PART I
Item 1. Business.
---------
The Company was organized as a Delaware corporation
in 1925. The Company is in three businesses: Bowman
Distribution, a distributor of consumable repair and
replacement products for industrial, heavy equipment, and
transportation maintenance markets; Associated Spring, a
manufacturer and distributor of custom-made springs and other
close-tolerance engineered metal components; and Barnes
Aerospace, a manufacturer of precision machined and
fabricated assemblies for the aircraft and aerospace
industries and a refurbisher of jet engine components.*
Bowman Distribution. Bowman Distribution is
-------------------
engaged in distributing in the United States, Canada, the
United Kingdom and France a variety of replacement parts and
other products, including fasteners and special purpose
hardware, automotive parts, automotive specialties and
accessories, general purpose electric and gas welding
supplies, industrial maintenance supplies, and industrial
aerosols such as adhesives, lubricants, and sealants.
The products sold by Bowman Distribution are, for
the most part, not manufactured by the Company, but are
obtained from a number of outside suppliers. The vast
majority of the products are repackaged and sold under
Bowman's labels.
Sales by Bowman Distribution in the United States
and Canada are primarily to industrial and food processing
plants, chemical and petrochemical process industries,
contractors, new-car dealers, garages, service stations,
operators of vehicle fleets, railroads, electric utilities,
and airline ground maintenance facilities.
In 1992, the Company sold substantially all of the
assets of the Pioneer division of Bowman.
Associated Spring. Associated Spring manufactures
-----------------
and distributes a wide variety of custom metal parts for
mechanical purposes. It is equipped to produce practically
every type of spring requiring precision engineering, as well
as an extensive
-----------------------
*As used in this annual report, "Company" refers to
the registrant and its consolidated subsidiaries except where
the context requires otherwise, and "Associated Spring,"
"Barnes Aerospace," and "Bowman Distribution" refer to the
above-defined businesses, but not to separate corporate
entities.
1
variety of precision metal components and assemblies. Its
products range in size from fine hairsprings for instruments
to large springs for heavy machinery, and its output of a
given metal part may vary in amount from a few units to
several million. Associated Spring does not produce leaf
springs or bed springs.
Associated Spring's custom metal parts are sold in
the United States and through the Company's foreign
subsidiaries to manufacturers in many industries, chiefly for
use as components in their own products. Custom metal parts
are sold primarily through Associated Spring's sales
employees. In view of the diversity of functions which
Associated Spring's custom metal parts perform, Associated
Spring's output is characterized by little standardization,
with the major portion being manufactured to customer
specifications.
The automotive and automotive parts industries
constitute Associated Spring's largest single custom metal
parts market. Other important outlets include manufacturers
of industrial and textile machinery, motors, generators,
electronic equipment, aircraft, diesel and other internal
combustion engines, household appliances and fixtures,
hardware, office equipment, agricultural equipment, railroad
equipment, general machinery, and scientific instruments.
The Associated Spring Distribution division is
engaged in the distribution of industrial products to the
tool and die market, of which die springs manufactured
primarily by Associated Spring are the principal item. It
also distributes certain standard parts manufactured by
Associated Spring consisting primarily of stock wire and flat
springs which are sold under the Company's SPEC registered
trademark.
Associated Spring also has manufacturing operations
in Brazil, Canada, Mexico, and Singapore, and distribution
operations in the United Kingdom and France. In 1994, it
closed its spring manufacturing plants in Gardena,
California, and Monterrey, Mexico. The Company has retained
a minority interest of 15% in its former subsidiary in
Argentina.
The Company is a partner in a joint venture
corporation in the United States with NHK Spring Co., Ltd. of
Japan. The joint venture corporation, NHK-Associated Spring
Suspension Components Inc. ("NASCO"), has a manufacturing
facility in Bowling Green, Kentucky. It manufactures and
sells hot-wound coil springs for automotive suspension
systems and counterbalance torque bars for trunk lids.
Barnes Group owns a minority interest of 45% in NASCO.
