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 SEPTEMBER 28, 2002
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 September 28, 2002
----- ------------------------------------
Common Stock, No par value 3,634,299
-1-
PART I
FINANCIAL INFORMATION
THE EASTERN COMPANY AND SUBSIDIARIES
ITEM I CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS
September 28, 2002 December 29, 2001
------------------ -----------------
CURRENT ASSETS
Cash and cash equivalents $ 8,840,283 $ 4,955,020
Investment in common stock 728,733 850,017
Accounts receivable, less allowance:
2002 - $251,000; 2001 - $342,000 11,513,212 10,814,017
Inventories 15,929,923 18,590,847
Prepaid expenses and other current assets 1,875,845 1,690,917
Deferred income taxes 640,200 640,200
------------- -------------
Total Current Assets 39,528,196 37,541,018
--------------------
Property, plant and equipment 41,398,955 40,323,624
Accumulated depreciation (16,683,161) (14,337,979)
------------- -------------
24,715,794 25,985,645
Prepaid pension cost 5,098,597 5,321,110
Goodwill 10,648,429 10,603,638
Other assets, net of accumulated amortization 2,309,890 2,444,643
------------- -------------
TOTAL ASSETS $ 82,300,906 $ 81,896,054
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,377,173 $ 3,471,951
Accrued compensation 1,985,032 982,464
Other accrued expenses 1,694,812 2,066,734
Current portion of long-term debt 8,751,165 3,388,662
------------- -------------
Total Current Liabilities 16,808,182 9,909,811
-------------------------
Deferred federal income taxes 3,015,000 3,126,500
Long-term debt, less current portion 17,237,661 25,013,906
Accrued postretirement benefits 2,792,160 2,735,910
Accrued rate swap obligation 1,212,665 1,054,420
Shareholders' Equity
Preferred Stock, no par value
Authorized shares - 2,000,000
(No shares issued)
Common Stock, no par value:
Authorized Shares - 25,000,000
Issued and outstanding shares:
2002-3,634,299; 2001-3,629,185
excluding 1,652,320 shares held in treasury 910,763 839,155
Accumulated other comprehensive (loss)/income:
Foreign currency translation (795,941) (1,156,515)
Derivative financial instruments (727,665) (632,420)
Unrealized holding (loss)/gain on investment in common stock (11,812) 60,972
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(1,535,418) (1,727,963)
Retained earnings 41,859,893 40,944,315
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TOTAL SHAREHOLDERS' EQUITY 41,235,238 40,055,507
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 82,300,906 $ 81,896,054
============= =============
See accompanying notes.
-2-
THE EASTERN COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Nine Months Ended Three Months Ended
Sept. 28, 2002 Sept. 29, 2001 Sept. 28, 2002 Sept. 29, 2001
-------------- -------------- -------------- --------------
Net sales $61,652,944 $63,918,185 $20,040,682 $20,551,161
Interest income 53,803 92,896 13,403 24,632
----------- ----------- ----------- -----------
61,706,747 64,011,081 20,054,085 20,575,793
Cost of products sold 46,153,532 47,798,692 14,464,027 15,950,291
----------- ----------- ----------- -----------
15,553,215 16,212,389 5,590,058 4,625,502
Selling and administrative expenses 10,966,287 10,392,996 4,054,823 3,148,444
Interest expense 1,322,108 1,780,011 437,526 540,151
Goodwill amortization - 594,040 - 198,461
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 3,264,820 3,445,342 1,097,709 738,446
Income taxes 1,151,152 1,213,983 419,666 209,174
----------- ----------- ----------- -----------
NET INCOME $ 2,113,668 $ 2,231,359 $ 678,043 $ 529,272
=========== =========== =========== ===========
Net income per share:
Basic $ 0.58 $ 0.62 $ 0.19 $ 0.15
Diluted $ 0.57 $ 0.61 $ 0.19 $ 0.15
Cash dividends per share $ 0.33 $ 0.33 $ 0.11 $ 0.11
See accompanying notes.
