Debt and Commitments

Long-term debt and notes and overdrafts payable at December 31 consisted of:



	2013					2012
	Carrying Amount			Fair Value		Carrying Amount			Fair Value
3.375% Convertible Notes	$	55,636		$	76,569	$	55,636		$	57,977
Unamortized debt discount – 3.375% Convertible Notes	(731		)	—		(3,122		)	—
Revolving credit agreement	487,920			482,431		589,200			599,172
Borrowings under lines of credit and overdrafts	1,074			1,074		3,380			3,380
Other foreign bank borrowings	405			410		945			947
Capital leases	3,120			3,402		159			159
Other	—			—		415			415
	547,424			563,886		646,613			662,050
Less current maturities	(57,083		)			(4,494		)
Long-term debt	$	490,341				$	642,119

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 to mitigate fluctuations in interest rates. Among other things, interest rate fluctuations impact the market value of the Company’s fixed-rate debt and fluctuations in the Company’s stock price impact the market value of its convertible notes.

In 2007, the Company sold $100,000 of 3.375% Senior Subordinated Convertible Notes due in March 2027 with interest payable semi-annually on March 1 and September 1 of each year commencing on September 1, 2007. During 2009, the Company repurchased $44,364 par value of these notes. The 3.375% Convertible Notes are general unsecured obligations of the Company and are subordinated in right of payment to all existing and future senior debt of the Company. These notes are subject to redemption at their par value at any time, at the option of the Company, on or after March 20, 2014. Additionally, these notes may be converted into a combination of cash and common stock of the Company at a conversion value equal to 35.3235 shares per note, equivalent to a conversion price of approximately $28.31 per share of common stock upon meeting certain conditions provided in the respective indenture agreement including (i) the closing stock price for 20 of the last 30 trading days in a quarter is greater than or equal to 130% of the conversion price or (ii) the note holders may require the Company to redeem some or all of the Notes on March 15^th of 2014, 2017 and 2022. As such, the balance of these Notes of $54,905 ($55,636 par value) and the related deferred tax balances, classified as long-term at December 31, 2012, have been classified as current in the accompanying balance sheet as of December 31, 2013. The first $1 of the conversion value of each note would be paid in cash and the additional conversion value, if any, would be paid in cash or common stock, at the option of the Company.

During 2013 and 2012, the 3.375% Convertible Notes were not eligible for conversion. Additionally, the 3.375% Convertible Notes are not eligible for conversion from January 1, 2014 through March 31, 2014, except on March 15^th of 2014, as noted above. The fair value of the notes was determined using quoted market prices (inactively traded) that represent Level 2 observable inputs.

Effective April 5, 2011, the Company exercised its right to redeem the remaining $92,500 principal amount of the 3.75% Convertible Notes under their indenture agreement. Of the total $92,500 principal amount, $11,865 of these notes were redeemed with accrued interest through the redemption date. The remaining $80,635 of these notes were surrendered for conversion. The Company elected to pay cash to holders of the notes surrendered for conversion, including the value of any residual shares of common stock that were payable to the holders electing to convert their notes into an equivalent share value, resulting in a total cash payment of $90,438 including a premium on conversion of $9,803 which reduced the equity component by $6,085, net of tax of $3,718. As a result of this transaction, the Company recaptured $40,217 of previously deducted contingent convertible debt interest which resulted in a $15,252 reduction in short-term deferred tax liabilities as well as a reduction of tax loss carryforwards reflected in long-term deferred tax assets. The Company used borrowings under its Credit Facility to finance the redemption of the 3.75% Convertible Notes.

The following table sets forth balance sheet information regarding the Company’s convertible notes at December 31:



	2013			2012
3.375% Convertible Notes:
Carrying value of equity component, net of tax	$	10,772		$	10,772
Principal value of liability component	$	55,636		$	55,636
Unamortized debt discount	(731		)	(3,122		)
Net carrying value of liability component	$	54,905		$	52,514

As of December 31, 2013, the remaining unamortized debt discount on the 3.375% Convertible Notes will be amortized over a remaining period of 3 months. The effective interest rate on the liability component is 8.00%.

The following table sets forth the components of interest expense for the Company’s convertible notes for the years ended December 31, 2013, 2012 and 2011.



	2013		2012		2011
Interest expense – 3.375% coupon	$	1,878	$	1,878	$	1,878
Interest expense – 3.375% debt discount amortization	2,391		2,211		2,044
Interest expense – 3.75% coupon	—		—		1,225
Interest expense – 3.75% debt discount amortization	—		—		114
	$	4,269	$	4,089	$	5,261

