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EXHIBIT - 13
[BARNES GROUP INC LOGO]
TECHNOLOGY AND SERVICE: ADDING VALUE THROUGH INNOVATION
BARNES GROUP INC.
1997 ANNUAL REPORT
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BARNES GROUP CORPORATE PROFILE
Founded in 1857 in Bristol, Connecticut, Barnes Group is a diversified
international company with three businesses serving a range of industrial and
transportation markets worldwide.
INSIDE
Financial Highlights......... ....................................3
Stockholder Letter........... ....................................4
The Year in Review:
Bowman Distribution....... ....................................6
Barnes Aerospace.......... ....................................8
Associated Spring......... ...................................10
Five-Year
Operating Results ...............................................12
Management's Discussion
and Analysis ....................................................13
A Continuing Salute to
Our Employees................ ...................................13
Consolidated
Financial Statements......... ...................................17
Notes to Consolidated
Financial Statements ............................................21
Quarterly Data............... ...................................31
Selected Financial Data...... ...................................32
Directory of Operations...... ...................................34
Directors and Officers,
Stockholders' Information.... ...................................35
ASSOCIATED SPRING
For nearly a century and a half, Associated Spring has been one of the world's
leading precision spring manufacturers. Today, more than 90 percent of its
business is built on providing highly engineered custom solutions for a range of
transportation and industrial applications, including precision stampings and
assemblies designed to meet the exacting requirements of durable goods
manufacturers. Key markets range from automotive, farm equipment, and
construction machinery to home appliances, electronics, and telecommunications.
As a high-technology company, Associated Spring has built on its basic strengths
with advanced automated systems and research facilities, highly specialized
capabilities and services, and a talented team of scientists, engineers, and
manufacturing professionals. Quality is at the heart of everything Associated
Spring does, as typified by the cover photo, which depicts the inspection of a
part for a high-voltage electrical contact at the group's Center For Advanced
Research.
BOWMAN DISTRIBUTION
Bowman Distribution has been an industry leader in the distribution of
maintenance, repair and operating (MRO) supplies since 1927. It is one of the
world's largest MRO distributors and has grown into an international logistical
management services business, serving thousands of customers in North America
and Europe.
Bowman uses innovative methods to solve customer issues. It has excelled over
the years by focusing on three areas: inventory management services, technical
support programs, and superior quality products -- all tailored to customer
needs. Its primary goal is to help customers maximize their MRO performance to
support continued productivity improvement. Bowman does this by managing and
controlling the basic logistical costs using the latest technology, such as the
developing global management information network shown on the cover.
BARNES AEROSPACE
Barnes Aerospace is a worldwide producer of machined and fabricated components
and assemblies for aircraft engine and airframe builders. It provides engine
component overhaul and repair services for most of the world's major commercial
airlines and the military.
Barnes Aerospace has earned an international reputation both for serving the
original equipment manufacture and overhaul and repair markets. The group
manufactures complex components for the compressor, combustor, and turbine
sections of jet engines. It also produces hot-formed parts from titanium and
other high temperature materials for ducting, bulkheads, exhaust nozzles, and
fairings. Barnes Aerospace uses the most advanced process control and production
techniques available for machining, forming, fabricating, and joining exotic
materials. Its quality and continuous improvement programs, as shown in the
cover photo, are essential to meeting customer expectations.
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FINANCIAL HIGHLIGHTS - BARNES GROUP INC.
(Dollars in thousands, except per share data)
YEARS ENDED DECEMBER 31, 1997 1996 1995
- ------------------------ ---- ---- ----
Net sales $642,660 $594,989 $592,509
Operating income 65,766 55,316 48,804
Net income 40,423 32,568 27,484
Net income per share
Basic 2.00 1.63 1.40
Diluted 1.96 1.61 1.38
Capital expenditures 33,398 33,892 35,820
Stockholders' equity at year-end 180,859 157,164 128,841
Return on average equity 23.4% 22.8% 22.6%
Total market value of stock at year-end $458,700 $399,835 $235,970
Closing market price per share 22 3/4 20 12
Dividends paid per share .65 .60 .53
Total return (stock price appreciation plus dividends) 17% 72% (1%)
All per share data adjusted for 3-for-1 stock split, effective April, 1997.
[NET SALES BAR GRAPH OF BARNES GROUP INC.]
[NET INCOME BAR GRAPH OF BARNES GROUP INC.]
[TOTAL MARKET VALUE OF STOCK BAR GRAPH OF BARNES GROUP INC.]
[TOTAL RETURN ON STOCK BAR GRAPH OF BARNES GROUP INC.]
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FROM THEODORE E. MARTIN, PRESIDENT AND CEO
A MESSAGE TO OUR STOCKHOLDERS
By any measure, Barnes Group had another outstanding year in 1997. The company
continued its momentum that began in 1994, setting new records in net income and
earnings per share for the third consecutive year, and new highs in sales for
the fourth successive year.
Net income for 1997 rose 24 percent to a record $40.4 million, from $32.6
million a year ago. On a basic earnings per share basis, earnings for the year
climbed to a new high of $2.00 per share, up 23 percent from $1.63 in 1996.
[PICTURE OF THEODORE E. MARTIN]
THEODORE E. MARTIN PRESIDENT AND CHIEF EXECUTIVE OFFICER
Diluted earnings per share, calculated according to the new Statement of
Financial Accounting Standards No. 128, was $1.96 per share in 1997, versus
$1.61 per share in 1996. Operating income for 1997 increased 19 percent to $65.8
million, and stockholders' equity at year-end grew 15 percent to $180.9 million.
Sales for the year totaled $643 million, up 8 percent from $595 million in 1996.
Fourth quarter 1997 earnings also established a new record for the quarter, as
the company turned in double-digit gains in both sales and profits. It was the
seventh successive quarter of record-breaking earnings. Contributing to the
year's overall performance were foreign exchange gains of $1.8 million for the
full year, of which $1.1 million occurred in the fourth quarter.
Our stockholders continued to reap the rewards of the company's strong
performance in 1997. The company's stock price over the year increased 14
percent, closing at $22.75 per share, compared with $20 per share at the end of
1996. In April 1997, our stockholders approved an increase in the company's
authorized common shares from 20 million to 60 million and a 3-for-1 stock
split, which is reflected in all per share data. We also raised the quarterly
cash dividend 11 percent to 16.7 cents per share in the second quarter of 1997,
the third increase in the last three years. The dividend, combined with our
stock price appreciation, provided a total annual return of 17 percent. The
total market value of our company rose 15 percent to $459 million, from $400
million at the end of 1996.
For each of the past three years, Barnes Group has posted record financial
results with meaningful growth in income and earnings per share. This orderly
progression of increased year-over-year results did not happen by chance. It has
been the direct result of nearly 3,900 employees working and pulling together to
meet our plan for making Barnes Group a top-tier performer for the long term.
This has been the blueprint behind the company's record of steady improvement,
one that we expect to continue in 1998 and well into the next century.
Our record-breaking performance in 1997 was driven by exceptionally strong
earnings growth in our Bowman Distribution and Barnes Aerospace businesses, and
a respectable performance from Associated Spring. We are especially pleased with
the accomplishments of Bowman's North American business, and with the strong,
positive strides made by our aerospace group for the fourth consecutive year.
Bowman continued its strong profit growth in North America and Europe in 1997.
It increased penetration of targeted markets, such as railroads, aerospace
companies and manufacturing plants; further developed large multilocation
maintenance, repair and operating supplies customers, and continued to reduce
operating costs. As a result, Bowman's operating income in 1997 increased for
the fourth consecutive year, up 22 percent from a strong 1996 performance. Sales
were $220 million, compared with $213 million the previous year.
Bowman's gains were also due to a highly successful program for increasing its
product mix through new supplier partnerships and alliances, which are providing
customers with the right innovative solutions for their particular needs. In
addition, it continued to make good progress in its transition to a logistics
management operation, with increasingly strong gains in the integrated supply
business. This type of operation is enabling large companies to
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adopt a unified approach to their professional maintenance and supply needs,
using Bowman as a single-source supplier. A new global management information
network is also being developed to improve Bowman's linkage with its customers
worldwide.
Barnes Aerospace increased its momentum in 1997, turning in significant sales
and profits from all of its operations. Buoyed by the sharp upturn in the
aerospace market, sales were $137 million, up 33 percent from $103 million in
1996. Operating income climbed dramatically to $14.4 million, up 172 percent
from $5.3 million in the prior year. Strong gains were made in the group's
precision machining, advanced fabrications and overhaul and repair businesses,
as Barnes Aerospace expanded services to aircraft and airframe builders for both
commercial airlines and the military. Backlog at year-end reached a record high
$131 million, up 27 percent from $103 million in 1996.
Under the direction of Cedric D. Beckett, the company's newest vice president
and president of Barnes Aerospace, the group completed an important move in
1997, integrating its separate businesses serving the Original Equipment
Manufacture (OEM) markets. The OEM operation now includes precision machining
and material fabrication, which together are creating a synergy that will lead
to further cost savings and productivity. The overhaul and repair business
continues to operate separately reporting to Beckett.
Associated Spring had sales of $287 million in 1997, up from $280 million the
year before. Operating income was $43.0 million, compared with $45.8 million in
1996. The lower income was due partly to softer sales in the electronics and
telecommunications markets, and to operating issues in Mexico which were
resolved. The group made significant improvements in both its U.S. and Mexico
operations in the second half of the year and is poised to capitalize on new
growth opportunities in 1998.
During the past year, Associated Spring continued to make gains in its
automotive-related operations, including its NASCO joint venture, and increased
business with Japanese "transplants" in the U.S. It also continued to penetrate
the European market, winning new business from several major automotive
manufacturers in Germany and Sweden, and it established an office in China to
expand its business along the Pacific Rim. The group's distribution business
also turned in higher sales and profits from its expanding business for die
springs and Stock Precision Engineered Components, particularly in Europe.
Our main strategies in 1997 continued to focus on investing in the latest
technology and the best people, enabling us to sustain our momentum and respond
better to the needs of our customers. To this end, we made important senior
management changes at the Executive Office, filling the top positions in
Finance, Law and Human Resources. We also elected two new directors, Frank E.
Grzelecki, vice chairman of Handy & Harman, and Robert W. Fiondella, chairman,
president and CEO of Phoenix Home Life Mutual Insurance Company.
As we look to the future, we are confident that our strategy for growth is on
target. Our goal remains to continue our global expansion in Europe and Asia,
and to further intensify our focus on building profitable sales, improving
productivity and reducing costs in all three of our businesses. These efforts
will include launching new products and expanding our existing products and
services. We firmly believe the company is on track to become one of the leading
service-focused companies in distribution and manufacturing worldwide.
/s/ Theodore E. Martin
Theodore E. Martin
President and Chief Executive Officer
By order of the Board of Directors
February 20, 1998
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BOWMAN DISTRIBUTION: THE YEAR IN REVIEW
[PICTURE OF LI-FEN JOU]
LI-FEN JOU, INFORMATION CENTER ANALYST AT BOWMAN GROUP HEADQUARTERS IN
CLEVELAND, OHIO, EXAMINES A SUPPLY CHAIN PLANNING PYRAMID, ONE OF THE KEY
ELEMENTS IN BOWMAN'S NEW WORLDWIDE INFORMATION NETWORK. DESIGNED TO MEET THE
CHANGING MRO NEEDS OF ITS CUSTOMERS AND SUPPLIERS INTO THE NEXT CENTURY, THE
SYSTEM WILL PROVIDE IMPROVEMENTS IN COMMUNICATIONS, COSTS, PRODUCTIVITY AND
ON-TIME DELIVERY THROUGHOUT THE SUPPLY CHAIN.
