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<SEC-DOCUMENT>0000927016-02-001564.txt : 20020415
<SEC-HEADER>0000927016-02-001564.hdr.sgml : 20020415
ACCESSION NUMBER: 0000927016-02-001564
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20011231
FILED AS OF DATE: 20020322
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-K405
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-04801
FILM NUMBER: 02582474
BUSINESS ADDRESS:
STREET 1: 123 MAIN ST
CITY: BRISTOL
STATE: CT
ZIP: 06010
BUSINESS PHONE: 2035837070
MAIL ADDRESS:
STREET 1: 123 MAIN ST
CITY: BRISTOL
STATE: CT
ZIP: 06010
FORMER COMPANY:
FORMER CONFORMED NAME: ASSOCIATED SPRING CORP
DATE OF NAME CHANGE: 19760518
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>d10k405.txt
<DESCRIPTION>FORM 10-K405
<TEXT>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
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 (I.R.S. Employer Identification No.)
incorporation or organization)
123 Main Street, Bristol, Connecticut 06011-0489
------------------------------------- ----------
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (860) 583-7070
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, $0.01 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
The aggregate market value of the registrant's voting stock held by
non-affiliates amounted to $333,581,909 as of January 31, 2002. The registrant
had outstanding 18,464,330 shares of common stock as of January 31, 2002.
Documents Incorporated by Reference:
Parts I and II incorporate information by reference from the registrant's 2001
Annual Report to Stockholders. Part III incorporates information by reference
from the registrant's Proxy Statement dated March 13, 2002.
<PAGE>
PART I
Item 1. Business.
--------
The Company is a diversified international manufacturer of
precision metal parts and distributor of industrial supplies, serving a wide
range of markets and customers. Founded in 1857 and headquartered in Bristol,
Connecticut, the Company was organized as a Delaware corporation in 1925. The
Company consists of three businesses: Associated Spring, one of the world's
largest manufacturer of precision mechanical and nitrogen gas springs; Barnes
Aerospace, a manufacturer and repairer of highly engineered assemblies and
products for aircraft engines, airframes, and land-based industrial gas
turbines; and Barnes Distribution, an international distributor of maintenance,
repair and operating supplies. The Company has more than 5,100 employees at over
50 locations worldwide.*
Associated Spring. Associated Spring is the largest
-----------------
manufacturer of precision springs in North America, and one of the largest
precision spring manufacturers in the world. Associated Spring is equipped to
produce virtually every type of precision spring, from fine hairsprings for
electronics and instruments to large heavy-duty springs for machinery. Nearly
all of Associated Spring's products are highly engineered custom solutions with
order sizes ranging from just a few units to several million. These products are
made of various metals, and are purchased primarily by durable goods
manufacturers in industries such as farm equipment, telecommunications, medical
devices, home appliances, electronics and transportation. Associated Spring also
manufactures nitrogen gas springs and manifold systems used to precisely control
stamping presses utilized in metal forming industries.
Through Associated Spring's ability to conduct product design
and development, physical product and material testing, rapid prototyping and
reduction of manufacturing-cycle times, the Company provides complete
engineering solutions from concept to manufacturing. Associated Spring's
precision mechanical springs are sold in the United States and through the
Company's foreign subsidiaries to manufacturers in many industries, chiefly for
use as components in their own products. Precision springs are sold primarily
through Associated Spring's sales employees.
Associated Spring has a global and diverse customer base,
including manufacturers of industrial and textile machinery, motors, generators,
electronic equipment, aircraft, household appliances and fixtures, hardware,
office equipment, agricultural equipment, railroad equipment, general machinery,
scientific instruments, light vehicles and heavy trucks.
Associated Spring has manufacturing operations in the United
States, Brazil, Canada, China, Mexico, Singapore, and Sweden, and has retained a
minority interest of 15% in its former subsidiary in Argentina.
___________________________
*As used in this annual report, "Company" refers to the registrant and its
consolidated subsidiaries except where the context requires otherwise, and
"Associated Spring," "Barnes Aerospace," and "Barnes Distribution" refer to the
above-defined businesses, but not to separate corporate entities.
1
<PAGE>
Associated Spring owns a 45% interest in a joint venture
corporation in the United States with NHK Spring Co., Ltd. of Japan. The joint
venture corporation, NHK-Associated Spring Suspension Components Inc. ("NASCO"),
manufactures suspension springs at its facility in Bowling Green, Kentucky.
Barnes Aerospace. Barnes Aerospace is a worldwide producer of
----------------
precision machined and fabricated components and assemblies for original
equipment manufacturer (OEM) turbine engine, airframe and industrial gas turbine
builders, and provides jet engine component overhaul and repair services for
many of the world's major commercial airlines. Barnes Aerospace products and
services, which have earned a reputation for excellence throughout the
international aerospace community, are sold primarily through Barnes Aerospace's
sales employees.
Barnes Aerospace's machining and fabrication operations, with
facilities in Connecticut, Arizona, Ohio, Michigan and Utah produce critical
engine and airframe parts through processes such as electrical discharge
machining, laser drilling, and multi-axis milling and turning and specialize in
hot and cold forming of complex parts made from titanium and other aerospace
alloys. Additional capabilities include superplastic forming and diffusion
bonding, and machining of aluminum and other sheet metal products. Customers
include airframe and gas turbine engine manufacturers for commercial and
military jets, business jets, and land-based industrial gas turbines.
Barnes Aerospace's overhaul and repair facilities, located in
Connecticut, Ohio, and Singapore, specialize in the refurbishment of jet engine
components such as cases, rotating air seals, honeycomb air seals and housings.
Processes performed at these facilities include electron beam welding, plasma
coating, vacuum brazing, and water jet cleaning. Customers include worldwide
major airlines and engine overhaul businesses and the United States military.
Barnes Distribution. Barnes Distribution is an industry leader
-------------------
in the distribution of maintenance, repair, and operating (MRO) supplies. Since
1927, it has grown into one of the world's largest value-added MRO distributors
and international logistics management service businesses. Barnes Distribution
distributes under four product lines: Bowman Distribution, Curtis Industries,
Mechanics Choice, and Raymond Distribution.
Bowman, Curtis and Mechanics Choice distribute a wide variety
of replacement parts and other products, and provide related inventory
management and logistics services. These products include fasteners, special
purpose hardware, electrical supplies, hydraulics, chemicals and security
products. Raymond distributes die and nitrogen gas springs and standard parts
such as coil and flat springs, most of which are manufactured by Associated
Spring. With the exception of springs from Associated Spring, the products sold
by Barnes Distribution are obtained from outside suppliers.
Using innovative methods and new technology to solve complex
supply problems, Barnes Distribution becomes a critical partner in the operation
and profitability of its customers. Barnes Distribution's products are sold in
the United States, Canada, Mexico, the United Kingdom, Ireland, France, Asia,
and Brazil through
2
<PAGE>
a sales force of over 1,000 people, and in many other countries through
distributors. Barnes Distribution's customers range from small automobile
dealers and repair shops to the largest railroads, utilities, food processors,
chemical producers and vehicle fleet operators.
Segment Analysis. The analysis of the Company's revenue from
----------------
sales to unaffiliated customers, operating profit and assets by business segment
as well as revenues from sales to unaffiliated customers and long-lived assets
by geographic area appearing on pages 26 through 27 of the Company's 2001 Annual
Report to Stockholders, included as Exhibit 13 to this report, is incorporated
by reference.
Competition. The Company competes with many other companies,
-----------
large and small, engaged in the manufacture and sale of custom metal parts and
assemblies (including aerospace components). The Company believes Associated
Spring is the largest manufacturer of precision springs in North America and one
of the largest in the world. The Company also faces active competition in the
products sold by Barnes Distribution. The principal methods of competition for
the Company's three businesses include service, quality, price, reliability of
supply, technology, innovation, and also, in the case of Associated Spring and
Barnes Aerospace, design.
Backlog. The backlog of the Company's orders believed to be
-------
firm amounted to $198,417,000 at the end of 2001, as compared with $202,667,000
at the end of 2000. Of the 2001 year-end backlog, $158,690,000 is attributable
to Barnes Aerospace and all of the balance is attributable to Associated Spring.
$36,638,000 of Barnes Aerospace's backlog is not expected to be shipped in 2002.
Substantially all of the remainder of the Company's backlog is expected to be
shipped during 2002.
Raw Materials and Customers. None of the Company's divisions
---------------------------
or segments is dependent upon any single source for its principal raw materials
or products for resale, and all such materials and products are readily
available. One customer, General Electric Co., accounted for 12.7% of the
Company's total sales in 2001. Automotive manufacturers and manufacturers of
electronic products are important customers of Associated Spring. Sales by
Barnes Aerospace to four manufacturers in the aerospace industry accounted for
approximately 64% of its business. Barnes Distribution is not dependent on any
one or a few customers for a significant portion of its sales.
Research and Development. Although most of the products
------------------------
manufactured by the Company are custom parts made to customers' specifications,
the Company is engaged in continuing efforts aimed at discovering and
implementing new knowledge that is useful in developing new products or services
or significantly improving existing products or services. The Company spent
approximately $4,478,000 on its research and development activities in 2001, as
compared to expenditures of approximately $4,528,000 in 2000 and $4,272,000 in
1999. There were no significant customer-sponsored research and development
activities.
Patents and Trademarks. Patents, licenses, franchises and
----------------------
concessions are not material to any of the Company's businesses.
Employees. As of December 31, 2001, the Company employed 5,150
---------
people.
3
<PAGE>
Environmental Laws. Compliance with federal, state, and local
------------------
laws which have been enacted or adopted regulating the discharge of materials
into the environment or otherwise relating to the protection of the environment
has not had a material effect and is not expected to have a material effect upon
the capital expenditures, earnings, or competitive position of the Company.
Item 2. Properties.
----------
The Company and its operating subsidiaries conduct business at
22 manufacturing plants, and 31 sales and distribution centers at various
locations throughout the world. All of the plants, except the one in China, one
in Arizona, and one location in Singapore, are owned. In addition, Associated
Spring-Asia has a long-term lease on the land but owns the plant in Singapore.
Of the properties that are owned, none is subject to any encumbrance. A listing
of the principal facility locations of each of the Company's businesses is set
forth below.
4
<PAGE>
Property List
-------------
L = Lease
O = Own
<TABLE>
<CAPTION>
Barnes Group Inc. Barnes Distribution
- ----------------- -------------------
<S> <C>
Headquarters - Bristol, CT (O) . Headquarters - Cleveland, OH (L)
Headquarters, Raymond Distribution -
Maumee, OH (L)
Associated Spring
- -----------------
. Headquarters - Farmington, CT (L) . Distribution Operations
- United States
. Manufacturing Plants Arlington, TX (L)
- United States Bakersfield, CA (L)
Brecksville, OH (O) Buena Park, CA (2-L)
Bristol, CT (O) Columbus, OH (L)
Corry, PA (O) Edison, NJ (L)
Dallas, TX (O) Elizabethtown, KY (O)
Milwaukee, WI (O) Las Vegas, NV (L)
Saline, MI (O) New Berlin, WI (L)
Syracuse, NY (O) Reno, NV (L)
- International Shelbyville, KY (O)
Burlington, Ontario, Canada (O)* Sparks, NV (O)
Campinas, Brazil (O)* Ypsilanti, MI (L)
Konigstein, Germany (O) - International
Mexico City, Mexico (O) Burlington, Ontario, Canada (O)*
Republic of Singapore (L-Land, Campinas, Brazil (O)*
O-Bldg.)* Concord, Ontario, Canada (O)
Tianjin, China (L) Corsham, United Kingdom (L)
Tranas, Sweden (O) Edmonton, Alberta, Canada (O)
Elancourt Cedex, France (L)
. Sales & Development Evesham, United Kingdom (L)
Boynton Beach, FL (L) Mexico City, Mexico (L)
Glen Ellyn, IL (L) Mississauga, Ontario, Canada (L)
Plymouth, MI (L) Moncton, New Brunswick, Canada (O)
Mullingar, Ireland (L)
. Distribution Republic of Singapore (L-Land
Frazer, MI (L) O-Bldg.)*
Trappas Cedex, France (L)
Barnes Aerospace
- ----------------
. Headquarters - Windsor, CT (O)
. Manufacturing Plants
- United States
East Granby, CT (O)
Lansing, MI (O)
Phoenix, AZ (L)
Ogden, UT (O)
West Chester, OH (O)
Windsor, CT (2-O)
- International
Republic of Singapore (L)
. Sales
Derby, United Kingdom (L) *Shared Facilities
</TABLE>
5
<PAGE>
The Company believes that its owned and leased properties have been
adequately maintained, are in satisfactory operating condition, are suitable and
adequate for the business activities conducted therein, and have productive
capacities sufficient to meet current needs.
Item 3. Legal Proceedings.
-----------------
There are no material pending legal proceedings to which the Company
or any of its subsidiaries is a party, or of which any of their property is the
subject.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
No matter was submitted during the fourth quarter of 2001 to a vote of
security holders.
6
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
----------------------------------------------------------------
Matters.
-------
The information regarding the Company's common stock contained on pages
21 through 23 of the Company's 2001 Annual Report to Stockholders is
incorporated by reference. As of January 31, 2002, the Company's common stock
was held by 18,464,330 stockholders of record. The Company's common stock is
traded on the New York Stock Exchange under the symbol "B".
Item 6. Selected Financial Data.
-----------------------
The selected financial data for the last five years contained on page
29 of the Company's 2001 Annual Report to Stockholders are incorporated
by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations.
-------------
The financial review and management's analysis thereof appearing on
pages 7 through 11 of the Company's 2001 Annual Report to Stockholders are
incorporated by reference.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
---------------------------------------------------------
The information regarding market risk contained on pages 10 and 11 of
the Company's 2001 Annual Report to Stockholders is incorporated by reference.
Item 8. Financial Statements and Supplementary Data.
-------------------------------------------
The financial statements and report of independent accountants
appearing on pages 12 through 27 of the Company's 2001 Annual Report to
Stockholders are incorporated by reference. See also the report of independent
accountants included on page 15 below pursuant to Item 302(a) of Regulation S-K.
The material under "Quarterly Data" on page 28 of the Company's 2001 Annual
Report to Stockholders is also incorporated by reference.
Item 9. Changes in and Disagreements With Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure.
--------------------
None.
7
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Company.
-----------------------------------------------
The material under "Election of Three Directors For A Three-Year Term
and one Director for a One-Year Term" on pages 1 through 3, of the Company's
Proxy Statement dated March 13, 2002 is incorporated by reference.
The Company's executive officers as of the date of this report are as
follows:
<TABLE>
<CAPTION>
Age as of
Executive Officer Position December 31, 2001
- ----------------- -------- -----------------
<S> <C> <C>
Edmund M. Carpenter President and Chief Executive Officer 60
(since 1998)
John R. Arrington Senior Vice President, Human Resources (since 55
1998)
Francis C. Boyle, Jr. Vice President, Controller (since 1997) 51
Leonard M. Carlucci Vice President, Barnes Group Inc. (since 1994) 55
and President, Associated Spring (since 1999)
Joseph D. DeForte Vice President, Tax (since 1999) 59
William C. Denninger Senior Vice President, Finance and 51
Chief Financial Officer (since 2000)
A. Keith Drewett Vice President, Barnes Group Inc. and 55
President, Barnes Distribution
(since 2000)
Thomas P. Fodell Vice President, Barnes Group Inc. and 51
Vice President, Sales and Marketing, Associated
Spring (since 2000)
Signe S. Gates Senior Vice President, General Counsel and 52
Secretary (since 1999)
Philip A. Goodrich Senior Vice President, Corporate Development 45
(since 2000)
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Age as of
Executive Officer Position December 31, 2001
- ----------------- -------- -----------------
<S> <C> <C>
Gregory F. Milzcik Vice President, Barnes Group Inc. and President, 42
Barnes Aerospace (since 1999)
Lawrence W. O'Brien Vice President, Treasurer (since 2001) 52
Idelle K. Wolf Vice President, Barnes Group Inc. and 49
Chief Operating Officer, Barnes Distribution
(since 2000)
</TABLE>
Except for Messrs. Carpenter, Arrington, DeForte, Denninger, Drewett,
Goodrich, Milzcik and O'Brien, and Mses. Gates and Wolf, each of the Company's
executive officers has been employed by the Company or its subsidiaries in an
executive or managerial capacity for at least the past five years. Each officer
holds office until his or her successor is chosen and qualified or otherwise as
provided in the By-Laws, except Mr. Carpenter who holds office pursuant to an
employment agreement with the Company, which is incorporated as Exhibit 10.12 to
this report. No family relationships exist among the executive officers of the
Company.
Mr. Carpenter joined the Company as President and Chief Executive
Officer in December 1998. From 1996 to 1998, Mr. Carpenter was a Senior Managing
Director of Clayton, Dubilier & Rice, Inc., a private equity firm.
Mr. Arrington joined the Company as Senior Vice President, Human
Resources in April 1998. From 1995 to 1998, Mr. Arrington was Vice President,
Human Resources of U.S. West Communications Group.
Mr. DeForte joined the Company as Vice President, Tax in August 1999.
From 1997 to 1999, Mr. DeForte was Vice President and Chief Financial Officer of
Loctite Corporation, a manufacturer and distributor of adhesives and sealants.
From 1988 to 1997, Mr. DeForte was Vice President, Tax, Loctite Corporation. In
1997, Loctite Corporation became a subsidiary of Henkel KGaA.
Mr. Denninger joined the Company as Senior Vice President, Finance and
Chief Financial Officer in March 2000. From 1994 to 2000, Mr. Denninger was Vice
President-Finance and Chief Financial Officer of BTR Inc., an industrial
products manufacturer.
Mr. Drewett joined the Company as Vice President, Barnes Group Inc. and
President, Barnes Distribution in May 2000, upon the Company's acquisition of
Curtis Industries. From 1998 to 2000, Mr. Drewett was President and Chief
Executive Officer of Curtis Industries, Inc. From 1992 to 1998, he was President
of the Automotive and Industrial Division of Curtis Industries. He was also
Senior Vice President of Curtis from 1997 to 1998 and Vice President of Curtis
from 1992 to 1997.
9
<PAGE>
Mr. Goodrich joined the Company as Vice President, Business
Development in November 1999. He was promoted to Senior Vice President,
Corporate Development in December 2000. From 1996 to 1998, Mr. Goodrich was
Senior Vice President, Corporate Development of AMETEK, Inc., a manufacturer of
electric motors and electronic equipment.
Mr. Milzcik joined the Company as Vice President, Barnes Group Inc.
and President, Barnes Aerospace in June 1999. From 1997 to 1999, Mr. Milzcik was
Vice President and General Manager of International Operations of Lockheed
Martin Aircraft and Logistics, an aerospace manufacturing and service company.
From 1994 to 1997, Mr. Milzcik was Group Vice President, Manufacturing and
Overhaul of Precision Standard, Inc., an aerospace structure manufacturing and
engineering services company.
Mr. O'Brien joined the Company as Vice President and Treasurer in
August 2001. From 1997 to 2001, Mr. O'Brien was Vice President and Treasurer of
L-3 Communications Corporation. From 1981 to 1996, Mr. O'Brien worked for
Pechiney Corporation including serving as Vice President and Treasurer from 1990
to 1996.
Ms. Gates joined the Company as Senior Vice President, General Counsel
and Secretary in June 1999. From 1996 to 1999, Ms. Gates was Vice President,
General Counsel and Corporate Secretary of Axel Johnson Inc., a manufacturing,
distribution and service company in the energy, telecommunications and
environmental industries.
Ms. Wolf joined the Company as Vice President, Barnes Group Inc. and
Chief Operating Officer, Barnes Distribution in May 2000, upon the Company's
acquisition of Curtis Industries. From 1998 to 2000, Ms. Wolf was Executive Vice
President and Chief Operating Officer of Curtis Industries, Inc. She was Senior
Vice President and Chief Financial Officer of Curtis from 1997 to 1998, and Vice
President of Finance and Chief Financial Officer from 1992 to 1997.
Item 11. Executive Compensation.
----------------------
The information under "Compensation of Directors" appearing on page 4,
and the information under "Compensation," "Stock Options," "Pension Plans,"
"Employment Agreement," and "Change-In-Control Agreements" appearing on pages 10
through 15 of the Company's Proxy Statement dated March 13, 2002, are
incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
--------------------------------------------------------------
The information concerning this item appearing on pages 4 and 5 of the
Company's Proxy Statement dated March 13, 2002, is incorporated by reference.
Item 13. Certain Relationships and Related Transactions.
----------------------------------------------
None.
10
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
----------------------------------------------------------------
(a) The report of PricewaterhouseCoopers LLP, independent accountants,
and the following financial statements and financial statement
schedules are filed as part of this report:
<TABLE>
<CAPTION>
Reference
--------------------------------
Annual Report
--------------
Form 10-K to Stockholders
--------- ---------------
(page) (page)
------ ------
<S> <C> <C>
Report of independent accountants 15 27
Consolidated balance sheets at December 31, 2001
and 2000 13
Consolidated statements of income for the years
ended December 31, 2001, 2000, and 1999 12
Consolidated statements of changes in stockholders'
equity for the years ended December 31, 2001,
2000, and 1999 15
Consolidated statements of cash flows for the years
ended December 31, 2001, 2000, and 1999 14
Notes to consolidated financial statements 16-27
Supplementary information 28
Quarterly data (unaudited)
Consolidated schedule for the years ended December
31, 2001, 2000, and 1999: 16
Schedule II - Valuation and Qualifying Accounts
</TABLE>
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or notes thereto.
The consolidated financial statements listed in the above index which are
included in the Annual Report to Stockholders of Barnes Group Inc. for the year
ended December 31, 2001, are incorporated by reference. With the exception of
the pages listed in the above index and in Items 1, 5, 6, 7, 7A, and 8, the 2001
Annual Report to Stockholders is not to be deemed filed as part of this report.
11
<PAGE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
(c) The Exhibits required by Item 601 of Regulation S-K are filed as
Exhibits to this Annual Report on Form 10-K and indexed at pages 17
through 21 of this report.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 22, 2002
BARNES GROUP INC.
By /s/ Edmund M. Carpenter
---------------------------------
Edmund M. Carpenter
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below as of the above date by the following persons on
behalf of the Company in the capacities indicated.
/s/ Edmund M. Carpenter
- -------------------------------------------------
Edmund M. Carpenter
President and Chief Executive Officer
(principal executive officer) and Director
/s/ William C. Denninger
- -------------------------------------------------
William C. Denninger
Senior Vice President, Finance
Chief Financial Officer
(principal financial officer)
/s/ Francis C. Boyle, Jr.
- -------------------------------------------------
Francis C. Boyle, Jr.
Vice President, Controller
(principal accounting officer)
/s/ Thomas O. Barnes
- -------------------------------------------------
Thomas O. Barnes
Director
13
<PAGE>
/s/ John W. Alden
- -----------------------------------------------------
John W. Alden
Director
/s/ Gary G. Benanav
- -----------------------------------------------------
Gary G. Benanav
Director
/s/ William S. Bristow, Jr.
- -----------------------------------------------------
William S. Bristow, Jr.
Director
/s/ George T. Carpenter
- -----------------------------------------------------
George T. Carpenter
Director
/s/ Donald W. Griffin
- -----------------------------------------------------
Donald W. Griffin
Director
/s/ Frank E. Grzelecki
- -----------------------------------------------------
Frank E. Grzelecki
Director
/s/ G. Jackson Ratcliffe
- -----------------------------------------------------
G. Jackson Ratcliffe
Director
14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Barnes Group Inc.
Our audits of the consolidated financial statements referred to in our report
dated January 30, 2002 appearing in the 2001 Annual Report to Stockholders of
Barnes Group Inc. (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the financial statement schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Hartford, Connecticut
January 30, 2002
15
<PAGE>
BARNES GROUP INC.
Schedule II - Valuation and Qualifying Accounts
Years Ended December 31, 2001, 2000, and 1999
( In thousands )
Allowances for Doubtful Accounts:
Balance December 31, 1998 $ 2,413
Provision charged to income (1) 1,343
Doubtful accounts written off (net) (427)
Other adjustments --
-----------
Balance December 31, 1999 3,329
Provision charged to income 936
Doubtful accounts written off (net) (2) (1,990)
Other adjustments (3) 445
-----------
Balance December 31, 2000 2,720
Provision charged to income (4) 2,076
Doubtful accounts written off (net) (4) (1,682)
Other adjustments --
-----------
Balance December 31, 2001 $ 3,114
===========
(1) The 1999 provision charged to income reflects complications encountered
during the implementation of a new integrated management system at Barnes
Distribution.
(2) The increase in doubtful accounts written off in 2000 was the result of
Barnes Distribution recognizing the write-off of receivables previously
reserved and expensed.
(3) Opening balances of acquired businesses.
(4) The 2001 increase in the provision charged to income and the level of
write-off of doubtful accounts reflects the impact the weak economic
environment has had on the Company's customers.
16
<PAGE>
EXHIBIT INDEX
Barnes Group Inc.
Annual Report on Form 10-K
for the Year ended December 31, 2001
------------------------------------
<TABLE>
<CAPTION>
Exhibit No. Description Reference
- ----------- ----------- ---------
<S> <C> <C>
3.1 Restated Certificate of Incorporation. Incorporated by reference to Exhibit 3.1 to
the Company's report on Form 10-K for the
year ended December 31, 1997.
3.2 Amended and Restated By-Laws. Incorporated by reference to Exhibit 3.2 to
the Company's report on Form 10-K for the
year ended December 31, 1998.
4.1 Revolving Credit Agreement dated as of Incorporated by reference to Exhibit 4.1 to
December 1, 1991 among the Company and the Company's report on Form 10-K for the
several commercial banks. year ended December 31, 1996.
4.2 (i) Sixth Amendment to Credit Agreement Incorporated by reference to Exhibit 4.2 to
set forth in Exhibit 4.1 dated as of the Company's report on Form 10-K for the
December 1, 1997. year ended December 31, 1997.
(ii) Seventh Amendment to Credit Agreement Filed with this report.
set forth in Exhibit 4.1 dated as of September
29, 1999.
(iii) Eighth Amendment to Credit Agreement Filed with this report.
set forth in Exhibit 4.1 dated as of
October 1, 2001.
4.3 Rights Agreement dated as of December 10, Incorporated by reference to Exhibit 1 to
1996, between the Company and ChaseMellon the Company's report on Form 8-A filed on
Shareholder Services, L.L.C. December 20, 1996.
4.4 Note Agreement dated as of September 16, Incorporated by reference to Exhibit 4.8 to
1991, among the Company and several the Company's report on Form 10-K for the
insurance companies. year ended December 31, 1996.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description Reference
- ----------- ----------- ---------
<S> <C> <C>
4.5 Note Purchase Agreement dated as of Incorporated by reference to Exhibit 4.9 to
December 1, 1995, between the Company and the Company's report on Form 10-K for the
several insurance companies. year ended December 31, 1995.
4.6 Note Agreement dated as of November 12, Incorporated by reference to Exhibit 4.6 to
1999, between 3031786 Nova Scotia Company, the Company's report on Form 10-K for the
a wholly owned subsidiary of the Company, year ended December 31, 1999.
and several insurance companies; and
related Guaranty Agreement between the
Company and such insurance companies.
4.7 Note Agreement dated as of November 21, Incorporated by reference to Exhibit 4.7 to
2000, between Barnes Group Inc. and several the Company's report on Form 10-K for the
insurance companies. year ended December 31, 2000.
4.8 Term Loan Facility Agreement between Incorporated by reference to Exhibit 10.1 to
Associated Spring-Asia Pte. Ltd. and The the Company's report on Form 10-Q for the
Development Bank of Singapore Limited, quarter ended June 30, 2001.
dated June 19, 2001.
4.9 Guarantee of Term Loan Facility Agreement, Incorporated by reference to Exhibit 10.2 to
between Barnes Group Inc. and The the Company's report on Form 10-Q for the
Development Bank of Singapore Limited, quarter ended June 30, 2001.
dated June 19, 2001.
4.10 Currency Swap and Interest Rate Hedging Incorporated by reference to Exhibit 10.3 to
Master Agreement, between Associated the Company's report on Form 10-Q for the
Spring-Asia Pte. Ltd. and The Development quarter ended June 30, 2001.
Bank of Singapore Limited, dated June 19,
2001.
4.11 Guarantee of Currency Swap and Interest Incorporated by reference to Exhibit 10.4 to
Rate Hedging Master Agreement, between the Company's report on Form 10-Q for the
Barnes Group Inc. and The Development Bank quarter ended June 30, 2001.
of Singapore Limited, dated June 19, 2001.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description Reference
- ----------- ----------- ---------
<S> <C> <C>
10.1* The Company's Management Incentive Incorporated by reference to Exhibit 10.1 to
Compensation Plan, as amended and restated the Company's report on Form 10-K for the
January 1, 2000. year ended December 31, 2000.
10.2* The Company's Long Term Incentive Plan. Incorporated by reference to Exhibit 10.2 to
the Company's report on Form 10-K for the
year ended December 31, 1995.
10.3* The Company's Retirement Benefit Incorporated by reference to Exhibit 10.3 to
Equalization Plan. the Company's report on Form 10-K for the
year ended December 31, 1995.
10.4* The Company's Supplemental Executive Incorporated by reference to Exhibit 10.4 to
Retirement Plan. the Company's report on Form 10-K for the
year ended December 31, 1995.
10.5* The Company's 1991 Stock Incentive Plan, as Incorporated by reference to Exhibit 10.5 to
amended and restated May 15, 1998. the Company's report on Form 10-K for the
year ended December 31, 1998.
10.6* The Company's Non-Employee Director Incorporated by reference to Exhibit 10.7 to
Deferred Stock Plan. the Company's report on Form 10-K for the
year ended December 31, 1994.
10.7* The Company's Amended and Restated Incorporated by reference to Exhibit 10.8 to
Directors' Deferred Compensation Plan. the Company's report on Form 10-K for the
year ended December 31, 1996.
10.8* The Company's Senior Executive Enhanced Incorporated by reference to Exhibit 10.8 to
Life Insurance Program, as amended and the Company's report on Form 10-K for the
restated May 16, 1997. year ended December 31, 1998.
10.9* The Company's Enhanced Life Insurance Incorporated by reference to Exhibit 10.12
Program. to the Company's report on Form 10-K for the
year ended December 31, 1993.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description Reference
- ----------- ----------- ---------
<S> <C> <C>
10.10* The Company's Supplemental Senior Officer Incorporated by reference to Exhibit 10.13
Retirement Plan. to the Company's report on Form 10-K for the
year ended December 31, 1996.
10.11* The Company's Executive Officer Incorporated by reference to Exhibit 10.14
Change-In-Control Severance Agreement. to the Company's report on Form 10-K for the
year ended December 31, 1997.
