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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-29 · 156 added, 145 removed, 300 unchanged (50% of the section changed)

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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.

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) a lack of material and in certain regions skilled labor availability, as well as recent periods of destocking from prior periods of over-ordering by customers.

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 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 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, 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.

Certain of our products for industrial applications, for example steel cylinders for packaged gas applications, have experienced volatility in demand related to customers securing high order rates in prior periods, only to enter a period of destocking in more recent periods.

While some areas of demand volatility and softness remain, such as in our Specialty Products segment, and more specifically our Norris Cylinder business, we have experienced more steady and consistent demand in our Packaging and Aerospace segments.

Overall, 2024 net sales increased $31.5 million, or 3.5%, compared to 2023.

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.

We experienced growth from acquisitions, as well as organic growth of 16.6% and 10.3% within our Aerospace and Packaging segments, respectively, compared to 2023 .

These increases were partially offset by lower sales of 37.2% in our Specialty Products segment as compared to the prior year as we work through a cyclical demand trough and destocking.

The most significant drivers affecting our financial results in 2024 compared with 2023 , other than as directly impacted by sales change s, were the impact of our recent acquisitions, accelerated depreciation charges related to shortening the useful lives of certain machinery and equipment in our Specialty Products segment, increased costs and decreased sales resulting from a prolonged labor union strike at one of our manufacturing facilities within our Aerospace segment, a charge to update our asbestos liability based on our recent actuarial valuation, improved material availability within our Aerospace segment, charges associated with environmental remediation liabilities, increased input costs, including expedited freight within our Packaging segment, lower realignment charges, and a decrease in our effective tax rat e.

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 of $5.5 million paid in July 2023 and $2.25 million paid in October 2024 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.

Weldmac contributed $12.9 million of acquisition-related net sales growth during 2024.

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 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.

Aarts, which is reported in our Packaging segment, is located in Waalwijk, the Netherlands, and contributed $2.8 million of acquisition-related sales growth during 2024 resulting from its January 2024 sales.

In 2024, following a strategic demand and profitability study of our cylinders products within our Specialty Products segment, we ceased use of our second hot forge which primarily produced lower profitability products, resulting in pre-tax non-cash charges related to accelerated depreciation expense of $8.2 million due to the shortening of the assets expected useful lives.

In August 2024, our labor agreement with the United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) at our TriMas Aerospace facility in Commerce, California, expired.

On August 4, 2024, the UAW initiated a strike, causing a work stoppage that resulted in lost production volumes, reduced sales, manufacturing inefficiencies and $3.4 million of strike-related costs in 2024, with the Company and the UAW reaching a new labor agreement in mid-October 2024.

In 2024, we commissioned our actuary to update our asbestos study, and upon completion we recorded a pre-tax charge of $5.5 million, which is included in selling, general and administrative expenses.

In 2024, we recorded a pre-tax charges of $3.6 million for environmental remediation for waste sites in which we had been named a potential responsible party.

During 2024, we experienced abrupt increases in orders for certain products within our Packaging segment, requiring us to incur incremental input costs, including expedited freight, in order to timely fulfill certain customer's orders.

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.

During 2024, we incurred pre-tax realignment charges of $0.9 million within our Packaging segment, related to the closure of our facility in Irwindale, California.

In 2023, we recorded pre-tax realignment charges of $10.3 million, 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.

The Company recognized a $17.6 million gain on the sale, which is included in the Corporate operating loss for 2022.

In the third quarter of 2022, we completed the sale of vacant land adjacent to our Tolleson, Arizona, manufacturing facility for net cash proceeds of $5.0 million, and recognized a $4.8 million gain on the sale, which is included within our Aerospace segment.

In 2022, we terminated our existing cross-currency swap agreements, de-designating the swaps as net investment hedges and received $26.2 million of cash.

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.

Our effective tax rate for 2024 and 2023 was 19.3%, and 20.2%, respectively.

