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 ~~September~~		June 30, ~~2018~~2019
Or
o☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period fromto.

Commission file number 001-10716

TRIMAS CORPORATION

(Exact name of registrant as specified in its charter)



Delaware		38-2687639
~~Delaware~~ (State or other jurisdiction of incorporation or organization)		~~38-2687639~~ (IRS Employer Identification No.)

38505 Woodward Avenue, Suite 200

Bloomfield Hills, Michigan48304

(Address of principal executive offices, including zip code)

~~(248)~~ (248) 631-5450

(Registrant's telephone number, including area code)



Title of each class	Trading symbol(s)	Name of exchange on which registered
Common stock	TRS	NASDAQ Global Select Market

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, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes 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~~Accelerated Filer	x☒	Accelerated filer	o☐

Non-accelerated filer	o☐	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 ~~October~~July 23, ~~2018,~~2019, the number of outstanding shares of the Registrant's common stock, $0.01 par value, was ~~45,814,673~~45,243,642 shares.

TriMas Corporation

Index



Part I.	Financial Information

		Forward-Looking Statements	2

	Item 1.	Consolidated Financial Statements	3

		Consolidated Balance Sheet as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018	3

		Consolidated Statement of Income for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	4

		Consolidated Statement of Comprehensive Income for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	5

		Consolidated Statement of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	6

		Consolidated Statement of Shareholders' Equity for the ~~Nine~~Three and Six Months Ended ~~September~~June 30, 2019 and 2018	7

		Notes to Consolidated Financial Statements	8

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37

	Item 4.	Controls and Procedures	37

Part II.	Other Information

	Item 1.	Legal Proceedings	38

	Item 1A.	Risk Factors	38

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

	Item 3.	Defaults Upon Senior Securities	38

	Item 4.	Mine Safety Disclosures	38

	Item 5.	Other Information	38

	Item 6.	Exhibits	39

	Signatures		40

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; information technology and other cyber-related risks; 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.~~2018. 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.

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

TriMas Corporation

Consolidated Balance Sheet

(Dollars in thousands)


	September 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
Assets	(unaudited)						(unaudited)
Current assets:
Cash and cash equivalents	$	79,630		$	27,580		$	40,280		$	108,150
Receivables, net of reserves of approximately $4.1 million as of September 30, 2018 and December 31, 2017, respectively	132,630			112,220
Receivables, net of reserves of approximately $3.7 million and $3.4 million as of June 30, 2019 and December 31, 2018, respectively							150,410			123,110
Inventories	165,470			155,350			180,500			173,120
Prepaid expenses and other current assets	8,360			16,120			7,020			7,430
Total current assets	386,090			311,270			378,210			411,810
Property and equipment, net	185,080			190,250			225,630			187,800
Operating lease right-of-use assets							39,260			—
Goodwill	316,730			319,390			334,780			316,650
Other intangibles, net	179,280			194,220			176,910			174,530
Deferred income taxes	—			9,100			610			1,080
Other assets	9,390			8,970			16,380			8,650
Total assets	$	1,076,570		$	1,033,200		$	1,171,780		$	1,100,520
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities, long-term debt							$	60		$	—
Accounts payable	$	77,780		$	72,410		85,570			93,430
Accrued liabilities	50,260			49,470			41,690			48,300
Operating lease liabilities, current portion							8,610			—
Total current liabilities	128,040			121,880			135,930			141,730
Long-term debt, net	293,290			303,080			294,120			293,560
Operating lease liabilities							31,040			—
Deferred income taxes	6,060			5,650			18,780			5,560
Other long-term liabilities	41,690			58,570			44,550			39,220
Total liabilities	469,080			489,180			524,420			480,070
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: 45,846,487 shares at September 30, 2018 and 45,724,453 shares at December 31, 2017	460			460
Common stock, $0.01 par: Authorized 400,000,000 shares; Issued and outstanding: 45,243,419 shares at June 30, 2019 and 45,527,993 shares at December 31, 2018							450			460
Paid-in capital	822,280			823,850			800,900			816,500
Accumulated deficit	(196,370		)	(262,960		)	(137,360		)	(179,660		)
Accumulated other comprehensive loss	(18,880		)	(17,330		)	(16,630		)	(16,850		)
Total shareholders' equity	607,490			544,020			647,360			620,450
Total liabilities and shareholders' equity	$	1,076,570		$	1,033,200		$	1,171,780		$	1,100,520

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

TriMas Corporation

Consolidated Statement of Income

(Unaudited—dollars in thousands, except for per share amounts)


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Net sales	$	223,780		$	209,330		$	665,790		$	622,530		$	239,370		$	224,910		$	460,660		$	442,010
Cost of sales	(162,060		)	(150,440		)	(478,910		)	(452,350		)	(174,020		)	(160,130		)	(335,490		)	(316,850		)
Gross profit	61,720			58,890			186,880			170,180			65,350			64,780			125,170			125,160
Selling, general and administrative expenses	(31,840		)	(30,600		)	(90,270		)	(99,560		)	(34,240		)	(33,260		)	(68,210		)	(58,430		)
Operating profit	29,880			28,290			96,610			70,620			31,110			31,520			56,960			66,730
Other expense, net:
Interest expense	(3,480		)	(3,390		)	(10,660		)	(10,360		)	(3,490		)	(3,480		)	(6,930		)	(7,180		)
Debt financing and related expenses	—			(6,640		)	—			(6,640		)
Other income (expense), net	410			(370		)	(2,330		)	(1,290		)	1,350			(2,180		)	670			(2,740		)
Other expense, net	(3,070		)	(10,400		)	(12,990		)	(18,290		)	(2,140		)	(5,660		)	(6,260		)	(9,920		)
Income before income tax expense	26,810			17,890			83,620			52,330			28,970			25,860			50,700			56,810
Income tax expense	(4,140		)	(4,760		)	(17,030		)	(17,360		)	(6,950		)	(6,260		)	(9,590		)	(12,890		)
Net income	$	22,670		$	13,130		$	66,590		$	34,970		$	22,020		$	19,600		$	41,110		$	43,920
Basic earnings per share:
Net income per share	$	0.49		$	0.29		$	1.45		$	0.77		$	0.48		$	0.43		$	0.90		$	0.96
Weighted average common shares—basic	45,850,288			45,721,155			45,850,187			45,669,782			45,592,075			45,920,307			45,585,445			45,850,137
Diluted earnings per share:
Net income per share	$	0.49		$	0.29		$	1.44		$	0.76		$	0.48		$	0.42		$	0.90		$	0.95
Weighted average common shares—diluted	46,166,558			46,029,361			46,198,884			45,953,578			45,828,315			46,200,757			45,910,249			46,215,047

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

TriMas Corporation

Consolidated Statement of Comprehensive Income

(Unaudited—dollars in thousands)


	Three months ended September 30,					Nine months ended September 30,					Three months ended June 30,						Six months ended June 30,
	2018			2017		2018			2017		2019			2018			2019			2018
Net income	$	22,670		$	13,130	$	66,590		$	34,970	$	22,020		$	19,600		$	41,110		$	43,920
Other comprehensive income (loss):
Defined benefit pension and postretirement plans (Note 14)	180			170		3,030			500
Defined benefit plans (Note 16)											100			2,650			200			2,850
Foreign currency translation	(2,210		)	910		(6,300		)	4,640		(900		)	(6,450		)	(200		)	(4,090		)
Derivative instruments (Note 9)	50			2,540		1,720			2,520
Derivative instruments (Note 10)											(730		)	5,710			1,490			1,670
Total other comprehensive income (loss)	(1,980		)	3,620		(1,550		)	7,660		(1,530		)	1,910			1,490			430
Total comprehensive income	$	20,690		$	16,750	$	65,040		$	42,630	$	20,490		$	21,510		$	42,600		$	44,350

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

TriMas Corporation

Consolidated Statement of Cash Flows

(Unaudited—dollars in thousands)


	Nine months ended September 30,						Six months ended June 30,
	2018			2017			2019			2018
Cash Flows from Operating Activities:
Net income	$	66,590		$	34,970		$	41,110		$	43,920
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities, net of acquisition impact:
Loss on dispositions of assets	70			3,210			40			70
Depreciation	18,630			18,890			13,070			12,870
Amortization of intangible assets	14,600			14,920			9,970			9,740
Amortization of debt issue costs	1,020			1,030			560			740
Deferred income taxes	9,290			2,420			4,230			6,340
Non-cash compensation expense	4,400			5,090			3,040			2,620
Debt financing and related expenses	—			6,640
Increase in receivables	(20,060		)	(12,700		)	(12,370		)	(20,380		)
Increase in inventories	(10,750		)	(580		)	(1,130		)	(5,880		)
Decrease in prepaid expenses and other assets	7,180			7,110			1,140			8,970
Decrease in accounts payable and accrued liabilities	(6,740		)	(8,590		)	(29,070		)	(7,530		)
Other operating activities	(1,140		)	240			(1,310		)	140
Net cash provided by operating activities	83,090			72,650
Net cash provided by operating activities, net of acquisition impact							29,280			51,620
Cash Flows from Investing Activities:
Capital expenditures	(15,890		)	(24,120		)	(12,310		)	(11,320		)
Acquisition of businesses, net of cash acquired							(67,030		)	—
Net proceeds from disposition of property and equipment	250			1,800			30			250
Net cash used for investing activities	(15,640		)	(22,320		)	(79,310		)	(11,070		)
Cash Flows from Financing Activities:
Proceeds from issuance of senior notes	—			300,000
Repayments of borrowings on term loan facilities	—			(257,940		)
Proceeds from borrowings on revolving credit and accounts receivable facilities	59,060			353,710
Repayments of borrowings on revolving credit and accounts receivable facilities	(68,490		)	(435,250		)
Debt financing fees	—			(6,070		)
Proceeds from borrowings on revolving credit facilities							93,220			59,060
Repayments of borrowings on revolving credit facilities							(92,410		)	(68,490		)
Shares surrendered upon exercise and vesting of equity awards to cover taxes	(2,380		)	(480		)	(3,230		)	(2,380		)
Payments to purchase common stock	(3,590		)	—			(15,420		)	(2,920		)
Other financing activities	—			(250		)
Net cash used for financing activities	(15,400		)	(46,280		)	(17,840		)	(14,730		)
Cash and Cash Equivalents:
Net increase for the period	52,050			4,050
Increase (decrease) for the period							(67,870		)	25,820
At beginning of period	27,580			20,710			108,150			27,580
At end of period	$	79,630		$	24,760		$	40,280		$	53,400
Supplemental disclosure of cash flow information:
Cash paid for interest	$	7,840		$	9,020		$	6,190		$	7,630
Cash paid for taxes	$	5,020		$	13,140		$	11,970		$	3,210

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

TriMas Corporation

Consolidated Statement of Shareholders' Equity

~~Nine~~Three and Six Months Ended ~~September~~June 30, 2019 and 2018

(Unaudited—dollars in thousands)


	Common Stock		Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total			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
Balances, December 31, 2018															$	460		$	816,500		$	(179,660	)	$	(16,850	)	$	620,450
Net income															—			—			19,090			—			19,090
Other comprehensive income															—			—			—			3,020			3,020
Purchase of common stock															—			(670		)	—			—			(670		)
Shares surrendered upon exercise and vesting of equity awards to cover taxes															—			(2,620		)	—			—			(2,620		)
Non-cash compensation expense															—			1,320			—			—			1,320
Impact of accounting standards adoption (Note 2)															—			—			1,190			(1,270		)	(80		)
Balances, March 31, 2019															$	460		$	814,530		$	(159,380	)	$	(15,100	)	$	640,510
Net income	—		—			66,590			—			66,590			—			—			22,020			—			22,020
Other comprehensive loss	—		—			—			(1,550		)	(1,550		)	—			—			—			(1,530		)	(1,530		)
Purchase of common stock	—		(3,590		)	—			—			(3,590		)	(10		)	(14,740		)	—			—			(14,750		)
Shares surrendered upon exercise and vesting of equity awards to cover taxes	—		(2,380		)	—			—			(2,380		)	—			(610		)	—			—			(610		)
Non-cash compensation expense	—		4,400			—			—			4,400			—			1,720			—			—			1,720
Balances, September 30, 2018	$	460	$	822,280		$	(196,370	)	$	(18,880	)	$	607,490
Balances, June 30, 2019															$	450		$	800,900		$	(137,360	)	$	(16,630	)	$	647,360



	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	—		—			24,320			—			24,320
Other comprehensive loss	—		—			—			(1,480		)	(1,480		)
Shares surrendered upon exercise and vesting of equity awards to cover taxes	—		(2,300		)	—			—			(2,300		)
Non-cash compensation expense	—		1,220			—			—			1,220
Balances, March 31, 2018	$	460	$	822,770		$	(238,640	)	$	(18,810	)	$	565,780
Net income	—		—			19,600			—			19,600
Other comprehensive income	—		—			—			1,910			1,910
Purchase of common stock	—		(2,920		)	—			—			(2,920		)
Shares surrendered upon exercise and vesting of equity awards to cover taxes	—		(80		)	—			—			(80		)
Non-cash compensation expense	—		1,400			—			—			1,400
Balances, June 30, 2018	$	460	$	821,170		$	(219,040	)	$	(16,900	)	$	585,690

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

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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,~~2019, TriMas ~~realigned~~began reporting its ~~reporting structure from four segments to three. While there were no changes to the Packaging~~machined components operations, located in Stanton, California and ~~Aerospace~~Tolleson, Arizona, in its Specialty Products reportable ~~segments, the Company combined its previous Energy and Engineered Components reportable segments into a new reportable segment titled Specialty Products.~~segment. This change was made in connection with ~~recent realignment efforts, providing a more streamlined operating structure and~~the transition of leadership responsibilities out of Aerospace to Specialty Products, allowing the Company to better leverage the machining competencies and resources ~~across~~of these operations with the ~~divisions~~other businesses within the Specialty Products reportable segment, as well as provide the Company with the opportunity to expand sales of these products to customers outside of the aerospace market. In addition, this change enables the Company's Aerospace reportable segment to better focus on driving growth and innovation in ~~this segment.~~its aerospace fastener and related product lines. See Note 1113, "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~~2018 Annual Report on Form 10-K.