10.12* Employment Agreement dated as of December Incorporated by reference to Exhibit 10.14
8, 1998 between the Company and Edmund M. to the Company's report on Form 10-K for the
Carpenter. year ended December 31, 1998.
10.13* The Company's Employee Stock and Ownership Incorporated by reference to Exhibit 10.13
Program. to the Company's report on Form 10-K for the
year ended December 31, 2000.
10.14* Barnes Group Inc. Executive Deferred Incorporated by reference to Exhibit 10.1 to
Compensation Plan. the Company's report on Form 10-Q for the
quarter ended September 30, 2001.
10.15* Barnes Group Inc. Retirement Savings Plan, Filed with this report.
as amended through January 1, 2002.
13 Portions of the 2001 Annual Report to Filed with this report.
Stockholders.
21 List of Subsidiaries. Filed with this report.
23 Consent of Independent Accountants. Filed with this report.
</TABLE>
*Management contract or compensatory plan or arrangement.
The Company agrees to furnish to the Commission, upon request,
a copy of each instrument with respect to which there are outstanding issues of
unregistered long-term debt of the Company and its subsidiaries the authorized
principal amount of which does not exceed 10% of the total assets of the Company
and its subsidiaries on a consolidated basis.
20
<PAGE>
Except for Exhibits 13, 21, and 23, which will be furnished
free of charge, copies of exhibits referred to above will be furnished at a cost
of twenty-five cents per page to security holders who make a written request to
the Secretary, Barnes Group Inc., 123 Main Street, P.O. Box 489, Bristol,
Connecticut 06011-0489.
21
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.2(II)
<SEQUENCE>3
<FILENAME>dex42ii.txt
<DESCRIPTION>SEVENTH AMENDMENT TO CREDIT AGMT
<TEXT>
<PAGE>
Exhibit 4.2 (ii)
SEVENTH AMENDMENT
TO
CREDIT AGREEMENT
THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated
as of September 29, 1999, by and between BARNES GROUP, INC. (the "Borrower"),
the Lenders parties to the Credit Agreement (as defined below) from time to
time (the "Lenders"), and MELLON BANK, N.A., a national banking association, as
Agent (in such capacity, the "Agent").
WHEREAS, the Agent, the Lenders and the Borrower are parties to a
certain Credit Agreement dated as of December 1, 1991 (as amended, the "Credit
Agreement"); and
WHEREAS, the Agent, the Lenders and the Borrower desire to amend the
Credit Agreement as set forth herein; and
WHEREAS, all words and terms used in this Amendment which are
defined in the Credit Agreement are used herein with the same meanings unless
otherwise defined herein or required by the context;
NOW, THEREFORE, in consideration of the foregoing premises and
intending to be legally bound, the Agent, the Lenders and the Borrower hereby
agree as follows:
Section 1. Amendment to Credit Agreement. The Credit Agreement is
-----------------------------
hereby amended as follows:
(a) By adding the following new defined term, "Subsidiary Debt Limit", to
Section 1.01:
"Subsidiary Debt Limit" shall mean $50,000,000; provided, however,
that the Subsidiary Debt Limit shall be increased to $100,000,000 in
the event that a Subsidiary of the Borrower incurs additional
Indebtedness in connection with the acquisition of Stromsholmen
A.B..
(b) By deleting the figure "$50,000,000" where it appears in Section
6.03(d)(i) thereof and substituting the words "the Subsidiary Debt Limit"
therefor.
(c) By adding a new Section 9.17 to read as follows:
9.17. Confidentiality. The Agent and each of the Lenders agree
---------------
to keep confidential any information relating to the Borrower
received by it pursuant to or in connection with this Agreement which
is (a) trade information which the Agent and the Lenders reasonably
expect that the Borrower would want to keep confidential, (b)
financial information or (c) information which is clearly marked
"CONFIDENTIAL"; provided, however, that this Section 9.17 shall not
--------
be construed to prevent the Agent or any Lender from disclosing such
information (i) to any Affiliate that shall agree to be bound by this
obligation of confidentiality, (ii) upon the order of any court or
administrative agency of competent jurisdiction, (iii) upon the
request or demand of any regulatory agency or authority having
jurisdiction over the Agent or such Lender (whether or not such
request or demand has the force of law), (iv) that has been publicly
disclosed, other than from a breach of this provision by the Agent or
any Lender, (v) that has been obtained from any person that is
neither a party to this Agreement nor an Affiliate of any such party,
(vi) in connection with the exercise of any right or
<PAGE>
remedy hereunder or under any other Loan Document, (vii) as
expressly contemplated by this Agreement or any other Loan Document
or (viii) to any prospective purchaser of a11 or any part of the
interest of any Lender which shall agree to be bound by the
obligation of confidentiality in this Agreement or the other Loan
Documents if such prospective purchaser is a financial institution
or has been consented to by the Borrower, which consent will not be
unreasonably withheld.
Section 2. Conditions. The obligation of the Agent and the Lenders
----------
to enter into the foregoing amendment to the credit Agreement shall be subject
to satisfaction by the Borrower of the following conditions precedent:
(a) The Agent shall have received (with a copy for each Lender) the
following documents dated as of the date of the issuance of the
Amendment (the "Closing Date") and in form and substance
satisfactory to the Lenders:
(i) An executed counterpart of this Amendment;
(ii) A certificate signed by a duly authorized officer of the
Borrower stating that (A) the representations and warranties
contained in Article III of the Credit Agreement (except for Section
3.06 which continues to be true as of the date set forth therein)
are correct on and as of the Closing Date and as though made on and
as of the Closing Date and (B) no Event of Default and no event, act
or omission which, with the giving of notice or the lapse of time or
both, would constitute such an Event of Default has occurred and is
continuing or would result from the execution and delivery of the
Amendment; and
(iii) evidence satisfactory to the Agent that the Borrower and
the holders of the Senior Notes have entered into an amendment to
the [Note Purchase Agreement] pursuant to which such holders agree
to increase the level of Subsidiary Indebtedness to $100,000,000 for
the purpose of permitting the acquisition of Stromsholmen A.B.
(b) The Agent shall have received (with a copy for each Lender) such
other approvals, certificates, opinions or documents, in form and
substance satisfactory to the Lenders, as the Lenders may reasonably
request.
Section 3. Effect of Amendment. The Credit Agreement, as amended by
-------------------
this Amendment, is in all respects ratified, approved and confirmed and shall,
as so amended, remain in full force and effect. From and after the date hereof,
all references in any document or instrument to the Credit Agreement shall mean
and include the Credit Agreement, as amended by this Amendment.
Section 4. Governing Law. This Amendment shall be governed by and
-------------
shall be interpreted and enforced in accordance with the laws of the State of
New York.
Section 5. Counterparts. This Amendment may be executed in any number
------------
of counterparts and by the different parties hereto on separate counterparts,
each of which counterparts, when so executed and delivered, shall be deemed to
be an original, and all of which counterparts, taken together, shall constitute
but one and the same Amendment.
-2-
<PAGE>
Section 6. Expenses. The Borrower shall reimburse the Lenders for
--------
all costs and expenses (including fees and expenses of counsel to the Agent)
incurred in connection with this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized.
BARNES GROUP, INC.
By_________________________________
Title______________________________
MELLON BANK, N.A., individually and
as Agent
By_________________________________
Title______________________________
FLEET NATIONAL BANK
By_________________________________
Title______________________________
THE CHASE MANHATTAN BANK
By_________________________________
Title______________________________
BANK ONE, N.A.
By_________________________________
Title______________________________
-3-
<PAGE>
KEYBANK NATIONAL
ASSOCIATION
By_________________________________
Title______________________________
BANKBOSTON
By_________________________________
Title______________________________
-4-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.2(III)
<SEQUENCE>4
<FILENAME>dex42iii.txt
<DESCRIPTION>EIGHTH AMENDMENT TO CREDIT AGMT
<TEXT>
<PAGE>
Exhibit 4.2 (iii)
EIGHTH AMENDMENT
TO
CREDIT AGREEMENT
THIS EIGHTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated
as of October 1, 2001 (the "Effective Date"), by and between BARNES GROUP, INC.
(the "Borrower"), the Lenders parties to the Credit Agreement (as defined
below) from time to time (the "Lenders"), and MELLON BANK, N.A., a national
banking association, as Agent (in such capacity, the "Agent").
WHEREAS, the Agent, the Lenders and the Borrower are parties to a
certain Credit Agreement dated as of December 1, 1991 (as amended, the "Credit
Agreement"); and
WHEREAS, the Agent, the Lenders and the Borrower desire to amend the
Credit Agreement as set forth herein; and
WHEREAS, all words and terms used in this Amendment which are defined
in the Credit Agreement are used herein with the same meanings unless otherwise
defined herein or required by the context;
NOW, THEREFORE, in consideration of the foregoing premises and
intending to be legally bound, the Agent, the Lenders and the Borrower hereby
agree as follows:
Section 1. Amendment to Credit Agreement. The Credit Agreement is
-----------------------------
hereby amended by deleting Section 6.01(a) in its entirety and substituting
therefor the following:
"(a) Consolidated Current Ratio. The Consolidated Current Ratio shall
--------------------------
not, on or at any time after March 31, 2002, be less than 1.40:1."
Section 2. Conditions. The obligation of the Agent and the Lenders to
----------
enter into the foregoing amendment to the Credit Agreement shall be subject to
satisfaction by the Borrower of the following conditions precedent:
(a) The Agent shall have received (with a copy for each Lender) the
following documents dated as of the date of the issuance of the
Amendment (the "Closing Date") and in form and substance satisfactory
to the Lenders:
(i) An executed counterpart of this Amendment;
(ii) A certificate signed by a duly authorized officer of the
Borrower stating that (A) the representations and warranties
contained in Article III of the Credit Agreement (except for Section
3.06 which continues to be true as of the date set forth therein) are
correct on and as of the Closing Date and as though made on and as of
the Closing Date and (B) no Event of Default and no event, act or
omission which, with the giving of notice or the lapse of time or
both, would constitute such an Event of Default has occurred and is
continuing or would result from the execution and delivery of the
Amendment; and
(b) The Agent shall have received (with a copy for each Lender)
such other approvals, certificates, opinions or documents, in form
and substance satisfactory to the Lenders, as the Lenders may
reasonably request.
<PAGE>
Section 3. Effect of Amendment. The Credit Agreement, as amended by
-------------------
this Amendment, is in all respects ratified, approved and confirmed and shall,
as so amended, remain in full force and effect. From and after the Effective
Date hereof, all references in any document or instrument to the Credit
Agreement shall mean and include the Credit Agreement, as amended by this
Amendment.
Section 4. Governing Law. This Amendment shall be governed by and
-------------
shall be interpreted and enforced in accordance with the laws of the State of
New York.
Section 5. Counterparts. This Amendment may be executed in any number
------------
of counterparts and by the different parties hereto on separate counterparts,
each of which counterparts, when so executed and delivered, shall be deemed to
be an original, and all of which counterparts, taken together, shall constitute
but one and the same Amendment.
Section 6. Expenses. The Borrower shall reimburse the Lenders for all
--------
costs and expenses (including fees and expenses of counsel to the Agent)
incurred in connection with this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized.
BARNES GROUP, INC.
By_________________________________
Title______________________________
MELLON BANK, N.A., individually and
as Agent
By_________________________________
Title______________________________
FLEET NATIONAL BANK
By_________________________________
Title______________________________
THE CHASE MANHATTAN BANK
By_________________________________
Title______________________________
-2-
<PAGE>
BANK ONE N.A.
By_________________________________
Title______________________________
KEYBANK NATIONAL
ASSOCIATION
By_________________________________
Title______________________________
-3-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.15
<SEQUENCE>5
<FILENAME>dex1015.txt
<DESCRIPTION>RETIREMENT SAVINGS PLAN, AS AMENDED
<TEXT>
<PAGE>
Exhibit 10.15
BARNES GROUP INC
RETIREMENT SAVINGS PLAN
[As Amended and Restated Effective January 1, 1997, April 1, 2001, and
January 1, 2002]
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS.......................................................2
ARTICLE 2 - PARTICIPATION.....................................................7
2.1 PARTICIPATION.........................................................7
2.2 TRANSFERRED PARTICIPANTS..............................................7
2.3 PARTICIPATION IN PAYSOP...............................................7
ARTICLE 3 - LIMITS ON CONTRIBUTIONS...........................................8
3.1 BEFORE-TAX CONTRIBUTIONS..............................................8
3.2 AFTER-TAX CONTRIBUTIONS...............................................9
3.3 MATCHING ALLOCATIONS; COMPANY CONTRIBUTIONS...........................9
3.4 LIMITATION AFFECTING HIGHLY COMPENSATED EMPLOYEES.....................9
3.5 MAXIMUM ANNUAL ADDITIONS..............................................9
3.6 MISTAKEN CONTRIBUTIONS...............................................12
3.7 CHANGE OF CONTRIBUTION ELECTION......................................12
3.8 LIMITATIONS ON AFTER-TAX CONTRIBUTIONS, MATCHING ALLOCATIONS AND
SUPPLEMENTAL CONTRIBUTIONS.................................................12
3.9 NONDISCRIMINATION TESTS..............................................12
3.10 ROLLOVER CONTRIBUTIONS ..............................................18
ARTICLE 4 - COMPANY STOCK FUND AND GUARANTEE ACCOUNT.........................18
4.1 CONTRIBUTIONS........................................................18
4.2 ELECTION TO TRANSFER PRIOR CONTRIBUTIONS.............................19
4.3 GUARANTEE ACCOUNT....................................................19
4.4 VALUE................................................................19
ARTICLE 4A - MERGER OF PAYSOP................................................21
4A.1 MERGER AND TRANSFER.................................................21
4A.2 SEPARATE ACCOUNTS...................................................21
4A.3 RIGHTS..............................................................21
ARTICLE 5 - INVESTMENT OF CONTRIBUTIONS......................................22
5.1 DIRECTED INVESTMENT ACCOUNT..........................................22
5.2 INVESTMENT ELECTION..................................................23
5.3 RESPONSIBILITY FOR INVESTMENTS.......................................23
5.4 CHANGES IN INVESTMENTS...............................................24
5.5 ACCOUNTS.............................................................24
5.6 DIVERSIFICATION OF COMPANY STOCK ACCOUNT ............................24
ARTICLE 6 - VESTED PORTION OF ACCOUNTS.......................................25
6.1 BEFORE-TAX, AFTER-TAX ACCOUNTS, ROLLOVER ACCOUNTS, AND PAYSOP
ACCOUNTS...................................................................25
6.2 MATCHING ACCOUNT.....................................................25
6.3 VESTING SERVICE......................................................26
6.4 AMENDMENT OF VESTING SCHEDULE........................................27
ARTICLE 7 - WITHDRAWALS WHILE STILL EMPLOYED.................................28
7.1 WITHDRAWAL OF AFTER-TAX CONTRIBUTIONS................................28
7.2 WITHDRAWAL OF BEFORE-TAX CONTRIBUTIONS AND ROLLOVER CONTRIBUTIONS ...28
7.3 MATCHING ACCOUNT.....................................................29
7.4 PAYSOP ACCOUNT.......................................................29
<PAGE>
7.5 PROCEDURES AND RESTRICTIONS..........................................30
7.6 GUARANTEE ACCOUNT....................................................30
ARTICLE 8 - DISTRIBUTION OF ACCOUNTS UPON TERMINATION OF EMPLOYMENT..........31
8.1 AMOUNT OF PAYMENT; PAYMENT IN COMPANY STOCK..........................31
8.2 METHODS OF DISTRIBUTION..............................................31
8.3 BENEFICIARY..........................................................32
8.4 FORFEITURES..........................................................32
8.5 DISTRIBUTION OF PAYSOP ACCOUNTS......................................33
8.6 DIRECT ROLLOVER DISTRIBUTIONS........................................33
ARTICLE 9 - ADMINISTRATION OF PLAN...........................................35
9.1 APPOINTMENT OF BENEFITS COMMITTEE....................................35
9.2 OPERATION OF BENEFITS COMMITTEE......................................35
9.3 GENERAL DUTIES OF THE BENEFITS COMMITTEE.............................35
9.4 CLAIMS PROCEDURE.....................................................36
9.5 INDEMNITY............................................................36
9.6 PLAN EXPENSES........................................................37
ARTICLE 10 - LOANS...........................................................38
10.1 LOAN LIMITS.........................................................38
10.2 INTEREST............................................................38
10.3 TERM................................................................38
10.4 SECURITY ...........................................................38
10.5 FREQUENCY/MINIMUM AMOUNTS ..........................................39
10.6 FEES ...............................................................39
10.7 PARTICIPANT LOAN PROGRAM ...........................................39
ARTICLE 11 - TRUSTEE ........................................................40
11.1 TRUST ..............................................................40
11.2 APPOINTMENT OF TRUSTEE .............................................40
11.3 DUTIES OF TRUSTEE ..................................................40
11.4 TRANSFER AND DISBURSEMENT OF FUNDS .................................40
11.5 INVESTMENT PERFORMANCE .............................................40
11.6 GENERAL POWERS OF TRUSTEE ..........................................41
11.7 PROHIBITED TRANSACTIONS ............................................42
11.8 TITLE TO ASSETS ....................................................43
11.9 EXPERTS ............................................................43
11.10 RECORDS ............................................................43
11.11 LIABILITY ..........................................................43
11.12 STANDARD OF CARE ...................................................44
11.13 ASSETS FOR EXCLUSIVE BENEFIT OF PARTICIPANTS .......................45
11.14 TERMINATION ........................................................45
ARTICLE 11A - ACQUISITION OF SHARES WITH ESOP LOANS; CERTAIN ALLOCATION RULES46
11A.l TERMS OF ESOP LOAN .................................................46
11A.2 ACQUISITION OF SHARES WITH PROCEEDS OF ESOP LOAN ...................47
11A.3 SHARES TO BE UNRESTRICTED ..........................................47
11A.4 ESOP LOAN AMORTIZATION PAYMENTS ....................................47
11A.5 ESOP LOAN PAYMENTS .................................................48
11A.6 RELEASE FROM ESOP LOAN SUSPENSE ACCOUNT ............................48
11A.7 USE OF DIVIDENDS ...................................................49
ARTICLE 12 - GENERAL PROVISIONS .............................................50
<PAGE>
12.1 EXCLUSIVE BENEFIT RULE ..............................................50
12.2 NONALIENATION .......................................................50
12.3 CONDITIONS OF EMPLOYMENT NOT AFFECTED BY PLAN .......................50
12.4 FACILITY OF PAYMENT .................................................50
12.5 INFORMATION .........................................................50
12.6 CONSTRUCTION ........................................................51
12.7 INABILITY TO LOCATE DISTRIBUTEE .....................................51
12.8 NAMED FIDUCIARIES ...................................................51
ARTICLE 13 - AMENDMENT, MERGER AND TERMINATION ..............................52
13.1 AMENDMENT OF PLAN ...................................................52
13.2 MERGER OR CONSOLIDATION .............................................52
13.3 ADDITIONAL PARTICIPATING EMPLOYERS ..................................52
13.4 TERMINATION OF PLAN .................................................53
ARTICLE 14 - TOP-HEAVY PROVISIONS ...........................................54
14.1 APPLICATION OF ARTICLE ..............................................54
14.2 DEFINITIONS .........................................................54
14.3 DETERMINATION OF TOP-HEAVY STATUS ...................................54
14.4 MINIMUM COMPANY CONTRIBUTION ........................................55
14.5 EFFECT ON SECTION 415 LIMITATIONS ...................................55
ARTICLE 15 - MILITARY VETERANS' MAKE-UP CONTRIBUTIONS .......................57
15.1 QUALIFIED MILITARY SERVICE ..........................................57
15.2 SERVICE CREDIT ......................................................57
15.3 MAKE-UP CONTRIBUTIONS ...............................................57
15.4 MAXIMUM TIME LIMIT ..................................................57
15.5 MATCHING ALLOCATIONS ................................................57
15.6 NO RETRO ACTIVE INVESTMENT RETURN ...................................57
15.7 LOAN REPAYMENTS .....................................................58
15.8 TESTING .............................................................58
15.9 COMPLIANCE ..........................................................58
<PAGE>
PREAMBLE
The purpose of the Barnes Group Inc. Retirement Savings Plan (formerly known as
the Barnes Group, Inc. Guaranteed Stock Plan and herein referred to as the
"Plan") is to assist Employees in achieving financial independence at retirement
and to encourage savings, as well as to enable Employees to share in the
ownership of Barnes Group Inc. (the "Company"). Effective July 28, 1989, the
Plan was amended and restated to constitute an employee stock ownership plan
("ESOP") which is intended to qualify as a stock bonus plan under Section
401(a) and as an employee stock ownership plan under Section 4975(e)(7) of the
Internal Revenue Code of 1986, as amended (the "Code"). The ESOP is designed to
invest primarily in "qualifing employer securities," as defined in Sections
4975(e)(8) and 409(1) of the Code and 407(d)(5) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). With respect to periods
commencing on and after October 1, 1989, the Plan is authorized to allocate
Shares of Common Stock of the Company acquired (whether before or after such
date) with the proceeds of an exempt loan to the ESOP under Section 4975(d)(3)
of the Code.
The Company is hereby amending and restating the Plan, as hereinafter set
forth, effective January 1, 1997, unless specifically stated otherwise, to
comply with the Small Business Job Protection Act of 1996, the Taxpayer Relief
Act of 1997, the Uniformed Services Employment and Reemployment Rights Act and
the IRS Restructuring and Reform Act of 1998. It is the intention of the
Company that the Plan as herein amended and restated shall continue to be
recognized as a stock bonus plan under Section 401(a) and as an employee stock
ownership plan under Section 4975(e)(7) of the Code.
Effective April 1,2001, the Curtis Industries, Inc. 401(k) Retirement Savings
Plan is hereby merged into the Plan in accordance with the provisions of
Section 13.2 hereof. Participants in the Curtis Industries, Inc. 401(k)
Retirement Savings Plan on March 31, 2001 shall, if actively employed on and
after April 1,2001 be subject in all respects to the terms of the Plan except
with regard to such benefits, rights and features which are required to be
preserved under section 411(d)(6) of the Internal Revenue Code.
Effective January 1, 2002, the Plan is further amended in response to enactment
of the Economic Growth Tax Relief Reconciliation Act of 2001.
<PAGE>
ARTICLE 1 - DEFINITIONS
As used herein, the terms set forth below shall have the following meanings.
Some of the words and phrases used in the Plan are not defined in this Article
1, but for convenience are defined as they are introduced into the text.
1.1 "Accounts" means the Before-Tax Account, the After-Tax Account, the
Matching Account, the Guarantee Account, the Prior Contributions Account,
the PAYSOP Account, the ESOP Loan Suspense Account, the Rollover Account,
the Merged Asset Account and any other account to be established by the
Benefits Committee pursuant to the terms of the Plan.
1.2 "Affiliated Employer" means any company not participating in the Plan
which is a member of a controlled group of corporations (determined under
Section 1563(a) of the Internal Revenue Code without regard to Section
1563(a)(4) and (e)(3)(C)), except that with respect to Section 3.5 "more
than 50 percent" shall be substituted for "at least 80 percent" where it
appears in Section 1563(a)(4) of the Code. The term "Affiliated Employer"
shall also include any trade or business under common control (as defined
in Section 414(c) of the Code) with the Company, a member of an
affiliated service group (as defined in Section 414(m) of the Code),
which includes the Company, and any other entity required to be
aggregated with the Company under regulations issued pursuant to Code
Section 414(o).
1.3 "After-Tax Contributions" means all amounts contributed pursuant to
Section 3.2 of the Plan.
1.4 "Before-Tax Contributions" means all amounts contributed pursuant to
Section 3.1 of the Plan.
1.5 "Board of Directors" means the Board of Directors of Barnes Group Inc.
1.6 "Break-in-Service" means a period or event affecting the determination of
a Participant's Vested Portion as provided in Article 6.
1.7 "Code" or "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time.
1.8 "Company Contributions" means contributions to the Plan required to be
made by the Company or an Employer pursuant to Section 3.3.
1.9 "Company Stock" means any "qualifying employer security" of the Company
within the meaning of Sections 4975(e)(8) and 409(1) of the Code,
including Common Stock of the Company.
1.10 "Compensation" means regular base pay, commissions, shift differential
and overtime pay, determined prior to any reduction pursuant to Section
3.1, or by reason of the application of
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Sections 125 and 132(f) of the Code, but excluding bonuses, severance
pay, reimbursed expenses, payment of deferred compensation, and any other
special payments. The annual Compensation of each Participant taken into
account in determining allocations for any Plan Year shall not exceed
$200,000, as adjusted for cost-of-living increases in accordance with
Section 401(a)(17)(B) of the Code. The dollar increase in effect on
January 1 of any calendar year is effective for years beginning in such
calendar year. If a Plan Year consists of fewer than 12 months the annual
compensation limit is an amount equal to the otherwise applicable annual
compensation limit multiplied by a fraction, the numerator of which is
the number of months in the short Plan Year period, and the denominator
of which is 12.
1.11 "Disability" means a disability on account of which the Participant is
unable to work at any gainful occupation for which the Participant is or
may become qualified by education, training or experience. Determination
as to the existence of a Disability shall be made by the Benefits
Committee or its designee on a non-discriminatory basis applicable to all
Participants in similar circumstances.
1.12 "Effective Date" means January 1, 1997 for this restated Plan except as
otherwise provided herein. The original effective date of the Plan was
April 1, 1984.
1.13 "Employee" means a person employed by an Employer in the United States as
a salaried or nonunion hourly employee or any other employer required to
be aggregated with such Employer under Sections 414(b), (c), (m) or (o)
of the Code and who is regularly scheduled to work at least 30 hours per
week. Notwithstanding the foregoing, Employee shall also mean a person
who is regularly scheduled to work less than 30 hours per week, but who
completes at least 1,000 hours of service during his initial twelve-month
period of employment or during any subsequent Plan Year.
The term Employee shall also include any leased employee deemed to be an
employee of any employer described in the previous paragraph as provided
in Section 414(n) or (i) of the Code.
The term "leased employee" means any person (other than an Employee of
the recipient) who pursuant to an agreement between the recipient and any
other person ("leasing organization") has performed services for the
recipient (or for the recipient and related persons determined in
accordance with Section 414(n)(6) of the code) on a substantially
full-time basis for a period of at least one year, and such services are
performed under primary direction or control by the Employer or
Affiliated Employer. Contributions or benefits provided to a leased
employee by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by the
recipient employer.
A leased employee shall not be considered an Employee of the recipient
if: (i) such employee is covered by a money purchase pension plan
providing: (1) a nonintegrated employer contribution rate of at least 10
percent of compensation, as defined in Section
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415(c)(3) of the Code but including amounts contributed by the employer
pursuant to a salary reduction agreement which are excludable from the
employee's gross income under Section 125, 402(a)(8), 402(h) or 403(b) of
the Code, (2) immediate participation, and (3) full and immediate
vesting; and (ii) leased employees do not constitute more than 20 percent
of the recipient's nonhighly compensated workforce.
1.14 "Employer" or "Company" means Barnes Group Inc. or any successor by
merger, purchase or otherwise, with respect to its employees; or any
other company participating in the Plan as provided in Section 13.3, with
respect to its employees.
1.15 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.16 "ESOP Effective Date" means July 28, 1989.
1.17 "Guarantee Account" means the bookkeeping account maintained for a
Participant reflecting the notional value of the guaranteed benefit
determined under Paragraph 4.3 hereof. Effective on and after April 1,
2001 no further contributions shall be made to the Guarantee Account of
any Participant.
1.18 "Highly Compensated Employee" means, with respect to a Plan Year, any
Employee who performs services for the Employer or an Affiliated Employer
during the year being tested (the "Determination Year") and who was a 5%
owner (or the spouse of a 5% owner), within the meaning of Section
416(i)(l)(B)(i) of the Code, at any time during the Determination Year or
the preceding year (the "Look-Back Year"), or who received compensation
from the Employer or an Affiliated Employer in excess of $80,000
(adjusted pursuant to Section 415(d) of the Code, except that the base
period is the calendar quarter ending September 30, 1996) during the
Look-Back Year. The Benefits Committee may elect that the Look-Back Year
shall be the calendar year ending with or within the Determination Year.
For purposes of determining an Employee's compensation, compensation
shall mean the Employee's total compensation reportable on Form W-2, plus
all contributions made on behalf of the Employee by the Employer or an
Affiliated Employer pursuant to a salary reduction agreements under
Sections 401(k), 408, 125, or 132(f) of the Code.
A highly compensated former employee is based on the rules applicable to
determining highly compensated employee status as in effect for that
determination year, in accordance with section 1.414(q)-1T, A-4 of the
temporary Income Tax Regulations and Notice 97-45.
In determining whether an employee is a highly compensated employee for
years beginning in 1997, the amendments to section 414(q) stated above
are treated as having been in effect for years beginning in 1996.
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The number of Highly Compensated Employees shall not exceed 20% of
Employees when ranked on the basis of compensation paid during the
Look-Back Year, excluding however, Employees who:
(i) have less than six months of eligibility service;
(ii) are under age 21;
(iii) ordinarily work not more than six months per year;
(iv) ordinarily work less than 17-1/2 hours per week; or
(v) are included in a unit of Employees covered by a collective
bargaining agreement if 90% or more of the Employer's Employees
are covered by collective bargaining agreements and the Plan
covers only those Employees who are not covered by such
agreements; or
Any Employee who is not a Highly Compensated Employee is a Nonhighly
Compensated Employee.
1.19 "Matching Allocations" shall have the meaning set forth in Section 3.3 of
the Plan.
1.20 "Merged Asset Account" shall mean such amounts transferred into the Plan
which are attributable to the Curtis Industries, Inc. 401(k) Retirement
Savings Plan. Salary deferral and employer matching contributions
previously held under the Curtis Industries, Inc. 401(k) Retirement
Savings Plan shall be separately accounted for under the Plan.
1.21 "Participant" means any person included in the membership of the Plan as
provided in Article 2.
1.22 "PAYSOP" means the Barnes Group Inc. Employee Stock Ownership Plan.
1.23 "Plan" means the Barnes Group Inc. Retirement Savings Plan as set forth
in this document or as amended from time to time.
1.24 "Plan Year" means the period beginning with the original Effective Date
of the Plan through December 31, 1984, and thereafter the calendar year
through December 31, 1998. Effective January 1, 1999, the Plan Year shall
mean the short plan year beginning January 1, 1999 and ending December
30, 1999, and thereafter the period beginning each December 31 and ending
the following December 30.
1.25 "Prior Contributions" means the Before-Tax, After-Tax and Matching
Accounts of a Participant that remain invested in the Fixed Income
Investment Fund or the Common Stock Investment Fund attributable to
contributions prior to April 30, 1988.
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1.26 "Benefits Committee" means the Benefits Committee appointed by the
Company's Board of Directors as provided in Article 9.
