What changed in this filing

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Item 1. Financial Statements

2020-11-09 compared with 2020-08-05 · 125 added, 132 removed, 420 unchanged (38% of the section changed)

3 unchanged sentences

Three Months Ended

Six Months Ended

June 29, 2019

Nine Months Ended

September 28,

$ 179,964,582

8 unchanged sentences

( 5,240,004 )

( 4,414,579 )

Selling and administrative expenses

5 unchanged sentences

( 4,002,548 )

Restructuring costs

( 2,651,877 )

( 2,635,987 )

Operating profit (loss)

( 2,242,207 )

Operating profit

Interest expense

( 2,081,283 )

Income (loss) before income taxes

( 2,431,843 )

Net income (loss)

$ ( 1,888,782 )

Earnings (loss) per Share:

Income before income taxes

Earnings per Share:

Cash dividends per share:

3 unchanged sentences

Three Months Ended

Six Months Ended

June 27, 2020

June 29, 2019

Net income (loss)

( 1,888,782 )

Nine Months Ended

September 28,

Other comprehensive income/(loss):

12 unchanged sentences

( 1,208,342 )

Comprehensive income (loss)

( 1,013,728 )

$ ( 852,399 )

Comprehensive income

See accompanying notes.

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

June 27, 2020

December 28, 2019

Current Assets

10 unchanged sentences

( 46,313,630 )

Property, Plant and Equipment, Net

Patents and other intangibles net of accumulated amortization

4 unchanged sentences

See accompanying notes.

THE EASTERN COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS’ EQUITY

June 27, 2020

December 28, 2019

Current Liabilities

2 unchanged sentences

Other accrued expenses

Current portion of lease liability

Current portion of long-term debt

42 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six Months Ended

June 27, 2020

June 29, 2019

Nine Months Ended

September 28,

Operating Activities

2 unchanged sentences

Unrecognized pension and postretirement benefits

( 1,066,777 )

Goodwill impairment loss

4 unchanged sentences

Accounts receivable

( 1,794,182 )

( 2,330,448 )

Prepaid expenses and other

Accounts payable

( 2,600,966 )

( 1,815,309 )

Accrued compensation

3 unchanged sentences

( 1,511,729 )

( 2,202,622 )

Net cash provided by operating activities

2 unchanged sentences

Business disposition

Business acquisition, net of cash acquired

( 7,172,868 )

( 81,155,753 )

Proceeds from sale of equipment

4 unchanged sentences

( 7,317,684 )

( 83,085,640 )

Financing Activities

Proceeds from long-term borrowings

Principal payments on long-term debt

1 unchanged sentence

( 29,009,769 )

Note Receivable

Issuance of Note Receivable

( 1,251,943 )

Payments Received from Note Receivable

Purchase common stock for treasury

4 unchanged sentences

( 7,472,542 )

( 7,648,700 )

Effect of exchange rate changes on cash

Net change in cash and cash equivalents

( 1,942,437 )

Cash and cash equivalents at beginning of period

3 unchanged sentences

Lease liability

( 10,280,814 )

See accompanying notes.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 27, 2020

October 3, 2020

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 Regulation S-X Item 8-03 and do not include all of the information and footnotes required by generally accepted accounting principles in the United States (“GAAP”) for complete financial statements.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X and do not include all of the information and footnotes required by generally accepted accounting principles in the United States (“GAAP”) for complete financial statements.

Refer to the consolidated financial statements of The Eastern Company (together with its consolidated subsidiaries, the “Company,” “we,” “us” or our”) and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 28, 2019, filed with the Securities and Exchange Commission on March 5, 2020 (the “2019 Form 10-K”), for additional information.

5 unchanged sentences

The Company’s fiscal year is a 52-53-week fiscal year ending on the Saturday nearest to December 31.

References to fiscal 2019 or the 2019 fiscal year mean the 52-week period ended on December 28, 2019 and references to fiscal 2020 or the 2020 fiscal year mean the 53-week period ending on January 2, 2021.

References to 2019 or the 2019 fiscal year mean the 52-week period ended on December 28, 2019 and references to 2020 or the 2020 fiscal year mean the 53-week period ending on January 2, 2021.

