SEC Filing | TriMas Corporation

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Table of Contents

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		March 31, 2021
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)

(248) 631-5450

(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 Stock 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 April 22, 2021, the number of outstanding shares of the Registrant's common stock, $0.01 par value, was 43,163,620 shares.

Table of Contents

TriMas Corporation

Index

Part I.

Financial Information

Forward-Looking Statements

Item 1.

Consolidated Financial Statements

Consolidated Balance Sheet as of March 31, 2021 and December 31, 2020

Consolidated Statement of Operations for the Three Months Ended March 31, 2021 and 2020

Consolidated Statement of Comprehensive Income for the Three Months Ended March 31, 2021 and 2020

Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2021 and 2020

Consolidated Statement of Shareholders' Equity for the Three Months Ended March 31, 2021 and 2020

Notes to Consolidated Financial Statements

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Item 4.

Controls and Procedures

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

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 coronavirus (“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, climate change legislation and other environmental regulations, as well as 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 and public health crises; the potential impact of Brexit; 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, 2020 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.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

TriMas Corporation

Consolidated Balance Sheet

(Dollars in thousands)


	March 31, 2021		December 31, 2020
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	421,140	$	73,950
Receivables, net of reserves of approximately $2.4 million and $2.1 million as of March 31, 2021 and December 31, 2020, respectively	128,000		113,410
Inventories	151,820		149,380
Prepaid expenses and other current assets	17,960		15,090
Total current assets	718,920		351,830
Property and equipment, net	251,150		253,060
Operating lease right-of-use assets	36,450		37,820
Goodwill	300,610		303,970
Other intangibles, net	199,010		206,200
Deferred income taxes	15,700		19,580
Other assets	21,460		21,420
Total assets	$	1,543,300	$	1,193,880
Liabilities and Shareholders' Equity
Current liabilities:
Current portion, long-term debt	$	300,000	$	—
Accounts payable	76,650		69,910
Accrued liabilities	57,490		60,540
Operating lease liabilities, current portion	6,350		6,740
Total current liabilities	440,490		137,190
Long-term debt, net	390,190		346,290
Operating lease liabilities	30,520		31,610
Deferred income taxes	24,840		24,850
Other long-term liabilities	61,290		69,690
Total liabilities	947,330		609,630
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: 43,199,240 shares at March 31, 2021 and 43,178,165 shares at December 31, 2020	430		430
Paid-in capital	747,080		749,050
Accumulated deficit	(146,550)		(159,610)
Accumulated other comprehensive loss	(4,990)		(5,620)
Total shareholders' equity	595,970		584,250
Total liabilities and shareholders' equity	$	1,543,300	$	1,193,880

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

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TriMas Corporation

Consolidated Statement of Income

(Unaudited—dollars in thousands, except for per share amounts)


	Three months ended March 31,
	2021		2020
Net sales	$	206,730	$	182,790
Cost of sales	(155,400)		(136,420)
Gross profit	51,330		46,370
Selling, general and administrative expenses	(30,220)		(26,540)


Operating profit	21,110		19,830
Other expense, net:
Interest expense	(3,550)		(3,580)
Debt financing and related expenses	(200)		—
Other expense, net	(930)		(80)
Other expense, net	(4,680)		(3,660)
Income before income tax expense	16,430		16,170
Income tax expense	(3,370)		(3,050)




Net income	$	13,060	$	13,120
Basic earnings per share:


Net income per share	$	0.30	$	0.30
Weighted average common shares—basic	43,185,007		44,201,053
Diluted earnings per share:


Net income per share	$	0.30	$	0.30
Weighted average common shares—diluted	43,634,876		44,470,472

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

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TriMas Corporation

Consolidated Statement of Comprehensive Income

(Unaudited—dollars in thousands)


	Three months ended March 31,
		2021		2020
Net income		$	13,060	$	13,120
Other comprehensive income (loss):
Defined benefit plans (Note 18)		150		150
Foreign currency translation		(3,420)		(8,260)
Derivative instruments (Note 11)		3,900		4,430
Total other comprehensive income (loss)		630		(3,680)
Total comprehensive income		$	13,690	$	9,440

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

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TriMas Corporation

Consolidated Statement of Cash Flows

(Unaudited—dollars in thousands)


