BARNES GROUP INC Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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PREVIEW

Please refer to the Overview in the Management's Discussion and Analysis of
Financial Condition and Results of Operations in the Company's Annual Report on
Form 10-K for the year ended December 31, 2021. The Annual Report on Form 10-K,
along with the Company's other filings, can be found on the Securities and
Exchange Commission's website, www.sec.gov, as well as on the Company's website:
www.barnesgroupinc.com.

First Quarter Highlights

The Company reported net sales of $312.4 million in the first quarter of 2022,
an increase of $10.8 million or 3.6%, from the first quarter of 2021. Organic
sales increased by $16.7 million, or 5.5%, including an increase of $19.1
million, or 23.4%, at Aerospace partially offset by a decrease of $2.4 million,
or 1.1%, at Industrial. The year-over-year increase at Aerospace was driven by
volume increases within both the Aerospace Original Equipment Manufacturing
("OEM") and Aerospace Aftermarket businesses, reflecting improving Aerospace end
markets. From an Industrial standpoint, end-markets remained under pressure
given the ongoing impacts of global supply chain constraints and semiconductor
shortages on near-term automotive and broader industrial production. The
strengthening of the U.S. dollar against foreign currencies decreased net sales
within the Industrial segment by approximately $5.9 million. Operating margins
decreased from 10.7% in the 2021 period to 10.0% in the current period, largely
a result of increased raw material, utility, labor and freight costs, partially
offset by an increase in sales volume within the Aerospace Aftermarket business.

Impact of macroeconomic trends

Several macroeconomic trends, partially driven by the ongoing effects of the
COVID-19 pandemic, continued to present challenges across our businesses during
the first quarter of 2022, with impacts including labor and supply chain
constraints and inflationary pressures resulting in increased freight, utility,
labor and raw material costs, amongst others. The Company has remained focused
on cost management and productivity initiatives to mitigate these impacts, in
addition to taking pricing actions to partially recover costs. Management also
continues to evaluate the ongoing development of events in Ukraine and the
potential for impacts on the Company's Consolidated Financial Statements.

RESULTS OF OPERATIONS

Net Sales

                                                   Three Months Ended
                                                        March 31,
                   (in millions)       2022         2021              Change
                   Industrial        $ 211.7      $ 220.0      $ (8.3)       (3.8) %
                   Aerospace           100.7         81.6        19.1        23.4  %

                   Total             $ 312.4      $ 301.6      $ 10.8         3.6  %



The Company reported net sales of $312.4 million in the first quarter of 2022,
an increase of $10.8 million, or 3.6%, from the first quarter of 2021. Organic
sales increased by $16.7 million, or 5.5%, including an increase of $19.1
million at Aerospace, partially offset by a decrease of $2.4 million at
Industrial. The year-over-year increase at Aerospace was driven by improved
sales within both the OEM and Aftermarket businesses, resulting primarily from
continuing global improvement in aerospace markets. From an Industrial
standpoint, sales decreased compared with the prior year period, as continuing
pressures resulting from global supply chain constraints and semiconductor
shortages impacted near-term automotive and broader industrial production. The
strengthening of the U.S. dollar against foreign currencies decreased net sales
within the Industrial segment by approximately $5.9 million.








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Expenses and Operating Income

                                                              Three Months Ended
                                                                  March 31,
        (in millions)                             2022          2021              Change
        Cost of sales                          $ 207.2       $ 194.7       $ 12.5        6.4  %
        % sales                                   66.3  %       64.5  %
        Gross profit (1)                       $ 105.2       $ 106.9       $ (1.7)      (1.6) %
        % sales                                   33.7  %       35.5  %
        Selling and administrative expenses    $  74.1       $  74.6       $ (0.5)      (0.6) %
        % sales                                   23.7  %       24.7  %
        Operating income                       $  31.1       $  32.4       $ (1.3)      (3.9) %
        % sales                                   10.0  %       10.7  %



(1) Sales less cost of sales.

Cost of sales in the first quarter of 2022 increased 6.4% from the 2021 period
and gross profit margin decreased from 35.5% in the 2021 period to 33.7% in the
2022 period. Gross profit margins decreased at Industrial and increased at
Aerospace. Within Industrial, gross profit and gross profit margin decreased
primarily as a result increased global supply chain constraints and inflationary
pressures, including increased freight, labor, utilities and raw material costs.
Within Aerospace, higher volumes in both the Aftermarket and OEM businesses
contributed to an increase in both gross profit and gross profit margin during
the first quarter of 2022, with operating margins specifically benefiting from
significant growth within the higher margin Aftermarket business. Operating
margins within both segments were also impacted by unfavorable productivity,
partially driven by labor availability, in part due to COVID-19. Selling and
administrative expenses in the first quarter of 2022 decreased 0.6% from the
2021 period whereas sales increased by 3.6% between the comparable 2021 and 2022
periods. As a percentage of sales, selling and administrative costs decreased
from 24.7% in the first quarter of 2021 to 23.7% in the 2022 period. The
decrease in selling and administrative costs as a percentage of sales was
primarily driven by lower amortization of certain intangibles related to earlier
acquisitions and lower incentive compensation. Operating income in the first
quarter of 2022 decreased by 3.9% to $31.1 million compared with the first
quarter of 2021 whereas operating income margin decreased from 10.7% to 10.0%,
driven by the items above.

