UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended ~~September 30, 2012~~March 31, 2013



¨	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

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 and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ¨

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



Large accelerated filer x	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

The registrant had outstanding ~~54,113,235~~53,745,549 shares of common stock as of ~~October~~April 24, ~~2012.~~2013.

Barnes Group Inc.

Index to Form 10-Q

For the Quarterly Period Ended ~~September 30, 2012~~March 31, 2013



		Page
Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Consolidated Statements of Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~	3
	Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~	4
	Consolidated Balance Sheets as of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012	5
	Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~	6
	Notes to Consolidated Financial Statements	7
	Report of Independent Registered Public Accounting Firm	19

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3028

Item 4.	Controls and Procedures	3128

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	32

~~Item 1A.~~	~~Risk Factors~~	3230

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3330

Item 6.	Exhibits	3431

	Signatures	3532
	Exhibit Index	3633

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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.

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(Unaudited)


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
	2012			2011			2012			2011			2013			2012
Net sales	$	306,059		$	298,643		$	902,577		$	886,069		$	263,545		$	222,795

Cost of sales	208,571			198,776			603,440			584,251			177,715			160,421
Selling and administrative expenses	67,817			65,679			202,327			203,140			60,875			37,756
	276,388			264,455			805,767			787,391			238,590			198,177
Operating income	29,671			34,188			96,810			98,678			24,955			24,618

Interest expense	3,243			1,902			8,046			7,906			4,357			2,368
Other expense (income), net	851			(501		)	1,799			228			966			859
Income from continuing operations before income taxes	25,577			32,787			86,965			90,544			19,632			21,391
Income taxes	4,847			7,896			18,463			22,730			4,199			3,801
Income from continuing operations	20,730			24,891			68,502			67,814			15,433			17,590
Loss from discontinued operations, net of income taxes	(2,249		)	(1,646		)	(2,983		)	(3,165		)
(Loss) income from discontinued operations, net of income taxes of $183 and $3,004 respectively (Note 2)													(1,961		)	4,617
Net income	$	18,481		$	23,245		$	65,519		$	64,649		$	13,472		$	22,207

Per common share:
Basic:
Income from continuing operations	$	0.38		$	0.45		$	1.25		$	1.23		$	0.29		$	0.33
Loss from discontinued operations, net of income taxes	(0.04		)	(0.03		)	(0.05		)	(0.06		)
(Loss) income from discontinued operations, net of income taxes													(0.04		)	0.08
Net income	$	0.34		$	0.42		$	1.20		$	1.17		$	0.25		$	0.41
Diluted:
Income from continuing operations	$	0.38		$	0.44		$	1.24		$	1.21		$	0.28		$	0.32
Loss from discontinued operations, net of income taxes	(0.04		)	(0.03		)	(0.05		)	(0.06		)
(Loss) income from discontinued operations, net of income taxes													(0.04		)	0.08
Net income	$	0.34		$	0.41		$	1.19		$	1.15		$	0.24		$	0.40
Dividends	$	0.10		$	0.08		$	0.30		$	0.24		$	0.10		$	0.10

Weighted average common shares outstanding:
Basic	54,508,387			55,834,038			54,618,636			55,325,541			54,739,465			54,805,636
Diluted	55,098,263			56,380,585			55,234,478			56,095,069			55,524,560			55,455,579

See accompanying notes.

BARNES GROUP INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)

Three months ended September 30, Nine months ended September 30,
2012 2011 2012 2011
Net income $ 18,481
$ 23,245
$ 65,519
$ 64,649
Other comprehensive income (loss), net of tax
      Unrealized gain (loss) on hedging activities, net of tax (1) 95
(19 ) (302 ) 31
      Foreign currency translation adjustments, net of tax (2) 24,567
(34,388 ) 14,112
5,405
Defined benefit pension and other postretirement benefits, net
      of tax (3)
394
1,988
4,305
3,318
Total other comprehensive income (loss), net of tax 25,056
(32,419 ) 18,115
8,754
Total comprehensive income (loss) $ 43,537
$ (9,174 ) $ 83,634
$ 73,403



	Three months ended March 31,
	2013			2012
Net income	$	13,472		$	22,207
Other comprehensive (loss) income, net of tax
Unrealized gain on hedging activities, net of tax (1)	427			236
Foreign currency translation adjustments, net of tax (2)	(14,505		)	14,709
Defined benefit pension and other postretirement benefits, net of tax (3)	2,410			1,205
Total other comprehensive (loss) income, net of tax	(11,668		)	16,150
Total comprehensive income	$	1,804		$	38,357

(1) Net of tax of ~~$(106)~~$188 and ~~$(6)~~$84 for the three months ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011, respectively, and $(425) and $107 for the~~ ~~nine months ended September 30, 2012 and 2011~~, respectively.

(2) Net of tax of ~~$1,587~~$(101) and ~~$(1,464)~~$717 for the three months ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011, respectively, and $1,095 and $(24) for the~~ ~~nine months ended September 30, 2012 and 2011~~, respectively.

(3) Net of tax of ~~$687~~$2,838 and ~~$445~~$1,017 for the three months ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011, respectively, and $2,848 and $1,336 for the~~ ~~nine months ended September 30, 2012 and 2011~~, respectively.

See accompanying notes.

BARNES GROUP INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

(Unaudited)


	September 30, 2012			December 31, 2011			March 31, 2013			December 31, 2012
Assets
Current assets
Cash and cash equivalents	$	87,354		$	62,505		$	99,872		$	86,356
Accounts receivable, less allowances (2012 - $2,846; 2011 - $2,898)	257,091			200,460
Accounts receivable, less allowances (2013 - $2,050; 2012 - $2,858)							226,744			253,202
Inventories	230,197			216,520			179,142			226,220
Deferred income taxes	33,400			28,829			12,968			33,906
Assets held for sale							241,311			—
Prepaid expenses and other current assets	27,318			21,680			17,682			18,856
Total current assets	635,360			529,994			777,719			618,540

Deferred income taxes	31,544			47,661			46,955			29,961

Property, plant and equipment	633,901			603,383			581,964			634,464
Less accumulated depreciation	(407,262		)	(392,599		)	(368,124		)	(401,367		)
	226,639			210,784			213,840			233,097

Goodwill	577,503			366,104			439,240			579,905
Other intangible assets, net	389,545			272,092			375,663			383,972
Other assets	18,288			13,730			22,191			23,121
Total assets	$	1,878,879		$	1,440,365		$	1,875,608		$	1,868,596

Liabilities and Stockholders' Equity
Current liabilities
Notes and overdrafts payable	$	8,085		$	12,364		$	12,539		$	3,795
Accounts payable	107,052			92,524			85,227			99,037
Accrued liabilities	99,159			92,250			72,786			96,364
Liabilities held for sale							23,809			—
Long-term debt - current	540			540			53,781			699
Total current liabilities	214,836			197,678			248,142			199,895

Long-term debt	678,050			333,148			604,370			642,119
Accrued retirement benefits	129,989			152,696			158,455			159,103
Deferred income taxes	54,107			20,662			47,809			48,707
Other liabilities	19,568			13,781			18,437			18,654

Commitments and contingencies (Note 13)
Commitments and contingencies (Note 14)
Stockholders' equity
Common stock - par value $0.01 per share Authorized: 150,000,000 shares Issued: at par value (2012 - 59,096,577 shares; 2011 - 58,593,802 shares)	591			586
Common stock - par value $0.01 per share Authorized: 150,000,000 shares Issued: at par value (2013 - 59,489,205 shares; 2012 - 59,202,029 shares)							595			592
Additional paid-in capital	329,170			316,251			348,158			332,588
Treasury stock, at cost (2012 - 4,998,447 shares; 2011 - 4,254,350 shares)	(99,729		)	(79,569		)
Treasury stock, at cost (2013 - 5,497,079 shares; 2012 - 4,999,556 shares)							(113,333		)	(99,756		)
Retained earnings	609,236			560,186			641,395			633,446
Accumulated other non-owner changes to equity	(56,939		)	(75,054		)	(78,420		)	(66,752		)
Total stockholders' equity	782,329			722,400			798,395			800,118
Total liabilities and stockholders' equity	$	1,878,879		$	1,440,365		$	1,875,608		$	1,868,596

See accompanying notes.

BARNES GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


	Nine months ended September 30,						Three Months Ended March 31,
	2012			2011			2013			2012
Operating activities:
Net income	$	65,519		$	64,649		$	13,472		$	22,207
Adjustments to reconcile net income to net cash from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	40,190			43,855			16,499			13,063
Amortization of convertible debt discount	1,641			1,633			582			537
Gain on disposition of property, plant and equipment	(214		)	(400		)	(54		)	(97		)
Stock compensation expense	6,564			5,866			12,657			2,100
Withholding taxes paid on stock issuances	(1,123		)	(1,089		)	(720		)	(683		)
Loss on the sale of businesses	749			—			—			767
Changes in assets and liabilities, net of the effects of acquisitions:
Changes in assets and liabilities:
Accounts receivable	(12,317		)	(27,462		)	(16,347		)	(1,512		)
Inventories	981			(11,385		)	(968		)	1,091
Prepaid expenses and other current assets	(5,683		)	(1,457		)	(235		)	(2,272		)
Accounts payable	2,756			4,867			7,144			(672		)
Accrued liabilities	(4,256		)	14,119			(16,679		)	(29,379		)
Deferred income taxes	1,470			632			485			3,852
Long-term retirement benefits	(17,967		)	(15,448		)	801			(2,708		)
Other	(1,009		)	95			1,020			25
Net cash provided by operating activities	77,301			78,475			17,657			6,319

Investing activities:
Proceeds from disposition of property, plant and equipment	556			3,352			44			135
Payments related to the sale of businesses, net	(339		)	—			—			(363		)
Change in restricted cash	4,900			—
Capital expenditures	(22,923		)	(25,169		)	(10,050		)	(7,281		)
Business acquisitions, net of cash acquired	(296,717		)	(3,495		)
Other	(3,013		)	(3,424		)	(1,420		)	(1,418		)
Net cash used by investing activities	(317,536		)	(28,736		)	(11,426		)	(8,927		)

Financing activities:
Net change in other borrowings	(4,558		)	3,023			8,737			(6,688		)
Payments on long-term debt	(78,065		)	(354,167		)	(6,245		)	(13,135		)
Proceeds from the issuance of long-term debt	376,000			339,290			21,000			49,000
Premium paid on convertible debt redemption	—			(9,803		)
Proceeds from the issuance of common stock	5,630			26,829			2,677			3,324
Common stock repurchases	(19,037		)	(22,369		)	(12,856		)	(11,141		)
Dividends paid	(16,245		)	(13,197		)	(5,443		)	(5,459		)
Excess tax benefit on stock awards	1,659			8,607			506			1,227
Other	(1,184		)	(2,098		)	(53		)	(65		)
Net cash provided (used) by financing activities	264,200			(23,885		)
Net cash provided by financing activities							8,323			17,063

Effect of exchange rate changes on cash flows	884			(461		)	(1,038		)	529
Increase in cash and cash equivalents	24,849			25,393			13,516			14,984
Cash and cash equivalents at beginning of period	62,505			13,450			86,356			62,505
Cash and cash equivalents at end of period	$	87,354		$	38,843		$	99,872		$	77,489

~~Supplemental Disclosure of Cash Flow Information:~~

~~Non-cash investing activities during the first nine months of 2012 include the assumption of~~ ~~$45,537~~ ~~of debt in connection with the acquisition of Synventive Molding Solutions.~~

See accompanying notes.

BARNES GROUP INC.

NOTES TO 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

The accompanying unaudited consolidated balance sheet and the related unaudited consolidated statements of income, comprehensive income 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 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, ~~2011~~2012 has been derived from the ~~2011~~2012 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, ~~2011~~2012. In the opinion of management, all adjustments, including normal recurring accruals considered necessary for a fair presentation, have been included. Operating results for the ~~three- and nine-month periods~~three-month period ended ~~September 30, 2012~~March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2012~~2013. Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

In the first quarter of ~~2012,~~2013, the Company entered into a definitive agreement to sell its Barnes Distribution North America business ("BDNA") to MSC Industrial Direct Co., Inc. ("MSC") for $550,000, subject to certain working capital and post closing adjustments. All previously reported financial information has been adjusted on a retrospective basis to reflect BDNA results as discontinued operations in the consolidated statements of income. The Company classified the business as "held for sale" on the consolidated balance sheets as of March 31, 2013. The Company completed the sale of BDNA on April 22, 2013. See Note 2 and Note 16.

Additionally, in the first quarter of 2013, the Company changed its organizational structure to align its strategic business units into ~~three~~two reportable business segments: Aerospace and Industrial. The Company has transferred the Associated Spring Raymond business ("Raymond"), its remaining business within the former Distribution segment, to the Industrial ~~and Distribution. See Note 12 for a description~~segment. Raymond sells, among other products, springs that are manufactured by one of the ~~three reportable segments.~~

Additionally, in the fourth quarter of 2011, the Company completed the sale of its Barnes Distribution Europe businesses (the "BDE business"). The BDE business was comprised of the Company's European KENT, Toolcom and BD France distribution businesses that were reported within the segment formerly referred to as Logistics and Manufacturing Services.

Industrial businesses. All previously reported financial information has been adjusted on a retrospective basis to reflect the segment ~~realignment and~~realignment. See Note 13.

In the ~~discontinued operations for all periods.~~third quarter of 2012, the Company completed its acquisition of Synventive Molding Solutions. The acquisition has been integrated into the Industrial segment. See Note 3.

2. Discontinued Operations

Barnes Distribution Europe

On December 30, 2011, the Company sold substantially all of the assets of its ~~BDE~~Barnes Distribution Europe ("BDE") business to Berner SE (the "Purchaser") in a cash transaction pursuant to the terms of a Share and Asset Purchase Agreement ("SPA") among the Company, the Purchaser, and their respective relevant ~~subsidiaries dated November 17, 2011.~~subsidiaries. The Company received gross proceeds of $33,358, which ~~represents~~represented the initial stated purchase price, and yielded net cash proceeds of $22,492 after consideration of cash sold, transaction costs paid and closing adjustments. The final amount of proceeds from the sale of the BDE business was subject to post-closing adjustments that were reflected in discontinued operations in periods subsequent to the disposition. The loss ~~on the transaction~~from operations of discontinued businesses for the ~~period~~quarter ended ~~September 30, 2012~~March 31, 2013 includes ~~certain additional transaction costs and post closing adjustments.~~a final settlement to a retained liability related to BDE.

As required by the terms of the SPA, the Company was required to place €9,000 of the proceeds in escrow to be used for any settlement of general representation and warranty claims. Absent a breach of warranty claim, the funds would be released from escrow on August 31, 2012 unless there were any then pending claims. Cash related to a pending claim would remain in escrow until a final determination of the claim had been made.

On August 17, 2012, the Purchaser provided a notice of breach of various warranties to the Company. The Company rejected the Purchaser's notice and demanded release of the full escrow effective August 31, 2012. The Purchaser refused to release the full escrow, and only €3,900 (~~$4,900~~) plus interest was released whereas €5,100 ($~~6,586~~6,537 at ~~September 30, 2012)~~March 31, 2013) plus interest remains in escrow. The Company objected to the retention of the escrow and expects to prevail in this matter. The Company has recorded the restricted cash in ~~prepaid expenses and~~ other ~~current~~ assets at ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011.~~2012.

