-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PWRdcNtAI/5sLwjAo7GXNpERv1wglYF+5YUF+0euA7IwT7uhbSAh7E+vJm8owDBk vh5lE+t1l6At/0+7b9F5Gg== 0000009984-00-000009.txt : 20000516 0000009984-00-000009.hdr.sgml : 20000516 ACCESSION NUMBER: 0000009984-00-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARNES GROUP INC CENTRAL INDEX KEY: 0000009984 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] IRS NUMBER: 060247840 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04801 FILM NUMBER: 633009 BUSINESS ADDRESS: STREET 1: 123 MAIN ST CITY: BRISTOL STATE: CT ZIP: 06010 BUSINESS PHONE: 2035837070 FORMER COMPANY: FORMER CONFORMED NAME: ASSOCIATED SPRING CORP DATE OF NAME CHANGE: 19760518 10-Q 1 BARNES GROUP INC. FORM 10-Q MARCH 31, 2000 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM l0-Q (Mark One) (X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2000 or ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For transition period from -------------------- to -------------------- Commission File Number 1-4801 BARNES GROUP INC. (a Delaware Corporation) I.R.S. Employer Identification No. 06-0247840 123 Main Street, Bristol, Connecticut 06010 Telephone Number (860) 583-7070 Number of common shares outstanding at May 10, 2000 - 18,462,206 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- -1- BARNES GROUP INC. FORM 10-Q INDEX For the Quarterly period ended March 31, 2000 DESCRIPTION PAGES - ----------- ----- PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Consolidated Statements of Income for the three months ended March 31, 2000 and 1999 3 Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999 4-5 Consolidated Statements of Cash Flows for the three months ended March 31, 2000 and 1999 6 Notes to Consolidated Financial Statements 7-9 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-13 PART II. OTHER INFORMATION ITEM 4. Submission of Matters to Vote of Security Holders 13 ITEM 6. Exhibits and Reports on Form 8-K 14 Signatures 14 -2- PART I. FINANCIAL INFORMATION Item 1. Financial Statements BARNES GROUP INC. CONSOLIDATED STATEMENTS OF INCOME Three months ended March 31, 2000 and 1999 (Dollars in thousands, except per share data) (Unaudited) 2000 1999 -------- -------- Net sales $173,007 $162,248 Cost of sales 116,318 109,540 Selling and administrative expenses 40,970 37,883 -------- -------- 157,288 147,423 -------- -------- Operating income 15,719 14,825 Other income 1,396 2,418 Interest expense 2,778 1,012 Other expenses 714 412 -------- -------- Income before income taxes 13,623 15,819 Income taxes 4,223 5,853 -------- -------- Net income $ 9,400 $ 9,966 ======== ======== Per common share: Net income: Basic $ .51 $ .50 Diluted .50 .50 Dividends .19 .18 Average common shares outstanding Basic 18,598,578 19,763,158 Diluted 18,753,019 19,971,417 See accompanying notes. -3- BARNES GROUP INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands) ASSETS March 31, December 31, 2000 1999 --------- ---------- (Unaudited) Current assets Cash and cash equivalents $ 43,873 $ 43,632 Accounts receivable, less allowances (2000-$3,691; 1999-$3,329) 106,324 91,701 Inventories Finished goods 42,904 39,573 Work-in-process 13,511 12,861 Raw materials and supplies 12,047 13,917 -------- -------- 68,462 66,351 Deferred income taxes and prepaid expenses 17,563 17,501 -------- -------- Total current assets 236,222 219,185 Deferred income taxes 23,113 23,797 Property, plant and equipment 370,817 368,191 Less accumulated depreciation 227,086 223,086 -------- -------- 143,731 145,105 Goodwill 88,037 88,562 Other assets 40,743 39,633 -------- -------- Total assets $531,846 $516,282 ======== ======== See accompanying notes. -4- BARNES GROUP INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands) LIABILITIES AND STOCKHOLDERS' EQUITY March 31, December 31, 2000 1999 --------- ----------- (Unaudited) Current liabilities Notes payable $ 33,922 $ 12,136 Accounts payable 55,201 57,458 Accrued liabilities 45,656 46,426 -------- -------- Total current liabilities 134,779 116,020 Long-term debt 140,000 140,000 Accrued retirement benefits 66,301 66,973 Other liabilities 11,076 12,675 Stockholders' equity Common stock-par value $0.01 per share Authorized: 60,000,000 shares Issued: 22,037,769 shares stated at par value 220 220 Additional paid-in capital 50,228 49,786 Treasury stock at cost, 2000-3,605,473 shares 1999-3,187,242 shares (70,027) (63,893) Retained earnings 224,208 218,388 Accumulated other comprehensive income (24,939) (23,887) -------- -------- Total stockholders' equity 179,690 180,614 -------- -------- Total liabilities and stockholders' equity $531,846 $516,282 ======== ======== See accompanying notes. -5- BARNES GROUP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended March 31, 2000 and 1999 (Dollars in thousands) (Unaudited) 2000 1999 ------- ------- Operating Activities: Net income $ 9,400 $ 9,966 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 8,304 7,412 (Gain) loss on sale of property, plant