-3-
THE EASTERN COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
Sept. 28, 2002 Sept. 29, 2001
-------------- --------------
OPERATING ACTIVITIES:
Net income $ 2,113,668 $ 2,231,359
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,699,443 3,272,665
Loss on sales of equipment and other assets - 488
Postretirement benefits other than pensions 56,250 (25,000)
Provision for losses on accounts receivable (93,065) (18,418)
Issuance of Common Stock for directors' fees 71,608 100,882
Changes in operating assets and liabilities:
Accounts receivable (619,603) 1,276,511
Inventories 2,615,100 (201,334)
Prepaid expenses (72,230) (21,832)
Prepaid pension 222,513 (105,403)
Accounts payable 642,565 (866,988)
Accrued expenses 1,281,753 (309,541)
Other assets (323,338) (146,924)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,594,664 5,186,465
INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (1,091,775) (1,546,338)
Other (2,241) -
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (1,094,016) (1,546,338)
FINANCING ACTIVITIES:
Principal payments on long-term debt (2,413,399) (2,080,905)
Proceeds from sales of Common Stock - 23,438
Purchases of Common Stock for treasury - (23,432)
Dividends paid (1,198,090) (1,199,822)
----------- -----------
NET CASH USED BY FINANCING ACTIVITIES (3,611,489) (3,280,721)
Effect of exchange rate changes on cash (3,896) (17,717)
NET CHANGE IN CASH AND CASH EQUIVALENTS 3,885,263 341,689
Cash and Cash Equivalents at Beginning of Period 4,955,020 4,541,706
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,840,283 $ 4,883,395
=========== ===========
-4-
THE EASTERN COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Nine Months Ended Three Months Ended
Sept. 28, 2002 Sept. 29, 2001 Sept. 28, 2002 Sept. 29, 2001
-------------- -------------- -------------- --------------
Net income $2,113,668 $2,231,359 $ 678,043 $ 529,272
Other comprehensive income items --
Foreign currency translation 360,574 (203,842) (25,487) (237,153)
Cumulative effect of accounting change
for derivative financial instruments,
net of income taxes of $265,000 - (400,756) - -
Change in fair value of derivative financial
instruments, net of income tax benefit:
2002 - $63,000 and $76,000 respectively; (95,245) - (113,549) -
2001 - $230,000 and $175,000 respectively - (338,140) - (250,136)
Unrealized holding loss on investment in common
stock, net of income tax benefit of
$48,500 and $53,000 respectively (72,784) - (79,122) -
---------- ---------- ---------- ----------
Comprehensive income $2,306,213 $1,288,621 $ 459,885 $ 41,983
========== ========== ========== ==========
-5-
THE EASTERN COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 28, 2002
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 in the United States for complete financial statements. Refer to the
Company's consolidated financial statements and notes thereto included in its
Form 10-K for the year ended December 29, 2001 for additional information.
The accompanying condensed consolidated financial statements are unaudited.
However, in the opinion of management, all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of the results of
operations for interim periods have been reflected therein. Operating results
for interim periods are not necessarily indicative of the results that may be
expected for the full year.
The condensed balance sheet as of December 29, 2001 has been derived from the
audited consolidated balance sheet at that date.
Note B - Earnings Per Share
- ---------------------------
The denominators used in the earnings per share computations follow:
Nine Months Ended Three Months Ended
Sept. 28, 2002 Sept. 29, 2001 Sept 28, 2002 Sept. 29, 2001
-------------- -------------- ------------- --------------
Basic:
Weighted average shares outstanding 3,630,644 3,633,174 3,632,046 3,635,430
Contingent shares outstanding - (11,250) - (11,250)
--------- --------- --------- ---------
Denominator for basic earnings per share 3,630,644 3,621,924 3,632,046 3,624,180
========= ========= ========= =========
Diluted:
Weighted average shares outstanding 3,630,644 3,633,174 3,632,046 3,635,430
Contingent shares outstanding - (11,250) - (11,250)
Dilutive stock options 66,407 58,517 - 24,534
--------- --------- --------- ---------
Denominator for diluted earnings per share 3,697,051 3,680,441 3,632,046 3,648,714
========= ========= ========= =========
Note C - Inventories
- --------------------
The components of inventories follow:
September 28, 2002 December 29, 2001
------------------ -----------------
Raw materials and component parts $ 7,056,956 $ 8,228,364
Work in process 3,759,462 4,390,818
Finished goods 5,113,505 5,971,665
------------ ------------
$ 15,929,923 $ 18,590,847