	Three months ended March 31,
	2021		2020
Cash Flows from Operating Activities:
Net income	$	13,060	$	13,120


Adjustments to reconcile net income to net cash provided by operating activities, net of acquisition impact:

Loss on dispositions of assets	20		50
Depreciation	7,850		6,660
Amortization of intangible assets	5,390		4,850
Amortization of debt issue costs	300		290
Deferred income taxes	2,200		2,570
Non-cash compensation expense	2,440		1,940

Debt financing and related expenses	200		—
Increase in receivables	(15,640)		(10,610)
Increase in inventories	(3,110)		(110)
Increase in prepaid expenses and other assets	(2,070)		(110)
Increase (decrease) in accounts payable and accrued liabilities	1,950		(14,780)
Other operating activities	3,150		(470)


Net cash provided by operating activities, net of acquisition impact	15,740		3,400
Cash Flows from Investing Activities:
Capital expenditures	(9,370)		(3,930)
Acquisition of businesses, net of cash acquired	—		(84,270)
Net proceeds from disposition of business, property and equipment	—		1,880


Net cash used for investing activities	(9,370)		(86,320)
Cash Flows from Financing Activities:

Proceeds from issuance of senior notes	400,000		—


Proceeds from borrowings on revolving credit facilities	—		198,290
Repayments of borrowings on revolving credit facilities	(48,620)		(48,330)

Debt financing fees	(6,150)		—



Shares surrendered upon exercise and vesting of equity awards to cover taxes	(1,770)		(1,830)

Payments to purchase common stock	(2,640)		(31,570)



Net cash provided by financing activities	340,820		116,560
Cash and Cash Equivalents:
Increase for the period	347,190		33,640
At beginning of period	73,950		172,470
At end of period	$	421,140	$	206,110
Supplemental disclosure of cash flow information:
Cash paid for interest	$	520	$	370
Cash paid for taxes	$	1,160	$	1,850

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

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TriMas Corporation

Consolidated Statement of Shareholders' Equity

Three Months Ended March 31, 2021 and 2020

(Unaudited—dollars in thousands)


	Common Stock		Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total
Balances, December 31, 2020	$	430	$	749,050	$	(159,610)	$	(5,620)	$	584,250
Net income	—		—		13,060		—		13,060
Other comprehensive income	—		—		—		630		630

Purchase of common stock	—		(2,640)		—		—		(2,640)
Shares surrendered upon exercise and vesting of equity awards to cover taxes	—		(1,770)		—		—		(1,770)


Non-cash compensation expense	—		2,440		—		—		2,440

Balances, March 31, 2021	$	430	$	747,080	$	(146,550)	$	(4,990)	$	595,970


	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

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

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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.

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 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 the coronavirus and related variants (“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. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the Company's 2020 Annual Report on Form 10-K.

2. New Accounting Pronouncements

Recently Adopted 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. The Company adopted ASU 2019-12 on January 1, 2021. The adoption of ASU 2019-12 did not have a material impact on the Company's consolidated financial statements.

3. Revenue

The following table presents the Company’s disaggregated net sales by primary market served (dollars in thousands):


	Three months ended March 31,
Customer Markets		2021		2020
Consumer Products		$	105,120	$	76,270
Aerospace & Defense		44,610		48,920
Industrial		57,000		57,600
Total net sales		$	206,730	$	182,790

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.

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

4. Realignment Actions

In the three months ended March 31, 2021, the Company executed certain realignment actions in response to reductions in current and expected future end market demand. First, the Company closed its Packaging segment's Union City, California manufacturing facility, consolidating the operation into its Indianapolis, Indiana and Woodridge, Illinois facilities. The Company also realigned its Aerospace segment footprint, consolidating certain activities previously in its Stanton, California facilities into its Tolleson, Arizona facility. In addition, the Company also reorganized its corporate office legal group. The Company recorded pre-tax realignment charges of $4.1 million during the three months ended March 31, 2021, including facility consolidation cost of approximately $1.5 million and employee separation costs of approximately $2.6 million. As of March 31, 2021, approximately $0.4 million of the severance costs had been paid. Approximately $1.8 million and $2.3 million of these charges were included in costs of sales and selling, general and administrative expenses, respectively, in the accompanying consolidated statement of income.

