TRIMAS CORP

Previous wording

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 significantly 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 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.

Current wording

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 significantly 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, 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, 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. 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 in 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.

Previous wording

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.

Current wording

The most significant drivers affecting our financial results in 2024 compared with 2023, other than as directly impacted by sales changes, 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 rate.

Previous wording

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.

Current wording

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

Previous wording

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.

Current wording

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 $2.8 million of acquisition-related sales growth during 2024 resulting from its January 2024 sales.

Previous wording

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.

Current wording

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. 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.

Previous wording

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.

Current wording

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.

Previous wording

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 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.

Current wording

Critical factors affecting our ability to succeed include: 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, including tariffs and duties.

Previous wording

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. 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.

Current wording

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

Previous wording

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.

Current wording

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 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.

Previous wording

Each year, as a core tenet of the TriMas Business Model, our businesses target cost savings from Kaizen and continuous improvement initiatives in an effort to reduce, or otherwise offset, the impact of increased input and conversion costs through increased throughput and yield rates, with a goal of at least covering inflationary and market cost increases. In addition, we continuously review our operating cost structures to ensure alignment with current market demand.

Current wording

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.

Previous wording

We continue to evaluate alternatives to redeploy the cash generated by our businesses, one of which includes returning capital to our shareholders. In 2020, our Board of Directors increased the authorization of share repurchases to a cumulative amount of $250 million. During 2023, we purchased 680,594 shares of our outstanding common stock for an aggregate purchase price of $18.8 million. As of December 31, 2023, we had $86.9 million remaining under the repurchase authorization.

Current wording

We continue to evaluate alternatives to redeploy the cash generated by our businesses, one of which includes returning capital to our shareholders. In 2020, our Board of Directors increased the authorization of share repurchases to a cumulative amount of $250 million. During 2024, we purchased 771,067 shares of our outstanding common stock for an aggregate purchase price of $19.3 million. As of December 31, 2024, we had $67.6 million remaining under the repurchase authorization.

Previous wording

In addition, in 2023, we declared quarterly dividends of $0.04 per share of common stock, aggregating todividends declared and paid on common shares during 2023 of $6.7 million. We will continue to evaluate opportunities to return capital to shareholders through the purchase of our common stock, as well as dividends, depending on market conditions and other factors.

Current wording

In addition, in 2024, we declared quarterly dividends of$0.04 per share of common stock, aggregating todividends declared and paid on common shares during 2024 of $6.6 million. We will continue to evaluate opportunities to return capital to shareholders through the purchase of our common stock, as well as dividends, depending on market conditions and other factors.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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.

Current wording

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 $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.

Previous wording

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

Current wording

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

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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

Current wording

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 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.

Previous wording

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.

Current wording

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 $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.

Previous wording

Packaging. 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.

Current wording

Packaging. 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.

Previous wording

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

Current wording

Aerospace. 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 $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.

Previous wording

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.

Current wording

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 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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

Cash flows provided by operating activities in 2023 were $88.2 million, as compared to $72.6 million in 2022. Significant changes in cash flows provided by operating activities and the reasons for such changes are as follows:

Current wording

Cash flows provided by operating activities in 2024 were $63.8 million, as compared to $88.2 million in 2023. Significant changes in cash flows provided by operating activities and the reasons for such changes are as follows:

Previous wording

•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.

Current wording

•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.

Previous wording

•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 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.

Current wording

•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 two days in 2024 and six days in 2023.

Previous wording

•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.

Current wording

•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.

Previous wording

•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.

Current wording

•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.

Previous wording

•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.

Current wording

•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.

Previous wording

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

Current wording

Net cash used for investing activities was $47.0 million and $134.4 million in 2024 and 2023, respectively. 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 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.

Previous wording

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.

Current wording

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

Previous wording

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 payment of principal and interest is jointly and severally guaranteed, on a senior unsecured basis by certain named subsidiaries of the Company. The 2029 Senior Notes arepari passu in right of payment with all existing and future senior indebtedness and subordinated to all existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness. In 2023, our consolidated subsidiaries that do not guarantee the Senior Notes represented 28% of the total of guarantor and non-guarantor net sales, treating each as a consolidated group and excluding intercompany transactions between guarantor and non-guarantor subsidiaries. In addition, our non-guarantor subsidiaries represented 38% and 15% of the total guarantor and non-guarantor assets and liabilities, respectively, as of December 31, 2023, treating the guarantor and non-guarantor subsidiaries each as a consolidated group.

