What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-02-29 compared with 2023-02-23 · 162 added, 166 removed, 283 unchanged (54% of the section changed)

6 unchanged sentences

We believe our businesses share important and distinguishing characteristics, including:

well-recognized and leading brand names in the focused markets we serve;

well-recognized and leading brand names in the markets we serve;

innovative product technologies and features;

1 unchanged sentence

established distribution networks;

relatively low ongoing capital investment requirements;

modest capital investment requirements;

strong cash flow conversion and long-term growth opportunities.

3 unchanged sentences

Key Factors Affecting Our Reported Results

Our businesses and results of operations depend upon general economic conditions.

We serve customers in industries that are highly competitive, cyclical and that may be significantly impacted by changes in economic or geopolitical conditions.

Our results of operations have been materially impacted over the past few years by macro-economic factors, first by the onset and proliferation of the coronavirus ("COVID-19") pandemic, then further from increased energy costs and supply chain disruptions from the Russia-Ukraine conflict, and more recently by cost inflation (raw materials, wage rates and freight).

Demand for the products our businesses produce and results of operations depend upon general economic conditions.

We serve customers in industries that are highly competitive and that may be significantly impacted by changes in economic or geopolitical conditions.

Our results of operations have been materially impacted over the past few years by macro-economic factors, first by the onset and proliferation of the coronavirus pandemic ("pandemic"), then further from increased energy costs and supply chain disruptions from the Russia-Ukraine conflict, and more recently by cost inflation (raw materials, wage rates and freight) and a lack of material and in certain regions skilled labor availability.

These factors s ignificantly affected each of our businesses and how we operate, albeit in different ways and magnitudes.

Sales in our Packaging segment for dispensing and closure products used in applications to help fight the spread of germs have experienced extreme volatility in demand, with demand spiking to record highs after the onset of the pandemic, demand abating as expected from those high levels over the past year, and in the second half of 2022 demand abruptly falling as a result of some of our large consumer goods customers' choices to rebalance on-hand inventory levels given the current macro-economic environment.

Sales of certain of our industrial and aerospace-related products were significantly depressed from historical levels during 2020 and 2021, but demand has significantly increased in 2022, to where the industrial demand in our Specialty Products segment has rebounded to pre-pandemic levels, while demand in our Aerospace segment continues to increase (and more quickly than expected) as air travel has picked-up and new aircraft build rates improve.

Altogether, this significant level of volatility in demand levels, input costs and supply chain availability, as well as internal labor availability, all have pressured our ability to operate efficiently and at historical margin levels.

Sales in our Packaging segment for dispensing and closure products used in applications to help fight the spread of germs have experienced extreme volatility in demand, with demand spiking to record highs after the onset of the pandemic, demand abating as expected from those high levels beginning mid-2022 and continuing through most of 2023, with demand stabilizing toward the end of 2023, as a result of some of our larger customers' choices to rebalance on-hand inventory levels and caution in purchasing behaviors given the current inflationary macro-economic environment.

Sales of certain of our aerospace-related products were significantly depressed from historical levels following the onset of the pandemic, but demand has significantly increased in recent quarters as air travel has picked-up and new aircraft build rates improve.

Certain of our products for industrial applications, for example steel cylinders for packaged gas applications, and engines and compressors for oil & gas extraction, have experienced volatility in demand related to a number of channel and economic factors in more recent periods.

Altogether, this significant level of volatility in demand levels, input and transportation costs, and material and labor availability, have pressured our ability to operate efficiently and at historical margin levels.

Overall, 2023 net sales increased $9.7 million, or 1.1%, compared to 2022.

S ales increased within our Specialty Products segment as a result of increased industrial demand and higher oil-field activity in North America.

Sales also increased as a result of recent acquisitions in our Packaging and Aerospace segments, as well as from sales of products used in food and beverage markets within our Packaging segment.

These factors were partially offset by an abrupt reduction in demand, which we believe is temporary, for personal care, home care and certain industrial products in the second half of 2022 in our Packaging segment, as well as unfavorable currency exchange.

The most significant drivers affecting our financial results in 2022 compared with 2021 , other than as directly impacted by sales changes or as a result of the labor-related availability and inefficiencies, were gains on the sale of non-core real estate, the settlement of our cross currency swaps, the impact of higher energy and other input costs, non-cash charges to update our asbestos liability to actuarial valuations , the year-over-year impact of our realignment actions , the impact of our 2021 debt refinancing activities, and the impact of a change in effective tax rates from 2021 to 2022.

We experienced sales growth from acquisitions in our Packaging and Aerospace segments, as well as organic sales increases within our Aerospace and Specialty Product segments as a result of increased demand levels in North America, particularly in the first half of the year for Specialty Products.

These increases were partially offset by reduced demand for dispensers and closures used in consumer products and industrial applications within our Packaging segment, which we believe declined due to lower customer order activity given high customer stocking levels, as well as continuing uncertainty around consumer sentiment as a result of the inflationary environment.

The most significant drivers affecting our financial results in 2023 compared with 2022 , other than as directly impacted by sales changes, were the impact of our recent acquisitions, improved manufacturing throughput in our Aerospace segment, material cost abatement in our Packaging segment, realignment actions in our Packaging segment, the year-over-year impact of the sale of non-core real estate in 2022, the year-over-year impact of the termination of our existing cross-currency swap agreements in 2022, and a decrease in our effective tax rate.

In April 2023, we acquired Weldmac Manufacturing Company ("Weldmac"), a designer and manufacturer of complex metal fabricated components and assemblies for the aerospace, defense and space launch end markets for a purchase price of $34.0 million, with additional contingent consideration ranging from zero to $10 million based on achievement of earnings targets.

Weldmac, which is reported in our Aerospace segment, is located in El Cajon, California.

Weldmac contributed $26.6 million of net sales during 2023.

We recognized a $2.4 million purchase accounting non-cash charge related to the step-up of Weldmac's inventory to fair value in 2023.

In July 2023, we made a cash payment of $5.5 million as additional consideration based on achievement of earnings targets.

The remaining possible contingent consideration ranges from zero to $4.5 million, based on achievement of 2023 earnings targets, as defined in the purchase agreement.

At December 31, 2023, we believe it is probable the maximum contingent consideration will be earned.

In February 2023, we acquired Aarts Packaging B.V.

("Aarts"), a luxury packaging solutions provider for beauty and lifestyle brands, as well as for customers in the food and life sciences end markets, for a purchase price of $37.8 million, net of cash acquired.

Aarts, which is reported in our Packaging segment, is located in Waalwijk, the Netherlands, and contributed $23.6 million of net sales during 2023.

In February 2022, we acquired Intertech Plastics LLC and related companies (collectively, "Intertech"), a manufacturer of custom injection molded products used in medical applications, as well as products and assemblies for consumer and industrial applications, for an aggregate amount of $64.1 million, net of cash acquired.

Intertech, which is reported in the Company's Packaging segment, has two manufacturing facilities located in the Denver, Colorado area.

