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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549

FORM 10-Q

(Mark One)    

ý

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2010

Or

o

 

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period from            to            .

Commission file number 001-10716

TRIMAS CORPORATION
(Exact name of registrant as specified in its charter)

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

39400 Woodward Avenue, Suite 130
Bloomfield Hills, Michigan 48304

(Address of principal executive offices, including zip code)

(248) 631-5450
(Registrant's telephone number, including area code)

        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 ý    No o.

        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o    No o.

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o   Accelerated filer ý   Non-accelerated filer o
(Do not check if a
smaller reporting company)
  Smaller reporting company o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

        As of October 28, 2010, the number of outstanding shares of the Registrant's common stock, $.01 par value, was 34,067,856 shares.


Table of Contents


TriMas Corporation

Index

Part I.

  Financial Information        

     

Forward-Looking Statements

    2  

  Item 1.  

Consolidated Financial Statements

    3  

     

Consolidated Balance Sheet—September 30, 2010 and December 31, 2009

    3  

     

Consolidated Statement of Operations for the Three and Nine Months Ended September 30, 2010 and 2009

    4  

     

Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 2010 and 2009

    5  

     

Consolidated Statement of Shareholders' Equity for the Nine Months Ended September 30, 2010

    6  

     

Notes to Unaudited Consolidated Financial Statements

    7  

  Item 2.  

Management's Discussion and Analysis of Financial Condition and Results of Operations

    31  

  Item 3.  

Quantitative and Qualitative Disclosure about Market Risk

    58  

  Item 4.  

Controls and Procedures

    58  

Part II.

  Other Information and Signatures        

  Item 1.  

Legal Proceedings

    59  

  Item 1A.  

Risk Factors

    59  

  Item 2.  

Unregistered Sales of Equity Securities and Use of Proceeds

    59  

  Item 3.  

Defaults Upon Senior Securities

    59  

  Item 4.  

Reserved

    59  

  Item 5.  

Other Information

    59  

  Item 6  

Exhibits

    60  

  Signature     65  

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Forward-Looking Statements

        This report contains forward-looking statements (as that term is defined by the federal securities laws) about our financial condition, results of operations and business. You can find many of these statements by looking for words such as "may," "will," "expect," "anticipate," "believe," "estimate" and similar words used in this report.

        These forward-looking statements are subject to numerous assumptions, risks and uncertainties. Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. We caution readers not to place undue reliance on the statements, which speak only as of the date of this report.

        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 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.

        You should carefully consider the factors discussed in Part I, Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2009, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K 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.

        We disclose important factors that could cause our actual results to differ materially from our expectations 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 condition, results of operations, prospects and ability to service our debt.

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PART I. FINANCIAL INFORMATION

        

Item 1.    Financial Statements

        


TriMas Corporation

Consolidated Balance Sheet

(Unaudited—dollars in thousands)

 
  September 30,
2010
  December 31,
2009
 

Assets

             

Current assets:

             
 

Cash and cash equivalents

  $ 46,510   $ 9,480  
 

Receivables, net of reserves of approximately $6.0 million and $5.7 million as of September 30, 2010 and December 31, 2009, respectively

    128,480     93,380  
 

Inventories

    149,130     141,840  
 

Deferred income taxes

    32,920     24,320  
 

Prepaid expenses and other current assets

    7,610     6,500  
 

Assets of discontinued operations held for sale

        4,250  
           
   

Total current assets

    364,650     279,770  

Property and equipment, net

    161,620     162,220  

Goodwill

    194,850     196,330  

Other intangibles, net

    155,640     164,080  

Other assets

    22,740     23,380  
           
   

Total assets

  $ 899,500   $ 825,780  
           

Liabilities and Shareholders' Equity

             

Current liabilities:

             
 

Current maturities, long-term debt

  $ 6,940   $ 16,190  
 

Accounts payable

    108,370     92,840  
 

Accrued liabilities

    74,570     65,750  
 

Liabilities of discontinued operations

        1,070  
           
   

Total current liabilities

    189,880     175,850  

Long-term debt

    492,480     498,360  

Deferred income taxes

    67,180     42,590  

Other long-term liabilities

    45,120     47,000  
           
   

Total liabilities

    794,660     763,800  
           

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

         

Common stock, $0.01 par: Authorized 400,000,000 shares; Issued and outstanding: 34,067,856 shares at September 30, 2010 and 33,895,503 shares at December 31, 2009

    340     330  

Paid-in capital

    529,710     528,370  

Accumulated deficit

    (470,800 )   (510,380 )

Accumulated other comprehensive income

    45,590     43,660  
           
   

Total shareholders' equity

    104,840     61,980  
           
   

Total liabilities and shareholders' equity

  $ 899,500   $ 825,780  
           

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

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TriMas Corporation

Consolidated Statement of Operations

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

 
  Three months ended
September 30,
  Nine months ended
September 30,
 
 
  2010   2009   2010   2009  

Net sales

  $ 247,880   $ 202,970   $ 720,000   $ 612,560  

Cost of sales

    (173,390 )   (144,770 )   (504,140 )   (457,720 )
                   
 

Gross profit

    74,490     58,200     215,860     154,840  

Selling, general and administrative expenses

    (41,260 )   (37,070 )   (120,330 )   (112,240 )

Gain (loss) on dispositions of property and equipment

    (220 )   20     (950 )   180  
                   
 

Operating profit

    33,010     21,150     94,580     42,780  
                   

Other income (expense), net:

                         
 

Interest expense

    (12,550 )   (10,750 )   (39,780 )   (34,530 )
 

Gain on extinguishment of debt

        1,180         28,250  
 

Gain on bargain purchase

            410      
 

Other, net

    (200 )   (190 )   (1,250 )   (1,710 )
                   
   

Other income (expense), net

    (12,750 )   (9,760 )   (40,620 )   (7,990 )
                   

Income from continuing operations before income tax expense

    20,260     11,390     53,960     34,790  

Income tax expense

    (7,500 )   (4,240 )   (20,230 )   (13,190 )
                   

Income from continuing operations

    12,760     7,150     33,730     21,600  

Income (loss) from discontinued operations, net of income tax benefit (expense)

    (40 )   (1,320 )   5,850     (10,460 )
                   

Net income

  $ 12,720   $ 5,830   $ 39,580   $ 11,140  
                   

Earnings per share—basic:

                         
   

Continuing operations

  $ 0.38   $ 0.21   $ 1.00   $ 0.64  
   

Discontinued operations, net of income tax benefit (expense)

    (0.00 )   (0.04 )   0.17     (0.31 )
                   
   

Net income per share

  $ 0.38   $ 0.17   $ 1.17   $ 0.33  
                   

Weighted average common shares—basic

    33,827,939     33,496,634     33,730,852     33,480,747  
                   

Earnings per share—diluted:

                         
   

Continuing operations

  $ 0.37   $ 0.21   $ 0.98   $ 0.64  
   

Discontinued operations, net of income tax benefit (expense)

    (0.00 )   (0.04 )   0.17     (0.31 )
                   
   

Net income per share

  $ 0.37   $ 0.17   $ 1.15   $ 0.33  
                   

Weighted average common shares—diluted

    34,512,820     34,007,846     34,380,188     33,752,210  
                   

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

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TriMas Corporation

Consolidated Statement of Cash Flows

(Unaudited—dollars in thousands)

 
  Nine months ended
September 30,
 
 
  2010   2009  

Cash Flows from Operating Activities:

             

Net income

  $ 39,580   $ 11,140  

Adjustments to reconcile net income to net cash provided by operating activities, net of acquisition impact:

             
 

Gain on dispositions of property and equipment

    (9,080 )   (180 )
 

Gain on bargain purchase

    (410 )    
 

Depreciation

    17,670     22,440  
 

Amortization of intangible assets

    10,600     10,970  
 

Amortization of debt issue costs

    2,200     1,680  
 

Deferred income taxes

    14,480     3,740  
 

Gain on extinguishment of debt

        (28,250 )
 

Non-cash compensation expense

    1,050     330  
 

Net proceeds from (reductions in) sale of receivables and receivables securitization

    4,340     (15,690 )
 

(Increase) decrease in receivables

    (35,710 )   24,600  
 

(Increase) decrease in inventories

    (3,150 )   51,690  
 

(Increase) decrease in prepaid expenses and other assets

    (1,770 )   1,860  
 

Increase (decrease) in accounts payable and accrued liabilities

    19,340     (18,440 )
 

Other, net

    2,460     1,750  
           
   

Net cash provided by operating activities, net of acquisition impact

    61,600     67,640  
           

Cash Flows from Investing Activities:

             
 

Capital expenditures

    (11,090 )   (10,850 )
 

Acquisition of businesses, net of cash acquired

    (12,760 )    
 

Net proceeds from disposition of businesses and other assets

    14,720     23,100  
           
   

Net cash provided by (used for) investing activities

    (9,130 )   12,250  
           

Cash Flows from Financing Activities:

             
 

Repayments of borrowings on term loan facilities

    (1,950 )   (2,370 )
 

Proceeds from borrowings on revolving credit facilities

    376,430     677,930  
 

Repayments of borrowings on revolving credit facilities

    (390,220 )   (690,740 )
 

Retirement of senior subordinated notes

        (43,850 )
 

Shares surrendered upon vesting of options and restricted stock awards to cover tax obligations

    (240 )    
 

Proceeds from exercise of stock options

    100      
 

Excess tax benefits from stock based compensation

    440      
           
   

Net cash used for financing activities

    (15,440 )   (59,030 )
           

Cash and Cash Equivalents:

             
 

Increase for the period

    37,030     20,860  
   

At beginning of period

    9,480     3,910  
           
   

At end of period

  $ 46,510   $ 24,770  
           
 

Supplemental disclosure of cash flow information:

             
   

Cash paid for interest

  $ 27,710   $ 25,460  
           
   

Cash paid for taxes

  $ 6,260   $ 6,730  
           

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

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TriMas Corporation

Consolidated Statement of Shareholders' Equity

Nine months Ended September 30, 2010

(Unaudited—dollars in thousands)

 
  Common
Stock
  Paid-in
Capital
  Accumulated
Deficit
  Accumulated
Other
Comprehensive
Income
  Total  

Balances, December 31, 2009

  $ 330   $ 528,370   $ (510,380 ) $ 43,660   $ 61,980  

Comprehensive income:

                               
 

Net income

            39,580         39,580  
 

Amortization of defined benefit plan deferred losses (net of tax of $30 thousand) (Note 15)

                60     60  
 

Foreign currency translation

                710     710  
 

Amortization of unrealized loss on interest rate swaps (net of tax of $0.7 million) (Note 10)

                1,160     1,160  
                               
   

Total comprehensive income

                            41,510  

Shares surrendered upon vesting of options and restricted stock awards to cover tax obligations

        (240 )           (240 )

Stock option exercises and restricted stock vestings

    10     90             100  

Excess tax benefits from stock based compensation

        440             440  

Non-cash compensation expense

        1,050             1,050  
                       

Balances, September 30, 2010

  $ 340   $ 529,710   $ (470,800 ) $ 45,590   $ 104,840  
                       

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

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation

        TriMas Corporation ("TriMas" or the "Company"), and its consolidated subsidiaries, is a global manufacturer and distributor of products for commercial, industrial and consumer markets. The Company is principally engaged in five reportable segments with diverse products and market channels: Packaging, Energy, Aerospace & Defense, Engineered Components and Cequent. See Note 12, "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 the current year presentation. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the Company's 2009 Annual Report on Form 10-K.

2. Discontinued Operations and Assets Held for Sale

        During the fourth quarter of 2009, the Company committed to a plan to exit its medical device line of business which was part of the Engineered Components operating segment. The business was sold in May 2010 for cash proceeds of $2.0 million, which approximated the net book value of the assets and liabilities sold.

        During the fourth quarter of 2008, the Company entered into a binding agreement to sell certain assets within its specialty laminates, jacketings and insulation tapes line of business, which was part of the Packaging operating segment. The sale was completed in February 2009 for cash proceeds of approximately $21.0 million. The Company's manufacturing facility is subject to a lease agreement expiring in 2024 that was not assumed by the purchaser of the business. During first quarter 2009, upon the cease use date of the facility, the Company recorded a pre-tax charge of approximately $10.7 million for future lease obligations on the facility, net of estimated sublease recoveries.

        During the fourth quarter of 2007, the Company committed to a plan to sell its property management line of business. The sale was completed in April 2010 for cash proceeds of $13.0 million, resulting in a pre-tax gain on sale of approximately $10.1 million during the second quarter of 2010.

        The results of the aforementioned businesses are reported as discontinued operations for all periods presented. Results of discontinued operations are summarized as follows:

 
  Three months
ended
September 30,
  Nine months
ended
September 30,
 
 
  2010   2009   2010   2009  
 
  (dollars
in thousands)

  (dollars
in thousands)

 

Net sales

  $   $ 1,430   $ 660   $ 12,000  
                   

Income (loss) from discontinued operations before income tax benefit (expense)

  $ (90 ) $ (2,140 ) $ 9,200   $ (17,000 )

Income tax benefit (expense)

    50     820     (3,350 )   6,540  
                   
 

Income (loss) from discontinued operations, net of income tax benefit (expense)

  $ (40 ) $ (1,320 ) $ 5,850   $ (10,460 )
                   

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

2. Discontinued Operations and Assets Held for Sale (Continued)

        Assets and liabilities of the discontinued operations held for sale are summarized as follows:

 
  September 30,
2010
  December 31,
2009
 
 
  (dollars in thousands)
 

Receivables, net

  $   $ 200  

Property and equipment, net

        4,050  
           
 

Total assets

  $   $ 4,250  
           

Accounts payable

  $   $ 150  

Accrued liabilities and other

        920  
           
 

Total liabilities

  $   $ 1,070  
           

3. Mosinee Plant Closure

        In March 2009, the Company announced plans to close its manufacturing facility in Mosinee, Wisconsin, moving production and distribution functions from Mosinee to lower-cost manufacturing facilities or to third-party sourcing partners. As of December 31, 2009, the Company completed the move and ceased operations in Mosinee. Upon the cease use date of the facility, the Company recorded a pre-tax charge within its Cequent segment of approximately $5.3 million for future lease obligations related to the facility, net of estimated lease recoveries. Also during 2009, the Company recorded a pre-tax charge within its Cequent segment of approximately $1.8 million, of which $1.6 million was recorded in the first quarter of 2009, primarily related to cash costs for severance benefits for approximately 160 employees that were involuntarily terminated as part of the closure. As of June 30, 2010, the Company had paid all severance benefits.

        In addition, the Company recorded approximately $2.6 million of accelerated depreciation expense during 2009 as a result of shortening the expected lives on certain machinery and equipment assets that the Company no longer utilizes following the closure, of which $0.5 million and $2.2 million was recorded in the three and nine months ended September 30, 2009.

4. Acquisitions

        On June 8, 2010, the Company's Norris Cylinder subsidiary, included in the Company's Engineered Components segment, completed the acquisition of certain assets and liabilities from Taylor-Wharton International, LLC ("TWI") and its subsidiary, TW Cylinders, related to TWI's high and low-pressure cylinder business for $11.8 million, including a net working capital adjustment of $0.8 million. The acquisition was completed following approval by the United States Bankruptcy Court for the District of Delaware pursuant to Section 363 of the U.S. Bankruptcy Code. The assets purchased generated approximately $17 million in revenue during 2009. The fair value of the net assets acquired exceeded the purchase price, resulting in a bargain purchase gain of approximately $0.4 million, which is included in other income, net in the accompanying consolidated results of operations for the nine months ended September 30, 2010. The purchase price remains subject to the finalization of the net working capital adjustment, which is expected to be completed during the fourth quarter of 2010.

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

4. Acquisitions (Continued)

        The results of operations of the aforementioned acquisition are not significant compared to the overall results of operations of the Company.

5. Goodwill and Other Intangible Assets

        Changes in the carrying amount of goodwill for the nine months ended September 30, 2010 are summarized as follows:

 
  Packaging   Energy   Aerospace &
Defense
  Engineered
Components
  Cequent   Total  
 
   
   
  (dollars in thousands)
   
   
 

Balance, December 31, 2009

  $ 115,460   $ 39,740   $ 41,130   $   $   $ 196,330  
 

Foreign currency translation

    (1,610 )   130                 (1,480 )
                           

Balance, September 30, 2010

  $ 113,850   $ 39,870   $ 41,130   $   $   $ 194,850  
                           

        The gross carrying amounts and accumulated amortization of the Company's other intangibles as of September 30, 2010 and December 31, 2009 are summarized below. The Company amortizes these assets over periods ranging from 1 to 30 years.

 
  As of September 30, 2010   As of December 31, 2009  
Intangible Category by Useful Life
  Gross
Carrying
Amount
  Accumulated
Amortization
  Gross
Carrying
Amount
  Accumulated
Amortization
 
 
   
  (dollars in thousands)
   
 

Customer relationships:

                         
 

5 - 12 years

  $ 25,190   $ (19,980 ) $ 24,710   $ (18,290 )
 

15 - 25 years

    154,610     (67,420 )   154,610     (61,250 )
                   

Total customer relationships

    179,800     (87,400 )   179,320     (79,540 )
                   

Technology and other:

                         
 

1 - 15 years

    26,520     (22,500 )   25,800     (22,060 )
 

17 - 30 years

    42,390     (18,180 )   42,120     (16,640 )
                   

Total technology and other

    68,910     (40,680 )   67,920     (38,700 )
                   

Trademark/Trade names (indefinite life)

    35,010         35,080      
                   

  $ 283,720   $ (128,080 ) $ 282,320   $ (118,240 )
                   

        Amortization expense related to technology and other intangibles was approximately $0.9 million and $1.0 million for the three months ended September 30, 2010 and 2009, respectively, and $2.8 million and $3.0 million for the nine months ended September 30, 2010 and 2009, respectively. These amounts are included in cost of sales in the accompanying consolidated statement of operations. Amortization expense related to customer intangibles was approximately $2.6 million for each of the three months ended September 30, 2010 and 2009, respectively, and $7.8 million and $7.9 million for the nine months ended September 30, 2010 and 2009, respectively. These amounts are included in selling, general and administrative expenses in the accompanying consolidated statement of operations.

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

6. Receivables Facility

        On December 29, 2009, the Company entered into a new three year accounts receivable facility through TSPC, Inc. ("TSPC"), a wholly-owned subsidiary, to sell trade accounts receivable of substantially all of the Company's domestic business operations. Under this facility, TSPC, from time to time, may sell an undivided fractional ownership interest in the pool of receivables up to approximately $75.0 million to a third party multi-seller receivables funding company. The Company did not have any amounts outstanding under the facility as of September 30, 2010 or December 31, 2009, but had $52.4 million and $32.1 million, respectively, available but not utilized. The net amount financed under the facility is less than the face amount of accounts receivable by an amount that approximates the purchaser's financing costs. As of September 30, 2010, the cost of funds under this facility consisted of a 3-month London Interbank Offered Rates ("LIBOR")-based rate plus a usage fee of 3.00% and a fee on the unused portion of the facility of 1.00%. Aggregate costs incurred under this facility were $0.2 million and $0.8 million for the three and nine months ended September 30, 2010, respectively, and are included in interest expense in the accompanying consolidated statement of operations. The facility expires on December 29, 2012.

        The cost of funds fees incurred are determined by calculating the estimated present value of the receivables sold compared to their carrying amount. The estimated present value factor is based on historical collection experience and a discount rate based on a 3 month LIBOR-based rate plus the usage fee discussed above and is computed in accordance with the terms of the securitization agreement. As of September 30 2010, the costs of funds under the facility was based on an average liquidation period of the portfolio of approximately 1.6 months and an average discount rate of 1.7%.

        Through December 28, 2009, TriMas was party to a 364-day accounts receivable facility through TSPC. Under this facility, TSPC, from time to time, sold an undivided fractional ownership interest in the pool of receivables up to approximately $55.0 million to a third party multi-seller receivables funding company. The net proceeds of the sale of receivables were less than the face amount of the accounts receivable sold by an amount that approximated the purchaser's financing costs. As of September 30, 2009, the cost of funds under this facility consisted of a commercial paper-based rate plus the usage fee of 4.5% and a fee on the unused portion of the facility of 2.25%. Previously, the Company completed its annual renewal of this facility in February 2009, incurring approximately $0.4 million. Aggregate costs incurred under this facility, including renewal costs, were $0.3 million and $1.3 million for the three and nine months ended September 30, 2009, respectively. Such amounts are included in other expense, net in the accompanying consolidated statement of operations.

