# Trimas Corp: Form 10-Q for the period ended Jun 30, 2024

- Company: [Trimas Corp](/companies/trs.md) (CIK 842633)
- Form: 10-Q
- Filed: 2024-07-30
- Accepted by EDGAR: Jul 30, 2024, 12:57 ET
- Period: 2024-06-30
- Accession: 0000842633-24-000072
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/842633/000084263324000072/trs-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/842633/000084263324000072/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $240.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $467.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-04-01 to 2024-06-30 | $186.5m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2024-01-01 to 2024-06-30 | $360.9m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-04-01 to 2024-06-30 | $54.0m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2024-01-01 to 2024-06-30 | $106.7m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-04-01 to 2024-06-30 | $36.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2024-01-01 to 2024-06-30 | $76.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | $17.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | $30.3m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-04-01 to 2024-06-30 | $5.2m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2024-01-01 to 2024-06-30 | $10.2m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $1.7m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $3.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | $10.9m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | $16.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.27 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | $0.39 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.27 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | $0.39 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 40,999,038 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 41,160,526 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | $14.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $24.1m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 6 months, 2024-01-01 to 2024-06-30 | $3.3m | us-gaap:PaymentsOfDividends |
| Share repurchases | 6 months, 2024-01-01 to 2024-06-30 | $16.9m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-06-30 | $35.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $438.9m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $1.37bn | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $155.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $689.9m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-06-30 | $675.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 68,735 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 second quarter 2024 net sales increased $7.3 million, or 3.1%, compared to second quarter 2023. We experienced organic growth of 13.0% and 27.6% within our Packaging and Aerospace segments, respectively, as well as growth from acquisitions of 2.4% within our Aerospace segment for our second quarter 2024 compared to second quarter 2023. These increases were partially offset by significant decreases in demand in our Specialty Products segment, resulting in 45.0% lower sales in our Specialty Products segment as compared to the prior year quarter.

The most significant drivers affecting our financial results in second quarter 2024 compared with second quarter 2023, other than as directly impacted by sales changes, were the impact of our recent acquisitions and increased input costs, including expedited freight within our Packaging segment, improved material availability within our Aerospace segment, and a decrease 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 predominantly 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. We expect to resolve the remaining contingent consideration matter in third quarter 2024. Weldmac, which is reported in our Aerospace segment, is located in El Cajon, California. Weldmac contributed $1.4 million of acquisition-related net sales growth during second quarter 2024.

During first quarter 2024, one of our customers in our Packaging segment abruptly increased their orders, requiring us to incur certain incremental input costs to timely fulfill certain of the customer's orders, for which some of these costs carried into second quarter 2024.

The effective income tax rate for second quarter 2024 was 13.7% as compared to 32.2% for second quarter 2023. The effective tax rate for second quarter 2024 was lower than in the prior year primarily due to the recognition of approximately $1.4 million of tax benefit related to foreign tax loss carryforwards and a decrease in losses in jurisdictions 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 to address variable and structural costs where demand has fallen. We will continue to assess and take 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' overall performance and market capitalization, we may record additional cash and non-cash charges related to further 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 generate 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 adjacent distribution channels and new 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 polypropylene, 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 or natural gas often is a precursor to rising input polymeric raw material costs, for which we may experience a contractual commercial recovery lag. Separately, our Arrow Engine business in our Specialty Products segment is sensitive to the demand for natural gas and crude oil predominantly in the United States. 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 (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 second quarter 2024, we purchased 131,900 shares of our outstanding common stock for an aggregate purchase price of $3.5 million. As of June 30, 2024, we had $70.1 million remaining under the repurchase authorization.

In addition, in second 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.

### Segment Information and Supplemental Analysis

The following table summarizes financial information for our reportable segments for the three months ended June 30, 2024 and 2023 (dollars in thousands):

| Net Sales | Three months ended June 30, 2024 | As a Percentage of Net Sales | 2023 | As a Percentage of Net Sales |
| --- | ---: | ---: | ---: | ---: |
| Packaging | $131,930 | 54.9% | $117,320 | 50.3% |
| Aerospace | 77,720 | 32.3% | 59,800 | 25.6% |
| Specialty Products | 30,850 | 12.8% | 56,070 | 24.1% |
| Total | $240,500 | 100.0% | $233,190 | 100.0% |
| **Gross Profit** |  |  |  |  |
| Packaging | $32,110 | 24.3% | $29,120 | 24.8% |
| Aerospace | 19,290 | 24.8% | 10,920 | 18.3% |
| Specialty Products | 2,610 | 8.5% | 14,490 | 25.8% |
| Total | $54,010 | 22.5% | $54,530 | 23.4% |
| **Selling, General and Administrative Expenses** |  |  |  |  |
| Packaging | $14,090 | 10.7% | $11,840 | 10.1% |
| Aerospace | 8,860 | 11.4% | 8,290 | 13.9% |
| Specialty Products | 2,030 | 6.6% | 2,390 | 4.3% |
| Corporate | 11,180 | N/A | 11,950 | N/A |
| **Total** | $36,160 | 15.0% | $34,470 | 14.8% |
| **Operating Profit (Loss)** |  |  |  |  |
| Packaging | $18,020 | 13.7% | $17,280 | 14.7% |
| Aerospace | 10,430 | 13.4% | 2,630 | 4.4% |
| Specialty Products | 580 | 1.9% | 12,100 | 21.6% |
| Corporate | (11,180) | N/A | (11,950) | N/A |
| Total | $17,850 | 7.4% | $20,060 | 8.6% |
| **Depreciation** |  |  |  |  |
| Packaging | $6,890 | 5.2% | $8,710 | 7.4% |
| Aerospace | 2,010 | 2.6% | 2,090 | 3.5% |
| Specialty Products | 1,070 | 3.5% | 950 | 1.7% |
| Corporate | 50 | N/A | 30 | N/A |
| Total | $10,020 | 4.2% | $11,780 | 5.1% |
| **Amortization** |  |  |  |  |
| Packaging | $1,650 | 1.3% | $1,620 | 1.4% |
| Aerospace | 2,570 | 3.3% | 2,880 | 4.8% |
| Specialty Products | — | —% | 110 | 0.2% |
| Corporate | — | N/A | — | N/A |
| Total | $4,220 | 1.8% | $4,610 | 2.0% |

The following table summarizes detail on the year-over-year sales growth percentages for our reportable segments for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023:

|  | Second Quarter 2024 vs. Second Quarter 2023 Organic | Acquisitions | Foreign Exchange | Total |
| --- | ---: | ---: | ---: | ---: |
| Consolidated TriMas Corporation | 2.8% | 0.6% | (0.3)% | 3.1% |
| Packaging | 13.0% | —% | (0.5)% | 12.5% |
| Aerospace | 27.6% | 2.4% | —% | 30.0% |
| Specialty Products | (45.0)% | —% | —% | (45.0)% |

26

The following table summarizes financial information for our reportable segments for the six months ended June 30, 2024 and 2023 (dollars in thousands):

| Net Sales | Six months ended June 30, 2024 | As a Percentage of Net Sales | 2023 | As a Percentage of Net Sales |
| --- | ---: | ---: | ---: | ---: |
| Packaging | $258,950 | 55.4% | $233,540 | 52.0% |
| Aerospace | 145,060 | 31.0% | 109,790 | 24.5% |
| Specialty Products | 63,590 | 13.6% | 105,320 | 23.5% |
| Total | $467,600 | 100.0% | $448,650 | 100.0% |
| **Gross Profit** |  |  |  |  |
| Packaging | $64,370 | 24.9% | $56,360 | 24.1% |
| Aerospace | 34,860 | 24.0% | 19,500 | 17.8% |
| Specialty Products | 7,490 | 11.8% | 26,360 | 25.0% |
| Total | $106,720 | 22.8% | $102,220 | 22.8% |
| **Selling, General and Administrative Expenses** |  |  |  |  |
| Packaging | $29,240 | 11.3% | $24,690 | 10.6% |
| Aerospace | 17,300 | 11.9% | 15,440 | 14.1% |
| Specialty Products | 4,300 | 6.8% | 4,510 | 4.3% |
| Corporate | 25,590 | N/A | 27,530 | N/A |
| Total | $76,430 | 16.3% | $72,170 | 16.1% |
| **Operating Profit (Loss)** |  |  |  |  |
| Packaging | $35,130 | 13.6% | $31,670 | 13.6% |
| Aerospace | 17,560 | 12.1% | 4,060 | 3.7% |
| Specialty Products | 3,190 | 5.0% | 21,850 | 20.7% |
| Corporate | (25,590) | N/A | (27,530) | N/A |
| Total | $30,290 | 6.5% | $30,050 | 6.7% |
| **Depreciation** |  |  |  |  |
| Packaging | $13,820 | 5.3% | $14,660 | 6.3% |
| Aerospace | 4,010 | 2.8% | 3,950 | 3.6% |
| Specialty Products | 2,080 | 3.3% | 1,870 | 1.8% |
| Corporate | 90 | N/A | 60 | N/A |
| Total | $20,000 | 4.3% | $20,540 | 4.6% |
| **Amortization** |  |  |  |  |
| Packaging | $3,290 | 1.3% | $3,180 | 1.4% |
| Aerospace | 5,140 | 3.5% | 5,790 | 5.3% |
| Specialty Products | — | —% | 230 | 0.2% |
| Corporate | — | N/A | — | N/A |
| Total | $8,430 | 1.8% | $9,200 | 2.1% |

The following table summarizes detail on the year-over-year sales growth percentages for our reportable segments for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023:

|  | Year to Date Second Quarter 2024 vs. Year to Date Second Quarter 2023 Organic | Acquisitions | Foreign Exchange | Total |
| --- | ---: | ---: | ---: | ---: |
| Consolidated TriMas Corporation | 0.7% | 3.4% | 0.1% | 4.2% |
| Packaging | 9.6% | 1.2% | 0.1% | 10.9% |
| Aerospace | 20.4% | 11.7% | —% | 32.1% |
| Specialty Products | (39.6)% | —% | —% | (39.6)% |

27

#### Results of Operations

The principal factors impacting us during the three months ended June 30, 2024, compared with the three months ended June 30, 2023, were:

- Increases in demand for products within our Packaging and Aerospace segments;
- Significant demand decrease in our Specialty Products segment;
- Improved material availability and resulting production efficiencies in our Aerospace segment;
- A decrease in our effective tax rate in second quarter 2024 compared with second quarter 2023; and
- The impact of recent acquisitions, primarily Weldmac.

### Three Months Ended June 30, 2024 Compared with Three Months Ended June 30, 2023

Overall, net sales increased $7.3 million, or 3.1%, to $240.5 million for the three months ended June 30, 2024, as compared with $233.2 million in the three months ended June 30, 2023. Acquisition-related sales growth was $1.4 million from our April 2023 acquisition of Weldmac. Organic sales, excluding the impact of currency exchange and acquisitions, increased $6.5 million, or 2.8%, as organic sales increases of 13.0% and 27.6% within our Packaging and Aerospace segments, respectively, were partially offset by a 45.0% sales decrease in our Specialty Products segment. In addition, net sales decreased by $0.6 million due to currency exchange, as our reported results in U.S. dollars were unfavorably impacted as a result of the strengthening of the U.S. dollar relative to foreign currencies.

Gross profit margin (gross profit as a percentage of sales) approximated 22.5% and 23.4% for the three months ended June 30, 2024 and 2023, respectively. Gross profit margin decreased primarily due to lower sales compared to second quarter of 2023 and related less favorable leveraging of fixed costs within our Specialty Products segment and increased input costs, including expedited freight, in our Packaging segment. In addition, the prior year quarter benefited from a successful $2.6 million commercial settlement in our Packaging segment. These decreases were partially offset by higher sales levels and the impact of purchase accounting inventory step-up amortization in the second quarter of 2023 that did not repeat within our Packaging and Aerospace segments. Additionally, gross profit increased due to improved fixed cost absorption, reduced material availability constraints, and a more favorable product sales mix within our Aerospace segment. Gross profit further increased due to the impact of structural cost reduction efforts as well as the impact of realignment costs in the second quarter of 2023 that did not repeat within our Packaging segment.

Operating profit margin (operating profit as a percentage of sales) approximated 7.4% and 8.6% for the three months ended June 30, 2024 and 2023, respectively. Operating profit decreased $2.2 million to $17.9 million in the three months ended June 30, 2024, from $20.1 million for the three months ended June 30, 2023, primarily due to lower sales levels and less favorable leveraging of fixed costs within our Specialty Products segment. Additionally, operating profit decreased due predominantly to increased input costs, including expedited freight, production inefficiencies, as well as the year-over-year impact of a successful $2.6 million commercial settlement in the second quarter of 2023 in our Packaging segment which did not repeat, and higher technology costs in preparation for upgrades in certain of our information technology applications. The decreases were partially offset by higher sales levels and the impact of purchase accounting inventory step-up amortization in the second quarter of 2023 that did not repeat within our Packaging and Aerospace segments. Operating profit also increased due to improved fixed cost absorption, reduced material availability constraints and a more favorable product sales mix within our Aerospace segment. Operating profit further increased due to the impact of realignment costs in the second quarter of 2023 that did not repeat and the favorable impact of structural cost reduction efforts within our Packaging segment.

Interest expense increased $1.3 million, to $5.2 million for the three months ended June 30, 2024, compared to $4.0 million for the three months ended June 30, 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) decreased $0.1 million to $0.1 million of income for the three months ended June 30, 2024, as compared to $0.2 million for the three months ended June 30, 2023, primarily due to a decrease in foreign currency transaction gains, partially offset by a non-cash settlement charge for our Canadian defined benefit obligations and miscellaneous other income in second quarter of 2023 that did not repeat.

The effective income tax rate for the three months ended June 30, 2024 and 2023 was 13.7% and 32.2%, respectively. We recorded income tax expense of $1.7 million and $5.2 million for the three months ended June 30, 2024 and 2023, respectively. The effective tax rate for the three months ended June 30, 2024 was lower than in the prior year primarily due to the recognition of approximately $1.4 million of tax benefit related to foreign tax loss carryforwards and a decrease in losses in jurisdictions where we do not recognize a tax benefit.

Net income decreased $0.1 million, to $10.9 million for the three months ended June 30, 2024, as compared to $11.0 million for the three months ended June 30, 2023. The decrease was primarily the result of a decrease in operating profit of $2.2 million, an increase in interest expense of $1.3 million, and a decrease in other income of $0.1 million, partially offset by a decrease in income tax expense of $3.5 million.

See below for a discussion of operating results by segment.

***Packaging.*** Net sales increased $14.6 million, or 12.5% (of which 13.0% was organic and (0.5)% was foreign currency exchange), to $131.9 million in the three months ended June 30, 2024, as compared to $117.3 million in the three months ended June 30, 2023. Sales of dispensing products used primarily for personal care and home care applications increased by $9.6 million. Sales of products used for Packaging's industrial applications increased by $3.9 million. These increases were partially offset by a decrease, as compared to prior year quarter, in sales of products used in food and beverage applications, primarily due to reduced demand for dairy applications in North America and certain closure applications in Europe as a large customer begins to cut over to a new product design from our Packaging group. Net sales decreased by $0.6 million due to currency exchange, as our reported results in U.S. dollars were unfavorably impacted as a result of the strengthening of the U.S. dollar relative to foreign currencies, as compared to second quarter 2023.

Gross profit increased $3.0 million to $32.1 million, or 24.3% of sales, in the three months ended June 30, 2024, as compared to $29.1 million, or 24.8% of sales, in the three months ended June 30, 2023, primarily due to higher sales levels, the favorable impact of prior year cost reduction efforts, and the impact of $3.3 million of realignment costs and $0.4 million of purchase accounting inventory step-up amortization in the second quarter of 2023 that did not repeat in the second quarter of 2024. Gross profit margin decreased due to a successful $2.6 million commercial settlement in the second quarter of 2023 that did not repeat, increased input costs, including expedited freight, production inefficiencies, and higher costs related to high demand for certain product lines.

Selling, general and administrative expenses increased $2.3 million to $14.1 million, or 10.7% of sales, in the three months ended June 30, 2024, as compared to $11.8 million, or 10.1% of sales, in the three months ended June 30, 2023, primarily due to $1.1 million higher information technology costs allocated from Corporate and higher employee-related costs.

Operating profit increased $0.7 million to $18.0 million, or 13.7% of sales, in the three months ended June 30, 2024, as compared to $17.3 million, or 14.7% of sales, in the three months ended June 30, 2023, primarily due to higher sales volume and the impact of realignment costs and purchase accounting inventory step-up amortization in the second quarter of 2023 that did not repeat. Operating profit as a percentage of net sales decreased primarily as a result of a successful commercial settlement in the second quarter of 2023 that did not repeat, increased input costs, including expedited freight, production inefficiencies, and higher selling, general and administrative expenses.

***Aerospace.*** Net sales for the three months ended June 30, 2024 increased $17.9 million, or 30.0% (of which 27.6% was organic and 2.4% related to acquisitions), to $77.7 million, as compared to $59.8 million in the three months ended June 30, 2023. Acquisition-related sales growth from our April 2023 acquisition of Weldmac was $1.4 million. Sales of our fasteners products increased by $10.0 million due to to improved production yield and commercial recoveries for fasteners used in new aircraft builds. Sales of our engineered components products increased by $6.5 million due to improved throughput. Demand continued to remain strong in second quarter 2024, resulting in an increase in the Aerospace segment's order backlog.

Gross profit increased $8.4 million to $19.3 million, or 24.8% of sales, in the three months ended June 30, 2024, from $10.9 million, or 18.3% of sales, in the three months ended June 30, 2023. Gross profit increased primarily due to higher sales levels and resulting improved fixed cost absorption, reduced material availability constraints, a more favorable product sales mix, favorable commercial recoveries and purchase accounting inventory step-up amortization of $0.8 million in the second quarter of 2023 that did not repeat.

Selling, general and administrative expenses increased $0.6 million to $8.9 million, or 11.4% of sales, in the three months ended June 30, 2024, as compared to $8.3 million, or 13.9% of sales, in the three months ended June 30, 2023, primarily due to higher employee-related costs and higher information technology costs as $0.6 million of information technology costs were allocated from Corporate in second quarter 2024, partially offset by lower legal costs and lower intangible asset amortization expense due to certain assets becoming fully amortized.

Operating profit increased $7.8 million to $10.4 million, or 13.4% of sales, in the three months ended June 30, 2024, as compared to $2.6 million, or 4.4% of sales, in the three months ended June 30, 2023, primarily due to the impact of higher sales levels, improved fixed cost absorption, reduced material availability production constraints, a more favorable product sales mix, commercial recoveries and purchase accounting inventory step-up amortization in the second quarter of 2023 that did not repeat, partially offset by higher selling, general and administrative expenses.

***Specialty Products.*** Net sales for the three months ended June 30, 2024 decreased $25.2 million, or 45.0%, to $30.9 million, as compared to $56.1 million in the three months ended June 30, 2023. Sales of our cylinder products decreased $17.6 million, or 41.0%, due predominantly to lower sales of cylinders for heating, ventilation, and air conditioning ("HVAC") applications as compared to the prior year quarter where a high rate of orders were placed by customers concerned with global supply of cylinders for HVAC applications. We believe that customers are currently in an overstocked position of cylinders for HVAC applications, which should subside by the end of 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 $7.6 million, or 58.2%, primarily as a result of lower compression package sales from a customer that has reduced their ordering rate significantly as compared to prior year quarter.

Gross profit decreased $11.9 million to $2.6 million, or 8.5% of sales, in the three months ended June 30, 2024, as compared to $14.5 million, or 25.8% of sales, in the three months ended June 30, 2023, primarily due to lower sales levels and significantly less favorable absorption of fixed costs.

Selling, general and administrative expenses decreased $0.4 million to $2.0 million, or 6.6% of sales, in the three months ended June 30, 2024, as compared to $2.4 million, or 4.3% of sales, in the three months ended June 30, 2023, as $0.4 million of information technology costs allocated from Corporate was more than offset by reduced spending levels in second quarter of 2024, consistent with current lower demand levels.

Operating profit decreased $11.5 million to $0.6 million, or 1.9% of sales, in the three months ended June 30, 2024, as compared to $12.1 million, or 21.6% of sales, in the three months ended June 30, 2023, primarily due to lower sales levels, which resulted in significantly less favorable absorption of fixed costs.

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

|  | Three months ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Corporate operating expenses | $8.6 | $8.8 |
| Non-cash stock compensation | 1.8 | 3.3 |
| Legacy expenses | 0.8 | (0.1) |
| Corporate expenses | $11.2 | $12.0 |

Corporate expenses decreased $0.8 million to $11.2 million for the three months ended June 30, 2024, from $12.0 million for the three months ended June 30, 2023, primarily due to a $1.5 million decrease in non-cash stock compensation due to timing and estimated attainment of existing awards, as well as a $0.2 million decrease in technology costs, as $2.1 million of technology costs allocated to our segments in the second quarter of 2024 was partially offset by $1.9 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 higher expenses primarily due to a $0.7 million environment settlement related to a legacy TriMas operation.

### Six Months Ended June 30, 2024 Compared with Six Months Ended June 30, 2023

Overall, net sales increased $19.0 million, or 4.2%, to $467.6 million for the six months ended June 30, 2024, as compared with $448.7 million in the six months ended June 30, 2023. Acquisition-related sales growth was $15.7 million, comprised of $2.8 million from our February 2023 acquisition of Aarts, and $12.9 million from our April 2023 acquisition of Weldmac. Organic sales, excluding the impact of currency exchange and acquisitions, increased $3.0 million, or 0.7%, as organic sales increases of 9.6% and 20.4% within our Packaging and Aerospace segments, respectively, driven by end market demand improvements were partially offset by a 39.6% sales decrease in our Specialty Products segment due to lower market demand. In addition, net sales increased by $0.3 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 22.8% for the six months ended June 30, 2024 and 2023. Gross profit margin increased primarily due to higher sales levels and related improved fixed cost absorption and the impact of purchase accounting inventory step-up amortization in the first half of 2023 that did not repeat within our Packaging and Aerospace segments. Additionally, gross margin increased due to reduced material availability constraints and a more favorable product sales mix within our Aerospace segment, and the year-over-year impact of realignment costs in the first half of 2023 within our Packaging segment. These improvements were offset by decreased sales and significantly less favorable absorption of fixed costs within our Specialty Products segment, and increased input costs, including expedited freight, in our Packaging segment. In addition, the prior year period benefited from a successful $2.6 million commercial settlement in our Packaging segment.

Operating profit margin (operating profit as a percentage of sales) approximated 6.5% and 6.7% for the six months ended June 30, 2024 and 2023, respectively. Operating profit increased $0.2 million, to $30.3 million, for the six months ended June 30, 2024, compared to $30.1 million for the six months ended June 30, 2023, primarily due to higher sales levels and related improved fixed cost absorption and the impact of purchase accounting inventory step-up amortization in the first half of 2023 that did not repeat within our Packaging and Aerospace segments. Additionally, operating profit margin increased due to reduced material availability constraints and a more favorable product sales mix within our Aerospace segment, and the year-over-year impact of realignment costs in the first half of 2023 within our Packaging segment. These improvements were partially offset by decreased sales and significantly less favorable absorption of fixed costs within our Specialty Products segment, and increased input costs, including expedited freight, and the year-over-year impact of a successful $2.6 million commercial settlement in the first half of 2023 in our Packaging segment which did not repeat. Operating profit further decreased as we incurred higher technology costs in preparation for upgrades in certain of our information technology applications.

