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You should read the following discussion together with Item 8, "Financial Statements and Supplementary Data."
−Removed: We are a diversified manufacturer and provider of products for customers primarily in the consumer products, aerospace & defense and industrial markets.
+Added: TriMas designs, develops and manufactures a diverse set of products primarily for the consumer products, aerospace & defense and industrial markets through its TriMas Packaging, TriMas Aerospace and Specialty Products groups.
Our wide range of innovative products are designed and engineered to solve application-specific challenges that our customers face.
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Packaging, Aerospace and Specialty Products.
−Removed: In December 2019, we completed the sale of our Lamons division ("Lamons"), a manufacturer and distributor of industrial sealing, fastening and specialty products primarily used in the petrochemical and petroleum-refining industries, to two wholly-owned subsidiaries of an investment fund sponsored by First Reserve.
−Removed: The sale of Lamons was an important strategic step for TriMas, in streamlining our portfolio of businesses, as it significantly reduced our exposure to the oil and gas market from over 20% of net sales in 2019 to less than 2% in 2020, and allowed us to further invest in our Packaging and Aerospace segments.
−Removed: We received net after-tax proceeds from the sale of approximately $112.7 million.
−Removed: The financial results of Lamons were previously reported within our Specialty Products segment.
−Removed: The financial position, results of operations and cash flows of Lamons are reported as discontinued operations for all periods presented through the date of disposition.
−Removed: Key Factors and Risks Affecting Our Reported Results
+Added: Key Factors Affecting Our Reported Results
Our businesses and results of operations depend upon general economic conditions.
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In March 2020, the President of the United States declared the coronavirus ("COVID-19") outbreak a national emergency, as the World Health Organization determined it was a pandemic.
−Removed: In response to the COVID-19 pandemic, federal, provincial, state, county and local governments and public health organizations or authorities around the world have implemented a variety of measures intended to control the spread of the virus, including quarantines, "shelter-in-place" or "stay-at-home" and similar orders, travel restrictions, business curtailments and closures, social distancing, personal hygiene requirements, and other measures.
+Added: In response to the COVID-19 pandemic, federal, provincial, state, county and local governments and public health organizations or authorities around the world implemented a variety of measures intended to control the spread of the virus, including quarantines, "shelter-in-place" or "stay-at-home" and similar orders, travel restrictions, business curtailments and closures, social distancing, personal hygiene requirements, and other measures.
We have been, and continue to be, focused on making sure the working environments for our employees are safe so our operations have the ability to deliver the products needed to support efforts to mitigate the COVID-19 pandemic.
−Removed: Nearly all of our manufacturing sites have been deemed essential operations and remained open during the pandemic, at varying levels of capacity and efficiency, experiencing only temporary shutdowns due to country-specific government mandates or for thorough cleaning as a result of suspected COVID-19 cases.
−Removed: The health of our employees, and the ability of our facilities to remain operational in the current regulated environment, is critical to our future results of operations.
−Removed: Our divisions were impacted in first quarter 2020 at differing levels and times, beginning with our Asian facilities and strategic supply network, both primarily in China, in late January, followed by our European (primarily Italy) and North American facilities in February and March.
+Added: Nearly all of our manufacturing sites have been deemed essential operations and remained open during the COVID-19 pandemic, at varying levels of capacity and efficiency, experiencing only temporary shutdowns due to country-specific government mandates or for thorough cleaning as a result of suspected COVID-19 cases.
+Added: The health of our employees, and the ability of our facilities to remain operational in the current regulated environment, will be critical to our future results of operations.
+Added: Our divisions were impacted in 2020 at differing levels and times, beginning with our Asian facilities and strategic supply network, both primarily in China, in late January, followed by our European (primarily Italy) and North American facilities in February and March.
We implemented new work rules and processes, which promote social distancing and increased hygiene to ensure the safety of our employees, particularly at our production facilities.
These measures, while not easily quantifiable, have increased the level of manufacturing inefficiencies due to elevated levels of absenteeism, resulting in less efficient production scheduling and, in certain cases, short-term idling of production.
−Removed: We expect that we will continue to operate with these protocols in place, which have impacted our 2020 results.
−Removed: Overall, our 2020 net sales increased approximately $46.4 million compared to 2019, primarily as a result of robust organic sales growth in our Packaging segment, particularly for dispensing and closure products we supply that are used in applications to fight the spread of germs, and as a result of acquisitions.
−Removed: These increases more than offset declines in sales in our Aerospace and Specialty Products segments, primarily related to the effects of the COVID-19 pandemic.
−Removed: The most significant drivers of change in results of operations in 2020 compared with 2019, other than as directly impacted by demand level changes as a result of the COVID-19 pandemic, were goodwill and intangible asset impairment charges in our Aerospace segment, our election to change our accounting policy for asbestos-related defense costs, realignment actions we undertook, primarily in our Aerospace and Specialty Products segments, in response to reduced end-market demand following the outbreak of COVID-19, the impact of our recent acquisitions and the recognition of income tax benefits related to tax-planning actions with respect to our intercompany debt restructuring.
+Added: We expect that we will continue to operate with these protocols in place for the foreseeable future.
+Added: Overall, 2021 net sales increased approximately $87.1 million, or 11.3%, compared to 2020, primarily as a result of increased industrial demand in our Specialty Products segment, acquisitions in our Packaging segment and the impact of customers' stocking orders within our Aerospace segment.
+Added: These increases were partially offset by a decline in sales of our Packaging segment's dispensing and closure products that are used in applications to fight the spread of germs, which sales reached record-high levels in 2020 when there was a significant spike in demand following the onset of the COVID-19 pandemic, but now have abated to what we believe is a new, and higher, normalized level.
+Added: The most significant drivers affecting our results of operations in 2021 compared with 2020, other than as directly impacted by demand level changes as a result of the COVID-19 pandemic, were goodwill and intangible asset impairment charges in 2020 in our Aerospace segment, our election to change our accounting policy for asbestos-related defense costs in 2020, realignment actions we undertook in response to reduced end-market demand following the outbreak of the COVID-19 pandemic, the impact of our recent acquisitions, increases in the cost of certain raw materials, the refinancing of our long term debt in 2021 and the recognition of the benefit of certain tax planning strategies.
During 2020, we determined there was a triggering event requiring an interim quantitative impairment assessment for goodwill and indefinite-lived intangible assets within our Aerospace segment.
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We determined the carrying value of both of our Aerospace reporting units, as well as of certain trade names, exceeded the fair value, resulting in non-cash, pre-tax impairment charges of approximately $126.8 million to goodwill and $7.8 million to indefinite lived intangible assets.
−Removed: The techniques used in our interim impairment tests incorporated a number of assumptions that we believe to be reasonable and to reflect the current market conditions.
−Removed: Assumptions in estimating future cash flows and earnings were based on Level 3 inputs under the fair value hierarchy and were primarily related to customer demand and revenue growth, and associated profitability and cash flows, all as part of an aerospace industry recovery post-pandemic.
−Removed: Data from aerospace publications and public companies was used to assess the reasonableness of management’s assumptions regarding the timing and extent of the industry recovery.
−Removed: To provide a level of sensitivity analysis, 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.
−Removed: Changes in future results, assumptions, and estimates from those used in the interim impairment test may lead to an outcome where additional impairment charges would be required in future periods.
−Removed: Specifically, actual results may vary from management's forecasts and such variations may be material and unfavorable, thereby triggering the need for future impairment tests where the conclusions may differ in reflection of prevailing market conditions.
−Removed: Further, continued adverse or worsening market conditions could result in the recognition of additional impairment if we determine that the fair value of our Aerospace Fasteners reporting unit has fallen below its carrying value.
−Removed: Certain circumstances that could reasonably be expected to negatively affect the underlying key assumptions and impact the estimated fair value of the Company’s Aerospace Fastener reporting unit may include such items as:
−Removed: (i) a decrease in expected future cash flows, due to the pandemic adversely impacting the aerospace industry longer or more deeply than currently estimated, (ii) inability to achieve the sales targeted as part of the Company’s strategic growth initiatives, and (iii) inability to efficiently leverage the projected sales growth at expected margin rates.
During 2020, we elected to change our accounting policy for asbestos-related defense costs from accruing for probable and reasonably estimable defense costs associated with known claims expected to settle to accruing for all future defense costs for both known and unknown claims, which we now believe can be reasonably estimated.
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We recorded a non-cash, pre-tax charge in second quarter 2020 for asbestos-related costs of approximately $23.4 million, which is included in selling, general and administrative expenses.
−Removed: Following the onset of the COVID-19 pandemic, we undertook certain realignment actions, primarily in our Aerospace and Specialty Products segments, in response to current and expected future reduced end market demand.
−Removed: We recorded non-cash charges of approximately $13.8 million related to inventory reductions, primarily as a result of a strategic decision in our Arrow Engine division to streamline its product line offering.
−Removed: We also recorded charges of approximately $2.3 million related to certain production equipment removed from service given reduced demand levels.
−Removed: In addition, we reduced our employment levels given lower customer demand, incurring approximately $3.8 million in severance charges.
−Removed: In December 2020, we completed the acquisition of 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.
−Removed: 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.
−Removed: Affaba & Ferrari contributed approximately $0.7 million of net sales during 2020 within our Packaging segment.
+Added: In 2021, we commissioned our actuary to update the asbestos study based on data as of September 30, 2021, and recorded a non-cash, pre-tax charge of $1.5 million, which is included in selling, general and administrative expenses, to increase the liability estimate.
+Added: Beginning in second quarter 2020, we have been executing certain realignment actions in response to reductions in current and expected future end market demand following the onset of the COVID-19 pandemic.
+Added: We recorded pre-tax facility consolidation and employee separation costs of approximately $3.5 million and $6.2 million, respectively, in 2021.
+Added: In 2020, we recorded a pre-tax charge of approximately $13.8 million related to inventory reductions, primarily as a result of a strategic decision in our Arrow Engine division to streamline its product line offering.
+Added: We also recorded charges of approximately $2.3 million related to certain production equipment removed from service given reduced demand levels, and employee separation costs of approximately $3.8 million.
+Added: In December 2021, we completed the acquisition of Omega Plastics ("Omega"), which specializes in manufacturing custom components and devices for drug delivery, diagnostic and orthopedic medical applications, as well as components for industrial applications, for an aggregate amount of approximately $22.5 million, net of cash acquired.
+Added: Omega, which is reported in the Company's Packaging segment, is located in Clinton Township, Michigan.
+Added: Omega contributed approximately $0.7 million of net sales during 2021.
+Added: In December 2021, we acquired TFI Aerospace ("TFI"), a manufacturer and supplier of specialty fasteners used in a variety of applications, predominately for the aerospace end market, for an aggregate amount of approximately $11.8 million, with additional contingent consideration ranging from zero to approximately $12.0 million to be paid based on 2023 and 2024 earnings per the purchase agreement.
+Added: TFI, which is reported in the Company's Aerospace segment, is located near Toronto, Canada.
+Added: TFI contributed approximately $0.3 million of net sales during 2021.
+Added: In December 2020, we completed the acquisition of 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.
+Added: Affaba & Ferrari, which is reported in our Packaging segment, operates out of a highly automated manufacturing facility and support office located in Borgo San Giovanni, Italy.
+Added: Affaba & Ferrari contributed approximately $36.3 million of incremental net sales during 2021.
In April 2020, we acquired the Rapak brand, including certain bag-in-box product lines and assets ("Rapak") for an aggregate amount of approximately $11.4 million.
−Removed: Rapak, which is reported in our Packaging segment, has three manufacturing locations in the United States.
−Removed: Rapak contributed approximately $13.9 million of net sales during 2020 within our Packaging segment, although it is performing below break-even operating profit as demand for its products, particularly those used in quick service restaurant applications, has significantly declined from pre-acquisition levels in 2019 due to the impact of the COVID-19 pandemic.
+Added: Rapak, which is reported in our Packaging segment, has two manufacturing locations in the United States.
+Added: Rapak contributed approximately $5.3 million of incremental net sales resulting from the January through March 2021 sales.
+Added: Rapak has been performing below break-even operating profit as demand for its products, particularly those used in quick service restaurant applications, has significantly declined from pre-acquisition levels in 2019 due to the impact of the COVID-19 pandemic.
In February 2020, we completed the acquisition of RSA Engineered Products ("RSA"), a provider of highly-engineered and proprietary components for air management systems used in critical flight applications, for an aggregate amount of approximately $83.7 million, net of cash acquired.
