UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM l0-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2003
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For transition period from
--------------------
to
--------------------
Commission File Number 1-4801
BARNES GROUP INC.
(a Delaware Corporation)
I.R.S. Employer Identification No. 06-0247840
123 Main Street, Bristol, Connecticut 06010
Telephone Number (860) 583-7070
Number of common shares outstanding at
May 7, 2003 - 20,109,022
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
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the exchange Act). Yes X No
--- ---
-1-
BARNES GROUP INC.
FORM 10-Q INDEX
For the Quarterly period ended March 31, 2003
DESCRIPTION PAGES
- ----------- -----
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Income
for the three months ended
March 31, 2003 and 2002 3
Consolidated Balance Sheets as
of March 31, 2003 and December 31, 2002 4-5
Consolidated Statements of Cash Flows
for the three months ended March 31,
2003 and 2002 6
Notes to Consolidated Financial
Statements 7-13
Report of Independent Accountants 14
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 15-19
ITEM 3. Quantitative and Qualitative Disclosure
About Market Risk 19
ITEM 4. Controls and Procedures 20
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds 20
ITEM 6. Exhibits and Reports on Form 8-K 20-21
Signatures 22
Certifications 23-24
Exhibit Index 25-26
-2-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME
Three months ended March 31, 2003 and 2002
(Dollars in thousands, except per share data)
(Unaudited)
2003 2002
-------- --------
Net sales $218,734 $194,236
Cost of sales 142,230 130,298
Selling and administrative expenses 63,294 52,381
-------- --------
205,524 182,679
-------- --------
Operating income 13,210 11,557
Other income 613 427
Interest expense 4,110 3,390
Other expenses 278 137
-------- --------
Income before income taxes 9,435 8,457
Income taxes 2,076 1,691
-------- --------
Net income $ 7,359 $ 6,766
======== ========
Per common share:
Net income:
Basic $ .38 $ .37
Diluted .37 .36
Dividend .20 .20
Average common shares outstanding:
Basic 19,531,719 18,497,371
Diluted 19,894,312 19,026,049
See accompanying notes.
-3-
BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS March 31, December 31,
2003 2002
--------- ------------
(Unaudited)
Current assets
Cash and cash equivalents $ 32,061 $ 28,355
Accounts receivable, less allowances
(2003-$3,125; 2002-$2,891) 129,358 97,533
Inventories
Finished goods 71,770 58,244
Work-in-process 18,754 16,993
Raw materials and supplies 12,980 13,572
-------- --------
103,504 88,809
Deferred income taxes 16,487 16,024
Prepaid expenses 10,565 7,916
-------- --------
Total current assets 291,975 238,637
Deferred income taxes 22,294 22,610
Property, plant and equipment 432,689 429,312
Less accumulated depreciation 275,139 269,872
-------- --------
157,550 159,440
Goodwill 212,549 164,594
Other assets 89,331 67,249
-------- --------
Total assets $773,699 $652,530
======== ========
See accompanying notes.
-4-
BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY March 31, December 31,
2003 2002
--------- ------------
(Unaudited)
Current liabilities
Accounts payable $ 78,405 $ 63,389
Accrued liabilities 72,443 61,853
Long-term debt - current 6,849 6,837
-------- --------
Total current liabilities 157,697 132,079
Long-term debt 277,187 214,125
Accrued retirement benefits 90,898 87,162
Other liabilities 12,370 10,944
Contingencies (Note 10)
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 53,167 53,511
Treasury stock at cost,
2003-2,101,694 shares
2002-3,081,718 shares (41,474) (61,847)
Retained earnings 258,349 255,147
Accumulated other non-owner changes
to equity (34,715) (38,811)
-------- --------
Total stockholders' equity 235,547 208,220
-------- --------
Total liabilities and stockholders'
equity $773,699 $652,530
======== ========
See accompanying notes.
