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Ir overview october 2017 final

Barnes Group provides an overview of its company and strategy. It summarizes that it has transformed its portfolio from being more cyclical to more secular through acquisitions and divestitures. It has shifted from a manufacturing focus to emphasizing design, applications, manufacturing and service with expanded intellectual property. Barnes Group's strategy is to build a world-class company focused on high margin, high growth businesses and effectively allocate capital to drive top quartile total shareholder returns through organic growth, strategic acquisitions, and returning cash to shareholders. It provides financial targets for 2017 and 2020 to double adjusted EPS through a combination of organic sales growth and margin expansion.

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Company Overview October 2017
Safe Harbor Statement 2 THIS PRESENTATION CONTAINS FORWARD-LOOKING STATEMENTS Forward-looking statements are made based upon management's good faith expectations and beliefs concerning future developments and their potential effect upon the Company. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed in the forward-looking statements, including the risks and uncertainties set forth under our full disclosure located at the end of this presentation and included in our SEC filings. Any forward-looking statements speak only as of the date on which it is made, and the Company assumes no obligation to update our forward-looking statements. References to adjusted financial results are non-GAAP measures. You will find GAAP reconciliation tables at the end of this presentation. "EPS" refers to diluted earnings per share.
Barnes Group at a Glance 3 INDUSTRIAL | 67%1 AEROSPACE | 33%1 46% 40% 14% Molding Solutions Engineered Components Nitrogen Gas Products 71% 29% OEM Aftermarket Headquarters Bristol, CT Total 2016 Revenue $1.2B Employees ~5,200 Dividend History2 83 Years KEY STATISTICS 1 2016 Revenue. 2 Consecutive years of paying a dividend. Global Provider of Engineered Products & Differentiated Industrial Technologies, Serving Diversified End Markets
ASIA1 17% EUROPE1 32% AMERICAS1 51% HQ Growing Our Global Presence 41 Percent of 2016 Destination Sales. Company estimates. Sales & Technical Service Manufacturing INDUSTRIAL 45 25 AEROSPACE 2 10 LOCATIONS Expand Footprint via Acquisitions and Globalization Focus on Local for Local Increase Aftermarket Services/ Field Support
Providing Differentiated Service through Global Network and Capabilities Delivering Highly Valued Engineering and Manufacturing Expertise from Initial Concept to Production Creating Superior Value for Our Customers; Aligned with Industry Leaders 5 INDUSTRIAL Engineered Solutions that Enhance Performance Applied Research and Technical Service Centers Active Onsite Customer Engagement AEROSPACE Concurrent Engineering, Complex Fabrication and Machining Expertise OEM Certified Parts and Repair Services; Life of Engine Support
PACKAGING INNOVATION CONSUMER-DRIVEN SUSTAINABILITY AGING POPULATION, RISING HEALTH NEEDS Vehicle Fuel Efficiency/ Light-weighting Advanced Metal-forming Applications Carbon Fiber Reinforced Polymers Increased Utilization of Plastics in Automobiles Safety/ Design High Volume Packaging Applications Multi-material Plastic Assemblies Thin-wall Technology Rising Rate of Diabetes and COPD Greater Demand for Medical & Pharmaceutical Devices Accelerating Technology Innovation Product Safety & Effectiveness Rise in Home Healthcare Portfolio Aligned with Several Long-Term Macro Drivers GLOBAL GROWING MIDDLE CLASS Increasing Air Travel Demand Next Generation Aircraft Growing Aftermarket for Repairs & Spares 6
Barnes Group Strategy 71 Top quartile within the Russell 2000 Index. Build a World-class Company Focused on High Margin, High Growth Businesses Effectively Allocate Capital to Drive Top Quartile TSR1 • Actively Manage Portfolio with a Focus on Multiple Platforms/Market Channels • Identify End Markets with Long-term Sustainable, Profitable Growth • Create Superior Value for Our Customers • Target Global Expansion Aligned with Macro Trends • Achieve Commercial, Operational and Financial Excellence • Drive Margin Expansion through Relentless Focus on Productivity • Invigorate Employee Development, Empowerment and Engagement • Build on Intellectual Property (IP) as Core Differentiator • Drive Innovation in Processes, Products and Systems • Share Best Practices through Global Innovation Forum • Drive Profitable Growth ̶ Investment in Core to Drive Organic Growth ̶ Disciplined, Strategic M&A • Return Cash to Shareholders via Dividends and Buybacks Expand and Protect Our Core IP to Deliver Differentiated Solutions Leverage BES to be a Significant Competitive Advantage 1 2 3 4
Major Portfolio Shifts Over Last Several Years Transformed Portfolio with Technological Orientation 8 WHERE WE WERE WHERE WE ARE PORTFOLIO COMPOSITION 3 Segments 2 Segments PORTFOLIO PROFILE Cyclical More Secular GEOGRAPHIC EXPOSURE Overweight U.S. Globally Balanced PATENTS ~300 ~1,200 CORE COMPETENCY Manufacturing Design, Applications, Manufacturing & Service IP OWNERSHIP Primarily Process Process, Products & Systems NEW MARKETS - Auto Model Changes, Medical, Personal Care & Packaging
Portfolio Transformation Has Driven Significant Financial Results 9 36% 32% 32% INDUSTRIAL AEROSPACE DISTRIBUTION Sales1 $1,133M Op. Inc.1 $86.5M Op. Margin1 7.6% Share Price3 $20.67 Market Cap3 $1.1B Divestitures Year Sales (M) EUR 2011 $105 NA 2013 $300 Acquisitions Year Sales (M) 2012 $160 2013 $110 2015 $38 2015 $9 2016 $75 Sales $1,231M +9% Adj. Op. Inc.2 $197.3M +128% Adj. Op. Margin2 16.0% +840 bps Share Price3 $47.42 +129% Market Cap3 $2.6B +136% 67% 33% 2016 SALES MIX 2010 SALES MIX1 INDUSTRIAL AEROSPACE PROACTIVE MANAGEMENT 1 2010 Sales, Operating Income and Operating Margin are “as reported” in the Company’s 2010 10-K. 2010 Sales Mix re-calculated to reflect three segments – Aerospace, Industrial & Distribution vs. the original two reported segments of Precision Components & Logistics and Manufacturing Services. 2 References to adjusted operating income and adjusted operating margin are non-GAAP measures. For a reconciliation to the appropriate GAAP measure, see the Appendix of this presentation. 3 Share Price and Market Cap as of December 31, 2010 and 2016.
Strategic M&A Framework 10 PROCESS PRODUCT SYSTEMS BROAD IP FOCUS BUILDING ON EXISTING CAPABILITIES IN AEROSPACE & INDUSTRIAL IN THE RIGHT MARKETS Plastics Processing Expertise Thermal Management Robotics/Automation Systems Force Control Technology Sensing & Control Systems ENABLING TECHNOLOGIESDIFFERENTIATED PROCESSES Complex Machining Hot Forming/Advanced Fabrications Fine Blanking/Progressive Stamping DEFENSIVECLOSE TO CORE HIGH GROWTH / MACRO-DRIVEN
We Have a Disciplined Approach to M&A 11 INVESTMENT RETURN CRITERIA EPS ACCRETION in First Full Year IRR > Cost of Capital ROIC > Cost of Capital w/in 5 Yrs. STRATEGIC ACQUISITION FILTERS INTELLECTUAL PROPERTY PROFITABILITY LEADERSHIP POSITION CYCLICAL MODERATION ATTRACTIVE MARKETS SCALE / ALIGNMENT Proprietary Technologies IP Type/Complexity & Protection Market Share Technical Expertise Close to Core Globalization Opportunity Recurring Revenues Downturn Resilience Market Size/Fragmentation Macro Trend Alignment 35%+ Gross Margin 20%+ EBITDA Potential
Barnes Enterprise System (BES) is Our Fully Integrated Operating System Building a Foundation of Excellence, Empowerment and Growth 12 Promotes a CULTURE of Employee Engagement and Empowerment Reflecting Our Strong Corporate Values Drives ALIGNMENT across the Organization around a Common Vision Fosters CONTINUOUS IMPROVEMENT and Innovation in All of Our Business Processes Achieves RESULTS that Drive Sustainable, Long-term Profitable Growth
Significant Progress Made; Still in Early Innings of Impact 13 EARLY STAGE MORE MATURE SALES EFFECTIVENESS Volume and Pricing GLOBAL SOURCING Supply Chain and Logistics LEVERAGE TECHNOLOGY Innovation and New Product Introductions OPERATIONAL EXCELLENCE Performance and Quality FUNCTIONAL EXCELLENCE SG&A Optimization 1 2 3 4 5 Revenue Focus Cost Focus BES: Productivity Goals Focused on Five Main Areas OPPORTUNITY
Financial Performance
Financial Performance Trends1 Strategy Execution Driving Strong Results 15 NET SALES ($M) ADJ. EPS22,3ADJ. OPERATING MARGINS2 $1,092 $1,262 $1,194 $1,231 +15.5% to 16.5% Total 2013 2014 2015 2016 2017E 12.9% 15.4% 15.8% 16.0% ~15.0% 2013 2014 2015 2016 2017E $1.83 $2.34 $2.38 $2.53 $2.84 to $2.89 2013 2014 2015 2016 2017E 1 Our 2017 full-year outlook is only as of our October 27, 2017 earnings release and is not being updated or affirmed at this time. 2 References to Adjusted Operating Margin and Adjusted EPS are non-GAAP measures. For a reconciliation to the appropriate GAAP measure, see the Appendix of this presentation. 3 EPS from Continuing Operations.
Strong Cash Generation and Conversion Fuel Growth 16 Cash Performance Trends1 $146 $183 $217 $218 2013 2014 2015 2016 2017E ~$195 ~$140 ADJ. CASH FROM OPERATIONS2 ADJ. FREE CASH FLOW2CAPITAL EXPENDITURES & DEPRECIATION $57 $57 $46 $48 $34 $42 $40 $43 $49 2013 2014 2015 2016 2017E $89 $126 $171 $170 2013 2014 2015 2016 2017E 118% 107% 134% 125% ~100% CASH CONVERSION ~$155 CapEx Depreciation ($M) $55 to $60 ~$210 1 Our 2017 full-year outlook is only as of our October 27, 2017 earnings release and is not being updated or affirmed at this time. 2 References to adjusted metrics are non-GAAP measures. For a reconciliation to the appropriate GAAP measure, see the Appendix of this presentation.