Interest expense

Interest expense decreased by $0.4 million in the first quarter of 2022 compared to the prior year period, primarily due to lower average borrowings during the period.

Other expenses (income), net

Other expenses (income), net in the first quarter of 2022 were $1.6 million
compared to $1.5 million in the first quarter of 2021.

Income taxes

The Company's effective tax rate for the first three months of 2022 was 21.0%
compared with 28.1% in the first three months of 2021 and 21.9% for the full
year 2021. The decrease in the first quarter of 2022 effective tax rate from the
full year 2021 rate is driven by an increase in projected earnings in low tax
jurisdictions and higher income in jurisdictions with tax holidays. These items
were partially offset by the absence of benefits related to the realignment of
tax basis goodwill and intangibles, and the favorable Mutual Aid Process
Approval, both recorded in 2021.

The Aerospace and Industrial segments have several multi-year tax holidays in
Singapore, China and Malaysia. The Company was granted a tax holiday in China
that was approved in December 2021. As a result of this tax holiday, the China
tax rate was reduced from 25% to 15% and is effective for a three year period
commencing January 1, 2021 (retroactively). Aerospace was granted an income tax
holiday for operations recently established in Malaysia. This holiday commenced
effective November 2020 (retroactively) and remains effective for a period of
ten years. The Singapore tax holiday is scheduled to expire in December 2022.
These holidays are subject to the Company meeting certain commitments in the
respective jurisdictions.

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Income and Income per Share

                                                                  Three Months Ended
                                                                       March 31,
      (in millions, except per share)                   2022        2021            Change
      Net income                                      $ 20.5      $ 19.4      $  1.1       5.7  %
      Net income per common share:
      Basic                                           $ 0.40      $ 0.38      $ 0.02       5.3  %
      Diluted                                           0.40        0.38        0.02       5.3  %
      Weighted average common shares outstanding:
      Basic                                             51.0        50.9         0.1       0.2  %
      Diluted                                           51.2        51.1         0.1       0.2  %


Basic and diluted net income per common share increased for the three-month
period ended March 31, 2022 as compared to 2021 due to the increase in net
income for the period. Basic and diluted weighted average common shares
outstanding were consistent for the periods and were only slightly impacted by
the repurchase of 100,000 shares during 2021 as part of the Company's publicly
announced Repurchase Program (as defined herein) as well as the issuance of
additional shares for employee stock plans.

Financial performance by line of business

Industrial

                                  Three Months Ended
                                       March 31,
(in millions)         2022          2021              Change
Sales              $ 211.7       $ 220.0       $ (8.3)       (3.8) %
Operating profit      14.7          21.3         (6.6)      (30.8) %
Operating margin       7.0  %        9.7  %



Sales at Industrial were $211.7 million in the first quarter of 2022, an $8.3
million, or 3.8%, decrease from the first quarter of 2021. Organic sales
decreased by $2.4 million, or 1.1%, during the 2022 period, primarily driven by
lower volume, partially offset by pricing actions, reflecting inflationary
pressures. The sales decline was driven by softer year-over-year transportation
and personal care markets, partially offset by comparable strength within the
packaging and medical markets. Medical sales, although having improved on a
year-over-year basis, declined sequentially since the end of 2021. The deepening
impacts of COVID-19 during the second half of 2021 and the first quarter of 2022
continued to pressure Industrial performance. This pressure drove global supply
chain constraints and labor availability challenges, in addition to
semiconductor shortages, with these factors continuing to impact automotive and
broader industrial production. The Automation business also saw a year-over-year
organic sales decline, although sales increased modestly on a sequential basis.
Foreign currency decreased sales on a year-over-year basis by approximately $5.9
million as the U.S. dollar strengthened against foreign currencies.

Operating profit at Industrial in the first quarter of 2022 decreased 30.8% from
the first quarter of 2021 to $14.7 million. Global supply chain constraints and
inflationary pressures impacted the current period as freight, utilities, labor
and raw material cost increases impacted the broader industry. Inflationary
pressures and increased global sourcing costs of approximately $8.0 million were
partially offset by pricing and procurement actions taken by the Company,
providing a recovery of approximately $5.0 million. Operating profit was also
impacted by lower productivity, due in part to COVID-19 related absenteeism, and
restructuring charges resulting from a 2021 action. Lower incentive compensation
served as a partial offset. Operating margin decreased from 9.7% in the 2021
period to 7.0% in the 2022 period, driven primarily by the increased costs
described above.

