Barnes Group Around the World
[WORLD-WIDE GLOBE GRAPHIC]
- --------------------------------------------------
- --------------
ASSOCIATED SPRING DISTRIBUTION OPERATIONS
HEADQUARTERS UNITED STATES
Bristol, Connecticut Maumee, Ohio
Cerritos, California
MANUFACTURING PLANTS Ypsilanti, Michigan
NORTH AMERICA Arlington, Texas
Bristol, Connecticut New Berlin, Wisconsin
Saline, Michigan
Syracuse, New York UNITED KINGDOM
Arden, North Carolina Evesham
Corry, Pennsylvania
Dallas. Texas FRANCE
Milwaukee, Wisconsin Montigny
Burlington, Ontario, Canada
Mexico City, Mexico
SOUTH AMERICA
Campinas, Brazil
ASIA
Republic of Singapore
- --------------------------------------------------
- --------------
BOWMAN DISTRIBUTION
HEADQUARTERS
Cleveland, Ohio
DISTRIBUTION CENTERS BARNES AEROSPACE
UNITED STATES HEADQUARTERS
Bakersfield, California Windsor, Connecticut
Norcross, Georgia
Rockford, Illinois MANUFACTURING PLANTS
Elizabethtown, Kentucky UNITED STATES
Edison, New Jersey East Granby, Connecticut
Arlington, Texas Windsor, Connecticut
Auburn, Washington Lansing, Michigan
Ogden, Utah
CANADA ASIA
Concord, Ontario Republic of Singapore
Edmonton, Alberta
Moncton, New Brunswick BARNES GROUP INC.
St. Laurent, Quebec HEADQUARTERS
Bristol, Connecticut
DISTRIBUTION OPERATIONS
UNITED KINGDOM
Corsham
FRANCE
Voisins Le Bretonneux
[UNITED STATES MAP GRAPHIC]
MANAGEMENTOS DISCUSSION AND ANALYSIS BARNES GROUP
INC.
A SALUTE TO OUR EMPLOYEES
WHO HELPED MAKE IT HAPPEN
Flowing through the following financial pages is a
series of employee photos that represent the
thousands of people throughout the company whose
contributions in 1996 helped us achieve record
earnings for the second year in a row. It is
through their efforts that the momentum that began
three years ago has accelerated -- and will
continue to move us ahead in the future. It has
always been a key part of Barnes GroupOs Guiding
Philosophy that Opeople are our most important
resource.O
[PHOTO OF TARIQ AFZAL ASSOCIATED SPRING
SOUTHFIELD, MICHIGAN]
[PHOTO OF AL BEDELL BARNES AEROSPACE WINDSOR,
CONNECTICUT]
RESULTS OF OPERATIONS
Barnes Group Inc. reported all-time records in
sales and earnings in 1996, for the second
consecutive year. Sales were $595.0 million
compared to $592.5 million in 1995. Sales in 1995
increased 4% over 1994. Operating income was up
13% in 1996 to $55.3 million, compared to $48.8
million in 1995. Operating income in 1995
increased 33% over the $36.6 million reported in
1994. Operating income margin has steadily
increased to 9.3% in 1996 compared to 8.2% in 1995
and 6.4% in 1994. The 1996 results reflect profit
growth at all three business segments and solid
sales gains at Barnes Aerospace. The 1995 results
reflected sales and profit improvements at all
three business segments. Cost of sales as a
percentage of sales was 64.7% in 1996, comparable
to the prior two year periods. Selling and
administrative expenses decreased in both 1996 and
1995 versus the previous years.
SEGMENT REVIEW -- SALES AND OPERATING INCOME
Associated Spring segment sales for 1996 were
$279.5 million, up slightly from 1995. Sales in
1995 of $279.0 million were 2% higher than 1994.
This segment reported an 8% increase in operating
income, to a record $45.8 million in 1996. In
1995, Associated Spring reported operating income
of $42.6 million compared to $41.7 million in
1994.
At the segmentOs North American manufacturing
operations, both sales and profits increased,
reflecting a stronger domestic automotive market,
gains in manufacturing efficiencies and lower
material costs. The groupOs distribution business,
which markets die springs and precision stock
springs, also reported sales and profit growth.
Internationally, results were down compared to the
strong results reported in 1995, reflecting a
slowdown in its electronics business and a
softening in Brazil.
Bowman Distribution segment sales for 1996 were
$213.4 million compared to $217.0 million in 1995
and $215.1 million in 1994. While overall North
American sales declined slightly in 1996 versus
1995, good progress was made in penetrating
targeted markets, such as railroad, aerospace,
public utilities and waste management companies
and large customers who look to Bowman for the
full support needed to maintain their operating
facilities. In Europe, BowmanOs sales declined 5%,
as management streamlined its van-based sales
force in an effort to eliminate low margin sales
volume. At the same time, Bowman U.K. reported an
18% increase in its systems business.
Bowman segment operating income in 1996 of $22.0
million increased $4.6 million or 26% from 1995.
The 1995 level of $17.4 million was $4.8 million
above 1994. The gains in operating income reflect
reductions in operating expenses in both North
America and Europe. This lower Ocost to serveO is
essential to BowmanOs strategy of penetrating
targeted markets and large customers where
competitive pricing is a key to success. Also
during 1996, the U.S. and Canadian operations were
integrated into a single, more effective sales and
service organization that is expected to have an
even greater impact on 1997 results.
Barnes Aerospace segment sales were $103.1 million
in 1996, up 6% from 1995, which followed an
increase of 18% from 1994. Sharply higher sales
were reported by the groupOs Repair and Overhaul
business in 1996. The Precision Machining business
also reported sales growth, while sales from the
Advanced Fabrications business were slightly lower
than in 1995. Sales growth in 1995 was driven
primarily by the Advanced Fabrications and
Precision Machining businesses.
Barnes Aerospace operating income was $5.3 million
in 1996 compared to $5.0 million in 1995. In 1994,
the group reported an operating loss of $1.8
million. The increase in 1996 profits reflects the
increased sales volume. The sharply higher
11
MANAGEMENTOS DISCUSSION AND ANALYSIS BARNES GROUP
INC.
[PHOTO OF LOU BESSETTE BARNES AEROSPACE WINDSOR,
CONNECTICUT]
[PHOTO OF WAYNE BUCK ASSOCIATED SPRING BURLINGTON,
ONTARIO]
[PHOTO OF CAROL DANIELS BOWMAN DISTRIBUTION YORK,
PENNSYLVANIA]
profits in 1995 compared to 1994 reflect the
higher sales volume, increased gross margins and
lower operating costs as a percentage of sales.
NON-OPERATING INCOME/EXPENSE
Other income was $4.1 million in 1996, $4.4
million in 1995 and $4.6 million in 1994. Other
income includes $1.6 million, $1.9 million and
$2.3 million from the companyOs investment in
NASCO, a company jointly owned with NHK Spring
Co., Ltd. of Japan. The 1996 decrease in NASCO
profits reflects increased costs, primarily
interest and depreciation, associated with a major
capacity expansion to meet increased customer
requirements for automotive suspension springs.
