SEC Info - Trimas Corp - 10-K

Trimas Corp · 10-K · For 12/31/05

Trimas Corp · 10-K · For 12/31/05

Filed On 4/4/06 12:51pm ET · SEC File 333-100351 · Accession Number 950136-6-2701

Annual Report · Form 10-K
Filing Table of Contents

10-K · Annual Report

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Filed On 4/4/06 12:51pm ET · SEC File 333-100351 · Accession Number 950136-6-2701

Annual Report · Form 10-KFiling Table of Contents

10-K · Annual Report

This is an EDGAR HTML document rendered as filed. [ Alternative Formats ]

Annual Report · Form 10-K
Filing Table of Contents

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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 and Section 15(d) of the Act.

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.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

As of March 31, 2006, the number of outstanding shares of the Registrant's common stock, $.01 par value, was 20,010,000 shares.

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		Page No.
Forward-Looking Statements			2
PART I.
Item 1.	Business		3
Item 1A.	Risk Factors		19
Item 1B.	Unresolved Staff Comments		24
Item 2.	Properties		24
Item 3.	Legal Proceedings		25
Item 4.	Submission of Matters to a Vote of Security Holders		26
PART II.
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		27
Item 6.	Selected Financial Data		27
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operation		29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		49
Item 8.	Financial Statements and Supplementary Data		50
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		94
Item 9A.	Controls and Procedures		94
Item 9B.	Other Information		95
PART III.
Item 10.	Directors and Executive Officers of the Registrant		96
Item 11.	Executive Compensation		101
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		106
Item 13.	Certain Relationships and Related Transactions		107
Item 14.	Principal Accounting Fees and Services		112
PART IV.
Item 15.	Exhibits and Financial Statement Schedules		113
Signatures			114
Exhibit Index

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.

Risks and uncertainties that could cause actual results to vary materially from those anticipated in the forward-looking statements included in this report include general economic conditions in the markets in which we operate and industry-related and other factors such as:

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We disclose important factors that could cause our actual results to differ materially from our expectations under Item 7. ‘‘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.

We are a manufacturer of highly engineered products serving niche markets in a diverse range of commercial, industrial and consumer applications. While serving diverse markets, most of our businesses share important characteristics, including leading market shares, strong brand names, established distribution networks, high operating margins, relatively low capital investment requirements, new product growth opportunities and strategic acquisition opportunities. We enjoy the number one or number two market position within the respective product category. In addition, we believe that in many of our businesses, we are one of only two or three manufacturers in the geographic markets where we currently compete.

We operate through four business segments, which had net sales and operating profit in 2005 as follows: Rieke Packaging Systems (net sales: $134.0 million; operating profit: $29.0 million); Cequent Transportation Accessories (net sales: $515.2 million; operating profit: $28.9 million); Industrial Specialties (net sales: $298.2 million; operating profit: $32.6 million); and Fastening Systems (net sales: $62.7 million; operating profit: $15.6 million).

In the fourth quarter of 2005, the Company reached a decision to sell its industrial fastening business. The industrial fastening business was a part of our Fastening Systems segment and consists of operating locations in Wood Dale, Illinois, Frankfort, Indiana and Lakewood, Ohio.

The information presented in this statement (information, amounts and description) exclude the business we have decided to exit and these operations are presented as discontinued operations and assets held for sale.

Each segment has distinctive products, distribution channels, strengths and strategies, which are described below.

Rieke is a leading designer and manufacturer of specialty, highly engineered closures and dispensing systems for a range of niche end-markets, including steel and plastic industrial and

consumer applications. We believe that Rieke is one of the largest manufacturers of steel and plastic industrial container closures and dispensing products in North America and also has a significant presence in Europe and other international markets. Rieke manufactures high performance, value-added products that are designed to enhance its customers' ability to store, ship, process and dispense various products in the industrial, agricultural, consumer and pharmaceutical markets. Examples of Rieke's products include steel and plastic closure caps, drum enclosures, rings and levers and dispensing systems, such as pumps and specialty sprayers.

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Our Rieke Packaging Systems brands, which include Rieke^®, Englass^™ and Stolz^™, are well established and recognized in their respective markets.

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As of December 31, 2005, Rieke employed approximately 24 salespeople throughout the world. Approximately 22 of these employees are located in the NAFTA and European regions. Rieke also uses third party agents and distributors in key geographic markets, including Europe, South America and Asia. Approximately 88% of Rieke's net sales are originated by its employee sales force.

Rieke and its agents and distributors primarily distribute directly to container manufacturers and to users or fillers of Rieke's containers. Rieke's point of sale may be to a container manufacturer; however, via a ‘‘pull through’’ strategy, Rieke will call on the container user or filler and suggest that it specify that a Rieke product be used on its container.

To support its ‘‘pull-through’’ strategy, Rieke offers bundling proposals to the container users or fillers. This strategy offers more attractive pricing on Rieke products purchased directly from Rieke and Rieke products that the container users or fillers specify that the container manufacturer apply to the container. Examples of users or fillers that use or specify Rieke products include industrial chemical, agricultural chemical, petroleum, paint, personal care, pharmaceutical and sanitary supply chemical companies.

Rieke's primary customers include Coca-Cola, Diversey, Dow Chemical, BASF, Chevron, Sherwin-Williams, Pepsi, Proctor & Gamble, Valvoline, Bayer/Monsanto, DuPont, Schering Plough, Boots, Pharmacia, Shell Oil and major container manufacturers around the world. In 2005, major customers also include Starbucks, Alberto Culver, Nestles, San Tropez and Ecolab. Rieke maintains a customer service center that provides technical support as well as other technical assistance to customers to reduce overall production costs.

Rieke's manufacturing facilities are located in Auburn, Indiana; Hamilton, Indiana; Mexico City, Mexico; Leicester, England; Neunkirchen, Germany; Valmadrera, Italy; and Hangzhou, China. The steel closure and dispensing production takes place at the Auburn, Indiana and Valmadrera, Italy sites. The remaining production sites are plastic injection molding and assembly locations only. At Auburn, Indiana, there is plastic molding machinery. Our technology center equipment and product design, research and automation equipment is located in Auburn, Indiana.

Rieke's steel closure and dispensing facilities include medium tonnage stamping machines using progressive dies. Ancillary production equipment includes high-speed internally designed automation equipment, paint and coating equipment and plating facilities.

Rieke's injection molded plastic manufacturing sites use a variety of resins including polyethylene, polypropylene and nylon raw materials. Injection molding machines range from 75 to 1,000 tons in size. There are approximately 124 injection-molding machines at these locations. Additionally, there is high-speed equipment at all locations except our China facility. This equipment is used to assemble multiple components into a finished product. Components of a finished product can range from two components to in excess of ten components.

Rieke also has equipment for pad printing on injection-molded products. Printing is desired by customers who want their company logos or other design work displayed on the closure or dispenser.

We maintain warehouse locations in Australia and France to facilitate the sale and distribution of products. The manufacturing facilities ship directly to the warehouses where inventory is held for distribution. In Canada, Singapore and Eastern Europe, we use distributors to deliver products to customers.

We believe that Rieke is one of the largest manufacturers of steel and plastic industrial container closures in North America. Since Rieke has a broad range of products in both closures and dispensing products, there are competitors in each of our product offerings. We do not believe that there is a single competitor that matches our entire product offering.

In the industrial steel closure product line our competitors within the NAFTA market include Greif Closure Systems and Technocraft. In the industrial plastic 55-gallon drum closure line, our primary competitors are Greif and IPCC. In the 5-gallon container closure market, our primary competitors are Greif, Bericap and APC. Our primary competitors in the ring and lever product line are Self Industries and Technocraft. In the dispensing product lines, our major competitors are Calmar, Aptar, Airspray and Indesco.

In the European market, our industrial steel closure product lines compete with Greif Closure Systems and Technocraft. The industrial plastic 55-gallon drum closure lines compete with Greif and Mauser. The Rieke^® 5-gallon container closure products compete with those of Greif and Bericap. Rieke's ring and lever products compete with those of Berger and Technocraft. Rieke's dispensing products compete with those of Jaycare, Calmar, WIKO and Airspray.

Cequent Transportation Accessories is a leading designer, manufacturer, marketer, and distributor of a wide range of accessories and cargo management products used to outfit and accessorize light trucks, SUV's, recreational vehicles, passenger cars and trailers for recreational and commercial use. Cequent's products offer the customer a range of solutions to efficiently ‘‘Get Their Gear on the Road.’’ We believe that Cequent's product lines and brand names are among the most recognized and extensive in the transportation accessories industry.

Cequent's brands and main product categories are sold through a wide range of channels and are described below:

We believe Cequent benefits from several important competitive strengths, including:

We believe that Cequent has significant opportunities to grow through new product introductions, cross selling products across channels, and providing bundled product solutions.

As of December 31, 2005, Cequent employed 84 professionals in sales, marketing and product management activities to support all customer channels. Of these professionals, Cequent has 61 strategic market representatives, with focused sales and account management responsibilities with specific customer relationships. Cequent's products are distributed through a variety of channels. Cequent employs a dedicated sales force in each of the primary channels, including the retail, national accounts, automotive and recreational vehicle OEMs, installer/distributor, trailer OEM and trailer aftermarket/distributor channels.

Cequent's products are distributed through a variety of channels. These channels include installer/distributor (automotive, recreational vehicle and trailer), OEMs (automotive, recreational

vehicle, and trailer), and retail channels (i.e., mass merchants, auto specialty, marine specialty, hardware/home centers, and catalogs). For example, the towing products group principally distributes to approximately 75 independent distributors and 4,500 independent installers under the Draw-Tite^®, Hidden Hitch^® and Reese^® brands. In addition, 500 of towing products' customers position Draw-Tite^® and Reese^® branded traditional towing products as an exclusive or preferred line, while the Reese^® branded heavy-duty towing products are positioned to the heavy-duty professional towing segment. Cequent is well represented in retail stores through mass merchants, such as Wal-Mart, hardware home centers such as Lowe's, and Home Depot, and specialty auto retailers, such as Pep Boys, AutoZone and CSK Auto.

Approximately 19% of Cequent's products are sold through its installer channel. Traditional recreational vehicle distributors account for approximately 21% of Cequent's sales. Trailer OEMs and distributors account for approximately 16% of Cequent's sales. Mass retailers account for approximately 14% of Cequent's sales, with the remainder of Cequent's business in other retail and OEM distribution. Cequent's Fulton^®-, Bulldog^®- and Wesbar^®-branded trailer and related accessory products are sold directly to major trailer OEMs, recreational vehicle distributors, as well as mass retailers. In general, the trailer OEM industry is highly fragmented and specialized, and is generally a low value-added assembly industry. Cequent relies upon strong historical relationships, significant brand heritage and its broad product offering to bolster its trailer and accessory products sales through the OEM channel and in various aftermarket segments. End-users include owners of personal watercraft and large commercial-industrial trailer users, as well as horse and stock trailering customers.

During 2005, Cequent re-focused its electrical products business unit and trailer products business unit into a newly formed ‘‘center of excellence’’ to provide service and value into the marine, agricultural, industrial, horse/livestock trailer and recreational vehicle markets. This reorganization optimizes Cequent’s deployment of sales, marketing, brand management, product management and distribution functions that currently serve the broad-based trailer aftermarket and OEM market segments. The combination of these businesses advances Cequent towards a single customer interface to more effectively provide an integrated solution and better synchronize its tremendous product breadth and depth and outstanding service performance for its customers, while also capitalizing on additional economies of scale. Moreover, this reorganization will enable further refinement of business processes to increase organizational flexibility and better enable us to meet the dynamic business needs of the customer and the evolving demands of several diverse market segments.

In 2005, Cequent concluded the remaining significant integration projects across the North American industrial base. These projects included the integration of our Elkhart, Indiana plastics operation into our Goshen, Indiana facility, relocation of our Albion, Indiana wiring operation to Reynosa, Mexico, and integration of our Sheffield, Pennsylvania distribution and manufacturing facility into our South Bend, Indiana distribution center while manufacturing was outsourced. In addition, within our Towing Products business unit we consolidated its distribution facilities from 11 locations to 8. Lastly, Cequent announced the construction of our new Thailand manufacturing facility that will begin operation in late 2006 and manufacture towing products and related accessories in support of the local Thailand market and our existing Australian market.

Prior to 2005, Cequent actively integrated several consolidation projects. These included: combining Cequent's towing products' Canton, Michigan and Elkhart, Indiana manufacturing facilities, and a southeast Michigan warehouse into a single, approximately 350,000 square foot, efficient flow manufacturing and master warehouse center in Goshen, Indiana. The consolidation of these facilities was completed in the first quarter of 2003. In conjunction with the HammerBlow and Highland acquisitions in early 2003, we continued to streamline our manufacturing and warehousing processes to exploit beneficial economies of scale. In the third quarter of 2003, Cequent completed the consolidation of the Sheridan, Arkansas towing products manufacturing facility, acquired in the HammerBlow transaction, into the Goshen, Indiana facility. In 2004, actions were initiated to close Cequent’s Concord, Ontario 22,000 square-foot distribution and customer service center and

consolidate the Oakville, Ontario 73,000 square-foot manufacturing facility into the Goshen, Indiana and Huntsville, Ontario facilities. Coincident with these moves, Oakville becomes Cequent’s Canadian distribution center. The manufacturing consolidation was completed in the fourth quarter of 2004. During the second quarter of 2005, the consolidation of distribution and customer-service activities for all Canadian customers was completed.

Cequent's 190,000 square-foot Mosinee, Wisconsin facility contains a wide range of manufacturing, distribution and research and development capabilities. Major processes at this facility include metal stamping (up to 800 ton press capacity), a steel tube mill, thread rolling and riveting, high-volume welding and assembly, significant in-house mechanical and electrical engineering capabilities and in-house tool, die and equipment maintenance capabilities. We believe these capabilities provide us with strategic cost advantages relative to our competition. During the first half of 2004, Cequent completed the consolidation of the Wausau, Wisconsin trailering products manufacturing facility, acquired in the HammerBlow transaction, into the Mosinee, Wisconsin facility.

The acquisition of HammerBlow's Juarez, Mexico facility provided Cequent with a world-class, low-cost facility, enabling optimization of trailer products' entire manufacturing system. Juarez is a key component in the post-acquisition consolidation of the trailer products manufacturing system, enabling the migration of higher labor content products currently produced in Mosinee, Wisconsin to the lower cost labor environment in Juarez, Mexico.

The Tekonsha, Michigan electrical products facility contains world-class manufacturing of proprietary electrical brake-control and accessory products, as well as broad engineering capacity to support all of Cequent's electrical product categories.

