First Quarter 2017 Earnings Presentation April 27, 2017
2 Forward-Looking Statement Forward-Looking Statement Any "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, contained herein, including those relating to the Company’s business, financial condition or future results, involve risks and uncertainties with respect to, including, but not limited to: the Company's leverage; liabilities imposed by the Company's debt instruments; market demand; competitive factors; supply constraints; material and energy costs; intangible assets, including goodwill or other intangible asset impairment charges; technology factors; litigation; government and regulatory actions; the Company's accounting policies; future trends; general economic and currency conditions; the potential impact of Brexit; various conditions specific to the Company's business and industry; the Company’s ability to identify attractive acquisition candidates, successfully integrate acquired operations or realize the intended benefits of such acquisitions; potential costs and savings related to facility consolidation activities; future prospects of the Company; and other risks that are detailed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016. These risks and uncertainties may cause actual results to differ materially from those indicated by the forward-looking statements. All forward-looking statements made herein are based on information currently available, and the Company assumes no obligation to update any forward-looking statements. Non-GAAP Financial Measures In this presentation, certain non-GAAP financial measures may be used. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measure may be found in the Appendix at the end of this presentation or in the earnings releases available on the Company’s website. Additional information is available at www.trimascorp.com under the “Investors” section. Please see the Appendix for details regarding certain costs, expenses and other amounts or charges, collectively described as “Special Items,” that are included in the determination of net income, earnings per share and/or cash flows from operating activities under GAAP, but that management believes should be separately considered when evaluating the quality of the Company’s core operating results, given they may not reflect the ongoing activities of the business. Management believes that presenting these non-GAAP financial measures, on an after Special Items basis, provides useful information to investors by helping them identify underlying trends in the Company’s businesses and facilitating comparisons of performance with prior and future periods. These non-GAAP financial measures should be considered in addition to, and not as a replacement for or superior to, the comparable GAAP financial measures.
3 1. Quarter Highlights and Performance 2. Segment Summary 3. Outlook 4. Questions and Answers 5. Appendix Presenters Include: • Thomas Amato, President and Chief Executive Officer • Robert Zalupski, Chief Financial Officer • Sherry Lauderback, Vice President, Investor Relations Agenda
Quarter Highlights and Performance
5 • First quarter results are showing positive signs from actions taken » Operating under a redefined TriMas Business Model • Accelerated business realignment efforts to drive improved performance » Leveraged existing locations and exited facilities in Wolverhampton, UK (Energy); Reynosa, Mexico (Energy); and Greater Noida, India (Packaging) » Approaching optimized manufacturing footprint for anticipated demand levels • Focused on achieving or exceeding 2017 Plan First Quarter Highlights 2017 is off to a solid start…more work to do. Commitment to Environmental, Health & Safety Annual Goal Setting & Measurement Flawless Launches Continuous Improvement Talent Development TriMas Business Model (TBM)
6 First Quarter Performance Note: Please see the Appendix for a detailed reconciliation to GAAP results. (Unaudited, dollars in millions, except per share amounts) Improved performance as a result of accelerated realignment efforts. Q1 2017 Q1 2016 Variance Net Sales $199.8 $202.9 (1.5%) Operating Profit $15.7 $16.5 (4.3%) Excluding Special Items, Operating Profit would have been: $23.9 $21.8 9.2% Excluding Special Items, Operating Profit margin would have been: 11.9% 10.8% 110 bps Net Income $7.0 $8.3 (15.8%) Excluding Special Items, Net Income would have been: $14.0 $12.4 12.9% Diluted Earnings Per Share $0.15 $0.18 (16.7%) Excluding Special Items, Diluted Earnings Per Share would have been: $0.30 $0.27 11.1% • Q1 2017 net sales were lower than Q1 2016 by 1.5% as a result of currency and de-emphasizing certain regions in the Energy segment ̶ On a constant currency basis, the Aerospace and Packaging segments increased 12% and 3%, respectively, driven by improved production throughput and product ramp-ups • Accelerated realignment and continuous improvement initiatives lifted Q1 2017 operating profit, excluding Special Items, by 9.2% compared to the prior year • Increased Q1 2017 EPS, excluding Special Items, by 11.1% to $0.30, compared to Q1 2016