Capital Allocation Framework 17 USES OF CASH 2012 TO 2016 ~$1.5B 52% 16% 11% 10% 7% 4% CRPs1 Dividends Share Buybacks Capex Investments Acquisitions Working Capital 1 Aerospace Aftermarket – Component Repair Programs (CRPs). • Annual Capex ~$50M to $60M; ~50% Growth Programs • R&D Investments • New Product and Process Introductions DRIVE ORGANIC GROWTH • Strict Strategic and Financial Criteria/Metrics • Target Highly Engineered Products and Services • Expand Global Reach/Channel Penetration • 83 Years of Consecutive Dividend Payout; Expected to Grow Commensurate with Earnings Growth • Opportunistic Share Repurchases, Largely to Offset Dilution RETURN CASH TO SHAREHOLDERS PURSUE STRATEGIC ACQUISITIONS
2017 Guidance and 2020 Financial Targets1 2017 GUIDANCE 2020 TARGETS ORGANIC SALES 10.5% to 11.5% 4% to 6% CAGR ADJ. OPERATING MARGIN2 ~15.0% 18% to 19% ADJ. EPS2 8% to 9% Double Digit3 CAGR CASH CONVERSION ~100% >100% ROIC --- ~10% 18 KEY ASSUMPTIONS • CapEx: ~50% Organic Growth Investments • Working Capital Improvements • FX: Consistent with 2017 Outlook • Tax Rate: ~27% to 28% • Average Diluted Shares: ~54M • Debt/EBITDA: Maintain <3.0x 1 Our 2017 and 2020 outlook is only as of our October 27, 2017 earnings release and is not being updated or affirmed at this time. Guidance and targets exclude future acquisitions or divestitures. 2 References to Adjusted EPS and Adjusted Operating Margin are non-GAAP measures. A reconciliation table for historical metrics can be found in the Appendix of this presentation. 3 Excluding discrete tax benefit of $0.12 recorded in Q2 2017. Executing Our Strategy to Deliver Improved Margin Performance Portfolio Transformation  Volume Leverage/Global Expansion Commercial Excellence  New Product Introductions  BES Execution / Maturity
2017 Segment Market Outlook1 1 Our 2017 full-year outlook is only as of our October 27, 2017 earnings release, and it is not being updated or affirmed at this time. * LDD – Low double digits %, LSD - Low single digits % 19 TOTAL SALES EXPECTATION UP 15.5% TO 16.5%; UP 10.5% TO 11.5% ORGANICALLY INDUSTRIAL SEGMENT AEROSPACE SEGMENT OTHER End Market Highlights / Comments Molding Solutions 31% 9%Nitrogen Gas Products Original Equipment Manufacturing (OEM) Maintenance, Repair, and Overhaul (MRO) Spare Parts (RSP Programs) 23% Up High 20s 6% 4% M&A F/X Favorable Hot Runner Demand, Focus on MRO Growth & Global Expansion, FOBOHA & Gammaflux Contribution Tool & Die Markets Remain Strong New Engine Programs Ramping, Solid OEM Orders and Backlog Aircraft Utilization Remains High Favorable CFM56 Demographic Trends Continue FOBOHA & Gammaflux Acquisition Sales ~+5% F/X Sales Impact ~0% Up High Teens Industrial Segment 67% Up Mid Teens Aerospace Segment 33% 27%Engineered Components Global Auto Production Good - but North America declining; General Industrial Markets Improving Up Mid Teens Up LSD Up LDD Up ~20% Up Mid Teens = Actual % of 2016 Sales 2017 Total Sales Growth Outlook*
Industrial Segment
Industrial Highlights 21 Comprehensive Portfolio of Highly-Engineered, Differentiated Industrial Products and Technologies; High Barriers Include Patents and Trade Secrets More Balanced End Market Portfolio Leveraged to Favorable Macro Trends Newly Focused and Strategically Aligned Business; Global Aftermarket Infrastructure in Place and Beginning to See Benefits – Early Days Expanding Opportunities Include Continued Innovation, Global Presence and M&A BES Continues to Enable Profitable Growth and Margin Expansion
MOLDING SOLUTIONS NITROGEN GAS PRODUCTS ENGINEERED COMPONENTS OVERVIEW Dedicated Mold Based Products and Services to High Quality Segments of Plastic Injection Molding Industry Precision Force and Motion Solutions for Sheet Metal Forming and Demanding Machine and Heavy Vehicle Applications Precision Engineered Components and Innovative Solutions Leveraging Premium Brands and Collaborative Teams to Create Superior Value for Our Customers BRANDS Synventive • FOBOHA • Männer Priamus • Gammaflux • Thermoplay KALLER • HYSON Associated Spring • AS RAYMOND Seeger • Hänggi 2016 % OF REVENUE 46% 14% 40% LEADING CUSTOMERS Industrial Segment at a Glance Leading Global Manufacturer of Highly-Engineered Products and Systems 22 Provide Value-added Engineering: R&D, Manufacturing, Test and Evaluation Serving Customers in Auto, Medical, Packaging, Personal Care and Other Industrial
Strategic Business Unit (SBU) Structure Maximize Practical Synergies of Complimentary Businesses 23 MOLDING SOLUTIONS NITROGEN GAS PRODUCTS ENGINEERED COMPONENTS  Creates Mass, Enhances Scalability and Improves Competitive Position  Catalyst for Process, Product and System Innovation  Enables Sales Effectiveness and Efficiency  Concentrates Focus on Operational Efficiencies  Facilitates Globalization of Brands
Portfolio Aligned with Several Long-Term Macro Drivers 24 AGING POPULATION, RISING HEALTH NEEDS CONSUMER-DRIVEN SUSTAINABILITY PACKAGING INNOVATION SELECT APPLICATIONS LEVERAGING OUR STRONG BRANDS
Macro Trend: Vehicle Fuel Efficiency Grill Front Bumper Glove Box Door Panel Instrument Panel Wheel Liner Rear Bumper Spoiler Transmission Washers Transmission Retaining Rings Gas Direct Injection Orifice Plates Roof Panel Structural Body Panel Body Panel Body Panel Clutch Springs Compressor Flapper Valve GLOBAL FUEL ECONOMY & ENVIRONMENTAL STANDARDS 25 MOLDING SOLUTIONS Hot runner systems enabling more complex structures, improved aerodynamics, lighter weight and stronger shapes, improving fuel efficiency NITROGEN GAS PRODUCTS Gas springs and servo controlled hydraulic systems to form complex shapes from new higher strength steels and aluminum alloys, resulting in safer and lighter vehicles ENGINEERED COMPONENTS Lighter weight powertrain & suspension components improving performance in smaller packages, resulting in greater fuel efficiency ENABLINGTECHNOLOGIESCOMPONENTS Rebound Springs
13% 19% 21% 23% 24% Tool & Die Medical, Personal Care & Packaging Auto - Production Auto - Molding Solutions General Industrial Continuing Profitable Growth through New Markets 26 REVENUES / ADJ. OPERATING MARGIN ($M)1 END MARKETS2 NEW MARKETS WITH TRANSFORMATION 688 822 782 824 ~960 12.5% 14.9% 15.0% 16.2% -1.0% 4.0% 9.0% 14.0% 19.0% 24.0% 0 100 200 300 400 500 600 700 800 900 1000 2013 2014 2015 2016 2017E Revenues Adj. Operating Margin Mid Teens 1 2014-2015 Revenue FX impact ($69M). Reference to Adjusted Operating Margin is a non-GAAP measure. Our 2017 full-year outlook is only as of our October 27, 2017 earnings release and is not being updated or affirmed at this time. For a reconciliation to the appropriate GAAP measure, see the Appendix of this presentation. 2 Percentages split YTD June 2017. Company estimates.
Favorable Key Market Indicators … … Supportive of Growth Outlook 27 6.7% 5.1% 5.8% 7.2% 3.6% 5.4% 4.8% 5.0% Automotive Closures Electronics Medical Others Packaging PersonalCare Transportation Projected Hot Runner Growth by Market2 2016-19 CAGR -3.2% 1.8% 1.3% 1.6% 1.1%0.9% 2.8% 2.7% 2.7% 2.1% 2016 2017E 2018E 2019E 2020E Industrial Production Index1 IPI Machining World IPI 1 Source: Moody’s July 2017. 2 Source: IC Interconnection Hot Runner Study, June 2016.
Automotive: Market Indicators Growth is Driven by Both Auto Production and New Model Launches 281 Source: IHS Markit Vehicle Production Forecast August 2017. 2 Source: IHS Markit November 2016, Michael Robinet. 18 17 18 18 18 22 22 22 23 23 49 50 50 52 54 3 3 3 4 4 2 2 3 3 3 2016 2017E 2018E 2019E 2020E N. America Europe Asia S. America Other 17 26 26 33 18 24 21 33 27 25 25 16 35 31 39 19 15 19 21 17 13 21 25 13 2016 2017E 2018E 2019E 2020E N. America Europe China Japan/Korea Other 6 Global Light Vehicle Production Estimated Low Growth in 2018 +1% Followed by Continued Modest Growth in Subsequent Years (+2% to 3% Annual Growth) Peaking New Launches Over 2018-2019 Having Impact on Growth in Current Period (2017); Expecting More Moderate Model Change in Subsequent Years Global Auto LV Production Forecast (Units in M)1 Global Auto New Model Changes (Units)2
Molding Solutions Overview 29 188 323 325 377 ~480 2013 2014 2015 2016 2017E REVENUES ($M)1 GEOGRAPHY2 48% 25% 24% 3% Europe Asia N. America RoW 68% HOT RUNNERS 27% PREMIUM MOLDS 5% CONTROLS PRODUCTS2 1 Our 2017 full-year outlook is only as of our October 27, 2017 earnings release and is not being updated or affirmed at this time. 2 Percentage split YTD 2017. Company estimates.
Nitrogen Gas Products Overview 30 116 126 116 115 ~135 2013 2014 2015 2016 2017E REVENUES ($M)1 PRODUCTS2 GEOGRAPHY2 30% 26% 25% 10% 9% China Americas Europe Japan Other Asia 92% TOOL & DIE • Market leader • High-quality brands: KALLER and HYSON • More controlled force in less space 8% MACHINE & HEAVY VEHICLE3 • Leverage core competencies to grow in adjacent niches 1 Our 2017 full-year outlook is only as of our October 27, 2017 earnings release and is not being updated or affirmed at this time. 2 Percentage split by 2016 Revenue. Company estimates. 3 Includes suspension, counterbalance, mill and press products.