In September 2011, the Company entered into an amended and restated revolving credit agreement (the "Amended Credit Agreement" or "Amended Credit Facility") with Bank of America, N.A. as the administrative agent. The Amended Credit Agreement increased the borrowing availability of the Amended Credit Facility from $400,000 to $500,000 and extended the expiration date of the Amended Credit Facility by four years from September 2012 to September 2016. In July 2012, the Company executed a $250,000 accordion feature that was available under the Amended Credit Agreement increasing the available amount under the Amended Credit Facility to $750,000. In September 2013, the Company entered into a Second Amendment to its revolving credit agreement ("Second Amendment") and retained Bank of America, N.A. as Administrative Agent for the lenders. The Second Amendment extends the maturity date of the debt facility by two years from September 2016 to September 2018 and includes an option to extend the maturity date for an additional year, subject to certain conditions. The Second Amendment also adds a new foreign subsidiary borrower in Germany, Barnes Group Acquisition GmbH, maintains the borrowing availability of the Company at $750,000 and adds an accordion feature to increase this amount to $1,000,000. The Company may exercise the accordion feature upon request to the Administrative Agent as long as an event of default has not occurred or is continuing. The borrowing availability of $750,000, pursuant to the terms of the Second Amendment, allows for Euro-denominated borrowings equivalent to $500,000. Euro-denominated borrowings are subject to foreign currency translation adjustments that are included within accumulated other non-owner changes to equity. Borrowings under the Amended Credit Agreement continue to bear interest at LIBOR plus a spread ranging from 1.10% to 1.70% depending on the Company's leverage ratio at the time of the borrowing. The Company paid fees and expenses of $1,261, $1,030 and $2,012 in conjunction with executing the Second Amendment in 2013, the execution of the accordion feature in 2012 and the refinancing of the Amended Credit Agreement in 2011, respectively. Such fees will be deferred and amortized into interest expense on the accompanying Consolidated Statements of Income through its maturity.

At December 31, 2013, borrowings and availability under the Amended Credit Agreement were $487,920 and $262,080, respectively. Borrowings included Euro-denominated borrowings of €114,000 ($157,320 at December 31, 2013). The interest rate on these borrowings was 1.36% and 1.97% on December 31, 2013 and 2012, respectively. The fair value of the borrowings is based on observable Level 2 inputs. The borrowings are valued using discounted cash flows based upon the Company's estimated interest costs for similar types of borrowings.

The Company's borrowing capacity remains limited by various debt covenants in the Amended Credit Agreement, certain of which have been amended in September 2013. The Amended Credit Agreement requires the Company to maintain a ratio of Consolidated Senior Debt, as defined in the Second Amendment, to Consolidated EBITDA, as defined, of not more than 3.25 times at the end of each fiscal quarter, a ratio of Consolidated Total Debt, as defined, to Consolidated EBITDA of not more than 4.00 times at the end of each fiscal quarter, and a ratio of Consolidated EBITDA to Consolidated Cash Interest Expense, as defined, of not less than 4.25 times at the end of each fiscal quarter. The Second Amendment also provides that in connection with certain permitted acquisitions with aggregate consideration in excess of $150,000, the Consolidated Senior Debt to EBITDA ratio and the Consolidated Total Debt to EBITDA ratio are permitted to increase to 3.50 times and 4.25 times, respectively, for a period of the four fiscal quarters ending after the closing of the acquisition. At December 31, 2013, the Company was in compliance with all covenants under the Amended Credit Agreement and continues to monitor its future compliance based on current and future economic conditions.

In addition, the Company has available approximately $15,000 in uncommitted short-term bank credit lines ("Credit Lines") of which $1,000 was borrowed at December 31, 2013 at an interest rate of 2.13% and $2,800 was borrowed at December 31, 2012 at an interest rate of 2.16%. The Company had also borrowed $74 and $580 under overdraft facilities at December 31, 2013 and 2012, respectively. Repayments under the Credit Lines are due within seven days after being borrowed. Repayments of the overdrafts are generally due within two days after being borrowed. The carrying amounts of the Credit Lines and overdrafts approximate fair value due to the short maturities of these financial instruments.

The Company also has other foreign bank borrowings. The fair value of the foreign bank borrowings are based on observable Level 2 inputs. These instruments are valued using discounted cash flows based upon the Company's estimated interest costs for similar types of borrowings.

The Company holds capital leases within the Männer Business that was acquired on October 31, 2013. The fair value of the capital leases are based on observable Level 2 inputs. These instruments are valued using discounted cash flows based upon the Company's estimated interest costs for similar types of borrowings.

Other debt consists primarily of bank acceptances which are used to pay certain vendors. Bank acceptances represent financial instruments accepted by certain Chinese vendors in lieu of cash paid on payables, generally range from three to six months in maturity and are guaranteed by banks. The fair values of the bank acceptances are based on observable Level 2 inputs and their carrying amounts approximate fair value due to their short maturities.

Long-term debt and notes payable, excluding the unamortized debt discount related to the Convertible Notes, are payable as follows: $57,814 in 2014, $750 in 2015, $806 in 2016, $865 in 2017, $487,920 in 2018 and $0 thereafter. The 3.375% Convertible Notes are included in 2014 according to their first put date.

In addition, the Company had outstanding letters of credit totaling $6,799 at December 31, 2013.

Interest paid was $11,636, $9,512 and $11,038 in 2013, 2012 and 2011, respectively. Interest capitalized was $247, $195 and $106 in 2013, 2012 and 2011, respectively, and is being depreciated over the lives of the related fixed assets.