2. New Accounting Pronouncements

Recently Issued Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20)" ("ASU 2018-14"), which modifies the disclosure requirements for employers who sponsor defined benefit pension or other postretirement plans. ASU 2018-14 is effective for fiscal years ending after December 15, 2020, with early adoption permitted. ASU 2018-14 is to be applied retrospectively to all periods presented. ~~The Company is in the process of assessing the impact of adoption on its consolidated financial statements.~~

In February 2018, the FASB issued 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.

Recently Adopted Accounting Pronouncements

In February 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" ("ASU 2018-02"), which provides for the option to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act ("Tax Reform Act") classified within accumulated other comprehensive income (loss) ("AOCI") to retained earnings. The Company adopted ASU 2018-02 on January 1, 2019, and elected to reclassify approximately $1.3 million in stranded tax effects from accumulated other comprehensive loss to accumulated deficit on the accompanying consolidated balance sheet. The Company's accounting policy is to release the income tax effects from AOCI when a defined benefit plan or a derivative instrument is liquidated and/or settled.

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)" ("(“ASU ~~2016-02"~~2016-02”) (the “New Lease Standard"), which requires ~~that~~ lessees ~~at the lease commencement date,~~to recognize a lease liability ~~representing~~and right-of-use (ROU) asset on its balance sheet for operating leases. Accounting for finance leases is substantially unchanged. The Company adopted 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." Since the issuance of the original standard, the FASB has issued several subsequent updates. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and is to be appliedNew Lease Standard on January 1, 2019 using a modified retrospective ~~approach~~transition, with ~~early adoption permitted. We plan~~the cumulative-effect adjustment to ~~adopt~~ the ~~standard effective January 1, 2019. We anticipate this standard will have a material impact on our consolidated~~opening balance ~~sheet. However, we do not expect adoption will have a material impact on our consolidated statement~~ of ~~income. While we are continuing to assess potential impacts~~accumulated deficit as of the ~~standard, we currently expect the most significant impact will be the recognition of right-of-use assets and lease liabilities for operating leases.~~effective date (the effective date method).

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

As a result of the adoption, the Company recognized approximately $40 million of right-of-use assets and lease liabilities on its consolidated balance sheet. Additionally, the Company recognized an approximate $0.1 million cumulative effective adjustment debit, net of tax, to accumulated deficit related to unamortized deferred losses for certain sale-leaseback transactions. The standard did not have an impact on the Company's consolidated statement of income.

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	2019		2018		2019		2018
Consumer	$	81,300	$	71,990	$	148,790	$	136,720
Aerospace	49,510		45,620		95,090		91,430
Industrial	54,880		55,970		109,110		110,320
Oil and gas	53,680		51,330		107,670		103,540
Total net sales	$	239,370	$	224,910	$	460,660	$	442,010

Three months ended September 30, Nine months ended September 30,
Customer End Markets 2018 2017 2018 2017
Consumer $ 72,440
$ 68,380
$ 209,160
$ 194,040
Aerospace 49,070
48,550
140,500
141,550
Industrial 51,880
46,120
162,200
145,410
Oil and gas 50,390
46,280
153,930
141,530
Total net sales $ 223,780
$ 209,330
$ 665,790
$ 622,530

The Company’s Packaging reportable segment earns revenues from the consumer (comprised of the health, beauty and home care, as well as food and beverage markets) 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 and aerospace 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~~ceased production at its Reynosa, Mexico facility 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.

obligations. 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.

5. Acquisitions

In April 2019, the Company acquired Taplast S.p.A. ("Taplast"), a designer and manufacturer of dispensers, closures and containers for the beauty and personal care, household, and food and beverage packaging end markets, for an aggregate amount of approximately $44.6 million, net of cash acquired. Located in both Italy and Slovakia, Taplast serves end markets in Europe and North America and generates approximately $32 million in annual revenue. Taplast is included in the Company's Packaging reportable segment.

In January 2019, the Company acquired Plastic Srl, a manufacturer of single-bodied and assembled polymeric caps and closures for use in home care product applications, for an aggregate amount of approximately $22.4 million, net of cash acquired. Located in Forli, Italy, Plastic Srl serves the home care market in Italy and other European countries and generates approximately $12 million in annual revenue. Plastic Srl is included in the Company's Packaging reportable segment.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

~~Wolverhampton, United Kingdom facility~~

In ~~March 2017,~~connection with these acquisitions, the Company ~~exited~~recorded approximately $0.2 million and $1.2 million of non-cash purchase accounting-related expenses during the three and six months ended June 30, 2019, respectively. Of these amounts, approximately $0.9 million was recognized during the six months ended June 30, 2019, within selling, general and administrative expenses, primarily related to the write-off of the Plastic Srl trade name acquired that will not be used. In addition, approximately $0.2 million and $0.3 million was recognized during the three and six months ended June 30, 2019, respectively, within cost of sales related to the step-up in value and subsequent sale of inventory.

6. Goodwill and Other Intangible Assets

During the three months ended March 31, 2019, in an effort to better align the Company's machining competencies and resources, the Company began reporting its ~~Wolverhampton, United Kingdom facility~~machined products operations within the Specialty Products reportable segment. ~~In connection with this action,~~These operations were previously reported in the Company's Aerospace reportable segment. As a result of the reporting structure change, the Company's previous Aerospace reporting unit was split into two new reporting units, Machined Products and Aerospace. The Company reallocated the goodwill attributed to the previous Aerospace reporting unit on a relative fair value basis between the Machined Products and the new Aerospace reporting units, resulting in an allocation of goodwill of $12.7 million and $133.7 million, respectively.

After the reallocation of goodwill, the Company ~~recorded pre-tax charges~~performed a Step I quantitative assessment for both the Machined Products and the new Aerospace reporting units. As part of ~~approximately $3.5 million within selling, general~~this assessment, the Company determined that the fair value of the Aerospace reporting unit exceeded its carrying value by more than 34% and ~~administrative expenses,~~the fair value of ~~which approximately $3.2 million were non-cash charges related to~~ the ~~disposal of certain assets.~~Machined Products reporting unit exceeded its carrying value by more than 13%.

5~~. Goodwill and Other Intangible Assets~~

Changes in the carrying amount of goodwill for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 are summarized as follows (dollars in thousands):



	Packaging			Aerospace			Specialty Products		Total
Balance, December 31, 2018	$	163,660		$	146,430		$	6,560	$	316,650
Goodwill from acquisitions	18,340			—			—		18,340
Goodwill reassigned in segment realignment	—			(12,740		)	12,740		—
Foreign currency translation and other	(210		)	—			—		(210		)
Balance, June 30, 2019	$	181,790		$	133,690		$	19,300	$	334,780

Packaging Aerospace Specialty Products Total
Balance, December 31, 2017 $ 166,400
$ 146,430
$ 6,560
$ 319,390
Foreign currency translation and other (2,660 ) —
—
(2,660 )
Balance, September 30, 2018 $ 163,740
$ 146,430
$ 6,560
$ 316,730

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 September 30, 2018 and December 31, 2017~~ are summarized below (dollars in thousands):



	As of June 30, 2019					As of December 31, 2018
Intangible Category by Useful Life	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Finite-lived intangible assets:
Customer relationships, 5 – 12 years	$	81,200	$	(52,550	)	$	73,450	$	(48,410	)
Customer relationships, 15 – 25 years	132,230		(62,250		)	132,230		(58,790		)
Total customer relationships	213,430		(114,800		)	205,680		(107,200		)
Technology and other, 1 – 15 years	57,040		(33,000		)	57,020		(31,600		)
Technology and other, 17 – 30 years	43,300		(36,610		)	43,300		(35,600		)
Total technology and other	100,340		(69,610		)	100,320		(67,200		)
Indefinite-lived intangible assets:
Trademark/Trade names	47,550		—			42,930		—
Total other intangible assets	$	361,320	$	(184,410	)	$	348,930	$	(174,400	)

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

As of September 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 $ 73,240
$ (46,410 ) $ 73,910
$ (41,000 )
   Customer relationships, 15 – 25 years 132,230
(57,060 ) 132,230
(51,880 )
Total customer relationships 205,470
(103,470 ) 206,140
(92,880 )
   Technology and other, 1 – 15 years 57,030
(30,900 ) 57,340
(29,120 )
   Technology and other, 17 – 30 years 43,300
(35,080 ) 43,300
(33,490 )
Total technology and other 100,330
(65,980 ) 100,640
(62,610 )
Indefinite-lived intangible assets:

Trademark/Trade names 42,930
—
42,930
—
Total other intangible assets $ 348,730
$ (169,450 ) $ 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,
	2019		2018		2019		2018
Technology and other, included in cost of sales	$	1,210	$	1,210	$	2,410	$	2,450
Customer relationships, included in selling, general and administrative expenses	3,830		3,620		7,560		7,290
Total amortization expense	$	5,040	$	4,830	$	9,970	$	9,740

Three months ended September 30, Nine months ended September 30,
2018 2017 2018 2017
Technology and other, included in cost of sales $ 1,230
$ 1,280
$ 3,680
$ 3,990
Customer relationships, included in selling, general and administrative expenses 3,630
3,650
10,920
10,930
Total amortization expense $ 4,860
$ 4,930
$ 14,600
$ 14,920

~~TRIMAS CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

6.7. Inventories

Inventories consist of the following components (dollars in thousands):



	June 30, 2019		December 31, 2018
Finished goods	$	90,960	$	91,780
Work in process	30,210		29,080
Raw materials	59,330		52,260
Total inventories	$	180,500	$	173,120

September 30,
2018 December 31,
2017
Finished goods $ 85,730
$ 86,310
Work in process 27,300
24,580
Raw materials 52,440
44,460
Total inventories $ 165,470
$ 155,350

78. Property and Equipment, Net

Property and equipment consists of the following components (dollars in thousands):



	June 30, 2019		December 31, 2018
Land and land improvements	$	19,210	$	15,580
Buildings	88,350		74,110
Machinery and equipment	344,950		318,860
	452,510		408,550
Less: Accumulated depreciation	226,880		220,750
Property and equipment, net	$	225,630	$	187,800

September 30,
2018 December 31,
2017
Land and land improvements $ 15,580
$ 15,500
Buildings 74,120
73,550
Machinery and equipment 311,530
303,880
401,230
392,930
Less: Accumulated depreciation 216,150
202,680
Property and equipment, net $ 185,080
$ 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,
	2019		2018		2019		2018
Depreciation expense, included in cost of sales	$	6,470	$	6,030	$	12,360	$	11,840
Depreciation expense, included in selling, general and administrative expenses	370		510		710		1,030
Total depreciation expense	$	6,840	$	6,540	$	13,070	$	12,870

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Three months ended September 30, Nine months ended September 30,
2018 2017 2018 2017
Depreciation expense, included in cost of sales $ 5,490
$ 5,440
$ 17,330
$ 17,380
Depreciation expense, included in selling, general and administrative expenses 270
400
1,300
1,510
Total depreciation expense $ 5,760
$ 5,840
$ 18,630
$ 18,890

89. Long-term Debt

The Company's long-term debt consists of the following (dollars in thousands):



	June 30, 2019			December 31, 2018
4.875% Senior Notes due October 2025	$	300,000		$	300,000
Other debt	60			—
Debt issuance costs	(5,880		)	(6,440		)
	294,180			293,560
Less: Current maturities, long-term debt	60			—
Long-term debt, net	$	294,120		$	293,560

September 30,
2018 December 31,
2017
4.875% Senior Notes due October 2025 $ 300,000
$ 300,000
Credit Agreement —
10,810
Debt issuance costs (6,710 ) (7,730 )
Long-term debt, net $ 293,290
$ 303,080

~~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 Company used the proceeds from the offering to fully repay the $250.9 million principal, plus $0.4 million related interest, outstanding on its former senior secured term loan A facility due 2020 ("Term Loan A Facility"), repay approximately $41.7 million of outstanding obligations under the Company's accounts receivable facility, pay fees and expenses of $5.0 million related to the Senior Notes offering, pay fees and expenses of $1.1 million related to amending its existing credit agreement, with the remaining amount retained as cash on its consolidated balance sheet. Of the $5.0 million of fees and expenses related to the Senior Notes, approximately $4.9 million was capitalized as debt issuance costs and approximately $0.1 million was recorded as debt financing and related expenses in the accompanying consolidated statement of income.

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.~~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	%

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.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The Company's revolving credit facility allows for the issuance of letters of credit, not to exceed $40.0 million in aggregate. At ~~September~~June 30, 2019, the Company had no amounts outstanding under its revolving credit facility and had approximately $285.2 million potentially available after giving effect to approximately $14.8 million of letters of credit issued and outstanding. At December 31, 2018, the Company had no amounts outstanding under its revolving credit facility and had approximately $284.9 million potentially available after giving effect to approximately $15.1 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 afterAfter consideration of leverage restrictions contained in the Credit Agreement, the Company had approximately ~~$284.9~~$285.2 million and ~~$332.1~~$284.9 million ~~at September 30, 2018 and December 31, 2017, respectively,~~ of borrowing capacity available for general corporate ~~purposes.~~

~~TRIMAS CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

purposes at June 30, 2019 and December 31, 2018, respectively.

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, to incur debt, liens, mergers, investments, loans, advances, guarantee obligations, acquisitions, assets dispositions, sale-leaseback transactions, hedging agreements, dividends and other restricted payments, transactions with affiliates, restrictive agreements and amendments to charters, bylaws, and other material documents. The terms of the Credit Agreement also require the Company and its restricted subsidiaries to meet certain restrictive financial covenants and ratios computed quarterly, including a maximum total net leverage ratio (total consolidated indebtedness plus outstanding amounts under the accounts receivable securitization facility, less the aggregate amount of certain unrestricted cash and unrestricted permitted investments, as defined, over consolidated EBITDA, as defined), a maximum senior secured net leverage ratio (total consolidated senior secured indebtedness, less the aggregate amount of certain unrestricted cash and unrestricted permitted investments, as defined, over consolidated EBITDA, as defined) and a minimum interest expense coverage ratio (consolidated EBITDA, as defined, over the sum of consolidated cash interest expense, as defined, and preferred dividends, as defined). At ~~September~~June 30, ~~2018,~~2019, the Company was in compliance with its financial covenants contained in the Credit Agreement.

In September 2017, the Company amended its existing credit agreement in connection with the Senior Notes offering and extended the maturity date, increased the permitted borrowings denominated in specific foreign currencies, removed the Term Loan A Facility and resized the revolving credit facility. The Company incurred fees and expenses of approximately $1.1 million related to the amendment, all of which was capitalized as debt issuance costs. The Company also recorded approximately $2.0 million non-cash expense related to the write-off of previously capitalized deferred financing fees within debt financing and related expenses in the accompanying consolidated statement of income.

