What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-02-25 compared with 2020-02-27 · 522 added, 444 removed, 703 unchanged (58% of the section changed)

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of TriMas Corporation and subsidiaries (the "Company") as of December 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, cash flows, and shareholders’ equity, for each of the three years in the period ended December 31, 2019, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").

We have audited the accompanying consolidated balance sheets of TriMas Corporation and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, cash flows, and shareholders’ equity, for each of the three years in the period ended December 31, 2020, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill - Aerospace Reporting Unit - Refer to Notes 3 and 7 to the financial statements.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Asbestos— Refer to Notes 3 and 17 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill impairment involves a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

The qualitative assessment involves significant use of management's judgment and assumptions related to macroeconomic conditions, industry and market considerations, overall financial performance, entity and reporting unit specific events, and capital markets pricing, as well as legal, regulatory, and contractual factors.

The Company also considers recent valuations of its reporting units, including the difference between the most recent fair value estimate and the carrying amount.

Changes in these assumptions could have a significant effect on management’s conclusion about whether a quantitative goodwill impairment test is necessary to estimate the fair value of its reporting units.

The Company’s goodwill balance was $335 million as of December 31, 2019, of which $134 million was allocated to the Aerospace Reporting Unit (“Aerospace”).

The Company concluded there were no indications that the fair value of any reporting unit was less than its carrying amount, therefore a quantitative assessment was not performed and no impairment was recognized.

Given the nature of the Aerospace operations, the assumptions used in the qualitative assessment, and the difference between the most recent fair value estimate and the carrying amount of Aerospace, auditing management’s judgments related to the impact of macroeconomic conditions, overall financial performance for Aerospace, and capital markets pricing involved especially subjective judgment.

During the second quarter of 2020, the Company elected to change its method of accounting for asbestos-related defense costs from accruing for probable and reasonably estimable defense costs associated with known claims expected to settle to accrue for all future defense costs for both known and unknown claims.

The Company believes this change is preferable, and this accounting change has been reflected as a change in accounting estimate effected by a change in accounting principle.

Following the change in accounting estimate, the Company’s liability for asbestos-related claims will be based on a study from the Company’s third-party actuary, the Company's review of the study, as well as the Company’s own review of asbestos claims and claim resolution activity.

The study from the Company’s actuary, based on data as of December 31, 2019, provided for a range of possible future liability from $31.5 million to $43.3 million.

During the second quarter 2020, the Company recorded a $23.4 million charge to increase the liability estimate to the $31.5 million noted as the low end of the range.

As of December 31, 2020, the Company’s total asbestos-related liability is $28.7 million and is included in accrued liabilities and other long-term liabilities, respectively, in the accompanying consolidated balance sheet.

We identified the initial gross asbestos liability recorded as a result of the change in accounting estimate as a critical audit matter because estimating projected indemnity and defense costs of pending and future asbestos-related claims involves significant estimation by management due to variables that are difficult to predict and the range of possible outcomes.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists, when performing audit procedures to evaluate whether the asbestos related reserves were appropriately recorded as of December 31, 2020.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s qualitative evaluation of goodwill impairment for Aerospace included the following, among others:

We tested the effectiveness of controls over goodwill, including those over management's judgments and assumptions related to macroeconomic conditions, industry and market considerations, overall financial performance, entity and reporting unit specific events, capital markets pricing, recent fair value estimates and carrying amounts, as well as legal, regulatory, and contractual factors.

We evaluated management’s ability to accurately forecast future revenues and operating margins by comparing actual results to management’s historical forecasts.

We evaluated the reasonableness of management’s qualitative assessment of factors affecting revenue and operating margin forecasts by comparing the forecasts to:

Historical revenues and operating margins.

Internal communications to management and the Board of Directors.

Forecasted information included in Company press releases as well as in analyst and industry reports for the Company and certain of its peer companies.

We evaluated the impact of changes in management’s forecasts from the October 1, 2019, annual measurement date to December 31, 2019.

With the assistance of our fair value specialists, we evaluated the reasonableness of management’s qualitative assessment of current factors that may affect the (1) comparable company trading multiples and (2) weighted average cost of capital as used in the most recent quantitative fair value estimate by:

Testing independent source information underlying the determination of the comparable company trading multiples and weighted average cost of capital.

Developing a range of independent estimates and comparing those to management’s assumptions.

Our audit procedures related to the asbestos-related reserves included the following, among others:

• We tested the effectiveness of controls over the valuation of the liability, including controls over the inputs to the model (claims data sets, indemnity settlement payments and legal payments), and over the accounting and disclosures related to the change in accounting policy resulting in a change in estimate.

This included inquires with management and inspection of documentation related to the change in accounting policy for asbestos and whether it is preferable and properly accounted for prospectively as a change in accounting estimate.

• With the assistance of our actuarial specialists that have experience in the area of asbestos-related reserves, we assessed the reasonableness of the valuation methodology, significant assumptions, and the range of probable outcomes estimated by management.

Additionally, the specialists developed a range of independent estimates and compared those to management’s estimate.

• We assessed the qualifications, experience, and objectivity of management’s third-party actuary.

• We tested the underlying data that served as the basis for the actuarial analysis, including claims data sets, indemnity settlement payments, and legal payments, to test the inputs to the actuarial estimate for completeness and accuracy.

Goodwill - Aerospace Reporting Units - Refer to Notes 3 and 9 to the financial statements.

Critical Audit Matter Description

The Company assesses goodwill for impairment on an annual basis as of October 1, and more frequently if there are changes in the business climate or as a result of a triggering event taking place.

The Company’s evaluation of goodwill for impairment involved the comparison of the fair value of each reporting unit to its carrying value.

If the Company concludes that conducting a quantitative assessment is required, it determines the fair value of its reporting units utilizing a discounted cash flow (income approach) and a market comparable method (market approach).

The determination of the fair value using the income approach requires management to make significant estimates and assumptions, which include forward-looking projections and discount rates.

The determination of the fair value using the market approach requires management to make significant estimates and assumptions, which include multiples of potentially comparable companies that are applied to management’s financial projections.

During the third quarter of 2020, as a result of a decline in its aerospace-related business' financial results, a significant reduction in its financial projections for the remainder of 2020 compared with prior projections, and uncertainty around the duration and magnitude of the impact of the COVID-19 pandemic on future financial results given their dependence on future levels of air travel and new aircraft builds, the Company determined there was a triggering event requiring an interim goodwill impairment assessment for its Aerospace Fasteners and Aerospace Engineered Products reporting units.

The Company determined that the carrying values of the Aerospace Fasteners and Aerospace Engineered Products reporting units exceeded their fair values, resulting in goodwill impairment charges of $70.8 million and $56.0 million, respectively.

The total Company goodwill balance was $304.0 million as of December 31, 2020, of which the Aerospace Fasteners reporting unit has $62.9 million, while the Aerospace Engineered Products reporting unit had no remaining goodwill.

Given the nature of the Aerospace Fasteners and Aerospace Engineered Products operations, sensitivity of the reporting unit’s business to changes in the economy, the reporting unit’s historical performance as compared to financial projections, and the difference between its fair value and the carrying value, auditing management’s judgments regarding financial projections, as well as selection of the discount rate and selection of multiples applied to management’s financial projections for the Aerospace Fasteners and Aerospace Engineered Products reporting units, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the financial projections, the selection of the discount rate, and the selection of multiples applied to management’s historical financial results and financial projections (“market multiples”) for the Aerospace Fasteners and Aerospace Engineered Products reporting units included the following, among others:

• We tested the effectiveness of controls over management’s goodwill impairment evaluation including the determination of fair value, such as controls related to management’s financial projections and the selection of the discount rate and market multiples used.

• We evaluated management’s ability to accurately project by comparing actual financial results to management’s historical financial projections.

• We evaluated the reasonableness of management’s financial projections by comparing the financial projections to historical financial results and projected information included in industry reports for the various industries the reporting units operate within.

• With the assistance of our fair value specialists, we evaluated the discount rate, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rate selected by management.

• With the assistance of our fair value specialists, we evaluated the market multiples by evaluating the selected potentially comparable publicly traded companies and the adjustments made for differences in growth prospects and risk profiles between the reporting units and the potentially comparable publicly traded companies.

We tested the underlying source information and mathematical accuracy of the calculations.

/s/ Deloitte & Touche LLP

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Receivables, net 113,410 108,860

Inventories 149,380 132,660

Prepaid expenses and other current assets 15,090 20,050

Current assets, discontinued operations

Total current assets 351,830 434,040

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Operating lease right-of-use assets 37,820 27,850

Goodwill 303,970 334,640

Other intangibles, net 206,200 161,390

Deferred income taxes 19,580 500

Non-current assets, discontinued operations

Other assets 21,420 19,950

Total assets $ 1,193,880 $ 1,192,700

Liabilities and Shareholders' Equity

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Operating lease liabilities, current portion 6,740 5,100

Current liabilities, discontinued operations

Total current liabilities 137,190 119,790

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Other long-term liabilities 69,690 40,810

Non-current liabilities, discontinued operations

Total liabilities 609,630 495,220

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TriMas Corporation

Consolidated Statement of Income

Consolidated Statement of Operations

(Dollars in thousands, except per share amounts)

Year ended December 31,

2020 2019 2018

Net sales $ 769,970 $ 723,530 $ 705,030

Cost of sales ( 587,890 ) ( 529,630 ) ( 504,920 )

Gross profit 182,080 193,900 200,110

Selling, general and administrative expenses ( 134,480 ) ( 102,530 ) ( 91,210 )

Net gain (loss) on dispositions of assets

Operating profit

Net loss on dispositions of assets ( 1,290 ) ( 150 ) ( 90 )

Impairment of goodwill and indefinite-lived intangible assets ( 134,600 ) — —

Operating profit (loss) ( 88,290 ) 91,220 108,810

Other expense, net:

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Other expense, net ( 14,420 ) ( 12,960 ) ( 16,450 )

Income before income taxes

Income tax expense

Income from continuing operations

Income (loss) from discontinued operations, net of income taxes

Income (loss) before income taxes ( 102,710 ) 78,260 92,360

Income tax benefit (expense) 22,950 ( 16,320 ) ( 18,650 )

Income (loss) from continuing operations ( 79,760 ) 61,940 73,710

Income from discontinued operations, net of income taxes — 36,680 9,590

Net income (loss) $ ( 79,760 ) $ 98,620 $ 83,300

Basic earnings (loss) per share:

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Discontinued operations — 0.81 0.21

Net income per share

Net income (loss) per share $ ( 1.83 ) $ 2.18 $ 1.82

Weighted average common shares - basic 43,581,232 45,303,659 45,824,555

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Discontinued operations — 0.80 0.20

Net income per share

Net income (loss) per share $ ( 1.83 ) $ 2.16 $ 1.80

Weighted average common shares - diluted 43,581,232 45,595,154 46,170,464

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Year ended December 31,

2020 2019 2018

Net income (loss) $ ( 79,760 ) $ 98,620 $ 83,300

Other comprehensive income (loss):

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Total other comprehensive income 380 12,120 480

Total comprehensive income

Total comprehensive income (loss) $ ( 79,380 ) $ 110,740 $ 83,780

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

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Year ended December 31,

2020 2019 2018

Cash Flows from Operating Activities:

Income (loss) from discontinued operations

Income from continuing operations

Net income (loss) $ ( 79,760 ) $ 98,620 $ 83,300

Income from discontinued operations — 36,680 9,590

Income (loss) from continuing operations ( 79,760 ) 61,940 73,710

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

Loss (gain) on dispositions of assets

Impairment of goodwill and indefinite-lived intangible assets 134,600 — —

Loss on dispositions of assets 1,290 150 90

Depreciation 29,020 24,870 22,230

Amortization of intangible assets 20,750 18,630 18,260

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Non-cash compensation expense 8,170 6,450 7,170

Debt financing and related expenses

Non-cash change in legacy liability estimate 23,400 — —

(Increase) decrease in receivables 9,580 3,280 ( 9,570 )

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Cash Flows from Financing Activities:

Proceeds from borrowings on revolving credit and accounts receivable facilities

Repayments of borrowings on revolving credit and accounts receivable facilities

Proceeds from borrowings on revolving credit facilities 367,280 189,060 59,060

Repayments of borrowings on revolving credit facilities ( 319,120 ) ( 189,340 ) ( 68,490 )

Payments to purchase common stock ( 39,420 ) ( 36,740 ) ( 12,140 )

Shares surrendered upon exercise and vesting of equity awards to cover taxes ( 2,600 ) ( 3,340 ) ( 2,380 )

Proceeds from issuance of senior notes

Repayments of borrowings on term loan facilities

Debt financing fees

Other financing activities — — —

Net cash used for financing activities of continuing operations

Net cash provided by (used for) financing activities of continuing operations 6,140 ( 40,360 ) ( 23,950 )

Net cash provided by financing activities of discontinued operations — — —

Net cash used for financing activities

Net cash provided by (used for) financing activities 6,140 ( 40,360 ) ( 23,950 )

Cash and Cash Equivalents:

Increase for the year

Increase (decrease) for the year ( 98,520 ) 64,320 80,570

At beginning of year 172,470 108,150 27,580

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(Dollars in thousands)

Stock Paid-In

Capital Accumulated

Deficit Accumulated

Comprehensive

Income (Loss)

Income (Loss) Total

Balances at December 31, 2017 $ 460 $ 823,850 $ ( 262,960 ) $ ( 17,330 ) $ 544,020

Net income — — 83,300 — 83,300

Other comprehensive income — — — 480 480

Purchase of common stock — ( 12,140 ) — — ( 12,140 )

Shares surrendered upon exercise and vesting of equity awards to cover taxes — ( 2,380 ) — — ( 2,380 )

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Balances at December 31, 2018 $ 460 $ 816,500 $ ( 179,660 ) $ ( 16,850 ) $ 620,450

Net income — — 98,620 — 98,620

Other comprehensive income — — — 12,120 12,120

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Non-cash compensation expense — 6,450 — — 6,450

Impact of accounting standards adoption — — 1,190 ( 1,270 ) ( 80 )

Balances at December 31, 2019 $ 450 $ 782,880 $ ( 79,850 ) $ ( 6,000 ) $ 697,480

Net loss — — ( 79,760 ) — ( 79,760 )

Other comprehensive income — — — 380 380

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Non-cash compensation expense 10 8,160 — — 8,170

Impact of accounting standards adoption (Note 2)

Balances at December 31, 2020 $ 430 $ 749,050 $ ( 159,610 ) $ ( 5,620 ) $ 584,250

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Basis of Presentation

TriMas Corporation ("TriMas" or the "Company"), and its consolidated subsidiaries, is a diversified industrial manufacturer of products for customers primarily in the consumer products, aerospace and industrial end markets.

In the first quarter of 2019, TriMas began reporting its Stanton, California and Tolleson, Arizona machined components operations in its Specialty Products reportable segment.

They were previously included in the Company's Aerospace reportable segment.

This modification was made in connection with an organizational change of leadership responsibilities, allowing the Company to better leverage the machining competencies and resources of these operations with the other businesses within the Specialty Products reportable segment.

On December 20, 2019, the Company completed the previously announced sale of its Lamons business (“Lamons”), a transaction entered into with an investment fund sponsored by First Reserve on November 1, 2019.

Lamons was sold for approximately $ 135 million in cash, subject to customary post-closing adjustments.

The financial results of Lamons were previously reported within the Company's Specialty Products reportable segment, and are presented as discontinued operations for all periods presented in the financial statements attached hereto.

TriMas Corporation ("TriMas" or the "Company"), and its consolidated subsidiaries, designs, engineers and manufactures innovative products under leading brand names for customers primarily in the consumer products, aerospace & defense, and industrial markets.

In the second quarter of 2020, the Company elected to change its method of accounting for asbestos-related defense costs from accruing for probable and reasonably estimable defense costs associated with known claims expected to settle to accrue for all future defense costs for both known and unknown claims, which the Company now believes are reasonably estimable.

The Company believes this change is preferable, as asbestos-related defense costs represent expenditures related to legacy activities that do not contribute to current or future revenue generating activities, and recording an estimate of the full liability for asbestos-related costs, where estimable with reasonable precision, provides a more complete assessment of the liability associated with resolving asbestos-related claims.

This accounting change has been reflected as a change in accounting estimate effected by a change in accounting principle.

See Note 17, "Commitments and Contingencies," for further information on this change.

In the first quarter of 2020, TriMas began reporting its machined components operations, located in Stanton, California and Tolleson, Arizona, as part of its Aerospace segment.

The operations were previously reported in the Specialty Products segment.

The move of these operations into TriMas Aerospace facilitates achieving anticipated synergies from the February 2020 RSA Engineered Products ("RSA") acquisition, allowing the Company to better leverage the machining competencies and resources across its aerospace businesses.

See Note 22, " Segment Information ," for further information on each of the Company's reportable segments.

In the fourth quarter of 2019, the Company completed the sale of its Lamons division (“Lamons”), a transaction entered into with an investment fund sponsored by First Reserve.

Lamons was sold for approximately $ 136.8 million in cash, of which approximately $ 135.0 million was received in 2019 and the remaining $ 1.8 million was received in the first quarter of 2020.

The financial results of Lamons were previously reported within the Company's Specialty Products segment, and are presented as discontinued operations for all periods presented in the financial statements attached hereto.

See Note 5, "Discontinued Operations," for further information on the sale of Lamons and its historical financial results.

The preparation of financial statements also requires management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities.

Actual results may differ from such estimates and assumptions due to risks and uncertainties, including uncertainty in the current economic environment due to the ongoing outbreak of a new strain of the coronavirus (“COVID-19”).

While the full impact of COVID-19 on the Company's operations is unknown and cannot be reasonably estimated at this time, the Company has made appropriate accounting estimates based on the facts and circumstances available as of the reporting date.

To the extent there are differences between these estimates and actual results, the Company's consolidated financial statements may be materially affected.

Certain prior year amounts have been reclassified to conform with current year presentation.

New Accounting Pronouncements

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The Company is in the process of assessing the impact of adoption on its consolidated financial statements.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20)" ("ASU 2018-14"), which modifies the disclosure requirements for employers who sponsor defined benefit pension or other postretirement plans.

ASU 2018-14 is effective for fiscal years ending after December 15, 2020, with early adoption permitted.

ASU 2018-14 is to be applied retrospectively to all periods presented.

The Company is in the process of assessing the impact of adoption on its consolidated financial statements.

The Company adopted ASU 2018-14 in the fourth quarter of 2020.

The standard relates to financial statement disclosure only and did not have an impact on the Company’s consolidated balance sheet, statement of operations or cash flows.

See Note 18, "Employee Benefit Plans," for disclosure of the Company's defined benefit plans.

In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment" ("ASU 2017-04"), which simplifies the test for goodwill impairment by eliminating the requirement to perform a hypothetical purchase price allocation to measure the amount of goodwill impairment.

ASU 2017-04 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted.

The Company plans to adopt ASU 2017-04 effective January 1, 2020.

The Company's adoption of ASU 2017-04 is not expected to have a significant impact on its consolidated financial statements.

Recently Adopted Accounting Pronouncements

In February 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" ("ASU 2018-02"), which provides for the option to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act ("Tax Reform Act") classified within accumulated other comprehensive income (loss) ("AOCI") to retained earnings.

The Company adopted ASU 2018-02 on January 1, 2019, and elected to reclassify approximately $ 1.3 million in stranded tax effects from accumulated other comprehensive loss to accumulated deficit on the accompanying consolidated balance sheet.

The Company's accounting policy is to release the income tax effects from AOCI when a defined benefit plan or a derivative instrument is liquidated and/or settled.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)" (“ASU 2016-02”) (the “New Lease Standard"), which requires lessees to recognize a lease liability and right-of-use (ROU) asset on its balance sheet for operating leases.

Accounting for finance leases is substantially unchanged.

The Company adopted the New Lease Standard on January 1, 2019 using a modified retrospective transition, and recorded a cumulative-effect adjustment to the opening balance of accumulated deficit as of the effective date (the effective date method).

As a result of the adoption, the Company recognized approximately $ 32 million of right-of-use assets and lease liabilities from continuing operations on its consolidated balance sheet.

Additionally, the Company recognized an approximate $ 0.1 million cumulative effect adjustment debit, net of tax, to accumulated deficit related to unamortized deferred losses for certain sale-leaseback transactions.

The standard did not have an impact on the Company's consolidated statement of income.

Instead, under ASU 2017-04, the goodwill impairment is the amount by which a reporting unit's carrying value exceeds its fair value;

however, the loss recognized should not exceed the total amount of goodwill allocated to the reporting unit.

The Company adopted ASU 2017-04 in the first quarter of 2020.

See Note 3, "Summary of Significant Accounting Policies," for further information on the Company's policies regarding assessing potential goodwill impairments.

Summary of Significant Accounting Policies

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The Company considers cash on hand and on deposit and investments in all highly liquid debt instruments with initial maturities of three months or less to be cash and cash equivalents.

Receivables are presented net of allowances for doubtful accounts of approximately $ 2.1 million and $ 2.8 million at December 31, 2019 and 2018 , respectively.

Cash and cash equivalents also includes restricted cash held on deposit with a financial institution as cash collateral for the Company's outstanding letters of credit.

See Note 8, " Cash and Cash Equivalents ," for further details regarding the Company's cash and cash equivalents.

Receivables are presented net of allowances for doubtful accounts of approximately $ 2.1 million at each of December 31, 2020 and 2019.

The Company monitors its exposure for credit losses and maintains allowances for doubtful accounts based upon the Company's best estimate of probable losses inherent in the accounts receivable balances.

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Property and equipment additions, including significant improvements, are recorded at cost.

Upon retirement or disposal of property and equipment, the cost and accumulated depreciation are removed from the accounts, and any gain or loss is included in the accompanying statement of income.

Upon retirement or disposal of property and equipment, the cost and accumulated depreciation are removed from the accounts, and any gain or loss is included in the accompanying statement of operations.

Repair and maintenance costs are charged to expense as incurred.

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Customer relationship intangibles are amortized over periods ranging from five to 25 years, while technology and other intangibles are amortized over periods ranging from one to 30 years.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Impairment of Long-Lived Assets and Definite-Lived Intangible Assets.

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More frequent evaluations may be required if the Company experiences changes in its business climate or as a result of other triggering events that take place.

If carrying value exceeds fair value, a possible impairment exists and further evaluation is performed.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company determines its reporting units at the individual operating segment level, or one level below, when there is discrete financial information available that is regularly reviewed by segment management for evaluating operating results.

For purposes of the Company's 2019 goodwill impairment test, the Company had six reporting units, four of which had goodwill, within its three reportable segments.

See Note 7 , " Goodwill and Other Intangible Assets ," for further details regarding the Company's goodwill impairment testing.

The Company begins its goodwill reviews by conducting a qualitative assessment ("Step Zero"), considering relevant events and circumstances that affect the fair value or carrying amount of a reporting unit.

An impairment loss is recognized when the carrying value of a reporting unit's goodwill exceeds its fair value.

For purposes of the Company's 2020 goodwill impairment test, the Company had six reporting units, three of which had goodwill, within its three reportable segments.

The Company begins its goodwill reviews by conducting a qualitative assessment, considering relevant events and circumstances that affect the fair value or carrying amount of a reporting unit.

Such events and circumstances can include macroeconomic conditions, industry and market considerations, overall financial performance, entity and reporting unit specific events, and capital markets pricing.

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The Company also considers recent valuations of its reporting units, including the difference between the most recent fair value estimate and the carrying amount.

These factors are all considered by management in reaching its conclusion about whether a quantitative goodwill impairment test is necessary to estimate the fair value of its reporting units.

If the Company concludes that conducting a quantitative assessment is required, it performs the first step of a two-step goodwill impairment test.

For the first step ("Step I"), the Company estimates the fair value of the reporting unit being evaluated utilizing a combination of three valuation techniques:

Each of these factors is considered by management in reaching its conclusion about whether a quantitative goodwill impairment test is necessary to estimate the fair value of its reporting units.

If the Company concludes that conducting a quantitative assessment is required, it performs a quantitative goodwill impairment test.

When conducting a quantitative goodwill impairment test, the Company determines the fair value of the reporting unit being evaluated utilizing a combination of three valuation techniques:

discounted cash flow (income approach), market comparable method (market approach) and market capitalization (direct market data method).

The income approach is based on management's operating plan and internal five-year forecast and utilizes forward-looking assumptions and projections, but considers factors unique to each reporting unit and related long-range plans that may not be comparable to other companies and that are not yet public.

The market approach considers potentially comparable companies and transactions within the industries where the Company's reporting units participate, and applies their trading multiples to the Company's reporting units.

The income approach is based on management's operating plan and internal five-year forecast and utilizes forward-looking assumptions and projections, on a discounted basis, but considers factors unique to each reporting unit and related long-range plans that may not be comparable to other companies and that are not yet public.

This approach utilizes data from actual marketplace transactions, but reliance on its results is limited by difficulty in identifying companies that are specifically comparable to the Company's reporting units, considering the diversity of the Company's businesses, the relative sizes and levels of complexity.

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Management evaluates and weights the results based on a combination of the income and market approaches, and, in situations where the income approach results differ significantly from the market and direct data approaches, management re-evaluates and adjusts, if necessary, its assumptions.

Based on the Step I test, if it is determined that the carrying value of the reporting unit is higher than its fair value, there is an indication that an impairment may exist and the second step ("Step II") is performed to measure the amount of impairment loss, if any.

In Step II, the Company determines the implied fair value of the reporting unit goodwill in the same manner as if the reporting unit was being acquired in a business combination and compares the implied fair value of the reporting unit goodwill to the carrying value of the goodwill.

If the implied fair value of the goodwill is less than the carrying value, goodwill is impaired and is written down to the implied fair value amount.

Based on the quantitative test, if it is determined that the carrying value of the reporting unit is higher than its fair value, goodwill is impaired and is written down to the fair value amount;

however, the loss recognized will not exceed the total amount of goodwill allocated to the reporting unit.

See Note 9, " Goodwill and Other Intangible Assets ," for further details regarding the Company's goodwill impairment testing.

Indefinite-Lived Intangibles.

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More frequent evaluations may be required if the Company experiences changes in its business climate or as a result of other triggering events that take place.

If carrying value exceeds fair value, a possible impairment exists and further evaluation is performed.

An impairment loss is recognized when the carrying value of the asset exceeds its fair value.

TRIMAS CORPORATION

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Assumptions used in the actuarial calculations could have a significant impact on plan obligations, and a lesser impact on current period expense.

Annually, the Company reviews the actual experience compared to the more significant assumptions used and makes adjustments to the assumptions, if warranted.