        In addition, the Company from time to time may sell an undivided interest in accounts receivable under factoring arrangements at three of its European subsidiaries. As of September 30, 2010 and December 31, 2009, the Company's funding under these arrangements was approximately $4.3 million and $4.5 million, respectively. Sales of the European subsidiaries' accounts receivable were sold at a discount from face value of approximately 1.8% and 1.2%, at September 30, 2010 and 2009, respectively. Costs associated with these transactions were approximately $0.08 million and $0.05 million for the three months ended September 30, 2010 and 2009, respectively, and $0.2 million for each of the nine month periods ended September 30, 2010 and 2009, and are included in other expense, net in the accompanying consolidated statement of operations.

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

7. Inventories

        Inventories consist of the following:

 
  September 30,
2010
  December 31,
2009
 
 
  (dollars in thousands)
 

Finished goods

  $ 98,110   $ 95,420  

Work in process

    19,080     16,270  

Raw materials

    31,940     30,150  
           
 

Total inventories

  $ 149,130   $ 141,840  
           

8. Property and Equipment, Net

        Property and equipment, net, consists of the following:

 
  September 30,
2010
  December 31,
2009
 
 
  (dollars in thousands)
 

Land and land improvements

  $ 2,880   $ 2,380  

Buildings

    48,360     44,810  

Machinery and equipment

    285,940     283,710  
           

    337,180     330,900  

Less: Accumulated depreciation

    175,560     168,680  
           
 

Property and equipment, net

  $ 161,620   $ 162,220  
           

        Depreciation expense was approximately $5.7 million and $6.6 million, and $17.6 million and $20.3 million for the three and nine months ended September 30, 2010 and 2009, respectively, of which $5.1 million and $6.0 million, and $15.6 million and $18.1 million, respectively, is included in cost of sales in the accompanying statement of operations, and $0.6 million and $0.6 million, and $2.0 million and $2.2 million, respectively, is included in selling, general and administrative expenses in the accompanying statement of operations.

        In connection with the closure of the Mosinee facility (see Note 3), the Company recorded accelerated depreciation expense of approximately $0.5 million and $2.2 million during the three and nine months ended September 30, 2009, respectively, which is included in the $6.0 million and $18.1 million of depreciation expense recorded in cost of sales during the three and nine months then ended. This charge related to shortening the expected useful lives on certain machinery and equipment.

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

9. Long-term Debt

        The Company's long-term debt consists of the following:

 
  September 30,
2010
  December 31,
2009
 
 
  (dollars in thousands)
 

U.S. bank debt

  $ 249,600   $ 256,680  

Non-U.S. bank debt and other

    4,520     12,890  

93/4% senior secured notes, due December 2017

    245,300     244,980  
           

    499,420     514,550  

Less: Current maturities, long-term debt

    6,940     16,190  
           
 

Long-term debt

  $ 492,480   $ 498,360  
           

U.S. Bank Debt

        The Company is a party to a credit facility consisting of a $83.0 million revolving credit facility, a $40.0 million deposit-linked supplemental revolving credit facility and a $252.2 million term loan facility (collectively, the "Credit Facility"). During the third quarter of 2010, the Company elected to reduce its supplemental revolving credit facility from $60.0 million to $40.0 million. Under the Credit Facility, the Company is also able to issue letters of credit, not to exceed $65.0 million in aggregate, against its revolving credit facility commitments. At September 30, 2010 and December 31, 2009, the Company had letters of credit of approximately $26.2 million and $31.2 million, respectively, issued and outstanding.

        At September 30, 2010 and December 31, 2009, the Company had $0 and $5.1 million, respectively, outstanding under its supplemental revolving credit facility and had additional revolving credit commitments of $96.8 million and $101.7 million, respectively, potentially available under the Credit Facility after giving effect to approximately $26.2 million and $31.2 million, respectively, of letters of credit issued and outstanding. In addition, including availability under its accounts receivable facility and after consideration of leverage restrictions contained in the Credit Facility, the Company had $149.2 million and $114.3 million, respectively of capacity available to it for general corporate purposes under its revolving credit and accounts receivable facilities.

        The bank debt is an obligation of the Company and its subsidiaries. Although the terms of the Credit Facility do not restrict the Company's subsidiaries from making distributions to it in respect of its 93/4% senior secured notes, it does contain certain other limitations on the distribution of funds from TriMas Company LLC, the principal subsidiary, to the Company. The restricted net assets of the guarantor subsidiaries of approximately $331.7 million and $270.4 million at September 30, 2010 and December 31, 2009, respectively, are presented in the financial information in Note 18, "Supplemental Guarantor Condensed Consolidating Financial Information." The Credit Facility also contains various negative and affirmative covenants and other requirements affecting the Company and its subsidiaries. The Company was in compliance with its covenants at September 30, 2010.

        The Company's term loan facility traded at approximately 97.8% and 95.5% of par value as of September 30, 2010 and December 31, 2009, respectively, and was valued based on Level 2 inputs as defined in the fair value hierarchy.

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

9. Long-term Debt (Continued)

Non-U.S. Bank Debt

        In the United Kingdom, the Company's subsidiary is party to a revolving debt agreement which is secured by a letter of credit under the Credit Facility. At September 30, 2010, the balance outstanding under this arrangement was $0.3 million at an interest rate of 2.5%. At December 31, 2009, the balance outstanding under this agreement was approximately $0.8 million at an interest rate of 2.5%.

        In Australia, the Company's subsidiary is party to a debt agreement which matures December 31, 2010 and is secured by substantially all the assets of the subsidiary. At September 30, 2010, the balance outstanding under this agreement was $3.9 million at an interest rate of 6.8%. At December 31, 2009, the balance outstanding under this agreement was approximately $11.7 million at an interest rate of approximately 6.6%.

Notes

        During the fourth quarter of 2009, the Company issued $250.0 million principal amount of 93/4% senior secured notes due 2017 ("Senior Notes") at a discount of $5.0 million. The net proceeds of the offering, approximately $239.7 million, together with $29.3 million of cash on hand, were used to repurchase $256.5 million principal amount of the Company's 97/8% senior subordinated notes due 2012 ("Sub Notes"), for tender costs and expenses related thereto, and to pay fees and expenses related to the Senior Notes.

        During the three and nine months ended September 30, 2009, the Company utilized approximately $8.7 million and $43.8 million, respectively, of cash on hand to retire $10.0 million and $73.2 million, respectively of face value of the Sub Notes, resulting in a net gain in the three and nine months ended September 30, 2009 of approximately $1.2 million and $28.3 million, respectively, after considering non-cash debt extinguishment costs of $0.1 million and $1.1 million, respectively.

        The Notes indenture contains negative and affirmative covenants and other requirements that are comparable to those contained in the Credit Facility. At September 30, 2010, the Company was in compliance with all such covenant requirements.

        The Company's Senior Notes traded at approximately 106.5% and 98.5% of par value as of September 30, 2010 and December 31, 2009, respectively, and was valued based on Level 2 inputs as defined in the fair value hierarchy.

10. Derivative Instruments

        The Company is party to interest rate swaps to fix the variable LIBOR-based portion on $200.0 million notional amount of the Company's term loan facility. Upon inception, the interest rate swaps were designated as cash flow hedges; however, upon the Company's amendment and restatement of its credit facilities in the fourth quarter of 2009, the Company determined that these interest rate swaps were no longer effective due to the imposition of a LIBOR floor in the determination of the variable interest rate on the term loan facility. In the first quarter of 2010, the Company amended the interest rate swaps to include a LIBOR floor similar to the term loan facility; however, the amended interest rate swaps have not been designated as hedging instruments. For the three and nine months ended September 30, 2010, approximately $0.6 million and $1.9 million, respectively, of unrealized loss from accumulated other

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

10. Derivative Instruments (Continued)


comprehensive income incurred while the interest rate swaps were effective was amortized into earnings as interest expense. Over the next 12 months, the Company expects approximately $0.8 million of unrealized loss in accumulated other comprehensive income incurred while the interest rate swaps were effective to be amortized into earnings as interest expense.

        As of December 31, 2009, the Company held a foreign exchange forward contract with a notional value of 55.5 million Mexican pesos and a foreign exchange forward contract with a notional value of £6.5 million. These contracts expired during the first quarter of 2010 and were not designated as hedging instruments.

        As of September 30, 2010 and December 31, 2009, the fair value carrying amounts of the Company's derivative instruments not designated as hedging instruments are recorded as follows:

 
   
  Asset Derivatives   Liability Derivatives  
 
  Balance Sheet Caption   September 30,
2010
  December 31,
2009
  September 30,
2010
  December 31,
2009
 
 
   
   
  (dollars in thousands)
   
 

Derivatives not designated as hedging instruments

                             
 

Interest rate contracts

  Accrued liabilities   $   $   $ 1,830   $ 1,700  
 

Interest rate contracts

  Other long-term liabilities                 660  
 

Foreign currency forward contracts

  Accrued liabilities                 150  
                       

Total derivatives not designated as hedging instruments

      $   $   $ 1,830   $ 2,510  
                       

        The effect of derivative instruments on the consolidated statement of operations for the three and nine months ended September 30, 2010 and 2009 is summarized as follows:

 
   
   
   
  Amount of Loss Reclassifed from
AOCI in to Earnings
 
 
  Amount of Loss Recognized
in AOCI on Derivatives
(Effective Portion,
net of tax)
   
 
 
   
  Three months
ended
September 30,
  Nine months
ended
September 30,
 
 
  Location of Loss
Reclassified from
AOCI into Earnings
(Effective Portion)
 
 
  As of
September 30,
2010
  As of
December 31
2009
 
 
  2010   2009   2010   2009  
 
  (dollars in thousands)
   
  (dollars
in thousands)

  (dollars
in thousands)

 

Derivatives designated as hedging instruments

                                         
 

Interest rate contracts

  $ (500 ) $ (1,660 ) Interest expense   $ (570 ) $ (940 ) $ (1,860 ) $ (1,950 )

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

10. Derivative Instruments (Continued)

 

 
  Amount of Gain (Loss)
Recognized in Earnings on
Derivatives
   
 
  Three months
ended
September 30,
  Nine months
ended
September 30,
   
 
  Location of Gain
(Loss) Recognized in
Earnings on
Derivative
 
  2010   2009   2010   2009
 
  (dollars
in thousands)

  (dollars
in thousands)

   

Derivatives not designated as hedging instruments

                           
 

Interest rate contracts

  $ (40 ) $   $ (1,600 ) $   Interest expense
 

Foreign exchange contracts

  $   $   $ 50   $   Other expense, net

        Valuations of the interest rate swaps and foreign currency forward contracts are based on the income approach which uses 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 30, 2010 and December 31, 2009 are shown below:

 
   
  September 30, 2010  
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)
 
 
   
  (dollars in thousands)
 

Interest rate swaps

  Recurring   $ (1,830 ) $   $ (1,830 ) $  
                       

 

 
   
  December 31, 2009  
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)
 
 
   
  (dollars in thousands)
 

Interest rate swaps

  Recurring   $ (2,360 ) $   $ (2,360 ) $  

Foreign currency forward contracts

  Recurring     (150 )       (150 )    
                       

      $ (2,510 ) $   $ (2,510 ) $  
                       

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

11. Commitments and Contingencies

        A civil suit was filed in the United States District Court for the Central District of California in December 1988 by the United States of America and the State of California against more than 180 defendants, including TriMas, for alleged release into the environment of hazardous substances disposed of at the Operating Industries, Inc. site in California. This site served for many years as a depository for municipal and industrial waste. The plaintiffs have requested, among other things, that the defendants clean up the contamination at that site. Consent decrees have been entered into by the plaintiffs and a group of the defendants, including TriMas, providing that the consenting parties perform certain remedial work at the site and reimburse the plaintiffs for certain past costs incurred by the plaintiffs at the site. The Company estimates that its share of the clean-up costs will not exceed $500,000, for which the Company has insurance proceeds. Plaintiffs had sought other relief such as damages arising out of claims for negligence, trespass, public and private nuisance, and other causes of action, but the consent decree governs the remedy. Based upon the Company's present knowledge and subject to future legal and factual developments, the Company does not believe that this matter will have a material adverse effect on its financial position, results of operations or cash flows.

        As of September 30, 2010, the Company was a party to approximately 1,054 pending cases involving an aggregate of approximately 8,169 claimants alleging personal injury from exposure to asbestos containing materials formerly used in gaskets (both encapsulated and otherwise) manufactured or distributed by certain of the Company's subsidiaries for use primarily in the petrochemical refining and exploration industries. The following chart summarizes the number of claimants, number of claims filed, number of claims dismissed, number of claims settled, the average settlement amount per claim and the total defense costs, exclusive of 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
  Average
settlement
amount per
claim during
period
  Total defense
costs during
period
 

Fiscal year ended December 31, 2009

    7,524     586     254     40   $ 4,644   $ 2,652,000  

Nine months ended September 30, 2010

    7,816     726     333     40   $ 8,138   $ 2,147,000  

        In addition, the Company acquired various companies to distribute its products that had distributed gaskets of other manufacturers prior to acquisition. The Company believes that many of its pending cases relate to locations at which none of its gaskets were distributed or used.

        The Company may be subjected to significant additional asbestos-related claims in the future, the cost of settling cases in which product identification can be made may increase, and the Company may be subjected to further claims in respect of the former activities of its acquired gasket distributors. The Company is unable to make a meaningful statement concerning the monetary claims made in the asbestos cases given that, among other things, claims may be initially made in some jurisdictions without specifying the amount sought or by simply stating the requisite or maximum permissible monetary relief, and may be amended to alter the amount sought. The large majority of claims do not specify the amount sought. Of the 8,169 claims pending at September 30, 2010, 53 set forth specific amounts of damages (other than

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

11. Commitments and Contingencies (Continued)


those stating the statutory minimum or maximum). 42 of the 53 claims sought between $1.0 million and $5.0 million in total damages (which includes compensatory and punitive damages), 9 sought between $5.0 million and $10.0 million in total damages (which includes compensatory and punitive damages) and 2 sought over $10.0 million (which includes compensatory and punitive damages). Solely with respect to compensatory damages, 44 of the 53 claims sought between $50,000 and $600,000, 7 sought between $1.0 million and $5.0 million and 2 sought over $5.0 million. Solely with respect to punitive damages, 42 of the 53 claims sought between $1.0 million and $2.5 million, 9 sought between $2.5 million and $5.0 million and 2 sought over $5.0 million. In addition, relatively few of the claims have reached the discovery stage and even fewer claims have gone past the discovery stage.

        Total settlement costs (exclusive of defense costs) for all such cases, some of which were filed over 20 years ago, have been approximately $5.7 million. All relief sought in the asbestos cases is monetary in nature. To date, approximately 50% 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 coverage available to the Company that might otherwise be disputed by the carriers and provides a methodology for the administration of such expenses. Nonetheless, there may be a period prior to the commencement of coverage under this agreement and following exhaustion of the Company's primary insurance coverage during which the Company would be solely responsible for defense costs and indemnity payments, the duration of which would be subject to the scope of damage awards and settlements paid.

        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 and other available information (including the availability of excess insurance), the Company does not believe that these cases will have a material adverse effect on its financial position and results of operations or cash flows.

        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.

12. Segment Information

        TriMas' reportable operating segments are business units that provide unique products and services. Each operating segment is independently managed, requires different technology and marketing strategies and has separate financial information evaluated regularly by the Company's chief operating decision maker in determining resource allocation and assessing performance. TriMas groups its operating segments into five reportable segments, described below. Within these operating segments, there are no individual products or product families for which reported revenues accounted for more than 10% of the Company's consolidated revenues.

        Packaging—Steel and plastic closure caps, drum enclosures, rings and levers, and dispensing systems for industrial and consumer markets.

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

12. Segment Information (Continued)

        Energy—Natural gas engines, compressors, gas production equipment and chemical pumps engineered at well sites for the oil and gas industry as well as metallic and non-metallic industrial sealant products and fasteners for the petroleum refining, petrochemical and other industrial markets.

        Aerospace & Defense—Highly engineered specialty fasteners and screws for the commercial and military aerospace industries and military munitions components for the defense industry.

        Engineered Components—High-pressure and low-pressure cylinders for the transportation, storage and dispensing of compressed gases, specialty fittings for the automotive industry, precision cutting instruments for the medical industry and specialty precision tools such as center drills, cutters, end mills and countersinks for the industrial metal-working market.

        Cequent—Custom-engineered towing, trailering and electrical products including trailer couplers, winches, jacks, trailer brakes and brake control solutions, lighting accessories and roof racks for the recreational vehicle, agricultural/utility, marine, automotive and commercial trailer markets, functional vehicle accessories and cargo management solutions including vehicle hitches and receivers, sway controls, weight distribution and fifth-wheel hitches, hitch-mounted accessories, and other accessory components.

        The Company's management uses Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") as a primary indicator of financial operating performance and as a measure of cash generating capability. Adjusted EBITDA is defined as net income (loss) before cumulative effect of accounting change and before interest, taxes, depreciation, amortization, debt extinguishment costs, non-cash asset and goodwill impairment charges and write-offs and non-cash losses on sale-leaseback of property and equipment.

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Table of Contents


TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

12. Segment Information (Continued)

        Segment activity is as follows:

 
  Three months ended
September 30,
  Nine months ended
September 30,
 
 
  2010   2009   2010   2009  
 
   
  (dollars in thousands)
   
 

Net Sales

                         

Packaging

  $ 44,490   $ 39,730   $ 133,610   $ 106,130  

Energy

    47,440     36,000     135,080     111,260  

Aerospace & Defense

    19,170     16,060     53,470     56,530  

Engineered Components

    24,950     15,100     67,180     48,570  

Cequent

    111,830     96,080     330,660     290,070  
                   
 

Total

  $ 247,880   $ 202,970   $ 720,000   $ 612,560  
                   

Operating Profit

                         

Packaging

  $ 13,140   $ 9,160   $ 38,480   $ 23,390  

Energy

    4,910     3,200     15,440     9,380  

Aerospace & Defense

    5,350     5,190     13,020     18,410  

Engineered Components

    2,690     920     8,430     1,640  

Cequent

    13,430     7,220     37,600     6,760  

Corporate expenses

    (6,510 )   (4,540 )   (18,390 )   (16,800 )
                   
 

Total

  $ 33,010   $ 21,150   $ 94,580   $ 42,780  
                   

Adjusted EBITDA

                         

Packaging

  $ 16,010   $ 12,540   $ 47,350   $ 32,760  

Energy

    5,620     3,950     17,540     11,730  

Aerospace & Defense

    5,770     5,760     14,780     20,180  

Engineered Components

    3,760     1,640     11,410     3,900  

Cequent

    17,320     12,200     49,290     21,700  

Corporate (expenses) income

    (6,450 )   (3,520 )   (18,390 )   11,360  
                   
 

Subtotal from continuing operations

    42,030     32,570     121,980     101,630  

Discontinued operations

    40     (1,660 )   9,650     (14,240 )
                   
 

Total company

  $ 42,070   $ 30,910   $ 131,630   $ 87,390  
                   

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

12. Segment Information (Continued)

        The following is a reconciliation of the Company's net income to Adjusted EBITDA:

 
  Three months ended
September 30,
  Nine months ended
September 30,
 
 
  2010   2009   2010   2009  
 
  (dollars in thousands)
 

Net income

  $ 12,720   $ 5,830   $ 39,580   $ 11,140  
 

Income tax expense

    7,450     3,420     23,580     6,650  
 

Interest expense

    12,680     10,930     40,200     35,050  
 

Debt extinguishment costs

        150         1,140  
 

Depreciation and amortization

    9,220     10,580     28,270     33,410  
                   

Adjusted EBITDA, total company

  $ 42,070   $ 30,910   $ 131,630   $ 87,390  
 

Adjusted EBITDA, discontinued operations

    40     (1,660 )   9,650     (14,240 )
                   

Adjusted EBITDA, continuing operations

  $ 42,030   $ 32,570   $ 121,980   $ 101,630  
                   

13. Equity Awards

        The Company maintains two long-term equity incentive plans, the TriMas Corporation 2006 Long Term Equity Incentive Plan (the "2006 Plan") and the 2002 Long Term Equity Incentive Plan (the "2002 Plan"). See below for details of awards by plan.

