UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report:
(Date of earliest event reported)
(Exact name of Registrant as specified in its charter) |
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(State or other jurisdiction |
| (Commission |
| (IRS Employer |
of incorporation) |
| File Number) |
| identification No.) |
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(Address of principal executive offices) |
| (Zip Code) |
(
(Registrant’s telephone number, including area code)
____________________________________________
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
ITEM 2.02 – Results of Operations and Financial Condition
Press Release dated August 8, 2023, announcing the second quarter earnings for 2023 is attached hereto.
ITEM 7.01 – Regulation FD Disclosure
On August 8, 2023, The Eastern Company released the second quarter earnings of 2023. A copy of the Press Release dated August 8, 2023, announcing the second quarter earnings for 2023 is attached hereto.
ITEM 9.01 – Financial Statements and Exhibits
(d) Exhibits
Exhibit No. |
| Title |
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| Press Release dated August 8, 2023 announcing the second quarter earnings for 2023. | |
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104 |
| Cover Page Interactive Data File (cover page XBRL tags are embedded within the Inline XBRL document) |
| 2 |
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, hereunto duly authorized.
| The Eastern Company |
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Date: August 8, 2023 | By: | /s/Nicholas Vlahos |
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| Nicholas Vlahos Chief Financial Officer |
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| 3 |
EXHIBIT 99.1
THE EASTERN COMPANY REPORTS SECOND QUARTER 2023 RESULTS
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| · | New leadership team executing on its operational transformation program with results beginning to materialize. |
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| · | Cash flow from operations for the six months ended July 1, 2023 increased by $16 million as compared to the same period in 2022. |
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| · | Secured $60 million term loan, $30 million revolver, and $75 million accordion for future acquisitions. |
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| · | Declared quarterly cash dividend of eleven cents ($0.11) per share to common shareholders, representing the Company’s 332nd consecutive quarterly dividend. |
SHELTON, CT – August 8, 2023 - The Eastern Company (“Eastern”) (NASDAQ:EML), an industrial manufacturer of unique engineered solutions serving commercial transportation, logistics, and other industrial markets, today announced the results of operations for the second fiscal quarter ended July 1, 2023.
President and CEO Mark Hernandez commented, “Our four-pronged strategy – based on disciplined operations, optimum capital utilization, focused commercial business, and value-adding acquisitions – continues to be the foundation for all our actions. In May 2023, we announced plans to close Associated Toolmakers, Ltd., our European mold tooling service facility, which did not align with our goal of focused commercial operations and restoring consistent profitability and recorded $1.4 million in costs associated with exiting that business. In June 2023, we acquired certain assets of Sureflex, Inc., a manufacturer of tractor-trailer electrical connection cable assemblies, to enhance the operating performance and efficiency of our Velvac production facilities.
Mr. Hernandez continued, “During the second quarter, we continued executing the operational transformation program we began implementing when I stepped into the CEO role in January 2023. Our financial results for the quarter continue to demonstrate the early impact of the many actions we are taking to enhance Eastern’s operating efficiency, reduce costs and strengthen the Company’s focus on delivering value to shareholders. On a sequential quarter basis, gross margin increased from 21% to 22%. On a year-over-year basis, our backlog as of July 1, 2023 was down 9% to $75.3 million as we continue optimizing our supply chain to reduce past due orders and transition from old to new programs with our commercial vehicle and automotive customers and increased shipments to our customers.”
“For Q2 2023, net income from continuing operations was $1.4 million, or $0.22 per diluted share, compared to net income from continuing operations of $3.7 million, or $0.59 per diluted share, for the comparable period in 2022, and non-GAAP adjusted net income from continuing operations was $2.5 million, or $0.40 per diluted share, compared to adjusted net income from continuing operations of $3.7 million, or $0.59 per diluted share, for Q2 2022. Although industry conditions are currently mixed, we continue to believe our initiatives, including ongoing portfolio optimization, improved pricing, and successful cost recovery actions, will have a positive impact on Eastern’s financial performance and set us on a sustainable path for growth. We expect their impact to be particularly noticeable beginning in the second half of 2023.”
