-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kg/+BWFPvqn0/ZNHDbE56G9JJvW1zYa8Sk7qL6qDMhfRT970ziDyVskFnmm6L9u7 7ECjprEVWAsJxE2cJAPfCQ== 0000009984-98-000005.txt : 19980814 0000009984-98-000005.hdr.sgml : 19980814 ACCESSION NUMBER: 0000009984-98-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARNES GROUP INC CENTRAL INDEX KEY: 0000009984 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] IRS NUMBER: 060247840 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04801 FILM NUMBER: 98685725 BUSINESS ADDRESS: STREET 1: 123 MAIN ST CITY: BRISTOL STATE: CT ZIP: 06011 BUSINESS PHONE: 2035837070 FORMER COMPANY: FORMER CONFORMED NAME: ASSOCIATED SPRING CORP DATE OF NAME CHANGE: 19760518 10-Q 1 BARNES GROUP INC. FORM 10-Q JUNE 30, 1998 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM l0-Q (Mark One) (X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 1998 or ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For transition period from -------------------- to -------------------- Commission File Number 1-4801 BARNES GROUP INC. (a Delaware Corporation) I.R.S. Employer Identification No. 06-0247840 123 Main Street, Bristol, Connecticut 06010 Telephone Number (860) 583-7070 Number of common shares outstanding at August 5, 1998 - 20,095,983 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- -1- BARNES GROUP INC. FORM 10-Q INDEX For the Quarterly period ended June 30, 1998
DESCRIPTION PAGES ----------- ----- PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Consolidated Statements of Income for the six months and second quarter ended June 30, 1998 and 1997 3 Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997 4-5 Consolidated Statements of Cash Flows for the six months ended June 30, 1998 and 1997 6 Notes to Consolidated Financial Statements 7-9 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-13 PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K 13 Signatures 13
-2- PART I. FINANCIAL INFORMATION Item 1. Financial Statements BARNES GROUP INC. CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data) (Unaudited)
Three months ended Six months ended June 30, June 30, -------------------- ------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Net sales $169,151 $165,867 $338,067 $324,000 Cost of sales 112,201 111,243 223,559 214,189 Selling and admin- istrative expenses 50,096 37,141 88,274 75,524 -------- -------- -------- -------- 162,297 148,384 311,833 289,713 -------- -------- -------- -------- Operating income 6,854 17,483 26,234 34,287 Other income 1,700 1,202 2,896 2,122 Interest expense 929 1,237 2,054 2,525 Other expenses 192 306 697 553 -------- -------- -------- -------- Income before income taxes 7,433 17,142 26,379 33,331 Income taxes 2,787 6,428 9,892 12,499 -------- -------- -------- -------- Net income $ 4,646 $ 10,714 $ 16,487 $ 20,832 ======== ======== ======== ======== Per common share: Net income - basic $ .23 $ .53 $ .82 $ 1.03 - diluted .23 .52 .81 1.01 Dividends .17 .17 .33 .32 Average common shares outstanding 20,222,640 20,307,821 20,198,031 20,197,220
[FN] See accompanying notes. -3- BARNES GROUP INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
ASSETS June 30, December 31, 1998 1997 -------- ----------- (Unaudited) Current assets Cash and cash equivalents $ 37,133 $ 32,530 Accounts receivable, less allowances (1998-$2,851; 1997-$3,061) 92,983 91,757 Inventories Finished goods 34,040 30,519 Work-in-process 18,879 17,369 Raw materials and supplies 15,742 13,194 -------- -------- 68,661 61,082 Deferred income taxes and prepaid expenses 17,647 17,648 -------- -------- Total current assets 216,424 203,017 Deferred income taxes 24,810 24,083 Property, plant and equipment 346,639 334,836 Less accumulated depreciation 210,728 201,006 -------- -------- 135,911 133,830 Goodwill 18,499 18,773 Other assets 28,430 28,275 -------- -------- Total assets $424,074 $407,978 ======== ========
[FN] See accompanying notes. -4- BARNES GROUP INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, December 31, 1998 1997 ----------- ------------ (Unaudited) Current liabilities Notes payable $ 2,619 $ 2,437 Accounts payable 42,127 37,776 Accrued liabilities 49,843 46,966 Guaranteed ESOP obligation-current 2,856 2,746 -------- -------- Total current liabilities 97,445 89,925 Long-term debt 60,000 60,000 Guaranteed ESOP obligation 749 2,205 Accrued retirement benefits 69,411 67,486 Other liabilities 10,482 7,503 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 48,175 47,007 Retained earnings 193,505 183,857 Accumulated other comprehensive income (19,138) (15,841) Treasury stock at cost, 1998-1,885,159 shares 1997-1,875,111 shares (33,170) (29,433) Guaranteed ESOP obligation (3,605) (4,951) -------- -------- Total stockholders' equity 185,987 180,859 -------- -------- Total liabilities and stockholders' equity $424,074 $407,978 ======== ========
[FN] See accompanying notes. -5- BARNES GROUP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Six months ended June 30, 1998 and 1997 (Dollars in thousands) (Unaudited)
