Barnes Group
Investor Overview
April 2015
Safe Harbor Statement
This presentation contains forward-looking statements. Forwardlooking 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. The Company assumes
no obligation to update our forward-looking statements.
References to adjusted financial results are non-GAAP measures. You will find a GAAP reconciliation
table at the end of this presentation.
-2-
Barnes Group Overview
• An International Industrial and Aerospace Manufacturer and Services Provider,
Serving a Wide Range of End Markets and Customers
• Two Global Business Segments: Industrial & Aerospace
• HQ in Bristol, CT with Global Operations in 60+ Locations; ~ 4,500 Employees
• 81 Consecutive Years of Paying a Dividend
1953
Sales pass $50M
1857
Wallace Barnes
founds company in
Bristol, CT making
springs for hoop
skirts and clocks
1968
Sales pass $100M
1946
Associated Spring
stock is offered OTC
1976
Name changes to
Barnes Group Inc.
1963
Associated Spring is
listed on NYSE
1923
Associated
Spring formed
1989
Sales pass $500M
2005
Sales pass $1B
1990
Aero Expands
in Singapore
1982
Barnes Aerospace
formed
2007
BGI celebrates its
150th anniversary
2012
Acquires
2002
Acquires
1999
Acquires
2013
Completes
Divestiture of
2006
Acquires
Acquires
A Long History … Significant Recent Transformation
-3-
2014 Segment Contribution
Sales – $1,262M
Aerospace
$440M
35%
Adjusted Operating Profit & Margin
$194M, 15.4%
Aero OEM
28%
Industrial
$822M
65%
Aero
Aftermarket
10%
Aerospace
$71M
16.3%
Industrial
$123M
Americas14.9%
56%
Highly Engineered Products and Innovative Solutions
Note: % Sales from Continuing Operations for the year ended December 31, 2014
-4-
2014 Sales by End Markets & Geography
End Markets
Transportation
32%
Aero OEM
26%
Industrial
33%
Aero
Aftermarket
9%
Geography
Europe
28%
Asia
17%
Americas
55%
Global, Diversified End Markets
Note: % Sales from Continuing Operations for the year ended December 31, 2014
-5-
Strategic Themes
• Seek Portfolio Enhancements to Drive
Shareholder Value
• Build On Intellectual Property (IP) as
Core Differentiator
• Choose End-Markets with Long Term
Sustainable, Profitable Growth
• Target Cyclical Moderation –
Multiple Platforms / Market Channels
• Expand Global Footprint / Access
• Enhance Barnes Enterprise System
• Invigorate Employee Development,
Empowerment and Engagement
Drive Sustainable Profitable Growth
-6-
Driving Operating Margin Expansion
Today’s Priorities
•
•
•
•
•
•
•
Differentiated Products and Processes
Organic Investment in Growth Platforms
Strategic Acquisitions
Leverage Commercial Aerospace
Extend Global Reach
5%
BES Next Generation
Avg. 2001-2005
Talent Development
Holding
Company
Approach
High
Teens
15.4%
2014
Expectation
Aligned
Portfolio
Executing Our Strategy to Deliver Improved Margin Performance
Note: 2001 to 2005 Average Operating Margin adjusted for the impact of accounting changes to be comparable to 2014. 2014 Adjusted Operating Margin from Continuing Operations. See GAAP
reconciliation table at the end of this presentation.
-7-
What Is BES?