Mr. Hernandez concluded, “Our balance sheet continues to strengthen. During the first six months of 2023 we also increased our cash flow from operations by $16 million compared to the same period in 2022. With this cash flow we paid down $5 million of debt during the second quarter and nearly $10 million year to date. As part of our disciplined operations strategy, we intend to continue to aggressively pay down our debt in order to increase our capacity for our fourth pillar of adding accretive acquisitions to our portfolio of companies. At the end of the second quarter, our senior net leverage ratio was 1.95 to 1. In 2018, our Board of Directors authorized a common stock repurchase program for the repurchase of up to 200,000 shares of company common stock, As of July 1, 2023, the Company has 60,000 shares remaining to be repurchased."
Second Quarter and Six Months Ended July 1, 2023 Financial Results
Net sales in the second quarter of 2023 decreased 2% to $68.3 million from $69.5 million in the corresponding period in 2022. Net sales for the first six months of 2023 increased by 2% to $140.8 million from $138.6 million in the corresponding period last year. Sales decreased in the second quarter of 2023 primarily due to lower demand for returnable transport packaging products. Sales increased for the first six months of 2023 compared to the first six months of 2022 primarily due to increased demand for truck accessories products as well as increased demand from distributors. Our backlog as of July 1, 2023 was down 9% to $75.3 million from $82.8 million as of July 2, 2022 as we continued to optimize our supply chain to reduce past due orders and transition from old to new programs with our commercial vehicle and automotive customers and increased shipments to customers.
3 ENTERPRISE DRIVE, SUITE 408, SHELTON, CONNECTICUT 06484
PHONE (203) 729 - 2255 * FAX (203) 723 - 8653 * WWW.EASTERNCOMPANY.COM
Gross margin as a percentage of sales was 22% in the second quarter and 22% in the first six months of 2023 compared to 23% in the second quarter and 22% in the first six months of 2022. Gross margin improved by 1% in the second quarter as compared to the first quarter of 2023.
Selling and administrative expense increased $1.1 million, or 11%, in the second quarter of 2023 when compared to the second quarter of 2022 primarily due to legal, professional, and selling costs and payroll-related expenses. Selling and administrative expenses increased $3.2 million, or 16% in the first six months of 2023 when compared to the corresponding period in 2022 primarily due to severance and other accrued compensation expenses of $1.8 million related to the elimination of the Chief Operating Officer position and the departure of our previous Chief Executive Officer during the first quarter of 2023 and legal, professional, and selling costs and payroll-related expenses during the first six months of 2023. The increase in selling expenses reflects both the increase in sales during the first six months ended 2023 as well as our investments in sales capabilities.
Other income decreased $0.3 million in the second quarter of 2023 and decreased $1.4 million in the first six months of 2023 compared to the corresponding periods in 2022. The decrease in other income of $0.3 million in the second quarter of 2023 was primarily driven by unfavorable pension costs of $0.3 million in the second quarter of 2023, while in the second quarter of 2022 the company had a favorable pension cost adjustment of $0.4 million, $1.4 million expense associated with the closure of Associated Toolmakers, Ltd., partially offset by a $1.6 million favorable adjustment for the final settlement of our swap agreement with Santander Bank, N.A. (“Santander”). The decrease in other income of $1.4 million for the first six months of 2023 when compared to the corresponding period in 2022 was primarily driven by unfavorable pension costs of $0.6 million for the first six months of 2023, while in the first six months of 2022 the Company had favorable pension cost adjustments of $0.9 million, $1.4 million expense associated with the closure of Associated Toolmakers, Ltd., and an unfavorable working capital adjustment of $0.4 million in the first quarter of 2023 related to the sale of the Greenwald business, partially offset by a $1.6 million favorable adjustment for the final settlement of our swap agreement with Santander, while in the first quarter of 2022 the Company had a loss on the sale of the Wheeling, IL building of $0.3 million.
Net income from continuing operations for the second quarter of 2023 was $1.4 million, or $0.22 per diluted share, compared to net income from continuing operations of $3.7 million, or $0.59 per diluted share, for the comparable period in 2022. In the first six months of 2023 net income was $2.0 million, or $0.32 per diluted share, compared to net income of $6.4 million, or $1.02 per diluted share, for the comparable period in 2022.
