TriMas (TRS) - 2021 Q1 - Quarterly Report

Forward-Looking Statements Statements about future events are subject to risks and uncertainties, and the company does not commit to updating them - Forward-looking statements are identified by words such as "may," "could," "should," "estimate," "project," "forecast," "intend," "expect," "anticipate," "believe," "target," or "plan"[10] - These statements are subject to numerous risks and uncertainties, including the severity and duration of the COVID-19 pandemic, general economic and currency conditions, material and energy costs, competitive factors, and the ability to realize business strategies[11] - Readers are cautioned not to place undue reliance on these statements, which speak only as of the report date, and the company does not undertake to update them except as required by law[12] PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements TriMas Corporation's unaudited consolidated financial statements for Q1 2021 and comparative periods, including balance sheet, income statement, cash flows, and equity, are presented with detailed notes Consolidated Balance Sheet Presents the company's financial position, including assets, liabilities, and equity, as of March 31, 2021, and December 31, 2020 | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | Change (vs Dec 31, 2020) (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------------------- | | Total Assets | $1,543,300 | $1,193,880 | +$349,420 | | Cash and cash equivalents | $421,140 | $73,950 | +$347,190 | | Total Current Assets | $718,920 | $351,830 | +$367,090 | | Total Liabilities | $947,330 | $609,630 | +$337,700 | | Current portion, long-term debt | $300,000 | $— | +$300,000 | | Long-term debt, net | $390,190 | $346,290 | +$43,900 | | Total Shareholders' Equity | $595,970 | $584,250 | +$11,720 | Consolidated Statement of Operations Details the company's revenues, expenses, and net income for the three months ended March 31, 2021, and 2020 | Metric | Three months ended March 31, 2021 (in thousands) | Three months ended March 31, 2020 (in thousands) | Change (YoY) (in thousands) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Net sales | $206,730 | $182,790 | +$23,940 | | Cost of sales | $(155,400) | $(136,420) | -$18,980 | | Gross profit | $51,330 | $46,370 | +$4,960 | | Selling, general and administrative expenses | $(30,220) | $(26,540) | -$3,680 | | Operating profit | $21,110 | $19,830 | +$1,280 | | Income before income tax expense | $16,430 | $16,170 | +$260 | | Net income | $13,060 | $13,120 | -$60 | | Basic earnings per share | $0.30 | $0.30 | $0.00 | | Diluted earnings per share | $0.30 | $0.30 | $0.00 | Consolidated Statement of Comprehensive Income Reports net income and other comprehensive income (loss) components for the three months ended March 31, 2021, and 2020 | Metric | Three months ended March 31, 2021 (in thousands) | Three months ended March 31, 2020 (in thousands) | Change (YoY) (in thousands) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Net income | $13,060 | $13,120 | -$60 | | Total other comprehensive income (loss) | $630 | $(3,680) | +$4,310 | | Total comprehensive income | $13,690 | $9,440 | +$4,250 | Consolidated Statement of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2021, and 2020 | Metric | Three months ended March 31, 2021 (in thousands) | Three months ended March 31, 2020 (in thousands) | Change (YoY) (in thousands) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Net cash provided by operating activities | $15,740 | $3,400 | +$12,340 | | Net cash used for investing activities | $(9,370) | $(86,320) | +$76,950 | | Net cash provided by financing activities | $340,820 | $116,560 | +$224,260 | | Cash and cash equivalents at end of period | $421,140 | $206,110 | +$215,030 | Consolidated Statement of Shareholders' Equity Details changes in shareholders' equity, including net income, other comprehensive income, and stock transactions, for the three months ended March 31, 2021, and 2020 | Metric | Balance, Dec 31, 2020 (in thousands) | Net Income (in thousands) | Other Comprehensive Income (in thousands) | Purchase of Common Stock (in thousands) | Balance, Mar 31, 2021 (in thousands) | | :-------------------------------- | :----------------------------------- | :-------------------------------- | :---------------------------------------- | :-------------------------------------- | :----------------------------------- | | Total Shareholders' Equity | $584,250 | $13,060 | $630 | $(2,640) | $595,970 | | Metric | Balance, Dec 31, 2019 (in thousands) | Net Income (in thousands) | Other Comprehensive Loss (in thousands) | Purchase