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Rapak generated approximately $30 million in net sales in 2019 and will be reported in TriMas' Packaging segment.</font></div></div> 0000842633 2020-01-01 2020-06-30 0000842633 2020-07-22 0000842633 2020-06-30 0000842633 2019-12-31 0000842633 2019-04-01 2019-06-30 0000842633 2019-01-01 2019-06-30 0000842633 2020-04-01 2020-06-30 0000842633 2019-03-31 0000842633 2018-12-31 0000842633 2020-01-01 2020-03-31 0000842633 us-gaap:RetainedEarningsMember 2020-04-01 2020-06-30 0000842633 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31 0000842633 us-gaap:AdditionalPaidInCapitalMember 2020-04-01 2020-06-30 0000842633 us-gaap:RetainedEarningsMember 2020-06-30 0000842633 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0000842633 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-04-01 2020-06-30 0000842633 us-gaap:CommonStockMember 2020-01-01 2020-03-31 0000842633 us-gaap:RetainedEarningsMember 2019-12-31 0000842633 2020-03-31 0000842633 us-gaap:CommonStockMember 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
 
 
 
 
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
 
 
For the Quarterly Period Ended
June 30, 2020
Or
 
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 001-10716
TRIMAS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
 
38-2687639
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer
Identification No.)
38505 Woodward Avenue, Suite 200
Bloomfield Hills, Michigan 48304
(Address of principal executive offices, including zip code)
(248631-5450
(Registrant's telephone number, including area code)
Title of each class
Trading symbol(s)
Name of exchange on which registered
Common stock, $0.01 par value
TRS
The NASDAQ Global Market LLC
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     No .
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
 
 
 
 
 
Non-accelerated filer
 
Smaller reporting company
 
 
 
 
 
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No 
As of July 22, 2020, the number of outstanding shares of the Registrant's common stock, $0.01 par value, was 45,503,644 shares.



TriMas Corporation
Index
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


1


Forward-Looking Statements
This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 about our financial condition, results of operations and business. These forward-looking statements can be identified by the use of forward-looking words, such as “may,” “could,” “should,” “estimate,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “target,” “plan” or other comparable words, or by discussions of strategy that may involve risks and uncertainties.
These forward-looking statements are subject to numerous assumptions, risks and uncertainties which could materially affect our business, financial condition or future results including, but not limited to: the severity and duration of the ongoing corona virus (“COVID-19”) pandemic on our operations, customers and suppliers, as well as related actions taken by governmental authorities and other third parties in response, each of which is uncertain, rapidly changing and difficult to predict; general economic and currency conditions; material and energy costs; risks and uncertainties associated with intangible assets, including goodwill or other intangible asset impairment charges; competitive factors; future trends; our ability to realize our business strategies; our ability to identify attractive acquisition candidates, successfully integrate acquired operations or realize the intended benefits of such acquisitions; information technology and other cyber-related risks; the performance of our subcontractors and suppliers; supply constraints; market demand; intellectual property factors; litigation; government and regulatory actions, including, without limitation, the impact of tariffs, quotas and surcharges; our leverage; liabilities imposed by our debt instruments; labor disputes; changes to fiscal and tax policies; contingent liabilities relating to acquisition activities; the disruption of operations from catastrophic or extraordinary events, including natural disasters or public health crises; the potential impact of Brexit; tax considerations relating to the Cequent spin-off; our future prospects; and other risks that are discussed in Part I, Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2019 and elsewhere in this report. The risks described in our Annual Report on Form 10-K and elsewhere in this report are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deemed to be immaterial also may materially adversely affect our business, financial position and results of operations or cash flows.
The cautionary statements set forth above should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. We caution readers not to place undue reliance on the statements, which speak only as of the date of this report. We do not undertake any obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statement to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as required by law.
We disclose important factors that could cause our actual results to differ materially from our expectations implied by our forward-looking statements under Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this report. These cautionary statements qualify all forward-looking statements attributed to us or persons acting on our behalf. When we indicate that an event, condition or circumstance could or would have an adverse effect on us, we mean to include effects upon our business, financial and other conditions, results of operations, prospects and ability to service our debt.