Engineered Components Overview REVENUES ($M)1 GEOGRAPHY2 60% 25% 10% 5% N. America Europe Asia S. America 42% LV POWERTRAIN SPRINGS/ RINGS 25% INDUSTRIAL ENGINEERED SPRINGS 15% FINE BLANKING/MICRO STAMPING 11% STRUTS/ASSEMBLY SOLUTIONS 7% CATALOG SPRINGS 31 385 373 342 333 ~340 2013 2014 2015 2016 2017E PRODUCTS2 1 Our 2017 full-year outlook is only as of our October 27, 2017 earnings release and is not being updated or affirmed at this time. 2 Percentage split by 2016 Revenue. Company estimates.
Industrial Segment Strategic Path Forward • Align Capabilities & Footprint to Key Market Trends/Global Customers • Invest in Strong Innovation Pipeline • Leverage Functional & Operational Synergies across SBUs • Expand Aftermarket & Global Reach • Target Strategic Acquisitions • Drive toward World-class Commercial Excellence • Utilize BES Enablers to Improve Productivity • Optimize Global Spend Accelerate Growth Expand Margin 32
Aerospace Segment
Aerospace Highlights 34 Return to Growth with Transition from Legacy to New Engine Programs Concurrent Engineering Expertise and Execution through BES Creating Strong Customer Relationships Flexible New Product Introduction Processes Creating Innovative Solutions to Address Customer Challenges Drive Aftermarket Presence through Investments and Partnerships
Aerospace at a Glance Well-Positioned in Commercial Aerospace Markets 35 OEM AFTERMARKET OVERVIEW Highly Engineered Machined and Fabricated Components Concurrent Engineering, New Product Introduction and Execution through BES MRO OEM-Source Approved Repair portfolio and Repair Development for major OEMs FAA/EASA/CAAC1 Certified Engine Component Repair Stations Component Repair Programs (CRPs) SPARE PARTS Revenue Sharing Programs (RSPs) Select Aftermarket Spare Parts for CFM56 and CF6 Engines 2016 % OF REVENUE 71% 29% LEADING CUSTOMERS GKN • Safran • Spirit • Honeywell Bell Helicopter • Northrop Grumman Korean Air • Delta • Iberia Safran • SR Technics • SAESL HAESL • Pratt & Whitney • MTU GE’s Airline and Repair Shop Customers 1 Note: FAA is the U.S. Federal Aviation Administration, EASA is the European Aviation Safety Agency and CAAC is the Civil Aviation Administration of China.
Aerospace Overview | New Engine Platforms Fueling Our Growth • Unprecedented number of new airplanes introduced • Commercial aircraft portfolio renewed • Very large aircraft in decline (A380/B747) ̶ Engines T900, GP7200, GEnx-2B • Large aircraft (twin aisle) growing (B777/B787/A330/A350) ̶ Engines GE90, GE9X, GEnx-1B, T1000, T700, T7000, XWB • Single aisle growing (B737/A320) ̶ Engines CFM56, LEAP B, V2500, LEAP A, GTF • CFM56 shop visits (aftermarket) increasing (B737/A320) ̶ Engine time on wing driving MRO growth ̶ Still in production/25+ year lifecycle AEROSPACE TRENDSREVENUES ($M)1 36 OEM 108 110 117 118 ~135 RSP MRO 295 330 296 288 ~330 2013 2014 2015 2016 2017E 2013 2014 2015 2016 2017E Aftermarket 1 Our 2017 full-year outlook is only as of our October 27, 2017 earnings release and is not being updated or affirmed at this time.
Aerospace Product Lifecycle Focused on Platform Transition and Managing Ramp 37 COST DEVELOPMENT EARLY PROD. MATURE PRODUCTION OUT OF PROD./SPARES GE9x Leap B Leap A/C A320Neo GTF Trent XWB Trent 1000 Genx 1B Genx 2B GE90 CFM56 Trent 700 CF6 NEW EMERGING & EARLY PROGRAMS OUT OF PRODUCTION SPARES LIFECYCLE NEW PLATFORMS Design Change Mgmt. Rate Readiness Dual Sourcing Learning Curve LEGACY PLATFORMS Pricing Pressure Cost Cycle Repair Development/ Service Network Spares Management V2500 Note: Company view.
OEM Market Environment Well-Positioned with Innovative Solutions and Services 38 1,035 1,035 1,110 1,165 1,288 401 403 411 404 372 1,436 1,590 1,704 1,812 1,884 2016 2017E 2018E 2019E 2020E Narrow Body Wide Body OEM Fcst COMMERCIAL AIRCRAFT DELIVERIES (UNITS) OEM SALES PER AIRCRAFT ($K)3 • Airbus and Boeing backlog at robust levels; equivalent to ~8 years of estimated production • 2016 cancellation activity within historical rates and relatively low as percent of backlog • Strong commercial aircraft deliveries forecasted over next several years; narrow body & A350 ramping, 777 in transition Boeing 777 (GE90) ~$900 Boeing 787 (GEnx-1B/Trent 1000) ~$200 Airbus A350 (XWB) ~$500 Airbus A320neo (LEAP A) ~$200 to ~$250 Boeing 737 (LEAP B) Opportunity 1 1 2 1 Source: 2016 Actual–Airbus, Boeing. Teal Group September 2017, OEM planned build rates. 2 Boeing and Airbus 3 OEM Sales per Aircraft is a directional metric as it can be highly variable over time due to a range of factors including changes in types of material and material costs, redesign of parts, quantity of parts per engine, percentage of work directed to suppliers, engine spares, and cost schedules agreed to under contract with the engine OEMs.
Opportunities for Growth Broaden Customer Base and Product Lines 39 PROGRAMS CUSTOMERS PRODUCT LINES NARROW BODY A320neo (Leap A/PW1100G) 737 MAX (Leap B) E2 (PW1700/1900G) WIDE BODY 777x (GE9x) 787 (Genx/T1000) A350 (Trent XWB) AIRFRAME NACELLE ENGINE► AIRBUS ► BOEING ► GE AVIATION ► ROLLS-ROYCE ► UTC AEROSPACE SYSTEMS ► SAFRAN ► PRATT & WHITNEY ► MTU AERO ENGINES ► KAWASAKI HEAVY INDUSTRIES ► MITSUBISHI HEAVY INDUSTRIES ► GKN AEROSPACE Active Participation
Aftermarket Drivers • Growing passenger traffic • Highly regulated industry by FAA, EASA and CAAC1 • Source approval controlled by customers • Niche capabilities on large engine cases • CFM56: most successful commercial engine ̶ Installed base: ~22,000 engines ̶ 2016: ~1,700 built ̶ 2017: ~1,300 to be built ̶ Latest model (5B & 7B) just entering 1st shop visit cycle • Product Lifecycle: ~25 years Estimated 5-Year CAGR of ~4% to 5%2 401 FAA: U.S. Federal Aviation Administration, EASA: European Aviation Safety Agency and CAAC: Civil Aviation Administration of China. 2 ICF Estimates.
Aftermarket Programs 41 Revenue Sharing Programs (RSPs) • Exclusivity to supply GE certain aftermarket spare parts • Covers life of CFM56 & CF6 engine programs • Agreements: 13; entered between 2003 - 2007 • Investment: $294M; amortized as a reduction of sales Component Repair Programs (CRPs) • License for GE-certified repair of certain critical components; enables access to serve global market • Covers life of CFM56, CF6 & CF34 engine programs • Agreements: 3; entered between 2013 - 2015 • Investment: $112M; amortized as a reduction of sales Programs Allow Us to Participate in OEM Certified Aftermarket Shop Visits Fleet Size 1 Source: Shop Visit Forecast, ICF April 2017; Fleet Size Forecast ICF, October 2016. 2.2 2.4 2.4 2.5 2.6 21.6 22.2 22.5 22.4 21.8 5 10 15 20 25 1.0 1.5 2.0 2.5 3.0 2016 2017E 2018E 2019E 2020E FleetSize(000s) EstimatedShopVisits(000s) CFM56 Family of Engines1 0.7 0.7 0.7 0.6 0.6 3.3 3.2 3.0 2.9 2.8 0 1 2 3 4 0.3 0.5 0.7 0.9 2016 2017E 2018E 2019E 2020E FleetSize(000s) EstimatedShopVisits(000s) CF6 Family of Engines1
Aerospace Strategic Path Forward Priorities Established around Growth Opportunities 42 Execution • Utilize Barnes Enterprise System to Drive Our Competitive Advantage • New Product Introduction Driving Customer Excellence through Speed and Agility • Focus on Growth in Engine, Nacelle and Airframe • Optimize Footprint and Expand Customer Base Fabrication • Flawless Execution of LEAP Program in Support of GE Ramp • Create Further Opportunities through Flexibility and Performance LEAP Program Aftermarket Business • Enhance OEM and Key Airline Relationships to Achieve Growth Expectations • Build on Regional Capability to Enhance Growth Opportunities • Focus on Opportunities that Create Value with IP and Content on Strategic ProgramsAcquisitions
Why Invest In Barnes Group?
