TriMas Corp (TRS) 2012 Q2 法說會逐字稿

Good day and welcome to the TriMas Corporation second-quarter 2012 earnings conference call. Today's conference is being recorded. I would now like to turn the call over to Ms. Sherry Lauderback. Please go ahead.

Thank you. Thank you and welcome to the TriMas Corporation's second-quarter 2012 earnings call. Participating on the call today are Dave Wathen, TriMas' President and CEO, and Mark Zeffiro, our Chief Financial Officer. Dave and Mark will review TriMas' second-quarter results as well as provide some additional details on our 2012 outlook. After our prepared remarks we will then open the call up to your questions.

In order to assist with your review of our results we have included the press release and PowerPoint presentation on our Company website, www.trimascorp.com under the Investor section. In addition, a replay of this call will be available later today by calling 888-203-1112, with a replay code of 768-7244.

Before we get started I would like to remind everyone that our comments today, which are intended to supplement your understanding of TriMas, may contain forward-looking statements that are inherently subject to a number of risks and uncertainties. Please refer to our Form 10-K for a list of factors that could cause our results to differ from those anticipated in any such forward-looking statement.

Also, we undertake no obligation to publicly update or revise any forward-looking statements, except as required by law. We would also direct your attention to our website where considerably more information may be found.

At this point I would like to turn the call over to Dave Wathen, TriMas' President and CEO. Dave.

Thanks, Sherry, and good morning. And thanks to all of you listening for your interest in TriMas. Today we are sharing the results of another quarter that demonstrates our continued performance improvement. We continue to stick to our plan balancing revenue and earnings growth to maximize the value of this Company.

Job performing economy, our job is to find the bright spots where we can capture growth for our businesses and execute fast and well on our new product programs and our geographic expansion projects that target these bright spots. In parallel our job is to be cost effective so that we achieve strong returns on our investments, continuously reduce our cost to stay competitive and are able to keep investing. This quarter's top and bottom-line results demonstrate good progress on these TriMas imperatives.

Our agenda today is that I will provide an overview of the second quarter, then Mark will discuss financial metrics and some details by segment. And I will finish by discussing our outlook, and then we will gladly take your questions.

You have likely seen our press releases this morning discussing our Q2 results and recent bolt-on acquisition agreements. Let me add some highlights on slide 4.

Our 17.5% sales growth comes from concentrating on what I am calling the bright spots, places where we can solve a problem for our customer; new products that add features and benefits that our customers are willing to pay for; participating as a part of the supply chain in faster growing markets; and identifying and executing on compelling bolt-on acquisitions.

I will share some examples of our recent successes when I go to the next slide. During Q2 we achieved a record $0.61 per share of earnings, excluding special items. Within the $0.61 we also absorbed acquisition-related costs and the effects of 10% more shares related to the assurance of 4 million shares earlier in the quarter.

Growth has to be profitable to be considered successful, so we keep after all aspects of cost so that we keep meeting our 3% total productivity target. We are also adding resources and continuing our emphasis on lean initiatives to fuel future productivity.

We are adding capacity in our Packaging, Aerospace and Energy businesses to serve the customer demands accompanying our growth initiatives. We are also expanding our low-cost facilities in Thailand and Mexico for ongoing productivity.

When we were executing on the plan we communicated the use of proceeds from our recent equity offering. Mark will share details of this with you.

Now on slide 5 I will share some business highlights that demonstrate some of the actions driving TriMas' revenue and earnings growth.

Rieke Packaging won several new global contracts a year ago and now all the fine-tuning and approvals required to actually begin shipping to those customers' local plants in Asia have kicked in.

The acquisitions of Innovative Molding and Arminak expanded our product offering such that we expected cross-selling synergies, which are now delivering new sales. We also knew these two acquisitions would mix our margins down, but we told you we would improve those over time.

Product margins in Innovative Molding are improving nicely since joining us a year ago. Mark will show you more about the improving performance of our Packaging segment.

Our main focus at Lamons continues to be building out our branch network through new greenfield branches and bolt-on acquisitions. But in the background we keep concentrating on growing our higher-margin engineered product sales and adding fasteners to our existing gasket contracts, which is a competitive advantage for us. Our new product pipeline is encouraging too.

Monogram added a sales office in China a year ago, and now has $2 million in orders for shipment in Q3. Monogram's new facility near Phoenix is building parts for approval by our key customer, and we expect to achieve incremental sales by fourth quarter. Monogram's growth is exceeding the aircraft build rates due to our concentration on new products, aircraft content and enhanced geographic coverage like China and Brazil.

Arrow's investment in new products are proving to be bright spots as gas products are up 15%, compression products are up 60%, and the parts business is up 27% year-to-date. The product mix is in constant flux with the shifting demands between oil, gas, shale and fracking, but our team in Tulsa is used to this and responses fast to the changing demand.

Norris is capitalizing well on the new anti-dumping duties on large cylinders from China. Plus all of the teams' work on improving the small high-pressure cylinder product that we make in Huntsville has grown sales in this category more than 40% versus first half 2011.

I was in Melbourne in June when our new consolidated plants there officially open. It has upgraded equipment for both productivity and enhanced product features that are helping us gain new customer contracts. In addition, Cequent North America achieved a 13% operating profit margin, while its new plants in Mexico are still just in startup mode, which bodes well for the future.

Now I would like to comment on the bolt-on acquisitions we have just announced with information on the next two slides. We have told you that Brazil is an attractive market for us, particularly in Energy with all their new oil supply, and especially due to all the new petrochemical plants being built. The large Energy and oil processing companies that we currently serve in other parts of the world are expected to invest multiple billions of dollars for multiple years into the future.

The acquisition of CIFAL establishes our initial Energy footprint in Brazil and allows us to expand on the strategy of providing special fasteners, similar to the fastener hub created by our South Texas Bolt & Fitting acquisition in 2010.

This is step one in Brazil. We will add capability for larger product sizes and more features at CIFAL. Plus this would be a Lamons hub so that we can add branches, providing gasket and fasteners adjacent to all the new refineries and plants.

We also announced the acquisition of Trail Com, the leading distributor of towing accessories and trailer components in New Zealand. As successful and profitable as Cequent is in Australia, we were weaker in the New Zealand market. We now have opportunities to cross-sell our products in New Zealand and strengthened our retail and trade presence in Australia as a result of this acquisition. Both of these recently announced acquisitions have attractive sales and cost synergies for us.

At this point I would like to turn the call over to Mark to share financial and segment information with you.

Thank you, David, and good morning. Let's start with a quick summary of our second-quarter results on slide 9. Our second-quarter sales were $338 million, a record quarterly sales level for TriMas, and a 17.5% increase compared to the second-quarter of 2011.

This is our ninth consecutive quarter of double-digit year-over-year sales increases with growth in five of our six segments. We continue to generate growth on many fronts. Our data growth efforts focus on new products, growing end markets and market share gains represent approximately 50% of our growth for the quarter and the year. Our bolt-on acquisitions are generating expected or better than expected results.

In addition, our sales increases were partially offset by $3.3 million of unfavorable currency exchange. Across the Company our strategies and our execution are driving positive results.

Q2 operating profit improved approximately 13% compared to Q2 2011 excluding special items, primarily as a result of higher sales. Our operating profit margin declined 60 basis points as margins were impacted by lower European Packaging sales, business sales mix including the acquisition, and higher costs related to the expansion in Energy.

Our productivity efforts more than offset the economics in the quarter, and as expected continue to fund our growth initiatives. Second-quarter 2012 income from continuing operations attributable to TriMas was $16.7 million. Excluding special items related to debt extinguishment and restructuring costs associated with the manufacturing footprint optimization, second-quarter 2012 income from continuing operations would have been $23 million, an increase of 25% compared to Q2 2012.

During Q2 we achieved a record quarterly diluted EPS of $0.61, while absorbing acquisition-related costs and the effects of more shares. Interest expense reductions and effective tax structure management also contributed during the quarter.

We remain focused on cash flow and our results to date are in line with our expectations. We plan to generate $40 million to $50 million in free cash flow for the year. We believe we have strong cash flow businesses and expect them to generate cash even in times of growth.

During Q2 we also issued 4 million shares of common stock for net proceeds of $79 million. These proceeds were used to redeem $50 million of our 9 3/4% senior secured notes, rolling our debt balance to $421 million, a 12% reduction from a year ago. We also committed $23 million in cash for the bolt-on acquisitions Dave discussed that expand our footprint into Brazil and New Zealand and provide significant opportunities for synergies.

A couple of comments on our six-month results which are consistent to Q2, year-to-date sales increased more than 16%, with high single-digit organic growth. Our Q2 year-to-date diluted EPS, excluding special items, would have been $1.01, an increase of more than 20% when compared to the prior year EPS of $0.84. To date we are pleased with our record sales and earnings for the Company.

On slide 10. As I mentioned, we ended the quarter with approximately $421 million in total debt, a 12% increase from June 30, 2011. During the last 12 months we also funded approximately $93 million in acquisitions and spent $45 million on CapEx, primarily used to generate future growth and productivity.

As a result, we ended the quarter with a leverage ratio of 2.19 times compared to 2.82 times at June 30, 2011. We remain disciplined in our balance of growth and indebtedness. Our progress was recently recognized by rating agencies with May upgrades from both Moody's and S&P.

