Barnes Group Investor Overview. April 2017

Transcription

1 Barnes Group Investor Overview April 2017

2 Safe Harbor Statement 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. 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. -2-

3 2016 Revenue Breakdown TOTAL REVENUE $1,231M 67% INDUSTRIAL $824M 33% AEROSPACE $407M AFTERMARKET 29% Aero % AEROSPACE TOOL & DIE 10% OEM 71% END MARKETS MEDICAL, PERSONAL CARE & PACKAGING 9% AEROSPACE OEM 23% ENGINEERED COMPONENTS 40% Americas 56% INDUSTRIAL NITROGEN GAS PRODUCTS 14% GEOGRAPHY EUROPE (Destination Sales) 32% ASIA 17% MOLDING SOLUTIONS 46% GENERAL INDUSTRIAL 14% AUTO MOLDING SOLUTIONS 15% AUTO PRODUCTION 19% AEROSPACE AFTERMARKET 10% AMERICAS 51% GLOBAL, DIVERSIFIED END MARKETS -3-

4 Barnes Group Overview A Global Industrial and Aerospace Manufacturer and Services Provider, Serving a Wide Range of End Markets and Customers Wallace Barnes founds company in Bristol, CT making springs for hoop skirts and clocks Associated Spring Formed Associated Spring stock is offered OTC Associated Spring is listed on NYSE Name changes to Barnes Group Inc. Barnes Aerospace formed Two Global Business Segments: Industrial & Aerospace Sales pass $500M Barnes Aerospace expands in Singapore Acquires NGP Acquires Seeger-Orbis Sales pass $1B Acquires Hänggi HQ in Bristol, CT with Global Operations in 90+ Locations; ~5,000 Employees Distribution Divestiture 83 Consecutive Years of Paying a Dividend BGI celebrates its 150th Anniversary Acquires Synventive Acquires Männer Acquires Thermoplay and Priamus Acquires FOBOHA Acquires Gammaflux A LONG HISTORY... SIGNIFICANT RECENT TRANSFORMATION -4-

5 Strategic Themes Build On Intellectual Property (IP) as Core Differentiator Seek Portfolio Enhancements to Drive Shareholder Value 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 -5-

6 Portfolio Transformation 2010 Sales Mix (1) M&A Transactions 2016 Sales Mix AEROSPACE 32% 36% DISTRIBUTION 32% INDUSTRIAL Sales (1) $1,133M Op. Inc. $ (1) $86.5 Divestitures Europe N. America Year Sales $105 $300 Acquisitions Year Sales $160 $110 Sales AEROSPACE 33% Adj. Op. Inc. $ $1,231M $197.3 INDUSTRIAL 67% +9% +128% Op. Margin (1) 7.6% 2015 $38 Adj. Op. Margin 16.0% +840 bps Share Price (2) Market Cap (2) $20.67 $1.1B $9 $75 Share Price (2) Market Cap (2) $47.42 $2.6B +129% +136% ($ 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 K 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 2016, respectively. -6-

7 Capital Allocation $57 $57 $34 CapEx and Depreciation ($ in Millions) $42 $55 $46 $48 $43 $44 $ F CapEx Depreciation Uses of Cash 2012 to 2016 ($ in Millions) SHARE REPO 11% $169 WORKING CAPITAL 4% $56 CAPEX 16% $246 DIVIDENDS 10% $152 CRP 7% $112 ACQUISITIONS 52% $784 Drive Organic Growth 2017 CapEx of ~$55M About Half Targeted to Growth Programs Strategic Portfolio Transformation Target Highly Engineered Products & Services Expand Global Reach / Channel Penetration Generate Shareholder Returns Continue to Pay a Competitive Dividend Opportunistic Share Repurchase DISCIPLINED CAPITAL ALLOCATION -7-

8 BES and Productivity BES enables us to continuously improve productivity to achieve superior customer value OUR PRODUCTIVITY EFFORTS INVOLVE FIVE MAIN AREAS OF FOCUS: REVENUE FOCUSED: Sales Effectiveness (Volume and Pricing) Leverage Technology (Innovation and New Product Dev.) COST FOCUSED: Global Sourcing (Supply Chain and Logistics) Operational Excellence (Performance and Quality) Functional Excellence (SG&A Optimization) PROGRESS IS MEASURED BY IMPROVEMENT IN OPERATING MARGIN BES IS ONE OF OUR GREATEST COMPETITVE ADVANTAGES -8-