Barnes Distribution North America

On February 22, 2013, the Company and MSC entered into an Asset Purchase Agreement ("APA") pursuant to which MSC would acquire BDNA. The APA provided that MSC would pay the Company $550,000 as consideration for the acquisition of BDNA, subject to certain working capital and post closing adjustments. In the first quarter of 2013, the Company classified the business as "held for sale". The results of BDNA have been segregated and presented as discontinued operations in the consolidated statements of income. The Company completed the sale of BDNA on April 22, 2013.

The following amounts related to ~~the~~ BDE ~~business~~and BDNA were derived from historical financial information. The amounts have been segregated from continuing operations and reported as discontinued operations within the consolidated financial statements:


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
	2012			2011			2012			2011			2013			2012
Net sales	$	—		$	26,751		$	—		$	86,028		$	75,821		$	80,301
Loss before income taxes	(2,234		)	(191		)	(2,234		)	(742		)
(Loss) income before income taxes													(1,778		)	8,401
Income tax expense	—			(744		)	—			(1,048		)	183			3,017
Loss from operations of discontinued businesses, net of income taxes	(2,234		)	(935		)	(2,234		)	(1,790		)
(Loss) income from operations of discontinued businesses, net of income taxes													(1,961		)	5,384
Loss on transaction	(21		)	(1,145		)	(788		)	(2,215		)	—			(780		)
Income tax benefit on loss on sale	6			434			39			840			—			13
Loss on the sale of businesses	(15		)	(711		)	(749		)	(1,375		)	—			(767		)
Loss from discontinued operations, net of income taxes	$	(2,249	)	$	(1,646	)	$	(2,983	)	$	(3,165	)
(Loss) income from discontinued operations, net of income taxes													$	(1,961	)	$	4,617

The ~~loss from operations~~BDNA assets and liabilities held for sale will be sold or otherwise disposed of ~~discontinued businesses is primarily due to adjustments to retained liabilities.~~and are comprised of the following:



Assets
Accounts receivable, less allowance of $801	$	38,752
Inventories	47,408
Prepaid expenses and other current assets	2,179
Property, plant and equipment, net	17,861
Goodwill	134,715
Other assets	396
Assets held for sale	$	241,311

Liabilities
Accounts payable	$	20,676
Accrued liabilities	2,964
Accrued retirement benefits	66
Other liabilities	103
Liabilities held for sale	$	23,809

3. Acquisition

~~On August 27,~~During 2012, the Company completed the acquisition of Synventive Molding Solutions (“Synventive”) by acquiring all of the issued and outstanding shares of capital stock of Synventive Acquisition Inc., a Delaware corporation. Synventive is a leading designer and manufacturer of highly engineered and customized hot runner systems and components which serve as the enabling technology for many complex injection molding applications and are standard in industries that require premium product aesthetics and performance. This business, which is being integrated into our Industrial segment, enhances the Company's core manufacturing capabilities, adds innovative products and services and is expected to expand the Company's global marketplace presence. The Company acquired Synventive for an aggregate purchase price of ~~$351,620, consisting of~~ ~~$306,083~~ ~~in cash (including cash acquired of~~ ~~$9,366) and the assumption of~~ ~~$45,537~~ ~~of debt. Immediately following the completion of the acquisition, the Company paid~~ ~~$45,156~~ ~~of the assumed debt, primarily using cash on hand. The remaining purchase price was financed primarily with borrowings under the Company's revolving credit facility.~~

~~During the nine months ended September 30, 2012, the Company incurred~~ ~~$2,409~~ of acquisition-related costs. These costs include due diligence costs and transaction costs to complete the acquisition. These costs have been recognized in the Company's Consolidated Statement of Income as selling and administrative expenses.

~~The operating results of Synventive have been included in the Consolidated Statements of Income since the date of acquisition. The Company reported~~ ~~$15,830~~ ~~in net sales and an operating loss of~~ ~~$2,896~~ ~~from Synventive, included within the Industrial segment's operating profit, inclusive of~~ ~~$5,117~~ ~~of short-term purchase accounting adjustments, for the period from the acquisition date through September 30, 2012.~~

~~The following table summarizes the fair values of the assets acquired, net of cash acquired, and liabilities assumed at the date of the acquisition:~~

Accounts Receivable $ 42,724
Inventory 13,546
Other current assets 3,988
Property, plant and equipment 16,481
Other noncurrent assets 2,841
Intangible assets (Note 6) 126,600
Goodwill (Note 6) 203,988
        Total assets acquired 410,168

Current liabilities (22,768 )
Other liabilities (4,361 )
Deferred taxes (40,785 )
Debt assumed (45,537 )
        Total liabilities assumed (113,451 )
        Net assets acquired $ 296,717

~~The final purchase price allocation is subject to post-closing adjustments pursuant to the terms of the Stock Purchase Agreement with Synventive.~~

The following table reflects the unaudited pro forma operating results of the Company for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2012, ~~and 2011,~~ which ~~give~~gives effect to the acquisition of Synventive as if it had occurred on January 1, 2011. 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, 2011, 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 Synventive 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 pro forma information does not include the effects of any synergies or cost reduction initiatives related to the acquisition.


	(Unaudited Pro Forma) Three months ended September 30,				(Unaudited Pro Forma) Nine months ended September 30,
	2012		2011		2012		2011		(Unaudited Pro Forma) Three months ended March 31, 2012
Net sales	328,880		337,796		1,004,098		994,098		$	262,120
Income from continuing operations	24,164		25,522		75,171		55,734		18,897
Net income	21,915		23,876		72,188		52,569		23,514

Per common share:
Basic:
Income from continuing operations	$	0.44	$	0.46	$	1.38	$	1.01	$	0.35
Net income	$	0.40	$	0.43	$	1.32	$	0.95	$	0.43
Diluted:
Income from continuing operations	$	0.44	$	0.45	$	1.36	$	0.99	$	0.34
Net income	$	0.40	$	0.42	$	1.31	$	0.94	$	0.42

Pro forma earnings during the three and nine month periods ended September 30, 2012 were adjusted to exclude non-recurring items including acquisition-related costs and expense related to the fair value adjustment to inventory and acquired backlog. Pro forma earnings in 2011 were adjusted to include acquisition-related costs of ~~$11,808~~ (~~$2,409~~ ~~incurred by the Company and~~ ~~$9,399~~ ~~incurred by Synventive at closing) and expense of~~ ~~$3,682~~ ~~and~~ ~~$1,200~~ related to the fair value adjustments to inventory and acquired backlog, respectively. In addition, 2011 earnings were adjusted to exclude a gain on debt restructuring and a foreign exchange gain related to debt at Synventive.

4. Net Income Per Common Share

For the purpose of computing diluted income from continuing operations and 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 and convertible senior subordinated notes. For the purpose of computing diluted income from continuing operations and net income per common share, the weighted-average number of common shares was increased by ~~589,876~~785,095 and ~~546,547~~649,943 for the three-month periods ended ~~September 30, 2012~~March 31, 2013 and ~~2011, respectively, and~~ ~~615,842~~ ~~and~~ ~~769,528~~ ~~for the~~ ~~nine month periods~~ ~~ended~~ ~~September 30,~~ 2012 ~~and~~ ~~2011~~, respectively, to account for the potential dilutive effect of stock-based incentive plans. There were no adjustments to income from continuing operations or net income for the purposes of computing income available to common stockholders for those periods.

The calculation of weighted-average diluted shares outstanding excludes all shares that would have been anti-dilutive. During the three month periods ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012, the Company excluded ~~367,428~~366,349 and ~~686,016~~ ~~stock options, respectively, from the calculation of weighted average diluted shares outstanding as the stock options would have been anti-dilutive. During the~~ ~~nine month periods~~ ~~ended~~ ~~September 30, 2012~~ ~~and~~ ~~2011, the Company excluded~~ ~~331,618~~ ~~and~~ ~~844,552~~307,113 stock options, respectively, from the calculation of weighted average diluted shares outstanding as the stock options would have been anti-dilutive.

The Company granted ~~101,000~~130,600 stock options, ~~161,204~~161,295 restricted stock unit awards and ~~103,160~~135,055 performance share awards in February ~~2012~~2013 as part of its annual grant ~~award.~~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 average common shares outstanding as they contain nonforfeitable rights to dividend payments. The performance share awards are part of a long-term Relative Measure program, which is designed to assess the Company's performance relative to the performance of companies included in the Russell 2000 Index over the three-year term of the program ending December 31, ~~2014.~~2015. The performance goals are independent of each other and based on three metrics: the Company's total shareholder return ("TSR"), basic earnings per share growth and operating income before depreciation and amortization growth (weighted equally). 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 portion of the performance share awards was determined using a Monte Carlo valuation method as the award contains a market condition.

In the first quarter of 2013, the Board of Directors of the Company approved a Transition and Resignation Agreement (the "Agreement") for its former Chief Executive Officer (“Former CEO”) in connection with his resignation of the CEO role and his assumption of a Vice Chairman role. The Agreement provides that, in exchange for the Former CEO's delivery of an effective release of claims, his adherence to certain restrictive covenants, and the successful provision of transition services, including with regard to certain equity grants, the successful sale of the Barnes Distribution North America business, the Former CEO's outstanding equity awards are modified to increase the post-termination exercise period for stock options until the earlier of ten years from the date of grant or five years from the retirement date and made non-forfeitable all outstanding stock options, restricted stock units awards and performance share awards that remained unvested on the day of his agreed to

resignation date from the company. The original vesting dates of the equity awards serve as the delivery dates and the performance metrics continue to apply to the performance share awards. The Company recorded $10,492 of stock compensation expense in the first quarter of 2013 as a result of the modifications.

The 3.375% convertible senior subordinated notes due in March 2027 (the “~~3.375%~~ ~~Convertible Notes”~~“Notes”) are convertible, under certain circumstances, into a combination of cash and common stock of the Company. The conversion price as of

~~September 30, 2012~~March 31, 2013 was approximately $28.31 per share of common stock. The dilutive effect of the ~~notes~~Notes is determined based on the average closing price of the Company's stock for the last 30 trading days of the quarter as compared to the conversion price of the ~~notes.~~Notes. Under the net share settlement method, there were no potential shares issuable under the ~~notes~~Notes as the ~~notes~~Notes would have been anti-dilutive for the ~~three and nine month~~three-month periods ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~.

~~Effective April 5, 2011, the Company, through the trustee of its~~ ~~3.75%~~ ~~convertible senior subordinated notes due in~~ ~~August 2025~~ ~~(the "3.75%~~ ~~Convertible Notes"), exercised its right to redeem the remaining $92,500~~ principal amount of these notes under their indenture agreement. The Company elected to pay cash to holders of the notes surrendered for conversion, including the value of any residual shares of common stock that were payable to the holders electing to convert their notes into an equivalent share value. Accordingly, the potential shares issuable for the ~~3.75%~~ ~~Convertible Notes were not included in either basic or diluted weighted average common shares outstanding for the nine month period ended~~ ~~September 30, 2011~~2012.

5. Inventories

The components of inventories consisted of:


	September 30, 2012		December 31, 2011		March 31, 2013		December 31, 2012
Finished goods	$	124,384	$	121,984	$	73,974	$	126,139
Work-in-process	60,797		60,557		61,495		56,186
Raw material and supplies	45,016		33,979		43,673		43,895
	$	230,197	$	216,520	$	179,142	$	226,220

As of March 31, 2013, BDNA held inventories of $47,408 which is included in assets held for sale in the accompanying consolidated balance sheet as of March 31, 2013. See Note 2.

6. 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 ~~September 30, 2012~~March 31, 2013:

Aerospace Industrial Distribution Total Company
January 1, 2012 $ 30,786
$ 192,544
$ 142,774
$ 366,104
Goodwill acquired —
203,988
—
203,988
Foreign currency translation —
7,034
377
7,411
September 30, 2012 $ 30,786
$ 403,566
$ 143,151
$ 577,503



	Aerospace		Industrial			Other			Total Company
January 1, 2013	$	30,786	$	414,244		$	134,875		$	579,905
Transfer to assets held for sale	—		—			(134,715		)	(134,715		)
Foreign currency translation	—		(5,790		)	(160		)	(5,950		)
March 31, 2013	$	30,786	$	408,454		$	—		$	439,240

In the first quarter of 2013, the Company realigned its reportable business segments by transferring the Associated Spring Raymond business ("Raymond"), its remaining business within the former Distribution segment, to the Industrial segment. The ~~changes recorded at Industrial include~~goodwill related to BDNA ("BDNA goodwill"), also a business within the former Distribution segment, was $~~203,988~~134,875 at December 31, 2012. At March 31, 2013, the BDNA goodwill was included within assets held for sale on the consolidated balance sheet. See Note 2. The BDNA and Raymond businesses represent individual reporting units as of goodwill resulting from the acquisition of Synventive. The amount allocated to Goodwill is reflective of the benefits the Company expects to realize from the entrance into a new business platform, increased global market accessDecember 31, 2012 and ~~Synventive's assembled workforce. None of the recognized goodwill is expected to be deductible for income tax purposes.~~March 31, 2013.

Other Intangible Assets:

Other intangible assets consisted of:


		September 30, 2012					December 31, 2011						March 31, 2013					December 31, 2012
	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:
Revenue sharing programs (RSPs)	Up to 30	$	293,700	$	(52,072	)	$	293,700	$	(46,367	)	Up to 30	$	293,700	$	(57,313	)	$	293,700	$	(54,638	)
Customer lists/relationships	10-15	102,806		(19,635		)	23,506		(17,292		)	10-15	91,306		(12,088		)	102,806		(21,727		)
Patents and technology	7-14	41,972		(6,283		)	6,572		(5,211		)	7-14	41,972		(9,261		)	41,972		(7,758		)
Trademarks/trade names	5-30	12,750		(7,317		)	12,050		(6,618		)	5-30	11,950		(6,930		)	12,750		(7,497		)
Other	Up to 15	12,692		(5,866		)	11,492		(4,454		)	Up to 15	12,692		(7,202		)	12,692		(6,927		)
		463,920		(91,173		)	347,320		(79,942		)		451,620		(92,794		)	463,920		(98,547		)
Unamortized intangible asset:
Trade name		10,000		—			—		—				10,000					10,000

Foreign currency translation		6,798		—			4,714		—				6,837		—			8,599		—
Other intangible assets		$	480,718	$	(91,173	)	$	352,034	$	(79,942	)		$	468,457	$	(92,794	)	$	482,519	$	(98,547	)

~~In connection with the acquisition of Synventive in August 2012, the Company recorded intangible assets~~Gross amounts of $~~126,600~~11,500 ~~which includes~~ ~~$79,300~~ ~~of customer relationships,~~ ~~$35,400~~ ~~of patents and technology,~~ ~~$10,700~~ ~~of trade names ($10,000~~ ~~of which relates to the Synventive trade name and has an indefinite life)~~ and $~~1,200~~800 that were included within customer lists and trademarks, respectively, at December 31, 2012, were related to BDNA, and are therefore classified within assets held for sale as of ~~customer backlog.~~March 31, 2013. The ~~weighted-average useful lives of the acquired assets~~gross amounts were 15 ~~years,~~ 7 ~~years,~~ 10 ~~years and less than~~ ~~one~~ ~~year, respectively.~~fully amortized at March 31, 2013.

