eml_ex991
Exhibit
99.1
FOR
IMMEDIATE RELEASE
March
16, 2021
THE
EASTERN COMPANY REPORTS RESULTS FOR THE FOURTH QUARTER FISCAL
2020
a
Rebound IN SALES to $60.4 MILLION and BACKLOG TO $85.0 MILLION, AS
many markets RETURN TO PRE-PANDEMIC DEMAND
NAUGATUCK,
CT – March 16, 2021 - The Eastern Company
(“Eastern” or the “Company”) (NASDAQ:EML),
a manufacturer of unique engineered solutions serving industrial
markets, today announced the results of operations for the fourth
quarter and fiscal year ended January 2, 2021.
●
Eastern’s
comprehensive program to maintain the health and safety of
employees resulted in no closures and no interruption of operations
related to the COVID-19 pandemic at any of its 21 facilities during
the fourth quarter of fiscal 2020.
●
Net sales were
$60.4 million in the fourth quarter of fiscal 2020. The Company
experienced a sharp recovery in demand to pre-pandemic levels
across most of its end-markets. However, the divestiture of our
composite panel businesses, delays in new automotive launches, and
lower sales to mining customers caused fourth quarter sales to lag
prior year comparable sales.
●
Earnings in the
fourth quarter and fiscal year of 2020 were $0.23 and $0.86 per
diluted share, respectively. Adjusted earnings for the fourth
quarter and full-year of 2020 were $0.74 and $1.95 per diluted
share, respectively. (See “Non-GAAP Financial Measures”
below.)
●
Eastern’s
backlog of orders increased to $85.0 million as of January 2, 2021,
compared to $71.2 million as of December 28, 2019, as demand for
many of the Company’s products and services has
rebounded.
●
Eastern’s
cash position remained strong in 2020, highlighted by $20.7 million
in cash generation from operations.
President
and CEO August Vlak commented, “During the fourth quarter,
demand across the vast majority of our product and service
offerings accelerated, marking two quarters of strong sequential
growth from the severe contraction during the second quarter.
Coupled with this recovery in demand, our recent acquisitions and
divestitures expedited growth in our adjusted earnings per share
and cash flow. The majority of our markets rebounded to prior year
sales levels in the fourth quarter, with noticeably strong growth
within our Class-8 truck, motorhomes, truck accessories, and
consumer packaging markets. In addition, we were awarded new sales
opportunities with several manufacturers of electric vehicles. We
continue to believe that the rapidly growing electric vehicle
market will provide us with material growth opportunities. In the
fourth quarter, sales growth in these markets was not sufficient to
offset the delay in many new automotive launches, lower sales to
mining customers, and the loss of sales from
divestitures.”
Mr.
Vlak added “Our fourth quarter 2020 net income of $1.4
million or $0.23 per diluted share before adjustments and $4.6
million or $0.74 per diluted share adjusting for one-time items
reflect the strong recovery across our businesses. Adjusted
earnings of $0.74 per diluted share represents earnings growth of
222% and 38%, respectively, over adjusted earnings per diluted
share in the second and third quarters of 2020. This growth in
adjusted earnings per share is attributable to rebounding demand in
many of our markets, recent acquisitions, as well as the positive
impact that our work to streamline the Company and focus on our
core businesses has had. In the quarter, we recorded $3.2 million
in impairment and structuring costs, net of tax, related to the
divestitures of our composite panel business, the consolidation of
our Eberhard operations, and the expansion of Velvac’s
manufacturing capacity in Mexico.”
Mr. Vlak continued “The strength in our backlog at the end of
the year and heading into 2021 indicates sustained growth of our
businesses and we are off to a strong start in 2021. The
value of our backlog of orders was $85.0 million at the end of
fiscal 2020, as compared to $71.2 million at the end of fiscal
2019. The growth in backlog is the result of rebounding demand for
truck accessories at Eberhard, the launch of a large new mirror
program for Class 8 trucks, and strong demand for products and
services in our blow mold tooling business, including the
acquisition of Hallink.”
Mr.
Vlak also said “Our balance sheet remains strong and we
believe that we have ample resources to navigate the improving
business environment. As of January 2, 2021, our net leverage ratio
was 3.04x, and our fixed charge coverage ratio was 2.10x –
both of which are well within with our bank covenants of 4.25x and
1.25x, respectively. We reduced our total debt by $10.1 million in
fiscal 2020.”
Mr.
