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Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2016 ¨ 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 of incorporation) (I.R.S. Employer Identification No.) 123 Main Street, Bristol, Connecticut 06010 (Address of Principal Executive Office) (Zip Code) (860) 583-7070 Registrant’s telephone number, including area code Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $0.01 Par Value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10- K. ¨ 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 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 o Non-accelerated filer o Smaller reporting company o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x The aggregate market value of the voting stock (Common Stock) held by non-affiliates of the registrant as of the close of business on June 30, 2016 was approximately $ 1,661,081,242 based on the closing price of the Common Stock on the New York Stock Exchange on that date. The registrant does not have any non-voting common equity. The registrant had outstanding 53,823,313 shares of common stock as of February 16, 2017 . Documents Incorporated by Reference Portions of the registrant’s definitive proxy statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders to be held May 5, 2017 are incorporated by reference into Part III.

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    UNITED STATESSECURITIES AND EXCHANGE COMMISSION

    Washington, D.C. 20549FORM 10-K

    x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2016

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934

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

    123 Main Street, Bristol, Connecticut 06010(Address of Principal Executive Office) (Zip Code)

    (860) 583-7070

    Registrants telephone number, including area codeSecurities registered pursuant to Section 12(b) of the Act:

    Title of each class Name of each exchange on which registeredCommon Stock, $0.01 Par Value New York Stock Exchange

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

    NoneIndicatebycheckmarkiftheregistrantisawell-knownseasonedissuer,asdefinedinRule405oftheSecuritiesAct.YesxNoIndicatebycheckmarkiftheregistrantisnotrequiredtofilereportspursuanttoSection13orSection15(d)oftheAct.YesNoxIndicatebycheckmarkwhethertheregistrant:(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1934

    duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports);and(2)hasbeensubjecttosuchfilingrequirementsforthepast90days.YesxNo

    IndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyandpostedonitscorporateWebsite,ifany,everyInteractiveDataFilerequiredtobesubmittedandpostedpursuanttoRule405ofRegulationS-T(232.405ofthischapter)duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtosubmitandpostsuchfiles).YesxNo

    IndicatebycheckmarkifdisclosureofdelinquentfilerspursuanttoItem405ofRegulationS-Kisnotcontainedherein,andwillnotbecontained,tothebestofregistrantsknowledge,indefinitiveproxyorinformationstatementsincorporatedbyreferenceinPartIIIofthisForm10-KoranyamendmenttothisForm10-K.

    Indicatebycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfiler,anon-acceleratedfiler,orasmallerreportingcompany.Seedefinitionsoflargeacceleratedfiler,acceleratedfiler,andsmallerreportingcompanyinRule12b-2oftheExchangeAct.(Checkone):

    Largeacceleratedfilerx AcceleratedfileroNon-acceleratedfilero Smallerreportingcompanyo

    Indicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b-2oftheAct).YesNoxTheaggregatemarketvalueofthevotingstock(CommonStock)heldbynon-affiliatesoftheregistrantasofthecloseofbusinessonJune30,2016was

    approximately$1,661,081,242basedontheclosingpriceoftheCommonStockontheNewYorkStockExchangeonthatdate.Theregistrantdoesnothaveanynon-votingcommonequity.

    Theregistranthadoutstanding53,823,313sharesofcommonstockasofFebruary16,2017.Documents Incorporated by Reference

    PortionsoftheregistrantsdefinitiveproxystatementtobedeliveredtostockholdersinconnectionwiththeAnnualMeetingofStockholderstobeheldMay5,2017areincorporatedbyreferenceintoPartIII.

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    Barnes Group Inc.Index to Form 10-K

    Year Ended December 31, 2016

    PagePartI Item1. Business 1Item1A. RiskFactors 4Item1B. UnresolvedStaffComments 12Item2. Properties 12Item3. LegalProceedings 14Item4. MineSafetyDisclosures 14

    PartII Item5. MarketforRegistrantsCommonEquity,RelatedStockholderMattersandIssuerPurchasesofEquitySecurities 15Item6. SelectedFinancialData 17Item7. ManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperations 18Item7A. QuantitativeandQualitativeDisclosuresAboutMarketRisk 36Item8. FinancialStatementsandSupplementaryData 37Item9. ChangesinandDisagreementswithAccountantsonAccountingandFinancialDisclosure 72Item9A. ControlsandProcedures 72Item9B. OtherInformation 73

    PartIII Item10. Directors,ExecutiveOfficersandCorporateGovernance 74Items11-14. IncorporatedbyReferencetoDefinitiveProxyStatement 75

    PartIV Item15. Exhibits,FinancialStatementSchedules 75Item16.

    Form10-KSummary76

    FORWARD-LOOKING STATEMENTS

    ThisAnnualReportmaycontainforward-lookingstatementsasdefinedinthePrivateSecuritiesLitigationReformActof1995.Forward-lookingstatementsoftenaddressourexpectedfutureoperatingandfinancialperformanceandfinancialcondition,andoftencontainwordssuchas"anticipate,""believe,""expect,""plan,""estimate,""project,"andsimilarterms.Theseforward-lookingstatementsdonotconstituteguaranteesoffutureperformanceandaresubjecttoavarietyofrisksanduncertaintiesthatmaycauseactualresultstodiffermateriallyfromthoseexpressedintheforward-lookingstatements.Theseinclude,amongothers:difficultymaintainingrelationshipswithemployees,includingunionizedemployees,customers,distributors,suppliers,businesspartnersorgovernmentalentities;failuretosuccessfullynegotiatecollectivebargainingagreementsorpotentialstrikes,workstoppagesorothersimilarevents;difficultiesleveragingmarketopportunities;changesinmarketdemandforourproductsandservices;rapidtechnologicalandmarketchange;theabilitytoprotectintellectualpropertyrights;introductionordevelopmentofnewproductsortransferofwork;higherrisksinglobaloperationsandmarkets;theimpactofintensecompetition;actsofterrorism,cybersecurityattacksorintrusionsthatcouldadverselyimpactourbusinesses;uncertaintiesrelatingtoconditionsinfinancialmarkets;currencyfluctuationsandforeigncurrencyexposure;futurefinancialperformanceoftheindustriesorcustomersthatweserve;ourdependenceuponrevenuesandearningsfromasmallnumberofsignificantcustomers;amajorlossofcustomers;inabilitytorealizeexpectedsalesorprofitsfromexistingbacklogduetoarangeoffactors,includingchangesincustomersourcingdecisions,materialchanges,productionschedulesandvolumesofspecificprograms;theimpactofgovernmentbudgetandfundingdecisions;changesinrawmaterialorproductpricesandavailability;integrationofacquiredbusinesses;restructuringcostsorsavings;thecontinuingimpactofprioracquisitionsand

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    divestitures;andanyotherfuturestrategicactions,includingacquisitions,divestitures,restructurings,orstrategicbusinessrealignments,andourabilitytoachievethefinancialandoperationaltargetssetinconnectionwithanysuchactions;theoutcomeofpendingandfuturelegal,governmental,orregulatoryproceedingsandcontingenciesanduninsuredclaims;futurerepurchasesofcommonstock;futurelevelsofindebtedness;andnumerousothermattersofaglobal,regionalornationalscale,includingthoseofapolitical,economic,business,competitive,environmental,regulatoryandpublichealthnature;andotherrisksanduncertaintiesdescribedinthisAnnualReport.TheCompanyassumesnoobligationtoupdateitsforward-lookingstatements.

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    PART I

    Item 1. BusinessBARNES GROUP INC. (1)

    Foundedin1857,BarnesGroupInc.(theCompany)isaglobalindustrialandaerospacemanufacturerandserviceprovider,servingawiderangeofendmarketsandcustomers.Thehighlyengineeredproducts,differentiatedindustrialtechnologies,andinnovativesolutionsdeliveredbyBarnesGroupareusedinfar-reachingapplicationsthatprovidetransportation,manufacturing,healthcareproducts,andtechnologytotheworld.BarnesGroupsapproximately5,000skilledanddedicatedemployeesaroundtheglobearecommittedtoachievingconsistentandsustainableprofitablegrowth.

    Structure

    TheCompanyoperatesundertwoglobalbusinesssegments:IndustrialandAerospace.TheIndustrialsegmentincludesthetheMoldingSolutions,NitrogenGasProductsandEngineeredComponentsbusinessunits.TheAerospacesegmentincludestheoriginalequipmentmanufacturer(OEM)businessandtheaftermarketbusiness,whichincludesmaintenancerepairandoverhaul(MRO)servicesandthemanufactureanddeliveryofaerospaceaftermarketspareparts.

    Inthethirdquarterof2016,theCompany,throughthreeofitssubsidiaries(collectively,thePurchaser),completeditsacquisitionofthemoldsbusinessofAdvalTechHoldingAGandAdvalTechHoldings(Asia)Pte.Ltd.("FOBOHA").FOBOHAisheadquarteredinHaslach,GermanyandoperatesoutofthreemanufacturingfacilitieslocatedinGermany,SwitzerlandandChina.TheCompanycompleteditspurchaseoftheGermanyandSwitzerlandbusinessesonAugust31,2016.ThepurchaseoftheChinabusinessrequiredgovernmentapprovalwhichwasgrantedonSeptember30,2016.FOBOHAspecializesinthedevelopmentandmanufactureofcomplexplasticinjectionmoldsforpackaging,medical,consumerandautomotiveapplications.TheCompanyacquiredFOBOHAforanaggregatecashpurchasepriceofCHF136.3million($138.6million)whichwasfinancedusingcashonhandandborrowingsundertheCompany'srevolvingcreditfacility.ThepurchasepriceincludespreliminaryadjustmentsunderthetermsoftheSharePurchaseAgreement("SPA"),includingapproximatelyCHF11.3million($11.5million)relatedtocashacquired,andissubjecttopostclosingadjustmentsunderthetermsoftheSPA.Inconnectionwiththeacquisition,theCompanyrecorded$39.8millionofintangibleassetsand$73.7millionofgoodwill.FOBOHAisbeingintegratedintotheIndustrialSegment,withinourMoldingSolutionsbusinessunit.SeeNote2andNote5totheConsolidatedFinancialStatements.

    Inthefourthquarterof2015,theCompanycompletedtheacquisitionofprivatelyheldPriamusSystemTechnologiesAGandtwoofitssubsidiaries(collectively,"Priamus")fromGrowthFinanceAG.Priamus,whichhasapproximately40employees,isheadquarteredinSchaffhausen,SwitzerlandandhasdirectsalesandserviceofficesintheU.S.andGermany.Priamusisatechnologyleaderinthedevelopmentofadvancedprocesscontrolsystemsfortheplasticinjectionmoldingindustryandservicesmanyoftheworld'shighestqualityplasticinjectionmoldersinthemedical,automotive,consumergoods,electronicsandpackagingmarkets.PriamusisbeingintegratedintotheIndustrialSegment,withinourMoldingSolutionsbusinessunit.SeeNote2oftheConsolidatedFinancialStatements.

    Inthethirdquarterof2015,theCompanycompletedtheacquisitionoftheThermoplaybusiness("Thermoplay")byacquiringallofthecapitalstockofprivatelyheldHPES.p.A.,theparentcompanythroughwhichThermoplayoperates.ThermoplaysheadquartersandmanufacturingfacilityarelocatedinPont-Saint-MartininAosta,Italy,withtechnicalservicecapabilitiesinChina,India,France,Germany,UnitedKingdom,Portugal,andBrazil.Thermoplayspecializesinthedesign,development,andmanufacturingofhotrunnersystemsforplasticinjectionmolding,primarilyinthepackaging,automotive,andmedicalendmarkets.ThermoplayisbeingintegratedintotheIndustrialSegment,withinourMoldingSolutionsbusinessunit.SeeNote2oftheConsolidatedFinancialStatements.

