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 April 2, 2016

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 April 27, 2016
Common Stock, No par value	6,250,207

PART 1 – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

THE EASTERN COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

ASSETS	April 2, 2016			January 2, 2016
Current Assets
Cash and cash equivalents	$	16,728,086		$	17,814,986
Accounts receivable, less allowances: $461,000 - 2016; $450,000 - 2015		17,864,495			17,502,445
Inventories		35,684,938			36,842,413
Prepaid expenses and other assets		2,250,755			2,122,215
Deferred income taxes		986,167			986,167
Total Current Assets		73,514,441			75,268,226
Property, Plant and Equipment		63,813,669			63,438,241
Accumulated depreciation		(37,466,820	)		(36,636,775	)
		26,346,849			26,801,466
Goodwill		14,848,095			14,790,793
Trademarks		169,845			164,957
Patents, technology, and other intangibles net of accumulated amortization		2,032,599			2,113,576
Deferred income taxes		2,366,374			2,599,541
		19,416,913			19,668,867
TOTAL ASSETS	$	119,278,203		$	121,738,559

2

LIABILITIES AND SHAREHOLDERS’ EQUITY	April 2, 2016			January 2, 2016
Current Liabilities
Accounts payable	$	7,792,497		$	9,109,394
Accrued compensation		1,809,148			2,873,871
Other accrued expenses		1,589,817			1,751,052
Current portion of long-term debt		1,250,000			1,428,571
Total Current Liabilities		12,441,462			15,162,888
Other long-term liabilities		286,920			286,920
Long-term debt, less current portion		1,250,000			1,785,714
Accrued postretirement benefits		744,473			793,055
Accrued pension cost		24,547,739			24,304,926
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: 8,944,936 shares in 2016 and 8,942,461 shares in 2015		29,036,652			28,997,050
Treasury Stock: 2,694,729 shares in 2016 and 2015		(19,105,723	)		(19,105,723	)
Retained earnings		90,557,674			90,597,041
Accumulated other comprehensive income (loss):
Foreign currency translation		(976,311	)		(1,154,098	)
Unrecognized net pension and postretirement benefit costs, net of tax		(19,504,683	)		(19,929,214	)
Accumulated other comprehensive loss		(20,480,994	)		(21,083,312	)
Total Shareholders’ Equity		80,007,609			79,405,056
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	119,278,203		$	121,738,559

See accompanying notes.

3

THE EASTERN COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

		Three Months Ended
		April 2, 2016			April 4, 2015
Net sales	$	33,101,657		$	36,876,842
Cost of products sold		(26,681,211	)		(29,541,664	)
Gross margin		6,420,446			7,335,178
Selling and administrative expenses		(5,459,582	)		(5,963,695	)
Operating profit		960,864			1,371,483
Interest expense		(36,285	)		(52,825	)
Other income		21,374			7,007
Income before income taxes		945,953			1,325,665
Income taxes		297,880			451,714
Net income	$	648,073		$	873,951
Earnings per share:
Basic	$	.10		$	.14
Diluted	$	.10		$	.14
Cash dividends per share:	$	.11		$	.11

See accompanying notes.

THE EASTERN COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	Three Months Ended
		April 2, 2016		April 4, 2015
Net income	$	648,073	$	873,951
Other comprehensive (loss) income:
Change in foreign currency translation		177,787		(594,332	)
Change in pension and postretirement benefit costs, net of taxes of: 2016 – $233,167 2015 – $186,514		424,531		339,590
Total other comprehensive (loss) income		602,318		(254,742	)
Comprehensive income	$	1,250,391	$	619,209

See accompanying notes.

4

THE EASTERN COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Three Months Ended
	April 2, 2016			April 4, 2015
Operating Activities
Net income	$	648,073		$	873,951
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		928,136			959,857
Unrecognized pension and postretirement benefits		851,929			848,173
Loss on sale of equipment and other assets		19,780			--
Issuance of Common Stock for directors’ fees		39,601			7,498
Changes in operating assets and liabilities:
Accounts receivable		(339,041	)		(2,317,994	)
Inventories		1,254,683			33,403
Prepaid expenses and other		(127,991	)		(140,975	)
Recoverable income taxes receivable		--			380,000
Other assets		(19,977	)		57,208
Accounts payable		(1,336,219	)		(14,302	)
Accrued compensation		(1,099,262	)		(1,349,334	)
Other accrued expenses		(161,982	)		989,385
Net cash provided by operating activities		657,730			326,870
Investing Activities
Purchases of property, plant and equipment		(338,270	)		(820,161	)
Net cash used in investing activities		(338,270	)		(820,161	)
Financing Activities
Principal payments on long-term debt		(714,285	)		(357,142	)
Dividends paid		(687,439	)		(686,841	)
Net cash used in financing activities		(1,401,724	)		(1,043,983	)
Effect of exchange rate changes on cash		(4,636	)		(161,879	)
Net change in cash and cash equivalents		(1,086,900	)		(1,699,153	)
Cash and cash equivalents at beginning of period		17,814,986			15,834,444
Cash and cash equivalents at end of period	$	16,728,086		$	14,135,291

See accompanying notes.

5

THE EASTERN COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

April 2, 2016

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 January 2, 2016 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 January 2, 2016 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:

	Three Months Ended
	April 2, 2016	April 4, 2015
Basic:
Weighted average shares outstanding	6,247,760	6,244,088
Diluted:
Weighted average shares outstanding	6,247,760	6,244,088
Dilutive stock options	-	-
Denominator for diluted earnings per share	6,247,760	6,244,088

Note C – Inventories

The components of inventories follow:

	April 2, 2016	January 2, 2016
Raw material and component parts	$   10,598,427	$    10,913,827
Work in process	7,422,467	7,681,576
Finished goods	17,664,044	18,247,010
	$ 35,684,938	$  36,842,413

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Note D – Segment Information

Segment financial information follows:

	Three Months Ended
	April 2, 2016		April 4, 2015
Revenues:
Sales to unaffiliated customers:
Industrial Hardware	$	14,591,513	$	14,786,666
Security Products		14,197,217		14,100,916
Metal Products		4,312,927		7,989,260
	$	33,101,657	$	36,876,842
Income before income taxes:
Industrial Hardware	$	697,196	$	731,545
Security Products		1,128,196		786,291
Metal Products		(864,528		(146,353	)
Operating Profit		960,864		1,371,483
Interest expense		(36,285		(52,825	)
Other income		21,374		7,007
Income before income taxes	$	945,953	$	1,325,665

Note E – Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 requires lessees to present right-of-use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. The guidance is to be applied using a modified retrospective approach at the beginning of the earliest comparative period in the financial statements and is effective for years beginning after December 15, 2019. Early adoption is permitted. The Company is still in the process of determining the effect that the adoption of ASU 2016-02 will have on the accompanying financial statements.