2006 Plan

        Information related to stock options at September 30, 2010 is as follows:

 
  Number of
Stock Options
  Weighted Average
Option Price
  Average
Remaining
Contractual Life
(Years)
  Aggregate
Intrinsic Value
 

Outstanding at January 1, 2010

    554,000   $ 1.14              
 

Granted

                       
 

Exercised

    (10,666 )   1.01              
 

Cancelled

                       
                   

Outstanding at September 30, 2010

    543,334   $ 1.15     8.4   $ 7,445,740  
                   

        As of September 30, 2010, 173,998 stock options were exercisable under the 2006 Plan. In addition, the fair value of options which vested during the nine month periods ended September 30, 2010 and 2009 was $0.1 million and $0 million, respectively. No options vested during the three month periods ended September 30, 2010 and 2009. As of September 30, 2010, 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 of 1.1 years.

        During the first quarter of 2010, the Company granted 25,000 restricted shares of common stock. These restricted shares are subject only to a service condition, vesting ratably over three years so long as the employee remains with the Company.

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

13. Equity Awards (Continued)

        Information related to restricted shares at September 30, 2010 is as follows:

 
  Number of
Unvested
Restricted
Shares
  Weighted Average
Grant Date Fair
Value
  Average
Remaining
Contractual Life
(Years)
  Aggregate
Intrinsic Value
 

Outstanding at January 1, 2010

    251,937   $ 5.99              
 

Granted

    25,000     6.95              
 

Vested

    (172,313 )   6.16              
 

Cancelled

    (2,296 )   8.80              
                   

Outstanding at September 30, 2010

    102,328   $ 5.88     1.0   $ 1,519,570  
                   

        As of September 30, 2010, there was approximately $0.2 million of unrecognized compensation cost related to unvested restricted shares that is expected to be recorded over a weighted-average period of 0.8 years.

        The Company recognized approximately $0.1 million for each of the three month periods ended September 30, 2010 and 2009, and approximately $0.5 million and $0.2 million for the nine months ended September 30, 2010 and 2009, respectively. The stock-based compensation expense is included in selling, general and administrative expenses in the accompanying statement of operations.

2002 Plan

        During the first quarter of 2010, the Company granted 97,870 stock options to certain key employees, each of which may be used to purchase one share of the Company's common stock. These stock options have a ten year life, vest ratably over three years from date of grant, have an exercise price of $6.09 and had a weighted-average fair value at grant date of $2.60. The fair value of these options at the grant date was estimated using the Black-Scholes option pricing model using the following weighted-average assumptions: expected life of 6 years, risk-free interest rate of 2.7% and expected volatility of 40%.

        Information related to stock options at September 30, 2010, is as follows:

 
  Number of
Options
  Weighted Average
Option Price
  Average
Remaining
Contractual Life
(Years)
  Aggregate
Intrinsic Value
 

Outstanding at January 1, 2010

    1,285,344   $ 13.45              
 

Granted

    97,870     6.09              
 

Exercised

    (90,617 )   1.01              
 

Cancelled

    (70,845 )   7.74              
                   

Outstanding at September 30, 2010

    1,221,752   $ 14.12     5.6   $ 6,044,350  
                   

        As of September 30, 2010, 774,184 stock options were exercisable under the 2002 Plan. In addition, the fair value of options which vested during the three months ended September 30, 2010 and 2009 was $0 and $0.04 million, respectively and $0.1 million and $0.2 million during the nine months ended September 30, 2010 and 2009, respectively. As of September 30, 2010, there was approximately $0.2 million

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

13. Equity Awards (Continued)


of unrecognized compensation cost related to stock options that is expected to be recorded over a weighted-average period of 1.0 years.

        During the first quarter of 2010, the Company granted 78,090 restricted shares of common stock to certain employees. These restricted shares are subject only to a service condition, vesting ratably over three years so long as the employee remains with the Company.

        Information related to restricted shares at September 30, 2010 is as follows:

 
  Number of
Unvested
Restricted
Shares
  Weighted Average
Grant Date Fair
Value
  Average
Remaining
Contractual Life
(Years)
  Aggregate
Intrinsic Value
 

Outstanding at January 1, 2010

    126,950   $ 5.20              
 

Granted

    78,090     6.09              
 

Vested

    (82,960 )   5.20              
 

Cancelled

    (190 )   5.20              
                   

Outstanding at September 30, 2010

    121,890   $ 5.77     1.7   $ 1,810,070  
                   

        As of September 30, 2010, there was approximately $0.4 million of unrecognized compensation cost related to unvested restricted shares that is expected to be recorded over a weighted-average period of 1.4 years.

        The Company recognized approximately $0.2 million and $0.04 million for the three months ended September 30, 2010 and 2009, respectively, and approximately $0.6 million and $0.1 million for nine months ended September 30, 2010 and 2009, respectively. The stock-based compensation expense is included in selling, general and administrative expenses in the accompanying statement of operations.

14. Earnings per Share

        Net earnings are divided by the weighted average number of shares outstanding during the year to calculate basic earnings per share. Diluted earnings (loss) per share are calculated to give effect to stock options and other stock-based awards. The calculation of diluted earnings (loss) per share included 132,461 and 32,806 restricted shares for the three months ended September 30, 2010 and 2009, respectively, and 111,187 and 14,813 restricted shares for the nine months ended September 30, 2010 and 2009, respectively. The calculation of diluted earnings (loss) per share also included 552,420 and 256,650 options to purchase shares of common stock for the three months ended September 30, 2010 and 2009, respectively, and 538,149 and 478,406 options for the nine months ended September 30, 2010 and 2009, respectively.

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

15. Defined Benefit Plans

        Net periodic pension and postretirement benefit costs for the Company's defined benefit pension plans and postretirement benefit plans cover foreign employees, union hourly employees and certain salaried employees. The components of net periodic pension and postretirement benefit costs for the three and nine months ended September 30, 2010 and 2009 are as follows:

 
  Pension Plans   Other Postretirement Benefits  
 
  Three Months
Ended
September 30,
  Nine Months
Ended
September 30,
  Three Months
Ended
September 30,
  Nine Months
Ended
September 30,
 
 
  2010   2009   2010   2009   2010   2009   2010   2009  
 
  (dollars in thousands)
  (dollars in thousands)
 

Service costs

  $ 150   $ 130   $ 460   $ 390   $   $   $   $  

Interest costs

    400     390     1,190     1,170     20     30     50     80  

Expected return on plan assets

    (400 )   (380 )   (1,190 )   (1,150 )                

Amortization of prior service cost

            10     10     (70 )   (70 )   (200 )   (200 )

Amortization of net loss (gain)

    110     80     320     230     (10 )   (10 )   (40 )   (20 )
                                   

Net periodic benefit cost

  $ 260   $ 220   $ 790   $ 650   $ (60 ) $ (50 ) $ (190 ) $ (140 )
                                   

        The Company contributed approximately $0.6 million and $1.4 million to its defined benefit pension plans during the three and nine months ended September 30, 2010, respectively. The Company expects to contribute approximately $1.9 million to its defined benefit pension plans for the full year 2010.

16. New Accounting Pronouncements

        As of September 30, 2010, there are no recently issued accounting pronouncements not yet adopted by the Company that would have a material impact on the Company's results of operations or financial position.

17. Subsequent Event

        On October 27, 2010, the Company signed a stock purchase agreement ("SPA") with South Texas Bolt & Fitting, Inc. ("STBF") for the purchase price of $18 million, payable in cash at closing, which is expected to occur on November 1, 2010. STBF will become part of the Company's Energy reportable segment. The purchase price is subject to a net working capital adjustment, if any, to be determined post-closing. The SPA contains customary representations, warranties, covenants and indemnities. STBF is a diversified manufacturer and distributor of various types of stud bolts, industrial fasteners and specialty products to the oil field and industrial markets. STBF had approximately $14.5 million in revenue in the twelve months ended June 30, 2010.

23


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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

18. Supplemental Guarantor Condensed Consolidating Financial Information

        Under an indenture dated December 29, 2009, TriMas Corporation, the parent company ("Parent"), issued 93/4% senior secured notes due 2017 in a total principal amount of $250.0 million (face value). The net proceeds of the offering were used, together with other available cash, to repurchase the Company's outstanding 97/8% senior subordinated notes due 2012 pursuant to a cash tender offer. The outstanding Senior Notes are guaranteed by substantially all of the Company's domestic subsidiaries ("Guarantor Subsidiaries"). All of the Guarantor Subsidiaries are 100% owned by the Parent and their guarantee is full, unconditional, joint and several. The Company's non-domestic subsidiaries and TSPC, Inc. have not guaranteed the Senior Notes ("Non-Guarantor Subsidiaries"). The Guarantor Subsidiaries have also guaranteed amounts outstanding under the Company's Credit Facility.

        The accompanying supplemental guarantor condensed, consolidating financial information is presented using the equity method of accounting for all periods presented. Under this method, investments in subsidiaries are recorded at cost and adjusted for the Company's share in the subsidiaries' cumulative results of operations, capital contributions and distributions and other changes in equity. Elimination entries relate primarily to the elimination of investments in subsidiaries and associated intercompany balances and transactions.

24


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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

18. Supplemental Guarantor Condensed Consolidating Financial Information (Continued)


Supplemental Guarantor
Condensed Financial Statements
Consolidating Balance Sheet
(dollars in thousands)

 
  September 30, 2010  
 
  Parent   Guarantor   Non-
Guarantor
  Eliminations   Consolidated
Total
 

Assets

                               

Current assets:

                               
 

Cash and cash equivalents

  $   $ 15,310   $ 31,200   $   $ 46,510  
 

Trade receivables, net

        109,350     19,130         128,480  
 

Receivables, intercompany

            5,130     (5,130 )    
 

Inventories

        125,360     23,770         149,130  
 

Deferred income taxes

    14,000     17,870     1,050         32,920  
 

Prepaid expenses and other current assets

        6,130     1,480         7,610  
                       
   

Total current assets

    14,000     274,020     81,760     (5,130 )   364,650  

Investments in subsidiaries

    331,680     137,180         (468,860 )    

Property and equipment, net

        115,890     45,730         161,620  

Goodwill

        148,220     46,630         194,850  

Intangibles and other assets

    11,640     166,080     6,370     (5,710 )   178,380  
                       
     

Total assets

  $ 357,320   $ 841,390   $ 180,490   $ (479,700 ) $ 899,500  
                       

Liabilities and Shareholders' Equity

                               

Current liabilities:

                               
 

Current maturities, long-term debt

  $   $ 2,760   $ 4,180   $   $ 6,940  
 

Accounts payable, trade

        85,720     22,650         108,370  
 

Accounts payable, intercompany

        5,130         (5,130 )    
 

Accrued liabilities

    7,180     57,190     10,200         74,570  
                       
   

Total current liabilities

    7,180     150,800     37,030     (5,130 )   189,880  

Long-term debt

    245,300     247,180             492,480  

Deferred income taxes

        69,270     3,620     (5,710 )   67,180  

Other long-term liabilities

        42,460     2,660         45,120  
                       
   

Total liabilities

    252,480     509,710     43,310     (10,840 )   794,660  
                       
   

Total shareholders' equity

    104,840     331,680     137,180     (468,860 )   104,840  
                       
   

Total liabilities and shareholders' equity

  $ 357,320   $ 841,390   $ 180,490   $ (479,700 ) $ 899,500  
                       

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

18. Supplemental Guarantor Condensed Consolidating Financial Information (Continued)


Supplemental Guarantor
Condensed Financial Statements
Consolidating Balance Sheet
(dollars in thousands)

 
  December 31, 2009  
 
  Parent   Guarantor   Non-
Guarantor
  Eliminations   Consolidated
Total
 

Assets

                               

Current assets:

                               
 

Cash and cash equivalents

  $   $ 300   $ 9,180   $   $ 9,480  
 

Trade receivables, net

        76,720     16,660         93,380  
 

Receivables, intercompany

            3,550     (3,550 )    
 

Inventories

        117,850     23,990         141,840  
 

Deferred income taxes

    5,400     23,450     870     (5,400 )   24,320  
 

Prepaid expenses and other current assets

    80     4,820     1,600         6,500  
 

Assets of discontinued operations held for sale

        4,250             4,250  
                       
   

Total current assets

    5,480     227,390     55,850     (8,950 )   279,770  

Investments in subsidiaries

    270,370     107,170         (377,540 )    

Property and equipment, net

        115,380     46,840         162,220  

Goodwill

        148,220     48,110         196,330  

Intangibles and other assets

    31,240     175,190     5,720     (24,690 )   187,460  
                       
     

Total assets

  $ 307,090   $ 773,350   $ 156,520   $ (411,180 ) $ 825,780  
                       

Liabilities and Shareholders' Equity

                               

Current liabilities:

                               
 

Current maturities, long-term debt

  $   $ 3,670   $ 12,520   $   $ 16,190  
 

Accounts payable, trade

        73,980     18,860         92,840  
 

Accounts payable, intercompany

        3,550         (3,550 )    
 

Accrued liabilities

    130     56,000     9,620         65,750  
 

Liabilities of discontinued operations

        1,070             1,070  
                       
   

Total current liabilities

    130     138,270     41,000     (3,550 )   175,850  

Long-term debt

    244,980     253,380             498,360  

Deferred income taxes

        66,920     5,760     (30,090 )   42,590  

Other long-term liabilities

        44,410     2,590         47,000  
                       
   

Total liabilities

    245,110     502,980     49,350     (33,640 )   763,800  
                       
   

Total shareholders' equity

    61,980     270,370     107,170     (377,540 )   61,980  
                       
   

Total liabilities and shareholders' equity

  $ 307,090   $ 773,350   $ 156,520   $ (411,180 ) $ 825,780  
                       

26


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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

18. Supplemental Guarantor Condensed Consolidating Financial Information (Continued)

Supplemental Guarantor
Condensed Financial Statements
Consolidating Statement of Operations
(dollars in thousands)

 
  Three Months Ended September 30, 2010  
 
  Parent   Guarantor   Non-
Guarantor
  Eliminations   Total  

Net sales

  $   $ 200,000   $ 65,140   $ (17,260 ) $ 247,880  

Cost of sales

        (138,730 )   (51,920 )   17,260     (173,390 )
                       
 

Gross profit

        61,270     13,220         74,490  

Selling, general and administrative expenses

        (34,920 )   (6,340 )       (41,260 )

Loss on dispositions of property and equipment

        (220 )           (220 )
                       
   

Operating profit

        26,130     6,880         33,010  

Other income (expense), net:

                               
 

Interest expense

    (6,410 )   (5,710 )   (430 )       (12,550 )
 

Other, net

        880     (1,080 )       (200 )
                       

Income (loss) before income tax (expense) benefit and equity in net income of subsidiaries

    (6,410 )   21,300     5,370         20,260  

Income tax (expense) benefit

    2,240     (8,280 )   (1,460 )       (7,500 )

Equity in net income of subsidiaries

    16,890     3,910         (20,800 )    
                       

Income from continuing operations

    12,720     16,930     3,910     (20,800 )   12,760  

Loss from discontinued operations

        (40 )           (40 )
                       

Net income

  $ 12,720   $ 16,890   $ 3,910   $ (20,800 ) $ 12,720  
                       

 

 
  Three Months Ended September 30, 2009  
 
  Parent   Guarantor   Non-
Guarantor
  Eliminations   Total  

Net sales

  $   $ 155,950   $ 56,810   $ (9,790 ) $ 202,970  

Cost of sales

        (110,410 )   (44,150 )   9,790     (144,770 )
                       
 

Gross profit

        45,540     12,660         58,200  

Selling, general and administrative expenses

        (31,390 )   (5,680 )       (37,070 )

Gain (loss) on dispositions of property and equipment

        (210 )   230         20  
                       
   

Operating profit

        13,940     7,210         21,150  

Other income (expense), net:

                               
 

Interest expense

    (6,690 )   (3,780 )   (280 )       (10,750 )
 

Gain on extinguishment of debt

    1,180                 1,180  
 

Other, net

        30     (220 )       (190 )
                       

Income (loss) before income tax (expense) benefit and equity in net income (loss) of subsidiaries

    (5,510 )   10,190     6,710         11,390  

Income tax (expense) benefit

    1,980     (4,590 )   (1,630 )       (4,240 )

Equity in net income (loss) of subsidiaries

    9,360     5,080         (14,440 )    
                       

Income from continuing operations

    5,830     10,680     5,080     (14,440 )   7,150  

Loss from discontinued operations

        (1,320 )           (1,320 )
                       

Net income

  $ 5,830   $ 9,360   $ 5,080   $ (14,440 ) $ 5,830  
                       

27


Table of Contents


TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

18. Supplemental Guarantor Condensed Consolidating Financial Information (Continued)


Supplemental Guarantor
Condensed Financial Statements
Consolidating Statement of Operations
(dollars in thousands)

 
  Nine Months Ended September 30, 2010  
 
  Parent   Guarantor   Non-
Guarantor
  Eliminations   Total  

Net sales

  $   $ 572,640   $ 196,630   $ (49,270 ) $ 720,000  

Cost of sales

        (400,070 )   (153,340 )   49,270     (504,140 )
                       
 

Gross profit

        172,570     43,290         215,860  

Selling, general and administrative expenses

          (103,280 )   (17,050 )       (120,330 )

Loss on dispositions of property and equipment

        (700 )   (250 )       (950 )
                       
   

Operating profit

        68,590     25,990         94,580  

Other income (expense), net:

                               
 

Interest expense

    (19,290 )   (18,870 )   (1,620 )       (39,780 )
 

Gain on bargain purchase

        410             410  
 

Other, net

        1,890     (3,140 )       (1,250 )
                       

Income before income tax expense and equity in net income (loss) of subsidiaries

    (19,290 )   52,020     21,230         53,960  

Income tax (expense) benefit

    6,750     (21,250 )   (5,730 )       (20,230 )

Equity in net income of subsidiaries

    52,120     15,500         (67,620 )    
                       

Income from continuing operations

    39,580     46,270     15,500     (67,620 )   33,730  

Income from discontinued operations

        5,850             5,850  
                       

Net income

  $ 39,580   $ 52,120   $ 15,500   $ (67,620 ) $ 39,580  
                       

 

 
  Nine Months Ended September 30, 2009  
 
  Parent   Guarantor   Non-
Guarantor
  Eliminations   Total  

Net sales

  $   $ 489,200   $ 148,100   $ (24,740 ) $ 612,560  

Cost of sales

        (364,010 )   (118,450 )   24,740     (457,720 )
                       
 

Gross profit

        125,190     29,650         154,840  

Selling, general and administrative expenses

        (96,730 )   (15,510 )       (112,240 )

Gain (loss) on dispositions of property and equipment

        (70 )   250         180  
                       
   

Operating profit

        28,390     14,390         42,780  

Other income (expense), net:

                               
 

Interest expense

    (22,160 )   (11,620 )   (750 )       (34,530 )
 

Gain on extinguishment of debt

    28,250                   28,250  
 

Other, net

        500     (2,210 )       (1,710 )
                       

Income (loss) before income tax (expense) benefit and equity in net income (loss) of subsidiaries

    6,090     17,270     11,430         34,790  

Income tax expense

    (2,010 )   (7,890 )   (3,290 )       (13,190 )

Equity in net income of subsidiaries

    7,060     8,140         (15,200 )    
                       

Income from continuing operations

    11,140     17,520     8,140     (15,200 )   21,600  

Loss from discontinued operations

        (10,460 )           (10,460 )
                       

Net income

  $ 11,140   $ 7,060   $ 8,140   $ (15,200 ) $ 11,140  
                       

28


Table of Contents


TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

18. Supplemental Guarantor Condensed Consolidating Financial Information (Continued)

Supplemental Guarantor
Condensed Financial Statements
Consolidating Statement of Cash Flows
(dollars in thousands)

 
  Nine Months Ended September 30, 2010  
 
  Parent   Guarantor   Non-Guarantor   Eliminations   Total  

Cash Flows from Operating Activities:

                               
   

Net cash provided by (used for) operating activities

  $ (12,630 ) $ 42,470   $ 31,760   $   $ 61,600  
                       

Cash Flows from Investing Activities:

                               
 

Capital expenditures

        (8,390 )   (2,700 )       (11,090 )
 

Acquisition of businesses, net of cash acquired

        (12,040 )   (720 )       (12,760 )
 

Net proceeds from disposition of businesses and other assets

        14,720             14,720  
                       
     

Net cash used for investing activities

        (5,710 )   (3,420 )       (9,130 )
                       

Cash Flows from Financing Activities:

                               
 

Repayments of borrowings on term loan facilities

        (1,950 )           (1,950 )
 

Proceeds from borrowings on revolving credit facilities

        372,840     3,590         376,430  
 

Repayments of borrowings on revolving credit facilities

        (378,000 )   (12,220 )       (390,220 )
 

Shares surrended upon vesting of options and restricted stock awards to cover tax obligations

    (240 )               (240 )
 

Proceeds from exercise of stock options

    100                 100  
 

Excess tax benefits from stock based compensation

        440             440  
 

Intercompany transfers (to) from subsidiaries

    12,770     (15,080 )   2,310          
                       
     

Net cash provided by (used for) financing activities

    12,630     (21,750 )   (6,320 )       (15,440 )
                       

Cash and Cash Equivalents:

                               
 

Increase for the period

        15,010     22,020         37,030  
   

At beginning of period

        300     9,180         9,480  
                       
   

At end of period

  $   $ 15,310   $ 31,200   $   $ 46,510  
                       

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TRIMAS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

18. Supplemental Guarantor Condensed Consolidating Financial Information (Continued)

 


Supplemental Guarantor
Condensed Financial Statements
Consolidating Statement of Cash Flows
(dollars in thousands)

 
  Nine Months Ended September 30, 2009  
 
  Parent   Guarantor   Non-Guarantor   Eliminations   Total  

Cash Flows from Operating Activities:

                               
 

Net cash provided by (used for) operating activities

  $ (14,320 ) $ 53,360   $ 28,600   $   $ 67,640  
                       

Cash Flows from Investing Activities:

                               
 

Capital expenditures

        (9,210 )   (1,640 )       (10,850 )
 

Net proceeds from disposition of businesses and other assets

        22,380     720         23,100  
                       
     

Net cash provided by (used for) investing activities

        13,170     (920 )       12,250  
                       

Cash Flows from Financing Activities:

                               
 

Repayments of borrowings on senior credit facilities

        (1,950 )   (420 )       (2,370 )
 

Proceeds from borrowings on revolving credit facilities

        674,780     3,150         677,930  
 

Repayments of borrowings on revolving credit facilities

        (683,300 )   (7,440 )       (690,740 )
 

Retirement of senior subordinated notes

    (43,850 )               (43,850 )
 

Intercompany transfers (to) from subsidiaries

    58,170     (39,180 )   (18,990 )        
                       
     

Net cash provided by (used for) financing activities

    14,320     (49,650 )   (23,700 )       (59,030 )
                       

Cash and Cash Equivalents:

                               
 

Increase for the period

        16,880     3,980         20,860  
   

At beginning of period

        340     3,570         3,910  
                       
   

At end of period

  $   $ 17,220   $ 7,550   $   $ 24,770  
                       

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

        The following discussion and analysis of our financial condition contains forward-looking statements regarding industry outlook and our expectations regarding the performance of our business. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under the heading "Forward Looking Statements," at the beginning of this report. Our actual results may differ materially from those contained in or implied by any forward-looking statements. You should read the following discussion together with the Company's reports on file with the Securities and Exchange Commission.

Introduction

        We are an industrial manufacturer and distributor of highly engineered products serving focused markets in a diverse range of commercial, industrial and consumer applications. We have five reportable segments: Packaging, Energy, Aerospace & Defense, Engineered Components and Cequent. In reviewing our financial results, consideration should be given to certain critical events, particularly our acquisitions and consolidation, integration and restructuring efforts in several of our business operations.

        Key Factors and Risks Affecting our Reported Results.    Our businesses and results of operations depend upon general economic conditions and we serve some customers in cyclical industries that are highly competitive and themselves adversely impacted by unfavorable economic conditions. During the fourth quarter of 2008, worldwide credit markets and global economic conditions deteriorated significantly, resulting in declines in demand for the Company's products and services. These conditions persisted throughout 2009, resulting in reductions in sales and earnings from comparable prior periods across all of our reportable segments except Packaging. We have experienced generally higher levels of economic activity during the first three quarters of 2010, which is one of the significant factors helping to generate year-over-year increases in revenue and earnings in all of our reportable segments except Aerospace & Defense. We expect that, although we have benefited from the economic recovery in the first three quarters of 2010, revenue and earnings may continue to trend below historical levels until the continuing uncertainty in the world economies stabilizes.

        Critical factors affecting our ability to succeed include: our ability to successfully pursue organic growth through product development, cross-selling and extending product-line offerings, and our ability to quickly and cost-effectively introduce new products; our ability to acquire and integrate companies or products that will supplement existing product lines, add new distribution channels, expand our geographic coverage or enable us to better absorb overhead costs; our ability to manage our cost structure more efficiently through improved 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 and overhead functions. If we are unable to do any of the foregoing successfully, our financial condition and results of operations could be materially and adversely impacted.

        There is some seasonality in the businesses within our Cequent reportable segment, where sales of towing and trailering products are generally stronger in the second and third quarters, as trailer original equipment manufacturers ("OEMs"), distributors and retailers acquire product for the spring and summer selling seasons. No other reportable segment experiences significant seasonal fluctuation in its businesses. We do not consider sales order backlog to be a material factor in our business. A growing portion of our sales may be derived from international sources, which exposes us to certain risks, including currency risks.

        The demand for some of our products, particularly in the Cequent segment, is heavily influenced by consumer sentiment. We experienced decreases in sales and earnings in 2008 and 2009 as a result of the general economic downturn, including an uncertain credit market and interest rate environment and rising energy costs, among other things. While we have experienced sales increases in certain of our Cequent businesses in 2010 as compared to 2009 given the improved economic conditions, we expect the current end market conditions in the Cequent segment may remain unstable until the U.S. economy recovers from

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existing recessionary forces, employment levels increase and consumer credit availability improves, thereby increasing consumer discretionary spending.

        We are sensitive to price movements in our raw materials supply base. Our largest material purchases are for steel, copper, aluminum, polyethylene and other resins and energy. Historically, we have experienced increasing costs of steel and resin and have worked with our suppliers to manage cost pressures and disruptions in supply. We have also initiated pricing programs to pass increased steel, copper, aluminum and resin costs to customers. Although we may experience delays in our ability to implement price increases, we generally are able to recover such increased costs. We may experience disruptions in supply in the future and we may not be able to pass along higher costs associated with such disruptions to our customers in the form of price increases. We will continue to take actions as necessary to manage risks associated with increasing steel or other raw material costs. However, such increased costs may adversely impact our earnings.

        We report shipping and handling expenses, associated with certain businesses within our Cequent segment, for its sales distribution network, as an element of selling, general and administrative expenses in our consolidated statement of operations. As such, gross margins for the Cequent segment may not be comparable to other companies which include all costs related to their distribution network in cost of sales.

        We have substantial debt, interest and lease payment requirements that may restrict our future operations and impair our ability to meet our obligations and, in a rising interest rate environment, our performance may be adversely affected by our degree of leverage.

        Recent Consolidation, Integration and Restructuring Activities.    During the past several years, we have undertaken significant consolidation, integration and other cost-savings programs to enhance our efficiency and achieve cost reduction opportunities which exist in our businesses. In addition to major consolidation projects, there have also been a series of ongoing initiatives to eliminate duplicative and excess manufacturing and distribution facilities, sales forces, and back office and other support functions in order to continue to optimize our cost structure in response to competitor actions and market conditions.

        In the fourth quarter of 2008, in response to the deteriorating recent economic conditions, we announced and accelerated our Profit Improvement Plan, which included further consolidation of distribution and manufacturing activities, continued integration of certain business activities, movement of production to lower-cost environments and expansion of strategic sourcing initiatives. We also implemented reductions in salaried headcount and in fixed and variable spending to better align the fixed cost structure of these operating segments with the reality of our current market environment and to maintain or improve operating margins. We implemented commercial actions to protect and gain market share through continued introduction of new and innovative products and by providing superior delivery and service to our customers. Further, we also implemented pricing initiatives in place to recover inflationary cost increases and we are continuing actions to leverage our businesses' strong brand names. During 2009, the Company realized savings of approximately $32 million resulting from the actions taken as a part of the Profit Improvement Plan. These implemented actions were a significant driver of maintaining our gross profit margin in 2009 despite a 20% reduction in sales as compared to 2008, and have helped to facilitate further margin expansion, particularly in the first half of 2010, given our lower cost structure and higher sales levels.

        The most significant element of our Profit Improvement Plan implemented during the first nine months of 2009 was the restructuring of our legacy towing, trailering and electrical businesses within our Cequent reportable segment into one business, rationalizing facilities and the management team. This restructuring plan included the announcement and start of the closure process of the Mosinee, WI manufacturing facility, which ceased operations in the fourth quarter of 2009. We incurred approximately $2.1 million and $7.6 million of costs in the three and nine months ended September 30, 2009, respectively, associated with this initiative.

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        There were no significant charges recorded in the first nine months of 2010 related to further implementation of our Profit Improvement Plan initiatives.

        Key Indicators of Performance.    In evaluating our business, our management considers Adjusted EBITDA as a key indicator of financial operating performance and as a measure of cash generating capability. We define Adjusted EBITDA as net income (loss) before cumulative effect of accounting change, interest, taxes, depreciation, amortization, debt extinguishment costs, non-cash asset and goodwill impairment charges and write-offs and non-cash losses on sale-leaseback of property and equipment. In evaluating Adjusted EBITDA, our management deems it important to consider the quality of our underlying earnings by separately identifying certain costs undertaken to improve our results, such as costs related to consolidating facilities and businesses in an effort to eliminate duplicative costs or achieve efficiencies, costs related to integrating acquisitions and restructuring costs related to expense reduction efforts. Although we may undertake new consolidation, restructuring and integration efforts in the future as a result of our acquisition activity, our management separately considers these costs in evaluating underlying business performance. Caution must be exercised in considering these items as they include substantially (but not necessarily entirely) cash costs and there can be no assurance that we will ultimately realize the benefits of these efforts. Moreover, even if the anticipated benefits are realized, they may be offset by other business performance or general economic issues.

        Management believes that consideration of Adjusted EBITDA together with a careful review of our results reported under GAAP is the best way to analyze our ability to service and/or incur indebtedness, as we are a highly leveraged company. We use Adjusted EBITDA as a key performance measure because we believe it facilitates operating performance comparisons from period to period and company to company by excluding potential differences caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses), and the impact of purchase accounting as well as depreciation and amortization expense. Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we also use Adjusted EBITDA for business planning purposes, in measuring our performance relative to that of our competitors and in evaluating acquisition opportunities.

        In addition, we believe Adjusted EBITDA and similar measures are widely used by investors, securities analysts, ratings agencies and other interested parties as a measure of financial performance and debt-service capabilities. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

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        Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our Company. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally. We carefully review our operating profit margins (operating profit as a percentage of net sales) at a segment level, which are discussed in detail in our year-to-year comparison of operating results.

        The following is a reconciliation of our net income to Adjusted EBITDA and cash flows provided by operating activities for the three and nine months ended September 30, 2010 and 2009:

 
  Three months
ended
September 30,
  Nine months
ended
September 30,
 
 
  2010   2009   2010   2009  
 
  (dollars in thousands)
 

Net income

  $ 12,720   $ 5,830   $ 39,580   $ 11,140  
 

Income tax expense

    7,450     3,420     23,580     6,650  
 

Interest expense

    12,680     10,930     40,200     35,050  
 

Debt extinguishment costs

        150         1,140  
 

Depreciation and amortization

    9,220     10,580     28,270     33,410  
                   

Adjusted EBITDA, total company

  $ 42,070   $ 30,910   $ 131,630   $ 87,390  
 

Interest paid

    (5,710 )   (3,630 )   (27,710 )   (25,460 )
 

Taxes paid

    (2,990 )   (2,420 )   (6,260 )   (6,730 )
 

(Gain) loss on dispositions of property and equipment

    230     (20 )   (9,080 )   (180 )
 

Gain on bargain purchase

            (410 )    
 

Gain on extinguishment of debt

        (1,330 )       (29,390 )
 

Receivables sales and securitization, net

    (50 )   (9,740 )   4,340     (15,690 )
 

Net change in working capital

    (3,370 )   21,700     (30,910 )   57,700  
                   

Cash flows provided by operating activities

  $ 30,180   $ 35,470   $ 61,600   $ 67,640  
                   

        The following table details certain items relating to our consolidation, restructuring and integration efforts that are included in the determination of net income (loss) under GAAP and are not added back to net income (loss) in determining Adjusted EBITDA from continuing operations, but that we would consider in evaluating the quality of our Adjusted EBITDA from continuing operations:

 
  Three months
ended
September 30,
  Nine months
ended
September 30,
 
 
  2010   2009   2010   2009  
 
  (dollars in thousands)
 

Severance and business unit restructuring costs(a)

  $   $ 2,290   $   $ 9,510  

Gross gain on extinguishment of debt(b)

        (1,330 )       (29,390 )
                   

  $   $ 960   $   $ (19,880 )
                   

(a)
Principally employee severance costs associated with business unit restructuring and other cost reduction activities.

(b)
Gains recognized in connection with the extinguishment of our senior subordinated notes due 2012, excluding debt extinguishment costs.

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Segment Information and Supplemental Analysis

        The following table summarizes financial information for our five current reportable segments for the three months ended September 30, 2010 and 2009:

 
  Three Months Ended September 30,  
 
  2010   As a
Percentage of
Net Sales
  2009   As a
Percentage of
Net Sales
 
 
  (dollars in thousands)
 

Net Sales:

                         

Packaging

  $ 44,490     17.9 % $ 39,730     19.6 %

Energy

    47,440     19.1 %   36,000     17.7 %

Aerospace & Defense

    19,170     7.7 %   16,060     7.9 %

Engineered Components

    24,950     10.1 %   15,100     7.4 %

Cequent

    111,830     45.1 %   96,080     47.3 %
                   
 

Total

  $ 247,880     100.0 % $ 202,970     100.0 %
                   

Gross Profit:

                         

Packaging

  $ 18,250     41.0 % $ 14,330     36.1 %

Energy

    12,330     26.0 %   9,270     25.8 %

Aerospace & Defense

    6,750     35.2 %   7,190     44.8 %

Engineered Components

    5,070     20.3 %   2,550     16.9 %

Cequent

    32,090     28.7 %   24,860     25.9 %
                   
 

Total

  $ 74,490     30.1 % $ 58,200     28.7 %
                   

Selling, General and Administrative:

                         

Packaging

  $ 5,010     11.3 % $ 5,150     13.0 %

Energy

    7,420     15.6 %   6,010     16.7 %

Aerospace & Defense

    1,390     7.3 %   2,000     12.5 %

Engineered Components

    2,270     9.1 %   1,540     10.2 %

Cequent

    18,660     16.7 %   17,830     18.6 %

Corporate expenses

    6,510     N/A     4,540     N/A  
                   
 

Total

  $ 41,260     16.6 % $ 37,070     18.3 %
                   

Operating Profit:

                         

Packaging

  $ 13,140     29.5 % $ 9,160     23.1 %

Energy

    4,910     10.3 %   3,200     8.9 %

Aerospace & Defense

    5,350     27.9 %   5,190     32.3 %

Engineered Components

    2,690     10.8 %   920     6.1 %

Cequent

    13,430     12.0 %   7,220     7.5 %

Corporate expenses

    (6,510 )   N/A     (4,540 )   N/A  
                   
 

Total

  $ 33,010     13.3 % $ 21,150     10.4 %
                   

Adjusted EBITDA:

                         

Packaging

  $ 16,010     36.0 % $ 12,540     31.6 %

Energy

    5,620     11.8 %   3,950     11.0 %

Aerospace & Defense

    5,770     30.1 %   5,760     35.9 %

Engineered Components

    3,760     15.1 %   1,640     10.9 %

Cequent

    17,320     15.5 %   12,200     12.7 %

Corporate expenses

    (6,450 )   N/A     (3,520 )   N/A  
                   
 

Subtotal from continuing operations

    42,030     17.0 %   32,570     16.0 %
                   

Discontinued operations

    40     N/A     (1,660 )   N/A  
                   
 

Total company

  $ 42,070     17.0 % $ 30,910     15.2 %
                   

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        The following table summarizes financial information for our five current reportable segments for the nine months ended September 30, 2010 and 2009:

 
  Nine Months Ended September 30,  
 
  2010   As a
Percentage of
Net Sales
  2009   As a
Percentage of
Net Sales
 
 
  (dollars in thousands)
 

Net Sales:

                         

Packaging

  $ 133,610     18.6 % $ 106,130     17.3 %

Energy

    135,080     18.8 %   111,260     18.2 %

Aerospace & Defense

    53,470     7.4 %   56,530     9.2 %

Engineered Components

    67,180     9.3 %   48,570     7.9 %

Cequent

    330,660     45.9 %   290,070     47.4 %
                   
 

Total

  $ 720,000     100.0 % $ 612,560     100.0 %
                   

Gross Profit:

                         

Packaging

  $ 54,050     40.5 % $ 37,680     35.5 %

Energy

    35,370     26.2 %   27,330     24.6 %

Aerospace & Defense

    20,030     37.5 %   24,870     44.0 %

Engineered Components

    14,470     21.5 %   6,300     13.0 %

Cequent

    91,940     27.8 %   58,660     20.2 %
                   
 

Total

  $ 215,860     30.0 % $ 154,840     25.3 %
                   

Selling, General and Administrative:

                         

Packaging

  $ 14,880     11.1 % $ 14,490     13.7 %

Energy

    19,880     14.7 %   17,880     16.1 %

Aerospace & Defense

    7,000     13.1 %   6,450     11.4 %

Engineered Components

    5,920     8.8 %   4,550     9.4 %

Cequent

    54,260     16.4 %   52,070     18.0 %

Corporate expenses

    18,390     N/A     16,800     N/A  
                   
 

Total

  $ 120,330     16.7 % $ 112,240     18.3 %
                   

Operating Profit:

                         

Packaging

  $ 38,480     28.8 % $ 23,390     22.0 %

Energy

    15,440     11.4 %   9,380     8.4 %

Aerospace & Defense

    13,020     24.4 %   18,410     32.6 %

Engineered Components

    8,430     12.5 %   1,640     3.4 %

Cequent

    37,600     11.4 %   6,760     2.3 %

Corporate expenses

    (18,390 )   N/A     (16,800 )   N/A  
                   
 

Total

  $ 94,580     13.1 % $ 42,780     7.0 %
                   

Adjusted EBITDA:

                         

Packaging

  $ 47,350     35.4 % $ 32,760     30.9 %

Energy

    17,540     13.0 %   11,730     10.5 %

Aerospace & Defense

    14,780     27.6 %   20,180     35.7 %

Engineered Components

    11,410     17.0 %   3,900     8.0 %

Cequent

    49,290     14.9 %   21,700     7.5 %

Corporate (expenses) income

    (18,390 )   N/A     11,360     N/A  
                   
 

Subtotal from continuing operations

    121,980     16.9 %   101,630     16.6 %
                   

Discontinued operations

    9,650     N/A     (14,240 )   N/A  
                   
 

Total company

  $ 131,630     18.3 % $ 87,390     14.3 %
                   

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Results of Operations

        The principal factors impacting us during the three months ended September 30, 2010 compared with the three months ended September 30, 2009, were:

Three Months Ended September 30, 2010 Compared with Three Months Ended September 30, 2009

        Overall, net sales increased approximately $44.9 million, or approximately 22.1%, to $247.9 million for the three months ended September 30, 2010, as compared with $203.0 million in the three months ended September 30, 2009. During the third quarter of 2010, net sales increased in each of our five reportable segments, generally due to higher sales volumes resulting from the upturn in economic conditions as compared to the global economic recession we experienced in the third quarter of 2009. In addition, net sales were favorably impacted by approximately $0.3 million as a result of currency exchange, as our reported results in U.S. dollars were positively impacted by stronger foreign currency, primarily in Australia, which more than offset weakness of the Euro relative to the U.S. dollar.

        Gross profit margin (gross profit as a percentage of sales) approximated 30.1% and 28.7% for the three months ended September 30, 2010 and 2009, respectively. The increase in profit margin is attributed primarily to operating leverage associated with the higher sales levels as well as the savings resulting from our lower fixed cost structure and alternate sourcing initiatives implemented in connection with our Profit Improvement Plan, with the largest impact experienced in our Packaging, Engineered Components and Cequent segments.

