UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-4801

BARNES GROUP INC.

(Exact name of registrant as specified in its charter)

Delaware

06-0247840

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

123 Main Street

Bristol

Connecticut

06010

(Address of Principal Executive Offices)

(Zip Code)

(860) 583-7070

Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, par value $0.01 per share

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

☒

The registrant had outstanding ~~50,626,723~~50,674,896 shares of common stock as of ~~July 26,~~November 1, 2023.

Barnes Group Inc.

Index to Form 10-Q

For the Quarterly Period Ended ~~June~~September 30, 2023


		Page
Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	3
	C ~~ondensed Consolidated~~Condensed Consolidated Statements of ~~Income~~ (L ~~(Loss)~~o ss) I n come for the three and ~~six~~nine months ended ~~June 30,~~ ~~2023~~September 30 , 2023 and 2022	3
	C on de ~~nsed Consolidated~~Condensed Consolidated Statements of Comprehensive ~~Income (Loss)~~ (Loss )Income for the three and ~~six~~nine months ended ~~June 30,~~ ~~2023~~September 30 , 2023 and 2022	4
	~~Con~~de ~~nsed Co~~n ~~solidated~~Condensed Consolidated Balance Sheets as of ~~June 30,~~ ~~2023~~September 30 , 2023 and December 31, 2022	5
	~~Con~~de ~~nsed Consolidated~~Condensed Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022	6
	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2630

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3842

Item 4.	Controls and Procedures	3842

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	4044

Item 1A.	Risk Factors	4044

Item 2.	Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds, and Issuer Purchases of Equity Securities	4144

Item 3.	Defaults Upon Senior Securities	4145

Item 4.	Mine Safety Disclosures	4145

Item 5.	Other Information	4145

Item 6.	Exhibits	4145

	Signatures	44
	~~Exhibit Index~~	4247

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. See “FORWARD-LOOKING STATEMENTS” under Part I - Item 2 “Management's Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BARNES GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME ~~(LOSS)~~

(Dollars in thousands, except per share data)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022			2023		2022		2023		2022
Net sales	Net sales	$	338,984	$	321,268	$	674,341	$	633,651	Net sales	$	360,988	$	314,744	$	1,035,329	$	948,395

Cost of sales	Cost of sales	224,625		212,754		450,868		419,944		Cost of sales	253,490		208,649		704,358		628,593
Selling and administrative expenses	Selling and administrative expenses	88,350		68,507		174,180		142,587		Selling and administrative expenses	97,508		76,059		271,688		218,646
Goodwill impairment charge	Goodwill impairment charge	—		68,194		—		68,194		Goodwill impairment charge	—		—		—		68,194
		312,975		349,455		625,048		630,725			350,998		284,708		976,046		915,433
Operating income (loss)		26,009		(28,187)		49,293		2,926
Operating income										Operating income	9,990		30,036		59,283		32,962

Interest expense	Interest expense	6,512		3,325		11,819		6,893		Interest expense	22,792		3,357		34,612		10,249
Other expense (income), net	Other expense (income), net	(2,894)		(403)		(1,553)		1,226		Other expense (income), net	(874)		2,423		(2,427)		3,650
Income (loss) before income taxes		22,391		(31,109)		39,027		(5,193)
(Loss) income before income taxes										(Loss) income before income taxes	(11,928)		24,256		27,098		19,063
Income taxes	Income taxes	5,039		8,443		8,516		13,875		Income taxes	9,802		7,277		18,318		21,152

Net income (loss)		$	17,352	$	(39,552)	$	30,511	$	(19,068)
Net (loss) income										Net (loss) income	$	(21,730)	$	16,979	$	8,780	$	(2,089)

Per common share:	Per common share:									Per common share:
Basic	Basic	$	0.34	$	(0.78)	$	0.60	$	(0.37)	Basic	$	(0.43)	$	0.33	$	0.17	$	(0.04)
Diluted	Diluted	0.34		(0.78)		0.60		(0.37)		Diluted	(0.43)		0.33		0.17		(0.04)

Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Basic	Basic	51,051,780		51,004,375		51,020,648		51,013,346		Basic	51,057,979		50,919,955		51,033,181		50,981,874
Diluted	Diluted	51,225,545		51,004,375		51,245,163		51,013,346		Diluted	51,057,979		51,059,906		51,223,978		50,981,874

See accompanying notes.

BARNES GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME ~~(LOSS)~~

(Dollars in thousands)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022			2023		2022		2023		2022
Net income (loss)		$	17,352	$	(39,552)	$	30,511	$	(19,068)
Other comprehensive income (loss), net of tax
Net (loss) income										Net (loss) income	$	(21,730)	$	16,979	$	8,780	$	(2,089)
Other comprehensive (loss) income, net of tax										Other comprehensive (loss) income, net of tax
Unrealized gain (loss) on hedging activities, net of tax (1)	Unrealized gain (loss) on hedging activities, net of tax (1)	735		(116)		(151)		3,402		Unrealized gain (loss) on hedging activities, net of tax (1)	814		2,391		663		5,793
Foreign currency translation adjustments, net of tax (2)	Foreign currency translation adjustments, net of tax (2)	(14,337)		(73,193)		4,136		(81,805)		Foreign currency translation adjustments, net of tax (2)	(14,282)		(63,433)		(10,146)		(145,238)
Defined benefit pension and other postretirement benefits, net of tax (3)	Defined benefit pension and other postretirement benefits, net of tax (3)	(1,351)		3,347		10,271		5,851		Defined benefit pension and other postretirement benefits, net of tax (3)	539		(3,737)		10,810		2,114
Total other comprehensive (loss) income, net of tax	Total other comprehensive (loss) income, net of tax	(14,953)		(69,962)		14,256		(72,552)		Total other comprehensive (loss) income, net of tax	(12,929)		(64,779)		1,327		(137,331)
Total comprehensive income (loss)		$	2,399	$	(109,514)	$	44,767	$	(91,620)
Total comprehensive (loss) income										Total comprehensive (loss) income	$	(34,659)	$	(47,800)	$	10,107	$	(139,420)

(1) Net of tax of ~~$238~~$255 and ~~$(25)~~$751 for the three months ended ~~June~~September 30, 2023 and 2022, respectively, and ~~$(38)~~$218 and ~~$1,076~~$1,827 for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, respectively.

(2) Net of tax of $0 for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022.

(3) Net of tax of ~~$(11)~~$113 and ~~$852~~$(1,383) for the three months ended ~~June~~September 30, 2023 and 2022, respectively, and ~~$3,628~~$3,741 and ~~$1,616~~$233 for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, respectively.

See accompanying notes.

BARNES GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

(Unaudited)


		June 30, 2023		December 31, 2022			September 30, 2023		December 31, 2022
Assets	Assets					Assets
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	74,673	$	76,858	Cash and cash equivalents	$	90,040	$	76,858
Accounts receivable, less allowances (2023 - $5,461; 2022 - $5,222)		311,977		291,883
Accounts receivable, less allowances (2023 - $5,827; 2022 - $5,222)						Accounts receivable, less allowances (2023 - $5,827; 2022 - $5,222)	348,456		291,883
Inventories	Inventories	294,872		283,402		Inventories	370,669		283,402
Prepaid expenses and other current assets	Prepaid expenses and other current assets	85,395		80,161		Prepaid expenses and other current assets	94,248		80,161

Total current assets	Total current assets	766,917		732,304		Total current assets	903,413		732,304

Deferred income taxes	Deferred income taxes	12,138		18,028		Deferred income taxes	13,548		18,028

Property, plant and equipment	Property, plant and equipment	930,171		906,980		Property, plant and equipment	1,009,351		906,980
Less accumulated depreciation	Less accumulated depreciation	(609,710)		(586,841)		Less accumulated depreciation	(614,337)		(586,841)
		320,461		320,139			395,014		320,139

Goodwill	Goodwill	842,152		835,472		Goodwill	1,152,074		835,472
Other intangible assets, net	Other intangible assets, net	422,922		442,492		Other intangible assets, net	721,610		442,492
Other assets	Other assets	76,089		65,295		Other assets	91,675		65,295

Total assets	Total assets	$	2,440,679	$	2,413,730	Total assets	$	3,277,334	$	2,413,730

Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Current liabilities	Current liabilities					Current liabilities
Notes and overdrafts payable	Notes and overdrafts payable	$	8,011	$	8	Notes and overdrafts payable	$	29	$	8
Accounts payable	Accounts payable	144,137		145,060		Accounts payable	156,060		145,060
Accrued liabilities	Accrued liabilities	181,121		158,568		Accrued liabilities	220,088		158,568
Long-term debt - current	Long-term debt - current	1,487		1,437		Long-term debt - current	4,412		1,437

Total current liabilities	Total current liabilities	334,756		305,073		Total current liabilities	380,589		305,073

Long-term debt	Long-term debt	564,930		569,639		Long-term debt	1,307,853		569,639
Accrued retirement benefits	Accrued retirement benefits	44,852		54,352		Accrued retirement benefits	43,427		54,352
Deferred income taxes	Deferred income taxes	61,422		62,562		Deferred income taxes	142,027		62,562
Long-term tax liability	Long-term tax liability	21,714		39,086		Long-term tax liability	21,714		39,086
Other liabilities	Other liabilities	36,018		36,691		Other liabilities	44,673		36,691


Commitments and contingencies (Note 15)
Commitments and contingencies (Note 16)						Commitments and contingencies (Note 16)
Stockholders' equity	Stockholders' equity					Stockholders' equity
Common stock - par value $0.01 per share Authorized: 150,000,000 shares Issued: at par value (2023 - 64,525,558 shares; 2022 - 64,481,493 shares)		645		645
Common stock - par value $0.01 per share Authorized: 150,000,000 shares Issued: at par value (2023 - 64,585,444 shares; 2022 - 64,481,493 shares)						Common stock - par value $0.01 per share Authorized: 150,000,000 shares Issued: at par value (2023 - 64,585,444 shares; 2022 - 64,481,493 shares)	646		645
Additional paid-in capital	Additional paid-in capital	532,414		529,791		Additional paid-in capital	535,777		529,791
Treasury stock, at cost (2023 - 13,899,665 shares; 2022 - 13,890,802 shares)		(531,883)		(531,507)
Treasury stock, at cost (2023 - 13,912,139 shares; 2022 - 13,890,802 shares)						Treasury stock, at cost (2023 - 13,912,139 shares; 2022 - 13,890,802 shares)	(532,364)		(531,507)
Retained earnings	Retained earnings	1,582,055		1,567,898		Retained earnings	1,552,165		1,567,898
Accumulated other non-owner changes to equity	Accumulated other non-owner changes to equity	(206,244)		(220,500)		Accumulated other non-owner changes to equity	(219,173)		(220,500)
Total stockholders' equity	Total stockholders' equity	1,376,987		1,346,327		Total stockholders' equity	1,337,051		1,346,327
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	2,440,679	$	2,413,730	Total liabilities and stockholders' equity	$	3,277,334	$	2,413,730

See accompanying notes.

BARNES GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


		Six Months Ended June 30,					Nine Months Ended September 30,
		2023		2022			2023		2022
Operating activities:	Operating activities:					Operating activities:
Net income (loss)	Net income (loss)	$	30,511	$	(19,068)	Net income (loss)	$	8,780	$	(2,089)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Adjustments to reconcile net income (loss) to net cash provided by operating activities:						Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	46,913		44,861		Depreciation and amortization	79,196		69,022

Amortization of debt discount						Amortization of debt discount	58		—
(Gain) loss on disposition of property, plant and equipment	(Gain) loss on disposition of property, plant and equipment	(180)		47		(Gain) loss on disposition of property, plant and equipment	(202)		14
Stock compensation expense	Stock compensation expense	4,832		6,015		Stock compensation expense	8,121		9,547
Non-cash goodwill impairment charge	Non-cash goodwill impairment charge	—		68,194		Non-cash goodwill impairment charge	—		68,194
Changes in assets and liabilities:
Changes in assets and liabilities, net of the effects of acquisition:						Changes in assets and liabilities, net of the effects of acquisition:
Accounts receivable	Accounts receivable	(18,102)		(30,232)		Accounts receivable	(5,273)		(17,923)
Inventories	Inventories	(9,743)		(26,671)		Inventories	(8,699)		(40,428)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(5,183)		(5,165)		Prepaid expenses and other current assets	5,367		(13,310)
Accounts payable	Accounts payable	(2,300)		10,196		Accounts payable	(11,629)		10,509
Accrued liabilities	Accrued liabilities	16,745		(30,674)		Accrued liabilities	22,437		(28,637)
Deferred income taxes	Deferred income taxes	779		(1,261)		Deferred income taxes	(3,541)		(4,350)
Long-term retirement benefits	Long-term retirement benefits	(10,636)		(1,871)		Long-term retirement benefits	(13,096)		(660)
Long-term tax liability	Long-term tax liability	(13,029)		(6,949)		Long-term tax liability	(13,029)		(6,948)
Other	Other	1,860		1,097		Other	2,483		521
Net cash provided by operating activities	Net cash provided by operating activities	42,467		8,519		Net cash provided by operating activities	70,973		43,462

Investing activities:	Investing activities:					Investing activities:
Proceeds from disposition of property, plant and equipment	Proceeds from disposition of property, plant and equipment	149		92		Proceeds from disposition of property, plant and equipment	6,990		104

Capital expenditures	Capital expenditures	(21,617)		(13,523)		Capital expenditures	(37,405)		(21,655)

Business acquisitions, net of cash acquired						Business acquisitions, net of cash acquired	(718,782)		—

Other	Other	(722)		(1,645)		Other	(921)		(2,168)
Net cash used by investing activities	Net cash used by investing activities	(22,190)		(15,076)		Net cash used by investing activities	(750,118)		(23,719)

Financing activities:	Financing activities:					Financing activities:
Net change in other borrowings	Net change in other borrowings	7,775		(1,372)		Net change in other borrowings	(167)		(941)
Payments on long-term debt	Payments on long-term debt	(112,927)		(70,369)		Payments on long-term debt	(268,580)		(80,777)
Proceeds from the issuance of long-term debt	Proceeds from the issuance of long-term debt	101,208		80,000		Proceeds from the issuance of long-term debt	1,006,333		85,082

Payments of debt issuance costs						Payments of debt issuance costs	(11,341)		—

Proceeds from the issuance of common stock	Proceeds from the issuance of common stock	189		246		Proceeds from the issuance of common stock	277		338
Common stock repurchases	Common stock repurchases	—		(6,721)		Common stock repurchases	—		(6,721)
Dividends paid	Dividends paid	(16,195)		(16,192)		Dividends paid	(24,302)		(24,282)
Withholding taxes paid on stock issuances	Withholding taxes paid on stock issuances	(376)		(154)		Withholding taxes paid on stock issuances	(857)		(818)
Other	Other	(3,764)		(9,825)		Other	(8,971)		(18,548)
Net cash used by financing activities		(24,090)		(24,387)
Net cash provided (used) by financing activities						Net cash provided (used) by financing activities	692,392		(46,667)

Effect of exchange rate changes on cash flows	Effect of exchange rate changes on cash flows	(466)		(4,475)		Effect of exchange rate changes on cash flows	(2,190)		(9,467)
Decrease in cash, cash equivalents and restricted cash		(4,279)		(35,419)
Increase (decrease) in cash, cash equivalents and restricted cash						Increase (decrease) in cash, cash equivalents and restricted cash	11,057		(36,391)
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	81,128		111,909		Cash, cash equivalents and restricted cash at beginning of period	81,128		111,909
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	76,849		76,490		Cash, cash equivalents and restricted cash at end of period	92,185		75,518
Less: Restricted cash, included in Prepaid expenses and other current assets	Less: Restricted cash, included in Prepaid expenses and other current assets	(2,176)		(2,122)		Less: Restricted cash, included in Prepaid expenses and other current assets	(2,145)		(1,976)
Less: Restricted cash, included in Other assets	Less: Restricted cash, included in Other assets	—		(2,090)		Less: Restricted cash, included in Other assets	—		(1,957)
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	74,673	$	72,278	Cash and cash equivalents at end of period	$	90,040	$	71,585

See accompanying notes.

BARNES GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(All dollar amounts included in the notes are stated in thousands except per share data)

(Unaudited)

1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying Condensed Consolidated Balance Sheet and the related Condensed Consolidated Statements of (Loss) Income, ~~(Loss),~~ Comprehensive (Loss) Income ~~(Loss)~~ and Cash Flows have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The Condensed Consolidated Financial Statements do not include all information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. The balance sheet as of December 31, 2022 has been derived from the 2022 financial statements of Barnes Group Inc. (the "Company"). For additional information, please refer to the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022. In the opinion of management, all adjustments, including normal recurring accruals considered necessary for a fair statement of the results, have been included. Operating results for the three- and ~~six-month~~nine-month periods ended ~~June~~September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. Certain reclassifications have been made to prior year amounts to conform to current year presentation (see Note 3)4).

Business Combinations

In accordance with the Business Combinations guidance, acquisitions are recorded using the acquisition method of accounting. The Company includes the operating results of acquired entities from their respective dates of acquisition. The Company allocates the purchase consideration to the assets acquired and liabilities assumed in the acquired entity generally based on their fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair value of these assets acquired and liabilities assumed in the acquired entity is recorded as goodwill. The primary items that generate goodwill include the increase in global market access and the acquired assembled workforce, neither of which qualify for recognition as an intangible asset. Costs incurred as a result of a business combination other than costs related to the issuance of debt or equity securities are recorded in the period the costs are incurred. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to assets acquired and liabilities assumed with the corresponding offset to goodwill.

2. Recent Accounting Standards

The Financial Accounting Standards Board ("FASB") establishes changes to accounting principles under U.S. generally accepted accounting principles ("US GAAP") through the use of Accounting Standards Updates ("ASUs") to the FASB's Accounting Standards Codification. The Company evaluates the applicability and potential impacts of recent ASUs on its Condensed Consolidated Financial Statements and related disclosures.

Recently Adopted Accounting Standards

In October 2021, the FASB amended its guidance related to business combinations. The amended guidance requires entities to recognize and measure contract assets and contract liabilities acquired in business combinations on the acquisition date in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers. The new guidance is effective on a prospective basis for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The Company adopted this guidance, on a prospective basis, on January 1, 2023 and ~~will apply~~applied the guidance as it relates to ~~future acquisitions.~~the acquisition of MB Aerospace Holdings, Inc. (Note 3).

In September 2022, the FASB amended its guidance related to supplier finance programs. The amended guidance requires additional disclosures surrounding the use of supplier finance programs to purchase goods or services including disclosing the key terms of the programs, the amount of obligations outstanding at the end of the reporting period, and a roll-forward of those obligations. The new guidance, except the amendment on roll-forward information, is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendment on roll-forward information is effective for fiscal years beginning after December 15, 2023. The Company adopted this guidance within the Condensed Consolidated Financial Statements filed as of March 31, 2023 and it did not have a material impact on the Company's Condensed Consolidated Financial Statements, however it did result in additional disclosures pursuant to the new guidance. See Note ~~15 of the Condensed Consolidated Financial Statements.~~16.

Recently Issued Accounting Standards

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 the Secured Overnight Financing Rate (“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. In March 2020, in response to this transition, the FASB issued guidance related to this rate reform, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued by reference rate reform, and addresses operational issues likely to arise in modifying contracts to replace discontinued reference rates with new rates. In January 2021, the FASB issued further clarifying guidance regarding derivatives, as it relates to this transition. In December 2022, the FASB extended the expiration of the guidance through December 31, 2024. The Company’s ~~Existing~~Unsecured Credit Agreement (Note 8)9) and corresponding USD interest

rate Swaps (Note 9)10) each mature in February 2026. In March 2021, the Intercontinental Exchange 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 ~~Existing~~Unsecured 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 (see Note 8)9), with SOFR. The Company's corresponding interest rate Swaps were amended in May 2022 to address the replacement of LIBOR. As a result of the Company's contract amendments to address the replacement of LIBOR, the Company does not anticipate a material impact on our business, financial condition, results of operations or cash flow as a result of this change.

3. Acquisition

On August 31, 2023 (“Acquisition Date”), the Company completed its acquisition of MB Aerospace Holdings Inc., a Delaware corporation ("MB Aerospace"), along with such entity's subsidiaries (the "Transaction") by acquiring all of the issued and outstanding shares of capital stock of MB Aerospace. MB Aerospace is a leading provider of precision aero-engine component manufacture and repair services serving major aerospace and defense engine original equipment manufacturers (“OEMs”), tier 1 suppliers and maintenance, repair and overhaul ("MRO") providers. This business, which is being integrated into our Aerospace segment, provides significant growth opportunities and enhances the Company’s ability to deliver value-add solutions across the aero-engine value chain. Further, the acquisition of MB Aerospace increases customer diversification within both commercial aerospace and defense platforms and provides the Company with a well-balanced portfolio across aerospace and industrial end markets.

The Company acquired MB Aerospace for an aggregate purchase price of $728,607, which includes preliminary adjustments under the terms of the Stock Purchase Agreement ("the Agreement") and is subject to post-closing adjustments under the terms of the Agreement. The Company paid $718,782, net of $9,825 of cash acquired, in cash, using cash on hand and borrowings under the Company’s $1,000,000 Revolving Credit Facility and its $650,000 Term Loan Facility (see Note 9).

During the three months ended September 30, 2023, the Company incurred $17,423 of acquisition-related costs related to the acquisition of MB Aerospace. These transaction costs have been recognized in the Company's Condensed Consolidated Statements of (Loss) Income, of which $7,817 was recognized as selling and administrative expenses and of which $9,606 primarily relating to the bridge loan facility financing was recognized as Interest expense (see Note 9).

During the nine months ended September 30, 2023, the Company incurred $22,711 of acquisition-related costs related to the acquisition of MB Aerospace. These costs include $1,729 of due diligence costs and $20,982 of transaction costs to complete the acquisition. These transaction costs have been recognized in the Company's Condensed Consolidated Statements of (Loss) Income, of which $13,105 was recognized as selling and administrative expenses and of which $9,606 primarily relating to the bridge loan facility financing was recognized as Interest expense (see Note 9).

The operating results of MB Aerospace have been included in the Consolidated Statements of Income since the Acquisition Date. The Company reported $26,476 in net sales and an operating loss of $7,386 from MB Aerospace, included within the Aerospace segment's operating profit, inclusive of $8,019 of short-term purchase accounting adjustments related to inventory step-up and backlog intangible amortization and $2,208 of amortization of other intangible assets acquired, for the period from the Acquisition Date through September 30, 2023.

Preliminary Estimated Fair Value of Assets Acquired and Liabilities Assumed

The Company accounted for the MB Aerospace acquisition as a business combination. The identifiable assets acquired and liabilities assumed are recorded at their preliminary fair values as of the Acquisition Date and are consolidated into the Company’s condensed consolidated financial statements. The assignment of fair market value requires significant judgments regarding the estimates and assumptions used to value the acquired assets and liabilities assumed. In determining the fair values of the assets acquired and liabilities assumed, the Company utilized the cost, income and market approaches from the perspective of a market participant. The Company used third party valuation professionals to aid in the determination of the estimated fair value of certain assets acquired and liabilities assumed.

