EASTERN CO
For the period ended Jun 29, 2024. Filed Aug 6, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 29, 2024 · Filed Aug 6, 2024
EML$26.23-3.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-30; filed 2024-05-06.
0001654954-24-005629
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-29; filed 2024-08-06.
0001654954-24-010035
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 46 previous paragraphs and 49 current paragraphs.
21 unchanged; 19 reworded; 9 added; 6 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 7 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
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Selling, general and administrative expenses increased $0.2 million, or 2%, in the second quarter of 2024 when compared to the second quarter of 2023 primarily due to higher payroll-related expense of $0.4 million and higher travel expenses of $0.1 million, partially offset by lower legal and professional expenses of $0.1 million, and lower selling costs of $0.2 million. Selling and administrative expenses decreased $0.2 million, or 1% in the first six months of 2024 when compared to the corresponding period in 2023 primarily due to lower payroll-related expenses of $0.1 million, lower legal and professional expenses of $0.3 million, and lower selling expenses of $0.1 million, partially offset by higher travel and other expenses of $0.3 million.
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Removed paragraphs (6)
Previous report
Selling, general and administrative expenses decreased $0.4 million, or 4%, in the first quarter of 2024 when compared to the first quarter of 2023 primarily due to lower legal, professional, and selling costs and payroll-related expenses. In the first quarter of 2023, selling, general and administrative expenses included 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.
Previous report
(1) We estimate the tax effect of the items identified to determine a non-GAAP annual effective tax rate applied to the pre-tax amount in order to calculate the non-GAAP provision for income taxes
Previous report
a) Severance expenses associated with accrued compensation and severance related to the elimination of the Chief Operating Officer position and the departure of the Chief Executive Officer
Previous report
b) Final settlement of working capital adjustment associated with Greenwald sale
Previous report
a) Severance expenses associated with accrued compensation and severance related to the elimination of the Chief Operating Officer position and the departure of the Chief Executive Officer
Previous report
b) Final settlement of working capital adjustment associated with Greenwald sale
Reworded paragraphs (19)
Previous wording
The following discussion is intended to highlight significant changes in the financial position and results of operations of The Eastern Company (together with its consolidated subsidiaries, the “Company,” “we,” “us” or “our”) for the three months ended March 30, 2024. This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and Notes thereto for the fiscal year ended December 30, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023, which was filed with the Securities and Exchange Commission (the “SEC”) on March 12, 2024 (the “2023 Form 10-K”).
Current wording
The following discussion is intended to highlight significant changes in the financial position and results of operations of The Eastern Company (together with its consolidated subsidiaries, the “Company,” “we,” “us” or “our”) for the three and six months ended June 29, 2024. This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and Notes thereto for the fiscal year ended December 30, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023, which was filed with the Securities and Exchange Commission (the “SEC”) on March 12, 2024 (the “2023 Form 10-K”).
Previous wording
The Company’s fiscal year is a 52-53-week fiscal year ending on the Saturday nearest to December 31. References to 2023, the 2023 fiscal year or fiscal 2023 mean the 52-week period ended on December 30, 2023, and references to 2024, the 2024 fiscal year or fiscal 2024 mean the 52-week period ending on December 28, 2024. In a 52-week fiscal year, each quarter has 13 weeks. References to the first quarter of 2023, the first fiscal quarter of 2023, the first quarter of fiscal 2023 or the three months ended April 1, 2023, mean the period from January 1, 2023 to April 1, 2023. References to the first quarter of 2024, the first fiscal quarter of 2024, the first quarter of fiscal 2024, or the three months ended March 30, 2024 mean the 13-week period from December 31, 2023 to March 30, 2024.
Current wording
The Company’s fiscal year is a 52-53-week fiscal year ending on the Saturday nearest to December 31. References in this Quarterly Report on Form 10-Q for the quarterly period ended June 29, 2024 (this “Form 10-Q”) to 2023, the 2023 fiscal year or fiscal 2023 mean the 52-week period ended on December 30, 2023, and references to 2024, the 2024 fiscal year or fiscal 2024 mean the 52-week period ending on December 28, 2024. In a 52-week fiscal year, each quarter has 13 weeks. References to the second quarter of 2023, the second fiscal quarter of 2023 or the three months ended July 1, 2023, mean the 13-week period from April 1, 2023 to July 1, 2023. References to the second quarter of 2024, the second fiscal quarter of 2024 or the three months ended June 29, 2024 mean the 13-week period from March 31, 2024 to June 29, 2024. References to the first six months of 2023 or the six months ended July 1, 2023 mean the period from January 1, 2023 to July 1, 2023. References to the first six months of 2024 or the six months ended June 29, 2024 mean the period from December 31, 2023 to June 29, 2024.