    _________(1)Asusedinthisannualreport,Company,BarnesGroup,weandoursrefertotheregistrantanditsconsolidatedsubsidiariesexceptwherethecontextrequiresotherwise,andIndustrialandAerospacerefertotheregistrantssegments,nottoseparatecorporateentities

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    INDUSTRIAL

    Industrialisaglobalmanufacturerofhighly-engineered,high-qualityprecisionparts,productsandsystemsforcriticalapplicationsservingadiversecustomerbaseinend-marketssuchastransportation,industrialequipment,consumerproducts,packaging,electronics,medicaldevices,andenergy.Focusedoninnovativecustomsolutions,Industrialparticipatesinthedesignphaseofcomponentsandassemblieswherebycustomersreceivethebenefitsofapplicationandsystemsengineering,newproductdevelopment,testingandevaluation,andthemanufacturingoffinalproducts.Productsaresoldprimarilythroughitsdirectsalesforceandglobaldistributionchannels.IndustrialsMoldingSolutionsbusinessesdesignandmanufacturecustomizedhotrunnersystems,advancedmoldcavitysensorsandprocesscontrolsystems,andprecisionhighcavitationandcubemoldassemblies-collectively,theenablingtechnologiesformanycomplexplasticinjectionmoldingapplications.IndustrialsNitrogenGasProductsbusinessmanufacturesnitrogengasspringsandmanifoldsystemsusedtopreciselycontrolstampingpresses.IndustrialsEngineeredComponentsbusinessesmanufactureandsupplyprecisionmechanicalproductsusedintransportationandindustrialapplications,includingmechanicalsprings,high-precisionpunchedandfine-blankedcomponents,andretainingrings.EngineeredComponentsisequippedtoproducemanytypesofhighlyengineeredprecisionsprings,fromfinehairspringsforelectronicsandinstrumentstolargeheavy-dutyspringsformachinery.

    Industrialcompeteswithabroadbaseoflargeandsmallcompaniesengagedinthemanufactureandsaleofengineeredproducts,precisionmolds,hotrunnersystemsandprecisioncomponents.Industrialcompetesonthebasisofquality,service,reliabilityofsupply,engineeringandtechnicalcapability,geographicreach,productbreadth,innovation,design,andprice.Industrialhasmanufacturing,distributionandassemblyoperationsintheUnitedStates,Brazil,China,Germany,Italy,Mexico,Singapore,SwedenandSwitzerland.IndustrialalsohassalesandserviceoperationsintheUnitedStates,Brazil,Canada,CzechRepublic,China/HongKong,France,Germany,India,Italy,Japan,Mexico,theNetherlands,Portugal,Singapore,Slovakia,SouthAfrica,SouthKorea,Spain,Switzerland,ThailandandtheUnitedKingdom.SalesbyIndustrialtoitsthreelargestcustomersaccountedforapproximately11%ofitssalesin2016.

    AEROSPACE

    AerospaceisaglobalproviderofcomplexfabricatedandprecisionmachinedcomponentsandassembliesforOEMturbineengine,airframeandindustrialgasturbinebuilders,andthemilitary.TheAerospaceaftermarketbusinessprovidesjetenginecomponentMROservices,includingservicesperformedunderourComponentRepairPrograms(CRPs),formanyoftheworldsmajorturbineenginemanufacturers,commercialairlinesandthemilitary.TheAerospaceaftermarketactivitiesalsoincludethemanufactureanddeliveryofaerospaceaftermarketspareparts,includingtherevenuesharingprograms(RSPs)underwhichtheCompanyreceivesanexclusiverighttosupplydesignatedaftermarketpartsoverthelifeoftherelatedaircraftengineprograms.

    AerospacesOEMbusinesssupplementstheleadingjetengineOEMcapabilitiesandcompeteswithalargenumberoffabricationandmachiningcompanies.Competitionisbasedmainlyonquality,engineeringandtechnicalcapability,productbreadth,newproductintroduction,timeliness,serviceandprice.Aerospacesfabricationandmachiningoperations,withfacilitiesinArizona,Connecticut,Michigan,Ohio,UtahandSingapore,producecriticalengineandairframecomponentsthroughtechnologicallyadvancedmanufacturingprocesses.

    TheAerospaceaftermarketbusinesssupplementsjetengineOEMsmaintenance,repairandoverhaulcapabilities,andcompeteswiththeservicecentersofmajorcommercialairlinesandotherindependentservicecompaniesfortherepairandoverhaulofturbineenginecomponents.Themanufactureandsupplyofaerospaceaftermarketspareparts,includingthoserelatedtotheRSPs,aredependentuponthereliableandtimelydeliveryofhigh-qualitycomponents.Aerospacesaftermarketfacilities,locatedinConnecticut,OhioandSingapore,specializeintherepairandrefurbishmentofhighlyengineeredcomponentsandassembliessuchascases,rotatinglifelimitedparts,rotatingairseals,turbineshrouds,vanesandhoneycombairseals.SalesbyAerospacetoitsthreelargestcustomers,GeneralElectric,Rolls-RoyceandUnitedTechnologiesCorporation,accountedforapproximately51%,13%and11%ofitssalesin2016,respectively.Salestoitsnextfourlargestcustomersin2016collectivelyaccountedforapproximately10%ofitstotalsales.

    FINANCIAL INFORMATION

    ThebacklogoftheCompanysordersbelievedtobefirmattheendof2016was$886millionascomparedwith$764millionattheendof2015.Ofthe2016year-endbacklog,$636millionwasattributabletoAerospaceand$250millionwasattributabletoIndustrial.Approximately65%oftheCompany'syear-endbacklogisscheduledtobeshippedduring2017.TheremainderoftheCompanysbacklogisscheduledtobeshippedafter2017.

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    Wehaveaglobalmanufacturingfootprintandatechnicalservicenetworktoserviceourworldwidecustomerbase.TheglobaleconomieshaveasignificantimpactonthefinancialresultsofthebusinessaswehavesignificantoperationsoutsideoftheUnitedStates.Forananalysisofourrevenuefromsalestoexternalcustomers,operatingprofitandassetsbybusinesssegment,aswellasrevenuesfromsalestoexternalcustomersandlong-livedassetsbygeographicarea,seeNote19oftheConsolidatedFinancialStatements.Foradiscussionofrisksattendanttotheglobalnatureofouroperationsandassets,seeItem1A.RiskFactors.

    RAW MATERIALS

    Theprincipalrawmaterialsusedtomanufactureourproductsarevariousgradesandformsofsteel,fromrolledsteelbars,platesandsheets,tohigh-gradevalvesteelwiresandsheets,variousgradesandforms(bars,sheets,forgings,castingsandpowders)ofstainlesssteels,aluminumalloys,titaniumalloys,copperalloys,graphite,andiron-based,nickel-based(Inconels)andcobalt-based(Hastelloys)superalloysforcomplexaerospaceapplications.Pricesforsteel,titanium,Inconel,Hastelloys,aswellasotherspecialtymaterials,haveperiodicallyincreasedduetohigherdemandand,insomecases,reductionoftheavailabilityofmaterials.Ifthisoccurs,theavailabilityofcertainrawmaterialsusedbyusorinproductssoldbyusmaybenegativelyimpacted.

    RESEARCH AND DEVELOPMENT

    Weconductresearchanddevelopmentactivitiesinourefforttoprovideacontinuousflowofinnovativenewproducts,processesandservicestoourcustomers.Wealsofocusoncontinuingeffortsaimedatdiscoveringandimplementingnewknowledgethatsignificantlyimprovesexistingproductsandservices,anddevelopingnewapplicationsforexistingproductsandservices.Ourproductdevelopmentstrategyisdrivenbyproductdesignteamsandcollaborationwithourcustomers,particularlywithinIndustrialsMoldingSolutionsbusinesses,aswellaswithinourAerospaceandourotherIndustrialbusinesses.Manyoftheproductsmanufacturedbyusarecustompartsmadetocustomersspecifications.Investmentsinresearchanddevelopmentareimportanttoourlong-termgrowth,enablingustostayaheadofchangingcustomerandmarketplaceneeds.Wespentapproximately$13million,$13millionand$16millionin2016,2015and2014,respectively,onresearchanddevelopmentactivities.

    PATENTS AND TRADEMARKS

    Patentsandotherproprietaryrightsarecriticaltocertainofourbusinessunits,howevertheCompanyalsoholdscertaintradesecretsandunpatentedknow-how.Wearepartytocertainlicensesofintellectualpropertyandholdnumerouspatents,trademarks,andtradenamesthatenhanceourcompetitiveposition.TheCompanydoesnotbelieve,however,thatanyoftheselicenses,patents,trademarksortradenamesisindividuallysignificanttotheCompanyoreitherofoursegments.Wemaintainprocedurestoprotectourintellectualproperty(includingpatentsandtrademarks)bothdomesticallyandinternationally.RiskfactorsassociatedwithourintellectualpropertyarediscussedinItem1A.RiskFactors.EXECUTIVE OFFICERS OF THE COMPANY

    ForinformationregardingtheExecutiveOfficersoftheCompany,seePartIII,Item10ofthisAnnualReport.ENVIRONMENTAL

    Compliancewithfederal,state,andlocallaws,aswellasthoseofothercountries,whichhavebeenenactedoradoptedregulatingthedischargeofmaterialsintotheenvironmentorotherwiserelatingtotheprotectionoftheenvironmenthasnothadamaterialeffect,andisnotexpectedtohaveamaterialeffect,uponourcapitalexpenditures,earnings,orcompetitiveposition.

    Ourpastandpresentbusinessoperationsandpastandpresentownershipandoperationsofrealpropertyandtheuse,sale,storageandhandlingofchemicalsandhazardousproductssubjectustoextensiveandchangingU.S.federal,stateandlocalenvironmentallawsandregulations,aswellasthoseofothercountries,pertainingtothedischargeofmaterialsintotheenvironment,enforcement,dispositionofwastes(includinghazardouswastes),theuse,shipping,labeling,andstorageofchemicalsandhazardousmaterials,buildingrequirements,orotherwiserelatingtoprotectionoftheenvironment.Wehaveexperienced,andexpecttocontinuetoexperience,coststocomplywithenvironmentallawsandregulations.Inaddition,newlawsandregulations,stricterenforcementofexistinglawsandregulations,thediscoveryofpreviouslyunknowncontaminationortheimpositionofnewclean-uprequirementscouldrequireustoincurcostsorbecomesubjecttoneworincreasedliabilitiesthatcouldhaveamaterialadverseeffectonourbusiness,financialcondition,resultsofoperationsandcashflows.

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    Weuseandgeneratehazardoussubstancesandwastesinouroperations.Inaddition,manyofourcurrentandformerpropertiesareorhavebeenusedforindustrialpurposes.Accordingly,wemonitorhazardouswastemanagementandapplicableenvironmentalpermittingandreportingforcompliancewithapplicablelawsatourlocationsintheordinarycourseofourbusiness.Wemaybesubjecttopotentialmaterialliabilitiesrelatingtoanyinvestigationandclean-upofourlocationsorpropertieswherewedeliveredhazardouswasteforhandlingordisposalthatmaybecontaminatedorwhichmayhavebeencontaminatedpriortoourpurchase,andtoclaimsallegingpersonalinjury.

    AVAILABLE INFORMATION

    OurInternetaddressiswww.BGInc.com.OurannualreportonForm10-K,quarterlyreportsonForm10-Q,currentreportsonForm8-K,andamendmentstothosereportsareavailablewithoutchargeonourwebsiteassoonasreasonablypracticableaftertheyarefiledwith,orfurnishedto,theU.S.SecuritiesandExchangeCommission("SEC").Inaddition,wehavepostedonourwebsite,andwillmakeavailableinprinttoanystockholderwhomakesarequest,ourCorporateGovernanceGuidelines,ourCodeofBusinessEthicsandConduct,andthechartersoftheAuditCommittee,CompensationandManagementDevelopmentCommitteeandCorporateGovernanceCommittee(theresponsibilitiesofwhichincludeservingasthenominatingcommittee)oftheCompanysBoardofDirectors.ReferencestoourwebsiteaddressedinthisAnnualReportareprovidedasaconvenienceanddonotconstitute,andshouldnotbeviewedas,anincorporationbyreferenceoftheinformationcontainedon,oravailablethrough,thewebsite.Therefore,suchinformationshouldnotbeconsideredpartofthisAnnualReport.

    Item 1A. Risk Factors

    Ourbusiness,financialconditionorresultsofoperationscouldbemateriallyadverselyaffectedbyanyofthefollowingrisks.Pleasenotethatadditionalrisksnotpresentlyknowntousmayalsomateriallyimpactourbusinessandoperations.RISKS RELATED TO OUR BUSINESS

    We depend on revenues and earnings from a small number of significant customers. Any bankruptcy of or loss of or, cancellation, reduction ordelay in purchases by these customers could harm our business. In2016,ournetsalestoGeneralElectricanditssubsidiariesaccountedfor17%ofourtotalsalesandapproximately51%ofAerospace'snetsales.Aerospace'ssecondandthirdlargestcustomers,Rolls-RoyceandUnitedTechnologiesCorporationanditssubsidiaries,accountedfor13%and11%,respectively,ofAerospacenetsalesin2016.Approximately10%ofAerospace'ssalesin2016weretoitsnextfourlargestcustomers.Approximately11%ofIndustrial'ssalesin2016weretoitsthreelargestcustomers.Someofoursuccesswilldependonthebusinessstrengthandviabilityofthosecustomers.Wecannotassureyouthatwewillbeabletoretainourlargestcustomers.Someofourcustomersmayinthefuturereducetheirpurchasesduetoeconomicconditionsorshifttheirpurchasesfromustoourcompetitors,in-houseortoothersources.Someofourlong-termsalesagreementsprovidethatuntilafirmorderisplacedbyacustomerforaparticularproduct,thecustomermayunilaterallyreduceordiscontinueitsprojectedpurchaseswithoutpenalty,orterminateforconvenience.Thelossofoneormoreofourlargestcustomers,anyreduction,cancellationordelayinsalestothesecustomers(includingareductioninaftermarketvolumeinourRSPs),ourinabilitytosuccessfullydeveloprelationshipswithnewcustomers,orfuturepriceconcessionswemaketoretaincustomerscouldsignificantlyreduceoursalesandprofitability.