[PICTURE OF LEORNARD M. CARLUCI]
LEONARD M. CARLUCCI PRESIDENT, BOWMAN DISTRIBUTION
During the past year, Bowman Distribution continued its pivotal role as an
essential player in helping the company become a top-tier performer for the long
term. In 1997, Bowman moved closer to its strategic goal of becoming the most
efficient provider of logistical management services both to targeted markets
and to maintenance, repair and operating supplies (MRO) customers on a global
basis.
1997 PERFORMANCE
Bowman's strategy requires a strong and increasing emphasis on service, cost,
and technology. This strategy provided the direction for continued growth in
1997. Sales for the group were $220 million, up from $213 million in 1996.
Operating income increased strongly for the fourth consecutive year, advancing
22 percent to $26.7 million, from $22.0 million a year ago.
The increase in sales and profits was due to gains made in penetrating large,
multilocation MRO customers in targeted transportation, industrial and utilities
markets in the U.S., Canada and Europe. Further impetus was provided by Bowman's
North American operations, which continued to reduce distribution costs and
upgrade both its sales and service account teams. In its European operations,
Bowman continued to improve the profit picture, especially in the United
Kingdom, reflecting gains in sales and productivity and lower operating
expenses. Productivity gains in the U.K. were driven by the full implementation
of upgraded systems including bar code scanners to help reduce inventory, error
rates, and order processing time.
Bowman's primary business focus over the past two years has been to
differentiate itself from its competitors by becoming a logistics management
operation with a strong emphasis on integrated supply. Because of this approach,
Bowman is increasing its high-volume, multiple-location customers, such as Union
Pacific Railroad, Grumman Northrop, Federal Express, and Waste Management.
During 1997, Bowman continued to build a strong and successful track record in
integrated supply. For a growing number of large, multi-location accounts,
Bowman is setting up and staffing the customer's own in-house maintenance
department. In other accounts, the level of service may consist simply of
delivering the product to the loading dock.
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In all cases, Bowman provides a flexible mix of systems, products and services
tailored to meet individual customers' needs.
The move to selling large accounts has created the need for greater teamwork,
with more sophisticated sales and service people working together to build each
account. At one large account, where hundreds of suppliers were formerly
utilized, a move toward integrated supply resulted in Bowman expanding product
offerings and increasing the number of customer locations from six to ultimately
over 100 throughout the U.S. This requires account management at the corporate
level of the customer and coordination of the entire sales organization by sales
management to set up the locations. In addition, product sourcing, inventory and
logistics planning are all part of the successful implementation to ensure
accelerated sales growth with this key account.
This logistics management program is focused on creating a partnership that
allows both the customer and Bowman to benefit from the economics of a large
account relationship. The goal is to reduce the number of required vendors,
provide overall cost reductions for the customer, and improve product quality
and service.
The past year was also marked by a significant increase in Bowman's product
line. Through supplier partnerships and alliances, approximately one million
parts are now available to customers. It is all part of a strategy to provide
Bowman's customers with innovative solutions to their particular needs. This
"bread-basket" approach allows customers to choose the right product mix or
system configuration for maximizing their MRO performance.
In response to growing market demands worldwide, Bowman has embarked on a major
upgrade of its management information system. This investment will enable it to
become one of the few MRO suppliers capable of networking information worldwide
to its distributors and customers in the U.S., Canada and Europe. Once
completed, this new system will meet Bowman's future needs as it expands into
additional world markets and strengthens its position as a global, world-class
business.
MARKET OPPORTUNITIES
Bowman is fast becoming the supplier of choice for companies seeking a unified
approach to their MRO needs. As major corporations continue their drive to focus
on core competencies and productivity, the need to outsource MRO and logistical
activities will create significant opportunities for Bowman on a worldwide
scale.
[BAR GRAPH OF NET SALES OF BOWMAN]
[BAR GRAPH OF OPERATING INCOME OF BOWMAN]
[PICTURE OF BOWMAN'S RESOURCE PLANNING TEAM]
BOWMAN HAS EXTENDED ITS TEAM APPROACH TO EVERY ASPECT OF ITS BUSINESS, FROM
SELLING AND SERVICING LARGE, MULTIPLE-LOCATION ACCOUNTS, TO THE DEVELOPMENT OF A
NEW STATE-OF-THE-ART GLOBAL MANAGEMENT INFORMATION NETWORK. A CRITICAL PART OF
THIS NETWORK INVOLVES SUPPLY CHAIN PLANNING FOR BOWMAN'S MAJOR PRODUCT GROUPS IN
THE AREAS OF FORECASTING, INVENTORY PLANNING AND DISTRIBUTION REQUIREMENT
PLANNING. HERE, A RESOURCE PLANNING PROJECT TEAM, LED BY MANAGER LOU DIFRANCESCO
(CENTER) AND INCLUDING PAM BRITTON (FRONT) AND VIKKI SUTTON, WORKS ON A
FORECASTING MODEL FOR BOWMAN'S HIGH-STRENGTH FASTENER LINE. THE TEAM'S GOAL IS
TO ENHANCE BOWMAN'S ABILITY TO HAVE THE RIGHT PRODUCT IN THE RIGHT PLACE AT THE
RIGHT TIME.
THE ADVANCED SYSTEM UPGRADES THE GROUP'S MIS CAPABILITIES, ENABLING BOWMAN TO
BECOME MORE RESPONSIVE, EFFICIENT AND COMPETITIVE INTO THE NEW MILLENIUM. THIS
TECHNOLOGY ADDS GREAT SPEED TO EVERYTHING FROM PURCHASING TO ORDER PROCESSING,
AND PROVIDES BOWMAN WITH THE TIMELY INFORMATION NEEDED FOR LONG-TERM GROWTH AND
PRODUCTIVITY GAINS.
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BARNES AEROSPACE: THE YEAR IN REVIEW
[PICTURE OF LEE ALBERT]
LEE ALBERT, PROCESS ENGINEER AT BARNES AEROSPACE'S OVERHAUL AND REPAIR FACILITY
IN EAST GRANBY, CONNECTICUT, EXAMINES THE FRONT INNER FLANGE THICKNESS ON A
PRATT & WHITNEY JT9D TURBINE EXHAUST CASE. THIS IS THE LATEST IN A SERIES OF
OUTER SHELL REPAIRS APPROVED BY P&W FOR THE GROUP'S OVERHAUL AND REPAIR UNIT.
DEVELOPING NEW REPAIR PROCESSES IS ESSENTIAL TO BARNES AEROSPACE'S GROWTH AS A
LEADING PROVIDER OF ENGINE COMPONENT REPAIRS FOR THE WORLD'S AIRLINES.
[PICTURE OF CEDRIC D. BECKETT]
CEDRIC D. BECKETT PRESIDENT, BARNES AEROSPACE
The entire Barnes Aerospace business has capitalized on the strong upturn in the
commercial aviation market for both engines and airframes. Sales for the group
were $137 million in 1997, up 33 percent from $103 million in the previous year,
and operating income increased 172 percent to $14.4 million, from $5.3 million a
year ago.
1997 PERFORMANCE
Barnes Aerospace experienced robust growth in 1997, expanding its service to
aircraft engine and airframe builders for commercial airlines and the military
at five locations -- four in the U.S. and one in Singapore. Shipments increased
more than 30 percent during the year, as demand for the group's capabilities
continued to surge. Backlog at year-end reached a record high $131 million,
versus $103 million in 1996.
For the fourth consecutive year, the aerospace group made solid gains in sales
and profits. Significant progress was made by the group's engine component
overhaul and repair business in serving the world's major airlines, and by its
Original Equipment Manufacture (OEM) units which increased penetration of such
major customers as Boeing, Allied Signal and Rolls Royce with both machined
components and fabricated assemblies. The group's precision machining unit in
Windsor, Connecticut, also continued to make significant gains in penetrating
the market for high-thrust, lightweight aircraft engines,
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particularly the GE 90 engine, which powers the new wide-body Boeing 777.
CREATING SYNERGY
In 1997, the aerospace group began the integration of its three separate
businesses serving two distinct market segments -- OEM and overhaul and repair
- -- to create a synergy for enhancing future growth and productivity
opportunities. The OEM businesses include precision machining and advanced
fabrications operations in Windsor, Connecticut; Ogden, Utah; and Lansing,
Michigan. Overhaul and repair includes plants in East Granby, Connecticut, and
Singapore.
The integration of the group's OEM businesses will eliminate duplication of
services and operations previously offered independently, and will result in
increased cost savings in operations. The ultimate strategic objective of the
integration is to offer airframe and engine customers one source for kits,
modules and assemblies.
[BAR GRAPH OF NET SALES OF BARNES AEROSPACE]
[BAR GRAPH OF OPERATING INCOME OF BARNES ACCOUNTING]
Barnes Aerospace expects major benefits to come from combining this synergy with
its continuing emphasis on research and development, which together will give
the group a unique and distinguished position in the aerospace industry. These
elements are the key to advancing technology and improving both manufacturing
costs and productivity. This is particularly true in its fabrications units
where many parts and assemblies made from titanium and other high-temperature
metals are being produced for the first time.
Further investment is being made in the group's Research and Development Center
in Windsor, which serves both the OEM and overhaul and repair units. The center
helps aerospace customers with their engine and airframe component designs and
materials selection, and analyzes the various metals used by the group to
improve product quality and reliability.
MARKET OPPORTUNITIES
The aviation industry is on an upward trend. With the aerospace manufacturing
sector recovering and the maintenance, repair and overhaul sector moving quickly
to outsourcing, Barnes Aerospace has many ongoing, long-range customer projects
in progress around the world. The response it has received from the aerospace
marketplace and customers alike validates the group's focus on quality
improvements, shortened delivery times and cost reduction.
The Goal Of Barnes Aerospace is to meet the aerospace industry's demand for
complex components, while continuing to advance its entire production process
and enhance the capabilities of its people. This focus on challenging
traditional ways of doing business will continue to provide increases in new
orders and repeat business for the entire aerospace group.
TEAMWORK AT BARNES AEROSPACE'S PRECISION MACHINING DIVISION IN WINDSOR,
CONNECTICUT, PLAYED A CRUCIAL ROLE IN THE DEVELOPMENT AND SUCCESS OF INDIVIDUAL
PRODUCT FAMILY CELLS ON THE FACTORY FLOOR, AND LED TO GREATER PRODUCTIVITY,
LOWER COSTS AND FASTER CUSTOMER RESPONSE.
PICTURED BELOW, IS A BEARING HOUSING CELL, ONE OF A DOZEN PRODUCT CELLS NOW IN
OPERATION AT WINDSOR. HERE, MACHINISTS EDGAR MALDONADO (LEFT) AND STANLEY WIECEK
(RIGHT), ALONG WITH PAM MICHAELS, INVENTORY CONTROL SUPERVISOR, WORK TOGETHER ON
THE FINAL PHASE OF TURNING THE REAR STUB SHAFT FOR A ROLLS ROYCE ENGINE. THE
WORK IN THIS CELL IS BEING DONE ON A 4-AXIS OKUMA LATHE, ONE OF MANY
HIGH-TECHNOLOGY PROCESSES EMPLOYED BY OUR AEROSPACE GROUP TO MAINTAIN ITS HIGH
STANDARDS OF QUALITY AND SERVICE.
