Exhibit 99.1
  
FOR IMMEDIATE RELEASE
 
April 28, 2021
 
 
 
THE EASTERN COMPANY REPORTS FIRST QUARTER 2021 RESULTS
 
NET SALES INCREASE 12% TO A NEW RECORD $73.1 MILLION; FIRST QUARTER 2021
 
EARNINGS MORE THAN DOUBLED TO $0.93 PER DILUTED SHARE
 
 
●
The launch of new products at Big 3 Precision and Velvac, as well as strong demand across many of our core markets, drove first quarter 2021 net sales to $73.1 million, a record in Eastern’s more than 160-year history and an increase of 12% compared with the first quarter of 2020.
 
●
Gross margin expansion of 1.2% in the first quarter of 2021 compared to the first quarter of 2020 reflects higher sales and our success in passing on most raw material cost increases in many of our businesses.
 
●
Earnings per diluted share in the first quarter of 2021 were $0.93, an increase of 102% over 2020, due to strong sales growth and a one-time gain of $1.4 million, net of tax, associated with the combination of our Eberhard and Illinois Lock businesses.
 
●
Cash flow from operations remained strong at $2.1 million for the first quarter 2021, an increase of 40% over the first quarter 2020, despite the $4.5 million increase of accounts receivable associated with the increase in sales in the first quarter of 2021.
 
●
Our balance sheet continued to strengthen with net leverage of 2.8x, down from 3.0x at the end of fiscal year 2020.
 
NAUGATUCK, CT – April 28, 2021 - The Eastern Company (“Eastern”) (NASDAQ:EML), an industrial manufacturer of unique engineered solutions serving industrial markets, today announced the results of operations for the first fiscal quarter ended April 3, 2021.
 
President and CEO August Vlak commented, “Sales in the first quarter of 2021 increased 12% compared to the first quarter of 2020, primarily due to product launches at Big 3 Precision and Velvac, as well as strong demand across a broad range of commercial vehicle markets, including class 8 trucks, service bodies and light trucks, recreational vehicles, and electric vehicle manufacturers. Additional sales from the acquisition of Hallink, completed in the second quarter of 2020, partly offset the loss of sales from the divestitures of Canadian Commercial Vehicles Corporation and Sesamee Mexicana in the second and fourth quarters of last year, respectively. As a result of strong demand across many of our markets, our backlog at the end of the first quarter 2021 remains strong at $98.0 million, an increase of $24.4 million, or 33% over the backlog at the end of the first quarter 2020.”
 
Mr. Vlak continued, “In the first quarter, our businesses demonstrated exceptional resilience in the face of significant disruptions in our supply chains and increases in raw material prices. All our businesses were impacted by the interruptions in transportation, causing significant delays in shipments. Moreover, freight costs and prices of certain raw materials, including steel and resins, rose throughout the quarter. Many of our businesses have been able to pass on most of these increases. We believe that purchasing adjustments and pricing recovery will help offset some of the impact of these trends in the remainder of the year.
 
 
 
 
Mr. Vlak observed, “Earnings of $0.93 per diluted share represent a 102% increase over earnings of $0.46 per diluted share in the first quarter of 2020. First quarter 2021 earnings include one-time gains associated with the consolidation of Eberhard and Illinois Lock. Adjusted earnings of $0.71 per diluted share reflect an increase of 54% over the first quarter of 2020. In addition, our adjusted EBITDA margin in the first quarter of 2021 was 12%, compared to 10% in the first quarter of 2020. (Please refer to our statement on non-GAAP measures and the attached schedules for a complete reconciliation between GAAP and non-GAAP measures.) We believe that this quarter is beginning to show the earnings potential of our Engineered Solutions businesses, including Big 3 Precision, Eberhard, and Velvac, despite lingering supply chain challenges.”
 
Mr. Vlak continued, “Our balance sheet remains strong. As of April 3, 2021, we have cash and cash equivalents of $17.5 million and an untapped $20 million revolving line of credit. Our net leverage ratio is 2.8x, and our fixed charge coverage ratio is 2.4x, both of which comfortably 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 sustain its growth.”
 
First Quarter 2021 Financial Results
 
Net sales in the first quarter of 2021 increased to $73.1 million from $65.3 million in the first quarter of 2020. Sales in the Engineered Solutions segment grew by 19% to $61.8 million in the first quarter of 2021 from $51.8 million in the first quarter of 2020. Sales in the Diversified Products segment decreased by 16% in the first quarter of 2021 compared to the first quarter of 2020, primarily due to the divestitures of Canadian Commercial Vehicles Corporation and Sesamee Mexicana last year.
 