1.27 "Rollover Contributions" means all amounts contributed pursuant to Section
3.10 of the Plan.
1.28 "Share" means a share of Common Stock of the Company.
1.29 "Trustees" means the trustees by whom the funds of the Plan are held as
provided in Article 11.
1.30 "Valuation Date" means the last business day of March, June, September and
December, and such other dates as may be determined by the Benefits
Committee.
1.31 "Value" means the fair market value of a Share of Common Stock, as
provided in Section 4.4 of the Plan.
1.32 "Vested Accounts" means the Before-Tax Account, the After-Tax Account, the
PAYSOP Account, the Rollover Account and the Vested Portion of the
Matching Account and, if applicable, the Vested Portion of the Merged
Asset Account.
1.33 "Vested Portion" means the portion of the Accounts in which the
Participant has a nonforfeitable interest as provided in Article 6.
Whenever appropriate, words and terms defined in the singular may be read as
the plural, and the plural may be read as the singular. Unless otherwise
required by the context, masculine pronouns also shall include the feminine,
and the feminine shall include the masculine.
The headings of the Articles and Sections herein are included solely for
convenience, and if there is any conflict between such headings and the
text of the Plan, the text shall control.
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ARTICLE 2 - PARTICIPATION
2.1 PARTICIPATION
An Employee, other than a leased employee as defined in Section 1.13, shall
become a Participant on the first day of the calendar month which is at least
30 days (or some lesser period of time designated by the Benefits Committee)
after the date on which he files with the Employer a form or forms prescribed
by the Benefits Committee on which he: (a) makes the election described in
Section 3.1; and (b) names a Beneficiary; provided, however, that former
Employees are eligible to become Participants as soon as administratively
feasible upon rehire.
Any Employee who was an actively employed participant in the Curtis Industries,
Inc. 401(k) Retirement Savings Plan on March 31, 2001 shall become a
Participant on April 1, 2001, provided he remains actively employed by the
Employer.
2.2 TRANSFERRED PARTICIPANTS
A Participant who becomes an employee of an Affiliated Employer but ceases to
be an Employee shall continue to be a Participant of the Plan but shall not be
eligible to make contributions.
2.3 PARTICIPATION IN PAYSOP
If an individual is or was a participant in the PAYSOP, and his PAYSOP Account
Balance is transferred to this Plan, such individual shall be a Participant in
this Plan; provided, that such Participant shall not at any time be entitled to
any Company Contributions, Matching Allocations or credit to the Guarantee
Account with respect to amounts in his PAYSOP Account.
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ARTICLE 3 - LIMITS ON CONTRIBUTIONS
3.1 BEFORE-TAX CONTRIBUTIONS
(a) A Participant may have his Compensation reduced on a Before-Tax
basis in multiples of 1% under the procedures and maximum amounts
specified by the Benefits Committee and have that amount contributed
to the Plan by the Employer; provided, however, that in no event may
the reduction in Compensation exceed 10% of Compensation, and provided
further that prior to April 1, 2001, a Participant may not make
Before-Tax Contributions for any period for which he has elected to
make After-Tax Contributions. On and after April 1, 2001, if a
Participant elects to contribute to the Plan both on a Before-Tax and
an After-Tax basis, in no event shall his aggregate Before-Tax and
After-Tax Contributions exceed 10% of his Compensation.
(b) No participant shall be permitted to reduce his Compensation under
the foregoing provision, or any other qualified plan maintained by the
Employer or any Affiliated Employer during any calendar year, in
excess of the dollar limitation contained in section 402(g) of the
Code in effect for such calendar year.
(c) A Participant may assign to this Plan any excess elective deferrals
made during a taxable year of the Participant under the plan of
another employer by notifying the Benefits Committee of the amount of
the excess elective deferrals to be assigned to the Plan. A Participant
is deemed to notify the Benefits Committee of any excess elective
deferrals that arise by taking into account only those Before-Tax
Contributions made to this Plan and any other plans of the Employer.
(d) Before-Tax Contributions in excess of the maximum elective deferral,
plus any income and minus any loss allocable thereto, shall be
distributed to the Participant no later than April 15 following the
calendar year for which such excess deferral was made.
(e) In the event that Before-Tax Contributions are used to repay an ESOP
Loan, and the Value of Shares released from the ESOP Loan Suspense
Account and allocated to the Participant's Before-Tax Account by reason
of the use of such Contributions is less than the amount of such
Contributions so used, the Company shall make an additional contribution
(a "Supplemental Contribution") to the Plan in an amount sufficient to
purchase Shares on the open market, or release additional shares from the
ESOP Loan Suspense Account, equal in Value to such difference, and such
Shares shall be allocated to the Participant's Before-Tax Account.
(f) Before-Tax Contributions accumulated through payroll deductions
shall be paid to the Trustee as of the earliest date on which such
contributions can reasonably be segregated from the Employer general
assets, but in any event not later than the fifteenth (15th) business
day of the month following the month during which such amounts would
otherwise have been payable to the Participant in cash. The provisions of
Department of Labor regulations 2510.3-102 are incorporated herein by
reference. Furthermore, any additional Employer contributions which are
allocable to the Participant's Before-Tax Account for a Plan Year
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shall be paid to the Plan no later than the 12-month period immediately
following the close of such Plan Year.
3.2 AFTER-TAX CONTRIBUTIONS
A Participant may make After-Tax Contributions to the Plan and have such
contributions made through payroll deductions in multiples of 1% of
Compensation to a maximum of 10% of Compensation under the procedures specified
by the Benefits Committee, provided, however, that prior to April 1, 2001 a
Participant may not make After-Tax Contributions for any period for which he
has elected to make Before-Tax Contributions. On and after April 1, 2001,
After-Tax Contributions shall be subject to the aggregate limitation set forth
in Section 3.1(a) hereof.
3.3 MATCHING ALLOCATIONS; COMPANY CONTRIBUTIONS
(a) Under procedures established by the Benefits Committee, the Employer
shall make Matching Allocations to the Matching Account of each
Participant. The Employer's obligation to make Matching Allocations shall
be satisfied (in accordance with the provisions of this Section 3.3 and,
if applicable, Article 11A) by crediting a Participant's Matching Account
with Shares having a Value equal to 50% of the first 6% of the
Participant's Before-Tax Contributions; provided, however, that such
Value shall not exceed 3% of the Participant's Compensation. If the Plan
does not have an outstanding ESOP Loan, the Matching Allocation will be
satisfied by Company Contributions, less the Value of Shares forfeited
pursuant to Section 8.4.
(b) If the Plan has an outstanding ESOP Loan under Article 11A, Matching
Allocations shall be satisfied by the following in the priority
indicated: (1) the Value of Shares released from the ESOP Loan Suspense
Account by reason of the use of dividends on Shares in the ESOP Loan
Suspense Account to repay the ESOP Loan; (2) Shares released from the
ESOP Loan Suspense Account (by reason of the use of Before-Tax
Contributions to repay the ESOP Loan) having an aggregate value in excess
of the amount of such Before-Tax Contributions; (3) the Value of Shares
forfeited pursuant to Section 8.4; (4) the Value of Shares released from
the ESOP Loan Suspense Account by reason of the use of Company
Contributions to repay the ESOP Loan; and (5) the Value of Shares
purchased on the open market with Company Contributions. Thus, if the
Plan has an outstanding ESOP Loan, the Matching Allocations to be
satisfied by Company Contributions will be that amount necessary, after
giving effect to items (1) through (3) above, to cause the crediting to
Participants' Matching Accounts of the aggregate Value set forth in the
second sentence of Section 3.3(a) hereof.
3.4 LIMITATION AFFECTING HIGHLY COMPENSATED EMPLOYEES
Notwithstanding any other provision of this Plan, the Actual Deferral
Percentage for eligible Employees who are Highly Compensated Employees must
satisfy the test described in Section 3.9.
3.5 MAXIMUM ANNUAL ADDITIONS
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(a) The amount of annual additions which may be credited to a
Participant's Accounts for any limitation year may not exceed the
lesser of:
(i) $40,000 (as adjusted pursuant to Section 415(d) of the
Code) reduced by the amount, if any, allocated to all
individual medical accounts (as defined in Section 415(l)(2) of
the Code) which are part of a defined benefit plan and further
reduced by the amount, if any, contributed to a separate
account for post-retirement medical benefits of key employees
(as defined in Section 419A(d)(3) of the Code) under a welfare
benefit fund (as defined in Section 419(e) of the Code) for the
limitation year; or
(ii) 100% of the Participant's compensation as defined in
Section 415(c)(3) of the Code and Section 1.415-2(d) of the
Department of the Treasury Regulations for limitation years
before 1998 and as defined in Section 3.9(a)(iv) for limitation
years after 1997.
(iii) If no more than one-third of all Before-Tax and After-Tax
Contributions and Matching Allocations for the limitation year
are allocated to the Accounts of Highly Compensated Employees,
for purposes of determining whether annual additions made to a
Participant's Before-Tax, Matching and After-Tax Accounts would
cause the above limitations to be exceeded, the limitations set
forth in 3.5(a)(i) shall be applied to the annual addition
described in Section 3.5(b) below, after excluding from such
annual addition an amount equal to (x) forfeitures of Company
Stock which were acquired with the proceeds of a loan described
in Section 404(a)(9)(A) of the Code, and (y) Employer
contributions which are deductible under Section 404(a)(9)(B)
of the Code and charged against the Participant's Account. The
Benefits Committee may adjust in a nondiscriminatory manner the
allocation of Before-Tax and After-Tax Contributions and
Matching Allocations to prevent the allocation of more than one
third of the Before-Tax and After-Tax Contributions and
Matching Allocations for the limitation year to the Accounts of
Highly Compensated Employees.
(iv) The compensation limit referred to in (ii) shall not apply
to any contribution for medical benefits after separation from
service (within the meaning of Section 401(h) or Section
419(A)(F)(2) of the Code) which is otherwise treated as an
annual addition.
(b) Limitation Year. Prior to December 31, 1999, limitation year
shall mean the calendar year. Effective December 31, 1999,
limitation year shall mean the Plan Year.
(c) Annual Additions. Annual additions shall mean the sum of the
following amounts credited to a Participant's Accounts for the
limitation year under all defined contribution plans maintained by
the Company:
(i) Company contributions, including Before-Tax Contributions;
(ii) Employee contributions, including After-Tax Contributions;
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(iii) Forfeitures used to reduce Company Contributions; and
(iv) amounts described in Sections 415(1)(2) and 419(A)(d)(2)
of the Code.
If, due to a reasonable error in estimating a Participant's annual
compensation, or due to the allocation of forfeitures, an excess
annual addition exists, such excess will be eliminated as follows:
(1) After-Tax Contributions, plus any income allocable thereto,
will be returned to the Participant to the extent necessary.
(2) Before-Tax Contributions, plus any income allocable
thereto, will be returned to the Participant to the extent
necessary.
(3) Matching Allocations attributable thereto for such
limitation year, plus any income and minus any loss allocable
thereto, will be placed in a suspense account and allocated in
succeeding Plan Years in accordance with procedures adopted by
the Benefits Committee.
(d) For Plan Years beginning prior to January 1, 2000, if the
Participant is, or was, covered under a defined benefit plan and
defined contribution plan maintained by the Company or any
Affiliated Employer, the sum of the Participant's defined benefit
plan fraction and defined contribution plan fraction may not exceed
1.0 in any limitation year.
The defined benefit plan fraction is a fraction, the numerator of
which is the sum of the Participant's projected annual benefits
under all defined benefit plans (whether or not terminated)
maintained by the Company or any Affiliated Employer, and the
denominator of which is the lesser of (i) 1.25 times the dollar
limitation of Section 415(b)(l)(A) of the Internal Revenue Code in
effect for the limitation year, reduced pro rata as provided in
Section 415(b)(5)(A) of the Code for less than 10 years of
participation by the Participant in a defined benefit plan
maintained by the Company or any Affiliated Employer; or (ii) 1.4
times the Participant's average compensation for the three
consecutive years that produce the highest average, reduced pro rata
as provided in Section 415(b)(5)(B) of the Code for less than 10
years of service as defined in Section 411(a)(5) of the Code by the
Participant with the Company or any Affiliated Employer. Projected
annual benefit means the annual benefit to which the Participant
would be entitled under the terms of the plan, if the Participant
continued employment until normal retirement age (or current age, if
later) and the Participant's compensation for the limitation year
and all other relevant factors used to determine such benefit
remained constant until normal retirement age (or current age, if
later).
The defined contribution plan fraction is a fraction, the numerator
of which is the sum of the annual additions to the Participant's
Accounts under all defined contribution plans maintained by the
Company or any Affiliated Employer (whether or not terminated) for
the current and all prior limitation years, and the denominator of
which is the sum of the lesser of the following amounts determined
for such year and for each prior year of service with
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the Company or any Affiliated Employer: (i) 1.25 times the dollar
limitation in effect under Section 415(c)(l)(A) of the Code for such
year, or (ii) 1.4 times the amount which may be taken into account under
Section 415(c)(l)(B) of the Code.
If, in any applicable limitation year beginning prior to January 1,
2000, the sum of the defined benefit plan fraction and the defined
contribution plan fraction will exceed 1.0, the excess annual additions
will be eliminated, in the order set forth in this Section 3.5, so that
the sum of the fractions equals 1.0.
3.6 MISTAKEN CONTRIBUTIONS
The Employer may recover without interest the amount of its contributions to
the Plan made on account of a mistake in fact, reduced by any investment loss
attributable to those contributions, if recovery is made within one year after
the date of those contributions.
3.7 CHANGE OF CONTRIBUTION ELECTION
(a) A Participant may suspend his contributions to be effective on the
first day of the calendar month which is at least 30 days (or some lesser
period of time designated by the Benefits Committee) after the date he
files with the Employer a form prescribed by the Benefits Committee for
such purpose. A Participant who suspends contributions hereunder shall
not be eligible to elect to make contributions under Section 3.1 or
Section 3.2 for a period of six months commencing with the date of such
suspension of contributions.
(b) A Participant may increase or decrease the amount of his
contributions, subject to the maximum contribution permitted under
Section 3.1 or Section 3.2, as applicable, to be effective on the first day
of the calendar month which is at least 30 days (or some lesser period of
time designated by the Benefits Committee) after he files a form
prescribed by the Benefits Committee for such purpose.
3.8 LIMITATIONS ON AFTER-TAX CONTRIBUTIONS, MATCHING
ALLOCATIONS AND SUPPLEMENTAL CONTRIBUTIONS
Notwithstanding any other provision of the Plan, the Actual Contribution
Percentage (as defined in section 3.9) for eligible Employees who are Highly
Compensated must satisfy the test described in Section 3.9.
3.9 NONDISCRIMINATION TESTS
(a) For purposes of this section, the following terms shall have the meaning
indicated below:
(i) "Actual Deferral Percentage" means the average (expressed as a
percentage) of the deferral percentages of Eligible Employees in a
group. An Eligible Employee's deferral percentage is equal to the
ratio (expressed as a percentage) of the Employee's Before-Tax
Contributions (including excess Before-Tax Contributions returned to
a Highly Compensated Employee pursuant to Section 3.1, but excluding
Before-Tax Contributions which exceeded the limit in Section 415(c)
of the Code
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and which have been or will be returned to any Employee
pursuant to Section 3.5(a)) contributed to the Trust Fund for the
Plan Year to the Eligible Employee's Compensation for the Plan Year.
The individual ratios shall be calculated to the nearest
one-hundredth of one percent (.01%).
(ii) "Actual Contribution Percentage" means the average (expressed as a
percentage) of the contribution percentages of Eligible Employees in
a group. An Eligible Employee's contribution percentage is equal to
the ratio (expressed as a percentage) of the Employee's After-Tax
Contributions, if any, Matching Allocations and Before-Tax
Contributions not used in the final Actual Deferral Percentage
(excluding Matching allocations which exceeded the limit in Section
415(c) of the Code) contributed to the Trust Fund for the Plan Year
to the Eligible Employee's Compensation for the Plan Year. The
individual ratios shall be calculated to the nearest one-hundredth
of one percent (.01%).
(iii) "Eligible Employee" means any Employee of the Employer who, during
the Plan Year, is eligible to make Before-Tax Contributions in
accordance with the provisions of Section 2.1, or is eligible to
receive Matching Allocations in accordance with Section 3.3. An
individual shall be treated as an Eligible Employee for a Plan Year
if he or she so qualifies for any part of the Plan Year, and whether
or not his or her right to make Before-Tax Contributions has been
exercised or suspended under Section 7.2(c). The Actual Deferral
Percentage and Actual Contribution Percentage defined above may be
calculated by dividing the Eligible Employees into two separate
groups-one for Eligible Employees who are under age 21 and/or who
have less than a year of service and one for the remaining Eligible
Employees. After 1998, Eligible Employees who are Nonhighly
Compensated Employees, who are under age 21 and/or who have less
than a year of service may be excluded from the calculations and
from the ADP and ACP tests provided the requirements of Code section
401(k)(3)(F) are satisfied.
(iv) "Compensation" means the Employee's 415 Compensation (as defined
below), but not in excess of the limit under Section 401(a)(17) of
the Code, or any other definition of compensation which satisfies
Section 414(s) of the Code for testing purposes. The term "415
Compensation" means wages, salaries and fees for professional
services and other amounts received from the Employer and all
Affiliated Employers during the Limitation Year (without regard to
whether or not an amount is paid in cash) for personal services
actually rendered in the course of employment with the Employer, to
the extent such amounts are includable in gross income, including,
but not limited to, overtime pay, bonuses, commissions to paid
salesmen, compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, fringe benefits,
reimbursements, expense allowances, and amounts contributed by the
Employer or Affiliated Employer on behalf of the Employee pursuant to
a salary deferral agreement under any cash or deferred arrangement
described in Section 401(k) of the Code or pursuant to a salary
reduction agreement under any cafeteria plan described in Section 125
of the Code, and excluding the following:
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(A) Amounts contributed by the employer or Affiliated Employer
on behalf of the Employee to any other plan of deferred
compensation and which are not includable in the Employee's
gross income for the taxable year in which contributed or any
distributions from a plan of deferred compensation;
(B) Amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
(C) Amounts realized with respect to the sale, exchange, or other
disposition of stock acquired under a qualified stock option; and
(D) Other amounts which receive special tax benefits, such as
premiums for group term life insurance (but only to the extent
that that premiums are not includable in the gross income of the
Employee).
Notwithstanding the foregoing, in determining the amount of Compensation
to be taken into account for purposes of this Section, the Benefits
Committee may limit the period used to determine an Employee's
Compensation for the Plan Year to the portion of the Plan Year in which
the Employee was an Eligible Employee (as defined in subparagraph (iii)
above), provided that this limit is applied uniformly and separately to
all Eligible Employees with respect to subparagraphs (i) and (ii) above
for such Plan Year.
(v) "Testing Method" means either the "prior year method" or the
"current year method." Under the prior year method, the Actual
Deferral Percentage and Actual Contribution Percentage for the group
of Eligible Employees who are Nonhighly Compensated Employees is
determined based on data from the preceding plan year. Under the
current year method, the Actual Deferral Percentage and Actual
Contribution Percentage for the group of Eligible Employees who are
Nonhighly Compensated Employees is determined based on data from the
current plan year. Under both methods, the Actual Deferral
Percentage and Actual Contribution Percentage for the group of
Eligible Employees who are Highly Compensated Employees is
determined based on data from the current plan year.
(b) If more than one plan providing for a cash or deferred arrangement, or for
matching contributions, or employee contributions (within the meaning of
Sections 401(k) and 401(m) of the Code) is maintained by the Employer or
an Affiliated Employer, then the individual ratios of any Highly
Compensated Employee who participates in more than one such plan or
arrangement shall, for purposes of determining the individual's Actual
Deferral Percentage and Actual Contribution Percentage, be determined as
if all such arrangements were a single plan or arrangement. If a Highly
Compensated Employee participates in two or more cash or deferred
arrangements that have different plan years, all cash or deferred
arrangements ending with or within the same calendar year shall be
treated as a single arrangement. Notwithstanding the foregoing, plans
that are subject to mandatory disaggregation pursuant to regulations
under Section 401(k) of the Code shall not be aggregated for purposes of
this paragraph but will be treated as separate plans.
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(c) In the event that this Plan satisfies the requirements of Sections 401(a)
(4)and 410(b) of the Code only if aggregated with one or more other plans,
and all such plans have the same Plan Year, then this Section shall be
applied by determining the Actual Deferral Percentage and Actual
Contribution Percentage of Eligible Employees as if all such plans were a
single plan. For Plan Years beginning in 1997, such plans may be
aggregated only if they use a consistent Testing Method.
(d) In accordance with the nondiscrimination requirements of Section
401(k) of the Code, the Benefits Committee may establish a Compensation
Deferral Limit with respect to Before-Tax Contributions credited to a
participant's Total Account during a Plan Year and may adjust such
deferral limit (in accordance with paragraph (f)(i) below) from time to
time during the Plan Year in order to satisfy one of the following limits
which are referred to as the ADP test:
(i) The Actual Deferral Percentage of the group of Eligible Employees
who are Highly Compensated Employees for the Plan Year shall not
exceed the Actual Deferral percentage of the group of Eligible
Employees who are Nonhighly Compensated Employees for the Plan Year
multiplied by 1.25.
(ii) The Actual Deferral Percentage of the group of Eligible
Employees who are Highly Compensated Employees for the Plan Year
shall not exceed the Actual Deferral Percentage of the group of
Eligible Employees who are Nonhighly Compensated Employees for the
Plan Year multiplied by two, provided that such Actual Deferral
percentage for Highly Compensated Employees is not more than two
percentage points higher than such Actual Deferral Percentage for
Nonhighly Compensated Employees.
(e) In accordance with the nondiscrimination requirements of Section
401(m) of the Code, the Benefits Committee may establish a Contribution
Percentage Limit with respect to After-Tax Contributions, if any,
credited to a Participant's account during a Plan Year and may adjust
such percentage limit (in accordance) with paragraph (f)(i) below from
time to time during the Plan Year in order to satisfy one of the
following limits which are referred to as the ACP test:
(i) The Actual Contribution Percentage of the group of Eligible
Employees who are Highly Compensated Employees for the Plan Year
shall not exceed the Actual Contribution Percentage of the group of
Eligible Employees who are Nonhighly Compensated Employees for the
Plan Year multiplied by 1.25.
(ii) The Actual Contribution Percentage of the group of Eligible
Employees who are Highly Compensated Employees for the Plan Year
shall not exceed the Actual Contribution Percentage of the group of
Eligible Employees who are Nonhighly Compensated Employees for the
Plan Year multiplied by two, provided that the Actual Contribution
Percentage for Highly Compensated Employees is not more than two
percentage points higher than such Actual Contribution Percentage
for Nonhighly Compensated Employees.
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(f) The Benefits Committee may take the following actions to assure
compliance with the nondiscrimination limitations of Section 401(k)
and/or Section 401(m) of the Code.
(i) If, during the Plan Year, the average percentages described in
paragraphs (d) and/or (e) above applicable to the group of Eligible
Employees who are Highly Compensated Employees are expected to
exceed the maximum average percentage necessary to comply with the
limits described in said paragraphs, the Benefits Committee may
direct that the Actual Deferral Percentage and/or the Actual
Contribution Percentage, as the case may be, for one or more members
of such group of Highly Compensated Employees be reduced
prospectively to the extent necessary to comply with the applicable
limit by limiting the percentage of Before-Tax Contributions and/or
After-tax Contributions of such Employees.
(ii) If, after the Plan Year ends, the average percentages describe
in paragraphs (d) and/or (e) above applicable to the group of
Eligible Employees who are Highly Compensated Employees exceed the
maximum average percentage necessary to comply with the limits
described in said paragraphs, the Benefits Committee may direct that
the Before-Tax Contribution and/or the After-Tax Contribution and
Matching Allocation, as the case may be, for one or more members of
such group of Highly Compensated Employees be reduced to the extent
necessary to comply with the applicable limit. Such reduction shall
follow the procedures described in paragraph (g) below.
(g) The total amount of Before-Tax Contribution to be refunded is
calculated by first successively reducing the Actual Deferral Percentage
of one or more members of such group of Highly Compensated Employees by
reducing the Actual Deferral Percentage of the Highly Compensated
Employee with the highest Actual Deferral Percentage until it equals the
Actual Deferral Percentage of the Highly Compensated Employee with the
second highest Actual Deferral Percentage, then reducing their Actual
Deferral Percentages until they equal the Actual Deferral Percentage of
the Highly Compensated Employee with the third highest Actual Deferral
Percentage, and so on until the average percentage for the group does not
exceed the applicable limit. Second, the excess of each Employee's Actual
Deferral Percentage over such reduced Actual Deferral Percentage
multiplied by the Employee's Compensation used in the test is calculated
as a hypothetical refund. Third, such excess hypothetical refunds are
aggregated to determine the total Before-Tax Contributions to be
refunded. The ADP test described in paragraph (d) above shall use the
data that reflects this hypothetical refund.
The actual Before-Tax Contribution refunds are then calculated by
successively reducing the amount of the Before-Tax Contribution of one or
more members of such group of Highly Compensated Employees beginning with
the Highly Compensated Employee(s) with the highest dollar amounts of
Before-Tax Contribution using the method described in the preceding
paragraph until the total of such actual refunds equals the total amount
of Before-Tax Contribution to be refunded. The ADP test described in
paragraph (d) above shall not use the data that reflects this actual
refund.
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The amount by which the Before-Tax Contribution exceeded the dollar limit
in Section 3.1 for a Highly Compensated Employee as described in (a)(i)
above shall also then be refunded and such refund shall be made in
accordance with Section 3.1.
The total amount of After-Tax Contribution to be refunded and/or Matching
allocation to be refunded and/or forfeited is calculated by first
successively reducing the Actual Contribution percentage of one or more
members of such group of Highly Compensated Employees beginning with the
Highly Compensated Employee with the highest Actual Contribution
Percentage in the same manner as the ADP test until the average
percentage for the group does not exceed the applicable limit. Second,
the excess of each Employee's Actual Contribution percentage over such
reduced Actual Contribution Percentage multiplied by the Employee's
Compensation used in the test is calculated as a hypothetical refund.
Third, such excess hypothetical refunds are aggregated to determine the
total After-Tax Contributions and Matching Allocations to be refunded
and/or forfeited. The ACP test in paragraph (e) above shall use the data
that reflects this hypothetical refund or forfeiture.
The actual After-Tax Contribution refunds and the actual Matching
Allocation refunds and/or forfeitures are then calculated by successively
reducing the After-Tax Contribution and then the Matching Allocation of
one or more members of such group of Highly Compensated Employees
beginning with the Highly Compensated Employee with the highest dollar
amount of combined After-Tax Contribution and Matching Allocation using
the method for refunding Before-Tax Contributions described above until
the total of such deemed refunds equals the total amount of After-Tax
Contribution and Matching Allocation to be refunded and/or forfeited.
Matching Allocations shall be refunded if vested and the ACP test failed,
or forfeited if the ACP test passed, or forfeited if the ACP test failed
and such contributions are nonvested. If the actual refund of Before-Tax
Contributions and/or After-Tax Contributions for any Employee includes an
amount of Before-Tax Contributions and/or After-Tax Contributions that
were matched, the Matching Allocation attributable thereto shall be
forfeited. The ACP test in paragraph (e) above shall not use the data
that reflects this actual refund or forfeiture.
(h) Contributions that are refunded or forfeited under paragraph (g)
above shall be adjusted for allocable gains or losses for the Plan Year
with respect to which the contributions were made. The amount of the
allocable gain or loss is the product of (i) multiplied by (ii), where
(i) is a ratio, the numerator of which is the Plan Year-to-date gain or
loss on the money type being refunded or forfeited and the denominator of
such money type at the beginning of the Plan Year, plus contributions of
that money type credited for such Plan Year, and (ii) is the amount of
the refund or forfeiture of that money type.
Money type for purposes of this paragraph mean Before-Tax Contributions,
After-Tax Contributions and Matching Allocations, whichever applies. A
refund of Before-Tax Contributions in excess of the limit in Section 3.1
is referred to as an excess deferral. A refund of Before-Tax
Contributions due to a failure of the ADP test is referred to as an
excess contribution, a refund of After-Tax Contributions and/or Matching
Allocations due to a failure of the ACP test is referred to as an excess
aggregate contribution, and a forfeiture of Matching Allocations is
referred to as a forfeiture.
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(i) Refunds or forfeitures needed to satisfy the above tests shall be
made before the end of the Plan Year following the Determination Year.
Refunds needed to satisfy the limit in Section 3.1 shall be made on or
before April 15 following the end of the calendar year. If the Employee
has made Before-Tax Contributions in excess of such limit to two or more
plans of unrelated employers, the Employee must notify the Benefits
Committee on or before March 1 following the end of the calendar year of
the amount to be refunded from this Plan in order to comply with such
limit for the year.
(j) Alternatively, within twelve (12) months after the end of the Plan
Year, the Employer, at its discretion may make a special qualified
non-elective contribution on behalf of Nonhighly Compensated Participants
in an amount sufficient to satisfy the ADP and/or ACP tests in lieu of
refunds or forfeitures. Such contribution, if any, shall be allocated to
the Accounts of certain Participants who are Nonhighly Compensated
Employees, in an amount not in excess of the limitations of Section 3.5
hereof, starting with the Participant with the lowest amount of
Compensation for the Plan Year for which the applicable test is
performed. If such contribution does not cause the Plan to pass the ADP
and/or ACP test, an additional contribution shall be made on behalf of
the Nonhighly Compensated Participant with the next lowest amount of
Compensation for the Plan Year for which such test is performed. Such
contribution process shall continue up to an amount necessary to pass the
ADP and/or ACP test. The amounts contributed pursuant to this Section on
behalf of such Nonhighly Compensated Participants shall be accounted for
separately.
(k) The Benefits Committee shall maintain sufficient records to
demonstrate that the Plan satisfies the nondiscrimination tests described
above. Changes in the Code or regulations affecting the ADP test and/or
the ACP test or the corrective methods may be used notwithstanding a
conflict with the above provisions.
3.10 ROLLOVER CONTRIBUTIONS
Effective on and after October 1, 2000, a Participant may make Rollover
Contributions to the Plan from other qualified plans, provided that such amount
qualifies as an "eligible rollover distribution" as defined in Code section
402(c) and provided further, that such transfer will not jeopardize the tax
exempt status of the Plan. The Benefits Committee may require such information
or documentation with respect to any such proposed Rollover Contributions as it
deems necessary or desirable in order to reasonably conclude that the
distributing plan, or in the case of a conduit Individual Retirement Account,
the originating plan, is qualified under Code section 401(a). Any Rollover
Contributions made by a Participant shall be allocated to the Participant's
Rollover Account.
