EXHIBIT 99.1
TELEDYNE FLUID SYSTEMS' NITROGEN BUSINESS UNIT AUDITED FINANCIAL
STATEMENTS, FOR THE YEAR ENDED DECEMBER 31, 1998 WITH REPORT OF
INDEPENDENT AUDITORS.
Audited Financial Statements
Teledyne Fluid Systems'
Nitrogen Business Unit
For the year ended December 31, 1998
with Report of Independent Auditors
Teledyne Fluid Systems' Nitrogen Business Unit
Audited Financial Statements
Year ended December 31, 1998
Contents
Report of Independent Auditors 1
Audited Financial Statements
Balance Sheet 2
Statement of Income and Comprehensive Income 3
Statement of Cash Flow 4
Notes to Audited Financial Statements 5
Report of Independent Auditors
Board of Directors
Barnes Group Inc.
We have audited the accompanying balance sheet of Teledyne Fluid
Systems' Nitrogen Business Unit (the "Company") as of December
31, 1998 and the related statements of income and comprehensive
income and cash flow for the period then ended. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based upon our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance 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. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Teledyne Fluid Systems' Nitrogen Business Unit at December 31,
1998, and the results of its operations and its cash flows for
the period then ended, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
/s/ ERNST & YOUNG LLP
Pittsburg, Pennsylvania
October 8, 1999
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Teledyne Fluid Systems' Nitrogen Business Unit
Balance Sheet
December 31, 1998
(000's omitted)
Assets
Current assets:
Cash and cash equivalents $ 4,764
Accounts receivable, net 8,633
Inventory, net 5,116
Due from affiliates 2,320
Prepaid expenses 78
Deferred tax asset 385
--------
Total current assets 21,296
Land 201
Buildings 4,411
Equipment 18,904
--------
23,516
Accumulated depreciation (14,601)
--------
Net property, plant and equipment 8,915
Goodwill-net 899
Deferred tax asset 127
Other assets 307
--------
Total assets $ 31,544
========
Liabilities and stockholder's equity
Liabilities:
Accounts payable $ 3,360
Accrued liabilities 3,100
Foreign income tax liability 2,022
Deferred tax liability 415
--------
Total current liabilities 8,897
Notes payable and long term debt 124
Deferred tax liability 205
--------
Total liabilities 9,226
Stockholder's equity
Net advances from Allegheny Teledyne Incorporated 23,534
Accumulated other comprehensive income (1,216)
--------
Total stockholder's equity 22,318
--------
Total liabilities and stockholder's equity $ 31,544
========
<FN>
See accompanying notes.
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Teledyne Fluid Systems' Nitrogen Business Unit
Statement of Income and Comprehensive Income
Year ended December 31, 1998
(000's omitted)
Sales $ 47,408
Cost of sales 28,917
---------
Gross profit 18,491
Selling, general and administrative expenses 8,318
---------
Earnings before other income 10,173
Other income:
Interest income 76
Other income 16
---------
Income before income taxes 10,265
Income taxes 3,666
---------
Net income 6,599
Other comprehensive income, net of tax:
Foreign currency translation adjustments (808)
Realized gain included in net income (16)
---------
Comprehensive income $ 5,775
=========
<FN>
See accompanying notes.
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Teledyne Fluid Systems' Nitrogen Business Unit
Statement of Cash Flow
Year ended December 31, 1998
(000's omitted)
Operating activities:
Net income $ 6,599
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,659
Deferred income taxes 272
Change in operating assets and liabilities:
Accounts receivable (1,112)
Due from affiliates (1,854)
Inventories 358
Accounts payable 1,440
Other 28
--------
Cash provided by operating activities 7,390
Investing activities:
Purchases of property, plant and equipment (3,078)
--------
Cash used in investing activities (3,078)
Financing activities:
Net advances to Allegheny Teledyne Incorporated (1,147)
--------
Cash used in financing activities (1,147)
Effect of foreign currency exchange rate changes on
cash and cash equivalents (808)
--------
Net increase in cash and cash equivalents 2,357
Cash and cash equivalents at beginning of year 2,407
--------
Cash and cash equivalents at end of year $ 4,764
========
<FN>
See accompanying notes.
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Teledyne Fluid Systems' Nitrogen Business Unit
Notes to Audited Financial Statements
December 31, 1998
(All dollar amounts included in the notes are stated in thousands
except per share data.)
1. Summary of Significant Accounting Policies
Basis of Combination
Teledyne Fluid Systems' Nitrogen Business Unit (the Company or
the Nitrogen Business Unit) consists of the Hyson, Kaller and
Stromsholmen facilities of Teledyne Fluid Systems' Division of
Teledyne Industries, Inc., a wholly owned subsidiary of Allegheny
Teledyne Incorporated (Allegheny Teledyne). The Nitrogen Business
Unit has no separate legal existence.
The accompanying financial statements have been prepared solely
to comply with the requirements of the Securities and Exchange
Commission (for inclusion in the Barnes Group Inc.'s current
report on Form 8-k(a).)
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect reported amounts and
related disclosures. Actual results could differ from those
estimates.
Revenue Recognition
Sales of nitrogen gas springs are recognized as product sales
when the unit is shipped and title has passed to the customer.
Inventories
Inventories are stated at the lower of cost (last-in, first-out;
and first-in, first-out cost methods) or market. Costs include
direct material, direct labor and applicable manufacturing and
engineering overhead, and other direct costs.
Income Taxes
Provision for income taxes includes deferred taxes resulting from
temporary differences in income for financial and tax purposes
using the liability method. Such temporary differences result
primarily from differences in the carrying value of assets and
liabilities.