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.

The decrease in effective tax rate 2024 as compared to 2023 is primarily as a result of a change in the mix of domestic and foreign pre-tax results.

Additional Key Risks that May Affect Our Reported Results

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 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.

We have executed meaningful realignment actions over the past few years to address variable and structural costs where demand has fallen.

We will continue to assess and take further actions if required.

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' overall performance and market capitalization, we may record additional cash and non-cash charges related to further 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.

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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, or expand our geographic coverage;

our ability to generate 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 adjacent distribution channels and new 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;

and our ability to absorb, or recover via commercial actions, inflationary or other cost increases.

and our ability to absorb, or recover via commercial actions, inflationary or other cost increases, including tariffs and duties.

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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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, 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.

Our largest raw material purchases are for polypropylene, 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 are subject to 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.

We will continue to take actions to mitigate such increases, including implementing commercial pricing adjustments, holding extra inventories, 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.

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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.

As such, an increase in crude oil often is a precursor to rising 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.

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.

Each year, as a core tenet of the TriMas Business Model, our businesses target cost savings from Kaizen (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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Total $ 16,800 1.8 % $ 18,180 2.0 % $ 19,100 2.2 %

The following table summarizes detail on the year-over-year sales growth percentages for our reportable segments for the year ended December 31, 2024 as compared to the year ended December 31, 2023:

Year to Date 2024 vs.

Year to Date 2023

Organic Acquisitions Foreign Exchange Total

Consolidated TriMas Corporation 2.0 % 1.8 % (0.3) % 3.5 %

Packaging 10.3 % 0.6 % (0.4) % 10.5 %

Aerospace 16.6 % 5.3 % — % 21.9 %

Specialty Products (37.2) % — % — % (37.2) %

The following "Results of Operations Year Ended December 31, 2024 Compared with Year Ended December 31, 2023" section presents an analysis of our consolidated operating results displayed in the Consolidated Statement of Income.

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The principal factors impacting us during the year ended December 31, 2024, compared with the year ended December 31, 2023 were:

• 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;

• Increases in demand for products within our Packaging and Aerospace segments;

• Significant demand decrease in our Specialty Products segment;

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

• Expedited freight costs within our Packaging segment related to the abrupt increase in demand for certain products;

• Accelerated depreciation charges related to shortening the useful lives of certain machinery and equipment in our Specialty Products segment;

• Inc reased costs, decreased sales levels and manufacturing inefficiencies resulting from a prolonged labor union strike at one of our manufacturing facilities in our Aerospace segment that ended in mid-October 2024;

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

• Improved material availability and resulting production efficiencies in our Aerospace segment;

• Environmental remediation expenses related to waste sites in which we had been named a potential responsible party;

• The impact of realignment expenses taken in 2023 in response to changes in end market demand;

• A decrease in our effective tax rate in 2024 compared with 2023.

Overall, net sales increased $31.5 million, or 3.5%, to $925.0 million in 2024, as compared to $893.6 million in 2023.

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.

Acquisition-related sales growth was $15.7 million, comprised of $2.8 million from our February 2023 acquisition of Aarts and $12.9 million from our April 2023 acquisition of Weldmac.

Organic sales, excluding the impact of currency exchange and acquisitions, increased $17.9 million, or 2.0%, driven by organic sales increases of 10.3% and 16.6% within our Packaging and Aerospace segments, respectively, due to end market demand improvements and growth initiatives.

These increases were partially offset by a 37.2% sales decrease in our Specialty Products segment due to lower market demand.

The increase in net sales was also offset by $2.0 million due to 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.

Gross profit margin (gross profit as a percentage of sales) approximated 21.6% and 22.5% in 2024 and 2023, respectively.

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.

