million in 1993 and $7.3 million in 1992. Provisions for plant closings and
restructurings taken in both 1993 and 1992 dampened operating earnings in
each of these years. Excluding these charges, operating income was $17.4
million in 1993 and $25.1 million in 1992. The gain in operating income in
1994 resulted from the increased volume of business, manufacturing
efficiencies and overall containment of costs. The focus on cost control led
to lower selling and administrative expenses, stated as a percent of sales,
in 1994, as compared to prior years.
Operating income in 1993 included a $3.4 million charge for a plant
consolidation and work force reduction at Barnes Aerospace and a $1.5 million
charge for a plant consolidation at Associated Spring's Mexican operations.
Operating income in 1992 included a $4.7 million charge for restructuring the
sales organization at Bowman's U.S. business, a provision of $9.1 million to
cover plant closings at Associated Spring, and a $4.0 million charge
related to the termination of a contract for C-17 aircraft parts at Barnes
Aerospace's Advanced Fabrications business.
Associated Spring's 1994 operating income rose $13.1 million, or 46%, from
the 1993 level before plant closing provisions. Gains in manufacturing
productivity coupled with excellent control of selling and administrative
expenses resulted in highly leveraged profit growth on the group's strong
sales gain.
Bowman's operating income in 1994 of $12.6 million was $5.9 million above the
1993 level. This gain reflects a higher sales volume in both the U.S. and
Europe and sharply lower selling and administrative expenses, stated
as a percent of sales.
11
MANAGEMENT'S DISCUSSION AND ANALYSIS
Excluding the 1993 plant closing and restructuring charges, Barnes
Aerospace's operating loss was reduced by $2.7 million in 1994. The 1994
operating loss of $1.8 million included $1.1 million of severance costs
recognized in the fourth quarter. The smaller loss in 1994 was due to ongoing
productivity improvements and cost reduction programs. In addition, the
group's Repair and Overhaul business achieved good profit leverage on
significantly higher sales volume. On the negative side, the Advanced
Fabrications unit suffered from high development and start-up costs
associated with new business in 1994.
Please refer to Note 14 of the Notes to Consolidated Financial Statements on
pages 26-27 for further information about the company's operations by
business segment.
NON-OPERATING INCOME/EXPENSE
Other income was $4.6 million in 1994, $4.1 million in 1993 and $3.5 million
in 1992, and includes $2.3 million, $1.7 million and $0.9 million, respectively,
from the company's investment in NASCO, a company jointly owned with NHK
Spring Co., Ltd. of Japan. Interest income, another component of other
income, increased 56% over 1993 to $1.3 million, primarily due to higher
interest rates on funds invested in Brazil.
Interest expense decreased slightly in 1994 following a sharp decline in
1993. In 1994, the impact of lower debt levels was largely offset by higher
interest rates. Lower debt levels and interest rates caused the decline in
1993.
Other expenses decreased in 1994 following an increase in 1993 primarily due
to foreign exchange and translation losses. These losses were $0.5 million,
$1.7 million and $0.1 million in 1994, 1993 and 1992, respectively.
INCOME TAXES
The company's effective tax rate was 40.1% in 1994 compared with 47.8% in
1993 and 24.0% in 1992. Note 7 of the Notes to Consolidated Financial
Statements on page 22 contains an explanatory table showing the factors
affecting the company's effective tax rate in each of these years.
At December 31, 1994, the company had deferred income tax assets of $56.9
million, less a valuation allowance of $6.0 million, and deferred income tax
liabilities of $18.4 million. Management believes that sufficient income
will be earned in future years to realize the deferred tax assets.
NET INCOME AND NET INCOME PER SHARE
Consolidated income was $20.3 million in 1994, $4.4 million in 1993 and $5.8
million, before the effect of accounting changes, in 1992. On a per share
basis, income for 1994 was $3.20, compared to $.70 in 1993 and $.94, before
effect of accounting changes, in 1992. In 1992, after giving effect to
accounting changes, the company had a net loss of $34.9 million, or $5.62
per share.
INFLATION
Management believes that inflation during the 1992-1994 period did not have a
material impact on the company's historical financial statements.
FINANCIAL CONDITION
The company's financial condition, as measured by its statement of cash flows
and balance sheet, remained strong. The following is a discussion of the
significant elements of these financial statements.
Cash Flows
Operating activities are the principal source of cash flows for the company,
generating $38 million in 1994, $18 million more than 1993. During the
past three years, operating activities provided over $100 million in
cash which the company used to pay dividends to stockholders and fund
significant investments in new plant and equipment.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS
Investing activities utilized cash of $31 million in 1994 compared with $21
million in 1993. Capital expenditures of $32 million continued at an
accelerated pace in 1994, 43% higher than 1993 and nearly 100% higher than
1992. During the past three years the company has invested over $70
million in new plant and equipment with nearly 60% of that invested at
Associated Spring in new equipment aimed at improving quality and
productivity and providing for the manufacture of new products.
In 1995, capital expenditures are expected to exceed 1994's level, with
the level of investments in all three businesses expected to be up.
The company's financing activities used cash of $8 million in 1994 compared
to $11 million in 1993. In 1994 and 1993 the company continued to use
surplus cash generated by its U.S. operations to reduce borrowings under
short-term lines of credit. Cash dividends were increased in the fourth
quarter of 1994 from $.35 per share to $.40 per share. Partially offsetting
these uses was the cash generated from the issuance of common stock, largely
in response to the exercise of employee stock options.
Liquidity and Capital Resources
The company's liquidity, measured in terms of the level of working capital,
was $88 million at December 31, 1994, compared to $87 million at December 31,
1993. The current ratio, a key measure of liquidity, approximated 2.0 at
both December 31, 1994 and 1993.
In evaluating the company's working capital position, consideration should be
given to the fact that the majority of its inventories are accounted for on a
LIFO basis. If these inventories were stated on a current cost basis, their
value would have been higher by $13 million in both 1994 and 1993.
The company's ratio of debt to total capitalization improved to 28% at
year-end 1994 from 31% at year-end 1993. For this purpose, total
capitalization is defined as total interest-bearing debt, plus accrued
long-term retirement benefits, other long-term liabilities and stockholders'
equity, excluding the guaranteed ESOP obligation.
During 1994, the company funded nearly $13 million of cash requirements for
its operations in Mexico and Europe using surplus cash from other foreign
operations. Foreign cash requirements in 1995 are expected to be funded in
this manner. To supplement internal cash generation in the U.S., the company
maintains substantial bank borrowing facilities. At December 31, 1994, the
company had $100 million of borrowing capacity available under a revolving
credit agreement which expires in December of 1999. In addition, the company
has available approximately $155 million in uncommitted, short-term bank
credit lines, of which $30 million was in use at December 31, 1994. During
1994 and 1993, the company maintained long-term debt of $70 million,
comprised in part, of borrowings under its short-term bank credit lines
backed by its long-term revolving credit agreement. The company has found
this to be a cost effective approach to long-term financing and intends to
continue this approach in 1995. The company believes these bank credit
facilities coupled with cash generated from operations are adequate for its
future requirements.