~~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 September 30, 2017, and $0.1 million and $0.9 million for the nine months ended September 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~~other debt 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, 2019				December 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Senior Notes	$	300,000	$	303,000	$	300,000	$	282,750
Other debt	60		60		—		—

September 30, 2018 December 31, 2017
Carrying Amount Fair Value Carrying Amount Fair Value
Senior Notes $ 300,000
$ 288,000
$ 300,000
$ 300,750
Revolving credit facility —
—
10,810
10,490

910. Derivative Instruments

Derivatives Designated as Hedging Instruments

In October ~~2017,~~2018, 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~~$125.0 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%~~2.9% of the notional amount. At inception, the cross-currency swaps were designated as net investment hedges.

In October 2018, immediately prior to entering into these cross-currency swap agreements, the Company terminated its existing cross-currency swap agreements, de-designating the swaps as net investment hedges and receiving approximately $1.1 million of cash. The cross-currency swap agreements were entered into in October 2017 and hedged the Company's net investment in Euro-denominated assets against future volatility in the exchange rate between the U.S. dollar and the Euro. The agreements had 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 was to receive net interest payments at a fixed rate of approximately 2.1% of the notional amount.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

~~The Company has historically utilized interest rate swap agreements to fix the LIBOR-based variable portion~~As 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.~~

~~In September 2017, immediately following the debt refinancing, the Company determined the likelihood of the hedged transactions occurring was less than probable~~2019 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 September 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. At the date the Company de-designated the swaps as effective hedges, there was approximately $2.9 million (net of tax of $1.8 million) of unrealized losses remaining in AOCI, which were reclassified into debt financing and related expenses in the accompanying consolidated statement of income during the third quarter of 2017.

~~As of~~ ~~September 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, 2019		December 31, 2018
Net Investment Hedges
Cross-currency swaps	Other assets	$	2,100	$	130

Asset / (Liability) Derivatives
Derivatives designated as hedging instruments Balance Sheet Caption September 30,
2018 December 31,
2017
Net Investment Hedges
Cross-currency swaps Other long-term liabilities $ (1,880 ) $ (4,110 )

The following table summarizes the ~~loss~~income recognized in AOCI on derivative contracts designated as hedging instruments as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, and the amounts reclassified from AOCI into earnings for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (dollars in thousands):



	Amount of Income Recognized in AOCI on Derivative (Effective Portion, net of tax)					Amount of Income (Loss) Reclassified from AOCI into Earnings
						Three months ended March 31,				Six months ended June 30,
	As of June 30, 2019		As of December 31, 2018		Location of Income (Loss) Reclassified from AOCI into Earnings (Effective Portion)	2019		2018		2019		2018
Net Investment Hedges
Cross-currency swaps	$	2,420	$	940	Other income (expense), net	$	—	$	—	$	—	$	—

Amount of Loss Recognized
in AOCI on Derivative
(Effective Portion, net of tax) Amount of Loss Reclassified
from AOCI into Earnings
Three months ended
September 30, Nine months ended
September 30,

As of
September 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 $ (1,450 ) $ (3,170 ) Other income (expense), net $ —
$ —
$ —
$ —
Cash Flow Hedges
Interest rate swaps $ —
$ —
Interest expense $ —
$ 20
$ —
$ (320 )
Debt financing and related expenses $ —
$ (4,680 ) $ —
$ (4,680 )

Over the next 12 months, the Company does not expect to reclassify any pre-tax deferred ~~losses~~amounts from AOCI into earnings.

Derivatives Not Designated as Hedging Instruments

As of June 30, 2019, the Company was party to foreign currency exchange forward contracts to economically hedge changes in foreign currency rates with notional amounts of approximately $96.2 million. The Company uses foreign exchange contracts to mitigate the risk associated with fluctuations in currency rates impacting cash flows related to certain of its receivables, payables and intercompany transactions denominated in foreign currencies. The foreign exchange contracts primarily mitigate currency exposures between the U.S. dollar and the Euro, British pound and the Chinese yuan, and have various settlement dates through March 2020. These contracts are not designated as hedge instruments; therefore, gains and losses on these contracts are recognized each period directly into the consolidated statement of income.

The following table summarizes the effects of derivatives not designated as hedging instruments on the Company's consolidated statement of income (dollars in thousands):



		Amount of Income Recognized in Earnings on Derivatives
		Three months ended March 31,				Six months ended June 30,
	Location of Income Recognized in Earnings on Derivatives	2019		2018		2019		2018
Derivatives not designated as hedging instruments
Foreign exchange contracts	Other income (expense), net	$	220	$	—	$	220	$	—

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Fair Value of Derivatives

The fair value of the Company's derivatives are estimated using an income approach based on valuation techniques to convert future amounts to a single, discounted amount. Estimates of the fair value of the Company's ~~interest rate~~cross-currency swaps and ~~cross-currency swaps~~foreign exchange contracts use observable inputs such as interest rate yield curves and forward currency exchange rates. Fair value measurements and the fair value hierarchy level for the Company's assets and liabilities measured at fair value on a recurring basis as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 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, 2019
Cross-currency swaps	Recurring	$	2,100	$	—	$	2,100	$	—
Foreign exchange contracts	Recurring	$	220	$	—	$	220	$	—
December 31, 2018
Cross-currency swaps	Recurring	$	130	$	—	$	130	$	—

11. Leases

The Company leases certain equipment and facilities under non-cancelable operating leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet; expense related to these leases is recognized on a straight-line basis over the lease term.

The components of lease expense are as follows (dollars in thousands):



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating lease cost	$	2,650	$	5,120
Short-term, variable and other lease costs	590		1,190
Total lease cost	$	3,240	$	6,310

Maturities of lease liabilities are as follows (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)
September 30, 2018 Cross-currency swaps Recurring $ (1,880 ) $ —
$ (1,880 ) $ —
December 31, 2017 Cross-currency swaps Recurring $ (4,110 ) $ —
$ (4,110 ) $ —



Year ended December 31,	Operating Leases^(a)
2019 (excluding the six months ended June 30, 2019)	$	5,270
2020	9,900
2021	8,280
2022	5,630
2023	4,470
Thereafter	12,530
Total lease payments	46,080
Less: Imputed interest	(6,430		)
Present value of lease liabilities	$	39,650

__________________________


^(a)	The maturity table excludes cash flows associated with exited lease facilities. Liabilities for exited lease facilities are included in accrued liabilities and other long-term liabilities in the accompanying consolidated balance sheet.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The weighted-average remaining lease term of the Company's operating leases as of June 30, 2019 is approximately 6.1 years. The weighted-average discount rate as of June 30, 2019 is approximately 5.0%.

Cash paid for amounts included in the measurement of operating lease liabilities during the six months ended June 30, 2019 was approximately $5.1 million, and is included in cash flows provided by operating activities in the consolidated statement of cash flows.

Right-of-use assets obtained in exchange for lease liabilities during the six months ended June 30, 2019 was approximately $1.9 million.

1012. Commitments and Contingencies

Asbestos

As of ~~September~~June 30, ~~2018~~2019, the Company was a party to ~~390~~366 pending cases involving an aggregate of ~~4,833~~4,806 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, 2019	4,820	70	75	9	4,806	$	34,856	$	1,184,000
Fiscal Year Ended December 31, 2018	5,256	171	564	43	4,820	$	7,191	$	2,260,000

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
Nine Months Ended September 30, 2018 5,256
123
517
29
4,833
$ 7,603
$ 1,718,100
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.

~~TRIMAS CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

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 ~~4,833~~4,806 claims pending at ~~September~~June 30, ~~2018, 54~~2019, 61 set forth specific amounts of damages (other than those stating the statutory minimum or maximum). At ~~September~~June 30, ~~2018,~~2019, of the 5461 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 — 14 40

In addition, relatively few of the claims have reached the discovery stage and even fewer claims have gone past the discovery stage.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Total settlement costs (exclusive of defense costs) for all such cases, some of which were filed over 2025 years ago, have been approximately ~~$8.8~~$9.2 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 months, prior to the commencement of coverage under this agreement and following exhaustion of the~~The Company's primary insurance ~~coverage, during which~~exhausted in November 2018, and the Company will be solely responsible for defense costs and indemnity payments prior to the commencement of coverage under this agreement, the duration of which would be subject to the scope of damage awards and settlements paid.

Based 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.

OnIn 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.

~~TRIMAS CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

1113. Segment Information

~~In the first quarter of 2018,~~ TriMas ~~realigned its reporting structure into~~reports 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^®, and Mac Fasteners^™ ~~and Martinic Engineering~~^™ brands, develops, qualifies and manufactures highly-engineered, precision fasteners ~~and machined products~~ to serve the aerospace market.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Specialty Products – The Specialty Products segment, which includes the Norris Cylinder^™, Lamons^®~~and Arrow~~^®, Arrow^® Engine and Martinic Engineering^™brands, designs, manufactures and distributes highly-engineered steel cylinders, sealing and fastener products, ~~and~~ wellhead engines and compression systems and machined products for use within the industrial, petrochemical, ~~and~~ oil and gas exploration and refining and aerospace markets.

Segment activity is as follows (dollars in thousands):



	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Net Sales
Packaging	$	103,990		$	95,090		$	192,830		$	183,290
Aerospace	42,240			39,100			80,570			76,890
Specialty Products	93,140			90,720			187,260			181,830
Total	$	239,370		$	224,910		$	460,660		$	442,010
Operating Profit (Loss)
Packaging	$	22,640		$	22,810		$	40,280		$	42,390
Aerospace	7,010			6,450			12,750			11,040
Specialty Products	10,170			10,100			21,030			20,240
Corporate^(a)	(8,710		)	(7,840		)	(17,100		)	(6,940		)
Total	$	31,110		$	31,520		$	56,960		$	66,730

Three months ended
September 30, Nine months ended
September 30,
2018 2017 2018 2017
Net Sales
Packaging $ 95,250
$ 89,560
$ 278,540
$ 259,260
Aerospace 49,070
48,550
140,500
141,550
Specialty Products 79,460
71,220
246,750
221,720
Total $ 223,780
$ 209,330
$ 665,790
$ 622,530
Operating Profit (Loss)
Packaging $ 22,060
$ 23,140
$ 64,450
$ 61,630
Aerospace 8,290
7,810
20,680
19,860
Specialty Products 7,720
5,000
26,610
11,770
Corporate^(a)
(8,190 ) (7,660 ) (15,130 ) (22,640 )
Total $ 29,880
$ 28,290
$ 96,610
$ 70,620

__________________________


^(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,~~12, "Commitments and Contingencies," for further details.

~~TRIMAS CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

1214. Equity Awards

Stock Options

The Company did not grant any stock option awards during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019. Information related to stock options at ~~September~~June 30, ~~2018~~2019 is as follows:



	Number of Stock Options		Weighted Average Option Price		Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2019	206,854		$	13.19
Granted	—		—
Exercised	(56,854	)	0.86
Cancelled	—		—
Expired	—		—
Outstanding at June 30, 2019	150,000		$	17.87	7.1	$	1,965,000

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 September 30, 2018 206,854
$ 13.19
5.8 $ 3,558,967

As of ~~September~~June 30, ~~2018, 156,854~~2019, 100,000 stock options outstanding were exercisable under the Company's long-term equity incentive plans. As of ~~September~~June 30, ~~2018,~~2019, there was approximately $0.1 million of unrecognized compensation cost related to stock options that is expected to be recorded ~~over a weighted average period~~during the third quarter of ~~0.8 years.~~2019.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The Company recognized approximately ~~$0.1 million and~~ $0.1 million of stock-based compensation expense related to stock options during each of the three ~~months~~month periods ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and approximately ~~$0.2~~$0.1 million and ~~$0.5~~$0.2 million of stock-based compensation expense during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. The stock-based compensation expense is included in selling, general and administrative expenses in the accompanying consolidated statement of income.

Restricted Stock Units

The Company awarded the following restricted stock units ("RSUs") during the ~~nine~~six months ended ~~September~~June 30, ~~2018:~~2019:

granted ~~141,203~~129,929 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~~25,872 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 ~~5,907~~2,711 RSUs related to director fee deferrals ~~for~~during the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. 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.

~~TRIMAS CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

During ~~2018,~~2019, the Company awarded ~~104,532~~95,882 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~~2019 and ending December 31, ~~2020.~~2021. 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~~estimates 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%~~2.29% and annualized volatility of ~~30.2%~~26.7%. 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~~each metric ~~and~~from 0% of the target award to a maximum of 200% of the target ~~award for the TSR metric.~~award.

During ~~2015,~~2016, 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~~January 1, 2016 and ending on December 31, ~~2017.~~2018. 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%~~139.0% of the target on a weighted average basis, resulting in an increase of ~~31,021~~38,315 shares during the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019.

Information related to RSUs at ~~September~~June 30, ~~2018~~2019 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, 2019	663,128		$	26.67
Granted	292,709		31.17
Vested	(290,164	)	22.30
Cancelled	(3,420	)	26.32
Outstanding at June 30, 2019	662,253		$	30.57	1.4	$	20,509,975

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 308,493
30.29

  Vested (338,141 ) 21.61

  Cancelled (34,931 ) 23.29

Outstanding at September 30, 2018 662,357
$ 26.65
1.2 $ 20,135,653

As of ~~September~~June 30, ~~2018~~2019, there was approximately ~~$9.3~~$12.3 million of unrecognized compensation cost related to unvested RSUs that is expected to be recorded over a weighted average period of ~~2.2~~ ~~years.~~2.3 years.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The Company recognized stock-based compensation expense related to RSUs of approximately $1.7 million and ~~$1.6~~$1.3 million during the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively and approximately ~~$4.2~~$3.0 million and ~~$4.6~~$2.5 million during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~,2018, respectively. The stock-based compensation expense is included in selling, general and administrative expenses in the accompanying consolidated statement of income.

