10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 2012

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:    0599

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)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

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 by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes   [X]No [  ]

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

Large accelerated filer [  ]	Accelerated filer [X]
Non-accelerated filer [  ] (Do not check if a smaller reporting company)	Smaller reporting company [  ]

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

Yes   [  ]No[X]

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 July 25, 2012
Common Stock, No par value	6,219,021

PART 1 – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

THE EASTERN COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

ASSETS	June 30, 2012			December 31, 2011
Current Assets
Cash and cash equivalents	$	14,484,499		$	11,147,297
Accounts receivable, less allowances: $484,000 - 2012; $423,000 - 2011		20,420,689			18,633,088
Inventories		29,550,898			29,793,434
Prepaid expenses and other assets		2,911,757			3,313,186
Recoverable income taxes receivable		-			647,950
Deferred income taxes		1,881,775			1,881,775
Total Current Assets		69,249,618			65,416,730
Property, Plant and Equipment		57,144,955			54,863,020
Accumulated depreciation		(31,769,991	)		(30,228,924	)
		25,374,964			24,634,096
Goodwill		13,902,604			13,905,209
Trademarks		155,342			152,446
Patents, technology, and other intangibles net of accumulated amortization		1,682,170			1,770,008
Deferred income taxes		625,296			821,485
		16,365,412			16,649,148
TOTAL ASSETS	$	110,989,994		$	106,699,974

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LIABILITIES AND SHAREHOLDERS’ EQUITY	June 30, 2012			December 31, 2011
Current Liabilities
Accounts payable	$	8,207,409		$	8,412,245
Accrued compensation		2,595,612			2,999,478
Other accrued expenses		1,612,217			1,060,143
Current portion of long-term debt		1,428,571			3,714,286
Total Current Liabilities		13,843,809			16,186,152
Other long-term liabilities		655,001			655,001
Long-term debt, less current portion		6,785,714			3,035,714
Accrued postretirement benefits		1,901,069			1,853,157
Accrued pension cost		14,725,208			15,811,622
Shareholders’ Equity
Voting Preferred Stock, no par value:
Authorized and unissued: 1,000,000 shares
Nonvoting Preferred Stock, no par value:
Authorized and unissued: 1,000,000 shares
Common Stock, no par value:
Authorized: 50,000,000 shares
Issued: 8,913,750 shares in 2012 and 8,908,607 shares in 2011		28,573,187			28,499,779
Treasury Stock: 2,694,729 shares in 2012 and 2011		(19,105,723	)		(19,105,723	)
Retained earnings		76,635,509			73,200,362
Accumulated other comprehensive income (loss):
Foreign currency translation		2,159,120			2,107,187
Unrecognized net pension and postretirement benefit costs, net of tax		(15,182,900	)		(15,543,277	)
Accumulated other comprehensive loss		(13,023,780	)		(13,436,090	)
Total Shareholders’ Equity		73,079,193			69,158,328
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	110,989,994		$	106,699,974

See accompanying notes.

-3-

THE EASTERN COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Six Months Ended						Three Months Ended
		June 30, 2012			July 2, 2011			June 30, 2012			July 2, 2011
Net sales	$	82,055,483		$	68,708,794		$	41,559,589		$	35,520,182
Cost of products sold		(64,625,627	)		(55,460,341	)		(32,314,199	)		(28,588,070	)
Gross margin		17,429,856			13,248,453			9,245,390			6,932,112
Selling and administrative expenses		(10,116,208	)		(9,230,481	)		(5,101,156	)		(4,633,196	)
Operating profit		7,313,648			4,017,972			4,144,234			2,298,916
Interest expense		(187,904	)		(120,043	)		(98,667	)		(53,040	)
Other income		10,723			9,516			4,587			3,071
Income before income taxes		7,136,467			3,907,445			4,050,154			2,248,947
Income taxes		2,458,513			1,326,472			1,417,808			766,148
Net income	$	4,677,954		$	2,580,973		$	2,632,346		$	1,482,799
Earnings per Share:
Basic	$	.75		$	.42		$	.42		$	.24
Diluted	$	.75		$	.42		$	.42		$	.24
Cash dividends per share:	$	.20		$	.18		$	.10		$	.09

See accompanying notes.

THE EASTERN COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	Six Months Ended				Three Months Ended
		June 30, 2012		July 2, 2011		June 30, 2012			July 2, 2011
Net income	$	4,677,954	$	2,580,973	$	2,632,346		$	1,482,799
Other comprehensive income/(loss):
Change in foreign currency translation		51,933		419,997		(410,952	)		116,810
Change in pension and postretirement benefit costs, net of taxes of: 2012 – $196,189 and $98,104, respectively 2011 – $187,438 and $94,057, respectively		360,377		345,544		180,206			172,772
Total other comprehensive income/(loss)		412,310		765,541		(230,746	)		289,582
Comprehensive income	$	5,090,264	$	3,346,514	$	2,401,600		$	1,772,381

See accompanying notes.

-4-

THE EASTERN COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Six Months Ended
	June 30, 2012			July 2, 2011
Operating Activities
Net income	$	4,677,954		$	2,580,973
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation and amortization		1,710,686			1,815,098
Loss on sale of equipment and other assets		17,756			-
Provision for doubtful accounts		65,159			33,403
Issuance of Common Stock for directors’ fees		12,298			12,301
Changes in operating assets and liabilities:
Accounts receivable		(1,811,994	)		(3,169,134	)
Inventories		268,835			(311,550	)
Prepaid expenses and other		411,292			(509,981	)
Prepaid pension cost		(517,902	)		249,140
Recoverable taxes receivable		647,949			-
Other assets		(34,196	)		(29,950	)
Accounts payable		(228,004	)		120,723
Accrued compensation		(395,312	)		(1,331,130	)
Other accrued expenses		570,077			129,293
Net cash provided (used) by operating activities		5,394,598			(410,814	)
Investing Activities
Purchases of property, plant and equipment		(2,371,770	)		(1,843,634	)
Proceeds from sales of equipment and other assets		19,000			-
Net cash used in investing activities		(2,352,770	)		(1,843,634	)
Financing Activities
Principal payments on long-term debt		(535,714	)		(535,714	)
Principal payments on revolving credit loan		(3,000,000	)		-
Proceeds from issuance of long-term debt		5,000,000			-
Proceeds from sales of Common Stock		61,110			90,990
Tax Benefit from disqualifying disposition of incentive stock options		-			16,453
Dividends paid		(1,242,807	)		(1,109,824	)
Net cash provided by/(used in) financing activities		282,589			(1,538,095	)
Effect of exchange rate changes on cash		12,785			17,158
Net change in cash and cash equivalents		3,337,202			(3,775,385	)
Cash and cash equivalents at beginning of period		11,147,297			12,224,608
Cash and cash equivalents at end of period	$	14,484,499		$	8,449,223

See accompanying notes.

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THE EASTERN COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 30, 2012

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 in the United States for complete financial statements. Refer to the Company’s consolidated financial statements and notes thereto included in its Form 10-K for the year ended December 31, 2011 for additional information.

The accompanying condensed consolidated financial statements are unaudited. However, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for interim periods have been reflected therein. All intercompany accounts and transactions are eliminated. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.

The condensed consolidated balance sheet as of December 31, 2011 has been derived from the audited consolidated balance sheet at that date.

Note B – Earnings Per Share

The denominators used in the earnings per share computations follow:

	Six Months Ended		Three Months Ended
	June 30, 2012	July 2, 2011	June 30, 2012	July 2, 2011
Basic:
Weighted average shares outstanding	6,214,644	6,164,798	6,217,198	6,166,883
Diluted:
Weighted average shares outstanding	6,214,644	6,164,798	6,217,198	6,166,883
Dilutive stock options	15,981	50,984	14,137	51,609
Denominator for diluted earnings per share	6,230,625	6,215,782	6,231,335	6,218,492

Note C – Inventories

The components of inventories follow:

	June 30, 2012	December 31, 2011
Raw material and component parts	$  11,761,257	$  11,863,199
Work in process	6,382,994	6,425,914
Finished goods	11,406,647	11,504,321
	$  29,550,898	$  29,793,434

 -6-

Note D – Segment Information

Segment financial information follows:

	Six Months Ended						Three Months Ended
	June 30, 2012			July 2, 2011			June 30, 2012			July 2, 2011
Revenues:
Sales to unaffiliated customers:
Industrial Hardware	$	36,954,659		$	29,466,082		$	17,746,959		$	14,865,806
Security Products		26,096,043			24,593,978			13,981,220			12,974,240
Metal Products		19,004,781			14,648,734			9,831,410			7,680,136
	$	82,055,483		$	68,708,794		$	41,559,589		$	35,520,182
Income before income taxes:
Industrial Hardware	$	4,089,783		$	1,984,681		$	2,125,226		$	1,050,796
Security Products		2,343,204			1,639,029			1,547,636			1,083,151
Metal Products		880,661			394,262			471,372			164,969
Operating Profit		7,313,648			4,017,972			4,144,234			2,298,916
Interest expense		(187,904	)		(120,043	)		(98,667	)		(53,040	)
Other income		10,723			9,516			4,587			3,071
	$	7,136,467		$	3,907,445		$	4,050,154		$	2,248,947

Note E – Recent Accounting Pronouncements

In May 2011, the FASB issued authoritative guidance which clarifies the concepts related to highest and best use and valuation premise, blockage factors and other premiums and discounts, the fair value measurement of financial instruments held in a portfolio and of those instruments classified as a component of shareowners’ equity. The guidance includes enhanced disclosure requirements about recurring Level 3 fair value measurements, the use of nonfinancial assets, and the level in the fair value hierarchy of assets and liabilities not recorded at fair value.  This guidance became effective for the Company on January 1, 2012. This guidance did not have an impact on our consolidated financial statements or disclosures, as there are presently no recurring Level 3 fair value measurements.