Cequent employs 62 engineers and invests approximately 1.5% of its revenue in engineering resources and product development. Cequent conducts extensive testing of its products in an effort to assure high quality and reliable product performance. Engineering, product design and fatigue testing are performed utilizing computer-aided design and finite element analysis. In addition, on-road performance research is conducted on hitches with instrumentation-equipped trailers and towing vehicles. Product testing programs are intended to continuously maintain and improve product reliability, and to reduce manufacturing costs.

Cequent's Australian facilities in Melbourne, Sydney and Brisbane contain manufacturing, engineering, design and research and development capabilities. Cequent manufactures, markets and distributes products throughout the Australian region as Hayman Reese^®-branded towing products and towing accessories, and ROLA^™-branded roof racks and roof rack accessories to the aftermarket and automotive OEM channels. In the fourth quarter 2004, in order to improve customer support and execution in the OE and aftermarket segments, Cequent Australia initiated a reorganization effort to consolidate three operating units into two separate customer focused business units: Cequent and TriMotive. Each unit has dedicated sales, engineering, manufacturing and logistic functions. Cequent’s aftermarket segment includes installers, distributors and retailers. The TriMotive automotive OE segment includes a wide array of global automotive customers, including Ford, Toyota and GM Holden. The creation of these two distinct business units better focuses resources to improve services and delivery to the customer and will enhance organizational flexibility to meet the dynamic, yet distinct, business requirements of the aftermarket and OE segments. This new organization also provides a platform for the pursuit of future business and additional economies of scale.

Cequent's raw material costs represent approximately 50% of its net sales. Steel is Cequent's single largest commodity and is used in the majority of its products and is delivered to Cequent's plants on a just-in-time basis from service centers. See ‘‘Materials and Supply Arrangements.’’

We believe that Cequent is one of the largest North American manufacturers and distributors of towing systems, trailer and electrical products. The competitive environment for towing and trailer products is highly fragmented and is characterized by numerous smaller suppliers, even the largest of which tends to focus in narrow product categories. For instance, we believe that, across the various

products that Cequent offers, only a few competitors maintain a significant or number-one market share in more than one specific product category. By comparison, Cequent competes on the basis of its broader range of products, the strength of its brands and distribution channels, as well as quality and price. Cequent's most significant competitors in towing products include Valley Automotive (AAS), Putnam Hitch Products and Curt Manufacturing. Cequent's trailer products competitors include Dutton-Lainson, Peterson, Atwood and Shelby, each of whom competes within one or at most a few categories of Cequent's broad trailer products portfolio. Cequent’s competitors for electrical products include Hopkins Manufacturing, Peterson Industries, Optronics, Grote and Hayes-Lemmerz, though each is positioned in a niche product line, as opposed to Cequent’s broad product array in the electrical product category. The retail channel presents a different set of competitors that are typically not seen in our installer and distributor channels, including Masterlock, Buyers, Allied, Keeper, Bell and Axius. As Cequent grows in the cargo management product category a different set of competitors exist. These competitors include Thule, Yakima and Sportrack.

Our companies in the Industrial Specialties segment design and manufacture a range of industrial products for use in diverse niche markets, including construction, commercial, energy, medical equipment and defense. Such products include precision tools, gaskets, cylinders, steel munitions casings, pressure sensitive tape and vapor barrier facings, and specialized engines. In general, these products are highly engineered, customer-specific items that are sold into niche markets with few competitors. These products are manufactured under several brand and trade names, including Compac^™, Lamons^® Gasket, Norris Cylinder, Arrow^® Engine, NI Industries, Keo^® Cutters, Richards Micro-Tool, Cutting Edge Technologies and Reska Spline Products. These names are maintained for the brand equity they carry in each of their respective end markets.

Compac. Compac manufactures flame-retardant facings and jacketings and insulation tapes used in conjunction with fiberglass insulation as vapor retarders. These products are principally used for commercial, residential and industrial construction applications, and are sold to major manufacturers of fiberglass insulation. Compac's product line also includes pressure-sensitive specialty tape products that are marketed to insulation manufacturers, as well as to numerous other customers. Pressure-sensitive products for the insulation industry are used for sealing pipe jacketing, ducts and fiberglass wrappings to increase the efficiency and cost effectiveness of heating and cooling installations. Combined with facing and jacketing products, pressure-sensitive specialty tapes enable us to offer customers a complete systems approach to insulation installation. Utilizing existing pressure-sensitive adhesive technologies, Compac continues to develop new product programs to expand its pressure-sensitive product positions into sub-segments of existing markets, including the electronics and transportation industries.

Lamons Gasket. Lamons manufactures and distributes metallic and nonmetallic industrial gaskets and complementary fasteners for refining, petrochemical and other industrial applications principally in the United States and Canada. In 2005, Lamons established manufacturing capability within Rieke's Hangzhou, China facility. Within six months, this facility reached expected productivity targets on their initial product line, and provides a low cost manufacturing alternative for specific product lines. The facility has been approved as a source for major Lamons customers and is expected to increase its share of production shipped to Asian and European users in the near term. Gaskets and complementary fasteners are supplied both for industrial original equipment manufacturers and maintenance repair operations. Gasket sales are made directly from the factory to major customers through eleven sales and service facilities in major regional markets, or through a large network of independent distributors. Lamons' overseas sales are either through Lamons' licensees or through its many distributors.

Norris Cylinder. Norris is one of the few manufacturers in North America that provides a complete line of large and intermediate size, high-pressure and low-pressure steel cylinders for the transportation, storage and dispensing of compressed gases. Norris' large high-pressure seamless compressed gas cylinders are used principally for shipping, storing and dispensing oxygen, nitrogen, argon, helium and other gases for industrial and health-care markets. In addition, Norris offers a

complete line of low-pressure steel cylinders used to contain and dispense acetylene gas for the welding and cutting industries. Other products Norris manufactures include seamless low-pressure chlorine cylinders and ASME-approved accumulator cylinders primarily used for storing breathing air and nitrogen. Norris markets cylinders primarily to major industrial gas producers and distributors, welding equipment distributors and buying groups as well as equipment manufacturers.

Precision Tool Company. Precision Tool Company produces a variety of specialty precision tools such as combined drills and countersinks, NC spotting drills, key seat cutters, end mills, reamers, master gears and gages. Markets served by these products include the automotive, industrial, aerospace and medical equipment industries. Precision Tool Company's Keo^® brand is the market share leader in the industrial combined drill and countersink niche. Richards Micro-Tool is a leading supplier of miniature end mills to the tool-making industry. Richards Micro-Tool has also been successful in providing the growing medical device market with bone drills and reamers. Sales to this specialized end market increased over 200% in 2005 as compared to 2004, and now exceed $1 million annually.

Arrow Engine. Arrow manufactures specialty engines, chemical pumps and engine replacement parts for the oil and natural gas extraction and other industrial engine markets. In an industry supported by elevated crude oil and natural gas prices, Arrow enjoyed better than 50% sales growth in 2005 as compared to 2004, driven by both strong engine and part sales. Arrow continues to focus on new product development in the industrial engine spare parts market, selective acquisitions, expanding market share in the United States and Canadian markets for oilfield pumping and gas compression engines and expanding its marketing and distribution capabilities to new geographic regions outside the United States and Canada.

NI Industries. NI Industries manufactures large diameter shell casings provided to the United States government and rocket launchers sold to foreign defense markets. We believe that NI Industries is a leading manufacturer in its product markets, due in part to its capabilities in the entire metal forming process from the acquisition of raw material to the design and fabrication of the final product. This gives NI Industries the flexibility and capacity to fully address the varied requirements of the munitions industry. The ability to form alloyed metals into the complex configurations needed to meet precise specifications in producing quality parts is a strength of this business. We believe that NI Industries is the only manufacturer in North America currently making deep drawn steel cartridge cases. NI Industries has the capability to manufacture mortar shells and projectiles as well as rocket and missile casings using both hot and cold forming methods. It also has a highly automated line capable of producing grenade bodies for the recently-improved design of munitions including the extended and guided multiple launch rocket systems. In the third quarter of 2005, the Riverbank, CA facility of NI was named on the final Base Realignment and Closure (BRAC) list. The Company is working with military and government personnel to provide continuing services at the ultimate location of the production lines currently managed by NI in Riverbank.

The businesses comprising the Industrial Specialties segment have opportunities to grow through the introduction of new products, entry into new markets, and the development of new customer opportunities, as well as through strategic acquisitions.

The customers of our Industrial Specialties segment operate primarily in the construction, commercial, defense, energy and medical device industries. Given the niche nature of many of our products, the Industrial Specialties segment relies upon a combination of direct sales forces and established networks of independent distributors with familiarity of the end users. In many of the markets this segment serves, its companies' brand names are virtually synonymous with product applications. The narrow end-user base of many of these products makes it possible for this segment to respond to customer-specific engineered applications and provide a high degree of customer service. Industrial Specialties' OEM and aftermarket customers include Airgas, Hanover, Universal Compression, BPAmoco, ExxonMobil, Owens Corning, Knauf, Medtronic, Dow, Certainteed, Praxair and Air Liquide.

Industrial Specialties employs various manufacturing processes including CNC machining and stamping, fluting, forging, coating, cold heading and forming, laminating and splitting, and deep-draw stamping that require high tonnage presses. Norris uses a hot billet pierce process to produce a seamless steel cylinder with integral bottom and sides for high-pressure applications in accordance with DOT 3AA and other international specifications. In addition, Norris provides service in massing operations of acetylene cylinders where we produce monolithic porous filler for use per DOT 8/TC 8WM or DOT 8AL/TC 8WAM specifications. Precision Tool Company manufactures millions of precision tools every year. The process includes CNC high-speed, high-precision grinding, turning and

milling. Lamons utilizes a complete assortment of world class gasket fabricating technologies including laser cutting for metal products and water jet cutting for certain non-metallic gaskets. In addition, Lamons has a full range of CNC machining capabilities to fabricate API ring joint gaskets and Kammpro gaskets to a maximum diameter of 70 inches. Lamons also owns and continues to develop proprietary equipment to manufacture spiral wound and heat exchanger gaskets.

This segment's primary competitors include Garlock (EnPro) and Flexitallic in gaskets; Texsteam, Williams Pumps and Continental Engine Line in engines; Harsco and Worthington in cylinders; 3M, MACtac, Venture and Scapa in pressure sensitive tapes; Johns Manville in asphalt coated paper; Lamtec in vapor retarders; Lavalin and Chamberlain in shell casings; and Niagara Moon Cutters, Whitney Tool and Magafor in precision tools. This segment's companies supply highly engineered, non-commodity, customer-specific products and most have large shares of small markets supplied by a limited number of competitors. In a significant number of areas, value-added design, finishing, warehousing, packaging, distribution and after-sales service have generated strong customer loyalty and supplement low-cost, know-how based manufacturing skills in each business' overall competitive advantage equation.

Fastening Systems manufactures a wide range of engineered fasteners utilized primarily by the aerospace and automotive industries. Monogram Aerospace Fasteners and Fittings Products, LLC comprise Fastening Systems.

In the fourth quarter 2005, we reached a decision to sell our industrial fasteners business, and this business is reported as discontinued operations and assets held for sale in this annual report included on Form 10-K.

In 2003, we acquired the automotive fasteners manufacturing business from Metaldyne, "Fittings." The Fittings acquisition augmented the manufacturing and commercial reach of the fastening systems segment by adding world-class manufacturing capabilities, engineering skills and additional product offerings through its Livonia, Michigan facility.

Monogram is a leading manufacturer of permanent blind bolt and temporary fasteners used in commercial and military aircraft construction and assembly. Monogram currently has 20 active patents worldwide. Monogram is a leader in the development of blind bolt fastener technology for the aerospace industry. Its Visu-Lok^®, Visu-Lok^®II and Radial-Lok^® blind bolts allow sections of aircraft to be joined together when access is limited to only one side of the airframe, providing certain cost efficiencies over conventional two piece fastening devices. Monogram's Composi-Lok^® and Composi-Lok^®II blind bolts are designed to solve unique fastening problems associated with the assembly of composite aircraft structures, and are therefore particularly well suited to take advantage of the increasing use of composite materials in aircraft construction.

Fittings manufactures tube nuts and fittings for its customers in the automotive industry at its Livonia, Michigan facility.

Both of the Fastening Systems businesses have significant opportunities to grow through new product introductions at Monogram and increased focus on supplying more value-added products through Fittings.

Monogram's aerospace fasteners and Fittings' automotive fasteners are sold through internal sales personnel and independent sales representatives. Although the overall market for fasteners and metallurgical services is highly competitive, these businesses provide products and services primarily for specialized markets, and compete principally as quality and service-oriented suppliers in their respective markets. Monogram's products are sold to manufacturers and distributors within the commercial and military aerospace industry, both domestic and foreign. Monogram works directly with aircraft manufacturers to develop and test new products and improve existing products. This close working relationship is a necessity given the critical safety nature and regulatory environment of its customers' products. Fittings sells its products to distributors and manufacturers in automotive markets.

Customers of the Fastening Systems segment include Airbus, Boeing, Stork-Fokker, Honeywell, ITT/Cooper, TI Automotive and Martin Rea.

Monogram manufactures and assembles highly-engineered specialty fasteners for the domestic and international aerospace industry in its Commerce, California facility. Fittings manufactures tube nuts and fittings for the automotive industry in its Livonia, Michigan facility.

This segment's primary competitors include H&L (Chicago Rivet) in tube nuts and fittings; and TAF (Textron) and Fairchild Fasteners (Alcoa) in aerospace fasteners. We believe that Monogram is a leader in the blind bolt market having in excess of 50% of the market in all blind fastener product categories in which they compete.

We are sensitive to price movements in our raw materials supply base. Our largest raw materials purchases are for steel, polyethylene and other resins and energy. Raw materials and other supplies used in our operations are normally available from a variety of competing suppliers.

TriMas and Metaldyne Corporation (‘‘Metaldyne’’), our former parent corporation, have agreed to cooperate in mutual sourcing agreements for certain natural gas energy requirements which should continue to provide benefits to both parties. Our electricity requirements are managed on a regional basis utilizing competition where deregulation is prevalent.

Steel is purchased primarily from steel mills and service centers with pricing contracts in the three to six month time frame. Changing global dynamics for steel production and supply will continue to present a challenge to our business. We have experienced significant increases in steel pricing during 2005, as well as disruptions in supply, although pricing increases and overall price levels abated somewhat in 2005. If steel pricing increases or issues with steel availability were to recur in future years we could be exposed to reduced operating profit margins depending on market conditions and customer price recovery. Polyethylene is generally a commodity resin with multiple suppliers capable of providing product. For most polyethylene purchases, we will negotiate the effective date of any upward pricing (usually 60 days). While both steel and polyethylene are readily available from a variety of competing suppliers, our business has experienced, and we believe will continue to experience, sharp increases in the costs of these raw materials.