-5-
BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 2003 and 2002
(Dollars in thousands)
(Unaudited)
2003 2002
------- -------
Operating activities:
Net income $ 7,359 $ 6,766
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 8,532 7,883
Gain on disposition of property,
plant and equipment (32) (61)
Changes in assets and liabilities:
Accounts receivable (15,986) (14,742)
Inventories 506 4,198
Prepaid expenses (1,489) (255)
Accounts payable 4,869 (6,288)
Accrued liabilities 1,373 1,078
Deferred income taxes 922 1,071
Long-term pension asset (698) (1,150)
Other 526 855
------- -------
Net cash provided (used) by operating activities 5,882 (645)
Investing activities:
Proceeds from disposition of property, plant
and equipment 204 306
Capital expenditures (3,301) (4,393)
Business acquisitions, net of cash acquired (61,167) (23,011)
Other (172) (68)
------- -------
Net cash used by investing activities (64,436) (27,166)
Financing activities:
Net increase in notes payable 2,852 3,947
Payment on long-term debt (137) --
Proceeds from the issuance of long-term debt 63,500 10,000
Proceeds from the issuance of common stock 440 999
Common stock repurchases (154) (96)
Dividends paid (3,983) (3,703)
Other (915) --
------- -------
Net cash provided by financing activities 61,603 11,147
Effect of exchange rate changes on cash flows 657 (1,535)
------- -------
Increase (decrease) in cash and cash equivalents 3,706 (18,199)
Cash and cash equivalents at beginning of period 28,355 48,868
------- -------
Cash and cash equivalents at end of period $32,061 $30,669
======= =======
Supplemental Disclosure of Cash Flow Information:
Non-cash financing and investing activities include the 2003 issuance of $18.5
million of treasury stock in connection with the Kar acquisition.
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,
2002. In the opinion of management, all adjustments, including normal
recurring accruals considered necessary for a fair presentation, have
been included. Operating results for the three-month period ended March
31, 2003 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2003. Certain
reclassifications have been made to prior year amounts to conform to the
current year presentation.
Stock-Based Compensation
------------------------
The Company accounts for stock-based employee compensation plans under
the recognition and measurement principles of APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations.
The following table illustrates the effect on net income and earnings
per share if the Company had applied the fair value recognition
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation,"
to stock-based employee compensation.
(Dollars in thousands, except per share data)
Three Months ended March 31, 2003 2002
------ ------
Net income, as reported $7,359 $6,766
Add: Stock-based employee
compensation expense included in
reported net income, net of
related tax effects 472 300
Deduct: Stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax
effects (1,411) (1,269)
------ ------
Pro forma net income $6,420 $5,797
====== ======
Earning per share:
Basic - as reported $ .38 $ .37
Basic - pro forma .33 .31
Diluted - as reported .37 .36
Diluted - pro forma .32 .30
The fair value of each stock option grant on the date of grant has been
estimated using the Black-Scholes option-pricing model. Assumptions
used for the 2003 grants were: Risk-free interest rate - 2.33%; expected
life -
-7-
3.8 years; expected volatility - 35%; expected dividend yield - 3.52%.
The weighted-average grant date fair value of options granted during
2003 was $4.13.
2. Net Income Per Common Share
---------------------------
For the purpose of computing diluted earnings per share, the weighted
average number of shares outstanding was increased by 362,593 and
528,678 for the periods ended March 31, 2003 and 2002, respectively, for
the potential dilutive effects of stock-based incentive plans. As of
March 31, 2003 there were 4,237,691 options for shares of common stock
outstanding of which 2,237,531 were considered dilutive. There were no
adjustments to net income for the purposes of computing income available
to common stockholders for those periods.
3. Acquisitions
------------
On February 6, 2003, the Company acquired Kar Products, LLC and certain
assets of a related company, A.& H. Bolt & Nut Company Ltd. (Kar), which
management believes is a leading full service distributor of
maintenance, repair and operating (MRO) supplies to industrial,
construction, transportation and other markets. The acquisition expands
both geographic scope and product line reach of the Barnes Distribution
segment. Kar has a diversified customer base that operates in all 50
states, Puerto Rico, and Canada, further enhancing Barnes Distribution's
leadership position within the MRO market and its international
presence. The results of operations of Kar have been included in the
consolidated financial statements since the purchase date. The purchase
price of $78.5 million, excluding transaction costs, was financed
through a combination of $4.0 million cash, $56.0 million of debt and
$18.5 million (923,506 shares) of Barnes Group common stock. The
Company anticipates achieving a number of post-acquisition cost savings
and other synergies through headquarters and infrastructure
consolidation.
The Company is in the process of obtaining third-party valuations of
certain assets acquired with Kar. Thus, the allocation of the purchase
price is subject to refinement. Any amounts attributable to such assets
are expected to be finalized during 2003. The aggregate purchase price,
including transaction costs of $1.2 million, was $79.7 million. The
following table summarizes the estimate of fair values of the assets
acquired and liabilities assumed at the date of acquisition (in
thousands):
Current assets $30,155
Property, plant, and equipment 3,634
Intangible assets 17,211
Goodwill 47,908
-------
Total assets acquired 98,908
-------
Current liabilities (16,150)
Other liabilities (3,091)
-------
Total liabilities assumed (19,241)
-------
Net assets acquired $79,667
=======
-8-
The following table reflects the pro forma operating results of the
Company for the three months ended March 31, 2003 and 2002, which gives
effect to the acquisition of Kar as if it had occurred on January 1,
2003 and January 1, 2002, respectively. The pro forma results are based
on assumptions that the Company believes are reasonable under the
circumstances. The pro forma results are not necessarily indicative of
the operating results that would have occurred if the acquisition had
been effective January 1, 2003 and 2002, nor are they intended to be
indicative of results that may occur in the future. The pro forma
information does not include the effect of synergies and cost reduction
initiatives related to the acquisition. The underlying pro forma
information includes the historical financial results of the Company and
Kar adjusted for the amortization expense associated with the assets
acquired, the Company's financing arrangements and certain purchase
accounting adjustments.
(Dollars in thousands, except per share data)
Three Months ended March 31, 2003 2002
-------- --------
Net sales $230,685 $225,759
Income before income taxes 9,834 9,998
Net income 7,599 7,690
Per common share:
Basic $ .38 $ .40
Diluted .38 .39
4. Goodwill and Other Intangible assets
------------------------------------
The following table sets forth the change in the carrying amount of
goodwill for each reportable segment for the period ended March 31,
2003:
(Dollars in thousands)
Associated Barnes Barnes Total
Spring Aerospace Distribution BGI
---------- --------- ------------ --------
January 1, 2003 $ 76,377 $ 30,900 $ 57,317 $164,594
Goodwill acquired 47 -- 47,908 47,955
-------- -------- -------- -------
March 31, 2003 $ 76,424 $ 30,900 $105,225 $212,549
======== ======== ======== ========
The $47.9 million goodwill acquired relates to the acquisition of Kar in
February 2003. The Company is in the process of obtaining third-party
valuations of certain intangible assets acquired with Kar. The purchase
price allocation is expected to be finalized during 2003.
Intangible assets, other than goodwill, consist of patents and
registered trademarks and customer lists/relationships. These assets are
being amortized over their estimated useful lives ranging up to 30
years. In connection with the acquisition of Kar, the Company recorded
intangible assets primarily related to customer lists/relationships in
2003 of $17.2 million which is being amortized over their estimated
useful life and will
-9-
result in approximately $1.6 million of amortization expense in 2003.
The Company is in the process of obtaining third-party valuations of
these and other intangibles and thus the amount is subject to
refinement.
5. Business Reorganization Accruals
--------------------------------
In connection with the Curtis acquisition in May 2000, the Company
recorded certain integration costs. The Company recorded total costs of
$6.4 million related primarily to lease consolidation costs, facility
closure costs and reductions in personnel. As of March 31, 2003, an
accrual of approximately $1.4 million remained, related to future lease
payments.
During the fourth quarter of 2001, the Company recorded pretax charges
of $4.8 million, primarily for Associated Spring, related to actions
aimed at reducing the Company's infrastructure including the closure of
an Associated Spring plant in Texas. As of March 31, 2003, the remaining
balance of $0.3 million related to post-closure holding costs for the
Texas plant, now closed and being held for sale.
In connection with the Kar acquisition in February 2003, the Company has
recorded certain integration costs. The integration plan includes
combining the headquarters functions and consolidating warehousing and
distribution networks. As a result, the Company recorded total costs of
$3.9 million that related primarily to lease consolidation costs,
facility closure costs and reductions primarily in administrative
personnel. These costs associated with the acquired business are
reflected as assumed liabilities in the allocation of the purchase price
to net assets acquired. The Company anticipates recording additional
integration costs in 2003 when additional warehouse consolidation plans
are finalized.
6. Debt
----
In February 2003, the Company borrowed $56.0 million under its revolving
credit facility in connection with financing the acquisition of Kar. The
March 31, 2003 weighted-average interest rate on these borrowings was
3.29%. Also, in conjunction with the acquisition, the Company amended
its revolving credit agreement, pursuant to which the maximum ratio of
Total Debt to EBITDA, as defined in the revolving credit agreement, was
increased to 3.25 times for the first three quarters of 2003 and will
decline to 3.0 times at December 31, 2003. The actual ratio at March 31,
2003 was 3.05.
At March 31, 2003, the Company classified $3.5 million of borrowings
under lines of credit due within one year as long-term debt. The Company
has both the intent and ability, through its revolving credit facility,
to refinance this amount on a long-term basis.
The Company's debt agreements contain financial covenants that require
the maintenance of interest coverage and leverage ratios, and minimum
levels of net worth. The agreements also place certain restrictions on
indebtedness, capital expenditures and investments by the Company and
its subsidiaries. Such covenants and restrictions determine the amount
of borrowings, dividends or treasury stock purchases the Company can
make under such agreements.