1998 1997 Operating activities: ------- ------- Net income $16,487 $20,832 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 14,091 13,906 Gain on sale of property, plant and equipment (98) (305) Changes in assets and liabilities: Accounts receivable (1,876) (11,935) Inventories (7,956) (1,929) Accounts payable 4,532 7,652 Accrued liabilities 3,077 (5,006) Deferred income taxes (937) 463 Other 6,086 (1,803) ------- ------- Net cash provided by operating activities 33,406 21,875 Investing activities: Proceeds from sale of property, plant and equipment 423 1,295 Capital expenditures (16,332) (19,212) Other (813) (239) ------- ------- Net cash used by investing activities (16,722) (18,156) Financing activities: Net increase in notes payable 260 4,012 Proceeds from the issuance of common stock 2,747 5,439 Common stock repurchases (6,651) (1,226) Dividends paid (6,761) (6,413) ------- ------- Net cash (used) provided by financing activities (10,405) 1,812 Effect of exchange rate changes on cash flows (1,676) (363) ------- ------- Increase in cash and cash equivalents 4,603 5,168 Cash and cash equivalents at beginning of period 32,530 23,986 ------- ------- Cash and cash equivalents at end of period $37,133 $29,154 ======= =======
[FN] See accompanying notes. -6- Notes to Consolidated Financial Statements: 1. Summary of Significant Accounting Policies ------------------------------------------ The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. For additional information, please refer to the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. In the opinion of management, all adjustments, including normal recurring accruals considered necessary for a fair presentation, have been included. Operating results for the six-month period ended June 30, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. 2. Non-recurring Charge -------------------- As announced on July 6, 1998, the Company's Board of Directors accepted the request for early retirement of Theodore E. Martin, president and chief executive officer. A special Board committee will oversee the search for a new president and chief executive officer. In recognition of the results Mr. Martin delivered for Barnes Group stockholders, effectively increasing the market value of the Company by $280 million over his three year tenure as president and CEO, the Board approved a retirement package that includes the accelerated payment and vesting of retirement and other benefits. The package resulted in a one- time charge against second quarter 1998 earnings of $12.9 million. The after-tax impact of this retirement package is $7.7 million or $.38 per common share -7- 3. Other Comprehensive Income -------------------------- In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income". This Statement establishes standards for reporting and displaying comprehensive income and its components in a full-set of financial statements. For interim reporting, the Statement requires the disclosure of total comprehensive income for the periods presented. The Statement is effective for fiscal periods beginning after December 15, 1997. Comprehensive income is defined as "the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources". This would include net income and "other comprehensive income" but exclude the sale and repurchase of stock and distribution of dividends. The only adjustment to stockholder's equity that the Company has that qualifies as an item of "other comprehensive income" is foreign currency translation adjustments. The effect of foreign currency translation adjustments on comprehensive income is as follows: Statement of Comprehensive Income (Dollars in thousands) (Unaudited)
Three months ended Six months ended June 30, June 30, ------------------- ------------------- 1998 1997 1998 1997 -------- -------- --------- -------- Net income $ 4,646 $ 10,714 $ 16,487 $ 20,832 Other comprehensive loss, net of tax (2,802) (7) (3,297) (1,705) -------- -------- -------- -------- Comprehensive income $ 1,844 $ 10,707 $ 13,190 $ 19,127 ======== ======== ======== ========
-8- 4. Segment Disclosure ------------------ Effective January 1, 1998, management responsibility for Raymond Distribution was transferred from the Associated Spring Group to the Bowman Distribution Group. Raymond is engaged in the distribution of industrial products and standard stock wire and flat springs manufactured primarily by Associated Spring. The transfer of Raymond to the Bowman Group will enhance synergy in the Company's distribution operations. All references to prior year segment data have been restated to reflect this transfer. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, "Disclosure About Segments of an Enterprise and Related Information". The Statement is effective for the Company's 1998 annual financial statements and interim periods beginning in the second year of application. Although management has not completed the review of the new Standard, it does not anticipate that its adoption will have a significant effect on the Company's reporting segments. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations --------------------- The Company's second quarter 1998 sales were up 2% to $169.2 million compared to $165.9 million in 1997. Operating income was $6.9 million versus $17.5 million for the comparable 1997 quarter. The second quarter 1998 operating income, before the one-time charge related to Mr. Martin's early retirement package, was $19.8 million, a 13% increase over the prior year's second quarter. The operating margin, excluding the non-recurring charge, improved to 11.7% compared to 10.5% in 1997's second quarter. The 1998 second quarter results reflect year-over-year sales gains at both Associated Spring and Barnes Aerospace and higher operating income in all three business segments. The Company's 1998 first half sales were $338.1 million, up 4% from $324.0 million in 1997 reflecting sales gains at both Associated Spring and Barnes Aerospace. First half 1998 operating income was $26.2 