Lastly, we ended the quarter with $221 million of cash in aggregate availability under our revolving credit and accounts receivable facilities. We will continue to focus on deleveraging the balance sheet, generating cash flow and lowering working capital as a percentage of sales.

At this point I would like to review our business performance by reportable segment beginning with our Packaging segment, on slide 12.

Q2 2012 Packaging sales grew 48% compared to Q2 2011, primarily as a result of Innovative Molding and Arminak acquisitions, which added a little more than $26 million in sales through the quarter.

This segment has been hardest hit by the downturn in European economy, which represented nearly a $0.03 per share negative effect on our performance. Our specialty systems product sales, unrelated to the acquisition, increased as North America gains offset the European economic challenges. We also shipped our first products to our large consumer packaged goods customer in Asia.

Packaging operating profit increased 10% in the quarter, primarily due to higher sales levels. Packaging, one of the highest margin segments in the Company, was impacted by unfavorable sales product mix as innovative and Arminak synergies and improvement plans are still coming online. Our lower level of industrial closure sales also had a negative impact on margin levels. Packaging incurred approximately $1 million of intangible asset amortization costs related to the acquisitions in Q2 as well.

Significant end market growth prospects for this segment continue to support our launches of new dispensing and closure products. The powerful combination of Rieke, Arminak and Innovative has enabled us to more quickly advance our targeted growth initiatives. We are beginning some salesforce integration and expect a positive customer response.

Moving on to slide 13, Energy. Energy sales increased 12% for Q2 compared to a year ago. The sales growth was the result of multiple growth initiatives, including market share wins within our highly engineered Bolt productline, geographic expansion, and increased demand. Approximately $1.4 million of this growth was due to our enhanced specialty Bolt capabilities, while new branches supporting our global customers contributed an additional $1.7 million.

As evidenced by today's announcement of our agreement to acquire CIFAL, we are executing our plan to further support customers in Brazil, given the growth in the Energy sector expected in the region in the years to come.

Energy's operating profit decreased as an impact of higher sales was more than offset by a less favorable product mix, increased sales at newer branches with lower margins, and some operational inefficiencies due to significant growth.

We will continue to expand our footprint in support of our global customers in new markets and maximize our supply chain and operational efficiencies for improved cost and delivery.

On slide 14. Aerospace & Defense sales decreased proximally 9% in Q2 2012 compared to Q2 2011, as improved demand for blind bolts and temporary fasteners from the Aerospace business customers was more than offset by the sales decline in the defense business. Our defense business continues to be negatively impacted by the increasing activity -- excuse me, by the decreased activity with managing the relocation and establishment of the new defense facility.

We are in the process of bidding future production of our ammunition casings, and will keep you posted as to the results. On the other hand, Monogram, our Aerospace business, continues to show positive sales momentum with a 10% increase in Q2 2012 sales compared to Q2 2011, including new sales into Asia. We continue to experience higher order activity which resulted in growing backlogs.

In Q2 operating profit was relatively flat with the 210 basis point improvement in margin percentage compared to Q2 2011, primarily due to the increased sales levels in Aerospace, which have significantly higher margins than the defense business, and as a result of productivity initiatives.

We expect this business to show revenue growth and margin expansion as aircraft build rates increase and our expanded geographic coverage generates results.

Moving on to slide 15, Engineered Components. Those businesses in this segment, Arrow Engine and Norris Cylinder, experienced continued growth on top of record 2011 sales levels. Q2 2012 segment sales were up 20%, primarily due to improved demand for engines, compressors and other well-side products and industrial cylinders.

Increased oil drilling activity benefited Arrow with sales up $6.6 million compared to Q2 2011. Arrow not only increased its core product sales in Q2, but also successfully introduced more than $1.6 million of new products to add well-side content.

During the quarter Norris Cylinder sales increased by $2.2 million due to market share gains. Norris also continued to successfully leverage a large cylinder asset -- the cylinder assets purchased during 2010.

As a result of these sales increases second-quarter 2012 operating profit increased almost 30% and operating profit margin expanded more than 16%. These improvements were a result of higher sales levels and higher operating leverage at Arrow.

Engineered Products is off to a great start for the first half of the year, but comps do get harder in the back half. We continue to develop new products and expand our international sales efforts in this segment.

On slide 16 we show the performance of Cequent split into two segments. Cequent North America sales increased 8% as a result of higher sales levels from all of our channels, including OE, industrial, aftermarket, retail and international. Sales increases were the result of market share gains and new product introductions. Cequent North America's operating profit and margin level increased, primarily due to the higher sales levels and lower SG&A cost, excluding those costs incurred to relocate certain production to lower-cost countries.

As evidenced by our continued footprint rationalization, we remain focused on making these businesses more efficient. We will also opportunistically pursue new areas of profitable growth.