Adjusted net income from continuing operations (a non-GAAP measure) for the second quarter of fiscal 2023 was $2.5 million, or $0.40 per diluted share, compared to adjusted net income from continuing operations of $3.7 million, or $0.59 per diluted share, for the comparable period in 2022. For the six months ended July 1, 2023, adjusted net income from continuing operations was $4.7 million, or $0.76 per diluted share, compared to $6.6 million, or $1.05 per diluted share, for the comparable period in 2022. Adjusted EBITDA from continuing operations (a non-GAAP measure) for the second quarter of fiscal 2023 was $5.9 million compared to adjusted EBITDA from continuing operations of $7.2 million for the second quarter of 2022. For the six months ended July 1, 2023, adjusted EBITDA from continuing operations was $11.5 million compared to adjusted EBITDA from continuing operations of $13.3 million for the 2022 period. See “Non-GAAP Financial Measures” below and the reconciliation table accompanying this release.
Conference Call and Webcast
The Eastern Company will host a conference call to discuss its results for the second quarter of 2023 and other matters on Wednesday, August 9, 2023, at 11:00 AM Eastern Time. Participants can access the conference call by phone at 888-506-0062 (toll-free in the US and Canada) or 973-528-0011 (international), using access code 759107. Participants can also join via the web at https://www.webcaster4.com/Webcast/Page/1757/48628.
About The Eastern Company
The Eastern Company manages industrial businesses that design, manufacture and sell unique engineered solutions to markets. Eastern’s businesses operate in industries that offer long-term macroeconomic growth opportunities. The Company operates from locations in the U.S., Canada, Mexico, Taiwan, and China. More information on the Company can be found at www.easterncompany.com.
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Safe Harbor for Forward-Looking Statements
Statements contained in this release that are not based on historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of forward-looking terminology such as “would,” “should,” “could,” “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue,” “plan,” “potential,” “opportunities,” or similar terms or variations of those terms or the negative of those terms. There are many factors that affect the Company’s business and the results of its operations and that may cause the actual results of operations in future periods to differ materially from those currently expected or anticipated. These factors include the impact of the COVID-19 pandemic and resulting economic effects, the impact of higher raw material and component costs and cost inflation, supply chain disruptions and shortages, particularly with respect to steel, plastics, scrap iron, zinc, copper and electronic components, rising interest rates, delays in delivery of our products to our customers, the impact of global economic conditions on demand for our products, including the impact, length and degree of economic downturns on the customers and markets we serve, reductions in production levels, the availability, terms and cost of financing, including borrowings under credit arrangements or agreements, the potential impact of bank failures on our ability to access financing or capital markets, and the impact of market conditions on pension plan funded status. Other factors include, but are not limited to: restrictions on operating flexibility imposed by the agreement governing our credit facility; the effect on interest rates of the replacement of the London Interbank Offered Rate (LIBOR) with a Secured Overnight Financing Rate (SOFR); risks associated with doing business overseas, including fluctuations in exchange rates and the inability to repatriate foreign cash, the impact on cost structure and on economic conditions as a result of actual and threatened increases in trade tariffs and the impact of political, economic and social instability; the inability to achieve the savings expected from global sourcing of materials;; lower-cost competition; our ability to design, introduce and sell new or updated products and related components; market acceptance of our products; the inability to attain expected benefits from acquisitions or the inability to effectively integrate such acquisitions and achieve expected synergies; domestic and international economic conditions, including the impact, length and degree of economic downturns on the customers and markets we serve and more specifically conditions in the automotive, construction, aerospace, energy, oil and gas, transportation, electronic, and general industrial markets; costs and liabilities associated with environmental compliance; the impact of climate change or terrorist threats and the possible responses by the U.S. and foreign governments; failure to protect our intellectual property; cyberattacks; materially adverse or unanticipated legal judgments, fines, penalties or settlements; and other risks identified and discussed in Item 1A, Risk Factors, and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2023, and that may be identified from time to time in our quarterly reports on Form 10-Q, current reports on Form 8-K and other filings we make with the SEC. 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. Also, the Company makes estimates and assumptions that may materially affect reported amounts and disclosures. These relate to valuation allowances for accounts receivable and 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. The Company undertakes 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, except as required by law.
Non-GAAP Financial Measures
The non-GAAP financial measures we provide in this release should be viewed in addition to, and not as an alternative for, results prepared in accordance with U.S. GAAP.