Outlook: In Industrial, management remains focused on generating organic sales
growth through the introduction of new products and services and by leveraging
the benefits of its diversified products and global industrial end-markets. Our
end markets remain impacted by the ongoing impacts of COVID-19, including
absenteeism and, more recently, lockdowns in China, and increasing supply chain
constraints. Markets within Europe generally improved during the first quarter
of 2022 as order rates increased, although growth remained sequentially flat
within our key regions of North America and China as supply chain disruptions
impacted demand and shipments across Industrial businesses and regions. For
overall industrial end-markets,
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the manufacturing Purchasing Managers' Index ("PMI") remains above 50 within the
United States and Europe, however, China has shown continued deterioration since
the last quarter of 2021, falling below 50 during the first quarter of 2022 with
slowing growth. Global light vehicle production through the first three months
of 2022 declined modestly as compared with the comparable 2021 period, largely a
result of the impacts of the semiconductor shortage, albeit production varied by
key region, with growth in China. Production of light vehicles is being
forecasted to improve in 2022 although the semiconductor shortage may continue
to impact near-term automotive builds. Management expects this shortage and
broader supply constraints to continue into the second quarter of 2022, with an
expectation that semiconductor chip supply will improve as the year goes on. Our
customers and the markets we serve may impose emissions reduction or other
environmental standards and requirements, including our conventional fuel-based
automotive markets, thereby impacting sales volumes within our automotive end
markets. Management also tracks closely the impact of pricing changes and lead
times on raw materials and freight, given the increasing pressure of supply
chain constraints. Management remains focused on labor constraints that have
impacted the business throughout 2021 and into 2022. Within our Molding
Solutions business, global medical markets remain healthy and are expected to
remain favorable given the recent demands of COVID-19, an aging population and
expanded medical applications. Orders within the personal care market have
declined on both a year-over-year and sequential basis. Sales volumes at certain
of our businesses is dependent upon the need for equipment used to produce
plastic products, which may be significantly influenced by the demand for
plastic products, the capital investment needs of companies in the plastic
injection molding and plastics processing industries, changes in technological
advances and changes in laws or regulations such as those related to single-use
plastics, product and packaging composition, and recycling. Automation orders
increased slightly on a sequential basis, although they trended downward on a
year-over-year standpoint as management continues to focus on further expansion
into adjacent end-markets that provide new applications. Management continues to
evaluate the ongoing development of events in Ukraine and the potential for
impacts on the Company. Within the segment, our exposure in Russia is minimal,
with historical annual sales of less than $2.0 million. As noted above, our
sales were negatively impacted by $5.9 million from fluctuations in foreign
currencies. To the extent that the U.S. dollar fluctuates relative to other
foreign currencies, our sales may be impacted relative to the prior year
periods. The relative impact on operating profit is not expected to be as
significant as the impact on sales as most of our businesses have expenses
primarily denominated in local currencies, where their revenues reside, however
operating margins may be impacted. Management is focused on sales growth through
innovation, acquisition and expanding geographic reach. Strategic investments in
new technologies, manufacturing processes and product development are expected
to provide benefits over the long term and management continues to evaluate such
opportunities.

The Company is focused on the proactive management of costs to mitigate the
ongoing impacts of COVID-19 and the continuing risks of supply chain constraints
on operating profit. Management also remains focused on strategic investments
and new product and process introductions, as well as driving productivity by
leveraging the Barnes Enterprise System ("BES"). The Company continues to manage
its cost structure to align with the intake of orders and sales given remaining
uncertainty within certain end-markets during 2022. Management will continue to
explore opportunities for additional cost savings, while working closely with
vendors and customers as it relates to the timing of deliveries and pricing
initiatives. It is anticipated that operating profit will continue to be
impacted by changes in sales volume, mix and pricing, inflation, labor and
freight costs, utilities and the levels of investments in growth and innovation
that are made within each of the Industrial businesses. The ongoing events and
uncertainty within Ukraine have also driven delivery and other logistical
challenges, further magnifying the impacts of increased freight costs, mentioned
above. Operating profit may also be impacted by enactment of or changes in
tariffs, trade agreements and trade policies that may affect the cost, lead
times and/or availability of goods, including but not limited to, steel and
aluminum. Costs associated with new product and process introductions,
restructuring and other cost initiatives, strategic investments and the
integration of acquisitions may negatively impact operating profit.

Aerospace

                                                    Three Months Ended
                                                        March 31,
                  (in millions)         2022         2021              Change
                  Sales              $ 100.7       $ 81.6       $ 19.1        23.4  %
                  Operating profit      16.4         11.1          5.3        47.8  %
                  Operating margin      16.3  %      13.6  %



The Aerospace segment reported sales of $100.7 million in the first quarter of
2022, a 23.4% increase from the first quarter of 2021. Sales increased 18.2% and
34.3% within the OEM and Aftermarket businesses, respectively, relative to the
comparable 2021 period. The year-over-year increase in OEM sales was driven
primarily by growing narrow body airframe production. Sales within the
Aftermarket Maintenance Repair and Overhaul ("MRO") and spare parts businesses
also improved during the first quarter of 2022 relative to the comparable period
as airline traffic and aircraft utilization have improved significantly. Sales
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within the segment are largely denominated in WE dollars and were therefore not significantly impacted by exchange rate variations.

Operating profit at Aerospace in the first quarter of 2022 increased 47.8% from
the first quarter of 2021 to $16.4 million. The increase in operating profit
resulted from the profit contribution of higher volumes within the OEM and
Aftermarket businesses, as discussed above, partially offset by unfavorable
productivity, in part due to COVID-19 related absenteeism and supply chain
challenges, and restructuring charges resulting from a 2021 action. Operating
margin increased from 13.6% in the 2021 period to 16.3% in the 2022 period,
driven primarily by the profit contribution of increased sales.

