Mon, 16 May 2022

  • Net sales from continuing operations grew to a record $69.0 million in the first quarter of 2022, an increase of 12% compared to net sales from continuing operations in the first quarter of 2021. Customer orders were strong and our backlog at the end of the first quarter of 2022 was up 23% to $85.8 million from $69.7 million at the end of the first quarter of 2021.
  • Gross margin was 21% in the first quarter of 2022, compared to 25% in the first quarter of 2021, as raw materials costs accelerated and our latest round of price increases will not take effect until May and June of 2022.
  • Earnings per diluted share from continuing operations for the first quarter of 2022 were $0.43, compared to $0.90 for the first quarter of 2021. Adjusted for one-time items, earnings per diluted share from continuing operations for the first quarter of 2022 were $0.46, compared to adjusted earnings per diluted share of $0.69 in the first quarter of 2021 (See Non-GAAP Financial Measures). The change in earnings was primarily the result of an increase in raw material costs and freight rates partially offset by higher sales volumes.

NAUGATUCK, CT / ACCESSWIRE / May 9, 2022 / The Eastern Company ('Eastern, or the Company') (NASDAQ:EML), an industrial manufacturer of unique engineered solutions serving commercial transportation, logistics, and other industrial markets, today announced the results of operations for the first fiscal quarter ended April 2, 2022.

President and CEO August Vlak commented, 'Net sales from continuing operations for the first quarter of 2022 increased 12% compared to the first quarter of 2021, a new record quarterly sales level for Eastern. We believe this sustained growth demonstrates that our businesses are effectively executing on the very favorable long-term demand trends across our core markets. Sales grew as a result of the increasing momentum of our recently launched truck mirror program and strengthening demand from distributors and aftermarket customers. ACT Research, a commercial vehicle and transportation markets research firm, estimates that Class-8 truck builds will reach 220,000 in 2022, an increase of 12% over 2021, and projects that 265,000 new Class-8 trucks will be built in 2023. Moreover, the increase in new automotive product launches, including several electric vehicle launches, drove an approximately 16% increase in sales of returnable transport packaging products in the first quarter of 2022 compared to the first quarter of 2021. We expect demand for returnable transport packaging to continue to increase throughout the remainder of this year and beyond, as the number of planned new vehicle launches grows to 53 in 2023 and 63 in 2024, according to BofA Global Research.'

'Our backlog at the end of the first quarter of 2022 reached $85.8 million, an increase of 23% over the backlog at the end of the first quarter of 2021. The increase in backlog was primarily due to increased demand from our commercial vehicle and truck accessories customers and reflects a return to strong demand for our products across most of our core markets.'

'Gross margin in the first quarter of 2022 was negatively impacted by raw material costs. The growth rate of raw material costs accelerated in the first quarter of 2022. For example, the cost of nickel increased by 41% between the first quarter of 2021 and the first quarter of 2022; the cost of most common forms of cold-rolled steel increased by 21%, and copper and zinc costs increased by 22% and 33%, respectively. We have initiated new rounds of price increases for our customers in each of our businesses in order to mitigate the impact of these most recent cost increases. These new prices go into effect in May and June of this year.'

Mr. Vlak continued, 'In the first quarter of 2022, our balance sheet reflected the growth of our business, with increases in both accounts receivables and inventories. We continued to navigate a rapidly evolving operating environment and to prioritize meeting the strong and growing demand from our customers by increasing our inventories and adding new suppliers. We expect to see inventories move to a normalized level in the second half of the year. Further, our accounts receivable days and inventory turns both moved in the right direction in the first quarter of 2022.'

Mr. Vlak concluded, 'We are optimistic about the remainder of this year and our longer-term future. Over the last few years, our team has effectively managed supply pressures, driven better throughput and continuously managed prices. Our team is committed, resilient, prepared for the challenges ahead and positioned to capture the opportunities in front of us. We all share a great sense of optimism and urgency to demonstrate what we are capable of doing.'

Summary of First Quarter 2022 Financials

Net sales in the first quarter of 2022 increased 12% to $69.0 million from $61.8 million for the corresponding period in 2021. Net sales of existing products increased 4% in the first quarter of 2022 compared to the corresponding period in 2021. Price increases and new products increased net sales by 8% in the first quarter of 2022 compared to the corresponding period in 2021.

Our gross margin in the first quarter of 2022 reflects the rapid increase in raw material prices. Cost of products sold increased by $8.2 million, or 18%, in the first quarter of 2022 compared to the corresponding period in 2021. The increase is primarily due to higher sales volume, as well as increases in the cost of materials and freight rates.

Selling and administrative expenses increased by $0.9 million, or 10%, in the first quarter of 2022 when compared to the corresponding period in 2021, primarily due to investments in sales and marketing, higher commissions, and other selling costs.

Other income decreased $1.9 million in the first quarter of 2022 from the first quarter of 2021, primarily due to a gain on the sale of the Eberhard Hardware Ltd. building of $1.8 million in the first quarter of 2021 that did not reoccur in the first quarter of 2022.