[PICTURE OF EDGAR MALDONADO, STANLEY WIECEK, AND PAM MICHAELS]
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Associated Spring: The Year In Review
[PICTURE OF DENNIS MARTIN]
DENNIS MARTIN, SENIOR LABORATORY TECHNICIAN AT ASSOCIATED SPRING'S CENTER FOR
ADVANCED RESEARCH IN BRISTOL, CONNECTICUT, PERFORMS CLOSE-UP INSPECTION ON THE
CONFIGURATION OF A BATTERY CONTACT SPRING USED IN PAGERS TO ENSURE THE STRINGENT
QUALITY AND RELIABILITY STANDARDS SET BY THE CUSTOMER. MARTIN SET UP THE
COMPUTER-CONTROLLED WIRE-FORMING MACHINE TO MAKE THE PART AND THEN TRANSFERRED
THE TOOLING AND PROGRAMMING TO THE MILWAUKEE PLANT FOR PRODUCTION.
[PICTURE OF ALI A. FADEL]
ALI A. FADEL PRESIDENT, ASSOCIATED SPRING
Associated Spring continued to strengthen its technology and service in 1997,
paving the way for increased growth in key industrial and transportation
markets. While setting a new high in sales for the sixth consecutive year, its
profits were slightly lower in 1997, due to softer sales in the electronics and
telecommunications markets, and to operating issues at its Mexico facility early
in the year that have since been resolved.
1997 PERFORMANCE
Net sales for the group were $287 million in 1997, up from $280 million in the
previous year. Operating income for 1997 totaled $43.0 million, compared with
$45.8 million in 1996. A number of Associated Spring's U.S. operations performed
well, particularly in the second half of 1997. Some of the group's operations
experienced strong gains in all market segments and in developing new
manufacturing systems to enhance future productivity and profit levels. Strong
performances were also turned in by operations serving the industrial sector.
These facilities currently supply parts to companies in the durable goods
sector, especially those in transportation, home appliances, farm and
construction machinery, and electrical and residential products.
Associated Spring's distribution business turned in gains in both sales and
profits. Strong gains were achieved in expanding the distribution of die springs
and Stock Precision Engineered Components (SPEC), particularly in Europe, where
it now has 12 locations, including new distributorships in Finland and Hungary.
The entire distribution business, including SPEC, was moved from Associated
Spring to Bowman Distribution beginning in 1998 to maximize synergies in the
company's distribution operations. In addition, Associated Spring's NASCO joint
venture in Kentucky, which serves Japanese automotive "transplants" in the U.S.,
also reported profit gains in 1997.
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Transportation continues to be Associated Spring's largest single market,
accounting for about 60 percent of its total business. Associated Spring
presently manufactures more than one million parts a day for domestic passenger
cars and trucks built by the "Big Three" and by Japanese "transplants" in the
U.S. Today, a typical American car is likely to contain more than 100
precision-engineered components built by Associated Spring -- everything from
engine valve springs and fuel injection components to brake and suspension
stampings. In addition, Associated Spring has increased its penetration of the
European spring market, providing components to major European automakers in
Germany, Austria, Hungary, and Sweden.
In September, Associated Spring officially dedicated a major addition at its
Milwaukee facility that has nearly tripled the plant size to 77,000 square feet.
The additional capacity will mean increased growth for both existing products,
such as starter and torque coil springs, and for new products serving the
fast-growing industrial, telecommunications, medical components and residential
products markets.
In 1997, Associated Spring marked its entry into mainland China, with a sales
and engineering office in Tianjin. The group expects to put a full production
facility in China for metal fabrications, high-speed stamping, and injection
molding by mid-1999, providing a major boost to our spring business in Asia.
Continuing its focus on total quality, Associated Spring achieved QS/ISO 9000
certification at two additional operations in 1997. QS 9000 for the automotive
industry and ISO 9000 for others, represents a new and improved way of doing
business, and sets a high standard of excellence. Associated Spring began its
goal to certify each of its manufacturing operations and its Center For Advanced
Research (CFAR) in these world-quality system standards in mid-1994. To date,
five operations have achieved certification, three in North America and two in
Latin America, as well as the Advanced Program Engineering groups.
MARKET OPPORTUNITIES
Associated Spring is continuing to make solid gains expanding its industrial
customer base, particularly in the electronics and telecommunications markets.
The business will expand in these and other markets that best benefit from its
intensive use of technology. In 1998, Associated Spring plans to continue to
build upon its strengths, investing in advanced systems, state-of-the-art
facilities, and technological expertise.
[BAR GRAPH OF NET SALES OF ASSOCIATED SPRING]
[BAR GRAPH OF OPERATING INCOME OF ASSOCIATED SPRING]
AS ASSOCIATED SPRING CONTINUES TO STRENGTHEN ITS ADVANCED TECHNOLOGICAL
CAPABILITIES, IT IS PLACING A MAJOR EMPHASIS ON AUTOMATING ITS KEY MANUFACTURING
OPERATIONS WORLDWIDE. AT ITS BRISTOL, CONNECTICUT PLANT, A TEAM OF ENGINEERS HAS
WORKED WITH THE GROUP'S CENTER FOR ADVANCED RESEARCH (CFAR) TO DEVELOP AN
AUTOMATIC HEAT SET MACHINE THAT HAS TRANSFORMED THE WAY TRANSMISSION WASHERS ARE
FORMED FOR THE AUTOMOTIVE INDUSTRY.
AT LEFT IN ABOVE PHOTO, MICHAEL MCGINTY, PROCESS ENGINEER AT BRISTOL, WHO
SPECIALIZES IN AUTOMATION AND CONTROLS, AND PAULO COIT, QUALITY ENGINEER,
EXAMINE A PART PRODUCED BY ONE OF 11 NEW HEAT SET MACHINES NOW IN OPERATION AT
BRISTOL. THE TWO, ALONG WITH OTHER TEAM MEMBERS, ESTABLISHED THE PRODUCTION
EQUIPMENT AND QUALITY SPECIFICATIONS FOR THE MACHINES, WHILE CFAR ENGINEERS
HELPED DEVELOP THE PROCESS SPECIFICATIONS. THIS INTERNAL TEAMWORK WAS CARRIED
THROUGH TO THE MANUFACTURER, ABACUS AUTOMATION, WHICH BECAME PART OF THE
PRODUCTION TEAM AT BRISTOL AND WORKED TOGETHER TO BUILD THE MACHINES.
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FIVE-YEAR OPERATING RESULTS - BARNES GROUP INC.
BOWMAN DISTRIBUTION (Dollars in millions) 1997 1996 1995 1994 1993
------ ------ ------ ------ ------
Net sales $220.0 $213.4 $217.0 $215.1 $193.2
Operating income 26.7 22.0 17.4 12.6 6.7
Identifiable assets (average for the year) 78.1 76.1 82.6 83.4 82.2
Capital expenditures 6.6 2.9 3.6 4.3 5.6
Depreciation expense 3.8 3.7 4.1 3.1 2.9
Yardsticks of profitability:
Operating margin 12.1% 10.3% 8.0% 5.9% 3.5%
Return on average assets 34.2% 28.9% 21.1% 15.1% 8.2%
BARNES AEROSPACE (Dollars in millions) 1997 1996 1995 1994 1993
------ ------ ------ ------ ------
Net sales $136.6 $103.1 $ 97.3 $ 82.3 $ 77.0
Operating income (loss) 14.4 5.3 5.0 (1.8) (7.9)
Identifiable assets (average for the year) 96.2 91.6 86.3 87.8 96.4
Capital expenditures 7.9 9.4 7.8 3.7 5.4
Depreciation expense 7.1 7.0 7.2 7.5 8.0
Order backlog (at year-end) 131.4 103.4 54.4 53.6 55.7
Yardsticks of profitability
Operating margin 10.5% 5.1% 5.1% (2.2%) (10.3%)
Return on average assets 15.0% 5.8% 5.8% (2.1%) (2.1%)
ASSOCIATED SPRING (Dollars in millions) 1997 1996 1995 1994 1993
------ ------ ------ ------ ------
Net sales $287.1 $279.5 $279.0 $272.4 $233.0
Operating income 43.0 45.8 42.6 41.7 27.1
Identifiable assets (average for the year) 180.5 169.1 152.5 134.5 115.3
Capital expenditures 18.7 21.5 24.2 23.7 11.1
Depreciation expense 14.3 13.0 11.6 9.0 7.7
Order backlog (at year-end) 53.9 47.8 56.7 54.5 46.9
Yardsticks of profitability:
Operating margin 15.0% 16.4% 15.3% 15.3% 11.6%
Return on average assets 23.8% 27.1% 27.9% 31.0% 23.5%
12
13
Management's Discussion And Analysis - Barnes Group Inc.
A CONTINUING SALUTE TO OUR EMPLOYEES
Once again this year, we are using the financial section to salute a
representative number of employees throughout the company whose contributions in
1997 enabled us to achieve record earnings for the third consecutive year.
Because of their efforts and those of so many others, our momentum has
accelerated in each of the past four years, as we aim to become a top-tier
performer for the long term.
Carm Buonerba
Bowman Distribution
Concord, Ontario
Michael Utschig
Associated Spring
Farmington, Connecticut
Lonel Douglas
Barnes Aerospace
East Granby, Connecticut
OUR BUSINESS
Barnes Group is a worldwide manufacturer of precision metal parts and an
industrial maintenance logistics company with three business segments. The
Bowman Distribution segment provides maintenance, repair, operating and
production services and supplies to industrial and transportation markets. The
Barnes Aerospace segment manufactures precision components and assemblies for
commercial and military aircraft and provides overhaul and repair services for
large commercial aircraft engines. The Associated Spring segment is a
manufacturer of assemblies, high precision springs, wireforms and stampings for
the transportation, industrial, electronics and telecommunications markets.
Through these three businesses, Barnes Group works with its customers'
organizations to help them realize the benefits of Barnes Group's manufacturing
capabilities and logistics management to enhance the customer's competitiveness
and responsiveness.
RESULTS OF OPERATIONS
For 1997, Barnes Group reported record sales and earnings for the third
consecutive year. Sales were up 8% to $643 million compared to $595 million in
1996 and $593 million in 1995. The increase in 1997 sales reflects growth at all
three business segments, particularly at Barnes Aerospace, where sales increased
33%. In 1996, sales were up from 1995 primarily as a result of improvement at
Barnes Aerospace.
Barnes Group continues to generate excellent profit gains. Operating income
increased for the fifth consecutive year, up 19% in 1997 to $65.8 million
compared to $55.3 million in 1996. The 1997 profit growth was driven by higher
sales volume, improved productivity and continued cost reductions at Barnes
Aerospace and Bowman Distribution. This was partially offset by Associated
Spring, which was impacted by softer sales to the electronics and
telecommunications markets, by increased fixed costs related to the Milwaukee
plant expansion and by operating issues in Mexico. Operating income in 1996
increased 13% over the $48.8 million reported in 1995, reflecting solid gains at
all three business segments.
Operating margin has steadily increased to 10.2% in 1997 from the 9.3% and 8.2%
reported in 1996 and 1995, respectively. This reflects higher sales volume and
lower selling and administrative expenses, partially offset by increased cost of
sales. In the past three years, the company has reduced selling and
administrative expenses by $15.7 million as sales increased by $73.5 million.
This focus on cost management is a key component of Barnes Group's future
operating strategy. Lower selling and administrative expenses are driven in
large part by Bowman Distribution's ongoing efforts to reduce its operating
expenses. In 1997, cost of sales as a percentage of sales increased to 66.4%
compared to 64.7% in 1996 and 64.5% in 1995. This is a result of a change in the
revenue mix among our three businesses, lower margins associated with new
products and larger customers at Bowman Distribution, and slightly higher fixed
costs at Associated Spring.
SEGMENT REVIEW --
SALES AND OPERATING INCOME
Bowman Distribution segment sales for 1997 were $220 million compared to $213
million in 1996 and $217 million in 1995. Bowman North America continues to
effectively implement its strategy of penetrating targeted markets, such as
railroad, aerospace, public utilities and waste management companies and
integrated supply customers to which Bowman provides the support needed to
maintain their operating facilities. In Europe, Bowman's sales were flat, as
management strategically downsized its van-based sales force in an effort to
eliminate low margin business.
Bowman's operating income in 1997 of $26.7 million increased $4.7 million, or
22%, from 1996. The 1996 level of $22.0 million increased $4.6 million, or 26%,
from 1995. The gains in operating income reflect volume increases, improved
supply chain management and lower operating expenses in both North America and
Europe. Continued productivity improvements and cost reductions are crucial to
Bowman's strategy where competitive pricing is a key to success.
13
14
Management's Discussion And Analysis - Barnes Group Inc.
Arturo Mendoza
Associated Spring
Mexico City, Mexico
Kevin Brooks
Associated Spring
Milwaukee, Wisconsin
Dennis Houle
Barnes Aerospace
Windsor, Connecticut
Bridgette ByField
Executive Office
Bristol, Connecticut
Barnes Aerospace segment sales were $137 million in 1997, up 33% from 1996,
which followed an increase of 6% from 1995. In 1997, sales improved in all three
aerospace businesses: precision machining, overhaul and repair and advanced
fabrications on the strength of the commercial aviation market for engines and
airframes. Sales growth in 1996 was driven primarily by the overhaul and repair
business.
Barnes Aerospace operating income increased 172% to $14.4 million in 1997
compared to $5.3 million in 1996. In 1995, the group reported operating income
of $5.0 million. The increase in profits for 1997 reflects higher sales volume,
improved pricing and significant productivity gains. To further increase
productivity while enhancing customer support, Barnes Aerospace consolidated its
separate businesses serving the Original Equipment Manufacture (OEM) markets.
The OEM operation now incorporates the precision machining and advanced
fabrications operations. This integration is expected to leverage resources and
result in a more effective organization.
Associated Spring segment sales for 1997 were $287 million, up 3% from 1996.
Sales in 1996 of $280 million were up slightly from 1995. This segment reported
operating income of $43.0 million in 1997 compared to $45.8 million in 1996 and
$42.6 million in 1995. Sales from manufacturing operations rose slightly, while
profits declined, reflecting some softness in its electronics and
telecommunications markets. Additionally, profits were impacted by the increased
fixed costs related to the expansion at the Milwaukee facility and operating
issues at the manufacturing facility in Mexico in early 1997. The issues in
Mexico were resolved and significant improvement was reported in the second half
of 1997 at this operation.
The Associated Spring distribution business, which markets die springs and
precision stock springs, reported both sales and profit growth. Strong gains
were achieved in Europe where there are now 12 locations. Effective January
1998, this distribution business was transferred to the Bowman segment to
maximize synergies in distribution operations.
NON-OPERATING INCOME/EXPENSE
Other income was $6.0 million in 1997, $4.1 million in 1996 and $4.4 million in
1995. In 1997, 1996 and 1995, other income included $1.8 million, $1.6 million
and $1.9 million, respectively, from the company's investment in NASCO, a
company jointly owned with NHK Spring Co., Ltd. of Japan. The 1997 increase in
NASCO profits reflects higher sales volume, the direct result of a capacity
expansion completed in 1996. Foreign exchange gains, another component of other
income, were $2.1 million in 1997. This compares to losses in 1996 and 1995
which are included in other expenses for those years. Additionally, interest
income of $1.2 million was generated in 1997 and 1996, and $1.4 million in 1995.
Interest expense was $4.9 million in 1997 compared to $5.0 million in 1996 and
$5.3 million in 1995. These results reflect comparable borrowing levels and
interest rates in 1997 and 1996. For further information on interest expense,
see Note 5 of the Notes to Consolidated Financial Statements on page 22.
Other expenses were $2.4 million in 1997 compared to $2.1 million in 1996 and
$2.5 million in 1995. Included in 1996 and 1995 are foreign exchange and
translation losses of $0.8 million and $1.1 million, respectively.
INCOME TAXES
The company's effective income tax rate has declined steadily over the last four
years. The company's effective tax rate was 37.3% in 1997 compared with 37.7% in
1996 and 39.5% in 1995. The lower rate in 1997 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 23.
NET INCOME AND
NET INCOME PER SHARE
Consolidated net income was $40.4 million in 1997, $32.6 million in 1996 and
$27.5 million in 1995. On a basic earnings per share basis, income for 1997 was
$2.00, compared to $1.63 in 1996 and $1.40 in 1995. Diluted earnings per share,
calculated in accordance with the newly issued Statement of Financial
14
15
Michael Fishleigh
Bowman Distribution
Concord, Ontario
Holly Bunn
Associated Spring
Bristol, Connecticut
Andre Luis Goncalves
Associated Spring
Campinas, Brazil
Peggie Canada
Bowman Distribution
Rockford, Illinois
Accounting Standards No. 128, shows the same positive trend as basic earnings
per share, increasing from $1.38 in 1995 to $1.61 in 1996 to $1.96 in 1997. This
marks the third consecutive year of record earnings.
In April 1997, stockholders approved an increase in authorized common shares
from 20 million to 60 million and a 3-for-1 stock split. All per share data
reflects the stock split.
INFLATION
Management believes that inflation during the 1995-1997 period did not have a
material impact on the company's historical financial statements.
LIQUIDITY AND CAPITAL RESOURCES
The company's ability to generate cash from operations in excess of its internal
operating needs is one of its leading financial strengths. In 1997, management
intensified its efforts on working capital management, which contributed
significantly to the increase in the cash provided by operating activities.
Management will continue to manage liquidity aggressively and anticipates that
operating activities in 1998 will provide sufficient cash flows to take
advantage of opportunities for internal business expansion and to meet all of
the company's financial commitments.
Management assesses the company's 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, capital stock
transactions, 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 a record $71.6 million of cash flow in 1997 compared to $45.8 million
in 1996 and $47.3 million in 1995. During the past three years, operating
activities provided approximately $165 million in cash which the company used,
in part, to pay dividends to stockholders, reduce financing debt, repurchase
shares and fund significant investments in plant and equipment. Within operating
activities, continued emphasis on asset management eliminated the need for
additional investment in working capital in 1997 during a period of increasing
sales. This contrasts with 1996, where significant additional working capital
was invested to support the sales growth.
Investing activities used cash of $34.2 million in 1997 compared with $32.2
million in 1996 and $36.6 million in 1995. Capital expenditures in 1997 were
$33.4 million versus $33.9 million in 1996 and $35.8 million in 1995. During the
past three years the company has invested over $103 million in new plant,
equipment and systems improvements. The focus of these investments is to support
business growth and to improve productivity and quality. The company expects
1998 capital spending to continue at a strong pace.
In 1997, the company's financing activities used cash of $26.6 million compared
to $6.9 million in 1996 and $13.8 million in 1995. The higher usage of cash in
1997 was due to a $10.0 million reduction in long-term debt and the repurchase
of $10.7 million of the company's stock. Cash dividends increased to $0.65 per
share in 1997. As a result, total cash dividends paid to stockholders increased
to $13.2 million.
The company has and will continue to utilize cash from non-U.S. subsidiaries to
fund international 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 outside the U.S.
To supplement internal cash generation, the company maintains substantial bank
borrowing facilities. At December 31, 1997, the company had $150 million of
borrowing capacity available under a revolving credit agreement that expires in
2002. During 1997, the company used a portion of the free cash flow generated by
its U.S. operations to reduce its long-term debt position from $70 million to
$60 million. The long-term debt is comprised, in part, of borrowings under its
short-term bank credit lines backed by its long-term revolving credit agreement.
15
16
MANAGEMENT'S DISCUSSION AND ANALYSIS - BARNES GROUP INC.
Mak Wah Weng
Associated Spring
Singapore
Manjit Grewal
Associated Spring
Burlington, Ontario
Holly LeBlanc
Executive Office
Bristol, Connecticut
Chan Chaturia
Barnes Aerospace
Windsor, Connecticut
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.
YEAR 2000 CONVERSION
The company recognizes the need to ensure that its systems, applications and
computerized equipment will recognize and process transactions for the year 2000
and beyond. In continuing efforts to become more productive and competitive, the
company continues to implement management, financial and operational systems
throughout the businesses. As part of these implementation processes, the
company is managing the risks and the costs associated with the Year 2000 issue.
More specifically, Bowman Distribution is in the process of implementing a
comprehensive distribution system, which will be utilized worldwide to meet its
growing market demands for superior customer service. This system will be
compliant with Year 2000 requirements. Barnes Aerospace is in the process of
implementing a fully integrated management and manufacturing information system
in its advanced fabrications business. This system, which is currently
operational in its precision machining business, is Year 2000 compliant.
Associated Spring is also in the process of implementing a management and
manufacturing information system at all locations. This project began in 1995
and as of December 1997, the system has been implemented at all but two
locations. This system will be compliant with Year 2000 requirements.
These projects are designed to address the company's operating and business
information needs while simultaneously addressing the Year 2000 issue for the
majority of the company's critical management, financial and operating systems.
In addition, the company's other computer systems and applications are being
reviewed and, where appropriate, detailed plans have been, or are being
developed and implemented on a schedule intended to permit the company's
computer systems to continue to function properly. The costs specific to the
Year 2000 issue are not expected to have a material impact on future operating
results, financial position or cash flows of the company. Management expects
that all projects related to the Year 2000 will be completed on a timely basis;
however, if such modifications and conversions are not completed on time, or if
the company's suppliers and customers do not address this issue successfully,
the Year 2000 issue could have a material impact on the operations and financial
condition of the company.
FUTURE ACCOUNTING CHANGES
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This standard
requires that the company disclose total comprehensive income, which includes
net income and other transactions which bypass the income statement. In 1997,
the Financial Accounting Standards Board also issued Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information." This standard establishes new requirements for reporting
segment information. Under the provisions of these standards the company is not
required to, and will not adopt these new standards until 1998. These standards
will not impact the company's financial position, results of operations or cash
flows.
FORWARD-LOOKING STATEMENTS
The company cautions readers that certain factors may affect the company's
results for future fiscal periods. These factors involve risks and uncertainties
that could cause future results to differ materially from those expressed or
implied in any forward-looking statements made on behalf of the company. For
this purpose, any statement other than one of historical fact may be considered
a forward-looking statement. Some important factors that could cause actual
results to vary materially from those anticipated in forward-looking statements
include economic volatility, currency fluctuations, regulatory changes and
technological changes (including Year 2000 issues), all of which may affect the
company's operations, products and markets. (See the company's annual report on
Form 10-K for more information about the factors that could affect future
results.)
16
17
CONSOLIDATED STATEMENTS OF INCOME - BARNES GROUP INC.
Zaya Oshana
Executive Office
Bristol, Connecticut
Janice Fisher
Associated Spring
Milwaukee, Wisconsin
George Bernier
Barnes Aerospace
East Granby, Connecticut
Catherine Lee
Associated Spring
Farmington, Connecticut
(Dollars in thousands, except per share data)
Years Ended December 31, 1997 1996 1995
----------- ----------- -----------
Net sales $ 642,660 $ 594,989 $ 592,509
Cost of sales 426,550 384,722 382,150
Selling and administrative expenses 150,344 154,951 161,555
----------- ----------- -----------
576,894 539,673 543,705
----------- ----------- -----------
Operating income 65,766 55,316 48,804
Other income 5,969 4,095 4,373
Interest expense 4,864 4,981 5,274
Other expenses 2,369 2,120 2,453
----------- ----------- -----------
Income before income taxes 64,502 52,310 45,450
Income taxes 24,079 19,742 17,966
----------- ----------- -----------
Net income $ 40,423 $ 32,568 $ 27,484
=========== =========== ===========
Per common share:
Net income:
Basic $ 2.00 $ 1.63 $ 1.40
Diluted 1.96 1.61 1.38
Dividends 0.65 0.60 0.53
Average common shares outstanding 20,236,884 19,923,987 19,640,013
See accompanying notes.
17
18
CONSOLIDATED BALANCE SHEETS - BARNES GROUP INC.
Seow Kee Chong
Barnes Aerospace
Singapore
Elizabeth Jocham
Bowman Distribution
Edison, New Jersey
Tyroon Ataw
Bowman Distribution
Concord, Ontario
Claudemir Goncalves Martins
Associated Spring
Campinas, Brazil
(Dollars in thousands)
December 31, 1997 1996
--------- ---------
ASSETS
Current assets
Cash and cash equivalents $ 32,530 $ 23,986
Accounts receivable, less allowances
(1997 - $3,061; 1996 - $3,158) 91,757 88,060
Inventories 61,082 64,942
Deferred income taxes 10,966 9,772
Prepaid expenses 6,682 3,538
--------- ---------
Total current assets 203,017 190,298
Deferred income taxes 24,083 23,575
Property, plant and equipment 133,830 131,071
Goodwill 18,773 19,441
Other assets 28,275 25,571
--------- ---------
Total assets $ 407,978 $ 389,956
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 2,437 $ 1,767
Accounts payable 37,776 30,363
Accrued liabilities 46,966 46,152
Guaranteed ESOP obligation-current 2,746 2,540
--------- ---------
Total current liabilities 89,925 80,822
Long-term debt 60,000 70,000
Guaranteed ESOP obligation 2,205 4,951
Accrued retirement benefits 67,486 69,085
Other liabilities 7,503 7,934
Stockholders' equity
Common stock - par value $.01 per share
Authorized: 60,000,000 shares
Issued: 22,037,769 shares at par value 220 15,737
Additional paid-in capital 47,007 28,347
Retained earnings 183,857 156,698
Foreign currency translation adjustments (15,841) (10,087)
Treasury stock at cost (1997 - 1,875,111 shares;
1996 - 2,046,009 shares) (29,433) (26,040)
Guaranteed ESOP obligation (4,951) (7,491)
--------- ---------
Total stockholders' equity 180,859 157,164
--------- ---------
Total liabilities and stockholders' equity $ 407,978 $ 389,956
========= =========
See accompanying notes.
18
19
CONSOLIDATED STATEMENTS OF CASH FLOWS - BARNES GROUP INC.
Edward Edgar, Jr.
Bowman Distribution
Edison, New Jersey
Heather Gibson
Associated Spring
Burlington, Ontario
Noyace Daniel
Associated Spring
Southfield, Michigan
Corlisa Edwards
Associated Spring
Glen Ellyn, Illinois
(Dollars in thousands)
Years Ended December 31, 1997 1996 1995
-------- -------- --------
OPERATING ACTIVITIES:
Net income $ 40,423 $ 32,568 $ 27,484
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 28,123 26,626 26,750
Loss (gain) on sale of property, plant and equipment 735 (528) (268)
Translation losses 237 427 290
Changes in assets and liabilities:
Accounts receivable (4,786) (2,321) 365
Inventories 3,150 (9,971) (6,073)
Accounts payable 8,036 (1,548) 794
Accrued liabilities 781 2,797 (2,664)
Deferred income taxes (1,215) 564 3,479
Other (3,844) (2,810) (2,862)
-------- -------- --------
Net cash provided by operating activities 71,640 45,804 47,295
INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment 1,442 2,361 1,301
Capital expenditures (33,398) (33,892) (35,820)
Other (2,266) (706) (2,057)
-------- -------- --------
Net cash used by investing activities (34,222) (32,237) (36,576)
FINANCING ACTIVITIES:
Net increase (decrease) in notes payable 813 1,322 (7,389)
Payments on long-term debt (10,000) -- --
Proceeds from the issuance of common stock 6,476 4,907 5,849
Common stock repurchases (10,673) (1,197) (1,746)
Dividends paid (13,187) (11,967) (10,491)
-------- -------- --------
Net cash used by financing activities (26,571) (6,935) (13,777)
Effect of exchange rate changes on cash flows (2,303) (514) (1,097)
-------- -------- --------
Increase (decrease) in cash and cash equivalents 8,544 6,118 (4,155)
Cash and cash equivalents at beginning of year 23,986 17,868 22,023
-------- -------- --------
Cash and cash equivalents at end of year $ 32,530 $ 23,986 $ 17,868
======== ======== ========
See accompanying notes.
19
20
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - BARNES GROUP INC.
Foreign
Additional Currency Guaranteed
Common Paid-In Retained Translation Treasury ESOP Stockholders
(Dollars in thousands) Stock Capital Earnings Adjustments Stock Obligation Equity
--------- --------- --------- ----------- --------- --------- ---------
January 1, 1995 $ 15,737 $ 27,772 $ 118,938 $ (8,715) $ (34,582) $ (12,011) $ 107,139
Net income 27,484 27,484
Dividends paid (10,491) (10,491)
Common stock repurchases (1,746) (1,746)
Employee stock plans (412) 6,475 6,063
Guaranteed ESOP obligation 2,172 2,172
Income tax benefits on unallocated
ESOP dividends 161 161
Translation adjustments (1,941) (1,941)
--------- --------- --------- ----------- --------- --------- ---------
December 31, 1995 15,737 27,360 136,092 (10,656) (29,853) (9,839) 128,841
Net income 32,568 32,568
Dividends paid (11,967) (11,967)
Common stock repurchases (1,197) (1,197)
Employee stock plans 987 (134) 5,010 5,863
Guaranteed ESOP obligation 2,348 2,348
Income tax benefits on unallocated
ESOP dividends 139 139
Translation adjustments 569 569
--------- --------- --------- ----------- --------- --------- ---------
December 31, 1996 15,737 28,347 156,698 (10,087) (26,040) (7,491) 157,164
Net income 40,423 40,423
Reduction in par value (15,517) 15,517 --
Dividends paid (13,187) (10,673) (13,187)
Common stock repurchases 7,280 (10,673)
Employee stock plans 3,143 (181) 2,540 10,242
Guaranteed ESOP obligation 2,540
Income tax benefits on unallocated
ESOP dividends 104 104
Translation adjustments (5,754) (5,754)
--------- --------- --------- ----------- --------- --------- ---------
December 31, 1997 $ 220 $ 47,007 $ 183,857 $ (15,841) $ (29,433) $ (4,951) $ 180,859
========= ========= ========= =========== ========= ========= =========
See accompanying notes.
20
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - BARNES GROUP INC.
Ed Guthrie
Associated Spring
Burlington, Ontario
Valerie Rose
Associated Spring
Glen Ellyn, Illinois
Kathryn Browne
Barnes Aerospace
Windsor, Connecticut
Dave Imm
Bowman Distribution
Corsham, United Kingdom
(All dollar amounts included in the notes are stated in thousands except per
share data and the tables in Note 13.)
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 $1,763, $1,550 and $1,897
for the years 1997, 1996 and 1995, respectively, of income from the company's
investment in NASCO. The company received dividends from NASCO totaling $596 and
$709 in 1997 and 1996, respectively.
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 an
original 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 75% 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
$16,536, $16,179 and $15,396 in 1997, 1996 and 1995, 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 $8,842 and
$8,175 at December 31, 1997 and 1996, respectively.
FOREIGN CURRENCY TRANSLATION: Assets and liabilities of foreign operations,
except those in countries with high rates of inflation, are translated at
year-end rates of exchange; revenue and expenses are translated at average
annual rates of exchange. The resulting translation gains and losses are
reflected in foreign currency translation adjustments within stockholders'
equity.
For operations in countries that have high rates of inflation, translation gains
and losses are included in net income. These translation effects, along with
foreign currency transactions, generated a net gain of $2,095 in 1997 and net
losses of $826 and $1,078 in 1996 and 1995, 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, "Accounting for Stock-Based Compensation," (SFAS 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 SFAS 123, the
impact on net income and income per share would not have been significant.
STOCK SPLIT: 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 enabled the company to effect a 3-for-1 stock split for stockholders of
record on April 3, 1997. All references to shares and per-share amounts in the
consolidated financial statements and accompanying notes have been adjusted
retroactively for the 3-for-1 stock split, unless otherwise noted.
NET INCOME PER COMMON SHARE: Earnings per share is computed in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings per Share." Basic
earnings per share is based on the weighted average number of common shares
outstanding during the year. Diluted earnings per share reflects the assumed
exercise and conversion of all securities. Shares held by the Employee Stock
Ownership Plan (ESOP) are considered outstanding for both basic and diluted
earnings per share.
There are no adjustments to net income for purposes of computing income
available to common stockholders for the years ended December 31, 1997, 1996 and
1995. For purposes of computing dilutive earnings per share, the weighted
average number of shares outstanding were increased by 419,433, 277,077 and
233,565 for 1997, 1996 and 1995, respectively, representing the potential
dilutive effects of stock-based plans.
21
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - BARNES GROUP INC.
Daniel Dufeu
Bowman Distribution
Voisins LeBretonneaux, France
Michelle Shuckerow
Bowman Distribution
Cromwell, Connecticut
Roger Yap
Associated Spring
Singapore
William Koss
Associated Spring
Glen Ellyn, Illinois
2. INVENTORIES
Inventories at December 31, consisted of:
1997 1996
------- -------
Finished goods $30,519 $30,285
Work-in-process 17,369 17,730
Raw materials and supplies 13,194 16,927
------- -------
$61,082 $64,942
======= =======
Inventories valued by the LIFO method aggregated $45,661 and $46,056 at December
31, 1997 and 1996, respectively. If LIFO inventories had been valued using the
FIFO method, they would have been $13,744 and $13,348 higher at those dates.
3. PROPERTY,
PLANT AND
EQUIPMENT
Property, plant and equipment at December 31, consisted of:
1997 1996
-------- --------
Land $ 3,782 $ 4,577
Buildings 65,610 64,336
Machinery and equipment 265,444 251,691
-------- --------
334,836 320,604
Less accumulated depreciation 201,006 189,533
-------- --------
$133,830 $131,071
======== ========
4. ACCRUED
LIABILITIES
Accrued liabilities at December 31, consisted of:
1997 1996
------- -------
Payroll and other compensation $17,006 $15,188
Postretirement/
postemployment benefits 6,047 6,465
Vacation pay 4,621 4,521
Accrued income taxes 2,872 6,688
Pension and profit sharing 3,163 2,102
Other 13,257 11,188
------- -------
$46,966 $46,152
======= =======
5. DEBT AND
COMMITMENTS
Long-term debt at December 31, consisted of:
1997 1996
------------------------ -------
CARRYING FAIR Carrying
AMOUNT VALUE Amount
------- ------- -------
9.47% Notes $24,615 $25,771 $30,769
7.13% Notes 25,000 25,192 25,000
Borrowings under
lines of credit 3,385 3,385 7,231
Industrial
Revenue Bond 7,000 7,000 7,000
------- ------- -------
$60,000 $61,348 $70,000
======= ======= =======
The 9.47% Notes are payable in thirteen semi-annual payments of $3,077 which
began 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 company's
estimated current interest cost for similar types of borrowings. The carrying
values of other long-term debt, notes payable and the guaranteed ESOP obligation
approximate their fair market value.