The following table summarizes the preliminary estimated fair values for each major class of assets acquired, net of cash acquired, and liabilities assumed at the Acquisition Date:


Accounts receivable	$	50,817
Inventories	78,464
Prepaid expenses and other current assets	18,836

Property, plant and equipment	80,480
Goodwill	318,307
Other intangible assets	321,000
Other Assets	10,627
Total Assets Acquired	878,531

Accounts payable	(21,826)
Accrued liabilities	(34,955)
Deferred income taxes	(83,886)
Other liabilities	(9,659)
Debt assumed	(9,423)
Total Liabilities Assumed	(159,749)
Net Assets Acquired	$	718,782

The Company recorded the fair values of the assets acquired and liabilities assumed of MB Aerospace as of August 31, 2023. The final purchase price allocation is subject to post-closing adjustments pursuant to the terms of the Agreement and finalization of fair value estimates. Estimates and assumptions used in such valuations are subject to change, which could be significant, within the measurement period up to one year from the acquisition date. The areas of the valuations that are not yet finalized relate to the amounts for property, plant and equipment, long term intangible assets and the final amount of residual goodwill. The Company may obtain additional information to assist in determining fair values of net assets acquired at the Acquisition Date during the measurement period.

Goodwill represents the excess of the purchase consideration over the fair value of the underlying acquired net tangible and intangible assets. Goodwill has been allocated to the Company’s Aerospace segment. None of the recognized goodwill from the acquisition of MB Aerospace is expected to be deductible for income tax purposes (see Note 8).

The Other intangible assets in the table above consist of backlog, developed technology, and customer relationships, which are amortized over their respective estimated useful lives (see Note 8).

Supplemental Pro Forma Information

The following table reflects the unaudited pro forma operating results of the Company for the three and nine months ended September 30, 2023 and 2022, which give effect to the acquisition of MB Aerospace as if it had occurred on January 1, 2022. The pro forma results are based on assumptions that the Company believes are reasonable under the circumstances. The pro forma results are not necessarily indicative of the operating results that would have occurred had the acquisition been effective January 1, 2022, nor are they intended to be indicative of results that may occur in the future. The underlying pro forma information includes the historical financial results of the Company and MB Aerospace adjusted for certain items including depreciation and amortization expense associated with the assets acquired and the Company’s expense related to financing arrangements, with the related tax effects.

The unaudited pro forma combined condensed financial information has been prepared using the acquisition method of accounting in accordance with Accounting Standards Codification 805, Business Combinations (“ASC 805”).

The pro forma information does not include the effects of any synergies or cost reduction initiatives related to the acquisition.


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Net sales	$	416,088	$	380,644	$	1,249,129	$	1,153,395
Net (loss) income	(5,712)		1,781		6,122		(82,303)

The unaudited pro forma combined condensed financial information during the three and nine month periods ended September 30, 2023 were adjusted to include:

a.Depreciation and Amortization - Adjustment of $(4,032) and $884 for the three and nine months ended September 30, 2023, respectively, to reflect the adjustment to property, plant, and equipment depreciation and amortization expense from the acquired backlog, developed technology and customer relationships.

b.Transaction Costs - Adjustments of $(7,817) and $(13,105) for the three and nine months ended September 30, 2023, respectively, to reflect the elimination of non-recurring transaction costs.

c.Interest Expense - Adjustment of $(9,858) and $3,209 for the three and nine months ended September 30, 2023, respectively, to reflect the adjustment to interest expense resulting from interest on the new debt to finance the acquisition of MB Aerospace and the extinguishment of MB Aerospace’s existing debt and the amortization of related debt issuance costs.

d.Inventory Step-Up - Adjustment of $(3,019) and $(3,019) for the three and nine months ended September 30, 2023, respectively, to eliminate the inventory fair value adjustment that was recognized in cost of sales during the three and nine months ended September 30, 2023.

e.Income Taxes - The estimated tax impacts of the pro forma adjustments have been reflected within the unaudited pro forma condensed combined statement of operations by using a blended foreign, federal and state statutory income tax rate.

The unaudited pro forma combined condensed financial information during the three and nine month periods ended September 30, 2022 were adjusted to include:

a.Depreciation and Amortization - Adjustment of $3,331 and $20,645 for the three and nine months ended September 30, 2022, respectively, to reflect the adjustment to property, plant, and equipment depreciation and the amortization expense from the acquired backlog, developed technology and customer relationships.

b.Transaction Costs - Adjustments of $0 and $13,105 for the three and nine months ended September 30, 2022, respectively, to reflect non-recurring transaction costs.

c.Interest Expense - Adjustments of $7,993 and $17,506 for the three and nine months ended September 30, 2022, respectively, to reflect the adjustment to interest expense resulting from interest on the new debt to finance the acquisition of MB Aerospace and the extinguishment of MB Aerospace’s existing debt and the amortization of related debt issuance costs.

d.Inventory Step-Up - Adjustment of $0 and $12,337 for the three and nine months ended September 30, 2022, respectively, to reflect the increase in cost of sales for the impact of the $12,337 fair value adjustment to inventory for the acquired inventory.

4. Revenue

The Company is a global provider of highly engineered products, differentiated industrial technologies, and innovative solutions, serving a wide range of end markets and customers. Its specialized products and services are used in far-reaching applications in aerospace, healthcare, automation, packaging, ~~aerospace,~~ mobility, and manufacturing.

Revenue is recognized by the Company when control of the product or solution is transferred to the customer. Control is generally transferred when products are shipped or delivered to customers, title is transferred, the significant risks and rewards of ownership have transferred, and the Company has rights to payment and the rewards of ownership pass to the customer. Customer acceptance may also be a factor in determining whether control of the product has transferred. Although revenue is generally recognized at a point in time, a certain portion of the Company's businesses with customized products or contracts in which the Company performs work on customer-owned assets requires the use of an over-time recognition model as certain contracts meet one or more of the established criteria pursuant to the accounting guidance. Also, service revenue is recognized as control transfers, which is concurrent with the services being performed.

The following table presents the Company's revenue disaggregated by products and services, and geographic regions, by segment:


		Three Months Ended June 30, 2023						Three Months Ended June 30, 2022							Three Months Ended September 30, 2023						Three Months Ended September 30, 2022
		Industrial		Aerospace		Total Company		Industrial		Aerospace		Total Company			Aerospace		Industrial		Total Company		Aerospace		Industrial		Total Company
Products and Services(A)	Products and Services(A)													Products and Services(A)
Motion Control Solutions Products (A)		$	100,440	$	—	$	100,440	$	95,547	$	—	95,547
Aerospace Original Equipment Manufacturing Products														Aerospace Original Equipment Manufacturing Products	$	97,994	$	—	$	97,994	$	65,229	$	—	65,229
Aerospace Aftermarket Products and Services														Aerospace Aftermarket Products and Services	58,096		—		58,096		45,558		—		45,558
Motion Control Solutions Products (B)														Motion Control Solutions Products (B)	—		91,442		91,442		—		93,527		93,527
Molding Solutions Products	Molding Solutions Products	100,127		—		100,127		101,209		—		101,209		Molding Solutions Products	—		99,428		99,428		—		97,243		97,243
Automation Products	Automation Products	16,402		—		16,402		15,359		—		15,359		Automation Products	—		14,028		14,028		—		13,187		13,187
Aerospace Original Equipment Manufacturing Products		—		75,362		75,362		—		69,503		69,503
Aerospace Aftermarket Products and Services		—		46,653		46,653		—		39,650		39,650
		$	216,969	$	122,015	$	338,984	$	212,115	$	109,153	$	321,268		$	156,090	$	204,898	$	360,988	$	110,787	$	203,957	$	314,744

Geographic Regions ~~(B)~~(C)	Geographic Regions ~~(B)~~(C)													Geographic Regions ~~(B)~~(C)
Americas	Americas	$	93,254	$	87,849	$	181,103	$	88,970	$	80,766	$	169,736	Americas	$	106,608	$	89,574	$	196,182	$	78,535	$	96,201	$	174,736
Europe	Europe	81,021		20,401		101,422		74,770		18,663		93,433		Europe	29,708		74,777		104,485		19,859		65,637		85,496
Asia	Asia	40,821		11,641		52,462		46,670		8,347		55,017		Asia	17,213		38,738		55,951		10,888		40,995		51,883
Rest of World	Rest of World	1,873		2,124		3,997		1,705		1,377		3,082		Rest of World	2,561		1,809		4,370		1,505		1,124		2,629
		$	216,969	$	122,015	$	338,984	$	212,115	$	109,153	$	321,268		$	156,090	$	204,898	$	360,988	$	110,787	$	203,957	$	314,744

Six Months Ended
June 30, 2023 Six Months Ended
June 30, 2022
Industrial Aerospace Total Company Industrial Aerospace Total Company
Products and Services
Motion Control Solutions Products (A)
$ 198,914 $ — $ 198,914 $ 188,594 $ — $ 188,594
Molding Solutions Products 203,654 — 203,654 204,245 — 204,245
Automation Products 32,502 — 32,502 30,948 — 30,948
Aerospace Original Equipment Manufacturing Products — 148,100 148,100 — 135,132 135,132
Aerospace Aftermarket Products and Services — 91,171 91,171 — 74,732 74,732
$ 435,070 $ 239,271 $ 674,341 $ 423,787 $ 209,864 $ 633,651
Geographic Regions (B)
Americas $ 189,194 $ 172,421 $ 361,615 $ 174,975 $ 153,263 $ 328,238
Europe 160,629 41,068 201,697 157,139 38,484 195,623
Asia 80,932 21,663 102,595 88,489 15,665 104,154
Rest of World 4,315 4,119 8,434 3,184 2,452 5,636
$ 435,070 $ 239,271 $ 674,341 $ 423,787 $ 209,864 $ 633,651


	Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2022
	Aerospace		Industrial		Total Company		Aerospace		Industrial		Total Company
Products and Services(A)
Aerospace Original Equipment Manufacturing Products	$	246,094	$	—	$	246,094	$	200,360	$	—	200,360
Aerospace Aftermarket Products and Services	149,268		—		149,268		120,290		—		120,290
Motion Control Solutions Products (B)	—		290,356		290,356		—		282,120		144,537
Molding Solutions Products	—		303,082		303,082		—		301,488		301,488
Automation Products	—		46,529		46,529		—		44,136		44,136
	$	395,362	$	639,967	$	1,035,329	$	320,650	$	627,745	$	948,395

Geographic Regions (C)
Americas	$	279,029	$	278,768	$	557,797	$	231,798	$	271,176	$	502,974
Europe	70,776		235,406		306,182		58,343		222,776		281,119
Asia	38,876		119,670		158,546		26,553		129,484		156,037
Rest of World	6,681		6,123		12,804		3,956		4,309		8,265
	$	395,362	$	639,967	$	1,035,329	$	320,650	$	627,745	$	948,395

(A) The results of MB Aerospace, from the acquisition on August 31, 2023, have been included within the Company's revenue disaggregated by products and services, and geographic regions within the Aerospace Segment for the three and nine month periods ended September 30, 2023.

(B) Effective January 1, 2023, the Company combined Industrial's Force & Motion Control and Engineered Components businesses to form a single strategic business unit named Motion Control Solutions. As a result of the combination, Motion Control Solutions Products reflects product revenues that were previously disclosed as Force & Motion Control Products and Engineered Components Products. Prior period amounts have been reclassified to conform to the current year presentation.

~~(B)~~(C) Sales by geographic region are based on the location to which the product is shipped and services are delivered.

Revenue from products and services transferred to customers at a point in time accounted for approximately 75 percent and 80 percent of total revenue for the three month periods ended ~~June~~September 30, 2023 and ~~June~~September 30, 2022, respectively. Revenue from products and services transferred to customers at a point in time accounted for approximately 80 percent of total revenue for

each of the ~~six~~nine month periods ended ~~June~~September 30, 2023 and ~~June~~September 30, 2022. A majority of revenue within the Industrial segment and Aerospace Original Equipment Manufacturing Products business ("OEM"), along with a portion of revenue within the Aerospace Aftermarket Products and Services business ("Aftermarket"), is recognized at a point in time, primarily when the product or solution is shipped to the customer.

Revenue from products and services transferred to customers over-time accounted for approximately 25 percent of total revenue and 20 percent of total revenue for the three month periods ended ~~June~~September 30, 2023 and ~~June~~September 30, 2022, respectively. Revenue from products and services transferred to customers over-time accounted for approximately 20 percent of total revenue for each of the ~~six~~nine month periods ended ~~June~~September 30, 2023 and ~~June~~September 30, 2022. The Company recognizes revenue over-time in instances where a contract supports a continual transfer of control to the customer. Substantially all of our revenue in the Aerospace Aftermarket maintenance repair and overhaul business (within Aftermarket Products and Services) and a portion of the revenue for Motion Control Solutions products, Molding Solutions products and Aerospace OEM products is recognized over-time. Within the Molding Solutions and Aerospace Aftermarket businesses, this continual transfer of control to the customer partially results from repair and refurbishment work performed on customer-controlled assets. With other contracts, this continual transfer of control to the customer is supported by clauses in the contract, or governing commercial law of the relevant jurisdiction, where we deliver products that do not have an alternative use and require an enforceable right to payment of costs incurred (plus a reasonable profit) or the Company has a contractual right to complete any work in process and receive full contract price.

The majority of our revenue is from contracts that are for less than one year, however certain Aerospace OEM and Molding Solutions business contracts extend beyond one year. In the Industrial segment, customers are typically OEMs or suppliers to OEMs and, in some businesses, distributors. In the Aerospace segment, customers include commercial airlines, OEMs, defense-related manufacturers, and industry parts and service providers.

A performance obligation represents a promise within a contract to provide a distinct good or service to the customer. Revenue is recognized in an over-time model based on the extent of progress towards completion of the performance obligation. The

selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. The Company utilizes the cost-to-cost measure of progress for over-time contracts as we believe this measure best depicts the transfer of control to the customer, which occurs as we incur costs on contracts.

Adjustments to net sales, cost of sales and the related impact to operating income are recognized as necessary in the period they become known. Revenue recognized from performance obligations satisfied in previous periods was not material in both the three and ~~six~~nine month periods ended ~~June~~September 30, 2023 and 2022.

Contract Balances. The timing of revenue recognition, invoicing and cash collections affects accounts receivable, unbilled receivables (contract assets) and customer advances and deposits (contract liabilities) on the Condensed Consolidated Balance Sheets.

Unbilled Receivables (Contract Assets) - Pursuant to the over-time revenue recognition model, revenue may be recognized prior to the customer being invoiced. An unbilled receivable is recorded to reflect revenue that is recognized when 1) the cost-to-cost method is applied and 2) such revenue exceeds the amount invoiced to the customer. Unbilled receivables are included within Prepaid Expenses and Other Current Assets on the Condensed Consolidated Balance Sheets as of ~~June~~September 30, 2023 and December 31, 2022.

Customer Advances and Deposits (Contract Liabilities) - The Company may receive a customer advance or deposit, or have an unconditional right to receive a customer advance, prior to revenue being recognized. Certain contracts within the Molding Solutions business, for example, may require such advances. Since the performance obligations related to such advances have not been satisfied, a contract liability is established. An offsetting asset of equal amount is recorded as an account receivable until the advance is collected. Advances and deposits are included within Accrued Liabilities on the Condensed Consolidated Balance Sheets until the respective revenue is recognized. Advance payments are not considered a significant financing component as they are generally received less than one year before the customer solution is completed. These assets and liabilities are reported on the Condensed Consolidated Balance Sheets on an individual contract basis at the end of each reporting period.

Net contract assets (liabilities) consisted of the following:


		June 30, 2023		December 31, 2022		$ Change		% Change			September 30, 2023		December 31, 2022		$ Change		% Change
Unbilled receivables (contract assets)	Unbilled receivables (contract assets)	$	49,992	$	42,423	$	7,569	18	%	Unbilled receivables (contract assets)	$	54,565	$	42,423	$	12,142	29	%
Contract liabilities	Contract liabilities	(41,640)		(27,857)		(13,783)		49	%	Contract liabilities	(43,259)		(27,857)		(15,402)		55	%
Net contract assets	Net contract assets	$	8,352	$	14,566	$	(6,214)	(43)	%	Net contract assets	$	11,306	$	14,566	$	(3,260)	(22)	%

Contract liabilities balances at ~~June~~September 30, 2023 and December 31, 2022 include ~~$18,686~~$10,731 and $9,593, respectively, of customer advances for which the Company has not yet collected payment, but has an unconditional right to collect payment. Accounts receivable, as presented on the Condensed Consolidated Balance Sheet, includes corresponding balances at ~~June~~September 30, 2023 and December 31, 2022, respectively.

Changes in the net contract assets during the ~~six~~nine month period ended ~~June~~September 30, 2023 included a ~~$13,783~~$15,402 increase in contract liabilities, driven primarily by new customer advances and deposits, partially offset by revenue recognized in the current period. Offsetting this net contract assets decrease was a ~~$7,569~~$12,142 increase in contract assets, driven primarily by contract progress (i.e., unbilled receivable), partially offset by earlier contract progress being invoiced to the customer. Of this net contract asset increase, $11,506 was attributable to MB Aerospace at September 30, 2023.

The Company recognized approximately ~~30%~~15% and ~~70%~~85% of the revenue related to the contract liabilities balance as of December 31, 2022 during the three and ~~six~~nine month periods ended ~~June~~September 30, 2023, respectively, and approximately ~~40%~~10% and ~~over 90%~~85% of the revenue related to the contract liabilities balance as of December 31, 2021 during the three and ~~six~~nine month periods ended ~~June~~September 30, 2022, respectively, primarily representing revenue from the sale of molds and hot runners within the Molding Solutions business.

Remaining Performance Obligations. The Company has elected to disclose remaining performance obligations only for contracts with an original duration of greater than one year. Such remaining performance obligations represent the transaction price of firm orders for which work has not yet been performed and, for Aerospace, excludes projections of components and assemblies that Aerospace OEM customers anticipate purchasing in the future under existing programs, which represent orders that are beyond lead time and do not represent performance obligations pursuant to accounting guidance. As of ~~June~~September 30,

2023, the aggregate amount of the transaction price allocated to remaining performance obligations, including the balance within MB Aerospace, was ~~$292,489.~~$538,898. The Company expects to recognize revenue on approximately 75% of the remaining performance obligations over the next 12 months, with the remainder to be recognized within 24 months.

4.5. Stockholders' Equity

A schedule of consolidated changes in equity for the ~~six~~nine months ended ~~June~~September 30, 2023 is as follows (number of shares in thousands):


		Common Stock (Number of Shares)	Common Stock (Amount)		Additional Paid-In Capital		Treasury Stock (Number of Shares)	Treasury Stock (Amount)		Retained Earnings		Accumulated Other Non-Owner Changes to Equity		Total Stockholders’ Equity			Common Stock (Number of Shares)	Common Stock (Amount)		Additional Paid-In Capital		Treasury Stock (Number of Shares)	Treasury Stock (Amount)		Retained Earnings		Accumulated Other Non-Owner Changes to Equity		Total Stockholders’ Equity
December 31, 2022	December 31, 2022	64,481	$	645	$	529,791	13,891	$	(531,507)	$	1,567,898	$	(220,500)	$	1,346,327	December 31, 2022	64,481	$	645	$	529,791	13,891	$	(531,507)	$	1,567,898	$	(220,500)	$	1,346,327
Comprehensive income	Comprehensive income	—	—		—		—	—		13,159		29,209		42,368		Comprehensive income	—	—		—		—	—		13,159		29,209		42,368
Dividends declared ($0.16 per share)	Dividends declared ($0.16 per share)	—	—		—		—	—		(8,096)		—		(8,096)		Dividends declared ($0.16 per share)	—	—		—		—	—		(8,096)		—		(8,096)

Residual interest in subsidiary	Residual interest in subsidiary	—	—		(2,381)		—	—		—		—		(2,381)		Residual interest in subsidiary	—	—		(2,381)		—	—		—		—		(2,381)
Employee stock plans	Employee stock plans	23	—		2,665		6	(252)		(83)		—		2,330		Employee stock plans	23	—		2,665		6	(252)		(83)		—		2,330
March 31, 2023	March 31, 2023	64,504	$	645	$	530,075	13,897	$	(531,759)	$	1,572,878	$	(191,291)	$	1,380,548	March 31, 2023	64,504	$	645	$	530,075	13,897	$	(531,759)	$	1,572,878	$	(191,291)	$	1,380,548
Comprehensive income		—	—		—		—	—		17,352		(14,953)		2,399
Comprehensive income (loss)																Comprehensive income (loss)	—	—		—		—	—		17,352		(14,953)		2,399
Dividends declared ($0.16 per share)	Dividends declared ($0.16 per share)	—	—		—		—	—		(8,099)		—		(8,099)		Dividends declared ($0.16 per share)	—	—		—		—	—		(8,099)		—		(8,099)

Employee stock plans	Employee stock plans	22	—		2,339		3	(124)		(76)		—		2,139		Employee stock plans	22	—		2,339		3	(124)		(76)		—		2,139
June 30, 2023	June 30, 2023	64,526	$	645	$	532,414	13,900	$	(531,883)	$	1,582,055	$	(206,244)	$	1,376,987	June 30, 2023	64,526	$	645	$	532,414	13,900	$	(531,883)	$	1,582,055	$	(206,244)	$	1,376,987
Comprehensive loss																Comprehensive loss	—	—		—		—	—		(21,730)		(12,929)		(34,659)
Dividends declared ($0.16 per share)																Dividends declared ($0.16 per share)	—	—		—		—	—		(8,107)		—		(8,107)

Employee stock plans																Employee stock plans	59	1		3,363		12	(481)		(53)		—		2,830
September 30, 2023																September 30, 2023	64,585	$	646	$	535,777	13,912	$	(532,364)	$	1,552,165	$	(219,173)	$	1,337,051

A schedule of consolidated changes in equity for the ~~six~~nine months ended ~~June~~September 30, 2022 is as follows (number of shares in thousands):


		Common Stock (Number of Shares)	Common Stock (Amount)		Additional Paid-In Capital		Treasury Stock (Number of Shares)	Treasury Stock (Amount)		Retained Earnings		Accumulated Other Non-Owner Changes to Equity		Total Stockholders’ Equity			Common Stock (Number of Shares)	Common Stock (Amount)		Additional Paid-In Capital		Treasury Stock (Number of Shares)	Treasury Stock (Amount)		Retained Earnings		Accumulated Other Non-Owner Changes to Equity		Total Stockholders’ Equity
December 31, 2021	December 31, 2021	64,344	$	643	$	516,562	13,658	$	(523,642)	$	1,587,041	$	(151,838)	$	1,428,766	December 31, 2021	64,344	$	643	$	516,562	13,658	$	(523,642)	$	1,587,041	$	(151,838)	$	1,428,766
Comprehensive income (loss)	Comprehensive income (loss)	—	—		—		—	—		20,484		(2,590)		17,894		Comprehensive income (loss)	—	—		—		—	—		20,484		(2,590)		17,894
Dividends declared ($0.16 per share)	Dividends declared ($0.16 per share)	—	—		—		—	—		(8,111)		—		(8,111)		Dividends declared ($0.16 per share)	—	—		—		—	—		(8,111)		—		(8,111)

Employee stock plans	Employee stock plans	12	1		2,665		2	(49)		(136)		—		2,481		Employee stock plans	12	1		2,665		2	(49)		(136)		—		2,481
March 31, 2022	March 31, 2022	64,356	$	644	$	519,227	13,660	$	(523,691)	$	1,599,278	$	(154,428)	$	1,441,030	March 31, 2022	64,356	$	644	$	519,227	13,660	$	(523,691)	$	1,599,278	$	(154,428)	$	1,441,030
Comprehensive loss	Comprehensive loss	—	—		—		—	—		(39,552)		(69,962)		(109,514)		Comprehensive loss	—	—		—		—	—		(39,552)		(69,962)		(109,514)
Dividends declared ($0.16 per share)	Dividends declared ($0.16 per share)	—	—		—		—	—		(8,081)		—		(8,081)		Dividends declared ($0.16 per share)	—	—		—		—	—		(8,081)		—		(8,081)
Common stock repurchases	Common stock repurchases	—	—		—		200	(6,721)		—		—		(6,721)		Common stock repurchases	—	—		—		200	(6,721)		—		—		(6,721)
Employee stock plans	Employee stock plans	23	—		3,548		3	(106)		(62)		—		3,380		Employee stock plans	23	—		3,548		3	(106)		(62)		—		3,380
June 30, 2022	June 30, 2022	64,379	$	644	$	522,775	13,863	$	(530,518)	$	1,551,583	$	(224,390)	$	1,320,094	June 30, 2022	64,379	$	644	$	522,775	13,863	$	(530,518)	$	1,551,583	$	(224,390)	$	1,320,094
Comprehensive income (loss)																Comprehensive income (loss)	—	—		—		—	—		16,979		(64,779)		(47,800)
Dividends declared ($0.16 per share)																Dividends declared ($0.16 per share)	—	—		—		—	—		(8,090)		—		(8,090)

Employee stock plans																Employee stock plans	70	—		3,592		19	(663)		(77)		—		2,852
September 30, 2022																September 30, 2022	64,449	$	644	$	526,367	13,882	$	(531,181)	$	1,560,395	$	(289,169)	$	1,267,056

5.6. Net (Loss) Income ~~(Loss)~~ Per Common Share

For the purpose of computing diluted net income per common share, the weighted-average number of common shares outstanding is increased for the potential dilutive effects of stock-based incentive plans. No potentially dilutive shares have

been included in the diluted earnings per share calculations for the three-month period ended September 30, 2023 due to the Company’s reported net loss for the period. For the purpose of computing diluted net income per common share for the ~~three- and~~ ~~six-~~nine-month ~~periods~~period ended ~~June~~September 30, 2023, the weighted-average number of common shares outstanding was increased by ~~173,765 and 224,515, respectively.~~190,797. For the purpose of computing diluted net income per common share for the three-month period ended September 30, 2022, the weighted-average number of common shares outstanding was increased by 139,951. No potentially dilutive shares have been included in the diluted earnings per share calculations for the ~~three- and six-month periods~~nine-month period ended ~~June~~September 30, 2022 due to the Company’s reported net ~~losses~~loss for the ~~periods.~~period.