Cequent Asia Pacific sales increased 32% when compared to Q2 2011 due to new customer program awards in Thailand and the benefit from the acquisition in South Africa completed in Q4 of 2011, partially offset by unfavorable impact of currency exchange.

Cequent Asia Pacific's operating profit increased due to increased sales levels and continued productivity efforts, excluding costs related to the consolidation and move to a new manufacturing facility in Australia completed in Q2.

We remain focused on productivity, product leverage, regional expansion in the Cequent segment. We are focused on achieving both sales and cost synergies from the recent Trail Com acquisition in New Zealand.

That concludes my comments. Now Dave will summarize the first half of 2012 and provide some additional comments on our 2012 outlook. Dave.

Thanks, Mark. I will close with a summary and look forward. I believe that TriMas' second-quarter results confirm that our strategies work for us and that our people execute projects well. We are now at nine consecutive quarters of year-over-year sales and earnings growth, meeting our strategic aspirations.

We continue to find attractive, accretive bolt-on acquisitions. Our tactic to follow and support our existing customers as they grow in global markets is proving to work well for us. And the targeted countries that we identified two years ago remain attractive for growth.

Our productivity tactics change, but our savings continue to fund our growth investments. Our manufacturing expansions are in the low right locations for growth and cost-out. And in parallel with investing for growth we have continued to improve our balance sheet. Our debt to EBITDA ratio below 2.2 is an important milestone for us.

Concerning our outlook for the balance of 2012 on slide 19, the update is that we are reaffirming our 2012 EPS guidance while raising our sales growth outlook, driven by our stronger Rieke growth to date and our recent acquisitions. Our earnings guidance remains at $1.75 to $1.85 per share after adding 4 million shares and including our projected acquisition integration and purchase accounting-related costs.

CapEx will still be within our original range, but likely to be close to 4% of sales and growing some in absolute terms to support the top-line.

We certainly plan to continue to invest in bolt-ons, CapEx and people to achieve our growth aspirations. Growth is particularly difficult when there are no tailwinds from the economy. We see the same headwinds everybody does. US GDP at 1% or 2%, growth in emerging markets may be slowing, pressure in Europe, unfavorable currency effects, etc.

So cost control, ongoing cost reduction and being poised to react with deeper cuts on short notice are vital. Our management of risks and opportunities with our structured process to respond quickly to changes is one of our key tactics to maximize TriMas' business results.

I will close with a reminder of our strategic aspirations on slide 20. Our top-line growth is on track. You have heard us discuss new orders and new sales, new facilities and investments in multiple faster-growing end markets ranging from aircraft and Energy to Thailand and Brazil. We continue to achieve our target productivity levels, and several new low-cost plants will help our ongoing productivity objectives.

We continue to grow earnings and our leverage ratio is getting near our target range. Our Company is really about its people, and we will continue to strive to be a great place to work. We owe everyone at TriMas the best working conditions possible.

One metric is safety. We have now had two facilities recognized this quarter for their safety achievements. I would like to personally thank our employees and leaders for all their efforts to make this happen. TriMas has a strong team of people in each of our businesses who know their businesses and customers well, have solid plans for revenue and earnings growth, know how to achieve good returns on investments, and enjoy competing with technology and speed.

We also have structured short-term and long-term incentive systems that reward our people for execution. This is straightforward and it produces results. We intend to stay focused on achieving all of our strategic aspirations.

Now we will gladly take your questions.

(Operator Instructions). Robert Kosowsky, Sidoti.

I was wondering if you could just dive in a little bit more to the margin weakness and Energy a nd what you see as a sustainable margin level, that does this has kind of an unusual amount of negatives going against it this quarter versus say what we saw in the first quarter or second quarter last year?

I would put it in context. This business has grown sizably in the last year. And we are still ironing out, as with any growth environment, those operational factors to make sure that we are as efficient as possible. Plus also in the quarter we did incur some sizable amounts associated with the acquisition in Brazil, and, obviously, the disruption associated with that and the cost associated with that. So to that end that is really the effect.

Long-term we remain committed to a tease level worth of operating profits out of this business. And we are starting to see the improvement in other areas of the business, but it has been more than offset by some of the ramp-up costs associated with those new branches, acquisitions, and frankly some of the inefficiencies that we just experience as a result of those growing pains.

Okay, that makes sense. And then could you maybe just map out a little bit more about what growth strategy in Brazil is now you have a beachhead there? I know, Dave, you touched on it a little in prepared remarks, but kind of do you have any more ideas like how long it is going to take to fully ramp up and what the next major steps are?

Yes. Of course, the end game is pretty clear. We need to have branches close to the customers. You can put pins on the map around the coast of Brazil as to where all the new plants are going in. Short-term there is more opportunity, I will say with Petrobras, because they're building something like 50 plus platforms, which because they are in deep drilling sites take more corrosion proofing on the fasteners and more special gaskets and all that.

So stage one is to make sure we can serve that. And believe me we have had plenty of meetings with them where they have made it clear that they need us to bring our technology to Brazil. So it feels pretty good, and obviously we are capitalizing on that.

So short-term it is, I will say, serve more the supply oil side, and the -- some of the existing refineries which we make sure we know. And then you'll see us sprouting branches near all the new construction sites.

And that is a multiyear thing -- several years before that is all built out. So we will obviously stage them in such a way that we can capture some of the build. And really, of course, we are into the ongoing MRO and aftermarket and rebuild kind of business, and so there is not a need to be on the ground in four, five, six or seven sites right now, but we will within a few years.

Okay, that is helpful. And then --.

And clearly both fasteners and gaskets. CIFAL is fasteners. But I have been there, it is a facility that is a year old. We have got training centers and all that, which is important to us, because we tend to train our customer engineers. But, also, room to put it into the high-end seals and gaskets and that sort of thing.

Okay, so that is like over the next few years you're going to be expanding like the products offering down there.

Yes, pretty fast on the product offering.

Okay, it is good to hear.

Slower on the footprint.

Okay, that is good to hear. And then as far as the Aerospace segment it seemed like there was a decent headwind in the second quarter last year. Was it similar this year? I haven't had a chance to look at the Q. And kind of just your general outlook for margins in that segment as well, because it seemed like it took a little step-down from what was in 1Q.

You've got the same kind of pressure as a result of the NI business in its final step-down in terms of activity year-on-year from a comp perspective. So that is really what is driving the top-line pressure. And NI at this point in time is still in that in between phase of deciding what the future business is. So that is yet ahead of us to decide and act on that, obviously supporting our customers in that specific space.

In terms of the Monogram business, no, there isn't a step-back in profitability. And, in fact, they grew nicely in the quarter. As I made mention, 10% top-line growth with continued addition to the backlog, so the business is operating very well.

Okay and then, finally, Dave, what are you seeing as far as like demand in the industrial closures business from Europe and North America? Is Europe getting a little bit weaker, or is it stabilized, just kind of your perspective on that?

It -- I'm going to say it stabilized. Europe stabilized at a lower rate, but we are watching it all the time. As Mark shared with you, that has been an expensive step-down for us because that is a pretty high-margin business for us. We have absorbed it, but --.

The US is okay. The 1% or 2% GDP number feels pretty accurate in a business like this that follows GDP, the industrial side of the Rieke business. To predict -- that is the trouble, what is going to happen in the second half and all. It feels like it is staying flat. And everything we can say it seems flat. And that is what you have got to live with. I am saying it over and over.

The only way you grow in these tight economies is you take it away from somebody else, then you go someplace that is growing faster. Obviously, we are doing both of those things.

Okay, that's helpful. And then just to back up on Aerospace, one last question. It looked like it was 27% operating margin in the first quarter, and it stepped-down about 25. Was there any kind of -- anything going on there or was it just product mix?

Just product mix.

Okay, thank you very much, and good luck guys.

We are building a new plant near Phoenix.

Okay, got you. Thank you.

(multiple speakers) cost of that.

Chevon Guy Tibness, Barrington Research Associates.

(inaudible) congratulations. My first question was sort of the acquisition front, the CIFAL and the Trail Com. Do you expect the synergies from the CIFAL to help uplift the operating margin for the Energy segment at least some extent? And -- okay, you can go ahead.

Yes. CIFAL makes specialty fasteners, which is what we would call the Engineered Products kind of thing. So it mixes us up into the higher-margin products right away.

Okay. So right away in the sense that you expect it to be a benefit in the second half or into 2013?

It will take longer than that. The second half is more about adding new products to that business.

We have also got -- obviously, got the ramp-down costs associated with inventory and the step-up associated with that, etc. So that will largely be digested for the first six months and you should see a step-up in terms of relative effects in that in 2013.

Now I believe you also asked a question about Trail Com.

Right.

Do you want me to comment on that? Trail Com is -- and if you put it in the context of our Asia-Pacific Cequent business, which is very profitable and doing very well, this has a retail component associated with that business. And there are significant purchasing synergies given the total TriMas leverage that we have in that space. So we expect to be able to see those margins improve over time as well.

Okay, okay. And what added acquisition costs do you expect for this year? And what are in the pipeline of acquisitions that you have planned for the second half of the year?

Yes, we of course have modeled our acquisition integration costs and all that into our second half in our guidance. But the pipeline is pretty decent. In a bumpy economy sometimes these opportunities come because of that. And, because you know we tend to do friendly acquisitions where we know the owners and all that.

The pipeline feels pretty good right now. And we have got some capacity, but we are also careful about making sure we have got financial capacity. My concern is more about making sure we have got the people capacity to do the integration. So we're thoughtful about that.

Okay, it sounds good. My other question is on the pricing pressures. Do you see the pricing pressures -- how do they look like for the Europe (inaudible) especially? And did TriMas undertake any price increases during this quarter?

I'm sorry, could you repeat the question?

I am sorry. How do you see the pricing pressures, especially in Europe? And did you guys take any price increases during the quarter?

It doesn't relate, obviously, solely to Europe. Our businesses do obviously take price when the economics otherwise warrant, and otherwise they would like to reposition in the market space. We did take price on a net basis upward in Q2, and it was across different businesses in different geographies.

It didn't relate specifically to Europe, but it did relate to the economics that otherwise we experienced from an inflation perspective.

Okay, okay. That's helpful. Just my last question. Can you comment on the normalized annual tax rate for 2012?

Our planning rate in terms of 2012 is approximately 33%.

Okay, it sounds good. Thanks, I will get back in line. Thank you.

Scott Graham, Jefferies.

Congratulations on a great quarter. Several questions for you. Someone mentioned the Q, I haven't seen it so, Mark, if you can help me square up some model stuff. The Cequent sales dollars acquisitions and the sales line, could you tell us what that was?

If you think about the acquisition in terms of Asia-Pacific Trail Com closed and it is about a $12 million run rate revenue business.

Wasn't there an acquisition in the number as well?

Yes, the South Africa number is about $1 million. (multiple speakers) not a big number.

Okay, nothing. Okay.

Yes.

And could you also tell us what the FX was in the Packaging and Cequent businesses?

Yes, FX in terms of the effect in the business iself, give me one second here, I'm digging around. The Packaging business from a sales perspective about $2 million.

Earnings sounds like $0.03.

So just a $2 million negative in Packaging. And what was in Cequent?

Cequent about $0.5 million, a little more than that.

All right.

Sales number.

And last one like that. The Packaging margins without the acquisitions.

Packaging margin without the acquisitions.

Yes, the base business.

You know, I don't have that immediately at my fingertips.

Okay, we can circle back on that.

But I would tell you that the core margins in that business remained pretty stable, and in fact slightly up year-on-year due to productivity efforts.

All right, that is about what I was looking for. Okay.

And Packaging was one of the businesses we got some price in. And so the margins feel pretty good in the base business. The work is in the acquisitions and the synergies and all that.

Yes. I can see that. So two maybe broader questions here. The acquisition of the Australian businesses, I guess it is a little curious from my standpoint, because in past conversations I just got the impression that it was the M&A pipeline was going to be more skewed and more focused on the other businesses. Could you walk me through your thinking on adding to Cequent?

I put acquisitions in strategic push form, find them bucket and opportunistic. When Carl and crew who won that business told me that -- I had learned that we were actually fairly weak in New Zealand. As strong as we are, we have very high share throughout Australia, we were fairly weak in New Zealand. And the owners of the biggest distribution -- distributor in New Zealand were ready to retire or whatever.

I would call it opportunistic that said here is a way to take everything we do in a business that has very attractive margins and growth rates and just add to it at a quite attractive multiple. So call it the opportunistic kind. And we will continue to do those. We have got -- as I say (inaudible) we have the financial and the people horsepower. This is also one where we have the people horsepower to tuck it into the existing business. So we are going to like the results.

Okay, so Cequent is back on for acquisitions. I guess, I thought we were heading in the other direction on that. So perhaps I was mistaken.

I would say though if you look at the return on capital propositions associated with that acquisition, we are all going to like the outcomes. And when you put it in that context it is about opportunistic. We had a guy retiring that was looking to sell the business. Why do you want to increase it -- have another competitor in that space?

So in terms of the total dollars if you will allocated to it, I tell you it is -- the way you just characterized it isn't that is back on, it is end markets that make sense with returns that make sense and a multiple that made sense in terms of buying that acquisition.

That is a fair characterization. I get that. So the pipeline now, if we were to look forward, and obviously we are not asking what is it, but could you give us an idea, Dave, on where the pipeline is strongest, which segment, and are there anything -- is there anything closer to the finish line?

We continue the pipeline that we -- I am visualizing the chart in my head. It is clearly Packaging, Energy and Aerospace. And while in a way I would dismiss aircraft because of the multiples, I have got -- we have got a new management team in that business, because the retirement of a guy that ran it for a long time. Sometimes somebody new brings you some new ideas. So I am actually a little more encouraged by some of the opportunities we are seeing for acquisitions in that aircraft space. So we are keeping after those, because you know how attractive they are strategically.

Energy is -- we got the footprint and we have to make the choice about is it better to do it by acquisition or by greenfield, and so it comes down to condition and price and existing business and how long, although we are going to be busy for a while now in Energy with CIFAL.