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 29, 2010, the Company signed a secured Loan Agreement (the “Loan Agreement”) with People’s United Bank (“People’s”) which included a $5,000,000 term portion (the “Original Term Loan”) and a $10,000,000 revolving credit portion.  On January 25, 2012, the Company amended the loan agreement by taking an additional $5,000,000 term loan (the “2012 Term Loan”).  Interest on the Original Term Loan portion of the Loan Agreement is fixed at 4.98%.  Interest on the 2012 Term Loan is fixed at 3.90%.  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 3.25% and a maturity date of January 31, 2014.  On January 23, 2014, the Company signed an amendment to its secured Loan Agreement with People’s which extended the maturity date of the $10,000,000 revolver portion of the Loan Agreement to July 1, 2016 and changed the interest rate to LIBOR plus 2.25%, eliminating the floor previously in place.  The Company did not utilize the revolving credit facility during Fiscal 2015 or during the first three months of 2016.

7

The Company has loan covenants under the Loan Agreement which required the Company to maintain a fixed charge coverage ratio of at least 1.1 to 1, and minimum tangible net worth of $55 million. In addition, the Company has restrictions on, among other things, new capital leases, purchases or redemptions of its capital stock, mergers and divestitures, and new borrowing.  The Company was in compliance with all covenants in 2015 and for the three month period ended April 2, 2016.

Note G – Goodwill

The following is a roll-forward of goodwill from year-end 2015 to the end of the first quarter 2016:

	Industrial Hardware Segment		Security Products Segment		Metal Products Segment		Total
Beginning balance	$	1,731,751	$	13,059,042	$	—	$	14,790,793
Foreign exchange		57,302		—		—		57,302
Ending balance	$	1,789,053	$	13,059,042	$	—	$	14,848,095

Note H – Intangibles

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)
2016 Gross Amount
Patents and developed technology	$	2,262,367	$	1,030,701	$	--	$	3,293,068	15.9
Customer relationships		--		449,706		--		449,706	5.0
Non-compete agreements		--		407,000		--		407,000	5.0
Intellectual property		--		307,370		--		307,370	5.0
Total Gross Intangibles	$	2,262,367	$	2,194,777	$	--	$	4,457,144	12.6
2016 Accumulated Amortization
Patents and developed technology	$	1,543,456	$	590,070	$	--	$	2,133,526
Customer relationships		--		112,426		--		112,426
Non-compete agreements		--		101,750		--		101,750
Intellectual property		--		76,843		--		76,843
Accumulated Amortization	$	1,543,456	$	881,089	$	--	$	2,424,545
Net April 2, 2016 per Balance Sheet	$	718,911	$	1,313,688	$	--	$	2,032,599

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2015 Gross Amount
Patents and developed technology	$	2,206,852	$	1,029,181	$	--	$	3,236,033	15.9
Customer relationships		--		449,706		--		449,706	5.0
Non-compete agreements		--		407,000		--		407,000	5.0
Intellectual property		--		307,370		--		307,370	5.0
Total Gross Intangibles	$	2,206,852	$	2,193,257	$	--	$	4,400,109	12.6
2015 Accumulated Amortization
Patents and developed technology	$	1,478,692	$	575,026	$	--	$	2,053,718
Customer relationships		--		89,941		--		89,941
Non-compete agreements		--		81,400		--		81,400
Intellectual property		--		61,474		--		61,474
Accumulated Amortization	$	1,478,692	$	807,841	$	--	$	2,286,533
Net January 2, 2016 per Balance Sheet	$	728,160	$	1,385,416	$	--	$	2,113,576

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 first quarter of fiscal 2016 and 2015 follow:

	Pension Benefits						Postretirement Benefits
	Three Months Ended							Three Months Ended
	April 2, 2016			April 4, 2015				April 2, 2016			April 4, 2015
Service cost	$	813,005		$	964,987			$	10,750		$	54,393
Interest cost		766,580			859,259				20,500			38,729
Expected return on plan assets		(1,243,941	)		(1,287,914	)			(11,750	)		(22,984	)
Amortization of prior service cost		50,143			54,647				(6,000	)		(5,972	)
Amortization of the net loss		627,055			472,728				(13,500	)		4,701
Net periodic benefit cost	$	1,012,842		$	1,063,707			$	--		$	68,867

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 2016, the Company expects to contribute $3.1 million into its pension plans and $118,000 into its postretirement plan. As of April 2, 2016, the Company has not made contributions into its pension plans and has contributed $46,000 to its postretirement plan and will make the remaining contributions as required during the remainder of the year.

9

On April 5, 2016 the Board of Directors passed a resolution freezing the benefits of The Salaried Employees Retirement Plan of The Eastern Company effective as of May 31, 2016.  The Board also approved several enhancements to The Eastern Company Savings and Investment Plan effective June 1, 2016.

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 $56,231 and $52,266 in the first quarter of 2016 and 2015, respectively.

Note J – Stock Based Compensation and Stock Options

As of April 2, 2016, the Company had one stock option plan, the 2010 plan, for officers, other key employees, and non-employee directors.  Incentive stock options granted under the 2010 plan 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 2010 plan, non-qualified 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 quarter of 2016 or 2015.

As of April 2, 2016, there were 500,000 shares of common stock reserved and available for future grant under the above noted 2010 plan.

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 2012 and non-U.S. income tax examinations by tax authorities prior to 2009.

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 months ended April 2, 2016.  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.

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 April 2, 2016 and January 2, 2016, there were no significant concentrations of credit risk. No one customer represented more than 10% of the Company’s net trade receivables at April 2, 2016 or at January 2, 2016.  The maximum exposure to credit risk is primarily represented by the carrying amount of the Company’s accounts receivable.

10

Interest Rate Risk

On April 2, 2016, the Company has no exposure to the risk of changes in market interest rates as the interest rate on the outstanding debt is 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 April 2, 2016 or January 2, 2016.

Note M – Subsequent Event

On April 5, 2016 the Board of Directors passed a resolution freezing the benefits of The Salaried Employees Retirement Plan of The Eastern Company as of May 31, 2016.  The Board also approved several enhancements to The Eastern Company Savings and Investment Plan effective June 1, 2016.

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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 thirteen weeks ended April 2, 2016. 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 January 2, 2016 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 January 2, 2016.

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. and foreign governments, 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.

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 first quarter of 2016 decreased 10% when compared to the first quarter of 2015.  The decrease in sales is primarily the result of a 46% decrease in sales in the Metal Products Segment.   Sales of our mining products were down 46% due to the sharp decline in the U. S. coal industry. Sales in the Industrial Hardware and Security Products segment were comparable to the first quarter of 2015.  Consolidated sales volume of existing products decreased in 2016 by 14% compared to the first quarter of 2015. The first quarter of 2016 was favorably affected by the introduction of new products which increased sales by 4%.

For the three months ended April 2, 2016, gross margin as a percentage of sales was 19% compared to 20% in the comparable period of 2015.  This decrease was primarily the result of decreased sales volume of mining products in the Metal Products segment causing lower utilization of the Company’s production capacity in the 2016 period.