In a 52-week fiscal year, each quarter is 13 weeks long.

In a 53-week fiscal year, each of the first two fiscal quarters and the fourth quarter are 13 weeks long, and the third fiscal quarter is 14 weeks long.

References to the second quarter of fiscal 2019, the second fiscal quarter of 2019 or the three months ended June 29, 2019 mean the period from March 31, 2019 to June 29, 2019.

References to the second quarter of fiscal 2020, the second fiscal quarter of 2020 or the three months ended June 27, 2020 mean the 13-week period from March 29, 2020 to June 27, 2020.

References to the six months ended June 29, 2019, the first six months of fiscal 2019 or the first half of fiscal 2019 mean the 26-week period from December 30, 2018 to June 29, 2019.

References to the six months ended June 27, 2020, the first six months of fiscal 2020 or the first half of fiscal 2020 mean the 26-week period from December 29, 2019 to June 27, 2020.

Certain amounts in the 2019 financial statements have been reclassified to conform with the 2020 presentation with no impact or change to previously reported net income or member’s equity.

We expect the effects of the COVID-19 pandemic to adversely impact our financial position, results of operations, and cash flows in fiscal 2020.

The unaudited Condensed Consolidated Financial Statements presented herein reflect our current estimates and assumptions that affect the reported amount of assets and liabilities and related disclosures as of the date of the financial statements and reported amounts of sales and expenses during the reporting periods presented.

Note B - Earnings (Loss) Per Share

The denominators used to calculate earnings (loss) per share are as follows:

References to the third quarter of 2019, the third fiscal quarter of 2019 or the three months ended September 28, 2019 mean the period from June 30, 2019 to September 28, 2019.

References to the third quarter of 2020, the third fiscal quarter of 2020 or the three months ended October 3, 2020 mean the 14-week period from June 28, 2020 to October 3, 2020.

References to the nine months ended September 28, 2019 or the first nine months of fiscal 2019 mean the 39-week period from December 30, 2018 to September 28, 2019.

References to the nine months ended October 3, 2020 or the first nine months of 2020 mean the 40-week period from December 29, 2019 to October 3, 2020.

Certain amounts in the 2019 financial statements have been reclassified to conform with the 2020 presentation with no impact or change to previously reported net income or shareholder’s equity.

Note B – Earnings Per Share

The denominators used to calculate earnings per share are as follow:

Three Months Ended

Six Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Nine Months Ended

September 28,

Weighted average shares outstanding

4 unchanged sentences

Inventories consist of the following components:

June 27, 2020

December 28, 2019

5 unchanged sentences

The Company maintains 12 reporting units, seven of which comprise the goodwill balance.

These seven units have an aggregate carrying amount of goodwill of approximately $75.4 million as of June 27, 2020.

These seven units have an aggregate carrying amount of goodwill of approximately $ 77.8 million as of October 3, 2020.

The Company tests its reporting units for impairment annually in December, or more frequently if events or circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

4 unchanged sentences

The values assigned to the key assumptions represent management’s assessment of future trends in the relevant industry and have been based on historical data from both external and internal sources.

In the second quarter of 2020, the management determined that it was more likely than not that the estimated fair value of Greenwald Industries was below its carrying amount.

In the second quarter of 2020, management determined that it was more likely than not that the estimated fair value of Greenwald Industries was below its carrying amount.

The factors that led to this determination included additional competition, industry movement away from legacy products and intense competition in new mobile payment apps.

1 unchanged sentence

As a result, an independent valuation was conducted which estimated that the carrying value exceeded the fair value by approximately $ 4.0 million.

Management has recognized this impairment charge in the current quarter.

In the second quarter of 2020, management performed additional assessments to determine if there were any events, circumstances or indicators of impairment among the Company’s other reporting units as a result of the operating conditions resulting from the COVID-19 pandemic.

Management concluded that the Company has not experienced any specific indicators of impairment for goodwill among its other reporting units that would require additional impairment tests.

Management recognized this impairment charge in the second quarter.

In the third quarter of 2020, management performed assessments to determine if there were any events, circumstances or indicators of impairment among the Company’s reporting units as a result of the operating conditions resulting from the COVID-19 pandemic.

