TRIMAS CORP 10-K

Item 1. Business Overview TriMas is a diversified manufacturer and provider of products for customers primarily in the consumer products, aerospace and industrial markets. Our wide range of innovative product solutions are engineered and designed to solve application-specific challenges that our customers face. We believe our businesses share important and distinguishing characteristics, including: well-recognized and leading brand names in the focused markets we serve; innovative product technologies and features; customer approved processes and qualified products; established distribution networks; relatively low ongoing capital investment requirements; strong cash flow conversion and long-term growth opportunities. With approximately 3,200 employees in eleven countries, we manufacture and supply products globally to a wide range of companies, with nearly 75% of our 2020 revenue generated from sales into North America. During 2020, our net sales were $770.0 million, operating loss was $88.3 million, which included non-cash goodwill and indefinite-lived intangible asset impairment pre-tax charges of approximately $134.6 million in the Aerospace segment, and net cash provided by operating activities was $127.4 million. On December 20, 2019, we completed the previously announced divestiture of our Lamons business ("Lamons"), a transaction entered into on November 1, 2019 with an investment fund sponsored by First Reserve. Lamons was sold for approximately $137 million in cash. The financial results of Lamons were previously reported within our Specialty Products segment, and are presented as discontinued operations for all periods presented in the financial statements attached hereto. Our Competitive Strengths Our operations are reported in three segments: Packaging, Aerospace and Specialty Products. We believe TriMas is uniquely positioned because of a number of competitive strengths, including: • Well-Recognized and Established Brands. Our main brands include Rieke®, Affaba & Ferrari™, Taplast™ and Rapak ® (reported in Packaging); TriMas Aerospace™, Monogram Aerospace Fasteners™, Allfast Fastening Systems ® , Mac Fasteners™, RSA Engineered Products and Martinic Engineering™ (reported in Aerospace); and Norris Cylinder™ and Arrow ® Engine Company (reported in Specialty Products). We believe each of our go-to-market brands are well-recognized and firmly established in the focused markets we serve. We believe our brands represent high standards and a commitment to quality and service that our customers rely on when they make their sourcing decisions. • Innovative and Proprietary Manufacturing and Product Technologies. We believe each of our businesses is well-positioned through years of refined manufacturing know-how, innovative product development, application engineering and solutions design. We believe our manufacturing competencies and installed capital base would be difficult and costly to replicate, providing us an advantage. We continue to place a priority on investing in innovation to protect and enhance our product designs, brand names and manufacturing methods. • Customer-Focused Solutions and Long-Term Customer Relationships. We work collaboratively with our customers to design new product applications that help satisfy rapidly changing preferences in the consumer product marketplace. As a recognized leader in many of our markets, customers partner with us during both the product development and production life cycle. These ongoing relationships, often developed over decades, coupled with our expertise in innovation and application engineering, position us to win new and replacement business with our customers when they launch new products or programs. Customers look to TriMas’ businesses for these product innovations because of our long-standing, trusted relationships. • Well-Established, Extensive Distribution Channels. Each of our businesses provides products through established distribution channels that cater to the specific needs of our customers’ purchasing preferences. We developed many of these channels over decades, and believe they are a competitive differentiator for us across the markets we serve. In many cases, we provide products directly to our end markets through our locations, while in other cases, we supply to distribution companies that provide our customers with flexible purchasing solutions. 4 Table of Contents • TriMas Business Model. We implemented the TriMas Business Model ("TBM") in late 2016 to improve the management, performance and oversight of our businesses. The TBM is the framework that provides a platform of standards across TriMas, which allows the executive management team to communicate how we plan, budget, measure, review, incent and reward our employees. It provides the foundation for determining our priorities, executing our growth and productivity initiatives, and allocating capital and resources. Through the TMB, we set near- and long-term performance objectives and goals, including safety, financial, and talent development, measure these against defined objectives, and utilize a reliable communication and escalation process that provides for flexibility and adjustments if market expectations change. We believe the TBM enhances connectivity between our operations, and allows us to benefit from sharing best practices across each of our businesses. We believe that the TBM, through a culture of Kaizen and continuous improvement, helps drive long-term improvement in our performance. Since implementation, we have rationalized manufacturing, warehousing and office locations, streamlined fixed expenses and selling, general and administrative expenses in certain of our businesses, increased our focus on optimizing inventory levels and improved certain of our manufacturing processes. We believe actions driven by the TBM have provided a benefit to us and have augmented our cash conversion characteristics and performance overall. We will continue to rely on the TBM to drive continuous improvement and to unlock TriMas’ value potential. Our Growth Strategy Guided by our experienced management team and our commitment to operational excellence, we are focused on the following components that comprise our core growth strategy: • Leverage the TriMas Business Model to Drive Performance. A key tenet of the TBM is our commitment to operational excellence and continuous improvement. We adopted the use of Kaizen methodology within our operations, which is predicated on engaging our employees to improve all aspects of our businesses. We believe our operating performance will continue to benefit from the use of Kaizen as a means to drive our decision-making processes. In addition to continuous improvement, the TBM is also focused on environmental, health and safety, annual goal setting and measurement, flawless launches and talent development. • Accelerate Organic Growth through Innovation. We continue to invest in organic growth in our most compelling market segments with the highest long-term return potential. We intend to leverage our brands, expand our product offerings to current and new customers, and introduce innovative products to meet our customers' needs and help solve their challenges. We believe our disciplined approach will allow us to defend and expand our product offerings, and grow our business over the longer term. In addition to product innovation, we also value process innovation and believe we can solidify our customer relationships using new innovative processes and manufacturing "know-how" to improve our quality, speed to market and overall competitiveness, increasing customer satisfaction, as well as our performance. • Expand our Core Platforms through Strategic Acquisitions. We believe that TriMas has opportunities to grow through strategic acquisitions that enhance the strengths of our core businesses. Our primary focus is on acquisition candidates to build out our Packaging and Aerospace platforms, as we believe the markets they serve offer the highest long-term growth and performance profile. We typically seek "bolt-on" acquisitions, in which we acquire another industry participant or adjacent product lines that expand our existing product offerings, gain access to new customers, end markets and distribution channels, expand our geographic footprint and/or capitalize on scale and cost efficiencies. • Drive Enhanced Cash Conversion. We use the TBM to drive management’s decision-making processes to achieve our annual growth and profitability targets, as well as drive our businesses toward achieving market-leading returns and cash flow conversion. We believe our commitment to having well-defined strategies in place, setting and executing against annual goals and long-range targets, operating in a data-driven environment, and awarding our team on annual cash flow achievement will allow us to grow our businesses and enhance our cash flow and related cash conversion. We believe we have the ability to generate substantial cash flow for reinvestment in our businesses, strategic acquisitions and other capital allocation actions consistent with our long-term financial goals. 5 Table of Contents Our Reportable Segments We report the results of our operations in three segments, which had net sales and operating profit/loss for the year ended December 31, 2020 as follows: Packaging (net sales: $488.3 million; operating profit: $94.0 million), Aerospace (net sales: $167.7 million; operating loss: $133.4 million, which includes non-cash goodwill and indefinite-lived intangible asset impairment charges) and Specialty Products (net sales: $113.9 million; operating profit: $4.4 million). For information pertaining to the net sales and operating profit attributed to our segments, refer to Note 22, " Segment Information ," included in Item 8, " Financial Statements and Supplementary Data ," within this Form 10-K. Effective with the first quarter of 2020, we reported our machined components operations in Stanton, California, and Tolleson, Arizona, as part of the Aerospace segment. The operations were previously reported in the Specialty Products segment. The move of these operations into our Aerospace segment facilitated a more rapid approach to achieving anticipated synergies from the February 2020 RSA Engineered Products acquisition, allowing the Company to better leverage the machining competencies and resources across its aerospace businesses. Each of our segments is described in more detail on the following pages. Packaging (63% of 2020 net sales) TriMas' Packaging segment consists primarily of the Rieke, Affaba & Ferrari, Taplast and Rapak brands. We believe our Packaging segment is a leading designer and manufacturer of specialty, highly-engineered polymeric and steel closure and dispensing systems for a range of end markets, including consumer packaging and industrial markets. We manufacture high-performance, value-added products that are designed to enhance its customers’ ability to store, transport, process and dispense various products. Our Packaging segment designs and manufactures dispensing products, (including foaming pumps, lotion and hand soap pumps, sanitizer pumps, beverage dispensers, perfume sprayers, nasal sprayers and trigger sprayers), polymeric and steel caps and closures (including food lids, flip-top closures, child resistance caps, drum and pail closures and flexible spouts), polymeric jar products, and fully integrated dispensers for fill-ready bag-in-box applications, all for a variety of consumer product markets including, but not limited to, beauty and personal care, home care, food and beverage, and pharmaceutical and nutraceutical, as well as the industrial market. During 2020, we acquired the Rapak ® brand in April and Affaba & Ferrari Srl in December to continue to expand our packaging platform. The acquisition of the Rapak brand included certain bag-in-box product lines and assets used in dairy, soda, smoothie and wine applications in the United States. Affaba & Ferrari, with a highly-automated manufacturing operation in Italy, designs and manufactures aseptic closures for energetic, juice and dairy drinks, as well as industrial closures and flex spouts with tamper evident and child-proof features. During 2019, we acquired Plastic Srl and Taplast. Plastic Srl, with operations in Italy, is a manufacturer of single-bodied and assembled caps and closures for use in home care product applications. Taplast, with operations in Italy and Slovakia, is a designer and manufacturer of dispensers, closures and containers for the beauty and personal care, household, and food and beverage packaging markets. TriMas' Packaging segment has the capability of manufacturing the majority of its products in North America, Europe or Asia, which allows us to evaluate manufacturing location decisions based on customer needs, timing, cost and capacity. 