RSA, located in Simi Valley, California, designs, engineers and manufactures highly-engineered components, including air ducting products, connectors and flexible joints, predominantly used in aerospace and defense engine bleed air, anti-icing and environmental control system applications.
−Removed: RSA contributed approximately $19.4 million of net sales during 2020 within our Aerospace segment.
−Removed: During 2020, we also undertook certain tax-planning actions with respect to intercompany debt restructuring, resulting in the recognition of approximately $6.4 million of income tax benefit.
+Added: RSA contributed approximately $4.3 million of incremental net sales resulting from January and February 2021 sales.
+Added: In first quarter 2021, we began experiencing an increase in material costs compared with 2020 levels, primarily for resin-based raw materials and components, as well as for certain types of steel.
+Added: These material costs further increased throughout 2021.
+Added: We have escalator/de-escalator clauses in our commercial contracts with certain of our customers, or can modify prices based on market conditions, and we have been taking actions to recover the increased cost of raw materials.
+Added: However, given the lag nature of the commercial pricing mechanisms, we have and will continue to experience net earnings pressure until resin costs begin to stabilize and/or decline for several consecutive months.
+Added: We estimate that due to the lag in timing between incurring the cost increases and recovering via commercial actions, our operating profit was negatively impacted by approximately $11 million in 2021, compared with 2020, primarily in our Packaging segment.
+Added: In 2021, we refinanced our long-term debt, issuing $400 million aggregate principal amount of 4.125% senior unsecured notes due April 15, 2029 ("2029 Senior Notes") at par value in a private placement under Rule 144A of the Securities Act of 1933, as amended, and amending our existing credit agreement ("Credit Agreement"), extending the maturity to March 2026.
+Added: We used the proceeds from the 2029 Senior Notes offering to pay fees and expenses of approximately $5.1 million related to the offering and approximately $1.1 million related to amending the Credit Agreement.
+Added: The remaining cash proceeds from the 2029 Senior Notes were used for general corporate purposes, including repaying all outstanding revolving credit facility borrowings and redeeming all of our outstanding senior notes due October 2025 ("2025 Senior Notes"), paying cash for the entire $300.0 million outstanding principal amount plus $7.3 million as a redemption premium.
+Added: The $5.1 million of fees and expenses related to the 2029 Senior Notes were capitalized as debt issuance costs, while the $7.3 million redemption premium as well as approximately $3.0 million of unamortized debt issuance costs associated with the 2025 Senior Notes were expensed in 2021.
+Added: In addition, our effective tax rate for 2021 was 17.1%, compared to 22.3% for 2020.
+Added: We recorded income tax expense of approximately $11.9 million in 2021, as compared to an income tax benefit of $23.0 million in 2020.
+Added: During 2021, we reported domestic and foreign pre-tax income of approximately $28.4 and $40.7 million, respectively, as compared to a 2020 domestic pre-tax loss of approximately $134.6 million and foreign pre-tax income of approximately $31.9 million.
+Added: The rate for 2021 includes the impact of income tax incentives in a foreign jurisdiction, the impact of certain non-deductible expenses and an increase in the statutory tax rate in another foreign jurisdiction which increased the value of certain deferred tax assets.
+Added: The effective tax rate for 2020 was impacted by a decrease in profitability in the U.S.
+Added: resulting from various one-time charges, including impairment of goodwill and indefinite-lived intangible assets and a change in our accounting policy for asbestos-related defense costs.
+Added: During 2020, we also undertook certain tax-planning actions with respect to restructuring our intercompany debt, resulting in the recognition of a $6.4 million deferred tax benefit.
Additional Key Risks that May Affect Our Reported Results
−Removed: The COVID-19 pandemic significantly impacted our 2020 results, and we expect it will continue to impact us in the future at varying degrees.
−Removed: We expect the robust customer demand for our Packaging segment's dispensing pumps and closure products used in personal care and home care applications that fight the spread of germs will continue, as we believe there is a new secular trend for higher levels of health and cleanliness.
−Removed: We are actively collaborating with our customers and strategic supply partners to manage production capacity and supply chain availability as efficiently as possible.
−Removed: Industrial demand in North America was lower than 2019 levels, and we are uncertain how and when demand will be impacted as many of the shelter-in-place orders are adjusted or lifted, particularly in North America, where orders for our industrial cylinders, for example, are heavily influenced by the levels of construction and HVAC activity.
−Removed: We expect the aerospace market to continue to experience the most severe dislocation going forward.
−Removed: With the current travel restrictions and significant drop in passenger miles, aircraft manufacturers have now significantly slowed production, and since second quarter we have experienced a significant drop in aerospace-related sales compared to prior year levels.
−Removed: We expect this trend to continue for the foreseeable future.
−Removed: We have executed realignment actions in 2020, primarily in our Aerospace and Specialty Products segments, and also in certain Packaging product areas where demand has fallen, such as in the quick-serve and restaurant applications, to protect against the uncertain end market demand.
+Added: We expect the COVID-19 pandemic will continue to impact us in the future at varying degrees.
+Added: We expect the robust customer demand, compared with pre-pandemic demand levels, for our Packaging segment's dispensing pumps and closure products used in personal care and home care applications will continue, albeit with some reduction from the surge experienced in 2020 and early 2021, as we believe there is a positive secular trend focused on consumers' desire to stop the spread of germs and improve personal hygiene.
+Added: Industrial demand in North America was lower in 2020 compared to previous levels, and while demand levels significantly increased in 2021, we are uncertain how and at what level demand will be impacted as governmental, travel or other restrictions are lifted, particularly in North America, where orders for our industrial cylinders, for example, are heavily influenced by the levels of construction and HVAC activity.
+Added: We expect the aerospace market to continue to experience severe dislocation going forward, as except for the significant stocking orders for certain of our products received during 2021, our sales levels would be significantly lower than historical levels.
+Added: With the current travel restrictions and sentiment, particularly low for international travel, aircraft manufacturers have slowed production, and since second quarter 2020 we have experienced a significant drop in aerospace-related sales related to new commercial airplane builds compared to prior levels.
+Added: We expect, except as favorably impacted by the customers' stocking orders in 2021, lower levels of sales and related production to continue for the foreseeable future.
+Added: We have executed significant realignment actions since the onset of the COVID-19 pandemic, primarily in our Aerospace and Specialty Products segments, and also in certain Packaging product areas where demand has fallen, such as in the quick service and restaurant applications, to protect against the uncertain end market demand.
We will continue to assess further actions if required.
However, as a result of the COVID-19 pandemic's impact on global economic activity, and the continued potential impact to our future results of operations, as well if there is an impact to TriMas' market capitalization, we may record additional cash and non-cash charges related to incremental realignment actions, as well as for uncollectible customer account balances, excess inventory and idle production equipment.
−Removed: Despite the potential decline in future demand levels and results of operations as a result of the COVID-19 pandemic, at present, we believe our capital structure is in a solid position, and we have ample cash and available liquidity under our revolving credit facility to meet our debt service obligations, capital expenditure requirements and other short-term and long-term obligations for the foreseeable future.
−Removed: Even after deploying nearly $200 million in our three acquisitions and completing stock purchases totaling $39.4 million during 2020, our December 31, 2020 net leverage ratio, as defined in our credit agreement, is below our long-term target of 2.0x.
−Removed: The extent of the COVID-19 pandemic's effect on our operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence at this time.
−Removed: Future developments include the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, timing of widespread vaccine availability, and the resumption of widespread economic activity.
+Added: Despite the potential decline in future demand levels and results of operations as a result of the COVID-19 pandemic, at present, we believe our capital structure is in a solid position.
+Added: We have ample cash and available liquidity under our revolving credit facility to meet our debt service obligations, capital expenditure requirements and other short-term and long-term obligations for the foreseeable future.
+Added: The extent of the COVID-19 pandemic's effect on our operational and financial performance will depend in large part on future
+Added: developments, which cannot be predicted with confidence at this time.
+Added: Future developments include the duration, scope and severity of the COVID-19 pandemic, the actions taken to contain or mitigate its impact, timing of widespread vaccine availability, and the resumption of normalized global economic activity.
Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we are unable to predict with any confidence the likely impact of the COVID-19 pandemic on our future operations.
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our ability to acquire and integrate companies or products that supplement existing product lines, add new distribution channels or customers, expand our geographic coverage or enable better absorption of overhead costs;
−Removed: our ability to manage our cost structure more efficiently via supply base management, internal sourcing and/or purchasing of materials, selective outsourcing and/or purchasing of support functions, working capital management, and greater leverage of our administrative functions.
+Added: our ability to manage our cost structure more efficiently via supply chain management, internal sourcing and/or purchasing of materials, selective outsourcing and/or purchasing of support functions, working capital management, and greater leverage of our administrative functions.
Our overall business does not experience significant seasonal fluctuation, other than our fourth quarter, which has tended to be the lowest net sales quarter of the year due to holiday shutdowns at certain customers or other customers deferring capital spending to the following year.
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Our largest raw material purchases are for resins (such as polypropylene and polyethylene), steel, aluminum and other oil and metal-based purchased components.
−Removed: While material cost changes did not have a significant impact in 2020 compared with 2019, there has been some volatility over the past two years as a direct and indirect result of foreign trade policy, where tariffs on certain of our commodity-based products sourced from Asia have been instituted, and certain North American suppliers have opportunistically increased their prices.
−Removed: As needed, we have taken actions, and will continue to take actions, to mitigate such increases, including implementing commercial pricing adjustments, resourcing to alternate suppliers and insourcing of previously sourced products to better leverage our global manufacturing footprint.
+Added: In addition to the factors affecting our 2021 results, there has been some volatility over the past two years as a direct and indirect result of foreign trade policy, where tariffs on certain of our commodity-based products sourced from Asia have been instituted, and certain North American suppliers have opportunistically increased their prices.
+Added: We will continue to take actions to mitigate such increases, including implementing commercial pricing adjustments, resourcing to alternate suppliers and insourcing of previously sourced products to better leverage our global manufacturing footprint.
Although we believe we are generally able to mitigate the impact of higher commodity costs over time, we may experience additional material costs and disruptions in supply in the future and may not be able to pass along higher costs to our customers in the form of price increases or otherwise mitigate the impacts to our operating results.
−Removed: Although we have escalator/de-escalator clauses in commercial contracts with certain of our customers, or can modify prices based on market conditions to recover higher costs, our price increases generally lags the underlying material cost increase, and we cannot be assured of full cost recovery in the open market.
+Added: Although we have escalator/de-escalator clauses in commercial contracts with certain of our customers, or can modify prices based on market conditions to recover higher costs, our price increases generally lag the underlying material cost increase, and we cannot be assured of full cost recovery in the open market.
+Added: If input costs increase at rapid rates, as they did during 2021, our ability to recover cost increases on a timely basis, much less at all, is made more difficult by the lag nature of these contracts.
Our Arrow Engine business in our Specialty Products segment is sensitive to the demand for natural gas and crude oil in North America.
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Separately, oil-based commodity costs are a significant driver of raw materials and purchased components used within our Packaging segment.
−Removed: Each year, as a core tenet of the TBM, our businesses target cost savings from Kaizen and continuous improvement initiatives in an effort to reduce, or otherwise offset, the impact of increased input and conversion costs through increased throughput and yield rates, with a goal of at least covering inflationary and market cost increases.
+Added: Each year, as a core tenet of the TriMas Business Model, our businesses target cost savings from Kaizen and continuous improvement initiatives in an effort to reduce, or otherwise offset, the impact of increased input and conversion costs through increased throughput and yield rates, with a goal of at least covering inflationary and market cost increases.
In addition, we continuously review our operating cost structures to ensure alignment with current market demand.
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In 2020, our Board of Directors increased the authorization of share repurchases to a cumulative amount of $250 million.
−Removed: During 2020, 2019 and 2018, we purchased 1,582,049, 1,230,050 and 442,632 shares of our outstanding common stock for approximately $39.4 million, $36.7 million and $12.1 million, respectively.
−Removed: As of December 31, 2020, the Company has approximately $161.7 million remaining under the repurchase authorization.
−Removed: We will continue to evaluate opportunities to return capital to shareholders through the purchase of our common stock, depending on market conditions and other factors.
+Added: During 2021, we purchased 596,084 shares of our outstanding common stock for approximately $19.1 million .
+Added: As of December 31, 2021 , we had approximately $142.6 million remaining under the repurchase authorization.
