# Trimas Corp: Form 10-Q for the period ended Mar 31, 2024

- Company: [Trimas Corp](/companies/trs.md) (CIK 842633)
- Form: 10-Q
- Filed: 2024-04-30
- Accepted by EDGAR: Apr 30, 2024, 11:54 ET
- Period: 2024-03-31
- Accession: 0000842633-24-000053
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/842633/000084263324000053/trs-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/842633/000084263324000053/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $227.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $174.4m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-01-01 to 2024-03-31 | $52.7m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-01-01 to 2024-03-31 | $40.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | $12.4m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $4.9m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $2.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | $5.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.12 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.13 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 41,322,014 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | −$3.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $13.3m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 3 months, 2024-01-01 to 2024-03-31 | $1.7m | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2024-01-01 to 2024-03-31 | $13.3m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-03-31 | $30.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $427.7m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $1.36bn | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $156.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $691.3m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-03-31 | $673.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 51,166 characters.

*The following discussion and analysis of our financial condition contains forward-looking statements regarding industry outlook and our expectations regarding the performance of our business. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under the heading "Forward-Looking Statements," at the beginning of this report. Our actual results may differ materially from those contained in or implied by any forward-looking statements. You should read the following discussion together with the Company's reports on file with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2023.*

### Introduction

TriMas designs, develops and manufactures a diverse set of products primarily for the consumer products, aerospace & defense and industrial markets through its TriMas Packaging, TriMas Aerospace and Specialty Products groups. Our wide range of innovative products are designed and engineered to solve application-specific challenges that our customers face. We believe our businesses share important and distinguishing characteristics, including: well-recognized and leading brand names in the markets we serve; innovative product technologies and features; a high-degree of customer approved processes and qualifications; established distribution networks; modest capital investment requirements; strong cash flow conversion and long-term growth opportunities. While the majority of our revenue is in the United States, we manufacture and supply products globally to a wide range of companies. We report our business activity in three segments: Packaging, Aerospace and Specialty Products.

#### Key Factors Affecting Our Reported Results

Demand for the products our businesses produce and results of operations depend upon general economic conditions. We serve customers in industries that are highly competitive, and that may be significantly impacted by changes in economic or geopolitical conditions.

Our results of operations have been materially impacted over the past few years by macro-economic factors, first by the onset and proliferation of the coronavirus pandemic ("pandemic"), then further from increased energy costs and supply chain disruptions from the Russia-Ukraine conflict, and more recently by cost inflation (raw materials, wage rates and freight) and a lack of material and in certain regions skilled labor availability. These factors significantly affected each of our businesses and how we operate, albeit in different ways and magnitudes. Sales in our Packaging segment for dispensing and closure products used in applications to help fight the spread of germs have experienced extreme volatility in demand, with demand spiking to record highs after the onset of the pandemic, demand abating as expected from those high levels beginning mid-2022 and continuing through most of 2023, as a result of some of our larger customers' choices to rebalance on-hand inventory levels and caution in purchasing behaviors given the current inflationary macro-economic environment. Sales of certain of our aerospace-related products were significantly depressed from historical levels following the onset of the pandemic, but demand has significantly increased in recent quarters as air travel has picked-up and new aircraft build rates improve. Certain of our products for industrial applications, for example steel cylinders for packaged gas applications, and engines and compressors for oil & gas extraction, have experienced volatility in demand related to a number of channel and economic factors in more recent periods. Altogether, this significant level of volatility in demand levels, input and transportation costs, and material and labor availability, have pressured our ability to operate efficiently in recent periods. While some areas of demand volatility remain, such as in our Specialty Products segment, we are beginning to see more steady and consistent demand in our Packaging and Aerospace end markets.

Overall, our first quarter 2024 net sales increased $11.6 million, or 5.4%, compared to first quarter 2023. We experienced growth from acquisitions as well as organic sales increases within each of our Packaging and Aerospace segments, as a result of increased demand levels. These increases were partially offset by decreased sales in our Specialty Products segment, resulting from a decrease in demand as customers continue working through higher inventory levels built up in 2023.

The most significant drivers affecting our financial results in first quarter 2024 compared with first quarter 2023, other than as directly impacted by sales changes, were the impact of our recent acquisitions, prior structural cost reductions within our Packaging segment, costs incurred to fulfill an abrupt increase in orders from one of our customers in our Packaging segment, improved material availability in our Aerospace segment, lower third party business diligence and consulting expenses in our corporate office in support of prospective streamlining actions and growth initiatives, and an increase in our effective tax rate.

In April 2023, we acquired Weldmac Manufacturing Company ("Weldmac"), a designer and manufacturer of complex metal fabricated components and assemblies for the aerospace, defense and space launch end markets for a purchase price of $34.0 million, with additional consideration of $5.5 million paid in July 2023 and remaining contingent consideration ranging from zero to $4.5 million based on achievement of 2023 earnings targets, as defined in the purchase agreement. Weldmac, which is reported in our Aerospace segment, is located in El Cajon, California. Weldmac contributed $11.4 million of net sales during first quarter 2024.

In February 2023, we acquired Aarts Packaging B.V. ("Aarts"), a luxury packaging solutions provider for beauty and lifestyle brands, as well as for customers in the food and life sciences end markets, for a purchase price of $37.8 million, net of cash acquired. Aarts, which is reported in our Packaging segment, is located in Waalwijk, the Netherlands and contributed $2.8 million of acquisition-related sales growth during first quarter 2024 resulting from its January 2024 sales.

