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 September 30, 2002
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
November 11, 2002 - 18,892,472
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 September 30, 2002
DESCRIPTION PAGES
- ----------- -----
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Income
for the three months and nine months
ended September 30, 2002 and 2001 3
Consolidated Balance Sheets as
of September 30, 2002 and December 31, 2001 4-5
Consolidated Statements of Cash Flows
for the nine months ended September 30,
2002 and 2001 6
Notes to Consolidated Financial
Statements 7-15
Report of Independent Auditors 16
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 17-23
ITEM 3. Quantitative and Qualitative Disclosure
About Market Risk 23
ITEM 4. Controls and Procedures 23-24
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 25
Signatures 25
Certifications 26-28
Exhibit Index 28
-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 Nine months ended
September 30, September 30,
-------------------- ---------------------
2002 2001 2002 2001
-------- -------- --------- --------
Net sales $196,799 $186,500 $600,420 $585,214
Cost of sales 134,524 125,178 407,028 391,630
Selling and admin-
istrative expenses 52,256 49,702 158,054 154,771
-------- -------- -------- --------
186,780 174,880 565,082 546,401
-------- -------- -------- --------
Operating income 10,019 11,620 35,338 38,813
Other income 2,156 958 3,357 3,699
Interest expense 3,877 3,848 10,895 12,567
Other expenses 167 1,127 378 3,429
-------- -------- -------- --------
Income before income
taxes 8,131 7,603 27,422 26,516
Income taxes 1,215 1,901 5,073 6,629
-------- -------- -------- --------
Net income $ 6,916 $ 5,702 $ 22,349 $ 19,887
======== ======== ======== ========
Per common share:
Net income
Basic $ .37 $ .31 $ 1.20 $ 1.07
Diluted .36 .30 1.17 1.05
Dividends .20 .20 .60 .60
Average common shares
outstanding
Basic 18,839,580 18,481,546 18,697,265 18,536,308
Diluted 19,150,751 18,998,071 19,156,896 18,949,447
See accompanying notes.
-3-
BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS September 30, December 31,
2002 2001
------------ -----------
(Unaudited)
Current assets
Cash and cash equivalents $ 38,923 $ 48,868
Accounts receivable, less allowances
(2002-$2,665; 2001-$3,114) 111,216 94,124
Inventories
Finished goods 56,185 51,840
Work-in-process 17,179 15,506
Raw materials and supplies 12,049 18,375
-------- --------
85,413 85,721
Deferred income taxes 17,173 16,702
Prepaid expenses 10,919 11,120
-------- --------
Total current assets 263,644 256,535
Deferred income taxes 7,342 5,783
Property, plant and equipment 425,701 406,639
Less accumulated depreciation 264,751 253,696
-------- --------
160,950 152,943
Goodwill 169,529 159,836
Other assets 71,712 61,408
-------- --------
Total assets $673,177 $636,505
======== ========
See accompanying notes.
-4-
BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY September 30, December 31,
2002 2001
------------ -----------
(Unaudited)
Current liabilities
Notes payable $ -- $ 5,500
Accounts payable 68,526 71,410
Accrued liabilities 63,494 59,118
Long-term debt - current 8,227 47,576
-------- --------
Total current liabilities 140,247 183,604
Long-term debt 234,345 178,365
Accrued retirement benefits 67,906 63,610
Other liabilities 13,234 12,089
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 52,254 54,874
Treasury stock at cost,
2002-3,165,314 shares
2001-3,576,322 shares (64,517) (76,903)
Retained earnings 254,281 243,369
Accumulated other non-owner
changes to equity (24,793) (22,723)
-------- --------
Total stockholders' equity 217,445 198,837
-------- --------
Total liabilities and stockholders'
equity $673,177 $636,505
======== ========
See accompanying notes.
-5-
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 2002 and 2001
(Dollars in thousands)
(Unaudited)
2002 2001
------- -------
Operating activities:
Net income $22,349 $19,887
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 25,073 28,067
Gain on disposition of property,
plant and equipment (129) (100)
Changes in assets and liabilities:
Accounts receivable (9,264) (10,689)
Inventories 9,433 299
Prepaid expenses (280) (4,265)
Accounts payable (6,756) 11,385
Accrued liabilities 714 (2,642)
Deferred income taxes (1,271) 9,160
Long-term pension asset (5,290) (5 110)
Other 1,030 (4,176)
------- -------
Net cash provided by operating activities 35,609 41,816
Investing activities:
Proceeds from disposition of property, plant 1,936 378
Capital expenditures (14,581) (18,970)
Business acquisitions, net of cash acquired (31,466) (43)
Other (651) (568)
------- -------
Net cash used by investing activities (44,762) (19,203)
Financing activities:
Net decrease in notes payable (3,249) (2,002)
Payments on long-term debt (8,646) (25,000)
Proceeds from the issuance of long-term debt 17,678 24,900
Proceeds from the issuance of common stock 3,353 2,322
Common stock repurchases (1,147) (8,214)
Dividends paid (11,233) (11,128)
Proceeds from sale of swaps 4,702 13,766
Other (748) (430)
------- -------
Net cash provided (used) by financing activities 710 (5,786)
Effect of exchange rate changes on cash flows (1,502) (2,196)
------- -------
(Decrease) increase in cash and cash equivalents (9,945) 14,631
Cash and cash equivalents at beginning of period 48,868 23,303
------- -------
Cash and cash equivalents at end of period $38,923 $37,934
======= =======
See accompanying notes.