million compared to the $34.3 million reported in 1997. -9- Operating income, before the non-recurring charge, was $39.1 million in 1998, an increase of 14.2% over the comparable 1997 period. The operating margin, excluding the non-recurring charge, increased to 11.6% versus 10.6% in 1997. All three business segments contributed to the improved operating income. Segment Review-Sales and Operating Income ------------------------------------------ Associated Spring segment sales for the second quarter and six months ending June 30, 1998 increased slightly over the comparable 1997 periods. Sales for the 1998 second quarter and first half were $69.3 million and $137.8 million, respectively. The sales gains were due to the strength in the North American and Mexican markets, offset in part by a decline in the Asia market place. The increase in the Group's operating income was significantly higher than the increase in sales for both second quarter and year-to-date 1998 periods due in large part to the Group's Mexican operation. The Mexican operation reported significant year-over-year improvement due in part to the resolution of the 1997 operating issues which negatively impacted the first half 1997 results. The Asian economic crisis had an adverse impact on the Group's Singapore operation as a large telecommunications customer and several other customers reduced orders in the second quarter. The North American General Motors strike, which was settled in late July, did not significantly impact second quarter 1998 sales. The magnitude of the strike's effect on second half results should be minor due to the anticipated increase in production by General Motors to meet its customers pent-up demand. Bowman Distribution's second quarter 1998 segment sales decreased 5% to $63.5 million and first half 1998 sales decreased slightly to $130.0 million from the comparable 1997 periods. The sales declines are a result of lower volume in North America. Significant operating income gains were reported in the second quarter and first six months of 1998 over the comparable prior year periods, the result of aggressive cost management. Barnes Aerospace segment sales for the second quarter of 1998 were $40.5 million, up 18% while the first six months sales improved 22% to $78.2 million over strong 1997 levels. Significant gains in sales and operating income were reported in both the original equipment manufacture and overhaul and repair businesses, a result of the strong commercial aviation engine and airframe markets. -10- Non-Operating Income/Expense ---------------------------- Other income in the second quarter and first half of 1998 was higher than 1997 due to the increase in both the equity income from the Company's investment in its NASCO joint venture and net foreign exchange transaction gains. Other expenses in 1997 reflect a small net foreign exchange translation loss. Interest expense in 1998 compared to 1997 decreased due to lower borrowing levels as well as marginally lower interest rates. Income Taxes ------------ The Company's effective tax rate for both 1998 and 1997 was 37.5%. Net Income and Net Income Per Share ----------------------------------- Consolidated net income for the second quarter of 1998 and 1997 was $4.6 million and $10.7 million, respectively. Basic and diluted earnings per share for the 1998 second quarter were $.23 compared to 1997's basic earnings per share of $.53 and diluted earnings per share of $.52. Without the non-recurring charge related to Mr. Martin's early retirement, net income for the second quarter 1998 was $12.4 million, or basic earnings per share of $.61, a 15% increase over 1997's second quarter. Consolidated net income for the first half of 1998 and 1997 was $16.5 million and $20.8 million, respectively. Basic and diluted earnings per share for the first six months of 1998 were $.82 and $.81 compared to 1997's basic and diluted earnings per share of $1.03 and $1.01, respectively. Without the non-recurring charge, net income for the first half of 1998 was $24.2 million, or $1.20 per share, a 17% increase over the first half of 1997. There were no adjustments to net income for the purpose of computing income available to common stockholders for 1998 and 1997. For the purpose of computing diluted earnings per share, the weighted average number of shares outstanding for the second quarters of 1998 and 1997 were increased by 339,811 and 431,404, respectively, and for the first six months of 1998 and 1997 were increased 360,763 and 422,660, respectively, representing the potential dilutive effects of stock-based incentive plans. -11- Financial Condition ------------------- Cash Flows ---------- Net cash generated by operating activities in the first six months of 1998 was $33.4 million, compared to $21.9 million in 1997. This 1998 increase in operating cash flows was due to improved operating results and working capital management. The $7.7 million charge to net income for Mr. Martin's early retirement had no effect on operating cash flows for the six month period ended June 30, 1998, since it was offset by a corresponding liability. Mr. Martin's early retirement charge includes components for pension benefits, which will be paid out over a long-term period, and stock options, which are a non-cash charge. Approximately $2.6 million of the non-recurring charge will be paid by December 31, 1998. Net cash used for investing activities during the first six months of 1998 was $16.7 million compared to $18.2 million in 1997's first