<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED APRIL 1, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION
PERIOD FROM _________________ to ______________________.
Commission File Number 0-599
THE EASTERN COMPANY
(Exact Name of Registrant as specified in its charter)
Connecticut 06-0330020
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
112 Bridge Street, Naugatuck, Connecticut 06770
(Address of principal executive offices) (Zip Code)
(203) 729-2255
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--------- ---------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of April 1, 1995
Common Stock, No par value 2,775,085
-1-
<PAGE> 2
PART I
FINANCIAL INFORMATION
THE EASTERN COMPANY AND SUBSIDIARIES
ITEM I CONSOLIDATED CONDENSED BALANCE SHEETS
- ------ -------------------------------------
ASSETS
<TABLE>
<CAPTION>
April 1, 1995 DEC. 31, 1994
CURRENT ASSETS (Unaudited) (Audited)
------------- ------------
<S> <C> <C>
Cash and cash equivalents $ 3,187,344 $ 2,610,244
Accounts Receivable,less allowance of: 9,615,164 9,665,164
1995- $359,722 1994- $330,024
Land held for sale - 1,018,111
Inventories 10,582,626 9,530,546
Prepaid expenses and other current assets 1,756,700 2,021,862
----------- -----------
Total Current Assets 25,141,834 24,845,927
Property, plant & equipment 24,636,958 23,950,535
Less accumulated depreciation (11,622,186) (10,996,773)
----------- -----------
13,014,772 12,953,762
Prepaid pension cost 3,092,313 2,958,362
Other assets, net 1,383,927 1,124,736
------------ ------------
TOTAL ASSETS $ 42,632,846 $ 41,882,787
============ ============
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Current Liabilities
<S> <C> <C>
Accounts payable $ 3,680,783 $ 3,239,241
Notes payable current 810,000 2,460,000
Accrued compensation and withholding 1,831,914 935,417
Accrued expenses 813,859 377,322
------------ -----------
TOTAL CURRENT LIABILITIES 7,136,556 7,011,980
Deferred Federal Income Taxes 1,939,200 1,939,200
Long-term Debt 180,000 240,000
Accrued postretirement benefits 2,868,900 2,848,150
</TABLE>
SHAREHOLDERS' EQUITY
<TABLE>
<S> <S> <S>
Common Stock No Par Value:
Authorized Shares - 25,000,000
Issued & outstanding shares: 9,009,392 9,009,392
1995-2,775,085 1994-2,775,085
(Excluding Shares in Treasury:
1995-520,085 1994-520,085)
PreferreStock Noar Value
Authozed Shar - 2,000,000
(No sres outsndi ng)
Retained Earnings 21,498,798 20,834,065
------------ ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 42,632,846 $ 41,882,787
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-2-
<PAGE> 3
<TABLE>
THE EASTERN COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<CAPTION>
THREE MONTHS ENDED
4/1/95 4/2/94
(Unaudited) (Unaudited)
<S> <C> <C>
Net Sales $17,684,662 $15,684,271
Interest Income 40,072 13,454
----------- -----------
Total 17,724,734 15,697,725
Cost of Products Sold 13,276,799 11,862,765
----------- -----------
4,447,935 3,834,960
Selling and Admin. Expenses 2,942,048 2,747,480
Interest Expense 43,645 26,583
Other Income Net (29,087) (62,117)
----------- -----------
INCOME BEFORE INCOME TAXES 1,491,329 1,123,014
Income Taxes 531,660 398,627
----------- -----------
NET INCOME $ 959,669 $ 724,387
=========== ===========
Net Income Per Share $ 0.35 $ 0.26
Cash Dividends Per Share $ 0.115 $ 0.115
Average Shares Outstanding 2,775,085 2,760,784
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-3-
<PAGE> 4
<TABLE>
THE EASTERN COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED
<CAPTION>
4/1/95 4/2/94
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 959,669 $ 724,387
Adjustments to reconcile net income to net
cash provided from operations:
Depreciation & Amortization 687,515 629,985
Pension plan income (88,913) (101,703)
Gain on sale of equipment and other assets (16,606) -
Postretirement benefits other than pensions 20,750 17,000
Provision for Losses on Accounts Receivable 30,035 33,107
Changes in Operating Assets and Liabilities:
Accounts receivable 8,785 (1,075,553)
Inventories (1,058,958) (741,701)
Prepaid expenses 264,554 (180,220)
Accounts payable 459,421 1,160,116
Accrued expenses 1,318,753 437,637
Other assets (321,104) 3,262
---------- ----------
NET CASH PROVIDED FROM OPERATING ACTIVITIES 2,263,901 906,317
INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (690,276) (457,213)
Proceeds from sale of equipment and other assets 1,034,717 -
Other - 3,600
--------- ---------
NET CASH PROVIDED (USED) FOR INVESTING ACTIVITIES 344,441 (453,613)
FINANCING ACTIVITIES:
Payment on line of credit (1,400,000) -
