The Eastern Company (“Eastern”) (NASDAQ:EML), an industrial
manufacturer of unique engineered solutions serving niche
industrial markets, today announced the results of operations for
the first quarter ended March 28, 2020 and its response to the
current COVID-19 pandemic.
President and CEO August Vlak commented, “Sales in the first
quarter of 2020 increased 7% compared to the first quarter of 2019,
driven by the acquisition of Big 3 Precision in August 2019. The
acquisition was an important step toward the achievement of our
long-term vision of building a larger and stronger company with a
more significant presence with key customers. Sales growth due to
the inclusion of Big 3 Precision was partly offset by a decline in
sales across nearly all businesses during the second half of March,
which was precipitated by customer shutdowns and temporary closures
of four of our facilities in response to the COVID-19 pandemic, as
well as considerable weakness in mining,” added Mr. Vlak.
“Despite ongoing uncertainty across our end markets and the
macro-environment, we believe that our businesses are well
positioned and will prove to be resilient once economic activity
rebounds” said Mr. Vlak. As of April 29, all but two production
facilities are operating and, at this time, the majority of our
customers are expected to re-open as soon as May 4. Our backlog
remained robust at the end of the first quarter. We are confident
that the numerous actions that we have taken to control expenses
position our businesses to withstand a significant and potentially
more prolonged economic downturn. Actions that we have taken to
date include the suspension of all hiring of salaried positions,
cessation of discretionary spending, temporary reduction in work
hours, initiation of furloughs, cancellation of certain merit-based
salary increases, and a limitation on capital spending to only
critical maintenance, safety, and regulatory projects,” remarked
Mr. Vlak.
Mr. Vlak continued, “Our balance sheet remains strong. As of
March 28, 2020, we have cash and cash equivalents of $16.5 million
and an untapped $20 million revolver. Our net leverage ratio is
2.58x, and our fixed charge coverage ratio is 2.58x, both of which
comply with our bank covenants of 4.25x and 1.25x, respectively. We
believe that our strong balance sheet and ample liquidity position
Eastern well to successfully navigate the current challenging
business environment.”
First Quarter 2020 Financial Results
Net sales in the first quarter of 2020 increased to $65.3
million from $60.9 million in the first quarter of 2019, primarily
due to the acquisition of Big 3 Precision. Sales in the Industrial
Hardware segment grew by 23% to $47.2 million in the first quarter
of 2020 from $38.4 million in the first quarter of 2019. Excluding
Big 3 Precision, sales in the first quarter of 2020 decreased by
11% compared to the same period in 2019, as sales growth in the
specialty vehicle, military, and off-highway markets were not
sufficient to offset the sales decline during the second half of
March, when certain of our customers closed their operations to
help stop the spread of COVID-19. Sales in the Security Products
segment fell by 16% in the first quarter of 2020 compared to the
first quarter of 2019, primarily as a result of disruption in the
supply chain related to extended closures of our facilities in
China during the month of February 2020. At this time, our
facilities in China are meeting demand. Sales in the Metal Products
segment slipped by 27% in the first quarter of 2020 compared to the
first quarter of 2019, as mining sales in the first quarter of 2020
were materially impacted by a decline in natural gas prices and a
rapid deterioration in mining.
Net Income for the first quarter of 2020 increased by 84% to
$2.9 million, or $0.46 per diluted share, from $1.6 million, or
$0.25 per diluted share, in the first quarter of 2019. Operating
profit margin in the Industrial Hardware segment improved to 7.3%
of sales in the first quarter 2020 from 3.3% of sales in the first
quarter of 2019, largely a result of the avoidance of significant
restructuring costs and a reduction in product development
expenses. While operating profit margin in the Security Products
segment remained essentially flat at 6.6% of sales in the first
quarter of 2020 compared to the first quarter of 2019, operating
profit margin in the Metal Products segment deteriorated in the
first quarter of 2020 compared to the first quarter of 2019 due to
the lower absorption of fixed costs as a consequence of the sharp
decline in sales.
Conference Call and Webcast
The Eastern Company will host a conference call to discuss its
results for the first quarter of 2020 and other matters on
Thursday, May 7th at 11:00 AM Eastern Time. Participants can access
the conference call by phone at (888) 669-0687 (toll free in US
& Canada) or (862) 298-0702 (international). Participants can
also join via the web at
https://www.webcaster4.com/Webcast/Page/1757/34516.
About The Eastern Company
The Eastern Company manages industrial businesses that design,
manufacture and sell unique engineered solutions to niche markets,
focusing on industries that offer long-term macroeconomic growth
opportunities. The Company operates across three reporting segments
-- Industrial Hardware, Security Products and Metal 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 “may,” “will,”
"believes," "intends", "continues," "reflects," "plans,"
"anticipates," "expects," “potential” 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.
Among 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, the
impact of the ongoing COVID-19 pandemic, including the impact of
shutdowns and other restrictions imposed in response to COVID-19 on
our supply chain and production and customer demand for our
products, 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.
Consolidated Statement of Operations
(unaudited)
THE EASTERN COMPANY (NASDAQ - EML)
THREE Months Ended
March 28,
2020
March 30,
2019
Net Sales
$
65,325,617
$
60,883,148
Net Income After Tax
2,895,817
1,570,960
Net Income Per Share:
Basic
$
0.46
$
0.25
Diluted
$
0.46
$
0.25
Weighted average
shares outstanding:
Basic
6,237,921
6,231,713
Diluted
6,241,052
6,264,829
Consolidated Balance Sheets
(unaudited)
THE EASTERN COMPANY (NASDAQ - EML)
28-Mar-20
28-Dec-19
Cash and marketable securities
$
16,532,035
$
18,030,810
Accounts Receivable
39,873,177
37,941,900
Inventories
55,274,876
54,599,266
Other assets
3,955,872
4,343,507
Current Assets
115,635,960
114,915,483
Net property, plant and equipment
41,926,567
42,022,613
Other intangible assets
110,522,496
111,382,405
Right of use assets
11,852,653
12,342,475
Total Assets
$
279,937,676
$
280,662,976
Accounts payable
$
22,629,076
$
19,960,507
Accrued compensation
2,216,765
3,815,186
Other accrued expenses
3,797,178
2,967,961
Current portion of long-term debt
5,187,689
5,187,689
Current Liabilities
33,830,708
31,931,343
Deferred income tax
5,270,465
5,270,465
Other long-term liabilities
2,465,260
2,465,261
Lease liability
11,852,653
12,342,475
Long-term debt
92,356,121
93,577,544
Accrued postretirement benefits
1,001,509
1,007,146
Accrued pension costs
28,052,482
28,631,485
Shareholders' equity
105,108,478
105,437,257
Total Liabilities and Shareholders'
equity
$
279,937,676
$
280,662,976
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version on businesswire.com: https://www.businesswire.com/news/home/20200429005468/en/
Investor Relations The Eastern Company August Vlak
or John L. Sullivan III 203-729-2255
Eastern (NASDAQ:EML)
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