of Common Stock (in thousands) | Balance, Mar 31, 2020 (in thousands) | | :-------------------------------- | :----------------------------------- | :-------------------------------- | :---------------------------------------- | :-------------------------------------- | :----------------------------------- | | Total Shareholders' Equity | $697,480 | $13,120 | $(3,680) | $(31,570) | $675,460 | Notes to Consolidated Financial Statements Provides detailed explanations and additional information supporting the consolidated financial statements 1. Basis of Presentation Describes the company's business and the accounting principles and assumptions used in preparing the financial statements - TriMas Corporation designs, engineers, and manufactures innovative products for customers primarily in the consumer products, aerospace & defense, and industrial markets[30] - The financial statements are unaudited and include management's estimates and assumptions, which may be affected by risks and uncertainties, including the ongoing COVID-19 pandemic[31] 2. New Accounting Pronouncements Discusses the adoption and impact of new accounting standards on the company's financial statements - The Company adopted ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," on January 1, 2021[33] - The adoption of ASU 2019-12 did not have a material impact on the Company's consolidated financial statements[33] 3. Revenue Provides a breakdown of net sales by customer market segments and their respective revenue streams | Customer Markets | Three months ended March 31, 2021 (in thousands) | Three months ended March 31, 2020 (in thousands) | Change (YoY) (in thousands) | | :----------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Consumer Products | $105,120 | $76,270 | +$28,850 | | Aerospace & Defense | $44,610 | $48,920 | -$4,310 | | Industrial | $57,000 | $57,600 | -$600 | | Total net sales | $206,730 | $182,790 | +$23,940 | - The Packaging segment earns revenues from consumer products and industrial markets, the Aerospace segment from aerospace & defense, and the Specialty Products segment from industrial markets[34] 4. Realignment Actions Details the strategic realignment initiatives undertaken by the company, including facility closures and consolidation, and associated pre-tax charges - In Q1 2021, the Company executed realignment actions, including closing a Packaging segment manufacturing facility and consolidating Aerospace segment activities[36] - Pre-tax realignment charges of $4.1 million were recorded, comprising approximately $1.5 million for facility consolidation and $2.6 million for employee separation costs[36] 5. Acquisitions Outlines recent acquisitions, including Affaba & Ferrari, Rapak, and RSA Engineered Products, and their strategic significance - On December 15, 2020, the Company acquired Affaba & Ferrari Srl for approximately $98.4 million, specializing in precision caps and closures for food & beverage and industrial products[37] - On April 17, 2020, the Company acquired the Rapak® brand for approximately $11.4 million, including bag-in-box product lines and assets[38] - On February 27, 2020, the Company acquired RSA Engineered Products for approximately $83.7 million, a manufacturer of highly-engineered ducting, connectors, and related products for aerospace and defense[39] 6. Cash and Cash Equivalents Presents the composition of cash and cash equivalents, distinguishing between unrestricted and restricted amounts | Component | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | Change (vs Dec 31, 2020) (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------------------- | | Cash and cash equivalents - unrestricted | $409,980 | $62,790 | +$347,190 | | Cash - restricted | $11,160 | $11,160 | $0 | | Total cash and cash equivalents | $421,140 | $73,950 | +$347,190 | - Restricted cash is placed on deposit as collateral for the Company's outstanding letters of credit[40] 7. Goodwill and Other Intangible Assets Provides details on goodwill by segment and the amortization of other intangible assets, including customer relationships and technology | Segment | Balance, Dec 31, 2020 (in thousands) | Foreign currency translation and other (in thousands) | Balance, Mar 31, 2021 (in thousands) | | :-------- | :----------------------------------- | :---------------------------------------------------- | :----------------------------------- | | Packaging | $234,560 | $(3,360) | $231,200 | | Aerospace | $62,850 | $— | $62,850 | | Specialty Products | $6,560 | $— | $6,560 | | Total | $303,970 | $(3,360) | $300,610 | - The Company amortizes other intangible assets over periods ranging