BARNES GROUP INC - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-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, 2005
OR

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-4801

BARNES GROUP INC.
(Exact name of registrant as specified in its charter)


Delaware			06-0247840
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

123 Main Street, Bristol, Connecticut			06011-0489
(Address of Principal Executive Offices)			(Zip Code)

(860) 583-7070
Registrant's telephone number, including area code

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 Act). Yes x No ¨

The registrant had outstanding 23,461,096 shares of common stock as of May 4, 2005.

Barnes Group Inc.
Index to Form 10-Q
For the Quarterly Period Ended March 31, 2005

		Page
Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements
	Consolidated Statements of Income for the three months ended March 31, 2005 and 2004	3
	Consolidated Balance Sheets as of March 31, 2005 and December 31, 2004	4
	Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and 2004	5
	Notes to Consolidated Financial Statements	6-12
	Report of Independent Registered Public Accounting Firm	13

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14-22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22

Item 4.	Controls and Procedures	22

Part II.	OTHER INFORMATION

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23

Item 6.	Exhibits	23

	Signatures	24
	Exhibit Index	25

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
	March 31,

	2005		2004

			As Restated
			(See Note 4)

Net sales	$	273,730	$	247,228

Cost of sales		175,748		162,111
Selling and administrative expenses		76,888		69,411

		252,636		231,522

Operating income		21,094		15,706

Other income		262		698

Interest expense		4,167		3,802
Other expenses		369		130


Income before income taxes		16,820		12,472

Income taxes		4,037		2,861


Net income	$	12,783	$	9,611


Per common share:
Net income:
Basic	$	.55	$	.42
Diluted		.54		.40
Dividends		.20		.20

Average common shares outstanding:
Basic	23,300,210		22,975,586
Diluted	23,848,115		23,877,153

See accompanying notes.

BARNES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)

	March 31,			December 31,
	2005			2004

					As Restated
					(See Note 4)
Assets
Current assets
Cash and cash equivalents	$	38,988				$	36,335
Accounts receivable, less allowances (2005 - $2,821; 2004 - $2,727)		154,580					138,941
Inventories		148,100					136,960
Deferred income taxes		24,472					26,615
Prepaid expenses		15,431					12,244


Total current assets		381,571					351,095

Deferred income taxes		19,155					18,543

Property, plant and equipment		480,070					484,832
Less accumulated depreciation		(318,987	)				(318,548	)

		161,083					166,284

Goodwill		223,299					221,856
Other intangible assets, net		124,358					125,447
Other assets		53,025					53,737


Total assets	$	962,491				$	936,962


Liabilities and Stockholders' Equity
Current liabilities
Notes payable	$	5,500				$	---
Accounts payable		146,653					135,983
Accrued liabilities		72,125					79,039
Long-term debt - current		9,322					9,410


Total current liabilities		233,600					224,432

Long-term debt		267,395					258,635
Accrued retirement benefits		84,443					85,685
Other liabilities		18,035					17,686

Commitments and Contingencies (Note 11)

Stockholders' equity
Common stock - par value $0.01 per share
Authorized: 60,000,000 shares
Issued: 24,419,694 shares at par value		244					244
Additional paid-in capital		99,680					102,678
Treasury stock, at cost (2005 - 1,022,034 shares; 2004 - 1,190,949 shares)		(26,866	)				(31,541	)
Retained earnings		300,804					292,852
Accumulated other non-owner changes to equity		(14,844	)				(13,709	)


Total stockholders' equity		359,018					350,524


Total liabilities and stockholders' equity	$	962,491				$	936,962

See accompanying notes.

BARNES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)

		Three months ended
		March 31,

		2005				2004

						As Restated
						(See Note 4)

Operating activities:
Net income	$	12,783		$	9,611
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		8,873			8,543
Gain on disposition of property, plant and equipment		(131	)		(215	)
Changes in assets and liabilities, net of the effects of acquisitions:
Accounts receivable		(16,903	)		(19,923	)
Inventories		(12,425	)		(3,544	)
Prepaid expenses		(3,743	)		(4,060	)
Accounts payable		10,467			6,305
Accrued liabilities		(6,129	)		(6,092	)
Deferred income taxes		2,133			1,805
Long-term pension assets		(475	)		(483	)
Other		1,250			2,211


Net cash used by operating activities		(4,300	)		(5,842	)

Investing activities:
Proceeds from disposition of property, plant and equipment		367			1,674
Capital expenditures		(5,425	)		(8,478	)
Business acquisitions, net of cash acquired		(402	)		---
Revenue sharing program payments		---			(15,000	)
Other		(112	)		(119	)


Net cash used by investing activities		(5,572	)		(21,923	)

Financing activities:
Net change in other borrowings		6,331			(12,484	)
Payments on long-term debt		(10,145	)		(6,135	)
Proceeds from the issuance of long-term debt		20,000			33,000
Proceeds from the issuance of common stock		828			1,740
Common stock repurchases		---			(47	)
Dividends paid		(4,670	)		(4,612	)


Net cash provided by financing activities		12,344			11,462

Effect of exchange rate changes on cash flows		181			(1,211	)


Increase (decrease) in cash and cash equivalents		2,653			(17,514	)

Cash and cash equivalents at beginning of period		36,335			49,788


Cash and cash equivalents at end of period	$	38,988		$	32,274

Supplemental Disclosure of Cash Flow Information:
Non-cash financing and investing activities in 2004 include the acquisition of a $25.0 million intangible asset and the recognition of the corresponding liability in connection with an aftermarket revenue sharing program ("RSP").

See accompanying notes.

BARNES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts included in the notes are stated in thousands except per share data.)

1. Summary of Significant Accounting Policies

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.

	Three months ended March 31,

	2005			2004

				As Restated

Net income, as reported	$	12,783		$	9,611
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		990			520
Deduct: Stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effects		(2,269	)		(1,530	)

Pro forma net income	$	11,504		$	8,601


Net income per share:
Basic - as reported	$	.55		$	.42
Basic - pro forma		.49			.37