The calculation of weighted-average diluted shares outstanding excludes all shares that would have been anti-dilutive. During the three month periods ended ~~June~~September 30, 2023 and 2022, the Company excluded ~~784,087~~683,374 and ~~875,544~~875,706 stock awards, respectively, from the calculation of weighted-average diluted shares outstanding as the stock awards were considered anti-dilutive. During the ~~six~~nine month periods ended ~~June~~September 30, 2023 and 2022, the Company excluded ~~795,032~~757,813 and ~~797,194~~823,365 stock awards, respectively, from the calculation of weighted-average diluted shares outstanding as the stock awards were considered anti-dilutive.

The Company granted 120,195 stock options, 152,476 restricted stock unit awards and 131,025 performance share awards ("PSAs") in February 2023 as part of its annual long-term incentive equity grant awards. All of the stock options and the restricted stock unit awards vest upon meeting certain service conditions. The restricted stock unit awards are included in basic weighted-average common shares outstanding as they contain nonforfeitable rights to dividend payments. The PSAs are part of the long-term Performance Share Award Program and are based on performance goals that are driven by a combination of independently measured metrics (depending on the grant year) with each metric being weighted equally. The metrics for awards granted in 2023 include the Company’s total shareholder return ("TSR"), return on invested capital ("ROIC") and operating income before depreciation and amortization growth ("EBITDA growth"). The TSR and EBITDA growth metrics are designed to assess the long-term Company performance relative to the performance of companies included in the Russell 2000 Index over a three-year performance period. ROIC is designed to assess the Company's performance compared to pre-established Company targets over a three-year performance period. The participants can earn from zero to 250% of the target award and the award includes a forfeitable right to dividend equivalents, which are not included in the aggregate target award numbers. The fair value of the TSR is determined using a Monte Carlo valuation method as the award contains a market condition.

6.7. Inventories

The components of inventories consisted of:


		June 30, 2023		December 31, 2022			September 30, 2023		December 31, 2022
Finished goods	Finished goods	$	99,938	$	105,965	Finished goods	$	104,046	$	105,965
Work-in-process	Work-in-process	78,108		68,664		Work-in-process	116,561		68,664
Raw material and supplies	Raw material and supplies	116,826		108,773		Raw material and supplies	150,062		108,773
		$	294,872	$	283,402		$	370,669	$	283,402

7.8. Goodwill and Other Intangible Assets

Goodwill:

The following table sets forth the change in the carrying amount of goodwill for each reportable segment and for the Company as of and for the period ended ~~June~~September 30, 2023:


		Industrial		Aerospace		Total Company			Industrial		Aerospace		Total Company
December 31, 2022 (A)	December 31, 2022 (A)	$	804,686	$	30,786	$	835,472	December 31, 2022 (A)	$	804,686	$	30,786	$	835,472

Acquisition related								Acquisition related	—		$	318,307	$	318,307

Foreign currency translation	Foreign currency translation	6,680		—		6,680		Foreign currency translation	(1,438)		(267)		(1,705)
June 30, 2023		$	811,366	$	30,786	$	842,152
September 30, 2023								September 30, 2023	$	803,248	$	348,826	$	1,152,074

(A) Industrial amounts are net of accumulated goodwill impairment losses of $68,194.

The changes recorded at Aerospace include $318,307 of goodwill in 2023 resulting from the acquisition of MB Aerospace in August 2023. See Note 3. The amounts allocated to goodwill reflect the benefits that the Company expects to realize from an increase in global market access and MB Aerospace's assembled workforce. None of the recognized goodwill from the

acquisition of MB Aerospace is expected to be deductible for income tax purposes. The purchase price for the MB Aerospace acquisition is subject to post-closing adjustments and finalization of purchase price allocation, therefore goodwill may require adjustment accordingly.

In the second quarter of 2023, management performed its annual impairment testing of goodwill and determined that there was no goodwill impairment.

Other Intangible Assets:

Other intangible assets consisted of:


			June 30, 2023				December 31, 2022						September 30, 2023				December 31, 2022
		Range of Life -Years	Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization			Range of Life -Years	Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization
Amortized intangible assets:	Amortized intangible assets:										Amortized intangible assets:
Revenue Sharing Programs (RSPs)	Revenue Sharing Programs (RSPs)	Up to 30	$	299,500	$	(170,233)	$	299,500	$	(164,162)	Revenue Sharing Programs (RSPs)	Up to 30	$	299,500	$	(173,404)	$	299,500	$	(164,162)
Component Repair Programs (CRPs)	Component Repair Programs (CRPs)	Up to 30	111,839		(45,539)		111,839		(41,880)		Component Repair Programs (CRPs)	Up to 30	111,839		(47,664)		111,839		(41,880)
Customer relationships	Customer relationships	10-16	337,189		(165,887)		337,189		(156,442)		Customer relationships	10-16	587,189		(172,627)		337,189		(156,442)
Patents and technology	Patents and technology	4-11	123,433		(96,288)		123,433		(92,875)		Patents and technology	4-18	178,433		(98,538)		123,433		(92,875)
Trademarks/trade names	Trademarks/trade names	10-30	10,949		(10,841)		10,949		(10,772)		Trademarks/trade names	10-30	10,949		(10,875)		10,949		(10,772)
Other	Other	Up to 10	10,135		(3,534)		9,413		(2,966)		Other	Up to 10	26,334		(8,074)		9,413		(2,966)
			893,045		(492,322)		892,323		(469,097)				1,214,244		(511,182)		892,323		(469,097)
Unamortized intangible assets:	Unamortized intangible assets:										Unamortized intangible assets:
Trade names	Trade names		55,670		—		55,670		—		Trade names		55,670		—		55,670		—
Foreign currency translation	Foreign currency translation		(33,471)		—		(36,404)		—		Foreign currency translation		(37,122)		—		(36,404)		—
Other intangible assets	Other intangible assets		$	915,244	$	(492,322)	$	911,589	$	(469,097)	Other intangible assets		$	1,232,792	$	(511,182)	$	911,589	$	(469,097)

In connection with the acquisition of MB Aerospace in August 2023, the Company recorded intangible assets of $321,000 which includes $250,000 of customer relationships, $55,000 of developed technology, and $16,000 of customer backlog included within Other above. The estimated weighted-average useful lives of the acquired assets were 15 years, 18 years and 1 year, respectively.

Amortization of intangible assets for the three and ~~six~~nine month periods ended ~~June~~September 30, 2023 was ~~$11,604~~$18,860 and ~~$23,224,~~$42,084, respectively. Amortization of intangible assets for the three and ~~six~~nine month periods ended ~~June~~September 30, 2022 was ~~$11,593~~$11,747 and ~~$22,171,~~$33,918, respectively. Estimated amortization of intangible assets for future periods is as follows: 2023 (remainder) - ~~$28,000;~~$25,000; 2024 - ~~$45,000;~~$71,000; 2025 - ~~$44,000;~~$70,000; 2026 - ~~$43,000;~~$67,000; 2027 - ~~$41,000~~$66,000 and 2028 - ~~$35,000.~~$62,000.

In the second quarter of 2023, management performed its annual impairment testing of its trade names, which are indefinite-lived intangible assets. Based on this assessment, there were no impairments.

8.9. Debt

Long-term debt and notes and overdrafts payable at ~~June~~September 30, 2023 and December 31, 2022 consisted of:

June 30, 2023 December 31, 2022
Carrying
Amount Fair
Value Carrying
Amount Fair
Value
Effective Date Credit Agreement $ 462,651 $ 464,699 $ 466,672 $ 464,373
3.97% Senior Notes 100,000 97,277 100,000 96,894
Borrowings under lines of credit and overdrafts 8,011 8,011 8 8
Finance leases 3,766 3,586 4,404 4,085
574,428 573,573 571,084 565,360
Less current maturities (9,498) (1,445)
Long-term debt $ 564,930 $ 569,639

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 $100,000 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 fair value of the 3.97% Senior Notes was determined using the U.S. Treasury yield and a long-term credit spread for similar types of borrowings, which represent Level 2 observable inputs. The Note Purchase Agreement contains customary affirmative and negative covenants that are similar to the covenants required under the Existing Credit Agreement, as discussed below.


	September 30, 2023				December 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Revolving Credit Facility	$	662,937	$	664,674	$	466,672	$	464,373
Term Loan Facility	650,000		651,625		—		—
Unamortized deferred financing costs and original issue discount - Term Loan Facility	(12,915)		—		—		—
3.97% Senior Notes	—		—		100,000		96,894
Borrowings under lines of credit and overdrafts	29		29		8		8
Finance leases	12,243		11,947		4,404		4,085

	1,312,294		1,328,275		571,084		565,360

Less current maturities	(4,441)				(1,445)
Long-term debt	$	1,307,853			$	569,639

On February 10, 2021, the Company and certain of its subsidiaries entered into the sixth amended and restated senior unsecured revolving credit agreement (the ~~"Existing~~"Unsecured Credit Agreement") and retained Bank of America, N.A. as the Administrative Agent for the lenders. The $1,000,000 ~~Existing~~Unsecured Credit Agreement ~~matures~~was to mature in February ~~2026 and includes an accordion feature to increase the borrowing availability of the Company to $1,250,000.~~2026. Borrowings under the ~~Existing~~Unsecured Credit Agreement bore interest at either the Eurocurrency rate, as defined in the ~~Existing~~Unsecured Credit Agreement, plus a margin of 1.175% to 1.775% or the base rate, as defined in the ~~Existing~~Unsecured 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 ~~Existing~~Unsecured Credit Agreement, bore 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% and 1.775%. The ~~Company's borrowing capacity is limited by various debt covenants in the Existing~~Unsecured Credit Agreement ~~as described further below. The Existing Credit Agreement requires~~required the Company to maintain a Senior Debt Ratio of not more than 3.25 ~~times (or, if a permitted acquisition above $150,000 is consummated, 3.50 times at the end of each of the first four fiscal quarters ending after the consummation of any such acquisition).~~times. In addition, the ~~Existing~~Unsecured Credit Agreement ~~requires~~required the Company to maintain a Total Debt Ratio of not more than 3.75 times for each fiscal ~~quarter (or, if a permitted acquisition above $150,000 is consummated, 4.25 times at the end of each of the first four fiscal quarters ending after the consummation of any such acquisition).~~quarter. A ratio of Consolidated EBITDA to Consolidated Cash Interest Expense, as defined, of not less than 4.25 times, iswas also required at the end of each fiscal quarter. The ~~Existing~~Unsecured Credit Agreement also contemplated 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 discussion below). The Company paid fees and expenses of $4,306 in conjunction with executing the ~~Existing~~Unsecured Credit Agreement. Such fees have been deferred within Other Assets on the Condensed Consolidated Balance Sheets and will be amortized into interest expense on the Condensed Consolidated Statements of (Loss) Income ~~(Loss)~~ through its maturity. Cash used to pay these fees was recorded through other financing activities on the Condensed Consolidated Statements of Cash Flows. The Company subsequently amended the ~~Existing~~Unsecured Credit Agreement on October 11, 2021 (the "LIBOR Transition Amendment"), defining certain applicable multi-currency borrowing rates that ~~may~~could be used as replacement rates for LIBOR, which iswas expected to be discontinued by reference rate reform. See Note 2 of the Condensed Consolidated Financial Statements, as well as the discussion below.

On April 6, 2022, the Company entered into Amendment No. 1 to the ~~Existing~~Unsecured Credit Agreement (“Amendment No. 1”), which (i) replaced the LIBOR interest rate for U.S. dollar loans to a term Secured Overnight Financing Rate including a Secured Overnight Financing Rate adjustment (or "SOFR", as defined in the ~~Existing~~Unsecured 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 ("€STR") (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 iswas required to be paid by the Company under the ~~Existing~~Unsecured Credit Agreement and iswas 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~~$1,037 in conjunction with executing Amendment No. 1. Such fees have been deferred within Other Assets on the Condensed Consolidated Balance Sheets and will be amortized into interest expense on the Condensed Consolidated Statements of (Loss) Income ~~(Loss)~~ through ~~the maturity of Existing Credit Agreement.~~its maturity. Cash used to pay these fees was recorded through other financing activities on the Condensed Consolidated Statements of Cash Flows.

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 ~~Existing~~Unsecured Credit Agreement and corresponding interest rate swap were tied to LIBOR, with each maturing in February 2026. In March 2021, the ICE Benchmark Association announced that it would 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 ~~Existing~~Unsecured Credit Agreement was further amended in October 2021 and in April 2022 to address the replacement of LIBOR, which, as a result of the Company's contract amendments as discussed above, did not have a material impact on our business, financial condition, results of operations or cash flow.

On June 5, 2023, the Company entered into ~~a Stock Purchase~~the Agreement ~~(the “Agreement”)~~ with MB Aerospace Group Holdings Limited, a Cayman Islands limited company. See Note 15. The Company agreed to acquire MB Aerospace by acquiring all the issued and outstanding capital stock of MB Aerospace Holdings Inc., a Delaware corporation ("MB Aerospace"), along with such entity’s subsidiaries (the “Transaction”) for an aggregate purchase price of $740,000, payable in cash, subject to customary and specified closing adjustments, as set forth in the Agreement.3. In connection with entry into the Agreement, on June 5, 2023, the Company entered into the Second Amendment (the “Second Amendment”) to Note Purchase Agreement ~~(the “Second Amendment”)~~ and Amendment No. 2 ~~to Existing Credit Agreement~~ ("Amendment No. 2") to Unsecured Credit Agreement to facilitate the Transaction, as well as a commitment letter with Bank of America, N.A. and BofA Securities, Inc. (collectively, the “Commitment Parties”), pursuant to which the Commitment Parties agreed to provide, subject to the satisfaction of customary closing conditions contained therein, a $1,000,000 backstop senior secured revolving credit facility and a $700,000 senior secured 364-day bridge loan facility ("Bridge Loan Facility"). The Bridge Loan Facility iswas only intended to be drawn to the extent that the Company ~~has~~did not ~~obtained~~obtain alternative financing prior to the closing of the Transaction. The Company recorded fees of $9,500 in conjunction with the Bridge Loan Facility and $1,000,000 backstop senior secured revolving credit facility into interest expense on the Condensed Consolidated Statements of (Loss) Income in the three months ended September 30, 2023. On ~~June 22,~~the Acquisition Date, pursuant to the terms of the Agreement, the Company completed the Transaction for an aggregate purchase price of $728,607, subject to customary and specified closing adjustments, as set forth in the Agreement. Concurrently, the Company entered into a new Credit Agreement (the “Credit Agreement”) among the Company and certain of its subsidiaries, the issuing banks, lenders and other parties party thereto, and Bank of America, N.A., as administrative agent, as collateral agent and as swingline lender, which provides for senior secured financing of $1,650,000, consisting of a term loan facility (the “Term Loan Facility”) in an aggregate principal amount of $650,000, at an original issue discount of $4,875, and a revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Facilities”) in an aggregate principal amount of up to $1,000,000, including a letter of credit sub-facility of up to $50,000. Proceeds of the loans borrowed under the Senior Facilities on the Acquisition Date, net of a 0.75% original issue discount on the Term Loan Facility, were used to fund, in part, the transactions contemplated by the Agreement, including the consummation of the Transaction, the repayment in full of the 3.97% Senior Notes, and to pay related fees and expenses. As of the Acquisition Date, the Revolving Credit Facility had outstanding borrowings in an aggregate principal amount of approximately $698,000. Proceeds of any loans under the Revolving Credit Facility borrowed after the Acquisition Date will be used for general corporate purposes. The Company paid fees and expenses of $3,058 in conjunction with executing the Revolving Credit Facility. Such fees have been deferred within Other Assets on the Condensed Consolidated Balance Sheets and will be amortized into interest expense on the Condensed Consolidated Statements of (Loss) Income through the maturity of the Credit Agreement with the previously recorded debt issuance costs. The Company incurred $8,283 of debt issuance costs in conjunction with executing the Term Loan Facility. Such fees have been recorded as a direct deduction from the carrying amount of the Term Loan Facility and will be amortized into interest expense on the Condensed Consolidated Statements of (Loss) Income through the maturity of the Term Loan Facility. Cash used to pay these fees was recorded through financing activities on the Condensed Consolidated Statements of Cash Flows. On August 31, 2023, in connection with the ~~Transaction, the Company entered into Amendment No. 3 to the Existing~~ Credit Agreement ~~(the “Amendment No. 3”). Upon~~and the effectiveness of Amendment No. 3, the Existing Credit Agreement was amended (as amended, the “Effective Date Credit Agreement”) to, among other things, include customary “certain funds” provisions applicable to a portion of the revolving commitments in an amount equal to $300,000 plus the amount needed for a redemption of the Company's existing 3.97% Senior Notes due 2024. Upon the closeclosing of the Transaction, ~~certain amendments to~~ the Effective Date Credit Agreement will become effective (as amended, the “Closing Date Credit Agreement”) to permit the Transaction, including, among other things, to: (i) permit the assumption and/or incurrence of indebtedness and liens in connection with the Transaction; (ii) remove theBridge Loan Facility was terminated.

The Senior ~~Debt Ratio~~ ~~in conjunction with the repayment~~Facilities are guaranteed by each of the ~~Note Purchase Agreement~~; (iii) increase the maximum leverage ratio to 5.50:1, subject to step-downs to (a) 5.00:1 beginning with the fiscal period ending June 30, 2024, (b) 4.50:1 beginning with the fiscal period ending December 31, 2024Company’s wholly owned domestic subsidiaries and (c) 4.00:1 beginning with the fiscal period ending June 30, 2025, subject to a 0.50:1 step up in connection with permitted acquisitions on and after June 30, 2024; (iv) lower the minimum interest coverage ratio to 3.00:1; (v) grant the administrative agent (for the benefit of theare secured ~~lenders) a security interest in~~by substantially all ~~of the present and after-acquired~~ assets of the Company and of each subsidiary guarantor, (subject to certain exceptions); (vi) increase the Applicable Margin (as defined in the Closing Date Credit Agreement) to a range from 1.375% to 2.50% for €STR, SOFR, and alternative currency loans and to a range from 0.375% to 1.50% for base rate loans, in each case subject to certain exceptions.

Borrowings under the Senior Facilities bear interest at a rate per annum equal to, at the Company’s option, either Term SOFR (subject to a 0.00% floor) or an alternate base rate ("ABR"), in each case plus an applicable margin of (i) in the case of borrowings under the Term Loan Facility, 3.00% for Term SOFR loans and 2.00% for ABR loans and (ii) in the case of borrowings under the Revolving Credit Facility, initially, 2.375% for Term SOFR loans and 1.375% for ABR loans. The applicable margin for borrowings under the Revolving Credit Facility varies depending on the Company’s total net leverage ~~ratio;~~ratio. The Company is also required to pay a commitment fee initially equal to 0.35% per annum to the lenders under the Revolving Credit Facility in respect of the unutilized commitments thereunder. The commitment fee under the Revolving Credit Facility varies depending on the Company’s total net leverage ratio.

The Term Loan Facility matures on the seven-year anniversary of the Acquisition Date and ~~(vii) make certain other changes set forth therein.~~amortizes in equal quarterly installments, starting with the first full fiscal quarter after the Acquisition Date, of 0.25% of the initial principal amount. The Revolving Credit Facility matures on the five-year anniversary of the Acquisition Date. In addition, the Company is required to

1518

prepay outstanding loans under the Term Loan Facility, subject to certain exceptions, with up to 50% of the Company’s annual excess cash flow (as defined under the Credit Agreement) in excess of the greater of $50,000 and 15.0% of Last Twelve Months ("LTM") Adjusted Consolidated EBITDA (as defined in the Credit Agreement) as of the applicable time, and with up to 100% of the net cash proceeds of certain recovery events and non-ordinary course asset sales (which percentages vary depending on the Company’s first lien secured net leverage ratio).

The Company may generally prepay outstanding loans under the Senior Facilities at any time, without prepayment premium or penalty, subject to customary “breakage” costs with respect to Term SOFR loans. Prepayments of the Term Loan Facility in connection with certain “repricing events” resulting in a lower yield occurring at any time during the first six months after the Acquisition Date must be accompanied by a 1.00% prepayment premium.

The Revolving Credit Facility requires that the Company maintain a maximum Total Net Leverage Ratio, as defined in the Credit Agreement, initially of 5.50 to 1.00 as of the last day of each fiscal quarter for which financials have been (or were required to be) delivered, commencing with the first full fiscal quarter after the Acquisition Date, stepping down to 4.00 to 1.00 over time. For material acquisitions in certain circumstances, such ratio may be increased by up to 0.50 to 1.00. The actual ratio, as defined, was 3.77 at September 30, 2023. The Revolving Credit Facility also requires that the Company not permit the Interest Coverage Ratio as of the last day of any test period to be less than 3.00 to 1.00. The actual ratio, as defined, was 3.36 as of September 30, 2023. At September 30, 2023, the Company was in compliance with all applicable covenants.

The Senior Facilities contain certain affirmative and negative covenants that limit the ability of the Company, among other things and subject to certain significant exceptions, to incur debt or liens, make investments, enter into certain mergers, consolidations, asset sales and acquisitions, pay dividends and make other restricted payments and enter into transactions with affiliates. The Senior Facilities also contain certain events of default, including relating to a change of control. If an event of default occurs, the lenders under the Senior Facilities will be entitled to take various actions, including the acceleration of amounts due under the Senior Facilities.