    The global nature of our business exposes us to foreign currency fluctuations that may affect our future revenues, debt levels and profitability. Wehavemanufacturingfacilitiesandtechnicalservice,salesanddistributioncentersaroundtheworld,andthemajorityofourforeignoperationsusethelocalcurrencyastheirfunctionalcurrency.Theseinclude,amongothers,theBrazilianreal,Britishpoundsterling,Canadiandollar,Chineserenminbi,Euro,Japaneseyen,Koreanwon,Mexicanpeso,Singaporedollar,Swedishkrona,SwissfrancandThaibaht.SinceourfinancialstatementsaredenominatedinU.S.dollars,changesincurrencyexchangeratesbetweentheU.S.dollarandothercurrenciesexposeustotranslationriskwhenthelocalcurrencyfinancialstatementsaretranslatedtoU.S.dollars.Changesincurrencyexchangeratesmayalsoexposeustotransactionrisk.Wemaybuyhedgesincertaincurrenciestoreduceoroffsetourexposuretocurrencyexchangefluctuations;however,thesetransactionsmaynotbeadequateoreffectivetoprotectusfromtheexposureforwhichtheyarepurchased.Wehavenotengagedinanyspeculativehedgingactivities.Currencyfluctuationsmayadverselyimpactourrevenuesandprofitabilityinthefuture.

    Our operations depend on our manufacturing, sales, and service facilities and information systems in various parts of the world which are subjectto physical, financial, regulatory, environmental, operational and other risks that could disrupt our operations. Wehaveasignificantnumberofmanufacturingfacilities,technicalservice,andsalescentersbothwithinandoutsidetheU.S.Theglobalscopeofourbusinesssubjectsustoincreasedrisksanduncertaintiessuchasthreats

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    ofwar,terrorismandinstabilityofgovernments;andeconomic,regulatoryandlegalsystemsincountriesinwhichweorourcustomersconductbusiness.

    Customer,supplierandourfacilitiesarelocatedinareasthatmaybeaffectedbynaturaldisasters,includingearthquakes,windstormsandfloods,whichcouldcausesignificantdamageanddisruptiontotheoperationsofthosefacilitiesand,inturn,couldhaveamaterialadverseeffectonourbusiness,financialcondition,resultsofoperationsandcashflows.Additionally,someofourmanufacturingequipmentandtoolingiscustom-madeandisnotreadilyreplaceable.Lossofsuchequipmentortoolingcouldhaveanegativeimpactonourmanufacturingbusiness,financialcondition,resultsofoperationsandcashflows.

    Althoughwehaveobtainedpropertydamageandbusinessinterruptioninsurance,amajorcatastrophesuchasanearthquake,windstorm,floodorothernaturaldisasteratanyofoursites,orsignificantlaborstrikes,workstoppages,politicalunrest,oranyoftheeventsdescribedabove,inanyoftheareaswhereweconductoperationscouldresultinaprolongedinterruptionofourbusiness.Anydisruptionresultingfromtheseeventscouldcausesignificantdelaysinthemanufactureorshipmentofproductsortheprovisionofrepairandotherservicesthatmayresultinourlossofsalesandcustomers.Ourinsurancewillnotcoverallpotentialrisks,andwecannotassureyouthatwewillhaveadequateinsurancetocompensateusforalllossesthatresultfromanyinsuredrisks.Anymateriallossnotcoveredbyinsurancecouldhaveamaterialadverseeffectonourfinancialcondition,resultsofoperationsandcashflows.Wecannotassureyouthatinsurancewillbeavailableinthefutureatacostacceptabletousoratacostthatwillnothaveamaterialadverseeffectonourprofitability,netincomeandcashflows.

    The global nature of our operations and assets subject us to additional financial and regulatory risks. Wehaveoperationsandassetsinvariouspartsoftheworld.Inaddition,wesellormayinthefuturesellourproductsandservicestotheU.S.andforeigngovernmentsandinforeigncountries.Asaglobalbusiness,wearesubjecttocomplexlawsandregulationsintheU.S.andothercountriesinwhichweoperate,andassociatedrisks,including:U.S.imposedembargoesofsalestospecificcountries;foreignimportcontrols(whichmaybearbitrarilyimposedorenforced);importregulationsandduties;exportregulations(whichrequireustocomplywithstringentlicensingregimes);reportingrequirementsregardingtheuseof"conflict"mineralsminedfromcertaincountries;anti-dumpingregulations;priceandcurrencycontrols;exchangeratefluctuations;dividendremittancerestrictions;expropriationofassets;war,civiluprisingsandriots;governmentinstability;governmentcontractingrequirementsincludingcostaccountingstandards,includingvariousprocurement,security,andauditrequirements,aswellasrequirementstocertifytothegovernmentcompliancewiththeserequirements;thenecessityofobtaininggovernmentalapprovalfornewandcontinuingproductsandoperations;andlegalsystemsordecrees,laws,taxes,regulations,interpretationsandcourtdecisionsthatarenotalwaysfullydevelopedandthatmayberetroactivelyorarbitrarilyapplied.Wehaveexperiencedinadvertentviolationsofsomeoftheseregulations,includingexportregulations,safetyandenvironmentalregulations,regulationsprohibitingsalesofcertainproductsandproductlabelingregulations,inthepast,noneofwhichhashador,webelieve,willhaveamaterialadverseeffectonourbusiness.However,anysignificantviolationsoftheseorotherregulationsinthefuturecouldresultincivilorcriminalsanctions,andthelossofexportorotherlicenseswhichcouldhaveamaterialadverseeffectonourbusiness.Wearesubjecttofederalandstateunclaimedpropertylawsintheordinarycourseofbusiness,andarecurrentlyundergoingamulti-stateunclaimedpropertyaudit,thetimingandoutcomeofwhichcannotbepredicted,andwemayincursignificantprofessionalfeesinconjunctionwiththeaudit.Wemayalsobesubjecttounanticipatedincometaxes,exciseduties,importtaxes,exporttaxes,valueaddedtaxes,orothergovernmentalassessments,andtaxesmaybeimpactedbychangesinlegislationinthetaxjurisdictionsinwhichweoperate.Inaddition,ourorganizationalandcapitalstructuremaylimitourabilitytotransferfundsbetweencountries,particularlyintotheU.S.,withoutincurringadversetaxconsequences.Anyoftheseeventscouldresultinalossofbusinessorotherunexpectedcoststhatcouldreducesalesorprofitsandhaveamaterialadverseeffectonourfinancialcondition,resultsofoperationsandcashflows.

    Any disruption or failure in the operation of our information systems, including from conversions or integrations of information technology orreporting systems, could have a material adverse effect on our business, financial condition, results of operations and cash flows. Ourinformationtechnology(IT)systemsareanintegralpartofourbusiness.WedependuponourITsystemstohelpprocessorders,manageinventory,makepaymentsandcollectaccountsreceivable.OurITsystemsalsoallowustopurchase,sellandshipproductsefficientlyandonatimelybasis,tomaintaincost-effectiveoperations,andtohelpprovidesuperiorservicetoourcustomers.Wearecurrentlyintheprocessofimplementingenterpriseresourceplanning(ERP)platformsacrosscertainofourbusinesses,andweexpectthatwewillneedtocontinuetoimproveandfurtherintegrateourITsystems,onanongoingbasisinordertoeffectivelyrunourbusiness.IfwefailtosuccessfullymanageandintegrateourITsystems,includingtheseERPplatforms,itcouldadverselyaffectourbusinessoroperatingresults.

    Further,intheordinarycourseofourbusiness,westoresensitivedata,includingintellectualproperty,ourproprietarybusinessinformationandthatofourcustomers, suppliers and business partners, and personally identifiable information of our employees, in our data centers and on our networks. The securemaintenance and transmission of this information is critical to our business operations. Despite our security measures, our information technology andinfrastructuremaybevulnerabletoattacksbyhackers

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    orbreachedduetoemployeeerror,malfeasanceorotherdisruptions.Anysuchbreachcouldcompromiseournetworksandtheinformationstoredtherecouldbeaccessed,publiclydisclosed,lostorstolen.Anysuchaccess,disclosureorotherlossofinformationcouldresultinlegalclaimsorproceedings,liabilityunderlawsthat protect the privacy of personal information, and regulatory penalties, disrupt our operations, and damage our reputation, which could adversely affect ourbusiness,revenuesandcompetitiveposition.

    We have significant indebtedness that could affect our operations and financial condition, and our failure to meet certain financial covenantsrequired by our debt agreements may materially and adversely affect our assets, financial position and cash flows. AtDecember31,2016,wehadconsolidateddebtobligationsof$501.0million,representingapproximately30%ofourtotalcapital(indebtednessplusstockholdersequity)asofthatdate.Ourlevelofindebtedness,proportionofvariableratedebtobligationsandthesignificantdebtservicingcostsassociatedwiththatindebtednessmayadverselyaffectouroperationsandfinancialcondition.Forexample,ourindebtednesscouldrequireustodedicateasubstantialportionofourcashflowsfromoperationstopaymentsonourdebt,therebyreducingtheamountofourcashflowsavailableforworkingcapital,capitalexpenditures,investmentsintechnologyandresearchanddevelopment,acquisitions,dividendsandothergeneralcorporatepurposes;limitourflexibilityinplanningfor,orreactingto,changesintheindustriesinwhichwecompete;placeusatacompetitivedisadvantagecomparedtoourcompetitors,someofwhomhavelowerdebtserviceobligationsandgreaterfinancialresourcesthanwedo;limitourabilitytoborrowadditionalfunds;orincreaseourvulnerabilitytogeneraladverseeconomicandindustryconditions.Inaddition,amajorityofourdebtarrangementsrequireustomaintaincertaindebtandinterestcoverageratiosandlimitourabilitytoincurdebt,makeinvestmentsorundertakecertainotherbusinessactivities.Theserequirementscouldlimitourabilitytoobtainfuturefinancingandmaypreventusfromtakingadvantageofattractivebusinessopportunities.Ourabilitytomeetthefinancialcovenantsorrequirementsinourdebtarrangementsmaybeaffectedbyeventsbeyondourcontrol,andwecannotassureyouthatwewillsatisfysuchcovenantsandrequirements.Abreachofthesecovenantsorourinabilitytocomplywiththerestrictionscouldresultinaneventofdefaultunderourdebtarrangementswhich,inturn,couldresultinaneventofdefaultunderthetermsofourotherindebtedness.Upontheoccurrenceofaneventofdefaultunderourdebtarrangements,aftertheexpirationofanygraceperiods,ourlenderscouldelecttodeclareallamountsoutstandingunderourdebtarrangements,togetherwithaccruedinterest,tobeimmediatelydueandpayable.Ifthisweretohappen,wecannotassureyouthatourassetswouldbesufficienttorepayinfullthepaymentsdueunderthosearrangementsorourotherindebtednessorthatwecouldfindalternativefinancingtoreplacethatindebtedness.

    Conditionsintheworldwidecreditmarketsmaylimitourabilitytoexpandourcreditlinesbeyondcurrentbankcommitments.Inaddition,ourprofitabilitymaybeadverselyaffectedasaresultofincreasesininterestrates.AtDecember31,2016,weandoursubsidiarieshad$501.0millionaggregateprincipalamountofconsolidateddebtobligationsoutstanding,ofwhichapproximately59%hadinterestratesthatfloatwiththemarket(nothedgedagainstinterestratefluctuations).A100basispointincreaseintheinterestrateonthefloatingratedebtineffectatDecember31,2016wouldresultinanapproximate$3.0millionannualizedincreaseininterestexpense.