Selling and administration costs decreased $0.5 million or 8% in the first quarter of 2016 compared to the prior year period. The decrease is the result of cost incurred in the first quarter of 2015 totaling approximately $0.6 million related to the proxy contest.

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In general, raw material prices have started to increase compared to an overall decline in in commodity prices experienced in 2015.  The Company recovers these additional costs from our customers through price increases wherever possible.  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 quarter of 2016 increased compared to the same period in 2015. This increase is primarily due to the timing differences in the collections of accounts receivable, payments of liabilities, and changes in inventories.  Cash on hand and cash flow from operations, along with the result of controlling discretionary expenditures, should be sufficient to enable the Company to meet all its existing obligations and continue its quarterly dividend payments.

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 April 2, 2016
	Industrial	Security	Metal
	Hardware	Products	Products	Total
Net sales	100.0%	100.0%	100.0%	100.0%
Cost of products sold	77.3%	75.5%	108.6%	80.6%
Gross margin	22.7%	24.5%	-8.6%	19.4%
Selling and administrative expense	17.9%	16.5%	11.4%	16.5%
Operating profit	4.8%	7.9%	-20.0%	2.9%
	Three Months Ended April 4, 2015
	Industrial	Security	Metal
	Hardware	Products	Products	Total
Net sales	100.0%	100.0%	100.0%	100.0%
Cost of products sold	76.6%	76.4%	93.1%	80.1%
Gross margin	23.4%	23.6%	6.9%	19.9%
Selling and administrative expense	18.5%	18.0%	8.7%	16.2%
Operating profit	4.9%	5.6%	-1.8%	3.7%

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The following table shows the amount of change for the first quarter of 2016 compared to the first quarter of 2015 in sales, cost of products sold, gross margin, selling and administrative expenses and operating results, by segment (dollars in thousands):

	Industrial	Security	Metal
	Hardware	Products	Products	Total
Net sales	$     (195)	$  96	$(3,676)	$ (3,775)
Volume	-8.1%	-2.0%	-46.0%	-14.0%
Prices	-0.2%	-0.3%	0.0%	-0.2%
New products	6.9%	3.0%	0.0%	4.0%
	-1.4%	0.7%	-46.0%	-10.2%
Cost of products sold	$      (45)	$     (59)	$  (2,755)	$ (2,859)
	-0.4%	-0.5%	-37.0%	-9.7%
Gross margin	$     (151)	$     155	$  (920)	$ (916)
	-4.3%	4.7%	-168.0%	-12.5%
Selling and administrative expenses	$      (116)	$     (187)	$   (202)	$    (505)
	-4.3%	-7.4%	-29.2%	-8.5%
Operating profit	$    (34)	$    342	$ (718)	$ (410)
	-4.7%	43.5%	-490.7%	-29.9%

Industrial Hardware Segment

Net sales in the Industrial Hardware segment were down 1.5% in the first quarter of 2016 compared to the prior year quarter. The lower sales in the first quarter of 2016 reflected lower volume of sales of existing products by 8.1%.  The majority of this decrease came from a 21% decrease in sales to our Class 8 truck customers where we sell many of our hardware products and lightweight composite panels.  Sales of new product in the 1st quarter contributed a 6.9% in increase sales consisting of new sleepers, electronic rotary latches and white board panels.

Cost of products sold for the Industrial Hardware segment remained the same in the first quarter of 2016 compared to the first quarter of 2015.  The most significant factors resulting in changes in cost of products sold in the 2016 quarter compared to the 2015 quarter included:

§a decrease of $0.8 million or 35% in outside parts and processing;

§an increase of $0.5 million or 1117% in inventory parts change;

§and an increase of $0.2 million or 160% in foreign currency exchange.

Gross margin as a percentage of net sales for the Industrial Hardware segment was 23% in the first quarter 2016 and 2015.  The slight decrease in gross margin for the 2015 period reflects the mix of products produced and the changes in cost of products sold discussed above.

Selling and administrative expenses in the Industrial Hardware segmentdecreased $0.1 million or 4% from 2015 to 2016.  The most significant factor resulting in changes in selling and administrative expenses in the Industrial Hardware segment was a decrease of $0.3 million or 100% in charges related to the proxy contest in 2015.

14

Security Products Segment

Net sales in the Security Products segment increased 1% in the first quarter of 2016 compared to the first quarter of 2015.  The increase in sales came from the introduction of new lock products, sold primarily to the luggage and storage markets and new flash cash products for the commercial laundry market adding 3% in new sales, offset by a 2% decrease in volume sales of existing products.

Cost of products sold for the Security Products segment decreased $0.1 million or 1% in 2016 as compared to the first quarter of 2015.  The most significant factors resulting in changes in cost of products sold in the first quarter of 2016 compared to 2015 quarter included a decrease of $0.1 million or 1% in raw materials.

Selling and administrative expenses in the Security Products segment decreased $0.2 million or 7% in the first quarter of 2016 compared to the same period in 2015. The most significant factors resulting in changes in selling and administrative expenses in the Security Products segment was a decrease of $0.2 million or 100% in charges related to the proxy contest in 2015.

Metal Products Segment

Net sales in the Metal Products segment decreased 46% in the first quarter of 2016 as compared to the prior year period. Sales of mining products were down 46% and sales of contract castings products were down 57% from the prior year levels. The U.S. mining industry is at its lowest levels in a decade and is forecasted to contract further during 2016. The coal mining industry continues to be impacted by coal plant closures, a mild winter, lower natural gas prices, excess coal inventories and stricter EPA regulations. The reduction in our contract castings products was due to the down turn in the Class 8 truck market where we supply EGR valve casting for truck engines.  Due to the decreases in incoming mining and contract casting orders the Company decreased its workforce by 39% during the 1st quarter and expects to see the full effect of these reduction in payroll and payroll cost beginning in the second quarter.  We are working with several new customers in the contract casting market which we expect to favorably impact the remainder of the 2016 fiscal year.

Cost of products sold for the Metal Products segment decreased $2.8 million or 37% in the first quarter of 2016 compared to the same period in 2015.  The most significant factors resulting in changes in cost of products sold in the first quarter of 2016 compared to the 2015 first quarter included:

§a decrease of $1.1 million or 37% in labor costs;

§a decrease of $0.7 million or 58% in raw materials;

§a decrease of $0.5 million or 49% in supplies and tools;

§a decrease of $0.3 million or 50% in outside parts and processing; and

§a decrease of $0.2 million or 28% in utilities.

Gross margin as a percentage of net sales decreased from 7% in the first quarter of 2015 to -9% for the 2016 quarter.  The decrease is primarily due to lower sales and high fixed costs associated with foundry operations.