CHANGES IN ACCOUNTING PRINCIPLES
As of January 1, 1992, the company recorded the effect of changes in three
accounting principles: one related to postretirement benefits other than
pensions (FAS 106), another for other postemployment benefits (FAS 112), and
a third for income taxes (FAS 109). The aggregate, one-time effect of these
changes reflected in the 1992 results was a charge of $40.7 million net of
tax benefits, equal to $6.56 per common share.
13
CONSOLIDATED STATEMENTS OF INCOME BARNES GROUP INC.
(Dollars in thousands, except per share data)
Years Ended December 31, 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
Net sales $569,197 $502,292 $529,073
Cost of sales 366,455 323,950 336,030
Selling and administrative expenses 166,093 160,904 167,949
Plant closings and restructurings -- 4,900 17,835
- -------------------------------------------------------------------------------------------------------------------------------
532,548 489,754 521,814
- -------------------------------------------------------------------------------------------------------------------------------
Operating income 36,649 12,538 7,259
Gain on sale of Pioneer division -- -- 5,000
Other income 4,611 4,117 3,464
Interest expense 5,133 5,187 6,609
Other expenses 2,205 3,077 1,443
- -------------------------------------------------------------------------------------------------------------------------------
Income before income taxes and
effect of accounting changes 33,922 8,391 7,671
Income taxes 13,606 4,008 1,838
Income before effect of accounting changes 20,316 4,383 5,833
Cumulative effect of accounting changes -- -- (40,695)
- -------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $20,316 $4,383 $(34,862)
===============================================================================================================================
Per common share:
Income before effect of accounting changes $3.20 $.70 $.94
Cumulative effect of accounting changes -- -- (6.56)
- -------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $3.20 $.70 $(5.62)
===============================================================================================================================
Dividends $1.45 $1.40 $1.40
Average common shares outstanding 6,353,777 6,249,966 6,202,305
See accompanying notes.
14
CONSOLIDATED BALANCE SHEETS BARNES GROUP INC
(Dollars in thousands)
December 31, 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $22,023 $24,129
Accounts receivable, less allowances
(1994 - $3,222; 1993 - $2,217) 86,877 77,651
Inventories 50,845 50,491
Deferred income taxes 12,147 12,642
Prepaid expenses 3,645 3,827
- -------------------------------------------------------------------------------------------------------------------------------
Total current assets 175,537 168,740
Deferred income taxes 23,854 22,277
Property, plant and equipment 112,569 103,043
Goodwill 20,614 21,201
Other assets 19,382 18,035
- -------------------------------------------------------------------------------------------------------------------------------
Total assets $351,956 $333,296
===============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $7,903 $10,553
Accounts payable 31,424 27,165
Accrued liabilities 45,713 42,003
Guaranteed ESOP obligation-current 2,172 2,008
- -------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 87,212 81,729
Long-term debt 70,000 70,000
Guaranteed ESOP obligation 9,839 12,011
Accrued retirement benefits 66,817 65,338
Other liabilities 10,949 12,369
Stockholders' equity
Common stock - par value $1.00 per share
Authorized: 20,000,000 shares
Issued: 7,345,923 shares stated at 15,737 15,737
Additional paid-in capital 27,772 28,745
Retained earnings 118,938 107,668
Foreign currency translation adjustments (8,715) (6,464)
Treasury stock at cost (1994 - 916,748 shares;
1993 - 1,052,440 shares) (34,582) (39,818)
- -------------------------------------------------------------------------------------------------------------------------------
119,150 105,868
Guaranteed ESOP obligation (12,011) (14,019)
- -------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 107,139 91,849
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $351,956 $333,296
===============================================================================================================================
See accompanying notes.
15
CONSOLIDATED STATEMENTS OF CASH FLOWS BARNES GROUP INC.
(Dollars in thousands)
Years Ended December 31, 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income (loss) $20,316 $4,383 $(34,862)
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Cumulative effect of accounting changes -- -- 40,695
Depreciation and amortization 23,733 23,094 23,741
Gain on sale of Pioneer division -- -- (5,000)
Gain on sale of property, plant and equipment (151) (442) (343)
Translation losses 356 1,459 897
Changes in assets and liabilities:
Accounts receivable (9,411) (4,504) 782
Inventories (1,037) 1,599 7,712
Accounts payable 4,298 3,113 3,592
Accrued liabilities 2,630 (6,369) 9,302
Deferred income taxes (485) 1,992 (5,653)
Other liabilities and assets (2,549) (4,683) 2,161
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 37,700 19,642 43,024
INVESTING ACTIVITIES
Proceeds from sale of Pioneer division -- 97 16,959
Proceeds from sale of property, plant and equipment 2,835 4,506 2,944
Capital expenditures (31,848) (22,216) (16,238)
Redemption of marketable securities -- -- 3,072
Other (2,252) (3,111) (1,771)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash (used) provided by investing activities (31,265) (20,724) 4,966
FINANCING ACTIVITIES
Net decrease in notes payable (2,653) (4,377) (7,836)
Proceeds from the issuance of common stock 3,956 1,706 1,189
Payments to retire long-term debt -- -- (8,714)
Other -- -- (77)
Dividends paid (9,223) (8,756) (8,684)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (7,920) (11,427) (24,122)
Effect of exchange rate changes on cash flows (621) (2,430) (2,761)
- -------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (2,106) (14,939) 21,107
Cash and cash equivalents at beginning of year 24,129 39,068 17,961
- -------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $22,023 $24,129 $39,068
===============================================================================================================================
See accompanying notes.
16
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY BARNES GROUP INC.
Foreign
Additional Currency Guaranteed
Common Paid-In Retained Translation Treasury ESOP Stockholders'
(Dollars in thousands) Stock Capital Earnings Adjustments Stock Obligation Equity
- -------------------------------------------------------------------------------------------------------------------------------
January 1, 1992 $15,737 $29,684 $155,151 $(261) $(43,904) $(17,594) $138,813
Net loss (34,862) (34,862)
Cash dividends (8,684) (8,684)
Employee stock plans (182) 1,416 1,234
Guaranteed ESOP obligation 1,718 1,718
Income tax benefits on unallocated
ESOP dividends 233 233
Translation adjustments (4,877) (4,877)
- -------------------------------------------------------------------------------------------------------------------------------
December 31, 1992 15,737 29,502 111,838 (5,138) (42,488) (15,876) 93,575
Net income 4,383 4,383
Cash dividends (8,756) (8,756)
Employee stock plans (757) 2,670 1,913
Guaranteed ESOP obligation 1,857 1,857
Income tax benefits on unallocated
ESOP dividends 203 203
Translation adjustments (1,326) (1,326)
- -------------------------------------------------------------------------------------------------------------------------------
December 31, 1993 15,737 28,745 107,668 (6,464) (39,818) (14,019) 91,849
Net income 20,316 20,316
Cash dividends (9,223) (9,223)
Employee stock plans (973) 5,236 4,263
Guaranteed ESOP obligation 2,008 2,008
Income tax benefits on unallocated
ESOP dividends 177 177
Translation adjustments (2,251) (2,251)
- -------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1994 $15,737 $27,772 $118,938 $(8,715) $(34,582) $(12,011) $107,139
===============================================================================================================================
See accompanying notes.