~~TRIMAS CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

1315. Earnings per Share

Net income is divided by the weighted average number of common shares outstanding during the period to calculate basic earnings per share. Diluted earnings per share is calculated to give effect to stock options and RSUs. The following table summarizes the dilutive effect of RSUs and options to purchase common stock for the ~~three and nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017:~~2018:


	Three months ended September 30,		Nine months ended September 30,		Three months ended June 30,		Six months ended June 30,
	2018	2017	2018	2017	2019	2018	2019	2018
Weighted average common shares—basic	45,850,288	45,721,155	45,850,187	45,669,782	45,592,075	45,920,307	45,585,445	45,850,137
Dilutive effect of restricted stock units	203,800	233,859	246,347	226,617	174,571	176,658	253,796	267,620
Dilutive effect of stock options	112,470	74,347	102,350	57,179	61,669	103,792	71,008	97,290
Weighted average common shares—diluted	46,166,558	46,029,361	46,198,884	45,953,578	45,828,315	46,200,757	45,910,249	46,215,047

In ~~November 2015,~~February 2019, the Company announced its Board of Directors had authorized the Company to increase the purchase of its common stock up to ~~$50~~$75 million in the aggregate. The previous authorization, approved in November 2015, authorized up to $50 million in share repurchases. In the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019, the Company purchased ~~23,191~~502,500 and ~~124,138~~527,400 shares of its outstanding common stock for approximately ~~$0.7~~$14.7 million and ~~$3.6~~$15.4 million, respectively. ~~The~~During the the three and six months ended June 30, 2018, the Company ~~did not purchase any~~purchased 100,947 shares of its outstanding common stock ~~in the three and nine months ended September 30, 2017.~~for approximately $2.9 million.

1416. 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~~ ~~nine months ended September 30, 2018~~ ~~and~~ ~~2017~~are as follows (dollars in thousands):



	Pension Plans
	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Service costs	$	260		$	280		$	520		$	580
Interest costs	270			290			540			590
Expected return on plan assets	(350		)	(420		)	(700		)	(850		)
Settlement/curtailment loss	—			2,500			—			2,500
Amortization of net loss	150			240			290			490
Net periodic benefit cost	$	330		$	2,890		$	650		$	3,310

Pension Plans
Three months ended
September 30, Nine months ended
September 30,
2018 2017 2018 2017
Service costs $ 270
$ 290
$ 850
$ 840
Interest costs 260
310
850
950
Expected return on plan assets (340 ) (370 ) (1,190 ) (1,100 )
Settlement/curtailment loss —
—
2,500
—
Amortization of net loss 180
260
670
760
Net periodic benefit cost $ 370
$ 490
$ 3,680
$ 1,450

The service cost component of net periodic benefit cost is recorded in cost of goods sold and selling, general and administrative expenses, while non-service cost components are recorded in other income (expense), net in the accompanying consolidated statement of 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 income (expense), net in the accompanying consolidated statement of income.

The Company contributed approximately $0.8 million and $2.0 million to its defined benefit pension plans during the three and nine months ended September 30, 2018, respectively. The Company expects to contribute approximately $2.4 million to its defined benefit pension plans for the full year ~~2018~~.

TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

15The Company contributed approximately $0.5 million and $1.0 million to its defined benefit pension plans during the three and six months ended June 30, 2019, respectively. The Company expects to contribute approximately $1.9 million to its defined benefit pension plans for the full year 2019.

17. Other Comprehensive Income (Loss)

Changes in AOCI by component for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 are summarized as follows, net of tax (dollars in thousands):



	Defined Benefit Plans			Derivative Instruments			Foreign Currency Translation			Total
Balance, December 31, 2018	$	(7,200	)	$	940		$	(10,590	)	$	(16,850	)
Net unrealized gains (losses) arising during the period ^(a)	—			1,490			(200		)	1,290
Less: Net realized losses reclassified to net income ^(b)	(200		)	—			—			(200		)
Net current-period other comprehensive income (loss)	200			1,490			(200		)	1,490
Reclassification of stranded tax effects	(1,260		)	(10		)	—			(1,270		)
Balance, June 30, 2019	$	(8,260	)	$	2,420		$	(10,790	)	$	(16,630	)

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)
—
1,720
(6,300 ) (4,580 )
Less: Net realized losses reclassified to net income ^(b)
(3,030 ) —
—
(3,030 )
Net current-period other comprehensive income (loss) 3,030
1,720
(6,300 ) (1,550 )
Balance, September 30, 2018 $ (7,420 ) $ (1,450 ) $ (10,010 ) $ (18,880 )

__________________________


^(a)	Derivative instruments, net of income tax of approximately $0.5 million. See Note 9,10, "Derivative Instruments," for further details.


^(b)	Defined benefit plans, net of income tax of approximately ~~$0.9~~$0.1 million. See Note ~~14,~~16, "Defined Benefit Plans," for further details.

Changes in AOCI by component for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 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)
—
(580 ) 4,640
4,060
Less: Net realized losses reclassified to net income ^(b)
(500 ) (3,100 ) —
(3,600 )
Net current-period other comprehensive income 500
2,520
4,640
7,660
Balance, September 30, 2017 $ (11,620 ) $ —
$ (5,120 ) $ (16,740 )



	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 ~~$0.4~~$0.5 million. See Note 9,10, "Derivative Instruments," for further details.


^(b)	Defined benefit plans, net of income tax of approximately ~~$0.2~~$0.8 million. See Note ~~14,~~16, "Defined Benefit Plans," for further details. ~~Derivative instruments, net of income tax of approximately $1.9 million. See Note 9, "Derivative Instruments," for further details.~~

~~16. Subsequent Event~~

In October 2018, the Company terminated its existing cross-currency swap agreements, de-designating the swaps as net investment hedges and receiving approximately $1.1 million of cash. The Company also entered into new 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. The new agreements have a five year tenor at notional amounts declining from $125.0 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 2.9% of the notional amount.

Item 2.2. 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.~~2018.

Introduction

We are a diversified ~~industrial~~global manufacturer and provider 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~~solve application-specific challenges that our ~~customers' application-specific needs.~~customers face. We believe our businesses share important and distinguishing characteristics, including: well-recognized and leading brand names in the ~~niche~~focused markets we serve; ~~established distribution networks;~~ innovative product technologies and features; customer approved processes and qualified products; established distribution networks; relatively low ongoing capital investment requirements; strong cash flow conversion and long-term growth opportunities. While the majority of our revenue is in the United States, we manufacture and supply products globally to a wide range of companies. We 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~~that may be significantly impacted by changes in economic conditions.

~~During the third~~Our overall second quarter ~~of 2018, there~~2019 financial results were ~~four significant factors impacting~~largely consistent with our ~~reported results as compared to the third quarter of 2017.~~

~~The first factor was an increase in~~expectations. We achieved sales ~~levels across most of our end markets. Third quarter 2018 net sales increased by 6.9% compared with third quarter 2017, with~~ increases in each of our ~~three~~ reportable segments ~~driven primarily~~compared to second quarter 2018 as result of organic growth initiatives as well as incremental sales generated by ~~growth~~the two businesses we acquired in 2019. Demand levels in our ~~health,~~end markets have been generally stable, except for the upstream oil and gas end market, which softened in second quarter 2019 compared with second quarter 2018 due to reduced drilling investment activity as a result of lower active rig counts in the U.S. and Canada.

The most significant drivers of change in results of operations compared with second quarter 2018 were the impact of our two acquisitions in 2019 and a one-time charge of $2.5 million related to the settlement of defined benefit obligations in second quarter 2018 that did not repeat in 2019.

We acquired Plastic Srl and Taplast S.p.A. ("Taplast") in January 2019 and April 2019, respectively. Plastic Srl is a manufacturer of single-bodied and assembled polymeric caps and closures for use in home care product applications. Taplast is a designer and manufacturer of dispensers, closures and containers for the beauty and ~~home~~personal care, household, and food and beverage packaging end ~~market~~markets. These acquisitions contributed $9.6 million of sales during second quarter 2019 within our Packaging reportable segment, and ~~increased volume of steel cylinder~~provide opportunities for future growth, as well as additional manufacturing and ~~oil and gas-related products within our Specialty Products reportable segment. We believe general industrial year-to-date activity levels have been higher in 2018 versus 2017, particularly~~engineering capacity, in the ~~United States,~~European market. The current profit margins of these acquired businesses are below those of our Packaging base product lines. While Plastic Srl and ~~we are well positioned~~Taplast were accretive to ~~take advantage of~~second quarter 2019 operating profit dollars, their relative contribution at a lower margin reduced the ~~incremental volume opportunities.~~

~~The second factor was continued positive momentum as we further leveraged~~overall Packaging reportable segment operating profit margin by more than 100 basis points. We expect, over time, to fully integrate these acquisitions utilizing the TriMas Business Model ("TBM"), ~~which provides for a common platform to operate~~gaining planned synergies and ~~manage our multi-industry set of businesses. Using~~improving margins over time.

During the TBM, we have continued to drive and leverage operating improvements, as well as continuously evaluate, realign and streamline fixed and selling, general and administrative expenses. Operating under the TBM contributed to increased operating profit on higher sales levels as we leveraged our fixed costs at a greater rate than in third 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. In the thirdsecond quarter of 2018, we ~~significantly benefited from the reduction~~purchased an annuity contract to transfer certain retiree defined benefit obligations to an insurance company. The annuity contract was funded by plan assets. We recognized a one-time settlement charge of approximately $2.5 million, which is included in other income (expense), net in the ~~U.S. Federal corporate tax rate from 35%~~accompanying consolidated statement of income.

One additional factor significantly impacting the year-to-date June 2019 versus year-to-date June 2018 results of operations relates to ~~21%, which is~~ the ~~primary reason for a decrease in our overall effective tax rate from 26.6% in third quarter 2017 to 15.4% in third quarter 2018.~~

~~The fourth factor impacting our third~~first quarter 2018 results was an increase in material costs, primarily related to oil and metal-based commodities. We believe these increased costs unfavorably impacted our third quarter by approximately $2 million compared to 2017, primarily in our Packaging reportable segment. Costs for these commodities were higher than in 2017 and have trended upward throughout 2018, and we believe have further increased in third quarter as a resulttermination 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 better leverage 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 three quarters of 2018, historically we have been generally able to mitigate the impact of increased commodity costs over time.

~~In addition to the third 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 non-cash 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~~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. OnIn 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~~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~~purchases 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. In mid 2018, material costs began to rise, increasing through the remainder of 2018, primarily as a direct and indirect result of foreign trade policy changes. These cost increases primarily related to oil and metal-based commodities. We took swift actions, and continue to take actions, to mitigate such cost increases, including implementing commercial pricing adjustments, resourcing to alternate suppliers and insourcing of previously sourced products to better leverage our global manufacturing footprint. As a result of these actions, as well as softening of certain underlying commodity costs, we have largely mitigated the impact such that material costs were not a significant driver of year-over-year profit change. Although we believe 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.~~increases or otherwise mitigate the impacts to our operating results.

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, demand for our Arrow Engine ~~business is most directly impacted by these factors, as its~~business' engine, ~~pumpjack~~pump jack and compressor products are impacted by active oil and gas rig counts and ~~well completion~~wellhead investment activities. In addition, a small portion of our Lamons business serves upstream customers at oil well sites that are impacted by fluctuating oil prices. The majority of ~~this~~the Lamons business provides ~~parts for~~sealing and fastening products to 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~~during 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 prices 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 of the TBM, our businesses target cost savings from Kaizen and continuous improvement ~~and productivity~~ initiatives in an effort to ~~lower~~reduce input and conversion costs and/or increase throughput and yield rates with a goal of at least covering inflationary and market cost increases. In addition, we continuously review our ~~costs~~cost structures to ensure alignment with current market demand.

~~As our businesses continue to generate cash, we~~We continue to evaluate ~~strategies~~alternatives to redeploy the cash generated by our ~~cash,~~businesses, one of which includes returning capital to our shareholders. In ~~November 2015,~~February 2019, we announced our Board of Directors had authorized usthe Company to increase the purchase ~~our~~of its common stock up to $75 million in the aggregate. The previous authorization, approved in November 2015, authorized up to $50 million in ~~the aggregate.~~share repurchases. In the three and ~~nine~~six months ended ~~September~~June 30, 2019, we purchased 502,500 and 527,400 shares of our outstanding common stock, each of which represents more than 1% of our outstanding common shares as of December 31, 2018, for approximately $14.7 million and $15.4 million, respectively. During the three and six months ended June 30, 2018, ~~the Company~~we purchased ~~23,191 and 124,138~~100,947 shares of ~~its~~our outstanding common stock for approximately ~~$0.7 million and $3.6 million, respectively. The 2018 share purchases represent the first stock buyback activity under this authorization.~~$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.