Intertech contributed $28.7 million of net sales during 2022.

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 $22.5 million, net of cash acquired.

Omega, which is reported in the Company's Packaging segment, is located in Clinton Township, Michigan.

Omega contributed $15.0 million of acquisition-related sales growth during the period January through November 2022.

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 $11.8 million, with additional contingent consideration ranging from zero to $12.0 million to be paid based on 2023 and 2024 earnings per the purchase agreement.

On the acquisition date, we recorded $3.7 million as our best estimate of fair value of the additional contingent consideration;

however, based on a detailed fourth quarter 2022 review of TFI's updated forecasted operating results, the we determined the likelihood of the contingent consideration being paid was remote, and therefore reversed the liability, with such adjustment being included in other income (expense), net.

TFI, which is reported in the Company's Aerospace segment, is located near Toronto, Canada.

TFI contributed $4.9 million of acquisition-related sales growth during the period January through November 2022.

Intertech, which is reported in our Packaging segment, has two manufacturing facilities located in the Denver, Colorado area.

Intertech contributed $5.3 million of acquisition-related sales growth during the period January through February 2023.

Over the past few years, we have been executing certain realignment actions in response to current and expected future end market demand and rising input costs.

We recorded pre-tax realignment charges of $10.3 million in 2023, primarily related to our actions to close and consolidate two production facilities in China into one new, larger facility in Haining, China, and to close and consolidate our Rohnert Park, California, manufacturing facility operations into other existing U.S.

production locations.

These charges consisted of $2.1 million employee-related costs, $0.8 million for the write down of inventory to fair value, $5.2 million related to other facility move and consolidation costs, and $2.2 million were related to charges to accelerate the depreciation of certain fixed assets.

We recorded pre-tax realignment charges of $5.0 million in 2022, of which $2.7 million related to facility move and consolidation costs and $2.3 million were for employee related costs.

In the fourth quarter of 2022, we sold a non-core facility in City of Industry, California, for net cash proceeds of $23.3 million.

3 unchanged sentences

The cross-currency swap agreements had notional amounts totaling $250.0 million, which declined to $25.0 million over various contract periods ending between October 15, 2023, and October 15, 2027.

We also experienced a significant increase in the cost of energy, primarily in our Europe-based operations, as well as for other input costs in 2022 compared with 2021.

Energy costs began to rise during late 2021, and further increased into 2022, which we believe is primarily due to geopolitical tensions associated with the Russia-Ukraine conflict, as well as realized and expected energy supply constraints.

Energy costs were more than $5 million higher in 2022 than in 2021.

While these costs have begun to stabilize and even recede at the end of 2022, we expect there could be additional cost and supply chain pressures going forward as a result of the uncertainty surrounding the conflict in Eastern Europe.

In 2022 and 2021, we commissioned our actuary to update our asbestos study, and upon completion we recorded non-cash, pre-tax charges of $5.6 million and $1.5 million, respectively, which are included in selling, general and administrative expenses.

We have been executing certain realignment actions in response to current and expected future end market demand, as well as for the move to our new Packaging facility in New Albany, Ohio.

We recorded pre-tax facility move/consolidation and employee-related costs of $2.7 million and $2.3 million, respectively, in 2022.

In 2021, we recorded pre-tax facility consolidation and employee separation costs of $3.5 million and $6.2 million, respectively.

In March 2021, we refinanced our long-term debt, issuing $400 million principal amount of 4.125% senior unsecured notes due April 15, 2029 ("2029 Senior Notes") at par value in a private placement offering and amending our existing credit agreement ("Credit Agreement"), extending the maturity to March 2026.

We used the proceeds from the 2029 Senior Notes offering to pay fees and expenses of $5.1 million related to the offering and $1.1 million related to amending the Credit Agreement.

The remaining cash proceeds from the 2029 Senior Notes were used for general corporate purposes, including repaying all outstanding revolving credit facility borrowings.

In April 2021, we completed the refinancing, 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.

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 $3.0 million of unamortized debt issuance costs associated with the 2025 Senior Notes were expensed in the second quarter of 2021.

Our effective tax rate for 2023 and 2022 was 20.2%, and 24.5%, respectively.

The rate for 2022 is higher primarily as a result of the recognition of $3.0 million of deferred tax benefits in Italy during the 2021, the majority of which related to a reduction in deferred tax liabilities in connection with certain tax incentives.

The rate for 2023 is lower primarily as a result of recognizing a $2.0 million tax benefit related to a net operating loss carryforward in a foreign jurisdiction, and a $0.6 million benefit related to tax incentives in another foreign jurisdiction.

Additional Key Risks that May Affect Our Reported Results

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.

We have executed meaningful realignment actions over the past few years, primarily in our Packaging segment, to address manufacturing capacity where demand has fallen.

We will continue to assess further actions if required.

However, as a result of the current period of macroeconomic inflation and uncertainty, the continued impact of the COVID-19 pandemic, and the potential impact of such factors 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, asset impairments as well as for uncollectible customer account balances, excess inventory and idle production equipment.

Other critical factors affecting our ability to succeed include:

However, as a result of the current period of macroeconomic inflation and uncertainty and the potential impact of such factors to our future results of operations, as well as if there is an impact to TriMas' market capitalization, we may record additional cash and non-cash charges related to incremental realignment actions, asset impairments, including impairments to our goodwill, intangible assets, fixed assets, inventory or customer receivable account balances.

Despite the potential for declines in future demand levels and results of operations, at present, we believe our capital structure is in a strong position.

We have sufficient cash and available liquidity under our revolving credit facility to meet our debt service obligations, capital expenditure requirements and other short-term and long-term obligations for the foreseeable future.

Critical factors affecting our ability to succeed include:

our ability to create organic growth through product development, cross-selling and extending product-line offerings, and our ability to quickly and cost-effectively introduce and successfully launch new products;

our ability to acquire and integrate companies or products that supplement existing product lines, add new distribution channels or customers, expand our geographic coverage or enable better absorption of overhead costs;

our ability to acquire and integrate companies or products that supplement existing product lines, add new distribution channels or customers, or expand our geographic coverage;

our ability to manage our cost structure more efficiently via supply chain management, internal sourcing and/or purchasing of materials, selective outsourcing and/or purchasing of support functions, working capital management, and greater leverage of our administrative functions;

1 unchanged sentence

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.

Given the short-cycle nature of most of our businesses, we do not consider sales order backlog to be a material factor.

A growing amount of our sales is derived from international sources, which exposes us to certain risks, including currency risks.

We are sensitive to price movements and availability of our raw materials supply.

Our largest raw material purchases are for resins (such as polypropylene and polyethylene), steel, aluminum and other metal and non-metal-based purchased components.

In addition to the pandemic and inflation-related factors affecting our 2021 and 2022 results, there has also been some volatility over the past two years as a direct and indirect result of foreign trade policy, where tariffs on certain of our commodity-based products sourced from Asia have been instituted, and certain North American suppliers have opportunistically increased their prices.