-6-
Notes to Consolidated Financial Statements:
1. Summary of Significant Accounting Policies
------------------------------------------
The accompanying unaudited consolidated balance sheet and consolidated
statements of income and cash flows 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. The financial statements 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,
2001. In the opinion of management, all adjustments, consisting of
normal recurring adjustments considered necessary for a fair
presentation, have been included. Operating results for the nine-month
period ended September 30, 2002 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2002.
Certain reclassifications have been made to prior year amounts to
conform to the current year presentation.
2. Net Income Per Common Share
---------------------------
For the purposes of computing diluted earnings per share, the weighted
average number of shares outstanding was increased by 311,171 and 16,525
for the three-month periods ended September 30, 2002 and 2001,
respectively, and 459,631 and 413,139 for the nine-month periods ended
September 30, 2002 and 2001, respectively, for the potential dilutive
effects of stock-based incentive plans. As of September 30, 2002 there
were 3,974,780 options for shares of common stock outstanding of which
2,172,719 were considered dilutive. There were no adjustments to net
income for the purpose of computing income available to common
stockholders for those periods.
3. New Accounting Standards
------------------------
The Company adopted 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.
Goodwill and other intangible assets with indefinite lives are no longer
amortized and instead are evaluated at least annually for impairment by
comparing the carrying value to the fair value at the reporting unit
level. Intangible assets with finite lives will be amortized over their
useful lives. SFAS 142 is effective for acquisitions completed after
June 30, 2001 and, as of January 1, 2002, become effective for all other
prior acquisitions.
-7-
Notes to Consolidated Financial Statements, Continued:
SFAS 142 states that an entity has six months from the date it initially
applies SFAS 142 to complete the transitional goodwill impairment test.
Management has completed the fair value assessment as of both the
adoption date and the annual measurement date and determined that no
impairments exist. The Company assesses the carrying value of goodwill
annually. There can be no assurances that an impairment will not occur
in the future.
In accordance with SFAS 142, the Company no longer amortizes goodwill.
The following table presents income adjusted to exclude goodwill
amortization expense recognized in the prior period:
(Dollars in thousands, except for per share data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------ -------------------
2002 2001 2002 2001
------ ------ ------- -------
Net income, as reported $6,916 $5,702 $22,349 $19,887
Add back: goodwill amortization,
net of income taxes -- 873 -- 2,569
------ ------ ------- -------
Adjusted net income $6,916 $6,575 $22,349 $22,456
====== ====== ======= =======
Basic earnings per share,
as reported $ .37 $ .31 $ 1.20 $ 1.07
Add back: goodwill amortization,
net of income taxes -- .05 -- .14
------ ------ ------- -------
Adjusted basic earnings per share $ .37 $ .36 $ 1.20 $ 1.21
====== ====== ======= =======
Diluted earnings per share,
as reported $ .36 $ .30 $ 1.17 $ 1.05
Add back: goodwill amortization,
net of income taxes -- .05 -- .14
------ ------ ------- -------
Adjusted diluted earnings
per share $ .36 $ .35 $ 1.17 $ 1.19
====== ====== ======= =======
4. Acquisitions
------------
On February 21, 2002, the Company purchased substantially all of the
-8-
Notes to Consolidated Financial Statements, Continued:
manufacturing assets of Seeger-Orbis GmbH & Co. OHG of Germany (Seeger-
Orbis) from TransTechnology Corporation. Seeger-Orbis is a leading
manufacturer of retainer rings and other precision engineered metal
components. The results of operations of Seeger-Orbis have been included
in the consolidated financial statements since the purchase date. The
acquired business expands both the product offerings and geographic
scope of the Associated Spring segment.
On April 29, 2002, the Company acquired Spectrum Plastics Molding
Resources, Inc. (Spectrum Plastics), a fully integrated, precision
injection molder of plastic products. The results of operations of
Spectrum Plastics have been included in the consolidated financial
statements since the purchase date and are included in the Associated
Spring segment. The acquisition adds a complementary product line that
will expand the current product offerings of this segment, enabling it
to become a single-source solution for customers needing plastic and
metal components and assemblies.
The aggregate cost of these two acquisitions was approximately $37.0
million. Consideration for the acquisitions included cash of
approximately $31.3 million, of which $2.0 million will be paid in two
equal installments in April 2003 and April 2004, issuance of 119,048
shares of Barnes Group common stock (at a market value at the time of
the acquisition of approximately $3.0 million), and the assumption of
$2.7 million of capital lease debt. The cost of the acquisitions may
change based on final purchase price adjustments and finalization of
integration plans.
5. Acquired Intangible Assets
--------------------------
Intangible assets, other than goodwill, consist of registered trademarks
purchased in the acquisition of the nitrogen gas spring business in
1999. These trademarks are being amortized over their estimated useful
lives of 30 years. At September 30, 2002, the gross carrying amount of
trademarks was $4.3 million and accumulated amortization was $0.4
million. Amortization expense for the nine-month period was
insignificant. The estimated aggregate amortization expense is
approximately $0.1 million in each of the years 2002 through 2006.