Outlook: Sales in the Aerospace OEM business are based on the general state of
the aerospace market driven by the worldwide economy and are supported by its
order backlog through participation in certain strategic commercial and
defense-related engine and airframe programs. OEM sales and orders grew in 2022
relative to the comparable 2021 period, although management expects orders to
temper slightly during 2022 as customer aircraft production schedules continue
to normalize, albeit at lower levels. The Company expects, however, that the OEM
business will see recovery in demand for its manufactured components as narrow
body airframe production is ramping, whereas wide body airframe production
remains under pressure. The duration and depth of the aerospace market
disruptions remain uncertain at this time, however a full recovery to
pre-pandemic levels is expected to take several years. Aerospace management
continues to work with customers to evaluate engine and airframe build
schedules, giving management the ability to react timely to such changes.
Management is also working closely with suppliers to align raw material
schedules with production requirements. Management also remains focused on labor
constraints that impacted the business throughout 2021 and that continued during
the first quarter of 2022, resulting, in part, from COVID-related absenteeism.
The business remains focused on executing long-term agreements while expanding
our share of production on key programs. Backlog at OEM was $716.3 million at
March 31, 2022, an increase of 5.3% since December 31, 2021, at which time
backlog was $680.1 million. Approximately 45% of OEM backlog is expected to be
recognized over the next 12 months. If COVID-19 continues to have a material
impact on the aerospace industry, including our more significant OEM customers,
it will continue to materially affect our Aerospace business and results of
operations. The Aerospace OEM business may also be impacted by changes in the
content levels on certain platforms, changes in customer sourcing decisions,
adjustments to customer inventory levels, labor and commodity availability
(including the availability of commodities sourced in Russia) and pricing,
vendor sourcing capacity and the use of alternate materials. Additional impacts
may include the redesign of parts, quantity of parts per engine, cost schedules
agreed to under contract with the engine and airframe manufacturers, as well as
the pursuit and duration of new programs. Fluctuations in fuel costs and
potential changes in regulatory requirements could impact airlines' decisions on
maintaining, deferring or canceling new aircraft purchases, in part based on the
value associated with new fuel-efficient technologies and targets established by
airlines to reduce greenhouse gas emissions.

COVID-19 continues to impact our Aerospace Aftermarket businesses. Reduced
aircraft utilization, aircraft removed from service and reduced airline
profitability, as compared with pre-COVID-19 levels, are expected to continue to
impact our business in the mid-term. The Aftermarket business has, however,
showed strong signs of a recovery during 2021 and early 2022. Domestic and
international passenger traffic have improved and certain domestic health and
travel restrictions were lifted. International travel restrictions and more
recent geopolitical considerations continue to impact wide body aircraft
utilization and corresponding Aftermarket orders, although freight-related air
traffic remains strong. Sales in the Aerospace Aftermarket business may continue
to be impacted by inventory management and changes in customer sourcing,
deferred or limited maintenance activity during engine shop visits and the use
of surplus (used) material during the engine repair and overhaul process.
Management believes that its Aerospace Aftermarket business continues to be
competitively positioned based on well-established long-term customer
relationships, including maintenance and repair contracts in the MRO business
and long-term Revenue Sharing Programs ("RSPs") and Component Repair Programs
("CRPs"). The MRO business may also be impacted by airlines that closely manage
their aftermarket costs as engine performance and quality improves. Fluctuations
in fuel costs and potential changes in regulatory requirements and their
corresponding impacts on airline profitability and behaviors within the
aerospace industry could also impact levels and frequency of aircraft
maintenance and overhaul activities, and airlines' decisions on maintaining,
deferring or canceling new aircraft purchases, in part based on the economics
associated with new fuel-efficient technologies.

Given the pressures on sales growth resulting from COVID-19, the Company remains
focused on the proactive management of costs and improved productivity to
mitigate continued pressure on operating profit. Certain cost savings actions
taken in the prior year remain in effect and have been critical in partially
offsetting the lower profit contribution of lower Aftermarket sales relative to
pre-COVID-19 levels. Aerospace will continue to explore opportunities for
additional productivity in 2022, including working closely with vendors and
customers as it relates to the timing of deliveries and pricing initiatives.
Management also remains focused on strategic investments and new product and
process introductions. Driving productivity through the application of BES
continues as a key initiative. Operating profit is expected to be affected by
the impact of the changes in sales volume noted above, mix and pricing,
particularly as they relate to the higher profit Aftermarket RSP spare
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parts business, and investments made in each of its businesses. Operating
profits may also be impacted by potential changes in tariffs, trade agreements
and trade policies that may affect the cost and/or availability of goods and
labor constraints. Costs associated with new product and process introductions,
the physical transfer of work to other global regions, additional productivity
initiatives and restructuring activities may also negatively impact operating
profit.

CASH AND CAPITAL RESOURCES

Management assesses the Company's liquidity in terms of its overall ability to
generate cash to fund its operating and investing activities. Of particular
importance in the management of liquidity are cash flows generated from
operating activities, capital expenditure levels, dividends, capital stock
transactions, effective utilization of surplus cash positions overseas and
adequate lines of credit. The Company currently maintains sufficient liquidity
and will continue to evaluate ways to enhance its liquidity position as it
navigates through the disrupted business environment that has resulted from
COVID-19 and more recent geopolitical uncertainty, in addition to the
macroeconomic trends discussed above.