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts included in the notes are stated in thousands except
per share data and the tables in Note 14.)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION: The accompanying consolidated financial statements include
the accounts of the company and all of its subsidiaries. Intercompany
transactions and account balances have been eliminated. The company accounts
for its 45% investment in the common stock of NASCO, an automotive suspension
spring company jointly owned with NHK Spring Co., Ltd. of Japan, under
the equity method. Other income in the accompanying income statements
includes $2,314, $1,734 and $940 for the years 1994, 1993 and 1992,
respectively, of income from the Company's investment in NASCO.
Certain reclassifications have been made in the 1993 and 1992 amounts to
conform with the 1994 presentation.
REVENUE RECOGNITION: Sales and related cost of sales are recognized when
products are shipped to customers.
CASH AND CASH EQUIVALENTS: All highly liquid investments purchased with a
maturity of three months or less are cash equivalents and are carried at fair
market value.
INVENTORIES: Inventories are valued at the lower of cost or market. The
last-in, first-out (LIFO) method was used to accumulate the cost of all U.S.
inventories which represent 74% of total inventories. The cost of foreign
subsidiary inventories was determined using the first-in, first-out (FIFO)
method.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is stated at
cost. Depreciation is provided using accelerated methods over estimated
useful lives ranging generally from 20 to 50 years for buildings, 3 to 17
years for machinery and equipment and 2 to 5 years for tooling. Maintenance
and repairs charged to expense were $16,341, $12,966 and $11,952 in 1994,
1993 and 1992, respectively.
GOODWILL: Goodwill represents the excess purchase price over the net assets
of companies acquired in business combinations. Goodwill acquired since 1970
is being amortized on a straight-line basis over 40 years; similar
investments for businesses acquired prior to 1970 (approximately $5,200) are
not being amortized. The company has determined that there is no indication
of any impairment in the value of goodwill. Accumulated amortization was
$7,002 and $6,415 at December 31, 1994 and 1993, respectively.
FOREIGN CURRENCY TRANSLATION: Assets and liabilities of foreign operations,
except those in countries with high rates of inflation, are translated at
year-end rates of exchange; revenue and expenses are translated at average
annual rates of exchange. The resulting translation gains and losses are
reflected in foreign currency translation adjustments within stockholders'
equity.
For operations in countries that have high rates of inflation, translation
gains and losses are included in net income. These losses, along with those
generated from foreign currency transactions, were $550, $1,661 and $147 in
1994, 1993 and 1992, respectively.
INCOME (LOSS) PER COMMON SHARE: Income (loss) per common share is based on
the weighted average number of common shares outstanding during the year.
The effect of common stock equivalents (stock options) is not material.
For purposes of calculating income per share, Employee Stock Ownership Plan
(ESOP) shares are considered outstanding.
CHANGES IN ACCOUNTING PRINCIPLE: Effective January 1, 1992, the company
adopted three new accounting standards, Statements of Financial Accounting
Standards No. 106, No. 109 and No. 112.
Statement of Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," requires companies to
recognize the estimated future cost of providing health and other
post-retirement benefits on an accrual basis during the period such benefits
are earned by employees. These benefits were previously expensed when paid.
The company elected to record the previously unrecognized service cost of
these benefits immediately, reducing 1992 net income by $38,054, ($63,424
less related deferred income tax benefit of $25,370) or $6.14 per share.
18
BARNES GROUP INC.
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," requires that the liability method be used to calculate deferred
income taxes. Under this method, deferred income tax assets and liabilities
are recognized on temporary differences between the financial statement and
tax bases of assets and liabilities using applicable tax rates. The
cumulative effect of this standard was to reduce 1992 net income by $950 or
$.15 per share.
Statement of Financial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits," requires that the cost of benefits provided to
former or inactive employees be recognized on the accrual basis of
accounting. Previously, the company recognized postemployment benefit costs
(primarily medical benefits provided to certain employees receiving workers'
compensation or long-term disability benefits) when paid. The cumulative
effect of this change in accounting principle, net of deferred income tax
benefit, reduced 1992 net income by $1,691, or $.27 per share.
2. DIVESTITURE
In December, 1992, the company sold its Pioneer division (formerly part of
the Bowman Distribution business segment) for $17,056 in cash. The company
recognized a pre-tax gain of $5,000 on the sale. Sales for Pioneer in 1992
included in the company's consolidated income statement were $29,349.
3. INVENTORIES
Inventories at December 31, consisted of:
1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
Finished goods $28,769 $25,527
Work-in-process 13,697 17,117
Raw materials and supplies 8,379 7,847
- -------------------------------------------------------------------------------------------------------------------------------
$50,845 $50,491
===============================================================================================================================
Inventories valued by the LIFO method aggregated $37,781 and $37,473 at
December 31, 1994 and 1993, respectively. If LIFO inventories had been
valued using the FIFO method, they would have been $12,639 and $12,986
higher at those dates.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, consisted of:
1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
Land $ 5,651 $ 5,762
Buildings 59,727 57,442
Machinery, equipment and tooling 210,807 193,402
- -------------------------------------------------------------------------------------------------------------------------------
276,185 256,606
Less accumulated depreciation 163,616 153,563
- -------------------------------------------------------------------------------------------------------------------------------
$112,569 $103,043
===============================================================================================================================
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. ACCRUED LIABILITIES
Accrued liabilities at December 31, consisted of:
1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
Payroll and other compensation $15,033 $10,371
Postretirement and postemployment benefits 7,631 6,611
Vacation pay 4,500 4,376
Accrued income taxes 3,927 2,486
Pension and profit sharing 1,707 1,718
Plant closings and restructurings 1,611 5,932
Other 11,304 10,509
- -------------------------------------------------------------------------------------------------------------------------------
$45,713 $42,003
===============================================================================================================================
6. DEBT AND COMMITMENTS
Long-term debt at December 31, consisted of:
1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
Carring Fair Carrying
Amount Value Amount
- -------------------------------------------------------------------------------------------------------------------------------
Senior Notes $40,000 $42,100 $40,000
Borrowings under lines of credit 23,000 23,00 23,000
Other 7,000 7,000 7,000
- -------------------------------------------------------------------------------------------------------------------------------
$70,000 $72,100 $70,000
===============================================================================================================================
Senior Notes placed with insurance companies are payable in thirteen
semi-annual payments of $3,077, beginning in September, 1995, and bear
interest at 9.47%. The fair value of these notes is determined using
discounted cash flows based on the company's estimated current interest rate
for similar types of borrowings. The carrying values of other long-term
debt, notes payable and guaranteed ESOP obligation approximate their fair
value.