In June 2011, the FASB issued authoritative guidance aimed at increasing the prominence of items reported in other comprehensive income in the financial statements. In December 2011, the FASB also issued an accounting standards update that indefinitely deferred certain financial statement presentation provisions contained in its original June 2011 guidance. The guidance requires companies to present comprehensive income in a single statement below net income or in a separate statement of comprehensive income immediately following the income statement. Companies will no longer be allowed to present comprehensive income on the statement of changes in shareholders' equity. In both options, companies must present the components of net income, total net income, the components of other comprehensive income, total other comprehensive income and total comprehensive income. This update does not change which items are reported in other comprehensive income or the requirement to report reclassifications of items from other comprehensive income to net income. This guidance became effective for the Company on January 1, 2012 and required retrospective application for all periods presented.  The adoption of this guidance did not impact the presentation of the consolidated financial statements of the Company.

-7-

In September 2011, the FASB issued authoritative guidance on testing goodwill for impairment.  This guidance provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity determines that the fair value of a reporting unit is less than its carrying amount, it is required to perform the currently prescribed two-step goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit, if any.  The Company adopted this guidance effective January 1, 2012 and it had no impact on the consolidated financial statements of the Company.

The Company has implemented all new accounting pronouncements that are in effect and that could impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued, but are not yet effective, that might have a material impact on the consolidated financial statements of the Company.

Note F – Debt

On January 25, 2012, the Company signed an amendment to its secured Loan Agreement with People’s United Bank (“People’s”) which included an additional $5,000,000 term portion (the “2012 Term Loan”).  The 2012 Term Loan requires quarterly payments of $178,571 for a period of seven (7) years, maturing on January 31, 2019.

Interest on the original term portion of the Loan Agreement is fixed at 4.98%.  Interest on the 2012 Term Loan is fixed at 3.90%   Prior to the amendment, the interest rate on the revolving credit portion of the Loan Agreement varied based on the LIBOR rate or People’s Prime rate plus a margin spread of 2.25%, with a floor rate of 4.0%.  As part of the amendment signed on January 25, 2012, this was changed to the LIBOR rate or People’s Prime rate plus 2.25%, with a floor of 3.25%; additionally the maturity date was extended to January 31, 2014.  During December 2011, the Company used $3,000,000 of the revolving credit, the proceeds of which, along with existing cash, were used to fund a discretionary pension payment made in December, 2011.  This amount was repaid in January 2012.  The Company did not utilize the revolving credit during the quarter ended June 30, 2012.

Note G – Goodwill

The following is a roll-forward of goodwill from year-end 2011 to the end of the second quarter 2012:

	Industrial Hardware Segment			Security Products Segment		Metal Products Segment		Total
Beginning balance	$	2,071,393		$	11,833,816	$	—	$	13,905,209
Foreign exchange		(2,605	)		—		—		(2,605	)
Ending balance	$	2,068,788		$	11,833,816	$	—	$	13,902,604

Note H – Intangibles

Patents are recorded at cost and are amortized using the straight-line method over the lives of the patents. Technology and licenses are recorded at cost and are generally amortized on a straight-line basis over periods ranging from 5 to 17 years. Non-compete agreements and customer relationships are being amortized using the straight-line method over a period of 5 years. Trademarks are not amortized as their lives are deemed to be indefinite.

-8-

The gross carrying amount and accumulated amortization of amortizable intangible assets:

	Industrial Hardware Segment		Security Products Segment		Metal Products Segment		Total		Weighted-Average Amortization Period (Years)
2012 Gross Amount:
Patents and developed technology	$	2,697,545	$	998,281	$	5,839	$	3,701,665	15.8
Customer relationships		45,825		—		—		45,825	5.0
Non-compete agreements		30,000		—		—		30,000	5.0
Total Gross Intangibles	$	2,773,370	$	998,281	$	5,839	$	3,777,490	15.6
2012 Accumulated Amortization:
Patents and developed technology	$	1,581,869	$	439,713	$	5,495	$	2,027,077
Customer relationships		41,243		—		—		41,243
Non-compete agreements		27,000		—		—		27,000
Total Gross Amortization	$	1,650,112	$	439,713	$	5,495	$	2,095,320
Net June 30, 2012         per Balance Sheet	$	1,123,258	$	558,568	$	344	$	1,682,170

	Industrial Hardware Segment		Security Products Segment		Metal Products Segment		Total		Weighted-Average Amortization Period (Years)
2011 Gross Amount:
Patents and developed technology	$	2,714,900	$	1,062,652	$	5,839	$	3,783,391	15.5
Customer relationships		45,825		1,921,811		—		1,967,636	5.0
Non-compete agreements		30,000		90,735		—		120,735	5.0
Total Gross Intangibles	$	2,790,725	$	3,075,198	$	5,839	$	5,871,762	11.7
2011 Accumulated Amortization:
Patents and developed technology	$	1,528,007	$	495,218	$	5,323	$	2,028,548
Customer relationships		36,660		1,921,811		—		1,958,471
Non-compete agreements		24,000		90,735		—		114,735
Total Gross Amortization	$	1,588,667	$	2,507,764	$	5,323	$	4,101,754
Net December 31, 2011 per Balance Sheet	$	1,202,058	$	567,434	$	516	$	1,770,008

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Note I – Retirement Benefit Plans

The Company has non-contributory defined benefit pension plans covering certain U.S. employees. Plan benefits are generally based upon age at retirement, years of service and, for its salaried plan, the level of compensation. The Company also sponsors unfunded nonqualified supplemental retirement plans that provide certain current and former officers with benefits in excess of limits imposed by federal tax law.

The Company also provides health care and life insurance for retired salaried employees in the United States who meet specific eligibility requirements.

Significant disclosures relating to these benefit plans for the second quarter and first six months of fiscal 2012 and 2011 follow:

	Pension Benefits
	Six Months Ended						Three Months Ended
	June 30, 2012			July 2,  2011			June 30, 2012			July 2,  2011
Service cost	$	1,347,196		$	1,060,503		$	674,549		$	530,251
Interest cost		1,427,960			1,474,837			713,980			737,419
Expected return on plan assets		(1,965,495	)		(1,825,142	)		(982,748	)		(912,571	)
Amortization of prior service cost		82,819			97,075			41,410			48,538
Amortization of the net loss		485,692			448,527			242,845			224,263
Net periodic benefit cost	$	1,378,172		$	1,255,800		$	690,036		$	627,900

	Postretirement Benefits
	Six Months Ended						Three Months Ended
	June 30, 2012			July 2,  2011			June 30, 2012			July 2,  2011
Service cost	$	86,807		$	63,232		$	49,307		$	31,616
Interest cost		71,694			68,376			37,694			34,188
Expected return on plan assets		(48,520	)		(49,650	)		(24,270	)		(24,825	)
Amortization of prior service cost		(11,945	)		(11,944	)		(5,945	)		(5,972	)
Amortization of the net loss		-			-			-			-
Net periodic benefit cost	$	98,036		$	70,014		$	56,786		$	35,007

The Company’s funding policy with respect to its qualified plans is to contribute at least the minimum amount required by applicable laws and regulations. In 2012, the Company is required to contribute $3,472,000 into its pension plans and $155,000 into its postretirement plan. As of June 30, 2012, the Company has made contributions totaling $1,881,000 into its pension plans and $62,000 to its postretirement plan and will make the remaining contributions as required during the remainder of the year.

The Company has a contributory savings plan under Section 401(k) of the Internal Revenue Code covering substantially all U.S. non-union employees. The plan allows participants to make voluntary contributions of up to 100% of their annual compensation on a pretax basis, subject to IRS limitations. The plan provides for contributions by the Company at its discretion. The Company made contributions of $47,272 and $96,729 in the second quarter and first six months of 2012, respectively and $45,026 and $93,157 in the second quarter and first six months of 2011, respectively.

-10-

Note J – Stock Based Compensation and Stock Options

The Company has stock option plans for officers, other key employees, and non-employee directors. As of June 30, 2012 two plans have shares reserved for future issuance, the 1995 and 2010 plans.  Incentive stock options granted under the 1995 and 2010 plans must have exercise prices that are not less than 100% of the fair market value of the stock on the dates the options are granted. Restricted stock awards may also be granted to participants under the 2010 plan with restrictions determined by the Compensation Committee of the Company’s Board of Directors. Under the 1995 and 2010 plans, nonqualified stock options granted to participants will have exercise prices determined by the Compensation Committee of the Company’s Board of Directors. No options or restricted stock were granted in the first six months of 2012 or 2011.

As of June 30, 2012, there were 500,000 shares available for future grant under the above noted 2010 plan and there were no shares available for grant under the 1995 plan.  As of June 30, 2012, there were 521,000 shares of common stock reserved under all option plans for future issuance.

	Six Months Ended June 30, 2012				Year Ended December 31, 2011
	Shares		Weighted - Average Exercise Price		Shares		Weighted - Average Exercise Price
Outstanding at beginning of period	25,500		$	13.580	80,000		$	12.471
Exercised	(4,500	)		13.580	(54,500	)		11.952
Outstanding at end of period	21,000			13.580	25,500			13.580

Options Outstanding and Exercisable
Range of Exercise Prices	Outstanding as of June 30, 2012	Weighted- Average Remaining Contractual Life	Weighted- Average Exercise Price
$13.58	21,000	2.5	13.580

At June 30, 2012, outstanding and exercisable options had an intrinsic value of $53,970.  The total intrinsic value of stock options exercised in the first six months of 2012 was $14,535.  For the six month periods ended June 30, 2012 and July 2, 2011, the Company recognized tax benefits of $0 and $16,453, respectively, resulting from the disqualification of incentive stock options that were exercised and sold prior to the required holding period.

Note K – Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions.  With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2008 and non-U.S. income tax examinations by tax authorities prior to 2005.

The total amount of unrecognized tax benefits could increase or decrease within the next twelve months for a number of reasons, including the closure of federal, state and foreign tax years by expiration of the statute of limitations and the recognition and measurement considerations under FASB Accounting Standards Codification (“ASC”) 740.  There have been no significant changes to the amount of unrecognized tax benefits during the three or six months ended June 30, 2012.  The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits will not increase or decrease significantly over the next twelve months.

-11-

Note L - Financial Instruments and Fair Value Measurements

Financial Risk Management Objectives and Policies

The Company is exposed primarily to credit, interest rate and currency exchange rate risks which arise in the normal course of business.

Credit Risk

Credit risk is the potential financial loss resulting from the failure of a customer or counterparty to settle its financial and contractual obligations to the Company, as and when they become due. The primary credit risk for the Company is its receivable accounts with customers. The Company has established credit limits for customers and monitors their balances to mitigate the risk of loss. At June 30, 2012 and December 31, 2011, there were no significant concentrations of credit risk. No one customer represented more than 10% of the Company’s net trade receivables at June 30, 2012.  At year end 2011 only one customer exceeded 10% of total receivables.  The maximum exposure to credit risk is primarily represented by the carrying amount of the Company’s accounts receivable.

Interest Rate Risk

On June 30, 2012, the Company has no exposure to the risk of changes in market interest rates as the interest rates on the outstanding debt are fixed at 4.98% and 3.90%.

Fair Value Measurements

Assets and liabilities that require fair value measurement are recorded at fair value using market and income valuation approaches and considering the Company’s and counterparty’s credit risk. The Company uses the market approach and the income approach to value assets and liabilities as appropriate. There are no assets or liabilities requiring fair value measurements on June 30, 2012 or December 31, 2011.

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to highlight significant changes in the Company’s financial position and results of operations for the twenty-six weeks ended June 30, 2012. The interim financial statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and Notes thereto for the fiscal year ended December 31, 2011 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

Certain statements set forth in this discussion and analysis of financial condition and results of operations are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. They use such words as “may,” “will,” “expect,” “believe,” “plan” and other similar terminology. These statements reflect management’s current expectations regarding future events and operating performance and speak only as of the date of this release. These forward-looking statements involve a number of risks and uncertainties, and actual future results and trends may differ materially depending on a variety of factors, including changing customer preferences, lack of success of new products, loss of customers, competition, increased raw material prices, problems associated with foreign sourcing of parts and products, changes within our industry segments and in the overall economy, litigation and legislation. In addition, terrorist threats and the possible responses by the U.S. government, the effects on consumer demand, the financial markets, the travel industry, the trucking industry and other conditions increase the uncertainty inherent in forward-looking statements. Forward-looking statements reflect the expectations of the Company at the time they are made, and investors should rely on them only as expressions of opinion about what may happen in the future and only at the time they are made. The Company undertakes no obligation to update any forward-looking statement. Although the Company believes it has an appropriate business strategy and the resources necessary for its operations, future revenue and margin trends cannot be reliably predicted and the Company may alter its business strategies to address changing conditions.

-12-

In addition, the Company makes estimates and assumptions that may materially affect reported amounts and disclosures. These relate to valuation allowances for accounts receivable and for excess and obsolete inventories, accruals for pensions and other postretirement benefits (including forecasted future cost increases and returns on plan assets), provisions for depreciation (estimating useful lives), uncertain tax positions, and, on occasion, accruals for contingent losses.

Overview

Sales in the second quarter of 2012 increased 17% compared to the second quarter of 2011, as a result of an increase in sales of existing products in many of the markets we serve, selective price increases to customers and the introduction of new products.  In the second quarter of 2012 Industrial Hardware sales increased 19%, Security Products sales increased 8% and Metal Products sales increased 28% compared to the prior year period.

Gross margin as a percentage of sales for the three months ended June 30, 2012 increased slightly to 22% compared to 20% in the comparable period a year ago.  This increase was the result of higher sales volume, selective price increases to customers, the mix of products produced and the introduction of new products.

Sales in the first six months of 2012 increased 19% compared to the prior year period as a result of an increase in sales of existing products in many of the markets we serve, selective price increases to customers and the introduction of new products.  Sales increased in the first six months of 2012 by 25% in the Industrial Hardware segment, by 6% in the Security Products segment, and by 30% in the Metal Products segment compared to the prior year period.

Gross margin as a percentage of sales for the six months ended June 30, 2012 was 21% compared to 19% in the comparable period a year ago.  This increase was the result of higher sales volume, selective price increases to customers, the mix of products produced and the introduction of new products.

Raw material prices have increased compared to the prior year periods.  The Company, through price increases, is recovering these additional costs from our customers, wherever possible.  The Company expects that raw material prices will continue to increase as worldwide economic conditions improve, which may have a negative impact on future operating margins if not recovered by price increases.  Currently, there is no indication that the Company will be unable to obtain supplies of all the raw materials that it requires.

Cash flow from operations in the first six months of 2012 increased compared to the same period in 2011. This increase is primarily due to the higher level of earnings in the 2012 period and the associated timing differences in the collections of accounts receivable, payments of liabilities, and changes in inventories.  Cash on hand, cash flow from operations, along with the result of controlling discretionary expenditures, should enable the Company to meet all its existing obligations and continue its quarterly dividend payments.

-13-

A more detailed analysis of the Company’s results of operations and financial condition follows:

Results of Operations

The following table shows, for the periods indicated, selected line items from the condensed consolidated statements of operations as a percentage of net sales, by segment:

	Three Months Ended June 30, 2012
	Industrial	Security	Metal
	Hardware	Products	Products	Total
Net sales	100.0%	100.0%	100.0%	100.0%
Cost of products sold	74.1%	74.4%	89.1%	77.8%
Gross margin	25.9%	25.6%	10.9%	22.2%
Selling and administrative expense	13.9%	14.5%	6.1%	12.2%
Operating profit	12.0%	11.1%	4.8%	10.0%
	Three Months Ended July 2, 2011
	Industrial	Security	Metal
	Hardware	Products	Products	Total
Net sales	100.0%	100.0%	100.0%	100.0%
Cost of products sold	79.0%	75.9%	90.9%	80.4%
Gross margin	21.0%	24.1%	9.1%	19.6%
Selling and administrative expense	13.9%	15.8%	6.9%	13.1%
Operating profit	7.1%	8.3%	2.2%	6.5%

The following table shows the amount of change for the second quarter of 2012 compared to the second quarter of 2011 in sales, cost of products sold, gross margin, selling and administrative expenses and operating profit, by segment (dollars in thousands):

	Industrial	Security	Metal
	Hardware	Products	Products	Total
Net sales	$ 2,881	$ 1,007	$ 2,151	$ 6,039
Volume	15.4%	6.3%	-6.3%	7.4%
Prices	0.4%	0.8%	4.2%	1.4%
New products	3.6%	0.7%	30.1%	8.2%
	19.4%	7.8%	28.0%	17.0%
Cost of products sold	$ 1,416	$ 552	$ 1,777	$ 3,745
	12.1%	5.6%	25.4%	13.1%
Gross margin	$ 1,465	$    455	$    374	$ 2,294
	46.9%	14.5%	53.8%	33.0%
Selling and administrative expenses	$    391	$    (10)	$      68	$    449
	18.8%	-0.5%	12.8%	9.7%
Operating profit	$ 1,074	$    465	$    306	$ 1,845
	102.2%	42.9%	185.7%	80.3%

-14-

The following table shows, for the periods indicated, selected line items from the condensed consolidated statements of income as a percentage of net sales, by segment:

	Six Months Ended June 30, 2012
	Industrial	Security	Metal
	Hardware	Products	Products	Total
Net sales	100.0%	100.0%	100.0%	100.0%
Cost of products sold	75.5%	75.9%	89.1%	78.8%
Gross margin	24.5%	24.1%	10.9%	21.2%
Selling and administrative expense	13.4%	15.1%	6.3%	12.3%
Operating profit	11.1%	9.0%	4.6%	8.9%
	Six Months Ended July 2, 2011
	Industrial	Security	Metal
	Hardware	Products	Products	Total
Net sales	100.0%	100.0%	100.0%	100.0%
Cost of products sold	79.1%	77.0%	90.3%	80.7%
Gross margin	20.9%	23.0%	9.7%	19.3%
Selling and administrative expense	14.2%	16.4%	7.0%	13.5%
Operating profit	6.7%	6.6%	2.7%	5.8%

The following table shows the amount of change for the first six months of 2012 compared to the first six months of 2011 in sales, cost of products sold, gross margin, selling and administrative expenses and operating profit, by segment (dollars in thousands):

	Industrial	Security	Metal
	Hardware	Products	Products	Total
Net sales	$ 7,489	$ 1,502	$ 4,356	$13,347
Volume	21.7%	4.5%	2.9%	11.5%
Prices	0.4%	0.7%	3.3%	1.1%
New products	3.3%	0.9%	23.5%	6.8%
	25.4%	6.1%	29.7%	19.4%
Cost of products sold	$ 4,609	$   871	$ 3,704	$ 9,184
	19.8%	4.6%	28.0%	16.6%
Gross margin	$ 2,880	$   631	$   652	$ 4,163
	46.6%	11.1%	45.8%	31.4%
Selling and administrative expenses	$    774	$  (73)	$   166	$    867
	18.5%	-1.8%	16.1%	9.4%
Operating profit	$ 2,106	$  704	$   486	$ 3,296
	106.1%	43.0%	123.4%	82.0%

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Industrial Hardware Segment

Net sales in the Industrial Hardware segment were up 19% in the second quarter of 2012 and up 25% in the first six months compared to the prior year periods.  The higher sales in both the second quarter and six month period of 2012 reflected an increase in sales of existing products to the distribution, truck accessory, military and Class 8 truck markets in 2012 compared to the same period in 2011, selective price increases to customers and the introduction of new products.  All of the new products were developed internally and included a rotary latch and a venting line of products for the Class 8 truck market; an escape hatch for the military market; a door latch for the recreational vehicle market; as well as a variety of locking and latching products for the many markets we serve.

Cost of products sold for the Industrial Hardware segment increased 12% in the second quarter and 20% in the first half of 2012 compared to the prior year periods.  The increases are due to increased costs for payroll and payroll related charges, supplies and tools, equipment maintenance, utilities, shipping, raw materials and purchased parts.

Gross margin as a percent of net sales increased to 26% in the second quarter of 2012 from 21% in the 2011 quarter.  Gross margin in the first half of 2012 increased to 25% from 21% in the prior year period.  The increase in gross margin for the 2012 periods reflects the higher volume of sales in 2012 and the mix of products produced.