Vlak concluded “Finally, I want to thank each and every one
of our people. Their resilience throughout 2020 was exemplary --
protecting the health and safety of colleagues, ensuring the
continuous operation of our factories, serving our customers and
giving back to our communities. Because of our exceptional people,
we were able to overcome the challenges of 2020 and are now in a
position of strength.”
Fourth quarter 2020 results
Net
sales in the fourth quarter of fiscal 2020 were $60.4 million, a
decline of 12% from $68.7 million in the fourth quarter of 2019.
Sales decreased due to lower demand for automotive returnable
packaging, the divestiture of Canadian Commercial Vehicles
Corporation in June of 2020 and lower demand for mining products,
partly offset by the impact of new program launches and stronger
sales of blow mold tooling and related services.
Net
income for the fourth quarter of fiscal 2020 was $1.4 million. In
the fourth quarter of fiscal 2020, net income was negatively
impacted by a non-cash goodwill impairment charge of $0.7 million,
net of tax, as the Company announced the closure of Eberhard
Hardware in Ontario, Canada. In addition, there were non-recurring
restructuring expenses, factory relocation expenses, and
transaction expenses in the amount of $0.9 million, net of tax, the
majority of which related to severance pay incurred due to the
closure of Eberhard Hardware; and a loss on disposition of Sesamee
Mexicana and Canadian Commercial Vehicles Corporation of $1.6
million, net of tax.
Full year 2020 results
Net
sales for fiscal year 2020 were $240.4 million, a decrease of 5%
from $251.7 million in 2019. The decline in sales was primarily due
to the decision by many of our industrial and consumer goods
customers to close operations as a result of the COVID-19 pandemic
and our divestiture of the Canadian Commercial Vehicle Corporation.
Sales in 2020 reflect a full year of sales from the Big 3 Precision
acquisition, as compared to four months of sales in 2019. The
acquisition of Big 3 Precision closed on August 30,
2019.
Net
income for fiscal 2020 decreased 59% to $5.4 million, or $0.86 per
diluted share, from $13.3 million, or $2.12 per diluted share, in
fiscal 2019. In fiscal 2020, net income was negatively impacted by
$6.8 million due to non-recurring costs, net of tax, including
goodwill impairment charges of $3.7 million net of tax, one-time
restructuring, factory relocation, and transaction costs of $1.5
million, net of tax, and a loss on disposition of Sesamee Mexicana
and Canadian Commercial Vehicle Corporation of $1.6 million, net of
tax. In fiscal 2019, net income was adversely affected by
non-recurring restructuring costs of $3.9 million, net of tax,
associated with the discontinuation of Road-iQ, a subsidiary of
Velvac, and the consolidation of our Composite Panel Technologies
facility, as well as an increase in M&A related
expenses.
Conference Call and Webcast
The
Eastern Company will host a conference call to discuss its results
for the fourth quarter and fiscal year 2020 and other matters on
March 16, 2021 at 11:00AM Eastern Time. Participants can access the
conference call by phone at (888)
506-0062 (toll free in US & Canada) or (862) 298-0702 (international)
and use conference entry code
326514. Participants can also join via the
web at https://www.webcaster4.com/Webcast/Page/1757/40199
About The Eastern Company
The Eastern Company manages industrial businesses that design,
manufacture and sell unique engineered solutions to industrial
markets, focusing on industries that offer long-term macroeconomic
growth opportunities. The Company operates across two reporting
segments – Engineered Solutions and Diversified Products --
from locations in the U.S., Canada, Mexico, U.K., Taiwan and China.
More information on the Company can be found at www.easterncompany.com.
Safe Harbor for Forward-Looking Statements
Statements
in this document about our future expectations, beliefs, goals,
plans or prospects constitute forward-looking statements within the
meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 and the rules, regulations and
releases of the Securities and Exchange Commission. Any statements
that are not statements of historical fact, including statements
containing the words "believes," "intends," "continues,"
"reflects," "plans," "anticipates," "expects,"
“recovering,” “opportunities” and similar
expressions, should also be considered to be forward-looking
statements. Readers should not place undue reliance on these
forward-looking statements, which are based upon management's
current beliefs and expectations. These forward-looking statements
are subject to risks and uncertainties, and actual results might
differ materially from those discussed in, or implied by, the
forward-looking statements. The risks and uncertainties that could
cause actual results or events to differ materially from those
indicated by such forward-looking statements include, but are not
limited to, effects
of the COVID-19 pandemic and the measures being taken to limit the
spread and resurgence of COVID-19, including supply chain
disruptions, delays in delivery of our products to our customers,
impact on demand for our products, reductions in production levels,
increased costs, including costs of raw materials, the impact on
global economic conditions, the availability, terms and cost of
financing, including borrowings under credit arrangements or
agreements, and risks associated with employees working remotely or
operating with reduced workforce; the scope and duration of the
COVID-19 pandemic, including the extent of resurgences and how
quickly and to what extent normal economic activity can resume; the
timing of the development and distribution of effective vaccines or
treatment of COVID-19, changing customer preferences, lack
of success of new products, loss of customers, cybersecurity
breaches, changes in competition in our markets, and increased
prices for raw materials resulting from tariffs on imported goods
or otherwise. There are important, additional factors that could
cause actual results or events to differ materially from those
indicated by such forward-looking statements, including those set
forth in our reports and filings with the Securities and Exchange
Commission. We undertake no obligation to update, alter, or
otherwise revise any forward-looking statements, whether written or
oral, that may be made from time to time, whether as a result of
new information, future events, or otherwise.
Non-GAAP Financial Measures
The
non-GAAP financial measures we provide in this report should be
viewed in addition to, and not as an alternative for, results
prepared in accordance U.S. GAAP. A reconciliation of non-GAAP
financial measures referenced in this release to the nearest GAAP
results is provided with this release.
To
supplement the consolidated financial statements prepared in
accordance with U.S. GAAP, we have presented adjusted earnings per
share and adjusted EBITDA, which are considered non-GAAP financial
measures. The non-GAAP financial measures presented may differ from
similarly titled non-GAAP financial measures presented by other
companies, and other companies may not define these non-GAAP
financial measures in the same way. These measures are not
substitutes for their comparable GAAP financial measures, such as
net sales, net income (loss), diluted earnings (loss) per common
share, or other measures prescribed by U.S. GAAP, and there are
limitations to using non-GAAP financial measures. Adjusted earnings
per share is defined as diluted earnings per share excluding, when
they occur, the impacts of impairment losses, losses on sale of subsidiaries, transaction
expenses, factory relocation expenses and restructuring
costs. We believe that adjusted earnings per share provides
important comparability of underlying operational results, allowing
investors and management to access operating performance on a
consistent basis.
Adjusted
EBITDA is defined as net income before interest expense, provision
for (benefit from) income taxes, and depreciation and amortization;
in addition to these adjustments, we exclude, when they occur, the
impacts of impairment losses, losses
on sale of subsidiaries, transaction expenses, factory relocation
expenses and restructuring costs. Adjusted EBITDA is a tool
that can assist management and investors in comparing our
performance on a consistent basis by removing the impact of certain
items that management believes do not directly reflect our
underlying operations.
Management
uses such measures to evaluate performance period over period, to
analyze the underlying trends in our business, including our
business segments, to assess our performance relative to that of
our competitors, and to establish operational goals and forecasts
that are used in allocating resources.
We
believe that presenting non-GAAP financial measures in addition to
GAAP financial measures provides investors greater transparency to
the information used by our management for its financial and
operational decision-making. We further believe that providing this
information better enables our investors to understand our
operating performance and to evaluate the methodology used by
management to evaluate and measure such performance.
Investor Relations Contacts
The Eastern Company
August
Vlak or John L. Sullivan III 203-729-2255
THE
EASTERN COMPANY
Consolidated
Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$240,403,114
|
$251,742,619
|
|
Cost
of products sold
|
(186,744,637)
|
(189,890,070)
|
|
Gross
margin
|
53,658,477
|
61,852,549
|
|
|
|
|
|
Product
development expense
|
(3,131,035)
|
(6,024,567)
|
|
Selling
and administrative expenses
|
(35,439,858)
|
(35,719,188)
|
|
Goodwill
impairment loss
|
(4,975,372)
|
—
|
|
Loss
on disposition of subsidiary
|
(2,158,863)
|
—
|
|
Restructuring
costs
|
(953,095)
|
(2,650,940)
|
|
Operating
profit
|
7,000,254
|
17,457,854
|
|
|
|
|
|
Interest
expense
|
(2,744,800)
|
(1,857,961)
|
|
Other
income
|
1,770,158
|
606,078
|
|
Income before income taxes
|
6,025,612
|
16,205,971
|
|
|
|
|
|
Income
taxes
|
620,090
|
2,939,829
|
|
Net income
|
$5,405,522
|
$13,266,142
|
|
|
|
|
|
Earnings per Share:
|
|
|
|
Basic
|
$0.87
|
$2.13
|
|
|
|
|
|
Diluted
|
$0.86
|
$2.12
|
THE
EASTERN COMPANY