Annually, the Company reviews the actual experience compared to the significant assumptions used and makes adjustments to the assumptions, if warranted.

Discount rates are based on an expected benefit payments duration analysis and the equivalent average yield rate for high-quality fixed-income investments.

Pension benefits are funded through deposits with trustees and the expected long-term rate of return on fund assets is based on actual historical returns and a review of other public company pension asset return data, modified for known changes in the market and any expected change in investment policy.

See Note 18, “ Employee Benefit Plans ,” for further information.

Asbestos-related Matters.

The Company accrues loss reserves for asbestos-related matters based upon an estimate of the ultimate liability for claims incurred, whether reported or not, including an estimate of future settlement costs and costs to defend.

The Company utilizes known facts and historical trends for Company-specific and general market asbestos-related activity, as well as an actuarial valuation in determining estimated required reserves which it believes are probable and reasonably estimable.

Asbestos-related accruals are assessed at each balance sheet date to determine if the liability remains reasonably stated.

Accruals for asbestos-related matters are included in the consolidated balance sheet in “Accrued liabilities” and “Other long-term liabilities.” See Note 17, “ Commitments and Contingencies ,” for further information.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenue Recognition.

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The nature and timing of the Company's revenue transactions are similar, as substantially all revenue is based on point-in-time transactions with customers under industry-standard payment terms.

The Company may require shortened payment terms, including cash-in-advance, on an individual customer basis depending on its assessment of the customer's credit risk.

The Company may require shortened payment terms, including cash-in-advance, on an individual customer basis depending on its assessment of the customer's credit worthiness.

Cost of Sales.

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costs related to the advertising, sale, marketing and distribution of the Company's products, amortization of customer intangible assets, costs of finance, human resources, legal functions, executive management costs and other administrative expenses.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Income Taxes.

5 unchanged sentences

The Company records interest and penalties related to unrecognized tax benefits in income tax expense.

On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Reform Act”) was signed into law.

The primary impact to the Company was a reduction in effective tax rate, substantially due to the reduction in the Federal statutory corporate income tax rate from 35 % to 21 % .

While the Tax Reform Act also introduced new global intangible and base-erosion provisions, neither of these provisions has had a significant impact on the Company’s financial statements.

The continued impact from the Tax Reform Act may differ from current estimates due to the issuance and finalization of future regulatory guidance.

See Note 23, " Income Taxes ," for further information.

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dollars are deferred as a component of accumulated other comprehensive income (loss) ("AOCI") in the consolidated statement of shareholders' equity.

Net foreign currency transaction gains (losses) were approximate gains of $ 0.3 million and $ 1.0 million for the years ended December 31, 2019 and December 31, 2018 , respectively, and a loss of $ 0.9 million for the year ended December 31, 2017 , and are included in other expense, net in the accompanying consolidated statement of income.

Net foreign currency transaction gains were approximately $ 0.6 million, $ 0.3 million and $ 1.0 million for the years ended December 31, 2020, 2019 and 2018, respectively, and are included in other expense, net in the accompanying consolidated statement of operations.

Derivative Financial Instruments.

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If a derivative is designated as a net investment hedge, then the effective portion of the changes in the fair value of the derivative is recognized in other comprehensive income and will be subsequently reclassified to earnings when the hedged net investment is either sold or substantially liquidated.

The Company formally documents hedging relationships for all derivative transactions and the underlying hedged items, as well as its risk management objectives and strategies for undertaking the hedge transactions.

See Note 12 , " Derivative Instruments ," for further information on the Company's financial instruments.

The Company formally documents hedging relationships for its derivative transactions and the underlying hedged items, as well as its risk management objectives and strategies for undertaking the hedge transactions.

See Note 14, " Derivative Instruments ," for further information.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value of Financial Instruments.

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The carrying value of financial instruments reported in the balance sheet for current assets and current liabilities approximates fair value due to the short maturity of these instruments.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Business Combinations.

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If the performance conditions are not achieved, no award is earned.

See Note 19, “ Equity Awards ,” for further information.

Other Comprehensive Income (Loss).

The Company refers to other comprehensive income (loss) as revenues, expenses, gains and losses that under accounting principles generally accepted in the United States of America are included in comprehensive income (loss) but are excluded from net earnings as these amounts are recorded directly as an adjustment to stockholders' equity.

Other comprehensive income (loss) is comprised of foreign currency translation adjustments, amortization of prior service costs and unrecognized gains and losses in actuarial assumptions for pension and postretirement plans and changes in unrealized gains and losses on derivatives.

Reclassifications.

Certain prior year amounts have been reclassified to conform with the current year presentation.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2020 Acquisitions

On December 15, 2020, the Company acquired Affaba & Ferrari Srl ("Affaba & Ferrari"), which specializes in the design, development and manufacture of precision caps and closures for food & beverage and industrial product applications, for an aggregate amount of approximately $ 98.4 million, net of cash acquired, subject to normal course adjustments, which are expected to be completed by mid-2021.

The fair value of assets acquired and liabilities assumed included approximately $ 49.1 million of goodwill, $ 35.1 million of intangible assets, $ 9.4 million of net working capital, $ 17.4 million of property and equipment, and $ 12.6 million of net deferred tax liabilities.

Affaba & Ferrari, which is reported in the Company's Packaging segment, operates out of a highly automated manufacturing facility and support office located in Borgo San Giovanni, Italy and historically generated approximately $ 34 million in annual revenue.

On April 17, 2020, the Company acquired the Rapak® brand, including certain bag-in-box product lines and assets ("Rapak") for an aggregate amount of approximately $ 11.4 million.

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

On February 27, 2020, the Company acquired RSA Engineered Products ("RSA"), a manufacturer of complex, highly-engineered and proprietary ducting, connectors and related products for air management systems used in aerospace and defense applications, for an aggregate amount of approximately $ 83.7 million, net of cash acquired.

The fair value of assets acquired and liabilities assumed included approximately $ 43.3 million of goodwill, $ 36.9 million of intangible assets, $ 10.1 million of net working capital, $ 2.1 million of property and equipment, and $ 8.7 million of net deferred tax liabilities.

RSA, which is reported in the Company's Aerospace segment, is located in Simi Valley, California and historically generated approximately $ 30 million in annual revenue.

2019 Acquisitions

In April 2019, the Company acquired Taplast S.p.A.

("Taplast"), a designer and manufacturer of dispensers, closures and containers for the beauty and personal care, household, and food and beverage packaging end markets, for an aggregate amount of approximately $ 44.7 million, net of cash acquired.

Through its operating facilities in Italy and Slovakia, Taplast serves end markets in Europe and North America and historically generated approximately $ 32 million in annual revenue.

Taplast is included in the Company's Packaging reportable segment.

In January 2019, the Company acquired Plastic Srl, a manufacturer of single-bodied and assembled polymeric caps and closures for use in home care product applications, for an aggregate amount of approximately $ 22.4 million , net of cash acquired.

Located in Forli, Italy, Plastic Srl serves the home care market in Italy and other European countries and historically generated approximately $ 12 million in annual revenue.

Plastic Srl is included in the Company's Packaging reportable segment.

In connection with these acquisitions, the Company recorded approximately $ 1.2 million of non-cash purchase accounting-related expenses during 2019, of which approximately $ 0.9 million was recognized within selling, general and administrative expenses, primarily related to the write-off of the Plastic Srl trade name acquired that will not be used.

In addition, approximately $ 0.3 million was recognized within cost of sales during 2019 related to the step-up in value and subsequent sale of inventory.

With manufacturing locations in both Italy and Slovakia, Taplast serves end markets in Europe and North America and historically generated approximately $ 32 million in annual revenue.

Taplast is reported in the Company's Packaging segment.

In January 2019, the Company acquired Plastic Srl, a manufacturer of single-bodied and assembled polymeric caps and closures for use in home care products, for an aggregate amount of approximately $ 22.4 million, net of cash acquired.

Located in Italy, Plastic Srl serves the home care market throughout Italy and other European countries and historically generated approximately $ 12 million in annual revenue.

Plastic Srl is reported in the Company's Packaging segment.

Discontinued Operations

On December 20, 2019, the Company completed the sale of Lamons to two wholly-owned subsidiaries of an investment fund sponsored by First Reserve, pursuant to an Asset and Stock Purchase Agreement dated as of November 1, 2019 (the “Purchase Agreement”), for a purchase price of $ 135 million , subject to certain adjustments as set forth in the Purchase Agreement which the Company expects to be finalized in the first quarter of 2020.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company recognized net cash proceeds of approximately $ 110.9 million , which represents the purchase price, less estimated tax payments of approximately $ 20.9 million and transaction costs of approximately $ 3.2 million .

The Company recognized net cash proceeds of approximately $ 112.7 million, which represented the purchase price, less estimated tax payments of approximately $ 20.9 million, transaction costs of approximately $ 3.2 million.

The Company recorded a pre-tax gain on sale of approximately $ 38.9 million, which includes the recognition of previously deferred non-cash foreign currency translation losses of approximately $ 12.4 million.

The Company determined that Lamons met the criteria to be classified as a discontinued operation.

As a result, the historical results for Lamons are shown in the accompanying consolidated statement of income as a discontinued operation and the assets and liabilities have been retrospectively reclassified to assets and liabilities of discontinued operations in the consolidated balance sheet.

The carrying value of the assets and liabilities of Lamons held in discontinued operations were as follows:

December 31, 2018

Current assets:

Receivables, net

Prepaid expenses and other current assets

Total current assets

Property and equipment, net

Other intangibles, net

Current liabilities:

Accounts payable

Accrued liabilities

Total current liabilities

Deferred income taxes

Total liabilities

As a result, the historical results for Lamons are reported in the accompanying consolidated statement of operations as a discontinued operation.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Results of discontinued operations are summarized as follows (dollars in thousands):

Year ended December 31,

Net sales $ 182,590 $ 172,110

Cost of sales ( 138,100 ) ( 128,100 )

Gross profit 44,490 44,010

Selling, general and administrative expenses ( 32,920 ) ( 30,590 )

Net gain (loss) on dispositions of assets 38,900 ( 160 )

Operating profit (loss)

Interest expense

Operating profit 50,470 13,260

Other income (expense), net ( 30 ) 360

Income (loss) from discontinued operations, before income taxes

Income from discontinued operations, before income taxes 50,440 13,620

Income tax expense ( 13,760 ) ( 4,030 )

Income (loss) from discontinued operations, net of tax

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Income from discontinued operations, net of tax $ 36,680 $ 9,590

Realignment Actions

During 2020, the Company executed certain realignment actions, primarily in its Aerospace and Specialty Products segments, in response to reductions in current and expected future end-market demand.

The Company recorded non-cash charges of approximately $ 13.8 million related to inventory reductions, primarily as a result of a strategic decision in its Arrow Engine division to narrow its product line focus.

The Company also recorded non-cash charges of approximately $ 2.3 million related to certain production equipment removed from service given reduced demand levels.

In addition, the Company reduced its employment levels given lower customer demand, incurring approximately $ 3.8 million in severance charges, of which approximately $ 3.7 million was paid by December 31, 2020.

During 2020, approximately $ 17.1 million of these charges were included in cost of sales and approximately $ 2.8 million were included in selling, general and administrative expenses in the accompanying consolidated statement of operations.

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

Year ended December 31,

Customer End Markets 2020 2019 2018

Consumer Products $ 402,080 $ 307,640 $ 276,740

Aerospace & Defense 167,740 194,110 185,920

Industrial 200,150 221,780 242,370

Total net sales $ 769,970 $ 723,530 $ 705,030

The Company’s Packaging reportable segment earns revenues from the consumer (which includes end markets such as health, beauty and home care, and food and beverage) and industrial end markets.

The Aerospace reportable segment earns revenues from the aerospace end market.

The Specialty Products reportable segment earns revenues from the industrial and aerospace end markets.

The Company’s Packaging segment earns revenues from the consumer products (comprised of the beauty and personal care, home care, food and beverage, pharmaceutical and nutraceutical submarkets) and industrial markets.

The Aerospace segment earns revenues from the aerospace & defense market (comprised of commercial, regional and business jet and military submarkets).

The Specialty Products segment earns revenues from a variety of submarkets within the industrial market.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cash and Cash Equivalents

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

2020 December 31,

Cash and cash equivalents - unrestricted $ 62,790 $ 172,470

Cash - restricted 11,160 —

Total cash and cash equivalents $ 73,950 $ 172,470

During 2020, the Company placed cash on deposit with a financial institution to be held as cash collateral for the Company's outstanding letters of credit.

In prior years, the Company used a portion of its credit agreement as collateral for letters of credit, which decreased availability under its revolving credit facility.

See Note 13, "Long-term Debt," for further information on the Company's credit agreement.

Goodwill and Other Intangible Assets

The Company performed a Step Zero qualitative assessment as part of its 2019, 2018 and 2017 annual impairment tests for all reporting units, which included a review of the Company’s market capitalization.

For purposes of the 2019 and 2018 annual impairment tests, based on the Step Zero assessment, the Company determined there were no indications that the fair value of a reporting unit was less than its carrying amount.

Therefore, the Company determined that the Step I and Step II tests were not required.

For purposes of the 2017 annual impairment test, for all reporting units with goodwill other than the Aerospace reporting unit, based on the Step Zero assessment, the Company determined that there were no indications that the fair value of a reporting unit was less than its carrying amount.

Therefore, the Company determined that the Step I and Step II tests were not required for these reporting units.

For purposes of the 2017 annual impairment test for the Company's Aerospace reporting unit, management elected to perform a Step I quantitative assessment in consideration of the partial goodwill impairment charge recorded during 2016.

In preparing the Step I analysis, the Company utilized both income and market-based approaches, placing a 50 % weighting on each.

Significant management assumptions used under the income approach were a weighted average cost of capital ("WACC") of 9.5 % and an estimated residual growth rate of 3 % .

In determining the WACC, management considered the level of risk inherent in the cash flow projections based on reducing previously utilized sales growth and margin expansion assumptions, as well as historical attainment of its projections and current market conditions.

The use of these unobservable inputs resulted in the fair value estimate being classified as a Level 3 measurement within the fair value hierarchy.

Upon completion of the Step I test, the Company determined that the fair value of the Aerospace reporting unit exceeded its carrying value by more than 15 % .

During the three months ended March 31, 2019, in an effort to better align the Company's machining competencies and resources, the Company began reporting its machined products operations within the Specialty Products reportable segment.

These operations were previously reported in the Company's Aerospace reportable segment.

As a result of the reporting structure change, the Company's previous Aerospace reporting unit was split into two new reporting units, Machined Products and Aerospace.

The Company reallocated the goodwill attributed to the previous Aerospace reporting unit on a relative fair value basis between the Machined Products and the new Aerospace reporting units, resulting in an allocation of goodwill of $ 12.7 million and $ 133.7 million , respectively.

After the reallocation of goodwill, the Company performed a Step I quantitative assessment for both the Machined Products and the new Aerospace reporting units.

As part of this assessment, the Company determined that the fair value of the Aerospace reporting unit exceeded its carrying value by more than 34 % and the fair value of the Machined Products reporting unit exceeded its carrying value by more than 13 % .

The Company performed a qualitative assessment as part of its 2020, 2019 and 2018 annual impairment tests (October 1 annual test date) for all reporting units, which included a review of the Company’s market capitalization.

Based on results of the qualitative assessments for the 2020, 2019 and 2018 annual impairment tests, the Company determined there were no indications that the fair value of a reporting unit was less than its carrying amount;

therefore, the Company determined that quantitative goodwill impairment tests were not required.

During the third quarter of 2020, as a result of a decline in its aerospace-related business' financial results, a significant reduction in its financial projections for the remainder of 2020 compared with prior projections, and uncertainty around the duration and magnitude of the impact of the COVID-19 pandemic on future financial results given their dependence on future levels of air travel and new aircraft builds, the Company determined there was a triggering event requiring an interim quantitative goodwill impairment assessment of each of its two aerospace-related reporting units:

Aerospace Fasteners and Aerospace Engineered Products.

In preparing the quantitative analysis, the Company utilized both income and market-based approaches.

The income-based approach was conducted using the discounted cash flow method, for which management updated its internal five-year forecast, and reflected its current best estimates of when, and at what level, a recovery of air travel, new aircraft builds, and resulting customer orders would occur and the related impact on each reporting unit's future sales, earnings and cash flows.

Assumptions in estimating the future cash flows were based on Level 3 inputs under the fair value hierarchy.

The Company also selected appropriate terminal growth rates as well as discount rates, which considered various factors including the level of inherent risk in achieving the forecast based on prior history and current market conditions.

The market-based approach considered potentially comparable publicly traded companies and transactions within the aerospace industry and applied their trading multiples to management's forecast estimates.

Upon completion of the quantitative goodwill impairment tests, the Company determined that the carrying values of the Aerospace Fasteners and Aerospace Engineered Products reporting units exceeded their fair values, resulting in goodwill impairment charges of approximately $ 70.8 million in its Aerospace Fasteners reporting unit and approximately $ 56.0 million in its Aerospace Engineered Products reporting unit.

Following the impairment charges, the Aerospace Fasteners reporting unit has $ 62.9 million of remaining goodwill, while the Aerospace Engineered Products reporting unit has no remaining goodwill.

The Company notes that a 1 % change in the discount rate would have impacted the total goodwill impairment charge by approximately $ 20 million, while a 0.5 % change in the terminal growth rate would have impacted the total goodwill impairment charge by approximately $ 5 million.

If the future financial results of the aerospace-related businesses significantly differ from the assumptions inherent in this analysis, the Company may be subject to further impairment charges.

In the first quarter of 2020, the Company began reporting its machined components operations within the Aerospace segment.

These operations were previously reported in the Company's Specialty Products segment.

As a result of the reporting structure change, goodwill of approximately $ 12.7 million was reassigned from the Specialty Products segment to the Aerospace segment.

TRIMAS CORPORATION

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Changes in the carrying amount of goodwill for the years ended December 31, 2020 and 2019 are as follows (dollars in thousands):

Packaging Aerospace Products Total

Balance, December 31, 2018 $ 163,660 $ 146,430 $ 6,560 $ 316,650

Goodwill from acquisitions 18,400 — — 18,400

Goodwill reassigned in segment realignment — ( 12,740 ) 12,740 —

Foreign currency translation and other ( 410 ) — — ( 410 )

1 unchanged sentence

Goodwill from acquisitions 49,130 43,260 — 92,390

Impairment charge — ( 126,840 ) — ( 126,840 )

Goodwill reassigned in segment realignment — 12,740 ( 12,740 ) —

2 unchanged sentences

Other Intangible Assets

For the purposes of the Company's 2019 and 2018 indefinite-lived intangible asset impairment tests, the Company performed a qualitative assessment to determine whether it was more likely than not that the fair values of the indefinite-lived intangible assets were less than the carrying values.

Based on the qualitative assessment performed, the Company does not believe that it is more likely than not that the fair values of each of its indefinite-lived intangible assets are less than the carrying values;

For the purposes of the Company's 2020, 2019 and 2018 annual indefinite-lived intangible asset impairment tests (as of October 1), the Company performed a qualitative assessment to determine whether it was more likely than not that the fair values of the indefinite-lived intangible assets were less than the carrying values.

Based on the qualitative assessment performed, the Company did not believe that it is more likely than not that the fair values of each of its indefinite-lived intangible assets were less than the carrying values;

therefore, a fair value calculation of the indefinite-lived intangible assets was not required for the 2020, 2019 and 2018 annual indefinite-lived intangible asset impairment tests.

In 2017, the Company performed a qualitative assessment as part of its annual impairment test to determine whether it was more likely than not that the fair values of the indefinite-lived intangible assets were less than the carrying values.

Based on the assessment, the Company determined that there were no indications that the fair values of any of its indefinite-lived intangible assets were less than the carrying values.

However, in consideration of the impairment charge recorded during 2016, the Company performed a quantitative assessment for its indefinite-lived intangible assets recorded on its balance sheet as of October 1, 2017 within the Aerospace reportable segment to supplement its qualitative assessment.

Using the relief-from-royalty method with a discount rate of 9.5 % and an estimated residual growth rate of 3 % , the Company determined each of its Aerospace-related trade names had a fair value that exceeded carrying values by more than 9 % .

The use of unobservable inputs resulted in the fair value estimates being classified as a Level 3 measurement within the fair value hierarchy.

During the third quarter of 2020, as a result of the significant forecast reduction in the Company's aerospace-related businesses, the Company also performed an interim quantitative assessment for the indefinite-lived intangible assets within the Aerospace segment, using the relief-from-royalty method.

Significant management assumptions used under the relief-from-royalty method reflected the Company's current assessment of the risks and uncertainties associated with the aerospace industry.

Upon completion of the quantitative impairment test, the Company determined that certain of the Company's aerospace-related trade names had carrying values that exceeded their fair values, and therefore recorded impairment charges of approximately $ 7.8 million.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The gross carrying amounts and accumulated amortization of the Company's other intangibles as of December 31, 2020 and 2019 are summarized below (dollars in thousands):

As of December 31, 2019

As of December 31, 2018

Intangible Category by Useful Life

Gross Carrying

As of December 31, 2020 As of December 31, 2019

Intangible Category by Useful Life Gross Carrying

Amount Accumulated

Amortization Gross Carrying

Amount Accumulated

Finite-lived intangible assets:

8 unchanged sentences

Total other intangible assets $ 400,370 $ ( 194,170 ) $ 334,720 $ ( 173,330 )

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Amortization expense related to intangible assets as included in the accompanying consolidated statement of income is summarized as follows (dollars in thousands):

Amortization expense related to intangible assets as included in the accompanying consolidated statement of operations is summarized as follows (dollars in thousands):

Year ended December 31,

2020 2019 2018

Technology and other, included in cost of sales $ 4,930 $ 4,780 $ 4,890

2 unchanged sentences

Estimated amortization expense for the next five fiscal years beginning after December 31, 2020 is as follows (dollars in thousands):

Year ended December 31,

Estimated Amortization Expense

Year ended December 31, Estimated Amortization Expense

2021 $ 21,790

2022 $ 18,230

2023 $ 16,330

2024 $ 14,830

2025 $ 14,480

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

2020 December 31,

Finished goods $ 78,010 $ 68,350

4 unchanged sentences

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

2020 December 31,

Land and land improvements $ 20,040 $ 19,110

1 unchanged sentence

Machinery and equipment 384,010 326,990

496,020 430,980

Accumulated depreciation 242,960 216,650

Property and equipment, net $ 253,060 $ 214,330

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

Year ended December 31,

2020 2019 2018

Depreciation expense, included in cost of sales $ 27,920 $ 23,700 $ 20,890

3 unchanged sentences

Accrued liabilities consist of the following components (dollars in thousands):

2020 December 31,

Accrued payroll $ 23,140 $ 16,390

High deductible insurance 4,980 5,720

Other 32,420 19,910

Total accrued liabilities $ 60,540 $ 42,020

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Long-term Debt

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

2020 December 31,

4.875% Senior Notes due October 2025 $ 300,000 $ 300,000

Credit Agreement 50,450 —

Debt issuance costs ( 4,160 ) ( 5,310 )

Long-term debt, net $ 346,290 $ 294,690

In September 2017, the Company issued $ 300.0 million aggregate principal amount of 4.875 % senior notes due October 15, 2025 ("Senior Notes") at par value in a private placement under Rule 144A of the Securities Act of 1933, as amended.

The Company used the proceeds from the offering to fully repay the $ 250.9 million principal, plus $ 0.4 million related interest, outstanding on its former senior secured term loan A facility due 2020 ("Term Loan A Facility"), repay approximately $ 41.7 million of outstanding obligations under the Company's accounts receivable facility, pay fees and expenses of $ 5.0 million related to the Senior Notes offering, pay fees and expenses of $ 1.1 million related to amending its existing credit agreement, with the remaining amount retained as cash on its consolidated balance sheet.

Of the $ 5.0 million of fees and expenses related to the Senior Notes, approximately $ 4.9 million was capitalized as debt issuance costs and approximately $ 0.1 million was recorded as debt financing and related expenses in the accompanying consolidated statement of income.

The Senior Notes accrue interest at a rate of 4.875 % per annum, payable semi-annually in arrears on April 15 and October 15, commencing on April 15, 2018 .

The Company has $ 300.0 million aggregate principal amount of 4.875 % senior notes outstanding due October 15, 2025 ("Senior Notes").

The Senior Notes accrue interest at a rate of 4.875 % per annum, payable semi-annually in arrears on April 15 and October 15.

The payment of principal and interest is jointly and severally guaranteed, on a senior unsecured basis, by certain subsidiaries of the Company (each a "Guarantor" and collectively the "Guarantors").

The Senior Notes are pari passu in right of payment with all existing and future senior indebtedness and subordinated to all existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Prior to October 15, 2020, the Company may redeem up to 35 % of the principal amount of the Senior Notes at a redemption price of 104.875 % of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds of one or more equity offerings provided that each such redemption occurs within 90 days of the date of closing of each such equity offering.

In addition, the Company may redeem all or part of the Senior Notes at a redemption price equal to 100 % of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, plus a "make whole" premium.

On or after October 15, 2020, the Company may redeem all or part of the Senior Notes at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, to the redemption date, if redeemed during the twelve-month period beginning on October 15 of the years indicated below:

The Company may redeem all or part of the Senior Notes at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, if redeemed during the twelve-month period beginning on October 15 of the years indicated below:

Year Percentage

2020 102.438 %

2021 101.219 %

2022 and thereafter 100.000 %

Credit Agreement

The Company is party to a credit agreement ("Credit Agreement") consisting of a $ 300.0 million senior secured revolving credit facility, which permits borrowings denominated in specific foreign currencies, subject to a $ 125.0 million sub limit, matures on September 20, 2022 and is subject to interest at London Interbank Offered Rate ("LIBOR") plus 1.50 % .

The Company is 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 September 20, 2022 and is subject to interest at London Interbank Offered Rate ("LIBOR") plus 1.50 %.

The interest rate spread is based upon the leverage ratio, as defined, as of the most recent determination date.

1 unchanged sentence

The terms and conditions of any incremental revolving credit facility commitments must be no more favorable than the existing credit facility.

The Company amended its existing credit agreement in 2017 in connection with the Senior Notes offering and extended the maturity date, increased the permitted borrowings denominated in specific foreign currencies, removed the Term Loan A Facility and resized the revolving credit facility.

The Company incurred fees and expenses of approximately $ 1.1 million related to the amendment, all of which was capitalized as debt issuance costs.

The Company also recorded approximately $ 2.0 million non-cash expense related to the write-off of previously capitalized deferred financing fees within debt financing and related expenses in the accompanying consolidated statement of income.

