Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. TRIMAS CORP (842633) 10-Q published on Apr 30, 2019 at 12:18 pm
Reporting Period: Mar 30, 2019
In February 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" ("ASU 2018-02"), which provides for the option to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act ("Tax Reform Act") classified within accumulated other comprehensive income (loss) ("AOCI") to retained earnings. ASU 2018-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. The Company adopted ASU 2018-02 on January 1, 2019, and elected to reclassify approximately $1.3 million in stranded tax effects from accumulated other comprehensive loss to accumulated deficit on the accompanying consolidated balance sheet. The Company's accounting policy is to release the income tax effects from accumulated other comprehensive income when a defined benefit plan or a derivative instrument is liquidated and/or settled.
In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)" (“ASU 2016-02”) (the “New Lease Standard"), which requires lessees to recognize a lease liability and right-of-use (ROU) asset on its balance sheet for operating leases. Accounting for finance leases is substantially unchanged. Since the issuance of ASU 2016-02, the FASB has issued several subsequent updates to the New Lease Standard. The New Lease Standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.
The Company adopted the New Lease Standard on January 1, 2019 using a modified retrospective transition, with the cumulative-effect adjustment to the opening balance of retained earnings as of the effective date (the effective date method). Under the effective date method, financial results reported in periods prior to 2019 are unchanged. The Company elected the package of practical expedients permitted under the transition guidance, which allows the Company to forgo reassessing: (1) whether expired or existing contracts contain leases; (2) lease classification of any existing or expired leases; and, (3) initial direct costs for any existing leases.
During the three months ended March 31, 2019, in an effort to better align the Company's machining competencies and resources, the Company began reporting its machined products operations within the Specialty Products reportable segment. These operations were previously reported in the Company's Aerospace reportable segment. As a result of the reporting structure change, the Company's previous Aerospace reporting unit was split into two new reporting units, Machined Products and Aerospace. The Company reallocated the goodwill attributed to the previous Aerospace reporting unit on a relative fair value basis between the Machined Products and the new Aerospace reporting units, resulting in an allocation of goodwill of $12.7 million and $133.7 million, respectively.
During 2018, material costs increased throughout the year, primarily related to oil and metal-based commodities. We took swift action to mitigate such cost increases, including implementing commercial pricing adjustments, resourcing to alternate suppliers and insourcing of sourced-product to better leverage our global manufacturing footprint. As a result of these actions, as well as softening of certain underlying commodity costs, we have now been able to mitigate the impact to where material costs were not a significant driver of year-over-year profit change. The two most significant drivers of net income change compared with first quarter 2018 related to our effective income tax rate and the reversal of a legacy liability in first quarter 2018 that did not repeat in 2019.
In addition to these two items, during first quarter 2019 we completed the acquisition of Plastic Srl, a manufacturer of single-bodied and assembled polymeric caps and closures for use in home care product applications, for an aggregate amount of approximately $22.3 million, net of cash acquired. Plastic Srl serves the home care market in Italy and other European countries and contributed approximately $2.8 million of net sales during the quarter within our Packaging reportable segment. We incurred purchase accounting-related expenses during first quarter 2019 of approximately $1.0 million related to this acquisition, of which approximately $0.9 million was recognized within selling, general and administrative expenses primarily related to the write-off of the trade name acquired that will not be used, and approximately $0.1 million was recognized within cost of sales related to the step-up in value and subsequent sale of inventory.