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.

Our largest raw material purchases are for resins (such as polypropylene and polyethylene), steel, aluminum, superalloys (such as titanium, A286 stainless steel and Inconel) and other oil and metal-based purchased components, the costs for each of which have experienced recent volatility.

There has also been some volatility over the past two years as a direct and indirect result of foreign trade policy, where tariffs on certain of our commodity-based products sourced from Asia have been instituted, the conflict in Eastern Europe, creating certain input material shortages, and labor shortages at certain of our raw material suppliers.

We will continue to take actions to mitigate such increases, including implementing commercial pricing adjustments, holding extra inventories and resourcing to alternate suppliers and insourcing of previously sourced products.

Although we believe we are generally able to mitigate the impact of higher commodity costs over time, we may experience additional material costs and disruptions in supply in the future and may not be able to pass along higher costs to our customers in the form of price increases or otherwise mitigate the impacts to our operating results.

Although we have escalator/de-escalator clauses in commercial contracts with certain of our customers, 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.

If input costs increase at rapid rates, as they did during 2021, our ability to recover cost increases on a timely basis 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.

Although we have escalator/de-escalator clauses in commercial contracts with certain of our customers to address fluctuations in input costs, or can modify prices based on market conditions to recover higher costs, our price increases generally lag the underlying input cost increase, and we cannot be assured of full cost recovery in the open market.

If input costs increase at rapid rates, our ability to recover cost increases on a timely basis is made more difficult by the lag nature of these contracts.

Oil-based commodity costs are a significant driver of raw materials and purchased components used within our Packaging segment.

As such, an increase in crude oil often is a precursor to rising input polymeric raw material costs, for which we may experience a contractual commercial recover lag.

Separately, our Arrow Engine business in our Specialty Products segment is sensitive to the demand for natural gas and crude oil in North America.

For example, demand for engine, pump jack and compressor products are impacted by active oil and gas rig counts and wellhead investment activities.

Separately, oil-based commodity costs are a significant driver of raw materials and purchased components used within our Packaging segment.

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.

46 unchanged sentences

Total $ 18,180 2.0 % $ 19,100 2.2 % $ 21,560 2.5 %

The following “Results of Operations Year Ended December 31, 2022 Compared with Year Ended December 31, 2021” section presents an analysis of our consolidated operating results displayed in the Consolidated Statement of Operations.

A discussion regarding our financial condition and results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission on March 1, 2022.

The following "Results of Operations Year Ended December 31, 2023 Compared with Year Ended December 31, 2022" section presents an analysis of our consolidated operating results displayed in the Consolidated Statement of Income.

A discussion regarding our financial condition and results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission on February 23, 2023.

Results of Operations

1 unchanged sentence

The principal factors impacting us during the year ended December 31, 2023, compared with the year ended December 31, 2022 were:

• the significant level of uncertainty and volatility in the markets we serve, whether impacted by the COVID-19 pandemic, the Russia-Ukraine conflict or other general inflationary pressures;

• reduced sales of our Packaging segment's products used in beauty and personal care and home care applications as a result of the abatement from peak demand levels following the pandemic, as well from an abrupt second-half 2022 demand reduction from large consumer packaged goods customers due to their choice to rebalance inventory levels;

• increases in sales in our Specialty Products segment as a result of a significant increase in industrial demand in 2022;

• the impact of recent acquisitions, primarily Omega and TFI in December 2021, and Intertech in February 2022;

• gains on the sale of non-core properties in City of Industry, California and Tolleson, Arizona;

• the impact of higher energy costs;

• expenses associated with our asbestos exposure to update the liability to recent actuarial studies;

• realignment expenses in response to reduced end-market demand following the outbreak of the COVID-19 pandemic;

• the impact of our debt refinancing activities;

• the impact of a increase in our effective tax rate from 2021 to 2022.

Overall, net sales increased $26.7 million, or 3.1%, to $883.8 million in 2022, as compared to $857.1 million in 2021, primarily as a result of Intertech, Omega and TFI, which collectively added $48.6 million of acquisition-related sales.

Organic sales, excluding the impact of currency exchange and acquisitions, decreased $4.0 million, as increases in sales of our industrial products in our Specialty Products segment as well as for food and beverage products in our Packaging segment were more than offset by declines in dispensing products for personal and home care applications, as demand for these products abated from peak levels following the pandemic, as well as the expected decline in sales of customers' stocking orders for highly-engineered fasteners in our Aerospace segment fulfilled in 2021.

In addition, net sales decreased $17.9 million due to currency exchange, as our reported results in U.S.

dollars were unfavorably impacted as a result of the strengthening U.S.

• Significant demand reductions for products in certain end markets within our Packaging segment;

• Significant demand increases in our Aerospace and Specialty Products segments, particularly in the first half of 2023;

• Significant gains on the sale of non-core properties in City of Industry, California, and Tolleson, Arizona, in 2022, which did not repeat in 2023;

• The impact of recent acquisitions, primarily Intertech in February 2022, Aarts in February 2023 and Weldmac in April 2023;

• Improved manufacturing throughput in our Aerospace segment;

• Decreased material and other input costs in our Packaging segment;

• Realignment expenses in response to changes in end market demand;

• Higher business diligence and consulting fees in support of our growth initiatives;

• The third quarter 2022 termination of our existing cross-currency swaps;

• A decrease in our effective tax rate in 2023 compared with 2022.

Overall, net sales increased $9.7 million, or 1.1%, to $893.6 million in 2023, as compared to $883.8 million in 2022.

Acquisition-related sales growth was $55.5 million, comprised of $5.3 million resulting from the January through February 2023 sales of our February 2022 acquisition of Intertech, $23.6 million from our February 2023 acquisition of Aarts, and $26.6 million from our April 2023 acquisition of Weldmac.

Organic sales, excluding the impact of currency exchange and acquisitions, decreased $47.3 million, as increases in sales of our industrial products in our Specialty Products segment, particularly in the first half of the year, and in our Aerospace segment driven by market demand improvements, were more than offset by a decrease in the Packaging segment due to lower market demand, primarily as a result of ongoing actions by many of our customers to rebalance their inventory levels and closely manage their order activity given continuing uncertainty around consumer sentiment as a result of the inflationary environment.

In addition, net sales increased $1.5 million due to currency exchange, as our reported results in U.S.

dollars were favorably impacted as a result of the weakening U.S.

dollar relative to foreign currencies.

Gross profit margin (gross profit as a percentage of sales) approximated 22.5% and 23.6% in 2023 and 2022, respectively.

Gross profit margin decreased due to a less favorable sales mix, primarily as a result of lower sales of Aerospace segment customers' stocking orders for highly-engineered fasteners, and lower fixed cost absorption from the reduction in the Packaging segment's personal care, home care and certain industrial product sales.

In addition, improved recovery of resin costs in our Packaging segment was offset by higher energy costs, primarily in our European Packaging segment facilities, higher steel costs in our Specialty Products segment, labor and production inefficiencies in our Aerospace segment, and unfavorable currency exchange.