The Company's revolving credit facility allows for the issuance of letters of credit, not to exceed $ 40.0 million in aggregate.

At December 31, 2019 , the Company had no amounts outstanding under its revolving credit facility and had $ 283.9 million potentially available after giving effect to approximately $ 16.1 million of letters of credit issued and outstanding.

During 2020, the Company placed cash on deposit with a financial institution to be held as cash collateral for the Company's outstanding letters of credit;

therefore, as of December 31, 2020, the Company had no letters of credit issued against its revolving credit facility.

See Note 8, " Cash and Cash Equivalents ," for further information on its cash deposits.

At December 31, 2020, the Company had $ 50.5 million outstanding under its revolving credit facility and had $ 249.5 million potentially available.

At December 31, 2019, the Company had no amounts outstanding under its revolving credit facility and had $ 283.9 million potentially available after giving effect to approximately $ 16.1 million of letters of credit issued and outstanding.

The Company's borrowing capacity was not reduced by leverage restrictions contained in the Credit Agreement as of December 31, 2020 and December 31, 2019.

The Company previously drew $ 150 million on its revolving credit facility in March 2020 to defend against potential uncertainty or liquidity issues in the financial markets as a result of the COVID-19 pandemic, but repaid this amount during second quarter 2020.

TRIMAS CORPORATION

3 unchanged sentences

The Credit Agreement also contains various negative and affirmative covenants and other requirements affecting the Company and its subsidiaries, including the ability to, subject to certain exceptions and limitations, incur debt, liens, mergers, investments, loans, advances, guarantee obligations, acquisitions, assets dispositions, sale-leaseback transactions, hedging agreements, dividends and other restricted payments, transactions with affiliates, restrictive agreements and amendments to charters, bylaws, and other material documents.

The terms of the Credit Agreement also require the Company and its restricted subsidiaries to meet certain restrictive financial covenants and ratios computed quarterly, including a maximum total net leverage ratio (total consolidated indebtedness plus outstanding amounts under the accounts receivable securitization facility, less the aggregate amount of certain unrestricted cash and unrestricted permitted investments, as defined, over consolidated EBITDA, as defined), a maximum senior secured net leverage ratio (total consolidated senior secured indebtedness, less the aggregate amount of certain unrestricted cash and unrestricted permitted investments, as defined, over consolidated EBITDA, as defined) and a minimum interest expense coverage ratio (consolidated EBITDA, as defined, over the sum of consolidated cash interest expense, as defined, and preferred dividends, as defined).

The terms of the Credit Agreement also require the Company and its restricted subsidiaries to meet certain restrictive financial covenants and ratios computed quarterly, including a maximum total net leverage ratio (total consolidated indebtedness plus outstanding amounts under any accounts receivable securitization facility, less the aggregate amount of certain unrestricted cash and unrestricted permitted investments, as defined, over consolidated EBITDA, as defined), a maximum senior secured net leverage ratio (total consolidated senior secured indebtedness, less the aggregate amount of certain unrestricted cash and unrestricted permitted investments, as defined, over consolidated EBITDA, as defined) and a minimum interest expense coverage ratio (consolidated EBITDA, as defined, over the sum of consolidated cash interest expense, as defined, and preferred dividends, as defined).

At December 31, 2020, the Company was in compliance with the financial covenants contained in the Credit Agreement.

Receivables Facility

In March 2018, the Company terminated its accounts receivable facility previously utilized through TSPC, Inc.

("TSPC"), a wholly-owned subsidiary.

The facility was used to sell trade accounts receivable of substantially all of the Company's domestic business operations.

Under this facility, TSPC, from time to time, could sell an undivided fractional ownership interest in the pool of receivables up to $ 75.0 million to a third-party multi-seller receivables funding company.

The cost of funds under this facility consisted of a 1-month LIBOR-based rate plus a usage fee of 1.00 % and a fee on the unused portion of the facility of 0.35 % .

Aggregate costs incurred under the facility were $ 0.1 million and $ 1.0 million for the years ended December 31, 2018 and 2017 , respectively, and are included in interest expense in the accompanying consolidated statement of income.

Long-term Debt Maturities

2 unchanged sentences

Future Maturities

Total $ 350,450

Fair Value of Debt

1 unchanged sentence

The carrying amounts and fair values were as follows (dollars in thousands):

December 31, 2019

December 31, 2018

Carrying Amount

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2020 December 31, 2019

Carrying Amount Fair Value Carrying Amount Fair Value

Senior Notes $ 300,000 $ 305,630 $ 300,000 $ 309,000

Revolving credit facility 50,450 50,450 — —

Debt Issuance Costs

1 unchanged sentence

These amounts consisted primarily of legal, accounting and other transaction advisory fees as well as facility fees paid to the lenders.

Amortization expense for these items was approximately $ 1.1 million , $ 1.3 million and $ 1.3 million in 2019 , 2018 and 2017 , respectively, and is included in interest expense in the accompanying consolidated statement of income.

Amortization expense for these items was approximately $ 1.2 million, $ 1.1 million and $ 1.3 million in 2020, 2019 and 2018, respectively, and is included in interest expense in the accompanying consolidated statement of operations.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Derivative Instruments

Derivatives Designated as Hedging Instruments

In October 2018, the Company entered into cross-currency swap agreements to hedge its net investment in Euro-denominated assets against future volatility in the exchange rate between the U.S.

The Company uses cross-currency swap contracts to hedge its net investment in Euro-denominated assets against future volatility in the exchange rate between the U.S.

dollar and the Euro.

By doing so, the Company synthetically converted a portion of its U.S.

By doing so, the Company synthetically converts a portion of its U.S.

dollar-based long-term debt into Euro-denominated long-term debt.

The agreements have a five year tenor at notional amounts declining from $ 125.0 million to $ 75.0 million over the contract period.

Under the terms of the swap agreements, the Company is to receive net interest payments at a fixed rate of approximately 2.9 % of the notional amount.

At inception, the cross-currency swaps were designated as net investment hedges.

In October 2018, immediately prior entering into the new cross-currency swap agreements, the Company terminated its existing cross-currency swap agreements, de-designating the swaps as net investment hedges and receiving approximately $ 1.1 million of cash.

The cross-currency swap agreements were entered into in October 2017 and hedged the Company's net investment in Euro-denominated assets against future volatility in the exchange rate between the U.S.

dollar and the Euro.

The agreements had a five year tenor at notional amounts declining from $ 150.0 million to $ 75.0 million over the contract period.

Under the terms of the swap agreements, the Company was to receive net interest payments at a fixed rate of approximately 2.1 % of the notional amount.

The Company has historically utilized interest rate swap agreements to fix the LIBOR-based variable portion of the interest rate on its long-term debt.

Prior to its debt refinancing in September 2017, the Company had interest rate swap agreements in place that hedged a declining notional value of debt ranging from approximately $ 238.4 million to approximately $ 192.7 million , amortizing consistent with future scheduled debt principal payments.

The interest rate swap agreements required the Company to receive a variable interest rate and pay a fixed interest rate in a range of 0.74 % to 2.68 % with various expiration terms extending to June 30, 2020 .

At inception, the interest rate swaps were designated as cash flow hedges.

In September 2017, immediately following the debt refinancing, the Company determined the likelihood of the hedged transactions occurring was not probable and de-designated the interest rate swaps as cash flow hedges and terminated the interest rate swaps for a cash payment of approximately $ 4.7 million .

There were no interest rate swaps outstanding as of December 31, 2017.

The cash flows associated with the cash flow hedges are reported in net cash provided by operating activities in the accompanying consolidated statement of cash flows.

Up to the date of the termination, the Company utilized hedge accounting, which allows for the effective portion of the interest rate swaps to be recorded in AOCI in the accompanying consolidated balance sheet.

At the date the Company de-designated the swaps as effective hedges, there was approximately $ 2.9 million (net of tax of $ 1.8 million ) of unrealized losses remaining in AOCI, which were reclassified into debt financing and related expenses in the accompanying consolidated statement of income during 2017.

In November 2020, the Company entered into additional cross-currency swap agreements at notional amounts declining from $ 50.0 million to $ 25.0 million over the contract period ending April 15, 2025.

Under the terms of the swap agreements, the Company is to receive net interest payments at a fixed rate of approximately 0.8 % of the notional amount.

As of December 31, 2020, the notional amount of these cross-currency swaps was $ 50.0 million.

In October 2018, the Company entered into cross-currency swap agreements at notional amounts declining from $ 125.0 million to $ 75.0 million over the contract period ending October 15, 2023.

Under the terms of the swap agreements, the Company is to receive net interest payments at a fixed rate of approximately 2.9 % of the notional amount.

As of December 31, 2020, the notional amount of these cross-currency swaps was $ 100.0 million.

In October 2018, immediately prior to entering into the new cross-currency swap agreements, the Company terminated its existing cross-currency swap agreements, de-designating the swaps as net investment hedges and receiving approximately $ 1.1 million of cash.

As of December 31, 2020 and 2019, the fair value carrying amount of the Company's derivatives designated as hedging instruments are recorded as follows (dollars in thousands):

Asset / (Liability) Derivatives

Derivatives designated as hedging instruments

Balance Sheet Caption

December 31, 2019

December 31, 2018

Derivatives designated as hedging instruments Balance Sheet Caption December 31, 2020 December 31, 2019

Net Investment Hedges

Cross-currency swaps

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cross-currency swaps Other assets $ — $ 4,460

Cross-currency swaps Other long-term liabilities ( 5,000 ) —

The following table summarizes the income recognized in AOCI on derivative contracts designated as hedging instruments as of December 31, 2020 and 2019, and the amounts reclassified from AOCI into earnings for the years ended December 31, 2020, 2019 and 2018 (dollars in thousands):

Amount of Income Recognized

Amount of Income (Loss) Recognized

in AOCI on Derivative

(Effective Portion, net of tax)

Location of Loss Reclassified from AOCI into Earnings

(Effective Portion)

Amount of Loss Reclassified from

(Effective Portion, net of tax) Location of Loss Reclassified from AOCI into Earnings

(Effective Portion) Amount of Loss Reclassified from

AOCI into Earnings

As of December 31,

Year ended December 31,

As of December 31, Year ended December 31,

2020 2019 2020 2019 2018

Net Investment Hedges

Cross-currency swaps

Other expense, net

Cash Flow Hedges

Interest rate swaps

Interest expense

Debt financing and related expenses

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

Cross-currency swaps $ ( 3,580 ) $ 4,230 Other expense, net $ — $ — $ —

Over the next 12 months, the Company does no t expect to reclassify any pre-tax deferred amounts from AOCI into earnings.

Derivatives Not Designated as Hedging Instruments

2 unchanged sentences

The foreign exchange contracts primarily mitigate currency exposures between the U.S.

dollar and the Euro, British pound and the Chinese yuan, and have various settlement dates through March 2020.

dollar and the Euro, British pound, Mexican peso and the Chinese yuan, and have various settlement dates through April 2021.

These contracts are not designated as hedging instruments;

therefore, gains and losses on these contracts are recognized each period directly into the consolidated statement of income.

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

therefore, gains and losses on these contracts are recognized each period directly into the consolidated statement of operations.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Amount of Loss Recognized in Earnings on Derivatives

4 unchanged sentences

Derivatives not designated as hedging instruments

Foreign exchange contracts

Other income (expense), net

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Foreign exchange contracts Other income (expense), net $ ( 470 ) $ ( 600 ) $ —

Fair Value of Derivatives

2 unchanged sentences

Fair value measurements and the fair value hierarchy level for the Company's assets and liabilities measured at fair value on a recurring basis as of December 31, 2020 and 2019 are as follows (dollars in thousands):

Asset / (Liability)

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

Description Frequency Asset / (Liability) Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

December 31, 2020

Cross-currency swaps

Foreign exchange contracts

Cross-currency swaps Recurring $ ( 5,000 ) $ — $ ( 5,000 ) $ —

Foreign exchange contracts Recurring $ 140 $ — $ 140 $ —

December 31, 2019

Cross-currency swaps

Cross-currency swaps Recurring $ 4,460 $ — $ 4,460 $ —

Foreign exchange contracts Recurring $ ( 770 ) $ — $ ( 770 ) $ —

The Company leases certain equipment and facilities under non-cancelable operating leases.

2 unchanged sentences

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

Year ended December 31, 2019

Year ended December 31, 2020 Year ended December 31, 2019

Operating lease cost $ 7,870 6,380

1 unchanged sentence

Total lease cost $ 9,410 $ 7,520

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Year ended December 31,

Operating Leases (a)

Year ended December 31, Operating Leases (a)

Thereafter 12,700

Total lease payments 43,880

2 unchanged sentences

__________________________

The maturity table excludes cash flows associated with exited lease facilities.

(a) The maturity table excludes cash flows associated with exited lease facilities.

Liabilities for exited lease facilities are included in accrued liabilities and other long-term liabilities in the accompanying consolidated balance sheet.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The weighted-average remaining term of the Company's operating leases as of December 31, 2020 is approximately 6.8 years.

The weighted-average discount rate as of December 31, 2020 is approximately 4.4 %.

Cash paid for amounts included in the measurement of operating lease liabilities during the year ended December 31, 2019 was approximately $ 6.4 million , and is included in cash flows provided by operating activities in the consolidated statement of cash flows.

Right-of-use assets obtained in exchange for lease liabilities during the year ended December 31, 2019 was approximately $ 1.4 million .