The company has a revolving credit agreement with six banks that allows
borrowings up to $100,000 under notes due December 6, 1999. A commitment fee
of .17% per annum is paid on the unused portion of the commitments. The
company had no borrowings under this agreement at December 31, 1994 and 1993.
The company has available approximately $155,000 in uncommitted, short-term
bank credit lines, of which $30,000 and $33,500 were in use at December 31,
1994 and 1993, respectively. The interest rate on these borrowings was 6.2%
and 3.4% at December 31, 1994 and 1993.
At December 31, 1994, the company classified $23,000 of borrowings under its
lines of credit and $3,077 of its Senior Notes due within one year as
long-term debt. The company has both the intent and the ability, through its
revolving credit agreement, to refinance these amounts on a long-term basis.
20
BARNES GROUP INC.
The company does not use derivatives for trading purposes. Interest rate
swaps, a form of derivative, are used to manage interest costs. During 1994
and 1993, the company used two interest rate swaps, one of which matured
in 1994. Currently, the company maintains an interest rate swap agreement
which effectively converts $20,000 of its fixed rate Senior Notes to floating
rate debt with interest equal to LIBOR plus 83 basis points. The effective
interest rate on this floating rate portion was 7.3% and 4.2% at December 31,
1994 and 1993, respectively. The difference between fixed rate and
floating rate interest is recognized as an adjustment to interest expense
in the period incurred. This swap decreases as the Senior Notes are repaid.
The fair value of the swap is estimated based upon current settlement prices
and was approximately $710 at December 31, 1994.
The company has guaranteed $7,400 of letters of credit and capital lease
obligations related to its 45% investment in NASCO. In addition, the company
has other outstanding letters of credit totalling $8,000 at December 31, 1994.
Maturities of long-term debt in each of the next five years are: $3,077,
$6,154, $6,154, $6,154 and $29,154. As noted, the 1995 maturity has
been classified as long-term.
Certain of the company's debt arrangements contain requirements as to
maintenance of minimum levels of working capital and net worth, and place
certain restrictions on dividend payments and acquisitions of the company's
common stock. Under the most restrictive covenant in any agreement, $34,009
was available for dividends or acquisitions of common stock at December 31,
1994.
Interest paid was $5,626, $5,496 and $6,650 in the years 1994, 1993 and 1992,
respectively.
7. INCOME TAXES
The components of income before income taxes and effect of accounting changes
and the provision for income taxes follow:
1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
Income before income taxes and
effect of accounting changes:
U.S. $23,639 $6,212 $3,996
International 10,283 2,179 3,675
- -------------------------------------------------------------------------------------------------------------------------------
$33,922 $8,391 $7,671
- -------------------------------------------------------------------------------------------------------------------------------
Income tax provision:
Current:
U.S. - federal $ 7,975 $ (743) $4,521
U.S. - state 1,639 (172) 1,326
International 4,477 2,931 1,644
- -------------------------------------------------------------------------------------------------------------------------------
14,091 2,016 7,491
- -------------------------------------------------------------------------------------------------------------------------------
Deferred:
U.S. - federal (403) 1,383 (4,601)
U.S. - state 355 626 (1,201)
International (437) (17) 149
- -------------------------------------------------------------------------------------------------------------------------------
(485) 1,992 (5,653)
- -------------------------------------------------------------------------------------------------------------------------------
$13,606 $4,008 $1,838
===============================================================================================================================
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred income tax assets and liabilities at December 31, consist of the tax
effects of temporary differences related to the following:
Assets Liabilities
- -------------------------------------------------------------------------------------------------------------------------------
1994 1993 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
Plant closings and restructurings $ 794 $ 2,756 $ -- $ --
Depreciation and amortization (7,155) (8,292) 1,826 2,082
Inventory valuation 6,295 5,383 587 13
Postretirement and postemployment benefits 29,234 29,129 -- --
Tax loss carryforwards 6,672 5,088 -- --
Other 6,147 5,360 1,050 883
- -------------------------------------------------------------------------------------------------------------------------------
41,987 39,424 3,463 2,978
Valuation allowance (5,986) (4,505) -- --
- -------------------------------------------------------------------------------------------------------------------------------
$36,001 $34,919 $ 3,463 $ 2,978
===============================================================================================================================
Current deferred income taxes $12,147 $12,642 $ 587 $ 14
Noncurrent deferred income taxes 23,854 22,277 2,876 2,964
- -------------------------------------------------------------------------------------------------------------------------------
$36,001 $34,919 $ 3,463 $ 2,978
===============================================================================================================================
The components of the net deferred income tax balances recognized in the
balance sheet at December 31, follow:
1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
Total deferred income tax assets $ 56,892 $ 55,861
Total deferred income tax asset
valuation allowance (5,986) (4,505)
Total deferred income tax liabilities (18,368) (19,415)
- -------------------------------------------------------------------------------------------------------------------------------
$ 32,538 $ 31,941
===============================================================================================================================
The company has not recognized deferred income taxes on $60,177 of
undistributed earnings of its international subsidiaries
since such earnings are considered to be reinvested indefinitely.
If the earnings were distributed in the form of dividends, the
company would be subject to both U.S. income taxes and foreign
withholding taxes. Determination of the amount of this unrecognized
deferred income tax liability is not practicable.
A reconciliation of the U.S. federal statutory income tax rate to the
consolidated effective income tax rate follows:
1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
U.S. federal statutory income tax rate 35.0% 35.0% 34.0%
Effect of graduated rates -- (1.0) --
State taxes (net of federal benefit) 3.8 3.6 1.9
Foreign losses without tax benefit 4.0 25.2 3.5
Translation losses 0.4 5.9 4.0
Research and development tax credits (0.3) (1.8) (6.5)
Foreign tax rates (3.1) (5.2) (0.4)
NASCO income (2.0) (5.9) (4.2)
Pioneer sale -- -- (7.7)
Goodwill amortization 0.7 2.7 3.2
Income tax benefit of allocated ESOP dividends (0.9) (3.2) (3.6)
Enacted rate change -- (9.5) --
Other 2.5 2.0 (0.2)
- -------------------------------------------------------------------------------------------------------------------------------
Consolidated effective income tax rate 40.1% 47.8% 24.0%
===============================================================================================================================
Income taxes paid were $8,848, $4,255 and $7,843 in 1994, 1993 and 1992,
respectively.
22
BARNES GROUP INC.
