Exhibit 13
management's discussion & analysis
[Picture]
Our Business
Barnes Group is a diversified international manufacturer of precision metal
parts and distributor of industrial supplies. The Company is comprised of three
business segments. The Associated Spring segment is a manufacturer of precision
mechanical and nitrogen gas springs for the electronics, telecommunications and
transportation markets. The Barnes Aerospace segment supplies precision machined
and fabricated components and assemblies for commercial and military aircraft
and industrial gas turbines, as well as engine component overhaul and repair
services in support of the global airline industry. The Barnes Distribution
segment, formerly known as Bowman Distribution, is an international distributor
of maintenance, repair and operating (MRO) supplies and a provider of logistics
management services for industrial, heavy equipment and transportation
maintenance markets. It also distributes close-tolerance engineered metal
components manufactured principally by Associated Spring. Through these three
businesses, Barnes Group helps its customers enhance their competitiveness and
responsiveness by realizing the benefits of its manufacturing and logistics
management capabilities.
Acquisitions
During the past three years, the Company acquired a number of businesses, which
were accounted for using the purchase method. Accordingly, the results of
operations of the acquired companies have been included in the consolidated
results from their respective acquisition dates.
In August 1999, the Company purchased substantially all of the assets and
liabilities of the nitrogen gas spring business of Teledyne Industries, Inc.,
for $92.2 million. This operation is a major supplier of nitrogen gas springs
and manifold systems for the metal forming industries. The nitrogen gas spring
business is included in the Associated Spring segment. This strategic
acquisition provided Associated Spring with new spring technologies and allows
it to continue to develop and expand products, markets and services.
In May 2000, the Company purchased substantially all of the assets and
liabilities of Curtis Industries, Inc. (Curtis) for $63.4 million. Curtis, a
distributor of MRO supplies and high-quality security products, was combined
with Bowman Distribution to form Barnes Distribution. This business combination
created a broader product offering, enhanced service capabilities, increased
sales penetration and cost savings opportunities.
In September 2000, the Company purchased substantially all of the assets and
liabilities of AVS/Kratz-Wilde Machine Company and Apex Manufacturing, Inc.
(Kratz-Wilde/Apex) for $40.9 million. Kratz-Wilde/Apex fabricates and machines
intricate aerospace components for jet engines and auxiliary power units. These
businesses are included in the Barnes Aerospace segment. This acquisition
augments Barnes Aerospace by extending product depth and customer penetration.
In January 2001, the Company acquired Euro Stock Springs & Components Limited
(Euro Stock) for $0.7 million. Euro Stock distributes die and other standard
springs through catalogs to customers located primarily in Europe. This
business, which is included in the Barnes Distribution segment, expanded Barnes
Distribution's presence in Europe and added a new sales channel through Euro
Stock's catalog.
In November 2001, the Company acquired certain assets of Forward Industries,
L.L.C., and its subsidiary Forward Industries, Ltd. for approximately $2.5
million. Forward Industries designs and manufactures nitrogen gas springs that
are used in the appliance, automotive, heating and cooling, and electrical
industries. This bolton acquisition, which helped secure a key brand, is being
integrated with the Company's existing nitrogen gas spring business and is
included in the Associated Spring segment.
On January 31, 2002, the Company announced it had signed an agreement to acquire
substantially all of the manufacturing assets of Seeger-Orbis GmbH & Co. OHG of
Germany from TransTechnology Corporation. The acquired business will expand both
the product offerings and geographic scope of the Associated Spring segment. The
acquisition is expected to close by the end of the first quarter of 2002. The
purchase price of approximately $20 million will be financed with cash held by
the Company outside the United States.
Results of Operations
Barnes Group reported record net sales of $769 million in 2001, an increase of
$29 million, or 4%, over last year's net sales of $740 million. Net sales growth
in 2001 reflected the sharp rise in sales at Barnes Aerospace and sales from the
Company's recent acquisitions. This growth was partially offset by a decline in
transportation- and telecommunications related sales at Associated Spring and
the adverse impact of weak economic conditions on Barnes Distribution's sales.
The businesses acquired in 2000 and 2001 provided incremental sales of $61
million in 2001: $1 million to Associated Spring, $34 million to Barnes
Aerospace and $26 million to Barnes Distribution. Geographically, domestic sales
increased 8% yearover- year, while foreign sales fell 8%. In 2000, Barnes Group
net sales were up $118 million, or 19%, over 1999, reflecting both acquisitions
and internal
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P A G E 7
management's discussion & analysis
growth in each of the three businesses. The acquired businesses provided
incremental sales of $101 million in 2000: $32 million to Associated Spring, $13
million to Barnes Aerospace and $56 million to Barnes Distribution.
Operating income was $40.3 million in 2001, compared with $62.9 million in 2000.
A number of items contributed to the operating income decline. The primary
factors were the impact of a weak industrial economy on sales volume and a shift
in the overall sales mix to lower-margin business. The $29 million net sales
increase comprised $61 million in incremental sales from the 2000 and 2001
acquisitions and a $31 million increase in the existing Aerospace business,
which was substantially offset by a $63 million sales decrease in the more
profitable Associated Spring and Barnes Distribution businesses. Also impacting
operating income were higher personnel costs, specifically health insurance and
pension costs. In addition, 2001 operating income reflects the cost of actions
aimed at reducing the Company's infrastructure, as well as increased investments
in selling, marketing and engineering efforts focused on preparing the Company
for the next business upturn. As described in note 13 to the Consolidated
Financial Statements, operating income included a $4.8 million pretax charge
taken in the fourth quarter of 2001, primarily related to a plant closure and
severance costs. Selling and administrative expenses increased $20.5 million in
2001 over 2000, reflecting the fourth quarter charge and the costs attributable
to the newly acquired businesses, as well as the continued investment made in
the sales, marketing and engineering functions throughout the Company.
While the tragic events of September 11th have created a roadblock for the
stalled domestic economy, management believes that the cost reductions and other
actions that Associated Spring and Barnes Distribution have executed over the
past year will enable them to effectively manage through the current economic
conditions. In addition, Barnes Aerospace is taking the appropriate actions
necessary to address near-term disruptions in the commercial aircraft market.
Operating income in 2000 increased $16.8 million to $62.9 million, or 37% over
1999. The increase was driven by double-digit sales and profit growth in each of
the three businesses. Lower pension expense, which primarily reflects solid
investment performance on plan assets, contributed $4.9 million of incremental
operating income over the comparable 1999 period. This was offset in part by
higher selling and administrative expenses. Selling and administrative expenses
increased $37.1 million in 2000, of which $33.6 million is attributable to the
newly acquired businesses. Included in operating income in 2000 is a gain of
$2.2 million related to the sale of a corporate asset and a $1.7 million charge
for integration costs related to the Curtis acquisition.
Segment Review -
Sales and Operating Profit
Associated Spring sales for 2001 were $279 million, down $48 million, or 15%,
from record 2000 sales of $327 million. Sales in 1999 were $283 million. Sales
at Associated Spring were impacted by lower production rates in the domestic
transportation markets and reduced sales of telecommunications and electronics
products. These factors impacted both domestic and foreign sales. Sales at
Associated Spring's U.S. operations started to contract in late 2000 and
continued throughout 2001, reflecting the weakness of the domestic economy.
Associated Spring's international sales dropped significantly in the Pacific
Rim, where it serves the telecommunications and electronics markets, but
continued to grow in Sweden and Brazil. Associated Spring's 2000 sales increased
over 1999 on the strength of its U.S. operations and the addition of the
nitrogen gas spring business. The 2000 sales increase included both domestic and
foreign sales growth. In 2000, sales at Associated Spring's U.S. operations
increased, reflecting continued penetration of the electronics and
transportation markets and the strength of the domestic economy, particularly in
the first half of the year. Additionally, the full-year impact in 2000 of the
August 1999 acquisition of the nitrogen gas spring business contributed to sales
increases both domestically and internationally.
Associated Spring reported operating profit of $19.4 million in 2001, compared
with $44.0 million in 2000 and $33.5 million in 1999. The decrease in 2001
reflects the sales volume decline, and in particular, the significant shortfall
in the more profitable electronics business, coupled with costs associated with
reducing the business's infrastructure. This was partially offset by lower
operating costs based on earlier management actions. Management responded to the
decline in the domestic economy by reducing its cost structure beginning late in
2000 and continuing throughout 2001, culminating with the decision to shut down
its Texas plant. Retained business from the Texas plant will be transferred to
other Associated Spring plants during 2002. The Company expects to incur
approximately $1.6 million of additional costs associated with these actions,
which will be expensed in 2002. This is expected to be offset by improved
earnings beginning in the second half of 2002. The operating profit improvement
in 2000 over 1999 reflects a full year of ownership of the nitrogen gas spring
business, increased sales to new sectors, higher manufacturing productivity and
lower operating expenses.
Barnes Aerospace achieved record sales of $200 million in 2001, up $65 million,
or 48%, compared with $135 million in 2000. Sales in 1999 were $121
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P A G E 8
management's discussion & analysis
million. Organic sales increased $31 million, or 26%, as Barnes Aerospace
continued to penetrate new markets and customers in both the overhaul and repair
and original equipment manufacturing businesses. Sales from the Kratz-Wilde/Apex
business, acquired in September 2000, increased $34 million year-overyear. Total
orders for the year were $216 million, up 26% from $171 million in 2000. Order
backlog rose to a year-end record $159 million at December 31, 2001, compared
with $145 million at December 31, 2000. The Barnes Aerospace sales increase in
2000 over 1999 included the acquisition of Kratz-Wilde/Apex that added $13
million in sales in 2000.