6 Table of Contents Competitive Strengths We believe TriMas' Packaging segment benefits from the following competitive strengths in coordination with operating under TriMas' overarching strategy: • Strong Product Innovation . Through its Global Innovation Centers located in India, the United Kingdom and the United States, our Packaging segment is focused on driving innovation across a broad range of dispensing and closure solutions for its customers. We have focused product development capabilities on consumer applications requiring special packaging forms, stylized containers and dispensing systems requiring a high degree of functionality and engineering, as well as evolving its industrial applications to include child resistant closures and other applications. Our Packaging segment has a consistent pipeline of new products ready for launch and continues to innovate to make products more environmentally friendly. For example, Rieke’s product development programs have provided innovative and proprietary product solution s, such as the patented single-polymer Mono TM -2e pump, which features six parts, all made from one material making it 100% recyclable. Taplast's AllPlastic TM pump, which contains 100% polyolefin materials, has a bellows technology that replaces the metal spring delivering an eco-friendly solution to our customers and consumers. In addition, Rieke, partnering with Amazon, also developed a range of products designed to meet the requirements of the high-growth e-commerce retail channel, including a proprietary dispenser locking mechanism to protect the integrity of package s and prevent liquids from leaking during shipment, such as the LDS TM -2e, a lotion pump, which was developed to meet consumers' demands and ISTA 6 standards as required by Amazon. TriMas' Packaging segment's emphasis on highly-engineered solutions and product development has yielded numerous issued and enforceable patents, with many other patent applications pending. For example, 45 patents were filed and 84 patents were issued in 2020. • Customized Solutions that Enhance Customer Loyalty and Relationships . A significant portion of our Packaging segment's products are customized designs that are developed and engineered to address specific customer technical, marketing and sustainability needs, helping to distinguish our customers’ products from those of their competitors. For example, the customization of specialty plastic caps, closures and dispensers including branding, unique colors, collar sizes, lining and venting results in substantial customer loyalty. The substantial investment in flexible manufacturing cells allows us to offer both short lead-times for high volume products and customization for more moderate volume orders, which provides significant advantages to our consumer packaged goods customer base. In addition, we provide customized dispensing solutions including unique pump designs, precision metering, unique colors and special collar sizes to fit the customer’s bottles. TriMas' Packaging segment is collaborating with customers to develop innovative products that are more eco-friendly and easier to recycle. We have also been successful in promoting the sale of complementary products in an effort to achieve preferred supplier status with several customers. • Global Sales and Manufacturing Footprint. TriMas' Packaging segment maintains a global network of sales, manufacturing and distribution sites, to serve our global customer base. Our global customers often desire supply chain capability and a flexible manufacturing footprint close to their end markets which result in shorter supply chains, reduced carbon footprint and better sustainability. To serve our customers in Asia, we have design and manufacturing capacity and offer highly engineered dispensing solutions through locations in China, India and Vietnam, and increased our Asian market sales coverage. Additionally, Rieke opened a facility in San Miguel de Allende, Mexico, during 2017, to replace an older, smaller facility in Mexico City, and provide additional manufacturing capacity to support growth. We have also increased our sales coverage in Europe and Asia. Our acquisitions of Affaba & Ferrari in 2020, and Plastic Srl and Taplast in 2019, provide us with additional sales, design and manufacturing capacity in Europe, with additional manufacturing facilities in Italy and Slovakia. We believe this flexible footprint provides us with multiple alternatives for production to best meet customer requirements and helps mitigate the impacts of potential trade disruption. The majority of our Packaging segment's manufacturing facilities around the world have advanced injection molding machines required to manufacture precision engineered dispensing and closure components, as well as automated, high-speed assembly equipment for multi-component products. Marketing, Customers and Distribution TriMas' Packaging segment accesses its markets through direct sales to end-use customers, as well as through leading distributors, where it has enjoyed favorable, long-standing relationships. Rieke employs an internal sales force in North America, Europe and Asia, and has recently established a Global Strategic Account sales team. We also use third-party agents and distributors in key geographic markets, including Europe, South America and Asia, as well as agents and distributors primarily to sell to container manufacturers and to users or fillers of containers. 7 Table of Contents TriMas' Packaging segment's end customers include, but are not limited to, consumer packaged goods, cosmetic, personal care, pharmaceutical, nutraceutical, food, beverage, warehouse clubs, retailers, e-retailers, fast food retailers, industrial chemical, paint, petroleum, agricultural chemical and sanitary supply chemical companies. We may provide products directly to the end customer, but the end customers may also specify that our products be provided to fillers or packagers. We also supply major container manufacturers around the world, and maintain a customer service center that provides technical support, as well as other technical assistance to customers. Our Packaging segment has manufacturing and distribution facilities in the United States, Mexico, the United Kingdom, Germany, Italy, Slovakia, China, India and Vietnam. Competition TriMas' Packaging segment has a broad range of products in both closures and dispensing systems, and therefore has various competitors in each of our product offerings. We do not believe that there is a single competitor that matches our entire product offering. Depending on the product and customers served, our competitors include Aptar, Bericap, Berry Global, CLC Packaging, Greif, Phoenix Closures, Silgan (including the acquisition of Albea in 2020), Technocraft and TKPC. Aerospace (22% of 2020 net sales) Our Aerospace segment is comprised of TriMas Aerospace, which includes the Monogram Aerospace Fasteners, Allfast Fastening Systems, Mac Fasteners, RSA Engineered Products and Martinic Engineering brands. We believe TriMas Aerospace is a leading designer and manufacturer of a diverse range of products, including, but not limited to, highly-engineered fasteners, collars, blind bolts, rivets, ducting and connectors for air management systems, and other highly-engineered machined parts and components, for use in focused markets within the aerospace industry. In general, these products are customer-specific and are manufactured utilizing customer-qualified and proprietary processes. The products also satisfy rigorous customer approvals or meet unique aerospace industry standards, and as such, we believe there are a limited set of competitors. We provide products to commercial, maintenance, repair and operations ("MRO"), and military and defense aerospace applications and platforms with sales to original equipment manufacturers ("OEMs"), supply chain distributors, MRO/aftermarket providers and tier one suppliers. Our customer-specified and/or qualified products are used in production of significant long-term aircraft programs, including several Boeing and Airbus commercial jetliner programs. Based on Boeing and Airbus' future aircraft delivery projections, we believe that commercial production will remain at stable levels through the next several years. We believe our brands are well established and recognized in their markets. The TriMas Aerospace product offering is as follows: • Monogram Aerospace Fasteners (“Monogram”). The product offering includes permanent threaded blind bolts, including high-strength, rotary-actuated blind bolts that allow sections of aircraft to be joined together when access is limited to only one side of the airframe, providing cost efficiencies over conventional two piece fastening devices. Monogram also provides collars and temporary fasteners used in aircraft construction and assembly. • Allfast Fastening Systems (“Allfast”). The product offering includes solid and blind rivets, blind bolts, temporary fasteners and installation tools for the aerospace industry. • Mac Fasteners. The product offering consists of high-volume, standard aerospace screws and bolts, manufactured to meet NAS, MS, AN and AS standards. • RSA Engineered Products (“RSA”). In February of 2020, we acquired RSA, a manufacturer of complex, highly-engineered and proprietary ducting, connectors and related products for air management systems used in aerospace and defense applications. • Martinic Engineering (“Martinic”). The product offering includes highly-engineered, precision machined, complex machine-to-print parts for aerospace applications, including auxiliary power units, as well as electrical, hydraulic and pneumatic systems. 8 Table of Contents Competitive Strengths We believe TriMas Aerospace benefits from the following competitive strengths in coordination with operating under TriMas' overarching strategy: • Broad Product Portfolio of Established Brands . We believe that TriMas Aerospace is a leading designer and manufacturer of engineered fasteners for the aerospace industry. The combination of the Monogram, Allfast and Mac Fasteners brands enables TriMas Aerospace to offer a wide range of fastener products which address a broad scope of customer requirements, providing scale to customers who continue to rationalize their supply base. In several of the product categories, including rotary-actuated blind bolts and blind and solid rivets, TriMas Aerospace has a meaningful market share with well-known and established brands. The combined product sets of the Monogram, Allfast and Mac Fasteners brands uniquely position us to benefit from platform-wide supply opportunities. In addition, RSA has extensive experience in providing air ducting, connectors and flexible joints used in hot engine bleed air, anti-icing and environmental control system applications. Martinic has a reputation, with more than 40 years of experience, of specializing in the high complexity machining of castings, forgings and bar stock for leading tier-one commercial and defense aerospace original equipment manufacturers. • Product Innovation. We believe that TriMas Aerospace’s engineering, research and development capability and new product focus are competitive advantages. For many years, TriMas Aerospace’s product development programs have provided innovative and proprietary product solutions. The close working relationship between our sales and engineering teams and our customers’ engineering teams is key to developing future products desired and required by our customers. Our innovation team adds value by working directly with our customers to address assembly and manufacturing process challenges to increase productivity, quality, speed and efficiency, while reducing overall installed cost. TriMas Aerospace has developed new fastener products that offer a flush break upon installation and is developing and testing other fastener designs which offer improved clamping characteristics on composite structures, improved aerodynamics and enhanced installed aesthetics. An example of such would include the newer Composi-Lok4 ® fastener evolution, affording installed weight savings in concert with fuel efficient aircraft designs. TriMas Aerospace has also designed the next generation temporary fastener with an 800% increase in clamping force called Fastack® SC (Super Clamp). TriMas Aerospace has also expanded its fastener offerings to include other fastening product applications on current aircraft, including the expansion of its suite of collar families used in traditional two-sided assembly. We believe our customer-focused approach to provide cost-effective technical solutions will drive the development of new products and create new opportunities for growth. • Leading Manufacturing Capabilities and Processes. We believe that TriMas Aerospace is a leading manufacturer of precision engineered components for the aerospace industry. Given industry regulatory requirements, as well as customer requirements, these products are required to be manufactured within tight tolerances and specifications, often out of hard-to-work-with and exotic materials including titanium, inconel and specialty steels. TriMas Aerospace is also capable of advanced precision CNC milling, high performance CNC turning and assembly, working in a variety of metals including super alloys, stainless steel, aircraft steel alloys, carbon steel alloys and aluminum alloys. Many of TriMas Aerospace’s products, facilities and manufacturing processes are required to be qualified and/or certified. Key certifications in TriMas Aerospace include: AS9100:2009 Revision D; ISO9001:2008; TSO; and NADCAP for non-destructive testing, heat treatment, wet processes and materials testing. While proprietary products and patents are important, having proprietary manufacturing processes and capabilities makes TriMas Aerospace’s products difficult to replicate. In addition, TriMas Aerospace is focused on continuously improving its processes and manufacturing operations by using the tools of Kaizen and automation, as applicable. The aerospace industry has strict requirements for quality and delivery, making process innovation and continuous improvement vital to TriMas Aerospace's success. We believe TriMas Aerospace’s manufacturing processes, capabilities and quality focus create a competitive strength for the business. Marketing, Customers and Distribution TriMas Aerospace serves both OEM and aftermarket customers on a wide variety of platforms. Given the focused nature of many of our products, TriMas Aerospace relies upon a global sales and technical team that is knowledgeable of both OEM customers and the established network of independent distributors. Although the markets for fasteners are highly competitive, we provide products and services primarily for specialized applications, and compete principally on technology, quality and service. TriMas Aerospace works directly with aircraft manufacturers to develop and test new products and improve existing products. TriMas Aerospace’s primary customers include OEMs, supply chain distributors, tier one suppliers and the United States government. 9 Table of Contents TriMas Aerospace's manufacturing facilities are located in the United States, and it exports products to Europe, South America and Asia. Competition Depending on the product and customers served, our primary competitors include Ateliers de la Haute Garonne, Cherry Aerospace - Precision Castparts Corp., Howmet Aerospace and LISI Aerospace, as well as a variety of aerospace and general industrial machined component manufacturers. We believe that we are a leader in the blind bolt market with significant market share in all blind fastener product categories in which we compete. Specialty Products (15% of 2020 net sales) Our Specialty Products segment is comprised of Norris Cylinder and Arrow Engine Company. We believe these businesses are well established and recognized in their respective markets. • Norris Cylinder . We believe Norris Cylinder is a leading designer, manufacturer and distributor of highly-engineered steel cylinders for use in industrial, heating, ventilation and air conditioning ("HVAC"), construction, health care and defense end markets. We believe that Norris Cylinder is a leading provider of a complete line of large, intermediate and small size, high and low-pressure steel cylinders for the transportation, storage and dispensing of compressed gases. Norris Cylinder’s large high-pressure seamless gas cylinders are used principally for shipping, storing and dispensing oxygen, nitrogen, argon, helium and other compressed gases. In addition, Norris Cylinder offers a complete line of steel cylinders used to contain and dispense acetylene gas for the welding and cutting industries. Norris Cylinder's products meet the rigorous standards required by the Department of Transportation ("DOT") or International Standards Organization ("ISO"), which certifies a cylinder's adequacy to perform in specific applications. Norris Cylinder markets cylinders primarily to domestic and international industrial gas producers and distributors, welding equipment distributors and equipment manufacturers. Given this customer base, Norris Cylinder tends to grow in times of increased industrial and infrastructure investment. • Arrow Engine . Arrow Engine is a provider of natural gas powered wellhead engines, compressors and replacement parts, all engineered for use in oil and natural gas production and other industrial and commercial markets. As Arrow's engines can operate from the natural gas produced at the wellhead, we believe Arrow is uniquely positioned to provide its products for remote pump jack installations. Arrow Engine distributes its products through a worldwide distribution network, primarily focused in the United States and Canada. Arrow Engine manufactures its own engine line and also offers a wide variety of spare parts for various industrial engines not manufactured by Arrow Engine. Competitive Strengths We believe our Specialty Products segment benefits from the following competitive strengths in coordination with operating under TriMas' overarching strategy: • Leading Market Positions and Strong Brand Names . Norris Cylinder, with more than 70 years of experience, is one of the worlds' largest manufacturers of high- and low-pressure steel cylinders, and the only manufacturer in the United States. We believe that Norris has a reputation for high-quality cylinders used in a variety of applications, including industrial gas, welding and cutting, government, medical, laboratories, food and beverage technology, breathing air, fire protection and aviation. We believe that Arrow Engine has also built a reputation for quality equipment, parts and accessories used in oil and natural gas production, and has a leading market position in the niche it serves. • Comprehensive Product Offering . We believe that both Norris Cylinder and Arrow Engine offer a comprehensive product offering that meets its customers' needs. Norris Cylinder offers a complete line of large, intermediate and small size, high and low-pressure steel cylinders to its customers across a variety of end markets. Arrow Engine also provides a comprehensive product offering, including engines, compressors, chemical pumps, generator sets, electronics and replacement parts to a variety of oilfield and industrial markets. • Established and Extensive Distribution Channels . Norris Cylinder has long-standing customer relationships and distributes directly to major gas companies, as well as distributing to domestic buying groups, OEMs, medium and small independent gas companies, and independent gas and welding distributors. Arrow Engine sells through a combination of a direct sales team and an established network of independent distributors. 10 Table of Contents Over the past several years, we realigned the cost structures of these businesses to better match recent demand levels. We are now focused on continuous improvement opportunities that will positively impact these businesses. We believe we are positioned well to leverage additional volume related to improvements in end market demand. Marketing, Customers and Distribution The primary customers of our Specialty Products segment operate in the industrial and upstream oil and gas end markets. Given the focused nature of many of our products, we rely upon a combination of a direct sales force and an established network of distributors with familiarity of the end-users. Norris Cylinder, for example, sells directly to customers and through distributors. Our primary customers include industrial gas producers and distributors, welding equipment distributors, and equipment manufacturers. The Norris Cylinder and Arrow Engine manufacturing facilities are located are in the United States. Competition Norris Cylinder competes against Worthington, Beijing Tianhai Industry Co., Faber and Vitkovice Cylinders, but is the only remaining steel cylinder manufacturer in the United States. In May 2012, the U.S. International Trade Commission made a unanimous final determination that Norris Cylinder had been materially injured by imports of DOT high-pressure steel cylinders that were being subsidized by the Government of China, as well as being dumped in the U.S. market by producers in China. As a result, trade duties were imposed on the subject imports for a five-year period to create a fairer competitive environment in the United States. The duty was extended and increased for an additional five-year period in 2017, and will be subject to renewal in 2022. Arrow Engine tends to compete against natural gas powered, lower horsepower, multi-cylinder engines from manufacturers such as Caterpillar, Chevy, Cummins and Ford industrial engines and electric motors. TriMas' Acquisition Strategy TriMas views accelerating its growth through acquisitions as core to achieving its overarching corporate growth strategy. Maintaining a relentless commitment to generating exceptional cash flow, along with a strong balance sheet, allows TriMas to execute against its acquisition strategy. Our primary focus is on acquisition candidates to build out our Packaging and Aerospace platforms, as we believe the markets they serve offer the highest long-term growth and performance profiles. We typically seek "bolt-on" acquisitions, in which we acquire another industry participant or adjacent product lines that expand our existing product offerings, gain access to new customers, end markets and distribution channels, expand our geographic footprint and/or capitalize on scale and cost efficiencies. While we would also consider opportunistic product line or bolt-on acquisitions in our Specialty Products segment, such transactions are of secondary focus. Materials and Supply Arrangements Our largest raw material purchases are for resins (such as polypropylene and polyethylene), steel, aluminum and other oil and metal-based purchased components. Raw materials and other supplies used in our operations are normally available from a variety of competing suppliers. In addition to raw materials, we purchase a variety of components and finished products from low-cost sources in China, India, Mexico, South Korea and Vietnam. Polypropylene and polyethylene are generally commodity resins with multiple suppliers capable of providing product globally. Steel is purchased primarily from steel mills and service centers. Changing global dynamics for steel production and supply will continue to present a challenge to our business. Historically, we have experienced volatility in costs of our raw material purchases and have worked with our suppliers to manage costs and disruptions in supply. We also utilize pricing programs to pass increased steel, resin and other raw material costs to customers. Although we may experience delays in our ability to implement price increases, we have been generally able to recover such increased costs. Human Capital Resources As of December 31, 2020, we employed approximately 3,200 people, of which approximately 50% were located outside the United States. We have one facility, located in Commerce, California (USA) where our hourly employees operate under a collective bargaining agreement, and which represents approximately 14% of our U.S. employees. We have four facilities outside of the United States where our employees are affiliated with state-controlled or trade unions, which covers approximately 41% of our non-U.S. employees. 