The Company believes that its ability to generate cash from operations in excess
of its internal operating needs is one of its financial strengths. Management
continues to focus on cash flow and working capital management, and anticipates
that operating activities in 2022 will generate sufficient cash to fund
operations. See additional discussion regarding currently available debt
facilities below. The Company continues to invest within its businesses, with
its estimate of 2022 capital spending to be approximately $50 to $55 million.

In October 2014, the Company entered into a Note Purchase Agreement ("Note
Purchase Agreement"), among the Company and New York Life Insurance Company, New
York Life Insurance and Annuity Corporation and New York Life Insurance and
Annuity Corporation Institutionally Owned Life Insurance Separate Account, as
purchasers, for the issuance of $100.0 million aggregate principal amount of
3.97% senior notes due October 17, 2024 (the "3.97% Senior Notes"). The 3.97%
Senior Notes are senior unsecured obligations of the Company and pay interest
semi-annually on April 17 and October 17 of each year at an annual rate of
3.97%. The 3.97% Senior Notes will mature on October 17, 2024 unless earlier
prepaid in accordance with their terms. Subject to certain conditions, the
Company may, at its option, prepay all or any part of the 3.97% Senior Notes in
an amount equal to 100% of the principal amount of the 3.97% Senior Notes so
prepaid, plus any accrued and unpaid interest to the date of prepayment, plus
the Make-Whole Amount, as defined in the Note Purchase Agreement, with respect
to such principal amount being prepaid. The Note Purchase Agreement contains
customary affirmative and negative covenants that are similar to the covenants
required under the Amended Credit Agreement, as discussed below. At March 31,
2022, the Company was in compliance with all covenants under the Note Purchase
Agreement.

On October 8, 2020, the Company entered into the sixth amendment to its fifth
amended and restated revolving credit agreement with Bank of America (the "Sixth
Amendment") and the first amendment to the Note Purchase Agreement with New York
Life (the "First NPA Amendment" and, collectively with the Sixth Amendment, the
"Amendments"). The Sixth Amendment maintained the borrowing availability of
$1,000.0 million along with access to request an additional $200.0 million
through an accordion feature. The Sixth Amendment and the First NPA Amendment
provided for an increase in the Company's maximum ratio of Consolidated Senior
Debt, as defined, to Consolidated EBITDA, as defined, from 3.25 times (or, if a
certain permitted acquisition above $150.0 million is consummated, 3.50 times)
to 3.75 times in each case at the end of the four fiscal quarters, beginning
with December 31, 2020, and regardless of whether a permitted acquisition, as
defined, is consummated, providing additional financing flexibility and access
to liquidity. Additionally, the Sixth Amendment requires the Company to maintain
a maximum ratio of Consolidated Total Debt, as defined, to Consolidated EBITDA,
of not more than 3.75 times in each case, at the end of the four fiscal
quarters, beginning with December 31, 2020 and regardless of whether a permitted
acquisition, as defined, is consummated. Furthermore, the First NPA Amendment
provides for (i) adjustments to the ratio of Consolidated Total Debt to
Consolidated EBITDA to conform to a more restrictive total leverage ratio that
may be required under the Sixth Amendment, (ii) an increase in the amount of
allowable add-back for restructuring charges when calculating Consolidated
EBITDA from $15.0 million to $25.0 million and (iii) a required fee payment
equal to 0.50% per annum times the daily outstanding principal amount of the
note during each of the four fiscal quarters, following the quarter ended
December 31, 2020, if the Company's Senior Leverage Ratio, as defined, exceeds
3.25 times. In October 2020, the Company paid fees and expenses of $1.4 million
in conjunction with executing the Amendments. Such fees have been deferred
within Other Assets on the accompanying Consolidated Balance Sheet and are being
amortized on the Consolidated Statements of Income.

On February 10, 2021, the Company and certain of its subsidiaries entered into
the sixth amended and restated senior unsecured revolving credit agreement (the
"Amended Credit Agreement") and retained Bank of America, N.A. as the
Administrative Agent for the lenders. The Amended Credit Agreement maintains the
$1,000.0 million of availability under the facility, while increasing the
available borrowings under the accordion feature from $200.0 million to $250.0
million (aggregate availability of $1,250.0 million) and extends the maturity
date through February 2026. The Amended Credit Agreement also adjusts the
interest rate to either the Eurocurrency rate, as defined in the Amended Credit
Agreement, plus a margin of 1.175% to 1.775%
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or the base rate, as defined in the Amended Credit Agreement, plus a margin of
0.175% to 0.775%, depending on the Company's leverage ratio at the time of the
borrowing. Multi-currency borrowings, pursuant to the Amended Credit Agreement,
bear interest at their respective interbank offered rate (i.e. Euribor) or 0.00%
(higher of the two rates) plus a margin of between 1.175% to 1.775%. As with the
earlier facility, the Company's borrowing capacity is limited by various debt
covenants in the Amended Credit Agreement, as described further below. The
Amended Credit Agreement requires the Company to maintain a Senior Debt Ratio of
not more than 3.25 times at the end of each fiscal quarter (or, if a permitted
acquisition above $150.0 million is consummated, 3.50 times at the end of each
of the first four fiscal quarters ending after the consummation of any such
acquisition). In addition, the Amended Credit Agreement requires the Company to
maintain a Total Debt Ratio of not more than 3.75 for each fiscal quarter (or,
if a permitted acquisition above $150.0 million is consummated, 4.25 times at
the end of each of the first four fiscal quarters ending after the consummation
of any such acquisition). A ratio of Consolidated EBITDA to Consolidated Cash
Interest Expense, as defined, of not less than 4.25, is required at the end of
each fiscal quarter. The Amended Credit Agreement also contemplates the
potential replacement of LIBOR (as defined below) with a successor financing
rate, pursuant to the intent of the United Kingdom's Financial Conduct Authority
to phase out use of LIBOR. See additional discussion immediately below regarding
the Company's ongoing evaluation related to this potential change in financing
rates. The Company paid fees and expenses of $4.3 million in conjunction with
executing the Amended Credit Agreement. Such fees have been deferred within
Other assets on the Consolidated Balance Sheets and will be amortized into
interest expense on the Consolidated Statements of Income through its maturity.
The Company subsequently amended the Credit Agreement on October 11, 2021 (the
"LIBOR Transition Amendment"), defining certain applicable multi-currency
borrowing rates that may be used as replacement rates for LIBOR, which is
expected to be discontinued by reference rate reform. See Note 2 of the
Consolidated Financial Statements, as well as discussion below.