5. Acquisitions

2020 Acquisitions

On December 15, 2020, the Company acquired Affaba & Ferrari Srl ("Affaba & Ferrari"), which specializes in the design, development and manufacture of precision caps and closures for food & beverage and industrial product applications, for an aggregate amount of approximately $98.4 million, net of cash acquired, subject to normal course adjustments, which are expected to be completed by mid-2021. The fair value of assets acquired and liabilities assumed included approximately $49.1 million of goodwill, $35.1 million of intangible assets, $9.4 million of net working capital, $17.4 million of property and equipment, and $12.6 million of net deferred tax liabilities. Affaba & Ferrari, which is reported in the Company's Packaging segment, operates out of a highly automated manufacturing facility and support office located in Borgo San Giovanni, Italy and historically generated approximately $34 million in annual revenue.

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. Rapak, which is reported in the Company's Packaging segment, has manufacturing locations in Indiana and Illinois and historically generated approximately $30 million in annual revenue.

On February 27, 2020, the Company acquired RSA Engineered Products ("RSA"), 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. The fair value of assets acquired and liabilities assumed included approximately $43.3 million of goodwill, $36.9 million of 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.

6. Cash and Cash Equivalents

Cash and cash equivalents consists of the following components (dollars in thousands):


	March 31, 2021		December 31, 2020
Cash and cash equivalents - unrestricted	$	409,980	$	62,790
Cash - restricted (a)	11,160		11,160
Total cash and cash equivalents	$	421,140	$	73,950

__________________________

(a) Includes cash placed on deposit with a financial institution to be held as cash collateral for the Company's outstanding letters of credit.

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

7. Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the three months ended March 31, 2021 are summarized as follows (dollars in thousands):



	Packaging		Aerospace		Specialty Products		Total
Balance, December 31, 2020	$	234,560	$	62,850	$	6,560	$	303,970




Foreign currency translation and other	(3,360)		—		—		(3,360)
Balance, March 31, 2021	$	231,200	$	62,850	$	6,560	$	300,610

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 March 31, 2021				As of December 31, 2020
Intangible Category by Useful Life	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Finite-lived intangible assets:
Customer relationships, 5 – 12 years	$	121,760	$	(62,380)	$	122,970	$	(59,470)
Customer relationships, 15 – 25 years	122,280		(63,870)		122,280		(62,450)
Total customer relationships	244,040		(126,250)		245,250		(121,920)
Technology and other, 1 – 15 years	57,100		(33,640)		57,180		(32,800)
Technology and other, 17 – 30 years	43,300		(39,570)		43,300		(39,450)
Total technology and other	100,400		(73,210)		100,480		(72,250)
Indefinite-lived intangible assets:
Trademark/Trade names	54,030		—		54,640		—
Total other intangible assets	$	398,470	$	(199,460)	$	400,370	$	(194,170)

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 March 31,
		2021		2020
Technology and other, included in cost of sales		$	950	$	1,210
Customer relationships, included in selling, general and administrative expenses		4,440		3,640
Total amortization expense		$	5,390	$	4,850

8. Inventories

Inventories consist of the following components (dollars in thousands):


	March 31, 2021		December 31, 2020
Finished goods	$	78,390	$	78,010
Work in process	31,500		29,680
Raw materials	41,930		41,690
Total inventories	$	151,820	$	149,380

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

9. Property and Equipment, Net

Property and equipment consists of the following components (dollars in thousands):


	March 31, 2021		December 31, 2020
Land and land improvements	$	19,810	$	20,040
Buildings	91,080		91,970
Machinery and equipment	389,390		384,010
	500,280		496,020
Less: Accumulated depreciation	249,130		242,960
Property and equipment, net	$	251,150	$	253,060

Depreciation expense as included in the accompanying consolidated statement of operations is as follows (dollars in thousands):


	Three months ended March 31,
	2021		2020
Depreciation expense, included in cost of sales	$	7,560	$	6,360
Depreciation expense, included in selling, general and administrative expenses	290		300
Total depreciation expense	$	7,850	$	6,660

10. Long-term Debt

The Company's long-term debt consists of the following (dollars in thousands):