The Company is in the process of obtaining third-party valuations of
certain intangible assets acquired with Seeger-Orbis and Spectrum
Plastics. Any amounts attributable to such intangible assets are
expected to be finalized by December 31, 2002 in the purchase price
allocations for such businesses. Intangible assets that were acquired
with the Seeger-Orbis and Spectrum Plastics businesses are not included
in the $4.3 million discussed above.
-9-
Notes to Consolidated Financial Statements, Continued:
6. Goodwill
--------
The following table sets forth the change in the carrying amount of
goodwill for each reportable segment for the period ended September 30,
2002:
(Dollars in thousands)
(Unaudited)
Associated Barnes Barnes Total
Spring Aerospace Distribution BGI
---------- --------- ------------ --------
Balance as of
January 1, 2002 $ 68,505 $ 31,415 $ 59,916 $159,836
Goodwill acquired 9,693 -- -- 9,693
-------- -------- -------- --------
Balance as of
September 30, 2002 $ 78,198 $ 31,415 $ 59,916 $169,529
======== ======== ======== ========
An adjustment of $0.9 million to acquired goodwill relates to the
November 2001 acquisition of the assets of Forward Industries for the
Associated Spring segment. Goodwill of $8.8 million relates to the April
2002 acquisition of Spectrum Plastics. This amount may be adjusted upon
finalization of the purchase price allocation as discussed in Note 5.
There is no goodwill recognized in connection with the acquisition of
Seeger-Orbis, pending completion of third-party valuations of certain
intangible assets as discussed in Note 5.
7. Business Reorganization Accruals
--------------------------------
In connection with the Curtis Industries acquisition in May 2000, the
Company incurred certain integration costs. During 2000 and 2001, the
Company recorded total costs of $9.7 million related primarily to lease
consolidation costs, facility closure costs and reductions in personnel.
At December 31, 2001, $5.5 million remained as liabilities related
primarily to future lease payments and facility closure costs. During
2002, $1.6 million of the accrual has been utilized primarily in
connection with warehouse closures. As of September 30, 2002, an accrual
of approximately $3.9 million remained in connection with the
integration programs. The integration activities are expected to be
completed by December 31, 2002 except for the future lease payments,
which will continue through the remaining lives of the leases.
During the fourth quarter of 2001, the Company recorded pre-tax charges
of $4.8 million, primarily for the Associated Spring segment, related to
actions aimed at reducing the Company's infrastructure. Such actions
included the closure of an Associated Spring plant in Texas. Additional
costs to transfer
-10-
Notes to Consolidated Financial Statements, Continued:
certain retained business to other Associated Spring plants in 2002
were not accruable in 2001 and are recognized as incurred in 2002. At
December 31, 2001, the accrual balance of $2.2 million related
primarily to facility holding costs and severance. During the first
nine months of 2002, $1.0 million of the accrual has been utilized. As
of September 30, 2002 the remaining balance of approximately $1.2
million related primarily to post-closure holding costs for the Texas
plant, which is currently for sale.
8. Debt
----
On June 14, 2002, the Company replaced its revolving credit and term
loan agreement with a new $150.0 million Senior Unsecured Revolving
Credit Agreement due June 14, 2005 with 11 commercial banks. The Company
had borrowed $50.0 million under this agreement at September 30, 2002.
The interest rate, which is equal to LIBOR plus 1.50%, was 3.33% at
September 30, 2002.
A commitment fee is payable quarterly on the unused portion of the
facility. This fee is calculated as a rate per annum on the average
daily unused commitment during each calendar quarter. The rate changes
based upon the Company's leverage ratio. On September 30, 2002, the
applicable annual rate was 0.450%.
The new revolving credit agreement contains financial covenants that
require the maintenance of interest coverage and leverage ratios, and
minimum levels of net worth. The agreement also places certain
restrictions on indebtedness, capital expenditures and investments by
the Company and its subsidiaries. Such covenants and restrictions
determine the amount that the Company may borrow under such agreement.
As of September 30, 2002, the Company is required to maintain a ratio of
Senior Debt to EBITDA, as defined in the agreement, of not more than 3.5
times. At December 31, 2002, the ratio is required to be not more than
3.0 times. The actual ratio as of September 30, 2002 was 3.02 times. The
Company expects to meet the 3.0 times requirement at year-end.
The Company assumed $2.7 million of debt related to capital leases with
the acquisition of Spectrum Plastics in April 2002. The weighted average
interest rate on these borrowings at September 30, 2002 was 7.75%. This
debt has an interest rate equalization prepayment penalty.
In August 2002, the Company terminated its $60.0 million interest rate
swap agreement dated July 21, 2001. This agreement had effectively
converted interest on the Company's 9.34% fixed rate notes to floating
rate interest at LIBOR plus 2.76%. The Company received a payment of
$4.7 million at termination, representing the fair value of the swap at
the time of
-11-
Notes to Consolidated Financial Statements, Continued:
termination. The accumulated adjustment of $4.7 million, included in the
carrying value of the debt, is being amortized as a reduction to
interest expense in accordance with the terms of the underlying debt.
In August 2002, the Company entered into a new interest rate swap
agreement. This agreement effectively converts $25.0 million of 7.13%
fixed rate notes to variable rate debt at an interest rate equal to
LIBOR plus 4.25%. The effective borrowing rate at September 30, 2002 was
6.02%.