On April 6, 2022, the Company entered into Amendment No. 1 to the Amended Credit
Agreement ("Amendment No. 1"), which (i) replaced the LIBOR interest rate for
U.S. dollar loans to a term Secured Overnight Financing Rate (or "SOFR", as
defined in the Amended Credit Agreement), (ii) added a daily SOFR option for
U.S. dollar loans and a term SOFR option for U.S. dollar loans, and (iii) added
the ability to borrow foreign swing line loans based on the Euro Short Term Rate
(as defined) with the same interest spread as the interest spread for SOFR Loans
(as defined) and Alternative Currency Loans (defined as loans denominated in
Euro, Sterling, Swiss Francs or Yen). In addition, Amendment No. 1 lowered the
interest rate spread on (i) SOFR Loans and Alternative Currency Loans to a range
from 0.975% to 1.70%, depending on the leverage ratio (the "Leverage Ratio") of
Consolidated Total Debt (as defined) to Consolidated EBITDA (as defined) as of
the end of each fiscal quarter, and (ii) loans based on the Base Rate (as
defined), to a range from 0.00% to 0.70%, depending on the Company's Leverage
Ratio as of the end of each fiscal quarter. Amendment No. 1 also lowered the
facility fee, which is required to be paid by the Company under the Amended
Credit Agreement and is calculated on the full amount of the revolving facility,
to a range from 0.15% to 0.30%, depending on the Company's Leverage Ratio at the
end of each fiscal quarter. In April 2022, the Company paid fees and expenses of
$1.0 million in conjunction with executing Amendment No. 1. Such fees will be
deferred within Other Assets on the Consolidated Balance Sheet and will be
amortized on the Consolidated Statements of Income.

The United Kingdom's Financial Conduct Authority, which regulates the London
Interbank Offered Rate ("LIBOR"), announced its intent to phase out the use of
LIBOR by December 31, 2021. The U.S. Federal Reserve, in conjunction with the
Alternative Reference Rates Committee, a steering committee comprised of large
U.S. financial institutions, identified SOFR as its preferred benchmark
alternative to U.S. dollar LIBOR. Published by the Federal Reserve Bank of New
York, SOFR represents a measure of the cost of borrowing cash overnight,
collateralized by U.S. Treasury securities, and is calculated based on directly
observable U.S. Treasury-backed repurchase transactions. The Company's Amended
Credit Agreement and corresponding interest rate swap are tied to LIBOR, with
each maturing in February 2026, as noted above. In March 2021, the ICE Benchmark
Association announced that it will extend the publication of overnight, 1, 3, 6
and 12 month LIBOR rates until June 30, 2023, while ceasing publication of all
other LIBOR rates including 1 week and 2 month rates. The Company's Amended
Credit Agreement was further amended in October 2021 and in April 2022 to
address the replacement of LIBOR via the LIBOR Transition Agreement and
Amendment No. 1, respectively, as detailed above. The Company does not
anticipate a material impact on our business, financial condition, results of
operations or cash flows

At March 31, 2022, the Company was in compliance with all applicable covenants.
The Company anticipates continued compliance under the Agreements in each of the
next four quarters. The Company's most restrictive financial covenant is the
Senior Debt Ratio, which required the Company to maintain a ratio of
Consolidated Senior Debt to Consolidated EBITDA of not more than 3.25 times at
March 31, 2022. The actual ratio at March 31, 2022 was 2.42 times, as defined.

Management did not repurchase any shares during the first quarter of 2022.
Management will continue to evaluate additional repurchases based on prevailing
market conditions, our liquidity requirements, contractual restrictions and
other factors. See "Part II - Item 2 - Unregistered Sales of Equity Securities
and Use of Proceeds".