2


PART I. FINANCIAL INFORMATION

Item 1.    Consolidated Financial Statements
TriMas Corporation
Consolidated Balance Sheet
(Dollars in thousands)


 
June 30,
2020

December 31,
2019
Assets
 
(unaudited)
 

Current assets:
 

 

Cash and cash equivalents
 
$
65,250


$
172,470

Receivables, net of reserves of approximately $3.7 million and $2.1 million as of June 30, 2020 and December 31, 2019, respectively
 
123,320


108,860

Inventories
 
140,890


132,660

Prepaid expenses and other current assets
 
18,900


20,050

Total current assets
 
348,360

 
434,040

Property and equipment, net
 
210,960


214,330

Operating lease right-of-use assets
 
35,270

 
27,850

Goodwill
 
376,320


334,640

Other intangibles, net
 
188,170


161,390

Deferred income taxes
 
3,630

 
500

Other assets
 
22,190


19,950

Total assets
 
$
1,184,900

 
$
1,192,700

Liabilities and Shareholders' Equity
 

 

Current liabilities:
 

 

Accounts payable
 
$
60,180


$
72,670

Accrued liabilities
 
46,680


42,020

Operating lease liabilities, current portion
 
6,480

 
5,100

Total current liabilities
 
113,340

 
119,790

Long-term debt, net
 
295,260


294,690

Operating lease liabilities
 
29,330

 
23,100

Deferred income taxes
 
27,960


16,830

Other long-term liabilities
 
57,910


40,810

Total liabilities
 
523,800

 
495,220

Preferred stock, $0.01 par: Authorized 100,000,000 shares;
Issued and outstanding: None
 

 

Common stock, $0.01 par: Authorized 400,000,000 shares;
Issued and outstanding: 43,502,103 shares at June 30, 2020 and 44,562,679 shares at December 31, 2019
 
440

 
450

Paid-in capital
 
753,430

 
782,880

Accumulated deficit
 
(82,430
)
 
(79,850
)
Accumulated other comprehensive loss
 
(10,340
)
 
(6,000
)
Total shareholders' equity
 
661,100

 
697,480

Total liabilities and shareholders' equity
 
$
1,184,900

 
$
1,192,700



The accompanying notes are an integral part of these financial statements.

3


TriMas Corporation
Consolidated Statement of Operations
(Unaudited—dollars in thousands, except for per share amounts)

 
 
Three months ended
June 30,
 
Six months ended
June 30,
 
 
2020
 
2019
 
2020
 
2019
Net sales
 
$
199,550

 
$
190,830

 
$
382,340

 
$
364,200

Cost of sales
 
(162,320
)
 
(137,040
)
 
(298,740
)
 
(263,620
)
Gross profit
 
37,230

 
53,790

 
83,600

 
100,580

Selling, general and administrative expenses
 
(55,380
)
 
(26,730
)
 
(81,920
)
 
(53,720
)
Operating profit (loss)
 
(18,150
)
 
27,060

 
1,680

 
46,860

Other expense, net:
 
 
 
 
 
 
 
 
Interest expense
 
(4,230
)
 
(3,490
)
 
(7,810
)
 
(6,930
)
Other income, net
 
1,130

 
1,220

 
1,050

 
650

Other expense, net
 
(3,100
)
 
(2,270
)
 
(6,760
)
 
(6,280
)
Income (loss) before income tax expense
 
(21,250
)
 
24,790

 
(5,080
)
 
40,580

Income tax benefit (expense)
 
5,550

 
(6,070
)
 
2,500

 
(7,310
)
Income (loss) from continuing operations
 
(15,700
)
 
18,720

 
(2,580
)
 
33,270

Income from discontinued operations, net of tax
 

 
3,300

 

 
7,840

Net income (loss)
 
$
(15,700
)
 
$
22,020

 
$
(2,580
)
 
$
41,110

Basic earnings (loss) per share:
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.36
)
 
$
0.41

 
$
(0.06
)
 