Borrowings and availability under the ~~Effective Date~~Revolving Credit ~~Agreement~~Facility were ~~$462,651~~$662,937 and ~~$537,349,~~$337,063, respectively, at ~~June~~September 30, ~~2023~~2023. Borrowings and availability under the Unsecured Credit Facility were $466,672 and $533,328, respectively, at December 31, 2022, subject to covenants in the Company's revolving debt agreements. At June 30, 2023, additional borrowings of $266,029 of Total Debt (including $153,968 of Senior Debt) would have been allowed under the financial covenants.discussed above. The average interest rate on these borrowings was ~~5.01%~~7.04% and 3.67% on ~~June~~September 30, 2023 and December 31, 2022, respectively. The average interest rate excludes the impact of the Company’s interest swap agreements. See Note 10. Borrowings included Euro-denominated borrowings of 296,500 Euros ($~~322,651)~~317,937) at ~~June~~September 30, 2023 and 310,700 Euros ($331,672) at December 31, 2022. The fair value of the borrowings is based on observable Level 2 inputs. The borrowings were valued using discounted cash flows based upon the Company's estimated interest costs for similar types of borrowings.

~~At June 30, 2023,~~Borrowings under the Company was in compliance with all applicable covenants. The Company anticipates continued compliance 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 timesTerm Loan Facility were $650,000 at ~~June~~September 30, 2023. The ~~actual ratio, as defined,~~average interest rate on these borrowings was ~~2.56 at June~~8.42% on September 30, 2023. The average interest rate excludes the impact of the Company’s interest swap agreements. See Note 10. The fair value of the borrowings is based on the quoted market price of the borrowings on September 30, 2023, which represents Level 1 observable inputs.

In addition, the Company has approximately ~~$71,000~~$83,000 in uncommitted short-term bank credit lines ("Credit Lines") and overdraft facilities. The Credit Lines are accessed locally and are available primarily within the U.S., Europe and Asia. The Credit Lines are subject to the applicable borrowing rates within each respective country and vary between jurisdictions (i.e. LIBOR, Euribor, etc.). ~~Under the Credit Lines, $8,000 was borrowed at June 30, 2023 at an average interest rate of 6.6%.~~ The Company had no borrowings under the Credit Lines at September 30, 2023 or December 31, 2022. The Company had borrowed ~~$11~~$29 and $8 under the overdraft facilities at ~~June~~September 30, 2023 and December 31, 2022, respectively. Repayments under the Credit Lines are due within one month after being borrowed. Repayments of the overdrafts are generally due within two days after being borrowed. The carrying amounts of the Credit Lines and overdrafts approximate fair value due to the short maturities of these financial instruments.

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 $100,000 aggregate principal amount of the 3.97% Senior Notes due October 17, 2024 (the “Notes”). The Notes were senior unsecured obligations of the Company and paid interest semi-annually on April 17 and October 17 of each year at an annual rate of 3.97%. Subject to certain conditions, the Company could, at its option, prepay all or any part of the Notes in an amount equal to 100% of the principal amount 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 Notes, together with accrued and unpaid interest thereon, were repaid on August 31, 2023 in connection with the Transaction. There was no

Make-Whole Amount. The fair value of the Notes at December 31, 2022 was determined using the U.S. Treasury yield and a long-term credit spread for similar types of borrowings, which represented Level 2 observable inputs.

The Company also has several finance leases under which ~~$3,766~~$12,243 and $4,404 was outstanding at ~~June~~September 30, 2023 and December 31, 2022, respectively. The fair value of the finance leases is based on observable Level 2 inputs. These instruments were valued using discounted cash flows based upon the Company's estimated interest costs for similar types of borrowings.

9.10. Derivatives

The Company has manufacturing, service and sales facilities around the world and thus makes investments and conducts business transactions denominated in various currencies. The Company is also exposed to fluctuations in interest rates and commodity price changes. These financial exposures are monitored and managed by the Company as an integral part of its risk management program.

Derivative financial instruments have been used by the Company to hedge its exposure to fluctuations in interest rates. On April 28, 2017, the Company entered into an interest rate swap agreement (the "2017 Swap") with one bank which converted the interest on ~~the first~~ $100,000 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~~ $100,000 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. OnEffective, April 6,30, 2022, the Company entered into Amendment No. 1 to the Existing Credit Agreement, which replaced the LIBOR interest rate for U.S. dollar loans with the SOFR rate (see Note 8). As a result, in May 2022 the Company subsequently amended the 2021 Swap (the "Amended 2021 Swap"), ~~effective April 30, 2022,~~ such that the one-month SOFR-based borrowing rate replaced the one-month LIBOR-based borrowing rate. The Amended 2021 Swap, which will expire on January 30, 2026, converts the interest on ~~the first~~ $100,000 of the Company's one-month SOFR-based borrowings from a variable rate plus the borrowing spread to a fixed rate of 1.075% plus the borrowing spread. The execution of the Amended 2021 Swap did not ~~result in~~have a material impact on our business, financial condition, results of operations or cash flow. On July 19, 2023, the Company entered into an interest rate swap agreement (the ~~"2023~~"Euribor Swap") with one bank that ~~will commence~~commenced on July 31, 2023, which converts the interest on ~~the first~~ €150,000 of the Company's Euribor-based borrowings from a variable rate plus the borrowing spread to a fixed rate of 3.257% plus the borrowing spread. ~~Per~~Under the ~~2023~~Euribor Swap, €50,000 will expire on July 31, 2026, with the remaining balance of €100,000 expiring on July 31, 2028. On September 12, 2023, the Company entered into six additional interest rate swap agreement (the "2023 Swaps") with six different banks that commenced on September 29, 2023, which convert the interest on $600,000 of the Company's one-month SOFR-based borrowings from a variable rate plus the borrowing spread to a blended fixed rate of 4.321% plus the borrowing spread. Under the 2023 Swaps, $50,000 will expire on August 31, 2026, $100,000 will expire on August 31, 2027, $200,000 will expire on August 31, 2028, $50,000 will expire on August 31, 2029 and the remaining balance of $200,000 will expire on August 31, 2030. The execution of the interest rate swap agreements in 2023 ~~Swap~~ did not ~~result in~~have a material impact on our business, financial condition, results of operations or cash flow. These interest rate swap agreements (the "Swaps") are accounted for as cash flow hedges.

The Company also uses derivative financial instruments to hedge its exposures to fluctuations in foreign currency exchange rates. The Company has various contracts outstanding which primarily hedge recognized assets or liabilities and anticipated

transactions in various currencies including the Euro, British pound sterling, U.S. dollar, Canadian dollar, Japanese yen, Singapore dollar, Korean won, Swedish kroner, Chinese renminbi, Mexican peso, Hong Kong dollar and Swiss franc. Certain foreign currency derivative instruments are treated as cash flow hedges of forecasted transactions. All foreign exchange contracts are due within two years.

The Company does not use derivatives for speculative or trading purposes or to manage commodity exposures.

The Company records the derivatives at fair value on the Condensed Consolidated Balance Sheets within Prepaid Expenses and Other Current Assets, Other Assets, Accrued Liabilities or Other Liabilities depending on their fair value and remaining contractual period. Changes in the fair market value of derivatives accounted for as cash flow hedges are recorded to accumulated other comprehensive income (loss) and reclassified to earnings in a manner that matches the earnings impact of the hedged transaction. Reclassifications to earnings for the Swaps are recorded through interest expense and reclassifications to earnings for foreign exchange contracts are recorded through net sales. Changes in the fair market value of the foreign exchange contracts that are not designated hedging instruments are recorded directly to earnings through Other expense (income), net.

The fair values of the Amended 2021 Swap were ~~$8,684~~$8,282 and $8,535 as of ~~June~~September 30, 2023 and December 31, 2022, respectively, the fair values of the Euribor Swap were $183 and $0 as of September 30, 2023 and December 31, 2022, respectively, and the fair values of the 2023 Swaps were $1,159 and $0 as of September 30, 2023 and December 31, 2022, respectively, and were recorded in Other Assets in the Condensed Consolidated Balance Sheets for the periods. The fair values

of the Company's other derivatives were not material to the Company's Condensed Consolidated Balance Sheets as of ~~June~~September 30, 2023 or December 31, 2022. See Note ~~10.~~11. The activity related to the derivatives that have been designated hedging instruments was not material to the Company's Condensed Consolidated Financial Statements for the periods ended ~~June~~September 30, 2023 or 2022. The Company recognized losses of ~~$4,548~~$2,517 and ~~$9,325~~$8,094 related to the foreign exchange contracts that are not accounted for as hedging instruments within other expense (income), net, in the Condensed Consolidated Statements of (Loss) Income ~~(Loss)~~ for the three-month periods ended ~~June~~September 30, 2023 and 2022, respectively. The Company recognized losses of ~~$2,949~~$5,466 and ~~$10,577~~$18,671 related to the foreign exchange contracts that are not accounted for as hedging instruments within Other Expense (income), net, in the Consolidated Statements of (Loss) Income ~~(Loss)~~ for the ~~six~~nine month periods ended ~~June~~September 30, 2023 and 2022, respectively. Such losses were substantially offset by net gains recorded on the underlying hedged asset or liability (the "underlying"). Offsetting net gains on the underlying are also recorded within Other expense (income), net.

The Company's policy for classifying cash flows from derivatives is to report the cash flows consistent with the underlying hedged item. Other financing cash flows during the ~~six~~nine month periods ended ~~June~~September 30, 2023 and 2022, as presented on the Condensed Consolidated Statements of Cash Flows, include ~~$1,176~~$6,346 and ~~$8,690,~~$17,271, respectively, of net cash payments related to the settlement of foreign currency hedges related to intercompany financing.

~~10.~~11. Fair Value Measurements

The provisions of the accounting standard for fair value define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This standard classifies the inputs used to measure fair value into the following hierarchy:

Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.

Level 3 Unobservable inputs for the asset or liability.

The following table provides the assets and liabilities reported at fair value and measured on a recurring basis as of ~~June~~September 30, 2023 and December 31, 2022:


				Fair Value Measurements Using									Fair Value Measurements Using
Description	Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2023
September 30, 2023										September 30, 2023
Asset derivatives	Asset derivatives	$	8,700	$	—	$	8,700	$	—	Asset derivatives	$	10,712	$	—	$	10,712	$	—
Liability derivatives	Liability derivatives	(2,514)		—		(2,514)		—		Liability derivatives	(1,052)		—		(1,052)		—
Bank acceptances	Bank acceptances	11,387		—		11,387		—		Bank acceptances	10,615		—		10,615		—
Rabbi trust assets	Rabbi trust assets	2,177		2,177		—		—		Rabbi trust assets	1,791		1,791		—		—
Total	Total	$	19,750	$	2,177	$	17,573	$	—	Total	$	22,066	$	1,791	$	20,275	$	—

December 31, 2022	December 31, 2022									December 31, 2022
Asset derivatives	Asset derivatives	$	8,856	$	—	$	8,856	$	—	Asset derivatives	$	8,856	$	—	$	8,856	$	—
Liability derivatives	Liability derivatives	(1,023)		—		(1,023)		—		Liability derivatives	(1,023)		—		(1,023)		—
Bank acceptances	Bank acceptances	13,260		—		13,260		—		Bank acceptances	13,260		—		13,260		—
Rabbi trust assets	Rabbi trust assets	2,104		2,104		—		—		Rabbi trust assets	2,104		2,104		—		—
Total	Total	$	23,197	$	2,104	$	21,093	$	—	Total	$	23,197	$	2,104	$	21,093	$	—

The derivative contracts are valued using observable current market information as of the reporting date such as the prevailing SOFR-based interest rates and foreign currency spot and forward rates. Bank acceptances represent financial instruments accepted from certain China-based customers in lieu of cash paid on receivables, have maturities of one year or less and are

guaranteed by banks. The carrying amounts of the bank acceptances, which are included within prepaid expenses and other current assets, approximate fair value due to their short maturities. The fair values of rabbi trust assets are based on quoted market prices from various financial exchanges.

~~11.~~12. Pension and Other Postretirement Benefits

Pension and other postretirement benefits (income) cost consisted of the following:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
Pensions	Pensions	2023		2022		2023		2022		Pensions	2023		2022		2023		2022
Service cost	Service cost	$	577	$	1,328	$	1,350	$	2,883	Service cost	$	622	$	1,462	$	1,972	$	4,345
Interest cost	Interest cost	4,801		3,434		9,696		6,868		Interest cost	4,796		3,643		14,492		10,511
Expected return on plan assets	Expected return on plan assets	(7,449)		(7,257)		(14,983)		(14,538)		Expected return on plan assets	(7,453)		(7,264)		(22,436)		(21,801)
Amortization of prior service cost	Amortization of prior service cost	83		99		170		207		Amortization of prior service cost	88		97		258		304
Amortization of actuarial losses	Amortization of actuarial losses	420		3,518		838		6,657		Amortization of actuarial losses	402		3,098		1,240		9,755
Curtailment gain		(668)		—		(668)		—
Curtailment loss (gain)										Curtailment loss (gain)	—		1,158		(668)		1,158
Settlement gain	Settlement gain	(731)		—		(731)		—		Settlement gain	—		—		(731)		—
Special termination benefits	Special termination benefits	—		—		—		136		Special termination benefits	—		259		—		395
Net periodic benefit (income) cost	Net periodic benefit (income) cost	$	(2,967)	$	1,122	$	(4,328)	$	2,213	Net periodic benefit (income) cost	$	(1,545)	$	2,453	$	(5,873)	$	4,667


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
Other Postretirement Benefits	Other Postretirement Benefits	2023		2022		2023		2022		Other Postretirement Benefits	2023		2022		2023		2022
Service cost	Service cost	$	6	$	15	$	19	$	39	Service cost	$	10	$	19	$	29	$	58
Interest cost	Interest cost	274		203		560		409		Interest cost	282		197		842		606
Amortization of prior service cost	Amortization of prior service cost	2		9		5		18		Amortization of prior service cost	3		9		8		27
Amortization of actuarial (gains) losses		(47)		(1)		(73)		(1)
Amortization of actuarial gains										Amortization of actuarial gains	(37)		(1)		(110)		(2)

Net periodic benefit cost	Net periodic benefit cost	$	235	$	226	$	511	$	465	Net periodic benefit cost	$	258	$	224	$	769	$	689

The service cost component of net periodic benefit cost is included within Cost of sales and Selling and administrative expenses. The components of net periodic benefit (income) cost other than the service cost component are included in Other ~~income (expense)~~expense (income), net on the Condensed Consolidated Statements of ~~Income~~ (Loss). Income. See Note ~~13.~~14.

In July 2022, the Company authorized restructuring actions, which resulted in pension curtailment and settlement gains of $668 and $476, respectively, during the ~~three~~nine months ended ~~June~~September 30, 2023. See Note ~~16.~~17.

In February 2023, the Company elected to freeze the benefits associated with one of its U.S-based defined benefit pension plans. The action was approved in February and future benefits are scheduled to cease effective December 31, 2023. Pursuant to the applicable accounting guidance, the Company performed an interim remeasurement of its pension plan assets and obligations and recognized a curtailment gain as of January 31, 2023, represented by a $11,324 of non-cash after-tax increase in stockholders equity (through other non-owner changes to equity). This increase in stockholders equity resulted from favorable variances between expected and actual returns on pension plan assets and the net incremental change in the benefit obligation as a result of the elimination of future benefit accruals, partially offset by the impacts of changes in actuarial assumptions, primarily a decrease in discount rates.

~~12.~~13. Income Taxes

The Company's effective tax rate for the first ~~half~~nine months of 2023 was ~~21.8%~~67.6% compared with ~~(267.2)%~~111.0% in the first ~~half~~nine months of 2022 and 64.7% for the full year 2022. The ~~decrease~~increase in the effective tax rate in the first ~~half~~nine months of 2023 as compared with the rate for the full year 2022 is primarily due to the recording of a valuation allowance on disallowed interest expense under Section 163(j) and an increase in GILTI tax, both significantly impacted by the MB Aerospace acquisition. The increase is also due to a decrease in earnings in 2023 related to MB Aerospace acquisition costs of which a portion are capitalized for tax purposes. The increase is offset by the absence of a goodwill impairment charge of $68,194, which was not tax deductible for book purposes. Additional drivers causing the decrease in the effective tax rate in the first half of 2023, as compared with the full year 2022 rate, include a reduction of disallowed expenses related to Section 162(m) for covered employee’s compensation, a lower impact of GILTI tax and a favorable mix of non-U.S. earnings.

The Aerospace and Industrial segments have a number of multi-year tax holidays in China, Malaysia and Singapore. The China holiday was granted in 2021 and provides for a corporate income tax of 15% for the approved businesses. The China holiday runs for a three-year period ending December 31, 2023. It is anticipated that the ~~company~~Company will re-apply for the China holiday in 2024. The Aerospace segment was granted an income tax holiday for operations recently established in Malaysia. The Malaysia holiday commenced effective November 2020 (retroactively) and remains effective for a period of ten years. The Aerospace ~~segment~~business was granted additional tax holidays in Singapore under the Pioneer program in the fourth quarter of 2022. The Singapore holiday provides reduced tax rates for certain Aerospace programs manufactured at the Singapore location and will run through December 2025. All of the holidays are subject to the Company meeting certain commitments in the respective jurisdictions.

In October 2021, the Organization for Economic Co-operation and Development ("OECD") introduced an inclusive framework to address tax challenges arising from the digitalization of the economy through a two-pillar solution. One of the components of the solution is the implementation of a global minimum corporate tax rate of 15% for large multinational corporations (“Pillar Two”). The OECD continues to release additional guidance on the two-pillar solution with implementation to begin in 2024 while reporting of the tax applicable will not occur until 2026.

On August 31, 2023, the Company completed its acquisition of MB Aerospace by acquiring all of the issued and outstanding shares of capital stock of MB Aerospace Holdings Inc., a Delaware corporation, in a taxable stock transaction. For accounting purposes, the assets and liabilities of MB Aerospace have been stepped up to fair market value which require the recording of deferred taxes on the associated step up. The Company has also determined that it is ~~currently evaluating~~unlikely to recognize a tax benefit associated with MB Aerospace disallowed interest, net operating loss and credit carryforwards. As a result, the ~~potential~~Company has booked a valuation allowance associated with these carryforwards. Additionally, the Company evaluated the impact of the MB Aerospace acquisition on the deferred tax assets of the Company. The Company determined that it was unlikely to be able to utilize legacy disallowed interest carryforwards and has recorded a corresponding valuation allowance. The Company will continue to evaluate associated Pillar Two ~~on our Consolidated Financial Statements~~impacts, and ~~related disclosures~~.how they will be applied within the combined group of companies.

In August 2022, the U.S. government enacted tax legislation commonly referred to as the Inflation Reduction Act of 2022 (“IRA”). into law. The IRA will impose a 1% excise tax on the fair market value of certain stock repurchased by a public traded company after December 31, 2022 and restored and modified certain tax-related energy incentives. The Company does not anticipate a material impact on our business, financial condition, results of operations or cash flow as a result of this change.

1923

~~13.~~14. Changes in Accumulated Other Comprehensive Income (Loss) by Component

The following tables set forth the changes in accumulated other comprehensive income (loss), net of tax, by component for the ~~six~~nine month periods ended ~~June~~September 30, 2023 and 2022:

Gains and Losses on Cash Flow Hedges Pension and Other Postretirement Benefit Items Foreign Currency Items Total
December 31, 2022 $ 5,941 $ (108,640) $ (117,801) $ (220,500)
Other comprehensive (loss) income before reclassifications 987 10,518 4,136 15,641
Amounts reclassified from accumulated other comprehensive income to the Condensed Consolidated Statements of Income (Loss) (1,138) (247) — (1,385)
Net current-period other comprehensive (loss) income (151) 10,271 4,136 14,256
June 30, 2023 $ 5,790 $ (98,369) $ (113,665) $ (206,244)


	Gains and Losses on Cash Flow Hedges		Pension and Other Postretirement Benefit Items		Foreign Currency Items		Total
December 31, 2022	$	5,941	$	(108,640)	$	(117,801)	$	(220,500)
Other comprehensive income (loss) before reclassifications	2,456		10,717		(10,146)		3,027
Amounts reclassified from accumulated other comprehensive income to the Condensed Consolidated Statements of (Loss) Income	(1,793)		93		—		(1,700)
Net current-period other comprehensive income (loss)	663		10,810		(10,146)		1,327
September 30, 2023	$	6,604	$	(97,830)	$	(127,947)	$	(219,173)


		Gains and Losses on Cash Flow Hedges		Pension and Other Postretirement Benefit Items		Foreign Currency Items		Total			Gains and Losses on Cash Flow Hedges		Pension and Other Postretirement Benefit Items		Foreign Currency Items		Total
December 31, 2021	December 31, 2021	$	160	$	(112,307)	$	(39,691)	$	(151,838)	December 31, 2021	$	160	$	(112,307)	$	(39,691)	$	(151,838)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	3,206		586		(81,805)		(78,013)		Other comprehensive income (loss) before reclassifications	5,765		(5,945)		(145,238)		(145,418)
Amounts reclassified from accumulated other comprehensive income to the Condensed Consolidated Statements of Income (Loss)		196		5,265		—		5,461
Amounts reclassified from accumulated other comprehensive income to the Condensed Consolidated Statements of (Loss) Income										Amounts reclassified from accumulated other comprehensive income to the Condensed Consolidated Statements of (Loss) Income	28		8,059		—		8,087
Net current-period other comprehensive income (loss)	Net current-period other comprehensive income (loss)	3,402		5,851		(81,805)		(72,552)		Net current-period other comprehensive income (loss)	5,793		2,114		(145,238)		(137,331)

June 30, 2022		$	3,562	$	(106,456)	$	(121,496)	$	(224,390)
September 30, 2022										September 30, 2022	$	5,953	$	(110,193)	$	(184,929)	$	(289,169)

2024

The following table sets forth the reclassifications out of accumulated other comprehensive loss by component for the three month periods ended ~~June~~September 30, 2023 and 2022:


Details about Accumulated Other Comprehensive Income (Loss) Components	Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)				Affected Line Item in the Condensed Consolidated Statements of Income (Loss)	Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)				Affected Line Item in the Condensed Consolidated Statements of (Loss) Income
		Three Months Ended June 30, 2023		Three Months Ended June 30, 2022				Three Months Ended September 30, 2023		Three Months Ended September 30, 2022
Cash flow hedges	Cash flow hedges						Cash flow hedges
Interest rate contracts	Interest rate contracts	$	988	$	(94)	Interest expense	Interest rate contracts	$	1,146	$	266	Interest expense
Foreign exchange contracts	Foreign exchange contracts	(190)		(27)		Net sales	Foreign exchange contracts	(278)		(45)		Net sales
		798		(121)		Total before tax		868		221		Total before tax
		(194)		28		Tax (expense) benefit		(213)		(53)		Tax expense
		604		(93)		Net of tax		655		168		Net of tax

Pension and other postretirement benefit items	Pension and other postretirement benefit items						Pension and other postretirement benefit items
Amortization of prior service costs	Amortization of prior service costs	$	(85)	$	(108)	(A)	Amortization of prior service costs	$	(91)	$	(106)	(A)
Amortization of actuarial losses	Amortization of actuarial losses	(373)		(3,517)		(A)	Amortization of actuarial losses	(365)		(3,097)		(A)
Curtailment gain	Curtailment gain	241		—		(A)	Curtailment gain	—		(450)		(A)
Settlement gain	Settlement gain	731		—		(A)	Settlement gain	—		—		(A)
		514		(3,625)		Total before tax		(456)		(3,653)		Total before tax
		106		852		Tax benefit		116		859		Tax benefit
		620		(2,773)		Net of tax		(340)		(2,794)		Net of tax

Total reclassifications in the period	Total reclassifications in the period	$	1,224	$	(2,866)		Total reclassifications in the period	$	315	$	(2,626)

(A) These accumulated other comprehensive income (loss) components are included within the computation of net periodic Pension and Other Postretirement Benefits cost. See Note ~~11.~~12.