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Operating cash flow may be supplemented with external borrowings to meet
near-term business expansion needs and the Company's current financial
commitments. The Company has assessed its credit facilities in conjunction with
the Amended Credit Facility and currently expects that its bank syndicate,
comprised of 12 banks, will continue to support its recently executed Amended
Credit Agreement, which matures in February 2026. At March 31, 2022, the Company
had $509.3 million unused and available for borrowings under its $1,000.0
million Amended Credit Facility, subject to covenants in the Company's revolving
debt agreements. At March 31, 2022, additional borrowings of $329.7 million of
Total Debt including $206.1 million of Senior Debt would have been allowed under
the financial covenants. The Company intends to use borrowings under its Amended
Credit Agreement to support the Company's ongoing growth initiatives. The
Company continues to analyze potential acquisition targets and end markets that
meet its strategic criteria with an emphasis on proprietary, highly-engineered
industrial technologies. The Company believes its credit facilities and access
to capital markets, coupled with cash generated from operations, are adequate
for its anticipated future requirements. The Company maintains communication
with its bank syndicate as it continues to monitor its cash requirements.

The Company had no borrowings under short-term bank lines of credit at March 31, 2022.

The Company entered into an interest rate swap agreement (the "2017 Swap"), with
one bank, which converted the interest on the first $100.0 million of the
Company's one-month LIBOR-based borrowings from a variable rate plus the
borrowing spread to a fixed rate of 1.92% plus the borrowing spread. The 2017
Swap expired on January 31, 2022. On March 24, 2021, the Company entered into a
new interest rate swap agreement (the "2021 Swap") with this same bank that
commenced on January 31, 2022 and that converted the interest on the first
$100.0 million of the Company's one-month LIBOR-based borrowings from a variable
rate plus the borrowing spread to a fixed rate of 1.17% plus the borrowing
spread. The 2021 Swap will expire on January 30, 2026. On April 6, 2022, the
Company entered into Amendment No. 1 to the Amended Credit Agreement, which
replaced the LIBOR interest rate for U.S. dollar loans with the SOFR rate (see
Note 8). As a result of the replacement of LIBOR pursuant to Amendment No. 1,
the Company plans to subsequently amend the 2021 Swap, effective April 29, 2022,
such that the one-month SOFR-based borrowing rate replaces the one-month
LIBOR-based borrowing rate. The Company does not anticipate any material impact
on our business, financial condition, results of operations or cash flow as a
result of this change. The 2021 Swap remained in place at March 31, 2022 and
these interest rate swap agreements (the "Swaps") are accounted for as cash flow
hedges. At March 31, 2022 and December 31, 2021, the Company's total borrowings
were comprised of 34% fixed rate debt and 66% variable rate debt.

At March 31, 2022, the Company held $75.3 million in cash and cash equivalents,
the majority of which was held by foreign subsidiaries. These amounts have no
material regulatory or contractual restrictions and, on a long-term basis, are
expected to primarily fund international investments.

Cash Flow

                                                                        Three Months Ended
                                                                            March 31,
(in millions)                                                 2022             2021            Change
Operating activities                                       $  (9.3)         $  35.6          $ (44.9)
Investing activities                                          (8.4)            (4.0)            (4.4)
Financing activities                                         (12.4)           (24.4)            12.1
Exchange rate effect                                           0.1             (2.3)             2.5
(Decrease) increase in cash, cash equivalents and
restricted cash                                            $ (30.0)         $   4.8          $ (34.8)



Operating activities used $9.3 million in the first three months of 2022 and
provided $35.6 million in the first three months of 2021. Operating cash flows
in the 2022 period were negatively impacted by higher outflows for accrued
liabilities, primarily related to incentive compensation. The 2022 period also
included a use of cash for working capital of $22.0 million compared to $1.6
million of cash provided by working capital in the 2021 period.

Investing activities used $8.4 million in the first three months of 2022
compared to $4.0 million in the first three months of 2021. Investing activities
in the 2022 period included capital expenditures of $7.4 million compared to
$7.9 million in the 2021 period. The Company expects capital spending in 2022 to
approximate $50 to $55 million.

Financing activities in the first three months of 2022 included a net decrease
in borrowings of $0.7 million compared to $10.6 million in the comparable 2021
period. Total cash used to pay dividends was $8.1 million in both the 2022 and
2021 periods.
                                       30
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Other financing cash flows in the first three months of 2022 and 2021 include $3.6 million and $1.6 millionrespectively, net cash outflows resulting from the settlement of foreign exchange hedges related to intercompany financing.

The Company maintains borrowing facilities with banks to supplement internal
cash generation. At March 31, 2022, $490.7 million was borrowed at an average
interest rate of 1.38% under the Company's $1,000.0 million Amended Credit
Facility which matures in February 2026. As of March 31, 2022, the Company had
no borrowings under short-term bank credit lines. At March 31, 2022, the
Company's total borrowings were comprised of 34% fixed rate debt and 66%
variable rate debt. The interest payments on $100.0 million of the variable rate
interest debt have been converted into payment of fixed interest plus the
borrowing spread under the terms of the interest rate swap that was executed in
March 2021.