Estimated amortization of intangible assets for future periods is as follows: ~~2012 -~~ ~~$20,000~~ ; 2013 - $~~27,000~~24,000; 2014 - $~~31,000~~24,000; 2015 - $~~31,000~~24,000 ~~and~~; 2016 - $~~30,000~~23,000 and 2017 - $24,000.

7. Debt

The Company's debt agreements contain financial covenants that require the maintenance of interest coverage and leverage ratios. The Company is in compliance with its debt covenants as of ~~September 30, 2012~~March 31, 2013, and closely monitors its future compliance based on current and anticipated future economic conditions.

Long-term debt and notes and overdrafts payable at ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012 consisted of:


	September 30, 2012					December 31, 2011					March 31, 2013					December 31, 2012
	Carrying Amount			Fair Value		Carrying Amount			Fair Value		Carrying Amount			Fair Value		Carrying Amount			Fair Value
3.375% Convertible Notes	$	55,636		$	60,239	$	55,636		$	59,038	$	55,636		$	61,240	$	55,636		$	57,977
Unamortized debt discount – 3.375% Convertible Notes	(3,692		)	—		(5,333		)	—		(2,540		)	—		(3,122		)	—
Revolving credit agreement	625,400			626,534		281,900			270,288		604,100			614,965		589,200			599,172
Borrowings under lines of credit and overdrafts	7,675			7,675		12,364			12,364		12,095			12,095		3,380			3,380
Foreign bank borrowings	1,080			1,080		1,485			1,642		810			812		945			947
Other	576			576		—			—		589			587		574			574
	686,675			696,104		346,052			343,332		670,690			689,699		646,613			662,050
Less current maturities	(8,625		)			(12,904		)			(66,320		)			(4,494		)
Long-term debt	$	678,050				$	333,148				$	604,370				$	642,119

The 3.375% Convertible Notes are subject to redemption at their par value at any time, at the option of the Company, on or after March 20, 2014. The note holders may also require the Company to redeem some or all of the notes at their par value on March 15^th of 2014, 2017 and 2022. As such, the balance of these Notes of $53,096 ($55,636 par value) and the related deferred tax balances are classified as current in the accompanying balance sheet as of March 31, 2013. The 3.375% Convertible Notes are also eligible for conversion upon meeting certain conditions as provided in the indenture agreement. The eligibility for conversion is determined quarterly. During the ~~third~~first quarter of ~~2012~~2013, the 3.375% Convertible Notes were not

eligible for conversion. During the ~~fourth~~second quarter of ~~2012~~2013, the 3.375% Convertible Notes will not be eligible for conversion. The ~~notes are valued~~fair value of the Notes was determined using quoted market prices that represent Level 2 observable inputs.

The Company maintains an amended and restated revolving credit agreement (the "Credit Agreement") with Bank of America, N.A. as the administrative agent. ~~In July 2012, the Company executed a~~ ~~$250,000~~ ~~accordion feature that was available under the Company's existing~~ ~~$500,000~~ ~~Credit Facility, increasing the available amount under the Credit Facility to~~ ~~$750,000~~. The $750,000 Credit Agreement matures in September 2016. Borrowings under the Credit Agreement bear interest at LIBOR plus a spread ranging from 1.10% to 1.70%. The fair value of the borrowings is based on observable Level 2 ~~inputs. The borrowings are valued~~inputs using discounted cash flows based upon the Company's estimated interest costs for similar types of borrowings.

In addition, the Company has available approximately $15,000 in uncommitted short-term bank credit lines ("Credit Lines"), of which $~~7,500~~11,200 was borrowed at ~~September 30, 2012~~March 31, 2013 at an interest rate of 2.16% and $~~12,000~~2,800 was borrowed at December 31, ~~2011~~2012 at an interest rate of ~~2.17%~~2.16%. The Company had also borrowed $~~175~~895 and $~~364~~580 under overdraft facilities at ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012, respectively. Repayments under the Credit Lines are due within ~~seven~~7 days after being borrowed. Repayments of the overdrafts are generally due within ~~two~~2 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.

The Company also has foreign bank borrowings. The fair value of the foreign bank borrowings are based on observable Level 2 inputs. These instruments are valued using discounted cash flows based upon the Company's estimated interest costs for similar types of borrowings.

Other debt consists primarily of bank acceptances which are used to pay certain vendors. Bank acceptances represent financial instruments accepted by certain Chinese vendors in lieu of cash paid on receivables, generally range from 3 to 6 months in maturity and are guaranteed by banks. The fair value of the bank acceptances are based on observable Level 2 inputs and their carrying amounts approximate fair value due to their short maturities.

8. Derivatives

The Company has manufacturing, sales and distribution 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.

Financial instruments have been used by the Company to hedge its exposure to fluctuations in interest rates. ~~The Company previously had~~ ~~two~~, ~~three-year interest rate swap agreements which together 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~~ ~~2.947%~~ ~~plus the borrowing spread. These agreements matured in the first quarter of 2011.~~ In April 2012, the Company entered into five-year interest rate swap agreements transacted with three banks which together convert 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 1.03% plus the borrowing spread. These interest rate swap agreements were accounted for as cash flow hedges.

The Company also uses 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 British pound sterling, U.S. dollar, Euro, Singapore dollar, Swedish ~~krona~~kroner 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.

Changes in the fair market value of derivatives that qualify as fair value hedges or cash flow hedges are recorded directly to earnings or accumulated other non-owner changes to equity, depending on the designation. Amounts recorded to accumulated other non-owner changes to equity are reclassified to earnings in a manner that matches the earnings impact of the hedged transaction. Any ineffective portion, or amounts related to contracts that are not designated as hedges, are recorded directly to earnings.

The following table sets forth the fair value amounts of derivative instruments held by the Company.

1312


	September 30, 2012					December 31, 2011					March 31, 2013					December 31, 2012
	Asset Derivatives		Liability Derivatives			Asset Derivatives		Liability Derivatives			Asset Derivatives		Liability Derivatives			Asset Derivatives		Liability Derivatives
Derivatives designated as hedging instruments:
Interest rate contracts	$	—	$	(2,014	)	$	—	$	—		$	—	$	(1,551	)	$	—	$	(1,818	)
Foreign exchange contracts	1,563		—			276		—			1,293		—			945		—

Derivatives not designated as hedging instruments:
Foreign exchange contracts	2,115		(53		)	28		(976		)	35		(1,609		)	2,370		(152		)
Total derivatives	$	3,678	$	(2,067	)	$	304	$	(976	)	$	1,328	$	(3,160	)	$	3,315	$	(1,970	)

Asset derivatives are recorded in prepaid expenses and other current assets in the accompanying consolidated balance sheets. Liability derivatives related to interest rate contracts and foreign exchange contracts are recorded in other liabilities and accrued liabilities, respectively, in the accompanying consolidated balance sheets.

The following table sets forth the gain, ~~(loss),~~ net of tax, recorded in accumulated other non-owner changes to equity for the ~~three- and nine-month~~three-month periods ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012 for derivatives held by the Company and designated as hedging instruments.


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
	2012			2011			2012			2011			2013		2012
Cash flow hedges:
Interest rate contracts	$	(551	)	$	—		$	(1,250	)	422			$	156	$	—
Foreign exchange contracts	646			(19		)	948			(391		)	271		236
	$	95		$	(19	)	$	(302	)	$	31		$	427	$	236

Amounts included within accumulated other non-owner changes to equity that were reclassified to expense during the first ~~nine~~three months of ~~2012~~2013 related to the interest rate swaps resulted in a fixed rate of interest of 1.03% plus the borrowing spread for the first $~~100,000~~ of one-month LIBOR borrowings. Amounts included within accumulated other non-owner changes to equity that were reclassified to income during the first nine months of 2011 related to the interest rate swaps resulted in a fixed rate of interest of ~~2.947%~~ ~~plus the borrowing spread for the first $~~100,000 of one-month LIBOR borrowings. The amounts reclassified for the foreign exchange contracts were not material in any period presented. Additionally, there were no amounts recognized in income for hedge ineffectiveness during the ~~three-~~three months ended March 31, 2013 and ~~nine-month periods ended September 30,~~ 2012 ~~and 2011~~.

The following table sets forth the (losses) gains ~~(losses)~~ recorded in other expense (income), net in the consolidated statements of income for the ~~three- and nine-month~~three month periods ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012 for non-designated derivatives held by the Company. Such amounts were substantially offset by gains (losses) ~~gains~~ recorded on the underlying hedged asset or liability.

Three months ended September 30, Nine months ended September 30,
2012 2011 2012 2011
Foreign exchange contracts $ 2,380
$ (3,144 ) $ 3,305
$ (4,055 )



	Three months ended March 31,
	2013			2012
Foreign exchange contracts	$	(3,906	)	$	1,057

9. 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 financial assets and financial liabilities reported at fair value and measured on a recurring basis:


				Fair Value Measurements Using										Fair Value Measurements Using
Description	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
September 30, 2012
March 31, 2013
Asset derivatives	$	3,678		$	—	$	3,678		$	—	$	1,328		$	—	$	1,328		$	—
Liability derivatives	(2,067		)	—		(2,067		)	—		(3,160		)	—		(3,160		)	—
Bank acceptances	3,343			—		3,343			—		3,151			—		3,151			—
Rabbi trust assets	1,816			1,816		—			—		1,896			1,896		—			—
	$	6,770		$	1,816	$	4,954		$	—	$	3,215		$	1,896	$	1,319		$	—

December 31, 2011
December 31, 2012
Asset derivatives	$	304		$	—	$	304		$	—	$	3,315		$	—	$	3,315		$	—
Liability derivatives	(976		)	—		(976		)	—		(1,970		)	—		(1,970		)	—
Bank acceptances											3,441			—		3,441			—
Rabbi trust assets	1,494			1,494		—			—		1,831			1,831		—			—
	$	822		$	1,494	$	(672	)	$	—	$	6,617		$	1,831	$	4,786		$	—

The derivative contracts are valued using observable current market information as of the reporting date such as the prevailing LIBOR-based and U.S. treasury interest rates and foreign currency spot and forward rates. Bank acceptances represent financial instruments accepted from certain Chinese customers in lieu of cash paid on receivables, generally range from 3 to 6 months in maturity 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.

10. Pension and Other Postretirement Benefits

Pension and other postretirement benefits expenses consisted of the following:


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
Pensions	2012			2011			2012			2011			2013			2012
Service cost	$	1,704		$	1,477		$	4,962		$	4,421		$	1,984		$	1,613
Interest cost	5,419			5,626			16,156			16,866			4,987			5,322
Expected return on plan assets	(8,216		)	(8,030		)	(24,506		)	(24,060		)	(8,276		)	(8,033		)
Amortization of prior service cost	209			280			629			842			203			211
Recognized losses	3,170			1,436			9,029			4,311			4,075			2,759
Settlement loss	91			—			91			—
Curtailment loss													199			—
Net periodic benefit cost	$	2,377		$	789		$	6,361		$	2,380		$	3,172		$	1,872

	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
Other Postretirement Benefits	2012			2011			2012			2011			2013			2012
Service cost	$	69		$	70		$	205		$	213		$	77		$	77
Interest cost	643			712			1,902			2,136			543			680
Amortization of prior service credit	(396		)	(385		)	(1,189		)	(1,156		)	(395		)	(396		)
Recognized losses	269			202			811			606			290			286
Net periodic benefit cost	$	585		$	599		$	1,729		$	1,799		$	515		$	647

1514

The curtailment loss during the first quarter of 2013 relates to the defined benefit pension plans that were impacted by the planned sale of BDNA. The Company also expects that its defined benefit pension and other post retirement benefit plans may be impacted by curtailments and settlements related to the sale of BDNA during the second quarter of 2013. See Note 2.

The Company contributes to a multi-employer defined benefit pension plan under the terms of a collective bargaining agreement. This multi-employer plan provides pension benefits to certain union-represented employees at BDNA. The Company has determined that a withdrawal from this multi-employer plan, following its entry into a definitive agreement to sell BDNA, is probable. The Company has estimated that its assessment of a withdrawal liability, on a pre-tax discounted basis, is $2,788. The expense has been recorded within discontinued operations.

11. Income Taxes

The Company's effective tax rate from continuing operations for the first ~~nine months~~quarter of 2013 was 21.4% compared with 17.8% in the first quarter of 2012 ~~was~~and ~~21.2%~~13.5%~~. In 2011,~~ for the ~~Company's~~full year 2012. The increase in the first quarter 2013 effective tax rate from ~~continuing operations was~~the full year 2012 rate of ~~25.1%~~13.5% is due to the absence of the 2012 reversal of certain foreign valuation allowances and tax rate decreases in certain foreign jurisdictions, the increase in the ~~first nine months of the year and~~ ~~21.7%~~ ~~for the full year. The~~Company's Swedish effective tax rate ~~for the first nine months of 2011 included the recognition of~~ ~~$1,793~~ ~~of discrete tax expense related to tax adjustments for earlier years. The decrease in the 2012 effective tax rate from continuing operations was driven primarily by the absence of this discrete item~~ and the ~~impact of a decrease in the planned repatriation of a portion of current year foreign earnings to the U.S., partially offset by a~~ projected change in the mix of earnings attributable to higher-taxing jurisdictions or jurisdictions where losses cannot be benefited in ~~2012.~~2013.

The Company was previously awarded a number of multi-year Pioneer tax status certificates (the "certificates") by the Ministry of Trade and Industry in Singapore for the production of certain engine components by the Aerospace aftermarket business, the earliest of which was granted in August 2005 retroactive to October 2003. The certificates are subject to the Company meeting certain capital expenditure and workforce commitments. The first certificate expired in September of 2012, the next certificate is scheduled to expire in the first quarter of 2013 and the remainingSingapore. No certificates are scheduled to expire in 2013.

12. Changes in Accumulated Other Comprehensive Income by Component

The following table sets forth the ~~subsequent~~changes in accumulated other comprehensive income by component for the period ended ~~two years~~March 31, 2013~~, unless extensions~~:



	Gains and Losses on Cash Flow Hedges			Pension and Other Postretirement Benefit Items			Foreign Currency Items			Total
January 1, 2013	$	(432	)	$	(146,441	)	$	80,121		$	(66,752	)
Other comprehensive income before reclassifications to consolidated statements of income	525			(388		)	(14,505		)	(14,368		)
Amounts reclassified from accumulated other comprehensive income to the consolidated statements of income	(98		)	2,798			—			2,700
Net current-period other comprehensive income	427			2,410			(14,505		)	(11,668		)
March 31, 2013	$	(5	)	$	(144,031	)	$	65,616		$	(78,420	)

The following table sets forth the reclassifications out of accumulated other comprehensive income by component for the period ended March 31, 2013:



Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statements of Income
Gains and losses on cash flow hedges
Interest rate contracts	$	(199	)	Interest expense
Foreign exchange contracts	284			Net sales
	85			Total before tax
	13			Tax benefit
	$	98		Net of tax

Pension and other postretirement benefit items
Amortization of prior-service credits	$	192		(A)
Amortization of actuarial losses	(4,365		)	(A)
Curtailment	(199		)	(A)
	(4,372		)	Total before tax
	1,574			Tax benefit
	(2,798		)	Net of tax
Total reclassifications in the period	$	(2,700	)

(A) These accumulated other comprehensive income components are ~~granted.~~included within the computation of net periodic pension cost. See Note 10.