Gross profit margin decreased due to reduced sales, significantly less favorable absorption of fixed costs, and $8.2 million of accelerated depreciation charges for certain machinery and equipment within our Specialty Products segment as well as increased input costs, the impact of a $2.6 million commercial settlement in 2023 that did not repeat in 2024, and higher production costs, which started to abate in fourth quarter 2024, related to demand reversion above peak capacity for certain product lines in our Packaging segment.

Also contributing to the decrease in gross profit were increased costs and manufacturing inefficiencies resulting from labor union strikes within our Aerospace segment.

The decrease in gross profit was partially offset by higher sales levels and related improved fixed cost absorption and the impact of a charge related to purchase accounting in 2023 that did not repeat within our Packaging and Aerospace segments.

Additionally, gross margin was favorably impacted by reduced material availability constraints, a more favorable product sales mix, and commercial recoveries within our Aerospace segment, and the lower year-over-year impact of realignment costs within our Packaging segment.

Operating profit margin (operating profit as a percentage of sales) approximated 5.1% and 7.3% in 2024 and 2023, respectively.

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.

Operating profit decreased $18.3 million, to $47.2 million in 2024, as compared to $65.4 million in 2023, primarily due to decreased sales, significantly less favorable absorption of fixed costs and accelerated depreciation charges for certain machinery and equipment within our Specialty Products segment, a $5.5 million pre-tax charge related to updating our asbestos studies, and $3.6 million of pre-tax charges related to our environmental remediation obligations.

Additionally, operating profit decreased due to increased input costs and higher production costs, which started to abate in fourth quarter 2024, related to high demand for certain dispensing products within our Packaging segment, as well as increased costs and manufacturing inefficiencies resulting from the labor union strike within our Aerospace segment.

These decreases were partially offset by higher sales levels and related improved fixed cost absorption and the impact of a charge related to purchase accounting in 2023 that did not repeat within our Packaging and Aerospace segments.

Operating profit was favorably impacted by lower realignment costs and the impact of $1.0 million higher net gains on sales of non-core properties within the Packaging segment, as well as reduced material availability constraints, a more favorable product sales mix, and commercial recoveries within the Aerospace segment.

Interest expense increased $3.6 million, to $19.6 million in 2024, as compared to $15.9 million in 2023, due to a higher effective interest rate and an increase in our weighted average borrowings as a result of increased borrowings from our revolving credit facility.

Other income increased $1.3 million to $2.4 million in 2024, from $1.1 million in 2023, primary due to the $2.2 million reversal of the Weldmac contingent consideration liability in 2024 and by a non-cash settlement charge for our Canadian defined benefit obligations during 2023, partially offset by increased foreign translation losses.

The effective income tax rate for 2024 was 19.3%, compared to 20.2% for 2023.

We recorded income tax expense of $5.8 million in 2024, as compared to $10.2 million in 2023.

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.

During 2024, we reported domestic and foreign pre-tax income of $3.3 million and $26.7 million, respectively, as compared to domestic and foreign pre-tax income of $20.7 million and $29.9 million, respectively, in 2023.

The rate for 2024 is lower primarily as a result of a change in the mix of domestic and foreign pre-tax results.

Net income decreased $16.1 million to $24.3 million in 2024, compared to $40.4 million in 2023.

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.

This decrease was primarily a result of a decrease in operating profit of $18.3 million and a $3.6 million increase in interest expense, partially offset by a decrease in income tax expense of $4.4 million and a $1.3 million increase in other income.

See below for a discussion of operating results by segment.

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.

Net sales increased $48.7 million, or 10.5% (of which 10.3% was organic, 0.6% related to acquisitions, and (0.4)% was foreign currency exchange), to $512.3 million in 2024, as compared to $463.6 million in 2023.

Acquisition-related sales growth was $2.8 million from the January 2024 sales of our February 2023 acquisition of Aarts.

Sales of dispensing products used primarily for beauty, personal care and home care applications increased organically by $38.2 million.

Sales of products used for industrial applications increased by $13.0 million.

These increases were partially offset by the decrease in sales of products used in food and beverage applications of $3.1 million, primarily due to reduced demand for certain flexible packaging applications in North America and beverage closure applications in Europe as certain customers prepare for cutting over to a new product design.

The increase in net sales was also offset by $2.0 million due to 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, as compared to 2023.

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.

Packaging's gross profit increased $14.6 million to $123.7 million, or 24.1% of sales, in 2024, as compared to $109.1 million, or 23.5% of sales, in 2023, primarily due to higher sales levels and resulting improved fixed cost absorption, the favorable impact of prior year cost reduction efforts, the impact of $8.9 million lower realignment costs and a $0.8 million purchase accounting charge related to the step-up of inventory to fair value in 2023 that did not repeat in 2024.

The increase in gross profit was partially offset by a $2.6 million commercial settlement in 2023 that did not repeat, and increased input costs, including expedited freight and labor required to timely fulfill an abrupt increase in customer orders in the first half of 2024, as well as higher production costs through third quarter 2024 associated with capacity restraints and high demand for certain product lines.

Packaging's selling, general and administrative expenses increased $7.7 million to $56.4 million, or 11.0% of sales, in 2024, as compared to $48.8 million, or 10.5% of sales, in 2023, primarily due to $4.7 million higher information technology costs allocated from Corporate, higher employee-related costs and higher professional fees.

Packaging's operating profit increased $8.0 million to $68.1 million, or 13.3% of sales, in 2024, as compared to $60.1 million, or 13.0% of sales, in 2023, primarily due to higher sales levels, improved fixed cost absorption, and the favorable impact of prior realignment actions, and the impact of $1.0 million higher net gains on sales of non-core properties.

These increases were partially offset by higher selling, general and administrative expenses, the impact of a commercial settlement in 2023 that did not repeat, and increased input costs, including expedited freight to timely fulfill an abrupt increase in customer orders.

Net sales increased $52.8 million, or 21.9% (of which 16.6% was organic and 5.3% related to acquisitions), to $294.2 million in 2024, as compared to $241.4 million in 2023.

Acquisition-related sales growth from our April 2023 acquisition of Weldmac was $12.9 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.

Sales of our fasteners products increased by $22.3 million due to increases in aircraft build rates, improved production yield and commercial recoveries, partially offset by a decrease in sales due to the labor union strike at our Aerospace facility in Commerce, California.

Sales of our engineered components products increased by $17.6 million due to improved throughput, commercial recoveries and new business wins.

Gross profit within Aerospace increased $21.9 million to $69.9 million, or 23.8% of sales, in 2024, from $48.0 million, or 19.9% of sales, in 2023.

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.

Gross profit increased primarily due to higher sales levels and resulting improved fixed cost absorption, reduced material availability constraints, a more favorable product sales mix, favorable commercial recoveries, and a $2.4 million purchase accounting charge related to the step-up of inventory to fair value in 2023 that did not repeat.

These increases were partially offset by increased costs and manufacturing inefficiencies resulting from the labor union strike.

Selling, general and administrative expenses increased $4.8 million to $36.2 million, or 12.3% of sales, in 2024, as compared to $31.4 million, or 13.0% of sales, in 2023, primarily due to higher employee-related costs, higher information technology costs,$1.8 million of increased costs related to the labor union strike, and higher ongoing selling, general and administrative costs associated with our acquisition of Weldmac.

These increases were partially offset by lower legal costs and lower intangible asset amortization expense due to certain assets becoming fully amortized.

Operating profit within Aerospace increased $18.2 million to $33.8 million, or 11.5% of sales, in 2024, as compared to $15.5 million, or 6.4% of sales, in 2023, primarily due to the impact of higher sales levels, improved fixed cost absorption, reduced material availability production constraints, a more favorable product sales mix, commercial recoveries, a purchase accounting adjustment related to Weldmac's inventory step-up to fair value in 2023 that did not repeat, and a $1.1 million indefinite-lived intangible asset impairment charge in 2023 that did not repeat.

