0000031107-95-000006.txt : 19950811 0000031107-95-000006.hdr.sgml : 19950811 ACCESSION NUMBER: 0000031107-95-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950401 FILED AS OF DATE: 19950512 DATE AS OF CHANGE: 19950809 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: EASTERN CO CENTRAL INDEX KEY: 0000031107 STANDARD INDUSTRIAL CLASSIFICATION: 3420 IRS NUMBER: 060330020 STATE OF INCORPORATION: CT FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00599 FILM NUMBER: 95558625 BUSINESS ADDRESS: STREET 1: 112 BRIDGE ST STREET 2: P O BOX 460 CITY: NAUGATUCK STATE: CT ZIP: 06770 BUSINESS PHONE: 2037292255 MAIL ADDRESS: STREET 1: 112 BRIDGE STREET STREET 2: P O BOX 460 CITY: NAUGATUCK STATE: CT ZIP: 06770 10-Q 1 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 1, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________________ to ______________________. Commission File Number 0-599 THE EASTERN COMPANY (Exact Name of Registrant as specified in its charter) Connecticut 06-0330020 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 112 Bridge Street, Naugatuck, Connecticut 06770 (Address of principal executive offices) (Zip Code) (203) 729-2255 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --------- --------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of April 1, 1995 Common Stock, No par value 2,775,085 -1- 2 PART I FINANCIAL INFORMATION THE EASTERN COMPANY AND SUBSIDIARIES ITEM I CONSOLIDATED CONDENSED BALANCE SHEETS - ------ ------------------------------------- ASSETS
April 1, 1995 DEC. 31, 1994 CURRENT ASSETS (Unaudited) (Audited) ------------- ------------ Cash and cash equivalents $ 3,187,344 $ 2,610,244 Accounts Receivable,less allowance of: 9,615,164 9,665,164 1995- $359,722 1994- $330,024 Land held for sale - 1,018,111 Inventories 10,582,626 9,530,546 Prepaid expenses and other current assets 1,756,700 2,021,862 ----------- ----------- Total Current Assets 25,141,834 24,845,927 Property, plant & equipment 24,636,958 23,950,535 Less accumulated depreciation (11,622,186) (10,996,773) ----------- ----------- 13,014,772 12,953,762 Prepaid pension cost 3,092,313 2,958,362 Other assets, net 1,383,927 1,124,736 ------------ ------------ TOTAL ASSETS $ 42,632,846 $ 41,882,787 ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities Accounts payable $ 3,680,783 $ 3,239,241 Notes payable current 810,000 2,460,000 Accrued compensation and withholding 1,831,914 935,417 Accrued expenses 813,859 377,322 ------------ ----------- TOTAL CURRENT LIABILITIES 7,136,556 7,011,980 Deferred Federal Income Taxes 1,939,200 1,939,200 Long-term Debt 180,000 240,000 Accrued postretirement benefits 2,868,900 2,848,150
SHAREHOLDERS' EQUITY Common Stock No Par Value: Authorized Shares - 25,000,000 Issued & outstanding shares: 9,009,392 9,009,392 1995-2,775,085 1994-2,775,085 (Excluding Shares in Treasury: 1995-520,085 1994-520,085) PreferreStock Noar Value Authozed Shar - 2,000,000 (No sres outsndi ng) Retained Earnings 21,498,798 20,834,065 ------------ ------------ TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 42,632,846 $ 41,882,787 ============ ============
See accompanying notes to consolidated condensed financial statements. -2- 3 THE EASTERN COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME
THREE MONTHS ENDED 4/1/95 4/2/94 (Unaudited) (Unaudited) Net Sales $17,684,662 $15,684,271 Interest Income 40,072 13,454 ----------- ----------- Total 17,724,734 15,697,725 Cost of Products Sold 13,276,799 11,862,765 ----------- ----------- 4,447,935 3,834,960 Selling and Admin. Expenses 2,942,048 2,747,480 Interest Expense 43,645 26,583 Other Income Net (29,087) (62,117) ----------- ----------- INCOME BEFORE INCOME TAXES 1,491,329 1,123,014 Income Taxes 531,660 398,627 ----------- ----------- NET INCOME $ 959,669 $ 724,387 =========== =========== Net Income Per Share $ 0.35 $ 0.26 Cash Dividends Per Share $ 0.115 $ 0.115 Average Shares Outstanding 2,775,085 2,760,784
See accompanying notes to consolidated condensed financial statements. -3- 4 THE EASTERN COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTHS ENDED