~~12.~~13. Information on Business Segments

~~In the first quarter of 2012, the Company changed its organizational structure to align its strategic business units into three reportable segments: Aerospace, Industrial and Distribution.~~ The Company is organized based upon the nature of its products and services. 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 reportable segments.

In the first quarter of 2013, the Company changed its organizational structure to align its strategic business units into two reportable segments: Aerospace and Industrial. The Company has transferred the Associated Spring Raymond business ("Raymond"), its remaining business within the former Distribution segment, to the Industrial segment. Raymond sells, among other products, springs that are manufactured by one of the Industrial businesses. All previously reported financial information has been adjusted on a retrospective basis to reflect the segment realignment.

The Aerospace segment produces precision-machined and fabricated components and assemblies for original equipment ~~manufacturer~~manufacturers (“OEM”) ~~turbine engine, airframe~~of commercial jet engines, airframes and industrial gas ~~turbine builders~~turbines throughout the world, and for the military. Aerospace also provides jet engine component overhaul and repair services for many of the world's major ~~turbine~~jet engine manufacturers, commercial airlines and the military. In addition, Aerospace manufactures and provides aerospace aftermarket spare ~~parts and provides repair services for aerospace engine components.~~parts. The Industrial segment is a global supplier of high quality manufactured precision components for critical applications, and a leading designer and manufacturer of highly engineered and customized hot runner systems and components, serving diverse industrial ~~end markets~~end-markets such as transportation, energy, electronics, medical devices and consumer products.The ~~Distribution~~Industrial segment ~~is an industry leader~~also participates in ~~logistics support through vendor managed inventory and technical sales for maintenance, repair, operating and production supplies, as well as~~ the design, assembly and distribution of engineered supplies for the global industrial base.

The following tables, adjusted on a retrospective basis to reflect the segment alignment, set forth information about the Company's operations by its ~~three~~two reportable segments:


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
	2012			2011			2012			2011			2013			2012
Net sales
Aerospace	$	98,370		$	98,125		$	289,391		$	283,415		$	98,045		$	97,250
Industrial	123,812			112,476			349,404			337,910			165,502			125,545
Distribution	85,719			90,260			270,999			271,903
Intersegment sales	(1,842		)	(2,218		)	(7,217		)	(7,159		)	(2		)	—
Total net sales	$	306,059		$	298,643		$	902,577		$	886,069		$	263,545		$	222,795

Operating profit
Aerospace	$	15,345		$	16,071		$	44,269		$	44,548		$	10,346		$	12,654
Industrial	7,406			10,340			28,728			32,275			14,609			11,964
Distribution	6,920			7,777			23,813			21,855
Total operating profit	29,671			34,188			96,810			98,678			24,955			24,618
Interest expense	3,243			1,902			8,046			7,906			4,357			2,368
Other expense (income), net	851			(501		)	1,799			228			966			859
Income from continuing operations before income taxes	$25,577			$32,787			$86,965			$90,544			$	19,632		$	21,391


	September 30, 2012		December 31, 2011		March 31, 2013		December 31, 2012
Assets
Aerospace	$	534,807	$	544,943	$	531,920	$	533,465
Industrial^(A)	879,284		453,279		907,505		907,124
Distribution	284,125		278,139
Other ^(B)	180,663		164,004
Other ^(A)					436,183		428,007
Total assets	$	1,878,879	$	1,440,365	$	1,875,608	$	1,868,596

(A) ~~The increase in assets within the Industrial segment primarily reflects the acquisition of Synventive.~~

~~(B)~~ "Other" assets include corporate-controlled assets, the majority of which are cash and deferred tax ~~assets.~~assets, as well as the assets of BDNA which are classified as held for sale in the accompanying consolidated balance sheet as of March 31, 2013. See Note 2.

~~13.~~14. 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. Product warranty liabilities were not material as of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012.

The Company was named in a lawsuit arising out of an alleged breach of contract and implied warranty by a customer of Toolcom Suppliers Limited (“Toolcom”), a business previously included within the former Logistics and Manufacturing Services segment, related to the sale of certain products prior to the Company’s 2005 acquisition of Toolcom. In 2006, the plaintiff filed the lawsuit in civil court in Scotland and asserted that certain products sold were not fit for a particular ~~use and claims approximately~~ ~~5,500~~ ~~pounds sterling (approximately $8,900~~ at ~~September 30, 2012) in damages, plus interest at~~use. The Company settled the ~~statutory rate~~lawsuit during the first quarter of 8% ~~per annum and costs. The court found~~2013 with an outcome that ~~Toolcom was in breach of contract and implied warranty, and ordered Toolcom to pay a portion of the plaintiff’s attorneys’ fees. The court has~~did not made determinations as to causation and damages. In the third quarter 2012, the customer provided to the Company additional information regarding its claim, increasing the amount of damages, including lost profits, that the customer allegedly suffered as a result of the Company's breach of contract and implied warranty, and the amount of interest due on the claim. Although the Company intends to vigorously defend its position, based on reviews of the currently available information and acknowledging the uncertainties of litigation, management has provided for what it believes to be a reasonable estimate of loss exposure. While it is currently not possible to determine the ultimate outcome of this matter, the Company believes that any ultimate losses would not be expected to have a material ~~adverse~~ effect on the ~~Company’s~~ consolidated financial ~~position or cash flows, but could be material to~~statements. The final settlement expense is included within the loss from operations of discontinued businesses in the consolidated ~~results~~statements of ~~operations of any one period.~~income for the quarter ended March 31, 2013.

Income Taxes

~~In connection with~~On April 16, 2013, the United States Tax Court rendered an ~~IRS audit for~~unfavorable decision in the ~~tax years 2000 through 2002,~~matter Barnes Group Inc. and Subsidiaries v. Commissioner of Internal Revenue (“April 2013 Tax Court Decision”). The Tax Court rejected the Company's objections and imposed penalties. The case involved IRS proposed adjustments ~~to these tax years~~ of approximately $16,500, plus a ~~potential penalty of~~ 20% penalty and interest for the tax years 1998, 2000 and 2001. The proposed IRS cash tax assessment (after utilization of a portion of the Company's existing net operating losses) is estimated to be approximately $13,000 including penalties and interest.

The case arose out of an Internal Revenue Service (“IRS”) audit for the tax ~~assessment plus interest.~~years 2000 through 2002. The adjustment relates to the federal taxation of foreign income of certain foreign subsidiaries. The Company filed an administrative protest of these adjustments. In the third quarter of 2009, the Company was informed that its protest was denied and a tax assessment was received from the Appeals Office of the IRS. InSubsequently, in November 2009, the Company filed a petition against the IRS in the ~~U.S.~~United States Tax Court, contesting the tax ~~assessment received. As expected, a~~assessment. A trial was held ~~in the first quarter of 2012~~ and all briefs were filed in 2012. In April 2013 the ~~third quarter of 2012. A~~Tax Court Decision was then issued rendering an unfavorable decision ~~is expected late~~against the Company and imposing penalties.

The Company expects the Tax Court to enter an order reflecting the tax assessment, interest and penalties due (“Court Approved Assessment”) in the ~~fourth~~second quarter 2013. Following entry of ~~2012~~that order, both parties have 90 days to decide whether or innot to appeal the ~~first half~~April 2013 Tax Court Decision. At the end of ~~2013. Depending on~~ the ~~outcome,~~90 day period, or earlier if an appeal is filed by ~~either party is possible.~~ the Company, the Court Approved Assessment becomes due.

The Company continues to believe that its tax position ~~on the issues raised by the IRS~~ is correct and the Company ~~plans to continue to take appropriate actions to vigorously defend~~is evaluating its ~~position.~~options including an appeal of the decision. The Company believes it should prevail on this issue. While any additional impact on the Company's liability for income taxes cannot presently be determined, the Company continues to believe it is adequately provided for and the outcomeApril Tax Court Decision is not expected to have a material effect on the Company's consolidated financial position, ~~or cash flows,~~ but could be material to both the consolidated results of operations ofand cash flows in any one period. The Company now expects the cash flows to be negatively impacted by approximately $13,000 in the third quarter of 2013 in connection with the Court Approved Assessment. In addition, in the second quarter of 2013, following the Company's evaluation, the Company could record an income tax charge of up to approximately $20,000 and a reduction in its deferred tax assets to reflect the utilization of a portion of the Company's net operating loss carryforwards.

15. Accounting Changes

In February 2013, the Financial Accounting Standards Board amended its guidance related to the presentation of other comprehensive income. The amended guidance requires that companies present information related to reclassification adjustments from accumulated other comprehensive income in their consolidated financial statements within a single note or on the face of the financial statements. The Company has adopted the provisions of the amended accounting standard within Note 12.

16. Subsequent Event

On April 22, 2013, the Company completed the previously announced sale of BDNA to MSC pursuant to the terms of the Asset Purchase Agreement dated February 22, 2013 (the "APA") between the Company and MSC. Pursuant to the terms of the APA, the total cash consideration paid for BDNA was approximately $550,000, subject to certain working capital and post closing adjustments set forth in the APA. The after-tax proceeds and net gain on sale from the transaction are expected to be approximately $400,000 and $200,000, respectively. Taxes will be payable during 2013. The Credit Facility does not require that the Company use the proceeds from the sale of BDNA to reduce its outstanding borrowings. The Company will utilize a portion of the proceeds to reduce debt, repurchase common shares, invest in profitable growth initiatives including potential acquisitions, and for general corporate purposes. In April 2013, the Company initially utilized approximately $480,000 to reduce borrowings under the Credit Facility.

On April 16, 2013, the United States Tax Court rendered an unfavorable decision in a case against the Company. See Note 14.

With respect to the unaudited consolidated financial information of Barnes Group Inc. for the three-month ~~and nine-month~~ periods ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012, PricewaterhouseCoopers LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate report dated ~~October~~April 29, ~~2012~~2013 appearing herein, states that they did not audit and they do not express an opinion on that unaudited consolidated financial

information. Accordingly, the degree of reliance on their report should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933, as amended, for their report on the unaudited consolidated financial information because that report is not a “report” or a “part” of the registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Securities Act of 1933, as amended.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Barnes Group Inc.

We have reviewed the accompanying consolidated balance sheet of Barnes Group Inc. and its subsidiaries as of ~~September 30, 2012~~March 31, 2013 and the related consolidated statements of income and comprehensive income for the three-month ~~and nine-month~~ periods ended ~~September 30, 2012~~March 31, 2013 and ~~September 30, 2011~~March 31, 2012 and the consolidated statements of cash flows for the ~~nine-month~~three-month periods ended ~~September 30, 2012~~March 31, 2013 and ~~September 30, 2011~~March 31, 2012. This interim financial information is the responsibility of the Company's management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, ~~2011~~2012, and the related consolidated statements of income and comprehensive income, of changes in stockholders' equity and of cash flows for the year then ended (not presented herein), and in our report dated February ~~21, 2012,~~25, 2013, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, ~~2011~~2012, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.



/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP Hartford, Connecticut
~~October~~April 29, ~~2012~~2013

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, ~~2011.~~2012. The Annual Report on Form 10-K and other documents related to the Company are located on the Company's website: www.bginc.com.

In the first quarter of ~~2012,~~2013, the Company entered into a definitive agreement to sell its Barnes Distribution North America Business ("BDNA") to MSC Industrial Direct Co., Inc. ("MSC") for $550.0 million, subject to certain working capital and post closing adjustments. All previously reported financial information has been adjusted on a retrospective basis to reflect BDNA results as discontinued operations. The Company completed the sale of BDNA on April 22, 2013.

~~Additionally, in the fourth quarter of 2011, the Company completed the sale of its Barnes Distribution Europe businesses (the "BDE business"). The BDE business was comprised~~segment. Raymond sells, among other products, springs that are manufactured by one of the ~~Company's European KENT, Toolcom and BD France distribution businesses that were reported within the segment formerly referred to as Logistics and Manufacturing Services.~~

Industrial businesses. All previously reported financial information has been adjusted on a retrospective basis to reflect the segment ~~realignment and the discontinued operations for all periods.~~realignment.

Aerospace

Aerospace produces precision-machined and fabricated components and assemblies for original equipment ~~manufacturer~~manufacturers ("OEM") ~~turbine engine, airframe,~~of commercial jet engines, airframes, and industrial gas ~~turbine builders~~turbines throughout the world, and for the military. Aerospace also provides jet engine component overhaul and repair ("MRO") services for many of the world's major ~~turbine~~jet engine manufacturers, commercial airlines and the military. MRO activities include the manufacture and delivery of aerospace aftermarket spare parts, participation in revenue sharing programs (“RSPs”) under which the Company receives an exclusive right to supply designated aftermarket parts over the life of the related aircraft engine program, and component repairs.

Aerospace's OEM business competes with both the leading jet engine OEMs and a large number of machining and fabrication companies. Competition is based mainly on quality, engineering and technical capability, product breadth, timeliness, service and price. Aerospace's machining and fabrication operations, with facilities in Arizona, Connecticut, Michigan, Ohio, Utah and Singapore, produce critical engine and airframe components through technically advanced processes.

Aerospace's MRO business competes with aerospace OEMs, service centers of major commercial airlines, and other independent service companies for the repair and overhaul of turbine engine components. The manufacturing and ~~supplying~~supply of aerospace aftermarket spare parts, including those related to the RSPs, are dependent upon the reliable and timely delivery of high-quality components. Aerospace's aftermarket facilities, located in Connecticut, Ohio and Singapore, specialize in the repair and refurbishment of highly engineered components and assemblies such as cases, rotating air seals, shrouds and honeycomb air seals.

Industrial

Industrial is a global ~~supplier~~manufacturer of ~~engineered components~~highly-engineered, high-quality, precision parts, products and systems for critical applications ~~focused on providing solutions for~~serving a diverse customer ~~base.~~base in end-markets such as transportation, energy, electronics, medical devices, and consumer products. Focused on custom solutions, Industrial participates in the design phase of components and assemblies whereby the customers receive the benefits of application and systems engineering, new product development, testing and evaluation, and the manufacturing of final products.

Industrial designs and manufactures customized hot runner systems and components - the enabling technology for many complex injection molding applications. It is ~~equipped to produce virtually every type of precision spring, from fine hairsprings for electronics and instruments, to large heavy-duty springs for machinery. It is also~~ a leading manufacturer and supplier of precision mechanical products, including precision mechanical springs, compressor reed valves and nitrogen gas products. Industrial also manufactures high-precision punched and fine-blanked components used in transportation and industrial applications,nitrogen gas springs and manifold systems used to precisely control stamping presses, and retention rings that position parts on a shaft or other axis. ~~Additionally, through our recent Synventive Molding Solutions acquisition,~~ Industrial is ~~a leading designer~~equipped to produce virtually every type of precision spring, from fine hairsprings for electronics and ~~manufacturer of highly engineered and customized hot runner systems and components - the enabling technology~~instruments to large heavy-duty springs for ~~many complex injection molding applications.~~

Industrial has a diverse customer base with products purchased by durable goods manufacturers located around the world in industries such as transportation, energy, electronics, medical devices and consumer products. Long-standing customer relationships enable Industrial to participate in the design phase of components and assemblies through which customers receive the benefits of manufacturing research, testing and evaluation. Products are sold primarily through Industrial's direct sales force and its global distribution channel.machinery.

Industrial competes with a broad base of large and small companies engaged in the manufacture and sale of custom metal components ~~systems,~~ and ~~assemblies;~~assemblies and competes on the basis of quality, service, reliability of supply, engineering and technical

capability, geographic reach, product breadth, innovation, design, and price. Products are sold primarily through its direct sales force and a network of global distribution channels.

Industrial has manufacturing, sales, assembly, and distribution operations in the United States, Brazil, Canada, China, Czech Republic, France, Germany, India, Italy, Japan, ~~Korea,~~ Mexico, Netherlands, Portugal, Singapore, Slovakia, South Korea, Spain, Sweden, Switzerland, Thailand, ~~and Turkey.~~

~~Distribution~~

Distribution provides value-added logistics support services including inventory management, technical sales, and supply chain solutions for maintenance, repair, operating, and production supplies and services. Distribution's global operations are engaged in the supplying and servicing of maintenance, repair and operating components and also the engineering and technical sales of custom solutions for springs, gas struts and engineered hardware.

Distribution's activities include logistics support through vendor-managed inventory and technical sales for stocked replacement parts and other products, catalog offerings, and custom solutions. Key business drivers include a value proposition centered on customer service, delivery, multiple sales channels, procurement systems, and strong customer relationships.

The Distribution segment faces active competition throughout the world. The products and services offered are not unique, and its competitors provide substantially similar products and services. Competition comes from local, regional, and national maintenance and repair supply distributors and from specialty manufacturers of springs, gas struts and engineered hardware. Service alternatives, timeliness and reliability of supply, price, technical capability, product breadth, quality and overall customer service are important competitive factors.

~~Distribution has sales, distribution, and assembly operations in the United States, Brazil, Canada, China, France, Mexico, Singapore, Spain~~Turkey and the United Kingdom. ~~Products and services are available in more than 30 countries.~~

~~Third~~First Quarter ~~2012~~2013 Highlights

~~On August 27, 2012,~~In February 2013, the Company ~~completed its acquisition of Synventive Acquisition Inc. ("Synventive”). Synventive is~~entered into a ~~leading designer~~definitive agreement to sell BDNA to MSC for $550.0 million, subject to certain working capital and ~~manufacturer of highly engineered and customized hot runner systems and components and provides related services. The acquisition is being integrated into the Industrial segment. The~~post closing adjustments. All previously reported financial information has been adjusted on a retrospective basis to reflect BDNA results ~~of Synventive, from the date of the acquisition, are included within consolidated financial statements of the Company for the three and nine month periods ended September 30, 2012.~~as discontinued operations. The Company ~~funded~~completed the ~~purchase price~~sale of ~~the acquisition from cash~~BDNA on ~~hand and borrowings under the Credit Facility.~~

On July 10, 2012, the Company executed a $250.0 million accordion feature that was available under the Company's existing $500.0 million Credit Agreement, increasing the available amount under the Credit Facility to $750.0 million.April 22, 2013.

In the ~~third~~first quarter of 2013, sales increased by $40.8 million, or 18.3% from the first quarter of 2012, to $263.5 million. This increase was driven primarily by a $40.3 million sales contribution from the Synventive business. Organic sales increased by $~~7.4~~1.9 million, or ~~2.5%~~0.9%, ~~from~~with growth at both the ~~third~~ ~~quarter of 2011 to~~ ~~$306.1~~ ~~million.~~Aerospace and Industrial segments. Foreign currency translation decreased sales by approximately $~~5.0~~1.4 million as the U.S. dollar strengthened against foreign currencies. ~~Organic sales decreased by~~ ~~$3.3~~ ~~million, or~~ ~~1.1%, while the Synventive acquisition provided sales of~~ ~~$15.8~~ million in the third quarter of 2012. Sales at the Aerospace segment increased slightly. Organic sales were relatively flat within the Industrial segment and declined approximately 5% within the Distribution segment as our customers closely managed their inventory levels.

Operating income in the ~~third~~first quarter of ~~2012 decreased~~2013 increased ~~13.2%~~1.4% to $~~29.7~~25.0 million from the ~~third~~first quarter of ~~2011~~2012 and operating income margin decreased from ~~11.4%~~11.0% to ~~9.7%~~9.5%. Operating ~~margin declines were~~income benefited primarily ~~the result of $5.1 million of short-term purchase accounting adjustments and transaction costs resulting~~ from the ~~acquisition~~profit contribution of ~~Synventive.~~the Synventive business, productivity improvements and favorable pricing, partially offset by non-recurring stock compensation expenses of $10.5 million related to the modification of outstanding equity awards granted to the former Chief Executive Officer ("CEO transition costs").

RESULTS OF OPERATIONS

Net Sales


	Three months ended September 30,											Nine months ended September 30,											Three months ended March 31,
(in millions)	2012			2011			Change					2012			2011			Change					2013		2012		Change
Aerospace	$	98.4		$	98.1		$	0.2		0.2	%	$	289.4		$	283.4		$	6.0		2.1	%	$	98.0	$	97.3	$	0.8	0.8	%
Industrial	123.8			112.5			11.3			10.1	%	349.4			337.9			11.5			3.4	%	165.5		125.5		40.0		31.8	%
Distribution	85.7			90.3			(4.5		)	(5.0	)%	271.0			271.9			(0.9		)	(0.3	)%
Intersegment sales	(1.8		)	(2.3		)	0.4			17.0	%	(7.2		)	(7.2		)	(0.1		)	(0.8	)%	—		—		—		—	%
Total	$	306.1		$	298.6		$	7.4		2.5	%	$	902.6		$	886.1		$	16.5		1.9	%	$	263.5	$	222.8	$	40.8	18.3	%

The Company reported net sales of $~~306.1~~263.5 million in the ~~third~~first quarter of ~~2012~~2013, an increase of $~~7.4~~40.8 million or ~~2.5%~~18.3%, from the ~~third~~first quarter of ~~2011~~2012. The ~~August 27, 2012~~ acquisition of Synventive in 2012 provided $~~15.8~~40.3 million of net sales during the ~~2012 period.~~first quarter of 2013. Organic sales increased by $1.9 million, which included an increase of $0.8 million at Aerospace and an increase of $1.1 million at Industrial. The strengthening of the U.S. dollar against foreign currencies decreased net sales by approximately $~~5.0~~ ~~million, of which~~ ~~$4.8~~ ~~million related to Industrial and~~ ~~$0.2~~ ~~million related to Distribution. Organic sales declined by~~ ~~$3.3~~ ~~million, which included a decrease of~~ ~~$4.3~~ ~~million at Distribution, partially offset by increases of~~ ~~$0.2~~ ~~million and~~ ~~$0.3~~ ~~million at Aerospace and Industrial, respectively.~~

~~The Company reported net sales of~~ ~~$902.6~~ ~~million in the first nine months of 2012, an increase of~~ ~~$16.5~~ ~~million or~~ ~~1.9%, from the first~~ ~~nine months~~ ~~2011. The acquisition of Synventive provided~~ ~~$15.8~~ ~~million of net sales during the 2012 period. The sales increase reflected~~ ~~$14.2~~ ~~million of organic sales growth which included increases of~~ ~~$6.0~~ ~~million,~~ ~~$7.8~~ ~~million and~~ ~~$0.5~~ ~~million at Aerospace, Industrial and Distribution, respectively. The strengthening of the U.S. dollar against foreign currencies, primarily in Europe and Brazil, decreased net sales by approximately~~ ~~$13.5~~ ~~million of which~~ ~~$12.1~~ ~~million related to Industrial and~~ $1.4 ~~million related to Distribution.~~million.

Expenses and Operating Income


	Three months ended September 30,											Nine months ended September 30,											Three months ended March 31,
(in millions)	2012			2011			Change					2012			2011			Change					2013			2012			Change
Cost of sales	$	208.6		$	198.8		$	9.8		4.9	%	$	603.4		$	584.3		$	19.2		3.3	%	$	177.7		$	160.4		$	17.3	10.8	%
% sales	68.1		%	66.6		%						66.9		%	65.9		%						67.4		%	72.0		%
Gross profit ⁽¹⁾	$	97.5		$	99.9		$	(2.4	)	(2.4	)%	$	299.1		$	301.8		$	(2.7	)	(0.9	)%	$	85.8		$	62.4		$	23.5	37.6	%
% sales	31.9		%	33.4		%						33.1		%	34.1		%						32.6		%	28.0		%
Selling and administrative expenses	$	67.8		$	65.7		$	2.1		3.3	%	$	202.3		$	203.1		$	(0.8	)	(0.4	)%	$	60.9		$	37.8		$	23.1	61.2	%
% sales	22.2		%	22.0		%						22.4		%	22.9		%						23.1		%	16.9		%
Operating income	$	29.7		$	34.2		$	(4.5	)	(13.2	)%	$	96.8		$	98.7		$	(1.9	)	(1.9	)%	$	25.0		$	24.6		$	0.3	1.4	%
% sales	9.7		%	11.4		%						10.7		%	11.1		%						9.5		%	11.0		%
⁽¹⁾^{- Sales less cost of sales.}

Cost of sales in the ~~third~~first quarter of ~~2012~~2013 increased ~~4.9%~~10.8% from the ~~2011~~2012 period, while gross profit margin ~~decreased~~increased from ~~33.4%~~ ~~in the~~ ~~2011~~ ~~period to~~ ~~31.9%~~28.0% in the 2012 period to 32.6% in the 2013 period. Gross margins declined at Aerospace and ~~Industrial while remaining flat~~improved at ~~Distribution.~~Industrial. The ~~decline in gross margin was driven primarily by a shift in mix within the Aerospace segment, lower volumes at Distribution and the impact of short-term purchase accounting adjustments related to the~~ acquisition of ~~Synventive.~~Synventive resulted in a higher percentage of sales, as well as higher gross profit as a percentage of sales, being driven by Industrial. Selling and administrative expenses in the ~~third~~first quarter of ~~2012~~2013 increased ~~3.3%~~61.2% from the ~~2011~~2012 period due primarily to the incremental operations of Synventive and ~~acquisition-related~~CEO transition costs ~~partially offset by lower employee related costs, primarily due to incentive compensation, as a result~~ of ~~the level of achievement of the Company's pre-established annual performance targets.~~$10.5 million. As a percentage of sales, selling and administrative costs increased from ~~22.0%~~16.9% in the ~~third~~first quarter of ~~2011~~2012 to ~~22.2%~~23.1% in the ~~2012~~2013 period. Operating income in the ~~third~~first quarter of ~~2012~~2013 ~~decreased~~increased ~~13.2%~~1.4% to $~~29.7~~25.0 million from the ~~third~~first quarter of ~~2011~~2012 and operating income margin decreased from ~~11.4%~~11.0% to ~~9.7%~~.

~~Cost of sales in the first~~ ~~nine months~~ ~~of 2012 increased~~ ~~3.3%~~ ~~from the 2011 period, while gross profit margin decreased from~~ ~~34.1%~~ ~~in the 2011 period to~~ ~~33.1%~~ ~~in the 2012 period. The decline was driven primarily by a shift in mix within the Aerospace~~

~~segment, increased pension costs and the impact of short-term purchase accounting adjustments related to the acquisition of Synventive. Selling and administrative expenses in the first~~ ~~nine months~~ ~~of 2012 decreased~~ ~~0.4%~~ ~~from the first~~ ~~nine months~~ of 2011 as a result of lower employee related costs, primarily due to incentive compensation, partially offset by an increase in acquisition-related costs. As a percentage of sales, selling and administrative costs decreased from ~~22.9%~~ ~~in the first nine months of 2011 to~~ ~~22.4%~~ ~~in the first nine months of 2012. Operating income in the first nine months of 2012 decreased~~ ~~1.9%~~ ~~from the 2011 period and operating income margin declined from~~ ~~11.1%~~ to ~~10.7%~~9.5%.

Interest expense

Interest expense increased by $~~1.3~~ ~~million and~~ ~~$0.1~~2.0 million in the ~~third~~first quarter of ~~2012~~2013 ~~and the first~~ ~~nine months~~ ~~of 2012, respectively,~~ compared to the prior year ~~amounts. The increase in interest expense during the third quarter of 2012 was~~amount, primarily a result of higher borrowings under the variable rate credit facility (the “Credit Facility”) used to fund the acquisition of Synventive. ~~In addition, higher average interest rates resulted from the Company's entering into the amended Credit Facility in September 2011 and five-year interest rate swap agreements in April 2012.~~

During the first nine months of 2012, the slight increase in interest expense was a result of higher borrowings to fund the acquisition of Synventive, partially offset by lower average interest rates following the redemption of the 3.75% Convertible Notes in April 2011, which was funded with the lower rate Credit Facility.

Other expense (income), net

Other expense (income), net in the ~~third~~first quarter of ~~2012~~2013 was $~~0.9~~1.0 million compared to $~~(0.5)~~0.9 million in the ~~third~~first quarter of ~~2011~~2012. ~~In the first~~ ~~nine months~~ ~~of 2012, other expense (income), net was~~ ~~$1.8~~ ~~million compared to~~ ~~$0.2~~ ~~million in the first~~ ~~nine months~~ ~~of 2011. The changes in other expense (income), net primarily reflect changes in foreign exchange net transaction losses during the periods.~~

Income Taxes

The Company's effective tax rate from continuing operations for the first ~~nine months~~quarter of 2013 was 21.4% compared with 17.8% in the first quarter of 2012 ~~was~~and ~~21.2%~~13.5%~~. In 2011,~~ for the ~~Company's~~full year 2012. The increase in the first quarter 2013 effective tax rate from ~~continuing operations was~~the full year 2012 rate of ~~25.1%~~13.5% is due to the absence of the 2012 reversal of certain foreign valuation allowances and tax rate decreases in certain foreign jurisdictions, the increase in the ~~first nine months of the year and~~ ~~21.7%~~ ~~for the full year. The~~Company's Swedish effective tax rate ~~for the first nine months of 2011 included the recognition of~~ ~~$1.8~~ million of discrete tax expense related to tax adjustments for earlier years. The decrease in the 2012 effective tax rate from continuing operations was driven primarily by the absence of this discrete item and the ~~impact of a decrease in the planned repatriation of a portion of current year foreign earnings to the U.S., partially offset by a~~ projected change in the mix of earnings attributable to higher-taxing jurisdictions or jurisdictions where losses cannot be benefited in ~~2012.~~2013.

~~In connection with~~On April 16, 2013, the United States Tax Court rendered an unfavorable decision in the matter Barnes Group Inc. and Subsidiaries v. Commissioner of Internal Revenue (“April 2013 Tax Court Decision”). The Tax Court rejected the Company's objections and imposed penalties. The case involved IRS proposed adjustments of approximately $16.5 million, plus a 20% penalty and interest for the tax years 1998, 2000 and 2001. The proposed IRS cash tax assessment (after utilization of a portion of the Company's existing net operating losses) is estimated to be approximately $13.0 million including penalties and interest.