ARTICLE 4 - COMPANY STOCK FUND AND GUARANTEE ACCOUNT
4.1 CONTRIBUTIONS
(a) All contributions made to the Plan on or after May 1, 1988, other than
Rollover Contributions, shall be invested in the Company Stock Fund. All
money contributed to this fund shall be invested in Company Stock;
provided, however, that amounts contributed to
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this fund may also be invested in short term obligations of the United
States Government or other short term investments selected by the Trustee
pending investment in Company Stock.
(b) Notwithstanding the foregoing, on and after April 1, 2001, unless a
Participant elects otherwise pursuant to Article 5 hereof, only Employer
Matching Allocations shall be invested in the Company Stock Fund
4.2 ELECTION TO TRANSFER PRIOR CONTRIBUTIONS
All amounts in a Participant's Accounts as of June 30, 1988 shall be subject to
a one-time irrevocable election by the Participant to transfer the amounts in
such Accounts in multiples of 25% into the Company Stock Fund.
This election must be on forms prescribed by the Benefits Committee and made
prior to June 1, 1988. Amounts transferred to the Company Stock Fund pursuant
to this Section 4.2 shall be used to purchase Company Stock within 90 days
after June 30, 1988 in a manner selected by the Trustee. Shares of Company
Stock will be credited to each Participant's Accounts based on the average
purchase price of the stock during the period over which it is purchased.
4.3 GUARANTEE ACCOUNT
Amounts transferred to the Company Stock Fund pursuant to Section 4.2 and all
Before-Tax and After-Tax Contributions made on or after May 1, 1988 and prior
to April 1, 2001, pursuant to Section 3.1 and 3.2 shall be credited to a
bookkeeping account called the Guarantee Account. Any amounts transferred out
of the Company Stock Fund pursuant to the diversification election provided in
Section 5.6 of the Plan shall cease as of the date of transfer to be credited
to the Guarantee Account, and the notional value of the Guarantee Account shall
be reduced by the amount transferred. The notional value of a Participant's
Guarantee Account shall be determined as if the amounts transferred and the
contributions described in this Section 4.3 earned interest at an annual rate
set by the Benefits Committee; provided, however, that such interest rate shall
not be less than 5% nor more than 12%. The notional value of a Participant's
Guarantee Account shall be reduced by the amount of any loans, withdrawals or
distributions to the Participant, or amounts transferred from the Company Stock
Account and Matching Account pursuant to Section 5.6.
4.4 VALUE
Shares will be allocated to the Participants' Accounts at the end of each
calendar quarter (or at such other dates as may be determined by the Benefits
Committee) on the basis of the aggregate cost to the Plan of the acquisition of
such Shares during the period in question, including any cost attributable to
making distributions to Participants who elect to receive such distributions in
cash, rather than in shares of Company Common Stock, pursuant to Section 8.1.
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For purposes of valuing a Participant's Accounts, the fair market value of a
Share of Common Stock on each Valuation Date (and other determination dates)
shall be the closing sales price of the Common Stock on the date of
determination on the New York Stock Exchange Composite Index (or on the
principal market on which the Common Stock is traded if the Common Stock is not
listed on that market on such date) or, if the Common Stock is not traded on
such date, the closing sales price of the Common Stock on the next preceding
trading day.
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ARTICLE 4A - MERGER OF PAYSOP
4A.1 MERGER AND TRANSFER
Effective as of December 31, 1990, the PAYSOP is merged into the Plan, and all
assets and liabilities of the PAYSOP shall be transferred to the Plan as soon
thereafter as practicable.
4A.2 SEPARATE ACCOUNTS
The Benefits Committee shall establish a separate account, to be called the
PAYSOP Account, for each account transferred from the PAYSOP, and each such
PAYSOP Account shall be invested in the Company Stock Fund.
4A.3 RIGHTS
Except as otherwise provided in the Plan, the rights of each Participant or the
beneficiary thereof with respect to his PAYSOP Account shall be determined
under the terms of the PAYSOP as in effect on December 31, 1990, attached
hereto as Exhibit A.
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ARTICLE 5 - INVESTMENT OF CONTRIBUTIONS
5.1 DIRECTED INVESTMENT ACCOUNT
(a) Participants may, subject to a procedure established by the Benefits
Committee and applied in a uniform nondiscriminatory manner, direct the
Trustee as to the investment of amounts contributed to the following
Accounts under the Plan on and after April 1, 2001:
(i) Before-Tax Account;
(ii) After-Tax Account;
(iii) Rollover Account; and
(iv) Merged Asset Account.
Upon attainment of age 55, a Participant may direct the Trustee as to the
investment of amounts contributed to the above-referenced Accounts (as
applicable) under the Plan prior to April 1, 2001 and, in addition, any
amounts attributable to pre-1988 contributions which were not previously
invested in Company Stock pursuant to Section 4.2 of Article 4 hereof.
In accordance with a Participant's investment elections, the Trustee
shall invest applicable accounts in specific assets, specific funds or
other investments permitted under the Plan. That portion of the interest
of any Participant so directing will thereupon be considered a
Participant's Directed Account.
(b) As of each Valuation Date, all Participant Directed Accounts shall be
charged or credited with the net earnings, gains, losses and expenses as
well as any appreciation or depreciation in the market value using
publicly listed fair market values when available or appropriate.
(c) The procedure established by the Benefits Committee shall provide an
explanation of the circumstances under which Participants and their
Beneficiaries may give investment instructions, including, but need not
be limited to, the following:
(i) the conveyance of instructions by the Participants and their
Beneficiaries to invest Participant Directed Accounts in directed
investments;
(ii) the name, address and phone number of the fiduciary (and, if
applicable, the person or persons designated by the fiduciary to
act on its behalf) responsible for providing information to the
Participant or a beneficiary upon request relating to the
investments in directed investments;
(iii) applicable restrictions on transfers to and from any specific
investment identified by name by a fiduciary as an available
investment under the Plan which may be acquired or disposed of by
the Trustee pursuant to the investment direction by a Participant.
(iv) any restrictions on the exercise of voting, tender and similar
rights related to a directed investment by the Participants or
their Beneficiaries;
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(v) a description of any transaction fees and expenses which affect
the balances in Participant Directed Accounts in connection with
the purchase or sale of directed investments; and
(vi) general procedures for the dissemination of investment and
other information relating to the investment alternatives available
under the Plan as deemed necessary or appropriate, including but
not limited to a description of the following:
(A) specific information regarding the investment vehicles
available under the Plan including a general description of the
investment objectives and risk and return characteristics and
information regarding the type and diversification of assets in
the portfolio of each;
(B) any designated entity that (a) has the power to manage,
acquire, or dispose of Plan assets and (b) acknowledges
fiduciary responsibility to the Plan in writing. Such entity
must be a person, firm, or corporation registered as an
investment adviser under the Investment Advisers Act of 1940, a
bank, or an insurance company; and
(C) a description of the additional information which may be
obtained upon request from the fiduciary designated to provide
such information.
(d) Any information regarding investments available under the Plan may be
provided to the Participant in one or more written documents.
(e) The Benefits Committee may, at its discretion, establish such
instructions, guidelines or policies as it deems necessary or appropriate
to ensure proper administration of the Plan, and may interpret the same
accordingly.
5.2 INVESTMENT ELECTION
The investment election described in Section 5.1 shall be made in 5%
increments on such form as may be prescribed by the Benefits Committee.
5.3 RESPONSIBILITY FOR INVESTMENTS
Each Participant is solely responsible for the selection of his investment
options for the amounts not transferred to the Company Stock fund or as
result of the diversification election under Section 5.6 herein. The
Trustees, the Benefits Committee, the Employer, and the officers, supervisors
and other employees of the officers, supervisors and other Employers are not
empowered to advise a Participant as to the manner in which such amounts
shall be invested.The fact that an investment fund is available to
Participants for investment under the Plan shall not be construed as a
recommendation for investment in that fund.
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5.4 CHANGES IN INVESTMENTS
Subject to rules and procedures established by the Benefits Committee, a
Participant may change his investment election under Section 5.2 and make
transfers between Investment Funds.
5.5 ACCOUNTS
The Benefits Committee shall establish and maintain Accounts which shall
account for the amounts contributed with respect to each Participant and for
the investment and disbursement thereof. At least once each year, each
participant shall be furnished with a statement setting forth the Value of his
Accounts and the vested portion thereof.
5.6 DIVERSIFICATION OF COMPANY STOCK ACCOUNT
(a) To the extent that a Participant's ability to direct the investment of
100% of his Accounts (excluding his Matching Account and PAYSOP Account)
upon attainment of age 55 fails to satisfy the requirements of Code
section 401(a)(28), any such Participant who has completed at least ten
(10) years of participation in the Plan may elect within 90 days after
the close of each Plan Year during the Election Period (as hereinafter
defined) to direct the Plan as to the investment of that portion of his
Matching Account sufficient to equal, when combined with amounts with
respect to which the Participant has investment direction capability,
not more than 25% of the shares which have ever been allocated to his
Company Stock Account (less the number of any such shares which have
been previously diversified pursuant to this Section 5.6). Provided,
that in the case of the last Plan Year during the Election Period, if
necessary to satisfy the requirements of Code section 401(a)(28), the
Participant may elect to diversify that portion of his Matching Account
sufficient to equal, when combined with amounts with respect to which
the Participant has investment direction capability, up to 50% of the
shares which have ever been allocated to his Company Stock Account
(less the number of any such shares which have been previously
diversified pursuant to this Section 5.6). For purposes of this Section,
"Election Period" means the period of six (6) consecutive Plan Years
beginning with the Plan Year in which the Participant has attained age
55 and completed ten (10) years of participation in the Plan.
(b) The diversification election shall be satisfied by permitting the
Participant to direct the transfer of that portion of his Matching
Account as to which diversification is required to any of the investment
funds available under the Plan.
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ARTICLE 6 - VESTED PORTION OF ACCOUNTS
6.1 BEFORE-TAX, AFTER-TAX ACCOUNTS, ROLLOVER ACCOUNTS, AND PAYSOP ACCOUNTS
A Participant shall at all times be 100% vested in, and have a nonforfeitable
right to, his Before-Tax Account, After-Tax Account, Rollover Account and
PAYSOP Account.
6.2 MATCHING ACCOUNT
(a) A Participant shall be vested in, and have a nonforfeitable right to, his
Matching Account in accordance with the following schedule:
Years of Vesting Service Vested Percentage
------------------------ -----------------
Less than 2 years 0%
2 years but less than 3 20%
3 years but less than 4 50%
4 years but less than 5 75%
5 or more years 100%
(b) Notwithstanding the foregoing, a Participant shall be 100% vested in,
and have a nonforfeitable right to, his Matching Account upon attaining
age 55 or upon Disability or death while actively employed by an Employer.
(c) Notwithstanding anything to the contrary herein, a Participant shall
at all times be 100% vested in the portion of his Accounts that are
attributable to Matching Contributions that were made to the Plan with
respect to such Participant prior to May 1, 1988 and which were
transferred to the Company Stock Fund by the Participant pursuant to the
irrevocable election described in Section 4.2 hereof.
(d) Notwithstanding anything to the contrary herein, a Participant who was
employed by the Pioneer Division of Barnes Group Inc. on December 31,
1992 shall at all times be 100% vested in his Matching Account.
(e) For purposes of vesting, service with Curtis Industries, Inc. shall be
recognized from the date of a Participant's employment with Curtis
Industries, Inc. Amounts in a former Curtis Industries, Inc. 401(k)
Retirement Savings Plan participant's Merged Asset Account which are
attributable to employer matching contributions under the Curtis
Industries, Inc. 401(k) Retirement Savings Plan will vest in accordance
with the above-referenced vesting schedule. Notwithstanding the
foregoing, a Participant who on March 31, 2001, was an active participant
in the Curtis Industries, Inc. 401(k) Retirement Savings Plan with at
least three years of service as of such date shall, if his termination of
employment occurs on or after April 1, 2001 receive credit for a Year of
Service for each Plan Year during which he completes at least 1,000 hours
of service.
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(f) The vested percentage of a former participant in the Curtis
Industries, Inc. 401(k) Retirement Savings Plan who terminated employment
prior to April 1, 2001 shall be determined according to the following
vesting schedule:
Years of Vesting Service Vested Percentage
------------------------ -----------------
Less than 5 years 0%
5 or more years 100%
6.3 VESTING SERVICE
(a) Vesting Service shall commence on the first day of the month during
which an Employee's date of employment occurs and shall end on the date
on the last day of the month during which such Employee severs from
service. The date an Employee severs from service is the earliest of:
(i) the date the Employee quits, is discharged, retires or dies; or
(ii) the first anniversary of the date the Employee is first absent
from service because of a leave of absence authorized by the
Employer, provided the Employee fails to return to work by the
second anniversary of such date; or
(iii) the first anniversary of the date the Employee is absent from
service for any other reason (e.g., sickness, vacation, layoff,
etc.), provided that the Employee fails to perform an hour of
service during the twelve months prior to such first anniversary
date.
Notwithstanding the foregoing, there shall be no severance from service,
and absence from employment shall be counted as Vesting Service in the
case of employment with an Affiliated Employer, or in the case of
military leave in accordance with Article 15. The Employer's leave policy
shall be applied in a uniform and nondiscriminatory manner to all
Employees under similar circumstances.
(b) For purposes of computing Vesting Service, the following rules apply in
cases of a termination of employment followed by a return to service:
(i) If an Employee severs from service as a result of quit, discharge or
retirement and then returns to service within twelve months, the
period of severance is included.
(ii) If an Employee is absent from service for any reason other than
quit, discharge or retirement and during the absence a quit,
discharge or retirement occurs, and the Employee subsequently
returns to service within twelve months of his original absence, the
period between the quit, discharge or retirement and the return to
service is included in the Employee's Vesting Service.
(iii) If an Employee severs from service, and fails to perform any hours
of service during the twelve months following the severance from
service date, then the Employee shall be deemed to have a one-year
Break in Service; provided, however, that if an
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employee severs from service (i) by reason of the pregnancy of the
Employee, (ii) by reason of the birth of a child of the Employee,
(iii) by reason of the placement of a child with the Employee in
connection with the adoption of such child by the Employee, or (iv)
for purposes of caring for such child for a period beginning
immediately following such birth or placement, and provides
satisfactory evidence to the plan administrator that the severance
was for one of the reasons specified above, the Employee shall have
a one-year Break in Service only if the Employee fails to perform an
hour of service during the sixteen-month period following the
severance of service. If an Employee having such a Break in Service
is later reemployed by the Employer, Vesting Service earned prior
to his most recent severance from service date shall be counted
along with any Vesting Service earned after the Employee's
reemployment date if:
(A) the period of Vesting service prior to his most recent
severance from service date, whether or not continuous, exceeds
the latest period of severance during which he was not employed
by the Employer, or
(B) he is re-employed prior to five (5) consecutive one (1) year
Breaks in Service.
(c) For purposes of computing Vesting Service, service with any entity acquired
by the Employer shall be considered to be service with the Employer.
(d) Prior to October 1,2000 Vesting Service shall be computed in accordance
with the terms of the Plan as then constituted.
6.4 AMENDMENT OF VESTING SCHEDULE
If at any time this Plan's vesting schedule is amended, then each Participant
with at least three (3) years of service shall have his non-forfeitable
percentage computed under the Plan in accordance with the vesting schedule that
is most favorable to such Participant under either (a) the preamendment vesting
schedule or (b) the post amendment vesting schedule, provided that each
Participant's postamendment non-forfeitable percentage interest in and to his
Matching Account shall not be less than the preamendment percentage in Trust.
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ARTICLE 7 - WITHDRAWALS WHILE STILL EMPLOYED
7.1 WITHDRAWAL OF AFTER-TAX CONTRIBUTIONS
A Participant may elect to withdraw all or part of h s After-Tax Account;
provided, however, that no more than two such withdrawals shall be made in any
Plan Year.
7.2 WITHDRAWAL OF BEFORE-TAX CONTRIBUTIONS AND ROLLOVER
CONTRIBUTIONS
(a) A Participant who has attained age 59-1/2 as of the effective date of any
withdrawal pursuant to this Section may elect to withdraw all or any part
of his Before-Tax Contributions or Rollover Contributions and the earnings
attributable thereto.
(b) A Participant who has not attained age 59-1/2 and who has withdrawn
the total amount available for withdrawal under Section 7.1 may elect to
make a withdrawal fkom his Before- Tax Account and earnings attributable
thereto through December 31, 1988, or Rollover Account, including all
earnings attributable thereto upon fkushing proof of financial hardship
satisfactory to the Benefits Committee or its designee. For purposes of
this paragraph, a distribution is on account of hardslup only if the
distribution is both made on account of an immediate and heavy financial
need of the Participant and is necessary to satisfy such financial need.
Such a withdrawal shall not exceed the amount required to meet the
immediate and heavy financial need created by the hardship and shall not
be reasonably available from other resources of the Participant. To the
extent a requested distribution is in excess of the amount required to
relieve the financial need or to the extent such need may be satisfied
from other resources that are reasonably available to the Participant,
the request for a hardship withdrawal distribution shall be denied.
A hardship withdrawal shall be deemed to be on account of an immediate and
heavy financial need of the Participant if the distribution is on account
of:
(i) medical expenses described in Section 213(d) of the Code
incurred by the Participant, his spouse, or any dependents of the
Participant (as defined in Section 152 of the Code); or funds
necessary for those persons to obtain medical care described in
Section 213(d) of the Code;
(ii) the purchase (excluding mortgage payments) of a principal
residence for the Participant;
(iii) payment of tuition, related educational expenses, and room and
board expenses for the next twelve months of post-secondary
education for the Participant, his or her spouse, children or
dependents and any other situation prescribed by the IRS pursuant to
Section 1.401(k)-1(d)(2)(iv)(C) of the Department of Treasury
Regulations;
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(iv) payments necessary to prevent the eviction of the Participant
from a principal residence or foreclosure on the mortgage of the
Participant's principal residence.
(c) A request for a hardship withdrawal shall be deemed by the Benefits
Committee or its designee as necessary to satisfy an immediate and heavy
financial need of a Participant if the following requirements are
satisfied:
(i) the distribution is not in excess of the amount of the immediate
and heavy financial need of the Participant, including any amounts
necessary to pay any federal, state, or local income taxes or
penalties reasonably anticipated as a result of the withdrawal in
accordance with written procedures adopted by the Benefits
Committee; and
(ii) the Participant has obtained all distributions, other than
hardshp distributions, and all nontaxable loans currently available
under all plans maintained by the Company.
In addition to the foregoing criteria, the determination of whether a
Participant has an immediate and heavy financial need and whether the
distribution is necessary to satisfy such financial need shall be made by
the Benefits Committee or its designee in accordance with uniform and
nondiscriminatory standards on the basis of all relevant facts and
circumstances.
If a hardship withdrawal is made, the Participant may not make any
contributions pursuant to the Plan for a period of six months commencing
with the Valuation Date following the date of the hardship withdrawal.
(d) A Participant may not make more than two withdrawals in any Plan Year
under this Section 7.2.
7.3 MATCHING ACCOUNT
Amounts in the Matching Account may not be withdrawn while the Participant is an
Employee of the Employer or an Affiliated Employer. However, with respect to an
individual who was a participant in the Curtis Industries, Inc. 401(k)
Retirement Savings Plan, at such time as the Participant shall have attained
the age of 59-1/2 years, the Benefits Committee, at the election of the
Participant, shall direct the Trustee to distribute all or a portion of the
amount then credited to the Merged Asset Account attributable to Curtis
employer matching contributions made prior to April 1,2001. Any such withdrawal
shall be permitted once per Plan Year. In the event that the Benefits Committee
makes such a distribution, the Participant shall continue to be eligible to
participate in the Plan on the same basis as any other Employee. Any
distribution made pursuant to this Section shall be made in a manner consistent
with Article 8, including, but not limited to, all notice and consent
requirements of Section 41 1(a)(11) of the Code and the Regulations thereunder.
7.4 PAYSOP ACCOUNT
Amounts in the PAYSOP Account may not be withdrawn while the Participant is an
Employee of the Employer or an Affiliated Employer.
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7.5 PROCEDURES AND RESTRICTIONS
To make a withdrawal, a Participant shall give written notice prior to the end
of a calendar quarter. A withdrawal shall be made as of the applicable
Valuation Date and the amount of such withdrawal shall be allocated among all
of his Funds in proportion to the value of the Participant's Accounts from
which the withdrawal is made as of the date of the withdrawal. With respect to
a withdrawal from the Company Stock Fund, the Participant shall indicate his
election to receive (i) shares of Common Stock, or (ii) cash, in an amount
equal to the market value of the shares of Common Stock to be withdrawn on the
last business day of the applicable calendar quarter. All payments of Common
Stock or cash to a Participant under this Article 7 shall be made within 60
days or as soon thereafter as administratively practicable following the last
day of the applicable calendar quarter. The account hierarchy for withdrawals
is as follows: first, the After-Tax Account attributable to employee After-Tax
Contributions; second, the After-Tax Account attributable to dividends on
shares purchased with the employee After-Tax Contributions; and third, the
Before-Tax Account.
7.6 GUARANTEE ACCOUNT
In the event that a Participant elects to make a withdrawal prior to
termination of employment pursuant to this Article 7 and the Benefits Committee
determines that such withdrawal is a final withdrawal of all Accounts by such
Participant, then the Participant shall be entitled to receive a distribution
of the excess, if any, in his Guarantee Account over the amount of his
withdrawal invested in the Company Stock Fund, determined in accordance with
Section 8.1(b) hereof, except that such determination shall be made only with
respect to that portion of his Guarantee Account attributable to the number of
shares of Common Stock that were withdrawn as his final withdrawal (or the
number of shares of Common Stock for which a cash equivalent final withdrawal
was made). No payment respecting a Participant's Guarantee Account shall be
made in connection with a withdrawal prior to a Participant's termination of
employment except in the situation where such withdrawal is deemed to be a
final withdrawal of all amounts in his Before-Tax Account by the Benefits
Committee.
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ARTICLE 8 - DISTRIBUTION OF ACCOUNTS UPON TERMINATION OF EMPLOYMENT
8.1 AMOUNT OF PAYMENT; PAYMENT IN COMPANY STOCK
(a) Upon termination of employment for any reason, a Participant may
elect to have the vested portion of his Accounts, without regard to the
Participant's Guarantee Account, distributed in cash as set forth in
Section 8.2; provided that any Participant (or such Participant's
beneficiary) may also elect to take payment of the balance in his
Accounts in whole shares of Company Common Stock, with any fractional
shares being distributed in cash. The amounts in each Account shall be
determined as of the Valuation Date on or next succeeding the date of
his termination and completion of a distribution request form or in
accordance with such uniform and nondiscriminatory procedures
established by the Benefits Committee. Absent such an election a
Participant who is entitled to payment of benefits and whose total
vested account balance exceeds $5,000 ($3,500 for distributions made
prior to January 1, 1998) may receive his benefits as soon as practical
after the Valuation Date next following his 65th birthday or on any
earlier Valuation Date elected by the Participant. For purposes of the
foregoing sentence, the value of a Participant's vested account balance
shall be determined without regard to that portion of the account
balance that is attributable to rollover contributions (and earnings
allocable thereto) within the meaning of Sections 402(c), 403(a)(4),
403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16) of the Code. If the value of
the Participant's vested account balance as so determined is $5,000 or
less, the Plan shall distribute the Participant's entire vested account
balances as of the Valuation Date on or next succeeding the date of his
termination.
(b) Notwithstanding the provisions of Section 8.1(a), if on the
applicable Valuation Date under Section 8.1(a), the aggregate Value of
the Participant's Company Stock Account attributable to (i) Before-Tax
Contributions and After-Tax Contributions made after May 1, 1988 and
prior to April 1, 2001 and (ii) to Prior Contributions transferred to
the Company Stock Fund pursuant to Section 4.2 is less than the value of
the Participant's Guarantee Account, then the difference shall be paid
to the Participant in cash; provided, that, to the extent such
difference is paid from the Plan, the Participant may elect to take
payment of such difference in whole shares of Common Stock, with any
fractional shares being distributed in cash. The amount described in the
immediately preceding sentence shall be paid either from the Plan, in
which case the Employer shall to the extent permitted by law, make a
special contribution to the Plan for such purpose, or directly to the
Participant by the Company.
8.2 METHODS OF DISTRIBUTION
(a) All distributions shall be made in one lump sum as soon after the
applicable Valuation Date as practical; provided, however, that upon
termination of employment on account of retirement on or after age 55 or
Disability, a Participant may, by written request to the Benefits
Committee, elect to receive in lieu of such lump sum a distribution in
the form of payments in 5, 10 or 15 annual installments; provided,
however, that the installment period selected must not exceed the life
expectancy of the Participant and any designated
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beneficiary. Except with respect to the Merged Asset Account of a
former Curtis Industries, Inc. 401(k) Retirement Savings Plan
Participant, in no event shall any distribution under the Plan be made
in the form of a single life or a joint and survivor annuity.
Unless otherwise elected by the Participant, payment of a Participant's
benefits shall commence on or about 60 days after the Valuation Date
coincident with or next following the latest of (i) his termination of
employment with the Company (ii) the determination of his Disability, or
(iii) attaining age 65. The amount of each installment payment shall be
equal to the Participant's total vested Account balance divided by the
number of payments remaining in the installment period. In the case of
an election of an installment distribution, the Participant's Accounts
shall continue to be administered as part of the funds of the Plan,
participating in earnings and realized and unrealized gains, and subject
to losses and expenses. A Participant who has elected an installment
distribution may at any time elect to receive the remaining balance if
his Account in either (i) a lump sum or (ii) a payment which is larger
than the payment which would otherwise be made and which is in an amount
at least equal to 20% of the remaining balance in his Accounts. Upon the
death of a participant who elected an installment distribution the
remaining balance in his Accounts shall be payable to his beneficiary in
a lump sum.
(b) For Plan Years commencing prior to 1989 and for Plan Years
commencing after 1996 - In the case of a Participant who is a 5% owner
of the Company's stock (as defined in Section 416 of the Code), the
distribution of the balances in all his Accounts must commence not later
than April 1st of the year following the year in which he attains 70
1/2; and in the case of a Participant other than a 5% owner, the
distribution of the balances in all his Accounts must commence not later
than the first day of April following the later of (A) the calendar year
in which he attains 70 1/2, or (B) the calendar year in which he retires.
(c) For Plan Years commencing after 1988 and before 1997 - With respect
to each Participant, the distribution of the balances in all his
Accounts must commence not later than April 1st following the calendar
year in which a Participant attains age 70 1/2.
8.3 BENEFICIARY
In the event of a Participant's death, all amounts payable pursuant to Section
8.1 or any remaining funds in the Accounts of a Participant who has elected the
installment distribution method under Section 8.2 shall be paid in one lump sum
to the Participant's spouse, if any, or to such other person as may have been
designated as the beneficiary by the Participant; provided, however, that no
beneficiary designation other than a spouse shall be effective with respect to
a Participant who has been married for at least the full year immediately prior
to the date of death unless the spouse consents in writing to the selection of
another beneficiary, acknowledges the effect of such election, and said
election is witnessed by a notary public or a representative of the Benefits
Committee specifically designated by said Benefits Committee. In the absence of
a spouse or designated beneficiary the amounts payable shall be paid to the
Participant's estate.
8.4 FORFEITURES
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If a Participant's employment is terminated prior to becoming 100% vested in
his Matching Account, such Participant's interest shall be forfeited
immediately and the value thereof shall be applied to reduce future Company
Contributions in accordance with applicable Treasury Regulations. If the
Participant is reemployed by an Employer prior to incurring five consecutive
one-year breaks in service, the value of such forfeiture, as of the date his
employment terminated, shall be restored as soon as administratively feasible
following his reemployment.
8.5 DISTRIBUTION OF PAYSOP ACCOUNTS
Notwithstanding anything provided to the contrary herein, no Shares allocated
to a Participant's PAYSOP Account may be distributed from that Account before
the end of the 84th month beginning after the month in which such Shares were
allocated to such Participant's account in the PAYSOP. The preceding sentence
shall not apply in the case of:
(a) death, Disability, separation from service, or termination of the Plan;
(b) a transfer of a Participant to the employment of an acquiring
employer from the employment of the Employer in the case of a sale to
the acquiring corporation of substantially all of the assets used by the
Employer in a trade or business conducted by the Employer; or
(c) a disposition of an Employer's interest in a subsidiary when the
Participant continues employment with such subsidiary;
(d) any distribution required under Section 401(a)(9) of the Code.
8.6 DIRECT ROLLOVER DISTRIBUTIONS
Notwithstanding any provision of the Plan to the contrary, if any distribution
to a Distributee (i) is made on or after January 1, 1993, (ii) totals $200 or
more, and (iii) constitutes an Eligible Rollover Distribution, the Distributee
may elect on a form provided by the Benefits Committee to have all or part of
such Eligible Rollover Distribution paid in a direct rollover to an Eligible
Retirement Plan selected by the Distributee. For this purpose, a Distributee,
an Eligible Rollover Distribution, and an Eligible Retirement Plan shall be
defined as follows:
(a) Distributee includes an Employee or former Employee. In addition,
the Employee's or former Employee's surviving Spouse and the Employee's
or former Employee's Spouse or former Spouse who is the alternate payee
under a qualified domestic relations order, as defined in Section 414(p)
of the Code, are Distributees with regard to the interest of the Spouse
or former Spouse.
(b) Eligible Rollover Distribution means any distribution of all or any
portion of the balance to the credit of a Distributee, except that an
Eligible Rollover Distribution does not include any distribution that is
one of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of the
Distributee and the Distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent
such
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distribution is required under Section 401(a)(9) of the Code; and the
portion of any distribution that is not includable in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities). A withdrawal from the
Before-Tax Account under Section 7.2(b) made after December 31, 1998 is
not an Eligible Rollover Distribution.
(c) Eligible Retirement Plan means a plan described below:
(i) an individual retirement account described in Section 408(a) of the
Code;
(ii) an individual retirement annuity (other than an endowment contract)
described in Section 408(b) of the Code;
(iii) a qualified defined contribution plan and exempt trust described in
Sections 401(a) and 501(a) of the Code respectively, the terms of
which permit the acceptance of rollover contributions;
(iv) an annuity plan described in Section 403(a) of the Code;
(v) an annuity contract described in Section 403(b) of the Code; or
(vi) an eligible plan under Section 457(b) of the Code which is
maintained by a state, political subdivision of a state, or any
agency or insrumentality of a state or political subdivision of a
state and which agrees to separately account for amounts
transferred into such plan from this Plan.
If an election is made to have only a part of an eligible rollover
distribution paid in a direct rollover, the amount of the direct rollover
must total $500 or more.