Selling and administrative expenses increased 19%for both the second quarter and first half of 2012 compared to the prior year periods, primarily due to increased payroll and payroll related charges, advertising, commission payments resulting from the higher sales volume in 2012, bad debt expense and an increase in the allocation of corporate expenses based on the sales volume in 2012.

Security Products Segment

Net sales in the Security Products segment increased 8% in the second quarter and 6% in the first half of 2012 compared to the 2011 periods.  The increase in sales in both the second quarter and six months of 2012 in the Security Products segment is a combination of increased sales of existing products, selective price increases to customers and sales of new products.  The increase in sales of existing products in 2012 in the Security Products segment resulted from sales to the many markets served by this segment, including: computer, storage, cash management and commercial laundry. Sales of new products included new lock products for the storage and cash management markets.

Cost of products sold for the Security Products segment increased 6% in the second quarter and 5% in the first half of 2012 compared to the same periods in 2011.  The increases in the second quarter and first half of 2012 were primarily the result of increased costs for raw materials.

Gross margin as a percentage of sales in the second quarter increased to 26% in 2012 from 24% in the prior year period and also increased slightly in the first half to 24% from 23% in the prior year period.  The increases in both the second quarter and first half of 2012 were primarily the result of the mix of products produced and the increased sales volume.

Selling and administrative expenses decreased 1% in the second quarter and 2% in the first half of 2012 as compared to the 2011 periods.  The decreases in the 2012 periods were primarily due to travel expenses and a reduction in amortization expense in 2012 resulting from acquisition costs related to Royal Lock which were fully amortized in 2011.   These decreases were reduced by increased costs for payroll and payroll related charges.

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Metal Products Segment

Net sales in the Metal Products segment were up 28% in the second quarter and up 30% in the first half of 2012 as compared to the prior year periods.  Sales of mining products were up 13% in the second quarter and up 20% in the first half of 2012 compared to the prior year periods.  The increase in sales of mining products was driven by continued strong demand in 2012 in both the U.S. and Canadian mining markets compared to the prior year periods and the introduction of new mining products.  New mining products included hexnuts, square cableheads, truss shoes, splice tubes, bearing blocks and steel mine anchor shells.  While the Company experienced a strong first half in sales of products for the coal mining industry, the coal mining industry is forecasting a softening in coal usage beginning during the second half of 2012 resulting from new clean air rules enacted by the U.S. Environmental Protection Agency (“EPA”), which may negatively impact the Company.   Sales of contract castings increased 183% in the second quarter and 123% in the first half of 2012 from the prior year levels.  The increase in sales of contract casting was primarily the result of new products: a tie plate for the railroad industry and kicker clips and rail clamps for a solar panel application.  The Company is actively trying to develop additional new products to replace any softening in sales volume of mining products that may result from the new EPA clean air regulations.

Cost of products sold increased 25% in the second quarter and 28% in the first half of 2012 compared to the same periods in 2011.  The increases in both 2012 periods resulted from the mix of products produced and manufacturing costs associated with the higher volume of sales in 2012.

Gross margin as a percentage of net sales increased from 9% to 11% in the second quarter of 2012 as compared to the 2011 period and increased from 10% to 11% for the first half of 2012 compared to the 2011 period. The increases in both the second quarter and first half of 2012 as compared to the prior year periods are due to the mix of products produced, elimination of products with unacceptable profit margins, price increases to customers, and cost reductions related to improved production efficiency.

Selling and administrative expenses were up 13% in the second quarter and 16% in the first half of 2012 compared to the same periods in 2011.  The increases were primarily related to an increase in payroll and payroll related charges and an increase in the allocation of corporate expenses based on the sales volume in 2012.

Other Items

Interest expense increased 86% in the second quarter and 57% in the first six months of 2012 compared to the prior year period due to the increased level of debt in 2012.

Other income was not material to the financial statements.

Income taxes reflected the change in the operating results.  The effective tax rates in the second quarter and first six months of 2012 were 35% and 34%, respectively, compared to 34% in both periods of 2011.

Liquidity and Sources of Capital

The Company provided $5.4 million from its operations during the first six months of 2012 compared to having used $400,000 during the same period in 2011.  The increase in cash flows in the quarter was primarily the result of the increased earnings in the current year over the same period last year and the associated timing differences in the collections of accounts receivable, payments of liabilities, and changes in inventories.  Cash flow from operations coupled with cash on hand at the beginning of the year was sufficient to fund capital expenditures, debt service, and dividend payments.  The Company did not utilize its revolving line of credit during the second quarter.

Additions to property, plant and equipment were $2.4 million for the first six months of 2012 compared to $1.8 million for the same period in 2011.  Total capital expenditures for 2012 are expected to be approximately $4 - $5 million.  As of June 30, 2012, there is approximately $350,000 of outstanding commitments for these capital expenditures.

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The following table shows key financial ratios at the end of each period:

	Second Quarter 2012		Second Quarter 2011		Year End 2011
Current ratio	5.0		5.4		4.0
Average days’ sales in accounts receivable	45		51		45
Inventory turnover	4.4		3.9		3.9
Total debt to shareholders’ equity	11.2	%	5.4	%	9.8	%

The following table shows important liquidity measures as of the balance sheet date for each period below (in millions):

		Second Quarter 2012		Second Quarter 2011		Year End 2011
Cash and cash equivalents	$	14.5	$	8.4	$	11.1
Working capital		55.4		49.8		49.2
Net cash provided by/(used in) by operating activities		5.4		(0.4	)	1.4
Change in working capital impact on net cash     used in operating activities		(1.1	)	(4.8	)	(9.7	)
Net cash used in investing activities		(2.4	)	(1.8	)	(3.4	)
Net cash provided by/(used in) financing activities		0.3		(1.5	)	0.8

Total inventories as of June 30, 2012 were $29.6 million, compared to $29.8 million at year end 2011 and $28.7 million at the end of the second quarter of 2011.  Accounts receivable increased to $20.4 million from $18.6 million at year end 2011 and $19.7 million at the end of the second quarter of fiscal 2011.  The increases are related to higher revenues in the first six months of the current year.

Cash on hand, cash flow from operating activities and funds available under the revolving credit portion of the Company’s Loan Agreement are expected to be sufficient to cover future foreseeable working capital requirements.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in market risk from what was reported in the 2011 Annual Report on Form 10-K.

ITEM 4 – CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures:

As of the end of the quarter ended June 30, 2012, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 240.13a-15.  As defined in Exchange Act Rules 240.13a-15(e) and 240.15d-15(e), “the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.”  Based upon that evaluation, the CEO and CFO concluded that the Company’s current disclosure controls and procedures were effective as of the June 30, 2012 evaluation date.

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The Company believes that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and the CEO and CFO have concluded that these controls and procedures are effective at the “reasonable assurance” level.

Changes in Internal Controls:

During the period covered by this report, there have been no significant changes in the Company’s internal control over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls.

PART II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

During the fourth quarter of 2010, the Company was contacted by the State of Illinois regarding potential ground contamination at our plant in Wheeling, Illinois.  The Company enlisted into a voluntary remediation program in Illinois and has engaged an environmental clean-up company to perform testing and develop a remediation plan, if needed.  No estimate for the cost of remediation was available when this Form 10-Q was filed with the SEC.

During 2008, the U.S. Environmental Protection Agency identified the Company as a potentially responsible party in connection with a site in Cleveland, Ohio based on the ownership of the site by a division of the Company in the 1960’s.  According to the Agency, the current occupant of the site filed bankruptcy, leaving behind plating operations which required remedial action.  The Company declined to participate in the remedial action, and intends to defend against any efforts of the Agency to impose any liability against the Company for environmental conditions on this site which may have occurred in the years since its ownership.

There are no other legal proceedings, other than ordinary routine litigation incidental to the Company’s business, to which either the Company or any of its subsidiaries is a party or to which any of their property is the subject.

ITEM 1A – RISK FACTORS

There have been no material changes in risk factors from what was reported in the 2011 Annual Report on Form 10-K.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There have been no sales of unregistered securities by the Company or purchases of registered equity securities by the Company during the period covered by this report.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4 – MINE SAFETY DISCLOSURES

Not applicable.

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ITEM 5 – OTHER INFORMATION

None

ITEM 6 – EXHIBITS

31) Certifications required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32) Certifications pursuant to Rule 13a-14(b) and 18 USC 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99(1)) The Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 is incorporated herein by reference.

99(2)) Form 8-K filed on April 25, 2012 setting forth the press release reporting the Company’s earnings for the quarter ended April 25, 2012 is incorporated herein by reference.

99(3)) Form 8-K filed on April 26, 2012 setting forth the results of the vote at the annual meeting of shareholders of the Company which was held on April 25, 2012 is incorporated herein by reference.

99(4)) Form 8-K filed on June 15, 2012 setting forth the press release that the Company is set to join the Russell Global Index when Russell Investments reconstitutes its comprehensive set of global equity indexes on June 25, 2012 is incorporated herein by reference.

99(5)) Form 8-K filed on July 25, 2012 setting forth the press release reporting the Company’s earnings for the quarter ended June 30, 2012 is incorporated herein by reference.

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)
DATE:  July 27, 2012	/s/Leonard F. Leganza
	Leonard F. Leganza Chairman, President and Chief Executive Officer
DATE:  July 27, 2012	/s/John L. Sullivan III
	John L. Sullivan III Vice President and Chief Financial Officer

-20- 

EX-31

EXHIBIT 31

CERTIFICATIONS

I, Leonard F. Leganza, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of The Eastern Company;

2.   Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)   designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)   all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:    July 27, 2012     

/s/ Leonard F. Leganza

Leonard F. Leganza

CEO

EXHIBIT 31

CERTIFICATIONS

I, John L. Sullivan III, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of The Eastern Company;

2.   Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)   designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)   all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:    July 27, 2012                                

/s/ John L. Sullivan III

John L. Sullivan III

CFO

EX-32

EXHIBIT 32

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND

CHIEF FINANCIAL OFFICER

Pursuant to 18 United States Code Section 1350,

as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Leonard F. Leganza, the Chief Executive Officer of The Eastern Company (the “Company”) and John L. Sullivan III, the Chief Financial Officer of the Company, hereby certify that, to the best of their knowledge:

1) The Company’s Quarterly Report on Form 10-Q for the Period ended June 30, 2012, and to which this certification is attached as Exhibit 32 (the “Periodic Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

2) The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

In Witness Whereof, the undersigned have set their hands hereto as of the 27th day of July, 2012.