    Changes in the availability or price of materials, products and energy resources could adversely affect our costs and profitability. Wemaybeadverselyaffectedbytheavailabilityorpriceofrawmaterials,productsandenergyresources,particularlyrelatedtocertainmanufacturingoperationsthatutilizesteel,stainlesssteel,titanium,Inconel,Hastelloysandotherspecialtymaterials.Theavailabilityandpriceofrawmaterialsandenergyresourcesmaybesubjecttocurtailmentorchangedueto,amongotherthings,newlawsorregulations,globaleconomicorpoliticaleventsincludingstrikes,terroristattacksandwar,suppliersallocationstootherpurchasers,interruptionsinproductionbysuppliers,changesinexchangeratesandprevailingpricelevels.Insomeinstancestherearelimitedsourcesforrawmaterialsandalimitednumberofprimarysuppliersforsomeofourproductsforresale.Althoughwearenotdependentuponanysinglesourceforanyofourprincipalrawmaterialsorproductsforresale,andsuchmaterialsandproductshave,historically,beenreadilyavailable,wecannotassureyouthatsuchrawmaterialsandproductswillcontinuetobereadilyavailable.Disruptioninthesupplyofrawmaterials,productsorenergyresourcesorourinabilitytocometofavorableagreementswithoursupplierscouldimpairourabilitytomanufacture,sellanddeliverourproductsandrequireustopayhigherprices.Anyincreaseinpricesforsuchrawmaterials,productsorenergyresourcescouldmateriallyadverselyaffectourcostsandourprofitability.

    We maintain pension and other postretirement benefit plans in the U.S. and certain international locations. Ourcostsofprovidingdefinedbenefitplansaredependentuponanumberoffactors,suchastheratesofreturnontheplansassets,exchangeratefluctuations,futuregovernmentalregulation,globalfixedincomeandequityprices,andourrequiredand/orvoluntarycontributionstotheplans.Declinesinthestockmarket,prevailinginterestrates,declinesindiscountrates,improvementsinmortalityratesandrisingmedicalcostsmaycauseanincreaseinourpensionandotherpostretirementbenefitexpensesinthefutureandresultinreductionsinourpensionfundassetvaluesandincreasesinourpensionandotherpostretirementbenefitobligations.Thesechangeshavecausedandmaycontinuetocauseasignificantreductioninournetworthandwithoutsustainedgrowthinthepensioninvestmentsovertimetoincreasethevalueoftheplansassets,and

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    dependingupontheotherfactorslistedabove,wecouldberequiredtoincreasefundingforsomeorallofthesepensionandpostretirementplans.

    We carry significant inventories and a loss in net realizable value could cause a decline in our net worth. AtDecember31,2016,ourinventoriestotaled$227.8million.Inventoriesarevaluedatthelowerofcostormarketbasedonmanagement'sjudgmentsandestimatesconcerningfuturesaleslevels,quantitiesandpricesatwhichsuchinventorieswillbesoldinthenormalcourseofbusiness.Acceleratingthedisposalprocessorincorrectestimatesoffuturesalespotentialmaynecessitatefuturereductiontoinventoryvalues.SeePartII-Item7-Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations-CriticalAccountingPolicies.

    We have significant goodwill and an impairment of our goodwill could cause a decline in our net worth. Ourtotalassetsincludesubstantialgoodwill.AtDecember31,2016,ourgoodwilltotaled$633.4million.Thegoodwillresultsfromourprioracquisitions,representingtheexcessofthepurchasepricewepaidoverthenetassetsofthecompaniesacquired.Weassesswhethertherehasbeenanimpairmentinthevalueofourgoodwillduringeachcalendaryearorsooneriftriggeringeventswarrant.Iffutureoperatingperformanceatoneormoreofourreportingunitsdoesnotmeetexpectationsorfairvaluesfallduetosignificantstockmarketdeclines,wemayberequiredtoreflectanon-cashchargetooperatingresultsforgoodwillimpairment.Therecognitionofanimpairmentofasignificantportionofgoodwillwouldnegativelyaffectourresultsofoperationsandtotalcapitalization,theeffectofwhichcouldbematerial.SeePartII-Item7-Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations-CriticalAccountingPolicies.

    We may not realize all of the sales expected from our existing backlog or anticipated orders .AtDecember31,2016,wehad$885.5millionoforderbacklog,themajorityofwhichrelatedtoaerospaceOEMcustomers.Therecanbenoassurancesthattherevenuesprojectedinourbacklogwillberealizedor,ifrealized,willresultinprofits.Weconsiderbacklogtobefirmcustomerordersforfuturedelivery.OEMcustomersmayprovideprojectionsofcomponentsandassembliesthattheyanticipatepurchasinginthefutureundernewandexistingprograms.Suchprojectionsareincludedinourbacklogwhentheyaresupportedbyalongtermagreement.Ourcustomersmayhavetherightundercertaincircumstancesorwithcertainpenaltiesorconsequencestoterminate,reduceordeferfirmordersthatwehaveinbacklog.Ifourcustomersterminate,reduceordeferfirmorders,wemaybeprotectedfromcertaincostsandlosses,butoursaleswillneverthelessbeadverselyaffected.Althoughwestrivetomaintainongoingrelationshipswithourcustomers,thereisanongoingriskthatordersmaybecanceledorrescheduledduetofluctuationsinourcustomersbusinessneedsorpurchasingbudgets.

    Also,ourrealizationofsalesfromnewandexistingprogramsisinherentlysubjecttoanumberofimportantrisksanduncertainties,includingwhetherourcustomersexecutethelaunchofproductprogramsontime,oratall,thenumberofunitsthatourcustomersactuallyproduce,thetimingofproductionandmanufacturinginsourcingdecisionsmadebyourcustomers.Inaddition,untilfirmordersareplaced,ourcustomersmayhavetherighttodiscontinueaprogramorreplaceuswithanothersupplieratanytimewithoutpenalty.Ourfailuretorealizesalesfromnewandexistingprogramscouldhaveamaterialadverseeffectonournetsales,resultsofoperationsandcashflows.

    We may not recover all of our up-front costs related to new or existing programs. Newprogramsmayrequiresignificantup-frontinvestmentsforcapitalequipment,engineering,inventory,designandtooling.AsOEMsinthetransportationandaerospaceindustrieshavelookedtosupplierstobearincreasingresponsibilityforthedesign,engineeringandmanufactureofsystemsandcomponents,theyhaveincreasinglyshiftedthefinancialriskassociatedwiththoseresponsibilitiestothesuppliersaswell.Thistrendmaycontinueandismostevidentintheareaofengineeringcostreimbursement.Wecannotassureyouthatwewillhaveadequatefundstomakesuchup-frontinvestmentsortorecoversuchcostsfromourcustomersaspartofourproductpricing.Intheeventthatweareunabletomakesuchinvestments,ortorecoverthemthroughsalesordirectreimbursementfromourcustomers,ourprofitability,liquidityandcashflowsmaybeadverselyaffected.Inaddition,weincurcostsandmakecapitalexpendituresfornewprogramawardsbaseduponcertainestimatesofproductionvolumesandproductioncomplexity.Whileweattempttorecoversuchcostsandcapitalexpendituresbyappropriatelypricingourproducts,thepricesofourproductsarebasedinpartuponplannedproductionvolumes.Iftheactualproductionissignificantlylessthanplannedorsignificantlymorecomplexthananticipated,wemaybeunabletorecoversuchcosts.Inaddition,becauseasignificantportionofouroverallcostsisfixed,declinesinourcustomersproductionlevelscanadverselyaffectthelevelofourreportedprofitsevenifourup-frontinvestmentsarerecovered.

    We may not realize all of the intangible assets related to the Aerospace aftermarket businesses. WeparticipateinaftermarketRevenueSharingPrograms("RSPs")underwhichwereceiveanexclusiverighttosupplydesignatedaftermarketpartsoverthelifeoftherelatedaircraftengineprogramtoourcustomer,GeneralElectric.Asconsideration,wepayparticipationfees,whicharerecordedasintangibleassetsandarerecognizedasareductionofsalesovertheestimatedlifeoftherelatedengineprogramswhichrangeupto30years.OurtotalinvestmentsinparticipationfeesunderourRSPsasof

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    December31,2016equaled$293.7million,allofwhichhavebeenpaid.AtDecember31,2016,theremainingunamortizedbalanceoftheseparticipationfeeswas$198.0million.

    WeenteredintoComponentRepairPrograms("CRPs"),alsowithGeneralElectric("GE"),duringthefourthquarterof2013("CRP1"),thesecondquarterof2014("CRP2")andthefourthquarterof2015("CRP3"and,collectivelywithCRP1andCRP2,the"CRPs").TheCRPsprovidefor,amongotheritems,therighttosellcertainaftermarketcomponentrepairservicesforCFM56,CF6,CF34andLMenginesdirectlytoothercustomersasoneofafewGElicensedsuppliers.Inaddition,theCRPsextendcertainexistingcontractsunderwhichtheCompanycurrentlyprovidestheseservicesdirectlytoGE.

    Weagreedtopay$26.6millionasconsiderationfortherightsrelatedtoCRP1.Ofthisbalance,wepaid$16.6millioninthefourthquarterof2013,$9.1millioninthefourthquarterof2014and$0.9millioninthefirstquarterof2016.Weagreedtopay$80.0millionasconsiderationfortherightsrelatedtoCRP2.Wepaid$41.0millioninthesecondquarterof2014,$20.0millioninthefourthquarterof2014and$19.0millioninthesecondquarterof2015.Weagreedtopay$5.2millionasconsiderationfortherightsrelatedtoCRP3.Wepaid$2.0millioninthefourthquarterof2015and$3.2millionwaspaidinDecember2016.WerecordedtheCRPpaymentsasanintangibleassetwhichisrecognizedasareductionofsalesovertheremainingusefullifeoftheseengineprograms.

    Therealizabilityofeachassetisdependentuponfuturerevenuesrelatedtotheprograms'aftermarketpartsandservicesandissubjecttoimpairmenttestingifcircumstancesindicatethatitscarryingamountmaynotberecoverable.Thepotentialexiststhatactualrevenueswillnotmeetexpectationsduetoachangeinmarketconditions,including,forexample,thereplacementofolderengineswithnew,morefuel-efficientenginesorourabilitytomaintainmarketsharewithintheaftermarketbusiness.Ashortfallinfuturerevenuesmayresultinthefailuretorealizethenetamountoftheinvestments,whichcouldadverselyaffectourfinancialconditionandresultsofoperations.Inaddition,profitabilitycouldbeimpactedbytheamortizationoftheparticipationfeesandlicenses,andtheexpirationoftheinternationaltaxincentivesontheseprograms.SeePartII-Item7-Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations-CriticalAccountingPolicies.

    We face risks of cost overruns and losses on fixed-price contracts. Wesellcertainofourproductsunderfirm,fixed-pricecontractsprovidingforafixedpricefortheproductsregardlessoftheproductionorpurchasecostsincurredbyus.Thecostofproducingproductsmaybeadverselyaffectedbyincreasesinthecostoflabor,materials,fuel,outsideprocessing,overheadandotherfactors,includingmanufacturinginefficiencies.Increasedproductioncostsmayresultincostoverrunsandlossesoncontracts.

    The departure of existing management and key personnel, a shortage of skilled employees or a lack of qualified sales professionals could materiallyaffect our business, operations and prospects. Ourexecutiveofficersareimportanttothemanagementanddirectionofourbusiness.Ourfuturesuccessdepends,inlargepart,onourabilitytoretainorreplacetheseofficersandothercapablemanagementpersonnel.Althoughwebelievewewillbeabletoattractandretaintalentedpersonnelandreplacekeypersonnelshouldtheneedarise,ourinabilitytodosocouldhaveamaterialadverseeffectonourbusiness,financialcondition,resultsofoperationsorcashflows.Becauseofthecomplexnatureofmanyofourproductsandservices,wearegenerallydependentonaneducatedandhighlyskilledworkforce,including,forexample,ourengineeringtalent.Inaddition,therearesignificantcostsassociatedwiththehiringandtrainingofsalesprofessionals.Wecouldbeadverselyaffectedbyashortageofavailableskilledemployeesorthelossofasignificantnumberofoursalesprofessionals.