Direct rollovers shall be accomplished in accordance with procedures
established by the Committee, including, in the case of distributions not
subject to the consent requirements of Section 411(a)(11), procedures for
affirmatively waiving the minimum notice period described in Income Tax
Regulation 1.402(c)-2T.
The procedures established by the Committee shall be made in accordance
with the rules set forth in Income Tax Regulation 1.401(a)(31)-1T.
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ARTICLE 9 - ADMINISTRATION OF PLAN
9.1 APPOINTMENT OF BENEFITS COMMITTEE
The general administration of the Plan and the responsibility for carrying out
the provisions of the Plan shall be placed in the Benefits Committee appointed
from time to time by the Board of Directors of the Company to serve at the
pleasure of the Board of Directors. Any person who is appointed a member of the
Benefits Committee shall signify his acceptance by filing written acceptance
with the Board of Directors and the Secretary of the Benefits Committee. Any
member of the Benefits Committee may resign by delivering his written
resignation to the Board of Directors and the Secretary of the Benefits
Committee. A member of the Benefits Committee may be a Participant in the Plan.
9.2 OPERATION OF BENEFITS COMMITTEE
(a) The members of the Benefits Committee shall elect a chairman from their
number and a secretary who may be but need not be one of the members
of the Benefits Committee; may appoint from their number such
subcommittees with such powers as they shall determine; may authorize
one or more of their number or any agent to execute or deliver any
instrument or make any payment on their behalf; may retain counsel,
employ agents and provide for such clerical, accounting, and consulting
services as they may require in carrying out the provisions of the Plan;
and may allocate among themselves or delegate to other persons all or
such portion of their duties under the Plan, as they, in their sole
discretion, shall decide.
(b) The Benefits Committee shall hold meetings upon such notice, at such
place or places, and at such time or times as it may from time to time
determine. Any act which the Plan authorizes or requires the Benefits
Committee to do may be done by a majority of its members. The action of
that majority expressed from time to time by vote at a meeting or in
writing without a meeting shall constitute the action of the Benefits
Committee and shall have the same effect for all purposes as if assented
to by all members of the Benefits Committee at the time in office. Any
member of the Benefits Committee who is a Participant shall not vote on
any question relating exclusively to himself.
(c) No member of the Benefits Committee shall receive any compensation from
the Plan for his services as such.
9.3 GENERAL DUTIES OF THE BENEFITS COMMITTEE
(a) Subject to the limitations of the Plan, the Benefits Committee from time
to time may establish rules for the administration of the Plan and the
transaction of its business.
(b) The Benefits Committee shall interpret the Plan and its determination of
all questions arising under the Plan shall be conclusive upon all
Participants and all other interested or affected parties.
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(c) The Benefits Committee shall maintain, or cause to be maintained,
records showing the individual balances in each Participant's Accounts.
However, maintenance of those records and Accounts shall not require any
segregation of the funds of the Plan.
(d) The Benefits Committee shall act as the named fiduciary responsible for
communications with Participants as needed to maintain Plan compliance
with ERISA Section 404(c), including but not limited to the receipt and
transmitting of Participant's directions as to the investment of their
account(s) under the Plan and the formulation of policies, rules, and
procedures pursuant to which Participants may give investment
instructions with respect to the investment of their accounts.
9.4 CLAIMS PROCEDURE
A Participant or beneficiary may claim any benefits due under this Plan by
mailing or delivering to the Benefits Committee a written application for
benefits, outlining the nature, amount and form of benefits due. If a claim for
benefits by a Participant or beneficiary is wholly or partially denied, written
notice of the denial shall be furnished to the claimant within a reasonable
period of time by the Benefits Committee. The notice shall contain the specified
reason for denial, reference to the Plan provisions on which denial is based, a
description of any additional material or information necessary to perfect the
claim, including an explanation of why such information is necessary, and an
explanation of the claims review procedure under this Plan. Such notice shall
be written in nontechnical language calculated to be understood by the claimant.
If notice of denial is not furnished and the claim is not granted within a
reasonable period of time, the claim shall be deemed denied for the purpose of
proceeding to the review stage hereinafter described.
A claimant may appeal a denial of a claim to the Benefits Committee. In making
such appeal, the claimant or his duly authorized representative shall, within a
period of 60 days after receipt of denial, request a review by written
application to the Benefits Committee, and may review pertinent documents and
submit, in writing, issues and comments. The Benefits Committee shall make a
decision on the appeal with 60 days after the request for review, unless
special circumstances require an extension of time in which case a decision
shall be rendered no later than 120 days after the request for review. The
decision shall include specific reasons for the decision and specific
references to Plan provisions on which the decision is based, and it shall be
communicated in writing to the Participant or beneficiary whose claim has been
denied in whole or in part.
9.5 INDEMNITY
The Benefits Committee and the individual members thereof shall be indemnified
by the Company against any and all liabilities arising by reason of any act or
failure to act made in good faith pursuant to the provisions of the Plan,
including expenses reasonably incurred in the defense of any claim relating
thereto.
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9.6 PLAN EXPENSES
All expenses of administration shall be paid out of the Trust Fund unless paid
by the Employer. Such expenses shall include any expenses incident to the
functioning of the Benefits Committee, or any person or persons retained or
appointed by the Benefits Committee incident to the exercise of its duties
under the Plan, including, but not limited to, fees of accountants, counsel,
investment managers, agents (including nonfiduciary agents) appointed for the
purpose of assisting the Benefits Committee or the Trustee in carrying out the
instructions of Participants as to the directed investment of their accounts
and other specialists and their agents, and other reasonable costs of
administering the Plan. Until paid, the expenses shall constitute a liability
of the Plan.
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ARTICLE 10 - LOANS
10.1 LOAN LIMITS
(a) After an Employee has been a Participant for two years, he may borrow
from the Plan an amount which, when added to all loans hereunder and to
all loans outstanding from any other plans of the Employer and all
Affiliated Employers which are qualified under Section 401(a) of the
Code, does not exceed the lesser of:
(i) $50,000 (less the highest outstanding loan balance in the 12
months preceding any loan) or
(ii) 50% of the present value of such Participant's vested interest
in his Accounts.
(b) Loans shall not be made available to Highly Compensated Employees (as
defined in Section 414(q) of the Code) in an amount greater than the
amount made available to other Employees. The amount in a Participant's
PAYSOP Account shall be taken into account in determining the amount of
any loan that may be permitted under this Section 10.1; provided,
however, that no portion of any loan to a Participant may be made from
amounts in such Participant's PAYSOP Account.
(c) For purposes of this Section 10.1, a Participant's service with an
entity acquired by Barnes Group, Inc. prior to April 1, 2001 shall be
considered as participation in the Plan.
10.2 INTEREST
All loans shall bear a reasonable rate of interest as established by the
Benefits Committee in a nondiscriminatory manner.
10.3 TERM
Any loan by its terms must require that repayment (principal and interest) be
amortized in level payments, not less frequently than quarterly, over a period
not extending beyond five years from the date of the loan, provided, however,
that any loan shall be repaid (or treated as a distribution) upon the
Participant's termination of employment for any reason.
10.4 SECURITY
Loans must be evidenced by written notes and must be adequately secured. In the
event of default, foreclosure on the note and attachment of security will not
occur until a distributable event occurs in the Plan.
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10.5 FREQUENCY/MINIMUM AMOUNTS
A loan may be taken out no more than once in any calendar year, and a
Participant may have no more than three loans outstanding at one time. Once a
loan has been repaid, at least six months must elapse before another loan can
be granted. The minimum loan is $1,000.
10.6 FEES
A Participant who borrows from the Plan, in accordance with this Article 10,
shall be charged a loan origination fee in an amount equal to the amount
charged by the Company's recordkeeper to administer such loan. Such fee shall
be calculated at the inception of each new loan under the Plan and shall be
included as part of the amount borrowed.
10.7 PARTICIPANT LOAN PROGRAM
The Benefits Committee shall establish a Participant Loan Program contained in
a separate written document which, when properly executed, shall be
incorporated by reference and made a part of the Plan. Such Participant Loan
program shall include, but need not be limited to the following:
(i) the identity of the person or position authorized to administer
the Participant Loan Program;
(ii) a procedure for applying for loans
(iii) the basis on which loans will be approved or denied;
(iv) limitations, if any, on the types and amounts of loans offered;
(v) the procedure for determining a reasonable rate of interest;
(vi) the types of collateral which may secure a Participant loan; and
(vii) events constituting default and the steps that will be taken to
preserve Plan assets.
The Participant loan program may be modified or amended in writing from time to
time without the necessity of amending the Plan.
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ARTICLE 11 - TRUSTEE
11.1 TRUST
The assets of the Plan shall be held in trust by the Trustee or Trustees
appointed pursuant to the provisions of Article 11.
11.2 APPOINTMENT OF TRUSTEE
Prior to May 1, 2001, the Benefits Committee shall be the Trustee with respect
to assets derived from contributions to the Plan prior to May 1, 1988 which
were not transferred to the Company Stock Fund pursuant to Section 4.2 hereof,
and assets removed from the Company Stock Account pursuant to Section 5.6
hereof. With respect to all other Plan assets, the Benefits Committee by
majority vote shall appoint a trustee or trustees (hereinafter referred to as
the "ESOP Trustee"). Any trustee may be removed with or without cause by the
Benefits Committee or by the chief executive officer of the Company. Each
trustee appointed by the Benefits Committee shall execute an agreement in a
form prescribed by the Benefits Committee under which the Trustee shall accept
his appointment and agree to be bound by the provisions of this Plan. The
succeeding Sections 11.3 through 11.14 shall apply only to the Benefits
Committee as Trustee of the aforementioned assets prior to May 1, 2001.
11.3 DUTIES OF TRUSTEE
The Trustee shall receive contributions made pursuant to the Plan and shall
invest them along with the income therefrom and without distinction between
principal and income in Investment Funds as designated by the Benefits
Committee and the Participants pursuant to Article 5 hereof; provided however,
that the Trustee may also direct that such assets of the Plan may, pending
their long term investment or distribution, be held in cash or cash equivalents
or invested in short-term securities issued or guaranteed by the United States
of America or any agency or instrumentality thereof or any other investments
of a short-term nature including corporate obligations or participation
therein.
11.4 TRANSFER AND DISBURSEMENT OF FUNDS
The Trustee shall transfer funds between Investment Funds according to the
direction of the Participants as permitted by Article 5 hereof, and shall
disburse Funds in a manner consistent with the other provisions of this Plan.
11.5 INVESTMENT PERFORMANCE
The investment performance of the Funds described in Section 5.5 hereof shall
be evaluated and monitored by the Trustee. The Trustee may appoint one or more
independent investment managers to direct the Trustee in the management of all
or part of the investment and reinvestment of such Funds.
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11.6 GENERAL POWERS OF TRUSTEE
Subject to the limitations of Article 5 and Section 11.2, the Trustee is
authorized and empowered in his discretion but not by way of limitation:
(a) to sell, exchange, convey, transfer, lease, or otherwise dispose of,
and also to grant options with respect to, any property whether real
or personal, at any time held by him, and any sale may be made by
private contract or by public auction, and for cash or upon credit, or
partly for cash and partly upon credit, as the Trustee may deem best,
and no persons dealing with the Trustee shall be bound to see to the
application of the purchase money or other proceeds or to inquire into
the validity, expediency or propriety of any such disposition;
(b) to acquire any real or personal property as the result of any
foreclosure, liquidation or other salvage of any investment previously
made by the Trustee;
(c) to compromise, compound or settle any debt or obligation due to or from
them as Trustee hereunder and to reduce the rate of interest on, to
extend or otherwise modify, or to foreclose upon default or otherwise
enforce any such obligation;
(d) to vote in person or by general or limited proxy on any stocks, bonds
or other securities held by the Trustee; to exercise any options
appurtenant to any stocks, bonds or other securities for the conversion
thereof into other stock, bonds or securities, or to exercise any
rights to subscribe for additional stocks, bonds or other securities
and to make any and all necessary payments therefor; to join in, or to
dissent from, or to oppose the reorganization, recapitalization,
consolidation, liquidation, sale or merger of corporations or
properties in which the Trustee may be interested as Trustee, upon such
terms and conditions as they may deem wise;
(e) to make, execute, acknowledge and deliver any and all deeds, leases,
assignments and other instruments;
(f) to borrow or raise monies for the purpose of the Trust to the extent
that the Trustee shall deem desirable or proper upon such terms and
conditions as the Trustee may deem desirable or proper, and for any
amounts so borrowed to issue their promissory notes as Trustee and to
secure the repayment thereof by mortgaging or pledging all or any part
of the Fund; and no person dealing with the Trustee shall be bound to
see to the application of the money lent or to inquire into the
validity, expediency or propriety of any such borrowing;
(g) to cause any investments from time to time held by the Trustee to be
registered in or transferred into, their name as Trustee or in the name
of their nominee or nominees, or in the name of the Trust hereby
created, or to retain them unregistered or in form permitting
transferability by delivery, but the books and records of the Trustee
shall at all times show that all such investments are part of the Fund;
any investments from time to time held by the Trustee may be
transferred by or from the Trustee, upon the assignment by any one of
the Trustees then appointed and qualified as a Trustee under this
Agreement;
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(h) to use the services of such banking institution or institutions, or
any savings and loan associations regardless of whether the funds thereof
are fully insured, as the Trustee may deem advisable, for the deposit or
safekeeping of any funds or securities at any time in the Fund, including
the deposit of cash in a noninterest bearing account;
(i) to transfer at any time and from time to time, all or any part of an
Investment Fund to, or withdraw the same from, any pooled investment fund
or group or collective trust invested in similar types of securities,
maintained by a bank or trust company supervised by a state or federal
agency, which has been determined by the Internal Revenue Service to be a
qualified trust or fund exempt from federal income tax under Section
501(a) of the Code and which has been established to permit separate
pension and profit sharing trusts qualified under Section 401(a) of the
Code to pool some or all of their funds for investment purposes; to the
extent the Fund is invested in such a pooled fund or group or collective
trust, the terms of the instrument establishing such pooled fund or group
or collective trust are made a part of this Agreement as fully as if set
forth at length herein; the mingling of assets of this Trust with assets
of other qualified participating trusts in such pooled funds or group or
collective trusts is specifically authorized;
(j) to enter into a group annuity contract issued by an insurance company
under which all or any part of the Fund may be invested; and
(k) to do all acts whether or not expressly authorized herein which he
may deem necessary or proper for the protection of the property held
hereunder.
11.7 PROHIBITED TRANSACTIONS
Notwithstanding the foregoing Section 11.6, unless a statutory or
administrative exemption is available, the Trustee shall not engage in any
transaction which he knows or should know constitutes a direct or indirect:
(a) sale, exchange or leasing of any property between the Fund and a party
in interest;
(b) lending of money or other extension of credit between the Fund and a
party in interest, other than the loans permitted by Article 10;
(c) furnishing of goods, services or facilities between the Fund and a
party in interest;
(d) transfer to, or use by or for the benefit of, a party in interest
of any assets of the Fund; or
(e) acquisition of any security issued by the Employer or an affiliate of
the Employer or real property leased to the Employer or an affiliate
of the Employer (other than as specifically contemplated by this Plan).
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11.8 TITLE TO ASSETS
All right, title and interest in and to the assets held in trust hereunder
shall at all times be vested in the qualified and acting Trustee, subject to
their right to select a nominee or nominees to hold legal title hereto, and
neither the Employer nor any Participant shall have any right, title or
interest in said assets except to have the trust administered in accordance
with the Plan.
11.9 EXPERTS
The Trustee may consult with legal counsel (who may be counsel employed by the
Employer) concerning any question which may arise with reference to their
powers, rights, duties and obligations under this Agreement, and the opinion of
such counsel shall, to the extent permitted by applicable law, be full and
complete protection with respect to any action taken or suffered by the
Trustee(s) hereunder in good faith and in accordance with the opinion of such
counsel. The Trustee may employ such counsel, accountants and other agents as
they may deem advisable. The Trustee may charge the fees of such counsel,
accountants and other agents, and any other expenses against the Fund to the
extent that they are not paid by the Employer.
11.10 RECORDS
The Trustee shall keep accurate and detailed accounts of all their investments,
receipts, disbursements, and other transactions hereunder and all accounts,
books, and records related thereto shall be open to inspection and audit at all
reasonable times by the Employer or their authorized representatives.
Within ninety (90) days after the close of each fiscal year, or any termination
of the duties of the Trustee(s), the Trustee(s) shall render an account of
their acts and transactions as Trustee hereunder. In the absence of the filing
in writing with the Trustee by the Employer or exceptions or objections to any
such account within sixty (60) days, the Employer shall be deemed to have
approved such account; and in such case or upon the written approval of the
Employer of any such account, the Trustee(s) shall, to the maximum extent
permitted by ERISA, be released, relieved, and discharged with respect to all
matters set forth in such account as though such account had been settled by
the decree of a court of competent jurisdiction in an action or proceeding in
which the Employer or Benefits Committee, all other persons having fiduciary
responsibility with respect to the Trust and all persons having any beneficial
interest in the Trust Fund were parties.
11.11 LIABILITY
(a) To the extent permitted by applicable law, no Trustee shall be
personally liable by virtue of any contract, agreement, bond or other
instrument made or executed by him as Trustee or on his behalf as
Trustee. However, a Trustee shall be liable for his failure, if any,
to meet any of the standards of conduct set forth in this agreement
or as provided below in Subsection (b).
(b) Any Trustee shall not be liable for an act or omission of another
person in carrying out any fiduciary responsibility where such
fiduciary responsibility is allocated to such other person
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by this Agreement or pursuant to a procedure established under this
Agreement except to the extent that:
(i) such Trustee participated knowingly in, or knowingly undertook
to conceal, an act or omission of such other person, knowing
such act or omission to be a breach of fiduciary
responsibility;
(ii) such Trustee, by his failure to comply with Section 404(a)(l)
of ERISA in the administration of his specific responsibility
which gives rise to his status as a fiduciary, has enabled such
other person to commit a breach of fiduciary responsibility;
(iii) such Trustee has knowledge of a breach of fiduciary
responsibility by such other person, unless he makes reasonable
efforts under the circumstances to remedy the breach; or
(iv) such Trustee has violated his duties under Section 404(a)(l)
of ERISA:
(A) with respect to the allocation of fiduciary responsibilities
among named fiduciaries or the designation of persons other
than named fiduciaries to carry out fiduciary responsibilities
under this Agreement;
(B) with respect to the establishment or implementation of
procedures for allocating fiduciary responsibilities
among named fiduciaries or for designating persons other
than named fiduciaries to carry out fiduciary
responsibilities under this Agreement; or
(C) in continuing the allocation of fiduciary
responsibilities among named fiduciaries or the
designation of persons other than named fiduciaries to
carry out fiduciary responsibilities under this
Agreement.
11.12 STANDARD OF CARE
The Trustee shall discharge its duties hereunder with the care, skill, prudence
and diligence under the circumstances then prevailing that a prudent person
acting in a like capacity and familiar with such matters would use in the
conduct of a like enterprise.
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11.13 ASSETS FOR EXCLUSIVE BENEFIT OF PARTICIPANTS
The assets of the Plan held in trust hereunder shall never inure to the benefit
of the Employer and shall be held for the exclusive purposes of providing
benefits to the Participants or their beneficiaries under the Plan and of
defraying reasonable expenses of administering the Plan.
11.14 TERMINATION
Any distribution of Trust Fund assets other than those held in the ESOP
Suspense Account after partial termination of the Plan, may be made at any time
and from time to time in whole or in part to the extent that no discrimination
in value results, in cash, in securities or other assets in kind, as the
Trustee may determine. Upon the termination of the Plan in its entirety the
ESOP Trustee shall:
(a) pay any and all expenses chargeable against the ESOP component of the
Plan;
(b) determine, in accordance with the provisions hereof, the balance in
each Participant's Accounts;
(c) repay the ESOP Loan(s), as the ESOP Trustee and the creditor(s)
shall agree and in the case of sale of Shares held in the ESOP
Suspense Account, allocate to each participant that portion of the
remaining balance of the proceeds which is determined by multiplying
such remaining balance by a fraction, the numerator of which is the
Participant's Account balance as the date of such termination, and the
denominator of which is the aggregate Account balances of all
Participants in the Plan as of such date; and
(d) pay over to each Participant, in accordance with the provisions of
section 403(d)(l) of ERISA and the provisions hereof, the balance in
his Accounts, and
(e) continue to maintain the Trust and Plan to pay benefits in accordance
with the provisions hereof except that no Employee shall become a
Participant of the Plan or its ESOP component, as the case may be,
on or after the effective date of such termination.
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ARTICLE 11A - ACQUISITION OF SHARES WITH ESOP LOANS;
CERTAIN ALLOCATION RULES
11A.1 TERMS OF ESOP LOAN
Effective July 28, 1989 the ESOP Trustee is empowered in its sole discretion
(1) to borrow funds (including a borrowing from the Company or any other of the
Affiliated Employers) and (2) to use such funds in accordance with Section
11A.2 hereof to acquire Company Stock to fund Before-Tax Contributions and
Matching Allocations in respect of periods on and after October 1, 1989, or to
repay a prior ESOP Loan, subject to the following conditions:
(a) An ESOP Loan shall be primarily for the benefit of the
Participants and their Beneficiaries.
(b) The terms of each ESOP Loan must, at the time the loan is made,
be at least as favorable to the Trust as the terms of a comparable
loan resulting from arm's length negotiations between independent
parties.
(c) Each ESOP Loan shall be for a specific term, shall bear a
reasonable rate of interest, and shall be without recourse against
the Trust or the Participants' Accounts, except that an ESOP Loan
may be guaranteed by the Company and may be secured by a pledge of
the Shares acquired with the proceeds of the ESOP Loan (or acquired
with the proceeds of a prior ESOP Loan which is being refinanced).
(d) No other Trust assets may be pledged as collateral for an ESOP
Loan, and no lender shall have recourse against Trust assets other
than (i) collateral given for the ESOP Loan, (ii) amounts held under
the ESOP Loan Payment Accumulation Account and (iii) earnings
attributable to such collateral.
(e) An ESOP Loan shall not be payable on demand except in the event
of default. In the event of default, the value of Plan assets
transferred in satisfaction of the ESOP Loan shall not exceed the
amount of the default plus any applicable prepayment or similar
penalties or premiums.
(f) If the lender is a disqualified person within the meaning of
Section 4975(e)(2) of the Code, the ESOP Loan must provide for a
transfer of Trust assets on default only upon and to the extent of
the failure of the Trust to meet the payment schedule of the ESOP
Loan.
(g) Payments of principal and/or interest on any ESOP Loan shall be
made by the ESOP Trustee in accordance with Section 11A.5.
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11A.2 ACQUISITION OF SHARES WITH PROCEEDS OF ESOP LOAN
The ESOP Loan proceeds shall be used by the ESOP Trustee within a reasonable
time after receipt to acquire Shares or to repay a prior ESOP Loan. In
acquiring Shares, the ESOP Trustee shall take all appropriate and necessary
measures to ensure that the Trust pays no more than "adequate consideration"
(within the meaning of Section 3(18) of ERISA) for such securities. All Shares
acquired with the proceeds of an ESOP Loan shall be placed in an ESOP Loan
Suspense Account established by the ESOP Trustee. To the extent required for
the purpose of pledging such Shares as collateral for the ESOP Loan, the Shares
held as collateral in the ESOP Loan Suspense Account may be physically
segregated from other Trust assets. Any pledge of Shares must provide for the
release of a portion of such Shares (in accordance with Section 11A.6 hereof)
not later than the end of the Plan Year with respect to which payments on the
ESOP Loan are made by the ESOP Trustee and for Shares so released to be
transferred as appropriate for allocation to Participants' Before-Tax and
Matching Accounts pursuant to the terms of the Plan.
11A.3 SHARES TO BE UNRESTRICTED
No Shares acquired with the proceeds of an ESOP Loan shall be subject to any
put, call or other option or any buy-sell or similar agreement while held by or
when distributed from the Trust, whether or not the Plan constitutes an
"employee stock ownership plan" within the meaning of Section 4975(e)(7) of the
Code at such time and whether or not the ESOP Loan has been repaid at such time.
11A.4 ESOP LOAN AMORTIZATION PAYMENTS
The Trustee shall transfer all dividends received on Shares acquired prior to
August 4, 1989 to the ESOP Loan Payment Accumulation Account to be used to
repay principal and interest on the ESOP Loan (including, to the extent
directed by the Benefits Committee, to make prepayments on such ESOP loan).
When dividends on shares allocated to a Participant's account are used to repay
principle and interest on the ESOP loan, Shares with a fair market value not
less than the amount of such dividend shall be allocated to the Participant's
account for the year in which such dividend would have been otherwise allocated
to the Participant's account. Dividends in excess of amounts used to make ESOP
Loan Amortization payments shall be used by the ESOP Trustee to purchase Shares
on the open market. To the extent directed by the Benefits Committee,
Before-Tax Contributions and Company Contributions shall either (i) be
transferred by the ESOP Trustee to the ESOP Loan Payment Accumulation Account
to be used to make ESOP Loan amortization payments, or (ii) be used by the ESOP
Trustee to purchase Shares on the open market. The Benefits Committee shall
ensure that sufficient amounts are transferred to the ESOP Loan Payment
Accumulation Account to make outstanding ESOP Loan amortization payments as
they become due.
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11A.5 ESOP LOAN PAYMENTS
To the extent necessary to make ESOP Loan amortization payments, funds in the
ESOP Loan Payment Accumulation Account shall be used in the following order of
priority:
(a) Dividends on Shares (allocated and unallocated) which were
acquired with the proceeds of an ESOP Loan and earnings thereon;
(b) Before-Tax Contributions that are allocated to the ESOP Loan
Payment Accumulation Account and earnings thereon;
(c) Company Contributions that are allocated to the ESOP Loan
Payment Accumulation Account and earnings thereon; and
(d) To the extent permitted by law, proceeds from the sale,
exchange, or disposition of Shares or other assets held in the ESOP
Loan Suspense Account and earnings thereon.
11A.6 RELEASE FROM ESOP LOAN SUSPENSE ACCOUNT
As of the beginning of each quarter, a number of Shares shall be released from
the ESOP Loan Suspense Account. Such number shall be determined as follows: the
number of Shares held in the ESOP Loan Suspense Account as of the end of the
preceding quarter shall be multiplied by a fraction, the numerator of which
shall be the amount of principal and interest paid for the current quarter, and
the denominator shall be the numerator plus the principal and interest to be
paid on all future amortization payments. The resulting number of Shares
divided by three shall be allocated as of the last day of each month during the
applicable quarter in satisfaction of the following obligations in the
following order of priority:
(a) In complete or partial satisfaction of the obligation to credit
Dividend Replacement Shares (as set forth in Section 11A.7(a)
hereof);
(b) In partial satisfaction of Matching Allocations (as described in
Section 3.3 hereof), but only to the extent the source of repayment
of the ESOP Loan consists of dividends described in Section 11A.7(b)
hereof;
(c) In complete or partial satisfaction of Before-Tax Contributions
(to the extent that the ESOP Loan amortization payment was made with
Before-Tax Contributions and Supplemental Contributions as described
in Section 3.1 hereof); and
(d) In complete or partial satisfaction of any remaining Matching
Allocations (as described in Section 3.3 hereof).
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11A.7 USE OF DIVIDENDS
(a) As of the end of any quarter in which a dividend is paid on
Shares which (i) were credited to Participants' Before-Tax and
Matching Accounts as of the record date for the payment of such
dividend and (ii) were acquired with the proceeds of an ESOP Loan,
the ESOP Trustee shall allocate to Participants' Before-Tax and
Matching Accounts, through Shares released from the ESOP Loan
Suspense Account or otherwise as described in Section 11A.4 hereof,
additional Shares ("Dividend Replacement Shares") having a Value
equal to the amount of such dividends and earnings thereon.
(b) Dividends on any Shares that were acquired with an ESOP Loan
(other than Shares described in paragraph (a) above) shall be used
to repay principal and interest on such ESOP Loan in partial
satisfaction of the Matching Allocation as provided in Section 3.3.
(c) Dividends on Shares not acquired with the proceeds of an ESOP
Loan shall be used to acquire additional Shares on the open market.
(d) Notwithstanding the foregoing, and in lieu thereof, Participants
may elect, in such manner as provided by the Benefits Committee, to
have any dividends paid for a Plan Year on Shares which were
credited to their Before-Tax and Matching Accounts as of the record
date(s) for the payment of such dividends be distributed to them
within 90 days of the end of such Plan Year.
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ARTICLE 12 - GENERAL PROVISIONS
12.1 EXCLUSIVE BENEFIT RULE
Except as otherwise provided in the Plan, no part of the corpus or income of
the funds of the Plan shall be used for, or diverted to, purposes other than
for the exclusive benefit of Participants and other persons entitled to
benefits under the Plan. No person shall have any interest in or right to any
part of the earnings of the Funds of the Plan, or any right in, or to, any part
of the assets held under the Plan, except as and to the extent expressly
provided in the Plan. Notwithstanding the foregoing, the Benefits Committee may
direct the Trustees to distribute benefits in accordance with the terms of any
qualified domestic relations order.
12.2 NONALIENATION
Except as required by an applicable law, no benefit under the Plan shall in any
manner be anticipated, assigned or alienated, and any attempt to do so shall be
void.
Notwithstanding any provision of this Section to the contrary, an offset to a
Participant's accrued benefit against an amount that the Participant is ordered
or required to pay the Plan with respect to a judgment, order or decree issued,
or a settlement entered into, on or after August 5, 1997, shall be permitted in
accordance with Code Sections 401(a)(13)(C) or (D).
12.3 CONDITIONS OF EMPLOYMENT NOT AFFECTED BY PLAN
The establishment of the Plan shall not confer any legal rights upon any
employee or other person for a continuation of employment nor shall it
interfere with the rights of the Employer to discharge any Employee and to
treat him without regard to the effect which that treatment might have upon him
as a Participant of the Plan.
12.4 FACILITY OF PAYMENT
If the Benefits Committee shall find that a Participant or other person
entitled to a benefit is unable to care for his affairs because of illness or
accident or is a minor, the Benefits Committee may direct that any benefit due
him, unless claim shall have been made for the benefit by a duly appointed
legal representative, be paid to his spouse, a child, a parent or other blood
relative, or to a person with whom he resides. Any payment so made shall be a
complete discharge of the liabilities of the Plan for that benefit.
12.5 INFORMATION
Each Participant or other person entitled to a benefit, before any benefit
shall be payable to him or on his account under the Plan, shall file with the
Benefits Committee the information that it shall require to establish his
rights and benefits under the Plan.
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12.6 CONSTRUCTION
The Plan shall be construed, regulated and administered under ERISA, as in
effect from time to time, and the laws of the State of Connecticut, except
where ERISA controls.
