-----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, LJksfx525w6W4RpOFuy2byj/Rak2TWclgw4oEQcx1RmsTMCIZj8FR1UW3VfRy3ge oRINTe+gxzSoCQHW6XQi6w== 0000009984-99-000012.txt : 19990817 0000009984-99-000012.hdr.sgml : 19990817 ACCESSION NUMBER: 0000009984-99-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 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: 99693510 BUSINESS ADDRESS: STREET 1: 123 MAIN ST CITY: BRISTOL STATE: CT ZIP: 06011 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 JUNE 30, 1999 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 June 30, 1999 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 August 12, 1999 - 19,372,296 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 June 30, 1999
DESCRIPTION PAGES - ----------- ----- PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Consolidated Statements of Income for the three months and six months ended June 30, 1999 and 1998 3 Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998 4-5 Consolidated Statements of Cash Flows for the six months ended June 30, 1999 and 1998 6 Notes to Consolidated Financial Statements 7-9 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-16 PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K 17 Signatures 17
-2- PART I. FINANCIAL INFORMATION Item 1. Financial Statements BARNES GROUP INC. CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data) (Unaudited)
Three months ended Six months ended June 30, June 30, -------------------- ------------------- 1999 1998 1999 1998 -------- -------- -------- -------- Net sales $156,283 $169,151 $318,531 $338,067 Cost of sales 107,280 112,201 216,820 223,559 Selling and admin- istrative expenses 36,470 50,096 74,353 88,274 -------- -------- -------- -------- 143,750 162,297 291,173 311,833 -------- -------- -------- -------- Operating income 12,533 6,854 27,358 26,234 Other income 1,406 1,700 3,824 2,896 Interest expense 901 929 1,913 2,054 Other expenses 276 192 688 697 -------- -------- -------- -------- Income before income taxes 12,762 7,433 28,581 26,379 Income taxes 4,579 2,787 10,432 9,892 -------- -------- -------- -------- Net income $ 8,183 $ 4,646 $ 18,149 $ 16,487 ======== ======== ======== ======== Per common share: Net income - basic $ .42 $ .23 $ .92 $ .82 - diluted .41 .23 .91 .81 Dividends .19 .17 .37 .33 Average common shares outstanding 19,576,567 20,222,640 19,669,347 20,198,031 See accompanying notes.
-3- BARNES GROUP INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
ASSETS June 30, December 31, 1999 1998 -------- ----------- (Unaudited) Current assets Cash and cash equivalents $ 34,046 $ 40,206 Short-term investments 1,063 2,566 Accounts receivable, less allowances (1999-$2,653; 1998-$2,413) 91,103 82,809 Inventories Finished goods 33,105 34,784 Work-in-process 14,880 15,309 Raw materials and supplies 12,931 14,311 -------- -------- 60,916 64,404 Deferred income taxes and prepaid expenses 18,622 17,243 -------- -------- Total current assets 205,750 207,228 Deferred income taxes 24,807 25,136 Property, plant and equipment 353,152 350,793 Less accumulated depreciation 218,078 211,546 -------- -------- 135,074 139,247 Goodwill 17,950 18,224 Other assets 29,593 29,069 -------- -------- Total assets $413,174 $418,904 ======== ======== See accompanying notes.
-4- BARNES GROUP INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, December 31, 1999 1998 --------- ----------- (Unaudited) Current liabilities Notes payable $ 10,891 $ 6,766 Accounts payable 42,645 38,439 Accrued liabilities 39,860 52,934 Guaranteed ESOP obligation-current 750 2,205 -------- -------- Total current liabilities 94,146 100,344 Long-term debt 51,000 51,000 Accrued retirement benefits 67,572 68,129 Other liabilities 10,357 10,757 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 49,730 49,231 Treasury stock at cost, 1999-2,504,175 shares 1998-2,202,417 shares (49,839) (42,893) Retained earnings 215,245 204,364 Accumulated other comprehensive income (24,507) (20,043) Guaranteed ESOP obligation (750) (2,205) -------- -------- Total stockholders' equity 190,099 188,674 -------- -------- Total liabilities and stockholders' equity $413,174 $418,904 ======== ======== See accompanying notes.