	March 31, 2021		December 31, 2020
4.125% Senior Notes due April 2029	$	400,000	$	—
4.875% Senior Notes due October 2025	300,000		300,000
Credit Agreement	—		50,450

Debt issuance costs	(9,810)		(4,160)
	690,190		346,290
Less: Current portion, long-term debt	300,000		—
Long-term debt, net	$	390,190	$	346,290

Senior Notes due 2029

In March 2021, the Company issued $400.0 million aggregate principal amount of 4.125% senior notes due April 15, 2029 ("2029 Senior Notes") at par value in a private placement under Rule 144A of the Securities Act of 1933, as amended. The Company used the proceeds from the 2029 Senior Notes offering to pay fees and expenses of approximately $5.1 million related to the offering and pay fees and expenses of $1.0 million related to amending its existing credit agreement. In connection with the offering, the Company issued a redemption notice for all of its outstanding senior notes due October 2025, and redeemed the entire $300.0 million principal amount subsequent to quarter end (on April 15, 2021). The remaining cash proceeds from the 2029 Senior Notes were used for general corporate purposes, including repaying all outstanding revolving credit facility borrowings. The $5.1 million of fees and expenses related to the 2029 Senior Notes were capitalized as debt issuance costs.

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The 2029 Senior Notes accrue interest at a rate of 4.125% per annum, payable semi-annually in arrears on April 15 and October 15, commencing on October 15, 2021. 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 2029 Senior Notes are pari passu in right of payment with all existing and future senior indebtedness and effectively subordinated to all existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness.

Prior to April 15, 2024, the Company may redeem up to 40% of the principal amount of the 2029 Senior Notes at a redemption price of 104.125% 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, prior to April 15, 2024, the Company may redeem all or part of the 2029 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 April 15, 2024, the Company may redeem all or part of the 2029 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 April 15 of the years indicated below:


Year	Percentage
2024	102.063	%
2025	101.031	%
2026 and thereafter	100.000	%

Senior Notes due 2025

In September 2017, the Company issued $300.0 million aggregate principal amount of 4.875% senior notes due October 15, 2025 ("2025 Senior Notes") at par value in a private placement under Rule 144A of the Securities Act of 1933, as amended. The 2025 Senior Notes accrue interest at a rate of 4.875% per annum, payable semi-annually in arrears on April 15 and October 15. 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 2025 Senior Notes are pari passu in right of payment with all existing and future senior indebtedness and effectively subordinated to all existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness.

In connection with the issuance of the 2029 Senior Notes, the Company issued a notice to redeem all of the outstanding 2025 Senior Notes, as permitted under the indenture, at a price of 102.438% of the principal amount. The redemption was completed subsequent to quarter end, on April 15, 2021. See Note 20, "Subsequent Events," for further information on the 2025 Senior Note redemption.

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Credit Agreement

In March 2021, the Company amended its existing credit agreement ("Credit Agreement") in connection with the issuance of the 2029 Senior Notes to extend the maturity date. The Company incurred fees and expenses of approximately $1.0 million related to the amendment, all of which was capitalized as debt issuance costs. The Company also recorded approximately $0.2 million of non-cash expense related to the write-off of previously capitalized deferred financing fees.

Below is a summary of key terms under the Credit Agreement as of March 31, 2021, compared to the key terms prior to the amendment (showing gross availability):

Instrument

Amount
($ in millions)

Maturity
Date

Interest Rate

Credit Agreement (as amended)

Senior secured revolving credit facility

$300.0

3/29/2026

LIBOR(a) plus 1.500%(b)

Credit Agreement (prior to amending)

Senior secured revolving credit facility

$300.0

9/20/2022

LIBOR(a) plus 1.500%(b)

__________________________

(a) London Interbank Offered Rate ("LIBOR")

(a) 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.