Interest expense increased $2.5 million, to $10.2 million, for the six months ended June 30, 2024, as compared to $7.7 million for the six months ended June 30, 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) decreased $0.4 million to $0.3 million of expense for the six months ended June 30, 2024, as compared to $0.1 million of income for the six months ended June 30, 2023, primarily due to a decrease in foreign currency transaction gains, partially offset by a non-cash settlement charge for our Canadian defined benefit obligations and miscellaneous other income in the first half of 2023 that did not repeat.

The effective income tax rate for the six months ended June 30, 2024 and 2023 was 19.0% and 29.1%, respectively. We recorded tax expense of $3.8 million for the six months ended June 30, 2024, as compared to $6.5 million for the six months ended June 30, 2023. The effective tax rate for the six months ended June 30, 2024 was lower than in the prior year primarily due to the recognition of approximately $1.4 million of tax benefit related to foreign tax loss carryforwards and a decrease in losses in jurisdictions where we do not recognize a tax benefit.

Net income increased by $0.2 million, to $16.1 million for the six months ended June 30, 2024, compared to $15.9 million for the six months ended June 30, 2023. The increase was primarily the result of an increase in operating profit of $0.2 million and a $2.8 million decrease in income tax expense, partially offset by an increase in interest expense of $2.5 million and an increase in other expense of $0.4 million.

See below for a discussion of operating results by segment.

***Packaging.*** Net sales increased $25.4 million, or 10.9% (of which 9.6% was organic, 1.2% related to acquisitions, and 0.1% was foreign currency exchange), to $259.0 million in the six months ended June 30, 2024, as compared to $233.5 million in the six months ended June 30, 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 $17.3 million. Sales of products used for our Packaging segment's industrial applications increased by $6.2 million. These increases were partially offset by the decrease in sales of products used in food and beverage applications of $3.5 million, primarily due to reduced demand for dairy applications in North America and certain closure applications in Europe as a large customer begins to cut over to a new product design from our Packaging group. Net sales increased by $0.3 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 half 2023.

Gross profit increased $8.0 million to $64.4 million, or 24.9% of sales, in the six months ended June 30, 2024, as compared to $56.4 million, or 24.1% of sales, in the six months ended June 30, 2023, primarily due to higher sales levels and resulting improved fixed cost absorption, the favorable impact of prior year cost reduction efforts, and the impact of $3.3 million of realignment costs and $0.8 million of purchase accounting inventory step-up amortization in the first half of 2023 that did not repeat in the first half of 2024. The increase in gross profit was partially offset by a successful $2.6 million commercial settlement in the first half of 2023 that did not repeat, increased input costs, including expedited freight and labor, required to timely fulfill an abrupt increase in a customer's orders in the first half of 2024, and higher costs related to high demand for certain product lines.

Selling, general and administrative expenses increased $4.6 million to $29.2 million, or 11.3% of sales, in the six months ended June 30, 2024, as compared to $24.7 million, or 10.6% of sales, in the six months ended June 30, 2023, primarily due to $2.2 million higher information technology costs allocated from Corporate and higher employee-related costs.

Operating profit increased $3.5 million to $35.1 million, or 13.6% of sales, in the six months ended June 30, 2024, as compared to $31.7 million, or 13.6% of sales, in the six months ended June 30, 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, the impact of a successful commercial settlement in first half of 2023 that did not repeat, and increased input costs, including expedited freight to timely fulfill an abrupt increase in a customer's orders.

***Aerospace.*** Net sales for the six months ended June 30, 2024 increased $35.3 million, or 32.1% (of which 20.4% was organic and 11.7% related to acquisitions), to $145.1 million, as compared to $109.8 million in the six months ended June 30, 2023. Acquisition-related sales growth from our April 2023 acquisition of Weldmac was $12.9 million. Sales of our fasteners products increased by $15.8 million due to increases in aircraft build rates, improved production yield and commercial recoveries. Sales of our engineered components products increased by $6.6 million due to improved throughput.

Gross profit increased $15.4 million to $34.9 million, or 24.0% of sales, in the six months ended June 30, 2024, from $19.5 million, or 17.8% of sales, in the six months ended June 30, 2023. Gross profit increased primarily due to higher sales levels and resulting improved fixed cost absorption, reduced material availability constraints, a more favorable product sales mix, favorable commercial recoveries, and purchase accounting inventory step-up amortization of $0.8 million in the first half of 2023 that did not repeat.

Selling, general and administrative expenses increased $1.9 million to $17.3 million, or 11.9% of sales, in the six months ended June 30, 2024, as compared to $15.4 million, or 14.1% of sales, in the six months ended June 30, 2023, primarily due to higher employee-related costs, $1.3 million higher information technology costs allocated from Corporate, and higher ongoing selling, general and administrative costs associated with our acquisition of Weldmac. These increases were partially offset by lower legal costs and lower intangible asset amortization expense due to certain assets becoming fully amortized.