        Operating profit margin (operating profit as a percentage of sales) approximated 13.3% and 10.4% for the three months ended September 30, 2010 and 2009, respectively. Operating profit increased approximately $11.9 million, or 56.1%, to $33.0 million for the three months ended September 30, 2010, from $21.1 million for the three months ended September 30, 2009, primarily as a result of higher sales volumes and savings realized in connection with our Profit Improvement Plan, which were partially offset by increased selling, general and administrative expenses in support of our increased sales levels and growth initiatives.

        Adjusted EBITDA margin from continuing operations (Adjusted EBITDA as a percentage of sales) approximated 17.0% and 16.0% for the three months ended September 30, 2010 and 2009, respectively. Adjusted EBITDA increased approximately $9.5 million, or 29.0%, to $42.0 million for the three months ended September 30, 2010, from $32.5 million for the three months ended September 30, 2009. After consideration of the $1.3 million gross gain on extinguishment of debt in the third quarter of 2009 that did not recur in 2010, $0.5 million of greater gains on transactions denominated in foreign currencies in the three months ended September 30, 2009 than the three months ended September 30, 2010, $0.4 million of costs incurred in connection with our receivables facility and receivables sales in the third quarter of 2009 that were included in other, net while the $0.2 million of costs incurred in the third quarter of 2010 in connection with the receivables facility are included in interest expense and a decrease in year-over-year depreciation expense of approximately $1.0 million, the change in Adjusted EBITDA is consistent with the change in operating profit between years.

        See below for a discussion of operating results by segment.

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        Packaging.    Net sales increased approximately $4.8 million, or 12.0%, to $44.5 million in the three months ended September 30, 2010, as compared to $39.7 million in the three months ended September 30, 2009. Overall, sales of our specialty dispensing products and new product introductions increased by approximately $1.0 million in the three months ended September 30, 2010 compared to the three months ended September 30, 2009, due primarily to increased sales into pharmaceuticals and the food industries. These increases were partially offset by lower sales into the personal care market in the third quarter of 2010 compared to the third quarter of 2009, where demand was very high due to the swine flu pandemic in the second half of 2009. Sales of our industrial closures, rings and levers increased by approximately $4.9 million in the three months ended September 30, 2010 compared to the three months ended September 30, 2009, primarily as a result of the continued moderate general economic recovery. Sales decreased by approximately $1.1 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 increased approximately $3.9 million to $18.2 million, or 41.0% of sales, in the three months ended September 30, 2010, as compared to $14.3 million, or 36.1% of sales, in the three months ended September 30, 2009. Of the increase in gross profit, approximately $2.1 million relates to the increase in sales volumes between years, which was partially offset by unfavorable currency exchange, which decreased gross profit by approximately $0.4 million. The remaining $2.2 million increase in gross profit is a result of the Profit Improvement Plan initiatives implemented in 2009 and through September 30, 2010, which includes productivity projects for alternative sourcing of certain production materials and improved internal processing, driving throughput and efficiency.

        Packaging's selling, general and administrative expenses decreased approximately $0.1 million to $5.0 million, or 11.3% of sales, in the three months ended September 30, 2010, as compared to $5.1 million, or 13.0% of sales, in the three months ended September 30, 2009, as this segment was able to generate additional sales without requirements for additional selling, general and administrative spending.

        Packaging's operating profit increased approximately $4.0 million to $13.1 million, or 29.5% of sales, in the three months ended September 30, 2010, as compared to $9.1 million, or 23.1% of sales, in three months ended September 30, 2009. The increase in operating profit between years is primarily attributed to increased sales volume and implemented projects associated with our Profit Improvement Plan and ongoing productivity initiatives, which were partially offset by unfavorable currency exchange.

        Packaging's Adjusted EBITDA increased approximately $3.5 million to $16.0 million, or 36.0% of sales, in the three months ended September 30, 2010, as compared to $12.5 million, or 31.6% of sales, in the three months ended September 30, 2009, consistent with the change in operating profit between years after consideration of $0.2 million less depreciation expense in the three months ended September 30, 2010 than the three months ended September 30, 2009 and $0.2 million of gains on transactions denominated in foreign currencies in the three months ended September 30, 2009 as compared to $0.1 million of losses on transactions denominated in foreign currencies in the three months ended September 30, 2010.

        Energy.    Net sales for the three months ended September 30, 2010 increased approximately $11.4 million, or 31.8%, to $47.4 million, as compared to $36.0 million in the three months ended September 30, 2009. Sales of specialty gaskets and related fastening hardware increased approximately $3.7 million. Of this increase, approximately $0.5 million relates to sales generated by our new Salt Lake City, UT and Rotterdam, the Netherlands, branch facilities. The remainder of the increase is primarily due to increased levels of turn-around activity at refineries and petrochemical plants and increased sales demand from the chemical industry, as customers continue to perform maintenance work and new programs deferred from 2009 that require our replacement and specialty gaskets and hardware. Sales within our engine business increased by approximately $7.7 million. Sales of our engine and engine parts increased approximately $6.5 million due to increased drilling activity as compared with the third quarter of 2009, which was a historically low sales period based on low drilling activity and deferring completion of

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previously drilled wells. Sales of our gas compression and processing and meter run equipment increased by approximately $1.2 million as we continue to introduce new products to add to our well-site content.

        Gross profit within Energy increased approximately $3.1 million to $12.3 million, or 26.0% of sales, in the three months ended September 30, 2010, as compared to $9.2 million, or 25.8% of sales, in the three months ended September 30, 2009. Gross profit increased approximately $2.9 million as a result of the increase in sales levels between years. Partially offsetting the increase in gross profit was $0.4 million increased freight and labor costs in our specialty gasket business associated with shortages in certain sourced-products which required incremental domestic production to meet demand. The remaining increase in gross profit of approximately $0.6 million is primarily attributable to higher margins earned resulting from our management actions in 2009 to lower our fixed cost structure and improve production efficiencies, primarily in our engine business, and increased material margins resulting from successful negotiations with our overseas vendors to reduce the purchase price of certain commodities and inbound freight rates.

        Selling, general and administrative expenses within Energy increased approximately $1.4 million to $7.4 million, or 15.6% of sales, in the three months ended September 30, 2010, as compared to $6.0 million, or 16.7% of sales, in the three months ended September 30, 2009, as selling, general and administrative expenses increased slightly in support of our growth initiatives in both businesses in this segment. However, selling, general and administrative expenses decreased as a percentage of sales due to its fixed cost reductions implemented throughout 2009.

        Overall, operating profit within Energy increased approximately $1.7 million to $4.9 million, or 10.3% of sales, in the three months ended September 30, 2010, as compared to $3.2 million, or 8.9% of sales, in the three months ended September 30, 2009, due principally to the leverage gained by higher sales volumes, higher margins earned due to the lower cost structure, further productivity efficiencies and increased material margins due to successful negotiation with suppliers, which were partially offset by slightly higher selling, general and administrative expenses in support of our growth initiatives and costs incurred during the third quarter of 2010 in our specialty gasket business due to increased higher-cost domestic production to meet customer demand.

        Energy's Adjusted EBITDA increased $1.7 million to $5.6 million, or 11.8% of sales, in the three months ended September 30, 2010, as compared to $3.9 million, or 11.0% of sales, in the three months ended September 30, 2009, consistent with the increase in operating profit between years.

        Aerospace & Defense.    Net sales for the three months ended September 30, 2010 increased approximately $3.1 million, or 19.4%, to $19.2 million, as compared to $16.1 million in the three months ended September 30, 2009. Sales in our aerospace business increased approximately $0.2 million, as demand from our distribution customers increased compared to third quarter 2009 levels. Over the past year, distribution customers have been lowering their on-hand inventory levels due to the uncertain economic environment, but now appear to have reset their inventory positions and have begun reorder activity. Sales in our defense business increased approximately $2.9 million, as an increase in revenue primarily associated with managing the relocation and closure of the defense facility of approximately $5.0 million more than offset decreases in revenue of $1.9 million of new product sales in the third quarter of 2009 that did not recur and $0.2 million lower maintenance activities in the third quarter of 2010 as compared to the third quarter of 2009.

        Gross profit within Aerospace & Defense decreased approximately $0.4 million to $6.8 million, or 35.2% of sales, in the three months ended September 30, 2010, from $7.2 million, or 44.8% of sales, in the three months ended September 30, 2009. The increase in sales levels between years resulted in approximately $1.4 million in gross profit. This increase in gross profit was more than offset by an unfavorable product sales mix in both the aerospace and defense businesses and due to unfavorable absorption of fixed costs in the aerospace business.

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        Selling, general and administrative expenses decreased approximately $0.6 million to $1.4 million, or 7.3% of sales, in the three months ended September 30, 2010, as compared to $2.0 million, or 12.5% of sales, in the three months ended September 30, 2009, primarily due to a reduction in estimated attorney and legal fee costs within our defense business.

        Operating profit within Aerospace & Defense increased approximately $0.2 million to $5.4 million, or 27.9% of sales, in the three months ended September 30, 2010, as compared to $5.2 million, or 32.3% of sales, in the three months ended September 30, 2009, as increased sales levels and lower attorney and legal fee costs in our defense business slightly more than offset an unfavorable product sales mix in both businesses and unfavorable absorption of fixed costs in the aerospace business.

        Aerospace & Defense's Adjusted EBITDA remained flat at $5.8 million, or 30.1% of sales, in the three months ended September 30, 2010, as compared to $5.8 million, or 35.9% of sales, in the three months ended September 30, 2009, consistent with the increase in operating profit between years after consideration of $0.2 million lower depreciation expense in the third quarter of 2010 than the third quarter of 2009.

        Engineered Components.    Net sales for the three months ended September 30, 2010 increased approximately $9.9 million, or 65.2%, to $25.0 million, as compared to $15.1 million in the three months ended September 30, 2009. Sales within our specialty fittings business increased by approximately $2.1 million, as our new product offerings for automotive fuel systems increased by approximately $0.9 million and sales of our core tube nut products increased by approximately $1.2 million as a result of the recent economic upturn. Sales in our precision tool cutting businesses increased by approximately $1.2 million, primarily as a result of the upturn in the domestic economy, market share gains in our countersink product line and the introduction of new metric tools. Sales in our industrial cylinder business increased by approximately $6.6 million, with $4.6 million of the increase as a result of the acquisition of the former Taylor-Wharton assets completed in the second quarter of 2010, and the remainder of the increase due to general improvement in the industrial markets.

        Gross profit within Engineered Components increased approximately $2.5 million to $5.1 million, or 20.3% of sales, in the three months ended September 30, 2010, from $2.6 million, or 16.9% of sales, in the three months ended September 30, 2009, as all of the businesses in this segment improved their gross profit dollars and margin as compared to 2009. Gross profit increased approximately $1.7 million as a result of the increase in sales levels between years. The remainder of the increase year-over-year in gross profit is a result of the cost reduction and internal productivity efforts implemented in 2009 in response to the economic slowdown, which the Company is now benefitting from the lower fixed cost structure and efficiencies gained from the productivity initiatives. In addition, Engineered Components experienced higher costs in the third quarter of 2009 due to the impact of lower absorption of fixed costs resulting from lower production and/or sales levels and our industrial cylinder business' sale of higher-cost inventory in excess of their ability to secure price increases.

        Selling, general and administrative expenses increased approximately $0.8 million to $2.3 million, or 9.1% of sales, in the three months ended September 30, 2010, as compared to $1.5 million, or 10.2% of sales, in the three months ended September 30, 2009, primarily as a result of increased sales and promotional spending in support of our sales growth projects and due to a full-run-rate of selling, general and administrative expenses resulting from the operation of the Huntsville, AL location acquired from Taylor-Wharton in June 2010.

        Operating profit within Engineered Components increased $1.8 million to approximately $2.7 million, or 10.8% of sales, in the three months ended September 30, 2010, as compared to operating profit of $0.9 million, or 6.1% of sales, in the three months ended September 30, 2009, primarily due to higher sales levels, the benefit of cost reductions and productivity initiatives implemented in 2009 and improved absorption and production efficiencies realized, which were partially offset by higher selling, general and administrative expenses.

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        Engineered Components' Adjusted EBITDA increased $2.1 million to $3.7 million, or 15.1% of sales, in the three months ended September 30, 2010, as compared to $1.6 million, or 10.9% of sales, in the three months ended September 30, 2009, consistent with the increase in operating profit between years after consideration of $0.3 million higher depreciation expense in the third quarter of 2010 compared to the third quarter of 2009.

        Cequent.    Net sales increased approximately $15.7 million to $111.8 million in the three months ended September 30, 2010, as compared to $96.1 million in the three months ended September 30, 2009. Net sales were favorably impacted by approximately $1.4 million of currency exchange, as our reported results in U.S. dollars were positively impacted as a result of the weaker U.S. dollar relative to foreign currencies. Sales within our performance products business (includes the legacy towing, trailering and electrical businesses) increased by $9.7 million, due to demand increases in significantly all of the markets that this business serves, resulting from the upturn in the domestic economy, with the largest impact with our automotive original equipment customers. In addition, our performance products business benefitted in the third quarter of 2010 from new product introductions in both our original equipment manufacturer and aftermarket businesses and market share gains in our aftermarket business. Sales in our retail business increased $5.2 million, due to the continued impact of new customers added during 2009, in addition to increased demand from our customers resulting from the general economic recovery. After considering the impact of currency exchange, sales in our Australia/Asia Pacific business decreased approximately $0.5 million, primarily due to the impact of government stimulus and pipeline fill orders for new sales programs in 2009 that did not recur in 2010, partially offset by continued higher original equipment manufacturer and aftermarket sales due to continued high consumer confidence and demand levels in the region, and continued market share gains.

        Cequent's gross profit increased approximately $7.2 million to $32.1 million, or 28.7% of sales, in the three months ended September 30, 2010, from approximately $24.9 million, or 25.9% of sales, in the three months ended September 30, 2009. Of this increase, approximately $3.7 million is due to the increased sales volumes between periods and $0.4 million is due to favorable currency exchange. The primary reason for the increase in gross profit relates to our cost reduction efforts implemented throughout 2009 as a part of our Profit Improvement Plan to resize the business and its fixed cost structure to recent demand levels, to identify alternate lower-cost foreign-sourced suppliers and to implement productivity initiatives to increase manufacturing efficiencies. The largest item within the Profit Improvement Plan was the closure of the Mosinee, WI manufacturing facility, which was completed in the fourth quarter of 2009. Cequent incurred approximately $1.7 million of costs impacting gross profit in the third quarter of 2009 to implement these actions, for which the benefit was realized in the third quarter of 2010, with no significant additional implementation costs incurred in 2010. These actions allowed for margin expansion in 2010 as Cequent was able to run at higher production levels to meet the increased consumer demand without additional significant fixed costs.

        Selling, general and administrative expenses increased approximately $0.8 million to $18.7 million, or 16.7% of sales, in the three months ended September 30, 2010, as compared to $17.9 million, or 18.6% of sales, in the three months ended September 30, 2009, primarily as a result of new sales promotions and other costs previously deferred that support our sales growth initiatives and higher sales levels in the third quarter of 2010. However, selling, general and administrative expenses decreased as a percentage of sales due to our fixed cost reductions implemented throughout 2009.

        Cequent's operating profit increased approximately $6.2 million to approximately $13.4 million, or 12.0% of sales, in the three months ended September 30, 2010 as compared to $7.2 million, or 7.5% of net sales, in the three months ended September 30, 2009. The increase in operating profit is due primarily to the cost reductions, alternate sourcing arrangements and productivity initiatives that have been implemented as part of the Profit Improvement Plan, for which savings are being realized in the third quarter of 2010, approximately $2.1 million of costs incurred in the third quarter of 2009 to implement

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such actions that did not recur in 2010, which were partially offset by increased selling, general and administrative expenses in support of the higher revenue levels and our sales growth initiatives.

        Cequent's Adjusted EBITDA increased approximately $5.1 million to $17.3 million, or 15.5% of sales, for the three months ended September 30, 2010, from $12.2 million, or 12.7% of sales, for the three months ended September 30, 2009. After consideration of approximately $1.0 million of lower depreciation expense in the three months ended September 30, 2010 compared with the three months ended September 30, 2009, due primarily to the closure of the Mosinee, WI facility, the change in Adjusted EBITDA is consistent with the increase in operating profit between years.

        Corporate Expenses (Income).    Corporate expenses (income) included in operating profit and Adjusted EBITDA consist of the following:

 
  Three months
ended
September 30,
 
 
  2010   2009  
 
  (in millions)
 

Corporate operating expenses

  $ 3.0   $ 2.0  

Employee costs and related benefits

    3.5     2.5  
           
 

Corporate expenses—operating profit

  $ 6.5   $ 4.5  

Receivables sales and securitization expenses

        0.4  

Gain on extinguishment of debt

        (1.3 )

Other, net

        (0.1 )
           
 

Corporate expenses (income)—Adjusted EBITDA

  $ 6.5   $ 3.5  
           

        Corporate expenses included in operating profit increased approximately $2.0 million to $6.5 million for the three months ended September 30, 2010, from $4.5 million for the three months ended September 30, 2009. The increase in corporate operating expenses between years is primarily attributed to the impact of lease termination costs for a former operating facility of approximately $0.6 million and approximately $0.3 million in increased travel costs in support of our non-U.S growth initiatives in the third quarter of 2010 as compared to the third quarter of 2009. The increase in employee costs and related benefits is attributed to short and long-term incentive equity and cash compensation expense in the third quarter of 2010 as compared to the third quarter of 2009. Receivables sales and securitization expenses decreased by approximately $0.4 million for the three months ended September 30, 2010 compared with the three months ended September 30, 2009, as new accounting guidance effective in the first quarter of 2010 requires that we account for the facility similar to our credit facility debt, where amounts outstanding under the facility are classified on the balance sheet as debt and costs incurred under the facility are classified as interest expense on the statement of operations. In addition, during the third quarter of 2009, we retired approximately $10.0 million face value of our senior subordinated notes, resulting in a net gain of approximately $1.2 million after considering non-cash debt extinguishment costs of $0.1 million.

        Interest Expense.    Interest expense increased approximately $1.8 million, to $12.6 million, for the three months ended September 30, 2010, as compared to $10.8 million for the three months ended September 30, 2009. The increase is primarily attributable to an increase in our effective weighted-average interest rate on variable rate U.S. borrowings to approximately 5.6% during the third quarter of 2010, from approximately 3.8% during the third quarter of 2009, and $0.2 million of aggregate costs incurred under the receivables facility as of September 30, 2010, previously recorded in other expense, net. These increases were partially offset by a decrease in our weighted-average variable-rate U.S. borrowings to approximately $263.8 million in the three months ended September 30, 2010 from approximately $309.4 million in the three months ended September 30, 2009. In addition, we recorded approximately $0.3 million of lower interest expense due to the decrease in our weighted average face value of our senior subordinated notes

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outstanding of approximately $256.3 million during the third quarter of 2009 as compared to the weighted average face value of our senior secured notes of approximately $250.0 million during the third quarter of 2010.

        Other Expense, Net.    Other expense, remained constant at $0.2 million for each of the three month periods ended September 30, 2010 and 2009. In the third quarter of 2009, we recognized approximately $0.5 million in gains on transactions denominated in foreign currencies, offset by $0.4 million of expenses in connection with the use of our receivables facility. There were no other individually significant amounts incurred or changes in amounts incurred in either of the three month periods ended September 30, 2010 and 2009.

        Income Taxes.    The effective income tax rate for both of the three month periods ended September 30, 2010 and 2009 was 37%. The Company's mix of earnings between domestic and foreign was comparable in both periods, resulting in a similar tax rate.

        Discontinued Operations.    The results of discontinued operations consist of our medical device line of business, which was sold in May 2010, our property management line of business, which was sold in April 2010 and our specialty laminates, jacketings and insulation tapes line of business, which was sold in February 2009. We had minimial activity in discontinued operations during the three months ended September 30, 2010, as compared to loss from discontinued operations, net of income tax benefit, of $1.3 million for the three months ended September 30, 2009. See Note 2, "Discontinued Operations and Assets Held for Sale," to our consolidated financial statements included in Part I, Item 1 of this report on Form 10-Q.