Net income from continuing operations for the first quarter of fiscal 2022 was $2.7 million, or $0.43 per diluted share, compared to net income of $5.7 million, or $0.90 per diluted share, for the comparable period in 2021. After excluding the first quarter 2022 loss on the sale of our Wheeling, IL property, net of tax, adjusted net income from continuing operation for the first quarter of 2022 was $2.9 million, or $0.46 per diluted share, compared to adjusted net income from continuing operations of $4.3 million, or $0.69 per diluted share, for the first quarter of 2021, after excluding the first quarter 2021 gain on sale of the Eberhard Hardware Ltd property, net of tax.

Conference Call and Webcast

The Eastern Company will host a conference call to discuss its results for the first quarter and other matters on May 10, 2022, 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), using access code 607845.Participants can also join via the web at https://www.webcaster4.com/Webcast/Page/1757/44794.

About The Eastern Company

The Eastern Company manages industrial businesses that design, manufacture and sell unique engineered solutions to markets. Eastern's businesses operate in industries that offer long-term macroeconomic growth opportunities. The Company operates 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 the scope and duration of the COVID-19 pandemic, including the timing of the distribution of COVID-19 vaccines and rates of vaccination, the extent of resurgences, the emergence of additional variants of COVID-19 and economic effects of the COVID-19 pandemic (and how quickly and to what extent normal economic activity can resume), 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 a reduced workforce. Other factors include, but are not limited to: risks associated with doing business overseas, including fluctuations in exchange rates and the inability to repatriate foreign cash, the impact on cost structure and on economic conditions as a result of actual and threatened increases in trade tariffs and the impact of political, economic and social instability; restrictions on operating flexibility imposed by the agreement governing our credit facility; the inability to achieve the savings expected from global sourcing of materials; the impact of higher raw material and component costs, particularly steel, plastics, scrap iron, zinc, copper and electronic components; lower-cost competition; our ability to design, introduce and sell new products and related components; market acceptance of our products; the inability to attain expected benefits from acquisitions or the inability to effectively integrate such acquisitions and achieve expected synergies; domestic and international economic conditions, including the impact, length and degree of economic downturns on the customers and markets we serve and more specifically conditions in the automotive, construction, aerospace, energy, oil and gas, transportation, electronic, and general industrial markets; costs and liabilities associated with environmental compliance; the impact of climate change or terrorist threats and the possible responses by the U.S. and foreign governments; failure to protect our intellectual property; cyberattacks; materially adverse or unanticipated legal judgments, fines, penalties or settlements. 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, except as required by law.

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 with 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 Net Income from Continuing Operations, and Adjusted Earnings Per Diluted Share from Continuing Operations, 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 U.S. 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 Net Income from Continuing Operations is defined as net income from continuing operations excluding, when incurred, certain one-time costs arising from the impacts of impairment losses, gains/losses on the sale of subsidiaries and facilities, transaction expenses primarily relating to acquisitions and divestitures, factory start-up costs, factory relocation expenses and restructuring costs. Adjusted Net Income from Continuing Operations 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 operating performance.

Adjusted Earnings Per Diluted Share from Continuing Operations is defined as earnings per diluted share from continuing operations excluding, when incurred, certain per share one-time costs arising from, for example, the impacts of impairment losses, gains/losses on the sale of subsidiaries, property and facilities, transaction expenses primarily relating to acquisitions and divestitures, factory start-up costs, factory relocation expenses and restructuring costs. We believe that Adjusted Earnings Per Diluted Share from Continuing Operations provides important comparability of underlying operational results, allowing investors and management to access operating performance on a consistent basis.

Adjusted EBITDA from Continuing Operations is defined as net income from continuing operations before interest expense, provision for income taxes, and depreciation and amortization and excluding, when incurred, the impacts of certain one-time costs arising from impairment losses, gains/losses on sale of subsidiaries and facilities, transaction expenses primarily relating to acquisitions and divestitures, factory start-up costs, factory relocation expenses and restructuring expenses. Adjusted EBITDA from Continuing Operations 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.

Management uses such measures to evaluate performance period-over-period, to analyze the underlying trends in our business, 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, U.S. GAAP financial measures.

We believe that presenting non-GAAP financial measures in addition to U.S. 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)

THE EASTERN COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

THE EASTERN COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

THE EASTERN COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Reconciliation of Non-GAAP Measures
Adjusted Net Income and EPS from Continuing Operations Calculation
For the Three Months ended April 2, 2022 and April 3, 2021

Reconciliation of Non-GAAP Measures
Adjusted EBITDA from Continuing Operations Calculation
For the Three Months ended April 2, 2022 and April 3, 2021
($000's)

A) Gain on sale of Eberhard Hardware Ltd building
B) Loss on sale of ILC building in Wheeling, IL

SOURCE: The Eastern Company



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https://www.accesswire.com/700508/The-Eastern-Company-Reports-First-Quarter-2022-Results-Record-Net-Sales-From-Continuing-Operations-an-Increase-of-12-Over-Prior-Year-Period

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