half. The decrease in cash used in 1998 compared to 1997 was due to lower capital spending. This reduction comes after five years of heavy investment by all three operating Groups to expand capacity and improve productivity, quality and customer service. Net cash used by financing activities was $10.4 million in the first half of 1998 compared to $1.8 million provided in 1997's first half. The higher usage of cash in 1998 was due to the increase in the Board of Director approved repurchase of common stock and the decrease in the proceeds from the exercise of stock option. Additional borrowings to support normal first half 1997 short-term working capital also impacted the period-over-period comparison. Liquidity and Capital Resources ------------------------------- During 1998 and 1997, the Company's long-term debt was comprised, in part, of borrowings under its short-term bank lines of credit backed by its long-term revolving credit agreement. At June 30, 1998, the company classified as long-term debt $6.5 million of borrowings under its lines of credit and $6.2 million of the current portion of its 9.47% long-term Notes. The Company has both the intent and the ability, through its revolving credit agreement, to refinance these amounts on a long-term basis. The Company intends to continue this cost effective method of long-term financing. -12- The Company maintains substantial bank borrowing facilities to supplement internal cash generation. At June 30, 1998, the Company had $150.0 million of borrowing capacity under its long-term revolving credit agreement of which none was borrowed. The Company had $7.0 million in borrowings under uncommitted short-term bank credit lines at June 30, 1998. The interest rate on these borrowings was 5.84%. The Company believes its credit facilities, coupled with cash generated from operations, are adequate for its anticipated future requirements. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits Exhibit 10 Retirement Agreement with President and CEO, dated July 6, 1998 Exhibit 27 Financial Data Schedule, June 30, 1998 (b) Reports on Form 8-K No reports on Form 8-K, Item 5, Other Events, were filed during the quarter ended June 30, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Barnes Group Inc. (Registrant) Date August 13, 1998 By /s/ Terry M. Murphy --------------- ------------------------------------- Terry M. Murphy Senior Vice President, Finance (the principal financial officer) Date August 13, 1998 By /s/ Francis C. Boyle, Jr. --------------- ------------------------------------- Francis C. Boyle, Jr. Vice President, Controller (the principal accounting officer) -13- EX-10 2 EXHIBIT 10 RETIREMENT AGREEMENT -------------------- This Retirement Agreement (the "Agreement") is entered into by Theodore E. Martin (the "Employee") and Barnes Group Inc., a Delaware corporation (the "Company") (collectively, the "Parties"), in consideration of the respective agreements and promises of the Parties contained in this Agreement. The Parties acknowledge that the terms and conditions of this Agreement have been voluntarily agreed to and that such terms are intended to be final and binding. 1. Retirement. (a) It is hereby agreed that ---------- Employee will retire on a date mutually agreeable to the Parties, but in no event later than December 15, 1998 (the "Retirement Date"). Employee agrees that, effective as of the Retirement Date, Employee will resign from his positions as President and Chief Executive Officer and as an employee and a director of the Company and, as applicable, as an employee, officer and director of each of the Company's subsidiaries. Employee further agrees to execute any documents as reasonably requested by the Company to properly reflect such retirement. Employee understands and agrees that, from and after the Retirement Date, he will no longer be authorized to incur any expenses, obligations or liabilities on behalf of the Company. (b) Employee agrees that, for the period beginning on the date of this Agreement and expiring on the Retirement Date, Employee shall: (i) continue to hold the titles of President and Chief Executive Officer of the Company; (ii) continue to serve as a director of the Company; and (iii) to the extent requested by the Company's Board of Directors or its designee, (a) assist in the management of the Company, (b) assist in the search and recruitment of a successor and (c) if a successor is named prior to the Retirement Date, cooperate with the successor until the Retirement Date in facilitating a smooth transition of leadership. 2. Retirement Benefits. Subject to this Agreement ------------------- becoming effective in accordance with Section 12, and in consideration for acceptance of the terms contained in this Agreement and the release of claims contained in Section 3, the Company agrees to provide Employee with the compensation and benefits set forth in paragraphs (a) through (n) of this Section 2 (the "Retirement Benefits"): (a) The Company shall continue to pay to Employee his base salary, at the rate in effect on the Retirement Date, which is $47,084 per month (the "Base Salary"), from the Retirement Date until August 21, 2001 (the "Continuation Period"), which shall not be reduced by any compensation received by Employee from any other employment (including self-employment). In the event Employee dies prior to August 21, 2001, the Employee's spouse, or if the Employee's spouse dies prior to August 21, 2001, the Employee's designated beneficiary (which may be a