9. Comprehensive Income
--------------------
Comprehensive income includes all changes in equity during a period
except those resulting from the investment by, and distributions to,
stockholders. For the Company, comprehensive income includes net income
and other non-owner changes to equity, which is comprised of foreign
currency translation adjustments and deferred gains and losses related
to certain derivative instruments.
Statement of Comprehensive Income
(Dollars in thousands)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
2002 2001 2002 2001
------- ------- ------- -------
Net income $6,916 $5,702 $22,349 $19,887
Unrealized losses on hedging
activities, net of income taxes (51) (1,493) (1,378) (1,057)
Foreign currency
translation adjustments (5,098) (2,832) (692) (3,638)
------ ------ ------- -------
Comprehensive income $1,767 $1,377 $20,279 $15,192
====== ====== ======= =======
-12-
Notes to Consolidated Financial Statements, Continued:
10. Income Taxes
------------
A reconciliation of the U.S. federal statutory income tax rate to the
consolidated effective income tax rate follows:
Nine months Twelve months
ended ended
September 30, December 31,
2002 2001
------------ ------------
U.S. federal statutory income tax rate 35.0% 35.0%
State taxes (net of federal benefit) 0.5 1.1
Foreign losses without tax benefit 2.4 3.6
Tax on foreign operations (15.8) (22.8)
NASCO equity income (0.1) 0.1
Extraterritorial income exclusion (0.7) --
Foreign sales corporation -- (1.5)
ESOP dividend (5.3) --
Other 2.5 3.0
---- ----
Consolidated effective income tax rate 18.5% 18.5%
==== ====
-13-
Notes to Consolidated Financial Statements, Continued:
11. Information on Business Segments
--------------------------------
The following tables set forth information about the Company's
operations by its three reportable business segments:
Operations by Reportable Business Segment
(Dollars in thousands)
(Unaudited)
Three months ended Nine months ended,
September 30, September 30,
2002 2001 2002 2001
-------- -------- --------- --------
Revenues
Associated Spring $ 80,873 $ 65,165 $244,479 $215,916
Barnes Aerospace 45,753 50,455 142,550 147,519
Barnes Distribution 71,990 72,979 219,123 229,387
Intersegment sales (1,817) (2,099) (5,732) (7,608)
-------- -------- -------- --------
Total revenues $196,799 $186,500 $600,420 $585,214
======== ======== ======== ========
Operating profit
Associated Spring $ 6,540 $ 5,219 $ 21,462 $ 20,558
Barnes Aerospace 1,306 5,006 6,920 12,872
Barnes Distribution 2,480 1,468 7,987 6,287
-------- -------- -------- --------
Total operating profit 10,326 11,693 36,369 39,717
Interest income 292 222 545 665
Interest expense (3,877) (3,848) (10,895) (12,567)
Other income(expense) 1,390 (464) 1,403 (1,299)
-------- -------- -------- --------
Income before income taxes $ 8,131 $ 7,603 $ 27,422 $ 26,516
======== ======== ======== ========
The 2002 acquisitions added approximately $47.1 million of assets to
the Associated Spring segment assets.
12. Contingencies
-------------
Retirement Savings Plan:
The Company continues to guarantee a minimum rate of return on certain
pre-April 2001 assets of its 401(k) Retirement Savings Plan (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
-14-
Notes to Consolidated Financial Statements, Continued:
guaranteed asset value when an employee who had invested in the Barnes
Group stock investment election or vested in the Company match, which is
paid in Barnes Group stock, withdraws from the Plan.
The following table provides a number of hypothetical market values of
the Company's stock compared to the estimated guarantee amounts based on
those market values:
(Dollars in thousands, except for per share data)
Stock price Plan
per share Guarantee
----------- ---------
$28.00 $ 30
24.00 40
20.00 400
16.00 2,800
12.00 9,900
At September 30, 2002, the value of the Company's guarantee on these
assets was approximately $0.4 million.
Restrictions on Stock Consideration for Spectrum Plastics:
The sole shareholder of Spectrum Plastics received 119,048 shares of the
Company's common stock as partial consideration for Spectrum Plastics.
For the one-year period following the required holding period under the
Federal securities laws (one-year requirement), the sole shareholder has
agreed not to sell the Company shares received in the acquisition at a
price below $25.20 per share without the consent of the Company. In the
event he sells any of the shares during that period with the consent of
the Company or during the one month following that period, the Company
will pay to him an amount equal to the difference between $25.20 per
share and a lesser price at which he sells such shares.
With respect to the unaudited consolidated financial information of Barnes
Group Inc. for the three- and nine-month periods ended September 30, 2002 and
2001, PricewaterhouseCoopers LLP reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate report dated October 11, 2002 appearing
herein, states that they did not audit and they do not express an opinion on
that unaudited consolidated financial information. Accordingly, the degree of
reliance on their report on such information should be restricted in light of
the limited nature of the review procedures applied. PricewaterhouseCoopers
LLP is not subject to the liability
-15-
provisions of Section 11 of the Securities Act of 1933 (the Act) for their
report on the unaudited consolidated financial information because that report
is not a "report" or a "part" of the registration statement prepared or
certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and
11 of the Act.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Barnes Group Inc.