To supplement the consolidated financial statements prepared in accordance with U.S. GAAP, we have presented Adjusted Net Income from Continuing Operations, Adjusted Earnings Per Share from Continuing Operations and Adjusted EBITDA from Continuing Operations, 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 U.S. GAAP financial measures, such as net sales, net income from continuing operations, diluted earnings per share from continuing operations, or other measures prescribed by U.S. GAAP, and there are limitations to using non-GAAP financial measures.
Adjusted Net Income from Continuing Operations is defined as net income from continuing operations excluding, when incurred, gains or losses that we do not believe reflect our ongoing operations, including, for example, the impacts of impairment losses, gains/losses on the sale of subsidiaries, property and facilities, transaction expenses primarily relating to acquisitions and divestitures, factory start-up costs, factory relocation expenses, executive severance, and restructuring costs. Adjusted Net Income from Continuing Operations is a tool that can assist management and investors in comparing our performance on a consistent basis across periods by removing the impact of certain items that management believes do not directly reflect our underlying operating performance.
Adjusted Earnings Per Share from Continuing Operations is defined as earnings per share from continuing operations excluding, when incurred, certain per share gains or losses that we do not believe reflect our ongoing operations, including, for example, the impacts of impairment losses, gains/losses on the sale of subsidiaries, property and facilities, transaction expenses primarily relating to acquisitions and divestitures, factory start-up costs, factory relocation expenses, executive severance, and restructuring costs. We believe that Adjusted Earnings Per Diluted Share from Continuing Operations provides important comparability of underlying operational results, allowing investors and management to access operating performance on a consistent basis from period to period.
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Adjusted EBITDA from Continuing Operations is defined as net income from continuing operations before interest expense, provision for income taxes, and depreciation and amortization and excluding, when incurred, the impacts of certain losses or gains that we do not believe reflect our ongoing operations, including, for example, impairment losses, gains/losses on sale of subsidiaries, property and facilities, transaction expenses primarily relating to acquisitions and divestitures, factory start-up costs, factory relocation expenses, executive severance, and restructuring expenses. Adjusted EBITDA from Continuing Operations 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, 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, U.S. GAAP financial measures.
We believe that presenting non-GAAP financial measures in addition to U.S. 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
Mark Hernandez or Nicholas Vlahos
203-729-2255
| 4 |
THE EASTERN COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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| Three Months Ended |
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| Six Months Ended |
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| July 1, 2023 |
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| July 2, 2022 |
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| July 1, 2023 |
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| July 2, 2022 |
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| Net sales |
| $ | 68,337,790 |
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| $ | 69,540,054 |
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| $ | 140,833,158 |
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| $ | 138,554,702 |
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| Cost of products sold |
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| (53,189,948 | ) |
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| (53,552,232 | ) |
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| (110,187,615 | ) |
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| (107,991,200 | ) |
| Gross margin |
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| 15,147,842 |
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| 15,987,822 |
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| 30,645,543 |
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| 30,563,502 |
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| Product development expense |
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| (1,431,110 | ) |
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| (959,364 | ) |