Packaging there are -- the pipeline feels pretty good. And again we are busy, and it is a people choice thing, so you would only -- we are more likely to only go after very well-run businesses that -- as opposed to a turnaround kind of situation. But they are out there.

The big question mark, and you have heard me say this before is there's a lot of technology in Europe that is attractive in Packaging, but it is a -- Europe is a tough place right now. But we will keep our ears and eyes open, because there are going to be ones that make sense.

I wanted to add one -- I would add one thing and that is Brazil.

Yes, Brazil is attractive in multiple markets. And so I would say that cuts across TriMas.

The Brazil acquisition -- I think that is strategically perfect for what we have coming up with Petrobras. So where are the multiples on these things as a function of the EBITDA -- are they under 10?

Oh, yes. For certain.

Yes.

Yes, yes.

We are responsible to our shareholders, and our Board reminds us of that. Yes, they are -- we wouldn't rule it out, but no, it is a heck of a lot easier being accretive if you're down in the mid-single-digits.

Again, congratulations on a great quarter, particularly the Cequent margin which was pretty eye-popping. Thank you.

Mark Tobin, ROTH Capital Partners.

Thanks for taking my questions. I think following onto the pipeline question, can you talk about the Packaging side, what you're seeing, I guess, from an opportunity standpoint? I know in that business you tend to have some larger business that you worked on with the revenue contribution that comes down the road.

Now, if you're talking the acquisition side about -- this side of it, obviously we continue to mine that field very extensively. We have an expert, very experienced leadership team that many of you have had the chance to meet, who are identifying the right kind of bolt-ons both from a technical and a regional perspective.

And they have been exceptionally busy with those shipments first headed off to Asia now in terms of those shipments to our customer in Asia, that consumer package goods company that I made mention of.

And with Arminak I will tell you that with the addition of manufacturing capability in the United States here in the next six months we are expecting some pretty sizable increases in revenues here. Almost unto itself like a separate little standalone acquisition in terms of acquiring into a new market and new customer that is going very well. (multiple speakers).

The formal line in Packaging is technology, because there is some technologies we want. You know, we stay in the technical end of dispensers for our business, and closures and that sort of thing. And there are some technologies that take a long, long time to develop, and we are finding that sometimes an acquisition is a better way to go.

The other thing that could happen in Packaging is a capacity add. Sometimes it is easier to buy a soft competitor for their capacity, because it is equipment we know well and all that. So we have our eyes open about that.

We have had some good ones of those in the past and I would -- the team knows I would like them to find the right one that adds --, because we know how many new molding machines we need and all of that to serve the volume, particularly in Asia. So there could be a deal to be had in that area too.

Okay, that's helpful. And then on your end market commentary, to me it sounded pretty consistent with the commentary during last quarter's call as far as choppiness and uncertainty. Are there any differences that you could highlight between what you are seeing now versus what you saw three months ago?

Yes, off the top of my head I would say that some of the shale field stuff and all that in Energy has slowed a little on the equipment side. But the compression business is up. Again, the team in Tulsa gets very high marks for jumping on where the opportunity is. And of course they live right in the middle of that whole conversation.

I would say in Energy for us, I mentioned corrosion proof because of depth and all that. That industry is continuing to upgrade its safety and consistency and all that. It is good for us on the higher-end products, and we are having to make sure we have got all the right things. So there is little tweaks that go on.

No surprises really in aircraft. It is just our content is good. We've got -- well, I was pleasantly surprised by real orders in China that matter. China is a tough place to sell that kind of technology product, because they would rather manufacture it themselves, and we feel good about proving we are the producer.

Norris is -- that pure industrial business looked pretty flat out there. What happened -- that business is having to scramble for more applications in fire safety and that kind of thing. And it is -- we all know though it is a flat, tough field market in anything except the bright spots we go after.

Okay, that's helpful.

(inaudible) I can't help you. It feels tough and the trick is finding the right places to go after. And it is going to be that way for -- it is the way we are running.

I think so far you guys are doing a good job at it. I appreciate it. Thank you.

Wayne Archambo, Monarch Partners.

yes, I had a question on the pipeline, but it sounds like you have answered this a number of time, so I appreciate your expansion on that. Thank you.

DeForest Hinman, Walthausen & Co.

I had a couple of questions. First on Europe, you talked about the weakness there in demand, but the euro is weak as well. Is there any export opportunities in that market or is it kind of captive in the sense where we produce there and you sell there as well?

We generally produce in Europe of what we sell in Europe. There is some export businesses into Europe, but not enough that we would spell that out as something that hurts us. I will say the caution I have is European companies exporting to the US because of currency, and we are watching that closely.

