William Pitts - Director of Investor Relations Patrick Dempsey - President and CEO Chris Stephens - SVP of Finance and CFO

Josh Chan - Baird Christopher Glynn - Oppenheimer Bhupender Bohra - Jefferies Myles Walton - Deutsche Bank Edward Marshall - Sidoti & Company Matt Summerville - Alembic Global Advisors Pete Skibitski - Drexel Hamilton

Thank you, Emily. Good morning, everyone and thank you for joining us for our second quarter 2017 earnings call.

With me are Barnes Group's President and CEO, Patrick Dempsey and Senior Vice President of Finance and Chief Financial Officer, Chris Stephens. If you have not received a copy of our earnings press release, you can find it on the Investor Relations section of our corporate website at BGINC.com.

During our call, we will be referring to the earnings release supplement slides, which are also posted on our website. Our discussion today includes certain non-GAAP financial measures, which provide additional information we believe is helpful to investors.

These measures have been reconciled to the related GAAP measures in accordance with SEC regulations. You will find a reconciliation table on our website as part of our press release and in the Form 8-K submitted to the SEC.

Certain statements we make on today's call, both during the opening remarks and during the question-and-answer session, may be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected.

Please consider the risks and uncertainties that are mentioned in today's call and are described in our periodic filings with the Securities and Exchange Commission. These filings are available through the Investor Relations section of our corporate website at BGINC.com.

We will now open today's call in our usual fashion with remarks from Patrick, followed by a review of our second quarter results and an updated 2017 outlook from Chris. After that, we will open up the call for questions.

Patrick?

Thanks, Bill, and good morning, everyone. Barnes Group continued to post strong total and organic sales growth in the second quarter, providing us with excellent top line results for the first half of 2017.

We generated 11% organic sales growth with double-digit organic growth in each segment for the second consecutive quarter. Adjusted operating income grew 16% compared to a year ago with adjusted operating margin coming in at 15.6%.

And for the first time, we ended the quarter with total backlog in excess of $1 billion. During the second quarter, we realized a substantial tax benefit via consolidation of several Swiss legal entities, providing approximately $0.12 of EPS benefit in the quarter.

Chris will provide some color on this later on. Including the tax item, adjusted diluted earnings per share were $0.81 in the quarter, up 29%.

As we continue our transformation, I feel very good about the progress we've made over the last five years. I'm confident in our profitable growth strategy and our team's ability to execute it.

Our current portfolio has been reshaped to capitalize on favorable macro trends, supporting the end markets in which we operate, whether they be industrial, transportation or aerospace. The tangible proof is in the organic revenue growth we are delivering.

In addition, the operating profit and margin trends have shown great progress. Let me now talk about our business segment performance in the quarter, beginning with industrial.

Industrial continues its impressive streak of consecutive quarterly sales growth, now reaching seven quarters as sales increased 23% compared to a year ago. Roughly speaking, organic growth reflects half of the increase, while our recent acquisitions of Gammaflux and FOBOHA account for the remainder.

The end markets served by molding solutions and nitrogen gas products remain strong and industrial end markets for our engineered components business continued to show improvement. At molding solutions, sales increased almost 50% over last year’s second quarter, while organic sales grew 20%.

Automotive model changes driving our Synventive business remained strong, providing for good order intake and sales growth well into double digits. Other molding solutions markets such as medical, personal care and packaging are likewise favorable.

As we spoke to last quarter, our mold business had been relatively slow, but our expectations remain positive. In the second quarter, we customer orders open up and the release of many mold projects that have been awaiting customer approval.

Accordingly, Männer sales and orders climbed well into the double digit. Performance in our molding solutions business overall has been excellent.

The team has done a great job building the business from its inception with the Synventive acquisition in 2012. From that initial entry into plastic injection molding, five other powerful brands have been added.

The strategic importance of this part of our portfolio is significant. One of the more recent acquisitions is our FOBOHA business, which enhances our position as a leading global supplier of complex molding systems.

As we mentioned at the time of acquisition, this is a great IT-based technology driven business. Nonetheless, we fully expected a near-term dampening of operating margins as we work through the integration process and bring the business up to the level of our expectations.

The lumpy nature of mold sales was also evident this quarter as FOBOHA saw an almost 50% sequential improvement in revenues. While this represented a solid quarter in terms of revenues, it came with low margins.

At this point the full benefits of the Barnes Enterprise System and plant synergies have yet to be realized. We have a detailed blueprint to improve profitability here and a significant step forward was initiated during the second quarter.

In order to optimize the performance of this business, we are consolidating some manufacturing operations and administrative functions. Consequently, we are in the process of closing FOBOHA’s Muri, Switzerland location and consolidating those operations within other molding solutions facilities including Männer’s Swiss operations.

Over time, we fully expect better performance from this business as we improve its commercial and operational processes and expand its aftermarket service offerings. To close out our molding solution’s discussion, with sustained end market strength, we now anticipate full-year organic growth in the high-single digit, up from our prior outlook of mid-single digit growth.

Our nitrogen gas products business continues to see solid worldwide tool and die order intake. Second quarter organic sales growth was in the high teens.

NGP started to see good growth beginning around the last - this time last year making for tougher comps in the second half of the year. That said we see generally positive end markets for the rest of the year.

As such, we now anticipate organic growth in low-double digits, up from our prior outlook of mid-single digits. Similar to the first quarter of 2017, our engineered components business delivered positive organic growth and orders, both up low-single digits.

Our end markets reflect mostly consistent trends with those mentioned on our first quarter call. General industrial markets are doing better and the forecast for global automotive production remains modestly positive for 2017.

Though North American automotive production now anticipates a small decline. At our associated spring business, our financial results were below expectations as higher costs on certain programs continue to impact operations.

Upon further detailed assessment and to address a number of these ongoing challenges, we determined that one of the most effective courses of action included the closure and consolidation of one of our smaller manufacturing plants into other existing larger operations. This allows the team to leverage current infrastructure, available capacity and engineering resources as they diligently work the necessary action plans.

Albeit it has taken longer than expected, I am confident that our team will resolve these operational challenges over the next several months. With respect to our outlook, we continue to anticipate engineered components organic sales growth to be in the low-single digits for 2017.

At the segment level, our full-year revenue outlook is in the low teens, in part due to the full-year contribution of acquisitions, while organic sales are now anticipated to be in the high-single digit. Forecasted adjusted operating margin at industrial remains in the mid teens, so admittedly down within that range from our prior view.

At aerospace, total sales were up 10% as compared to a year ago. Ramping engine programs within the OEM business drove high single digits growth, while strength in the aftermarket lifted MRO sales by 18% and spare parts sales by 23% over the prior year quarter.

Operating margin of 17.5% improved 360 basis points over last year's adjusted 13.9%, as the larger OE production volumes benefit our manufacturing operations and higher aftermarket margins flow through to operating profit. The aerospace team delivered solid performance again in the quarter, achieving good productivity improvement in the midst of a substantial OE ramp and strong aftermarket volumes.

For 2017, our aerospace outlook has improved further and we now forecast total sales to be up in the mid-teens with OEM in the mid-teens, MRO up low double digits and spare parts growing in the high teens. Our operating margin outlook is for the high-teens, given the higher level of aftermarket demand.

In closing, we have positioned the business to perform well and to leverage key macro trends and favorable end markets. This is demonstrated by the strong organic growth and operating profit trend achieved to date.

I'm confident in the Barnes team and that our growth strategy will further deliver increased value to our stakeholders. One final item, we look forward to discussing our business strategy, operations and financial objectives in greater details at Barnes Group inaugural Investor Day on September 7 in New York City.

We hope to see you there. Let me now turn the call over to Chris.

Thank you, Patrick and good morning, everyone. Let me begin with highlights of our second quarter results on slide 3 of our supplement and end with our updated 2017 outlook.

Second quarter sales of 364 million were up 19% from the prior year period, driven by strong 11% organic sales growth and 25 million or 8% from our recent acquisitions, FOBOHA and Gammaflux. FX unfavorably impacted sales by roughly 2 million or 1%.

Net income in the quarter was 45 million or $0.82 per diluted share, compared to 33.2 million or $0.61 a year ago. As Patrick mentioned, the second quarter includes a discrete tax benefit of $0.12.

On an adjusted basis, EPS of $0.81 was up 29% from $0.63 last year. Second quarter 2017 adjusted income excludes a $0.03 benefit from restructuring actions, which relates to a pension curtailment gain that more than offsets restructuring charges recorded in the quarter and a $0.02 charge for FOBOHA short-term purchase accounting in our industrial segment.

Last year’s second quarter adjusted income excludes $0.02 of contract termination dispute charges in our aerospace segment. Now, on to segment performance.

Industrial’s second quarter sales were 251.8 million, up 23% from a year ago. Organic sales were very strong, growing 12% as our nitrogen gas products and molding solutions businesses continued to perform well.

Unfavorable FX reduced sales by approximately 2 million, while the recent acquisitions contributed 25 million. Operating profit was 37.4 million, up 7% from the prior year period, driven by the profit impact of increased organic sales, partially offset by lower productivity, given higher costs on certain programs within our engineered components business.

The second quarter of 2017 includes a net benefit of 1.7 million from restructuring actions, primarily pension related as noted and 1.2 million of FOBOHA short-term purchase accounting adjustments. Excluding these items, adjusted operating profit of 36.9 million was up 6% from 34.8 million a year ago.

Adjusted operating margin was 14.7%, down 230 basis points, driven by engineered components and lower margin contribution from FOBOHA. During the second quarter, we undertook a couple of restructuring actions within our industrial business, as highlighted by Patrick.

We authorized the closure of two manufacturing plants, one within molding solutions and the other within engineered components and we are consolidating their operations with other existing facilities. Pretax charges associated with these actions amounted to 5.7 million, offset by a 7.4 million in pension curtailment gain, which netted a $0.03 benefit in the second quarter.

For the third and fourth quarters we anticipate a penny or two of additional charges in each quarter related to these actions and for the full-year, inclusive of the pension curtailment gain, we expect the net charge to be zero and these actions to result in annual savings of $5 million in 2018. At aerospace, second quarter sales, 112.7 million, up 10% from last year as OEM sales increased with higher volumes for new engine programs and aftermarket MRO and spare parts each experienced double-digit year-over-year sales growth.

Operating in the profit - in the quarter was 19.7 million, up 39% from the adjusted 14.2 million in the prior year period, reflecting the profit impact from higher sales volumes and solid productivity improvements, which were partially offset by price deflation and higher employee related costs. Operating margins improved to 17.5%, up 360 basis points from last year's adjusted operating margin of 13.9%.

Aerospace backlog remains strong at 683 million, up 4% year over year and down slightly as compared to the first quarter of 2017. Of the current backlog, we expect to ship just under 50% over the next 12 months.

Other items to note, interest expense increased $700,000 to 3.5 million, partially as a result of a higher effective average interest rate versus a year ago. Our effective tax rate for the second quarter of 2017 was 15.4 million [ph] compared with 27% in the comparable quarter last year and 25.7% for the full-year 2016.

The primary driver of the second quarter’s lower tax rate is the result of merging several legal entities in Switzerland. This allowed the company to eliminate the valuation allowance on previously reserved net operating losses that would have otherwise expired unused.

The impact related to this charge is a discrete benefit of approximately 6.3 million or $0.12 per share in the quarter. With respect to share count, our second quarter average diluted shares outstanding were 54.7 million.

During the second quarter, we did not be purchased any shares, so approximately 4.3 million shares remain available for repurchase under existing board authorization. Year-to-date cash provided by operating activities was 102 million versus 97 million last year.

Including those results are discretionary pension contributions of 5 million in 2017 and 15 million in 2016. Free cash flow which we define as operating cash flow less capital expenditures was 75 million compared to 74 million last year.

With respect to our balance sheet, our debt to EBITDA ratio as defined by our credit agreement was 1.6 times at quarter end similar to the first quarter. Under our existing covenants, additional borrowings of approximately 530 million of senior debt would be allowed, while 460 million remain available on our credit facility at quarter and.

Turning to our updated 2017 outlook on Slide 4 of our supplement. Given the strong first half, we now expect 2017 revenue growth of 14% to 15% with organic growth of 9% to 10%, acquisition growth of about 5% and no meaningful impact from FX.

Operating margin outlook is in the 15.5% to 16% range lower than previous view and our GAAP net income is expected to be in a range of $2.77 to $2.87 per diluted share. Excluding $0.03 in remaining for both short-term purchase accounting adjustments for the year, adjusted 2017 EPS is expected to be $2.80 to $2.90, up 11% to 15% from 2016’s adjusted EPS of $2.53.

And for the second half, we see a balanced 3Q and 4Q with respect to adjusted EPS. A few additional 2017 guidance items, our CapEx expectation remains at 55 million, our effective tax rate is now approximately 24% and average diluted shares outstanding are anticipated to be 54.7 million shares.

Lastly, we now expect cash conversion to be greater than 90% of net income, lower than our previous outlook, primarily due to the non-cash pension curtailment gain and discrete tax benefit as well as for increased working capital needs to support the higher growth in our outlook. In summary, excellent topline growth, continued solid cash generation and a well-positioned balance sheet sets up nicely heading into the back half of 2017.

We'll continue to make the growth investments and pursue accretive acquisitions that support our strategy to drive superior performance over the long term. Operator, we will now open the call for questions.

This is Josh Chan on for Tim. My first question is on the industrial margins, you mentioned FOBOHA and also engineered components.

I was wondering if you could kind of isolate the margin softness there and would you be able to say that NGP and the molding solutions margins were higher year-over-year this quarter, and then also can you kind of talk a little bit more about the specific impact of each of the margin headwinds?

So, as we mentioned in the prepared remarks, your comments are correct in that both areas in industrial that impacted overall margin performance were engineered components and FOBOHA. In the case of FOBOHA, this was something that we didn't -- wasn't unexpected from the time of acquisition and there, the team is working a series of very deliberate actions, of which we announced the consolidation of the Swiss operations in FOBOHA into our other existing operations this quarter.

So we had a large increase in revenues in the quarter from FOBOHA as mentioned again, indicative of the lumpiness of the business, a 50% sequential -- almost 50% sequential improvement quarter-to-quarter, but the lower margins clearly is an area that we're addressing with a very definitive set of plans. On the engineered component side, similarly, we mentioned in the first quarter that we had some challenges and those challenges are around program launches that have now continued into the second quarter and continue to be a priority for the associated spring business.

The impact for engineered components again is approximately about one point of industrial margins in the quarter and that's similar to what we experienced in the first quarter. So for both -- both items have clear definitive plans in terms of addressing both issues of which you, as I mentioned, we took two deliberate very definitive actions in the quarter.

And then very impressive growth on the industrial platform overall, I mean, understandably this moderates against the tougher comps in the second half, but just wondering as you think about kind of a sequential progression within industrial, is there anything unusual about what you expect in terms of the sequential cadence of the industrial markets or do you expect pretty normal seasonality in the back half?

Well, we see Q3 maybe somewhat challenged versus Q2, but nonetheless the end markets as highlighted, whether it's molding solutions or nitrogen gas products, we remain very positive on for the full year. Engineered components continues to see improvement on the industrial side of its business, whilst the automotive is tempering.

Moreover, the challenge there being the margins as we just discussed, but revenue growth wise, we're looking at a continuing strength into the second half.

Hey, just wondering what comments would be on LEAP B and 737 MAX, if you have any updates there?

So LEAP-A and LEAP-C continues to be the prime area of focus, Chris. The LEAP-B is still, we’re working that program in the background, not with nearly the volume of what we are working as a priority on the LEAP-A.

That said, the team has made great progress on the LEAP-A and the understanding as it pertains to the B is that the A & C has to perform well as the launch aircraft on the A320neo and I think all indications for the most part is that’s tracking to expectations from an Airbus standpoint and from a GE standpoint. With the B, we are looking at, we have certain products within the production system as we speak, but we also look at - we’re continually looking at the opportunity to expand upon that, but not ready for it to announce a OEM sales for aircraft at this juncture.

And then on the aftermarket, obviously looking at a tremendous year, I'm wondering how to evaluate the puts and takes versus, you know, there elements of a bubble year here or is it more the fleet demographics run rates maturing in your participation programs kind of hitting a stride.

As we look at our aftermarket, as you know the primary driver are RSP programs and our CRP programs, both of which we entered into as life of program deals which are intended to have a long future in terms of 20 to 25 years product life cycles. What we're seeing with the CFM right now is that the demographic of the fleet of the installed fleet are reaching points where they need to come into the shops for maintenance.

So we're seeing great year-over-year performance, but if you go back to ‘15, ‘16 and even ’14, our conversations were about subdued or deferred maintenance. Now what we’re seeing is that maintenance flowing through.

All the fundamental support at continued level of modest growth on the CFM shop visits and we think you know clearly it's been demonstrated into 2017 on both our repairs and our spare parts.

The first question on industrial margin, it seems like you know if we look at the first half year, pretty strong organic growth, look at the margins I think you know you talked about engineered component being pretty – a little bit weak. But when you take the guidance for the second half, I think you're expecting a little bit better on the molding side of the business.

And you kept your overall margins kind of pretty unchanged from what you had before. Can you give us some color like when you think about your better business or better margin businesses improving in the second half, how should we think about the margin progression?

So you look at molding solutions and nitrogen gas products as being two of the really strong end markets and strong performers in the first half. Our line of sight to the second half sees that continuing.

And both of those businesses are higher margin businesses and clearly we see them continuing to perform at the levels they did in the first half. If I look to our Synventive business as an example, which is driven by automotive model changes, that business in the second quarter hit a number of records, whether it was backlog sales or profitability.

And again just continues to - the team in molding solutions continues to convert every opportunity to translate it into revenues and corresponding margins. With our nitrogen gas products business, it's now operating for a couple of quarters at peak levels.

The team there has done an outstanding job in flexing up their manufacturing capacity to meet that increased demand. And so again we're looking at the second half of the year being consistent to the first half albeit that it will hit tougher comps, because now we're almost moving into five quarters of consecutive growth as it pertains to our NGP business.

So net-net, the softening parts of our outlook on margins continued to be FOBOHA and engineered components, of which I think we have clear actions to address that and to bring them up to expectations, in line with the rest of industrial overall. We announced the closure and consolidation of two businesses, one in molding solutions, one in engineering components.

And as Chris mentioned, we're looking at an outlook of approximately 5 million savings in 2018, pertaining to those two actions.

Okay. Got it.

And lastly, what are the expectations for the tax rate in the second half here?

So for the full year, Bhupender, we’re looking at approximately 24%. So we can take the first half, kind of first half comparison to be in that 26%, 27% range.

We have that discrete tax item as we commented in the second quarter, which is growing -- resulting in a lower tax rate, roughly 15% in Q2. But think of it as 26%, 27% for the second half.

Okay. And that $0.12 is in the $0.81 number here, right?

It is. That's right.

Right. We have the benefit in that $0.81.

Yeah.

Just had a few quick ones for you. First, on the working capital side.

It sounded like that was going to be a source of the pressure in cash conversion in the back half of the year, but I guess your second half implied revenues are actually down versus your first half revenues. So the working capital builds for expected future growth, are we really talking about some sort of expected growth in ’18 or just can you give us some more color on that, Chris?

Yeah. So we just look at, mainly receivables and inventory in the back half.

You’re right that half year of ’17 compared to half year of ’16, just as we look at the working capital needs, again mainly in receivables and inventory is where we're seeing that pressure. So we think greater than 90%, we’ll continue to work that aggressively to try to get that over 100%, but right now, our best view is greater than 90%.

We have actions in place and as you know, we're incentivized on an annualized basis to drive days working capital, but we're going to take all actions necessary to keep that minimal, but right now that’s kind of our best view.

So is it customer actions or is it, I mean, it sounds more like DSOs and then inventory?

Yeah. It’s true.

And it depends on where the mix of sales goes to. So when you think about the mix of longer terms in terms of receivables for certain customers as well as the growth that we're seeing in China, which typically has longer terms, so those are, I will call it, the two primary areas.

And the other one was, you mentioned 5 million benefit into next year as a result of the actions taken in ’17. Is that inclusive or incremental to what you're doing on FOBOHA from their business operating model?

We've expected to be incremental. I mean we bought this business.

There are several costs and sales synergies that we were targeting. We view this one as a near term one that we wanted to be aggressive with in terms of our actions and set this business up for better margins, more consistent margins that we get out of our molding solutions business and overall industrial performance going forward, so that decision was made and we expect that benefit to carry into ‘18.

And I apologize for this one if I missed it, but can you give us the growth rates in the quarter of elements of commercial aero?

Commercial aero on OE side was up high single digits.

And then within aftermarket, the spares?

Aftermarket, sorry aftermarket was up, MRO was up 18%, revenue sharing programs, up 23%.

Yeah. Right.

For blended, 20% for the quarter.

Okay. Those are good numbers.

For blended 20% for the quarter.

So I guess following, I'm piggybacking on the last question about spares seeing that it's up 23% year over year, I would have anticipated unless it’s coming off of a small base and that might be the case. But the margin in the business to be slightly stronger than what it was.

Not that it was weak, but probably doesn't stack up to expectations with that kind of spares number. Any thoughts?

So, if you look at Q1 to Q2, I think it addresses a little bit of your commentary which was that in Q1 we had 19.5% operating margins in aerospace and in Q2 we had 17.5. Clearly tremendous year-over-year improvement of 360 basis points, yet to your commentary the delta between the two was really a mix within the OE side of the business.

So both aftermarket comparables on a sequential basis, it performed equally as well. The delta for aerospace in total was mix issue within the OE side.

The mix then to expand a little on that was we had very strong fabrication type work that flow through in Q1, which came back to a more normal level in Q2, so.

To kind of dig into that mix in the OE side, is that everything to do with some of the ramp up in the newer engine programs that might have flowed through as well that could have pressured the margin?

There is a factor that as we continue to ramp, the team is still coming down the learning curve. To that end, there is continuing challenges there that are going to continue I think throughout the year.

But if you look at our OE business in total, productivity improvements in the quarter, we're very pleasing in terms of the improvements that the team has made quarter to quarter. At the same time, as these volumes increase over the course of the year, there is a learning curve that were continuing to come down and that's going to continue I think throughout the year.

And then stepping back kind of bigger picture aero, I kind of talk about maybe what you're seeing obviously you’re seeing a nice ramp on the narrow with the LEAP, but as we kind of think about the wide body in the aircraft in the content flow through there, have you seen or noticed any difference in the backlog as we kind of trend forward here as we get closer and closer to slowdowns in the 777 et cetera.

Yes we're seeing that - we're seeing I think what all of the, you know, the commentaries around the outlook for the industry is truly flowing into our backlog. So our backlog today is a very different backlog that it was just 24 months ago.

And in particular for us that is translating into a continual decline of the GE-90 which powers the 777 and a corresponding ramp in the LEAP and the XWB, the XWB powering the A350. So as we talked all through 2015 and 2016 about Barnes going - aerospace going through a transitional period.

In that transitional period, our backlog has been turning over in alignment with the new programs.

And when I look at kind of the margin potential for say the legacy GE-30 versus the LEAP-B and E, XWB. Let's not talk about kind of initial product margins, but maybe kind of mature manufacturing margins maybe a year or two years from now.

Do you see them comparable, is there a difference, is there a better pricing element et cetera on the newer business?

I think our expectation are that we're going in you know internally what we have is clear hurdle rates that we've set against these new programs and we’re driving the businesses to achieve those levels of margin. So for our OE business, overall, was there a number of programs that make up the entire business.

As we move forward, we’re looking to expectations within our OE business to have comparable margins on a go forward basis to what we've seen in the past.

Okay. And that's kind of the mid-teen to high-teen kind of focus I’m assuming.

Well, we've not went down below the overall aerospace segment and the segment itself, your commentary is correct that for the segment, we've indicated mid-teens as our goal in the short term and then as we just indicated on the call, we're now looking at high teens as a result of stronger aftermarket in the second half of this year.

On to industrials, when I think about NGP, I always thought it was a global auto business. Can you kind of talk to me about maybe what the content of auto is within NGP versus say other manufacturing.

So, our NGP businesses really serve in the tool and die industry and the tool and die industry is anywhere, where there is metals, sheet metal being stamped if you like. And so there are a number of end markets.

Auto clearly is one of the larger ones, but there's also white goods, there is also, in that there is the transportation industry in total, there's agriculture, anywhere where there's metal being formed to produce an end product. An area that the business has been focused on over the last couple of years and have made great strides in is moving their particular core competencies towards adjacent markets and there, the focus has been on how to use the nitrogen gas technology in suspensions.

And so as you noticed in maybe the last couple of quarters, we've highlighted that there were some nice wins there that the team has achieved moving into that space and -- but it's early days. But that gives you a flavor for what the overall end markets are that they're serving.

But I guess the question is what percent of the business is auto and then I guess what particularly drove it, what was particularly the strongest portion of that business in the quarter?

Primarily, I would say automotive in Asia has been a strong driver as well as, but that said, they've seen strength in automotive across all three regions. The automotive piece of the business is probably 70 plus percent in the current mix and that fluctuates depending on where orders come in on a year-to-year basis, but obviously the strength of automotive at the moment as an industry in total, nitrogen gas products is clearly benefiting from that.

A couple of questions. First in the molding solutions business, do you have figures in terms of what the book to bill was in Q2, most specifically I'm more interested in the book to bill in Synventive if that's available.

Yes. So Matt, what we saw from a book-to-bill within our molding solutions business, there was about call it 110% actually in terms of orders in excess of sales.

And then you said Synventive specifically.

Yes.

Yes. Synventive was basically 1 to 1.

We still continue to see some strength out of our Synventive business, beating the model changes, mostly in North America. North America actually as well as China are having very good years in our Synventive business.

And then with respect to NGP, can you talk about sort of the cadence if you will in that business throughout the quarter, whether you saw sequential strengthening, flattening, weakening and I guess kind of, if there's regional color there that might provide additional insights into that business, if you could comment there as well.

So building on Chris’s comments, we saw very nice trend in Asia in particular with the nitrogen gas products business. But that was also coupled with very nice strength in Europe as well as North America.

So the business right now leans more towards Asia in the context of what the source of its revenue streams are because again what they have - the team there is done a fabulous job in building a distributor network across the globe. And as you, they are the market leader in this space.

So they - in terms of the quarter, I think the strength was relatively consistent throughout and has - that strength as I also mentioned has continued now since the second quarter of 2016, so we've seen a number of nice consecutive quarters of growth within NGP over five quarters now.

And then just to further flush out the margin issue in industrial, you mentioned the engineering component saying was about 100 basis point impact, can you also quantify what the FOBOHA impact was or even whether or not I mean was that business even accretive if you back out the inventory cost.

So to answer your question it was accretive and to put a range on it, it was about a point as well to the industrial margins.

And maybe if we can just flush wash out a little more, what exactly is the issue in engineered components, you mentioned it has to do with ramping a new program and I guess I want to understand why the combining facilities will solve that problem rather than complicate it. And then similarly what specifically are the issues or challenges you're having with FOBOHA and maybe kind of a timeline on resolution there as well?

Thank you.

So addressing Associated Spring first, and if I take a step back and I put it into context of Barnes Group overall, as we've employed the new vision and strategy for the company to drive towards more intellectual property and differentiated solutions to create value for the customer, Matt, what I would say is that Associated Spring has been challenged on that same front that says how do our traditional businesses which maybe don't get as much as the limelight as to some of the exquisite acquisitions that we've made. But at the same time the hurdle rates or the expectations are the same across the portfolio.

That business has stepped up and embraced those challenges with a view to taking on new product lines that are I think a step function different in terms of complexity and in terms of technical challenges. So the issues for the most part I think that you know became evident in the second quarter was that in taking on those challenges, we need to leverage the critical mass of the total business and so in turn the decision was that in the smaller size that I referenced that we closed and consolidated into the larger ones, really we need to leverage our critical mass.

And in doing so the intent being that we will take these from you know not to have them maybe overstrain a smaller size with limited resources, but to leverage the critical mass of the larger ones. And so the decision for us after a lot of assessments, we initially believed that maybe the smaller plant could have taken the challenges in hand, but upon further review we made the decision to close and consolidate.

So the other aspect of - as we take on these newer products, the team has been challenged to push also the process capabilities and the technology side of the equation. And so in turn, we are working through those, what's really driving the cost is that we're protecting the customer in the process and protecting delivery schedules which really means that as we work through these issues we are absorbing additional costs in the form of whether it's engineering resources, whether it's driving over time, expediting freight and so forth.

So again to me, I see it all as goodness as it's an investment in our skillset and the business capabilities for the future. On the FOBOHA side, really what we're looking at is the two primary drivers is commercial excellence and operational excellence.

And as we assess that business right from the time of acquisition, we saw the opportunity to leverage what are some excellent business processes that exist already within Manor and to flow of them into the FOBOHA business. So that process -- business processes wise as well as the opportunity to globalize the business, utilizing the existing footprint that now we've built up worldwide in our molding solutions business, because our goal ultimately will be to expand our aftermarket offerings as it pertains to this business on a global basis, whether it be North America, Europe or Asia and those efforts are continuing.

The team is making great progress in the background in terms of building out that infrastructure as well.

Yeah. I guess I just have one question left.

I just want to understand or make sure I understand conceptually on the guidance change. You get the $0.12 tax benefit.

The guidance went up by $0.12. So it's basically the increased revenue expected for the full year is being offset by some of the margin challenges at industrial and they’re kind of washing out for this year.

Is that conceptually what’s going on?

That's right, Pete. So the $0.12 benefit to the quarter on the tax side and we mentioned is reflected in our full year guidance.

And you think about the overall revenue growth we're seeing and the aftermarket improvement in aerospace and the margin profile, which we’re now guiding towards the high-teens for operating margin for aero is offsetting, neutralized on the industrial side, given the discussion we had on FOBOHA and the engineered components in terms of the programs we’re executing on. And then as we look to the second half of the year I made in my opening comments, we look at Q3 and Q4, no real substantial change in adjusted EPS over those two quarters.

For our full year, on an adjusted basis, guiding to $2.80 to $2.90.

And just one last one, so I’ve made it for Patrick. Hey, Patrick, on the RSP visibility, has it improved or lengthened in terms of your visibility, in terms of orders coming in or is it just a similar, I mean, I think you’ve said maybe you’ve got a couple of quarters worth of visibility typically.

I'm just curious that whether you see a change with traffic growth continuing to be pretty strong?

Well, to your point Pete, the fundamentals remain positive. So traffic growth utilization, within our revenue sharing programs, one thing that we would make reference to is over the last six quarters, we've seen them being much more consistent quarter-to-quarter than we have previously because previously, they were very lumpy.

We have seen a somewhat stabilizing in that. There are a number of factors, the market plus as you know early on in the process, we had an intermediary distributor, which was maybe creating some volatility.

But that has leveled out somewhat. We've seen clearly a marked improvement from ’16 to ’17 of a positive 20% plus improvement in revenue growth.

The -- I mentioned earlier the CFM56, a contributor in those as well is the CF6 engine program, which we see a nice pickup in ’17 versus ’16 as well. And that I think is driven by continued utilization of those wide body aircraft that maybe are not retiring or not sun setting as fast as they might otherwise would have with the current low oil prices.

So we're benefiting from both. Visibility, it’s still a short cycle business.

So when we receive an order, we ship it on the revenue side, within a couple of days and we are definitely planning for the full year. We’re seeing, as we've indicated in our guidance, that strength that we've seen in the first half we believe will continue into the second half.

And just so I’m clear on the distributor issue that you mentioned, are they just not kind of stocking and destocking kind of as radically as they were before, they’re just smoothing out a little bit.

Exactly, I think what they've done is they've taken with time and it took a little bit of time was they've established min, max levels now that they're comfortable with and they have a good - a better feel of what the demand - the real demand is from the market and they're managing their inventory levels accordingly.

Good morning, this is actually Les in for Mike. Just from a high level I guess, on the Aerospace OE side, it's clearly seeing benefits of new engines, but what's the impact if any from legacy headwinds they either abate or perhaps actually get worse in the coming months?

Well, our guidance takes into account any decline that we see on the legacy side. So as we think about our aerospace business on the OE side, we've given guidance of being up mid-teens for the year and that's taken into consideration the legacy declines.

The primary program that we've referenced earlier the GE-90 on the Boeing 777 that has, you know, if you go back six months ago, it was announced that they would move production down to a rate of five per month beginning mid-year and we believe that that has been reflected in our outlook for the rest of the year as well.

And then I guess perhaps on the transition beyond the learning curve on the neo and the MAX engines. How should we think about the mix potential there?

Well, as we move forward, the LEAP program will become a significant contributor to our overall OE business in particular to LEAP-A on the A320neo and that program right now, we are you know basically deploying a lot of resources to meet and exceed the expectations as it pertains to it. The program continues to make tremendous progress from an Airbus standpoint, from a LEAP standpoint in total.

And as we move forward we’ll continue to build our capacity and we're still building our capacity even as we speak in anticipation of the higher volumes as this ramp goes into ’18 and ’19. So again it will become a larger piece of our overall portfolio, but also A350 on the XWB engine is also a key element of our go-forward portfolio as well as the - was the GE-90 will decline, it will not necessarily go away because the same components that we produce the new engines will continue to be - a number of those will continue to be produced or to keep those engines maintained.

And so there is a long tail that goes with these programs albeit a step function down from the prior peaks.

I guess last one for me, pertaining to capital deployment perhaps, M&A and maybe any kind of potential opportunities in aftermarket aero that you are seeing?

So on the aftermarket side of aerospace, it’s an area that we keep very close tabs on. It's not one that in the short term we're thinking about deploying capital.

From a capital deployment standpoint on M&A we continue to be very active in our due diligence of not only existing spaces that we play in, but also adjacent spaces. And as we move forward, if you look at our aerospace aftermarket in particular because you mentioned it, where we've deployed capital is not so much being in new acquisitions, in brick and mortar, but has been more into longer term [indiscernible] program type deals in particular, the CRP and RSP which we just talked about.

Thank you all for joining us this morning. We look forward to speaking with you next as part of our inaugural Investor Day on September 7.

And operator, we will now conclude today's call. Thank you.