-10-
Under the most restrictive borrowing capacity covenant in any agreement,
$18.1 million of additional capacity was available at March 31, 2003.
Under the most restrictive net worth covenant in any agreement, $31.5
was available for payment of dividends or to fund acquisitions of shares
of the Company's common stock at March 31, 2003.
7. 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)
For the three months ended March 31, 2003 2002
------- -------
Net income $ 7,359 $ 6,766
Unrealized (losses) gains on hedging
activities, net of income taxes (171) (618)
Foreign currency
translation adjustments 4,267 (1,570)
------- -------
Comprehensive income $11,455 $ 4,578
======= =======
8. Income Taxes
------------
A reconciliation of the U.S. federal statutory income tax rate to the
consolidated effective income tax rate follows:
Three months Twelve months
ended ended
March 31, December 31,
2003 2002
------------ ------------
U.S. federal statutory income tax rate 35.0% 35.0%
State taxes (net of federal benefit) 0.9 0.9
Foreign losses without tax benefit 1.4 3.6
Tax on foreign operations (11.5) (16.0)
NASCO equity income (0.9) (0.4)
Export sales benefit (1.0) (1.3)
ESOP dividend (2.3) (5.8)
Other 0.4 2.0
---- ----
Consolidated effective income tax rate 22.0% 18.0%
==== ====
-11-
9. Information on Business Segments
--------------------------------
The following tables set forth information about the Company's
operations by its three reportable business segments:
(Dollars in thousands)
For the three months ended March 31, 2003 2002
-------- --------
Revenues
Associated Spring $ 85,065 $ 75,565
Barnes Aerospace 42,329 47,410
Barnes Distribution 93,847 72,865
Intersegment sales (2,507) (1,604)
-------- --------
Total revenue $218,734 $194,236
======== ========
Operating profit
Associated Spring $ 7,624 $ 7,033
Barnes Aerospace 2,706 2,880
Barnes Distribution 3,197 1,902
-------- --------
Total operating profit 13,527 11,815
Interest income 295 124
Interest expense (4,110) (3,390)
Other expense (277) (92)
-------- --------
Income before income taxes $ 9,435 $ 8,457
======== ========
The Kar acquisition added approximately $98.9 million of assets to the
Barnes Distribution segment assets.
10. Contingencies
-------------
Retirement Savings Plan:
The Company guarantees 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 if, and to the extent
that, the value of the related Company stock does not cover the
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
----------- ---------
$25.00 $ 34
20.00 400
15.00 4,400
10.00 13,400
5.00 22,600
0.00 32,900
-12-
The closing price of the Company's stock on March 31, 2003 was $21.16,
resulting in an estimated guarantee on Plan assets of $0.2 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, which ended April 29, 2003, 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 this period with
the consent of the Company or during the one month following this
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.
Product Warranties:
The Company provides product warranties in connection with the sale of
products. Product warranty liabilities were not significant as of March
31, 2003.
------------------------
With respect to the unaudited consolidated financial information of
Barnes Group Inc. for the three-month period ended March 31, 2003 and
2002, 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 April 17, 2003
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 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.
-13-
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Barnes Group Inc.
We have reviewed the accompanying consolidated statements of income and
cash flows of Barnes Group Inc. and its subsidiaries for each of the
three-month periods ended March 31, 2003 and 2002, and the consolidated
balance sheet as of March 31, 2003. This interim financial information
is 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 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, 2002, 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 31, 2003 (except
for Note 3, which is as of February 6, 2003) 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, 2002, 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
April 17, 2003
-14-
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, 2002. The
most significant areas involving management judgments and estimates are
described in Management's Discussion and Analysis in the Company's Annual
Report on Form 10-K for the year ended December 31, 2002, to which there have
been no material changes. Actual results could differ from those estimates.
Acquisitions
------------
On February 6, 2003, the Company acquired Kar Products, LLC and certain assets
of a related company, A.& H. Bolt & Nut Company Ltd. (Kar), a leading full
service distributor of maintenance repair and operating (MRO) supplies to
industrial, construction, transportation and other markets. The acquisition
expands both the geographic scope and product line of the Barnes Distribution
segment. Kar has a diversified customer base that operates in all 50 states,
Puerto Rico, and Canada, further enhancing Barnes Distribution's leadership
position within the MRO market and international presence. The results of
operations of Kar have been included in the consolidated financial statements
since the purchase date. The consideration for the acquisition of $78.5
million was financed through a combination of $4.0 million cash, $56.0 million
of debt and $18.5 million (923,506 shares) of Barnes Group common stock.