Net income for the first quarter of 2021 increased by 102% to $5.8 million, or $0.93 per diluted share, from $2.9 million, or $0.46 per diluted share, in the first quarter of 2020. Operating profit margin in the Engineered Products segment improved to 10% of sales in the first quarter 2021 from 7% of sales in the first quarter of 2020. Operating profit margin in the Diversified Products segment fell to -1% of sales in the first quarter of 2021 compared to breakeven in the first quarter of 2020.
 
Conference Call and Webcast
 
The Eastern Company will host a conference call to discuss its results for the first quarter of 2021 and other matters on Wednesday, May 12, 2021 at 11:00 AM Eastern Time. Participants can access the conference call by phone at 888-506-0062 (toll free in US & Canada) or 973-528-0011 (international). Participants can also join via the web at https://www.webcaster4.com/Webcast/Page/1757/41050
 
About The Eastern Company
 
The Eastern Company manages industrial businesses that design, manufacture and sell unique engineered solutions to industrial markets, focusing on industries that offer long-term macroeconomic growth opportunities. The Company operates across two reporting segments – Engineered Solutions and Diversified Products -- from locations in the U.S., Canada, Mexico, U.K., Taiwan and China. More information on the Company can be found at www.easterncompany.com.
 
 
 
 
Safe Harbor for Forward-Looking Statements
 
Statements in this document about our future expectations, beliefs, goals, plans or prospects constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and the rules, regulations and releases of the Securities and Exchange Commission. Any statements that are not statements of historical fact, including statements containing the words “would”, “should”, “may,” “will,” "believes," “estimates,” "intends", "continues," "reflects," "plans," "anticipates," "expects," “potential,” “opportunities” and similar expressions, should also be considered to be forward-looking statements. Readers should not place undue reliance on these forward-looking statements, which are based upon management's current beliefs and expectations. These forward-looking statements are subject to risks and uncertainties, and actual results might differ materially from those discussed in, or implied by, the forward-looking statements. The risks and uncertainties that could cause actual results or events to differ materially from those indicated by such forward-looking statements include, but are not limited to, effects of the COVID-19 pandemic and the measures being taken to limit the spread and resurgence of COVID-19, including supply chain disruptions, delays in delivery of our products to our customers, impact on demand for our products, reductions in production levels, increased costs, including costs of raw materials, the impact on global economic conditions, the availability, terms and cost of financing, including borrowings under credit arrangements or agreements, and risks associated with employees working remotely or operating with reduced workforce; the scope and duration of the COVID-19 pandemic, including the extent of any resurgences and how quickly and to what extent normal economic activity can resume; the timing of the development and distribution of effective vaccines or treatment of COVID-19, changing customer preferences, lack of success of new products, loss of customers, cybersecurity breaches, changes in competition in our markets, and increased prices for raw materials resulting from tariffs on imported goods or otherwise. There are important, additional factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including those set forth in our reports and filings with the Securities and Exchange Commission. We undertake no obligation to update, alter, or otherwise revise any forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events, or otherwise.
 
Non-GAAP Financial Measures
 
The non-GAAP financial measures we provide in this release should be viewed in addition to, and not as an alternative for, results prepared in accordance U.S. GAAP. A reconciliation of non-GAAP financial measures referenced in this release to the nearest GAAP results is provided with this release.
 
To supplement the consolidated financial statements prepared in accordance with U.S. GAAP, we have presented adjusted earnings per share, adjusted EBITDA and adjusted EBITDA margin, which are considered non-GAAP financial measures. The non-GAAP financial measures presented may differ from similarly titled non-GAAP financial measures presented by other companies, and other companies may not define these non-GAAP financial measures in the same way. These measures are not substitutes for their comparable GAAP financial measures, such as net sales, net income, diluted earnings per common share, or other measures prescribed by U.S. GAAP, and there are limitations to using non-GAAP financial measures.
 
Adjusted earnings per share is defined as diluted earnings per share excluding, when they occur, the impacts of impairment losses, losses on sale of subsidiaries, transaction expenses, factory relocation expenses and restructuring costs. We believe that adjusted earnings per share provides important comparability of underlying operational results, allowing investors and management to access operating performance on a consistent basis.
 
 
 
 
Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, and depreciation and amortization and excluding, when they occur, the impacts of impairment losses, losses on sale of subsidiaries, transaction expenses, factory relocation expenses and restructuring expenses. Adjusted EBITDA is a tool that can assist management and investors in comparing our performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our underlying operations.
 
Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of net sales.
 
Management uses such measures to evaluate performance period over period, to analyze the underlying trends in our business including our business segments, to assess our performance relative to our competitors, and to establish operational goals and forecasts that are used in allocating resources. These financial measures should not be considered in isolation from, or as a replacement for, GAAP financial measures.
 
We believe that presenting non-GAAP financial measures in addition to GAAP financial measures provides investors greater transparency to the information used by our management for its financial and operational decision-making. We further believe that providing this information better enables our investors to understand our operating performance and to evaluate the methodology used by management to evaluate and measure such performance.
 
 
Investor Relations Contacts
 
The Eastern Company
August Vlak or John L. Sullivan III
203-729-2255
 
 
 
  
THE EASTERN COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
 
 
Three Months Ended
 
 
 
April 3,
2021
 
 
March 28,
2020
 
Net sales
 $73,097,875 
 $65,325,616 
Cost of products sold
  (55,839,321)
  (50,663,943)
Gross margin
  17,258,554 
  14,661,673 
 
    
    
Product development expense
  (838,825)
  (775,444)
Selling and administrative expenses
  (10,485,520)
  (10,024,958)
Operating profit
  5,934,209 
  3,861,271 
 
    
    
Interest expense
  (702,859)
  (827,664)
Other income
  2,426,741 
  744,793 
Income before income taxes
  7,658,091 
  3,778,400 
 
    
    
Income taxes
  (1,817,264)
  (882,583)
Net income
 $5,840,827 
 $2,895,817 
 
    
    
Earnings per share:
    
    
Basic
 $0.93 
 $0.46 
 
    
    
Diluted
 $0.93 
 $0.46 
 
    
    
Cash dividends per share:
 $0.11 
 $0.11 
 
 
 
 
 
THE EASTERN COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
April 3,
2021
 
 
January 2,
2021
 
 
 
(unaudited)
 
 
 
 
Current Assets
 
 
 
 
 
 
Cash and cash equivalents
 $17,464,669 
 $16,101,635 
Marketable securities
  29,224 
  28,951 
Accounts receivable, less allowances: 2021 - $618,000; 2020 - $545,000
  42,228,264 
  37,749,129 
Inventories
  53,960,426 
  53,112,393 
Current portion of note receivable
  459,863 
  398,414 
Prepaid expenses and other assets
  5,341,214 
  4,345,250 
    Total Current Assets
  119,483,660 
  111,735,772 
 
    
    
Property, Plant and Equipment
  86,539,328 
  88,198,093 
     Accumulated depreciation
  (47,244,599)
  (48,246,120)
     Property, Plant and Equipment, Net
  39,294,729 
  39,951,973 
 
    
    
Goodwill
  76,921,385 
  76,895,015 
Trademarks
  5,404,284 
  5,404,284 
Patents and other intangibles, net of accumulated amortization
  25,958,715 
  27,096,006 
Long term notes receivable, less current portion
  1,547,503 
  1,677,277 
Right of Use Assets
  12,882,498 
  12,768,027 
Other Assets
  122,714,385 
  123,840,609 
 
    
    
TOTAL ASSETS
 $281,492,774 
 $275,528,354 
 
 
 
 
THE EASTERN COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
April 3,
2021
 
 
January 2,
2021
 
 
 
(unaudited)
 
 
 
 
Current Liabilities
 
 
 
 
 
 
Accounts payable
 $25,357,557 
 $23,507,719 
Accrued compensation
  2,520,725 
  3,675,223 
Other accrued expenses
  4,785,793 
  4,121,568 
Current portion of lease liability
  3,039,689 
  2,923,761 
Current portion of long-term debt
  7,062,689 
  6,437,689 
Total Current Liabilities
  42,766,453 
  40,665,960 
 
    
    
Deferred income taxes
  2,899,074 
  2,899,075 
Other long-term liabilities
  1,144,127 
  1,144,127 
Lease liability
  9,871,835 
  9,883,168 
Long-term debt, less current portion
  80,468,737 
  82,255,803 
Accrued postretirement benefits
  1,168,262 
  1,185,139 
Accrued pension cost
  32,443,297 
  33,188,623 
Total Liabilities
  170,761,785 
  171,221,895 
 
    
    
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
  31,779,299 
  31,501,041 
        Issued: 9,003,230 shares in 2021 and 8,996,625 shares in 2020
    
    
        Outstanding: 6,253,501 shares in 2021 and 6,246,896 shares in 2020
    
    
Treasury Stock: 2,749,729 shares in 2021 and 2,749,729 shares in 2020
  (20,537,962)
  (20,537,962)
Retained earnings
  128,356,468 
  122,840,131 
Accumulated other comprehensive loss:
    
    
       Foreign currency translation
  874,810 
  953,864 
       Unrealized loss on marketable securities, net of tax
  (4,302)
  (4,507)
Unrealized loss on interest rate swap, net of tax
  (974,045)
  (1,387,085)
Unrecognized net pension and postretirement benefit costs, net of tax
  (28,763,279)
  (29,059,023)
     Accumulated other comprehensive loss
  (28,866,816)
  (29,496,751)
Total Shareholders’ Equity
  110,730,989 
  104,306,459 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 $281,492,774 
 $275,528,354 
 