Segment Information and Supplemental Analysis

The following table summarizes financial information for our reportable segments for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (dollars in thousands):


	Three months ended September 30,										Three months ended June 30,
	2018			As a Percentage of Net Sales		2017			As a Percentage of Net Sales		2019			As a Percentage of Net Sales		2018			As a Percentage of Net Sales
Net Sales
Packaging	$	95,250		42.6	%	$	89,560		42.8	%	$	103,990		43.4	%	$	95,090		42.3	%
Aerospace	49,070			21.9	%	48,550			23.2	%	42,240			17.7	%	39,100			17.4	%
Specialty Products	79,460			35.5	%	71,220			34.0	%	93,140			38.9	%	90,720			40.3	%
Total	$	223,780		100.0	%	$	209,330		100.0	%	$	239,370		100.0	%	$	224,910		100.0	%
Gross Profit
Packaging	$	30,690		32.2	%	$	31,880		35.6	%	$	32,740		31.5	%	$	31,630		33.3	%
Aerospace	13,850			28.2	%	13,500			27.8	%	11,940			28.3	%	11,420			29.2	%
Specialty Products	17,180			21.6	%	13,510			19.0	%	20,670			22.2	%	21,730			24.0	%
Total	$	61,720		27.6	%	$	58,890		28.1	%	$	65,350		27.3	%	$	64,780		28.8	%
Selling, General and Administrative Expenses
Packaging	$	8,630		9.1	%	$	8,740		9.8	%	$	10,100		9.7	%	$	8,820		9.3	%
Aerospace	5,560			11.3	%	5,690			11.7	%	4,930			11.7	%	4,960			12.7	%
Specialty Products	9,460			11.9	%	8,510			11.9	%	10,500			11.3	%	11,640			12.8	%
Corporate	8,190			N/A		7,660			N/A		8,710			N/A		7,840			N/A
Total	$	31,840		14.2	%	$	30,600		14.6	%	$	34,240		14.3	%	$	33,260		14.8	%
Operating Profit (Loss)
Packaging	$	22,060		23.2	%	$	23,140		25.8	%	$	22,640		21.8	%	$	22,810		24.0	%
Aerospace	8,290			16.9	%	7,810			16.1	%	7,010			16.6	%	6,450			16.5	%
Specialty Products	7,720			9.7	%	5,000			7.0	%	10,170			10.9	%	10,100			11.1	%
Corporate	(8,190		)	N/A		(7,660		)	N/A		(8,710		)	N/A		(7,840		)	N/A
Total	$	29,880		13.4	%	$	28,290		13.5	%	$	31,110		13.0	%	$	31,520		14.0	%
Depreciation
Packaging	$	2,950		3.1	%	$	3,160		3.5	%	$	3,800		3.7	%	$	3,340		3.5	%
Aerospace	1,590			3.2	%	1,450			3.0	%	1,490			3.5	%	1,490			3.8	%
Specialty Products	1,160			1.5	%	1,210			1.7	%	1,480			1.6	%	1,640			1.8	%
Corporate	60			N/A		20			N/A		70			N/A		70			N/A
Total	$	5,760		2.6	%	$	5,840		2.8	%	$	6,840		2.9	%	$	6,540		2.9	%
Amortization
Packaging	$	2,270		2.4	%	$	2,320		2.6	%	$	2,480		2.4	%	$	2,270		2.4	%
Aerospace	2,160			4.4	%	2,160			4.4	%	2,000			4.7	%	2,030			5.2	%
Specialty Products	430			0.5	%	450			0.6	%	560			0.6	%	530			0.6	%
Corporate	—			N/A		—			N/A		—			N/A		—			N/A
Total	$	4,860		2.2	%	$	4,930		2.4	%	$	5,040		2.1	%	$	4,830		2.1	%

The following table summarizes financial information for our reportable segments for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (dollars in thousands):


	Nine months ended September 30,										Six months ended June 30,
	2018			As a Percentage of Net Sales		2017			As a Percentage of Net Sales		2019			As a Percentage of Net Sales		2018			As a Percentage of Net Sales
Net Sales
Packaging	$	278,540		41.8	%	$	259,260		41.7	%	$	192,830		41.9	%	$	183,290		41.5	%
Aerospace	140,500			21.1	%	141,550			22.7	%	80,570			17.5	%	76,890			17.4	%
Specialty Products	246,750			37.1	%	221,720			35.6	%	187,260			40.6	%	181,830			41.1	%
Total	$	665,790		100.0	%	$	622,530		100.0	%	$	460,660		100.0	%	$	442,010		100.0	%
Gross Profit
Packaging	$	91,550		32.9	%	$	89,770		34.6	%	$	60,710		31.5	%	$	60,860		33.2	%
Aerospace	37,750			26.9	%	36,710			25.9	%	23,140			28.7	%	21,480			27.9	%
Specialty Products	57,580			23.3	%	43,700			19.7	%	41,320			22.1	%	42,820			23.5	%
Total	$	186,880		28.1	%	$	170,180		27.3	%	$	125,170		27.2	%	$	125,160		28.3	%
Selling, General and Administrative Expenses
Packaging	$	27,100		9.7	%	$	28,140		10.9	%	$	20,430		10.6	%	$	18,470		10.1	%
Aerospace	17,070			12.1	%	16,850			11.9	%	10,390			12.9	%	10,440			13.6	%
Specialty Products	30,970			12.6	%	31,930			14.4	%	20,290			10.8	%	22,580			12.4	%
Corporate	15,130			N/A		22,640			N/A		17,100			N/A		6,940			N/A
Total	$	90,270		13.6	%	$	99,560		16.0	%	$	68,210		14.8	%	$	58,430		13.2	%
Operating Profit (Loss)
Packaging	$	64,450		23.1	%	$	61,630		23.8	%	$	40,280		20.9	%	$	42,390		23.1	%
Aerospace	20,680			14.7	%	19,860			14.0	%	12,750			15.8	%	11,040			14.4	%
Specialty Products	26,610			10.8	%	11,770			5.3	%	21,030			11.2	%	20,240			11.1	%
Corporate	(15,130		)	N/A		(22,640		)	N/A		(17,100		)	N/A		(6,940		)	N/A
Total	$	96,610		14.5	%	$	70,620		11.3	%	$	56,960		12.4	%	$	66,730		15.1	%
Depreciation
Packaging	$	9,510		3.4	%	$	9,250		3.6	%	$	7,060		3.7	%	$	6,560		3.6	%
Aerospace	4,940			3.5	%	4,370			3.1	%	2,950			3.7	%	2,950			3.8	%
Specialty Products	3,980			1.6	%	5,120			2.3	%	2,920			1.6	%	3,220			1.8	%
Corporate	200			N/A		150			N/A		140			N/A		140			N/A
Total	$	18,630		2.8	%	$	18,890		3.0	%	$	13,070		2.8	%	$	12,870		2.9	%
Amortization
Packaging	$	6,840		2.5	%	$	7,100		2.7	%	$	4,850		2.5	%	$	4,570		2.5	%
Aerospace	6,470			4.6	%	6,470			4.6	%	4,010			5.0	%	4,060			5.3	%
Specialty Products	1,290			0.5	%	1,350			0.6	%	1,110			0.6	%	1,110			0.6	%
Corporate	—			N/A		—			N/A		—			N/A		—			N/A
Total	$	14,600		2.2	%	$	14,920		2.4	%	$	9,970		2.2	%	$	9,740		2.2	%

Results of Operations

The principal factors impacting us during the three months ended ~~September~~June 30, ~~2018,~~2019, compared with the three months ended ~~September~~June 30, ~~2017,~~2018, were:

increased sales levels ~~across our end markets,~~in all three reportable segments, primarily driven by growth in our health, beauty and home care end market within our Packaging reportable segment and ~~from higher demand for our industrial and oil and gas-related products~~increased throughput within our ~~Specialty Products~~Aerospace reportable segment;

~~benefits of leveraging the TBM, as we continue to drive operating improvements, as well as evaluate, realign and streamline fixed costs and selling, general and administrative expenses;~~

the impact of ~~fees~~our Plastic Srl and ~~expenses~~Taplast acquisitions in 2019 within our Packaging reportable segment; and

the recognition of a one-time, non-cash settlement charge of approximately $2.5 million in second quarter 2018 related to our ~~third quarter 2017 refinancing activities;~~

~~the impact of the Tax Reform Act, contributing~~decision to ~~a lower overall effective tax rate; and~~

~~higher commodity costs, primarily related~~purchase an annuity contract to ~~oil and steel-based raw materials, primarily impacting our Packaging reportable segment.~~

transfer certain U.S. pension obligations to an insurance company.

Three Months Ended ~~September~~June 30, ~~2018~~2019 Compared with Three Months Ended ~~September~~June 30, ~~2017~~2018

Overall, net sales increased approximately $14.5 million, or ~~6.9%~~6.4%, to ~~$223.8~~$239.4 million for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared with ~~$209.3~~$224.9 million in the three months ended ~~September~~June 30, ~~2017,~~2018. The acquisitions of Taplast, in April 2019, and Plastic Srl, in January 2019, contributed approximately $9.6 million of sales in our Packaging reportable segment. Sales of our historical businesses increased by approximately $6.8 million, primarily driven by ~~$5.5~~approximately $4.0 million higher sales ofwithin our Packaging reportable segment's health, beauty and home care products ~~within our Packaging reportable segment as well as $4.2~~and $3.1 million higher sales ~~of our oil and gas-related products and $4.1 million higher sales of industrial cylinder products, both~~ within our ~~Specialty Products~~Aerospace reportable segment. These increases were partially offset by approximately ~~$0.6~~$2.0 million of net unfavorable currency exchange, as our reported results in U.S. dollars were negatively impacted as a result of the stronger U.S. dollar relative to foreign currencies.

Gross profit margin (gross profit as a percentage of sales) approximated ~~27.6%~~27.3% and ~~28.1%~~28.8% for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Gross ~~profit dollars increased primarily as a result of higher sales levels, while gross~~ profit margin decreased, as the impact of higher sales levels was more than offset by ~~higher commodity-related costs and~~ a less favorable product sales ~~mix.~~mix, resulting from higher levels of growth in our lower gross margin reportable segments, as well as due to the recent acquisitions yielding lower gross profit margins. Gross profit margin further declined due to a $1.1 million reduction in expense in second quarter 2018 related to a change in our estimate of future unrecoverable lease obligations for our former Reynosa, Mexico facility that did not repeat in 2019, and as a result of unfavorable currency exchange.

Operating profit margin (operating profit as a percentage of sales) approximated ~~13.4%~~13.0% and ~~13.5%~~14.0% for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Operating profit ~~increased~~decreased approximately ~~$1.6~~$0.4 million, or ~~5.6%~~1.3%, to ~~$29.9~~$31.1 million for the three months ended ~~September~~June 30, ~~2018,~~2019, from ~~$28.3~~$31.5 million for the three months ended ~~September~~June 30, ~~2017 primarily due to~~2018. Operating profit and related margin declined as the impact of higher sales levels ~~which were partially~~was more than offset by ~~higher commodity-related costs,~~ a less favorable product sales mix, increases in purchase accounting expenses and ~~slightly higher selling, general~~professional fees supporting corporate development activities, and ~~administrative expenses, primarily in our Specialty Products reportable segment.~~as a result of unfavorable currency exchange.

Interest expense ~~increased~~remained flat at approximately ~~$0.1 million, to~~ $3.5 million for the three months ended ~~September~~June 30, 2019 and 2018, as ~~compared to $3.4 million for the three months ended September 30, 2017, as an increase~~there was no significant change in our ~~interest rates more than offset lower weighted average borrowings.~~

~~In September 2017, we 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~~debt structure, and the majority of the Securities Act of 1933, as amended. We incurred debt financing and related expenses of approximately $6.6 million for the three months ended September 30, 2017, related to costs associated with the issuance of our Senior Notes, repayment of all outstanding obligations of our former senior secured term loan A facility due 2020 ("Term Loan A Facility"), termination of the interest rate swaps and the amendment of our existing credit agreement.borrowings are at a fixed rate.

Other income (expense), net decreased approximately ~~$0.8~~$3.5 million, to ~~$0.4~~$1.3 million of other income, net for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$0.4~~$2.2 million of other expense, net for the three months ended ~~September~~June 30, 2018, primarily due to a one-time charge of $2.5 million related to the settlement of defined benefit obligations in second quarter 2018 that did not repeat in second quarter 2019, and an increase in gains on transactions denominated in foreign currencies.

The effective income tax rate for the three months ended ~~September~~June 30, 2019 and 2018 was 24.0% and ~~2017 was 15.4% and 26.6%~~24.2%, 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 recognized a netgenerating fewer losses at certain foreign subsidiaries where no tax benefit ~~of approximately $2.7 million~~could be recorded in the three months ended ~~September~~June 30, ~~2018 related~~2019 as compared to ~~provision to return adjustments for our U.S. Federal tax return, which included an approximate $1.1 million benefit due to additional regulations that were issued during~~ the three months ended ~~September~~June 30, ~~2018 in connection with the Tax Reform Act.~~2018.

Net income increased by approximately ~~$9.6~~$2.4 million, to ~~$22.7~~$22.0 million for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$13.1~~$19.6 million for the three months ended ~~September~~June 30, ~~2017.~~2018. The increase in net income was ~~primarily~~ the result of a decrease in debt financing and related expenses of approximately $6.6 million, an increase in operating profit of approximately $1.6 million, a decrease in income tax expense of approximately $0.6 million and a decrease in other income (expense), net of approximately ~~$0.8~~$3.5 million, partially offset by an increase in ~~interest~~income tax expense of approximately ~~$0.1~~$0.7 million and a decrease in operating profit of approximately $0.4 million.

See below for a discussion of operating results by segment.

Packaging. Net sales increased approximately $~~5.7~~8.9 million, or ~~6.4%~~9.4%, to $~~95.3~~104.0 million in the three months ended ~~September~~June 30, ~~2018~~2019, as compared to $~~89.6~~95.1 million in the three months ended ~~September~~June 30, ~~2017.~~2018. The acquisitions of Taplast, in April 2019, and Plastic Srl, in January 2019, contributed approximately $9.6 million of sales. Sales of our health, beauty and home care products increased approximately ~~$5.5~~$4.0 million, primarily due to higher demand in ~~Asia~~North America and ~~North America. Sales~~Europe. These increases were partially offset by a decrease in sales of our ~~industrial closures increased~~food and beverage products of approximately ~~$1.8~~$2.8 million, primarily due to ~~higher~~lower sales of pumps as well as softer overall end market demand in North America. Sales of our ~~food and beverage~~industrial products ~~decreased~~declined by approximately ~~$1.0 million.~~$0.2 million due to lower end market demand in North America. Additionally, net sales decreased by approximately ~~$0.6~~$1.7 million due to unfavorable currency exchange, as our reported results in U.S. dollars were negatively impacted as a result of the stronger U.S. dollar relative to foreign currencies.

Packaging's gross profit ~~decreased~~increased approximately ~~$1.2~~$1.1 million to ~~$30.7~~$32.7 million, or ~~32.2%~~31.5% of sales, in the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$31.9~~$31.6 million, or ~~35.6%~~33.3% of sales, in the three months ended ~~September~~June 30, ~~2017. Gross~~2018. Although gross profit dollars increased due to higher sales, gross profit margin declined primarily due to a less favorable product sales mix, as our acquired companies have lower margins than the Packaging base business, impacting our gross margin by more than 100 basis points. In addition, our health, beauty and home care end market products comprised a larger percentage of net sales in second quarter 2019, and yield a lower gross profit margin than the remainder of this segment. Lastly, gross profit decreased by approximately ~~$2.0~~$0.7 million due to unfavorable currency exchange, as our reported results in U.S. dollars were negatively impacted as a result of the stronger U.S. dollar relative to foreign currencies.

Packaging's selling, general and administrative expenses increased approximately $1.3 million to $10.1 million, or 9.7% of sales, in the three months ended June 30, 2019, as compared to $8.8 million, or 9.3% of sales, in the three months ended June 30, 2018, primarily due higher ~~resin-based~~ongoing selling, general and ~~steel raw material~~administrative costs ~~which increased during~~associated with our 2019 acquisitions.

Packaging's operating profit decreased approximately $0.2 million to $22.6 million, or 21.8% of sales, in the ~~quarter and resin price escalation clauses and other measures had not yet taken effect~~three months ended June 30, 2019, as compared to ~~recover~~$22.8 million, or ~~offset. In addition, while profit increased on higher~~24.0% of sales, ~~levels, this~~in the three months ended June 30, 2018, as the impact ~~was partially offset by~~of a less favorable product sales mix and ~~continued pricing pressures, most notably~~unfavorable foreign currency exchange more than offset the impact of higher sales levels.

