The accompanying unaudited consolidated balance sheet as of March 31, 2005 and the related 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 consolidated financial statements do not include all information and notes required by generally accepted accounting principles for complete financial statements. The balance sheet as of December 31, 2004, as restated, has been derived from the 2004 financial statements of Barnes Group Inc. (the "Company"). For additional information, please refer to the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2004. 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, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. Certain reclassifications have been made to prior year amounts to conform with the current year presentation.

See Note 4 for discussion of the Company's change in the method of accounting for the cost of certain U.S. inventories as of January 1, 2005 and restatement of previously reported amounts.

Stock-Based Compensation

The Company accounts for stock-based employee compensation plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and its related interpretations. The following table illustrates the effect on net income and net income per share if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," to stock-based employee compensation.

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The average fair value of options granted in the three months ended March 31, 2005 and 2004 was $4.95 and $5.40, respectively. The fair value of each stock option on the date of grant was estimated using the Black-Scholes option-pricing model based on the following weighted average assumptions:

2. Net Income Per Common Share

For the purpose of computing diluted net income per share, the weighted-average number of shares outstanding was increased by 547,905 and 901,567 for the three-month periods ended March 31, 2005 and 2004, respectively, for the potential dilutive effects of stock-based incentive plans. As of March 31, 2005, there were 3,690,626 options for shares of common stock outstanding of which 2,055,415 were considered dilutive. As of March 31, 2004, there were 3,644,803 options for shares of common stock outstanding of which 3,200,497 were considered dilutive. There were no adjustments to net income for the purposes of computing income available to common stockholders for those periods.

3. 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 comprise foreign currency translation adjustments and deferred gains and losses related to certain derivative instruments.

4. Inventories

The components of inventories consisted of:

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As of January 1, 2005, the Company changed the method of determining the cost of certain U.S. inventories which previously utilized the last-in, first-out method ("LIFO") to the first-in, first-out method ("FIFO"). The change was made as the FIFO method more accurately reflects the replacement cost of inventory. The Company has operated in a low inflationary environment, and frequently a deflationary environment, for a number of years, thus reducing any potential advantages of the LIFO method in matching current revenues with current costs. Additionally, the change enhances the comparability of the Company's financial statements with its peers' as FIFO is the predominant method utilized in its industry. As a result, all inventories are now valued at the lower of cost, determined on a FIFO basis, or market. All previously reported results have been restated to reflect the retroactive application of the accounting change as required by APB Opinion No. 20, "Accounting Changes." As a result of the change in a ccounting, the following amounts were restated.

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5. Goodwill and Other Intangible Assets

Goodwill:
The following table sets forth the change in the carrying amount of goodwill for each reportable segment and for the Company for the period ended March 31, 2005:

In the first quarter of 2005, changes in the goodwill recorded at Associated Spring related to purchase price adjustments and the completion of the valuation of fixed assets acquired in the third quarter 2004 acquisition of DE-STA-CO Manufacturing ("DE-STA-CO"). The purchase price allocation of this acquisition is subject to finalization of the valuation of certain assets and liabilities. As a result, preliminary amounts assigned to assets and liabilities are subject to revision in future periods.

Other Intangible Assets:
Other intangible assets consisted of:

Amortization of intangible assets is expected to be approximately $3,400 in each of the years 2005 - 2009.

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6. Business Reorganization

Business reorganization accruals are included in accrued liabilities. In connection with the acquisition of the assets of Curtis Industries, Inc. in May 2000, the Company recorded certain exit costs. As of March 31, 2005, the remaining balance of $405 related to future lease payments which will continue through the remaining terms of the leases ending in 2013.

In connection with the acquisition of Kar Products, LLC and certain assets of a related company, A.&H. Bolt & Nut Company Ltd. ("Kar") in February 2003, the Company recorded certain costs. The Company's reorganization plan included combining the headquarters functions and consolidating warehousing and distribution centers. The accruable integration costs were primarily related to lease consolidations and employee severance payments for reductions primarily in administrative and warehouse personnel. During the first quarter of 2005, $666 of the accrual was utilized. As of March 31, 2005, the remaining balance of $292 related to future lease payments.

In January 2005, the Company entered into three forward currency exchange contracts related to its term loan facility with The Development Bank of Singapore Limited. These contracts effectively convert the remaining two interest payments of Yen 25.8 million and Yen 25.2 million which are due on June 30, 2005 and December 30, 2005, respectively, and one interest and principal payment of Yen 111.4 million due in June 2006 to Singapore dollar payments. The forward contracts are cash flow hedges. The fair value of these forward contracts, in the aggregate, at March 31, 2005 was a liability of $44.

8. Pension and Other Postretirement Benefits

Pension and other postretirement benefits expense consisted of the following:

9. Income Taxes

It is currently management's intention to continue to indefinitely reinvest undistributed foreign earnings of its international subsidiaries. However, management is currently evaluating the impact of the one-time favorable foreign dividend provisions enacted as part of the American Jobs Creation Act of 2004.

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The following table sets forth information about the Company's operations by its three reportable business segments: