Connecticut
|
001-35383
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06-0330020
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(State
or other jurisdiction
|
(Commission
File Number)
|
(IRS
Employer
|
of
incorporation)
|
|
Identification
No.)
|
112 Bridge Street, Naugatuck, Connecticut
|
|
06770
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
Exhibit No.
|
|
Title
|
|
|
|
|
Press
Release dated July 31, 2020 announcing the second quarter earnings
for 2020.
|
|
The Eastern Company
|
|
|
|
|
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|
Date:
July 31, 2020
|
/s/ John L.
Sullivan III
|
|
John L.
Sullivan IIIVice President and Chief Financial Officer
|
|
Three
Months Ended
|
Six
Months Ended
|
||
|
June
27, 2020
|
June
29, 2019
|
June
27, 2020
|
June
29, 2019
|
Net
sales
|
$48,833,409
|
$61,439,929
|
$114,159,025
|
$122,323,077
|
Cost of products
sold
|
(38,076,590)
|
(46,430,039)
|
(88,308,972)
|
(93,504,144)
|
Gross
margin
|
10,756,819
|
15,009,890
|
25,850,053
|
28,818,933
|
|
|
|
|
|
Product development
expense
|
(756,171)
|
(2,174,803)
|
(1,531,615)
|
(4,414,579)
|
Selling and
administrative expenses
|
(7,960,307)
|
(8,076,501)
|
(17,858,438)
|
(16,474,766)
|
Goodwill impairment
loss
|
(4,002,548)
|
—
|
(4,002,548)
|
—
|
Restructuring
costs
|
(280,000)
|
(1,799,293)
|
(280,000)
|
(2,635,987)
|
Operating profit
(loss)
|
(2,242,207)
|
2,959,293
|
2,177,452
|
5,293,601
|
|
|
|
|
|
Interest
expense
|
(606,553)
|
(261,618)
|
(1,434,217)
|
(554,158)
|
Other
income
|
416,917
|
586,823
|
603,322
|
600,748
|
Income
(loss) before income taxes
|
(2,431,843)
|
3,284,498
|
1,346,556
|
5,340,191
|
|
|
|
|
|
Income
taxes
|
(543,061)
|
754,725
|
339,521
|
1,239,458
|
Net
income (loss)
|
$(1,888,782)
|
$2,529,773
|
$1,007,036
|
$4,100,733
|
|
|
|
|
|
Earnings
(loss) per Share:
|
|
|
|
|
Basic
|
$(.30)
|
$.41
|
$.16
|
$.66
|
|
|
|
|
|
Diluted
|
$(.30)
|
$.40
|
$.16
|
$.65
|
|
|
|
|
|
Cash
dividends per share:
|
$.11
|
$.11
|
$.22
|
$.22
|
ASSETS
|
June
27, 2020
|
December 28,
2019
|
|
(unaudited)
|
|
Current
Assets
|
|
|
Cash and cash
equivalents
|
$19,986,055
|
$17,996,505
|
Marketable
securities
|
25,916
|
34,305
|
Accounts
receivable, less allowances: 2020 - $693,000;2019 -
$556,000
|
33,580,263
|
37,941,900
|
Inventories
|
55,908,740
|
54,599,266
|
Current portion of
note receivable
|
221,348
|
—
|
Prepaid expenses
and other assets
|
3,668,863
|
4,343,507
|
Total
Current Assets
|
113,391,185
|
114,915,483
|
|
|
|
Property,
Plant and Equipment
|
87,020,830
|
88,336,243
|
Accumulated
depreciation
|
(47,313,479)
|
(46,313,630)
|
|
39,707,351
|
42,022,613
|
|
|
|
Goodwill
|
75,440,535
|
79,518,012
|
Trademarks
|
5,404,283
|
5,404,283
|
Patents
and other intangibles net of accumulated amortization
|
25,012,787
|
26,460,110
|
Long
term note receivable, less current portion
|
1,030,595
|
—
|
Right
of Use Assets
|
11,384,763
|
12,342,475
|
|
118,272,963
|
123,724,880
|
TOTAL
ASSETS
|
$271,371,499
|
$280,662,976
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
June
27, 2020
|
December 28,
2019
|
|
(unaudited)