Consolidated
Balance Sheet
|
|
|
|
|
ASSETS
|
|
|
|
Current Assets
|
|
|
|
Cash
and cash equivalents
|
$16,101,635
|
$17,996,505
|
|
Marketable
securities
|
28,951
|
34,305
|
|
Accounts
receivable, less allowances: 2020 - $545,000; 2019 -
$556,000
|
37,749,129
|
37,941,900
|
|
Inventories:
|
53,112,393
|
54,599,266
|
|
Current
portion of note receivable
|
398,414
|
—
|
|
Prepaid
expenses and other assets
|
4,345,250
|
5,366,507
|
|
Total Current Assets
|
111,735,772
|
115,938,483
|
|
|
|
|
|
Property, Plant and Equipment
|
39,951,973
|
40,999,613
|
|
|
|
|
|
Other Assets
|
|
|
|
Goodwill
|
76,895,015
|
79,518,012
|
|
Trademarks
|
5,404,284
|
5,404,283
|
|
Patents,
technology and other intangibles net of accumulated
amortization
|
27,096,006
|
26,460,110
|
|
Long
term note receivable, less current portion
|
1,677,277
|
—
|
|
Right
of Use Assets
|
12,768,027
|
12,342,475
|
|
|
123,840,609
|
123,724,880
|
|
|
|
|
|
TOTAL ASSETS
|
$275,528,354
|
$280,662,976
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
Current Liabilities
|
|
|
|
Accounts
payable
|
$23,507,719
|
$19,960,507
|
|
Accrued
compensation
|
3,675,223
|
3,815,186
|
|
Other
accrued expenses
|
4,121,568
|
2,967,961
|
|
Current
portion of lease liability
|
2,923,761
|
2,965,572
|
|
Current
portion of long-term debt
|
6,437,689
|
5,187,689
|
|
Total Current Liabilities
|
40,665,960
|
34,896,915
|
|
|
|
|
|
Deferred income taxes
|
2,899,075
|
5,270,465
|
|
Other long-term liabilities
|
1,144,127
|
2,465,261
|
|
Lease liability
|
9,883,168
|
9,376,903
|
|
Long-term debt, less current portion
|
82,255,803
|
93,577,544
|
|
Accrued postretirement benefits
|
1,185,139
|
1,007,146
|
|
Accrued pension cost
|
33,188,623
|
28,631,485
|
|
|
|
|
|
Total Shareholders’ Equity
|
104,306,459
|
105,437,257
|
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$275,528,354
|
$280,662,976
|
Reconciliation of expenses from GAAP to Non-GAAP EPS
calculation
For the Three and Twelve Months ended January 2, 2021 and December
28, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income as reported per
|
|
|
|
|
|
|
|
|
|
generally
accepted accounting principles (GAAP)
|
$1,413,813
|
|
$4,972,327
|
|
$5,405,522
|
|
$13,266,142
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
Per Share as reported under generally accepted
|
|
|
|
|
|
|
|
|
|
accounting
principles (GAAP):
|
|
|
|
|
|
|
|
|
|
Basic
|
0.23
|
|
0.80
|
|
0.87
|
|
2.13
|
|
|
Diluted
|
0.23
|
|
0.79
|
|
0.86
|
|
2.12
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
for one-time expenses:
|
|
|
|
|
|
|
|
|
|
Goodwill
impairment loss, net of tax
|
715,026
|
A
|
-
|
|
3,716,937
|
A
|
-
|
|
|
Loss
on sale of Subsidiary, net of tax
|
1,619,147
|
I
|
-
|
|
1,619,147
|
I
|
-
|
|
|
Transaction
expenses
|
95,849
|
E
|
515,919
|
|
299,531
|
E
|
1,699,862
|
G
|
|
Factory
relocation, net of tax
|
299,600
|
C
|
-
|
|
475,244
|
C
|
-
|
|
|
Restructuring
costs, net of tax
|
489,408
|
H
|
144,908
|
D,F
|
714,821
|
B,H
|
2,181,550
|
D,F
|
|
Total
adjustments for one-time expenses
|
$3,219,030
|
|
$660,827
|
|
$6,825,680
|
|
$3,881,412
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Net Income (related to one time expenses);
|
|
|
|
|
|
|
|
|
|
(Non-GAAP)
|
$4,632,843
|
|
$5,633,154
|
|
$12,231,202
|
|
$17,147,554
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Earnings per share
|
|
|
|
|
|
|
|
|
|
(related
to one time expenses); (Non-GAAP)
|
|
|
|
|
|
|
|
|
|
Basic
|
$0.74
|
|
$0.90
|
|
$1.96
|
|
$2.75
|
|
|
Diluted
|
$0.74
|
|
$0.90
|
|
$1.95
|
|
$2.73
|
|
A) Goodwill impairment
B) Cost incurred on disposition of Canadian Commercial
Vehicles
C) Cost incurred on relocation of factory in Reynosa,
Mexico
D) Cost incurred on the relocation of Composite Panels
Technology
E) Cost incurred in the acquisition of Hallink RSB,
Inc.