As of December 31, 2005, we employed approximately 4,800 people, of which approximately 18% were unionized and approximately 20% were located outside the United States. We currently have union contracts covering 13 facilities worldwide, 9 of which are in the United States. Three of the nine contracts in the United States are scheduled to expire in 2006 but have not yet been renewed. Employee relations have generally been satisfactory. We cannot predict the impact of any further unionization of our workplace.

Sales of towing and trailer products within Cequent are generally stronger in the second and third quarters, as trailer OEMs, distributors and retailers acquire product for the spring selling season. No other operating segment experiences significant seasonal fluctuation in its business. We do not consider sales order backlog to be a material factor in our business.

Our operations are subject to federal, state, local and foreign laws and regulations pertaining to pollution and protection of the environment, health and safety, governing among other things, emissions to air, discharge to waters and the generation, handling, storage, treatment and disposal of waste and other materials, and remediation of contaminated sites. We have been named as a potentially responsible party under CERCLA, the federal Superfund law, or similar state laws at several sites requiring cleanup. These laws generally impose liability for costs to investigate and remediate contamination without regard to fault and under certain circumstances liability may be joint and several resulting in one responsible party being held responsible for the entire obligation. Liability may also include damages to natural resources. We have entered into consent decrees relating to two sites in California along with the many other co-defendants in these matters. We have incurred substantial expenses for these sites over a number of years, a portion of which has been covered by insurance. See Item 3, ‘‘Legal Proceedings’’ below. In addition to the foregoing, our businesses have incurred and likely will continue to incur expenses to investigate and clean up existing and former company-owned or leased property, including those properties made the subject of sale-leaseback transactions for which we have provided environmental indemnities to the lessors.

We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safety laws and regulations, many of which provide for substantial fines and criminal sanctions for violations. Based on information presently known to us and accrued environmental reserves, we do not expect environmental costs or contingencies to have a material adverse effect on us. The operation of manufacturing plants entails risks in these areas, however, and we may incur material costs or liabilities in the future that could adversely affect us. Potentially material expenditures could be required in the future. For example, we may be required to comply with evolving environmental and health and safety laws, regulations or requirements that may be adopted or imposed in the future or to address newly discovered information or conditions that require a response.

Our identified intangible assets, consisting of customer relationships, trademarks and trade names and technology, are valued at approximately $255.2 million at December 31, 2005, net of accumulated amortization. We utilized an independent valuation firm to assist us in valuing our intangible assets in connection with the acquisition of such intangible assets. The valuation of each of the identified intangibles was performed using broadly accepted valuation methodologies and techniques.

Customer Relationships — We have developed and maintained stable, long-term buying relationships with customer groups for specific branded products and/or niche market product offerings within each of our operating group segments. Useful lives of customer relationship intangibles range from six to forty years and have been estimated using historic customer retention

and turnover data. Other factors contributing to estimated useful lives include the diverse nature of niche markets and products of which we have significant share, how customers in these markets make purchases and these customers' position in the supply chain.

Trademarks and Trade Names — Each of our operating groups designs and manufactures products for niche markets under various trade names and trademarks including Draw-Tite^®, Reese^®, Hidden Hitch^®, Bulldog^®, Tekonsha^®, Highland The Pro's Brand^®, Fulton^®, Wesbar^®, LEP^™, Visu-Lok^®, ViseGrip^® and FlexSpout^®, among others. Our trademark/trade name intangibles are well-established and considered long-lived assets that require maintenance through advertising and promotion expenditures. Because it is our practice and intent to maintain and to continue to support, develop and market these trademarks/trade names for the foreseeable future, we consider our rights in these trademarks/trade names to have an indefinite life, except as otherwise dictated by applicable law.

Technology — We hold a number of United States and foreign patents, patent applications, and unpatented or proprietary product and process oriented technologies, particularly within Rieke Packaging Systems, Fastening Systems and Cequent Transportation Accessories. We have, and will continue to dedicate, technical resources toward the further development of our products and processes in order to maintain our competitive position in the transportation, industrial and commercial markets that we serve. Estimated useful lives for our technology intangibles range from one to thirty years and are determined in part by any legal, regulatory or contractual provisions that limit useful life. For example, patent rights have a maximum limit of twenty years in the United States. Other factors considered include the expected use of the technology by the operating groups, the expected useful life of the product and/or product programs to which the technology relates, and the rate of technology adoption by the industry.

Quarterly, or as conditions may warrant, we assess whether the value of our identified intangibles has been impaired. Factors considered in performing this assessment include current operating results, business prospects, customer retention, market trends, potential product obsolescence, competitor activities and other economic factors. We continue to invest in maintaining customer relationships, trademarks and trade names, and the design, development and testing of proprietary technologies that we believe will set our products apart from those of our competitors.

Approximately 17.2% of our net sales for the fiscal year ended December 31, 2005 were derived from sales by our subsidiaries located outside of the United States, and we may significantly expand our international operations through acquisitions. In addition, approximately 21.3% of our operating net assets as of December 31, 2005 were located outside of the United States. We operate manufacturing facilities in Australia, Canada, China, the United Kingdom (U.K.), Italy, Germany and Mexico. Within Australia, we operate three facilities that manufacture and distribute hitches, towing accessories, roof rack systems and other accessories for the caravan market, with approximately 280 employees. Our Canadian operations, with approximately 240 employees, include the production and distribution of towing products through Cequent, distribution of closures and dispensing products through Rieke's U.S. operations, and the manufacturing and distribution of gaskets produced in one gasket facility within the Industrial Specialties segment. Rieke’s China operations produce consumer dispensing products and also manufactures spiral-wound gaskets for Lamons Gasket customers in one facility with approximately 250 employees. Within the United Kingdom, Rieke Packaging Systems Ltd. has approximately 60 employees. Englass produces specialty sprayers, pumps and related products in one facility in the U.K. TOV, a manufacturer of specialty steel industrial container closures, operates in one location in Italy with approximately 100 employees. In Germany, Stolz has one facility that manufactures a wide variety of closures for industrial packaging markets with approximately 60 employees. In Juarez, Mexico, we manufacture Cequent's electrical products and accessories, as well as metal fabrication, with approximately 260 employees. Additionally, Rieke's Mexico City operations produce plastic drum closures and dispensing products in one factory, with approximately 110 employees. For information pertaining to the net sales and operating net assets attributed to our international operations, refer to Note 19, ‘‘Segment Information,’’ to the audited financial statements for the years ended December 31, 2005, 2004 and 2003 included in this report.

Sales outside of the United States, particularly sales to emerging markets, are subject to various risks that are not present in sales within U.S. markets, including governmental embargoes or foreign trade restrictions such as antidumping duties, changes in U.S. and foreign governmental regulations, tariffs and other trade barriers, the potential for nationalization of enterprises, foreign exchange risk and other political, economic and social instability. In addition, there are tax inefficiencies in repatriating portions of our cash flow from non-U.S. subsidiaries.

You should carefully consider each of the risks described below, together with information included elsewhere in this Annual Report on Form 10-K and other documents we file with the SEC. The risks and uncertainties described below are those that we have identified as material, but are not the only risks and uncertainties facing us. Our business is also subject to general risks and uncertainties that affect other companies, such as overall U.S. and non-U.S. economic and industry conditions, including global economic events, geopolitical events, changes in laws or accounting rules, fluctuations in interest rates and currency exchange rates, terrorism, other international conflicts, natural disasters or other disruptions of unexpected economic/business conditions. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial may also impact our business operations, financial results and liquidity.

We incurred net losses of $45.9 million, $2.2 million and $30.9 million for the years ended December 31, 2005, 2004 and 2003, respectively. These losses principally resulted from the high interest expense associated with our highly leveraged capital structure. Non-cash expenses such as depreciation and amortization of intangible assets and asset impairments also contributed to our net losses. Net losses may continue in the future.

Our businesses depend upon general economic conditions and we serve some customers in highly cyclical industries; as such we are subject to the loss of sales and margin due to an economic downturn or recession.

Our financial performance depends, in large part, on conditions in the markets that we serve in both the U.S. and global economies. Some of the industries that we serve are highly cyclical, such as the automotive, construction, industrial equipment, energy, aerospace and electrical equipment industries. We may experience a reduction in sales and margins as a result of a downturn in economic conditions. Lower demand may also negatively affect our capacity utilization, which may further reduce our operating margins.

Many of the markets we serve are highly competitive, which could limit the volume of products that we sell and reduce our operating margins.

Many of our products are sold in competitive markets. We believe that the principal points of competition in our markets are product quality, price, design and engineering capabilities, product development, conformity to customer specifications, reliability and timeliness of delivery, customer service and effectiveness of distribution. Maintaining and improving our competitive position will require continued investment by us in manufacturing, engineering, quality standards, marketing, customer service and support of our distribution networks. We may have insufficient resources in the future to continue to make such investments and, even if we make such investments, we may not be able to maintain or improve our competitive position. As is the case with any U.S. manufacturer, we also face the risk of lower cost foreign manufacturers located in China and elsewhere in Southeast Asia competing in the markets for our products and we may be driven as a consequence of this competition to increase our investment overseas. Competitive pressure may limit the volume of products that we sell and reduce our operating margins.

Increases in our raw material or energy costs or the loss of critical suppliers could adversely affect our profitability and other financial results.

We are sensitive to price movements in our raw materials supply base. Our largest material purchases are for steel, polyethylene and other resins and energy. When we experience cost increases

for raw materials, energy and other commodities, it may be difficult for us to completely offset the impact with price increases on a timely basis due to outstanding commitments to our customers, competitive considerations and our customers^' resistance to accepting such price increases. A failure by our suppliers to continue to supply us with certain raw materials or component parts on commercially reasonable terms, or at all, would have a material adverse effect on us. To the extent there are energy supply disruptions or material fluctuations in energy costs, our margins could be materially adversely impacted.

Historically, we have grown primarily through acquisitions. If we are unable to identify attractive acquisition candidates, successfully integrate acquired operations or realize the intended benefits of our acquisitions, we may be adversely affected.

One of our principal growth strategies is to pursue strategic acquisition opportunities. A substantial portion of our historical growth has derived from acquisitions. Since our separation from Metaldyne in June 2002, we have completed seven acquisitions. Each of these acquisitions required integration expense and actions that negatively impacted our results of operations and that could not have been fully anticipated beforehand. In addition, attractive acquisition candidates may not be identified and acquired in the future, financing for acquisitions may be unavailable on satisfactory terms and we may be unable to accomplish our strategic objectives in effecting a particular acquisition. We may encounter various risks in acquiring other companies, including the possible inability to integrate an acquired business into our operations, diversion of management^'s attention and unanticipated problems or liabilities, some or all of which could materially and adversely affect our business strategy and financial condition and results of operations.

We may be unable to successfully implement our growth strategies. Our ability to realize our growth opportunities, apart from acquisitions and related cost savings, may be limited.

We have identified many growth opportunities, involving new product development, cross-selling, product bundling, cost reduction measures and similar organic growth opportunities. However, our businesses operate in relatively stable industries and it may be difficult to successfully pursue these strategies and realize material benefits therefrom. Even if we are successful, other risks attendant to our businesses and the economy generally may substantially or entirely eliminate the benefits. While we have been successful with some of these strategies in the past, our growth has principally come through acquisitions.

Our products are typically highly engineered or customer-driven and we are subject to risks associated with changing technology and manufacturing techniques which could place us at a competitive disadvantage.

We believe that our customers rigorously evaluate their suppliers on the basis of product quality, price competitiveness, technical expertise and development capability, new product innovation, reliability and timeliness of delivery, product design capability, manufacturing expertise, operational flexibility, customer service and overall management. Our success depends on our ability to continue to meet our customers' changing specifications with respect to these criteria. We anticipate that we must remain committed to product research and development, advanced manufacturing techniques and service to remain competitive. We may be unable to address technological advances, implement new and more cost-effective manufacturing techniques, or introduce new or improved products, whether in existing or new markets, so as to remain competitive within our businesses or to grow our businesses as desired. Furthermore, we may be unable to adequately protect our own technological developments to produce a sustainable competitive advantage.

While we believe that our patents, trademarks and other intellectual property have significant value, it is uncertain that this intellectual property or any intellectual property acquired or developed by us in the future, will provide a meaningful competitive advantage. Our patents or pending applications may be challenged, invalidated or circumvented by competitors or rights granted

thereunder may not provide meaningful proprietary protection. Moreover, competitors may infringe on our patents or successfully avoid them through design innovation. Policing unauthorized use of our intellectual property is difficult and expensive, and we may not be able to, or have the resources to, prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States. An adverse outcome in any intellectual property litigation could subject us to significant liabilities to third parties, require us to license technology or other intellectual property rights from others, require us to comply with injunctions to cease marketing or using certain products or brands, or require us to redesign, reengineer, or re-brand certain products or packaging. Further, we may incur costs in terms of legal fees and expenses, whether or not the claim is valid, to respond to intellectual property infringement claims. These or other liabilities or claims may increase or otherwise have a material adverse effect on our financial condition and future results of operations.

We may incur material losses and costs as a result of product liability, recall and warranty claims that may be brought against us.

We are subject to a variety of litigation incidental to our businesses, including claims for damages arising out of use of our products, claims relating to intellectual property matters and claims involving employment matters and commercial disputes. In addition, one of our Industrial Specialties segment subsidiaries is a party to lawsuits related to asbestos contained in gaskets formerly manufactured by it or its predecessors. Some of this litigation includes claims for punitive and consequential as well as compensatory damages. Resolution of these litigation matters may divert our management's attention and we may incur significant litigation costs in defending these matters and we may be required to pay damage awards or settlements or become subject to equitable remedies that could adversely affect our businesses.

Our business may be materially and adversely affected by compliance obligations and liabilities under environmental laws and regulations.

We are subject to federal, state, local and foreign environmental laws and regulations which impose limitations on the discharge of pollutants into the ground, air and water and establish standards for the generation, treatment, use, storage and disposal of solid and hazardous wastes. We may be legally or contractually responsible or alleged to be responsible for the investigation and remediation of contamination at various sites, and for personal injury or property damages, if any, associated with such contamination. We have been named as potentially responsible parties under the federal Superfund law or similar state laws in several sites requiring cleanup related to disposal of wastes we generated. We have entered into consent decrees relating to two sites in California along with the many other co-defendants in these matters. We have incurred substantial expenses for all these sites over a number of years, a portion of which has been covered by insurance. See "Business—Legal Proceedings" for a discussion of these matters. In addition to the foregoing, our businesses have incurred and likely will continue to incur expenses to investigate and clean up existing and former company-owned or leased property. Additional sites may be identified at which we are a potentially responsible party under the federal Superfund law or similar state laws. We must also comply with various health and safety regulations in the U.S. and abroad in connection with our operations. There can be no assurance that we have been or will be at all times in substantial compliance with environmental health and safety laws. Failure to comply with any of these laws could result in civil, criminal, monetary and non-monetary penalties and damage to our reputation.