/s/ Leonard F. Leganza

Leonard F. Leganza

CEO

/s/ John L. Sullivan III

John L. Sullivan III

CFO

A signed original of this written statement required by Section 906 has been provided to The Eastern Company and will be retained by The Eastern Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification “accompanies” the Form 10-Q to which it relates, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q, irrespective of any general incorporation language contained in such filing.)

XML

Retirement Benefit Plans (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jun. 30, 2012	Jul. 02, 2011
Significant disclosures relating to benefit plans [Abstract]
Percentage of voluntary contributions allowed to participants, maximum (in hundredths)			100.00%
Contributions made by the Company under Section 401(k)	$ 47,272	$ 45,026	$ 96,729	$ 93,157
Pension Benefits [Member]
Significant disclosures relating to benefit plans [Abstract]
Service cost	674,549	530,251	1,347,196	1,060,503
Interest cost	713,980	737,419	1,427,960	1,474,837
Expected return on plan assets	(982,748)	(912,571)	(1,965,495)	(1,825,142)
Amortization of prior service cost	41,410	48,538	82,819	97,075
Amortization of the net loss	242,845	224,263	485,692	448,527
Net periodic benefit cost	690,036	627,900	1,378,172	1,255,800
Contributions required by the company in defined benefit plan in 2012	3,472,000		3,472,000
Contributions made by Company			1,881,000
Postretirement Benefits [Member]
Significant disclosures relating to benefit plans [Abstract]
Service cost	49,307	31,616	86,807	63,232
Interest cost	37,694	34,188	71,694	68,376
Expected return on plan assets	(24,270)	(24,825)	(48,520)	(49,650)
Amortization of prior service cost	(5,945)	(5,972)	(11,945)	(11,944)
Amortization of the net loss	0	0	0	0
Net periodic benefit cost	56,786	35,007	98,036	70,014
Contributions required by the company in defined benefit plan in 2012	155,000		155,000
Contributions made by Company			$ 62,000

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Retirement Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2012

Retirement Benefit Plans [Abstract]

Significant disclosures relating to benefit plans

Significant disclosures relating to these benefit plans for the second quarter and first six months of fiscal 2012 and 2011 follow:

	Pension Benefits
	Six Months Ended						Three Months Ended
	June 30, 2012			July 2,  2011			June 30, 2012			July 2,  2011
Service cost	$	1,347,196		$	1,060,503		$	674,549		$	530,251
Interest cost		1,427,960			1,474,837			713,980			737,419
Expected return on plan assets		(1,965,495	)		(1,825,142	)		(982,748	)		(912,571	)
Amortization of prior service cost		82,819			97,075			41,410			48,538
Amortization of the net loss		485,692			448,527			242,845			224,263
Net periodic benefit cost	$	1,378,172		$	1,255,800		$	690,036		$	627,900

	Postretirement Benefits
	Six Months Ended						Three Months Ended
	June 30, 2012			July 2,  2011			June 30, 2012			July 2,  2011
Service cost	$	86,807		$	63,232		$	49,307		$	31,616
Interest cost		71,694			68,376			37,694			34,188
Expected return on plan assets		(48,520	)		(49,650	)		(24,270	)		(24,825	)
Amortization of prior service cost		(11,945	)		(11,944	)		(5,945	)		(5,972	)
Amortization of the net loss		-			-			-			-
Net periodic benefit cost	$	98,036		$	70,014		$	56,786		$	35,007

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Earnings Per Share

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Share

Note B - Earnings Per Share

The denominators used in the earnings per share computations follow:

	Six Months Ended				Three Months Ended
	June 30, 2012		July 2, 2011		June 30, 2012		July 2, 2011
Basic:
Weighted average shares outstanding		6,214,644		6,164,798		6,217,198		6,166,883
Diluted:
Weighted average shares outstanding		6,214,644		6,164,798		6,217,198		6,166,883
Dilutive stock options		15,981		50,984		14,137		51,609
Denominator for diluted earnings per share		6,230,625		6,215,782		6,231,335		6,218,492

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Segment Information (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jun. 30, 2012	Jul. 02, 2011
Segment Reporting Information [Line Items]
Revenues, sales to unaffiliated customers	$ 41,559,589	$ 35,520,182	$ 82,055,483	$ 68,708,794
Operating Profit	4,144,234	2,298,916	7,313,648	4,017,972
Interest expense	(98,667)	(53,040)	(187,904)	(120,043)
Other income	4,587	3,071	10,723	9,516
Income before income taxes	4,050,154	2,248,947	7,136,467	3,907,445
Industrial Hardware [Member]
Segment Reporting Information [Line Items]
Revenues, sales to unaffiliated customers	17,746,959	14,865,806	36,954,659	29,466,082
Operating Profit	2,125,226	1,050,796	4,089,783	1,984,681
Security Products [Member]
Segment Reporting Information [Line Items]
Revenues, sales to unaffiliated customers	13,981,220	12,974,240	26,096,043	24,593,978
Operating Profit	1,547,636	1,083,151	2,343,204	1,639,029
Metal Products [Member]
Segment Reporting Information [Line Items]
Revenues, sales to unaffiliated customers	9,831,410	7,680,136	19,004,781	14,648,734
Operating Profit	$ 471,372	$ 164,969	$ 880,661	$ 394,262

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Inventories (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Components of inventories [Abstract]
Raw material and component parts	$ 11,761,257	$ 11,863,199
Work in process	6,382,994	6,425,914
Finished goods	11,406,647	11,504,321
Inventories	$ 29,550,898	$ 29,793,434

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Debt (Details) (USD $)		6 Months Ended			6 Months Ended
	Dec. 31, 2011	Jun. 30, 2012 Revolving Credit Line [Member]	Dec. 31, 2011 Revolving Credit Line [Member]	Jun. 30, 2012 Loan Agreement [Member]	Jun. 30, 2012 2012 Term Loan Member]	Jan. 25, 2012 2012 Term Loan Member]
Debt Instrument [Line Items]
Additional term loan						$ 5,000,000
Periodic payment of loan					178,571
Period of loan					7 years
Maturity date of loan		Jan. 31, 2014			Jan. 31, 2019
Fixed rate of interest (in hundredths)				4.98%	3.90%
Description of variable rate basis		LIBOR rate or People's Prime rate
Basis spread on variable rate (in hundredths)			2.25%
Floor rate of loan (in hundredths)		3.25%	4.00%
Line of credit facility amount outstanding	$ 3,000,000

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Goodwill (Details) (USD $)	6 Months Ended
	Jun. 30, 2012
Goodwill [Roll Forward]
Beginning balance	$ 13,905,209
Foreign exchange	(2,605)
Ending balance	13,902,604
Industrial Hardware Segment [Member]
Goodwill [Roll Forward]
Beginning balance	2,071,393
Foreign exchange	(2,605)
Ending balance	2,068,788
Security Products Segment [Member]
Goodwill [Roll Forward]
Beginning balance	11,833,816
Foreign exchange	0
Ending balance	11,833,816
Metal Products Segment [Member]
Goodwill [Roll Forward]
Beginning balance	0
Foreign exchange	0
Ending balance	$ 0

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Basis of Presentation

6 Months Ended

Jun. 30, 2012

Basis of Presentation [Abstract]

Basis of Presentation

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 in the United States for complete financial statements. Refer to the Company's consolidated financial statements and notes thereto included in its Form 10-K for the year ended December 31, 2011 for additional information.

The accompanying condensed consolidated financial statements are unaudited. However, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for interim periods have been reflected therein. All intercompany accounts and transactions are eliminated. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.

The condensed consolidated balance sheet as of December 31, 2011 has been derived from the audited consolidated balance sheet at that date.

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Intangibles (Details) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Finite-Lived Intangible Assets [Line Items]
Useful lives of intangible assets	15 years 7 months 21 days	11 years 8 months 12 days
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	$ 3,777,490	$ 5,871,762
Accumulated Amortization	2,095,320	4,101,754
Net as per Balance Sheet	1,682,170	1,770,008
Weighted Average Amortization Period	15 years 7 months 21 days	11 years 8 months 12 days
Industrial Hardware Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	2,773,370	2,790,725
Accumulated Amortization	1,650,112	1,588,667
Net as per Balance Sheet	1,123,258	1,202,058
Security Products Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	998,281	3,075,198
Accumulated Amortization	439,713	2,507,764
Net as per Balance Sheet	558,568	567,434
Metal Products Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	5,839	5,839
Accumulated Amortization	5,495	5,323
Net as per Balance Sheet	344	516
Technology and licenses [Member] | Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Useful lives of intangible assets	5 years
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Weighted Average Amortization Period	5 years
Technology and licenses [Member] | Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Useful lives of intangible assets	17 years
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Weighted Average Amortization Period	17 years
Patents and developed technology [Member]
Finite-Lived Intangible Assets [Line Items]
Useful lives of intangible assets	15 years 9 months 18 days	15 years 6 months
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	3,701,665	3,783,391
Accumulated Amortization	2,027,077	2,028,548
Weighted Average Amortization Period	15 years 9 months 18 days	15 years 6 months
Patents and developed technology [Member] | Industrial Hardware Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	2,697,545	2,714,900
Accumulated Amortization	1,581,869	1,528,007
Patents and developed technology [Member] | Security Products Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	998,281	1,062,652
Accumulated Amortization	439,713	495,218
Patents and developed technology [Member] | Metal Products Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	5,839	5,839
Accumulated Amortization	5,495	5,323
Customer relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Useful lives of intangible assets	5 years	5 years
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	45,825	1,967,636
Accumulated Amortization	41,243	1,958,471
Weighted Average Amortization Period	5 years	5 years
Customer relationships [Member] | Industrial Hardware Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	45,825	45,825
Accumulated Amortization	41,243	36,660
Customer relationships [Member] | Security Products Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	0	1,921,811
Accumulated Amortization	0	1,921,811
Customer relationships [Member] | Metal Products Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	0	0
Accumulated Amortization	0	0
Non-compete agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Useful lives of intangible assets	5 years	5 years
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	30,000	120,735
Accumulated Amortization	27,000	114,735
Weighted Average Amortization Period	5 years	5 years
Non-compete agreements [Member] | Industrial Hardware Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	30,000	30,000
Accumulated Amortization	27,000	24,000
Non-compete agreements [Member] | Security Products Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	0	90,735
Accumulated Amortization	0	90,735
Non-compete agreements [Member] | Metal Products Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	0	0
Accumulated Amortization	$ 0	$ 0