BES is a Fully Integrated Operating
System that:
• Promotes a Culture of Employee
Engagement and Empowerment
Reflecting our Strong Corporate Values
• Ensures Alignment Across the
Organization Around a Common Vision
• Fosters Continuous Improvement and
Innovation in all of our Business
Processes
• Achieves Results that Drive Sustainable
Profitable Growth
BES is One of Our Greatest Competitive Advantages
-8-
Capital Allocation
CapEx and Depreciation
Drive Organic Growth
($ in Millions)
CapEx
Depreciation
• 2015F CapEx Range $55 to $60M
• About Half Targeted to Growth Programs
$57
$37 $37
$38 $34
2011
2012
$57
$34
2013
~$55
to
$60
~$40
$42
2014
2015F
Uses of Cash 2010 to 2014
CRP
$87
7%
M&A
$607
47%
Working
Capital
$120
9%
Share Repo
$158
12%
Dividends
$105
8%
• Target Highly Engineered Products & Services
• Expand Global Reach / Channel Penetration
Generate Shareholder Returns
($ in Millions)
CapEx
$218
17%
Strategic Portfolio Transformation
20%
Returned
Directly to
Shareholders
• Continue to Pay a Competitive Dividend
 Annualized Dividend Increased 9% in 2014
• Opportunistic Share Repurchase
 Primarily to Offset Dilution of Equity-Based
Compensation
Disciplined Capital Allocation
-9-
M&A Transactions
2010 Sales Mix (1)
2014 Sales Mix
Portfolio Evolution
Distribution
32%
Aerospace
32%
Year
Sales
Europe
2011
$105
N. America
2013
$300
Aerospace
35%
Industrial
65%
Divestitures
Industrial
36%
Sales (1)
$1,133M
Op. Inc. $ (1)
$86.5
Op. Margin (1)
7.6%
Share Price (2)
$20.67
Market Cap (2)
$1.1B
Sales
Acquisitions
2012
$160
2013
$110
$1,262M
+11%
Adj. Op. Inc. $
$194.5
+125%
Adj. Op. Margin
15.4%
+780 bps
Share Price (2)
$37.01
+79%
Market Cap (2)
$2.0B
+82%
($ in millions, ~ annual sales at time of transaction)
Portfolio Transformation Well Underway
(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) Share Price and Market Cap as of December 31, 2010 and 2014, respectively.
-10-
Industrial – Market Environment
• Leading Global Manufacturer of Highly-Engineered, High-Quality, Precision Components
• Focused on Custom Components and Solutions Employing Differentiated Industrial Technologies
• Value Added Engineering: Research, Design, Manufacturing, Testing and Evaluation
Transportation
General Industrial
•
•
•
Emerging Market Expansion – Growing with our Customers
Healthcare Requirements of an Aging Population
Markit Manufacturing PMIs for March 2015 …
US 55.7, Eurozone 52.2, Emerging Markets 50.1, Global 51.8
Barnes Group Participation
•
•
•
Advanced Technologies to Meet Fuel Efficiency Requirements
Highly-Engineered, Precision Components;
Penetration Rates Exceed Market Growth
Global Light Vehicle Production Forecasted to Increase …
+2% to 3% in 2015, +3% to 4% in 2016 & 2017 (IHS Automotive-Mar’15)
Barnes Group Participation
Manufacturing Expansion
Benefiting Tool & Die Market
Light Vehicles – Plastics
Healthcare for an Aging
Population
Light Vehicles – Metals
China Expansion
Gas Direct Injection (GDi)
Global Expansion
8 to 10 Speed Transmissions
Favorable Industrial End-Markets
-11-
Aerospace – Market Environment
Aerospace Provides Superior Technology-Based Manufacturing Solutions and
Comprehensive Component Overhaul and Repair Services to the World’s Major
Jet Engine Manufacturers, Commercial Airlines and Military Customers
Original Equipment Mfg.
•
•
•
Airbus & Boeing Experienced Strong Order Intake in ‘13 & ‘14
Airbus & Boeing Backlog at Levels Equivalent to >8 Years of
2015 Estimated Production
Strong Commercial Aircraft Deliveries Forecasted Over Next
Several Years; 787 & A350 Ramping, 777 in Transition
2,000
Aftermarket
•
•
•
•
•
Low Oil Prices May Accelerate Spend on Deferred Maintenance
Older Aircraft May See Greater Utilization
Global Airline Traffic Growth Remains Solid
Global Airline Profitability Strong and Growing
CFM56 Fleet Size and Shop Visits Expected to Grow; Fleet Size to Peak in
2018, Shop Visits to Peak in 2022 Benefiting RSPs and CRPs