$
0.73

Discontinued operations
 

 
0.07

 

 
0.17

Net income (loss) per share
 
$
(0.36
)
 
$
0.48

 
$
(0.06
)
 
$
0.90

Weighted average common shares—basic
 
43,463,235

 
45,592,075

 
43,832,144

 
45,585,445

Diluted earnings (loss) per share:
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.36
)
 
$
0.41

 
$
(0.06
)
 
$
0.72

Discontinued operations
 

 
0.07

 

 
0.17

Net income (loss) per share
 
$
(0.36
)
 
$
0.48

 
$
(0.06
)
 
$
0.89

Weighted average common shares—diluted
 
43,463,235

 
45,828,315

 
43,832,144

 
45,910,249



The accompanying notes are an integral part of these financial statements.

4


TriMas Corporation
Consolidated Statement of Comprehensive Income
(Unaudited—dollars in thousands)

 
 
Three months ended
June 30,
 
Six months ended
June 30,
 
 
2020
 
2019
 
2020
 
2019
Net income (loss)
 
$
(15,700
)
 
$
22,020

 
$
(2,580
)
 
$
41,110

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Defined benefit plans (Note 18)
 
160

 
100

 
310

 
200

Foreign currency translation
 
1,310

 
(900
)
 
(6,950
)
 
(200
)
Derivative instruments (Note 11)
 
(2,130
)
 
(730
)
 
2,300

 
1,490

Total other comprehensive income (loss)
 
(660
)
 
(1,530
)
 
(4,340
)
 
1,490

Total comprehensive income (loss)
 
$
(16,360
)
 
$
20,490

 
$
(6,920
)
 
$
42,600



The accompanying notes are an integral part of these financial statements.



5


TriMas Corporation
Consolidated Statement of Cash Flows
(Unaudited—dollars in thousands)
 
 
Six months ended June 30,
 
 
2020
 
2019
Cash Flows from Operating Activities:
 
 
 
 
Net income (loss)
 
$
(2,580
)
 
$
41,110

Income from discontinued operations
 

 
7,840

Income (loss) from continuing operations
 
(2,580
)
 
33,270

Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities, net of acquisition impact:
 

 

Loss on dispositions of assets
 
1,010

 
30

Depreciation
 
14,770

 
11,990

Amortization of intangible assets
 
10,150

 
9,380

Amortization of debt issue costs
 
570

 
560

Deferred income taxes
 
(1,460
)
 
4,130

Non-cash compensation expense
 
4,680

 
3,040

Non-cash change in legacy liability estimate
 
23,400

 

Increase in receivables
 
(12,300
)
 
(5,720
)
Decrease in inventories
 
5,260

 
380

Decrease in prepaid expenses and other assets
 
290

 
1,430

Decrease in accounts payable and accrued liabilities
 
(14,530
)
 
(24,410
)
Other operating activities
 
1,580

 
(1,310
)
Net cash provided by operating activities of continuing operations
 
30,840

 
32,770

Net cash used for operating activities of discontinued operations
 

 
(3,490
)
Net cash provided by operating activities, net of acquisition impact
 
30,840

 
29,280

Cash Flows from Investing Activities:
 
 
 
 
Capital expenditures
 
(9,250
)
 
(11,500
)
Acquisition of businesses, net of cash acquired
 
(95,160
)
 
(67,030
)
Net proceeds from disposition of business, property and equipment
 
2,110

 

Net cash used for investing activities of continuing operations
 
(102,300
)
 
(78,530
)
Net cash used for investing activities of discontinued operations
 

 
(780
)
Net cash used for investing activities
 
(102,300
)
 
(79,310
)
Cash Flows from Financing Activities:
 
 
 
 
Proceeds from borrowings on revolving credit facilities
 
245,700

 
93,220

Repayments of borrowings on revolving credit facilities
 
(247,320
)
 
(92,410
)
Shares surrendered upon exercise and vesting of equity awards to cover taxes
 
(2,570
)
 
(3,230
)
Payments to purchase common stock
 
(31,570
)
 