The case arose out of an Internal Revenue Service (“IRS”) audit for the tax years 2000 through ~~2002, the IRS proposed adjustments to these tax years of approximately $16.5~~ ~~million, plus a potential penalty of~~ ~~20%~~ ~~of the tax assessment plus interest.~~2002. The adjustment relates to the federal taxation of foreign income of certain foreign subsidiaries. The Company filed an administrative protest of these adjustments. In the third quarter of 2009, the Company was informed that its protest was denied and a tax assessment was received from the Appeals Office of the IRS. InSubsequently, in November 2009, the Company filed a petition against the IRS in the ~~U.S.~~United States Tax Court, contesting the tax ~~assessment received. As expected, a~~assessment. A trial was held ~~in the first quarter of 2012~~ and all briefs were filed in 2012. In April 2013 the ~~third quarter of 2012. A~~Tax Court Decision was then issued rendering an unfavorable decision ~~is expected late~~against the Company and imposing penalties.

The Company continues to believe that its tax position ~~on the issues raised by the IRS~~ is correct and the Company ~~plans to continue to take appropriate actions to vigorously defend~~is evaluating its ~~position.~~options including an appeal of the decision. The Company believes it should prevail on this issue. While any additional impact on the Company's liability for income taxes cannot presently be determined, the Company continues to believe it is adequately provided for and the outcomeApril Tax Court Decision is not expected to have a material effect on the Company's consolidated financial position, ~~or cash flows,~~ but could be material to both the consolidated results of operations ofand cash flows in any one period. The Company now expects the cash flows to be negatively impacted by approximately $13.0 million in the third quarter of 2013 in connection with the Court Approved Assessment. In addition, in the second quarter of 2013, following the Company's evaluation, the Company could record an income tax charge of up to approximately $20.0 million and a reduction in its deferred tax assets to reflect the utilization of a portion of the Company's net operating loss carryforwards.

Discontinued Operations

On February 22, 2013, the Company and MSC entered into an Asset Purchase Agreement ("APA") pursuant to which MSC will acquire BDNA. The APA provided that MSC would pay the Company $550.0 million as consideration for the acquisition of BDNA, subject to certain working capital and post closing adjustments. In the first quarter of 2013, upon approval of the sale of BDNA by the Company's Board of Directors, the Company classified the business as "held for sale". The results of BDNA have been segregated and presented as discontinued operations. The Company completed the sale of BDNA on April 22, 2013. In the first

2322

quarter of 2013, the Company recorded a $2.0 million loss from discontinued operations. The loss relates to the income generated by the operations of BDNA, more than offset by transaction expenses associated with the BDNA sale, charges related to the pension plans held by BDNA and a final adjustment related to a retained liability at BDE. See Note 2 and Note 16 of the Consolidated Financial Statements.

Income and Income per Share


	Three months ended September 30,											Nine months ended September 30,											Three months ended March 31,
(in millions, except per share)	2012			2011			Change					2012			2011			Change					2013			2012		Change
Income from continuing operations	$	20.7		$	24.9		$	(4.2	)	(16.7	)%	$	68.5		$	67.8		$	0.7		1.0	%	$	15.4		$	17.6	$	(2.2	)	(12.3	)%
Loss from discontinued operations, net of income taxes	(2.2		)	(1.6		)	(0.6		)	(36.6	)%	(3.0		)	(3.2		)	$	0.2		5.8	%
(Loss) income from discontinued operations, net of income taxes																							(2.0		)	4.6		(6.6		)	NM
Net income	$	18.5		$	23.2		$	(4.8	)	(20.5	)%	$	65.5		$	64.6		$	0.9		1.3	%	$	13.5		$	22.2	$	(8.7	)	(39.3	)%
Per common share:
Basic:
Income from continuing operations	$	0.38		$	0.45		$	(0.07	)	(15.6	)%	$	1.25		$	1.23		$	0.02		1.6	%	$	0.29		$	0.33	$	(0.04	)	(12.1	)%
Loss from discontinued operations, net of income taxes	(0.04		)	(0.03		)	(0.01		)	(33.3	)%	(0.05		)	(0.06		)	0.01			16.7	%
(Loss) income from discontinued operations, net of income taxes																							(0.04		)	0.08		(0.12		)	NM
Net income	$	0.34		$	0.42		$	(0.08	)	(19.0	)%	$	1.20		$	1.17		$	0.03		2.6	%	$	0.25		$	0.41	$	(0.16	)	(39.0	)%
Diluted:
Income from continuing operations	$	0.38		$	0.44		$	(0.06	)	(13.6	)%	$	1.24		$	1.21		$	0.03		2.5	%	$	0.28		$	0.32	$	(0.04	)	(12.5	)%
Loss from discontinued operations, net of income taxes	(0.04		)	(0.03		)	(0.01		)	(33.3	)%	(0.05		)	(0.06		)	0.01			16.7	%
(Loss) income from discontinued operations, net of income taxes																							(0.04		)	0.08		(0.12		)	NM
Net income	$	0.34		$	0.41		$	(0.07	)	(17.1	)%	$	1.19		$	1.15		$	0.04		3.5	%	$	0.24		$	0.40	$	(0.16	)	(40.0	)%
Weighted average common shares outstanding:
Basic	54.5			55.8			(1.3		)	(2.4	)%	54.6			55.3			(0.7		)	(1.3	)%	54.7			54.8		(0.1		)	(0.1	)%
Diluted	55.1			56.4			(1.3		)	(2.3	)%	55.2			56.1			(0.9		)	(1.5	)%	55.5			55.5		0.1			0.1	%

NM - Not meaningful

In the ~~third~~first quarter of ~~2012~~2013, basic and diluted income from continuing operations per common share decreased ~~15.6%~~12.1% and ~~13.6%~~12.5%, respectively, from the ~~third~~first quarter of ~~2011~~2012 ~~and for the first~~ ~~nine months~~ ~~of 2012 increased~~ ~~1.6%~~ ~~and~~ ~~2.5%, respectively, from the first~~ ~~nine months~~ ~~of 2011.~~. The ~~changes~~decreases were directly attributable to the ~~changes~~decrease in income from continuing operations for the ~~periods.~~period. Basic and diluted weighted average common shares outstanding decreased due to the repurchase of 1,509,156 shares and 700,000 shares during 2011 and 2012, respectively. The decrease was partially offset by shares issued for employee stock plan activity. Diluted weighted average common shares outstanding decreased primarily as a result of the decrease in basic weighted average common shares outstanding.remained flat period over period.

Financial Performance by Business Segment

Aerospace


	Three months ended September 30,											Nine months ended September 30,											Three months ended March 31,
(in millions)	2012			2011			Change					2012			2011			Change					2013			2012			Change
Sales	$	98.4		$	98.1		$	0.2		0.2	%	$	289.4		$	283.4		$	6.0		2.1	%	$	98.0		$	97.3		$	0.8		0.8	%
Operating profit	15.3			16.1			(0.7		)	(4.5	)%	44.3			44.5			(0.3		)	(0.6	)%	10.3			12.7			(2.3		)	(18.2	)%
Operating margin	15.6		%	16.4		%						15.3		%	15.7		%						10.6		%	13.0		%

The Aerospace segment reported sales of $~~98.4~~98.0 million in the ~~third~~first quarter of ~~2012~~2013, a ~~0.2%~~0.8% increase from the ~~third~~first quarter of ~~2011~~2012. The OEM manufacturing business reflected increased sales activity, ~~however this growth was primarily~~partially offset by ~~a decline~~declines in sales ~~within the aftermarket RSP spare parts business. Sales~~ within the aftermarket repair and overhaul ~~business were flat. In the first~~ ~~nine months~~ ~~of 2012, this segment reported sales of~~ ~~$289.4~~ ~~million, a~~ ~~2.1%~~ ~~increase from the first~~ ~~nine months~~ ~~of 2011 primarily as a result of growth in the aftermarket repair~~ and ~~overhaul and the OEM manufacturing businesses. This growth was partially offset by a decline in sales within the aftermarket RSP~~ spare parts ~~business.~~businesses.

Operating profit at Aerospace in the ~~third~~first quarter of 2013 decreased 18.2% from the first quarter of 2012 ~~decreased~~ ~~4.5%~~ ~~from the~~ ~~third quarter of 2011~~to $~~15.3~~10.3 million. The decrease was driven ~~primarily~~ by ~~a shift in mix, due~~CEO transition costs of $3.9 million allocated to the segment. The profit ~~impact~~benefit of higher sales in the OEM business was partially offset by the profit detriment of lower sales in the aftermarket ~~RSP spare parts business, partially offset by higher sales in the OEM manufacturing business. Operating margin declined from~~ ~~16.4%~~ ~~in the 2011 period to~~ ~~15.6%~~ ~~in the 2012 period. Operating profit in the first~~ ~~nine months~~ ~~of 2012 decreased~~ ~~0.6%~~ ~~from the first~~ ~~nine~~

~~months~~ ~~of 2011 to~~ ~~$44.3~~ million. Operating profit was impacted by a shift in mix as the profit impact of lower sales in the aftermarket RSP spare parts business were offset by the profit impact of higher sales in the OEM manufacturing and the aftermarket repair and overhaul and spare parts businesses. Operating margin declined from ~~15.7%~~ ~~in the first nine months of 2011 to~~ ~~15.3%~~13.0% in the 2012 period to 10.6% in the 2013 period.

Outlook: Sales in the ~~aerospace~~Aerospace OEM business are impacted by the general state of the aerospace market driven by the worldwide economy and are driven by its order backlog through its participation in certain strategic commercial and military engine and airframe programs. Backlog in this business was ~~$540.5~~$536.6 million at ~~September 30, 2012~~March 31, 2013, of which approximately ~~58%~~57% is

expected to be shipped in the next 12 months. The ~~aerospace~~Aerospace OEM business may be impacted by adjustments of customer inventory levels, commodity availability and pricing, changes in the content levels on certain platforms including insourcing, changes in production schedules of specific engine and airframe programs, as well as the pursuit of new programs. Sales levels in the aerospace aftermarket repair and overhaul business are expected to reflect long-term trends towards improving maintenance, repair and overhaul activity, but may be negatively impacted by short-term fluctuations in demand. Incremental management fees within the aftermarket RSP spare parts business are dependent on future sales volumes and are treated as a reduction to sales. Management fees increase once during the life of each individual program, generally in the fourth or later years of each program. Management continues to believe its aerospace aftermarket business is competitively positioned based on strong customer relationships, including long-term RSP agreements and long-term maintenance and repair contracts in the repair and overhaul business, expanded capabilities and current capacity levels.

Management is focused on growing operating profit at Aerospace primarily through organic sales growth, productivity initiatives, new product introductions and continued cost management. Operating profit is expected to continue to be affected by the profit impact of changes in sales volume, mix and ~~mix,~~pricing, particularly as it relates to the highly profitable aftermarket RSP spare parts business, and investments made in each of its businesses. Management actively manages commodity price increases through pricing actions and other productivity initiatives. In addition, the highly profitable aftermarket RSPs are expected to be impacted by incremental management fees which are deducted from sales and increase once during the life of each individual program generally in the fourth or later years of the particular program. Costs associated with increases in new product introductions may also negatively impact operating profit.

Industrial


	Three months ended September 30,										Nine months ended September 30,											Three months ended March 31,
(in millions)	2012		2011			Change					2012			2011			Change					2013			2012			Change
Sales	$123.8		$	112.5		$	11.3		10.1	%	$	349.4		$	337.9		$	11.5		3.4	%	$	165.5		$	125.5		$	40.0	31.8	%
Operating profit	7.4		10.3			(2.9		)	(28.4	)%	28.7			32.3			(3.5		)	(11.0	)%	14.6			12.0			2.6		22.1	%
Operating margin	6.0	%	9.2		%						8.2		%	9.6		%						8.8		%	9.5		%

Sales at Industrial were $~~123.8~~165.5 million in the ~~third~~first quarter of ~~2012~~2013, a ~~10.1%~~$40.0 million increase from the ~~third~~first quarter of ~~2011~~2012. The acquisition of Synventive provided $~~15.8~~40.3 million of sales. Organic sales, which benefited from favorable pricing and ~~organic sales~~mix, increased by $~~0.3~~1.1 million during the ~~2012~~2013 period. These increases were partially offset by the negative impact of foreign currency translation which decreased sales by approximately $~~4.8~~1.4 million as the U.S. dollar strengthened against foreign currencies. ~~In the first nine months of 2012, this segment reported sales of $349.4 million, a~~ ~~3.4%~~ ~~percent increase from the first nine months of 2011. The acquisition of Synventive provided~~ ~~$15.8~~ ~~million of sales and organic sales increased by~~ ~~$7.8~~ ~~million. The negative impact of foreign currency translation decreased sales by approximately~~ ~~$12.1~~ ~~million during the first nine months of 2012.~~

Operating profit in the ~~third~~first quarter of ~~2012~~2013 at Industrial was $~~7.4~~14.6 million, ~~a decrease~~an increase of $~~2.9~~2.6 million from the ~~third~~first quarter of ~~2011.~~2012. Operating ~~margin declines were~~profit benefited primarily ~~the result of $5.1 million of short-term purchase accounting adjustments and transaction costs resulting~~ from the ~~acquisition~~profit contribution of ~~Synventive. Lower incentive compensation,~~the Synventive business, productivity improvements and favorable pricing. These benefits were partially offset by ~~higher pension~~CEO transition costs ~~benefited operating profit. Operating profit in the first nine months~~ of ~~2012 was~~ ~~$28.7~~$6.6 million ~~a decrease of~~ ~~11.0%~~ ~~from the first nine months of 2011. The impacts of short-term purchase accounting adjustments and transaction costs related~~that were allocated to the ~~acquisition of Synventive were the primary drivers in the lower operating profit.~~segment.

Outlook:In the ~~industrial~~Industrial manufacturing businesses, management is focused on generating organic sales growth by leveraging the benefits of the diversified products and industrial end-markets in which its businesses have a global presence ~~as well as gaining market share~~ and introducing new products. The Company also remains focused on sales growth through acquisition. The Synventive acquisition, for example, adds innovative products and services and is expected to expand the Company's global marketplace presence into geographic regions and end-markets where it had limited access. Our ability to generate sales growth in the global markets served by these businesses is subject to economic conditions. Order activity in certain end-markets, including transportation, may provide extended sales growth. Strategic investments are expected to provide incremental benefits in the long term.

Operating profit is largely dependent on the sales volumes and mix within all businesses of the segment. Management continues to focus on improving profitability through leveraging organic sales growth, acquisitions, pricing initiatives, ~~lean~~ productivity and process ~~improvements and investments to reduce outsourcing costs related to certain manufacturing processes. Management~~

~~actively manages commodity price increases through pricing and productivity initiatives.~~improvements. Costs associated with increases in new product introductions and the integration of and within the Synventive business may negatively impact operating profit.