Interest income, another component of other
income, was $1.2 million in 1996 compared to $1.4
million in 1995 and $1.3 million in 1994.
Interest expense was consistent over the three
years reflecting comparable borrowing levels and a
relatively stable interest rate environment.
Other expenses decreased in 1996 following an
increase in 1995, primarily due to foreign
exchange and translation losses. These losses were
$0.8 million, $1.1 million and $0.5 million in
1996, 1995 and 1994, respectively.
INCOME TAXES
The companyOs effective income tax rate has
declined steadily over the last three years. The
companyOs effective tax rate was 37.7% in 1996
compared with 39.5% in 1995 and 40.1% in 1994. The
lower rate in 1996 was due in part to lower
foreign losses without tax benefit and higher
foreign income with tax rates lower than the U.S.
statutory tax rate. For further discussion of
income taxes, see Note 6 of the Notes to
Consolidated Financial Statements on page 20.
NET INCOME AND NET INCOME PER SHARE
Consolidated net income was $32.6 million in 1996,
$27.5 million in 1995 and $20.3 million in 1994.
On a per share basis, income for 1996 was $4.90,
compared to $4.20 in 1995 and $3.20 in 1994. This
marks the second consecutive year of record
earnings.
INFLATION
Management believes that inflation during the 1994-
1996 period did not have a material impact on the
companyOs historical financial statements.
LIQUIDITY AND CAPITAL RESOURCES
The companyOs ability to generate cash from
operations in excess of its capital investment and
dividend requirements is one of its leading
financial strengths. Management anticipates that
operating activities in 1997 will continue to
provide sufficient cash flows to capitalize on
opportunities for business expansion and to meet
all of the companyOs financial commitments.
Management assesses the companyOs liquidity in
terms of its overall ability to generate cash to
fund its operating and investing activities. Of
particular importance in the management of
liquidity are cash flows generated from operating
activities, capital expenditure levels, dividends,
effective utilization of surplus cash positions
overseas and adequate bank lines of credit.
Operating activities are the principal source of
cash flow for the company, generating nearly $46
million of cash flow in 1996 after a record $47
million in 1995. During the past three years,
operating activities provided over $130 million of
cash which the company used, in part, to pay
dividends to stockholders and fund significant
investments in plant and equipment.
12
MANAGEMENTOS DISCUSSION AND ANALYSIS BARNES GROUP
INC.
[PHOTO OF CARL DELINE BARNES AEROSPACE LANSING,
MICHIGAN]
[PHOTO OF JOHN DONLON EXECUTIVE OFFICE BRISTOL,
CONNECTICUT]
[PHOTO OF JERRY DRALLE BOWMAN DISTRIBUTION
CLEVELAND, OHIO]
Investing activities used cash of $32 million in
1996 compared with $37 million in 1995 and $31
million in 1994. Capital expenditures of $34
million in 1996 approached the record level of $36
million in 1995. During the past three years, the
company has invested over $100 million in new
plant and equipment with nearly $70 million of
that invested at Associated Spring. The focus of
these investments is plant and equipment to
support business growth and to improve
productivity and quality. The company expects 1997
capital spending to continue at a strong pace.
Financing activities include net borrowings,
dividend payments and stock transactions. In 1996,
the companyOs financing activities used cash of $7
million compared to $14 million in 1995. The
higher usage of cash in 1995 was due, in part, to
a $7 million debt reduction. In 1996, the annual
cash dividend per share was increased from $1.60
to $1.80. As a result, total cash dividends paid
to stockholders increased to $12 million.
The company has and will continue to utilize
surplus cash from foreign subsidiaries to fund
worldwide cash requirements when it is cost
effective to do so. The repatriation of certain
cash balances to the U.S. could have adverse tax
consequences; however, those balances are
generally available to fund ordinary business
needs worldwide.
To supplement internal cash generation, the
company maintains substantial bank borrowing
facilities. At December 31, 1996, the company had
$150 million of borrowing capacity available under
a revolving credit agreement that expires in 2001.
In addition, the company has available $130
million in uncommitted, short-term bank credit
lines, of which $7.5 million was in use at
December 31, 1996. During 1996 and 1995, 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 considers
this a cost effective way to manage its long-term
financing needs. The company believes its bank
credit facilities coupled with cash generated from
operations are adequate for its anticipated future
requirements.
13
[PHOTO OF RICK FRANCOLINI BOWMAN DISTRIBUTION
CROMWELL, CONNECTICUT]
[PHOTO OF MARK GAMBLE ASSOCIATED SPRING
BURLINGTON, ONTARIO]
[PHOTO OF STEVE GANDOLFO BARNES AEROSPACE WINDSOR,
CONNECTICUT]
CONSOLIDATED STATEMENTS OF INCOME BARNES GROUP
INC.
(Dollars in thousands, except per share data)
Years Ended December 31, 1996 1995 1994
- --------------------------------------------------
- ----------------
Net sales $ 594,989$ 592,509$ 569,197
Cost of sales 384,722 382,150 366,455
Selling and administrative
expenses 154,951 161,555 166,093
- --------------------------------------------------
- ----------------
539,673 543,705 532,548
- --------------------------------------------------
- ----------------
Operating income 55,316 48,804 36,649
Other income 4,095 4,373 4,611
Interest expense 4,981 5,274 5,133
Other expenses 2,120 2,453 2,205
- --------------------------------------------------
- ----------------
Income before income taxes52,310 45,450 33,922
Income taxes 19,742 17,966 13,606
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- ----------------
Net income $ 32,568$ 27,484$ 20,316
==================================================
================
Per common share:
Net income $ 4.90$ 4.20$ 3.20
==================================================
================
Dividends $ 1.80$ 1.60$ 1.45
==================================================
================
Average common shares outstanding6,641,3296,546,671 6,353,777
See accompanying notes
14
[PHOTO OF LES GRIFFIN BOWMAN DISTRIBUTION ANAHEIM,
CALIFORNIA]
[PHOTO OF REBECCA HAMILTON BOWMAN DISTRIBUTION
HAYWARD, CALIFORNIA]
[PHOTO OF JIM HENDRICKSON BOWMAN DISTRIBUTION
ROCKFORD, ILLINOIS]
CONSOLIDATED BALANCE SHEETS BARNES GROUP INC.