9 Driving Operating Margin Expansion FOCUS AREAS Differentiated Products and Processes Organic Growth Investment Strategic Acquisitions Leverage Commercial Aerospace Extend Global Reach BES Next Generation Talent Management 5% 16.0% High- Teens AVG EXPECTATION HOLDING COMPANY APPROACH 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 Adjusted Operating Margin, see GAAP reconciliation table at the end of this presentation. -9-

10 Industrial Market Environment Leading Global Manufacturer of Highly-Engineered Products and Systems Focused on Custom Components and Solutions Employing Differentiated Industrial Technologies Value Added Engineering: Research, Design, Manufacturing, Testing, and Evaluation GENERAL INDUSTRIAL Emerging Market Expansion Growing with our Customers Healthcare Requirements of an Aging Population Markit Manufacturing PMIs for March 2017 US 53.3, China 51.2, Eurozone 56.2, Emerging Markets 51.6, Global 53.0 BARNES GROUP PARTICIPATION Manufacturing Expansion Benefiting Tool & Die Market Healthcare for an Aging Population China Expansion TRANSPORTATION Advanced Technologies to Meet Fuel Efficiency Requirements Highly-Engineered, Precision Components Penetration Rates Exceed Market Growth Global Light Vehicle Production Forecasted to Increase Modestly ~+2% in 2017, ~+1% in 2018, ~+3% in 2019 (IHS Automotive-Mar 17) BARNES GROUP PARTICIPATION Light Vehicles Plastics Light Vehicles Metals Gas Direct Injection (GDi) Global Expansion 8 to 10 Speed Transmissions INDUSTRIAL TECHNOLOGIES THAT SUPPORT KEY MACRO TRENDS -10-

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 Commercial Aircraft Deliveries (Units) 1,600 1,400 1,200 1, Wide-Body Narrow-Body E 2018E 2019E 2020E 2021E Source: 2016 Actual Airbus and Boeing; Teal Group Estimates as of March 2017 Original Equipment Mfg. Airbus & Boeing Backlog at Robust Levels; Equivalent to ~8 Years of Estimated Production 2016 Cancellation Activity within Historical Rates and Relatively Low as a Percent of the Backlog Strong Commercial Aircraft Deliveries Forecasted Over Next Several Years; Narrow-Body & A350 Ramping, 777 in Transition OEM Sales Per Aircraft (1) Boeing 777 (GE90) Boeing 787 (Genx-1B / Trent 1000) Airbus A350 (XWB) Aftermarket Aftermarket ~$900K ~$200K ~$500K Airbus A320neo (with LEAP) ~$200K to $250K (1) 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 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 CFM56 Fleet Size and Shop Visits Expected to Grow; Fleet Size to Peak in 2018, Shop Visits to Peak in 2023 Benefiting RSPs and CRPs WELL-POSITIONED IN AEROSPACE END-MARKETS -11-

12 Estimated Shop Visits (000s) Fleet Size (000s) Estimated Shop Visits (000s) Fleet Size (000s) Barnes Aftermarket RSPs and CRPs Revenue Sharing Programs (RSPs) Exclusive Rights to Supply Certain Aftermarket Spare Parts to General Electric (GE) Covers Life of CFM56 & CF6 Engine Programs 13 Agreements, Entered Between 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 CFM56 Family of Engines Shop Visits Fleet Size Component Repair Programs (CRPs) CF6 Family of Engines Provides Licensing Rights from GE for Repair Services of Certain Critical Components which Improve Overall Engine Efficiency Covers Life of CFM56, CF6 and CF34 Engine Programs Allows Access to Serve Global Market as OEM Certified Repair Service 3 Agreements, Entered Between Investment of $112M, Amortized as a Reduction of Sales Expands Margin Profile of Aftermarket MRO Business Shop Visits Fleet Size Sources: Shop Visit Forecast, ICF Apr 17; Fleet Size Forecast ICF, Oct 16 PROGRAMS ALLOW BARNES AEROSPACE TO PARTICIPATE IN OEM CERTIFIED AFTERMARKET -12-

