UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For transition period from
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to
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Commission File Number 1-4801
BARNES GROUP INC.
(a Delaware Corporation)
I.R.S. Employer Identification No. 06-0247840
123 Main Street, Bristol, Connecticut 06010
Telephone Number (860) 583-7070
Number of common shares outstanding at
August 11, 1997 - 20,309,968
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
--- ---
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BARNES GROUP INC.
FORM 10-Q INDEX
For the Quarterly period ended June 30, 1997
DESCRIPTION PAGES
----------- -----
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Income
for the six months and second quarter
ended June 30, 1997 and 1996 3
Consolidated Balance Sheets as of
June 30, 1997 and December 31, 1996 4-5
Consolidated Statements of Cash Flows
for the six months ended June 30,
1997 and 1996 6
Notes to Consolidated Financial
Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-10
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 11
Signatures 11
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
------------------ -----------------
1997 1996 1997 1996
-------- -------- --------- -------
Net sales $165,867 $152,604 $324,000 $302,695
Cost of sales 111,243 98,887 214,189 196,060
Selling and admin-
istrative expenses 37,141 39,295 75,524 80,959
-------- -------- -------- --------
148,384 138,182 289,713 277,019
-------- -------- -------- --------
Operating income 17,483 14,422 34,287 25,676
Other income 1,202 1,103 2,122 2,053
Interest expense 1,237 1,300 2,525 2,588
Other expenses 306 482 553 863
-------- -------- -------- --------
Income before income
taxes 17,142 13,743 33,331 24,278
Income taxes 6,428 5,085 12,499 8,983
-------- -------- -------- --------
Net income $ 10,714 $ 8,658 $ 20,832 $ 15,295
======== ======== ======== ========
Per common share:
Net income $ .53 $ .43 $ 1.03 $ .77
Dividends .17 .15 .32 .30
Average common shares
outstanding 20,307,821 19,929,192 20,197,220 19,838,547
<FN>
See accompanying notes.
-3-
BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS June 30, December 31,
1997 1996
-------- ------------
(Unaudited)
Current assets
Cash and cash equivalents $ 29,154 $ 23,986
Accounts receivable, less allowances
(1997-$2,699; 1996-$3,158) 99,743 88,060
Inventories
Finished goods 33,327 30,285
Work-in-process 18,515 17,730
Raw materials and supplies 14,595 16,927
-------- --------
66,437 64,942
Deferred income taxes and prepaid
expenses 14,126 13,310
-------- --------
Total current assets 209,460 190,298
Deferred income taxes 22,955 23,575
Property, plant and equipment 332,245 320,604
Less accumulated depreciation 196,465 189,533
-------- --------
135,780 131,071
Goodwill 19,147 19,441
Other assets 26,753 25,571
-------- --------
Total assets $414,095 $389,956
======== ========
<FN>
See accompanying notes.
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BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, December 31,
1997 1996
-------- ------------
(Unaudited)
Current liabilities
Notes payable $ 5,704 $ 1,767
Accounts payable 37,784 30,363
Accrued liabilities 42,269 46,152
Guaranteed ESOP obligation-current 2,641 2,540
-------- --------
Total current liabilities 88,398 80,822
Long-term debt 70,000 70,000
Guaranteed ESOP obligation 3,605 4,951
Accrued retirement benefits 68,711 69,085
Other liabilities 7,178 7,934
Stockholders' equity
Common stock-par value $.01 per share
Authorized: 60,000,000 shares
Issued: 22,037,769 shares stated at 220 15,737
Additional paid-in capital 45,563 28,347
Retained earnings 171,088 156,698
Foreign currency translation
adjustments (11,792) (10,087)
Treasury stock at cost,
1997-1,730,940 shares
1996-2,046,009 shares (22,630) (26,040)
Guaranteed ESOP obligation (6,246) (7,491)
-------- --------
Total stockholders' equity 176,203 157,164
-------- --------
Total liabilities and stockholders'
equity $414,095 $389,956
======== ========
<FN>
See accompanying notes.