-5- BARNES GROUP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Six months ended June 30, 1999 and 1998 (Dollars in thousands) (Unaudited)
1999 1998 Operating activities: ------- ------- Net income $18,149 $16,487 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 15,433 14,091 Gain on sale of property, plant and equipment (576) (98) Changes in assets and liabilities: Accounts receivable (8,835) (1,876) Inventories 2,484 (7,956) Accounts payable 4,479 4,532 Accrued liabilities (12,595) 3,077 Deferred income taxes 612 (937) Other (3,505) 6,086 ------- ------- Net cash provided by operating activities 15,646 33,406 Investing activities: Proceeds from sale of property, plant and equipment 1,096 423 Capital expenditures (12,076) (16,332) Redemption of short-term investments 1,503 -- Other (773) (813) ------- ------- Net cash used by investing activities (10,250) (16,722) Financing activities: Net increase in notes payable 4,124 260 Proceeds from the issuance of common stock 946 2,747 Common stock repurchases (7,817) (6,651) Dividends paid (7,274) (6,761) ------- ------- Net cash used by financing activities (10,021) (10,405) Effect of exchange rate changes on cash flows (1,535) (1,676) ------- ------- (Decrease) increase in cash and cash equivalents (6,160) 4,603 Cash and cash equivalents at beginning of period 40,206 32,530 ------- ------- Cash and cash equivalents at end of period $34,046 $37,133 ======= ======= 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, 1998. In the opinion of management, all adjustments, including normal recurring accruals considered necessary for a fair presentation, have been included. Operating results for the six-month period ended June 30, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. 2. Property, Plant and Equipment ----------------------------- Property, plant and equipment are stated at cost. Depreciation is recorded over estimated useful lives ranging from 20 to 50 years for buildings and 3 to 17 years for machinery and equipment. The straight-line method of depreciation was adopted for all property, plant and equipment placed into service after March 31, 1999. For property, plant and equipment placed into service prior to April 1, 1999, depreciation is provided 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. In addition, the new method is prevalent in the industries in which the company operates. The effect of this change on net income was not material. 3. 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. Foreign currency translation adjustments result from the foreign operation's assets and liabilities being translated at the period-end exchange rates and revenues and -7- Notes to Consolidated Financial Statements Continued: expenses being translated at average rates of exchange. The resulting translation gains and losses are reflected in accumulated other comprehensive income within stockholders' equity. Statement of Comprehensive Income (Dollars in thousands) (Unaudited)
Three months ended Six months ended June 30, June 30, ------------------- ------------------- 1999 1998 1999 1998 -------- -------- -------- -------- Net income $ 8,183 $ 4,646 $ 18,149 $ 16,487 Other comprehensive gain (loss) 405 (2,802) (4,464) (3,297) -------- -------- -------- -------- Comprehensive income $ 8,588 $ 1,844 $ 13,685 $ 13,190 ======== ======== ======== ========
4. Subsequent Event ---------------- On July 28, 1999, the company announced that it had signed a definitive agreement to acquire the nitrogen gas springs business of Teledyne Fluid Systems, of Allegheny Teledyne Incorporated, for the Associated Spring business segment. Subject to regulatory review, the acquisition is expected to be finalized during the third quarter of 1999. The company plans to finance the purchase through the issuance of long- term debt, which will result in both higher interest expense and debt to capital ratios in the future. 5. Information on Business Segments -------------------------------- The company evaluates the performance of its reportable segments based on operating profit of the respective businesses. Segment operating profit was modified to follow the accounting policies described in the summary of significant accounting policies footnote included in the company's 1998 Annual Report. In addition, all corporate office administrative expenses are allocated to the segments, exclusive of the costs associated with the accelerated retirement package for the former president and chief executive officer. -8- Notes to Consolidated Financial Statements Continued: The following tables set forth information about the company's operations by its three reportable business segments:
Three months ended Six months ended June 30, June 30, ------------------- ------------------- 1999 1998 1999 1998 -------- -------- -------- -------- (Dollars in thousands) Revenues: Bowman Distribution $ 58,999 $ 63,457 $118,994 $129,987 Associated Spring 68,510 69,309 134,809 137,790 Barnes Aerospace 31,708 40,519 70,689 78,238 Intersegment sales (2,934) (4,134) (5,961) (7,948) -------- -------- -------- -------- Total revenue $156,283 $169,151 $318,531 $338,067 ======== ======== ======== ======== Operating profit: Bowman Distribution $ 2,728 $ 9,142 $ 7,583 $ 18,877 Associated Spring 9,057 7,583 15,981 14,780 Barnes Aerospace 2,139 3,988 5,815 7,174 Former CEO retirement package -- (12,905) -- (12,905) -------- -------- -------- -------- Total operating profit 13,924 7,808 29,379 27,926 Interest income 172 339 443 698 Interest expense 901 929 1,913 2,054 Other income(expense) (433) 215 672 (191) -------- -------- -------- -------- Income before income taxes $ 12,762 $ 7,433 $ 28,581 $ 26,379 ======== ======== ======== ========
-9- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations --------------------- The company's second quarter 1999 sales were $156.3 million, down 8% from $169.2 million in 1998. Operating income was $12.5 million versus $6.9 million for the comparable 1998 quarter. In the second quarter of 1998 operating income included a non-recurring charge of $12.9 million related to the accelerated retirement package of the company's former president and chief executive officer. The second quarter 1999 performance reflects sales and profit declines at Barnes Aerospace and Bowman Distribution. However, Associated Spring reported a 19% increase in operating profits in the 1999 second quarter on near level year-over-year sales. The company's 1999 first half sales were $318.5 million, down 6% from $338.1 million in 1998. The 1999 year-to-date operating income was $27.4 million versus $26.2 million reported in 1998. The 1998 year-to-date results include the non-recurring charge related to the accelerated retirement package of the company's former president and chief executive officer. The 1999 results reflect year-over-year sales declines at all three business segments and operating profit declines at Barnes Aerospace and Bowman Distribution. The operating profit declines were partially offset by Associated Spring, which recorded an 8% year-over-year improvement in operating profit. Segment Review-Sales and Operating Profit ------------------------------------------ Associated Spring segment sales for the second quarter and six months ending June 30, 1999 declined slightly versus the comparable 1998 periods. Sales for the 1999 second quarter and first half were $68.5 million and $134.8 million, respectively. In spite of lower sales, the second quarter and year-to-date 1999 operating profits increased to $9.1 million and $16.0 million, respectively, a 19% and 8% improvement over the comparable 1998 periods. The improved results are largely attributable to a strong performance by Associated Spring's largest U.S. plant, stabilization of international economies, and cost management at Associated Spring's headquarters. -10- Management's Discussion and Analysis of Financial Condition and Results of Operations Continued: Bowman Distribution's second quarter and year-to-date 1999 segment sales were $59.0 million and $119.0 million, a 7% and 9% decline from the comparative 1998 periods. Operating profits in 1999 also declined in both the second quarter and first half as compared to 1998. The sales and profit shortfalls in 1999 were due to shipment delays and cancellations resulting from a planned warehouse shutdown initiated in the first quarter to install a new warehouse management system at the Elizabethtown, Kentucky facility. This implementation encountered unanticipated operational as well as software problems during the system installation which resulted in shipment delays, cancellations and added costs. Management is addressing this issue and expects to see improved customer service levels and warehouse efficiency in the second half of 1999. Barnes Aerospace's second quarter 1999 segment sales were $31.7 million compared to $40.5 million in 1998 and the year-to-date 1999 segment sales were $70.7 million compared to $78.2 million in 1998. A direct result of the sales decline was a shortfall in operating profits in 1999 in both the second quarter and first half compared to 1998. The 1999 sales and operating profit declines occurred at Barnes Aerospace's original equipment manufacturing facilities, the result of significant rescheduling by its customers due to the slowdown in the aviation industry. This industry slowdown has resulted in a decrease in new orders for aerospace products and cancellations or rescheduling of existing orders throughout the industry and is expected to result in lower manufacturing volumes in the near term. The 1999 results at Barnes Aerospace's overhaul and repair facilities kept pace with last year's strong performance. Non-Operating Income/Expense ---------------------------- Other income for the first half of 1999 increased over 1998 reflecting a gain on the sale of the recently closed Associated Spring, Arden, North Carolina facility and net foreign exchange transaction gains, mainly resulting from the devaluation of the Brazilian real, in the early part of 1999. The decline in other income in the second quarter of 1999 compared to 1998 was largely attributable to lower net