Nine months Ended September 30, 2010 Compared with Nine months Ended September 30, 2009

        Overall, net sales increased approximately $107.4 million, or approximately 17.5%, to $720.0 million for the nine months ended September 30, 2010, as compared with $612.6 million in the nine months ended September 30, 2009. During the first nine months of 2010, net sales increased in each of our five reportable segments except Aerospace & Defense, generally due to higher sales volumes resulting from the upturn in economic conditions as compared to the global economic recession we experienced in the first nine months of 2009 and due to the introduction of new products. In addition, net sales were favorably impacted by approximately $9.3 million as a result of currency exchange, as our reported results in U.S. dollars were positively impacted by stronger foreign currencies, primarily in Australia.

        Gross profit margin (gross profit as a percentage of sales) approximated 30.0% and 25.3% for the nine months ended September 30, 2010 and 2009, respectively. The increase in profit margin is attributed primarily to operating leverage associated with the higher sales levels and reduced cost structure and the realization of savings resulting from our cost reduction and alternate sourcing initiatives implemented in connection with our Profit Improvement Plan, with the largest impact experienced in our Packaging, Engineered Components and Cequent segments.

        Operating profit margin (operating profit as a percentage of sales) approximated 13.1% and 7.0% for the nine months ended September 30, 2010 and 2009, respectively. Operating profit increased approximately $51.8 million, or 121.1%, to $94.6 million for the nine months ended September 30, 2010, from $42.8 million for the nine months ended September 30, 2009, primarily as a result of higher sales volumes, higher gross profits resulting from savings realized in connection with our Profit Improvement Plan and our ongoing productivity initiatives, which were partially offset by increased selling, general and administrative expenses in support of our increased sales levels and growth initiatives.

        Adjusted EBITDA margin from continuing operations (Adjusted EBITDA as a percentage of sales) approximated 16.9% and 16.6% for the nine months ended September 30, 2010 and 2009, respectively. Adjusted EBITDA increased approximately $20.4 million for the nine months ended September 30, 2010, as compared to the nine months ended September 30, 2009. After consideration of the $29.4 million gross

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gain on extinguishment of debt in the first nine months of 2009 that did not recur in 2010, the $0.4 million gain on bargain purchase in the second quarter of 2010 on the Norris Cylinder asset acquisition, $0.9 million of losses on transactions denominated in foreign currencies in the nine months ended September 30, 2010 as compared to $0.3 million of gains associated with transactions deoniminated in foreign currencies in the nine months ended September 30, 2009, $1.3 million of costs incurred in connection with our receivables facility in the first nine months of 2009 that were included in other, net while the $0.8 million of costs incurred in the first nine months of 2010 in connection with the facility are included in interest expense and a decrease in year-over-year depreciation expense of approximately $2.7 million, the change in Adjusted EBITDA is consistent with the change in operating profit between years.

        See below for a discussion of operating results by segment.

        Packaging.    Net sales increased approximately $27.5 million, or 25.9%, to $133.6 million in the nine months ended September 30, 2010, as compared to $106.1 million in the nine months ended September 30, 2009. Sales of our specialty dispensing products and new product introductions increased by approximately $12.1 million in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009, due primarily to increased sales into the personal care markets, pharmaceuticals and the food industries. Sales of our industrial closures, rings and levers increased by approximately $15.9 million in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009, primarily as a result of the continued moderate general economic recovery. In addition, sales decreased by approximately $0.5 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 increased approximately $16.4 million to $54.1 million, or 40.5% of sales, in the nine months ended September 30, 2010, as compared to $37.7 million, or 35.5% of sales, in the nine months ended September 30, 2009. Of the increase in gross profit, approximately $9.7 million relates to the increase in sales volumes between years. The remaining $6.7 million increase in gross profit is a result of the Profit Improvement Plan initiatives implemented in 2009 and through September 30, 2010, which includes productivity projects for alternative sourcing of certain production materials and improved internal processing, driving throughput and efficiency.

        Packaging's selling, general and administrative expenses increased approximately $0.4 million to $14.9 million, or 11.1% of sales, in the nine months ended September 30, 2010, as compared to $14.5 million, or 13.7% of sales, in the nine months ended September 30, 2009. While the spending levels increased slightly in support of our growth initiatives, this segment was able to significantly reduce selling, general and administrative expenses as a percentage of sales due to its fixed cost reductions implemented throughout 2009 and into 2010.

        Packaging's operating profit increased approximately $15.1 million to $38.5 million, or 28.8% of sales, in the nine months ended September 30, 2010, as compared to $23.4 million, or 22.0% of sales, in nine months ended September 30, 2009. The increase in operating profit between years is primarily attributed to increased sales volumes and implemented projects associated with our Profit Improvement Plan and other productivity projects, which were partially offset by a slight increase in selling, general and administrative expenses.

        Packaging's Adjusted EBITDA increased approximately $14.6 million to $47.4 million, or 35.4% of sales, in the nine months ended September 30, 2010, as compared to $32.8 million, or 30.9% of sales, in the nine months ended September 30, 2009, consistent with the change in operating profit between years after consideration of $0.2 million less depreciation expense in the nine months ended September 30, 2010 than the nine months ended September 30, 2009 and $0.3 million greater losses on transactions denominated in foreign currencies in the three months ended September 30, 2010 than the three months ended September 30, 2010.

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        Energy.    Net sales for the nine months ended September 30, 2010 increased approximately $23.8 million, or 21.4%, to $135.1 million, as compared to $111.3 million in the nine months ended September 30, 2009. Sales of specialty gaskets and related fastening hardware increased approximately $11.0 million. Of this increase, approximately $2.3 million relates to sales generated by our new Salt Lake City, UT and Rotterdam, the Netherlands, branch facilities. The remainder of the increase is primarily as a result of increased levels of turn-around activity at petrochemical refineries and increased sales demand from the chemical industry, as customers continue to perform maintenance work and new programs deferred from 2009 that require our replacement and specialty gaskets and hardware. Sales within our engine business increased by approximately $12.8 million. Sales of our engine and engine parts increased approximately $9.3 million due to increased drilling activity as compared to 2009 and expansion of engine sales into international markets. Sales of our gas compression and processing and meter run equipment increased by approximately $3.5 million as we continue to introduce new products to add to our well-site content.

        Gross profit within Energy increased approximately $7.9 million to $35.4 million, or 26.2% of sales, in the nine months ended September 30, 2010, as compared to $27.3 million, or 24.6% of sales, in the nine months ended September 30, 2009. Gross profit increased approximately $5.8 million as a result of the increase in sales levels between years. The remaining increase in gross profit is primarily attributable to higher margins earned resulting from our management actions in 2009 to lower our fixed cost structure and improve production efficiencies, primarily in our engine business, and increased material margins resulting from successful negotiations with our overseas vendors to reduce the purchase price of certain commodities and inbound freight rates.

        Selling, general and administrative expenses within Energy increased approximately $2.0 million to $19.9 million, or 14.7% of sales, in the nine months ended September 30, 2010, as compared to $17.9 million, or 16.1% of sales, in the nine months ended September 30, 2009 as selling, general and administrative expenses increased in support of our growth initiatives in both businesses in this segment. However, selling, general and administrative expenses decreased as a percentage of sales due to its fixed cost reductions implemented throughout 2009.

        Overall, operating profit within Energy increased approximately $6.0 million to $15.4 million, or 11.4% of sales, in the nine months ended September 30, 2010, as compared to $9.4 million, or 8.4% of sales, in the nine months ended September 30, 2009, due principally to the leverage gained by higher sales volumes, higher margins earned due to the lower cost structure, further productivity efficiencies and increased material margins due to successful negotiation with suppliers, which were partially offset by higher selling, general and administrative expenses in support of our growth initiatives.

        Energy's Adjusted EBITDA increased $5.8 million to $17.5 million, or 13.0% of sales, in the nine months ended September 30, 2010, as compared to $11.7 million, or 10.5% of sales, in the nine months ended September 30, 2009, consistent with the increase in operating profit between years after consideration of approximately $0.1 million of losses on transactions denominated in foreign currencies in the nine months ended September 30, 2010 as compared to $0.1 million of gains on transactions denominated in foreign currencies in the nine months ended September 30, 2009.

        Aerospace & Defense.    Net sales for the nine months ended September 30, 2010 decreased approximately $3.0 million, or 5.4%, to $53.5 million, as compared to $56.5 million in the nine months ended September 30, 2009. Sales in our aerospace business decreased approximately $7.3 million, primarily due continued lower demand from distribution customers as they sold-off their existing inventory during the first half of 2010. In addition, we had a launch order for new products, primarily titanium screws, of approximately $4.4 million during the nine months ended September 30, 2009 that did not recur in 2010. Sales in our defense business increased approximately $4.3 million, as an increase in revenue primarily associated with managing the relocation and closure of the defense facility of approximately $10.6 million more than offset the fact that we did not sell any cartridge cases and provided less related maintenance in

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the first nine months of 2010 due to the relocation of the defense facility, as compared to approximately $4.4 million of cartridge case sales with related maintenance activity in the first nine months of 2009, and $1.9 million lower new product sales in the nine months ended September 30, 2010 than the nine months ended September 30, 2009.

        Gross profit within Aerospace & Defense decreased approximately $4.8 million to $20.0 million, or 37.5% of sales, in the nine months ended September 30, 2010, from $24.8 million, or 44.0% of sales, in the nine months ended September 30, 2009. Of this decrease, approximately $1.3 million is due to the decline in sales levels between years. The remainder of the decline in gross profit is due to an unfavorable product sales mix in both businesses and unfavorable absorption of fixed costs in our aerospace business resulting from the decline in sales volumes.

        Selling, general and administrative expenses increased approximately $0.6 million to $7.0 million, or 13.1% of sales, in the nine months ended September 30, 2010, as compared to $6.4 million, or 11.4% of sales, in the nine months ended September 30, 2009 due primarily to increased attorney and legal fee costs within our defense business.

        Operating profit within Aerospace & Defense decreased approximately $5.4 million to $13.0 million, or 24.4% of sales, in the nine months ended September 30, 2010, as compared to $18.4 million, or 32.6% of sales, in the nine months ended September 30, 2009, primarily due to lower sales volumes, an unfavorable product sales mix, unfavorable absorption of fixed costs in our aerospace business and higher selling, general and administrative expenses in our defense business due to attorney and legal fees.

        Aerospace & Defense's Adjusted EBITDA decreased approximately $5.4 million to $14.8 million, or 27.6% of sales, in the nine months ended September 30, 2010, as compared to $20.2 million, or 35.7% of sales, in the nine months ended September 30, 2009, consistent with the decrease in operating profit between years.

        Engineered Components.    Net sales for the nine months ended September 30, 2010 increased approximately $18.6 million, or 38.3%, to $67.2 million, as compared to $48.6 million in the nine months ended September 30, 2009. Sales within our specialty fittings business increased by approximately $8.3 million, as our new product offerings for automotive fuel systems increased by approximately $4.2 million and sales of our core tube nut products increased by approximately $4.1 million as a result of the recent economic upturn. Sales in our precision tool cutting businesses increased by approximately $3.4 million, primarily as a result of the upturn in the domestic economy and market share gains in our countersink product line. Sales in our industrial cylinder business increased by approximately $6.9 million, with $6.0 million of the increase as a result of the asset acquisition in the second quarter of 2010. In addition, the industrial cylinder business recognized sales of approximately $1.7 million related to new product introductions for cellular phone tower and breathing air applications. These increases in sales were partially offset by lower orders by certain significant customers during the first six months of 2010 as compared to the same period in 2009 due to higher inventory levels, and lower overall order activity, as the recent upturn in the economy did not begin to manifest itself in additional sales in this business until the second and third quarters of 2010.

        Gross profit within Engineered Components increased approximately $8.2 million to $14.5 million, or 21.5% of sales, in the nine months ended September 30, 2010, from $6.3 million, or 13.0% of sales, in the nine months ended September 30, 2009, as all of the businesses in this segment improved their gross profit dollars and margin as compared to 2009. Gross profit increased approximately $2.4 million as a result of the increase in sales levels between years. The majority of the increase year-over-year in gross profit is a result of the cost reduction and internal productivity efforts implemented in 2009 and early 2010 in response to the economic slowdown, which the Company is now benefitting from the lower fixed cost structure and efficiencies gained from the productivity initiatives. In addition, Engineered Components experienced higher costs in the first nine months of 2009 due to the impact of lower absorption of fixed costs resulting from lower production and/or sales levels in all six businesses and our industrial cylinder business' sale of higher-cost inventory in excess of their ability to secure price increases.

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        Selling, general and administrative expenses increased approximately $1.4 million to $5.9 million, or 8.8% of sales, in the nine months ended September 30, 2010, as compared to $4.5 million, or 9.4% of sales, in the nine months ended September 30, 2009, primarily as a result of increased sales and promotional spending in support of our sales growth projects, the addition of the Huntsville, AL location in June 2010 following its acquisition from Taylor-Wharton and due to legal and diligence fees and expenses associated with this acquisition. However, despite the increase in expenses, this segment was able to reduce selling, general and administrative expenses as a percentage of sales, primarily due to cost reduction efforts implemented in 2009.

        Operating profit within Engineered Components increased $6.8 million to approximately $8.4 million, or 12.5% of sales, in the nine months ended September 30, 2010, as compared to operating profit of $1.6 million, or 3.4% of sales, in the nine months ended September 30, 2009, primarily due to higher sales levels, the benefit of cost reductions and productivity initiatives implemented in 2009 and improved absorption and production efficiencies realized, which were partially offset by higher selling, general and administrative expenses.

        Engineered Components' Adjusted EBITDA increased $7.5 million to $11.4 million, or 17.0% of sales, in the nine months ended September 30, 2010, as compared to $3.9 million, or 8.0% of sales, in the nine months ended September 30, 2009, consistent with the increase in operating profit between years after consideration of the $0.4 million bargain purchase gain recognized in the second quarter of 2010 on Norris Cylinder's asset acquisition and $0.3 million of increased depreciation expense in the nine months ended September 30, 2010 as compared to the nine months ended September 30, 2009.

        Cequent.    Net sales increased approximately $40.6 million to $330.7 million in the nine months ended September 30, 2010, as compared to $290.1 million in the nine months ended September 30, 2009. Net sales were favorably impacted by approximately $9.2 million of currency exchange, as our reported results in U.S. dollars were positively impacted as a result of the weaker U.S. dollar relative to foreign currencies. Sales within our performance products business (includes the legacy towing, trailering and electrical businesses) increased by $23.0 million, due to demand increases, primarily impacting the third quarter of 2010, in significantly all of the markets that this business serves, resulting from the upturn in the domestic economy, with the largest impact with our automotive original equipment customers. In addition, our performance products business benefitted in the first nine months of 2010 from new product introductions in both our original equipment manufacturer and aftermarket businesses and market share gains in our aftermarket business. Sales in our retail business increased $2.5 million, due to the continued impact of new customers added during 2009, in addition to increased demand from our customers resulting from the general economic recovery. After considering the impact of currency exchange, sales in our Australia/Asia Pacific business increased approximately $5.9 million, due primarily to continued higher original equipment manufacturer and aftermarket sales resulting from continued consumer confidence following new government stimulus incentives announced during the third quarter of 2009, and further market share gains.

        Cequent's gross profit increased approximately $33.3 million to $91.9 million, or 27.8% of sales, in the nine months ended September 30, 2010, from approximately $58.6 million, or 20.2% of sales, in the nine months ended September 30, 2009. Of this increase, approximately $5.5 million is due to the increased sales volumes between periods and $2.8 million is due to favorable currency exchange. The primary reason for the increase is our cost reduction efforts implemented throughout 2009 as a part of our Profit Improvement Plan to resize the business and the fixed cost structure to recent demand levels, to identify alternate lower-cost foreign-sourced suppliers and to implement productivity initiatives to increase manufacturing efficiencies. The largest item within the Profit Improvement Plan was the closure of the Mosinee, WI manufacturing facility, which was completed in the fourth quarter of 2009. Cequent incurred approximately $4.7 million of costs impacting gross profit in the first nine months of 2009 to implement these actions, for which the benefit was realized with no significant additional implementation costs

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incurred in 2010. These actions allowed for margin expansion in 2010 as Cequent was able to run at higher production levels to meet the increased consumer demand without additional significant fixed costs.

        Selling, general and administrative expenses increased approximately $2.2 million to $54.3 million, or 16.4% of sales, in the nine months ended September 30, 2010, as compared to $52.1 million, or 18.0% of sales, in the nine months ended September 30, 2009. Cequent incurred approximately $2.8 million of costs incurred associated with implementing the Profit Improvement Plan in the first nine months of 2009, primarily related to severance charges recorded in connection with the announcement of the closure of the Mosinee, WI facility. The remaining increase of $5.0 million in selling, general and administrative expenses, after consideration of the 2009 Profit Improvement Plan incremental charges, primarily resulted from new sales promotions and other costs previously deferred that support our sales growth initiatives and higher sales levels in 2010 as compared to 2009.

        Cequent's operating profit increased approximately $30.8 million to approximately $37.6 million, or 11.4% of sales, in the nine months ended September 30, 2010, as compared to $6.8 million, or 2.3% of net sales, in the nine months ended September 30, 2009. The increase in operating profit is due primarily to the cost reductions, alternate sourcing arrangements and productivity initiatives that were implemented as part of the Profit Improvement Plan during 2009, approximately $7.6 million of costs incurred in the first nine months of 2009 to implement such actions for which savings are being realized in the first nine months of 2010 and operating margin expansion resulting from higher sales and production levels with little additional fixed costs.

        Cequent's Adjusted EBITDA increased approximately $27.6 million to $49.3 million, or 14.9% of sales, for the nine months ended September 30, 2010, from $21.7 million, or 7.5% of sales, for the nine months ended September 30, 2009. After consideration of approximately $2.7 million of lower depreciation expense in the nine months ended September 30, 2010 compared with the nine months ended September 30, 2009, due primarily to the closure of the Mosinee, WI facility, and $0.3 million of losses on transactions denominated in foreign currencies in the nine months ended September 30, 2010 as compared to $0.4 million of gains on transactions denominated in foreign currencies in the nine months ended September 30, 2009, the change in Adjusted EBITDA is consistent with the increase in operating profit between years.

        Corporate Expenses (Income).    Corporate expenses (income) included in operating profit and Adjusted EBITDA consist of the following:

 
  Nine months
ended
September 30,
 
 
  2010   2009  
 
  (in millions)
 

Corporate operating expenses

  $ 7.8   $ 7.4  

Employee costs and related benefits

    10.6     9.4  
           
 

Corporate expenses—operating profit

  $ 18.4   $ 16.8  

Receivables sales and securitization expenses

        1.6  

Gain on repurchase of bonds

        (29.4 )

Depreciation

    (0.1 )   (0.1 )

Other, net

    0.1     (0.3 )
           
 

Corporate expenses (income)—Adjusted EBITDA

  $ 18.4   $ (11.4 )
           

        Corporate expenses included in operating profit increased approximately $1.6 million to $18.4 million for the nine months ended September 30, 2010, from $16.8 million for the nine months ended September 30, 2009. The increase in corporate operating expenses between years is primarily attributed to the impact of lease termination costs for a former operating facility of approximately $0.6 million and

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approximately $0.5 million in increased travel costs in the first nine months of 2010 compared to the first nine months of 2009. These increases were partially offset by lower professional fees year-over-year, as we incurred significant legal and tax fees associated with the establishment of our European Holding Company structure during 2009 that did not recur in 2010. The increase in employee costs and related benefits is attributed to short and long-term incentive equity and cash compensation expense in the first nine months of 2010 as compared to the first nine months of 2009, partially offset by a charge of approximately $2.9 million associated with the termination of our former chief executive officer recorded in the first nine months of 2009. Receivables sales and securitization expenses decreased by approximately $1.6 million for the nine months ended September 30, 2010 compared with the nine months ended September 30, 2009, as new accounting guidance effective in the first quarter of 2010 requires that we account for the facility similar to our credit facility debt, where amounts outstanding under the facility are classified on the balance sheet as debt and costs incurred under the facility are classified as interest expense on the statement of operations. In addition, during the nine months ended 2009, we retired approximately $73.2 million face value of our senior subordinated notes, resulting in a net gain of approximately $28.3 million after considering non-cash debt extinguishment costs of $1.1 million.