trust established by Employee), shall be entitled to continue to receive the payments to which Employee would have been entitled under this paragraph (a) until August 21, 2001. (b) The Company shall pay to Employee a short term incentive award in respect of 1998, which shall be equal to $847,512 (150% of the Base Salary) (the "Annual Bonus"). The amount and payment of the Annual Bonus shall not be contingent upon the attainment of any performance goals. The Annual Bonus in respect of 1998 shall be paid at the same time as annual bonuses are paid to the Company's other senior executives in respect of 1998 (the "1998 Bonus Payment Date"). In the event Employee dies prior to the 1998 Bonus Payment Date, the Employee's spouse, or if the Employee's spouse dies prior to the 1998 Bonus Payment Date, the Employee's designated beneficiary (which may be a trust established by Employee), shall be entitled to receive the payment to which Employee would have been entitled under this paragraph (b). (c) On January 5, 1999, and on or before the fifth (5th) day of each calendar month through and including August 2001, the Company shall pay to Employee an amount equal to $70,626 (one-twelfth (1/12) of the Annual Bonus); PROVIDED, HOWEVER, that the payment in respect of August 2001 shall be $47,843 (21/31 of $70,626). In the event Employee dies prior to August 21, 2001, the Employee's spouse, or if the Employee's spouse dies prior to August 21, 2001, the Employee's designated beneficiary (which may be a trust established by Employee), shall be entitled to continue to receive the payments to which Employee would have been entitled under this paragraph (c) until August 21, 2001. (d) During the Continuation Period, the Company shall continue Employee's and his spouse's participation in and coverage under the Company's medical and dental plans in which the Employee and his spouse participated immediately prior to the Retirement Date, subject to Employee's or his spouse's, as the case may be, payment of all applicable employee contributions or premiums at the rate in effect from time to time for the Company's active employees. (e) Following the Continuation Period, the Employee and his spouse shall be eligible for that health insurance coverage, if any, generally provided by the Company to senior executives retiring on the last day of the Continuation Period and their spouses. Employee's and his spouse's eligibility shall be determined as if Employee continued in employment with the Company through the end of the Continuation Period. (f) The Company shall continue to pay all premiums on Employee's life insurance policy issued under the Company's Officer Enhanced Life Insurance Program (the "Life Insurance Program") until the Employee's sixty-fifth (65th) birthday. The Company shall provide Employee an income tax gross-up equal to the product of (1) 35% plus the applicable state income rate and (2) the Employee's taxable income in respect of these premiums. (g) The Company shall pay to Employee within ten (10) days after the Retirement Date an amount in cash equal to $1,305,420 in satisfaction of all of his outstanding performance units under the Company's 1996 Long Term Incentive Plan. (h) In satisfaction of any benefits payable to Employee under the Company's Supplemental Senior Officer Retirement Plan (the "SORP"), Supplemental Executive Retirement Plan (the "SERP") and Retirement Benefit Equalization Plan, the Company shall pay - 2 - to Employee, beginning September 1, 2001, a monthly lifetime benefit under the SORP of $33,576.10 and a monthly lifetime benefit under the SERP of $4,977.03. In the event Employee dies after September 1, 2001, and is survived by his spouse, Employee's spouse shall be entitled to receive a monthly lifetime benefit under the SORP of $16,788.05 commencing on the first day of the month following the Employee's death. No benefit is payable to Employee's spouse under the SERP. In lieu of the form of payment specified in this paragraph (h) in respect of the SORP, Employee may elect to receive an actuarially equivalent benefit payable in any of the optional forms of benefit provided under the SORP. Any such election must be irrevocable and made prior to September 1, 2000. In the event Employee dies prior to September 1, 2001, and is survived by his spouse, Employee's spouse shall be entitled to receive a monthly lifetime benefit, beginning September 1, 2001, equal to $16,788.05. Actuarial equivalence for purposes of this paragraph (h) shall be determined in accordance with the provisions of the SORP as in effect on the date of this Agreement. (i) Within ten (10) days after the Retirement Date, the Company shall (1) transfer to Employee the title of the Company-provided automobile being utilized by the Employee as of the Retirement Date and (2) provide Employee an income tax gross-up equal to the product of (x) 35% plus the applicable state income tax rate and (y) the value of the car includible as taxable income by Employee. The Company shall be responsible for any sales tax imposed on the transfer of title. (j) On or before December 15, 1998, the Company shall offer to purchase Employee's primary residence at a price established by a third party appraiser selected by Employee and reasonably acceptable to the Company. The Company shall, in accordance with the Company's policy, reimburse Employee for the costs of relocating Employee and his spouse to any location within the forty-eight contiguous states. The Company shall provide Employee an income