The Company's revolving credit facility allows for the issuance of letters of credit, not to exceed $40.0 million in aggregate. The Company places cash on deposit with a financial institution to be held as cash collateral for the Company's outstanding letters of credit; therefore, as of March 31, 2021 and December 31, 2020, the Company had no letters of credit issued against its revolving credit facility. See Note 6, "Cash and Cash Equivalents," for further information on its cash deposit. At March 31, 2021, the Company had no amounts outstanding under its revolving credit facility and had $300.0 million potentially available after giving effect to letters of credit issued and outstanding. At December 31, 2020, the Company had $50.5 million outstanding under its revolving credit facility and had approximately $249.5 million potentially available. The Company's borrowing capacity was not reduced by leverage restrictions contained in the Credit Agreement as of March 31, 2021 and December 31, 2020.

The debt under the Credit Agreement is an obligation of the Company and certain of its domestic subsidiaries and is secured by substantially all of the assets of such parties. Borrowings under the $125.0 million (equivalent) foreign currency sub limit of the $300.0 million senior secured revolving credit facility are secured by a cross-guarantee amongst, and a pledge of the assets of, the foreign subsidiary borrowers that are a party to the agreement. The Credit Agreement also contains various negative and affirmative covenants and other requirements affecting the Company and its subsidiaries, including the ability, subject to certain exceptions and limitations, to incur debt, liens, mergers, investments, loans, advances, guarantee obligations, acquisitions, assets dispositions, sale-leaseback transactions, hedging agreements, dividends and other restricted payments, transactions with affiliates, restrictive agreements and amendments to charters, bylaws, and other material documents. The terms of the Credit Agreement also require the Company and its restricted subsidiaries to meet certain restrictive financial covenants and ratios computed quarterly, including a maximum total net leverage ratio (total consolidated indebtedness plus outstanding amounts under the accounts receivable securitization facility, less the aggregate amount of certain unrestricted cash and unrestricted permitted investments, as defined, over consolidated EBITDA, as defined), a maximum senior secured net leverage ratio (total consolidated senior secured indebtedness, less the aggregate amount of certain unrestricted cash and unrestricted permitted investments, as defined, over consolidated EBITDA, as defined) and a minimum interest expense coverage ratio (consolidated EBITDA, as defined, over the sum of consolidated cash interest expense, as defined, and preferred dividends, as defined). At March 31, 2021, the Company was in compliance with its financial covenants contained in the Credit Agreement.

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Fair Value of Debt

The valuations of the Senior Notes and revolving credit facility were determined based on Level 2 inputs under the fair value hierarchy, as defined. The carrying amounts and fair values were as follows (dollars in thousands):


	March 31, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
4.125% Senior Notes due April 2029	$	400,000	$	400,000	$	—	$	—
4.875% Senior Notes due October 2025	300,000		307,500		300,000		305,630
Revolving credit facility	—		—		50,450		50,450

11. Derivative Instruments

Derivatives Designated as Hedging Instruments

The Company uses cross-currency swap contracts to hedge its net investment in Euro-denominated assets against future volatility in the exchange rate between the U.S. dollar and the Euro. By doing so, the Company synthetically converts a portion of its U.S. dollar-based long-term debt into Euro-denominated long-term debt. At inception, the Company designates its cross-currency swaps as net investment hedges.

As of March 31 2021, the Company had cross-currency swap agreements at notional amounts totaling $200.0 million, which declines to $25.0 million over various contract periods ending between October 15, 2023 and April 15, 2027. Under the terms of the agreements, the Company is to receive net interest payments at fixed rates ranging from approximately 0.8% to 2.9% of the notional amounts.

As of March 31, 2021 and December 31, 2020, the fair value carrying amount of the Company's derivatives designated as hedging instruments are recorded as follows (dollars in thousands):

Asset / (Liability) Derivatives

Derivatives designated as hedging instruments

Balance Sheet Caption

March 31,
2021

December 31,
2020

Net Investment Hedges

Cross-currency swaps

Other assets

190

—

Cross-currency swaps

Other long-term liabilities

—

(5,000)

The following table summarizes the income recognized in accumulated other comprehensive income (loss) ("AOCI") on derivative contracts designated as hedging instruments as of March 31, 2021 and December 31, 2020, and the amounts reclassified from AOCI into earnings for the three months ended March 31, 2021 and 2020 (dollars in thousands):


	Amount of Income (Loss) Recognized in AOCI on Derivative (Effective Portion, net of tax)					Amount of Income (Loss) Reclassified from AOCI into Earnings
						Three months ended March 31,
	As of March 31, 2021		As of December 31, 2020		Location of Income (Loss) Reclassified from AOCI into Earnings (Effective Portion)	2021		2020
Net Investment Hedges
Cross-currency swaps	$	320	$	(3,580)	Other expense, net	$	—	$	—

Over the next 12 months, the Company does not expect to reclassify any pre-tax deferred amounts from AOCI into earnings.