13 2017 Segment Market Outlook (Updated 4/28/2017) INDUSTRIAL SEGMENT Actual % of 2016 Sales Molding Solutions 31% Nitrogen Gas Products Engineered Components 9% 27% Industrial Segment 67% 2017 Total Sales Growth Outlook* Up DD Up MSD Up LSD Up HSD End Market Highlights / Comments Favorable Hot Runner Demand, Focus on MRO Growth & Global Expansion, FOBOHA & Gammaflux Contribution Tool & Die Markets Remain Strong Global Auto Production Good - but Growth is Peaking; General Industrial Markets Improving Original Equipment Manufacturing (OEM) 23% Up MSD to HSD New Engine Programs Ramping as OEM Sales Growth Returns, Solid Backlog AEROSPACE SEGMENT Maintenance, Repair, and Overhaul (MRO) Spare Parts (RSP Programs) 6% 4% Aerospace Segment 33% Up MSD to HSD Up MSD to HSD Up MSD to HSD Aircraft Utilization Remains High Favorable CFM56 Demographic Trends Continue M&A FOBOHA & Gammaflux Acquisition Sales ~+4% OTHER F/X F/X Sales Headwind of ~1% 2017 TOTAL SALES EXPECTATION UP 8% TO 9%; UP 5% TO 6% ORGANICALLY * DD - Double digits, HSD - High single digits, MSD - Mid single digits, LSD - Low single digits Our 2017 full-year outlook is only as of our April 28, 2017 earnings call, and it is not being updated or affirmed at this time. -13-

14 Financial Performance Trends (1,2) Net Sales (Continuing Operations, $ in Millions) Adjusted EPS (2) (Continuing Operations) +6% to +10% $1,092 $1,262 $1,194 $1,231 +8% to +9% Total +5% to +6% Organic $1.83 $2.34 $2.38 $2.53 $2.68 to $ F Adj. Operating Margins (2) (Continuing Operations) 12.9% 15.4% 15.8% 16.0% 16.0% to 17.0% F Adj. Free Cash Flow (2) ($ in Millions) $89 $126 $172 $170 >$147 at MidPt of EPS Outlook F F Cash Conversion: 118% 107% 134% 125% >100% (1) Our 2017 full-year outlook is only as of our April 28, 2017 earnings call, and it is not being updated or affirmed at this time. (2) References to adjusted operating margin, adjusted EPS and adjusted free cash flow for 2013, 2014, 2015, 2016 and 2017 are non-gaap measures. For a reconciliation to the appropriate GAAP measure, see the Appendix of this presentation. -14-

15 Why Invest In Barnes Group? WELL POSITIONED BUSINESSES Global Industrial Products and Services; Auto Production at High Levels Commercial Aero; OEM Production at High Levels, Aftermarket Improving 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 -15-

16 Appendix

17 Industrial Segment Brands MOLDING SOLUTIONS Specializes in the Development and Manufacture of High- Precision Molds and Hot Runner Systems Manufacturer of Hot Runner Systems and Components with a Focus on Providing High Quality Products and Value Added Services Specializes in the Design, Development, and Manufacturing of Customized Hot Runner Systems Technology Leader in Stack Turning Molds, Cube Molds, Multi- Component Molds, and In-Mold Assembly Technology Leader in the Development of Advanced Process Control Systems for the Plastic Injection Molding Industry END MARKETS: Medical / Pharmaceutical Personal Care / Health Care Packaging Electronic Components END MARKETS: Automotive Exterior and Interior Components Telecom and Electronic Components END MARKETS: Packaging Automotive Electronics Medical END MARKETS: Packaging Medical Consumer Goods Automotive Technology Leader in Hot Runner Temperature and Sequential Valve Gate Control Systems GROWTH DRIVERS: Capacity Expansion Expand Globally GROWTH DRIVERS: Expand Automotive Offerings Increase Premium Consumer and Electronics Penetration GROWTH DRIVERS: Expand Globally GROWTH DRIVERS: Expand Globally END MARKETS: Medical Automotive Consumer Goods Electronics Packaging GROWTH DRIVERS: Extend Engineering Capabilities Across Molding Solutions -17-