Previous wording
Statements contained in this Quarterly Report on Form 10-Q of the Company 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:
Current wording
Statements contained in this Form 10-Q 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:
Previous wording
The Company is also subject to other risks identified and discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, in Item 1A,Risk Factors, and in Item 7,Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the 2023 Form 10-K, 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.
Current wording
The Company is also subject to other risks identified and discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, in Part I, Item 1A,Risk Factors, and in Part II, Item 7,Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the 2023 Form 10-K, 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.
Previous wording
Net sales in the first quarter of 2024 decreased 6% to $67.9 million from $72.5 million in the corresponding period in 2023. Sales declined in the first quarter of 2024 primarily due to lower demand for truck accessories and returnable transport packaging products, partially offset by increased demand for truck mirror assemblies. Our backlog as of March 30, 2024 increased 35% to $97.4 million from $72.0 million as of April 1, 2023, driven by increased orders for various truck mirror assemblies.
Current wording
Net sales in the second quarter of 2024 increased 7% to $73.2 million from $68.3 million in the corresponding period in 2023. Net sales for the first six months of 2024 increased 0.2% to $141.1 million from $140.8 million in the corresponding period last year. Sales increased in the second quarter of 2024 primarily due to increased demand for truck mirror assemblies of $8.0 million and returnable transport packaging products of $0.4 million, offset by lower demand for truck accessories of $3.6 million. In the second quarter of 2024, truck mirror assemblies volume was favorably impacted by additional orders of approximately $5.0 million from two key customers due to our operational flexibility and competitive advantages. Sales were relatively flat for the first six months of 2024 compared to the first six months of 2023 with increased demand for truck mirror assemblies of $12.2 million offset by lower demand for truck accessories of $7.6 million and returnable transport packaging products of $4.3 million. Our backlog as of June 29, 2024 increased 43% to $107.3 million from $75.3 million as of July 1, 2023, driven by increased orders for various truck mirror assemblies and returnable transport packaging products.
Previous wording
Net sales of existing products declined 11% in the first quarter of 2024 compared to the corresponding period in 2023. Price increases and new products increased net sales by 5% in the first quarter of 2024 compared to the corresponding period in 2023. New products included various truck mirror assemblies, rotary latches, D-rings, and mirror cams.
Current wording
Net sales of existing products declined 2% in the second quarter of 2024 and 7% for the first six months of 2024 compared to the corresponding periods in 2023. Price increases and new products increased net sales by 9% in the second quarter of 2024 and 7% in the first six months of 2024, compared to the corresponding periods in 2023. New products included various truck mirror assemblies, rotary latches, D-rings, and mirror cams.
Previous wording
Cost of products sold decreased $5.3 million, or 9%, in the first quarter of 2024 compared to the corresponding period in 2023. The decreases in the first quarter of 2024 are primarily due to lower sales volumes. Additionally, the Company paid tariff costs on China-sourced products of approximately $0.7 million in the first quarter of 2024 compared to $0.6 million in the first quarter of fiscal 2023. Most tariffs on China-sourced products have been recovered through price increases.
Current wording
Cost of products sold increased $1.8 million, or 3%, in the second quarter of 2024 and decreased by $3.5 million, or 3% in the first six months of 2024 compared to the corresponding period in 2023. The increase in cost of products sold in the second quarter of 2024 are primarily due to higher sales volume. The decrease in cost of products sold in the first six months of 2024 when compared to the same period last year is primarily due to lower production volumes and other cost savings initiatives. Additionally, the Company paid tariff costs on China-sourced products of approximately $0.6 million and $1.2 million in the second quarter of 2024 and first six months of 2024 respectively, compared to $0.5 million and $1.1 million in the second quarter of 2023 and first six months of 2023, respectively. Most tariffs on China-sourced products have been recovered through price increases.
Previous wording
Gross margin as a percentage of sales was 24% in the first quarter of 2024 compared to 21% in the first quarter of fiscal 2023. Our gross margins in the first quarter of 2024 primarily reflect the impact of price increases to customers to recover increases in raw material costs and other cost savings initiatives.