8. COMMON STOCK
In 1994, 1993 and 1992, 135,692, 70,504 and 43,283 shares of common stock
were issued from treasury for the exercise of stock options, purchases by
the Employee Stock Purchase Plan and various other incentive awards.
Each share of outstanding common stock contains a dividend distribution right
(Right) which entitles the holder to purchase 1/100 of a share of Series
A Junior Participating Preferred Stock for one hundred dollars.
Separate rights certificates will be mailed to stockholders if a person or
group acquires, or commences a tender or exchange offer for 50% or more of
the outstanding shares of the company's common stock. The Rights, which have
no voting or dividend rights, expire July 29, 1996 and may be redeemed by the
company at a price of five cents per Right at any time until the tenth day
following public announcement that a person or group has acquired or intends
to acquire 50% or more of the outstanding common stock.
If, following the acquisition by a person or group of 50% or more of the
outstanding shares of the company's common stock, the company is acquired in
a merger or other business combination or 50% or more of the company's assets
or earning power is sold or transferred, each outstanding Right becomes
exercisable for common stock or other securities of the acquiring entity
having a value of twice the exercise price of the Right.
9. PREFERRED STOCK
At December 31, 1994 and 1993, the company had 3,000,000 shares of $1 par
value preferred stock authorized, none of which were outstanding.
10. 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.
The GSP is a leveraged Employee Stock Ownership Plan (ESOP). In 1989, the
GSP purchased 579,310 shares of the company's common stock at a cost of
$21,000 using the proceeds of a loan guaranteed by the company. These
shares are held in trust and are issued to employees' accounts in the
GSP as the loan is repaid. Principal and interest on the GSP loan are
being paid in quarterly installments through 1999. The loan bears
interest based on LIBOR. At December 31, 1994 the interest rate was 6.2%.
Interest of $653, $592 and $773 was incurred in 1994, 1993 and 1992,
respectively.
Contributions and certain dividends received are used in part by the GSP to
service its debt. Contributions in-clude both employee contributions up to a
maximum of 10% of eligible pay and matching company contributions.
The company contributions are equal to the amount required by the Plan to pay
the principal and interest due under the Plan loan plus that required to
purchase any additional shares required to be allocated to participant
accounts, less the sum of participant contributions and dividends received by
the Plan. The GSP used $1,323 of company dividends for debt service in 1994,
and used $1,277 in each of the years 1993 and 1992. The company expenses all
cash contributions made to the GSP. Compensation expense related to the GSP
was $2,268, $2,452 and $1,682 in 1994, 1993 and 1992, respectively. In
addition to the company shares held in trust, the GSP also purchases the
company's common stock on the open market to meet its requirements.
As of December 31, 1994, the GSP held 1,184,332 shares of the company's
common stock, of which 283,720 shares were unallocated.
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For financial statement purposes, the company reflects its guarantee of the
GSP's debt as a liability with a like amount reflected as a reduction of
stockholders' equity.
The company also has an Employee Stock Purchase Plan under which eligible
employees may elect to have up to 10% of base compensation deducted from
payroll for the purchase of the company's common stock at 85% of
market value. The maximum number of shares which may be purchased
under the Plan is 675,000. During 1994, 22,367 shares (23,737 and 23,532
shares in 1993 and 1992, respectively) were purchased. As of December 31,
1994, 242,883 shares may be issued in the future.
The 1991 Barnes Group Stock Incentive Plan authorizes the granting of
incentives to officers and other executives in the form of stock options,
stock appreciation rights, incentive stock rights and performance unit
awards. A predecessor plan which provided for similar incentives expired
in 1991. Options granted under that plan continue to be exercisable and
any options which terminate without being exercised become available for
grant under the 1991 Plan. A maximum of 806,972 common shares are
subject to issuance under this plan after December 31, 1994.
Data relating to grants under these plans follow:
Options 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
Outstanding, January 1 713,696 497,245
Granted 117,300 362,950
Exercised (at $17.64 to $36.13) 108,464 44,059
Cancelled 77,978 102,440
- -------------------------------------------------------------------------------------------------------------------------------
Outstanding, December 31 (at $17.96 to $38.38) 644,554 713,696
===============================================================================================================================
Exercisable, December 31 (at $17.96 to $38.38) 237,120 291,312
===============================================================================================================================
Available for future grants, December 31 162,418 201,740
===============================================================================================================================
Under the Non-employee Director Deferred Stock Plan each non-employee
director is awarded 2,000 shares of the company's common stock upon
retirement. In 1994, 4,000 shares were issued under this plan.
No shares were issued in 1993 or 1992. As of December 31, 1994, 20,000
shares were reserved for issuance under this plan.
Total shares reserved for issuance under all stock plans aggregated 1,069,855
at December 31, 1994.
11. PENSION PLANS
The company has noncontributory defined benefit pension plans covering a
majority of its worldwide employees at Associated Spring, Bowman Distribution
and its Executive Office. Plan benefits for salaried and non-union hourly
employees are based on years of service and average salary. Plans covering
union hourly employees provide benefits based on years of service. The
company funds U.S. pension costs in accordance with the Employee Retirement
Income Security Act of 1974 (ERISA). Plan assets consist primarily of common
stocks and fixed income investments.
Pension expense consisted of the following:
1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
Service cost $ 5,282 $ 4,467 $ 4,292
Interest cost 15,290 14,946 14,548
Actual (return) loss on plan assets 941 (25,875) (16,696)
Net amortization and deferral (20,295) 7,308 (1,294)
- -------------------------------------------------------------------------------------------------------------------------------
$ 1,218 $ 846 $ 850
===============================================================================================================================
In connection with the company's 1992 plant closings, a curtailment gain of
$1,024 was recognized.
24
BARNES GROUP INC.
The funded status of the plans at December 31 is set forth below:
1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
Plan assets at fair value $216,767 $229,455
Actuarial present value of benefit obligations:
Vested benefits 176,219 183,257
Nonvested benefits 3,856 3,083
- -------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligations 180,075 186,340
Additional benefits based on projected future salary increases 20,324 26,583
- -------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligations 200,399 212,923
- -------------------------------------------------------------------------------------------------------------------------------
Plan assets greater than projected benefit obligations $16,368 $16,532
===============================================================================================================================
Reconciliation to net pension asset recognized in the accompanying balance
sheets:
1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
Plan assets greater than projected benefit obligations $16,368 $16,532
Adjustments for unrecognized:
Net gains (2,901) (2,935)
Prior service costs 4,859 5,456
Net asset at transition (10,639) (12,380)
- -------------------------------------------------------------------------------------------------------------------------------
(8,681) (9,859)
- -------------------------------------------------------------------------------------------------------------------------------
Net pension asset $ 7,687 $ 6,673
===============================================================================================================================
Significant assumptions used in determining pension expense and the funded
status of the plans were:
1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
Weighted average discount rate 8.25% 7.50% 9.00%
Increase in compensation 5.25% 5.25% 6.00%
Long-term rate of return on plan assets 9.00% 9.00% 9.00%
The company has defined contribution plans covering employees of Barnes
Aerospace and field sales employees of Bowman Distribution's U.S. operation.