18 Industrial Segment Brands (continued) ENGINEERED COMPONENTS NITROGEN GAS PRODUCTS Pioneer, Leader & Innovator in Engineered Spring & Precision Metal Component Manufacturing Progressive Stamping, Micro-Stamping, Fine Blanking and Forming from Prototype Building to Complete Assemblies Develops and Produces a Comprehensive Range of Retaining Rings, Fasteners, Snap Rings and Shims Manufacturer of Nitrogen Gas Springs and Hydraulic Systems for Automotive Stamping Dies and Demanding Vehicle and Industrial Applications END MARKETS: Light Vehicle General Industrial Household / Whitegoods Other Transportation END MARKETS: Light Vehicle General Industrial END MARKETS: Light Vehicle General Industrial END MARKETS: Industrial Equipment for Transportation, HVAC, Electronics, Whitegoods and Sheet Metal Stamping GROWTH DRIVERS: Advanced Transmission Offerings Differentiated Product Growth GROWTH DRIVERS: Deliver Automotive GDi (Gas Direct Injection) Develop Adjacent Markets, such as Medical GROWTH DRIVERS: Expand Globally Enhance Product Offerings GROWTH DRIVERS: Expand Tool & Die Offerings Extend Machine & Vehicle Offerings / Other Adjacent Markets -18-

19 Molding Solutions (MS) Growth Strategy Manufacture Premium Hot Runners & Molds for Customers Requiring Superior Quality Drive Innovative Technologies for High Quality Plastic Parts Provide Unmatched Applications and Design Engineering Support Bring Reliability of System Supply, Robust Products, and Repeatable Processes for Customer Efficiency Be the Best in Industry Service and Repair Support Deliver the Lowest Total Cost of Ownership Expand Globally BARNES MOLDING SOLUTIONS HOT RUNNERS MOLDS CONTROL SYSTEMS -19-

20 Engineered Components (EC) Growth Strategy Growth through a Synergetic Marketing Value Proposition and Cross-Brand Collaboration o Global Sales Team & Global Engineering Support o Marketing Plan for Cross-BU Synergetic Value Proposition o Other Synergies (e.g. Supply Chain, Quality, R&D, etc.) Expand Innovation Portfolio -20-

21 Nitrogen Gas Products (NGP) Growth Strategy Drive Innovation to Create Superior Customer Value Strengthen Leadership in the Global Tool & Die Market Grow Machine & Vehicle / Other Market Adjacencies Invest in Technology and Capabilities to Enable Growth More controlled force in less space -21-

22 Aerospace Businesses (with 2016 Segment Sales Contribution) ORIGINAL EQUIPMENT MANUFACTURING 71% Provides Highly Engineered Machined and Fabricated Components Using Super-alloys Concurrent Engineering & NPI Capabilities Deliver Value BARNES AEROSPACE AFTERMARKET 29% Maintenance, Repair, and Overhaul OEM-Source Approved for Rolls Royce, Safran, GE, and Pratt & Whitney Engines FAA/EASA/CAAC Certified Engine Component Repair Stations Component Repair Programs (CRPs) 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 -22-

23 Barnes Aerospace Components Shaft Nuts & Gears Rotating Air Ducts Fan Blade Metal Lead Edges & Tip Caps Engine Cases Retainer Rings Combustor Components Turbine Exhaust Cases, Cones, Cylinders and Fairings Tube and Duct Assemblies Bearing Housings Manifolds Vane Actuation Rings, Lever Arms Struts Stub Shafts Rotating Air/Oil Seals, Vane Rings, Lever Arms HP and LP Shrouds, Hangers and Segments, Machined & Fabricated -23-

24 Commercial Aircraft Engine Product Life Cycle Early Production: Leap A (A320NEO) GENX-1B (B787) PW1000 GTF (A320NEO, Cseries) GENX-2B (B747-8) Trent 1000 (B787) Trent XWB (A350) COST DEV. EARLY PROD. PRODUCT MATURITY SPARES Mature: CFM56 (B737, A320) CF6-80C/E (A330, B767) CF34-3/8 (CRJ, E175) CF34-10E (E195) AE3000 (Embraer, Cessna) V2500 (A320) PW4000(B767) Trent700 (A330) Trent900 (A380) GP7200 (A380) GE90-115B (B777) PRODUCTION VOLUME Development: Leap B,C (B737Max,C919) GE9X (B777X) PW1000 GTF (E Jets, MRJ) Passport (Global 7000/8000) Trent 7000 (A330Neo) Silvercrest (Dassault, Cessna) NEW EMERGING & EARLY LIFE CYCLE PROGRAMS TIME OUT OF PRODUCTION SPARES Out of Production: JT-9D (DC10,B747,B767,A310) JT-8D (DC9,MD80,B727,B737) PW2000 (B757) CF6-6 (DC10) CF6-50 (A300, B747) Trent 500 (A340) Trent 800 (B777) PARTICIPATION THROUGHOUT THE PRODUCT LIFE CYCLE -24-