Rental expense for operating leases as classified under prior authoritative lease guidance for the Company was approximately $ 5.8 million in 2018 and $ 9.5 million in 2017 .

Minimum payments for operating leases having initial or remaining non-cancelable lease terms in excess of one year at December 31, 2018 as classified under prior authoritative lease guidance were as follows (dollars in thousands):

Year ended December 31,

Minimum Payments

Cash paid for amounts included in the measurement of operating lease liabilities was approximately $ 7.9 million and $ 6.4 million during 2020 and 2019, respectively, and is included in cash flows provided by operating activities in the consolidated statement of cash flows.

Right-of-use assets obtained in exchange for lease liabilities were approximately $ 14.0 million and $ 1.4 million during 2020 and 2019, respectively, primarily due to acquisitions.

Rental expense for operating leases as classified under prior authoritative lease guidance for the Company was approximately $ 5.8 million in 2018.

Other Long-term Liabilities

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

2020 December 31,

Non-current asbestos-related liabilities $ 26,170 $ 6,200

Other long-term liabilities 43,520 34,610

Total other long-term liabilities $ 69,690 $ 40,810

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Commitments and Contingencies

7 unchanged sentences

Future events, including those relating to climate change or greenhouse gas regulation, could require the Company to incur expenses related to the modification or curtailment of operations, installation of pollution control equipment or investigation and cleanup of contaminated sites.

As of December 31, 2019 , the Company was a party to 346 pending cases involving an aggregate of 4,759 claimants primarily alleging personal injury from exposure to asbestos containing materials formerly used in gaskets (both encapsulated and otherwise) manufactured or distributed by certain of its subsidiaries for use primarily in the petrochemical refining and exploration industries.

The following chart summarizes the number of claimants, number of claims filed, number of claims dismissed, number of claims settled, the average settlement amount per claim and the total defense costs, excluding amounts reimbursed under the Company's primary insurance, at the applicable date and for the applicable periods:

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

pending at end of period

Total defense

As of December 31, 2020, the Company was a party to 337 pending cases involving an aggregate of 4,655 claimants primarily alleging personal injury from exposure to asbestos containing materials formerly used in gaskets (both encapsulated and otherwise) manufactured or distributed by Lamons and certain other related subsidiaries for use primarily in the petrochemical refining and exploration industries.

The following chart summarizes the number of claims, number of claims filed, number of claims dismissed, number of claims settled, the average settlement amount per claim and the total defense costs, at the applicable date and for the applicable periods:

period Claims filed

period Claims

pending at end of period Average

period Total defense

Fiscal year ended December 31, 2020 4,759 219 287 36 4,655 $ 18,314 $ 2,130,000

3 unchanged sentences

The Company believes that many of the pending cases relate to locations at which none of its gaskets were distributed or used.

The Company may be subjected to significant additional asbestos-related claims in the future, the cost of settling cases in which product identification can be made may increase, and the Company may be subjected to further claims in respect of the former activities of its acquired gasket distributors.

The Company is unable to make a meaningful statement concerning the monetary claims made in the asbestos cases given that, among other things, claims may be initially made in some jurisdictions without specifying the amount sought or by simply stating the requisite or maximum permissible monetary relief, and may be amended to alter the amount sought.

The Company may be subjected to significant additional asbestos-related claims in the future, and will aggressively defend or reasonably resolve, as appropriate.

The cost of settling cases in which product identification can be made may increase, and the Company may be subjected to further claims in respect of the former activities of its acquired gasket distributors.

The cost of claims varies as claims may be initially made in some jurisdictions without specifying the amount sought or by simply stating the requisite or maximum permissible monetary relief, and may be amended to alter the amount sought.

The large majority of claims do not specify the amount sought.

Of the 4,655 claims pending at December 31, 2020, 40 set forth specific amounts of damages (other than those stating the statutory minimum or maximum).

At December 31, 2019 , of the 56 claims that set forth specific amounts, there was one claim seeking more than $ 5 million for punitive damages.

Below is a breakdown of the amount sought for those claims seeking specific amounts:

Range of damages sought (in millions)

At December 31, 2020, of the 40 claims that set forth specific amounts, there were no claims seeking specific amounts for punitive damages.

Below is a breakdown of the compensatory damages sought for those claims seeking specific amounts:

Range of damages sought (in millions) $0.0 to $0.6 $0.6 to $5.0 $5.0+

Number of claims — 6 34

In addition, relatively few of the claims have reached the discovery stage and even fewer claims have gone past the discovery stage.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Relatively few claims have reached the discovery stage and even fewer claims have gone past the discovery stage.

Total settlement costs (exclusive of defense costs) for all such cases, some of which were filed over 25 years ago, have been approximately $ 10.0 million.

All relief sought in the asbestos cases is monetary in nature.

To date, approximately 40 % of the Company's costs related to settlement and defense of asbestos litigation have been covered by its primary insurance.

Effective February 14, 2006, the Company entered into a coverage-in-place agreement with its first level excess carriers regarding the coverage to be provided to the Company for asbestos-related claims when the primary insurance is exhausted.

The coverage-in-place agreement makes asbestos defense costs and indemnity insurance coverage available to the Company that might otherwise be disputed by the carriers and provides a methodology for the administration of such expenses.

The Company's primary insurance exhausted in November 2018, and the Company is solely responsible for defense costs and indemnity payments prior to the commencement of coverage under this agreement, the duration of which would be subject to the scope of damage awards and settlements paid.

Based on the settlements made to date and the number of claims dismissed or withdrawn for lack of product identification, the Company believes that the relief sought (when specified) does not bear a reasonable relationship to its potential liability.

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

Metaldyne Corporation

Prior to 2002, the Company was wholly-owned by Metaldyne Corporation ("Metaldyne").

In connection with the reorganization between TriMas and Metaldyne in 2002, TriMas assumed certain liabilities and obligations of Metaldyne, mainly comprised of contractual obligations to former TriMas employees, tax related matters, benefit plan liabilities and reimbursements to Metaldyne of normal course payments to be made on TriMas' behalf.

There has been significant volatility in the historical number of claim filings and costs to defend, with previous claim counts and spend levels much higher than current levels.

Management believes this volatility was associated more with tort reform, plaintiff practices and state-specific legal dockets than the Company’s underlying asbestos-related exposures.

In the past three years, however, the number of new claim filings, and costs to defend, have become much more consistent, ranging between 143 to 173 new claims per year and total defense costs ranging between $ 2.2 million and $ 2.3 million.

The higher degree of consistency in census data and spend levels, as well as lower claim activity levels and an evolving defense strategy, has allowed the Company to more effectively and efficiently manage claims, making process or local counsel arrangement improvements where possible.

Given the consistency of activity over a multi-year period, the Company believed a trend may have formed where it could be possible to reasonably estimate its future cash exposure for all asbestos-related activity with an adequate level of precision.

As such, the Company commissioned an actuary to help evaluate the nature and predictability of its asbestos-related costs, and provide an actuarial range of estimates of future exposures.

Based upon its review of the actuarial study, which was completed in June 2020 using data as of December 31, 2019 and which projected spend levels through a terminal year of 2064, the Company affirmed its belief that it now has the ability to reasonably estimate its future asbestos-related exposures for pending as well as unknown future claims.

This accounting change has been reflected as a change in accounting estimate effected by a change in accounting principle.

In connection with this second quarter 2020 change, the Company recorded a non-cash, pre-tax charge for asbestos-related costs of approximately $ 23.4 million which is included in selling, general and administrative expenses in the accompanying consolidated statement of operations.

The study from the Company’s actuary, based on data as of December 31, 2019, provided for a range of possible future liability from $ 31.5 million to $ 43.3 million.

The Company did not believe any amount within the range of potential outcomes represented a better estimate than another given the many factors and assumptions inherent in the projections, and therefore recorded the $ 23.4 million charge to increase the liability estimate to $ 31.5 million, at the low-end of the range.

As of December 31, 2020, the Company’s total asbestos-related liability is $ 28.7 million, and is included in accrued liabilities and other long-term liabilities, respectively, in the accompanying consolidated balance sheet.

The Company’s primary insurance, which covered approximately 40 % of historical costs related to settlement and defense of asbestos litigation, expired in November 2018, upon which the Company became solely responsible for defense costs and indemnity payments.

The Company is party to a coverage-in-place agreement (entered into in 2006) with its first level excess carriers regarding the coverage to be provided to the Company for asbestos-related claims.

The Company will continue to be solely responsible for defense costs and indemnity payments prior to the commencement of coverage under this agreement, the duration of which would be subject to the scope of damage awards and settlements paid.

Based upon the Company’s review of the actuarial study, the Company does not believe it is probable that it will reach the threshold of qualified future settlements required to commence excess carrier insurance coverage under the coverage-in-place agreement.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In 2007, Metaldyne merged into a subsidiary of Asahi Tec Corporation (“Asahi”) whereby Metaldyne became a wholly-owned subsidiary of Asahi, and in 2009, Metaldyne and its U.S.

subsidiaries filed voluntary petitions in the United States Bankruptcy Court under Chapter 11 of the U.S.

Bankruptcy Code.

In January 2018, the U.S.

Bankruptcy Court entered a final decree to close all remaining cases and finalize the Metaldyne bankruptcy distribution trust, effectively terminating any potential obligation by TriMas to Metaldyne.

In consideration of the final decree, the Company removed the obligation from its balance sheet during the first quarter of 2018, resulting in an approximate $ 8.2 million non-cash reduction in selling, general and administrative expenses in the accompanying consolidated statement of income.

While the Company recorded a significant non-cash charge in the six months ended June 30, 2020 in connection with its change in accounting policy, based upon the Company's experience to date, including the trend in annual defense and settlement costs incurred to date, and other available information (including the availability of excess insurance), the Company does not believe these cases will have a material adverse effect on its financial position or cash flows.

Claims and Litigation

4 unchanged sentences

The plan contains both contributory and noncontributory profit sharing arrangements, as defined.

Aggregate charges included in the accompanying consolidated statement of income under this plan for both continuing and discontinued operations were approximately $ 4.6 million , $ 4.2 million and $ 3.8 million in 2019 , 2018 and 2017 , respectively.

Aggregate charges included in the accompanying consolidated statement of operations under this plan for both continuing and discontinued operations were approximately $ 3.4 million, $ 4.6 million and $ 4.2 million in 2020, 2019 and 2018, respectively.

Certain of the Company's non-U.S.

1 unchanged sentence

Plan Assets, Expenses and Obligations

Net periodic pension benefit expense recorded in the Company's consolidated statement of income for defined benefit pension plans include the following components (dollars in thousands):

Net periodic pension benefit expense recorded in the Company's consolidated statement of operations for defined benefit pension plans include the following components (dollars in thousands):

Pension Benefit

2020 2019 2018

Service cost $ 1,230 $ 1,050 $ 1,120

Interest cost 930 1,070 1,100

3 unchanged sentences

Net periodic benefit expense $ 1,600 $ 1,300 $ 4,180

The service cost component of net periodic benefit expense is recorded in cost of goods sold and selling, general and administrative expenses, while non-service cost components are recorded in other expense, net in the accompanying consolidated statement of income.

During 2018, the Company recognized one-time settlement and curtailment charges of approximately $ 2.6 million, of which approximately $ 2.5 million was due to the purchase of an annuity contract to transfer certain U.S.

1 unchanged sentence

The annuity contract was funded by plan assets.

The estimated net actuarial loss and prior service cost for defined benefit pension plans that is expected to be amortized from AOCI into net periodic benefit expense in 2020 is approximately $ 0.9 million .

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Actuarial valuations of the Company's defined benefit pension plans were prepared as of December 31, 2020, 2019 and 2018.

2 unchanged sentences

Pension Benefit

2020 2019 2018

Discount rate for obligations 2.79 % 3.41 % 4.50 %

Discount rate for benefit costs 3.41 % 4.50 % 4.37 %

Rate of increase in compensation levels

Rate of increase in compensation levels N/A N/A N/A

Expected long-term rate of return on plan assets 6.13 % 7.13 % 7.13 %

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company utilizes a high-quality (Aa or greater) corporate bond yield curve as the basis for its domestic discount rate for its pension benefit plans.

3 unchanged sentences

Pension Benefit

2020 2019 2018

Discount rate for obligations 1.50 % 2.10 % 3.00 %

2 unchanged sentences

Expected long-term rate of return on plan assets 4.10 % 4.60 % 4.60 %

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following provides a reconciliation of the changes in the Company's defined benefit pension plans' projected benefit obligations and fair value of assets for each of the years ended December 31, 2020 and 2019 and the funded status as of December 31, 2020 and 2019 (dollars in thousands):

2 unchanged sentences

Benefit obligations at January 1 $ ( 36,580 ) $ ( 30,300 )

Service cost ( 1,230 ) ( 1,050 )

Interest cost ( 930 ) ( 1,070 )

Participant contributions ( 60 ) ( 60 )

Actuarial gain (loss)

Actuarial loss (a)

( 2,420 ) ( 4,190 )

Benefit payments 1,140 900

Annuity purchase

Settlements and curtailments

Change in foreign currency ( 750 ) ( 810 )

6 unchanged sentences

Benefit payments ( 1,140 ) ( 900 )

Annuity purchase

Change in foreign currency 960 890

1 unchanged sentence

Funded status at December 31 $ ( 4,770 ) $ ( 6,320 )

__________________________

(a) The actuarial losses for the year ended December 31, 2020 and 2019 were primarily due to a decrease in the discount rate utilized in measuring the projected benefit obligations, partially offset by other assumptions and experience gains.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Pension Benefit

Amounts Recognized in Balance Sheet

Prepaid benefit cost

Other assets $ 4,470 $ 1,690

Current liabilities ( 340 ) ( 330 )

6 unchanged sentences

Total accumulated other comprehensive loss recognized at December 31 $ 11,640 $ 13,430

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accumulated Benefit Obligations

Projected Benefit Obligations

Accumulated Benefit Obligations Projected Benefit Obligations

2020 2019 2020 2019

Benefit Obligations at December 31,

2 unchanged sentences

Benefit obligations $ ( 16,820 ) $ ( 14,840 ) $ ( 16,940 ) $ ( 14,910 )

Plan assets $ 7,700 $ 6,890 $ 7,700 $ 6,890

The assumptions regarding discount rates and expected return on plan assets can have a significant impact on amounts reported for benefit plans.