7 First Quarter Performance (1) Free Cash Flow is defined as Net Cash Provided by/Used for Operating Activities, excluding the cash impact of Special Items, less Capital Expenditures. (Unaudited, dollars in millions) Note: Please see the Appendix for a detailed reconciliation to GAAP results. Increased focus on cash flow as a key component of the new TriMas Business Model. • Reduced Net Debt by $68.2 million to $344.2 million compared to March 31, 2016 • Improved Free Cash Flow(1) by $23.6 million to $17.7 million compared to Q1 2016, through enhanced focus on performance and net working capital management • Ended the quarter with cash and available liquidity of approximately $169 million, and a leverage ratio of 2.5x Q1 2017 Q1 2016 Variance Q4 2016 Variance Free Cash Flow(1) $17.7 ($5.9) $23.6 $33.2 ($15.5) Capital Expenditures $10.7 $6.0 $4.8 $8.9 $1.8 Inventories $159.0 $167.3 ($8.3) $160.5 ($1.5) Total Debt $366.9 $437.9 ($71.0) $374.7 ($7.8) Cash $22.6 $25.4 ($2.8) $20.7 $1.9 Net Debt $344.2 $412.4 ($68.2) $353.9 ($9.7)
Segment Summary
9 Packaging Segment • Sales increased 3% on a constant currency basis • Growth in the Industrial, Health Beauty & Home Care, and Food & Beverage end markets • Operating profit increased slightly, while margins remained solid Quarterly Comments (Unaudited, dollars in millions) Note: Please see the Appendix for a detailed reconciliation to GAAP results. Positioning business for product innovation to drive future growth. • Consolidated Greater Noida location into Baddi, India facility to streamline infrastructure • Completed new facility with expanded capacity in San Miguel, Mexico • Leveraging innovation resources and support teams in India, the United Kingdom and the United States to drive new product growth Actions Markets, Products & Brands Financial Summary Q1 2017 Q1 2016 Variance Sales $81.0 $80.1 1.1% Operating Profit, excluding Special Items $18.5 $18.3 1.1% Operating Margi , excluding Special Items 22.9% 22.9% 0 bps
10 Aerospace Segment Quarterly Comments (Unaudited, dollars in millions) Note: Please see the Appendix for a detailed reconciliation to GAAP results. Focusing on manufacturing and delivery performance. Actions Markets, Products & Brands • Continuing focus on increasing manufacturing output and improved production efficiencies • Seeking to drive additional synergies across fastener businesses and further integrate platform • Continuing efforts to better align product mix and focus production capacity to improve financial performance • Increased sales due to improved production output and solid customer demand • Operating profit and related margin increased due to higher sales levels and accelerated operational performance actions • Continued progress on recovery plan – more work to do Financial Summary Q1 2017 Q1 2016 Variance Sales $45.4 $40.5 12.1% Operating Profit, excluding Special Items $5.0 $3.5 41.6% Operating Margin, xcluding Special Items 11.0% 8.7% 230 bps
11 Energy Segment Quarterly Comments (Unaudited, dollars in millions) Note: Please see the Appendix for a detailed reconciliation to GAAP results. Accelerating performance improvement plans. Actions Markets, Products & Brands • Sales decreased due to de-emphasizing underperforming regions and reduced demand in oil and gas end markets (exited Wolverhampton, UK facility) • Ceased production in Reynosa, Mexico facility in favor of leveraging existing Houston infrastructure • Business realignment actions offsetting the profit impact of the lower sales levels • On-going assessment of the global manufacturing and branch footprint to ensure optimal infrastructure for anticipated demand levels • Driving continued manufacturing and operational improvements across all locations • Expanding sales and development efforts of specialty products and new applications Financial Summary Q1 2017 Q1 2016 Variance Sales $40.9 $44.8 -8.5% Operating Profit, excluding Special Items $2.5 $1.1 133.0% Operating Margin, excluding Special Items 6.2% 2.4% 380 bps
12 Engineered Components Segment Quarterly Comments (Unaudited, dollars in millions) Note: Please see the Appendix for a detailed reconciliation to GAAP results. Tight cost management mitigating impact of lower end market volume. Actions Markets, Products & Brands • Sales declined due to continued soft industrial end markets, customer consolidations, and reduced oil and natural gas well completions • Flexed cost structure to hold operating profit margin • Experiencing higher quote activity related to Arrow well jack engines and compressors • Continuing to manage through customer consolidations which impact steel cylinder demand and activity • Seeking to enter new steel cylinder product-use markets such as hydrogen fuel cell applications • Focusing on turning quote activity into additional sales of Arrow products Financial Summary Q1 2017 Q1 2016 Variance Sales $32.5 $37.5 -13.3% Operating Profit, excluding Special Items $5.0 $5.7 -13.1% Operating Margin, excluding Special Items 15.3% 15.3% 0 bps
13 Segment Performance Summary (Unaudited, dollars in millions) Segment Operating Profit Margin (excluding Special Items) Note: Please see the detailed reconciliation to GAAP results in the Appendix. Net Sales Improvements driven by accelerated realignment actions. $203 $200 Q1 2016 Q1 2017 $29 $31 Q1 2016 Q1 2017 14.1% 15.5% -1.5% +8.3%
Outlook