4/1/95 4/2/94 (Unaudited) (Unaudited) OPERATING ACTIVITIES: Net Income $ 959,669 $ 724,387 Adjustments to reconcile net income to net cash provided from operations: Depreciation & Amortization 687,515 629,985 Pension plan income (88,913) (101,703) Gain on sale of equipment and other assets (16,606) - Postretirement benefits other than pensions 20,750 17,000 Provision for Losses on Accounts Receivable 30,035 33,107 Changes in Operating Assets and Liabilities: Accounts receivable 8,785 (1,075,553) Inventories (1,058,958) (741,701) Prepaid expenses 264,554 (180,220) Accounts payable 459,421 1,160,116 Accrued expenses 1,318,753 437,637 Other assets (321,104) 3,262 ---------- ---------- NET CASH PROVIDED FROM OPERATING ACTIVITIES 2,263,901 906,317 INVESTING ACTIVITIES: Purchases of property, plant, and equipment (690,276) (457,213) Proceeds from sale of equipment and other assets 1,034,717 - Other - 3,600 --------- --------- NET CASH PROVIDED (USED) FOR INVESTING ACTIVITIES 344,441 (453,613) FINANCING ACTIVITIES: Payment on line of credit (1,400,000) - Principal payments on long-term debt and notes payable (310,000) (310,000) Proceeds from Sales of Common Stock (Stock Options) - 229,701 Purchases of Common Stock for the Treasury - (99,414) Dividends Paid (319,136) (318,500) ---------- ---------- NET CASH USED FOR FINANCING ACTIVITIES (2,029,136) (498,213) Effect of exchange rate changes on cash (2,106) 41,343 ---------- --------- NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 577,100 (4,166) Cash and Cash Equivalents at Beginning of Year 610,244 2,479,998 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 3,187,344 $2,475,832 =========== ==========
See accompanying notes to consolidated condensed financial statements. -4- 5 THE EASTERN COMPANY AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED As reported: 4/1/95 4/2/94 (Unaudited) (Unaudited) Average Shares Outstanding 2,775,085 2,760,784 Net Income $ 959,669 $ 724,387 ========== ========== Net Income Per Share $0.35 $0.26 ===== ===== Assume stock options were included in primary earnings per share computation: Average Shares Outstanding 2,775,085 2,760,784 Stock options based on Treasury stock method Using quarter end market price 64,299 72,461 --------- --------- TOTALS 2,839,384 2,833,245 ========= ========= Net Income $ 959,669 $ 724,387 ========== ========== Net Income per Share $0.34 $0.26 ===== =====
See accompanying notes to consolidated condensed financial statements. -5- 6 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS April 1, 1995 Note A - Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying condensed consolidated financial statements are unaudited. However, in the opinion of the Registrant's management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for such interim periods have been reflected therein. Certain 1994 amounts have been reclassified to conform to 1995 presentation. Note B - Net Income Per Share Net income per share of common stock is based on the weighted average number of shares outstanding during each period (1995 - 2,775,085 shares; 1994 - 2,760,784 shares). Common stock equivalents (Stock Options) did not have a material dilutive effect on net income per share. The computation of net income per share of common stock on a fully diluted basis did not result in any material dilution in 1995 or 1994. -6- 7 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net income for the first quarter 1995 was up 32% to $959,669 or $.35 per share on a 13% increase in sales to $17,684,662 versus first quarter 1994 net income of $724,387 or $.26 per share on sales of $15,684,271. The first quarter 1995 net sales increase of 13% or $2 million from the first quarter of 1994 resulted from an increase in volume of 7%, new products of 3% and price increases of 3%. New products include the recently acquired "Prestolock" line of keyless locks, being offered by the Registrant's CCL Security Products division and new malleable castings products manufactured by the Registrant's Frazer & Jones division. Demand for the Registrant's transportation and industrial hardware product lines, served by the Registrant's Eberhard Manufacturing division and the Registrant's Canadian Eberhard Hardware Manufacturing, Ltd. subsidiary, remains strong. The Registrant's Eberhard Manufacturing division established a sales and distribution facility in Lerma, Mexico in the first quarter 1995 under the name Sesamee Mexicana, Ltd., a new subsidiary, to expand its market for high quality security hardware for the transportation and industrial markets in Central and South America. Sales for the first three months of 1995 to the underground coal mining industry, serviced by the Frazer & Jones division, were up slightly from the comparable period a year ago. Sales to the underground coal mining industry are expected to be less in the second quarter than the first quarter due to excess coal inventories as the result of the warm winter. Increased coal production is anticipated in the second half of the year resulting in increased demand for the Registrant's mine roof fasteners. Contract malleable casting sales more than doubled from the