BARNES GROUP INC - FORM 8-K - EX-99.1 - FINANCIAL SUPPLEMENT DATED APRIL 27, 2018

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8-K - FORM 8-K RECLASSIFICATION OF PENSION AND OTHER POSTRETIREMENT BENEFIT COSTS - BARNES GROUP INC	form8-kreclassificationofp.htm

Exhibit 99.1

Financial Supplement

2014, 2015 and 2016 (Full Years)

2017 (Quarters and Full Year)

Financial Results Adjusted for the Reclassification of Pension and Other Postretirement Benefit Costs

(Unaudited)

April 27, 2018

Barnes Group Inc.

Financial Supplement

2014, 2015 and 2016 (Full Years) and 2017 (Quarters and Full Year) Financial Results Adjusted for the Reclassification of Pension and Other Postretirement Benefit Costs

In March 2017, the Financial Accounting Standards Board amended its guidance related to the presentation of pension and other postretirement benefit costs. The amended guidance requires the bifurcation of net periodic benefit cost for pension and other postretirement plans. The service cost component of expense will be presented with other employee compensation costs in operating income, consistent with the current guidance. The other components of expense, however, will be reported separately outside of operating income. The guidance is effective for annual periods beginning after December 15, 2017 and interim periods within that reporting period. The Company will adopt the amended guidance during the first quarter of 2018. The amended guidance will be applied retrospectively for the presentation of the service cost component and the other components of net periodic benefit cost in the Consolidated Statements of Income.

The attached schedules detail the retrospective adjustments of the 2014, 2015 and 2016 financial results and segment information on a full year basis as well as the 2017 financial results and segment information on a quarterly and full year basis. In addition, Non-GAAP financial measures previously provided for the those periods have been adjusted herein and presented together with revised reconciliations to GAAP measures as retrospectively adjusted. The retrospective adjustments had no effect on the Company's previously reported net income, financial condition or cash flows.

This document is supplemental to related information previously included in (i) the Company’s financial statements set forth in its annual and quarterly periodic reports filed by the Company with the Securities and Exchange Commission ("SEC") for periods commencing and subsequent to January 1, 2014 and (ii) prior earnings releases issued for periods commencing and subsequent to January 1, 2014 (and which were included in the Company’s Current Reports on Form 8-K); and, accordingly, should be read in conjunction with the Company’s 2014, 2015, 2016 and 2017 Forms 10-K and the 2017 Forms 10-Q filed with the SEC.



Barnes Group Inc. Financial Results Adjusted for the Reclassification of Pension and Other Postretirement Benefit Costs
Unaudited
Dollars in thousands
	2014									2015									2016
Income Statement	As Reported			Adjustments			As Adjusted ⁽¹⁾			As Reported			Adjustments			As Adjusted ⁽¹⁾			As Reported			Adjustments			As Adjusted ⁽¹⁾
Net sales	$	1,262,006		$	—		$	1,262,006		$	1,193,975		$	—		$	1,193,975		$	1,230,754		$	—		$	1,230,754
Cost of sales	829,648			(1,102		)	828,546			782,817			(10,787		)	772,030			790,299			(1,572		)	788,727
Selling and administrative expenses	252,384			(91		)	252,293			242,762			(4,359		)	238,403			248,277			(546		)	247,731
	1,082,032			(1,193		)	1,080,839			1,025,579			(15,146		)	1,010,433			1,038,576			(2,118		)	1,036,458
Operating income	179,974			1,193			181,167			168,396			15,146			183,542			192,178			2,118			194,296
Operating margin	14.3		%				14.4		%	14.1		%				15.4		%	15.6		%				15.8		%
Interest expense	11,392			—			11,392			10,698			—			10,698			11,883			—			11,883
Other expense (income), net	2,082			1,193			3,275			(248		)	15,146			14,898			(2,326		)	2,118			(208		)
Income from continuing operations before income taxes	166,500			—			166,500			157,946			—			157,946			182,621			—			182,621
Income taxes	45,959			—			45,959			36,566			—			36,566			47,020			—			47,020
Income from continuing operations	120,541			—			120,541			121,380			—			121,380			135,601			—			135,601
Income (loss) from discontinued operations, net of income taxes	(2,171		)	—			(2,171		)	—			—			—			—			—			—
Net income	$	118,370		$	—		$	118,370		$	121,380		$	—		$	121,380		$	135,601		$	—		$	135,601


Non-GAAP Financial Measure Reconciliation	As Presented			Adjustments			As Adjusted ⁽¹⁾			As Presented			Adjustments			As Adjusted ⁽¹⁾			As Presented			Adjustments			As Adjusted ⁽¹⁾
Operating Income (GAAP)	$	179,974		$	1,193		$	181,167		$	168,396		$	15,146		$	183,542		$	192,178		$	2,118		$	194,296
Männer short-term purchase accounting adjustments	8,504			—			8,504			1,481			—			1,481			—			—			—
Thermoplay short-term purchase accounting adjustments	—			—			—			1,167			—			1,167			—			—			—
FOBOHA short-term purchase accounting adjustments	—			—			—			—			—			—			2,316			—			2,316
Acquisition transaction costs	—			—			—			970			—			970			1,164			—			1,164
Restructuring/reduction in force	6,020			—			6,020			4,222			—			4,222			—			—			—
Contract termination dispute charges	—			—			—			2,788			—			2,788			3,005			—			3,005
Contract termination arbitration award	—			—			—			—			—			—			(1,371		)	—			(1,371		)
Pension lump-sum settlement charge	—			—			—			9,856			(9,856		)	—			—			—			—
Operating Income as adjusted (Non-GAAP)⁽²⁾	$	194,498		$	1,193		$	195,691		$	188,880		$	5,290		$	194,170		$	197,292		$	2,118		$	199,410
Operating Margin (GAAP)	14.3		%				14.4		%	14.1		%				15.4		%	15.6		%				15.8		%
Operating Margin as adjusted (Non-GAAP)⁽²⁾	15.4		%				15.5		%	15.8		%				16.3		%	16.0		%				16.2		%

Notes:
(1) Represents "As Reported" or "As Presented" financial information adjusted on a retrospective basis to reflect the impact of the reclassification of pension and other postretirement benefit costs.

(2) The Company has excluded the following from its "as adjusted Non-GAAP" financial measurements:

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.

2015: 1) short-term purchase accounting adjustments related to its Männer acquisition, 2) short-term purchase accounting adjustments related to its Thermoplay acquisition, 3) transaction costs related to its Thermoplay and Priamus acquisitions, 4) restructuring and workforce reduction charges and 5) certain charges recorded in the Aerospace segment in the third quarter of 2015 related to a contract termination dispute following a customer sourcing decision.

2016: 1) short-term purchase accounting adjustments related to its FOBOHA acquisition, 2) transaction costs related to its FOBOHA acquisition, 3) charges related to the contract termination dispute and 4) operating income related to the contract termination arbitration award.

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.



Barnes Group Inc. Financial Results Adjusted for the Reclassification of Pension and Other Postretirement Benefit Costs
Unaudited
Dollars in thousands
	2014										2015										2016
Segment Information	As Reported			Adjustments				As Adjusted ⁽¹⁾			As Reported			Adjustments				As Adjusted ⁽¹⁾			As Reported			Adjustments				As Adjusted ⁽¹⁾
Net sales
Industrial	$	822,051		$	—			$	822,051		$	782,273		$	—			$	782,273		$	824,216		$	—			$	824,216
Aerospace	439,959			—				439,959			411,709			—				411,709			406,541			—				406,541
Intersegment sales	(4		)	—				(4		)	(7		)	—				(7		)	(3		)	—				(3		)
Total net sales	$	1,262,006		$	—			$	1,262,006		$	1,193,975		$	—			$	1,193,975		$	1,230,754		$	—			$	1,230,754

Operating profit
Industrial	$	108,360		1,204				$	109,564		$	102,950		12,149				$	115,099		$	129,677		2,122				$	131,799
Aerospace	71,614			(11		)		71,603			65,446			2,997				68,443			62,501			(4		)		62,497
Total operating profit	$	179,974		$	1,193			$	181,167		$	168,396		$	15,146			$	183,542		$	192,178		$	2,118			$	194,296

Operating margin
Industrial	13.2		%	10			bps	13.3		%	13.2		%	150			bps	14.7		%	15.7		%	30			bps	16.0		%
Aerospace	16.3		%	—			bps	16.3		%	15.9		%	70			bps	16.6		%	15.4		%	—			bps	15.4		%
Total operating margin	14.3		%	10			bps	14.4		%	14.1		%	130			bps	15.4		%	15.6		%	20			bps	15.8		%

Non-GAAP Financial Measure Reconciliation	As Presented			Adjustments				As Adjusted ⁽¹⁾			As Presented			Adjustments				As Adjusted ⁽¹⁾			As Presented			Adjustments				As Adjusted ⁽¹⁾
Operating Profit - Industrial Segment (GAAP)	$	108,360		$	1,204			$	109,564		$	102,950		$	12,149			$	115,099		$	129,677		$	2,122			$	131,799
Männer short-term purchase accounting adjustments	8,504			—				8,504			1,481			—				1,481			—			—				—
Thermoplay short-term purchase accounting adjustments	—			—				—			1,167			—				1,167			—			—				—
FOBOHA short-term purchase accounting adjustments	—			—				—			—			—				—			2,316			—				2,316
Acquisition transaction costs	—			—				—			970			—				970			1,164			—				1,164
Restructuring/reduction in force	6,020			—				6,020			3,448			—				3,448			—			—				—
Pension lump-sum settlement charge	—			—				—			7,450			(7,450		)		—			—			—				—
Operating Profit - Industrial Segment as adjusted (Non-GAAP)⁽²⁾	$	122,884		$	1,204			$	124,088		$	117,466		$	4,699			$	122,165		$	133,157		$	2,122			$	135,279
Operating Margin - Industrial Segment (GAAP)	13.2		%					13.3		%	13.2		%					14.7		%	15.7		%					16.0		%
Operating Margin - Industrial Segment as adjusted (Non-GAAP)⁽²⁾	14.9		%					15.1		%	15.0		%					15.6		%	16.2		%					16.4		%
Operating Profit - Aerospace Segment (GAAP)	$	71,614		$	(11	)		$	71,603		$	65,446		$	2,997			$	68,443		$	62,501		$	(4	)		$	62,497
Restructuring/reduction in force	—			—				—			774			—				774			—			—				—
Contract termination dispute charges	—			—				—			2,788			—				2,788			3,005			—				3,005
Contract termination arbitration award	—			—				—			—			—				—			(1,371		)	—				(1,371		)
Pension lump-sum settlement charge	—			—				—			2,405			(2,405		)		—			—			—				—
Operating Profit - Aerospace Segment as adjusted (Non-GAAP)⁽²⁾	$	71,614		$	(11	)		$	71,603		$	71,413		$	592			$	72,005		$	64,135		$	(4	)		$	64,131
Operating Margin - Aerospace Segment (GAAP)	16.3		%					16.3		%	15.9		%					16.6		%	15.4		%					15.4		%
Operating Margin - Aerospace Segment as adjusted (Non-GAAP)⁽²⁾	16.3		%					16.3		%	17.3		%					17.5		%	15.8		%					15.8		%

Notes:
(1) Represents "As Reported" or "As Presented" financial information adjusted on a retrospective basis to reflect the impact of the reclassification of pension and other postretirement benefit costs.

(2) The Company has excluded the following from its "as adjusted Non-GAAP" financial measurements:

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.

2015: 1) short-term purchase accounting adjustments related to its Männer acquisition, 2) short-term purchase accounting adjustments related to its Thermoplay acquisition, 3) transaction costs related to its Thermoplay and Priamus acquisitions, 4) restructuring and workforce reduction charges and 5) certain charges recorded in the Aerospace segment in the third quarter of 2015 related to a contract termination dispute following a customer sourcing decision.

2016: 1) short-term purchase accounting adjustments related to its FOBOHA acquisition, 2) transaction costs related to its FOBOHA acquisition, 3) charges related to the contract termination dispute and 4) operating income related to the contract termination arbitration award.

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.



Barnes Group Inc. Financial Results Adjusted for the Reclassification of Pension and Other Postretirement Benefit Costs
Unaudited
Dollars in thousands
	Q1 2017									Q2 2017									Q3 2017									Q4 2017									2017 Full Year
Income Statement	As Reported			Adjustments			As Adjusted ⁽¹⁾			As Reported			Adjustments			As Adjusted ⁽¹⁾			As Reported			Adjustments			As Adjusted ⁽¹⁾			As Reported			Adjustments			As Adjusted ⁽¹⁾			As Reported			Adjustments			As Adjusted ⁽¹⁾
Net sales	$	341,802		$	—		$	341,802		$	364,493		$	—		$	364,493		$	357,156		$	—		$	357,156		$	373,048		$	—		$	373,048		$	1,436,499		$	—		$	1,436,499
Cost of sales	219,833			(284		)	219,549			236,506			6,032			242,538			236,016			(610		)	235,406			246,933			(647		)	246,286			939,288			4,491			943,779
Selling and administrative expenses	66,221			(246		)	65,975			70,847			349			71,196			73,354			(502		)	72,852			76,511			(265		)	76,246			286,933			(664		)	286,269
	286,054			(530		)	285,524			307,353			6,381			313,734			309,370			(1,112		)	308,258			323,444			(912		)	322,532			1,226,221			3,827			1,230,048
Operating income	55,748			530			56,278			57,140			(6,381		)	50,759			47,786			1,112			48,898			49,604			912			50,516			210,278			(3,827		)	206,451
Operating margin	16.3		%				16.5		%	15.7		%				13.9		%	13.4		%				13.7		%	13.3		%				13.5		%	14.6		%				14.4		%
Interest expense	3,349			—			3,349			3,541			—			3,541			3,748			—			3,748			3,934			—			3,934			14,571			—			14,571
Other expense (income), net	23			530			553			394			(6,381		)	(5,987		)	357			1,112			1,469			(767		)	912			145			8			(3,827		)	(3,819		)
Income before income taxes	52,376			—			52,376			53,205			—			53,205			43,681			—			43,681			46,437			—			46,437			195,699			—			195,699
Income taxes	14,073			—			14,073			8,178			—			8,178			8,348			—			8,348			105,685			—			105,685			136,284			—			136,284
Net income	$	38,303		$	—		$	38,303		$	45,027		$	—		$	45,027		$	35,333		$	—		$	35,333		$	(59,248	)	$	—		$	(59,248	)	$	59,415		$	—		$	59,415


Non-GAAP Financial Measure Reconciliation	As Presented			Adjustments			As Adjusted ⁽¹⁾			As Presented			Adjustments			As Adjusted ⁽¹⁾			As Presented			Adjustments			As Adjusted ⁽¹⁾			As Presented			Adjustments			As Adjusted ⁽¹⁾			As Presented			Adjustments			As Adjusted ⁽¹⁾
Operating Income (GAAP)	$	55,748		$	530		$	56,278		$	57,140		$	(6,381	)	$	50,759		$	47,786		$	1,112		$	48,898		$	49,604		$	912		$	50,516		$	210,278		$	(3,827	)	$	206,451
FOBOHA short-term purchase accounting adjustments	600			—			600			1,193			—			1,193			501			—			501			—			—			—			2,294			—			2,294
Restructuring/reduction in force	—			—			—			(1,652		)	7,447			5,795			260			—			260			1,406			—			1,406			13			7,447			7,460
Operating Income as adjusted (Non-GAAP)⁽²⁾	$	56,348		$	530		$	56,878		$	56,681		$	1,066		$	57,747		$	48,547		$	1,112		$	49,659		$	51,010		$	912		$	51,922		$	212,585		$	3,620		$	216,205
Operating Margin (GAAP)	16.3		%				16.5		%	15.7		%				13.9		%	13.4		%				13.7		%	13.3		%				13.5		%	14.6		%				14.4		%
Operating Margin as adjusted (Non-GAAP)⁽²⁾	16.5		%				16.6		%	15.6		%				15.8		%	13.6		%				13.9		%	13.7		%				13.9		%	14.8		%				15.1		%

Notes:
(1) Represents "As Reported" or "As Presented" financial information adjusted on a retrospective basis to reflect the impact of the reclassification of pension and other postretirement benefit costs.

(2) The Company has excluded the following from its "as adjusted Non-GAAP" financial measurements for 2017: 1) short-term purchase accounting adjustments related to its FOBOHA acquisition and 2) the net (gain) loss from restructuring actions related to the closure and consolidation of two manufacturing facilities within the Industrial segment. 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.



Barnes Group Inc. Financial Results Adjusted for the Reclassification of Pension and Other Postretirement Benefit Costs
Unaudited
Dollars in thousands
	Q1 2017									Q2 2017										Q3 2017									Q4 2017									2017 Full Year
Segment Information	As Reported			Adjustments			As Adjusted ⁽¹⁾			As Reported			Adjustments				As Adjusted ⁽¹⁾			As Reported			Adjustments			As Adjusted ⁽¹⁾			As Reported			Adjustments			As Adjusted ⁽¹⁾			As Reported			Adjustments				As Adjusted ⁽¹⁾
Net sales
Industrial	$	227,340		$	—		$	227,340		$	251,845		$	—			$	251,845		$	240,390		$	—		$	240,390		$	254,334		$	—		$	254,334		$	973,890		$	—			$	973,890
Aerospace	114,470			—			114,470			112,662			—				112,662			116,767			—			116,767			118,718			—			118,718			462,617			—				462,617
Intersegment sales	(8		)	—			(8		)	(14		)	—				(14		)	(1		)	—			(1		)	(4		)	—			(4		)	(8		)	—				(8		)
Total net sales	$	341,802		$	—		$	341,802		$	364,493		$	—			$	364,493		$	357,156		$	—		$	357,156		$	373,048		$	—		$	373,048		$	1,436,499		$	—			$	1,436,499

Operating profit
Industrial	$	33,456		$	447		$	33,903		$	37,395		$	(6,512	)		$	30,883		$	29,308		$	1,028		$	30,336		$	26,899		$	830		$	27,729		$	127,056		$	(4,207	)		$	122,849
Aerospace	22,292			83			22,375			19,745			131				19,876			18,478			84			18,562			22,705			82			22,787			83,222			380				83,602
Total operating profit	$	55,748		$	530		$	56,278		$	57,140		$	(6,381	)		$	50,759		$	47,786		$	1,112		$	48,898		$	49,604		$	912		$	50,516		$	210,278		$	(3,827	)		$	206,451

Operating margin
Industrial	14.7		%	20		bps	14.9		%	14.8		%	(250		)	bps	12.3		%	12.2		%	40		bps	12.6		%	10.6		%	30		bps	10.9		%	13.0		%	(40		)	bps	12.6		%
Aerospace	19.5		%	—		bps	19.5		%	17.5		%	10			bps	17.6		%	15.8		%	10		bps	15.9		%	19.1		%	10		bps	19.2		%	18.0		%	10			bps	18.1		%
Total operating margin	16.3		%	20		bps	16.5		%	15.7		%	(180		)	bps	13.9		%	13.4		%	30		bps	13.7		%	13.3		%	20		bps	13.5		%	14.6		%	(20		)	bps	14.4		%

Non-GAAP Financial Measure Reconciliation	As Presented			Adjustments			As Adjusted ⁽¹⁾			As Presented			Adjustments				As Adjusted ⁽¹⁾			As Presented			Adjustments			As Adjusted ⁽¹⁾			As Presented			Adjustments			As Adjusted ⁽¹⁾			As Presented			Adjustments				As Adjusted ⁽¹⁾
Operating Profit - Industrial Segment (GAAP)	$	33,456		$	447		$	33,903		$	37,395		$	(6,512	)		$	30,883		$	29,308		$	1,028		$	30,336		$	26,899		$	830		$	27,729		$	127,056		$	(4,207	)		$	122,849
FOBOHA short-term purchase accounting adjustments	600			—			600			1,193			—				1,193			501			—			501			—			—			—			2,294			—				2,294
Restructuring/reduction in force	—			—			—			(1,652		)	7,447				5,795			260			—			260			1,406			—			1,406			13			7,447				7,460
Operating Profit - Industrial Segment as adjusted (Non-GAAP)⁽²⁾	$	34,056		$	447		$	34,503		$	36,936		$	935			$	37,871		$	30,069		$	1,028		$	31,097		$	28,305		$	830		$	29,135		$	129,363		$	3,240			$	132,603
Operating Margin - Industrial Segment (GAAP)	14.7		%				14.9		%	14.8		%					12.3		%	12.2		%				12.6		%	10.6		%				10.9		%	13.0		%					12.6		%
Operating Margin - Industrial Segment as adjusted (Non-GAAP)⁽²⁾	15.0		%				15.2		%	14.7		%					15.0		%	12.5		%				12.9		%	11.1		%				11.5		%	13.3		%					13.6		%

Notes:
(1) Represents "As Reported" or "As Presented" financial information adjusted on a retrospective basis to reflect the impact of the reclassification of pension and other postretirement benefit costs.

(2) The Company has excluded the following from its "as adjusted Non-GAAP" financial measurements for 2017: 1) short-term purchase accounting adjustments related to its FOBOHA acquisition and 2) the net (gain) loss from restructuring actions related to the closure and consolidation of two manufacturing facilities within the Industrial segment. 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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