-----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, L2wt9NgMMty4cGcXQHpltPcitz9hiIxOYFkA5xqJFdUlqSOtQAD4vHT4I5gF7m3f dSgFK4cRH5ENoOFnLOj6IQ== 0000031107-98-000006.txt : 19980819 0000031107-98-000006.hdr.sgml : 19980819 ACCESSION NUMBER: 0000031107-98-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980704 FILED AS OF DATE: 19980818 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: SEC FILE NUMBER: 000-00599 FILM NUMBER: 98693632 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 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 JULY 4, 1998 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 JULY 4, 1998 ----- ------------------------------ Common Stock, No par value 2,426,728 -1- PART I FINANCIAL INFORMATION THE EASTERN COMPANY AND SUBSIDIARIES ITEM I CONSOLIDATED CONDENSED BALANCE SHEET (UNAUDITED)
ASSETS July 4, 1998 January 3, 1998 ------------ --------------- CURRENT ASSETS Cash and cash equivalents 3,175,272 2,111,289 Accounts receivable, less allowance: 8,672,451 8,725,167 1998- $392,000; 1997- $329,000 Inventories 13,008,241 12,414,866 Prepaid expenses and other current assets 2,147,414 2,846,557 ---------- ---------- Total Current Assets 27,003,378 26,097,879 Property, plant and equipment 27,167,559 25,434,424 Accumulated depreciation (13,232,266) (11,997,894) ---------- ---------- 13,935,293 13,436,530 Prepaid pension cost 4,219,593 4,217,604 Other assets, net 1,875,433 2,046,148 ---------- ---------- TOTAL ASSETS $47,033,697 $45,798,161 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable 8,634,976 3,663,662 Accounts payable 3,026,382 3,499,857 Accrued compensation and withholding 1,833,214 1,413,418 Other accrued expenses 1,817,321 2,662,088 ---------- ---------- Total Current Liabilities 15,311,893 11,239,025 Deferred federal income taxes 2,492,200 2,492,200 Long-term debt - 60,000 Accrued postretirement benefits 2,769,795 2,763,795 Shareholders' Equity Common Stock, No Par Value: Authorized shares - 25,000,000 Issued and outstanding shares: 1,614,447 6,078,427 1998-2,426,728; 1997-2,593,089 (Excluding shares in Treasury: 1998-1,012,335; 1997-831,780) Preferred Stock, No Par Value Authorized shares - 2,000,000 (No shares issued) Unearned compensation (548,906) (492,969) Accumulated other comprehensive loss - translation adjustment (699,221) (563,211) Retained earnings 26,093,489 24,220,894 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $47,033,697 $45,798,161 ========== ==========
See accompanying notes. -2- THE EASTERN COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
SIX MONTHS ENDED THREE MONTHS ENDED July 4, 1998 June 28, 1997 July 4, 1998 June 27, 1997 ------------ ------------- ------------ ------------- Net sales 35,765,163 32,853,668 17,353,207 16,919,070 Interest income 72,376 69,947 48,932 33,970 ---------- ---------- ---------- ---------- Total 35,837,532 32,923,615 17,402,139 16,953,040 Cost of products sold 26,067,883 24,413,837 12,586,316 12,464,078 ---------- ---------- ---------- ---------- 9,769,656 8,509,778 4,815,823 4,488,962 Selling and administrative expenses 5,486,435 6,094,355 2,562,066 3,112,386 Interest expense 300,976 134,095 225,406 67,788 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 3,982,245 2,281,328 2,028,351 1,308,788 Income taxes 1,387,639 833,965 723,842 475,848 NET INCOME 2,594,606 1,447,363 1,304,509 832,940 ========== ========== ========== ========== Net income per share: Basic $ 1.05 $ 0.53 $ 0.55 $ 0.30 Diluted $ 1.01 $ 0.52 $ 0.52 $ 0.30 Cash dividends per share $ 0.28 $ 0.23 $ 0.150 $ 0.115
See accompanying notes. -3- THE EASTERN COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED July 4, 1998 June 28, 1997 ------------ ------------- OPERATING ACTIVITIES: Net income $ 2,594,606 $ 1,447,363 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,493,379 1,524,692 (Gain) loss on sale of equipment and other assets (90,638) 2,335 Postretirement benefits other than pensions 6,000 5,887 Provision for losses on accounts receivable 66,047 62,991 Issuance of Common Stock for directors' fees 25,814 40,323 Changes in operating assets and liabilities: Accounts receivable (52,218) (2,071,798) Inventories (663,521) (1,421,504) Prepaid expenses 694,708 552,897 Prepaid pension (1,989) (35,801) Accounts payable (431,505) 739,302 Accrued expenses (427,853) 801,187 Other assets (13,747) (281,494) ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES 3,210,536 1,354,927 INVESTING ACTIVITIES: Purchases of property, plant, and equipment (1,833,540) (1,028,524) Other 99,535 46,429 ---------- ---------- NET CASH USED BY INVESTING ACTIVITIES (1,734,005) (982,095) FINANCING ACTIVITIES: Payment on line of credit - (500,000) Proceeds from line of credit 5,000,000 - Principal payments on long-term debt (94,100) (128,556) Proceeds from sales of Common Stock 453,529 93,750 Purchases of Common Stock for treasury (4,673,678) (371,740) Dividens paid (702,324) (632,651) ---------- ---------- NET CASH USED BY FINANCING ACTIVITIES (376,352) (1,179,418) Effect of exchange rate changes on cash (36,196) 2,344 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,063,983 (804,242) Cash and Cash Equivalents at Beginning of Year 2,111,289 2,269,031 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,175,272 $ 1,464,789 ========== ==========
See accompanying notes. -4- THE EASTERN COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNADUITED)