Barnes Aerospace operating profit was a record $16.4 million in 2001, as
compared with $8.0 million in 2000 and $5.3 million in 1999. The increase in
2001 operating profit and margin reflects higher sales volume and benefits from
lean manufacturing initiatives. The increase in profits for 2000, compared with
1999, reflects the increased sales volume.
Barnes Distribution sales for 2001 were $298 million, compared with $291 million
in 2000 and $230 million in 1999. Sales from the acquired businesses increased
$26 million year-over-year. Organic sales from Distribution's other businesses,
Raymond and the balance of Barnes Distribution, formerly known as Bowman
Distribution, decreased $7 million and $12 million, respectively, reflecting the
negative impact of the weak economic conditions in the manufacturing and
industrial sectors. The Barnes Distribution 2000 sales increase over 1999
included $56 million from Curtis, which was acquired in May 2000. The remainder
of the increase is attributable to higher sales in the North American business.
This increase reflects significant improvement in a computerized distribution
management system that had negatively impacted customer service and sales in
1999 and early 2000. Customer service was restored to historical levels in
mid-2000, which has positively impacted sales volume.
Barnes Distribution operating profit in 2001 was $5.5 million, compared with
$12.9 million in 2000 and $9.9 million in 1999. Synergies realized from the
integration of Curtis were more than offset by lower profit from the significant
decline in other business sales. Although sales increased in total, sales in the
more profitable business of Raymond and the former Bowman Distribution were down
significantly. The increase in operating profit in 2000 over 1999 reflects the
higher sales volume, offset in part by integration costs of $1.7 million related
to the acquisition of Curtis.
Other Income/Expense
Other income totaled $3.9 million in 2001, compared with $4.8 million in 2000
and $4.4 million in 1999. The decrease in other income in 2001, compared with
2000, was due to lower equity income from the Company's NASCO joint venture,
offset in part by higher net foreign exchange transaction gains. The increase in
2000 over 1999 reflects higher interest income and net foreign exchange
transaction gains.
Interest expense and other expenses increased in both 2001 and 2000 as a result
of acquisitions. In each year, interest expense increased due to significantly
higher borrowings, offset in part, in 2001, by lower average interest rates.
Other expenses increased with the additional goodwill amortization associated
with the acquisitions.
Income Taxes
The Company's effective tax rate was 18.5% in 2001, compared with 26.6% in 2000
and 33.0% in 1999. The decline in the tax rate in both 2001 and 2000 is due to a
significant shift in the overall mix of income to a higher percentage of foreign
income, with tax rates lower than the U.S. statutory tax rate.
Net Income and Net Income Per Share
Consolidated net income was $19.1 million in 2001, $35.7 million in 2000, and
$28.6 million in 1999. Basic earnings per share was $1.03 for 2001, compared
with $1.92 in 2000 and $1.47 in 1999. Diluted earnings per share was $1.01 for
2001, as compared with $1.90 in 2000 and $1.46 in 1999.
Inflation
Management believes that during the 1999-2001 period, inflation did not have a
material impact on the Company's 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 financial strengths. Management continues to focus
on cash flow and anticipates that operating activities in 2002, combined with
aggressive asset management, will provide sufficient cash to take advantage of
opportunities for organic business expansion and to meet the Company's current
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.
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P A G E 9
management's discussion & analysis
Operating activities are the principal source of cash flow for the Company,
generating $66.9 million in 2001, up from $51.9 million in 2000 and $62.8
million in 1999. The significant increase in operating cash flow was due
primarily to significant improvements in working capital, which more than offset
the lower operating results. Management continues to stress the need for
aggressive cash management and was effective in reducing overall working capital
levels in 2001. In 2000, strong operating results contributed significantly to
operating cash flow, offset in part by higher investments in working capital and
other non-cash income. During the past three years, operating activities
provided $181.6 million in cash, which the Company used, in part, to pay
dividends to stockholders, repurchase Company stock, fund significant
investments in plant and equipment, and partially fund acquisitions.
Investing activities used cash of $26.6 million in 2001, compared with $134.5
million in 2000 and $117.0 million in 1999. The significant cash use in 2000 and
1999 is attributable to the purchases of Curtis and Kratz-Wilde/Apex in 2000 and
the purchase of the nitrogen gas spring business in 1999. In 2001, funds used
for two bolt-on acquisitions were offset in part by a favorable purchase price
adjustment received in 2001 on the Kratz-Wilde/Apex acquisition. The Company's
capital spending program focuses on business growth and improvements in
productivity and quality. In 2001, capital spending was reduced in response to
the economic downturn. The Company does not expect capital spending in 2002 to
exceed 2001 levels.
Net cash used by financing activities was $13.8 million in 2001, compared with
net cash provided by financing activities of $64.8 million in 2000 and $58.8
million in 1999. Cash of $13.8 million was generated from the sale of a
cross-currency debt swap in 2001. The proceeds from this sale, combined with
strong operating cash flow, were used in part to pay down debt, fund capital
expenditures, pay dividends and repurchase the Company's stock. In 2000 and
1999, the increase in borrowings reflected the issuance of additional long-term
debt to fund business acquisitions as well as to supplement cash generated by
operating activities. Cash dividends increased in 2001, for the eighth
consecutive year, to $0.80 per share. As a result, total cash used to pay 2001
dividends to stockholders was $14.8 million.
The Company has used and will continue to use cash from non-U.S. subsidiaries to
fund international cash requirements, including acquisitions when it is cost
effective. The repatriation of certain cash balances to the U.S. could have
adverse tax consequences; however, those balances are generally available to
fund business needs outside the U.S.
To supplement internal cash generation, the Company maintains substantial bank
borrowing facilities. At December 31, 2001, the Company had a $150 million
revolving credit agreement, of which $40 million was borrowed at an interest
rate of 2.45%. Additionally, the Company had $5.5 million in borrowings under
uncommitted short-term bank credit lines, at an interest rate of 2.78%. The
revolving credit borrowing facility expires in December 2002. Accordingly,
borrowings under this facility are classified as current. Management intends to
negotiate a new revolving credit agreement in the first half of 2002. The
Company believes its credit facilities, coupled with cash generated from
operations, are adequate for its anticipated future requirements.
In November 1999, the Company financed a portion of the nitrogen gas spring
business acquisition through the issuance of $70 million of private placement
Senior Notes. The Notes, placed with seven insurance companies, range in
maturity from eight to 11 years and bear an average annual interest rate of
7.75%. The balance of the acquisition purchase price was financed through
borrowings under the Company's revolving credit agreement.
In November 2000, the Company financed a portion of the Curtis and
Kratz-Wilde/Apex business acquisitions through issuance of $60 million of
privately placed Senior Notes with three insurance companies. Although the Notes
have an effective interest rate of 9.34%, they are tied to an interest rate swap
agreement that effectively converted them to variable-rate debt. These Notes are
payable in three equal annual installments beginning in 2006.
Market Risk
Market risk is the potential economic loss that may result from adverse changes
in the fair value of financial instruments. The Company's financial results
could be impacted by changes in interest rates, foreign currency exchange rates
and commodity price changes. The Company uses financial instruments to hedge its
exposure to fluctuations in interest rates and foreign exchange rates. The
Company does not use derivatives for speculative or trading purposes.
The Company's long-term debt portfolio consists of fixed-rate and variable-rate
instruments and is managed to reduce the overall cost of borrowing while also
minimizing the effect of changes in interest rates on near-term earnings. As
part of managing its debt portfolio, the Company maintains an interest rate swap
agreement to convert its $60 million fixedrate Senior Notes to variable-rate
debt. The exchange agreement had a positive impact on 2001 earnings, reducing
interest expense by $0.7 million.
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P A G E 10
management's discussion & analysis
The Company's primary interest rate risk is derived from its outstanding
variable-rate debt obligations. At December 31, 2001, the result of a
hypothetical 1% increase in the average cost of the Company's variable-rate
debt, including the interest rate swap agreement, would have decreased pre-tax
profit by $1.1 million.
At December 31, 2001, the fair value of the Company's fixed-rate debt was $120.0
million, compared with its carrying amount of $117.2 million. The Company
estimates that a 1% decrease in market interest rates at December 31, 2001 would
have increased the fair value of the Company's fixed-rate debt to $125.3
million.
The Company has manufacturing, sales and distribution facilities around the
world and thus makes investments and conducts business transactions denominated
in various currencies. Foreign currency commitments and transaction exposures
are managed at the operating units as an integral part of their businesses in
accordance with a corporate policy that addresses acceptable levels of foreign
currency exposures. The Company does not hedge its foreign currency net asset
exposure.
The currencies of the locations where the Company's business operations are
conducted are the U.S. dollar, Singapore dollar, Euro, British pound, Mexican
peso, Brazilian real, Canadian dollar, Swedish krona and Chinese renminbi. The
Company is exposed primarily to U.S. dollar-denominated financial instruments at
its international locations. Based on a 10% adverse movement in all currencies,
the potential loss in fair value from the Company's financial instruments at the
end of 2001 would have resulted in reducing pretax profit by $2.1 million.