During first quarter 2024, one of our customers in our Packaging segment abruptly increased their orders, which required us to incur certain incremental input costs to timely fulfill certain of the customer's orders.

The effective income tax rate for first quarter 2024 was 28.5% as compared to 21.1% for first quarter 2023. The effective tax rate for first quarter 2024 was higher than in the prior year primarily due to increased earnings in certain foreign jurisdictions where the effective tax rate was higher than 21% and losses at certain foreign subsidiaries where no tax benefit could be recorded.

#### Additional Key Risks that May Affect Our Reported Results

We have executed meaningful realignment actions over the past few years, primarily in our Packaging segment, to address manufacturing capacity where demand has fallen. We will continue to assess further actions if required. However, as a result of the current period of macroeconomic inflation and uncertainty and the potential impact of such factors to our future results of operations, as well as if there is an impact to TriMas' market capitalization, we may record additional cash and non-cash charges related to incremental realignment actions, asset impairments, including impairments to our goodwill, intangible assets, fixed assets, inventory or customer receivable account balances.

Despite the potential for declines in future demand levels and results of operations, at present, we believe our capital structure is in a strong position. We have sufficient cash and available liquidity under our revolving credit facility to meet our debt service obligations, capital expenditure requirements and other short-term and long-term obligations for the foreseeable future.

Critical factors affecting our ability to succeed include: our ability to create organic growth through product development, cross-selling and extending product-line offerings, and our ability to quickly and cost-effectively introduce and successfully launch new products; our ability to acquire and integrate companies or products that supplement existing product lines, add new distribution channels or customers, or expand our geographic coverage; our ability to manage our cost structure more efficiently via supply chain management, internal sourcing and/or purchasing of materials, selective outsourcing and/or purchasing of support functions, working capital management, and greater leverage of our administrative functions; and our ability to absorb, or recover via commercial actions, inflationary or other cost increases.

Our overall business does not experience significant seasonal fluctuation, other than our fourth quarter, which has tended to be the lowest net sales quarter of the year due to holiday shutdowns at certain customers or other customers deferring capital spending to the following year. A growing amount of our sales is derived from international sources, which exposes us to certain risks, including currency risks.

We are sensitive to price movements and availability of our raw materials supply. Our largest raw material purchases are for resins (such as polypropylene and polyethylene), steel, aluminum, superalloys (such as titanium, A286 stainless steel and Inconel) and other oil and metal-based purchased components, the costs for each of which are subject to volatility. There has also been some volatility over the past two years as a direct and indirect result of foreign trade policy, where tariffs on certain of our commodity-based products sourced from Asia have been instituted, the conflict in Eastern Europe, creating certain input material shortages, and labor shortages at certain of our raw material suppliers. We will continue to take actions to mitigate such increases, including implementing commercial pricing adjustments, holding extra inventories and resourcing to alternate suppliers and insourcing of previously sourced products. Although we believe we are generally able to mitigate the impact of higher commodity costs over time, we may experience additional material costs and disruptions in supply in the future and may not be able to pass along higher costs to our customers in the form of price increases or otherwise mitigate the impacts to our operating results.

Although we have escalator/de-escalator clauses in commercial contracts with certain of our customers to address fluctuations in input costs, or can modify prices based on market conditions to recover higher costs, our price increases generally lag the underlying input cost increase, and we cannot be assured of full cost recovery in the open market. If input costs increase at rapid rates, our ability to recover cost increases on a timely basis is made more difficult by the lag nature of these contracts.

Oil-based commodity costs are a significant driver of raw materials and purchased components used within our Packaging segment. As such, an increase in crude oil often is a precursor to rising input polymeric raw material costs, for which we may experience a contractual commercial recover lag. Separately, our Arrow Engine business in our Specialty Products segment is sensitive to the demand for natural gas and crude oil in North America. For example, demand for engine, pump jack and compressor products are impacted by active oil and gas rig counts and wellhead investment activities.

Each year, as a core tenet of the TriMas Business Model, our businesses target cost savings from Kaizen and continuous improvement initiatives in an effort to reduce, or otherwise offset, the impact of increased input and conversion costs through increased throughput and yield rates, with a goal of at least covering inflationary and market cost increases. In addition, we continuously review our operating cost structures to ensure alignment with current market demand.

We continue to evaluate alternatives to redeploy the cash generated by our businesses, one of which includes returning capital to our shareholders. In 2020, our Board of Directors increased the authorization of share repurchases to a cumulative amount of $250 million. During first quarter 2024, we purchased 540,037 shares of our outstanding common stock for an aggregate purchase price of $13.3 million. As of March 31, 2024, we had $73.6 million remaining under the repurchase authorization.

In addition, in first quarter 2024, we declared dividends of $0.04 per share of common stock and paid dividends of $1.7 million. We will continue to evaluate opportunities to return capital to shareholders through the purchase of our common stock, as well as dividends, depending on market conditions and other factors.