A Strong Legacy and Bright Future 44 Business Transformation Delivering Enhanced Growth and Margin Performance Building Portfolio of Differentiated Technologies and Highly-engineered Products Reinvigorating Our Innovation Process with a Significant Focus on IP Clear Strategy to Drive Sustainable, Long-term Profitable Growth Passionate, Experienced Leadership Team Fostering Cultural Transformation
Our Strategy is Working; Business Performance Significantly Improved Significant Opportunity as We Continue Our Journey 45 Focused on Sustainable, Long- term Profitable Growth 1 Well-positioned with Significant Competitive Advantages 2 Barnes Enterprise System Creates Scalable, Repeatable Processes 3 Talent Management to Align and Develop a High-performing Global Workforce Innovation Drives Differentiated New Products, Services and Processes 4 5
Appendix
Forward-Looking Statements This presentation contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements often address our expected future operating and financial performance and financial condition, and often contain words such as "anticipate," "believe," "expect," "plan," "estimate," "project," and similar terms. These forward-looking statements do not constitute guarantees of future performance and are subject to a variety of risks and uncertainties that may cause actual results to differ materially from those expressed in the forward-looking statements. These include, among others: difficulty maintaining relationships with employees, including unionized employees, customers, distributors, suppliers, business partners or governmental entities; failure to successfully negotiate collective bargaining agreements or potential strikes, work stoppages or other similar events; difficulties leveraging market opportunities; changes in market demand for our products and services; rapid technological and market change; the ability to protect intellectual property rights; introduction or development of new products or transfer of work; higher risks in global operations and markets; the impact of intense competition; acts of terrorism, cybersecurity attacks or intrusions that could adversely impact our businesses; uncertainties relating to conditions in financial markets; currency fluctuations and foreign currency exposure; future financial performance of the industries or customers that we serve; our dependence upon revenues and earnings from a small number of significant customers; a major loss of customers; inability to realize expected sales or profits from existing backlog due to a range of factors, including changes in customer sourcing decisions, material changes, production schedules and volumes of specific programs; the impact of government budget and funding decisions; changes in raw material or product prices and availability; integration of acquired businesses; restructuring costs or savings; the continuing impact of prior acquisitions and divestitures; and any other future strategic actions, including acquisitions, divestitures, restructurings, or strategic business realignments, and our ability to achieve the financial and operational targets set in connection with any such actions; the outcome of pending and future legal, governmental, or regulatory proceedings and contingencies and uninsured claims; product liabilities; future repurchases of common stock; future levels of indebtedness; and numerous other matters of a global, regional or national scale, including those of a political, economic, business, competitive, environmental, regulatory and public health nature; and other risks and uncertainties described in documents filed with or furnished to the Securities and Exchange Commission ("SEC") by the Company, including, among others, those in the Management's Discussion and Analysis of Financial Condition and Results of Operations and Risk Factors sections of the Company's filings. The Company assumes no obligation to update its forward-looking statements. 47
Non-GAAP Financial Measure Reconciliation (1 of 5)Unaudited) 48 (Dollars in thousands) (Unaudited) YTD SEP Twelve Months Ended December 31, 2017 2016 2015 2014 2013 SEGMENT RESULTS Operating Profit - Industrial Segment (GAAP) $ 100,154 $ 129,677 $ 102,950 $ 108,360 $ 71,888 Männer short-term purchase accounting adjustments - - 1,481 8,504 5,456 Thermoplay short-term purchase accounting adjustments - - 1,167 - - FOBOHA short-term purchase accounting adjustments 2,294 2,316 - - - Acquisition transaction costs - 1,164 970 - 1,823 Restructuring/reduction in force (1,392) - 3,448 6,020 - Pension lump-sum settlement charge - - 7,450 - - CEO transition costs - - - - 6,589 Operating Profit - Industrial Segment as adjusted (Non-GAAP)1 $ 101,056 $ 133,157 $ 117,466 $ 122,884 $ 85,756 Operating Margin - Industrial Segment (GAAP) 13.9% 15.7% 13.2% 13.2% 10.5% Operating Margin - Industrial Segment as adjusted (Non-GAAP)1 14.0% 16.2% 15.0% 14.9% 12.5% Operating Profit - Aerospace Segment (GAAP) $ 60,519 $ 62,501 $ 65,446 $ 71,614 $ 51,313 Restructuring/reduction in force - - 774 - - Contract termination dispute charges - 3,005 2,788 - - Contract termination arbitration award - (1,371) - - - Pension lump-sum settlement charge - - 2,405 - - CEO transition costs - - - - 3,903 Operating Profit - Aerospace Segment as adjusted (Non-GAAP)1 $ 60,519 $ 64,135 $ 71,413 $ 71,614 $ 55,216 Operating Margin - Aerospace Segment (GAAP) 17.6% 15.4% 15.9% 16.3% 12.7% Operating Margin - Aerospace Segment as adjusted (Non-GAAP)1 17.6% 15.8% 17.3% 16.3% 13.7%
Non-GAAP Financial Measure Reconciliation (2 of 5)) 49 (Dollars in thousands, expect per share data) (Unaudited) YTD SEP Twelve Months Ended December 31, 2017 2016 2015 2014 2013 CONSOLIDATED RESULTS Operating Income (GAAP) $ 160,673 $ 192,178 $ 168,396 $ 179,974 $ 123,201 Männer short-term purchase accounting adjustments - - 1,481 8,504 5,456 Thermoplay short-term purchase accounting adjustments - - 1,167 - - FOBOHA short-term purchase accounting adjustments 2,294 2,316 - - - Acquisition transaction costs - 1,164 970 - 1,823 Restructuring/reduction in force (1,392) - 4,222 6,020 - Contract termination dispute charges - 3,005 2,788 - - Contract termination arbitration award - (1,371) - - - Pension lump-sum settlement charge - - 9,856 - - CEO transition costs - - - - 10,492 Operating Income as adjusted (Non-GAAP)1 $ 161,575 $ 197,292 $ 188,880 $ 194,498 $ 140,972 Operating Margin (GAAP) 15.1% 15.6% 14.1% 14.3% 11.3% Operating Margin as adjusted (Non-GAAP)1 15.2% 16.0% 15.8% 15.4% 12.9% Diluted Income from Continuing Operations per Share (GAAP) $ 2.17 $ 2.48 $ 2.19 $ 2.16 $ 1.31 Männer short-term purchase accounting adjustments - - 0.02 0.11 0.07 Thermoplay short-term purchase accounting adjustments - - 0.01 - - FOBOHA short-term purchase accounting adjustments 0.03 0.03 - - - Acquisition transaction costs - 0.02 0.02 - 0.03 Restructuring/reduction in force (0.03) - 0.05 0.07 - Contract termination dispute charge - 0.03 0.03 - - Contract termination arbitration award - (0.03) - - - Pension lump-sum settlement charge - - 0.11 - - Tax benefit recognized for refund of withholding taxes - - (0.05) - - CEO transition costs - - - - 0.12 April 2013 tax court decision - - - - 0.30 Diluted Income from Continuing Operations per Share as adjusted (Non-GAAP)1 $ 2.17 $ 2.53 $ 2.38 $ 2.34 $ 1.83
NOTES: 1 The Company has excluded the following from its historical "as adjusted" financial measurements: 2017: 1) Short-term purchase accounting adjustments related to its FOBOHA acquisition and 2) the net gain from restructuring actions related to the closure and consolidation of two manufacturing facilities within the Industrial segment. 2016: 1) Transaction costs related to its FOBOHA acquisition, 2) short-term purchase accounting adjustments related to its FOBOHA acquisition, 3) charges related to the contract termination dispute and 4) operating income related to the contract termination arbitration award and the non-operating interest income awarded. 2015: 1) Short-term purchase accounting adjustments related to its Männer and Thermoplay acquisitions, 2) transaction costs related to its Thermoplay and Priamus acquisitions, 3) restructuring and workforce reduction charges, 4) certain charges recorded in the Aerospace segment in the third quarter of 2015 related to a contract termination dispute following a customer sourcing decision, 5) the pension lump-sum settlement charge recorded in 2015 and 6) a tax benefit recognized in the third quarter of 2015 related to a refund of withholding taxes that were previously paid and included in tax expense in prior years. 2014: 1) Short-term purchase accounting adjustments related to its Männer acquisition and 2) restructuring charges related to the closure of production operations at its Associated Spring facility located in Saline, Michigan. 2013: 1) Short-term purchase accounting adjustments related to its Männer acquisition, 2) transaction costs related to its Männer acquisition, 3) CEO transition costs associated with the modification of outstanding equity awards and 4) the tax charge associated with the April 2013 tax court decision. The tax effect of these items was calculated based on the respective tax jurisdiction of each item. Management believes that these adjustments provide the Company and its investors with an indication of our baseline performance excluding items that are not considered to be reflective of our ongoing results. Management does not intend results excluding the adjustments to represent results as defined by GAAP, and the reader should not consider it as an alternative measurement calculated in accordance with GAAP, or as an indicator of the Company's performance. Accordingly, the measurements have limitations depending on their use. Non-GAAP Financial Measure Reconciliation (3 of 5)s 50
Non-GAAP Financial Measure Reconciliation (4 of 5)s 2017 Full-Year Outlook Diluted Net Income per Share (GAAP) $ 2.83 to $ 2.88 FOBOHA short-term purchase accounting adjustments 0.03 Restructuring actions (0.02) Diluted Net Income per Share as adjusted (Non-GAAP)1 $ 2.84 $ 2.89 NOTES: 1 The Company has excluded short-term purchase accounting adjustments related to its FOBOHA acquisition and the net gain from restructuring actions related to the closure and consolidation of two manufacturing facilities within the Industrial segment from its "as adjusted" financial measurements for 2017. 51
Non-GAAP Financial Measure Reconciliation (5 of 5) 52 (Dollars in thousands) (Unaudited) YTD SEP Twelve Months Ended December 31, 2017 2016 2015 2014 2013 FREE CASH FLOW (FCF): Net cash provided by operating activities1 $ 167,763 $ 217,646 $ 217,475 $ 196,153 $ 16,079 Capital expenditures (41,957) (47,577) (45,982) (57,365) (57,304) Free cash flow2 $ 125,806 $ 170,069 $ 171,493 $ 138,788 $ (41,225) Free cash flow to net income cash conversion ratio (as adjusted): Free cash flow (from above) $ 125,806 $ 170,069 $ 171,493 $ 138,788 $ (41,225) Income tax payments related to the gain on the sale of BDNA - - - - 130,004 Income tax reduction related to the gain on the sale of BDNA - - - (12,608) - Free cash flow (as adjusted)3 125,806 170,069 171,493 126,180 88,779 Net income 118,663 135,601 121,380 118,370 270,527 Gain on the sale of BDNA, net of tax - - - - (195,317) Pension lump-sum settlement charge, net of tax - - 6,182 - - Net income (as adjusted)3 $ 118,663 $ 135,601 $ 127,562 $ 118,370 $ 75,210 Free cash flow to net income cash conversion ratio (as adjusted)3 106% 125% 134% 107% 118% NOTES: 1 The Company has reclassified certain components of 2013 to 2015 Net cash provided by operating activities to reflect new accounting guidance related to certain aspects of share-based payments to employees. 2 The Company defines free cash flow as net cash provided by operating activities less capital expenditures. The Company believes that the free cash flow metric is useful to investors and management as a measure of cash generated by business operations that can be used to invest in future growth, pay dividends, repurchase stock and reduce debt. This metric can also be used to evaluate the Company's ability to generate cash flow from business operations and the impact that this cash flow has on the Company's liquidity. 3 For the purpose of calculating the cash conversion ratio, the Company has excluded the following: 2015: The pension lump-sum settlement charge, net of tax, from net income. 2014: The utilization of the year-end 2013 income tax receivable (related to the gain on the sale of BDNA) to offset the 2014 payments from FCF. 2013: The income tax payments related to the gain on the sale of BDNA made during 2013 from FCF and the gain on the sale of BDNA from net income. Adjusted cash from operations in 2013 and 2014 of $146M and $183M also excluded these items.

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Ir overview october 2017 final

  • 1.
  • 2.