foreign exchange gains. Interest expense and other expenses for both the first half and second quarter of 1999 were comparable to the same periods in 1998. Income Taxes ------------ The company's effective tax rate was 36.5% in 1999 as compared to 37.5% in 1998. The lower rate in 1999 was due to lower state taxes as well as higher foreign income with tax rates lower than the U.S. statutory tax rate. -11- Management's Discussion and Analysis of Financial Condition and Results of Operations Continued: Net Income and Net Income Per Share ----------------------------------- Consolidated net income for the second quarter of 1999 and 1998 was $8.2 million and $4.6 million, respectively. Basic and diluted earnings per share for the 1999 second quarter were $.42 and $.41 compared to 1998's basic and diluted earnings per share of $.23. In the second quarter of 1998, earnings included a non-recurring after-tax charge of $7.7 million, or $.38 per share related to the accelerated retirement package of the company's former president and chief executive officer. Consolidated net income for the first half of 1999 and 1998 was $18.1 million and $16.5 million, respectively. Basic and diluted earnings per share for the first six months of 1999 were $.92 and $.91 compared to 1998's basic and diluted earnings per share, including the non-recurring charge, of $.82 and $.81, respectively. There were no adjustments to net income for the purpose of computing income available to common stockholders for 1999 and 1998. For the purpose of computing diluted earnings per share, the weighted average number of shares outstanding for the second quarter of 1999 and 1998 was increased by 263,937 and 339,811, respectively, and for the first six months of 1999 and 1998 was increased 236,098 and 360,763, respectively, representing the potential dilutive effects of stock-based incentive plans. Financial Condition ------------------- Cash Flows ---------- Net cash generated by operating activities in the first six months of 1999 was $15.6 million, compared to $33.4 million in 1998. This decrease in operating cash flows is primarily related to cash payments of $7.0 million made in 1999 for the early retirement package for the former president and chief executive officer which was expensed and accrued in 1998. These cash payments are reflected in the decrease in accrued liabilities. Net cash used for investing activities during the first six months of 1999 was $10.3 million compared to $16.7 million in 1998's first half. The decrease in cash used in 1999 compared to 1998 was due primarily to lower capital spending. This reduction comes after five years of heavy investment by all three operating Groups to expand capacity and improve productivity, quality and customer service. -12- Management's Discussion and Analysis of Financial Condition and Results of Operations Continued: Net cash used by financing activities was $10.0 million in the first half of 1999 compared to $10.4 million in 1998's first half. Liquidity and Capital Resources ------------------------------- During 1999 and 1998, the company's long-term debt was comprised, in part, of borrowings under its short-term bank lines of credit backed by its long-term revolving credit agreement. At June 30, 1999, the company classified as long-term debt $3.6 million of borrowings under its lines of credit and $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 these amounts on a long-term basis. The company intends to continue this cost-effective method of long-term financing. As described in the Notes to Consolidated Financial Statements, on July 28, 1999, the company signed a definitive agreement to acquire the nitrogen gas springs business of Teledyne Fluid Systems, a division of Allegheny Teledyne Incorporated. The company plans to finance this purchase, which is subject to regulatory review, through the issuance of long-term debt that will result in both higher future interest costs and debt to capital ratios. The company maintains substantial bank borrowing facilities to supplement internal cash generation. At June 30, 1999, the company had $150.0 million of borrowing capacity under its long-term revolving credit agreement of which none was borrowed. The company had $14.0 million in borrowings under uncommitted short-term bank credit lines at June 30, 1999. The interest rate on this borrowing was 5.62%. The company believes its credit facilities coupled with cash generated from operations are adequate for its anticipated future requirements. Year 2000 Readiness -------------------- Background ---------- When the Year 2000 (Y2K) arrives, computer software may not be able to distinguish between the year 1900 and 2000 and, as a result, date-based information may not be processed accurately. This situation has never been experienced, so no one is quite sure of the consequences or how to completely prevent business disruptions. -13- Management's Discussion and Analysis of Financial Condition and Results of Operations Continued: General Approach ---------------- The company's intention is to be fully Y2K