We have reviewed the accompanying consolidated statements of income of Barnes
Group Inc. and its subsidiaries for each of the three-month and nine-month
periods ended September 30, 2002 and 2001, the consolidated statement of cash
flows for the nine-month periods ended September 30, 2002 and 2001 and the
consolidated balance sheet as of September 30, 2002. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with auditing standards generally accepted in the
United States of America, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated interim financial information
for it to be in conformity with accounting principles generally accepted in
the United States of America.
We previously audited in accordance with auditing standards generally accepted
in the United States of America, the consolidated balance sheet as of December
31, 2001, and the related consolidated statements of income, stockholders'
equity, and of cash flows for the year then ended (not presented herein), and
in our report dated January 30, 2002 we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information set
forth in the accompanying consolidated balance sheet as of December 31, 2001,
is fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Hartford, Connecticut
October 11, 2002
-16-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
CRITICAL ACCOUNTING POLICIES
----------------------------
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. Significant accounting policies are
disclosed in Note 1 of the Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December 31, 2001. The
most significant areas involving management judgments and estimates are
described below. Actual results could differ from such estimates.
Inventory Valuation:
Inventories are valued at the lower of cost or market. The last-in, first-out
(LIFO) method was used to value the majority of domestic inventories.
Provisions are made to reduce excess or obsolete inventories to their
estimated net realizable value. The process for evaluating the value of excess
and obsolete inventory often requires the Company to make subjective judgments
and estimates concerning future sales levels, quantities and prices at which
such inventory will be able to be sold in the normal course of business.
Accelerating the disposal process or incorrect estimates of future sales
potential may necessitate future adjustments to these provisions.
Business Acquisitions:
Assets and liabilities acquired in business combinations are recorded at their
estimated fair values at the acquisition date. At September 30, 2002, the
Company has $169.5 million of goodwill, representing the cost of acquisitions
in excess of fair values assigned to the underlying net assets of acquired
companies. In accordance with SFAS 142, goodwill and intangible assets deemed
to have indefinite lives are not amortized, but are subject to annual
impairment testing. The assessment of goodwill involves the estimation of the
fair value of "reporting units," as defined by the SFAS 142. Management
completed this assessment during the second quarter of 2002 based on the best
information available as of the date of the assessment, which incorporated
management assumptions about expected future cash flows. Future cash flows can
be affected by changes in the global and local economies, industries and
markets in which the Company sells products or services, and the execution of
management's plans, particularly with respect to integrating acquired
companies. There can be no assurance that future events will not result in
impairment of goodwill or other assets.
Reorganization of Businesses:
The Company records liabilities at the time when management approves and
commits to a reorganization plan. This plan must identify all significant
actions to be taken and specify an expected completion date that is within a
reasonable period of time. The liability includes those costs that can be
reasonably estimated. These estimates are subject to adjustments based upon
actual costs incurred.
-17-
Management's Discussion and Analysis of Financial
Condition and Results of Operations, Continued:
Pension and Other Postretirement Benefits:
Accounting policies and significant assumptions related to pension and other
postretirement expense are disclosed in Note 11 of the Notes to Consolidated
Financial Statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 2001. The Company has estimated the long-term rate of
return on pension plan assets to be 9.75% based on actual historical
performance. A one-quarter percentage point change in the assumed long-term
rate of return would impact the Company's pretax income by approximately $0.7
million annually. The Company reviews this and other assumptions at least
annually.
Income Taxes:
At September 30, 2002, the Company has recognized $24.5 million of deferred
tax assets, net of valuation reserves. The realization of these benefits is
dependent on future income. For those jurisdictions where the expiration date
of tax carry-forwards or the projected operating results indicate that
realization is not likely, a valuation allowance is provided. Management
believes that sufficient income will be earned in the future to realize
deferred income tax assets, net of valuation allowances recorded. The
recognized net deferred tax asset is based on the Company's estimates of
future taxable income and its tax planning strategies. The realization of
these deferred tax assets can be impacted by changes to tax codes, statutory
tax rates and future taxable income levels.
RESULTS OF OPERATIONS
---------------------
The following table sets forth, as a percentage of revenue, the Company's
consolidated statement of income data for the quarter and nine months ended
September 30, 2002 and 2001:
Three months ended Nine months ended,
September 30, September 30,
2002 2001 2002 2001
-------- -------- -------- -------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 68.4 67.1 67.8 66.9
----- ----- ----- -----
Gross profit 31.6 32.9 32.2 33.1
Selling and
administrative expenses 26.5 26.7 26.3 26.5
----- ----- ----- -----
Operating income 5.1 6.2 5.9 6.6
Other income 1.1 0.5 0.6 0.6
Interest expense 2.0 2.0 1.8 2.1
Other expense 0.1 0.6 0.1 0.6
Income taxes 0.6 1.0 0.9 1.1
----- ----- ----- -----
Net income 3.5% 3.1% 3.7% 3.4%
===== ===== ===== =====
-18-
Management's Discussion and Analysis of Financial
Condition and Results of Operations, Continued:
Net sales for the third quarter 2002 were $196.8 million, up 5.5% from $186.5
million last year. Sales growth in the third quarter reflects the Company's
recent acquisitions, which contributed $12.3 million to the Associated Spring
segment's sales, and strong growth in Associated Spring's base business. This
was partially offset by a 9.3% decline in sales at Barnes Aerospace and a 1.4%
decline at Barnes Distribution. The Company's sales for the first nine months
of 2002 were $600.4 million, up 2.6% from $585.2 million for the same period
in 2001. The increase on a year-to-date basis reflects sales from acquisitions
of $28.6 million, partially offset by the decline at Barnes Aerospace, which
coincides with a decline in the aerospace industry, and the impact on Barnes
Distribution of adverse market conditions in the manufacturing, industrial and
transport services sectors.