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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Current Assets
Cash and cash equivalents	$ 14,484,499	$ 11,147,297
Accounts receivable, less allowances: $484,000 - 2012; $423,000 - 2011	20,420,689	18,633,088
Inventories	29,550,898	29,793,434
Prepaid expenses and other assets	2,911,757	3,313,186
Recoverable income taxes receivable	0	647,950
Deferred income taxes	1,881,775	1,881,775
Total Current Assets	69,249,618	65,416,730
Property, Plant and Equipment	57,144,955	54,863,020
Accumulated depreciation	(31,769,991)	(30,228,924)
Net Property, Plant and Equipment	25,374,964	24,634,096
Goodwill	13,902,604	13,905,209
Trademarks	155,342	152,446
Patents, technology and other intangibles net of accumulated amortization	1,682,170	1,770,008
Deferred income taxes	625,296	821,485
Total Other Assets	16,365,412	16,649,148
TOTAL ASSETS	110,989,994	106,699,974
Current Liabilities
Accounts payable	8,207,409	8,412,245
Accrued compensation	2,595,612	2,999,478
Other accrued expenses	1,612,217	1,060,143
Current portion of long-term debt	1,428,571	3,714,286
Total Current Liabilities	13,843,809	16,186,152
Other long-term liabilities	655,001	655,001
Long-term debt, less current portion	6,785,714	3,035,714
Accrued postretirement benefits	1,901,069	1,853,157
Accrued pension cost	14,725,208	15,811,622
Shareholders' Equity
Voting Preferred Stock, no par value: Authorized and unissued: 1,000,000 shares
Nonvoting Preferred Stock, no par value: Authorized and unissued: 1,000,000 shares
Common Stock, no par value: Authorized: 50,000,000 shares Issued: 8,913,750 shares in 2012 and 8,908,607 shares in 2011	28,573,187	28,499,779
Treasury Stock: 2,694,729 shares in 2012 and 2011	(19,105,723)	(19,105,723)
Retained earnings	76,635,509	73,200,362
Accumulated other comprehensive income (loss):
Foreign currency translation	2,159,120	2,107,187
Unrecognized net pension and postretirement benefit costs, net of tax	(15,182,900)	(15,543,277)
Accumulated other comprehensive loss	(13,023,780)	(13,436,090)
Total Shareholders' Equity	73,079,193	69,158,328
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 110,989,994	$ 106,699,974

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (Parenthetical) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jun. 30, 2012	Jul. 02, 2011
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) [Abstract]
Change in pension and postretirement benefit costs, taxes	$ 98,104	$ 94,057	$ 196,189	$ 187,438

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Income Taxes (Details) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012
Income Taxes [Abstract]
Significant changes to the amount of unrecognized tax benefits	$ 0	$ 0
Period over which unrecognized tax benefits will not increase or decrease		12 months

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2012

Segment Information [Abstract]

Segment financial information

Segment financial information follows:

	Six Months Ended						Three Months Ended
	June 30, 2012			July 2, 2011			June 30, 2012			July 2, 2011
Revenues:
Sales to unaffiliated customers:
Industrial Hardware	$	36,954,659		$	29,466,082		$	17,746,959		$	14,865,806
Security Products		26,096,043			24,593,978			13,981,220			12,974,240
Metal Products		19,004,781			14,648,734			9,831,410			7,680,136
	$	82,055,483		$	68,708,794		$	41,559,589		$	35,520,182
Income before income taxes:
Industrial Hardware	$	4,089,783		$	1,984,681		$	2,125,226		$	1,050,796
Security Products		2,343,204			1,639,029			1,547,636			1,083,151
Metal Products		880,661			394,262			471,372			164,969
Operating Profit		7,313,648			4,017,972			4,144,234			2,298,916
Interest expense		(187,904	)		(120,043	)		(98,667	)		(53,040	)
Other income		10,723			9,516			4,587			3,071
	$	7,136,467		$	3,907,445		$	4,050,154		$	2,248,947

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Financial Instruments and Fair Value Measurements (Details)	Jun. 30, 2012	Dec. 31, 2011
Loan Agreement [Member]
Interest Rate Risk [Abstract]
Fixed rate of interest (in hundredths)	4.98%
2012 Term Loan Member]
Interest Rate Risk [Abstract]
Fixed rate of interest (in hundredths)	3.90%
Credit Concentration Risk [Member]
Credit Risk [Abstract]
Number of customers that represented more than 10% of trade receivables	0	1

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Intangibles (Tables)

6 Months Ended

Jun. 30, 2012

Intangibles [Abstract]

Gross carrying amount and accumulated amortization of amortizable intangible assets

The gross carrying amount and accumulated amortization of amortizable intangible assets:

	Industrial Hardware Segment		Security Products Segment		Metal Products Segment		Total		Weighted-Average Amortization Period (Years)
2012 Gross Amount:
Patents and developed technology	$	2,697,545	$	998,281	$	5,839	$	3,701,665		15.8
Customer relationships		45,825		-		-		45,825		5.0
Non-compete agreements		30,000		-		-		30,000		5.0
Total Gross Intangibles	$	2,773,370	$	998,281	$	5,839	$	3,777,490		15.6
2012 Accumulated Amortization:
Patents and developed technology	$	1,581,869	$	439,713	$	5,495	$	2,027,077
Customer relationships		41,243		-		-		41,243
Non-compete agreements		27,000		-		-		27,000
Total Gross Amortization	$	1,650,112	$	439,713	$	5,495	$	2,095,320
Net June 30, 2012         per Balance Sheet	$	1,123,258	$	558,568	$	344	$	1,682,170

	Industrial Hardware Segment		Security Products Segment		Metal Products Segment		Total		Weighted-Average Amortization Period (Years)
2011 Gross Amount:
Patents and developed technology	$	2,714,900	$	1,062,652	$	5,839	$	3,783,391		15.5
Customer relationships		45,825		1,921,811		-		1,967,636		5.0
Non-compete agreements		30,000		90,735		-		120,735		5.0
Total Gross Intangibles	$	2,790,725	$	3,075,198	$	5,839	$	5,871,762		11.7
2011 Accumulated Amortization:
Patents and developed technology	$	1,528,007	$	495,218	$	5,323	$	2,028,548
Customer relationships		36,660		1,921,811		-		1,958,471
Non-compete agreements		24,000		90,735		-		114,735
Total Gross Amortization	$	1,588,667	$	2,507,764	$	5,323	$	4,101,754
Net December 31, 2011 per Balance Sheet	$	1,202,058	$	567,434	$	516	$	1,770,008

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $)	6 Months Ended
	Jun. 30, 2012	Jul. 02, 2011
Operating Activities
Net income	$ 4,677,954	$ 2,580,973
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation and amortization	1,710,686	1,815,098
Loss on sale of equipment and other assets	17,756	0
Provision for doubtful accounts	65,159	33,403
Issuance of Common Stock for directors' fees	12,298	12,301
Changes in operating assets and liabilities:
Accounts receivable	(1,811,994)	(3,169,134)
Inventories	268,835	(311,550)
Prepaid expenses and other	411,292	(509,981)
Prepaid pension cost	(517,902)	249,140
Recoverable taxes receivable	647,949	0
Other assets	(34,196)	(29,950)
Accounts payable	(228,004)	120,723
Accrued compensation	(395,312)	(1,331,130)
Other accrued expenses	570,077	129,293
Net cash provided (used) by operating activities	5,394,598	(410,814)
Investing Activities
Purchases of property, plant and equipment	(2,371,770)	(1,843,634)
Proceeds from sales of equipment and other assets	19,000	0
Net cash used in investing activities	(2,352,770)	(1,843,634)
Financing Activities
Principal payments on long-term debt	(535,714)	(535,714)
Principal payments on revolving credit loan	(3,000,000)	0
Proceeds from issuance of long-term debt	5,000,000	0
Proceeds from sales of Common Stock	61,110	90,990
Tax Benefit from disqualifying disposition of incentive stock options	0	16,453
Dividends paid	(1,242,807)	(1,109,824)
Net cash provided by/(used in) financing activities	282,589	(1,538,095)
Effect of exchange rate changes on cash	12,785	17,158
Net change in cash and cash equivalents	3,337,202	(3,775,385)
Cash and cash equivalents at beginning of period	11,147,297	12,224,608
Cash and cash equivalents at end of period	$ 14,484,499	$ 8,449,223

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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Current Assets
Accounts receivable, allowances	$ 484,000	$ 423,000
Shareholders' Equity
Voting Preferred Stock, no par value (in dollars per share)	$ 0	$ 0
Voting Preferred Stock, shares authorized (in shares)	1,000,000	1,000,000
Nonvoting Preferred Stock, no par value (in dollars per share)	$ 0	$ 0
Nonvoting Preferred Stock, shares authorized (in shares)	1,000,000	1,000,000
Common Stock, no par value (in dollars per share)	$ 0	$ 0
Common Stock, shares authorized (in shares)	50,000,000	50,000,000
Common Stock, shares issued (in shares)	8,913,750	8,908,607
Treasury Stock, shares (in shares)	2,694,729	2,694,729

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Stock Based Compensation and Stock Options

6 Months Ended

Jun. 30, 2012

Stock Based Compensation and Stock Options [Abstract]

Stock Based Compensation and Stock Options

Note J - Stock Based Compensation and Stock Options

The Company has stock option plans for officers, other key employees, and non-employee directors. As of June 30, 2012 two plans have shares reserved for future issuance, the 1995 and 2010 plans.  Incentive stock options granted under the 1995 and 2010 plans must have exercise prices that are not less than 100% of the fair market value of the stock on the dates the options are granted. Restricted stock awards may also be granted to participants under the 2010 plan with restrictions determined by the Compensation Committee of the Company's Board of Directors. Under the 1995 and 2010 plans, nonqualified stock options granted to participants will have exercise prices determined by the Compensation Committee of the Company's Board of Directors. No options or restricted stock were granted in the first six months of 2012 or 2011.