(15,420
)
Net cash used for financing activities of continuing operations
 
(35,760
)
 
(17,840
)
Net cash provided by financing activities of discontinued operations
 

 

Net cash used for financing activities
 
(35,760
)
 
(17,840
)
Cash and Cash Equivalents:
 

 

Decrease for the period
 
(107,220
)
 
(67,870
)
At beginning of period
 
172,470

 
108,150

At end of period
 
$
65,250

 
$
40,280

Supplemental disclosure of cash flow information:
 

 

Cash paid for interest
 
$
7,150

 
$
6,190

Cash paid for taxes
 
$
3,410

 
$
10,160



The accompanying notes are an integral part of these financial statements.

6


TriMas Corporation
Consolidated Statement of Shareholders' Equity
Six Months Ended June 30, 2020 and 2019
(Unaudited—dollars in thousands)

 
 
Common
Stock
 
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Total
Balances, December 31, 2019
 
$
450

 
$
782,880

 
$
(79,850
)
 
$
(6,000
)
 
$
697,480

Net income
 

 

 
13,120

 

 
13,120

Other comprehensive loss
 

 

 

 
(3,680
)
 
(3,680
)
Purchase of common stock
 
(20
)
 
(31,550
)
 

 

 
(31,570
)
Shares surrendered upon exercise and vesting of equity awards to cover taxes
 

 
(1,830
)
 

 

 
(1,830
)
Non-cash compensation expense
 

 
1,940

 

 

 
1,940

Balances, March 31, 2020
 
$
430

 
$
751,440

 
$
(66,730
)
 
$
(9,680
)
 
$
675,460

Net loss
 

 

 
(15,700
)
 

 
(15,700
)
Other comprehensive loss
 

 

 

 
(660
)
 
(660
)
Shares surrendered upon exercise and vesting of equity awards to cover taxes
 

 
(740
)
 

 

 
(740
)
Non-cash compensation expense
 
10

 
2,730

 

 

 
2,740

Balances, June 30, 2020
 
$
440

 
$
753,430

 
$
(82,430
)
 
$
(10,340
)
 
$
661,100


 
 
Common
Stock
 
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Total
Balances, December 31, 2018
 
$
460

 
$
816,500

 
$
(179,660
)
 
$
(16,850
)
 
$
620,450

Net income
 

 

 
19,090

 

 
19,090

Other comprehensive income
 

 

 

 
3,020

 
3,020

Purchase of common stock
 

 
(670
)
 

 

 
(670
)
Shares surrendered upon exercise and vesting of equity awards to cover taxes
 

 
(2,620
)
 

 

 
(2,620
)
Non-cash compensation expense
 

 
1,320

 

 

 
1,320

Impact of accounting standards adoption
 

 

 
1,190

 
(1,270
)
 
(80
)
Balances, March 31, 2019
 
$
460

 
$
814,530

 
$
(159,380
)
 
$
(15,100
)
 
$
640,510

Net income
 

 

 
22,020

 

 
22,020

Other comprehensive loss
 

 

 

 
(1,530
)
 
(1,530
)
Purchase of common stock
 
(10
)
 
(14,740
)
 

 

 
(14,750
)
Shares surrendered upon exercise and vesting of equity awards to cover taxes
 

 
(610
)
 

 

 
(610
)
Non-cash compensation expense
 

 
1,720

 

 

 
1,720

Balances, June 30, 2019
 
$
450

 
$
800,900

 
$
(137,360
)
 
$
(16,630
)
 
$
647,360


The accompanying notes are an integral part of these financial statements.