Third quarter operating income was $10.0 million compared to $11.6 million in
the corresponding 2001 period. These results largely reflect the impact of
lower sales volume and severance costs in the Barnes Aerospace segment
combined with higher postretirement expense primarily at Associated Spring.
The 2002 year-to-date operating income was $35.3 million compared to $38.8
million in 2001.
Operating income margin for the third quarter was 5.1% compared to 6.2% a year
ago. Gross margin declined to 31.6% from 32.9% a year ago. Gross margin
improvements at Associated Spring and Barnes Distribution were more than
offset by lower margins at Barnes Aerospace. Total selling and administrative
expenses in the third quarter declined slightly, as a percentage of sales,
from the year ago period. Reductions in selling and administrative costs at
Associated Spring and Barnes Distribution were partially offset by higher
severance at Barnes Aerospace and higher postretirement costs at Associated
Spring.
Segment Review - Sales and Operating Profit
-------------------------------------------
Associated Spring sales for the 2002 third quarter and year-to-date were $80.9
million and $244.5 million, up 24.1% and 13.2% from a year ago. Strong sales
of nitrogen gas springs and products for the global transportation market, as
well as $12.3 million of incremental sales from recent acquisitions, favorably
impacted sales growth in the third quarter. Sales to customers in the
telecommunications and electronics industries, however, were off significantly
from a year ago and may continue to worsen, due to economic conditions in
these industries worldwide. Third quarter and year-to-date operating profit
for the segment increased to $6.5 million and $21.5 million, increases of
25.3% and 4.4%, respectively, from the comparable 2001 periods. Operating
profit growth reflected the higher sales volume combined with lower costs and
productivity improvements.
Barnes Aerospace third quarter and year-to-date 2002 sales were $45.8 million
and $142.6 million, down 9.3% and 3.4%, respectively, from the comparable 2001
periods. Operating profit for the third quarter and year-to-date period
decreased to $1.3 million and $6.9 million, respectively, reflecting lower
sales volume, severance expense of $0.7 million in the third quarter and $1.3
million year-to-date, and
-19-
Management's Discussion and Analysis of Financial
Condition and Results of Operations, Continued:
higher costs aimed at improving productivity. Air traffic, which impacts
orders for new aircraft, has not returned to pre-September 11, 2001 levels and
is not expected to do so in the near future. While sales were down 9.3% for
the quarter, orders of $39.1 million were down 25.6% compared to a year ago.
Order backlog has declined in each of the last four quarters and now stands at
$143.0 million, down nearly 10% from $158.7 million at December 31, 2001. The
growth and customer diversification programs initiated by Barnes Aerospace
several years ago are helping to mitigate some of the impact of the current
aerospace downturn. Nevertheless, management has continued to reduce the cost
structure of the business through workforce reductions and other actions.
These actions are expected to generate substantial cost savings going forward.
Barnes Distribution third quarter and year-to-date 2002 segment sales were
$72.0 million and $219.1 million, respectively, and were decreases of 1.4% and
4.5% from the comparable 2001 periods. The sales decline reflects the
continued weak economic conditions in the North American and European
industrial and transport services markets. Despite the sales decline,
operating profit improved significantly in the third quarter and year-to-date
periods to $2.5 million and $8.0 million, respectively. This improvement was
attributable to realization of the synergies of the Curtis Industries
acquisition and the resulting cost savings from warehouse consolidations,
reduced selling and administrative expenses, and gross margin improvements.
Other Income/Expense
--------------------
The increase in other income for the third quarter compared to 2001 resulted
from foreign exchange transaction gains of $1.6 million compared to gains of
$0.6 million a year ago. These transaction gains related primarily to
exposures on U.S. dollar-denominated financial instruments at the Company's
international locations. To reduce its foreign currency exposure in countries
where the local currency is strengthening against the U.S. dollar, management
has converted U.S. dollar-denominated cash and short-term investments to local
currency, and are using forward currency contracts for other U.S. dollar-
denominated assets in an effort to reduce the volatility of changes in foreign
exchange rates on the income statement. In weaker currency countries such as
Brazil and Mexico, management continues to invest excess cash in U.S. dollar-
denominated instruments. The significant gain in the third quarter reflects
changes in the Brazilian currency, on investments that were U.S. dollar-based.
Lower interest expense in the first nine months of 2002 was a result of lower
market interest rates and a fixed-to-variable interest rate swap agreement
that more than offset the impact of an increase in average borrowings.
Other expenses declined in 2002 due to an accounting change that eliminated
goodwill amortization of $1.0 million and $3.1 million in the third quarter
and year-to-date, respectively. This change is described more fully in Note 3,
"New Accounting Standards."