(Dollars in thousands)
December 31, 1996 1995
- --------------------------------------------------
- ----------------
ASSETS
Current assets
Cash and cash equivalents $ 23,986 $ 17,868
Accounts receivable, less allowances
(1996 - $3,158; 1995 - $3,635) 88,060 86,086
Inventories 64,942 56,749
Deferred income taxes 9,772 8,344
Prepaid expenses 3,538 3,769
- --------------------------------------------------
- ----------------
Total current assets 190,298 172,816
Deferred income taxes 23,575 24,308
Property, plant and equipment 131,071 122,870
Goodwill 19,441 20,028
Other assets 25,571 21,527
- --------------------------------------------------
- ----------------
Total assets $389,956 $361,549
==================================================
================
LIABILITIES AND STOCKHOLDERSO EQUITY
Current liabilities
Notes payable $ 1,767 $ 509
Accounts payable 30,363 31,839
Accrued liabilities 46,152 42,840
Guaranteed ESOP obligation-current 2,540 2,348
- --------------------------------------------------
- ----------------
Total current liabilities 80,822 77,536
Long-term debt 70,000 70,000
Guaranteed ESOP obligation 4,951 7,491
Accrued retirement benefits 69,085 68,824
Other liabilities 7,934 8,857
StockholdersO equity
Common stock - par value $1.00 per share
Authorized: 20,000,000 shares
Issued: 7,345,923 shares stated at15,73715,737
Additional paid-in capital 28,347 27,360
Retained earnings 156,698 136,092
Foreign currency translation adjustments (10,087) (10,656)
Treasury stock at cost (1996 - 682,003 shares;
1995 - 791,205 shares) (26,040) (29,853)
Guaranteed ESOP obligation (7,491) (9,839)
- --------------------------------------------------
- ----------------
Total stockholdersO equity 157,164 128,841
- --------------------------------------------------
- ----------------
Total liabilities and stockholdersO equity$389,956 $361,549
==================================================
================
See accompanying notes.
15
[PHOTO OF BOB HOWAT ASSOCIATED SPRING SALINE,
MICHIGAN]
[PHOTO OF NANCY JOHANSEN BARNES AEROSPACE OGDEN,
UTAH]
[PHOTO OF RON KURYLO ASSOCIATED SPRING SOUTHFIELD,
MICHIGAN]
CONSOLIDATED STATEMENTS OF CASH FLOWS BARNES
GROUP INC.
(Dollars in thousands)
Years Ended December 31, 1996 1995 1994
- --------------------------------------------------
- ----------------
OPERATING ACTIVITIES:
Net income $32,568$27,484$20,316
Adjustments to reconcile net income
to net cash from operating activities
Depreciation and amortization26,626 26,750 23,733
Gain on sale of property, plant and
equipment (528) (268) (151)
Translation losses 427 290 356
Changes in assets and liabilities:
Accounts receivable (2,321) 365(9,411)
Inventories (9,971)(6,073)(1,037)
Accounts payable (1,548) 794 4,298
Accrued liabilities 2,797(2,664) 2,630
Deferred income taxes 564 3,479 (485)
Other liabilities and assets(2,810)(2,862)(2,5
49)
- --------------------------------------------------
- -----------------
Net cash provided by operating activities45,80447,295 37,700
INVESTING ACTIVITIES:
Proceeds from sale of property,
plant and equipment 2,361 1,301 2,835
Capital expenditures (33,892)(35,820)(31,848)
Other (706)(2,057)(2,252)
- --------------------------------------------------
- ----------------
Net cash used by investing activities(32,237)(36,576) (31,265)
FINANCING ACTIVITIES:
Net increase (decrease) in notes payable1,322(7,389) (2,653)
Proceeds from the issuance of common stock4,9075,849 3,956
Payments to acquire treasury stock(1,197)(1,746)--
Dividends paid (11,967)(10,491)(9,223)
- --------------------------------------------------
- ----------------
Net cash used by financing activities(6,935)(13,777) (7,920)
Effect of exchange rate changes on cash flows(514) (1,097) (621)
- --------------------------------------------------
- ----------------
Increase (decrease) in cash and cash
equivalents 6,118(4,155)(2,106)
Cash and cash equivalents at beginning
of year 17,868 22,023 24,129
- --------------------------------------------------
- ----------------
Cash and cash equivalents at end of year$23,986$17,868 $22,023
==================================================
================
See accompanying notes.
16
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERSO EQUITY BARNES
GROUP INC.
Additional
Common Paid-In Retained
(Dollars in thousands) Stock Capital Earnings
- -------------------------------------------------------------------
January 1, 1994 $15,737 $28,745 $107,668
Net income 20,316
Cash dividends (9,223)
Employee stock plans (973)
Guaranteed ESOP obligation
Income tax benefits on unallocated
ESOP dividends 177
Translation adjustments
- -------------------------------------------------------------------
December 31, 1994 15,737 27,772 118,938
Net income 27,484
Cash dividends (10,491)
Employee stock plans (412)
Guaranteed ESOP obligation
Income tax benefits on unallocated
ESOP dividends 161
Translation adjustments
- -------------------------------------------------------------------
December 31, 1995 15,737 27,360 136,092
Net income 32,568
Cash dividends (11,967)
Employee stock plans 987 (134)
Guaranteed ESOP obligation
Income tax benefits on unallocated
ESOP dividends 139
Translation adjustments
- -------------------------------------------------------------------
December 31, 1996 $15,737 $28,347 $156,698
===================================================================
See accompanying notes.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERSO EQUITY BARNES
GROUP INC. (CONTINUED)
Foreign
Currency Guaranteed
Translation Treasury ESOPStockholdersO
Adjustments StockObligation Equity
- -------------------------------------------------------------------
$ (6,464) $(39,818) $(14,019) $ 91,849
20,316
(9,223)
5,236 4,263
2,008 2,008
177
(2,251) (2,251)
- -------------------------------------------------------------------
(8,715) (34,582) (12,011) 107,139
27,484
(10,491)
4,729 4,317
2,172 2,172
161
(1,941) (1,941)
- -------------------------------------------------------------------
(10,656) (29,853) (9,839) 128,841
32,568
(11,967)
3,813 4,666
2,348 2,348
139
569 569
- -------------------------------------------------------------------
$(10,087) $(26,040) $ (7,491) $157,164
===================================================================
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES
GROUP INC.
[PHOTO OF ERIC MABLEY BOWMAN DISTRIBUTION CONCORD,
ONTARIO]
[PHOTO OF MARY LOU MANCHESTER AS HEADQUARTERS
BRISTOL, CONNECTICUT]
[PHOTO OF TERRY MARTIN AS HEADQUARTERS BRISTOL,
CONNECTICUT]
(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
GENERAL: The preparation of financial statements
requires management to make estimates and
assumptions that affect the reported amounts of
assets and liabilities at the date of the
financial statements and the reported amounts of
revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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 $1,550, $1,897 and
$2,314 for the years 1996, 1995 and 1994,
respectively, of income from the companyOs
investment in NASCO. During 1996, the company
received $709 in dividends from NASCO.
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 71% 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 and 3 to 17 years for
machinery and equipment. Maintenance and repairs
charged to expense were $16,179, $15,396 and
$16,341 in 1996, 1995 and 1994, 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. On a periodic basis, the
company estimates future undiscounted cash flows
of the businesses to which goodwill relates to
ensure that the carrying value of goodwill has not
been impaired. Accumulated amortization was $8,175
and $7,588 at December 31, 1996 and 1995,
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 stockholdersO
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 $826, $1,078 and $550 in 1996,
1995 and 1994, respectively.