Gross profit margin decreased due to lower sales levels and absorption of fixed costs, as well as increased realignment costs associated with our actions to close and consolidate two production facilities in China into a new, larger facility in Haining, China, and to close and consolidate our Rohnert Park, California, manufacturing facility operations into other existing U.S.

production locations within our Packaging segment.

Gross profit also decreased due to a $2.4 million purchase accounting non-cash charge related to the step-up of Weldmac's inventory to fair value in our Aerospace segment and wage inflation.

These decreases were partially offset by higher sales and improved throughput and fixed cost absorption within our Aerospace segment, higher sales levels, particularly in the first half of 2023, and favorable pricing in our Specialty Products segment, and lower material and other input costs, including $4.3 million of lower energy costs, in our Packaging segment.

Operating profit margin (operating profit as a percentage of sales) approximated 7.3% and 11.2% in 2023 and 2022, respectively.

Operating profit increased $4.0 million, to $99.1 million in 2022, as compared to $95.1 million in 2021, primarily due to $22.4 million of gains on the sale of non-core properties in City of Industry, California and Tolleson, Arizona, improved recovery of resin costs, higher sales in our Specialty Products segment, and $4.7 million of lower realignment charges, partially offset by less favorable product sales mix, lower fixed cost absorption in our Packaging segment, $4.1 million of additional pre-tax charges related to updating our asbestos studies in 2022 compared with 2021, production inefficiencies resulting from supply chain constraints and labor volatility, and unfavorable currency exchange.

Interest expense decreased $0.4 million, to $14.1 million in 2022, as compared to $14.5 million in 2021, due to a lower effective interest rate and a decrease in our weighted average borrowings.

We incurred $10.5 million of debt financing and related expense in 2021, of which $10.3 million was related to expenses incurred associated with the redemption of our 2025 Senior Notes and $0.2 million related to the write-off of previously capitalized deferred financing fees associated with our Credit Agreement.

Other income (expense) increased $3.7 million to other income of $2.7 million in 2022, from other expense of $1.0 million in 2021, primarily due to the reversal of the TFI contingent consideration liability in 2022.

Operating profit decreased $33.6 million, to $65.4 million in 2023, as compared to $99.1 million in 2022, primarily due to the year-over-year impact of $22.4 million of gains on the sale of non-core properties in City of Industry, California, and Tolleson, Arizona, recorded in 2022, lower sales levels and lower absorption of fixed costs as well as higher realignment costs within our Packaging segment, and an increase in professional fees.

Additionally, operating profit decreased due to wage inflation, the impact of a non-cash charge related to Weldmac purchase accounting, and a $1.1 million indefinite-lived intangible asset impairment charge in our Aerospace segment.

These decreases were partially offset by the impact of higher sales levels and related improved fixed cost absorption within our Aerospace segment, higher sales levels and favorable pricing in our Specialty Products segment, and lower material and other input costs in our Packaging segment.

Interest expense increased $1.8 million, to $15.9 million in 2023, as compared to $14.1 million in 2022, due to a higher effective interest rate and an increase in our weighted average borrowings.

Other income decreased $1.6 million to $1.1 million in 2023, from $2.7 million in 2022, primarily due to the year-over-year impact of the reversal of the TFI contingent consideration liability in 2022 and a non-cash settlement charge for our Canadian defined benefit obligations, partially offset by a decrease in other expenses.

The effective income tax rate for 2023 was 20.2%, compared to 24.5% for 2022.

We recorded income tax expense of $21.5 million in 2022, as compared to income tax expense of $11.8 million in 2021.

During 2022, we reported domestic and foreign pre-tax income of $56.8 million and $30.9 million, respectively, as compared to a domestic and foreign pre-tax income of $28.4 million and $40.7 million in 2021.

Net income increased $8.9 million to $66.2 million in 2022, compared to a net income of $57.3 million in 2021.

This increase was primarily a result of an increase in operating profit of $4.0 million, the year-over-year impact of the $10.5 million debt financing and related expenses in 2021, a $3.7 million increase in other income, as well as a decrease in interest expense of $0.4 million, partially offset by an increase in income tax expense in 2022.

We recorded income tax expense of $10.2 million in 2023, as compared to $21.5 million in 2022.

During 2023, we reported domestic and foreign pre-tax income of $20.7 million and $29.9 million, respectively, as compared to domestic and foreign pre-tax income of $56.8 million and $30.9 million in 2022.

Net income decreased $25.8 million to $40.4 million in 2023, compared to $66.2 million in 2022.

This decrease was primarily a result of a decrease in operating profit of $33.6 million, a $1.8 million increase in interest expense, and a $1.6 million decrease in other income, partially offset by a decrease in income tax expense of $11.3 million.

See below for a discussion of operating results by segment.

Net sales decreased $11.1 million, or 2.1%, to $522.2 million in 2022, as compared to $533.3 million in 2021.

Acquisition-related sales growth was $43.7 million, comprised of $28.7 million of sales from our February 2022 acquisition of Intertech and $15.0 million resulting from the January through November 2022 sales of our December 2021 acquisition of Omega.

Sales of products used in food and beverage markets increased by $13.9 million, primarily due to strong demand for closures, dispensers and bag-in-box packaging as the hospitality sector continues to rebound from prior COVID-19 pandemic-related shutdowns.

Sales of products used in industrial markets decreased by $3.6 million, primarily as a result of lower demand for drum and pail closure products in North America.

Sales of dispensing products used in personal care and home care applications decreased by $46.5 million, as COVID-19-related demand levels have abated for these products from the peak levels, as well as more recently due to further temporary lower demand from large consumer goods customers who we believe are rebalancing on-hand inventory levels given first half 2022 over-ordering to protect supply and as a result of the current macro-economic environment.

Net sales decreased by $17.9 million due to currency exchange, as our reported results in U.S.

dollars were unfavorably impacted as a result of the strengthening U.S.

Net sales decreased $58.6 million, or 11.2%, to $463.6 million in 2023, as compared to $522.2 million in 2022, as customer demand fell at a significant rate given overstock positions predominantly in consumer goods and industrial markets, and did not rebound as anticipated given the onset of significant inflationary pressure which occurred during much of 2023.

Acquisition-related sales growth was $28.9 million, comprised of $5.3 million resulting from the January through February 2023 sales of our February 2022 acquisition of Intertech and $23.6 million from our February 2023 acquisition of Aarts.

Sales of products used in food and beverage markets decreased by $38.1 million, primarily due to lower demand for food and certain beverage closures.

Sales of products used in industrial markets decreased by $22.2 million, primarily as a result of lower demand for drum and pail closure products.

Sales of dispensing products used in personal care and home care applications decreased by $27.1 million.

We believe that the decrease in sales in each of these categories was due to lower customer order activity given higher customer stocking levels, as well as continuing uncertainty around consumer sentiment as a result of the inflationary environment.

These decreases were partially offset by an increase in net sales of $1.7 million due to currency exchange, as our reported results in U.S.

dollars were favorably impacted as a result of the weakening of the U.S.

dollar relative to foreign currencies, as compared to 2022.

Packaging's gross profit decreased $8.7 million to $137.0 million, or 26.2% of sales, in 2022, as compared to $145.8 million, or 27.3% of sales, in 2021.

During 2021, we were impacted by $11 million of higher resin costs than we were able to recover via commercial actions.

We have generally recovered such costs during 2022, as market prices have generally stabilized.

Gross profit from improved material cost recovery was more than offset by $4.1 million of higher energy costs, primarily in our European manufacturing facilities, lower sales levels, as well as $5.0 million of currency exchange, as our reported results in U.S.

dollars were unfavorably impacted as a result of the strengthening U.S.

dollar relative to foreign currencies.

In addition, gross profit margin declined as a result of a less favorable product sales mix and lower fixed cost absorption primarily associated with the decline in personal care, home care and industrial products.

Packaging's selling, general and administrative expenses increased $6.6 million to $55.7 million, or 10.7% of sales, in 2022, as compared to $49.1 million, or 9.2% of sales, in 2021, primarily due to higher ongoing selling, general and administrative costs associated with our acquisitions as we integrate them into our portfolio, as well as higher realignment costs of $1.8 million primarily related to employee-related actions.

The increase was partially offset by lower intangible asset amortization expense due to certain assets becoming fully amortized as well as lower employee-related costs.

Packaging's operating profit decreased $15.5 million to $81.0 million, or 15.5% of sales, in 2022, as compared to $96.5 million, or 18.1% of sales, in 2021, as the impact of improved year-over-year recovery of material costs was more than offset by a less favorable product sales mix, lower fixed cost absorption, higher energy costs, higher selling, general and administrative expenses and the impact of $2.6 million of unfavorable currency exchange.

Packaging's gross profit decreased $28.0 million to $109.1 million, or 23.5% of sales, in 2023, as compared to $137.0 million, or 26.2% of sales, in 2022, primarily due to lower sales and resulting lower absorption of fixed costs.

Gross profit further declined in 2023 due to $7.2 million of higher realignment costs, primarily associated with our actions to close and consolidate two production facilities in China into a new, larger facility in Haining, China, and to close and consolidate our Rohnert Park, California, manufacturing facility operations into other existing U.S.

production locations.

The decrease in gross profit was partially offset by lower material and other input costs, including $4.3 million of lower energy costs, as compared with the spike in costs in 2022, primarily in our Europe-based operations.

Packaging's selling, general and administrative expenses decreased $6.9 million to $48.8 million, or 10.5% of sales, in 2023, as compared to $55.7 million, or 10.7% of sales, in 2022, primarily due to the transfer of $5.5 million of information technology costs to Corporate in 2023, lower overall spending levels in 2023, consistent with current lower demand levels, as well as $1.0 million of lower costs associated with realignment actions.

In addition, we incurred lower intangible asset amortization expense due to certain assets becoming fully amortized.

These decreases more than offset higher ongoing selling, general and administrative costs associated with our acquisitions.

Packaging's operating profit decreased $20.9 million to $60.1 million, or 13.0% of sales, in 2023, as compared to $81.0 million, or 15.5% of sales, in 2022, as the impact of lower selling, general and administrative expenses and energy costs was more than offset by lower sales levels, lower absorption of fixed costs and higher realignment costs.

Net sales increased $53.3 million, or 28.3%, to $241.4 million in 2023, as compared to $188.1 million in 2022.

TFI, acquired in December 2021, added $4.9 million of sales from January through November 2022.

Sales of our fasteners products decreased by $0.4 million, as increases in demand for fasteners used in new aircraft builds, and market share gains, were more than offset by the expected loss of $29.4 million of sales of customers' stocking orders for highly-engineered fasteners fulfilled in 2021.

Sales of our engineered components products increased by $0.3 million.

Gross profit within Aerospace decreased $7.7 million to $32.2 million, or 17.1% of sales, in 2022, from $40.0 million, or 21.8% of sales, in 2021, primarily due to a less favorable product sales mix in 2022, with lower sales of the customers' stocking orders for highly-engineered fasteners, as well as production inefficiencies resulting from supply chain and labor constraints.

Selling, general and administrative expenses increased $2.3 million to $29.0 million, or 15.4% of sales, in 2022, as compared to $26.7 million, or 14.6% of sales, in 2021, primarily due to higher ongoing selling, general and administrative costs associated with our acquisition of TFI and higher employee-related costs.

Operating profit within Aerospace decreased $5.2 million to $8.1 million, or 4.3% of sales, in 2022, as compared to $13.3 million, or 7.2% of sales, in 2021, as the impact of a $4.8 million pre-tax gain on the sale of vacant land adjacent to the Tolleson, Arizona, manufacturing facility in 2022, as well as higher sales levels, was more than offset by a less favorable product sales mix, production inefficiencies resulting from supply chain constraints and volatility in labor availability and higher selling, general and administrative expenses.

Acquisition-related sales growth from our April 2023 acquisition of Weldmac was $26.6 million.

Sales of our fasteners products increased by $19.1 million due to increases in demand for fasteners used in new aircraft builds.

Sales of our engineered components products increased by $7.6 million due to higher end market demand.

Gross profit within Aerospace increased $15.8 million to $48.0 million, or 19.9% of sales, in 2023, from $32.2 million, or 17.1% of sales, in 2022.

Gross profit increased primarily due to higher sales levels and improved manufacturing throughput and fixed cost absorption, partially offset by increased material costs, wage inflation and a $2.4 million purchase accounting non-cash charge related to the step-up of Weldmac's inventory to fair value.

Selling, general and administrative expenses increased $2.4 million to $31.4 million, or 13.0% of sales, in 2023, as compared to $29.0 million, or 15.4% of sales, in 2022, primarily due to higher ongoing selling, general and administrative costs associated with our acquisition of Weldmac and higher facility costs, partially offset by lower employee-related costs and lower intangible asset amortization expense due to certain assets becoming fully amortized.

Operating profit within Aerospace increased $7.5 million to $15.5 million, or 6.4% of sales, in 2023, as compared to $8.1 million, or 4.3% of sales, in 2022, primarily due to the impact of higher sales levels and improved manufacturing throughput and fixed cost absorption.

These increases were partially offset by increased material costs, wage inflation, higher selling, general and administrative expenses, a $1.1 million indefinite-lived intangible asset impairment charge, the recognition of the purchase accounting adjustment related to Weldmac's inventory step-up to fair value, and the year-over-year impact of the $4.8 million pre-tax gain on the sale of vacant land adjacent to our Tolleson, Arizona, manufacturing facility recorded in 2022.

Specialty Products.

Net sales increased $15.0 million, or 8.6%, to $188.6 million in 2023, as compared to $173.6 million in 2022.