-20-
Management's Discussion and Analysis of Financial
Condition and Results of Operations, Continued:
Income Taxes
------------
The Company's effective tax rate for the first nine months of 2002 was 18.5%
compared to 25.0% for the same period in 2001. The lower tax rate in 2002
reflects the benefit of an ESOP dividend distribution tax deduction. The 2002
tax deduction, which also included a retroactive election for the 2001
dividend distribution, was the result of an amendment to the Retirement
Savings Plan, which provides for participants who have invested in Barnes
Group stock to elect to receive a cash distribution or to reinvest their
dividends. The tax rate percentage is expected to be in the low 20's in 2003,
assuming an anticipated shift in earnings to countries with higher tax rates,
primarily the United States.
Net Income and Net Income Per Share
-----------------------------------
Consolidated net income for the third quarter of 2002 and 2001 was $6.9
million and $5.7 million, respectively. Basic and diluted earnings per share
for the third quarter of 2002 were $.37 and $.36, respectively, compared to
basic and diluted earnings per share of $.31 and $.30, respectively, for the
third quarter of 2001.
Consolidated net income for the first nine months of 2002 and 2001 was $22.3
million and $19.9 million, respectively. Basic and diluted earnings per share
for the first nine months of 2002 were $1.20 and $1.17, compared to 2001's
basic and diluted earnings per share of $1.07 and $1.05, respectively.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
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.
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 working capital and anticipates operating
activities in 2002 will provide sufficient cash to meet the Company's current
financial commitments and take advantage of opportunities for organic growth.
Net cash provided by operating activities in the first nine months of 2002 was
$35.6 million, down from $41.8 million provided in the first nine months of
2001. In the first nine months of 2002, operating cash flows were negatively
impacted primarily by a higher use of working capital compared to the same
2001 period. Accounts payable decreased in part due to reduced inventory
purchases combined with the impact in 2002, of aggressive working capital
management at the end of 2001.
-21-
Management's Discussion and Analysis of Financial
Condition and Results of Operations, Continued:
The reduction in depreciation and amortization expense was due to the absence
of $3.1 million of goodwill amortization in 2002, as previously discussed. In
addition, depreciation declined $0.8 million due to lower capital spending
over the past three years and the retirement of older assets. During the first
nine months of 2001, the increase in prepaid expenses was primarily due to an
increase in prepaid taxes, which resulted from overpayments that will be
applied to subsequent years. In addition, the 2001 net decrease in deferred
taxes resulted primarily from changes in temporary differences related to
property, plant and equipment and accrued retirement benefits.
Net cash used by investing activities in the first nine months of 2002 was
$44.8 million compared with $19.2 million in 2001. The significant increase in
investing activities for the first nine months of 2002 resulted from the
acquisitions of Seeger-Orbis and Spectrum Plastics. The Seeger-Orbis
acquisition was funded from cash held by the Company outside the United
States. Due to the current economic environment, capital spending was below
the 2001 level.
Net cash provided by financing activities was $0.7 million in the first nine
months of 2002, compared to $5.8 million used in the comparable period of
2001. Cash generation included $4.7 million of cash proceeds from the
termination of an interest rate swap agreement. In 2002, cash provided by
operating activities, and proceeds from additional borrowings under the
revolving credit agreement and short-term credit lines, and excess cash were
used to fund acquisitions and capital expenditures, and to pay dividends. In
2001, proceeds from the sale of a cross-currency debt swap, combined with
strong cash flow from operating activities, were used in part to fund capital
expenditures, pay dividends, repurchase the Company's stock and reduce debt.
The Company maintains bank borrowing facilities to supplement internal cash
generation. At September 30, 2002, the Company had a $150.0 million borrowing
facility under a three-year revolving credit agreement of which $50.0 million
was borrowed at an interest rate of 3.33%. The Company also has approximately
$15.0 million in uncommitted short-term bank credit lines, none of which was
in use at September 30, 2002. Borrowing capacity is restricted based upon
various debt covenants. The most restrictive covenant requires the Company to
maintain a ratio of Senior Debt to EBITDA, as defined in the agreement, of not
more than 3.5 times at September 30, 2002. The actual ratio was 3.02 times and
would have allowed additional borrowings under senior borrowing facilities of
$37.9 million on September 30, 2002. The covenant will change to 3.0 times at
December 31, 2002, which the Company expects to meet.
The Company assumed $2.7 million of debt related to capital leases with the
acquisition of Spectrum Plastics in April 2002. The weighted average interest
rate on this borrowing at September 30, 2002 was 7.75%. This debt has an
interest rate equalization prepayment penalty.
-22-
Management's Discussion and Analysis of Financial
Condition and Results of Operations, Continued:
The Company believes its credit facilities coupled with cash generated from
operations are adequate to finance its anticipated future requirements.
The funded status of the Company's pension plans is dependent upon many
factors, including returns on invested assets and the level of market interest
rates. Recent declines in the value of securities traded in equity markets and
declines in long-term interest rates have had a negative impact on the funded
status of the plans. In 2002, no contribution was required and no
contribution was made to any of the pension plans. Upon final measurement of
the plans' funded status in the fourth quarter of 2002, the Company may
recognize an additional minimum pension liability through an after-tax charge
to accumulated other non-owner changes to equity. The amount of additional
minimum pension liability is subject to changes in the returns on invested
assets and long-term interest rates during the fourth quarter.