12.7 INABILITY TO LOCATE DISTRIBUTEE
Notwithstanding any other provisions of the Plan, in the event the Benefits
Committee cannot locate any person to whom a payment is due under the Plan, the
benefit in respect of which such payment is to be made shall be forfeited at
such time as the Benefits Committee shall determine in its sole discretion (but
in all events prior to the time such benefit would otherwise escheat under any
applicable state law); provided that such benefit shall be reinstated if such
person subsequently makes a valid claim for such benefit.
12.8 NAMED FIDUCIARIES
The named fiduciaries, who shall have authority to control and manage the
operation and administration of the Plan, are as follows:
(a) the Board, which shall have the sole right to appoint and remove
from office the members of the Benefits Committee, and the Trustee
and to amend or terminate the Plan:
(b) the Benefits Committee, which shall have the authority and
duties specified in Article 8 hereof; and
(c) the Trustee, who shall have the authority and duties specified
in the Plan and Trust Agreement.
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ARTICLE 13 - AMENDMENT, MERGER AND TERMINATION
13.1 AMENDMENT OF PLAN
The Board of Directors or, in the event the Board has so delegated its
authority, the Benefits Committee may amend the Plan in whole or in part at
anytime, and retroactively if deemed necessary or appropriate by a majority
vote of its members. However, no amendment shall make it possible for any part
of the Funds of the Plan to be used for, or diverted to, purposes other than
for the exclusive benefit of persons entitled to benefits under the Plan. No
amendment shall be made which has the effect of decreasing the balance of the
Accounts of any Participant or of reducing the nonforfeitable percentage of the
balance of the Accounts of a Participant below the nonforfeitable percentage
computed under the Plan as in effect on the date on which the amendment is
adopted or, if later, the date on which the amendment becomes effective.
13.2 MERGER OR CONSOLIDATION
The Plan may not be merged or consolidated with, and its assets or liabilities
may not be transferred to, any other plan unless each person entitled to
benefits under the Plan would, if the resulting plan were then terminated,
receive a benefit immediately after the merger, consolidation or transfer which
is equal to or greater than the benefit he would have been entitled to receive
immediately before the merger, consolidation, or transfer if the Plan had been
terminated and such other plan and fund are qualified under Sections 401(a) and
501(a) of the Code.
13.3 ADDITIONAL PARTICIPATING EMPLOYERS
(a) If any company is or becomes a subsidiary of or associated with an
Employer, the Board of Directors may include the employees of that
subsidiary or associated company in the membership of the Plan upon
appropriate action by that company necessary to adopt the Plan. ln that
event, or if any persons become Employees of an Employer as the result of
acquisition of all or part of the assets or business of another company,
the Board of Directors shall determine to what extent, if any, previous
service with the subsidiary, associated or other company shall be
recognized under the Plan, but subject to the continued qualification of
the Trust for the Plan as tax-exempt under the Internal Revenue Code.
(b) Any subsidiary or associated company may terminate its participation
in the Plan upon appropriate action by it. In that event the funds of the
Plan held on account of Participants in the employ of that company, and
any unpaid balances of the Accounts of all Participants who have separated
from the employ of that company, shall be determined by the Benefits
Committee. Those funds shall be distributed as provided in Section 13.4 if
the Plan should be terminated, or shall be segregated by the trustees as a
separate trust, pursuant to certification to the trustees by the Benefits
Committee, continuing the Plan as a separate plan for the employees of
that company under which the Board of Directors of that company shall
succeed to all the powers and duties of the Board of Directors, including
the appointment of the members of the Benefits Committee.
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13.4 TERMINATION OF PLAN
The Board of Directors may terminate the Plan or completely discontinue
contributions under the Plan for any reason at any time. In case of termination
or partial termination of the Plan, or complete discontinuance of Employer
contributions to the Plan, the rights of affected Participants to their
Accounts under the Plan as of the date of the termination or discontinuance
shall be nonforfeitable. The total amount in each Participant's Accounts shall
be distributed, as the Benefits Committee shall direct, to him or for his
benefit or continued in trust for his benefit, except that in the case of
Before-Tax Contributions such Before-Tax Contributions shall be distributed
only in accordance with the provisions of Article 8.
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ARTICLE 14 - TOP-HEAVY PROVISIONS
14.1 APPLICATION OF ARTICLE
This Article 14 shall apply for Plan Years beginning after December 31, 1983.
14.2 DEFINITIONS
For purposes of this Article, the following definitions apply:
(a) Key Employee. The term "key employee" means any Employee or
former Employee (including any deceased Employee) who at any time
during the Plan Year that includes the determination date was an
officer of the Employer having Annual Compensation greater than
$130,000 (as adjusted under Section 416(i)(1) of the Code for Plan
Years beginning after December 31, 2002), a 5-percent owner of the
Employer, or a 1-percent owner of the Employer having "Annual
Compensation" of more than $150,000. For this purpose, "Annual
Compensation" means Annual Pay within the meaning of Section
415(c)(3) of the Code. The determination of who is a Key Employee
will be made in accordance with Section 416(i)(1) of the Code and
the applicable regulations and other guidance of general
applicability issued thereunder.
14.3 DETERMINATION OF TOP-HEAVY STATUS
As of each determination date, the Company shall compute the aggregate accrued
benefits of all Key Employees of the Company. If within the meaning of Section
416(g) of the Internal Revenue Code, the aggregate accrued benefits of all Key
Employees exceeds 60% of the aggregate accrued benefits of all Employees, then
the Plan will be deemed to be "top-heavy" for the Plan Year next following such
determination date (and in the case of the first Plan Year, for the Plan Year
ending with such determination date). In making this determination, there shall
be considered (i) all other qualified plans of the Company in which a Key
Employee is a Participant, and (ii) all other qualified plans of the Company
which enable this Plan or plans described in (i) above to meet the requirements
of Section 401(a)(4) or 410 of the Code, and (iii) at the option of the
Company, any other qualified plans of the Company which meet the requirements
of Section 401(a)(4) and 410 of the Code. If any other plans of the Company are
aggregated with this Plan as described in the preceding sentence, this Plan
shall be deemed to be top-heavy only if the aggregated plans are a "top-heavy
group," as defined in Section 416(g)(2)(B) of the Code. For purposes of
determining the present values of accrued benefits and the amounts of account
balances of Employees as of the determination date, the following rules shall
apply:
(a) The present values of accrued benefits and the amounts of
account balances of an Employee as of the determination date shall
be increased by the distributions made with respect to the Employee
under the Plan and any Plan aggregated with the Plan under Section
416(g)(2) of the Code during the 1-year period ending on the
determination date. The preceding sentence shall also apply to
distributions under a terminated plan which, had it not been
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terminated, would have been aggregated with the Plan under Section
416(g)(2)(A)(i) of the Code. In the case of a distribution made for
a reason other than separation from service, death, or disability,
this provision shall be applied by substituting "5-year period" for
"1-year period."
(b) The accrued benefits and accounts of any individual who has not
performed services for the Employer during the 1-year period ending
on the determination date shall not be taken into account.
14.4 MINIMUM COMPANY CONTRIBUTION
Notwithstanding any other provision of this Plan except the limitations set
forth in this Section 14.4, for any Plan Year in which this Plan is top-heavy,
there shall be allocated to the Before-Tax Contribution Account of each
Participant (and each Employee who would have become a Participant had he not
declined to execute a Before-Tax election) an amount of not less than 3% of
such individual's compensation as defined in Section 14.2(d); provided that (i)
this minimum contribution shall not be made to a Participant or Employee who is
a Key Employee for the Plan Year or who has separated from service prior to the
last day of the Plan Year, and (ii) this minimum contribution shall be provided
solely by Company contributions (which shall include Company contributions to
such individual's Before-Tax Contribution Account under Section 3.1 of this
Plan and Matching Allocations made to such individual's Matching Account under
Section 3.3 of this Plan). Notwithstanding the foregoing, if the largest
percentage of compensation contributed or required to be contributed by the
Company to any Key Employee for the Plan Year is less than 3% (considering only
the first $200,000 of compensation for Key Employees), then the amount
allocable to each eligible individual hereunder shall be that lesser
percentage. For purposes of this Section 14.4, all defined contribution plans
of the Company shall be aggregated to the end that the minimum contribution
requirement shall be satisfied if the aggregate contributions attributable to
Company contributions and forfeitures if any, made to all defined contribution
plans equal 3% (or applicable lesser percentage) of any such individual's
compensation.
If a Participant is covered under any qualified defined benefit plan of the
Company, then the minimum benefit or the minimum contribution requirement
applicable should this Plan or the other plan become top-heavy shall be
satisfied by the minimum benefit provisions of the defined benefit plan rather
than the minimum contribution provisions of this Plan.
14.5 EFFECT ON SECTION 415 LIMITATIONS
For purposes of computing the aggregate limitation on benefits and
contributions for a Key Employee who participates in both a defined
contribution plan and defined benefit plan maintained by the Company, in any
Plan Year in which this Plan is part of a top-heavy group, the dollar
limitation in the denominator of the fraction set forth in Section 415(e) of
the Code shall be multiplied by 1.0 rather than 1.25. However, the preceding
sentence is not applicable if:
(a) The Plan would not be top-heavy if 90% were substituted for 60%
in the second sentence of Section 14.3; and
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<PAGE>
(b) The benefits and contributions under each plan satisfy the
minimum requirements of Section 416(h)(2) (A)(ii)(I) and (II) of the
Code by (i) substituting 4% for 3% wherever 3% appears in Section
14.4 and (ii) computing a Participant's minimum retirement benefit
provided under the defined benefit plan by substituting 3% for 2% of
the Participant's highest average compensation for the 5 consecutive
years for which he had the highest compensation and by increasing
(but not more than 10 percentage points) 20% of the Participant's
highest average compensation for such 5-year period by 1 percentage
point for each Plan Year the Plan is top-heavy, wherever such
references appear in the minimum benefits section of the top-heavy
provisions of such defined benefit plan.
56
<PAGE>
ARTICLE 15 - MILITARY VETERANS' MAKE-UP CONTRIBUTIONS
15.1 QUALIFIED MILITARY SERVICE
"Qualified Military Service" means any service in the Armed Forces (or other
Uniformed Service as provided in the Uniformed Services Employment and
Reemployment Rights Act (the 'USERRA') which is credited to an Employee upon
his or her return to employment with the Employer or Affiliated Employer on or
after December 12, 1994 and within the period during which his or her
employment rights are protected by USERRA.
15.2 SERVICE CREDIT
An employee who has Qualified Military Service shall receive credit under this
Plan for such service in the same manner and under the same rules as if the
service had been performed for the Employer or an Affiliated Employer.
15.3 MAKE-UP CONTRIBUTIONS
An Eligible Employee may elect to make up some or all of the Before-Tax
Contributions and/or After-Tax Contributions that could otherwise have been
made during the period of Qualified Military Service. The amount of such
contributions shall not exceed the amount that could have been made in
accordance with all Plan provisions and limits that would have applied during
such period. Compensation will be imputed for the period of Qualified Military
Service based on the rate of pay the Employee would have received during such
period. The election shall be made in a manner similar to that used for current
Before-Tax Contributions and/or After-Tax Contributions and the Employee may
elect to change, suspend or cease such contributions in accordance with the
provisions in effect at the time of such election.
15.4 MAXIMUM TIME LIMIT
The maximum time limit for making such contributions shall be the lesser
of three (3) times the duration of the Qualified Military Service or five (5)
years and is measured from the later of January 1, 1997 or the date the
Employee is reemployed following such absence.
15.5 MATCHING ALLOCATIONS
Matching Allocations shall be made in the same amount and at the same
relative time as would have applied had the make-up contributions by the
Employee been made during the period of Qualified Military service.
15.6 NO RETROACTIVE INVESTMENT RETURN
All make-up contributions and Matching Allocations shall be invested in
accordance with the Section 4.1 when the contributions are actually made. No
retroactive adjustment in the
57
<PAGE>
Participant's Accounts will be made for investment gains or losses for any
period prior to the date the contributions are actually made.
15.7 LOAN REPAYMENTS
The Benefits Committee may adopt rules of uniform application that will allow
loan repayments to be suspended for some or all of the period of Qualified
Military Service. Such suspension will not result in default and the period of
suspension will defer the date on which the loan is scheduled to be fully
repaid. Interest shall accrue on such loan balance during the period of
suspension and shall become payable upon the resumption of employment. Loan
repayments shall resume upon re-employment and will be increased to repay the
then outstanding balance, including interest that accrued during the Qualified
Military Service. A new loan agreement shall be issued at that time.
15.8 TESTING
Contributions made under this Article 15 shall be excluded from all testing in
Plan Years subsequent to the Plan Year to which the contributions relate and
Plan Years prior to the Plan Year in which they are actually made.
15.9 COMPLIANCE
The provisions of this Article 15 shall be administered to comply with Section
414(u) of the Code and applicable regulations.
58
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Amended and Restated Plan
to be executed by its duly authorized officer and its corporate seal to be
hereunto affixed this_______ day of ___________________, 2002.
WITNESS BARNES GROUP INC.
________________________________ By:_________________________________
Title:______________________________
59
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>6
<FILENAME>dex13.txt
<DESCRIPTION>PORTIONS OF 2001 ANNUAL REPORT
<TEXT>
<PAGE>
Exhibit 13
management's discussion & analysis
[Picture]
Our Business
Barnes Group is a diversified international manufacturer of precision metal
parts and distributor of industrial supplies. The Company is comprised of three
business segments. The Associated Spring segment is a manufacturer of precision
mechanical and nitrogen gas springs for the electronics, telecommunications and
transportation markets. The Barnes Aerospace segment supplies precision machined
and fabricated components and assemblies for commercial and military aircraft
and industrial gas turbines, as well as engine component overhaul and repair
services in support of the global airline industry. The Barnes Distribution
segment, formerly known as Bowman Distribution, is an international distributor
of maintenance, repair and operating (MRO) supplies and a provider of logistics
management services for industrial, heavy equipment and transportation
maintenance markets. It also distributes close-tolerance engineered metal
components manufactured principally by Associated Spring. Through these three
businesses, Barnes Group helps its customers enhance their competitiveness and
responsiveness by realizing the benefits of its manufacturing and logistics
management capabilities.
Acquisitions
During the past three years, the Company acquired a number of businesses, which
were accounted for using the purchase method. Accordingly, the results of
operations of the acquired companies have been included in the consolidated
results from their respective acquisition dates.
In August 1999, the Company purchased substantially all of the assets and
liabilities of the nitrogen gas spring business of Teledyne Industries, Inc.,
for $92.2 million. This operation is a major supplier of nitrogen gas springs
and manifold systems for the metal forming industries. The nitrogen gas spring
business is included in the Associated Spring segment. This strategic
acquisition provided Associated Spring with new spring technologies and allows
it to continue to develop and expand products, markets and services.
In May 2000, the Company purchased substantially all of the assets and
liabilities of Curtis Industries, Inc. (Curtis) for $63.4 million. Curtis, a
distributor of MRO supplies and high-quality security products, was combined
with Bowman Distribution to form Barnes Distribution. This business combination
created a broader product offering, enhanced service capabilities, increased
sales penetration and cost savings opportunities.
In September 2000, the Company purchased substantially all of the assets and
liabilities of AVS/Kratz-Wilde Machine Company and Apex Manufacturing, Inc.
(Kratz-Wilde/Apex) for $40.9 million. Kratz-Wilde/Apex fabricates and machines
intricate aerospace components for jet engines and auxiliary power units. These
businesses are included in the Barnes Aerospace segment. This acquisition
augments Barnes Aerospace by extending product depth and customer penetration.
In January 2001, the Company acquired Euro Stock Springs & Components Limited
(Euro Stock) for $0.7 million. Euro Stock distributes die and other standard
springs through catalogs to customers located primarily in Europe. This
business, which is included in the Barnes Distribution segment, expanded Barnes
Distribution's presence in Europe and added a new sales channel through Euro
Stock's catalog.
In November 2001, the Company acquired certain assets of Forward Industries,
L.L.C., and its subsidiary Forward Industries, Ltd. for approximately $2.5
million. Forward Industries designs and manufactures nitrogen gas springs that
are used in the appliance, automotive, heating and cooling, and electrical
industries. This bolton acquisition, which helped secure a key brand, is being
integrated with the Company's existing nitrogen gas spring business and is
included in the Associated Spring segment.
On January 31, 2002, the Company announced it had signed an agreement to acquire
substantially all of the manufacturing assets of Seeger-Orbis GmbH & Co. OHG of
Germany from TransTechnology Corporation. The acquired business will expand both
the product offerings and geographic scope of the Associated Spring segment. The
acquisition is expected to close by the end of the first quarter of 2002. The
purchase price of approximately $20 million will be financed with cash held by
the Company outside the United States.
Results of Operations
Barnes Group reported record net sales of $769 million in 2001, an increase of
$29 million, or 4%, over last year's net sales of $740 million. Net sales growth
in 2001 reflected the sharp rise in sales at Barnes Aerospace and sales from the
Company's recent acquisitions. This growth was partially offset by a decline in
transportation- and telecommunications related sales at Associated Spring and
the adverse impact of weak economic conditions on Barnes Distribution's sales.
The businesses acquired in 2000 and 2001 provided incremental sales of $61
million in 2001: $1 million to Associated Spring, $34 million to Barnes
Aerospace and $26 million to Barnes Distribution. Geographically, domestic sales
increased 8% yearover- year, while foreign sales fell 8%. In 2000, Barnes Group
net sales were up $118 million, or 19%, over 1999, reflecting both acquisitions
and internal
-----------
P A G E 7
<PAGE>
management's discussion & analysis
growth in each of the three businesses. The acquired businesses provided
incremental sales of $101 million in 2000: $32 million to Associated Spring, $13
million to Barnes Aerospace and $56 million to Barnes Distribution.
Operating income was $40.3 million in 2001, compared with $62.9 million in 2000.
A number of items contributed to the operating income decline. The primary
factors were the impact of a weak industrial economy on sales volume and a shift
in the overall sales mix to lower-margin business. The $29 million net sales
increase comprised $61 million in incremental sales from the 2000 and 2001
acquisitions and a $31 million increase in the existing Aerospace business,
which was substantially offset by a $63 million sales decrease in the more
profitable Associated Spring and Barnes Distribution businesses. Also impacting
operating income were higher personnel costs, specifically health insurance and
pension costs. In addition, 2001 operating income reflects the cost of actions
aimed at reducing the Company's infrastructure, as well as increased investments
in selling, marketing and engineering efforts focused on preparing the Company
for the next business upturn. As described in note 13 to the Consolidated
Financial Statements, operating income included a $4.8 million pretax charge
taken in the fourth quarter of 2001, primarily related to a plant closure and
severance costs. Selling and administrative expenses increased $20.5 million in
2001 over 2000, reflecting the fourth quarter charge and the costs attributable
to the newly acquired businesses, as well as the continued investment made in
the sales, marketing and engineering functions throughout the Company.
While the tragic events of September 11th have created a roadblock for the
stalled domestic economy, management believes that the cost reductions and other
actions that Associated Spring and Barnes Distribution have executed over the
past year will enable them to effectively manage through the current economic
conditions. In addition, Barnes Aerospace is taking the appropriate actions
necessary to address near-term disruptions in the commercial aircraft market.
Operating income in 2000 increased $16.8 million to $62.9 million, or 37% over
1999. The increase was driven by double-digit sales and profit growth in each of
the three businesses. Lower pension expense, which primarily reflects solid
investment performance on plan assets, contributed $4.9 million of incremental
operating income over the comparable 1999 period. This was offset in part by
higher selling and administrative expenses. Selling and administrative expenses
increased $37.1 million in 2000, of which $33.6 million is attributable to the
newly acquired businesses. Included in operating income in 2000 is a gain of
$2.2 million related to the sale of a corporate asset and a $1.7 million charge
for integration costs related to the Curtis acquisition.
Segment Review -
Sales and Operating Profit
Associated Spring sales for 2001 were $279 million, down $48 million, or 15%,
from record 2000 sales of $327 million. Sales in 1999 were $283 million. Sales
at Associated Spring were impacted by lower production rates in the domestic
transportation markets and reduced sales of telecommunications and electronics
products. These factors impacted both domestic and foreign sales. Sales at
Associated Spring's U.S. operations started to contract in late 2000 and
continued throughout 2001, reflecting the weakness of the domestic economy.
Associated Spring's international sales dropped significantly in the Pacific
Rim, where it serves the telecommunications and electronics markets, but
continued to grow in Sweden and Brazil. Associated Spring's 2000 sales increased
over 1999 on the strength of its U.S. operations and the addition of the
nitrogen gas spring business. The 2000 sales increase included both domestic and
foreign sales growth. In 2000, sales at Associated Spring's U.S. operations
increased, reflecting continued penetration of the electronics and
transportation markets and the strength of the domestic economy, particularly in
the first half of the year. Additionally, the full-year impact in 2000 of the
August 1999 acquisition of the nitrogen gas spring business contributed to sales
increases both domestically and internationally.
Associated Spring reported operating profit of $19.4 million in 2001, compared
with $44.0 million in 2000 and $33.5 million in 1999. The decrease in 2001
reflects the sales volume decline, and in particular, the significant shortfall
in the more profitable electronics business, coupled with costs associated with
reducing the business's infrastructure. This was partially offset by lower
operating costs based on earlier management actions. Management responded to the
decline in the domestic economy by reducing its cost structure beginning late in
2000 and continuing throughout 2001, culminating with the decision to shut down
its Texas plant. Retained business from the Texas plant will be transferred to
other Associated Spring plants during 2002. The Company expects to incur
approximately $1.6 million of additional costs associated with these actions,
which will be expensed in 2002. This is expected to be offset by improved
earnings beginning in the second half of 2002. The operating profit improvement
in 2000 over 1999 reflects a full year of ownership of the nitrogen gas spring
business, increased sales to new sectors, higher manufacturing productivity and
lower operating expenses.
Barnes Aerospace achieved record sales of $200 million in 2001, up $65 million,
or 48%, compared with $135 million in 2000. Sales in 1999 were $121
- ----------
P A G E 8
<PAGE>
management's discussion & analysis
million. Organic sales increased $31 million, or 26%, as Barnes Aerospace
continued to penetrate new markets and customers in both the overhaul and repair
and original equipment manufacturing businesses. Sales from the Kratz-Wilde/Apex
business, acquired in September 2000, increased $34 million year-overyear. Total
orders for the year were $216 million, up 26% from $171 million in 2000. Order
backlog rose to a year-end record $159 million at December 31, 2001, compared
with $145 million at December 31, 2000. The Barnes Aerospace sales increase in
2000 over 1999 included the acquisition of Kratz-Wilde/Apex that added $13
million in sales in 2000.
Barnes Aerospace operating profit was a record $16.4 million in 2001, as
compared with $8.0 million in 2000 and $5.3 million in 1999. The increase in
2001 operating profit and margin reflects higher sales volume and benefits from
lean manufacturing initiatives. The increase in profits for 2000, compared with
1999, reflects the increased sales volume.
Barnes Distribution sales for 2001 were $298 million, compared with $291 million
in 2000 and $230 million in 1999. Sales from the acquired businesses increased
$26 million year-over-year. Organic sales from Distribution's other businesses,
Raymond and the balance of Barnes Distribution, formerly known as Bowman
Distribution, decreased $7 million and $12 million, respectively, reflecting the
negative impact of the weak economic conditions in the manufacturing and
industrial sectors. The Barnes Distribution 2000 sales increase over 1999
included $56 million from Curtis, which was acquired in May 2000. The remainder
of the increase is attributable to higher sales in the North American business.
This increase reflects significant improvement in a computerized distribution
management system that had negatively impacted customer service and sales in
1999 and early 2000. Customer service was restored to historical levels in
mid-2000, which has positively impacted sales volume.
Barnes Distribution operating profit in 2001 was $5.5 million, compared with
$12.9 million in 2000 and $9.9 million in 1999. Synergies realized from the
integration of Curtis were more than offset by lower profit from the significant
decline in other business sales. Although sales increased in total, sales in the
more profitable business of Raymond and the former Bowman Distribution were down
significantly. The increase in operating profit in 2000 over 1999 reflects the
higher sales volume, offset in part by integration costs of $1.7 million related
to the acquisition of Curtis.
Other Income/Expense
Other income totaled $3.9 million in 2001, compared with $4.8 million in 2000
and $4.4 million in 1999. The decrease in other income in 2001, compared with
2000, was due to lower equity income from the Company's NASCO joint venture,
offset in part by higher net foreign exchange transaction gains. The increase in
2000 over 1999 reflects higher interest income and net foreign exchange
transaction gains.
Interest expense and other expenses increased in both 2001 and 2000 as a result
of acquisitions. In each year, interest expense increased due to significantly
higher borrowings, offset in part, in 2001, by lower average interest rates.
Other expenses increased with the additional goodwill amortization associated
with the acquisitions.
Income Taxes
The Company's effective tax rate was 18.5% in 2001, compared with 26.6% in 2000
and 33.0% in 1999. The decline in the tax rate in both 2001 and 2000 is due to a
significant shift in the overall mix of income to a higher percentage of foreign
income, with tax rates lower than the U.S. statutory tax rate.
Net Income and Net Income Per Share
Consolidated net income was $19.1 million in 2001, $35.7 million in 2000, and
$28.6 million in 1999. Basic earnings per share was $1.03 for 2001, compared
with $1.92 in 2000 and $1.47 in 1999. Diluted earnings per share was $1.01 for
2001, as compared with $1.90 in 2000 and $1.46 in 1999.
Inflation
Management believes that during the 1999-2001 period, inflation did not have a
material impact on the Company's financial statements.
Liquidity and Capital Resources
The Company's ability to generate cash from operations in excess of its internal
operating needs is one of its financial strengths. Management continues to focus
on cash flow and anticipates that operating activities in 2002, combined with
aggressive asset management, will provide sufficient cash to take advantage of
opportunities for organic business expansion and to meet the Company's current
financial commitments.
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.
-----------
P A G E 9
<PAGE>
management's discussion & analysis
Operating activities are the principal source of cash flow for the Company,
generating $66.9 million in 2001, up from $51.9 million in 2000 and $62.8
million in 1999. The significant increase in operating cash flow was due
primarily to significant improvements in working capital, which more than offset
the lower operating results. Management continues to stress the need for
aggressive cash management and was effective in reducing overall working capital
levels in 2001. In 2000, strong operating results contributed significantly to
operating cash flow, offset in part by higher investments in working capital and
other non-cash income. During the past three years, operating activities
provided $181.6 million in cash, which the Company used, in part, to pay
dividends to stockholders, repurchase Company stock, fund significant
investments in plant and equipment, and partially fund acquisitions.
Investing activities used cash of $26.6 million in 2001, compared with $134.5
million in 2000 and $117.0 million in 1999. The significant cash use in 2000 and
1999 is attributable to the purchases of Curtis and Kratz-Wilde/Apex in 2000 and
the purchase of the nitrogen gas spring business in 1999. In 2001, funds used
for two bolt-on acquisitions were offset in part by a favorable purchase price
adjustment received in 2001 on the Kratz-Wilde/Apex acquisition. The Company's
capital spending program focuses on business growth and improvements in
productivity and quality. In 2001, capital spending was reduced in response to
the economic downturn. The Company does not expect capital spending in 2002 to
exceed 2001 levels.
Net cash used by financing activities was $13.8 million in 2001, compared with
net cash provided by financing activities of $64.8 million in 2000 and $58.8
million in 1999. Cash of $13.8 million was generated from the sale of a
cross-currency debt swap in 2001. The proceeds from this sale, combined with
strong operating cash flow, were used in part to pay down debt, fund capital
expenditures, pay dividends and repurchase the Company's stock. In 2000 and
1999, the increase in borrowings reflected the issuance of additional long-term
debt to fund business acquisitions as well as to supplement cash generated by
operating activities. Cash dividends increased in 2001, for the eighth
consecutive year, to $0.80 per share. As a result, total cash used to pay 2001
dividends to stockholders was $14.8 million.
The Company has used and will continue to use cash from non-U.S. subsidiaries to
fund international cash requirements, including acquisitions when it is cost
effective. The repatriation of certain cash balances to the U.S. could have
adverse tax consequences; however, those balances are generally available to
fund business needs outside the U.S.
To supplement internal cash generation, the Company maintains substantial bank
borrowing facilities. At December 31, 2001, the Company had a $150 million
revolving credit agreement, of which $40 million was borrowed at an interest
rate of 2.45%. Additionally, the Company had $5.5 million in borrowings under
uncommitted short-term bank credit lines, at an interest rate of 2.78%. The
revolving credit borrowing facility expires in December 2002. Accordingly,
borrowings under this facility are classified as current. Management intends to
negotiate a new revolving credit agreement in the first half of 2002. The
Company believes its credit facilities, coupled with cash generated from
operations, are adequate for its anticipated future requirements.
In November 1999, the Company financed a portion of the nitrogen gas spring
business acquisition through the issuance of $70 million of private placement
Senior Notes. The Notes, placed with seven insurance companies, range in
maturity from eight to 11 years and bear an average annual interest rate of
7.75%. The balance of the acquisition purchase price was financed through
borrowings under the Company's revolving credit agreement.
In November 2000, the Company financed a portion of the Curtis and
Kratz-Wilde/Apex business acquisitions through issuance of $60 million of
privately placed Senior Notes with three insurance companies. Although the Notes
have an effective interest rate of 9.34%, they are tied to an interest rate swap
agreement that effectively converted them to variable-rate debt. These Notes are
payable in three equal annual installments beginning in 2006.
Market Risk
Market risk is the potential economic loss that may result from adverse changes
in the fair value of financial instruments. The Company's financial results
could be impacted by changes in interest rates, foreign currency exchange rates
and commodity price changes. The Company uses financial instruments to hedge its
exposure to fluctuations in interest rates and foreign exchange rates. The
Company does not use derivatives for speculative or trading purposes.
The Company's long-term debt portfolio consists of fixed-rate and variable-rate
instruments and is managed to reduce the overall cost of borrowing while also
minimizing the effect of changes in interest rates on near-term earnings. As
part of managing its debt portfolio, the Company maintains an interest rate swap
agreement to convert its $60 million fixedrate Senior Notes to variable-rate
debt. The exchange agreement had a positive impact on 2001 earnings, reducing
interest expense by $0.7 million.
- -----------
P A G E 10
<PAGE>
management's discussion & analysis
The Company's primary interest rate risk is derived from its outstanding
variable-rate debt obligations. At December 31, 2001, the result of a
hypothetical 1% increase in the average cost of the Company's variable-rate
debt, including the interest rate swap agreement, would have decreased pre-tax
profit by $1.1 million.
At December 31, 2001, the fair value of the Company's fixed-rate debt was $120.0
million, compared with its carrying amount of $117.2 million. The Company
estimates that a 1% decrease in market interest rates at December 31, 2001 would
have increased the fair value of the Company's fixed-rate debt to $125.3
million.