ready with all of its critical business systems and critical third party business relationships by the Year 2000. The process of addressing Y2K readiness began in early 1997 at each of the company's three business segments. The company established a primary Y2K project team led by its chief financial officer and its information technology (IT) directors. With the assistance of a third party consultant, the company is using a multi-phase approach to manage the Y2K readiness project involving assessment of the problem, remediation and testing. The company is on target to complete its Y2K readiness project at both its Associated Spring and Barnes Aerospace businesses by the end of the third quarter of 1999. At Bowman Distribution the implementation of an enterprise management system encountered difficulties in the second quarter of 1999 which have caused a delay in the final implementation until the fourth quarter of this year. Assessment ---------- In this phase, the company identifies its critical business systems and critical third party business relationships, and assesses the Y2K impact on each one to determine the relative risks of possible Y2K failures. Based on the risk assessments, priorities are set, resources are allocated and the plan for the next phase, remediation, is established. The assessment of the company's systems is complete, although the monitoring of the readiness of critical business relationships with suppliers and customers is a continuous process. In addition, as new IT systems come on line, they will be assessed as to their Y2K impact on the readiness of the company's critical systems. Remediation ----------- This phase involves the conversion, modification, or replacement of systems that are not Y2K ready, and the implementation and integration of new Y2K ready systems. It also involves efforts to foster Y2K readiness of third parties with which the company has critical business relationships. This phase is by far the most complicated, time consuming and costly of the Y2K project. The completion of remediation or implementation of critical systems for Barnes Aerospace and Associated Spring was completed during the second quarter of 1999. For Bowman Distribution, remediation is expected to be completed by year-end with the new system implementation. -14- Management's Discussion and Analysis of Financial Condition and Results of Operations Continued: Testing ------- During this phase, the testing, verification and validation of the performance, functionality and integration of new, replaced and converted systems will be conducted. Both Aerospace and Associated Spring are well into the testing phase, the completion of which is planned by the end of the third quarter of 1999. Bowman Distribution expects to complete its testing phase during the fourth quarter. The fourth quarter will also be used to resolve unanticipated activities including possible vendor modifications. Contingency Plans ----------------- The company is developing contingency plans concurrent with the remediation and testing phases. When the Y2K readiness risks have been determined, contingency plans will be finalized to deal with the most likely worst-case scenarios. Associated Spring and Barnes Aerospace will have substantially completed this phase by the end of the third quarter of 1999, with follow-up to occur in the fourth quarter. Management considers the timing of the implementation of the Bowman Distribution enterprise management system to be a risk area for the company. As a result, plans and costs are being developed to make the existing Bowman Distribution system Y2K ready by December 1, 1999. Cost ---- The total expenses specifically associated with the company becoming Y2K ready are not expected to be material. Because the company has been in the continuous process of upgrading and modifying existing IT systems as well as adding new systems in the ordinary course of doing business, Y2K readiness was incorporated into the overall strategy to improve and upgrade IT systems. With the expected implementation of the Bowman enterprise management system in 1999, the company will have completed a process begun in 1995 of upgrading all of its critical application software. The costs specific to addressing the Y2K readiness project are those directly related to upgrading existing systems to be Y2K ready and costs related to outside consultants assisting with the Y2K project. These costs have been expensed as they have been incurred and totaled approximately $0.6 million in 1998 and are expected to total approximately $1.2 million in 1999. The $1.2 million estimate does not include the costs of the Bowman contingency plan to modify the existing system to be Y2K ready by the Year 2000. -15- Management's Discussion and Analysis of Financial Condition and Results of Operations Continued: These Bowman contingency plan costs are currently being finalized and are not expected to have a significant impact on the company's consolidated financial statements. A significant portion of the company's overall IT expense of approximately $11.5 million in 1998 and the estimated $12.4 million in 1999 is either directly or indirectly used to address Y2K readiness either through software remediation or implementation. In addition, capitalized IT related hardware and software expenditures totaled $12.0 million in 1998 and are expected to be $9.0 million in 1999. Risks ----- Y2K readiness encompasses a number of factors, which the company cannot completely control, including its critical business relationships with third party suppliers and customers. Although the company is taking steps to minimize the potential adverse effects of the Y2K issue, any failure by the company, its major vendors, other material service providers, or its principal customers to address this issue on an adequate and timely basis could have a material adverse effect on the company's business, results of operations, cash flow and financial condition. Forward-Looking Statements -------------------------- The company cautions readers that certain factors may affect the company's results for future fiscal periods. These factors involve risks and uncertainties that could cause future results to differ materially from those expressed or implied in any forward-looking statements made on behalf of the company. For this purpose, any statement other than one of historical fact may be considered a forward-looking statement. Some important factors that could cause actual results to vary materially from those anticipated in forward-looking statements include economic and industry volatility, currency and interest rate fluctuations, regulatory changes and technological changes (including Y2K issues), all of which may affect the company's operations, products and markets. -16- PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits Exhibit 18 Independent accountants' preferability letter regarding change in accounting principles Exhibit 27 Financial Data Schedule, June 30, 1999 (b) Reports on Form 8-K A report on Form 8-K dated August 9, 1999 was filed with the commission on August 11, 1999. This report includes information under Item 5 concerning the July 28, 1999 announcement of the company's agreement to acquire the nitrogen gas springs business of Teledyne Fluid Systems, a business of Allegheny Teledyne Incorporated. 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 August 16, 1999 By /s/ Francis C. Boyle, Jr. --------------- ------------------------------------- Francis C. Boyle, Jr. Vice President, Controller (the principal financial officer) Date August 16, 1999 By /s/ John J. Locher --------------- ------------------------------------- John J. Locher Vice President, Treasurer -17- EX-18 2 INDEPENDENT ACCOUNTANTS' PREFERABILITY LETTER Exhibit 18 [PwC Letterhead] PricewaterhouseCoopers LLP One Financial Plaza Hartford CT 06013 Telephone (860) 240 2000 July 16, 1999 Board of Directors Barnes Group Inc. 123 Main Street Bristol, CT 06011 Dear Directors: We are providing this letter to you for inclusion as an exhibit to your Form 10-Q filing pursuant to Item 601 of Regulation S-K. We have been provided a copy of the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1999. Note 2 therein describes a change in accounting principle for depreciating property, plant and equipment from the accelerated method to the straight line method. It should be understood that the preferability of one acceptable method of accounting over another for depreciation has not been addressed in any authoritative accounting literature, and in expressing our concurrence below we have relied on management's determination that this change in accounting principle is preferable. Based on our reading of management's stated reasons and justification for this change in accounting principle in the Form 10-Q, and our discussions with management as to their judgment about the relevant business planning factors relating to the change, we concur with management that such change represents, in the Company's circumstances, the adoption of a preferable accounting principle in conformity with Accounting Principles Board Opinion No. 20. We have not audited any financial statements of the Company as of any date or for any period subsequent to December 31, 1998. Accordingly, our comments are subject to change upon completion of an audit of the financial statements covering the period of the accounting change. Very truly yours, /s/PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP EX-27 3
5 This schedule contains summary financial information extracted from the consolidated balance sheet of Barnes Group Inc. at June 30, 1999, and the related consolidated statement of income for the six months ended June 30, 1999, and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 34,046 1,063 93,756 2,653 60,916 205,750 353,152 218,078 413,174 94,146 51,000 0 0 220 189,879 413,174 318,531 318,531 216,820 216,820 0 336 1,913 28,581 10,432 18,149 0 0 0 18,149 .92 .91 Basic and diluted earnings per share calculated in accordance with Statement of Financial Accounting Standards No. 128.
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