============ ============
-6-
THE EASTERN COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 28, 2002
Note D - Segment Information
- ----------------------------
Segment financial information follows:
NINE MONTHS ENDED THREE MONTHS ENDED
Sept 28, 2002 Sept 29, 2001 Sept 28, 2002 Sept 29, 2001
------------- ------------- ------------- -------------
Revenues:
Sales to unaffiliated customers:
Industrial Hardware $21,844,325 $22,022,936 $ 6,941,910 $ 6,610,316
Security Products 27,920,380 27,294,370 9,426,059 9,359,413
Metal Products 11,888,239 14,600,879 3,672,713 4,581,432
----------- ----------- ----------- -----------
61,652,944 63,918,185 20,040,682 20,551,161
General corporate 53,803 92,896 13,403 24,632
----------- ----------- ----------- -----------
$61,706,747 $64,011,081 $20,054,085 $20,575,793
=========== =========== =========== ===========
Income Before Income Taxes:
Industrial Hardware $ 2,775,821 $ 3,053,409 $ 976,348 $ 846,827
Security Products 3,184,933 2,404,967 1,211,838 1,007,068
Metal Products (188,489) 1,254,856 (400,323) 127,163
----------- ----------- ----------- -----------
Operating Profit 5,772,265 6,713,232 1,787,863 1,981,058
General corporate expenses (1,190,440) (1,487,879) (257,731) (702,461)
Interest expense (1,317,005) (1,780,011) (432,423) (540,151)
----------- ----------- ----------- -----------
$ 3,264,820 $ 3,445,342 $ 1,097,709 $ 738,446
=========== =========== =========== ===========
Note E - FASB Statement 142 - Goodwill and Other Intangible Assets
- ------------------------------------------------------------------
Effective December 30, 2001, the Company adopted FASB Statement 142, Goodwill
and Other Intangible Assets. Under the new standard, goodwill is no longer
amortized but rather subjected to annual impairment tests; other intangibles
continue to be amortized over their useful lives. The Company recently
completed its initial impairment review and determined that there is no
impairment.
The changes in the carrying amount of goodwill for the six months ended
September 28, 2002, follow:
Balance as of December 29, 2001 $10,603,638
Goodwill acquired 50,735
Change due to foreign currency translation (5,944)
-----------
Balance as of September 28, 2002 $10,648,429
===========
Goodwill amortization for the three and nine month periods ended September
29, 2001 were $198,461 and $594,040, respectively. If the provisions of
Statement No. 142 had been applied effective December 31, 2000 then the net
income for the Company would have been $648,349 or $.18 per diluted share and
$2,587,783 or $.70 per diluted share for the three and nine month periods
ended September 29, 2001.
-7-
Note F - FASB Statement 133 - Accounting for Derivative Instruments and Hedging
Activities
- -------------------------------------------------------------------------------
Effective December 31, 2000, the Company adopted FASB Statement 133, Accounting
for Derivative Instruments and Hedging Activities. The statement requires the
Company to recognize all derivatives in the balance sheet at fair value.
Further, derivatives that are not hedges are adjusted to fair value through
operations. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives are either offset against the change in
fair value of assets, liabilities, or firm commitments through operations or
recognized in other comprehensive income until the hedged item is recognized in
operations. The adoption of Statement No. 133 resulted in a charge to
comprehensive income for the cumulative effect of accounting change of $400,756
in the first quarter of 2001.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company makes estimates and assumptions that may materially affect reported
amounts and disclosures. These relate to valuation allowances for the
collectibility of accounts receivable and for excess and obsolete inventories,
accruals for pensions and other postretirement benefits (including forecasted
future cost increases and returns on plan assets), provisions for depreciation
(estimating useful lives), and, on occasion, accruals for contingent losses. The
Company is also subject to various risks and uncertainties that may cause actual
results to differ from estimated results, such as changes within our industry
segments, in the overall economy, competition, litigation and legislation.
Recent Developments
Effective October 1, 2002 the Company acquired all of the issued and outstanding
stock of Canadian Commercial Vehicles Corporation (CCV) for cash of
approximately $70,000 and the assumption of approximately $130,000 of debt,
which the Company paid upon closing. CCV will be established as a Canadian
Subsidiary of The Eastern Company, located in Kelowna, British Columbia, Canada.