These increases were partially offset by higher selling, general and administrative expenses and increased costs and manufacturing inefficiencies related to the strike.

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 $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 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.

Net sales decreased $70.1 million, or 37.2%, to $118.5 million in 2024, as compared to $188.6 million in 2023.

Sales of forged steel cylinders decreased $45.2 million, or 31.3%, due to lower demand resulting primarily from certain large distributor customers closely managing overstocked positions given high order rates in previous years which were in reaction to disruptions in the global supply chain.

Sales of natural gas fired engines, compressors and related parts used in remote power generation and assistance applications for natural gas and crude oil extraction decreased by $24.9 million, or 56.4%, primarily as a result of lower compression package sales from a customer that has reduced their ordering rate significantly as compared to the prior year.

Gross profit within Specialty Products decreased $38.4 million to $5.9 million, or 5.0% of sales, in 2024, as compared to $44.3 million, or 23.5% of sales, in 2023.

Gross profit decreased due to lower sales levels, which resulted in significantly lower fixed cost absorption, and from $8.2 million of accelerated depreciation charges for certain machinery and equipment.

Selling, general and administrative expenses within Specialty Products was $7.8 million, or 6.6% of sales, in 2024, as compared to $7.8 million, or 4.2% of net sales, in 2023, as $1.8 million of higher information technology costs allocated from Corporate was offset by cost reduction actions in 2024, in response to lower market demand levels.

Operating profit (loss) within Specialty Products decreased $38.4 million to an operating loss of $2.0 million, or 1.7% of sales, in 2024, as compared to an operating profit of $36.4 million, or 19.3% of sales, in 2023, primarily due to lower sales levels, which resulted in significantly less favorable absorption of fixed costs, and accelerated depreciation charges for certain machinery and equipment.

Corporate Expenses.

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Legacy expenses 9.7 0.2

Gain on disposition of assets — (17.6)

Corporate expenses $ 52.7 $ 46.6

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.

Corporate expenses increased $6.1 million to $52.7 million in 2024, from $46.6 million in 2023, primarily due to a $5.5 million pre-tax charge related to updating our asbestos studies in 2024, $3.6 million of pre-tax charges related to our environment remediation obligations and $1.3 million of higher professional costs associated with business acquisition, diligence and transaction related activity.

These increases were partially offset by a $2.7 million decrease in non-cash stock compensation due to expected attainment of existing awards and a $1.3 million decrease in technology costs, as $5.3 million of higher costs associated with upgrades of certain of our information technology applications were more than offset by $6.6 million of technology costs allocated to our segments that was not allocated in 2023.

Liquidity and Capital Resources

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

• 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.

• In 2024, the Company generated $107.3 million in cash flows, based on the reported net income of $24.3 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, change in asbestos and environmental liability estimates and other operating activities.

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 similar non-cash items.

• Increases in accounts receivable resulted in a use of cash of $20.5 million and $5.5 million in 2024 and 2023, respectively.

The increased use of cash for 2024 and 2023 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.

Days sales outstanding of receivables increased by two days in 2024 and six days in 2023.

• We increased our investment in inventory by $21.2 million and $7.1 million in 2024 and 2023, respectively.

Our days sales in inventory decreased by four days in 2024, primarily as a result of moderating inventory levels with higher sales levels within our Packaging and Aerospace segments.

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 .

• 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.

• Increases in prepaid expenses and other assets resulted in a use of cash of $2.3 million in 2024, while decreases in prepaid expenses and other assets resulted in a source of cash of $4.8 million in 2023.

The changes in 2024 and 2023 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 $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.

• Increases in accounts payable and accrued liabilities resulted in a source of cash of $0.6 million in 2024, as compared to a use of cash of $14.5 million in 2023.

Our days accounts payable on hand decreased by six day through 2024 and increased by one day through 2023.