Management concluded that the Company has not experienced any specific indicators of impairment for goodwill among its reporting units that would require additional impairment tests.

There were no goodwill impairments in the third quarter of 2020.

Note E – Leases

12 unchanged sentences

All options to extend, when it is reasonably certain the option will be exercised, have been included in the calculation of the ROU asset and lease liability.

Currently, the Company has 41 operating leases and one finance lease with an ROU asset and lease liability of $ 11,384,763 as of June 27, 2020.

The finance lease arrangement is immaterial.

Currently, the Company has 36 operating leases and four finance leases with a lease liability of $ 11,248,144 as of October 3, 2020.

The finance lease arrangements are immaterial.

The basis, terms and conditions of the leases are determined by the individual agreements.

The leases do not contain residual value guarantees, restrictions, or covenants that could that could cause the Company to incur additional financial obligations.

The leases do not contain residual value guarantees, restrictions, or covenants that could cause the Company to incur additional financial obligations.

We rent or sublease a part of one real estate property to a third party.

2 unchanged sentences

Total lease expense for each of the next five fiscal years is estimated to be as follows:

2020 - $ 1,471,506 ;

2021 - $ 2,657,481 ;

remainder of 2020 - $ 824,251 ;

2021 - $ 3,011,067 ;

1 unchanged sentence

2023 - $ 1,699,249 ;

The weighted average years is 6 remaining lease term.

2024 - $ 1,223,651 and $ 2,422,753 thereafter.

The weighted average remaining lease term is 6 years.

The interest rate used was 5.0 %.

10 unchanged sentences

The revolving commitment portion has a maturity date of August 30, 2024 .

As of June 27, 2020, the Company has not borrowed any funds on the revolving commitment portion of the facility.

As of October 3, 2020, the Company has not borrowed any funds on the revolving commitment portion of the facility.

The term loan bears interest at a variable rate based on the LIBOR rate plus an applicable margin of 1.25 % to 2.25 %, depending on the Company’s senior net leverage ratio.

3 unchanged sentences

In addition, the Company is required to maintain a fixed charge coverage ratio to be not less than 1.25 to 1.

The Company was in compliance with all of its covenants under the Credit Agreement at June 27, 2020 and through the date of filing this Form 10-Q.

The Company was in compliance with all of its covenants under the Credit Agreement at October 3, 2020 and through the date of filing this Form 10-Q.

On August 30, 2019, the Company entered into an interest rate swap contract with Santander Bank, N.A., with an original notational amount of $ 50,000,000 , which was equal to 50% of the outstanding balance of the term loan on that date.

The Company has a fixed interest rate of 1.44 % on the swap contract and will pay the difference between the fixed rate and LIBOR when LIBOR is below 1.44 % and will receive interest when the LIBOR rate exceeds 1.44 %.

On June 27, 2020, the interest rate for half ($ 48.8 million) of the term portion was 1.67 %, using a one month LIBOR rate, and 2.94 % on the remaining balance ($ 48.8 million) of the term loan based on a one month LIBOR rate.

On October 3, 2020, the interest rate for half ($47.5 million) of the term portion was 1.66 %, using a one month LIBOR rate, and 2.94 % on the remaining balance ($ 47.5 million) of the term loan based on a one month LIBOR rate.

The interest rates under the Credit Agreement and the interest rate swap contract are susceptible to changes to the method of determining LIBOR rates and to the potential phasing out of LIBOR after 2021.

23 unchanged sentences

Under the 2010 Plan and the 2020 Plan, non-qualified stock options granted to participants will have exercise prices determined by the Compensation Committee of the Company’s Board of Directors.

During the first six months of fiscal 2020 and 2019, no stock options or restricted stock were granted that were subject to the meeting of performance measurements.

For the first half of fiscal 2019, the Company used several assumptions which included an expected term of 3.5 years, volatility deviation of 28.88 % and a risk free rate of 2.48 %.

For the first half of fiscal 2020, the Company used several assumptions which included an expected term of 4 .0 years, volatility deviation of 38.62 % and a risk free rate of 0.26 %.

During the first nine months of fiscal 2020 and 2019, no stock options or restricted stock were granted that were subject to the meeting of performance measurements.