Aerospace. Net sales for the three months ended June 30, 2019increased approximately $3.1 million, or 8.0%, to $42.2 million, as compared to $39.1 million in the ~~health, beauty~~three months ended June 30, 2018, due to steady demand levels for fastener products combined with improved production throughput at our Commerce, California and ~~home care end market.~~Ottawa, Kansas manufacturing facilities.

~~Packaging's selling,~~Gross profit within Aerospace increased approximately $0.5 million to $11.9 million, or 28.3% of sales, in the three months ended June 30, 2019, from $11.4 million, or 29.2% of sales, in the three months ended June 30, 2018, primarily due to the higher sales levels, while gross profit margins slightly declined due to a less favorable product sales mix, with a higher percentage of standard fastener sales in second quarter 2019 as a result of improved production throughput at our Ottawa, Kansas manufacturing facility.

Selling, general and administrative expenses decreased approximately $0.1 million to ~~$8.6~~approximately $4.9 million, or ~~9.1%~~11.7% of sales, in the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$8.7~~$5.0 million, or ~~9.8%~~12.7% of sales, in the three months ended ~~September~~June 30, ~~2017,~~2018, as ~~this segment leveraged its spending levels well on~~a result of leveraging the higher sales ~~levels.~~levels without additional selling costs.

~~Packaging's operating~~Operating profit ~~decreased~~within Aerospace increased approximately ~~$1.1~~$0.6 million to ~~$22.1~~$7.0 million, or ~~23.2%~~16.6% of sales, in the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$23.1~~$6.5 million, or ~~25.8%~~16.5% of sales in the three months ended ~~September~~June 30, 2017, as the impact of higher raw material costs, a less favorable product sales mix and pricing pressures more than offset the impact of higher sales levels and lower selling, general, and administrative expenses.

~~Aerospace.~~ ~~Net sales for the~~ ~~three months ended September 30,~~ 2018,~~increased~~ ~~approximately $0.5 million, or~~ ~~1.1%, to~~ ~~$49.1 million, as compared to~~ ~~$48.6 million~~ ~~in the~~ ~~three months ended September 30, 2017~~. Sales of our fastener products increased by approximately $0.7 million due to organic growth and improved throughput, as customer demand continued at expected levels. Sales of our machined components products decreased by approximately $0.2 million, primarily due to the impact of our decision to exit certain less profitable components.

Gross profit within Aerospace increased approximately $0.4 million to $13.9 million, or 28.2% of sales, in the three months ended September 30, 2018, from $13.5 million, or 27.8% of sales, in the three months ended September 30, 2017, primarily due to higher sales levels and as a result of improved production efficiencies and a more favorable product sales mix, which more than offset incremental costs and temporary inefficiencies related to finalizing the collective bargaining agreement in our Commerce, CA facility.

~~Selling, general and administrative expenses remained relatively flat at $5.6 million, or 11.3% of sales, in the three months ended September 30, 2018, as compared to~~ ~~$5.7 million, or~~ ~~11.7%~~ ~~of sales, in the three months ended September 30, 2017.~~

Operating profit within Aerospace increased approximately $0.5 million to $8.3 million, or 16.9% of sales, in the three months ended September 30, 2018, as compared to $7.8 million, or 16.1% of sales in the three months ended September 30, 2017, primarily due to higher sales levels, improved production efficiencies and a more favorable product sales mix.levels.

Specialty Products. Net sales for the three months ended ~~September~~June 30, ~~2018~~2019 increased approximately ~~$8.3~~$2.4 million, or ~~11.6%~~2.7%, to ~~$79.5~~$93.1 million, as compared to ~~$71.2~~$90.7 million in the three months ended ~~September~~June 30, ~~2017~~2018. ~~Sales of our industrial products increased by approximately $4.1 million due to increased sales volume of steel cylinders.~~ Sales of our oil and gas related products increased by approximately ~~$4.2~~$2.5 million, primarily as a result of ~~higher~~increased petrochemical and refining-customer demand in North America, which more than offset lower sales of engines, compressors and ~~compressors to wellhead sites~~related parts used in upstream applications due to ~~higher levels~~lower drilling investment activity as a result of ~~drilling activity~~lower rig counts in the ~~United States~~U.S. and ~~Canada, as well as~~Canada. Sales also increased by approximately $0.8 million due to ~~higher levels~~increased demand for our machined components products. Sales of ~~refinery turnaround activity. These increases were partially offset~~our industrial products decreased by approximately ~~$0.1~~$0.7 million due to decreased demand for both high pressure and acetylene steel cylinders, which we believe was due to U.S. weather-related delays in the typical spring and summer heating, ventilation and air conditioning ("HVAC") selling season. In addition, net sales decreased by approximately $0.2 million of net unfavorable currency exchange, as our reported results in U.S. dollars were negatively impacted as a result of the stronger U.S. dollar relative to foreign currencies.

Gross profit within Specialty Products ~~increased~~decreased approximately ~~$3.7~~$1.0 million to ~~$17.2~~$20.7 million, or ~~21.6%~~22.2% of sales, in the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$13.5~~$21.7 million, or ~~19.0%~~24.0% of sales, in the three months ended ~~September~~June 30, ~~2017. Higher third~~2018. In second quarter 2018, ~~sales levels improved both~~we reduced our estimate of future unrecoverable lease obligations related to the closure of our former Reynosa, Mexico facility by $1.1 million. This reduction did not repeat in 2019. In addition, gross profit ~~dollars and margin, as each business in this segment continues to leverage a lower fixed cost footprint. These increases were partially offset by higher specialty steel costs in third~~decreased from second quarter 2018 ~~used in the manufacture~~levels as a result of ~~our industrial cylinder products.~~higher freight and conversion costs.

Selling, general and administrative expenses within Specialty Products ~~increased~~decreased approximately ~~$1.0~~$1.1 million to ~~$9.5~~$10.5 million, or ~~11.9%~~11.3% of sales, in the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$8.5~~$11.6 million, or ~~11.9%~~12.8% of sales, in the three months ended ~~September~~June 30, ~~2017,~~2018, primarily due to ~~increased selling~~approximately $0.7 million of severance and restructuring costs ~~consistent~~associated with the ~~support required to meet~~exit of our Bangalore, India facility in the ~~higher sales volumes.~~second quarter of 2018 that did not repeat, and leverage of our lower cost footprint.

Operating profit within Specialty Products increased approximately ~~$2.7~~$0.1 million to ~~$7.7~~$10.2 million, or ~~9.7%~~10.9% of sales, in the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$5.0~~$10.1 million, or ~~7.0%~~11.1% of sales, in the three months ended ~~September~~June 30, ~~2017,~~2018. Operating profit and related margin was essentially flat, as ~~a result~~the impact of higher sales levels, freight and ~~a lower fixed cost structure resulting from previous business realignment actions, partially~~conversion costs in second quarter 2019 were offset by ~~higher specialty steel costs~~restructuring-related items in second quarter 2018 related to our Bangalore, India and ~~higher selling, general and administrative expenses.~~Reynosa, Mexico facilities that did not repeat in 2019.

Corporate. Corporate expenses consist of the following (dollars in millions):


	Three months ended September 30,				Three months ended June 30,
	2018		2017		2019		2018
Corporate operating expenses	$	5.7	$	5.2	$	5.9	$	5.9
Non-cash stock compensation	1.8		1.8		1.7		1.4
Legacy expenses	0.7		0.7		1.1		0.5
Corporate expenses	$	8.2	$	7.7	$	8.7	$	7.8

Corporate expenses increased approximately ~~$0.5~~$0.9 million to $~~8.2~~8.7 million for the three months ended ~~September~~June 30, ~~2018~~2019, from $~~7.7~~7.8 million for the three months ended ~~September~~June 30, ~~2017~~2018. Corporate operating expenses ~~increased~~remained flat at approximately ~~$0.5~~$5.9 million ~~primarily due to~~for the three months ended June 30, 2019 and 2018, as an increase in professional fees related to corporate development ~~activities.~~activities was offset by a decrease in expense related to the timing and estimated attainment of our annual incentive compensation plans. Legacy expenses increased approximately $0.6 million, primarily due to reductions of certain of our legacy liabilities in 2018 that did not repeat in 2019. Non-cash stock compensation increased approximately $0.3 million, primarily due to the timing and amount of equity grants in 2019 compared with 2018.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 Compared with ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018

Overall, net sales increased approximately ~~$43.3~~$18.7 million, or ~~6.9%~~4.2%, to ~~$665.8~~$460.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared with ~~$622.5~~$442.0 million in the ~~nine~~six months ended ~~September~~June 30, ~~2017, primarily driven~~2018, The acquisitions of Taplast, in April 2019, and Plastic Srl, in January 2019, contributed approximately $12.5 million of sales in our Packaging reportable segment. Sales of our historical businesses increased by ~~$13.0~~approximately $10.4 million. The primary drivers of this increase were approximately $9.0 million higher sales ofwithin our Packaging reportable segment's health, beauty and home care products, ~~within our Packaging reportable segment, as well as $12.6~~$4.6 million higher sales ~~of industrial cylinder products and $11.7 million higher~~in our oil and gas-related ~~product sales, both~~products within our Specialty Products reportable ~~segment. In addition, net~~segment and $3.7 million higher sales ~~increased~~within our Aerospace reportable segment, which were partially offset by approximately ~~$3.6~~$6.3 million ~~due to~~lower sales of our industrial and food and beverage products in our Packaging reportable segment. Our sales were also impacted by $4.2 million of net ~~favorable~~unfavorable currency exchange, as our reported results in U.S. dollars were ~~favorably~~negatively impacted as a result of the ~~weakening~~stronger U.S. dollar relative to foreign currencies.

Gross profit margin (gross profit as a percentage of sales) approximated ~~28.1%~~27.2% and ~~27.3%~~28.3% for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Gross profit ~~increased primarily~~margin decreased, as ~~a result~~the impact of higher sales levels ~~and lower facility exit costs, primarily within our Specialty Products and Packaging reportable segments. These increases were partially~~was more than offset by ~~the impact of higher commodity-related costs,~~ a less favorable product sales mix, ~~and pricing pressures, most notably~~resulting from higher levels of growth in our ~~health, beauty~~lower gross margin reportable segments, as well as due to the recent acquisitions yielding lower gross profit margins. Gross profit margin further declined due to a $1.1 million reduction in expense in the first half of 2018 related to a change in our estimate of future unrecoverable lease obligations for our former Reynosa, Mexico facility that did not repeat in the first half of 2019, and ~~home care end market within our Packaging reportable segment.~~as a result of unfavorable currency exchange.

Operating profit margin (operating profit as a percentage of sales) approximated ~~14.5%~~12.4% and ~~11.3%~~15.1% for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Operating profit ~~increased~~decreased approximately ~~$26.0~~$9.8 million, or ~~36.8%~~14.6%, to ~~$96.6~~$57.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, compared to ~~$70.6~~$66.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017. Operating~~2018. The primary driver of this year-over-year decrease in operating profit ~~increased primarily due to overall higher sales levels~~ and ~~lower costs to exit, move and consolidate facilities in the first nine months of 2018 as compared to 2017. Operating profit also increased by~~related margin was an approximately $8.2 million ~~due to a~~non-cash reduction of our recorded liability to Metaldyne in first quarter 2018 following the U.S. Bankruptcy Court's final decree to close all remaining cases and terminate the Metaldyne bankruptcy distribution trust. Operating profit and related margin further declined as the impact of higher sales levels was more than offset by a less favorable product sales mix, increases in purchase accounting expenses and professional fees supporting corporate development activities, and as a result of unfavorable currency exchange.

Interest expense ~~increased~~decreased approximately $0.3 million, to ~~$10.7~~$6.9 million, for the ~~nine~~six months ended ~~September~~June 30, 2019, as compared to $7.2 million for the six months ended June 30, 2018, as ~~compared to $10.4 million for the nine months ended September 30, 2017, as an increase~~a result of a decrease in our variable interest rates ~~more than offset~~and lower weighted average borrowings.

We incurred debt financing and related expenses of approximately $6.6 million for the nine months ended September 30, 2017, related to costs associated with the issuance of our Senior Notes, repayment of all outstanding obligations of the Term Loan A Facility, termination of the interest rate swaps and the amendment of our existing credit agreement.

Other income (expense), net ~~increased~~decreased approximately ~~$1.0~~$3.4 million, to ~~$2.3~~$0.7 million of ~~expense~~other income, net for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, from ~~$1.3~~$2.7 million of other expense, net for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, 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~~in second quarter 2018 that did not repeat in second quarter 2019, and an increase in gains on transactions denominated in foreign currencies.

The effective income tax rate for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 was 18.9% and ~~2017 was 20.4% and 33.2%~~22.7%, respectively. The decrease in the rate was primarily a result of discrete items that occurred during the ~~Tax Reform Act signed into law on December 22, 2017,~~first quarter of 2019, including the reversal of uncertain tax benefits for which ~~reduced~~ the ~~U.S. corporate income~~statute of limitations expired, excess tax rate from 35% to 21% and added the Foreign Derived Intangible Income deduction effective January 1, 2018. Our tax rate also decreased as we recognized a net tax benefit of approximately $2.7 million in the nine months ended September 30, 2018benefits related to ~~provision to return adjustments for our U.S. Federal~~share based compensation that vested in first quarter 2019, and a reduction in deferred tax ~~return, which included an approximate $1.1 million benefit due to additional regulations that were issued in connection with~~liabilities resulting from the ~~Tax Reform Act. We also~~implementation of state tax planning initiatives. In addition, we generated fewer losses at certain foreign subsidiaries where no tax benefit could be recorded in the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017. This decrease was partially offset by the Tax Reform Act’s repeal of the domestic manufacturing activities deduction and limitation of deductions related to executive compensation.~~2018.

Net income ~~increased~~decreased by approximately ~~$31.6~~$2.8 million, to ~~$66.6~~$41.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, compared to ~~$35.0~~$43.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. The ~~increase~~decrease was primarily the result of ~~an increase~~a decrease in operating profit of approximately ~~$26.0~~$9.8 million, partially offset by a decrease in ~~debt financing and related expenses~~other income (expense), net of approximately ~~$6.6~~$3.4 million, ~~and~~ a decrease in income tax expense of approximately ~~$0.3 million, partially offset by an increase in other income (expense), net of approximately $1.0~~$3.3 million, and ~~an increase~~a decrease in interest expense of approximately $0.3 million.