15 FY 2017 Outlook (1) Free Cash Flow is defined as Net Cash Provided by/Used for Operating Activities, excluding the cash impact of Special Items, less Capital Expenditures. Reaffirming previously provided full year 2017 outlook. Note: All of the figures on this slide exclude any current and future Special Items. Full Year Outlook (as of 4/27/17) Sales Growth 2% – 4% Earnings Per Share, diluted $1.35 – $1.45 Free Cash Flow(1) > 100% of net income
16 Closing Comments Drive Toward Exceptional Cash Generation and ROI Improve cash generation through performance to drive higher returns. P e rf o rm a nc e Ca s h P rior itie s Commitment to Environmental, Health & Safety Annual Goal Setting & Measurement Flawless Launches Continuous Improvement Talent Development TriMas Business Model (TBM) 1. Re-invest in our businesses 2. Reduce net debt with a long-term target leverage ratio of <2.0x 3. Evaluate bolt-on acquisitions to augment TriMas’ highest value proposition segments 4. Consider share repurchases and/or dividends
Questions and Answers
Appendix
19 Condensed Consolidated Balance Sheet (Dollars in thousands) March 31, December 31, 2017 2016 (unaudited) Assets Current assets: Cash and cash equivalents............................................... 22,640$ 20,710$ Receivables, net.............................................................. 119,240 111,570 Inventories...................................................................... 159,010 160,460 Prepaid expenses and other current assets....................... 7,980 16,060 Total current assets...................................................... 308,870 308,800 Property and equipment, net................................................ 184,000 179,160 Goodwill............................................................................. 316,110 315,080 Other intangibles, net........................................................... 209,100 213,920 Other assets....................................................................... 34,810 34,690 Total assets................................................................. 1,052,890$ 1,051,650$ Liabilities and Shareholders' Equity Current liabilities: Current maturities, long-term debt..................................... 13,770$ 13,810$ Accounts payable............................................................ 76,850 72,270 Accrued liabilities............................................................ 40,880 47,190 Total current liabilities................................................... 131,500 133,270 L ng-term d bt, net............................................................. 353,110 360,840 Deferred income taxes........................................................ 8,070 5,910 Other long-term liabilities...................................................... 50,130 51,910 Total liabilities.............................................................. 542,810 551,930 Total shareholders' equity............................................. 510,080 499,720 Total liabilities and shareholders' equity.......................... 1,052,890$ 1,051,650$
20 Consolidated Income Statement (Unaudited, dollars in thousands, except for per share amounts) Three months ended 2017 2016 Net sales......................................................................................... 199,830$ 202,880$ Cost of sales.................................................................................... (148,070) (146,960) Gross profit.................................................................................. 51,760 55,920 Selling, general and administrative expenses...................................... (36,020) (39,470) Operating profit............................................................................ 15,740 16,450 Other expense, net: Interest expense........................................................................... (3,550) (3,440) Other expense, net........................................................................ (610) (60) Other expense, net.................................................................... (4,160) (3,500) Income before income taxes............................................................. 11,580 12,950 Income tax expense.......................................................................... (4,590) (4,650) Net income...................................................................................... 6,990 8,300 Earnings per share - basic: Net income per share.................................................................... 0.15$ 0.18$ Weighted average common shares - basic 45,570,495 45,278,990 Earnings per share - diluted: Net income per share.................................................................... 0.15$ 0.18$ Weighted average common shares - diluted 45,908,958 45,654,816 March 31,