RECENT ACCOUNTING CHANGES
-------------------------
In April 2002, Statement of Financial Accounting Standards ("SFAS") No. 145,
"Rescission of FASB Statements No. 4, 44, and 64, amendment of FASB Statement
No. 13, and Technical Corrections," was issued. The standard eliminates an
inconsistency between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. The adoption of this
statement is not expected to have a material impact on the Company's financial
position, results of operations or cash flow.
In June 2002, SFAS No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities," was issued. This statement provides guidance on the
recognition and measurement of liabilities associated with exit or disposal
activities and requires that such liabilities be recognized when incurred.
This statement is effective for exit or disposal activities that are initiated
after December 31, 2002 and does not impact the Company's existing
reorganization accruals. Adoption of this standard may impact the timing of
recognition of costs associated with future exit and disposal activities.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
There has been no significant change in the Company's exposure to market risk
during the first nine months of 2002. For discussion of the Company's exposure
to market risk, refer to the Company's Annual Report on Form 10-K for the year
ended December 31, 2001.
Item 4. Controls and Procedures
During the 90-day period prior to the filing date of this report, management,
including the Company's President and Chief Executive Officer and Chief
Financial
-23-
Officer, evaluated the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based upon, and as of the date
of, that evaluation, the President and Chief Executive Officer and Chief
Financial Officer concluded that the disclosure controls and procedures were
effective, in all material respects, to ensure that information required to be
disclosed in the reports the Company files and submits under the Securities
Exchange Act is recorded, processed, summarized and reported as and when
required.
There have been no significant changes in the Company's internal controls
since the date of the evaluation, or in other factors, which could
significantly affect internal controls subsequent to the date the Company's
President and Chief Executive Officer and Chief Financial Officer carried out
their evaluation. There were no significant deficiencies or material
weaknesses identified in the evaluation.
Forward-Looking Statements
--------------------------
This quarterly report may contain certain forward-looking statements as
defined in the Public Securities Litigation and Reform Act of 1995. These
forward-looking 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. These risks and uncertainties include, but are not
limited to, 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; the Company's ability to finance growth plans,
share repurchases and general operating activities; the Company's ability to
achieve earnings forecasts; changes in economic and political conditions
worldwide and in the locations and industries where the Company does business;
interest and foreign exchange rate fluctuations; and changes in laws and
regulations.
-24-
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 15 Letter regarding unaudited interim financial
information.
Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
Exhibit 99.2 Certification Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
(b) Form 8-K
No reports on Form 8-K were filed during the quarter ended September
30, 2002.
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 November 13, 2002 By /S/ William C. Denninger
----------------- -------------------------------------
William C. Denninger
Senior Vice President, Finance
and Chief Financial Officer
(the principal financial officer)
Date November 13, 2002 By /s/ Francis C. Boyle, Jr.
----------------- -------------------------------------
Francis C. Boyle, Jr.
Vice President, Controller
(the principal accounting officer)
-25-
CERTIFICATIONS
I, Edmund M. Carpenter, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Barnes Group Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b)any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
-26-
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated: November 13, 2002
/s/ Edmund M. Carpenter
-----------------------
Edmund M. Carpenter
President and Chief Executive Officer
I, William C. Denninger, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Barnes Group Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
-27-
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b)any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated: November 13, 2002
/s/ William C. Denninger
-------------------------
William C. Denninger
Chief Financial Officer
EXHIBIT INDEX
BARNES GROUP INC.
Quarterly Report on Form 10-Q
For Quarter ended September 30, 2002
------------------------------------
Exhibit No. Description Reference
---------- ----------- ---------
15 Letter regarding unaudited interim Filed with this report.
financial information.
99.1 Certification Pursuant to 18 U.S.C. Filed with this report.
Section 1350 as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act
of 2002.
99.2 Certification Pursuant to 18 U.S.C. Filed with this report.
Section 1350 as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act
of 2002.
-28-
Exhibit 15
November 13, 2002
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Commissioners:
We are aware that our report dated October 11, 2002 on our review of interim
financial information of Barnes Group Inc. (the "Company') as of and for the
period ended September 30, 2002 and included in the Company's quarterly report
on Form 10-Q for the quarter then ended is incorporated by reference in its
Registration Statements on Form S-8 (No. 2-56437, pertaining to the Employee
Stock Purchase Plan; No. 2-91285, pertaining to the 1981 Stock Incentive Plan;
Nos. 33-20932 and 33-30229, pertaining to the Retirement Savings Plan; the
registration statements filed on July 18, 1994, No. 33-91758, and May 16,
1997, No. 33-27339, pertaining to the 1991 Barnes Group Stock Incentive Plan;
No. 333-41398 and No. 333-88518, pertaining to the Barnes Group Inc. Employee
Stock and Ownership Program; and No. 333-57658, pertaining to the Key
Executive Stock Plan).
Very truly yours,
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Barnes Group Inc. (the
"Company") on Form 10-Q for the period ending September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Edmund M. Carpenter, Chief Executive Officer of the Company, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 that:
1) the Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
2) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
/s/ Edmund M. Carpenter
- -----------------------
Edmund M. Carpenter
Chief Executive Officer
November 13, 2002
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Barnes Group Inc. (the
"Company") on Form 10-Q for the period ending September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
William C. Denninger, Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 that:
1) the Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
2) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
/s/ William C. Denninger
- ------------------------
William C. Denninger
Chief Financial Officer
November 13, 2002