        Interest Expense.    Interest expense increased approximately $5.3 million, to $39.8 million, for the nine months ended September 30, 2010, as compared to $34.5 million for the nine months ended September 30, 2009. The increase is primarily attributable to an unfavorable change in the fair value of our interest rate swaps of $1.5 million during the first nine months of 2010, $0.8 million of aggregate costs incurred under the receivables facility as of September 30, 2010, previously recorded in other expense, net and an increase in our effective weighted-average interest rate on variable rate U.S. borrowings to approximately 5.6% during the nine months ended September 30, 2010, from approximately 3.9% during the nine months ended September 30, 2009. These increases were partially offset by a decrease in our weighted-average U.S. borrowings to approximately $271.0 million in the nine months ended September 30, 2010 from approximately $315.7 million in the nine months ended September 30, 2009. In addition, we recorded approximately $2.7 million of lower interest expense due to the decrease in our weighted average face value of our senior subordinated notes outstanding of approximately $281.9 million during the first nine months of 2009 as compared to the weighted average face value of our senior secured notes of approximately $250.0 million during the first nine months of 2010.

        Other Expense, Net.    Other expense, net decreased approximately $0.4 million, to $1.3 million for the nine months ended September 30, 2010, as compared to $1.7 million for the nine months ended September 30, 2009. During the first nine months of 2010, we incurred approximately $0.9 million of losses on transactions denominated in foreign currencies. During the first nine months of 2009, we recognized approximately $0.3 million in gains on transactions denominated in foreign currencies and incurred $1.6 million of expenses in connection with the use and renewal of our receivables facility. There were no other individually significant amounts incurred or changes in amounts incurred in either of the nine month periods ended September 30, 2010 and 2009.

        Income Taxes.    The effective income tax rates for the nine months ended September 30, 2010 and 2009 were 37% and 38%, respectively. During the first nine months of 2010, we incurred a tax charge of approximately $1.3 million related to the impact of certain U.S. tax legislation that expired in the first quarter of 2010. This tax charge was offset by a lower overall effective tax rate. The lower overall effective tax rate is due to the Company's foreign income, which is subject to a lower tax rate, increasing as a percentage of the Company's total income.

        Discontinued Operations.    The results of discontinued operations consist of our medical device line of business, which was sold in May 2010, our property management line of business, which was sold in April 2010 and our specialty laminates, jacketings and insulation tapes line of business, which was sold in February 2009. Income from discontinued operations, net of income tax expense, was $5.9 million for the nine months ended September 30, 2010, as compared to loss from discontinued operations, net of income

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tax benefit, of $10.5 million for the nine months ended September 30, 2009. See Note 2, "Discontinued Operations and Assets Held for Sale," to our consolidated financial statements included in Part I, Item 1 of this report on Form 10-Q.

        Cash provided by operating activities for the nine months ended September 30, 2010 was approximately $61.6 million, as compared to $67.6 million for the nine months ended September 30, 2009. Significant changes in cash flows provided by operating activities and the reasons for such changes are as follows:

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        Net cash used for investing activities for the nine months ended September 30, 2010 was approximately $9.1 million, as compared to net cash provided by investing activities of $12.3 million for the nine months ended September 30, 2009. During the first nine months of 2010, we paid approximately $12.8 million for business acquisitions, primarily for the asset acquisition within our Norris Cylinder business in June 2010, and incurred approximately $11.1 million in capital expenditures. The cash used for the asset purchases was partially offset by cash received from the sale of our property management line of business, our medical device line of business and other asset dispositions of approximately $14.7 million. During the first nine months of 2009, we generated approximately $23.1 million of cash from business and asset dispositions, primarily as a result of the sale of our specialty laminates, jacketings and insulation tapes line of business. We also incurred approximately $10.9 million in capital expenditures to support our growth initiatives.

        Net cash used by financing activities for the nine months ended September 30, 2010 was approximately $15.4 million, as compared to cash used of approximately $59.0 million for the nine months ended September 30, 2009. During the first nine months of 2010, we decreased amounts outstanding on our revolving credit facilities by approximately $13.8 million based on our strong operating cash flows. During the first nine months of 2009, we used approximately $43.8 million of available cash to retire $73.2 million face value of our previous 97/8% senior subordinated notes via open market purchases. In addition, we decreased amounts outstanding on our revolving credit facilities during the first nine months of 2009 by approximately $12.8 million.

        During the fourth quarter of 2009, we amended and restated our credit facilities. Prior to the amendment and restatement, the credit facilities consisted of a $90.0 million revolving credit facility, a $60.0 million deposit-linked supplemental revolving credit facility and a $260.0 million term loan facility. Under the amended and restated credit facilities, the revolving credit facility was reduced to $83.0 million, while the supplemental revolving credit facility and term loan facility remained at $60.0 million and $252.2 million, respectively (collectively, the Amended and Restated Credit Agreement or "ARCA"). Under the ARCA, we extended the maturity of $70.0 million of our revolving credit facility until December 15, 2013, and the maturity of $226.3 million of our term loan until December 15, 2015. During the third quarter of 2010, we elected to reduce our supplemental revolving credit facility from $60.0 million to $40.0 million. The maturity date of $8.0 million of our revolving credit facility and the $40.0 million deposit-linked supplemental revolving credit facility remain at August 2, 2011, and the maturity date of $25.9 million of the term loan remains at August 2, 2013. At September 30, 2010, approximately $249.6 million was outstanding on the term loan and $0 was outstanding on the revolving credit facilities. Under the ARCA, up to $25.0 million of our revolving credit facility in the aggregate is available in 2010 to be used for one or more permitted acquisitions subject to certain conditions and other outstanding borrowings and issued letters of credit.

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        Amounts drawn under our revolving credit facilities fluctuate daily based upon our working capital and other ordinary course needs. Availability under our revolving credit facilities depends upon, among other things, compliance with our credit agreement's financial covenants. Our credit facilities contain negative and affirmative covenants and other requirements affecting us and our subsidiaries, including among others: restrictions on incurrence of debt (except for permitted acquisitions and subordinated indebtedness), liens, mergers, investments, loans, advances, guarantee obligations, acquisitions, asset dispositions, sale-leaseback transactions, hedging agreements, dividends and other restricted junior payments, stock repurchases, transactions with affiliates, restrictive agreements and amendments to charters, by-laws, 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 leverage ratio (total consolidated indebtedness plus outstanding amounts under the accounts receivable securitization facility over consolidated EBITDA, as defined), interest expense coverage ratio (consolidated EBITDA, as defined, over cash interest expense, as defined) and a capital expenditures covenant. The most restrictive of these financial covenants are the leverage ratio and interest expense coverage ratio. Our permitted leverage ratio under the ARCA is 5.00 to 1.00 for July 1, 2010 to December 31, 2010, 4.75 to 1.00 for January 1, 2011 to June 30, 2011, 4.50 to 1.00 for July 1, 2011 to September 30, 2011, 4.25 to 1.00 for October 1, 2011 to September 30, 2012, 4.00 to 1.00 for October 1, 2012 to June 30, 2013 and 3.50 to 1.00 from July 1, 2013 and thereafter. Our actual leverage ratio was 3.21 to 1.00 at September 30, 2010. Our permitted interest expense coverage ratio under the ARCA is 2.00 to 1.00 for July 1, 2010 to June 30, 2011, 2.25 to 1.00 for July 1, 2011 to June 30, 2012, 2.40 to 1.00 for July 1, 2012 to December 31, 2012, 2.50 to 1.00 for January 1, 2013 to September 30, 2013 and 2.75 to 1.00 for October 1, 2013 and thereafter. Our actual interest expense coverage ratio was 3.25 to 1.00 at September 30, 2010. At September 30, 2010, we were in compliance with our financial covenants.

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        The following is a reconciliation of net income (loss), as reported, which is a GAAP measure of our operating results, to Consolidated Bank EBITDA, as defined in our credit agreement, for the twelve months ended September 30, 2010:

 
  Year Ended
December 31, 2009
  Less:
Nine Months
Ended
September 30, 2009
  Add:
Nine Months
Ended
September 30, 2010
  Twelve Months
Ended
September 30, 2010
 
 
   
  (dollars in thousands)
   
 

Net income (loss), as reported

  $ (220 ) $ 11,140   $ 39,580   $ 28,220  

Bank stipulated adjustments:

                         
 

Interest expense, net (as defined)

    45,720     35,040     40,200     50,880  
 

Income tax expense (benefit)(1)

    (520 )   6,650     23,580     16,410  
 

Depreciation and amortization

    43,940     33,410     28,270     38,800  
 

Extraordinary non-cash charges(2)

    3,270             3,270  
 

Monitoring fees(3)

    2,890             2,890  
 

Interest equivalent costs(4)

    1,530     1,220         310  
 

Non-cash compensation expense(5)

    1,370     340     1,050     2,080  
 

Other non-cash expenses or losses

    3,570     2,290     3,140     4,420  
 

Non-recurring expenses or costs in connection with acquisition integration(6)

            70     70  
 

Non-recurring expenses or costs for cost savings projects(7)

    10,940     5,420         5,520  
 

Debt extinguishment costs(8)

    11,400     1,140         10,260  
 

Negative EBITDA from discontinued operations(9)

    390     220     150     320  
 

Permitted dispositions(10)

    14,990     14,030     (9,790 )   (8,830 )
 

Permitted acquisitions(11)

    (820 )   (630 )   1,030     840  
                   
 

Consolidated Bank EBITDA, as defined

  $ 138,450   $ 110,270   $ 127,280   $ 155,460  
                   

 
  September 30, 2010  
 
  (dollars in
thousands)

 

Total long-term debt

  $ 499,420  

Aggregate funding under the receivables securitization facility

     
       

Total Consolidated Indebtedness, as defined

  $ 499,420  
       

Consolidated Bank EBITDA, as defined

  $ 155,460  
       

Actual leverage ratio

    3.21 x
       

Covenant requirement

    5.00 x
       

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  Year Ended
December 31, 2009
  Less:
Nine Months
Ended
September 30, 2009
  Add:
Nine Months
Ended
September 30, 2010
  Twelve Months
Ended
September 30, 2010
 
 
  (dollars in thousands)
 

Interest expense, as reported

  $ 45,720   $ 35,040   $ 40,200   $ 50,880  

Bank stipulated adjustments:

                         
 

Interest equivalent costs from receivables financing

    1,530     1,220         310  
 

Interest income

    (310 )   (210 )   (350 )   (450 )
 

Non-cash amounts attributable to amortization of financing costs

    (2,240 )   (1,690 )   (2,210 )   (2,760 )
 

Pro forma adjustment for acquisitions and dispositions

    (360 )   (270 )   (90 )   (180 )
                   
 

Total Consolidated Cash Interest Expense, as defined

  $ 44,340   $ 34,090   $ 37,550   $ 47,800  
                   

 
  September 30, 2010  
 
  (dollars in
thousands)

 

Consolidated Bank EBITDA, as defined

  $ 155,460  

Total Consolidated Cash Interest Expense, as defined

    47,800  
       

Actual interest expense ratio

    3.25 x
       

Covenant requirement

    2.00 x
       

(1)
Amount includes tax expense (benefits) associated with discontinued operations.

(2)
Non-cash charges associated with tangible and intangible asset impairments, including goodwill.

(3)
Represents management fees and expenses paid to Heartland and/or its affiliates pursuant to the Heartland Advisory Agreement.

(4)
Interest-equivalent costs associated with the Company's receivables securitization facility.

(5)
Non-cash expenses resulting from the grant of restricted shares of common stock and common stock options.

(6)
Non-recurring costs and expenses arising from the integration of any business acquired not to exceed $25,000,000 in the aggregate.

(7)
Non-recurring costs and expenses relating to cost savings projects, including restructuring and severance expenses, not to exceed $32,000,000 in the aggregate, subsequent to October 1, 2009.

(8)
Costs incurred in connection with amending and restating our credit facilities, issuance of our 93/4% senior secured notes and the retirement of our 97/8% senior subordinated notes.

(9)
Not to exceed $10,000,000 in any fiscal year.

(10)
EBITDA from permitted dispositions, as defined.

(11)
EBITDA from permitted acquisitions, as defined.

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        Two of our international businesses are also parties to loan agreements with banks, denominated in their local currencies.

        In the United Kingdom, we are party to a revolving debt agreement with a bank in the amount of £1.0 million, At September 30, 2010, the balance outstanding under this agreement, which is secured by a letter of credit under our credit facilities, was approximately $0.3 million at an interest rate of 2.5%.

        In Australia, we are party to a debt agreement with a bank in the amount of $23.0 million Australian dollars which expires December 31, 2010. At September 30, 2010, the balance outstanding under this agreement was approximately $3.9 million at an interest rate of 6.8%. Borrowings under this arrangement are secured by substantially all the assets of our local business which is also subject to financial and reporting covenants. Financial covenants include a capital adequacy ratio (tangible net worth over total tangible assets) and an interest coverage ratio (EBIT over gross interest cost) and we were in compliance with such covenants at September 30, 2010. In addition to the financial covenants there are other financial restrictions such as: restrictions on dividend payments, U.S. parent loan repayments, negative pledge and undertakings with respect to related entities.

        Another important source of liquidity is our $75.0 million accounts receivable facility, under which we have the ability to sell eligible accounts receivable to a third-party multi-seller receivables funding company. As of September 30, 2010, we had no amounts funded under the facility with $52.4 million available but not utilized.

        At September 30, 2010, our available revolving credit capacity of $123.0 million under our credit facility was reduced by approximately $26.2 million of letters of credit outstanding as of that date. 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. After consideration of outstanding letters of credit, we had $96.8 million of revolving credit capacity available, in addition to the aforementioned $52.4 million of available liquidity under our accounts receivable facility. After consideration of our leverage covenant, we had aggregate available funding under our revolving credit and accounts receivable facilities of $149.2 million at September 30, 2010.

        Our available revolving credit capacity under our credit facility, after consideration of approximately $26.2 million in letters of credit outstanding related thereto, is approximately $96.8 million, while our available liquidity under our accounts receivable securitization facility ranges from $32 million to $59 million, depending on the level of our receivables outstanding at a given point in time during the year. We rely upon our cash flow from operations and available liquidity under our revolving credit and accounts receivable facilities to fund our debt service obligations and other contractual commitments, working capital and capital expenditure requirements. Generally, we use available liquidity under these facilities to fund capital expenditures and daily working capital requirements during the first half of the year, as we experience some seasonality in our Cequent operating segment. Sales of towing and trailering products within this segment are generally stronger in the second and third quarters, as original equipment manufacturers (OEMs), distributors and retailers acquire product for the spring and summer selling seasons. None of our other operating segments experience any significant seasonal fluctuations in their respective businesses. During the second half of the year, the investment in working capital is reduced and amounts outstanding under our credit and securitization facilities are paid down. At the end of each quarter, we generally use cash on hand to pay down amounts outstanding under our revolving credit and accounts receivable facilities.

        Cash management related to our revolving credit and accounts receivable facilities is centralized. We monitor our cash position and available liquidity on a daily basis and forecast our cash needs on a weekly basis within the current quarter and on a monthly basis outside the current quarter over the remainder of the year. Our business and related cash forecasts are updated monthly. Given aggregate available funding under our revolving credit and accounts receivable facilities of $149.2 million at September 30, 2010, after

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consideration of the aforementioned leverage restrictions, and based on forecasted cash sources and requirements inherent in our business plans, we believe that our liquidity and capital resources, including anticipated cash flows from operations, will be sufficient to meet our debt service, capital expenditure and other short-term and long-term obligation needs for the foreseeable future.

        We also have $250.0 million (face value) 93/4% senior secured notes ("Senior Notes") due in 2017 outstanding at September 30, 2010. Interest on the Senior Notes accrues at the rate of 9.75% per annum and is payable semi-annually in arrears on June 15 and December 15.

        The Senior Notes are general senior secured obligations of the Company and are pari passu in right of payment with all existing and future indebtedness of the Company that is not subordinated in right of payment to the Senior Notes.

        Prior to December 15, 2012, the Company may redeem up to 35% of the principal amount of Senior Notes at a redemption price equal to 109.750% of the principal amount, plus accrued and unpaid interest to the applicable redemption date plus additional interest, if any, with the net cash proceeds of one or more equity offerings, provided that at least 65% of the original principal amount of Senior Notes issued remains outstanding after such redemption, and provided further that each such redemption occurs within 90 days of the date of closing of each such equity offering.

        Principal payments required under our amended and restated credit facility term loan are: $0.7 million due each calendar quarter through September 30, 2015; $24.9 million due August 2, 2013 relative to term loan amounts not extended, and; $211.7 million due on December 15, 2015.

        Our credit facility is guaranteed on a senior secured basis by us and all of our domestic subsidiaries, other than our special purpose receivables subsidiary, on a joint and several basis. In addition, our obligations and the guarantees thereof are secured by substantially all the assets of us and the guarantors.

        Our exposure to interest rate risk results from variable rates under our credit facility. Borrowings under our credit facility bear interest at various rates, some of which are subject to a 2% LIBOR-floor.

        At September 30, 2010, 1-Month LIBOR approximated 0.26%. Based on our variable rate-based borrowings outstanding at September 30, 2010, and after consideration of the 2% LIBOR-floor applicable to $35.4 million of our supplemental revolving credit facility and $224.0 million of our term loan, a 1% increase in the per annum interest rate for borrowings under our U.S. and foreign credit facilities would increase our interest expense by approximately $0.3 million annually. The impact of a further decrease in LIBOR on our annual interest expense would not be material.

        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 $14.7 million. We expect to continue to utilize leasing as a financing strategy in the future to meet capital expenditure needs and to reduce debt levels.

        In addition to rent expense from continuing operations, we also have approximately $2.2 million in annual future lease obligations related to businesses that have been discontinued, of which approximately 64% relates to the facility for the former specialty laminates, jacketings and insulation tapes line of business (which extends through 2024) and 36% relates to the Wood Dale facility in the former industrial fastening business (which extends through 2022).

Market Risk

        We conduct business in several locations throughout the world and are subject to market risk due to changes in the value of foreign currencies. We do not currently use derivative financial instruments to manage these risks. The functional currencies of our foreign subsidiaries are 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

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in U.S. dollars will fluctuate with changes in exchange rates between such local currencies and the U.S. dollar.

Common Stock

        We voluntarily transferred our stock exchange listing in the U.S. from The New York Stock Exchange to The NASDAQ Global Market® effective August 24, 2009. The company's stock continues to trade under the symbol "TRS."

Credit Rating

        We and certain of our outstanding debt obligations are rated by Standard & Poor's and Moody's. On August 23, 2010, Moody's upgraded our credit ratings and assigned a rating of B3 to our senior secured notes, assigned a rating of B2 to our corporate family rating, assigned a rating of Ba3 to our senior secured credit facility, and affirmed our outlook as stable. On August 11, 2010, Standard & Poor's upgraded our outlook to stable and affirmed our credit facilities, senior secured notes, and corporate credit ratings of BB, B-, and B+, respectively. If our credit ratings were to decline, our ability to access certain financial markets may become limited, the perception of us in the view of our customers, suppliers and security holders may worsen and as a result, we may be adversely affected.

Outlook

        We believe the actions completed in 2009 under our Profit Improvement Plan have positioned us for continued profitable future growth and have placed us in a better competitive position by enabling strategies focused on reduced cycle times and securing our position as best cost producer. Although we are now realizing the full-run-rate benefit of the cost reductions and other initiatives associated with this Plan, we continue to emphasize our continuous productivity initiatives and to grow revenue via new products, bolt-on acquisitions and expand our core products in non-U.S. markets, while continuing to reduce our indebtedness and increase our available liquidity.

        The combination of the savings realized from the actions taken under our Profit Improvement Plan, our ongoing productivity initiatives and the upturn in economic activity in the first nine months of 2010 has helped us to grow our earnings levels and significantly expand our earnings margins as compared to 2009. Although the expansion of our earnings margins may not be as dramatic on a year-over-year basis in the back half of 2010 as they were in the first half of 2010, as we now are experiencing the full-run-rate benefit of many of our prior year actions, we continue to actively identify and execute our strategies and have the capacity to service higher demand levels with our existing fixed cost structure, which should continue to grow our earnings levels and margins should the economy continue to strengthen. However, as there is still some degree of uncertainty in the markets that our businesses serve, there are a range of possible outcomes due to the uncertain financial markets environment, and we can offer no assurances that the economy will continue to improve.

Impact of New Accounting Standards

        As of September 30, 2010, there are no recently issued accounting pronouncements not yet adopted by the Company that would have a material impact on the Company's results of operations or financial position.

