10-K 1 trs201510-k.htm 10-K 10-K

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
__________________________________________________________________________________________________
Form 10-K
(Mark One)
 
 
x
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
Or
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                             to                            
Commission file number 001-10716
__________________________________________________________________________________________________
TRIMAS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation or
Organization)
 
38-2687639
(IRS Employer Identification No.)
39400 Woodward Avenue, Suite 130
Bloomfield Hills, Michigan 48304
(Address of Principal Executive Offices, Including Zip Code)
(248) 631-5450
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class:
 
Name of Each Exchange on Which Registered:
Common stock, $0.01 par value
 
NASDAQ Stock Market LLC
         Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x    No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 and Section 15(d) of the Act. Yes o    No x
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x   No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of "accelerated filer," "large accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer x
 
Accelerated Filer o
 
Non-accelerated Filer o
(Do not check if a smaller reporting company)
 
Smaller Reporting Company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o    No x
The aggregate market value of the voting common equity held by non-affiliates of the Registrant as of June 30, 2015 was approximately $1.3 billion, based upon the closing sales price of the Registrant's common stock, $0.01 par value, reported for such date on the NASDAQ Global Select Market. For purposes of this calculation only, directors, executive officers and the principal controlling shareholder or entities controlled by such controlling shareholder are deemed to be affiliates of the Registrant.
As of February 19, 2016, the number of outstanding shares of the Registrant's common stock, $0.01 par value, was 45,332,516 shares.
Portions of the Registrant's Proxy Statement for the 2016 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein.
 
 
 
 
 



TRIMAS CORPORATION INDEX
 
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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Forward-Looking Statements
This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 about our financial condition, results of operations and business. These forward-looking statements can be identified by the use of forward-looking words, such as “may,” “could,” “should,” “estimate,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “target,” “plan” or other comparable words, or by discussions of strategy that may involve risks and uncertainties.
These forward-looking statements are subject to numerous assumptions, risks and uncertainties which could materially affect our business, financial condition or future results including, but not limited to, risks and uncertainties with respect to: the Company's leverage; liabilities imposed by the Company's debt instruments; market demand; competitive factors; supply constraints; material and energy costs; risks and uncertainties associated with intangible assets, including goodwill or other intangible asset impairment charges; technology factors; litigation; government and regulatory actions; the Company's accounting policies; future trends; general economic and currency conditions; various conditions specific to the Company's business and industry; the Company’s ability to integrate Allfast and attain the expected synergies, including that the acquisition is accretive; the Company’s ability to attain targeted savings and free cash flow amounts under its Financial Improvement Plan; future prospects of the Company; and other risks that are discussed in Part I, Item 1A, "Risk Factors." The risks described in this report are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deemed to be immaterial also may materially adversely affect our business, financial position and results of operations or cash flows.
The cautionary statements set forth above should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. We caution readers not to place undue reliance on the statements, which speak only as of the date of this report. We do not undertake any obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statement to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.
We disclose important factors that could cause our actual results to differ materially from our expectations implied by our forward-looking statements under Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this report. These cautionary statements qualify all forward-looking statements attributed to us or persons acting on our behalf. When we indicate that an event, condition or circumstance could or would have an adverse effect on us, we mean to include effects upon our business, financial and other conditions, results of operations, prospects and ability to service our debt.


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PART I

Item 1.    Business
We are a global designer, manufacturer and distributor of engineered and applied products for commercial, industrial and consumer markets. Most of our businesses share important characteristics, including leading market positions, strong brand names, broad product offerings in focused markets, established distribution networks, relatively high operating margins, relatively low capital investment requirements and both organic and acquisition growth opportunities. We use a common operating model across our businesses. The TriMas Operating Model is the framework that provides, wherever possible given the diverse nature of our businesses, commonality and consistency across TriMas, and drives how we plan, budget, measure, review, incent and reward our people. It provides the foundation for determining our priorities, executing our growth and productivity initiatives and allocating capital and resources. We believe that a majority of our 2015 net sales were in markets in which our products enjoy the number one or number two market position within their respective product categories.
Our Reportable Segments
We operate through four reportable segments which had net sales and operating profit for the year ended December 31, 2015 as follows: Packaging (net sales: $334.3 million; operating profit: $78.5 million), Aerospace (net sales: $176.5 million; operating profit: $28.3 million), Energy (net sales: $193.4 million; operating loss: $97.2 million) and Engineered Components (net sales: $159.8 million; operating profit: $18.2 million). For information pertaining to the net sales and operating profit attributed to our reportable segments, refer to Note 19, "Segment Information," included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K.
Due to a significant decline in current and expected profitability levels in our Energy reportable segment and our Arrow Engine business within our Engineered Components reportable segment during 2015, and a decline in our stock price and resulting market capitalization, we recorded pre-tax goodwill impairment charges in the fourth quarter of 2015 of approximately $70.9 million and $3.2 million, respectively. For information pertaining to these impairment charges, refer to Note 8, "Goodwill and Other Intangible Assets," included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K.
In addition to our reportable segments as presented, we have discontinued certain lines of businesses over the past three years as follows, the results of which are presented as discontinued operations for all periods presented in the financial statements attached hereto:
On June 30, 2015, we completed the spin-off of our Cequent businesses, comprised of the former Cequent Americas and Cequent Asia Pacific Europe Africa ("Cequent APEA") reportable segments, creating a new independent publicly traded company, Horizon Global Corporation ("Horizon"), through the distribution of 100% of the Company's interest in Horizon to holders of the Company's common stock.
During the third quarter of 2014, we ceased operations of our NI Industries business. NI Industries manufactured cartridge cases for the defense industry and was party to a U.S. Government facility maintenance contract. We received approximately $6.7 million for the sale of certain intellectual property and related inventory and tooling. As a result of discontinuing operations of NI Industries, we renamed the "Aerospace & Defense" reportable segment "Aerospace."
Each reportable segment has distinct products, distribution channels, strengths and strategies, which are described below.
Packaging
We believe Packaging is a leading designer, manufacturer and distributor of specialty, highly-engineered closure and dispensing systems for a range of end markets, including steel and plastic industrial and consumer packaging applications. We believe that Packaging is one of the largest manufacturers of steel and plastic industrial container closures and dispensing products in North America, with a significant presence in Europe, Asia and other geographic markets. Packaging manufactures high-performance, value-added products that are designed to enhance its customers' ability to store, transport, process and dispense various products for the industrial, food and beverage, and health, beauty and home markets. Packaging's products include steel and plastic closure caps, drum enclosures, and specialty plastic closure and dispensing systems, such as foamers, pumps and specialty sprayers.
Packaging is dual headquartered in the United Kingdom and Indiana. We believe our Packaging brands, which include Rieke®, Arminak & Associates®, Englass®, Innovative Molding™ and Stolz®, are well established and recognized in their respective markets.

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Packaging's specialty closure portion of the business designs and manufactures industrial closure products under the Rieke and Stolz brands in North America, Europe and Asia. We believe Rieke has significant market share for many of its key products, such as steel drum enclosures, plastic drum closures, plastic pail dispensers and plugs and plastic enclosures for sub-20 liter-sized containers.
The specialty dispensing portion of the business designs and manufactures products sold as Rieke, Arminak & Associates, Englass and Innovative Molding brands serving two primary markets:
In the health, beauty and home market segments, the products include foamers, pumps, fine mist sprayers and other packaging solutions for the cosmetic, personal care and household product markets in North America, Europe, Asia, Latin America, Middle East, Australia and Africa, and pharmaceutical and personal care dispensers sold primarily in Europe.
In the food and beverage markets, the products include specialty plastic closures for bottles and jars, and dispensing pumps for North America, Europe, Asia and Australia.

In the third quarter of 2013, we sold our packaging business in Italy which manufactured ring and lever closures for steel drums and pails and served the industrial market in Europe.
Competitive Strengths    
We believe Packaging benefits from the following competitive strengths:
Strong Product Innovation. We believe that Packaging's research and development capability and new product focus is a competitive advantage. For more than 90 years, Packaging's product development programs have provided innovative and proprietary product solutions, such as the Visegrip® steel flange and plug closure, and the all-plastic, environmentally safe, self-venting FlexSpout® flexible pouring spout. Recent examples of innovation within specialty dispensing include hands-free foamer applications for soap, potable water dispenser systems for two-to-five gallon water containers and improved airless high-viscosity liquid dispensing systems to meet thick characteristics in personal care creamers. Packaging’s recent developments of child resistant dispensers for the medical field and several specialty solutions for dispensing, closure and trigger applications for our customers are further examples of our technical advancements. During 2015, Packaging added to this capability by opening a Global Innovation Center in Asia. Based outside Delhi, India, this center houses a cross-functional team of product development, sales, marketing, customer service and supply chain experts. This team is focused on driving innovation across Packaging's broad range of packaging solutions for its customers in the industrial, food & beverage, and health, beauty and home care markets. Packaging's emphasis upon highly-engineered packaging solutions and research and development has yielded numerous issued and enforceable patents, with many other patent applications pending. We believe that Packaging's innovative product solutions have enabled this segment to evolve our products to meet existing customers' needs, as well as attract new customers in a variety of consumer end markets such as beverage, cosmetic, food, medical, nutraceutical, personal care and pharmaceutical.

Customized Solutions that Enhance Customer Loyalty and Relationships. A significant portion of Packaging's products are customized for end-users, as Packaging's products are often developed and engineered to address specific customer needs, providing solutions for issues or problems. Packaging provides extensive in-house design, development and technical staff to provide solutions to customer requirements for closures and dispensing applications. For example, the customization of specialty plastic caps and closures including unique colors, collar sizes, lining, venting and branding at short-lead times provides substantial customer loyalty. The continual investment in flexible manufacturing cells allows Packaging to offer both short lead times for high volume products and extensive customization for low order volumes, which provides significant advantages to our consumer goods customer base. In addition, Packaging provides customized dispensing solutions including unique pump design, precision metering, unique colors and special collar sizes to fit the bottles. Packaging has also been successful in promoting the sale of complementary products in an effort to create preferred supplier status.

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Leading Market Positions and Global Presence. We believe that Packaging is a leading designer and manufacturer of plastic closure caps, drum enclosures, and dispensing systems, such as pumps, foamers and specialty sprayers. Packaging maintains a global network of manufacturing and distribution sites, reflecting its global opportunities and increasing global customer base. Packaging's global customers often want supply chain capability and a flexible manufacturing footprint close to their end market consumers. To better serve our customers in Asia, we added to this global footprint by acquiring Lion Holdings Pvt. Ltd. ("Lion Holdings") in July 2014. Lion Holdings has increased our manufacturing capacity for highly engineered dispensing solutions through locations in India and Vietnam, and increased our Asian market coverage. Also during 2014, we added manufacturing capacity in China to better serve the domestic Chinese market. The majority of Packaging's manufacturing facilities around the world have technologically advanced injection molding machines required to manufacture engineered dispensing and closure solutions, as well as automated, high-speed agile assembly equipment for multiple component products.
Strategies
We believe Packaging has significant opportunities to grow, including:
Innovate New Products and New Applications. Packaging has focused its research and development capabilities on consumer applications requiring special packaging forms, stylized containers and dispenser systems requiring a high degree of functionality and engineering, as well as continuously evolving its industrial applications. Many new product innovations take years to develop. Packaging has a consistent pipeline of new products ready for launch. For example, 39 new patent filings were filed in 2015, with 22 new patents issued. Other recent examples include a dual component dispensing device for the application of pre-operation surgical sterilization, as well as various foamers, pumps and sprayers.
Globalize Product Opportunities. Packaging successfully globalizes its products by localizing its expertise in product customization to meet regional market requirements. Our network of manufacturing and distribution sites ensures customers have a global product standard manufactured locally providing the shortest lead-time, to provide products and support where our customers need them. All salespeople in the organization are trained at successfully selling all products in the Packaging group. We believe that, as compared with our competitors, Packaging is able to offer a wider variety of products to our long-term North American customers with enhanced service and tooling support. We have entered into supply agreements with many of these customers based on our broad product offering.
Increase Global Presence. Over the past few years, Packaging has increased its international manufacturing and sales presence, with advanced manufacturing capabilities in China, India and Vietnam, as well as an increased sales presence in that region. We have also increased our sales coverage in China and India. By maintaining a presence in international locations, Packaging hopes to continue to discover new markets and new applications and to capitalize on lower-cost production opportunities.
Marketing, Customers and Distribution
Packaging employs an internal sales force in North America, Europe and Asia. Packaging also uses third-party agents and distributors in key geographic markets, including Europe, South America and Asia. Packaging's agents and distributors primarily sell directly to container manufacturers and to users or fillers of containers. While the point of sale may be to a container manufacturer or bottle filling business, Packaging, via a "pull through" strategy, calls on the container user or filler and suggests that it specify that our product be used on its container.
To support its "pull-through" strategy, Packaging offers more attractive pricing on products purchased directly from us and on products in which the container users or fillers specify Packaging. Users or fillers that utilize or specify our products include agricultural chemical, food, industrial chemical, paint, personal care, petroleum, pharmaceutical and sanitary supply chemical companies such as BASF, Gechem Gmbh, McDonald's, Pennzoil Quaker State, Reckitt Benckiser (UK) Healthcare, Sherwin-Williams and Wings Food Products, among others.
Packaging's primary end customers include Colgate, ConAgra Foods, Dial Corporation, Ecolab, L’Oreal, Mast Global (Bath & Body Works and Victoria Secret), Method, Nestle, Purna Pharmaceuticals, RB (formerly known as Reckitt Benckiser), Starbucks, Thornton & Ross and Unilever. We also supply major container manufacturers around the world such as Berenfield, Berlin Packaging, BWAY, Cleveland Steel Container, Greif, North Coast Container and Tricorbraun. Packaging maintains a customer service center that provides technical support as well as other technical assistance to customers to reduce overall production costs.

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Competition
Since Packaging has a broad range of products in both closures and dispensing systems, there are competitors in each of our product offerings. We do not believe that there is a single competitor that matches our entire product offering.
Depending on the product and customers served, Packaging's competitors include Aptar, Albea, Bericap, West Rock, Berry Plastics, Greif, and Phoenix Closures.
Aerospace
We believe Aerospace is a leading designer and manufacturer of a diverse range of products for use in focused markets within the aerospace industry. In general, Aerospace's products are highly-engineered, customer-specific items that are sold into focused markets with few competitors.
Aerospace's brands include Monogram Aerospace Fasteners™, Allfast Fastening Systems®, Mac Fasteners™ and Martinic Engineering™, which we believe are well established and recognized in their markets.
Monogram Aerospace Fasteners. We believe Monogram Aerospace Fasteners ("Monogram") is a leading manufacturer of permanent blind bolts and temporary fasteners used in commercial, business and military aircraft construction and assembly. Certain Monogram products contain patent protection, with additional patents pending. We believe Monogram is a leader in the development of blind bolt fastener technology for the aerospace industry, specifically in high-strength, rotary-actuated blind bolts that allow sections of aircraft to be joined together when access is limited to only one side of the airframe, providing certain cost efficiencies over conventional two piece fastening devices.
Allfast Fastening Systems. Acquired in October 2014, Allfast Fastening Systems ("Allfast") is a leading global manufacturer of solid and blind rivets, blind bolts, temporary fasteners and installation tools for the aerospace industry with content on substantially all commercial, defense and general aviation platforms in production and in service. Certain Allfast products contain patent protection.
Mac Fasteners. Acquired in October 2013, Mac Fasteners manufactures alloy and stainless steel aerospace fasteners, globally utilized by original equipment manufacturers ("OEMs"), aftermarket repair companies, and commercial and military aircraft producers.
Martinic Engineering. Acquired in January 2013, Martinic Engineering ("Martinic") manufactures highly-engineered, precision machined, complex parts for commercial and military aerospace applications, including auxiliary power units, as well as electrical hydraulic and pneumatic systems. In November 2015, we added to this product capability by acquiring certain assets and personnel related to Parker Hannifin's Tolleson, Arizona facility, which also manufactures complex machined parts for the aerospace industry.
Competitive Strengths
We believe Aerospace benefits from the following competitive strengths:
Broad Product Portfolio of Established Brands. We believe that Aerospace is a leading designer and manufacturer of fasteners and other complex, machined components for the aerospace industry. The combination of the Monogram, Allfast and Mac Fasteners brands enables Aerospace to offer a broad range of fastener products covering a broad scope of complexity and price ranges, as well as providing scale to customers who continue to rationalize their supply base and prefer to deal with fewer, broader-ranged suppliers. In several of the product categories, including rotary actuated blind bolts and blind and solid rivets, Aerospace has a meaningful market share with well-known and established brands.
Strong Product Innovation. We believe that Aerospace's engineering, research and development capability and new product focus is a competitive advantage. For many years, Aerospace’s product development programs have provided innovative and proprietary product solutions. Recent innovations already brought to market include collars, extended range blind bolts and titanium screws. During 2015, Aerospace created a focused Engineering, Research and Technology team across the brands that incorporates sales, marketing and engineering disciplines into one group. We believe this is a unique approach which will provide quick technical solutions for our customers, drive the development of new products and create new opportunities for additional revenue.

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Leading Manufacturing Capabilities and Processes. We believe that Aerospace is a leading manufacturer of precision engineered components for the aerospace industry. As a result regulations and customer requirements for Aerospace, products need to be manufactured within tight tolerances and specifications, often out of hard to work with materials including titanium, inconel and specialty steels. Many of this businesses' products, facilities and manufacturing processes are required to be qualified and/or certified. Key certifications in Aerospace include : AS9100:2009 Revision C; ISO9001:2008; ISO14001:2004; TSO; and NADCAP for non-destructive testing, heat treatment, wet processes and materials testing. While proprietary products and patents are important, having proprietary manufacturing processes and capabilities makes Aerospace's products difficult to replicate. We believe Aerospace's manufacturing processes, capabilities and quality focus create a competitive strength for the business.
Strategies
We believe the Aerospace segment has significant opportunities to grow and improve margins, based on the following strategies:
Leverage Strengths and Integrate Across the Aerospace Brands. The combined product sets of Monogram, Allfast and Mac Fasteners uniquely position us to benefit from platform-wide supply opportunities and grow at a level in excess of industry aircraft build rates. In addition, our aerospace platform will benefit from expected synergistic cost savings, including leveraging combined purchasing activities and indirect labor, joint commercial and product development efforts, and sharing of better practices between previously separate businesses. Aerospace customers will benefit from a combined product portfolio of proprietary products and product development efforts. The addition of Allfast, Martinic and Mac Fasteners products to the portfolio enables this segment to reach additional customers, including tier one suppliers to airframe OEMs and aftermarket repair companies, respectively. Monogram and Allfast can also cross-sell products into each other's legacy set of customers.
Develop New Products. The Aerospace segment has a history of successfully creating and introducing new products and there are currently several significant product initiatives underway. We focus on expanding our current products into new applications on the aircraft, as well as securing qualified products onto new programs. Aerospace products contain patent protection, with additional patents pending, as well as proprietary manufacturing processes and "know-how." Monogram has developed the next generation Composi-Lok® 3, offering a flush break upon installation, a new Composi-Lite™ derivative affording significant installed weight savings in concert with fuel efficient aircraft designs, and is developing and testing other fasteners to offer improved clamping characteristics on composite structures. Aerospace also continues to expand its fastener offerings to include existing aerospace fastening products, including a suite of collar families used in traditional two-sided assembly. Our close working relationship between our new Engineering, Research and Technology team and our customers' engineering teams is key to developing future products desired and required by our customers.
Increase Margins. The Aerospace segment is focused on expanding its margins through a variety of initiatives, including, but not limited to, executing on profitable growth strategies, leveraging one aerospace platform and implementing programs to improve manufacturing efficiencies. Increasing sales over the existing fixed cost structure, implementing price improvement strategies, and adding higher margin products to the product portfolio will all improve margins. In addition, by implementing the TriMas Operating System at all Aerospace locations, productivity, cycle times and on time delivery should improve, while reducing costs and spend.
Marketing, Customers and Distribution
Aerospace's customers operate primarily in the aerospace industry, serving both OE and aftermarket customers on a wide variety of platforms. Given the focused nature of many of our products, the Aerospace segment relies upon a combination of direct sales forces and established networks of independent distributors with familiarity of the end-users. Although the markets for fasteners and complex machine components are highly competitive, we provide products and services primarily for specialized markets, and compete principally as technology, quality and service-oriented suppliers in their respective markets. Aerospace's products are sold to manufacturers and distributors within the commercial, business and military aerospace industry, both domestic and foreign. While products are sold to manufacturers, distributors, tier one suppliers and aftermarket repair companies, Aerospace works directly with aircraft manufacturers to develop and test new products and improve existing products. Aerospace's OEM, distribution, tier one supplier and other customers include Airbus, Boeing, Embraer, Hamilton Sunstrand (United Technologies Corp.), KLX, Inc., Parker Hannifin, Peerless Aerospace Fasteners, Spirit Aero Systems, TPS Aviation, Wesco Aircraft Hardware, and the United States government.


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Competition
This segment's primary competitors include Ateliers de la Haute Garonne (AHG), Alcoa Fastening Systems, Cherry Aerospace (Precision Castparts Corp.) and LISI Aerospace. We believe that we are a leader in the blind bolt market with significant market share in all blind fastener product categories in which we compete. Aerospace companies supply highly engineered, non-commodity, customer-specific products that principally have large shares of small markets supplied by a limited number of competitors.
Energy
We believe Energy is a leading manufacturer and distributor of metallic and non-metallic gaskets, bolts, industrial fasteners and specialty products for the petroleum refining, petrochemical, oil field and industrial markets. With operations principally in North America and newer locations in Europe and Asia, Energy supplies gaskets and complementary fasteners to both maintenance repair operations ("MRO") and industrial OEMs. Our brands which comprise this segment include Lamons® and Basrur Uniseal Private Limited™ (Basrur).
Competitive Strengths
We believe Energy benefits from the following competitive strengths:
Comprehensive Product Offering. We offer a full suite of gasket and bolt products to the petroleum refining, petrochemical, oil field and industrial markets. Over the years, Energy has expanded its product offering to include custom-manufactured, specialty bolts of various sizes and made-to-order configurations and other CNC-machined components in Europe, as well as isolation kits, capabilities to produce high quality sheet jointing used in the manufacture of soft gaskets, and PTFE for its chemical customers. While many of the competitors manufacture and distribute either gaskets or bolts, supplying both provides us with an advantage to customers who prefer to deal with fewer suppliers.
Established and Extensive Distribution Channels. Our business utilizes an established hub-and-spoke distribution system whereby our primary manufacturing facilities supply products to our own branches and highly knowledgeable network of worldwide distributors and licensees, which are located in close proximity to our primary customers. Our primary manufacturing facilities are in Houston, Texas; Faridabad and Bangalore, India; Wolverhampton, United Kingdom; and the newly opened facility in Reynosa, Mexico; with company-owned branches strategically located around the world to serve our global customer base. Enabled by its branch network and close proximity to its customers, Energy's ability to provide quick turn-around and customized solutions for its customers is also a competitive strength. This established network of branches, enhanced by third-party distributors, allows us to add new customers in various locations and to increase distribution to existing customers. Our experienced in-house sales support teams work with our global network of distributors and licensees to create a strong market presence in all aspects of the oil, gas and petrochemical refining industries.
Leading Market Positions and Strong Brand Name. We believe we are one of the largest gasket and bolt suppliers to the global energy market. We believe that Lamons is known as a quality brand and offers premium service to the industry. We also believe that our facilities have the latest proprietary technology and equipment to be able to produce urgent requirement gaskets and bolts locally to meet its customers' demands.

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Strategies
The Energy segment has been faced with several external challenges related to the reduction of its upstream business as a result of the decline in oil prices, as well as downstream business postponement of refinery shutdowns and customer capital expenditures. We believe Energy has opportunities to improve its margins, while maintaining its market leadership, including:
Reconfiguring its Footprint to Drive Lower-Costs. Over the past year, we have been in the process, and continue to work through, reducing the cost structures through ongoing manufacturing, overhead and administrative productivity initiatives, global sourcing and selectively shifting manufacturing capabilities to countries with lower costs. We have performed a comprehensive review of our physical footprint and have closed and or consolidated locations to reduce our fixed cost structure. We have also moved a portion of our gasket and fastener operations from our Houston facility to a new facility in Reynosa, Mexico. The move to Mexico is expected to improve our global operating model and enhance the competitiveness of the business, while increasing customer service, as we move our higher-volume, longer lead-time products to this facility. In addition to our core domestic manufacturing facility in Houston, we have advanced manufacturing facilities and sourcing capabilities in China and India. Multi-country manufacturing capabilities provide flexibility to move specific manufacturing requirements amongst facilities to leverage lower cost opportunities and better serve our customers. We believe expanding our new Matrix® product and capacity in India will further increase profitability, as we manufacture our own sheet product compared to reliance for comparable product from our competitors.

Improve Operational Efficiency at all Locations. We believe that there are additional opportunities to improve our operational efficiency at all of our locations by continuing the implementation of the lean-based TriMas Operating System. Through improved planning, inventory management, pricing and processes, Energy should improve its margins, while reducing its product lead-times and increase customer fill-rates.

Expand Engineered and Specialty Product Offering. Over the past couple of years, we have launched several new highly-engineered and specialty products and have broadened our specialty bolt offering. Examples of new products include: WRI-LP gaskets, a hydrofluoric acid gasket solution; inhibitor gaskets designed to prevent corrosion in offshore platform flanges; IsoTekTM Gaskets, an engineered sealing solution for flanged pipe connections; and intelligent bolts which provide more reliable load indication. Most recently, Energy was the first in Europe approved to manufacture the API 20E fasteners used in subsea critical applications, and the first in the world approved to manufacture to API 6A, 17D, 20E and Q1 quality systems. In addition to providing revenue growth opportunities, specialty products tend to have higher margins than their standard counterparts.
Marketing, Customers and Distribution
Energy relies upon a combination of direct sales forces and established networks of independent distributors and licensees with familiarity of the end users. Gaskets and bolts are supplied directly to major customers through our sales and service facilities in major regional markets, or through a large network of independent distributors/licensees. The sales and distribution network's close proximity to the customer makes it possible for Energy to respond to customer-specific engineered applications and provide a high degree of customer service. Our overseas sales are made either through newer sales and service facilities in Belgium, India, Singapore, Spain, Thailand and the United Kingdom, licensees or through our many distributors. Significant Energy customers include Dow Chemical, ExxonMobil, Bechtel, DNOW, LyondellBasell, MRC and Valero.
Competition
Energy's primary competitors include ERIKS, Flexitallic Group, Garlock (EnPro), Klinger, Lone Star and Teadit. Most of Energy's competitors supply either gaskets or bolts. We believe that providing both gaskets and bolts, as well as our hub-and-spoke distribution model, gives us a competitive advantage with many customers. We believe that our broader product portfolio and strong brand name enables us to maintain our market leadership position as one of the largest gasket and bolt suppliers to the energy market.

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Engineered Components
We believe Engineered Components is a leading designer, manufacturer and distributor of high-pressure and acetylene cylinders for the transportation, storage and dispensing of compressed gases, as well as a variety of natural gas powered engines and parts, gas compressors, gas production equipment, meter runs, engine electronics and chemical pumps all engineered for use in oil and natural gas production. In general, these products are highly-engineered, customer-specific items that are sold into focused markets with few competitors.
Engineered Components' brands include Arrow® Engine and Norris Cylinder™ which we believe are well established and recognized in their respective markets.
Arrow Engine. We believe that Arrow Engine is a market leading provider of natural gas powered engines and parts. Arrow Engine also provides gas compressors, gas production, meter runs, engine electronics and chemical pumps, all engineered for use in oil and natural gas production and other industrial and commercial markets. Arrow Engine distributes its products through a worldwide distribution network with a particularly strong presence in the United States and Canada. Arrow Engine owns the original equipment manufacturing rights to distribute engines and replacement parts for four main OEM engine lines and offers a wide variety of spare parts for an additional six engine lines, which are widely used in the energy industry and other industrial applications. Arrow Engine has developed a new line of products in the area of industrial engine spare parts for various industrial engines not manufactured by Arrow Engine, including selected engines manufactured and sold under the Caterpillar®, Waukesha®, Ajax® and Gemini® brands. Arrow Engine has expanded its product line to include compressors and compressor packaging, gas production equipment, meter runs and other electronic products.
Norris Cylinder. Norris Cylinder is a leading provider of a complete line of large and intermediate/small size, high-pressure and acetylene steel cylinders for the transportation, storage and dispensing of compressed gases. Norris Cylinder's large high-pressure seamless compressed gas cylinders are used principally for shipping, storing and dispensing oxygen, nitrogen, argon, helium and other gases for industrial and health care markets. In addition, Norris Cylinder offers a complete line of acetylene steel cylinders used to contain and dispense acetylene gas for the welding and cutting industries. Norris Cylinder markets cylinders primarily to major domestic and international industrial gas producers and distributors, welding equipment distributors and buying groups, as well as equipment manufacturers.
Strategies
We believe the businesses within the Engineered Components segment have opportunities to grow, based on the following:
Strong Product Innovation. The Engineered Components segment has a history of successfully creating and introducing new products and there are currently several significant product initiatives underway. Arrow Engine continues to introduce new products in the area of industrial engine spare parts for various industrial engines not manufactured by Arrow Engine, including selected engines manufactured and sold under the Caterpillar®, Waukesha®, Ajax® and Gemini® brands. Arrow Engine has also launched an offering of customizable compressors and gas production and meter run equipment, which are used by existing end customers in the oil and natural gas extraction markets, as well as development of a natural gas compressor used for compressed natural gas (CNG) filling stations. Norris Cylinder developed a process for manufacturing ISO cylinders capable of holding higher pressure gases and has been awarded a United Nations certification for its ISO cylinders, making Norris Cylinder the first manufacturer approved to distribute ISO cylinders domestically. Norris Cylinder has also created new designs for seamless acetylene applications in marine and international markets.
Entry into New Markets and Development of New Customers. Engineered Components has opportunities to grow its businesses by offering its products to new customers, markets and geographies. In November 2013, Norris Cylinder acquired the assets of Worthington Cylinder's Tilbury, Ontario and Jefferson, Ohio facilities, making Norris Cylinder the only manufacturer of steel high-pressure and acetylene cylinders in North America. Norris Cylinder is selling its cylinders internationally into Europe, South Africa, and South and Central America, as well as pursuing new end markets such as cylinders for use at cell towers (hydrogen fuel cells), in mine safety (breathing air and rescue chambers) and in fire suppression. Arrow Engine continues to expand its product portfolio to serve new customers and new applications for oil and natural gas production in all areas of the industry, including shale drilling. Arrow Engine is also expanding international sales, particularly in Mexico, Indonesia and Venezuela.

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Reconfigure Capacity to Reflect Expected Demand Levels. Norris Cylinder is in the process of deploying previously acquired assets in both its Huntsville, Alabama and Longview, Texas facilities to support its future expected growth, increasing its capacity for both large and small high pressure cylinders. Norris Cylinder is in process of installing equipment obtained during previous acquisitions in an effort to produce higher volume cylinders more efficiently, while allowing higher technology products to be produced on the current forge asset. At the same time, Arrow Engine, has been unfavorably impacted by reductions in drilling activity driven by the decline in oil prices. In response, Arrow Engine has been focused on right-sizing its business to reflect the current demand levels by lowering costs and maximizing resources until the end market recovers. Where possible, Arrow Engine is variablizing the cost structure to respond quickly to end market changes and enhance flexibility, driving low cost sourcing efforts, and focusing on additional productivity and Lean initiatives.
Marketing, Customers and Distribution
Engineered Components' customers operate in the oil, gas, industrial and commercial industries. Given the focused nature of many of our products, the Engineered Components segment relies upon a combination of direct sales forces and established networks of independent distributors with familiarity of the end-users. In many of the markets this segment serves, its companies' brand names are virtually synonymous with product applications. The narrow end-user base of many of these products makes it possible for this segment to respond to customer-specific engineered applications and provide a high degree of customer service. Engineered Components' OEM and aftermarket customers include Airgas, Air Liquide, Chesapeake, Kidde-Fenwal, Midcon Compression, Praxair and Total Operations and Production Services (TOPS). In years with higher levels of drilling activity, DNOW and Weatherford would also be larger customers of engines, parts and compressor products.
Competition
Arrow Engine tends to compete against natural gas powered, lower horsepower, multi-cylinder engines from manufacturers such as Caterpillar, Chevy, Cummins and Ford industrial engines and electric motors. Norris Cylinder competes against Worthington, Beijing Tianhai Industry Co., Faber and Vitkovice Cylinders. In May 2012, the U.S. International Trade Commission made a unanimous final determination that Norris Cylinder had been materially injured by imports of DOT high pressure steel cylinders that were being subsidized by the Government of China, as well as being dumped in the U.S. market by producers in China, and as a result, imposed antidumping and countervailing duties on the subject imports to create a fairer competitive environment in the United States. Engineered Components' companies supply highly engineered, non-commodity, customer-specific products with large shares of small markets supplied by a limited number of competitors.
Acquisition Strategy
We believe that our businesses have significant opportunities to grow through disciplined, strategic acquisitions that enhance the strengths of our core businesses. We typically seek "bolt-on" acquisitions, in which we acquire another industry participant or adjacent product lines that expand our existing product offerings, gain access to new customers, end markets and distribution channels, expand our geographic footprint and/or capitalize on scale and cost efficiencies. Strategically, our primary focus is on acquisition targets in the Packaging and Aerospace segments, as these segments have higher growth and margin profiles. This is evidenced by our 2014 acquisitions of Allfast Fastening Systems in Aerospace and Lion Holdings and the remaining 30% interest in Arminak & Associates in Packaging, and our 2015 acquisition of certain assets and personnel related to Parker Hannifin’s Tolleson, Arizona facility, which manufactures complex machined parts for the aerospace industry. We will also consider opportunistic bolt-on acquisitions in our other segments, although such transactions are likely to be more modest in terms of target size and transaction value.
Materials and Supply Arrangements
Our largest raw material purchases are for steel, aluminum, titanium, cast iron, polyethylene and other resins. Raw materials and other supplies used in our operations are normally available from a variety of competing suppliers. In addition to raw materials, we purchase a variety of components and finished products from low-cost sources in China, India, Mexico, South Korea, Taiwan, Thailand and Vietnam.
Steel is purchased primarily from steel mills and service centers with pricing contracts principally in the three-to-six month time frame. Changing global dynamics for steel production and supply will continue to present a challenge to our business. Polyethylene is generally a commodity resin with multiple suppliers capable of providing product globally. While both steel and polyethylene are readily available from a variety of competing suppliers, our business has experienced, and we believe will continue to experience, volatility in the costs of these raw materials.

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Employees and Labor Relations
As of December 31, 2015, we employed approximately 4,200 people, of which approximately 49% were located outside the United States and 19% were unionized. We currently have collective bargaining agreements covering seven facilities worldwide, two of which are in the United States. Employee relations have generally been satisfactory.
On January 5, 2015, we finalized the decision to move a portion of the gasket and fastener operations from our Energy facility in Houston, Texas to a new facility in Reynosa, Mexico. This announcement impacts approximately 10% of facility's current unionized work force. The decision to move a portion of the manufacturing is the result of our effort to improve our Energy global operating model and enhance the competitiveness of the business. This transition is expected to be completed over the next 12 to 18 months.
In August 2015, we concluded, without a work stoppage or strike, a three year extension of our labor agreement with the United Automobile, Aerospace and Agricultural Implement Workers of America at our aerospace facility in California.
Seasonality and Backlog
None of our reportable segments experience significant seasonal fluctuations. However, our fourth quarter tends to be our lowest revenue quarter as a result of holiday slowdowns at certain of our significant customers.
We do not consider sales order backlog to be a material factor in our businesses. Our Aerospace customers often provide a forward view of build rates and needs for products, but firm orders do not extend for more than a few months, and often times are not guaranteed and could change.
Environmental Matters
We are subject to increasingly stringent environmental laws and regulations, including those relating to air emissions, wastewater discharges and chemical and hazardous waste management and disposal. Some of these environmental laws hold owners or operators of land or businesses liable for their own and for previous owners' or operators' releases of hazardous or toxic substances or wastes. Other environmental laws and regulations require the obtainment and compliance with environmental permits. To date, costs of complying with environmental, health and safety requirements have not been material. However, the nature of our operations and our long history of industrial activities at certain of our current or former facilities, as well as those acquired, could potentially result in material environmental liabilities.
Current laws and regulations have not had a material impact on our business, capital expenditures or financial position, while we must comply with existing and pending climate change legislation, regulation and international treaties or accords. Future events, including those relating to climate change or greenhouse gas regulation could require us to incur expenses related to the modification or curtailment of operations, installation of pollution control equipment or investigation and cleanup of contaminated sites.
Intangible Assets
Our identified intangible assets, consisting of customer relationships, trademarks and trade names and technology, are recorded at approximately $273.9 million at December 31, 2015, net of accumulated amortization. The valuation of each of the identified intangibles was performed using broadly accepted valuation methodologies and techniques.
Customer Relationships. We have developed and maintained stable, long-term selling relationships with customer groups for specific branded products and/or focused market product offerings within each of our businesses. Useful lives assigned to customer relationship intangibles range from five to 25 years and have been estimated using historic customer retention and turnover data. Other factors considered in evaluating estimated useful lives include the diverse nature of focused markets and products of which we have significant share, how customers in these markets make purchases and these customers' position in the supply chain. We also monitor and evaluate the impact of other evolving risks including the threat of lower cost competitors and evolving technology.
Trademarks and Trade Names. Each of our operating groups designs and manufactures products for focused markets under various trade names and trademarks (see discussion above by reportable segment). Our trademark/trade name intangibles are well-established and considered long-lived assets that require maintenance through advertising and promotion expenditures. Because it is our practice and intent to maintain and to continue to support, develop and market these trademarks/trade names for the foreseeable future, we consider our rights in these trademarks/trade names to have an indefinite life, except as otherwise dictated by applicable law.

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Technology. We hold a number of United States and foreign patents, patent applications, and proprietary product and process-oriented technologies within all four of our reportable segments. We have, and will continue to dedicate, technical resources toward the further development of our products and processes in order to maintain our competitive position in the industrial, commercial and consumer end markets that we serve. Estimated useful lives for our technology intangibles range from one to 30 years and are determined in part by any legal, regulatory or contractual provisions that limit useful life. For example, patent rights have a maximum limit of 20 years in the United States. Other factors considered include the expected use of the technology by the operating groups, the expected useful life of the product and/or product programs to which the technology relates, and the rate of technology adoption by the industry.
International Operations
Approximately 13.7% of our net sales for the year ended December 31, 2015 were derived from sales by our subsidiaries located outside of the United States, and we may significantly expand our international operations through organic growth actions and acquisitions. In addition, approximately 15.0% of our operating net assets as of December 31, 2015 were located outside of the United States. We operate manufacturing facilities in Belgium, Canada, China, Germany, India, Mexico, Singapore, Spain, Thailand, the United Kingdom and Vietnam. In addition to the net sales derived from sales by our subsidiaries located outside of the United States, we also generated approximately $82.7 million of export sales from the United States. For information pertaining to the net sales and operating net assets attributed to our international operations, refer to Note 19, "Segment Information," included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K.
Website Access to Company Reports
We use our corporate website, www.trimascorp.com/Investor Relations, as a channel for routine distribution of important information, including news releases, analyst presentations and financial information. We post filings as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission ("SEC"), including our annual, quarterly, and current reports on Forms 10-K, 10-Q, and 8-K, our proxy statements and any amendments to those reports or statements. All such postings and filings are available on our Investor Relations section of the website free of charge. The SEC also maintains a website, www.sec.gov, that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The content on any website referred to in this Annual Report on Form 10-K is not incorporated by reference into this Annual Report on Form 10-K unless expressly noted.


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Item 1A.    Risk Factors
You should carefully consider each of the risks described below, together with information included elsewhere in this Annual Report on Form 10-K and other documents we file with the SEC. The risks and uncertainties described below are those that we have identified as material, but are not the only risks and uncertainties facing us. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial may also impact our business operations, financial results and liquidity.
Risks Relating to our Business
Our businesses depend upon general economic conditions and we serve some customers in highly cyclical industries; as such, we may be subject to the loss of sales and margins due to an economic downturn or recession.
Our financial performance depends, in large part, on conditions in the markets that we serve in both the U.S. and global economies. Some of the industries that we serve are highly cyclical, such as the industrial equipment, energy and aerospace industries. When combined with ongoing customer consolidation activity and periodic manufacturing and inventory initiatives, an uncertain macro-economic and political climate could lead to reduced demand from our customers and increased price competition for our products, increased risk of excess and obsolete inventories and uncollectible receivables, and higher overhead costs as a percentage of revenue all of which would impact our operating margins.
Many of the markets we serve are highly competitive, which could limit the volume of products that we sell and reduce our operating margins.
Many of our products are sold in competitive markets. We believe that the principal points of competition in our markets are product quality and price, design and engineering capabilities, product development, conformity to customer specifications, reliability and timeliness of delivery, customer service and effectiveness of distribution. Maintaining and improving our competitive position will require continued investment by us in manufacturing, engineering, quality standards, marketing, customer service and support of our distribution networks. We may have insufficient resources in the future to continue to make such investments and, even if we make such investments, we may not be able to maintain or improve our competitive position. We also face the risk of lower-cost foreign manufacturers located in China, Southeast Asia, India and other regions competing in the markets for our products and we may be driven as a consequence of this competition to increase our investment overseas. Making overseas investments can be highly complicated and we may not always realize the advantages we anticipate from any such investments. Competitive pressure may limit the volume of products that we sell and reduce our operating margins.
Trends in oil and natural gas prices may affect the demand for, and profitability of, our energy products and services, which could have a material adverse effect on our business, consolidated results of operations, and consolidated financial condition.
The oil and gas industry historically has experienced periodic downturns. Demand for our energy-related products, such as engines, gaskets and fasteners, is sensitive to the level of drilling and production activity of, and the corresponding capital spending by, oil and natural gas companies. The level of drilling and production activity is directly affected by trends in oil and natural gas prices, which have been recently volatile and may continue to be volatile.
Prices for oil and natural gas are subject to large fluctuations in response to changes in the supply of and demand for oil and natural gas, market uncertainty, geopolitical developments and a variety of other factors that are beyond our control. Even the perception of longer-term lower oil and natural gas prices can reduce or defer major capital expenditures by our customers in the oil and gas industry. Given the long-term nature of many large-scale development projects, a significant downturn in the oil and gas industry could result in the reduction in demand for our energy-related products, and could have a material adverse effect on our financial condition, results of operations and cash flows.
Our growth strategy includes the impact of acquisitions. If we are unable to identify attractive acquisition candidates, successfully integrate acquired operations or realize the intended benefits of our acquisitions, we may be adversely affected.
One of our principal growth strategies is to pursue strategic acquisition opportunities. We have completed 16 acquisitions over the past five years (excluding ones completed in our former Cequent businesses), primarily bolt-on businesses to our existing platforms. Each of these acquisitions required integration expense and actions that negatively impacted our results of operations and that could not have been fully anticipated beforehand. In addition, attractive acquisition candidates may not be identified and acquired in the future, financing for acquisitions may be unavailable on satisfactory terms and we may be unable to accomplish our strategic objectives in effecting a particular acquisition. We may encounter various risks in acquiring other companies, including the possible inability to integrate an acquired business into our operations, diversion of management's attention and unanticipated problems or liabilities, some or all of which could materially and adversely affect our business strategy and financial condition and results of operations.

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We have significant goodwill and intangible assets, and future impairment of our goodwill and intangible assets could have a material negative impact on our financial results.
At December 31, 2015, our goodwill and intangible assets were approximately $652.8 million and represented approximately 55.8% of our total assets. Due to a significant decline in profitability levels in our Energy and engine products reporting units, we recorded pre-tax goodwill and indefinite-lived intangible asset impairment charges in the fourth quarter of 2015 of approximately $75.7 million. If we experience declines in sales and operating profit or do not meet our current and forecasted operating budget, we may be subject to additional goodwill and/or other intangible asset impairments in the future. Historically, included within our net losses were pre-tax, non-cash goodwill and indefinite-lived impairment charges of approximately $62.5 million (excluding discontinued operations primarily relating to our former Cequent businesses) which were recorded during the year ended December 31, 2008. While the fair value of our remaining goodwill exceeds its carrying value, significantly worse financial performance of our businesses, significantly different assumptions regarding future performance of our businesses or significant declines in our stock price could result in future impairment losses. Because of the significance of our goodwill and intangible assets, and based on the magnitude of historical impairment charges, any future impairment of these assets could have a material adverse effect on our financial results.
We may be unable to successfully implement our business strategies. Our ability to realize our business strategies may be limited.
Our businesses operate in relatively mature industries and it may be difficult to successfully pursue our growth strategies and realize material benefits therefrom. Even if we are successful, other risks attendant to our businesses and the economy generally may substantially or entirely eliminate the benefits. While we have successfully utilized some of these strategies in the past, our growth has principally come through acquisitions.
Our ability to deliver products that satisfy customer requirements is dependent on the performance of our subcontractors and suppliers, as well as on the availability of raw materials and other components.

We rely on other companies, including subcontractors and suppliers, to provide and produce raw materials, integrated components and sub-assemblies and production commodities included in, or used in the production of, our products. If one or more of our suppliers or subcontractors experiences delivery delays or other performance problems, we may be unable to meet commitments to our customers or incur additional costs. In some instances, we depend upon a single source of supply. Any service disruption from one of these suppliers, either due to circumstances beyond the supplier’s control, such as geo-political developments, or as a result of performance problems or financial difficulties, could have a material adverse effect on our ability to meet commitments to our customers or increase our operating costs.
Increases in our raw material or energy costs or the loss of critical suppliers could adversely affect our profitability and other financial results.
We are sensitive to price movements in our raw materials supply base. Our largest material purchases are for steel, copper, aluminum, titanium, polyethylene and other resins. Prices for these products fluctuate with market conditions, and have generally increased over time. We may be unable to completely offset the impact with price increases on a timely basis due to outstanding commitments to our customers, competitive considerations or our customers’ resistance to accepting such price increases and our financial performance may be adversely impacted by further price increases. A failure by our suppliers to continue to supply us with certain raw materials or component parts on commercially reasonable terms, or at all, could have a material adverse effect on us. To the extent there are energy supply disruptions or material fluctuations in energy costs, our margins could be materially adversely impacted.
Our products are typically highly engineered or customer-driven and we are subject to risks associated with changing technology and manufacturing techniques that could place us at a competitive disadvantage.
We believe that our customers rigorously evaluate their suppliers on the basis of product quality, price competitiveness, technical expertise and development capability, new product innovation, reliability and timeliness of delivery, product design capability, manufacturing expertise, operational flexibility, customer service and overall management. Our success depends on our ability to continue to meet our customers’ changing expectations with respect to these criteria. We anticipate that we will remain committed to product research and development, advanced manufacturing techniques and service to remain competitive, which entails significant costs. We may be unable to address technological advances, implement new and more cost-effective manufacturing techniques, or introduce new or improved products, whether in existing or new markets, so as to maintain our businesses’ competitive positions or to grow our businesses as desired.

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We depend on the services of key individuals and relationships, the loss of which could materially harm us.
Our success will depend, in part, on the efforts of our senior management, including our chief executive officer. Our future success will also depend on, among other factors, our ability to attract and retain other qualified personnel. The loss of the services of any of our key employees or the failure to attract or retain employees could have a material adverse effect on us.
Our reputation, ability to do business, and results of operations may be impaired by improper conduct by any of our employees, agents, or business partners.
While we strive to maintain high standards, we cannot provide assurance that our internal controls and compliance systems will always protect us from acts committed by our employees, agents, or business partners that would violate U.S. and/or non-U.S. laws or fail to protect our confidential information, including the laws governing payments to government officials, bribery, fraud, anti-kickback and false claims rules, competition, export and import compliance, money laundering, and data privacy laws, as well as the improper use of proprietary information or social media. Any such allegations, violations of law or improper actions could subject us to civil or criminal investigations in the U.S. and in other jurisdictions, could lead to substantial civil or criminal, monetary and non-monetary penalties, and related shareholder lawsuits, could lead to increased costs of compliance, could damage our reputation and could have a material effect on our financial statements.
We have debt principal and interest payment requirements that may restrict our future operations and impair our ability to meet our obligations.
As of December 31, 2015, we have approximately $419.6 million of outstanding debt. After consideration of our interest rate swap agreement (see Note 13, "Derivative Instruments," included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K for additional information), approximately 66% of our debt bears interest at variable rates. We may experience increases in our interest expense as a result of general increases in interest rate levels. Our debt service payment obligations in 2015 were approximately $30.2 million, and based on amounts outstanding as of December 31, 2015, a 1% increase in the per annum interest rate for our variable rate debt would increase our interest expense by approximately $2.8 million annually.
Our degree of leverage and level of interest expense may have important consequences, including:
our leverage may place us at a competitive disadvantage as compared with our less leveraged competitors and make us more vulnerable in the event of a downturn in general economic conditions or in any of our businesses;
our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate may be limited;
a substantial portion of our cash flow from operations will be dedicated to the payment of interest and principal on our indebtedness, thereby reducing the funds available to us for operations, capital expenditures, acquisitions, future business opportunities or obligations to pay rent in respect of our operating leases; and
our operations are restricted by our debt instruments, which contain certain financial and operating covenants, and those restrictions may limit, among other things, our ability to borrow money in the future for working capital, capital expenditures, acquisitions, rent expense or other purposes.
Our ability to service our debt and other obligations will depend on our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, many of which are beyond our control. Our business may not generate sufficient cash flow, and future financings may not be available to provide sufficient net proceeds, to meet these obligations or to successfully execute our business strategies. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."
Restrictions in our debt instruments and accounts receivable facility limit our ability to take certain actions and breaches thereof could impair our liquidity.
Our credit agreement contains covenants that restrict our ability to:
pay dividends or redeem or repurchase capital stock;
incur additional indebtedness and grant liens;
make acquisitions and joint venture investments;
sell assets; and
make capital expenditures.

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Our credit agreement also requires us to comply with financial covenants relating to, among other things, interest coverage and leverage. Our accounts receivable facility contains covenants similar to those in our credit agreement and includes additional requirements regarding our receivables. We may not be able to satisfy these covenants in the future or be able to pursue our strategies within the constraints of these covenants. Substantially all of the assets of our domestic subsidiaries (other than our special purpose receivables subsidiary) are pledged as collateral pursuant to the terms of our credit agreement. Borrowings under the foreign currency sub limit are secured by a pledge of the assets of the foreign subsidiary borrowers that are party to our credit agreement. A breach of a covenant contained in our debt instruments could result in an event of default under one or more of our debt instruments, our accounts receivable facility and our lease financing arrangements. Such breaches would permit the lenders under our credit agreement to declare all amounts borrowed thereunder to be due and payable, and the commitments of such lenders to make further extensions of credit could be terminated. In addition, such breach may cause a termination of our accounts receivable facility. Each of these circumstances could materially and adversely impair our liquidity.
We may face liability associated with the use of products for which patent ownership or other intellectual property rights are claimed.
We may be subject to claims or inquiries regarding alleged unauthorized use of a third party's intellectual property. An adverse outcome in any intellectual property litigation could subject us to significant liabilities to third parties, require us to license technology or other intellectual property rights from others, require us to comply with injunctions to cease marketing or using certain products or brands, or require us to redesign, re-engineer, or re-brand certain products or packaging, any of which could affect our business, financial condition and operating results. If we are required to seek licenses under patents or other intellectual property rights of others, we may not be able to acquire these licenses on acceptable terms, if at all. In addition, the cost of responding to an intellectual property infringement claim, in terms of legal fees and expenses and the diversion of management resources, whether or not the claim is valid, could have a material adverse effect on our business, results of operations and financial condition.
We may be unable to adequately protect our intellectual property.
While we believe that our patents, trademarks and other intellectual property have significant value, it is uncertain that this intellectual property or any intellectual property acquired or developed by us in the future, will provide a meaningful competitive advantage. Our patents or pending applications may be challenged, invalidated or circumvented by competitors or rights granted thereunder may not provide meaningful proprietary protection. Moreover, competitors may infringe on our patents or successfully avoid them through design innovation. Policing unauthorized use of our intellectual property is difficult and expensive, and we may not be able to, or have the resources to, prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the U.S. The cost of protecting our intellectual property may be significant and have a material adverse effect on our financial condition and future results of operations.
We may incur material losses and costs as a result of product liability, recall and warranty claims that may be brought against us.
We are subject to a variety of litigation incidental to our businesses, including claims for damages arising out of use of our products, claims relating to intellectual property matters and claims involving employment matters and commercial disputes.
We currently carry insurance and maintain reserves for potential product liability claims. However, our insurance coverage may be inadequate if such claims do arise and any liability not covered by insurance could have a material adverse effect on our business. Although we have been able to obtain insurance in amounts we believe to be appropriate to cover such liability to date, our insurance premiums may increase in the future as a consequence of conditions in the insurance business generally or our situation in particular. Any such increase could result in lower net income or cause the need to reduce our insurance coverage. In addition, a future claim may be brought against us that could have a material adverse effect on us. Any product liability claim may also include the imposition of punitive damages, the award of which, pursuant to certain state laws, may not be covered by insurance. Our product liability insurance policies have limits that, if exceeded, may result in material costs that could have an adverse effect on our future profitability. In addition, warranty claims are generally not covered by our product liability insurance. Further, any product liability or warranty issues may adversely affect our reputation as a manufacturer of high-quality, safe products, divert management's attention, and could have a material adverse effect on our business.

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In addition, the Lamons business within our Energy reportable segment is a party to lawsuits related to asbestos contained in gaskets formerly manufactured by it or its predecessors. Some of this litigation includes claims for punitive and consequential as well as compensatory damages. We are not able to predict the outcome of these matters given that, among other things, claims may be initially made in jurisdictions without specifying the amount sought or by simply stating the minimum or maximum permissible monetary relief, and may be amended to alter the amount sought. Of the 6,242 claims pending at December 31, 2015, 120 set forth specific amounts of damages (other than those stating the statutory minimum or maximum). See Note 15, "Commitments and Contingencies," included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K for additional information.
Total settlement costs (exclusive of defense costs) for all such cases, some of which were filed over 20 years ago, have been approximately $7.8 million. All relief sought in the asbestos cases is monetary in nature. To date, approximately 40% of our costs related to settlement and defense of asbestos litigation have been covered by our primary insurance. Effective February 14, 2006, we entered into a coverage-in-place agreement with our first level excess carriers regarding the coverage to be provided to us for asbestos-related claims when the primary insurance is exhausted. The coverage-in-place agreement makes asbestos defense costs and indemnity insurance coverage available to us that might otherwise be disputed by the carriers and provides a methodology for the administration of such expenses. Nonetheless, we believe it is likely that there will be a period within the next 12 to 18 months, prior to the commencement of coverage under this agreement and following exhaustion of our primary insurance coverage, during which we likely will be solely responsible for defense costs and indemnity payments, the duration of which would be subject to the scope of damage awards and settlements paid. We also may incur significant litigation costs in defending these matters in the future. We may be required to incur additional defense costs and pay damage awards or settlements or become subject to equitable remedies that could adversely affect our businesses.
Our business may be materially and adversely affected by compliance obligations and liabilities under environmental laws and regulations.
We are subject to increasingly stringent environmental laws and regulations, including those relating to air emissions, wastewater discharges and chemical and hazardous waste management and disposal. Some of these environmental laws hold owners or operators of land or businesses liable for their own and for previous owners' or operators' releases of hazardous or toxic substances or wastes. Other environmental laws and regulations require the obtainment and compliance with environmental permits. To date, costs of complying with environmental, health and safety requirements have not been material. However, the nature of our operations and our long history of industrial activities at certain of our current or former facilities, as well as those acquired, could potentially result in material environmental liabilities.
While we must comply with existing and pending climate change legislation, regulation and international treaties or accords, current laws and regulations have not had a material impact on our business, capital expenditures or financial position. Future events, including those relating to climate change or greenhouse gas regulation, could require us to incur expenses related to the modification or curtailment of operations, installation of pollution control equipment or investigation and cleanup of contaminated sites.
Our borrowing costs may be impacted by our credit ratings developed by various rating agencies.
Two major ratings agencies, Standard & Poor's and Moody's, evaluate our credit profile on an ongoing basis and have each assigned ratings for our long-term debt. If our credit ratings were to decline, our ability to access certain financial markets may become limited, 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.
We have significant operating lease obligations and our failure to meet those obligations could adversely affect our financial condition.
We lease many of our manufacturing facilities and certain capital equipment. Our rental expense in 2015 under these operating leases was approximately $17.2 million. A failure to pay our rental obligations would constitute a default allowing the applicable landlord to pursue any remedy available to it under applicable law, which would include taking possession of our property and, in the case of real property, evicting us. These leases are categorized as operating leases and are not considered indebtedness for purposes of our debt instruments.

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We may be subject to further unionization and work stoppages at our facilities or our customers may be subject to work stoppages, which could seriously impact the profitability of our business.
As of December 31, 2015, approximately 19% of our work force was unionized under several different unions and bargaining agreements. We currently have collective bargaining agreements covering seven facilities worldwide, two of which are in the United States.
On January 5, 2015, we finalized the decision to move a portion of the gasket and fastener operations from our Energy facility in Houston to a new facility in Mexico. This announcement impacts approximately 10% of facility's current unionized work force. The decision to move a portion of the manufacturing is the result of our effort to improve our Energy global operating model and enhance the competitiveness of the business. This transition is expected to be completed over the next 12 to 18 months.
In August 2015, we concluded, without a work stoppage or strike, a three year extension of our labor agreement with the United Automobile, Aerospace and Agricultural Implement Workers of America at our aerospace facility in California.
We are not aware of any present active union organizing drives at any of our other facilities. We cannot predict the impact of any further unionization of our workplace.
Many of our direct or indirect customers have unionized work forces. Strikes, work stoppages or slowdowns experienced by these customers or their suppliers could result in slowdowns or closures of assembly plants where our products are included. In addition, organizations responsible for shipping our customers' products may be impacted by occasional strikes or other activity. Any interruption in the delivery of our customers' products could reduce demand for our products and could have a material adverse effect on us.
Our healthcare costs for active employees and future retirees may exceed our projections and may negatively affect our financial results.
We maintain a range of healthcare benefits for our active employees and a limited number of retired employees pursuant to labor contracts and otherwise. Healthcare benefits for active employees and certain retirees are provided through comprehensive hospital, surgical and major medical benefit provisions or through health maintenance organizations, all of which are subject to various cost-sharing features. Some of these benefits are provided for in fixed amounts negotiated in labor contracts with the respective unions. If our costs under our benefit programs for active employees and retirees exceed our projections, our business and financial results could be materially adversely affected. Additionally, foreign competitors and many domestic competitors provide fewer benefits to their employees and retirees, and this difference in cost could adversely impact our competitive position.
A growing portion of our sales may be derived from international sources, which exposes us to certain risks which may adversely affect our financial results and impact our ability to service debt.
We have operations outside of the United States. Approximately 13.7% of our net sales for the year ended December 31, 2015 were derived from sales by our subsidiaries located outside of the U.S. In addition, we may significantly expand our international operations through internal growth and acquisitions.  International operations, particularly sales to emerging markets and manufacturing in non-U.S. countries, are subject to risks which are not present within U.S. markets, which include, but are not limited to, the following:
       
volatility of currency exchange between the U.S. dollar and currencies in international markets;

changes in local government regulations and policies including, but not limited to, foreign currency exchange controls or monetary policy, governmental embargoes, repatriation of earnings, expropriation of property, duty or tariff restrictions, investment limitations and tax policies;
       
political and economic instability and disruptions, including labor unrest, civil strife, acts of war, guerrilla activities, insurrection and terrorism;
       
legislation that regulates the use of chemicals;
       
disadvantages of competing against companies from countries that are not subject to U.S. laws and regulations, including the Foreign Corrupt Practices Act ("FCPA");
       
compliance with international trade laws and regulations, including export control and economic sanctions, such as anti-dumping duties;
       

20


difficulties in staffing and managing multi-national operations;
       
limitations on our ability to enforce legal rights and remedies;

tax inefficiencies in repatriating cash flow from non-U.S. subsidiaries that could affect our financial results and reduce our ability to service debt;        

reduced protection of intellectual property rights; and
       
other risks arising out of foreign sovereignty over the areas where our operations are conducted.
 
In addition, we could be adversely affected by violations of the FCPA and similar worldwide anti-bribery laws as well as export controls and economic sanction laws. The FCPA and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business.
Our acquisition and disposition agreements by which we have acquired or sold companies, include indemnification provisions that may not fully protect us and may result in unexpected liabilities.
Certain of the agreements related to the acquisition and disposition of businesses require indemnification against certain liabilities related to the operations of the company for the previous owner. We cannot be assured that any of these indemnification provisions will fully protect us, and as a result we may incur unexpected liabilities that adversely affect our profitability and financial position.
Increased IT security threats and more sophisticated and targeted computer crime could pose a risk to our systems, networks, and products.

Increased global IT security threats and more sophisticated and targeted computer crime pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data and communications. While we attempt to mitigate these risks by employing a number of measures, including employee training, comprehensive monitoring of our networks and systems, and maintenance of backup and protective systems, our networks and systems remain potentially vulnerable to advanced persistent threats. Depending on their nature and scope, such threats could potentially lead to the compromising of confidential information and communications, improper use of our systems and networks, manipulation and destruction of data, defective products, production downtimes and operational disruptions, which in turn could adversely affect our reputation, competitiveness and results of operations.

A major failure of our information systems could harm our business.

We depend on integrated information systems to conduct our business. We may experience operating problems with our information systems as a result of system failures, viruses, computer hackers or other causes. Any significant disruption or slowdown of our systems could cause customers to cancel orders or cause standard business processes to become inefficient or ineffective.

Our stock price may be subject to significant volatility due to our own results or market trends.
If our revenue, earnings or cash flows in any quarter fail to meet the investment community's expectations, there could be an immediate negative impact on our stock price. Our stock price could also be impacted by broader market trends and world events unrelated to our performance.

21


Risks Relating to the Spin-off of our former Cequent Businesses
We may be unable to achieve some or all of the benefits that we expected to achieve from the spin-off.
Although we believe that the separation of our former Cequent businesses from TriMas will provide financial, operational, managerial and other benefits to us and our shareholders, the spin-off may not provide such results on the scope or scale we anticipate, and we may not realize the assumed benefits of the spin-off. If we do not realize these assumed benefits, we could suffer a material adverse effect on our financial condition.
If the spin-off does not qualify as a tax-free transaction, the Company and its shareholders could be subject to substantial tax liabilities.
The spin-off was conditioned on our receipt of an opinion from our tax advisors, in form and substance satisfactory to us, that the distribution of shares of our Cequent businesses in the spin-off qualifies as tax-free to the Cequent businesses, the Company and our shareholders for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) and related provisions of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), the Company and other members of our consolidated tax reporting group. The opinion relied on, among other things, various assumptions and representations as to factual matters made by the Company and the Cequent businesses which, if inaccurate or incomplete in any material respect, could jeopardize the conclusions reached by our advisor in its opinion. The opinion is not binding on the Internal Revenue Service ("IRS"), or the courts, and there is no assurance that the IRS or the courts will not challenge the qualification of the spin-off as a transaction under Sections 355 and 368(a) of the Code or that any such challenge would not prevail.
If the spin-off were determined not to qualify under Section 355 of the Code, each U.S. holder of our common shares who received shares of the Cequent businesses in connection with the spin-off would generally be treated as having received a taxable distribution of property in an amount equal to the fair market value of the shares of the Cequent businesses that were received. That distribution would be taxable to each such shareholder as a dividend to the extent of our current and accumulated earnings and profits. For each such shareholder, any amount that exceeded our earnings and profits would be treated first as a non-taxable return of capital to the extent of such shareholder’s tax basis in his or her common shares of the Company with any remaining amount being taxed as a capital gain. We would be subject to tax as if we had sold common shares in a taxable sale for their fair market value and we would recognize taxable gain in an amount equal to the excess of the fair market value of such common shares over our tax basis in such common shares, which could have a material adverse impact on our financial condition, results of operations and cash flows.
Certain members of our board of directors and management may have actual or potential conflicts of interest because of their ownership of shares of the Cequent businesses or their relationships with the Cequent businesses following the spin-off.
Certain members of our board of directors and management are expected to own shares of the Cequent businesses and/or options to purchase shares of the Cequent businesses, which could create, or appear to create, potential conflicts of interest when our directors and executive officers are faced with decisions that could have different implications for the Company and the Cequent businesses. It is possible that some of our directors might also be directors of the Cequent businesses following the spin-off. This may create, or appear to create, potential conflicts of interest if these directors are faced with decisions that could have different implications for the Cequent businesses then the decisions have for the Company.

22


Item 1B.    Unresolved Staff Comments
Not applicable.
Item 2.    Properties
Properties
Our principal manufacturing facilities range in size from approximately 10,000 square feet to approximately 255,000 square feet. Except as set forth in the table below, all of our manufacturing facilities are owned. The leases for our manufacturing facilities have initial terms that expire from 2016 through 2026 and are all renewable, at our option, for various terms, provided that we are not in default under the lease agreements. Substantially all of our owned U.S. real properties are subject to liens in connection with our credit facility. Our executive offices are located in Bloomfield Hills, Michigan under a lease through June 2017. Our buildings have been generally well maintained, are in good operating condition and are adequate for current production requirements.
The following list sets forth the location of our principal owned and leased manufacturing and other facilities used in continuing operations and identifies the principal reportable segment utilizing such facilities as of December 31, 2015:
Packaging
 
Energy
 
Aerospace
 
Engineered 
Components
United States:
Arkansas:
Atkins
(1)
California:
   Azusa(1)    
   Rohnert Park(1)
Indiana:
   Auburn
   Hamilton
(1)
Ohio:
   New Albany(1)
International:
Germany:
   Neunkirchen
Mexico:
    Mexico City
United Kingdom:
    Leicester
China:
    Hangzhou
(1)
      Haining City(1)
India:
    Greater Noida
    Baddi
Vietnam:
    Thu Dau Mot(1)
 
United States:
Texas:
    Houston
(1)
International:
Belgium:
    Geel, Antwerp
(1)
Canada:
    Sarnia, Ontario
(1)
India:
Faridabad
(1)
    Bangalore(1)
Mexico:
    Reynosa(1)
Thailand:
    Muang Rayong(1)
United Kingdom:
    Wolverhampton(1)
 
United States:
California:
    Commerce(1)
       Stanton(1)
     City of Industry
Kansas:
    Ottawa(1)
Arkansas:
     Paris(1)
Arizona:
    Tolleson
 
United States:
Alabama:
    Huntsville
Oklahoma:
    Tulsa
Texas:
    Longview
 
 
 
__________________________
(1) 
Represents a leased facility. All such leases are operating leases.
Item 3.    Legal Proceedings
See Note 15, "Commitments and Contingencies" included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K.
Item 4.    Mine Safety Disclosures
Not applicable.

23


Supplementary Item. Executive Officers of the Company
As of December 31, 2015, the following were executive officers of the Company:

David M. Wathen. Mr. Wathen, age 63, has served as president and chief executive officer of the Company since 2009. He served as president and chief executive officer of Balfour Beatty, Inc. (U.S. operations), an engineering, construction and building management services company, from 2003 until 2007. Prior to his Balfour Beatty appointment, he was a principal member of Questor, a private equity firm, from 2000 to 2002. Mr. Wathen held management positions from 1977 to 2000 with General Electric, a diversified technology and financial services company, Emerson Electric, a global manufacturing and technology company, Allied Signal, an automotive parts manufacturer, and Eaton Corporation, a diversified power management company.

Robert J. Zalupski. Mr. Zalupski, age 56, was appointed chief financial officer of the Company in January 2015. Prior to his appointment as chief financial officer, he served as vice president, finance and treasurer for the Company since 2003 and assumed responsibility for corporate development in March 2010. He joined the Company as director of finance and treasury in 2002, prior to which he worked in the Detroit office of Arthur Andersen. From 1996 through 2001, Mr. Zalupski was a partner in the audit and business advisory services practice of Arthur Andersen providing audit, business consulting, and risk management services to both public and privately held companies in the manufacturing, defense and automotive industries. Prior to 1996, Mr. Zalupski held various positions of increasing responsibility within the audit practice of Arthur Andersen serving public and privately held clients in a variety of industries.

Joshua A. Sherbin. Mr. Sherbin, age 52, was appointed the Company’s general counsel and corporate secretary in 2005, and vice president and chief compliance officer in May 2008, prior to which he was employed as the North American corporate counsel and corporate secretary for Valeo, a diversified Tier 1 international automotive supplier headquartered in Europe. Prior to joining Valeo in 1997, Mr. Sherbin was senior counsel, assistant corporate secretary for Kelly Services, Inc., an employment staffing company, from 1995 to 1997. From 1988 until 1995, he was an associate with the law firm Butzel Long in its general business practice.

Colin E. Hindman. Mr. Hindman, age 41, has been with the Company since 2002 and was appointed vice president of human resources in February 2010. In August 2008, Mr. Hindman was appointed group HR director and from 2002 to 2007, Mr. Hindman served in a variety of management positions within the Company's human resource departments. Prior to joining the Company, Mr. Hindman held various human resource management positions from 1996 to 2002 with Dana Corporation, a manufacturer of automotive product solutions, and Wabash Technologies, a manufacturer of sensors, actuators and assemblies.


24


PART II
Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock, par value $0.01 per share, is listed for trading on the NASDAQ Global Select Market under the symbol "TRS." As of February 19, 2016, there were 302 holders of record of our common stock.
Our credit agreement restricts the payment of dividends on common stock, as such we did not pay dividends in 2015 or 2014. Our current policy is to retain earnings to repay debt and finance our operations and acquisitions. See the discussion under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" and Note 12 to the Company's financial statements captioned "Long-term Debt," included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K.
The high and low sales prices per share of our common stock by quarter, as reported on the NASDAQ through December 31, 2015, are shown below:
 
 
Price range of
common stock
 
 
High Price
 
Low Price
Year ended December 31, 2015
 
 
 
 
4th Quarter
 
$
22.02

 
$
15.29

3rd Quarter
 
$
25.35

 
$
15.32

2nd Quarter
 
$
32.54

 
$
27.74

1st Quarter
 
$
31.85

 
$
26.59

Year ended December 31, 2014
 
 
 
 
4th Quarter
 
$
33.23

 
$
23.68

3rd Quarter
 
$
39.16

 
$
24.32

2nd Quarter
 
$
38.51

 
$
30.80

1st Quarter
 
$
39.92

 
$
30.73

At the close of business on June 30, 2015, our shareholders received two common shares of Horizon common stock for every five shares of the Company they held as of the close of business on June 25, 2015. On June 30, 2015, the last trading day before the spin-off became effective, the closing price of our common shares, trading "regular way" (that is with an entitlement to common shares of Horizon distributed in the spin-off) was $29.60. On July 1, 2015, the first trading day after the spin-off, the opening price of our common shares was $24.99 per share and the opening price of Horizon common shares was $15.50 per share. These stock prices for our common stock and Horizon common stock were as quoted on the NASDAQ Global Select Market and the New York Stock Exchange, respectively.


25


Performance Graph
The following graph compares the cumulative total stockholder return from December 31, 2007 through December 31, 2015 for TriMas common stock, the Russell 2000 Index and a peer group(1) of companies we have selected for purposes of this comparison. We have assumed that dividends have been reinvested (and taking into account the value of Horizon Global shares distributed in the spin-off) and returns have been weighted-averaged based on market capitalization. The graph assumes that $100 was invested on December 31, 2007 in each of TriMas common stock, the stocks comprising the Russell 2000 Index and the stocks comprising the peer group.
______________
(1) 
Includes Actuant Corporation, Carlisle Companies Inc., Crane Co., Dover Corporation, IDEX Corporation, Illinois Tool Works, Inc., SPX Corporation, Teleflex, Inc. and Kaydon Corp (included in peer group 2007-2012, due to being acquired during 2013).

26


Item 6.    Selected Financial Data
The following table sets forth our selected historical financial data from continuing operations for the five years ended December 31, 2015. The financial data for each of the five years presented has been derived from our financial statements and notes to those financial statements, for which the years ended December 31, 2011 and December 31, 2012 were audited by KPMG LLP and the years ended December 31, 2013 through December 31, 2015 have been audited by Deloitte & Touche LLP. The following data should be read in conjunction with Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our audited financial statements included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K.
 
 
Year ended December 31,
 
 
2015
 
2014
 
2013
 
2012
 
2011
 
 
(dollars and shares in thousands, except per share data)
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
863,980

 
$
887,300

 
$
799,700

 
$
738,550

 
$
590,800

Gross profit
 
236,110

 
237,010

 
226,040

 
211,750

 
185,360

Operating profit (loss) (a)
 
(4,250
)
 
86,650

 
97,210

 
88,400

 
83,390

Income (loss) from continuing operations (a), (b)
 
(28,660
)
 
46,890

 
59,240

 
13,750

 
26,850

Per Share Data:
 
 
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
 
 
Continuing operations (a)
 
$
(0.64
)
 
$
1.03

 
$
1.34

 
$
0.30

 
$
0.78

Weighted average shares
 
45,124

 
44,882

 
40,926

 
37,521

 
34,246

Diluted:
 
 
 
 
 
 
 
 
 
 
Continuing operations (a)
 
$
(0.64
)
 
$
1.02

 
$
1.32

 
$
0.30

 
$
0.77

Weighted average shares
 
45,124

 
45,269

 
41,396

 
37,949

 
34,780

 
 
Year ended December 31,
 
 
2015
 
2014
 
2013
 
2012
 
2011
 
 
(dollars in thousands)
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
 
Total assets (c), (d), (e), (f)
 
$
1,170,300

 
$
1,625,430

 
$
1,268,990

 
$
1,101,570

 
$
959,940

Total debt (d), (e)
 
419,630

 
630,810

 
294,620

 
407,950

 
458,040

Goodwill and other intangibles (a), (d)
 
652,790

 
757,500

 
445,840

 
401,370

 
301,160

__________________________
(a) During the fourth quarter of 2015, we recorded a goodwill and indefinite-lived intangible asset impairment charge of approximately $75.7 million. See Note 8, "Goodwill and Other Intangibles Assets," included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K for further information.
(b) During 2012, we incurred debt extinguishment costs of approximately $46.8 million related to the redemption of our former senior notes and the refinance of our previous credit agreement.
(c) On June 30, 2015, we completed the spin-off of our Cequent businesses, thereby reducing the amount of our total assets as compared to prior periods. See Note 6, "Discontinued Operations" included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K for further information.
(d) On October 17, 2014, we acquired 100% of the equity interest in Allfast Fastening Systems, thereby increasing the amount of our total assets, total debt and goodwill and other intangibles as of December 31, 2014. See Note 5, "Acquisitions" and Note 12, "Long-term Debt" included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K for further information.
(e) Due to the adoption of Accounting Standards Update ("ASU") 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs," in 2015, unamortized debt issuance costs of $7.8 million, $9.2 million, $9.7 million and $11.8 million as of December 31, 2014, 2013, 2012 and 2011, respectively, which were previously presented in total assets have been reclassified to total debt. See Note 2, "New Accounting Pronouncements" and Note 12, "Long-term Debt" included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K for further information.
(f) Due to the adoption of ASU 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes", during the fourth quarter of 2015, deferred tax assets of $28.6 million, $22.6 million, $19.7 million and $20.1 million as of December 31, 2014, 2013, 2012 and 2011, respectively, which were previously presented in total assets have been reclassified to noncurrent deferred tax liabilities. See Note 2, "New Accounting Pronouncements" included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K for further information.

27


Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations
The statements in the discussion and analysis regarding industry outlook, our expectations regarding the performance of our business and the other non-historical statements in the discussion and analysis are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in Item 1A "Risk Factors." Our actual results may differ materially from those contained in or implied by any forward-looking statements. You should read the following discussion together with Item 8, "Financial Statements and Supplementary Data."
Introduction
We are a global manufacturer and distributor of products for commercial, industrial and consumer markets. We are principally engaged in four reportable segments: Packaging, Aerospace, Energy and Engineered Components.
On June 30, 2015, we completed the spin-off of our Cequent businesses, creating a new independent publicly-traded company, Horizon Global Corporation ("Horizon"). On June 30, 2015, our stockholders received two shares of Horizon common stock for every five shares of TriMas common stock that they held as of the close of business on June 25, 2015. The financial position, results of operations and cash flows of Horizon are reflected as discontinued operations for all periods presented through the date of the spin-off.
Key Factors and Risks Affecting Our Reported Results.  Our businesses and results of operations depend upon general economic conditions and we serve some customers in cyclical industries that are highly competitive and themselves significantly impacted by changes in economic conditions. There has been little or no economic growth, particularly in the United States, although global economic conditions appear to have been relatively stable over the past couple of years. The most significant external factor impacting us in 2015 was the impact of lower oil prices, which directly impacted our Arrow Engine business (which serves the upstream oil and natural gas market at the well site) and our Energy business, which primarily serves petrochemical and other refineries in the downstream oil and gas markets. Our Arrow Engine business revenue declined more than 50% during 2015, primarily due to fewer orders for new engines and well-site content as a result of the reduction in oil prices and drilling activity. The Arrow Engine business reacted aggressively in cutting costs and structuring its business to the lower demand levels, and was essentially able to break-even in profit during 2015 despite the significant top line reduction.
In addition to oil prices, our 2015 results were also significantly impacted by a stronger U.S. dollar and a slowing of industrial production and related customer demand during the back half of 2015. While we experienced some organic growth in certain of our businesses in 2015 as compared to 2014, the majority of our growth was generated by sales from acquisitions. Our 2015 sales decreased as compared to 2014, as the aforementioned sales growth was more than offset by reductions in sales, primarily as a result of the impact of lower oil prices.
During 2014 and 2015, we undertook significant actions in our Energy reportable segment to reassess, restructure and optimize our manufacturing and sales footprints, as demand levels had been less consistent and lower than historical levels. Starting in the second half of 2013, both in the United States and abroad, petrochemical plants and refinery customers deferred shutdown activity, plus we experienced decreases in engineering and construction ("E&C") customer activity. We were able to gain market share and additional product content during 2014 and the first three quarters of 2015, primarily consisting of standard and highly-engineered bolts, which essentially offset the reduction in upstream channel business impacted by lower oil prices. Thus, we held total sales at consistent levels at around $50 million each quarter, but with significantly less favorable product sales mix primarily due to the lower E&C and shutdown activity, which would typically be a higher-margin business. Given these factors, during 2014, we announced the closure of a sales branch in China, a manufacturing facility in Brazil and the move of certain longer lead-time standard products from our Houston, Texas manufacturing facility to a new facility in Mexico, which began production in the fourth quarter of 2015. In 2015, we also announced the consolidation and/or closure of several of our facilities, including manufacturing facilities in Hangzhou, China, Rio de Janeiro, Brazil and Houston, Texas (former South Texas Bolt and Fitting facility).

28


During the third quarter of 2015, given the impact of lower oil prices on net sales and profitability, the uncertain macroeconomic environment and a recent slowing of industrial production and related demand, we announced a financial improvement plan ("FIP") to improve our profitability, cash flow conversion and operational efficiency. As part of the FIP, we originally targeted cost actions to yield approximately $15 million of annual savings, accelerating approximately $5 million of savings initiatives in the Energy reportable segment, with the remaining $10 million of savings initiatives spread relatively evenly across the remainder of the Company. The FIP consisted of headcount reductions, manufacturing and administrative cost reduction and facility closures or consolidations, for which we estimate one-time cash and non-cash charges to implement of approximately $6 million to $7 million. We expect the majority of the actions to be completed by the end of the first quarter of 2016. We believe the FIP will help to mitigate the external factors pressuring our top-line, and position the Company for improved profitability and operating leverage across a lower fixed cost structure in the future when demand levels recover. We continue to evaluate further actions as merited based on business performance, considering additional cost reductions or facility closures should sales and profitability levels continue below historical levels.
Due to a significant decline in profitability levels in our Energy and engine products reporting units during 2015 and a decline in our stock price and resulting market capitalization, we determined there were indicators that the fair value of the Energy and engine products reporting units, and/or other units, may be less than the carrying value. As such, we performed an impairment analysis of each of our reporting units and indefinite-lived trademarks/trade names, along with a comparison of the estimated aggregate fair value of all reporting units to our market capitalization, all as required by the authoritative accounting literature. Based on the results of the goodwill impairment test, we recorded pre-tax goodwill impairment charges in the fourth quarter of 2015 of approximately $70.9 million in our Energy reporting unit and approximately $3.2 million in our engine products reporting unit. As of December 31, 2015, there is no goodwill recorded in the Energy and engine products reporting units.
Over the past few years, we have executed on our growth strategies via bolt-on acquisitions, new products and geographic expansion within our existing platforms in each of our reportable segments. We have also proceeded with the aforementioned cost savings activities in our Energy reportable segment, moving toward more efficient facilities and lower cost country production. While our growth strategies have significantly contributed to increased net sales levels over this time period, our earnings margins over the period of execution have declined from historical levels, primarily due to costs incurred to move, close or consolidate existing facilities, the incurrence of acquisition diligence and integration costs, the margin impact of acquiring businesses with historically lower margins than our legacy businesses and due to increasing business in new markets to TriMas, where we make pricing decisions to penetrate new markets and do not yet have volume leverage. In addition to the energy end-market challenges, we have also incurred significant costs related to manufacturing inefficiencies associated with changes in aerospace customer demand with some distribution customer consolidation, a trend toward smaller lot order sizes and less consistent order patterns over the past few quarters. While these challenges and endeavors have significantly impacted margins, we believe that the margins in these businesses will migrate to historical levels over time (and have in Packaging, for example, where the acquisitions in the past few years have been integrated) as we integrate our acquisitions into our businesses, right-size our facilities and staffing levels to current and expected demand levels and patterns and capitalize on productivity initiatives and volume efficiencies.
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 new products; our ability to acquire and integrate companies or products that supplement existing product lines, add new distribution channels, expand our geographic coverage or enable better absorption of overhead costs; our ability to manage our cost structure more efficiently via supply base management, internal sourcing and/or purchasing of materials, selective outsourcing and/or purchasing of support functions, working capital management, and greater leverage of our administrative functions. If we are unable to do any of the foregoing successfully, our financial condition and results of operations could be materially and adversely impacted.
Our businesses do not experience significant seasonal fluctuation. We do not consider sales order backlog to be a material factor in our business. We expect sales growth to be derived from international sources, which exposes us to certain risks, including currency risks.
We are sensitive to price movements in our raw materials supply base. Our largest material purchases are for steel, aluminum, polyethylene and other resins and utility-related inputs. Historically, we have experienced volatility in costs of steel and resin and have worked with our suppliers to manage costs and disruptions in supply. We also utilize pricing programs to pass increased steel, aluminum and resin costs to customers. Although we may experience delays in our ability to implement price increases, we have been generally able to recover such increased costs. We may experience disruptions in supply in the future and may not be able to pass along higher costs associated with such disruptions to our customers in the form of price increases.

29


In addition to the aforementioned price movements in significant raw materials, certain of our businesses are sensitive to oil price movements. Our Arrow Engine business is most directly impacted by significant volatility in oil prices. Arrow's pumpjack and other engine sales and related parts, which comprise a significant portion of the business, are impacted by oil drilling levels, rig counts and commodity pricing. The decline of oil prices in late fourth quarter 2014 and through 2015 has significantly impacted demand levels in this business, with sales levels dropping more than 50% from 2014. Our other businesses may be impacted by volatile oil prices, but not as directly. For example, a portion of our Energy reportable segment serves upstream customers at oil well sites that have been impacted by changes in oil prices, while the majority of the segment provides parts for refineries and chemical plants, which may or may not choose to defer capital expenditures or changeover production stock, both of which would require retooling with our gaskets and bolts, in times of fluctuations in oil prices. Our Packaging reportable segment may be impacted by oil prices, as it is a significant driver of resin pricing, although we generally are able to maintain profit levels when oil prices change due to escalator/de-escalator clauses in contracts with many of our customers.


30


Segment Information and Supplemental Analysis
The following table summarizes financial information for our four reportable segments:
 
 
Year ended December 31,
 
 
2015
 
As a Percentage of Net Sales
 
2014
 
As a Percentage of Net Sales
 
2013
 
As a Percentage of Net Sales
 
 
(dollars in thousands)
Net Sales
 
 
 
 
 
 
 
 
 
 
 
 
Packaging
 
$
334,270

 
38.7
 %
 
$
337,710

 
38.1
 %
 
$
313,220

 
39.2
%
Aerospace
 
176,480

 
20.4
 %
 
121,510

 
13.7
 %
 
95,530

 
11.9
%
Energy
 
193,390

 
22.4
 %
 
206,720

 
23.3
 %
 
205,580

 
25.7
%
Engineered Components
 
159,840

 
18.5
 %
 
221,360

 
24.9
 %
 
185,370

 
23.2
%
Total
 
$
863,980

 
100.0
 %
 
$
887,300

 
100.0
 %
 
$
799,700

 
100.0
%
Gross Profit
 
 
 
 
 
 
 
 
 
 
 
 
Packaging
 
$
120,610

 
36.1
 %
 
$
118,210

 
35.0
 %
 
$
111,930

 
35.7
%
Aerospace
 
58,580

 
33.2
 %
 
34,710

 
28.6
 %
 
34,640

 
36.3
%
Energy
 
23,720

 
12.3
 %
 
35,660

 
17.3
 %
 
46,170

 
22.5
%
Engineered Components
 
33,200

 
20.8
 %
 
48,430

 
21.9
 %
 
33,300

 
18.0
%
Total
 
$
236,110

 
27.3
 %
 
$
237,010

 
26.7
 %
 
$
226,040

 
28.3
%
Selling, General and Administrative
 
 
 
 
 
 
 
 
 
 
 
 
Packaging
 
$
41,990

 
12.6
 %
 
$
38,490

 
11.4
 %
 
$
38,540

 
12.3
%
Aerospace
 
29,700

 
16.8
 %
 
16,860

 
13.9
 %
 
11,790

 
12.3
%
Energy
 
46,790

 
24.2
 %
 
40,600

 
19.6
 %
 
37,150

 
18.1
%
Engineered Components
 
11,750

 
7.4
 %
 
14,190

 
6.4
 %
 
13,600

 
7.3
%
Corporate expenses
 
32,120

 
N/A

 
36,450

 
N/A

 
37,460

 
N/A

Total
 
$
162,350

 
18.8
 %
 
$
146,590

 
16.5
 %
 
$
138,540

 
17.3
%
Operating Profit (Loss)
 
 
 
 
 
 
 
 
 
 
 
 
Packaging
 
$
78,470

 
23.5
 %
 
$
77,850

 
23.1
 %
 
$
83,770

 
26.7
%
Aerospace
 
28,320

 
16.0
 %
 
17,830

 
14.7
 %
 
22,830

 
23.9
%
Energy
 
(97,160
)
 
(50.2
)%
 
(6,660
)
 
(3.2
)%
 
8,620

 
4.2
%
Engineered Components
 
18,240

 
11.4
 %
 
34,080

 
15.4
 %
 
19,450

 
10.5
%
Corporate
 
(32,120
)
 
N/A

 
(36,450
)
 
N/A

 
(37,460
)
 
N/A

Total
 
$
(4,250
)
 
(0.5
)%
 
$
86,650

 
9.8
 %
 
$
97,210

 
12.2
%
Capital Expenditures
 
 
 
 
 
 
 
 
 
 
 
 
Packaging
 
$
13,670

 
4.1
 %
 
$
13,730

 
4.1
 %
 
$
11,010

 
3.5
%
Aerospace
 
5,010

 
2.8
 %
 
4,430

 
3.6
 %
 
4,810

 
5.0
%
Energy
 
7,610

 
3.9
 %
 
2,690

 
1.3
 %
 
5,250

 
2.6
%
Engineered Components
 
2,320

 
1.5
 %
 
1,690

 
0.8
 %
 
2,190

 
1.2
%
Corporate
 
50

 
N/A

 
460

 
N/A

 
970

 
N/A

Total
 
$
28,660

 
3.3
 %
 
$
23,000

 
2.6
 %
 
$
24,230

 
3.0
%
Depreciation and Amortization
 
 
 
 
 
 
 
 
 
 
 
 
Packaging
 
$
20,920

 
6.3
 %
 
$
20,410

 
6.0
 %
 
$
18,960

 
6.1
%
Aerospace
 
13,290

 
7.5
 %
 
7,630

 
6.3
 %
 
3,790

 
4.0
%
Energy
 
4,790

 
2.5
 %
 
4,600

 
2.2
 %
 
3,820

 
1.9
%
Engineered Components
 
4,200

 
2.6
 %
 
4,460

 
2.0
 %
 
4,270

 
2.3
%
Corporate
 
340

 
N/A

 
340

 
N/A

 
260

 
N/A

Total
 
$
43,540

 
5.0
 %
 
$
37,440

 
4.2
 %
 
$
31,100

 
3.9
%



31


Results of Operations
Year Ended December 31, 2015 Compared with Year Ended December 31, 2014
The principal factors impacting us during the year ended December 31, 2015, compared with the year ended December 31, 2014 were:
the spin-off of the Cequent businesses, including costs incurred to affect and reclassifying to discontinued operations for all periods presented, and amending our credit agreement ("Credit Agreement");
the impact of lower oil prices, primarily in our Engineered Components and Energy reportable segments;
the impact of acquisitions (see below for the impact by reportable segment);
cash and non-cash costs incurred related to facility closures and consolidations, primarily within our Energy reportable segment;
an approximate $74.1 million goodwill impairment charge between our Energy and Engineered Components reportable segments;
the impact of the stronger U.S. dollar, primarily in our Packaging and Energy reportable segments; and
the impact of industrial slowing demand in the back half of 2015, primarily in our Packaging and Engineered Components reportable segments;
Overall, net sales decreased approximately $23.3 million, or approximately 2.6%, to $864.0 million in 2015, as compared to $887.3 million in 2014. The impact of lower oil prices and the strong U.S. dollar significantly pressured the top-line during 2015, more than offsetting additional sales from organic sales growth and acquisitions in our Aerospace reportable segment. As a result of lower oil prices and related activity, sales of engine and compression-related products declined approximately $52.9 million during 2015 within our Engineered Components reportable segment. Sales further declined in our Engineered Components reportable segment by approximately $8.6 million, primarily due to a reduction of sales of our acetylene cylinders and lower export sales due to the impact of the stronger U.S. dollar. In addition, sales declined approximately $8.8 million (constant currency) in our Energy reportable segment, primarily from lower North American upstream gasket and bolt sales into oil and natural gas fields. Sales were further impacted by approximately $13.1 million of net unfavorable currency exchange, as our reported results in U.S. dollars were negatively impacted as a result of the stronger U.S. dollar relative to foreign currencies. These decreases were partially offset by an increase in sales during 2015 of approximately $57.5 million due to our recent acquisitions and by approximately $7.9 million of higher demand from our OEM and other customers in our Aerospace reportable segment.
Gross profit margin (gross profit as a percentage of sales) approximated 27.3% and 26.7% in 2015 and 2014, respectively. The primary driver of the increase in gross profit was our Aerospace reportable segment, due to both higher profit and margin associated with the Allfast Fastening Systems ("Allfast") acquisition and improved manufacturing efficiencies in 2015 in our legacy Aerospace business. Lower material costs also benefited profit margins in our Packaging and Engineered Components reportable segments. Gross profit margin also increased in our Packaging reportable segment due to productivity initiatives and a more favorable product sales mix. While gross profit margin declined within our Engineered Components reportable segment due to lower fixed cost absorption, this segment was able to substantially offset the impact of an approximate 28% sales reduction to only a 110 basis point reduction in gross profit margin due to cost reductions and aligning its structure with current demand levels. Gross profit margin declined in our Energy reportable segment due to higher costs related to our restructuring and footprint optimization efforts as well as costs related to U.S. West Coast port delays. In addition, gross profit was negatively impacted by approximately $4.8 million of unfavorable currency exchange, as our reported results in U.S. dollars were negatively impacted as a result of the stronger U.S. dollar relative to foreign currencies.
Operating profit (loss) margin (operating profit (loss) as a percentage of sales) approximated (0.5)% and 9.8% in 2015 and 2014, respectively. Operating profit decreased $91.0 million, or 104.9%, to an operating loss of $4.3 million in 2015 as compared to operating profit of $86.7 million in 2014, primarily due to approximately $74.1 million in goodwill impairment charges in our Energy and Engineered Components reportable segments. Increases in operating profit margin in our Packaging and Aerospace reportable segments due to productivity and manufacturing efficiencies, plus the favorable product sales mix impact of the Allfast acquisition, and a reduction in corporate costs and expenses were more than offset by reductions in profit margin in Energy and Engineered Components reportable segments. The decline in the Energy reportable segment, after consideration of the goodwill impairment, was due to costs related to our restructuring and footprint optimization efforts, higher legal expenses and costs related to U.S. West Coast port delays. The decline in operating profit margin within Engineered Components is primarily due to lower fixed cost absorption related to our engine and compression-related products, while costs were reduced year-over-year, net sales of such products were down more than 50% from 2014 levels.

32


Interest expense increased approximately $4.5 million, to $14.1 million in 2015, as compared to $9.6 million in 2014. The increase in interest expense was primarily due to an increase in our weighted-average variable rate borrowings to approximately $631.8 million in 2015, from approximately $512.3 million in 2014, primarily due to incremental net borrowings associated with funding the Allfast acquisition in October 2014 and the distribution received from the Cequent spin-off in June 2015. The effective weighted average interest rate on our outstanding variable rate borrowings, including our Credit Agreement and accounts receivable facilities, was approximately 1.9% for 2015 and 2014, respectively. Historically, a portion of our interest expense was allocated to the Cequent businesses and was recorded as discontinued operations.
We incurred debt financing and extinguishment costs of approximately $2.0 million in 2015 related to the amendment of our Credit Agreement in conjunction with the spin-off of the Cequent businesses during the second quarter of 2015. During 2014, we incurred debt financing expenses of approximately $3.4 million related to our former incremental term loan A facility used to fund the Allfast acquisition.
Other expense, net decreased approximately $2.3 million to $1.8 million in 2015, from $4.1 million in 2014. The decrease was primarily due to costs attributed to a reduction of certain indemnification assets related to uncertain tax liabilities during 2014 that did not recur.
The effective income tax rate for 2015 was (29.6)%, compared to 32.6% for 2014. During 2015, we reported domestic and foreign pre-tax losses of approximately $3.2 million and $19.0 million, respectively, and recognized tax benefits of approximately $3.1 million due to a change in an uncertain tax position for which the statute of limitations expired and research and manufacturing tax incentives.  In addition, we were unable to record tax benefit of approximately $11.4 million related to pre-tax goodwill impairment charges in the U.S. and certain other jurisdictions. We also incurred tax charges of approximately $3.8 million directly attributable to increases in valuation allowances on certain deferred tax assets including foreign tax operating loss carryforwards. In 2014, we reported domestic and foreign pre-tax income of approximately $67.3 million and $2.3 million, respectively, and recognized tax benefits of approximately $4.4 million due to a change in an uncertain tax position for which the statute of limitations expired and research and manufacturing tax incentives. In addition, we incurred tax charges of approximately $3.3 million during 2014 directly attributable to increases in valuation allowances on certain deferred tax assets including foreign tax operating loss carryforwards. 
Income (loss) from continuing operations decreased approximately $75.6 million to a loss of $28.7 million in 2015, from income of $46.9 million in 2014. The decrease was primarily the result of an approximately $91.0 million decrease in operating profit, which includes approximately $74.1 million in goodwill impairment charges in 2015, and increased interest expense of approximately $4.5 million, partially offset by a decrease in income tax expense of approximately $16.2 million, decreases in other expenses of approximately $2.3 million, and decreased debt financing and extinguishment costs of approximately $1.4 million.
Net income attributable to noncontrolling interest was $0.8 million in 2014. The income was related to our 70% acquisition in Arminak & Associates LLC ("Arminak") in February 2012, and represented the 30% interest not attributed to TriMas Corporation. We acquired the remaining 30% interest in Arminak on March 11, 2014. See Note 5, "Acquisitions," included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K.
See below for a discussion of operating results by reportable segment.
Packaging.  Net sales decreased approximately $3.4 million, or 1.0%, to $334.3 million in 2015, as compared to $337.7 million in 2014, primarily as a result of approximately $8.5 million of unfavorable currency exchange, as our reported results in U.S. dollars were negatively impacted as a result of the stronger U.S. dollar relative to foreign currencies. Sales of our industrial closures also decreased approximately $2.4 million, primarily as a result of lower demand in North America. These decreases were partially offset by incremental net sales of approximately $7.0 million related to the acquisition of Lion Holdings Pvt. Ltd. ("Lion Holdings") in the third quarter of 2014 and an increase of approximately $0.4 million related to our specialty systems products, primarily due to increased demand from customers in North America.
Packaging's gross profit increased approximately $2.4 million to $120.6 million, or 36.1% of sales in 2015, as compared to $118.2 million, or 35.0% of sales in 2014. Gross profit increased primarily due to profit derived from the acquisition of Lion Holdings, as well as a $1.2 million reduction of an estimated acquisition related liability, a more favorable product mix and continued productivity initiatives. These increases were partially offset by approximately $3.9 million of unfavorable currency exchange as a result of the stronger U.S. dollar relative to foreign currencies.

33


Packaging's selling, general and administrative expenses increased approximately $3.5 million to $42.0 million, or 12.6% of sales in 2015, as compared to $38.5 million, or 11.4% of sales in 2014, primarily as a result of approximately $1.8 million of incremental selling, general and administrative costs associated with our Lion Holdings acquisition and a $0.9 million charge associated with the closure of a distribution center in Europe. Additionally, during 2015 we recognized a $1.1 million reduction in the Arminak contingent liability to the estimated fair value, as compared to a $2.0 million reduction in the Arminak contingent liability recognized during 2014.
Packaging's operating profit increased approximately $0.6 million to $78.5 million, or 23.5% of sales in 2015, as compared to $77.9 million, or 23.1% of sales, in 2014, primarily due to an approximate $1.7 million charge in 2014 associated with the disposal of equipment which was rendered obsolete as part of the Lion Holdings acquisition that did not repeat in 2015. Although sales levels decreased and selling general and administrative expenses increased, operating profit and margin increased due to a more favorable product mix and continued productivity initiatives.
Aerospace.    Net sales increased approximately $55.0 million, or 45.2%, to $176.5 million in 2015, as compared to $121.5 million in 2014. Sales increased approximately $50.5 million due to the acquisition of Allfast in October 2014 and Parker-Hannifin Corporation's Tolleson, Arizona facility in November 2015. In addition, sales increased by approximately $7.9 million due to higher demand from our OEM and other customers. These increases were partially offset by lower demand from our two largest distribution customers, as they have communicated they are reducing their on-hand inventory levels of certain of our fastener products.
Gross profit within Aerospace increased approximately $23.9 million to $58.6 million, or 33.2% of sales, in 2015, from $34.7 million, or 28.6% of sales, in 2014, primarily due to additional profit and the favorable product sales mix associated with the acquisition of Allfast. In addition, the additional sales levels from our legacy business and improved manufacturing and labor efficiencies in 2015 lifted profit dollars and margin slightly, as this segment improved its manufacturing throughput and operating effectiveness following inefficiencies in 2014 resulting from increased change-over and processing related to smaller customer order quantities and less predictable than expected order patterns associated with our large OE and distribution customers.
Selling, general and administrative expenses increased approximately $12.8 million to $29.7 million, or 16.8% of sales, in 2015, as compared to $16.9 million, or 13.9% of sales, in 2014, primarily due to higher ongoing selling, general and administrative costs of approximately $8.5 million related to our Allfast acquisition. In addition, we incurred approximately $2.1 million in incremental costs related to a warehouse consolidation and other sales-related reorganizations. The remaining increase is primarily due to costs incurred to affect future synergies associated with combining four previously separate businesses and processes into one Aerospace platform.
Operating profit within Aerospace increased approximately $10.5 million to $28.3 million, or 16.0% of sales, in 2015, as compared to $17.8 million, or 14.7% of sales, in 2014. Operating profit increased due to higher sales levels, while operating profit margin increased due to increases in gross margin due to profit derived from Allfast and improved manufacturing efficiencies in 2015, which were partially offset by increased selling, general and administrative costs primarily related to the ongoing cost of acquisitions.
Energy.    Net sales in 2015 decreased approximately $13.3 million, or 6.4%, to $193.4 million, as compared to $206.7 million in 2014. Through the first three quarters of 2015, this segment, after consideration of foreign currency exchange, increased sales levels compared to 2014 by approximately $1.2 million, as market share gains and higher E&C sales more than offset weaker upstream sales at well sites due to the lower oil prices and lower sales as a result of closure of locations in China and Brazil. However, in the fourth quarter of 2015, sales declined approximately 20% from the level in the first three quarters of 2015, due primarily to lower demand from large refinery and petrochemical customers, partially due to the lower oil prices and partially due to deferring planned fourth quarter capital spending projects. Despite this significant change in late 2015, overall 2015 sales still increased by approximately $1.9 million from 2014 levels in our international branches due to continued geographic market expansion and new product introductions. However, the international branch sales increase was more than offset by an approximate $5.9 million sales decline in North America due to the lower petrochemical and refinery customer demand levels and approximately $4.8 million of lower sales in China and Brazil due to our restructuring activities in those regions. In addition, this segment was impacted by approximately $4.5 million of net unfavorable currency exchange, as our reported results in U.S. dollars were negatively impacted as a result of the stronger U.S. dollar relative to foreign currencies.
Gross profit within Energy decreased approximately $12.0 million to $23.7 million, or 12.3% of sales, in 2015, as compared to $35.7 million, or 17.3% of sales, in 2014. Gross profit decreased primarily due to the decrease in sales and the resulting reduction in fixed costs absorption. In addition, we incurred approximately $4.0 million due to higher material sourcing costs, related to U.S. West Coast port delays, where we moved certain production to higher cost facilities to meet current orders. Gross profit continues to be impacted by our restructuring efforts, including facility closures and footprint optimization costs and severance, as this effort was also underway during 2014, the year over year impact on gross profit was approximately $3.1 million.

34


Selling, general and administrative expenses within Energy increased approximately $6.2 million to $46.8 million, or 24.2% of net sales, in 2015, as compared to $40.6 million or 19.6% of net sales, in 2014. During 2015, we incurred incremental costs of approximately $6.0 million associated with our restructuring efforts, including facility closures and footprint optimization costs, consulting fees and severance costs. Additionally, we incurred higher legal costs of approximately $0.6 million primarily due to the resolution of a previous legal claim, net of insurance recoveries.
Operating profit within Energy decreased approximately $90.5 million to a $97.2 million loss, or 50.2% of sales, in 2015, as compared to a $6.7 million loss, or 3.2% of sales, in 2014. Operating profit and related margin decreased primarily as a result of a $72.5 million goodwill and indefinite-lived intangible assets impairment charge during the fourth quarter of 2015, an approximate $1.4 million charge in 2015 associated with the disposal of equipment in conjunction with our facility closures and consolidation efforts, higher restructuring related costs and higher sourcing costs resulting from port delays.
Engineered Components.    Net sales in 2015 decreased approximately $61.5 million, or 27.8%, to $159.8 million, as compared to $221.4 million in 2014. Sales of our slow speed and compressor engine and related products declined approximately $35.2 million, and sales of our gas compression products declined approximately $17.7 million, both primarily as a result of reduced levels of oil and gas drilling and well completions in the U.S. and Canada in response to lower oil prices. Sales further declined as a result of a one-time sale of our compressor packages by a significant customer in 2014 for approximately $5.6 million that did not recur. In addition, sales of our industrial cylinder products decreased approximately $8.6 million, primarily due to a reduction of sales of our acetylene cylinders and lower export sales due to the impact of the stronger U.S. dollar.
Gross profit within Engineered Components decreased approximately $15.2 million to $33.2 million, or 20.8% of sales, in 2015, from $48.4 million, or 21.9% of sales, in 2014. Gross profit declined as a result of the decreased sales levels in our engine and compression-related products due to lower oil prices. Gross profit margin for engine and compression-related products further declined due to lower fixed cost absorption, despite cost reductions to better align our cost structure with current demand levels. These decreases were partially offset by increased gross profit and gross profit margin from sales of our industrial cylinders as a result of continued productivity initiatives, as we continue to gain efficiencies from our previous asset acquisition.
Selling, general and administrative expenses decreased approximately $2.4 million to $11.8 million, or 7.4% of sales, in 2015, as compared to $14.2 million, or 6.4% of sales, in 2014, substantially all due to cost reductions in our engine and compression-related products, as we reduced costs given the low oil-related activity to better align our cost structure with current demand levels.
Operating profit within Engineered Components decreased approximately $15.8 million to $18.2 million, or 11.4% of sales, in 2015, as compared to $34.1 million, or 15.4% of sales, in 2014, primarily due to the reduced sales levels. Operating profit also decreased as a result of a $3.2 million goodwill impairment charge during the fourth quarter of 2015 as a result of the significant decline in current and forecasted sales of engine and engine-related products. Operating profit margin decreased as a result of lower fixed cost absorption related to our engine and compression-related products, which was partially offset by increased productivity initiatives and additional fixed cost absorption for our industrial cylinder products.
Corporate Expenses.    Corporate expenses included in operating profit consist of the following:
 
Year ended December 31,
 
2015
 
2014
 
(in millions)
Corporate operating expenses
$
12.4

 
$
15.3

Employee costs and related benefits
19.7

 
21.2

     Corporate expenses
$
32.1

 
$
36.5

Corporate expenses included in operating profit decreased approximately $4.4 million to $32.1 million in 2015, from $36.5 million in 2014. The decrease between years is primarily attributed to $1.4 million lower acquisition due diligence costs incurred in 2015 than in 2014 , a decrease in expense due to the timing and estimated attainment of our short and long-term incentive compensation and a reduction in employee costs and related benefits due to headcount reductions as part of the FIP.
Discontinued Operations.    The results of discontinued operations consists of our former Cequent businesses, which were spun-off on June 30, 2015, and our former NI Industries business, which ceased operation in September 2014. Loss from discontinued operations, net of income tax expenses, was $4.7 million for the year ended December 31, 2015, as compared to income from discontinued operations, net of income tax expenses of $22.4 million for the year ended December 31, 2014. See Note 6, "Discontinued Operations," to our consolidated financial statements attached herein.


35


Year Ended December 31, 2014 Compared with Year Ended December 31, 2013
The principal factors impacting us during the year ended December 31, 2014 compared with the year ended December 31, 2013 were:
the impact of our various acquisitions during 2014 and 2013 (see below for the impact by reportable segment);
business unit restructuring within our Energy reportable segment, under which we incurred approximately $13.2 million of costs during 2014;
continued economic strength in certain of the markets our businesses serve in 2014 compared to 2013, contributing to increased net sales in all four of our reportable segments;
the sale of our business in Italy within the Packaging reportable segment, for which we recorded a pre-tax gain of approximately $10.5 million;
our equity offering during 2013, where we issued 5,175,000 shares of common stock for net proceeds of approximately $174.7 million; and
our fourth quarter 2014 amendment to our Credit Agreement to add a $275.0 million incremental senior secured term loan A facility, and our amendment of our new credit agreement in 2013, which allowed us to reduce interest costs.
Overall, net sales increased approximately $87.6 million, or approximately 11.0%, to $887.3 million in 2014, as compared to $799.7 million in 2013. During 2014, net sales increased in all four of our reportable segments. Of the sales increase, approximately $54.9 million was due to our recent acquisitions. The remainder of the increase in sales levels between years was due to the impact of continued economic strength in certain of our end markets, primarily in our Packaging and Engineered Components reportable segments, our expansion in international markets, primarily in our Packaging reportable segment and our new product introductions and related growth, primarily in our Engineered Components reportable segment.
Gross profit margin (gross profit as a percentage of sales) approximated 26.7% and 28.3% in 2014 and 2013, respectively. Gross profit increased due to continued productivity, cost reductions and automation efforts primarily in our Engineered Components and Packaging reportable segments. The increases in gross profit margin were partially offset by a less favorable product sales mix, primarily in our Energy, Aerospace and Packaging reportable segments, manufacturing inefficiencies in our Aerospace reportable segment and the impact of the restructuring in our Energy reportable segment. In addition, we continue to experience an overall less favorable product sales mix in the reportable segments with recent acquisitions, as the acquired businesses tend to have lower margins than our historical businesses, plus we incur purchase accounting charges and integration costs in the first several quarters of ownership.
Operating profit margin (operating profit as a percentage of sales) approximated 9.8% and 12.2% in 2014 and 2013, respectively. Operating profit decreased $10.5 million, or 10.9%, to $86.7 million in 2014 as compared to $97.2 million in 2013, primarily as a result of higher sales levels. Operating profit margin decreased primarily due the impact of the restructuring in our Energy reportable segment, a less favorable product sales mix, primarily in our Energy, Aerospace and Packaging reportable segments and as a result of the newly acquired companies comprising a larger percentage of sales and having lower margins than our legacy businesses and manufacturing inefficiencies in our Aerospace reportable segment. In addition, our operating profit margin decreased due to a $10.5 million gain recognized within our Packaging reportable segment on the sale of the Italian business, including $7.9 million related to the release of historical currency translation adjustments into net income during 2013, that did not recur in 2014. Partially offsetting the decreases in operating profit margin were continued productivity, cost reductions and automation efforts primarily in our Packaging and Engineered Components reportable segments as well as operating leverage gained on the higher sales levels primarily in our Packaging and Engineered Components reportable segments.
Interest expense decreased approximately $5.7 million, to $9.6 million in 2014, as compared to $15.3 million in 2013. The decrease in interest expense was primarily due to a reduction in our overall interest rates due to the refinancing of our Credit Agreement at lower interest rates in the fourth quarter of 2013. Interest expense further declined due to a decrease in our effective weighted average interest rate on variable rate borrowings, including our Credit Agreement and accounts receivable facilities, to approximately 1.9% for 2014, from 2.7% for 2013, and a decrease in our weighted-average variable rate borrowings to approximately $512.3 million in 2014, from approximately $514.2 million in 2013.
We incurred debt financing expenses of approximately $3.4 million in 2014 related to our incremental term loan A facility used to fund the Allfast acquisition. During 2013, we incurred debt extinguishment costs of approximately $2.5 million related to the refinance of our U.S. bank debt.

36


Other expense, net increased approximately $0.8 million to $4.1 million in 2014, from $3.3 million in 2013. The change was primarily related to higher losses on transactions denominated in foreign currencies.
The effective income tax rate was 32.6% for 2014, as compared to 22.2% for 2013. During 2014, we reported domestic and foreign pre-tax income of approximately $67.3 million and $2.3 million, respectively, and recognized tax benefits of approximately $4.4 million primarily due to a change in an uncertain tax position for which the statute of limitations expired and research and manufacturing tax incentives. In addition, we incurred tax charges of approximately $3.3 million during 2014 directly attributable to increases in valuation allowances on certain deferred tax assets including foreign tax operating loss carryforwards. In 2013, we reported domestic and foreign pre-tax income of approximately $47.8 million and $28.4 million, respectively, and recognized tax benefits of approximately $9.0 million primarily attributable to certain gains not subject to tax, a change in an uncertain tax position for which the statute of limitations expired and research and manufacturing tax incentives. We also incurred tax charges of approximately $3.0 million during 2013 directly attributable to increases in valuation allowances on certain deferred tax assets including foreign tax operating loss carryforwards and international restructuring events. 
Income from continuing operations decreased approximately $12.3 million to $46.9 million in 2014, from $59.2 million in 2013. The decrease was primarily the result of a $10.5 million gain recognized within our Packaging reportable segment on the sale of the Italian business in 2013 that did not recur in 2014, a $5.8 million increase in income tax expense, plus a a $0.9 million increase in debt financing and extinguishment costs and a $0.8 million increase in other expenses, partially offset by a $5.7 million reduction in interest expense.
Net income attributable to noncontrolling interest was $0.8 million in 2014, compared to $4.5 million in 2013. The income relates to our 70% acquisition in Arminak & Associates LLC ("Arminak") in February 2012, which represents the 30% interest not attributed to TriMas Corporation. On March 11, 2014, we acquired the remaining 30% interest in Arminak. See Note 5, "Acquisitions," included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K.
See below for a discussion of operating results by reportable segment.
Packaging.   Net sales increased approximately $24.5 million, or 7.8%, to $337.7 million in 2014, as compared to $313.2 million in 2013. Sales of our specialty systems products increased by approximately $22.0 million, primarily due to increases in demand from our major customers in North America and Europe, as well as continued growth in our revenue base in Asia. Sales further increased approximately $4.8 million as a result of the acquisition of Lion Holdings Pvt. Ltd. ("Lion Holdings") in the third quarter of 2014. Sales of our industrial closures declined by approximately $3.9 million, primarily as a result of the loss of approximately $10.2 million of sales associated with our Italian rings and levers business sold in the third quarter of 2013, which was partially offset by increased sales of our other industrial closures, primarily in our U.S. markets. In addition, sales also increased by approximately $1.6 million as a result of a net favorable currency exchange, as our reported results in U.S. dollars were positively impacted as a result of a weaker U.S. dollar relative to foreign currencies.
Packaging's gross profit increased approximately $6.3 million to $118.2 million, or 35.0% of sales, in 2014, as compared to $111.9 million, or 35.7% of sales, in 2013, primarily due to the higher sales levels. Gross profit margin decreased from the prior year as ongoing productivity and automation initiatives and increased sales in certain higher-margin industrial products were more than offset by a less favorable product mix shift, with sales of our lower margin specialty products comprising a larger percentage of overall sales, as well as cost incurred in Asia as we add capacity to meet expected demand.
Packaging's selling, general and administrative expenses decreased approximately $0.1 million to $38.5 million, or 11.4% of sales, in 2014, as compared to $38.5 million, or 12.3% of sales, in 2013. Selling, general and administrative expenses decreased as a percent of sales, as a $2.0 million reduction in the Arminak & Associates contingent liability to estimated fair value was offset by increased selling, general and administrative costs associated with the continued investment in growth initiatives, including costs associated with the Lion Holdings acquisition.
Packaging's operating profit decreased approximately $5.9 million to $77.9 million, or 23.1% of sales, in 2014, as compared to $83.8 million, or 26.7% of sales, in 2013. Operating profit decreased primarily due an approximately $10.5 million gain recognized on the sale of the Italian business in the third quarter of 2013, which included approximately $7.9 million related to the release of historical currency translation adjustments into net income. In addition to the impact of the Italian business gain in 2013, operating profit margin decreased further as ongoing productivity initiatives and operating leverage gained were more than offset by a less favorable product sales mix and costs associated with the Lion Holdings acquisition, including approximately $1.7 million of charges associated with the disposal of equipment which was rendered obsolete as part of our recent acquisitions.
Aerospace.    Net sales increased approximately $26.0 million, or 27.2%, to $121.5 million in 2014, as compared to $95.5 million in 2013. Sales increased approximately $27.0 million due to the acquisition of Allfast in the fourth quarter of 2014, Mac Fasteners, Inc. ("Mac") in the fourth quarter of 2013, and Martinic Engineering, Inc. ("Martinic") in the first quarter of 2013. These increases were partially offset by a decrease in sales in our legacy aerospace business.

37


Gross profit within Aerospace remained flat at $34.7 million, or 28.6% of sales, in 2014, from $34.6 million, or 36.3% of sales, in 2013. Gross profit margins declined due to approximately $1.2 million of incremental inventory step-up costs and approximately $0.5 million of incremental ongoing intangible asset amortization costs related to our recent acquisitions. Gross profit margins also declined due to manufacturing and labor inefficiencies resulting from increased change-over and processing related to smaller customer order quantities, less predictable than expected order patterns associated with our large OE and distribution customers and a less favorable product sales mix. Additionally, gross profit margin declined due to our Mac and Martinic acquisitions, which have lower gross margin than our legacy aerospace business.
Selling, general and administrative expenses increased approximately $5.1 million to $16.9 million, or 13.9% of sales, in 2014, as compared to $11.8 million, or 12.3% of sales, in 2013, primarily due to higher ongoing selling, general and administrative costs of approximately $2.1 million associated with our Allfast, Mac and Martinic acquisitions, and approximately $1.6 million of incremental intangible asset amortization costs and legal and professional fees associated with consummating the acquisitions. Selling, general and administrative costs increased in our legacy aerospace business, primarily due to an approximately $1.1 million charge for resolution of a customer claim. In addition, we incurred approximately $0.7 million in additional employee related costs in 2014 associated with changes in leadership.
Operating profit within Aerospace decreased approximately $5.0 million to $17.8 million, or 14.7% of sales, in 2014, as compared to $22.8 million, or 23.9% of sales, in 2013, primarily due to manufacturing and labor inefficiencies, a less favorable product sales mix, lower profit margins associated with our recent acquisitions and higher selling, general and administrative expenses in support of our growth initiatives, which more than offset the impact of higher sales levels.
Energy.    Net sales for 2014 increased approximately $1.1 million, or 0.6%, to $206.7 million, as compared to $205.6 million in 2013. Sales increased by approximately $6.1 million due to our acquisitions in 2013, including Wulfrun Specialised Fasteners ("Wulfrun") and substantially all the business assets of Tat Lee (Thailand) Ltd. ("Tat Lee"), as well as growth in our U.S. markets as a result of increased sales of standard gaskets and bolts, particularly in the fourth quarter of 2014. These increases were partially offset by decreased sales of approximately $4.5 million in China and Brazil as a result of our facility closure and restructuring activities in those regions in the second quarter of 2014, approximately $1.1 million as a result of lower branch sales in Europe and lower demand in certain Canadian markets.
Gross profit within Energy decreased approximately $10.5 million to $35.7 million, or 17.3% of sales, in 2014, as compared to $46.2 million, or 22.5% of sales in 2013, primarily due to approximately $6.7 million of charges associated with the closure of our China sales branch and Brazilian manufacturing facility, including a charge of approximately $3.9 million for the estimated future unrecoverable lease obligation on our Brazilian manufacturing facility. In addition, gross profit margin declined as a result of a less favorable product sales mix, with a higher percentage of sales being generated by lower margin standard gaskets and bolts, as well as labor inefficiencies associated with our footprint, restructuring and optimization efforts and additional sales being generated by our recent acquisitions, which have lower margins than the historical business.
Selling, general and administrative expenses within Energy increased approximately $3.4 million to $40.6 million, or 19.6% of net sales, in 2014, as compared to $37.2 million, or 18.1% of net sales, in 2013, as we continued to invest in our growth initiatives, including approximately $1.3 million for the normal operating selling, general and administrative costs of our recent acquisitions. In addition, we incurred approximately $4.9 million of expense in the current year related to both the remaining operating charges and exit costs associated with the facility closure and restructuring activities, including approximately $1.9 million as a result of the reduction in value of certain intangible assets, offset by reduced spending the back half of 2014 due to the closure of the facilities.
Operating profit within Energy decreased approximately $15.3 million to $6.7 million, or 3.2% of sales, in 2014, as compared to $8.6 million, or 4.2% of sales, in 2013. Operating profit and profit margin decreased primarily due to approximately $13.2 million of charges associated with our China sales branch and Brazil manufacturing facility restructuring activity, including an approximately $1.3 million loss related to the release of historical currency translation adjustments into net income, a higher percentage of our sales being generated by our recent acquisitions, which have lower margins than our historical business and increased normal selling, general and administrative costs.

38


Engineered Components.    Net sales in 2014 increased approximately $36.0 million, or 19.4%, to $221.4 million, as compared to $185.4 million in 2013. Sales in our industrial cylinder business increased by approximately $26.0 million, due primarily to approximately $17.0 million in sales being generated from our November 2013 cylinder asset acquisition, as well as continued growth projects related to both new product sales of fire suppressant and aviation cylinders, and growth in our Mexico and South America markets.  Sales in our engine business increased approximately $10.0 million, with approximately $5.6 million of the increase related to a large order for compressor packages by a significant customer in the first quarter of 2014. In addition, sales increased in our gas compression products by approximately $7.2 million resulting from both growth in our existing customer base and new customers. These increases were partially offset by an approximate $2.9 million decrease in our slow speed and compressor engine and related products business, primarily due to a reduced demand of our single cylinder engines and the impact of falling oil prices in late 2014.
Gross profit within Engineered Components increased approximately $15.1 million to $48.4 million, or 21.9% of sales, in 2014, from $33.3 million, or 18.0% of sales, in 2013, primarily due to margin improvement, as well as higher sales levels in both of our industrial cylinder and engine businesses. Gross profit margin in our engine business increased, as the lower fixed cost absorption we experienced during the third quarter of 2013, primarily a result of lower production and procurement levels, did not recur in 2014, and as a result of a more favorable product sales mix and continued productivity initiatives. Gross profit margin in our industrial cylinder business remained flat, as increased gross profit margin due to continued productivity initiatives and operating leverage gained on the recent cylinder asset acquisition was offset by a less favorable product sales mix.
Selling, general and administrative expenses increased approximately $0.6 million to $14.2 million, or 6.4% of sales, in 2014, as compared to $13.6 million, or 7.3% of sales, in 2013, as a result of the increased sales in both our engine and industrial cylinder businesses, with lower selling, general and administrative expenses as a percent of sales as a result of additional operating leverage gained on the higher sales levels, primarily in our engine business, as well as reduced legal fees in our industrial cylinder business, which was partially offset by increased amortization of the intangible assets associated with the fourth quarter 2013 cylinder asset acquisition.
Operating profit within Engineered Components increased approximately $14.6 million to $34.1 million, or 15.4% of sales, in 2014, as compared to $19.5 million, or 10.5% of sales, in 2013, primarily due to the increased sales levels, with margin improvement resulting from improved fixed cost absorption in our engine business, continued productivity and cost reduction initiatives, as well as the additional operating leverage gained on selling, general and administrative expenses.
Corporate Expenses.    Corporate expenses included in operating profit consist of the following:
 
 
Year ended December 31,
 
 
2014
 
2013
 
 
(in millions)
Corporate operating expenses
 
$
15.3

 
$
14.7

Employee costs and related benefits
 
21.2

 
22.8

     Corporate expenses
 
$
36.5

 
$
37.5

Corporate expenses included in operating profit decreased approximately $1.0 million to $36.5 million in 2014, from $37.5 million in 2013. The decrease between years is primarily attributed to a reduction in costs associated with our long-term incentive programs due to year-over-year reductions in estimated attainment for certain of our performance awards, which was partially offset by an increase in costs related to acquisition due diligence.
Discontinued Operations.    The results of discontinued operations consists of our former Cequent businesses, which were spun-off on June 30, 2015, our former NI Industries business, which ceased operation in September 2014, and our precision tool cutting and specialty fitting lines of business, which were sold in December 2011. Income from discontinued operations, net of income tax expense, was $22.4 million and $20.8 million in 2014 and 2013, respectively. See Note 6, "Discontinued Operations," to our consolidated financial statements attached herein.

39


Liquidity and Capital Resources
Cash Flows
Cash flows provided by operating activities of continuing operations in 2015 were approximately $76.6 million, as compared to $92.5 million in 2014. Significant changes in cash flows provided by operating activities of continuing operations and the reasons for such changes are as follows:
In 2015, the Company generated $92.8 million in cash flows, based on the reported net loss from continuing operations of $28.7 million and after considering the effects of non-cash items related to impairment of goodwill and indefinite-lived intangible assets, losses on dispositions of businesses and other assets, depreciation, amortization, stock compensation and related changes in excess tax benefits, changes in deferred income taxes, debt financing and extinguishment costs and other, net. In 2014, the Company generated $91.2 million based on the reported net income from continuing operations of $46.9 million and after considering the effects of similar non-cash items.
Decreases in accounts receivable resulted in a source of cash of approximately $5.3 million in 2015, while increases in receivables resulted in a use of cash of approximately $9.8 million in 2014. The primary driver of the change in each year was the year-over-year change in net sales, given sales in the last quarter of each year, based on historical turnover, are likely collected in the quarter following the sale. Fourth quarter 2015 net sales was approximately 14% lower than fourth quarter 2014 sales, and fourth quarter 2014 sales was approximately 17% higher than fourth quarter 2013. Partially offsetting the cash source in 2015 was an increase in days sales outstanding of receivables to approximately 58 days, as compared to approximately 55 days in 2014.
For the year ended December 31, 2015, we reduced our investment in inventory by approximately $3.3 million, primarily as a result of lower sales levels. For the year ended December 31, 2014, we used approximately $6.0 million of cash for investment in our inventories. While our gross inventory levels decreased in 2015, our days sales in inventory increased by approximately 14 days, primarily due to higher material sourcing costs and increased purchases related to U.S. West Coast port delays, mainly in our Energy reportable segment.
Decreases in accounts payable and accrued liabilities resulted in a cash use of approximately $29.5 million in 2015, as compared to a cash source of $11.8 million in 2014. The decrease in accounts payable and accrued liabilities is primarily driven by the decrease in purchases in the second half of 2015 as a result of the decrease in sales, the timing of payments made to suppliers and mix of vendors and related terms. In addition, accrued liabilities decreased in 2015 due to the settlement of various liabilities related to the October 2014 Allfast acquisition. Our days accounts payable on hand at year end remained essentially flat at 55 days in both 2015 and 2014.
Net cash used for investing activities in 2015 was approximately $37.0 million, as compared to $405.7 million in 2014. During 2015, we paid approximately $10.0 million for two acquisitions, the largest of which was the acquired business assets of Parker Hannifin in our Aerospace reportable segment. We also incurred approximately $28.7 million in capital expenditures in 2015, as we have continued our investment in growth, capacity and productivity-related capital projects. Cash received from the disposition of assets was approximately $1.7 million in 2015. During 2014, we paid approximately $382.9 million for the acquisition of Allfast in our Aerospace reportable segment and Lion Holdings in our Packaging reportable segment. We also invested approximately $23.0 million in capital expenditures and received cash from the disposition of assets of approximately $0.2 million.
Net cash used for financing activities in 2015 was approximately $236.4 million, as compared to net cash provided by financing activities of $284.5 million in 2014. In conjunction with the spin-off, Horizon made a cash distribution to us of $214.5 million, we used the distribution received from Horizon to amend and pay down our term loan facilities. During 2015, we had net additional repayments of approximately $169.9 million on our term loan facilities and $39.5 million on our receivables and revolving credit facilities. We transferred cash of approximately $17.1 million during the period to Horizon, as a result of the spin-off of our former Cequent businesses. We also made deferred purchase price payments related to our previous acquisitions of approximately $6.4 million, we used approximately $1.9 million related to debt financing fees, and used a net cash amount of approximately $1.7 million net, related to our stock compensation arrangements. During 2014, we had net additional borrowings of approximately $266.1 million on our term loan facilities and $74.9 million on our receivables and revolving credit facilities, of which a significant portion was used to fund the Allfast acquisition. In addition, we purchased the remaining 30% noncontrolling interest of Arminak for a cash purchase price of $51.0 million. We also had cash uses of approximately $3.8 million related to debt financing costs and $1.1 million net, related to our stock compensation arrangements.

40


Our Debt and Other Commitments
During the second quarter of 2015, we amended our Credit Agreement, pursuant to which we were able to extend maturities and resize our credit facilities following the spin-off of the Cequent businesses. The cash distribution to the Company from Horizon was used to reduce the outstanding borrowings under the previous credit agreement. The Credit Agreement consists of a $500.0 million senior secured revolving credit facility, which permits revolving borrowings denominated in specific foreign currencies ("Foreign Currency Loans"), subject to a $75.0 million sub limit, and a $275.0 million senior secured term loan A facility ("Term Loan A Facility").
Below is a summary of the key terms under the Credit Agreement as of December 31, 2015, and the key terms of the previous credit agreement in place immediately prior to entering into the amended Credit Agreement on June 30, 2015, with term loans showing the face amount of borrowings upon issuance and revolving credit facilities showing gross availability at each date:
Instrument
 
Amount
($ in millions)
 
Maturity Date
 
Interest Rate
Credit Agreement
 
 
 
 
 
 
Senior secured revolving credit facility
 
$
500.0

 
6/30/2020
 
LIBOR(a) plus 1.750%(b)
Senior secured term loan A facility
 
275.0

 
6/30/2020
 
LIBOR(a) plus 1.750%(b)
 
 
 
 
 
 
 
Previous Credit Agreement
 
 
 
 
 
 
Senior secured revolving credit facility
 
575.0

 
10/16/2018
 
LIBOR(a) plus 1.625%(b)
Senior secured term loan A facility
 
450.0

 
10/16/2018
 
LIBOR(a) plus 1.625%(b)
__________________________
(a) London Interbank Offered Rate ("LIBOR")
(b) The interest rate spread is based upon the leverage ratio, as defined, as of the most recent determination date.
The Credit Agreement also provides incremental term loan facility commitments and/or incremental revolving credit facility commitments in an amount not to exceed the greater of $300 million and an amount such that, after giving effect to such incremental commitments and the incurrence of any other indebtedness substantially simultaneously with the making of such incremental commitments, the senior secured net leverage ratio, as defined in the Credit Agreement, is no greater than 2.50 to 1.00. The terms and conditions of any incremental term loan facility and/or incremental revolving credit facility commitments must be no more favorable than the existing credit facilities under the Credit Agreement.
We may be required to prepay a portion of the loans under the Term Loan A Facility in an amount equal to a percentage of our excess cash flow, as defined, with such percentage based on our leverage ratio, as defined. As of December 31, 2015, no amounts are due under this provision.
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 the Credit Agreement's financial covenants. Our Credit Agreement contains various negative and affirmative covenants and other requirements affecting us and our subsidiaries that are comparable to the previous credit agreement, including restrictions on incurrence of debt, liens, mergers, investments, loans, advances, guarantee obligations, acquisitions, asset 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 the Credit Agreement also require us and our subsidiaries to meet certain restrictive financial covenants and ratios computed quarterly, including a maximum leverage ratio (total consolidated indebtedness plus outstanding amounts under the accounts receivable securitization facility over consolidated EBITDA, as defined) and a minimum interest expense coverage ratio (consolidated EBITDA, as defined, over cash interest expense, as defined). Our permitted leverage ratio under the Credit Agreement is 3.50 to 1.00 as of December 31, 2015. If we were to complete an acquisition which qualifies for a Covenant Holiday Period, as defined in our Credit Agreement, then our permitted leverage ratio cannot exceed 4.00 to 1.00 during that period. Our actual leverage ratio was 2.80 to 1.00 as of December 31, 2015. Our permitted interest expense coverage ratio under the Credit Agreement is 3.00 to 1.00 and, our actual interest expense coverage ratio was 12.77 to 1.00 as of December 31, 2015. At December 31, 2015, we were in compliance with our financial and other covenants contained in the Credit Agreement.

41


The following is a reconciliation of net income (loss), as reported, which is a GAAP measure of our operating results, to Consolidated Bank EBITDA, as defined in our Credit Agreement, for the year ended December 31, 2015. We present Consolidated Bank EBITDA to show our performance under our financial covenants.
 
 
Year ended
December 31, 2015
 
 
(dollars in thousands)
Net income (loss)
 
$
(33,400
)
Bank stipulated adjustments:
 
 
Interest expense, net (as defined)
 
14,060

Income tax expense
 
6,540

Depreciation and amortization
 
43,540

Extraordinary non-cash charges
 
75,680

Non-cash compensation expense(1)
 
6,340

Other non-cash expenses or losses
 
17,830

Non-recurring expenses or costs(2)
 
15,000

Acquisition integration costs(3)
 
1,880

Debt financing and extinguishment costs(4)
 
1,970

Permitted dispositions(5)
 
4,740

Consolidated Bank EBITDA, as defined
 
$
154,180

 
 
December 31, 2015
 
 
(dollars in thousands)
Total Consolidated Indebtedness, as defined(6)
 
$
432,230

 
Consolidated Bank EBITDA, as defined
 
154,180

 
Actual leverage ratio
 
2.80

x
Covenant requirement
 
3.50

x
 
 
December 31, 2015
 
 
(dollars in thousands)
Interest expense, as defined
 
$
14,060

Interest income
 
(420
)
Non-cash amounts attributable to amortization of financing costs
 
(1,700
)
Pro forma adjustment for acquisitions and dispositions
 
130

Total consolidated cash interest expense, as defined
 
$
12,070


42


 
 
December 31, 2015
 
 
 
(dollars in thousands)
 
Consolidated Bank EBITDA, as defined
 
$
154,180

 
Total consolidated cash interest expense, as defined
 
12,070

 
Actual interest expense coverage ratio
 
12.77

x
Covenant requirement
 
3.00

x
________________________________________
(1)Non-cash compensation expenses resulting from the grant of restricted shares of common stock and common stock options.
(2)Non-recurring costs and expenses related to cost savings projects, including restructuring and severance expenses, not to exceed $15 million in any fiscal year and $40.0 million in aggregate, subsequent to January 1, 2013.
(3)Costs and expenses arising from the integration of any business acquired not to exceed $15 million in any fiscal year and $40 million in the aggregate.
(4)Costs incurred with refinancing our credit facilities.
(5)EBITDA from permitted dispositions, as defined.
(6)Includes $6.6 million of acquisition related deferred purchase price and contingent consideration as of December 31, 2015.
Another important source of liquidity is our $75.0 million accounts receivable facility, under which we have the ability to sell eligible accounts receivable to a third-party multi-seller receivables funding company. During the second quarter of 2015, we amended the facility to remove the former Cequent businesses and to reduce the committed funding from $105.0 million to $75.0 million, with no other significant changes to the facility. In December 2015, the Company further amended the facility to extend the maturity date from October 16, 2018 to June 30, 2020.
Our available liquidity under our accounts receivable facility ranges from $60 million to $96 million, depending on the level of receivables outstanding at a given point in time during the year. We had $53.6 million and $78.7 million outstanding under the facility as of December 31, 2015 and 2014, respectively, and $7.1 million and $1.6 million available but not utilized as of December 31, 2015 and 2014, respectively. At December 31, 2015, we had $100.3 million outstanding under our revolving credit facility and had $378.1 million potentially available after giving effect to approximately $21.6 million of letters of credit issued and outstanding. At December 31, 2014, we had $118.1 million outstanding under our revolving credit facility and had $435.0 million potentially available after giving effect to approximately $21.9 million of letters of credit issued and outstanding. The letters of credit are used for a variety of purposes, including support of certain operating lease agreements, vendor payment terms and other subsidiary operating activities, and to meet various states' requirements to self-insure workers' compensation claims, including incurred but not reported claims. Including availability under our accounts receivable facility and after consideration of leverage restrictions contained in the Credit Agreement, as of December 31, 2015 and December 31, 2014, we had $107.4 million and $192.0 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 and accounts receivable facilities to fund our debt service obligations and other contractual commitments, working capital and capital expenditure requirements. At the end of each quarter, we use cash on hand from our domestic and certain foreign subsidiaries to pay down amounts outstanding under our revolving credit and accounts receivable facilities. Generally, excluding the impact and timing of acquisitions, we use available liquidity under these facilities to fund capital expenditures and daily working capital requirements.
Our combined weighted average monthly amounts outstanding on our Credit Agreement and our accounts receivable facility approximated $631.8 million and $512.3 million during 2015 and 2014, respectively. The overall increase is due primarily to the incremental term loan and additional borrowings under our existing senior secured revolving credit facility to fund the Allfast acquisition during the fourth quarter of 2014.
Cash management related to our revolving credit and accounts receivable facilities is centralized. We monitor our cash position and available liquidity on a daily basis and forecast our cash needs on a weekly basis within the current quarter and on a monthly basis outside the current quarter over the remainder of the year. Our business and related cash forecasts are updated monthly. Given aggregate available funding under our revolving credit and accounts receivable facilities of $107.4 million at December 31, 2015, after consideration of the aforementioned leverage restrictions, and based on forecasted cash sources and requirements inherent in our business plans, we believe that our liquidity and capital resources, including anticipated cash flows from operations, will be sufficient to meet our debt service, capital expenditure and other short-term and long-term obligation needs for the foreseeable future.

43


Our exposure to interest rate risk results primarily from the variable rates under our Credit Agreement. Borrowings under the Credit Agreement bear interest, at various rates, as more fully described in Note 12, "Long-term Debt," included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K. We use interest rate swap agreements to fix the LIBOR-based variable portion of the interest rates on our term loan facility. As of December 31, 2015, we had interest rate swap agreements in place that hedge a notional amount of debt from approximately $251.5 million to approximately $192.7 million, with established fixed interest rates in a range of 0.74% to 2.68% with various expiration terms extending to June 30, 2020.
We are subject to variable interest rates on our term loan and revolving credit facility. At December 31, 2015, one-Month LIBOR and three-Month LIBOR approximated 0.43% and 0.61%, respectively. Based on our variable rate-based borrowings outstanding at December 31, 2015, and after consideration of the interest rate swap agreement associated with our $275.0 million term loan A, a 1% increase in the per annum interest rate would increase our interest expense by approximately $2.8 million annually.
Principal payments required under the Credit Agreement for the term loan A facility are $3.4 million due each fiscal quarter beginning December 2015 through September 2018 and approximately $5.2 million due each fiscal quarter from December 2018 through March 2020, with final payment of $202.8 million due on June 30, 2020.
In addition to our long-term debt, we have other cash commitments related to leases. We account for these lease transactions primarily as operating leases, and incurred expense from continuing operations related thereto of approximately $17.2 million in 2015. We expect to continue to utilize leasing as a financing strategy in the future to meet capital expenditure needs and to reduce debt levels.
In addition to lease expense from continuing operations, we also have approximately $2.4 million in annual future lease obligations related to businesses that have been discontinued, of which, approximately 64% relate to the facility for the former specialty laminates, jacketings and insulation tapes line of business (which extends through 2024) and 36% relates to the facility for the former industrial fastening business (which extends through 2022).
Market Risk
We conduct business in various locations throughout the world and are subject to market risk due to changes in the value of foreign currencies. The functional currencies of our foreign subsidiaries are primarily the local currency in the country of domicile. We manage these operating activities at the local level and revenues and costs are generally denominated in local currencies; however, results of operations and assets and liabilities reported in U.S. dollars will fluctuate with changes in exchange rates between such local currencies and the U.S. dollar.
We have historically used derivative financial instruments to manage currency risks, albeit in immaterial notional contracts, as we explored the predictability of our procurement activities denominated in currencies other than the functional currency of our subsidiaries and the impact of currency rate volatility on our earnings.
We are also subject to interest risk as it relates to our long-term debt. We use interest rate swap agreements to fix the variable portion of our debt to manage this risk. See Note 13, "Derivative Instruments," included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K for additional information.
Common Stock
TriMas is listed in the NASDAQ Global Select MarketSM. Our stock trades under the symbol "TRS."


44


Commitments and Contingencies
Under various agreements, we are obligated to make future cash payments in fixed amounts. These include payments under our long-term debt agreements, rent payments required under operating and capital lease agreements, certain benefit obligations and interest obligations on our credit agreement.
The following table summarizes our expected fixed cash obligations over various future periods related to these items as of December 31, 2015.
 
 
Payments Due by Periods
 
 
Total
 
Less than
One Year
 
1 - 3 Years
 
3 - 5 Years
 
More than
5 Years
 
 
(dollars in thousands)
Contractual cash obligations:
 
 
 
 
 
 
 
 
 
 
Long-term debt and receivables facilities
 
$
425,680

 
$
13,850

 
$
29,380

 
$
382,450

 
$

Lease obligations
 
91,810

 
17,400

 
30,450

 
21,090

 
22,870

Benefit obligations
 
20,980

 
880

 
3,600

 
4,740

 
11,760

Interest obligations (a)
 
36,670

 
8,720

 
16,530

 
11,420

 

Deferred purchase price and contingent consideration
 
6,550

 
6,550

 

 

 

Total contractual obligations
 
$
581,690

 
$
47,400

 
$
79,960

 
$
419,700

 
$
34,630

__________________________
(a)Interest on our both our senior secured revolving credit facility and term loan A facility is based on LIBOR plus 175.0 basis points, which equaled approximately 2.2% at December 31, 2015. Interest on our receivables facility is based on LIBOR plus 100.0 basis points, which equaled 1.4% at December 31, 2015. These rates were used to estimate our future interest obligations with respect to the long-term debt.
As of December 31, 2015, we had a $500.0 million revolving credit facility and a $75.0 million accounts receivable facility. We had $100.3 million outstanding under our revolving credit facility, and $53.6 million outstanding under the accounts receivable facility as of December 31, 2015.
We may be required to prepay a portion of our term loan A facility in an amount equal to a percentage of our excess cash flow, as defined, which such percentage based on our leverage ratio, as defined. No amounts have been included in the contractual obligations table as a reasonable estimate cannot be determined.
As of December 31, 2015, we are contingently liable for standby letters of credit totaling $21.6 million issued on our behalf by financial institutions under the Credit Agreement. These letters of credit are used for a variety of purposes, including to support 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.
The liability related to unrecognized tax benefits has been excluded from the contractual obligations table because a reasonable estimate of the timing and amount of cash flows from future tax settlements cannot be determined. For additional information, refer to Note 20, "Income Taxes," included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K.
Credit Rating
We and certain of our outstanding debt obligations are rated by Standard & Poor's and Moody's. On June 3, 2015, Moody's assigned a rating of Ba3 to our new senior secured credit facilities, as presented in Note 12, "Long-term Debt" included in Item 8, "Financial Statements and Supplementary Data" within this Form 10-K. Moody's downgraded our Corporate Family Rating to Ba3 from Ba2 and maintained our outlook as stable. On June 1, 2015, Standard & Poor's affirmed a BB- corporate credit rating to our amended credit facilities and maintained our 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.
Outlook
Over the past two years, we have significantly reshaped our portfolio with the spin-off of Cequent and the acquisitions of Allfast and Lion Holdings, to where we are heavily-weighted toward the Packaging and Aerospace sectors. We believe these two businesses offer higher-growth and higher-margin profiles and potential, and are the two strategic platforms that we plan to invest more heavily in and would like to grow more quickly than our other segments to increase our overall profitability and improve other financial metrics.

45


We believe that the current macroeconomic environment will continue into 2016, with many headwinds continuing to pressure our results of operations - most notably lower oil prices, the strong U.S. dollar and a general industrial weakness, all with little or no economic growth. Our sales were essentially flat in the first nine months of 2015, as organic and acquisition-related sales increases essentially offset the impact of lower oil prices and the strong U.S. dollar. However, our sales sharply declined in the fourth quarter as economic conditions worsened and customer demand across our businesses slowed. In response, we increased our previously announced FIP by 50%, to an expected annual full run-rate cost savings level of $22 million, with actions taking place across all of our businesses and within our corporate office. We plan to execute on internal initiatives which we believe will enable us to navigate through the current environment until demand levels and activity increase, and position us for improved profitability and ability to leverage our lower fixed cost structure with higher sales levels.
While the tactics we employ may differ between years, our strategic priorities remain consistent: generating profitable growth, enhancing profit margins, optimizing capital and resource allocation and striving to be a workplace of choice for great people.
Impact of New Accounting Standards
See Note 2, "New Accounting Pronouncements," included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K.
Critical Accounting Policies
The following discussion of accounting policies is intended to supplement the accounting policies presented in Note 3, "Summary of Significant Accounting Policies" included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K. Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, our evaluation of business and macroeconomic trends, and information from other outside sources, as appropriate.
Receivables.    Receivables are presented net of allowances for doubtful accounts of approximately $3.7 million and $2.2 million at December 31, 2015 and 2014, respectively. We monitor our exposure for credit losses and maintain adequate allowances for doubtful accounts. We determine these allowances based on our historical write-off experience and/or specific customer circumstances and provide such allowances when amounts are reasonably estimable and it is probable a loss has been incurred. We do not have concentrations of accounts receivable with a single customer or group of customers and do not believe that significant credit risk exists due to our diverse customer base. Trade accounts receivable of substantially all domestic business operations may be sold, on an ongoing basis, to TSPC, but remain included in our consolidated balance sheet.
Depreciation and Amortization.    Depreciation is computed principally using the straight-line method over the estimated useful lives of the assets. Annual depreciation rates are as follows: land and land improvements/buildings, 10 to 40 years, and machinery and equipment, three to 15 years. Capitalized debt issuance costs are amortized over the underlying terms of the related debt securities. Customer relationship intangibles are amortized over periods ranging from five to 25 years, while technology and other intangibles are amortized over periods ranging from one to 30 years.
Impairment of Long-Lived Assets and Definite-Lived Intangible Assets.    We review, on at least a quarterly basis, the financial performance of each business unit for indicators of impairment. In reviewing for impairment indicators, we also consider events or changes in circumstances such as business prospects, customer retention, market trends, potential product obsolescence, competitive activities and other economic factors. An impairment loss is recognized when the carrying value of an asset group exceeds the future net undiscounted cash flows expected to be generated by that asset group. The impairment loss recognized is the amount by which the carrying value of the asset group exceeds its fair value.
Goodwill and Indefinite-Lived Intangibles.    We assess goodwill and indefinite-lived intangible assets for impairment at the reporting unit level on an annual basis as of October 1, by reviewing relevant qualitative and quantitative factors. More frequent evaluations may be required if we experience changes in our business climate or as a result of other triggering events that take place. If carrying value exceeds fair value, a possible impairment exists and further evaluation is performed.
We determine our reporting units at the individual operating segment level, or one level below, when there is discrete financial information available that is regularly reviewed by segment management for evaluating operating results. For purposes of our 2015 goodwill impairment test, we had 10 reporting units within our four reportable segments, all of which had goodwill. 

46


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.
Due to a significant decline in profitability levels in our Energy and engine products reporting units during 2015 and a decline in our stock price and resulting market capitalization, we determined there were indicators that the fair value of the Energy and engine products reporting units, and/or other units, may be less than the carrying value. As such, we performed a Step I quantitative goodwill impairment test for nine out of 10 of our reporting units. For the Allfast reporting unit, we performed a Step Zero qualitative analysis. In conducting the Step I quantitative analysis, we determined the estimated fair value of the reporting units 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 Energy and engine products reporting units failed Step I, requiring a Step II test to determine the amount, if any, of an impairment charge. All other reporting units passed the Step I test, with estimated fair value of goodwill exceeding the carrying value by more than 25%, and thus there was no goodwill impairment. In addition, a 1% reduction in residual growth rate combined with a 1% increase in the weighted average cost of capital would not have changed the conclusions reached under the Step I impairment test. In performing Step II of the quantitative goodwill impairment test, we determined the implied fair value of the Energy and engine reporting unit goodwill in the same manner as if the reporting units were being acquired in a business combination and compared the implied fair value of the reporting unit's goodwill to the respective carrying value of the goodwill. Based on our analysis, the implied fair value of goodwill for our Energy and engine products reporting units were less than the respective carrying values, therefore we recorded pre-tax goodwill impairment charges of appropriately $74.1 million during the fourth quarter of 2015.
Additionally, because of the factors previously mentioned, during the fourth quarter of 2015 we performed a quantitative assessment for all of our indefinite-lived intangibles assets except for the Allfast trade name, using a relief-from-royalty method. For the Allfast trade name we performed a Step Zero qualitative analysis. 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 the fair value of our indefinite-lived intangible assets exceeded the carrying value, and thus there was no impairment. Although our indefinite-lived intangible assets passed the quantitative testing, we noted a trademark/trade name within our Aerospace reportable segment that had excess fair value over its carrying value of less than 10%.
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.
Pension and Postretirement Benefits.    Annual net periodic expense and accrued benefit obligations recorded with respect to our defined benefit plans are determined on an actuarial basis. We determine assumptions used in the actuarial calculations which impact reported plan obligations and expense, considering trends and changes in the current economic environment in determining the most appropriate assumptions to utilize as of our measurement date. Annually, we review the actual experience compared to the most significant assumptions used and make adjustments to the assumptions, if warranted. The healthcare trend rates are reviewed based upon actual claims experience. Discount rates are based upon an expected benefit payments duration analysis and the equivalent average yield rate for high-quality fixed-income investments. Pension benefits are funded through deposits with trustees and the expected long-term rate of return on plan assets is based upon actual historical returns modified for known changes in the market and any expected change in investment policy. Postretirement benefits are not funded and our policy is to pay these benefits as they become due. Certain accounting guidance, including the guidance applicable to pensions, does not require immediate recognition of the effects of a deviation between actual and assumed experience or the revision of an estimate. This approach allows the favorable and unfavorable effects that fall within an acceptable range to be netted.

47


Income Taxes.    We compute income taxes using the asset and liability method, whereby deferred income taxes using current enacted tax rates are provided for the temporary differences between the financial reporting basis and the tax basis of assets and liabilities and for operating loss and tax credit carryforwards. We determine valuation allowances based on an assessment of positive and negative evidence on a jurisdiction-by-jurisdiction basis and record a valuation allowance to reduce deferred tax assets to the amount more likely than not to be realized. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We record interest and penalties related to unrecognized tax benefits in income tax expense.
Other Loss Reserves.    We have other loss exposures related to environmental claims, asbestos claims and litigation. Establishing loss reserves for these matters requires the use of estimates and judgment in regard to risk exposure and ultimate liability. We are generally self-insured for losses and liabilities related principally to workers' compensation, health and welfare claims and comprehensive general, product and vehicle liability. Generally, we are responsible for up to $0.5 million per occurrence under our retention program for workers' compensation, between $0.3 million and $2.0 million per occurrence under our retention programs for comprehensive general, product and vehicle liability, and have a $0.3 million per occurrence stop-loss limit with respect to our self-insured group medical plan. We accrue loss reserves up to our retention amounts based upon our estimates of the ultimate liability for claims incurred, including an estimate of related litigation defense costs, and an estimate of claims incurred but not reported using actuarial assumptions about future events. We accrue for such items when such amounts are reasonably estimable and probable. We utilize known facts and historical trends, as well as actuarial valuations in determining estimated required reserves. Changes in assumptions for factors such as medical costs and actual experience could cause these estimates to change significantly.

48


Item 7A.    Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business, we are exposed to market risk associated with fluctuations in commodity prices, insurable risks due to property damage, employee and liability claims, and other uncertainties in the financial and credit markets, which may impact demand for our products.
We conduct business in various locations throughout the world and are subject to market risk due to changes in the value of foreign currencies. The functional currencies of our foreign subsidiaries are primarily the local currency in the country of domicile. We manage these operating activities at the local level and revenues and costs are generally denominated in local currencies; however, results of operations and assets and liabilities reported in U.S. dollars will fluctuate with changes in exchange rates between such local currencies and the U.S. dollar. We are also subject to interest risk as it relates to long-term debt, for which we have historically and may prospectively employ derivative instruments such as interest rate swaps to mitigate the risk of variable interest rates. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" for details about our primary market risks, and the objectives and strategies used to manage these risks. Also see Note 12, "Long-term Debt," and Note 13, "Derivative Instruments," included in Item 8, "Financial Statements and Supplementary Data," within this Form 10-K for additional information.
 




49


Item 8.    Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Board of Directors and Shareholders of
TriMas Corporation
Bloomfield Hills, Michigan

We have audited the accompanying consolidated balance sheets of TriMas Corporation and subsidiaries (the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income, cash flows, and shareholders’ equity for each of the three years in the period ended December 31, 2015. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of TriMas Corporation and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Notes 1 and 6 to the consolidated financial statements, on June 30, 2015, the Company completed the spin-off of its Cequent businesses. As a result of the spin-off, the financial position and the results of operations and cash flows related to the Cequent businesses have been presented as discontinued operations for all periods presented.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2016 expressed an unqualified opinion on the Company's internal control over financial reporting.

 


/s/ Deloitte & Touche LLP

Detroit, Michigan
February 26, 2016



50


TriMas Corporation
Consolidated Balance Sheet
(Dollars in thousands)
 
 
December 31,
 
 
2015
 
2014
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
19,450

 
$
24,420

Receivables, net
 
121,990

 
132,800

Inventories
 
167,370

 
171,260

Prepaid expenses and other current assets
 
17,810

 
8,690

Current assets, discontinued operations
 

 
192,580

Total current assets
 
326,620

 
529,750

Property and equipment, net
 
181,130

 
177,470

Goodwill
 
378,920

 
460,080

Other intangibles, net
 
273,870

 
297,420

Other assets
 
9,760

 
20,030

Non-current assets, discontinued operations
 

 
140,680

Total assets
 
$
1,170,300

 
$
1,625,430

Liabilities and Shareholders' Equity
 
 
 
 
Current liabilities:
 
 
 
 
Current maturities, long-term debt
 
$
13,850

 
$
23,400

Accounts payable
 
88,420

 
103,510

Accrued liabilities
 
50,480

 
60,150

Current liabilities, discontinued operations
 

 
119,900

Total current liabilities
 
152,750

 
306,960

Long-term debt, net
 
405,780

 
607,410

Deferred income taxes
 
11,260

 
22,120

Other long-term liabilities
 
53,320

 
67,410

Non-current liabilities, discontinued operations
 

 
30,900

Total liabilities
 
623,110

 
1,034,800

Preferred stock $0.01 par: Authorized 100,000,000 shares;
Issued and outstanding: None
 

 

Common stock, $0.01 par: Authorized 400,000,000 shares;
Issued and outstanding: 45,322,527 shares at December 31, 2015 and 45,280,385 shares at December 31, 2014
 
450

 
450

Paid-in capital
 
812,160

 
806,810

Accumulated deficit
 
(254,120
)
 
(226,850
)
Accumulated other comprehensive income (loss)
 
(11,300
)
 
10,220

Total shareholders' equity
 
547,190

 
590,630

Total liabilities and shareholders' equity
 
$
1,170,300

 
$
1,625,430


The accompanying notes are an integral part of these financial statements.


51


TriMas Corporation
Consolidated Statement of Operations
(Dollars in thousands, except per share amounts)
 
 
Year ended December 31,
 
 
2015
 
2014
 
2013
Net sales
 
$
863,980

 
$
887,300

 
$
799,700

Cost of sales
 
(627,870
)
 
(650,290
)
 
(573,660
)
Gross profit
 
236,110

 
237,010

 
226,040

Selling, general and administrative expenses
 
(162,350
)
 
(146,590
)
 
(138,540
)
Net gain (loss) on dispositions of property and equipment
 
(2,330
)
 
(3,770
)
 
9,710

Impairment of goodwill and indefinite-lived intangible assets
 
(75,680
)
 

 

Operating profit (loss)
 
(4,250
)
 
86,650

 
97,210

Other expense, net:
 
 
 
 
 
 
Interest expense
 
(14,060
)
 
(9,590
)
 
(15,270
)
Debt financing and extinguishment expenses
 
(1,970
)
 
(3,360
)
 
(2,460
)
Other expense, net
 
(1,840
)
 
(4,100
)
 
(3,330
)
Other expense, net
 
(17,870
)
 
(17,050
)
 
(21,060
)
Income (loss) from continuing operations before income tax expense
 
(22,120
)
 
69,600

 
76,150

Income tax expense
 
(6,540
)
 
(22,710
)
 
(16,910
)
Income (loss) from continuing operations
 
(28,660
)
 
46,890

 
59,240

Income (loss) from discontinued operations, net of income taxes
 
(4,740
)
 
22,390

 
20,830

Net income (loss)
 
(33,400
)
 
69,280

 
80,070

Less: Net income attributable to noncontrolling interests
 

 
810

 
4,520

Net income (loss) attributable to TriMas Corporation
 
$
(33,400
)
 
$
68,470

 
$
75,550

Basic earnings (loss) per share attributable to TriMas Corporation:
 
 
 
 
 
 
Continuing operations
 
$
(0.64
)
 
$
1.03

 
$
1.34

Discontinued operations
 
(0.10
)
 
0.50

 
0.51

Net income (loss) per share
 
$
(0.74
)
 
$
1.53

 
$
1.85

Weighted average common shares - basic
 
45,123,626

 
44,881,925

 
40,926,257

Diluted earnings (loss) per share attributable to TriMas Corporation:
 
 
 
 
 
 
Continuing operations
 
$
(0.64
)
 
$
1.02

 
$
1.32

Discontinued operations
 
(0.10
)
 
0.49

 
0.51

Net income (loss) per share
 
$
(0.74
)
 
$
1.51

 
$
1.83

Weighted average common shares - diluted
 
45,123,626

 
45,269,409

 
41,395,706



The accompanying notes are an integral part of these financial statements.

52


TriMas Corporation
Consolidated Statement of Comprehensive Income
(Dollars in thousands)

 
 
Year ended December 31,
 
 
2015
 
2014
 
2013
Net income (loss)
 
$
(33,400
)
 
$
69,280

 
$
80,070

Other comprehensive income (loss):
 
 
 
 
 
 
Defined pension and postretirement pension plans (Note 16)
 
1,810

 
(3,340
)
 
1,600

Foreign currency translation
 
(12,370
)
 
(13,820
)
 
(15,770
)
Derivative instruments (Note 13)
 
(2,650
)
 
(450
)
 
2,740

Total other comprehensive loss
 
(13,210
)
 
(17,610
)
 
(11,430
)
Total comprehensive income (loss)
 
(46,610
)
 
51,670

 
68,640

Less: Net income attributable to noncontrolling interests
 

 
810

 
4,520

Total comprehensive income (loss) attributable to TriMas Corporation
 
$
(46,610
)
 
$
50,860

 
$
64,120





The accompanying notes are an integral part of these financial statements.


53



TriMas Corporation
Consolidated Statement of Cash Flows
(Dollars in thousands)
 
 
Year ended December 31,
 
 
2015
 
2014
 
2013
Cash Flows from Operating Activities:
 
 
 
 
 
 
Net income (loss)
 
$
(33,400
)
 
$
69,280

 
$
80,070

Income (loss) from discontinued operations
 
(4,740
)
 
22,390

 
20,830

Income (loss) from continuing operations
 
(28,660
)
 
46,890

 
59,240

Adjustments to reconcile net income (loss) to net cash provided by operating activities, net of acquisition impact:
 
 
 
 
 
 
Impairment of goodwill and indefinite-lived intangible assets