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Derivatives Not Designated as Hedging Instruments

As of March 31, 2021, the Company was party to foreign currency exchange forward contracts to economically hedge changes in foreign currency rates with notional amounts of approximately $132.7 million. The Company uses foreign exchange contracts to mitigate the risk associated with fluctuations in currency rates impacting cash flows related to certain of its receivables, payables and intercompany transactions denominated in foreign currencies. The foreign exchange contracts primarily mitigate currency exposures between the U.S. dollar and the Euro, British pound, Mexican peso and the Chinese yuan, and have various settlement dates through December 2021. These contracts are not designated as hedge instruments; therefore, gains and losses on these contracts are recognized each period directly into the consolidated statement of income.

The following table summarizes the effects of derivatives not designated as hedging instruments on the Company's consolidated statement of income (dollars in thousands):


		Amount of Income (Loss) Recognized in Earnings on Derivatives
		Three months ended March 31,
	Location of Income (Loss) Recognized in Earnings on Derivatives	2021		2020
Derivatives not designated as hedging instruments
Foreign exchange contracts	Other expense, net	$	4,020	$	(70)

Fair Value of Derivatives

The fair value of the Company's derivatives are estimated using an income approach based on valuation techniques to convert future amounts to a single, discounted amount. Estimates of the fair value of the Company's cross-currency swaps and foreign exchange contracts use observable inputs such as interest rate yield curves and forward currency exchange rates. Fair value measurements and the fair value hierarchy level for the Company's assets and liabilities measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 are shown below (dollars in thousands):


Description	Frequency	Asset / (Liability)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2021
Cross-currency swaps	Recurring	$	190	$	—	$	190	$	—
Foreign exchange contracts	Recurring	$	330	$	—	$	330	$	—
December 31, 2020
Cross-currency swaps	Recurring	$	(5,000)	$	—	$	(5,000)	$	—
Foreign exchange contracts	Recurring	$	140	$	—	$	140	$	—

12. Leases

The Company leases certain equipment and facilities under non-cancelable operating leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet; expense related to these leases is recognized on a straight-line basis over the lease term.

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The components of lease expense are as follows (dollars in thousands):


	Three months ended March 31,
	2021		2020
Operating lease cost	$	2,140	$	1,650
Short-term, variable and other lease costs	430		310
Total lease cost	$	2,570	$	1,960

Maturities of lease liabilities are as follows (dollars in thousands):


Year ended December 31,	Operating Leases(a)
2021 (excluding the three months ended March 31, 2021)	$	5,710
2022	7,300
2023	6,450
2024	5,560
2025	4,390
Thereafter	12,620
Total lease payments	42,030
Less: Imputed interest	(5,160)
Present value of lease liabilities	$	36,870

__________________________

(a) The maturity table excludes cash flows associated with exited lease facilities. Liabilities for exited lease facilities are included in accrued liabilities and other long-term liabilities in the accompanying consolidated balance sheet.

The weighted-average remaining lease term of the Company's operating leases as of March 31, 2021 is approximately 6.6 years. The weighted-average discount rate as of March 31, 2021 is approximately 4.3%.

Cash paid for amounts included in the measurement of operating lease liabilities was approximately $2.2 million and $1.7 million during the three months ended March 31, 2021 and 2020, respectively, and is included in cash flows provided by operating activities in the consolidated statement of cash flows.

Right-of-use assets obtained in exchange for lease liabilities were approximately $1.9 million and $2.9 million during the three months ended March 31, 2021 and 2020, respectively.