    Safe Harbor Statement 2 THISPRESENTATION CONTAINS FORWARD-LOOKING STATEMENTS Forward-looking statements are made based upon management's good faith expectations and beliefs concerning future developments and their potential effect upon the Company. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed in the forward-looking statements, including the risks and uncertainties set forth under our full disclosure located at the end of this presentation and included in our SEC filings. Any forward-looking statements speak only as of the date on which it is made, and the Company assumes no obligation to update our forward-looking statements. References to adjusted financial results are non-GAAP measures. You will find GAAP reconciliation tables at the end of this presentation. "EPS" refers to diluted earnings per share.
  • 3.
    Barnes Group ata Glance 3 INDUSTRIAL | 67%1 AEROSPACE | 33%1 46% 40% 14% Molding Solutions Engineered Components Nitrogen Gas Products 71% 29% OEM Aftermarket Headquarters Bristol, CT Total 2016 Revenue $1.2B Employees ~5,200 Dividend History2 83 Years KEY STATISTICS 1 2016 Revenue. 2 Consecutive years of paying a dividend. Global Provider of Engineered Products & Differentiated Industrial Technologies, Serving Diversified End Markets
  • 4.
    ASIA1 17% EUROPE1 32% AMERICAS1 51% HQ Growing Our GlobalPresence 41 Percent of 2016 Destination Sales. Company estimates. Sales & Technical Service Manufacturing INDUSTRIAL 45 25 AEROSPACE 2 10 LOCATIONS Expand Footprint via Acquisitions and Globalization Focus on Local for Local Increase Aftermarket Services/ Field Support
  • 5.
    Providing Differentiated Servicethrough Global Network and Capabilities Delivering Highly Valued Engineering and Manufacturing Expertise from Initial Concept to Production Creating Superior Value for Our Customers; Aligned with Industry Leaders 5 INDUSTRIAL Engineered Solutions that Enhance Performance Applied Research and Technical Service Centers Active Onsite Customer Engagement AEROSPACE Concurrent Engineering, Complex Fabrication and Machining Expertise OEM Certified Parts and Repair Services; Life of Engine Support
  • 6.
    PACKAGING INNOVATION CONSUMER-DRIVEN SUSTAINABILITY AGING POPULATION, RISING HEALTHNEEDS Vehicle Fuel Efficiency/ Light-weighting Advanced Metal-forming Applications Carbon Fiber Reinforced Polymers Increased Utilization of Plastics in Automobiles Safety/ Design High Volume Packaging Applications Multi-material Plastic Assemblies Thin-wall Technology Rising Rate of Diabetes and COPD Greater Demand for Medical & Pharmaceutical Devices Accelerating Technology Innovation Product Safety & Effectiveness Rise in Home Healthcare Portfolio Aligned with Several Long-Term Macro Drivers GLOBAL GROWING MIDDLE CLASS Increasing Air Travel Demand Next Generation Aircraft Growing Aftermarket for Repairs & Spares 6
  • 7.
    Barnes Group Strategy 71Top quartile within the Russell 2000 Index. Build a World-class Company Focused on High Margin, High Growth Businesses Effectively Allocate Capital to Drive Top Quartile TSR1 • Actively Manage Portfolio with a Focus on Multiple Platforms/Market Channels • Identify End Markets with Long-term Sustainable, Profitable Growth • Create Superior Value for Our Customers • Target Global Expansion Aligned with Macro Trends • Achieve Commercial, Operational and Financial Excellence • Drive Margin Expansion through Relentless Focus on Productivity • Invigorate Employee Development, Empowerment and Engagement • Build on Intellectual Property (IP) as Core Differentiator • Drive Innovation in Processes, Products and Systems • Share Best Practices through Global Innovation Forum • Drive Profitable Growth ̶ Investment in Core to Drive Organic Growth ̶ Disciplined, Strategic M&A • Return Cash to Shareholders via Dividends and Buybacks Expand and Protect Our Core IP to Deliver Differentiated Solutions Leverage BES to be a Significant Competitive Advantage 1 2 3 4
  • 8.
    Major Portfolio ShiftsOver Last Several Years Transformed Portfolio with Technological Orientation 8 WHERE WE WERE WHERE WE ARE PORTFOLIO COMPOSITION 3 Segments 2 Segments PORTFOLIO PROFILE Cyclical More Secular GEOGRAPHIC EXPOSURE Overweight U.S. Globally Balanced PATENTS ~300 ~1,200 CORE COMPETENCY Manufacturing Design, Applications, Manufacturing & Service IP OWNERSHIP Primarily Process Process, Products & Systems NEW MARKETS - Auto Model Changes, Medical, Personal Care & Packaging
  • 9.
    Portfolio Transformation HasDriven Significant Financial Results 9 36% 32% 32% INDUSTRIAL AEROSPACE DISTRIBUTION Sales1 $1,133M Op. Inc.1 $86.5M Op. Margin1 7.6% Share Price3 $20.67 Market Cap3 $1.1B Divestitures Year Sales (M) EUR 2011 $105 NA 2013 $300 Acquisitions Year Sales (M) 2012 $160 2013 $110 2015 $38 2015 $9 2016 $75 Sales $1,231M +9% Adj. Op. Inc.2 $197.3M +128% Adj. Op. Margin2 16.0% +840 bps Share Price3 $47.42 +129% Market Cap3 $2.6B +136% 67% 33% 2016 SALES MIX 2010 SALES MIX1 INDUSTRIAL AEROSPACE PROACTIVE MANAGEMENT 1 2010 Sales, Operating Income and Operating Margin are “as reported” in the Company’s 2010 10-K. 2010 Sales Mix re-calculated to reflect three segments – Aerospace, Industrial & Distribution vs. the original two reported segments of Precision Components & Logistics and Manufacturing Services. 2 References to adjusted operating income and adjusted operating margin are non-GAAP measures. For a reconciliation to the appropriate GAAP measure, see the Appendix of this presentation. 3 Share Price and Market Cap as of December 31, 2010 and 2016.
  • 10.
    Strategic M&A Framework 10 PROCESSPRODUCT SYSTEMS BROAD IP FOCUS BUILDING ON EXISTING CAPABILITIES IN AEROSPACE & INDUSTRIAL IN THE RIGHT MARKETS Plastics Processing Expertise Thermal Management Robotics/Automation Systems Force Control Technology Sensing & Control Systems ENABLING TECHNOLOGIESDIFFERENTIATED PROCESSES Complex Machining Hot Forming/Advanced Fabrications Fine Blanking/Progressive Stamping DEFENSIVECLOSE TO CORE HIGH GROWTH / MACRO-DRIVEN
  • 11.
    We Have aDisciplined Approach to M&A 11 INVESTMENT RETURN CRITERIA EPS ACCRETION in First Full Year IRR > Cost of Capital ROIC > Cost of Capital w/in 5 Yrs. STRATEGIC ACQUISITION FILTERS INTELLECTUAL PROPERTY PROFITABILITY LEADERSHIP POSITION CYCLICAL MODERATION ATTRACTIVE MARKETS SCALE / ALIGNMENT Proprietary Technologies IP Type/Complexity & Protection Market Share Technical Expertise Close to Core Globalization Opportunity Recurring Revenues Downturn Resilience Market Size/Fragmentation Macro Trend Alignment 35%+ Gross Margin 20%+ EBITDA Potential
  • 12.
    Barnes Enterprise System(BES) is Our Fully Integrated Operating System Building a Foundation of Excellence, Empowerment and Growth 12 Promotes a CULTURE of Employee Engagement and Empowerment Reflecting Our Strong Corporate Values Drives ALIGNMENT across the Organization around a Common Vision Fosters CONTINUOUS IMPROVEMENT and Innovation in All of Our Business Processes Achieves RESULTS that Drive Sustainable, Long-term Profitable Growth
  • 13.
    Significant Progress Made;Still in Early Innings of Impact 13 EARLY STAGE MORE MATURE SALES EFFECTIVENESS Volume and Pricing GLOBAL SOURCING Supply Chain and Logistics LEVERAGE TECHNOLOGY Innovation and New Product Introductions OPERATIONAL EXCELLENCE Performance and Quality FUNCTIONAL EXCELLENCE SG&A Optimization 1 2 3 4 5 Revenue Focus Cost Focus BES: Productivity Goals Focused on Five Main Areas OPPORTUNITY
  • 14.
  • 15.
    Financial Performance Trends1 StrategyExecution Driving Strong Results 15 NET SALES ($M) ADJ. EPS22,3ADJ. OPERATING MARGINS2 $1,092 $1,262 $1,194 $1,231 +15.5% to 16.5% Total 2013 2014 2015 2016 2017E 12.9% 15.4% 15.8% 16.0% ~15.0% 2013 2014 2015 2016 2017E $1.83 $2.34 $2.38 $2.53 $2.84 to $2.89 2013 2014 2015 2016 2017E 1 Our 2017 full-year outlook is only as of our October 27, 2017 earnings release and is not being updated or affirmed at this time. 2 References to Adjusted Operating Margin and Adjusted EPS are non-GAAP measures. For a reconciliation to the appropriate GAAP measure, see the Appendix of this presentation. 3 EPS from Continuing Operations.
  • 16.
    Strong Cash Generationand Conversion Fuel Growth 16 Cash Performance Trends1 $146 $183 $217 $218 2013 2014 2015 2016 2017E ~$195 ~$140 ADJ. CASH FROM OPERATIONS2 ADJ. FREE CASH FLOW2CAPITAL EXPENDITURES & DEPRECIATION $57 $57 $46 $48 $34 $42 $40 $43 $49 2013 2014 2015 2016 2017E $89 $126 $171 $170 2013 2014 2015 2016 2017E 118% 107% 134% 125% ~100% CASH CONVERSION ~$155 CapEx Depreciation ($M) $55 to $60 ~$210 1 Our 2017 full-year outlook is only as of our October 27, 2017 earnings release and is not being updated or affirmed at this time. 2 References to adjusted metrics are non-GAAP measures. For a reconciliation to the appropriate GAAP measure, see the Appendix of this presentation.
  • 17.
    Capital Allocation Framework 17 USESOF CASH 2012 TO 2016 ~$1.5B 52% 16% 11% 10% 7% 4% CRPs1 Dividends Share Buybacks Capex Investments Acquisitions Working Capital 1 Aerospace Aftermarket – Component Repair Programs (CRPs). • Annual Capex ~$50M to $60M; ~50% Growth Programs • R&D Investments • New Product and Process Introductions DRIVE ORGANIC GROWTH • Strict Strategic and Financial Criteria/Metrics • Target Highly Engineered Products and Services • Expand Global Reach/Channel Penetration • 83 Years of Consecutive Dividend Payout; Expected to Grow Commensurate with Earnings Growth • Opportunistic Share Repurchases, Largely to Offset Dilution RETURN CASH TO SHAREHOLDERS PURSUE STRATEGIC ACQUISITIONS
  • 18.