~~Distribution~~

Three months ended September 30, Nine months ended September 30,
(in millions) 2012 2011 Change 2012 2011 Change
Sales $ 85.7
$ 90.3
$ (4.5 ) (5.0 )% $ 271.0
$ 271.9
$ (0.9 ) (0.3 )%
Operating profit 6.9
7.8
(0.9 ) (11.0 )% 23.8
21.9
2.0
9.0 %
Operating margin 8.1 % 8.6 % 8.8 % 8.0 %

~~The Distribution segment reported sales of $85.7~~ ~~million in the~~ ~~third quarter of 2012, a~~ ~~5.0%~~ ~~decrease from the~~ ~~third quarter of 2011. Organic sales declined by~~ ~~$4.3~~ ~~million, while the negative impact of foreign currency translation decreased sales by approximately~~ ~~$0.2~~ ~~million as the U.S. dollar strengthened against foreign currencies. In the first nine months of 2012, this segment reported sales of~~ ~~$271.0~~ ~~million, a~~ ~~0.3%~~ ~~decrease from the first~~ ~~nine months~~ ~~of 2011. Organic sales improved by~~ ~~$0.5~~ ~~million, while the negative impact of foreign currency translation decreased sales by approximately~~ ~~$1.4~~ ~~million.~~

~~Operating profit at Distribution in the~~ ~~third quarter of 2012~~ ~~decreased~~ ~~11.0%~~ ~~from the third quarter of 2011 to~~ ~~$6.9~~ million. The decrease was primarily driven by the profit impact of lower sales volumes, which was partially offset by lower employee related costs. Employee related costs benefited from lower incentive compensation, partially offset by higher pension costs. Operating margins declined from ~~8.6%~~ ~~in the third quarter of 2011 to~~ ~~8.1%~~ ~~in the 2012 period. Operating profit in the first~~ ~~nine months~~ ~~of 2012 increased~~ ~~9.0%~~ ~~from the first nine months of 2011 to~~ ~~$23.8~~ ~~million. The increase during the 2012 period was driven by lower employee related costs, primarily due to incentive compensation, partially offset by increased pension costs.~~

Outlook: Organic sales levels in the Distribution segment are largely dependent upon the economy in the regions served, the retention of its customers and continuation of existing sales volumes to such customers, and the effectiveness and size of its sales force. Both near-term and long-term economic conditions remain uncertain as customers within our distribution businesses continue to manage costs and inventory levels. Recent sales have declined as our customers closely manage their inventory levels. Management continues to focus on profitable sales mix and believes future sales growth may result from improvements in economic and end-market conditions, pricing initiatives, and investments in market penetration activities and sales force productivity initiatives.

Management is focused on growing operating profit at Distribution primarily through leveraging organic sales growth, productivity initiatives and continued cost management. Operating profit is expected to be affected by the profit impact of the changes in sales volume and sales mix. Management actively manages supplier price increases through pricing actions and other productivity initiatives.

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's 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 ~~2012~~2013 will generate adequate cash. The Company closely monitors its cash generation, usage and preservation including the management of working capital to generate cash.

On April 22, 2013, the Company completed the sale of BDNA to MSC. The total cash consideration paid for BDNA was $550.0 million, subject to certain working capital and post closing adjustments. The after-tax proceeds from the transaction are estimated to be approximately $400.0 million. Taxes will be payable during 2013. The Credit Facility does not require that the Company use the proceeds from the sale of BDNA to reduce its outstanding borrowings. The Company will utilize a portion of the proceeds to reduce debt, repurchase common shares, invest in profitable growth initiatives including acquisitions, and for general corporate purposes. In April 2013, the Company initially utilized approximately $480.0 million to reduce borrowings under its Credit Facility (the "April 2013 Credit Facility payment").

The Company's 3.375% Convertible Notes are subject to redemption at their par value at any time, at the option of the Company, on or after March 20, 2014. The note holders may also require the Company to redeem some or all of the 3.375% Convertible Notes on March 15^thof 2014, 2017 and 2022. Accordingly, the 3.375% Convertible Notes, classified as long-term debt as of December 31, 2012, have been classified within the current portion of long-term debt as of March 31, 2013. Payment on the 3.375% Convertible Notes, if required by note holders, is expected to be financed through internal cash, borrowings under its Credit Facility and the sale of debt securities, or a combination thereof.

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 and currently expects that its bank syndicate, comprised of 17 banks, will continue to support its Credit Facility which matures in September 2016. In July 2012, the bank syndicate made available an additional $250.0 million under the existing Credit Facility, bringing the amended Credit

Facility to $750.0 million. At ~~September 30, 2012~~March 31, 2013, the Company has $~~124.6~~145.9 million unused and available for borrowings under its amended $750.0 million Credit Facility, subject to covenants in the Company's debt agreements. At ~~September 30, 2012~~March 31, 2013, additional borrowings of ~~$132.0~~$117.0 million of Total Debt and ~~$33.4~~$24.5 million of Senior Debt would have been allowed under the covenants. The unused and available borrowings were increased subsequently by the amount of the April 2013 Credit Facility payment. Additional funds may be used, as needed, to support the Company's ongoing growth initiatives. The Company believes its credit facilities and access to capital markets, coupled with cash generated from operations, are adequate for its anticipated future requirements.

The Company closely monitors compliance with its various debt covenants. The Company's most restrictive financial covenant is the Senior Debt Ratio which requires the Company to maintain a ratio of Consolidated Senior Debt, as defined in the Amended and Restated Credit Agreement ("Credit Agreement"), to Consolidated EBITDA, as defined, of not more than 3.25 times at ~~September 30, 2012~~March 31, 2013. The actual ratio at ~~September 30, 2012~~March 31, 2013 was ~~3.09~~3.13 times. The Company's debt agreements also contain other financial covenants that require the maintenance of a certain other debt ratio (Consolidated Total Debt, as defined, to Consolidated EBITDA of not more than 4.00 times) and a certain interest coverage ratio (Consolidated EBITDA to Consolidated Cash Interest Expense, as defined, of at least 4.25 times) at ~~September 30, 2012~~March 31, 2013. The Company is in compliance with its debt covenants as of ~~September 30, 2012~~March 31, 2013.

In April 2012, the Company entered into five-year interest rate swap agreements transacted with three banks which together convert the interest on the first $100.0 million of borrowings under the Company’s Credit Agreement from a variable rate plus the borrowing spread to a fixed rate of 1.03% plus the borrowing spread for the purpose of mitigating its exposure to variable interest rates.

~~The purchase price of Synventive was financed primarily with borrowings under the Company's Credit Facility.~~ Any future acquisitions are expected to be financed through internal cash, borrowings and equity, or a combination thereof. Additionally, we may from time to time seek to retire or repurchase our outstanding debt through cash purchases ~~and /~~ and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

Cash Flow


	Nine months ended September 30,									Three Months Ended March 31,
(in millions)	2012			2011			Change			2013			2012			Change
Operating activities	$	77.3		$	78.5		$	(1.2	)	$	17.7		$	6.3		$	11.3
Investing activities	(317.5		)	(28.7		)	(288.8		)	(11.4		)	(8.9		)	(2.5		)
Financing activities	264.2			(23.9		)	288.1			8.3			17.1			(8.7		)
Exchange rate effect	0.9			(0.5		)	1.4			(1.0		)	0.5			(1.6		)
Increase in cash	$	24.8		$	25.4		$	(0.6	)	$	13.5		$	15.0		$	(1.5	)

Operating activities provided $~~77.3~~17.7 million in cash in the first ~~nine~~three months of ~~2012~~2013 as compared to $~~78.5~~6.3 million in the first ~~nine~~three months of ~~2011.~~2012. In the first ~~nine~~three months of ~~2012,~~2013, operating cash flows were ~~negatively~~positively impacted by ~~higher~~improved operating performance, which was offset within net income by $10.5 million in non-cash CEO transition costs. Higher cash payments for accrued employee incentive compensation, which was earned in 2011 and paid in the first quarter of 2012, ~~as well as increased contributions to~~negatively impacted the ~~Company's pension plans. In addition, a continued focus on working capital reductions resulted in a lower use of cash than in the 2011~~2012 period. ~~An increase in receivables, driven by higher levels of sales growth, generated a higher use of cash in the comparable 2011 period. Receivables growth in~~However, the 2012 period was ~~tempered~~positively impacted by lower levels of ~~sales growth.~~cash used for working capital as a result of the focus in 2012 on reducing working capital levels. The cash generated from operations in the ~~2012~~2013 period, together with borrowings under the Company's credit agreements, was primarily used for capital expenditures, the repurchase of stock and the payment of dividends.

Investing activities in the ~~2012~~2013 period primarily consisted of ~~the cash outflow~~capital expenditures of $~~296.7~~ ~~million to fund the Synventive acquisition. Capital expenditures in the 2012 period were~~ ~~$22.9~~10.1 million compared to $~~25.2~~7.3 million in the ~~2011~~2012 period. ~~The higher expenditures in the 2011 period related primarily to the purchase of previously leased equipment.~~ The Company expects capital spending in ~~2012~~2013 to approximate ~~$35 to $40~~$45 million. Investing activities include the release of approximately $4.9 million of escrow funds related to the 2011 sale of the BDE businesses. Investing activities for the 2011 period also included the acquisition of a hydro-pneumatic suspensions business from Curtiss-Wright Antriebstechnik Gmbh for 3.1 million Swiss francs (~~$3.5~~ ~~million).~~

Cash provided by financing activities in the first ~~nine~~three months of ~~2012~~2013 included a net increase in borrowings of $~~293.4~~23.5 million compared to ~~a net decrease in borrowings of~~ $~~11.9~~29.2 million in the comparable ~~2011~~2012 period. ~~In the 2012 period, net borrowings were primarily used to fund the Synventive acquisition. Payments on long-term debt include the payment of $45.1 million of~~

debt that was assumed in the Synventive acquisition using cash on hand held by foreign subsidiaries. The 2011 period includes the redemption of the remaining $92.5 million principal amount of the 3.75% Convertible Notes including a ~~$9.8~~ ~~million premium paid on conversion for those notes surrendered for conversion. The redemption, including the premium, was funded by borrowings under the Credit Facility.~~

Proceeds from the issuance of common stock decreased $~~21.2~~0.6 million in the ~~2012~~2013 period from the ~~2011~~2012 period primarily as a result of ~~higher~~fewer stock option exercises in the ~~2011~~2013 period. During the ~~nine~~three months ended ~~September 30,~~March 31, 2013 and March 31, 2012,, the Company repurchased ~~0.7~~0.5 million and 0.4 million shares, respectively, of the Company's ~~stock at a~~stock. The cost of the repurchases was $~~19.0~~12.9 million ~~under~~in the terms of its publicly announced repurchase program. The repurchase program, announced on October 20, 2011 (the "2011 Program"), authorized the repurchase of up to 5.0 million shares of the Company's common stock. As of2013 period and ~~September 30, 2012, the Company had repurchased 1.2 million shares of the Company's common stock under the 2011 Program. During the~~ ~~nine months~~ ~~ended~~ ~~September 30, 2011, the Company repurchased 1.0 million shares of the Company's stock at a cost of~~ $~~22.4~~11.1 million ~~under~~in the ~~terms of a previous publicly announced repurchase program.~~2012 period. Total cash used to pay dividends was $~~16.2~~5.4 million in the 2013 period compared to $5.5 million in the 2012 ~~period compared to~~ ~~$13.2~~ ~~million in the 2011~~ period. ~~In addition, cash used by financing activities in the 2011 period was partially offset by an~~ ~~$8.6~~ ~~million excess tax benefit recorded for 2011 tax deductions related to employee stock plan activity in 2011 and prior years.~~

At ~~September 30, 2012~~March 31, 2013, the Company held $~~87.4~~99.9 million in cash and cash equivalents, ~~the majority~~substantially all of which ~~are~~was held by foreign subsidiaries. Cash and cash equivalents held by foreign subsidiaries ~~may~~are expected to continue to increase in the near term. These balances are available primarily to fund international investments. The Company has not repatriated any portion of current year foreign earnings to the U.S. during the first ~~nine~~three months of ~~2012;~~2013; however, repatriations of a portion of current year foreign earnings are planned during the remainder of ~~2012.~~2013.

The Company maintains borrowing facilities with banks to supplement internal cash generation. At ~~September 30, 2012~~March 31, 2013, $~~625.4~~604.1 million was borrowed at an interest rate of ~~1.45%~~1.77% under the Company's amended $750.0 million Credit Facility which matures in September 2016. In addition, as of ~~September 30, 2012~~March 31, 2013, the Company had $~~7.5~~11.2 million in borrowings under short-term bank credit lines. At ~~September 30, 2012~~March 31, 2013, the Company's total borrowings ~~are~~were comprised of approximately 23% fixed rate debt and approximately 77% variable rate debt. The interest payments on approximately $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 respective interest rate swaps that were executed in April 2012.

Debt Covenants

Borrowing capacity is limited by various debt covenants in the Company's debt agreements. As of ~~September 30, 2012~~March 31, 2013, the most restrictive borrowing capacity covenant in any agreement requires the Company to maintain a maximum ratio of Consolidated Senior Debt, as defined, to Consolidated EBITDA, as defined, of not more than 3.25 times for the four fiscal quarters then ending. The Company's debt agreements also contain other financial covenants that require the maintenance of a certain other debt ratio, Consolidated Total Debt, as defined, to Consolidated EBITDA of not more than 4.00 times and a certain interest coverage ratio, Consolidated EBITDA to Consolidated Cash Interest Expense, as defined, of at least 4.25 times, at ~~September 30, 2012~~March 31, 2013. Following is a reconciliation of Consolidated EBITDA to the Company's net income (in millions):

2826


	Four fiscal quarters ended September 30, 2012			Four fiscal quarters ended March 31, 2013
Net income	$	65.6		$	86.5
Add back:
Interest expense	10.4			14.2
Income taxes	21.0			12.8
Depreciation and amortization	55.2			60.8
Loss from discontinued operations, net of income taxes	26.7			3.3
Adjustment for acquired businesses	26.9			11.5
Other adjustments	(0.2		)	8.5
Consolidated EBITDA, as defined	$	205.6		$	197.6

Consolidated Senior Debt, as defined, as of September 30, 2012	$	634.7
Consolidated Senior Debt, as defined, as of March 31, 2013				$	617.6
Ratio of Consolidated Senior Debt to Consolidated EBITDA	3.09			3.13
Maximum	3.25			3.25
Consolidated Total Debt, as defined, as of September 30, 2012	$	690.4
Consolidated Total Debt, as defined, as of March 31, 2013				$	673.2
Ratio of Consolidated Total Debt to Consolidated EBITDA	3.36			3.41
Maximum	4.00			4.00
Consolidated Cash Interest Expense, as defined, as of September 30, 2012	$	13.8
Consolidated Cash Interest Expense, as defined, as of March 31, 2013				$	14.4
Ratio of Consolidated EBITDA to Consolidated Cash Interest Expense	14.93			13.70
Minimum	4.25			4.25

~~Other adjustments represent~~The loss from discontinued operations, net ~~gains on the sale~~ of ~~assets, depreciation and amortization~~income taxes, reflects losses associated with ~~the~~BDE. The loss on discontinued operations ~~and due diligence and transaction expenses~~related to BDNA remains included in EBITDA, as ~~permitted under~~defined, until the ~~Credit Agreement.~~date the disposition is consummated. The adjustment for acquired businesses reflects the pre-acquisition operations of Synventive for the ~~eleven month~~five-month period ended August 27, 2012. Other adjustments represent income taxes included within discontinued operations associated with BDNA, net gains on the sale of assets and due diligence and transaction expenses as permitted under the Credit Agreement. Consolidated Total Debt excludes the debt discount related to the 3.375% Convertible Notes. The Company's financial covenants are measured as of the end of each fiscal quarter. At ~~September 30, 2012~~March 31, 2013, additional borrowings of ~~$132.0~~$117.0 million of Total Debt and ~~$33.4~~$24.5 million of Senior Debt would have been allowed under the covenants. Senior Debt includes primarily the borrowings under the Credit Facility and the borrowings under lines of credit. The Company's unused credit facilities at ~~September 30, 2012~~March 31, 2013 were $~~124.6~~145.9 million.