Company contributions under these plans are based primarily on the
performance of the business unit and employee compensation. Total expense
amounted to $1,431, $1,566 and $1,288 in 1994,
1993 and 1992, respectively.
12. POSTRETIREMENT HEALTHCARE AND LIFE INSURANCE BENEFITS
The company provides certain medical, dental and life insurance benefits for
a majority of its retired employees in the U.S. and Canada. It is the
company's practice to fund these benefits as incurred.
Postretirement benefit expense consisted of the following:
1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
Service cost $ 874 $ 792 $ 968
Interest cost 5,199 5,840 5,799
Net amortization (158) -- --
- -------------------------------------------------------------------------------------------------------------------------------
$5,915 $6,632 $6,767
===============================================================================================================================
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The amounts included in the accompanying balance sheets at December 31 were
as follows:
1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligations: $50,917 $48,199 $45,267
Employees eligible to retire 6,209 8,334 9,445
Employees not eligible to retire 12,020 15,204 11,570
Unrecognized prior service cost 1,245 1,403 --
Unrecognized net loss (986) (4,823) --
- -------------------------------------------------------------------------------------------------------------------------------
$69,405 $68,317 $66,282
===============================================================================================================================
Postretirement benefit obligations included in:
Accrued liabilities $5,300 $5,200 $4,923
Accrued retirement benefits 64,105 63,117 61,359
- -------------------------------------------------------------------------------------------------------------------------------
$69,405 $68,317 $66,282
===============================================================================================================================
A deferred tax asset is included in the accompanying balance sheet
recognizing the future tax benefit of the post-retirement benefit obligations
(See Note 7).
Cash payments made in 1994, 1993 and 1992 for postretirement benefits were
$4,828, $4,597 and $4,229, respectively.
The company's accumulated benefit obligations take into account certain
cost-sharing provisions. The annual assumed rate of increase in the cost of
covered benefits (i.e., healthcare cost trend rate) is assumed to be 13.0%
for 1994 gradually reducing to 5.0% by the year 2001. A one percentage point
increase in the assumed healthcare cost trend rate would increase the
accumulated benefit obligations by approximately $6,030 at December 31, 1994
and would increase 1994 expense by approximately $642.
Discount rates of 8.25%, 7.5% and 9.25% were used in determining the
accumulated benefit obligations at December 31, 1994, 1993 and 1992,
respectively.
13. LEASES
Rent expense was $6,072, $5,256 and $5,535 for 1994, 1993 and 1992,
respectively. Minimum rental commitments under noncancellable leases
(principally for buildings and equipment) in years 1995 through 1999 are
$3,705, $2,781, $1,896, $1,521, $998 and $5,258 thereafter.
14. INFORMATION ON BUSINESS SEGMENTS
The company operates three businesses:
ASSOCIATED SPRING manufactures and distributes precision springs and custom
metal parts.
BOWMAN DISTRIBUTION distributes fast-moving, consumable repair and
replacement products for industrial, transportation and heavy equipment
maintenance markets.
BARNES AEROSPACE manufactures and repairs jet engine components and airframe
parts principally for the aircraft and aerospace markets.
26
BARNES GROUP INC.
The following tables set forth information about the company's operations by
its three business segments and by geographic area.
Sales between the business segments and between the geographic areas are
accounted for on the same basis as sales to unaffiliated customers.
Operating income includes net sales less cost of sales, selling and
administrative expenses and the cost of plant closings and restructurings.
In 1993, plant closings and restructurings included $3.4 million for
combining operations of the Aerospace machining units and $1.5 million for
the consolidation of Associated Spring's operations in Mexico. In 1992,
plant closings and restructurings included $9.1 million for closing
Associated Spring plants in Ohio, California and Tennessee and a
distribution facility in Pennsylvania, $4.7 million for restructuring Bowman
Distribution's U.S. sales organization, and $4.0 million related to the
termination of a contract for C-17 aircraft parts made by the Barnes
Aerospace Advanced Fabrications business. Other income and expenses are not
included in operating income. Corporate assets consist of cash and cash
equivalents, deferred income taxes, other assets, transportation equipment
and the Executive Office building.
OPERATIONS BY BUSINESS SEGMENT
Net Sales Operating Income
- -------------------------------------------------------------------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
Associated Spring $272.4 $233.0 $202.9 $41.7 $28.6 $18.5
Bowman Distribution 215.1 193.2 238.5 12.6 6.7 23.2
Barnes Aerospace 82.3 77.0 90.5 (1.8)* (4.5) (2.9)
Intersegment sales (0.6) (0.9) (2.8) -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
$569.2 $502.3 $529.1 52.5 30.8 38.8
========================
Plant closings and restructurings -- (4.9) (17.8)
Corporate expenses (15.9) (13.4) (13.7)
- -------------------------------------------------------------------------------------------------------------------------------
Operating income $36.6 $12.5 $ 7.3
===============================================================================================================================
*Includes a $1.1 provision for severance costs recorded in the fourth quarter.
Identifiable Assets Capital Expenditures Depreciation Expense
- -------------------------------------------------------------------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992 1994 1993 1992 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
Associated Spring $144.7 $124.3 $106.3 $23.7 $11.1 $ 6.4 $ 9.0 $ 7.7 $ 8.0
Bowman Distribution 86.0 80.7 83.7 4.3 5.6 4.2 3.1 2.9 3.8
Barnes Aerospace 85.6 90.0 102.8 3.7 5.4 5.5 7.5 8.0 7.7
Corporate 35.7 38.3 55.5 0.1 0.1 0.1 0.2 0.3 0.4
- -------------------------------------------------------------------------------------------------------------------------------
$352.0 $333.3 $348.3 $31.8 $22.2 $16.2 $19.8 $18.9 $19.9
===============================================================================================================================
OPERATIONS BY GEOGRAPHIC AREA
Net Sales Operating Income
- -------------------------------------------------------------------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
Domestic $454.8 $404.8 $442.0 $45.0 $28.4 $36.4
International 121.9 103.1 93.8 7.5 2.4 2.4
Sales between geographic areas (7.5) (5.6) (6.7) -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
$569.2 $502.3 $529.1 $52.5 $30.8 $38.8
===============================================================================================================================
Identifiable Assets
- -------------------------------------------------------------------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
Domestic $226.6 $210.3 $209.9
International 89.7 84.7 82.9
Corporate 35.7 38.3 55.5
- -------------------------------------------------------------------------------------------------------------------------------
$352.0 $333.3 $348.3
===============================================================================================================================
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. CONTINGENCY
In December, 1991, the company was notified by the McDonnell Douglas
Corporation that McDonnell Douglas was terminating for default an $8,200
contract with the company's Advanced Fabrication unit. In 1992, the company
wrote off $4,000 of net assets related to this contract previously included
in its financial statements. The company believes it has legitimate defenses
to the default claim. While no reasonable estimate of the possible loss or
range of loss can be made at this time, management believes that it is
unlikely that the ultimate resolution of this dispute will have a material
effect on future results of operations of the company. In management's
opinion, the ultimate resolution of this dispute, regardless of the outcome,
will not have a material effect on the financial position of the company.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Barnes Group Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position
of Barnes Group Inc. and its subsidiaries at December 31, 1994, and the
results of their operations and their cash flows for the year, in conformity
with generally accepted accounting principles. These financial statements
are the responsibility of the Company's management; our re-sponsibility is to
express an opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above. The
financial statements of Barnes Group Inc. for the years ended December 31,
1993 and 1992 were audited by other independent accountants whose report
dated January 28, 1994 on those statements included an explanatory paragraph
relative to the change, in 1992, in the methods of accounting for income
taxes and for certain postretirement and postemployment benefits.