comparable three month period a year ago. Sales of custom locks were off slightly from the comparable period a year ago. Improved sales are expected for the second and third quarters. The Registrant's construction segment, consisting of the Thompson Materials division, continues to show improved sales as compared to the same period a year ago. The Registrant's gross margin as a percentage of sales for the three months ended April 1, 1995 was 25% compared to the same period a year ago of 24%. The gross margin for the first quarter of 1995 increased from the comparable period a year ago, due to a greater proportion of productive capacity being utilized to meet expected demand in the second half of 1995. Selling and administrative expenses were up 7% or $195 thousand for the three months ended April 1, 1995 as compared to the same period a year ago. Increases in the first quarter were for normal operating expenses as the result of increased business activity and increase selling and marketing activities at the registrants Illinois Lock division and CCL Security Products division. Overall selling and administrative expenses expressed as a percentage of sales remained comparable to the three month periods a year ago at approximately 17%. Other income for the three months ended April 1, 1995, was down $33 thousand from the comparable periods a year ago. This was due to the receipt of two payments of commission income in the first quarter of 1994 versus only one payment received in the first quarter of 1995. The agreement where the Registrant receives commission income, as the result of the sale of the Alloy Foundries malleable business expires in August 1995. The effective tax rate for the first quarter 1995 was comparable to the same period a year ago at approximately 36% -7- 8 Liquidity and Sources of Capital Cash flows from operations were $2.264 million for the first three months of 1995 versus $906 thousand in the first quarter of 1994. The increase in net income coupled with tax refunds more than offset increased inventories. The Registrant repaid $1.4 million on its short-term line of credit mainly utilizing proceeds from the sale of land from the discontinued Alloy Foundries operation. Inventory increased from the 1994 year-end level by $1.059 million, however, inventory turns remain comparable at 7 times per year as the result of the increased sales activity. The Registrant believes inventory levels are adequate to meet customer requirements and anticipated increased sales activity. The average day sales in accounts receivable increased to 57 days for collection versus the end of 1994 collection average of 55 days. The prime reason for the increase in collection days comes from the Construction Segment where collections historically are slow. The Registrant continually monitors collection activity made at this division. Additions to property plant and equipment were $690 thousand during the first three months of 1995 versus $457 thousand for the comparable period a year ago. Total 1995 capital expenditures will be higher than the expected $2.3 million level of depreciation for the year due to an additional $500 thousand capital improvement project at the Registrant's Frazer & Jones division. Other Matters On June 24, 1994, the Registrant settled all claims with both the Beacon Heights Coalition and the Laurel Park Coalition and the respective complaints against the Registrant on behalf of the Coalitions were dismissed by stipulation. No complaints are now pending in the U.S. District Court involving the Registrant and a final judgement was entered by the U.S. District Court in the consolidated proceedings on March 17, 1995. An appeal, however, has been filed by one agency as described in Part II, Item 1 below. The Registrant continues to actively monitor the situation. It is management's opinion that the resolution of these matters will not have a material adverse effect on the Registrant's financial position, operating results or liquidity. -8- 9 PART II OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS - In April 1988, Murtha Enterprises Inc. and related parties (collectively "Murtha"), as the result of a February 1987 suit (docket number N-87-52 PCD) brought by the U. S. Environmental Protection Agency (the "EPA") and others, concerning the Beacon Heights and Laurel Park landfills, instituted third- party actions against approximately 200 companies or individuals including the Registrant. The underlying suit against Murtha was settled with EPA and the other parties and the Consent Decree has been approved by the Court. On September 22, 1988, the EPA filed a