The Company's exposure to commodity price changes relates primarily to certain
manufacturing operations that utilize high-grade steel spring wire and titanium.
The Company manages its exposure to changes in those prices through its
procurement and sales practices. The Company is not dependent upon any single
source for any of its principal raw materials or products for resale, and all
such materials and products are readily available.
Future Accounting Changes
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No.141, "Business Combinations," and SFAS
No. 142, "Goodwill and Other Intangible Assets." SFAS 141 requires companies to
account for acquisitions entered into after June 30, 2001, using the purchase
method and establishes criteria to be used in determining whether acquired
intangible assets are to be recorded separately from goodwill. SFAS 142 sets
forth the accounting for goodwill and other intangible assets related to
business combinations. Goodwill and other intangible assets with indefinite
lives will no longer be amortized and instead will be evaluated annually for
impairment by comparing the carrying value to the fair value at the reporting
unit level. Intangible assets with definitive lives will be amortized over their
useful lives. SFAS 142 is effective for acquisitions completed after June 30,
2001, and effective for previous acquisitions on January 1, 2002.
Management is in the process of analyzing and assessing the impact of the
adoption of these statements. The Company expects that the adoption of SFAS 142
will have a favorable impact of approximately $3.4 million on net income due to
the elimination of goodwill amortization. However, the actual effect of this
accounting change on the Company's consolidated results of operations and
financial position will be determined upon completion of the impairment
evaluation in 2002.
In August 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets, "which will be
effective on January 1, 2002, for the Company. Management believes that adoption
of this standard will not have a material impact on the Company's financial
position, results of operations or cash flows.
Forward-Looking Statements
This Annual Report may contain certain forwardlooking statements as defined in
the Public Securities Litigation and Reform Act of 1995. These forwardlooking
statements are subject to risks and uncertainties that may cause actual results
to differ materially from those contained in the statements. Investors are
encouraged to consider these risks and uncertainties as described within the
Company's periodic filings with the Securities and Exchange Commission,
including the following: the ability of the Company to integrate newly acquired
businesses and to realize acquisition synergies on schedule; changes in market
demand for the types of products and services produced and sold by the Company;
the Company's success in identifying and attracting customers in new markets;
the Company's ability to develop new and enhanced products to meet customers'
needs on time; changes in economic and political conditions worldwide and in the
locations where the Company does business; interest and foreign exchange rate
fluctuations; and changes in laws and regulations.
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P A G E 11
consolidated statements of income
(Dollars in thousands, except per share data)
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Years ended December 31, 2001 2000 1999
- --------------------------------------------------------------------------------------------------
Net sales $ 768,821 $ 740,032 $ 622,356
Cost of sales 519,536 488,634 424,945
Selling and administrative expenses 208,965 188,449 151,304
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728,501 677,083 576,249
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Operating income 40,320 62,949 46,107
Other income 3,890 4,773 4,400
Interest expense 16,161 15,140 6,093
Other expenses 4,590 3,992 1,716
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Income before income taxes 23,459 48,590 42,698
Income taxes 4,338 12,925 14,086
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Net income $ 19,121 $ 35,665 $ 28,612
==================================================================================================
Per common share:
Net income:
Basic $ 1.03 $ 1.92 $ 1.47
Diluted 1.01 1.90 1.46
Dividends 0.80 0.79 0.75
Average common shares outstanding:
Basic 18,506,247 18,568,359 19,417,856
Diluted 18,919,968 18,791,227 19,642,755
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See accompanying notes.
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P A G E 12
consolidated balance sheets
(Dollars in thousands)
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December 31, 2001 2000
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Assets
Current assets
Cash and cash equivalents $ 48,868 $ 23,303
Accounts receivable, less allowances
(2001 - $3,114; 2000 - $2,720) 94,124 107,434
Inventories 85,721 88,514
Deferred income taxes 16,702 12,647
Prepaid expenses 11,120 9,450
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Total current assets 256,535 241,348
Deferred income taxes 5,783 15,010
Property, plant and equipment 152,943 163,766
Goodwill 159,836 155,667
Other assets 61,408 61,150
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Total assets $ 636,505 $ 636,941
==============================================================================================
Liabilities and Stockholders' Equity
Current liabilities
Notes payable $ 5,500 $ 3,678
Accounts payable 71,410 62,985
Accrued liabilities 59,118 60,183
Long-term debt - current 47,576 -
- ----------------------------------------------------------------------------------------------
Total current liabilities 183,604 126,846
Long-term debt 178,365 230,000
Accrued retirement benefits 63,610 67,686
Other liabilities 12,089 11,076
Commitments and contingencies (notes 10 and 12)
Stockholders' equity
Common stock - par value $0.01 per share
Authorized: 60,000,000 shares
Issued: 22,037,769 shares at par value 220 220
Additional paid-in capital 54,874 51,845
Treasury stock at cost (2001 - 3,576,322 shares;
2000 - 3,430,411 shares) (76,903) (69,181)
Retained earnings 243,369 239,266
Accumulated other comprehensive income (22,723) (20,817)
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Total stockholders' equity 198,837 201,333
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Total liabilities and stockholders' equity $ 636,505 $ 636,941
==============================================================================================
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See accompanying notes.
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P A G E 13
consolidated statements of cash flows
(Dollars in thousands)
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Years ended December 31, 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------
Operating activities:
Net income $ 19,121 $ 35,665 $ 28,612
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 37,045 35,871 30,602
Loss (gain) on disposition of property,
plant and equipment 2,093 (1,960) (857)
Changes in assets and liabilities:
Accounts receivable 11,378 1,087 (1,731)
Inventories (3,629) (7,631) 1,980
Accounts payable 13,634 (5,415) 17,356
Accrued liabilities (5,552) 1,026 (9,524)
Deferred income taxes 6,510 5,863 3,655
Other (13,700) (12,649) (7,296)
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Net cash provided by operating activities 66,900 51,857 62,797
Investing activities:
Proceeds from disposition of property, plant
and equipment 1,093 2,744 1,929
Capital expenditures (22,365) (26,575) (27,222)
Business acquisitions, net of cash acquired (1,036) (104,935) (92,239)
Redemption of short-term investments - - 2,566
Other (4,286) (5,776) (2,019)
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Net cash used by investing activities (26,594) (134,542) (116,985)
Financing activities:
Net (decrease) increase in notes payable (1,583) (5,201) 5,249
Payments on long-term debt (28,000) (60,000) (70,000)
Proceeds from the issuance of long-term debt 22,765 150,000 159,000
Proceeds from the issuance of common stock 2,845 3,920 1,486
Common stock repurchases (8,798) (9,197) (22,351)
Dividends paid (14,806) (14,677) (14,564)
Proceeds from the sale of debt swap 13,766 - -
- -----------------------------------------------------------------------------------------------------------
Net cash (used) provided by financing activities (13,811) 64,845 58,820
Effect of exchange rate changes on cash flows (930) (2,489) (1,206)
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Increase (decrease) in cash and cash equivalents 25,565 (20,329) 3,426
Cash and cash equivalents at beginning of year 23,303 43,632 40,206
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 48,868 $ 23,303 $ 43,632
===========================================================================================================
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See accompanying notes.
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P A G E 14
Consolidated statements of changes in stockholder's equity
Accumulated
Additional Other Guaranteed Total
Common Paid-In Treasury Retained Comprehensive ESOP Stockholders'
(Dollars in thousands) Stock Capital Stock Earnings Income Obligation Equity
- ------------------------------------------------------------------------------------------------------------------------------------
January 1, 1999 $ 220 $ 49,231 $ (42,893) $ 204,364 $ (20,043) $(2,205) $ 188,674
Comprehensive income:
Net income 28,612 28,612
Foreign currency
translation adjustments - (3,844) (3,844)
--------- --------- ---------
Comprehensive income 28,612 (3,844) 24,768
Dividends paid (14,564) (14,564)
Common stock repurchases (22,351) (22,351)
Employee stock plans 555 1,351 (44) 1,862
Guaranteed ESOP obligation 2,205 2,205
Income tax benefits on
unallocated ESOP dividends 20 20
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December 31, 1999 220 49,786 (63,893) 218,388 (23,887) - 180,614
Comprehensive income:
Net income 35,665 35,665
Foreign currency
translation adjustments - 3,070 3,070
--------- --------- ---------
Comprehensive income 35,665 3,070 38,735
Dividends paid (14,677) (14,677)
Common stock repurchases (9,197) (9,197)
Employee stock plans 2,059 3,909 (110) 5,858
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December 31, 2000 220 51,845 (69,181) 239,266 (20,817) - 201,333
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net income 19,121 19,121
Foreign currency
translation adjustments - (1,244) (1,244)
Unrealized losses on hedging activities,
net of income taxes - (662) (662)
--------- --------- ---------
Comprehensive income 19,121 (1,906) 17,215
Dividends paid (14,806) (14,806)
Common stock repurchases (8,798) (8,798)
Employee stock plans 3,029 1,076 (212) 3,893
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December 31, 2001 $ 220 $ 54,874 $ (76,903) $ 243,369 $ (22,723) $ - $ 198,837
====================================================================================================================================
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See accompanying notes.