+Added: In addition, in 2021 our Board of Directors declared the first dividend since our initial public offering in 2007.
+Added: We declared dividends of $0.04 per share of common stock and we paid dividends of $1.7 million for the year ended December 31, 2021.
+Added: We will continue to evaluate opportunities to return capital to shareholders through the purchase of our common stock as well as dividends, depending on market conditions and other factors.
Segment Information and Supplemental Analysis
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Specialty Products 5,500 3.9 % 3,890 3.4 % 5,090 3.7 %
−Removed: Corporate (a)
−Removed: 90 N/A 70 N/A 4,890 N/A
+Added: Corporate 90 N/A 90 N/A 70 N/A
Total $ 45,060 5.3 % $ 40,480 5.3 % $ 29,670 4.1 %
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Total $ 21,560 2.5 % $ 20,750 2.7 % $ 18,630 2.6 %
−Removed: ________________________________________
−Removed: (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.
−Removed: These purchased assets were subsequently transferred from Corporate to the segment utilizing the assets.
+Added: The following “Results of Operations Year Ended December 31, 2021 Compared with Year Ended December 31, 2020” section presents an analysis of our consolidated operating results displayed in the Consolidated Statement of Operations.
+Added: A discussion regarding our financial condition and results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the Securities and Exchange Commission on February 25, 2021.
Results of Operations
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The principal factors impacting us during the year ended December 31, 2021, compared with the year ended December 31, 2020 were:
−Removed: • increases in our Packaging segment's organic sales and related operating profit as a result of significantly higher demand, primarily for our products used in applications to help fight the spread of germs;
−Removed: • approximately $134.6 million of non-cash, pre-tax goodwill and indefinite-lived intangible asset impairment charges during 2020 in our Aerospace segment, primarily as a result of lower current and expected future financial results due to uncertainty around the duration and magnitude of the impact of the COVID-19 pandemic;
−Removed: • reduced sales and related profit within our Aerospace and Specialty Products segments, primarily as a result of the COVID-19 pandemic;
+Added: • the impact on global business activity of the COVID-19 pandemic;
+Added: • approximately $134.6 million of goodwill and indefinite-lived intangible asset impairment charges in 2020;
• a change in our accounting policy for asbestos-related defense costs during 2020;
−Removed: • the impact of our recent acquisitions, primarily RSA in February 2020 and Rapak in April 2020;
−Removed: • realignment expenses, primarily in our Aerospace and Specialty Products segments, in response to reduced end-market demand following the outbreak of COVID-19;
−Removed: • an income tax benefit related to intercompany debt restructuring.
−Removed: Overall, net sales increased approximately $46.4 million, or approximately 6.4%, to $770.0 million in 2020, as compared to $723.5 million in 2019.
−Removed: Our recent acquisitions contributed approximately $44.1 million of inorganic sales growth.
−Removed: Organic sales, excluding the impact of currency exchange, increased approximately $3.4 million, as approximately $72.4 million of sales increases in our Packaging segment, primarily for products used in applications that help fight the spread of germs, were more than offset by approximately $45.8 million of lower sales in our Aerospace segment and $23.2 million lower sales in our Specialty Products segment, both primarily due to lower demand as a result of the COVID-19 pandemic.
−Removed: In addition, net sales were lower by approximately $1.1 million due to unfavorable currency exchange, as our reported results in U.S.
−Removed: dollars were negatively impacted as a result of the stronger U.S.
+Added: • realignment expenses in response to reduced end-market demand following the outbreak of the COVID-19 pandemic;
+Added: • the impact of our debt refinancing activities;
+Added: • the impact of our recent acquisitions, primarily Affaba & Ferrari, in December 2020;
+Added: • the impact of material cost increase, primarily resin-related;
+Added: • the impact of a reduction in our effective tax rate from 2020 to 2021.
+Added: Overall, net sales increased approximately $87.1 million, or approximately 11.3%, to $857.1 million in 2021, as compared to $770.0 million in 2020, primarily as a result of acquisitions, which added approximately $46.9 million of sales.
+Added: Organic sales, excluding the impact of currency exchange and acquisitions, increased approximately $31.5 million, primarily due to increases in sales of products used in food and beverage applications in our Packaging segment and of industrial products in both our Specialty Products and Packaging segments.
+Added: These increases were partially offset by the expected decline in sales of dispensing products that help fight the spread of germs in our Packaging segment, as the demand levels decreased compared with the record-high levels in 2020.
+Added: In addition, net sales increased approximately $8.7 million due currency exchange, as our reported results in U.S.
+Added: dollars were favorably impacted as a result of the weakening U.S.
dollar relative to foreign currencies.
Gross profit margin (gross profit as a percentage of sales) approximated 25.3% and 23.6% in 2021 and 2020, respectively.
−Removed: Gross profit margin decreased, as the impact of higher sales levels was more than offset by the impact of approximately $17.1 million of realignment expenses during 2020, approximately $15.0 million of which were non-cash and approximately $2.1 million of which were cash expenses, primarily in our Aerospace and Specialty Products segments, where we executed actions to lower our cost structure in response to reduced end market demand following the outbreak of the COVID-19 pandemic.
−Removed: In addition, we recorded approximately $2.8 million of non-cash purchase accounting charges during 2020 for the step-up of inventory to fair value and subsequent amortization related to our RSA and Rapak acquisitions as compared to approximately $0.3 million of such charges in 2019.
−Removed: Gross profit margin was also negatively impacted by approximately $2.0 million for an updated estimate of a pre-acquisition contingent liability within our Aerospace segment during 2020, as well as lower fixed cost absorption, higher production inefficiencies and a less favorable product sales mix, all due primarily to the COVID-19 pandemic.
+Added: Gross profit margin increased primarily due the impact of lower realignment, contingent liability, and purchase accounting charges of approximately $13.0 million, $2.0 million, and $2.0 million, respectively, in 2021 than in 2020.
+Added: These increases, plus a more favorable product sales mix and leveraging of our prior realignment actions in our Specialty Products segment were partially offset by approximately $11 million higher material costs than recovered via commercial actions (primarily for resin) in our Packaging segment and lower fixed cost absorption and labor inefficiencies within our Aerospace segment.
Operating profit (loss) margin (operating profit as a percentage of sales) approximated 11.1% and (11.5)% in 2021 and 2020, respectively.
−Removed: Operating profit (loss) decreased $179.5 million, to $88.3 million of operating loss in 2020, as compared to $91.2 million operating profit in 2019.
−Removed: This decrease was primarily a result of approximately $134.6 million of non-cash goodwill and indefinite-lived intangible asset impairment charges within our Aerospace segment and an approximate $23.4 million non-cash charge due to a change in accounting policy, both recorded during 2020.
−Removed: Operating profit further decreased due to approximately $19.9 million of realignment expenses recorded during 2020, of which $16.1 million were non-cash and $3.8 million were cash expenses, primarily in our Aerospace and Specialty Products segments, where we executed actions to lower our cost structure in response to reduced end market demand.
−Removed: Operating profit (loss) also decreased as a result of increased purchase accounting expenses, a less favorable product sales mix and as a result of unfavorable currency exchange.
−Removed: Interest expense increased approximately $0.7 million, to $14.7 million in 2020, as compared to $14.0 million in 2019, primarily as a result of increased weighted average borrowings from approximately $338.0 million in 2019 to $368.9 million in 2020.
−Removed: We drew $150 million on our revolving credit facility in first quarter 2020 to ensure availability of cash on hand at the onset of the pandemic, but subsequently repaid this amount in second quarter 2020.
−Removed: Other income decreased approximately $0.8 million to $0.2 million in 2020, from $1.0 million in 2019, primarily due to lower year-over-year interest income on cash balances and higher defined benefit pension expenses.
+Added: Operating profit (loss) increased $183.4 million, to an operating profit of approximately $95.1 million in 2021, as compared to an operating loss of approximately $88.3 million in 2020, primarily due to approximately $134.6 million of goodwill and indefinite-lived intangible asset impairment charges as well as the impact of the $2.0 million pre-acquisition contingent liability charge within our Aerospace segment, which were recorded in 2020 and did not repeat in 2021.
+Added: Operating profit and margin further increased due to higher sales levels and lower realignment and purchase accounting costs in 2021 than in 2020.
+Added: These increases were partially offset by higher material costs (primarily resin) in our Packaging segment and labor inefficiencies and lower fixed cost absorption within our Aerospace segment.
+Added: Interest expense decreased approximately $0.2 million, to $14.5 million in 2021, as compared to $14.7 million in 2020, as a lower effective interest rate more than offset an increase in our weighted average borrowings.
+Added: We incurred approximately $10.5 million of debt financing and related expense in 2021, of which approximately $10.3 million was related to expenses incurred associated with the redemption of our 2025 Senior Notes and approximately $0.2 million related to the write-off of previously capitalized deferred financing fees associated with our Credit Agreement.
+Added: Other income (expense) decreased approximately $1.2 million to other expense of approximately $1.0 million in 2021, from other income of approximately $0.2 million in 2020, primarily due to a year-over-year increase in losses on transactions denominated in foreign currencies.
The effective income tax rate for 2021 was 17.1%, compared to 22.3% for 2020.
−Removed: We recorded an income tax benefit of approximately $23.0 million in 2020, as compared to $16.3 million of income tax expense in 2019.
−Removed: During 2020, we reported a domestic income tax loss of approximately $134.6 million and foreign pre-tax income of approximately $31.9 million, compared to 2019 domestic and foreign pre-tax income of approximately $52.2 million and $26.1 million, respectively.
−Removed: The effective tax rate for 2020 was impacted by a decrease in profitability in the U.S.
+Added: We recorded income tax expense of approximately $11.8 million in 2021, as compared to an income tax benefit of $23.0 million in 2020.
+Added: During 2021, we reported domestic and foreign pre-tax income of approximately $28.4 million and $40.7 million, respectively, as compared to a 2020 domestic pre-tax loss of approximately $134.6 million and foreign pre-tax income of approximately $31.9 million.
+Added: The effective tax rate for 2021 varied from the U.S.
+Added: federal statutory rate primarily as a result of income tax incentives in a foreign jurisdiction, the impact of certain non-deductible expenses and an increase in the statutory tax rate in another foreign jurisdiction which increased the value of certain deferred tax assets.
+Added: Our effective tax rate for 2020 was impacted by a decrease in profitability in the U.S.
resulting from various one-time charges, including impairment of goodwill and indefinite-lived intangible assets and a change in our accounting policy for asbestos-related defense costs.
During 2020, we also undertook certain tax-planning actions with respect to restructuring our intercompany debt, resulting in the recognition of a $6.4 million deferred tax benefit.
−Removed: Income (loss) from continuing operations decreased approximately $141.7 million to a loss of approximately $79.8 million in 2020, compared to income of $61.9 million in 2019.
−Removed: The decrease was primarily the result of a decrease in operating profit (loss) of approximately $179.5 million, which was significantly impacted by the goodwill and indefinite-lived intangibles impairment charge, an increase in interest expense of approximately $0.7 million, and a decrease in other income of approximately $0.8 million, partially offset by an increase in income tax benefit of approximately $39.3 million.
+Added: Net income (loss) increased approximately $137.1 million to net income of approximately $57.3 million in 2021, compared to a net loss of $79.8 million in 2020.
+Added: This increase was primarily a result of an increase in operating profit of approximately $183.4 million and a decrease in interest expense of $0.2 million, partially offset by debt financing and related expenses of approximately $10.5 million, an increase in tax expense of approximately $34.8 million and an increase in other expense of $1.2 million.
See below for a discussion of operating results by segment.
Net sales increased approximately $44.9 million, or 9.2%, to $533.3 million in 2021, as compared to $488.3 million in 2020.
−Removed: Acquisition-related growth was approximately $24.7 million, comprised of approximately $13.9 million of sales from our April 2020 acquisition of Rapak, approximately $0.7 million of sales from our December 2020 acquisition of Affaba & Ferrari, and approximately $10.1 million of January through April 2020 sales for Taplast, which was acquired in late April 2019.
−Removed: Sales of dispensing products used in beauty and personal care and home care applications increased by approximately $53.5 million, primarily as a result of increased demand for personal hygiene applications due to heightened awareness of reducing the spread of germs following the onset of the COVID-19 pandemic.
−Removed: Sales of products used in food and beverage markets increased by approximately $15.4 million, primarily due to higher sales of beverage dispensers, including pumps and related products, in North America.
−Removed: Sales of products used in industrial markets increased by approximately $2.1 million, primarily due to higher demand within North America, some of which we believe is attributable to higher sales of products used in the transportation of bulk sanitizer and industrial cleaning solutions.
−Removed: These increases were partially offset by approximately $1.1 million of unfavorable currency exchange, as our reported results in U.S.
−Removed: dollars were negatively impacted as a result of the stronger U.S.
+Added: Acquisition-related sales growth was approximately $42.3 million, comprised of $36.3 million of sales from our December 2020 acquisition of Affaba & Ferrari, $5.3 million resulting from the January through March 2021 sales of our April 2020 acquisition of Rapak and $0.7 million of sales from our December 2021 acquisition of Omega.
+Added: Sales of products used in food and beverage markets increased by approximately $19.1 million, primarily due to increased demand for caps and closures and flexible packaging as the hospitality sector began to rebound from prior COVID-19 pandemic-related shutdowns.
+Added: Sales of products used in industrial markets increased by approximately $13.5 million, primarily as a result of higher demand for closure products in North America.
+Added: Sales of dispensing products used in beauty and personal care as well as home care applications that help fight the spread of germs decreased by approximately $42.4 million, as demand has abated for these products from the peak levels in 2020 as a result of the COVID-19 pandemic.
+Added: Net sales also increased by approximately $8.7 million due to currency exchange, as our reported results in U.S.
+Added: dollars were favorably impacted as a result of the weakening U.S.
dollar relative to foreign currencies.
−Removed: Packaging's gross profit increased approximately $26.2 million to $142.4 million, or 29.2% of sales, in 2020, as compared to $116.2 million, or 29.6% of sales, in 2019, primarily due to increased sales levels.
−Removed: These increases were partially offset by approximately $1.1 million in non-cash realignment costs during 2020 primarily related to the disposal of certain equipment that was taken out of service and approximately $0.8 million for a purchase accounting non-cash charge related to the step-up of Rapak's inventory to fair value and subsequent amortization.
−Removed: Gross profit margin was lower than 2019 due to a less favorable product sales mix as well as Rapak generating low gross profit at current demand levels, all as a result of the impacts of the COVID-19 pandemic.
−Removed: Packaging's selling, general and administrative expenses increased approximately $12.5 million to $47.9 million, or 9.8% of sales, in 2020, as compared to $35.3 million, or 9.0% of sales, in 2019, as we incurred approximately $4.4 million of higher ongoing selling, general and administrative costs associated with our acquisitions, higher incentive costs in 2020 given the higher profit levels and higher employment levels given the higher sales levels.
−Removed: Additionally, we incurred approximately $1.2 million in charges associated with our realignment actions, primarily for severance in 2020, as well as recognized an approximate $3.9 million non-cash reversal of a contingent liability for which the underlying obligation expired during 2019, which did not repeat in 2020.
−Removed: These increases were partially offset by an approximate $0.8 million non-cash charge during 2019 related to the write-off of the trade name acquired in the Plastic Srl acquisition that was not used.
−Removed: Packaging's operating profit increased approximately $13.2 million to $94.0 million, or 19.2% of sales, in 2020, as compared to $80.8 million, or 20.6% of sales, in 2019, primarily as a result of increased sales, which was partially offset by realignment charges taken during 2020, the recognition of the purchase accounting adjustment related to Rapak's inventory step-up to fair value and subsequent amortization, a less favorable product sales mix and higher selling, general and administrative expenses.
−Removed: Net sales decreased approximately $26.4 million, or 13.6%, to $167.7 million in 2020, as compared to $194.1 million in 2019.
−Removed: The February 2020 acquisition of RSA contributed approximately $19.4 million of sales.
−Removed: Sales of our fastener and machined components products declined by approximately $35.5 million and $10.3 million, respectively, both due to lower demand resulting from current and expected future reduced air travel due to the COVID-19 pandemic, with fastener sales also lower, as expected, due to the 737 Max grounding.
−Removed: Gross profit within Aerospace decreased approximately $26.0 million to $27.0 million, or 16.1% of sales, in 2020, from $53.1 million, or 27.3% of sales, in 2019, due primarily to the decrease in sales levels and related lower fixed cost absorption and production inefficiencies due to the impact of the COVID-19 pandemic.
−Removed: In 2020, we also undertook certain realignment actions to protect against uncertain end-market demand related to the COVID-19 pandemic, resulting in charges of approximately $4.6 million related to inventory reductions, $2.1 million related to severance as we reduced our manufacturing employment levels and $0.3 million related to production equipment removed from service given current demand levels.
−Removed: In addition, we recorded charges during 2020 of approximately $2.0 million related to the non-cash step-up of RSA's inventory to fair value under purchase accounting and subsequent amortization as well as approximately $2.0 million for an update to a pre-acquisition contingent liability.
−Removed: Selling, general and administrative expenses increased approximately $1.5 million to $25.6 million, or 15.2% of sales, in 2020, as compared to $24.1 million, or 12.4% of sales, in 2019, primarily due to approximately $3.8 million of ongoing costs of RSA.
−Removed: This increase was partially offset by cost reduction efforts to mitigate the impact of lower sales levels.
−Removed: Operating profit (loss) within Aerospace decreased approximately $162.4 million to an operating loss of $133.4 million, or (79.6)% of sales, in 2020, as compared to an operating profit of $29.0 million, or 14.9% of sales, in 2019.
−Removed: Operating profit and related margin decreased primarily due to approximately $134.6 million of pre-tax, non-cash goodwill and indefinite-lived intangible asset impairment charges in 2020.
−Removed: Operating profit also declined due to realignment charges, as well as the impact of lower sales levels, which resulted in lower fixed cost absorption and higher production inefficiencies as a result of the COVID-19 pandemic, the recognition of the purchase accounting adjustment related to RSA's inventory step-up to fair value and subsequent amortization, the update of a pre-acquisition contingent liability and higher selling, general and administrative expenses.
−Removed: Specialty Products.
−Removed: Net sales decreased approximately $23.2 million, or 16.9%, to $113.9 million in 2020, as compared to $137.1 million in 2019.
−Removed: Sales of our cylinder products decreased by approximately $14.6 million, as low demand for steel cylinders used in construction and HVAC activity in North America was partially offset by a modest increase in the sale of cylinders used for oxygen and other medical applications.
−Removed: Sales of engines, compressors and related parts used in upstream oil and gas applications decreased by approximately $8.6 million, primarily as a result of low oil-field activity in North America given the low price of oil.
−Removed: Gross profit within Specialty Products decreased approximately $12.0 million to $12.7 million, or 11.1% of sales, in 2020, as compared to $24.7 million, or 18.0% of sales, in 2019.
−Removed: During 2020, we undertook certain realignment actions in response to reduced end market demand, resulting in approximately $9.0 million of non-cash charges, primarily related to Arrow Engine streamlining its product line offering and liquidating its non-core inventory.
−Removed: The remainder of the decrease is primarily due to the decrease in sales levels, as well as to the related lower fixed cost absorption and production inefficiencies, all as a result of the COVID-19 pandemic.
−Removed: Selling, general and administrative expenses within Specialty Products decreased approximately $0.7 million to $7.9 million, or 6.9% of sales, in 2020, as compared to $8.6 million, or 6.3% of net sales, in 2019.
−Removed: During 2020, we incurred realignment expenses of approximately $0.7 million related to severance for sales and administrative employees, which was more than offset by reduced year-over-year spending levels as a result of lower activity and employee levels.
−Removed: Operating profit within Specialty Products decreased approximately $11.7 million to $4.4 million, or 3.8% of sales, in 2020, as compared to $16.0 million, or 11.7% of sales, in 2019, primarily as a result of the 2020 realignment actions, as well as due to the impact of lower sales and related lower fixed cost absorption and production inefficiencies.
−Removed: Corporate Expenses.
−Removed: Corporate expenses included in operating profit consist of the following (dollars in millions):
−Removed: Year ended December 31,
−Removed: Corporate operating expenses $ 20.8 $ 25.4
−Removed: Non-cash stock compensation 8.2 5.8
−Removed: Legacy (income) expenses, net 24.2 3.3
−Removed: Corporate expenses $ 53.2 $ 34.5
−Removed: Corporate expenses included in operating profit increased approximately $18.7 million to $53.2 million in 2020, from $34.5 million in 2019, primarily as a result of the $23.4 million non-cash charge due to the change of our accounting policy for asbestos-related defense costs during 2020 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 we now believe can be reasonably estimated.
−Removed: Non-cash stock compensation expense increased due to the timing and nature of equity awards in 2020 compared with 2019.
−Removed: We also incurred lower corporate operating expenses in 2020 and favorably resolved certain legacy matters during 2020.
−Removed: Discontinued Operations.
−Removed: The results of discontinued operations consist of our former Lamons business, which was sold in December 2019.
−Removed: Income from discontinued operations, net of income tax expenses, was $36.7 million for the year ended December 31, 2019.
−Removed: See Note 5, “Discontinued Operations,” to our consolidated financial statements attached herein.
−Removed: Year Ended December 31, 2019 Compared with Year Ended December 31, 2018
−Removed: The principal factors impacting us during the year ended December 31, 2019 compared with the year ended December 31, 2018 were:
−Removed: • the impact of our two acquisitions, Plastic Srl and Taplast, acquired in January 2019 and April 2019, respectively, which drove the overall sales growth but at lower operating margins;
−Removed: • a decline in North American industrial end market sales and related operating profit, primarily in our Specialty Products and Packaging segments;
−Removed: • the termination of a Corporate liability, resulting in an approximate $8.2 million reduction in selling, general and administrative expenses during 2018 which did not repeat in 2019;
−Removed: • an approximate $3.9 million non-cash reversal of a contingent liability in our Packaging segment, for which the underlying obligation expired in 2019;
−Removed: • the settlement of defined benefit obligations in 2018, which resulted in an approximate $2.5 million non-cash settlement charge that did not repeat in 2019.
−Removed: Overall, net sales increased approximately $18.5 million, or approximately 2.6%, to $723.5 million in 2019, as compared to $705.0 million in 2018.
−Removed: The acquisitions of Taplast, in April 2019, and Plastic Srl, in January 2019, contributed approximately $35.3 million of sales in our Packaging segment.
−Removed: Organic sales overall, excluding the impact of currency exchange, decreased by approximately $11.0 million compared to 2018.
−Removed: We experienced approximately $12.2 million higher sales to the Packaging segment's health, beauty and home care end markets and $8.2 million higher sales within our Aerospace segment, both due to solid demand levels primarily in North America.
−Removed: These increases were more than offset by an approximate $19.6 million decline in sales of industrial-related products in our Specialty Products and Packaging segments, primarily as a result of end market conditions in North America, as well as approximately $11.8 million lower sales of products for food and beverage applications.
−Removed: Additionally, net sales were lower by approximately $5.8 million due to unfavorable currency exchange, as our reported results in U.S.
−Removed: dollars were negatively impacted as a result of the stronger U.S.
+Added: Packaging's gross profit increased approximately $3.3 million to $145.8 million, or 27.3% of sales, in 2021, as compared to $142.4 million, or 29.2% of sales, in 2020, primarily due to the higher sales levels, plus approximately $3.1 million of currency exchange, as our reported results in U.S.
+Added: dollars were favorably impacted as a result of the weakening U.S.
dollar relative to foreign currencies.
−Removed: Gross profit margin (gross profit as a percentage of sales) approximated 26.8% and 28.4% in 2019 and 2018, respectively.
−Removed: Gross profit margin decreased, as the impact of higher sales levels was more than offset by a less favorable product sales mix, resulting from higher levels of sales growth in product applications and end markets typically with lower margin profiles, and acquisition sales with gross margins below TriMas' overall gross margin rate.
−Removed: Gross profit margin further declined due to higher freight and conversion costs in 2019 and as a result of unfavorable currency exchange.
−Removed: Operating profit margin (operating profit as a percentage of sales) approximated 12.6% and 15.4% in 2019 and 2018, respectively.
−Removed: Operating profit decreased approximately $17.6 million, to $91.2 million in 2019, as compared to an operating profit of $108.8 million in 2018.
−Removed: Operating profit and margin decreased primarily due to the year-over-year impact of an approximate $8.2 million non-cash reduction of our recorded liability to Metaldyne in 2018 following the U.S.
−Removed: Bankruptcy Court's final decree to close all remaining cases and terminate the Metaldyne bankruptcy distribution trust that did not repeat in 2019.