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| (2,832,309 | ) |
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| (2,156,372 | ) |
| Selling general and administrative expenses |
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| (11,289,037 | ) |
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| (10,141,815 | ) |
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| (23,226,674 | ) |
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| (20,007,429 | ) |
| Operating profit |
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| 2,427,695 |
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| 4,886,643 |
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| 4,586,560 |
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| 8,399,701 |
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| Interest expense |
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| (781,104 | ) |
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| (503,787 | ) |
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| (1,507,110 | ) |
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| (938,121 | ) |
| Other income (expense) |
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| 252,180 |
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| 511,810 |
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| (378,520 | ) |
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| 1,000,330 |
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| Income from continuing operations before income taxes |
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| 1,898,771 |
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| 4,894,666 |
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| 2,700,930 |
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| 8,461,910 |
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| Income tax expense |
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| (499,564 | ) |
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| (1,193,877 | ) |
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| (694,409 | ) |
|
| (2,075,002 | ) |
| Net income from continuing operations |
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| 1,399,207 |
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| 3,700,789 |
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|
| 2,006,521 |
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| 6,386,908 |
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| Discontinued Operations (see note B) |
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| Gain from operations of discontinued operations |
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| - |
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| 459,563 |
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| - |
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| 930,749 |
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| Income tax expense |
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| - |
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|
| (123,737 | ) |
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| - |
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|
| (250,604 | ) |
| Gain from discontinued operations |
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| - |
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|
| 335,826 |
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| - |
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| 680,145 |
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| Net income |
| $ | 1,399,207 |
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| $ | 4,036,615 |
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| $ | 2,006,521 |
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| $ | 7,067,053 |
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| Earnings per share from continuing operations: |
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| Basic |
| $ | 0.22 |
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| $ | 0.59 |
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| $ | 0.32 |
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| $ | 1.02 |
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| Diluted |
| $ | 0.22 |
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| $ | 0.59 |
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| $ | 0.32 |
|
| $ | 1.02 |
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|
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|
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|
|
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| Earnings per share from discontinued operations: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
| $ | - |
|
| $ | 0.06 |
|
| $ | - |
|
| $ | 0.11 |
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
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| Diluted |
| $ | - |
|
| $ | 0.06 |
|
| $ | - |
|
| $ | 0.11 |
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|
|
|
|
|
|
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| Total earnings per share: |
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|
|
|
|
|
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|
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|
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| Basic |
| $ | 0.22 |
|
| $ | 0.65 |
|
| $ | 0.32 |
|
| $ | 1.13 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| Diluted |
| $ | 0.22 |
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| $ | 0.65 |
|
| $ | 0.32 |
|
| $ | 1.13 |
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|
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|
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|
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| Cash dividends per share: |
| $ | 0.11 |
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| $ | 0.11 |
|
| $ | 0.22 |
|
| $ | 0.22 |
|
| 5 |
THE EASTERN COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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| July 1, 2023 |
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| December 31, 2022 |
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| (unaudited) |
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| ASSETS |
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| Current Assets |
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| Cash and cash equivalents |
| $ | 13,204,674 |
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| $ | 10,187,522 |
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| Accounts receivable, less allowances: 2023 - $601,516; 2022 - $677,000 |
|
| 41,983,715 |
|
|
| 42,886,250 |
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| Inventories |
|
| 57,536,157 |
|
|
| 64,636,591 |
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| Current portion of notes receivable |
|
| 168,160 |
|
|
| 1,006,421 |
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| Prepaid expenses and other assets |
|
| 6,172,162 |
|
|
| 6,598,774 |
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| Total Current Assets |
|
| 119,064,868 |
|
|
| 125,315,558 |
|
|
|
|
|
|
|
|
|
|
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| Property, Plant and Equipment |
|
| 57,338,192 |
|
|
| 56,112,889 |
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| Accumulated depreciation |
|
| (31,228,575 | ) |
|
| (30,000,797 | ) |
| Property, Plant and Equipment, Net |
|
| 26,109,617 |
|
|
| 26,112,092 |
|
|
|
|
|
|
|
|
|
|
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| Goodwill |
|
| 70,810,947 |
|
|
| 70,777,459 |
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| Trademarks |
|
| 5,514,956 |
|
|
| 5,514,886 |
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| Patents and other intangibles net of accumulated amortization |
|
| 17,058,089 |
|
|
| 18,819,897 |
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| Long term notes receivable, less current portion |
|
| 876,427 |
|
|
| 2,276,631 |
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| Deferred Income Taxes |
|
| 488,989 |
|
|
| 488,989 |
|
| Right of Use Assets |
|
| 16,621,564 |
|
|
| 12,217,521 |
|
| Total Other Assets |
|
| 111,370,972 |
|
|
| 110,095,383 |
|
|
|
|
|
|
|
|
|
|
|
| TOTAL ASSETS |
| $ | 256,545,457 |
|
| $ | 261,523,033 |
|
| 6 |
THE EASTERN COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
| July 1, 2023 |
|
| December 31, 2022 |
| ||
|
|
| (unaudited) |
|
|
|
| ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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|
|
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|
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| Current Liabilities |
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|
|
|
|
| ||
| Accounts payable |
| $ | 27,010,990 |
|
| $ | 27,638,317 |
|
| Accrued compensation |
|
| 3,758,455 |
|
|
| 3,327,832 |
|
| Other accrued expenses |
|
| 3,683,882 |
|
|
| 3,944,964 |
|
| Current portion of operating lease liability |
|
| 3,583,505 |
|
|
| 3,059,547 |
|
| Current portion of finance lease liability |
|
| 152,253 |
|
|
| - |
|
| Current portion of long-term debt |
|
| 3,011,829 |
|
|
| 9,010,793 |
|
| Total Current Liabilities |
|
| 41,200,914 |
|
|
| 46,981,453 |
|
|
|
|
|
|
|
|
|
|
|
| Other long-term liabilities |
|
| 754,763 |
|
|
| 754,762 |
|
| Operating lease liability, less current portion |
|
| 13,038,059 |
|
|
| 9,195,205 |
|
| Finance lease liability, less current portion |
|
| 836,445 |
|
|
| - |
|
| Long-term debt, less current portion |
|
| 51,379,405 |
|
|
| 55,136,231 |
|
| Accrued postretirement benefits |
|
| 664,710 |
|
|
| 666,222 |
|
| Accrued pension cost |
|
| 22,448,575 |