    If we are unable to protect our intellectual property rights effectively, our financial condition and results of operations could be adversely affected.Weownorarelicensedundervariousintellectualpropertyrights,includingpatents,trademarksandtradesecrets.Ourintellectualpropertyrightsmaynotbesufficientlybroadorotherwisemaynotprovideusasignificantcompetitiveadvantage,andpatentsmaynotbeissuedforpendingorfuturepatentapplicationsownedbyorlicensedtous.Inaddition,thestepsthatwehavetakentomaintainandprotectourintellectualpropertymaynotpreventitfrombeingchallenged,invalidated,circumventedordesigned-around,particularlyincountrieswhereintellectualpropertyrightsarenothighlydevelopedorprotected.Insomecircumstances,enforcementmaynotbeavailabletousbecauseaninfringerhasadominantintellectualpropertypositionorforotherbusinessreasons,orcountriesmayrequirecompulsorylicensingofourintellectualproperty.Wealsorelyonnondisclosureandnoncompetitionagreementswithemployees,consultantsandotherpartiestoprotect,inpart,confidentialinformation,tradesecretsandotherproprietaryrights.Therecanbenoassurancethattheseagreementswilladequatelyprotecttheseintangibleassetsandwillnotbebreached,thatwewillhaveadequateremediesforanybreach,orthatotherswillnotindependentlydevelopsubstantiallyequivalentproprietaryinformation.Ourfailuretoobtainormaintainintellectualpropertyrightsthatconveycompetitiveadvantage,adequatelyprotectourintellectualpropertyordetectorpreventcircumventionorunauthorizeduseofsuchpropertyandthecostofenforcingourintellectualpropertyrightscouldadverselyimpactourcompetitiveposition,financialconditionandresultsofoperations.

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    Any product liability, warranty, contractual or other claims in excess of insurance may adversely affect our financial condition. Ouroperationsexposeustopotentialproductliabilityrisksthatareinherentinthedesign,manufactureandsaleofourproductsandtheproductswebuyfromthirdpartiesandselltoourcustomers,ortopotentialwarranty,contractualorotherclaims.Forexample,wemaybeexposedtopotentialliabilityforpersonalinjury,propertydamageordeathasaresultofthefailureofanaircraftcomponentdesigned,manufacturedorsoldbyus,orthefailureofanaircraftcomponentthathasbeenservicedbyusorofthecomponentsthemselves.Whilewehaveliabilityinsuranceforcertainrisks,ourinsurancemaynotcoverallliabilities.Additionally,insurancecoveragemaynotbeavailableinthefutureatacostacceptabletous.Anymaterialliabilitynotcoveredbyinsuranceorforwhichthird-partyindemnificationisnotavailableforthefullamountofthelosscouldhaveamaterialadverseeffectonourfinancialcondition,resultsofoperationsandcashflows.

    Fromtimetotime,wereceiveproductwarrantyclaims,underwhichwemayberequiredtobearcostsofrepairorreplacementofcertainofourproducts.Warrantyclaimsmayrangefromindividualcustomerclaimstofullrecallsofallproductsinthefield.Wevigorouslydefendourselvesinconnectionwiththesematters.Wecannot,however,assureyouthatthecosts,chargesandliabilitiesassociatedwiththesematterswillnotbematerial,orthatthosecosts,chargesandliabilitieswillnotexceedanyamountsreservedfortheminourconsolidatedfinancialstatements.

    Our business, financial condition, results of operations and cash flows could be adversely impacted by strikes or work stoppages. Approximately16%ofourU.S.employeesarecoveredbycollectivebargainingagreementsandmorethan37%ofournon-U.S.employeesarecoveredbycollectivebargainingagreementsorstatutorytradeunionagreements.TheCompanyhasanationalcollectivebargainingagreement(CBA)withcertainunionizedemployeesattheBristol,ConnecticutandCorry,PennsylvaniafacilitiesoftheAssociatedSpringbusinessunit,coveringapproximately250employees.ThecurrentCBAwillexpireinAugust2017,atwhichtimewewillnegotiateasuccessoragreement.ThelocalcollectivebargainingagreementfortheMilwaukee,WisconsinfacilityoftheAssociatedSpringbusinessunitwillexpireonJune30,2017,atwhichtimewewillnegotiateasuccessoragreement.Inaddition,wehaveannualnegotiationsinBrazilandMexicoand,collectively,thesenegotiationscoverapproximately300employeesinthosetwocountries.In2016,wealsocompletednegotiationsresultinginwageincreasesatfourlocationsinourIndustrialsegmentandonelocationinourAerospacesegment,collectivelycoveringatotalofapproximately900employees.

    Althoughwebelievethatourrelationswithouremployeesaregood,wecannotassureyouthatwewillbesuccessfulinnegotiatingnewcollectivebargainingagreementsorthatsuchnegotiationswillnotresultinsignificantincreasesinthecostoflabor,includinghealthcare,pensionsorotherbenefits.Anypotentialstrikesorworkstoppages,andtheresultingadverseimpactonourrelationshipswithcustomers,couldhaveamaterialadverseeffectonourbusiness,financialcondition,resultsofoperationsorcashflows.Similarly,aprotractedstrikeorworkstoppageatanyofourmajorcustomers,suppliersorothervendorscouldmateriallyadverselyaffectourbusiness.

    Changes in taxation requirements could affect our financial results. Ourproductsaresubjecttoimportandexcisedutiesand/orsalesorvalue-addedtaxesinmanyjurisdictionsinwhichweoperate.Increasesinindirecttaxescouldaffectourproductsaffordabilityandthereforereduceoursales.Wearealsosubjecttoincometaxinnumerousjurisdictionsinwhichwegeneraterevenues.Changesintaxlaws,taxratesortaxrulingsmayhaveasignificantadverseimpactonoureffectivetaxrate.Amongotherthings,ourtaxliabilitiesareaffectedbythemixofpretaxincomeorlossamongthetaxjurisdictionsinwhichweoperateandtherepatriationofforeignearningstotheU.S.Further,duringtheordinarycourseofbusiness,wearesubjecttoexaminationbythevarioustaxauthoritiesofthejurisdictionsinwhichweoperatewhichcouldresultinanunanticipatedincreaseintaxes.PotentialtaxreformdiscussedbythenewU.S.administration,suchasreducingthecorporateincometaxrateorchangingtherepatriationandtaxationofforeignearnings,mayimpactincometaxexpenses,deferredtaxassetsintheU.S.andtaxliabilitybalances.

    Changes in accounting guidance could affect our financial results. Newaccountingguidancethatmaybecomeapplicabletousfromtimetotime,orchangesintheinterpretationsofexistingguidance,couldhaveasignificanteffectonourreportedresultsfortheaffectedperiods.Forexample,theFinancialAccountingStandardsBoardissuedanewaccountingstandardforrevenuerecognitioninMay2014-AccountingStandardsUpdate(ASU)2014-09,"RevenuefromContractswithCustomers(Topic606)".AlthoughwearecurrentlyintheprocessofevaluatingtheimpactofASU2014-09onourconsolidatedfinancialstatements,itisexpectedtochangethewayweaccountforcertainofoursalestransactionsandreportedbacklog.Adoptionofthestandardcouldhaveamaterialimpactonourfinancialstatementsandmayretroactivelyaffecttheaccountingtreatmentoftransactionscompletedbeforeadoption.SeePartII-Item7-Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations-OtherMattersforadditionaldisclosurerelatedtotheCompany'splannedadoptionofTopic606.

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    RISKS RELATED TO THE INDUSTRIES IN WHICH WE OPERATE

    We operate in highly competitive markets. We may not be able to compete effectively with our competitors, and competitive pressures couldadversely affect our business, financial condition and results of operations. Ourtwoglobalbusinesssegmentscompetewithanumberoflargerandsmallercompaniesinthemarketsweserve.Someofourcompetitorshavegreaterfinancial,production,researchanddevelopment,orotherresourcesthanwedo.WithinAerospace,certainofourOEMcustomerscompetewithourrepairandoverhaulbusiness.SomeofourOEMcustomersintheaerospaceindustryalsocompetewithuswheretheyhavetheabilitytomanufacturethecomponentsandassembliesthatwesupplytothembuthavechosen,forcapacitylimitations,costconsiderationsorotherreasons,tooutsourcethemanufacturingtous.Ourcustomersawardbusinessbasedon,amongotherthings,price,quality,reliabilityofsupply,service,technologyanddesign.Ourcompetitorseffortstogrowmarketsharecouldexertdownwardpressureonourproductpricingandmargins.Ourcompetitorsmayalsodevelopproductsorservices,ormethodsofdeliveringthoseproductsorservicesthataresuperiortoourproducts,servicesormethods.Ourcompetitorsmayadaptmorequicklythanustonewtechnologiesorevolvingcustomerrequirements.Wecannotassureyouthatwewillbeabletocompetesuccessfullywithourexistingorfuturecompetitors.Ourabilitytocompetesuccessfullywilldepend,inpart,onourabilitytocontinuemakeinvestmentstoinnovateandmanufacturethetypesofproductsdemandedbyourcustomers,andtoreducecostsbysuchmeansasreducingexcesscapacity,leveragingglobalpurchasing,improvingproductivity,eliminatingredundanciesandincreasingproductioninlow-costcountries.Wehaveinvested,andexpecttocontinuetoinvest,inincreasingourmanufacturingfootprintinlow-costcountries.Wecannotassureyouthatwewillhavesufficientresourcestocontinuetomakesuchinvestmentsorthatwewillbesuccessfulinmaintainingourcompetitiveposition.Ifweareunabletodifferentiateourproductsormaintainalow-costfootprint,wemaylosemarketshareorbeforcedtoreduceprices,therebyloweringourmargins.Anysuchoccurrencescouldadverselyaffectourfinancialcondition,resultsofoperationsandcashflows.

    Theindustriesinwhichweoperatehavebeenexperiencingconsolidation,bothinoursuppliersandthecustomersweserve.SupplierconsolidationisinpartattributabletoOEMsmorefrequentlyawardinglong-termsolesourceorpreferredsuppliercontractstothemostcapablesuppliersinanefforttoreducethetotalnumberofsuppliersfromwhomcomponentsandsystemsarepurchased.Ifconsolidationofourexistingcompetitorsoccurs,wewouldexpectthecompetitivepressureswefacetoincrease,andwecannotassureyouthatourbusiness,financialcondition,resultsofoperationsorcashflowswillnotbeadverselyimpactedasaresultofconsolidationbyourcompetitorsorcustomers.

    Original equipment manufacturers in the aerospace and transportation industries have significant pricing leverage over suppliers and may be ableto achieve price reductions over time. Additionally, we may not be successful in our efforts to raise prices on our customers. ThereissubstantialandcontinuingpressurefromOEMsinthetransportationindustries,includingautomotiveandaerospace,toreducethepricestheypaytosuppliers.Weattempttomanagesuchdownwardpricingpressure,whiletryingtopreserveourbusinessrelationshipswithourcustomers,byseekingtoreduceourproductioncoststhroughvariousmeasures,includingpurchasingrawmaterialsandcomponentsatlowerpricesandimplementingcost-effectiveprocessimprovements.Oursuppliershaveperiodicallyresisted,andinthefuturemayresist,pressuretolowertheirpricesandmayseektoimposepriceincreases.IfweareunabletooffsetOEMpricereductions,ourprofitabilityandcashflowscouldbeadverselyaffected.Inaddition,OEMshavesubstantialleverageinsettingpurchasingandpaymentterms,includingthetermsofacceleratedpaymentprogramsunderwhichpaymentsaremadepriortotheaccountduedateinreturnforanearlypaymentdiscount.OEMscanunexpectedlychangetheirpurchasingpoliciesorpaymentpractices,whichcouldhaveanegativeimpactonourshort-termworkingcapital.

    Demand for our defense-related products depends on government spending. AportionofAerospace'ssalesisderivedfromthemilitarymarket,includingsingle-sourcedanddual-sourcedsales.Themilitarymarketislargelydependentupongovernmentbudgetsandissubjecttogovernmentalappropriations.Althoughmulti-yearcontractsmaybeauthorizedinconnectionwithmajorprocurements,fundsaregenerallyappropriatedonafiscalyearbasiseventhoughaprogrammaybeexpectedtocontinueforseveralyears.Consequently,programsareoftenonlypartiallyfundedandadditionalfundsarecommittedonlyasfurtherappropriationsaremade.Wecannotassureyouthatmaintenanceoforincreasesindefensespendingwillbeallocatedtoprogramsthatwouldbenefitourbusiness.Moreover,wecannotassureyouthatnewmilitaryaircraftprogramsinwhichweparticipatewillenterfull-scaleproductionasexpected.Adecreaseinlevelsofdefensespendingorthegovernmentsterminationof,orfailuretofullyfund,oneormoreofthecontractsfortheprogramsinwhichweparticipatecouldhaveamaterialadverseeffectonourfinancialpositionandresultsofoperations.