The following table summarizes financial information for our reportable segments for the three months ended March 31, 2024 and 2023 (dollars in thousands):

| Net Sales | Three months ended March 31, 2024 | As a Percentage of Net Sales | 2023 | As a Percentage of Net Sales |
| --- | ---: | ---: | ---: | ---: |
| Packaging | $127,020 | 55.9% | $116,220 | 53.9% |
| Aerospace | 67,340 | 29.7% | 49,990 | 23.2% |
| Specialty Products | 32,740 | 14.4% | 49,250 | 22.9% |
| Total | $227,100 | 100.0% | $215,460 | 100.0% |
| **Gross Profit** |  |  |  |  |
| Packaging | $32,260 | 25.4% | $27,240 | 23.4% |
| Aerospace | 15,570 | 23.1% | 8,580 | 17.2% |
| Specialty Products | 4,880 | 14.9% | 11,870 | 24.1% |
| Total | $52,710 | 23.2% | $47,690 | 22.1% |
| **Selling, General and Administrative Expenses** |  |  |  |  |
| Packaging | $15,150 | 11.9% | $12,850 | 11.1% |
| Aerospace | 8,440 | 12.5% | 7,150 | 14.3% |
| Specialty Products | 2,270 | 6.9% | 2,120 | 4.3% |
| Corporate | 14,410 | N/A | 15,580 | N/A |
| Total | $40,270 | 17.7% | $37,700 | 17.5% |
| **Operating Profit (Loss)** |  |  |  |  |
| Packaging | $17,110 | 13.5% | $14,390 | 12.4% |
| Aerospace | 7,130 | 10.6% | 1,430 | 2.9% |
| Specialty Products | 2,610 | 8.0% | 9,750 | 19.8% |
| Corporate | (14,410) | N/A | (15,580) | N/A |
| Total | $12,440 | 5.5% | $9,990 | 4.6% |
| **Depreciation** |  |  |  |  |
| Packaging | $6,930 | 5.5% | $5,950 | 5.1% |
| Aerospace | 2,000 | 3.0% | 1,860 | 3.7% |
| Specialty Products | 1,010 | 3.1% | 920 | 1.9% |
| Corporate | 40 | N/A | 30 | N/A |
| Total | $9,980 | 4.4% | $8,760 | 4.1% |
| **Amortization** |  |  |  |  |
| Packaging | $1,640 | 1.3% | $1,560 | 1.3% |
| Aerospace | 2,570 | 3.8% | 2,910 | 5.8% |
| Specialty Products | — | —% | 120 | 0.2% |
| Corporate | — | N/A | — | N/A |
| Total | $4,210 | 1.9% | $4,590 | 2.1% |

#### Results of Operations

The principal factors impacting us during the three months ended March 31, 2024, compared with the three months ended March 31, 2023, were:

- Increases in demand for products within our Packaging and Aerospace segments;
- Significant demand decrease in our Specialty Products segment;
- The impact of recent acquisitions, primarily Aarts and Weldmac;
- Prior structural cost reductions within our Packaging segment;
- Improved material availability in our Aerospace segment;
- Lower business diligence and consulting fees in support of our growth initiatives; and
- An increase in our effective tax rate in first quarter 2024 compared with first quarter 2023.

### Three Months Ended March 31, 2024 Compared with Three Months Ended March 31, 2023

Overall, net sales increased $11.6 million, or 5.4%, to $227.1 million for the three months ended March 31, 2024, as compared with $215.5 million in the three months ended March 31, 2023. Acquisition-related sales growth was $14.2 million, comprised of $2.8 million from our February 2023 acquisition of Aarts, and $11.4 million from our April 2023 acquisition of Weldmac. Organic sales, excluding the impact of currency exchange and acquisitions, decreased $3.5 million, as sales increases in our Packaging and Aerospace segments driven by end market demand improvements and market share gains were more than offset by a decrease in the Specialty Products segment due to lower market demand, primarily as a result of our customers managing inventory levels built up in 2023. In addition, net sales increased by $0.9 million due to currency exchange, as our reported results in U.S. dollars were favorably impacted as a result of a weakening U.S. dollar relative to foreign currencies.

Gross profit margin (gross profit as a percentage of sales) approximated 23.2% and 22.1% for the three months ended March 31, 2024 and 2023, respectively. Gross profit margin increased primarily due to higher sales levels and improved fixed cost absorption within our Packaging and Aerospace segments. In addition, gross profit margin improved due to reduced material availability constraints and a more favorable product sales mix within our Aerospace segment. These increases were partially offset by decreased sales and less favorable leveraging of fixed costs within our Specialty Products segment and increased input costs, including expedited freight and labor, required to timely fulfill an abrupt increase in a customer's orders in our Packaging segment.

Operating profit margin (operating profit as a percentage of sales) approximated 5.5% and 4.6% for the three months ended March 31, 2024 and 2023, respectively. Operating profit increased $2.5 million, to $12.4 million, for the three months ended March 31, 2024, compared to $10.0 million for the three months ended March 31, 2023, primarily due to higher sales levels and improved fixed cost absorption, as well as reduced material availability constraints and a more favorable product sales mix within our Aerospace segment. Additionally, operating profit increased due to higher sales levels and improved fixed cost absorption as well as the favorable impact of prior realignment actions in our Packaging segment, and lower professional fees. These improvements were partially offset by the impact of lower sales levels and less favorable leveraging of fixed costs in our Specialty Products segment, and increased input costs, including expedited freight and labor, required to timely fulfill an abrupt increase in a customer's orders in our Packaging segment.