STOCK-BASED COMPENSATION: The company applies APB
Opinion 25 to account for stock-based
compensation. The FASB issued Statement of
Financial Accounting Standards No. 123,
OAccounting for Stock-Based Compensation,O (FAS
123) effective for years beginning after December
15, 1995. Under the provisions of this accounting
standard, the company is not required to change
its method of accounting for stock-based
compensation. Had the company adopted FAS 123, the
impact on net income and income per share would
not have been significant.
INCOME PER COMMON SHARE: Income 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 and
incentive stock rights) is not material. For
purposes of calculating income per share, Employee
Stock Ownership Plan (ESOP) shares are considered
outstanding.
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES
GROUP INC.
[PHOTO OF PATRICIA MARTINEZ BOWMAN DISTRIBUTION
EDISON, NEW JERSEY]
[PHOTO OF FRAN MCDONALD BOWMAN DISTRIBUTION
CLEVELAND, OHIO]
[PHOTO OF FAZAL MOHAMED BOWMAN DISTRIBUTION
CONCORD, ONTARIO]
2. INVENTORIES
Inventories at December 31, consisted of:
1996 1995
- --------------------------------------------------
- ----------------
Finished goods $ 30,285 $ 29,535
Work-in-process 17,730 13,827
Raw materials and supplies 16,927 13,387
- --------------------------------------------------
- ----------------
$ 64,942 $ 56,749
==================================================
================
Inventories valued by the LIFO method aggregated
$46,056 and $39,219 at December 31, 1996 and 1995,
respectively. If LIFO inventories had been valued
using the FIFO method, they would have been
$13,348 and $12,632 higher at those dates.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31,
consisted of:
1996 1995
- --------------------------------------------------
- ----------------
Land $ 4,577 $ 5,412
Buildings 64,336 60,064
Machinery and equipment 251,691 232,356
- --------------------------------------------------
- ----------------
320,604 297,832
Less accumulated depreciation 189,533 174,962
- --------------------------------------------------
- ----------------
$131,071 $122,870
==================================================
================
4. ACCRUED LIABILITIES
Accrued liabilities at December 31, consisted of:
1996 1995
- --------------------------------------------------
- ----------------
Payroll and other compensation $ 15,188 $ 12,699
Postretirement/
postemployment benefits 6,465 6,541
Vacation pay 4,521 4,460
Accrued income taxes 6,688 5,006
Pension and profit sharing 2,102 2,017
Other 11,188 12,117
- --------------------------------------------------
- ----------------
$ 46,152 $ 42,840
==================================================
================
5. DEBT AND COMMITMENTS
Long-term debt at December 31, consisted of:
1996 1995
- --------------------------------------------------
- ----------------
CARRYING FAIR Carrying
AMOUNT VALUE Amount
- --------------------------------------------------
- ----------------
9.47% Notes $30,769 $32,620 $36,923
7.13% Notes 25,000 24,346 25,000
Borrowings under
lines of credit 7,231 7,231 1,077
Industrial
Revenue Bond 7,000 7,000 7,000
- --------------------------------------------------
- ----------------
$70,000 $71,197 $70,000
==================================================
================
The 9.47% Notes are payable in thirteen semi-
annual payments of $3,077 beginning on September
16, 1995, while the 7.13% Notes are payable in
four equal installments of $6,250 beginning on
December 5, 2002. The fair values of these notes
are determined using discounted cash flows based
upon the companyOs estimated current interest rate
for similar types of borrowings. The carrying
values of other long-term debt, notes payable and
the guaranteed ESOP obligation approximate their
fair value.
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES
GROUP INC.
[PHOTO OF RAJ OAK ASSOCIATED SPRING SOUTHFIELD,
MICHIGAN]
[PHOTO OF STEPHEN ORME ASSOCIATED SPRING
BURLINGTON, ONTARIO]
[PHOTO OF DIANA PEACOCK ASSOCIATED SPRING SALINE,
MICHIGAN]
The company has a revolving credit agreement with
six banks that allows borrowings up to $150,000
under notes due December 6, 2001. A commitment fee
of .115% per annum is paid on the unused portion
of the commitments.
The company had no borrowings under this agreement
at December 31, 1996 and 1995.
The company has available $130,000 in uncommitted,
short-term bank credit lines, of which $7,500 and
$1,500 were in use at December 31, 1996 and 1995,
respectively. The interest rate on these
borrowings was 5.7% and 6.1% at December 31, 1996
and 1995.
The Industrial Revenue Bond, due in 2008, has a
variable interest rate. The interest rate on this
borrowing was 4.5% and 5.9% at December 31, 1996
and 1995, respectively.
At December 31, 1996, the company classified
$7,231 of borrowings under its lines of credit and
$6,154 of its 9.47% 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.
During 1996, the company had outstanding an
interest rate swap, a form of derivative, which
effectively converted $15,385 of its fixed rate
9.47% Notes to floating rate debt with interest
equal to LIBOR plus 83 basis points. The effective
interest rate on the floating rate portion was
6.4% and 6.7% at December 31, 1996 and 1995,
respectively. This swap decreases as the Notes are
repaid. The fair value of the swap is determined
based upon current market prices and was $1,160 at
December 31, 1996. The company does not use
derivatives for trading purposes.
The company guaranteed $8,711 of letters of
credit, bank borrowings and capital lease
obligations related to its 45% investment in
NASCO. In addition, the company has other
outstanding letters of credit totaling $3,854 at
December 31, 1996.
Certain of the companyOs debt arrangements contain
requirements to maintain minimum levels of working
capital and net worth, which as a result, place
limitations on dividend payments and acquisitions
of the companyOs common stock. Under the most
restrictive covenant in any agreement, $52,104 was
available for dividends or acquisitions of common
stock at December 31, 1996.
Interest paid was $5,736, $5,661 and $5,626 in
1996, 1995 and 1994, respectively. Interest
capitalized was $527, $214 and $478 in 1996, 1995
and 1994, respectively, and is being depreciated
over the lives of the related fixed assets.
6. INCOME TAXES
The components of income before income taxes and
the provision for income taxes follow:
1996 1995 1994
- --------------------------------------------------
- ----------------
Income before income taxes:
U.S. $37,957 $31,722 $23,639
International 14,353 13,728 10,283
- --------------------------------------------------
- ----------------
$52,310 $45,450 $33,922
==================================================
================
Income tax provision:
Current:
U.S. - federal $12,451 $ 7,668 $ 7,975
U.S. - state 3,045 1,363 1,639
International 3,682 5,456 4,477
- --------------------------------------------------
- ----------------
19,178 14,487 14,091
- --------------------------------------------------
- ----------------
Deferred:
U.S. - federal (388) 2,479 (403)
U.S. - state (105) 1,056 355
International 1,057 (56) (437)
- --------------------------------------------------
- ----------------
564 3,479 (485)
- --------------------------------------------------
- ----------------
$19,742 $17,966 $13,606
==================================================
================
20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES
GROUP INC.