Current wording
Gross margin as a percentage of sales was 25% in the second quarter of 2024 and 24% in the first six months of 2024 compared to 22% in both the second quarter and first six months of 2023. Our gross margins in the second quarter of 2024 primarily reflect the impact of price increases to customers to recover increases in raw material costs and other cost savings initiatives.
Previous wording
Product development expenseswere flat in the first quarter of 2024 compared to the corresponding period in 2023 as we continue to invest in new products at Eberhard, Velvac and Big 3. As a percentage of net sales, product development costs were 2.0% for the first quarter of 2024 compared to 1.9% for the corresponding period in 2023.
Current wording
Product development expensesdecreased $0.1 million in the second quarter of 2024 and decreased $0.2 million in the first six months of 2024 compared to the corresponding periods in 2023 as we continue to invest in new products at our Eberhard, Velvac, and Big 3 businesses. As a percentage of net sales, product development costs were 1.8% for the second quarter of 2024 and 1.9% for the first six months of 2024, compared to 2.1% and 2.0% for the corresponding periods in 2023.
Previous wording
Interest expense increased $0.1 million in the first quarter of 2024 compared to the corresponding period in 2023 due to higher interest rates.
Current wording
Interest expense increased $0.1 million in the second quarter of 2024 and $0.2 million in the first six months of 2024 compared to the corresponding period in 2023 due to higher interest rates, partially offset by lower principal balances.
Previous wording
Other income and expenseof $0.0 million increased $0.6 million in the first quarter of 2024 when compared to the corresponding period in 2023. The increase in other income of $0.6 million in the first quarter of 2024 was primarily driven by an unfavorable final working capital adjustment of $0.4 million related to the sale of the Greenwald business in the first quarter of 2023.
Current wording
Other income and expensedecreased $0.3 million in the second quarter of 2024 and increased $0.4 million in the first six months of 2024 when compared to the corresponding periods in 2023. The decrease in other income of $0.3 million in the second quarter of 2024 was primarily driven by a $1.6 million favorable adjustment for the final settlement of our swap agreement with Santander Bank, N.A. (“Santander”) in the second quarter of 2023, partially offset by $1.4 million expense associated with the closure of Associated Toolmakers, Ltd. in the second quarter of 2023. The increase in other income of $0.4 million for the first six months of 2024 when compared to the corresponding period in 2023 was primarily driven by $1.4 million of expense associated with the closure of Associated Toolmakers, Ltd. in the second quarter of 2023, an unfavorable final working capital adjustment of $0.4 million related to the sale of the Greenwald business in the first quarter of 2023, partially offset by a $1.6 million favorable adjustment for the final settlement of our swap agreement with Santander in the second quarter of 2023.
Previous wording
Net incomefor the first quarter of fiscal 2024 was $1.9 million, or $0.31 per diluted share compared to net income of $0.6 million, or $0.10 per diluted share, for the comparable period in 2023.
Current wording
Net incomefor the second quarter of fiscal 2024 was $3.5 million, or $0.56 per diluted share compared to net income of $1.4 million, or $0.22 per diluted share, for the comparable period in 2023. In the first six months of 2024 net income was $5.5 million, or $0.87 per diluted share compared to net income of $2.0 million, or $0.32 per diluted share for the comparable period in 2023.
Previous wording
The following table shows the change in sales and operating profit for the first quarter of 2024 compared to the first quarter of 2023 (dollars in thousands):
Current wording
The following table shows the change in sales and operating profit for the second quarter and first six months of 2024 compared to the second quarter and first six months of 2023 (dollars in thousands):
Previous wording
The Company generated $3.6 million of cash from operations during the first three months of fiscal 2024 compared to generating $6.9 million during the first three months of fiscal 2023. Cash flow from operations in the first three months of 2024 was lower when compared to the corresponding period in 2023 primarily due to increases in accounts receivable and lower reductions in inventory, partially offset by increases in accounts payable.
Current wording
The Company generated $10.3 million of cash from operations during the first six months of fiscal 2024 compared to generating $13.6 million during the first six months of fiscal 2023. Cash flow from operations in the first six months of 2024 was lower when compared to the corresponding period in 2023 primarily due to increases in accounts receivable and lower reductions in inventory, partially offset by increases in accounts payable.