The Company has manufacturing, sales and distribution facilities around the
world and thus makes investments and conducts business transactions denominated
in various currencies. Foreign currency commitments and transaction exposures
are managed at the operating units as an integral part of their businesses in
accordance with a corporate policy that addresses acceptable levels of foreign
currency exposures. The Company does not hedge its foreign currency net asset
exposure.
The currencies of the locations where the Company's business operations are
conducted are the U.S. dollar, Singapore dollar, Euro, British pound, Mexican
peso, Brazilian real, Canadian dollar, Swedish krona and Chinese renminbi. The
Company is exposed primarily to U.S. dollar-denominated financial instruments at
its international locations. Based on a 10% adverse movement in all currencies,
the potential loss in fair value from the Company's financial instruments at the
end of 2001 would have resulted in reducing pretax profit by $2.1 million.
The Company's exposure to commodity price changes relates primarily to certain
manufacturing operations that utilize high-grade steel spring wire and titanium.
The Company manages its exposure to changes in those prices through its
procurement and sales practices. The Company is not dependent upon any single
source for any of its principal raw materials or products for resale, and all
such materials and products are readily available.
Future Accounting Changes
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No.141, "Business Combinations," and SFAS
No. 142, "Goodwill and Other Intangible Assets." SFAS 141 requires companies to
account for acquisitions entered into after June 30, 2001, using the purchase
method and establishes criteria to be used in determining whether acquired
intangible assets are to be recorded separately from goodwill. SFAS 142 sets
forth the accounting for goodwill and other intangible assets related to
business combinations. Goodwill and other intangible assets with indefinite
lives will no longer be amortized and instead will be evaluated annually for
impairment by comparing the carrying value to the fair value at the reporting
unit level. Intangible assets with definitive lives will be amortized over their
useful lives. SFAS 142 is effective for acquisitions completed after June 30,
2001, and effective for previous acquisitions on January 1, 2002.
Management is in the process of analyzing and assessing the impact of the
adoption of these statements. The Company expects that the adoption of SFAS 142
will have a favorable impact of approximately $3.4 million on net income due to
the elimination of goodwill amortization. However, the actual effect of this
accounting change on the Company's consolidated results of operations and
financial position will be determined upon completion of the impairment
evaluation in 2002.
In August 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets, "which will be
effective on January 1, 2002, for the Company. Management believes that adoption
of this standard will not have a material impact on the Company's financial
position, results of operations or cash flows.
Forward-Looking Statements
This Annual Report may contain certain forwardlooking statements as defined in
the Public Securities Litigation and Reform Act of 1995. These forwardlooking
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,
including 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; changes in economic and political conditions worldwide and in the
locations where the Company does business; interest and foreign exchange rate
fluctuations; and changes in laws and regulations.
-----------
P A G E 11
<PAGE>
consolidated statements of income
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
------------
Years ended December 31, 2001 2000 1999
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 768,821 $ 740,032 $ 622,356
Cost of sales 519,536 488,634 424,945
Selling and administrative expenses 208,965 188,449 151,304
- --------------------------------------------------------------------------------------------------
728,501 677,083 576,249
- --------------------------------------------------------------------------------------------------
Operating income 40,320 62,949 46,107
Other income 3,890 4,773 4,400
Interest expense 16,161 15,140 6,093
Other expenses 4,590 3,992 1,716
- --------------------------------------------------------------------------------------------------
Income before income taxes 23,459 48,590 42,698
Income taxes 4,338 12,925 14,086
- --------------------------------------------------------------------------------------------------
Net income $ 19,121 $ 35,665 $ 28,612
==================================================================================================
Per common share:
Net income:
Basic $ 1.03 $ 1.92 $ 1.47
Diluted 1.01 1.90 1.46
Dividends 0.80 0.79 0.75
Average common shares outstanding:
Basic 18,506,247 18,568,359 19,417,856
Diluted 18,919,968 18,791,227 19,642,755
------------
</TABLE>
See accompanying notes.
- ----------
P A G E 12
<PAGE>
consolidated balance sheets
<TABLE>
<CAPTION>
(Dollars in thousands)
-------------
December 31, 2001 2000
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 48,868 $ 23,303
Accounts receivable, less allowances
(2001 - $3,114; 2000 - $2,720) 94,124 107,434
Inventories 85,721 88,514
Deferred income taxes 16,702 12,647
Prepaid expenses 11,120 9,450
- ----------------------------------------------------------------------------------------------
Total current assets 256,535 241,348
Deferred income taxes 5,783 15,010
Property, plant and equipment 152,943 163,766
Goodwill 159,836 155,667
Other assets 61,408 61,150
- ----------------------------------------------------------------------------------------------
Total assets $ 636,505 $ 636,941
==============================================================================================
Liabilities and Stockholders' Equity
Current liabilities
Notes payable $ 5,500 $ 3,678
Accounts payable 71,410 62,985
Accrued liabilities 59,118 60,183
Long-term debt - current 47,576 -
- ----------------------------------------------------------------------------------------------
Total current liabilities 183,604 126,846
Long-term debt 178,365 230,000
Accrued retirement benefits 63,610 67,686
Other liabilities 12,089 11,076
Commitments and contingencies (notes 10 and 12)
Stockholders' equity
Common stock - par value $0.01 per share
Authorized: 60,000,000 shares
Issued: 22,037,769 shares at par value 220 220
Additional paid-in capital 54,874 51,845
Treasury stock at cost (2001 - 3,576,322 shares;
2000 - 3,430,411 shares) (76,903) (69,181)
Retained earnings 243,369 239,266
Accumulated other comprehensive income (22,723) (20,817)
- ----------------------------------------------------------------------------------------------
Total stockholders' equity 198,837 201,333
- ----------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 636,505 $ 636,941
==============================================================================================
-------------
</TABLE>
See accompanying notes.
-----------
P A G E 13
<PAGE>
consolidated statements of cash flows
<TABLE>
<CAPTION>
(Dollars in thousands)
-----------
Years ended December 31, 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net income $ 19,121 $ 35,665 $ 28,612
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 37,045 35,871 30,602
Loss (gain) on disposition of property,
plant and equipment 2,093 (1,960) (857)
Changes in assets and liabilities:
Accounts receivable 11,378 1,087 (1,731)
Inventories (3,629) (7,631) 1,980
Accounts payable 13,634 (5,415) 17,356
Accrued liabilities (5,552) 1,026 (9,524)
Deferred income taxes 6,510 5,863 3,655
Other (13,700) (12,649) (7,296)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 66,900 51,857 62,797
Investing activities:
Proceeds from disposition of property, plant
and equipment 1,093 2,744 1,929
Capital expenditures (22,365) (26,575) (27,222)
Business acquisitions, net of cash acquired (1,036) (104,935) (92,239)
Redemption of short-term investments - - 2,566
Other (4,286) (5,776) (2,019)
- -----------------------------------------------------------------------------------------------------------
Net cash used by investing activities (26,594) (134,542) (116,985)
Financing activities:
Net (decrease) increase in notes payable (1,583) (5,201) 5,249
Payments on long-term debt (28,000) (60,000) (70,000)
Proceeds from the issuance of long-term debt 22,765 150,000 159,000
Proceeds from the issuance of common stock 2,845 3,920 1,486
Common stock repurchases (8,798) (9,197) (22,351)
Dividends paid (14,806) (14,677) (14,564)
Proceeds from the sale of debt swap 13,766 - -
- -----------------------------------------------------------------------------------------------------------
Net cash (used) provided by financing activities (13,811) 64,845 58,820
Effect of exchange rate changes on cash flows (930) (2,489) (1,206)
- -----------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 25,565 (20,329) 3,426
Cash and cash equivalents at beginning of year 23,303 43,632 40,206
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 48,868 $ 23,303 $ 43,632
===========================================================================================================
-----------
</TABLE>
See accompanying notes.
- ----------
P A G E 14
<PAGE>
Consolidated statements of changes in stockholder's equity
<TABLE>
<CAPTION>
Accumulated
Additional Other Guaranteed Total
Common Paid-In Treasury Retained Comprehensive ESOP Stockholders'
(Dollars in thousands) Stock Capital Stock Earnings Income Obligation Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 1, 1999 $ 220 $ 49,231 $ (42,893) $ 204,364 $ (20,043) $(2,205) $ 188,674
Comprehensive income:
Net income 28,612 28,612
Foreign currency
translation adjustments - (3,844) (3,844)
--------- --------- ---------
Comprehensive income 28,612 (3,844) 24,768
Dividends paid (14,564) (14,564)
Common stock repurchases (22,351) (22,351)
Employee stock plans 555 1,351 (44) 1,862
Guaranteed ESOP obligation 2,205 2,205
Income tax benefits on
unallocated ESOP dividends 20 20
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1999 220 49,786 (63,893) 218,388 (23,887) - 180,614
Comprehensive income:
Net income 35,665 35,665
Foreign currency
translation adjustments - 3,070 3,070
--------- --------- ---------
Comprehensive income 35,665 3,070 38,735
Dividends paid (14,677) (14,677)
Common stock repurchases (9,197) (9,197)
Employee stock plans 2,059 3,909 (110) 5,858
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 2000 220 51,845 (69,181) 239,266 (20,817) - 201,333
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net income 19,121 19,121
Foreign currency
translation adjustments - (1,244) (1,244)
Unrealized losses on hedging activities,
net of income taxes - (662) (662)
--------- --------- ---------
Comprehensive income 19,121 (1,906) 17,215
Dividends paid (14,806) (14,806)
Common stock repurchases (8,798) (8,798)
Employee stock plans 3,029 1,076 (212) 3,893
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 2001 $ 220 $ 54,874 $ (76,903) $ 243,369 $ (22,723) $ - $ 198,837
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
-----------
P A G E 15
<PAGE>
notes to consolidated financial statements
[PICTURE]
(All dollar amounts included in the notes are stated in thousands except per
share data and the tables in note 13.)
1. Summary of Significant Accounting Policies
General: 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. Actual results could differ
from those estimates.
Certain reclassifications have been made to prior year amounts to conform to the
current year presentation.
Consolidation: The accompanying consolidated financial statements include the
accounts of the Company and all of its subsidiaries. Intercompany transactions
and account balances have been eliminated. The Company accounts for its 45%
investment in the common stock of NASCO, a suspension spring company jointly
owned with NHK Spring Co., Ltd., of Japan, under the equity method. Other income
in the accompanying income statements includes income of $408, $1,611 and $1,714
for the years 2001, 2000 and 1999, respectively, from the Company's investment
in NASCO. The Company received dividends from NASCO totaling $464, $666 and
$1,006 in 2001, 2000 and 1999, respectively.
Revenue recognition: Sales and related cost of sales are recognized when
products are shipped to customers and title has passed.
Cash and cash equivalents: Cash in excess of operating requirements is invested
in short-term, highly liquid, income-producing investments. All highly liquid
investments purchased with a maturity of three months or less are cash
equivalents. Cash equivalents are carried at fair value.
Inventories: Inventories are valued at the lower of cost or market. The last-in,
first-out (LIFO) method was used to accumulate the cost of the majority of U.S.
inventories, which represent 77% of total inventories. The cost of all other
inventories was determined using the first-in, first-out (FIFO) method.
Property, plant and equipment: Property, plant and equipment is stated at cost.
Depreciation is recorded over estimated useful lives, ranging from 20 to 50
years for buildings and three to 17 years for machinery and equipment. The
straight-line method of depreciation was adopted for all property, plant and
equipment placed in service after March 31, 1999. For property, plant and
equipment placed into service prior to April 1, 1999, depreciation is calculated
using accelerated methods. The change in accounting principle was made to
reflect improvements in the design and durability of machinery and equipment.
Management believes that the straight-line method results in a better matching
of revenues and costs, and the new method is prevalent in the industries in
which the Company operates.
Goodwill: Goodwill represents the excess purchase price over the net assets of
companies acquired in business combinations. Goodwill acquired since 1970 but
prior to July 1, 2001, is being amortized on a straight-line basis over 40
years; similar investments for businesses acquired prior to 1970 (approximately
$5,200) are not being amortized. In accordance with Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets," goodwill
acquired after June 30, 2001, is not being amortized, as the lives are
considered indefinite, and previously acquired goodwill will no longer be
amortized effective January 1, 2002. On a periodic basis, the Company estimates
future undiscounted cash flows of the businesses to which goodwill relates to
ensure that the carrying value of goodwill has not been impaired. Goodwill
resulting from the 1999 purchase of the nitrogen gas spring business was
$70,322. The acquisition in 2000 of Curtis and Kratz-Wilde/Apex resulted in
additions to goodwill of $55,598 and $23,370, respectively. Goodwill resulting
from 2001 acquisitions was $1,050. At December 31, 2001 and 2000, accumulated
goodwill amortization was $18,120 and $13,904, respectively.
Derivatives: The Company has manufacturing, sales and distribution facilities
around the world and thus makes investments and conducts business transactions
denominated in various currencies. The Company is also exposed to fluctuations
in interest rates and commodity price changes. These financial exposures are
monitored and managed by the Company as an integral part of its risk management
program. The Company uses financial instruments to hedge its exposure to
fluctuations in interest rates and foreign currency exchange rates and does not
use derivatives for speculative or trading purposes. The Company also does not
use derivatives to manage commodity exposures or hedge its foreign currency net
investment exposure.
The Company adopted Statement of Financial Accounting Standards No. 133 (SFAS
133), "Accounting for Derivative Instruments and Hedging Activities," as
amended, on January 1, 2001. The standard requires that all derivative
instruments be recorded on the balance sheet at fair value. The accounting for
changes in the fair value depends on how the derivative is used and designated.
In accordance with the transition provisions of SFAS 133, the Company recorded a
$400 gain on January 1, 2001, which was entirely offset by a loss recorded on
the re-measurement of underlying balance sheet items. There was no transition
adjustment to other comprehensive income.
Foreign currency contracts qualify as fair value hedges of unrecognized firm
commitments or cash flow hedges of recognized assets and liabilities or
anticipated transactions. Gains and losses on derivatives are recorded directly
to earnings or other comprehensive income, depending on the designation. Amounts
recorded to other comprehensive income are reclassified to earnings in a manner
that matches the earnings impact of the hedged transaction. Any ineffective
portion is recorded directly to earnings. The Company's policy for classifying
cash flows from derivatives is to report the cash flows consistent with the
underlying instrument.
At December 31, 2001, the fair value of derivatives held by the Company was a
net asset of $287. Amounts in other comprehensive income expected to be
reclassified to earnings within the next year are not material. During 2001,
gains or losses related to hedge ineffectiveness were immaterial. Foreign
currency transactions gains included in income were $1,874, $1,012 and $752 in
2001, 2000 and 1999, respectively, inclusive of gains and losses on foreign
currency derivatives.
- -----------
P A G E 16
<PAGE>
notes to consolidated financial statements
[PICTURE]
Foreign currency translation: Substantially all of the Company's subsidiaries
use the local currency as the functional currency. Assets and liabilities of
foreign operations are translated at year-end rates of exchange; revenues and
expenses are translated at average annual rates of exchange. The resulting
translation gains and losses are reflected in accumulated other comprehensive
income within stockholders' equity.
Net income per common share: Earnings per share is computed in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings per Share." Basic
earnings per share is calculated using the weighted average number of common
shares outstanding during the year. Diluted earnings per share reflect the
assumed exercise and conversion of all dilutive securities. Shares held by the
Retirement Savings Plan are considered outstanding for both basic and diluted
earnings per share. For purposes of computing earnings per share, the weighted
average number of shares outstanding was increased by 413,721 shares, 222,868
shares and 224,899 shares for 2001, 2000 and 1999, respectively. There are no
adjustments to net income for purposes of computing income available to common
stockholders for the years ended December 31, 2001, 2000 and 1999.
Comprehensive income: Comprehensive income includes all changes in equity during
a period except those resulting from investment by and distributions to
stockholders. For the Company, comprehensive income includes net income, foreign
currency translation adjustments and deferred gains and losses related to
certain derivative instruments.
2. Acquisitions
During the past three years, the Company has acquired a number of businesses,
all of which were accounted for using the purchase method. Accordingly, the
results of operations of the acquired companies have been included in the
consolidated results from their respective acquisition dates.
In August 1999, the Company purchased substantially all of the assets and
liabilities of the nitrogen gas spring business of Teledyne Industries, Inc.,
for $92,239. The nitrogen gas spring business is included in the Associated
Spring segment.
In May 2000, the Company purchased substantially all of the assets and
liabilities of Curtis Industries, Inc. (Curtis) for $63,363. Curtis, a
distributor of maintenance, repair and operating supplies and high-quality
security products, is included in the Barnes Distribution segment.
In September 2000, the Company purchased substantially all of the assets and
liabilities of Kratz-Wilde Machine Company and Apex Manufacturing Inc.
(Kratz-Wilde/Apex) for $40,938. Kratz-Wilde/Apex fabricates and machines
intricate aerospace components for jet engines and auxiliary power units.
Kratz-Wilde/Apex is included in the Barnes Aerospace business segment.
In January 2001, the Company acquired Euro Stock Springs & Components Limited
(Euro Stock) for $708. Euro Stock distributes die and other standard springs
through catalogs to customers located primarily in Europe, and is included in
the Barnes Distribution segment.
In November 2001, the Company acquired certain assets of Forward Industries,
L.L.C., and its subsidiary Forward Industries, Ltd. Forward Industries designs
and manufactures nitrogen gas springs that are used in the appliance,
automotive, heating and cooling, and electrical industries. The purchase price
was approximately $2,500, of which $962 was paid in 2001. This acquisition is
being integrated with the Company's existing nitrogen gas spring business and is
included in the Associated Spring segment.
On January 31, 2002, the Company announced that it had signed an agreement to
acquire substantially all of the manufacturing assets of Seeger-Orbis GmbH & Co.
OHG of Germany from TransTechnology Corporation. The acquired business will
expand both the product offerings and geographic scope of the Associated Spring
segment. The acquisition is expected to close by the end of the first quarter of
2002. The purchase price of approximately $20,000 will be financed with cash
held by the Company outside the United States.
The purchase price has been allocated to tangible and intangible assets and
liabilities of the businesses based upon estimates of their respective fair
market values. The resulting goodwill, excluding Forward Industries, is being
amortized over a 40-year life.
In connection with the Curtis acquisition, the Company incurred 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 $9,708, relating primarily to lease
consolidation costs, facility closure costs and reductions in personnel. Costs
of $7,965 associated with the acquired business are reflected as assumed
liabilities in the allocation of the purchase price to net assets acquired. The
remaining integration costs of $1,743 are reflected in expenses in 2000. As of
December 31, 2001, $5,537 remained as liabilities related primarily to future
lease and severance payments.
The following table reflects the operating results of the Company for the years
ended December 31, 2000 and 1999, on a pro forma basis, which gives effect to
the acquisitions of the three businesses acquired in 1999 and 2000 at the
beginning of 1999. The 2001 acquisitions are excluded from the pro forma results
due to their relative immateriality. The pro forma results are not necessarily
indicative of the operating results that would have occurred had the
acquisitions been effective January 1, 1999; nor are they intended to be
indicative of results that may occur in the future. The underlying pro forma
information includes the amortization expense associated with the assets
acquired, the Company's financing arrangements, certain purchase accounting
adjustments and related
-----------
P A G E 17
<PAGE>
notes to consolidated financial statements
income tax effects. The pro forma results do not include the effects of
synergies and cost reduction initiatives related to the acquisitions.
<TABLE>
<CAPTION>
(Unaudited) 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
Net sales $798,652 $780,042
Income before income taxes 48,309 44,908
Net income 35,449 32,607
Per common share:
Basic $ 1.91 $ 1.68
Diluted 1.89 1.66
</TABLE>
3. Inventories
Inventories at December 31 consisted of:
<TABLE>
<CAPTION>
--------
2001 2000
- --------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $ 51,840 $ 59,665
Work-in-process 15,506 13,605
Raw materials and supplies 18,375 15,244
- --------------------------------------------------------------------------------
$ 85,721 $ 88,514
================================================================================
--------
</TABLE>
Inventories valued by the LIFO method aggregated $66,092 and $64,422 at December
31, 2001 and 2000, respectively. If LIFO inventories had been valued using the
FIFO method, they would have been $13,135 and $13,283 higher at those dates.
4. Property, Plant and Equipment
Property, plant and equipment at December 31 consisted of:
<TABLE>
<CAPTION>
--------
2001 2000
- --------------------------------------------------------------------------------
<S> <C> <C>
Land $ 4 ,046 $ 4,181
Buildings 74,191 73,400
Machinery and equipment 328,402 322,738
- --------------------------------------------------------------------------------
406,639 400,319
Less accumulated depreciation 253,696 236,553
- --------------------------------------------------------------------------------
$152,943 $163,766
================================================================================
--------
</TABLE>
Depreciation expense was $30,008, $30,314 and $27,606 for 2001, 2000 and 1999,
respectively.
5. Accrued Liabilities
Accrued liabilities at December 31 consisted of:
<TABLE>
<CAPTION>
--------
2001 2000
- --------------------------------------------------------------------------------
<S> <C> <C>
Payroll and other compensation $ 13,503 $ 19,909
Postretirement/postemployment benefits 9,283 7,949
Other 36,332 32,325
- --------------------------------------------------------------------------------
$ 59,118 $ 60,183
================================================================================
--------
</TABLE>
- -----------
P A G E 18
<PAGE>
notes to consolidated financial statements
6. Debt and Commitments
Long-term debt at December 31 consisted of:
----------------------
2001 2000
- --------------------------------------------------------------------------------
Carrying Fair Carrying
Amount Value Amount
- --------------------------------------------------------------------------------
9.47% Notes $ -- $ -- $ 6,154
7.13% Notes 25,000 25,318 25,000
7.66% Notes 24,500 25,717 24,500
7.80% Notes 45,500 46,738 45,500
9.34% Notes, including interest swap 61,741 68,488 60,000
2.15% Notes 22,200 22,267 --
Revolving Credit 40,000 40,000 50,000
Industrial Revenue Bond 7,000 7,000 7,000
Borrowings under lines of credit -- -- 11,846
- --------------------------------------------------------------------------------
225,941 235,528 230,000
Less current maturities (47,576) (47,576) --
- --------------------------------------------------------------------------------
Total $178,365 $187,952 $230,000
================================================================================
----------------------
The 9.47% Notes matured on September 16, 2001. The 7.13% Notes are payable in
four equal annual installments of $6,250 beginning on December 5, 2002. The
7.66% Notes are payable in 2007. The 7.80% Notes are payable in three equal
annual installments beginning in 2008. The 9.34% Notes are payable in three
equal installments beginning in 2006.
In July 2001, the Company borrowed Yen 3,000 million, under a term loan facility
with The Development Bank of Singapore Limited. The loan is payable in nine
semi-annual installments of Yen 87.3 million that began on December 28, 2001,
with a balloon payment of Yen 2,214.3 million due June 30, 2006. The borrowing
has a stated interest rate of 2.15%. In connection with the yen borrowing, the
Company entered into a series of forward currency exchange contracts, a form of
derivative, that effectively convert the yen principal payments to Singapore
dollar payments. The forward contracts are cash flow hedges. The effective
interest rate of the borrowing is 5.5%. Proceeds from this borrowing were used,
in part, to repay borrowings under the Company's revolving credit agreement. The
fair value of the forward contracts was approximately ($1,534) at December 31,
2001.
The fair values of the Notes are determined using discounted cash flows based
upon the Company's estimated current interest cost for similar types of
borrowings. The carrying values of other long-term debt and notes payable
approximate their fair market values.
The Company has a revolving credit agreement with five banks that allows
borrowings up to $150,000 under notes due December 6, 2002. A fee of 0.115% per
annum is paid on the unused portion of the commitments. The Company had $40,000
borrowed under this agreement at an interest rate of 2.45% at December 31, 2001.
The Company's revolving credit agreement will mature on December 6, 2002.
Borrowings under the revolving credit agreement are recorded in the current
portion of long-term debt. The Company intends to negotiate a new revolving
credit agreement in the first half of 2002. The Company also has available
approximately $25,000 in uncommitted short-term bank credit lines, of which
$5,500 and $15,000 was in use at December 31, 2001 and 2000, respectively. The
interest rates on these borrowings were 2.78% and 7.7% at December 31, 2001 and
2000, respectively.
The Industrial Revenue Bond, due in 2008, has a variable interest rate. The
interest rate on this borrowing was 1.80% and 5.10% at December 31, 2001 and
2000, respectively.
The Company's long-term debt portfolio consists of fixed-rate and variable-rate
instruments and is managed to reduce the overall cost of borrowing and mitigate
fluctuations in interest rates. Interest rate fluctuations result in changes in
the market value of the Company's fixed-rate debt. In July 2001, the Company
entered into an interest rate swap agreement, a form of derivative. The swap
effectively converts $60,000 of 9.34% fixed-rate Senior Notes to variable-rate
debt equal to LIBOR plus 276 basis points. The effective rate of the borrowing
was 4.91% on December 31, 2001. This interest rate contract is a fair value
hedge, which is effective in offsetting fluctuations in the fair value of the
debt instrument. The gains and losses on the interest rate contract are recorded
to earnings and are offset by gains and losses recorded on the re-measurement of
the underlying debt. The fair value of the swap is determined based upon current
market prices and was approximately $1,741 at December 31, 2001.
Long-term debt, excluding the fair value of the swap, is payable as follows:
$7,576 in 2003, $7,576 in 2004, $7,576 in 2005, $36,896 in 2006 and $117,000
thereafter.
In March 2001, the Company terminated its $70,000 cross-currency exchange
agreement dated September 21, 2000. This agreement converted U.S.
dollar-denominated interest and principal liabilities into Swedish
krona-denominated liabilities at a fixed interest rate during the agreement
period. The Company received a payment of $13,766 at termination. The payment
represented the fair value of the foreign currency swap at the time of
termination. The accumulated adjustment to the carrying value of the debt is
being amortized in accordance with the terms of the underlying debt.
-----------
P A G E 19
<PAGE>
notes to consolidated financial statements
In addition, the Company had outstanding letters of credit totaling $2,991 at
December 31, 2001.
Certain of the Company's debt arrangements contain requirements as to
maintenance of minimum levels of cash flow, working capital and net worth, and
place certain net worth restrictions on dividend payments and acquisitions of
the Company's common stock. The most restrictive covenants include a fixed
charge coverage covenant and a net worth covenant. Under the most restrictive
net worth covenant in any agreement, $17,224 was available for dividends or
acquisitions of common stock at December 31, 2001.
Interest paid was $16,076, $17,945 and $5,505 in 2001, 2000 and 1999,
respectively. Interest capitalized was $163, $188 and $264 in 2001, 2000 and
1999, respectively, and is being depreciated over the lives of the related fixed
assets.
7. Income Taxes
The components of income before income taxes and the income tax provision
follow:
<TABLE>
<CAPTION>
-----------
2001 2000 1999
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before income taxes:
U.S. $ 2,368 $ 19,763 $ 27,585
International 21,091 28,827 15,113
- -------------------------------------------------------------------------------------------
$ 23,459 $ 48,590 $ 42,698
===========================================================================================
Income tax provision:
Current:
U.S. -- federal $ (3,407) $ 2,353 $ 5,233
U.S. -- state (713) 674 529
International 3,699 4,035 4,669
- -------------------------------------------------------------------------------------------
(421) 7,062 10,431
- -------------------------------------------------------------------------------------------
Deferred:
U.S. -- federal 4,470 3,726 2,973
U.S. -- state 1,121 683 1,109
U.S. -- state rate reduction -- 1,181 --
International (832) 273 (427)
- -------------------------------------------------------------------------------------------
4,759 5,863 3,655
- -------------------------------------------------------------------------------------------
$ 4,338 $ 12,925 $ 14,086
===========================================================================================
-----------
</TABLE>
Deferred income tax assets and liabilities at December 31 consisted of the tax
effects of temporary differences related to the following:
<TABLE>
<CAPTION>
Assets Liabilities
- -------------------------------------------------------------------------------------------
2001 2000 2001 2000
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts $ 756 $ 780 $ -- $ --
Depreciation and amortization (9,023) (5,447) 2,930 3,506
Inventory valuation 7,472 7,168 782 983
Postretirement/postemployment costs 23,325 24,676 (249) (306)
Foreign tax loss carry-forwards 10,762 10,062 -- --
Other (2,883) (1,898) 3,293 3,476
- -------------------------------------------------------------------------------------------
30,409 35,341 6,756 7,659
Valuation allowance (7,924) (7,684) -- --
- -------------------------------------------------------------------------------------------
$ 22,485 $ 27,657 $ 6,756 $ 7,659
===========================================================================================
Current deferred income taxes $ 16,702 $ 12,647 $ 688 $ 1,062
Noncurrent deferred income taxes 5,783 15,010 6,068 6,597
- -------------------------------------------------------------------------------------------
$ 22,485 $ 27,657 $ 6,756 $ 7,659
===========================================================================================
---------- -----------
</TABLE>
The deferred income tax assets will be realized through reversals
of existing taxable temporary differences with the remainder, net of the
valuation allowance, dependent on future income. Management believes that
sufficient income will be earned in the future to realize the remaining net
deferred income tax assets. The tax loss carry-forwards of $26,634 have
remaining carry-forward periods ranging from 3 years to unlimited. The Company
has tax credit carry-forwards of $2,296 with remaining carry-forward periods
ranging from one to 10 years.
- -----------
P A G E 20
<PAGE>
notes to consolidated financial statements
The Company has not recognized deferred income taxes on $145,793 of
undistributed earnings of its international subsidiaries, since such earnings
are considered to be reinvested indefinitely. If the earnings were distributed
in the form of dividends, the Company would be subject, in certain cases, to
both U.S. income taxes and foreign withholding taxes. Determination of the
amount of this unrecognized deferred income tax liability is not practicable.
A reconciliation of the U.S. federal statutory income tax rate to the
consolidated effective income tax rate follows:
----------
2001 2000 1999
- --------------------------------------------------------------------------------
U.S. federal statutory income tax rate 35.0% 35.0% 35.0%
State taxes (net of federal benefit) 1.1 1.8 2.5
State tax rate reduction -- 1.6 --
Foreign losses without tax benefit 3.6 0.8 1.2
Tax on foreign operations (22.8) (12.7) (3.7)
NASCO equity income 0.1 (0.5) (0.9)
Foreign sales corporation (1.5) (0.9) (0.8)
ESOP dividend -- -- (1.2)
Other 3.0 1.5 0.9
- --------------------------------------------------------------------------------
Consolidated effective income tax rate 18.5% 26.6% 33.0%
================================================================================
----------
Income taxes paid, net of refunds, were $2,046, $7,165 and $15,781 in 2001, 2000
and 1999, respectively.