For the first nine months of fiscal 2019, the Company used several assumptions which included an expected term of 3.5 to 4 years, volatility deviation of 28.88% to 32.33 % and a risk free rate of 1.42% to 2.48 %.

For the first nine months of fiscal 2020, the Company used several assumptions which included an expected term of 4.0 years, volatility deviation of 38.62 % and a risk free rate of 0.26 % for the purposes of measuring compensation under the Black Scholes Method.

The 2010 Plan and the 2020 Plan also permit the issuance of Stock Appreciation Rights (“SARs”).

The SARs are in the form of an option with a cashless exercise price equal to the difference between the fair value of the Company’s common stock at the date of grant and the fair value as of the exercise date resulting in the issuance of the Company’s common stock.

During the first six months of fiscal 2020, the Company issued 44,000 SARs under the 2020 Plan, and during the first six months of fiscal 2019, 36,000 SARs were issued under the 2010 Plan.

Stock-based compensation expense in connection with SARs previously granted to employees was approximately $ 85,000 and $ 93,000 in the second quarter of 2020 and 2019 respectively and for was approximately $ 195,000 and $ 173,000 in the first six months of fiscal years 2020 and 2019 respectively.

As of June 27, 2020, there were no shares of Company common stock reserved and available for future grant under the 2010 Plan, as it expired and there were 751,864 shares of Company common stock reserved and available for future grant under the 2020 Plan.

During the first nine months of fiscal 2020, the Company issued 44,000 SARs under the 2020 Plan, and during the first nine months of fiscal 2019, 96,000 SARs were issued under the 2010 Plan.

Stock-based compensation expense in connection with SARs previously granted to employees was approximately $ 85,000 and $ 108,000 in the third quarter of 2020 and 2019 respectively and was approximately $ 279,000 and $ 281,000 in the first nine months of fiscal years 2020 and 2019 respectively.

As of October 3, 2020, there were 818,864 shares of Company common stock reserved and available for future grant under the 2020 Plan.

The following tables set forth the outstanding SARs for the period specified:

Six Months Ended

June 27, 2020

Nine Months Ended

October 3, 2020

December 28, 2019

6 unchanged sentences

Outstanding as of

June 27, 2020

October 3, 2020

Weighted- Average Remaining Contractual Life

1 unchanged sentence

Exercisable as of

June 27, 2020

October 3, 2020

Weighted- Average Remaining Contractual Life

2 unchanged sentences

The following tables set forth the outstanding stock grants for the period specified:

Six Months Ended

June 27, 2020

Nine Months Ended

October 3, 2020

December 28, 2019

6 unchanged sentences

Outstanding as of

June 27, 2020

October 3, 2020

Weighted- Average Remaining Contractual Life

1 unchanged sentence

Exercisable as of

June 27, 2020

October 3, 2020

Weighted- Average Remaining Contractual Life

Weighted- Average Exercise Price

As of June 27, 2020, outstanding SARs and grants had an intrinsic value of $ 445,000 .

As of October 3, 2020, outstanding SARs and grants had an intrinsic value of $ 558,000 .

Note H – Share Repurchase Program

2 unchanged sentences

Under this program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The Company did not repurchase any shares under its share repurchase program during the second quarter of 2020.

The Company did not repurchase any shares under its share repurchase program during the third quarter of 2020.

Total Number of

5 unchanged sentences

Under the Plans or

Balance as of March 28, 2020

March 29, 2020 - June 27, 2020

Balance as of June 27, 2020

June 28, 2020 – October 3, 2020

Balance as of October 3, 2020

Note I – Revenue Recognition

1 unchanged sentence

The Company records revenues based on a five-step model in accordance with FASB Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers.” The Company has defined purchase orders as contracts in accordance with ASC Topic 606.

For its customer contracts, the Company identifies its performance obligations, which is delivering goods or services, determining the transaction price, allocating the contract transaction price to the performance obligations (when applicable), and recognizes the revenue when (or as) the performance obligation is transferred to the customer.

For its customer contracts, the Company identifies its performance obligations, which are delivering goods or services, determines the transaction price, allocates the contract transaction price to the performance obligations (when applicable), and recognizes the revenue when (or as) the performance obligation is transferred to the customer.