|
|
| 22,174,465 |
|
| Total Liabilities |
|
| 130,322,871 |
|
|
| 134,908,338 |
|
|
|
|
|
|
|
|
|
|
|
| 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 |
|
| 33,596,350 |
|
|
| 33,586,165 |
|
| Issued: 9,072,761 shares at 2023 and 9,056,421 shares at 2022 |
|
|
|
|
|
|
|
|
| Outstanding: 6,238,316 shares at 2023 and 6,221,976 shares at 2022 |
|
|
|
|
|
|
|
|
| Treasury Stock: 2,834,445 shares at 2023 and 2,834,445 shares at 2022 |
|
| (22,544,685 | ) |
|
| (22,544,684 | ) |
| Retained earnings |
|
| 139,622,432 |
|
|
| 138,985,852 |
|
| Accumulated other comprehensive loss: |
|
|
|
|
|
|
|
|
| Foreign currency translation |
|
| (1,235,435 | ) |
|
| (1,140,978 | ) |
| Unrealized gain on interest rate swap, net of tax |
|
| - |
|
|
| 1,449,754 |
|
| Unrecognized net pension and postretirement benefit costs, net of tax |
|
| (23,216,076 | ) |
|
| (23,721,414 | ) |
| Accumulated other comprehensive loss |
|
| (24,451,511 | ) |
|
| (23,412,638 | ) |
| Total Shareholders’ Equity |
|
| 126,222,586 |
|
|
| 126,614,695 |
|
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
| $ | 256,545,457 |
|
| $ | 261,523,033 |
|
| 7 |
THE EASTERN COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
|
| Six Months Ended |
| |||||
|
|
| July 1, 2023 |
|
| July 2, 2022 |
| ||
| Operating Activities |
|
|
|
|
|
| ||
| Net income |
| $ | 2,006,521 |
|
| $ | 7,067,053 |
|
| Less: gain from discontinued operations |
|
| - |
|
|
| 680,145 |
|
| Income from continuing operations |
| $ | 2,006,521 |
|
| $ | 6,386,908 |
|
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
| Depreciation and amortization |
|
| 3,621,126 |
|
|
| 3,632,317 |
|
| Unrecognized pension and postretirement benefits |
|
| 656,655 |
|
|
| 81,210 |
|
| Loss on sale of equipment and other assets |
|
| 318,775 |
|
|
| 276,250 |
|
| Provision for doubtful accounts |
|
| (16,731 | ) |
|
| 39,437 |
|
| Stock compensation expense |
|
| 10,185 |
|
|
| 414,619 |
|
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Accounts receivable |
|
| 918,871 |
|
|
| (3,302,349 | ) |
| Inventories |
|
| 7,711,536 |
|
|
| (5,237,113 | ) |
| Prepaid expenses and other |
|
| 562,548 |
|
|
| (1,228,182 | ) |
| Other assets |
|
| 163,077 |
|
|
| 58,576 |
|
| Accounts payable |
|
| (953,660 | ) |
|
| (100,497 | ) |
| Accrued compensation |
|
| (165,590 | ) |
|
| (1,711,069 | ) |
| Other accrued expenses |
|
| (1,274,858 | ) |
|
| (1,812,968 | ) |
| Net cash provided by (used in) operating activities |
|
| 13,558,455 |
|
|
| (2,502,862 | ) |
|
|
|
|
|
|
|
|
|
|
| Investing Activities |
|
|
|
|
|
|
|
|
| Business Acquisition |
|
| (547,638 | ) |
|
| - |
|
| Payments received from notes receivable |
|
| 2,309,236 |
|
|
| 428,832 |
|
| Proceeds from sale of equipment |
|
| - |
|
|
| 1,371,073 |
|
| Purchases of property, plant and equipment |
|
| (1,978,784 | ) |
|
| (1,140,728 | ) |
| Net cash (used in) provided by investing activities |
|
| (217,186 | ) |
|
| 659,177 |
|
|
|
|
|
|
|
|
|
|
|
| Financing Activities |
|
|
|
|
|
|
|
|
| Principal payments on long-term debt |
|
| (69,248,743 | ) |
|
| (3,767,866 | ) |
| Principal payments on short-term borrowing (revolver) |
|
| (252,025 | ) |
|
| - |
|
| Proceeds from short term borrowings (revolver) |
|
| - |
|
|
| 10,000,000 |
|
| Proceeds from new long-term debt financing |
|
| 60,000,000 |
|
|
| - |
|
| Financing leases, net |
|
| 674,558 |
|
|
| (126,547 | ) |
| Purchase common stock for treasury |
|
| - |
|
|
| (1,423,378 | ) |
| Dividends paid |
|
| (1,369,941 | ) |
|
| (1,372,101 | ) |
| Net cash (used in) provided by financing activities |
|
| (10,196,151 | ) |
|
| 3,310,108 |
|
|
|
|
|
|
|
|
|
|
|
| Discontinued Operations |
|
|
|
|
|
|
|
|
| Cash used in operating activities |
|
| - |
|
|
| (717,668 | ) |
| Cash used in discontinued operations |
|
| - |
|
|
| (717,668 | ) |
|
|
|
|
|
|
|
|
|
|
| Effect of exchange rate changes on cash |
|
| (127,966 | ) |
|
| (160,653 | ) |
| Net change in cash and cash equivalents |
|
| 3,017,152 |
|
|
| 588,103 |
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents at beginning of period |
|
| 10,187,522 |
|
|
| 6,602,429 |
|
| Cash and cash equivalents at end of period 1 |
| $ | 13,204,674 |
|
| $ | 7,190,532 |
|
|
|
|
|
|
|
|
|
|
|
| Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
| Interest |
| $ | 1,364,527 |
|
| $ | 1,012,157 |
|
| Income taxes |
|
| 315,120 |
|
|
| 1,647,375 |
|
|
|
|
|
|
|
|
|
|
|
| Non-cash investing and financing activities |
|
|
|
|
|
|
|
|
| Right of use asset |
|
| 4,404,043 |
|
|
| 1,694,711 |
|
| Lease liability |
|
| (5,355,510 | ) |
|
| (1,595,081 | ) |
1 includes cash from assets held for sale of $0.1 million as of July 2, 2022
| 8 |
| Reconciliation of Non-GAAP Measures | ||||||||||||||||
| Adjusted Net Income and EPS from Continuing Operations Calculation | ||||||||||||||||