As of June 30, 2012, there were 500,000 shares available for future grant under the above noted 2010 plan and there were no shares available for grant under the 1995 plan.  As of June 30, 2012, there were 521,000 shares of common stock reserved under all option plans for future issuance.

	Six Months Ended June 30, 2012						Year Ended December 31, 2011
	Shares			Weighted - Average Exercise Price			Shares			Weighted - Average Exercise Price
Outstanding at beginning of period		25,500			$	13.580		80,000			$	12.471
Exercised		(4,500	)			13.580		(54,500	)			11.952
Outstanding at end of period		21,000				13.580		25,500				13.580

Options Outstanding and Exercisable
Range of Exercise Prices		Outstanding as of June 30, 2012		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price
$	13.58		21,000		2.5		13.580

At June 30, 2012, outstanding and exercisable options had an intrinsic value of $53,970.  The total intrinsic value of stock options exercised in the first six months of 2012 was $14,535.  For the six month periods ended June 30, 2012 and July 2, 2011, the Company recognized tax benefits of $0 and $16,453, respectively, resulting from the disqualification of incentive stock options that were exercised and sold prior to the required holding period.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Jul. 25, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	EASTERN CO
Entity Central Index Key	0000031107
Current Fiscal Year End Date	--12-29
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		6,219,021
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2012

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Income Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

Income Taxes

Note K - Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions.  With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2008 and non-U.S. income tax examinations by tax authorities prior to 2005.
 

The total amount of unrecognized tax benefits could increase or decrease within the next twelve months for a number of reasons, including the closure of federal, state and foreign tax years by expiration of the statute of limitations and the recognition and measurement considerations under FASB Accounting Standards Codification ("ASC") 740.  There have been no significant changes to the amount of unrecognized tax benefits during the three or six months ended June 30, 2012.  The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits will not increase or decrease significantly over the next twelve months.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jun. 30, 2012	Jul. 02, 2011
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) [Abstract]
Net sales	$ 41,559,589	$ 35,520,182	$ 82,055,483	$ 68,708,794
Cost of products sold	(32,314,199)	(28,588,070)	(64,625,627)	(55,460,341)
Gross margin	9,245,390	6,932,112	17,429,856	13,248,453
Selling and administrative expenses	(5,101,156)	(4,633,196)	(10,116,208)	(9,230,481)
Operating profit	4,144,234	2,298,916	7,313,648	4,017,972
Interest expense	(98,667)	(53,040)	(187,904)	(120,043)
Other income	4,587	3,071	10,723	9,516
Income before income taxes	4,050,154	2,248,947	7,136,467	3,907,445
Income taxes	1,417,808	766,148	2,458,513	1,326,472
Net income	$ 2,632,346	$ 1,482,799	$ 4,677,954	$ 2,580,973
Earnings per Share:
Basic (in dollars per share)	$ 0.42	$ 0.24	$ 0.75	$ 0.42
Diluted (in dollars per share)	$ 0.42	$ 0.24	$ 0.75	$ 0.42
Cash dividends per share (in dollars per share)	$ 0.10	$ 0.09	$ 0.20	$ 0.18

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2012

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Note E - Recent Accounting Pronouncements

In May 2011, the FASB issued authoritative guidance which clarifies the concepts related to highest and best use and valuation premise, blockage factors and other premiums and discounts, the fair value measurement of financial instruments held in a portfolio and of those instruments classified as a component of shareowners' equity. The guidance includes enhanced disclosure requirements about recurring Level 3 fair value measurements, the use of nonfinancial assets, and the level in the fair value hierarchy of assets and liabilities not recorded at fair value.  This guidance became effective for the Company on January 1, 2012. This guidance did not have an impact on our consolidated financial statements or disclosures, as there are presently no recurring Level 3 fair value measurements.

In June 2011, the FASB issued authoritative guidance aimed at increasing the prominence of items reported in other comprehensive income in the financial statements. In December 2011, the FASB also issued an accounting standards update that indefinitely deferred certain financial statement presentation provisions contained in its original June 2011 guidance. The guidance requires companies to present comprehensive income in a single statement below net income or in a separate statement of comprehensive income immediately following the income statement. Companies will no longer be allowed to present comprehensive income on the statement of changes in shareholders' equity. In both options, companies must present the components of net income, total net income, the components of other comprehensive income, total other comprehensive income and total comprehensive income. This update does not change which items are reported in other comprehensive income or the requirement to report reclassifications of items from other comprehensive income to net income. This guidance became effective for the Company on January 1, 2012 and required retrospective application for all periods presented.  The adoption of this guidance did not impact the presentation of the consolidated financial statements of the Company.

In September 2011, the FASB issued authoritative guidance on testing goodwill for impairment.  This guidance provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity determines that the fair value of a reporting unit is less than its carrying amount, it is required to perform the currently prescribed two-step goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit, if any.  The Company adopted this guidance effective January 1, 2012 and it had no impact on the consolidated financial statements of the Company.

The Company has implemented all new accounting pronouncements that are in effect and that could impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued, but are not yet effective, that might have a material impact on the consolidated financial statements of the Company.

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Segment Information

6 Months Ended

Jun. 30, 2012

Segment Information [Abstract]

Segment Information

Note D - Segment Information

Segment financial information follows:

	Six Months Ended						Three Months Ended
	June 30, 2012			July 2, 2011			June 30, 2012			July 2, 2011
Revenues:
Sales to unaffiliated customers:
Industrial Hardware	$	36,954,659		$	29,466,082		$	17,746,959		$	14,865,806
Security Products		26,096,043			24,593,978			13,981,220			12,974,240
Metal Products		19,004,781			14,648,734			9,831,410			7,680,136
	$	82,055,483		$	68,708,794		$	41,559,589		$	35,520,182
Income before income taxes:
Industrial Hardware	$	4,089,783		$	1,984,681		$	2,125,226		$	1,050,796
Security Products		2,343,204			1,639,029			1,547,636			1,083,151
Metal Products		880,661			394,262			471,372			164,969
Operating Profit		7,313,648			4,017,972			4,144,234			2,298,916
Interest expense		(187,904	)		(120,043	)		(98,667	)		(53,040	)
Other income		10,723			9,516			4,587			3,071
	$	7,136,467		$	3,907,445		$	4,050,154		$	2,248,947

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Goodwill (Tables)

6 Months Ended

Jun. 30, 2012

Goodwill [Abstract]

Roll-forward of goodwill

The following is a roll-forward of goodwill from year-end 2011 to the end of the second quarter 2012:

	Industrial Hardware Segment			Security Products Segment		Metal Products Segment		Total
Beginning balance	$	2,071,393		$	11,833,816	$	-	$	13,905,209
Foreign exchange		(2,605	)		-		-		(2,605	)
Ending balance	$	2,068,788		$	11,833,816	$	-	$	13,902,604

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Financial Instruments and Fair Value Measurements

6 Months Ended

Jun. 30, 2012

Financial Instruments and Fair Value Measurements [Abstract]

Financial Instruments and Fair Value Measurements

Note L - Financial Instruments and Fair Value Measurements

Financial Risk Management Objectives and Policies

The Company is exposed primarily to credit, interest rate and currency exchange rate risks which arise in the normal course of business.

Credit Risk

Credit risk is the potential financial loss resulting from the failure of a customer or counterparty to settle its financial and contractual obligations to the Company, as and when they become due. The primary credit risk for the Company is its receivable accounts with customers. The Company has established credit limits for customers and monitors their balances to mitigate the risk of loss. At June 30, 2012 and December 31, 2011, there were no significant concentrations of credit risk. No one customer represented more than 10% of the Company's net trade receivables at June 30, 2012.  At year end 2011 only one customer exceeded 10% of total receivables.  The maximum exposure to credit risk is primarily represented by the carrying amount of the Company's accounts receivable.

Interest Rate Risk

On June 30, 2012, the Company has no exposure to the risk of changes in market interest rates as the interest rates on the outstanding debt are fixed at 4.98% and 3.90%.

Fair Value Measurements

Assets and liabilities that require fair value measurement are recorded at fair value using market and income valuation approaches and considering the Company's and counterparty's credit risk. The Company uses the market approach and the income approach to value assets and liabilities as appropriate. There are no assets or liabilities requiring fair value measurements on June 30, 2012 or December 31, 2011.

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Intangibles

6 Months Ended

Jun. 30, 2012

Intangibles [Abstract]

Intangibles

Note H - Intangibles

Patents are recorded at cost and are amortized using the straight-line method over the lives of the patents. Technology and licenses are recorded at cost and are generally amortized on a straight-line basis over periods ranging from 5 to 17 years. Non-compete agreements and customer relationships are being amortized using the straight-line method over a period of 5 years. Trademarks are not amortized as their lives are deemed to be indefinite.