    The aerospace industry is highly regulated. Complications related to aerospace regulations may adversely affect the Company. Asubstantialportionofourincomeisderivedfromouraerospacebusinesses.TheaerospaceindustryishighlyregulatedintheU.S.bytheFederalAviationAdministration,orFAA,andinothercountriesbysimilarregulatoryagencies.Wemustbecertifiedbytheseagenciesand,insomecases,byindividualOEMsinordertoengineerandservicesystemsandcomponentsusedinspecificaircraftmodels.Ifmaterialauthorizationsorapprovalsweredelayed,revokedorsuspended,our

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    businesscouldbeadverselyaffected.Newormorestringentgovernmentalregulationsmaybeadopted,orindustryoversightheightened,inthefuture,andwemayincursignificantexpensestocomplywithanynewregulationsoranyheightenedindustryoversight.

    Fluctuations in jet fuel and other energy prices may impact our operating results. Fuelcostsconstituteasignificantportionofoperatingexpensesforcompaniesintheaerospaceindustry.Fluctuationsinfuelcostscouldimpactlevelsandfrequencyofaircraftmaintenanceandoverhaulactivities,andairlines'decisionsonmaintaining,deferringorcancelingnewaircraftpurchases,inpartbasedonthevalueassociatedwithnewfuelefficienttechnologies.Widespreaddisruptiontooilproduction,refineryoperationsandpipelinecapacityincertainareasoftheU.S.canimpactthepriceofjetfuelsignificantly.ConflictsintheMiddleEast,animportantsourceofoilfortheU.S.andothercountrieswherewedobusiness,causepricesforfueltobevolatile.Becauseweandmanyofourcustomersareintheaerospaceindustry,thesefluctuationscouldhaveamaterialadverseeffectonourfinancialconditionorresultsofoperations.

    Our products and services may be rendered obsolete by new products, technologies and processes. Ourmanufacturingoperationsfocusonhighlyengineeredcomponentswhichrequireextensiveengineeringandresearchanddevelopmenttime.Ourcompetitiveadvantagemaybeadverselyimpactedifwecannotcontinuetointroducenewproductsaheadofourcompetition,orifourproductsarerenderedobsoletebyotherproductsorbynew,differenttechnologiesandprocesses.Thesuccessofournewproductswilldependonanumberoffactors,includinginnovation,customeracceptance,theefficiencyofoursuppliersinprovidingmaterialsandcomponentparts,andtheperformanceandqualityofourproductsrelativetothoseofourcompetitors.Wecannotpredictthelevelofmarketacceptanceortheamountofmarketshareournewproductswillachieve.Additionally,wemayfaceincreasedorunexpectedcostsassociatedwithnewproductintroductionincludingtheuseofadditionalresourcessuchaspersonnel.Wecannotassurethatwewillnotexperiencenewproductintroductiondelaysinthefuture.

    RISKS RELATED TO RESTRUCTURING, ACQUISITIONS, JOINT VENTURES AND DIVESTITURES

    Our restructuring actions could have long-term adverse effects on our business. Fromtimetotime,wehaveimplementedrestructuringactivitiesacrossourbusinessestoadjustourcoststructure,andwemayengageinsimilarrestructuringactivitiesinthefuture.Wemaynotachieveexpectedcostsavingsfromworkforcereductionsorrestructuringactivitiesandactualcharges,costsandadjustmentsduetotheseactionsmayvarymateriallyfromourestimates.Ourabilitytorealizeanticipatedcostsavings,synergiesandrevenueenhancementsmaybeaffectedbyanumberoffactors,includingthefollowing:ourabilitytoeffectivelyeliminateduplicativebackofficeoverheadandoverlappingsalespersonnel,rationalizemanufacturingcapacity,synchronizeinformationtechnologysystems,consolidatewarehousingandotherfacilitiesandshiftproductiontomoreeconomicalfacilities;significantcashandnon-cashintegrationandimplementationcostsorchargesinordertoachievethosecostsavings,whichcouldoffsetanysuchsavingsandothersynergiesresultingfromouracquisitionsordivestitures;andourabilitytoavoidlabordisruptioninconnectionwiththeseactivities.Inaddition,delaysinimplementingplannedrestructuringactivitiesorotherproductivityimprovementsmaydiminishtheexpectedoperationalorfinancialbenefits.

    Our acquisition and other strategic initiatives may not be successful. Wehavemadeanumberofacquisitionsinthepast,includingmostrecentlythe

    acquisitionoftheFOBOHAbusiness,andweanticipatethatwemay,fromtimetotime,acquireadditionalbusinesses,assetsorsecuritiesofcompanies,andenterintojointventuresandotherstrategicrelationshipsthatwebelievewouldprovideastrategicfitwithourbusinesses.TheseactivitiesexposetheCompanytoanumberofrisksanduncertainties,theoccurrenceofanyofwhichcouldmateriallyadverselyaffectourbusiness,cashflows,financialconditionandresultsofoperations.Aportionoftheindustriesthatweservearematureindustries.Asaresult,ourfuturegrowthmaydependinpartonthesuccessfulacquisitionandintegrationofacquiredbusinessesintoourexistingoperations.Wemaynotbeabletoidentifyandsuccessfullynegotiatesuitableacquisitions,obtainfinancingforfutureacquisitionsonsatisfactoryterms,obtainregulatoryapprovalsorotherwisecompleteacquisitionsinthefuture.

    Wecouldhavedifficultiesintegratingacquiredbusinesseswithourexistingoperations.Difficultiesofintegrationcanincludecoordinatingandconsolidatingseparatesystems,integratingthemanagementoftheacquiredbusiness,retainingmarketacceptanceofacquiredproductsandservices,maintainingemployeemoraleandretainingkeyemployees,andimplementingourenterpriseresourceplanningsystemsandoperationalproceduresanddisciplines.Anysuchdifficultiesmaymakeitmoredifficulttomaintainrelationshipswithemployees,customers,businesspartnersandsuppliers.Inaddition,evenifintegrationissuccessful,thefinancialperformanceofacquiredbusinessmaynotbeasexpectedandtherecanbenoassurancewewillrealizeanticipatedbenefitsfromouracquisitions.Wecannotassureyouthatwewilleffectivelyassimilatethebusinessorproductofferingsofacquiredcompaniesintoourbusinessorproductofferingsorrealizeanticipatedoperationalsynergies.Inconnectionwiththeintegrationofacquiredoperationsortheconductofouroverallbusinessstrategies,wemayperiodicallyrestructureourbusinessesand/orsellassetsorportionsofourbusiness.Integratingtheoperationsandpersonnelofacquired

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    companiesintoourexistingoperationsmayresultindifficulties,significantexpenseandaccountingcharges,disruptourbusinessordivertmanagementstimeandattention.

    Acquisitionsinvolvenumerousotherrisks,includingpotentialexposuretounknownliabilitiesofacquiredcompaniesandthepossiblelossofkeyemployeesandcustomersoftheacquiredbusiness.Certainoftheacquisitionagreementsbywhichwehaveacquiredbusinessesrequiretheformerownerstoindemnifyusagainstcertainliabilitiesrelatedtothebusinessoperationsbeforeweacquiredit.However,theliabilityoftheformerownersislimitedandcertainformerownersmaybeunabletomeettheirindemnificationresponsibilities.Wecannotassureyouthattheseindemnificationprovisionswillprotectusfullyoratall,andasaresultwemayfaceunexpectedliabilitiesthatadverselyaffectourfinancialcondition.InconnectionwithacquisitionsorjointventureinvestmentsoutsidetheU.S.,wemayenterintoderivativecontractstopurchaseforeigncurrencyinordertohedgeagainsttheriskofforeigncurrencyfluctuationsinconnectionwithsuchacquisitionsorjointventureinvestments,whichsubjectsustotheriskofforeigncurrencyfluctuationsassociatedwithsuchderivativecontracts.Additionally,ourfinaldeterminationsandappraisalsofthefairvalueofassetsacquiredandliabilitiesassumedinouracquisitionsmayvarymateriallyfromearlierestimates.Wecannotassureyouthatthefairvalueofacquiredbusinesseswillremainconstant.

    We continually assess the strategic fit of our existing businesses and may divest or otherwise dispose of businesses that are deemed not to fit withour strategic plan or are not achieving the desired return on investment, and we cannot be certain that our business, operating results and financialcondition will not be materially and adversely affected. Asuccessfuldivestituredependsonvariousfactors,includingourabilitytoeffectivelytransferliabilities,contracts,facilitiesandemployeestoanypurchaser,identifyandseparatetheintellectualpropertytobedivestedfromtheintellectualpropertythatwewishtoretain,reducefixedcostspreviouslyassociatedwiththedivestedassetsorbusiness,andcollecttheproceedsfromanydivestitures.Inaddition,ifcustomersofthedivestedbusinessdonotreceivethesamelevelofservicefromthenewowners,thismayadverselyaffectourotherbusinessestotheextentthatthesecustomersalsopurchaseotherproductsofferedbyus.Alloftheseeffortsrequirevaryinglevelsofmanagementresources,whichmaydivertourattentionfromotherbusinessoperations.Ifwedonotrealizetheexpectedbenefitsorsynergiesofanydivestituretransaction,ourconsolidatedfinancialposition,resultsofoperationsandcashflowscouldbenegativelyimpacted.Inaddition,divestituresofbusinessesinvolveanumberofrisks,includingsignificantcostsandexpenses,thelossofcustomerrelationships,andadecreaseinrevenuesandearningsassociatedwiththedivestedbusiness.Furthermore,divestiturespotentiallyinvolvesignificantpost-closingseparationactivities,whichcouldinvolvetheexpenditureofmaterialfinancialresourcesandsignificantemployeeresources.Anydivestituremayresultinadilutiveimpacttoourfutureearningsifweareunabletooffsetthedilutiveimpactfromthelossofrevenueassociatedwiththedivestiture,aswellassignificantwrite-offs,includingthoserelatedtogoodwillandotherintangibleassets,whichcouldhaveamaterialadverseeffectonourresultsofoperationsandfinancialcondition.Item 1B. Unresolved Staff Comments

    None.Item 2. Properties

    Number of Facilities - Owned Location Industrial Aerospace Other Total Manufacturing:

    NorthAmerica 6 5 0 11Europe 9 0 0 9Asia 1 0 0 1CentralandLatinAmerica 2 0 0 2

    18 5 0 23

    Non-Manufacturing: NorthAmerica 0 0 1* 1Europe 2 0 0 2

    2 0 1 3

    *TheCompany'sCorporateoffice

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    Number of Facilities - Leased Location Industrial Aerospace Other Total Manufacturing:

    NorthAmerica 2 2 0 4Europe 3 0 0 3Asia 5 5 0 10

    10 7 0 17

    Non-Manufacturing: NorthAmerica 8 2 1** 11Europe 13 1 0 14Asia 22 0 0 22CentralandLatinAmerica 4 0 0 4

    47 3 1 51

    **IndustrialsegmentheadquartersandcertainSharedServicesgroups.

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    Item 3. Legal Proceedings

    InNovember2016,theCompanyspreviouslydisclosedarbitrationwithTriumphActuationSystems-Yakima,LLC("Triumph")wasconcluded.TheCompanywasawarded$9.2million,plusinterestonthejudgmentof$1.4million,whichamountswerereceivedonJanuary3,2017.TheoutcomedidnothaveamaterialimpactontheCompany'sconsolidatedfinancialposition,liquidityorconsolidatedresultsofoperations.

    Inaddition,wearesubjecttolitigationfromtimetotimeintheordinarycourseofbusinessandvariousothersuits,proceedingsandclaimsarependingagainstusandoursubsidiaries.Whileitisnotpossibletodeterminetheultimatedispositionofeachoftheseproceedingsandwhethertheywillberesolvedconsistentwithourbeliefs,weexpectthattheoutcomeofsuchproceedings,individuallyorintheaggregate,willnothaveamaterialadverseeffectonourfinancialconditionorresultsofoperations.

    Item 4. Mine Safety Disclosures

    Notapplicable.

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    PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

    (a) Market Information

    TheCompanyscommonstockistradedontheNewYorkStockExchangeunderthesymbolB.Thefollowingtablesetsforth,fortheperiodsindicated,thelowandhighsalesintra-daytradingpricepershare,asreportedbytheNewYorkStockExchange,anddividendsdeclaredandpaid.