We have substantial debt and interest payment requirements that may restrict our future operations and impair our ability to meet our obligations.

We continue to have indebtedness that is substantial in relation to our shareholders' equity. As of December 31, 2005, we have approximately $727.7 million of outstanding debt and approximately $349.3 million of shareholders' equity. Approximately 40% of our debt bears interest at variable rates and we may experience material increases in our interest expense as a result of increases in interest rate levels generally. Our debt service payment obligations in 2005 were approximately $73.4 million

and based on amounts outstanding as of December 31, 2005 a 1% increase in the per annum interest rate for our variable rate debt would increase our interest expense by approximately $2.9 million annually. Our degree of leverage and level of interest expense may have important consequences, including:

Our ability to service our debt and other obligations will depend on our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, many of which are beyond our control. Our business may not generate sufficient cash flow, and future financings may not be available to provide sufficient net proceeds, to meet these obligations or to successfully execute our business strategies. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

Restrictions in our debt instruments and accounts receivable facility limit our ability to take certain actions and breaches thereof could impair our liquidity.

Our credit facility and the indenture governlng our senior subordinated notes contain covenants that restrict our ability to:

Our credit facility also requires us to comply with financial covenants relating to, among other things, interest coverage and leverage. Our accounts receivable facility contains covenants similar to those in our credit facility and includes additional requirements regarding our receivables. We may not be able to satisfy these covenants in the future or be able to pursue our strategies within the constraints of these covenants. Substantially all of our assets and the assets of our domestic subsidiaries (other than our special purpose receivables subsidiary) are pledged as collateral pursuant to the terms of our credit facility. A breach of a covenant contained in our debt instruments could result in an event of default under one or more of our debt instruments, our accounts receivable facility and our lease financing arrangements. Such breaches would permit the lenders under our credit facility to declare all amounts borrowed thereunder to be due and payable, and the commitments of such lenders to make further extensions of credit could be terminated. In addition, such breach may cause a termination of our accounts receivable facility. Each of these circumstances could materially and adversely impair our liquidity.

We have significant operating lease obligations and our failure to meet those obligations could adversely affect our financial condition.

We lease many of our manufacturing facilities and certain capital equipment. Our annualized rental expense under these operating leases approximates $17.2 million. A failure to pay our rental obligations would constitute a default allowing the applicable landlord to pursue any remedy available to it under applicable law, which would include taking possession of our property and, in the case of real property, evicting us. These leases are categorized as operating leases and are not considered indebtedness for purposes of our debt instruments.

We have significant goodwill and intangible assets, and future impairment of our goodwill and intangible assets could have a material negative impact on our financial results.

At December 31, 2005 our goodwill and intangible assets were approximately $900.0 million, and represented approximately 63.0% of our total assets. Our net loss of $45.9 million for the year ended December 31, 2005 included a charge of $41.6 million, net of income tax benefit of $28.7 million, for impairment of property and equipment and intangible assets related to our industrial fasteners business which is held for sale and is reported as discontinued operations. Because of the significance of our goodwill and intangible assets, any future impairment of these assets could have a material adverse effect on our financial results.

We may be subject to further unionization and work stoppages at our facilities or our customers may be subjected to work stoppages, which could seriously impact the profitability of our business.

As of December 31, 2005, approximately 18% of our work force was unionized under several different unions and bargaining agreements. If our unionized workers or those of our customers or suppliers were to engage in a strike, work stoppage or other slowdown in the future, we could experience a significant disruption of our operations. In addition, if a greater percentage of our work force becomes unionized, our labor costs and risks associated with strikes, work stoppages or other slowdowns may increase. Many of our direct or indirect customers have unionized work forces. Strikes, work stoppages or slowdowns experienced by these customers or their suppliers could result in slowdowns or closures of assembly plants where our products are included. In addition, organizations responsible for shipping our customers' products may be impacted by occasional strikes or other activity. Any interruption in the delivery of our customers' products could reduce demand for our products and could have a material adverse effect on us.

Our healthcare costs for active employees and future retirees may exceed our projections and may negatively affect our financial results.

We maintain a range of healthcare benefits for our active employees and a limited number of retired employees pursuant to labor contracts and otherwise. Healthcare benefits for active employees and certain retirees are provided through comprehensive hospital, surgical and major medical benefit provisions or through health maintenance organizations, all of which are subject to various cost-sharing features. Some of these benefits are provided for in fixed amounts negotiated in labor contracts with the respective unions. If our costs under our benefit programs for active employees and retirees exceed our projections, our business and financial results could be materially adversely affected. Additionally, foreign competitors and many domestic competitors provide fewer benefits to their employees and retirees, and this difference in cost could adversely impact our competitive position.

A growing portion of our sales may be derived from international sources, which exposes us to certain risks which may adversely affect our financial results and impact our ability to service debt.

Approximately 17.2% of our net sales for the fiscal year ended December 31, 2005 were derived from sales by our subsidiaries located outside of the United States. We may significantly expand our international operations through internal growth and acquisitions. Sales outside of the United States,

particularly sales to emerging markets, and foreign manufacturing are subject to various other risks which are not present within U.S. markets, including governmental embargoes or foreign trade restrictions such as antidumping duties, changes in U.S. and foreign governmental regulations, tariffs and other trade barriers, the potential for nationalization of enterprises, foreign exchange risk and other political, economic and social instability. In addition, there are tax inefficiencies in repatriating cash flow from non-U.S. subsidiaries that could affect our financial results and reduce our ability to service debt.

Our principal manufacturing facilities range in size from approximately 10,000 square feet to approximately 380,000 square feet. Except as set forth in the table below, all of our manufacturing facilities are owned. The leases for our manufacturing facilities have initial terms that expire from 2006 through 2024 and are all renewable, at our option, for various terms, provided that we are not in default under the lease agreements. Substantially all of our owned U.S. real properties are subject to liens under our amended and restated credit facility. Our executive offices are located in Bloomfield Hills, Michigan under a lease assumed by us from Heartland Industrial Partners (‘‘Heartland’’) and subsequently amended in March 2004 extending the term to January 2010. See Item 13, ‘‘Certain Relationships and Related Party Transactions.’’ Our buildings, machinery and equipment have been generally well maintained, are in good operating condition and are adequate for current production requirements. We may enter into leases for equipment in lieu of making capital expenditures to acquire such equipment or to reduce debt.

The following list sets forth the location of our principal owned and leased manufacturing and other facilities and identifies the principal operating segment utilizing such facilities. Multiple references to the same location denote separate facilities or multiple activities in that location.

Rieke Packaging
Systems

Cequent Transportation
Accessories

Industrial
Specialties

Fastening
Systems

United States:
Indiana:
    Auburn
    Hamilton⁽¹⁾

International:
Germany:
    Neunkirchen
Italy:
    Valmadrera
Mexico:
    Mexico City
United Kingdom:
    Leicester
China:
    Hangzhou⁽¹⁾

United States:
Indiana:
    Albion⁽³⁾
    Goshen⁽¹⁾
    South Bend⁽¹⁾
Michigan:
    Tekonsha⁽¹⁾
    Plymouth⁽¹⁾
Pennsylvania:
    Sheffield⁽³⁾
Wisconsin:
    Mosinee⁽¹⁾
    Schofield
Ohio:
    Solon⁽¹⁾

International:
Australia:
    Dandenmong, Victoria
    Regents Park,
        New South Wales⁽¹⁾
Wakerley,
    Queensland⁽¹⁾
Canada:
    Huntsville, Ontario
    Oakville, Ontario
Mexico:
    Juarez⁽¹⁾
    Reynosa

United States:
California:
    Riverbank⁽²⁾
    Vernon
Massachusetts:
    Plymouth⁽¹⁾
Michigan:
    Warren⁽¹⁾
New Jersey:
    Edison⁽¹⁾
    Hackettstown⁽¹⁾
Oklahoma:
    Tulsa
Texas:
    Houston⁽¹⁾
    Longview


International:
Canada:
    Sarnia, Ontario⁽¹⁾
China:
    Hangzhou⁽¹⁾

United States:
California:
    Commerce⁽¹⁾
Illinois:
     Wood Dale⁽¹⁾⁽⁴⁾
Indiana:
    Frankfort⁽¹⁾⁽⁴⁾
Michigan:
     Livonia⁽¹⁾
Ohio:
    Lakewood⁽⁴⁾

During 2002, we have entered into sale-leaseback transactions with respect to nine real properties in the United States and Canada. During 2004, one sale-leaseback transaction was terminated. In general, pursuant to the terms of each sale-leaseback transaction, we transferred title of the real property to a purchaser and, in turn, entered into separate leases with the purchaser having a 20-year basic lease term plus two separate ten-year renewal options. The renewal option must be exercised with respect to all, and not less than all, of the property locations.

During 2003, the Company has entered into additional sale-leaseback transactions with respect to three real properties in the United States. The term of these leases is 15 years, with the right to extend. Rental payments are due monthly. All of the foregoing leases are accounted for as operating leases.

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 us, 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 us, 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. We estimate that our share of the clean-up costs will not exceed $500,000, for which we have 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. While, based upon our present knowledge and subject to future legal and factual developments, we do not believe that this matter will have a material adverse effect on our financial position, results of operations or cash flow, future legal and factual developments may result in materially adverse expenditures.

As of February 28, 2006, we were a party to approximately 1,609 pending cases involving an aggregate of approximately 19,952 claimants alleging personal injury from exposure to asbestos containing materials formerly used in gaskets (both encapsulated and otherwise) manufactured or distributed by certain of our subsidiaries for use primarily in the petrochemical refining and exploration industries. In addition, we acquired various companies to distribute our products that had distributed gaskets of other manufacturers prior to acquisition. We believe that many of our pending cases relate to locations at which none of our gaskets were distributed or used. Total settlement costs (exclusive of defense costs) for all such cases, some of which were filed over 13 years ago, have been approximately $3.4 million. All relief sought in the asbestos cases is monetary in nature. To date, approximately 50% of our costs related to settlement and defense of asbestos related litigation have been covered by our primary insurance. Effective February 14, 2006, we entered into a coverage in place agreement with our first level excess carriers regarding the coverage to be provided to us for asbestos related claims when the primary insurance is exhausted. The coverage in place agreement makes coverage available to us that might otherwise be disputed by the carriers and provides a methodology for the administration of asbestos-related defense and indemnity payments. The coverage in place agreement allocates payment responsibility among the primary carrier, excess carriers and the Company's subsidiary.

We 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 we may be subjected to further claims in respect of the former activities of our acquired gasket distributors. We note that we are 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. In addition, relatively few of the claims have reached the discovery stage and even fewer claims have gone past the discovery stage. Based on the settlements made to date and the number of claims dismissed or withdrawn for lack of product identification, we believe that the relief sought (when specified) does not bear a reasonable relationship to our potential liability. Based upon our experience to date and other available information (including the availability of excess insurance), we do not believe that these cases will have a material adverse effect on our financial condition or future results of operations.

We are subject to other claims and litigation in the ordinary course of our business, but do not believe that any such claim or litigation will have a material adverse effect on our financial position or future results of operations.

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

No trading market for the Company's common stock exists. We did not pay dividends in 2004 or 2005. Our current policy is to retain earnings to repay debt and finance our operations and acquisition strategies. In addition, our credit facility restricts the payment of dividends on common stock. See the discussion under Item 7, ‘‘Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources’’ and Note 13 to the Company's financial statements captioned ‘‘Long-term Debt,’’ included in Item 8 of this report.

Please see Item 12, ‘‘Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters’’ for securities authorized for issuance under equity compensation plans.

The following table sets forth our selected historical financial data for the five years ended December 31, 2005. In reviewing the following information, it should be noted that on June 6, 2002, Metaldyne issued approximately 66% of our then fully diluted common equity to an investor group led by Heartland. We did not establish a new basis of accounting as a result of this common equity issuance due to the continuing contractual control by Heartland. Our combined financial information for the periods prior to June 6, 2002 includes allocations and estimates of direct and indirect Metaldyne corporate administrative costs attributed to us, which are deemed by management to be reasonable but are not necessarily reflective of the costs which we thereafter incurred or may incur on an ongoing basis. Prior to June 6, 2002, we were wholly-owned by Metaldyne.

In 2003, we acquired three significant businesses: (1) HammerBlow Acquisition Corp. on January 30, 2003, (2) Highland Group Corporation on February 21, 2003 and (3) an automotive manufacturing business from Metaldyne, which we refer to as the Fittings acquisition, on May 9, 2003. The historical financial information for 2003 includes the results of the HammerBlow and Highland businesses subsequent to the date of their acquisition. The Fittings acquisition was accounted for as a reorganization of entities under common control because of Heartland’s interests in Metaldyne and us. As a result, historical periods have been revised to include the effects of the Fittings acquisition as if Fittings had been owned by us for all periods presented. The following data should be read in conjunction with Item 7. ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and our audited financial statements included elsewhere in this report.


	For the Year Ended December 31,
(in thousands except per share data)	2005			2004			2003			2002			2001

Statement of Operations Data:
Net sales	$	1,010,120		$	939,680		$	812,430		$	650,240		$	641,700
Gross profit		247,410			257,310			227,820			188,800			182,890
Operating profit	$	84,100		$	88,690		$	49,570		$	73,010		$	68,550
Income (loss) from continuing operations	$	880		$	14,010		$	(18,080	)	$	4,950		$	(10,090	)
Loss from discontinued operations, net of income tax benefit	$	(46,340	)	$	(16,200	)	$	(12,850	)	$	(39,710	)	$	(1,080	)
Net loss⁽¹⁾	$	(45,880	)	$	(2,190	)	$	(30,930	)	$	(34,760	)	$	(11,170	)
Earnings (loss) Per Share Data – Basic and Diluted:
Continuing operations	$	0.04		$	0.70		$	(0.90	)
Discontinued operations, net of income tax benefit		(2.31	)		(0.81	)		(0.64	)
Cumulative effect of change in accounting principle, net of income tax benefit		(0.02	)		—			—
Net loss per share	$	(2.29	)	$	(0.11	)	$	(1.54	)
Weighted average shares		20,010,000			20,010,000			20,047,090
Other Financial Data from Continuing Operations:
Depreciation and amortization	$	37,120		$	36,200		$	43,530		$	33,150		$	50,190
Capital expenditures		20,340			36,330			25,400			31,180			14,510
Statement of Cash Flows Data from continuing and discontinued operations:
Cash flow provided by (used for):
Operating activities	$	29,890		$	42,620		$	41,360		$	(22,000	)	$	78,710
Investing activities		(16,640	)		(46,840	)		(161,280	)		(39,090	)		(13,020	)
Financing activities		(12,610	)		530			26,260			157,750			(68,970	)
Selected Balance Sheet Data:
Total assets	$	1,428,510		$	1,522,200		$	1,500,030		$	1,426,060		$	1,281,600
Total debt		727,680			738,020			735,980			696,180			440,760
Goodwill and other intangibles		900,000			925,280			938,550			751,800			806,870

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations covers periods subsequent to our separation from Metaldyne and the HammerBlow, Highland and Fittings acquisitions. In addition, the statements in the discussion and analysis regarding industry outlook, our expectations regarding the performance of our business and the other non-historical statements in the discussion and analysis are forward-looking statements. 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 Item 8. "Financial Statements and Supplementary Data."