Previous wording
Additions to property, plant, and equipment were $1.8 million and $1.2 million for the first three months of 2024 and 2023, respectively. As of March 30, 2024, there was approximately $3.0 million of outstanding commitments for capital expenditures.
Current wording
Additions to property, plant, and equipment were $2.8 million and $2.0 million for the first six months of 2024 and 2023, respectively. As of June 29, 2024, there was approximately $3.0 million of outstanding commitments for capital expenditures.
Previous wording
Inventories of $55.8 million as of March 30, 2024 declined by $3.4 million, or 5.8%, when compared to $59.3 million at the end of fiscal year 2023 and declined $1.8 million, or 3.1%, when compared to $57.7 million at the end of the first quarter of fiscal 2023. Accounts receivable, less allowances, were $42.9 million as of March 30, 2024, as compared to $37.1 million at 2023 fiscal year end and $44.5 million at the end of the first quarter of fiscal 2023.
Current wording
Inventories of $56.9 million as of June 29, 2024 declined by $2.4 million, or 4.0%, when compared to $59.3 million at the end of fiscal year 2023 and declined $0.6 million, or 1.0%, when compared to $57.5 million at the end of the second quarter of fiscal 2023. Accounts receivable, less allowances, were $42.3 million as of June 29, 2024, as compared to $37.1 million at 2023 fiscal year end and $42.0 million at the end of the second quarter of fiscal 2023.
Previous wording
On June 16, 2023, the Company entered into a credit agreement with TD Bank, N.A., Wells Fargo Bank, Bank of America, and M&T Bank as lenders (the “Credit Agreement”), and incurred indebtedness under the Credit Agreement in the aggregate principal amount of $60 million in the form of a term loan, the proceeds of which were used to repay the Company’s remaining outstanding term loan and to terminate its existing credit facility with Santander Bank. See Note G for additional information regarding the terms of the Credit Agreement, including repayment terms, interest rates and applicable loan covenants. Under the terms of the Credit Agreement, the Company is subject to restrictive covenants that limit our ability to, among other things, incur additional indebtedness, pay dividends, or make other distributions, and consolidate, merge, sell or otherwise dispose of assets, as well as financial covenants that require us to maintain a fixed charge coverage ratio and a maximum senior net leverage ratio. These covenants may limit how we conduct our business, and in the event of certain defaults, our repayment obligations may be accelerated. We were in compliance with all our covenants as of March 30, 2024 and had no outstanding borrowings under the revolving commitment portion of the credit facility as of this date.
Current wording
On June 16, 2023, the Company entered into a credit agreement with TD Bank, N.A., Wells Fargo Bank, Bank of America, and M&T Bank as lenders (the “Credit Agreement”), and incurred indebtedness under the Credit Agreement in the aggregate principal amount of $60 million in the form of a term loan, the proceeds of which were used to repay the Company’s remaining outstanding term loan and to terminate its existing credit facility with Santander. See Note GDebt, for additional information regarding the terms of the Credit Agreement, including repayment terms, interest rates and applicable loan covenants. Under the terms of the Credit Agreement, the Company is subject to restrictive covenants that limit our ability to, among other things, incur additional indebtedness, pay dividends, or make other distributions, and consolidate, merge, sell or otherwise dispose of assets, as well as financial covenants that require us to maintain a fixed charge coverage ratio and a maximum senior net leverage ratio. These covenants may limit how we conduct our business, and in the event of certain defaults, our repayment obligations may be accelerated. We were in compliance with all of our covenants as of June 29, 2024 and had no outstanding borrowings under the revolving commitment portion of the credit facility as of such date.
Previous wording
As of the end of the first quarter of 2024, the Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Current wording
As of the end of the second quarter of 2024, the Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Previous wording
The preparation of financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. For a full description of our critical accounting estimates, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the 2023 Form 10-K. While there have been no material changes to our critical accounting estimates, we continue to monitor the methodologies and assumptions underlying such critical accounting estimates.
Current wording
The preparation of financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. For a full description of our critical accounting estimates, refer to Part II, Item 7,Management’s Discussion and Analysis of Financial Condition and Results of Operations of the 2023 Form 10-K. While there have been no material changes to our critical accounting estimates since the filing of the 2023 Form 10-K, we continue to monitor the methodologies and assumptions underlying such critical accounting estimates.