    2017 Guidance and2020 Financial Targets1 2017 GUIDANCE 2020 TARGETS ORGANIC SALES 10.5% to 11.5% 4% to 6% CAGR ADJ. OPERATING MARGIN2 ~15.0% 18% to 19% ADJ. EPS2 8% to 9% Double Digit3 CAGR CASH CONVERSION ~100% >100% ROIC --- ~10% 18 KEY ASSUMPTIONS • CapEx: ~50% Organic Growth Investments • Working Capital Improvements • FX: Consistent with 2017 Outlook • Tax Rate: ~27% to 28% • Average Diluted Shares: ~54M • Debt/EBITDA: Maintain <3.0x 1 Our 2017 and 2020 outlook is only as of our October 27, 2017 earnings release and is not being updated or affirmed at this time. Guidance and targets exclude future acquisitions or divestitures. 2 References to Adjusted EPS and Adjusted Operating Margin are non-GAAP measures. A reconciliation table for historical metrics can be found in the Appendix of this presentation. 3 Excluding discrete tax benefit of $0.12 recorded in Q2 2017. Executing Our Strategy to Deliver Improved Margin Performance Portfolio Transformation  Volume Leverage/Global Expansion Commercial Excellence  New Product Introductions  BES Execution / Maturity
  • 19.
    2017 Segment MarketOutlook1 1 Our 2017 full-year outlook is only as of our October 27, 2017 earnings release, and it is not being updated or affirmed at this time. * LDD – Low double digits %, LSD - Low single digits % 19 TOTAL SALES EXPECTATION UP 15.5% TO 16.5%; UP 10.5% TO 11.5% ORGANICALLY INDUSTRIAL SEGMENT AEROSPACE SEGMENT OTHER End Market Highlights / Comments Molding Solutions 31% 9%Nitrogen Gas Products Original Equipment Manufacturing (OEM) Maintenance, Repair, and Overhaul (MRO) Spare Parts (RSP Programs) 23% Up High 20s 6% 4% M&A F/X Favorable Hot Runner Demand, Focus on MRO Growth & Global Expansion, FOBOHA & Gammaflux Contribution Tool & Die Markets Remain Strong New Engine Programs Ramping, Solid OEM Orders and Backlog Aircraft Utilization Remains High Favorable CFM56 Demographic Trends Continue FOBOHA & Gammaflux Acquisition Sales ~+5% F/X Sales Impact ~0% Up High Teens Industrial Segment 67% Up Mid Teens Aerospace Segment 33% 27%Engineered Components Global Auto Production Good - but North America declining; General Industrial Markets Improving Up Mid Teens Up LSD Up LDD Up ~20% Up Mid Teens = Actual % of 2016 Sales 2017 Total Sales Growth Outlook*
  • 20.
  • 21.
    Industrial Highlights 21 Comprehensive Portfolioof Highly-Engineered, Differentiated Industrial Products and Technologies; High Barriers Include Patents and Trade Secrets More Balanced End Market Portfolio Leveraged to Favorable Macro Trends Newly Focused and Strategically Aligned Business; Global Aftermarket Infrastructure in Place and Beginning to See Benefits – Early Days Expanding Opportunities Include Continued Innovation, Global Presence and M&A BES Continues to Enable Profitable Growth and Margin Expansion
  • 22.
    MOLDING SOLUTIONS NITROGENGAS PRODUCTS ENGINEERED COMPONENTS OVERVIEW Dedicated Mold Based Products and Services to High Quality Segments of Plastic Injection Molding Industry Precision Force and Motion Solutions for Sheet Metal Forming and Demanding Machine and Heavy Vehicle Applications Precision Engineered Components and Innovative Solutions Leveraging Premium Brands and Collaborative Teams to Create Superior Value for Our Customers BRANDS Synventive • FOBOHA • Männer Priamus • Gammaflux • Thermoplay KALLER • HYSON Associated Spring • AS RAYMOND Seeger • Hänggi 2016 % OF REVENUE 46% 14% 40% LEADING CUSTOMERS Industrial Segment at a Glance Leading Global Manufacturer of Highly-Engineered Products and Systems 22 Provide Value-added Engineering: R&D, Manufacturing, Test and Evaluation Serving Customers in Auto, Medical, Packaging, Personal Care and Other Industrial
  • 23.
    Strategic Business Unit(SBU) Structure Maximize Practical Synergies of Complimentary Businesses 23 MOLDING SOLUTIONS NITROGEN GAS PRODUCTS ENGINEERED COMPONENTS  Creates Mass, Enhances Scalability and Improves Competitive Position  Catalyst for Process, Product and System Innovation  Enables Sales Effectiveness and Efficiency  Concentrates Focus on Operational Efficiencies  Facilitates Globalization of Brands
  • 24.
    Portfolio Aligned withSeveral Long-Term Macro Drivers 24 AGING POPULATION, RISING HEALTH NEEDS CONSUMER-DRIVEN SUSTAINABILITY PACKAGING INNOVATION SELECT APPLICATIONS LEVERAGING OUR STRONG BRANDS
  • 25.
    Macro Trend: VehicleFuel Efficiency Grill Front Bumper Glove Box Door Panel Instrument Panel Wheel Liner Rear Bumper Spoiler Transmission Washers Transmission Retaining Rings Gas Direct Injection Orifice Plates Roof Panel Structural Body Panel Body Panel Body Panel Clutch Springs Compressor Flapper Valve GLOBAL FUEL ECONOMY & ENVIRONMENTAL STANDARDS 25 MOLDING SOLUTIONS Hot runner systems enabling more complex structures, improved aerodynamics, lighter weight and stronger shapes, improving fuel efficiency NITROGEN GAS PRODUCTS Gas springs and servo controlled hydraulic systems to form complex shapes from new higher strength steels and aluminum alloys, resulting in safer and lighter vehicles ENGINEERED COMPONENTS Lighter weight powertrain & suspension components improving performance in smaller packages, resulting in greater fuel efficiency ENABLINGTECHNOLOGIESCOMPONENTS Rebound Springs
  • 26.
    13% 19% 21% 23% 24% Tool & Die Medical,Personal Care & Packaging Auto - Production Auto - Molding Solutions General Industrial Continuing Profitable Growth through New Markets 26 REVENUES / ADJ. OPERATING MARGIN ($M)1 END MARKETS2 NEW MARKETS WITH TRANSFORMATION 688 822 782 824 ~960 12.5% 14.9% 15.0% 16.2% -1.0% 4.0% 9.0% 14.0% 19.0% 24.0% 0 100 200 300 400 500 600 700 800 900 1000 2013 2014 2015 2016 2017E Revenues Adj. Operating Margin Mid Teens 1 2014-2015 Revenue FX impact ($69M). Reference to Adjusted Operating Margin is a non-GAAP measure. Our 2017 full-year outlook is only as of our October 27, 2017 earnings release and is not being updated or affirmed at this time. For a reconciliation to the appropriate GAAP measure, see the Appendix of this presentation. 2 Percentages split YTD June 2017. Company estimates.
  • 27.
    Favorable Key MarketIndicators … … Supportive of Growth Outlook 27 6.7% 5.1% 5.8% 7.2% 3.6% 5.4% 4.8% 5.0% Automotive Closures Electronics Medical Others Packaging PersonalCare Transportation Projected Hot Runner Growth by Market2 2016-19 CAGR -3.2% 1.8% 1.3% 1.6% 1.1%0.9% 2.8% 2.7% 2.7% 2.1% 2016 2017E 2018E 2019E 2020E Industrial Production Index1 IPI Machining World IPI 1 Source: Moody’s July 2017. 2 Source: IC Interconnection Hot Runner Study, June 2016.
  • 28.
    Automotive: Market Indicators Growthis Driven by Both Auto Production and New Model Launches 281 Source: IHS Markit Vehicle Production Forecast August 2017. 2 Source: IHS Markit November 2016, Michael Robinet. 18 17 18 18 18 22 22 22 23 23 49 50 50 52 54 3 3 3 4 4 2 2 3 3 3 2016 2017E 2018E 2019E 2020E N. America Europe Asia S. America Other 17 26 26 33 18 24 21 33 27 25 25 16 35 31 39 19 15 19 21 17 13 21 25 13 2016 2017E 2018E 2019E 2020E N. America Europe China Japan/Korea Other 6 Global Light Vehicle Production Estimated Low Growth in 2018 +1% Followed by Continued Modest Growth in Subsequent Years (+2% to 3% Annual Growth) Peaking New Launches Over 2018-2019 Having Impact on Growth in Current Period (2017); Expecting More Moderate Model Change in Subsequent Years Global Auto LV Production Forecast (Units in M)1 Global Auto New Model Changes (Units)2
  • 29.
    Molding Solutions Overview 29 188 323325 377 ~480 2013 2014 2015 2016 2017E REVENUES ($M)1 GEOGRAPHY2 48% 25% 24% 3% Europe Asia N. America RoW 68% HOT RUNNERS 27% PREMIUM MOLDS 5% CONTROLS PRODUCTS2 1 Our 2017 full-year outlook is only as of our October 27, 2017 earnings release and is not being updated or affirmed at this time. 2 Percentage split YTD 2017. Company estimates.
  • 30.
    Nitrogen Gas ProductsOverview 30 116 126 116 115 ~135 2013 2014 2015 2016 2017E REVENUES ($M)1 PRODUCTS2 GEOGRAPHY2 30% 26% 25% 10% 9% China Americas Europe Japan Other Asia 92% TOOL & DIE • Market leader • High-quality brands: KALLER and HYSON • More controlled force in less space 8% MACHINE & HEAVY VEHICLE3 • Leverage core competencies to grow in adjacent niches 1 Our 2017 full-year outlook is only as of our October 27, 2017 earnings release and is not being updated or affirmed at this time. 2 Percentage split by 2016 Revenue. Company estimates. 3 Includes suspension, counterbalance, mill and press products.
  • 31.
    Engineered Components Overview REVENUES($M)1 GEOGRAPHY2 60% 25% 10% 5% N. America Europe Asia S. America 42% LV POWERTRAIN SPRINGS/ RINGS 25% INDUSTRIAL ENGINEERED SPRINGS 15% FINE BLANKING/MICRO STAMPING 11% STRUTS/ASSEMBLY SOLUTIONS 7% CATALOG SPRINGS 31 385 373 342 333 ~340 2013 2014 2015 2016 2017E PRODUCTS2 1 Our 2017 full-year outlook is only as of our October 27, 2017 earnings release and is not being updated or affirmed at this time. 2 Percentage split by 2016 Revenue. Company estimates.