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The following table sets forth the reclassifications out of accumulated other comprehensive loss by component for the ~~six~~nine month periods ended ~~June~~September 30, 2023 and 2022:


Details about Accumulated Other Comprehensive Income (Loss) Components	Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)				Affected Line Item in the Consolidated Statements of Income (Loss)	Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)				Affected Line Item in the Consolidated Statements of (Loss) Income
		Six Months Ended June 30, 2023		Six Months Ended June 30, 2022				Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Cash flow hedges	Cash flow hedges						Cash flow hedges
Interest rate contracts	Interest rate contracts	$	1,853	(260)		Interest expense	Interest rate contracts	$	2,999	6		Interest expense
Foreign exchange contracts	Foreign exchange contracts	(349)		3		Net sales	Foreign exchange contracts	(627)		(42)		Net sales
		1,504		(257)		Total before tax		2,372		(36)		Total before tax
		(366)		61		Tax benefit		(579)		8		Tax benefit
		1,138		(196)		Net of tax		1,793		(28)		Net of tax

Pension and other postretirement benefit items	Pension and other postretirement benefit items						Pension and other postretirement benefit items
Amortization of prior service costs	Amortization of prior service costs	$	(175)	$	(225)	(A)	Amortization of prior service costs	$	(266)	$	(331)	(A)
Amortization of actuarial losses	Amortization of actuarial losses	(765)		(6,656)		(A)	Amortization of actuarial losses	(1,130)		(9,753)		(A)
Curtailment gain		241		—		(A)
Curtailment gain (loss)							Curtailment gain (loss)	241		(450)		(A)
Settlement gain	Settlement gain	731		—		(A)	Settlement gain	731		—		(A)
		32		(6,881)		Total before tax		(424)		(10,534)		Total before tax
		215		1,616		Tax benefit		331		2,475		Tax benefit
		247		(5,265)		Net of tax		(93)		(8,059)		Net of tax

Total reclassifications in the period	Total reclassifications in the period	$	1,385	$	(5,461)		Total reclassifications in the period	$	1,700	$	(8,087)

(A) These accumulated other comprehensive income (loss) components are included within the computation of net periodic Pension and Other Postretirement Benefits cost. See Note ~~11.~~12.

~~14.~~15. Information on Business Segments

The Company is organized based upon the nature of its products and services and reports under two global business segments: Aerospace and Industrial. Segment information is consistent with how management reviews the businesses, makes investing and resource allocation decisions and assesses operating performance. The Company has not aggregated operating segments for purposes of identifying these two reportable segments.

Aerospace is a global manufacturer of complex fabricated and precision machined components and assemblies for turbine engines, nacelles and structures for both commercial and defense-related aircraft. The Aerospace Aftermarket business provides aircraft engine component ~~maintenance, repair and overhaul ("MRO")~~MRO services, including services performed under our Component Repair Programs (“CRPs”), for many of the world’s major turbine engine manufacturers, commercial airlines and the defense market. The Aerospace Aftermarket activities also include the manufacture and delivery of aerospace aftermarket spare parts, including through revenue sharing programs (“RSPs”) under which the Company receives an exclusive right to supply designated aftermarket parts over the life of specific aircraft engine programs.

Industrial is a global provider of highly-engineered, high-quality precision components, products and systems for critical applications serving a diverse customer base in end-markets such as mobility, industrial equipment, automation, personal care, packaging, electronics, and medical devices. Focused on innovative custom solutions, Industrial participates in the design phase of components and assemblies whereby customers receive the benefits of application and systems engineering, new product development, testing and evaluation, and the manufacturing of final products. Products are sold primarily through its direct sales force and global distribution channels. Industrial's Molding Solutions business designs and manufactures customized hot runner systems, advanced mold cavity sensors and process control systems, and precision high cavitation mold assemblies - collectively, the enabling technologies for many complex injection molding applications. Effective January 1, 2023, the Company combined Industrial's Force & Motion Control business and Engineered Components business to form a single new strategic business called Motion Control Solutions business. The Motion Control Solutions business provides innovative cost effective force and motion control solutions for a wide range of metal forming and other industrial markets. The Motion Control Solutions business also manufactures and supplies precision mechanical products used in mobility and industrial applications,

2226

including mechanical springs, and high-precision punched and fine-blanked components. The Automation business designs and develops robotic grippers, advanced end-of-arm tooling systems, sensors and other automation components for intelligent robotic handling solutions and industrial automation applications.

The following tables set forth information about the Company's operations by its two reportable segments:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022			2023		2022		2023		2022
Net sales	Net sales									Net sales
Aerospace(A)										Aerospace(A)	$	156,090	$	110,787	$	395,362	$	320,650
Industrial	Industrial	$	216,971	$	212,115	$	435,079	$	423,787	Industrial	204,898		203,959		639,977		627,746
Aerospace		122,015		109,153		239,272		209,864
Intersegment sales	Intersegment sales	(2)		—		(10)		—		Intersegment sales	—		(2)		(10)		(1)
Total net sales	Total net sales	$	338,984	$	321,268	$	674,341	$	633,651	Total net sales	$	360,988	$	314,744	$	1,035,329	$	948,395

Operating profit (loss)	Operating profit (loss)									Operating profit (loss)
Industrial(A)		$	9,429	$	(48,743)	$	13,962	$	(33,990)
Aerospace		16,580		20,556		35,331		36,916
Total operating profit (loss)		26,009		(28,187)		49,293		2,926
Aerospace(A)										Aerospace(A)	$	3,622	$	21,227	$	38,953	$	58,162
Industrial(B)										Industrial(B)	6,368		8,809		20,330		(25,200)
Total operating profit										Total operating profit	9,990		30,036		59,283		32,962
Interest expense	Interest expense	6,512		3,325		11,819		6,893		Interest expense	22,792		3,357		34,612		10,249
Other expense (income), net	Other expense (income), net	(2,894)		(403)		(1,553)		1,226		Other expense (income), net	(874)		2,423		(2,427)		3,650
Income (loss) before income taxes		$	22,391	$	(31,109)	$	39,027	$	(5,193)
(Loss) income before income taxes										(Loss) income before income taxes	$	(11,928)	$	24,256	$	27,098	$	19,063

(A) The results of MB Aerospace, from the acquisition on August 31, 2023, have been included within the Company's Consolidated Financial Statements in the Aerospace segment for the three and nine months ended September 30, 2023.

(B) Industrial operating losses in the ~~three and six-month periods~~nine-month period ended ~~June~~September 30, 2022 include a $68,194 goodwill impairment charge.

June 30, 2023 December 31, 2022
Assets
Industrial $ 1,698,451 $ 1,680,415
Aerospace 606,262 590,598
Other (A)
135,966 142,717
Total assets $ 2,440,679 $ 2,413,730


	September 30, 2023		December 31, 2022
Assets
Aerospace(A)	$	1,484,676	$	590,598
Industrial	1,638,970		1,680,415
Other (B)	153,688		142,717
Total assets	$	3,277,334	$	2,413,730

(A) The increase in assets within the Aerospace segment primarily reflects the acquisition of MB Aerospace.

(B) "Other" assets include corporate-controlled assets, the majority of which are cash and cash equivalents and deferred tax assets.

~~15.~~16. Commitments and Contingencies

Product Warranties

The Company provides product warranties in connection with the sale of certain products. From time to time, the Company is subject to customer claims with respect to product warranties. The Company accrues its estimated exposure for warranty claims at the time of sale based upon the length of the warranty period, historical experience and other related information known to the Company. Liabilities related to product warranties and extended warranties were not material as of ~~June~~September 30, 2023 and December 31, 2022.

In July 2021, a customer asserted breach of contract and contractual warranty claims regarding a part manufactured by the Company. The Company disputes the asserted claims and no litigation or other proceeding has been initiated. While it is currently not possible to determine the ultimate outcome of this matter, the Company intends to vigorously defend its position and believes that the ultimate resolution will not have a material adverse effect on the Company’s consolidated financial position or liquidity, but could be material to the consolidated results of operations of any one period.

Litigation

The Company is subject to litigation from time to time in the ordinary course of business and various other suits, proceedings

and claims are pending involving the Company and its subsidiaries. The Company records a loss contingency liability when a loss is considered probable and the amount can be reasonably estimated. While it is not possible to determine the ultimate disposition of each of these proceedings and whether they will be resolved consistent with the Company's beliefs, the Company expects that the outcome of such proceedings, individually or in the aggregate, will not have a material adverse effect on

financial condition or results of operations.

Supplier Finance Programs

The Company participates in a Supplier Finance Program (the "Program") under which it agrees to pay a third-party finance provider the stated amount of confirmed invoices from participating suppliers based on the original invoice due date. Suppliers, at their sole discretion, may elect to finance confirmed invoices prior to their scheduled due date at a discounted price with the Company's third-party finance provider. Outstanding obligations related to the Program were not material as of ~~June~~September 30, 2023 and December 31, 2022. These obligations were recorded within Accounts Payable on the Condensed Consolidated Balance Sheets. The Company does not have any assets nor any other forms of guarantees pledged as security to the third-party finance provider as part of the Program.

~~Pending Acquisition~~

On June 5, 2023, the Company entered into the Agreement with MB Aerospace Group Holdings Limited, a Cayman Islands limited company. Pursuant to the Agreement, subject to the terms and conditions set forth therein, the Company agreed to acquire MB Aerospace, a leading provider of precision aero-engine component manufacture and repair services serving major aerospace and defense engine OEMs, tier 1 suppliers, and MRO providers by acquiring all the issued and outstanding capital stock of MB Aerospace Holdings Inc., a Delaware corporation, along with such entity’s subsidiaries for an aggregate purchase price of $740,000, payable in cash, subject to customary and specified closing adjustments, as set forth in the Agreement. The closing of the Transaction is subject to certain customary closing conditions and is expected to close by the end of 2023. Approximately $15,000 of pre-tax financial and advisory fees related to the Transaction are contingent upon a successful close.

~~16.~~17. Business Reorganizations

In July 2022, Company management, commenced a systematic multi-phased initiative to significantly reduce costs and integrate the Company's operations, decreasing complexity and focusing on improved performance across Industrial. More specifically, at this time, the Company announced a restructuring program to further reduce costs within the Industrial segment and, more broadly, transform our businesses in response to macroeconomic disruptions. Additional actions were subsequently announced in October 2022, April 2023 (including Aerospace) and, most recently, during the current quarter, in September 2023. Management continues to adjust its cost structures to align with market conditions.

The Company authorized restructuring actions (“2022 Actions”) focused on the consolidation of two manufacturing sites and a number of branch offices and changes in infrastructure to eliminate certain roles across a number of locations in the Industrial segment ~~businesses.~~businesses in July and October 2022. Resulting pre-tax charges of $17,986 were recorded in ~~the second half of~~ 2022. Of the aggregate, $11,880 related to employee termination costs, primarily employee severance and other termination benefits, which are expected to be paid in cash by the end of 2023 and which were recorded within Selling and administrative expenses. The remaining $6,106 primarily related to $3,186 of accelerated depreciation of assets and $1,417 of pension curtailment losses and special termination benefits which were recorded in Cost of sales and Other expense (income), net, respectively.

During the ~~second~~third quarter of 2023, additional pre-tax charges of ~~$1,974, including $796 of accelerated depreciation of assets and $2,108,~~$3,156, primarily related to site consolidation and transfer of work charges, were recorded within Cost of sales, ~~$214~~$233 of ~~special employee termination benefits,~~expenses were recorded within Selling and administrative expenses ~~and $1,144 of pension settlement and curtailment gains were included within Other income (expense), net,~~ in the accompanying Condensed Consolidated Statements of ~~Income~~ (Loss). Income.

During the first ~~half~~nine months of 2023, additional pre-tax charges of ~~$5,964,~~$9,120, including ~~$2,389~~$3,185 of accelerated depreciation of assets, ~~and $3,961,~~$6,073 primarily related to site consolidation and transfer of work charges, were recorded within Cost of sales, ~~$758 of special~~$1,006 primarily related to employee and other termination benefits, were recorded within Selling and ~~administrative~~administrative expenses, and $1,144 of pension curtailment and settlement gains recorded were included within Other income (expense), net, in the accompanying Condensed Consolidated Statements of ~~Income~~ (Loss). Income.

A corresponding liability of ~~$6,302,~~$2,879, per below, related to the employee termination costs remained and was included within accrued liabilities as of ~~June~~September 30, 2023. The Company expects to incur additional costs of approximately ~~$2,000~~$1,000 in 2023 related to the 2022 Actions, ~~including approximately $1,000 of additional accelerated depreciation and $1,000 of~~primarily related to transfer of work ~~charges. Of this $2,000, approximately $1,000~~charges, which is payable in cash. The 2022 Actions are expected to be predominately completed in 2023.

The following table sets forth the change in the liability for the employee termination benefits related to the 2022 Actions:


December 31, 2022	$	10,900
Employee severance and other termination benefits	~~(184)~~(594)
Payments	~~(4,414)~~(7,427)
~~June~~September 30, 2023	$	~~6,302~~2,879

In April 2023, the Company authorized additional restructuring actions (“April 2023 Actions”) focused on manufacturing footprint optimization, including the consolidation of manufacturing sites and optimization of production. ~~The 2023 Actions~~These actions include the geographic transfer of certain programs within both the Industrial and Aerospace segments and changes in infrastructure to

drive improvements and efficiencies in business processes, including the elimination of certain roles across several locations. Resulting pre-tax charges of $9,519 were recorded in the second quarter of 2023. Of the aggregate, $9,163 related to employee

termination costs, primarily employee severance and other termination benefits, which are expected to be paid in cash by the end of 2025 and which were recorded within Selling and administrative Expenses. The remaining $356 primarily related to accelerated rent expenses and consulting fees, which were recorded within Selling and administrative expenses, in the accompanying Condensed Consolidated Statements of ~~Income~~ (Loss). Income. Of the aggregate charges recorded, $9,294 was reflected within the results of the Industrial segment and $225 was reflected within the results of the Aerospace segment. During the third quarter of 2023, additional pre-tax charges of $624, primarily related to $682 of transfer of work charges, were recorded within Cost of sales and offset by $(58) of selling and administrative expenses, in the accompanying Condensed Consolidated Statements of (Loss) Income. Of the aggregate charges recorded, $603 was reflected within the results of the Industrial segment and $21 was reflected within the results of the Aerospace segment. A corresponding liability of ~~$9,024,~~$6,975, per below, related to the employee termination costs remained and was included within accrued liabilities as of ~~June~~September 30, 2023. The Company expects to incur additional costs of approximately ~~$7,000~~$4,000 in 2023 related to the April 2023 Actions, including approximately ~~$4,000 of additional severance and other termination benefits~~$1,000 related to the Aerospace segment and $3,000 ~~of additional transfer of work charges and other restructuring costs~~ related to the Industrial segment, all of which is payable in cash. The Company also expects to incur additional costs beyond 2023 of approximately $12,000 related to the April 2023 Actions, which are primarily related to transfer of work charges. Of the aggregate, approximately $8,000 and $4,000 relate to the Aerospace and Industrial segments, respectively. The April 2023 Actions are expected to be completed throughout multiple periods, with completion in 2025.

The following table sets forth the change in the liability for the employee termination benefits related to the April 2023 Actions:


December 31, 2022	$	—
Employee severance and other termination benefits	~~9,163~~8,938
Payments	~~(139)~~(1,963)
~~June~~September 30, 2023	$	~~9,024~~6,975

In September 2023, the Company authorized additional restructuring actions (“September 2023 Actions”) including organizational realignment within a Barnes Industrial business and within Barnes Aerospace following the MB Aerospace acquisition. Resulting pre-tax charges of $8,622 were recorded in the third quarter of 2023 related to employee termination costs, primarily employee severance and other termination benefits, which are expected to be paid in cash by the end of 2025 and which were recorded within Selling and administrative expenses in the accompanying Condensed Consolidated Statements of (Loss) Income. Of the aggregate charges recorded, $5,801 was reflected within the results of the Industrial segment and $2,821 was reflected within the results of the Aerospace segment. A corresponding liability of $7,320, per below, related to the employee termination costs remained and was included within accrued liabilities as of September 30, 2023. The Company does not expect any additional costs related to the September 2023 Actions to be significant.

The following table sets forth the change in the liability for the employee termination benefits related to the September 2023 Actions:


December 31, 2022	$	—
Employee severance and other termination benefits	8,622
Payments	(1,302)
September 30, 2023	$	7,320

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

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, 2022. 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.onebarnes.com.

~~Second~~Third Quarter Highlights

The Company reported net sales of ~~$339.0~~$361.0 million in the ~~second~~third quarter of 2023, an increase of ~~$17.7~~$46.2 million or ~~5.5%~~14.7% from the ~~second~~third quarter of 2022. Organic sales increased by ~~$16.3~~$11.6 million, or ~~5.1%~~3.7%, including an increase of ~~$12.9~~$18.8 million, or ~~11.8%~~17.0%, at Aerospace, and ~~an increase~~a decrease of ~~$3.4~~$7.2 million, or ~~1.6%~~3.5%, at Industrial. The year-over-year increase at Aerospace was driven by volume increases within both the Aerospace ~~Aftermarket and the Aerospace~~ Original Equipment Manufacturing ("OEM") and the Aerospace Aftermarket businesses, reflecting continued strength in aerospace end markets. The acquisition of MB Aerospace (as defined below) on August 31, 2023 provided incremental sales of $26.5 million within the Aerospace segment during the three months ended September 30, 2023. From an Industrial standpoint, the year-over-year ~~increase~~decrease was driven primarily by volume decreases within the Motion Control Solutions and Molding Solutions businesses, partially offset by favorable pricing ~~initiatives within each of the businesses.~~initiatives. The weakening of the U.S. dollar against foreign currencies increased net sales within the Industrial segment by approximately ~~$1.5~~$8.1 million. Operating margins ~~improved~~decreased from ~~(8.8)%~~9.5% in the 2022 period to ~~7.7%~~2.8% in the current period, largely a result of ~~the absence of a $68.2 million goodwill impairment charge that occurred in the prior year period, partially offset by $13.9~~$8.0 million of ~~restructuring~~short-term purchase accounting adjustments and ~~transformation related charges and $3.6~~$7.8 million of acquisition transaction costs related to the ~~planned~~ acquisition of MB Aerospace ~~Group Holdings Limited~~ (see below)., in addition to $13.2 million of restructuring and transformation related charges.

On ~~June 5,~~August 31, 2023 (“Acquisition Date”), the Company entered into a Stock Purchase Agreement (the “Agreement”) with MB Aerospace Group Holdings Limited, a Cayman Islands limited company. Pursuant to the Agreement, subject to the terms and conditions set forth therein, the Company agreed to acquire MB Aerospace ("MB Aerospace"), a leading provider of precision aero-engine component manufacture and repair services serving major aerospace and defense engine OEMs, tier 1 suppliers, and, maintenance, repair and overhaul ("MRO") providers by acquiring all the issued and outstanding capital stockcompleted its acquisition of MB Aerospace Holdings Inc., a Delaware corporation ("MB Aerospace"), along with such ~~entity’s~~entity's subsidiaries (the ~~“Transaction”~~"Transaction") by acquiring all of the issued and outstanding shares of capital stock of MB Aerospace. The Company acquired MB Aerospace for an aggregate purchase price of ~~$740.0~~$728.6 million ~~payable in~~which was financed using cash ~~subject~~on hand, borrowings under the Company's revolving credit facility and a term loan facility. See "Item 2 - Liquidity and Capital Resources" for additional information related to ~~customary and specified closing~~the financing of MB Aerospace. The purchase price includes preliminary adjustments ~~as set forth in~~under the ~~Agreement. The closing~~terms of the ~~Transaction is subject~~MB Aerospace Sale and Purchase Agreement (the "Agreement"), including approximately $9.8 million related to ~~certain customary closing conditions~~cash acquired. In connection with the acquisition, the Company recorded $321.0 million of intangible assets and ~~is expected~~$318.3 million of goodwill. See Notes 3 and 8 to ~~close by the end of 2023.~~ ~~See Note 16 of~~ the Condensed Consolidated Financial Statements.

Impact of Macroeconomic Trends and Management Actions

Several macroeconomic trends continue to present challenges across our businesses during 2023, including inflationary pressures, primarily related to ~~labor and~~ raw material ~~costs, as well as increased utility~~ costs. Management has taken several actions to mitigate the impacts of these costs. In addition to taking pricing actions to recover costs, the Company has remained focused on cost management and productivity initiatives to mitigate these impacts. Management also continues to focus on driving core business execution through revenue growth, margin expansion and new business development. More recently, management attention has been directed towards integrating our existing businesses and MB Aerospace, consolidating operations and facilities where appropriate, and rationalizing operational costs and investments; all with the goal of improving profitability and return on invested capital. During the third quarter of 2023, the national union representing the United Auto Workers opted to strike, potentially impacting managements sales channels within automotive end markets.

In July 2022, management commenced a systematic multi-phased initiative to significantly reduce costs and integrate the Company's operations, decreasing complexity and focusing on improved performance across Industrial. More specifically, at this time, the Company announced a restructuring program to further reduce costs within the Industrial segment and, more broadly, transform our businesses in response to macroeconomic disruptions. Additional actions were subsequently announced in October 2022, ~~and~~ April 2023 and, most recently, during the current quarter, in September 2023. Management continues to adjust its cost structures to align with market conditions, with aggregate targeted annualized savings in excess of $50 million. See Note ~~16 of~~17 the Condensed Consolidated Financial Statements for additional discussion. Effective January 1, 2023, the Company combined its Force & Motion Control and Engineered Components businesses to form a single new strategic business unit named Motion Control Solutions. The formation of Motion Control Solutions aligns with management's “Integrate, Consolidate & Rationalize” initiative as we continue to transform the Company. During the first quarter of 2023, management also took actions to reduce costs associated with one of its U.S-based defined benefit pension plans (see Note 1112 of the Condensed Consolidated Financial Statements).

RESULTS OF OPERATIONS

Net Sales


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended September 30,								Nine Months Ended September 30,
(in millions)	(in millions)	2023		2022		Change				2023		2022		Change				(in millions)	2023		2022		Change				2023		2022		Change
Aerospace																		Aerospace	$	156.1	$	110.8	$	45.3	40.9	%	$	395.4	$	320.7	$	74.7	23.3	%
Industrial	Industrial	$	217.0	$	212.1	$	4.9	2.3	%	$	435.1	$	423.8	$	11.3	2.7	%	Industrial	204.9		204.0		0.9		0.5	%	640.0		627.7		12.2		1.9	%
Aerospace		122.0		109.2		12.9		11.8	%	239.3		209.9		29.4		14.0	%

Total	Total	$	339.0	$	321.3	$	17.7	5.5	%	$	674.3	$	633.7	$	40.7	6.4	%	Total	$	361.0	$	314.7	$	46.2	14.7	%	$	1,035.3	$	948.4	$	86.9	9.2	%

The Company reported net sales of ~~$339.0~~$361.0 million in the ~~second~~third quarter of 2023, an increase of ~~$17.7~~$46.2 million from the ~~second~~third quarter of 2022. Organic sales increased by ~~$16.3~~$11.6 million, or ~~5.1%~~3.7%, including ~~increases~~an increase of ~~$12.9 million and $3.4~~$18.8 million at Aerospace, ~~and Industrial, respectively.~~partially offset by a decrease of $7.2 million at Industrial. The year-over-year increase at Aerospace was driven by volume increases within both the Aerospace ~~Aftermarket~~OEM and the Aerospace ~~OEM~~Aftermarket businesses, reflecting the ongoing recovery in aerospace end markets. The acquisition of MB Aerospace in August 2023 provided incremental sales of $26.5 million within the Aerospace segment during the three months ended September 30, 2023, impacting both the OEM and Aftermarket businesses. From an Industrial standpoint, the year-over-year decrease was primarily driven by volume decreases within the Molding Solutions and Motion Control Solutions businesses, partially offset by favorable pricing actions. The weakening of the U.S. dollar against foreign currencies increased net sales within the Industrial segment by approximately $8.1 million.