2 unchanged sentences

December 31, 2020

Benefit Obligation

Benefit Obligation 2020 Expense

Discount rate

2 unchanged sentences

Expected return on assets

50 basis point increase

50 basis point decrease

50 basis point increase N/A $ ( 170 )

50 basis point decrease N/A $ 170

The Company expects to make contributions of approximately $ 3.6 million to fund its pension plans during 2021.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company's overall investment goal is to provide for capital growth with a moderate level of volatility by investing assets in targeted allocation ranges.

3 unchanged sentences

The actual weighted average asset allocation of the Company's domestic and foreign pension plans' assets at December 31, 2020 and 2019 and target allocations by class, were as follows:

Domestic Pension

Foreign Pension

Domestic Pension Foreign Pension

Actual Actual

Target 2020 2019 Target 2020 2019

Equity securities 60 % 67 % 62 % 33 % 33 % 30 %

Fixed income 36 % 32 % 34 % 45 % 44 % 46 %

Diversified growth (a)

— % — % — % 22 % 22 % 23 %

Cash and other 4 % 1 % 4 % — 1 % 1 %

Total 100 % 100 % 100 % 100 % 100 % 100 %

________________________________________

(a) Diversified growth funds invest in a broad range of asset classes including equities, investment grade and high yield bonds, commodities, property, private equity, infrastructure and currencies.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Actual allocations to each asset vary from target allocations due to periodic investment strategy changes, market value fluctuations and the timing of benefit payments and contributions.

3 unchanged sentences

Investment policies reflect the unique circumstances of the respective plans and include requirements designed to mitigate these risks by including quality and diversification standards.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the level under the fair value hierarchy (see Note 3, " Summary of Significant Accounting Policies ") that the Company's pension plan assets are measured, on a recurring basis as of December 31, 2020 (dollars in thousands):

Total Level 1 Level 2 Level 3

Plan assets subject to leveling

1 unchanged sentence

Equity securities $ 5,160 $ 5,160 $ — $ —

Fixed income 2,500 2,500 — —

Cash and cash equivalents 310 310 — —

2 unchanged sentences

Equity securities 9,180

Fixed income 12,880

Diversified growth 5,870

Cash and cash equivalents 160

Total $ 36,060 $ 7,970 $ — $ —

________________________________________

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The Company maintains the following long-term equity incentive plans (collectively, the "Plans"):

Shares Approved for Issuance

Plan Names Shares Approved for Issuance

TriMas Corporation 2017 Equity and Incentive Compensation Plan

TriMas Corporation Director Retainer Share Election Program

The Company previously maintained the 2006 Long Term Equity Incentive Plan, which expired in 2016, and the 2011 Omnibus Incentive Compensation Plan, which was replaced by the TriMas Corporation 2017 Equity and Incentive Compensation Plan in 2017, such that, while existing grants remain outstanding until exercised, vested or canceled, no new shares may be issued under these plans.

The Company previously maintained the 2011 Omnibus Incentive Compensation Plan, which was replaced by the TriMas Corporation 2017 Equity and Incentive Compensation Plan in 2017, such that, while existing grants remain outstanding until exercised, vested or canceled, no new shares may be issued under the plan.

Stock Options

The Company did not grant any stock options during 2019 , 2018 and 2017 .

The Company did no t grant any stock options during 2020, 2019 and 2018.

Information related to stock options as of and for the year ended December 31, 2020 is as follows:

Stock Options

Weighted Average

Contractual Life (Years)

Stock Options Weighted Average

Option Price Average

Contractual Life (Years) Aggregate

Intrinsic Value

Outstanding at January 1, 2020 150,000 $ 17.87

Exercised — —

Cancelled — —

Outstanding at December 31, 2020 150,000 $ 17.87 5.6 $ 2,070,000

As of December 31, 2019 , all 150,000 stock options outstanding were exercisable under the Plans.

Stock options of 50,000 vested during each of 2019 , 2018 and 2017 , respectively.

The Company recognized approximately $ 0.1 million , $ 0.2 million and $ 0.5 million of stock-based compensation expense related to stock options during 2019 , 2018 and 2017 , respectively.

The stock-based compensation expense is included in selling, general and administrative expenses in the accompanying consolidated statement of income.

As of December 31, 2020, the 150,000 stock options outstanding were exercisable under the Company's long-term equity incentive plans and there was no unrecognized compensation cost related to stock options.

No stock options vested during 2020 and 50,000 stock options vested during each of 2019 and 2018.

The Company recognized no stock-based compensation expense related to stock options during 2020 and approximately $ 0.1 million and $ 0.2 million of stock-based compensation expense related to stock options during 2019 and 2018, respectively.

The stock-based compensation expense is included in selling, general and administrative expenses in the accompanying consolidated statement of operations.

Restricted Stock Units

During 2019 , 2018 and 2017 , the Company issued 139,575 , 141,203 , and 189,062 RSUs, respectively, to certain employees which are subject only to a service condition and vest ratably over three years so long as the employee remains with the Company.

During 2019 , 2018 and 2017 , the Company granted 25,872 , 25,830 and 30,429 RSUs, respectively, to its non-employee independent directors, which vest one year from date of grant so long as the director and/or Company does not terminate their service prior to the vesting date.

The Company awarded the following restricted stock units ("RSUs") during 2020, 2019, and 2018:

• granted 190,650 , 139,575 , and 141,203 RSUs, respectively, to certain employees, which are subject only to a service condition and vest ratably over three years so long as the employee remains with the Company;

• granted 30,590 , 25,872 and 25,830 RSUs, respectively, to its non-employee independent directors, which vest one year from date of grant so long as the director and/or Company does not terminate their service prior to the vesting date;

• issued 3,673 , 4,494 and 7,263 RSUs, respectively, related to director fee deferrals as certain of the Company's directors elected to defer all or a portion of their directors fees and to receive the amount in Company common stock at a future date.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During 2019 , the Company awarded 95,882 performance-based RSUs to certain Company key employees which vest three years from the grant date as long as the employee remains with the Company.

These awards are earned 50.0 % based upon the Company's achievement of earnings per share compound annual growth rate ("EPS CAGR") metrics over a period beginning January 1, 2019 and ending December 31, 2021.

The Company awarded the following RSUs during 2020:

• granted 31,816 RSUs to certain employees, which are subject only to a service condition and fully vest at the end of three years so long as the employee remains with the Company;

• granted 2,558 RSUs to certain employees, which are subject only to a service condition and vest one year from the date of grant so long as the employee remains with the Company.

During 2020, the Company awarded 113,146 performance-based RSUs to certain key employees which vest three years from the grant date as long as the employee remains with the Company.

These awards are earned 50 % based upon the Company's achievement of an earnings per share compound annual growth rate ("EPS CAGR") metric over a period beginning January 1, 2020 and ending December 31, 2022.

The remaining 50 % of the awards are earned based on the Company's total shareholder return ("TSR") relative to the TSR of the common stock of a pre-defined industry peer-group, measured over the performance period.

TSR is calculated as the Company's average closing stock price for the 20 trading days at the end of the performance period plus Company dividends, divided by the Company's average closing stock price for the 20 trading days prior to the start of the performance period.

The Company estimated the grant-date fair value and term of the awards subject to a market condition using a Monte Carlo simulation model, using the following weighted average assumptions:

risk-free interest rate of 2.29 % and annualized volatility of 26.7 % .

Depending on the performance achieved for these two metrics, the amount of shares earned, if any, can vary from 0 % of the target award to a maximum of 200 % of the target award for the EPS CAGR metric and 0 % of the target award to a maximum of 200 % of the target award for the TSR metric.

The Company estimates the grant-date fair value subject to a market condition using a Monte Carlo simulation model, using the following weighted average assumptions:

risk-free rate of 0.56 % and annualized volatility of 26.2 %.

Depending on the performance achieved for these two metrics, the amount of shares earned, if any, can vary for each metric from 0 % of the target award to a maximum of 200 % of the target award.

The Company awarded 95,882 and 104,532 of similar performance-based RSUs in 2019 and 2018, respectively.

For similar performance-based RSUs awarded in 2017, the Company attained 127.4 % of the target on a weighted average basis, resulting in an increase of 27,567 shares during 2020.

The Company allows for its non-employee independent directors to make an annual election to defer all or a portion of their director fees and to receive the deferred amount in cash or equity.

Certain of the Company's directors have elected to defer all or a portion of their director fees and to receive the amount in Company common stock at a future date.

The Company issued 4,494 , 7,263 and 12,912 shares in 2019 , 2018 and 2017 , respectively, related to director fee deferrals.

In addition, the Company awarded 87,034 performance-based RSUs to certain key divisional employees which vest three years from the grant date as long as the employee remains with the Company.

These awards are earned based upon the Company's stock price performance over the period from January 1, 2020 and ending December 31, 2022.

The stock price achievement is calculated based on the Company's average closing stock price for each quarter end for the 20 trading days up to and including March 31, June 30, September 30, and December 31, 2022, respectively.

The Company estimates the grant-date fair value subject to a market condition using a Monte Carlo simulation model, using the following weighted average assumptions:

risk free rate of 0.85 % and annualized volatility of 25.2 %.

Depending on the performance achieved for this metric, the amount of shares earned, if any, can vary from 0 % of the target award to a maximum of 160 % of the target award, although it automatically is earned at the target award level if the Company's stock price is equal to or greater than a specified stock price for either five consecutive trading days or 20 total trading days during the performance period.

Information related to restricted shares as of and for the year ended December 31, 2020 is as follows:

Shares Weighted

Fair Value Average

Life (Years) Aggregate

Intrinsic Value

Outstanding at January 1, 2020 622,528 $ 30.77

Granted 487,034 21.43

Vested ( 302,924 ) 27.88

Cancelled ( 21,670 ) 27.53

Outstanding at December 31, 2020 784,968 $ 26.46 1.2 $ 24,859,937

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The Company recognized stock-based compensation expense related to restricted shares of approximately $ 8.2 million, $ 5.7 million and $ 6.9 million in 2020, 2019 and 2018, respectively.

The stock-based compensation expense is included in selling, general and administrative expenses in the accompanying statement of income.

The stock-based compensation expense is included in selling, general and administrative expenses in the accompanying statement of operations.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Earnings per Share

Net income is divided by the weighted average number of common shares outstanding during the year to calculate basic earnings per share.

Diluted earnings per share is calculated to give effect to stock options and RSUs.

The following table summarizes the dilutive effect of restricted shares and options to purchase common stock:

For the year ended December 31, 2020, no restricted shares or stock options were included in the computation of net income (loss) per share because to do so would be anti-dilutive.

The following table summarizes the dilutive effect of RSUs and options to purchase common stock:

Year ended December 31,

2020 2019 2018

Weighted average common shares—basic 43,581,232 45,303,659 45,824,555

Dilutive effect of restricted share awards

Dilutive effect of restricted stock units — 224,946 242,204

Dilutive effect of stock options — 66,549 103,705

Weighted average common shares—diluted 43,581,232 45,595,154 46,170,464

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In November 2019 , the Company announced that its Board of Directors increased the Company's common stock share repurchase authorization to $ 150 million .

The initial authorization, approved in November 2015, authorized up to $ 50 million in the aggregate of its common stock.

During 2019 and 2018 , the Company purchased 1,230,050 and 442,632 shares of its outstanding common stock for approximately $ 36.7 million and $ 12.1 million , respectively.

The Company did not purchase any shares of its outstanding common stock during 2017 .

In March 2020, the Company announced its Board of Directors had authorized the Company to increase the purchase of its common stock up to $ 250 million in the aggregate.

The initial authorization, approved in November 2015, authorized up to $ 50 million of purchases in the aggregate of its common stock.

During 2020, 2019 and 2018, the Company purchased 1,582,049 , 1,230,050 and 442,632 shares of its outstanding common stock for approximately $ 39.4 million, $ 36.7 million and $ 12.1 million, respectively.

As of December 31, 2020, the Company has approximately $ 161.7 million remaining under the repurchase authorization.

Other Comprehensive Income

Changes in AOCI by component for the year ended December 31, 2020 are summarized as follows, net of tax (dollars in thousands):

Defined Benefit Plans

Derivative Instruments

Foreign Currency Translation

Defined Benefit Plans Derivative Instruments Foreign Currency Translation Total

Balance, December 31, 2019 $ ( 9,930 ) $ 4,230 $ ( 300 ) $ ( 6,000 )

Net unrealized gains (losses) arising during the period (a)

670 ( 7,810 ) 6,880 ( 260 )

Net realized losses reclassified to net income (b)

( 640 ) — — ( 640 )

Net current-period other comprehensive income (loss) 1,310 ( 7,810 ) 6,880 380

Reclassification of stranded tax effects

Balance, December 31, 2020 $ ( 8,620 ) $ ( 3,580 ) $ 6,580 $ ( 5,620 )

6 unchanged sentences

See Note 18, " Employee Benefit Plans ," for additional details .