| For the Three and Six Months ended July 1, 2023 and July 2, 2022 | ||||||||||||||||
| ($000's) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
|
| July 1, 2023 |
|
| July 2, 2022 |
|
| July 1, 2023 |
|
| July 2, 2022 |
| ||||
| Net income from continuing operations as reported per generally accepted accounting principles (GAAP) |
| $ | 1,399 |
|
| $ | 3,701 |
|
| $ | 2,007 |
|
| $ | 6,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings per share from continuing operations as reported under generally accepted accounting principles (GAAP): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
| $ | 0.22 |
|
| $ | 0.59 |
|
| $ | 0.32 |
|
| $ | 1.02 |
|
| Diluted |
| $ | 0.22 |
|
| $ | 0.59 |
|
| $ | 0.32 |
|
| $ | 1.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss on sale of Wheeling, IL building, net of tax |
|
| - |
|
|
| - |
|
|
|
|
|
|
| 202 | A |
| Severance and accrued compensation, net of tax |
|
|
|
|
|
|
|
|
|
| 1,349 | B |
|
|
|
|
| Greenwald final sale adjustment |
|
|
|
|
|
|
|
|
|
| 293 | C |
|
|
|
|
| Associated Toolmakers, Ltd. closure, net of tax |
|
| 1,086 | D |
|
|
|
|
|
| 1,086 | D |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total adjustments (non-GAAP) |
| $ | 1,086 |
|
| $ | - |
|
| $ | 2,728 |
|
| $ | 202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted net income from continuing operations (non-GAAP) |
| $ | 2,485 |
|
| $ | 3,701 |
|
| $ | 4,735 |
|
| $ | 6,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted earnings per share from continuing operations (non-GAAP): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
| $ | 0.40 |
|
| $ | 0.59 |
|
| $ | 0.76 |
|
| $ | 1.06 |
|
| Diluted |
| $ | 0.40 |
|
| $ | 0.59 |
|
| $ | 0.76 |
|
| $ | 1.05 |
|
| A) | Loss on sale of ILC building in Wheeling, IL |
| B) | Severance expenses associated with accrued compensation and severance related to the elimination of the Chief Operating Officer position and the departure of the former Chief Executive Officer |
| C) | Final settlement of working capital adjustment associated with Greenwald sale |
| D) | Associated Toolmakers, Ltd. closure costs |
| 9 |
| Reconciliation of Non-GAAP Measures | ||||||||||||||||
| Adjusted EBITDA from Continuing Operations Calculation | ||||||||||||||||
| For the Three and Six Months ended July 1, 2023 and July 2, 2022 | ||||||||||||||||
| ($000's) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
|
| July 1, 2023 |
|
| July 2, 2022 |
|
| July 1, 2023 |
|
| July 2, 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Net income from continuing operations as reported per generally accepted accounting principles (GAAP) |
| $ | 1,399 |
|
| $ | 3,701 |
|
| $ | 2,007 |
|
| $ | 6,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest expense |
|
| 781 |
|
|
| 504 |
|
|
| 1,507 |
|
|
| 938 |
|
| Provision for income taxes |
|
| 500 |
|
|
| 1,194 |
|
|
| 694 |
|
|
| 2,075 |
|
| Depreciation and amortization |
|
| 1,806 |
|
|
| 1,803 |
|
|
| 3,621 |
|
|
| 3,633 |
|
| Loss on sale of Wheeling, IL building |
|
| - |
|
|
| - |
|
|
|
|
|
|
| 269 | A |
| Severance and accrued compensation, net of tax |
|
|
|
|
|
|
|
|
|
| 1,799 | B |
|
|
|
|
| Greenwald final sale adjustment |
|
|
|
|
|
|
|
|
|
| 390 | C |
|
|
|
|
| Associated Toolmakers, Ltd. closure |
|
| 1,448 | D |
|
|
|
|
|
| 1,448 | D |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted EBITDA from continuing operations |
| $ | 5,934 |
|
| $ | 7,202 |
|
| $ | 11,466 |
|
| $ | 13,302 |
|
| A) | Loss on sale of ILC building in Wheeling, IL |
| B) | Severance expenses associated with accrued compensation and severance related to the elimination of the Chief Operating Officer position and the departure of the former Chief Executive Officer |
| C) | Final settlement of working capital adjustment associated with Greenwald sale |
| D) | Associated Toolmakers, Ltd. closure costs |
| 10 |
Cover |
Aug. 08, 2023 |
|---|---|
| Cover [Abstract] | |
| Entity Registrant Name | The Eastern Company |
| Entity Central Index Key | 0000031107 |
| Document Type | 8-K |
| Amendment Flag | false |
| Entity Emerging Growth Company | false |
| Document Period End Date | Aug. 08, 2023 |
| Entity Incorporation State Country Code | CT |
| Entity Tax Identification Number | 06-0330020 |
| Written Communications | false |
| Soliciting Material | false |
| Pre Commencement Tender Offer | false |
| Pre Commencement Issuer Tender Offer | false |
| Entity File Number | 001-35383 |
| Entity Address Address Line 1 | 3 Enterprise Drive |
| Entity Address Address Line 2 | Suite 408 |
| Entity Address City Or Town | Shelton |
| Entity Address Postal Zip Code | 06484 |
| City Area Code | 203 |
| Local Phone Number | 729-2255 |
| Security 12b Title | Common Stock, No Par Value |
| Trading Symbol | EML |
| Security Exchange Name | NASDAQ |
| Entity Address State Or Province | CT |