B Barnes Group Inc

Fourth Quarter 2017:

• Sales of $373 million, up 15% from last year’s fourth quarter; Organic Sales up 10%
• Operating Margin of 13.3%; Adjusted Operating Margin of 13.7%, down 230 bps
• GAAP EPS of ($1.10) including a $1.79 charge for new U.S. tax legislation
• Adjusted EPS of $0.71, up 6% versus prior year

Full Year 2017:

• Sales of $1,436 million, up 17% from 2016; Full Year Organic Sales up 11%
• Operating Margin of 14.6%; Adjusted Operating Margin of 14.8%, down 120 bps
• GAAP EPS of $1.09 including a $1.77 charge for new U.S. tax legislation
• Adjusted EPS of $2.88, up 14% from 2016

2018 Outlook:

• 2018 Expected Sales Growth of 4% to 6%; Organic Sales Growth of 3% to 5%
• 2018 Adjusted Net Income of $2.98 to $3.13 per Share; Up 3% to 9% from 2017 Adjusted Net Income of $2.88 per Share

Barnes Group Inc. (NYSE: B), a global provider of highly engineered products and differentiated industrial technologies, today reported financial results for the fourth quarter and full year 2017.

Fourth quarter 2017 net sales of $373 million were up 15% from $324 million in the prior year period driven by strong organic sales growth (1) of 10%. Foreign exchange favorably impacted sales by approximately 4% while acquisition sales contributed 1%. Net loss for the fourth quarter was ($59.2) million, or ($1.10) per diluted share, compared to net income of $36.7 million, or $0.67 per diluted share, a year ago. In the fourth quarter of 2017, the Company recorded a charge of $96.7 million related to the new U.S. tax legislation. On an adjusted basis, net income was $0.71 per diluted share, up 6% from $0.67 last year. Adjusted net income per diluted share in the fourth quarter of 2017 excludes a $1.79 charge related to new U.S. tax laws and $0.02 per share related to restructuring actions within our Industrial Segment. Fourth quarter 2016 adjusted net income per share excludes $0.03 of FOBOHA short-term purchase accounting adjustments in our Industrial Segment and a $0.03 benefit related to a contract termination dispute in our Aerospace Segment.

For the full year 2017, Barnes Group generated net sales of $1,436 million, up 17% from $1,231 million in the prior year. Full year organic sales were up 11%, while acquisitions contributed 5% and favorable foreign exchange provided 1%. Net income for the year was $59.4 million, or $1.09 per diluted share, compared to $135.6 million, or $2.48 per diluted share, a year ago. On an adjusted basis, net income was $2.88 per diluted share, up 14% from $2.53 last year. For 2017, adjusted net income per share excludes a $1.77 charge related to tax law changes, $0.03 of FOBOHA short-term purchase accounting adjustments and a $0.01 benefit from restructuring actions. Adjusted net income per share for 2016 excludes $0.05 of FOBOHA short-term purchase accounting adjustments and acquisition transaction costs in our Industrial Segment and a contract termination arbitration award which offset related charges in our Aerospace Segment.

A table reconciling 2017 and 2016 non-GAAP adjusted results presented in this release to the Company’s GAAP results is included at the end of this press release.

“Barnes Group delivered a strong 2017 with double-digit organic sales and adjusted earnings per share growth,” said Patrick J. Dempsey, President and Chief Executive Officer of Barnes Group Inc. “Our sustained focus on enhancing our portfolio and pipeline of innovative products and services, advancing the Barnes Enterprise System (“BES”), and developing a high-performing global organization has resulted in continued progress along our transformation journey and positions us to perform well moving forward.”

“Accordingly, we expect 2018 to be another solid year as generally favorable end markets coupled with our BES emphasis on driving commercial, operational and financial excellence across our Company are anticipated to drive revenue, margin, and earnings growth,” added Dempsey.

Industrial

• Fourth quarter 2017 sales were $254.3 million, up 18% from $215.7 million in the prior year period. Organic sales increased by 11%, with growth across all three business units; Molding Solutions, Nitrogen Gas Products, and Engineered Components. Favorable foreign exchange increased sales by approximately $13.1 million, or 6%, while acquisition revenues were $2.6 million, or 1%.
• Operating profit in the fourth quarter was $26.9 million, down 11% from $30.2 million in the prior year period, as continuing higher costs incurred on certain programs within Engineered Components’ Associated Spring business and incentive compensation at select SBUs were only partially offset by the profit benefit of increased sales and the absence of $1.8 million in FOBOHA short-term purchase accounting adjustments taken last year. The fourth quarter of 2017 includes restructuring related costs of $1.4 million related to two previously announced plant consolidations. Excluding this item, adjusted operating profit was $28.3 million, down 12% from an adjusted $32.0 million a year ago. Adjusted operating margin was 11.1%, down 370 bps, driven by lower productivity, primarily at Engineered Components, and a low margin contribution from the FOBOHA business.
• Full year 2017 sales were $973.9 million, up 18% from $824.2 million last year. Organic sales were up 10%, while acquisitions contributed 7% and favorable foreign exchange contributed 1%. Full year operating profit of $127.1 million was down 2% from $129.7 million in the prior year. On an adjusted basis, operating profit was $129.4 million for 2017 versus $133.2 million a year ago, a decrease of 3%. Adjusted operating margin was 13.3%, down 290 bps from last year.

Aerospace

• Fourth quarter 2017 sales were $118.7 million, up 9% from $108.5 million in the same period last year. Aerospace original equipment manufacturing (“OEM”) sales increased 6% due to the continuing ramp of new engine programs. Aerospace aftermarket sales increased 17% from continuing growth in maintenance, repair and overhaul (“MRO”), and spare parts sales.
• Operating profit was $22.7 million for the fourth quarter of 2017, up 7% as compared to $21.1 million in the prior year period, reflecting the profit impact from higher sales volumes and productivity benefits, partially offset by scheduled price deflation. Excluding a contract termination award of $1.4 million in the fourth quarter of 2016, adjusted operating profit was up 15% from $19.8 million a year ago while operating margin of 19.1% was up 90 bps from an adjusted 18.2% a year ago.
• Full year 2017 sales were $462.6 million, up 14% from $406.5 million last year. Operating profit was $83.2 million, up 33%, versus $62.5 million a year ago. Full year 2017 Aerospace operating profit was up 30% versus an adjusted $64.1 in the prior year. Operating margin was 18% versus an adjusted 15.8% last year, up 220 bps.
• Aerospace OEM backlog ended 2017 at $714 million, up 14% compared to a year ago and up 1% sequentially from the third quarter of 2017. The Company expects to ship approximately 50% of this backlog over the next 12 months.

Additional Information

• Full year 2017 interest expense increased $2.7 million to $14.6 million primarily as a result of a higher average effective interest rate versus a year ago.
• Other income, net for the year decreased $2.3 million versus a year ago primarily due to the absence of $1.4 million of interest income related to the contract termination arbitration award in 2016.
• The Company’s effective tax rate from continuing operations was 69.6% in 2017 compared with 25.7% in 2016. The increase in the 2017 effective tax rate is primarily due to a provisional $96.7 million income tax charge recorded as a result of the Tax Cuts and Jobs Act (the Act) enacted in December 2017. Excluding the impact of the Act, the Company’s 2017 effective tax rate would have been 20.2%. The comparable decrease from 25.7% to 20.2% is due to the adjustment of the Swiss valuation reserves worth $0.12 of earnings per share, the settlement of tax audits and closure of tax years for various tax jurisdictions, and the change in the mix of earnings. These items were partially offset by the expiration of certain tax holidays.

2018 Outlook

Barnes Group expects 2018 total revenue growth of 4% to 6%, with organic sales growth of 3% to 5%. Foreign exchange is anticipated to benefit revenues by approximately 1% for the year. Operating margin is forecasted to be in the range of 15.5% to 16.5%. Earnings are expected to be in the range of $2.98 to $3.13 per diluted share, up 3% to 9% from 2017’s adjusted diluted earnings per share of $2.88. Further, the Company anticipates capital expenditures of between $60 million to $65 million and cash conversion of greater than 100% of net income. Based upon our forecasted geographic mix of earnings, the effective tax rate for 2018 is expected to be between 25% and 26%. The Company does not expect the new Revenue Recognition standard to have a material impact on future revenues or net income.

“2017 was a good year for Barnes Group even as we dealt with some operational challenges within one of our Industrial businesses. As we move beyond this in the first half of 2018, we anticipate solid revenue growth, improved financial performance, and good cash generation. With our supportive balance sheet, we will continue to invest in organic growth opportunities and strategic acquisitions that position us well for the future,” said Christopher J. Stephens, Jr., Senior Vice President, Finance and Chief Financial Officer, Barnes Group Inc.

Conference Call Information

Barnes Group Inc. will conduct a conference call with investors to discuss fourth quarter and full year 2017 results at 8:30 a.m. ET today, February 16, 2018. The public may access the conference through a live audio webcast available on the Investor Relations section of Barnes Group’s website at www.BGInc.com. The conference is also available by direct dial at (866) 393-4306 in the U.S. or (734) 385-2616 outside of the U.S.; Conference ID 3989187. Supplemental materials will be posted to the Investor Relations section of the Company's website prior to the conference call.

In addition, the call will be recorded and available for playback from 12:00 p.m. (ET) on Friday, February 16, 2018 until 11:59 p.m. (ET) on Friday, February 23, 2018, by dialing (404) 537-3406; Conference ID 3989187.

Note:(1) Organic sales growth represents the total reported sales increase within the Company’s ongoing businesses less the impact of foreign currency translation and acquisition and divestitures completed in the preceding twelve months.

About Barnes GroupBarnes Group Inc. (NYSE: B) is a global provider of highly engineered products, differentiated industrial technologies, and innovative solutions, serving a wide range of end markets and customers. Its specialized products and services are used in far-reaching applications including aerospace, transportation, manufacturing, healthcare, and packaging. Barnes Group’s skilled and dedicated employees around the globe are committed to the highest performance standards and achieving consistent, sustainable profitable growth. For more information, visit www.BGInc.com.

Forward-Looking Statements

This press release 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; the impact of new or revised tax laws and regulations; 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.

                                    BARNES GROUP INC. CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data) (Unaudited)   Three months ended December 31, Twelve months ended December 31, 2017 2016

%Change

2017 2016

%Change

  Net sales $ 373,048 $ 324,167 15.1 $ 1,436,499 $ 1,230,754 16.7   Cost of sales 246,933 208,271 18.6 939,288 790,299 18.9 Selling and administrative expenses   76,511     64,522   18.6   286,933     248,277   15.6     323,444     272,793   18.6   1,226,221     1,038,576   18.1   Operating income 49,604 51,374 (3.4 ) 210,278 192,178 9.4   Operating margin 13.3 % 15.8 % 14.6 % 15.6 %   Interest expense 3,934 3,057 28.7 14,571 11,883 22.6 Other expense (income), net   (767 )   (2,351 ) NM   8     (2,326 ) NM   Income before income taxes 46,437 50,668 (8.4 ) 195,699 182,621 7.2   Income taxes   105,685     13,954   NM   136,284     47,020   NM   Net (loss) income $ (59,248 ) $ 36,714   NM $ 59,415   $ 135,601   (56.2 )   Common dividends $ 7,509   $ 6,991   7.4 $ 29,551   $ 27,435   7.7   Per common share:   Net (loss) income: Basic $ (1.10 ) $ 0.68 NM $ 1.10 $ 2.50 (56.0 ) Diluted (1.10 ) 0.67 NM 1.09 2.48 (56.0 ) Dividends 0.14 0.13 7.7 0.55 0.51 7.8   Weighted average common shares outstanding: Basic 53,874,164 54,133,060 (0.5 ) 54,073,407 54,191,013 (0.2 ) Diluted 53,874,164 54,574,734 (1.3 ) 54,605,298 54,631,313 (0.0 )   NM - Not Meaningful              

BARNES GROUP INC.

OPERATIONS BY REPORTABLE BUSINESS SEGMENT

(Dollars in thousands)

(Unaudited)

  Three months ended December 31, Twelve months ended December 31, 2017       2016      

%Change

2017       2016      

%Change

Net sales           Industrial $ 254,334 $ 215,682 17.9 $ 973,890 $ 824,216 18.2   Aerospace 118,718 108,486 9.4 462,617 406,541 13.8   Intersegment sales   (4 )   (1 )   (8 )   (3 )   Total net sales $ 373,048   $ 324,167   15.1 $ 1,436,499   $ 1,230,754   16.7   Operating profit   Industrial $ 26,899 $ 30,232 (11.0 ) $ 127,056 $ 129,677 (2.0 )   Aerospace   22,705     21,142   7.4   83,222     62,501   33.2   Total operating profit $ 49,604   $ 51,374   (3.4 ) $ 210,278   $ 192,178   9.4   Operating margin Change Change   Industrial 10.6 % 14.0 % (340 ) bps. 13.0 % 15.7 % (270 ) bps.   Aerospace   19.1 %   19.5 % (40 ) bps.   18.0 %   15.4 % 260 bps.   Total operating margin 13.3 % 15.8 % (250 ) bps. 14.6 % 15.6 % (100 ) bps.         BARNES GROUP INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited)      

December 31,2017

December 31,2016

Assets Current assets Cash and cash equivalents $ 145,290 $ 66,447 Accounts receivable 348,943 287,123 Inventories 241,962 227,759 Prepaid expenses and other current assets   32,526   27,163   Total current assets 768,721 608,492     Deferred income taxes 12,161 25,433 Property, plant and equipment, net 359,298 334,489 Goodwill 690,223 633,436 Other intangible assets, net 507,042 522,258 Other assets   28,271   13,431   Total assets $ 2,365,716 $ 2,137,539   Liabilities and Stockholders' Equity Current liabilities Notes and overdrafts payable $ 5,669 $ 30,825 Accounts payable 127,521 112,024 Accrued liabilities 181,241 156,967 Long-term debt - current   1,330   2,067   Total current liabilities 315,761 301,883   Long-term debt 525,597 468,062 Accrued retirement benefits 89,000 109,350 Deferred income taxes 73,505 66,446 Long-term tax liability 79,770 - Other liabilities 21,762 23,440   Total stockholders' equity   1,260,321   1,168,358   Total liabilities and stockholders' equity $ 2,365,716 $ 2,137,539         BARNES GROUP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)      

Twelve months endedDecember 31,

2017 2016 Operating activities: Net income $ 59,415 $ 135,601 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 90,150 80,154 Gain on disposition of property, plant and equipment (246 ) (349 ) Stock compensation expense 12,279 11,493 Effect of U.S. tax reform on deferred tax assets 4,152 - Changes in assets and liabilities, net of the effects of acquisitions: Accounts receivable (50,082 ) (23,057 ) Inventories (173 ) 1,989 Prepaid expenses and other current assets (4,241 ) 569 Accounts payable 12,018 11,778 Accrued liabilities 14,439 15,825 Deferred income taxes 3,589 (2,210 ) Long-term retirement benefits (16,349 ) (15,492 ) Long-term tax liability 79,770 - Other   (801 )   1,345     Net cash provided by operating activities 203,920 217,646   Investing activities: Proceeds from disposition of property, plant and equipment 2,594 780 Capital expenditures (58,712 ) (47,577 ) Business acquisitions, net of cash acquired (8,922 ) (128,613 ) Component Repair Program payments - (4,100 ) Other   (3,000 )   -     Net cash used by investing activities (68,040 ) (179,510 )   Financing activities: Net change in other borrowings (25,304 ) 8,375 Payments on long-term debt (73,161 ) (321,506 ) Proceeds from the issuance of long-term debt 129,118 303,277 Proceeds from the issuance of common stock 2,408 4,611 Common stock repurchases (40,791 ) (20,520 ) Dividends paid (29,551 ) (27,435 ) Withholding taxes paid on stock issuances (5,380 ) (4,885 ) Other   (21,090 )   4,771     Net cash used by financing activities (63,751 ) (53,312 )   Effect of exchange rate changes on cash flows   6,714     (2,303 )   Increase (decrease) in cash and cash equivalents 78,843 (17,479 )   Cash and cash equivalents at beginning of year   66,447     83,926     Cash and cash equivalents at end of year $ 145,290   $ 66,447       BARNES GROUP INC. RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW (Dollars in thousands) (Unaudited)            

Twelve months endedDecember 31,

2017 2016 Free cash flow:   Net cash provided by operating activities $ 203,920 $ 217,646 Capital expenditures   (58,712 )   (47,577 )   Free cash flow(1) $ 145,208   $ 170,069     Free cash flow to net income cash conversion ratio (as adjusted):   Net income 59,415 135,601 Effects of U.S. tax reform   96,700     -   Net income (as adjusted)(2) $ 156,115   $ 135,601     Free cash flow to net income cash conversion ratio (as adjusted)(2) 93 % 125 %

Notes:(1) 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.

(2) For the purpose of calculating the cash conversion ratio, the Company has excluded the effects of U.S. tax reform, commonly referred to as the Tax Cuts and Jobs Act, from 2017 net income.