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 Notes to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2011~~2012. The most significant areas involving management judgments and estimates are described in Management's Discussion and Analysis of Financial Conditions and Results of Operations in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2011~~2012. There have been no material changes to such judgments and estimates. Actual results could differ from those estimates.

EBITDA

EBITDA for the first ~~nine~~three months of ~~2012~~2013 was ~~$132.2~~$38.8 million compared to ~~$139.4~~$44.5 million in the first ~~nine~~three months of ~~2011.~~2012. EBITDA is a measurement not in accordance with accounting principles generally accepted in the United States of America (“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. Accordingly, the measurement has limitations depending on its use. 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.

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


	Nine months ended September 30,				Three Months Ended March 31,
	2012		2011		2013		2012
Net income	$	65.5	$	64.6	$	13.5	$	22.2
Add back:
Interest expense	8.0		8.0		4.4		2.4
Income taxes	18.5		22.9		4.4		6.8
Depreciation and amortization	40.2		43.9		16.5		13.1
EBITDA	$	132.2	$	139.4	$	38.8	$	44.5

FORWARD-LOOKING STATEMENTS

Certain of the statements in this quarterly report may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are made based upon management's good faith expectations and beliefs concerning future developments and their potential effect upon the Company and can be identified by the use of words such as "anticipated," "believe," "expect," "plans," "strategy," "estimate," "project," and other words of similar meaning in connection with a discussion of future operating or financial performance. These forward-looking statements may relate to, among others, the anticipated benefits of the Synventive acquisition; the impact of the acquisition on the Company’s financial results, business performance and product offerings; and the expected impact of the acquisition on the Company's financial results, business performance and product offerings; and the impact of the acquisition on the Company’s fiscal revenue, non-GAAP results and GAAP results. These forward-looking statements do not constitute guarantees of future performance and are subject to a variety of risks and uncertainties that ~~could~~may cause actual results to differ materially from those ~~anticipated.~~expressed in the forward-looking statements. These include, but are not limited to: ~~the effects of disruption from the transaction, making it more difficult to maintain~~difficulty maintaining relationships with employees, customers, distributors, suppliers, business partners or governmental entities; the success of ~~the companies in implementing their~~ integration ~~strategies; the actual benefits realized from this transaction; disruptions to our business and financial conditions as a result of this acquisition or other investments or acquisitions;~~strategy implementation; the ability to recruit and retain key ~~personnel;~~personnel and execute effective executive transitions; difficulties leveraging market opportunities; difficulties providing solutions that meet the needs of customers; ~~market acceptance of Synventive’s products and services;~~ rapid technological and market change; the ability to protect intellectual property rights; ~~the ability to maintain partner, reseller, distribution and vendor support and supply relationships;~~ higher risks in international operations and markets; ~~the ability to hire and retain employees;~~ the impact of increased competition; currency fluctuations; litigation; and other risks and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission by the Company, including the Management's Discussion and Analysis of Financial Condition and Results of Operations and Risk Factors sections of the ~~Company’s~~Company's filings with the Securities and Exchange Commission. The risks and uncertainties described in our periodic filings with the Securities and Exchange Commission include, among others, uncertainties arising from the current or worsening conditions in financial markets; future financial performance of the industries or customers that we serve; changes in market demand for our products and services; inability to realize expected sales or profits from existing backlog; integration of acquired ~~businesses, including integration of Synventive;~~businesses; restructuring costs or savings; the impact of the divestiture of the Barnes Distribution North America business to MSC Industrial Direct Co., Inc.; the impact of the acquisition in 2012 of the Synventive Molding Solutions business; the impact of the divestiture in 2011 of our Barnes Distribution Europe ~~businesses~~businesses; and any other future strategic actions, including acquisitions, joint ventures, divestitures, restructurings, or strategic business realignments, and our ability to achieve the financial and operational targets set in connection with any such actions; introduction or development of new products or transfer of work; changes in raw material or product prices and availability; foreign currency exposure; our dependence upon revenues and earnings from a small number of significant customers; a major loss of customers; the impact of the U.S. Tax Court's unfavorable decision related to an IRS audit for the tax years 2000 through 2002 rendered on April 16, 2013; the outcome of pending and future claims or litigation or governmental, regulatory proceedings, investigations, inquiries, and audits; uninsured claims and litigation; outcome of contingencies; future repurchases of common stock; future levels of indebtedness; and numerous other matters of global, regional or national scale, including those of a political, economic, business, competitive, environmental, regulatory and public health nature. The Company assumes no obligation to update our forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In August 2012, the Company completed the acquisition of Synventive, which was financed primarily with borrowings under the Company's variable rate revolving credit facility. The additional borrowings increased the Company's total borrowings to approximately 23% fixed rate debt and 77% variable rate debt at September 30, 2012.

~~interest rates.~~

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, ~~2011.~~2012.

Item 4. Controls and Procedures

Management, including the Company's President and 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 Synventive Molding Solutions ("Synventive") on August 27, 2012 and it represented approximately 21% of our total assets as of September 30, 2012. As the acquisition occurred in the third quarter of 2012, the scope of our assessment of the effectiveness of internal control over financial reporting does not include Synventive. This exclusion is in accordance with the SEC's general guidance that an assessment of a recently acquired business may be omitted from our scope in the year of acquisition. Based upon, and as of the date of, our 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, as amended, is (i) recorded, processed, summarized and reported as and when required and (ii) is accumulated and communicated to the 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 ~~third~~first fiscal quarter of ~~2012~~2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

3129

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company was named in a lawsuit arising out of an alleged breach of contract and implied warranty by a customer of Toolcom Suppliers Limited (“Toolcom”), a business previously included within the former Logistics and Manufacturing Services segment, related to the sale of certain products prior to the Company’s 2005 acquisition of Toolcom. In 2006, the plaintiff filed the lawsuit in civil court in Scotland and asserted that certain products sold were not fit for a particular ~~use and claims approximately 5.5 million pounds sterling (approximately $8.9 million at~~ ~~September 30, 2012) in damages, plus interest at~~use. The Company settled the ~~statutory rate~~lawsuit during the first quarter of ~~8% per annum and costs. The court found~~2013 with an outcome that ~~Toolcom was in breach of contract and implied warranty, and ordered Toolcom to pay a portion of the plaintiff’s attorneys’ fees. The court has~~did not made determinations as to causation and damages. In the third quarter 2012, the customer provided to the Company additional information regarding its claim, increasing the amount of damages, including lost profits, that the customer allegedly suffered as a result of the Company's breach of contract and implied warranty, and the amount of interest due on the claim. Although the Company intends to vigorously defend its position, based on reviews of the currently available information and acknowledging the uncertainties of litigation, management has provided for what it believes to be a reasonable estimate of loss exposure. While it is currently not possible to determine the ultimate outcome of this matter, the Company believes that any ultimate losses would not be expected to have a material ~~adverse~~ effect on the ~~Company’s~~ consolidated financial ~~position or cash flows, but could be material to~~statements. The final settlement expense was included within the loss from operations of discontinued businesses in the consolidated ~~results~~statements of ~~operations of any one period.~~income for the quarter ended March 31, 2013.

In addition, 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 other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011. We are updating those risk factors to include the following risks associated with our recent acquisition of all of the issued and outstanding shares of capital stock of Synventive Acquisition Inc. ("Synventive") and the financing for that acquisition ("Synventive Acquisition"). As reported in our Form 8-K filed with the Securities and Exchange Commission (“SEC”) on August 30, 2012 and as described elsewhere in this Form 10-Q, we completed the Synventive Acquisition on August 27, 2012 and funded the purchase price for the acquisition from cash on hand and borrowings under our Credit Agreement.

The Synventive Acquisition exposes the Company to a number of risks and uncertainties, the occurrence of any of which could materially adversely affect our business, cash flows, financial condition and results of operations as well as the market price of our common stock. Such risks and uncertainties include risks relating to the integration of Synventive's business with the Company, the financial performance of Synventive and risks associated with incurring additional indebtedness.

We may not realize the anticipated benefits of the Synventive Acquisition. Our ability to realize such benefits will depend on our ability to successfully and efficiently integrate Synventive's business, which involves products and services, markets and geographies that are new to the Company, into our business, in addition to an increased scale of our international operations. Difficulties of integration could include coordinating and consolidating separate systems, integrating the management of the acquired business, retaining market acceptance of Synventive's products and services, maintaining employee morale and retaining key employees, and implementing our enterprise resource planning systems and operational procedures and disciplines. Any such difficulties may make it more difficult to maintain relationships with employees, customers, business partners and suppliers. In addition, even if integration is successful, the financial performance of the acquired business may not be as expected and there can be no assurance we will realize anticipated revenue and earnings enhancements from the Synventive Acquisition.

In addition, our management has spent, and will continue to spend, a significant amount of its time and efforts directed toward the integration of Synventive, which time and efforts otherwise could have been spent on our other businesses and other opportunities that could have been beneficial to us.

Finally, we have incurred a substantial amount of additional indebtedness which could have an adverse effect on our financial health and make it more difficult for us to obtain additional financing in the future. The additional debt we incurred to fund the acquisition purchase price may have an adverse effect on our financial condition and may limit our ability to obtain any necessary financing in the future for working capital, capital expenditures, future acquisitions, debt service requirements or other purposes. Additionally, we may not be able to generate sufficient cash flow or otherwise obtain funds necessary to meet

these additional debt obligations. Any default under the Credit Agreement could result in the acceleration of the repayment obligations to our lenders, as well as the acceleration of all of our outstanding debt.

~~The realization of any of the foregoing risks may materially adversely affect our business, cash flows, financial condition, results of operations or the market price of our common stock.~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

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 (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs⁽²⁾

July 1-31, 2012 —
$ —
—
3,800,000
August 1-31, 2012 16,697
$ 23.75
—
3,800,000
September 1-30, 2012 —
$ —
—
3,800,000
Total 16,697
⁽¹⁾
$ 23.75
—



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 (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs⁽¹⁾

January 1-31, 2013	1,701		$	23.39	—	3,800,000
February 1-28, 2013	26,686		$	24.36	—	5,000,000	⁽¹⁾
March 1-31, 2013	469,136		$	27.47	468,000	4,532,000
Total	497,523	⁽²⁾	$	27.29	468,000

(1)

The Program was publicly announced on October 20, 2011 (the "2011 Program") authorizing repurchase of up to 5.0 million shares of common stock. At December 31, 2012, 3.8 million shares of common stock had not been purchased under the 2011 Program. On February 21, 2013, the Board of Directors of the Company increased the number of shares authorized for repurchase under the 2011 Program by 1.2 million shares of common stock. The 2011 Program permits open market purchases and privately negotiated transactions.

(2)

~~All~~Other than 468,000 shares purchased in the first quarter of 2013, which were purchased as part of the Company's 2011 Program, all acquisitions of equity securities during the ~~third~~first quarter of ~~2012~~2013 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)~~	~~The program was publicly announced on October 20, 2011 authorizing repurchase of up to 5.0 million shares of the Company's common stock.~~

3330

Item 6. Exhibits



(a) Exhibits
Exhibit 2.1	~~Stock~~Asset Purchase Agreement, dated February 22, 2013, between the Company and MSC Industrial Direct Co., Inc.
Exhibit 10.1	Amendment No. 1 and Consent under the Fifth Amended and Restated Revolving Credit Agreement, dated as of ~~July 16, 2012, incorporated by reference to~~ February 21, 2013.
Exhibit ~~2.1 to Form 8-K filed by~~10.2	Transition and Resignation Agreement between the Company ~~on July 17, 2012.~~and Gregory F. Milzcik, dated February 22, 2013.
Exhibit 10.3	Offer Letter between the Company and Patrick Dempsey, dated February 22, 2013.
Exhibit 10.4	Employee Non-Disclosure, Non-Competition, Non-Solicitation and Non-Disparagement Agreement between the Company and Patrick J. Dempsey, dated February 27, 2013.
Exhibit 15	Letter regarding unaudited interim financial information.
Exhibit 31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 101.INS	XBRL Instance Document.
Exhibit 101.SCH	XBRL Taxonomy Extension Schema Document.
Exhibit 101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
Exhibit 101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
Exhibit 101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
Exhibit 101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

3431

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:	~~October~~April 29, ~~2012~~2013	/s/ CHRISTOPHER J. STEPHENS, JR.
		Christopher J. Stephens, Jr. Senior Vice President, Finance Chief Financial Officer (Principal Financial Officer)

Date:	~~October~~April 29, ~~2012~~2013	/s/ MARIAN ACKER
		Marian Acker Vice President, Controller (Principal Accounting Officer)

3532

EXHIBIT INDEX

Barnes Group Inc.

Quarterly Report on Form 10-Q

For the Quarter ended ~~September 30, 2012~~March 31, 2013



Exhibit No.	Description	Reference
2.1	~~Stock~~ Asset Purchase Agreement, dated ~~as of July 16, 2012.~~February 22, 2013, between the Company and MSC Industrial Direct Co., Inc.	Incorporated by reference to Exhibit 2.1 to Form 8-K filed by the Company on ~~July 17, 2012.~~February 27, 2013.
10.1	Amendment No. 1 and Consent under the Fifth Amended and Restated Revolving Credit Agreement, dated as of February 21, 2013.	Filed with this report.
10.2	Transition and Resignation Agreement between the Company and Gregory F. Milzcik, dated February 22, 2013.	Filed with this report.
10.3	Offer Letter between the Company and Patrick Dempsey, dated February 22, 2013.	Filed with this report.
10.4	Employee Non-Disclosure, Non-Competition, Non-Solicitation and Non-Disparagement Agreement between the Company and Patrick J. Dempsey, dated February 27, 2013.	Filed with this report.
15	Letter regarding unaudited interim financial information.	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.
32	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.	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.

3633




Accounts Receivable	$	42,724
Inventory	13,546
Other current assets	3,988
Property, plant and equipment	16,481
Other noncurrent assets	2,841
Intangible assets (Note 6)	126,600
Goodwill (Note 6)	203,988
Total assets acquired	410,168

Current liabilities	(22,768		)
Other liabilities	(4,361		)
Deferred taxes	(40,785		)
Debt assumed	(45,537		)
Total liabilities assumed	(113,451		)
Net assets acquired	$	296,717