Operating profit increased $13.5 million to $17.6 million, or 12.1% of sales, in the six months ended June 30, 2024, as compared to $4.1 million, or 3.7% of sales, in the six months ended June 30, 2023, primarily due to the impact of higher sales levels, improved fixed cost absorption, reduced material availability production constraints, a more favorable product sales mix, commercial recoveries, and purchase accounting inventory step-up amortization in the first half of 2023 that did not repeat, partially offset by higher selling, general and administrative expenses.

***Specialty Products.*** Net sales for the six months ended June 30, 2024 decreased $41.7 million, or 39.6%, to $63.6 million, as compared to $105.3 million in the six months ended June 30, 2023. Sales of our cylinder products decreased $27.0 million, or 33.7%, due predominantly to lower sales of cylinders for HVAC applications as compared to the prior year where a high rate of orders were placed by customers concerned with global supply of cylinders for HVAC applications. We believe that customers are currently in an overstocked position of cylinders for HVAC applications, which should subside by the end of 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 $14.7 million, or 58.5%, primarily as a result of lower compression package sales from a customer that has reduced their ordering rate significantly as compared to the prior year.

Gross profit decreased $18.9 million to $7.5 million, or 11.8% of sales, in the six months ended June 30, 2024, as compared to $26.4 million, or 25.0% of sales, in the six months ended June 30, 2023, primarily due to lower sales levels, which resulted in significantly less favorable absorption of fixed costs.

Selling, general and administrative expenses decreased $0.2 million to $4.3 million, or 6.8% of sales, in the six months ended June 30, 2024, as compared to $4.5 million, or 4.3% of sales, in the six months ended June 30, 2023, as $0.9 million of higher information technology costs allocated from Corporate was more than offset by reduced spending levels in the first half of 2024, consistent with current lower demand levels.

Operating profit decreased $18.7 million to $3.2 million, or 5.0% of sales, in the six months ended June 30, 2024, as compared to $21.9 million, or 20.7% of sales, in the six months ended June 30, 2023, primarily due to lower sales levels, which resulted in significantly less favorable absorption of fixed costs.

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

|  | Six months ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Corporate operating expenses | $18.2 | $21.3 |
| Non-cash stock compensation | 6.4 | 6.2 |
| Legacy expenses | 1.0 | — |
| Corporate expenses | $25.6 | $27.5 |

Corporate expenses decreased $1.9 million to $25.6 million for the six months ended June 30, 2024, from $27.5 million for the six months ended June 30, 2023, primarily due to $3.3 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 $0.3 million as $4.4 million of technology costs allocated to our segments in the first six months of 2024 was mostly offset by $4.1 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 $0.9 million increase in employee related costs, a $0.2 million increase in non-cash stock compensation, and higher expenses primarily due to a $0.7 million environment settlement related to a legacy TriMas operation.

### Liquidity and Capital Resources

#### Cash Flows

Cash flows provided by operating activities were $14.7 million for the six months ended June 30, 2024, as compared to cash provided of $26.2 million for the six months ended June 30, 2023. Significant changes in cash flows provided by operating activities and the reasons for such changes were as follows:

- For the six months ended June 30, 2024, we generated $59.2 million in cash flows, based on net income of $16.1 million and after considering the effects of non-cash items related to depreciation, amortization, loss on dispositions of assets, changes in deferred income taxes, stock-based compensation, provision for losses on accounts receivables, and other operating activities. For the six months ended June 30, 2023, we generated $56.6 million in cash flows based on net income of $15.9 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 $24.7 million and $20.1 million for the six months ended June 30, 2024 and 2023, respectively. The increased use of cash for each of the six month periods is due primarily to the timing of sales and collection of cash related thereto within the periods. Days sales outstanding of receivables decreased one day through the six months ended June 30, 2024, and increased by four days through the six months ended June 30, 2023.
- We increased our investment in inventory by $18.3 million for the six months ended June 30, 2024, while we decreased our investment in inventory by $2.5 million for the six months ended June 30, 2023. Our days sales in inventory decreased by five days through the six months ended June 30, 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 six months ended June 30, 2023, primarily a result of moderating inventory levels with sales level.
- Increases in prepaid expenses and other assets resulted in a use of cash of $0.4 million for the six months ended June 30, 2024, and decreases in prepaid expenses and other assets resulted a source of cash of $1.2 million for the six months ended June 30, 2023. 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 $1.2 million and $14.1 million for the six months ended June 30, 2024 and 2023, respectively. Days accounts payable on hand decreased by seven days through the six months ended June 30, 2024 and 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 six months ended June 30, 2024 and 2023 was $23.9 million and $96.5 million, respectively. During the first six months of 2024, we invested $24.1 million in capital expenditures, as we continued our investment in growth, capacity and productivity-related capital projects. We also received net proceeds of $0.2 million from disposition of property and equipment. During the first six months of 2023, we invested $24.9 million in capital expenditures and paid $71.8 million, net of cash acquired, to acquire Aarts and Weldmac.