tax gross-up equal to the product of (1) 35% plus the applicable state income tax rate and (2) Employee's taxable income in respect of the Company's purchase of Employee's residence and relocation of Employee and his spouse. (k) During the Continuation Period, the Company shall provide Employee with financial planning services in accordance with the Company's policy as in effect from time to time for the Company's active employees, but, in no event, on terms less favorable than under the Company's policy as in effect on the date of this Agreement. The annual cost to the Company shall not exceed $5,000. The Company shall provide Employee an income tax gross-up equal to the product of (1) 35% plus the applicable state income tax rate and (2) Employee's taxable income in respect of the financial planning services. (l) All outstanding stock options held by the Employee shall become vested as of the Retirement Date. In accordance with the Company's amended and restated 1991 Stock Incentive Plan, Employee shall have five (5) years from the Retirement Date within which to exercise the options; PROVIDED, HOWEVER, that if the 1991 Stock Incentive Plan is amended to provide for a longer post-employment exercise period, Employee shall be allowed to exercise his stock options for that longer period which shall be deemed to have commenced on the Retirement Date. - 3 - (m) In respect of all incentive stock units granted to the Employee, the Company shall pay to the Employee an amount equal to the product of (1) 125,199 and (2) the greater of (i) the closing per share price of the Company's common stock on the Retirement Date and (ii) $30. The Company shall pay such amount in cash within ten (10) days after the Retirement Date. In addition, on January 15, 1999, the Company shall pay to the Employee an amount equal to the product of (1) 96,000 and (2) the aggregate per share cash dividends paid to the Company's shareholders in the third and fourth quarters of 1998. (n) The Company shall reimburse Employee for his attorney's fees in connection with negotiating this Agreement, subject to a maximum amount of $1,000. The Company shall provide Employee an income tax gross-up equal to the product of (1) 35% plus the applicable state income tax rate and (2) the amount of reimbursement. The Retirement Benefits shall be paid or provided subject to the withholding of any taxes or other amounts required by law to be withheld. Any gross-up payments under Sections 1(f), (i), (j), (k) and (n) shall be payable on or before January 15 of the year following the year for which the income is includible in the Employee's taxable income. It is mutually agreed that a portion of the Retirement Benefits provided to Employee under this Section 2 exceed what he is already entitled to under the Company's plans, policies and practices. 3. Release of Claims. In consideration for the ----------------- Retirement Benefits, the sufficiency of which is acknowledged hereby, the Employee, with the intention of binding himself and his heirs, executors, administrators and assigns, does hereby release, remise, acquit and forever discharge the Company and its present and former officers, directors, executives, agents, attorneys, employees, affiliated companies, subsidiaries, successors, predecessors and assigns (collectively the "Released Parties"), of and from any and all claims, actions, causes of action, complaints, charges, demands, rights, damages, debts, sums of money, accounts, financial obligations, suits, expenses, attorneys' fees and liabilities of whatever kind or nature in law, equity or otherwise, whether accrued, absolute, contingent, unliquidated or otherwise and whether now known or unknown, suspected or unsuspected, which the Employee, individually or as a member of a class, now has, owns or holds, or has at any time heretofore had, owned or held, against any Released Party arising out of or in any way connected with the Employee's employment relationship with the Company, its subsidiaries, predecessors or affiliated entities, or the termination thereof, including without limitation, any claims for severance or vacation benefits, unpaid wages, salary or incentive payment, breach of contract, wrongful discharge, impairment of economic opportunity, defamation, intentional infliction of emotional harm or other tort, all applicable state and local labor and employment laws (including all laws concerning unlawful and unfair labor and employment practices) or employment discrimination under any applicable federal, state or local statute, provision, order or regulation including, but not limited to, any claim under Title VII of the Civil Rights Act of 1964 ("Title VII"), Civil Rights Act of 1988, Fair labor Standards Act, Americans with Disabilities Act, Employee Retirement Income Security Act, - 4 - the Federal Age Discrimination in Employment Act ("ADEA") and any similar or analogous state statute, including without limitation Connecticut's Human Rights Law, excepting only: (a) those obligations of the Company under this Agreement; (b) any rights to indemnification the Employee may have under applicable corporate law, the by-laws or certificate of incorporation of any Released Party or as an insured under any Director's and Officer's liability insurance policy now or previously in force; and (c) any claims for benefits under any Company employee benefit plans (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended). The Employee acknowledges and agrees that this Agreement is not to be construed in any way as an admission of any liability whatsoever by any Released Party under Title VII, ADEA or any other federal or state statute or the principals of common law, any such liability having been expressly denied. The Employee acknowledges and agrees that he has not, with respect to any transaction or state of facts existing prior to the date of this Agreement, filed any complaints, charges or lawsuits against any of the Released Parties with any governmental agency or any court or tribunal. 