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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)    
  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 2021
Or
  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 38-2687639
(State or other jurisdiction of
incorporation or organization)
  (IRS Employer
Identification No.)
38505 Woodward Avenue, Suite 200
Bloomfield Hills, Michigan 48304
(Address of principal executive offices, including zip code)
(248) 631-5450
(Registrant's telephone number, including area code)
Title of each class Trading symbol(s) Name of exchange on which registered
Common stock, $0.01 par value TRS The NASDAQ Stock Market LLC
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     No .
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No 
As of July 22, 2021, the number of outstanding shares of the Registrant's common stock, $0.01 par value, was 42,917,209 shares.


TriMas Corporation
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1

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: the severity and duration of the ongoing coronavirus (“COVID-19”) pandemic on our operations, customers and suppliers, as well as related actions taken by governmental authorities and other third parties in response, each of which is uncertain, rapidly changing and difficult to predict; general economic and currency conditions; material and energy costs; risks and uncertainties associated with intangible assets, including goodwill or other intangible asset impairment charges; competitive factors; future trends; our ability to realize our business strategies; our ability to identify attractive acquisition candidates, successfully integrate acquired operations or realize the intended benefits of such acquisitions; information technology and other cyber-related risks; the performance of our subcontractors and suppliers; supply constraints; market demand; intellectual property factors; litigation; government and regulatory actions, including, without limitation, climate change legislation and other environmental regulations, as well as the impact of tariffs, quotas and surcharges; our leverage; liabilities imposed by our debt instruments; labor disputes; changes to fiscal and tax policies; contingent liabilities relating to acquisition activities; the disruption of operations from catastrophic or extraordinary events, including natural disasters and public health crises; the potential impact of Brexit; our future prospects; and other risks that are discussed in Part I, Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2020 and elsewhere in this report. The risks described in our Annual Report on Form 10-K and elsewhere 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, except as required by law.
We disclose important factors that could cause our actual results to differ materially from our expectations implied by our forward-looking statements under Part I, Item 2, "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.
2

PART I. FINANCIAL INFORMATION

Item 1.    Consolidated Financial Statements
TriMas Corporation
Consolidated Balance Sheet
(Dollars in thousands)
June 30,
2021
December 31,
2020
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 117,410  $ 73,950 
Receivables, net of reserves of approximately $1.5 million and $2.1 million as of June 30, 2021 and December 31, 2020, respectively 135,220  113,410 
Inventories 149,920  149,380 
Prepaid expenses and other current assets 19,910  15,090 
Total current assets 422,460  351,830 
Property and equipment, net 253,230  253,060 
Operating lease right-of-use assets 38,970  37,820 
Goodwill 301,430  303,970 
Other intangibles, net 194,150  206,200 
Deferred income taxes 12,300  19,580 
Other assets 22,410  21,420 
Total assets $ 1,244,950  $ 1,193,880 
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 77,250  $ 69,910 
Accrued liabilities 56,320  60,540 
Operating lease liabilities, current portion 6,530  6,740 
Total current liabilities 140,100  137,190 
Long-term debt, net 393,370  346,290 
Operating lease liabilities 32,890  31,610 
Deferred income taxes 19,560  24,850 
Other long-term liabilities 61,430  69,690 
Total liabilities 647,350  609,630 
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: 42,966,074 shares at June 30, 2021 and 43,178,165 shares at December 31, 2020
430  430 
Paid-in capital 735,880  749,050 
Accumulated deficit (134,710) (159,610)
Accumulated other comprehensive loss (4,000) (5,620)
Total shareholders' equity 597,600  584,250 
Total liabilities and shareholders' equity $ 1,244,950  $ 1,193,880 


The accompanying notes are an integral part of these consolidated financial statements.
3

TriMas Corporation
Consolidated Statement of Operations
(Unaudited—dollars in thousands, except for per share amounts)
  Three months ended
June 30,
Six months ended
June 30,
  2021 2020 2021 2020
Net sales $ 218,990  $ 199,550  $ 425,720  $ 382,340 
Cost of sales (160,960) (162,320) (316,360) (298,740)
Gross profit 58,030  37,230  109,360  83,600 
Selling, general and administrative expenses (32,460) (55,380) (62,680) (81,920)
Operating profit (loss) 25,570  (18,150) 46,680  1,680 
Other expense, net:    
Interest expense (4,120) (4,230) (7,670) (7,810)
Debt financing and related expenses (10,320) —  (10,520) — 
Other income (expense), net 670  1,130  (260) 1,050 
Other expense, net (13,770) (3,100) (18,450) (6,760)
Income (loss) before income tax expense 11,800  (21,250) 28,230  (5,080)
Income tax benefit (expense) 40  5,550  (3,330) 2,500 
Net income (loss) $ 11,840  $ (15,700) $ 24,900  $ (2,580)
Basic earnings (loss) per share:    
Net income (loss) per share $ 0.27  $ (0.36) $ 0.58  $ (0.06)
Weighted average common shares—basic 43,110,191  43,463,235  43,147,599  43,832,144 
Diluted earnings (loss) per share:    
Net income (loss) per share $ 0.27  $ (0.36) $ 0.57  $ (0.06)
Weighted average common shares—diluted 43,308,356  43,463,235  43,471,616  43,832,144 


The accompanying notes are an integral part of these consolidated financial statements.
4

TriMas Corporation
Consolidated Statement of Comprehensive Income
(Unaudited—dollars in thousands)
Three months ended
June 30,
Six months ended
June 30,
2021 2020 2021 2020
Net income (loss) $ 11,840  $ (15,700) $ 24,900  $ (2,580)
Other comprehensive income (loss):
Defined benefit plans (Note 17) 160  160  310  310 
Foreign currency translation 1,400  1,310  (2,020) (6,950)
Derivative instruments (Note 10) (570) (2,130) 3,330  2,300 
Total other comprehensive income (loss) 990  (660) 1,620  (4,340)
Total comprehensive income (loss) $ 12,830  $ (16,360) $ 26,520  $ (6,920)


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


5

TriMas Corporation
Consolidated Statement of Cash Flows
(Unaudited—dollars in thousands)
Six months ended June 30,
2021 2020
Cash Flows from Operating Activities:
Net income (loss) $ 24,900  $ (2,580)
Adjustments to reconcile net income to net cash provided by operating activities, net of acquisition impact:
Loss on dispositions of assets 130  1,010 
Depreciation 15,830  14,770 
Amortization of intangible assets 10,780  10,150 
Amortization of debt issue costs 520  570 
Deferred income taxes 1,790  (1,460)
Non-cash compensation expense 5,660  4,680 
Non-cash change in legacy liability estimate —  23,400 
Debt financing and related expenses 10,520  — 
Increase in receivables (22,600) (12,300)
(Increase) decrease in inventories (900) 5,260 
(Increase) decrease in prepaid expenses and other assets (7,430) 290 
Increase (decrease) in accounts payable and accrued liabilities 1,350  (14,530)
Other operating activities 2,120  1,580 
Net cash provided by operating activities, net of acquisition impact 42,670  30,840 
Cash Flows from Investing Activities:
Capital expenditures (18,330) (9,250)
Acquisition of businesses, net of cash acquired —  (95,160)
Net proceeds from disposition of business, property and equipment 140  2,110 
Net cash used for investing activities (18,190) (102,300)
Cash Flows from Financing Activities:
Retirement of senior notes (300,000) — 
Proceeds from issuance of senior notes 400,000  — 
Proceeds from borrowings on revolving credit facilities —  245,700 
Repayments of borrowings on revolving credit facilities (48,620) (247,320)
Debt financing fees and senior notes redemption premium (13,570) — 
Shares surrendered upon exercise and vesting of equity awards to cover taxes (4,620) (2,570)
Payments to purchase common stock (14,210) (31,570)
Net cash provided by (used for) financing activities 18,980  (35,760)
Cash and Cash Equivalents:
Increase (decrease) for the period 43,460  (107,220)
At beginning of period 73,950  172,470 
At end of period $ 117,410  $ 65,250 
Supplemental disclosure of cash flow information:
Cash paid for interest $ 6,170  $ 7,150 
Cash paid for taxes $ 4,420  $ 3,410 



The accompanying notes are an integral part of these consolidated financial statements.
6

TriMas Corporation
Consolidated Statement of Shareholders' Equity
Six Months Ended June 30, 2021 and 2020
(Unaudited—dollars in thousands)
Common
Stock
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Total
Balances, December 31, 2020 $ 430  $ 749,050  $ (159,610) $ (5,620) $ 584,250 
Net income —  —  13,060  —  13,060 
Other comprehensive income —  —  —  630  630 
Purchase of common stock —  (2,640) —  —  (2,640)
Shares surrendered upon exercise and vesting of equity awards to cover taxes —  (1,770) —  —  (1,770)
Non-cash compensation expense —  2,440  —  —  2,440 
Balances, March 31, 2021 $ 430  $ 747,080  $ (146,550) $ (4,990) $ 595,970 
Net income —  —  11,840  —  11,840 
Other comprehensive income —  —  —  990  990 
Purchase of common stock —  (11,570) —  —  (11,570)
Shares surrendered upon exercise and vesting of equity awards to cover taxes —  (2,850) —  —  (2,850)
Non-cash compensation expense —  3,220  —  —  3,220 
Balances, June 30, 2021 $ 430  $ 735,880  $ (134,710) $ (4,000) $ 597,600 

Common
Stock
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Total
Balances, December 31, 2019 $ 450  $ 782,880  $ (79,850) $ (6,000) $ 697,480 
Net income —  —  13,120  —  13,120 
Other comprehensive loss —  —  —  (3,680) (3,680)
Purchase of common stock (20) (31,550) —  —  (31,570)
Shares surrendered upon exercise and vesting of equity awards to cover taxes —  (1,830) —  —  (1,830)
Non-cash compensation expense —  1,940  —  —  1,940 
Balances, March 31, 2020 $ 430  $ 751,440  $ (66,730) $ (9,680) $ 675,460 
Net loss —  —  (15,700) —  (15,700)
Other comprehensive loss —  —  —  (660) (660)
Shares surrendered upon exercise and vesting of equity awards to cover taxes —  (740) —  —  (740)
Non-cash compensation expense 10  2,730  —  —  2,740 
Balances, June 30, 2020 $ 440  $ 753,430  $ (82,430) $ (10,340) $ 661,100 


The accompanying notes are an integral part of these consolidated financial statements.
7


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1. Basis of Presentation
TriMas Corporation ("TriMas" or the "Company"), and its consolidated subsidiaries, designs, engineers and manufactures innovative products under leading brand names for customers primarily in the consumer products, aerospace & defense, and industrial markets.
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries and, in the opinion of management, contain all adjustments, including adjustments of a normal and recurring nature, necessary for a fair presentation of financial position and results of operations. The preparation of financial statements requires management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities. Actual results may differ from such estimates and assumptions due to risks and uncertainties, including uncertainty in the current economic environment due to the ongoing outbreak of the coronavirus and related variants (“COVID-19”). While the full impact of the COVID-19 pandemic is unknown and cannot be reasonably estimated at this time, the Company has made appropriate accounting estimates based on the facts and circumstances available as of the reporting date. To the extent there are differences between these estimates and actual results, the Company's consolidated financial statements may be materially affected.
Results of operations for interim periods are not necessarily indicative of results for the full year. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the Company's 2020 Annual Report on Form 10-K.
2. Revenue
The following table presents the Company’s disaggregated net sales by primary market served (dollars in thousands):
Three months ended June 30, Six months ended June 30,
Customer Markets 2021 2020 2021 2020
Consumer Products $ 112,900  $ 104,530  $ 218,020  $ 183,590 
Aerospace & Defense 44,560  42,610  89,170  91,530 
Industrial 61,530  52,410  118,530  107,220 
Total net sales $ 218,990  $ 199,550  $ 425,720  $ 382,340 
The Company’s Packaging segment earns revenues from the consumer products (comprised of the beauty and personal care, home care, food and beverage, pharmaceutical and nutraceutical submarkets) and industrial markets. The Aerospace segment earns revenues from the aerospace & defense market (comprised of commercial, regional and business jet and military submarkets). The Specialty Products segment earns revenues from a variety of submarkets within the industrial market.
3. Realignment Actions
2021 Realignment Actions
During the six months ended June 30, 2021, the Company executed certain realignment actions in response to reductions in current and expected future end market demand. First, the Company closed its Packaging segment's Union City, California manufacturing facility, consolidating the operation into its Indianapolis, Indiana and Woodridge, Illinois facilities. The Company also realigned its Aerospace segment footprint, consolidating certain activities previously in its Stanton, California facilities into its Tolleson, Arizona facility. In addition, the Company also reorganized its corporate office legal and finance groups. The Company recorded pre-tax realignment charges of approximately $4.2 million and $8.2 million during the three and six months ended June 30, 2021, respectively. Of these costs, approximately $0.7 million and $2.2 million during the three and six months ended June 30, 2021, respectively, related to facility consolidations, and approximately $3.5 million and $6.0 million, respectively, were for employee separation costs. As of June 30, 2021, approximately $1.0 million of the employee separation costs had been paid. For the three and six months ended June 30, 2021, approximately $0.9 million and $2.7 million of these charges were included in costs of sales, respectively, and approximately $3.3 million and $5.5 million were included in selling, general and administrative expenses, respectively, in the accompanying consolidated statement of operations.
8


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
2020 Realignment Actions
In the three months ended June 30, 2020, the Company executed certain realignment actions, primarily in its Aerospace and Specialty Products segments, in response to reductions in current and expected future end market demand. The Company recorded a non-cash charge of approximately $13.2 million related to inventory reductions, primarily as a result of a strategic decision in its Arrow Engine division to narrow its product line focus. The Company also recorded a non-cash charge of approximately $2.2 million related to certain production equipment removed from service given reduced demand levels. In addition, the Company reduced its employment levels given lower customer demand during second quarter 2020, incurring approximately $3.1 million in severance charges, of which approximately $1.9 million was paid by June 30, 2020. For the three months ended June 30, 2020, approximately $16.0 million and $2.5 million of these charges were included in cost of sales and selling, general and administrative expenses, respectively, in the accompanying consolidated statement of operations.
4. Acquisitions
2020 Acquisitions
On December 15, 2020, the Company acquired Affaba & Ferrari Srl ("Affaba & Ferrari"), which specializes in the design, development and manufacture of precision caps and closures for food & beverage and industrial product applications, for an aggregate amount of approximately $98.4 million, net of cash acquired, subject to normal course adjustments, which are expected to be completed in the third quarter of 2021. The fair value of assets acquired and liabilities assumed included approximately $49.1 million of goodwill, $35.1 million of intangible assets, $9.4 million of net working capital, $17.4 million of property and equipment, and $12.6 million of net deferred tax liabilities. Affaba & Ferrari, which is reported in the Company's Packaging segment, operates out of a highly automated manufacturing facility and support office located in Borgo San Giovanni, Italy and historically generated approximately $34 million in annual revenue.
On April 17, 2020, the Company acquired the Rapak® brand, including certain bag-in-box product lines and assets ("Rapak"), for an aggregate amount of approximately $11.4 million. Rapak, which is reported in the Company's Packaging segment, has manufacturing locations in Indiana and Illinois and historically generated approximately $30 million in annual revenue.
On February 27, 2020, the Company acquired RSA Engineered Products ("RSA"), a manufacturer of complex, highly-engineered and proprietary ducting, connectors and related products for air management systems used in aerospace and defense applications, for an aggregate amount of approximately $83.7 million, net of cash acquired. The fair value of assets acquired and liabilities assumed included approximately $43.3 million of goodwill, $36.9 million of intangible assets, $10.1 million of net working capital, $2.1 million of property and equipment, and $8.7 million of net deferred tax liabilities. RSA, which is reported in the Company's Aerospace segment, is located in Simi Valley, California and historically generated approximately $30 million in annual revenue.
5. Cash and Cash Equivalents
Cash and cash equivalents consists of the following components (dollars in thousands):
  June 30,
2021
December 31,
2020
Cash and cash equivalents - unrestricted $ 106,250  $ 62,790 
Cash - restricted (a)
11,160  11,160 
Total cash and cash equivalents $ 117,410  $ 73,950 
__________________________
(a)     Includes cash placed on deposit with a financial institution to be held as cash collateral for the Company's outstanding letters of credit.
9


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
6. Goodwill and Other Intangible Assets
Changes in the carrying amount of goodwill for the six months ended June 30, 2021 are summarized as follows (dollars in thousands):
Packaging Aerospace Specialty Products Total
Balance, December 31, 2020 $ 234,560  $ 62,850  $ 6,560  $ 303,970 
Foreign currency translation and other (2,540) —  —  (2,540)
Balance, June 30, 2021 $ 232,020  $ 62,850  $ 6,560  $ 301,430 
The Company amortizes its other intangible assets over periods ranging from one to 30 years. The gross carrying amounts and accumulated amortization of the Company's other intangibles are summarized below (dollars in thousands):
As of June 30, 2021 As of December 31, 2020
Intangible Category by Useful Life Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization
Finite-lived intangible assets:
   Customer relationships, 5 – 12 years $ 122,010  $ (65,350) $ 122,970  $ (59,470)
   Customer relationships, 15 – 25 years 122,280  (65,300) 122,280  (62,450)
Total customer relationships 244,290  (130,650) 245,250  (121,920)
   Technology and other, 1 – 15 years 57,180  (34,480) 57,180  (32,800)
   Technology and other, 17 – 30 years 43,300  (39,680) 43,300  (39,450)
Total technology and other 100,480  (74,160) 100,480  (72,250)
Indefinite-lived intangible assets:
 Trademark/Trade names 54,190  —  54,640  — 
Total other intangible assets $ 398,960  $ (204,810) $ 400,370  $ (194,170)
Amortization expense related to intangible assets as included in the accompanying consolidated statement of operations is summarized as follows (dollars in thousands):
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Technology and other, included in cost of sales $ 950  $ 1,260  $ 1,900  $ 2,470 
Customer relationships, included in selling, general and administrative expenses 4,440  4,040  8,880  7,680 
Total amortization expense $ 5,390  $ 5,300  $ 10,780  $ 10,150 
7. Inventories
Inventories consist of the following components (dollars in thousands):
  June 30,
2021
December 31,
2020
Finished goods $ 77,850  $ 78,010 
Work in process 31,040  29,680 
Raw materials 41,030  41,690 
Total inventories $ 149,920  $ 149,380 
10


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
8. Property and Equipment, Net
Property and equipment consists of the following components (dollars in thousands):
  June 30,
2021
December 31,
2020
Land and land improvements $ 19,870  $ 20,040 
Buildings 92,170  91,970 
Machinery and equipment 397,290  384,010 
509,330  496,020 
Less: Accumulated depreciation 256,100  242,960 
Property and equipment, net $ 253,230  $ 253,060 
Depreciation expense as included in the accompanying consolidated statement of operations is as follows (dollars in thousands):
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Depreciation expense, included in cost of sales $ 7,670  $ 7,830  $ 15,230  $ 14,190 
Depreciation expense, included in selling, general and administrative expenses 310  280  600  580 
Total depreciation expense $ 7,980  $ 8,110  $ 15,830  $ 14,770 
9. Long-term Debt
The Company's long-term debt consists of the following (dollars in thousands):
  June 30,
2021
December 31,
2020
4.125% Senior Notes due April 2029 $ 400,000  $ — 
4.875% Senior Notes due October 2025 —  300,000 
Credit Agreement —  50,450 
Debt issuance costs (6,630) (4,160)
Long-term debt, net $ 393,370  $ 346,290 
Senior Notes due 2029
In March 2021, the Company issued $400.0 million aggregate principal amount of 4.125% senior notes due April 15, 2029 ("2029 Senior Notes") at par value in a private placement under Rule 144A of the Securities Act of 1933, as amended ("Securities Act"). The Company used the proceeds from the 2029 Senior Notes offering to pay fees and expenses of approximately $5.1 million related to the offering and pay fees and expenses of $1.1 million related to amending its existing credit agreement. In connection with the issuance, during the second quarter of 2021, the Company completed the redemption of its outstanding 4.875% senior notes due October 15, 2025 ("2025 Senior Notes"), paying $300.0 million to retire the outstanding principal amount plus $7.3 million as a redemption premium. The remaining cash proceeds from the 2029 Senior Notes were used for general corporate purposes, including repaying all outstanding revolving credit facility borrowings. The $5.1 million of fees and expenses related to the 2029 Senior Notes were capitalized as debt issuance costs, while the $7.3 million redemption premium, as well as approximately $3.0 million of unamortized debt issuance costs associated with the 2025 Senior Notes, were included in debt financing and related expenses in the accompanying statement of operations in the six months ended June 30, 2021.
11


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The 2029 Senior Notes accrue interest at a rate of 4.125% per annum, payable semi-annually in arrears on April 15 and October 15, commencing on October 15, 2021. The payment of principal and interest is jointly and severally guaranteed, on a senior unsecured basis, by certain subsidiaries of the Company (each a "Guarantor" and collectively the "Guarantors"). The 2029 Senior Notes are pari passu in right of payment with all existing and future senior indebtedness and effectively subordinated to all existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness.
Prior to April 15, 2024, the Company may redeem up to 40% of the principal amount of the 2029 Senior Notes at a redemption price of 104.125% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds of one or more equity offerings provided that each such redemption occurs within 90 days of the date of closing of each such equity offering. In addition, prior to April 15, 2024, the Company may redeem all or part of the 2029 Senior Notes at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, plus a "make whole" premium. On or after April 15, 2024, the Company may redeem all or part of the 2029 Senior Notes at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, to the redemption date, if redeemed during the twelve-month period beginning on April 15 of the years indicated below:
Year Percentage
2024 102.063  %
2025 101.031  %
2026 and thereafter 100.000  %
Senior Notes due 2025
In September 2017, the Company issued $300.0 million aggregate principal amount of its 2025 Senior Notes at par value in a private placement under Rule 144A of the Securities Act. During the three months ended June 30, 2021, and in connection with the issuance of the 2029 Senior Notes, the Company redeemed all of the outstanding 2025 Senior Notes, as permitted under the indenture, at a price of 102.438% of the principal amount.
Credit Agreement
During the first quarter of 2021, the Company amended its credit agreement ("Credit Agreement") in connection with the issuance of the 2029 Senior Notes to extend the maturity date. The Company incurred fees and expenses of approximately $1.1 million related to the amendment, all of which was capitalized as debt issuance costs. The Company also recorded approximately $0.2 million of non-cash expense related to the write-off of previously capitalized deferred financing fees. The Credit Agreement consists of a $300.0 million senior secured revolving credit facility, which permits borrowings denominated in specific foreign currencies, subject to a $125.0 million sub limit, maturing on March 29, 2026 and is subject to interest at London Interbank Offered Rate ("LIBOR") plus 1.50%. 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 revolving credit facility commitments in an amount not to exceed the greater of $200.0 million and an amount such that, after giving effect to such incremental commitments and the incurrence of any other indebtedness substantially simultaneously with the making of such commitments, the senior secured net leverage ratio, as defined, is no greater than 3.00 to 1.00. The terms and conditions of any incremental revolving credit facility commitments must be no more favorable than the existing credit facility.
The Company's revolving credit facility allows for the issuance of letters of credit, not to exceed $40.0 million in aggregate. The Company places cash on deposit with a financial institution to be held as cash collateral for the Company's outstanding letters of credit; therefore, as of June 30, 2021 and December 31, 2020, the Company had no letters of credit issued against its revolving credit facility. See Note 5, "Cash and Cash Equivalents," for further information on its cash deposit. At June 30, 2021, the Company had no amounts outstanding under its revolving credit facility and had $300.0 million available. At December 31, 2020, the Company had $50.5 million outstanding under its revolving credit facility and had approximately $249.5 million available. The Company's borrowing capacity was not reduced by leverage restrictions contained in the Credit Agreement as of June 30, 2021 and December 31, 2020.
12


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The debt under the Credit Agreement is an obligation of the Company and certain of its domestic subsidiaries and is secured by substantially all of the assets of such parties. Borrowings under the $125.0 million (equivalent) foreign currency sub limit of the $300.0 million senior secured revolving credit facility are secured by a cross-guarantee amongst, and a pledge of the assets of, the foreign subsidiary borrowers that are a party to the agreement.  The Credit Agreement also contains various negative and affirmative covenants and other requirements affecting the Company and its subsidiaries, including the ability, subject to certain exceptions and limitations, to incur debt, liens, mergers, investments, loans, advances, guarantee obligations, acquisitions, assets dispositions, sale-leaseback transactions, hedging agreements, dividends and other restricted payments, transactions with affiliates, restrictive agreements and amendments to charters, bylaws, and other material documents. The terms of the Credit Agreement also require the Company and its restricted subsidiaries to meet certain restrictive financial covenants and ratios computed quarterly, including a maximum total net leverage ratio (total consolidated indebtedness plus outstanding amounts under the accounts receivable securitization facility, less the aggregate amount of certain unrestricted cash and unrestricted permitted investments, as defined, over consolidated EBITDA, as defined), a maximum senior secured net leverage ratio (total consolidated senior secured indebtedness, less the aggregate amount of certain unrestricted cash and unrestricted permitted investments, as defined, over consolidated EBITDA, as defined) and a minimum interest expense coverage ratio (consolidated EBITDA, as defined, over the sum of consolidated cash interest expense, as defined, and preferred dividends, as defined). At June 30, 2021, the Company was in compliance with its financial covenants contained in the Credit Agreement.
Other Revolving Loan Facility
In May 2021, the Company, through one of its non-U.S. subsidiaries, entered into a revolving loan facility with a borrowing capacity of $4 million. The facility is guaranteed by TriMas Corporation. There were no borrowings on this loan facility during the three months ended June 30, 2021.
Fair Value of Debt
The valuations of the Senior Notes and revolving credit facility were determined based on Level 2 inputs under the fair value hierarchy, as defined. The carrying amounts and fair values were as follows (dollars in thousands):
June 30, 2021 December 31, 2020
Carrying Amount Fair Value Carrying Amount Fair Value
4.125% Senior Notes due April 2029 $ 400,000  $ 404,500  $ —  $ — 
4.875% Senior Notes due October 2025 —  —  300,000  305,630 
Revolving credit facility —  —  50,450  50,450 

13


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
10. Derivative Instruments
Derivatives Designated as Hedging Instruments
The Company uses cross-currency swap contracts to hedge its net investment in Euro-denominated assets against future volatility in the exchange rate between the U.S. dollar and the Euro. By doing so, the Company synthetically converts a portion of its U.S. dollar-based long-term debt into Euro-denominated long-term debt. At inception, the Company designates its cross-currency swaps as net investment hedges.
As of June 30, 2021, the Company had cross-currency swap agreements at notional amounts totaling $250.0 million, which declines to $25.0 million over various contract periods ending between April 15, 2022 and April 15, 2027. Under the terms of the agreements, the Company is to receive net interest payments at fixed rates ranging from approximately 0.8% to 2.9% of the notional amounts.
As of June 30, 2021 and December 31, 2020, the fair value carrying amount of the Company's derivatives designated as hedging instruments are recorded as follows (dollars in thousands):
    Asset / (Liability) Derivatives
Derivatives designated as hedging instruments Balance Sheet Caption June 30,
2021
December 31,
2020
Net Investment Hedges        
Cross-currency swaps Other long-term liabilities (580) (5,000)
The following table summarizes the income recognized in accumulated other comprehensive income (loss) ("AOCI") on derivative contracts designated as hedging instruments as of June 30, 2021 and December 31, 2020, and the amounts reclassified from AOCI into earnings for the three and six months ended June 30, 2021 and 2020 (dollars in thousands):
Amount of Loss Recognized
in AOCI on Derivatives
(Effective Portion, net of tax)
Amount of Income (Loss) Reclassified
from AOCI into Earnings
Three months ended
June 30,
Six months ended
June 30,
As of
June 30,
2021
As of December 31, 2020 Location of Income (Loss) Reclassified from AOCI into Earnings (Effective Portion) 2021 2020 2021 2020
Net Investment Hedges
Cross-currency swaps $ (250) $ (3,580) Other income (expense), net $ —  $ —  $ —  $ — 
Over the next 12 months, the Company does not expect to reclassify any pre-tax deferred amounts from AOCI into earnings.
Derivatives Not Designated as Hedging Instruments
As of June 30, 2021, the Company was party to foreign currency exchange forward contracts to economically hedge changes in foreign currency rates with notional amounts of approximately $126.5 million. The Company uses foreign exchange contracts to mitigate the risk associated with fluctuations in currency rates impacting cash flows related to certain of its receivables, payables and intercompany transactions denominated in foreign currencies. The foreign exchange contracts primarily mitigate currency exposures between the U.S. dollar and the Euro, Mexican peso and the Chinese yuan, and have various settlement dates through December 2021. These contracts are not designated as hedge instruments; therefore, gains and losses on these contracts are recognized each period directly into the consolidated statement of operations.
14


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The following table summarizes the effects of derivatives not designated as hedging instruments on the Company's consolidated statement of operations (dollars in thousands):
Amount of Income (Loss) Recognized in
Earnings on Derivatives
Three months ended
June 30,
Six months ended
June 30,
Location of Income (Loss)
Recognized in
Earnings on Derivatives
2021 2020 2021 2020
Derivatives not designated as hedging instruments
Foreign exchange contracts Other income (expense), net $ (1,160) $ 550  $ 2,860  $ 480 
Fair Value of Derivatives
The fair value of the Company's derivatives are estimated using an income approach based on valuation techniques to convert future amounts to a single, discounted amount. Estimates of the fair value of the Company's cross-currency swaps and foreign exchange contracts use observable inputs such as interest rate yield curves and forward currency exchange rates. Fair value measurements and the fair value hierarchy level for the Company's assets and liabilities measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020 are shown below (dollars in thousands):  
Description Frequency Asset / (Liability) Quoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
June 30, 2021
Cross-currency swaps Recurring $ (580) $ —  $ (580) $ — 
Foreign exchange contracts Recurring $ (670) $ —  $ (670) $ — 
December 31, 2020
Cross-currency swaps Recurring $ (5,000) $ —  $ (5,000) $ — 
Foreign exchange contracts Recurring $ 140  $ —  $ 140  $ — 
11. Leases
The Company leases certain equipment and facilities under non-cancelable operating leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet; expense related to these leases is recognized on a straight-line basis over the lease term.
The components of lease expense are as follows (dollars in thousands):
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Operating lease cost $ 2,140  $ 2,020  $ 4,280  $ 3,670 
Short-term, variable and other lease costs 430  270  860  580 
Total lease cost $ 2,570  $ 2,290  $ 5,140  $ 4,250 
15


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Maturities of lease liabilities are as follows (dollars in thousands):
Year ended December 31,
Operating Leases(a)
2021 (excluding the six months ended June 30, 2021) $ 3,940 
2022 7,720 
2023 6,880 
2024 6,000 
2025 4,850 
Thereafter 15,800 
Total lease payments 45,190 
Less: Imputed interest (5,770)
Present value of lease liabilities $ 39,420 
__________________________
(a)     The maturity table excludes cash flows associated with exited lease facilities. Liabilities for exited lease facilities are included in accrued liabilities and other long-term liabilities in the accompanying consolidated balance sheet.
The weighted-average remaining lease term of the Company's operating leases as of June 30, 2021 is approximately 7.0 years. The weighted-average discount rate as of June 30, 2021 is approximately 4.2%.
Cash paid for amounts included in the measurement of operating lease liabilities was approximately $4.2 million and $3.0 million during the six months ended June 30, 2021 and 2020, respectively, and is included in cash flows provided by operating activities in the consolidated statement of cash flows.
Right-of-use assets obtained in exchange for lease liabilities were approximately $6.1 million and $10.2 million during the six months ended June 30, 2021 and 2020, respectively.
12. Other long-term liabilities
Other long-term liabilities consist of the following components (dollars in thousands):
  June 30,
2021
December 31,
2020
Non-current asbestos-related liabilities $ 24,810  $ 26,170 
Other long-term liabilities 36,620  43,520 
Total other long-term liabilities $ 61,430  $ 69,690 
16


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
13. Commitments and Contingencies
Asbestos
As of June 30, 2021, the Company was a party to 374 pending cases involving an aggregate of 4,725 claimants primarily alleging personal injury from exposure to asbestos containing materials formerly used in gaskets (both encapsulated and otherwise) manufactured or distributed by its former Lamons division and certain other related subsidiaries for use primarily in the petrochemical, refining and exploration industries. The following chart summarizes the number of claims, number of claims filed, number of claims dismissed, number of claims settled, the average settlement amount per claim and the total defense costs, at the applicable date and for the applicable periods:
  Claims
pending at
beginning of
period
Claims filed
during
period
Claims
dismissed
during
period
Claims
settled
during
period
Claims
pending at
end of
period
Average
settlement
amount per
claim during
period
Total defense
costs during
period
Six Months Ended June 30, 2021 4,655  143  55  18  4,725  $ 15,228  $ 1,060,000 
Fiscal Year Ended December 31, 2020 4,759  219  287  36  4,655  $ 18,314  $ 2,130,000 
In addition, the Company acquired various companies to distribute its products that had distributed gaskets of other manufacturers prior to acquisition. The Company believes that many of its pending cases relate to locations at which none of its gaskets were distributed or used.
The Company may be subjected to significant additional asbestos-related claims in the future, and will aggressively defend or reasonably resolve, as appropriate. The cost of settling cases in which product identification can be made may increase, and the Company may be subjected to further claims in respect of the former activities of its acquired gasket distributors. The cost of claims varies as claims may be initially made in some jurisdictions without specifying the amount sought or by simply stating the requisite or maximum permissible monetary relief, and may be amended to alter the amount sought. The large majority of claims do not specify the amount sought. Of the 4,725 claims pending at June 30, 2021, 33 set forth specific amounts of damages (other than those stating the statutory minimum or maximum). At June 30, 2021, of the 33 claims that set forth specific amounts, there was one claim seeking more than $5 million for punitive damages. Below is a breakdown of the compensatory damages sought for those claims seeking specific amounts:
Compensatory
Range of damages sought (dollars in millions) $0.0 to $0.6 $0.6 to $5.0 $5.0+
Number of claims 6 27
Relatively few claims have reached the discovery stage and even fewer claims have gone past the discovery stage. Total settlement costs (exclusive of defense costs) for all such cases, some of which were filed over 25 years ago, have been approximately $10.3 million. All relief sought in the asbestos cases is monetary in nature. Based on the settlements made to date and the number of claims dismissed or withdrawn for lack of product identification, the Company believes that the relief sought (when specified) does not bear a reasonable relationship to its potential liability.
There has been significant volatility in the historical number of claim filings and costs to defend, with previous claim counts and spend levels much higher than current levels. Management believes this volatility was associated more with tort reform, plaintiff practices and state-specific legal dockets than the Company’s underlying asbestos-related exposures. From 2017 to 2019, however, the number of new claim filings, and costs to defend, had become much more consistent, ranging between 143 to 173 new claims per year and total defense costs ranging between $2.2 million and $2.3 million.
17


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The higher degree of consistency in census data and spend levels, as well as lower claim activity levels and an evolving defense strategy, has allowed the Company to more effectively and efficiently manage claims, making process or local counsel arrangement improvements where possible. Given the consistency of activity over a multi-year period, the Company believed a trend may have formed where it could be possible to reasonably estimate its future cash exposure for all asbestos-related activity with an adequate level of precision. As such, the Company commissioned an actuary to help evaluate the nature and predictability of its asbestos-related costs, and provide an actuarial range of estimates of future exposures. Based upon its review of the actuarial study, which was completed in June 2020 using data as of December 31, 2019 and which projected spend levels through a terminal year of 2064, the Company affirmed its belief that it now has the ability to reasonably estimate its future asbestos-related exposures for pending as well as unknown future claims.
During the second quarter 2020, the Company elected to change its method of accounting for asbestos-related defense costs from accruing for probable and reasonably estimable defense costs associated with known claims expected to settle to accrue for all future defense costs for both known and unknown claims, which the Company now believes are reasonably estimable. The Company believes this change is preferable, as asbestos-related defense costs represent expenditures related to legacy activities that do not contribute to current or future revenue generating activities, and recording an estimate of the full liability for asbestos-related costs, where estimable with reasonable precision, provides a more complete assessment of the liability associated with resolving asbestos-related claims. This accounting change was reflected as a change in accounting estimate effected by a change in accounting principle.
Following the change in accounting estimate, the Company’s liability for asbestos-related claims will be based on a study from the Company’s third-party actuary, the Company's review of the study, as well as the Company’s own review of asbestos claims and claim resolution activity. The study from the Company’s actuary, based on data as of December 31, 2019, provided for a range of possible future liability from $31.5 million to $43.3 million. The Company did not believe any amount within the range of potential outcomes represented a better estimate than another given the many factors and assumptions inherent in the projections, and therefore recorded a non-cash, pre-tax charge of $23.4 million in second quarter 2020 to increase the liability estimate to $31.5 million, at the low-end of the range. This charge is included in selling, general and administrative expenses in the accompanying consolidated statement of operations. As of June 30, 2021, the Company’s total asbestos-related liability is $27.3 million, and is included in accrued liabilities and other long-term liabilities, respectively, in the accompanying consolidated balance sheet.
The Company’s primary insurance, which covered approximately 40% of historical costs related to settlement and defense of asbestos litigation, expired in November 2018, upon which the Company became solely responsible for defense costs and indemnity payments. The Company is party to a coverage-in-place agreement (entered into in 2006) with its first level excess carriers regarding the coverage to be provided to the Company for asbestos-related claims. The coverage-in-place agreement makes asbestos defense costs and indemnity insurance coverage available to the Company that might otherwise be disputed by the carriers and provides a methodology for the administration of such expenses. The Company will continue to be solely responsible for defense costs and indemnity payments prior to the commencement of coverage under this agreement, the duration of which would be subject to the scope of damage awards and settlements paid. Based upon the Company’s review of the actuarial study, the Company does not believe it is probable that it will reach the threshold of qualified future settlements required to commence excess carrier insurance coverage under the coverage-in-place agreement.
Based upon the Company's experience to date, including the trend in annual defense and settlement costs incurred to date, and other available information (including the availability of excess insurance), the Company does not believe these cases will have a material adverse effect on its financial position, results of operations, or cash flows.
Claims and Litigation
The Company is subject to other claims and litigation in the ordinary course of business, but does not believe that any such claim or litigation will have a material adverse effect on its financial position and results of operations or cash flows.
18


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
14. Segment Information
TriMas reports its operations in three segments: Packaging, Aerospace, and Specialty Products. Each of these segments has discrete financial information that is regularly evaluated by TriMas' president and chief executive officer (chief operating decision maker) in determining resource, personnel and capital allocation, as well as assessing strategy and performance. The Company utilizes its proprietary TriMas Business Model as its platform which is based upon a standardized set of processes to manage and drive results and strategy across its multi-industry businesses.
Within each of the Company's reportable segments, there are no individual products or product families for which reported net sales accounted for more than 10% of the Company's consolidated net sales. See below for more information regarding the types of products and services provided within each reportable segment:
Packaging – The Packaging segment, which consists primarily of the Rieke®, Taplast, Affaba & Ferrari, Stolz and Rapak® brands, develops and manufactures a broad array of dispensing products (such as foaming pumps, lotion and hand soap pumps, sanitizer pumps, beverage dispensers, perfume sprayers, nasal sprayers and trigger sprayers), polymeric and steel caps and closures (such as food lids, flip-top closures, child resistance caps, beverage closures, drum and pail closures, flexible spouts, and agricultural closures), polymeric jar products, and fully integrated dispensers for fill-ready bag-in-box applications, all for a variety of consumer products submarkets including, but not limited to, beauty and personal care, food and beverage, home care, and pharmaceutical and nutraceutical, as well as the industrial market.
Aerospace – The Aerospace segment, which includes the Monogram Aerospace Fasteners, Allfast Fastening Systems®, Mac Fasteners, RSA Engineered Products and Martinic Engineering brands, develops, qualifies and manufactures highly-engineered, precision fasteners, tubular products and assemblies for fluid conveyance, and machined products and assemblies to serve the aerospace and defense market.
Specialty Products – The Specialty Products segment, which includes the Norris Cylinder and Arrow® Engine brands, designs, manufactures and distributes highly-engineered steel cylinders, wellhead engines and compression systems for use within industrial markets.
Segment activity is as follows (dollars in thousands):
  Three months ended
June 30,
Six months ended
June 30,
  2021 2020 2021 2020
Net Sales
Packaging $ 139,630  $ 128,830  $ 271,720  $ 228,880 
Aerospace 44,560  42,610  89,170  91,530 
Specialty Products 34,800  28,110  64,830  61,930 
Total $ 218,990  $ 199,550  $ 425,720  $ 382,340 
Operating Profit (Loss)
Packaging $ 27,850  $ 24,040  $ 49,150  $ 42,320 
Aerospace 2,120  (4,210) 6,620  870 
Specialty Products 6,010  (5,940) 10,530  (2,510)
Corporate (10,410) (32,040) (19,620) (39,000)
Total $ 25,570  $ (18,150) $ 46,680  $ 1,680 
19


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
15. Equity Awards
Stock Options
The Company recognized no stock-based compensation expense related to stock options during the three and six months ended June 30, 2021 and 2020, respectively. As of June 30, 2021, there was no unrecognized compensation costs related to stock options remaining. Information related to stock options at June 30, 2021 is as follows:
Number of
Stock Options
Weighted Average Option Price Average  Remaining Contractual Life (Years) Aggregate Intrinsic Value
Outstanding at January 1, 2021 150,000  $ 17.87 
Granted —  — 
  Exercised (150,000) 17.87 
  Cancelled —  — 
  Expired —  — 
Outstanding at June 30, 2021 —  $ —  —  $ — 
Restricted Stock Units
The Company awarded the following restricted stock units ("RSUs") during the six months ended June 30, 2021:
granted 113,504 RSUs to certain employees, which are subject only to a service condition and vest ratably over three years so long as the employee remains with the Company;
granted 21,112 RSUs to its non-employee independent directors, which fully vest one year from date of grant so long as the director and/or Company does not terminate the director's service prior to the vesting date; and
issued 995 RSUs related to director fee deferrals during the six months ended June 30, 2021 as certain of the Company's directors elected to defer all or a portion of their directors fees and to receive the amount in Company common stock at a future date.
During 2021, the Company awarded 72,962 performance-based RSUs to certain Company key employees which vest three years from the grant date as long as the employee remains with the Company. These awards are earned 50% based upon the Company's achievement of an earnings per share compound annual growth rate ("EPS CAGR") metric over a period beginning January 1, 2021 and ending December 31, 2023. The remaining 50% of the awards are earned based on the Company's total shareholder return ("TSR") relative to the TSR of the common stock of a pre-defined industry peer-group, measured over the performance period. TSR is calculated as the Company's average closing stock price for the 20 trading days at the end of the performance period plus Company dividends, divided by the Company's average closing stock price for the 20 trading days prior to the start of the performance period. The Company estimates the grant-date fair value subject to a market condition using a Monte Carlo simulation model, using the following weighted average assumptions: risk-free rate of 0.28% and annualized volatility of 35.5%. Depending on the performance achieved for these two metrics, the amount of shares earned, if any, can vary for each metric from 0% of the target award to a maximum of 200% of the target award. For similar performance-based RSUs awarded in 2018, the Company attained 126.2% of the target on a weighted average basis, resulting in an increase of 25,993 shares during the three months ended March 31, 2021.
20


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Information related to RSUs at June 30, 2021 is as follows:
Number of Unvested RSUs Weighted Average Grant Date Fair Value Average Remaining Contractual Life (Years) Aggregate Intrinsic Value
Outstanding at January 1, 2021 784,968  $ 26.46 
  Granted 234,566  34.62 
  Vested (301,008) 30.80 
  Cancelled (19,252) 25.54 
Outstanding at June 30, 2021 699,274  $ 27.35  1.3 $ 21,208,980 
As of June 30, 2021, there was approximately $9.1 million of unrecognized compensation cost related to unvested RSUs that is expected to be recorded over a weighted average period of 2.1 years.
The Company recognized stock-based compensation expense related to RSUs of approximately $3.2 million and $2.7 million during the three months ended June 30, 2021 and 2020, respectively, and approximately $5.7 million and $4.7 million during the six months ended June 30, 2021 and 2020, respectively. The stock-based compensation expense is included in selling, general and administrative expenses in the accompanying consolidated statement of operations.
16. Earnings per Share
Net income is divided by the weighted average number of common shares outstanding during the period to calculate basic earnings per share. Diluted earnings per share is calculated to give effect to stock options and RSUs. For the three and six months ended June 30, 2020, no restricted shares or options to purchase shares were included in the computation of net income (loss) per share because to do so would be anti-dilutive. The following table summarizes the dilutive effect of RSUs and options to purchase common stock for the three and six months ended June 30, 2021 and 2020:
Three months ended
June 30,
Six months ended
June 30,
2021 2020 2021 2020
Weighted average common shares—basic 43,110,191  43,463,235  43,147,599  43,832,144 
Dilutive effect of restricted stock units 198,165  —  299,425  — 
Dilutive effect of stock options —  —  24,592  — 
Weighted average common shares—diluted 43,308,356  43,463,235  43,471,616  43,832,144 
In March 2020, the Company announced its Board of Directors had authorized the Company to increase the purchase of its common stock up to $250 million in the aggregate.  The initial authorization, approved in November 2015, authorized up to $50 million of purchases in the aggregate of its common stock. In the three and six months ended June 30, 2021, the Company purchased 358,047 and 440,218 shares of its outstanding common stock for approximately $11.6 million and $14.2 million, respectively. The Company purchased no shares during the three months ended June 30, 2020 and 1,253,650 shares of its outstanding common stock for approximately $31.6 million during the six months ended June 30, 2020. As of June 30, 2021, the Company has approximately $147.5 million remaining under the repurchase authorization.
21


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
17. Defined Benefit Plans
Net periodic pension benefit costs for the Company's defined benefit pension plans cover certain foreign employees, union hourly employees and salaried employees. The components of net periodic pension cost are as follows (dollars in thousands):
  Pension Plans
  Three months ended
June 30,
Six months ended
June 30,
  2021 2020 2021 2020
Service costs $ 320  $ 310  $ 650  $ 630 
Interest costs 200  230  400  470 
Expected return on plan assets (390) (360) (780) (730)
Amortization of net loss 230  230  460  450 
Net periodic benefit cost $ 360  $ 410  $ 730  $ 820 
The service cost component of net periodic benefit cost is recorded in cost of goods sold and selling, general and administrative expenses, while non-service cost components are recorded in other income (expense), net in the accompanying consolidated statement of operations.
The Company contributed approximately $0.7 million and $2.2 million to its defined benefit pension plans during the three and six months ended June 30, 2021, respectively. The Company expects to contribute approximately $3.6 million to its defined benefit pension plans for the full year 2021.
22


TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
18. Other Comprehensive Income (Loss)
Changes in AOCI by component for the six months ended June 30, 2021 are summarized as follows, net of tax (dollars in thousands):
Defined Benefit Plans  Derivative Instruments Foreign Currency Translation Total
Balance, December 31, 2020 $ (8,620) $ (3,580) $ 6,580  $ (5,620)
Net unrealized gains (losses) arising during the period (a)
—  3,330  (2,020) 1,310 
Less: Net realized losses reclassified to net income (b)
(310) —  —  (310)
Net current-period other comprehensive income (loss) 310  3,330  (2,020) 1,620 
Balance, June 30, 2021 $ (8,310) $ (250) $ 4,560  $ (4,000)
__________________________
(a)     Derivative instruments, net of income tax of approximately $1.1 million. See Note 10, "Derivative Instruments," for further details.
(b)     Defined benefit plans, net of income tax of approximately $0.1 million. See Note 17, "Defined Benefit Plans," for further details.
Changes in AOCI by component for the six months ended June 30, 2020 are summarized as follows, net of tax (dollars in thousands):
Defined Benefit Plans  Derivative Instruments Foreign Currency Translation Total
Balance, December 31, 2019 $ (9,930) $ 4,230  $ (300) $ (6,000)
Net unrealized gains (losses) arising during the period (a)
—  2,300  (6,950) (4,650)
Less: Net realized losses reclassified to net income (b)
(310) —  —  (310)
Net current-period other comprehensive income (loss) 310  2,300  (6,950) (4,340)
Balance, June 30, 2020 $ (9,620) $ 6,530  $ (7,250) $ (10,340)
__________________________
(a)     Derivative instruments, net of income tax of approximately $0.8 million. See Note 10, "Derivative Instruments," for further details.
(b)     Defined benefit plans, net of income tax of approximately $0.1 million. See Note 17, "Defined Benefit Plans," for further details.
19. Income Taxes
The effective income tax rate for the three months ended June 30, 2021 and 2020 was (0.3)% and 26.1%, respectively. The rate for the three months ended June 30, 2021 is lower than in the prior year primarily as a result of the recognition of approximately $3.0 million of deferred tax benefits in Italy, the majority of which related to a reduction in deferred tax liabilities in connection with certain tax incentives.
The effective income tax rate for the six months ended June 30, 2021 and 2020 was 11.8% and 49.2%, respectively. The rate for the six months ended June 30, 2021 is lower than in the prior year primarily as a result of the recognition of approximately $3.0 million of deferred tax benefits in Italy, the majority of which related to a reduction in deferred tax liabilities in connection with certain tax incentives. The rate for the six months ended June 30, 2020 was impacted by a decrease in profitability resulting from various realignment charges as well as an expense for a change in the Company’s accounting policy for asbestos-related defense costs.
23

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition contains forward-looking statements regarding industry outlook and our expectations regarding the performance of our business. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under the heading "Forward-Looking Statements," at the beginning of this report. 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 the Company's reports on file with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2020.
Introduction
We are a diversified manufacturer and provider of products for customers primarily in the consumer products, aerospace & defense and industrial markets. Our wide range of innovative products are designed and engineered to solve application-specific challenges that our customers face. We believe our businesses share important and distinguishing characteristics, including: well-recognized and leading brand names in the focused markets we serve; innovative product technologies and features; a high-degree of customer approved processes and qualifications; established distribution networks; relatively low ongoing capital investment requirements; strong cash flow conversion and long-term growth opportunities. While the majority of our revenue is in the United States, we manufacture and supply products globally to a wide range of companies. We report our business activity in three segments: Packaging, Aerospace and Specialty Products.
Key Factors Affecting Our Reported Results  
Our businesses and results of operations depend upon general economic conditions. We serve customers in industries that are highly competitive, cyclical and that may be significantly impacted by changes in economic or geopolitical conditions.
In March 2020, the President of the United States declared the coronavirus ("COVID-19") outbreak a national emergency, as the World Health Organization determined it was a pandemic. In response to the COVID-19 pandemic, federal, provincial, state, county and local governments and public health organizations or authorities around the world implemented a variety of measures intended to control the spread of the virus, including quarantines, "shelter-in-place" or "stay-at-home" and similar orders, travel restrictions, business curtailments and closures, social distancing, personal hygiene requirements, and other measures.
We have been, and continue to be, focused on making sure the working environments for our employees are safe so our operations have the ability to deliver the products needed to support efforts to mitigate the COVID-19 pandemic. Nearly all of our manufacturing sites have been deemed essential operations and remained open during the pandemic, at varying levels of capacity and efficiency, experiencing only temporary shutdowns due to country-specific government mandates or for thorough cleaning as a result of suspected COVID-19 cases. The health of our employees, and the ability of our facilities to remain operational in the current regulated environment, will be critical to our future results of operations.
Our divisions were impacted in 2020 at differing levels and times, beginning with our Asian facilities and strategic supply network, both primarily in China, in late January, followed by our European (primarily Italy) and North American facilities in February and March. We implemented new work rules and processes, which promote social distancing and increased hygiene to ensure the safety of our employees, particularly at our production facilities. These measures, while not easily quantifiable, have increased the level of manufacturing inefficiencies due to elevated levels of absenteeism, resulting in less efficient production scheduling and, in certain cases, short-term idling of production. We expect that we will continue to operate with these protocols in place, which have impacted our results since early 2020.
Overall, our second quarter 2021 net sales increased approximately $19.4 million, or 9.7%, compared to second quarter 2020, primarily as a result of acquisitions in our Packaging segment and as a result of increased industrial demand in our Specialty Products segment. Sales in our Packaging segment related to dispensing and closure products we supply that are used in applications to fight the spread of germs continue at very high levels, but, as expected, lower than second quarter 2020 levels when there was a significant spike in demand at the onset of the pandemic.
The most significant drivers affecting our results of operations and our financial position in second quarter 2021 compared with second quarter 2020, other than as directly impacted by demand level changes as a result of the COVID-19 pandemic, were a change in accounting policy for asbestos-related defense costs in second quarter 2020, the refinancing of our long-term debt agreements in 2021, the impact of our recent acquisitions, increases in the cost of certain raw materials, our realignment actions, and a decrease in our effective tax rate primarily as a result of the recognition of deferred tax benefits in Italy.
24

In second quarter 2020, we elected to change our accounting policy for asbestos-related defense costs from accruing for probable and reasonably estimable defense costs associated with known claims expected to settle to accruing for all future defense costs for both known and unknown claims, which we now believe can be reasonably estimated. This accounting change has been reflected as a change in accounting estimate effected by a change in accounting principle. We recorded a non-cash, pre-tax charge for asbestos-related costs of approximately $23.4 million in the three months ended June 30, 2020, which is included in selling, general and administrative expenses.
In March 2021, we refinanced our long-term debt, issuing $400 million principal amount of 4.125% senior unsecured notes due April 15, 2029 ("2029 Senior Notes") at par value in a private placement offering, and amending our existing credit agreement ("Credit Agreement"), extending the maturity to March 2026. We used the proceeds from the 2029 Senior Notes offering to pay fees and expenses of approximately $5.1 million related to the offering and approximately $1.1 million related to amending the Credit Agreement. The remaining cash proceeds from the 2029 Senior Notes were used for general corporate purposes, including repaying all outstanding revolving credit facility borrowings. In April 2021, we completed the refinancing, redeeming all of our outstanding senior notes due October 2025 ("2025 Senior Notes"), paying cash for the entire $300.0 million outstanding principal amount plus $7.3 million as a redemption premium. The $5.1 million of fees and expenses related to the 2029 Senior Notes were capitalized as debt issuance costs, while the $7.3 million redemption premium as well as approximately $3.0 million of unamortized debt issuance costs associated with the 2025 Senior Notes were expensed in the second quarter of 2021.
In December 2020, we completed the acquisition of Affaba & Ferrari Srl ("Affaba & Ferrari"), which specializes in the design, development and manufacture of precision caps and closures for food & beverage and industrial product applications, for an aggregate amount of approximately $98.4 million, net of cash acquired, subject to normal course adjustments, which are expected to be completed in third quarter 2021. Affaba & Ferrari, which is reported in the Company's Packaging segment, operates out of a highly automated manufacturing facility and support office located in Borgo San Giovanni, Italy. Affaba & Ferrari contributed approximately $9.9 million of net sales during second quarter 2021.
In first quarter 2021, we began experiencing an increase in material costs compared with 2020 levels, primarily for resin-based raw materials and components, as well as for certain types of steel. These material costs further increased during second quarter 2021. We have escalator/de-escalator clauses in our commercial contracts with certain of our customers, or can modify prices based on market conditions, and we have been taking actions to recover the increased cost of raw materials. We estimate that due to the lag in timing between incurring the cost increases and recovering via commercial actions, our operating profit was negatively impacted by approximately $4 million and $6 million in the three and six months ended June 30, 2021, respectively, compared with 2020, primarily in our Packaging segment.
Since second quarter 2020, we have been executing certain realignment actions in response to reductions in current and expected future end market demand following the onset of the COVID-19 pandemic. In second quarter 2021, we continued our facility consolidation initiatives within our Packaging and Aerospace segments and also reorganized our corporate office finance group. As a result of these realignment efforts, we recorded pre-tax facility consolidation and employee separation costs of approximately $0.7 million and $3.5 million, respectively, during second quarter 2021. In second quarter 2020, we recorded non-cash charges of approximately $13.2 million related to inventory reductions, primarily as a result of a strategic decision in our Arrow Engine division to streamline its product line offering. We also recorded charges of approximately $2.2 million related to certain production equipment removed from service given reduced demand levels and reduced our employment levels given lower customer demand, incurring approximately $3.1 million in severance charges.
Our effective tax rate in second quarter 2021 was (0.3)%, compared to 26.1% in second quarter of 2020. The rate for the second quarter 2021 is lower than in the prior year primarily as a result of the recognition of approximately $3.0 million of deferred tax benefits in Italy, the majority of which related to a reduction in deferred tax liabilities in connection with certain tax incentives.


25

Additional Key Risks that May Affect Our Reported Results
We expect the COVID-19 pandemic will continue to impact us in the future at varying degrees. We expect the robust customer demand, compared with pre-pandemic demand levels, for our Packaging segment's dispensing pumps and closure products used in personal care and home care applications will continue, as we believe there is a positive secular trend focused on consumers' desire to stop the spread of germs and improve personal hygiene. We are actively collaborating with our customers and strategic supply partners to manage production capacity and supply chain availability as efficiently as possible. Industrial demand in North America was lower in 2020 compared to previous levels, and while demand levels increased in second quarter 2021, we are uncertain how and at what level demand will be impacted as governmental, travel or other restrictions are lifted, particularly in North America, where orders for our industrial cylinders, for example, are heavily influenced by the levels of construction and HVAC activity. We expect the aerospace market to continue to experience severe dislocation going forward, as except for the significant stocking order for certain of our products received during 2021, our sales levels would be significantly lower than historical levels. With the current travel restrictions and significant drop in passenger miles, aircraft manufacturers have slowed production, and since second quarter 2020 we have experienced a significant drop in aerospace-related sales related to new commercial airplane builds compared to prior levels. We expect, except as favorably impacted by the customer stocking orders in 2021, lower levels of sales and related production to continue for the foreseeable future.
We have executed significant realignment actions since the onset of the COVID-19 pandemic, primarily in our Aerospace and Specialty Products segments, and also in certain Packaging product areas where demand has fallen, such as in the quick service and restaurant applications, to protect against the uncertain end market demand. We will continue to assess further actions if required. However, as a result of the COVID-19 pandemic's impact on global economic activity, and the continued potential impact to our future results of operations, as well if there is an impact to TriMas' market capitalization, we may record additional cash and non-cash charges related to incremental realignment actions, as well as for uncollectible customer account balances, excess inventory and idle production equipment.
Despite the potential decline in future demand levels and results of operations as a result of the COVID-19 pandemic, at present, we believe our capital structure is in a solid position, even more so following our 2021 debt refinancing. We have ample cash and available liquidity under our revolving credit facility to meet our debt service obligations, capital expenditure requirements and other short-term and long-term obligations for the foreseeable future.
The extent of the COVID-19 pandemic's effect on our operational and financial performance will depend in large part on future
developments, which cannot be predicted with confidence at this time. Future developments include the duration, scope and severity of the COVID-19 pandemic, the actions taken to contain or mitigate its impact, timing of widespread vaccine availability, and the resumption of normalized global economic activity. Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we are unable to predict with any confidence the likely impact of the COVID-19 pandemic on our future operations.
Beyond the unique risks presented by the COVID-19 pandemic, other critical factors affecting our ability to succeed include: our ability to create organic growth through product development, cross-selling and extending product-line offerings, and our ability to quickly and cost-effectively introduce and successfully launch new products; our ability to acquire and integrate companies or products that supplement existing product lines, add new distribution channels or customers, expand our geographic coverage or enable better absorption of overhead costs; our ability to 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.
Our overall business does not experience significant seasonal fluctuation, other than our fourth quarter, which has tended to be the lowest net sales quarter of the year due to holiday shutdowns at certain customers or other customers deferring capital spending to the following year. Given the short-cycle nature of most of our businesses, we do not consider sales order backlog to be a material factor. A growing amount of our sales is derived from international sources, which exposes us to certain risks, including currency risks.
We are sensitive to price movements and availability of our raw materials supply. Our largest raw material purchases are for resins (such as polypropylene and polyethylene), steel, aluminum and other oil and metal-based purchased components. In addition to the factors affecting our second quarter 2021 results, there has been some volatility over the past two years as a direct and indirect result of foreign trade policy, where tariffs on certain of our commodity-based products sourced from Asia have been instituted, and certain North American suppliers have opportunistically increased their prices. We will continue to take actions, to mitigate such increases, including implementing commercial pricing adjustments, resourcing to alternate suppliers and insourcing of previously sourced products to better leverage our global manufacturing footprint. Although we believe we are generally able to mitigate the impact of higher commodity costs over time, we may experience additional material costs and disruptions in supply in the future and may not be able to pass along higher costs to our customers in the form of price increases or otherwise mitigate the impacts to our operating results.
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Although we have escalator/de-escalator clauses in commercial contracts with certain of our customers, or can modify prices based on market conditions to recover higher costs, our price increases generally lag the underlying material cost increase, and we cannot be assured of full cost recovery in the open market.
Our Arrow Engine business in our Specialty Products segment is sensitive to the demand for natural gas and crude oil in North America. For example, demand for engine, pump jack and compressor products are impacted by active oil and gas rig counts and wellhead investment activities. Separately, oil-based commodity costs are a significant driver of raw materials and purchased components used within our Packaging segment.
Each year, as a core tenet of the TriMas Business Model, our businesses target cost savings from Kaizen and continuous improvement initiatives in an effort to reduce, or otherwise offset, the impact of increased input and conversion costs through increased throughput and yield rates, with a goal of at least covering inflationary and market cost increases. In addition, we continuously review our operating cost structures to ensure alignment with current market demand.
We continue to evaluate alternatives to redeploy the cash generated by our businesses, one of which includes returning capital to our shareholders. In 2020, our Board of Directors increased the authorization of share repurchases to a cumulative amount of $250 million. During second quarter 2021, we purchased 358,047 shares of our outstanding common stock for approximately $11.6 million. As of June 30, 2021, we had approximately $147.5 million remaining under the repurchase authorization. We will continue to evaluate opportunities to return capital to shareholders through the purchase of our common stock, depending on market conditions and other factors.

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Segment Information and Supplemental Analysis
The following table summarizes financial information for our reportable segments for the three months ended June 30, 2021 and 2020 (dollars in thousands):
Three months ended June 30,
  2021 As a Percentage
of Net Sales
2020 As a Percentage
of Net Sales
Net Sales
Packaging $ 139,630  63.8  % $ 128,830  64.6  %
Aerospace 44,560  20.3  % 42,610  21.3  %
Specialty Products 34,800  15.9  % 28,110  14.1  %
Total $ 218,990  100.0  % $ 199,550  100.0  %
Gross Profit (Loss)
Packaging $ 40,490  29.0  % $ 37,850  29.4  %
Aerospace 9,310  20.9  % 2,670  6.3  %
Specialty Products 8,230  23.6  % (3,290) (11.7) %
Total $ 58,030  26.5  % $ 37,230  18.7  %
Selling, General and Administrative Expenses
Packaging $ 12,640  9.1  % $ 13,810  10.7  %
Aerospace 7,190  16.1  % 6,880  16.1  %
Specialty Products 2,220  6.4  % 2,650  9.4  %
Corporate 10,410  N/A 32,040  N/A
Total $ 32,460  14.8  % $ 55,380  27.8  %
Operating Profit (Loss)
Packaging $ 27,850  19.9  % $ 24,040  18.7  %
Aerospace 2,120  4.8  % (4,210) (9.9) %
Specialty Products 6,010  17.3  % (5,940) (21.1) %
Corporate (10,410) N/A (32,040) N/A
Total $ 25,570  11.7  % $ (18,150) (9.1) %
Depreciation
Packaging $ 5,230  3.7  % $ 5,050  3.9  %
Aerospace 1,810  4.1  % 2,070  4.9  %
Specialty Products 910  2.6  % 960  3.4  %
Corporate 30  N/A 30  N/A
Total $ 7,980  3.6  % $ 8,110  4.1  %
Amortization
Packaging $ 2,400  1.7  % $ 2,320  1.8  %
Aerospace 2,880  6.5  % 2,860  6.7  %
Specialty Products 110  0.3  % 120  0.4  %
Corporate —  N/A —  N/A
Total $ 5,390  2.5  % $ 5,300  2.7  %









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The following table summarizes financial information for our reportable segments for the six months ended June 30, 2021 and 2020 (dollars in thousands):
Six months ended June 30,
  2021 As a Percentage
of Net Sales
2020 As a Percentage
of Net Sales
Net Sales
Packaging 271,720  63.8  % 228,880  59.9  %
Aerospace 89,170  21.0  % 91,530  23.9  %
Specialty Products 64,830  15.2  % 61,930  16.2  %
Total $ 425,720  100.0  % $ 382,340  100.0  %
Gross Profit
Packaging 74,360  27.4  % 66,530  29.1  %
Aerospace 20,280  22.7  % 14,580  15.9  %
Specialty Products 14,720  22.7  % 2,490  4.0  %
Total $ 109,360  25.7  % $ 83,600  21.9  %
Selling, General and Administrative Expenses
Packaging 25,210  9.3  % 24,210  10.6  %
Aerospace 13,660  15.3  % 13,710  15.0  %
Specialty Products 4,190  6.5  % 5,000  8.1  %
Corporate 19,620  N/A 39,000  N/A
Total $ 62,680  14.7  % $ 81,920  21.4  %
Operating Profit (Loss)
Packaging 49,150  18.1  % 42,320  18.5  %
Aerospace 6,620  7.4  % 870  1.0  %
Specialty Products 10,530  16.2  % (2,510) (4.1) %
Corporate (19,620) N/A (39,000) N/A
Total $ 46,680  11.0  % $ 1,680  0.4  %
Depreciation
Packaging 10,400  3.8  % 9,140  4.0  %
Aerospace 3,590  4.0  % 3,760  4.1  %
Specialty Products 1,780  2.7  % 1,800  2.9  %
Corporate 60  N/A 70  N/A
Total $ 15,830  3.7  % $ 14,770  3.9  %
Amortization
Packaging 4,800  1.8  % 4,650  2.0  %
Aerospace 5,760  6.5  % 5,260  5.7  %
Specialty Products 220  0.3  % 240  0.4  %
Corporate —  N/A —  N/A
Total $ 10,780  2.5  % $ 10,150  2.7  %

Results of Operations
The principal factors impacting us during the three months ended June 30, 2021, compared with the three months ended June 30, 2020, were:
the impact on global business activity of the COVID-19 pandemic;
a change in our accounting policy for asbestos-related defense costs in second quarter 2020;
the impact of our debt refinancing activities;
the impact of our recent acquisitions, primarily Affaba & Ferrari in December 2020;
the impact of material cost increases, primarily resin-related;
the impact of our realignment actions; and
a decrease in our effective tax rate from the recognition of certain discrete tax items in second quarter 2021.
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Three Months Ended June 30, 2021 Compared with Three Months Ended June 30, 2020
Overall, net sales increased approximately $19.4 million, or 9.7%, to $219.0 million for the three months ended June 30, 2021, as compared with $199.6 million in the three months ended June 30, 2020. Our acquisitions added approximately $9.9 million of sales. Organic sales, excluding the impact of currency exchange and acquisitions, increased approximately $4.9 million, as increases in our Aerospace and Specialty Products segments were partially offset by the expected decline in organic sales in our Packaging segment as the high demand levels for products that help fight the spread of germs decreased compared with the record-high levels in prior year. In addition, net sales increased by approximately $4.6 million due to currency exchange, as our reported results in U.S. dollars were favorably impacted as a result of a weakening U.S. dollar relative to foreign currencies.
Gross profit margin (gross profit as a percentage of sales) approximated 26.5% and 18.7% for the three months ended June 30, 2021 and 2020, respectively. Gross profit margin increased primarily due to the impact of higher realignment costs of $15.1 million in the second quarter of 2020 as compared to 2021, the impact of a non-cash purchase accounting charge in the second quarter of 2020 that did not repeat in 2021, as well as favorable foreign currency exchange. These increases were partially offset by an increase in material costs in the second quarter of 2021, primarily for resin-based materials. We estimate that due to the lag in timing between incurring the material cost increases and recovering via commercial actions, our gross profit was negatively impacted by approximately $4 million.
Operating profit (loss) margin (operating profit as a percentage of sales) approximated 11.7% and (9.1)% for the three months ended June 30, 2021 and 2020, respectively. Operating profit (loss) increased approximately $43.7 million to an operating profit of approximately $25.6 million in the three months ended June 30, 2021, from an operating loss of approximately $18.2 million for the three months ended June 30, 2020. Operating profit margin and dollars increased primarily as a result of a non-cash, pre-tax charge for asbestos-related costs of approximately $23.4 million in the second quarter of 2020 due to a change in accounting policy that did not repeat in 2021, as well as due to higher realignment costs of $14.3 million in the second quarter of 2020 as compared to 2021 and higher sales levels. These increases were partially offset by an increase in material costs.
Interest expense decreased approximately $0.1 million, to $4.1 million, for the three months ended June 30, 2021, as compared to approximately $4.2 million for the three months ended June 30, 2020, respectively, as lower weighted average borrowings more than offset an increase in our interest rates.
We incurred approximately $10.3 million of debt financing and related expense for the three months ended June 30, 2021 related to expenses incurred associated with the redemption of our 2025 Senior Notes.
Other income decreased approximately $0.5 million to approximately $0.7 million for the three months ended June 30, 2021, as compared to approximately $1.1 million for the three months ended June 30, 2020, primarily due to a decrease in foreign currency gains.
The effective income tax rate for the three months ended June 30, 2021 and 2020 was (0.3)% and 26.1%, respectively. We recorded nominal income tax benefit for the three months ended June 30, 2021 as compared to approximately $5.6 million for the three months ended June 30, 2020. The rate for the three months ended June 30, 2021 is lower than in the prior year primarily as a result of the recognition of approximately $3.0 million of deferred tax benefits in Italy, the majority of which related to a reduction in deferred tax liabilities in connection with certain tax incentives.
Net income (loss) increased approximately $27.5 million, to net income of $11.8 million for the three months ended June 30, 2021, as compared to a net loss of $15.7 million for the three months ended June 30, 2020. The increase was primarily the result of an increase in operating profit (loss) of approximately $43.7 million, partially offset by debt financing and related expenses of approximately $10.3 million, a decrease in the income tax benefit of approximately $5.5 million and a decrease in other income of approximately $0.5 million.
See below for a discussion of operating results by segment.
Packaging. Net sales increased approximately $10.8 million, or 8.4%, to $139.6 million in the three months ended June 30, 2021, as compared to $128.8 million in the three months ended June 30, 2020. Affaba & Ferrari, acquired in December 2020, contributed approximately $9.9 million of sales in the second quarter of 2021. Sales of dispensing products used in applications that help fight the spread of germs decreased by approximately $4.7 million, as demand in the second quarter of 2021, while still above historical levels, was lower than demand in second quarter 2020, which we believe was at peak levels following the onset of the COVID-19 pandemic. Net sales also increased by approximately $4.6 million due to currency exchange, as our reported results in U.S. dollars were favorably impacted as a result of the weakening U.S. dollar relative to foreign currencies.
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Gross profit increased approximately $2.6 million to $40.5 million, or 29.0% of sales, in the three months ended June 30, 2021, as compared to $37.9 million, or 29.4% of sales, in the three months ended June 30, 2020, primarily due to increased sales levels and approximately $1.5 million of currency exchange, as our reported results in U.S. dollars were favorably impacted as a result of the weakening U.S. dollar relative to foreign currencies. During the second quarter of 2021, we recognized approximately $0.3 million of realignment costs primarily related to the closure of our Union City, California manufacturing facility and consolidation into our Indianapolis, Indiana and Woodridge, Illinois facilities as compared to $0.9 million of realignment costs in the second quarter of 2020, primarily related to the disposal of certain equipment removed from service. In addition, we recognized an approximate $0.8 million purchase accounting non-cash charge related to our 2020 acquisition of Rapak for the step-up of inventory to fair value and subsequent amortization during the three months ended June 30, 2020 that did not repeat in 2021. These increases were partially offset by approximately $4 million of higher material costs (primarily resin) than were recovered via sales price increases in the second quarter of 2021, and a less favorable product sales mix.
Selling, general and administrative expenses decreased approximately $1.2 million to $12.6 million, or 9.1% of sales, in the three months ended June 30, 2021, as compared to $13.8 million, or 10.7% of sales, in the three months ended June 30, 2020, due to approximately $1.4 million in charges associated with second quarter 2020 realignment actions, primarily for severance, that did not repeat in 2021.
Operating profit increased approximately $3.8 million to $27.9 million, or 19.9% of sales, in the three months ended June 30, 2021, as compared to $24.0 million, or 18.7% of sales, in the three months ended June 30, 2020, primarily due to higher sales levels, favorable currency exchange, lower realignment costs, and the impact of purchase accounting adjustments in the second quarter of 2020 that did not repeat in 2021. These increases were partially offset by the impact of higher material costs and a less favorable product sales mix.
Aerospace.    Net sales for the three months ended June 30, 2021 increased approximately $2.0 million, or 4.6%, to $44.6 million, as compared to $42.6 million in the three months ended June 30, 2020. Sales of our engineered components increased by approximately $1.1 million primarily due to timing of end market demand. Sales of our fasteners products increased by approximately $0.9 million, as the impact of stocking orders for specialized fasteners of approximately $7.9 million was mostly offset by a decline in overall market-related demand resulting from current and expected future reduced air travel due to the COVID-19 pandemic.
Gross profit increased approximately $6.6 million to $9.3 million, or 20.9% of sales, in the three months ended June 30, 2021, from $2.7 million, or 6.3% of sales, in the three months ended June 30, 2020, due primarily to realignment actions taken in the second quarter of 2020 to protect against uncertain end market demand and other adverse effects following the outbreak of the COVID-19 pandemic, resulting in charges of approximately $4.2 million related to inventory reductions, approximately $1.7 million related to severance and approximately $0.3 million related to production equipment removed from service. Gross profit also improved due to a more favorable product sales mix and the impact of an approximate $1.5 million purchase accounting non-cash charge related to our 2020 acquisition of RSA Engineered Products ("RSA") for the step-up of inventory to fair value and subsequent amortization during the three months ended June 30, 2020 that did not repeat in 2021. Partially offsetting these year-over-year improvements was a decline in gross profit due to lower absorption of fixed costs and production inefficiencies driven by the COVID-19 pandemic, as well as approximately $0.6 million of realignment actions taken related to facility consolidations.
Selling, general and administrative expenses increased approximately $0.3 million to approximately $7.2 million, or 16.1% of sales, in the three months ended June 30, 2021, as compared to $6.9 million, or 16.1% of sales, in the three months ended June 30, 2020, primarily due to higher third party expenses.
Operating profit (loss) increased approximately $6.3 million to an operating profit of approximately $2.1 million, or 4.8% of sales, in the three months ended June 30, 2021, as compared to an operating loss of $4.2 million, or 9.9% of sales, in the three months ended June 30, 2020, primarily due to lower year-over-year realignment charges, a more favorable product sales mix and the recognition of a purchase accounting adjustment related to RSA's step-up to fair value and subsequent amortization during the second quarter of 2020 that did not repeat in 2021, partially offset by lower absorption of fixed costs, production inefficiencies and higher selling, general and administrative expenses.
Specialty Products.   Net sales for the three months ended June 30, 2021 increased approximately $6.7 million, or 23.8%, to $34.8 million, as compared to $28.1 million in the three months ended June 30, 2020. Sales of our cylinder products increased approximately $5.0 million, due to higher demand for steel cylinders in North America as industrial activity begins to increase following the previous lower levels a year ago as a result of the COVID-19 pandemic. Sales of engines, compressors and related parts used in upstream oil and gas applications increased by approximately $1.7 million, primarily as a result of higher oil-field activity in North America. The second quarter of 2020 included approximately $0.7 million of sales related to the liquidation of non-core inventory following our strategic decision to streamline Arrow Engine's product line offering.
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Gross profit increased approximately $11.5 million to $8.2 million, or 23.6% of sales, in the three months ended June 30, 2021, as compared to $3.3 million, or 11.7% of sales, in the three months ended June 30, 2020. During the second quarter of 2020, we executed certain realignment actions in response to reduced end market demand as a result of the COVID-19 pandemic, resulting in approximately $9.0 million of non-cash charges, primarily related to Arrow Engine streamlining its product line offering and liquidating the non-core inventory, which did not repeat in 2021. In addition, gross profit increased in the second quarter of 2021 due to higher sales levels, while margins further improved due to favorable product sales mix and leveraging the previous realignment actions.
Selling, general and administrative expenses decreased approximately $0.4 million to $2.2 million, or 6.4% of sales, in the three months ended June 30, 2021, as compared to $2.7 million, or 9.4% of sales, in the three months ended June 30, 2020, as we incurred selling, general and administrative realignment expenses of approximately $0.7 million in the second quarter of 2020 related to severance as we reduced our employment levels.
Operating profit (loss) increased approximately $12.0 million to an operating profit of $6.0 million, or 17.3% of sales, in the three months ended June 30, 2021, as compared to an operating loss of $5.9 million, or 21.1% of sales, in the three months ended June 30, 2020, primarily due to the impact of the second quarter 2020 realignment costs that did not repeat in 2021, as well as higher sales and related profit conversion leveraging the 2020 realignment actions.
Corporate.    Corporate expenses consist of the following (dollars in millions):
  Three months ended June 30,
  2021 2020
Corporate operating expenses $ 6.6  $ 5.6 
Non-cash stock compensation 3.3  2.8 
Legacy expenses 0.5  23.6 
Corporate expenses $ 10.4  $ 32.0 
Corporate expenses decreased approximately $21.6 million to approximately $10.4 million for the three months ended June 30, 2021, from approximately $32.0 million for the three months ended June 30, 2020, primarily as a result of the $23.4 million non-cash charge recorded in second quarter 2020 due to the change of our accounting policy for asbestos-related defense costs. Corporate operating expenses increased primarily as a result of realignment charges recorded in the second quarter 2021 relating to the corporate office finance group reorganization.

Six Months Ended June 30, 2021 Compared with Six Months Ended June 30, 2020
Overall, net sales increased approximately $43.4 million, or 11.3%, to $425.7 million for the six months ended June 30, 2021, as compared with $382.3 million in the six months ended June 30, 2020, primarily as a result of acquisitions, which added approximately $27.6 million of sales. Organic sales, excluding the impact of currency exchange and acquisitions, increased approximately $8.4 million, as a sales increase of $12.1 million in our Packaging segment, primarily for dispensing products used in applications that help fight the spread of germs, and an increase of $2.9 million in our Specialty Products segment, primarily for steel cylinders used in industrial applications in North America, were partially offset by $6.6 million lower sales in our Aerospace segment, primarily due to lower demand as a result of the COVID-19 pandemic. In addition, net sales increased by approximately $7.4 million due to currency exchange, as our reported results in U.S. dollars were favorably impacted as a result of a weakening U.S. dollar relative to foreign currencies.
Gross profit margin (gross profit as a percentage of sales) approximated 25.7% and 21.9% for the six months ended June 30, 2021 and 2020, respectively. Gross profit margin increased primarily due to the impact of higher realignment costs of $13.3 million in the first half of 2020 as compared to 2021, the impact of non-cash purchase accounting charges in the first half of 2020 that did not repeat in 2021, as well as favorable foreign currency exchange. This increase was partially offset by an increase in material costs in the first half of 2021, primarily for resin-based materials. We estimate that due to the lag in timing between incurring the material cost increases and recovering via commercial actions, our gross profit was negatively impacted by approximately $6 million.
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Operating profit margin (operating profit as a percentage of sales) approximated 11.0% and 0.4% for the six months ended June 30, 2021 and 2020, respectively. Operating profit increased approximately $45.0 million, to $46.7 million for the six months ended June 30, 2021, compared to $1.7 million for the six months ended June 30, 2020. Operating profit margin and dollars increased primarily as a result of a non-cash, pre-tax charge for asbestos-related costs of approximately $23.4 million in the second quarter of 2020 due to a change in accounting policy that did not repeat in 2021, as well as due to higher realignment costs of $10.3 million in the second quarter of 2020 as compared to 2021 and higher sales levels. These increases were partially offset by an increase in material costs.
Interest expense decreased approximately $0.1 million, to $7.7 million, for the six months ended June 30, 2021, as compared to $7.8 million for the six months ended June 30, 2020, as lower weighted average borrowings more than offset an increase in our interest rates. We drew $150 million on our revolving credit facility in first quarter 2020 to ensure availability of cash on hand, but subsequently repaid this amount late in second quarter 2020.
We incurred approximately $10.5 million of debt financing and related expense for the six months ended June 30, 2021, of which approximately $10.3 million was related to expenses incurred associated with the redemption of our 2025 Senior Notes and approximately $0.2 million related to the write-off of previously capitalized deferred financing fees associated with our Credit Agreement.
Other income (expense), net decreased approximately $1.3 million, to $0.3 million of other expense for the six months ended June 30, 2021, from $1.1 million of other income, net for the six months ended June 30, 2020, primarily due to a year-over-year increase in losses on transactions denominated in foreign currencies.
The effective income tax rate for the six months ended June 30, 2021 and 2020 was 11.8% and 49.2%, respectively. We recorded tax expense of approximately $3.3 million for the six months ended June 30, 2021 as compared to a tax benefit of approximately $2.5 million for the six months ended June 30, 2020. The rate for the six months ended June 30, 2021 is lower than in the prior year primarily as a result of the recognition of approximately $3.0 million of deferred tax benefits in Italy, the majority of which related to a reduction in deferred tax liabilities in connection with certain tax incentives. The rate for the six months ended June 30, 2020 was impacted by a decrease in profitability resulting from various realignment charges as well as an expense for a change in the Company’s accounting policy for asbestos-related defense costs.
Net income increased by approximately $27.5 million, to net income of $24.9 million for the six months ended June 30, 2021, compared to a net loss of $2.6 million for the six months ended June 30, 2020. The increase was primarily the result of an increase in operating profit of approximately $45.0 million, partially offset by debt financing and related expenses of approximately $10.5 million, an increase in the income tax benefit (expense) of approximately $5.8 million and a decrease in other income (expense) of approximately $1.3 million.
See below for a discussion of operating results by segment.
Packaging.   Net sales increased approximately $42.8 million, or 18.7%, to $271.7 million in the six months ended June 30, 2021, as compared to $228.9 million in the six months ended June 30, 2020. Acquisition-related sales growth was approximately $23.3 million, comprised of $18.0 million of sales from our December 2020 acquisition of Affaba & Ferrari and $5.3 million resulting from the January through March 2021 sales of our April 2020 acquisition of Rapak. Sales of dispensing products used in beauty and personal care and home care applications that help fight the spread of germs increased by approximately $4.1 million, primarily for personal hygiene applications, as demand rose, in part, due to the COVID-19 pandemic. Sales of products used in industrial markets increased by approximately $3.2 million, primarily as a result of higher demand from the drums and metal closure markets in North America. Sales of products used in food and beverage markets increased by approximately $2.0 million, as the sub-markets in which many of these products are used, such as vending machines in exercise facilities, began to rebound from prior pandemic-related shutdowns. Net sales also increased by approximately $7.4 million due to currency exchange, as our reported results in U.S. dollars were favorably impacted as a result of the weakening U.S. dollar relative to foreign currencies.
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Packaging's gross profit increased approximately $7.8 million to $74.4 million, or 27.4% of sales, in the six months ended June 30, 2021, as compared to $66.5 million, or 29.1% of sales, in the six months ended June 30, 2020, primarily due to increased sales levels and approximately $2.5 million of currency exchange, as our reported results in U.S. dollars were favorably impacted as a result of the weakening U.S. dollar relative to foreign currencies. In addition, we recognized an approximate $0.8 million purchase accounting non-cash charge related to the step-up of Rapak's inventory to fair value and subsequent amortization during the three months ended June 30, 2020 that did not repeat in 2021. These increases were partially offset by approximately $6 million of higher material costs (primarily resin) than were recovered via sales price increases in the first half of 2021. During the first half of 2021, we recognized approximately $1.6 million of realignment costs primarily related to the closure of our Union City, California manufacturing facility and consolidation into our Indianapolis, Indiana and Woodridge, Illinois facilities as compared to $0.9 million of realignment costs in the second quarter of 2020, primarily related to the disposal of certain equipment removed from service. In addition, we recognized an approximate $0.8 million purchase accounting non-cash charge related to the step-up of Affaba & Ferrari's inventory to fair value and subsequent amortization in the first half of 2021.
Packaging's selling, general and administrative expenses increased approximately $1.0 million to $25.2 million, or 9.3% of sales, in the six months ended June 30, 2021, as compared to $24.2 million, or 10.6% of sales, in the six months ended June 30, 2020, primarily due to higher ongoing selling, general and administrative costs associated with our acquisitions, partially offset by approximately $1.4 million in charges associated with first half 2020 realignment actions, primarily for severance, that did not repeat in the first half of 2021.
Packaging's operating profit increased approximately $6.8 million to $49.2 million, or 18.1% of sales, in the six months ended June 30, 2021, as compared to $42.3 million, or 18.5% of sales, in the six months ended June 30, 2020, primarily due to higher sales levels and favorable currency exchange. These increases were partially offset by the impact of higher material costs, incremental realignment charges and higher selling, general and administrative expenses.
Aerospace.    Net sales for the six months ended June 30, 2021 decreased approximately $2.4 million, or 2.6%, to $89.2 million, as compared to $91.5 million in the six months ended June 30, 2020. RSA, acquired in February 2020, added approximately $4.3 million of sales for January and February 2021. While sales of our fastener products benefited from approximately $13.9 million of customers' stocking orders for specialized fasteners in the first six months of 2021, sales of our fastener and engineered components products declined by approximately $4.4 million and $2.3 million, respectively, both due to the lower demand resulting from current and expected future reduced air travel due to the COVID-19 pandemic.
Gross profit within Aerospace increased approximately $5.7 million to $20.3 million, or 22.7% of sales, in the six months ended June 30, 2021, from $14.6 million, or 15.9% of sales, in the six months ended June 30, 2020, due primarily to realignment actions taken in the second quarter of 2020 to protect against uncertain end market demand and other adverse effects following the outbreak of the COVID-19 pandemic, resulting in charges of approximately $4.2 million related to inventory reductions, approximately $1.7 million related to severance and approximately $0.3 million related to production equipment removed from service. Gross profit also improved due to a more favorable product sales mix and the impact of an approximate $2.0 million purchase accounting non-cash charge related to the step-up of RSA's inventory to fair value and subsequent amortization during the six months ended June 30, 2020 that did not repeat in 2021. Partially offsetting these improvements was a decline in gross profit due to lower absorption of fixed costs and production inefficiencies driven by the COVID-19 pandemic and by approximately $1.1 million due to realignment actions taken related to facility consolidations.
Selling, general and administrative expenses was flat at $13.7 million, or 15.3% of sales, in the six months ended June 30, 2021, as compared to $13.7 million, or 15.0% of sales, in the six months ended June 30, 2020, as the impact of higher ongoing selling, general and administrative costs associated with our acquisition of RSA was offset by cost reduction efforts to mitigate the impact of lower sales levels
Operating profit (loss) within Aerospace increased approximately $5.8 million to an operating profit of $6.6 million, or 7.4% of sales, in the six months ended June 30, 2021, as compared to an operating loss of $0.9 million, or 1.0% of sales, in the six months ended June 30, 2020, primarily due to lower realignment charges, a more favorable product sales mix and the recognition of a purchase accounting adjustment related to RSA's step-up to fair value and subsequent amortization during the first half of 2020 that did not repeat in 2021, partially offset by lower fixed cost absorption and production inefficiencies.
Specialty Products.    Net sales for the six months ended June 30, 2021 increased approximately $2.9 million, or 4.7%, to $64.8 million, as compared to $61.9 million in the six months ended June 30, 2020. Sales of our cylinder products increased approximately $1.9 million, due to higher demand for steel cylinders in North America as industrial activity began to increase in second quarter 2021 following the previous lower levels in 2020 as a result of the pandemic. Sales of engines, compressors and related parts used in upstream oil and gas applications increased by approximately $1.0 million, primarily as a result of higher oil-field activity in North America. Our sales in the first six months of 2020 included approximately $0.7 million related to the liquidation of non-core inventory following our strategic decision to streamline Arrow Engine's product line offering.
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Gross profit within Specialty Products increased approximately $12.2 million to $14.7 million, or 22.7% of sales, in the six months ended June 30, 2021, as compared to $2.5 million, or 4.0% of sales, in the six months ended June 30, 2020. During the six months ended June 30, 2020, we executed certain realignment actions in response to reduced end market demand as a result of the COVID-19 pandemic, resulting in approximately $9.0 million of non-cash charges, primarily related to Arrow Engine streamlining its product line offering and liquidating the non-core inventory, which did not repeat in 2021. In addition, gross profit increased in the six months ended June 30, 2021 due to higher sales levels, while margins further improved due to favorable product sales mix and leveraging the previous realignment actions.
Selling, general and administrative expenses within Specialty Products decreased approximately $0.8 million to $4.2 million, or 6.5% of sales, in the six months ended June&nbs