CCV manufactures lightweight sleeper boxes used in Class 8 trailer trucks. The
effects of this acquisition on the Company's consolidated financial position and
operation results are not material.
In addition, subsequent to the close of the third quarter, the Company paid down
approximately $2.5 million on the revolving credit portion of its debt. The
remainder of the revolving credit loan is expected to be refinanced prior to its
expiration on July 1, 2003.
Results of Operations
Net income per share for the third quarter of 2002 was $678 thousand or $.19 per
diluted share on sales of $20.0 million compared to $529 thousand or $.15 per
diluted share on sales of $20.6 million in the third quarter of 2001. As part of
our normal accounting procedures, we review accrual provisions, inventories, and
accounts receivable on a regular basis. Earnings in the third quarter had a net
favorable impact of $.13 per diluted share as a result of normal adjustments
relating to inventory and various accruals, as well as, legal expenses relating
to patent applications, and bad debt write-offs. Net income for the first nine
months of 2002 was $2.1 million or $.57 per diluted share on sales of $61.7
million as compared to the first nine months of 2001 of $2.2 million or $.62 per
diluted share on sales of $63.9 million.
Sales for the third quarter 2002 were down 3% compared to the same period a
year ago. New product sales contributed 4% and volume of existing products
decreased 7%. Sales for the first nine months of 2002 were down 4% compared to
the same period a year ago. Volume of existing products was down 7% while new
product sales were up 3%.
-8-
The Industrial Hardware segment's third quarter sales were up 5% compared to
the third quarter of 2001. New product sales increased 8% while volume of
existing products decreased 3%. Sales for the first nine months of 2002 were
down 1% compared to the same period a year ago. New product sales
increased 7% while sales volume of existing products was down 8%. New products
include pushbutton locking systems for use on utility truck bodies, rotary
locks with cables for tonneau covers and door closures for school and courtesy
buses. Sales of heavy hardware to the tractor-trailer industry were down 24%
for the first nine months of 2002 as compared to the same period a year ago.
However, sales of our heavy hardware in the third quarter increased 12% over
the comparable period a year ago, this trend is expected to continue through
the fourth quarter. Sales of our school and courtesy bus products were up 26%
for the first nine months of the year as compared to the first nine months of
2001. Sales of industrial hardware are off 11% from prior year levels while
truck and utility body hardware sales were comparable to prior year levels.
The lower sales in the industrial hardware segment is reflective of the
overall softness in the economy, however, we anticipate an improvement in
business during the fourth quarter of 2002.
The Security Products segment's sales were up 1% in the third quarter of 2002
as compared to the third quarter of 2001. Price increases were up 1%, new
products sales were up 2% and volume of existing products was down 2%. Sales
for the first nine months of 2002 were up 2% compared to the first nine months
of 2001. Price increases were up 1%, new product sales increased 2% and volume
of existing products was down 1%. Sales of new products include a three-dial
lock, drawer slides, and luggage tags. Sales of locks to the computer industry
increased 45% in the third quarter of 2002 as compared to the comparable
quarter of 2001, while sales for the first nine months of 2002 increased 29%
as compared to the first nine months of 2001. Sales of locks to the electronic
industries were up 1% for the first nine months of 2002 as compared to the
first nine months of 2001. Sales of locks to the luggage industry remain below
prior year levels, however, it is improving gradually and is expected to
continue to improve in the fourth quarter of 2002. Sales of security products
to the commercial laundry industry increased 6% as compared to the first nine
months of 2001. Despite the current economic environment, sales increases were
up across the majority of the product lines in the Security Product Segment,
with smart card systems accounting for the majority of the increase. The
Company continues to pursue new business opportunities through aggressive
pricing, improved customer service, intense marketing and a commitment to new
product development.
The Metal Products segment's sales were down 20% in the third quarter 2002 as
compared to the third quarter of 2001. Volume of existing products was down
19% and prices decreased 1%. Sales for the first nine months were down 19%
compared to the first nine months of 2001 all attributable to a decrease in
volume. Sales of our contract casting products for use in the commercial and
industrial construction industry decreased 20% for the first nine months of
2002 as compared to the first nine months of 2001. Foreign competition from
China and Mexico with low labor rates and favorable foreign exchange rates has
created pricing pressure and reduced demand for our contract casting products.