21 Consolidated Statement of Cash Flow (Unaudited, dollars in thousands) 2017 2016 Cash Flows from Operating Activities: Net income..................................................................................................................... 6,990$ 8,300$ Adjustments to reconcile net income to net cash provided by (used for) operating activities: Loss on dispositions of assets...................................................................................... 4,170 590 Depreciation............................................................................................................... 5,800 5,940 Amortization of intangible assets................................................................................... 4,990 5,100 Amortization of debt issue costs.................................................................................... 350 340 Deferred income taxes................................................................................................. 1,870 (20) Non-cash compensation expense.................................................................................. 1,470 1,970 Tax effect from stock based compensation.................................................................... - 620 Increase in receivables................................................................................................ (7,590) (11,210) (Increase) decrease in inventories................................................................................ (420) 330 Decrease in prepaid expenses and other assets............................................................ 8,070 7,700 Decrease in accounts payable and accrued liabilities..................................................... (3,160) (23,660) Other operating activities.............................................................................................. (570) 660 Net cash provided by (used for) operating activities................................................ 21,970 (3,340) Cash Flows from Investing Activities: Capital expenditures.................................................................................................... (10,740) (5,980) Net proceeds from dispositions of property and equipment............................................. 30 120 Net cash used for investing activities...................................................................... (10,710) (5,860) Cash Flows from Financing Activities: Repayments of borrowings on term loan facilities........................................................... (3,470) (3,470) Proceeds from borrowings on revolving credit and accounts receivable facilities............... 186,640 117,130 Repayments of borrowings on revolving credit and accounts receivable facilities.............. (191,760) (97,220) Shares surrendered upon options and restricted stock vesting to cover taxes................... (450) (650) Other financing activities.............................................................................................. (290) (620) Net cash provided by (used for) financing activities................................................. (9,330) 15,170 Cash and Cash Equivalents: Net increase for the period........................................................................................... 1,930 5,970 At beginning of period.................................................................................................. 20,710 19,450 At end of period....................................................................................................... 22,640$ 25,420$ Supplemental disclosure of cash flow information: Cash paid for interest............................................................................................... 3,050$ 2,980$ Cash paid for taxes.................................................................................................. 1,230$ 1,780$ March 31, Three months ended
Three months ended 2017 2016 Packaging Net sales................................................................................................... 80,960$ 80,110$ Operating profit.......................................................................................... 16,850$ 17,840$ Special Items to consider in evaluating operating profit: Business restructuring and severance costs............................................. 1,670$ 470$ Excluding Special Items, operating profit would have been..................... 18,520$ 18,310$ Aerospace Net sales................................................................................................... 45,420$ 40,500$ Operating profit.......................................................................................... 5,000$ 3,460$ Special Items to consider in evaluating operating profit: Business restructuring and severance costs............................................. -$ 70$ Excluding Special Items, operating profit would have been..................... 5,000$ 3,530$ Energy Net sales................................................................................................... 40,930$ 44,750$ Operating loss............................................................................................ (3,900)$ (3,610)$ Special Items to consider in evaluating operating profit: Business restructuring and severance costs............................................. 6,440$ 4,700$ Excluding Special Items, operating profit would have been..................... 2,540$ 1,090$ Engineered Components Net sales................................................................................................... 32,520$ 37,520$ Operating profit.......................................................................................... 4,980$ 5,580$ Special Items to consider in evaluating operating profit: Business restructuring and severance costs............................................. -$ 150$ Excluding Special Items, operating profit would have been..................... 4,980$ 5,730$ Corporate expenses Operating loss............................................................................................ (7,190)$ (6,820)$ Total Company Net sales................................................................................................... 199,830$ 202,880$ Operating profit.......................................................................................... 15,740$ 16,450$ Total Special Items to consider in evaluating operating profit.......................... 8,110$ 5,390$ Excluding Special Items, operating profit would have been..................... 23,850$ 21,840$ March 31, 22 Company & Segment Financial Information (Unaudited, dollars in thousands)