The gross carrying amount and accumulated amortization of amortizable intangible assets:

	Industrial Hardware Segment		Security Products Segment		Metal Products Segment		Total		Weighted-Average Amortization Period (Years)
2012 Gross Amount:
Patents and developed technology	$	2,697,545	$	998,281	$	5,839	$	3,701,665		15.8
Customer relationships		45,825		-		-		45,825		5.0
Non-compete agreements		30,000		-		-		30,000		5.0
Total Gross Intangibles	$	2,773,370	$	998,281	$	5,839	$	3,777,490		15.6
2012 Accumulated Amortization:
Patents and developed technology	$	1,581,869	$	439,713	$	5,495	$	2,027,077
Customer relationships		41,243		-		-		41,243
Non-compete agreements		27,000		-		-		27,000
Total Gross Amortization	$	1,650,112	$	439,713	$	5,495	$	2,095,320
Net June 30, 2012         per Balance Sheet	$	1,123,258	$	558,568	$	344	$	1,682,170

	Industrial Hardware Segment		Security Products Segment		Metal Products Segment		Total		Weighted-Average Amortization Period (Years)
2011 Gross Amount:
Patents and developed technology	$	2,714,900	$	1,062,652	$	5,839	$	3,783,391		15.5
Customer relationships		45,825		1,921,811		-		1,967,636		5.0
Non-compete agreements		30,000		90,735		-		120,735		5.0
Total Gross Intangibles	$	2,790,725	$	3,075,198	$	5,839	$	5,871,762		11.7
2011 Accumulated Amortization:
Patents and developed technology	$	1,528,007	$	495,218	$	5,323	$	2,028,548
Customer relationships		36,660		1,921,811		-		1,958,471
Non-compete agreements		24,000		90,735		-		114,735
Total Gross Amortization	$	1,588,667	$	2,507,764	$	5,323	$	4,101,754
Net December 31, 2011 per Balance Sheet	$	1,202,058	$	567,434	$	516	$	1,770,008

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Debt

6 Months Ended

Jun. 30, 2012

Debt [Abstract]

Debt

Note F - Debt

On January 25, 2012, the Company signed an amendment to its secured Loan Agreement with People's United Bank ("People's") which included an additional $5,000,000 term portion (the "2012 Term Loan").  The 2012 Term Loan requires quarterly payments of $178,571 for a period of seven (7) years, maturing on January 31, 2019.

Interest on the original term portion of the Loan Agreement is fixed at 4.98%.  Interest on the 2012 Term Loan is fixed at 3.90%   Prior to the amendment, the interest rate on the revolving credit portion of the Loan Agreement varied based on the LIBOR rate or People's Prime rate plus a margin spread of 2.25%, with a floor rate of 4.0%.  As part of the amendment signed on January 25, 2012, this was changed to the LIBOR rate or People's Prime rate plus 2.25%, with a floor of 3.25%; additionally the maturity date was extended to January 31, 2014.  During December 2011, the Company used $3,000,000 of the revolving credit, the proceeds of which, along with existing cash, were used to fund a discretionary pension payment made in December, 2011.  This amount was repaid in January 2012.  The Company did not utilize the revolving credit during the quarter ended June 30, 2012.

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Goodwill

6 Months Ended

Jun. 30, 2012

Goodwill [Abstract]

Goodwill

Note G - Goodwill

The following is a roll-forward of goodwill from year-end 2011 to the end of the second quarter 2012:

	Industrial Hardware Segment			Security Products Segment		Metal Products Segment		Total
Beginning balance	$	2,071,393		$	11,833,816	$	-	$	13,905,209
Foreign exchange		(2,605	)		-		-		(2,605	)
Ending balance	$	2,068,788		$	11,833,816	$	-	$	13,902,604

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Retirement Benefit Plans

6 Months Ended

Jun. 30, 2012

Retirement Benefit Plans [Abstract]

Retirement Benefit Plans

Note I - Retirement Benefit Plans

The Company has non-contributory defined benefit pension plans covering certain U.S. employees. Plan benefits are generally based upon age at retirement, years of service and, for its salaried plan, the level of compensation. The Company also sponsors unfunded nonqualified supplemental retirement plans that provide certain current and former officers with benefits in excess of limits imposed by federal tax law.

The Company also provides health care and life insurance for retired salaried employees in the United States who meet specific eligibility requirements.

Significant disclosures relating to these benefit plans for the second quarter and first six months of fiscal 2012 and 2011 follow:

	Pension Benefits
	Six Months Ended						Three Months Ended
	June 30, 2012			July 2,  2011			June 30, 2012			July 2,  2011
Service cost	$	1,347,196		$	1,060,503		$	674,549		$	530,251
Interest cost		1,427,960			1,474,837			713,980			737,419
Expected return on plan assets		(1,965,495	)		(1,825,142	)		(982,748	)		(912,571	)
Amortization of prior service cost		82,819			97,075			41,410			48,538
Amortization of the net loss		485,692			448,527			242,845			224,263
Net periodic benefit cost	$	1,378,172		$	1,255,800		$	690,036		$	627,900

	Postretirement Benefits
	Six Months Ended						Three Months Ended
	June 30, 2012			July 2,  2011			June 30, 2012			July 2,  2011
Service cost	$	86,807		$	63,232		$	49,307		$	31,616
Interest cost		71,694			68,376			37,694			34,188
Expected return on plan assets		(48,520	)		(49,650	)		(24,270	)		(24,825	)
Amortization of prior service cost		(11,945	)		(11,944	)		(5,945	)		(5,972	)
Amortization of the net loss		-			-			-			-
Net periodic benefit cost	$	98,036		$	70,014		$	56,786		$	35,007

The Company's funding policy with respect to its qualified plans is to contribute at least the minimum amount required by applicable laws and regulations. In 2012, the Company is required to contribute $3,472,000 into its pension plans and $155,000 into its postretirement plan. As of June 30, 2012, the Company has made contributions totaling $1,881,000 into its pension plans and $62,000 to its postretirement plan and will make the remaining contributions as required during the remainder of the year.

The Company has a contributory savings plan under Section 401(k) of the Internal Revenue Code covering substantially all U.S. non-union employees. The plan allows participants to make voluntary contributions of up to 100% of their annual compensation on a pretax basis, subject to IRS limitations. The plan provides for contributions by the Company at its discretion. The Company made contributions of $47,272 and $96,729 in the second quarter and first six months of 2012, respectively and $45,026 and $93,157 in the second quarter and first six months of 2011, respectively.

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Stock Based Compensation and Stock Options (Details) (USD $)	6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Dec. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of plans that have shares reserved for further issuance	2
Shares of common stock reserved under all option plans for future issuance (in shares)	521,000
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of fair market value of stock on grant date for exercise price, minimum (in hundredths)	100.00%
Options granted (in shares)	0	0
Stock Option Activity [Roll Forward]
Outstanding at beginning of period (in shares)	25,500	80,000	80,000
Exercised (in shares)	(4,500)		(54,500)
Outstanding at end of period (in shares)	21,000		25,500
Weighted - Average Exercise Price [Roll Forward]
Outstanding at beginning of period (in dollars per share)	13.580	12.471	12.471
Exercised (in dollars per share)	13.580		11.952
Outstanding at end of period (in dollars per share)	13.580		13.580
Options Outstanding and Exercisable [Abstract]
Outstanding as of June 30, 2012 (in shares)	21,000
Weighted - Average Remaining Contractual Life	2 years 6 months
Weighted- Average Exercise Price (in dollars per share)	$ 13.580
Options outstanding and exercisable, intrinsic value	$ 53,970
Total intrinsic value of stock options exercised	14,535
Recognized tax benefits from the disqualification of incentive stock options	$ 0	$ 16,453
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock granted (in shares)	0	0
1995 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for future grant (in shares)	0
2010 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for future grant (in shares)	500,000

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Inventories (Tables)

6 Months Ended

Jun. 30, 2012

Inventories [Abstract]

Components of inventories

The components of inventories follow:

	June 30, 2012		December 31, 2011
Raw material and component parts	$	11,761,257	$	11,863,199
Work in process		6,382,994		6,425,914
Finished goods		11,406,647		11,504,321
	$	29,550,898	$	29,793,434

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Stock Based Compensation and Stock Options (Tables)

6 Months Ended

Jun. 30, 2012

Stock Based Compensation and Stock Options [Abstract]

Stock Option Activity

As of June 30, 2012, there were 500,000 shares available for future grant under the above noted 2010 plan and there were no shares available for grant under the 1995 plan.  As of June 30, 2012, there were 521,000 shares of common stock reserved under all option plans for future issuance.

	Six Months Ended June 30, 2012						Year Ended December 31, 2011
	Shares			Weighted - Average Exercise Price			Shares			Weighted - Average Exercise Price
Outstanding at beginning of period		25,500			$	13.580		80,000			$	12.471
Exercised		(4,500	)			13.580		(54,500	)			11.952
Outstanding at end of period		21,000				13.580		25,500				13.580

Options outstanding and exercisable

Options Outstanding and Exercisable
Range of Exercise Prices		Outstanding as of June 30, 2012		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price
$	13.58		21,000		2.5		13.580

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jun. 30, 2012	Jul. 02, 2011
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) [Abstract]
Net income	$ 2,632,346	$ 1,482,799	$ 4,677,954	$ 2,580,973
Other comprehensive income/(loss):
Change in foreign currency translation	(410,952)	116,810	51,933	419,997
Change in pension and postretirement benefit costs, net of taxes of: 2012 - $196,189 and $98,104, respectively; 2011 - $187,438 and $94,057, respectively	180,206	172,772	360,377	345,544
Total other comprehensive income/(loss)	(230,746)	289,582	412,310	765,541
Comprehensive income	$ 2,401,600	$ 1,772,381	$ 5,090,264	$ 3,346,514

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Inventories

6 Months Ended

Jun. 30, 2012

Inventories [Abstract]

Inventories

Note C - Inventories

The components of inventories follow:

	June 30, 2012		December 31, 2011
Raw material and component parts	$	11,761,257	$	11,863,199
Work in process		6,382,994		6,425,914
Finished goods		11,406,647		11,504,321
	$	29,550,898	$	29,793,434

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Earnings Per Share (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jun. 30, 2012	Jul. 02, 2011
Basic:
Weighted average shares outstanding (in shares)	6,217,198	6,166,883	6,214,644	6,164,798
Diluted:
Weighted average shares outstanding (in shares)	6,217,198	6,166,883	6,214,644	6,164,798
Dilutive stock options (in shares)	14,137	51,609	15,981	50,984
Denominator for diluted earnings per share (in shares)	6,231,335	6,218,492	6,230,625	6,215,782

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Denominators used in the earnings per share computations

The denominators used in the earnings per share computations follow:

	Six Months Ended				Three Months Ended
	June 30, 2012		July 2, 2011		June 30, 2012		July 2, 2011
Basic:
Weighted average shares outstanding		6,214,644		6,164,798		6,217,198		6,166,883
Diluted:
Weighted average shares outstanding		6,214,644		6,164,798		6,217,198		6,166,883
Dilutive stock options		15,981		50,984		14,137		51,609
Denominator for diluted earnings per share		6,230,625		6,215,782		6,231,335		6,218,492