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BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months ended June 30, 1997 and 1996
(Dollars in thousands)
(Unaudited)
1997 1996
------- -------
Operating Activities:
Net income $20,832 $15,295
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 13,906 13,895
Gain on sale of property, plant and
equipment (305) (287)
Translation losses 115 138
Changes in assets and liabilities:
Accounts receivable (11,935) (9,138)
Inventories (1,929) (9,080)
Accounts payable 7,652 (389)
Accrued liabilities (5,006) 504
Deferred income taxes 463 (925)
Other liabilities and assets (1,918) (1,530)
------- -------
Net Cash Provided by Operating Activities 21,875 8,483
Investing Activities:
Proceeds from sale of property, plant
and equipment 1,295 1,172
Capital expenditures (19,212) (15,130)
Other (239) (747)
------- -------
Net Cash Used by Investing Activities (18,156) (14,705)
Financing Activities:
Net increase in notes payable 4,012 15,436
Proceeds from the issuance of common stock 5,439 3,903
Payments to acquire treasury stock (1,226) --
Dividends paid (6,413) (5,961)
------- -------
Net Cash Provided by Financing Activities 1,812 13,378
Effect of exchange rate changes on cash flows (363) (582)
------- -------
Increase in cash and cash equivalents 5,168 6,574
Cash and cash equivalents at beginning of period 23,986 17,868
------- -------
Cash and cash equivalents at end of period $29,154 $24,442
======= =======
<FN>
See accompanying notes.
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Notes to Consolidated Financial Statements:
1. Summary of Significant Accounting Policies
------------------------------------------
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. They do not include all information and
footnotes required by generally accepted accounting principles
for complete financial statements. For additional
information, please refer to the consolidated financial
statements and footnotes included in the company's Annual
Report on Form 10-K for the year ended December 31, 1996. In
the opinion of management, all adjustments, including normal
recurring accruals considered necessary for a fair
presentation, have been included. Operating results for the
six-month period ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the year
ending December 31, 1997.
2. Common Stock
------------
On April 2, 1997, the stockholders approved an amendment to the
company's Restated Certificate of Incorporation providing for
an increase in the number of authorized common shares from 20
million to 60 million and a reduction in the par value of
common and preferred stock from $1.00 to $.01 per share. This
allowed the company to effect a three-for-one stock split for
stockholders of record on April 3, 1997, previously authorized
by the Board of Directors.
All references to shares and per share amounts in the
consolidated financial statements and accompanying notes have
been adjusted retroactively for the three-for-one stock split.
Stockholders' equity at June 30, 1997 reflects the effect of
the stock split and change in par value per share. These
changes reduced the common stock account by $15.5 million and
increased the additional paid-in capital account by a like
amount.
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
---------------------
The company's second quarter 1997 sales were up 9% to $165.9 million
compared to $152.6 million in 1996. Operating income increased 21%
to $17.5 million versus 1996 results of $14.4 million. The second
quarter 1997 operating margin improved to 10.5% compared to 9.5% in
the 1996 second quarter. The 1997 second quarter results reflect
period-over-period sales gains in all three business segments,
operating income growth in Barnes Aerospace and Bowman Distribution
and continued strong operating results at Associated Spring.
The company's 1997 first half sales were $324.0 million, up 7% from
$302.7 million in 1996 reflecting sales gains in all three business
segments. First half operating income was $34.3 million, an
increase of 34% over the $25.7 million reported in 1996. The 1997
six month operating margin was 10.6% versus 8.5% in the comparable
1996 period.
Segment Review - Sales and Operating Income
-------------------------------------------
Associated Spring segment sales for the second quarter and six
months ending June 30, 1997 rose approximately 3% over the
comparable 1996 periods. Sales for the 1997 second quarter were
$74.8 million and $148.5 million year to date. The sales gains were
due to the continued strength of the domestic automotive and durable
goods markets, gains in the Brazilian and distribution businesses
and a second quarter increase in sales reported by the Singapore
operation. Operating income declined in both 1997 periods compared
to 1996 primarily due to the disappointing results reported by the
group's Mexican operation.
Bowman Distribution's second quarter 1997 segment sales increased 6%
to $57.1 million, and first half sales were $111.9 million, up 3%
over 1996. Operating income gains more than kept pace with sales.
The sales and operating income increases reflect strong gains made
in Bowman's U.S. business due largely to increased penetration of
large accounts, particularly railroads and electric utilities.
Excellent progress was made in Europe to improve profitability.
Barnes Aerospace segment sales for 1997's second quarter were $34.3
million, up 32% over 1996 and first half sales improved 30% to $64.3
million over 1996. Strong gains in sales and operating income were
reported by all three of the group's business units, as they
benefited from the upturn in the commercial aircraft engine and
airframe markets.
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Non-operating Income/Expense
----------------------------
Other income for the second quarter and first half of 1997 increased
compared to 1996 primarily due to higher profits from the company's
joint venture, NASCO.