SIX MONTHS ENDED THREE MONTHS ENDED July 4, 1998 June 28, 1997 July 4, 1998 June 28, 1997 ------------ ------------- ------------- ------------- Net income 2,594,606 1,447,363 1,304,509 832,940 Other comprehensive (loss) income: Foreign currency translation (136,010) 107,138 (92,152) 91,401 -------- ------- ------- ------ Comprehensive income 2,458,596 1,554,501 1,212,357 924,341 ========= ========= ========= =======
See accompanying notes. -5- THE EASTERN COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) JULY 4, 1998 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. The condensed balance sheet as of January 3, 1998 has been derived from the audited financial statements at that date. Note B - Earnings Per Share The denominators used in the earnings per share computations follow:
SIX MONTHS ENDED July 4,1998 June 28, 1997 ----------- ------------- Basic: Weighted average shares outstanding 2,508,820 2,745,116 Contingent shares outstanding (32,500) (22,500) ---------- ---------- Denominator for basic earnings per share 2,476,320 2,722,616 Diluted: Weighted average shares outstanding 2,508,820 2,745,116 Contingent shares outstanding (32,500) (22,500) Dilutive stock options 104,301 32,102 ---------- ---------- Denominator for diluted earnings per share 2,580,621 2,754,718 THREE MONTHS ENDED July 4,1998 June 28, 1997 ----------- ------------- Basic: Weighted average shares outstanding 2,425,858 2,757,355 Contingent shares outstanding (32,500) (22,500) ----------- ---------- Denominator for basic earnings per share 2,425,858 2,734,855 Diluted: Weighted average shares outstanding 2,393,358 2,757,355 Contingent shares outstanding (32,500) (22,500) Dilutive stock options 118,727 30,726 ---------- ---------- Denominator for diluted earnings per share 2,512,085 2,765,581
-6- THE EASTERN COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) JULY 4, 1998 Note C - Changes in Accounting Principles Effective January 4, 1998, The Eastern Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income". The adoption of this Statement had no impact on the Company's net income or shareholders' equity. Under SFAS 130 the Company's foreign currency translation adjustments, which are reported separately in shareholders' equity, are also required to be included in the determination of other comprehensive income or loss. The prior year financial statements have been reclassified to conform to the requirements of SFAS 130. Note D - Litigation The Registrant is involved in litigation relating to environmental matters for which the ultimate outcome is not expected to have any material adverse impact on financial position, operating results or liquidity. See Part II Item 1 Legal Proceedings for further information. -7- ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net income per share (basic) for the second quarter of 1998 was the highest level reported in the Company's 140-year history and represented the sixth consecutive quarter of increased earnings. Net income for the second quarter was $1.3 million or $.55 per share (basic) on sales of $17.4 million versus the second quarter of 1997 of $833 thousand or $.30 per share (basic) on sales of $16.9 million. Net income for the first six months of 1998 was $2.6 million or $1.05 per share (basic) on sales of $35.8 million versus the first six months of 1997 of $1.4 million or $.53 per share (basic) on sales of $32.9 million. Second quarter sales were up 3% compared to the same period a year ago. While volume was down 1%, price increases and new products each contributed 2% over the comparable quarter of 1997. Sales for the first half of 1998 were up 9% compared to the same period a year ago. Volume was up 5%, while prices and new products were both up 2%, respectively over the same period last year. New products include vehicular hardware products produced and designed by Eberhard Manufacturing division and contract malleable iron casting products manufactured by the Frazer & Jones division. Contract malleable casting sales were up 2% from the comparable six-month period a year ago. Sales of expansion shells, used in the underground mining industry, were down 4% for the first half of 1998 versus the first half of 1997. Sales of expansion shells are expected to be down slightly in the second half of 1998 as compared to the second half of 1997. Demand for the Registrant's heavy hardware, servicing the tractor trailer industry, was up 29% from the first half of 1997. Sales to independent distributors, original equipment manufacturers of industrial hardware and vehicular accessories was strong during the first half of 1998 and is expected to remain strong for the second half of 1998. Sales of custom locks were up 2% in the second quarter and up 12% for the first half over the comparable period a year ago. Sales of custom locks are expected to decrease in the second half as shipments of computer lock applications decline over the comparable period a year ago. The Registrant's overall results are expected to show further improvement in the second half of 1998 as compared to the same period of 1997. Gross margin as a percentage of sales for the three and six months ended July 4, 1998 was approximately 27% compared to 26% for the comparable periods a year ago. The improvement in gross margin in 1998 for both the three and six month periods versus the comparable period a year ago is due mainly to increased sales volume and price increases. Selling and administrative expenses were down 18% or $550 thousand and down 10% or $608 thousand for the three and six months ended July 4, 1998 as compared to the same periods a year ago. Selling and administrative expenses were lower in the second quarter of 1998 as compared to the same periods in 1997. This was due