See below for a discussion of operating results by segment.

Packaging. Net sales increased approximately ~~$19.3~~$9.5 million, or ~~7.4%~~5.2%, to ~~$278.5~~$192.8 million in the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$259.3~~$183.3 million in the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. The Taplast and Plastic Srl acquisitions contributed approximately $12.5 million in the first half of 2019. Sales of our health, beauty and home care products increased approximately ~~$13.0~~$9.0 million, ~~driven by~~primarily due to higher ~~sales~~demand in ~~Asia~~North America and ~~North America~~Europe as well as ~~the ramp up~~continued sales growth in Asia. These increases were partially offset by a decrease in sales of ~~new products.~~our food and beverage products by approximately $6.3 million, primarily due to lower sales of pumps as well as softer overall end market demand in North America. Sales of our industrial ~~closures increased~~products declined by approximately ~~$3.4~~$1.9 million due to ~~increased~~lower end market demand in North ~~America.~~America, in part due to the unusually cold weather in the first quarter of 2019. Additionally, net sales ~~increased~~decreased by approximately ~~$2.9~~$3.8 million due to ~~favorable~~unfavorable currency exchange, as our reported results in U.S. dollars were ~~favorably~~negatively impacted as a result of the ~~weakening of the~~stronger U.S. dollar relative to foreign currencies.

Packaging's gross profit ~~increased~~decreased approximately ~~$1.8~~$0.2 million to ~~$91.6~~$60.7 million, or ~~32.9%~~31.5% of sales, in the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$89.8~~$60.9 million, or ~~34.6%~~33.2% of sales, in the ~~nine~~six months ended ~~September~~June 30, ~~2017, primarily as a result higher sales levels, as well as~~2018. Gross profit decreased by approximately $1.4 million of costs incurred in the first nine months of 2017 to consolidate manufacturing facilities in India and to finalize the move to a new facility in Mexico that did not recur and approximately $1.3$1.5 million due to ~~favorable~~unfavorable currency exchange, as our reported results in U.S. dollars were ~~favorably~~negatively impacted as a result of the ~~weakening of the~~stronger U.S. dollar relative to foreign currencies. ~~These increases were partially offset~~In addition, while gross profit dollars increased as a result of higher sales levels, gross profit margin declined due to a less favorable product sales mix, as the acquired businesses have lower margins than the Packaging base business, impacting first half 2019 gross margin by nearly 100 basis points. In addition, our health, beauty and home care end market products comprised a larger percentage of net sales in the first half of 2019, and yield a lower gross profit margin than sales to our other end markets.

Packaging's selling, general and administrative expenses increased approximately $2.0 million to $20.4 million, or 10.6% of sales, in the six months ended June 30, 2019, as compared to $18.5 million, or 10.1% of sales, in the six months ended June 30, 2018, primarily due to higher ~~steel~~ongoing selling, general and ~~resin-based material~~administrative costs associated with our 2019 acquisitions as well as non-cash purchase accounting-related expenses of approximately $0.8 million related to the write-off of the trade name acquired in the Plastic Srl acquisition that will not be used.

Packaging's operating profit decreased approximately $2.1 million to $40.3 million, or 20.9% of sales, in the six months ended June 30, 2019, as compared to $42.4 million, or 23.1% of sales, in the six months ended June 30, 2018, as the impact of unfavorable foreign currency exchange, a less favorable product sales mix and ~~pricing pressures, most notably in our health, beauty and home care end market.~~

~~Packaging's~~higher selling, general and administrative expenses ~~decreased approximately $1.0 million to $27.1 million, or 9.7%~~more than offset the impact of sales, in the nine months ended September 30, 2018, as compared to $28.1 million, or 10.9% of sales, in the nine months ended September 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, which was partially offset by higher employee-related costs in the first nine months of 2018 supporting our sales growth initiatives.

Packaging's operating profit increased approximately $2.8 million to $64.5 million, or 23.1% of sales, in the nine months ended September 30, 2018, as compared to $61.6 million, or 23.8% of sales, in the nine months ended September 30, 2017. Operating profit increased primarily due to higher sales levels, lower consolidation and move costs than in 2017, lower selling, general, and administrative expenses and approximately $0.9 million due to favorable currency exchange, all of which were partially offset by higher material costs, a less favorable product sales mix and pricing pressures.levels.

Aerospace. Net sales for the ~~nine~~six months ended ~~September~~June 30, ~~2018 decreased~~2019 increased approximately ~~$1.1~~$3.7 million, or ~~0.7%~~4.8%, to ~~$140.5~~$80.6 million, as compared to ~~$141.6~~$76.9 million in the ~~nine~~six months ended ~~September~~June 30, ~~2017. Sales of our fastener products decreased by approximately $0.8 million, primarily as a result of higher sales~~2018, due to steady demand levels ~~in the first half of 2017, as compared to the first half of 2018, when we reduced our past due order levels. Order intake activity~~ for fastener products ~~was, as expected, higher~~combined with improved production throughput in ~~the first nine months of 2018 than the first nine months of 2017. Sales of~~second quarter 2019 at our ~~machined components products decreased by approximately $0.3 million due to our decision to exit certain less profitable components.~~Commerce, California and Ottawa, Kansas manufacturing facilities.

Gross profit within Aerospace increased approximately ~~$1.0~~$1.7 million to ~~$37.8~~$23.1 million, or ~~26.9%~~28.7% of sales, in the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, from ~~$36.7~~$21.5 million, or ~~25.9%~~27.9% of sales, in the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, primarily ~~as a result of~~due to the higher sales levels and improved production ~~efficiencies and a more favorable product sales mix.~~efficiencies.

Selling, general and administrative expenses ~~increased~~remained relatively flat at approximately ~~$0.2 million to $17.1~~$10.4 million, or ~~12.1%~~12.9% of sales, in the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$16.9~~$10.4 million, or ~~11.9%~~13.6% of sales, in the ~~nine~~six months ended ~~September~~June 30, ~~2017, primarily due to a reduction in estimated uncollectable accounts receivable following cash collections from a customer~~2018, as lower ongoing selling expenses were offset by approximately $0.4 million of professional fees incurred in the ~~nine months ended September 30, 2017 that did not recur.~~

first quarter of 2019 to analyze our standard fastener product line and recommend opportunities to improve.

Operating profit within Aerospace increased approximately ~~$0.8~~$1.7 million to ~~$20.7~~$12.8 million, or ~~14.7%~~15.8% of sales, in the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$19.9~~$11.0 million, or ~~14.0%~~14.4% of sales, in the ~~nine~~six months ended ~~September~~June 30, ~~2017, as the impact of improved production efficiencies and a more favorable product mix more than offset the impact of lower~~2018, primarily due to higher sales levels and ~~higher selling, general and administrative expenses.~~improved production efficiencies.

Specialty Products. Net sales for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 increased approximately ~~$25.0~~$5.5 million, or ~~11.3%~~3.0%, to ~~$246.8~~$187.3 million, as compared to ~~$221.7~~$181.8 million in the ~~nine~~six months ended ~~September~~June 30, ~~2017. Sales of our industrial products increased by approximately $12.6 million, primarily due to increased demand for steel cylinders.~~2018. Sales of our oil and gas related products increased by approximately ~~$11.7~~$4.6 million, ~~due to higher levels~~primarily as a result of ~~refinery turnaround activity as well as~~ increased petrochemical and refining-customer demand in North America, which more than offset lower sales of engines, compressors and ~~compressors to wellhead sites~~related parts used in upstream applications due to ~~higher levels~~lower drilling investment activity as a result of ~~drilling activity~~lower rig counts in the ~~United States~~U.S. and Canada. Sales of our industrial products increased by approximately $1.3 million, primarily due to increased demand for specialty steel cylinders, which more than offset lower sales of high pressure and acetylene steel cylinder sales. In addition, net sales ~~increased~~decreased by approximately ~~$0.7~~$0.4 million of net ~~favorable~~unfavorable currency exchange, as our reported results in U.S. dollars were ~~positively~~negatively impacted as a result of the ~~weaker~~stronger U.S. dollar relative to foreign currencies.

Gross profit within Specialty Products ~~increased~~decreased approximately ~~$13.9~~$1.5 million to ~~$57.6~~$41.3 million, or ~~23.3%~~22.1% of sales, in the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$43.7~~$42.8 million, or ~~19.7%~~23.5% of sales, in the ~~nine~~six months ended ~~September~~June 30, ~~2017. Gross profit dollars and margin increased primarily as a result~~2018. In second quarter 2018, we reduced our estimate of higher sales levels, as this segment continues to leverage its lower fixed cost footprint. In addition, gross profit dollars and margin increased as a result of approximately $4.7 million lower costs in the nine months ended September 30, 2018 compared with 2017,future unrecoverable lease obligations related to the closure of our former Reynosa, Mexico facility by $1.1 million. This reduction did not repeat in 2019. In addition, gross profit decreased from first half 2018 levels as a result of higher freight and ~~Bangalore, India facilities. These increases were partially offset by higher specialty steel costs in the first nine months of 2018 used in the manufacture of our industrial cylinder products.~~conversion costs.

Selling, general and administrative expenses within Specialty Products decreased approximately ~~$0.9~~$2.3 million to ~~$31.0~~$20.3 million, or ~~12.6%~~10.8% of sales, in the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$31.9~~$22.6 million, or ~~14.4%~~12.4% of sales, in the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, primarily due to leverage of our lower cost footprint, as ~~a result of a $3.5 million charge recorded in 2017 related to the exit of the Wolverhampton, United Kingdom facility, which was partially offset by increased selling costs~~well 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.~~facility in 2018 that did not repeat in 2019.

Operating profit within Specialty Products increased approximately ~~$14.8~~$0.8 million to ~~$26.6~~$21.0 million, or ~~10.8%~~11.2% of sales, in the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$11.8~~$20.2 million, or ~~5.3%~~11.1% of sales, in the ~~nine~~six months ended ~~September~~June 30, ~~2017, as a result of higher sales levels, lower costs associated with facility closures, and~~2018, primarily due to lower selling, general and administrative ~~expenses,~~spending in the first half of 2019, which was partially offset by ~~increased specialty stock~~higher freight and conversion costs ~~related to~~in the ~~manufacture~~first half of ~~industrial cylinders.~~2019 and reduction in a lease obligation in 2018 that did not repeat in 2019.

Corporate. Corporate expenses, net consist of the following (dollars in millions):


	Nine months ended September 30,					Six months ended June 30,
	2018			2017		2019		2018
Corporate operating expenses	$	16.9		$	15.8	$	11.8	$	11.2
Non-cash stock compensation	4.4			5.1		3.0		2.6
Legacy (income) expenses, net	(6.2		)	1.7		2.3		(6.9		)
Corporate expenses, net	$	15.1		$	22.6	$	17.1	$	6.9

Corporate expenses, net ~~decreased~~increased approximately ~~$7.5~~$10.2 million to $~~15.1~~17.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019, from $~~22.6~~6.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~,2018. Legacy (income) expenses, net increased approximately $9.2 million, primarily due to the termination of the liability to Metaldyne in first quarter 2018, ~~resulting~~which resulted in an approximate $8.2 million non-cash reduction in legacy (income) expenses, net. Corporate operating expenses increased approximately ~~$1.1~~$0.6 million, primarily due to an increase in professional fees related to corporate development ~~activities and an increase in expense related to the timing and estimated attainment of our short-term incentive compensation plans.~~activities. Non-cash stock compensation ~~decreased~~increased approximately ~~$0.7~~$0.4 million, primarily due to the timing and amount of equity grants in ~~2018~~2019 compared with ~~2017.~~2018.

Liquidity and Capital Resources

Cash Flows

Cash flows provided by operating activities were approximately ~~$83.1~~$29.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to approximately ~~$72.7~~$51.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Significant changes in cash flows provided by operating activities and the reasons for such changes were as follows:

For the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, the Company generated approximately ~~$113.5~~$70.7 million of cash, based on the reported net income of approximately ~~$66.6~~$41.1 million and after considering the effects of non-cash items related to depreciation, amortization, loss on dispositions of assets, changes in deferred income taxes, ~~debt financing and related expenses,~~ stock-based compensation and other operating activities. For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, the Company generated approximately ~~$87.4~~$76.4 million in cash flows based on the reported net income of approximately ~~$35.0~~$43.9 million and after considering the effects of similar non-cash items.

Increases in accounts receivable resulted in a use of cash of approximately ~~$20.1~~$12.4 million and ~~$12.7~~$20.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. The increased use of cash for each of the ~~nine~~six month periods is due primarily to the timing of sales and collection of cash related thereto within the periods. Days sales outstanding of receivables ~~remained flat period-over-period.~~increased by approximately three days.

We increased our investment in inventory by approximately ~~$10.8~~$1.1 million and $5.9 million for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018, respectively, primarily as a result of operating at higher production levels to support sales ~~growth. For the nine months ended September 30, 2017, we increased our investment in~~growth, plus additional procurement of China-sourced inventory ~~by approximately $0.6 million.~~ahead of anticipated tariff increases.

Decreases in prepaid expenses and other assets resulted in a use of cash ~~source~~ of approximately ~~$7.2~~$1.1 million and ~~$7.1~~$9.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, 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 ~~were~~resulted in a use of cash of approximately ~~$6.7~~$29.1 million and $7.5 million for the ~~nine~~six months ended ~~September~~June 30, 2019 and 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 $8.6 million for the nine months ended September 30, 2017,respectively, primarily as a result of the timing of payments made to suppliers and the mix of vendors and related terms. ~~Our days~~The decrease in accounts payable ~~on hand decreased~~and accrued liabilities for the six months ended June 30, 2018 was further impacted by ~~approximately three days period-over-period.~~an approximate $8.2 million non-cash reduction in an obligation.

Net cash used for investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 was approximately ~~$15.6~~$79.3 million and ~~$22.3~~$11.1 million, respectively. During the first ~~nine~~six months of ~~2018,~~2019, we paid approximately $67.0 million, net of cash acquired, to acquire Plastic Srl and Taplast. We also incurred approximately ~~$15.9~~$12.3 million in capital expenditures, as we 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 ~~nine~~six months of ~~2017,~~2018, we incurred approximately ~~$24.1~~$11.3 million in capital expenditures and received cash from the disposition of property and equipment of approximately ~~$1.8~~$0.3 million.