We are an industrial manufacturer of highly engineered products serving niche markets in a diverse range of commercial, industrial and consumer applications. We have four operating segments: Rieke Packaging Systems, Cequent Transportation Accessories, Industrial Specialties and Fastening Systems. In reviewing our financial results for the past three years, consideration should be given to certain critical events, particularly our separation from Metaldyne in June 2002, and subsequent acquisitions and recent consolidation, integration and restructuring efforts.

Key Factors and Risks Affecting our Reported Results. Critical factors affecting our ability to succeed include: our ability to successfully pursue organic growth through new product development, cross-selling and product bundling 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 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 out-sourcing 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.

Our results of operations depend upon general economic conditions and we serve some customers in highly cyclical industries that are highly competitive and themselves adversely impacted by unfavorable economic conditions. There is some seasonality in our Cequent segment business as well. Sales of towing and trailer products within Cequent are generally stronger in the second and third quarters, as trailer OEMs, distributors and retailers acquire product for the spring/summer selling season. No other operating segment experiences significant seasonal fluctuation in its business. We do not consider backlog orders 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.

Historically, we have not experienced significant fluctuations in raw materials costs which materially impacted our profitability. However, we are sensitive to price movements in our raw materials supply base. Our largest raw materials purchases are for steel, polyethylene and other resins. We have experienced increasing costs of steel and resin and have worked with our suppliers to manage cost pressures and disruptions in supply. We also initiated pricing programs to pass increased steel and resin costs to customers, although we experienced a delay in our ability to implement price increases and recover fully such increased costs. Although steel price increases and disruptions in supply have abated in 2005, we will continue to take actions as necessary to manage risks associated with increasing steel costs. However, we may experience recurring steel price increases or disruptions in supply in the future and we may not be able to pass along such higher costs to our customers in the form of price increases. Such increased costs may adversely impact our earnings. 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.

Our June 2002 Recapitalization and Separation from Metaldyne. On June 6, 2002, we undertook a recapitalization that resulted in our separation from Metaldyne. Heartland and other investors

invested approximately $265.0 million in us and acquired approximately 66% of our fully diluted common stock. Metaldyne retained or received approximately 34% of our fully diluted common stock. As part of this recapitalization: (1) we entered into a credit facility that then consisted of a $150.0 million revolving credit facility and a $260.0 million term loan facility; (2) we entered into a $125.0 million receivables securitization facility, and; (3) we issued approximately $352.8 million in aggregate principal amount of 9 7/8% senior subordinated notes due 2012. We used the proceeds from these financings to pay a cash dividend to Metaldyne that had been declared immediately prior to the recapitalization and to repay our obligations in respect of Metaldyne financing arrangements. In total, we declared and paid a cash dividend to Metaldyne equal to $840.0 million, less the aggregate amount of such debt repayment and receivables repurchase.

Refer to Note 13, ‘‘Long-term Debt,’’ in the notes to financial statements for information on our current credit facility terms, and Item 13, ‘‘Certain Relationships and Related Transactions’’ for additional information concerning the June 2002 transactions.

Our Recent Acquisitions. Since our separation from Metaldyne in June 2002, we have completed seven acquisitions. The most significant of these were the HammerBlow, Highland and Fittings acquisitions. We also completed four smaller acquisitions: Haun Engine in August 2002, Cutting Edge Technologies in January 2003, Chem-Chrome in October 2003, and Bargman in January 2004.

On January 30, 2003, within our Cequent Transportation Accessories segment, we acquired all of the capital stock of HammerBlow Acquisition Corp., a manufacturer and distributor of towing, trailer and other vehicle accessories throughout North America, for a purchase price of approximately $145.2 million. Of this amount, $7.2 million of the purchase price was deferred and paid in January 2004.

On February 21, 2003, within our Cequent Transportation Accessories segment, we acquired all of the capital stock of Highland Group Corporation, a manufacturer of cargo management and vehicle protection products, for a purchase price of approximately $73.5 million.

On May 9, 2003, within our Fastening Systems segment, we acquired an automotive fasteners manufacturing business from Metaldyne, a related party, for approximately $22.7 million on a debt-free basis (the ‘‘Fittings Acquisition’’). In connection with the Fittings Acquisition, we agreed to sublease Metaldyne’s Livonia, Michigan facility, at which the acquired business was and is located. Because we and Metaldyne are under the common control of Heartland, this transaction was accounted for as a reorganization of entities under common control and, accordingly, we did not establish a new basis of accounting in the assets or liabilities of the Fittings business. Our reported results for prior periods have been revised to include the financial results of the Fittings business, including the allocation of certain charges to the Fittings business. Examples of such allocations include amounts charged or allocated by Metaldyne for corporate-level services and interest expense attributable to Fittings. See Item 13. ‘‘Certain Relationships and Related Transactions.’’

Recent and Anticipated Consolidation, Integration and Restructuring Activities. We have undertaken significant consolidation, integration and other cost savings programs to enhance our efficiency and achieve cost reduction opportunities arising from our acquisitions. These programs were essentially completed as of December 31, 2004. In addition to these major projects, there are also a series of other smaller initiatives to eliminate duplicative and excess manufacturing and distribution facilities, sales forces, and back office and other support functions, some of which were extended in 2005 in order to continue to optimize our cost structure in response to competitor actions and market conditions. The aggregate costs of these actions for 2005, 2004 and 2003 were approximately $2.6 million, $8.0 million and $9.5 million, respectively. We believe all of these costs were warranted by the anticipated future benefits of these actions. In 2004, we completed the establishment of our stand-alone corporate office. With the expiration on December 31, 2003 of the shared services agreement between Metaldyne and us, we now handle internally the legal, tax, benefit administration and environmental, health and safety services formerly provided by Metaldyne. We have hired an internal audit director, a tax director, a director of environmental, health and safety and established a stand-alone human resources compensation and benefits function.

The key elements and status of our consolidation, integration and other cost-savings programs are summarized below:

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 interest, taxes, depreciation, amortization, non-cash asset and goodwill impairment charges and write-offs, non-cash losses on sale-leaseback of property and equipment and legacy restricted stock award expense. 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 our consolidation, restructuring and integration efforts are expected to

continue and will be driven in part by our acquisition activity, our management eliminates these costs to evaluate underlying business performance. Caution must be exercised in eliminating 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 Adjusted EBITDA is the best indicator (together with a careful review of the aforementioned items) of 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 and SFAS No. 142 (affecting 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, to incent and compensate our management personnel, 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:

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 business. 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 Adjusted EBITDA to net loss and cash flows from operating activities for the three years ended December 31, 2005:


	For the Year Ended December 31,
(in thousands)	2005			2004			2003
Net loss	$	(45,880	)	$	(2,190	)	$	(30,930	)
Income tax benefit		(30,560	)		(4,290	)		(5,590	)
Interest expense		75,510			67,650			64,780
Legacy stock award expense		—			—			4,830
Loss on sale-leaseback of property and equipment⁽¹⁾		—			—			18,200
Impairment of assets		73,220			10,650			7,600
Write-off of deferred equity offering costs		—			1,140			—
Depreciation and amortization		41,140			44,510			54,850
Adjusted EBITDA ⁽¹⁾		113,430			117,470			113,740
Interest paid		(70,550	)		(61,650	)		(61,710	)
Taxes paid		(12,630	)		(10,220	)		(8,500	)
Legacy stock award expense paid		—			(5,400	)		(4,560	)
Loss on dispositions of plant and equipment		300			790			1,910
Payments to Metaldyne to fund contractual liabilities		(2,900	)		(4,610	)		(6,370	)
Receivables securitization, net		(9,580	)		47,960			—
Net change in working capital		11,820			(41,720	)		6,850
Cash flows provided by operating activities	$	29,890		$	42,620		$	41,360

The following details certain items relating to our consolidation, restructuring and integration efforts not eliminated in determining Adjusted EBITDA, but that we would eliminate in evaluating the quality of our Adjusted EBITDA:

The following table summarizes financial information for our four current operating segments:


	For the Year Ended December 31,
($ in thousands)	2005			As a Percentage of Net Sales			2004			As a Percentage of Net Sales			2003			As a Percentage of Net Sales
Net Sales:
Rieke Packaging Systems	$	134,000			13.3	%	$	129,220			13.8	%	$	119,100			14.6	%
Cequent Transportation Accessories		515,230			51.0	%		511,300			54.4	%		427,410			52.6	%
Industrial Specialties		298,160			29.5	%		248,680			26.5	%		217,890			26.8	%
Fastening Systems		62,730			6.2	%		50,480			5.4	%		48,030			5.9	%
Total	$	1,010,120			100.0	%	$	939,680			100.0	%	$	812,430			100.0	%
Gross Profit:
Rieke Packaging Systems	$	46,590			34.8	%	$	47,760			37.0	%	$	44,160			37.1	%
Cequent Transportation Accessories		109,510			21.3	%		134,550			26.3	%		113,800			26.6	%
Industrial Specialties		68,810			23.1	%		59,520			23.9	%		54,460			25.0	%
Fastening Systems		22,520			35.9	%		15,550			30.8	%		15,400			32.1	%
Allocated / Corporate expenses		(20	)		N/A			(70	)		N/A			—			N/A
Total	$	247,410			24.5	%	$	257,310			27.4	%	$	227,820			28.0	%
Selling, General and Administrative:
Rieke Packaging Systems	$	17,520			13.1	%	$	17,330			13.4	%	$	17,670			14.8	%
Cequent Transportation Accessories		77,150			15.0	%		81,980			16.0	%		73,730			17.3	%
Industrial Specialties		36,150			12.1	%		37,030			14.9	%		33,300			15.3	%
Fastening Systems		6,820			10.9	%		6,620			13.1	%		7,870			16.4	%
Allocated / Corporate expenses		22,020			N/A			21,930			N/A			25,890			N/A
Total	$	159,660			15.8	%	$	164,890			17.5	%	$	158,460			19.5	%
Loss (Gain) on Dispositions of Property and Equipment:
Rieke Packaging Systems	$	100			0.1	%	$	460			0.4	%	$	1,190			1.0	%
Cequent Transportation Accessories		500			0.1	%		850			0.2	%		2,700			0.6	%
Industrial Specialties		30			0.0	%		20			0.0	%		6,100			2.8	%
Fastening Systems		60			0.1	%		20			0.0	%		2,710			5.6	%
Corporate		—			N/A			—			N/A			(510	)		N/A
Total	$	690			0.1	%	$	1,350			0.1	%	$	12,190			1.5	%
Impairment of Assets and Goodwill:
Rieke Packaging Systems	$	—			0.0	%	$	—			0.0	%	$	—			0.0	%
Cequent Transportation Accessories		2,960			0.6	%		100			0.0	%		—			0.0	%
Industrial Specialties		—			0.0	%		2,280			0.9	%		7,600			3.5	%
Fastening Systems		—			0.0	%		—			0.0	%		—			0.0	%
Corporate		—			N/A			—			N/A			—			N/A
Total	$	2,960			0.3	%	$	2,380			0.3	%	$	7,600			0.9	%
Operating Profit:
Rieke Packaging Systems	$	28,980			21.6	%	$	29,970			23.2	%	$	25,300			21.2	%
Cequent Transportation Accessories		28,900			5.6	%		51,610			10.1	%		37,370			8.7	%
Industrial Specialties		32,630			10.9	%		20,200			8.1	%		7,460			3.4	%
Fastening Systems		15,630			24.9	%		8,910			17.7	%		4,820			10.0	%
Allocated / Corporate expenses		(22,040	)		N/A			(22,000	)		N/A			(25,380	)		N/A
Total	$	84,100			8.3	%	$	88,690			9.4	%	$	49,570			6.1	%
Capital Expenditures:
Rieke Packaging Systems	$	8,470			6.3	%	$	14,740			11.4	%	$	11,280			9.5	%
Cequent Transportation Accessories		7,390			1.4	%		12,830			2.5	%		7,390			1.7	%
Industrial Specialties		3,180			1.1	%		5,730			2.3	%		5,580			2.6	%
Fastening Systems		1,230			1.9	%		2,750			5.4	%		910			1.9	%
Corporate		70			N/A			280			N/A			240			N/A
Total	$	20,340			2.0	%	$	36,330			3.9	%	$	25,400			3.1	%

Overall, net sales increased $70.4 million, or approximately 7.5%, in 2005 as compared with 2004. Of this increase, approximately $47.4 million is attributed to organic growth and approximately $6.0 million is due to currency exchange as our reported results in U.S. dollars benefited from stronger foreign currencies. In addition, we estimate that approximately $17 million of additional sales in 2005 was the result of recovery of steel cost increases that were passed through to customers. Rieke’s net sales increased $4.8 million, or approximately 3.7%, in 2005 as compared with 2004 due to new product sales, the favorable effects of currency exchange and partial recovery of increased steel costs, offset in part by slightly lower sales of core products such as rings, closures and plastic plugs. Cequent’s net sales increased $3.9 million, or approximately 0.8%, in 2005 as compared with 2004. After consideration of the favorable effects of currency exchange on sales of $5.1 million and the beneficial impact of steel cost increases recovered from customers of approximately $14 million, sales decreased between years approximately $15.2 million. Net sales within our Industrial Specialties segment increased $49.5 million, or 19.9%, in 2005 as compared with 2004 due to improved demand across all businesses in the segment and recovery of steel cost increases, most notably within our Industrial Cylinder business. Net sales within our Fastening Systems segment increased $12.3 million, or 24.3%, in 2005 as compared with 2004 due primarily to the increase in sales of this segment’s aerospace fasteners.