23 Additional Information Regarding Special Items (Unaudited, dollars in thousands, except for per share amounts) Three months ended March 31, 2017 2016 Net income, as reported......................................................................................................... 6,990$ 8,300$ After-tax impact of Special Items to consider in evaluating quality of net income: Business restructuring and severance costs........................................................................... 7,000 4,090 Excluding Special Items, net income would have been....................................................... 13,990$ 12,390$ Three months ended March 31, 2017 2016 Diluted earnings per share, as reported................................................................................. 0.15$ 0.18$ After-tax impact of Special Items to consider in evaluating quality of EPS: Business restructuring and severance costs........................................................................... 0.15 0.09 Excluding Special Items, EPS would have been.................................................................. 0.30$ 0.27$ Weighted-average shares outstanding .............................................................................. 45,908,958 45,654,816 2017 2016 Operating profit (excluding Special Items).............................................................................. 23,850$ 21,840$ Corporate expenses (excluding Special Items)........................................................................ 7,190 6,820 Segment operating profit (excluding Special Items)............................................................... 31,040$ 28,660$ Segment operating profit margin (excluding Special Items).................................................... 15.5% 14.1% March 31, Three months ended
24 Additional Information Regarding Special Items (Unaudited, dollars in thousands) As reported Special Items Excluding Special Items As reported Special Items Excluding Special Items Net cash provided by (used for) operating activities.................. 21,970$ 6,490$ 28,460$ (3,340)$ 3,440$ 100$ Less: Capital expenditures...................................................... (10,740) - (10,740) (5,980) - (5,980) Free Cash Flow...................................................................... 11,230 6,490 17,720 (9,320) 3,440 (5,880) Net income............................................................................ 6,990 7,000 13,990 8,300 4,090 12,390 Free Cash Flow as a percentage of net income........................ 161% 127% -112% -47% Three months ended March 31, 2017 2016 March 31, December 31, March 31, 2017 2016 2016 Current maturities, long-term debt.......................................................................... 13,770$ 13,810$ 13,840$ Long-ter debt, net.............................................................................................. 353,110 360,840 424,010 Long-term Debt.................................................................................................... 366,880 374,650 437,850 Less: Cash and cash equivalents........................................................................... 22,640 20,710 25,420 Net Debt.............................................................................................................. 344,240$ 353,940$ 412,430$
25 LTM Bank EBITDA and Ratios (Unaudited, dollars in thousands) (1) As defined in the Credit Agreement dated June 30, 2015. March 31, December 31, 2017 2016 (41,110)$ (39,800)$ Interest expense.................................................................................. 13,830 13,720 Depreciation and amortization.............................................................. 44,610 44,860 Extraordinary non-cash charges........................................................... 98,900 98,900 Non-cash compensation expense.......................................................... 6,440 6,940 Other non-cash expenses or losses....................................................... 12,070 8,180 Non-recurring expenses or costs ......................................................... 13,700 11,400 Acquisition integration costs................................................................. 690 1,460 149,130$ 145,660$ Net loss for the twelve months ended……………………………................... Bank EBITDA - LTM Ended (1)………………………………………………………………… March 31, December 31, Key Ratios: 2017 2016 Bank LTM EBITDA……………………………………………………………………………….……………………………………… 149,130$ 145,660$ Interest Coverage Ratio 12.03 x 11.94 x Leverage Ratio……………………………………………………...………………... 2.52 x 2.63 x