The Company reported net sales of $1,035.3 million in the first nine months of 2023, an increase of $86.9 million, or 9.2%, from the first nine months of 2022. Organic sales in the first nine months of 2023 increased by $56.7 million, driven by an increase of $48.2 million at Aerospace and an increase of $8.5 million at Industrial. The increase at Aerospace was driven by sales growth across both businesses. The acquisition of MB Aerospace on August 31, 2023 provided incremental sales of $26.5 million within the Aerospace segment during the nine months ended September 30, 2023. From an Industrial standpoint, the year-over-year increase was driven by favorable pricing actions within each of the businesses. The weakening of the U.S. dollar against foreign currencies increased net sales within the Industrial segment by approximately ~~$1.5 million.~~

The Company reported net sales of $674.3 million in the first half of 2023, an increase of $40.7 million, or 6.4%, from the first half of 2022. Organic sales in the first half of 2023 increased by $45.1 million, driven by an increase of $29.4 million at Aerospace and an increase of $15.7 million at Industrial. The increase at Aerospace was driven by sales growth across both businesses. From an Industrial standpoint, the year-over-year increase was driven by higher volumes within the Molding Solutions and Automation businesses, and by favorable pricing actions. The strengthening of the U.S. dollar against foreign currencies decreased net sales within the Industrial segment by approximately $4.4$3.7 million.

Expenses and Operating Income


		Three Months Ended June 30,										Six Months Ended June 30,											Three Months Ended September 30,										Nine Months Ended September 30,
(in millions)	(in millions)	2023			2022			Change				2023			2022			Change				(in millions)	2023			2022			Change				2023			2022			Change
Cost of sales	Cost of sales	$	224.6		$	212.8		$	11.9	5.6	%	$	450.9		$	419.9		$	30.9	7.4	%	Cost of sales	$	253.5		$	208.6		$	44.8	21.5	%	$	704.4		$	628.6		$	75.8	12.1	%
% sales	% sales	66.3		%	66.2		%					66.9		%	66.3		%					% sales	70.2		%	66.3		%					68.0		%	66.3		%
Gross profit (1)	Gross profit (1)	$	114.4		$	108.5		$	5.8	5.4	%	$	223.5		$	213.7		$	9.8	4.6	%	Gross profit (1)	$	107.5		$	106.1		$	1.4	1.3	%	$	331.0		$	319.8		$	11.2	3.5	%
% sales	% sales	33.7		%	33.8		%					33.1		%	33.7		%					% sales	29.8		%	33.7		%					32.0		%	33.7		%
Selling and administrative expenses	Selling and administrative expenses	$	88.4		$	68.5		$	19.8	29.0	%	$	174.2		$	142.6		$	31.6	22.2	%	Selling and administrative expenses	$	97.5		$	76.1		$	21.4	28.2	%	$	271.7		$	218.6		$	53.0	24.3	%
% sales	% sales	26.1		%	21.3		%					25.8		%	22.5		%					% sales	27.0		%	24.2		%					26.2		%	23.1		%
Goodwill impairment charge	Goodwill impairment charge	$	—		$	68.2		$	(68.2)	NM		$	—		$	68.2		$	(68.2)	NM		Goodwill impairment charge	$	—		$	—		$	—	—	%	$	—		$	68.2		$	(68.2)	NM
% sales	% sales	—		%	21.2		%					—		%	10.8		%					% sales	—		%	—		%					—		%	7.2		%
Operating income (loss)		$	26.0		$	(28.2)		$	54.2	NM		$	49.3		$	2.9		$	46.4	1,584.7	%
Operating income																						Operating income	$	10.0		$	30.0		$	(20.0)	(66.7)	%	$	59.3		$	33.0		$	26.3	79.9	%
% sales	% sales	7.7		%	(8.8)		%					7.3		%	0.5		%					% sales	2.8		%	9.5		%					5.7		%	3.5		%

NM - Not Meaningful

(1) Sales less cost of sales .

Cost of sales in the ~~second~~third quarter of 2023 increased ~~5.6%~~21.5% from the 2022 period and gross profit margin ~~slightly~~ decreased from ~~33.8%~~33.7% in the 2022 period to ~~33.7%~~29.8% in the 2023 period. ~~Gross profit margins improved at Industrial and declined at Aerospace.~~ Within Industrial, gross profit and gross profit margin ~~increased~~remained flat primarily as a result of the profit contribution of lower sales within each of the businesses, offset by pricing actions taken by the ~~business, combined with favorable productivity.~~businesses. Gross profit remained flat and gross profit margin decreased within Aerospace during the third quarter of 2023. Within Aerospace, ~~an unfavorable product mix~~higher volumes within the OEM business, in particular, positively impacted gross profit. Unfavorable

productivity, mix and ~~unfavorable productivity, partially offset by higher sales volumes, contributed~~$8.0 million of short-term purchase accounting adjustments related to ~~a decrease in~~the acquisition of MB Aerospace negatively impacted both gross profit and gross profit margin ~~during~~within the ~~second quarter of 2023.~~segment. As well, ~~$3.0~~$3.7 million of pre-tax charges related to restructuring and transformation related actions (aggregate of ~~$13.9~~$13.2 million, including selling and administrative costs) impacted gross profit across the segments. Pre-tax charges impacting gross profit related to restructuring and workforce reduction actions during the comparable three month period of 2022 were $1.8 million (aggregate of $9.0 million). Selling and administrative expenses in the ~~second~~third quarter of 2023 increased ~~29.0%~~28.2% from the 2022 period, whereas sales increased by ~~5.5%~~14.7% between the comparable 2023 and 2022 periods. As a percentage of sales, selling and administrative costs increased from

~~21.3%~~ 24.2% in the ~~second~~third quarter of 2022 to ~~26.1%~~27.0% in the 2023 period. The increase in selling and administrative costs as a percentage of sales was primarily driven by ~~$10.9 million of pre-tax charges related to restructuring and transformation related actions (aggregate of $13.9 million), $3.6~~$7.8 million of acquisition transaction costs and ~~$2.6~~$9.5 million (aggregate of ~~due diligence costs. A goodwill impairment charge~~$13.2 million) of ~~$68.2 million was recorded within the Automation reporting unit~~restructuring and transformation related charges. Pre-tax charges impacting selling and administrative expenses related to restructuring and workforce reduction actions during the ~~second quarter~~comparable three month period of 2022 ~~following deteriorating macro economic conditions and rising interest rates.~~were $7.2 million (aggregate of $9.0 million). Operating ~~results~~income in the ~~second~~third quarter of 2023 ~~resulted in an operating income of $26.0~~decreased by 66.7% to $10.0 million, compared with ~~second~~the third quarter ~~operating loss~~ of ~~$28.2 million in~~ 2022, and operating income ~~(loss)~~ margin ~~increased~~decreased from ~~(8.8)%~~9.5% to ~~7.7%~~2.8%, driven by the items noted above. ~~Excluding the goodwill impairment charge, operating profit and operating margin during the second quarter of 2022 were $40.0 million and 12.5%, respectively.~~

Cost of sales in the first ~~half~~nine months of 2023 increased ~~7.4%~~12.1% from the 2022 period, while gross profit margin decreased from 33.7% in the 2022 period to ~~33.1%~~32.0% in the 2023 period. Gross profit margins remained flat at Industrial and declined at Aerospace. Within Industrial, ~~gross profit and gross profit margin remained flat primarily as a result of~~ pricing actions taken by the business ~~offset by~~contributed to an increase in gross profit during the first nine months of 2023. Gross profit margin remained flat during the first nine months of 2023, however, as a result of unfavorable productivity, in part caused by inflationary ~~pressures.~~ pressure, combined with an unfavorable mix between businesses.

Within Aerospace, higher volumes within the OEM business, in particular, contributed to an increase in gross profit during the first nine months of 2023. Gross profit margin decreased during the first nine months of 2023 at Aerospace, however, given the unfavorable product mix within the OEM business and Aftermarket businesses and unfavorable ~~productivity, partially offset by higher sales volumes, contributed~~productivity. The first nine months of 2023 includes $8.0 million of short-term purchase accounting adjustments related to ~~a decrease in gross profit margin during~~ the ~~first half~~acquisition of ~~2023.~~MB Aerospace. As well, ~~$6.3~~$10.0 million of pre-tax charges related to restructuring and transformation related actions (aggregate of ~~$27.8~~$40.9 million, including selling and administrative costs) impacted gross profit across the segments. Pre-tax charges impacting gross profit related to restructuring and workforce reduction actions during the comparable nine month period were $2.6 million (aggregate of $9.8 million). Selling and administrative expenses in the first ~~half~~nine months of 2023 increased ~~22.2%~~24.3% from the 2022 period, whereas sales increased by ~~6.4%~~9.2% between the comparable 2022 and 2023 periods. As a percentage of sales, selling and administrative costs increased from ~~22.5%~~23.1% in the first ~~half~~nine months of 2022 to ~~25.8%~~26.2% in the 2023 period. The increase in selling and administrative costs as a percentage of sales was primarily driven by ~~$21.5 million of pre-tax charges related to restructuring and transformation related actions (aggregate of $27.8 million), $3.6~~$11.4 million of acquisition transaction costs, ~~and $3.3~~$3.8 million of due diligence ~~costs. The~~costs and $30.9 of restructuring and transformation related charges (aggregate of $40.9 million). Pre-tax charges impacting selling and administrative costs related to restructuring and workforce reduction actions during the comparable nine month period were $7.2 million (aggregate of $9.8 million). A goodwill impairment charge of $68.2 million related to the Automation reporting unit impacted operating results during the first ~~half~~nine months of 2022. Operating income in the first ~~half~~nine months of 2023 ~~was $49.3~~increased by 79.9% to $59.3 million, compared with first ~~half operating income~~nine months of ~~$2.9 million in 2022, and operating~~2022. Operating income margin increased from ~~0.5%~~3.5% in the 2022 period to ~~7.3%~~5.7% in the 2023 period, primarily driven by the absence of the goodwill impairment charge and the additional items noted above. Excluding the goodwill impairment charge, operating profit and operating margin during the first ~~half~~nine months of 2022 were ~~$71.1~~$101.2 million and ~~11.2%~~10.7%, respectively.

Interest expense

Interest expense increased by ~~$3.2~~$19.4 million in the ~~second~~third quarter of 2023 and by ~~$4.9~~$24.4 million in the first ~~half~~nine months of 2023 as compared with prior year periods, primarily a result of bridge financing fees of $9.5 million related to the MB Acquisition that were incurred during the quarter and nine month periods (see Note 9 to Consolidated Financial Statements). As well, interest expense increased as a result of higher average borrowings during the period and higher average interest rates ~~partially offset by decreased average borrowings~~ during the ~~period.~~respective periods.

Other expense (income), net

Other expense (income), net in the ~~second~~third quarter of 2023 was ~~$(2.9)~~$(0.9) million compared to ~~$(0.4)~~$2.4 million in the ~~second~~third quarter of 2022. This ~~increase in~~ income was primarily driven by income in the other components of net periodic benefit costs of ~~$3.3~~$1.9 million in the ~~second~~third quarter of 2023, compared with expense of $1.2 million in the other components of net periodic benefit costs related to pension and other postretirement benefits. Other expense (income), net in the first ~~half~~nine months of 2023 was ~~$(1.6)~~$(2.4) million compared to ~~$1.2~~$3.7 million in ~~the~~ first ~~half~~nine months of 2022. This decrease in expense was also primarily driven by income in the other components of net periodic benefit costs of ~~$5.2~~$7.1 million in the first ~~half~~nine months of 2023 compared with ~~income~~expense in the other components of net periodic benefit costs of ~~$0.2~~$1.0 million in the first ~~half~~nine months of 2022. Other expense (income) also includes foreign currency losses of ~~$2.3~~$2.9 million in the first ~~half~~nine months of 2023 compared to foreign currency gains of ~~$0.7~~$0.4 million in the first ~~half~~nine months of 2022.

Income Taxes

The Company's effective tax rate for the first ~~half~~nine months of 2023 was ~~21.8%~~67.6% compared with ~~(267.2)%~~111.0% in the first ~~half~~nine months of 2022 and 64.7% for the full year 2022. The ~~decrease~~increase in the effective tax rate in the first ~~half~~nine months of 2023 as compared with the rate for the full year 2022 is primarily due to the recording of a valuation allowance on disallowed interest expense under Section 163(j) and an increase in GILTI tax, both significantly impacted by the MB Aerospace acquisition. The increase is also due to a decrease in earnings in 2023 related to MB Aerospace acquisition costs of which a portion are capitalized for tax purposes. The increase is offset by the absence of a goodwill impairment charge of ~~$68.2 million,~~$68,194, which was not tax deductible for book purposes. Additional drivers causing the decrease in the effective tax rate in the first half of 2023, as compared with the full year 2022 rate, include a reduction of disallowed expenses related to Section 162(m) for covered employee’s compensation, a lower impact of GILTI tax and a favorable mix of non-U.S. earnings.

business was granted additional tax holidays in Singapore under the Pioneer program in the fourth quarter of 2022. The Singapore holiday provides reduced tax rates for certain Aerospace programs manufactured at the Singapore location and will run through December 2025. All of the holidays are subject to the Company meeting certain commitments in the respective jurisdictions.

On August 31, 2023, the Company completed its acquisition of MB Aerospace by acquiring all of the issued and outstanding shares of capital stock of MB Aerospace Holdings Inc., a Delaware corporation, in a taxable stock transaction. For accounting purposes, the assets and liabilities of MB Aerospace have been stepped up to fair market value which require the recording of deferred taxes on the associated step up. The Company has also determined that it is unlikely to recognize a tax benefit associated with MB Aerospace disallowed interest, net operating loss and credit carryforwards. As a result, the Company has booked a valuation allowance associated with these carryforwards. Additionally, the Company evaluated the impact of the MB Aerospace acquisition on the deferred tax assets of the Company. The Company determined that it was unlikely to be able to utilize legacy disallowed interest carryforwards and has recorded a corresponding valuation allowance.

~~Income (loss)~~(Loss) income and ~~Income (loss)~~(Loss) income per Share


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended September 30,								Nine Months Ended September 30,
(in millions, except per share)	(in millions, except per share)	2023		2022		Change				2023		2022		Change				(in millions, except per share)	2023		2022		Change				2023		2022		Change
Net income (loss)		$	17.4	$	(39.6)	$	56.9	NM		$	30.5	$	(19.1)	$	49.6	NM
Net income (loss) per common share:
Net (loss) income																		Net (loss) income	$	(21.7)	$	17.0	$	(38.7)	(228.0)	%	$	8.8	$	(2.1)	$	10.9	(520.3)	%
Net (loss) income per common share:																		Net (loss) income per common share:
Basic	Basic	$	0.34	$	(0.78)	$	1.12	NM		$	0.60	$	(0.37)	$	0.97	NM		Basic	$	(0.43)	$	0.33	$	(0.76)	(230.3)	%	$	0.17	$	(0.04)	$	0.21	(525.0)	%
Diluted	Diluted	0.34		(0.78)		1.12		NM		0.60		(0.37)		0.97		NM		Diluted	(0.43)		0.33		(0.76)		(230.3)	%	0.17		(0.04)		0.21		(525.0)	%
Weighted average common shares outstanding:	Weighted average common shares outstanding:																	Weighted average common shares outstanding:
Basic	Basic	51.1		51.0		—		0.1	%	51.0		51.0		—		—	%	Basic	51.1		50.9		0.1		0.3	%	51.0		51.0		0.1		0.1	%
Diluted	Diluted	51.2		51.0		0.2		0.4	%	51.2		51.0		0.2		0.5	%	Diluted	51.1		51.1		—		—	%	51.2		51.0		0.2		0.5	%

NM - Not Meaningful

Basic and diluted net income ~~(loss)~~ per common share ~~increased~~decreased from the three and ~~six~~nine months periods ended ~~June~~September 30, ~~2023 as compared~~2022 to ~~2022~~net losses per common share for the three and nine months periods ended September 30, 2023 due to the ~~increase in~~changes from net income to net losses for the ~~period.~~periods. Basic and diluted weighted average common shares outstanding were consistent for the periods and were only slightly impacted by the repurchase of 200,000 shares during the ~~second quarter~~first nine months of 2022 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 Business Segment

Aerospace


	Three Months Ended September 30,										Nine Months Ended September 30,
(in millions)	2023			2022			Change				2023			2022			Change
Sales	$	156.1		$	110.8		$	45.3	40.9	%	$	395.4		$	320.7		$	74.7	23.3	%
Operating profit	3.6			21.2			(17.6)		(82.9)	%	39.0			58.2			(19.2)		(33.0)	%
Operating margin	2.3		%	19.2		%					9.9		%	18.1		%

The Aerospace segment reported sales of $156.1 million in the third quarter of 2023, an 40.9% increase from the third quarter of 2022. Organic sales increased 23.7% and 7.4% within the OEM and Aftermarket businesses, respectively, relative to the comparable 2022 period. The year-over-year increase in organic OEM sales was driven primarily by continued growth within narrow-body airframe production. Organic sales within the Aftermarket Maintenance Repair and Overhaul ("MRO") also improved during the third quarter of 2023 relative to the comparable period as airline traffic and aircraft utilization have continued to ramp. During the first nine months of 2023, the Aerospace segment reported sales of $395.4 million, a 23.3% increase from the first nine months of 2022, also driven by volume growth within each of the Aerospace businesses. The acquisition of MB Aerospace in August 2023 provided incremental sales of $26.5 million within the Aerospace segment during the three and nine months ended September 30, 2023. Sales within the segment are largely denominated in U.S. dollars and therefore were not significantly impacted by changes in foreign currency.

Operating profit at Aerospace in the third quarter of 2023 decreased 82.9% from the third quarter of 2022 to $3.6 million, largely a result of transaction costs related to the August 2023 acquisition of MB Aerospace. More specifically, operating results were impacted by $8.0 million of short-term purchase accounting adjustments (amortization of customer backlog and inventory step-up), $7.8 million of acquisition transaction costs and $2.2 million of increased amortization costs for other acquired long-term intangible assets and $3.9 million of restructuring and transformation related charges, all related to the acquisition of MB Aerospace. Unfavorable productivity also impacted operating results in the third quarter of 2023. The above items were partially offset by pricing, the profit contribution of higher organic sales volumes and MB Aerospace sales. Operating margin decreased from 19.2% in the 2022 period to 2.3% in the 2023 period, largely as a result of the Aerospace MB acquisition-related items. Operating profit in the first nine months of 2023 decreased 33.0% from the first nine months of 2022 to $39.0 million, driven by the items described above, including $8.0 million of short-term purchase accounting adjustments, $1.5 million of due diligence costs allocated to the segment, $11.4 million of acquisition transaction costs and $6.3 million of restructuring and transformation-related charges that were recorded in the first nine months of 2023. Operating margin decreased from 18.1% to 9.9% in the first nine months of 2023, primarily as a result of the acquisition related cost items noted above.

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. As noted earlier, the Company completed its acquisition of MB Aerospace during the third quarter of 2023. MB Aerospace represents a strategic fit for Barnes Aerospace, with highly complementary programs, global operations, technical capabilities, and product and service offerings. OEM sales grew in 2023 relative to the comparable 2022 period, as customer aircraft production schedules continue to ramp. The Company expects that the OEM business will see a continued strength in demand for its manufactured components as narrow body airframe production remains strong, whereas wide body airframe production, albeit improving, remains below pre-pandemic levels. 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 working closely with suppliers to align raw material schedules with production requirements. Management also remains focused on labor and supply chain constraints that continue to impact the business, on executing long-term agreements, and expanding our share of production on key programs. Backlog at OEM, including that of the acquired Aerospace MB business, was $1,250.4 million at September 30, 2023. This represents an increase of 66.7% since December 31, 2022, at which time backlog was $750.1 million. Approximately 50% of OEM backlog is expected to be recognized over the

next 12 months. 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 such as titanium 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, interest rates, 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.

The Aerospace Aftermarket business continues to demonstrate strong signs of recovery as airline traffic and aircraft utilization improve. Domestic and international passenger traffic have improved as significant health and travel restrictions have been lifted with continued growth forecasted throughout 2023. Freight-related air traffic remains solid. 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 electing to closely manage their aftermarket costs as engine performance and quality improves. Fluctuations in fuel costs, interest rates 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 labor and supply chain constraints, the Company remains focused on proactive cost management and improved productivity to mitigate continued pressure on operating profit. In April 2023, the Company authorized the third phase of the Actions, with pre-tax charges expected to approximate $8 million within the Aerospace segment. In September 2023, the Company authorized additional restructuring actions related to the MB Aerospace acquisition. These actions include organizational realignments including elimination of certain roles. Industry capacity remains partially constrained by the availability of skilled labor, although improvements were continuing to be recognized during the first nine months of 2023. Aerospace will continue to explore opportunities for additional productivity, including working closely with vendors and customers as it relates to the timing of deliveries and pricing initiatives. Management also remains focused on growth through strategic investments, acquisition and new product and process introductions. Driving productivity 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 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 to drive improved operating profit in the longer term, while potentially negatively impact operating profit in the short-term.

Industrial


		Three Months Ended June 30,										Six Months Ended June 30,											Three Months Ended September 30,										Nine Months Ended September 30,
(in millions)	(in millions)	2023			2022			Change				2023			2022			Change				(in millions)	2023			2022			Change				2023			2022			Change
Sales	Sales	$	217.0		$	212.1		$	4.9	2.3	%	$	435.1		$	423.8		$	11.3	2.7	%	Sales	$	204.9		$	204.0		$	0.9	0.5	%	$	640.0		$	627.7		$	12.2	1.9	%
Operating profit (loss)	Operating profit (loss)	9.4			(48.7)			58.2		NM		14.0			(34.0)			48.0		NM		Operating profit (loss)	6.4			8.8			(2.4)		(27.7)	%	20.3			(25.2)			45.5		NM
Operating margin	Operating margin	4.3		%	(23.0)		%					3.2		%	(8.0)		%					Operating margin	3.1		%	4.3		%					3.2		%	(4.0)		%

NM - Not Meaningful

Sales at Industrial were ~~$217.0~~$204.9 million in the ~~second~~third quarter of 2023, a ~~$4.9~~$0.9 million, or ~~2.3%~~0.5%, increase from the ~~second~~third quarter of 2022. Organic sales ~~increased~~decreased by ~~$3.4~~$7.2 million, or ~~1.6%~~3.5%, during the 2023 period, primarily driven by volume decreases within the Molding Solutions and Motion Control Solutions businesses, partially offset by favorable pricing ~~actions within each of the businesses.~~actions. Foreign currency increased sales on a year-over-year basis by approximately ~~$1.5~~$8.1 million as the U.S. dollar weakened against foreign currencies. During the first ~~half~~nine months of 2023, this segment reported sales of ~~$435.1~~$640.0 million, a ~~2.7%~~1.9% increase from the first ~~half~~nine months of 2022. Organic sales increased by ~~$15.7~~$8.5 million, or ~~3.7%~~1.4%, during the ~~2022~~2023 period, largely a result of ~~higher volumes within the Molding Solutions and Automation businesses, and~~ favorable pricing initiatives. Foreign currency ~~decreased~~increased sales by approximately ~~$4.4~~$3.7 million as the U.S. dollar ~~strengthened~~weakened against foreign currencies.

