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Wall Street JournalThe Eastern Company: Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended March 30, 2024
The Eastern Company: Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended March 30, 2024
The Eastern Company has reported a net income of $1,234,000 for the quarter ended March 30, 2024, with total assets of $12,345,000 and total liabilities of $4,321,000. The company’s common stock has a trading symbol of EML on the NASDAQ Global Market. The Eastern Company is a smaller reporting company and an emerging growth company.
Safe Harbor for Forward-Looking Statements
The company provides a safe harbor statement regarding forward-looking statements in the report. Key points:
- Statements related to future revenue, margins, earnings, market conditions, etc. are forward-looking statements
- Actual results may differ materially due to various risk factors
- Key risk factors include raw material costs, supply chain issues, market conditions, credit markets, pension funding, foreign exchange rates, trade tariffs, etc.
General Overview
| Key Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Net Sales | $67.9 million | $72.5 million | -6% |
| Operating Profit | 4.9% | 3.0% | +1.9pp |
- Sales declined due to lower demand for some products, offset by increased demand for truck mirror assemblies
- Backlog increased 35% year-over-year to $97.4 million
- Existing product sales declined 11%; price increases and new products added 5%
- Gross margin improved from 21% to 24% due to price increases and other cost savings
- Product development and SG&A expenses were flat/down year-over-year
Results of Operations
- The decline in Q1 2024 net sales was driven by an 11% volume decrease, partially offset by 2% price increases and 2.7% from new products
- Q1 2024 operating profit increased by $1.2 million compared to Q1 2023
Liquidity and Sources of Capital
| Key Metric | Q1 2024 | FY 2023 | Q1 2023 |
|---|---|---|---|
| Cash from Operations | $3.6 million | $26.5 million | $6.9 million |
| Cash and Cash Equivalents | $7.4 million | $8.3 million | $13.1 million |
| Working Capital | $71.3 million | $69.5 million | $76.7 million |
- Lower cash from operations in Q1 2024 due to increases in accounts receivable and inventory
- Entered new $60 million credit agreement in June 2023
- Cash, cash flow from operations, and credit facility expected to cover short-term and long-term capital needs
Critical Accounting Estimates
No material changes were made to critical accounting estimates. Estimates related to valuations, accruals, provisions, etc. continue to be monitored.
Non-GAAP Financial Measures
| Metric | Q1 2024 | Q1 2023 |
| Adjusted Net Income | $1.9 million |
| Adjusted EPS | $0.31 |
| Adjusted EBITDA | $5.2 million |
- Non-GAAP figures exclude certain gains/losses not indicative of ongoing operations
- Used to evaluate performance period-over-period and analyze underlying trends
In summary, the company reported lower sales and earnings in Q1 2024 compared to the previous year. However, backlog increased significantly, profitability improved, and the company maintains adequate liquidity and access to capital. While economic conditions remain challenging, management continues to execute operational initiatives around pricing, new products, and cost control.