Other expenses decreased in the second quarter and first six months
of 1997 compared to 1996 primarily due to lower foreign exchange and
translation losses.
Income Taxes
------------
The company's 1997 second quarter and first half effective tax rate
was 37.5%, compared to the effective rate of 37.0% in the comparable
1996 periods. The increase was due to U.S. income, with income tax
rates higher than the foreign tax rates, comprising a greater
percentage of consolidated income before taxes in 1997 as compared
to 1996.
Net Income and Net Income Per Share
-----------------------------------
The consolidated net income for the second quarter of 1997 was $10.7
million, or 53 cents per share, compared to 1996's second quarter
net income of $8.7 million, or 43 cents per share. This is the
company's best quarter ever and the second consecutive record
breaking quarter.
Consolidated net income for the first six months of 1997 was $20.8
million, or $1.03 per share, compared to 1996's net income of $15.3
million, or 77 cents per share.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128 ("FAS 128"), "Earnings Per Share", requiring
the dual presentation of basic and diluted earnings per share. The
company is required to adopt the provisions of the Statement in the
fourth quarter of 1997. If earnings per share for the quarters had
been computed under the provisions of FAS 128 the results would be:
Three months Six months
ended June 30, ended June 30,
Earnings Per Share 1997 1996 1997 1996
---- ---- ---- ----
As Reported $.53 $.43 $1.03 $.77
Pro forma:
Basic .53 .43 1.03 .77
Diluted .52 .43 1.01 .76
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Financial Condition
-------------------
Cash Flows
----------
In the first half of 1997, operating activities provided $21.9
million of cash flow, $13.4 million higher than in 1996. While
earnings were strong in both years, better working capital
management in 1997 versus 1996 provided nearly $8 million of
incremental cash flow.
Net cash used for investing activities during the first six months
of 1997 was $18.2 million compared to $14.7 million in 1996's first
half. The increase in 1997 reflects higher levels of capital
expenditures as all three operating groups continue to expand
capacity and improve productivity, quality and customer service by
investing in new manufacturing equipment and new hardware and
software for the customer information technologies systems project
at Bowman.
In the first half of 1997, net cash provided by financing activities
was $1.8 million compared to $13.4 million provided in the first
half of 1996. The increase in notes payable in 1996 partially
funded the cash needed for investing activities and the increase in
cash and cash equivalents. In 1997, investing activities were
funded in large part from cash provided by operations. The proceeds
from the issuance of common stock for both periods was largely due
to the exercise of stock options. Dividends paid to shareholders
increased in 1997 over 1996 reflecting an increase in the dividend
rate in the first half of 1997 to 32 cents per share versus 30 cents
per share in the first half of 1996.
Liquidity and Capital Resources
-------------------------------
During 1997 and 1996, the company maintained long-term debt of $70.0
million, comprised, in part, of borrowings under its short-term bank
credit lines backed by its long-term revolving credit agreement. At
June 30, 1997, the company classified as long-term debt $10.3
million of borrowings under its lines of credit and $6.2 million of
the current portion of its 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. The company considers
this a cost effective way to manage its long-term financing needs.
The company maintains substantial bank borrowing facilities to
supplement cash generated internally. At June 30, 1997, the company
had $150.0 million of borrowing capacity available under its
revolving credit agreement of which none was borrowed. In addition,
the company had approximately $120.0 million in uncommitted short-
term bank credit lines, of which $12.0 million was in use at June
30, 1997. The interest rate on this borrowing was 5.83%. The
company believes these credit facilities coupled with cash generated
from operations are adequate for its anticipated future
requirements.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
One report dated April 8, 1997 was filed. It
addressed the proposal to stockholders to approve the
amendment of the company's Restated Certificate of
Incorporation. The amendment, as approved, increased
the number of authorized common shares from 20 million
to 60 million and reduced the par value of common and
preferred stock from $1.00 to $0.01 per share. The
stockholder approval of the amendment was a condition
to the three-for-one common stock split approved by the
Board of Directors, February 21, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Barnes Group Inc.
(Registrant)
Date August 13, 1997 By /s/ John J. Locher
--------------- -------------------------------------
John J. Locher
Vice President, Treasurer
(the principal financial officer)
Date August 13, 1997 By /s/ Francis C. Boyle, Jr.
--------------- -------------------------------------
Francis C. Boyle, Jr.
Vice President, Controller
(the principal accounting officer)
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