Interest expense increased $1.2 million, to $4.9 million, for the three months ended March 31, 2024, as compared to $3.7 million for the three months ended March 31, 2023, due to an increase in our weighted average borrowings and a higher effective interest rate as a result of increased borrowings from our revolving credit facility.

Other income (expense) increased $0.3 million to $0.3 million of expense for the three months ended March 31, 2024, as compared to less than $0.1 million of expense for the three months ended March 31, 2023, primarily due to mark-to-market losses on our de-designated cross currency swap.

The effective income tax rate for the three months ended March 31, 2024 and 2023 was 28.5% and 21.1%, respectively. We recorded tax expense of $2.1 million for the three months ended March 31, 2024, as compared to $1.3 million for the three months ended March 31, 2023. The effective tax rate for the three months ended March 31, 2024 was higher than in the prior year primarily due to increased earnings in certain foreign jurisdictions where the effective tax rate was higher than 21% and losses at certain foreign subsidiaries where no tax benefit could be recorded.

Net income increased by $0.2 million, to $5.1 million for the three months ended March 31, 2024, compared to $4.9 million for the three months ended March 31, 2023. The increase was primarily the result of an increase in operating profit of $2.5 million, partially offset by an increase in interest expense of $1.2 million, an increase in income tax expense of $0.7 million and an increase in other expense of $0.3 million.

See below for a discussion of operating results by segment.

***Packaging.*** Net sales increased $10.8 million, or 9.3%, to $127.0 million in the three months ended March 31, 2024, as compared to $116.2 million in the three months ended March 31, 2023. Acquisition-related sales growth was $2.8 million resulting from the January 2024 sales of our February 2023 acquisition of Aarts. Sales of dispensing products used primarily for personal care and home care applications increased by $7.7 million. Sales of products used for industrial applications increased by $2.3 million. These increases were partially offset by the decrease in sales of products used in food and beverage applications of $3.3 million, primarily due to reduced demand for dairy applications and lower demand for beverage closures in Europe as customers begin to cut over to new product designs. Net sales increased by $0.9 million due to currency exchange, as our reported results in U.S. dollars were favorably impacted as a result of the weakening U.S. dollar relative to foreign currencies, as compared to first quarter 2023.

Packaging's gross profit increased $5.0 million to $32.3 million, or 25.4% of sales, in the three months ended March 31, 2024, as compared to $27.2 million, or 23.4% of sales, in the three months ended March 31, 2023, primarily due to higher sales levels and resulting improved fixed cost absorption, as well as the favorable impact of structural cost reduction efforts following our realignment actions. The increase in gross profit was partially offset by increased input costs, including expedited freight and labor, required to timely fulfill an abrupt increase in a customer's orders in the first quarter of 2024.

Packaging's selling, general and administrative expenses increased $2.3 million to $15.2 million, or 11.9% of sales, in the three months ended March 31, 2024, as compared to $12.9 million, or 11.1% of sales, in the three months ended March 31, 2023, primarily due to $1.1 million higher information technology costs allocated from Corporate and higher ongoing selling, general and administrative costs associated with our acquisition.

Packaging's operating profit increased $2.7 million to $17.1 million, or 13.5% of sales, in the three months ended March 31, 2024, as compared to $14.4 million, or 12.4% of sales, in the three months ended March 31, 2023, primarily due to higher sales levels, improved fixed cost absorption, and the favorable impact of prior realignment actions, partially offset by higher selling, general and administrative expenses and increased input costs required to timely fulfill an abrupt increase in a customer's orders.

***Aerospace.*** Net sales for the three months ended March 31, 2024 increased $17.4 million, or 34.7%, to $67.3 million, as compared to $50.0 million in the three months ended March 31, 2023. Acquisition-related sales growth from our April 2023 acquisition of Weldmac was $11.4 million. Sales of our fasteners products increased by $5.8 million due to increases in aircraft build rates and market share gains. Sales of our engineered components products increased by $0.1 million.

Gross profit within Aerospace increased $7.0 million to $15.6 million, or 23.1% of sales, in the three months ended March 31, 2024, from $8.6 million, or 17.2% of sales, in the three months ended March 31, 2023. Gross profit increased primarily due to higher sales levels and resulting improved fixed cost absorption, reduced material availability constraints, and a more favorable product sales mix.

Selling, general and administrative expenses increased $1.3 million to $8.4 million, or 12.5% of sales, in the three months ended March 31, 2024, as compared to $7.2 million, or 14.3% of sales, in the three months ended March 31, 2023, primarily due to higher ongoing selling, general and administrative costs associated with our acquisition of Weldmac and $0.7 million higher information technology costs allocated from Corporate in the three months ended March 31, 2024, partially offset by lower intangible asset amortization expense due to certain assets becoming fully amortized.

Operating profit within Aerospace increased $5.7 million to $7.1 million, or 10.6% of sales, in the three months ended March 31, 2024, as compared to $1.4 million, or 2.9% of sales, in the three months ended March 31, 2023, primarily due to the impact of higher sales levels, improved fixed cost absorption, reduced material availability production constraints, and a more favorable product sales mix, partially offset by higher selling, general and administrative expenses.