4. Press Releases; Confidentiality of Agreement. -------------------------------------------- Except as may be required by applicable law, the Parties shall mutually agree on the form of any press release relating to Employee's retirement from the Company. Other than with respect to information provided in any such press release or required to be disclosed by court order, the Employee agrees not to disclose the terms of this Agreement to any person or entity, other than the Employee's immediate family and financial or legal advisors who agree to be bound by the confidentiality provisions of this Agreement. 5. Return of Company Property. Employee agrees to -------------------------- return to the Company all documents, files, and other property of any kind belonging to the Company by no later than the Retirement Date. 6. Non-Solicitation; Non-Discouragement of Business. Until August 21, 2001, Employee shall not, directly or indirectly, employ, attempt to employ or solicit for employment, any person who currently is an employee of the Company, its subsidiaries or affiliates; PROVIDED, HOWEVER, that the preceding clause shall not apply with respect to Employee's two sons, Kenneth Martin and Michael Martin. Employee further agrees that, until August 21, 2001, he shall not discourage, or attempt to discourage, any person, firm, corporation or business entity from doing business with the Company or otherwise interfere with the business relationships between the Company and any person, firm, corporation or other business entity. 7. Non-Disparagement. Employee agrees that he will ----------------- not make or publish any disparaging statements (whether written or oral) regarding the Company or its subsidiaries, - 5 - affiliates, directors, officers or employees. The Company agrees that it shall use its best efforts to ensure that its directors and officers do not make or publish any disparaging statements (whether written or oral) regarding the Employee or any member of his immediate family. Within five (5) days of the date of this Agreement, the Company shall inform its officers and directors of the Company's obligation under this Section 7. 8. Non-Competition. By and in consideration of the --------------- Retirement Benefits and as an inducement to the Company to enter into this Agreement with Employee, Employee agrees that until August 21, 2001, Employee shall not directly or indirectly become engaged, concerned or interested in or be affiliated with any other business (a "Competing Business") competing in any respect with any material business of the Company or any of its subsidiaries as of the date of this Agreement; PROVIDED, HOWEVER, that nothing contained in this Agreement shall preclude the holding (directly or through nominees) for investment of securities of any such Competing Business which are listed on any recognized securities exchange or are otherwise traded publicly so long as not more than one percent (1%) of any issue of such securities of any one company shall be so held. Employee acknowledges that the non-competition provisions contained in this Agreement are reasonable and necessary, in view of the nature of the Company and Employee's knowledge thereof, in order to protect the legitimate interests of the Company. 9. Non-Disclosure. The Parties agree that Employee -------------- has obtained knowledge of confidential information regarding the business and affairs of the Company. It is therefore agreed that Employee shall respect and protect the confidentiality of all confidential information pertaining to the Company and its subsidiaries, and Employee represents and agrees that he has not and will not appropriate for his own use, disclose to any third party, or authorize anyone else to disclose, unless authorized by the Company in writing, any secret, confidential, proprietary or financial information concerning the operations, future plans, methods of doing business, or financial condition of the Company or its subsidiaries or affiliates, any customer lists, customer files or other information relating to the customers of the Company or its subsidiaries or affiliates, or any lists of the Company's shareholders that he obtained as a result of his employment with the Company and which is not otherwise publicly available (unless it became publicly available in violation of this Section 9 or any other agreement of Employee). This Section 9 shall not apply to information required to be disclosed by court order provided that the Employee shall notify the Company prior to the disclosure of any information required to be disclosed by court order. 10. Review Period. The Employee represents that he ------------- has carefully read and fully understands the terms of this Agreement, that he has been given not less than twenty-one (21) days to consider this Agreement, that he has been advised to seek, and has had the opportunity to seek, the advice and assistance of counsel with regard to this Agreement, and that he knowingly and voluntarily, of his own free will, without any duress, being fully informed and after due deliberate thought and action, accepts the terms of and executes the same as his own free act. If Employee executes this Agreement prior to the expiration of the twenty-one day period, Employee acknowledges that he has done so voluntarily and knowingly. 11. Revocation. Employee acknowledges and understands ---------- that this Agreement may be revoked by him within seven (7) days of signing it and shall not be effective until the period during which Employee may revoke this Agreement has expired without Employee having - 6 - revoked this Agreement. Revocation shall be made by sending a written notice of revocation to Thomas O. Barnes, Chairman, at Barnes Group Inc., 123 Main Street, Bristol, Connecticut 06011-0489. For this revocation to be effective, written notice must be received no later than the close of business of the seventh (7th) day after Employee signs this Agreement. If Employee revokes this Agreement, it shall not be effective or enforceable and Employee will not receive or be entitled to receive any of the Retirement Benefits provided for in this Agreement. This Agreement shall be final and binding on the eighth (8th) day after it has been executed and delivered to the Company. 12. Notices. All notices and communications provided ------- for in this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or sent by certified mail, return receipt requested, postage prepaid; if to Employee, addressed to him at his most recent address as provided to the Company in writing, and if to the Company, addressed to Thomas O. Barnes, Chairman, at Barnes Group Inc., 123 Main Street, Bristol, Connecticut 06011-0489, or to such other address as any party may have furnished to any other in accordance herewith. All notices and communications shall be deemed to have been received on the date of delivery thereof or on the third business day after the mailing thereof, except that notice of change of address shall be effective only upon receipt. 13. Breach of Representation. As a further material ------------------------ inducement to the Company to enter into this Agreement, Employee agrees that in the event Employee breaches this Agreement or it is discovered that any representation made in this Agreement was false when made, all further payment or provision of the Retirement Benefits, other than the benefit to which Employee would be entitled under the SORP and SERP in the absence of this Agreement based on his service and compensation through the Retirement Date, shall cease. 14. Complete Agreement. The Parties acknowledge and ------------------ agree that this Agreement constitutes the complete agreement between them and that no oral modification of this Agreement is permissible. The Parties further acknowledge and agree that this Agreement and the terms contained herein supersede all previous contracts and agreements between the Parties, and that all previous contracts and agreements between the Parties, other than contracts and agreements under which Employee has a vested right, shall become null and void upon execution of this Agreement. 15. Counterparts. This Agreement may be executed in ------------ several counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 16. Successors. This Agreement shall be binding upon ---------- any and all successors and assigns of Employee and the Company. - 7 - 17. Governing Law. Except for issues or matters as to ------------- which federal law is applicable, this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Connecticut without giving effect to the conflicts of law principles thereof. BARNES GROUP INC. By: /s/ Thomas O. Barnes ------------------------ Thomas O. Barnes Chairman STATE OF CONNECTICUT ) ) SS. COUNTY OF HARTFORD ) ----------- On this 6 day of July , 1998, before me ---- --------- personally appeared Thomas O. Barnes, to me known to be the person who executed this Agreement and acknowledged that he executed the same as his free act and deed. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal in the Country and State aforesaid, the day and year first above written. Notary Public My Commission Expires: 06/30/01 /s/ Wilma D. Hart By: /s/ Theodore E. Martin -------------------------- Theodore E. Martin STATE OF CONNECTICUT ) ) SS. COUNTY OF HARTFORD ) ----------- On this 6 day of July , 1998, before me ---- --------- personally appeared Theodore E. Martin, to me known to be the person described in and who executed this Agreement and acknowledged that he executed the same as his free act and deed. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal in the Country and State aforesaid, the day and year first above written. Notary Public My Commission Expires: 06/30/01 /s/ Wilma D. Hart 27279.10 (NY04) - 8 - [/TEXT] EX-27 3
5 This schedule contains summary financial information extracted from the consolidated balance sheet of Barnes Group Inc. at June 30, 1998, and the related consolidated statement of income for the six months ended June 30, 1998, and is qualified in its entirty by reference to such financial statements. 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 37,133 0 95,834 2,851 68,661 216,424 346,639 210,728 424,074 97,445 60,749 0 0 220 185,767 424,074 338,067 338,067 223,559 223,559 0 215 2,054 26,379 9,892 16,487 0 0 0 16,487 .82 .81 Basic and diluted earnings per share calculated in accordance with Statement of Financial Accccounting Standards No. 128.
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