Net cash used for financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 was approximately ~~$15.4~~$17.8 million and ~~$46.3~~$14.7 million, respectively. During the first ~~nine~~six months of 2019, we received proceeds from borrowings, net of repayments, of approximately $0.8 million on our revolving credit facilities. We also purchased approximately $15.4 million of outstanding common stock and used a net cash amount of approximately $3.2 million related to our stock compensation arrangements. 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 ~~$3.6~~$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 nine months of 2017, the Company issued $300.0 million principal Senior Notes, repaid approximately $257.9 million on our former Term Loan A Facility and made net repayments of approximately $81.5 million on our revolving credit and accounts receivable facilities. In connection with the refinancing of our long-term debt in the third quarter of 2017, we paid approximately $6.1 million of debt financing fees. We also used a net cash amount of approximately $0.5 million related to our stock compensation arrangements.

Our Debt and Other Commitments

The $300.0 million aggregate principal amount of ~~Senior Notes~~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.~~2018 ("Senior Notes"). 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 ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, our consolidated subsidiaries that do not guarantee the Senior Notes represented approximately ~~13%~~16% 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%~~33% and 7%15% of the total guarantor and non-guarantor assets and liabilities, respectively, as of ~~September~~June 30, ~~2018,~~2019, 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 ~~September~~June 30, ~~2018.~~2019. 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 ~~1.50~~1.57 to 1.00 at ~~September~~June 30, ~~2018.~~2019. Our permitted senior secured net leverage ratio under the Credit Agreement is 3.50 to 1.00 as of ~~September~~June 30, ~~2018.~~2019. 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 ~~September~~June 30, ~~2018.~~2019. Our permitted interest expense coverage ratio under the Credit Agreement is 3.00 to 1.00 as of ~~September~~June 30, ~~2018.~~2019. Our actual interest expense coverage ratio was ~~12.11~~15.35 to 1.00 at ~~September~~June 30, ~~2018.~~2019. At ~~September~~June 30, ~~2018,~~2019, we were in compliance with our financial covenants.

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 ~~September~~June 30, ~~2018~~2019 (dollars in thousands). We present Consolidated Bank EBITDA to show our performance under our financial covenants.



	Twelve Months Ended September 30, 2018			Twelve Months Ended June 30, 2019
Net income	$	62,580		$	80,490
Bank stipulated adjustments:
Interest expense	14,700			13,660
Income tax expense	33,300			19,440
Depreciation and amortization	46,290			44,450
Non-cash compensation expense⁽¹⁾	6,090			7,590
Other non-cash expenses or losses	3,670			4,660
Non-recurring expenses or costs⁽²⁾	3,090			4,090
Extraordinary, non-recurring or unusual gains or losses	(6,300		)	2,500
Business and asset dispositions	490			200
Permitted acquisitions				4,480
Casualty or business interruption expenses covered and reimbursed by insurance				460
Consolidated Bank EBITDA, as defined	$	163,910		$	182,020


	September 30, 2018			June 30, 2019
Total Indebtedness, as defined⁽³⁾	$	246,210		$	285,000
Consolidated Bank EBITDA, as defined	163,910			182,020
Total net leverage ratio	1.50		x	1.57		x
Covenant requirement	4.00		x	4.00		x



	June 30, 2019
Total Senior Secured Indebtedness⁽⁴⁾	$	(18,940	)
Consolidated Bank EBITDA, as defined	182,020
Senior secured net leverage ratio	n/m			x
Covenant requirement	3.50			x



	Twelve Months Ended June 30, 2019
Interest expense	$	13,660
Bank stipulated adjustments:
Interest income	(690		)
Non-cash amounts attributable to amortization of financing costs	(1,110		)
Total Consolidated Cash Interest Expense, as defined	$	11,860

September 30, 2018
Total Senior Secured Indebtedness⁽⁴⁾
$ (57,740 )
Consolidated Bank EBITDA, as defined 163,910

Senior secured net leverage ratio n/m
x
Covenant requirement 3.50
x

Twelve Months Ended September 30, 2018
Interest expense $ 14,700
Bank stipulated adjustments:
Interest income (40 )
Non-cash amounts attributable to amortization of financing costs (1,130 )
Total Consolidated Cash Interest Expense, as defined $ 13,530


	September 30, 2018			June 30, 2019
Consolidated Bank EBITDA, as defined	$	163,910		$	182,020
Total Consolidated Cash Interest Expense, as defined	13,530			11,860
Actual interest expense coverage ratio	12.11		x	15.35		x
Covenant requirement	3.00		x	3.00		x

_____________________________


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


⁽²⁾	Non-recurring costs and expenses relating to diligence and transaction costs, purchase accounting costs, severance, relocation, restructuring and curtailment expenses.


⁽³⁾	Includes $4.0 million of acquisition deferred purchase price.


⁽⁴⁾	Senior secured indebtedness is negative at ~~September~~June 30, ~~2018~~2019 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,~~June 30, 2019, we had no amounts outstanding under ~~the~~our revolving credit facility and had approximately ~~$57.8~~$285.2 million potentially available ~~but not utilized.~~

after giving effect to approximately $14.8 million of letters of credit issued and outstanding. At ~~September 30,~~December 31, 2018, we had no amounts outstanding under our revolving credit facility and had approximately $284.9 million potentially available after giving effect to approximately $15.1 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~~After consideration of leverage restrictions contained in the Credit Agreement, as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, we had approximately ~~$284.9~~$285.2 million and ~~$332.1~~$284.9 million, respectively, of borrowing capacity available for general corporate purposes.

We rely upon our cash flow from operations and available liquidity under our revolving credit facility to fund our debt service obligations and other contractual commitments, working capital and capital expenditure requirements. 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 ~~nine~~six months of ~~2018~~2019 approximated ~~$320.2~~$329.5 million, compared to approximately ~~$380.0~~$330.3 million during the first ~~nine~~six months of ~~2017. The overall decrease is primarily due to repayments using~~2018, as we effectively redeployed the cash ~~flows from operations.~~generated by our operations over this time period into two bolt-on acquisitions, capital investments in our business and repurchases of our common stock.

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 ~~approximately 50%~~the majority of our cash on hand as of ~~September~~June 30, ~~2018~~2019 is located in jurisdictions outside the U.S., given ~~aggregate~~ available funding under our revolving credit facility of ~~$284.9~~$285.2 million at ~~September~~June 30, ~~2018~~2019 (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 ~~September~~June 30, ~~2018,~~2019, 1-Month LIBOR approximated ~~2.26%~~2.40%. At ~~September~~June 30, ~~2018,~~2019, 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~~$12.3 million in ~~2017.~~2018. 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,~~February 2019, we announced our Board of Directors had authorized us to increase the purchase of our common stock up to ~~$50~~$75 million in the aggregate. The previous authorization, approved in November 2015, authorized up to $50 million in share repurchases. In the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019, we purchased ~~23,191~~502,500 and ~~124,138~~527,400 shares of our outstanding common stock for an aggregate purchase price of approximately ~~$0.7~~$14.7 million and ~~$3.6~~$15.4 million, respectively. 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.

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~~use derivative financial instruments to manage currency risks ~~albeit in immaterial notional contracts, as we explored the predictability of~~associated with our procurement activities denominated in currencies other than the functional currency of our subsidiaries and the impact of currency rate volatility on our earnings. As of June 30, 2019, we were party to foreign exchange forward and swap contracts to hedge changes in foreign currency exchange rates with notional amounts of approximately $96.2 million. We also use cross-currency swap agreements to mitigate currency risks associated with the net investment in certain of our foreign subsidiaries. See Note 9,10, "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~~Long-term Debt," 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 Market^SM. 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,~~2019, Moody's ~~upgraded~~affirmed a Ba3 rating to our Senior Notes, ~~rating to Ba3 from B1,~~ as presented in Note 89, "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~~affirmed a Ba2 Corporate Family Rating ~~to Ba2 from Ba3~~ and maintained its outlook as stable. On ~~May 11, 2018,~~January 30, 2019, Standard & Poor's ~~upgraded~~affirmed a BB- rating to our senior unsecured debt, ~~rating to BB- from B+, upgraded our~~affirmed a BB 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 second quarter 2019 results ~~for the first nine months of 2018 continue~~continued our ~~recent~~ positive momentum, as we further improve our operating efficacy under the TriMas Business Model, which provides athe 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 in each of our three reportable segments, plus added two bolt-on acquisitions, 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.~~achieved anticipated overall first half 2019 financial results.

We expect ~~sales levels~~to maintain our positive momentum throughout 2019, and believe we are well positioned to capitalize on available market growth opportunities, as well as have instilled a culture of Kaizen and continuous improvement to generate additional production efficiencies and cost savings. We remain cautiously optimistic about our growth and earnings expansion prospects for ~~2018 will be higher than originally projected considering~~2019. We are not anticipating improvements in our year-to-date growth, which have been boosted by improved economic activity and the continued success of our organic sales growth programs. We believe fourth quarter year-over-year growth may moderate from the 6.9% growth we achieved in the first nine months of 2018 compared to 2017,end markets, particularly given economic uncertainty around direct and indirect impacts of ~~recently enacted tariffs on foreign-sourced materials.~~

foreign trade policies. We will continue our efforts to mitigate the impact of external factors, while focusing on ~~those areas~~the aspects of our business that we can control.

We will continue to prioritize and pursue growth programs, particularly in our Packaging and Aerospace reportable ~~segments.~~segments, where we have many initiatives underway that we expect will benefit us in the second half of 2019. We will also continue to ~~monitor the~~ensure our cost ~~structure of our Specialty Products reportable segment, to ensure it remains~~structures remain aligned with customer demand in the end markets we ~~serve.~~

serve, most notably in our Specialty Products reportable segment. We ~~will continue~~expect to leverage the tenets of the TriMas Business Model to achieve our growth plans, execute ~~our~~continuous improvement ~~actions, adjust our product portfolios~~initiatives to ~~deemphasize or no longer sell certain lower-margin products,~~offset inflationary pressures, and seek lower-cost sources for input costs, all while continuously assessing our manufacturing footprint, productivity and ~~fixed cost~~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.

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 ~~September~~June 30, ~~2018~~2019, 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~~2018.

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 September 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.

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 89, "Long-term Debt," and Note 910, "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 ~~September~~June 30, ~~2018~~2019, 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 ~~September~~June 30, ~~2018~~2019, 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 ~~September~~June 30, ~~2018~~2019 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

TRIMAS CORPORATION

Item 1. Legal Proceedings

See Note 1012, "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,~~2018, 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~~2018 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 ~~September~~June 30, ~~2018.~~2019.

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⁾
July 1, 2018 to July 31, 2018 23,191
$ 28.96
23,191
$ 46,408,538
August 1, 2018 to August 31, 2018 —
$ —
—
$ 46,408,538
September 1, 2018 to September 30, 2018 —
$ —
—
$ 46,408,538
Total 23,191
$ 28.96
23,191
$ 46,408,538



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, 2019 to April 30, 2019	—	$	—	—	$	62,179,972
May 1, 2019 to May 31, 2019	167,900	$	29.10	167,900	$	57,294,263
June 1, 2019 to June 30, 2019	334,600	$	29.47	334,600	$	47,433,785
Total	502,500	$	29.35	502,500	$	47,433,785

__________________________

⁽¹⁾

In February 2019, the Company announced its Board of Directors had authorized the Company to increase the purchase of its common stock up to $75 million in the aggregate from its previous authorization of $50 million. Pursuant to ~~a publicly announced~~this share repurchase program, ~~from November 2015,~~ during the three months ended ~~September~~June 30, ~~2018,~~2019, the Company repurchased ~~23,191~~502,500 shares of its common stock at a cost of approximately ~~$0.7~~$14.7 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.

Item 6. Exhibits

Exhibits Index:



~~3.1(a)~~3.1 (a)	Fourth Amended and Restated Certificate of Incorporation of TriMas Corporation.
~~3.2(b)~~3.2 (b)	Third Amended and Restated By-laws of TriMas Corporation.
10.1	Form of Performance Stock Units Agreement - 2019 LTI - under the 2017 Equity and Incentive Compensation Plan.*
10.2	Form of Restricted Stock Units Agreement (Three-Year Vest) - 2019 LTI - under the 2017 Equity and Incentive Compensation Plan.*
10.3	Form of Restricted Stock Units Agreement (Board Of Directors) (One-Year Vest) - 2019 LTI - under the 2017 Equity and Incentive Compensation Plan.*
31.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.
31.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002.
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002.
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.

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:	~~October~~July 30, ~~2018~~2019	By:	Robert J. Zalupski Chief Financial Officer



	As of September 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	$	73,240	$	(46,410	)	$	73,910	$	(41,000	)
Customer relationships, 15 – 25 years	132,230		(57,060		)	132,230		(51,880		)
Total customer relationships	205,470		(103,470		)	206,140		(92,880		)
Technology and other, 1 – 15 years	57,030		(30,900		)	57,340		(29,120		)
Technology and other, 17 – 30 years	43,300		(35,080		)	43,300		(33,490		)
Total technology and other	100,330		(65,980		)	100,640		(62,610		)
Indefinite-lived intangible assets:
Trademark/Trade names	42,930		—			42,930		—
Total other intangible assets	$	348,730	$	(169,450	)	$	349,710	$	(155,490	)



	September 30, 2018				December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Senior Notes	$	300,000	$	288,000	$	300,000	$	300,750
Revolving credit facility	—		—		10,810		10,490



	Amount of Loss Recognized in AOCI on Derivative (Effective Portion, net of tax)							Amount of Loss Reclassified from AOCI into Earnings
								Three months ended September 30,					Nine months ended September 30,
	As of September 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	$	(1,450	)	$	(3,170	)	Other income (expense), net	$	—	$	—		$	—	$	—
Cash Flow Hedges
Interest rate swaps	$	—		$	—		Interest expense	$	—	$	20		$	—	$	(320	)
							Debt financing and related expenses	$	—	$	(4,680	)	$	—	$	(4,680	)



	September 30, 2018
Total Senior Secured Indebtedness⁽⁴⁾	$	(57,740	)
Consolidated Bank EBITDA, as defined	163,910
Senior secured net leverage ratio	n/m			x
Covenant requirement	3.50			x

Compensatory

Range of damages sought (dollars in millions)

$0.0 to $0.6

$0.6 to $5.0

Number of claims