22
23
Jocelyn Carlson
Executive Office
Bristol, Connecticut
Richmond Cursiter
Bowman Distribution
Corsham, United Kingdom
Gene Little
Bowman Distribution
Rockford, Illinois
Thomas Manayathara
Associated Spring
Farmington, Connecticut
The company has a revolving credit agreement with six banks that allows
borrowings up to $150,000 under notes due December 6, 2002. 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, 1997 and 1996.
The company has available approximately $90,000 in short-term bank credit lines,
of which $3,400 and $7,500 were in use at December 31, 1997 and 1996,
respectively. The interest rate on these borrowings was 5.9% and 5.7% at
December 31, 1997 and 1996.
The Industrial Revenue Bond, due in 2008, has a variable interest rate. The
interest rate on this borrowing was 4.5% at December 31, 1997 and 1996.
At December 31, 1997, the company classified $3,385 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.
The company had outstanding an interest rate swap, a form of derivative, which
effectively converted $12,300 of its fixed rate 9.47% Notes to floating rate
debt with interest equal to LIBOR plus 83 basis points.
The effective interestrate on the floating rate portion was 6.9% and 6.4% at
December 31, 1997 and 1996, respectively. This swap decreases as the Notes are
repaid. The fair value of the swap is determined based upon current market
prices and was $851 at December 31, 1997. The company does not use derivatives
for trading purposes.
The company guaranteed $8,100 of letters of credit, bank borrowings and capital
lease obligations related to its 45% investment in NASCO. In addition, the
company had other outstanding letters of credit totaling $3,990.
Certain of the company's debt arrangements contain requirements as to
maintenance of minimum levels of working capital and net worth, and place
certain restrictions on dividend payments and acquisitions of the company's
common stock. Under the most restrictive covenant in any agreement, $58,048 was
available for dividends or acquisitions of common stock at December 31, 1997.
Interest paid was $5,554, $5,736 and $5,661 in 1997, 1996 and 1995,
respectively. Interest capitalized was $472, $527 and $214 in 1997, 1996 and
1995, 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:
1997 1996 1995
-------- -------- --------
Income before income taxes:
U.S. $ 49,517 $ 37,957 $ 31,722
International 14,985 14,353 13,728
-------- -------- --------
$ 64,502 $ 52,310 $ 45,450
======== ======== ========
Income tax provision:
Current:
U.S. - federal $ 16,339 $ 12,451 $ 7,668
U.S. - state 4,050 3,045 1,363
International 4,905 3,682 5,456
-------- -------- --------
25,294 19,178 14,487
-------- -------- --------
Deferred:
U.S. - federal (821) (388) 2,479
U.S. - state (217) (105) 1,056
International (177) 1,057 (56)
-------- -------- --------
(1,215) 564 3,479
-------- -------- --------
$ 24,079 $ 19,742 $ 17,966
======== ======== ========
23
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - BARNES GROUP INC.
Paulo Coit
Associated Spring
Bristol, Connecticut
Tuck Martin
Bowman Distribution
Elizabethtown, Kentucky
Christine Sych
Barnes Aerospace
East Granby, Connecticut
Neil McCallum
Bowman Distribution
Concord, Ontario
Deferred income tax assets and liabilities at December 31, consist of the tax
effects of temporary differences related to the following:
Assets Liabilities
------------------------ ----------------------
1997 1996 1997 1996
-------- -------- ------- -------
Allowance for doubtful accounts $ 1,139 $ 1,108 $ -- $ --
Depreciation and amortization (6,492) (7,083) 2,680 2,450
Inventory valuation 4,418 4,143 529 1,382
Postretirement/postemployment costs 27,771 28,510 (331) (467)
Tax loss carryforwards 9,988 9,329 -- --
Other 5,954 4,770 1,709 1,260
-------- -------- ------- -------
42,778 40,777 4,587 4,625
Valuation allowance (7,729) (7,430) -- --
-------- -------- ------- -------
$ 35,049 $ 33,347 $ 4,587 $ 4,625
======== ======== ======= =======
Current deferred income taxes $ 10,966 $ 9,772 $ 850 $ 1,379
Noncurrent deferred income taxes 24,083 23,575 3,737 3,246
-------- -------- ------- -------
$ 35,049 $ 33,347 $ 4,587 $ 4,625
======== ======== ======= =======
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 $89,349 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, in certain cases, to both U.S. income
taxes and foreign withholding taxes. Determination of the amount of this
unrecognized deferred income tax liability is not practicable.
A reconciliation of the U.S. federal statutory income tax rate to the
consolidated effective income tax rate follows:
1997 1996 1995
---- ---- ----
U.S. federal statutory income tax rate 35.0% 35.0% 35.0%
State taxes (net of federal benefit) 3.9 3.6 3.5
Foreign losses without tax benefit 0.6 1.6 2.7
Foreign tax rates (1.5) (2.5) (1.6)
NASCO equity income (0.6) (0.6) (1.0)
Other (0.1) 0.6 0.9
---- ---- ----
Consolidated effective income tax rate 37.3% 37.7% 39.5%
==== ==== ====
Income taxes paid, net of refunds, were $25,337, $17,825 and $13,269 in 1997,
1996 and 1995, respectively.
24
25
Denise Bradley
Bowman Distribution
Edison, New Jersey
Ricardo Mohr
Associated Spring
Mexico City, Mexico
Mark Baker
Associated Spring
Burlington, Ontario
George Naseef
Associated Spring
Glen Ellyn, Illinois
7. COMMON STOCK
In 1997, 1996 and 1995, 566,077, 389,418 and 503,337 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 1997, 1996
and 1995, the company acquired 395,179, 61,812 and 126,708 shares of the
company's common stock at a cost of $10,673, $1,197 and $1,746, respectively.
These acquired shares were placed in treasury.
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
enabled the company to effect a 3-for-1 stock split for stockholders of record
on April 3, 1997. All references to shares and per-share amounts in the
consolidated financial statements and accompanying notes have been adjusted
retroactively for the 3-for-1 stock split. Stockholders' equity at December 31,
1997, reflects the effect of the stock split and change in par value per share.
These changes reduced the common stock account by $15,517 and increased the
additional paid-in capital account by a like amount.
In December 1996, the company adopted a new stockholder rights plan. 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 $.01 per Right at any time until 10 days
following a public announcement that a 35% or greater position in the company's
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 company's common stock, the company is acquired in a
merger or other business combination or 50% or more of the company's assets or
earning power is sold or transferred, each outstanding Right becomes exercisable
for common stock or other securities of the acquiring entity having a value of
twice the exercise price of the Right.
8. PREFERRED STOCK
At December 31, 1997 and 1996, the company had 3,000,000 shares of preferred
stock authorized, none of which were outstanding. As discussed in Note 7, the
par value of preferred stock was reduced from $1.00 to $.01 per share in 1997.
9. STOCK PLANS
All U.S. salaried and non-union hourly employees are eligible to participate in
the company's Guaranteed Stock Plan (GSP). The GSP provides for the investment
of employer and employee contributions in the company's common stock. The
company guarantees a minimum rate of return on certain GSP assets.
The GSP is a leveraged ESOP. In 1989, the GSP purchased 1,737,930 shares of the
company's common stock at a cost of $21,000 using the proceeds of a loan
guaranteed by the company. These shares are held in trust and are issued to
employees' accounts in the GSP as the loan is repaid. Principal and interest on
the GSP loan are being paid in quarterly installments through 1999. The loan
bears interest based on LIBOR. At December 31, 1997 the interest rate was 6.5%.
Interest of $387, $538 and $747 was incurred in 1997, 1996 and 1995,
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 GSP to pay the
principal and interest due under the GSP 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
$1,781, $1,642 and $1,459 of company dividends for debt service in 1997, 1996
and 1995, respectively. The company expenses all cash contributions made to the
GSP. Cash contributions in 1996 and 1995 resulted in compensation cost of $1,666
and $2,019, respectively, and in income of $498 in 1997. As of December 31,
1997, the GSP held 3,201,772 shares of the company's common stock, of which
318,476 shares were unallocated. For financial statement purposes, the company
reflects its guarantee of the GSP's debt as a liability with a like amount
reflected as a reduction of stockholders' equity.
25
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - BARNES GROUP INC.
Philip Laux
Associated Spring
Glen Ellyn, Illinois
Fran Lamprey
Bowman Distribution
Cromwell, Connecticut
Carlos Perez
Associated Spring
Bristol, Connecticut
Karen Tharpe
Bowman Distribution
Elizabethtown, Kentucky
The company has an Employee Stock Purchase Plan (ESPP) under which eligible
employees may elect to have up to 10% of base compensation deducted from payroll
for the purchase of the company's common stock at 85% of market value on the
date of purchase. The maximum number of shares which may be purchased under the
ESPP is 2,025,000. During 1997, 46,600 shares (53,535 and 63,036 shares in 1996
and 1995, respectively) were purchased. As of December 31, 1997, 565,478 shares
may be purchased in the future.
The 1991 Barnes Group Stock Incentive Plan (1991 Plan) authorizes the granting
of incentives to executive officers and other key employees 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 which
terminate without being exercised become available for grant under the 1991
Plan. A maximum of 2,650,029 common shares are subject to issuance under this
plan after December 31, 1997. Compensation cost related to these plans was
$1,150 and $904 in 1997 and 1996, respectively. No amount was recorded in 1995.
Data relating to options granted under these plans follow:
1997 1996 1995
-----------------------------------------------------------------------------------
AVERAGE Average Average
NUMBER EXERCISE Number Exercise Number Exercise
OF SHARES PRICE of Shares Price of Shares Price
--------- --------- --------- --------- --------- ---------
Outstanding, January 1 1,088,991 $ 10.98 1,501,068 $ 10.91 1,933,662 $ 10.54
Granted 441,190 $ 22.96 69,450 $ 15.65 237,300 $ 13.36
Exercised 505,113 $ 10.79 327,636 $ 11.30 438,138 $ 10.67
Cancelled 45,624 $ 18.44 153,891 $ 11.67 231,756 $ 10.75
------- --------- --------- --------- --------- ---------
Outstanding, December 31, 979,444 $ 16.13 1,088,991 $ 10.98 1,501,068 $ 10.91
======= ========= ========= ========= ========= =========
Exercisable, December 31, 478,680 $ 10.77 217,020 $ 10.25 427,200 $ 10.76
======= ========= ========= ========= ========= =========
As of December 31, 1997 there were 1,345,013 shares available for future grant
(1,750,890 at December 31, 1996).
The following table summarizes information about stock options outstanding at
December 31, 1997:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- -------------------------
RANGE OF AVERAGE AVERAGE AVERAGE
EXERCISE NUMBER REMAINING EXERCISE NUMBER EXERCISE
PRICES OF SHARES LIFE PRICE OF SHARES PRICE
------ ----------------------------------------- -------------------------
$ 7 TO $11 414,555 5.4 YEARS $10.03 393,861 $ 10.08
$12 TO $14 134,469 7.1 YEARS $13.27 73,719 $ 13.15
$19 TO $23 358,470 9.2 YEARS $22.28 11,100 $ 19.50
$24 TO $30 71,950 9.7 YEARS $26.01 -- $ --
============ ======= ========= ====== ======= ========
Incentive Stock Rights entitle the holder to receive shares of the company's
common stock without payment, after the lapse of the incentive period and
certain units are 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. All units granted have a five-year incentive period. In
1997, 4,500 units were granted, 5,811 units were credited to holders for
dividend equivalents and no units were forfeited. As of December 31, 1997, there
were 325,572 units outstanding.
Under the Non-Employee Director Deferred Stock Plan each non-employee director
is awarded 6,000 shares of the company's common stock upon retirement. There
were 12,000 shares issued under this plan in 1997 and 6,000 in 1996. No shares
were issued in 1995. As of December 31, 1997, 54,000 shares were reserved for
issuance under this plan.
