-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UVHgt2/gwTghxJvITdMX8xwA4hzyD7rBDMCAbFjgt9b+PvSLDdPb80pUQWt+oltJ HakGe6hMuLm0a9K9PVyPSA== 0000031107-96-000003.txt : 19960515 0000031107-96-000003.hdr.sgml : 19960515 ACCESSION NUMBER: 0000031107-96-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960330 FILED AS OF DATE: 19960514 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: EASTERN CO CENTRAL INDEX KEY: 0000031107 STANDARD INDUSTRIAL CLASSIFICATION: CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420] IRS NUMBER: 060330020 STATE OF INCORPORATION: CT FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00599 FILM NUMBER: 96562709 BUSINESS ADDRESS: STREET 1: 112 BRIDGE ST STREET 2: P O BOX 460 CITY: NAUGATUCK STATE: CT ZIP: 06770 BUSINESS PHONE: 2037292255 MAIL ADDRESS: STREET 1: 112 BRIDGE STREET STREET 2: P O BOX 460 CITY: NAUGATUCK STATE: CT ZIP: 06770 10-Q 1 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 30,1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________________ to ______________________. Commission File Number 0-599 THE EASTERN COMPANY (Exact Name of Registrant as specified in its charter) Connecticut 06-0330020 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 112 Bridge Street, Naugatuck, Connecticut 06770 (Address of principal executive offices) (Zip Code) (203) 729-2255 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --------- --------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of March 30, 1996 Common Stock, No par value 2,696,284 -1- 2 PART I FINANCIAL INFORMATION THE EASTERN COMPANY AND SUBSIDIARIES ITEM I CONSOLIDATED CONDENSED BALANCE SHEETS (UNADITED) - ------ ------------------------------------- ASSETS
CURRENT ASSETS March 30, 1996 Dec. 30, 1995 ------------- ------------ Cash and cash equivalents $ 1,843,861 $ 1,521,361 Accounts receivable,less allowance of: 1996- $519,720 1995- $501,000 8,300,234 7,810,742 Inventories 11,795,823 11,792,876 Prepaid expenses and other current assets 1,980,657 2,010,332 ----------- ----------- Total Current Assets 23,920,575 23,135,311 Property, plant and equipment 26,265,843 25,090,676 Accumulated depreciation (12,116,778) (11,405,013) ----------- ----------- 14,149,065 13,685,663 Prepaid pension cost 3,705,130 3,069,066 Other assets, net 1,161,830 1,200,059 ------------ ------------ TOTAL ASSETS $ 42,936,600 $ 41,090,099 ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities Notes payable $ 2,119,313 $ 1,119,313 Accounts payable 3,710,029 3,004,297 Accrued compensation and withholding 1,662,829 908,297 Accrued expenses 759,303 863,749 ------------ ----------- Total Current Liabilities 8,251,474 5,895,656 Deferred federal income taxes 2,237,900 2,237,900 Long-term debt 280,065 339,856 Accrued postretirement benefits 2,813,003 2,810,003 Shareholders' Equity Common Stock No Par Value: Authorized Shares - 25,000,000 Issued & outstanding shares: 8,017,738 8,017,738 1996-2,696,284 1995-2,696,284 (Excluding Shares in Treasury: 1996-610,987 1995-610,987) Preferred Stock, No Par Value Authorized Share - 2,000,000 (No shares issued) Retained earnings 21,336,420 21,788,946 ------------ ------------ TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 42,936,600 $ 41,090,099 ============ ============
See accompanying notes. -2- 3 THE EASTERN COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 30, 1996 APRIL 1, 1995 Net sales $14,541,552 $16,415,632 Interest income 36,709 40,070 ----------- ----------- Total 14,578,261 16,455,702 Cost of products sold 12,117,549 12,114,995 ----------- ----------- 2,460,712 4,310,707 Selling and admin. expenses 2,691,835 2,678,023 Interest expense 50,839 43,645 Other income net - (29,087) ----------- ----------- (LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (281,962) 1,618,126 Income taxes (79,801) 574,770 ----------- ----------- (LOSS) INCOME FROM CONTINUING OPERATIONS (202,161) 1,043,356 Discontinued operations - (83,687) ----------- ----------- NET (LOSS) INCOME $ (202,161) $ 959,669 =========== =========== (Loss) income per share from continuing operations $ (0.07) $ 0.38 Net (loss) income per share $ (0.07) $ 0.35 Cash dividends per share $ 0.115 $ 0.115 Average shares outstanding 2,696,284 2,775,085
See accompanying notes. -3- 4 THE EASTERN COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) THREE MONTHS ENDED