Barnes Aerospace. Barnes Aerospace is engaged in
----------------
the advanced fabrication and precision machining of
components for jet engines and airframes as well as the
repair and overhaul of jet engine components. Windsor
Manufacturing, Windsor Airmotive, and Advanced Fabrications
constitute the Barnes Aerospace Group.
2
Windsor Manufacturing manufactures machined and
fabricated parts as well as assemblies. It specializes in
the machining of difficult-to-process aircraft engine
superalloys. Manufacturing processes include computer
numerically controlled machining, electrical discharge
machining, laser drilling, creep-feed grinding, and automated
deburring. Customers include gas turbine engine
manufacturers for commercial and military jets as well as
land-based turbines.
Windsor Airmotive specializes in refurbishing jet
engine components. Electron beam welding and plasma spray
are two of the major processes used in this division, and
customers include approximately 30 airlines and engine
overhaul businesses worldwide and the U.S. military. In
1995, Windsor Airmotive's Singapore operations moved into a
larger facility.
Advanced Fabrications, through its Jet Die and
Flameco plants, specializes in hot forming and fabricating
titanium and other high-temperature alloys such as hastelloy
and inconel for use in precision details and assemblies for
aircraft engine and airframe applications. It utilizes
advanced manufacturing processes including superplastic
forming and diffusion bonding.
Segment Analysis. The analysis of the Company's
----------------
revenue from sales to unaffiliated customers, operating
income, and identifiable assets by industry segments and geo-
graphic areas appearing on pages 27 and 28 of the Company's
1996 Annual Report to Stockholders, included as Exhibit 13 to
this report, is incorporated by reference.
Competition. The Company competes with many other
-----------
companies, large and small, engaged in the manufacture and
sale of custom metal parts (including aerospace components).
The Company believes Associated Spring is the largest
domestic manufacturer of precision springs used for
mechanical purposes. The Company also faces active
competition in the products sold by Bowman Distribution. The
principal methods of competition for the Company's three
businesses include service, quality, price, reliability of
supply, and also, in the case of Associated Spring and Barnes
Aerospace, technology and design.
Backlog. The backlog of the Company's orders
-------
believed to be firm amounted to $151,142,000 at the end of
1996, as compared with $111,125,000 at the end of 1995. Of
the 1996 year-end backlog, $103,357,000 is attributable to
the Barnes Aerospace Group and all of the balance is
attributable to the Associated Spring Group. $12,078,000 of
Barnes Aerospace's backlog is not expected to be shipped in
1997. Substantially all of the remainder of the Company's
backlog is expected to be shipped during 1997.
3
Raw Materials and Customers. None of the Company's
---------------------------
divisions or groups are dependent upon any single source for
any of their principal raw materials or products for resale,
and all such materials and products are readily available.
No one customer accounted for more than 10% of total sales in
1996. Automotive manufacturers and manufacturers of
electronic products are important customers of Associated
Spring. Sales by Barnes Aerospace to two domestic jet engine
manufacturers accounted for approximately 50% of its
business. Bowman Distribution is not dependent on any one or
a few customers for a significant portion of its sales.
Research and Development. Although most of the
------------------------
products manufactured by the Company are custom parts made to
the customers' specifications, the Company is engaged in
continuing efforts aimed at discovering and implementing new
knowledge that is useful in developing new products or
services or improving significantly an existing product or
service. The Company spent approximately $3,957,000 on its
research and development activities in 1996, as compared to
expenditures of approximately $3,087,000 in 1995 and
$2,640,000 in 1994. There were no significant customer-
sponsored research and development activities.
Patents and Trademarks. Patents, licenses,
----------------------
franchises and concessions are not material to any of the
Company's businesses.
Employees. As of the date of this report, the
---------
Company employs approximately 3,800 persons.
Environmental Laws. Compliance with federal,
------------------
state, and local laws which have been enacted or adopted
regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment has
not had a material effect and is not expected to have a
material effect upon the capital expenditures, earnings, or
competitive position of the Company.