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 $47.0 million and $134.4 million in 2024 and 2023, respectively.

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

During 2024, we invested $51.0 million in capital expenditures as we continued our investment in growth, capacity and productivity-related capital projects.

We also received proceeds of $4.0 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.

During 2023, we paid $77.3 million, net of cash acquired, to acquire Aarts and Weldmac, invested $54.2 million in capital expenditures, made a payment of $3.4 million related to the expiration of one of our cross-currency swap agreements, and received proceeds of $0.5 million from the disposition of property and equipment.

Net cash used for financing activities was $28.6 million and $30.9 million in 2024 and 2023, 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.

During 2024, we received net proceeds of $1.4 million from borrowings on our revolving credit facilities, purchased $19.3 million of outstanding common stock, used a net cash amount of $1.8 million related to our stock compensation arrangements, paid dividends of $6.6 million, and paid $2.3 million related to other financing activities, which includes $2.25 million of cash paid as final contingent consideration for the Weldmac acquisition.

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.

Our Debt and Other Commitments

In March 2021, we issued the 2029 Senior Notes in a private placement under Rule 144A of the Securities Act of 1933, as amended.

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

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.

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 income.

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.

The $400.0 million aggregate principal amount of our senior notes due 2029 ("Senior Notes") accrues interest at a rate of 4.125% per annum, payable semi-annually in arrears on April 15 and October 15.

The payment of principal and interest is jointly and severally guaranteed, on a senior unsecured basis by certain named subsidiaries of the Company.

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In addition, our non-guarantor subsidiaries represented 37% and 15% of the total guarantor and non-guarantor assets and liabilities, respectively, as of December 31, 2024, treating the guarantor and non-guarantor subsidiaries each as a consolidated group.

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.

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.

In March 2021, we amended our Credit Agreement in connection with the issuance of the 2029 Senior Notes to extend the maturity date.

We incurred fees and expenses of $1.1 million related to the amendment, all of which were capitalized as debt issuance costs.

We also recorded $0.2 million of non-cash expense related to the write-off of previously capitalized deferred financing fees.

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 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.

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

Year Percentage

2024 102.063 %

2025 101.031 %

2026 and thereafter 100.000 %

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, maturing on March 29, 2026.

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

As of December 31, 2024, monthly borrowings under the Credit Agreement are 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 1.75%, and U.S.

dollar borrowings subject to the Secured Overnight Financing Rate plus a spread of 1.85%.

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Depreciation and amortization 64,920

Impairment charges (1)

Non-cash compensation expense (2)

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Non-recurring expenses or costs (3)

Effects of purchase accounting adjustments 3,190

Extraordinary, non-recurring or unusual gains or losses 8,530

Business and asset dispositions (1,000)

Permitted acquisitions 3,030

Currency gains and losses 1,340

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________________________________________

(1) Non-cash charges related to indefinite-lived intangible asset impairment.

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

(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.

(3) Non-recurring costs and expenses relating to diligence and transaction costs, strike related costs, severance, relocation and realignment.

(4) Includes $1.6 million of finance leases as of December 31, 2024.

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

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, 2024, we had $1.5 million outstanding under our revolving credit facility and had $292.2 million potentially available after giving effect to $6.3 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.

After consideration of leverage restrictions contained in the Credit Agreement, as of December 31, 2024 and 2023, we had $216.7 million and $256.9 million, respectively, of borrowing capacity available for general corporate purposes.

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.

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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.

At December 31, 2023, we had no amounts outstanding on our revolving credit facility and, therefore, no variable rate-based borrowings outstanding.

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

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.

The majority of our lease transactions are accounted for as operating leases, and we incurred rent expense related thereto of $13.9 million in 2024.

We expect leasing will continue to be an available financing option to fund future capital expenditure requirements.

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Moody's also affirmed a Ba2 Corporate Family Rating and maintained its outlook as stable.

On May 22, 2023, Standard & Poor's affirmed a BB- rating to our 2029 Senior Notes.