  • 32.
    Industrial Segment StrategicPath Forward • Align Capabilities & Footprint to Key Market Trends/Global Customers • Invest in Strong Innovation Pipeline • Leverage Functional & Operational Synergies across SBUs • Expand Aftermarket & Global Reach • Target Strategic Acquisitions • Drive toward World-class Commercial Excellence • Utilize BES Enablers to Improve Productivity • Optimize Global Spend Accelerate Growth Expand Margin 32
  • 33.
  • 34.
    Aerospace Highlights 34 Return toGrowth with Transition from Legacy to New Engine Programs Concurrent Engineering Expertise and Execution through BES Creating Strong Customer Relationships Flexible New Product Introduction Processes Creating Innovative Solutions to Address Customer Challenges Drive Aftermarket Presence through Investments and Partnerships
  • 35.
    Aerospace at aGlance Well-Positioned in Commercial Aerospace Markets 35 OEM AFTERMARKET OVERVIEW Highly Engineered Machined and Fabricated Components Concurrent Engineering, New Product Introduction and Execution through BES MRO OEM-Source Approved Repair portfolio and Repair Development for major OEMs FAA/EASA/CAAC1 Certified Engine Component Repair Stations Component Repair Programs (CRPs) SPARE PARTS Revenue Sharing Programs (RSPs) Select Aftermarket Spare Parts for CFM56 and CF6 Engines 2016 % OF REVENUE 71% 29% LEADING CUSTOMERS GKN • Safran • Spirit • Honeywell Bell Helicopter • Northrop Grumman Korean Air • Delta • Iberia Safran • SR Technics • SAESL HAESL • Pratt & Whitney • MTU GE’s Airline and Repair Shop Customers 1 Note: FAA is the U.S. Federal Aviation Administration, EASA is the European Aviation Safety Agency and CAAC is the Civil Aviation Administration of China.
  • 36.
    Aerospace Overview |New Engine Platforms Fueling Our Growth • Unprecedented number of new airplanes introduced • Commercial aircraft portfolio renewed • Very large aircraft in decline (A380/B747) ̶ Engines T900, GP7200, GEnx-2B • Large aircraft (twin aisle) growing (B777/B787/A330/A350) ̶ Engines GE90, GE9X, GEnx-1B, T1000, T700, T7000, XWB • Single aisle growing (B737/A320) ̶ Engines CFM56, LEAP B, V2500, LEAP A, GTF • CFM56 shop visits (aftermarket) increasing (B737/A320) ̶ Engine time on wing driving MRO growth ̶ Still in production/25+ year lifecycle AEROSPACE TRENDSREVENUES ($M)1 36 OEM 108 110 117 118 ~135 RSP MRO 295 330 296 288 ~330 2013 2014 2015 2016 2017E 2013 2014 2015 2016 2017E Aftermarket 1 Our 2017 full-year outlook is only as of our October 27, 2017 earnings release and is not being updated or affirmed at this time.
  • 37.
    Aerospace Product Lifecycle Focusedon Platform Transition and Managing Ramp 37 COST DEVELOPMENT EARLY PROD. MATURE PRODUCTION OUT OF PROD./SPARES GE9x Leap B Leap A/C A320Neo GTF Trent XWB Trent 1000 Genx 1B Genx 2B GE90 CFM56 Trent 700 CF6 NEW EMERGING & EARLY PROGRAMS OUT OF PRODUCTION SPARES LIFECYCLE NEW PLATFORMS Design Change Mgmt. Rate Readiness Dual Sourcing Learning Curve LEGACY PLATFORMS Pricing Pressure Cost Cycle Repair Development/ Service Network Spares Management V2500 Note: Company view.
  • 38.
    OEM Market Environment Well-Positionedwith Innovative Solutions and Services 38 1,035 1,035 1,110 1,165 1,288 401 403 411 404 372 1,436 1,590 1,704 1,812 1,884 2016 2017E 2018E 2019E 2020E Narrow Body Wide Body OEM Fcst COMMERCIAL AIRCRAFT DELIVERIES (UNITS) OEM SALES PER AIRCRAFT ($K)3 • Airbus and Boeing backlog at robust levels; equivalent to ~8 years of estimated production • 2016 cancellation activity within historical rates and relatively low as percent of backlog • Strong commercial aircraft deliveries forecasted over next several years; narrow body & A350 ramping, 777 in transition Boeing 777 (GE90) ~$900 Boeing 787 (GEnx-1B/Trent 1000) ~$200 Airbus A350 (XWB) ~$500 Airbus A320neo (LEAP A) ~$200 to ~$250 Boeing 737 (LEAP B) Opportunity 1 1 2 1 Source: 2016 Actual–Airbus, Boeing. Teal Group September 2017, OEM planned build rates. 2 Boeing and Airbus 3 OEM Sales per Aircraft is a directional metric as it can be highly variable over time due to a range of factors including changes in types of material and material costs, redesign of parts, quantity of parts per engine, percentage of work directed to suppliers, engine spares, and cost schedules agreed to under contract with the engine OEMs.
  • 39.
    Opportunities for Growth BroadenCustomer Base and Product Lines 39 PROGRAMS CUSTOMERS PRODUCT LINES NARROW BODY A320neo (Leap A/PW1100G) 737 MAX (Leap B) E2 (PW1700/1900G) WIDE BODY 777x (GE9x) 787 (Genx/T1000) A350 (Trent XWB) AIRFRAME NACELLE ENGINE► AIRBUS ► BOEING ► GE AVIATION ► ROLLS-ROYCE ► UTC AEROSPACE SYSTEMS ► SAFRAN ► PRATT & WHITNEY ► MTU AERO ENGINES ► KAWASAKI HEAVY INDUSTRIES ► MITSUBISHI HEAVY INDUSTRIES ► GKN AEROSPACE Active Participation
  • 40.
    Aftermarket Drivers • Growingpassenger traffic • Highly regulated industry by FAA, EASA and CAAC1 • Source approval controlled by customers • Niche capabilities on large engine cases • CFM56: most successful commercial engine ̶ Installed base: ~22,000 engines ̶ 2016: ~1,700 built ̶ 2017: ~1,300 to be built ̶ Latest model (5B & 7B) just entering 1st shop visit cycle • Product Lifecycle: ~25 years Estimated 5-Year CAGR of ~4% to 5%2 401 FAA: U.S. Federal Aviation Administration, EASA: European Aviation Safety Agency and CAAC: Civil Aviation Administration of China. 2 ICF Estimates.
  • 41.
    Aftermarket Programs 41 Revenue SharingPrograms (RSPs) • Exclusivity to supply GE certain aftermarket spare parts • Covers life of CFM56 & CF6 engine programs • Agreements: 13; entered between 2003 - 2007 • Investment: $294M; amortized as a reduction of sales Component Repair Programs (CRPs) • License for GE-certified repair of certain critical components; enables access to serve global market • Covers life of CFM56, CF6 & CF34 engine programs • Agreements: 3; entered between 2013 - 2015 • Investment: $112M; amortized as a reduction of sales Programs Allow Us to Participate in OEM Certified Aftermarket Shop Visits Fleet Size 1 Source: Shop Visit Forecast, ICF April 2017; Fleet Size Forecast ICF, October 2016. 2.2 2.4 2.4 2.5 2.6 21.6 22.2 22.5 22.4 21.8 5 10 15 20 25 1.0 1.5 2.0 2.5 3.0 2016 2017E 2018E 2019E 2020E FleetSize(000s) EstimatedShopVisits(000s) CFM56 Family of Engines1 0.7 0.7 0.7 0.6 0.6 3.3 3.2 3.0 2.9 2.8 0 1 2 3 4 0.3 0.5 0.7 0.9 2016 2017E 2018E 2019E 2020E FleetSize(000s) EstimatedShopVisits(000s) CF6 Family of Engines1
  • 42.
    Aerospace Strategic PathForward Priorities Established around Growth Opportunities 42 Execution • Utilize Barnes Enterprise System to Drive Our Competitive Advantage • New Product Introduction Driving Customer Excellence through Speed and Agility • Focus on Growth in Engine, Nacelle and Airframe • Optimize Footprint and Expand Customer Base Fabrication • Flawless Execution of LEAP Program in Support of GE Ramp • Create Further Opportunities through Flexibility and Performance LEAP Program Aftermarket Business • Enhance OEM and Key Airline Relationships to Achieve Growth Expectations • Build on Regional Capability to Enhance Growth Opportunities • Focus on Opportunities that Create Value with IP and Content on Strategic ProgramsAcquisitions
  • 43.
    Why Invest InBarnes Group?
  • 44.
    A Strong Legacyand Bright Future 44 Business Transformation Delivering Enhanced Growth and Margin Performance Building Portfolio of Differentiated Technologies and Highly-engineered Products Reinvigorating Our Innovation Process with a Significant Focus on IP Clear Strategy to Drive Sustainable, Long-term Profitable Growth Passionate, Experienced Leadership Team Fostering Cultural Transformation
  • 45.
    Our Strategy isWorking; Business Performance Significantly Improved Significant Opportunity as We Continue Our Journey 45 Focused on Sustainable, Long- term Profitable Growth 1 Well-positioned with Significant Competitive Advantages 2 Barnes Enterprise System Creates Scalable, Repeatable Processes 3 Talent Management to Align and Develop a High-performing Global Workforce Innovation Drives Differentiated New Products, Services and Processes 4 5
  • 46.
  • 47.
