As of December 31, 2002, the Company is required to maintain a ratio of Total Debt to EBITDA, as defined in the revolving credit agreement, of not more than 3.0 times. This ratio requirement will increase to 3.25 at March 31, 2003, and will return to 3.0 at December 31, 2003. The actual ratio at December 31, 2002, was 2.66 times. Interest paid was $9,496, $16,076 and $17,945 in 2002, 2001 and 2000, respectively.  The amount paid in 2002 reflects the $4,702 of cash received for the swap termination. Interest capitalized was $128, $163 and $188 in 2002, 2001 and 2000, respectively, and is being depreciated over the lives of the related fixed assets. Defined benefit pension plans cover a majority of the Company’s worldwide employees at Associated Spring and the Company’s Corporate 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 616,310 shares of Company stock. Additionally, the Company has defined contribution plans covering a majority of the employees of Barnes Aerospace, certain field sales employees of Barnes Distribution’s U.S.  operation, employees of Spectrum, non-union employees of Barnes Distribution Canada and union employees of Associated Spring-Milwaukee. Company contributions under these plans are based primarily on the performance of the business units and employee compensation. The Spectrum defined contribution plan was terminated effective January 1, 2003. Contribution expense under these defined contribution plans was $1,727, $1,803 and $1,447 in 2002, 2001 and 2000, respectively. Most U.S. salaried and non-union hourly employees are eligible to participate in the Company’s 401(k) program. See Note 15 for further discussion of this plan. In accordance with SFAS 87, “Employers’ Accounting for Pensions,” the Corporation has recorded a non-cash minimum pension liability adjustment for underfunded plans of $25,920 at December 31, 2002, representing the excess of the unfunded accumulated benefit obligation (“ABO”) over previously recorded pension cost liabilities. The minimum pension liability adjustment is included in accrued retirement benefits on the balance sheet. An after-tax charge of $16,822 is included in accumulated other non-owner changes to equity, which is part of shareholders’ equity.  The principal cause of the accrual for a minimum pension liability adjustment was the decline in the value of equity securities held by the pension trusts.  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. A reconciliation of the beginning benefit obligations to the ending benefit obligations follows: Back to Table of Contents 10. Pension and Other Postretirement Benefits Benefit obligation, January 1 Service cost Interest cost Amendments Actuarial loss  Benefits paid Acquisition Curtailment Foreign exchange rate changes Benefit obligation, December 31 Projected benefit obligations related to plans  with benefit obligations in excess of assets Accumulated benefit obligations related to plans  with accumulated benefit obligations in  excess of assets 2001 $^{$}$73,676 562 5,114 — 848 (8,083) — — (57) $^{$}$72,060 2001 $^{$}$245,250 7,436 18,224 — 11,013 (16,612) — — (1,050) $^{$}$264,261 $ 20,603 $ 18,704 2002 $^{$}$72,060 726 5,231 3,914 9,999 (7,905) — — 15 $^{$}$84,040 2002 $^{$}$264,261 8,034 18,622 3,538 8,980 (17,554) 3,851 (576) 2,675 $^{$}$291,831 $^{$}$274,644 $^{$}$120,007 Other Postretirement Benefits Pensions PAGE 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES GROUP INC.