from one to 30 years, including customer relationships and technology[42] | Amortization Expense | Three months ended March 31, 2021 (in thousands) | Three months ended March 31, 2020 (in thousands) | | :------------------------------------------------- | :------------------------------------- | :------------------------------------- | | Technology and other, included in cost of sales | $950 | $1,210 | | Customer relationships, included in SG&A | $4,440 | $3,640 | | Total amortization expense | $5,390 | $4,850 | 8. Inventories Breaks down inventory components, including finished goods, work in process, and raw materials | Component | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | Change (vs Dec 31, 2020) (in thousands) | | :---------------- | :----------------------------- | :----------------------------- | :-------------------------------- | | Finished goods | $78,390 | $78,010 | +$380 | | Work in process | $31,500 | $29,680 | +$1,820 | | Raw materials | $41,930 | $41,690 | +$240 | | Total inventories | $151,820 | $149,380 | +$2,440 | 9. Property and Equipment, Net Details the composition of property and equipment, net of accumulated depreciation, and associated depreciation expenses | Component | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | Change (vs Dec 31, 2020) (in thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | :-------------------------------- | | Land and land improvements | $19,810 | $20,040 | -$230 | | Buildings | $91,080 | $91,970 | -$890 | | Machinery and equipment | $389,390 | $384,010 | +$5,380 | | Less: Accumulated depreciation | $249,130 | $242,960 | +$6,170 | | Property and equipment, net | $251,150 | $253,060 | -$1,910 | | Depreciation Expense | Three months ended March 31, 2021 (in thousands) | Three months ended March 31, 2020 (in thousands) | | :------------------------------------------------- | :------------------------------------- | :------------------------------------- | | Depreciation expense, included in cost of sales | $7,560 | $6,360 | | Depreciation expense, included in SG&A | $290 | $300 | | Total depreciation expense | $7,850 | $6,660 | 10. Long-term Debt Describes the company's long-term debt instruments, including senior notes and credit agreements, and recent refinancing activities | Debt Instrument | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | Change (vs Dec 31, 2020) (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------------------- | | 4.125% Senior Notes due April 2029 | $400,000 | $— | +$400,000 | | 4.875% Senior Notes due October 2025 | $300,000 | $300,000 | $0 | | Credit Agreement | $— | $50,450 | -$50,450 | | Debt issuance costs | $(9,810) | $(4,160) | -$5,650 | | Long-term debt, net | $390,190 | $346,290 | +$43,900 | - In March 2021, the Company issued $400.0 million of 4.125% senior notes due April 15, 2029, using proceeds to pay offering fees, amend its credit agreement, and redeem its outstanding 2025 Senior Notes[47] - The $300.0 million principal amount of 4.875% Senior Notes due October 2025 was redeemed subsequent to quarter end, on April 15, 2021[52] 11. Derivative Instruments Explains the use of derivative instruments, such as cross-currency swaps and foreign currency exchange forward contracts, to manage market risks - The Company uses cross-currency swap contracts to hedge its net investment in Euro-denominated assets, synthetically converting a portion of its U.S. dollar-based long-term debt into Euro-denominated debt[62] - As of March 31, 2021, cross-currency swap agreements totaled $200.0 million notional amount, declining to $25.0 million over various contract periods ending between October 2023 and April 2027[63] - The Company also uses foreign currency exchange forward contracts (notional amounts of approximately $132.7 million as of March 31, 2021) to mitigate risk from currency fluctuations impacting receivables, payables, and intercompany transactions[66] | Derivative Type | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | | Cross-currency swaps (Asset) | $190 | $— | | Cross-currency swaps (Liability) | $— | $(5,000) | | Foreign exchange contracts (Asset) | $330 | $140 | 12. Leases Presents lease cost components, weighted-average remaining lease term, and discount rate for the company's operating leases | Lease Cost Component | Three months ended March 31, 2021 (in thousands) | Three months ended March 31, 2020 (in thousands) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | | Operating lease cost | $2,140 | $1,650 | | Short-term, variable and other lease costs | $430 | $310 | | Total lease cost | $2,570 | $1,960 | - The weighted-average remaining lease term of the