Beginning in the third quarter of 2002, the Company began to phase out of its
low margin contract casting business. Effective 2003, the Metal Product
segment will concentrate sales activity in its proprietary mine roof anchor
systems. However, the Company will continue to offer contract castings to
customers with acceptable profit margins. Sales of our mine roof anchors were
down 17% for the first nine months of 2002 as compared to 2001. Demand for our
proprietary mine roof anchors remains soft as a result of a mild winter
reducing coal usage by utility companies. To combat reduction in our contract
casting and mine roof anchor products the Company continues to develop ductile
iron casting capabilities in order to compete in the market for smaller sized
ductile iron castings. Also, the Company is currently developing a mine roof
anchor system to compete with resin bolt systems.
Gross margin as a percentage of sales for the three and nine months ended
September 28, 2002 were approximately 28% and 25% respectively compared to 25%
and 23% in the comparable periods a year ago. The change in gross margin is
primarily the result of product mix and the aforementioned adjustments relating
to inventory and various accruals.
-9-
Selling and administrative expenses were up 29% or $906 thousand and 6% or
$573 thousand respectively for the three and nine months ended September 28,
2002 compared to the same periods a year ago. The increase in selling and
administrative expenses for both the three and nine month periods was mainly
due to higher legal and professional fees, associated with disallowed patent
applications and other professional services, and increased travel expenses
compared to the same periods of 2001.
Interest expense decreased by $103 thousand or 19% for the third quarter of
2002 and $458 thousand or 26% for nine months as compared to the same periods
in 2001. This decrease in interest expense was due to lower debt and lower
interest rates.
Earnings before income taxes for the three months ended September 28, 2002
were up $359 thousand or 49% and for nine months ended September 28, 2002 were
down 5% or $181 thousand as compared to the same periods of 2001. The
Industrial Hardware segment was up 15% or $130 thousand and down 9% or $278
thousand for the three and nine month periods as compared to the same periods
a year ago. The increase in the third quarter was primarily the result of
increased sales in the quarter compared to the prior year quarter while the
decrease for the first nine months was due to lower sales compared to the
prior year period. The Security Products segment earnings before income taxes
for the three and nine month periods ended September 28, 2002 were up 20% or
$205 thousand and 32% or $780 thousand respectively compared to the comparable
periods a year ago. This increase was the result of increased sales volume and
the elimination of goodwill amortization expense as required by FASB Statement
142, "Goodwill and Other Intangible Assets" and efficiency gains achieved
through the consolidation of our manufacturing operations of CCL Security
Products into the Illinois Lock facility in Wheeling Illinois. The Metal
Products segment earnings were down 415% or $527 thousand and 115% or $1.4
million for the third quarter and first nine months of 2002 over the same
periods a year ago. Lower sales volume in both contract casting and mine roof
anchor systems resulted in the lower earnings.
Liquidity and Sources of Capital
Cash flows from operations were $8.6 million for the first nine months of 2002
versus $5.2 million for the same period in 2001. The change in cash flows
resulted from changes in the level of sales at all locations and the
associated timing differences for collections of accounts receivable and
payments of liabilities and changes in inventories. Cash flow from operations
coupled with cash on hand at the beginning of the year was sufficient to fund
capital expenditures, debt service and dividend payments.
Additions to property, plant and equipment were $1.1 million during the first
nine months of 2002 versus $1.5 million for the comparable period a year ago.
Total 2002 capital expenditures are not expected to exceed the $3.0 million
level of depreciation for the year.
Total inventories as of September 28, 2002 were $15.9 million or $2.7 million
lower than year-end 2001. The inventory turnover ratio of 3.9 turns at the end
of the third quarter was slightly higher than the prior year third quarter of
3.7 turns and the year end ratio of 3.3 turns. Accounts receivable increased
by $700 thousand from year end 2001. The average day's sales in accounts
receivable for the third quarter of 2002 was 52 days compared to the 54 days
in the third quarter of 2001.