Principal payments on long-term debt and
notes payable (310,000) (310,000)
Proceeds from Sales of Common Stock
(Stock Options) - 229,701
Purchases of Common Stock for the Treasury - (99,414)
Dividends Paid (319,136) (318,500)
---------- ----------
NET CASH USED FOR FINANCING ACTIVITIES (2,029,136) (498,213)
Effect of exchange rate changes on cash (2,106) 41,343
---------- ---------
NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS 577,100 (4,166)
Cash and Cash Equivalents at Beginning of Year 610,244 2,479,998
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 3,187,344 $2,475,832
=========== ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-4-
<PAGE> 5
<TABLE>
THE EASTERN COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
THREE MONTHS ENDED
As reported: 4/1/95 4/2/94
(Unaudited) (Unaudited)
<S> <C> <C>
Average Shares Outstanding 2,775,085 2,760,784
Net Income $ 959,669 $ 724,387
========== ==========
Net Income Per Share $0.35 $0.26
===== =====
Assume stock options were
included in primary earnings
per share computation:
Average Shares Outstanding 2,775,085 2,760,784
Stock options based on
Treasury stock method
Using quarter end market price 64,299 72,461
--------- ---------
TOTALS 2,839,384 2,833,245
========= =========
Net Income $ 959,669 $ 724,387
========== ==========
Net Income per Share $0.34 $0.26
===== =====
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-5-
<PAGE> 6
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
April 1, 1995
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
The accompanying condensed consolidated financial statements are unaudited.
However, in the opinion of the Registrant's management, all adjustments
(consisting only of normal recurring accruals) necessary for a fair
presentation of the results of operations for such interim periods have been
reflected therein.
Certain 1994 amounts have been reclassified to conform to 1995 presentation.
Note B - Net Income Per Share
Net income per share of common stock is based on the weighted average number
of shares outstanding during each period (1995 - 2,775,085 shares; 1994 -
2,760,784 shares). Common stock equivalents (Stock Options) did not have a
material dilutive effect on net income per share. The computation of net
income per share of common stock on a fully diluted basis did not result in
any material dilution in 1995 or 1994.
-6-
<PAGE> 7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Net income for the first quarter 1995 was up 32% to $959,669 or $.35 per share
on a 13% increase in sales to $17,684,662 versus first quarter 1994 net income
of $724,387 or $.26 per share on sales of $15,684,271.
The first quarter 1995 net sales increase of 13% or $2 million from the first
quarter of 1994 resulted from an increase in volume of 7%, new products of 3%
and price increases of 3%. New products include the recently acquired
"Prestolock" line of keyless locks, being offered by the Registrant's CCL
Security Products division and new malleable castings products manufactured by
the Registrant's Frazer & Jones division. Demand for the Registrant's
transportation and industrial hardware product lines, served by the
Registrant's Eberhard Manufacturing division and the Registrant's Canadian
Eberhard Hardware Manufacturing, Ltd. subsidiary, remains strong. The
Registrant's Eberhard Manufacturing division established a sales and
distribution facility in Lerma, Mexico in the first quarter 1995 under the
name Sesamee Mexicana, Ltd., a new subsidiary, to expand its market for high
quality security hardware for the transportation and industrial markets in
Central and South America. Sales for the first three months of 1995 to the
underground coal mining industry, serviced by the Frazer & Jones division,
were up slightly from the comparable period a year ago. Sales to the
underground coal mining industry are expected to be less in the second quarter
than the first quarter due to excess coal inventories as the result of the
warm winter. Increased coal production is anticipated in the second half of
the year resulting in increased demand for the Registrant's mine roof
fasteners. Contract malleable casting sales more than doubled from the
comparable three month period a year ago. Sales of custom locks were off
slightly from the comparable period a year ago. Improved sales are expected
for the second and third quarters. The Registrant's construction segment,
consisting of the Thompson Materials division, continues to show improved
sales as compared to the same period a year ago.
The Registrant's gross margin as a percentage of sales for the three months
ended April 1, 1995 was 25% compared to the same period a year ago of 24%.
The gross margin for the first quarter of 1995 increased from the comparable
period a year ago, due to a greater proportion of productive capacity being
utilized to meet expected demand in the second half of 1995.
Selling and administrative expenses were up 7% or $195 thousand for the three
months ended April 1, 1995 as compared to the same period a year ago.
Increases in the first quarter were for normal operating expenses as the
result of increased business activity and increase selling and marketing
activities at the registrants Illinois Lock division and CCL Security Products
division. Overall selling and administrative expenses expressed as a
percentage of sales remained comparable to the three month periods a year ago
at approximately 17%.
Other income for the three months ended April 1, 1995, was down $33 thousand
from the comparable periods a year ago. This was due to the receipt of two
payments of commission income in the first quarter of 1994 versus only one
payment received in the first quarter of 1995. The agreement where the
Registrant receives commission income, as the result of the sale of the Alloy
Foundries malleable business expires in August 1995.
The effective tax rate for the first quarter 1995 was comparable to the same
period a year ago at approximately 36%
-7-
<PAGE> 8
Liquidity and Sources of Capital
Cash flows from operations were $2.264 million for the first three months of
1995 versus $906 thousand in the first quarter of 1994. The increase in net
income coupled with tax refunds more than offset increased inventories. The
Registrant repaid $1.4 million on its short-term line of credit mainly
utilizing proceeds from the sale of land from the discontinued Alloy Foundries
operation.
Inventory increased from the 1994 year-end level by $1.059 million, however,
inventory turns remain comparable at 7 times per year as the result of the
increased sales activity. The Registrant believes inventory levels are
adequate to meet customer requirements and anticipated increased sales
activity. The average day sales in accounts receivable increased to 57 days
for collection versus the end of 1994 collection average of 55 days. The
prime reason for the increase in collection days comes from the Construction
Segment where collections historically are slow. The Registrant continually
monitors collection activity made at this division.
Additions to property plant and equipment were $690 thousand during the first
three months of 1995 versus $457 thousand for the comparable period a year
ago. Total 1995 capital expenditures will be higher than the expected $2.3
million level of depreciation for the year due to an additional $500 thousand
capital improvement project at the Registrant's Frazer & Jones division.
Other Matters
On June 24, 1994, the Registrant settled all claims with both the Beacon
Heights Coalition and the Laurel Park Coalition and the respective complaints
against the Registrant on behalf of the Coalitions were dismissed by
stipulation. No complaints are now pending in the U.S. District Court
involving the Registrant and a final judgement was entered by the U.S.
District Court in the consolidated proceedings on March 17, 1995. An appeal,
however, has been filed by one agency as described in Part II, Item 1 below.
The Registrant continues to actively monitor the situation. It is
management's opinion that the resolution of these matters will not have a
material adverse effect on the Registrant's financial position, operating
results or liquidity.
-8-
<PAGE> 9
PART II
OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS -
In April 1988, Murtha Enterprises Inc. and related parties (collectively
"Murtha"), as the result of a February 1987 suit (docket number N-87-52 PCD)
brought by the U. S. Environmental Protection Agency (the "EPA") and others,
concerning the Beacon Heights and Laurel Park landfills, instituted third-
party actions against approximately 200 companies or individuals including
the Registrant. The underlying suit against Murtha was settled with EPA and
the other parties and the Consent Decree has been approved by the Court.
On September 22, 1988, the EPA filed a complaint against the Registrant and
seven other defendants seeking recovery of present and future response costs
incurred by the United States in conjunction with the Beacon Heights
landfill. The complaint alleged total damages of approximately $1.8 million
($1.3 million actual and $.5 million future). On October 31, 1988 the court
consolidated the EPA action against the Registrant with the other cases under
docket number N-87-52 (PCD).
By complaint dated September 6, 1990, the Beacon Heights Coalition (the
"Beacon Coalition"), a group of parties who have entered into a consent order
with EPA, instituted a direct action against the Registrant and approximately
400 other named parties concerning the Beacon Heights landfill. The Beacon
Coalition claimed that these defendants generated or transported hazardous
substances disposed of at the Beacon Heights landfill, and are therefore
responsible for a share of the Beacon Coalition's response costs.
The Registrant has filed answers to both the EPA Complaint and the Beacon
Coalition Complaint.
In March 1991, a Laurel Park Coalition which did not include the Registrant
entered into Consent Decree and Administrative Order by Consent with the EPA
and the State of Connecticut to remediate the Laurel Park landfill. The
Consent Decree has been approved by the Court.
In May 1991, EPA and the State of Connecticut ("State") each filed a
complaint against the Registrant and three other defendants seeking recovery
of present and future response costs incurred in connection with the Laurel
Park landfill. The EPA claims costs in excess of $1.8 million and the state
claims costs in excess of $2.5 million. On July 1, 1991, the court
consolidated these actions against the Registrant with the other cases under
docket number N-87-52 (PCD). The Registrant filed answers to both of these
complaints.
By order dated February 8, 1994, the court granted a motion filed by
Registrant for judgment on the pleadings against EPA and the state with
respect to each of their claims against Registrant. By motions dated
February 22, 1994 and February 23, 1994, EPA and the State respectively moved
for reconsideration of the court's order, which motions were denied.
By order dated February 8, 1994, the court permitted the Laurel Park
Coalition to file a complaint against eight parties including the Registrant,
which claims were to be assigned for trial if the Coalition filed a
complaint.
On June 24, 1994 , the Registrant settled all claims with both the Beacon
Heights Coalition and the Laurel Park Coalition and the respective complaints
against the Registrant on behalf of the Coalitions were dismissed by
stipulation.
-9-
<PAGE> 10
On March 17, 1995, the U.S. District Count entered a final judgement in the
consolidated proceedings (docket number N-87-52(PCD)) which included the
granting of Registrant's motion for judgement on the pleadings. As a result
of this judgement, no complaints are now pending in the U.S. District Court
involving the Registrant.
On April 17, 1995, the State filed its notice of appeal from this final
judgement with the U.S. District Court. It is likely that the EPA will also
appeal the court's order granting the Registrant's motion for judgement on
the pleadings as embodied in said final judgement.
The Registrant will continue to vigorously pursue its legal interest in this
matter. The Registrant believes that these actions will not have a
materially adverse impact on the Registrant's consolidated financial
position, operating results or liquidity.
There are no other material legal proceedings, other than ordinary routine
litigation incidental to the business, to which either the Registrant or any
of its subsidiaries is a party to or by which any of their property is the
subject.
ITEM 2 CHANGES IN SECURITIES
None
ITEM 3 DEFAULTS UPON SENIOR SECURITIES -
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
None
ITEM 5 OTHER INFORMATION -
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
None
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 thereunto duly authorized.
THE EASTERN COMPANY
(Registrant)
Stedman G. Sweet
DATE: May 12, 1995 ____________________________________
Stedman G. Sweet
President and Chief Executive Officer
Donald E. Whitmore, Jr., Vice
DATE: May 12, 1995 _______________________________
Donald E. Whitmore, Jr., Vice
President and Principal Financial Officer
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> APR-1-1995
<CASH> 3,187,344
<SECURITIES> 0
<RECEIVABLES> 9,974,886
<ALLOWANCES> 359,722
<INVENTORY> 10,582,626
<CURRENT-ASSETS> 25,141,834
<PP&E> 24,636,958
<DEPRECIATION> 11,622,186
<TOTAL-ASSETS> 42,632,846
<CURRENT-LIABILITIES> 7,136,556
<BONDS> 0
<COMMON> 9,009,392
0
0
<OTHER-SE> 21,498,798
<TOTAL-LIABILITY-AND-EQUITY> 42,632,846
<SALES> 17,684,662
<TOTAL-REVENUES> 17,753,821
<CGS> 13,276,799
<TOTAL-COSTS> 13,276,799
<OTHER-EXPENSES> 2,909,548
<LOSS-PROVISION> 32,500
<INTEREST-EXPENSE> 43,645
<INCOME-PRETAX> 1,491,329
<INCOME-TAX> 531,660
<INCOME-CONTINUING> 959,669
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 959,669
<EPS-PRIMARY> .35
<EPS-DILUTED> .34
</TABLE>