8. Common Stock
In 2001, 2000 and 1999, 290,591 shares, 351,237 shares and 105,189 shares,
respectively, of common stock were issued from treasury for the exercise of
stock options, various other incentive awards and purchases by the Employee
Stock Purchase Plan. In 2001, 2000 and 1999, the Company acquired 436,502
shares, 594,406 shares and 1,090,014 shares, respectively, of the Company's
common stock at a cost of $8,798, $9,197 and $22,351, respectively. These
amounts exclude shares issued and reacquired in connection with certain cashless
exercises under the Company's stock option plans. These reacquired shares were
placed in treasury.
In December 1996, the Company adopted a new shareholder rights plan. Under the
plan, each share of common stock contains one right (Right) that entitles the
holder to purchase one one-hundredth of a share of Series A Junior Participating
Preferred Stock, for $200. The Rights generally will not become exercisable
unless and until, among other things, any person or group acquires beneficial
ownership of 35% or more of the outstanding stock. The Rights are generally
redeemable at $0.01 per Right at any time until 10 days following a public
announcement that a 35% or greater position in the Company's common stock has
been acquired and will expire, unless earlier redeemed or exchanged, on December
23, 2006.
If, following the acquisition of 35% or more of the outstanding shares of the
Company's common stock, the Company is acquired in a merger or other business
combination, or 50% or more of the Company's assets or earning power is sold or
transferred, each outstanding Right becomes exercisable for common stock or
other securities of the acquiring entity having a value of twice the exercise
price of the Right.
9. Preferred Stock
At December 31, 2001 and 2000, the Company had 3,000,000 shares of preferred
stock authorized, none of which was outstanding.
10. Stock Plans
Most U.S. salaried and non-union hourly employees are eligible to participate in
the Company's 401(k) plan. Effective April 1, 2001, the 401(k) plan, previously
called the Barnes Group Inc. Guaranteed Stock Plan (GSP), was amended and
renamed the Barnes Group Inc. Retirement Savings Plan (RSP). The RSP continues
to provide for the investment of employer and employee contributions in the
Company's common stock and also provides other investment alternatives for
employee contributions. Employee contributions to the RSP for investment in the
Company's common stock after March 31, 2001, are no longer guaranteed a minimum
rate of return. However, the Company continues to guarantee a minimum rate of
return on certain pre-April 1, 2001, assets of the plan. This guarantee will
become a liability for the Company only if, and to the extent that, the value of
the related Company stock does not cover the guaranteed asset value when an
employee withdraws from the plan. At December 31, 2001, the value of the
Company's guarantee on these assets was $44 based on the Company's December 31,
2001, closing stock price of $23.99 per share.
The GSP was a leveraged ESOP until mid-1999. In 1989, the GSP purchased
1,737,930 shares of the Company's common stock at a cost of $21,000, using the
proceeds of a loan guaranteed by the Company. These shares were held in trust
and were issued to employees' accounts in the GSP until the loan was repaid in
mid-1999. The loan interest was based on LIBOR and generated interest
-----------
P A G E 21
<PAGE>
notes to consolidated financial statements
costs of $32 in 1999. Contributions and certain dividends received were used in
part by the GSP to service its debt. Contributions included both employee
contributions and Company contributions. The Company contributions were equal to
the amount required by the GSP to pay the principal and interest due under the
GSP loan plus that required to purchase any additional shares required to be
allocated to participant accounts, less the sum of participant contributions and
dividends received by the GSP.
Now that the RSP is no longer leveraged, the Company contributes an amount equal
to 50% of employee contributions up to 6% of eligible compensation plus any
guarantee payment. Employees may elect to contribute additional amounts up to a
total of 10% of eligible compensation. The GSP used $1,012 of Company dividends
for debt service in 1999. The Company expenses all contributions made to the
RSP. The Company recognized expense of $3,560, $2,295 and $1,115 in 2001, 2000
and 1999, respectively. As of December 31, 2001, the RSP held 3,430,212 shares
of the Company's common stock.
The Company has an Employee Stock Purchase Plan (ESPP) under which eligible
employees may elect to have up to the lesser of $25,000 or 10% of base
compensation deducted from payroll for the purchase of the Company's common
stock at 85% of market value on the date of purchase. The maximum number of
shares which may be purchased under the ESPP is 2,025,000. The number of shares
purchased under the ESPP was 62,691, 75,052 and 62,868 in 2001, 2000 and 1999,
respectively. As of December 31, 2001, 319,268 additional shares may be
purchased.
The 1991 Barnes Group Stock Incentive Plan (1991 Plan) authorizes the granting
of incentives to executive officers, directors and key employees in the form of
stock options, restricted stock awards and other long-term incentive vehicles.
Options granted under the 1991 Plan that terminate without being exercised
become available for future grants. As of December 31, 2001 and 2000, there were
634,392 shares and 583,328 shares, respectively, available for future grant
under the 1991 Plan. A maximum of 2,007,572 common shares are subject to
issuance under this plan after December 31, 2001.
On April 12, 2000, the Company's stockholders approved the Barnes Group Inc.
Employee Stock and Ownership Program (2000 Plan). Effective February 1, 2000,
the 2000 Plan permitted the granting of stock options, restricted stock awards,
and other long-term incentive vehicles, to eligible participants including
directors and eligible employees to purchase up to 2,500,000 shares of the
Company's common stock. Such shares have been authorized and reserved. Options
granted under the 2000 Plan that terminate without being exercised become
available for future grants. As of December 31, 2001 and 2000, there were
330,880 and 1,536,399 shares, respectively, available for future grants under
the 2000 Plan. A maximum of 2,428,602 common shares are subject to issuance
under this plan after December 31, 2001.
Compensation cost related to these plans was $1,974, $798 and $610 in 2001, 2000
and 1999, respectively. The Company recorded, in additional paid-in capital, tax
benefits related to stock options of $650, $776 and $40 in 2001, 2000 and 1999,
respectively.
In 1998, 60,000 incentive units and 75,000 stock options were granted outside of
the 1991 Plan. The options are included in the tables below.
Data relating to options granted under these plans follow:
<TABLE>
<CAPTION>
------------------------
2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------
Average Average Average
Number Exercise Number Exercise Number Exercise
of Shares Price of Shares Price of Shares Price
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, January 1 2,471,992 $19.74 1,808,775 $20.70 1,238,587 $22.39
Granted 1,447,681 $18.81 1,207,622 $16.88 827,820 $19.20
Exercised 379,435 $17.11 324,036 $12.75 24,727 $18.96
Cancelled 165,446 $20.33 220,369 $22.22 232,905 $24.57
- ----------------------------------------------------------------------------------------------------------------------
Outstanding, December 31 3,374,792 $19.61 2,471,992 $19.74 1,808,775 $20.70
======================================================================================================================
Exercisable, December 31 1,388,325 $21.34 899,926 $21.36 696,965 $18.91
======================================================================================================================
------------------------
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 2001:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
- --------------------------------------------------------------------------------------------------------------
Range of Average Average Average
Exercise Number Remaining Exercise Number Exercise
Price of Shares Life (Years) Price of Shares Price
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$10 to $18 901,929 7.68 $16.19 383,670 $15.79
$18 to $20 1,589,068 8.56 $18.60 261,007 $19.44
$20 to $31 883,795 6.84 $24.92 743,648 $24.87
- --------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------
P A G E 22
<PAGE>
notes to consolidated financial statements
Restricted stock awards under the 1991 and 2000 Plans entitle the holder to
receive, without payment, one share of the Company's common stock after the
expiration of the vesting period. Certain awards are also subject to the
satisfaction of established performance goals. Additionally, holders of
restricted stock awards are credited with dividend equivalents, which are
converted into additional restricted stock awards. All awards have up to a
five-year vesting period. In 2001, 158,000 awards were granted; 10,330 awards
were credited to holders for dividend equivalents; 129,276 awards, which include
dividend equivalents, were converted to an equivalent number of shares of common
stock; and 28,846 awards were forfeited. As of December 31, 2001, there were
264,975 awards outstanding.
Under the Non-Employee Director Deferred Stock Plan each non-employee director
is awarded 6,000 shares of the Company's common stock upon retirement. There
were 6,000 and 12,000 shares issued to new directors in 2001 and 2000,
respectively. No shares were issued in 1999. Additionally, 6,000 shares were
cancelled in 1999. There are 48,000 shares reserved for issuance under this
plan.
Total shares reserved for issuance under all stock plans aggregated 4,803,442 at
December 31, 2001.
The Company applies APB Opinion 25, "Accounting for Stock Issued to Employees,"
to account for stock-based compensation. Had compensation cost for the Company's
stock-based compensation plans been determined based on the fair value at the
grant dates for awards under those plans, consistent with the method of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
---------
2001 2000 1999
- --------------------------------------------------------------------------------
Net income:
As reported $19,121 $35,665 $28,612
Pro forma 15,386 32,988 27,053
Basic earnings per share:
As reported $ 1.03 $ 1.92 $ 1.47
Pro forma .83 1.78 1.39
Diluted earnings per share:
As reported $ 1.01 $ 1.90 $ 1.46
Pro forma .81 1.76 1.38
---------
The fair value of each stock option grant on the date of grant has been
estimated using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
---------
2001 2000 1999
- --------------------------------------------------------------------------------
Risk-free interest rate 4.84% 6.65% 5.35%
Expected life 5 years 5 years 6 years
Expected volatility 35% 30% 30%
Expected dividend yield 3.40% 3.57% 3.54%
---------
The weighted-average grant date fair values of options granted during 2001, 2000
and 1999 were $4.77, $4.44 and $5.07, respectively. For option grants made
pursuant to reload provisions, the expected life is one year.
11. Pension and Other Postretirement Benefits
Defined benefit pension plans cover a majority of the Company's worldwide
employees at Associated Spring, its Executive Office, and a substantial portion
of the employees at Barnes Distribution. Plan benefits for salaried and
non-union hourly employees are based on years of service and average salary.
Plans covering union hourly employees provide benefits based on years of
service. The Company funds U.S. pension costs in accordance with the Employee
Retirement Income Security Act of 1974, as amended (ERISA). Plan assets consist
primarily of common stocks and fixed income investments, including 384,048
shares of Company stock. Additionally, the Company has a defined contribution
plan covering employees of Barnes Aerospace and certain field sales employees of
Barnes Distribution's U.S. operation. Company contributions under this plan are
based primarily on the performance of the business units and employee
compensation. Contribution expense under this plan was $1,803, $1,447 and $1,292
in 2001, 2000 and 1999, respectively.
The Company provides certain other medical, dental and life insurance
postretirement benefits for a majority of its retired employees in the U.S. and
Canada. It is the Company's practice to fund these benefits as incurred.
-----------
P A G E 23
<PAGE>
notes to consolidated financial statements
A reconciliation of the beginning benefit obligations to the ending benefit
obligations follows:
<TABLE>
<CAPTION>
Pensions Other Postretirement Benefits
- -------------------------------------------------------------------------------------------------------------
2001 2000 2001 2000
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Benefit obligation, January 1 $245,250 $231,167 $73,676 $60,321
Service cost 7,436 6,264 562 481
Interest cost 18,224 17,707 5,114 5,148
Amendments -- 232 -- --
Actuarial loss 11,013 4,855 848 12,519
Benefits paid from plan assets (16,612) (15,719) (8,083) (6,510)
Acquisition -- 2,048 -- 1,747
Foreign exchange rate changes (1,050) (1,304) (57) (30)
- -------------------------------------------------------------------------------------------------------------
Benefit obligation, December 31 $264,261 $245,250 $72,060 $73,676
=============================================================================================================
Projected benefit obligations related to
plans with benefit obligations in excess
of assets $ 20,603 $ 12,204 $72,060 $73,676
=============================================================================================================
---------- ---------
</TABLE>
A reconciliation of the beginning fair value of plan assets to the ending fair
value of plan assets follows:
Pensions
- ---------------------------------------------------------------------------
2001 2000
- ---------------------------------------------------------------------------
Fair value of plan assets, January 1 $324,370 $344,447
Actual return on plan assets (246) (4,610)
Company contributions 821 292
Plan participants' contributions 138 120
Benefits paid (16,612) (15,719)
Foreign exchange rate changes (1,236) (2,014)
Acquisition -- 1,854
- ---------------------------------------------------------------------------
Fair value of plan assets, December 31 $307,135 $324,370
- ---------------------------------------------------------------------------
Assets related to plans with benefit
obligations in excess of plans assets $ 7,705 $ 1,808
===========================================================================
---------- ----------
A reconciliation of the funded states of the plans with the amount recognized in
the accompanying balance sheets is set forth below:
<TABLE>
<CAPTION>
Pensions Other Postretirement Benefits
- -------------------------------------------------------------------------------------------------------------
2001 2000 2001 2000
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Funded status $ 42,874 $ 79,120 $(72,060) $(73,676)
Adjustments for unrecognized:
Net (gains) losses (24,888) (66,668) 13,486 12,862
Prior service costs (benefits) 5,365 6,171 (2,245) (3,531)
Net asset at transition (292) (758) -- --
- -------------------------------------------------------------------------------------------------------------
Prepaid (accrued) benefit cost $ 23,059 $ 17,865 $(60,819) $(64,345)
=============================================================================================================
---------- -----------
</TABLE>
At December 31, 2001, the prepaid pension benefit cost consisted of $34,421 in
other assets, $1,082 in accrued liabilities and $10,280 in accrued retirement
benefits. At December 31, 2000, the prepaid pension benefit cost consisted of
$220 in prepaid expenses, $27,135 in other assets, $430 in accrued liabilities
and $9,060 in accrued retirement benefits.
Pension deferred gains and losses that fall outside of a 10% corridor are
amortized over 8.7 years or the remaining average service life of active
participants, whichever is shorter.
- -----------
P A G E 24
<PAGE>
notes to consolidated financial statements
Significant assumptions used in determining pension and other postretirement
expense and the funded status of the plans were:
- --------------------------------------------------------------------------------
2001 2000 1999
- --------------------------------------------------------------------------------
Weighted average discount rate 7.25% 7.75% 8.00%
Long-term rate of return on plan assets 9.75% 9.75% 9.75%
Increase in compensation 4.50% 4.75% 4.75%
================================================================================
---------
Pension and other postretirement benefit expenses consisted of the following:
<TABLE>
<CAPTION>
Pensions Other Postretirement Benefits
- --------------------------------------------------------------------------------------------------------------------------
2001 2000 1999 2001 2000 1999
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 7,436 $ 6,264 $ 6,218 $ 562 $ 481 $ 629
Interest cost 18,224 17,707 16,944 5,114 5,148 4,445
Expected return on plan assets (29,130) (27,601) (24,441) -- -- --
Amortization of transition assets (442) (1,636) (1,643) -- -- --
Recognized (gains) losses (2,934) (3,420) (753) 253 144 45
Prior service cost (benefits) 1,096 1,113 1,048 (1,320) (1,321) (1,355)
- --------------------------------------------------------------------------------------------------------------------------
Benefit (credit) cost $ (5,750) $ (7,573) $ (2,627) $ 4,609 $ 4,452 $ 3,764
==========================================================================================================================
------------ -----------
</TABLE>
The Company's accumulated postretirement benefit obligations, exclusive of
pensions, take into account certain cost-sharing provisions. The annual rate of
increase in the cost of covered benefits (i.e., healthcare cost trend rate) is
assumed to be 10% in 2001, decreasing gradually to an ultimate amount of 5% in
2006. A one percentage point increase in the assumed healthcare cost trend rate
would increase the accumulated postretirement benefit obligations by
approximately $2,272 at December 31, 2001, and would have increased the 2001
aggregate of the service and interest cost components of postretirement benefit
expense by approximately $166. A one percentage point decrease in the assumed
healthcare cost trend rate would decrease the accumulated postretirement benefit
obligations by approximately $2,192 at December 31, 2001, and would have
decreased the 2001 aggregate of the service and interest cost components of
postretirement benefit expense by approximately $160.
12. Leases
The Company has various noncancellable operating leases for buildings, office
space and equipment. Capital leases were not significant. Rent expense was
$9,942, $9,127 and $7,712 for 2001, 2000 and 1999, respectively. Minimum rental
commitments under noncancellable leases in years 2002 through 2006 are $7,703,
$6,549, $5,428, $4,393 and $3,860, and $5,827 thereafter.
13. Information on Business Segments
The Company's reportable segments are strategic business groups that offer
different products and services. Each segment is managed separately because each
business requires different technology and marketing strategies. Specifically,
the Company operates three reportable business segments, as follows:
Associated Spring manufactures precision mechanical and nitrogen gas springs,
manifold systems and other close-tolerance engineered metal components,
principally for the electronics, telecommunications and transportation markets.
Associated Spring's custom metal parts are sold in the U.S. and through its
international subsidiaries. International manufacturing operations are located
in Brazil, Sweden, Canada, Mexico, Singapore and China.
Barnes Aerospace supplies precision machined and fabricated components and
assemblies for the aerospace and industrial gas turbine industries.
Additionally, it refurbishes jet engine components for many of the world's
commercial airlines and the military. Barnes Aerospace's operations are
primarily in the U.S., with additional locations in Europe and Singapore. Its
markets are located primarily in the U.S., Europe and Asia.
Barnes Distribution distributes fast-moving, consumable repair and replacement
products for industrial, heavy equipment and transportation maintenance markets.
Additionally, it distributes close-tolerance engineered metal components
principally manufactured by Associated Spring. Barnes Distribution, formerly
known as Bowman Distribution, was formed from the combination of the Curtis
acquisition and Bowman Distribution. Barnes Distribution's operations and
markets are located primarily in the U.S., with additional locations in Canada,
Europe, Asia, Mexico and Brazil.
The Company evaluates the performance of its reportable segments based on the
operating profit of the respective businesses, which includes net sales, cost of
sales, selling and administrative expenses and certain components of other
income and other expenses, as well as the allocation of corporate overhead
expenses.
-----------
P A G E 25
<PAGE>
notes to consolidated financial statements
The equity income from the Company's investment in the NASCO joint venture is
incorporated into the segment results of Associated Spring. Sales among the
business segments and among the geographic areas in which the businesses operate
are accounted for on the same basis as sales to unaffiliated customers.
Additionally, revenues are attributed to countries based on location of
manufacturing or distribution facilities.
During the fourth quarter of 2001, the Company recorded pre-tax charges of
$4,842, primarily in the Associated Spring segment, related to actions aimed at
reducing the Company's infrastructure in light of ongoing weak economic
conditions. These charges also included costs to realign the management of the
sales organization at Barnes Distribution. These charges included $1,248 for
severance and related employee termination costs, $2,618 for asset write-downs
and $976 for facility exit costs. The actions include closing an Associated
Spring plant in Texas and transferring certain retained business to other
Associated Spring plants in 2002.
These charges include $179 recorded in cost of sales and $4,663 in selling and
administrative expenses, and relate to net workforce reductions of approximately
122 salaried and hourly employees, the elimination of approximately 128,500
square feet of facilities and the disposal of assets.
The following tables set forth information about the Company's operations by its
three reportable business segments and by geographic area.
Operations by Reportable Business Segment
<TABLE>
<CAPTION>
(Dollars in millions)
Associated Barnes Barnes Total
Revenues Spring Aerospace Distribution Other BGI
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2001 $279.2 $200.4 $298.4 $ (9.2) $768.8
2000 327.3 135.1 291.1 (13.5) 740.0
1999 282.6 121.3 230.4 (11.9) 622.4
Operating profit
- ----------------------------------------------------------------------------------------------------------------
2001 $ 19.4 $ 16.4 $ 5.5 $ -- $ 41.3
2000 44.0 8.0 12.9 -- 64.9
1999 33.5 5.3 9.9 -- 48.7
Assets
- ----------------------------------------------------------------------------------------------------------------
2001 $244.1 $141.4 $171.5 $ 79.5 $636.5
2000 273.6 130.1 178.6 54.6 636.9
1999 260.6 79.7 94.8 81.2 516.3
Depreciation and amortization
- ----------------------------------------------------------------------------------------------------------------
2001 $ 16.8 $ 9.7 $ 9.9 $ 0.6 $ 37.0
2000 17.8 8.6 9.0 0.5 35.9
1999 16.5 7.8 6.0 0.3 30.6
Capital expenditures
- ----------------------------------------------------------------------------------------------------------------
2001 $ 8.7 $ 7.5 $ 6.0 $ 0.2 $ 22.4
2000 14.2 4.2 5.5 2.7 26.6
1999 9.8 7.1 9.4 0.9 27.2
</TABLE>
Notes:
In 2001, one customer accounted for 13% of the Company's total revenues. In 2000
and 1999, sales from any one customer did not exceed 10% of the Company's total
revenues. "Other" revenues represent intersegment sales, the majority of which
are sales by Associated Spring to Barnes Distribution. The operating profit of
Associated Spring includes income from its equity investment in NASCO of $0.4
million, $1.6 million and $1.7 million in 2001, 2000 and 1999, respectively.
The assets of Associated Spring include the NASCO investment of $9.4 million,
$10.0 million and $9.5 million in 2001, 2000 and 1999, respectively. "Other"
assets include corporate-controlled assets, the majority of which are cash and
deferred tax assets.
- -----------
P A G E 26
<PAGE>
notes to consolidated financial statements
A reconciliation of the total reportable segments' operating profit to income
before income taxes follows:
<TABLE>
<CAPTION>
----------
2001 2000 1999
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Operating profit $ 41.3 $ 64.9 $ 48.7
Interest income 0.9 1.5 1.0
Interest expense (16.2) (15.1) (6.1)
Other expense (2.5) (2.7) (0.9)
- ---------------------------------------------------------------------------
Income before income taxes $ 23.5 $ 48.6 $ 42.7
===========================================================================
----------
</TABLE>
Operations by Geographic Area
<TABLE>
<CAPTION>
(Dollars in millions)
Revenues Domestic International Intergeographical Total BGI
====================================================================================================
<S> <C> <C> <C> <C>
2001 $625.7 $172.2 $(29.1) $768.8
2000 580.6 186.3 (26.9) 740.0
1999 488.2 147.0 (12.8) 622.4
====================================================================================================
Long-lived assets
- ----------------------------------------------------------------------------------------------------
2001 $266.4 $107.8 $ -- $374.2
2000 262.4 118.2 -- 380.6
1999 164.5 109.1 -- 273.6
====================================================================================================
</TABLE>
Notes:
International sales derived from any one country did not exceed 10% of the
Company's total revenues. Intergeographical sales are equally distributed
between domestic and international.
Report of Independent Accountants PricewaterhouseCoopers [LOGO]
To the Board of Directors and Stockholders of Barnes Group Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of Barnes Group Inc.
and its subsidiaries at December 31, 2001 and 2000, and the results of their
operations and their cash flows for the each of the three years in the period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Hartford, Connecticut
January 30, 2002
-----------
P A G E 27
<PAGE>
quarterly data (unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth Full
(Dollars in millions, except per share data) Quarter Quarter Quarter Quarter Year
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2001
Net sales $ 199.3 $ 199.5 $ 186.5 $ 183.5 $ 768.8
Gross profit* 66.7 65.6 61.3 55.7 249.3
Operating income 13.8 13.4 11.6 1.5 40.3
Net income 7.3 6.9 5.7 (0.8) 19.1
Per common share:
Net income:
Basic 0.39 0.37 0.31 (0.04) 1.03
Diluted 0.39 0.36 0.30 (0.04) 1.01
Dividends 0.20 0.20 0.20 0.20 0.80
Market prices (high-low) $21.00-18.00 $24.70-18.25 $24.80-19.48 $24.94-19.20 $24.94-18.00
- ---------------------------------------------------------------------------------------------------------------------------------
2000
Net sales $ 173.0 $ 188.5 $ 190.6 $ 187.9 $ 740.0
Gross profit* 56.7 65.6 67.0 62.1 251.4
Operating income 15.8 16.1 17.0 14.0 62.9
Net income 9.4 9.1 9.3 7.9 35.7
Per common share:
Net income:
Basic 0.51 0.49 0.50 0.42 1.92
Diluted 0.50 0.49 0.49 0.41 1.90
Dividends 0.19 0.20 0.20 0.20 0.79
Market prices (high-low) $16.50-12.00 $18.25-14.63 $20.25-16.44 $22.38-17.63 $22.38-12.00
=================================================================================================================================
</TABLE>
* Sales less cost of sales.
Note: The fourth quarter of 2001 includes a pre-tax charge of $4.8 million
primarily related to a plant closure and severance costs.
- -----------
P A G E 28
<PAGE>
selected financial data
<TABLE>
<CAPTION>
----------
2001 2000 1999 1998(3) 1997
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Per common share (1)(2)
Net Income
- ------------------------------------------------------------------------------------------------------------------------
Basic $ 1.03 $ 1.92 $ 1.47 $ 1.72 $ 2.00
- ------------------------------------------------------------------------------------------------------------------------
Diluted 1.01 1.90 1.46 1.69 1.96
- ------------------------------------------------------------------------------------------------------------------------
Dividends paid 0.80 0.79 0.75 0.69 0.65
- ------------------------------------------------------------------------------------------------------------------------
Stockholders' equity (at year-end) 10.77 10.82 9.58 9.51 8.97
- ------------------------------------------------------------------------------------------------------------------------
Stock price (at year-end) 23.99 19.88 16.31 29.25 22.75
========================================================================================================================
For the year (in thousands)
Net sales $ 768,821 $ 740,032 $ 622,356 $ 651,183 $ 642,660
- ------------------------------------------------------------------------------------------------------------------------
Operating income 40,320 62,949 46,107 55,279 65,031
- ------------------------------------------------------------------------------------------------------------------------
As a percent of sales 5.2% 8.5% 7.4% 8.5% 10.1%
- ------------------------------------------------------------------------------------------------------------------------
Income before income taxes $ 23,459 $ 48,590 $ 42,698 $ 54,663 $ 64,502
- ------------------------------------------------------------------------------------------------------------------------
Income taxes 4,338 12,925 14,086 20,169 24,079
- ------------------------------------------------------------------------------------------------------------------------
Net income 19,121 35,665 28,612 34,494 40,423
- ------------------------------------------------------------------------------------------------------------------------
As a percent of average stockholders' equity 9.5% 19.1% 15.4% 18.4% 23.4%
- ------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization $ 37,045 $ 35,871 $ 30,602 $ 28,431 $ 28,123
- ------------------------------------------------------------------------------------------------------------------------
Capital expenditures 22,365 26,575 27,222 34,571 33,398
- ------------------------------------------------------------------------------------------------------------------------
Average common shares outstanding -- basic 18,506 18,568 19,418 20,096 20,237
========================================================================================================================
Year-end financial position (in thousands)
Working capital $ 72,931 $ 114,502 $ 103,165 $ 106,884 $ 113,092
- ------------------------------------------------------------------------------------------------------------------------
Current ratio 1.4 to 1 1.9 to 1 1.9 to 1 2.1 to 1 2.3 to 1
- ------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment $ 152,943 $ 163,766 $ 145,105 $ 139,247 $ 133,830
- ------------------------------------------------------------------------------------------------------------------------
Total assets 636,505 636,941 516,282 418,904 407,978
- ------------------------------------------------------------------------------------------------------------------------
Long-term debt /(4)/ 225,941 230,000 140,000 51,000 62,205
- ------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 198,837 201,333 180,614 188,674 180,859
- ------------------------------------------------------------------------------------------------------------------------
Debt as a percent of total capitalization /(5)/ 53.8% 54.1% 45.7% 24.1% 27.1%
========================================================================================================================
Year-end statistics
Employees 5,150 5,471 4,020 3,847 3,872
========================================================================================================================
----------
</TABLE>
(1) All per share data, other than earnings per common share, are based on
common shares outstanding at the end of each year. Earnings per common
share are based on weighted average common shares outstanding during each
year.
(2) All per share data have been adjusted for the three-for-one stock split
effective April 1997.
(3) Includes a $12.9 million pretax, $7.7 million after-tax charge ($0.38 per
share) against income related to the accelerated retirement package for
the Company's former president.
(4) Long-term debt includes current and long-term portion.
(5) Debt includes all interest-bearing debt and total capitalization includes
interest-bearing debt and stockholders' equity.
-----------
P A G E 29
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>7
<FILENAME>dex21.txt
<DESCRIPTION>LIST OF SUBSIDIARIES
<TEXT>
<PAGE>
EXHIBIT 21
BARNES GROUP INC.
LIST OF SUBSIDIARIES
--------------------
Subsidiaries of the Company:
- ---------------------------
Jurisdiction of
Name Incorporation
---- -------------
Associated Spring-Asia PTE. LTD. Singapore
Associated Spring do Brasil Ltda. Brazil
Associated Spring Mexico, S.A. Mexico
Associated Spring (Tianjin) Company, Limited China
Barnes Financing Delaware LLC Delaware
Barnes Group (Bermuda) Limited Bermuda
Barnes Group Canada Corp. Canada
Barnes Group (Delaware) LLC Delaware
Barnes Group Finance Company (Delaware) Delaware
Barnes Group (Germany) GmbH Germany
Barnes Group Holding B.V. Netherlands
Barnes Sweden Holding Company AB Sweden
Barnes Group (U.K.) Limited United Kingdom
Barnes Group France S.A. France
Curtis Industries of Canada Limited Canada
Euro Stock Springs & Components Limited United Kingdom
3031786 Nova Scotia Company Canada
3032350 Nova Scotia Limited Canada
Raymond Distribution (Ireland) Limited Ireland
Raymond Distribution-Mexico, S.A. de C.V. Mexico
Ressorts SPEC, SARL France
Seeger-Orbis GmbH & Co. OHG Germany
Stromsholmen AB Sweden
The Wallace Barnes Company Connecticut
Windsor Airmotive Asia PTE. LTD. Singapore
The Company's consolidated financial statements include all of the
above-named subsidiaries. For a statement of the principles of consolidation
applicable to these subsidiaries, see note 1 of the Notes to Consolidated
Financial Statements on page 16 of the 2001 Annual Report to Stockholders.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>8
<FILENAME>dex23.txt
<DESCRIPTION>CONSENT OF PRICEWATERHOUSECOOPERS LLP
<TEXT>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 2-56437, pertaining to the Employee Stock Purchase
Plan; No. 2-91285, pertaining to the 1981 Stock Incentive Plan; Nos. 33-20932
and 33-30229, pertaining to the Retirement Savings Plan; the registration
statements filed on July 18, 1994, No. 33-91758 and May 16, 1997, No. 33-27339,
pertaining to the 1991 Barnes Group Stock Incentive Plan; No. 333-41398,
pertaining to the Barnes Group Inc. Employee Stock and Ownership Program; and
No. 333-57658, pertaining to the Key Executive Stock Plan) of Barnes Group Inc.
of our report dated January 30, 2002 relating to the financial statements, which
appears in the Annual Report to Stockholders, which is incorporated in this
Annual Report on Form 10-K. We also consent to the incorporation by reference of
our report dated January 30, 2002 relating to the financial statement schedule,
which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Hartford, Connecticut
March 22, 2002
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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