Sales of our cylinder products increased by $19.4 million due to a higher demand for steel cylinders in North America as industrial activity continues to increase from depressed levels as a result of the COVID-19 pandemic.

Sales of engines, compressors and related parts used in stationary power generation and assistance applications for natural gas and crude oil extraction increased by $13.7 million primarily as a result of higher oil-field activity in North America.

Sales of our cylinder products increased $8.0 million due to higher demand for steel cylinders for packaged gas applications in North America, as industrial activity improved from 2022, mostly in the first half of 2023, as well as improved pricing.

Sales of engines, compressors and related parts used in stationary power generation and assistance applications for natural gas and crude oil extraction increased by $7.0 million, most of which occurred in the first half of 2023, as customers increased capital spending earlier in the year as compared to 2022 purchasing rates.

Additionally, in the second half of 2023 a customer did not renew its contract to purchase natural gas extraction compressors given a need for a much broader range of large compressors, which were not available from the Specialty Products' Arrow Engine business.

Gross profit within Specialty Products increased $5.2 million to $44.3 million, or 23.5% of sales, in 2023, as compared to $39.0 million, or 22.5% of sales, in 2022.

Gross profit increased due to higher sales levels and leverage of our fixed cost footprint, partially offset by higher steel and labor costs.

Selling, general and administrative expenses within Specialty Products decreased $0.3 million to $8.7 million, or 5.0% of sales, in 2022, as compared to $9.0 million, or 6.4% of net sales, in 2021, primarily due to lower employee-related costs.

Operating profit within Specialty Products increased $7.7 million to $30.3 million, or 17.4% of sales, in 2022, as compared to $22.6 million, or 16.0% of sales, in 2021, primarily due to increased sales levels.

Gross profit increased due to higher sales levels and favorable material pricing, partially offset by wage inflation.

Selling, general and administrative expenses within Specialty Products decreased $0.9 million to $7.8 million, or 4.2% of sales, in 2023, as compared to $8.7 million, or 5.0% of net sales, in 2022, primarily due to the transfer of information technology costs to Corporate in 2023, as well as lower overall spending levels.

Operating profit within Specialty Products increased $6.2 million to $36.4 million, or 19.3% of sales, in 2023, as compared to $30.3 million, or 17.4% of sales, in 2022, primarily due to increased sales levels, favorable material pricing and lower selling, general and administrative expenses, partially offset by wage inflation.

Corporate Expenses.

3 unchanged sentences

Non-cash stock compensation 9.7 9.8

Legacy (income) expenses, net 5.7 1.6

(Gain) loss on disposition of assets (17.6) —

Legacy expenses 0.2 5.7

Gain on disposition of assets — (17.6)

Corporate expenses $ 46.6 $ 20.3

Corporate operating loss decreased $17.0 million to $20.3 million in 2022, from $37.2 million in 2021, primarily as a result of a $17.6 million gain on the sale of a non-core facility in City of Industry, California, and a $3.7 million decrease in corporate operating expenses as a result of the realignment charges related to the corporate office legal and finance groups in 2021.

These amounts were partially offset by $4.1 million of additional pre-tax non-cash charges related to updating our asbestos studies in 2022 compared with 2021.

Corporate expenses increased $26.4 million to $46.6 million in 2023, from $20.3 million in 2022, primarily due to the year-over-year impact of a $17.6 million gain recognized in 2022 on the sale of a non-core facility in City of Industry, California, $4.5 million of higher professional fees primarily for business diligence and strategic consulting, and $8.3 million of higher information technology costs in 2023, of which $6.8 million related to costs now reported as corporate expenses due to centralizing certain of our information technology costs in 2023.

We incurred higher information technology costs in 2023 as we prepare for upgrades in certain of our information technology applications, including an enterprise resource planning software implementation.

These increases were partially offset by the year-over-year impact of a $5.6 million non-cash charge in 2022 related to updating our asbestos studies.

Liquidity and Capital Resources

1 unchanged sentence

Significant changes in cash flows provided by operating activities and the reasons for such changes are as follows:

• In 2022, the Company generated $109.2 million in cash flows, based on the reported net income of $66.2 million and after considering the effects of non-cash items related to depreciation, amortization, (gain) loss on dispositions of assets, changes in deferred income taxes, stock-based compensation, change in legacy liability estimate, and other operating activities.

In 2021, the Company generated $139.2 million in cash flows based on the reported net income of $57.3 million and after considering the effects of similar non-cash items and debt financing and related expenses.

• In 2023, the Company generated $110.5 million in cash flows, based on the reported net income of $40.4 million and after considering the effects of non-cash items related to impairment of indefinite-lived intangible assets, depreciation, amortization of intangible assets and debt issuance costs, (gain) loss on dispositions of assets, changes in deferred income taxes, stock-based compensation, provision for losses on accounts receivable and other operating activities.

In 2022, the Company generated $109.2 million in cash flows based on the reported net income of $66.2 million and after considering the effects of similar non-cash items and change in legacy liability estimate.

• Increases in accounts receivable resulted in a use of cash of $5.5 million and $6.7 million in 2023 and 2022, respectively.

The increased use of cash for 2022 and 2021 is due primarily to the timing of sales and collection of cash related thereto with the periods.

Days sales outstanding of receivables increased by five days through 2022, and remained relatively consistent through 2021.

The increased use of cash for 2023 and 2022 is due primarily to the timing of sales and related collection of cash during the periods.

Days sales outstanding of receivables increased by six days in 2023 and five days in 2022.

• We increased our investment in inventory by $7.1 million and $7.0 million in 2023 and 2022, respectively.

Our days sales in inventory increased by eleven days in 2023, primarily as a result of investing in certain inventories in our Aerospace segment as a result of increased customer demand.

Our days sales in inventory increased by seven days in 2022, primarily as a result of proactively investing in certain raw materials and purchased components to protect against supply chain disruptions and potential cost increases .

Our days sales in inventory decreased by nine days in 2021, 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.

• Decreases in prepaid expenses and other assets resulted in a source of cash of $4.8 million and $6.1 million in 2023 and 2022, respectively.

The changes in 2023 and 2022 are primarily as a result of the timing of payments made for income taxes and certain operating expenses.

• Decreases in accounts payable and accrued liabilities resulted in a use of cash of $29.1 million in 2022, while increases in accounts payable and accrued liabilities resulted in a source of cash of $2.1 million in 2021.

Our days accounts payable on hand remained consistent through 2022 and increased by five days through 2021.

• Decreases in accounts payable and accrued liabilities resulted in a use of cash of $14.5 million and $29.1 million in 2023 and 2022, respectively.

Our days accounts payable on hand increased by one day through 2023 and remained consistent through 2022.

Our days accounts payable on hand fluctuate primarily as a result of the timing of payments made to suppliers and the mix of vendors and related terms.

Net cash used for investing activities was $134.4 million and $55.0 million in 2023 and 2022, respectively.

During 2022, we paid $64.1 million, net of cash acquired, to acquire Intertech.