−Removed: In addition, during 2019, we also recognized a $3.9 million non-cash reversal of a contingent liability in our Packaging segment.
−Removed: Operating profit and related margin further declined as the impact of higher sales levels was more than offset by a less favorable product sales mix, increased purchase accounting expenses, increased professional fees primarily in support of corporate development activities, higher freight and conversion costs, and as a result of unfavorable currency exchange.
−Removed: Interest expense increased approximately $0.1 million, to $14.0 million in 2019, as compared to $13.9 million in 2018, as a result of higher intra-period revolving credit borrowings in 2019 as compared to 2018.
−Removed: Other income (expense), net increased approximately $3.5 million to $1.0 million in 2019, from $2.5 million in 2018, primarily due to a one-time charge of $2.5 million related to the settlement of defined benefit obligations in the second quarter of 2018 that did not repeat in 2019.
−Removed: Income tax expense decreased approximately $2.3 million, to $16.3 million in 2019 as compared to $18.7 million in 2018.
−Removed: The effective income tax rate for 2019 was 20.9%, compared to 20.2% for 2018.
−Removed: During 2019, we reported domestic and foreign pre-tax income of approximately $52.2 million and $26.1 million, respectively, and recognized tax benefits of approximately $1.2 million resulting from research and manufacturing tax incentives.
−Removed: We also incurred tax charges of approximately $3.6 million directly attributable to increases in valuation allowances on certain deferred tax assets including foreign tax operating loss carryforwards.
−Removed: In 2018, we reported domestic and foreign pre-tax income of approximately $64.7 million and $27.7 million, and recognized a net tax benefit of approximately $2.7 million related to provision to return adjustments for our U.S.
−Removed: Federal tax return, which included an approximate $1.1 million benefit due to additional regulations that were issued in connection with the Tax Cuts and Jobs Act ("Tax Reform Act").
−Removed: Income from continuing operations decreased approximately $11.8 million to $61.9 million in 2019, from $73.7 million in 2018.
−Removed: The decrease was primarily the result of a decrease in operating profit of approximately $17.6 million, partially offset by a decrease in income tax expense of approximately $2.3 million and an increase of other income (expense) of approximately $3.5 million.
−Removed: See below for a discussion of operating results by segment.
+Added: Although gross profit dollars increased, gross profit margin decreased as the impact of a more favorable product sales mix, as higher margin industrial and food and beverage products comprised a larger percentage of total sales, was offset by approximately $11 million of higher material costs (primarily resin) than were recovered via sales price increases during 2021.
+Added: Gross profit margin was also unfavorably impacted by inflationary headwinds on utilities costs, higher labor costs driven by pandemic-related shortages and higher freight costs driven by increased container costs and freight lane rates.
+Added: In addition, we recognized approximately $1.6 million of realignment costs during 2021 primarily related to the closure of our Union City, California manufacturing facility and consolidation into our Indianapolis, Indiana and Woodridge, Illinois facilities as compared to $1.1 million of realignment costs in 2020, primarily related to the disposal of certain equipment removed from service.
+Added: Packaging's selling, general and administrative expenses increased approximately $1.3 million to $49.1 million, or 9.2% of sales, in 2021, as compared to $47.9 million, or 9.8% of sales, in 2020, primarily due to higher ongoing selling, general and administrative costs associated with our acquisitions, partially offset by approximately $1.2 million in charges associated with realignment actions in 2020, primarily for severance, that did not repeat in 2021.
+Added: Packaging's operating profit increased approximately $2.5 million to $96.5 million, or 18.1% of sales, in 2021, as compared to $94.0 million, or 19.2% of sales, in 2020, primarily due to higher sales levels, a more favorable product sales mix and favorable currency exchange, which were partially offset by the impact of higher material and other manufacturing input costs, incremental realignment charges and higher selling, general and administrative expenses.
Net sales increased approximately $15.6 million, or 9.3%, to $183.3 million in 2021, as compared to $167.7 million in 2020.
−Removed: The Taplast and Plastic Srl acquisitions contributed approximately $35.3 million in 2019.
−Removed: Sales to the health, beauty and home care end market increased approximately $12.2 million, primarily due to higher demand in North America and Europe as well as sales growth in Asia.
−Removed: These increases were partially offset by a decrease in sales of products to the food and beverage end market by approximately $11.8 million, primarily due to lower sales of pumps as well as labor and capacity constraints to manufacture caps for certain food applications.
−Removed: Sales of products to the industrial end market declined by approximately $5.8 million due to lower demand in North America.
−Removed: Additionally, net sales were lower by approximately $5.8 million due to unfavorable currency exchange, as our reported results in U.S.
−Removed: dollars were negatively impacted as a result of the stronger U.S.
−Removed: dollar relative to foreign currencies.
−Removed: Packaging's gross profit decreased approximately $3.4 million to $116.2 million, or 29.6% of sales, in 2019, as compared to $119.6 million, or 32.5% of sales, in 2018.
−Removed: Gross profit decreased by approximately $3.2 million due to higher freight costs, more than half of which was as a result of expediting shipments to fulfill committed delivery dates, and by approximately $2.0 million due to unfavorable currency exchange, as our reported results in U.S.
−Removed: dollars were negatively impacted as a result of the stronger U.S.
−Removed: dollar relative to foreign currencies.
−Removed: While the increase in net sales contributed incremental gross profit dollars, we experienced a less favorable product sales mix, primarily due to gross margins of the acquired businesses being below the current overall segment margin, which impacted gross margin by nearly 100 basis points.
−Removed: In addition, sales to the health, beauty and home care end market comprised a larger percentage of net sales in 2019 compared to 2018, and yield a lower gross profit margin.
−Removed: Packaging's selling, general and administrative expenses increased approximately $0.3 million to $35.3 million, or 9% of sales, in 2019, as compared to $35.0 million, or 9.5% of sales, in 2018, primarily due to higher ongoing selling, general and administrative costs associated with the acquisitions completed in 2019 as well as non-cash purchase accounting-related expenses of approximately $0.8 million related to the write-off of the trade name acquired in the Plastic Srl acquisition that will not be used.
−Removed: These increases were partially offset by an approximate $3.9 million non-cash reversal of a contingent liability for which the underlying obligation expired in 2019.
−Removed: Packaging's operating profit decreased approximately $3.8 million to $80.8 million, or 20.6% of sales, in 2019, as compared to $84.6 million, or 23.0% of sales, in 2018, as the impact of higher freight costs, unfavorable foreign currency exchange, a less favorable product sales mix, and higher selling, general and administrative expenses more than offset the impact of higher sales levels.
−Removed: Net sales increased approximately $8.2 million, or 4.4%, to $194.1 million in 2019, as compared to $185.9 million in 2018, due to an increase of approximately $8.5 million due to steady demand levels for fastener products combined with improved production throughput at our manufacturing facilities, partially offset by a decrease of approximately $0.3 million due to lower sales of machined components products.
−Removed: Gross profit within Aerospace increased approximately $3.4 million to $53.1 million, or 27.3% of sales, in 2019, from $49.6 million, or 26.7% of sales, in 2018, as the higher sales were more profitable as a result of production efficiencies.
−Removed: In addition, gross profit and related margin increased due to a favorable product sales mix of more highly-engineered fasteners.
−Removed: Selling, general and administrative expenses increased approximately $1.7 million to $24.1 million, or 12.4% of sales, in 2019, as compared to $22.3 million, or 12.0% of sales, in 2018, primarily due to higher employee costs.
−Removed: Operating profit within Aerospace increased approximately $1.7 million to $29.0 million, or 14.9% of sales, in 2019, as compared to $27.3 million, or 14.7% of sales, in 2018, primarily due to higher sales levels, improved production efficiencies and a more favorable product sales mix, which were partially offset by higher selling, general and administrative expenses.
+Added: RSA, acquired in February 2020, added approximately $4.3 million of sales for January and February 2021 and TFI, acquired in December 2021, added approximately $0.3 million of sales.
+Added: Sales of our fastener products increased approximately $11.2 million, as approximately $29.4 million of sales of customers' stocking orders for highly-engineered fasteners in 2021 were partially offset by lower year-over-year sales resulting from current and expected future reduced air travel due to the COVID-19 pandemic.
+Added: Sales of our engineered components products declined by approximately $0.2 million.
+Added: Gross profit within Aerospace increased approximately $13.0 million to $40.0 million, or 21.8% of sales, in 2021, from $27.0 million, or 16.1% of sales, in 2020, primarily due to charges recorded in 2020 that did not repeat in 2021.
+Added: First, we recorded approximately $4.5 million lower realignment charges in 2021 compared with 2020, which were principally related to inventory reductions and facility consolidations in response to the COVID-19 pandemic.
+Added: In addition, in 2020, we recorded a $2.0 million charge related to an updated estimate of a pre-acquisition contingent liability, as well as an approximate $2.0 million purchase accounting non-cash charge related to the step-up of RSA's inventory to fair value and subsequent amortization, each of which did not repeat in 2021.
+Added: Gross profit margin was further aided by a more favorable product sales mix in 2021, as the stocking orders were primarily for highly-engineered fasteners that command above-average profit margins.
+Added: All of these factors were partially offset by lower absorption of fixed costs and labor inefficiencies during 2021 driven by the COVID-19 pandemic.
+Added: Selling, general and administrative expenses increased approximately $1.1 million to $26.7 million, or 14.6% of sales, in 2021, as compared to $25.6 million, or 15.2% of sales, in 2020, primarily due to the impact of higher ongoing selling, general and administrative costs associated with our acquisitions.
+Added: Operating profit (loss) within Aerospace increased approximately $146.7 million to an operating profit of $13.3 million, or 7.2% of sales, in 2021, as compared to an operating loss of $133.4 million, or 79.6% of sales, in 2020, primarily due to approximately $134.6 million of goodwill and indefinite-lived intangible asset impairment charges during 2020.
+Added: Operating profit also improved due to realignment and other charges recorded in 2020 that did not repeat in 2021, as well as through a more favorable product sales mix, partially offset by labor inefficiencies, lower absorption of fixed costs and higher selling, general and administrative expenses.
Specialty Products.
−Removed: Net sales for 2019 decreased approximately $13.8 million, or 9.2%, to $137.1 million, as compared to $150.9 million in 2018.
−Removed: Sales of engines, compressors and related parts used in upstream oil and gas applications decreased approximately $7.1 million due to lower oil and gas drilling investment activity in the U.S.
−Removed: Sales of our industrial cylinder products decreased approximately $6.7 million, primarily due to decreased demand for both high pressure and acetylene steel cylinders, we believe, as a result of customer consolidation and related asset cylinder inventory management.
−Removed: Gross profit within Specialty Products decreased approximately $6.2 million to $24.7 million, or 18.0% of sales, in 2019, as compared to $30.9 million, or 20.4% of sales, in 2018.
−Removed: Gross profit decreased primarily due to lower sales, reduced fixed cost absorption, and higher conversion costs for our cylinder products.
−Removed: Selling, general and administrative expenses within Specialty Products decreased approximately $1.2 million to $8.6 million, or 6.3% of sales, in 2019, as compared to $9.8 million, or 6.5% of sales, in 2018.
−Removed: Selling, general and administrative expenses decreased as we have continued to manage spending levels consistent with current lower demand levels.
−Removed: Operating profit within Specialty Products decreased approximately $5.0 million to $16.0 million, or 11.7% of sales, in 2019, as compared to $21.0 million, or 13.9% of sales, in 2018, primarily due to lower sales levels, reduced fixed cost absorption and higher conversion costs.
+Added: Net sales increased approximately $26.6 million, or 23.4%, to $140.5 million in 2021, as compared to $113.9 million in 2020.
+Added: Sales of our cylinder products increased by approximately $17.9 million due to a higher demand for steel cylinders in North America as industrial activity continues to rebound following significantly depressed demand in 2020 as result of the COVID-19 pandemic.
+Added: Sales of engines, compressors and related parts used in upstream oil and gas applications increased by approximately $8.7 million primarily as a result of higher oil-field activity in North America.
+Added: Our 2020 sales included approximately $0.7 million related to the liquidation of non-core inventory following our strategic decision to streamline Arrow Engine's product line offering.
+Added: Gross profit within Specialty Products increased approximately $18.8 million to $31.5 million, or 22.4% of sales, in 2021, as compared to $12.7 million, or 11.1% of sales, in 2020.