[PHOTO OF BARRY QUINN BOWMAN DISTRIBUTION CONCORD,
ONTARIO]
[PHOTO OF JACK RABABEH ASSOCIATED SPRING
SOUTHFIELD, MICHIGAN]
[PHOTO OF ROBERT REED ASSOCIATED SPRING SALINE,
MICHIGAN]
Deferred income tax assets and liabilities at
December 31, consist of the tax effects of
temporary differences related to the following:
Assets Liabilities
- --------------------------------------------------
- ----------------
1996 1995 1996 1995
- --------------------------------------------------
- ----------------
Allowance for doubtful accounts$ 1,108$ 1,296$ (3) $ (10)
Depreciation and amortization(7,083)(6,460) 2,450 1,980
Inventory valuation 4,143 3,127 1,382 775
Postretirement/postemployment costs28,51028,921(467) (435)
Tax loss carryforwards 9,329 7,665 -- --
Other 4,770 4,742 1,263 1,163
- --------------------------------------------------
- ----------------
40,77739,291 4,625 3,473
Valuation allowance (7,430)(6,639) -- --
- --------------------------------------------------
- ----------------
$33,347$32,652$4,625 $3,473
==================================================
================
Current deferred income taxes$9,772$ 8,344$1,379$ 765
Noncurrent deferred income taxes23,57524,308 3,246 2,708
- --------------------------------------------------
- ----------------
$33,347$32,652$4,625 $3,473
==================================================
================
The components of the net deferred income tax
balances recognized in the balance sheet at
December 31, follow:
1996 1995
- --------------------------------------------------
- ----------------
Total deferred income tax assets $55,770$53,307
Total deferred income tax asset valuation
allowance (7,430)(6,639)
Total deferred income tax liabilities(19,618)(17,489)
- --------------------------------------------------
- ----------------
$28,722$29,179
==================================================
================
A portion of the deferred income tax assets can be
realized through carrybacks and reversals of
existing taxable temporary differences with the
remainder, net of the valuation allowance,
dependent on future income. Management believes
that sufficient income will be earned in the
future to realize the remaining net deferred
income tax assets. The tax loss carryforwards have
remaining carryforward periods ranging from five
years to unlimited.
The company has not recognized deferred income
taxes on $78,733 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.
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES
GROUP INC.
[Photo of Grace Sciarretta Executive Office
Bristol, Connecticut]
[Photo of Andy Smith Associated Spring Burlington,
Ontario]
[Photo of Dave Smith Associated Spring Southfield,
Michigan]
A reconciliation of the U.S. federal statutory
income tax rate to the consolidated effective
income tax rate follows:
1996 1995 1994
- --------------------------------------------------
- ----------------
U.S. federal statutory income tax rate35.0%
35.0%35.0%
State taxes (net of federal benefit) 3.6 3.5
3.8
Foreign losses without tax benefit 1.6 2.7
4.0
Foreign tax rates (2.5) (1.6)
(3.1)
NASCO income (0.6) (1.0)
(2.0)
Other 0.6 0.9 2.4
- --------------------------------------------------
- ----------------
Consolidated effective income tax rate37.7%
39.5%40.1%
==================================================
================
Income taxes paid, net of refunds, were $17,825,
$13,269 and $8,849 in 1996, 1995 and 1994,
respectively.
7. COMMON STOCK
In 1996, 1995 and 1994, 129,806, 167,779 and
135,692 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. In 1996 and 1995,
the company acquired 20,604 and 42,236 shares of
the companyOs common stock from its Guaranteed
Stock Plan at a cost of $1,197 and $1,746,
respectively. These acquired shares were placed in
treasury.
In December 1996, the company adopted a new
stockholder rights plan.
The company had adopted a rights plan in 1986,
that expired earlier this year. Under the new
plan, each share of common stock contains one
right (Right) that entitles the holder to purchase
one one-hundredth of a share of Series A Junior
Participating Preferred Stock, for two hundred
dollars. The Rights generally will not become
exercisable unless and until, among other things,
any person or group acquires beneficial ownership
of 35% or more of the outstanding stock. The new
Rights are generally redeemable at one cent per
Right at any time until 10 days following a public
announcement that a 35% or greater position in the
companyOs common stock has been acquired and will
expire, unless earlier redeemed or exchanged, on
December 23, 2006.
If, following the acquisition by a person or group
of 35% or more of the outstanding shares of the
companyOs common stock, the company is acquired in
a merger or other business combination or 50% or
more of the companyOs 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.
8. PREFERRED STOCK
At December 31, 1996 and 1995, the company had
3,000,000 shares of one dollar par value preferred
stock authorized, none of which were outstanding.
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES
GROUP INC.
[PHOTO OF JENNIFER SMITH-CAMPBELL BARNES AEROSPACE
WINDSOR, CONNECTICUT]
[PHOTO OF STAN SUGGS ASSOCIATED SPRING SOUTHFIELD,
MICHIGAN
[PHOTO OF KHALAF SUKKAR ASSOCIATED SPRING SALINE,
MICHIGAN
9. STOCK PLANS
All U.S. salaried and non-union hourly employees
are eligible to participate in the companyOs
Guaranteed Stock Plan (GSP). The GSP provides for
the investment of employer and employee
contributions in the companyOs 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 companyOs 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 employeesO 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, 1996, the interest rate was
6.4%. Interest of $538, $747 and $653 was incurred
in 1996, 1995 and 1994, respectively.
Contributions and certain dividends received are
used in part by the GSP to service its debt.
Contributions include both employee contributions
up to a maximum of 10% of eligible pay and 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 GSP. The GSP used
$1,642, $1,459 and $1,323 of company dividends for
debt service in 1996, 1995 and 1994, respectively.
The company expenses all cash contributions made
to the GSP. Compensation expense was $1,666,
$2,019 and $2,268 in 1996, 1995 and 1994,
respectively. In addition to the company shares
held in trust, the GSP also purchases the
companyOs common stock on the open market to meet
its requirements. As of December 31, 1996, the GSP
held 1,149,622 shares of the companyOs common
stock, of which 165,855 shares were unallocated.
For financial statement purposes, the company
reflects its guarantee of the GSPOs debt as a
liability with a like amount reflected as a
reduction of stockholdersO equity.
The company 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 companyOs common
stock at 85% of market value on the date of
purchase. The maximum number of shares which may
be purchased under the Plan is 675,000. During
1996, 17,845 shares (21,012 and 22,367 shares in
1995 and 1994, respectively) were purchased. As of
December 31, 1996, 204,026 shares may be issued in
the future.
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES
GROUP INC.
[PHOTO OF ROAN TAN BARNES AEROSPACE WINDSOR,
CONNECTICUT]
[PHOTO OF JEFF TIBOLLA BOWMAN DISTRIBUTION SOUTH
JORDAN, UTAH]
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
that provided for similar incentives expired in
1991. Options granted under that plan continue to
be exercisable and any options that terminate
without being exercised become available for grant
under the 1991 Plan. A maximum of 1,051,714 common
shares are subject to issuance under this plan
after December 31, 1996. As of December 31, 1996,
there were 583,630 shares available for future
grant (160,570 at December 31, 1995). Compensation
cost related to these plans was $904 and $128 in
1996 and 1994, respectively. No amount was
recorded in 1995.
Data relating to options granted under these plans
follow:
1996 1995
- --------------------------------------------------
- ----------------
AVERAGE Average
NUMBEREXERCISE NumberExercise
OF SHARES PRICEof Shares Price
- --------------------------------------------------
- ----------------
Outstanding, January 1500,356$32.73644,554 $31.61
Granted 23,150 $46.96 79,100 $40.09
Exercised 109,212 $33.90 146,046 $32.01
Cancelled 51,297 $35.00 77,252 $32.24
- --------------------------------------------------
- ----------------
Outstanding, December 31, 362,997 $32.95 500,356 $32.73
==================================================
================
Exercisable, December 31, 72,340 $30.74 142,400 $32.29
==================================================
================
The following table summarizes information about
stock options outstanding at December 31, 1996:
OPTIONS OUTSTANDINGOPTIONS EXERCI
SABLE
----------------------------------
- -------------------
RANGE OF AVERAGE AVERAGE AVERAGE
EXERCISE NUMBERREMAININGEXERCISE NUMBEREXERCISE
PRICESOF SHARES LIFE PRICEOF SHARES PRICE
- ------------------------------------------------
- --------------------
$20 to $27 46,3705.7 years $25.43 33,870 $25.05
$31 to $33229,4666.6 years $31.30 14,934 $32.14
$35 to $40 28,7116.3 years $37.50 13,411 $36.37
$40 to $47 51,9008.6 years $41.23 10,125 $40.27
$ 58.50 6,5509.9 years $58.50 -- $ --
Incentive Stock Rights entitle the holder to
receive shares of the companyOs common stock
without payment, after the lapse of the incentive
period and subject to the satisfaction of
established performance goals. Additionally,
holders are credited with dividend equivalents,
which are converted into additional incentive
stock units, based on dividends paid on
outstanding shares. In 1996, 108,000 incentive
stock units were granted, of which 36,500 are
subject to performance goals. All units granted
have a five year incentive period. During 1996, an
additional 2,087 units were credited to holders
for dividend equivalents and 5,000 units were
forfeited.
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES
GROUP INC.
[PHOTO OF VIBOL TIEM BARNES AEROSPACE OGDEN, UTAH]
[PHOTO OF CARYN WOODWARD BARNES AEROSPACE WINDSOR,
CONNECTICUT]
Under the Non-employee Director Deferred Stock
Plan each non-employee director is awarded 2,000
shares of the companyOs common stock upon
retirement. There were 2,000 shares issued under
this plan in 1996 and 4,000 in 1994. No shares
were issued in 1995. As of December 31, 1996,
18,000 shares were reserved for issuance under
this plan.
Total shares reserved for issuance under all stock
plans aggregated 1,273,740 at December 31, 1996.
10. PENSION PLANS
The company has noncontributory defined benefit
pension plans covering a majority of its worldwide
employees at Associated Spring, Bowman
Distribution and at 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:
1996 1995 1994
- --------------------------------------------------
- ----------------
Service cost $ 5,591$ 4,836$ 5,282
Interest cost 15,839 15,907 15,290
Actual (return) loss on plan assets(34,906)(43,256) 941
Net amortization and deferral 13,981 22,960(20,295)
- --------------------------------------------------
- ----------------
$ 505$ 447$ 1,218
==================================================
================
The funded status of the plans at December 31, is
set forth below:
1996 1995
- --------------------------------------------------
- ----------------
Plan assets at fair value $271,450$247,915
Actuarial present value of benefit obligations:
Vested benefits 187,728201,231
Nonvested benefits 13,713 4,124
- --------------------------------------------------
- ----------------
Accumulated benefit obligations 201,441 205,355
Additional benefits based on
projected future salary increases 20,840 23,026
- --------------------------------------------------
- ----------------
Projected benefit obligations 222,281 228,381
- --------------------------------------------------
- ----------------
Plan assets greater than projected
benefit obligations $ 49,169$ 19,534
==================================================
================
Reconciliation to net pension asset recognized in
the accompanying balance sheets:
1996 1995
- --------------------------------------------------
- ----------------
Plan assets greater than projected
benefit obligations $ 49,169$ 19,534
Adjustments for unrecognized:
Net gains (39,387)(6,512)
Prior service costs 6,843 4,591
Net asset at transition (7,505)(9,043)
- --------------------------------------------------
- ----------------
(40,049) (10,964)
- --------------------------------------------------
- ----------------
Net pension asset $ 9,120$ 8,570
==================================================
================
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES
GROUP INC.
Significant assumptions used in determining
pension expense and the funded status of the plans
were:
1996 1995 1994
- --------------------------------------------------
- ----------------
Weighted average discount rate 7.75% 7.25% 8.25%
Increase in compensation 5.25% 5.25% 5.25%
Long-term rate of return on plan assets9.00% 9.00% 9.00%
The company has defined contribution plans
covering employees of Barnes Aerospace and field
sales employees of Bowman DistributionOs U.S.
operation. Company contributions under these plans
are based primarily on the performance of the
business units and employee compensation. Total
expense amounted to $1,735, $1,748 and $1,431 in
1996, 1995 and 1994, respectively.
11. 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 companyOs practice to fund these benefits as
incurred.
Postretirement benefit expense consisted of the
following:
1996 1995 1994
- --------------------------------------------------
- ----------------
Service cost $ 660 $ 679$ 874
Interest cost 4,782 5,594 5,199
Net amortization (1,150) (158) (158)
- --------------------------------------------------
- ----------------
$ 4,292 $6,115$ 5,915
==================================================
================
The amounts included in the accompanying balance
sheets at December 31, were as follows:
1996 1995 1994
- --------------------------------------------------
- ----------------
Accumulated benefit obligations:
Retirees $46,283$57,160$50,917
Employees eligible to retire 5,283 6,904 6,209
Employees not eligible to retire 10,464 13,654 12,020
Unrecognized prior service cost 9,799 1,021 1,245
Unrecognized net loss (1,331)(7,339) (986)
- --------------------------------------------------
- ----------------
$70,498$71,400$69,405
==================================================
================Postretirement benefit obligations
included in:
Accrued liabilities $ 5,273$ 5,673$ 5,300
Accrued retirement benefits 65,225 65,727 64,105
- --------------------------------------------------
- ----------------
$70,498$71,400$69,405
==================================================
================
A deferred tax asset is included in the
accompanying balance sheet recognizing the future
tax benefit of the postretirement benefit
obligations (See Note 6).