/S/ PRICE WATERHOUSE LLP
Hartford, Connecticut
January 23, 1995
28
QUARTERLY DATA (UNAUDITED)
First Second Third Fourth Full
(Dollars in millions except per share data) Quarter Quarter Quarter Quarter Year
- -------------------------------------------------------------------------------------------------------------------------------
1994
Net sales $142.1 $143.2 $140.3 $143.6 $569.2
Gross profit* 51.4 51.4 50.6 49.3 202.7
Operating income 8.8 9.6 10.2 8.0 36.6
Net income 4.9 5.5 5.4 4.5 20.3
Per Common Share:
Net income .78 .87 .84 .71 3.20
Dividends .35 .35 .35 .40 1.45
Market prices (high-low) $31 1/2-29 1/2 $37 3/4-29 3/4 $38-33 5/8 $39 7/8-35 1/2 $39 7/8-291/2
1993
Net sales $127.0 $127.5 $123.1 $124.7 $502.3
Gross profit* 45.9 47.1 43.8 41.5 178.3
Operating income (loss) 1.5 6.7 4.8 (.5) 12.5
Net income (loss) .3 2.9 2.8 (1.6) 4.4
Per Common Share:
Net income (loss) .05 .47 .44 (.26) .70
Dividends .35 .35 .35 .35 1.40
Market prices (high-low) $32 1/4-29 7/8 $33-301/2 $32 3/4-31 $32 3/4-31 1/4 $33-29 7/8
Note: The fourth quarter of 1994 includes a pretax charge of $1.1 or $.10
per common share for severance costs at Barnes Aerospace. The first quarter
of 1993 includes a pretax charge of $3.4 or $.33 per common
share for plant consolidation and reduction of work force at Barnes
Aerospace. The fourth quarter of 1993 includes a $1.5 charge without tax
benefit or $.24 per common share for the consolidation of Associated
Spring's Mexican operations.
*Sales minus cost of sales.
29
SELECTED FINANCIAL DATA
1994 1993(2) 1992(3)(4)
- --------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE (1)
Income (loss)
Continuing operations $3.20 $.70 $.94
Effect of accounting changes -- -- (6.56)
Discontinued operations -- -- --
Net income (loss) 3.20 .70 (5.62)
Dividends paid 1.45 1.40 1.40
Stockholders' equity before deduction of guaranteed
ESOP obligation (at year-end) 18.53 16.82 17.59
Stock price (at year-end) 38 31 1/4 30 1/2
- --------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR (in thousands)
Net sales $569,197 $502,292 $529,073
Operating income
36,649 12,538 7,259
As a percent of sales 6.4% 2.5% 1.4%
Income from continuing operations before income taxes
and effect of accounting changes $33,922 $8,391 $7,671
Income taxes
13,606 4,008 1,838
Income from continuing operations before
effect of accounting changes (8) 20,316 4,383 5,833
As a percent of average stockholders' equity
before deduction of guaranteed ESOP obligation 18.0% 4.1% 5.1%
Effect of accounting changes $-- $-- $(40,695)
Net income (loss) 20,316 4,383 (34,862)
Net income (loss) applicable to common stock 20,316 4,383 (34,862)
Depreciation and amortization 23,733 23,094 23,741
Capital expenditures 31,848 22,216 16,238
Average common shares outstanding 6,354 6,250 6,202
- --------------------------------------------------------------------------------------------------------------------------
YEAR-END FINANCIAL POSITION (in thousands)
Working capital $88,325 $87,011 $93,500
Current ratio 2.0 TO 1 2.1 to 1 2.0 to 1
Property, plant and equipment $112,569 $103,043 $104,437
Total assets
351,956 333,296 348,346
Long-term debt 70,000 70,000 70,000
Stockholders' equity before deduction of
guaranteed ESOP obligation 119,150 105,868 109,451
Guaranteed ESOP obligation 12,011 14,019 15,876
Stockholders' equity 107,139 91,849 93,575
Debt as a percent of total capitalization (9) 28.3% 30.5% 31.2%
- --------------------------------------------------------------------------------------------------------------------------
YEAR-END STATISTICS
Employees 4,181 4,357 4,051
(1) All per-share data, other than earnings per common share, are based on
common shares outstanding at the end of each year. Earnings per common
share are based on weighted average common shares outstanding during
each year.
(2) Includes a $3.4 million pretax, $2.0 million after-tax charge ($.33
per share) against income related to the plant consolidation and work
force reduction at Barnes Aerospace and a $1.5 million charge without
tax benefit ($.24 per share) for a plant consolidation at Associated
Spring's Mexican operations.
(3) Includes a $17.8 million pretax, $10.7 million after-tax charge
($1.73 per share) against income related to the costs of plant closings
at Associated Spring, Barnes Aerospace charges on a terminated contract
and restructuring of Bowman U.S. sales organization. These charges were
partially offset by a $5.0 million pretax gain, $3.7 million after-tax
($.60 per share) from the sale of Bowman's Pioneer division.
(4) Barnes Group adopted three new accounting standards in 1992 retroactive
to the beginning of the year. Included is a one-time $39.7 million
after-tax charge ($6.41 per share) to comply with FAS 106 and 112
which changes the accounting for certain postretirement and
postemployment benefits to the accrual method and an additional
$1.0 million income tax charge ($.15 per share) for FAS 109, which
changed income tax accounting.