Management has authorized certain integration activities aimed at achieving a
number of post-acquisition cost savings and other synergies through
headquarters and infrastructure consolidation. This integration plan includes
combining the headquarters functions and consolidating warehousing and
distribution networks. As a result, the Company recorded total costs of $3.9
million related primarily to lease consolidation costs, facility closure costs
and reductions in personnel. These costs associated with the acquired business
are reflected as assumed liabilities in the allocation of the purchase price
to net assets acquired. The total cost of the acquisition may change based on
final purchase price adjustments and finalization of integration plans.
-15-
Results of Operations
---------------------
The following table sets forth, as a percentage of revenue, the Company's
consolidated statement of income data:
Three months ended March 31, 2003 2002
----- -----
Net sales 100.0% 100.0%
Cost of sales 65.0 67.1
----- -----
Gross profit 35.0 32.9
Selling and
administrative expenses 29.0 27.0
----- -----
Operating income 6.0 5.9
Other income 0.3 0.2
Interest expense 1.9 1.7
Other expense 0.1 --
Income taxes 0.9 0.9
----- -----
Net income 3.4% 3.5%
===== =====
Net sales for the first quarter 2003 were a record $218.7 million, up 12.6%
from $194.2 million in the first quarter last year. The sales increase
primarily reflected the Company's recent acquisitions, which contributed $19.2
million to Barnes Distribution and $9.9 million to Associated Spring. This
growth was partially offset by a 10.7% decline in sales at Barnes Aerospace.
First quarter 2003 operating income was $13.2 million compared to $11.6
million in the first three months of 2002. These results reflect higher
operating profit at Associated Spring and Barnes Distribution and lower
operating profit in the Barnes Aerospace segment. The Company-wide operating
income margin was 6.0% compared with 5.9% a year ago. This increase was
driven, for the most part, by a higher gross margin, which improved to 35.0%
from 32.9% a year ago. This increase in gross margin reflects higher gross
profit margins at Barnes Distribution, combined with an overall shift in the
sales mix to the higher margin distribution business. Selling and
administrative expenses increased as a percentage of sales compared to last
year's first quarter. This was also driven by the higher proportion of sales
in the distribution business, which has a higher selling expense component.
Also impacting operating expenses were higher personnel costs, specifically
pension and other postretirement benefit costs.
Segment Review - Sales and Operating Profit
-------------------------------------------
Associated Spring's sales for first quarter 2003 were $85.1 million, compared
to $75.6 million a year ago. Sales during the quarter reflected nearly $10.0
million of incremental sales from recent acquisitions and continued growth in
the sales of nitrogen gas spring products. Partially offsetting these items
was a drop in sales related to a planned withdrawal from the heavy truck brake
spring market, as well as a decline in sales to the telecommunications and
electronics markets. Operating profit for the segment was $7.6 million in the
first quarter of 2003 compared with $7.0 million for the same period a year
ago. This increase reflected the higher sales volume and the benefits of last
year's closure of the Texas facility, which were partially offset by higher
personnel costs, primarily pension and other postretirement expenses. Overall
light vehicle production is
-16-
expected to be slightly lower in 2003 compared to 2002. The impact on
Associated Spring, whether positive or negative, is unclear and is ultimately
dependent upon the actual light vehicle production mix. The end markets for
telecommunications and electronics products are expected to remain weak in the
near term.
Barnes Aerospace's first quarter 2003 sales were $42.3 million, down 10.7%
compared with $47.4 million in 2002, reflecting the continued challenging
commercial aerospace marketplace. Operating profit was $2.7 million for the
current quarter, down slightly from $2.9 million during last year's first
quarter reflecting the lower sales volume. Operating profit was positively
impacted by headcount reductions and other actions taken throughout Barnes
Aerospace in 2002 aimed at positioning the business for a period of lower
commercial aerospace volume. First quarter 2002 operating profit included $0.5
million of severance costs. Orders recorded during the first quarter of 2003
were $38.3 million and order backlog at March 31, 2003 was $148.2 million,
compared with $151.8 million at year-end 2002. Impacting first quarter 2003
orders and backlog was an order cancellation of approximately $7.1 million
related to a single OEM customer. Direct and indirect orders for the U.S.
military were approximately 26% of the orders booked during the first quarter
of 2003. Recent events such as the war in Iraq and the outbreak of severe
acute respiratory syndrome (SARS) have had a negative impact on air travel,
the long-term effects of which are unclear.