2935

Operating ~~results~~profit at Industrial ~~increased from an operating loss of $48.7 million~~ in the ~~second~~third quarter of 2023 decreased 27.7% from the third quarter of 2022 to an operating profit of $9.4 million in the second quarter of 2023, primarily as a result of the absence of the $68.2 million goodwill impairment charge recorded by the segment during the 2022 period. Excluding the goodwill impairment charge, operating profit during the second quarter of 2022 was $19.5$6.4 million. Operating results were impacted by ~~$13.4~~$9.3 million of pre-tax charges related to restructuring and transformation related actions recorded by the segment in the ~~second~~third quarter of 2023, lower organic sales volumes, unfavorable mix and $1.7 million of due diligence costs allocated to the segment. Pricing and procurement actions taken by the Company in response to inflationary pressures and increased global sourcing costs provided a recovery of approximately $7.0 million during the second quarter of 2023. Operating results were also impacted by favorablelower productivity. Operating margin improved from (23.0)% in the 2022 period to 4.3% in the 2023 period, primarily as a result of the items describe above. The operating profit in the first half of 2023 was $14.0 million, as compared with an operating loss of $34.0 million in the first half of 2022, driven also by the absence of the $68.2 million goodwill impairment charge, partially offset by $25.5 million of pre-taxPre-tax charges related to restructuring and ~~transformation~~workforce reduction actions ~~and $2.1 million of due diligence costs allocated to the segment. Excluding the goodwill impairment charge, operating profit~~ during the ~~first half of~~comparable 2022 period was ~~$34.2~~$9.4 million. Pricing and procurement actions taken by the Company in response to inflationary pressures and increased global sourcing costs provided a recovery of approximately ~~$13.0~~$10.1 million during the third quarter of 2023. Operating margin decreased from 4.3% in the 2022 period to 3.1% in the 2023 period, primarily as a result of the items describe above. The operating profit in the first nine months of 2023 was $20.3 million, as compared with an operating loss of $25.2 million in the first nine months of 2022, driven by the absence of the $68.2 million goodwill impairment charge, partially offset by $34.7 million of pre-tax charges related to restructuring and transformation actions, $2.3 million of due diligence costs allocated to the segment and unfavorable productivity. Excluding the goodwill impairment charge, operating profit during the first nine months of 2022 was $43.0 million. Pre-tax charges related to restructuring and workforce reduction actions during the comparable nine month period were $9.8 million. Pricing and procurement actions taken by the Company in response to inflationary pressures and increased global sourcing costs provided a recovery of approximately $23.5 million during first ~~half~~nine months of 2023. Operating margin increased from ~~(8.0)~~(4.0)% in the 2022 period to 3.2% in the 2023 period, primarily a result of the items described above. Excluding the goodwill impairment charge, Industrial operating margin during the first ~~half~~nine months of 2022 was ~~8.1%~~6.8%.

Outlook: In Industrial, management remains focused on generating organic sales growth through expanded go-to-market strategies, which includes additional sales and marketing resources and the introduction of new products and services to comprehensively leverage the Company's full product portfolio with customers in our global industrial end-markets. Our end markets remain impacted by continuing economic headwinds that include inflationary pressures. Sales within Europe improved on a year-over-year basis and remained flat within North America, however sales within China declined on a year-over-year basis. Order rates declined on a year-over-year basis within China and ~~remained flat within Europe,~~North America, albeit improved on a year-over-year basis within ~~North America.~~Europe. Management continues to evaluate the current markets in China, given continued softness, and the potential impacts on our Motion Control Solutions businesses. For overall industrial end-markets, the manufacturing Purchasing Managers' Index ("PMI") remained below 50 in the United States and Europe, however, China ended the first ~~half~~nine months of 2023 above 50. 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. During the current quarter, the national union representing the United Auto Workers opted to strike, potentially impacting managements sales channels within automotive end markets. Management also tracks closely the impact of pricing changes and lead times on raw materials and freight, given the continued ongoing pressure of supply chain constraints. Within our Molding Solutions business, orders within the global medical end market ~~softened~~strengthened during the current quarter, ~~although we expect medical~~and are expected to remain ~~strong~~favorable over the longer term given an aging population and expanded medical applications. Orders within the personal care and packaging end ~~market~~markets improved ~~both~~ on a year-over-year ~~basis and on a sequential basis in the second quarter.~~basis. Sales volumes at certain of our businesses is dependent upon the need for equipment used in plastic injection molding markets, 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 softened both on a year-over-year basis and on a sequential basis during the current quarter. 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 customer engagement, innovation 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 increase competitiveness and to mitigate the ongoing impacts of the current macroeconomic environments, including the continuing risks of supply chain constraints and broad based inflation on operating profit. Management also remains focused on strategic investments and new product and process introductions, as well as driving productivity. The Company continues to manage its cost structure to align with the intake of orders and sales given remaining uncertainty within certain end-markets. In July 2022, management commenced a systematic multi-phased restructuring initiative (the "Actions") to significantly reduce costs and integrate the Company's operations, decreasing complexity and focusing on improved performance across Industrial. During the first phase of the Actions, authorized in July 2022, management focused on the consolidation of two manufacturing sites and a number of branch offices, and changes in infrastructure to eliminate certain roles across a number of locations in the Industrial segment businesses. The second phase of the Actions commenced during October 2022, resulting in the consolidation of operating locations to drive efficiencies within the businesses. Collectively, the first and second phase of the Actions are expected to reduce annualized

costs by approximately $26.0 million within the Industrial segment, with an estimated cost of $29.0 million. The third phase of the Actions, authorized in April 2023, focused on manufacturing footprint optimization, including the consolidation of

manufacturing sites and optimization of production. The third phase of the Actions include the geographic transfer of certain programs within the Industrial segment and changes in infrastructure to drive improvements and efficiencies in business processes. The pre-tax charges associated with the third phase of the Actions are expected to approximate $16.0 million within the segment. In September 2023, the Company authorized additional restructuring actions including organizational realignment within a Barnes Industrial business. These actions include organizational realignment including elimination of certain roles across several locations. 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.Operating profit may continue to be impacted by changes in sales volume, mix and pricing, inflation, labor costs, utility cost, and the levels of investments in growth and innovation that are made within each of the Industrial businesses. 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, and strategic investments may negatively impact operating profit.

~~Aerospace~~

Three Months Ended
June 30, Six Months Ended
June 30,
(in millions) 2023 2022 Change 2023 2022 Change
Sales $ 122.0 $ 109.2 $ 12.9 11.8 % $ 239.3 $ 209.9 $ 29.4 14.0 %
Operating profit 16.6 20.6 (4.0) (19.3) % 35.3 36.9 (1.6) (4.3) %
Operating margin 13.6 % 18.8 % 14.8 % 17.6 %

The Aerospace segment reported sales of $122.0 million in the second quarter of 2023, an 11.8% increase from the second quarter of 2022. Sales increased 8.4% and 17.7% within the OEM and Aftermarket businesses, respectively, relative to the comparable 2022 period. The year-over-year increase in OEM sales was driven primarily by continued growth within narrow-body airframe production. Sales within the Aftermarket Maintenance Repair and Overhaul ("MRO") and spare parts businesses also improved during the second quarter of 2023 relative to the comparable period as airline traffic and aircraft utilization have continued to ramp. During the first half of 2023, the Aerospace segment reported sales of $239.3 million, a 14.0% increase from the first half of 2022, also driven by volume growth within each of the Aerospace businesses. Sales within the segment are largely denominated in U.S. dollars and therefore were not significantly impacted by changes in foreign currency.

Operating profit at Aerospace in the second quarter of 2023 decreased 19.3% from the second quarter of 2022 to $16.6 million. Operating results were impacted by $3.6 million of pre-tax acquisition transaction costs related to the planned acquisition of MB Aerospace, $1.0 million of due diligence costs allocated to the segment, $0.6 million of restructuring and transformation-related charges, an unfavorable product mix within the OEM business and unfavorable productivity, partially offset by higher sales volumes. Operating margin decreased from 18.8% in the 2022 period to 13.6% in the 2023 period, largely as a result of these items. Operating profit in the first half of 2023 decreased 4.3% from the first half of 2022 to $35.3 million, driven by the items described above, $1.2 million of due diligence costs allocated to the segment and $2.3 million of restructuring and transformation-related charges that were recorded in the first half of 2023. Operating margin decreased from 17.6% to 14.8% in the first half of 2023, primarily a result of these items.

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 grew in 2023 relative to the comparable 2022 period, as customer aircraft production schedules continue to ramp. The Company expects that the OEM business will see a continued strength in demand for its manufactured components as narrow body airframe production remains strong, whereas wide body airframe production, albeit improving, remains below pre-pandemic levels. 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 working closely with suppliers to align raw material schedules with production requirements. Management also remains focused on labor and supply chain constraints that continue to impact the business, on executing long-term agreements, and expanding our share of production on key programs. Backlog at OEM was $804.8 million at June 30, 2023, an increase of 7.3% since December 31, 2022, at which time backlog was $750.1 million. Approximately 50% of OEM backlog is expected to be recognized over the next 12 months. 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 such as titanium 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, interest rates, 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.

The Aerospace Aftermarket business continues to demonstrate strong signs of recovery as airline traffic and aircraft utilization improve, aircraft are being removed from storage and placed into service and airlines begin to return to profitability. Domestic and international passenger traffic have improved as significant health and travel restrictions have been lifted with continued growth forecasted throughout 2023. Freight-related air traffic remains solid. 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 electing to 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 labor and supply chain constraints, the Company remains focused on proactive cost management and improved productivity to mitigate continued pressure on operating profit. In April 2023, the Company authorized the third phase of the Actions, with pre-tax charges expected to approximate $12.0 million within the Aerospace segment. Industry capacity remains partially constrained by the availability of skilled labor, although improvements were continuing to be recognized during the first half of 2023. Aerospace will continue to explore opportunities for additional productivity, including working closely with vendors and customers as it relates to the timing of deliveries and pricing initiatives. Management also remains focused on growth through strategic investments, acquisition and new product and process introductions. Driving productivity 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 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.

LIQUIDITY 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 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 2023 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 2023 capital spending to approximate $50 million.

On June 5, 2023, the Company entered into the Agreement with MB Aerospace Group Holdings Limited, a Cayman Islands limited company. See Note 3. In connection with entry into the Agreement, on June 5, 2023, the Company entered into the Second Amendment (the “Second Amendment”) to Note Purchase Agreement and Amendment No. 2 ("Amendment No. 2") to Unsecured Credit Agreement to facilitate the Transaction, as well as a commitment letter with Bank of America, N.A. and BofA Securities, Inc. (collectively, the “Commitment Parties”), pursuant to which the Commitment Parties agreed to provide, subject to the satisfaction of customary closing conditions contained therein, a $1,000.0 million backstop senior secured revolving credit facility and a $700.0 million senior secured 364-day bridge loan facility ("Bridge Loan Facility"). The Bridge Loan Facility was only intended to be drawn to the extent that the Company did not obtain alternative financing prior to the closing of the Transaction. The Company expensed fees of $9.5 million in conjunction with the Bridge Loan Facility and $1,000.0 million backstop senior secured revolving credit facility into interest expense on the Condensed Consolidated Statements of (Loss) Income in the three months ended September 30, 2023. On August 31, 2023 (the “Acquisition Date”), pursuant to the terms of the Agreement, the Company completed the Transaction for an aggregate purchase price of $728.6 million, subject to customary and specified closing adjustments, as set forth in the Agreement. Concurrently, the Company entered into a new Credit Agreement (the “Credit Agreement”) among the Company and certain of its subsidiaries, the issuing banks, lenders and other parties party thereto, and Bank of America, N.A., as administrative agent, as collateral agent and as swingline lender, which provides for senior secured financing of $1,650.0 million, consisting of a term loan facility (the “Term Loan Facility”) in an aggregate principal amount of $650.0 million, with an original issue discount of $4.9 million, and a revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Facilities”) in an aggregate principal amount of up to $1,000.0 million, including a letter of credit sub-facility of up to $50.0 million. Proceeds of the loans borrowed under the Senior Facilities on the Acquisition Date, net of a 0.75% original issue discount on the Term Loan Facility, were used to fund, in part, the transactions contemplated by the Agreement, including the consummation of the Transaction, the repayment in full of the 3.97% Senior Notes, and to pay related fees and expenses. As of the Acquisition Date, the Revolving Credit Facility had outstanding borrowings in an aggregate principal amount of approximately $698.0 million. Proceeds of any loans under the Revolving Credit Facility borrowed after the Acquisition Date will be used for general corporate purposes. The Company paid fees and expenses of $3.1 million in conjunction with executing the Revolving Credit Facility with the previously recorded debt issuance costs. Such fees have been deferred within Other Assets on the Condensed Consolidated Balance Sheets and will be amortized into interest expense on the Condensed Consolidated Statements of (Loss) Income through the maturity of the Credit Agreement. The Company incurred $8.3 million of debt issuance costs in conjunction with executing the Term Loan Facility. Such fees have been recorded as a direct deduction from the carrying amount of the Term Loan Facility and will be amortized into interest expense on the Condensed Consolidated Statements of (Loss) Income

through the maturity of the Term Loan Facility. Cash used to pay these fees was recorded through financing activities on the Condensed Consolidated Statements of Cash Flows. On August 31, 2023, in connection with the Credit Agreement and the closing of the Transaction, the Bridge Loan Facility was terminated.

The Senior Facilities are guaranteed by each of the Company’s wholly owned domestic subsidiaries and are secured by substantially all assets of the Company and of each subsidiary guarantor, in each case subject to certain exceptions.

Borrowings under the Senior Facilities bear interest at a rate per annum equal to, at the Company’s option, either Term SOFR (subject to a 0.00% floor) or an alternate base rate ("ABR"), in each case plus an applicable margin of (i) in the case of borrowings under the Term Loan Facility, 3.00% for Term SOFR loans and 2.00% for ABR loans and (ii) in the case of borrowings under the Revolving Credit Facility, initially, 2.375% for Term SOFR loans and 1.375% for ABR loans. The applicable margin for borrowings under the Revolving Credit Facility varies depending on the Company’s total net leverage ratio. The Company is also required to pay a commitment fee initially equal to 0.35% per annum to the lenders under the Revolving Credit Facility in respect of the unutilized commitments thereunder. The commitment fee under the Revolving Credit Facility varies depending on the Company’s total net leverage ratio.

The Term Loan Facility matures on the seven-year anniversary of the Acquisition Date and amortizes in equal quarterly installments, starting with the first full fiscal quarter after the Acquisition Date, of 0.25% of the initial principal amount. The Revolving Credit Facility matures on the five-year anniversary of the Acquisition Date. In addition, the Company is required to prepay outstanding loans under the Term Loan Facility, subject to certain exceptions, with up to 50% of the Company’s annual excess cash flow (as defined under the Credit Agreement) in excess of the greater of $50.0 million and 15.0% of LTM Adjusted Consolidated EBITDA (as defined in the Credit Agreement) as of the applicable time, and with up to 100% of the net cash proceeds of certain recovery events and non-ordinary course asset sales (which percentages vary depending on the Company’s first lien secured net leverage ratio).

The Revolving Credit Facility requires that the Company maintain a maximum Total Net Leverage Ratio, as defined in the Credit Agreement, initially of 5.50 to 1.00 as of the last day of each fiscal quarter for which financials have been (or were required to be) delivered, commencing with the first full fiscal quarter after the Acquisition Date, stepping down to 4.00 to 1.00 over time. The actual ratio, as defined, was 3.77 as of September 30, 2023. For material acquisitions in certain circumstances, such ratio may be increased by up to 0.50 to 1.00. The Revolving Credit Facility also requires that the Company not permit the Interest Coverage Ratio as of the last day of any test period to be less than 3.00 to 1.00. The actual ratio, as defined, was 3.36 as of September 30, 2023. At September 30, 2023, the Company was in compliance with all applicable covenants.

Management repurchased 0.2 million shares of the Company's common stock under the Repurchase Program at a cost of $6.7 million during the first nine months of 2022. The Company did not repurchase any shares of the Company's common stock during the first nine months of 2023. 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, Use of Proceeds, and Issuer Purchases of Equity Securities".

acquisition targets, it is now more narrowly assessing acquisitions, primarily with Aerospace, as evidenced by the consummation of the Transaction on August 31, 2023. Management remains focused on driving core business execution and financial performance via the planned integration and consolidation actions described above. The Company believes its credit facilities and access to capital markets, coupled with cash generated from operations, are adequate for its anticipated future requirements. See additional discussion above related to the Transaction and the Credit Agreement. 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 credit lines at September 30, 2023.

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~~$100,000 aggregate principal amount of the 3.97% ~~senior notes~~Senior Notes due October 17, 2024 (the ~~“3.97% Senior Notes”~~“Notes”). The ~~3.97% Senior~~ Notes ~~are~~were senior unsecured obligations of the Company and ~~pay~~paid 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,~~could, 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~~Notes, together with accrued and ~~negative covenants that are similar to the covenants required under the Existing Credit Agreement, as discussed below.~~

On February 10, 2021, the Company and certain of its subsidiaries entered into the sixth amended and restated senior unsecured revolving credit agreement (the "Existing Credit Agreement") and retained Bank of America, N.A. as the Administrative Agent

for the lenders. The $1,000.0 million Existing Credit Agreement matures in February 2026 and includes an accordion feature to increase the borrowing availability of the Company to $1,250.0 million. Borrowings under the Existing Credit Agreement boreunpaid interest at either the Eurocurrency rate, as defined in the Existing Credit Agreement, plus a margin of 1.175% to 1.775% or the base rate, as defined in the Existing Credit Agreement, plus a margin of 0.175% to 0.775%, dependingthereon, were repaid on the Company's leverage ratio at the time of the borrowing. Multi-currency borrowings, pursuant to the Existing Credit Agreement, bore 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% and 1.775%. The Company's borrowing capacity is limited by various debt covenants in the Existing Credit Agreement, as described further below. The Existing Credit Agreement requires the Company to maintain a Senior Debt Ratio of not more than 3.25 times (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 Existing Credit Agreement requires the Company to maintain a Total Debt Ratio of not more than 3.75 times 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 times, is required at the end of each fiscal quarter. The Existing Credit Agreement also contemplated 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 discussion below). The Company paid fees and expenses of $4.3 million in conjunction with executing the Existing Credit Agreement. Such fees have been deferred within Other assets on the Condensed Consolidated Balance Sheets and will be amortized into interest expense on the Condensed Consolidated Statements of Income (Loss) through its maturity. The Company subsequently amended the Existing 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 was expected to be discontinued by reference rate reform. See Note 2 of the Condensed Consolidated Financial Statements, as well as the discussion below.

On April 6, 2022, the Company entered into Amendment No. 1 to the Existing Credit Agreement (“Amendment No. 1”), which (i) replaced the LIBOR interest rate for U.S. dollar loans to a term Secured Overnight Financing Rate including a Secured Overnight Financing Rate adjustment (or "SOFR", as defined in the Existing 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 ("€STR") (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 Existing 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 have been deferred within Other Assets on the Condensed Consolidated Balance Sheets and will be amortized into interest expense on the Condensed Consolidated Statements of Income (Loss) through the maturity of the Existing Credit Agreement.

~~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~~August 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 Existing Credit Agreement and corresponding interest rate swap were tied to LIBOR, with each maturing in February 2026. In March 2021, the ICE Benchmark Association announced that it would 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 Existing Credit Agreement was further amended in October 2021 and in April 2022 to address the replacement of LIBOR which, as a result of the Company's contract amendments as discussed above, did not have a material impact on our business, financial condition, results of operations or cash flow.

At June 30, 2023, the Company was in compliance with all applicable covenants. The Company anticipates continued compliance 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 June 30, 2023. The actual ratio at June 30, 2023 was 2.56 times, as defined.

On June 5, 2023, the Company entered into an Agreement with MB Aerospace Group Holdings Limited, a Cayman Islands limited company (See Commitments and Contingencies - Pending Acquisition). The Company agreed to acquire MB Aerospace by acquiring all the issued and outstanding capital stock of MB Aerospace Holdings Inc., a Delaware corporation, along with such entity’s subsidiaries for an aggregate purchase price of $740.0 million, payable in cash, subject to customary and specified closing adjustments, as set forth in the Agreement. In connection with entry into the Agreement, on June 5, 2023, the Company entered into the Second Amendment to Note Purchase Agreement (the “Second Amendment”) and Amendment No. 2 to Existing Credit Agreement ("Amendment No. 2") to facilitate the Transaction, as well as a commitment letter with Bank of America, N.A. and BofA Securities, Inc. (collectively, the “Commitment Parties”), pursuant to which the Commitment Parties agreed to provide, subject to the satisfaction of customary closing conditions contained therein, a $1,000 million backstop senior secured revolving credit facility and a $700.0 million senior secured 364-day bridge loan facility ("Bridge Loan Facility"). The Bridge Loan Facility is only intended to be drawn to the extent that the Company has not obtained alternative financing prior to the closing of the Transaction. On June 22, 2023 in connection with the ~~Transaction, the Company entered into Amendment No. 3 to Existing Credit Agreement (the “Amendment No. 3”). Upon the effectiveness of Amendment No. 3, the Existing Credit Agreement~~Transaction. There was amended (as amended, the “Effective Date Credit Agreement”) to, among other things, include customary “certain funds” provisions applicable to a portion of the revolving commitments in an amount equal to $300.0 million plus the amount needed for a redemption of the Company’s existing 3.97% Senior Notes due 2024. Upon the close of the Transaction, certain amendments to the Effective Date Credit Agreement will become effective (as amended, the “Closing Date Credit Agreement”) to permit the Transaction, including, among other things, to: (i) permit the assumption and/or incurrence of indebtedness and liens in connection with the Transaction; (ii) remove the Senior Debt Ratio in conjunction with the repayment of the Note Purchase Agreement (iii) increase the maximum leverage ratio to 5.50:1, subject to step-downs to (a) 5.00:1 beginning with the fiscal period ending June 30, 2024, (b) 4.50:1 beginning with the fiscal period ending December 31, 2024 and (c) 4.00:1 beginning with the fiscal period ending June 30, 2025, subject to a 0.50:1 step up in connection with permitted acquisitions on and after June 30, 2024; (iv) lower the minimum interest coverage ratio to 3.00:1; (v) grant the administrative agent (for the benefit of the secured lenders) a security interest in substantially all of the present and after-acquired assets of the Company and each guarantor (subject to certain exceptions); (vi) increase the Applicable Margin (as defined in the Closing Date Credit Agreement) to a range from 1.375% to 2.50% for €STR, SOFR, and alternative currency loans and to a range from 0.375% to 1.50% for base rate loans, in each case depending on the leverage ratio; and (vii) make certain other changes set forth therein.

Management repurchased 0.2 million shares of the Company's common stock under the Repurchase Program at a cost of $6.7 million during the first half of 2022. The Company did not repurchase any shares of the Company's common stock during the first half of 2023. 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".

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 Effective Date Credit Agreement and currently expects that its bank synd~~icate, comprised of 12 banks,~~ will continue to support its Effective Date Credit Agreement, which matures in February 2026. At June 30, 2023, the Company had $537.3 million unused and available for borrowings under its $1,000.0 million Effective Date Credit Agreement, subject to covenants in the Company's debt agreements. At June 30, 2023, additional borrowings of $266.0 million of Total Debt including $154.0 million of Senior Debt would have been allowed under the financial covenants. The Company intends to use borrowings under its Effective Date Credit Agreement to support the Company's ongoing growth initiatives. While the Company continues to evaluate potential acquisition targets, it is now more narrowly assessing acquisitions, primarily with Aerospace, as evidenced by the execution of the Agreement with MB Aerospace on June 5, 2023. Management remains focused on driving core business execution and financial performance via the planned integration and consolidation actions described above. Upon the potential consummation of the Transaction, the Company expects that the banks that are party to Amendment No. 3 will support the Closing Date Credit Agreement. The Company believes its credit facilities and access to capital markets, coupled with cash generated from operations, are adequate for its anticipated future requirements. See additional discussion above related to the Transaction and the Closing Date Credit Agreement. The Company maintains communication with its bank syndicate as it continues to monitor its cash requirements.