Cash flow from operating activities and funds available under the revolving
credit portion of the Company's loan agreement should be sufficient to cover
future working capital requirements. The Company borrowings against the
revolving credit totaled approximately $5 million as of September 28, 2002,
all of which has been classified on the balance sheet under "Current portion
of long-term debt". Subsequent to the end of the third quarter the Company
paid down approximately $2.5 million of the revolving credit. The Company
intends to refinance the remainder of its revolving credit loan prior to its
expiration on July 1, 2003. The Company is also in the process of refinancing
its long-term debt to reduce quarterly payment requirements.
-10-
A summary of the Company's contractual obligations and commitments as of
September 28, 2002 (amounts in millions), follows:
Obligations and
Commitments 2003 2004 2005 2006 2007 Thereafter
----------- ---- ---- ---- ---- ---- ----------
Revolver $5.0 $ - $ - $ - $ - $ -
Long-term debt 3.7 4.2 12.2 0.2 0.2 0.4
Operating Leases 0.3 0.3 0.3 0.3 0.2 -
---- ---- ----- ---- ---- ----
Total $9.0 $4.5 $12.5 $0.5 $0.4 $0.4
Other Matters
No other matters are currently pending.
Note: The preceding information contains forward looking statements which
reflect the Company's current expectations regarding its future operating
performance and achievements and is subject to certain risks and uncertainties
that could cause actual results to differ materially from those set forth in
such statements. Such risks and uncertainties include changing customer
preferences, lack of success of new products, loss of customers, competition,
increased raw material prices and problems associated with foreign sourcing of
parts and products. The Company is not obligated to update or revise the
aforementioned statements for new developments.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in market risk from what was reported in
Part I, Item 7A of the 2001 Annual Report on Form 10-K, which is incorporated
herein by reference.
ITEM 4 CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Within the 90 days prior to the date of this report, the Company carried out
an evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of
the Company's disclosure controls and procedures. The Company's disclosure
controls and procedures are designed to ensure that information required to be
disclosed by the Company in its periodic SEC filings is recorded, processed
and reported within the time periods specified in the SEC's rules and forms.
Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective in timely alerting them to material information relating to the
Company (including its consolidated subsidiaries) required to be included in
the Company's periodic SEC filings.
Changes in Internal Controls
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation.
-11-
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS -
- ------ -------------------
There are no significant pending legal proceedings, other than
ordinary routine litigation incidental to the Company's
business, to which either the Registrant or any of its
subsidiaries is a party or of which any of their property is
the subject.
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
- ------ -----------------------------------------
None
ITEM 3 DEFAULTS UPON SENIOR SECURITIES-
- ------ -------------------------------
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
See the information set forth in Part II, Item 4 of the Form
10-Q of the Company for the quarterly period ended March 30,
2002, which is incorporated herein by reference.
ITEM 5 OTHER INFORMATION
- ------ -----------------
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) 99(1) The Registrant's Annual Report on Form 10-K for
the fiscal year ended December 29, 2001 is
incorporated herein by reference.
99(2) The Registrant's Quarterly Report on Form 10-Q
for the quarterly period ended March 30, 2002
in incorporated herein by reference.
99(3) Certifications pursuant to 18 USC 1350, as
adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) 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)
DATE: October 24, 2002 /s/Leonard F. Leganza
---------------- ---------------------
Leonard F. Leganza
President and Chief Executive Officer
DATE: October 24, 2002 /s/John L. Sullivan, III
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John L. Sullivan, III
Vice President, Secretary and Treasurer
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CERTIFICATIONS
I, Leonard F. Leganza, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Eastern Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
DATE: October 24, 2002 /s/Leonard F. Leganza
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Leonard F. Leganza
President and Chief Executive Officer
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I, John L. Sullivan III, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Eastern Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
DATE: October 24, 2002 /s/John L. Sullivan, III
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John L. Sullivan, III
Vice President, Secretary and Treasurer
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EXHIBIT 99(3)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with The Eastern Company (the "Company") Quarterly Report on Form
10-Q for the quarter ended September 28, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Leonard F. Leganza,
certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906
of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15 (d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
DATE: October 24, 2002 /s/Leonard F. Leganza
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Leonard F. Leganza
President and Chief Executive Officer
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with The Eastern Company (the "Company") Quarterly Report on Form
10-Q for the quarter ended September 28, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, John L. Sullivan III,
certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906
of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15 (d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
DATE: October 24, 2002 /s/John L. Sullivan, III
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John L. Sullivan, III
Vice President, Secretary and Treasurer
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