***Specialty Products.*** Net sales for the three months ended March 31, 2024 decreased $16.5 million, or 33.5%, to $32.7 million, as compared to $49.3 million in the three months ended March 31, 2023. Sales of our cylinder products decreased $9.4 million due to a continued weak end market, and in turn, lower demand for steel cylinders as customers had built up high inventory positions in 2023 and continue to work through the levels in early 2024. Sales of natural gas fired engines, compressors and related parts used in remote power generation and assistance applications for natural gas and crude oil extraction decreased by $7.1 million as customer sales rates abated from a high sales rate in first quarter 2023, and from a customer that shifted purchases to a supplier with a much broader product offering.

Gross profit within Specialty Products decreased $7.0 million to $4.9 million, or 14.9% of sales, in the three months ended March 31, 2024, as compared to $11.9 million, or 24.1% of sales, in the three months ended March 31, 2023, primarily due to lower sales levels, which resulted in less favorable leveraging of fixed costs across our existing cost footprint.

Selling, general and administrative expenses within Specialty Products increased $0.2 million to $2.3 million, or 6.9% of sales, in the three months ended March 31, 2024, as compared to $2.1 million, or 4.3% of sales, in the three months ended March 31, 2023, due to $0.4 million higher information technology costs allocated from Corporate.

Operating profit within Specialty Products decreased $7.1 million to $2.6 million, or 8.0% of sales, in the three months ended March 31, 2024, as compared to $9.8 million, or 19.8% of sales, in the three months ended March 31, 2023, primarily due to lower sales levels, which resulted in less favorable leveraging of fixed costs across our existing cost footprint.

***Corporate.*** Corporate expenses, net consist of the following (dollars in millions):

|  | Three months ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Corporate operating expenses | $9.6 | $12.5 |
| Non-cash stock compensation | 4.6 | 2.9 |
| Legacy expenses | 0.2 | 0.2 |
| Corporate expenses | $14.4 | $15.6 |

Corporate expenses decreased $1.2 million to $14.4 million for the three months ended March 31, 2024, from $15.6 million for the three months ended March 31, 2023, primarily due to $2.9 million lower professional fees as we incurred costs for business strategy and other consulting services in 2023 that did not repeat. Additionally, technology costs decreased $0.1 million as $2.2 million of technology costs allocated to our segments in the first quarter of 2024 was mostly offset by $1.0 million of higher costs in preparation for upgrades in certain of our information technology applications, and by other general increases in technology costs. We largely centralized our information technology costs in the first quarter of 2023. These decreases were partially offset by a $1.7 million increase in non-cash stock compensation, due to the accelerated vesting of certain awards, and higher employee-rated costs.

### Liquidity and Capital Resources

#### Cash Flows

Cash flows used by operating activities were $3.7 million for the three months ended March 31, 2024, as compared to cash provided of $9.7 million for the three months ended March 31, 2023. Significant changes in cash flows provided by operating activities and the reasons for such changes were as follows:

- For the three months ended March 31, 2024, the Company generated $29.9 million in cash flows, based on the reported net income of $5.1 million and after considering the effects of non-cash items related to depreciation, amortization, gain on dispositions of assets, changes in deferred income taxes, stock-based compensation, provision for losses on accounts receivables, and other operating activities. For the three months ended March 31, 2023, the Company generated $24.0 million in cash flows based on the reported net income of $4.9 million and after considering the effects of similar non-cash items, except for changes in provision for losses on accounts receivables.
- Increases in accounts receivable resulted in a use of cash of $16.2 million and $11.9 million for the three months ended March 31, 2024 and 2023, respectively. The increased use of cash for each of the three month periods is due primarily to the timing of sales and collection of cash related thereto within the periods. Days sales outstanding of receivables remained consistent through the three months ended March 31, 2024, and increased by three days through the three months ended March 31, 2023.
- We increased our investment in inventory by $14.3 million for the three months ended March 31, 2024, while we increased our investment in inventory by $1.6 million for the three months ended March 31, 2023. Our days sales in inventory increased by one day through the three months ended March 31, 2024, as we continued to manage inventory levels, considering our supply needs, and balanced with sales growth within our Packaging and Aerospace segments. Our days sales in inventory decreased by two days through the three months ended March 31, 2023, primarily a result of moderating inventory levels with sales level.
- Decreases in prepaid expenses and other assets resulted in a source of cash of $0.5 million and $1.5 million for the three months ended March 31, 2024 and 2023, respectively. These changes were primarily a result of the timing of payments made for income taxes and certain operating expenses.
- Decreases in accounts payable and accrued liabilities resulted in a use of cash of $3.7 million and $2.4 million for the three months ended March 31, 2024 and 2023, respectively. Days accounts payable on hand decreased by eight days through the three months ended March 31, 2024, while decreasing by three days through the three months ended March 31, 2023. Our days accounts payable on hand fluctuate primarily as a result of the timing of payments made to suppliers and the mix of vendors and related terms.

Net cash used for investing activities for the three months ended March 31, 2024 and 2023 was $13.1 million and $52.6 million, respectively. During the first three months of 2024, we invested $13.3 million in capital expenditures, as we continued our investment in growth, capacity and productivity-related capital projects. We also received net proceeds of $0.1 million from disposition of property and equipment. During the first three months of 2023, we invested $14.8 million in capital expenditures and paid $37.8 million, net of cash acquired, to acquire Aarts.