Barnes Distribution's sales in the first three months of 2003 were $93.8
million, up 28.8% from $72.9 million in 2002. The increase in sales for the
quarter included $19.2 million from the February 6, 2003 acquisition of Kar
and the translation impact resulting from the weakening of the U.S. dollar
relative to foreign currencies. Sales in the North American business were
positively impacted by an increased focus on national and regional account
development and an e-commerce platform initiated in 2002. This was offset by a
drop in other sales, reflecting the continued weakness in the manufacturing
and industrial sectors. Operating profit for the first quarter 2003 was $3.2
million, up 68.1% from $1.9 million a year ago. The improvement in operating
results was driven primarily by higher profitability in Barnes Distribution's
North American operations, which included a higher gross profit margin, and
incremental operating profit contributed by Kar.
Other Income/Expense
--------------------
Interest expense increased in 2003 as a result of higher borrowings related
primarily to the Kar acquisition, coupled with a reduction in the amount of
debt subject to interest rate swaps.
Income Taxes
------------
The Company's effective tax rate for first quarter 2003 was 22.0%, compared
with 20.0% in 2002's first quarter and 18.0% for the full year 2002. The
higher rate in 2003 is primarily due to an additional deduction for the
Company's Retirement Savings Plan (RSP) dividends in 2002, and an anticipated
shift in 2003 earnings to countries with higher tax rates, primarily the
United States. The 2002 tax deduction included a retroactive election for the
2001 dividend distribution, the result of an amendment to the Company's RSP.
Net Income and Net Income Per Share
-----------------------------------
Consolidated net income for the first quarter of 2003 and 2002 was $7.4
million and $6.8 million, respectively. Basic and diluted earnings per share
for the first quarter of 2003 were $.38 and $.37 compared to 2002's basic and
diluted earnings per share of $.37 and $.36, respectively.
-17-
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 optimization and anticipates that operating
activities in 2003 will provide sufficient cash to take advantage of
opportunities for organic business expansion and to meet the Company's current
financial commitments. On May 7, 2003, the Company filed a prospectus
supplement with the Securities and Exchange Commission pursuant to a shelf
registration statement, indicating the Company's intent to offer for sale
2,000,000 shares of its common stock. The shelf registration statement was
declared effective on April 11, 2003. Proceeds from this offering will be used
to reduce the incremental borrowings related to the Kar acquisition. Future
acquisitions are expected to be financed through a mix of internal cash,
borrowing and equity.
Net cash provided by operating activities in the first three months of 2003
was $5.9 million, compared to a net cash use of $0.6 million in 2002's first
quarter. The significant improvement in the first quarter of 2003 operating
cash flow reflects higher operating results and a lower use of working
capital.
Net cash used by investing activities in the first quarter of 2003 was $64.4
million compared with $27.2 million in 2002. The significant increase in this
year's investing activities was due, in large part, to the acquisition of Kar
in February 2003. Investing activity in 2002 included the acquisition of
Seeger-Orbis. Capital spending in 2003 was below the 2002 level.
Net cash provided by financing activities was $61.6 million in the first three
months of 2003 compared to $11.1 million in the comparable period of 2002. In
2003, proceeds from additional borrowings were used to fund the Kar
acquisition.
The Company maintains bank-borrowing facilities to supplement internal cash
generation. At March 31, 2003, the Company had a $150.0 million borrowing
facility under a three-year revolving credit agreement, of which $98.0 million
was borrowed at an interest rate of 3.29%. Additionally, the Company had $15.0
million in uncommitted short-term bank credit lines, of which $3.5 million was
in use at March 31, 2003.
Borrowing capacity is limited by various debt covenants. The most restrictive
covenant requires the Company to maintain a ratio of Total Debt to EBITDA, as
defined in the revolving credit agreement, of not more than 3.25 times at
March 31, 2003. The actual ratio at March 31, 2003 was 3.05 times and would
have allowed additional borrowings of $18.1 million. The covenant will decline
to 3.0 times at December 31, 2003 which the Company expects to meet. The
Company believes its credit facilities coupled with cash generated from
operations are adequate for its anticipated future requirements.
The $150 million shelf registration statement permitting offerings of both
debt and equity, which was declared effective on April 11, 2003 will provide
the Company increased flexibility for future financing activities.