Company's operating leases as of March 31, 2021, is approximately 6.6 years[71] - The weighted-average discount rate as of March 31, 2021, is approximately 4.3%[71] 13. Other long-term liabilities Details the composition of other long-term liabilities, including non-current asbestos-related liabilities | Component | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | Change (vs Dec 31, 2020) (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------------------- | | Non-current asbestos-related liabilities | $25,420 | $26,170 | -$750 | | Other long-term liabilities | $35,870 | $43,520 | -$7,650 | | Total other long-term liabilities | $61,290 | $69,690 | -$8,400 | 14. Commitments and Contingencies Discusses legal proceedings, particularly asbestos-related claims, and the associated liabilities and defense costs - As of March 31, 2021, the Company was a party to 347 pending cases involving 4,676 claimants primarily alleging personal injury from asbestos exposure[75] | Metric | Three Months Ended March 31, 2021 | Fiscal Year Ended December 31, 2020 | | :-------------------------------- | :---------------------------------- | :---------------------------------- | | Claims pending at beginning of period | 4,655 | 4,759 | | Claims filed during period | 62 | 219 | | Claims dismissed during period | 35 | 287 | | Claims settled during period | 6 | 36 | | Claims pending at end of period | 4,676 | 4,655 | | Average settlement amount per claim | $37,917 | $18,314 | | Total defense costs during period | $530,000 | $2,130,000 | - In Q2 2020, the Company changed its accounting method for asbestos-related defense costs to accrue for all future costs (known and unknown), recording a $23.4 million charge to increase the liability estimate to $31.5 million (low-end of actuarial range)[80][81] - As of March 31, 2021, the total asbestos-related liability is $27.9 million[81] 15. Segment Information Provides financial performance data, including net sales and operating profit, for the company's Packaging, Aerospace, and Specialty Products segments - TriMas reports its operations in three segments: Packaging, Aerospace, and Specialty Products[86] | Segment | Net Sales (Q1 2021, in thousands) | Net Sales (Q1 2020, in thousands) | Operating Profit (Q1 2021, in thousands) | Operating Profit (Q1 2020, in thousands) | | :----------------- | :-------------------------------- | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Packaging | $132,090 | $100,050 | $21,300 | $18,280 | | Aerospace | $44,610 | $48,920 | $4,500 | $5,080 | | Specialty Products | $30,030 | $33,820 | $4,520 | $3,430 | | Corporate | N/A | N/A | $(9,210) | $(6,960) | | Total | $206,730 | $182,790 | $21,110 | $19,830 | 16. Equity Awards Details stock-based compensation expense, restricted stock units (RSUs) awarded, and unrecognized compensation costs - No stock-based compensation expense related to stock options was recognized during the three months ended March 31, 2021 and 2020[89] - The Company awarded 234,021 Restricted Stock Units (RSUs) in Q1 2021, including service-based and performance-based awards[90][92] - Stock-based compensation expense related to RSUs was approximately $2.4 million in Q1 2021, up from $1.9 million in Q1 2020[93] - As of March 31, 2021, approximately $12.5 million of unrecognized compensation cost related to unvested RSUs is expected to be recorded over a weighted average period of 2.4 years[92] 17. Earnings per Share Presents basic and diluted earnings per share calculations and information on common stock repurchases | Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Weighted average common shares—basic | 43,185,007 | 44,201,053 | | Dilutive effect of restricted stock units | 400,685 | 217,074 | | Dilutive effect of stock options | 49,184 | 52,345 | | Weighted average common shares—diluted | 43,634,876 | 44,470,472 | - Basic and diluted earnings per share remained flat at $0.30 for both the three months ended March 31, 2021 and 2020[19] - The Company purchased 82,171 shares of its outstanding common stock for approximately $2.6 million, with approximately $159.1 million remaining under the repurchase authorization[94] 18. Defined Benefit Plans Outlines the components of net periodic benefit cost and company contributions to defined benefit pension plans | Component | Three months ended March 31, 2021 (in thousands) | Three months ended March 31, 2020 (in thousands) | | :------------------------ | :------------------------------------- | :------------------------------------- | | Service costs | $330 | $320 | | Interest costs | $200 | $240 | | Expected return on plan assets | $(390) | $(370) | | Amortization