Gross profit margins (gross profit as a percentage of sales) approximated 24.5% and 27.4% in 2005 and 2004, respectively. Most notably, Cequent's gross profit margin declined from approximately 26.3% in 2004 to approximately 21.3% in 2005 due principally to reduced sales volumes of towing and trailer products in the higher margin wholesale distributor and installer channels, significant competitive pricing pressures in all market channels, but especially retail, and insufficient recovery of steel and other material cost increases via pricing. Rieke's gross profit margin declined from 37.0% in 2004 to 34.8% in 2005. The decline in gross profit margins is due principally to the impact of resin cost increases, steel cost recovery issues related to certain products in Europe and other cost increases not able to be fully recovered from customers. Gross profit within Industrial Specialties increased $9.3 million to $68.8 million in 2005 compared to $59.5 million in 2004 due to higher sales levels. However, gross profit as a percent of sales declined to 23.1% in 2005 from 23.9% in 2004 primarily as a result of steel cost increases incurred not able to be recovered from customers and increases in non-steel material costs including foil, yarn, asphalt and other oil-based products, which further eroded material margins. Within Fastening Systems, gross profit margins improved from approximately 30.8% in 2004 to approximately 35.9% in 2005. This improvement is due to increased sales of higher margin aerospace fasteners, and improved material margins on non-steel related items.

Operating profit margins (operating profit as a percentage of sales) approximated 8.3% and 9.4% for the years ended December 31, 2005 and 2004, respectively. The decline in operating profit margins is due principally to Cequent. Within Cequent, operating profit decreased $22.7 million in 2005 compared to 2004 as this business segment in spite of reducing variable selling and other fixed costs approximately $4.2 million during 2005 had lower sales levels and overall lower gross profits due to inability to recover material cost increases from customers. Operating profit margins at Rieke

decreased to 21.6% in 2005 from 23.2% in 2004 as Rieke experienced increased steel, resin and other material cost increases which it was not able to fully recover from its customers. Within the Industrial Specialties segment, operating profit increased $12.4 million from $20.2 million in 2004 to $32.6 million in 2005 as businesses in this segment benefited from significantly increased sales levels between years. Also, in the first half of 2004, Compac incurred higher costs and operational inefficiencies associated with the consolidation of its manufacturing activities into its new Hackettstown, New Jersey facility which was completed during the fourth quarter 2004. Within Fastening Systems, operating profit improved approximately $6.7 million from $8.9 million in 2004 to $15.6 million in 2005 as this segment benefited from significantly higher sales with only a nominal increase in related selling and other fixed costs.

Rieke Packaging Systems. Net sales increased $4.8 million, or approximately 3.7%, to $134.0 million in 2005 compared to $129.2 million in 2004. Of this amount, $9.8 million relates to increased sales of new specialty dispensing products, $0.5 million is due to the favorable impact of foreign currency exchange as a result of a weaker U.S. dollar. These increases were in part offset by an approximate $4.7 million decrease in sales of core products, including industrial closures, rings and levers, compared to the year-ago period.

Rieke's gross profit margins declined to approximately 34.8% during 2005 from 37.0% in 2004, and gross profit earned declined $1.2 million between years. The beneficial impact of higher sales levels and favorable impact of currency exchange were more than offset by increased resin, steel and other materials cost increases not able to be recovered from customers and higher energy costs, resulting in the decrease in gross profit margins between years.

Rieke's selling, general and administrative costs were $17.5 million or 13.1% of sales in 2005 compared to $17.3 million or 13.4% of sales in the prior year, as costs associated with launch and sales ramp-up activities related to specialty pump dispensing products for consumer applications approximately offset costs incurred in the first half 2004 related to employee severance and maintaining compliance with various health and safety requirements at a European manufacturing facility.

Overall, Rieke's operating profit margins declined to approximately 21.6% in 2005 as compared to 23.2% in 2004. The impact of increased sales levels between years, the favorable effect of stronger foreign currencies on results reported in U.S. dollars, and certain employee-related and other regulatory health and safety costs that did not recur in 2005 were more than offset by increased resin, steel and other material cost increases not able to be fully recovered from customers. Operating margins were further impacted by increased costs associated with the launch of new specialty dispensing products.

Cequent Transportation Accessories. Net sales increased $3.9 million, or slightly less than 1.0%, to $515.2 million in 2005 from $511.3 million in 2004. After consideration of the favorable impacts of currency exchange of $5.1 million and steel cost increases recovered from customers of approximately $14 million, net sales decreased approximately $15.2 million between years. This decrease is due to lower market demand compared to the year-ago period and the impact of customer inventory adjustments, primarily within our towing and trailer products business units, as well as significant price competition in all market channels, but especially retail due to increasing competition from off-shore locations.

Cequent's gross profit decreased $25.1 million to $109.5 million, or 21.3% of net sales in 2005, from $134.6 million or 26.3% of net sales in 2004. Of this decline in gross profit, we estimate approximately $34.5 million is attributed to a decline in material margins due to inability to fully recover steel and other material cost increases via pricing in our towing and trailer products businesses, and significant competitive pricing pressures in all market channels, but especially retail. This decline in material margins was offset in part by reductions in direct labor costs and variable spending of approximately $6.6 million. The remaining decline in gross profit is due to loss of incremental margin on an estimated $15.2 million of lower sales in 2005 when compared to 2004.

Cequent's selling, general and administrative expenses decreased a net $4.8 million to $77.2 million or 15.0% of sales in 2005, from $82.0 million or 16.0% of sales in 2004, as Cequent reduced

selling, general and administrative expenses in response to lower sales and gross profits between years. In 2004 Cequent incurred approximately $1.2 million in higher costs related to the consolidation of certain businesses distribution activities in South Bend, Indiana and ramp-up of that facility's operations. These costs did not recur in 2005.

In 2005, operating profit was reduced an additional $3.0 million as Cequent incurred asset impairment charges related to the closure of its Elkhart, Indiana plastics operation which was merged into our Goshen, Indiana facility and the shutdown of Consumer Products' distribution/manufacturing facility located in Sheffield, Pennsylvania, which was merged into our South Bend, Indiana distribution center.

Overall, Cequent's operating profit decreased $22.7 million to $28.9 million, or 5.6% of net sales, in 2005 from $51.6 million, or 10.1% of net sales in 2004. The decline in operating profit between years is the result of lower sales levels, principally in the towing and trailer products businesses and margin erosion in all market channels due to severe competitor pricing pressures and inability to recover fully steel and other material cost increases via pricing. These negative impacts to operating profit were partially offset by reductions in selling, general and administrative expenses in response to reduced levels of sales activity and lower gross profits. Operating profit was also impacted by $3.0 million in asset impairment charges associated with closure and merger of facilities into other existing Cequent operations.

Industrial Specialties. Net sales during the 2005 increased $49.5 million, or approximately 19.9% to $298.2 million compared to $248.7 million in 2004. Of this amount, approximately $47.5 million is a result of increasing demand for our products in the energy and petrochemical, general industrial, commercial construction, and defense markets due to new products, marketshare gains, and economic expansion. We estimate approximately $2 million is due to additional recovery of steel cost increases passed through to customers, principally within our industrial cylinder and precision tooling businesses.

Gross profit within our Industrial Specialties segment increased $9.3 million from $59.5 million, or 23.9% of sales in 2004, to $68.8 million or 23.1% of sales in 2005. Of the increased amount, we estimate $11.4 million is attributed to incremental margin on increased sales levels between years, which was offset in part as a result of steel and other material cost increases including foil, yarn, asphalt and other oil-based products, not able to be recovered from customers, of approximately $2.4 million.

Selling, general and administrative expenses decreased a net $0.9 million from $37.0 million or 14.9% of sales in 2004 to $36.1 million or 12.1% of sales in 2005 as the Industrial Specialties businesses were able to achieve higher sales levels without increasing selling and administrative costs to do so. Further, in 2004 we estimate we incurred approximately $4.1 million of costs in connection with the consolidation of Compac's Netcong and Edison, New Jersey facilities to a new facility in Hackettstown, New Jersey that was completed in fourth quarter 2004. These costs did not recur in 2005. However, the impact of this reduction was offset approximately $0.3 million as our specialty gasket business recorded charges of $3.0 million and $2.7 million in 2005 and 2004, respectively, related to asbestos litigation defense costs.

In 2004, operating profit also included a $2.4 million impairment charge related to the facility vacated as part of the consolidation of Compac's operations in Hackettstown, New Jersey.

Operating profit for 2005 increased $12.4 million to $32.6 million, or 10.9% of net sales, from $20.2 million, or 8.1% of net sales in 2004. The increase between years is primarily due to increased sales volumes across all of this segment's businesses, partially offset by the impact of steel and other material costs incurred that could not be recovered via pricing from customers, and slightly higher charges recorded related to asbestos litigation defense costs. In 2004, operating profit was further reduced as a result of costs incurred related to the consolidation of two operating facilities into one facility within our Compac business and impairment charge taken related to the vacated facility and certain equipment.

Fastening Systems. In the fourth quarter 2005, we reached a decision to sell the industrial fasteners business within our Fastening Systems segment. As more fully discussed in Note 5 of the

Company's consolidated financial statements, the results of its business operations are presented as discontinued operations, assets held for sale and excluded from management's discussion and analysis of operations below.

Net sales for 2005 increased $12.2 million or 24.3%, to $62.7 million from $50.5 million in 2004. Net sales in our aerospace fasteners business increased 30.1% over the year ago period as strong market demand related to commercial and business jet build rates continued. Net sales within our specialty automotive fasteners business also increased a solid 10% due to market share gains in 2005.

Gross profit within our Fastening Systems segment increased $7.0 million from $15.5 million or 30.8% of sales in 2004 to $22.5 million or 35.9% of sales, in 2005. This improvement is primarily the result of a more profitable product mix due to proportionately greater sales of higher margin aerospace fasteners, and improved material margins on non-steel related items.

Selling, general and administrative expenses at Fastening Systems increased $0.2 million from $6.6 million or 13.l% of net sales in 2004 to $6.8 million or 10.9% of net sales in 2005 as our aerospace fasteners business benefitted from the operational leverage associated with strong demand.

Overall, operating profit within Fastening Systems increased $6.7 million to $15.6 million, or 24.9% of sales in 2005 from $8.9 million or 17.7% of sales in 2004 as strong market demand, proportionately greater sales of higher margin aerospace fasteners and improved material margins on non-steel related items resulted in increased profitability.

Corporate Expenses and Management Fees. Corporate office expenses and management fees were flat between years at approximately $22.0 million in 2005 and 2004, respectively. In 2005, increases in group medical and workers compensation insurance expense and higher costs associated with operating our Asian Sourcing Office, were approximately offset by the $1.1 million write-off of deferred equity offering costs in 2004 that did not occur in the current year.

Interest Expense. Interest expense increased approximately $7.6 million in 2005 as compared to 2004 due to an increase in our weighted average interest rate from 5.69% at December 31, 2004 to 7.2% at December 31, 2005. We also incurred greater borrowings on our revolving credit facility in the first half of 2005 to fund increasing levels of investment in working capital, which were offset in part by reductions in borrowings on our revolving credit facility in the second half of 2005, as the Company partially paid down amounts outstanding on our revolver in addition to scheduled principal payments of $2.9 million on our term loan facility.

Other Expense, Net. Other expense, net increased approximately $5.0 million between years from $1.1 million in 2004 to $6.1 million in 2005. Of this amount, approximately $1.5 million relates to greater expenses incurred as a result of increased use of the Company's receivables securitization facility and sale of receivables under a factoring arrangement at certain European subsidiaries to fund working capital needs and $0.6 million is due to expenses incurred in connection with renewal of the Company’s receivables securitization facility in July 2005. The remaining increase between years is primarily due to net losses on transactions denominated in foreign currencies other than the local currency of the company subsidiary that is a party to the transaction of $2.3 million, compared to net gains on foreign currency transactions of $0.7 million in the same period a year ago.

Income Taxes. The effective income tax rate for 2005 was 68.6% compared to 29.7% for 2004. In 2005, the Company reported foreign pre-tax income of approximately $10.6 million and a domestic pre-tax loss of approximately $7.8 million. In 2004, foreign operations reported pre-tax income of approximately $34.9 million compared to a reported domestic pre-tax loss of $15.0 million. In 2005, certain of the Company's foreign subsidiaries made a dividend distribution of approximately $55.8 million from accumulated earnings and profits. Prior to 2005, the Company had provided for applicable federal taxes of approximately $3.1 million on the anticipated repatriation of foreign earnings. The 2005 dividend resulted in the Company recording an additional tax expense of approximately $0.4 million in the current year related to federal taxes on foreign accumulated earnings and profits. A valuation allowance of $2.2 million and $0.5 million was recorded during 2005 and 2004, respectively. The Company has determined the need for valuation allowances against deferred tax assets associated with a dual consolidated tax loss, certain state NOL's, and a foreign tax

credit carryforward. During 2005 and 2004, the Company recorded a tax benefit of $1.0 million and $1.2 million, respectively, related to extraterritorial income exclusions (‘‘ETI’’). The ETI tax deduction is based on the amount of export sales by domestic entities and has minimal relationship with net income (loss). In addition, the tax benefits associated with our 2005 and 2004 domestic pre-tax losses for Federal purposes were offset by tax expense incurred on foreign income and to a lesser extent at the state level.

Discontinued Operations. In fourth quarter 2005, the Board of Directors authorized management to move forward with its plan to sell our industrial fasteners operations, which consists of operations located in Frankfort, Indiana; Wood Dale, Illinois; and Lakewood, Ohio. The loss from discontinued operations, net of income tax benefit in 2005 was $46.4 million and included a net of tax impairment charge of $41.6 million which was recorded to reduce the carrying value of net assets used in the industrial fastener business to their estimated fair value. In 2004, the loss from discontinued operations, net of related tax benefits was $2.2 million. See Note 5 to our consolidated financial statements in Part II, Item 8 of this annual report on Form 10K.

Cumulative effect of change in accounting principle. In the fourth quarter 2005, we adopted FASB Interpretation No. 47 (FIN47), "Accounting for Conditional Asset Retirement Obligation." The Company adopted FIN47 as of December 31, 2005 and recorded a cumulative effect of change in accounting principle of approximately $0.4 million, net of income tax benefit of $0.3 million. Pro forma balance sheet information has not been provided as the impact to the balance sheet is not material.