An example of that would be -- of course, there are only a few companies in the world that can make industrial gas cylinders; two of them are in Europe. And with the euro weak it makes it easier for them.

Now on the other side of that whole equation, of course the softness in Europe, I would hate to be an exporter sitting in China and losing business in Europe and looking for places to sell and all that. So it has made the companies in China that we do some business with more competitive. They have had to be. You know how it is.

You know how it is. You just keep after the effects of it all and try to find the places to capitalize on it and don't let the pain and hurt you too bad.

One of the things I was out add in terms of Europe is the Rieke business, and which is really our largest concentration in Europe, always looks at it's make by analysis in terms of its global footprint. So the flow of products is part and parcel of what they do in terms of thinking about what European supply could end up other places. So that is just normal course of events for us.

Okay. And on the CIFAL acquisition what was the actual multiple on that deal?

We traditionally don't disclose that, but it is consistent with historical multiples that we pay, which is less than 10 kind of numbers. And if you look at historically they are in around the number about 6 or a little more than 6.

Okay. And building on that, I think we were selling into Brazil, if I'm not mistaken. How much revenue potentially could we shift from an import basis into Brazil and quickly flip it over to being produced at CIFAL to avoid the import tariffs?

The single customer, if I understand your question about this, is really pre-existing customers on a global basis that we have there locally. It isn't a material amount that we have been shipping into Brazil.

As you made note, those import duties and the like and make it a make in Brazil for consumption in Brazil kind of market. So that is going to help us in terms of stepping forward there.

But I will reinforce it with an anecdote. The management team at CIFAL is staying because they see the upside of being part of Lamons or being involved with Lamons. Preacquisition that management team was identifying orders, and actually got some orders for product that they didn't traditionally have, but Lamons could provide. So that really reinforced to those people how valuable the broad product line was going to be.

And it is not trivial amounts. It is enough that -- we will have -- you'll see a nice ramp-up in that business, but again it is not a matter of flipping production into it, it is really incremental sales due to a broader product line.

Okay. And as of today with this acquisition of CIFAL do we see a need for more acquisitions on the gaskets and the bolts in Brazil, or do we think this management team can grow this business organically with capital from us?

We know, we know need multiple sites in Brazil, because our model is to be close to our customers with fast turnaround. And it comes down to -- it is a lot faster to do it by acquisition. So if we can find the right price and the right product and all that, the right experience, when it is really about the people, you'll see us doing more acquisitions in Brazil.

Okay, thank you.

(Operator Instructions). Robert Kosowsky, Sidoti.

Just a couple of other questions. First off you mentioned in Packaging the specialty dispenser in North America, that revenue growth is going well. I was wondering if you can kind of give some more color as to where exactly it is being sold into?

And then also more broadly talk about the revamp of the sales force in the specially dispensing side now that you've got Arminak in the fold, and just what that -- where you are thinking about where you want to take that from a higher-level standpoint?

Let me comment on the salesforce first. We know we need one global sales force; that is the end game. So we are -- as you would expect with a couple of fairly large acquisitions, we were heading that way.

That is -- we will do it fairly slowly, because it is a business that pricing is vitally important. Being with the right customers is vitally important, so it needs to be well thoughtout. So I am not sure what else to say it as far as this is something that is going to happen in a month. It takes -- it is going to take us a while. We are going to march down the road very, very carefully.

All right. That is good to hear. And also just about the revenue opportunities on like the legacy specialty dispensing business in North America?

One of the advantages -- one of the advantages that Arminak brought is a much broader line of firmware products. And there is a lot of activity in that product line. And it is exactly -- call it an integrated salesforce. It is a salesforce that didn't have the whole product line, having more now.

I would also tell you that there are certain customers that are winning in the market that we happen to have excellent relationships with, and we have been afforded broader offerings with them as a result of that. I wouldn't say it is new customers, but it is pre-existing customers outside the acquisition discussion.

Because of the product line we have been able to offer more.

It is good to hear. Then finally in Norris was there any kind of one-time pickup from the antidumping rules or did anything mess around with the quarter in particular?

No, I tell you, this is up has been a year-long process, whereby the chilling effect, if you will, really has been experienced over the last 12 months as you have to make known that you're bringing a suit to market, or suit in front of obviously the appropriate bodies.

Now what I would tell you is there is an effect there that ultimately resulted in us gaining share over the last 12 months. It is nothing within the quarter. It has been an ongoing effect.

Okay, thank you very much. And good luck with the back half of the year.

We have no further questions in the queue at this time.

Okay, we appreciate your attention. I always appreciate the team at TriMas that pulled together and produced great results. I am proud of the crew. So again thanks for your attention. And obviously with follow-ups you know that Sherry is on point. Thank you.

That does conclude today's conference. Thank you for your participation.