7


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


1. Basis of Presentation
TriMas Corporation ("TriMas" or the "Company"), and its consolidated subsidiaries, designs, engineers and manufactures innovative products under leading brand names for customers primarily in the consumer products, aerospace & defense, and industrial markets.
In the first quarter of 2020, TriMas began reporting its machined components operations, located in Stanton, California and Tolleson, Arizona, as part of its Aerospace segment. The operations were previously reported in the Specialty Products segment. The move of these operations into TriMas Aerospace facilitates a more rapid approach to achieving anticipated synergies from the recent RSA Engineered Products ("RSA") acquisition, allowing the Company to better leverage the machining competencies and resources across its aerospace businesses. See Note 15, "Segment Information," for further information on each of the Company's reportable segments.
In addition, on December 20, 2019, the Company completed the sale of its Lamons division (“Lamons”), a transaction entered into with an investment fund sponsored by First Reserve on November 1, 2019. Lamons was sold for approximately $135 million in cash. The financial results of Lamons were previously reported within the Company's Specialty Products segment, and are presented as discontinued operations for all periods presented in the financial statements attached hereto.
In the second quarter of 2020, the Company elected to change its method of accounting for asbestos-related defense costs from accruing for probable and reasonably estimable defense costs associated with known claims expected to settle to accrue for all future defense costs for both known and unknown claims, which the Company now believes are reasonably estimable. The Company believes this change is preferable, as asbestos-related defense costs represent expenditures related to legacy activities that do not contribute to current or future revenue generating activities, and recording an estimate of the full liability for asbestos-related costs, where estimable with reasonable precision, provides a more complete assessment of the liability associated with resolving asbestos-related claims. This accounting change has been reflected as a change in accounting estimate effected by a change in accounting principle. See Note 14, "Commitments and Contingencies," for further information on this change.
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries and, in the opinion of management, contain all adjustments, including adjustments of a normal and recurring nature, necessary for a fair presentation of financial position and results of operations. The preparation of financial statements also requires management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities. Actual results may differ from such estimates and assumptions due to risks and uncertainties, including uncertainty in the current economic environment due to the ongoing outbreak of a new strain of the coronavirus (“COVID-19”). While the full impact of COVID-19 is unknown and cannot be reasonably estimated at this time, the Company has made appropriate accounting estimates based on the facts and circumstances available as of the reporting date. To the extent there are differences between these estimates and actual results, the Company's consolidated financial statements may be materially affected.
Results of operations for interim periods are not necessarily indicative of results for the full year, and certain prior year amounts have been reclassified to conform to current year presentation. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the Company's 2019 Annual Report on Form 10-K.
2. New Accounting Pronouncements
Recently Issued Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" ("ASU 2019-12"), which removes specific exceptions to the general principles in Topic 740, simplifies the accounting for income taxes and provides clarification of certain aspects of current guidance. ASU 2019-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted. The Company is in the process of assessing the impact of adoption on its consolidated financial statements.

8


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)

In August 2018, the FASB issued ASU 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20)" ("ASU 2018-14"), which modifies the disclosure requirements for employers who sponsor defined benefit pension or other postretirement plans. ASU 2018-14 is effective for fiscal years ending after December 15, 2020, with early adoption permitted. ASU 2018-14 is to be applied retrospectively to all periods presented. The Company is in the process of assessing the impact of adoption on its consolidated financial statements.
3. Discontinued Operations
On December 20, 2019, the Company completed the sale of Lamons to two wholly-owned subsidiaries of an investment fund sponsored by First Reserve, pursuant to an Asset and Stock Purchase Agreement dated as of November 1, 2019 (the “Purchase Agreement”), for a purchase price of $135 million, subject to certain adjustments as set forth in the Purchase Agreement. The transaction was finalized in the first quarter of 2020 and resulted in a $1.8 million payment to the Company.
The Company's historical results for Lamons are shown in the accompanying consolidated statement of operations as a discontinued operation. Results of discontinued operations are summarized as follows (dollars in thousands):
 
 
Three months ended
June 30,
 
Six months ended
June 30,
 
 
2019
 
2019
Net sales
 
$
48,540

 
$
96,460

Cost of sales
 
(36,980
)
 
(71,870
)
Gross profit
 
11,560

 
24,590

Selling, general and administrative expenses
 
(7,510
)
 
(14,490
)
Operating profit
 
4,050

 
10,100

Other income, net
 
130

 
20

Income from discontinued operations, before income taxes
 
4,180

 
10,120

Income tax expense
 
(880
)
 