Cash payments made in 1996, 1995 and 1994 for
postretirement benefits were $5,194, $5,210 and
$4,828, respectively.
The companyOs 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 9.0% for 1996, 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
$2,175 at December 31, 1996, and would have
increased 1996 expense by approximately $168.
Discount rates of 7.75%, 7.25% and 8.25% were used
in determining the accumulated benefit obligation
at December 31, 1996, 1995 and 1994, respectively.
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES
GROUP INC.
12. LEASES
The company has various noncancellable operating
leases for buildings, office space and equipment.
Capital leases were not significant. Rent expense
was $6,268, $5,866 and $6,072 for 1996, 1995 and
1994, respectively. During 1997, both Associated
Spring and Bowman Distribution will relocate to
new headquarters facilities under operating
leases. Minimum rental commitments under
noncancellable leases in years 1997 through 2001
are $3,327, $3,612, $2,268, $2,292, $2,420 and
$13,349 thereafter.
13. SUBSEQUENT EVENT
On February 21, 1997, the Board of Directors
authorized, subject to stockholder approval, an
amendment to the CompanyOs Restated Certificate of
Incorporation, as amended, providing for an
increase in the number of shares of authorized
common stock from 20,000,000 to 60,000,000 and a
reduction in the par values of the common stock
and preferred stock from one dollar to one cent
per share (the OAmendmentO.) The Amendment is
being presented to stockholders for approval at
the companyOs April 2, 1997 Annual Meeting of
Stockholders. On February 21, 1997, the Board of
Directors also authorized (a) a three-for-one
stock split of the companyOs common stock in the
form of a 200% stock dividend for stockholders of
record on April 3, 1997, subject to stockholder
approval of the Amendment, and (b) the transfer
from stated capital to surplus of all capital in
excess of the aggregate par value of the companyOs
issued shares, subject to effectiveness of the
stock split. If the stock split is effected, the
number of shares of issued common stock will
triple, per share data for all periods presented
will decrease accordingly, adjustments will be
made to all outstanding stock options and other
stock-based awards and the Board-authorized
transfer from stated capital to surplus will
occur.
14. INFORMATION ON BUSINESS SEGMENTS
The company operates three businesses:
ASSOCIATED SPRING: manufactures and distributes
custom-made springs and other close-tolerance
engineered metal components principally to the
transportation, electronics and industrial
markets. Associated SpringOs custom metal parts
are sold in the United States and through its
foreign subsidiaries. Foreign manufacturing
operations are located in Brazil, Canada, Mexico
and Singapore. The automotive and automotive parts
industries constitute Associated SpringOs largest
market.
BOWMAN DISTRIBUTION: distributes fast-moving,
consumable repair and replacement products for
industrial, heavy equipment and transportation
maintenance markets. Bowman DistributionOs
operations and markets are located primarily in
the United States. Other important locations
include Canada and Europe.
BARNES AEROSPACE: manufactures precision machined
parts and fabricated assemblies, and refurbishes
jet engine components for the aircraft and
aerospace industries. Barnes AerospaceOs
operations and markets are located primarily in
the United States and Singapore.
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 and selling and administrative expenses.
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. Included in the 1996 identifiable
international assets are the assets of
manufacturing facilities in Singapore ($23,633),
Brazil ($15,320), Canada ($19,421) and Mexico
($13,107) and distribution facilities in Canada
($12,337), United Kingdom ($15,288) and France
($8,042). Associated SpringOs operation in
Singapore was an important contributor to the
companyOs international operating income during
each of the three years presented.
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES
GROUP INC.
The following tables set forth information about
the companyOs operations by its three business
segments and by geographic area.
OPERATIONS BY BUSINESS SEGMENT
Net Sales Operating Income
----------------------------
- ----------------------
(Dollars in millions) 19961995 1994 1996 1995 1994
- --------------------------------------------------
- ----------------
Associated Spring $279.5$279.0$272.4 $45.8 $42.6
$41.7
Bowman Distribution 213.4 217.0 215.1 22.0 17.4
12.6
Barnes Aerospace103.1 97.3 82.3 5.3 5.0
(1.8)
Intersegment sales (1.0) (0.8)(0.6) -- -- --
----------------------------------
- -----------------
$595.0 $592.5$569.2 73.1 65.0 52.5
==========================
Corporate expenses (17.8)(16
.2) (15.9)
- --------------------------------------------------
- ----------------
Operating income $55.3 $48.8 $36.6
==================================================
================
Identifiable Capital Depreciation
Assets Expenditures Expense
--------------------------------------------------
- ---------------------
(Dollars in
millions) 1996 1995 1994 1996 1995 1994 1996 1995 1994
- ---------------------------------------------------------------
- -----------------
Associated
Spring $177.8$160.3$144.7$21.5$24.2$23.7 $13.0$11.6$ 9.0
Bowman
Distribution73.0 79.2 86.0 2.9 3.6 4.3 3.7 4.1 3.1
Barnes
Aerospace 96.1 87.0 85.6 9.4 7.8 3.7 7.0 7.2 7.5
Corporate 43.1 35.0 35.7 0.1 0.2 0.1 0.3 0.3 0.2
- -------------------------------------------------------------
- -------------------
$390.0$361.5$352.0$33.9$35.8$31.8 $24.0$23.2$19.8
=============================================================
===================
OPERATIONS BY GEOGRAPHIC AREA
Net Sales Operating Income
--------------------------------
- ---------------
(Dollars in millions)1996 1995 1994 1996 1995 1994
- ---------------------------------------------------------------------
Domestic $466.4$463.4$454.8 $59.5$51.3$45.0
International 138.8 137.9 121.9 13.6 13.7 7.5
Sales between geographic
areas (10.2) (8.8) (7.5) -- -- --
- ---------------------------------------------------------------------
$595.0$592.5$569.2 $73.1$65.0$52.5
=====================================================================
Identifiable Assets
-----------------------
(Dollars in millions) 1996 1995 1994
- --------------------------------------------------
- ----------------
Domestic $239.8$227.5$226.6
International 107.1 99.0 89.7
Corporate 43.1 35.0 35.7
- --------------------------------------------------
- ----------------
$390.0$361.5$352.0
===========================================================
=======
28
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
BARNES GROUP INC.
In our opinion, the accompanying consolidated
balance sheets 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, 1996 and 1995, and the results of their
operations and their cash flows for each of the
three years in the period ended December 31, 1996,
in conformity with generally accepted accounting
principles. These financial statements are the
responsibility of the company's management; our
responsibility is to express an opinion on these
financial statements based on our audits. We
conducted our audits 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 audits provide a
reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Hartford, Connecticut
January 22, 1997, except
as to Note 13, which is
as of February 21, 1997
QUARTERLY DATA (UNAUDITED) BARNES GROUP INC.