Aircraft Deliveries (Units)
Wide-body
Narrow-body
1,500
1,000
500
0
2014
2015E 2016E 2017E 2018E 2019E
Sources: RBC Est. as of April 2015
Well-Positioned in Aerospace End-Markets
-12-
Aerospace Businesses
(with 2014 Segment Sales Contribution)
Barnes Aerospace OEM
Barnes Aerospace Aftermarket
Maintenance, Repair
& Overhaul
75%
•
•
Provides Highly Engineered
Machined and Fabricated
Components Using Super-alloys
Concurrent Engineering & NPI
Capabilities Deliver Value
•
•
•
OEM-Source Approved for Rolls
Royce, SNECMA, GE and Pratt &
Whitney Engines
FAA/EASA/CAAC Certified
Engine Component Repair
Stations
Component Repair Programs
(CRPs)
25%
Spare Parts
•
•
Revenue Sharing Programs
(RSPs)
Selected Aftermarket Spare
Parts for CFM56 and CF6
Engines
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
-13-
Barnes Aftermarket RSPs and CRPs
CFM56 Family of Engines
Shop Visits
Estimated Shop Visits (000s)
3.0
19.6
2.43
25
2.89
2.45
2.49
20
2.57
15
2.0
10
1.5
5
1.0
0
2013
2014
2015
2016
2017
2018
CF6 Family of Engines
Shop Visits
Estimated Shop Visits (000s)
Programs Allow Barnes Aerospace to Participate
in OEM Certified Aftermarket Business
24.5
2.77
2.5
Component Repair Programs (CRPs)
 Provides Licensing Rights from GE for Repair Services of Certain
Critical Components which Improve Overall Engine Efficiency
 Covers Life of CFM56 & CF6 Engine Programs
 Allows Access to Serve Global Market as OEM Certified Repair Service
 2 Agreements, Entered Between 2013 - 2014
 Investment of $107M, Amortized as a Reduction of Sales
 Expands Margin Profile of Aftermarket MRO Business
21.0
22.3
Fleet Size
24.2
23.4
1.0
3.8
3.7
3.5
0.96
Fleet Size
3.3
4
3.0
0.90
0.8
0.83
0.85
0.82
2.9
0.78
3
2
0.6
1
0.4
Fleet Size (000s)
 Exclusive Rights to Supply Certain Aftermarket Spare Parts to
General Electric (GE)
 Covers Life of CFM56 & CF6 Engines Programs
 13 Agreements, Entered Between 2003 - 2007
 Investment of $294M, Amortized as a Reduction of Sales
 Quarterly Net Sales Can Vary Due to Inventory Management, Mix of
Engines, Scope of Engine Repair, and Surplus Material for these High
Margin Programs
Fleet Size (000s)
Revenue Sharing Programs (RSPs)
0
2013
2014
2015
2016
2017
2018
Sources: Shop Visit Forecast- ICF Aug’13 for 2013; ICF May’14
for 2014-2018; Fleet Size-Aviation Week CAMRO 2013
-14-
Financial Performance Trends (1,4)
Net Sales
Adjusted EPS (2)
(Continuing Operations,
$ in Millions)
$865
$929
2011
2012
$1,092
2013
(Continuing Operations)
+5% to 11%
$1,262
+1%
to +3%
Growth;
+6%
to +8%
Organic
2014
2015F
Adj. Operating Margins
$1.34
$1.52
2011
2012
11.7%
2011
12.2%
2012
2013
15.4%
2014
2013
$2.34
2014
2015F
Free Cash Flow (3)
(2)
(Continuing Operations)
12.9%
$1.83
$2.45
to
$2.60
($ in Millions)
16%
to
17%
2015F
$84
$99
$83
2011
2012
2013
Cash Conversion:
92%
104%
110%
$117
$136
to
$144
2014
2015F
99%
~100%
(1) Our
2015 full-year guidance is only as of our April 24, 2015 earnings call, and it is not being updated or affirmed at this time.
References to adjusted operating margin and adjusted EPS for 2012, 2013, 2014 and 2015 are non-GAAP measures. For a reconciliation to the appropriate GAAP measure, see the Appendix of this presentation.
(3) The Company defines free cash flow as net cash provided by operating activities less capital expenditures. Cash Conversion is equal to Net Cash Provided by Operating Activities less Capital Expenditures divided by Net Income (2011
excludes the loss on sale of Barnes Distribution Europe; the Company has excluded the income tax payments related to the gain on the sale of BDNA made during 2013 and the utilization of the related year-end 2013 income tax receivable
to offset 2014 payments from free cash flow and the gain on the sale of BDNA from net income.)
(4) All previously reported financial information, except for Free Cash Flow, has been adjusted on a retrospective basis to reflect discontinued operations.
(2)
-15-
Why Invest In Barnes Group?