(2,280
)
Income from discontinued operations, net of tax
 
$
3,300

 
$
7,840


4. Revenue
The following table presents the Company’s disaggregated net sales by primary market served (dollars in thousands):
 
 
Three months ended June 30,
 
Six months ended June 30,
Customer Markets
 
2020
 
2019
 
2020
 
2019
Consumer Products
 
$
104,530

 
$
82,060

 
$
183,590

 
$
149,980

Aerospace & Defense
 
42,610

 
49,510

 
91,530

 
95,090

Industrial
 
52,410

 
59,260

 
107,220

 
119,130

Total net sales
 
$
199,550

 
$
190,830

 
$
382,340

 
$
364,200


The Company’s Packaging segment earns revenues from the consumer products (comprised of the beauty and personal care, home care, food and beverage, pharmaceutical and nutraceutical submarkets) and industrial markets. The Aerospace segment earns revenues from the aerospace & defense market (comprised of commercial, regional and business jet and military submarkets). The Specialty Products segment earns revenues from a variety of submarkets within the industrial market.

9


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)

5. Realignment Actions
In the three months ended June 30, 2020, the Company executed certain realignment actions, primarily in its Aerospace and Specialty Products segments, in response to reductions in current and expected future end market demand. The Company recorded a non-cash charge of approximately $13.2 million related to inventory reductions, primarily as a result of a strategic decision in its Arrow Engine division to narrow its product line focus. The Company also recorded a non-cash charge of approximately $2.2 million related to certain production equipment removed from service given reduced demand levels. In addition, the Company reduced its employment levels given lower customer demand during second quarter 2020, incurring approximately $3.1 million in severance charges, of which approximately $1.9 million was paid by June 30, 2020. For the three months ended June 30, 2020, approximately $16.0 million and $2.5 million of these charges were included in cost of sales and selling, general and administrative expenses, respectively, in the accompanying consolidated statement of operations.
6. Acquisitions
2020 Acquisitions
On April 17, 2020, the Company acquired the Rapak® brand, including certain bag-in-box product lines and assets ("Rapak") for an aggregate amount of approximately $11.4 million, subject to normal course adjustments. Rapak, which is reported in the Company's Packaging segment, has manufacturing locations in Indiana, California and Illinois, and historically generated approximately $30 million in annual revenue.
On February 27, 2020, the Company acquired RSA Engineered Products, a manufacturer of complex, highly-engineered and proprietary ducting, connectors and related products for air management systems used in aerospace and defense applications, for an aggregate amount of approximately $83.7 million, net of cash acquired, subject to normal course adjustments. The fair value of assets acquired and liabilities assumed included approximately $80.2 million of goodwill and intangible assets, $10.1 million of net working capital, $2.1 million of property and equipment, and $8.7 million of net deferred tax liabilities. RSA, which is reported in the Company's Aerospace segment, is located in Simi Valley, California and historically generated approximately $30 million in annual revenue.
In connection with the acquisitions, the Company recorded approximately $2.3 million and $2.8 million of non-cash purchase accounting-related expenses during the three and six months ended June 30, 2020, respectively, within cost of sales related to the step-up in value and subsequent sale of inventory.
2019 Acquisitions
In April 2019, the Company acquired Taplast S.p.A. ("Taplast"), a designer and manufacturer of dispensers, closures and containers for the beauty and personal care, home care, and food and beverage packaging markets, for an aggregate amount of approximately $44.7 million, net of cash acquired. With manufacturing locations in both Italy and Slovakia, Taplast serves markets in Europe and North America and historically generated approximately $32 million in annual revenue. Taplast is reported in the Company's Packaging segment.
In January 2019, the Company acquired Plastic Srl, a manufacturer of single-bodied and assembled polymeric caps and closures for use in home care products, for an aggregate amount of approximately $22.4 million, net of cash acquired. Located in Italy, Plastic Srl serves the home care market throughout Italy and other European countries and historically generated approximately $12 million in annual revenue. Plastic Srl is reported in the Company's Packaging segment.
In connection with the acquisitions, the Company recorded approximately $0.2 million and $1.2 million of non-cash purchase accounting-related expenses during the three and six months ended June 30, 2019, respectively. Of these amounts, approximately $0.9 million was recognized during the six months ended June 30, 2019, within selling, general and administrative expenses, primarily related to the write-off of the Plastic Srl trade name acquired that will not be used. In addition, approximately $0.2 million and $0.3 million was recognized during the three and six months ended June 30, 2019, respectively, within cost of sales related to the step-up in value and subsequent sale of inventory.