-18-
First quarter 2003 earnings before interest, taxes, depreciation and
amortization (EBITDA) were $22.1 million compared to $19.7 million in the
first quarter of 2002. EBITDA is a measurement not calculated in accordance
with generally accepted accounting principles (GAAP). The Company defines
EBITDA as net income plus income taxes, interest expense and depreciation and
amortization. The Company does not intend EBITDA to represent cash flows from
operations as defined by GAAP, and the reader should not consider it as an
alternative to net income, net cash provided by operating activities or any
other items calculated in accordance with GAAP, or as an indicator of the
Company's operating performance. The Company's definition of EBITDA may not be
comparable with EBITDA as defined by other companies. The Company believes
EBITDA is commonly used by financial analysts and others in the industries in
which the Company operates and, thus, provides useful information to
investors. Management uses EBITDA as one measure of leverage capacity and debt
servicing ability.
Following is a reconciliation of EBITDA to the Company's net income:
(Dollars in thousands)
Three months ended March 31, 2003 2002
------- -------
Net income $ 7,359 $ 6,766
Add back:
Income taxes 2,076 1,691
Depreciation & amortization 8,532 7,883
Interest expense 4,110 3,390
------- -------
EBITDA $22,077 $19,730
======= =======
Forward-Looking Statements
--------------------------
This quarterly report may contain certain forward-looking statements as
defined in the Private 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 effectiveness
of the Company's marketing and sales programs; increased competitive
activities including pricing, advertising and promotions that could
adversely affect customer demand for the Company's products; changes in
economic, political and public health conditions, worldwide and in the
locations where the Company does business; interest and foreign exchange
rate fluctuations; and changes in laws and regulations.
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 three months of 2003. 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, 2002.
-19-
Item 4. Controls and Procedures
Evaluation of Disclosure 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 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 of
1934 is recorded, processed, summarized and reported as and when required.
Changes in Internal Controls. There have been no significant changes in the
Company's internal controls or in other factors which could significantly
affect internal controls subsequent to the date when the Company's President
and Chief Executive Officer and Chief Financial Officer carried out their
evaluation. No significant deficiencies or material weaknesses in the internal
controls were identified in the evaluation.
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
On February 6, 2003, the Company issued 923,506 shares of its common
stock valued at approximately $18.5 million to the former owner of Kar
Products, LLC in partial consideration for the Company's acquisition
of Kar Products, LLC. This issuance was exempt from the registration
requirements of the Act by Section 4(2) of the Act because it did not
involve a public offering.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 2.1 Membership Interest and Asset Purchase Agreement,
dated as of January 15, 2003, by and among Barnes
Group Inc., Barnes Group Canada Corp., Kar Products,
LLC, A. & H. Bolt & Nut Company Ltd., GC-Sun Holdings
II, L.P., A. & H. Bolt Holdings, Inc., Sunsource
Canada Investment Company, GC-Sun, Inc., GC-Sun G.P.
II, Inc., GS-Sun G.P., Inc., and GC-Sun Holdings, L.P.
Exhibit 4.1(i) Registration Rights Agreement, dated as of February 6,
2003, by and between Barnes Group Inc. and GC-Sun
Holdings II, L.P.
(ii) Letter Agreement, dated as of March 31, 2003, by and
between Barnes Group Inc. and GC-Sun Holdings II, L.P.
Exhibit 4.2 Amendment No. 1, dated as of February 5, 2003, to
Revolving Credit Agreement dated as of June 14, 2002.
-20-
Exhibit 4.3 Amendment No. 2, dated as of February 5, 2003, to Note
Purchase Agreement dated as December 1, 1995.
Exhibit 4.4 Amendment No. 1, dated as of February 5, 2003, to Note
Agreement dated as November 12, 1999.
Exhibit 4.5 Amendment No. 2, dated as of February 5, 2003, to Note
Agreement dated as of November 21, 2002.
Exhibit 4.6 Guarantee, dated as of February 6, 2003, by Kar
Products, LLC in favor of Senior Lenders at Barnes
Group Inc.
Exhibit 10.1 Barnes Group Inc. Performance-Linked Bonus Plan for
Selected Executive Officers.
Exhibit 10.2 Barnes Group Inc. Amended Employee Stock and Ownership
Program as further amended.
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
A report on Form 8-K regarding the execution of a definitive agreement
to acquire Kar Products was filed with the Commission on January 21,
2003.
A report on Form 8-K regarding the completion of the acquisition of
Kar Products was filed on February 20, 2003.
-21-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Barnes Group Inc.
(Registrant)
Date May 12, 2003 By /s/ William C. Denninger
------------ -------------------------------
William C. Denninger
Senior Vice President, Finance
and Chief Financial Officer
(the principal financial officer)
Date May 12, 2003 By /s/ Francis C. Boyle, Jr.
------------ -------------------------------
Francis C. Boyle, Jr.