On January 7, 2025, Moody's affirmed a Ba3 rating to our Senior Notes and a Ba2 Corporate Family Rating, and changed its outlook from stable to negative.

On June 28, 2024, Standard & Poor's affirmed a BB- rating to our Senior Notes.

Standard & Poor's also 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.

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.

Through 2024, we proactively managed through a significant destocking period and resulting demand trough as compared to the prior year period within our cylinder business.

We also managed through a labor union strike at one of our Aerospace production facilities, and we navigated increased input costs as a result of abruptly increased orders for certain dispensing applications within our Packaging segment.

We recently completed the divestiture of our Arrow Engine business, exiting our direct presence in the oil and gas market sector.

As we look to 2025, we anticipate continued strength and operating leverage from our Aerospace business.

We expect modest organic sales growth within our Packaging segment, while having the opportunity to improve our production throughput and reduce certain input costs.

Within the cylinder business in Specialty Products, we believe we will see marginal improvement in demand as inventory positions are further depleted, and therefore, we anticipate sequential improvement in operating profit as we move forward given these anticipated incremental sales and structural costs saving actions we have already implemented.

We will continue to monitor trends in demand changes and adjust costs and investments accordingly.

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.

While we expect a continued modest demand recovery in certain of our consumer products and industrial markets and continued strength in our aerospace & defense market, we remain cautious of the impact of global market uncertainty, particularly the potential impact of tariffs on our customer demand and our input costs.

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, 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 are taking continued actions toward streamlining and optimizing our business portfolio.

We have been actively exploring a range of potential options, particularly over the past year, to accelerate the focus of our business portfolio.

As we focus our portfolio of businesses, we expect to continue to leverage the tenets of our TriMas Business Model to manage our 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

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For purposes of our 2024 goodwill impairment test, we had six reporting units, four of which had goodwill, within our three reportable segments.

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.

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 2024 annual impairment tests, we performed qualitative assessments for all reporting units except the Life Sciences reporting unit within our Packaging segment, for which we elected to perform quantitative assessments.

Based on results of 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 value;

therefore, we determined that quantitative goodwill impairment tests were not required for all reporting units included in the qualitative assessment.

In conducting the quantitative analysis for the Life Sciences reporting unit, we determined the estimated fair value 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.

Based on results of the 2024 quantitative assessment, we determined there were no indications that the fair value of the Life Sciences reporting unit was less than its carrying value.

The techniques used in our quantitative impairment test incorporated a number of assumptions that we believe to be reasonable and to reflect the current market conditions.

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.

To provide a level of sensitivity analysis, a 1% increase in the weighted average cost of capital would have resulted in a goodwill impairment charge of approximately $7 million, while a 0.5% decrease in the terminal growth rate would have resulted in a goodwill impairment charge of approximately $2 million.

Changes in future results, assumptions, and estimates from those used in the quantitative impairment test may lead to an outcome where impairment charges would be required in future periods.

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.

Further, continued adverse or worsening market conditions could result in the recognition of additional impairment if we determine that the fair value of our Life Sciences reporting unit has fallen below its carrying value.

Certain circumstances that could reasonably be expected to negatively affect the underlying key assumptions and impact the estimated fair value of our Life Sciences reporting unit may include such items as:

(i) a decrease in expected future cash flows, (ii) inability to achieve the sales targeted as part of our strategic growth initiatives, and (iii) inability to efficiently leverage the projected sales growth at expected margin rates.

Additionally, we performed a quantitative assessment for the indefinite-lived intangible assets within the packaging-related Life Sciences reporting unit after electing the option to bypass the qualitative assessment.

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.

Upon completion of the quantitative impairment test, we determined that one of the Life Sciences trade names had a carrying value that exceeded its fair value, and therefore recorded an impairment charge of $0.2 million.

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

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What changed 10-K

Item 7. Management’s Discussion and Analysis