|
|
Current
Liabilities
|
|
|
Accounts
payable
|
$18,942,706
|
$19,960,507
|
Accrued
compensation
|
2,044,562
|
3,815,186
|
Other accrued
expenses
|
4,849,785
|
2,967,961
|
Current portion of
long-term debt
|
5,187,689
|
5,187,689
|
Total
Current Liabilities
|
31,024,742
|
31,931,343
|
|
|
|
Deferred
income taxes
|
4,374,343
|
5,270,465
|
Other
long-term liabilities
|
2,465,260
|
2,465,261
|
Lease
liability
|
11,384,763
|
12,342,475
|
Long-term
debt, less current portion
|
90,954,799
|
93,577,544
|
Accrued
postretirement benefits
|
1,000,476
|
1,007,146
|
Accrued
pension cost
|
27,388,381
|
28,631,485
|
|
|
|
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
|
31,100,484
|
30,651,815
|
Issued:
8,987,324 shares in 2020 and 8,975,434 shares in 2019
|
|
|
Outstanding:
6,237,595 shares in 2020 and 6,240,705 shares in 2019
|
|
|
Treasury
Stock: 2,749,729 shares in 2020 and 2,734,729 shares in
2019
|
(20,537,962)
|
(20,169,098)
|
Retained
earnings
|
119,310,219
|
120,189,111
|
Accumulated other
comprehensive loss:
|
|
|
Foreign
currency translation
|
(2,564,356)
|
(2,037,952)
|
Unrealized
gain on marketable securities, net of tax
|
(6,796)
|
(471)
|
Unrealized gain
(loss) on interest rate swap, net of tax
|
(1,679,808)
|
167,489
|
Unrecognized net
pension and postretirement benefit costs, net of tax
|
(22,843,046)
|
(23,363,637)
|
Accumulated
other comprehensive loss
|
(27,094,006)
|
(25,234,571)
|
Total
Shareholders’ Equity
|
102,778,735
|
105,437,257
|
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$271,371,499
|
$280,662,976
|
|
|
|
|
Six Months
Ended
|
|
|
June 27,
2020
|
June 29,
2019
|
Operating
Activities
|
|
|
Net
income
|
$1,007,036
|
$4,100,733
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
4,050,250
|
2,391,314
|
Unrecognized
pension and postretirement benefits
|
(962,094)
|
448,214
|
Goodwill
impairment loss
|
4,002,548
|
—
|
(Gain)
loss on sale of equipment and other assets
|
(420,536)
|
2,208,740
|
Provision
for doubtful accounts
|
156,286
|
43,420
|
Stock
compensation expense
|
448,669
|
293,726
|
Changes
in operating assets and liabilities:
|
|
|
Accounts
receivable
|
3,408,873
|
(1,794,182)
|
Inventories
|
(2,330,448)
|
3,618,303
|
Prepaid
expenses and other
|
616,300
|
(21,533)
|
Other
assets
|
734,790
|
709,357
|
Accounts
payable
|
(730,055)
|
(89,081)
|
Accrued
compensation
|
(1,697,444)
|
(1,307,966)
|
Other
accrued expenses
|
(927,178)
|
(1,893,440)
|
Net cash provided by operating activities
|
7,356,997
|
8,707,605
|
|
|
|
Investing Activities
|
|
|
Marketable
securities
|
8,389
|
(23,136)
|
Business
disposition
|
1,378,602
|
—
|
Proceeds
from sale of equipment
|
445,212
|
—
|
Purchases
of property, plant and equipment
|
(1,183,419)
|
(1,261,942)
|
Net cash provided by/used in investing activities
|
648,784
|
(1,285,078)
|
|
|
|
Financing Activities
|
|
|
Principal
payments on long-term debt
|
(2,622,745)
|
(6,275,000)
|
Note
Receivable
|
(1,251,943)
|
—
|
Purchase
common stock for treasury
|
(368,864)
|
—
|
Dividends
paid
|
(1,372,673)
|
(1,373,700)
|
Net cash used in financing activities