Selling and administrative expenses in the Metal Products segment decreased than $0.2 million or 29% in the first quarter of 2016 compared to the same period in 2015. The most significant factors resulting in changes in selling and administrative expenses in the Metal Products segment in the first quarter of 2016 compared to the 2015 quarter were:

§a decrease of $0.1 million or 100% in charges related to the proxy contest in 2015; and

§a decrease $0.1 million in other charges.

Other Items

Interest expense decreased 31% in the first quarter of 2016 compared to the prior year period due to the decreased level of debt.

15

Other income for both periods presented was not material to the financial statements.

Income taxes reflected the change in the operating results.  The effective tax rate in the first quarter of 2016 was 31.5% and was comparable to the 2015 effective rate which was 34.1%.

Liquidity and Sources of Capital

The Company generated approximately $658,000 of cash from its operations during the first three months of 2016 compared to approximately $327,000 during the same period in 2015.  The increase in cash flows in the 2016 quarter compared to the prior year period was primarily the result of 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.

Additions to property, plant and equipment were approximately $338,000 for the first three months of 2016 and $820,000 for the same period in 2015.  Total capital expenditures for 2016 are expected to be approximately $2.5 million.  As of April 2, 2016, there is approximately $160,000 of outstanding commitments for these capital expenditures.

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

	First Quarter 2016	First Quarter 2015	Year End 2015
Current ratio	5.9	5.5	5.0
Average days’ sales in accounts receivable	50	48	47
Inventory turnover	3.0	3.5	3.0
Total debt to shareholders’ equity	3.1%	5.2%	4.0%

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

	First			First				Year
	Quarter			Quarter				End
	2016			2015				2015
Cash and cash equivalents
- Held in the United States	$	5.8			$	4.6			$	6.9
- Held by a foreign subsidiary		10.9				9.5				10.9
		16.7				14.1				17.8
Working capital		61.1				58.3				60.1
Net cash provided by operating activities		0.7				0.3				9.1
Change in working capital impact on net cash     (used) in operating activities		(1.8	)			(2.3	)			(2.0	)
Net cash (used) in investing activities		(0.3	)			(0.8	)			(2.5	)
Net cash (used) in financing activities		(1.4	)			(1.0	)			(3.9	)

U.S. income taxes have not been provided on the undistributed earnings of the Company’s foreign subsidiaries except where required under U.S. tax laws.  The Company would be required to accrue and pay United States income taxes to repatriate the funds held by foreign subsidiaries not otherwise provided. The Company intends to reinvest these earnings outside the United States indefinitely.

All cash held by foreign subsidiaries is readily convertible into other currencies, including the U.S. Dollar.

Total inventories were $35.7 million on April 2, 2016 compared to $36.8 million at year end 2015, a 3% decrease, and $34.2 million, a 4% increase compared to the end of the first quarter of 2015.  Accounts receivable were $17.9 million compared to $17.5 million at year end 2015 and $19.3 million at the end of the first quarter of 2015.

16

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 2015 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 April 2, 2016, 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 April 2, 2016 evaluation date.

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.

17

PART II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

During 2010, the Company was contacted by the State of Illinois regarding potential ground contamination at our plant in Wheeling, Illinois.  The Company signed up with a voluntary remediation program in Illinois and has engaged an environmental clean-up company to perform testing and develop a remediation plan.  Since 2010, the environmental company has completed a number of tests and a final remediation system design is expected to be approved in this fiscal year.  In Fiscal 2016, the Company has expensed $2,500 related to this issue and expects an additional cost for the remediation system of approximately $25,000.

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 2015 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.

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 January 2, 2016 is incorporated herein by reference.

99(2)) Form 8-K filed on March 18, 2016 setting forth the press release reporting the release of the President’s Letter from the Annual Report to Shareholders is incorporated herein by reference.

99(3)) Form 8-K filed on March 30, 2016 setting forth the press release reporting the release of the compensatory arrangements with certain officers is incorporated herein by reference.

18

99(4)) Form 8-K filed on April 15, 2016 setting forth the press release reporting the release of an amendment to its proxy statement is incorporated herein by reference.

99(5)) Form 8-K filed on April 29, 2016 setting forth the press release reporting the Company’s earnings for the quarter ended April 2, 2016 is incorporated herein by reference.

99(6)) Form 8-K filed on April 29, 2016 setting forth the results of the annual meeting of the Shareholders of the Company which was held on April 27, 2016 is incorporated 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:  April 29, 2016	/s/August M. Vlak
	August M. Vlak President and Chief Executive Officer
DATE:  April 29, 2016	/s/John L. Sullivan III
	John L. Sullivan III Vice President and Chief Financial Officer
DATE:  April 29, 2016	/s/Angelo M. Labbadia
	Angelo M. Labbadia Chief Operating Officer

19

EX-31

EXHIBIT 31

CERTIFICATIONS

I, August M. Vlak, certify that:

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

2.      Based on my knowledge, this 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 report;

3.      Based on my knowledge, the financial statements, and other financial information included in this 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 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 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:  April 29, 2016

/s/August M. Vlak

August M. Vlak

CEO

EXHIBIT 31

CERTIFICATIONS

I, John L. Sullivan III, certify that:

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

2.      Based on my knowledge, this 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 report;

3.      Based on my knowledge, the financial statements, and other financial information included in this 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 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 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:   April 29, 2016

/s/John L. Sullivan III

John L. Sullivan III

CFO

EXHIBIT 31

CERTIFICATIONS

I, Angelo M. Labbadia, certify that:

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

7.      Based on my knowledge, this 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 report;

8.      Based on my knowledge, the financial statements, and other financial information included in this 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 report;

9.      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:

e)   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 report is being prepared;

f)   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;

g)   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

h)   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

10.      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):

c)   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

d)   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:   April 29, 2016

/s/Angelo M. Labbadia

Angelo M. Labbadia

COO

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, August M. Vlak, the Chief Executive Officer of The Eastern Company (the “Company”), Angelo Labbadia, the Chief Operating Officer of 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 April 2, 2016, 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 29th day of April, 2016.

/s/ August M. Vlak

August M. Vlak

CEO

/s/ John L. Sullivan III

John L. Sullivan III

CFO

/s/ Angelo A. Labbadia

Angelo A. Labbadia

COO

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

Document and Entity Information - shares	3 Months Ended
	Apr. 02, 2016	Apr. 27, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	EASTERN CO
Entity Central Index Key	0000031107
Current Fiscal Year End Date	--12-31
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		6,250,207
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Apr. 02, 2016