 
 
 
THE EASTERN COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 
 
Three Months Ended
 
 
 
April 3,
2021
 
 
March 28,
2020
 
Operating Activities
 
 
 
 
 
 
Net income
 $5,840,827 
 $2,895,817 
Adjustments to reconcile net income to net cash provided by operating activities:
    
    
Depreciation and amortization
  2,192,622 
  2,055,782 
Unrecognized pension and postretirement benefits
  (674,262)
  (678,305)
(Gain) loss on sale of equipment and other assets
  (1,600,288)
  (437,446)
Provision for doubtful accounts
  73,097 
  156,286 
Stock compensation expense
  278,258 
  238,293 
Changes in operating assets and liabilities:
    
    
Accounts receivable
  (4,551,399)
  (2,273,864)
Inventories
  (1,015,663)
  (994,546)
Prepaid expenses and other
  (744,138)
  341,582 
Other assets
  (156,726)
  (415,415)
Accounts payable
  2,063,182 
  2,766,829 
Accrued compensation
  (1,159,489)
  (1,585,976)
Other accrued expenses
  1,554,036 
  (564,572)
Net cash provided by operating activities
  2,100,057 
  1,504,465 
 
    
    
Investing Activities
    
    
Marketable securities
  (273)
  11,151 
Payments received from notes receivable
  68,325 
  — 
Proceeds from sale of equipment
  1,994,017 
  445,212 
Purchases of property, plant and equipment
  (919,589)
  (828,115)
Net cash provided by/used in investing activities
  1,142,480 
  (371,752)
 
    
    
Financing Activities
    
    
Principal payments on long-term debt
  (1,162,045)
  (1,221,423)
Lease payments
  (9,875)
  — 
Purchase common stock for treasury
  — 
  (368,864)
Dividends paid
  (684,702)
  (686,614)
Net cash used in financing activities
  (1,856,622)
  (2,276,901)
 
    
    
Effect of exchange rate changes on cash
  (22,881)
  (343,436)
Net change in cash and cash equivalents
  1,363,034 
  (1,487,624)
 
    
    
Cash and cash equivalents at beginning of period
  16,101,635 
  17,996,505 
Cash and cash equivalents at end of period
 $17,464,669 
 $16,508,881 
 
    
    
Supplemental disclosure of cash flow information:
    
    
Interest
 $685,520 
 $827,664 
Income taxes
  21,100 
  21,000 
 
    
    
Non-cash investing and financing activities
    
    
Right of use asset
  114,471 
  (489,822)
Lease liability
  (104,595)
  489,822 
 
 
 
 
THE EASTERN COMPANY AND SUBSIDIARIES
RECONCILIATION OF ONE-TIME ITEMS FROM GAAP TO NON-GAAP EPS
 
($000's)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
April 3,
2021
 
 
March 28,
2020
 
 
 
 
 
 
 
 
Net Income as reported per generally accepted accounting principles (GAAP)
 $5,841 
 $2,896 
 
    
    
 
    
    
Earnings Per Share as reported under generally accepted accounting principles (GAAP):
    
    
Basic
 $0.93 
 $0.46 
Diluted
 $0.93 
 $0.46 
 
    
    
Adjustments for one-time items:
    
    
 
    
    
Gain on sale of Eberhard Hardware Ltd building, net of tax
  (1,353)A
  - 
 
    
    
Total adjustments for one-time items
    
    
(Non-GAAP)
  (1,353)
  - 
 
    
    
Adjusted Net Income (related to one-time items)
 $4,488 
 $2,896 
 
    
    
 
    
    
Adjusted earnings per share (related to one-time items); (Non-GAAP)
    
    
Basic
 $0.72 
 $0.46 
Diluted
 $0.71 
 $0.46 
 
A) Gain on sale of Eberhard Hardware Ltd building
 
 
 
 
THE EASTERN COMPANY AND SUBSIDIARIES
RECONCILIATION OF ONE-TIME ITEMS FROM GAAP TO NON-GAAP EBITDA
 
($000's)
 
 
 
 
 
 
 
 
 
 
 
 
April 3,
2021
 
 
March 28,
2020
 
 
 
 
 
 
 
 
Net Income/(loss) as reported per generally accepted accounting principles (GAAP)
 $5,841 
 $2,896 
 
    
    
Interest expense
  703 
  828 
 
    
    
Provision for income taxes
  1,817 
  883 
 
    
    
Depreciation and amortization
  2,193 
  2,056 
 
    
    
Gain on sale of Eberhard Hardware Ltd Building
  (1,841)A
  - 
 
    
    
 
    
    
Adjusted EBITDA
 $8,713 
 $6,662 
 
A) Gain on sale of Eberhard Hardware Ltd building