Item 2. Properties.
----------
The Company and its Canadian subsidiary operate 12
manufacturing plants and 14 warehouses at various locations
throughout the United States and Canada, of which all of the
plants and 6 of the warehouses are owned in fee, and the
others are leased. Of the properties which are owned, none
is subject to any encumbrance. The Company's other foreign
subsidiaries own or lease plant or warehouse facilities in
the countries where their operations are conducted. The
listing of the facility locations of each of the Company's
businesses contained in the Directory of Operations on the
inside front cover of the 1996 Annual Report to Stockholders,
included as Exhibit 13 to this report, is incorporated by
reference.
4
The Company believes that its owned and leased
properties have been adequately maintained, are in
satisfactory operating condition, are suitable and adequate
for the business activities conducted therein, and have
productive capacities sufficient to meet current needs.
Item 3. Legal Proceedings.
-----------------
There are no material pending legal proceedings to
which the Company or any of its subsidiaries is a party, or
of which any of their property is the subject.
Item 4. Submission of Matters to a Vote of Security
-------------------------------------------
Holders.
-------
No matter was submitted during the fourth quarter
of 1996 to a vote of security holders.
The following information is included in accordance
with the provisions of Item 401(b) of Regulation S-K:
Executive Officers of the Company*
--------------------------------
Age as of
Executive Officer Position December 31, 1996
----------------- -------- -----------------
Theodore E. Martin President and 57
Chief Executive
Officer
(since 1995)
Thomas O. Barnes Chairman of the 47
Board of Directors
(since 1995) and
Senior Vice President-
Administration
(since 1993)
Mary Louise Beardsley Associate General 42
Counsel and
Secretary
(since 1994)
Francis C. Boyle, Jr. Vice President, 46
Controller
(since 1997)
Leonard M. Carlucci Vice President, 50
Barnes Group Inc.
(since 1994) and
President, Bowman
Distribution
(since 1995)
5
Age as of
Executive Officer Position December 31, 1996
----------------- -------- -----------------
Ali A. Fadel Vice President, 41
Barnes Group Inc.
and President,
Associated Spring
(since 1994)
William V. Grickis, Jr. Vice President, 46
General Counsel
(since 1997)
John J. Locher Vice President, 52
Treasurer
(since 1992)
* All officers are elected by the Board of Directors and
serve an indefinite term at the discretion of the Board.
Except for Messrs. Barnes and Grickis, each of the
Company's executive officers has been employed by the Company
or its subsidiaries in an executive or managerial capacity
for at least the past five years. Each officer holds office
until his or her successor is chosen and qualified, or
otherwise as provided in the By-Laws. No family
relationships exist among the executive officers of the
Company.
Mr. Barnes was elected Senior Vice President-
Administration effective December 16, 1993. From 1982 to
1993, Mr. Barnes was employed by The Olson Brothers Company
as Executive Vice President and President, which position he
held since 1983. Prior to joining Olson Brothers, Mr. Barnes
held a variety of management positions with The Connecticut
Bank and Trust Company, The S. Carpenter Construction
Company, and the Company's Bowman Distribution division.
Mr. Grickis joined the Company as Vice President,
General Counsel on February 3, 1997. From 1981 to 1997, Mr.
Grickis held various positions in the legal department of
Loctite Corporation and for more than the past five years was
its Corporate Counsel and Assistant Secretary.
6
PART II
Item 5. Market for the Registrant's Common Stock and
--------------------------------------------
Related Stockholder Matters.
---------------------------
The information regarding the Company's common
stock contained on pages 22 and 29 of the Company's 1996
Annual Report to Stockholders is incorporated by reference.
As of February 4, 1997, the Company's common stock was held
by 3,723 stockholders of record. The Company's common stock
is traded on the New York Stock Exchange.
Item 6. Selected Financial Data.
-----------------------
The selected financial data for the last five years
contained on pages 30 and 31 of the Company's 1996 Annual
Report to Stockholders is incorporated by reference.
Item 7. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations.
-----------------------------------
The financial review and management's analysis
thereof appearing on pages 11 through 13 of the Company's
1996 Annual Report to Stockholders are incorporated by
reference.
Item 8. Financial Statements and Supplementary Data.
-------------------------------------------
The financial statements and report of independent
accountants appearing on pages 14 through 29 of the Company's
1996 Annual Report to Stockholders are incorporated by
reference. See also the report of independent accountants
included on page 13 below pursuant to Item 302(a) of
Regulation S-K. The material under "Quarterly Data" on page
29 of the Company's 1996 Annual Report to Stockholders is
also incorporated by reference.
Item 9. Changes and Disagreements with Accountants on
---------------------------------------------
Accounting and Financial Disclosure.
-----------------------------------
None.
7
PART III
Item 10. Directors and Executive Officers of the Company.
-----------------------------------------------
The material under "Election of Directors" on pages
1 through 4 of the Company's Proxy Statement dated March 4,
1997, is incorporated by reference. See also "Executive
Officers of the Company," included above pursuant to Item
401(b) of Regulation S-K.
Item 11. Executive Compensation.
----------------------
The material under "Compensation of Directors"
appearing on page 4 and the information appearing on pages 7
through 14 of the Company's Proxy Statement dated March 4,
1997, is incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
---------------------------------------------------
Management.
----------
The information concerning this item appearing on
pages 5 and 6 of the Company's Proxy Statement dated March 4,
1997, is incorporated by reference.
Item 13. Certain Relationships and Related Transactions.
----------------------------------------------
The information concerning this item appearing on
page 10 of the Company's Proxy Statement dated March 4, 1997,
is incorporated by reference.
8
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
---------------------------------------------------
on Form 8-K.
-----------
(a) The report of Price Waterhouse LLP,
independent accountants, and the following
financial statements and financial statement
schedules are filed as part of this report:
Reference
-------------------------------------
Annual Report
Form 10-K to Stockholders
(page) (page)
--------- ---------------
Report of independent 13 29
accountants
Consolidated balance 15
sheets at December 31,
1996 and 1995
Consolidated statements 14
of income for the years
ended December 31, 1996,
1995 and 1994
Consolidated statements 17
of changes in stockholders'
equity for the years
ended December 31, 1996,
1995 and 1994
Consolidated statements 16
of cash flows for the years
ended December 31, 1996,
1995 and 1994
Notes to consolidated 18 - 28
financial statements
Supplementary information 29
Quarterly data (unaudited)
Consolidated schedules for
the years ended December 31,
1996, 1995 and 1994
VIII - Valuation and 14
qualifying accounts
All other schedules have been omitted since the
required information is not present or not present in
amounts sufficient to require submission of the schedule,
or because the information required is included in the
consolidated financial statements or notes thereto.
9
The consolidated financial statements listed in
the above index which are included in the Annual Report to
Stockholders of Barnes Group Inc. for the year ended
December 31, 1996, are hereby incorporated by reference.
With the exception of the pages listed in the above index
and in Items 1, 2, 5, 6, 7, and 8, the 1996 Annual Report
to Stockholders is not to be deemed filed as part of this
report.
(b) One report on Form 8-K was filed on December
20, 1996, reporting on the adoption of a
shareholder rights plan in Item 5. No
financial statements were filed with the
report.
(c) The Exhibits required by Item 601 of
Regulation S-K are filed as Exhibits to this
Annual Report and indexed at pages 15 through
18 of this report.
10
SIGNATURES
----------
Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: February 21, 1997
BARNES GROUP INC.
By /s/ Theodore E. Martin
-----------------------------------------
Theodore E. Martin
President and Chief Executive Officer
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below as
of the above date by the following persons on behalf of the
Company in the capacities indicated.
/s/ Theodore E. Martin
---------------------------------------------------
Theodore E. Martin
President and Chief Executive Officer
(the principal executive officer) and Director
/s/ John J. Locher
---------------------------------------------------
John J. Locher
Vice President, Treasurer
(the principal financial officer)
/s/ Francis C. Boyle, Jr.
--------------------------------------------------
Francis C. Boyle, Jr.
Vice President, Controller
(the principal accounting officer)
/s/ Thomas O. Barnes
-------------------------------------------------
Thomas 0. Barnes
Director
11
/s/ Gary G. Benanav
-------------------------------------------------
Gary G. Benanav
Director
/s/ William S. Bristow, Jr.
-------------------------------------------------
William S. Bristow, Jr.
Director
/s/ Robert J. Callander
-------------------------------------------------
Robert J. Callander
Director
/s/ George T. Carpenter
-------------------------------------------------
George T. Carpenter
Director
/s/ Donna R. Ecton
-------------------------------------------------
Donna R. Ecton
Director
/s/ Marcel P. Joseph
-------------------------------------------------
Marcel P. Joseph
Director
/s/ Juan M. Steta
-------------------------------------------------
Juan M. Steta
Director
/s/ K. Grahame Walker
-------------------------------------------------
K. Grahame Walker
Director
12
CONFORMED COPY
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Barnes Group Inc.
Our audits of the consolidated financial statements for the
years ended December 31, 1996, 1995 and 1994 referred to in
our report dated January 22, 1997, except as to Note 13,
which is as of February 21, 1997, appearing on page 29 of
the 1996 Annual Report to Stockholders of Barnes Group Inc.
(which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-
K) also included an audit of the Financial Statement
Schedule for the years ended December 31, 1996, 1995 and
1994 listed in Item 14(a) of this Form 10-K. In our
opinion, this Financial Statement Schedule presents fairly,
in all material respects, the information set forth therein
when read in conjunction with the related consolidated
financial statements.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Hartford, Connecticut
January 22, 1997, except
as to Note 13, which is
as of February 21, 1997
13
BARNES GROUP INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1996, 1995 and 1994
(in thousands)
Provision
Balance at charged to Balance
beginning costs and at end
of year expenses Deductions(1) of year
---------- --------- ------------- -------
1996
Allowance
for doubtful
accounts $3,635 $ 545 $1,022 $3,158
1995
Allowance
for doubtful
accounts $3,222 $1,577 $1,164 $3,635
1994
Allowance
for doubtful
accounts $2,217 $1,523 $ 518 $3,222
(1) Write-offs, net of recoveries
14
EXHIBIT INDEX
-------------
Barnes Group Inc.
Annual Report on Form 10-K
for year ended December 31, 1996
--------------------------------
Exhibit No. Description Reference
---------- ----------- ---------
3.1 Restated Certificate Incorporated by
of Incorporation, reference to Exhibit
as amended 3.1 to the Company's
report on Form 10-K
for the year ended
December 31, 1992.
3.2 By-Laws. Incorporated by
reference to Exhibit
3.2 to the Company's
report on Form 10-K
for the year ended
December 31, 1995.
4.1 Revolving Credit Filed with this
Agreement dated as report.
of December 1, 1991
among the Company and
several commercial
banks.
4.2 First Amendment to Incorporated by
Credit Agreement set reference to Exhibit
forth in Exhibit 4.1 4.2 to the Company's
dated as of December report on Form 10-K
1, 1992. for the year ended
December 31, 1992.
4.3 Second Amendment to Incorporated by
Credit Agreement set reference to Exhibit
forth in Exhibit 4.1 4.3 to the Company's
dated as of December report on Form 10-K
1, 1993. for the year ended
December 31, 1993.
4.4 Third Amendment to Incorporated by
Credit Agreement set reference to Exhibit
forth in Exhibit 4.1 4.4 to the Company's
dated as of report on Form 10-K
December 1, 1994. for the year ended
December 31, 1994.
15
Exhibit No. Description Reference
---------- ----------- ---------
4.5 Fourth Amendment to Incorporated by
Credit Agreement set reference to Exhibit
forth in Exhibit 4.1 4.5 to the Company's
dated as of report on Form 10-K
December 1, 1995. for the year ended
December 31, 1995.