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($)	Apr. 02, 2016	Jan. 02, 2016
Current Assets
Cash and cash equivalents	$ 16,728,086	$ 17,814,986
Accounts receivable, less allowances: $461,000 - 2016; $450,000 - 2015	17,864,495	17,502,445
Inventories	35,684,938	36,842,413
Prepaid expenses and other assets	2,250,755	2,122,215
Deferred income taxes	986,167	986,167
Total Current Assets	73,514,441	75,268,226
Property, Plant and Equipment	63,813,669	63,438,241
Accumulated depreciation	(37,466,820)	(36,636,775)
Net Property, Plant and Equipment	26,346,849	26,801,466
Goodwill	14,848,095	14,790,793
Trademarks	169,845	164,957
Patents, technology and other intangibles net of accumulated amortization	2,032,599	2,113,576
Deferred income taxes	2,366,374	2,599,541
Total Other Assets	19,416,913	19,668,867
TOTAL ASSETS	119,278,203	121,738,559
Current Liabilities
Accounts payable	7,792,497	9,109,394
Accrued compensation	1,809,148	2,873,871
Other accrued expenses	1,589,817	1,751,052
Current portion of long-term debt	1,250,000	1,428,571
Total Current Liabilities	12,441,462	15,162,888
Other long-term liabilities	286,920	286,920
Long-term debt, less current portion	1,250,000	1,785,714
Accrued postretirement benefits	744,473	793,055
Accrued pension cost	$ 24,547,739	$ 24,304,926
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: 8,944,936 shares in 2016 and 8,942,461 shares in 2015	$ 29,036,652	$ 28,997,050
Treasury Stock: 2,694,729 shares in 2016 and 2015	(19,105,723)	(19,105,723)
Retained earnings	90,557,674	90,597,041
Accumulated other comprehensive income (loss):
Foreign currency translation	(976,311)	(1,154,098)
Unrecognized net pension and postretirement benefit costs, net of tax	(19,504,683)	(19,929,214)
Accumulated other comprehensive loss	(20,480,994)	(21,083,312)
Total Shareholders' Equity	80,007,609	79,405,056
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 119,278,203	$ 121,738,559

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($)	Apr. 02, 2016	Jan. 02, 2016
Current Assets
Accounts receivable, allowances	$ 461,000	$ 450,000
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)	8,944,936	8,942,461
Treasury Stock, shares (in shares)	2,694,729	2,694,729

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)	3 Months Ended
	Apr. 02, 2016	Apr. 04, 2015
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) [Abstract]
Net sales	$ 33,101,657	$ 36,876,842
Cost of products sold	(26,681,211)	(29,541,664)
Gross margin	6,420,446	7,335,178
Selling and administrative expenses	(5,459,582)	(5,963,695)
Operating profit	960,864	1,371,483
Interest expense	(36,285)	(52,825)
Other income	21,374	7,007
Income before income taxes	945,953	1,325,665
Income taxes	297,880	451,714
Net income	$ 648,073	$ 873,951
Earnings per Share:
Basic (in dollars per share)	$ 0.10	$ 0.14
Diluted (in dollars per share)	0.10	0.14
Cash dividends per share: (in dollars per share)	$ 0.11	$ 0.11

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($)	3 Months Ended
	Apr. 02, 2016	Apr. 04, 2015
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) [Abstract]
Net income	$ 648,073	$ 873,951
Other comprehensive (loss) income:
Change in foreign currency translation	177,787	(594,332)
Change in pension and postretirement benefit costs, net of taxes of: 2016 - $233,167 2015 - $186,514	424,531	339,590
Total other comprehensive (loss) income	602,318	(254,742)
Comprehensive income	$ 1,250,391	$ 619,209

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (Parenthetical) - USD ($)	3 Months Ended
	Apr. 02, 2016	Apr. 04, 2015
Other comprehensive (loss) income:
Change in pension and postretirement benefit costs, taxes	$ 233,167	$ 186,514

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)	3 Months Ended
	Apr. 02, 2016	Apr. 04, 2015
Operating Activities
Net income	$ 648,073	$ 873,951
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	928,136	959,857
Unrecognized pension & postretirement benefits	851,929	848,173
Loss on sale of equipment and other assets	19,780	0
Issuance of Common Stock for directors' fees	39,601	7,498
Changes in operating assets and liabilities:
Accounts receivable	(339,041)	(2,317,994)
Inventories	1,254,683	33,403
Prepaid expenses and other	(127,991)	(140,975)
Recoverable income taxes receivable	0	380,000
Other assets	(19,977)	57,208
Accounts payable	(1,336,219)	(14,302)
Accrued compensation	(1,099,262)	(1,349,334)
Other accrued expenses	(161,982)	989,385
Net cash provided by operating activities	657,730	326,870
Investing Activities
Purchases of property, plant and equipment	(338,270)	(820,161)
Net cash used in investing activities	(338,270)	(820,161)
Financing Activities
Principal payments on long-term debt	(714,285)	(357,142)
Dividends paid	(687,439)	(686,841)
Net cash used in financing activities	(1,401,724)	(1,043,983)
Effect of exchange rate changes on cash	(4,636)	(161,879)
Net change in cash and cash equivalents	(1,086,900)	(1,699,153)
Cash and cash equivalents at beginning of period	17,814,986	15,834,444
Cash and cash equivalents at end of period	$ 16,728,086	$ 14,135,291

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Basis of Presentation

3 Months Ended

Apr. 02, 2016

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 January 2, 2016 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 January 2, 2016 has been derived from the audited consolidated balance sheet at that date.

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Earnings Per Share

3 Months Ended

Apr. 02, 2016

Earnings Per Share [Abstract]

Earnings Per Share

Note B – Earnings Per Share

The denominators used in the earnings per share computations follow:

	Three Months Ended
	April 2, 2016		April 4, 2015
Basic:
Weighted average shares outstanding		6,247,760		6,244,088
Diluted:
Weighted average shares outstanding		6,247,760		6,244,088
Dilutive stock options		-		-
Denominator for diluted earnings per share		6,247,760		6,244,088

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Inventories

3 Months Ended

Apr. 02, 2016

Inventories [Abstract]

Inventories

Note C – Inventories

The components of inventories follow:

	April 2, 2016		January 2, 2016
Raw material and component parts	$	10,598,427	$	10,913,827
Work in process		7,422,467		7,681,576
Finished goods		17,664,044		18,247,010
	$	35,684,938	$	36,842,413

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Segment Information

3 Months Ended

Apr. 02, 2016

Segment Information [Abstract]

Segment Information

Note D – Segment Information

Segment financial information follows:

	Three Months Ended
	April 2, 2016			April 4, 2015
Revenues:
Sales to unaffiliated customers:
Industrial Hardware	$	14,591,513		$	14,786,666
Security Products		14,197,217			14,100,916
Metal Products		4,312,927			7,989,260
	$	33,101,657		$	36,876,842
Income before income taxes:
Industrial Hardware	$	697,196		$	731,545
Security Products		1,128,196			786,291
Metal Products		(864,528	)		(146,353	)
Operating Profit		960,864			1,371,483
Interest expense		(36,285	)		(52,825	)
Other income		21,374			7,007
Income before income taxes	$	945,953		$	1,325,665

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Recent Accounting Pronouncements

3 Months Ended

Apr. 02, 2016

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Note E – Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 requires lessees to present right-of-use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. The guidance is to be applied using a modified retrospective approach at the beginning of the earliest comparative period in the financial statements and is effective for years beginning after December 15, 2019. Early adoption is permitted. The Company is still in the process of determining the effect that the adoption of ASU 2016-02 will have on the accompanying financial statements.