complaint against the Registrant and seven other defendants seeking recovery of present and future response costs incurred by the United States in conjunction with the Beacon Heights landfill. The complaint alleged total damages of approximately $1.8 million ($1.3 million actual and $.5 million future). On October 31, 1988 the court consolidated the EPA action against the Registrant with the other cases under docket number N-87-52 (PCD). By complaint dated September 6, 1990, the Beacon Heights Coalition (the "Beacon Coalition"), a group of parties who have entered into a consent order with EPA, instituted a direct action against the Registrant and approximately 400 other named parties concerning the Beacon Heights landfill. The Beacon Coalition claimed that these defendants generated or transported hazardous substances disposed of at the Beacon Heights landfill, and are therefore responsible for a share of the Beacon Coalition's response costs. The Registrant has filed answers to both the EPA Complaint and the Beacon Coalition Complaint. In March 1991, a Laurel Park Coalition which did not include the Registrant entered into Consent Decree and Administrative Order by Consent with the EPA and the State of Connecticut to remediate the Laurel Park landfill. The Consent Decree has been approved by the Court. In May 1991, EPA and the State of Connecticut ("State") each filed a complaint against the Registrant and three other defendants seeking recovery of present and future response costs incurred in connection with the Laurel Park landfill. The EPA claims costs in excess of $1.8 million and the state claims costs in excess of $2.5 million. On July 1, 1991, the court consolidated these actions against the Registrant with the other cases under docket number N-87-52 (PCD). The Registrant filed answers to both of these complaints. By order dated February 8, 1994, the court granted a motion filed by Registrant for judgment on the pleadings against EPA and the state with respect to each of their claims against Registrant. By motions dated February 22, 1994 and February 23, 1994, EPA and the State respectively moved for reconsideration of the court's order, which motions were denied. By order dated February 8, 1994, the court permitted the Laurel Park Coalition to file a complaint against eight parties including the Registrant, which claims were to be assigned for trial if the Coalition filed a complaint. On June 24, 1994 , the Registrant settled all claims with both the Beacon Heights Coalition and the Laurel Park Coalition and the respective complaints against the Registrant on behalf of the Coalitions were dismissed by stipulation. -9- 10 On March 17, 1995, the U.S. District Count entered a final judgement in the consolidated proceedings (docket number N-87-52(PCD)) which included the granting of Registrant's motion for judgement on the pleadings. As a result of this judgement, no complaints are now pending in the U.S. District Court involving the Registrant. On April 17, 1995, the State filed its notice of appeal from this final judgement with the U.S. District Court. It is likely that the EPA will also appeal the court's order granting the Registrant's motion for judgement on the pleadings as embodied in said final judgement. The Registrant will continue to vigorously pursue its legal interest in this matter. The Registrant believes that these actions will not have a materially adverse impact on the Registrant's consolidated financial position, operating results or liquidity. There are no other material legal proceedings, other than ordinary routine litigation incidental to the business, to which either the Registrant or any of its subsidiaries is a party to or by which any of their property is the subject. ITEM 2 CHANGES IN SECURITIES None ITEM 3 DEFAULTS UPON SENIOR SECURITIES - None ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None ITEM 5 OTHER INFORMATION - None ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE EASTERN COMPANY (Registrant) Stedman G. Sweet DATE: May 12, 1995 ____________________________________ Stedman G. Sweet President and Chief Executive Officer Donald E. Whitmore, Jr., Vice DATE: May 12, 1995 _______________________________ Donald E. Whitmore, Jr., Vice President and Principal Financial Officer -10- EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR FORM 10Q
5 3-MOS DEC-31-1994 APR-1-1995 3,187,344 0 9,974,886 359,722 10,582,626 25,141,834 24,636,958 11,622,186 42,632,846 7,136,556 0 9,009,392 0 0 21,498,798 42,632,846 17,684,662 17,753,821 13,276,799 13,276,799 2,909,548 32,500 43,645 1,491,329 531,660 959,669 0 0 0 959,669 .35 .34