Net cash provided by financing activities for the three months ended March 31, 2024 was $12.4 million and net cash used for financing activities for the three months ended March 31, 2023 was $17.3 million. During the three months ended March 31, 2024, we received net proceeds of $29.1 million from borrowings on our revolving credit facilities, purchased $13.3 million of outstanding common stock, used a net cash amount of $1.6 million related to our stock compensation arrangements, paid dividends of $1.7 million and paid $0.1 million related to other financing activities. Our reported net proceeds from borrowings on our revolving credit facilities considers the impact of foreign currency translation. During the three months ended March 31, 2023, we purchased $10.4 million of outstanding common stock, used a net cash amount of $2.3 million related to our stock compensation arrangements, paid dividends of $1.7 million, and paid $3.0 million related to liabilities assumed in our acquisition of Aarts.

#### Our Debt and Other Commitments

In March 2021, we issued $400.0 million aggregate principal amount of 4.125% senior notes due April 15, 2029 ("Senior Notes") at par value in a private placement under Rule 144A of the Securities Act of 1933, as amended ("Securities Act"). The Senior Notes accrue interest at a rate of 4.125% 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. The 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, we may redeem up to 40% of the principal amount of the 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, we 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 April 15, 2024, we 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 April 15 of the years indicated below:

| Year | Percentage |
| --- | ---: |
| 2024 | 102.063% |
| 2025 | 101.031% |
| 2026 and thereafter | 100.000% |

For the three months ended March 31, 2024, our consolidated subsidiaries that do not guarantee the Senior Notes represented 30% of the total of guarantor and non-guarantor net sales, treating each as a consolidated group and excluding intercompany transactions between guarantor and non-guarantor subsidiaries. In addition, our non-guarantor subsidiaries represented 37% and 14% of the total guarantor and non-guarantor assets and liabilities, respectively, as of March 31, 2024, treating the guarantor and non-guarantor subsidiaries each as a consolidated group.

We are 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, maturing on March 29, 2026. The Credit Agreement is subject to benchmark interest rates determined based on the currency denomination of borrowings, with British pound sterling borrowings subject to the Sterling Overnight Index Average and Euro borrowings to the Euro InterBank Offered Rate (“EURIBOR”), both plus a spread of 1.625%, and U.S. dollar borrowings subject to the Secured Overnight Financing Rate ("SOFR") plus a spread of 1.725%. The interest rate spread is based upon the leverage ratio, as defined, as of the most recent determination date. Our revolving credit facility allows for the issuance of letters of credit, not to exceed $40.0 million in aggregate.

The Credit Agreement provides for incremental revolving credit 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 in the Credit Agreement, 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.

Amounts drawn under our revolving credit facility fluctuate daily based upon our working capital and other ordinary course needs. Availability under our revolving credit facility depends upon, among other things, compliance with our Credit Agreement's financial covenants. Our Credit Agreement contains various negative and affirmative covenants and other requirements affecting us and our subsidiaries, including the ability to, subject to certain exceptions and limitations, incur debt, liens, mergers, investments, loans, advances, guarantee obligations, acquisitions, asset 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 our Credit Agreement require us and our 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) 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). Our permitted total net leverage ratio under the Credit Agreement is 4.00 to 1.00 as of March 31, 2024. If we were to complete an acquisition which qualifies for a Covenant Holiday Period, as defined in our Credit Agreement, then our permitted total net leverage ratio cannot exceed 4.50 to 1.00 during that period. Our actual total net leverage ratio was 2.59 to 1.00 at March 31, 2024. Our permitted interest expense coverage ratio under the Credit Agreement is 3.00 to 1.00 as of March 31, 2024. Our actual interest expense coverage ratio was 10.18 to 1.00 at March 31, 2024. At March 31, 2024, we were in compliance with our financial covenants.

The following is a reconciliation of net income, as reported, which is a GAAP measure of our operating results, to Consolidated Bank EBITDA, as defined in our Credit Agreement, for the twelve months ended March 31, 2024 (dollars in thousands). We present Consolidated Bank EBITDA to show our performance under our financial covenants.

|  | Twelve Months Ended March 31, 2024 |
| --- | ---: |
| Net income | $40,590 |
| Bank stipulated adjustments: |  |
| Interest expense | 17,150 |
| Income tax expense | 10,970 |
| Depreciation and amortization | 58,430 |
| Non-cash compensation expense(1) | 11,300 |
| Other non-cash expenses or losses | 780 |
| Non-recurring expenses or costs(2) | 17,630 |
| Effects of purchase accounting adjustments | 2,790 |
| Business and asset dispositions | 410 |
| Permitted acquisitions | 240 |
| Currency gains and losses | 230 |
| Consolidated Bank EBITDA, as defined | $160,520 |

|  | March 31, 2024 |  |
| --- | ---: | --- |
| Total Indebtedness, as defined(3) | $415,110 |  |
| Consolidated Bank EBITDA, as defined | 160,520 |  |
| Total net leverage ratio | 2.59 | x |
| Covenant requirement | 4.00 | x |

32

|  | Twelve Months Ended March 31, 2024 |
| --- | ---: |
| Interest expense | $17,150 |
| Bank stipulated adjustments: |  |
| Interest income | (440) |
| Non-cash amounts attributable to amortization of financing costs | (940) |
| Total Consolidated Cash Interest Expense, as defined | $15,770 |

|  | March 31, 2024 |  |
| --- | ---: | --- |
| Consolidated Bank EBITDA, as defined | $160,520 |  |
| Total Consolidated Cash Interest Expense, as defined | 15,770 |  |
| Actual interest expense coverage ratio | 10.18 | x |
| Covenant requirement | 3.00 | x |

(1) Non-cash compensation expenses resulting from the grant of equity awards.