Total shares reserved for issuance under all stock plans aggregated 3,269,507 at
December 31, 1997.
26
27
Eduardo Mariscal
Associated Spring
Mexico City, Mexico
JoAnn Calcinari
Bowman Distribution-Raymond
Bristol, Connecticut
Brian Tomczak
Associated Spring
Milwaukee, Wisconsin
Jim Higdon
Bowman Distribution
Elizabethtown, Kentucky
10. PENSION PLANS
The company has noncontributory defined benefit pension plans covering a
majority of its worldwide employees at Associated Spring, Bowman Distribution
and its Executive Office. Plan benefits for salaried and non-union hourly
employees are based on years of service and average salary. Plans covering union
hourly employees provide benefits based on years of service. The company funds
U.S. pension costs in accordance with the Employee Retirement Income Security
Act of 1974 (ERISA). Plan assets consist primarily of common stocks and fixed
income investments.
Pension (income) expense consisted of the following:
1997 1996 1995
-------- -------- --------
Service cost $ 5,384 $ 5,591 $ 4,836
Interest cost 16,668 15,839 15,907
Actual return on plan assets (43,726) (34,906) (43,256)
Net amortization and deferral 21,442 13,981 22,960
-------- -------- --------
$ (232) $ 505 $ 447
======== ======== ========
The funded status of the plans at December 31, is set forth below:
1997 1996
-------- --------
Plan assets at fair value $299,632 $271,450
Actuarial present value of benefit obligations:
Vested benefits 195,120 187,728
Nonvested benefits 14,910 13,713
-------- --------
Accumulated benefit obligations 210,030 201,441
Additional benefits based on projected -------- --------
future salary increases 23,922 20,840
-------- --------
Projected benefit obligations 233,952 222,281
-------- --------
Plan assets greater than projected benefit obligations $ 65,680 $ 49,169
======== ========
The following is a reconciliation to the net pension asset recognized in the
accompanying balance sheets:
1997 1996
-------- --------
Plan assets greater than projected benefit obligations $ 65,680 $ 49,169
Adjustments for unrecognized:
Net gains (56,091) (39,387)
Prior service costs 5,934 6,843
Net asset at transition (5,765) (7,505)
-------- --------
(55,922) (40,049)
-------- --------
Net pension asset $ 9,758 $ 9,120
======== ========
Significant assumptions used in determining pension expense and the funded
status of the plans were:
1997 1996 1995
---- ---- ----
Weighted average discount rate 7.50% 7.75% 7.25%
Increase in compensation 5.25% 5.25% 5.25%
Long-term rate of return on plan assets 9.00% 9.00% 9.00%
The company has a defined contribution plan covering employees of Barnes
Aerospace and field sales employees of Bowman Distribution's U.S. operation.
Company contributions under this plan are based primarily on the performance of
the business units and employee compensation. Total expense amounted to $2,593,
$1,735 and $1,748 in 1997, 1996 and 1995, respectively.
27
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - BARNES GROUP INC.
Kalil Diah Volante
Associated Spring
Campinas, Brazil
Lim Mun Cheong
Associated Spring
Singapore
Ken Wright
Bowman Distribution
Cromwell, Connecticut
Sheila Rippy
Bowman Distribution
Rockford, Illinois
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 company's
practice to fund these benefits as incurred.
Postretirement benefit expense consisted of the following:
1997 1996 1995
------- ------- -------
Service cost $ 506 $ 660 $ 679
Interest cost 4,320 4,782 5,594
Net amortization (1,422) (1,150) (158)
------- ------- -------
$ 3,404 $ 4,292 $ 6,115
======= ======= =======
The amounts included in the accompanying balance sheets at December 31, were as
follows:
1997 1996 1995
------- -------- --------
Accumulated benefit obligations:
Retirees $46,928 $ 46,283 $ 57,160
Employees eligible to retire 4,067 5,283 6,904
Employees not eligible to retire 8,988 10,464 13,654
Unrecognized prior service cost 8,376 9,799 1,021
Unrecognized net gain (loss) 245 (1,331) (7,339)
------- -------- --------
$68,604 $ 70,498 $ 71,400
======= ======== ========
Postretirement benefit obligations included in:
Accrued liabilities $5,076 $5,273 $5,673
Accrued retirement benefits 63,528 65,225 65,727
------- -------- --------
$68,604 $70,498 $71,400
======= ======== ========
Cash payments made in 1997, 1996 and 1995 for postretirement benefits were
$5,298, $5,194 and $5,210, respectively.
The company's accumulated benefit obligations take into account certain
cost-sharing provisions. The annual assumed rate of increase in the cost of
covered benefits (i.e., healthcare cost trend rate) is assumed to be 8.0% for
1997, 7.0% for 1998, with a further reduction 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 $1,991 at December
31, 1997, and would have increased the 1997 aggregate of the service and
interest cost components of postretirement benefit expense by approximately
$156.
Discount rates of 7.50%, 7.75% and 7.25% were used in determining the
accumulated benefit obligation at December 31, 1997, 1996 and 1995,
respectively.
12. LEASES
The company has various noncancellable operating leases for buildings, office
space and equipment. Capital leases were not significant. Rent expense was
$7,178, $6,268 and $5,866 for 1997, 1996 and 1995, respectively. During 1997,
both Associated Spring headquarters and Bowman Distribution headquarters
relocated to new facilities under operating leases. Minimum rental commitments
under noncancellable leases in years 1998 through 2002 are $5,124, $3,824,
$3,376, $3,111, $2,633 and $11,623 thereafter.
28
29
13. INFORMATION ON
BUSINESS SEGMENTS
The company operates three businesses:
BOWMAN DISTRIBUTION: distributes fast-moving, consumable repair and replacement
products for industrial, heavy equipment and transportation maintenance markets.
Bowman Distribution's operations and markets are located primarily in the U.S.
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 Aerospace's operations and markets are located primarily in
the U.S., Europe and Asia.
ASSOCIATED SPRING: manufactures and distributes custom-made springs and other
close-tolerance engineered metal components, principally for the transportation,
electronics and industrial markets. Associated Spring's custom metal parts are
sold in the U.S. and through its international subsidiaries. International
manufacturing operations are located in Brazil, Canada, Mexico and Singapore.
The automotive and automotive parts industries constitute Associated Spring's
largest market.
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 and office equipment and the Executive Office
building. Included in the 1997 identifiable international assets are the assets
of manufacturing facilities in Singapore ($30,005), Brazil ($16,378), Canada
($19,610) and Mexico ($9,968) and distribution facilities in Canada ($13,697),
U.K. ($16,095) and France ($7,314). Associated Spring's operation in Singapore
was an important contributor to the company's international operating income
during each of the three years presented.
The following tables set forth information about the company's operations by its
three business segments and by geographic area.
OPERATIONS BY BUSINESS SEGMENT
Net Sales Operating Income
---------------------------- ------------------------
(Dollars in millions) 1997 1996 1995 1997 1996 1995
------ ------ ------ ---- ---- ----
Bowman Distribution $220.0 $213.4 $217.0 $26.7 $22.0 $17.4
Barnes Aerospace 136.6 103.1 97.3 14.4 5.3 5.0
Associated Spring 287.1 279.5 279.0 43.0 45.8 42.6
Intersegment sales (1.0) (1.0) (0.8) -- -- --
------ ------ ------ ---- ---- ----
$642.7 $595.0 $592.5 84.1 73.1 65.0
====== ====== ======
Corporate expenses (18.3) (17.8) (16.2)
----- ----- -----
Operating income $65.8 $55.3 $48.8
===== ===== =====
Identifiable Assets Capital Expenditures Depreciation Expense
----------------------------- -------------------------- ----------------------------
(Dollars in millions) 1997 1996 1995 1997 1996 1995 1997 1996 1995
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
Bowman Distribution $ 83.2 $ 73.0 $ 79.2 $ 6.6 $ 2.9 $ 3.6 $ 3.8 $ 3.7 $ 4.1
Barnes Aerospace 96.2 96.1 87.0 7.9 9.4 7.8 7.1 7.0 7.2
Associated Spring 183.2 177.8 160.3 18.7 21.5 24.2 14.3 13.0 11.6
Corporate 45.4 43.1 35.0 0.2 0.1 0.2 0.2 0.3 0.3
----------------------------------------------------------------------------------------------------
$ 408.0 $ 390.0 $ 361.5 $ 33.4 $ 33.9 $ 35.8 $ 25.4 $ 24.0 $ 23.2
====================================================================================================
29
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - BARNES GROUP INC.
OPERATIONS BY GEOGRAPHIC AREA
Net Sales Operating Income
--------------------------------------- -------------------------------------
1997 1996 1995 1997 1996 1995
--------- --------- --------- --------- --------- ---------
(Dollars in millions) $ 515.0 $ 466.4 $ 463.4 $ 71.6 $ 59.5 $ 51.3
Domestic 139.5 138.8 137.9 12.5 13.6 13.7
International (11.8) (10.2) (8.8) -- -- --
--------- --------- --------- --------- --------- ---------
Sales between geographic areas $ 642.7 $ 595.0 $ 592.5 $ 84.1 $ 73.1 $ 65.0
========= ========= ========= ========= ========= =========
Identifiable Assets
-------------------------------------
(Dollars in millions) 1997 1996 1995
--------- --------- ---------
Domestic $ 249.4 $ 239.8 $ 227.5
International 113.2 107.1 99.0
Corporate 45.4 43.1 35.0
-------------------------------------
$ 408.0 $ 390.0 $ 361.5
=====================================
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, 1997 and 1996, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1997, 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 21, 1998
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QUARTERLY DATA (UNAUDITED) - BARNES GROUP INC.
First Second Third Fourth Full
(Dollars in millions, except per share data) Quarter Quarter Quarter Quarter Year
------------ ------------ ------------ ------------ ------------
1997
Net sales $ 158.1 $ 165.9 $ 158.5 $ 160.2 $ 642.7
Gross profit(1) 55.2 54.6 53.2 53.1 216.1
Operating income 16.8 17.5 16.1 15.4 65.8
Net income 10.1 10.7 10.1 9.5 40.4
Per Common Share:(2)
Net income:
Basic 0.50 0.53 0.50 0.47 2.00
Diluted 0.49 0.52 0.49 0.46 1.96
Dividends 0.15 0.17 0.16 0.17 0.65
Market prices (high-low) $24.92-19.79 $29.88-22.88 $30.38-27.00 $29.25-22.75 $30.38-19.79
1996
Net sales $ 150.1 $ 152.6 $ 147.1 $ 145.2 $ 595.0
Gross profit(1) 52.9 53.7 52.2 51.5 210.3
Operating income 11.2 14.4 14.7 15.0 55.3
Net income 6.6 8.7 8.7 8.6 32.6
Per Common Share:(2)
Net income:
Basic 0.34 0.43 0.44 0.42 1.63
Diluted 0.33 0.43 0.43 0.42 1.61
Dividends 0.15 0.15 0.15 0.15 0.60
Market prices (high-low) $ 15.08-11.67 $17.29-14.92 $17.04-15.42 $20.67-16.54 $20.67-11.67
(1) Sales minus cost of sales.
(2) All per share data has been adjusted for the 3-for-1 stock split.
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SELECTED FINANCIAL DATA - BARNES GROUP INC.