30
1991 1990 1989(5) 1988 1987 1986(7) 1985 1984
- --------------------------------------------------------------------------------------------------------------------------
$2.60 $2.76 $1.94 $3.06 $2.80 $2.57 $2.27 $2.42
-- -- -- -- -- -- -- --
-- -- -- -- -- -- (.60) .09
2.60 2.76 1.94 3.06 2.80 2.57 1.67 2.51
1.40 1.40 1.40 1.20 1.15 1.00 .85 .80
25.31 23.88 21.96 20.35 17.91 19.27 17.68 18.09
35 3/8 25 7/8 29 35 5/8 32 30 1/2 27 1/2 21 5/8
- --------------------------------------------------------------------------------------------------------------------------
$535,660 $545,857 $511,221 $496,060 $458,016 $439,727 $431,762 $418,663
37,982 41,198 33,990 43,702 42,265 43,056 40,767 41,107
7.1% 7.5% 6.6% 8.8% 9.2% 9.8% 9.4% 9.8%
$28,849 $29,952 $23,118 $33,175 $34,576 $35,336 $33,574 $34,110
12,926 13,163 10,745 14,327 16,736 18,733 17,157 16,609
15,923 16,789 11,114 16,711 17,700 16,603 16,417 17,501
10.5% 12.0% 9.0% 15.9% 14.0% 14.0% 13.4% 13.9%
$-- $-- $-- $-- $-- $-- $(4,324) $622
15,923 16,789 12,373 18,848 17,840 16,603 12,093 18,123
15,923 16,789 11,114 16,711 17,700 16,603 12,093 18,123
23,159 22,044 18,167 16,626 15,470 14,511 13,486 13,120
19,099 21,615 18,218 21,821 22,457 18,803 16,232 13,395
6,127 6,078 5,733 5,465 6,321 6,461 7,223 7,232
- --------------------------------------------------------------------------------------------------------------------------
$102,995 $94,087 $89,194 $102,126 $85,991 $54,659 $54,077 $70,945
2.2 to 1 1.9 to 1 1.9 to 1 2.3 to 1 2.0 to 1 1.5 to 1 1.6 to 1 1.8 to 1
$114,299 $114,717 $107,491 $100,403 $96,066 $87,613 $87,662 $92,675
341,857 342,383 328,116 311,876 297,946 277,828 253,586 279,505
78,428 78,714 79,088 79,287 73,853 32,285 29,837 39,421
156,407 145,614 133,218 112,810 97,103 123,025 113,978 131,302
17,594 19,182 20,650 -- -- -- -- --
138,813 126,432 112,568 112,810 97,103 123,025 113,978 131,302
36.5% 39.8% 41.1% 37.7% 39.7% 28.5% 22.9% 24.4%
- --------------------------------------------------------------------------------------------------------------------------
4,478 4,744 4,799 4,770 4,712 4,697 4,845 5,354
(5) Includes a $6.5 million pretax, $3.9 million after-tax charge
($.68 per share) against income related to restructuring costs at
Associated Spring.
(6) Includes a $2.9 million pretax, $1.6 million after-tax charge ($.26
per share) against income related to the transition costs involved
in modernizing Associated Spring's valve spring production facilities
in North America.
(7) Barnes Group changed its U.S. pension cost accounting to comply with
FAS 87. The effect was to increase net income by $2.2 million
($.33 per share).
(8) Adjusted for preferred dividends in 1989, 1988 and 1987.
(9) Debt includes all interest-bearing debt and total capitalization includes
interest-bearing debt, accrued long-term retirement benefits, other
long-term liabilities, preferred stock and stockholders' equity,
excluding the guaranteed ESOP obligation.
31
[INSIDE BACK COVER]
DIRECTORY OF OPERATIONS STOCKHOLDERS' INFORMATION
BARNES GROUP INC. BOWMAN DISTRIBUTION TRANSFER AGENT
AND REGISTRAR
Executive Office Headquarters
Mellon Securities
Bristol, Connecticut Cleveland, Ohio Trust Company
Shareholder Inquiries
Bowman-U.S. and Stock Transfers
ASSOCIATED SPRING Headquarters 85 Challenger Rd.
Ridgefield Park, NJ 07660
Headquarters Cleveland, Ohio 1-800-288-9541
(Continental U.S. only)
Bristol, Connecticut or 1-412-236-8000
Distribution Centers
For Hearing Impaired
Manufacturing Plants United States: 1-800-231-5469
North America: Bakersfield, California
Norcross, Georgia Stock Exchange
Bristol, Connecticut Rockford, Illinois
Saline, Michigan Elizabethtown, Kentucky New York Stock Exchange
Syracuse, New York Edison, New Jersey Stock Trading Symbol: B
Arden, North Carolina Arlington, Texas
Corry, Pennsylvania Auburn, Washington
Dallas, Texas DIVIDEND INVESTMENT PLAN
Milwaukee, Wisconsin Canada:
Burlington, Ontario, Dividends on Barnes Group
Canada Concord, Ontario common stock may be
Mexico City, Mexico Edmonton, Alberta automatically invested
Moncton, New Brunswick in additional shares.
Brazil: St. Laurent, Quebec This service is
Stumpp & Schuele provided free to
do Brasil Other Operations stockholders. Further
Industria e information can be
Comercio Limitada, United Kingdom: obtained from:
Campinas
Singapore: Bowman Distribution Mellon Securities
Associated Spring-Asia Europe, Trust Company
Pte. Ltd. Motalink and Reinvestment Services
Bowman Systems UK, P. O. Box 750
Corsham Pittsburgh, PA 15230-9625
Distribution Headquarters 1-800-288-9541
France: (Continental U.S. only)
Maumee, Ohio or 1-412-236-8000
Bowman Distribution
France S.A., For Hearing Impaired
Autoliaisons and 1-800-231-5469
LeSysteme Bowman,
Voisins Le Bretonneux
Distribution Centers BARNES AEROSPACE INDEPENDENT ACCOUNTANTS
Cerritos, California Price Waterhouse LLP
Ypsilanti, Michigan Headquarters One Financial Plaza
Arlington, Texas Hartford, CT 06103
New Berlin, Wisconsin Windsor, Connecticut
10-K REPORT AVAILABLE
International Manufacturing Plants Stockholders who wish to
obtain a free copy of
United Kingdom: Flameco the 10-K Report, which
Associated Spring SPEC Ogden, Utah the Company files with
Limited, Evesham the Securities and
France: Jet Die Exchange Commission,
Associated Spring Lansing, Michigan should write to:
Ressorts SPEC
Montigny Windsor Manufacturing Secretary
Windsor, Connecticut Barnes Group Inc.
Executive Office
Windsor Airmotive 123 Main St,
East Granby, P. O. Box 489
Connecticut Bristol, CT 06011-0489
Windsor Airmotive Asia ANNUAL MEETING
Pte. Ltd.
Republic of Singapore Barnes Group Inc. annual
meeting of stockholders
will be held at
10:30 a.m.,Wednesday,
April 5, 1995, at The
Travelers Education
Center, Hartford, CT.
INVESTOR INFORMATION
Barnes Group welcomes
inquiries from
stockholders, analysts
and prospective
investors. Contact:
John F. Sand,
Director -
Public Affairs
Barnes Group Inc.
123 Main St.,
P.O. Box 489
Bristol, CT 06011-0489
1-203-583-7070
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