Well Positioned Businesses
 Global Industrial Products and Services; Expanding Auto Production
 Commercial Aerospace; Strong OEM, Aftermarket Recovering
Strong Financial Performance
 Demonstrated Margin Expansion; Further Expansion Planned
 Benefiting from Barnes Enterprise System
 Strong Cash Generator; Solid Balance Sheet
Strategy Execution Delivering Results
 Expanding Differentiated Systems, Products and Processes
 Disciplined Acquisitions and Strategic Investments
 Focused on Sustainable, Long-Term Profitable Growth
-16-
Appendix
Industrial Businesses
(with 2014 Sales Contribution)
16%
23%
15%
Manufacturer of Hot Runner
Systems and Components with a
Focus on Providing High Quality
Products and Value Added
Services
Specializes in the Development
and Manufacture of High-Precision
Molds and Hot Runner Systems
Manufacturer of Nitrogen Gas Springs
and Hydraulic Systems for Automotive
Stamping Dies and Demanding Vehicle
and Industrial Applications
End Markets:
• Automotive Exterior and Interior
Components
• General Industrial
• Telecom and Electronic
Components
End Markets:
• Medical / Pharmaceutical
• Personal Care
• Packaging
• Electronic Components
End Markets:
• Industrial Equipment for
Transportation, HVAC, Electronics,
Whitegoods and Sheet Metal Stamping
Growth Drivers:
• Expand Automotive Offerings
• Increase Premium Consumer
and Electronics Penetration
Growth Drivers:
• Capacity Expansion
• Expand Globally
Growth Drivers:
• Expand Tool & Die Offerings
• Extend Machine & Vehicle Offerings
-18-
Industrial Businesses (Continued)
(with 2014 Segment Sales Contribution)
6%
32%
Pioneer, Leader & Innovator in
Engineered Spring & Precision Metal
Component Manufacturing
End Markets:
• Light Vehicle
• General Industrial
• Household / Whitegoods
• Other Transportation
Growth Drivers:
• Advanced Transmission Offerings
• Differentiated Product Growth
8%
Progressive Stamping, MicroStamping, Fine Blanking and
Forming from Prototype Building
to Complete Assemblies
End Markets:
• Light Vehicle
• General Industrial
Develops and Produces a
Comprehensive Range of
Retaining Rings, Fasteners, Snap
Rings and Shims
End Markets:
• Light Vehicle
• General Industrial
Growth Drivers:
• Deliver Automotive GDi
(Gas Direct Injection)
• Develop Adjacent Markets, such
as Medical
Growth Drivers:
• Expand Globally
• Enhance Product Offerings
-19-
Barnes Aerospace Components
Rotating Air Ducts
Shaft Nuts & Gears
Engine
Cases
Retainer
Rings
Combustor Components
Turbine Exhaust
Cases, Cones,
Cylinders and
Fairings
Stub
Shafts
Tube and
Duct Assemblies
Struts
Bearing
Housings
Manifolds
Vane Actuation
Rings, Lever Arms
HP and LP Shrouds,
Hangers and Segments,
Machined & Fabricated
Rotating Air/Oil Seals,
Vane Rings, Lever Arms
-20-
Commercial Aircraft Engine Product Life Cycle
COST
DEV.
Development:
Leap A,B,C (A320Neo,B737Max,C919)
GE9X (B777X)
PW1000 GTF (Cseries, E Jets, MRJ)
Passport (Global 7000/8000)
Trent 7000 (A330Neo)
Silvercrest (Dassault, Cessna)
EARLY
PROD.