During 2023, we paid $77.3 million, net of cash acquired, to acquire Aarts and Weldmac.

We invested $54.2 million in capital expenditures as we have continued our investment in growth, capacity and productivity-related capital projects.

We received proceeds of $26.2 million from the termination of our cross-currency swap agreements.

We also received proceeds of $28.8 million from the disposition of property and equipment, primarily related to the sale of vacant land adjacent to one of our manufacturing facilities and the sale of a non-core facility in California.

During 2021, we paid $34.3 million, net of cash acquired, to acquire Omega and TFI.

In 2021, we invested $45.1 million in capital expenditures and received cash from the disposition of business, property and equipment of $0.2 million.

Net cash used for financing activities was $46.2 million in 2022, while net cash provided by financing activities was $11.8 million in 2021.

We made a payment of $3.4 million related to the expiration of one of our cross-currency swap agreements.

We also received proceeds of $0.5 million from the disposition of property and equipment.

During 2022, we paid $64.1 million, net of cash acquired, to acquire Intertech, invested $46.0 million in capital expenditures and received cash from the disposition of business, property and equipment of $28.8 million, primarily related to the sale of vacant land adjacent to one of our manufacturing facilities and the sale of a non-core facility in California.

We also received proceeds of $26.2 million from the termination of our cross-currency swap agreements.

Net cash used for financing activities was $30.9 million and $46.2 million in 2023 and 2022, respectively.

During 2023, we received net proceeds of $0.6 million from borrowings on our revolving credit facilities, purchased $18.8 million of outstanding common stock, used a net cash amount of $2.7 million related to our stock compensation arrangements, paid dividends of $6.7 million, and paid $3.3 million related to liabilities assumed in our acquisition of Aarts.

Our reported net proceeds from borrowings on our revolving credit facilities considers the impact of foreign currency translation.

During 2022, we purchased $36.9 million of outstanding common stock, used a net cash amount of $2.4 million related to our stock compensation arrangements and paid dividends of $6.9 million.

During 2021, we issued $400.0 million principal amount of the 2029 Senior Notes, made net repayments of $48.6 million on our revolving credit facilities, and redeemed $300.0 million principal amount of the 2025 Senior Notes.

In connection with refinancing our long-term debt, we paid $13.6 million of debt financing fees and redemption premium.

We also purchased $19.1 million of outstanding common stock, used a net cash amount of $5.2 million related to our stock compensation arrangements and paid dividends of $1.7 million.

Our Debt and Other Commitments

3 unchanged sentences

The remaining cash proceeds from the 2029 Senior Notes were used for general corporate purposes, including repaying all outstanding revolving credit facility borrowings.

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 $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.

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.

9 unchanged sentences

The Credit Agreement consists of a $300.0 million senior secured revolving credit facility, which permits borrowings denominated in specific foreign currencies, subject to a $125.0 million sub limit, maturing on March 29, 2026.

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, the amendment replaced the reference rate terms for U.S.

dollar LIBOR borrowings to the Secured Overnight Financing Rate ("SOFR"), British pound sterling LIBOR borrowings to the Sterling Overnight Index Average ("SONIA") and Euro LIBOR borrowings to the Euro Short Term Rate ("ESTR"), all plus a spread of 1.50%.

In November 2021 and April 2023, we amended the Credit Agreement to replace LIBOR.

As of December 31, 2023, the Credit Agreement is subject to benchmark interest rates that are based on the currency denomination of borrowings, with British pound sterling borrowings subject to the Sterling Overnight Index Average and Euro borrowings subject to the Euro InterBank Offered Rate, both plus a spread of 1.625%, and U.S.

dollar borrowings subject to the Secured Overnight Financing Rate plus a spread of 1.725%.

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

13 unchanged sentences

Dollars are in thousands in the below tables.

December 31, 2022

Year ended December 31, 2023

Net income $ 40,360

6 unchanged sentences

Non-recurring expenses or costs (2)

Extraordinary, non-recurring or unusual gains or losses 5,590

Effects of purchase accounting adjustments 3,190

8 unchanged sentences

Covenant requirement 4.00 x

December 31, 2022

Year ended December 31, 2023

Interest expense, as defined $ 15,920

10 unchanged sentences

(1) Non-cash compensation expenses resulting from the grant of equity awards.

(2) Non-recurring costs and expenses relating to diligence and transaction costs, purchase accounting costs, severance, relocation, restructuring and curtailment expenses.

(2) Non-recurring costs and expenses relating to trade name impairment charges, diligence and transaction costs, purchase accounting costs, severance, relocation, restructuring and settlement expenses.

(3) Includes $4.5 million of acquisition-related contingent consideration, $1.3 million of derivative liabilities and $2.2 million of finance leases as of December 31, 2023.

The Credit Agreement allows issuance of letters of credit, not to exceed $40.0 million in aggregate, against revolving credit facility commitments.

As of December 31, 2021, we placed cash on deposit with a financial institution to be held as cash collateral for our outstanding letters of credit;

effectively, as of December 31, 2021, we had no letters of credit issued against our revolving credit facility.

At December 31, 2023, we had no amounts outstanding under our revolving credit facility and had $294.0 million potentially available after giving effect to $6.0 million of letters of credit issued and outstanding.

At December 31, 2021, we had no amounts outstanding under our revolving credit facility and had $300.0 million potentially available.

Our letters of credit, or corresponding 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, 2022 and December 31, 2021.

At December 31, 2022, we had no amounts outstanding under our revolving credit facility and had $293.9 million potentially available after giving effect to $6.1 million of letters of credit issued and outstanding.

Our letters of credit are used for a variety of purposes, including support of certain operating lease agreements, vendor payment terms and other subsidiary operating activities, and to meet various states' requirements to self-insure workers' compensation claims, including incurred but not reported claims.

After consideration of leverage restrictions contained in the Credit Agreement, as of December 31, 2023, we had $256.9 million of borrowing capacity available for general corporate purposes.

Our borrowing capacity was not reduced by leverage restrictions contained in the Credit Agreement as of December 31, 2022.

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.

Our weighted average borrowings were $400.1 million during 2022, compared to $401.9 million during 2021, 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.

Our weighted average borrowings were $417.4 million during 2023, compared to $400.1 million during 2022, primarily due to the aggregate principal balance on our senior notes as well as higher borrowings on revolving credit facilities during 2023.

In May 2021, we, through one of our non-U.S.

5 unchanged sentences

Our business and related cash forecasts are updated monthly.

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.

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.

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.

The majority of our cash on hand as of December 31, 2022 is located within the United States, and given available funding under our revolving credit facility of $300.0 million at December 31, 2022 (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 next 12 months and for the foreseeable future, as well as dividends and share repurchases.

The majority of our cash on hand as of December 31, 2023, is located in jurisdictions outside the United States.

We have available funding under our revolving credit facility of $256.9 million at December 31, 2023, (after consideration of the aforementioned leverage restrictions).