of net loss | $230 | $220 | | Net periodic benefit cost | $370 | $410 | - The Company contributed approximately $1.5 million to its defined benefit pension plans during Q1 2021 and expects to contribute approximately $3.6 million for the full year 2021[98] 19. Other Comprehensive Income (Loss) Details the components of other comprehensive income (loss), including defined benefit plans, derivative instruments, and foreign currency translation | Component | Balance, Dec 31, 2020 (in thousands) | Net unrealized gains (losses) arising during the period (in thousands) | Net realized losses reclassified to net income (in thousands) | Net current-period other comprehensive income (loss) (in thousands) | Balance, Mar 31, 2021 (in thousands) | | :-------------------------- | :----------------------------------- | :----------------------------------------------------------------- | :---------------------------------------------------------- | :---------------------------------------------------------------- | :----------------------------------- | | Defined Benefit Plans | $(8,620) | $— | $(150) | $150 | $(8,470) | | Derivative Instruments | $(3,580) | $3,900 | $— | $3,900 | $320 | | Foreign Currency Translation | $6,580 | $(3,420) | $— | $(3,420) | $3,160 | | Total | $(5,620) | $480 | $(150) | $630 | $(4,990) | | Component | Balance, Dec 31, 2019 (in thousands) | Net unrealized gains (losses) arising during the period (in thousands) | Net realized losses reclassified to net income (in thousands) | Net current-period other comprehensive income (loss) (in thousands) | Balance, Mar 31, 2020 (in thousands) | | :-------------------------- | :----------------------------------- | :----------------------------------------------------------------- | :---------------------------------------------------------- | :---------------------------------------------------------------- | :----------------------------------- | | Defined Benefit Plans | $(9,930) | $— | $(150) | $150 | $(9,780) | | Derivative Instruments | $4,230 | $4,430 | $— | $4,430 | $8,660 | | Foreign Currency Translation | $(300) | $(8,260) | $— | $(8,260) | $(8,560) | | Total | $(6,000) | $(3,830) | $(150) | $(3,680) | $(9,680) | 20. Subsequent Events Reports significant events occurring after the balance sheet date, such as the redemption of outstanding senior notes - On April 15, 2021, the Company completed the redemption of all its outstanding 2025 Senior Notes[102] - The redemption involved a cash payment of $314.6 million, including a $7.3 million redemption premium and $7.3 million of accrued interest[102] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's perspective on TriMas Corporation's financial condition and results for Q1 2021, covering key factors, risks, segment performance, liquidity, and outlook Introduction Provides an overview of TriMas Corporation as a diversified manufacturer and its business characteristics across key segments - TriMas is a diversified manufacturer and provider of products for customers primarily in the consumer products, aerospace & defense, and industrial markets[105] - The company's businesses share characteristics such as well-recognized brands, innovative product technologies, established distribution networks, relatively low ongoing capital investment requirements, strong cash flow conversion, and long-term growth opportunities[105] - Business activity is reported in three segments: Packaging, Aerospace, and Specialty Products[105] Key Factors Affecting Our Reported Results Discusses primary drivers of financial performance, including sales growth, acquisitions, raw material costs, and realignment actions - Overall net sales increased approximately $23.9 million (13.1%) in Q1 2021 compared to Q1 2020, primarily due to robust organic sales growth and acquisitions in the Packaging segment, particularly for products used to fight the spread of germs[110] - These increases were partially offset by sales declines in the Aerospace and Specialty Products segments, mainly due to the effects of the COVID-19 pandemic[110] - Significant factors affecting results included the refinancing of long-term debt, recent acquisitions (Affaba & Ferrari, Rapak, RSA), increases in raw material costs, and Q1 2021 realignment actions[111] - Increased material costs, primarily for resin-based raw materials, negatively impacted operating profit by approximately $2.0 million in Q1 2021, mainly in the Packaging segment, due to a lag in price recovery[116] - Pre-tax realignment charges of approximately $4.1 million were recorded in Q1 2021, including facility consolidation costs ($1.5 million) and employee