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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Debt

3 Months Ended

Apr. 02, 2016

Debt [Abstract]

Debt

Note F – Debt

On January 29, 2010, the Company signed a secured Loan Agreement (the “Loan Agreement”) with People’s United Bank (“People’s”) which included a $5,000,000 term portion (the “Original Term Loan”) and a $10,000,000 revolving credit portion.  On January 25, 2012, the Company amended the loan agreement by taking an additional $5,000,000 term loan (the “2012 Term Loan”).  Interest on the Original Term Loan portion of the Loan Agreement is fixed at 4.98%.  Interest on the 2012 Term Loan is fixed at 3.90%.  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 3.25% and a maturity date of January 31, 2014.  On January 23, 2014, the Company signed an amendment to its secured Loan Agreement with People’s which extended the maturity date of the $10,000,000 revolver portion of the Loan Agreement to July 1, 2016 and changed the interest rate to LIBOR plus 2.25%, eliminating the floor previously in place.  The Company did not utilize the revolving credit facility during Fiscal 2015 or during the first three months of 2016.

The Company has loan covenants under the Loan Agreement which required the Company to maintain a fixed charge coverage ratio of at least 1.1 to 1, and minimum tangible net worth of $55 million. In addition, the Company has restrictions on, among other things, new capital leases, purchases or redemptions of its capital stock, mergers and divestitures, and new borrowing.  The Company was in compliance with all covenants in 2015 and for the three month period ended April 2, 2016.

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Goodwill

3 Months Ended

Apr. 02, 2016

Goodwill [Abstract]

Goodwill

Note G – Goodwill

The following is a roll-forward of goodwill from year-end 2015 to the end of the first quarter 2016:

	Industrial Hardware Segment		Security Products Segment		Metal Products Segment		Total
Beginning balance	$	1,731,751	$	13,059,042	$	—	$	14,790,793
Foreign exchange		57,302		—		—		57,302
Ending balance	$	1,789,053	$	13,059,042	$	—	$	14,848,095

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Intangibles

3 Months Ended

Apr. 02, 2016

Intangibles [Abstract]

Intangibles

Note H – Intangibles

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)
2016 Gross Amount
Patents and developed technology	$	2,262,367	$	1,030,701	$	--	$	3,293,068		15.9
Customer relationships		--		449,706		--		449,706		5.0
Non-compete agreements		--		407,000		--		407,000		5.0
Intellectual property		--		307,370		--		307,370		5.0
Total Gross Intangibles	$	2,262,367	$	2,194,777	$	--	$	4,457,144		12.6
2016 Accumulated Amortization
Patents and developed technology	$	1,543,456	$	590,070	$	--	$	2,133,526
Customer relationships		--		112,426		--		112,426
Non-compete agreements		--		101,750		--		101,750
Intellectual property		--		76,843		--		76,843
Accumulated Amortization	$	1,543,456	$	881,089	$	--	$	2,424,545
Net April 2, 2016 per Balance Sheet	$	718,911	$	1,313,688	$	--	$	2,032,599

2015 Gross Amount
Patents and developed technology	$	2,206,852	$	1,029,181	$	--	$	3,236,033	15.9
Customer relationships		--		449,706		--		449,706	5.0
Non-compete agreements		--		407,000		--		407,000	5.0
Intellectual property		--		307,370		--		307,370	5.0
Total Gross Intangibles	$	2,206,852	$	2,193,257	$	--	$	4,400,109	12.6
2015 Accumulated Amortization
Patents and developed technology	$	1,478,692	$	575,026	$	--	$	2,053,718
Customer relationships		--		89,941		--		89,941
Non-compete agreements		--		81,400		--		81,400
Intellectual property		--		61,474		--		61,474
Accumulated Amortization	$	1,478692	$	807,841	$	--	$	2,286,533
Net January 2, 2016 per Balance Sheet	$	728,160	$	1,385,416	$	--	$	2,113,576

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Retirement Benefit Plans

3 Months Ended

Apr. 02, 2016

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 first quarter of fiscal 2016 and 2015 follow:

	Pension Benefits						Postretirement Benefits
	Three Months Ended						Three Months Ended
	April 2, 2016			April 4, 2015			April 2, 2016			April 4, 2015
Service cost	$	813,005		$	964,987		$	10,750		$	54,393
Interest cost		766,580			859,259			20,500			38,729
Expected return on plan assets		(1,243,941	)		(1,287,914	)		(11,750	)		(22,984	)
Amortization of prior service cost		50,143			54,647			(6,000	)		(5,972	)
Amortization of the net loss		627,055			472,728			(13,500	)		4,701
Net periodic benefit cost	$	1,012,842		$	1,063,707		$	--		$	68,867

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 2016, the Company expects to contribute $3.1 million into its pension plans and $118,000 into its postretirement plan. As of April 2, 2016, the Company has not made contributions into its pension plans and has contributed $46,000 to its postretirement plan and will make the remaining contributions as required during the remainder of the year.

On April 5, 2016 the Board of Directors passed a resolution freezing the benefits of The Salaried Employees Retirement Plan of The Eastern Company effective as of May 31, 2016.  The Board also approved several enhancements to The Eastern Company Savings and Investment Plan effective June 1, 2016.

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 $56,231 and $52,266 in the first quarter of 2016 and 2015, respectively.

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Stock Based Compensation and Stock Options

3 Months Ended

Apr. 02, 2016

Stock Based Compensation and Stock Options [Abstract]

Stock Based Compensation and Stock Options

Note J – Stock Based Compensation and Stock Options

As of April 2, 2016, the Company had one stock option plan, the 2010 plan, for officers, other key employees, and non-employee directors.  Incentive stock options granted under the 2010 plan 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 2010 plan, non-qualified 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 quarter of 2016 or 2015.

As of April 2, 2016, there were 500,000 shares of common stock reserved and available for future grant under the above noted 2010 plan.

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Income Taxes

3 Months Ended

Apr. 02, 2016

Income Tax [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 2012 and non-U.S. income tax examinations by tax authorities prior to 2009.

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 months ended April 2, 2016.  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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Financial Instruments and Fair Value Measurements

3 Months Ended

Apr. 02, 2016

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 April 2, 2016 and January 2, 2016, there were no significant concentrations of credit risk. No one customer represented more than 10% of the Company’s net trade receivables at April 2, 2016 or at January 2, 2016.  The maximum exposure to credit risk is primarily represented by the carrying amount of the Company’s accounts receivable.

Interest Rate Risk

On April 2, 2016, the Company has no exposure to the risk of changes in market interest rates as the interest rate on the outstanding debt is 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 April 2, 2016 or January 2, 2016.