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P A G E 15
notes to consolidated financial statements
[PICTURE]
(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.
Certain reclassifications have been made to prior year amounts to conform to the
current year presentation.
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, a suspension spring company jointly
owned with NHK Spring Co., Ltd., of Japan, under the equity method. Other income
in the accompanying income statements includes income of $408, $1,611 and $1,714
for the years 2001, 2000 and 1999, respectively, from the Company's investment
in NASCO. The Company received dividends from NASCO totaling $464, $666 and
$1,006 in 2001, 2000 and 1999, respectively.
Revenue recognition: Sales and related cost of sales are recognized when
products are shipped to customers and title has passed.
Cash and cash equivalents: Cash in excess of operating requirements is invested
in short-term, highly liquid, income-producing investments. All highly liquid
investments purchased with a maturity of three months or less are cash
equivalents. Cash equivalents are carried at fair 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 the majority of U.S.
inventories, which represent 77% of total inventories. The cost of all other
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 recorded over estimated useful lives, ranging from 20 to 50
years for buildings and three to 17 years for machinery and equipment. The
straight-line method of depreciation was adopted for all property, plant and
equipment placed in service after March 31, 1999. For property, plant and
equipment placed into service prior to April 1, 1999, depreciation is calculated
using accelerated methods. The change in accounting principle was made to
reflect improvements in the design and durability of machinery and equipment.
Management believes that the straight-line method results in a better matching
of revenues and costs, and the new method is prevalent in the industries in
which the Company operates.
Goodwill: Goodwill represents the excess purchase price over the net assets of
companies acquired in business combinations. Goodwill acquired since 1970 but
prior to July 1, 2001, 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. In accordance with Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets," goodwill
acquired after June 30, 2001, is not being amortized, as the lives are
considered indefinite, and previously acquired goodwill will no longer be
amortized effective January 1, 2002. 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. Goodwill
resulting from the 1999 purchase of the nitrogen gas spring business was
$70,322. The acquisition in 2000 of Curtis and Kratz-Wilde/Apex resulted in
additions to goodwill of $55,598 and $23,370, respectively. Goodwill resulting
from 2001 acquisitions was $1,050. At December 31, 2001 and 2000, accumulated
goodwill amortization was $18,120 and $13,904, respectively.
Derivatives: The Company has manufacturing, sales and distribution facilities
around the world and thus makes investments and conducts business transactions
denominated in various currencies. The Company is also exposed to fluctuations
in interest rates and commodity price changes. These financial exposures are
monitored and managed by the Company as an integral part of its risk management
program. The Company uses financial instruments to hedge its exposure to
fluctuations in interest rates and foreign currency exchange rates and does not
use derivatives for speculative or trading purposes. The Company also does not
use derivatives to manage commodity exposures or hedge its foreign currency net
investment exposure.
The Company adopted Statement of Financial Accounting Standards No. 133 (SFAS
133), "Accounting for Derivative Instruments and Hedging Activities," as
amended, on January 1, 2001. The standard requires that all derivative
instruments be recorded on the balance sheet at fair value. The accounting for
changes in the fair value depends on how the derivative is used and designated.
In accordance with the transition provisions of SFAS 133, the Company recorded a
$400 gain on January 1, 2001, which was entirely offset by a loss recorded on
the re-measurement of underlying balance sheet items. There was no transition
adjustment to other comprehensive income.
Foreign currency contracts qualify as fair value hedges of unrecognized firm
commitments or cash flow hedges of recognized assets and liabilities or
anticipated transactions. Gains and losses on derivatives are recorded directly
to earnings or other comprehensive income, depending on the designation. Amounts
recorded to other comprehensive income are reclassified to earnings in a manner
that matches the earnings impact of the hedged transaction. Any ineffective
portion is recorded directly to earnings. The Company's policy for classifying
cash flows from derivatives is to report the cash flows consistent with the
underlying instrument.
At December 31, 2001, the fair value of derivatives held by the Company was a
net asset of $287. Amounts in other comprehensive income expected to be
reclassified to earnings within the next year are not material. During 2001,
gains or losses related to hedge ineffectiveness were immaterial. Foreign
currency transactions gains included in income were $1,874, $1,012 and $752 in
2001, 2000 and 1999, respectively, inclusive of gains and losses on foreign
currency derivatives.
- -----------
P A G E 16
notes to consolidated financial statements
[PICTURE]
Foreign currency translation: Substantially all of the Company's subsidiaries
use the local currency as the functional currency. Assets and liabilities of
foreign operations are translated at year-end rates of exchange; revenues and
expenses are translated at average annual rates of exchange. The resulting
translation gains and losses are reflected in accumulated other comprehensive
income within stockholders' equity.
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 calculated using the weighted average number of common
shares outstanding during the year. Diluted earnings per share reflect the
assumed exercise and conversion of all dilutive securities. Shares held by the
Retirement Savings Plan are considered outstanding for both basic and diluted
earnings per share. For purposes of computing earnings per share, the weighted
average number of shares outstanding was increased by 413,721 shares, 222,868
shares and 224,899 shares for 2001, 2000 and 1999, respectively. There are no
adjustments to net income for purposes of computing income available to common
stockholders for the years ended December 31, 2001, 2000 and 1999.
Comprehensive income: Comprehensive income includes all changes in equity during
a period except those resulting from investment by and distributions to
stockholders. For the Company, comprehensive income includes net income, foreign
currency translation adjustments and deferred gains and losses related to
certain derivative instruments.
2. Acquisitions
During the past three years, the Company has acquired a number of businesses,
all of which were accounted for using the purchase method. Accordingly, the
results of operations of the acquired companies have been included in the
consolidated results from their respective acquisition dates.
In August 1999, the Company purchased substantially all of the assets and
liabilities of the nitrogen gas spring business of Teledyne Industries, Inc.,
for $92,239. The nitrogen gas spring business is included in the Associated
Spring segment.
In May 2000, the Company purchased substantially all of the assets and
liabilities of Curtis Industries, Inc. (Curtis) for $63,363. Curtis, a
distributor of maintenance, repair and operating supplies and high-quality
security products, is included in the Barnes Distribution segment.
In September 2000, the Company purchased substantially all of the assets and
liabilities of Kratz-Wilde Machine Company and Apex Manufacturing Inc.
(Kratz-Wilde/Apex) for $40,938. Kratz-Wilde/Apex fabricates and machines
intricate aerospace components for jet engines and auxiliary power units.
Kratz-Wilde/Apex is included in the Barnes Aerospace business segment.
In January 2001, the Company acquired Euro Stock Springs & Components Limited
(Euro Stock) for $708. Euro Stock distributes die and other standard springs
through catalogs to customers located primarily in Europe, and is included in
the Barnes Distribution segment.
In November 2001, the Company acquired certain assets of Forward Industries,
L.L.C., and its subsidiary Forward Industries, Ltd. Forward Industries designs
and manufactures nitrogen gas springs that are used in the appliance,
automotive, heating and cooling, and electrical industries. The purchase price
was approximately $2,500, of which $962 was paid in 2001. This acquisition is
being integrated with the Company's existing nitrogen gas spring business and is
included in the Associated Spring segment.
On January 31, 2002, the Company announced that it had signed an agreement to
acquire substantially all of the manufacturing assets of Seeger-Orbis GmbH & Co.
OHG of Germany from TransTechnology Corporation. The acquired business will
expand both the product offerings and geographic scope of the Associated Spring
segment. The acquisition is expected to close by the end of the first quarter of
2002. The purchase price of approximately $20,000 will be financed with cash
held by the Company outside the United States.
The purchase price has been allocated to tangible and intangible assets and
liabilities of the businesses based upon estimates of their respective fair
market values. The resulting goodwill, excluding Forward Industries, is being
amortized over a 40-year life.
In connection with the Curtis acquisition, the Company incurred certain
integration costs. The integration plan includes combining the headquarters
functions and consolidating warehousing and distribution networks. As a result,
the Company recorded total costs of $9,708, relating primarily to lease
consolidation costs, facility closure costs and reductions in personnel. Costs
of $7,965 associated with the acquired business are reflected as assumed
liabilities in the allocation of the purchase price to net assets acquired. The
remaining integration costs of $1,743 are reflected in expenses in 2000. As of
December 31, 2001, $5,537 remained as liabilities related primarily to future
lease and severance payments.
The following table reflects the operating results of the Company for the years
ended December 31, 2000 and 1999, on a pro forma basis, which gives effect to
the acquisitions of the three businesses acquired in 1999 and 2000 at the
beginning of 1999. The 2001 acquisitions are excluded from the pro forma results
due to their relative immateriality. The pro forma results are not necessarily
indicative of the operating results that would have occurred had the
acquisitions been effective January 1, 1999; nor are they intended to be
indicative of results that may occur in the future. The underlying pro forma
information includes the amortization expense associated with the assets
acquired, the Company's financing arrangements, certain purchase accounting
adjustments and related
-----------
P A G E 17
notes to consolidated financial statements
income tax effects. The pro forma results do not include the effects of
synergies and cost reduction initiatives related to the acquisitions.
(Unaudited) 2000 1999
- --------------------------------------------------------------------------------
Net sales $798,652 $780,042
Income before income taxes 48,309 44,908
Net income 35,449 32,607
Per common share:
Basic $ 1.91 $ 1.68
Diluted 1.89 1.66
3. Inventories
Inventories at December 31 consisted of:
--------
2001 2000
- --------------------------------------------------------------------------------
Finished goods $ 51,840 $ 59,665
Work-in-process 15,506 13,605
Raw materials and supplies 18,375 15,244
- --------------------------------------------------------------------------------
$ 85,721 $ 88,514
================================================================================
--------
Inventories valued by the LIFO method aggregated $66,092 and $64,422 at December
31, 2001 and 2000, respectively. If LIFO inventories had been valued using the
FIFO method, they would have been $13,135 and $13,283 higher at those dates.
4. Property, Plant and Equipment
Property, plant and equipment at December 31 consisted of:
--------
2001 2000
- --------------------------------------------------------------------------------
Land $ 4 ,046 $ 4,181
Buildings 74,191 73,400
Machinery and equipment 328,402 322,738
- --------------------------------------------------------------------------------
406,639 400,319
Less accumulated depreciation 253,696 236,553
- --------------------------------------------------------------------------------
$152,943 $163,766
================================================================================
--------
Depreciation expense was $30,008, $30,314 and $27,606 for 2001, 2000 and 1999,
respectively.
5. Accrued Liabilities
Accrued liabilities at December 31 consisted of:
--------
2001 2000
- --------------------------------------------------------------------------------
Payroll and other compensation $ 13,503 $ 19,909
Postretirement/postemployment benefits 9,283 7,949
Other 36,332 32,325
- --------------------------------------------------------------------------------
$ 59,118 $ 60,183
================================================================================
--------
- -----------
P A G E 18
notes to consolidated financial statements
6. Debt and Commitments
Long-term debt at December 31 consisted of:
----------------------
2001 2000
- --------------------------------------------------------------------------------
Carrying Fair Carrying
Amount Value Amount
- --------------------------------------------------------------------------------
9.47% Notes $ -- $ -- $ 6,154
7.13% Notes 25,000 25,318 25,000
7.66% Notes 24,500 25,717 24,500
7.80% Notes 45,500 46,738 45,500
9.34% Notes, including interest swap 61,741 68,488 60,000
2.15% Notes 22,200 22,267 --
Revolving Credit 40,000 40,000 50,000
Industrial Revenue Bond 7,000 7,000 7,000
Borrowings under lines of credit -- -- 11,846
- --------------------------------------------------------------------------------
225,941 235,528 230,000
Less current maturities (47,576) (47,576) --
- --------------------------------------------------------------------------------
Total $178,365 $187,952 $230,000
================================================================================
----------------------
The 9.47% Notes matured on September 16, 2001. The 7.13% Notes are payable in
four equal annual installments of $6,250 beginning on December 5, 2002. The
7.66% Notes are payable in 2007. The 7.80% Notes are payable in three equal
annual installments beginning in 2008. The 9.34% Notes are payable in three
equal installments beginning in 2006.
In July 2001, the Company borrowed Yen 3,000 million, under a term loan facility
with The Development Bank of Singapore Limited. The loan is payable in nine
semi-annual installments of Yen 87.3 million that began on December 28, 2001,
with a balloon payment of Yen 2,214.3 million due June 30, 2006. The borrowing
has a stated interest rate of 2.15%. In connection with the yen borrowing, the
Company entered into a series of forward currency exchange contracts, a form of
derivative, that effectively convert the yen principal payments to Singapore
dollar payments. The forward contracts are cash flow hedges. The effective
interest rate of the borrowing is 5.5%. Proceeds from this borrowing were used,
in part, to repay borrowings under the Company's revolving credit agreement. The
fair value of the forward contracts was approximately ($1,534) at December 31,
2001.
The fair values of the 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 and notes payable
approximate their fair market values.
The Company has a revolving credit agreement with five banks that allows
borrowings up to $150,000 under notes due December 6, 2002. A fee of 0.115% per
annum is paid on the unused portion of the commitments. The Company had $40,000
borrowed under this agreement at an interest rate of 2.45% at December 31, 2001.
The Company's revolving credit agreement will mature on December 6, 2002.
Borrowings under the revolving credit agreement are recorded in the current
portion of long-term debt. The Company intends to negotiate a new revolving
credit agreement in the first half of 2002. The Company also has available
approximately $25,000 in uncommitted short-term bank credit lines, of which
$5,500 and $15,000 was in use at December 31, 2001 and 2000, respectively. The
interest rates on these borrowings were 2.78% and 7.7% at December 31, 2001 and
2000, respectively.
The Industrial Revenue Bond, due in 2008, has a variable interest rate. The
interest rate on this borrowing was 1.80% and 5.10% at December 31, 2001 and
2000, respectively.
The Company's long-term debt portfolio consists of fixed-rate and variable-rate
instruments and is managed to reduce the overall cost of borrowing and mitigate
fluctuations in interest rates. Interest rate fluctuations result in changes in
the market value of the Company's fixed-rate debt. In July 2001, the Company
entered into an interest rate swap agreement, a form of derivative. The swap
effectively converts $60,000 of 9.34% fixed-rate Senior Notes to variable-rate
debt equal to LIBOR plus 276 basis points. The effective rate of the borrowing
was 4.91% on December 31, 2001. This interest rate contract is a fair value
hedge, which is effective in offsetting fluctuations in the fair value of the
debt instrument. The gains and losses on the interest rate contract are recorded
to earnings and are offset by gains and losses recorded on the re-measurement of
the underlying debt. The fair value of the swap is determined based upon current
market prices and was approximately $1,741 at December 31, 2001.
Long-term debt, excluding the fair value of the swap, is payable as follows:
$7,576 in 2003, $7,576 in 2004, $7,576 in 2005, $36,896 in 2006 and $117,000
thereafter.
In March 2001, the Company terminated its $70,000 cross-currency exchange
agreement dated September 21, 2000. This agreement converted U.S.
dollar-denominated interest and principal liabilities into Swedish
krona-denominated liabilities at a fixed interest rate during the agreement
period. The Company received a payment of $13,766 at termination. The payment
represented the fair value of the foreign currency swap at the time of
termination. The accumulated adjustment to the carrying value of the debt is
being amortized in accordance with the terms of the underlying debt.
-----------
P A G E 19
notes to consolidated financial statements
In addition, the Company had outstanding letters of credit totaling $2,991 at
December 31, 2001.
Certain of the Company's debt arrangements contain requirements as to
maintenance of minimum levels of cash flow, working capital and net worth, and
place certain net worth restrictions on dividend payments and acquisitions of
the Company's common stock. The most restrictive covenants include a fixed
charge coverage covenant and a net worth covenant. Under the most restrictive
net worth covenant in any agreement, $17,224 was available for dividends or
acquisitions of common stock at December 31, 2001.
Interest paid was $16,076, $17,945 and $5,505 in 2001, 2000 and 1999,
respectively. Interest capitalized was $163, $188 and $264 in 2001, 2000 and
1999, respectively, and is being depreciated over the lives of the related fixed
assets.
7. Income Taxes
The components of income before income taxes and the income tax provision
follow:
-----------
2001 2000 1999
- -------------------------------------------------------------------------------------------
Income before income taxes:
U.S. $ 2,368 $ 19,763 $ 27,585
International 21,091 28,827 15,113
- -------------------------------------------------------------------------------------------
$ 23,459 $ 48,590 $ 42,698
===========================================================================================
Income tax provision:
Current:
U.S. -- federal $ (3,407) $ 2,353 $ 5,233
U.S. -- state (713) 674 529
International 3,699 4,035 4,669
- -------------------------------------------------------------------------------------------
(421) 7,062 10,431
- -------------------------------------------------------------------------------------------
Deferred:
U.S. -- federal 4,470 3,726 2,973
U.S. -- state 1,121 683 1,109
U.S. -- state rate reduction -- 1,181 --
International (832) 273 (427)
- -------------------------------------------------------------------------------------------
4,759 5,863 3,655
- -------------------------------------------------------------------------------------------
$ 4,338 $ 12,925 $ 14,086
===========================================================================================
-----------
Deferred income tax assets and liabilities at December 31 consisted of the tax
effects of temporary differences related to the following:
Assets Liabilities
- -------------------------------------------------------------------------------------------
2001 2000 2001 2000
- -------------------------------------------------------------------------------------------
Allowance for doubtful accounts $ 756 $ 780 $ -- $ --
Depreciation and amortization (9,023) (5,447) 2,930 3,506
Inventory valuation 7,472 7,168 782 983
Postretirement/postemployment costs 23,325 24,676 (249) (306)
Foreign tax loss carry-forwards 10,762 10,062 -- --
Other (2,883) (1,898) 3,293 3,476
- -------------------------------------------------------------------------------------------
30,409 35,341 6,756 7,659
Valuation allowance (7,924) (7,684) -- --
- -------------------------------------------------------------------------------------------
$ 22,485 $ 27,657 $ 6,756 $ 7,659
===========================================================================================
Current deferred income taxes $ 16,702 $ 12,647 $ 688 $ 1,062
Noncurrent deferred income taxes 5,783 15,010 6,068 6,597
- -------------------------------------------------------------------------------------------
$ 22,485 $ 27,657 $ 6,756 $ 7,659
===========================================================================================
---------- -----------
The deferred income tax assets will be realized through 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 carry-forwards of $26,634 have
remaining carry-forward periods ranging from 3 years to unlimited. The Company
has tax credit carry-forwards of $2,296 with remaining carry-forward periods
ranging from one to 10 years.
- -----------
P A G E 20
notes to consolidated financial statements
The Company has not recognized deferred income taxes on $145,793 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:
----------
2001 2000 1999
- --------------------------------------------------------------------------------
U.S. federal statutory income tax rate 35.0% 35.0% 35.0%
State taxes (net of federal benefit) 1.1 1.8 2.5
State tax rate reduction -- 1.6 --
Foreign losses without tax benefit 3.6 0.8 1.2
Tax on foreign operations (22.8) (12.7) (3.7)
NASCO equity income 0.1 (0.5) (0.9)
Foreign sales corporation (1.5) (0.9) (0.8)
ESOP dividend -- -- (1.2)
Other 3.0 1.5 0.9
- --------------------------------------------------------------------------------
Consolidated effective income tax rate 18.5% 26.6% 33.0%
================================================================================
----------
Income taxes paid, net of refunds, were $2,046, $7,165 and $15,781 in 2001, 2000
and 1999, respectively.
8. Common Stock
In 2001, 2000 and 1999, 290,591 shares, 351,237 shares and 105,189 shares,
respectively, of common stock were issued from treasury for the exercise of
stock options, various other incentive awards and purchases by the Employee
Stock Purchase Plan. In 2001, 2000 and 1999, the Company acquired 436,502
shares, 594,406 shares and 1,090,014 shares, respectively, of the Company's
common stock at a cost of $8,798, $9,197 and $22,351, respectively. These
amounts exclude shares issued and reacquired in connection with certain cashless
exercises under the Company's stock option plans. These reacquired shares were
placed in treasury.
In December 1996, the Company adopted a new shareholder rights plan. Under the
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 $200. 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 Rights are generally
redeemable at $0.01 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 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.
9. Preferred Stock
At December 31, 2001 and 2000, the Company had 3,000,000 shares of preferred
stock authorized, none of which was outstanding.
10. Stock Plans
Most U.S. salaried and non-union hourly employees are eligible to participate in
the Company's 401(k) plan. Effective April 1, 2001, the 401(k) plan, previously
called the Barnes Group Inc. Guaranteed Stock Plan (GSP), was amended and
renamed the Barnes Group Inc. Retirement Savings Plan (RSP). The RSP continues
to provide for the investment of employer and employee contributions in the
Company's common stock and also provides other investment alternatives for
employee contributions. Employee contributions to the RSP for investment in the
Company's common stock after March 31, 2001, are no longer guaranteed a minimum
rate of return. However, the Company continues to guarantee a minimum rate of
return on certain pre-April 1, 2001, assets of the plan. This guarantee will
become a liability for the Company only if, and to the extent that, the value of
the related Company stock does not cover the guaranteed asset value when an
employee withdraws from the plan. At December 31, 2001, the value of the
Company's guarantee on these assets was $44 based on the Company's December 31,
2001, closing stock price of $23.99 per share.
The GSP was a leveraged ESOP until mid-1999. 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 were held in trust
and were issued to employees' accounts in the GSP until the loan was repaid in
mid-1999. The loan interest was based on LIBOR and generated interest
-----------
P A G E 21
notes to consolidated financial statements
costs of $32 in 1999. Contributions and certain dividends received were used in
part by the GSP to service its debt. Contributions included both employee
contributions and Company contributions. The Company contributions were 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.
Now that the RSP is no longer leveraged, the Company contributes an amount equal
to 50% of employee contributions up to 6% of eligible compensation plus any
guarantee payment. Employees may elect to contribute additional amounts up to a
total of 10% of eligible compensation. The GSP used $1,012 of Company dividends
for debt service in 1999. The Company expenses all contributions made to the
RSP. The Company recognized expense of $3,560, $2,295 and $1,115 in 2001, 2000
and 1999, respectively. As of December 31, 2001, the RSP held 3,430,212 shares
of the Company's common stock.
The Company has an Employee Stock Purchase Plan (ESPP) under which eligible
employees may elect to have up to the lesser of $25,000 or 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. The number of shares
purchased under the ESPP was 62,691, 75,052 and 62,868 in 2001, 2000 and 1999,
respectively. As of December 31, 2001, 319,268 additional shares may be
purchased.
The 1991 Barnes Group Stock Incentive Plan (1991 Plan) authorizes the granting
of incentives to executive officers, directors and key employees in the form of
stock options, restricted stock awards and other long-term incentive vehicles.
Options granted under the 1991 Plan that terminate without being exercised
become available for future grants. As of December 31, 2001 and 2000, there were
634,392 shares and 583,328 shares, respectively, available for future grant
under the 1991 Plan. A maximum of 2,007,572 common shares are subject to
issuance under this plan after December 31, 2001.
On April 12, 2000, the Company's stockholders approved the Barnes Group Inc.
Employee Stock and Ownership Program (2000 Plan). Effective February 1, 2000,
the 2000 Plan permitted the granting of stock options, restricted stock awards,
and other long-term incentive vehicles, to eligible participants including
directors and eligible employees to purchase up to 2,500,000 shares of the
Company's common stock. Such shares have been authorized and reserved. Options
granted under the 2000 Plan that terminate without being exercised become
available for future grants. As of December 31, 2001 and 2000, there were
330,880 and 1,536,399 shares, respectively, available for future grants under
the 2000 Plan. A maximum of 2,428,602 common shares are subject to issuance
under this plan after December 31, 2001.
Compensation cost related to these plans was $1,974, $798 and $610 in 2001, 2000
and 1999, respectively. The Company recorded, in additional paid-in capital, tax
benefits related to stock options of $650, $776 and $40 in 2001, 2000 and 1999,
respectively.
In 1998, 60,000 incentive units and 75,000 stock options were granted outside of
the 1991 Plan. The options are included in the tables below.
Data relating to options granted under these plans follow:
------------------------
2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------
Average Average Average
Number Exercise Number Exercise Number Exercise
of Shares Price of Shares Price of Shares Price
- ----------------------------------------------------------------------------------------------------------------------
Outstanding, January 1 2,471,992 $19.74 1,808,775 $20.70 1,238,587 $22.39
Granted 1,447,681 $18.81 1,207,622 $16.88 827,820 $19.20
Exercised 379,435 $17.11 324,036 $12.75 24,727 $18.96
Cancelled 165,446 $20.33 220,369 $22.22 232,905 $24.57
- ----------------------------------------------------------------------------------------------------------------------
Outstanding, December 31 3,374,792 $19.61 2,471,992 $19.74 1,808,775 $20.70
======================================================================================================================
Exercisable, December 31 1,388,325 $21.34 899,926 $21.36 696,965 $18.91
======================================================================================================================
------------------------
The following table summarizes information about stock options outstanding at
December 31, 2001:
- --------------------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
- --------------------------------------------------------------------------------------------------------------
Range of Average Average Average
Exercise Number Remaining Exercise Number Exercise
Price of Shares Life (Years) Price of Shares Price
- --------------------------------------------------------------------------------------------------------------
$10 to $18 901,929 7.68 $16.19 383,670 $15.79
$18 to $20 1,589,068 8.56 $18.60 261,007 $19.44
$20 to $31 883,795 6.84 $24.92 743,648 $24.87
- --------------------------------------------------------------------------------------------------------------
- -----------
P A G E 22
notes to consolidated financial statements
Restricted stock awards under the 1991 and 2000 Plans entitle the holder to
receive, without payment, one share of the Company's common stock after the
expiration of the vesting period. Certain awards are also subject to the
satisfaction of established performance goals. Additionally, holders of
restricted stock awards are credited with dividend equivalents, which are
converted into additional restricted stock awards. All awards have up to a
five-year vesting period. In 2001, 158,000 awards were granted; 10,330 awards
were credited to holders for dividend equivalents; 129,276 awards, which include
dividend equivalents, were converted to an equivalent number of shares of common
stock; and 28,846 awards were forfeited. As of December 31, 2001, there were
264,975 awards 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 6,000 and 12,000 shares issued to new directors in 2001 and 2000,
respectively. No shares were issued in 1999. Additionally, 6,000 shares were
cancelled in 1999. There are 48,000 shares reserved for issuance under this
plan.
Total shares reserved for issuance under all stock plans aggregated 4,803,442 at
December 31, 2001.
The Company applies APB Opinion 25, "Accounting for Stock Issued to Employees,"
to account for stock-based compensation. Had compensation cost for the Company's
stock-based compensation plans been determined based on the fair value at the
grant dates for awards under those plans, consistent with the method of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
---------
2001 2000 1999
- --------------------------------------------------------------------------------
Net income:
As reported $19,121 $35,665 $28,612
Pro forma 15,386 32,988 27,053
Basic earnings per share:
As reported $ 1.03 $ 1.92 $ 1.47
Pro forma .83 1.78 1.39
Diluted earnings per share:
As reported $ 1.01 $ 1.90 $ 1.46
Pro forma .81 1.76 1.38
---------
The fair value of each stock option grant on the date of grant has been
estimated using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
---------
2001 2000 1999
- --------------------------------------------------------------------------------
Risk-free interest rate 4.84% 6.65% 5.35%
Expected life 5 years 5 years 6 years
Expected volatility 35% 30% 30%
Expected dividend yield 3.40% 3.57% 3.54%
---------
The weighted-average grant date fair values of options granted during 2001, 2000
and 1999 were $4.77, $4.44 and $5.07, respectively. For option grants made
pursuant to reload provisions, the expected life is one year.