11 Table of Contents We believe employee relations are good and are not aware of any present active union organizing activities at any of our facilities. We cannot predict the impact of any further unionization of our workplace. Our labor agreement with the United Automobile, Aerospace and Agricultural Implement Workers of America at our TriMas Aerospace facility in Commerce, California expires in August 2021 and we expect to enter into timely negotiations regarding the extension of our agreement. TriMas focuses on a number of human capital resources objectives in managing its business, including our commitment to safety, employee engagement, diversity and inclusion, and talent development. These human capital resources objectives, taken together, may be material to understanding our business under certain circumstances. These objectives are reinforced by our Code of Conduct, our global policies, including our Global Human Rights Policy, and our commitment to sustainability as evidenced in our inaugural 2020 Sustainability Report.These objectives are reinforced by our Code of Conduct, our global policies, including our Global Human Rights Policy, and our commitment to sustainability as evidenced in our inaugural 2020 Sustainability Report . Commitment to Safety One of our primary objectives is the health and safety of our employees and anyone who conducts business on our behalf. The commitment to safety starts at the top levels of our organization. We believe a safe and secure workplace is fundamental and important to our success. TriMas is committed to providing a safe and healthy workplace, and complying with applicable safety and health laws, regulations and internal requirements. We are also committed to engaging our employees to continually improve health and safety by acting upon opportunities to reduce risk and improve our safety and health performance. TriMas maintains comprehensive safety programs focused on identifying hazards and eliminating risks that can lead to severe injuries. Employee Engagement At TriMas, a commitment to continuous improvement is one of our core values and imperative to our long-term success. We embrace the tools of Kaizen and work to foster a culture of employee engagement to drive performance improvements and operational excellence. Diversity and Inclusion We believe we are at our best when we bring together unique perspectives, experiences and ideas, and actively build diverse teams and inclusive work environments across our global locations. We believe that tapping into our employees’ diverse backgrounds and experiences ensures we make better decisions and supports stronger operating performance. Our goal is to foster working environments that are fair and safe, where rights are respected and everyone can achieve their full potential. Our policies and practices strive to assure equal employment and advancement opportunities for all qualified people. We also work to maintain appropriate standards of conduct in the workplace and to be sensitive to the concerns of our diverse group of employees. We strive to maintain workplaces that are free from discrimination or harassment on the basis of race, religion, color, national origin, sex, age, genetic information, sexual orientation, gender identity, protected veteran status, disability or any other characteristic protected by applicable law. Talent Development We believe that a talented, engaged and dynamic workforce is vital to our success. We seek to hire, develop and retain individuals who embrace and thrive in our culture. Our culture is grounded in our values: Integrity, Customer-focused, Teamwork, Results-driven and Continuous Improvement. Our businesses strive to build robust talent pipelines through targeted recruitment initiatives across our global footprint. Our programs are intended to ensure seamless onboarding for our new employees. We identify and nurture talent through a culture that is designed to enable employees to succeed and grow into leadership positions. We believe that our diverse businesses and structure provide many opportunities for employees to follow their own path and advance their careers. We support a culture of continuous development, and we provide employees with the opportunity to receive frequent performance feedback. On a regular basis throughout the year, employees have goal alignment, performance and career development discussions with their managers (via annual goal setting, mid-year and year-end performance and talent reviews). At these times, employees receive candid feedback on their performance against set objectives. These reviews evaluate each employee’s strengths, skills and areas for opportunity, which are important for career development. Seasonality TriMas does not experience significant seasonal fluctuation, other than our fourth quarter, which has tended to be the lowest net sales quarter of the year given holiday shutdowns by certain of our customers and other customers deferring capital spending to the following year. 12 Table of Contents Environmental Matters We are subject to increasingly stringent environmental laws and regulations, including those relating to air emissions, wastewater discharges, and