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Subsequent Event

3 Months Ended

Apr. 02, 2016

Subsequent Event [Abstract]

Subsequent Event

Note M – Subsequent Event

On April 5, 2016 the Board of Directors passed a resolution freezing the benefits of The Salaried Employees Retirement Plan of The Eastern Company as of May 31, 2016.  The Board also approved several enhancements to The Eastern Company Savings and Investment Plan effective June 1, 2016.

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Earnings Per Share (Tables)

3 Months Ended

Apr. 02, 2016

Earnings Per Share [Abstract]

Denominators used in the earnings per share computations

The denominators used in the earnings per share computations follow:

	Three Months Ended
	April 2, 2016		April 4, 2015
Basic:
Weighted average shares outstanding		6,247,760		6,244,088
Diluted:
Weighted average shares outstanding		6,247,760		6,244,088
Dilutive stock options		-		-
Denominator for diluted earnings per share		6,247,760		6,244,088

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Inventories (Tables)

3 Months Ended

Apr. 02, 2016

Inventories [Abstract]

Components of inventories

The components of inventories follow:

	April 2, 2016		January 2, 2016
Raw material and component parts	$	10,598,427	$	10,913,827
Work in process		7,422,467		7,681,576
Finished goods		17,664,044		18,247,010
	$	35,684,938	$	36,842,413

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Segment Information (Tables)

3 Months Ended

Apr. 02, 2016

Segment Information [Abstract]

Segment financial information

Segment financial information follows:

	Three Months Ended
	April 2, 2016			April 4, 2015
Revenues:
Sales to unaffiliated customers:
Industrial Hardware	$	14,591,513		$	14,786,666
Security Products		14,197,217			14,100,916
Metal Products		4,312,927			7,989,260
	$	33,101,657		$	36,876,842
Income before income taxes:
Industrial Hardware	$	697,196		$	731,545
Security Products		1,128,196			786,291
Metal Products		(864,528	)		(146,353	)
Operating Profit		960,864			1,371,483
Interest expense		(36,285	)		(52,825	)
Other income		21,374			7,007
Income before income taxes	$	945,953		$	1,325,665

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Goodwill (Tables)

3 Months Ended

Apr. 02, 2016

Goodwill [Abstract]

Roll-forward of goodwill

The following is a roll-forward of goodwill from year-end 2015 to the end of the first quarter 2016:

	Industrial Hardware Segment		Security Products Segment		Metal Products Segment		Total
Beginning balance	$	1,731,751	$	13,059,042	$	—	$	14,790,793
Foreign exchange		57,302		—		—		57,302
Ending balance	$	1,789,053	$	13,059,042	$	—	$	14,848,095

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Intangibles (Tables)

3 Months Ended

Apr. 02, 2016

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)
2016 Gross Amount
Patents and developed technology	$	2,262,367	$	1,030,701	$	--	$	3,293,068		15.9
Customer relationships		--		449,706		--		449,706		5.0
Non-compete agreements		--		407,000		--		407,000		5.0
Intellectual property		--		307,370		--		307,370		5.0
Total Gross Intangibles	$	2,262,367	$	2,194,777	$	--	$	4,457,144		12.6
2016 Accumulated Amortization
Patents and developed technology	$	1,543,456	$	590,070	$	--	$	2,133,526
Customer relationships		--		112,426		--		112,426
Non-compete agreements		--		101,750		--		101,750
Intellectual property		--		76,843		--		76,843
Accumulated Amortization	$	1,543,456	$	881,089	$	--	$	2,424,545
Net April 2, 2016 per Balance Sheet	$	718,911	$	1,313,688	$	--	$	2,032,599

2015 Gross Amount
Patents and developed technology	$	2,206,852	$	1,029,181	$	--	$	3,236,033	15.9
Customer relationships		--		449,706		--		449,706	5.0
Non-compete agreements		--		407,000		--		407,000	5.0
Intellectual property		--		307,370		--		307,370	5.0
Total Gross Intangibles	$	2,206,852	$	2,193,257	$	--	$	4,400,109	12.6
2015 Accumulated Amortization
Patents and developed technology	$	1,478,692	$	575,026	$	--	$	2,053,718
Customer relationships		--		89,941		--		89,941
Non-compete agreements		--		81,400		--		81,400
Intellectual property		--		61,474		--		61,474
Accumulated Amortization	$	1,478692	$	807,841	$	--	$	2,286,533
Net January 2, 2016 per Balance Sheet	$	728,160	$	1,385,416	$	--	$	2,113,576

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Retirement Benefit Plans (Tables)

3 Months Ended

Apr. 02, 2016

Retirement Benefit Plans [Abstract]

Significant disclosures relating to benefit plans

Significant disclosures relating to these benefit plans for the first quarter of fiscal 2016 and 2015 follow:

	Pension Benefits						Postretirement Benefits
	Three Months Ended						Three Months Ended
	April 2, 2016			April 4, 2015			April 2, 2016			April 4, 2015
Service cost	$	813,005		$	964,987		$	10,750		$	54,393
Interest cost		766,580			859,259			20,500			38,729
Expected return on plan assets		(1,243,941	)		(1,287,914	)		(11,750	)		(22,984	)
Amortization of prior service cost		50,143			54,647			(6,000	)		(5,972	)
Amortization of the net loss		627,055			472,728			(13,500	)		4,701
Net periodic benefit cost	$	1,012,842		$	1,063,707		$	--		$	68,867

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Earnings Per Share (Details) - shares	3 Months Ended
	Apr. 02, 2016	Apr. 04, 2015
Basic [Abstract]
Weighted average shares outstanding (in shares)	6,247,760	6,244,088
Diluted [Abstract]
Weighted average shares outstanding (in shares)	6,247,760	6,244,088
Dilutive stock options (in shares)	0	0
Denominator for diluted earnings per share (in shares)	6,247,760	6,244,088

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Inventories (Details) - USD ($)	Apr. 02, 2016	Jan. 02, 2016
Components of inventories [Abstract]
Raw material and component parts	$ 10,598,427	$ 10,913,827
Work in process	7,422,467	7,681,576
Finished goods	17,664,044	18,247,010
Inventories	$ 35,684,938	$ 36,842,413

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Segment Information (Details) - USD ($)	3 Months Ended
	Apr. 02, 2016	Apr. 04, 2015
Segment Reporting Information [Line Items]
Revenues, sales to unaffiliated customers	$ 33,101,657	$ 36,876,842
Operating Profit	960,864	1,371,483
Interest expense	(36,285)	(52,825)
Other income	21,374	7,007
Income before income taxes	945,953	1,325,665
Industrial Hardware [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Revenues, sales to unaffiliated customers	14,591,513	14,786,666
Operating Profit	697,196	731,545
Security Products [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Revenues, sales to unaffiliated customers	14,197,217	14,100,916
Operating Profit	1,128,196	786,291
Metal Products [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Revenues, sales to unaffiliated customers	4,312,927	7,989,260
Operating Profit	$ (864,528)	$ (146,353)