MARCH 30, 1996 APRIAL 1, 1995 -------------- -------------- OPERATING ACTIVITIES: Net (loss) income $ (202,161) $ 959,669 Adjustments to reconcile net (loss) income to net cash provided from operations: Depreciation and amortization 763,246 687,515 Gain on sale of equipment and other assets - (16,606) Postretirement benefits other than pensions 3,000 20,750 Provision for losses on accounts receivable 17,500 30,035 Changes in operating assets and liabilities: Accounts receivable (503,836) 8,785 Inventories 2,987 (1,058,958) Prepaid expenses 30,364 264,554 Prepaid pension (636,064) (88,913) Accounts payable 700,253 459,421 Accrued expenses 698,265 1,318,753 Other assets (12,569) (321,104) ---------- ---------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 860,985 2,263,901 INVESTING ACTIVITIES: Purchases of property, plant, and equipment (1,172,221) (690,276) Proceeds from sale of equipment and other assets - 1,034,717 Other - - --------- --------- NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (1,172,221) 344,441 FINANCING ACTIVITIES: Payment on line of credit - (1,400,000) Proceeds from line of credit 1,000,000 - Principal payments on long-term debt 60,000 (310,000) Dividends paid (310,074) (319,136) ---------- ---------- NET CASH USED FOR FINANCING ACTIVITIES 629,926 (2,029,136) Effect of exchange rate changes on cash 3,810 (2,106) ---------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS 322,500 577,100 Cash and Cash Equivalents at Beginning of Year 1,521,361 2,610,244 ----------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,843,861 $ 3,187,344 =========== ===========
See accompanying notes. -4- 5 THE EASTERN COMPANY AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (UNAUDITED)
THREE MONTHS ENDED As reported: MARCH 30, 1996 APRIL 1, 1995 -------------- ------------- Primary: Average shares outstanding 2,696,284 2,775,085 Net effect of dilutive stock options -- based on the treasury stock method using average market price - 64,299 --------- --------- Total 2,696,284 2,839,384 ========= ========= (Loss) income from continuing operations $ (202,161) $1,043,356 ========== ========== Net (loss) income $ (202,161) $ 959,669 ========== ========== (Loss) income per share from continuing operations ($0.07) $0.37 ===== ===== Net (loss) Income Per Share ($0.07) $0.34 ===== ===== Fully diluted: Average shares outstanding 2,696,284 2,775,085 Net effect of dilutive stock options -- based on the treasury stock method using quarter-end market price, if higher than average market price - 64,299 --------- --------- Total 2,696,284 2,839,384 ========= ========= (Loss) income from continuing operations $ (202,161) $1,043,356 ========== ========== Net (loss) income $ (202,161) $ 959,669 ========== ========== (Loss) income per share from continuing operations ($0.07) $0.37 ===== ==== Net (loss) Income Per Share ($0.07) $0.34 ===== =====
See accompanying notes. -5- THE EASTERN COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) Note A - Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying condensed consolidated financial statements are unaudited. However, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for such interim periods have been reflected therein. Certain 1995 amounts have been reclassified to conform to 1996 presentation. The condensed balance sheet as of December 30, 1995 has been derived from the audited financial statements at that date. Note B - Net (Loss) Income Per Share Net (loss) income per share of common stock is based on the weighted average number of shares outstanding during each period (1996 - 2,696,284 shares; 1995 - - 2,775,085 shares). Common stock equivalents (stock options) did not have a material dilutive effect on net income per share in 1995. The computation of net income per share of common stock on a fully diluted basis did not result in any material dilution in 1995. Stock options were anti-dilutive in 1996 and were excluded from the per share calculations. Note C - Discontinued Operations In August 1995, the Company sold the business and substantially all assets of its construction segment and retained accounts receivable. At March 30, 1996 and December 30, 1995 accounts receivable include $555,397 and $582,627 respectively. The statement of income for the three months ended April 1, 1995 has been reclassified to reflect the discontinuance of this segment. -6- ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations A loss for the first quarter of 1996 resulted from continuing operations of $202 thousand or $.07 per share on sales of $14.5 million versus income from continuing operations for the first quarter 1995 of $1.0 million or $.38 per share on sales of $16.4 million. Net income for the first quarter of 1995 was $960 thousand or $.35 per share after the loss from the discontinued construction segment of $84 thousand or $.03 per share. The first quarter 1996 net sales were down 11% or $1.9 million from the first quarter of 1995. Sales volume declined 13% due to the continued softness in the coal mining industry which