                                          BARNES GROUP INC. NON-GAAP FINANCIAL MEASURE RECONCILIATION (Dollars in thousands, except per share data) (Unaudited)   Three months ended December 31, Twelve months ended December 31, 2017 2016 % Change 2017 2016 % Change

SEGMENT RESULTS

Operating Profit - Industrial Segment (GAAP) $ 26,899 $ 30,232 (11.0 ) $ 127,056 $ 129,677 (2.0 )   Acquisition transaction costs - (14 ) - 1,164 FOBOHA short-term purchase accounting adjustments - 1,786 2,294 2,316 Restructuring actions   1,406     -     13     -     Operating Profit - Industrial Segment as adjusted (Non-GAAP) (1) $ 28,305   $ 32,004   (11.6 ) $ 129,363   $ 133,157   (2.8 )   Operating Margin - Industrial Segment (GAAP) 10.6 % 14.0 % (340 ) bps. 13.0 % 15.7 % (270 ) bps. Operating Margin - Industrial Segment as adjusted (Non-GAAP) (1) 11.1 % 14.8 % (370 ) bps. 13.3 % 16.2 % (290 ) bps.   Operating Profit - Aerospace Segment (GAAP) $ 22,705 $ 21,142 7.4 $ 83,222 $ 62,501 33.2   Contract termination dispute charges - 7 - 3,005 Contract termination arbitration award   -     (1,371 )   -     (1,371 )   Operating Profit - Aerospace Segment as adjusted (Non-GAAP) (1) $ 22,705   $ 19,778   14.8 $ 83,222   $ 64,135   29.8   Operating Margin - Aerospace Segment (GAAP) 19.1 % 19.5 % (40 ) bps. 18.0 % 15.4 % 260 bps. Operating Margin - Aerospace Segment as adjusted (Non-GAAP) (1)         19.1 %         18.2 %         90       bps.         18.0 %         15.8 %       220       bps.  

CONSOLIDATED RESULTS

Operating Income (GAAP) $ 49,604 $ 51,374 (3.4 ) $ 210,278 $ 192,178 9.4   Acquisition transaction costs - (14 ) - 1,164 FOBOHA short-term purchase accounting adjustments - 1,786 2,294 2,316 Restructuring actions 1,406 - 13 - Contract termination dispute charges - 7 - 3,005 Contract termination arbitration award   -     (1,371 )   -     (1,371 )   Operating Income as adjusted (Non-GAAP) (1) $ 51,010   $ 51,782   (1.5 ) $ 212,585   $ 197,292   7.8   Operating Margin (GAAP) 13.3 % 15.8 % (250 ) bps. 14.6 % 15.6 % (100 ) bps. Operating Margin as adjusted (Non-GAAP) (1)         13.7 %         16.0 %         (230 )     bps.         14.8 %         16.0 %       (120 )     bps.   Diluted Net (Loss) Income per Share (GAAP) $ (1.10 ) $ 0.67 NM $ 1.09 $ 2.48 (56.0 )   Acquisition transaction costs - - - 0.02 FOBOHA short-term purchase accounting adjustments - 0.03 0.03 0.03 Restructuring actions 0.02 - (0.01 ) - Contract termination dispute charges - - - 0.03 Contract termination arbitration award - (0.03 ) - (0.03 ) Effects of U.S. tax reform   1.79     -     1.77     -     Diluted Net Income per Share as adjusted (Non-GAAP) (1) $ 0.71   $ 0.67   6.0 $ 2.88   $ 2.53   13.8                                                                 Full-Year 2018 Outlook Diluted Net Income per Share (GAAP) $ 2.98 to $ 3.13                                                                 NM - Not Meaningful

Notes:(1) The Company has excluded the following from its "as adjusted" financial measurements for 2017: 1) short-term purchase accounting adjustments related to its FOBOHA acquisition, 2) the net loss (gain) from restructuring actions related to the closure and consolidation of two manufacturing facilities within the Industrial segment and 3) the effects of U.S. tax reform commonly referred to as the Tax Cuts and Jobs Act ($96,700). The Company has excluded the following from its "as adjusted" financial measurements for 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. The tax effects of these items, excluding the effects of U.S. tax reform which impacted tax expense directly, were calculated based on the respective tax jurisdiction of each item and range from approximately 19% to 37%. 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.

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Barnes Group Inc.William PittsDirector, Investor Relations860-583-7070