(2) Non-recurring costs and expenses relating to diligence and transaction costs, purchase accounting costs, severance, relocation, restructuring and curtailment expenses.

(3) Includes $4.5 million of acquisition-related contingent consideration and $2.0 million of finance leases as of March 31, 2024.

At March 31, 2024, we had $29.0 million outstanding under our revolving credit facility and had $265.0 million potentially available after giving effect to $6.0 million of letters of credit issued and outstanding. At December 31, 2023, we had no amounts outstanding under our revolving credit facility and had $294.0 million potentially available after giving effect to $6.0 million of letters of credit issued and outstanding. Our letters of credit are used for a variety of purposes, including support of certain operating lease agreements, vendor payment terms and other subsidiary operating activities, and to meet various states' requirements to self-insure workers' compensation claims, including incurred but not reported claims. After consideration of leverage restrictions contained in the Credit Agreement, as of March 31, 2024 and December 31, 2023, we had $227.0 million and $256.9 million, respectively, of borrowing capacity available for general corporate purposes.

We rely upon our cash flow from operations and available liquidity under our revolving credit facility to fund our debt service obligations and other contractual commitments, working capital and capital expenditure requirements. At the end of each quarter, we have historically used cash on hand from our domestic and foreign subsidiaries to pay down amounts outstanding under our revolving credit facility, as applicable.

Our weighted average borrowings during the first three months of 2024 approximated $422.9 million, compared to $403.0 million during the first three months of 2023, primarily due to borrowings made on our revolving credit facility.

In May 2021, we, through one of our non-U.S. subsidiaries, entered into a revolving loan facility with a borrowing capacity of $4.0 million. The facility is guaranteed by TriMas Corporation. There were no borrowings on this loan facility as of March 31, 2024.

Cash management related to our revolving credit facility is centralized. We monitor our cash position and available liquidity on a daily basis and forecast our cash needs on a weekly basis within the current quarter and on a monthly basis outside the current quarter over the remainder of the year. Our business and related cash forecasts are updated monthly.

While the majority of our cash on hand as of March 31, 2024 is located outside of the U.S., given available funding under our revolving credit facility of $227.0 million at March 31, 2024 (after consideration of the aforementioned leverage restrictions) and based on forecasted cash sources and requirements inherent in our business plans, we believe that our liquidity and capital resources, including anticipated cash flows from operations, will be sufficient to meet our debt service, capital expenditure and other short-term and long-term obligations for the foreseeable future, as well as dividends and share repurchases.

We are subject to variable interest rates on our revolving credit facility, which is subject to a benchmark interest rate determined based on the currency denomination of borrowings. At March 31, 2024, the SOFR approximated 5.3% and the 1-Month EURIBOR approximated 3.9%. Based on our variable rate-based borrowings outstanding at March 31, 2024, a 1% increase in the per annum interest rate would increase our interest expense by $0.3 million annually.

In addition to our long-term debt, we have other cash commitments related to leases. The majority of our lease transactions are accounted for as operating leases, and annual rent expense for continuing operations related thereto approximated $14.9 million in 2023. We expect leasing will continue to be an available financing option to fund future capital expenditure requirements.

As part of our first quarter 2023 acquisition of Aarts, we assumed a $2.9 million liability to a bank related to the advance funding of certain accounts receivable invoices. We terminated this arrangement, and repaid the outstanding balance, in March 2023.

In March 2020, we announced our Board of Directors had authorized us to increase the purchase of our common stock up to $250 million in the aggregate, an increase of $100 million from the prior authorization. In the three months ended March 31, 2024, we purchased 540,037 shares of our outstanding common stock for an aggregate purchase price of $13.3 million. Since the initial authorization through March 31, 2024, we have purchased 6,335,534 shares of our outstanding common stock for an aggregate purchase price of $176.4 million. We will continue to evaluate opportunities to return capital to shareholders through the purchase of our common stock and the payment of dividends, depending on market conditions, and other factors.

### Market Risk

We conduct business in various locations throughout the world and are subject to market risk due to changes in the value of foreign currencies. The functional currencies of our foreign subsidiaries are primarily the local currency in the country of domicile. We manage these operating activities at the local level and revenues and costs are generally denominated in local currencies; however, results of operations and assets and liabilities reported in U.S. dollars will fluctuate with changes in exchange rates between such local currencies and the U.S. dollar.

We use derivative financial instruments to manage currency risks associated with our procurement activities denominated in currencies other than the functional currency of our subsidiaries and the impact of currency rate volatility on our earnings. As of March 31, 2024, we were party to foreign exchange forward and swap contracts to hedge changes in foreign currency exchange rates with notional amounts of $207.9 million. We also use cross-currency swap agreements to mitigate currency risks associated with the net investment in certain of our foreign subsidiaries. See Note 9, "*Derivative Instruments*," included in Part 1, Item 1, "*Notes to Unaudited Consolidated Financial Statements*," within this quarterly report on Form 10-Q for additional information.