chemical and hazardous waste management and disposal. Some of these environmental laws hold owners or operators of land or businesses liable for their own and for previous owners' or operators' releases of hazardous or toxic substances or wastes. Other environmental laws and regulations require obtaining and complying with environmental permits. To date, costs of complying with environmental, health and safety requirements have not been material. However, the nature of our operations and our long history of industrial activities at certain of our current or former facilities, as well as those acquired, could potentially result in material environmental liabilities. Current environmental laws and regulations have not had a material impact on our business, capital expenditures or financial position. However, we must comply with existing and pending climate change legislation, regulation and international treaties or accords. Future events, including those relating to climate change or greenhouse gas regulation could require us to incur expenses related to the modification or curtailment of operations, installation of pollution control equipment or investigation and cleanup of contaminated sites. In addition to environmental laws and regulations, our operations are governed by variety of laws and regulations, including those relating to workplace safety and worker health, principally the Occupational Safety and Health Act and regulations thereunder. We believe that we are in material compliance with these laws and regulations and do not believe that future compliance with such laws and regulations will have a material adverse effect on our business, financial condition, results of operations and cash flows. Intangible Assets Our identified intangible assets, consisting of customer relationships, trademarks and trade names, and technology, are recorded at approximately $206.2 million at December 31, 2020, net of accumulated amortization. The valuation of each of the identified intangibles was performed using broadly accepted valuation methodologies and techniques. Customer Relationships. We have developed and maintained stable, long-term selling relationships with customer groups for specific branded products and/or focused market product offerings within each of our businesses. Useful lives assigned to customer relationship intangibles range from five to 25 years and have been estimated using historic customer retention and turnover data. Other factors considered in evaluating estimated useful lives include the diverse nature of focused markets and products of which we have significant share, how customers in these markets make purchases and these customers' position in the supply chain. We also monitor and evaluate the impact of other evolving risks including the threat of lower cost competitors and evolving technology. Trademarks and Trade Names. Each of our businesses designs and manufactures products for focused markets under various trade names and trademarks (see discussion above by reportable segment). Our trademark/trade name intangibles are well-established and considered long-lived assets that require maintenance through advertising and promotion expenditures. Because it is our practice and intent to maintain and to continue to support, develop and market these trademarks/trade names for the foreseeable future, we consider our rights in these trademarks/trade names to have an indefinite life, except as otherwise dictated by applicable law. Technology. We hold a number of United States and foreign patents, patent applications, and proprietary product and process-oriented technologies within all three of our reportable segments. We have, and will continue to dedicate, technical resources toward the further development of our products and processes in order to maintain our competitive position in the industrial, commercial and consumer end markets that we serve. Estimated useful lives for our technology intangibles range from one to 30 years and are determined in part by any legal, regulatory or contractual provisions that limit useful life. For example, patent rights have a maximum limit of 20 years in the United States. Other factors considered include the expected use of the technology by the operating groups, the expected useful life of the product and/or product programs to which the technology relates, and the rate of technology adoption by the industry. International Operations Approximately 22.7% of our net sales for the year ended December 31, 2020 were derived from sales by our businesses located outside of the United States, and approximately 37.4% of our long-lived assets as of December 31, 2020 were located outside of the United States. We operate manufacturing facilities in China, Germany, India, Italy, Mexico, Slovakia, the United Kingdom and Vietnam, in addition to our U.S. operations. In addition to the net sales derived from sales by our businesses located outside of the United States, we also generated approximately $70.0 million of export sales from the United States. 13 Table of Contents Website Access to Company Reports We use our corporate website, www.trimascorp.com, as a channel for routine distribution of important information, including news releases, company presentations and links to our businesses' websites, as well as our inaugural Sustainability Report, which we launched in December 2020. We also provide financial information on our website and post filings as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission ("SEC"), including our annual, quarterly, and current reports on Forms 10-K, 10-Q and 8-K, our proxy statements and any amendments to those reports or statements. All such postings and filings are available under our Investors section of the website free of charge. The SEC also maintains a website, www.sec.gov, that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The content on any website referred to in this Annual Report on Form 10-K is not incorporated by reference into this Annual Report on Form 10-K unless expressly noted. 14 Table of Contents