Vice President, Controller
(the principal accounting officer)
-22-
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
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: May 12, 2003
/s/ Edmund M. Carpenter
-----------------------
Edmund M. Carpenter
President and Chief Executive Officer
-23-
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;
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: May 12, 2003
/s/ William C. Denninger
-------------------------
William C. Denninger
Chief Financial Officer
-24-
EXHIBIT INDEX
BARNES GROUP INC.
Quarterly Report on Form 10-Q
For Quarter ended March 31, 2003
------------------------------------
Exhibit No. Description Reference
- ---------- ----------- ---------
2.1 Membership Interest and Asset Incorporated by reference
Purchase Agreement, dated as of to Exhibit 2.1 to the
January 15, 2003, by and among Company's report on Form
Barnes Group Inc., Barnes Group 8-K filed February 20, 2003.
Canada Corp., Kar Products, LLC,
A. & H. Bolt & Nut Company Ltd.,
GC-Sun Holdings II, L.P.,
A. & H. Bolt Holdings, Inc.,
Sunsource Canada Investment
Company, GC-Sun, Inc.,
GC-Sun G.P. II, Inc.,
GS-Sun G.P., Inc., and
GC-Sun Holdings, L.P.
4.1 (i) Registration Rights Agreement, Incorporated by reference
dated as of February 6, 2003, by to Exhibit 4.1 to the
and between Barnes Group Inc. and Company's report on Form
GC-Sun Holdings II, L.P. 8-K filed February 20, 2003.
(ii) Letter Agreement, dated as of Incorporated by reference
March 31, 2003, by and between to Exhibit 4.14 to the
Barnes Group Inc. and GC-Sun Company's registration
Holdings II, L.P. statement of Form S-3 file
April 2, 2003.
4.2 Amendment No. 1, dated as of Incorporated by reference
February 5, 2003, to Revolving to Exhibit 4.1(ii) to the
Credit Agreement dated as of Company's report on Form
June 14, 2002. 10-K for the year ended
December 31, 2002.
4.3 Amendment No. 2, dated as of Incorporated by reference
February 5, 2003, to Note to Exhibit 4.3(iv) to the
Purchase Agreement dated as Company's report on Form
December 1, 1995. 10-K for the year ended
December 31, 2002.
4.4 Amendment No. 1, dated as of Incorporated by reference
February 5, 2003, to Note to Exhibit 4.4(ii) to the
Agreement dated as Company's report on Form
November 12, 1999. 10-K for the year ended
December 31, 2002.
-25-
4.5 Amendment No. 2, dated as of Incorporated by reference
February 5, 2003, to Note to Exhibit 4.5(iii) to
Agreement dated as of the Company's report on
November 21, 2002. Form 10-K for the year
ended December 31, 2002.
4.6 Guarantee, dated as of Incorporated by reference
February 6, 2003, by Kar to Exhibit 4.7 to the
Products, LLC in favor of Company's report on
Senior Lenders at Barnes Form 10-K for the year
Group Inc. ended December, 31, 2002.
10.1 Barnes Group Inc. Performance- Incorporated by reference
Linked Bonus Plan for Selected to Annex I to the
Executive Officers Company's Proxy Statement
Dated March 15, 2001 for
the Annual Meeting of
Stockholders held April
12, 2001 that was filed on
March 13, 2001.
10.2 Barnes Group Inc. Amended Filed with this report.
Employee Stock and Ownership
Program as further amended.
15 Letter regarding unaudited Filed with this report.
interim financial information.
99.1 Certification Pursuant to 18 Furnished with this
U.S.C. Section 1350 as Adopted report.
Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification Pursuant to 18 Furnished with this
U.S.C. Section 1350 as Adopted report.
Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
-26-
Exhibit 15
May 12, 2003
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Commissioners:
We are aware that our report dated April 17, 2003 on our review of interim
financial information of Barnes Group Inc. (the "Company") as of and for the
period ended March 31, 2003 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-3 (No. 333-104242), and Form S-8 (Nos. 2-
56437, 2-91285, 33-20932, 33-30229, 33-91758, 33-27339, 333-41398, 333-88518
and 333-57658).
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 March 31, 2003 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
May 12, 2003
A signed original of this written statement required by Section 906 has been
provided to Barnes Group Inc. and will be retained by Barnes Group Inc. and
furnished to the Securities and Exchange Commission or its staff upon request.
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
May 12, 2003
A signed original of this written statement required by Section 906 has been
provided to Barnes Group Inc. and will be retained by Barnes Group Inc. and
furnished to the Securities and Exchange Commission or its staff upon request.