13. Other long-term liabilities

Other long-term liabilities consist of the following components (dollars in thousands):


	March 31, 2021		December 31, 2020
Non-current asbestos-related liabilities	$	25,420	$	26,170
Other long-term liabilities	35,870		43,520
Total other long-term liabilities	$	61,290	$	69,690

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

14. Commitments and Contingencies

Asbestos

As of March 31, 2021, the Company was a party to 347 pending cases involving an aggregate of 4,676 claimants primarily alleging personal injury from exposure to asbestos containing materials formerly used in gaskets (both encapsulated and otherwise) manufactured or distributed by its former Lamons division and certain other related subsidiaries for use primarily in the petrochemical, refining and exploration industries. The following chart summarizes the number of claims, number of claims filed, number of claims dismissed, number of claims settled, the average settlement amount per claim and the total defense costs, at the applicable date and for the applicable periods:


	Claims pending at beginning of period	Claims filed during period	Claims dismissed during period	Claims settled during period	Claims pending at end of period	Average settlement amount per claim during period		Total defense costs during period
Three Months Ended March 31, 2021	4,655	62	35	6	4,676	$	37,917	$	530,000
Fiscal Year Ended December 31, 2020	4,759	219	287	36	4,655	$	18,314	$	2,130,000

In addition, the Company acquired various companies to distribute its products that had distributed gaskets of other manufacturers prior to acquisition. The Company believes that many of its pending cases relate to locations at which none of its gaskets were distributed or used.

The Company may be subjected to significant additional asbestos-related claims in the future, and will aggressively defend or reasonably resolve, as appropriate. The cost of settling cases in which product identification can be made may increase, and the Company may be subjected to further claims in respect of the former activities of its acquired gasket distributors. The cost of claims varies as claims may be initially made in some jurisdictions without specifying the amount sought or by simply stating the requisite or maximum permissible monetary relief, and may be amended to alter the amount sought. The large majority of claims do not specify the amount sought. Of the 4,676 claims pending at March 31, 2021, 34 set forth specific amounts of damages (other than those stating the statutory minimum or maximum). At March 31, 2021, of the 34 claims that set forth specific amounts, there was one claim seeking more than $5 million for punitive damages. Below is a breakdown of the compensatory damages sought for those claims seeking specific amounts:

Compensatory

Range of damages sought (dollars in millions)

$0.0 to $0.6

$0.6 to $5.0

$5.0+

Number of claims

—

Relatively few claims have reached the discovery stage and even fewer claims have gone past the discovery stage. Total settlement costs (exclusive of defense costs) for all such cases, some of which were filed over 25 years ago, have been approximately $10.3 million. All relief sought in the asbestos cases is monetary in nature. Based on the settlements made to date and the number of claims dismissed or withdrawn for lack of product identification, the Company believes that the relief sought (when specified) does not bear a reasonable relationship to its potential liability.

There has been significant volatility in the historical number of claim filings and costs to defend, with previous claim counts and spend levels much higher than current levels. Management believes this volatility was associated more with tort reform, plaintiff practices and state-specific legal dockets than the Company’s underlying asbestos-related exposures. From 2017 to 2019, however, the number of new claim filings, and costs to defend, had become much more consistent, ranging between 143 to 173 new claims per year and total defense costs ranging between $2.2 million and $2.3 million.

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The higher degree of consistency in census data and spend levels, as well as lower claim activity levels and an evolving defense strategy, has allowed the Company to more effectively and efficiently manage claims, making process or local counsel arrangement improvements where possible. Given the consistency of activity over a multi-year period, the Company believed a trend may have formed where it could be possible to reasonably estimate its future cash exposure for all asbestos-related activity with an adequate level of precision. As such, the Company commissioned an actuary to help evaluate the nature and predictability of its asbestos-related costs, and provide an actuarial range of estimates of future exposures. Based upon its review of the actuarial study, which was completed in June 2020 using data as of December 31, 2019 and which projected spend levels through a terminal year of 2064, the Company affirmed its belief that it now has the ability to reasonably estimate its future asbestos-related exposures for pending as well as unknown future claims.

During the second quarter 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 was reflected as a change in accounting estimate effected by a change in accounting principle.