Net cash provided by financing activities was $9.3 million and $0.1 million for the six months ended June 30, 2024 and 2023, respectively. During the six months ended June 30, 2024, we received net proceeds of $31.3 million from borrowings on our revolving credit facilities, purchased $16.9 million of outstanding common stock, used a net cash amount of $1.6 million related to our stock compensation arrangements, paid dividends of $3.3 million, and paid $0.2 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 six months ended June 30, 2023, we received net proceeds of $22.2 million from borrowings on our revolving credit facilities, purchased $13.1 million of outstanding common stock, used a net cash amount of $2.6 million related to our stock compensation arrangements, paid dividends of $3.3 million, and paid $3.1 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.

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 six months ended June 30, 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 June 30, 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 June 30, 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 2.71 to 1.00 at June 30, 2024. Our permitted interest expense coverage ratio under the Credit Agreement is 3.00 to 1.00 as of June 30, 2024. Our actual interest expense coverage ratio was 8.92 to 1.00 at June 30, 2024. At June 30, 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 June 30, 2024 (dollars in thousands). We present Consolidated Bank EBITDA to show our performance under our financial covenants.

|  | Twelve Months Ended June 30, 2024 |
| --- | ---: |
| Net income | $40,510 |
| Bank stipulated adjustments: |  |
| Interest expense | 18,400 |
| Income tax expense | 7,470 |
| Depreciation and amortization | 56,280 |
| Non-cash compensation expense(1) | 9,910 |
| Other non-cash expenses or losses | 140 |
| Non-recurring expenses or costs(2) | 16,760 |
| Effects of purchase accounting adjustments | 1,590 |
| Business and asset dispositions | 320 |
| Currency gains and losses | 1,160 |
| Consolidated Bank EBITDA, as defined | $152,540 |

|  | June 30, 2024 |  |
| --- | ---: | --- |
| Total Indebtedness, as defined(3) | $412,650 |  |
| Consolidated Bank EBITDA, as defined | 152,540 |  |
| Total net leverage ratio | 2.71 | x |
| Covenant requirement | 4.00 | x |

|  | Twelve Months Ended June 30, 2024 |
| --- | ---: |
| Interest expense | $18,400 |
| Bank stipulated adjustments: |  |
| Interest income | (350) |
| Non-cash amounts attributable to amortization of financing costs | (940) |
| Total Consolidated Cash Interest Expense, as defined | $17,110 |

|  | June 30, 2024 |  |
| --- | ---: | --- |
| Consolidated Bank EBITDA, as defined | $152,540 |  |
| Total Consolidated Cash Interest Expense, as defined | 17,110 |  |
| Actual interest expense coverage ratio | 8.92 | 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 $1.9 million of finance leases as of June 30, 2024.

At June 30, 2024, we had $31.2 million outstanding under our revolving credit facility and had $262.8 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 June 30, 2024 and December 31, 2023, we had $197.5 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 six months of 2024 approximated $452.9 million, compared to $432.0 million during the first six 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 June 30, 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 June 30, 2024 is located outside of the U.S., given available funding under our revolving credit facility of $197.5 million at June 30, 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 June 30, 2024, the 1-Month SOFR approximated 5.3%, the 1-Month EURIBOR approximated 3.6%, the SONIA approximated 5.2%, and the Prime rate approximated 8.5%. Based on our variable rate-based borrowings outstanding at June 30, 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 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. In the six months ended June 30, 2024, we purchased 671,937 shares of our outstanding common stock for an aggregate purchase price of $16.9 million. Since the initial authorization through June 30, 2024, we have purchased 6,467,434 shares of our outstanding common stock for an aggregate purchase price of $179.9 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 June 30, 2024, we were party to foreign exchange forward and swap contracts to hedge changes in foreign currency exchange rates with notional amounts of $139.5 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 10, "*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 9, *"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 June 28, 2024, 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 businesses and an imbalance of high demand against a lack of material and skilled labor availability in our aerospace businesses. While we believe supply-related production challenges are largely behind us in the Aerospace segment, we have further opportunity to improve our production throughput, and hence conversion, within our Packaging segment as we progress through 2024. Within our Specialty Products segment, we currently are working through a significant demand trough as compared to the prior year period where we enjoyed exceptional sales rates and commercial strength. Within Specialty Products, we believe sales rates are firming up, and therefore, we anticipate sequential improvement in operating profit as we move through the year based on structural costs saving actions we are implementing. We will continue to monitor trends in demand changes and adjust costs and investments accordingly.

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 modest 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 in 2024. 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 June 30, 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, 649 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 9, "*Long-term Debt*," and Note 10, "*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, 1,703 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 June 30, 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 June 30, 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 June 30, 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 Jul 30, 2024.
Source: SEC EDGAR, the filing index for accession 0000842633-24-000072. Last ingested by Listed: Oct 29, 2026, 09:45 ET. No prices; not investment advice.