11. Pension and Other Postretirement Benefits
Defined benefit pension plans cover a majority of the Company's worldwide
employees at Associated Spring, its Executive Office, and a substantial portion
of the employees at Barnes Distribution. 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, as amended (ERISA). Plan assets consist
primarily of common stocks and fixed income investments, including 384,048
shares of Company stock. Additionally, the Company has a defined contribution
plan covering employees of Barnes Aerospace and certain field sales employees of
Barnes Distribution's U.S. operation. Company contributions under this plan are
based primarily on the performance of the business units and employee
compensation. Contribution expense under this plan was $1,803, $1,447 and $1,292
in 2001, 2000 and 1999, respectively.
The Company provides certain other medical, dental and life insurance
postretirement 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.
-----------
P A G E 23
notes to consolidated financial statements
A reconciliation of the beginning benefit obligations to the ending benefit
obligations follows:
Pensions Other Postretirement Benefits
- -------------------------------------------------------------------------------------------------------------
2001 2000 2001 2000
- -------------------------------------------------------------------------------------------------------------
Benefit obligation, January 1 $245,250 $231,167 $73,676 $60,321
Service cost 7,436 6,264 562 481
Interest cost 18,224 17,707 5,114 5,148
Amendments -- 232 -- --
Actuarial loss 11,013 4,855 848 12,519
Benefits paid from plan assets (16,612) (15,719) (8,083) (6,510)
Acquisition -- 2,048 -- 1,747
Foreign exchange rate changes (1,050) (1,304) (57) (30)
- -------------------------------------------------------------------------------------------------------------
Benefit obligation, December 31 $264,261 $245,250 $72,060 $73,676
=============================================================================================================
Projected benefit obligations related to
plans with benefit obligations in excess
of assets $ 20,603 $ 12,204 $72,060 $73,676
=============================================================================================================
---------- ---------
A reconciliation of the beginning fair value of plan assets to the ending fair
value of plan assets follows:
Pensions
- ---------------------------------------------------------------------------
2001 2000
- ---------------------------------------------------------------------------
Fair value of plan assets, January 1 $324,370 $344,447
Actual return on plan assets (246) (4,610)
Company contributions 821 292
Plan participants' contributions 138 120
Benefits paid (16,612) (15,719)
Foreign exchange rate changes (1,236) (2,014)
Acquisition -- 1,854
- ---------------------------------------------------------------------------
Fair value of plan assets, December 31 $307,135 $324,370
- ---------------------------------------------------------------------------
Assets related to plans with benefit
obligations in excess of plans assets $ 7,705 $ 1,808
===========================================================================
---------- ----------
A reconciliation of the funded states of the plans with the amount recognized in
the accompanying balance sheets is set forth below:
Pensions Other Postretirement Benefits
- -------------------------------------------------------------------------------------------------------------
2001 2000 2001 2000
- -------------------------------------------------------------------------------------------------------------
Funded status $ 42,874 $ 79,120 $(72,060) $(73,676)
Adjustments for unrecognized:
Net (gains) losses (24,888) (66,668) 13,486 12,862
Prior service costs (benefits) 5,365 6,171 (2,245) (3,531)
Net asset at transition (292) (758) -- --
- -------------------------------------------------------------------------------------------------------------
Prepaid (accrued) benefit cost $ 23,059 $ 17,865 $(60,819) $(64,345)
=============================================================================================================
---------- -----------
At December 31, 2001, the prepaid pension benefit cost consisted of $34,421 in
other assets, $1,082 in accrued liabilities and $10,280 in accrued retirement
benefits. At December 31, 2000, the prepaid pension benefit cost consisted of
$220 in prepaid expenses, $27,135 in other assets, $430 in accrued liabilities
and $9,060 in accrued retirement benefits.
Pension deferred gains and losses that fall outside of a 10% corridor are
amortized over 8.7 years or the remaining average service life of active
participants, whichever is shorter.
- -----------
P A G E 24
notes to consolidated financial statements
Significant assumptions used in determining pension and other postretirement
expense and the funded status of the plans were:
- --------------------------------------------------------------------------------
2001 2000 1999
- --------------------------------------------------------------------------------
Weighted average discount rate 7.25% 7.75% 8.00%
Long-term rate of return on plan assets 9.75% 9.75% 9.75%
Increase in compensation 4.50% 4.75% 4.75%
================================================================================
---------
Pension and other postretirement benefit expenses consisted of the following:
Pensions Other Postretirement Benefits
- --------------------------------------------------------------------------------------------------------------------------
2001 2000 1999 2001 2000 1999
- --------------------------------------------------------------------------------------------------------------------------
Service cost $ 7,436 $ 6,264 $ 6,218 $ 562 $ 481 $ 629
Interest cost 18,224 17,707 16,944 5,114 5,148 4,445
Expected return on plan assets (29,130) (27,601) (24,441) -- -- --
Amortization of transition assets (442) (1,636) (1,643) -- -- --
Recognized (gains) losses (2,934) (3,420) (753) 253 144 45
Prior service cost (benefits) 1,096 1,113 1,048 (1,320) (1,321) (1,355)
- --------------------------------------------------------------------------------------------------------------------------
Benefit (credit) cost $ (5,750) $ (7,573) $ (2,627) $ 4,609 $ 4,452 $ 3,764
==========================================================================================================================
------------ -----------
The Company's accumulated postretirement benefit obligations, exclusive of
pensions, take into account certain cost-sharing provisions. The annual rate of
increase in the cost of covered benefits (i.e., healthcare cost trend rate) is
assumed to be 10% in 2001, decreasing gradually to an ultimate amount of 5% in
2006. A one percentage point increase in the assumed healthcare cost trend rate
would increase the accumulated postretirement benefit obligations by
approximately $2,272 at December 31, 2001, and would have increased the 2001
aggregate of the service and interest cost components of postretirement benefit
expense by approximately $166. A one percentage point decrease in the assumed
healthcare cost trend rate would decrease the accumulated postretirement benefit
obligations by approximately $2,192 at December 31, 2001, and would have
decreased the 2001 aggregate of the service and interest cost components of
postretirement benefit expense by approximately $160.
12. Leases
The Company has various noncancellable operating leases for buildings, office
space and equipment. Capital leases were not significant. Rent expense was
$9,942, $9,127 and $7,712 for 2001, 2000 and 1999, respectively. Minimum rental
commitments under noncancellable leases in years 2002 through 2006 are $7,703,
$6,549, $5,428, $4,393 and $3,860, and $5,827 thereafter.
13. Information on Business Segments
The Company's reportable segments are strategic business groups that offer
different products and services. Each segment is managed separately because each
business requires different technology and marketing strategies. Specifically,
the Company operates three reportable business segments, as follows:
Associated Spring manufactures precision mechanical and nitrogen gas springs,
manifold systems and other close-tolerance engineered metal components,
principally for the electronics, telecommunications and transportation 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, Sweden, Canada, Mexico, Singapore and China.
Barnes Aerospace supplies precision machined and fabricated components and
assemblies for the aerospace and industrial gas turbine industries.
Additionally, it refurbishes jet engine components for many of the world's
commercial airlines and the military. Barnes Aerospace's operations are
primarily in the U.S., with additional locations in Europe and Singapore. Its
markets are located primarily in the U.S., Europe and Asia.
Barnes Distribution distributes fast-moving, consumable repair and replacement
products for industrial, heavy equipment and transportation maintenance markets.
Additionally, it distributes close-tolerance engineered metal components
principally manufactured by Associated Spring. Barnes Distribution, formerly
known as Bowman Distribution, was formed from the combination of the Curtis
acquisition and Bowman Distribution. Barnes Distribution's operations and
markets are located primarily in the U.S., with additional locations in Canada,
Europe, Asia, Mexico and Brazil.
The Company evaluates the performance of its reportable segments based on the
operating profit of the respective businesses, which includes net sales, cost of
sales, selling and administrative expenses and certain components of other
income and other expenses, as well as the allocation of corporate overhead
expenses.
-----------
P A G E 25
notes to consolidated financial statements
The equity income from the Company's investment in the NASCO joint venture is
incorporated into the segment results of Associated Spring. Sales among the
business segments and among the geographic areas in which the businesses operate
are accounted for on the same basis as sales to unaffiliated customers.
Additionally, revenues are attributed to countries based on location of
manufacturing or distribution facilities.
During the fourth quarter of 2001, the Company recorded pre-tax charges of
$4,842, primarily in the Associated Spring segment, related to actions aimed at
reducing the Company's infrastructure in light of ongoing weak economic
conditions. These charges also included costs to realign the management of the
sales organization at Barnes Distribution. These charges included $1,248 for
severance and related employee termination costs, $2,618 for asset write-downs
and $976 for facility exit costs. The actions include closing an Associated
Spring plant in Texas and transferring certain retained business to other
Associated Spring plants in 2002.
These charges include $179 recorded in cost of sales and $4,663 in selling and
administrative expenses, and relate to net workforce reductions of approximately
122 salaried and hourly employees, the elimination of approximately 128,500
square feet of facilities and the disposal of assets.