PRODUCT
MATURITY
SPARES
PRODUCTION
VOLUME
Early Production:
GENX-1B (B787)
GENX-2B (B747)
Trent 1000 (B787)
Trent XWB (A350)
TIME
NEW EMERGING &
EARLY LIFE CYCLE
PROGRAMS
OUT OF
PRODUCTION
SPARES
Mature:
CFM56 (B737, A320)
CF6-80E (A330)
CF34-3/8 (CRJ, E175)
CF34-10E (E195)
AE3000 (Embraer, Cessna)
V2500 (A320)
PW4000(B767)
Trent700 (A330)
Trent900 (A380)
GP7200 (A380)
GE90-115B (B777)
Out of Production:
JT-9D (DC10,B747,B767,A310)
JT-8D (DC9,MD80,B727,B737)
PW2000 (B757)
CF6-6 (DC10)
CF6-50 (A300)
Trent 500 (A340)
Trent 800 (B777)
Participation Throughout The Product Life Cycle
-21-
Appendix: Non-GAAP Financial Measure Reconciliation
($ in Thousands, except per share data)
Twelve months ended December 31,
2014
2012 (1)
2013
SEGMENT RESULTS
Operating Profit - Industrial Segment (GAAP)
$
108,360
$
71,888
$
49,253
Synventive short-term purchase accounting adjustments
-
-
4,987
Synventive acquisition transaction costs
-
-
912
8,504
5,456
-
-
1,823
-
6,020
-
-
-
6,589
-
Männer short-term purchase accounting adjustments
Männer acquisition transaction costs
Restructuring Charges
CEO transition costs
Operating Profit - Industrial Segment as adjusted (Non-GAAP) (2)
$
122,884
$
85,756
$
55,152
Operating Margin - Industrial Segment (GAAP)
13.2%
10.5%
9.1%
Operating Margin - Industrial Segment as adjusted (Non-GAAP) (2)
14.9%
12.5%
10.2%
Operating Profit - Aerospace Segment (GAAP)
$
CEO transition costs
Operating Profit - Aerospace Segment as adjusted (Non-GAAP) (2)
71,614
$
51,313
$
Operating Margin - Aerospace Segment (GAAP)
Operating Margin - Aerospace Segment as adjusted (Non-GAAP) (2)
$
57,878
$
57,878
3,903
71,614
$
55,216
-
16.3%
12.7%
14.8%
16.3%
13.7%
14.8%
CONSOLIDATED RESULTS
Operating Income (GAAP)
$
179,974
$
123,201
$
107,131
Synventive short-term purchase accounting adjustments
-
-
4,987
Synventive acquisition transaction costs
-
-
912
8,504
5,456
-
-
1,823
-
6,020
-
-
-
10,492
Männer short-term purchase accounting adjustments
Männer acquisition transaction costs
Restructuring Charges
CEO transition costs
Operating Income as adjusted (Non-GAAP) (2)
$
Operating Margin (GAAP)
Operating Margin as adjusted (Non-GAAP) (2)
Diluted Income from Continuing Operations per Share (GAAP)
$
194,498
$
140,972
$
113,030
14.3%
11.3%
11.5%
15.4%
12.9%
12.2%
2.16
$
1.31
$
1.44
Synventive short-term purchase accounting adjustments
-
-
0.07
Synventive acquisition transaction costs
-
-
0.01
0.11
0.07
-
-
0.03
-
0.07
-
-
CEO transition costs
-
0.12
-
April 2013 tax court decision
-
0.30
Männer short-term purchase accounting adjustments
Männer acquisition transaction costs
Restructuring Charges
Diluted Income from Continuing Operations per Share as adjusted (Non-GAAP) (2)
$
Diluted Income from Continuing Operations per Share (GAAP)
$
2.34
$
1.83
Notes:
(1) Results for 2012 have been adjusted on a retrospective basis to reflect
the impact of the BDNA discontinued operations, including a reallocation
of corporate overhead expenses, and the segment realignment.
(2) The Company has excluded the following from its "as adjusted"
financial measurements: 1) short-term purchase accounting adjustments
and transaction costs related to its Synventive acquisition in 2012, 2)
short-term purchase accounting adjustments and transaction costs related
to its Männer acquisition in 2013, 2014 and 2015, 3) restructuring charges
related to the closure of production operations at the Company’s
Associated Spring facility located in Saline, Michigan in 2014 , 4) CEO
transition costs associated with the modification of outstanding equity
awards in 2013, and 5) the tax charge associated with the April 2013 tax
court decision in 2013.
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.
As Barnes Group does not predict special items that may occur in the
future, and because our outlook is developed at a level of detail different
than that used to prepare GAAP-based financial measures, we do not
provide reconciliations to GAAP of our forward-looking financial measures.
$
1.52
Full-Year 2015 Outlook
2.43
Männer short-term purchase accounting adjustments
Diluted Income from Continuing Operations per Share as adjusted (Non-GAAP) (2)
to
$
2.58
$
2.60
0.02
$
2.45
to
-22-
Safe Harbor Statement
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," "strategy," "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 international operations and markets; the impact of intense competition;
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, 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
insourcing 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, joint ventures, 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; 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. The Company assumes no obligation to update our forward-looking statements.
-23-
24