Current wording

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. The Senior Notes arepari passu in right of payment with all existing and future senior indebtedness and subordinated to all existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness. In 2024, our consolidated subsidiaries that do not guarantee the Senior Notes represented 30% of the total of guarantor and non-guarantor net sales, treating each as a consolidated group and excluding intercompany transactions between guarantor and non-guarantor subsidiaries. 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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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

Previous wording

Amounts drawn under our revolving credit facility fluctuate daily based upon our working capital and other ordinary course needs. Availability under our revolving credit facility depends upon, among other things, compliance with our Credit Agreement's financial covenants. Our Credit Agreement contains various negative and affirmative covenants and other requirements affecting us and our subsidiaries, including the ability to, subject to certain exceptions and limitations, incur debt, liens, mergers, investments, loans, advances, guarantee obligations, acquisitions, assets dispositions, sale-leaseback transactions, hedging agreements, dividends and other restricted payments, transactions with affiliates, restrictive agreements and amendments to charters, bylaws, and other material documents. The terms of our Credit Agreement require us and our subsidiaries to meet certain restrictive financial covenants and ratios computed quarterly, including a maximum total net leverage ratio (total consolidated indebtedness plus outstanding amounts under any accounts receivable securitization facility, less the aggregate amount of certain unrestricted cash and unrestricted permitted investments, as defined, over consolidated EBITDA, as defined) and a minimum interest expense coverage ratio (consolidated EBITDA, as defined, over the sum of consolidated cash interest expense, as defined, and preferred dividends, as defined). Our permitted total net leverage ratio under the Credit Agreement is 4.00 to 1.00 as of December 31, 2023. If we were to complete an acquisition which qualifies for a Covenant Holiday Period, as defined in our Credit Agreement, then our permitted total net leverage ratio cannot exceed 4.50 to 1.00 during that period. Our actual total net leverage ratio was 2.39 to 1.00 at December 31, 2023. Our permitted interest expense coverage ratio under the Credit Agreement is 3.00 to 1.00, and our actual interest expense coverage ratio was 11.13 to 1.00 as of December 31, 2023. At December 31, 2023, we were in compliance with our financial covenants.

Current wording

Amounts drawn under our revolving credit facility fluctuate daily based upon our working capital and other ordinary course needs. Availability under our revolving credit facility depends upon, among other things, compliance with our Credit Agreement's financial covenants. Our Credit Agreement contains various negative and affirmative covenants and other requirements affecting us and our subsidiaries, including the ability to, subject to certain exceptions and limitations, incur debt, liens, mergers, investments, loans, advances, guarantee obligations, acquisitions, assets dispositions, sale-leaseback transactions, hedging agreements, dividends and other restricted payments, transactions with affiliates, restrictive agreements and amendments to charters, bylaws, and other material documents. The terms of our Credit Agreement require us and our subsidiaries to meet certain restrictive financial covenants and ratios computed quarterly, including a maximum total net leverage ratio (total consolidated indebtedness plus outstanding amounts under any accounts receivable securitization facility, less the aggregate amount of certain unrestricted cash and unrestricted permitted investments, as defined, over consolidated EBITDA, as defined) and a minimum interest expense coverage ratio (consolidated EBITDA, as defined, over the sum of consolidated cash interest expense, as defined, and preferred dividends, as defined). Our permitted total net leverage ratio under the Credit Agreement is 4.00 to 1.00 as of December 31, 2024. If we were to complete an acquisition which qualifies for a Covenant Holiday Period, as defined in our Credit Agreement, then our permitted total net leverage ratio cannot exceed 4.50 to 1.00 during that period. Our actual total net leverage ratio was 2.57 to 1.00 at December 31, 2024. Our permitted interest expense coverage ratio under the Credit Agreement is 3.00 to 1.00, and our actual interest expense coverage ratio was 8.24 to 1.00 as of December 31, 2024. At December 31, 2024, we were in compliance with our financial covenants.

Previous wording

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

Current wording

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