The following tables set forth information about the Company's operations by its
three reportable business segments and by geographic area.
Operations by Reportable Business Segment
(Dollars in millions)
Associated Barnes Barnes Total
Revenues Spring Aerospace Distribution Other BGI
- ----------------------------------------------------------------------------------------------------------------
2001 $279.2 $200.4 $298.4 $ (9.2) $768.8
2000 327.3 135.1 291.1 (13.5) 740.0
1999 282.6 121.3 230.4 (11.9) 622.4
Operating profit
- ----------------------------------------------------------------------------------------------------------------
2001 $ 19.4 $ 16.4 $ 5.5 $ -- $ 41.3
2000 44.0 8.0 12.9 -- 64.9
1999 33.5 5.3 9.9 -- 48.7
Assets
- ----------------------------------------------------------------------------------------------------------------
2001 $244.1 $141.4 $171.5 $ 79.5 $636.5
2000 273.6 130.1 178.6 54.6 636.9
1999 260.6 79.7 94.8 81.2 516.3
Depreciation and amortization
- ----------------------------------------------------------------------------------------------------------------
2001 $ 16.8 $ 9.7 $ 9.9 $ 0.6 $ 37.0
2000 17.8 8.6 9.0 0.5 35.9
1999 16.5 7.8 6.0 0.3 30.6
Capital expenditures
- ----------------------------------------------------------------------------------------------------------------
2001 $ 8.7 $ 7.5 $ 6.0 $ 0.2 $ 22.4
2000 14.2 4.2 5.5 2.7 26.6
1999 9.8 7.1 9.4 0.9 27.2
Notes:
In 2001, one customer accounted for 13% of the Company's total revenues. In 2000
and 1999, sales from any one customer did not exceed 10% of the Company's total
revenues. "Other" revenues represent intersegment sales, the majority of which
are sales by Associated Spring to Barnes Distribution. The operating profit of
Associated Spring includes income from its equity investment in NASCO of $0.4
million, $1.6 million and $1.7 million in 2001, 2000 and 1999, respectively.
The assets of Associated Spring include the NASCO investment of $9.4 million,
$10.0 million and $9.5 million in 2001, 2000 and 1999, respectively. "Other"
assets include corporate-controlled assets, the majority of which are cash and
deferred tax assets.
- -----------
P A G E 26
notes to consolidated financial statements
A reconciliation of the total reportable segments' operating profit to income
before income taxes follows:
----------
2001 2000 1999
- ---------------------------------------------------------------------------
Operating profit $ 41.3 $ 64.9 $ 48.7
Interest income 0.9 1.5 1.0
Interest expense (16.2) (15.1) (6.1)
Other expense (2.5) (2.7) (0.9)
- ---------------------------------------------------------------------------
Income before income taxes $ 23.5 $ 48.6 $ 42.7
===========================================================================
----------
Operations by Geographic Area
(Dollars in millions)
Revenues Domestic International Intergeographical Total BGI
====================================================================================================
2001 $625.7 $172.2 $(29.1) $768.8
2000 580.6 186.3 (26.9) 740.0
1999 488.2 147.0 (12.8) 622.4
====================================================================================================
Long-lived assets
- ----------------------------------------------------------------------------------------------------
2001 $266.4 $107.8 $ -- $374.2
2000 262.4 118.2 -- 380.6
1999 164.5 109.1 -- 273.6
====================================================================================================
Notes:
International sales derived from any one country did not exceed 10% of the
Company's total revenues. Intergeographical sales are equally distributed
between domestic and international.
Report of Independent Accountants PricewaterhouseCoopers [LOGO]
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, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of Barnes Group Inc.
and its subsidiaries at December 31, 2001 and 2000, and the results of their
operations and their cash flows for the each of the three years in the period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States of America. 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 auditing standards generally
accepted in the United States of America, 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 our opinion.
/s/ PricewaterhouseCoopers LLP
Hartford, Connecticut
January 30, 2002
-----------
P A G E 27
quarterly data (unaudited)
First Second Third Fourth Full
(Dollars in millions, except per share data) Quarter Quarter Quarter Quarter Year
- ---------------------------------------------------------------------------------------------------------------------------------
2001
Net sales $ 199.3 $ 199.5 $ 186.5 $ 183.5 $ 768.8
Gross profit* 66.7 65.6 61.3 55.7 249.3
Operating income 13.8 13.4 11.6 1.5 40.3
Net income 7.3 6.9 5.7 (0.8) 19.1
Per common share:
Net income:
Basic 0.39 0.37 0.31 (0.04) 1.03
Diluted 0.39 0.36 0.30 (0.04) 1.01
Dividends 0.20 0.20 0.20 0.20 0.80
Market prices (high-low) $21.00-18.00 $24.70-18.25 $24.80-19.48 $24.94-19.20 $24.94-18.00
- ---------------------------------------------------------------------------------------------------------------------------------
2000
Net sales $ 173.0 $ 188.5 $ 190.6 $ 187.9 $ 740.0
Gross profit* 56.7 65.6 67.0 62.1 251.4
Operating income 15.8 16.1 17.0 14.0 62.9
Net income 9.4 9.1 9.3 7.9 35.7
Per common share:
Net income:
Basic 0.51 0.49 0.50 0.42 1.92
Diluted 0.50 0.49 0.49 0.41 1.90
Dividends 0.19 0.20 0.20 0.20 0.79
Market prices (high-low) $16.50-12.00 $18.25-14.63 $20.25-16.44 $22.38-17.63 $22.38-12.00
=================================================================================================================================
* Sales less cost of sales.
Note: The fourth quarter of 2001 includes a pre-tax charge of $4.8 million
primarily related to a plant closure and severance costs.
- -----------
P A G E 28
selected financial data
----------
2001 2000 1999 1998(3) 1997
========================================================================================================================
Per common share (1)(2)
Net Income
- ------------------------------------------------------------------------------------------------------------------------
Basic $ 1.03 $ 1.92 $ 1.47 $ 1.72 $ 2.00
- ------------------------------------------------------------------------------------------------------------------------
Diluted 1.01 1.90 1.46 1.69 1.96
- ------------------------------------------------------------------------------------------------------------------------
Dividends paid 0.80 0.79 0.75 0.69 0.65
- ------------------------------------------------------------------------------------------------------------------------
Stockholders' equity (at year-end) 10.77 10.82 9.58 9.51 8.97
- ------------------------------------------------------------------------------------------------------------------------
Stock price (at year-end) 23.99 19.88 16.31 29.25 22.75
========================================================================================================================
For the year (in thousands)
Net sales $ 768,821 $ 740,032 $ 622,356 $ 651,183 $ 642,660
- ------------------------------------------------------------------------------------------------------------------------
Operating income 40,320 62,949 46,107 55,279 65,031
- ------------------------------------------------------------------------------------------------------------------------
As a percent of sales 5.2% 8.5% 7.4% 8.5% 10.1%
- ------------------------------------------------------------------------------------------------------------------------
Income before income taxes $ 23,459 $ 48,590 $ 42,698 $ 54,663 $ 64,502
- ------------------------------------------------------------------------------------------------------------------------
Income taxes 4,338 12,925 14,086 20,169 24,079
- ------------------------------------------------------------------------------------------------------------------------
Net income 19,121 35,665 28,612 34,494 40,423
- ------------------------------------------------------------------------------------------------------------------------
As a percent of average stockholders' equity 9.5% 19.1% 15.4% 18.4% 23.4%
- ------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization $ 37,045 $ 35,871 $ 30,602 $ 28,431 $ 28,123
- ------------------------------------------------------------------------------------------------------------------------
Capital expenditures 22,365 26,575 27,222 34,571 33,398
- ------------------------------------------------------------------------------------------------------------------------
Average common shares outstanding -- basic 18,506 18,568 19,418 20,096 20,237
========================================================================================================================
Year-end financial position (in thousands)
Working capital $ 72,931 $ 114,502 $ 103,165 $ 106,884 $ 113,092
- ------------------------------------------------------------------------------------------------------------------------
Current ratio 1.4 to 1 1.9 to 1 1.9 to 1 2.1 to 1 2.3 to 1
- ------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment $ 152,943 $ 163,766 $ 145,105 $ 139,247 $ 133,830
- ------------------------------------------------------------------------------------------------------------------------
Total assets 636,505 636,941 516,282 418,904 407,978
- ------------------------------------------------------------------------------------------------------------------------
Long-term debt /(4)/ 225,941 230,000 140,000 51,000 62,205
- ------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 198,837 201,333 180,614 188,674 180,859
- ------------------------------------------------------------------------------------------------------------------------
Debt as a percent of total capitalization /(5)/ 53.8% 54.1% 45.7% 24.1% 27.1%
========================================================================================================================
Year-end statistics
Employees 5,150 5,471 4,020 3,847 3,872
========================================================================================================================
----------
(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 have been adjusted for the three-for-one stock split
effective April 1997.
(3) Includes a $12.9 million pretax, $7.7 million after-tax charge ($0.38 per
share) against income related to the accelerated retirement package for
the Company's former president.
(4) Long-term debt includes current and long-term portion.
(5) Debt includes all interest-bearing debt and total capitalization includes
interest-bearing debt and stockholders' equity.
-----------
P A G E 29