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 next 12 months and for the foreseeable future, as well as dividends and share repurchases.

We are subject to variable interest rates on our revolving credit facility, which is subject to a benchmark interest rate determined based on the currency denomination of borrowings.

1 unchanged sentence

In addition to our long-term debt, we have other cash commitments related to leases.

We account for these lease transactions as operating leases, and incurred rent expense for continuing operations related thereto of $13.9 million in 2022.

The majority of our lease transactions are accounted for as operating leases, and we incurred rent expense for continuing operations related thereto of $14.9 million in 2023.

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.

3 unchanged sentences

Since the initial authorization through December 31, 2023, we have purchased 5,795,497 shares of our outstanding common stock for an aggregate purchase price of $163.1 million.

We will continue to evaluate opportunities to return capital to shareholders through the purchase of our common stock, depending on market conditions, including the potential impact of the COVID-19 pandemic, and other factors.

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.

Under various agreements, we are obligated to make future cash payments in fixed amounts.

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.

These include payments under our long-term debt agreements, rent payments required under operating and finance lease agreements, certain benefit obligations and interest obligations on our long-term debt.

The following table summarizes our material contractual cash obligations as of December 31, 2023 (dollars in thousands).

5 unchanged sentences

Operating lease obligations 52,420 9,560 16,770 13,140 12,950

Finance lease obligations 2,370 540 1,130 700 —

Benefit obligations 16,400 1,310 2,780 3,040 9,270

19 unchanged sentences

We have historically used interest rate swap agreements to fix the variable portion of our debt to manage this risk.

See Note 13, " Derivative Instruments ," included in Item 8, " Financial Statements and Supplementary Data ," within this Form 10-K for additional information.

TriMas is listed in the NASDAQ Global Select Market SM .

7 unchanged sentences

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.

Since the onset of the COVID-19 pandemic in 2020, each of our businesses has been impacted by significant macro-economic factors.

Sales in our Packaging segment for dispensing and closure products we supply that are used in applications to fight the spread of germs spiked in 2020 and early 2021, and have now abated from those peak levels in 2022.

Sales in our Specialty Products segment had been depressed by low levels of industrial activity in the U.S.

during 2020, but have since strongly rebounded in 2022.

Sales in our Aerospace segment were significantly depressed at the onset of the pandemic and for many quarters thereafter, but demand began to significantly increase during 2022.

Following the pandemic and now the Russia-Ukraine conflict, there have been significant challenges in inflationary pressures, supply chain disruptions, labor availability, as well as significant volatility in our customers' order patterns.

We believe this period of uncertainty will continue to persist in the near-term.

However, no matter the outcome of these factors, we expect to continue to mitigate, as much as practical, the impact of these challenges, executing on realignment actions and taking other proactive actions as necessary, to maintain our strong balance sheet and generate cash in support of our capital allocation strategy.

Following 2023, where we proactively managed through demand weakness in the consumer products and industrial markets, we anticipate the beginning of a gradual recovery within both of these markets in 2024, with consumer spending leading the way in the earlier part of the year.

We also anticipate that demand in the aerospace & defense market will continue to remain strong in 2024.

As our Aerospace segment continues to experience strong order intake, we will continue to increase capacity and address challenges to manufacturing throughput in order to support market demand.

We have seen a number of global market uncertainties stemming from the macro-economic environment in the past few years, including significant challenges in inflationary pressures, supply chain disruptions and labor availability, as well as significant volatility in our customers' sentiment and order patterns.

While we expect gradual demand recovery in the consumer products and industrial markets and continued strength in our aerospace & defense market, we believe this period of global market uncertainty will continue into 2024, at least in the near-term.

However, no matter the outcome of these factors, we expect to continue to mitigate, as much as practical, the impact of these challenges, executing on streamlining actions and taking other steps as necessary, to maintain our strong balance sheet and generate cash in support of our capital allocation strategy.

We believe our capital structure remains strong and that we have sufficient headroom under our financial covenants, and ample cash and available liquidity under our revolving credit facility, to meet our debt service, capital expenditure and other short-term and long-term obligations for the next 12 months and for the foreseeable future, as well as fund dividends, share repurchases and bolt-on acquisitions consistent with our capital allocation strategy.

We expect to continue to leverage the tenets of our TriMas Business Model to manage our multi-industry businesses on a longer-term basis, to 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.

We expect to continue to leverage the tenets of our TriMas Business Model to manage our multi-industry businesses on a longer-term basis, achieve our growth plans, execute continuous improvement initiatives to offset inflationary pressures, and seek lower-cost sources for input costs, all while continuously assessing the appropriateness of our manufacturing footprint and fixed-cost structure.

Impact of New Accounting Standards

10 unchanged sentences

See Item 1A, "Risk Factors," for additional information regarding risks associated with a concentrated customer base.

Depreciation and Amortization.

Depreciation is computed principally using the straight-line method over the estimated useful lives of the assets.

Annual depreciation rates are as follows:

building and land/building improvements three to 40 years, and machinery and equipment, three to 15 years.

Capitalized debt issuance costs are amortized over the underlying terms of the related debt securities.

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

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

9 unchanged sentences

For purposes of our 2023 goodwill impairment test, we had six reporting units, four 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.

In conducting the qualitative assessment, we consider macroeconomic conditions, industry and market considerations, overall financial performance, entity and reporting unit specific events, capital markets pricing, recent fair value estimates and carrying amounts, as well as legal, regulatory, and contractual factors.

These factors are all considered in reaching a conclusion about whether it is more likely than not that the fair values of the intangible assets are less than the carrying values.

If we conclude that further testing is required, we would perform a quantitative valuation to estimate the fair value of our intangible assets.

For purposes of the 2022 annual impairment tests, based on the qualitative assessments, we determined there were no indications that the fair value of a reporting unit or indefinite-lived intangible asset was less than its carrying amount;

therefore, we determined that quantitative assessments were not required.

For purposes of the 2023 annual impairment tests, we elected the option to bypass the qualitative assessment and performed a quantitative assessment.

In conducting the quantitative analysis, we determined the estimated fair value of each reporting unit utilizing both income and market-based approaches.

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.

The market approach relies on market data of other public companies that we deem comparable in operations to our reporting units.

Upon completion of the goodwill impairment test, we determined that the fair values of the TriMas Packaging, Life Sciences, Aerospace Fasteners, and Norris Cylinder reporting units exceeded their carrying values by approximately 43%, 15%, 7%, and 254%, respectively, and thus there was no goodwill impairment.

Additionally, we performed a quantitative assessment for all of our indefinite-lived intangible assets, except for the Aarts trade name, using the relief-from-royalty method.

We performed a qualitative assessment for the Aarts trade name as it was acquired less than one year prior and has long-term sales projections consistent with those expected in the purchase price valuation.

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.

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.

Upon completion of the quantitative impairment test, we determined that one of our aerospace-related trade names had a carrying value that exceeded its fair value, and therefore recorded an impairment charge of $1.1 million during 2023.

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.

27 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis