UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One) | ||
x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
For the Quarterly Period Ended June 30, 2018 | ||
Or | ||
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
For the Transition Period from to . | ||
Commission file number 001-10716
TRIMAS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) | 38-2687639 (IRS Employer Identification No.) | |
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)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o.
Indicate by check mark 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 | x | Accelerated filer | o | |
Non-accelerated filer | o | (Do not check if a smaller reporting company) | ||
Smaller reporting company | o | |||
Emerging growth company | o | |||
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of July 31, 2018, the number of outstanding shares of the Registrant's common stock, $0.01 par value, was 45,846,987 shares.
TriMas Corporation
Index
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: 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; the performance of our subcontractors and suppliers; supply constraints; market demand; technology factors; intellectual property factors; litigation; government and regulatory actions, including, without limitation, 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; information technology factors; the disruption of operations from catastrophic or extraordinary events, including natural disasters; the potential impact of Brexit; tax considerations relating to the Cequent spin-off; 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, 2017. 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, 2018 | December 31, 2017 | |||||||
Assets | (unaudited) | |||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 53,400 | $ | 27,580 | ||||
Receivables, net of reserves of approximately $4.1 million as of June 30, 2018 and December 31, 2017, respectively | 132,500 | 112,220 | ||||||
Inventories | 160,680 | 155,350 | ||||||
Prepaid expenses and other current assets | 6,960 | 16,120 | ||||||
Total current assets | 353,540 | 311,270 | ||||||
Property and equipment, net | 187,070 | 190,250 | ||||||
Goodwill | 317,700 | 319,390 | ||||||
Other intangibles, net | 184,290 | 194,220 | ||||||
Deferred income taxes | 2,270 | 9,100 | ||||||
Other assets | 8,990 | 8,970 | ||||||
Total assets | $ | 1,053,860 | $ | 1,033,200 | ||||
Liabilities and Shareholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 80,970 | $ | 72,410 | ||||
Accrued liabilities | 45,040 | 49,470 | ||||||
Total current liabilities | 126,010 | 121,880 | ||||||
Long-term debt, net | 293,010 | 303,080 | ||||||
Deferred income taxes | 5,480 | 5,650 | ||||||
Other long-term liabilities | 43,670 | 58,570 | ||||||
Total liabilities | 468,170 | 489,180 | ||||||
Preferred stock, $0.01 par: Authorized 100,000,000 shares; Issued and outstanding: None | — | — | ||||||
Common stock, $0.01 par: Authorized 400,000,000 shares; Issued and outstanding: 45,869,678 shares at June 30, 2018 and 45,724,453 shares at December 31, 2017 | 460 | 460 | ||||||
Paid-in capital | 821,170 | 823,850 | ||||||
Accumulated deficit | (219,040 | ) | (262,960 | ) | ||||
Accumulated other comprehensive loss | (16,900 | ) | (17,330 | ) | ||||
Total shareholders' equity | 585,690 | 544,020 | ||||||
Total liabilities and shareholders' equity | $ | 1,053,860 | $ | 1,033,200 | ||||
The accompanying notes are an integral part of these financial statements.
3
TriMas Corporation
Consolidated Statement of Income
(Unaudited—dollars in thousands, except for per share amounts)
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net sales | $ | 224,910 | $ | 213,370 | $ | 442,010 | $ | 413,200 | ||||||||
Cost of sales | (160,130 | ) | (153,900 | ) | (316,850 | ) | (301,910 | ) | ||||||||
Gross profit | 64,780 | 59,470 | 125,160 | 111,290 | ||||||||||||
Selling, general and administrative expenses | (33,260 | ) | (33,050 | ) | (58,430 | ) | (68,960 | ) | ||||||||
Operating profit | 31,520 | 26,420 | 66,730 | 42,330 | ||||||||||||
Other expense, net: | ||||||||||||||||
Interest expense | (3,480 | ) | (3,420 | ) | (7,180 | ) | (6,970 | ) | ||||||||
Other expense, net | (2,180 | ) | (140 | ) | (2,740 | ) | (920 | ) | ||||||||
Other expense, net | (5,660 | ) | (3,560 | ) | (9,920 | ) | (7,890 | ) | ||||||||
Income before income tax expense | 25,860 | 22,860 | 56,810 | 34,440 | ||||||||||||
Income tax expense | (6,260 | ) | (8,010 | ) | (12,890 | ) | (12,600 | ) | ||||||||
Net income | $ | 19,600 | $ | 14,850 | $ | 43,920 | $ | 21,840 | ||||||||
Basic earnings per share: | ||||||||||||||||
Net income per share | $ | 0.43 | $ | 0.32 | $ | 0.96 | $ | 0.48 | ||||||||
Weighted average common shares—basic | 45,920,307 | 45,717,697 | 45,850,137 | 45,644,096 | ||||||||||||
Diluted earnings per share: | ||||||||||||||||
Net income per share | $ | 0.42 | $ | 0.32 | $ | 0.95 | $ | 0.48 | ||||||||
Weighted average common shares—diluted | 46,200,757 | 45,922,416 | 46,215,047 | 45,915,687 | ||||||||||||
The accompanying notes are an integral part of these financial statements.
4
TriMas Corporation
Consolidated Statement of Comprehensive Income
(Unaudited—dollars in thousands)
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net income | $ | 19,600 | $ | 14,850 | $ | 43,920 | $ | 21,840 | ||||||||
Other comprehensive income (loss): | ||||||||||||||||
Defined benefit pension and postretirement plans (Note 14) | 2,650 | 160 | 2,850 | 330 | ||||||||||||
Foreign currency translation | (6,450 | ) | 1,930 | (4,090 | ) | 3,730 | ||||||||||
Derivative instruments (Note 9) | 5,710 | (400 | ) | 1,670 | (20 | ) | ||||||||||
Total other comprehensive income | 1,910 | 1,690 | 430 | 4,040 | ||||||||||||
Total comprehensive income | $ | 21,510 | $ | 16,540 | $ | 44,350 | $ | 25,880 | ||||||||
The accompanying notes are an integral part of these financial statements.
5
TriMas Corporation
Consolidated Statement of Cash Flows
(Unaudited—dollars in thousands)
Six months ended June 30, | ||||||||
2018 | 2017 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 43,920 | $ | 21,840 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Loss on dispositions of assets | 70 | 3,030 | ||||||
Depreciation | 12,870 | 13,050 | ||||||
Amortization of intangible assets | 9,740 | 9,990 | ||||||
Amortization of debt issue costs | 740 | 690 | ||||||
Deferred income taxes | 6,340 | 2,060 | ||||||
Non-cash compensation expense | 2,620 | 3,340 | ||||||
Increase in receivables | (20,380 | ) | (11,490 | ) | ||||
(Increase) decrease in inventories | (5,880 | ) | 2,850 | |||||
Decrease in prepaid expenses and other assets | 8,970 | 6,280 | ||||||
Decrease in accounts payable and accrued liabilities | (7,530 | ) | (1,930 | ) | ||||
Other operating activities | 140 | (120 | ) | |||||
Net cash provided by operating activities | 51,620 | 49,590 | ||||||
Cash Flows from Investing Activities: | ||||||||
Capital expenditures | (11,320 | ) | (16,910 | ) | ||||
Net proceeds from disposition of property and equipment | 250 | 1,780 | ||||||
Net cash used for investing activities | (11,070 | ) | (15,130 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Repayments of borrowings on term loan facilities | — | (6,910 | ) | |||||
Proceeds from borrowings on revolving credit and accounts receivable facilities | 59,060 | 300,050 | ||||||
Repayments of borrowings on revolving credit and accounts receivable facilities | (68,490 | ) | (324,900 | ) | ||||
Shares surrendered upon exercise and vesting of equity awards to cover taxes | (2,380 | ) | (480 | ) | ||||
Payments to purchase common stock | (2,920 | ) | — | |||||
Other financing activities | — | (250 | ) | |||||
Net cash used for financing activities | (14,730 | ) | (32,490 | ) | ||||
Cash and Cash Equivalents: | ||||||||
Net increase for the period | 25,820 | 1,970 | ||||||
At beginning of period | 27,580 | 20,710 | ||||||
At end of period | $ | 53,400 | $ | 22,680 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 7,630 | $ | 6,060 | ||||
Cash paid for taxes | $ | 3,210 | $ | 10,600 | ||||
The accompanying notes are an integral part of these financial statements.
6
TriMas Corporation
Consolidated Statement of Shareholders' Equity
Six Months Ended June 30, 2018
(Unaudited—dollars in thousands)
Common Stock | Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||
Balances, December 31, 2017 | $ | 460 | $ | 823,850 | $ | (262,960 | ) | $ | (17,330 | ) | $ | 544,020 | ||||||||
Net income | — | — | 43,920 | — | 43,920 | |||||||||||||||
Other comprehensive income | — | — | — | 430 | 430 | |||||||||||||||
Purchase of common stock | — | (2,920 | ) | — | — | (2,920 | ) | |||||||||||||
Shares surrendered upon exercise and vesting of equity awards to cover taxes | — | (2,380 | ) | — | — | (2,380 | ) | |||||||||||||
Non-cash compensation expense | — | 2,620 | — | — | 2,620 | |||||||||||||||
Balances, June 30, 2018 | $ | 460 | $ | 821,170 | $ | (219,040 | ) | $ | (16,900 | ) | $ | 585,690 | ||||||||
The accompanying notes are an integral part of these financial statements.
7
1. Basis of Presentation
TriMas Corporation ("TriMas" or the "Company"), and its consolidated subsidiaries, is a diversified industrial manufacturer of products for customers in the consumer products, aerospace, industrial, petrochemical, refinery and oil and gas end markets.
In the first quarter of 2018, TriMas realigned its reporting structure from four segments to three. While there were no changes to the Packaging and Aerospace reportable segments, the Company combined its previous Energy and Engineered Components reportable segments into a new reportable segment titled Specialty Products. This change was made in connection with recent realignment efforts, providing a more streamlined operating structure and to better leverage resources across the divisions in this segment. See Note 11, "Segment Information," for further information on each of the Company's reportable segments.
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. Results of operations for interim periods are not necessarily indicative of results for the full year. Certain prior year amounts have been reclassified to conform with current year presentation. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the Company's 2017 Annual Report on Form 10-K.
2. New Accounting Pronouncements
Recently Issued Accounting Pronouncements
In February 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220)" ("ASU 2018-02"), which provides for the option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings resulting from the Tax Cuts and Jobs Act ("Tax Reform Act"). ASU 2018-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. ASU 2018-02 is to be applied retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate related to the Tax Reform Act is recorded. The Company is in the process of assessing the impact of adoption on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" ("ASU 2017-04"), which simplifies the test for goodwill impairment by eliminating the requirement to perform a hypothetical purchase price allocation to measure the amount of goodwill impairment. ASU 2017-04 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The Company is in the process of assessing the impact of adoption on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)" ("ASU 2016-02"), which requires that lessees, at the lease commencement date, recognize a lease liability representing the lessee's obligation to make lease payments arising from a lease as well as a right-of-use asset, which represents the lessee's right to use, or control the use of a specified asset, for the lease term. The new guidance also aligns lessor accounting to the lessee accounting model and to Topic 606, "Revenue from Contracts with Customers." ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and is to be applied using a modified retrospective approach with early adoption permitted. The Company is in the process of assessing the impact of the adoption on its consolidated financial statements.
8
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
3. Revenue
Revenue is recognized when control of promised goods are transferred to customers, which generally occurs when products are shipped from the Company’s facilities to its customers. The amount of revenue recorded reflects the consideration the Company expects to be entitled to in exchange for transferring those goods. Net sales are comprised of gross revenues, based on observed stand-alone selling prices, less estimates of expected returns, trade discounts and customer allowances, which include incentives such as volume discounts and other supply agreements in connection with various programs. Such deductions are estimated and recorded during the period the related revenue is recognized. The Company may adjust these estimates when the expected amount of consideration changes based on sales volumes or other contractual terms. Sales and other consumption taxes the Company collects from customers and remits to government agencies are excluded from revenue. The Company has elected to account for freight and shipping costs that occur after control of the related goods transfer to the customer as a fulfillment cost within cost of sales. The nature and timing of the Company's revenue transactions are similar, as substantially all revenue is based on point-in-time transactions with customers under industry-standard payment terms. The Company may require shortened payment terms, including cash-in-advance, on an individual customer basis depending on its assessment of the customer's credit risk.
The following table presents the Company’s disaggregated net sales by primary end market served (dollars in thousands):
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
Customer End Markets | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Consumer | $ | 71,990 | $ | 66,780 | $ | 136,720 | $ | 125,660 | ||||||||
Aerospace | 45,620 | 47,580 | 91,430 | 93,000 | ||||||||||||
Industrial | 55,970 | 50,000 | 110,320 | 99,290 | ||||||||||||
Oil and gas | 51,330 | 49,010 | 103,540 | 95,250 | ||||||||||||
Total net sales | $ | 224,910 | $ | 213,370 | $ | 442,010 | $ | 413,200 | ||||||||
The Company’s Packaging reportable segment earns revenues from the consumer and industrial end markets. The Aerospace reportable segment earns revenues from the aerospace end market. The Specialty Products reportable segment earns revenues from the industrial and oil and gas end markets.
4. Facility Closures
Bangalore, India facility
In May 2018, the Company exited its Bangalore, India facility within the Specialty Products reportable segment. In connection with this action, the Company recorded pre-tax charges of approximately $0.7 million within selling, general and administrative expenses and approximately $0.6 million within cost of sales related to severance benefits for employees involuntarily terminated, facility closure costs and costs related to the disposal of certain assets.
Reynosa, Mexico facility
In March 2017, the Company announced plans within the Specialty Products reportable segment to cease production at its Reynosa, Mexico facility, and consolidate production into its Houston, Texas facility. During the second quarter of 2017, upon the cease use date of the facility, the Company recorded a pre-tax charge of approximately $1.5 million within cost of sales for estimated future unrecoverable lease obligations, net of estimated sublease recoveries, for the lease that expires in 2025. In addition, in the second quarter of 2017, the Company incurred approximately $1.2 million of pre-tax non-cash charges within cost of sales related to accelerated depreciation expense as a result of shortening the expected lives on certain machinery, equipment and leasehold improvement assets that the Company no longer used following the facility closure.
During the second quarter of 2018, following entry into a sublease agreement for the facility, the Company re-evaluated its estimate of unrecoverable future obligations, and reduced its estimate by approximately $1.1 million.
9
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Wolverhampton, United Kingdom facility
In March 2017, the Company exited its Wolverhampton, United Kingdom facility within the Specialty Products reportable segment. In connection with this action, the Company recorded pre-tax charges of approximately $3.5 million within selling, general and administrative expenses, of which approximately $3.2 million were non-cash charges related to the disposal of certain assets.
5. Goodwill and Other Intangible Assets
Changes in the carrying amount of goodwill for the six months ended June 30, 2018 are summarized as follows (dollars in thousands):
Packaging | Aerospace | Specialty Products | Total | ||||||||||||
Balance, December 31, 2017 | $ | 166,400 | $ | 146,430 | $ | 6,560 | $ | 319,390 | |||||||
Foreign currency translation and other | (1,690 | ) | — | — | (1,690 | ) | |||||||||
Balance, June 30, 2018 | $ | 164,710 | $ | 146,430 | $ | 6,560 | $ | 317,700 | |||||||
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 as of June 30, 2018 and December 31, 2017 are summarized below (dollars in thousands):
As of June 30, 2018 | As of December 31, 2017 | |||||||||||||||
Intangible Category by Useful Life | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||||||||||
Finite-lived intangible assets: | ||||||||||||||||
Customer relationships, 5 – 12 years | $ | 73,540 | $ | (44,660 | ) | $ | 73,910 | $ | (41,000 | ) | ||||||
Customer relationships, 15 – 25 years | 132,230 | (55,330 | ) | 132,230 | (51,880 | ) | ||||||||||
Total customer relationships | 205,770 | (99,990 | ) | 206,140 | (92,880 | ) | ||||||||||
Technology and other, 1 – 15 years | 57,030 | (30,200 | ) | 57,340 | (29,120 | ) | ||||||||||
Technology and other, 17 – 30 years | 43,300 | (34,550 | ) | 43,300 | (33,490 | ) | ||||||||||
Total technology and other | 100,330 | (64,750 | ) | 100,640 | (62,610 | ) | ||||||||||
Indefinite-lived intangible assets: | ||||||||||||||||
Trademark/Trade names | 42,930 | — | 42,930 | — | ||||||||||||
Total other intangible assets | $ | 349,030 | $ | (164,740 | ) | $ | 349,710 | $ | (155,490 | ) | ||||||
Amortization expense related to intangible assets as included in the accompanying consolidated statement of income is summarized as follows (dollars in thousands):
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Technology and other, included in cost of sales | $ | 1,210 | $ | 1,360 | $ | 2,450 | $ | 2,710 | ||||||||
Customer relationships, included in selling, general and administrative expenses | 3,620 | 3,640 | 7,290 | 7,280 | ||||||||||||
Total amortization expense | $ | 4,830 | $ | 5,000 | $ | 9,740 | $ | 9,990 | ||||||||
10
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
6. Inventories
Inventories consist of the following components (dollars in thousands):
June 30, 2018 | December 31, 2017 | |||||||
Finished goods | $ | 84,510 | $ | 86,310 | ||||
Work in process | 26,840 | 24,580 | ||||||
Raw materials | 49,330 | 44,460 | ||||||
Total inventories | $ | 160,680 | $ | 155,350 | ||||
7. Property and Equipment, Net
Property and equipment consists of the following components (dollars in thousands):
June 30, 2018 | December 31, 2017 | |||||||
Land and land improvements | $ | 15,410 | $ | 15,500 | ||||
Buildings | 74,310 | 73,550 | ||||||
Machinery and equipment | 309,400 | 303,880 | ||||||
399,120 | 392,930 | |||||||
Less: Accumulated depreciation | 212,050 | 202,680 | ||||||
Property and equipment, net | $ | 187,070 | $ | 190,250 | ||||
Depreciation expense as included in the accompanying consolidated statement of income is as follows (dollars in thousands):
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Depreciation expense, included in cost of sales | $ | 6,030 | $ | 6,740 | $ | 11,840 | $ | 11,940 | ||||||||
Depreciation expense, included in selling, general and administrative expenses | 510 | 510 | 1,030 | 1,110 | ||||||||||||
Total depreciation expense | $ | 6,540 | $ | 7,250 | $ | 12,870 | $ | 13,050 | ||||||||
8. Long-term Debt
The Company's long-term debt consists of the following (dollars in thousands):
June 30, 2018 | December 31, 2017 | |||||||
4.875% Senior Notes due October 2025 | $ | 300,000 | $ | 300,000 | ||||
Credit Agreement | — | 10,810 | ||||||
Debt issuance costs | (6,990 | ) | (7,730 | ) | ||||
Long-term debt, net | $ | 293,010 | $ | 303,080 | ||||
11
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Senior Notes
In September 2017, the Company issued $300.0 million aggregate principal amount of 4.875% senior notes due October 15, 2025 ("Senior Notes") at par value in a private placement under Rule 144A of the Securities Act of 1933, as amended. The Senior Notes accrue interest at a rate of 4.875% per annum, payable semi-annually in arrears on April 15 and October 15, commencing on April 15, 2018. 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 Senior Notes are pari passu in right of payment with all existing and future senior indebtedness and subordinated to all existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness.
Prior to October 15, 2020, the Company may redeem up to 35% of the principal amount of the Senior Notes at a redemption price of 104.875% 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, the Company may redeem all or part of the 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 October 15, 2020, the Company may redeem all or part of the Senior Notes at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, to the redemption date, if redeemed during the twelve-month period beginning on October 15 of the years indicated below:
Year | Percentage | ||
2020 | 102.438 | % | |
2021 | 101.219 | % | |
2022 and thereafter | 100.000 | % | |
Credit Agreement
The Company is a party to a credit agreement ("Credit Agreement") consisting of a $300.0 million senior secured revolving credit facility, which permits borrowings denominated in specific foreign currencies, subject to a $125.0 million sub limit, matures on September 20, 2022 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. At June 30, 2018, the Company had no amounts outstanding under its revolving credit facility and had approximately $285.9 million potentially available after giving effect to approximately $14.1 million of letters of credit issued and outstanding. At December 31, 2017, the Company had approximately $10.8 million outstanding under its revolving credit facility and had approximately $274.3 million potentially available after giving effect to approximately $14.9 million of letters of credit issued and outstanding. However, including availability under its former accounts receivable facility and after consideration of leverage restrictions contained in the Credit Agreement, the Company had approximately $285.9 million and $332.1 million at June 30, 2018 and December 31, 2017, respectively, of borrowing capacity available for general corporate purposes.
12
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(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 to, subject to certain exceptions and limitations, incur debt, liens, mergers, investments, loans, advances, guarantee obligations, acquisitions, assets dispositions, sale-leaseback transactions, hedging agreements, dividends and other restricted payments, transactions with affiliates, restrictive agreements and amendments to charters, bylaws, and other material documents. The terms of 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, 2018, the Company was in compliance with its financial covenants contained in the Credit Agreement.
Receivables Facility
In March 2018, the Company terminated its accounts receivable facility previously utilized through TSPC, Inc. ("TSPC"), a wholly-owned subsidiary. The facility was used to sell trade accounts receivable of substantially all of the Company's domestic business operations. Under this facility, TSPC, from time to time, could sell an undivided fractional ownership interest in the pool of receivables up to $75.0 million to a third-party multi-seller receivables funding company. The cost of funds under this facility consisted of a 1-month LIBOR-based rate plus a usage fee of 1.00% and a fee on the unused portion of the facility of 0.35%.
At December 31, 2017, the Company had no amounts outstanding under the facility and approximately $57.8 million available but not utilized. Aggregate costs incurred under the facility were approximately $0.3 million for the three months ended June 30, 2017, and $0.1 million and $0.6 million for the six months ended June 30, 2018 and 2017, respectively, and are included in interest expense in the accompanying consolidated statement of income.
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, 2018 | December 31, 2017 | |||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||
Senior Notes | $ | 300,000 | $ | 286,500 | $ | 300,000 | $ | 300,750 | ||||||||
Revolving credit facility | — | — | 10,810 | 10,490 | ||||||||||||
9. Derivative Instruments
In October 2017, the Company entered into cross-currency swap agreements 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 converted a portion of its U.S. dollar-based long-term debt into Euro-denominated long-term debt. The agreements have a five year tenor at notional amounts declining from $150.0 million to $75.0 million over the contract period. Under the terms of the swap agreements, the Company is to receive net interest payments at a fixed rate of approximately 2.10% of the notional amount. At inception, the cross-currency swaps were designated as net investment hedges.
The Company has historically utilized interest rate swap agreements to fix the LIBOR-based variable portion of the interest rate on its long-term debt. Prior to its debt refinancing in September 2017, the Company had interest rate swap agreements in place that hedged a declining notional value of debt ranging from approximately $238.4 million to approximately $192.7 million, amortizing consistent with future scheduled debt principal payments. The interest rate swap agreements required the Company to receive a variable interest rate and pay a fixed interest rate in a range of 0.74% to 2.68% with various expiration terms extending to June 30, 2020. At inception, the interest rate swaps were designated as cash flow hedges.
13
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
In September 2017, immediately following the debt refinancing, the Company determined the likelihood of the hedged transactions occurring was less than probable and de-designated the interest rate swaps as cash flow hedges and terminated the interest rate swaps for a cash payment of approximately $4.7 million. There were no interest rate swaps outstanding as of June 30, 2018 or December 31, 2017. The cash flows associated with the cash flow hedges are reported in net cash provided by operating activities on the statement of cash flows. Up to the date of the termination, the Company utilized hedge accounting, which allows for the effective portion of the interest rate swaps to be recorded in accumulated other comprehensive income or loss ("AOCI") in the accompanying consolidated balance sheet.
As of June 30, 2018 and December 31, 2017, the fair value carrying amount of the Company's derivative instruments are recorded as follows (dollars in thousands):
Asset / (Liability) Derivatives | ||||||||||
Derivatives designated as hedging instruments | Balance Sheet Caption | June 30, 2018 | December 31, 2017 | |||||||
Net Investment Hedges | ||||||||||
Cross-currency swaps | Other long-term liabilities | $ | (1,940 | ) | $ | (4,110 | ) | |||
The following table summarizes the loss recognized in AOCI on derivative contracts designated as hedging instruments as of June 30, 2018 and December 31, 2017, and the amounts reclassified from AOCI into earnings for the three and six months ended June 30, 2018 and 2017 (dollars in thousands):
Amount of Loss Recognized in AOCI on Derivative (Effective Portion, net of tax) | Amount of Loss Reclassified from AOCI into Earnings | ||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||
As of June 30, 2018 | As of December 31, 2017 | Location of Loss Reclassified from AOCI into Earnings (Effective Portion) | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
Net Investment Hedges | |||||||||||||||||||||||||
Cross-currency swaps | $ | (1,500 | ) | $ | (3,170 | ) | Other expense, net | $ | — | $ | — | $ | — | $ | — | ||||||||||
Cash Flow Hedges | |||||||||||||||||||||||||
Interest rate swaps | $ | — | $ | — | Interest expense | $ | — | $ | (90 | ) | $ | — | $ | (340 | ) | ||||||||||
Over the next 12 months, the Company does not expect to reclassify any pre-tax deferred losses from AOCI into earnings.
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 interest rate swaps and cross-currency swaps 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, 2018 and December 31, 2017 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, 2018 | Cross-currency swaps | Recurring | $ | (1,940 | ) | $ | — | $ | (1,940 | ) | $ | — | |||||||
December 31, 2017 | Cross-currency swaps | Recurring | $ | (4,110 | ) | $ | — | $ | (4,110 | ) | $ | — | |||||||
14
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
10. Commitments and Contingencies
Asbestos
As of June 30, 2018, the Company was a party to 396 pending cases involving an aggregate of 4,841 claims primarily alleging personal injury from exposure to asbestos containing materials formerly used in gaskets (both encapsulated and otherwise) manufactured or distributed by certain of its 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, excluding amounts reimbursed under the Company's primary insurance, 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, 2018 | 5,256 | 91 | 484 | 22 | 4,841 | $ | 6,545 | $ | 1,125,386 | ||||||||||||||
Fiscal Year Ended December 31, 2017 | 5,339 | 173 | 231 | 25 | 5,256 | $ | 8,930 | $ | 2,280,000 | ||||||||||||||
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, 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 Company is unable to make a meaningful statement concerning the monetary claims made in the asbestos cases given that, among other things, 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 4,841 claims pending at June 30, 2018, 60 set forth specific amounts of damages (other than those stating the statutory minimum or maximum). At June 30, 2018, of the 60 claims that set forth specific amounts, there were no claims seeking specific amounts for punitive damages. Below is a breakdown of the amount 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 | — | 12 | 48 | |||
In addition, relatively few of the 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 20 years ago, have been approximately $8.7 million. All relief sought in the asbestos cases is monetary in nature. To date, approximately 40% of the Company's costs related to settlement and defense of asbestos litigation have been covered by its primary insurance. Effective February 14, 2006, the Company entered into a coverage-in-place agreement with its first level excess carriers regarding the coverage to be provided to the Company for asbestos-related claims when the primary insurance is exhausted. The coverage-in-place agreement makes asbestos defense costs and indemnity insurance coverage available to the Company that might otherwise be disputed by the carriers and provides a methodology for the administration of such expenses. Nonetheless, the Company believes it is likely there will be a period within the next six to 12 months, prior to the commencement of coverage under this agreement and following exhaustion of the Company's primary insurance coverage, during which the Company will be solely responsible for defense costs and indemnity payments, the duration of which would be subject to the scope of damage awards and settlements paid.
15
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
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. 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 and results of operations or cash flows.
Metaldyne Corporation
Prior to June 6, 2002, the Company was wholly-owned by Metaldyne Corporation ("Metaldyne"). In connection with the reorganization between TriMas and Metaldyne in June 2002, TriMas assumed certain liabilities and obligations of Metaldyne, mainly comprised of contractual obligations to former TriMas employees, tax related matters, benefit plan liabilities and reimbursements to Metaldyne of normal course payments to be made on TriMas' behalf.
In 2007, Metaldyne merged into a subsidiary of Asahi Tec Corporation (“Asahi”) whereby Metaldyne became a wholly-owned subsidiary of Asahi, and in 2009, Metaldyne and its U.S. subsidiaries filed voluntary petitions in the United States Bankruptcy Court under Chapter 11 of the U.S. Bankruptcy Code.
On January 11, 2018, the U.S. Bankruptcy Court entered a final decree to close all remaining cases and finalize the Metaldyne bankruptcy distribution trust, effectively terminating any potential obligation by TriMas to Metaldyne. In consideration of the final decree, the Company removed the obligation from its balance sheet during the first quarter of 2018, resulting in an approximate $8.2 million non-cash reduction in selling, general and administrative expenses in the accompanying consolidated statement of income.
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.
11. Segment Information
In the first quarter of 2018, TriMas realigned its reporting structure into three reportable 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 a standardized set of processes to manage and drive results and strategy across its multi-industry businesses.
Within 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® brand, develops and manufactures specialty dispensing and closure products for the health, beauty and home care, food and beverage, and industrial markets.
Aerospace – The Aerospace segment, which includes the Monogram Aerospace Fasteners™, Allfast Fastening Systems®, Mac Fasteners™ and Martinic Engineering™ brands, develops, qualifies and manufactures highly-engineered, precision fasteners and machined products to serve the aerospace market.
Specialty Products – The Specialty Products segment, which includes the Norris Cylinder™, Lamons® and Arrow® Engine brands, designs, manufactures and distributes highly-engineered steel cylinders, sealing and fastener products, and wellhead engines and compression systems for use within the industrial, petrochemical, and oil and gas exploration and refining markets.
16
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Segment activity is as follows (dollars in thousands):
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net Sales | ||||||||||||||||
Packaging | $ | 95,090 | $ | 88,740 | $ | 183,290 | $ | 169,700 | ||||||||
Aerospace | 45,620 | 47,580 | 91,430 | 93,000 | ||||||||||||
Specialty Products | 84,200 | 77,050 | 167,290 | 150,500 | ||||||||||||
Total | $ | 224,910 | $ | 213,370 | $ | 442,010 | $ | 413,200 | ||||||||
Operating Profit (Loss) | ||||||||||||||||
Packaging | $ | 22,810 | $ | 21,590 | $ | 42,390 | $ | 38,490 | ||||||||
Aerospace | 7,310 | 6,990 | 12,390 | 12,050 | ||||||||||||
Specialty Products | 9,240 | 5,260 | 18,890 | 6,770 | ||||||||||||
Corporate(a) | (7,840 | ) | (7,420 | ) | (6,940 | ) | (14,980 | ) | ||||||||
Total | $ | 31,520 | $ | 26,420 | $ | 66,730 | $ | 42,330 | ||||||||
__________________________
(a) | During the first quarter of 2018, the Company removed an obligation from its balance sheet, resulting in an approximate $8.2 million non-cash reduction in selling, general and administrative expenses. See Note 10, "Commitments and Contingencies," for further details. |
12. Equity Awards
Stock Options
The Company did not grant any stock option awards during the six months ended June 30, 2018. Information related to stock options at June 30, 2018 is as follows:
Number of Stock Options | Weighted Average Option Price | Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value | ||||||||||
Outstanding at January 1, 2018 | 206,854 | $ | 13.19 | ||||||||||
Granted | — | — | |||||||||||
Exercised | — | — | |||||||||||
Cancelled | — | — | |||||||||||
Expired | — | — | |||||||||||
Outstanding at June 30, 2018 | 206,854 | $ | 13.19 | 6.1 | $ | 3,352,113 | |||||||
As of June 30, 2018, 106,854 stock options outstanding were exercisable under the Plans. As of June 30, 2018, there was approximately $0.2 million of unrecognized compensation cost related to stock options that is expected to be recorded over a weighted average period of 1.1 years.
The Company recognized approximately $0.1 million and $0.2 million of stock-based compensation expense related to stock options during the three months ended June 30, 2018 and 2017, respectively, and approximately $0.2 million and $0.3 million of stock-based compensation expense during the six months ended June 30, 2018 and 2017, respectively. The stock-based compensation expense is included in selling, general and administrative expenses in the accompanying consolidated statement of income.
17
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Restricted Stock Units
The Company awarded the following restricted stock units ("RSUs") during the six months ended June 30, 2018:
• | granted 140,183 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; and |
• | granted 25,830 RSUs to its non-employee independent directors, which 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. |
In addition, the Company issued 4,509 RSUs related to director fee deferrals for the six months ended June 30, 2018. The Company allows for its non-employee independent directors to make an annual election to defer all or a portion of their directors fees and to receive the deferred amount in cash or equity. Certain of the Company's directors have 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 2018, the Company awarded 104,532 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 earnings per share compound annual growth rate ("EPS CAGR") metrics over a period beginning January 1, 2018 and ending December 31, 2020. The remaining 50% of the grants 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 and 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 estimated the grant-date fair value and term of the awards subject to a market condition using a Monte Carlo simulation model, using the following weighted average assumptions: risk-free rate of 2.67% and annualized volatility of 30.2%. Depending on the performance achieved for these two metrics, the amount of shares earned, if any, can vary from 40% of the target award to a maximum of 200% of the target award for the EPS CAGR metric and 0% of the target award to a maximum of 200% of the target award for the TSR metric.
During 2015, the Company awarded performance-based RSUs to certain Company key employees which were earned based upon the Company's TSR relative to the TSR of the common stock of a pre-defined industry peer-group and measured over a period beginning September 10, 2015 and ending on December 31, 2017. Depending on the performance achieved, the amount of shares earned could vary from 0% of the target award to a maximum of 200% of the target award. The Company attained 126.9% of the target on a weighted average basis, resulting in an increase of 31,021 shares during the six months ended June 30, 2018.
Information related to RSUs at June 30, 2018 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, 2018 | 726,936 | $ | 22.60 | ||||||||||
Granted | 306,075 | 30.29 | |||||||||||
Vested | (338,141 | ) | 21.61 | ||||||||||
Cancelled | (26,710 | ) | 22.23 | ||||||||||
Outstanding at June 30, 2018 | 668,160 | $ | 26.64 | 1.4 | $ | 19,643,904 | |||||||
As of June 30, 2018, there was approximately $10.6 million of unrecognized compensation cost related to unvested RSUs that is expected to be recorded over a weighted average period of 2.4 years.
The Company recognized stock-based compensation expense related to RSUs of approximately $1.3 million and $1.7 million during the three months ended June 30, 2018 and 2017, respectively, and approximately $2.5 million and $3.0 million during the six months ended June 30, 2018 and 2017, respectively. The stock-based compensation expense is included in selling, general and administrative expenses in the accompanying consolidated statement of income.
18
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
13. 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 restricted stock units. The following table summarizes the dilutive effect of restricted stock units and options to purchase common stock for the three and six months ended June 30, 2018 and 2017:
Three months ended June 30, | Six months ended June 30, | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Weighted average common shares—basic | 45,920,307 | 45,717,697 | 45,850,137 | 45,644,096 | ||||||||
Dilutive effect of restricted stock units | 176,658 | 162,153 | 267,620 | 222,996 | ||||||||
Dilutive effect of stock options | 103,792 | 42,566 | 97,290 | 48,595 | ||||||||
Weighted average common shares—diluted | 46,200,757 | 45,922,416 | 46,215,047 | 45,915,687 | ||||||||
In November 2015, the Company announced its Board of Directors had authorized the Company to purchase its common stock up to $50 million in the aggregate. During the second quarter of 2018, the Company executed its first activity under its stock purchase program, purchasing 100,947 shares of its outstanding common stock for approximately $2.9 million.
14. 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 for the three and six months ended June 30, 2018 and 2017 are as follows (dollars in thousands):
Pension Plans | ||||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Service costs | $ | 280 | $ | 270 | $ | 580 | $ | 550 | ||||||||
Interest costs | 290 | 320 | 590 | 640 | ||||||||||||
Expected return on plan assets | (420 | ) | (360 | ) | (850 | ) | (730 | ) | ||||||||
Settlement/curtailment loss | 2,500 | — | 2,500 | — | ||||||||||||
Amortization of net loss | 240 | 250 | 490 | 500 | ||||||||||||
Net periodic benefit cost | $ | 2,890 | $ | 480 | $ | 3,310 | $ | 960 | ||||||||
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 expense, net in the accompanying consolidated statement of income.
During the second quarter of 2018, the Company purchased an annuity contract to transfer certain retiree defined benefit obligations to an insurance company. The annuity contract was funded by plan assets. The Company recognized a one-time settlement charge of approximately $2.5 million, which is included in other expense, net in the accompanying consolidated statement of income.
The Company contributed approximately $0.6 million and $1.2 million to its defined benefit pension plans during the three and six months ended June 30, 2018, respectively. The Company expects to contribute approximately $2.3 million to its defined benefit pension plans for the full year 2018.
19
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
15. Other Comprehensive Income (Loss)
Changes in AOCI by component for the six months ended June 30, 2018 are summarized as follows, net of tax (dollars in thousands):
Defined Benefit Plans | Derivative Instruments | Foreign Currency Translation | Total | |||||||||||||
Balance, December 31, 2017 | $ | (10,450 | ) | $ | (3,170 | ) | $ | (3,710 | ) | $ | (17,330 | ) | ||||
Net unrealized gains (losses) arising during the period (a) | — | 1,670 | (4,090 | ) | (2,420 | ) | ||||||||||
Less: Net realized losses reclassified to net income (b) | (2,850 | ) | — | — | (2,850 | ) | ||||||||||
Net current-period other comprehensive income (loss) | 2,850 | 1,670 | (4,090 | ) | 430 | |||||||||||
Balance, June 30, 2018 | $ | (7,600 | ) | $ | (1,500 | ) | $ | (7,800 | ) | $ | (16,900 | ) | ||||
__________________________
(a) | Derivative instruments, net of income tax of approximately $0.5 million. See Note 9, "Derivative Instruments," for further details. |
(b) | Defined benefit plans, net of income tax of approximately $0.8 million. See Note 14, "Defined Benefit Plans," for further details. |
Changes in AOCI by component for the six months ended June 30, 2017 are summarized as follows, net of tax (dollars in thousands):
Defined Benefit Plans | Derivative Instruments | Foreign Currency Translation | Total | |||||||||||||
Balance, December 31, 2016 | $ | (12,120 | ) | $ | (2,520 | ) | $ | (9,760 | ) | $ | (24,400 | ) | ||||
Net unrealized gains (losses) arising during the period (a) | — | (230 | ) | 3,730 | 3,500 | |||||||||||
Less: Net realized losses reclassified to net income (b) | (330 | ) | (210 | ) | — | (540 | ) | |||||||||
Net current-period other comprehensive income (loss) | 330 | (20 | ) | 3,730 | 4,040 | |||||||||||
Balance, June 30, 2017 | $ | (11,790 | ) | $ | (2,540 | ) | $ | (6,030 | ) | $ | (20,360 | ) | ||||
__________________________
(a) | Derivative instruments, net of income tax of approximately $0.1 million. See Note 9, "Derivative Instruments," for further details. |
(b) | Defined benefit plans, net of income tax of approximately $0.1 million. See Note 14, "Defined Benefit Plans," for further details. Derivative instruments, net of income tax of approximately $0.1 million. See Note 9, "Derivative Instruments," for further details. |
20
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, 2017.
Introduction
We are a diversified industrial manufacturer of products for customers in the consumer products, aerospace, industrial, petrochemical, refinery and oil and gas end markets. Our wide range of innovative and quality product solutions are engineered and designed to address our customers' application-specific needs. We believe our businesses share important and distinguishing characteristics, including: well-recognized and leading brand names in the niche markets we serve; established distribution networks; innovative product technologies and features; customer approved processes and qualified products; 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 are principally engaged in three reportable 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 cyclical industries that are highly competitive and are themselves significantly impacted by changes in economic conditions.
During the second quarter of 2018, there were five significant factors impacting our reported results as compared to the second quarter of 2017.
The first factor was an increase in sales levels across most of our end markets. Second quarter 2018 net sales increased by 5.4% compared with second quarter 2017, driven primarily by growth in our health, beauty and home care end market within our Packaging reportable segment and an increased volume of steel cylinder sales within our Specialty Products reportable segment. We believe general industrial year-to-date activity levels have been higher in 2018 versus 2017, particularly in the United States, and we are well positioned to take advantage of the incremental volume opportunities.
The second factor was continued positive momentum as we further leveraged the TriMas Business Model ("TBM"), which provides for a common platform to operate and manage our multi-industry set of businesses. We implemented the TBM in late 2016 and have continued to drive and leverage operating improvements, as well as continuously evaluate, realign and streamline fixed and selling, general and administrative expenses. The improvements and efficiencies attained through the TBM contributed to increased operating profit from higher sales levels leveraging at a greater rate than in second quarter 2017.
The third factor affecting our year-over-year results was the enactment of the Tax Cuts and Jobs Act (the "Tax Reform Act") on December 22, 2017. We adopted the new legislation in the fourth quarter of 2017, and recorded one-time provisional charges of approximately $12.7 million related to taxing previously deferred foreign income and revaluing our net deferred tax assets. However, in the second quarter of 2018, we significantly benefited from the reduction in the U.S. Federal corporate tax rate from 35% to 21%, which resulted in a decrease in our overall effective tax rate from 35.0% in second quarter 2017 to 24.2% in second quarter 2018.
The fourth factor impacting our results was an increase in material costs in the second quarter 2018, primarily related to oil and metal-based commodities. Costs for these commodity-based items are higher than in 2017 and have been trending upward during 2018, and we believe have further increased in second quarter as a result of governmental intervention in trade matters. Historically, we have been able to work with our suppliers to manage costs. Tactics we employ in mitigating commodity cost increases include commercial pricing adjustments, both contractual and negotiated, resourcing to alternate suppliers to secure better pricing or avoid import and transportation costs, and insourcing to take advantage of our global manufacturing footprint. Certain of these measures take time, and in some cases some investment, to implement. While we have not fully recovered the commodity cost increases in the first half of 2018, we have, over time, been generally able to mitigate the impact of increased commodity costs.
The fifth factor was the recognition of a one-time, non-cash settlement charge of approximately $2.5 million related to our decision to purchase an annuity contract and transfer certain U.S. pension obligations to an insurance company. We continue to execute de-risking strategies across our company to mitigate or eliminate potential volatility related to future payment obligations. The settlement charge was included in other expense, net in our consolidated statement of income.
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In addition to the second quarter 2018 events, another significant factor affecting our 2018 reported results was an adjustment to terminate a legacy liability of approximately $8.2 million during the first quarter of 2018, which resulted in a reduction to corporate office selling, general and administrative expenses. Prior to 2002, we were wholly-owned by Metaldyne Corporation ("Metaldyne"). In connection with the reorganization between TriMas and Metaldyne in June 2002, we assumed certain liabilities and obligations of Metaldyne, mainly comprised of contractual obligations to former TriMas employees, tax related matters, benefit plan liabilities and reimbursements to Metaldyne of normal course payments to be made on TriMas' behalf. Metaldyne and its U.S. subsidiaries filed voluntary petitions in the United States Bankruptcy Court under Chapter 11 of the U.S. Bankruptcy Code in 2009. On January 11, 2018, the U.S. Bankruptcy Court entered a final decree to close all remaining cases and finalize the Metaldyne bankruptcy distribution trust, effectively terminating any potential obligation by TriMas to Metaldyne.
Additional Key Risks that May Affect Our Reported Results
Critical factors affecting our ability to succeed include: our ability to create organic growth through product development, cross selling and extending product-line offerings, and our ability to quickly and cost-effectively introduce new products; our ability to acquire and integrate companies or products that supplement existing product lines, add new distribution channels 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 in our raw materials supply base. Our largest material purchases are for resins (such as polypropylene and polyethylene), steel, aluminum and other oil and metal-based purchased components. Although we are generally able to mitigate the impact of higher commodity costs, 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.
Certain of our businesses in our Specialty Products reportable segment are sensitive to the demand for natural gas and crude oil in North America. For example, our Arrow Engine business is most directly impacted by these factors, as its engine pumpjack and compressor products are impacted by oil and gas rig counts and well completion activities. In addition, a portion of our Lamons business serves upstream customers at oil well sites that have been impacted by lower oil prices. The majority of this business provides parts for oil refineries and petrochemical plants, which may or may not decide to incur capital expenditures for their preventive maintenance or capacity expansion activities, both of which require use of our gaskets and bolts, in times of fluctuating oil prices. Separately, oil-based commodity costs are a significant driver of raw materials and purchased components used within our Packaging reportable segment. Although we have escalator/de-escalator clauses in commercial contracts with certain of our customers, or can modify p;rices based on market conditions to recover higher costs, we cannot be assured of full cost recovery in the open market.
Each year, as a core tenet within the TBM, our businesses target cost savings from continuous improvement and productivity initiatives in an effort to lower input costs or improve throughput and yield rates with a goal of at least covering inflationary and market cost increases. In addition, we continuously review our costs to ensure alignment with current market demand.
As our businesses continue to generate cash, we continuously evaluate strategies to redeploy our cash, which includes returning capital to our shareholders. In November 2015, we announced our Board of Directors had authorized us to purchase our common stock up to $50 million in the aggregate. In the second quarter of 2018 we purchased 100,947 shares of our outstanding common stock for approximately $2.9 million, marking the first stock buyback activity under this 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, 2018 and 2017 (dollars in thousands):
Three months ended June 30, | |||||||||||||
2018 | As a Percentage of Net Sales | 2017 | As a Percentage of Net Sales | ||||||||||
Net Sales | |||||||||||||
Packaging | $ | 95,090 | 42.3 | % | $ | 88,740 | 41.6 | % | |||||
Aerospace | 45,620 | 20.3 | % | 47,580 | 22.3 | % | |||||||
Specialty Products | 84,200 | 37.4 | % | 77,050 | 36.1 | % | |||||||
Total | $ | 224,910 | 100.0 | % | $ | 213,370 | 100.0 | % | |||||
Gross Profit | |||||||||||||
Packaging | $ | 31,630 | 33.3 | % | $ | 32,230 | 36.3 | % | |||||
Aerospace | 12,750 | 27.9 | % | 12,410 | 26.1 | % | |||||||
Specialty Products | 20,400 | 24.2 | % | 14,830 | 19.2 | % | |||||||
Total | $ | 64,780 | 28.8 | % | $ | 59,470 | 27.9 | % | |||||
Selling, General and Administrative Expenses | |||||||||||||
Packaging | $ | 8,820 | 9.3 | % | $ | 10,640 | 12.0 | % | |||||
Aerospace | 5,440 | 11.9 | % | 5,420 | 11.4 | % | |||||||
Specialty Products | 11,160 | 13.3 | % | 9,570 | 12.4 | % | |||||||
Corporate | 7,840 | N/A | 7,420 | N/A | |||||||||
Total | $ | 33,260 | 14.8 | % | $ | 33,050 | 15.5 | % | |||||
Operating Profit (Loss) | |||||||||||||
Packaging | $ | 22,810 | 24.0 | % | $ | 21,590 | 24.3 | % | |||||
Aerospace | 7,310 | 16.0 | % | 6,990 | 14.7 | % | |||||||
Specialty Products | 9,240 | 11.0 | % | 5,260 | 6.8 | % | |||||||
Corporate | (7,840 | ) | N/A | (7,420 | ) | N/A | |||||||
Total | $ | 31,520 | 14.0 | % | $ | 26,420 | 12.4 | % | |||||
Depreciation | |||||||||||||
Packaging | $ | 3,340 | 3.5 | % | $ | 3,210 | 3.6 | % | |||||
Aerospace | 1,690 | 3.7 | % | 1,480 | 3.1 | % | |||||||
Specialty Products | 1,440 | 1.7 | % | 2,490 | 3.2 | % | |||||||
Corporate | 70 | N/A | 70 | N/A | |||||||||
Total | $ | 6,540 | 2.9 | % | $ | 7,250 | 3.4 | % | |||||
Amortization | |||||||||||||
Packaging | $ | 2,270 | 2.4 | % | $ | 2,390 | 2.7 | % | |||||
Aerospace | 2,150 | 4.7 | % | 2,150 | 4.5 | % | |||||||
Specialty Products | 410 | 0.5 | % | 460 | 0.6 | % | |||||||
Corporate | — | N/A | — | N/A | |||||||||
Total | $ | 4,830 | 2.1 | % | $ | 5,000 | 2.3 | % | |||||
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The following table summarizes financial information for our reportable segments for the six months ended June 30, 2018 and 2017 (dollars in thousands):
Six months ended June 30, | |||||||||||||
2018 | As a Percentage of Net Sales | 2017 | As a Percentage of Net Sales | ||||||||||
Net Sales | |||||||||||||
Packaging | $ | 183,290 | 41.5 | % | $ | 169,700 | 41.1 | % | |||||
Aerospace | 91,430 | 20.7 | % | 93,000 | 22.5 | % | |||||||
Specialty Products | 167,290 | 37.8 | % | 150,500 | 36.4 | % | |||||||
Total | $ | 442,010 | 100.0 | % | $ | 413,200 | 100.0 | % | |||||
Gross Profit | |||||||||||||
Packaging | $ | 60,860 | 33.2 | % | $ | 57,890 | 34.1 | % | |||||
Aerospace | 23,900 | 26.1 | % | 23,210 | 25.0 | % | |||||||
Specialty Products | 40,400 | 24.1 | % | 30,190 | 20.1 | % | |||||||
Total | $ | 125,160 | 28.3 | % | $ | 111,290 | 26.9 | % | |||||
Selling, General and Administrative Expenses | |||||||||||||
Packaging | $ | 18,470 | 10.1 | % | $ | 19,400 | 11.4 | % | |||||
Aerospace | 11,510 | 12.6 | % | 11,160 | 12.0 | % | |||||||
Specialty Products | 21,510 | 12.9 | % | 23,420 | 15.6 | % | |||||||
Corporate | 6,940 | N/A | 14,980 | N/A | |||||||||
Total | $ | 58,430 | 13.2 | % | $ | 68,960 | 16.7 | % | |||||
Operating Profit (Loss) | |||||||||||||
Packaging | $ | 42,390 | 23.1 | % | $ | 38,490 | 22.7 | % | |||||
Aerospace | 12,390 | 13.6 | % | 12,050 | 13.0 | % | |||||||
Specialty Products | 18,890 | 11.3 | % | 6,770 | 4.5 | % | |||||||
Corporate | (6,940 | ) | N/A | (14,980 | ) | N/A | |||||||
Total | $ | 66,730 | 15.1 | % | $ | 42,330 | 10.2 | % | |||||
Depreciation | |||||||||||||
Packaging | $ | 6,560 | 3.6 | % | $ | 6,090 | 3.6 | % | |||||
Aerospace | 3,350 | 3.7 | % | 2,920 | 3.1 | % | |||||||
Specialty Products | 2,820 | 1.7 | % | 3,910 | 2.6 | % | |||||||
Corporate | 140 | N/A | 130 | N/A | |||||||||
Total | $ | 12,870 | 2.9 | % | $ | 13,050 | 3.2 | % | |||||
Amortization | |||||||||||||
Packaging | $ | 4,570 | 2.5 | % | $ | 4,780 | 2.8 | % | |||||
Aerospace | 4,310 | 4.7 | % | 4,310 | 4.6 | % | |||||||
Specialty Products | 860 | 0.5 | % | 900 | 0.6 | % | |||||||
Corporate | — | N/A | — | N/A | |||||||||
Total | $ | 9,740 | 2.2 | % | $ | 9,990 | 2.4 | % | |||||
Results of Operations
The principal factors impacting us during the three months ended June 30, 2018, compared with the three months ended June 30, 2017, were:
• | increased sales levels across most of our end markets, primarily driven by growth in our health, beauty and home care end market within our Packaging reportable segment and from higher industrial cylinder sales within our Specialty Products reportable segment; |
• | continued benefits of leveraging the TBM, as we have continued to drive and leverage operating improvements, as well as continuously evaluate, realign and streamline fixed and selling, general and administrative expenses; |
• | the impact of the Tax Reform Act, contributing to a lower overall effective tax rate; |
• | higher commodity costs, primarily related to oil and steel-based raw materials, utilized in our Packaging and Specialty Products reportable segments; and |
• | the recognition of a one-time, non-cash settlement charge of approximately $2.5 million related to our decision to purchase an annuity contract to transfer certain U.S. pension obligations to an insurance company. |
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Three Months Ended June 30, 2018 Compared with Three Months Ended June 30, 2017
Overall, net sales increased approximately $11.5 million, or 5.4%, to $224.9 million for the three months ended June 30, 2018, as compared with $213.4 million in the three months ended June 30, 2017, primarily driven by $4.8 million higher sales of industrial cylinder products within our Specialty Products reportable segment and $4.6 million higher sales of health, beauty and home care products within our Packaging reportable segment. In addition, net sales increased by approximately $1.4 million due to net favorable currency exchange, as our reported results in U.S. dollars were favorably impacted as a result of the weakening U.S. dollar relative to foreign currencies.
Gross profit margin (gross profit as a percentage of sales) approximated 28.8% and 27.9% for the three months ended June 30, 2018 and 2017, respectively. Gross profit increased primarily as a result of higher sales levels and lower facility exit costs in our Specialty Products reportable segment in second quarter 2018, which more than offset the impact of higher commodity-related costs.
Operating profit margin (operating profit as a percentage of sales) approximated 14.0% and 12.4% for the three months ended June 30, 2018 and 2017, respectively. Operating profit increased approximately $5.1 million, or 19.3%, to $31.5 million for the three months ended June 30, 2018, from $26.4 million for the three months ended June 30, 2017. Operating profit increased primarily due to overall higher sales levels and lower facility exit costs, as selling, general and administrative expenses remained relatively flat compared to 2017.
Interest expense increased approximately $0.1 million, to $3.5 million for the three months ended June 30, 2018, as compared to $3.4 million for the three months ended June 30, 2017, as an increase in our interest rates more than offset lower weighted average borrowings.
Other expense, net increased approximately $2.1 million, to $2.2 million for the three months ended June 30, 2018, as compared to $0.1 million for the three months ended June 30, 2018, primarily due to a one-time charge of $2.5 million related to the settlement of defined benefit obligations, partially offset by an increase in gains on transactions denominated in foreign currencies.
The effective income tax rates for the three months ended June 30, 2018 and 2017 were 24.2% and 35.0%, respectively. The decrease in the rate was primarily a result of the Tax Reform Act signed into law on December 22, 2017, which reduced the U.S. corporate income tax rate from 35% to 21% and added the Foreign Derived Intangible Income deduction effective January 1, 2018. In addition, we generated fewer losses at certain foreign subsidiaries where no tax benefit could be recorded in the three months ended June 30, 2018 as compared to the three months ended June 30, 2017. This decrease was partially offset by the Tax Reform Act’s repeal of the domestic manufacturing activities deduction and executive compensation limitation.
Net income increased by approximately $4.7 million, to $19.6 million for the three months ended June 30, 2018, as compared to $14.9 million for the three months ended June 30, 2017. The increase in net income was primarily the result of an increase in operating profit of approximately $5.1 million and a decrease in income tax expense of approximately $1.7 million, partially offset by an increase in other expense, net of approximately $2.1 million.
See below for a discussion of operating results by segment.
Packaging. Net sales increased approximately $6.4 million, or 7.2%, to $95.1 million in the three months ended June 30, 2018, as compared to $88.7 million in the three months ended June 30, 2017. Sales of our health, beauty and home care products increased approximately $4.6 million, primarily due to higher demand in Asia and North America as well as the ramp up of new products. Sales of our industrial closures increased approximately $0.9 million due to higher demand in North America. Sales of our food and beverage products decreased by approximately $0.2 million. Additionally, net sales increased by approximately $1.1 million due to favorable currency exchange, as our reported results in U.S. dollars were favorably impacted as a result of the weakening of the U.S. dollar relative to foreign currencies.
Packaging's gross profit decreased approximately $0.6 million to $31.6 million, or 33.3% of sales, in the three months ended June 30, 2018, as compared to $32.2 million, or 36.3% of sales, in the three months ended June 30, 2017. Gross profit decreased primarily as a result of a less favorable product sales mix and pricing pressures, most notably in the health, beauty and home care end market. In addition, gross profit was further pressured by higher resin-based raw material costs, which increased in late second quarter 2018 but price escalation clauses and other measures had not yet taken effect to recover such costs. The decrease was partially offset by approximately $0.5 million of favorable currency exchange, as our reported results in U.S. dollars were favorably impacted as a result of the weakening of the U.S. dollar relative to foreign currencies.
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Packaging's selling, general and administrative expenses decreased approximately $1.8 million to $8.8 million, or 9.3% of sales, in the three months ended June 30, 2018, as compared to $10.6 million, or 12.0% of sales, in the three months ended June 30, 2017, primarily due to a charge of approximately $1.1 million during the second quarter of 2017 to reserve for an outstanding accounts receivable deemed uncollectable from a European customer who filed for insolvency, as well as lower overall administrative expenses in second quarter 2018.
Packaging's operating profit increased approximately $1.2 million to $22.8 million, or 24.0% of sales, in the three months ended June 30, 2018, as compared to $21.6 million, or 24.3% of sales, in the three months ended June 30, 2017, as the impact of higher sales levels and lower selling, general, and administrative expenses more than offset the impact of a less favorable product sales mix, pricing pressures and higher commodity costs.
Aerospace. Net sales for the three months ended June 30, 2018 decreased approximately $2.0 million, or 4.1%, to $45.6 million, as compared to $47.6 million in the three months ended June 30, 2017. Sales of our machined components products decreased by approximately $1.2 million, primarily due to the impact of our decision to exit certain less profitable production jobs. Sales of our fastener products decreased by approximately $0.8 million. Order intake activity for fastener products was, as expected, higher in the second quarter of 2018 than the second quarter of 2017.
Gross profit within Aerospace increased approximately $0.3 million to $12.8 million, or 27.9% of sales, in the three months ended June 30, 2018, from $12.4 million, or 26.1% of sales, in the three months ended June 30, 2017. Although sales levels decreased, gross profit increased, primarily as a result of improved production efficiencies and a more favorable product sales mix.
Selling, general and administrative expenses remained flat at $5.4 million, or 11.9% of sales, in the three months ended June 30, 2018, as compared to $5.4 million, or 11.4% of sales, in the three months ended June 30, 2017.
Operating profit within Aerospace increased approximately $0.3 million to $7.3 million, or 16.0% of sales, in the three months ended June 30, 2018, as compared to $7.0 million, or 14.7% of sales in the three months ended June 30, 2017, as improved production efficiencies and a more favorable product mix more than offset the impact of lower sales levels.
Specialty Products. Net sales for the three months ended June 30, 2018 increased approximately $7.1 million, or 9.3%, to $84.2 million, as compared to $77.1 million in the three months ended June 30, 2017. Sales of our industrial products increased by approximately $4.8 million, primarily due to increased sales volume of steel cylinders. Sales of our oil and gas related products increased by approximately $2.0 million, primarily as a result of higher sales of engines and compressors to wellhead sites due to higher levels of drilling activity in the United States and Canada. In addition, net sales increased by approximately $0.3 million of net favorable currency exchange, as our reported results in U.S. dollars were positively impacted as a result of the weaker U.S. dollar relative to foreign currencies.
Gross profit within Specialty Products increased approximately $5.6 million to $20.4 million, or 24.2% of sales, in the three months ended June 30, 2018, as compared to $14.8 million, or 19.2% of sales, in the three months ended June 30, 2017. Gross profit dollars and margin increased primarily as a result of approximately $3.4 million lower costs in second quarter 2018 than in second quarter 2017 related to the closure of our Reynosa, Mexico and Bangalore, India facilities. In addition, higher second quarter 2018 sales levels improved both gross profit dollars and margin, as this segment continues to leverage its lower fixed cost footprint. These increases were partially offset by higher specialty steel costs in second quarter 2018 used in the manufacture of our industrial cylinder products.
Selling, general and administrative expenses within Specialty Products increased approximately $1.6 million to $11.2 million, or 13.3% of sales, in the three months ended June 30, 2018, as compared to $9.6 million, or 12.4% of sales, in the three months ended June 30, 2017, primarily due to increased selling costs as a result of higher sales volumes and approximately $0.7 million of severance and restructuring costs associated with the exit of our Bangalore, India facility.
Operating profit within Specialty Products increased approximately $3.9 million to $9.2 million, or 11.0% of sales, in the three months ended June 30, 2018, as compared to $5.3 million, or 6.8% of sales, in the three months ended June 30, 2017, as a result of higher sales levels, lower facility exit costs and incremental savings resulting from footprint realignment activities, partially offset by higher selling, general and administrative expenses, and higher material costs.
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Corporate. Corporate expenses consist of the following (dollars in millions):
Three months ended June 30, | ||||||||
2018 | 2017 | |||||||
Corporate operating expenses | $ | 5.9 | $ | 5.2 | ||||
Non-cash stock compensation | 1.4 | 1.8 | ||||||
Legacy expenses | 0.5 | 0.4 | ||||||
Corporate expenses | $ | 7.8 | $ | 7.4 | ||||
Corporate expenses increased approximately $0.4 million to $7.8 million of income for the three months ended June 30, 2018, from $7.4 million of expense for the three months ended June 30, 2017. Corporate operating expenses increased approximately $0.7 million, primarily due to an increase in expense related to the timing and estimated attainment of our short-term incentive compensation plans. Non-cash stock compensation decreased approximately $0.4 million, primarily due to the timing and amount of equity grants in 2018 compared with 2017.
Six Months Ended June 30, 2018 Compared with Six Months Ended June 30, 2017
Overall, net sales increased approximately $28.8 million, or 7.0%, to $442.0 million for the six months ended June 30, 2018, as compared with $413.2 million in the six months ended June 30, 2017, primarily driven by $8.5 million higher sales of industrial cylinder products and $7.5 million higher oil and gas-related product sales, both within our Specialty Products reportable segment, and $7.5 million higher sales of health, beauty and home care products within our Packaging reportable segment. In addition, net sales increased by approximately $4.2 million due to net favorable currency exchange, as our reported results in U.S. dollars were favorably impacted as a result of the weakening U.S. dollar relative to foreign currencies.
Gross profit margin (gross profit as a percentage of sales) approximated 28.3% and 26.9% for the six months ended June 30, 2018 and 2017, respectively. Gross profit increased primarily as a result of higher sales levels and lower facility exit costs in our Specialty Products and Packaging reportable segments in the first half of 2018, which more than offset the impact of higher commodity-related costs in the first half of 2018.
Operating profit margin (operating profit as a percentage of sales) approximated 15.1% and 10.2% for the six months ended June 30, 2018 and 2017, respectively. Operating profit increased approximately $24.4 million, or 57.6%, to $66.7 million for the six months ended June 30, 2018, compared to $42.3 million for the six months ended June 30, 2017. Operating profit increased primarily due to overall higher sales levels and lower costs to exit, move and consolidate facilities in the first half of 2018 compared to the first half of 2017. Operating profit also increased by approximately $8.2 million due to a reduction of our recorded liability to Metaldyne following the U.S. Bankruptcy Court's final decree to close all remaining cases and terminate the Metaldyne bankruptcy distribution trust.
Interest expense increased approximately $0.2 million, to $7.2 million, for the six months ended June 30, 2018, as compared to $7.0 million for the six months ended June 30, 2017, as an increase in our interest rates more than offset lower weighted average borrowings.
Other expense, net increased approximately $1.8 million, to $2.7 million for the six months ended June 30, 2018, from $0.9 million for the six months ended June 30, 2017, primarily due to a one-time, non-cash charge of approximately $2.5 million related to the settlement of defined benefit obligations, which was partially offset by an increase in gains on transactions denominated in foreign currencies.
The effective income tax rates for the six months ended June 30, 2018 and 2017 were 22.7% and 36.6%, respectively. The decrease in the rate was primarily a result of the Tax Reform Act signed into law on December 22, 2017, which reduced the U.S. corporate income tax rate from 35% to 21% and added the Foreign Derived Intangible Income deduction effective January 1, 2018. In addition, we generated fewer losses at certain foreign subsidiaries where no tax benefit could be recorded in the three months ended June 30, 2018 as compared to the three months ended June 30, 2017. This decrease was partially offset by the Tax Reform Act’s repeal of the domestic manufacturing activities deduction and executive compensation limitation.
Net income increased by approximately $22.1 million, to $43.9 million for the six months ended June 30, 2018, compared to $21.8 million for the six months ended June 30, 2017. The increase was primarily the result of a $24.4 million increase in operating profit, partially offset by a $1.8 million increase in other expense, net, a $0.3 million increase in income tax expense and a $0.2 million increase in interest expense.
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See below for a discussion of operating results by segment.
Packaging. Net sales increased approximately $13.6 million, or 8.0%, to $183.3 million in the six months ended June 30, 2018, as compared to $169.7 million in the six months ended June 30, 2017, with sales increases in all three primary end markets. Sales of our health, beauty and home care products increased approximately $7.5 million, driven by higher sales in Asia and North America as well as the ramp up of new products. Sales of our industrial closures increased approximately $1.6 million due to increased demand in North America. Sales of our food and beverage products increased approximately $1.1 million due to increased demand in North America. Additionally, net sales increased by approximately $3.4 million due to favorable currency exchange, as our reported results in U.S. dollars were favorably impacted as a result of the weakening of the U.S. dollar relative to foreign currencies.
Packaging's gross profit increased approximately $3.0 million to $60.9 million, or 33.2% of sales, in the six months ended June 30, 2018, as compared to $57.9 million, or 34.1% of sales, in the six months ended June 30, 2017, primarily as a result of approximately $1.4 million of costs incurred in the first half of 2017 to consolidate manufacturing facilities in India and to finalize the move to a new facility in Mexico that did not repeat in the first half of 2018 and approximately $1.5 million due to favorable currency exchange, as our reported results in U.S. dollars were favorably impacted as a result of the weakening of the U.S. dollar relative to foreign currencies. Gross profit margin declined, primarily due to a less favorable product sales mix and pricing pressures, most notably in our health, beauty and home care end market.
Packaging's selling, general and administrative expenses decreased approximately $0.9 million to $18.5 million, or 10.1% of sales, in the six months ended June 30, 2018, as compared to $19.4 million, or 11.4% of sales, in the six months ended June 30, 2017, due to a charge of approximately $1.1 million during the second quarter of 2017 to reserve for an outstanding accounts receivable deemed uncollectable from a European customer who filed for insolvency, which was partially offset by higher employee-related costs in the first half of 2018 supporting our sales growth initiatives.
Packaging's operating profit increased approximately $3.9 million to $42.4 million, or 23.1% of sales, in the six months ended June 30, 2018, as compared to $38.5 million, or 22.7% of sales, in the six months ended June 30, 2017. Operating profit increased primarily due to higher sales levels, lower consolidation and move costs than in the first half of 2017, lower selling, general, and administrative expenses and by approximately $1.0 million due to favorable currency exchange, all of which were partially offset by a less favorable product sales mix and pricing pressures.
Aerospace. Net sales for the six months ended June 30, 2018 decreased approximately $1.6 million, or 1.7%, to $91.4 million, as compared to $93.0 million in the six months ended June 30, 2017. Sales of our fastener products decreased by approximately $1.5 million, primarily as a result of higher sales levels in the first half of 2017 as we reduced our past due order levels. Order intake activity for fastener products was, as expected, higher in the first half of 2018 than the first half of 2017. Sales of our machined components products were flat with first half 2017 levels, as higher sales levels related to solid demand and improved manufacturing throughput were essentially offset by our decision to exit certain less profitable production jobs.
Gross profit within Aerospace increased approximately $0.7 million to $23.9 million, or 26.1% of sales, in the six months ended June 30, 2018, from $23.2 million, or 25.0% of sales, in the six months ended June 30, 2017, primarily as a result of improved production efficiencies and a more favorable product sales mix.
Selling, general and administrative expenses increased approximately $0.4 million to $11.5 million, or 12.6% of sales, in the six months ended June 30, 2018, as compared to $11.2 million, or 12.0% of sales, in the six months ended June 30, 2017, primarily due to a reduction in estimated uncollectable accounts receivable following cash collections from a customer in the six months ended June 30, 2017.
Operating profit within Aerospace increased approximately $0.3 million to $12.4 million, or 13.6% of sales, in the six months ended June 30, 2018, as compared to $12.1 million, or 13.0% of sales, in the six months ended June 30, 2017, as the impact of improved production efficiencies and a more favorable product mix more than offset the impact of lower sales levels and higher selling, general and administrative expenses.
Specialty Products. Net sales for the six months ended June 30, 2018 increased approximately $16.8 million, or 11.2%, to $167.3 million, as compared to $150.5 million in the six months ended June 30, 2017. Sales of our industrial products increased by approximately $8.5 million, primarily due to increased demand for steel cylinders. Sales of our oil and gas related products increased by approximately $7.5 million, due to higher levels of refinery turnaround activity as well as increased sales of engines and compressors to wellhead sites due to higher levels of drilling activity in the United States and Canada. In addition, net sales increased by approximately $0.8 million of net favorable currency exchange, as our reported results in U.S. dollars were positively impacted as a result of the weaker U.S. dollar relative to foreign currencies.
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Gross profit within Specialty Products increased approximately $10.2 million to $40.4 million, or 24.1% of sales, in the six months ended June 30, 2018, as compared to $30.2 million, or 20.1% of sales, in the six months ended June 30, 2017. Gross profit dollars and margin increased primarily as a result of approximately $4.5 million lower costs in the first six months of 2018 compared with the first six months of 2017 related to the closure of our former Reynosa, Mexico and Bangalore, India facilities. In addition, higher first half 2018 sales levels converted into higher gross profit dollars and margin, as this segment continues to leverage its lower fixed cost footprint. These increases were partially offset by higher specialty steel costs in the first half of 2018 used in the manufacture of our industrial cylinder products.
Selling, general and administrative expenses within Specialty Products decreased approximately $1.9 million to $21.5 million, or 12.9% of sales, in the six months ended June 30, 2018, as compared to $23.4 million, or 15.6% of sales, in the six months ended June 30, 2017, primarily as a result of a $3.5 million charge recorded in the first half of 2017 related to the exit of the Wolverhampton, United Kingdom facility, which was partially offset by increased selling costs as a result of higher sales volumes and approximately $0.7 million of severance and restructuring costs associated with the exit of our Bangalore, India facility.
Operating profit within Specialty Products increased approximately $12.1 million to $18.9 million, or 11.3% of sales, in the six months ended June 30, 2018, as compared to $6.8 million, or 4.5% of sales, in the six months ended June 30, 2017, as a result of higher sales levels, lower costs associated with facility closures, and lower selling, general and administrative expenses, partially offset by increased commodity costs related to the production of industrial cylinders.
Corporate. Corporate expenses, net consist of the following (dollars in millions):
Six months ended June 30, | ||||||||
2018 | 2017 | |||||||
Corporate operating expenses | $ | 11.2 | $ | 10.7 | ||||
Non-cash stock compensation | 2.6 | 3.3 | ||||||
Legacy (income) expenses, net | (6.9 | ) | 1.0 | |||||
Corporate expenses, net | $ | 6.9 | $ | 15.0 | ||||
Corporate expenses, net decreased approximately $8.1 million to $6.9 million for the six months ended June 30, 2018, from $15.0 million for the six months ended June 30, 2017, primarily due to the termination of the liability to Metaldyne in first quarter 2018, resulting in an approximate $8.2 million non-cash reduction in legacy (income) expenses, net. Corporate operating expenses increased approximately $0.5 million, primarily due to an increase in expense related to the timing and estimated attainment of our short-term incentive compensation plans. Non-cash stock compensation decreased approximately $0.7 million, primarily due to the timing and amount of equity grants in 2018 compared with 2017.
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Liquidity and Capital Resources
Cash Flows
Cash flows provided by operating activities were approximately $51.6 million for the six months ended June 30, 2018, as compared to approximately $49.6 million for the six months ended June 30, 2017. Significant changes in cash flows provided by operating activities and the reasons for such changes were as follows:
• | For the six months ended June 30, 2018, the Company generated approximately $76.4 million of cash, based on the reported net income of approximately $43.9 million and after considering the effects of non-cash items related to depreciation, amortization, loss on dispositions of assets, changes in deferred income taxes, stock-based compensation and other operating activities. For the six months ended June 30, 2017, the Company generated approximately $53.9 million in cash flows based on the reported net income of approximately $21.8 million and after considering the effects of similar non-cash items. |
• | Increases in accounts receivable resulted in a use of cash of approximately $20.4 million and $11.5 million for the six months ended June 30, 2018 and 2017, respectively. The increased use of cash for each of the six month periods is due primarily to the timing of sales and collection of cash within the periods. Days sales outstanding of receivables remained flat period-over-period. |
• | We increased our investment in inventory by approximately $5.9 million for the six months ended June 30, 2018, primarily as a result of operating at higher production levels to support sales growth. For the six months ended June 30, 2017, we reduced our investment in inventory by approximately $2.9 million, primarily as a result of our footprint consolidation and relocations projects. While our inventory levels are higher in 2018 than in 2017, our days sales in inventory have remained flat, as we continue our significant focus on working capital management. |
• | Decreases in prepaid expenses and other assets resulted in a cash source of approximately $9.0 million and $6.3 million for the six months ended June 30, 2018 and 2017, respectively, primarily as a result of the timing of payments made for income taxes and certain operating expenses. |
• | Decreases in accounts payable and accrued liabilities resulted in a cash use of approximately $7.5 million for the six months ended June 30, 2018, primarily related to an approximate $8.2 million non-cash reduction in an obligation during first quarter 2018. Decreases in accounts payable and accrued liabilities resulted in a cash use of approximately $1.9 million for the six months ended June 30, 2017, primarily as a result of timing of payments made to suppliers and the mix of vendors and related terms. Our days accounts payable on hand remained flat period-over-period. |
Net cash used for investing activities for the six months ended June 30, 2018 and 2017 was approximately $11.1 million and $15.1 million, respectively. During the first six months of 2018, we incurred approximately $11.3 million in capital expenditures, as we have continued our investment in growth, capacity and productivity-related capital projects. Cash received from the disposition of property and equipment was approximately $0.3 million. During the first six months of 2017, we incurred approximately $16.9 million in capital expenditures and received cash from the disposition of property and equipment of approximately $1.8 million.
Net cash used for financing activities for the six months ended June 30, 2018 and 2017 was approximately $14.7 million and $32.5 million, respectively. During the first six months of 2018, we made net repayments of approximately $9.4 million on our revolving credit and accounts receivable facilities. We also purchased approximately $2.9 million of outstanding common stock and used a net cash amount of approximately $2.4 million related to our stock compensation arrangements. During the first six months of 2017, we made net repayments of approximately $24.9 million on our revolving credit and accounts receivable facilities, and repaid approximately $6.9 million on our former term loan A facility. We also used a net cash amount of approximately $0.5 million related to our stock compensation arrangements.
Our Debt and Other Commitments
In September 2017, we issued $300.0 million aggregate principal amount of 4.875% senior unsecured notes due October 15, 2025 at par value in a private placement under Rule 144A of the Securities Act of 1933, as amended. The Senior Notes accrue interest at a rate of 4.875% per annum, payable semi-annually in arrears on April 15 and October 15, commencing on April 15, 2018.
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The payment of principal and interest is jointly and severally guaranteed, on a senior unsecured basis by certain named subsidiaries of the Company (each a "Guarantor" and collectively the "Guarantors"). The Senior Notes are pari passu in right of payment with all existing and future senior indebtedness and subordinated to all existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness. For the six months ended June 30, 2018, our consolidated subsidiaries that do not guarantee the Senior Notes represented approximately 14% of the total of guarantor and non-guarantor net sales, treating each as a consolidated group and excluding intercompany transactions between guarantor and non-guarantor subsidiaries. In addition, our non-guarantor subsidiaries represented approximately 29% and 7% of the total guarantor and non-guarantor assets and liabilities, respectively, as of June 30, 2018, treating the guarantor and non-guarantor subsidiaries each as a consolidated group and excluding intercompany transactions between such groups.
Prior to October 15, 2020, we may redeem up to 35% of the principal amount of the Senior Notes at a redemption price of 104.875% 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, we may redeem all or part of the 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.
We are party to a credit agreement ("Credit Agreement") consisting of a $300.0 million senior secured revolving credit facility, which permits borrowings denominated in specific foreign currencies, subject to a $125.0 million sub limit. The Credit Agreement matures on September 20, 2022 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 allows issuance of letters of credit, not to exceed $40.0 million in aggregate, against revolving credit facility commitments.
The Credit Agreement also provides for incremental revolving credit 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 in the Credit Agreement, 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.
Amounts drawn under our revolving credit facility fluctuate daily based upon our working capital and other ordinary course needs. Availability under our revolving credit facility depends upon, among other things, compliance with our Credit Agreement's financial covenants. Our Credit Agreement contains various negative and affirmative covenants and other requirements affecting us and our subsidiaries, including the ability to, subject to certain exceptions and limitations, incur debt, liens, mergers, investments, loans, advances, guarantee obligations, acquisitions, assets dispositions, sale-leaseback transactions, hedging agreements, dividends and other restricted payments, transactions with affiliates, restrictive agreements and amendments to charters, bylaws, and other material documents. The terms of our Credit Agreement require us and our subsidiaries to meet certain restrictive financial covenants and ratios computed quarterly, including a maximum total net leverage ratio (total consolidated indebtedness plus outstanding amounts under 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). Our permitted total net leverage ratio under the Credit Agreement is 4.00 to 1.00 as of June 30, 2018. If we were to complete an acquisition which qualifies for a Covenant Holiday Period, as defined in our Credit Agreement, then our permitted total net leverage ratio cannot exceed 4.50 to 1.00 during that period. Our actual total net leverage ratio was 1.67 to 1.00 at June 30, 2018. Our permitted senior secured net leverage ratio under the Credit Agreement is 3.50 to 1.00 as of June 30, 2018. If we were to complete an acquisition which qualifies for a Covenant Holiday Period, as defined in our Credit Agreement, then our permitted senior secured net leverage ratio cannot exceed 4.00 to 1.00 during that period. Our actual senior secured net leverage ratio was not meaningful at June 30, 2018. Our permitted interest expense coverage ratio under the Credit Agreement is 3.00 to 1.00 as of June 30, 2018. Our actual interest expense coverage ratio was 12.13 to 1.00 at June 30, 2018. At June 30, 2018, we were in compliance with our financial covenants.
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The following is a reconciliation of net income, as reported, which is a GAAP measure of our operating results, to Consolidated Bank EBITDA, as defined in our Credit Agreement, for the twelve months ended June 30, 2018 (dollars in thousands). We present Consolidated Bank EBITDA to show our performance under our financial covenants.
Twelve Months Ended June 30, 2018 | ||||
Net income | $ | 53,040 | ||
Bank stipulated adjustments: | ||||
Interest expense | 14,610 | |||
Income tax expense | 35,790 | |||
Depreciation and amortization | 46,440 | |||
Non-cash compensation expense(1) | 6,060 | |||
Other non-cash expenses or losses | 4,240 | |||
Non-recurring expenses or costs(2) | 3,370 | |||
Extraordinary, non-recurring or unusual gains or losses | (6,300 | ) | ||
Business and asset dispositions | 730 | |||
Debt financing and extinguishment costs | 4,910 | |||
Consolidated Bank EBITDA, as defined | $ | 162,890 | ||
June 30, 2018 | ||||
Total Indebtedness, as defined(3) | $ | 271,430 | ||
Consolidated Bank EBITDA, as defined | 162,890 | |||
Total net leverage ratio | 1.67 | x | ||
Covenant requirement | 4.00 | x | ||
June 30, 2018 | ||||
Total Senior Secured Indebtedness(4) | $ | (28,580 | ) | |
Consolidated Bank EBITDA, as defined | 162,890 | |||
Senior secured net leverage ratio | n/m | x | ||
Covenant requirement | 3.50 | x | ||
Twelve Months Ended June 30, 2018 | ||||
Interest expense | $ | 14,610 | ||
Bank stipulated adjustments: | ||||
Non-cash amounts attributable to amortization of financing costs | (1,180 | ) | ||
Total Consolidated Cash Interest Expense, as defined | $ | 13,430 | ||
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June 30, 2018 | ||||
Consolidated Bank EBITDA, as defined | $ | 162,890 | ||
Total Consolidated Cash Interest Expense, as defined | 13,430 | |||
Actual interest expense coverage ratio | 12.13 | x | ||
Covenant requirement | 3.00 | x | ||
_____________________________
(1) | Non-cash compensation expenses resulting from the grant of equity awards. |
(2) | Non-recurring costs and expenses relating to severance, relocation, restructuring and curtailment expenses. |
(3) | Includes $4.0 million of acquisition deferred purchase price. |
(4) | Senior secured indebtedness is negative at June 30, 2018 due to the deduction of certain unrestricted cash and unrestricted permitted investments as allowed under the Credit Agreement. |
During the three months ended March 31, 2018, we terminated our $75.0 million accounts receivable facility, under which we had the ability to sell eligible accounts receivable to a third-party multi-seller receivables funding company. At December 31, 2017, we had no amounts outstanding under the facility and approximately $57.8 million available but not utilized.
At June 30, 2018, we had no amounts outstanding under our revolving credit facility and had approximately $285.9 million potentially available after giving effect to approximately $14.1 million of letters of credit issued and outstanding. At December 31, 2017, we had approximately $10.8 million outstanding under our revolving credit facility and had approximately $274.3 million potentially available after giving effect to approximately $14.9 million of letters of credit issued and outstanding. The letters of credit are used for a variety of purposes, including support of certain operating lease agreements, vendor payment terms and other subsidiary operating activities, and to meet various states' requirements to self-insure workers' compensation claims, including incurred but not reported claims. Including availability under our accounts receivable facility and after consideration of leverage restrictions contained in the Credit Agreement, as of June 30, 2018 and December 31, 2017, we had approximately $285.9 million and $332.1 million, respectively, of borrowing capacity available for general corporate purposes.
We rely upon our cash flow from operations and available liquidity under our revolving credit facility to fund our debt service obligations and other contractual commitments, working capital and capital expenditure requirements. At the end of each quarter, we use cash on hand from our domestic and foreign subsidiaries to pay down amounts outstanding under our revolving credit facility, as applicable.
Our weighted average borrowings during the first six months of 2018 approximated $330.3 million, compared to approximately $404.0 million during the first six months of 2017. The overall decrease is primarily due to repayments using cash flows from operations.
Cash management related to our revolving credit facility is centralized. We monitor our cash position and available liquidity on a daily basis and forecast our cash needs on a weekly basis within the current quarter and on a monthly basis outside the current quarter over the remainder of the year. Our business and related cash forecasts are updated monthly. While the majority of our cash on hand as of June 30, 2018 is located in jurisdictions outside the U.S., given aggregate available funding under our revolving credit facility of $285.9 million at June 30, 2018 (after consideration of the aforementioned leverage restrictions) and based on forecasted cash sources and requirements inherent in our business plans, we believe that our liquidity and capital resources, including anticipated cash flows from operations, will be sufficient to meet our debt service, capital expenditure and other short-term and long-term obligations for the foreseeable future.
We are subject to variable interest rates on our revolving credit facility. At June 30, 2018, 1-Month LIBOR approximated 2.09%. At June 30, 2018, we had no amounts outstanding on our revolving credit facility and therefore no variable rate-based borrowings outstanding.
In addition to our long-term debt, we have other cash commitments related to leases. We account for these lease transactions as operating leases, and annual rent expense for continuing operations related thereto approximated $16.7 million in 2017. We expect leasing will continue to be an available financing option to fund future capital expenditure requirements.
We continuously evaluate strategies to redeploy our cash, including returning capital to our shareholders. In November 2015, we announced our Board of Directors had authorized us to purchase our common stock up to $50 million in the aggregate. In the three and six months ended June 30, 2018 we purchased 100,947 shares of our outstanding common stock for approximately $2.9 million. 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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Market Risk
We conduct business in various locations throughout the world and are subject to market risk due to changes in the value of foreign currencies. The functional currencies of our foreign subsidiaries are primarily the local currency in the country of domicile. We manage these operating activities at the local level and revenues and costs are generally denominated in local currencies; however, results of operations and assets and liabilities reported in U.S. dollars will fluctuate with changes in exchange rates between such local currencies and the U.S. dollar.
We have historically used derivative financial instruments to manage currency risks, albeit in immaterial notional contracts, as we explored the predictability of our procurement activities denominated in currencies other than the functional currency of our subsidiaries and the impact of currency rate volatility on our earnings. We use cross-currency swap agreements to mitigate currency risks associated with the net investment in certain of our foreign subsidiaries. See Note 9, "Derivative Instruments," included in Part 1, Item 1, "Notes to Unaudited Consolidated Financial Statements," within this quarterly report on Form 10-Q for additional information.
We are also subject to interest risk as it relates to our long-term debt. We have historically used interest rate swap agreements to fix the variable portion of our debt to manage this risk. See Note 9, "Derivative Instruments," included in Part 1, Item 1, "Notes to Unaudited Consolidated Financial Statements," within this quarterly report on Form 10-Q for additional information.
Common Stock
TriMas is listed in the NASDAQ Global Select MarketSM. Our stock trades under the symbol "TRS."
Credit Rating
We and certain of our outstanding debt obligations are rated by Standard & Poor's and Moody's. On June 7, 2018, Moody's upgraded our Senior Notes rating to Ba3 from B1, as presented in Note 8, "Long-term Debt" included in Part I, Item 1, "Notes to Unaudited Consolidated Financial Statements" within this quarterly report on Form 10-Q. Moody's also upgraded our Corporate Family Rating to Ba2 from Ba3 and maintained its outlook as stable. On May 11, 2018, Standard & Poor's upgraded our senior unsecured debt rating to BB- from B+, upgraded our corporate credit rating to BB from BB- and maintained its outlook as stable. If our credit ratings were to decline, our ability to access certain financial markets may become limited, our cost of borrowings may increase, the perception of us in the view of our customers, suppliers and security holders may worsen and as a result, we may be adversely affected.
Outlook
Our first half 2018 results continue our recent positive momentum, as we further improve our operating efficacy under the TriMas Business Model, which provides a standardized set of processes that we follow to drive results across our multi-industry set of businesses. We experienced year-over-year increases in sales and operating profit, with further improvement in net income as a result of a lower tax rate following the enactment of the Tax Reform Act.
We expect sales levels for 2018 will be higher than originally projected considering our year to date growth, which has been boosted by improved economic activity and the continued success of our internal sales growth programs. We do believe year-over-year growth in the second half of 2018 will moderate from the 7.0% growth in the first half of 2018, as compared with the first half of 2017, as certain customers may have bought earlier in 2018 than they originally planned or may defer planned second half purchases given economic uncertainty around direct and indirect impacts of recently enacted tariffs on foreign-sourced materials.
We will continue our efforts to mitigate the impact of external factors, while also focusing on those areas we can control. We will also continue to prioritize growth programs, particularly in our Packaging and Aerospace reportable segments, many of which are underway and will provide benefit through the remainder of 2018. We will also continue to monitor the cost structure of our Specialty Products reportable segment, to ensure it remains aligned with customer demand in the end markets we serve.
We will continue to leverage the tenets of the TriMas Business Model to execute our improvement actions, adjust our product portfolios to deemphasize or no longer sell certain lower-margin products, and seek lower-cost sources for input costs, all while continuously assessing our manufacturing footprint, productivity and fixed cost structure.
Impact of New Accounting Standards
See Note 2, "New Accounting Pronouncements," included in Part 1, Item 1, "Notes to Unaudited Consolidated Financial Statements," within this quarterly report on Form 10-Q.
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Critical Accounting Policies
Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, our evaluation of business and macroeconomic trends, and information from other outside sources, as appropriate.
During the quarter ended June 30, 2018, there were no material changes to the items that we disclosed as our critical accounting policies in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Annual Report on Form 10-K for the year ended December 31, 2017.
In completing our 2017 assessment of goodwill and indefinite-lived intangible assets, we determined the fair value of the Aerospace reporting unit exceeded its carrying value by more than 15%, and thus there was no goodwill impairment. All other reporting units with goodwill had an implied fair value greater than carrying value by more than 89% in our last quantitative assessment. The amount of remaining goodwill attributable to the Aerospace reporting unit was approximately $146.4 million as of each of June 30, 2018 and December 31, 2017. We have not identified any events or changes in circumstances that could reasonably be expected to have an other than temporary effect on the significant assumptions used in estimating the fair value of our Aerospace or other reporting units with goodwill.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business, we are exposed to market risk associated with fluctuations in foreign currency exchange rates. We are also subject to interest risk as it relates to long-term debt. See Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," for details about our primary market risks, and the objectives and strategies used to manage these risks. Also see Note 8, "Long-term Debt," and Note 9, "Derivative Instruments," in Part I, Item 1, "Notes to Unaudited Consolidated Financial Statements," included within this quarterly report on Form 10-Q for additional information.
Item 4. Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Evaluation of disclosure controls and procedures
As of June 30, 2018, an evaluation was carried out by management, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) pursuant to Rule 13a-15 of the Exchange Act. The Company's disclosure controls and procedures are designed only to provide reasonable assurance that they will meet their objectives. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2018, the Company's disclosure controls and procedures are effective to provide reasonable assurance that they would meet their objectives.
Changes in internal control over financial reporting
There have been no changes in the Company's internal control over financial reporting during the quarter ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
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PART II. OTHER INFORMATION
TRIMAS CORPORATION
Item 1. Legal Proceedings
See Note 10, "Commitments and Contingencies," included in Part I, Item 1, "Notes to Unaudited Consolidated Financial Statements," within this quarterly report on Form 10-Q.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part 1, Item 1A., "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2017, which could materially affect our business, financial condition or future results. There have been no significant changes in our risk factors as disclosed in our 2017 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information about purchases made by the Company, or on behalf of the Company by an affiliated purchaser, of shares of the Company's common stock during the three months ended June 30, 2018.
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1) | ||||||||||
April 1, 2018 to April 30, 2018 | — | $ | — | — | $ | 50,000,000 | ||||||||
May 1, 2018 to May 31, 2018 | 19,782 | $ | 27.12 | 19,782 | $ | 49,463,606 | ||||||||
June 1, 2018 to June 30, 2018 | 81,165 | $ | 29.36 | 81,165 | $ | 47,080,257 | ||||||||
Total | 100,947 | $ | 28.92 | 100,947 | $ | 47,080,257 | ||||||||
__________________________
(1) | Pursuant to a publicly announced share repurchase program from November 2015, during the three months ended June 30, 2018, the Company repurchased 100,947 shares of its common stock at a cost of approximately $2.9 million. The share repurchase program, pursuant to which the Company is authorized to purchase up to $50 million in aggregate of its common stock, is effective and has no expiration date. |
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
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Item 6. Exhibits
Exhibits Index:
3.1(a) | |
3.2(b) | |
10.1 | |
10.2 | |
10.3 | |
31.1 | |
31.2 | |
32.1 | |
32.2 | |
101.INS | XBRL Instance Document. |
101.SCH | XBRL Taxonomy Extension Schema Document. |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
(a) | Incorporated by reference to the Exhibits filed with our Quarterly Report on Form 10-Q filed on August 3, 2007 (File No. 001-10716). | |
(b) | Incorporated by reference to the Exhibits filed with our Current Report on Form 8-K filed on December 18, 2015 (File No. 001-10716). | |
*Management contracts and compensatory plans or arrangements.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TRIMAS CORPORATION (Registrant) | ||||
/s/ ROBERT J. ZALUPSKI | ||||
Date: | August 7, 2018 | By: | Robert J. Zalupski Chief Financial Officer | |
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Exhibit 10.1
1/1/18 - 12/31/20 Award
Performance Stock Units
TRIMAS CORPORATION
2017 EQUITY AND INCENTIVE COMPENSATION PLAN
PERFORMANCE STOCK UNITS AGREEMENT
TriMas Corporation (the “Company”), as permitted by the TriMas Corporation 2017 Equity and Incentive Compensation Plan (“Plan”), and as approved by the Committee, has granted to the individual listed below (“Grantee”), the opportunity to earn performance-based Restricted Stock Units (“PSUs”) in the amount designated in this Performance Stock Units Agreement (“Agreement”), subject to the terms and conditions of the Plan and this Agreement.
Unless otherwise defined in this Agreement or in one or more Appendices to this Agreement, the terms used in this Agreement have the same meanings as defined in the Plan.
I. NOTICE OF PSU AWARD
Grantee: | [specify Grantee’s name] |
Date of Agreement: | As of [enter date] |
Date of Grant: | [Grant Date] |
Number of PSUs in Award: | [number of PSUs] (“Target”), subject to addition or subtraction as set forth on Appendix A depending on achievement of applicable Management Objectives |
Performance Period: | Beginning on January 1, 2018, and continuing through December 31, 2020 |
Settlement Date | May 1, 2021 |
Settlement Method: | Earned and vested PSUs will be settled by delivery of one share of Common Stock for each PSU being settled |
II. AGREEMENT
A. Grant of PSUs. The Company has granted to Grantee (who, pursuant to this award is a Participant in the Plan) the opportunity to earn the number of PSUs described above, subject to adjustment as provided otherwise in this Agreement (this “Award”). The PSUs evidenced by
this Agreement are payable only in shares of Common Stock as described in this Agreement. Notwithstanding anything to the contrary anywhere else in this Agreement, the PSUs subject to this Award are subject to the terms and provisions of the Plan, which are incorporated by reference into this Agreement.
1. Vesting. Except as otherwise designated in this Agreement, Grantee must be a Service Provider on the Settlement Date (as such term is defined in Section II.A.7 below) to be eligible to earn and receive payment for any PSUs, and any PSUs subject to this Award will be canceled and forfeited if Grantee terminates as a Service Provider prior to the Settlement Date. Any PSUs that remain unearned after the “Determination Date” (as such term is defined in Appendix A) will be cancelled and forfeited.
2. Performance Goals to Earn PSUs. Grantee will only receive shares of Common Stock related to, and to the extent that such shares are earned pursuant to, the Management Objectives and goals specified in Appendix A to this Agreement (“Performance Goals”).
3. Dividend Equivalent Rights. Grantee shall be credited with cash per PSU equal to the amount of each cash dividend paid by the Company (if any) to holders of Common Stock generally with a record date occurring on or after the Date of Grant and prior to the time when the PSUs are earned and/or vest and are settled in accordance with Section II.A.7 hereof. Any amounts credited pursuant to the immediately preceding sentence shall be subject to the same applicable terms and conditions (including earning, vesting, payment, and forfeitability) as apply to the PSUs based on which the dividend equivalents were credited, and such amounts shall be paid in either cash or Common Stock, as determined by the Committee in its sole discretion, at the same time as the PSUs to which they relate. If such amounts are paid in Common Stock, the number of shares so paid shall be rounded down to the nearest whole number and shall be determined by dividing such credited amounts by the Market Value per Share on the payment date.
4. Rights as a Shareholder. This Award does not entitle Grantee to any ownership interest in any actual shares of Common Stock unless and until such shares of Common Stock are issued to Grantee pursuant to the terms of the Plan. Except as otherwise provided in Section II.A.3 hereof, until shares of Common Stock are issued to Grantee in settlement of earned PSUs under this Award, Grantee will have none of the rights of a stockholder of the Company with respect to the shares of Common Stock issuable in settlement of the PSUs, including the right to vote the shares of Common Stock. Shares of Common Stock issuable in settlement of PSUs will be delivered to Grantee on the Settlement Date in book entry form or in such other manner as the Committee may determine.
5. Adjustments. The PSUs covered by this Award will be subject to adjustment as provided in Section 11 of the Plan.
6. Termination of Service; Forfeiture.
(a) Voluntary Termination; Termination by Company. Any PSUs subject to this Award will be canceled and forfeited if, prior to the Settlement Date, Grantee voluntarily terminates as a Service Provider (other than for Good Reason as provided below), or if
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Grantee’s status as a Service Provider is terminated by the Company or a Subsidiary for any reason (other than death, Disability, or Retirement).
(b) Qualifying Termination Prior to a Change in Control. Notwithstanding the foregoing, and except as set forth in subsection (f) of this Section II.A.6, if Grantee ceases to be a Service Provider prior to the Settlement Date as a result of Grantee’s Qualifying Termination, Grantee shall vest in a pro-rata portion of the number of PSUs, if any, that are earned under Section II.A.2 due to the achievement of the performance measures specified in Appendix A during the performance period specified in the table above (the “Performance Period”). The pro-rata percentage of the number of PSUs to be earned and settled under Section II.A.7 shall be equal to (x) the amount determined under Section II.A.2 above at the end of the Performance Period, multiplied by (y) a fraction (not greater than 1), the numerator of which is the number of whole calendar months Grantee was employed or rendering services from the beginning of the Performance Period through the date of Grantee’s Qualifying Termination, and the denominator of which is 36.
(c) Disability. Notwithstanding the foregoing, if Grantee ceases to be a Service Provider prior to the Settlement Date as a result of Grantee’s Disability, Grantee’s PSUs shall become vested at the end of the Performance Period in the number of PSUs that would have been actually earned due to the achievement of the performance measures specified in Appendix A, assuming Grantee had continued to be a Service Provider through the Settlement Date.
(d) Death. Notwithstanding the foregoing, if Grantee ceases to be a Service Provider prior to the Settlement Date as a result of Grantee’s death, Grantee’s PSUs shall immediately become fully vested based on the Target number set forth in “Number of PSUs in Award” in Section I.
(e) Retirement. If Grantee ceases to be a Service Provider as a result of Grantee’s Retirement, the Committee may, in its discretion, permit Grantee to receive a pro-rata amount of PSUs, with the pro-rata amount determined in accordance with subsection (b) of this Section II.A.6.
(f) Change in Control. In the event of a Change in Control that occurs prior to the Settlement Date, the PSUs will vest in accordance with this Section II.A.6(f).
(1) Notwithstanding anything set forth herein to the contrary, if at any time before the Settlement Date or forfeiture of the PSUs, and while Grantee is continuously a Service Provider, a Change in Control occurs, then the PSUs will vest (except to the extent that a Replacement Award is provided to Grantee in accordance with Section II.A.6(f)(2) to continue, replace or assume the PSUs covered by this Agreement (the “Replaced Award”)) as follows: the number of PSUs subject to this Award that shall become vested and non-forfeitable shall equal (x) the Target number set forth in “Number of PSUs in Award” in Section I, less (y) the number of PSUs that had already become vested as of the date of such termination, but in no event may negative discretion be exercised with respect to the number of PSUs
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vested. Any PSUs that are not earned and do not vest in accordance with the foregoing sentence shall terminate and be forfeited.
(2) For purposes of this Agreement, a “Replacement Award” means an award (A) of the same type (e.g., performance stock units) as the Replaced Award, (B) that has a value at least equal to the value of the Replaced Award, (C) that relates to publicly traded equity securities of the Company or its successor in the Change in Control or another entity that is affiliated with the Company or its successor following the Change in Control, (D) if Grantee holding the Replaced Award is subject to U.S. federal income tax under the Code, the tax consequences of which to such Grantee under the Code are not less favorable to such Grantee than the tax consequences of the Replaced Award, and (E) the other terms and conditions of which are not less favorable to Grantee holding the Replaced Award than the terms and conditions of the Replaced Award (including the provisions that would apply in the event of a subsequent Change in Control). A Replacement Award may be granted only to the extent it does not result in the Replaced Award or Replacement Award failing to comply with or be exempt from Section 409A of the Code. Without limiting the generality of the foregoing, the Replacement Award may take the form of a continuation of the Replaced Award if the requirements of the two preceding sentences are satisfied. The determination of whether the conditions of this Section II.A.6(f)(2) are satisfied will be made by the Committee, as constituted immediately before the Change in Control, in its sole discretion.
(3) If, after receiving a Replacement Award, Grantee experiences a Qualifying Termination with the Company or a Subsidiary (or any of their successors) (as applicable, the “Successor”) within a period of two years after the Change in Control and prior to the Settlement Date, the number of PSUs subject to this Award that shall become vested and non-forfeitable shall equal (x) the Target number set forth in “Number of PSUs in Award” in Section I, less (y) the number of PSUs that had already become vested as of the date of such termination, but in no event may negative discretion be exercised with respect to the number of PSUs vested. Any PSUs that are not earned and do not vest in accordance with the foregoing sentence shall terminate and be forfeited.
Any PSUs that are not earned and do not vest in accordance with this Section II.A.6. shall terminate and be forfeited as of the date Grantee ceases to be a Service Provider. However, in particular, this Award is subject to Section 18(c) of the Plan.
7. Determination of PSUs Earned and Vested; Settlement.
(a)Subject to Section II.A.7(b), upon the Committee’s certification of achievement of the Performance Goals, and Grantee’s satisfaction of the vesting requirements in Section II.A.1 and Section II.A.6 above, as applicable, this Award shall be settled by issuing to Grantee the number of shares of Common Stock determined pursuant to Appendix A, and Grantee’s name shall be entered as the shareholder of record on the
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books of the Company with respect to such shares. This settlement shall occur on May 1, 2021 (the “Settlement Date”).
(b)The PSUs that become vested as a result of Grantee’s death pursuant to Section II.A.6(d) will be settled by issuing to Grantee one share of Common Stock for each PSU that is vested within 30 days of Grantee’s death, and Grantee’s name shall be entered as the shareholder of record on the books of the Company with respect to such shares. The PSUs that become vested as a result of a Change in Control where no Replacement Award is provided pursuant to Section II.A.6(f)(1) will settled by issuing to Grantee on share of Common Stock for each PSU that is vested within 30 days of the Change in Control, and Grantee’s name shall be entered as the shareholder of record on the books of the Company with respect to such shares. The PSUs that become vested as a result of Grantee’s Qualifying Termination within two years after a Change in Control pursuant to Section II.A.6(f)(3) will be settled by issuing to Grantee one share of Common Stock for each PSU that is vested within 30 days of such Qualifying Termination, and Grantee’s name shall be entered as the shareholder of record on the books of the Company with respect to such shares.
(c)Any unearned PSUs at the end of the Performance Period, or if earlier, the time of settlement, will be canceled and forfeited. In all circumstances, the number of PSUs earned or vested will be rounded down to the nearest whole PSU, unless otherwise determined by the Committee.
B. Other Terms and Conditions.
1. Non-Transferability of Award. Except as described below, this Award and the PSUs subject to this Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution. The terms of this Award are binding on the executors, administrators, heirs, successors and assigns of Grantee.
2. Withholding. To the extent that the Company is required to withhold federal, state, local or foreign taxes or other amounts in connection with any payment made or benefit realized by Grantee under this Agreement, and the amounts available to the Company for such withholding are insufficient, it shall be a condition to the receipt of such payment or the realization of such benefit that Grantee make arrangements satisfactory to the Company for payment of the balance of such taxes or other amounts required to be withheld. If Grantee’s benefit is to be received in the form of shares of Common Stock, then (a) if Grantee is subject to Section 16 of the Exchange Act, Grantee may elect that (1) the Company will withhold shares of Common Stock having a value equal to the amount required to be withheld or (2) Grantee will pay to the Company an amount in cash equal to the amount required to be withheld, and (b) if Grantee is not subject to Section 16 of the Exchange Act, Grantee may elect that all or any part of such withholding requirement be satisfied by the retention by the Company of a portion of the Common Stock to be delivered to Grantee, by delivering to the Company other Common Stock held by Grantee, or by tendering sufficient funds in cash or cash equivalent to the Company. The shares of Common Stock used for tax or other withholding will be valued at an amount equal to the fair market value of such shares of Common Stock on the date the benefit is to be included in Grantee’s income. In no event will the fair market
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value of the shares of Common Stock to be withheld and/or delivered pursuant to this Section II.B.2 to satisfy applicable withholding taxes or other amounts in connection with the benefit exceed (x) the maximum amount that could be required to be withheld or (y) if so determined by the Committee after the date hereof, the minimum amount required to be withheld.
3. Dispute Resolution. Grantee and the Company agree that any disagreement, dispute, controversy, or claim arising out of or relating to this Agreement, its interpretation, validity, or the alleged breach of this Agreement, will be settled exclusively and, consistent with the procedures specified in this Section II.B.3, irrespective of its magnitude, the amount in controversy, or the nature of the relief sought, in accordance with the following:
(a) Negotiation. Grantee and the Company will use their best efforts to settle the dispute, claim, question or disagreement. To this effect, they will consult and negotiate with each other in good faith and, recognizing their mutual interests, attempt to reach a just and equitable solution satisfactory to both parties.
(b) Arbitration. If Grantee and the Company do not reach a solution within a period of 30 days from the date on which the dispute, claim, disagreement, or controversy arises, then, upon written notice by Grantee to the Company or the Company to Grantee, all disputes, claims, questions, controversies, or differences will be submitted to arbitration administered by the American Arbitration Association (the “AAA”) in accordance with the provisions of its Employment Arbitration Rules and Mediation Procedures (the “Arbitration Rules”).
(1) Arbitrator. The arbitration will be conducted by one arbitrator skilled in the arbitration of executive employment matters. The parties to the arbitration will jointly appoint the arbitrator within 30 days after initiation of the arbitration. If the parties fail to appoint an arbitrator as provided above, an arbitrator with substantial experience in executive employment matters will be appointed by the AAA as provided in the Arbitration Rules. The Company will pay all of the reasonable fees, if any, and expenses of the arbitrator and the arbitration, unless otherwise determined by the arbitrator. Each party to the arbitration will be responsible for his/its respective attorneys’ fees or other costs of representation.
(2) Location. The arbitration will be conducted in Oakland County, Michigan.
(3) Procedure. At any oral hearing of evidence in connection with the arbitration, each party or its legal counsel will have the right to examine its witnesses and cross-examine the witnesses of any opposing party. No evidence of any witness may be presented in any form unless the opposing party or parties has the opportunity to cross-examine the witness, except under extraordinary circumstances in which the arbitrator determines that the interests of justice require a different procedure.
(4) Decision. Any decision or award of the arbitrator is final and binding on the parties to the arbitration proceeding. The parties agree that the arbitration
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award may be enforced against the parties to the arbitration proceeding or their assets wherever they may be found and that a judgment upon the arbitration award may be entered in any court having jurisdiction.
(5) Power. Nothing contained in this Agreement may be deemed to give the arbitrator any authority, power, or right to alter, change, amend, modify, add to, or subtract from any of the provisions of this Agreement.
The provisions of this Section II.B.3 survive the termination or expiration of this Agreement, are binding on the Company’s and Grantee’s respective successors, heirs, personal representatives, designated beneficiaries and any other person asserting a claim described above, and may not be modified without the consent of the Company. To the extent arbitration is required, no person asserting a claim has the right to resort to any federal, state or local court or administrative agency concerning the claim unless expressly provided by federal statute, and the decision of the arbitrator is a complete defense to any action or proceeding instituted in any tribunal or agency with respect to any dispute, unless precluded by federal statute.
4. Section 409A of the Code. To the extent applicable, it is intended that this Agreement and the Plan comply with or be exempt from the provisions of Section 409A of the Code. This Agreement and the Plan shall be administered in a manner consistent with this intent, and any provision that would cause this Agreement or the Plan to fail to satisfy Section 409A of the Code shall have no force or effect until amended to comply with or be exempt from Section 409A of the Code (which amendment may be retroactive to the extent permitted by Section 409A of the Code and may be made by the Company without the consent of the Grantee).
5. No Continued Right as Service Provider. Nothing in the Plan or in this Agreement confers on Grantee any right to continue as a Service Provider, or interferes with or restricts in any way the rights of the Company or any Subsidiary, which are hereby expressly reserved, to discharge Grantee at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written employment agreement between Grantee and the Company or any Subsidiary.
6. Effect on Other Benefits. In no event will the value, at any time, of the PSUs or any other payment or right to payment under this Agreement be included as compensation or earnings for purposes of any other compensation, retirement, or benefit plan offered to employees of, or other Service Providers to, the Company or any Subsidiary unless otherwise specifically provided for in such plan.
7. Unfunded and Unsecured General Creditor. Grantee, as a holder of PSUs and rights under this Agreement has no rights other than those of a general creditor of the Company. The PSUs represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of this Agreement and the Plan.
8. Severability. If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid or unenforceable, the remainder of this Agreement and the application of such provision to any other person or circumstances shall not
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be affected, and the provisions so held to be invalid or unenforceable shall be reformed to the extent (and only to the extent) necessary to make it enforceable and valid.
9. Electronic Delivery. The Company may, in its sole discretion, deliver any documents related to the PSUs and Grantee’s participation in the Plan, or future awards that may be granted under the Plan, by electronic means or request Grantee’s consent to participate in the Plan by electronic means. Grantee hereby consents to receive such documents by electronic delivery and, if requested, agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
10. Nature of Grant. In accepting this Award, Grantee acknowledges that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time unless otherwise provided in the Plan or this Agreement;
(b) the grant of this Award is voluntary and occasional and does not create any contractual or other right to receive future grants of awards, or benefits in lieu of awards, even if awards have been granted repeatedly in the past,
(c) all decisions with respect to future grants, if any, will be at the sole discretion of the Committee;
(d) Grantee is voluntarily participating in the Plan;
(e) the PSUs and the Common Stock subject to the PSUs are an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or Grantee’s employer, and which is outside the scope of Grantee’s employment contract, if any;
(f) the PSUs and the Common Stock subject to the PSUs are not intended to replace any pension rights or compensation;
(g) the future value of the underlying Common Stock is unknown and cannot be predicted with certainty;
(h) Awards and resulting benefits are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments insofar as permitted by law;
(i) in consideration of the grant of the PSUs, no claim or entitlement to compensation or damages shall arise from forfeiture of the PSUs resulting from termination of Grantee’s employment with the Company or Grantee’s employer (for any reason whatsoever and whether or not in breach of local labor laws) and Grantee irrevocably releases the Company and Grantee’s employer from any such claim that may arise; if, notwithstanding
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the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, Grantee shall be deemed irrevocably to have waived any entitlement to pursue such claim; and
(j) in the event Grantee ceases to be a Service Provider (whether or not in breach of local labor laws), Grantee’s right to vest in the PSUs under the Plan, if any, will terminate effective as of the date that Grantee is no longer a Service Provider and will not be extended by any notice period mandated under local law (e.g., active service would not include a period of “garden leave” or similar period pursuant to local law); the Committee shall have the exclusive discretion to determine when Grantee is no longer a Service Provider for purposes of the PSUs.
11. Non-U.S. Addendum. Notwithstanding any provisions in this Agreement, the PSUs shall also be subject to the special terms and conditions set forth in the Non-U.S. Addendum attached as Appendix C to this Agreement for Grantee’s country. Moreover, if Grantee relocates to one of the countries included in the Non-U.S. Addendum, the special terms and conditions for such country will apply to Grantee to the extent the Company determines that the application of such terms and conditions are necessary or advisable in order to comply with local law or facilitate the administration of the Plan. The Non-U.S. Addendum attached hereto as Appendix C constitutes part of this Agreement.
12. Amendments. Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that (a) no amendment shall materially adversely affect the rights of Grantee under this Agreement without Grantee’s written consent, and (b) Grantee’s consent shall not be required to an amendment that is deemed necessary by the Company to ensure compliance with Section 409A of the Code or Section 10D of the Exchange Act.
13. Relation to Plan. This Agreement is subject to the terms and conditions of the Plan. In the event of any inconsistency between the provisions of this Agreement and the Plan, the Plan shall govern. The Committee acting pursuant to the Plan, as constituted from time to time, shall, except as expressly provided otherwise herein or in the Plan, have the right to determine any questions which arise in connection with this Agreement.
14. Governing Law. This Agreement is governed by and construed in accordance with the laws of the State of Delaware, notwithstanding conflict of law provisions.
15. Clawback Policy. Any shares of Common Stock issued to Grantee in settlement of the PSUs (plus dividend equivalent payments) shall be subject to the Company’s recoupment policy, if any, as in effect from time to time. Further, notwithstanding anything in this Agreement to the contrary, Grantee acknowledges and agrees that (a) this Agreement and this Award described herein (and any settlement thereof) are subject to the terms and conditions of such policy, or any other form of Company recoupment (or similar) policy (if any) as may be in effect from time to time specifically to implement Section 10D of the Exchange Act and any applicable rules or regulations promulgated thereunder (including applicable rules and regulations of any national securities exchange on which the Common Stock may be traded) (the “Compensation Recovery
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Policy”), and (b) applicable provisions of this Agreement shall be deemed superseded by and subject to the terms and conditions of the Compensation Recovery Policy from and after the effective date thereof.
(Signature Page Follows)
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This Agreement may be executed in two or more counterparts, each of which is deemed an original and all of which constitute one document.
TRIMAS CORPORATION
Dated as of: [grant date] | By: /s/ Joshua A. Sherbin Name: Joshua A. Sherbin Title: Senior Vice President and General Counsel |
GRANTEE ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE PLAN, CONFERS ON GRANTEE ANY RIGHT WITH RESPECT TO CONTINUATION AS A SERVICE PROVIDER OF THE COMPANY OR ANY PARENT OR SUBSIDIARY, NOR INTERFERES IN ANY WAY WITH GRANTEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE GRANTEE’S SERVICE PROVIDER RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE AND WITH OR WITHOUT PRIOR NOTICE.
BY CLICKING THE “ACCEPT” BUTTON, GRANTEE ACKNOWLEDGES RECEIPT OF A COPY OF THE PLAN AND REPRESENTS THAT GRANTEE IS FAMILIAR WITH THE TERMS AND PROVISIONS OF THE PLAN. GRANTEE ACCEPTS THIS PERFORMANCE-BASED RESTRICTED STOCK UNITS AWARD SUBJECT TO ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT AND THE PLAN. GRANTEE HAS REVIEWED THE PLAN AND THIS AGREEMENT IN THEIR ENTIRETY. GRANTEE AGREES TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL ALL DECISIONS OR INTERPRETATIONS OF THE COMMITTEE UPON ANY QUESTIONS ARISING UNDER THE PLAN OR THIS AWARD.
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APPENDIX A
TO
PERFORMANCE STOCK UNITS AGREEMENT
PERFORMANCE GOALS FOR PSU AWARD
The actual number of PSUs earned by Grantee will be determined by the Committee by May 1, 2021 following the end of the Performance Period (“Determination Date”), using data as of, and including, December 31, 2020 under the rules described below. Any PSUs not earned as of the Determination Date will be canceled and forfeited.
1. The actual number of shares of Common Stock delivered to Grantee in settlement of the PSUs earned under this Agreement will be determined based on actual performance results as described below, subject to Section II.A.1 of the Agreement.
2. The PSUs subject to this Award are earned based on the achievement of specific performance measures over the Performance Period (i.e., January 1, 2018 through December 31, 2020) and determined on the Determination Date.
3. 50% of the Target PSUs will be earned based on the achievement of EPS CAGR (the “EPS CAGR PSUs”), and 50% of the Target PSUs will be earned based on the achievement of Relative Total Shareholder Return (“RTSR PSUs”).
4. Definitions. For purposes hereof:
(A) | “EPS CAGR” means the cumulative average growth rate during the Performance Period of the diluted earnings per share from continuing operations as reported in the Company’s Income Statement within the applicable Form 10-Q and Form 10-K, plus or minus special items that may occur from time-to-time that the Committee believes should adjust the as-reported results for measurement of performance. |
(B) | “Peer Group” means, of a benchmark group of 103 entities currently in the S&PSmallCap 600 Capped Industrials index (the names of which are attached hereto as Annex A), those entities that remain in the Peer Group as of the end of the Performance Period after application of the Peer Group Adjustment Protocol. |
(C) | “Peer Group Adjustment Protocol” means: (i) if an entity listed in Annex A files for bankruptcy and/or liquidation, is operating under bankruptcy protection, or is delisted from its primary stock exchange because it fails to meet the exchange listing requirements, then such entity will remain in the Peer Group, but RTSR for the Performance Period will be calculated as if such entity achieved Total Shareholder Return placing it at the bottom (chronologically, if more than one such entity) of the Peer Group; (ii) if, by the last day of the Performance Period, an entity listed in Annex A has been acquired and/or is no longer existing as a public company that is traded on its primary stock exchange (other than for the reasons as described in subsection (i) above), then such entity will not remain in the Peer Group and RTSR |
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for the Performance Period will be calculated as if such entity had never been a member of the Peer Group; and (iii) except as otherwise described in subsection (i) and (ii) above, for purposes of this performance goal, for each of the entities listed in Annex A, such entity shall be deemed to include any successor to all or substantially all of the primary business of such entity at end of the Performance Period.
(D) | “Relative Total Shareholder Return” or “RTSR” means the percentile rank of the Company’s Total Shareholder Return among the Total Shareholder Returns of all members of the Peer Group, ranked in descending order, at the end of the Performance Period. |
(E) | “Total Shareholder Return” means, with respect to the Common Stock and the common stock of each of the members of the Peer Group, a rate of return reflecting stock price appreciation, plus the reinvestment of dividends in additional shares of stock, from the beginning of the Performance Period through the end of the Performance Period. For purposes of calculating Total Shareholder Return for each of the Company and the members of the Peer Group, the beginning stock price will be based on the average closing stock price for the 20 trading days immediately preceding January 1, 2018 on the principal stock exchange on which the stock is then traded and the ending stock price will be based on the average closing stock price for the 20 trading days immediately preceding January 1, 2021 on the principal stock exchange on which the stock then trades. |
5. EPS CAGR Performance Matrix. From 0% to 200% of the EPS CAGR PSUs will be earned based on achievement of the EPS CAGR performance goal during the Performance Period as follows:
EPS CAGR % | EPS CAGR PSUs Earned |
4.5% | 40.0% |
5.0% | 50.0% |
5.5% | 65.0% |
6.0% | 77.5.% |
6.5% | 90.0% |
7.5% | 100.0% |
8.5% | 120.0% |
9.5% | 140.0% |
10.0% | 160.0% |
10.5% | 180.0% |
11.0% | 200.0% |
5. Number of EPS CAGR PSUs Earned. Following the Performance Period, on the Determination Date, the Committee shall determine whether and to what extent the EPS CAGR performance goal has been satisfied for the Performance Period and shall determine the number of
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EPS CAGR PSUs that shall become nonforfeitable hereunder and under the Agreement on the basis of the following:
(A) | Below Threshold. If, upon the conclusion of the Performance Period, EPS CAGR for the Performance Period falls below the lowest EPS CAGR level set forth in the Performance Matrix, no EPS CAGR PSUs shall become nonforfeitable. |
(B) | Threshold or Above. If, upon the conclusion of the Performance Period, EPS CAGR for the Performance Period is exactly equal to one of the levels set forth in the Performance Matrix, a percentage of the EPS CAGR PSUs equal to the percentage set forth opposite such level in the Performance Matrix (rounded down to the nearest whole number of PSUs) shall become nonforfeitable. If, upon the conclusion of the Performance Period, EPS CAGR for the Performance Period falls between two levels set forth in the Performance Matrix, a percentage of the EPS CAGR PSUs shall become nonforfeitable based on straight-line mathematical interpolation between the percentages applicable to such levels (rounded down to the nearest whole number of PSUs). |
6. RTSR Performance Matrix. From 0% to 200% of the RTSR PSUs will be earned based on achievement of the RTSR performance goal during the Performance Period as follows:
Performance Level | Relative Total Shareholder Return | RTSR PSUs Earned |
Threshold | Ranked below or at 25th percentile | 0% |
Above Threshold | Ranked at 35th percentile | 50% |
Target | Ranked at 50th percentile | 100% |
Intermediate | Ranked at 65th percentile | 150% |
Maximum | Ranked at or above 80th percentile | 200% |
7. Number of RTSR PSUs Earned. Following the Performance Period, on the Determination Date, the Committee shall determine whether and to what extent the RTSR performance goal has been satisfied for the Performance Period and shall determine the number of RTSR PSUs that shall become nonforfeitable hereunder and under the Agreement on the basis of the following:
(A) | Threshold. If, upon the conclusion of the Performance Period, RTSR for the Performance Period equals or falls below the “Threshold” level, as set forth in the Performance Matrix, no RTSR PSUs shall become nonforfeitable. |
(B) | Between Threshold and Above Threshold. If, upon the conclusion of the Performance Period, RTSR for the Performance Period exceeds the “Threshold” level, but is less than the “Above Threshold” level, as set forth in the Performance Matrix, a percentage between 0% and 50% (determined on the basis of straight-line mathematical interpolation) of the RTSR PSUs (rounded down to the nearest whole number of PSUs) shall become nonforfeitable. |
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(C) | Above Threshold. If, upon the conclusion of the Performance Period, RTSR for the Performance Period equals the “Above Threshold” level, as set forth in the Performance Matrix, 50% of the RTSR PSUs (rounded down to the nearest whole number of PSUs) shall become nonforfeitable. |
(D) | Between Above Threshold and Target. If, upon the conclusion of the Performance Period, RTSR for the Performance Period exceeds the “Above Threshold” level, but is less than the “Target” level, as set forth in the Performance Matrix, a percentage between 50% and 100% (determined on the basis of straight-line mathematical interpolation) of the RTSR PSUs (rounded down to the nearest whole number of PSUs) shall become nonforfeitable. |
(E) | Target. If, upon the conclusion of the Performance Period, RTSR for the Performance Period equals the “Target” level, as set forth in the Performance Matrix, 100% of the RTSR PSUs shall become nonforfeitable. |
(F) | Between Target and Intermediate. If, upon the conclusion of the Performance Period, RTSR for the Performance Period exceeds the “Target” level, but is less than the “Intermediate” level, as set forth in the Performance Matrix, a percentage between 100% and 150% (determined on the basis of straight-line mathematical interpolation) of the RTSR PSUs (rounded down to the nearest whole number of PSUs) shall become nonforfeitable. |
(G) | Intermediate. If, upon the conclusion of the Performance Period, RTSR for the Performance Period equals the “Intermediate” level, as set forth in the Performance Matrix, 150% of the RTSR PSUs shall become nonforfeitable. |
(H) | Between Intermediate and Maximum. If, upon the conclusion of the Performance Period, RTSR for the Performance Period exceeds the “Intermediate” level, but is less than the “Maximum” level, as set forth in the Performance Matrix, a percentage between 150% and 200% (determined on the basis of straight-line mathematical interpolation) of the RTSR PSUs (rounded down to the nearest whole number of PSUs) shall become nonforfeitable. |
(I) | Equals or Exceeds Maximum. If, upon the conclusion of the Performance Period, RTSR for the Performance Period equals or exceeds the “Maximum” level, as set forth in the Performance Matrix, 200% of the RTSR PSUs shall become nonforfeitable. |
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ANNEX A
S&P SmallCap 600 Industrials (End of December 2017) | ||||||
Company Name | Ticker | Company Name | Ticker | Company Name | Ticker | |
AAON, Inc. | AAON | Forward Air Corporation | FWRD | Orion Group Holdings, Inc. | ORN | |
AAR Corp. | AIR | Franklin Electric Co., Inc. | FELE | Patrick Industries, Inc. | PATK | |
ABM Industries Incorporated | ABM | FTI Consulting, Inc. | FCN | PGT Innovations, Inc. | PGTI | |
Actuant Corporation | ATU | General Cable Corporation | BGC | Powell Industries, Inc. | POWL | |
Aegion Corporation | AEGN | Gibraltar Industries, Inc. | ROCK | Proto Labs, Inc. | PRLB | |
Aerojet Rocketdyne Holdings, Inc. | AJRD | Griffon Corporation | GFF | Quanex Building Products Corporation | NX | |
AeroVironment, Inc. | AVAV | Harsco Corporation | HSC | R.R. Donnelley & Sons Company | RRD | |
Alamo Group Inc. | ALG | Hawaiian Holdings, Inc. | HA | Raven Industries, Inc. | RAVN | |
Albany International Corp. | AIN | Healthcare Services Group, Inc. | HCSG | Resources Connection, Inc. | RECN | |
Allegiant Travel Company | ALGT | Heartland Express, Inc. | HTLD | Roadrunner Transportation Systems, Inc. | RRTS | |
American Woodmark Corporation | AMWD | Heidrick & Struggles International, Inc. | HSII | Saia, Inc. | SAIA | |
Apogee Enterprises, Inc. | APOG | Hillenbrand, Inc. | HI | Simpson Manufacturing Co., Inc. | SSD | |
Applied Industrial Technologies, Inc. | AIT | Hub Group, Inc. | HUBG | SkyWest, Inc. | SKYW | |
ArcBest Corporation | ARCB | Insperity, Inc. | NSP | SPX Corporation | SPXC | |
Astec Industries, Inc. | ASTE | Insteel Industries, Inc. | IIIN | SPX FLOW, Inc. | FLOW | |
Atlas Air Worldwide Holdings, Inc. | AAWW | Interface, Inc. | TILE | Standex International Corporation | SXI | |
Axon Enterprise, Inc. | AAXN | John Bean Technologies | JBT | Team, Inc. | TISI | |
AZZ Inc. | AZZ | Kaman Corporation | KAMN | Tennant Company | TNC | |
Barnes Group Inc. | B | Kelly Services, Inc. | KELY.A | Tetra Tech, Inc. | TTEK | |
Brady Corporation | BRC | Korn/Ferry International | KFY | The Greenbrier Companies, Inc. | GBX | |
Briggs & Stratton Corporation | BGG | Lindsay Corporation | LNN | Titan International, Inc. | TWI | |
Chart Industries, Inc. | GTLS | LSC Communications, Inc. | LKSD | Trex Company, Inc. | TREX | |
CIRCOR International, Inc. | CIR | Lydall, Inc. | LDL | Triumph Group, Inc. | TGI | |
Comfort Systems USA, Inc. | FIX | Marten Transport, Ltd. | MRTN | TrueBlue, Inc. | TBI | |
Cubic Corporation | CUB | Matson, Inc. | MATX | UniFirst Corporation | UNF | |
DXP Enterprises, Inc. | DXPE | Matthews International Corp | MATW | Universal Forest Products, Inc. | UFPI | |
Echo Global Logistics, Inc. | ECHO | Mercury Systems, Inc. | MRCY | US Ecology, Inc. | ECOL | |
Encore Wire Corporation | WIRE | Mobile Mini, Inc. | MINI | Veritiv Corporation | VRTV | |
Engility Holdings, Inc. | EGL | Moog Inc. | MOG.A | Viad Corp | VVI | |
EnPro Industries, Inc. | NPO | Mueller Industries, Inc. | MLI | Vicor Corporation | VICR | |
ESCO Technologies Inc. | ESE | Multi-Color Corporation | LABL | Wabash National Corporation | WNC | |
Essendant Inc. | ESND | MYR Group Inc. | MYRG | WageWorks, Inc. | WAGE | |
Exponent, Inc. | EXPO | National Presto Industries, Inc. | NPK | Watts Water Technologies, Inc. | WTS | |
Federal Signal Corporation | FSS | Navigant Consulting, Inc. | NCI | |||
Forrester Research, Inc. | FORR | On Assignment, Inc. | ASGN | |||
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APPENDIX B
TO
PERFORMANCE STOCK UNITS AGREEMENT
GLOSSARY
For purposes of this Agreement:
“Cause” means (a) Grantee’s conviction of or plea of guilty or nolo contendere to a crime constituting a felony under the laws of the United States or any State thereof or any other jurisdiction in which the Company or its Subsidiaries conduct business; (b) Grantee’s willful misconduct in the performance of his or her duties to the Company or its Subsidiaries and failure to cure such breach within thirty (30) days following written notice thereof from the Company; (c) Grantee’s willful failure or refusal to follow directions from the Board (or direct reporting executive) and failure to cure such breach within thirty (30) days following written notice thereof from the Board; or (d) Grantee’s breach of fiduciary duty to the Company or its Subsidiaries for personal profit. Any failure by the Company or a Subsidiary of the Company to notify Grantee after the first occurrence of an event constituting Cause shall not preclude any subsequent occurrences of such event (or a similar event) from constituting Cause. Notwithstanding anything in this Agreement to the contrary, nothing in this Agreement prevents Grantee from providing, without prior notice to the Company, information to governmental authorities regarding possible legal violations or otherwise testifying or participating in any investigation or proceeding by any governmental authorities regarding possible legal violations, and for purpose of clarity Grantee is not prohibited from providing information voluntarily to the Securities and Exchange Commission pursuant to Section 21F of the Exchange Act.
“Disability” (and similar terms) means Grantee’s physical or mental condition resulting from any medically determinable physical or mental impairment that renders Grantee incapable of engaging in any substantial gainful employment and that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 365 days. Notwithstanding the foregoing, Grantee shall not be deemed to be Disabled as a result of any condition that:
(a) | was contracted, suffered, or incurred while Grantee was engaged in, or resulted from Grantee having engaged in, a felonious activity; |
(b) | resulted from an intentionally self-inflicted injury or an addiction to drugs, alcohol, or substances which are not administered under the direction of a licensed physician as part of a medical treatment plan; or |
(c) | resulted from service in the Armed Forces of the United States for which Grantee received or is receiving a disability benefit or pension from the United States, or from service in the armed forces of any other country irrespective of any disability benefit or pension. |
The Disability of Grantee and the date on which Grantee ceases to be a Service Provider by reason of Disability shall be determined by the Committee, in accordance with uniform
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principles consistently applied, on the basis of such evidence as the Committee and the Company deem necessary and desirable, and its good faith determination shall be conclusive for all purposes of the Plan. The Committee or the Company shall have the right to require Grantee to submit to an examination by a physician or physicians and to submit to such reexaminations as the Committee or the Company shall require in order to make a determination concerning Grantee’s physical or mental condition; provided, however, that Grantee may not be required to undergo a medical examination more often than once each 180 days. If Grantee engages in any occupation or employment (except for rehabilitation as determined by the Committee) for remuneration or profit, which activity would be inconsistent with the finding of Disability, or if the Committee, on the recommendation of the Company, determines on the basis of a medical examination that Grantee no longer has a Disability, or if Grantee refuses to submit to any medical examination properly requested by the Committee or the Company, then in any such event Grantee shall be deemed to have recovered from such Disability.
“Good Reason” means:
(a) | A material and permanent diminution in Grantee’s duties or responsibilities; |
(b) | A material reduction in the aggregate value of base salary and bonus opportunity provided to Grantee by the Company; or |
(c) | A permanent reassignment of Grantee to another primary office more than 50 miles from the current office location. |
Grantee must notify the Company of Grantee’s intention to invoke termination for Good Reason within 90 days after Grantee has knowledge of such event and provide the Company 30 days’ opportunity for cure, and Grantee must actually terminate Grantee’s employment with the Company prior to the 365th day following such occurrence or such event shall not constitute Good Reason. Grantee may not invoke termination for Good Reason if Cause exists at the time of such termination.
“Qualifying Termination” means a termination of Grantee’s status as a Service Provider with the Company or a Subsidiary (a) for any reason other than:
(i) death;
(ii) Disability; or
(iii) Cause; or
(b) by Grantee without Good Reason.
“Retirement” means termination of Grantee’s status as a Service Provider with the consent of the Committee after attaining age 55 and five years of service with the Company and its Subsidiaries.
“Service Provider” means an individual actively providing services to the Company or a Subsidiary.
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APPENDIX C
TO
PERFORMANCE STOCK UNIT AGREEMENT
NON-U.S. ADDENDUM
Additional Terms and Conditions for Equity Grants Under the TriMas Corporation 2017 Equity and Incentive Compensation Plan, as amended
Terms and Conditions
This Addendum includes additional terms and conditions that govern the performance-based Restricted Stock Units (“PSUs”) granted to you under the TriMas Corporation 2017 Equity and Incentive Compensation Plan (referred to as the “Plan”) if you reside in one of the countries listed below. Certain capitalized terms used but not defined in this Addendum have the meanings set forth in the Plan and/or your award agreement (the “Agreement”) that relates to your award. By accepting your award, you agree to be bound by the terms and conditions contained in the paragraphs below in addition to the terms of the Plan, the Agreement, and the terms of any other document that may apply to you and your award.
COUNTRY-SPECIFIC LANGUAGE
Below please find country specific language that applies to Grantees in the following countries: the United Kingdom.
UNITED KINGDOM
Terms and Conditions
Retirement. For purposes of the Agreement and notwithstanding the definition of “Retirement” in Appendix B hereto, “Retirement” shall mean the termination of Grantee’s services with the Company or a Subsidiary in circumstances determined by the Committee (in its reasonable discretion, provided that, for the avoidance of doubt, the Committee shall not be obliged to exercise its discretion in favor of the Grantee) to be retirement.
Dividend Equivalent Rights. Section II.A.3 of the Agreement is hereby amended in its entirety to read as follows:
“Grantee shall be notionally credited with cash per PSU equal to the amount of each cash dividend paid by the Company (if any) to holders of Common Stock generally with a record date occurring on or after the Date of Grant and prior to the time when the PSUs are earned and/or vest and are settled in accordance with Section II.A.7 hereof. Any amounts notionally credited pursuant to the immediately preceding sentence shall be subject to the same applicable terms and conditions (including earning, vesting, payment, and forfeitability) as apply to the PSUs based on which the dividend equivalents were notionally credited, and such amounts shall be paid in either cash or Common Stock, as determined by the Committee
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in its sole discretion, at the same time as the PSUs to which they relate. If such amounts are paid in Common Stock, the number of shares so paid shall be rounded down to the nearest whole number and shall be determined by dividing the amounts so notionally credited by the Market Value per Share on the payment date. Notwithstanding the foregoing provisions of this Section II.A.3, Grantee shall not be entitled to the cash notionally credited at any time to the PSUs (or the Common Stock representing the same, as the case may be) either legally or beneficially unless and until Grantee becomes entitled to receive the actual Common Stock in respect of this Award pursuant to Section II.A.7 of this Agreement.”
Non-Transferability of Award. Section II.B.1 of the Agreement is hereby amended in its entirety to read as follows:
“Except as described below, this Award and the PSUs subject to this Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and this Award shall lapse and any unvested PSUs subject to this Award shall be forfeited if a bankruptcy order is made in respect of Grantee.”
Withholding. Section II.B.2 of the Agreement is hereby amended in its entirety to read as follows:
“Grantee hereby indemnifies the Company, Grantee’s employer or any other person in respect of:
(i) | any amount of income tax for which the Company, Grantee’s employer or any other person is obliged to account under the Pay-As-You-Earn system and any amounts of employee’s national insurance contributions arising from the earning and/or vesting of this Award (or which would not otherwise have arisen but for the grant of this Award to Grantee); and |
(ii) | any amount of income tax for which the Company, Grantee’s employer or any other person is obliged to account under the Pay-As-You-Earn system and any amounts of employee’s national insurance contributions arising in respect of, or in connection with the holding or disposal by Grantee of the shares of Common Stock acquired pursuant to this Award or the conversion of such shares of Common Stock into securities of another description whilst such shares of Common Stock are held by Grantee, |
and in pursuance of such indemnity, Grantee hereby agrees that he or she shall pay to the Company (or to such other entity as directed by it) such amount as shall be notified to Grantee by the Company as being due on any occasion under such indemnity, within seven days after being so notified. To the extent that Grantee fails to pay any amount so notified to him or her by the Company within seven days after such notification, Grantee hereby agrees that the Company may withhold, or procure the withholding, from any salary, wages, payment or payments due to Grantee from
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the Company or Grantee’s employer an amount which is equal to the amount notified to Grantee, sell or procure the sale of sufficient of the shares of Common Stock acquired by Grantee pursuant to this Award on behalf of Grantee to produce a sum which after any costs of sale is sufficient to discharge the amount so notified to Grantee and retain such sum or make such other arrangements, by which Grantee hereby agrees to be bound, so as to ensure that the amount notified to Grantee is discharged in full. The Company will not be obliged to deliver any shares of Common Stock to Grantee pursuant to this Award, if Grantee fails to comply with his or her obligations under the foregoing provisions of this Section II.B.2 and Grantee shall not be entitled to receive the delivery of such shares of Common Stock.”
Clawback Policy. Section II.B.15 of the Agreement shall not apply.
Data Privacy. A new Section II.B.16 is added to the Agreement to read as follows:
The Company and Rieke Packaging Systems Limited (the “Grantee’s Employer”), (together the “Relevant TriMas Companies”) will process the Grantee’s personal data in connection with the Plan. For the purposes of data protection legislation, the Relevant TriMas Companies will each act as controller in relation to such personal data.
Categories of Personal Data
The categories of personal data that we will process in connection with the Plan are the Grantee’s:
• | name; |
• | date of birth; |
• | job title; |
• | home address (and, if different, mailing address) and postal code; |
• | telephone number; |
• | social insurance, national insurance, US taxpayer and/or foreign tax identification number; |
• | salary; |
• | country of citizenship and nationality; |
• | any Common Stock or directorships held in the any of the Relevant TriMas Companies; |
x
• | details of all awards or any other entitlement to Common Stock awarded, cancelled, exercised, vested, unvested or outstanding in Grantee’s favour; and |
• | reference number (where relevant to link the Grantee’s benefits under the Plan to other documentation issued to or from the US Department of the Treasury Internal Revenue Service). |
The processing of the personal data set out above is mandatory in order for the Relevant TriMas Companies to provide and administer the Plan.
Purposes of Processing Personal Data
The Relevant TriMas Companies will process the Grantee’s personal data for the purposes of:
• | administering and maintaining the Plan relating to the Grantee and records associated with the Plan (including maintaining a database of Participants in the Plan); |
• | providing information to (i) trustees of any employee benefit trust or (ii) the third party administrators involved directly or indirectly in the operation of the Plan (as set out in the “Sharing Personal Data with Third Parties” section below); |
• | providing information relating to Grantee in connection with the operation of the Plan to HM Revenue and Customs in the United Kingdom as required by law; |
• | to enable any potential purchasers of the business and/or assets of any of the Relevant TriMas Companies and/or their Subsidiaries to (i) complete due diligence on, and value, the business and/or assets; and (ii) use such personal data for the operation of their business; |
• | obtaining legal and other professional advice; and |
• | establishing, exercising or defending legal rights. |
Legal Basis for Processing Personal Data
The processing of the Grantee’s personal data:
• | in relation to the information provided to HM Revenue and Customs in the United Kingdom and the Department of the Treasury Internal Revenue Service in the United States of America, is necessary for compliance with a legal obligation to which the Relevant TriMas Companies are subject; |
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• | in relation to (i) obtaining legal and other professional advice; and (ii) establishing, exercising or defending legal rights, is pursuant to the Relevant TriMas Companies’ legitimate interests of commencing and/or handling any legal proceedings (including prospective legal proceedings), for obtaining legal advice or for establishing, exercising or defending legal rights; |
• | in respect of all other personal data set out above, is necessary for the performance of the Performance Stock Units Agreement between the Grantee and TriMas Corporation. |
The Relevant TriMas Companies will also process the Grantee’s personal data as necessary to comply with any legal obligations to which the Relevant TriMas Companies are subject.
Sharing Personal Data with Third Parties
The Grantee’s personal details as set out above will be transferred between the Grantee’s Employer and the Company in order to administer and maintain the Plan and records associated with the Plan.
The Company is based in the United States of America which is not designated by the European Commission as providing an adequate level of protection for personal data. As such, the Grantee’s Employer and the Company have entered into a data transfer agreement governed by standard data protection clauses adopted by the Commission to safeguard personal data in respect of these transfers. The Grantee can obtain a copy of this data transfer agreement by contacting the TriMas Corporate Benefits Group at 248-631-5450 or 38505 Woodward Avenue, Suite 200, Bloomfield Hills, Michigan 48304.
The Relevant TriMas Companies will also share the Grantee’s personal data with National Financial Services LLC, Fidelity Stock Plan Services LLC and Fidelity Brokerage Services LLC (part of the FMR LLC group of companies) which are based in the United States of America. The Company has entered into a data transfer agreement governed by standard data protection clauses adopted by the Commission to safeguard personal data in respect of these transfers. The Grantee can obtain a copy of this data transfer agreement by either, (1) contacting your local human resources representative, (2) contacting Fidelity Stock Plan Services by calling 1-800-844-9354 (Domestic) or 1-800-544-0275 (International), and (3) by logging into Grantee’s Fidelity account at www.netbenefits.fidelity.com and visiting the Plan & Grant Documents section of the Grantee’s account.
In the event that the Relevant TriMas Companies sell any part(s) of their business and/or assets, they will also disclose the Grantee’s personal data to actual or potential purchasers of parts of its business or assets, and their respective advisers and insurers for the potential purchaser’s legitimate interests of:
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• | enabling potential purchasers to complete due diligence on, and value, the business and/or assets; |
• | transferring the personal data in connection with any relevant sale and the transfer of the Relevant TriMas Company’s contractual rights and/or obligations; and |
• | the use of such personal data by a purchaser for the operation of its business. |
The Relevant TriMas Companies will also share the Grantee’s personal data with:
• | its professional advisors, auditors, service providers; |
• | HM Revenue and Customs in the United Kingdom and the Department of the Treasury Internal Revenue Service in the United States of America and other regulators, and governmental and law enforcement agencies; and |
• | third parties if it is under a duty to disclose or share the Grantee’s personal data in order to comply with any laws, regulations or good governance obligations, or in order to enforce or to protect its rights, property or safety, or that of its customers or other persons with whom it has a business relationship. |
Retention of Personal Data
The Relevant TriMas Companies will retain the Grantee’s personal data for the duration of the Plan and for a further period of eight years after the Grantee ceases to be a member of the Plan.
The Relevant TriMas Companies will retain the Grantee’s personal data for longer than the period specified above if required by law, to defend or exercise legal rights (such as defending legal claims) or to comply with regulatory obligations.
The Grantee’s Rights
In order to control the use of their personal data, each Grantee has the following controls over their personal data:
• | Each Grantee may request access to or copies of the personal data that the Relevant TriMas Companies hold about them by contacting their local human resources representative; |
• | If the Grantee believes that any information the Relevant TriMas Companies hold about them is incorrect or incomplete, the Grantee should contact their local human resources representative as soon as possible. The Relevant TriMas Companies will take steps to seek to correct or update any information if they are satisfied that the information they holds is inaccurate. In certain |
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circumstances, the Grantee may also request that the Relevant TriMas Companies restrict their processing;
• | Each grantee may request that their personal data be deleted where it is no longer necessary for the purposes for which it is being processed and provided there is no other lawful basis for which the Relevant TriMas Companies may continue to process such personal data. The Grantee can exercise this right by contacting their local human resources representative; |
• | If the Relevant TriMas Companies are processing the Grantee’s personal data to meet their legitimate interests (as set out above), the Grantee may object to the processing of their personal information by the Relevant TriMas Companies. If the Relevant TriMas Companies are unable to demonstrate their legitimate grounds for that processing, they will no longer process the Grantee’s personal information for those purposes; |
• | Where the Grantee has provided the Relevant TriMas Companies with their personal data that the Relevant TriMas Companies process using automated means, the Grantee may be entitled to a copy of that personal data in a structured, commonly-used and machine readable format. The Grantee can exercise this right by contacting their local human resources representative. |
The Grantee should contact their local human resources representative in relation to any concerns about how their personal data is processed and the Relevant TriMas Companies will try to resolve the Grantee’s concerns. However, if the Grantee considers that the Relevant TriMas Companies is in breach of its obligations under data protection laws, the Grantee may lodge a complaint with the Information Commissioner’s Office in the United Kingdom (such as by accessing https://ico.org.uk/concerns/).”
Loss of Office or Employment. A new Section II.B.17 is added to the Agreement to read as follows:
“In no circumstances shall Grantee, on ceasing to hold the office or employment by virtue of which he has been granted this Award, be entitled to any compensation for any loss of any right or benefit or prospective right or benefit under this Award or the Plan which he might otherwise have enjoyed whether such compensation is claimed by way of damages for wrongful dismissal or other breach of contract or by way of compensation for loss of office or otherwise.”
Notifications
There are no country-specific notifications.
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Exhibit 10.2
Restricted Stock Units Award
Three-Year Vest
TRIMAS CORPORATION
2017 EQUITY AND INCENTIVE COMPENSATION PLAN
RESTRICTED STOCK UNITS AGREEMENT
TriMas Corporation (the “Company”), as permitted by the TriMas Corporation 2017 Equity and Incentive Compensation Plan (“Plan”), and as approved by the Committee, has granted to the individual listed below (“Grantee”), a Restricted Stock Units award (“Award”) for the number of Restricted Stock Units set forth below (“Restricted Stock Units”), subject to the terms and conditions of the Plan and this Restricted Stock Units Agreement (“Agreement”).
Unless otherwise defined in this Agreement or in Appendix A to this Agreement, the terms used in this Agreement have the same meanings as defined in the Plan.
I. NOTICE OF AWARD
Grantee: | [specify Grantee’s name] |
Date of Agreement: | As of [enter date] |
Date of Grant: | [grant date] |
Number of Restricted Stock Units: | [number of Restricted Stock Units] |
II. AGREEMENT
A. Grant of Restricted Stock Units. The Company has granted to Grantee (who, pursuant to this Award is a Participant in the Plan) the number of Restricted Stock Units set forth above, subject to adjustment as provided in this Agreement. The Restricted Stock Units granted under this Agreement are payable only in shares of Common Stock as described in Section II.A.2. Notwithstanding anything to the contrary anywhere else in this Agreement, the Restricted Stock Units evidenced by this Award are subject to the terms and provisions of the Plan, which are incorporated by reference into this Agreement.
1. Vesting.
(a)General. Subject to Section II.A.1(b), the Restricted Stock Units will vest in three substantially equal installments on the first three anniversaries of the Date of Grant (each, a “Vesting Date”), subject generally to Grantee’s continued status as a Service Provider through each such Vesting Date.
(b)Termination of Service; Forfeiture. Notwithstanding any other provision of this Agreement:
(i) Voluntary Termination; Termination for Cause. Any unvested Restricted Stock Units subject to this Award will be canceled and forfeited if Grantee voluntarily terminates as a Service Provider (other than for Good Reason as provided below), or if Grantee’s status as a Service Provider is involuntarily terminated by the Company or a Subsidiary for Cause. Notwithstanding the foregoing, no termination of Grantee’s employment shall qualify as a termination for Cause unless (x) the Company notifies Grantee in writing of the Company’s intention to terminate Grantee’s employment for Cause within 90 days following the initial existence of the occurrence or event giving rise to Cause, (y) Grantee fails to cure such occurrence or event within 30 days after receipt of such notice from the Company and (z) the Company terminates Grantee’s employment within 45 days after the expiration of Grantee’s cure period in subsection (y).
(ii) Death; Disability. If Grantee ceases to be a Service Provider prior to any Vesting Date as a result of Grantee’s death or Disability, Grantee shall fully vest in the Restricted Stock Units subject to this Award that have not already vested as of the date on which Grantee ceases to be a Service Provider due to Grantee’s death or Disability.
(iii) Qualifying Termination Prior to a Change in Control. If Grantee has a Qualifying Termination that occurs prior to (or more than two years after) a Change in Control and before the final Vesting Date, Grantee shall vest in a pro-rata portion of Grantee’s unvested Restricted Stock Units, with the pro-rata amount calculated by (x) multiplying the total number of Restricted Stock Units subject to this Award by a fraction with (i) a numerator equaling the number of whole calendar months that have elapsed from the Date of Grant to the date of Grantee’s Qualifying Termination, and (ii) a denominator equal to 36, and then (y) subtracting the number of Restricted Stock Units that have already vested under this Award.
(iv) Retirement. If Grantee ceases to be a Service Provider as a result of Grantee’s Retirement, the Committee may, in its discretion, permit Grantee to receive a pro-rata portion of the Restricted Stock Units, with the pro-rata portion determined in accordance with Section II.A.1(b)(iii).
(v) Change in Control. In the event of a Change in Control that occurs prior to the vesting of any portion of the Restricted Stock Units subject to this Award, such unvested Restricted Stock Units shall vest in accordance with this Section II.A.1(b)(v).
(A) Notwithstanding anything to the contrary herein, if at any time before the vesting or forfeiture of Restricted Stock Units subject to this Award, and while Grantee is continuously a Service Provider, a Change in Control occurs, then the Restricted Stock Units will become
2
nonforfeitable and payable to Grantee in accordance with Section II.A.2 hereof, except to the extent that a Replacement Award is provided to Grantee in accordance with Section II.A.1(b)(v)(B) to continue, replace or assume the Restricted Stock Units covered by this Award (the “Replaced Award”).
(B) For purposes of this Agreement, a “Replacement Award” means an award (1) of the same type (e.g., time-based restricted stock units) as the Replaced Award, (2) that has a value at least equal to the value of the Replaced Award, (3) that relates to publicly traded equity securities of the Company or its successor in the Change in Control or another entity that is affiliated with the Company or its successor following the Change in Control, (3) if Grantee holding the Replaced Award is subject to U.S. federal income tax under the Code, the tax consequences of which to such Grantee under the Code are not less favorable to such Grantee than the tax consequences of the Replaced Award, and (E) the other terms and conditions of which are not less favorable to Grantee holding the Replaced Award than the terms and conditions of the Replaced Award (including the provisions that would apply in the event of a subsequent Change in Control). A Replacement Award may be granted only to the extent it does not result in the Replaced Award or Replacement Award failing to comply with or be exempt from Section 409A of the Code. Without limiting the generality of the foregoing, the Replacement Award may take the form of a continuation of the Replaced Award if the requirements of the two preceding sentences are satisfied. The determination of whether the conditions of this Section II.A.1(b)(v)(B) are satisfied will be made by the Committee, as constituted immediately before the Change in Control, in its sole discretion.
(C) If, after receiving a Replacement Award, Grantee experiences a Qualifying Termination with the Company or a Subsidiary (or any of their successors) (as applicable, the “Successor”) within a period of two years after the Change in Control and during the remaining vesting period for the Replacement Award, the Replacement Award shall become fully vested and nonforfeitable with respect to the time-based restricted stock units covered by such Replacement Award upon such termination.
(D) If a Replacement Award is provided, notwithstanding anything in this Agreement to the contrary, any outstanding Restricted Stock Units subject to this Award that at the time of the Change in Control are not subject to a “substantial risk of forfeiture” (within the meaning of Section 409A of the Code) will be deemed to be vested and nonforfeitable at the time of such Change in Control.
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Any Restricted Stock Units that do not vest in accordance with Section II.A.1(a) or this Section II.A.1(b) shall be canceled and forfeited as of the date Grantee ceases to be a Service Provider. However, in particular, this Award is subject to Section 18(c) of the Plan.
2. Settlement.
(a) General. Subject to Section II.A.2(b) below, and as soon as administratively practicable following (but no later than thirty (30) days following) each applicable Vesting Date, the Company shall issue Grantee one share of Common Stock for each Restricted Stock Unit that is vested (but has not previously been settled) on such Vesting Date.
(b) Other Payment Events. Notwithstanding Section II.A.2(a), to the extent that the Restricted Stock Units are vested on the dates set forth below, payment with respect to the Restricted Stock Units will be made as follows:
(1) to the extent the Restricted Stock Units are vested as a result of Section II.A.1(b) (and have not previously been settled) on the date of Grantee’s separation from service (within the meaning of Section 409A(a)(2)(A)(i) of the Code), the Company shall issue Grantee one share of Common Stock for each vested Restricted Stock Unit as soon as practicable following (but no later than thirty (30) days following) the date of such separation from service; and
(2) to the extent the Restricted Stock Units are vested as a result of Section II.A.1(b) (and have not previously been settled) on the date of a Change in Control, the Company shall issue Grantee one share of Common Stock for each vested Restricted Stock Unit as soon as practicable following (but no later than thirty (30) days following) the date of the Change in Control; provided, however, that if such Change in Control would not qualify as a permissible date of distribution under Section 409A(a)(2)(A) of the Code, and the regulations thereunder, and where Section 409A of the Code applies to such distribution, Grantee is entitled to receive the corresponding payment on the date that would have otherwise applied pursuant to Sections II.A.2(a) or II.A.2(b)(1) as though such Change in Control had not occurred.
3. Dividend Equivalent Rights. Grantee shall be credited with cash per Restricted Stock Unit equal to the amount of each cash dividend paid by the Company (if any) to holders of Common Stock generally with a record date occurring on or after the Date of Grant and prior to the time when the Restricted Stock Units are settled in accordance with Section II.A.2 hereof. Any amounts credited pursuant to the immediately preceding sentence shall be subject to the same applicable terms and conditions (including vesting, payment or forfeitability) as apply to the Restricted Stock Units based on which the dividend equivalents were credited, and such amounts shall be paid in either cash or Common Stock, as determined by the Committee in its sole discretion, at the same time as the Restricted Stock Units to which they relate. If such amounts are paid in Common Stock, the number of shares so paid shall be rounded down to the nearest whole number and shall be determined by dividing such credited amounts by the Market Value per Share on the payment date.
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4. Rights as a Shareholder. Grantee will not have any rights of a stockholder (including voting and dividend rights) with respect to the Restricted Stock Units covered by this Award (except as otherwise provided in Section II.A.3).
5. Adjustments. The Restricted Stock Units covered by this Award will be subject to adjustment as provided in Section 11 of the Plan.
B. Other Terms and Conditions.
1. Non-Transferability of Award. Except as described below, this Award and the Restricted Stock Units subject to this Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution. The terms of this Award are binding on the executors, administrators, heirs, successors and assigns of Grantee.
2. Withholding. To the extent that the Company is required to withhold federal, state, local or foreign taxes or other amounts in connection with any payment made or benefit realized by Grantee under this Agreement, and the amounts available to the Company for such withholding are insufficient, it shall be a condition to the receipt of such payment or the realization of such benefit that Grantee make arrangements satisfactory to the Company for payment of the balance of such taxes or other amounts required to be withheld. If Grantee’s benefit is to be received in the form of shares of Common Stock, then (a) if Grantee is subject to Section 16 of the Exchange Act, Grantee may elect that (1) the Company will withhold shares of Common Stock having a value equal to the amount required to be withheld or (2) Grantee will pay to the Company an amount in cash equal to the amount required to be withheld, and (b) if Grantee is not subject to Section 16 of the Exchange Act, Grantee may elect that all or any part of such withholding requirement be satisfied by the retention by the Company a portion of the Common Stock to be delivered to Grantee, by delivering to the Company other Common Stock held by Grantee, or by tendering sufficient funds in cash or cash equivalent to the Company. The shares of Common Stock used for tax or other withholding will be valued at an amount equal to the fair market value of such shares of Common Stock on the date the benefit is to be included in Grantee’s income. In no event will the fair market value of the shares of Common Stock to be withheld or delivered pursuant to this Section II.B.2 to satisfy applicable withholding taxes or other amounts in connection with the benefit exceed (x) the maximum amount that could be required to be withheld or (y) if so determined by the Committee after the date hereof, the minimum amount required to be withheld.
3. Dispute Resolution. Grantee and the Company agree that any disagreement, dispute, controversy, or claim arising out of or relating to this Agreement, its interpretation, validity, or the alleged breach of this Agreement, will be settled exclusively and, consistent with the procedures specified in this Section II.B.3, irrespective of its magnitude, the amount in controversy, or the nature of the relief sought, in accordance with the following:
(a) Negotiation. Grantee and the Company will use their best efforts to settle the dispute, claim, question or disagreement. To this effect, they will consult and negotiate with each other in good faith and, recognizing their mutual interests, attempt to reach a just and equitable solution satisfactory to both parties.
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(b) Arbitration. If Grantee and the Company do not reach a solution within a period of 30 days from the date on which the dispute, claim, disagreement, or controversy arises, then, upon written notice by Grantee to the Company or the Company to Grantee, all disputes, claims, questions, controversies, or differences will be submitted to arbitration administered by the American Arbitration Association (the “AAA”) in accordance with the provisions of its Employment Arbitration Rules and Mediation Procedures (the “Arbitration Rules”).
(1) Arbitrator. The arbitration will be conducted by one arbitrator skilled in the arbitration of executive employment matters. The parties to the arbitration will jointly appoint the arbitrator within 30 days after initiation of the arbitration. If the parties fail to appoint an arbitrator as provided above, an arbitrator with substantial experience in executive employment matters will be appointed by the AAA as provided in the Arbitration Rules. The Company will pay all of the reasonable fees, if any, and expenses of the arbitrator and the arbitration, unless otherwise determined by the arbitrator. Each party to the arbitration will be responsible for his/its respective attorneys fees or other costs of representation.
(2) Location. The arbitration will be conducted in Oakland County, Michigan.
(3) Procedure. At any oral hearing of evidence in connection with the arbitration, each party or its legal counsel will have the right to examine its witnesses and cross-examine the witnesses of any opposing party. No evidence of any witness may be presented in any form unless the opposing party or parties has the opportunity to cross-examine the witness, except under extraordinary circumstances in which the arbitrator determines that the interests of justice require a different procedure.
(4) Decision. Any decision or award of the arbitrator is final and binding on the parties to the arbitration proceeding. The parties agree that the arbitration award may be enforced against the parties to the arbitration proceeding or their assets wherever they may be found and that a judgment upon the arbitration award may be entered in any court having jurisdiction.
(5) Power. Nothing contained in this Agreement may be deemed to give the arbitrator any authority, power, or right to alter, change, amend, modify, add to, or subtract from any of the provisions of this Agreement.
The provisions of this Section II.B.3 survive the termination or expiration of this Agreement, are binding on the Company’s and Grantee’s respective successors, heirs, personal representatives, designated beneficiaries and any other person asserting a claim described above, and may not be modified without the consent of the Company. To the extent arbitration is required, no person asserting a claim has the right to resort to any federal, state or local court or administrative agency concerning the claim unless expressly provided by federal statute, and the decision of the arbitrator is a complete defense to any action or proceeding instituted in any tribunal or agency with respect to any dispute, unless precluded by federal statute.
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4. Section 409A of the Code. To the extent applicable, it is intended that this Agreement and the Plan comply with or be exempt from the provisions of Section 409A of the Code. This Agreement and the Plan shall be administered in a manner consistent with this intent, and any provision that would cause this Agreement or the Plan to fail to satisfy Section 409A of the Code shall have no force or effect until amended to comply with or be exempt from Section 409A of the Code (which amendment may be retroactive to the extent permitted by Section 409A of the Code and may be made by the Company without the consent of Grantee).
5. No Continued Right as Service Provider. Nothing in the Plan or in this Agreement confers on Grantee any right to continue as a Service Provider, or interferes with or restricts in any way the rights of the Company or any Subsidiary or Affiliate of the Company, which are hereby expressly reserved, to discharge Grantee at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written employment agreement between Grantee and the Company or any Subsidiary.
6. Effect on Other Benefits. In no event will the value, at any time, of the Restricted Stock Units or any other payment or right to payment under this Agreement be included as compensation or earnings for purposes of any other compensation, retirement, or benefit plan offered to employees of, or other Service Providers to, the Company or any Subsidiary unless otherwise specifically provided for in such plan.
7. Severability. If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid or unenforceable, the remainder of this Agreement and the application of such provision to any other person or circumstances shall not be affected, and the provisions so held to be invalid or unenforceable shall be reformed to the extent (and only to the extent) necessary to make it enforceable and valid.
8. Electronic Delivery. The Company may, in its sole discretion, deliver any documents related to the Restricted Stock Units and Grantee’s participation in the Plan, or future awards that may be granted under the Plan, by electronic means or request Grantee’s consent to participate in the Plan by electronic means. Grantee hereby consents to receive such documents by electronic delivery and, if requested, agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
9. Nature of Grant. In accepting this Award, Grantee acknowledges that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time unless otherwise provided in the Plan or this Agreement;
(b) the grant of the Restricted Stock Units is voluntary and occasional and does not create any contractual or other right to receive future grants of restricted stock units, or benefits in lieu of restricted stock units, even if restricted stock units have been granted repeatedly in the past;
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(c) all decisions with respect to future restricted stock unit grants, if any, will be at the sole discretion of the Committee;
(d) Grantee is voluntarily participating in the Plan;
(e) the Restricted Stock Units and the Common Stock subject to the Restricted Stock Units are an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or Grantee’s employer, and which is outside the scope of Grantee’s employment contract, if any;
(f) the Restricted Stock Units and the Common Stock subject to the Restricted Stock Units are not intended to replace any pension rights or compensation;
(g) the future value of the underlying Common Stock is unknown and cannot be predicted with certainty;
(h) Awards and resulting benefits are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments insofar as permitted by law;
(i) in consideration of the grant of the Restricted Stock Units, no claim or entitlement to compensation or damages shall arise from forfeiture of the Restricted Stock Units resulting from termination of Grantee’s employment with the Company or Grantee’s employer (for any reason whatsoever and whether or not in breach of local labor laws) and Grantee irrevocably releases the Company and Grantee’s employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, Grantee shall be deemed irrevocably to have waived any entitlement to pursue such claim; and
(j) in the event Grantee ceases to be a Service Provider (whether or not in breach of local labor laws), Grantee’s right to vest in the Restricted Stock Units under the Plan, if any, will terminate effective as of the date that Grantee is no longer a Service Provider and will not be extended by any notice period mandated under local law (e.g., active service would not include a period of “garden leave” or similar period pursuant to local law); the Committee shall have the exclusive discretion to determine when Grantee is no longer a Service Provider for purposes of the Restricted Stock Units.
10. Non-U.S. Addendum. Notwithstanding any provisions in this Agreement, the Restricted Stock Units shall also be subject to the special terms and conditions set forth in the Non-U.S. Addendum attached as Appendix B to this Agreement for Grantee’s country. Moreover, if Grantee relocates to one of the countries included in the Non-U.S. Addendum, the special terms and conditions for such country will apply to Grantee to the extent the Company determines that the application of such terms and conditions are necessary or advisable in order to comply with
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local law or facilitate the administration of the Plan. The Non-U.S. Addendum attached hereto as Appendix B constitutes part of this Agreement.
11. Amendments. Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that (a) no amendment shall materially adversely affect the rights of Grantee under this Agreement without Grantee’s written consent, and (b) Grantee’s consent shall not be required to an amendment that is deemed necessary by the Company to ensure compliance with Section 409A of the Code or Section 10D of the Exchange Act.
12. Relation to Plan. This Agreement is subject to the terms and conditions of the Plan. In the event of any inconsistency between the provisions of this Agreement and the Plan, the Plan shall govern. The Committee acting pursuant to the Plan, as constituted from time to time, shall, except as expressly provided otherwise herein or in the Plan, have the right to determine any questions which arise in connection with this Agreement.
13 Governing Law. This Agreement is governed by and construed in accordance with the laws of the State of Delaware, notwithstanding conflict of law provisions.
14. Clawback Policy. Any shares of Common Stock issued to Grantee in settlement of the Restricted Stock Units (plus dividend equivalent payments) shall be subject to the Company’s recoupment policy, if any, as in effect from time to time. Further, notwithstanding anything in this Agreement to the contrary, Grantee acknowledges and agrees that (a) this Agreement and this Award described herein (and any settlement thereof) are subject to the terms and conditions of such policy, or any other form of Company recoupment (or similar) policy (if any) as may be in effect from time to time specifically to implement Section 10D of the Exchange Act and any applicable rules or regulations promulgated thereunder (including applicable rules and regulations of any national securities exchange on which the Common Stock may be traded) (the “Compensation Recovery Policy”), and (b) applicable provisions of this Agreement shall be deemed superseded by and subject to the terms and conditions of the Compensation Recovery Policy from and after the effective date thereof.
(Signature Page Follows)
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This Agreement may be executed in two or more counterparts, each of which is deemed an original and all of which constitute one document.
TRIMAS CORPORATION
Dated as of: [grant date] | By: /s/ Joshua A. Sherbin Name: Joshua A. Sherbin Title: Senior Vice President and General Counsel |
GRANTEE ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE PLAN, CONFERS ON GRANTEE ANY RIGHT WITH RESPECT TO CONTINUATION AS A SERVICE PROVIDER OF THE COMPANY OR ANY PARENT OR SUBSIDIARY, NOR INTERFERES IN ANY WAY WITH GRANTEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE GRANTEE’S SERVICE PROVIDER RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE AND WITH OR WITHOUT PRIOR NOTICE.
BY CLICKING THE “ACCEPT” BUTTON BELOW, GRANTEE ACKNOWLEDGES RECEIPT OF A COPY OF THE PLAN AND REPRESENTS THAT GRANTEE IS FAMILIAR WITH THE TERMS AND PROVISIONS OF THE PLAN. GRANTEE ACCEPTS THIS AWARD SUBJECT TO ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT AND THE PLAN. GRANTEE HAS REVIEWED THE PLAN AND THIS AGREEMENT IN THEIR ENTIRETY. GRANTEE AGREES TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL ALL DECISIONS OR INTERPRETATIONS OF THE COMMITTEE UPON ANY QUESTIONS ARISING UNDER THE PLAN OR THIS AWARD.
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APPENDIX A
TO
RESTRICTED STOCK UNITS AGREEMENT
GLOSSARY
For purposes of this Agreement:
“Cause” means (a) Grantee’s conviction of or plea of guilty or nolo contendere to a crime constituting a felony under the laws of the United States or any State thereof or any other jurisdiction in which the Company or its Subsidiaries conduct business; (b) Grantee’s willful misconduct in the performance of his or her duties to the Company or its Subsidiaries and failure to cure such breach within thirty (30) days following written notice thereof from the Company; (c) Grantee’s willful failure or refusal to follow directions from the Board (or direct reporting executive) and failure to cure such breach within thirty (30) days following written notice thereof from the Board; or (d) Grantee’s breach of fiduciary duty to the Company or its Subsidiaries for personal profit. Any failure by the Company or a Subsidiary of the Company to notify Grantee after the first occurrence of an event constituting Cause shall not preclude any subsequent occurrences of such event (or a similar event) from constituting Cause. Notwithstanding anything in this Agreement to the contrary, nothing in this Agreement prevents Grantee from providing, without prior notice to the Company, information to governmental authorities regarding possible legal violations or otherwise testifying or participating in any investigation or proceeding by any governmental authorities regarding possible legal violations, and for purpose of clarity Grantee is not prohibited from providing information voluntarily to the Securities and Exchange Commission pursuant to Section 21F of the Exchange Act.
“Disability” (and similar terms) means Grantee’s physical or mental condition resulting from any medically determinable physical or mental impairment that renders Grantee incapable of engaging in any substantial gainful employment and that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 365 days. Notwithstanding the foregoing, Grantee shall not be deemed to be Disabled as a result of any condition that:
(a) | was contracted, suffered, or incurred while Grantee was engaged in, or resulted from Grantee having engaged in, a felonious activity; |
(b) | resulted from an intentionally self-inflicted injury or an addiction to drugs, alcohol, or substances which are not administered under the direction of a licensed physician as part of a medical treatment plan; or |
(c) | resulted from service in the Armed Forces of the United States for which Grantee received or is receiving a disability benefit or pension from the United States, or from service in the armed forces of any other country irrespective of any disability benefit or pension. |
The Disability of Grantee and the date on which Grantee ceases to be a Service Provider by reason of Disability shall be determined by the Committee, in accordance with uniform principles consistently applied, on the basis of such evidence as the Committee and the Company deem necessary and desirable, and its good faith determination shall be conclusive for all purposes of the Plan. The Committee or the Company shall have the right to require Grantee to submit to an examination by a physician or physicians and to submit to such reexaminations as the Committee or the Company shall require in order to make a determination concerning Grantee’s physical or mental condition; provided, however, that Grantee may not be required to undergo a medical examination more often than once each 180 days. If Grantee engages in any occupation or employment (except for rehabilitation as determined by the Committee) for remuneration or profit, which activity would be inconsistent with the finding of Disability, or if the Committee, on the recommendation of the Company, determines on the basis of a medical examination that Grantee no longer has a Disability, or if Grantee refuses to submit to any medical examination properly requested by the Committee or the Company, then in any such event Grantee shall be deemed to have recovered from such Disability.
“Good Reason” means:
(a) | A material and permanent diminution in Grantee’s duties or responsibilities; |
(b) | A material reduction in the aggregate value of base salary and bonus opportunity provided to Grantee by the Company; or |
(c) | A permanent reassignment of Grantee to another primary office more than 50 miles from the current office location. |
Grantee must notify the Company of Grantee’s intention to invoke termination for Good Reason within 90 days after Grantee has knowledge of such event and provide the Company 30 days’ opportunity for cure, and Grantee must actually terminate Grantee’s employment with the Company prior to the 365th day following such occurrence or such event shall not constitute Good Reason. Grantee may not invoke termination for Good Reason if Cause exists at the time of such termination.
“Qualifying Termination” means a termination of Grantee’s status as a Service Provider with the Company or a Subsidiary (a) for any reason other than:
(i) death;
(ii) Disability; or
(iii) Cause; or
(b) by Grantee without Good Reason.
“Retirement” means termination of Grantee’s status as a Service Provider with the consent of the Committee after attaining age 55 and five years of service with the Company and its Subsidiaries.
“Service Provider” means an individual actively providing services to the Company or a Subsidiary.
APPENDIX B
TO
RESTRICTED STOCK UNITS AGREEMENT
NON-U.S. ADDENDUM
Additional Terms and Conditions for Equity Grants Under the TriMas Corporation 2017 Equity and Incentive Compensation Plan, as amended
Terms and Conditions
This Addendum includes additional terms and conditions that govern the restricted stock units (“RSUs”) granted to you under the TriMas Corporation 2017 Equity and Incentive Compensation Plan (referred to as the “Plan”) if you reside in one of the countries listed below. Certain capitalized terms used but not defined in this Addendum have the meanings set forth in the Plan and/or your award agreement (the “Agreement”) that relates to your award. By accepting your award, you agree to be bound by the terms and conditions contained in the paragraphs below in addition to the terms of the Plan, the Agreement, and the terms of any other document that may apply to you and your award.
COUNTRY-SPECIFIC LANGUAGE
Below please find country specific language that applies to Participants in the following countries: the United Kingdom.
UNITED KINGDOM
Terms and Conditions
Retirement. For purposes of the Agreement and notwithstanding the definition of “Retirement” in Appendix A hereto, “Retirement” shall mean the termination of Grantee’s services with the Company or a Subsidiary in circumstances determined by the Committee (in its reasonable discretion, provided that, for the avoidance of doubt, the Committee shall not be obliged to exercise its discretion in favor of the Grantee) to be retirement.
Dividend Equivalent Rights. Section II.A.3 of the Agreement is hereby amended in its entirety to read as follows:
“Grantee shall be notionally credited with cash per Restricted Stock Unit equal to the amount of each cash dividend paid by the Company (if any) to holders of Common Stock generally with a record date occurring on or after the Date of Grant and prior to the time when the Restricted Stock Units are settled in accordance with Section II.A.2 hereof. Any amounts notionally credited pursuant to the immediately preceding sentence shall be subject to the same applicable terms and conditions (including vesting, payment or forfeitability) as apply to the Restricted Stock Units based on which the dividend equivalents were notionally
credited, and such amounts shall be paid in either cash or Common Stock, as determined by the Committee in its sole discretion, at the same time as the Restricted Stock Units to which they relate. If such amounts are paid in Common Stock, the number of shares so paid shall be rounded down to the nearest whole number and shall be determined by dividing the amounts so notionally credited by the Market Value per Share on the payment date. Notwithstanding the foregoing provisions of this Section II.A.3, Grantee shall not be entitled to the cash notionally credited at any time to the Restricted Stock Units (or the Common Stock representing the same, as the case may be) either legally or beneficially unless and until Grantee becomes entitled to receive the actual Common Stock in respect of this Award pursuant to Section II.A.2 of this Agreement.”
Non-Transferability of Award. Section II.B.1 of the Agreement is hereby amended in its entirety to read as follows:
“Except as described below, this Award and the Restricted Stock Units subject to this Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and this Award shall lapse and any unvested Restricted Stock Units subject to this Award shall be forfeited if a bankruptcy order is made in respect of Grantee.”
Withholding. Section II.B.2 of the Agreement is hereby amended in its entirety to read as follows:
“Grantee hereby indemnifies the Company, Grantee’s employer or any other person in respect of:
(i) | any amount of income tax for which the Company, Grantee’s employer or any other person is obliged to account under the Pay-As-You-Earn system and any amounts of employee’s national insurance contributions arising from the vesting of this Award (or which would not otherwise have arisen but for the grant of this Award to Grantee); and |
(ii) | any amount of income tax for which the Company, Grantee’s employer or any other person is obliged to account under the Pay-As-You-Earn system and any amounts of employee’s national insurance contributions arising in respect of, or in connection with the holding or disposal by Grantee of the shares of Common Stock acquired pursuant to this Award or the conversion of such shares of Common Stock into securities of another description whilst such shares of Common Stock are held by Grantee, |
and in pursuance of such indemnity, Grantee hereby agrees that he or she shall pay to the Company (or to such other entity as directed by it) such amount as shall be notified to Grantee by the Company as being due on any occasion under such indemnity, within seven days after being so notified. To the extent that Grantee fails
to pay any amount so notified to him or by the Company within seven days after such notification, Grantee hereby agrees that the Company may withhold, or procure the withholding, from any salary, wages, payment or payments due to Grantee from the Company or Grantee’s employer an amount which is equal to the amount notified to Grantee, sell or procure the sale of sufficient of the shares of Common Stock acquired by Grantee pursuant to this Award on behalf of Grantee to produce a sum which after any costs of sale is sufficient to discharge the amount so notified to Grantee and retain such sum or make such other arrangements, by which Grantee hereby agrees to be bound, so as to ensure that the amount notified to Grantee is discharged in full. The Company will not be obliged to deliver any shares of Common Stock to Grantee pursuant to this Award if Grantee fails to comply with his or her obligations under the foregoing provisions of this Section II.B.2 and Grantee shall not be entitled to receive the delivery of such shares of Common Stock.”
Clawback Policy. Section II.B.14 of the Agreement shall not apply.
Data Privacy. A new Section II.B.15 is added to the Agreement to read as follows:
The Company and Rieke Packaging Systems Limited (the “Grantee’s Employer”), (together the “Relevant TriMas Companies”) will process the Grantee’s personal data in connection with the Plan. For the purposes of data protection legislation, the Relevant TriMas Companies will each act as controller in relation to such personal data.
Categories of Personal Data
The categories of personal data that we will process in connection with the Plan are the Grantee’s:
• | name; |
• | date of birth; |
• | job title; |
• | home address (and, if different, mailing address) and postal code; |
• | telephone number; |
• | social insurance, national insurance, US taxpayer and/or foreign tax identification number; |
• | salary; |
• | country of citizenship and nationality; |
• | any Common Stock or directorships held in the any of the Relevant TriMas Companies; |
• | details of all awards or any other entitlement to Common Stock awarded, cancelled, exercised, vested, unvested or outstanding in Grantee’s favour; and |
• | reference number (where relevant to link the Grantee’s benefits under the Plan to other documentation issued to or from the US Department of the Treasury Internal Revenue Service). |
The processing of the personal data set out above is mandatory in order for the Relevant TriMas Companies to provide and administer the Plan.
Purposes of Processing Personal Data
The Relevant TriMas Companies will process the Grantee’s personal data for the purposes of:
• | administering and maintaining the Plan relating to the Grantee and records associated with the Plan (including maintaining a database of Participants in the Plan); |
• | providing information to (i) trustees of any employee benefit trust or (ii) the third party administrators involved directly or indirectly in the operation of the Plan (as set out in the “Sharing Personal Data with Third Parties” section below); |
• | providing information relating to Grantee in connection with the operation of the Plan to HM Revenue and Customs in the United Kingdom as required by law; |
• | to enable any potential purchasers of the business and/or assets of any of the Relevant TriMas Companies and/or their Subsidiaries to (i) complete due diligence on, and value, the business and/or assets; and (ii) use such personal data for the operation of their business; |
• | obtaining legal and other professional advice; and |
• | establishing, exercising or defending legal rights. |
Legal Basis for Processing Personal Data
The processing of the Grantee’s personal data:
• | in relation to the information provided to HM Revenue and Customs in the United Kingdom and the Department of the Treasury Internal Revenue |
Service in the United States of America, is necessary for compliance with a legal obligation to which the Relevant TriMas Companies are subject;
• | in relation to (i) obtaining legal and other professional advice; and (ii) establishing, exercising or defending legal rights, is pursuant to the Relevant TriMas Companies’ legitimate interests of commencing and/or handling any legal proceedings (including prospective legal proceedings), for obtaining legal advice or for establishing, exercising or defending legal rights; |
• | in respect of all other personal data set out above, is necessary for the performance of the Restricted Stock Units Agreement between the Grantee and TriMas Corporation. |
The Relevant TriMas Companies will also process the Grantee’s personal data as necessary to comply with any legal obligations to which the Relevant TriMas Companies are subject.
Sharing Personal Data with Third Parties
The Grantee’s personal details as set out above will be transferred between the Grantee’s Employer and the Company in order to administer and maintain the Plan and records associated with the Plan.
The Company is based in the United States of America which is not designated by the European Commission as providing an adequate level of protection for personal data. As such, the Grantee’s Employer and the Company have entered into a data transfer agreement governed by standard data protection clauses adopted by the Commission to safeguard personal data in respect of these transfers. The Grantee can obtain a copy of this data transfer agreement by contacting the TriMas Corporate Benefits Group at 248-631-5450 or 38505 Woodward Avenue, Suite 200, Bloomfield Hills, Michigan 48304.
The Relevant TriMas Companies will also share the Grantee’s personal data with National Financial Services LLC, Fidelity Stock Plan Services LLC and Fidelity Brokerage Services LLC (part of the FMR LLC group of companies) which are based in the United States of America. The Company has entered into a data transfer agreement governed by standard data protection clauses adopted by the Commission to safeguard personal data in respect of these transfers. The Grantee can obtain a copy of this data transfer agreement by either, (1) contacting your local human resources representative, (2) contacting Fidelity Stock Plan Services by calling 1-800-844-9354 (Domestic) or 1-800-544-0275 (International), and (3) by logging into Grantee’s Fidelity account at www.netbenefits.fidelity.com and visiting the Plan & Grant Documents section of the Grantee’s account.
In the event that the Relevant TriMas Companies sell any part(s) of their business and/or assets, they will also disclose the Grantee’s personal data to actual or potential
purchasers of parts of its business or assets, and their respective advisers and insurers for the potential purchaser’s legitimate interests of:
• | enabling potential purchasers to complete due diligence on, and value, the business and/or assets; |
• | transferring the personal data in connection with any relevant sale and the transfer of the Relevant TriMas Company’s contractual rights and/or obligations; and |
• | the use of such personal data by a purchaser for the operation of its business. |
The Relevant TriMas Companies will also share the Grantee’s personal data with:
• | its professional advisors, auditors, service providers; |
• | HM Revenue and Customs in the United Kingdom and the Department of the Treasury Internal Revenue Service in the United States of America and other regulators, and governmental and law enforcement agencies; and |
• | third parties if it is under a duty to disclose or share the Grantee’s personal data in order to comply with any laws, regulations or good governance obligations, or in order to enforce or to protect its rights, property or safety, or that of its customers or other persons with whom it has a business relationship. |
Retention of Personal Data
The Relevant TriMas Companies will retain the Grantee’s personal data for the duration of the Plan and for a further period of eight years after the Grantee ceases to be a member of the Plan.
The Relevant TriMas Companies will retain the Grantee’s personal data for longer than the period specified above if required by law, to defend or exercise legal rights (such as defending legal claims) or to comply with regulatory obligations.
The Grantee’s Rights
In order to control the use of their personal data, each Grantee has the following controls over their personal data:
• | Each Grantee may request access to or copies of the personal data that the Relevant TriMas Companies hold about them by contacting their local human resources representative; |
• | If the Grantee believes that any information the Relevant TriMas Companies hold about them is incorrect or incomplete, the Grantee should contact their |
local human resources representative as soon as possible. The Relevant TriMas Companies will take steps to seek to correct or update any information if they are satisfied that the information they holds is inaccurate. In certain circumstances, the Grantee may also request that the Relevant TriMas Companies restrict their processing;
• | Each grantee may request that their personal data be deleted where it is no longer necessary for the purposes for which it is being processed and provided there is no other lawful basis for which the Relevant TriMas Companies may continue to process such personal data. The Grantee can exercise this right by contacting their local human resources representative; |
• | If the Relevant TriMas Companies are processing the Grantee’s personal data to meet their legitimate interests (as set out above), the Grantee may object to the processing of their personal information by the Relevant TriMas Companies. If the Relevant TriMas Companies are unable to demonstrate their legitimate grounds for that processing, they will no longer process the Grantee’s personal information for those purposes; |
• | Where the Grantee has provided the Relevant TriMas Companies with their personal data that the Relevant TriMas Companies process using automated means, the Grantee may be entitled to a copy of that personal data in a structured, commonly-used and machine readable format. The Grantee can exercise this right by contacting their local human resources representative. |
The Grantee should contact their local human resources representative in relation to any concerns about how their personal data is processed and the Relevant TriMas Companies will try to resolve the Grantee’s concerns. However, if the Grantee considers that the Relevant TriMas Companies is in breach of its obligations under data protection laws, the Grantee may lodge a complaint with the Information Commissioner’s Office in the United Kingdom (such as by accessing https://ico.org.uk/concerns/).”
Loss of Office or Employment. A new Section II.B.16 is added to the Agreement to read as follows:
“In no circumstances shall Grantee, on ceasing to hold the office or employment by virtue of which he has been granted this Award, be entitled to any compensation for any loss of any right or benefit or prospective right or benefit under this Award or the Plan which he might otherwise have enjoyed whether such compensation is claimed by way of damages for wrongful dismissal or other breach of contract or by way of compensation for loss of office or otherwise.”
Notifications
There are no country-specific notifications.
Exhibit 10.3
Restricted Stock Units Award
To Board of Directors
TRIMAS CORPORATION
2017 EQUITY AND INCENTIVE COMPENSATION PLAN
RESTRICTED STOCK UNITS AGREEMENT
TriMas Corporation (the “Company”), as permitted by the TriMas Corporation 2017 Equity and Incentive Compensation Plan (“Plan”), and as approved by the Committee, has granted to the individual listed below (“Grantee”), a Restricted Stock Units award (“Award”) for the number of Restricted Stock Units set forth below (“Restricted Stock Units”), subject to the terms and conditions of the Plan and this Restricted Stock Units Agreement (“Agreement”).
Unless otherwise defined in this Agreement, the terms used in this Agreement have the same meanings as defined in the Plan. The term “Service Provider” as used in this Agreement means an individual actively providing services to the Company or a Subsidiary. A Service Provider includes a member of the Board.
I. NOTICE OF AWARD
Grantee: | [specify Grantee’s name] |
Date of Agreement: | As of [enter date] |
Date of Grant: | May 1, 2018 |
Number of Restricted Stock Units: | [number of Restricted Stock Units] |
II. AGREEMENT
A. Grant of Restricted Stock Units. The Company has granted to Grantee (who, pursuant to this Award is a Participant in the Plan) the number of Restricted Stock Units set forth above, subject to adjustment as provided in this Agreement. The Restricted Stock Units evidenced by this Agreement are payable only in shares of Common Stock as described in Section II.A.2. Notwithstanding anything to the contrary anywhere else in this Agreement, the Restricted Stock Units subject to this Award are subject to the terms and provisions of the Plan, which are incorporated by reference into this Agreement.
1. Vesting.
(a)General. Subject to Section II.A.1(b), the Restricted Stock Units will vest in full on the first anniversary of the Date of Grant (the “Vesting Date”), subject generally
to Grantee’s continued status as a Service Provider through such Vesting Date. In particular, this Award is subject to Section 18(c) of the Plan.
(b)Termination of Service; Forfeiture. Any unvested Restricted Stock Units subject to this Award will be canceled and forfeited if Grantee terminates as a Service Provider, or if Grantee’s status as a Service Provider is terminated by the Company, for any reason before the Vesting Date; provided, however, if Grantee ceases to be a Service Provider prior to the Vesting Date as a result of Grantee’s death, Disability or Retirement, Grantee shall fully vest in the Restricted Stock Units subject to this Award as of the date on which Grantee ceases to be a Service Provider due to Grantee’s death, Disability or Retirement.
(c)Disability Definition. For purposes of this Agreement, “Disability” (and similar terms) means Grantee’s physical or mental condition resulting from any medically determinable physical or mental impairment that renders Grantee incapable of engaging in any substantial gainful employment and that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 365 days. Notwithstanding the foregoing, Grantee shall not be deemed to be Disabled as a result of any condition that:
(1) was contracted, suffered, or incurred while Grantee was engaged in, or resulted from Grantee having engaged in, a felonious activity;
(2) resulted from an intentionally self-inflicted injury or an addiction to drugs, alcohol, or substances which are not administered under the direction of a licensed physician as part of a medical treatment plan; or
(3) resulted from service in the Armed Forces of the United States for which Grantee received or is receiving a disability benefit or pension from the United States, or from service in the armed forces of any other country irrespective of any disability benefit or pension.
The Disability of Grantee and the date on which Grantee ceases to be a Service Provider by reason of Disability shall be determined by the Committee, in accordance with uniform principles consistently applied, on the basis of such evidence as the Committee and the Company deem necessary and desirable, and its good faith determination shall be conclusive for all purposes of the Plan. The Committee or the Company shall have the right to require Grantee to submit to an examination by a physician or physicians and to submit to such reexaminations as the Committee or the Company shall require in order to make a determination concerning Grantee’s physical or mental condition; provided, however, that Grantee may not be required to undergo a medical examination more often than once each 180 days. If Grantee engages in any occupation or employment (except for rehabilitation as determined by the Committee) for remuneration or profit, which activity would be inconsistent with the finding of Disability, or if the Committee, on the recommendation of the Company, determines on the basis of a medical examination that Grantee no longer has a Disability, or if Grantee refuses to submit to any medical examination properly requested
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by the Committee or the Company, then in any such event Grantee shall be deemed to have recovered from such Disability.
(d)Retirement Definition. For purposes of this Agreement, “Retirement” means termination of Grantee’s status as a Service Provider with the consent of the Committee after attaining age 55 and five years of service with the Company and its Subsidiaries.
2. Settlement.
(a)General. Subject to Section II.A.2(b) below, and as soon as administratively practicable following (but no later than thirty (30) days following) the Vesting Date, the Company shall issue Grantee one share of Common Stock for each vested Restricted Stock Unit.
(b)Other Payment Events. Notwithstanding Section II.A.2(a), to the extent the Restricted Stock Units are vested as a result of Section II.A.1(b) (and have not previously been settled) on the date of Grantee’s separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)), the Company shall issue Grantee one share of Common Stock for each vested Restricted Stock Unit as soon as practicable following (but no later than thirty (30) days following) the date of such separation from service.
3. Dividend Equivalent Rights. Grantee shall be credited with cash per Restricted Stock Unit equal to the amount of each cash dividend paid by the Company (if any) to holders of Common Stock generally with a record date occurring on or after the Date of Grant and prior to the time when the Restricted Stock Units are settled in accordance with Section II.A.2 hereof. Any amounts credited pursuant to the immediately preceding sentence shall be subject to the same applicable terms and conditions (including vesting, payment or forfeitability) as apply to the Restricted Stock Units based on which the dividend equivalents were credited, and such amounts shall be paid in either cash or Common Stock, as determined by the Committee in its sole discretion, at the same time as the Restricted Stock Units to which they relate. If such amounts are paid in Common Stock, the number of shares so paid shall be rounded down to the nearest whole number and shall be determined by dividing such credited amounts by the Market Value per Share on the payment date.
4. Rights as a Shareholder. Grantee will not have any rights of a stockholder (including voting and dividend rights) with respect to the Restricted Stock Units covered by this Award (except as otherwise provided in Section II.A.3).
5. Adjustments. The Restricted Stock Units covered by this Award will be subject to adjustment as provided in Section 11 of the Plan.
B. Other Terms and Conditions.
1. Non-Transferability of Award. Except as described below, this Award and the Restricted Stock Units subject to this Award may not be sold, pledged, assigned, hypothecated,
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transferred, or disposed of in any manner other than by will or by the laws of descent or distribution. The terms of this Award are binding on the executors, administrators, heirs, successors and assigns of Grantee.
2. Taxes. Grantee is responsible for the payment of any and all taxes that arise with respect to this Award. Grantee agrees to tender sufficient funds to satisfy any applicable taxes arising in connection with the vesting of the Restricted Stock Units (or other applicable events) under this Award.
3. Dispute Resolution. Grantee and the Company agree that any disagreement, dispute, controversy, or claim arising out of or relating to this Agreement, its interpretation, validity, or the alleged breach of this Agreement, will be settled exclusively and, consistent with the procedures specified in this Section II.B.3, irrespective of its magnitude, the amount in controversy, or the nature of the relief sought, in accordance with the following:
(a)Negotiation. Grantee and the Company will use their best efforts to settle the dispute, claim, question or disagreement. To this effect, they will consult and negotiate with each other in good faith and, recognizing their mutual interests, attempt to reach a just and equitable solution satisfactory to both parties.
(b)Arbitration. If Grantee and the Company do not reach a solution within a period of 30 days from the date on which the dispute, claim, disagreement, or controversy arises, then, upon written notice by Grantee to the Company or the Company to Grantee, all disputes, claims, questions, controversies, or differences will be submitted to arbitration administered by the American Arbitration Association (the “AAA”) in accordance with the provisions of its Employment Arbitration Rules and Mediation Procedures (the “Arbitration Rules”).
(1) Arbitrator. The arbitration will be conducted by one arbitrator skilled in the arbitration of executive employment matters. The parties to the arbitration will jointly appoint the arbitrator within 30 days after initiation of the arbitration. If the parties fail to appoint an arbitrator as provided above, an arbitrator with substantial experience in executive employment matters will be appointed by the AAA as provided in the Arbitration Rules. The Company will pay all of the reasonable fees, if any, and expenses of the arbitrator and the arbitration, unless otherwise determined by the arbitrator. Each party to the arbitration will be responsible for his/its respective attorneys fees or other costs of representation.
(2) Location. The arbitration will be conducted in Oakland County, Michigan.
(3) Procedure. At any oral hearing of evidence in connection with the arbitration, each party or its legal counsel will have the right to examine its witnesses and cross-examine the witnesses of any opposing party. No evidence of any witness may be presented in any form unless the opposing party or parties has the opportunity
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to cross-examine the witness, except under extraordinary circumstances in which the arbitrator determines that the interests of justice require a different procedure.
(4) Decision. Any decision or award of the arbitrator is final and binding on the parties to the arbitration proceeding. The parties agree that the arbitration award may be enforced against the parties to the arbitration proceeding or their assets wherever they may be found and that a judgment upon the arbitration award may be entered in any court having jurisdiction.
(5) Power. Nothing contained in this Agreement may be deemed to give the arbitrator any authority, power, or right to alter, change, amend, modify, add to, or subtract from any of the provisions of this Agreement.
The provisions of this Section II.B.3 survive the termination or expiration of this Agreement, are binding on the Company’s and Grantee’s respective successors, heirs, personal representatives, designated beneficiaries and any other person asserting a claim described above, and may not be modified without the consent of the Company. To the extent arbitration is required, no person asserting a claim has the right to resort to any federal, state or local court or administrative agency concerning the claim unless expressly provided by federal statute, and the decision of the arbitrator is a complete defense to any action or proceeding instituted in any tribunal or agency with respect to any dispute, unless precluded by federal statute.
4. Section 409A of the Code. To the extent applicable, it is intended that this Agreement and the Plan comply with or be exempt from the provisions of Section 409A of the Code. This Agreement and the Plan shall be administered in a manner consistent with this intent, and any provision that would cause this Agreement or the Plan to fail to satisfy Section 409A of the Code shall have no force or effect until amended to comply with Section 409A of the Code (which amendment may be retroactive to the extent permitted by Section 409A of the Code and may be made by the Company without the consent of Grantee).
5. No Continued Right as Service Provider. Nothing in the Plan or in this Agreement confers on Grantee any right to continue as a Service Provider, or interferes with or restricts in any way the rights of the Company or any Subsidiary of the Company, which are hereby expressly reserved.
6. Severability. If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid or unenforceable, the remainder of this Agreement and the application of such provision to any other person or circumstances shall not be affected, and the provisions so held to be invalid or unenforceable shall be reformed to the extent (and only to the extent) necessary to make it enforceable and valid.
7. Governing Law. This Agreement is governed by and construed in accordance with the laws of the State of Delaware, notwithstanding conflict of law provisions.
8. Electronic Delivery. The Company may, in its sole discretion, deliver any documents related to the Restricted Stock Units and Grantee’s participation in the Plan, or future
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awards that may be granted under the Plan, by electronic means or request Grantee’s consent to participate in the Plan by electronic means. Grantee hereby consents to receive such documents by electronic delivery and, if requested, agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
8. Amendments. Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that (a) no amendment shall materially adversely affect the rights of Grantee under this Agreement without Grantee’s written consent, and (b) Grantee’s consent shall not be required to an amendment that is deemed necessary by the Company to ensure compliance with Section 409A of the Code or Section 10D of the Exchange Act.
8. Relation to Plan. This Agreement is subject to the terms and conditions of the Plan. In the event of any inconsistency between the provisions of this Agreement and the Plan, the Plan shall govern. The Committee acting pursuant to the Plan, as constituted from time to time, shall, except as expressly provided otherwise herein or in the Plan, have the right to determine any questions which arise in connection with this Agreement.
(Signature Page Follows)
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This Agreement may be executed in two or more counterparts, each of which is deemed an original and all of which constitute one document.
TRIMAS CORPORATION
Dated as of: [grant date] | By: /s/ Joshua A. Sherbin Name: Joshua A. Sherbin Title: Senior Vice President and General Counsel |
GRANTEE ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE PLAN, CONFERS ON GRANTEE ANY RIGHT WITH RESPECT TO CONTINUATION AS A SERVICE PROVIDER OF THE COMPANY OR ANY PARENT OR SUBSIDIARY, NOR INTERFERES IN ANY WAY WITH GRANTEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE GRANTEE’S SERVICE PROVIDER RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE AND WITH OR WITHOUT PRIOR NOTICE.
BY CLICKING THE “ACCEPT” BUTTON BELOW, GRANTEE ACKNOWLEDGES RECEIPT OF A COPY OF THE PLAN AND REPRESENTS THAT GRANTEE IS FAMILIAR WITH THE TERMS AND PROVISIONS OF THE PLAN. GRANTEE ACCEPTS THIS AWARD SUBJECT TO ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT AND THE PLAN. GRANTEE HAS REVIEWED THE PLAN AND THIS AGREEMENT IN THEIR ENTIRETY. GRANTEE AGREES TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL ALL DECISIONS OR INTERPRETATIONS OF THE COMMITTEE UPON ANY QUESTIONS ARISING UNDER THE PLAN OR THIS AWARD.
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Exhibit 31.1
Certification
Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
(Chapter 63, Title 18 U.S.C. Section 1350(A) and (B))
I, Thomas A. Amato, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of TriMas Corporation;
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: August 7, 2018
/s/ THOMAS A. AMATO | |
Thomas A. Amato Chief Executive Officer | |
Exhibit 31.2
Certification
Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
(Chapter 63, Title 18 U.S.C. Section 1350(A) and (B))
I, Robert J. Zalupski, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of TriMas Corporation;
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: August 7, 2018
/s/ ROBERT J. ZALUPSKI | |
Robert J. Zalupski Chief Financial Officer | |
Exhibit 32.1
Certification Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of TriMas Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas A. Amato, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 7, 2018
/s/ THOMAS A. AMATO | |
Thomas A. Amato Chief Executive Officer | |
Exhibit 32.2
Certification Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of TriMas Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert J. Zalupski, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 7, 2018
/s/ ROBERT J. ZALUPSKI | |
Robert J. Zalupski Chief Financial Officer | |