    2016 Low High DividendsQuarterendedMarch31 $ 30.07 $ 35.81 $ 0.12QuarterendedJune30 31.13 37.75 0.13QuarterendedSeptember30 32.55 41.86 0.13QuarterendedDecember31 37.88 49.90 0.13

    2015 Low High DividendsQuarterendedMarch31 $ 33.75 $ 41.00 $ 0.12QuarterendedJune30 38.75 41.74 0.12QuarterendedSeptember30 35.33 41.78 0.12QuarterendedDecember31 33.00 39.74 0.12Stockholders

    AsofFebruary14,2017,therewereapproximately3,239holdersofrecordoftheCompanyscommonstock.AsignificantnumberoftheoutstandingsharesofcommonstockwhicharebeneficiallyownedbyindividualsorentitiesareregisteredinthenameofanomineeofTheDepositoryTrustCompany,asecuritiesdepositoryforbanksandbrokeragefirms.TheCompanybelievesthatthereareapproximately18,774beneficialownersofitscommonstock.Dividends

    PaymentoffuturedividendswilldependupontheCompanysfinancialcondition,resultsofoperationsandotherfactorsdeemedrelevantbytheCompanysBoardofDirectors,aswellasanylimitationsresultingfromfinancialcovenantsundertheCompanyscreditfacilitiesordebtindentures.Seethetableabovefordividendinformationfor2016and2015.Securities Authorized for Issuance Under Equity Compensation Plans

    ForinformationregardingSecuritiesAuthorizedforIssuanceUnderEquityCompensationPlans,seePartIII,Item12ofthisAnnualReport.

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    Performance Graph

    Astockperformancegraphbasedoncumulativetotalreturns(pricechangeplusreinvesteddividends)for$100investedinBarnesGroup,Inc.("BGI")onDecember31,2011issetforthbelow.

    2011 2012 2013 2014 2015 2016BGI $100.00 $94.74 $163.80 $160.20 $155.06 $210.56S&P 600 $100.00 $116.30 $164.33 $173.75 $170.27 $215.26Russell 2000 $100.00 $116.37 $161.53 $169.43 $161.96 $196.38

    Theperformancegraphdoesnotincludeapublishedindustryorline-of-businessindexorpeergroupofsimilarissuersbecausetheCompanyisinmultiplelinesofbusinessanddoesnotbelieveameaningfulpublishedindexorpeergroupcanbereasonablyidentified.Accordingly,aspermittedbySECrules,thegraphincludestheS&P600SmallCapIndexandtheRussell2000Index,whicharecomprisedofissuerswithgenerallysimilarmarketcapitalizationstothatoftheCompany.

    (c) Issuer Purchases of Equity Securities

    Period

    Total Numberof Shares (or Units)

    Purchased

    Average PricePaid Per Share

    (or Unit)

    Total Number ofShares (or Units)

    Purchased as Part ofPublicly AnnouncedPlans or Programs

    Maximum Number of Shares(or Units) that May Yet Be

    Purchased Under the Plans orPrograms (2)

    October1-31,2016 100 $ 40.55 4,573,798November1-30,2016 124,792 $ 38.95 124,792 4,449,006December1-31,2016 $ 4,449,006Total 124,892 (1) $ 38.95 124,792

    (1) Otherthan124,792sharespurchasedinthefourthquarterof2016,whichwerepurchasedaspartoftheCompany's2011Program(definedbelow),allacquisitionsofequitysecuritiesduringthefourthquarterof2016weretheresultoftheoperationofthetermsoftheCompany'sstockholder-approvedequitycompensationplansandthetermsoftheequityrightsgrantedpursuanttothoseplanstopayfortherelatedincometaxuponissuanceofshares.Thepurchasepriceofashareofstockusedfortaxwithholdingisthemarketpriceonthedateofissuance.

    (2) TheprogramwaspubliclyannouncedonOctober20,2011(the"2011Program")authorizingrepurchaseofupto5.0millionsharesofcommonstock.AtDecember31,2015,1.1millionsharesofcommonstockhadnotbeenpurchasedunderthe2011Program.OnFebruary10,2016,theBoardofDirectorsoftheCompanyincreasedthenumberofsharesauthorizedforrepurchaseunderthe2011Programby3.9millionsharesofcommonstock(5.0millionauthorized,intotal).The2011Programpermitsopenmarketpurchases,purchasesunderaRule10b5-1tradingplanandprivatelynegotiatedtransactions.

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    Item 6. Selected Financial Data

    2016 (5) 2015 (6) 2014 2013 (7)(9) 2012 (8)(9)

    Per common share (1) Incomefromcontinuingoperations

    Basic $ 2.50 $ 2.21 $ 2.20 $ 1.34 $ 1.46Diluted 2.48 2.19 2.16 1.31 1.44

    Netincome Basic 2.50 2.21 2.16 5.02 1.74Diluted 2.48 2.19 2.12 4.92 1.72

    Dividendsdeclaredandpaid 0.51 0.48 0.45 0.42 0.40Stockholdersequity(atyear-end) 21.72 20.94 20.40 21.17 14.76Stockprice(atyear-end) 47.42 35.39 37.01 38.31 22.46For the year (inthousands) Netsales $ 1,230,754 $ 1,193,975 $ 1,262,006 $ 1,091,566 $ 928,780Operatingincome 192,178 168,396 179,974 123,201 107,131

    Asapercentofnetsales 15.6% 14.1% 14.3% 11.3% 11.5%Incomefromcontinuingoperations $ 135,601 $ 121,380 $ 120,541 $ 72,321 $ 79,830

    Asapercentofnetsales 11.0% 10.2% 9.6% 6.6% 8.6%Netincome $ 135,601 $ 121,380 $ 118,370 $ 270,527 $ 95,249

    Asapercentofnetsales 11.0% 10.2% 9.4% 24.8% 10.3%Asapercentofaveragestockholdersequity(2) 11.6% 10.7% 10.3% 28.3% 12.6%

    Depreciationandamortization $ 80,154 $ 78,242 $ 81,395 $ 65,052 $ 57,360Capitalexpenditures 47,577 45,982 57,365 57,304 37,787Weightedaveragecommonsharesoutstandingbasic 54,191 55,028 54,791 53,860 54,626Weightedaveragecommonsharesoutstandingdiluted 54,631 55,513 55,723 54,973 55,224Year-end financial position (inthousands) Workingcapital $ 306,609 $ 359,038 $ 323,306 $ 276,878 $ 418,645Goodwill 633,436 587,992 594,949 649,697 579,905Otherintangibleassets,net 522,258 528,322 554,694 534,293 383,972Property,plantandequipment,net 334,489 308,856 299,435 302,558 233,097Totalassets 2,137,539 2,061,866 2,073,885 2,123,673 1,868,596Long-termdebtandnotespayable 500,954 509,906 504,734 547,424 646,613Stockholdersequity 1,168,358 1,127,753 1,111,793 1,141,414 800,118Debtasapercentoftotalcapitalization(3) 30.0% 31.1% 31.2% 32.4% 44.7%Statistics Employeesatyear-end(4) 5,036 4,735 4,515 4,331 3,795(1) Incomefromcontinuingoperationsandnetincomepercommonsharearebasedontheweightedaveragecommonsharesoutstandingduringeachyear.Stockholdersequitypercommonshareiscalculated

    basedonactualcommonsharesoutstandingattheendofeachyear.(2) Averagestockholders'equityiscalculatedbasedonthemonth-endstockholdersequitybalancesbetweenDecember31,2015andDecember31,2016(13-monthaverage).(3) Debtincludesallinterest-bearingdebtandtotalcapitalizationincludesinterest-bearingdebtandstockholdersequity.(4) Thenumberofemployeesateachyear-endincludesemployeesofcontinuingoperationsandexcludesprioremployeesofdiscontinuedoperations.(5) During2016,theCompanycompletedtheacquisitionofFOBOHA.TheresultsofFOBOHA,fromtheacquisitiononAugust31,2016,havebeenincludedwithintheCompany'sConsolidatedFinancial

    StatementsfortheperiodendedDecember31,2016.(6) During2015,theCompanycompletedtheacquisitionsofThermoplayandPriamus.TheresultsofThermoplayandPriamus,fromtheiracquisitionsonAugust7,2015andOctober1,2015,respectively,

    havebeenincludedwithintheCompany'sConsolidatedFinancialStatementsfortheperiodendedDecember31,2015.(7) During2013,theCompanycompletedtheacquisitionoftheMnnerBusiness.TheresultsoftheMnnerBusiness,fromtheacquisitiononOctober31,2013,havebeenincludedwithintheCompany's

    ConsolidatedFinancialStatementsfortheperiodendedDecember31,2013.(8) During2012,theCompanycompletedtheacquisitionofSynventive.TheresultsofSynventive,fromtheacquisitiononAugust27,2012,havebeenincludedwithintheCompany'sConsolidatedFinancial

    StatementsfortheperiodendedDecember31,2012.(9) During2013,theCompanysoldtheBDNAbusinesswithinthesegmentformerlyreferredtoasDistribution.TheresultsoftheBDNAbusiness,includingany(loss)gainonthesaleofbusiness,havebeen

    reportedthroughdiscontinuedoperationsduringtherespectiveperiods.

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    Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations

    YoushouldreadthefollowingdiscussioninconjunctionwithourconsolidatedfinancialstatementsandrelatednotesinthisAnnualReportonForm10-K.Inadditiontohistoricalinformation,thisdiscussioncontainsforward-lookingstatementsthatinvolverisks,uncertainties,andassumptionsthatcouldcauseactualresultstodiffermateriallyfromourexpectations.FactorsthatcouldcausesuchdifferencesincludethosedescribedinthesectiontitledRiskFactorsandelsewhereinthisreport.Weundertakenoobligationtoupdateanyoftheforward-lookingstatements.

    OVERVIEW

    2016 Highlights

    BarnesGroupInc.(the"Company")achievedsalesof$1,230.8millionin2016,anincreaseof$36.8million,or3.1%,from2015.Acquiredbusinessescontributedincrementalsalesof$47.4millionduring2016.Organicsales(netsalesexcludingbothforeigncurrencyandacquisitionimpacts)decreasedby$1.1million,or0.1%,withanincreaseof0.5%andadecreaseof1.3%withintheIndustrialandAerospacesegments,respectively.SalesintheIndustrialsegmentwereimpactedbychangesinforeigncurrencywhichdecreasedsalesbyapproximately$9.6millionastheU.S.dollarstrengthenedagainstforeigncurrencies.

    Operatingincomeincreased14.1%from$168.4millionin2015to$192.2millionin2016andoperatingmarginincreasedfrom14.1%in2015to15.6%in2016.OperatingincomewasimpactedbyimprovedproductivitywithinIndustrialandtheprofitcontributionsoftheincrementalsalesgeneratedatourrecentlyacquiredbusinesses,partiallyoffsetbyunfavorablepricingwithinbothsegments.Operatingincomeduring2016and2015included$2.3millionand$2.6millionofshort-termpurchaseaccountingadjustments,respectively,relatedtorecentbusinessacquisitions.Operatingincomein2015includeda$9.9millionlump-sumpensionsettlementchargeand$4.2millionofchargesrelatedtocertainworkforcereductionsandrestructuringcharges.

    TheCompanyfocusedonprofitablesalesgrowthbothorganicallyandthroughacquisition,inadditiontoproductivityimprovements,askeystrategicobjectivesin2016.Managementcontinueditsfocusoncashflowandworkingcapitalmanagementin2016andgenerated$217.6millionincashflowfromoperations.

    Business Transformation

    AcquisitionsandstrategicrelationshipswithourcustomershavebeenakeygrowthdriverfortheCompany,andwecontinuetoseekallianceswhichfosterlong-termbusinessrelationships.Theseacquisitionshaveallowedustoextendintoneworadjacentmarkets,expandourgeographicreach,andcommercializenewproducts,processesandservices.TheCompanycontinuallyevaluatesitsbusinessportfoliotooptimizeproductofferingsandmaximizevalue.Wehavesignificantlytransformedourbusinessfollowingourentranceintotheplasticinjectionmoldingmarket.

    Inthethirdquarterof2016,theCompany,throughthreeofitssubsidiaries(collectively,thePurchaser),completeditsacquisitionofthemoldsbusinessofAdvalTechHoldingAGandAdvalTechHoldings(Asia)Pte.Ltd.("FOBOHA").FOBOHAisheadquarteredinHaslach,GermanyandoperatesoutofthreemanufacturingfacilitieslocatedinGermany,SwitzerlandandChina.TheCompanycompleteditspurchaseoftheGermanyandSwitzerlandbusinessesonAugust31,2016.ThepurchaseoftheChinabusinessrequiredgovernmentapprovalwhichwasgrantedonSeptember30,2016.FOBOHAspecializesinthedevelopmentandmanufactureofcomplexplasticinjectionmoldsforpackaging,medical,consumerandautomotiveapplications.TheCompanyacquiredFOBOHAforanaggregatecashpurchasepriceofCHF136.3million($138.6million)whichwasfinancedusingcashonhandandborrowingsundertheCompany'srevolvingcreditfacility.ThepurchasepriceincludespreliminaryadjustmentsunderthetermsoftheSharePurchaseAgreement("SPA"),includingapproximatelyCHF11.3million($11.5million)relatedtocashacquired,andissubjecttopostclosingadjustmentsunderthetermsoftheSPA.Inconnectionwiththeacquisition,theCompanyrecorded$39.8millionofintangibleassetsand$73.7millionofgoodwill.SeeNote2andNote5totheConsolidatedFinancialStatements.