+Added: During 2020, we executed certain realignment actions in response to reduced end market demand as a result of the COVID-19 pandemic, resulting in approximately $9.0 million of non-cash charges, primarily related to Arrow Engine streamlining its product line offering and liquidating its non-core inventory, which did not repeat in 2021.
+Added: In addition, gross profit increased in 2021 due to higher sales levels, while margins improved due to favorable product sales mix and leveraging previous realignment actions.
+Added: Selling, general and administrative expenses within Specialty Products increased approximately $1.1 million to $9.0 million, or 6.4% of sales, in 2021, as compared to $7.9 million, or 6.9% of net sales, in 2020.
+Added: Our 2021 selling, general and administrative expenses have increased primarily due to higher employment and spending levels incurred to support the increase in sales levels.
+Added: We incurred selling, general and administrative realignment expenses of approximately $0.7 million in 2020 related to severance that did not repeat in 2021.
+Added: Operating profit within Specialty Products increased approximately $18.2 million to $22.6 million, or 16.0% of sales, in 2021, as compared to $4.4 million, or 3.8% of sales, in 2020, primarily due to the impact of 2020 realignment costs that did not repeat in 2021, as well as higher sales and related profit conversion leveraging the 2020 realignment actions without the need to add significant incremental fixed costs.
Corporate Expenses.
3 unchanged sentences
Non-cash stock compensation 9.5 8.2
−Removed: Legacy expenses 3.3 (5.4)
+Added: Legacy (income) expenses, net 1.6 24.2
Corporate expenses $ 37.2 $ 53.2
−Removed: Corporate expenses included in operating profit increased approximately $10.4 million to $34.5 million in 2019, from $24.1 million in 2018.
−Removed: Legacy (income) expenses, net increased approximately $8.7 million, primarily due to the termination of the liability to Metaldyne in first quarter 2018, which resulted in an approximate $8.2 million non-cash reduction in legacy (income) expenses, net, that did not occur in 2019.
−Removed: Corporate operating expenses increased approximately $3.1 million, primarily due to increased professional fees in support of corporate development activities.
−Removed: Discontinued Operations.
−Removed: The results of discontinued operations consists of our former Lamons business, which was sold on December 20, 2019.
−Removed: Income from discontinued operations, net of income tax expenses, was $36.7 million for the year ended December, 31 2019, as compared to a loss from discontinued operations, net of income taxes, of $9.6 million for the year ended December 31, 2018.
−Removed: See Note 5, “Discontinued Operations,” to our consolidated financial statements attached herein.
+Added: Corporate expenses included in operating profit decreased approximately $16.0 million to $37.2 million in 2021, from $53.2 million in 2020, primarily as a result of the $23.4 million non-cash charge recorded in 2020 due to the change of our accounting policy for asbestos-related defense costs.
+Added: In 2021, we commissioned our actuary to update the asbestos study, and recorded a non-cash charge of $1.5 million to increase the liability estimate.
+Added: Corporate operating expenses increased primarily as a result of realignment charges related to the corporate office legal and finance groups in 2021 as well as an increase in professional fees related to corporate development activities.
Liquidity and Capital Resources
−Removed: Cash flows provided by operating activities of continuing operations in 2020 were approximately $127.4 million, as compared to approximately $95.7 million in 2019.
−Removed: Significant changes in cash flows provided by operating activities of continuing operations and the reasons for such changes are as follows:
−Removed: • In 2020, the Company generated approximately $105.0 million in cash flows, based on the reported net loss of approximately $79.8 million and after considering the effects of non-cash items related to depreciation, amortization, loss on dispositions of assets, changes in deferred income taxes, stock-based compensation, change in legacy liability estimate, impairment of goodwill and indefinite-lived intangible assets and other operating activities.
−Removed: In 2019, the Company generated approximately $111.4 million in cash flows based on the reported net income from continuing operations of approximately $61.9 million and after considering the effects of similar non-cash items.
−Removed: • Decreases in accounts receivable resulted in a source of cash of approximately $9.6 million and $3.3 million in 2020 and 2019, respectively, primarily due to timing of cash collections.
−Removed: Days sales outstanding of receivables decreased by approximately four days compared to 2019, as we placed a significant focus on our credit and collections process, particularly in those businesses most impacted by the pandemic where credit risk was heightened.
−Removed: • We decreased our investment in inventory by approximately $4.0 million and $0.7 million in 2020 and 2019, respectively.
−Removed: Our days sales in inventory decreased by approximately eight days in 2020 as compared to 2019, primarily as a result of the strategic decision in our Arrow Engine division to streamline its product line offering during 2020.
+Added: Cash flows provided by operating activities in 2021 were approximately $134.2 million, as compared to approximately $127.4 million in 2020.
+Added: Significant changes in cash flows provided by operating activities and the reasons for such changes are as follows:
+Added: • In 2021, the Company generated approximately $139.2 million in cash flows, based on the reported net income of approximately $57.3 million and after considering the effects of non-cash items related to depreciation, amortization, loss on dispositions of assets, changes in deferred income taxes, debt financing and related expenses, stock-based compensation, change in legacy liability estimate, and other operating activities.
+Added: In 2020, the Company generated approximately $105.0 million in cash flows based on the reported net loss of approximately $79.8 million and after considering the effects of similar non-cash items and the impairment of goodwill and indefinite-lived intangible assets.
+Added: • Increases in accounts receivable resulted in a use of cash of approximately $11.2 million in 2021, while decreases in accounts receivable resulted in a source of cash of approximately $9.6 million 2020, primarily due to timing of net sales and related cash collections.
+Added: Days sales outstanding of receivables remained relatively consistent in 2021 compared to 2020, and decreased by approximately four days through 2020 compared to 2019, as we placed a significant focus on our credit and collections process, particularly in those businesses most impacted by the pandemic where credit risk was heightened.
+Added: • We increased our investment in inventory by approximately $1.0 million in 2021, while decreasing our investment in inventory by approximately $4.0 million in 2020.
+Added: Our days sales in inventory decreased by approximately nine days in 2021 compared with 2020 through active inventory management and selling through certain inventory items that were at elevated levels at the end of 2020 due to lower demand as a result of the COVID-19 pandemic.
+Added: Our days sales in inventory decreased by approximately eight days in 2020 compared to 2019, primarily as a result of the strategic decision in our Arrow Engine division to streamline its product line offering during 2020.
We continue to moderate inventory levels in line with sales levels.
−Removed: • Decreases in prepaid expenses and other assets resulted in a source of cash of approximately $4.4 million in 2020, while increases in prepaid expense and other assets resulted in a use of cash of approximately $6.9 million in 2019.
−Removed: The changes in both 2020 and 2019 are primarily as a result of the timing of payments made for income taxes and certain operating expenses.
−Removed: • Increases in accounts payable and accrued liabilities resulted in a source of cash of approximately $4.5 million in 2020, while decreases in accounts payable and accrued liabilities resulted in a use of cash of approximately $12.8 million in 2019.
−Removed: Our days accounts payable on hand decreased by approximately 15 days in 2020 as we paid certain key Packaging vendors more quickly in 2020 to ensure our orders remained a top priority for them given our robust demand levels and minimal available capacity in the marketplace.
−Removed: This decrease was more than offset by our increase in accrued liabilities during 2020, primarily as a result of the timing and amount of wage-related accruals.
−Removed: Our days accounts payable on hand increased by approximately seven days in 2019 due to the timing and mix of payment terms with our vendors.
−Removed: The decrease in accounts payable and accrued liabilities was further impacted by net non-cash reductions of obligations of approximately $3.9 million in 2019.
−Removed: Net cash used for investing activities of continuing operations was approximately $232.1 million in 2020, while net cash provided by investing activities of continuing operations was approximately $31.3 million in 2019.
−Removed: During 2020, we paid approximately $193.5 million, net of cash acquired, in the aggregate to acquire RSA, Rapak, and Affaba & Ferrari.
+Added: • Decreases in prepaid expenses and other assets resulted in a source of cash of approximately $5.0 million and $4.4 million in 2021 and 2020, respectively.
+Added: The changes in 2021 and 2020 are primarily as a result of the timing of payments made for income taxes and certain operating expenses.
+Added: • Increases in accounts payable and accrued liabilities resulted in a source of cash of approximately $2.1 million and $4.5 million in 2021 and 2020, respectively.
+Added: Our days accounts payable on hand increased by approximately five days in 2021 due to timing and mix of payments terms in 2021 while days payables decreased by approximately 15 days in 2020, primarily as we paid certain key Packaging vendors more quickly in 2020 to ensure our orders remained a top priority for them given our robust demand levels and minimal available capacity in the marketplace.
+Added: This decrease was more than offset by our increase in accrued liabilities in 2020, primarily as a result of the timing and amount of wage-related accruals.
+Added: Net cash used for investing activities was approximately $79.2 million and $232.1 million in 2021 and 2020, respectively.
+Added: During 2021, we paid approximately $34.3 million, net of cash acquired, to acquire Omega and TFI.
We invested approximately $45.1 million in capital expenditures as we have continued our investment in growth, capacity and productivity-related capital projects.
−Removed: Cash received from the disposition of business, property and equipment was approximately $2.0 million in 2020.
−Removed: During 2019, we invested approximately $29.7 million in capital expenditures and received cash from the disposition of business, property and equipment of approximately $128.1 million, primarily related to the sale of Lamons.
−Removed: During 2019, we paid approximately $67.1 million, net of cash acquired, to acquire Plastic Srl and Taplast.
−Removed: Net cash provided by financing activities in 2020 was approximately $6.1 million, while net cash used for financing activities was approximately $40.4 million in 2019.
−Removed: During 2020, we received proceeds from borrowings, net of repayments, of approximately $48.2 million on our revolving credit facilities.
−Removed: We also purchased approximately $39.4 million of outstanding common stock and used a net cash amount of approximately $2.6 million related to our stock compensation arrangements.
−Removed: During 2019, we made net repayments of approximately $0.3 million on our revolving credit facilities, purchased approximately $36.7 million of outstanding common stock and used a net cash amount of approximately $3.3 million related to our stock compensation arrangements.
+Added: During 2020, we paid approximately $193.5 million, net of cash acquired, to acquire RSA, Rapak and Affaba & Ferrari.
+Added: In 2020, we invested approximately $40.5 million in capital expenditures and received cash from the disposition of business, property and equipment of approximately $2.0 million.
+Added: Net cash provided by financing activities was approximately $11.8 million and $6.1 million in 2021 and 2020, respectively.
+Added: During 2021, we issued $400.0 million principal amount of senior notes, made net repayments of approximately $48.6 million on our revolving credit facilities, and redeemed $300.0 million principal amount of senior notes.
+Added: In connection with refinancing our long-term debt, we paid approximately $13.6 million of debt financing fees and redemption premium.
+Added: We also purchased approximately $19.1 million of outstanding common stock, used a net cash amount of approximately $5.2 million related to our stock compensation arrangements and paid dividends of approximately $1.7 million.
+Added: During 2020, we received proceeds from borrowings, net of repayments, of approximately $48.2 million on our revolving credit facilities, purchased approximately $39.4 million of outstanding common stock and used a net cash amount of approximately $2.6 million related to our stock compensation arrangements.
Our Debt and Other Commitments
−Removed: The $300.0 million aggregate principal amount of our senior notes due 2025 ("Senior Notes") accrues interest at a rate of 4.875% per annum, payable semi-annually in arrears on April 15 and October 15, and mature on October 15, 2025.
−Removed: The payment of principal and interest is jointly and severally guaranteed, on a senior unsecured basis by certain named subsidiaries of the Company (each a "Guarantor" and collectively the "Guarantors").
+Added: In March 2021, we issued the 2029 Senior Notes in a private placement under Rule 144A of the Securities Act of 1933, as amended.
+Added: We used the proceeds from the 2029 Senior Notes offering to pay fees and expenses of approximately $5.1 million related to the offering and pay fees and expenses of $1.1 million related to amending our Credit Agreement.
+Added: In connection with the issuance, we completed the redemption of our 2025 Senior Notes, paying $300.0 million to retire the outstanding principal amount plus $7.3 million as a redemption premium.
+Added: The remaining cash proceeds from the 2029 Senior Notes were used for general corporate purposes, including repaying all outstanding revolving credit facility borrowings.
+Added: The $5.1 million of fees and expenses related to the 2029 Senior Notes were capitalized as debt issuance costs, while the $7.3 million redemption premium, as well as approximately $3.0 million of unamortized debt issuance costs associated with the 2025 Senior Notes were recorded as expense within debt financing and related expenses in the accompanying consolidated statement of operations.