Overall, net sales increased $127.3 million, or approximately 15.7%, in 2004 as compared with 2003. Of this increase, approximately $58.6 million is attributed to organic growth and approximately $14.9 million is due to currency exchange as our reported results in U.S. dollars benefited from stronger foreign currencies. We estimate that approximately $27 million of additional sales in 2004 was the result of recovery of steel cost increases that were passed through to customers. In addition, approximately $26.8 million of the increase is the result of including a full year of activity related to HammerBlow and Highland, which were acquired during the first quarter of 2003, and the acquisition of Bargman, which occurred in January 2004. Rieke’s net sales increased $10.1 million, or approximately 8.5%, in 2004 as compared with 2003 due to new product sales, the favorable effects of currency exchange and partial recovery of increased steel costs, offset in part by a one-time revenue increase in 2003 from certain government programs and slightly lower sales of core products such as rings and plastic plugs. Cequent’s net sales increased $83.9 million, or approximately 19.6%, in 2004 as compared with 2003. This increase is due to strong early order activity and customer inventory builds for the spring/summer selling seasons, recovery of steel cost increases and the favorable effects of currency exchange. Net sales within our Industrial Specialties segment increased $30.8 million, or approximately 14.1%, in 2004 as compared with 2003 due to improved demand across all businesses in the segment and recovery of steel cost increases, most notably at Lamons and Norris Cylinder. Net sales within our Fastening Systems segment increased $2.5 million, or approximately 5.1%, in 2004 as

compared with 2003 due to increases in sales of the segment’s aerospace fasteners and industrial fasteners for the off-road, agricultural and construction machinery markets, and recovery of steel cost increases.

Gross profit margins (gross profit as a percentage of sales) approximated 27.4% and 28.0% in 2004 and 2003, respectively. Gross profits within Rieke Packaging Systems improved approximately $3.6 million in 2004 as compared to 2003 as Rieke benefited from increased sales levels and favorable impact of currency exchange. However, gross profit margins were approximately flat between years as one-time costs associated with the start-up of a new manufacturing facility in China, higher steel costs not recovered from customers and increased costs associated with new product launches during the first half of 2004 negated the favorable impacts of increased sales levels and foreign exchange between years. Cequent’s gross profit margin declined slightly from approximately 26.6% in 2003 to approximately 26.3% in 2004 as the beneficial impact of increased sales volumes year-to-date, greater operating efficiencies as a result of completion of plant consolidation activities at its Goshen Indiana facility in the first half of 2003, and favorable impact of currency exchange more than offset the impact of significantly higher steel costs and freight costs not able to be fully recovered from customers. Gross profit margins within our Industrial Specialties segment declined in 2004 to approximately 23.9% compared to approximately 25.0% in 2003 primarily due to steel cost increases incurred and passed through to customers on which no gross profit margin was earned and higher costs and operational inefficiencies associated with consolidating two manufacturing plants into a single facility in our Compac business. Within Fastening Systems, gross profit margins declined from approximately 32.1% in 2003 to approximately 30.8% in 2004 due principally to higher steel costs that could not be passed through to customers.

Operating profit margins (operating profits as a percentage of sales) approximated 9.4% and 6.1% in 2004 and 2003, respectively. Operating profit at Rieke Packaging Systems increased approximately $4.7 million in 2004 as compared with 2003. This increase was due principally to increased sales volumes and the favorable impact of currency exchange during 2004 as compared to the same period a year ago, offset in part by plant start-up costs in China, and new product launch costs related to the introduction of eight new consumer products in the first half of 2004. Operating profit at Rieke in 2003 was also reduced approximately $2.1 million due to non-cash losses associated with the sale-leaseback of equipment in the first half of 2003 and impairment of customer relationship intangibles. At Cequent, operating profit increased $14.2 million in 2004 as compared with 2003 primarily due to higher sales volumes, increased operating efficiencies as a result of completing plant consolidation activities in the first half of 2003 at our Goshen, Indiana and Reynosa, Mexico, operations and lower costs associated with the completion of plant restructuring and acquisition integration activities. However, these improvements were partially offset by higher steel and freight costs, due to fuel surcharges that could not be fully passed through to its customers. Operating profit at Cequent in 2003 was also reduced by approximately $3.5 million of non-cash losses associated with the sale-leaseback of equipment at various locations and impairment of customer relationship intangibles. Within the Industrial Specialties segment, operating profit increased $12.7 million in 2004 as compared to 2003 as the segment benefited from higher overall sales in all markets compared to the prior year and reduced non-cash charges between years associated with impairment of assets, goodwill and customer intangibles and losses on sale-leaseback transactions. Within Fastening Systems, operating profit increased approximately $4.1 million in 2004 from $4.8 million in 2003 to $8.9 million in 2004. Overall, the net decrease between years is due to lower gross profits as discussed above, offset by reduced selling, general and administrative costs in 2004 and lower non-cash charges between years associated with impairment of assets and customer intangibles and losses on sale-leaseback transactions.

Rieke Packaging Systems. Net sales increased $10.1 million, or approximately 8.5%, to $129.2 million in 2004 as compared to $119.1 million in 2003. Compared to the same period in 2003, Rieke’s sales increased approximately $6.6 million due to increased sales of new products and $4.4 million due to the favorable impact of foreign currency exchange. In addition, we estimate approximately $2 million of the sales increase was due to steel cost increases Rieke was able to recover from its customers. These increases were partially offset by approximately $1.4 million of

revenue in 2003 from U.S. Government aid programs to Afghanistan, Iraq and other countries that did not recur at the same levels in 2004. In 2004, Rieke also experienced a decrease in sales of industrial closure and other dispensing products in North America.

Rieke’s gross profit margins were approximately flat between years at 37.0% in 2004 as compared to 37.1% in 2003. In 2004, we estimate Rieke incurred $2 million of steel cost increases that they were not able to recover from customers. Also, during the first half of 2004, Rieke incurred higher costs of approximately $1 million associated with the start-up of a new manufacturing facility in Hangzhou, China. These increased costs were largely offset through material cost reduction projects, reduced discretionary spending and the favorable impacts of currency exchange.

Rieke's selling, general and administrative costs decreased a net $0.4 million to $17.3 million in 2004 from $17.7 million in 2003. Rieke incurred non-cash charges due to impairment of customer intangibles of $0.3 million and $1.2 million in 2004 and 2003, respectively. This decrease in non-cash charges between years was partially offset by increased selling costs associated with higher sales levels in 2004.

Overall, Rieke’s operating profit margin improved to 23.2% in 2004 as compared with 21.2% in 2003, due to increased sales levels between years, the benefit of stronger foreign currencies, a $0.8 million non-cash loss on the sale-leaseback of machinery and equipment in the first quarter of 2003 that did not recur, and lower non-cash charges associated with impairment of customer intangibles. These improvements were offset in part by steel cost increases not recovered from customers, start-up costs at our new manufacturing facility in China, and higher launch costs associated with sales of new products.

Cequent Transportation Accessories. Net sales increased $83.9 million, or approximately 19.6%, to $511.3 million in 2004 as compared to $427.4 million in 2003. Of this amount, approximately $26.8 million of the sales increase is the result of including a full year of activity related to HammerBlow and Highland, which were acquired in the first quarter of 2003, and the acquisition of Bargman, which occurred in January 2004. In addition, we estimate approximately $19 million of increased sales in 2004 is the result of steel cost increases that Cequent was able to recover from its customers, and $10.1 million is due to the favorable impact of currency exchange as Cequent’s reported results in U.S. dollars benefited from a stronger Australian and Canadian dollar. After consideration of these items, Cequent experienced organic sales growth in 2004 of approximately $28.3 million, or 6.6% as compared to 2003, as Cequent benefited from an improved overall economic outlook and consumer sentiment, which resulted in stronger customer demand across all of Cequent’s business lines, particularly in the first half of 2004.

Cequent’s gross profits increased approximately $20.8 million between years to 26.3% of sales in 2004 compared to 26.6% of sales in 2003. Of this amount, approximately $14.1 million is attributed to higher sales levels compared to the prior year and the acquisition of Bargman. Cequent’s gross profits were also favorably impacted by increased sales of electrical products, improved operating efficiencies resulting from completion of integration activities with respect to the operations of HammerBlow and Highland and the favorable effects of currency exchange. We estimate gross profit margins in 2004 were approximately 240 basis points lower due to the impact of: (1) higher steel costs incurred that were not able to be recovered from customers, and; (2) higher steel costs incurred and recovered from customers, but on which no gross profit was earned.

Cequent’s selling, general and administrative expenses increased a net $8.3 million in 2004 compared to 2003, primarily due to additional costs associated with the start-up of Cequent’s new distribution center in South Bend, Indiana and increased sales levels associated with acquisitions of HammerBlow, Highland and Bargman. These cost increases were partially offset by a $1.9 million non-cash charge related to impairment of customer intangibles that did not recur in 2004. Even after consideration of increased sales resulting from steel costs recovered from customers in 2004 and the impact of the non-cash impairment in 2003, selling, general and administrative costs as a percent of sales decreased between years as higher sales levels more than offset additional selling and administrative expenses incurred.

Overall, Cequent’s operating profit margin increased from approximately 8.7% in 2003 to approximately 10.1% in 2004 due principally to higher sales levels, improved sales mix and increased operating efficiencies due to completion of several integration initiatives during 2004. These improvements were offset by higher steel and freight costs incurred that were not able to be recovered from customers and higher steel costs incurred and recovered from customers, but on which no operating margin was earned.

Industrial Specialties. Net sales during 2004 increased $30.8 million, or approximately 14.1%, compared to 2003. Of this amount, approximately $24.1 million is attributed to improved demand for our products in the commercial construction, precision tool, energy and petrochemical, and general industrial markets. In addition, we estimate approximately $6 million of increased sales in 2004 is the result of steel cost increases that Industrial Specialties was able to recover from its customers, principally at Lamons and Norris Cylinder.

Gross profit margins at Industrial Specialties declined to approximately 23.9% in 2004 from approximately 25.0% in 2003, primarily as a result of higher steel costs incurred and recovered from customers, but on which no gross profit was earned.

Selling, general and administrative expenses as a percent of sales declined to approximately 14.9% in 2004 from approximately 15.3% in 2003. This decrease resulted in part due to consolidation of sales branch offices within our Lamons business during the second and third quarters of 2003. The benefits of these lower operating costs were partially offset by $3.9 million of costs incurred during 2004 in connection with the consolidation of Compac’s Netcong and Edison, New Jersey plant operations into a new facility in Hackettstown, New Jersey. In 2003, our Lamons and Compac businesses also incurred $2.5 million in non-cash charges due to impairment of customer intangibles that did not recur in 2004. Additionally, in 2004 Lamons recorded a $2.7 million charge related to increased asbestos litigation defense costs.

During 2004, the Industrial Specialties segment recorded a $2.3 million non-cash asset impairment charge related to property and equipment abandoned as a result of completing the Compac facilities consolidation. In 2003, this segment recorded $6.0 million non-cash loss on sale-leaseback transactions of machinery and equipment and a goodwill impairment charge of approximately $7.6 million related to the group's precision cutting tools business.

Operating profits within the Industrial Specialties segment were $20.2 million, or 8.1% of sales in 2004 as compared to $7.5 million, or 3.4% of sales in 2003. In 2004, the benefits of higher sales levels and increased operating efficiencies at Lamons due to prior year consolidation activities, were offset by costs incurred related to the consolidation of our Compac facilities and non-cash charges associated with impairment of property and equipment and customer intangibles. In 2003, operating profit was significantly impacted by non-cash charges related to losses on sale-leaseback of equipment ($6.0 million), and impairment of goodwill ($7.6 million) and customer intangibles ($2.5 million) in all partially offset by costs in 2004 associated with the consolidation of Compac’s facilities.

Net sales increased by $2.5 million, or approximately 5.1%, as a result of higher aerospace fastener sales. Sales of our fittings to the automotive industry were essentially flat with the prior year.

Gross profit increased by approximately $.1 million due principally to margin earned on increased sales offset by the impact of higher steel and tooling costs.

Selling, general and administrative expenses decreased approximately $1.3 million primarily due to elimination of certain group operating expenses as we consolidated our group staff and eliminated certain general and administrative positions.

Overall, operating profit increased by approximately $1.3 million between years to $8.9 million an increase of approximately 17.5% primarily due to increased sales and the elimination of certain operating expenses, as we consolidated and eliminated certain general and administrative activities, which more than offset higher steel and tooling costs.

Corporate Expenses and Management Fees. General and administrative expense at corporate office decreased approximately $4.0 million in 2004 compared to 2003. This decrease is primarily due to $4.8 million of legacy restricted stock award expense in 2003 that did not recur in 2004, offset in part by higher compensation expense due to an increase in personnel to establish a stand-alone corporate office and the write-off of $1.1 million of equity offering costs that are no longer able to be deferred.

Interest Expense. Interest expense increased approximately $2.9 million in 2004 as compared to 2003 due to an increase in our weighted average interest rate from 4.65% at December 31, 2003 to 5.69% at December 31, 2004 and greater borrowings on our revolving credit facility in 2004 to fund higher levels of capital expenditures and increasing levels of investment in working capital during the year. These changes were offset in part by the timing and amount of borrowings in 2003 related to the acquisitions of HammerBlow, Highland and Fittings and cash received in sale-leaseback transactions that were completed during the first half of 2003.

Other Expense, Net. Other expense, net increased approximately $0.9 million between years principally due to higher costs related to the increased use of our receivables securitization facility.

Income Taxes. The effective income tax rate for 2004 was 29.7% compared to (16.9%) for 2003. In 2004, the Company reported foreign pre-tax income of approximately $34.9 million and domestic pre-tax loss of approximately $15.0 million. In 2003, foreign operations reported pre-tax income of approximately $22.7 million compared to a reported domestic pre-tax loss of $38.2 million. During 2004, the Company recorded a tax benefit of $1.2 million related to extraterritorial income exclusions (‘‘ETI’’). The ETI tax deduction is based on the amount of export sales by domestic entities and has minimal relationship with net income (loss). In addition, the tax benefits associated with our 2004 and 2003 domestic pre-tax losses for Federal purposes were offset by tax expense incurred on foreign income and to a lesser extent at the state level. For 2003, no tax benefit was recorded related to the goodwill impairment as such impairment is non-deductible. In 2003, we also reported an additional $3.1 million of tax expense related to unremitted earnings at one of our Canadian subsidiaries as these earnings were no longer considered permanently reinvested.

Discontinued operations. The loss from discontinued operations net of income tax benefit, was $16.2 million in 2004 compared to $12.9 million in 2003. See Note 5 to our consolidated financial statements in Part II, Item 8 of this annual report on Form 10K.

Cash provided by operating activities for the year ended December 31, 2005 was approximately $29.9 million as compared to cash provided by operating activities for the year ended December 31, 2004 of approximately $42.6 million. In 2005, net cash provided by operating activities was reduced $9.6 million due to decreased use of our receivables securitization facility. In 2004 , net cash provided by operating activities benefited as a result of increased activity on our receivables securitization facility of $48.0 million. The decreased levels of working capital also reflect a lesser negative impact of steel costs and accelerated payments to steel suppliers in 2005 compared to the prior year.