separation costs ($2.6 million)[117] Additional Key Risks that May Affect Our Reported Results Identifies significant risks, including the ongoing impact of the COVID-19 pandemic, capital structure, and operational challenges - The COVID-19 pandemic is expected to continue impacting the company, with robust demand for Packaging's germ-fighting products, uncertain industrial demand, and severe dislocation in the aerospace market[118] - The company's capital structure is in a solid position, with ample cash and available liquidity to meet debt service and other obligations, especially after the Q1 2021 debt refinancing[120] - Other critical factors include the ability to create organic growth, successfully integrate acquisitions, manage cost structure efficiently, and mitigate raw material price volatility[122][124] Segment Information and Supplemental Analysis Presents detailed financial performance data for the Packaging, Aerospace, and Specialty Products segments | Segment | Net Sales (Q1 2021, in thousands) | Net Sales (Q1 2020, in thousands) | Operating Profit (Q1 2021, in thousands) | Operating Profit (Q1 2020, in thousands) | | :----------------- | :-------------------------------- | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Packaging | $132,090 | $100,050 | $21,300 | $18,280 | | Aerospace | $44,610 | $48,920 | $4,500 | $5,080 | | Specialty Products | $30,030 | $33,820 | $4,520 | $3,430 | | Corporate | N/A | N/A | $(9,210) | $(6,960) | | Total | $206,730 | $182,790 | $21,110 | $19,830 | | Segment | Gross Profit (Q1 2021, in thousands) | Gross Profit (Q1 2020, in thousands) | SG&A (Q1 2021, in thousands) | SG&A (Q1 2020, in thousands) | | :----------------- | :-------------------------------- | :-------------------------------- | :----------------------------- | :----------------------------- | | Packaging | $33,870 | $28,680 | $12,570 | $10,400 | | Aerospace | $10,970 | $11,910 | $6,470 | $6,830 | | Specialty Products | $6,490 | $5,780 | $1,970 | $2,350 | | Corporate | N/A | N/A | $9,210 | $6,960 | | Total | $51,330 | $46,370 | $30,220 | $26,540 | Results of Operations Analyzes the company's overall financial performance, including net sales, gross profit, operating profit, and net income Overall Summarizes the company's consolidated financial performance, highlighting changes in net sales, profit margins, and net income - Net sales increased by $23.9 million (13.1%) to $206.7 million, with acquisitions contributing $17.7 million and organic sales increasing $3.5 million, primarily in the Packaging segment[132] - Gross profit margin decreased from 25.4% to 24.8%, impacted by approximately $2.0 million in higher material costs and $1.8 million in realignment costs[133] - Operating profit increased by $1.3 million to $21.1 million, but net income remained relatively flat at $13.1 million due to higher other expenses and income tax expense[134][139] - The effective income tax rate for Q1 2021 was 20.5%, up from 18.9% in Q1 2020, primarily due to higher non-deductible expenses[138] Packaging Analyzes the Packaging segment's sales growth, driven by acquisitions and increased demand for personal hygiene products, and its operating profit - Net sales increased approximately $32.0 million (32.0%) to $132.1 million[141] - Acquisition-related sales growth was approximately $13.4 million, and organic sales of dispensing products for personal hygiene increased by approximately $8.8 million due to COVID-19 demand[141] - Operating profit increased by $3.0 million to $21.3 million, but operating profit margin decreased from 18.3% to 16.1% due to higher material costs, realignment charges, and purchase accounting adjustments[142][144] Aerospace Discusses the Aerospace segment's sales decline due to reduced air travel, partially offset by acquisitions, and its operating profit - Net sales decreased approximately $4.3 million (8.8%) to $44.6 million, despite a $4.3 million contribution from the RSA acquisition[145] - Sales of fastener and engineered components declined due to lower demand from reduced air travel caused by the COVID-19 pandemic[145] - Operating profit decreased by $0.6 million to $4.5 million, impacted by lower sales and realignment charges[148] - Gross profit margin improved from 24.3% to 24.6% due to a more favorable product sales mix and the non-recurrence of a prior year purchase accounting charge[146] Specialty Products Examines the Specialty Products segment's sales decrease due to lower demand, alongside an improvement in operating profit and margin - Net sales decreased approximately $3.8 million (11.2%) to $30.0 million, primarily due to lower demand for steel