F) Costs incurred in the closure of Road IQ in Bellingham,
WA
G) Costs incurred on the acquisition of Big 3
Precision
H) Costs incurred on announced reorganization of Eberhard Hardware
Ltd
I) Loss on disposition of subsidiaries
Use of Non-GAAP Financial Measures
To supplement our consolidated financial statements presented in
accordance with generally accepted accounting principles in the
United States (“GAAP”), we disclose certain non-GAAP
financial measures including adjusted net income and adjusted
earnings per diluted share. Adjusted net income and adjusted
earnings per diluted share exclude one time related expenses. These
measures are not in accordance with GAAP.
Management uses such measures to evaluate performance period over
period, to analyze the underlying trends in our business including
our business segments, to assess our performance relative to our
competitors, and to establish operational goals and forecasts that
are used in allocating resources. These financial measures should
not be considered in isolation from, or as a replacement for, GAAP
financial measures.
We believe that presenting non-GAAP financial measures in addition
to GAAP financial measures provides investors greater transparency
to the information used by our management for its financial and
operational decision-making. We further believe that providing this
information better enables our investors to understand our
operating performance and to evaluate the methodology used by
management to evaluate and measure such performance.
Reconciliation of expenses from GAAP to Non-GAAP EBITDA
calculation
For the Three and Twelve Months ended January 2, 2021 and December
28, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income/(loss) as reported per generally accepted accounting
principles (GAAP)
|
$1,413,813
|
|
$4,972,327
|
|
$5,405,522
|
|
$13,266,142
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
663,517
|
|
883,425
|
|
2,744,800
|
|
1,857,961
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for/(benefit from) income taxes
|
(689,205)
|
|
404,796
|
|
620,090
|
|
2,939,829
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
2,333,286
|
|
2,647,402
|
|
8,477,512
|
|
6,454,881
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
impairment loss
|
972,824
|
A
|
-
|
|
4,975,372
|
A
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
on Sale of Subsidiary
|
2,158,863
|
I
|
-
|
|
2,158,863
|
I
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Factory
relocation
|
428,000
|
C
|
-
|
|
678,920
|
C
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
costs
|
665,861
|
H
|
12,774
|
D, F
|
953,095
|
B,H
|
2,664,651
|
D, F
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
costs
|
95,849
|
E
|
515,919
|
G
|
299,531
|
E
|
1,699,862
|
G
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$8,042,808
|
|
$9,436,643
|
|
$26,313,705
|
|
$28,883,326
|
|
A) Goodwill impairment
B) Cost incurred on disposition of Canadian Commercial
Vehicles
C) Cost incurred on relocation of factory in Reynosa,
Mexico
D) Cost incurred on the relocation of Composite Panels
Technology
E) Cost incurred in the acquisition of Hallink RSB,
Inc.
F) Costs incurred in the closure of Road IQ in Bellingham,
WA
G) Costs incurred in the acquisition of Big 3
Precision
H) Costs incurred on announced reorganization of Eberhard Hardware
Ltd
I) Loss on disposition of subsidiaries
Use of Non-GAAP Financial Measures
To supplement our consolidated financial statements presented in
accordance with generally accepted accounting principles in the
United States (“GAAP”), we disclose certain non-GAAP
financial measures including adjusted net income and adjusted
earnings per diluted share. Adjusted net income and adjusted
earnings per diluted share exclude one time related expenses. These
measures are not in accordance with GAAP.
Management uses such measures to evaluate performance period over
period, to analyze the underlying trends in our business including
our business segments, to assess our performance relative to our
competitors, and to establish operational goals and forecasts that
are used in allocating resources. These financial measures should
not be considered in isolation from, or as a replacement for, GAAP
financial measures.
We believe that presenting non-GAAP financial measures in addition
to GAAP financial measures provides investors greater transparency
to the information used by our management for its financial and
operational decision-making. We further believe that providing this
information better enables our investors to understand our
operating performance and to evaluate the methodology used by
management to evaluate and measure such performance.