1997 1996 1995
-------- -------- --------
PER COMMON SHARE (1) (2)
Income (loss)
-------- -------- --------
Continuing operations $ 2.00 $ 1.63 $ 1.40
-------- -------- --------
Effect of accounting changes -- -- --
-------- -------- --------
Net income (loss)
Basic 2.00 1.63 1.40
-------- -------- --------
Diluted 1.96 1.61 1.38
-------- -------- --------
Dividends paid .65 .60 .53
-------- -------- --------
Stockholders' equity (at year-end) 8.97 7.86 6.55
-------- -------- --------
Stock price (at year-end) 22.75 20.00 12.00
======== ======== ========
FOR THE YEAR (in thousands)
Net sales $642,660 $594,989 $592,509
-------- -------- --------
Operating income 65,766 55,316 48,804
-------- -------- --------
As a percent of sales 10.2% 9.3% 8.2%
-------- -------- --------
Income from continuing operations before income taxes
and effect of accounting changes $ 64,502 $ 52,310 $ 45,450
-------- -------- --------
Income taxes 24,079 19,742 17,966
-------- -------- --------
Income from continuing operations before
effect of accounting changes 40,423 32,568 27,484
-------- -------- --------
As a percent of average stockholders' equity 23.4% 22.8% 22.6%
-------- -------- --------
Effect of accounting changes $ -- $ -- $ --
-------- -------- --------
Net income (loss) 40,423 32,568 27,484
-------- -------- --------
Depreciation and amortization 28,123 26,626 26,750
-------- -------- --------
Capital expenditures 33,398 33,892 35,820
-------- -------- --------
Average common shares outstanding - basic 20,237 19,924 19,640
======== ======== ========
YEAR-END FINANCIAL POSITION (in thousands)
Working capital $113,092 $109,476 $ 95,280
-------- -------- --------
Current ratio 2.3 to 1 2.4 to 1 2.2 to 1
-------- -------- --------
Property, plant and equipment $133,830 $131,071 $122,870
-------- -------- --------
Total assets 407,978 389,956 361,549
-------- -------- --------
Long-term debt 60,000 70,000 70,000
-------- -------- --------
Guaranteed ESOP obligation - long term portion 2,205 4,951 7,491
-------- -------- --------
Stockholders' equity 180,859 157,164 128,841
-------- -------- --------
Debt as a percent of total capitalization(6) 27.1% 33.5% 38.4%
======== ======== ========
YEAR-END STATISTICS
Employees 3,872 3,761 3,880
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1994 1993 (3) 1992(4)(5)
--------- -------- ---------
$ 1.07 $ .23 $ .31
--------- -------- ---------
-- -- (2.19)
--------- -------- ---------
1.07 .23 (1.87)
--------- -------- ---------
1.06 .23 (1.87)
--------- -------- ---------
.48 .47 .47
--------- -------- ---------
5.55 4.86 5.01
--------- -------- ---------
12.67 10.42 10.17
========= ======== =========
$ 569,197 $502,292 $ 529,073
--------- -------- ---------
36,649 12,538 7,259
--------- -------- ---------
6.4% 2.5% 1.4%
--------- -------- ---------
$ 33,922 $ 8,391 $ 7,671
--------- -------- ---------
13,606 4,008 1,838
--------- -------- ---------
20,316 4,383 5,833
--------- -------- ---------
20.3% 4.7% 5.8%
--------- -------- ---------
$ -- $ -- $ (40,695)
--------- -------- ---------
20,316 4,383 (34,862)
--------- -------- ---------
23,733 23,094 23,741
--------- -------- ---------
31,848 22,216 16,238
--------- -------- ---------
19,061 18,750 18,607
========= ======== =========
$ 88,325 $ 87,011 $ 93,500
--------- -------- ---------
2.0 to 1 2.1 to 1 2.0 to 1
--------- -------- ---------
$ 112,569 $103,043 $ 104,437
--------- -------- ---------
351,956 333,296 348,346
--------- -------- ---------
70,000 70,000 70,000
--------- -------- ---------
9,839 12,011 14,019
--------- -------- ---------
107,139 91,849 93,575
--------- -------- ---------
45.6% 50.7% 51.9%
========= ======== =========
4,181 4,357 4,051
(1) All per share data, other than earnings per common share, are based on
common shares outstanding at the end of each year. Earnings per common share
are based on weighted average common shares outstanding during each year.
(2) All per share data has been adjusted for the 3-for-1 stock split effective
April, 1997.
(3) Includes a $3.4 million pretax, $2.0 million after-tax charge ($.11 per
share) against income related to the plant consolidation and work-force
reduction at Barnes Aerospace and a $1.5 million charge without tax benefit
($.08 per share) for a plant consolidation at Associated Spring's Mexico
operations.
(4) Includes a $17.8 million pretax, $10.7 million after-tax charge ($.58 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's U.S. sales organization. These charges were partially offset by
a $5.0 million pretax gain, $3.7 million after-tax ($.20 per share) from the
sale of Bowman's Pioneer division.
(5) 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 ($2.14 per share) to comply with SFAS 106 and 112, both of which
change the accounting for certain postretirement and postemployment benefits
to the accrual method and an additional $1.0 million income tax charge ($.05
per share) for SFAS 109, which changed income tax accounting.
(6) Debt includes all interest-bearing debt including the guaranteed ESOP
obligation, and total capitalization includes interest-bearing debt and
stockholders' equity.
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BARNES GROUP AROUND THE WORLD
[GRAPHIC OMITTED]
BARNES
GROUP INC.
Headquarters
- - BRISTOL, CONNECTICUT
BOWMAN
DISTRIBUTION
Headquarters
1 CLEVELAND, OHIO
Distribution Operations
United States
2 ANAHEIM, CALIFORNIA
3 BAKERSFIELD, CALIFORNIA
4 NORCROSS, GEORGIA
5 ROCKFORD, ILLINOIS
6 ELIZABETHTOWN, KENTUCKY
7 EDISON, NEW JERSEY
8 COLUMBUS, OHIO
9 ARLINGTON, TEXAS
10 HOUSTON, TEXAS
11 AUBURN, WASHINGTON
Canada
12 CONCORD, ONTARIO
13 EDMONTON, ALBERTA
14 MONCTON, NEW BRUNSWICK
United Kingdom
15 CORSHAM
France
16 VOISINS LE BRETONNEUX
Raymond Distribution
United States
17 MAUMEE, OHIO
18 CERRITOS, CALIFORNIA
19 YPSILANTI, MICHIGAN
20 ARLINGTON, TEXAS
21 NEW BERLIN, WISCONSIN
United Kingdom
22 EVESHAM
France
23 MONTIGNY
BARNES
AEROSPACE
Headquarters
1 WINDSOR, CONNECTICUT
Manufacturing Plants
United States
2 EAST GRANBY, CONNECTICUT
3 WINDSOR, CONNECTICUT
4 LANSING, MICHIGAN
5 OGDEN, UTAH
Asia
6 REPUBLIC OF SINGAPORE
ASSOCIATED
SPRING
Headquarters
1 FARMINGTON, CONNECTICUT
Manufacturing Plants
North America
2 BRISTOL, CONNECTICUT
3 SALINE, MICHIGAN
4 SYRACUSE, NEW YORK
5 ARDEN, NORTH CAROLINA
6 CORRY, PENNSYLVANIA
7 DALLAS, TEXAS
8 MILWAUKEE, WISCONSIN
9 BURLINGTON, ONTARIO, CANADA
10 MEXICO CITY, MEXICO
South America
11 CAMPINAS, BRAZIL
Asia
12 REPUBLIC OF SINGAPORE
34
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DIRECTORS
*THOMAS O. BARNES
CHAIRMAN OF THE BOARD
*-++GARY G. BENANAV
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
New York Life International, Inc.
EXECUTIVE VICE PRESIDENT
New York Life Insurance Company
New York, New York
*-WILLIAM S. BRISTOW, JR.
PRESIDENT
W.S. Bristow & Associates, Inc.
Rollinsford, New Hampshire
*++ROBERT J. CALLANDER
EXECUTIVE IN RESIDENCE
Columbia University
School of Business
RETIRED VICE CHAIRMAN
Chemical Banking Corporation
New York, New York
*-++GEORGE T. CARPENTER
PRESIDENT
The S. Carpenter Construction Company
Bristol, Connecticut
- -++DONNA R. ECTON
CHIEF OPERATING OFFICER
PETsMART, Inc.
Phoenix, Arizona
- -ROBERT W. FIONDELLA
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Phoenix Home Life
Mutual Insurance Company
Hartford, Connecticut
++FRANK E. GRZELECKI
VICE CHAIRMAN
Handy & Harman
Rye, New York
- -++MARCEL P. JOSEPH
FORMER CHAIRMAN
OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Augat Inc.
Mansfield, Massachusetts
*THEODORE E. MARTIN
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
OFFICERS
EXECUTIVE OFFICE
THEODORE E. MARTIN
President and
Chief Executive
Officer
TERRY M. MURPHY
Senior Vice President,
Finance
JAMES A. PAYNTER
Senior Vice President,
Human Resources
WILLIAM V. GRICKIS, JR.
Vice President,
General Counsel
and Secretary
JOHN J. LOCHER
Vice President,
Treasurer
FRANCIS C. BOYLE, JR.
Vice President,
Controller
OPERATIONS
ALI A. FADEL
Vice President,
Barnes Group Inc.,
and President,
Associated Spring
LEONARD M. CARLUCCI
Vice President,
Barnes Group Inc.,
and President,
Bowman Distribution
CEDRIC D. BECKETT
Vice President,
Barnes Group Inc.,
and President,
Barnes Aerospace
STOCKHOLDERS' INFORMATION
TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660
Phone: 1-800-288-9541 (Continental U.S. only)
or 1-201-329-8660
For Hearing Impaired 1-800-231-5469
USE THE ABOVE ADDRESS AND PHONE NUMBERS FOR INFORMATION ON THE FOLLOWING
SERVICES:
STOCKHOLDER INQUIRIES/ADDRESS CHANGES/
CONSOLIDATIONS
LOST CERTIFICATES/REPLACEMENTS
CERTIFICATE TRANSFERS:
All certificates should be sent certified or registered mail.
DIVIDEND INVESTMENT/STOCKHOLDER INVESTMENT PLANS:
Dividends on Barnes Group common stock may be
automatically invested in additional shares.
HAND DELIVERIES:
ChaseMellon Shareholder Services, L.L.C.
120 Broadway, 13th Floor
New York, NY 10271
STOCK EXCHANGE
New York Stock Exchange
Stock Trading Symbol: B
Listed on the S&P Small Cap 600 Index
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
One Financial Plaza
Hartford, CT 06103
ANNUAL MEETING
Barnes Group Inc. annual meeting of stockholders
will be held at 10:30 a.m., Wednesday, April 8, 1998,
at Associated Spring Group Headquarters,
Farmington, CT.
INVESTOR INFORMATION
Barnes Group welcomes inquiries from stockholders, analysts and prospective
investors. Quarterly reports, 10-K's and other information on the company are
available on request. Please note that the company is no longer required to
provide quarterly reports to stockholders. Those wishing to receive this
information can obtain it over the Internet or by requesting it from the company
at the phone or fax numbers listed below.
Contact: Robert D. Lipira (for investor relations)
or Holly V. LeBlanc (for stockholder relations)
Barnes Group Inc.
123 Main St., P.O. Box 489
Bristol, CT 06011-0489
Phone: 1-860-583-7070
Fax: 1-860-589-3507
COMMUNICATION
For additional information on the company, call our Fax-on-Demand Service at
1-800-311-4606. For press releases on the Internet, address
http://www.businesswire.com/cnn
* Member of Executive Committee
- - Member of Audit Committee
++ Member of Compensation Committee
Design: Susan Brier, The WriteDesign Company, LLC / Printing: Universal Press
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BARNES GROUP INC [LOGO]