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Teledyne Fluid Systems' Nitrogen Business Unit
Notes to Audited Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Accounts Receivable
Accounts receivable is presented net of a reserve for doubtful
accounts of $28 at December 31, 1998. The Company markets its
products and services principally throughout the United States,
Europe and Asia. Trade credit is extended based upon evaluation
of each customer's ability to perform its obligations, which are
updated periodically.
Property, Plant and Equipment
Property, plant and equipment are carried at cost. The method of
depreciation adopted for all property placed into service after
June 30, 1996 is the straight-line method. For buildings and
equipment acquired prior to July 1, 1996, depreciation is
computed using a combination of accelerated and straight-line
methods.
Foreign Currency Translation
The Company's Stromsholmen entity's accounts are measured using
local currency as the functional currency. Assets and liabilities
are translated at the exchange rate in affect at year-end.
Revenues and expenses are translated at the rates of exchange
prevailing during the year. Translation adjustments arising from
differences in exchange rates from period to period are reflected
in accumulated other comprehensive income within stockholder's
equity.
2. Accounts Receivable
Accounts receivable is summarized as follows at December 31,
1998:
Trade accounts receivable $ 8,608
Other receivables 53
Reserve for doubtful accounts (28)
--------
Total accounts receivable $ 8,633
========
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Teledyne Fluid Systems' Nitrogen Business Unit
Notes to Audited Financial Statements (continued)
3. Inventories
Inventories are summarized as follows at December 31, 1998:
Raw materials $ 1,669
Work-in-process 1,642
Finished goods 2,253
--------
Total inventories at current cost 5,564
Less allowance to reduce current cost value
to LIFO basis (227)
Less reserve for obsolete inventory (221)
--------
Total inventories $ 5,116
========
Inventories determined on the last-in, first-out method were
$1,726 at December 31, 1998.
4. Related Party Transactions
The accompanying financial statements include transactions with
Allegheny Teledyne as follows at December 31, 1998:
Net advances from Allegheny Teledyne,
beginning of the year $ 18,082
Net income 6,599
Net cash transactions with Allegheny Teledyne (1,147)
--------
Net advances from Allegheny Teledyne,
end of the year $ 23,534
========
The Nitrogen Business Unit participates in Allegheny Teledyne's
centralized cash management system. Cash receipts in excess of
cash requirements are transferred to Allegheny Teledyne. These
transactions with Allegheny Teledyne are non-interest bearing and
the net advances fluctuate on a daily basis.
The Company's general and administrative expenses include
allocated expenses incurred by Allegheny Teledyne on the
Company's behalf including costs for finance, legal, tax and
human resources functions. The Nitrogen Business Unit also
participates in casualty, medical and life insurance programs
sponsored by Allegheny Teledyne.
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Teledyne Fluid Systems' Nitrogen Business Unit
Notes to Audited Financial Statements (continued)
5. Income Taxes
The Nitrogen Business Unit is included in the consolidated
federal and certain state income tax returns of Allegheny
Teledyne. Any required tax payments were made by Allegheny
Teledyne as part of its consolidated returns. Provision for
income taxes was calculated as if the Company had filed separate
income tax returns. Provision for income taxes was as follows for
the year ended December 31, 1998:
Current:
Federal $ 1,420
State 254
Foreign 1,720
--------
Total 3,394
--------
Deferred:
Federal 245
State 27
--------
272
--------
Total provision for income taxes $ 3,666
========
Deferred income taxes result from temporary differences in the
recognition of income and expense for financial and income tax
reporting purposes. Deferred income taxes represent future tax
benefits or costs to be recognized when those temporary
differences reverse.
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Teledyne Fluid Systems' Nitrogen Business Unit
Notes to Audited Financial Statements (continued)
5. Income Taxes (continued)
The categories of assets and liabilities that have resulted in
differences in the timing of the recognition of income and
expense were as follows as of December 31, 1998:
Deferred income tax assets:
Reserves $ 203
Deferred compensation and other benefit plans 264
Other 45
--------
Total deferred income tax assets 512
--------
Deferred income tax liabilities:
Basis of property, plant and equipment 205
Inventory valuation 192
Reserves 141
Other 82
--------
Total deferred income tax liabilities 620
--------
Net deferred income tax liabilities $ 108
========
6. Pension Plan
Certain Nitrogen Business Unit employees participate in a
noncontributory defined benefit plan sponsored by Allegheny
Teledyne. Benefits under the defined benefit plan are generally
based on years of service and/or final average pay. Allegheny
Teledyne funds the pension plan in accordance with the
requirements of the Employee Retirement Income Security Act of
1974 (ERISA), as amended, and the Internal Revenue Code.
Net periodic pension expense allocated to the Nitrogen Business
Unit was $114 for the year ended December 31, 1998.
7. Subsequent Event
On August 30, 1999, Barnes Group Inc. purchased substantially all
of the assets of the nitrogen gas springs business of the
Teledyne Fluid Systems' Division of Teledyne Industries, Inc.
pursuant to an Asset Purchase and Sale Agreement dated as of July
27, 1999 by and between Teledyne Industries, Inc. and Barnes
Group Inc. (the "Purchaser").
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Teledyne Fluid Systems' Nitrogen Business Unit
Notes to Audited Financial Statements (continued)
7. Subsequent Event (continued)
The Purchaser intends to continue the use of such machinery,
equipment and other physical property in connection with the
operation of such business. The acquired assets also include all
of the capital stock of Stromsholmen AB, a Swedish corporation,
in Tranas, Sweden that produces and distributes nitrogen gas
springs for the metal forming industries. Such stock was acquired
by Barnes Sweden Holding Company AB, a wholly owned subsidiary of
the Purchaser.
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