10


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)

7. Goodwill and Other Intangible Assets
The Company assesses goodwill and other intangible assets for impairment on an annual basis as of October 1, and more frequently if there are changes in the business climate or as a result of a triggering event taking place. The Company considered the current and potential future market and economic impacts that may result from the COVID-19 pandemic, including its impact on the Company's reporting units, and also assessed the change in its market capitalization during the first and second quarter of 2020. Based on this review, and after consideration of the historical excess in fair value over carrying value within the Company's reporting units, the Company determined that there was not a triggering event which would require an interim impairment test to be performed.
In the first quarter of 2020, the Company began reporting its machined products operations within the Aerospace segment. These operations were previously reported in the Company's Specialty Products segment. As a result of the reporting structure change, goodwill of approximately $12.7 million was reassigned from the Specialty Products segment to the Aerospace segment.
Changes in the carrying amount of goodwill for the six months ended June 30, 2020 are summarized as follows (dollars in thousands):
 
Packaging
 
Aerospace
 
Specialty Products
 
Total
Balance, December 31, 2019
$
181,650

 
$
133,690

 
$
19,300

 
$
334,640

Goodwill from acquisitions

 
43,260

 

 
43,260

Goodwill reassigned in segment realignment

 
12,740

 
(12,740
)
 

Foreign currency translation and other
(1,580
)
 

 

 
(1,580
)
Balance, June 30, 2020
$
180,070

 
$
189,690

 
$
6,560

 
$
376,320


The Company amortizes its other intangible assets over periods ranging from one to 30 years. The gross carrying amounts and accumulated amortization of the Company's other intangibles are summarized below (dollars in thousands):
 
 
As of June 30, 2020
 
As of December 31, 2019
Intangible Category by Useful Life
 
Gross Carrying Amount
 
Accumulated Amortization
 
Gross Carrying Amount
 
Accumulated Amortization
Finite-lived intangible assets:
 

 

 

 

   Customer relationships, 5 – 12 years
 
$
100,160

 
$
(54,200
)
 
$
73,860

 
$
(49,910
)
   Customer relationships, 15 – 25 years
 
122,280

 
(59,230
)
 
122,280

 
(56,010
)
Total customer relationships
 
222,440

 
(113,430
)
 
196,140

 
(105,920
)
   Technology and other, 1 – 15 years
 
54,100

 
(31,240
)
 
52,430

 
(29,790
)
   Technology and other, 17 – 30 years
 
43,300

 
(38,620
)
 
43,300

 
(37,620
)
Total technology and other
 
97,400

 
(69,860
)
 
95,730

 
(67,410
)
Indefinite-lived intangible assets:
 

 

 

 

 Trademark/Trade names
 
51,620

 

 
42,850

 

Total other intangible assets
 
$
371,460

 
$
(183,290
)
 
$
334,720

 
$
(173,330
)


11


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)

Amortization expense related to intangible assets as included in the accompanying consolidated statement of operations is summarized as follows (dollars in thousands):
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2020
 