Debt Covenants

As noted above, borrowing capacity is limited by various debt covenants in the
Company's debt agreements. Following is a reconciliation of Consolidated EBITDA,
a key metric in the debt covenants, to the Company's net income (in millions):

                                                                      Four Fiscal Quarters Ended
                                                                            March 31, 2022
Net income                                                            $                 101.0
Add back:
Interest expense                                                                         15.8
Income taxes                                                                             25.8
Depreciation and amortization                                                            92.5
Adjustment for non-cash stock based compensation                                         11.7

Workforce reduction and restructuring charges                                             1.5

Other adjustments                                                                        (1.0)

Consolidated EBITDA, as defined in the Amended Credit Agreement $

             247.3

Consolidated Senior Debt, as defined, as of March 31, 2022            $                 597.7
Ratio of Consolidated Senior Debt to Consolidated EBITDA                                 2.42
Maximum                                                                                  3.25
Consolidated Total Debt, as defined, as of March 31, 2022             $                 597.7
Ratio of Consolidated Total Debt to Consolidated EBITDA                                  2.42
Maximum                                                                                  3.75

Consolidated cash interest expense, as defined, at March 31, 2022 $

              15.8

Ratio of consolidated EBITDA to consolidated interest expense

            15.62
Minimum                                                                                  4.25



The Amended Credit Agreement allows for certain adjustments within the
calculation of the financial covenants. Other adjustments consists primarily of
net gains on the sale of assets as permitted under the Amended Credit Agreement.
The Company's financial covenants are measured as of the end of each fiscal
quarter. At March 31, 2022, additional borrowings of $329.7 million of Total
Debt, including $206.1 million of Senior Debt, would have been allowed under the
covenants. Senior Debt includes primarily the borrowings under the Amended
Credit Agreement, the 3.97% Senior Notes and the borrowings under the lines of
credit. The Company's unused committed credit facilities at March 31, 2022 were
$509.3 million; however, the borrowing capacity was limited by the debt
covenants to $329.7 million of Total Debt and $206.1 million of Senior Debt at
March 31, 2022.


OTHER MATTERS

The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Significant accounting policies are
disclosed in Note 1 of the Consolidated Financial Statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 2021. The most
significant areas involving
                                       31
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management judgments and estimates are described in Management's Discussion and
Analysis of Financial Condition and Results of Operations in the Company's
Annual Report on Form 10-K for the year ended December 31, 2021. Actual results
could differ from those estimates. There have been no material changes to such
judgments and estimates.


EBITDA

Earnings before interest expense, income taxes, and depreciation and
amortization ("EBITDA") for the first three months of 2022 was $51.8 million
compared to $52.9 million in the first three months of 2021. EBITDA is a
measurement not in accordance with generally accepted accounting principles
("GAAP"). The Company defines EBITDA as net income plus interest expense, income
taxes, and depreciation and amortization which the Company incurs in the normal
course of business. The Company does not intend EBITDA to represent cash flows
from operations as defined by GAAP, and the reader should not consider it as an
alternative to net income, net cash provided by operating activities or any
other items calculated in accordance with GAAP, or as an indicator of the
Company's operating performance. The Company's definition of EBITDA may not be
comparable with EBITDA as defined by other companies. The Company believes
EBITDA is commonly used by financial analysts and others in the industries in
which the Company operates and, thus, provides useful information to investors.
Accordingly, the calculation has limitations depending on its use.

Following is a reconciliation of EBITDA to the Company's net income (in
millions):

                                       Three Months Ended
                                           March 31,
                                        2022             2021
Net income                       $     20.5            $ 19.4
Add back:
Interest expense                        3.6               3.9
Income taxes                            5.4               7.6
Depreciation and amortization          22.3              22.0
EBITDA                           $     51.8            $ 52.9



FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q are 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," "continue,"
"will," "should," "may," 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:
the Company's ability to manage economic, business and geopolitical conditions,
including global price inflation and shortages impacting the availability of
materials; the duration and severity of the COVID-19 pandemic, including its
impacts across our business on demand, supply chains, operations and liquidity;
failure to successfully negotiate collective bargaining agreements or potential
strikes, work stoppages or other similar events; changes in market demand for
our products and services; rapid technological and market change; the ability to
protect and avoid infringing upon intellectual property rights; challenges
associated with the introduction or development of new products or transfer of
work; higher risks in global operations and markets; the impact of intense
competition; the physical and operational risks from natural disasters, severe
weather events, climate change which may limit accessibility to sufficient water
resources, outbreaks of contagious diseases and other adverse public health
developments; acts of war, terrorism and other international conflicts; the
failure to achieve anticipated cost savings and benefits associated with
workforce reductions and restructuring actions; currency fluctuations and
foreign currency exposure; impacts from goodwill impairment and related charges;
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;
government tariffs, trade agreements and trade policies; changes or
uncertainties in laws, regulations, rates, policies or interpretations that
impact the Company's business operations or tax status, including those that
address climate change, environmental, health and safety matters, and the
materials processed by our products or their end markets; fluctuations in the
pricing or availability of raw materials, freight, transportation, utilities and
other items required by our operations; labor shortages or other business
interruptions at transportation centers, shipping ports, our suppliers'
facilities or our facilities; disruptions in information technology systems,
including as a result of cybersecurity attacks or data
                                       32

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security breaches; the ability to hire and retain senior management and
qualified personnel; the continuing impact of prior acquisitions and
divestitures, and any other future strategic actions, and our ability to achieve
the financial and operational targets set in connection with any such actions;
the ability to achieve social and environmental performance goals; the outcome
of pending and future litigation and governmental proceedings; the impact of
actual, potential or alleged defects or failures of our products or third-party
products within which our products are integrated, including product
liabilities, product recall costs and uninsured claims; future repurchases of
common stock; future levels of indebtedness; 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.

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