    Inthefourthquarterof2015,theCompany,itselfandthroughtwoofitssubsidiaries,completedtheacquisitionofprivatelyheldPriamusSystemTechnologiesAGandtwoofitssubsidiaries(collectively,"Priamus")fromGrowthFinanceAG.Priamus,whichhasapproximately40employees,isheadquarteredinSchaffhausen,SwitzerlandandhasdirectsalesandserviceofficesintheU.S.andGermany.Priamusisatechnologyleaderinthedevelopmentofadvancedprocesscontrolsystemsfortheplasticinjectionmoldingindustryandservicesmanyoftheworld'shighestqualityplasticinjectionmoldersinthemedical,automotive,consumergoods,electronicsandpackagingmarkets.PriamushasbeenintegratedintoourIndustrial

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    segment.TheCompanyacquiredPriamusforanaggregatecashpurchasepriceofCHF9.9million($10.1million)whichwasfinancedusingcashonhandandborrowingsundertheCompany'srevolvingcreditfacility.ThepurchasepriceincludesadjustmentsunderthetermsoftheSharePurchaseAgreement,includingCHF1.6million($1.6million)relatedtocashacquired.SeeNote2oftheConsolidatedFinancialStatements.

    Inthethirdquarterof2015,theCompany,throughoneofitssubsidiaries,completedtheacquisitionoftheThermoplaybusiness("Thermoplay")byacquiringallofthecapitalstockofprivatelyheldHPES.p.A.,theparentcompanythroughwhichThermoplayoperates("HPE").ThermoplaysheadquartersandmanufacturingfacilityarelocatedinPont-Saint-MartininAosta,Italy,withtechnicalservicecapabilitiesinChina,India,France,Germany,UnitedKingdom,Portugal,andBrazil.Thermoplay,whichhasbeenintegratedintoourIndustrialsegment,specializesinthedesign,development,andmanufacturingofhotrunnersolutionsforplasticinjectionmolding,primarilyinthepackaging,automotive,andmedicalendmarkets.TheCompanyacquiredThermoplayforanaggregatecashpurchasepriceof58.1million($63.7million),pursuanttothetermsoftheSaleandPurchaseAgreement("SPA"),whichwasfinancedusingcashonhandandborrowingsundertheCompany'srevolvingcreditfacility.ThepurchasepriceincludesadjustmentsunderthetermsoftheSPA,including17.1million($18.7million)relatedtocashacquired.SeeNote2oftheConsolidatedFinancialStatements.

    Management Objectives

    Managementfocusedonthreekeystrategicenablersduring2016:deploymentoftheBarnesEnterpriseSystem,acceleratinginnovationandmaturingthetalentmanagementsystem,which,incombination,areexpectedtogeneratelong-termvaluefortheCompany'sstockholdersandourcustomers.TheCompany'sstrategiesforgrowthincludebothorganicgrowthfromnewproducts,processes,systems,services,marketsandcustomers,andgrowthfromacquisitions.TheCompany'sstrategiesforprofitabilityincludeemployeeengagementandempowermenttodriveproductivityandprocessinitiatives,suchastheapplicationofnewtechnologies,automationandinnovation,intensifiedfocusonintellectualpropertyasacoredifferentiator.AkeycomponentoftheCompany'scultureistheBarnesEnterpriseSystem(BES),theCompany'soperatingsystem,whichdrivesalignmentandfosterscontinuousimprovement,collaborationandinnovationthroughouttheglobalorganization.Our Business

    TheCompanyconsistsoftwooperatingsegments:IndustrialandAerospace.

    Key Performance Indicators

    Managementevaluatestheperformanceofitsreportablesegmentsbasedonthesales,operatingprofit,operatingmarginsandcashgenerationoftherespectivebusinesses,whichincludesnetsales,costofsales,sellingandadministrativeexpensesandcertaincomponentsofotherincomeandotherexpenses,aswellastheallocationofcorporateoverheadexpenses.Eachsegmenthasstandardkeyperformanceindicators(KPIs),anumberofwhicharefocusedoncustomermetrics(on-time-deliveryandquality),internaleffectivenessandproductivity/efficiencymetrics(saleseffectiveness,globalsourcing,operationalexcellence,functionalexcellence,salesperemployee,costofquality,anddaysworkingcapital),employeesafety-relatedmetrics(totalrecordableincidentrateandlosttimeincidentrate),andspecificKPIsonprofitablegrowth.Key Industry Data

    Inbothsegments,managementtracksavarietyofeconomicandindustrydataasindicatorsofthehealthofaparticularsector.

    AtIndustrial,keydataforthemanufacturingoperationsincludetheInstituteforSupplyManagementsmanufacturingPMICompositeIndex(andsimilarindicesforEuropeanandAsian-basedbusinesses);theFederalReservesIndustrialProductionIndex("theIPI");theGlobalInsightglobalmedicalandmeasuringequipmentindex;theproductionoflightvehicles,bothintheU.S.andglobally;worldwidelightvehiclenewmodelintroductionsandexistingmodelrefreshes;NorthAmericanmediumandheavydutyvehicleproduction;andglobalGDPgrowthforecasts.

    AtAerospace,managementoftheaftermarketbusinessmonitorsthenumberofaircraftintheactivefleet,thenumberofplanestemporarilyorpermanentlytakenoutofservice,aircraftutilizationratesforthemajorairlines,engineshopvisits,airlineprofitability,aircraftfuelcostsandtrafficgrowth.TheAerospaceOEMbusinessregularlytracksordersanddeliveriesforeachofthemajoraircraftmanufacturers,aswellasenginepurchasesmadefornewaircraft.ManagementalsomonitorsannualappropriationsfortheU.S.militaryrelatedtopurchasesofneworusedaircraftandenginecomponents.

    19

  • Table of Contents

    RESULTS OF OPERATIONSSales

    ($inmillions) 2016 2015 $ Change % Change 2014Industrial $ 824.2 $ 782.3 $ 41.9 5.4% $ 822.1Aerospace 406.5 411.7 (5.2) (1.3)% 440.0Total $ 1,230.8 $ 1,194.0 $ 36.8 3.1% $ 1,262.0

    2016vs.2015:

    TheCompanyreportednetsalesof$1,230.8millionin2016,anincreaseof$36.8million,or3.1%,from2015.Acquiredbusinessescontributedincrementalsalesof$47.4millionduringthe2016period.OrganicsaleswithinIndustrialincreasedby$4.1million,or0.5%,during2016,primarilyduetostrengthinourMoldingSolutionsbusinesses,slightlyoffsetbycontinuedsoftnessinNorthAmericangeneralindustrialend-markets.Aerospacerecordedsalesof$406.5millionin2016,a$5.2million,or1.3%decreasefrom2015.LowersaleswithintheOEMandsparepartsbusinesseswerepartiallyoffsetbyincreasedsaleswithintheMRObusiness.TheimpactofforeigncurrencytranslationdecreasedsaleswithinIndustrialbyapproximately$9.6millionastheU.S.dollarstrengthenedagainstforeigncurrencies.SaleswithinAerospacewerenotimpactedbychangesinforeigncurrencyasthesearelargelydenominatedinU.S.dollars.TheCompanysinternationalsalesincreased10.4%year-over-year,whiledomesticsalesdecreased4.7%,largelyaresultAerospacesalesbeingprimarilyU.S.-based.Excludingtheimpactofforeigncurrencytranslationonsales,however,theCompany'sinternationalsalesin2016increased12.0%,inclusiveofsalesthroughacquisition,from2015.

    2015vs.2014:

    TheCompanyreportednetsalesof$1,194.0millionin2015,adecreaseof$68.0million,or5.4%,from2014.TheacquisitionsofThermoplayonAugust7,2015andPriamusonOctober1,2015providedsalesof$13.6millionand$2.0million,respectively,duringthe2015period.OrganicsaleswithinIndustrialincreasedby$13.5million,or1.6%,during2015,primarilyduetofavorableend-marketsservedbyourtoolanddieandplasticsbusinessesduringthefirsthalfof2015.Asofteningwithinourtransportationandgeneralindustrialend-marketsduringthesecondhalfof2015temperedasubstantialportionoftheorganicgrowthinthefirsthalfoftheyear.Aerospacerecordedsalesof$411.7millionin2015,a$28.3million,or6.4%decreasefrom2014.LowersaleswithintheOEMandMRObusinesseswerepartiallyoffsetbyincreasedsaleswithinthesparepartsbusiness.Thesparepartsbusinessbenefitedfromincreaseddemandasaresultofhigheraircraftutilizationandcustomerrestockingofinventory,whereastheMRObusinesscontinuedtobeimpactedbydeferredmaintenanceoncertainplatforms.Thetimingofcustomerdeliveriesandexecution,whichwaspartiallyimpactedbynewproductintroductionchallenges,inadditiontotheimpactofacontractterminationdispute,directlyimpactedlowersaleswithintheOEMbusinessduringthesecondhalfof2015.TheimpactofforeigncurrencytranslationdecreasedsaleswithinIndustrialbyapproximately$68.8millionastheU.S.dollarstrengthenedagainstforeigncurrencies.SaleswithinAerospacewerenotimpactedbychangesinforeigncurrencyasthesearelargelydenominatedinU.S.dollars.TheCompanysinternationalsalesdecreased2.4%year-over-year,whiledomesticsalesdecreased4.7%.Excludingtheimpactofforeigncurrencytranslationonsales,however,theCompany'sinternationalsalesin2015increased7.8%,inclusiveofsalesthroughacquisition,from2014.

    20

  • Table of Contents

    Expenses and Operating Income

    ($inmillions) 2016 2015 $ Change % Change 2014Costofsales $ 790.3 $ 782.8 $ 7.5 1.0% $ 829.6

    %sales 64.2% 65.6% 65.7%Grossprofit(1) $ 440.5 $ 411.2 $ 29.3 7.1% $ 432.4

    %sales 35.8% 34.4% 34.3%Sellingandadministrativeexpenses $ 248.3 $ 242.8 $ 5.5 2.3% $ 252.4

    %sales 20.2% 20.3% 20.0%Operatingincome $ 192.2 $ 168.4 $ 23.8 14.1% $ 180.0

    %sales 15.6% 14.1% 14.3%

    (1) Saleslesscostofsales

    2016vs.2015:

    Costofsalesin2016increased1.0%from2015,whilegrossprofitmarginincreasedfrom34.4%in2015to35.8%in2016.GrossmarginsimprovedatIndustrialanddecreasedatAerospace.Grossmarginduringthecomparable2015periodincludedachargeof$6.4millionrelatedtoalump-sumpensionsettlementcharge(seeNote11oftheConsolidatedFinancialStatements).AtIndustrial,grossprofitincreasedduring2016primarilyasaresultoffavorableproductivityandstrengthwithintheMoldingSolutionsbusinesses.Grossprofitduring2016wasnegativelyimpactedby$2.3millionofshort-termpurchaseaccountingadjustmentsrelatedtotheacquisitionofFOBOHA,whereasthe2015periodincluded$0.9millionofshort-termpurchaseaccountingadjustmentsrelatedtotheacquisitionoftheMnnerbusinessand$0.9millionofshort-termpurchaseaccountingadjustmentsrelatedtotheacquisitionofThermoplay.WithinAerospace,adeclineingrossprofitrelatesprimarilytolowersalesvolumesandunfavorableproductivity.Sellingandadministrativeexpensesin2016increased2.3%fromthe2015period,dueinpartto$3.0millionofcostsrelatedtothecontractterminationdisputewithintheAerospacesegmentandtheincrementaloperationsoftheacquiredbusinesses,partiallyoffsetbyan$0.8millionreductioninshort-termpurchaseaccountingadjustmentsrelatedtoacquisitions.Duringthe2015period,sellingandadministrativeexpensesincluded$4.2millionofchargesrelatedtoworkforcereductionsandseverance,and$3.5millionoflump-sumpensionsettlementcharges.Short-termpurchaseaccountingadjustmentsthatimpactsellingandadministrativeexpensesduring2015included$0.6millionand$0.3millionrelatedtotheacquisitionsofMnnerandThermoplay,respectively.Asapercentageofsales,sellingandadministrativecostsdecreasedslightlyfrom20.3%inthe2015periodto20.2%inthe2016period.Operatingincomeinthe2016periodincreased14.1%to$192.2millionfrom2015andoperatingincomemarginincreasedfrom14.1%to15.6%.

    2015vs.2014:

    Costofsal


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