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Changes in AOCI by component for the year ended December 31, 2019 are summarized as follows, net of tax (dollars in thousands):

Defined Benefit Plans

Derivative Instruments

Foreign Currency Translation

Defined Benefit Plans Derivative Instruments Foreign Currency Translation Total

Balance, December 31, 2018 $ ( 7,200 ) $ 940 $ ( 10,590 ) $ ( 16,850 )

Net unrealized gains (losses) arising during the period (a)

( 1,870 ) 3,300 ( 2,060 ) ( 630 )

Net realized losses reclassified to net income (b)

( 400 ) — ( 12,350 ) ( 12,750 )

Net current-period other comprehensive income (loss) ( 1,470 ) 3,300 10,290 12,120

Reclassification of stranded tax effects ( 1,260 ) ( 10 ) — ( 1,270 )

Balance, December 31, 2019 $ ( 9,930 ) $ 4,230 $ ( 300 ) $ ( 6,000 )

__________________________

(a) Derivative instruments, net of income tax expense of $ 1.2 million .

(a) Defined benefit plans, net of income tax of $ 0.5 million.

See Note 18, " Employee Benefit Plans ," for additional details.

Derivative instruments, net of income tax expense of $ 1.0 million.

See Note 14, " Derivative Instruments ," for further details.

1 unchanged sentence

See Note 18, "Employee Benefit Plans," for additional details.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Segment Information

TriMas is organized into three reportable segments:

TriMas reports its operations in three segments:

Packaging, Aerospace and Specialty Products.

Each of these segments has discrete financial information that is regularly evaluated by TriMas’ president and chief executive officer (chief operating decision maker) in determining resource, personnel and capital allocation, as well as assessing strategy and performance.

The Company utilizes its proprietary TriMas Business Model as a standardized set of processes to manage and drive results and strategy across its multi-industry businesses.

The Company utilizes its proprietary TriMas Business Model as its platform which is based upon a standardized set of processes to manage and drive results and strategy across its multi-industry businesses.

Within the Company's reportable segments, there are no individual products or product families for which reported net sales accounted for more than 10% of the Company's consolidated net sales.

See below for more information regarding the types of products and services provided within each reportable segment:

Packaging – The Packaging segment, which consists primarily of the Rieke ® , Taplast and Stolz brands, develops and manufactures a broad array of dispensing products (such as foaming pumps, mist pumps, lotion pumps, and trigger sprayers), polymeric and steel caps and closures, and polymeric jar products for a variety of end markets including, but not limited to, health, beauty and home care, food and beverage, and industrial.

Aerospace – The Aerospace segment, which includes the Monogram Aerospace Fasteners ™ , Allfast Fastening Systems ® and Mac Fasteners ™ brands, develops, qualifies and manufactures highly-engineered, precision fasteners and machined products to serve the aerospace market.

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

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

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

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

TRIMAS CORPORATION

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Year ended December 31,

2020 2019 2018

Packaging $ 488,340 $ 392,340 $ 368,200

Aerospace 167,740 194,110 185,920

Specialty Products 113,890 137,080 150,910

Total $ 769,970 $ 723,530 $ 705,030

Operating Profit (Loss)

Packaging $ 93,990 $ 80,770 $ 84,590

Aerospace ( 133,440 ) 28,950 27,290

Specialty Products 4,350 16,000 20,990

Corporate ( 53,190 ) ( 34,500 ) ( 24,060 )

Total $ ( 88,290 ) $ 91,220 $ 108,810

Capital Expenditures

Packaging $ 30,730 $ 16,400 $ 13,590

Aerospace 5,770 8,110 1,190

Specialty Products 3,890 5,090 3,750

Corporate (a)

Total $ 40,480 $ 29,670 $ 23,420

Depreciation and Amortization

Packaging $ 27,600 $ 24,650 $ 21,620

Aerospace 18,130 15,090 15,190

Specialty Products 3,910 3,480 3,400

Corporate 130 280 280

Total $ 49,770 $ 43,500 $ 40,490

Packaging $ 721,440 $ 546,950 $ 435,140

Aerospace 348,190 393,260 392,140

Specialty Products 65,520 77,250 82,610

Corporate 58,730 175,240 95,260

Subtotal from continuing operations 1,193,880 1,192,700 1,005,150

Discontinued operations — — 95,370

Total $ 1,193,880 $ 1,192,700 $ 1,100,520

________________________________________

(a) Corporate capital expenditures for the years ended December 31, 2018 and 2017, respectively, are primarily related to purchases of machinery and equipment formerly held under operating leases.

These purchased assets were subsequently transferred from Corporate to the reportable segment utilizing the assets.

(a) Corporate capital expenditures for the year ended December 31, 2018 are primarily related to purchases of machinery and equipment formerly held under operating leases.

These purchased assets were subsequently transferred from Corporate to the segment utilizing the assets.

TRIMAS CORPORATION

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As of December 31,

Long-lived Assets

2020 2019 2018

Sales Long-lived Assets Net

Sales Long-lived Assets

Europe $ 116,350 $ 225,120 $ 87,420 $ 110,530 $ 54,920 $ 53,770

Asia Pacific 46,350 41,140 37,920 40,720 38,920 44,230

Other Americas 11,740 19,510 6,290 18,430 6,170 7,500

Total non-U.S.

174,440 285,770 131,630 169,680 100,010 105,500

595,530 477,460 591,900 540,680 605,020 550,990

Total $ 769,970 $ 763,230 $ 723,530 $ 710,360 $ 705,030 $ 656,490

The Company's export sales from the U.S.

approximated $ 70.0 million, $ 74.1 million and $ 69.9 million in 2020, 2019 and 2018, respectively.

The Company's income before income taxes and income tax expense, each by tax jurisdiction, consists of the following (dollars in thousands):

The Company's income (loss) before income taxes and income tax expense (benefit), each by tax jurisdiction, consists of the following (dollars in thousands):

Year ended December 31,

Income before income taxes:

Total income before income taxes

2020 2019 2018

Income (loss) before income taxes:

Domestic $ ( 134,630 ) $ 52,190 $ 64,670

Foreign 31,920 26,070 27,690

Total income (loss) before income taxes $ ( 102,710 ) $ 78,260 $ 92,360

Current income tax expense:

Federal $ 200 $ 3,530 $ 4,410

State and local 810 1,280 2,060

Foreign 7,750 7,070 6,200

Total current income tax expense 8,760 11,880 12,670

Deferred income tax expense (benefit):

Federal ( 16,900 ) 4,890 4,570

State and local ( 4,430 ) 500 1,310

Total deferred income tax expense

Income tax expense

Foreign ( 10,380 ) ( 950 ) 100

Total deferred income tax expense (benefit) ( 31,710 ) 4,440 5,980

Income tax expense (benefit) $ ( 22,950 ) $ 16,320 $ 18,650

TRIMAS CORPORATION

1 unchanged sentence

The components of deferred taxes are as follows (dollars in thousands):

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Deferred tax assets:

Accounts receivable $ 260 $ 480

Inventories 5,080 4,390

Accrued liabilities and other long-term liabilities 19,190 12,210

1 unchanged sentence

Tax loss and credit carryforwards 20,760 9,200

Other, principally deferred income

Other 340 340

Gross deferred tax asset 54,580 33,410

8 unchanged sentences

Net deferred tax liability $ ( 5,270 ) $ ( 16,330 )

The following is a reconciliation of income tax expense computed at the U.S.

federal statutory rate to income tax expense allocated to income before income taxes (dollars in thousands):

The following is a reconciliation of income tax expense (benefit) computed at the U.S.

federal statutory rate to income tax expense (benefit) allocated to income (loss) before income taxes (dollars in thousands):

Year ended December 31,

2020 2019 2018

federal statutory rate 21 % 21 % 21 %

3 unchanged sentences

Change in recognized tax benefits ( 920 ) ( 920 ) ( 560 )

Goodwill and other intangible assets impairment 13,430 — —

Nontaxable income — ( 570 ) ( 940 )

2 unchanged sentences

Tax Reform Act — — ( 400 )

Income tax expense

Other, net ( 1,020 ) ( 1,150 ) ( 600 )

Income tax expense (benefit) $ ( 22,950 ) $ 16,320 $ 18,650

During 2020, the Company undertook certain tax-planning actions with respect to intercompany debt restructuring within the group.

These actions resulted in the recognition of an approximate $ 6.4 million deferred tax benefit related to an interest limitation carryforward.

The Company has recorded deferred tax assets on $ 43.4 million of various state operating loss carryforwards and $ 61.6 million of various foreign operating loss carryforwards.

The majority of the state tax loss carryforwards expire between 2026 and 2032 and the majority of the foreign losses have indefinite carryforward periods.

The Company has not made a provision for U.S.

or additional foreign withholding taxes related to investments in foreign subsidiaries that are indefinitely reinvested since any excess of the amount for financial reporting over the tax basis in these investments is not significant as of December 31, 2019 .

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In December 2017, the Tax Reform Act was signed into law, and, among the provisions, reduced the Federal statutory corporate income tax rate from 35 % to 21 % effective January 1, 2018, and implemented a territorial tax system, imposing a one-time tax on the deemed repatriation of undistributed earnings of non-U.S.

The Company has not made a provision for U.S.

In December 2017, the Tax Cuts and Jobs Act ("Tax Reform Act") was signed into law, and, among the provisions, reduced the Federal statutory corporate income tax rate from 35 % to 21 % effective January 1, 2018, and implemented a territorial tax system, imposing a one-time tax on the deemed repatriation of undistributed earnings of non-U.S.

subsidiaries ("Transition Tax").

2 unchanged sentences

In 2018, the Company recognized an approximate $ 1.1 million income tax benefit in connection with finalizing the revaluation of its net deferred tax assets following the filing of the Company's 2017 corporate income tax return, and recognized an approximate $ 0.7 million income tax expense related to finalizing the Transition Tax, resulting in a $ 0.4 million net reduction in 2018 to the $ 12.7 million provisional tax expense recorded in 2017.

As of December 31, 2019, the U.S Internal Revenue Service (“IRS”) is still in the process of issuing guidance to taxpayers to address changes enacted in the Tax Reform Act.

The Company has prepared the income tax provision for years ended December 31, 2019 and 2018 based on available guidance.

However, if final guidance is issued that modifies the existing temporary guidance issued by the IRS or if the final guidance contradicts positions taken by the Company in the absence of any IRS guidance, this could have a significant impact on the Company's consolidated financial statements.

Unrecognized Tax Benefits

4 unchanged sentences

Tax positions related to current year:

Additions 110

Tax positions related to prior years:

Settlements —

Lapses in the statutes of limitations ( 880 )

1 unchanged sentence

Tax positions related to current year:

Additions 150

Tax positions related to prior years:

Settlements —

Lapses in the statutes of limitations ( 760 )

1 unchanged sentence

In addition to the UTBs summarized above, the Company has recorded approximately $ 0.8 million and $ 1.4 million in potential interest and penalties associated with uncertain tax positions as of December 31, 2020 and 2019, respectively.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company is subject to U.S.

3 unchanged sentences

The Company does not believe that the results of these examinations will have a significant impact on the Company's tax position or its effective tax rate.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Management monitors changes in tax statutes and regulations and the issuance of judicial decisions to determine the potential impact to UTBs and is not aware of, nor does it anticipate, any subsequent events that could have a significant impact on the Company's financial position during the next twelve months.

Summary Quarterly Financial Data

The Company's unaudited quarterly financial data is as follows (dollars in thousands, except for per share data):

As of December 31, 2019

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Income from continuing operations

Income from discontinued operations, net of income taxes

Earnings per share—basic:

Continuing operations

Discontinued operations

Net income per share

Weighted average shares—basic

Earnings per share—diluted:

Continuing operations

Discontinued operations

Net income per share

Weighted average shares—diluted

As of December 31, 2018

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Income from continuing operations

Income from discontinued operations, net of income taxes

Earnings per share—basic:

Continuing operations

Discontinued operations

Net income per share

Weighted average shares—basic

Earnings per share—diluted:

Continuing operations

Discontinued operations

Net income per share

Weighted average shares—diluted

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Subsequent Events

On February 19, 2020, the Company announced that it has signed an agreement to acquire the Rapak ® brand, including certain bag-in-box product lines and assets ("Rapak") from Liqui-Box, for a purchase price of $ 12 million .

As a regulatory condition, the acquisition is subject to Liqui-Box's successful completion of its acquisition of DS Smith's Plastic Division.

Annual net sales related to the acquired products is approximately $ 30 million .

The transaction is expected to close in the first half of 2020, at which time Rapak will become part of the Packaging reportable segment.

On January 30, 2020, the Company announced that it has signed an agreement to acquire RSA Engineered Products ("RSA") for a purchase price of $ 85 million , subject to customary closing conditions.

RSA is a manufacturer of complex, highly-engineered and proprietary ducting, connectors and related products for air management systems used in aerospace and defense applications, and has annual net sales of approximately $ 30 million .

The transaction is expected to close during the first quarter of 2020, at which time RSA will become part of the Aerospace reportable segment.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data