Cash used for investing activities decreased to approximately $16.6 million for the year ended December 31, 2005 compared to $46.8 million in 2004 as capital spending reflected a more normal maintenance level of expenditures. During 2004, capital expenditures were $21.3 million greater than 2005 as we essentially completed our major restructuring and consolidation activities during 2004. We also generated net proceeds from the sale of facilities of $5.0 million during 2005. In 2004, capital spending was $43.0 million due primarily to planned expenditures for our Hangzhou, China and Hackettstown, New Jersey facilities, and investments related to new product launches, mainly in our Rieke Packaging Systems segment. During the first quarter of 2004, we also completed the acquisition of Theodore Bargman Company within our Cequent Transportation Accessories segment.

Cash used for financing activities was $12.6 million for the year ended December 31, 2005 compared to $0.5 million provided by financing activities for the year ended December 31, 2004. During 2005, the Company utilized cash to pay down amounts on our revolving credit facility. In 2004, we funded capital expenditures, increased levels of investment in working capital and retirement of a note payable through a combination of borrowings on our revolving credit facility and proceeds from receivables sold through our securitization facility.

On January 29, 2004, we completed the acquisition of Bargman. The total consideration paid was approximately $5.5 million. The transaction was funded by borrowings under our revolving Credit Facility.

Our Credit Facility in the United States includes a $150.0 million revolving Credit Facility and a $335.0 million term loan facility (of which $4.1 million and $256.2 million was outstanding as of December 31, 2005, respectively). Up to $100.0 million of our revolving Credit Facility is available to be used for one or more permitted acquisitions. Our Credit Facility also provides for an uncommitted $125.0 million incremental term loan facility that, subject to certain conditions, is available to fund one or more permitted acquisitions. Amounts drawn under our revolving Credit


	For the Year Ended December 31,
	2005		2004		2003
(in thousands)
Facility and business consolidation costs ^(a)	$	200	$	280	$	—
Business unit restructuring costs ^(b)		1,130		6,250		2,650
Acquisition integration costs ^(c)		1,290		1,510		6,810
	$	2,620	$	8,040	$	9,460


	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	•	We may be subject to work stoppages and further unionization at our facilities or our customers or suppliers may be subjected to work stoppages, which could seriously impact the profitability of our business;


	•	We have not yet completed implementing our current plans to improve internal controls over financial reporting and may be unable to remedy certain internal control weaknesses identified by our management and take other actions to meet our 2007 compliance deadline for Section 404 of the Sarbanes-Oxley Act of 2002. Our conclusions and actions relative to our control weakness is subject to scrutiny in the future, including review by the Securities and Exchange Commission in connection with its ordinary course review of our public filings and disclosure or otherwise.


	•	Rieke designs and manufactures traditional industrial closure and dispensing products in North America and Asia. We believe Rieke has significant market share for many of its key products, such as steel drum enclosures, plastic drum closures and plastic pail dispensers and plugs.


	•	Englass, located in the United Kingdom, focuses on pharmaceutical and personal care dispensers sold primarily in Europe, but its product and engineering ‘‘know-how’’ is applicable to the consumer dispensing market in North America and in other regions, which we believe provide significant opportunities for growth.


	•	Stolz, located in Germany, is a European leader in plastic enclosures for sub-20 liter sized containers used in automotive and chemical applications.


	•	TOV, located in Italy, specializes in the lever and ring closures that are used in the European industrial market. This specialty closure system is sold into the North American Free Trade Agreement (‘‘NAFTA’’) markets as well.


	•	Strong Research, Development and New Product Capability. We believe that Rieke's research and development capability and new product focus is a competitive advantage. For more than 80 years, Rieke's product development programs have provided innovative and proprietary product solutions, such as the ViseGrip^® steel flange and plug closure, the Poly-ViseGrip^™ plastic closure and the all-plastic, environmentally safe, self-venting FlexSpout^® flexible pouring spout. Rieke's emphasis upon highly engineered packaging solutions and research and development has yielded 101 active patents and 88 patents pending. Rieke has approximately 23 technical employees responsible for new product development, improving existing products and design automation equipment to assist in cost reductions, both internally and at our customers' locations. Approximately 32.5% of Rieke's 2005 net sales relate to products utilizing its patented processes or technology.


	•	Customized Solutions that Enhance Customer Loyalty. A significant portion of Rieke's products are customized for end-users who also use Rieke's specialty tooling equipment to install the products. The installation in customer drum and pail plants of customized, patent protected, Rieke-designed insertion equipment and tools that are specially designed for use on Rieke manufactured closures and dispensers creates substantial switching costs. As a result, and because the equipment is located inside customers' plants, Rieke is able to support favorable pricing and generate a high degree of customer loyalty. Rieke has also been successful in bundling a variety of products at attractive pricing in an effort to create preferred supplier status.


	•	Leading Market Positions and Global Presence. We believe that Rieke is a leading designer and manufacturer of steel and plastic closure caps, drum enclosures, rings and levers and dispensing systems, such as pumps and specialty sprayers. Rieke maintains a global presence, reflecting its global opportunities and customer base. Its headquarters and manufacturing and technology center is located in Auburn, Indiana and it has manufacturing operations in


		Mexico, England, Germany, Italy and China. Rieke also maintains warehouse locations in Australia and France. All of Rieke's manufacturing facilities have technologically advanced injection molding machines required to manufacture industrial container closures and specialty dispensing and packaging products, as well as automated, high-speed assembly equipment for multiple component products.


	•	Strong Customer Relationships. Rieke benefits from long-standing relationships with many of its customers. We believe that Rieke's high level of customer recognition is due to its emphasis on product development, product quality and performance characteristics and the maintenance of high customer service standards. Rieke also provides extensive in-house design and development technical staff to provide a solution to customer requirements for closures and dispensing.


	•	New Consumer Product Applications. We believe that Rieke has significant opportunities to apply its existing highly engineered products to new consumer products and pharmaceutical applications, particularly in North America, and for new product development. Rieke has focused its research and development capabilities on North American consumer applications requiring special packaging forms, and stylized containers and dispenser applications requiring a high degree of functionality and engineering and content. During calendar year 2005, we introduced three major new dispensing products into various markets. The first of these products is a specialty pump for the skin care markets. Most of this newly acquired business has been at the expense of our sole competitor in the marketplace. Moving forward, we expect the majority of the opportunities to shift from market share capture to market introduction. The second new offering was an airless dispenser which targets the high-viscosity face and hair care products market. Typical examples include hair gels, pastes and other styling products. Our third new product offering was a 1.7 ml dispenser for the home cleaner market.


	•	Product Cross-Selling Opportunities. Recently, Rieke began to cross-market successful European products, such as rings and levers, to a similar end-user customer base in the North American market utilizing its direct sales force. We believe that, as compared with its competitors, Rieke is able to offer a wider variety of products on a bundled basis to its long-term North American customers at better pricing and with enhanced service and tooling support. Many of these customers have entered into supply agreements with Rieke on these bundled product offerings.


	•	Acquisition Opportunities. We believe Rieke has significant opportunities to grow its business through disciplined, strategic acquisitions. There are many companies participating in product and application markets that have similar product technologies and/or a common customer base. By acquiring such companies, Rieke may obtain new product technologies to be sold to its existing customers, or new customers to whom the broader Rieke product portfolio can be offered. In addition, Rieke intends to pursue any cost savings opportunities by consolidating purchasing, sales, finance and administrative functions into its existing infrastructure. At our manufacturing facilities in Hamilton, Indiana, and Hangzhou, China, we have additional floor space and manufacturing capacity that may absorb the manufacturing operations of future acquisitions.


	•	Increased International Presence. Rieke will seek to increase its international manufacturing and sales presence. For example, Rieke opened a new production and assembly facility in Hangzhou, China during the first quarter of 2004. This facility produces and assembles many of Rieke's recently introduced products and potentially its anticipated new product launches as well. This location has been selected since many of these new products have multiple components for which assembly is a major cost factor. Automation of the assembly process in certain of these products can be either technically difficult or costly. Rieke's facility in China


		provides it access to a skilled, but significantly lower cost, labor market for assembly operations. In addition, Rieke believes there is a growing market in the Far East for its products and many multi-national customers require product availability throughout the world, including in the Asian market. During 2005, a marketing plan for Asia was identified and will be implemented in 2006.


	•	The Draw-Tite^®, Reese^® and Hidden Hitch^® brands represent towing products and accessories, such as hitches, weight distribution systems, fifth-wheel hitches, ball mounts, draw bars, gooseneck hitches, brake controls, wiring harnesses and T-connectors and are sold to independent installers and distributor channels for both automotive/truck and recreational vehicles. Similar towing accessory products are sold to the retail channel under the Reese Towpower^™ and Reese Outfitter^® brands, while the Hayman-Reese^™ brand of towing products are sold in the Australian aftermarket channel.


	•	The Fulton^® and Bulldog^® brands represent trailer products and accessories, such as jacks, winches, couplers, trailer wiring, converters, ramps and fenders. These brands are sold through independent installers, trailer original equipment manufacturers (OEM’s) and distributor channels serving the marine, agricultural, industrial and horse/livestock markets.

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	•	The Tekonsha^® brand is the most recognized name in brake controls and related brake components. These products are sold through automotive, recreational vehicle and agricultural distributors and automotive OEMs.


	•	The Bargman^® and Wesbar^® brands are recognized names for recreational vehicle and marine lighting, respectively. Bargman^® - branded products include interior and exterior recreational vehicle lighting products and accessories, such as license plate lights and brackets, porch and utility lights, assist bars, door locks and latches, and access doors, while Wesbar^® - branded products include submersible and utility trailer lighting. These brands and products are sold through independent installers, trailer and recreational vehicle OEMs and wholesale distributors, and marine retail specialty channels.


	•	Highland The Pro's Brand^® and ROLA^™ comprise our brand presence in the cargo management product category. Cargo management products include bike racks, cargo carriers, luggage boxes, tie-downs and soft travel-cargo carriers which are sold through independent installers, wholesale distributors and retail channels.


	•	Leading Market Position. Cequent primarily competes in highly fragmented niche markets where no single competitor possesses a comparable breadth of product and distribution. We believe that we are one of the leading designers and manufacturers of aftermarket products to outfit and accessorize light trucks, cross-over utility vehicles (CUV's), SUV's, recreational vehicles and passenger cars, and trailers for both recreational and commercial use. We believe Cequent is one of the largest suppliers of towing and trailer products to its primary channels, including the independent installer and wholesale distributor channels. Also, we supply to mass merchants such as Wal-Mart, Lowe's, and Home Depot, specialty auto retailers such as Pep Boys, Advanced Auto, AutoZone, and the recreational vehicle aftermarket and RV OEMs.


	•	Strong Brand Names. We believe Cequent's brands include many of the leading names in its industry. Cequent's brand portfolio includes such well established names as Reese^®, Draw-Tite^®, Hidden Hitch^®, Bulldog^®, Tekonsha^®, Highland The Pro's Brand^®, Fulton^®, Wesbar^®, ROLA^™, Hayman-Reese^™ and Bargman^®. We believe that such recognized brands provide Cequent with a significant competitive advantage. Cequent has positioned its brands to create pricing options for entry-level through premium product offerings across all of our distribution channels. We believe that no other competitor features a comparable array of brand names.


	•	Diverse Product Portfolio. Cequent benefits from a diverse range of product offerings and does not rely upon any single product. By offering a wide range of products, Cequent is able to provide a complete solution to satisfy its customers' needs. Its towing products and accessories offerings feature ball mounts and draw bars, hitch receivers, fifth-wheel hitches, weight distribution systems and an array of ‘‘accessory’’ products. Its electrical product offerings feature a broad range of lighting components including incandescent, LED, halogen and fluorescent lighting, T-connectors and wiring harnesses. It also offers a range of braking products including proportional, timed, inertial and electrical brake controls for automotive applications and related brake components. Its trailer product portfolio includes winches, jacks, couplers, fenders, trailer brakes and ramps. In addition, Cequent offers a large variety of cargo management and vehicle protection accessories, including tie-downs and soft-travel cargo carriers, floor mats, cargo liners, bike racks, hood protection products and many other accessories.


	•	Multiple Distribution Channels. Cequent utilizes several distribution channels for its sales, including mass merchants, specialty retailers, independent wholesale distributors, independent installers and trailer OEMs. In 2005, approximately 19% of Cequent's products were sold through a highly fragmented installer channel composed primarily of single proprietor businesses. Mass retailers accounted for approximately 14% of Cequent's sales, and traditional recreational vehicle distributors accounted for approximately 21% of Cequent's sales in 2005. Trailer OEMs and distributors, which also represent a highly fragmented industry, accounted for approximately 16% of Cequent's sales in 2005. The remainder of Cequent's sales were through other retail and OE distribution channels.


	•	Vertically Integrated Manufacturing Capability. As a result of significant restructuring activity completed over the last two years, Cequent has a relatively efficient and vertically integrated manufacturing capability. With respect to towing products, Cequent consolidated the manufacturing of Reese^® and Draw-Tite^® branded products into a single facility in Goshen, Indiana, which significantly enhanced process capability in forming, stamping and painting applications. Cequent also consolidated the manufacturing of its trailering products at the former HammerBlow Wausau, Wisconsin facility into its Mosinee, Wisconsin facility. Cequent's customers generally require manufacturing in small batches and in significant variety to maintain aftermarket inventory and maintenance of designs for 10 to 15 years of light vehicle models. Accordingly, we seek to maintain a lean, ‘‘quick change’’ manufacturing


		culture and system. Cequent's plants are vertically integrated to receive raw materials and convert them to finished products through three major steps: first, stamping and related methods of forming, cutting, punching, boring and prepping, followed by welding and assembly of components and lastly, cleaning, coating, painting and inspection of finished products. Cequent has in-house wiring harness design and manufacturing capability, one of the industry's largest research and development facilities for both testing and design, and a ‘‘hub and spoke’’ distribution system with capability to meet delivery requirements specified by our customers.


	•	New Product Introductions. Cequent has developed and successfully launched new products in the past and presently is developing a range of product innovations. In towing, new products include an enhanced fifth-wheel hitch design, bike racks, soft pack roof racks and a range of cargo management and point of purchase accessories. Cequent has patents pending on products called Signature Series^™ fifth-wheel and slider, InterLock^TM ball mount and related towing and vehicle accessories. In trailer-related products, new introductions include pivot tongue couplers, metal ramps, heavy-duty jacks and winches and electrical products, such as auto leveling brake controls, LED lighting and electrical accessories. In addition, it is continually refreshing its existing retail products with new designs and features and innovative packaging and merchandising.