4.6 Fifth Amendment to Filed with this
Credit Agreement set report.
forth in Exhibit 4.1
dated as of
December 1, 1996.
4.7 Rights Agreement Incorporated by
dated as of December reference to Exhibit
10, 1996, between the 1 to the Company's
Company and report on Form 8-A
ChaseMellon Shareholder filed on December 20,
Services L.L.C. 1996
4.8 Note Agreement dated Filed with this
as of September 16, report.
1991, among the
Company and several
insurance companies.
4.9 Note Purchase Agreement Incorporated by
dated as of December 1, reference to Exhibit
1995, between the 4.9 to the Company's
Company and several report on Form 10-K
insurance companies. for the year ended
December 31, 1995.
10.1 The Company's Incorporated by
Management Incentive reference to Exhibit
Plan. 10.1 to the Company's
report on Form 10-K
for the year ended
December 31, 1995.
10.2 The Company's Long Incorporated by
Term Incentive Plan. reference to Exhibit
10.2 to the Company's
report on Form 10-K
for the year ended
December 31, 1995.
16
Exhibit No. Description Reference
----------- ----------- ---------
10.3 The Company's Incorporated by
Retirement Benefit reference to Exhibit
Equalization Plan. 10.3 to the Company's
report on Form 10-K
for the year ended
December 31, 1995.
10.4 The Company's Incorporated by
Supplemental reference to Exhibit
Executive 10.4 to the Company's
Retirement Plan. report on Form 10-K
for the year ended
December 31, 1995.
10.5 The Company's 1981 Filed with this
Stock Incentive Plan. report.
10.6 The Company's 1991 Filed with this
Stock Incentive Plan, report.
as amended February 21,
1997.
10.7 The Company's Non- Incorporated by
Employee Director reference to Exhibit
Deferred Stock Plan. 10.7 to the Company's
report on Form 10-K
for the year ended
December 31, 1994.
10.8 The Company's Filed with this
Amended and Restated report.
Directors' Deferred
Compensation Plan.
10.9 Consulting Agreement Incorporated by
dated as of April 1, reference to Exhibit
1994 between the 10.9 to the Company's
Company and Wallace report on Form 10-K
Barnes. for the year ended
December 31, 1994.
10.10 Addendum to Incorporated by
Consulting Agreement reference to Exhibit
set forth in Exhibit 10.10 to the Company's
10.9 dated as of report on Form 10-K for
May 22, 1995. the year ended
December 31, 1995.
17
Exhibit No. Description Reference
---------- ----------- ---------
10.11 The Company's Officer Incorporated by
Enhanced Life reference to Exhibit
Insurance Program. 10.11 to the
Company's report on
Form 10-K for the
year ended
December 31, 1993.
10.12 The Company's Enhanced Incorporated by
Life Insurance Program. reference to Exhibit
10.12 to the
Company's report on
Form 10-K for the
year ended
December 31, 1993.
10.13 The Company's Filed with this
Supplemental Senior report.
Officer Retirement
Plan.
13 Portions of the 1996 Filed with this
Annual Report to report.
Stockholders.
21 List of Subsidiaries. Filed with this
report.
23 Consent of Independent Filed with this
Accountants. report.
The Company agrees to furnish to the Commission,
upon request, a copy of each instrument with respect to which
there are outstanding issues of unregistered long-term debt
of the Company and its subsidiaries the authorized principal
amount of which does not exceed 10% of the total assets of
the Company and its subsidiaries on a consolidated basis.
Except for Exhibit 13, which will be furnished free
of charge, and Exhibits 21 and 23, which are included herein,
copies of exhibits referred to above will be furnished at a
cost of twenty cents per page to security holders who make a
written request therefor to The Secretary, Barnes Group Inc.,
Executive Office, 123 Main Street, P.O. Box 489, Bristol,
Connecticut 06011-0489.
18