cylinders and reduced oil-field activity[149] - Operating profit increased by $1.1 million to $4.5 million, with operating profit margin improving from 10.1% to 15.1%[152] - Profit improvement was driven by a favorable product sales mix, higher profit conversion from prior fixed cost reductions, and lower selling, general and administrative expenses[150][151][152] Corporate Details the increase in corporate expenses, primarily due to realignment charges related to legal group reorganization | Component | Three months ended March 31, 2021 (in millions) | Three months ended March 31, 2020 (in millions) | | :------------------------ | :------------------------------------ | :------------------------------------ | | Corporate operating expenses | $6.4 | $5.4 | | Non-cash stock compensation | $2.4 | $1.9 | | Legacy expenses | $0.4 | $(0.3) | | Corporate expenses | $9.2 | $7.0 | - Corporate expenses increased by approximately $2.3 million to $9.2 million, primarily due to realignment charges related to the corporate office legal group reorganization[152] Liquidity and Capital Resources Assesses the company's cash flows, debt structure, and overall capital resources to meet financial obligations and support operations Cash Flows Provides an overview of cash generated from operating, investing, and financing activities, and changes in cash and cash equivalents - Net cash provided by operating activities increased to approximately $15.7 million in Q1 2021, compared to $3.4 million in Q1 2020[154] - Net cash used for investing activities decreased significantly to approximately $9.4 million in Q1 2021 from $86.3 million in Q1 2020, primarily due to the absence of large acquisitions[154] - Net cash provided by financing activities increased to approximately $340.8 million in Q1 2021 from $116.6 million in Q1 2020, mainly driven by the issuance of $400.0 million in senior notes[155] - In Q1 2021, the Company made net repayments of approximately $48.6 million on its revolving credit facilities and purchased approximately $2.6 million of common stock[155] Our Debt and Other Commitments Details the company's debt instruments, compliance with financial covenants, and available liquidity - In March 2021, the Company issued $400.0 million of 4.125% Senior Notes due April 2029 and amended its Credit Agreement, extending its maturity date[156][160] - The 2025 Senior Notes were redeemed subsequent to quarter end, on April 15, 2021[156] - As of March 31, 2021, the Company was in compliance with its financial covenants, with a total net leverage ratio of 1.77x (covenant 4.00x) and an interest expense coverage ratio of 12.78x (covenant 3.00x)[163][175] - At March 31, 2021, the Company had no amounts outstanding under its revolving credit facility and had approximately $300.0 million potentially available[168] Market Risk Discusses the company's exposure to foreign currency exchange rates and interest rate fluctuations, and its use of derivative instruments for hedging - The Company is exposed to market risk due to fluctuations in foreign currency exchange rates and interest rate changes on its long-term debt[177][179] - Derivative financial instruments, such as foreign exchange forward and cross-currency swap contracts, are used to manage currency risks[178] - As of March 31, 2021, the Company had foreign exchange forward and swap contracts with notional amounts of approximately $132.7 million[178] Common Stock Provides information on TriMas common stock listing and recent share repurchase activities - TriMas common stock is listed on the NASDAQ Global Select Market under the symbol "TRS"[180] - In Q1 2021, the Company purchased 82,171 shares of its common stock for approximately $2.6 million, with approximately $159.1 million remaining under the repurchase authorization[176] Credit Rating Presents the company's credit ratings from Moody's and Standard & Poor's, and potential impacts of rating changes - Moody's assigned a Ba3 rating to the 2029 Senior Notes and affirmed a Ba2 Corporate Family Rating with a stable outlook[180] - Standard & Poor's assigned a BB- rating to the 2029 Senior Notes and affirmed a BB corporate credit rating with a stable outlook[180] - A decline in credit ratings could limit access to financial markets, increase borrowing costs, and negatively impact the perception of the company[180] Outlook Outlines the company's expectations for future demand, strategic plans for growth and efficiency, and capital structure strength - The Company expects a continued period of uncertainty regarding demand levels across its markets due to the COVID-19 pandemic[182] - Plans include mitigating