+Added: The 2029 Senior Notes accrue interest at a rate of 4.125% per annum, payable semi-annually in arrears on April 15 and October 15, commencing on October 15, 2021.
+Added: The payment of principal and interest is jointly and severally guaranteed, on a senior unsecured basis by certain named subsidiaries of the Company.
The 2029 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.
1 unchanged sentence
In addition, our non-guarantor subsidiaries represented approximately 42% and 50% of the total guarantor and non-guarantor assets and liabilities, respectively, as of December 31, 2021, treating the guarantor and non-guarantor subsidiaries each as a consolidated group.
−Removed: We may redeem all or part of the Senior Notes at a redemption price equal to 102.438% (reducing to 101.219% from October 15, 2021 through October 15, 2022 and 100% thereafter) of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date.
−Removed: We are party to a credit agreement ("Credit Agreement"), consisting of a $300.0 million senior secured revolving credit facility, which permits borrowings denominated in specific foreign currencies, subject to a $125.0 million sub limit.
−Removed: The Credit Agreement matures on September 20, 2022 and is subject to interest at London Interbank Offered Rate ("LIBOR") plus 1.50%.
−Removed: The interest rate spread is based upon the leverage ratio, as defined, as of the most recent determination date.
−Removed: The Credit Agreement allows issuance of letters of credit, not to exceed $40.0 million in aggregate, against revolving credit facility commitments.
+Added: Prior to April 15, 2024, we may redeem up to 40% of the principal amount of the 2029 Senior Notes at a redemption price of 104.125% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds of one or more equity offerings provided that each such redemption occurs within 90 days of the date of closing of each such equity offering.
+Added: In addition, prior to April 15, 2024, we may redeem all or part of the 2029 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.
+Added: In March 2021, we amended our Credit Agreement in connection with the issuance of the 2029 Senior Notes to extend the maturity date.
+Added: We incurred fees and expenses of approximately $1.1 million related to the amendment, all of which were capitalized as debt issuance costs.
+Added: We also recorded approximately $0.2 million of non-cash expense related to the write-off of previously capitalized deferred financing fees.
+Added: Below is a summary of key terms under the Credit Agreement as of December 31, 2021, compared to the key terms prior to the amendment (showing gross availability):
+Added: Instrument Amount
+Added: ($ in millions) Maturity
+Added: Date Interest Rate
+Added: Credit Agreement (as amended)
+Added: Senior secured revolving credit facility $300.0 3/29/2026 LIBOR (a) plus 1.500% (b)
+Added: Credit Agreement (prior to amending)
+Added: Senior secured revolving credit facility $300.0 9/20/2022 LIBOR (a) plus 1.500% (b)
+Added: __________________________
+Added: (a) London Interbank Offered Rate ("LIBOR")
+Added: (a) The interest rate spread is based upon the leverage ratio, as defined, as of the most recent determination date.
+Added: The senior secured revolving credit facility under the Credit Agreement permits borrowings denominated in specific foreign currencies, subject to a $125.0 million sub limit.
The Credit Agreement also provides for incremental revolving credit commitments in an amount not to exceed the greater of $200 million and an amount such that, after giving effect to such incremental commitments and the incurrence of any other indebtedness substantially simultaneously with the making of such commitments, the senior secured net leverage ratio, as defined in the Credit Agreement, is no greater than 3.00 to 1.00.
3 unchanged sentences
Our Credit Agreement contains various negative and affirmative covenants and other requirements affecting us and our subsidiaries, including the ability to, subject to certain exceptions and limitations, incur debt, liens, mergers, investments, loans, advances, guarantee obligations, acquisitions, 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.
−Removed: The terms of our Credit Agreement require us and our subsidiaries to meet certain restrictive financial covenants and ratios computed quarterly, including a maximum total net leverage ratio (total consolidated indebtedness plus outstanding amounts under 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).
+Added: The terms of our Credit Agreement require us and our subsidiaries to meet certain restrictive financial covenants and ratios computed quarterly, including a maximum total net leverage ratio (total consolidated indebtedness plus outstanding amounts under any accounts receivable securitization facility, less the aggregate amount of certain unrestricted cash and unrestricted permitted investments, as defined, over consolidated EBITDA, as defined) and a minimum interest expense coverage ratio (consolidated EBITDA, as defined, over the sum of consolidated cash interest expense, as defined, and preferred dividends, as defined).
Our permitted total net leverage ratio under the Credit Agreement is 4.00 to 1.00 as of December 31, 2021.
1 unchanged sentence
Our actual total net leverage ratio was 1.60 to 1.00 at December 31, 2021.
−Removed: Our permitted senior secured net leverage ratio under the Credit Agreement is 3.50 to 1.00 as of December 31, 2020.
−Removed: If we were to complete an acquisition which qualifies for a Covenant Holiday Period, as defined in our Credit Agreement, then our permitted senior secured net leverage ratio cannot exceed 4.00 to 1.00 during that period.
−Removed: Our actual senior secured net leverage ratio was 0.08 at December 31, 2020.
Our permitted interest expense coverage ratio under the Credit Agreement is 3.00 to 1.00, and our actual interest expense coverage ratio was 13.31 to 1.00 as of December 31, 2021.
4 unchanged sentences
December 31, 2021
−Removed: Net loss $ (79,760)
+Added: Net income $ 57,310
Bank stipulated adjustments:
Interest expense, net (as defined) 14,510
−Removed: Income tax benefit (14,810)
+Added: Income tax expense 11,800
Depreciation and amortization 53,450
−Removed: Impairment charges and asset write-offs 134,600
Non-cash compensation expense (1)
+Added: Non-cash charges for deferred tax asset valuation allowances 250
Other non-cash expenses or losses 1,210
3 unchanged sentences
Business and asset dispositions 130
+Added: Net losses on early extinguishment of debt 3,000
Permitted acquisitions 3,290
+Added: Currency gains and losses 890
Consolidated Bank EBITDA, as defined $ 177,460
5 unchanged sentences
December 31, 2021
−Removed: Total senior secured indebtedness $ 12,970
−Removed: Consolidated Bank EBITDA, as defined 170,940
−Removed: Senior secured net leverage ratio 0.08 x
−Removed: Covenant requirement 3.50 x
−Removed: December 31, 2020
Interest expense, as defined $ 14,510
10 unchanged sentences
(1) Non-cash compensation expenses resulting from the grant of equity awards.
−Removed: (2) Non-recurring costs and expenses relating to severance, relocation, restructuring and curtailment expenses.
−Removed: During 2018, we terminated our $75.0 million accounts receivable facility, under which we had the ability to sell eligible accounts receivable to a third-party multi-seller receivables funding company.
−Removed: In 2020, we placed cash on deposit with a financial institution to be held as cash collateral for our outstanding letters of credit;
−Removed: therefore, as of December 31, 2020, we had no letters of credit issued against our revolving credit facility.
−Removed: At December 31, 2020, we had $50.5 million outstanding under our revolving credit facility and had $249.5 million potentially available.
−Removed: At December 31, 2019, we had no amounts outstanding under our 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.
−Removed: The letters of credit are used for a variety of purposes, including support of certain operating lease agreements, vendor payment terms and other subsidiary operating activities, and to meet various states' requirements to self-insure workers' compensation claims, including incurred but not reported claims.
+Added: (2) Non-recurring costs and expenses relating to diligence and transaction costs, purchase accounting costs, severance, relocation and restructuring expenses.
+Added: (3) Includes approximately $3.8 million of acquisition related contingent consideration as of December 31, 2021.
+Added: The Credit Agreement allows issuance of letters of credit, not to exceed $40.0 million in aggregate, against revolving credit facility commitments.
+Added: We placed cash on deposit with a financial institution to be held as cash collateral for our outstanding letters of credit;
+Added: therefore, as of December 31, 2021 and December 31, 2020, we had no letters of credit issued against our revolving credit facility.
+Added: At December 31, 2021, we had no amounts outstanding under our revolving credit facility and had $300.0 million potentially available after giving effect to letters of credit issued and outstanding.
+Added: At December 31, 2020, we had $50.5 million amounts outstanding under our revolving credit facility and had $249.5 million potentially available after giving effect to letters of credit issued and outstanding.
+Added: Our restricted cash deposits are used for a variety of purposes, including support of certain operating lease agreements, vendor payment terms and other subsidiary operating activities, and to meet various states' requirements to self-insure workers' compensation claims, including incurred but not reported claims.
Our borrowing capacity was not reduced by leverage restrictions contained in the Credit Agreement as of December 31, 2021 and December 31, 2020.
−Removed: We rely upon our cash flow from operations and available liquidity under our revolving credit facility to fund our debt service obligations and other contractual commitments, working capital and capital expenditure requirements, as well as for discretionary spending such as any repurchases of our common stock.
+Added: We rely upon our cash flow from operations and available liquidity under our revolving credit facility to fund our debt service obligations and other contractual commitments, working capital and capital expenditure requirements.
At the end of each quarter, we have historically used cash on hand from our domestic and certain foreign subsidiaries to pay down amounts outstanding under our revolving credit facility, as applicable.
−Removed: Our weighted average borrowings approximated $368.9 million during 2020, compared to $338.0 million during 2019, due to our March 2020 proactive $150 million draw on our revolving credit facility to ensure availability of cash on hand given the potential uncertainty surrounding the financial markets as a result of the COVID-19 pandemic, and as a result of an increase in December 2020 as part of funding the Affaba & Ferrari acquisition.
−Removed: We repaid the $150 million during second quarter 2020.
+Added: Our weighted average borrowings approximated $401.9 million during 2021, compared to $368.9 million during 2020, primarily due to a higher aggregate principal balance on our senior notes due to the issuance of the 2029 Senior Notes and the redemption of the 2025 Senior Notes during 2021.
+Added: In May 2021, we, through one of our non-U.S.
+Added: subsidiaries, entered into a revolving loan facility with a borrowing capacity of $4 million.
+Added: The facility is guaranteed by TriMas Corporation.
+Added: There were no borrowings on this loan facility as of December 31, 2021.
Cash management related to our revolving credit facility is centralized.
1 unchanged sentence
Our business and related cash forecasts are updated monthly.
−Removed: In considering the economic uncertainty surrounding the potential business impacts from the COVID-19 pandemic with respect to our operations, supply chains, distribution channels, and end-market customers, during 2020, we took certain defensive actions as we monitored our cash position and available liquidity.
−Removed: Those actions included suspending our repurchase of our common stock during second quarter 2020, borrowing on our revolving credit facility, tightening our capital expenditures, advanced monitoring of our accounts receivable balances and flexing cost structures of operations expected to be most impacted by COVID-19.
−Removed: Given strong cash generation and our current liquidity position, we relaxed certain of these actions in the third quarter of 2020, choosing to further invest in capital expenditures and resume purchasing shares of our common stock.
−Removed: The majority of our cash on hand as of December 31, 2020 is located in jurisdictions outside the United States.
−Removed: We have aggregate available funding under our revolving credit facility of $249.5 million at December 31, 2020, which is not reduced by leverage restrictions.
−Removed: Based on forecasted cash sources and requirements inherent in our business plans, we believe that our liquidity and capital resources, including anticipated cash flows from operations, will be sufficient to meet our debt service, capital expenditure and other short-term and long-term obligation needs for the foreseeable future.
−Removed: In addition, we may evaluate opportunities to refinance our Senior Notes and/or the Credit Agreement ahead of their maturity dates.
−Removed: There can be no assurance, however, that we will be able to refinance our Senior Notes or the Credit Agreement on more favorable terms.
+Added: In considering the economic uncertainty surrounding the potential business impacts from the COVID-19 pandemic with respect to our operations, supply chains, distribution channels, and end-market customers, we took certain defensive actions during 2020 as we monitored our cash position and available liquidity.
+Added: These actions included suspending our repurchase of our common stock, borrowing on our revolving credit facility, tightening our capital expenditures, advanced monitoring of our accounts receivable balances and flexing cost structures of operations expected to be most impacted by COVID-19.
+Added: Given strong cash generation and our current liquidity position, we subsequently relaxed certain of these actions, choosing to further invest in capital expenditures, resume purchasing shares of our common stock and initiating a cash dividend.
+Added: The majority of our cash on hand as of December 31, 2021 is located within the United States, and given available funding under our revolving credit facility of $300.0 million at December 31, 2021 (after consideration of the aforementioned leverage restrictions) and based on forecasted cash sources and requirements inherent in our business plans, we believe that our liquidity and capital resources, including anticipated cash flows from operations, will be sufficient to meet our debt service, capital expenditure and other short-term and long-term obligation needs for the foreseeable future, as well as dividends and share repurchases.