|
(5,616,225)
|
(7,648,700)
|
|
|
|
Effect of exchange rate changes on cash
|
(400,006)
|
(31,690)
|
Net change in cash and cash equivalents
|
1,989,550
|
(257,863)
|
|
|
|
Cash
and cash equivalents at beginning of period
|
17,996,505
|
13,925,765
|
Cash and cash equivalents at end of period
|
$19,986,055
|
$13,667,902
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
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||||||||||||
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|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June
29, 2019
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||||||||
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|
|
|
|
|
|
|
|
|
Net Income (Loss) as reported per generally accepted accounting
principles (GAAP)
|
|
$
|
(1,888,782
|
)
|
|
$
|
2,529,773
|
|
|
$
|
1,007,036
|
|
|
$
|
4,100,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
Earnings (Loss) Per Share as reported under generally accepted
accounting principles (GAAP):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.30
|
)
|
|
$
|
0.41
|
|
|
$
|
0.16
|
|
|
$
|
0.66
|
|
Diluted
|
|
$
|
(0.30
|
)
|
|
$
|
0.40
|
|
|
$
|
0.16
|
|
|
$
|
0.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for one-time expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill impairment loss (A)
|
|
$
|
(4,002,548
|
)
|
|
|
|
|
|
$
|
(4,002,548
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring costs
|
|
$
|
(280,000
|
)(B)
|
|
$
|
(1,799,293
|
)(C)
|
|
$
|
(280,000
|
)(B) |
|
$
|
(2,635,987
|
)(C)(D)
|
|
|
$
|
(4,282,548
|
)
|
|
$
|
(1,799,293
|
)
|
|
$
|
(4,282,548
|
)
|
|
$
|
(2,635,987
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income (related to one-time expenses);
(Non-GAAP)
|
|
$
|
2,393,766
|
|
|
$
|
4,329,066
|
|
|
$
|
5,289,584
|
|
|
$
|
6,736,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings per share (related to one-time expenses);
(Non-GAAP)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.38
|
|
|
$
|
0.69
|
|
|
$
|
0.85
|
|
|
$
|
1.08
|
|
Diluted
|
|
$
|
0.38
|
|
|
$
|
0.69
|
|
|
$
|
0.85
|
|
|
$
|
1.08
|
|
|
Three Months Ended
|
Six Months Ended
|
||||||
|
June 27, 2020
|
|
June 29, 2019
|
|
|
June 27, 2020
|
June 29, 2019
|
|
|
|
|
|
|
|
|
|
|
Net
Income(loss) as reported per generally accepted accounting
principles (GAAP)
|
$(1,888,782)
|
|
$2,529,773
|
|
|
$1,007,036
|
$4,100,733
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
606,553
|
|
261,618
|
|
|
1,434,217
|
554,158
|
|
|
|
|
|
|
|
|
|
|
Provision for
(benefit from) income taxes
|
(543,061)
|
|
754,725
|
|
|
339,521
|
1,239,458
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
1,994,468
|
|
952,515
|
|
|
4,050,250
|
2,391,314
|
|
|
|
|
|
|
|
|
|
|
Goodwill
impairment loss
|
4,002,548
|
A
|
|
|
|
4,002,548
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
costs
|
280,000
|
B
|
1,799,293
|
C
|
|
280,000
|
2,635,987
|
C,D
|
|
|
|
|
|
|
|
|
|
Transaction
costs
|
17,182
|
|
|
|
|
17,182
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$4,468,908
|
|
$6,297,924
|
|
|
$11,130,754
|
$10,921,650
|
|