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Debt (Details) - USD ($)	3 Months Ended
	Apr. 02, 2016	Jan. 25, 2012	Jan. 29, 2010
Debt Instrument [Line Items]
Minimum tangible net worth	$ 55,000,000
Revolving Credit Loan [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 10,000,000		$ 10,000,000
Maturity date of loan	Jul. 01, 2016
Revolving Credit Loan [Member] | LIBOR [Member]
Debt Instrument [Line Items]
Basis spread on variable rate	2.25%
Revolving Credit Loan [Member] | People's Prime Rate [Member]
Debt Instrument [Line Items]
Basis spread on variable rate	2.25%
Revolving Credit Loan [Member] | Floor Rate [Member]
Debt Instrument [Line Items]
Floor rate of loan	3.25%
Loan Agreement [Member]
Debt Instrument [Line Items]
Fixed charge coverage ratio as multiple, minimum	1.1
Term Loan [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity			$ 5,000,000
Fixed rate of interest	4.98%		4.98%
2012 Term Loan [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 5,000,000	$ 5,000,000
Fixed rate of interest	3.90%	3.90%

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Goodwill (Details)	3 Months Ended
	Apr. 02, 2016 USD ($)
Goodwill [Roll Forward]
Beginning balance	$ 14,790,793
Foreign exchange	57,302
Ending balance	14,848,095
Industrial Hardware Segment [Member]
Goodwill [Roll Forward]
Beginning balance	1,731,751
Foreign exchange	57,302
Ending balance	1,789,053
Security Products Segment [Member]
Goodwill [Roll Forward]
Beginning balance	13,059,042
Foreign exchange	0
Ending balance	13,059,042
Metal Products Segment [Member]
Goodwill [Roll Forward]
Beginning balance	0
Foreign exchange	0
Ending balance	$ 0

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Intangibles (Details) - USD ($)	3 Months Ended	12 Months Ended
	Apr. 02, 2016	Jan. 03, 2015	Jan. 02, 2016
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	$ 4,457,144		$ 4,400,109
Accumulated Amortization	2,424,545		2,286,533
Net as per Balance Sheet	$ 2,032,599		2,113,576
Weighted Average Amortization Period	12 years 7 months 6 days	12 years 7 months 6 days
Industrial Hardware Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	$ 2,262,367		2,206,852
Accumulated Amortization	1,543,456		1,478,692
Net as per Balance Sheet	718,911		728,160
Security Products Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	2,194,777		2,193,257
Accumulated Amortization	881,089		807,841
Net as per Balance Sheet	1,313,688		1,385,416
Metal Products Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	0		0
Accumulated Amortization	0		0
Net as per Balance Sheet	0		0
Patents and Developed Technology [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	3,293,068		3,236,033
Accumulated Amortization	$ 2,133,526		2,053,718
Weighted Average Amortization Period	15 years 10 months 24 days	15 years 10 months 24 days
Patents and Developed Technology [Member] | Industrial Hardware Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	$ 2,262,367		2,206,852
Accumulated Amortization	1,543,456		1,478,692
Patents and Developed Technology [Member] | Security Products Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	1,030,701		1,029,181
Accumulated Amortization	590,070		575,026
Patents and Developed Technology [Member] | Metal Products Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	0		0
Accumulated Amortization	0		0
Customer Relationships [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	449,706		449,706
Accumulated Amortization	$ 112,426		89,941
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	$ 0		0
Accumulated Amortization	0		0
Customer Relationships [Member] | Security Products Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	449,706		449,706
Accumulated Amortization	112,426		89,941
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]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	407,000		407,000
Accumulated Amortization	$ 101,750		81,400
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	$ 0		0
Accumulated Amortization	0		0
Non-compete Agreements [Member] | Security Products Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	407,000		407,000
Accumulated Amortization	101,750		81,400
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
Intellectual Property [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	307,370		307,370
Accumulated Amortization	$ 76,843		61,474
Weighted Average Amortization Period	5 years	5 years
Intellectual Property [Member] | Industrial Hardware Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	$ 0		0
Accumulated Amortization	0		0
Intellectual Property [Member] | Security Products Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	307,370		307,370
Accumulated Amortization	76,843		61,474
Intellectual Property [Member] | Metal Products Segment [Member]
Gross carrying amount and accumulated amortization of amortizable intangible assets [Abstract]
Gross Amount	0		0
Accumulated Amortization	$ 0		$ 0

XML

Retirement Benefit Plans (Details) - USD ($)	3 Months Ended
	Apr. 02, 2016	Apr. 04, 2015
Significant disclosures relating to benefit plans [Abstract]
Percentage of voluntary contributions allowed to participants, maximum	100.00%
Employer contributions made	$ 56,231	$ 52,266
Pension Benefits [Member]
Significant disclosures relating to benefit plans [Abstract]
Service cost	813,005	964,987
Interest cost	766,580	859,259
Expected return on plan assets	(1,243,941)	(1,287,914)
Amortization of prior service cost	50,143	54,647
Amortization of the net loss	627,055	472,728
Net periodic benefit cost	1,012,842	1,063,707
Contributions required by the Company in defined benefit plan	3,100,000
Contributions made by Company	0
Postretirement Benefits [Member]
Significant disclosures relating to benefit plans [Abstract]
Service cost	10,750	54,393
Interest cost	20,500	38,729
Expected return on plan assets	(11,750)	(22,984)
Amortization of prior service cost	(6,000)	(5,972)
Amortization of the net loss	(13,500)	4,701
Net periodic benefit cost	0	$ 68,867
Contributions required by the Company in defined benefit plan	118,000
Contributions made by Company	$ 46,000

XML

Stock Based Compensation and Stock Options (Details)	3 Months Ended
	Apr. 02, 2016 Plan shares	Apr. 04, 2015 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of plans that have shares reserved for further issuance | Plan	1
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock granted (in shares)	0	0
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	100.00%
Options granted (in shares)	0	0
2010 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for future grant (in shares)	500,000

XML

Income Taxes (Details)	3 Months Ended
	Apr. 02, 2016 USD ($)
Income Tax Examination [Line Items]
Significant changes to the amount of unrecognized tax benefits	$ 0

XML

Financial Instruments and Fair Value Measurements (Details)	Apr. 02, 2016 Customer Liabilities Assets	Jan. 02, 2016 Customer Liabilities Assets	Jan. 25, 2012	Jan. 29, 2010
Liabilities [Member]
Fair Value Measurements [Abstract]
Number of assets and liabilities requiring fair value measurements | Liabilities	0	0
Term Loan [Member]
Interest Rate Risk [Abstract]
Fixed rate of interest	4.98%			4.98%
2012 Term Loan [Member]
Interest Rate Risk [Abstract]
Fixed rate of interest	3.90%		3.90%
Credit Concentration Risk [Member]
Credit Risk [Abstract]
Number of customers that represented more than 10% of trade receivables | Customer	0	0
Assets [Member]
Fair Value Measurements [Abstract]
Number of assets and liabilities requiring fair value measurements | Assets	0	0