(Dollars in millions, First Second Third Fourth Full
except per share data) Quarter Quarter Quarter Quarter Year
- ----------------------------------------------------------------------
- ------------------
1996
Net sales $150.1 $152.6 $147.1 $145.2 $595.0
Gross profit* 52.9 53.7 52.2 51.5 210.3
Operating income11.2 14.4 14.7 15.0 55.3
Net income 6.6 8.7 8.7 8.6 32.6
Per Common Share:
Net income 1.01 1.30 1.31 1.28 4.90
Dividends .45 .45 .45 .45 1.80
Market prices
(high-low)$45 1U4-35$51 7U8-44 3U4$51 1U8-46 1U4$62-49 5U8$62-35
1995
Net sales $158.6 $151.0 $141.7 $141.2 $592.5
Gross profit* 57.7 54.8 49.8 48.1 210.4
Operating income14.5 13.4 11.1 9.8 48.8
Net income 8.3 7.3 6.3 5.6 27.5
Per Common Share:
Net income 1.29 1.12 .95 .84 4.20
Dividends .40 .40 .40 .40 1.60
Market price
(high-low)$44 3U8-36 1U4$45 3U4-40 1U4$43-40$40 7U8-35 7U8$45 3U4-
35 7U8
<FN>
*Sales minus cost of sales.
29
SELECTED FINANCIAL DATA BARNES GROUP INC.
1996 1995 19941993(2)
- -------------------------------------------------------------
- ---------
PER COMMON SHARE (1)
Income (loss)
Continuing operations $ 4.90$ 4.20$ 3.20$
.70
Effect of accounting changes-- -- --
Net income (loss) 4.90 4.20 3.20 .70
Dividends paid 1.80 1.60 1.45 1.40
Stockholders' equity (at year-end) 23.58 19.66 16.66
14.59
Stock price (at year-end) 60 36 38 31 1U4
- -------------------------------------------------------------
- ---------
FOR THE YEAR (in thousands)
Net sales $594,989$592,509$569,197$502
,292
Operating income 55,316 48,80436,649 12,538
As a percent of sales 9.3% 8.2% 6.4% 2.5%
Income from continuing operations
before income taxes
and effect of accounting changes$ 52,310$ 45,450$
33,922 $ 8,391
Income taxes 19,742 17,96613,606 4,008
Income from continuing operations before
effect of accounting changes (8)32,56827,48420,316
4,383
As a percent of average
stockholdersO equity 22.8% 22.6% 20.3% 4.7%
Effect of accounting changes$ --$ --$ --$
- --
Net income (loss) 32,568 27,48420,316 4,383
Net income (loss) applicable to
common stock 32,568 27,48420,316 4,383
Depreciation and amortization26,62626,75023,73323,094
Capital expenditures 33,892 35,82031,848 22,216
Average common shares outstanding 6,641 6,547 6,354
6,250
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- ---------
YEAR-END FINANCIAL POSITION
(in thousands)
Working capital $109,476$ 95,280$ 88,325$ 87
,011
Current ratio 2.4 to 12.2 to 12.0 to 12.1
to 1
Property, plant and equipment$131,071$122,870$112,569
$103,043
Total assets 389,956361,549351,956333,29
6
Long-term debt 70,000 70,00070,000 70,000
Guaranteed ESOP obligation -
long term portion 4,951 7,491 9,839 12,011
StockholdersO equity 157,164128,841107,13991,849
Debt as a percent of total
capitalization(9) 33.5% 38.4% 45.6% 50.7%
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- ----------
YEAR-END STATISTICS
Employees 3,761 3,880 4,181 4,357
<FN>
(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 SpringOs 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 BowmanOs 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
SELECTED FINANCIAL DATA BARNES GROUP INC.
(CONTINED)
1992(3)(4) 1991 1990 1989(5) 1988 1987(6) 1986(7)
- ---------------------------------------------------------------
- -----------------
$ .94$ 2.60$ 2.76 $ 1.94$ 3.06$ 2.80 $ 2.57
(6.56) -- -- -- -- -- --
(5.62) 2.60 2.76 1.94 3.06 2.80 2.57
1.40 1.40 1.40 1.40 1.20 1.15 1.00
15.04 22.46 20.74 18.55 20.35 17.91 19.27
30 1U2 35 3U8 25 7U8 29 35 5U8 32 30 1U2
- ---------------------------------------------------------------
- -----------------
$ 529,073$535,660$545,857 $511,221$496,060$458,016 $439,727
7,259 37,982 41,198 33,990 43,702 42,265 43,056
1.4% 7.1% 7.5% 6.6% 8.8% 9.2% 9.8%
$ 7,671$ 28,849$ 29,952 $ 23,118$ 33,175$ 34,576 $ 35,336
1,838 12,926 13,163 10,745 14,327 16,736 18,733
5,833 15,923 16,789 11,114 16,711 17,700 16,603
5.8% 12.2% 14.1% 9.9% 15.9% 14.0% 14.0%
$(40,695)$ --$ -- $ --$ --$ -- $ --
(34,862) 15,923 16,789 12,373 18,848 17,840 16,603
(34,862) 15,923 16,789 11,114 16,711 17,700 16,603
23,741 23,159 22,044 18,167 16,626 15,470 14,511
16,238 19,099 21,615 18,218 21,821 22,457 18,803
6,202 6,127 6,078 5,733 5,465 6,321 6,461
- ---------------------------------------------------------------
- -----------------
$ 93,500$102,995$ 94,087 $ 89,194$102,126$ 85,991$ 54,659
2.0 to 12.2 to 11.9 to 1 1.9 to 12.3 to 12.0 to 1 1.5 to 1
$104,437$114,299$114,717 $107,491$100,403$ 96,066$ 87,613
348,346 341,857 342,383 328,116 311,876 297,946 277,828
70,000 78,428 78,714 79,088 79,287 73,853 32,285
14,019 15,877 17,594 19,181 -- -- --
93,575 138,813 126,432 112,568 112,810 97,103 123,025
51.9% 46.2% 50.2% 52.8% 45.1% 48.6% 31.6%
- ---------------------------------------------------------------
- -----------------
4,051 4,478 4,744 4,799 4,770 4,712 4,697
<FN>
(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 SpringOs
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
including the guaranteed ESOP obligation, and
total capitalization includes interest-
bearing debt and stockholdersO equity.
31
APPENDIX TO FORM EX-13 FILINGS TO DESCRIBE
DIFFERENCES BETWEEN PRINTED AND EDGAR-FILED TEXTS.
(1) Rule lines for tables are omitted.
(2) Italic typeface is displayed in normal type.
(3) Boldface type is displayed in capital
letters.
(4) Because the printed page breaks are not
reflected, certain tabular and columnar
headings and symbols are displayed
differently in this filing.
(5) Bullet points and similar graphic symbols are
omitted.
(6) Page numbering is different.