began in the second quarter of 1995 and the down turn in the transportation industry which began in the fourth quarter of 1995. New products and price increases contributed 2% in increased sales helping to offset a portion of the decline in volume. New products include the "Gun Blok", a patented keyless trigger lock for securing most hand guns and rifles, introduced by the Registrant's CCL Security Products division; new malleable castings products manufactured by the Frazer & Jones division; and hardware components for the appliance industry offered by the Registrant's Canadian subsidiary, Eberhard Hardware Manufacturing, Ltd. As previously forecast, demand for the Registrant's heavy hardware for the tractor trailer industry was down from the first quarter of 1995. Demand for other locking and latching devices used in the transportation and industrial hardware markets remain strong. Sales to the underground coal mining industry were down 31% from the comparable period a year ago. This industry continues to be soft and is not expected to improve in the near-term. Sales of custom locks were up slightly from the comparable period a year ago and improved sales are expected for the second and third quarters. Gross margin as a percentage of sales for the three months ended March 30, 1996 was 17% compared to the same period a year ago of 26%. The decrease in gross margin was attributable to a decrease in sales, curtailed production resulting in an under utilization of productive capacity and production problems incurred in the contract malleable casting business. Selling and administrative expenses of $2.7 million were comparable to 1995 levels. Expressed as a percent of sales, selling and administrative expenses were 19% versus 16% for the comparable period a year ago. This percentage increase is all due to a temporary decline in sales during the first quarter of 1996 as compared to the same period a year ago. Other income for the three months ended March 30, 1996, was down $29 thousand from the comparable period a year ago. An agreement by which the Registrant received commission income expired in August 1995. -7- Liquidity and Sources of Capital Cash flows from operations were $861 thousand for the first quarter of 1996 versus $2.264 million in the first quarter of 1995. Cash generated from operations was not sufficient to fund the Registrant's capital expenditure program or the company paid contribution to its salary pension plan. As a result, the Registrant drew down an additional $1 million from its short-term line of credit in the first quarter 1996. Early in the second quarter the Registrant drew down an additional $500 thousand from its short-term line of credit to fund on going capital expenditure programs. Inventory balances at the end of the first quarter of 1996 of $11.8 million were comparable to year end 1995 levels. Inventory turns of 5.5 times at the end of the first quarter of 1996 was comparable to the year end rate. The Registrant believes inventory levels are adequate to meet customer requirements and anticipated increased sales activity. The average day's sales in accounts receivable remained at the year-end level of 53 days. The balance of uncollected accounts receivable from the discontinued segment was $555 thousand at the end of the first quarter of 1996. The Registrant continues to pursue collection of this outstanding balance. Additions to property plant and equipment were $1.2 million during the first three months of 1996 versus $690 thousand for the comparable period a year ago. Total 1996 capital expenditures will approximate or be slightly higher than the expected $2.5 million level of depreciation for the year. Other Matters On June 24, 1994, the Registrant settled all claims with both the Beacon Heights Coalition and the Laurel Park Coalition and the respective complaints against the Registrant on behalf of the Coalitions were dismissed by stipulation. No complaints are now pending in the U.S. District Court involving the Registrant and a final judgment was entered by the U.S. District Court in the consolidated proceedings on May 2, 1995. Appeals have been filed by the State and the EPA as described in Part II, Item 1 below. The Registrant continues to actively monitor the situation. It is management's opinion that the resolution of these matters will not have a material adverse effect on the Registrant's financial position, operating results or liquidity. -8- PART II OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS - In April 1988, Murtha Enterprises Inc. and related parties (collectively "Murtha"), as the result of a February 1987 suit (docket number N-87-52 PCD) brought by the U. S. Environmental Protection Agency (the "EPA") and others, concerning the Beacon Heights and Laurel Park landfills, instituted third- party actions against approximately 200 companies or individuals including the Registrant. The underlying suit against Murtha was settled with EPA and the other parties and the Consent Decree has been approved by the Court. On September 22, 1988, the EPA filed a complaint against the Registrant and seven other defendants seeking recovery of present and future response costs incurred by the United States in conjunction with the Beacon Heights landfill. The complaint alleged total damages of approximately $1.8 million ($1.3 million actual and $.5 million future). On October 31, 1988 the court consolidated the EPA action against the Registrant with the other cases under docket number N-87-52 (PCD). By complaint dated September 6, 1990, the Beacon Heights Coalition (the "Beacon Coalition"), a group of parties who have entered into a consent order with EPA, instituted a direct action against the Registrant and approximately 400 other named parties concerning the Beacon Heights landfill. The Beacon Coalition claimed that these defendants generated or transported hazardous substances disposed of at the Beacon Heights landfill, and are therefore responsible for a share of the Beacon Coalition's response costs. The Registrant has filed answers to both the EPA Complaint and the Beacon Coalition Complaint. In March 1991, a Laurel Park Coalition which did not include the Registrant entered into Consent Decree and Administrative Order by Consent with the EPA and the State of Connecticut to remediate the Laurel Park landfill. The Consent Decree has been approved by the Court. In May 1991, EPA and the State of Connecticut ("State") each filed a complaint against the Registrant and three other defendants seeking recovery of present and future response costs incurred in connection with the Laurel Park landfill. The EPA claims costs in excess of $1.8 million and the state claims costs in excess of $2.5 million. On July 1, 1991, the court consolidated these actions against the Registrant with the other cases under docket number N-87-52 (PCD). The Registrant filed answers to both of these complaints. By order dated February 8, 1994, the court granted a motion filed by Registrant for judgment on the pleadings against EPA and the state with respect to each of their claims against Registrant. By motions dated February 22, 1994 and February 23, 1994, EPA and the State respectively moved for reconsideration of the court's order, which motions were denied. By order dated February 8, 1994, the court permitted the Laurel Park Coalition to file a complaint against eight parties including the Registrant, which claims were to be assigned for trial if the Coalition filed a complaint. On June 24, 1994 , the Registrant settled all claims with both the Beacon Heights Coalition and the Laurel Park Coalition and the respective complaints against the Registrant on behalf of the Coalitions were dismissed by stipulation. -9- On May 2, 1995, the U.S. District Count entered a final judgment in the consolidated proceedings (docket number N-87-52(PCD)) which included the granting of Registrant's motion for judgment on the pleadings. As a result of this judgment, no complaints are now pending in the U.S. District Court involving the Registrant. On May 10, 1995, the State and the EPA filed their notices of appeal from this final judgment with the U.S. District Court. Briefs have been filed and the matter was argued before the U.S. Court of Appeals for the Second Circuit in New York and the parties are awaiting a decision. The Registrant will continue to vigorously pursue its legal interest in this matter. The Registrant believes that these actions will not have a materially adverse impact on the Registrant's consolidated financial position, operating results or liquidity. There are no other material legal proceedings, other than ordinary routine litigation incidental to the business, to which either the Registrant or any of its subsidiaries is a party to or by which any of their property is the subject. ITEM 2 CHANGES IN SECURITIES None ITEM 3 DEFAULTS UPON SENIOR SECURITIES - None ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None ITEM 5 OTHER INFORMATION - None ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE EASTERN COMPANY (Registrant) DATE: May 14, 1996 STEDMAN G. SWEET ---------------- Stedman G. Sweet President and Chief Executive Officer DATE: May 14, 1996 DONALD E. WHITMORE, JR. ----------------------- Donald E. Whitmore, Jr., Vice President and Chief Financial Officer -10- EX-27 2
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