Following the change in accounting estimate, the Company’s liability for asbestos-related claims will be based on a study from the Company’s third-party actuary, the Company's review of the study, as well as the Company’s own review of asbestos claims and claim resolution activity. The study from the Company’s actuary, based on data as of December 31, 2019, provided for a range of possible future liability from $31.5 million to $43.3 million. The Company did not believe any amount within the range of potential outcomes represented a better estimate than another given the many factors and assumptions inherent in the projections, and therefore recorded a $23.4 million charge in second quarter 2020 to increase the liability estimate to $31.5 million, at the low-end of the range. As of March 31, 2021, the Company’s total asbestos-related liability is $27.9 million, and is included in accrued liabilities and other long-term liabilities, respectively, in the accompanying consolidated balance sheet.

The Company’s primary insurance, which covered approximately 40% of historical costs related to settlement and defense of asbestos litigation, expired in November 2018, upon which the Company became solely responsible for defense costs and indemnity payments. The Company is party to a coverage-in-place agreement (entered into in 2006) with its first level excess carriers regarding the coverage to be provided to the Company for asbestos-related claims. The coverage-in-place agreement makes asbestos defense costs and indemnity insurance coverage available to the Company that might otherwise be disputed by the carriers and provides a methodology for the administration of such expenses. The Company will continue to be solely responsible for defense costs and indemnity payments prior to the commencement of coverage under this agreement, the duration of which would be subject to the scope of damage awards and settlements paid. Based upon the Company’s review of the actuarial study, the Company does not believe it is probable that it will reach the threshold of qualified future settlements required to commence excess carrier insurance coverage under the coverage-in-place agreement.

Based upon the Company's experience to date, including the trend in annual defense and settlement costs incurred to date, and other available information (including the availability of excess insurance), the Company does not believe these cases will have a material adverse effect on its financial position, results of operations, or cash flows.

Claims and Litigation

The Company is subject to other claims and litigation in the ordinary course of business, but does not believe that any such claim or litigation will have a material adverse effect on its financial position and results of operations or cash flows.

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

15. Segment Information

TriMas reports its operations in three segments: Packaging, Aerospace, and Specialty Products. Each of these segments has discrete financial information that is regularly evaluated by TriMas' president and chief executive officer (chief operating decision maker) in determining resource, personnel and capital allocation, as well as assessing strategy and performance. The Company utilizes its proprietary TriMas Business Model as its platform which is based upon a standardized set of processes to manage and drive results and strategy across its multi-industry businesses.

Within each of the Company's reportable segments, there are no individual products or product families for which reported net sales accounted for more than 10% of the Company's consolidated net sales. See below for more information regarding the types of products and services provided within each reportable segment:

Packaging – The Packaging segment, which consists primarily of the Rieke®, Taplast, Affaba & Ferrari, Stolz and Rapak® brands, develops and manufactures a broad array of dispensing products (such as foaming pumps, lotion and hand soap pumps, sanitizer pumps, beverage dispensers, perfume sprayers, nasal sprayers and trigger sprayers), polymeric and steel caps and closures (such as food lids, flip-top closures, child resistance caps, beverage closures, drum and pail closures, flexible spouts, and agricultural closures), polymeric jar products, and fully integrated dispensers for fill-ready bag-in-box applications, all for a variety of consumer products submarkets including, but not limited to, beauty and personal care, food and beverage, home care, and pharmaceutical and nutraceutical, as well as the industrial market.

Aerospace – The Aerospace segment, which includes the Monogram Aerospace Fasteners™, Allfast Fastening Systems®, Mac Fasteners™, RSA Engineered Products and Martinic Engineering™ brands, develops, qualifies and manufactures highly-engineered, precision fasteners, tubular products and assemblies for fluid conveyance, and machined products and assemblies to serve the aerospace and defense market.

Specialty Products – The Specialty Products segment, which includes the Norris Cylinder™ and Arrow® Engine brands, designs, manufactures and distributes highly-engineered steel cylinders, wellhead engines and compression systems for use within industrial markets.

Segment activity is as follows (dollars in thousands):


	Three months ended March 31,
	2021		2020
Net Sales
Packaging	$	132,090	$	100,050
Aerospace	44,610		48,920
Specialty Products	30,030		33,820
Total	$	206,730	$	182,790
Operating Profit (Loss)
Packaging	$	21,300	$	18,280
Aerospace	4,500		5,080
Specialty Products	4,520		3,430
Corporate	(9,210)		(6,960)
Total	$