25 Appendix: Non-GAAP Financial Measure Reconciliation ($ in Thousands, Unaudited) (Dollars in thousands, except per share data) (Unaudited) CONSOLIDATED RESULTS Twelve months ended December 31, Operating Income (GAAP) $ 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, FOBOHA short-term purchase accounting adjustments 2, Acquisition transaction costs 1, ,823 Restructuring/reduction in force charges - 4,222 6,020 - Contract termination dispute charge 3,005 2, Contract termination arbitration award (1,371) Pension lump-sum settlement charge - 9, CEO transition costs ,492 Operating Income as adjusted (Non-GAAP) (1) $ 197,292 $ 188,880 $ 194,498 $ 140,972 Operating Margin (GAAP) 15.6% 14.1% 14.3% 11.3% Operating Margin as adjusted (Non-GAAP) (1) 16.0% 15.8% 15.4% 12.9% Diluted Income from Continuing Operations per Share (GAAP) $ 2.48 $ 2.19 $ 2.16 $ 1.31 Männer short-term purchase accounting adjustments Thermoplay short-term purchase accounting adjustments FOBOHA short-term purchase accounting adjustments Acquisition transaction costs Restructuring/reduction in force charges Contract termination dispute charge Contract termination arbitration award (0.03) Pension lump-sum settlement charge Tax benefit recognized for refund of withholding taxes - (0.05) - - CEO transition costs April 2013 tax court decision Notes: (1) The Company has excluded the following from its historical "as adjusted" financial measurements: ) 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 ) 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) 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 ) 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 ) 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. Diluted Income from Continuing Operations per Share as adjusted (Non-GAAP) (1) $ 2.53 $ 2.38 $ 2.34 $

26 Appendix: Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow ($ in Thousands, Unaudited) Free cash flow: Twelve months ended December 31, Net cash provided by operating activities (1) $ 217,646 $ 217,475 $ 196,153 $ 16,079 Capital expenditures (47,577) (45,982) (57,365) (57,304) Free cash flow (2) $ 170,069 $ 171,493 $ 138,788 $ (41,225) Free cash flow to net income cash conversion ratio (as adjusted): Free cash flow (from above) $ 170,069 $ 171,493 $ 138,788 $ (41,225) Income tax payments related to the gain on the sale of BDNA ,004 Income tax reduction related to the gain on the sale of BDNA - - (12,608) - Free cash flow (as adjusted) (3) 170, , ,180 88,779 Net income 135, , , ,527 Gain on the sale of BDNA, net of tax (195,317) Pension lump-sum settlement charge, net of tax - 6, Net income (as adjusted) (3) $ 135,601 $ 127,562 $ 118,370 $ 75,210 Free cash flow to net income cash conversion ratio (as adjusted) (3) 125% 134% 107% 118% Notes: (1) The Company has reclassified 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 Pension lump-sum settlement charge, net of tax, from net income 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 free cash flow The income tax payments related to the gain on the sale of BDNA made during 2013 from free cash flow and the gain on the sale of BDNA from net income. -26-

27 Appendix: Non-GAAP Forecast Financial Measure Reconciliation Full-Year 2017 Outlook (1) Diluted Net Income per Share (GAAP) $ 2.65 to $ 2.75 FOBOHA Short-Term Purchase Accounting Adjustments 0.03 Diluted Net Income per Share as adjusted (Non-GAAP) (2) $ 2.68 to $ 2.78 Notes: (1) The Company has excluded the following from its "as adjusted" financial measurements for 2017: short-term purchase accounting adjustments related to its FOBOHA acquisition. (2) 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. -27-

28 Forward-Looking Statements This presentation contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 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; 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. -28-

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