We are also subject to interest risk as it relates to our long-term debt. We have historically used interest rate swap agreements to fix the variable portion of our debt to manage this risk.

### Common Stock

TriMas is listed in the NASDAQ Global Select Market. Our stock trades under the symbol "TRS."

### Credit Rating

We and certain of our outstanding debt obligations are rated by Standard & Poor's and Moody's. On March 19, 2024, Moody's affirmed a Ba3 rating to our Senior Notes. See Note 8, *"Long-term Debt"* included in Part I, Item 1, *"Notes to Unaudited Consolidated Financial Statements"* within this quarterly report on Form 10-Q. Moody's also affirmed a Ba2 Corporate Family Rating and maintained its outlook as stable. On May 22, 2023, Standard & Poor's affirmed a BB- rating to our Senior Notes. Standard & Poor's also affirmed a BB corporate credit rating and maintained its outlook as stable. If our credit ratings were to decline, our ability to access certain financial markets may become limited, our cost of borrowings may increase, the perception of us in the view of our customers, suppliers and security holders may worsen and as a result, we may be adversely affected.

### Outlook

In 2023, we proactively managed through demand weakness in certain of our packaging end markets and an imbalance of demand in sub-supply and labor in our aerospace businesses, which we believe are largely behind us as we progress through 2024. While some areas of demand volatility remain, such as in our Specialty Products segment, we remain optimistic about our future prospects as we see pockets of strength and the beginning of more steady and consistent demand in certain of our end markets. As these end markets continue to experience strong order intake, we will continue to increase capacity and address challenges to manufacturing throughput in order to support market demand.

We have seen a number of global market uncertainties stemming from the macro-economic environment in the past few years, including significant challenges in inflationary pressures, supply chain disruptions and labor availability, as well as significant volatility in our customers' sentiment and order patterns. While we expect a continued gradual demand recovery in certain of our consumer products and industrial markets and continued strength in our aerospace & defense market, we remain cautious of the impact of global market uncertainty into 2024, at least in the near-term. However, no matter the outcome of these factors, we expect to continue to mitigate, as much as practical, the impact of these challenges, executing on streamlining actions and taking other steps as necessary, to maintain our strong balance sheet and generate cash in support of our capital allocation strategy.

We believe our capital structure remains strong and that we have sufficient headroom under our financial covenants, and ample cash and available liquidity under our revolving credit facility, to meet our debt service, capital expenditure and other short-term and long-term obligations for the next 12 months and for the foreseeable future, as well as fund dividends, share repurchases and bolt-on acquisitions consistent with our capital allocation strategy.

We expect to continue to leverage the tenets of our TriMas Business Model to manage our multi-industry businesses on a longer-term basis, achieve our growth plans, execute continuous improvement initiatives to offset inflationary pressures, and seek lower-cost sources for input costs, all while continuously assessing the appropriateness of our manufacturing footprint and fixed-cost structure.

### Impact of New Accounting Standards

See Note 2, "*New Accounting Pronouncements*," included in Part 1, Item 1, "*Notes to Unaudited Consolidated Financial Statements*," within this quarterly report on Form 10-Q.

### Critical Accounting Policies

Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions used in calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, our evaluation of business and macroeconomic trends, and information from other outside sources, as appropriate.

During the quarter ended March 31, 2024, there were no material changes to the items that we disclosed as our critical accounting policies in Part II, Item 7, "*Management's Discussion and Analysis of Financial Condition and Results of Operations*," in the Annual Report on Form 10-K for the year ended December 31, 2023.

## Market risk

As filed, 648 characters.

In the normal course of business, we are exposed to market risk associated with fluctuations in foreign currency exchange rates. We are also subject to interest risk as it relates to long-term debt. See Part I, Item 2, "*Management's Discussion and Analysis of Financial Condition and Results of Operations,*" for details about our primary market risks, and the objectives and strategies used to manage these risks. Also see Note 8, "*Long-term Debt*," and Note 9, "*Derivative Instruments*," in Part I, Item 1, "*Notes to Unaudited Consolidated Financial Statements*," included within this quarterly report on Form 10-Q for additional information.

## Controls and procedures

As filed, 1,706 characters.

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

### Evaluation of disclosure controls and procedures

As of March 31, 2024, an evaluation was carried out by management, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) pursuant to Rule 13a-15 of the Exchange Act. The Company's disclosure controls and procedures are designed only to provide reasonable assurance that they will meet their objectives. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2024, the Company's disclosure controls and procedures are effective to provide reasonable assurance that they would meet their objectives.

### Changes in internal control over financial reporting

There have been no changes in the Company's internal control over financial reporting during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

## Risk factors

As filed, 388 characters.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part 1, Item 1A., "*Risk Factors*," in our 2023 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. There have been no significant changes in our risk factors as disclosed in our 2023 Annual Report on Form 10-K.

Filed Apr 30, 2024.
Source: SEC EDGAR, the filing index for accession 0000842633-24-000053. Last ingested by Listed: Nov 6, 2026, 15:06 ET. No prices; not investment advice.