and equipment (36) 110 Changes in assets and liabilities: Accounts receivable (14,950) (6,706) Inventories (2,298) 744 Accounts payable (2,076) 2,085 Accrued liabilities (600) (7,112) Deferred income taxes 58 108 Other (2,592) (2,501) ------- ------- Net Cash (Used) Provided by Operating Activities (4,790) 4,106 Investing Activities: Proceeds from sale of property, plant and equipment 166 140 Capital expenditures (6,120) (5,180) Other (382) (452) ------- ------- Net Cash Used by Investing Activities (6,336) (5,492) Financing Activities: Net increase in notes payable 21,793 10,364 Proceeds from the issuance of common stock 334 268 Common stock repurchases (6,582) (4,121) Dividends paid (3,534) (3,557) ------- ------- Net Cash Provided by Financing Activities 12,011 2,954 Effect of exchange rate changes on cash flows (644) (1,513) ------- ------- Increase in cash and cash equivalents 241 55 Cash and cash equivalents at beginning of period 43,632 40,206 ------- ------- Cash and cash equivalents at end of period $43,873 $40,261 ======= ======= See accompanying notes. -6- Notes to Consolidated Financial Statements: 1. Summary of Significant Accounting Policies ------------------------------------------ The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. For additional information, please refer to the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. In the opinion of management, all adjustments, including normal recurring accruals considered necessary for a fair presentation, have been included. Operating results for the three-month period ended March 31, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. 2. Comprehensive Income -------------------- Comprehensive income includes all changes in equity during a period except those resulting from the investment by and distributions to owners. For the Company, comprehensive income includes net income and foreign currency translation adjustments. The resulting translation gains and losses are reflected in accumulated other comprehensive income within stockholders' equity. The effect of translation losses reduced comprehensive income by $1.1 million in the first quarter of 2000 and by $4.9 million in the comparative 1999 period. -7- Notes to Consolidated Financial Statements Continued: 3. Information on Business Segments -------------------------------- The following tables set forth information about the Company's operations by its three reportable business segments: For the three months ended March 31, 2000 1999 (Dollars in thousands) -------- -------- Revenues Associated Spring $ 86,313 $ 66,299 Bowman Distribution 61,087 59,995 Barnes Aerospace 29,290 38,981 Intersegment sales (3,683) (3,027) -------- -------- Total revenue $173,007 $162,248 ======== ======== Operating profit Associated Spring $ 12,336 $ 6,924 Bowman Distribution 2,914 4,855 Barnes Aerospace 1,109 3,676 -------- -------- Total operating profit 16,359 15,455 Interest income 276 271 Interest expense 2,778 1,012 Other income (expense) (234) 1,105 -------- -------- Income before income taxes $ 13,623 $ 15,819 ======== ======== 4. Stock Plans ----------- All U.S. salaried and non-union hourly employees are eligible to participate in the Company's Guaranteed Stock Plan (GSP). The GSP provides for the investment of employer and employee contributions in the Company's common stock. The Company guarantees a minimum rate of return on certain GSP assets. This guarantee will only become a liability for the Company if, and to the extent, the value of the related Company stock -8- Notes to Consolidated Financial Statements Continued: does not cover the guaranteed asset value on the day an employee withdraws from the plan. At March 31, 2000, the Company's guarantee was $4.9 million based on the March 31, 2000 Company's stock closing price of $14.50 per share. This compares to a guarantee of $2.3 million at December 31, 1999 when the closing price per share was $16.31. Based on a May 5, 2000 closing price of $17.56, the guarantee would have been $1.5 million. 5. Subsequent Event ---------------- On May 11, 2000, the Company announced that it had purchased substantially all of the assets of Curtis Industries, Inc. (Curtis), of Mayfield Heights, Ohio, pursuant to an agreement dated April 27, 2000. Curtis was a subsidiary of Paragon Corporate Holdings, Inc., a privately held company. Curtis, with 1999 sales of over $80 million, will be combined with the Company's Bowman Distribution segment to form Barnes Distribution. The purchase price of $62.1 million was financed through an existing long-term credit agreement. The increase in debt will result in both higher interest expense and debt to capital ratios in the future. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations --------------------- The Company's first quarter 2000 consolidated sales were a record $173.0 million, up 6.6% from $162.2 million last year. First quarter 2000 operating income was up 6.0% to $15.7 million compared to $14.8 million in the comparable 1999 period. Non-U.S. operations accounted for 25.4% of total sales during the current quarter, versus 19.8% a year ago. Operating income margin in both quarters was 9.1%. These results reflect period-over-period sales and earnings growth in the Associated Spring segment, offset in part by a decline in Bowman Distribution earnings and declines in Barnes Aerospace sales and earnings. The cost of sales and selling and administrative expenses as a percentage of sales for the first quarter of both years were approximately the same. -9- Management's Discussion and Analysis of Financial Condition and Results of Operations Continued: Segment Review - Sales and Operating Profit ------------------------------------------- Associated Spring segment sales for first quarter 2000 increased 30.2% over the same period last year. Sales were a record $86.3 million versus $66.3 million in 1999. The nitrogen gas springs business, acquired in the third quarter of 1999, contributed $13.0 million in sales during this year's first quarter. Excluding the nitrogen gas springs business, sales increased 10.5% period-over- period, due to strong demand from the telecommunications, electronics and transportation markets served by Associated Spring. Operating profit increased 78.2% to $12.3 million in the first quarter of 2000, largely a result of the higher sales volume. Order backlog at Associated Spring increased 11.1% to $61.9 million at March 31, 2000, from $55.7 million at December 31, 1999. Bowman Distribution segment sales in the first three months of 2000 were $61.1 million, up 1.8% from $60.0 million in 1999, the highest since the second quarter of 1998. The sales improvement in the first quarter at Bowman reflects progress made in resolving the issues related to the 1999 implementation of a fully integrated business system in North America. The complications encountered with the new system caused shipment delays and higher costs throughout 1999. Although the implementation issues related to this system have not been fully corrected, management continues to make progress toward a full resolution. Operating profit in 2000's first quarter declined compared to 1999's first quarter as Bowman continues to incur additional costs associated with the new business system. Barnes Aerospace segment first quarter 2000 sales of $29.3 million declined 24.9% from 1999, reflecting a soft aerospace market. However, an encouraging sign is the 7.5% increase in sales order backlog to $85.9 million at March 31, 2000 from $79.9 million at December 31, 1999. First quarter 2000 operating profit of $1.1 million decreased from the $3.7 million profit reported last year, due to a decline in sales volume, partially offset by effective cost control during the period. -10- Management's Discussion and Analysis of Financial Condition and Results of Operations Continued: Non-Operating Income/Expense ---------------------------- The decline in the first quarter 2000 other income is due to lower foreign exchange gains of $0.2 million compared to $1.3 million in 1999's first quarter. Other income also includes $0.6 million in both years from the Company's NASCO joint venture. Interest expense and other expenses increased in the first quarter of 2000 as a result of the acquisition of the nitrogen gas springs business in the third quarter of 1999. The increase in interest expense is due to additional borrowings to finance the acquisition and the increase in other expense reflects the goodwill amortization associated with the acquisition. Income Taxes ------------ The Company's effective tax rate for first quarter 2000 was 31.0% compared to 37.0% in 1999's first quarter. This decline is due to lower state taxes, a higher percentage of foreign income with tax rates lower than the U.S. statutory tax rate, and foreign tax benefits related to the acquisition of the nitrogen gas springs business. Net Income and Net Income Per Share ----------------------------------- Consolidated net income for the first quarter of 2000 and 1999 was $9.4 million and $10.0 million, respectively. Due to the lower average common shares outstanding, basic earnings per share for the first quarter of 2000 increased to $.51 from $.50 per share last year. On a diluted basis, earnings per share was $.50 in both 2000 and 1999. For the purposes of computing diluted earnings per share, the weighted average number of shares outstanding was increased for the potential dilutive effects of stock-based incentive plans. -11- Management's Discussion and Analysis of Financial Condition and Results of Operations Continued: Financial Condition ------------------- Cash Flows ---------- Net cash used by operating activities in the first three months of 2000 was $4.8 million compared to cash generated in 1999's first quarter of $4.1 million. In the first quarter of 2000 operating cash flow was significantly impacted by higher investments in operating assets and liabilities, which were used to support a