lower volumes in challenged markets through realignment actions and leveraging the TriMas Business Model for growth, cost efficiency, and supply chain optimization[182][185] - The capital structure remains strong, with sufficient liquidity to meet obligations, following the 2029 Senior Notes issuance and Credit Agreement amendment[184] Impact of New Accounting Standards Refers to specific notes for details on the effects of recently adopted accounting standards - Refer to Note 2, "New Accounting Pronouncements," for details on the impact of new accounting standards[186] Critical Accounting Policies Highlights the company's accounting policies requiring significant management judgment and confirms no material changes in Q1 2021 - The Company's accounting policies require significant management judgment in selecting appropriate assumptions for financial estimates[187] - There were no material changes to the critical accounting policies disclosed in the 2020 Annual Report on Form 10-K during Q1 2021[188] Item 3. Quantitative and Qualitative Disclosures about Market Risk Refers to other sections for detailed disclosures on market risks, including foreign currency and interest rate exposures, and management strategies - The Company is exposed to market risk associated with fluctuations in foreign currency exchange rates and interest risk related to long-term debt[190] - Further details on primary market risks, objectives, and management strategies are provided in Part I, Item 2 and Notes 10 and 11[190] Item 4. Controls and Procedures Management's assessment of the effectiveness of disclosure controls and procedures, confirming their efficacy and no material changes to internal controls - Management, with the participation of the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of March 31, 2021[192] - No material changes in internal control over financial reporting occurred during Q1 2021, despite some employees working from home due to the COVID-19 pandemic[193] PART II. OTHER INFORMATION Item 1. Legal Proceedings Refers to Note 14 for detailed information regarding the company's legal proceedings - Refer to Note 14, "Commitments and Contingencies," included in Part I, Item 1, "Notes to Unaudited Consolidated Financial Statements," for information on legal proceedings[196] Item 1A. Risk Factors Refers to the 2020 Annual Report on Form 10-K for a comprehensive discussion of risk factors, with no significant changes reported - Refer to Part 1, Item 1A, "Risk Factors," in the 2020 Annual Report on Form 10-K for factors that could materially affect the business[197] - There have been no significant changes in the Company's risk factors as disclosed in its 2020 Annual Report on Form 10-K[197] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details the company's common stock repurchases under its publicly announced program and the remaining authorization | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program | | :-------------------------------- | :----------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | :-------------------------------------------------------------------------- | | January 1, 2021 to January 31, 2021 | — | $— | — | $161,705,818 | | February 1, 2021 to February 28, 2021 | — | $— | — | $161,705,818 | | March 1, 2021 to March 31, 2021 | 82,171 | $32.10 | 82,171 | $159,068,327 | | Total | 82,171 | $32.10 | 82,171 | $159,068,327 | - In March 2020, the Board of Directors authorized an increase in common stock repurchases up to $250 million in aggregate[202] Item 3. Defaults Upon Senior Securities This item is not applicable to the company's current financial status - Not applicable[199] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[200] Item 5. Other Information This item is not applicable to the company's current disclosures - Not applicable[201] Item 6. Exhibits Lists all supporting documents filed with the Form 10-Q, including corporate governance, debt agreements, and certifications - Exhibits include the Fourth Amended and Restated Certificate of Incorporation and Third Amended and Restated By-laws[203] - The Indenture for the 2029 Senior Notes and the Second Replacement Revolving Facility Amendment are listed[203] - Forms of Performance Stock Units Agreement and Restricted Stock Units Agreements are included[203] - Certifications pursuant to 18 U.S.C. Sections 1350 and 906 of the Sarbanes-Oxley Act of 2002 are provided[203] Signatures Confirms the official signing of the report by the Chief Financial Officer - The report was signed by Robert J. Zalupski, Chief Financial Officer of TriMas Corporation[208] - The signature date is April 29, 2021[208]