We are subject to variable interest rates on our revolving credit facility.
At December 31, 2021, 1-Month LIBOR approximated 0.10%.
−Removed: Based on our variable rate-based borrowings outstanding at December 31, 2020, a 1% increase in the per annum interest rate would increase our interest expense by approximately $0.5 million annually.
+Added: At December 31, 2021, we had no amounts outstanding on our revolving credit facility and, therefore, no variable rate-based borrowings outstanding.
+Added: In November 2021, we amended the Credit Agreement to replace LIBOR with a benchmark interest rate determined based on the currency denomination of borrowings, effective January 1, 2022.
In addition to our long-term debt, we have other cash commitments related to leases.
−Removed: We account for these lease transactions primarily as operating leases, and incurred expense from continuing operations related thereto of approximately $9.4 million in 2020.
+Added: We account for these lease transactions as operating leases, and incurred rent expense for continuing operations related thereto of approximately $11.0 million in 2021.
We continue to be party to non-cancelable leases for certain facilities we have exited as part of restructuring activities, and have entered into sublease agreements to minimize our net lease payments.
6 unchanged sentences
These include payments under our long-term debt agreements, rent payments required under operating lease agreements, certain benefit obligations and interest obligations on our long-term debt.
−Removed: The following table summarizes our significant contractual cash obligations as of December 31, 2020 (dollars in thousands).
+Added: The following table summarizes our material contractual cash obligations as of December 31, 2021 (dollars in thousands).
Payments Due by Periods
7 unchanged sentences
123,750 16,500 33,000 33,000 41,250
+Added: Contingent consideration 3,760 — 3,760 — —
Total contractual obligations $ 599,230 $ 26,170 $ 56,090 $ 48,870 $ 468,100
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dollars will fluctuate with changes in exchange rates between such local currencies and the U.S.
−Removed: We have historically used derivative financial instruments to manage currency risks, as we seek to to mitigate the risk associated with fluctuations in currency rates impacting cash flows related to certain receivables, payables and intercompany transactions denominated in foreign currencies.
+Added: We have historically used derivative financial instruments to manage currency risks, as we seek to mitigate the risk associated with fluctuations in currency rates impacting cash flows related to certain receivables, payables and intercompany transactions denominated in foreign currencies.
We also use cross-currency swap agreements to mitigate currency risks associated with the net investment in certain of our foreign subsidiaries.
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We and certain of our outstanding debt obligations are rated by Standard & Poor's and Moody's.
−Removed: On June 12, 2020, Moody's affirmed a Ba3 rating to our Senior Notes, as presented in Note 13, "Long-term Debt" included in Item 8, "Financial Statements and Supplementary Data" within this Form 10-K.
+Added: On March 24, 2021, Moody's assigned a Ba3 rating to our 2029 Senior Notes, as presented in Note 13, "Long-term Debt" included in Item 8, "Financial Statements and Supplementary Data" within this Form 10-K.
Moody's also affirmed a Ba2 Corporate Family Rating and maintained its outlook as stable.
−Removed: On February 12, 2020, Standard & Poor's affirmed a BB- rating to our senior unsecured debt, affirmed a BB corporate credit rating and maintained its outlook as stable.
+Added: On March 15, 2021, Standard & Poor's assigned a BB- rating to our 2029 Senior Notes.
+Added: On February 26, 2021 Standard & Poor's affirmed a BB corporate credit rating and maintained its outlook as stable.
If our credit ratings were to decline, our ability to access certain financial markets may become limited, our cost of borrowings may increase, the perception of us in the view of our customers, suppliers and security holders may worsen and as a result, we may be adversely affected.
−Removed: On the whole, 2020 was an unprecedented and particularly challenging year following the onset of the COVID-19 pandemic, which significantly affected each of our businesses and how we operate, albeit in different ways and magnitudes.
−Removed: We believe our financial results demonstrate our ability to effectively leverage our TriMas Business Model, working across our businesses with a high degree of connectivity to respond to changing market conditions.
−Removed: We capitalized on opportunities where market demand was high, while also taking swift actions where market demand was sharply reduced.
−Removed: In 2020, we experienced year-over-year overall growth in sales, driven by robust organic growth in our Packaging segment and from acquisitions, which were partially offset by significant sales decreases in our Aerospace and Specialty Products segments, where we took proactive realignment actions to mitigate the effects of lower demand from the pandemic as much as practical.
−Removed: Looking forward, we believe there will be a continued period of uncertainty related to demand levels for our products, whether it be when new aircraft builds will ramp-up that require our fasteners or engineered products, if industrial production will increase over the lower 2020 levels that may require our cylinder or closure products, and how long and at what rate the recent high demand will continue for our dispenser and closure product applications that help fight the spread of germs.
−Removed: We expect to continue to mitigate, as much as practical, the impact of lower volumes in the most challenged end markets, executing realignment actions as necessary so we are positioned to gain operating leverage when these end markets begin to recover.
−Removed: We believe we remain well positioned to capitalize on the recovery of the aerospace and industrial markets, as well as available market growth opportunities.
−Removed: We believe the availability and effectiveness of vaccines, as well as continued measures intended to control the spread of the virus, are among the most significant factors that could impact demand for our products.
+Added: Over the past two years, the COVID-19 pandemic has significantly affected each of our businesses and how we operate, albeit in different ways and magnitudes.
+Added: Sales in our Packaging segment for dispensing and closure products we supply that are used in applications to fight the spread of germs have continued to be much stronger than before the COVID-19 pandemic, although, as expected, have abated from peak levels in 2020 at the onset of the COVID-19 pandemic.
+Added: Sales in our Specialty Products segment had been depressed by low levels of industrial activity in the U.S.
+Added: during 2020, but have since strongly rebounded in the last nine months of 2021.
+Added: Sales in our Aerospace segment are expected to be lower than historical levels for an indefinite period as a result of low new commercial aircraft builds, but have been significantly boosted by customers' stocking orders throughout 2021.
+Added: We believe our 2021 financial results demonstrate our ability to effectively leverage our TriMas Business Model, working across our businesses with a high degree of connectivity to respond to changing market conditions, including the ongoing challenges presented by the COVID-19 pandemic.
+Added: We have capitalized on opportunities where market demand was high, while also taking swift actions where market demand was sharply reduced.
+Added: We have continued to take proactive realignment actions to mitigate the effects of lower demand from the COVID-19 pandemic as much as practical, while at the same time growing our businesses through organic new products as well as via bolt-on acquisitions.
+Added: Looking forward, we believe there will be a continued period of uncertainty related to demand levels for our products, whether it be when production rates for new aircraft builds, which require our fasteners and engineered products, will ramp-up, or whether general industrial activity will continue to increase toward pre-pandemic levels.
+Added: We expect to continue to mitigate, as much as practical, the impact of low volumes in the most challenged end markets, executing realignment actions as necessary so we are positioned to gain operating leverage when these end markets recover.
+Added: We believe we remain well positioned to capitalize on the recovery of the aerospace market, just as we have with the improvement in the industrial markets in the back half of 2021, as well as capture available market growth opportunities.
+Added: We believe the continued effectiveness of vaccines, as well as continued measures intended to control the spread of the virus and future variants thereof, are among the most significant factors that could impact demand for our products.
As a result of continued uncertainties resulting from the COVID-19 pandemic, and their potential impact to our future results of operations, as well as to TriMas' market capitalization, we may record additional cash and non-cash charges related to further realignment actions, as well for uncollectible customer account balances, excess inventory and idle production equipment.
−Removed: At this time, we are not able to practically estimate the extent or amount of any such potential cash and non-cash charges.
−Removed: At present, we believe our capital structure is strong and that we have sufficient headroom under our financial covenants, and ample cash and available liquidity under our revolving credit facility, to meet our debt service, capital expenditure and other short-term and long-term obligations for the foreseeable future.
+Added: At this time, we are not able to estimate the extent or amount of any such potential cash and non-cash charges.
+Added: Following the issuance of our 2029 Senior Notes and the amendment of our Credit Agreement in 2021, we believe our capital structure remains strong and that we have sufficient headroom under our financial covenants, and ample cash and available liquidity under our revolving credit facility, to meet our debt service, capital expenditure and other short-term and long-term obligations for the foreseeable future, as well as dividends and share repurchases.
We expect to continue to leverage the tenets of our TriMas Business Model to manage our multi-industry businesses and address the ongoing challenges presented by the COVID-19 pandemic, and on a longer-term basis, achieve our growth plans, execute continuous improvement initiatives to offset inflationary pressures, and seek lower-cost sources for input costs, all while continuously assessing the appropriateness of our manufacturing footprint and fixed-cost structure.
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These judgments are based on our historical experience, our evaluation of business and macroeconomic trends, and information from other outside sources, as appropriate.
−Removed: Receivables are presented net of allowances for doubtful accounts of approximately $2.1 million at December 31, 2020 and 2019.
+Added: Receivables are presented net of allowances for doubtful accounts of approximately $1.6 million and $2.1 million at December 31, 2021 and 2020, respectively.
We monitor our exposure for credit losses and maintain adequate allowances for doubtful accounts.
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We determine our 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.
−Removed: For purposes of our 2020 goodwill impairment test, we had six reporting units, three of which had goodwill, within our three reportable segments.
+Added: For purposes of our 2021 goodwill impairment test, we had five reporting units, three of which had goodwill, within our three reportable segments.
We first perform a qualitative assessment for our annual goodwill impairment test and for our indefinite-lived intangible asset impairment test, which involves significant use of management's judgment and assumptions to determine whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying amount.
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therefore, we determined that quantitative assessments were not required.
−Removed: During the third quarter of 2020, as a result of a decline in our aerospace-related business' financial results, a significant reduction in 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, we determined there was a triggering event requiring an interim quantitative goodwill impairment assessment of each of our two aerospace-related reporting units:
−Removed: Aerospace Fasteners and Aerospace Engineered Products.
−Removed: In conducting the quantitative analysis, we determined the estimated fair value of the Aerospace reporting units utilizing both income and market-based approaches.
−Removed: The income approach relies on the present value of estimated future cash flows of the business, discounted using a rate appropriately reflecting the risks inherent in the cash flows.
−Removed: The market approach relies on market data of other public companies that we deem comparable in operations to our reporting units.
−Removed: Upon completion of the goodwill impairment test, we determined that the carrying values of the Aerospace Fasteners and Aerospace Engineered Products reporting units exceeded their fair values, resulting 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.
−Removed: We note 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.
−Removed: Additionally, because of the factors previously mentioned, we also performed a quantitative assessment for all of our indefinite-lived intangible assets included within the Aerospace segment, using a relief-from-royalty method.
−Removed: The relief-from-royalty method involves the estimation of appropriate market royalty rates for our indefinite-lived intangible assets and the application of these royalty rates to forecasted net sales attributable to the intangible assets.
−Removed: The resulting cash flows are then discounted to present value, using a rate appropriately reflecting the risks inherent in the cash flows, which is compared to the carrying value of the assets.
−Removed: Upon completion of the quantitative impairment test, we determined that certain of our aerospace-related trade names had carrying values that exceeded their fair values, and therefore recorded impairment charges of approximately $7.8 million during 2020.
Future declines in sales and/or operating profit, declines in our stock price, or other changes in our business or the markets for our products could result in further impairments of our goodwill and indefinite-lived intangible assets.
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We are generally party to high deductible insurance programs for losses and liabilities related principally to workers' compensation, health and welfare claims and comprehensive general, product and vehicle liability.
−Removed: Generally, we are responsible for up to $0.8 million per occurrence under our retention program for workers' compensation, between $0.3 million and $1.5 million per occurrence under our retention programs for comprehensive general, product and vehicle liability, and have a $0.4 million per occurrence stop-loss limit with respect to our self-insured group medical plan.
+Added: Generally, we are responsible for up to $0.8 million per occurrence under our retention program for workers' compensation, up to $1.5 million per occurrence under our retention programs for comprehensive general, product and vehicle liability, and have a $0.4 million per occurrence stop-loss limit with respect to our self-insured group medical plan.
We accrue loss reserves up to our retention amounts based upon our estimates of the ultimate liability for claims incurred, including an estimate of related litigation defense costs, and an estimate of claims incurred but not reported using actuarial assumptions about future events.
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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.