2019
 
2020
 
2019
Technology and other, included in cost of sales
 
$
1,260

 
$
1,200

 
$
2,470

 
$
2,400

Customer relationships, included in selling, general and administrative expenses
 
4,040

 
3,550

 
7,680

 
6,980

Total amortization expense
 
$
5,300

 
$
4,750

 
$
10,150

 
$
9,380


8. Inventories
Inventories consist of the following components (dollars in thousands):
 
 
June 30,
2020
 
December 31,
2019
Finished goods
 
$
73,320

 
$
68,350

Work in process
 
30,670

 
30,560

Raw materials
 
36,900

 
33,750

Total inventories
 
$
140,890

 
$
132,660


9. Property and Equipment, Net
Property and equipment consists of the following components (dollars in thousands):
 
 
June 30,
2020
 
December 31,
2019
Land and land improvements
 
$
19,560

 
$
19,110

Buildings
 
85,820

 
84,880

Machinery and equipment
 
329,120

 
326,990

 
 
434,500

 
430,980

Less: Accumulated depreciation
 
223,540

 
216,650

Property and equipment, net
 
$
210,960

 
$
214,330


Depreciation expense as included in the accompanying consolidated statement of operations is as follows (dollars in thousands):
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2020
 
2019
 
2020
 
2019
Depreciation expense, included in cost of sales
 
$
7,830

 
$
6,010

 
$
14,190

 
$
11,440

Depreciation expense, included in selling, general and administrative expenses
 
280

 
290

 
580

 
550

Total depreciation expense
 
$
8,110

 
$
6,300

 
$
14,770

 
$
11,990



12


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)

10. Long-term Debt
The Company's long-term debt consists of the following (dollars in thousands):
 
 
June 30,
2020
 
December 31,
2019
4.875% Senior Notes due October 2025
 
$
300,000

 
$
300,000

Debt issuance costs
 
(4,740
)
 
(5,310
)
Long-term debt, net
 
$
295,260

 
$
294,690


Senior Notes
In September 2017, the Company issued $300.0 million aggregate principal amount of 4.875% senior notes due October 15, 2025 ("Senior Notes") at par value in a private placement under Rule 144A of the Securities Act of 1933, as amended. The Senior Notes accrue interest at a rate of 4.875% per annum, payable semi-annually in arrears on April 15 and October 15, commencing on April 15, 2018. The payment of principal and interest is jointly and severally guaranteed, on a senior unsecured basis, by certain subsidiaries of the Company (each a "Guarantor" and collectively the "Guarantors"). The Senior Notes are pari passu in right of payment with all existing and future senior indebtedness and subordinated to all existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness.
Prior to October 15, 2020, the Company may redeem up to 35% of the principal amount of the Senior Notes at a redemption price of 104.875% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds of one or more equity offerings provided that each such redemption occurs within 90 days of the date of closing of each such equity offering. In addition, the Company may redeem all or part of the Senior Notes at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, plus a "make whole" premium. On or after October 15, 2020, the Company may redeem all or part of the Senior Notes at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, to the redemption date, if redeemed during the twelve-month period beginning on October 15 of the years indicated below:
Year
 
Percentage
2020
 
102.438
%
2021
 
101.219
%
2022 and thereafter
 
100.000
%

Credit Agreement
The Company is a party to a credit agreement ("Credit Agreement") consisting of a $300.0 million senior secured revolving credit facility, which permits borrowings denominated in specific foreign currencies, subject to a $125.0 million sub limit, matures on September 20, 2022 and is subject to interest at London Interbank Offered Rate ("LIBOR") plus 1.50%. The interest rate spread is based upon the leverage ratio, as defined, as of the most recent determination date.
The Credit Agreement also provides incremental revolving credit facility commitments in an amount not to exceed the greater of $200.0 million and an amount such that, after giving effect to such incremental commitments and the incurrence of any other indebtedness substantially simultaneously with the making of such commitments, the senior secured net leverage ratio, as defined, is no greater than 3.00 to 1.00. The terms and conditions of any incremental revolving credit facility commitments must be no more favorable than the existing credit facility.

13


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)

The Company's revolving credit facility allows for the issuance of letters of credit, not to exceed $40.0 million in aggregate. At June 30, 2020, the Company had no amounts outstanding under its revolving credit facility and had approximately $284.1 million potentially available after giving effect to approximately $15.9 million of letters of credit issued and outstanding. At December 31, 2019, the Company had no amounts outstanding under its revolving credit facility and had approximately $283.9 million