higher level of business activity. Net cash used by investing activities in the first quarter of 2000 was $6.3 million compared to $5.5 million in 1999. The increase was a result of higher capital expenditures at the Barnes Aerospace segment. Net cash provided by financing activities was $12.0 million in the first quarter of 2000 and $3.0 million in the comparable period last year. Higher borrowings were used to finance the incremental operating activity requirements and a higher level of the Company's stock repurchases. Liquidity and Capital Resources ------------------------------- At March 31, 2000, the Company classified as long-term debt $6.2 million of the current portion of its 9.47% long-term notes. The Company has both the intent and the ability, through its revolving credit agreement, to refinance this amount on a long-term basis. The Company maintains substantial bank borrowing facilities to supplement internal cash generation. At March 31, 2000, the Company had $150.0 million of borrowing capacity under its long- term revolving credit agreement of which $40.0 million was borrowed. The Company had $16.0 million in borrowings under uncommitted short-term bank credit lines at March 31, 2000. The interest rate on this borrowing was 6.79%. The Company believes its credit facilities coupled with cash generated from operations are adequate to finance its anticipated future requirements. -12- Management's Discussion and Analysis of Financial Condition and Results of Operations Continued: Forward-Looking Statements -------------------------- The Company cautions readers that certain factors may affect the Company's results for future fiscal periods. These factors involve risks and uncertainties that could cause future results to differ materially from those expressed or implied in any forward-looking statements made on behalf of the Company. For this purpose, any statement other than one of historical fact may be considered a forward-looking statement. Some important factors that could cause actual results to vary materially from those anticipated in forward-looking statements include changes in worldwide economic and political conditions, currency and interest rate fluctuations, regulatory and technological changes, all of which may affect the Company's operations, products and markets. PART II. OTHER INFORMATION Item 4. Submission of Matters to Vote of Security Holders ------------------------------------------------- (a) The Annual Meeting of the registrant's stockholders was held on April 12, 2000. Proxies for the meeting were solicited pursuant to Regulation 14 A. (c)(1) The following directors were elected: Votes in Votes For Terms Director Favor Withheld Expiring -------- ----- -------- -------- Thomas O. Barnes 16,266,426 800,940 2003 Gary G. Benanav 16,283,074 784,292 2003 Robert W. Fiondella 15,850,276 1,217,090 2003 (2) The stockholders approved the Barnes Group Inc. Employee Stock and Ownership Program. The proposal was adopted as 10,701,211 shares voted for, 4,476,189 shares voted against, 217,685 shares abstained and 1,672,281 shares did not vote. (3) The stockholders approved the selection of PricewaterhouseCoopers LLP as the Company's independent accountants for 2000. The proposal was adopted as 16,601,405 shares voted for, 288,378 shares voted against and 177,583 shares abstained. -13- Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibit Exhibit 27 Financial Data Schedule, March 31, 2000. (b) Reports on Form 8-K A report on Form 8-K dated April 27, 2000 was filed with the commission on April 28, 2000. This report includes information under Item 5 concerning the April 27, 2000 announcement of the Company's agreement to acquire Curtis Industries, Inc. a subsidiary of Paragon Corporate Holdings, Inc., a privately held company. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Barnes Group Inc. (Registrant) Date May 15, 2000 By /S/ William C. Denninger ------------ ------------------------------------- William C. Denninger Senior Vice President, Finance and Chief Financial Officer (the principal financial officer) Date May 15, 2000 By /s/ Francis C. Boyle, Jr. ------------ ------------------------------------- Francis C. Boyle, Jr. Vice President, Controller (the principal accounting officer) -14- EX-27 2 BARNES GROUP INC. FINANCIAL DATA SCHEDULE MARCH 31, 2000
5 This schedule contains summary financial information extracted from the consolidated balance sheet of Barnes Group Inc. at March 31, 2000, and the related consolidated statement of income for the three months ended March 31, 2000, and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 43,873 0 101,015 3,691 68,462 236,222 370,817 227,086 531,846 134,779 140,000 0 0 220 179,470 531,846 173,007 173,007 116,318 116,318 0 487 2,778 13,623 4,223 9,400 0 0 0 9,400 .51 .50 Basic and diluted earnings per share calculated in accordance with Statement of Financial Accounting Standards No. 128.
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