primarily to favorable reductions in group insurance costs in 1998. In addition, one time charges were experienced in 1997 in connection with the early retirement of the Company's former Chief Executive Officer as well as some higher costs associated with the Beacon Heights and Laurel Park landfill suits discussed under legal proceedings below. Additionally, the first half of 1997 included one time charges incurred as a result of a proxy contest. Interest expense for the second quarter of 1998 was $225 thousand versus $68 thousand for the second quarter of 1997. This increase was due to additional short-term borrowing to fund the purchase of Common Stock for treasury. -8- Liquidity and Sources of Capital Cash flows from operations were $3.2 million for the first half of 1998 versus $1.4 million in the first half of 1997. The change in cash flows resulted from timing differences for collections of accounts receivable and payments of liabilities and an increase in inventory. Cash flow from operations was sufficient to fund capital expenditures and dividend payments to shareholders. However, the purchase of 178,400 shares of Common Stock for treasury at the end of the first quarter was funded by borrowing $5 million against the Registrant's short-term line of credit at the beginning of the second quarter 1998. Additions to property, plant and equipment were $1.8 million during the first half of 1998 versus $1.0 million for the comparable period a year ago. Total 1998 capital expenditures are expected to be higher than the expected $2.6 million level of depreciation for the year. A capital expansion program has been approved for the Registrant's Frazer & Jones division as added manufacturing capacity is required to accommodate additional contract casting business expected in 1999. In addition, the Registrant's Canadian subsidiary, Eberhard Hardware Manufacturing Ltd., is expanding its manufacturing facility to accommodate increased business from two Canadian trailer manufacturers. Inventory balances at the end of the second quarter of 1998 of $13 million were $593 thousand higher than year end 1997 and $702 thousand higher than the second quarter of 1997. Inventory turns of 4.2 times at the end of the second quarter of 1998 was comparable to both the previous year end rate and also the second quarter of 1997. Accounts receivable at the end of the second quarter 1998 were $8.7 million which was $53 thousand lower than year end and $342 thousand lower than the second quarter of 1997. The average day's sales in accounts receivable was 45 days at the end of the second quarter 1998 versus 48 days for the comparable period a year ago. The decrease in accounts receivable was driven by increased collection activity. The Registrant has a $10 million line of credit of which $8.5 million has been utilized. The Registrant's strong balance sheet and internal cash flow generation should be sufficient to cover future working capital requirements and the aforementioned capital expansion programs. Other Matters On July 22, 1998, the Board of Directors of The Eastern Company approved a new Rights Agreement and declared a dividend of one common share purchase right for each outstanding share of Common Stock, no par value, of the Company. The dividend is payable on August 21, 1998 to the shareholders of record on August 7, 1998. The description and terms of the Rights are set forth in a Rights Agreement between the Company and BankBoston, NA, as Rights Agent as filed with the Securities and Exchange Commission on Form 8-K on August 6, 1998. 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. Claims against the Registrant and certain other defendants filed by the two government agencies as described in Part II, item 1 below were dismissed by the Court. A final judgement was entered by the U. S. District Court in the consolidated proceedings on March 17, 1995. Appeals, however, were filed by the two government agencies as described in Part II, item 1 below. -9- On November 1, 1996, the United States Court of Appeals for the Second Circuit reversed the U.S. District Court's ruling dismissing the government agencies' environmental claims against the Registrant and certain other defendants, and the environmental claims by the Laurel Park and Beacon Heights Coalitions against numerous defendants. See further description in Part II, Item 1 below. In May 1998, the Registrant and its co-defendants entered into a proposed consent decree with the EPA, which, if approved, would resolve the Registrant's remaining liability with respect to the Laurel Park and Beacon Heights landfills. The consent decree is now pending before the United States District Court. 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. Note: The preceding information contains statements which reflect the Registrant's current expectations regarding its future operating performance and achievements and are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in such statements. The Registrant is not obligated to update or revise the aforementioned statements for new developments. ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - ------ ---------------------------------------------------------- Not applicable. -10- 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 connection 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 files 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. -11- On March 17, 1995, the U.S. District Court entered a final judgement in the consolidated proceedings (docket number N-87-52(PCD)) which included the granting of Registrant's motion for judgement on the pleadings. As a result of this judgement, no complaints were then pending in the U.S. District Court involving the Registrant. On April 17, 1995, the State filed its notice of appeal from this final judgement with the U.S. District Court. On May 10, 1995, EPA filed its notice of appeal from the judgement. On November 1, 1996 the U.S. Court of Appeals for the Second Circuit reversed the District Court ruling dismissing EPA and State of Connecticut environmental claims against the Registrant and environmental claims by the Laurel Park and Beacon Heights Coalitions against numerous defendants. The Court of Appeals remanded the case to the U.S. District Court in Connecticut for further proceedings. The governmental lawsuits, brought after governmental settlements with the Coalitions, seek to recover remediation costs of the governments unreimbursed by the Coalition settlements or the settlement with the owner/operator in connection with the Laurel Park and Beacon Heights landfills. The EPA has claimed that the Registrant and two other corporate defendants are responsible for an aggregate of $3.1 million in remediation costs with respect to the Beacon Heights landfill and that the Registrant and one other corporate defendant are responsible for an aggregate of $2.3 million in remediation costs with respect to the Laurel Park landfill; Connecticut has claimed that the Registrant and one other defendant are responsible for an aggregate of $.8 million in remediation costs with respect to the Laurel Park landfill. The Registrant intends to continue to vigorously contest any liability relating to these governmental claims. The Registrant would also pursue its rights of contribution against the other defendants in the event of any liability, which the Registrant expects would significantly reduce any liability imposed. In addition, it would file claims against its insurance carriers. In its decision, the Second Circuit also reversed the U.S. District Court's dismissal of numerous actions brought by the Beacon Heights and Laurel Park Coalitions against non-settling parties. These Coalitions assumed full responsibility for cleaning up the two landfill sites and, as noted above, the Registrant has settled with both Coalitions with respect to liability at these sites in 1994. It is believed that many of the defendants in the pending Coalition actions and certain other persons who have not been sued by the governments have a responsibility for remediation cost and may be brought into these actions as co-defendants with the Registrant. The Registrant intends to resist the EPA claims and if necessary bring these other persons into the action to share the costs of reimbursements to the government if ultimately imposed. After rejecting motions for rehearing, the Court of Appeals returned the cases to the US District Court. On July 21, 1997, the District Court issued an order appointing a Special Master to mediate, find facts if necessary and report back to the court within six months as to all remaining claims for contribution. The Registrant is actively participating in this process as it pertains to the EPA Claims against the Registrant and the Registrant's contribution rights against the United States and third-party defendants. In January 1998, the Registrant entered into a proposed consent decree with the State which was approved by the court. In May 1998, the Registrant and its co-defendants entered into a proposed consent decree with the EPA, which, if approved, would resolve the Registrant's remaining liability with respect to the Laurel Park and Beacon Heights landfills. The consent decree is now pending before the United States District Court. 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 significant legal proceedings, other than ordinary routine litigation incidental to the business, to which either the Registrant or any of its subsidiaries is a party of or which any of their property is the subject. -12- ITEM 2 CHANGES IN SECURITIES - ------ --------------------- On July 22, 1998, the Board of Directors of the Registrant approved a new Rights Agreement and declared a dividend of one common share purchase rights for each outstanding share of common stock, no par value, of the Company. For a description of the rights, see the Form 8-K filed with the Securities and Exchange Commisssion on August 6, 1998. 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 - ------- -------------------------------- On August 6, 1998, the Registrant filed with the Securities and Exchange Commission a Form 8-K describing the new Rights Agreement approved by the Board of Directors on July 22, 1998 and the declaration of a dividend of one common stock purchase right for each outstanding share of common stock held of record on August 7, 1998. See Part I, Item 2, Other Matters and Part II, Item 2, Changes in Securities. 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: August 18, 1998 /s/Leonard F. Leganza --------------- --------------------- Leonard F. Leganza President and Chief Executive Officer DATE: August 18, 1998 /s/Donald E. Whitmore, Jr. --------------- -------------------------- Donald E. Whitmore, Jr., Executive Vice President and Chief Financial Officer -13- EX-27 2 FDS --
5 6-MOS JAN-3-1998 JUL-4-1998 3175272 0 8672451 392000 13008241 27003378 27167559 13232266 47033697 15311893 0 0 0 1614447 24845362 47033697 35765163 35837539 26067883 26067883 5423444 62991 300976 3982245 1387639 2594606 0 0 0 2594606 1.05 1.01
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