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,

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our evaluation of business and macroeconomic trends, and information from other outside sources, as appropriate.

        During the quarter ended September 30, 2010, 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 Company's 2009 Annual Report on Form 10-K.

Grants of Plan-Based Awards

        We note that due to a clerical error the grants of plan-based awards table as presented in our proxy statement distributed on April 5, 2010 misstated certain threshold, target and maximum future payouts under non-equity incentive plan awards for certain of our named executive officers. The impact of the updated threshold, target and maximum future payouts, if earned, is not significant individually or in aggregate compared to the results of our operations. See below for the adjusted table and related footnote disclosures for each of the Company's named executive officers based on their 2009 salaries:

 
   
   
  Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards
  All Other
Stock Awards:
Number of
Shares of
Stock or Units
(#)
   
  Grant Date
Fair Value
of Stock
and Unit
Awards
($)
 
 
   
   
  Closing
Price on
Grant Date
($/share)
 
Name
  Grant Type   Grant Date   Threshold
($)
  Target
($)
  Maximum
($)
 

David M. Wathen

  Incentive Compensation Plan(1)           37,125     742,500     1,577,813                    

  Time Vested Stock Option(2)     1/13/2009                       200,000     1.38     106,460  

  Restricted Stock Unit(3)     N/A                       125,000          

  Performance Unit(4)     12/4/2009                       79,840     5.20     415,200  

  Performance Unit(5)     12/4/2009                       26,620     5.20     138,400  

A. Mark Zeffiro

  Incentive Compensation Plan(1)           12,600     252,000     535,500                    

  Time Vested Stock Option(2)     3/9/2009                       90,000     1.01     35,760  

  Performance Unit(4)     12/4/2009                       9,940     5.20     51,700  

  Performance Unit(5)     12/4/2009                       5,960     5.20     31,000  

Thomas M. Benson

  Incentive Compensation Plan(1)           7,500     150,000     300,000                    

  Time Vested Stock Option(2)     3/9/2009                       37,500     1.01     14,900  

  Performance Unit(4)     12/4/2009                       10,170     5.20     52,900  

  Performance Unit(5)     12/4/2009                       6,110     5.20     31,800  

Lynn A. Brooks

  Incentive Compensation Plan(1)           13,550     271,000     542,000                    

  Time Vested Stock Option(2)     3/9/2009                       72,500     1.01     28,810  

  Performance Unit(4)     12/4/2009                       18,060     5.20     93,900  

  Performance Unit(5)     12/4/2009                       10,840     5.20     56,400  

Joshua A. Sherbin

  Incentive Compensation Plan(1)           8,750     175,000     371,875                    

  Time Vested Stock Option(2)     3/9/2009                       87,500     1.01     34,770  

  Performance Unit(4)     12/4/2009                       6,900     5.20     35,900  

  Performance Unit(5)     12/4/2009                       4,140     5.20     21,500  

Grant H. Beard

  Incentive Compensation Plan(1)           52,500     875,000     1,618,750                    

Edward L. Schwartz

  Incentive Compensation Plan(1)           16,800     280,000     518,000                    

(1)
The amounts above in the Estimated Future Payouts under Non-Equity Incentive Plan Awards are based on awards pursuant to the Incentive Compensation Plan and the centerpoint of each NEO as of December 31, 2009. The threshold payout is based on the largest percentage payout of the smallest metric is the NEO's composite target bonus and the target award is a specified dollar figure for each NEO. The maximum estimated possible payout for each participant is equal to maximum attainment for each metric. Messrs. Beard and Schwartz resigned January 13, 2009 and March 4, 2009, respectively. The values shown for Messrs. Beard and Schwartz relate to the Company's previously titled bonus plan, the Annual Value Creation Plan. The values for Messrs. Beard and Schwartz are based on eligibility at 100% and 70%, respectively, of base salary.

(2)
The 2009 grants of time-based stock options to the named executive officers were made under the 2006 Long Term Equity Incentive Plan, except for Mr. Benson, which was made under the 2002 Long Term Equity Incentive Plan. All of the awards have restrictions that lapse as to one-third of the number of shares on each anniversary date of the grant.

(3)
In connection with his joining the Company on January 13, 2009, Mr. Wathen was given the opportunity to earn restricted stock units in the event that the Company's closing stock price for any successive 75 trading day period within 36 months of his start date, exceeds five thresholds: $5.00; $10.00; $15.00; $20.00; and $25.00. For each threshold met, Mr. Wathen would earn 25,000 restricted stock units, up to a maximum of 125,000 should all five thresholds be met within the 36 month period. If earned, the restricted stock units would vest ratably over a three year period from the date of the grant.

(4)
These performance unit grants were made under the 2006 Long Term Equity Incentive Plan for all named executive officers. These grants represent voluntary elections to convert a portion of their targeted cash Incentive Compensation Plan award into performance units, payable in

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(5)
These performance grants were made under the 2006 Long Term Equity Incentive Plan for all named executive officers. For those NEOs that elected to convert a percentage of their target cash incentive compensation plan award to performance units, the Company awarded the NEO an additional performance unit grant, subject to the same performance conditions as the converted performance units. Each NEO met these performance conditions in 2009. These awards vest on March 15, 2011.

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 9, "Long-term Debt," in Part I, Item 1, "Notes to Unaudited Consolidated Financial Statements," included within this 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 and 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.

        As of September 30, 2010, an evaluation was carried out by management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934, (the "Exchange Act")) pursuant to Rule 13a-15 of the Exchange Act. Our 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 30, 2010, the Company's disclosure controls and procedures are effective to provide reasonable assurance that they would meet their objectives.

        There have been no changes in the Company's internal control over financial reporting during the quarter ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION

TRIMAS CORPORATION

        

Item 1.    Legal Proceedings

        See Note 11, "Commitments and Contingencies" included in Part I, Item 1, "Notes to Unaudited Consolidated Financial Statements," within this 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, 2009, 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 2009 Form 10-K.

        The risks described in our Annual Report on Form 10-K 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.

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

        None.

Item 3.    Defaults Upon Senior Securities

        Not applicable.

Item 4.    Submission of Matters to a Vote of Security Holders

        Reserved.

Item 5.    Other Information

        Not applicable.

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Item 6.    Exhibits.

Exhibits Index:

  3.1 (l) Fourth Amended and Restated Certificate of Incorporation of TriMas Corporation.

 

3.2

(l)

Third Amended and Restated By-laws of TriMas Corporation.

 

4.1

(a)

Indenture relating to the 97/8% senior subordinated notes, dated as of June 6, 2002, by and among TriMas Corporation, each of the Guarantors named therein and The Bank of New York as Trustee, (including Form of Note as Exhibit).

 

4.2

(c)

Supplemental Indenture dated as of March 4, 2003.

 

4.3

(d)

Third Supplemental Indenture dated as of May 9, 2003.

 

4.4

(e)

Third Supplemental Indenture dated as of August 6, 2003.

 

4.5

(p)

Fourth Supplemental Indenture dated as of February 28, 2008.

 

4.6

(ad)

Fifth Supplemental Indenture dated as of January 26, 2009.

 

4.7

(ac)

Sixth Supplemental Indenture, dated as of December 29, 2009.

 

4.8

(ac)

Indenture relating to the 93/4% senior secured notes dated as of December 29, 2009, among TriMas Corporation, the Guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee.

 

10.1

(a)

Stock Purchase Agreement dated as of May 17, 2002 by and among Heartland Industrial Partners, L.P., TriMas Corporation and Metaldyne Company LLC.

 

10.2

(a)

Amended and Restated Shareholders Agreement, dated as of July 19, 2002 by and among TriMas Corporation and Metaldyne Corporation.

 

10.3

(j)

Amendment No. 1 to Amended and Restated Shareholders Agreement dated as of August 31, 2006.

 

10.4

(i)

Credit Agreement dated as of June 6, 2002, as amended and restated as of August 2, 2006 among TriMas Corporation, TriMas Company LLC, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, and Comerica Bank, as Syndication Agent.

 

10.5

(ab)

Credit Agreement dated as of June 6, 2002, as amended and restated as of August 2, 2006, as further amended and restated as of December 16, 2009, among TriMas Corporation, TriMas Company LLC, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, Comerica Bank, as Syndication Agent and J.P. Morgan Securities Inc., as Lead Arranger and Bookrunner.

 

10.6

(ac)

Credit Agreement dated as of June 6, 2002, as amended and restated as of August 2, 2006, as further amended and restated as of December 16, 2009, as further amended and restated as of January 13, 2010, among TriMas Corporation, TriMas Company LLC, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, Comerica Bank, as Syndication Agent, and J.P. Morgan Securities Inc., as Lead Arranger and Bookrunner.

 

10.7

(a)

Receivables Purchase Agreement, dated as of June 6, 2002, by and among TriMas Corporation, the Sellers party thereto and TSPC, Inc., as Purchaser.

 

10.8

(w)

Amendment No. 1 as of February 13, 2009 to Receivables Purchase Agreement.

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  10.9 (a) Receivables Transfer Agreement, dated as of June 6, 2002, by and among TSPC, Inc., as Transferor, TriMas Corporation, individually, as Collection Agent, TriMas Company LLC, individually as Guarantor, the CP Conduit Purchasers, Committed Purchasers and Funding Agents party thereto, and JPMorgan Chase Bank as Administrative Agent.

 

10.10

(k)

Amendment dated as of June 3, 2005, to Receivables Transfer Agreement.

 

10.11

(h)

Amendment dated as of July 5, 2005, to Receivables Transfer Agreement.

 

10.12

(n)

Amendment dated as of December 31, 2007, to Receivables Transfer Agreement.

 

10.13

(o)

Amendment dated as of February 22, 2008, to Receivables Transfer Agreement.

 

10.14

(w)

Amendment dated as of February 13, 2009, to Receivables Transfer Agreement.

 

10.15

(p)

TriMas Receivables Facility Amended and Restated Fee Letter dated February 22, 2008.

 

10.16

(w)

TriMas Receivables Facility Amended and Restated Fee Letter dated February 13, 2009.

 

10.17

(ac)

Amended and Restated Receivables Purchase Agreement, dated as of December 29, 2009, among TriMas Corporation, the Sellers named therein and TSPC, Inc. as Purchaser.

 

10.18

(ac)

Receivables Transfer Agreement, dated as of December 29, 2009, among TSPC, Inc., as Transferor, TriMas Corporation, as Collection Agent, TriMas Company LLC, as Guarantor, the persons party thereto from time to time as Purchasers and Wachovia Bank, National Association, as Administrative Agent.

 

10.19

(a)

Lease Assignment and Assumption Agreement, dated as of June 21, 2002, by and among Heartland Industrial Group, L.L.C., TriMas Company LLC and the Guarantors named therein.

 

10.20

(a)

TriMas Corporation 2002 Long Term Equity Incentive Plan.

 

10.21

(t)

First Amendment to the TriMas Corporation 2002 Long Term Equity Incentive Plan.

 

10.22

(t)

Third Amendment to the TriMas Corporation 2002 Long Term Equity Incentive Plan.

 

10.23

(t)

Third Amendment to the TriMas Corporation 2002 Long Term Equity Incentive Plan.

 

10.24

(t)

Fourth Amendment to the TriMas Corporation 2002 Long Term Equity Incentive Plan.

 

10.25

(d)

Asset Purchase Agreement among TriMas Corporation, Metaldyne Corporation and Metaldyne Company LLC dated May 9, 2003, (including Exhibit A—Form of Sublease Agreement).

 

10.26

(f)

2003 Form of Stock Option Agreement.

 

10.27

(s)

2008 Annual Value Creation Program.

 

10.28

(t)

409A Amendment to TriMas Corporation Annual Value Creation Plan effective September 10, 2008.

 

10.29

(g)

Form of Indemnification Agreement.

 

10.30

(j)

Amendment No. 1 to Stock Purchase Agreement, dated as of August 31, 2006 by and among Heartland Industrial Partners, L.P., TriMas Corporation and Metaldyne Corporation.

 

10.31

(s)

Amendment No. 2 to Stock Purchase Agreement, dated as of November 27, 2006 by and among Heartland Industrial Partners, L.P., TriMas Corporation and Metaldyne Corporation.

 

10.32

(j)

Advisory Agreement, dated June 6, 2002 between Heartland Industrial Partners, L.P. and TriMas Corporation.

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  10.33 (k) First Amendment to Advisory Agreement, dated as of November 1, 2006 between Heartland Industrial Group, L.L.C. and TriMas Corporation.

 

10.34

(k)

Third Amendment to Advisory Agreement, dated as of November 1, 2006 between Heartland Industrial Group, L.L.C. and TriMas Corporation.

 

10.35

(k)

Management Rights Agreement.

 

10.36

(aa)

Executive Severance / Change of Control Policy.

 

10.37

(ag)

TriMas Corporation 2006 Long Term Equity Incentive Plan Composite Plan Document.

 

10.38

(q)

Separation Agreement dated April 10, 2008.

 

10.39

(r)

Letter Agreement dated April 28, 2008.

 

10.40

(s)

Letter Agreement dated July 1, 2008.

 

10.41

(z)

ISDA 2002 Master Agreement between JPMorgan Chase Bank, N. A. and TriMas Company LLC dated as of January 29, 2009.

 

10.42

(t)

Interest Rate Swap Transaction letter Agreement between JPMorgan Chase Bank, N.A. and TriMas Company, LLC effective as of April 29, 2008.

 

10.43

(ad)

Interest Rate Swap Transaction letter Agreement between JPMorgan Chase Bank, N.A. and TriMas Company, LLC effective as of January 28, 2009.

 

10.44

(ad)

Interest Rate Swap Transaction letter Agreement between JPMorgan Chase Bank, N.A. and TriMas Company, LLC effective as of October 28, 2009.

 

10.45

(w)

Asset Purchase Agreement between Lamtec Corporation, Compac Corporation and TriMas Company LLC dated as of December 8, 2008.

 

10.46

(u)

Offer Letter from TriMas Corporation to David M. Wathen dated as of January 12, 2009.

 

10.47

(v)

Separation Agreement dated as of January 13, 2009.

 

10.48

(y)

Separation Agreement dated as of March 5, 2009.

 

10.49

(x)

TriMas Corporation Long Term Equity Incentive Plan Non-Qualified Stock Option Agreement.

 

10.50

(y)

2009 TriMas Incentive Compensation Plan.

 

10.51

(af)

2010 TriMas Incentive Compensation Plan.

 

10.52

(aa)

Flexible Cash Allowance Policy.

 

10.53

(ad)

TriMas Corporation 2006 Long Term Equity Incentive Plan Restricted Stock Agreement—2009 Additional Grant.

 

10.54

(ad)

TriMas Corporation 2006 Long Term Equity Incentive Plan Restricted Stock Agreement—2009 162(m) Conversion Grant.

 

10.55

(ad)

TriMas Corporation 2002 Long Term Equity Incentive Plan Restricted Stock Agreement—2009 Conversion and Additional Grants.

 

10.56

(ae)

TriMas Corporation 2002 Long Term Equity Incentive Plan Non-Qualified Stock Option Agreement.

 

10.57

(ae)

TriMas Corporation 2002 Long Term Equity Incentive Plan Restricted Share Award Agreement.

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  10.58 (ae) TriMas Corporation 2006 Long Term Equity Incentive Plan Restricted Stock Unit Agreement.

 

10.59

(ah)

Asset Purchase Agreement among TW Cylinders LLC, Taylor-Wharton International LLC and Norris Cylinder Company dated as of April 30, 2010.

 

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.

(a)
Incorporated by reference to the Exhibits filed with our Registration Statement on Form S-4, filed on October 4, 2002 (File No. 333-100351).

(b)
Incorporated by reference to the Exhibits filed with Amendment No. 2 to our Registration Statement on Form S-4, filed on January 28, 2003 (File No. 333-100351).

(c)
Incorporated by reference to the Exhibits filed with our Annual Report on Form 10-K filed March 31, 2003 (File No. 333-100351).

(d)
Incorporated by reference to the Exhibits filed with our Registration Statement on Form S-4, filed June 9, 2003 (File No. 333-105950).

(e)
Incorporated by reference to the Exhibits filed with our Quarterly Report on Form 10-Q filed on August 14, 2003 (File No. 333-100351).

(f)
Incorporated by reference to the Exhibits filed with our Quarterly Report on Form 10-Q filed on November 12, 2003 (File No. 333-100351).

(g)
Incorporated by reference to the Exhibits filed with Amendment No. 3 to our Registration Statement on Form S-1/A, filed on June 29, 2004 (File No. 333-113917).

(h)
Incorporated by reference to the Exhibits filed with our Report on Form 8-K filed on July 6, 2005 (File No. 333-100351).

(i)
Incorporated by reference to the Exhibits filed with our Report on Form 8-K filed on August 3, 2006 (File No. 333-100351).

(j)
Incorporated by reference to the Exhibits filed with Amendment No. 1 to our Registration Statement on Form S-1, filed on September 19, 2006 (File No. 333-136263).

(k)
Incorporated by reference to the Exhibits filed with Amendment No. 3 to our Registration Statement on Form S-1, filed on January 18, 2007 (File No. 333-136263).

(l)
Incorporated by reference to the Exhibits filed with our Quarterly Report on Form 10-Q, filed on August 3, 2007 (File No. 333-100351).

(m)
Incorporated by reference to the Exhibits filed with the Registration Statement on Form S-8, filed on August 31, 2007 (File No. 333-145815).

(n)
Incorporated by reference to the Exhibits filed with our Report on Form 8-K filed on January 4, 2008 (File No. 001-10716).

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(o)
Incorporated by reference to the Exhibits filed with our Report on Form 8-K filed on February 26, 2008 (File No. 001-10716).

(p)
Incorporated by reference to the Exhibits filed with our Annual Report on Form 10-K filed on March 13, 2008 (File No. 001-10716).

(q)
Incorporated by reference to the Exhibits filed with our Report on Form 8-K filed on April 10, 2008 (File No. 001-10716).

(r)
Incorporated by reference to the Exhibits filed with our Report on Form 8-K filed on June 2, 2008 (File No. 001-10716).

(s)
Incorporated by reference to the Exhibits filed with our Quarterly Report on Form 10-Q filed on August 7, 2008 (File No. 001-10716).

(t)
Incorporated by reference to the Exhibits filed with our Quarterly Report on Form 10-Q filed on November 10, 2008 (File No. 001-10716).

(u)
Incorporated by reference to the Exhibits filed with our Report on Form 8-K filed on January 14, 2009 (File No. 001-10716).

(v)
Incorporated by reference to the Exhibits filed with our Report on Form 8-K filed on February 5, 2009 (File No. 001-10716).

(w)
Incorporated by reference to the Exhibits filed with our Report on Form 8-K filed on February 17, 2009 (File No. 001-10716).

(x)
Incorporated by reference to the Exhibits filed with our Report on Form 8-K filed on March 6, 2009 (File No. 001-10716).

(y)
Incorporated by reference to the Exhibits filed with our Report on Form 8-K filed on March 10, 2009 (File No. 001-10716).

(z)
Incorporated by reference to the Exhibits filed with our Annual Report on Form 10-K filed on March 10, 2009 (File No. 001-10716).

(aa)
Incorporated by reference to the Exhibits filed with our Report on Form 8-K filed on December 10, 2009 (File No. 001-10716).

(ab)
Incorporated by reference to the Exhibits filed with our Report on Form 8-K filed on December 17, 2009 (File No. 001-10716).

(ac)
Incorporated by reference to the Exhibits filed with our Report on Form 8-K filed on January 15, 2010 (File No. 001-10716).

(ad)
Incorporated by reference to the Exhibits filed with our Annual Report on Form 10-K filed on March 4, 2010 (File No. 001-10716).

(ae)
Incorporated by reference to the Exhibits filed with our Report on Form 8-K filed on March 4, 2010 (File No. 001-10716).

(af)
Incorporated by reference to the Exhibits filed with our Report on Form 8-K filed on March 15, 2010 (File No. 001-10716).

(ag)
Incorporated by reference to the Exhibits filed with our Report on Form 8-K filed on March 26, 2010 (File No. 001-10716).

(ah)
Incorporated by reference to the Exhibits filed with our Quarterly Report on Form 10-Q filed on April 30, 2010 (File No. 001-10716).

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Signature

        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)

Date: October 28, 2010

 

By:

 

/s/ A. MARK ZEFFIRO

A. Mark Zeffiro
Chief Financial Officer

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