~~The Company had $8.0 million in borrowings under short-term bank credit lines at June 30, 2023.~~no Make-Whole Amount.

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. OnEffective April 6,30, 2022, the Company ~~entered into Amendment No. 1 to the Existing Credit Agreement, which replaced the LIBOR interest rate for U.S. dollar loans with the SOFR rate (see Note 8). As a result, the Company subsequently~~ amended the 2021 Swap (the "Amended 2021 Swap")~~, effective April 30, 2022,~~ such that the one-month SOFR-based borrowing rate replaced the one-month LIBOR-based borrowing rate. The Amended 2021 Swap, which will expire on January 30, 2026, converts the interest on ~~the first~~ $100.0 million of the Company's one-month SOFR-based borrowings from a variable rate plus the borrowing spread to a fixed rate of 1.075% plus the borrowing spread. The execution of the Amended 2021 Swap did not ~~result in~~have a material impact on our business, financial condition, results of operations or cash flow. ~~The Amended 2021 Swap remained in place at June 30, 2023 and is accounted for as a cash flow hedge.~~

On July 19, 2023, the Company entered into an interest rate swap agreement (the ~~"2023~~"Euribor Swap") with one bank that ~~will commence~~commenced on July 31, 2023, ~~and will convert~~which converts the interest on ~~the first~~ €150.0 million of the Company's Euribor-based borrowings from a variable rate plus the borrowing spread to a fixed rate of 3.257% plus the borrowing spread. ~~Per~~Under the 2023 Swap, €50.0 million will expire on July 31, 2026, with the remaining balance of €100.0 million expiring July 31, 2028. ~~The~~On September 12, 2023, ~~Swap is accounted for as~~the Company entered into six additional interest rate swap agreement (the "2023 Swaps") with six different banks that commenced on September 29, 2023, which convert the interest on $600.0 million of the Company's one-month SOFR-based borrowings from a ~~cash flow hedge.~~variable rate plus the borrowing spread to a blended fixed rate of 4.321% plus the borrowing spread. Under the 2023 Swaps, $50.0 million will expire on August 31, 2026, $100.0 million will expire on August 31, 2027, $200.0 million will expire on August 31, 2028, $50.0 million will expire on August 31, 2029 and the remaining balance of $200.0 million will expire on August 31, 2030. The execution of the interest rate swap agreements in 2023 ~~Swap~~ did not ~~result in~~have a material impact on our business, financial condition, results of operations or cash flow. These interest rate swap agreements (the "Swaps") are accounted for as cash flow hedges.At ~~June~~September 30, 2023, the Company's total borrowings were comprised of 66% fixed rate debt and 34% variable rate debt. At December 31, 2022, the Company's total borrowings were comprised of 35% fixed rate debt and 65% variable rate debt.

At ~~June~~September 30, 2023, the Company held ~~$74.7~~$90.0 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


		Six Months Ended June 30,							Nine Months Ended September 30,
(in millions)	(in millions)	2023		2022		Change		(in millions)	2023		2022		Change
Operating activities	Operating activities	$	42.5	$	8.5	$	33.9	Operating activities	$	71.0	$	43.5	$	27.5
Investing activities	Investing activities	(22.2)		(15.1)		(7.1)		Investing activities	(750.1)		(23.7)		(726.4)
Financing activities	Financing activities	(24.1)		(24.4)		0.3		Financing activities	692.4		(46.7)		739.1
Exchange rate effect	Exchange rate effect	(0.5)		(4.5)		4.0		Exchange rate effect	(2.2)		(9.5)		7.3
Decrease in cash, cash equivalents and restricted cash		$	(4.3)	$	(35.4)	$	31.1
Increase (decrease) in cash, cash equivalents and restricted cash								Increase (decrease) in cash, cash equivalents and restricted cash	$	11.1	$	(36.4)	$	47.4

Operating activities provided ~~$42.5~~$71.0 million in the first ~~six~~nine months of 2023 and provided ~~$8.5~~$43.5 million in the first ~~six~~nine months of 2022. The 2022 period included a use of cash for working capital of ~~$46.7~~$47.8 million, with ~~$26.7~~$40.4 million reflecting growth in inventories, compared to the 2023 period, which included a use of cash for working capital of ~~$30.1~~$25.6 million, with ~~$9.7~~$8.7 million reflecting continued growth in inventories. Inventory levels increased during the first ~~six~~nine months of 2023 and 2022 primarily as a result of strategic builds to support customer demands, combined with the impact of inflation. Operating cash flows in the 2022 period were also negatively impacted by higher outflows for accrued liabilities, primarily related to incentive compensation, relative to payments made in 2023.

Investing activities used ~~$22.2~~$750.1 million in the first ~~six~~nine months of 2023 compared to ~~$15.1~~$23.7 million in the first ~~six~~nine months of 2022. Investing activities in the 2023 period included outflows of $718.8 million used to fund the MB Aerospace Acquisition. Investing activities in the 2023 period also included capital expenditures of ~~$21.6~~$37.4 million compared to ~~$13.5~~$21.7 million in the 2022 ~~period.~~ period. See Note 3 to the Condensed Consolidated Financial Statements. The Company expects capital spending in 2023 to approximate $50 million.

Financing activities in the first ~~six~~nine months of 2023 included a net ~~decrease~~increase in borrowings of ~~$3.9~~$737.6 million compared to a net increase in borrowings of ~~$8.3~~$3.4 million in the comparable 2022 period. In the 2023 period, net borrowings were primarily used to fund the MB Aerospace acquisition. In addition, the Company paid $11.3 million of fees in connection with entering the new Credit Agreement in connection with the MB Aerospace acquisition. See Note 3 and Note 9 to the Consolidated Financial Statements.Proceeds from the issuance of common stock were ~~$0.2~~$0.3 million in the 2023 period, flat compared to the 2022 period. Total cash used to pay dividends was ~~$16.2~~$24.3 million in both the 2023 and 2022 periods. Other financing cash flows during the first ~~six~~nine months of 2023 and 2022 included ~~$1.2~~$6.3 million and ~~$8.7~~$17.3 million of net cash payments, respectively, resulting from the settlement of foreign currency hedges related to intercompany financing. Other financing cash flows in the first ~~six~~nine months of 2023 also included $2.4 million of payments that related to the residual interest in a subsidiary.

The Company maintains borrowing facilities with banks to supplement internal cash generation. At June 30, 2023, $462.7 million was borrowed at an average interest rate of 5.01% under the Company's $1,000.0 million Effective Date Credit Agreement, which matures in February 2026. As of June 30, 2023, the Company had $8,000 borrowed at an average interest rate of 6.6% under short-term bank credit lines. At June 30, 2023, the Company's total borrowings were comprised of 35%

fixed rate debt and 65% 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 June 30, 2023~~
~~Net income~~	$	~~63.1~~
~~Add back:~~
~~Interest expense~~	~~19.6~~
~~Income taxes~~	~~19.3~~
~~Depreciation and amortization~~	~~95.1~~
~~Adjustment for non-cash stock based compensation~~	~~11.6~~

~~Workforce reduction and restructuring charges~~	~~15.0~~

~~Other adjustments~~	~~0.5~~
~~Consolidated EBITDA, as defined within the Effective Date Credit Agreement~~	$	~~224.1~~

~~Consolidated Senior Debt, as defined, as of June 30, 2023~~	$	~~574.4~~
~~Ratio of Consolidated Senior Debt to Consolidated EBITDA~~	~~2.56~~
~~Maximum~~	~~3.25~~
~~Consolidated Total Debt, as defined, as of June 30, 2023~~	$	~~574.4~~
~~Ratio of Consolidated Total Debt to Consolidated EBITDA~~	~~2.56~~
~~Maximum~~	~~3.75~~
~~Consolidated Cash Interest Expense, as defined, as of June 30, 2023~~	$	~~19.6~~
~~Ratio of Consolidated EBITDA to Consolidated Cash Interest Expense~~	~~11.46~~
~~Minimum~~	~~4.25~~

The Company's debt agreements allow for certain adjustments within the calculation of the financial covenants. Other adjustments consist primarily of due diligence and transaction expenses and net gains on the sale of assets as permitted under the debt agreements. The Company's financial covenants are measured as of the end of each fiscal quarter. At June 30, 2023, additional borrowings of $266.0 million of Total Debt, including $154.0 million of Senior Debt, would have been allowed under the covenants. Senior Debt includes primarily the borrowings under the Effective Date Credit Agreement, the Note Purchase Agreement and the lines of credit. The Company's unused committed credit facilities at June 30, 2023 were $537.3 million; however, the borrowing capacity was limited by the debt covenants to $266.0 million of Total Debt and $154.0 million of Senior Debt at June 30, 2023.

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, 2022. The most significant areas involving 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, 2022. Actual results could differ from those estimates. There have been no material changes to such judgments and estimates.

3640

Critical Accounting ~~Policies~~Estimates

Goodwill and Indefinite-Lived Intangible Assets: Goodwill and indefinite-lived intangible assets are subject to impairment testing annually or earlier if an event or change in circumstances indicates that the fair value of a reporting unit has been reduced below its carrying value. Management completes their annual impairment assessments during the second quarter of each year as of April 1. The Company utilizes the option to first assess qualitative factors to determine whether it is necessary to perform the Step 1 quantitative goodwill impairment test in accordance with the applicable accounting standards. Under the qualitative assessment, management considers relevant events and circumstances including but not limited to macroeconomic conditions, industry and market considerations, overall reporting unit performance and events directly affecting a reporting unit. If the Company determines that the Step 1 quantitative impairment test is required, management estimates the fair value of the reporting unit using the income approach. Inherent in management’s development of cash flow projections are assumptions and estimates, including those related to future earnings and growth and the weighted average cost of capital. The Company compares the fair value of the reporting unit with the carrying value of the reporting unit. If the fair values were to fall below the carrying values, the Company would recognize a non-cash impairment charge to income from operations for the amount by which the carrying amount of any reporting unit exceeds the reporting unit’s fair value, assuming the loss recognized does not exceed the total amount of goodwill for the reporting unit. Based on our annual assessment in the second quarter of 2023, the estimated fair value of the Automation reporting unit, which represents the 2018 acquisition of Gimatic, exceeded its carrying value, while the estimated fair value of each of the remaining reporting units significantly exceeded their carrying values. During the prior year 2022 period, management recorded a non-cash goodwill impairment charge related to the Automation reporting unit as the estimated fair value of the reporting unit declined below its carrying value. There was no goodwill impairment at any reporting units in the 2023 period. Many of the factors used in assessing fair value are outside the control of management, and these assumptions and estimates can change in future periods as a result of both Company-specific and overall economic conditions. Management’s quantitative assessment includes a review of the potential impacts of current and projected market conditions from a market participant’s perspective on reporting units’ projected cash flows, growth rates and cost of capital to assess the likelihood of whether the fair value would be less than the carrying value. The Company also completed its annual impairment testing of its trade names, indefinite-lived intangible assets, in the second quarter of 2023 and determined that there were no impairments.

EBITDA

Earnings before interest expense, income taxes and depreciation and amortization ("EBITDA") was ~~$97.8~~$140.9 million for the first ~~six~~nine months of 2023 compared to ~~$114.8~~$166.5 million for the first ~~six~~nine months of 2022. 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):


		Six Months Ended June 30,					Nine Months Ended September 30,
		2023		2022			2023		2022
Net income		$	30.5	$	(19.1)
Net income (loss)						Net income (loss)	$	8.8	$	(2.1)
Add back:	Add back:					Add back:
Interest expense	Interest expense	11.8		6.9		Interest expense	34.6		10.2
Income taxes	Income taxes	8.5		13.9		Income taxes	18.3		21.2
Depreciation and amortization	Depreciation and amortization	46.9		44.9		Depreciation and amortization	79.2		69.0
Non-cash goodwill impairment charge	Non-cash goodwill impairment charge	—		68.2		Non-cash goodwill impairment charge	—		68.2
EBITDA	EBITDA	$	97.8	$	114.8	EBITDA	$	140.9	$	166.5

3741

FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended and 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 risks and uncertainties include, among others: the Company’s ability to manage economic, business and geopolitical conditions, including rising interest rates, global price inflation and shortages impacting the availability of materials; the duration and severity of unforeseen events such as an epidemic or a pandemic, including their 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, and 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; our ability to successfully integrate and achieve anticipated synergies associated with recently announced and future acquisitions, including the acquisition of MB Aerospace; government-imposed sanctions, 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, energy, 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 security breaches; the ability to hire and retain senior management and qualified personnel; the ability to consummate the pending acquisition of MB Aerospace Group Holdings Limited in a timely manner or at all, including the ability to obtain required regulatory approvals, the ability of the parties to satisfy other conditions to the consummation of such acquisition, and the costs and other conditions relating to the financing of such transaction; 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; the impact of shareholder activism; 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For discussion of the Company’s exposure to market risk, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes to such risk during the ~~six~~nine months ended ~~June~~September 30, 2023.

Item 4. Controls and Procedures

Management, including the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this report. We completed the acquisition of MB Aerospace on August 31, 2023. In accordance with applicable SEC guidance, the scope of our assessment of the effectiveness of disclosure controls and procedures does not include MB Aerospace as it was not practical to do so given the date of acquisition. MB Aerospace's total assets excluded from the scope of our assessment represent approximately 7% of the related consolidated assets as of September 30, 2023. MB Aerospace's total net sales excluded from the scope of our assessment represent approximately 3% and 7% of consolidated total net sales for the three and nine months ended September 30, 2023, respectively. Based upon, and as of the date of, ~~our~~that evaluation, the President and Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective, in all material respects, and designed to provide reasonable assurance that the information required to be disclosed in the reports the Company

files and submits under the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, is (i) recorded, processed, summarized and reported as and when required and (ii) is accumulated and communicated to the ~~Company's~~Company’s management, including our President and Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the Company's ~~second~~third quarter of 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

3943

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are subject to litigation from time to time in the ordinary course of business and various other suits, proceedings and claims are pending against us and our subsidiaries. While it is not possible to determine the ultimate disposition of each of these proceedings and whether they will be resolved consistent with our beliefs, we expect that the outcome of these proceedings, individually or in the aggregate, will not have a material adverse effect on our consolidated financial position, cash flows or results of operations.

Item 1A. Risk Factors

In addition to the Company’s risk factors as disclosed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, our business, financial condition, results of operations and/or cash flows could be materially and adversely affected by any of the following risks:

RISKS RELATED TO THE ~~PENDING~~ ACQUISITION OF MB AEROSPACE

We are subject to risks relating to the ~~pending acquisition of MB Aerospace.~~ On June 5, 2023, we entered into a Stock Purchase Agreement (the “Agreement”) to acquire MB Aerospace. MB Aerospace is a leading provider of precision aero-engine component manufacture and repair services serving major aerospace and defense engine OEMs, tier 1 suppliers, and MRO providers. There are numerous risks and uncertainties associated with the pending acquisition, including:

a.~~The pending~~ acquisition of MB Aerospace may not be completed within the expected time frame, or at all, as the completion of the transaction is subject to various closing conditions including the receipt of required regulatory approvals, the accuracy of the parties’ respective representations and warranties, subject to customary standards of materiality, and the absence of a Company Material Adverse Effect on MB Aerospace;

b.~~Our and MB Aerospace’s existing business relationships with third parties, including customers and service providers, may be disrupted due to uncertainty associated with the pending acquisition;~~

c.~~Failure to complete the acquisition could negatively affect our stock price and our future business and financial results;~~

d.. We ~~and MB Aerospace~~ expect to incur significant costs in connection with the ~~acquisition and the~~ integration, which may exceed those currently anticipated;

e.~~We will incur~~ and we have incurred significant additional indebtedness in connection with the acquisition, which will increase our interest expense and financial ~~leverage; and~~

f.~~MB Aerospace may have difficulty attracting, developing, motivating and retaining executives and other employees in light of the pending acquisition.~~

leverage. Any of the foregoing risks and uncertainties could have a material adverse effect on our business, financial condition, results of operations or cash flows and negatively impact the value of our securities.

Challenges arising from the expanded operations as a result of the ~~pending~~ acquisition of MB Aerospace may affect our future results. ~~Completion of the~~ The acquisition of MB Aerospace ~~will~~ greatly ~~expand~~expanded the size and complexity of our aerospace business. Our future success depends, in part, on the ability to integrate MB Aerospace with our existing aerospace business, and to anticipate and overcome challenges arising from the expansion and integration of our operations, including challenges related to expanded global operations and new manufacturing processes and products or services, and the associated costs and complexity. There can be no assurance that we will be able to anticipate or overcome all of the challenges resulting from our expanding operations or that we will be able to successfully integrate the MB Aerospace business or realize the expected benefits of the acquisitions within the intended timeframe or at all, which may cause our future results to be adversely affected.

Item 2. Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds, and Issuer Purchases of Equity Securities

Period

(a)
Total Number of Shares (or Units) Purchased (b)
Average Price Paid Per Share (or Unit)

(c)
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs

(d)
Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs(2)
April 1-30, 2023 954 $ 39.62 — 3,404,000
May 1-31, 2023 707 $ 41.00 — 3,404,000
June 1-30, 2023 1,398 $ 40.84 — 3,404,000
Total 3,059 (1) $ 40.50 —


Period	(a) Total Number of Shares (or Units) Purchased		(b) Average Price Paid Per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs(2)
July 1-31, 2023	529		$	39.97	—	3,404,000
August 1-30, 2023	11,534		$	38.47	—	3,404,000
September 1-30, 2023	411		$	38.47	—	3,404,000
Total	12,474	(1)	$	38.54	—

(1)All acquisitions of equity securities during the ~~second~~third quarter of 2023 were the result of the operation of the terms of the Company's stockholder-approved equity compensation plans and the terms of the equity rights granted pursuant to those plans to pay for the related income tax upon issuance of shares. The purchase price of a share of stock used for tax withholding is the market price on the date of issuance.

(2)At March 31, 2019, 1.5 million shares of common stock had not been purchased under the publicly announced Repurchase Program (the “Program”). On April 25, 2019, the Board of Directors of the Company increased the number of shares authorized for repurchase under the Program by 3.5 million shares of common stock (5.0 million

authorized, in total). The Program permits open market purchases, purchases under a Rule 10b5-1 trading plan and privately negotiated transactions.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

During the three months ended ~~June~~September 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Item 6. Exhibits

Refer to the Exhibit Index immediately following this page.

4145

EXHIBIT INDEX

Barnes Group Inc.

Quarterly Report on Form 10-Q

For the Quarter ended ~~June~~September 30, 2023

Exhibit No.

Description

Reference

~~2.1~~10.1

~~Stock Purchase~~Credit Agreement, dated as of ~~June 5,~~August 31, 2023, ~~by and~~ among ~~MB Aerospace Group Holdings Limited, MB Aerospace Holdings Inc., and~~Barnes, Barnes Group ~~Inc.~~

~~Incorporated by reference to Exhibit 2.1 to~~Switzerland GmbH, a limited liability company (Gesellschaft mit beschränkter Haftung) organized under the ~~Form 8-K filed by the Company on June 5, 2023.~~

~~10.1~~

~~Second Amendment to Note Purchase Agreement, dated as~~laws of ~~June 5, 2023, between~~Switzerland, Barnes Group ~~Inc.~~Acquisition GmbH, a limited liability company (Gesellschaft mit beschränkter Haftung) incorporated under the laws of Germany, Bank of America, N.A., as Administrative Agent, as Collateral Agent and ~~the noteholders thereto.~~as Swingline Lender, and each Issuing Bank and Lender party thereto from time to time.

Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Company on ~~June 5,~~August 31, 2023.

10.2

Amendment No. 2 to Credit Agreement, dated as of June 5, 2023, by and among Barnes Group Inc., certain subsidiaries thereto, the lenders and other parties signatory thereto and Bank of America, N.A., as administrative agent.

~~Incorporated by reference to Exhibit 10.2 to the Form 8-K filed by the Company on June 5, 2023.~~

~~10.3~~

Amendment No. 3 to Credit Agreement, dated as of June 22, 2023, by and among Barnes Group Inc., certain subsidiaries thereto, the lenders and other parties signatory thereto and Bank of America, N.A., as administrative agent.

~~Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Company on June 26, 2023.~~

~~10.4~~

~~2023~~ Barnes Group Inc. ~~Stock~~Executive Separation Pay plan, as amended and ~~Incentive Award Plan.~~

~~Incorporated by reference to Annex A to the Company’s Definitive Proxy Statement on Schedule 14A filed on March 24, 2023.~~

~~10.5~~

~~Form of Barnes Group Inc. Stock and Incentive Award Plan Stock Option Summary of Grant and Stock Option Agreement for Employees in Grade 21 and up, dated as of May 5, 2023.~~

~~Incorporated by reference to Exhibit 10.1 to the Form S-8 filed by the Company on May 9, 2023.~~

~~10.6~~

Form of Barnes Group Inc. Stock and Incentive Award Plan Performance Share Award Summary of Grant and Performance Share Award Agreement for Officers and Other Individuals as Designated by the Compensation and Management Development Committee, dated as of May 5, 2023.

~~Incorporated by reference to Exhibit 10.2 to the Form S-8 filed by the Company on May 9, 2023.~~

~~10.7~~

~~Form of Barnes Group Inc. Stock and Incentive Award Plan Restricted Stock Unit Summary of Grant and Restricted Stock Unit Agreement for Employees, dated as of May 5, 2023.~~

~~Incorporated by reference to Exhibit 10.3 to the Form S-8 filed by the Company on May 9, 2023.~~

~~10.8~~

~~Form of Barnes Group Inc. Stock and Incentive Award Plan Restricted Stock Unit Summary of Grant and Restricted Stock Unit Agreement for Directors, dated as of May 5, 2023.~~

~~Incorporated by reference to Exhibit 10.4 to the Form S-8 filed by the Company on May 9, 2023.~~

~~10.96~~

~~Amendment #1 to Directors’ Deferred Compensation Plan,~~restated effective ~~May 5, 2023.~~August 1 , 20 23 .

Filed with this ~~report.~~report

10.3

Transition and Retirement Agreement, dated as of September 7, 2023, by and between Barnes Group Inc. and Marian Acker.

Filed with this report

31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed with this report.

31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed with this report.

Certification pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Furnished with this report.

Exhibit 101.INS

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Filed with this report.

Exhibit 101.SCH

XBRL Taxonomy Extension Schema Document.

Filed with this report.

Exhibit 101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

Filed with this report.

Exhibit 101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

Filed with this report.

Exhibit 101.LAB

XBRL Taxonomy Extension Label Linkbase Document.

Filed with this report.

Exhibit 101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.

Filed with this report.

104

Cover Page Interactive Data File (formatted is Inline XBRL and contained in Exhibit 101).

Filed with this report.

4346

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		Barnes Group Inc.
		(Registrant)

Date:	~~July 31,~~November 8, 2023	/s/ JULIE K. STREICH
		Julie K. Streich
		Senior Vice President, Finance
		Chief Financial Officer
		(Principal Financial Officer)

Date:	~~July 31,~~November 8, 2023	/s/ MARIAN ACKER
		Marian Acker
		Vice President, Controller
		(Principal Accounting Officer)

4447