    Forward-Looking Statements This presentationcontains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements often address our expected future operating and financial performance and financial condition, and often contain words such as "anticipate," "believe," "expect," "plan," "estimate," "project," and similar terms. These forward-looking statements do not constitute guarantees of future performance and are subject to a variety of risks and uncertainties that may cause actual results to differ materially from those expressed in the forward-looking statements. These include, among others: difficulty maintaining relationships with employees, including unionized employees, customers, distributors, suppliers, business partners or governmental entities; failure to successfully negotiate collective bargaining agreements or potential strikes, work stoppages or other similar events; difficulties leveraging market opportunities; changes in market demand for our products and services; rapid technological and market change; the ability to protect intellectual property rights; introduction or development of new products or transfer of work; higher risks in global operations and markets; the impact of intense competition; acts of terrorism, cybersecurity attacks or intrusions that could adversely impact our businesses; uncertainties relating to conditions in financial markets; currency fluctuations and foreign currency exposure; future financial performance of the industries or customers that we serve; our dependence upon revenues and earnings from a small number of significant customers; a major loss of customers; inability to realize expected sales or profits from existing backlog due to a range of factors, including changes in customer sourcing decisions, material changes, production schedules and volumes of specific programs; the impact of government budget and funding decisions; changes in raw material or product prices and availability; integration of acquired businesses; restructuring costs or savings; the continuing impact of prior acquisitions and divestitures; and any other future strategic actions, including acquisitions, divestitures, restructurings, or strategic business realignments, and our ability to achieve the financial and operational targets set in connection with any such actions; the outcome of pending and future legal, governmental, or regulatory proceedings and contingencies and uninsured claims; product liabilities; future repurchases of common stock; future levels of indebtedness; and numerous other matters of a global, regional or national scale, including those of a political, economic, business, competitive, environmental, regulatory and public health nature; and other risks and uncertainties described in documents filed with or furnished to the Securities and Exchange Commission ("SEC") by the Company, including, among others, those in the Management's Discussion and Analysis of Financial Condition and Results of Operations and Risk Factors sections of the Company's filings. The Company assumes no obligation to update its forward-looking statements. 47
  • 48.
    Non-GAAP Financial MeasureReconciliation (1 of 5)Unaudited) 48 (Dollars in thousands) (Unaudited) YTD SEP Twelve Months Ended December 31, 2017 2016 2015 2014 2013 SEGMENT RESULTS Operating Profit - Industrial Segment (GAAP) $ 100,154 $ 129,677 $ 102,950 $ 108,360 $ 71,888 Männer short-term purchase accounting adjustments - - 1,481 8,504 5,456 Thermoplay short-term purchase accounting adjustments - - 1,167 - - FOBOHA short-term purchase accounting adjustments 2,294 2,316 - - - Acquisition transaction costs - 1,164 970 - 1,823 Restructuring/reduction in force (1,392) - 3,448 6,020 - Pension lump-sum settlement charge - - 7,450 - - CEO transition costs - - - - 6,589 Operating Profit - Industrial Segment as adjusted (Non-GAAP)1 $ 101,056 $ 133,157 $ 117,466 $ 122,884 $ 85,756 Operating Margin - Industrial Segment (GAAP) 13.9% 15.7% 13.2% 13.2% 10.5% Operating Margin - Industrial Segment as adjusted (Non-GAAP)1 14.0% 16.2% 15.0% 14.9% 12.5% Operating Profit - Aerospace Segment (GAAP) $ 60,519 $ 62,501 $ 65,446 $ 71,614 $ 51,313 Restructuring/reduction in force - - 774 - - Contract termination dispute charges - 3,005 2,788 - - Contract termination arbitration award - (1,371) - - - Pension lump-sum settlement charge - - 2,405 - - CEO transition costs - - - - 3,903 Operating Profit - Aerospace Segment as adjusted (Non-GAAP)1 $ 60,519 $ 64,135 $ 71,413 $ 71,614 $ 55,216 Operating Margin - Aerospace Segment (GAAP) 17.6% 15.4% 15.9% 16.3% 12.7% Operating Margin - Aerospace Segment as adjusted (Non-GAAP)1 17.6% 15.8% 17.3% 16.3% 13.7%
  • 49.
    Non-GAAP Financial MeasureReconciliation (2 of 5)) 49 (Dollars in thousands, expect per share data) (Unaudited) YTD SEP Twelve Months Ended December 31, 2017 2016 2015 2014 2013 CONSOLIDATED RESULTS Operating Income (GAAP) $ 160,673 $ 192,178 $ 168,396 $ 179,974 $ 123,201 Männer short-term purchase accounting adjustments - - 1,481 8,504 5,456 Thermoplay short-term purchase accounting adjustments - - 1,167 - - FOBOHA short-term purchase accounting adjustments 2,294 2,316 - - - Acquisition transaction costs - 1,164 970 - 1,823 Restructuring/reduction in force (1,392) - 4,222 6,020 - Contract termination dispute charges - 3,005 2,788 - - Contract termination arbitration award - (1,371) - - - Pension lump-sum settlement charge - - 9,856 - - CEO transition costs - - - - 10,492 Operating Income as adjusted (Non-GAAP)1 $ 161,575 $ 197,292 $ 188,880 $ 194,498 $ 140,972 Operating Margin (GAAP) 15.1% 15.6% 14.1% 14.3% 11.3% Operating Margin as adjusted (Non-GAAP)1 15.2% 16.0% 15.8% 15.4% 12.9% Diluted Income from Continuing Operations per Share (GAAP) $ 2.17 $ 2.48 $ 2.19 $ 2.16 $ 1.31 Männer short-term purchase accounting adjustments - - 0.02 0.11 0.07 Thermoplay short-term purchase accounting adjustments - - 0.01 - - FOBOHA short-term purchase accounting adjustments 0.03 0.03 - - - Acquisition transaction costs - 0.02 0.02 - 0.03 Restructuring/reduction in force (0.03) - 0.05 0.07 - Contract termination dispute charge - 0.03 0.03 - - Contract termination arbitration award - (0.03) - - - Pension lump-sum settlement charge - - 0.11 - - Tax benefit recognized for refund of withholding taxes - - (0.05) - - CEO transition costs - - - - 0.12 April 2013 tax court decision - - - - 0.30 Diluted Income from Continuing Operations per Share as adjusted (Non-GAAP)1 $ 2.17 $ 2.53 $ 2.38 $ 2.34 $ 1.83
  • 50.
    NOTES: 1 The Companyhas excluded the following from its historical "as adjusted" financial measurements: 2017: 1) Short-term purchase accounting adjustments related to its FOBOHA acquisition and 2) the net gain from restructuring actions related to the closure and consolidation of two manufacturing facilities within the Industrial segment. 2016: 1) Transaction costs related to its FOBOHA acquisition, 2) short-term purchase accounting adjustments related to its FOBOHA acquisition, 3) charges related to the contract termination dispute and 4) operating income related to the contract termination arbitration award and the non-operating interest income awarded. 2015: 1) Short-term purchase accounting adjustments related to its Männer and Thermoplay acquisitions, 2) transaction costs related to its Thermoplay and Priamus acquisitions, 3) restructuring and workforce reduction charges, 4) certain charges recorded in the Aerospace segment in the third quarter of 2015 related to a contract termination dispute following a customer sourcing decision, 5) the pension lump-sum settlement charge recorded in 2015 and 6) a tax benefit recognized in the third quarter of 2015 related to a refund of withholding taxes that were previously paid and included in tax expense in prior years. 2014: 1) Short-term purchase accounting adjustments related to its Männer acquisition and 2) restructuring charges related to the closure of production operations at its Associated Spring facility located in Saline, Michigan. 2013: 1) Short-term purchase accounting adjustments related to its Männer acquisition, 2) transaction costs related to its Männer acquisition, 3) CEO transition costs associated with the modification of outstanding equity awards and 4) the tax charge associated with the April 2013 tax court decision. The tax effect of these items was calculated based on the respective tax jurisdiction of each item. Management believes that these adjustments provide the Company and its investors with an indication of our baseline performance excluding items that are not considered to be reflective of our ongoing results. Management does not intend results excluding the adjustments to represent results as defined by GAAP, and the reader should not consider it as an alternative measurement calculated in accordance with GAAP, or as an indicator of the Company's performance. Accordingly, the measurements have limitations depending on their use. Non-GAAP Financial Measure Reconciliation (3 of 5)s 50
  • 51.
    Non-GAAP Financial MeasureReconciliation (4 of 5)s 2017 Full-Year Outlook Diluted Net Income per Share (GAAP) $ 2.83 to $ 2.88 FOBOHA short-term purchase accounting adjustments 0.03 Restructuring actions (0.02) Diluted Net Income per Share as adjusted (Non-GAAP)1 $ 2.84 $ 2.89 NOTES: 1 The Company has excluded short-term purchase accounting adjustments related to its FOBOHA acquisition and the net gain from restructuring actions related to the closure and consolidation of two manufacturing facilities within the Industrial segment from its "as adjusted" financial measurements for 2017. 51
  • 52.
    Non-GAAP Financial MeasureReconciliation (5 of 5) 52 (Dollars in thousands) (Unaudited) YTD SEP Twelve Months Ended December 31, 2017 2016 2015 2014 2013 FREE CASH FLOW (FCF): Net cash provided by operating activities1 $ 167,763 $ 217,646 $ 217,475 $ 196,153 $ 16,079 Capital expenditures (41,957) (47,577) (45,982) (57,365) (57,304) Free cash flow2 $ 125,806 $ 170,069 $ 171,493 $ 138,788 $ (41,225) Free cash flow to net income cash conversion ratio (as adjusted): Free cash flow (from above) $ 125,806 $ 170,069 $ 171,493 $ 138,788 $ (41,225) Income tax payments related to the gain on the sale of BDNA - - - - 130,004 Income tax reduction related to the gain on the sale of BDNA - - - (12,608) - Free cash flow (as adjusted)3 125,806 170,069 171,493 126,180 88,779 Net income 118,663 135,601 121,380 118,370 270,527 Gain on the sale of BDNA, net of tax - - - - (195,317) Pension lump-sum settlement charge, net of tax - - 6,182 - - Net income (as adjusted)3 $ 118,663 $ 135,601 $ 127,562 $ 118,370 $ 75,210 Free cash flow to net income cash conversion ratio (as adjusted)3 106% 125% 134% 107% 118% NOTES: 1 The Company has reclassified certain components of 2013 to 2015 Net cash provided by operating activities to reflect new accounting guidance related to certain aspects of share-based payments to employees. 2 The Company defines free cash flow as net cash provided by operating activities less capital expenditures. The Company believes that the free cash flow metric is useful to investors and management as a measure of cash generated by business operations that can be used to invest in future growth, pay dividends, repurchase stock and reduce debt. This metric can also be used to evaluate the Company's ability to generate cash flow from business operations and the impact that this cash flow has on the Company's liquidity. 3 For the purpose of calculating the cash conversion ratio, the Company has excluded the following: 2015: The pension lump-sum settlement charge, net of tax, from net income. 2014: The utilization of the year-end 2013 income tax receivable (related to the gain on the sale of BDNA) to offset the 2014 payments from FCF. 2013: The income tax payments related to the gain on the sale of BDNA made during 2013 from FCF and the gain on the sale of BDNA from net income. Adjusted cash from operations in 2013 and 2014 of $146M and $183M also excluded these items.