A good or service is transferred when the customer obtains control of that good or service.

19 unchanged sentences

The Company will adopt ASU 2019-12 in 2021.

On March 27, 2020, President Trump signed into law the $2 trillion bipartisan Coronavirus Aid, Relief, and Economic Security Act (H.R.

748) (“The CARES Act”).

On March 27, 2020, the $2 trillion bipartisan Coronavirus Aid, Relief, and Economic Security Act (H.R.

748) (“the CARES Act” became law).

The CARES Act includes a variety of economic and tax relief measures intended to stimulate the economy, including loans for small businesses, payroll tax credits/deferrals, and corporate income tax relief.

2 unchanged sentences

The Company had taxable income in 2018 and 2019, thus we would only benefit from this item of CARES Act relief to the extent we incur a tax net operating loss in 2020 that can be carried back.

As of June 27, 2020, a tax net operating loss is not expected for taxable year 2020.

As of October 3, 2020, a tax net operating loss is not expected for taxable year 2020.

In addition, this item of CARES Act relief increased the positive evidence supporting utilization of our gross deferred tax assets due to available income in carryback years;

11 unchanged sentences

The Company will also continue to assess the effect of state level tax relief provisions as enacted, such as state net operating loss rule changes and conformity to the federal interest, depreciation and charitable contribution deduction changes.

The total amount of unrecognized tax benefits could increase or decrease within the next 12 months for a number of reasons, including the closure of federal, state and foreign tax years by expiration of the statute of limitations and the recognition and measurement considerations under FASB ASC Topic 740, “Income Taxes.” There have been no significant changes to the amount of unrecognized tax benefits during the three months ended June 27, 2020.

The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits will not increase or decrease significantly over the next twelve months.

4 unchanged sentences

The Company also provides health care and life insurance for retired salaried employees in the United States who meet specific eligibility requirements.

Significant disclosures relating to these benefit plans for the first half of fiscal years 2020 and 2019 are as follows:

Significant disclosures relating to these benefit plans for the first nine months of fiscal years 2020 and 2019 are as follows:

Pension Benefits

Three Months Ended

Six Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Nine Months Ended

September 28,

Interest cost

7 unchanged sentences

Net periodic benefit cost (benefit)

$ ( 104,415 )

Postretirement Benefits

Three Months Ended

Six Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Nine Months Ended

September 28,

Interest cost

Expected return on plan assets

Gain on significant event

Amortization of prior service cost

1 unchanged sentence

Net periodic benefit cost (benefit)

$ ( 204,434 )

$ ( 219,823 )

The Company’s funding policy with respect to its qualified plans is to contribute at least the minimum amount required by applicable laws and regulations.

In fiscal year 2020, the Company expects to contribute $ 2,690,000 into its pension plans and $ 50,000 into its postretirement plan.

As of June 27, 2020, the Company has made contributions of approximately $ 400,000 into its pension plans, has contributed $ 15,000 to its postretirement plan and will make the remaining contributions as required during the remainder of fiscal the year.

As of October 3, 2020, the Company has made contributions of approximately $ 400,000 into its pension plans, has contributed $ 10,000 to its postretirement plan and will make the remaining contributions as required during the remainder of fiscal the year.

The Company delayed its required pensions payments, as permitted, under the CARES Act until the fourth quarter of 2020.

The Company has a contributory savings plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”) covering substantially all U.S.

4 unchanged sentences

Three Months Ended

Six Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Nine Months Ended

September 28,

Regular matching contribution

2 unchanged sentences

Total contributions for the period

The non-discretionary contribution of $ 550,286 made in the six months ended June 27, 2020 was accrued for and expensed in the prior fiscal year.

The non-discretionary contribution of $ 550,286 made in the nine months ended October 3, 2020 was accrued for and expensed in the prior fiscal year.

Note L – Segment Information

Financial information by segment is as follows:

For the third quarter of 2020, financial information by segment is as follows:

Three Months Ended

Six Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Nine Months Ended

September 28,

Sales to unaffiliated customers:

Industrial Hardware

$ 128,249,908

$ 115,321,597

Security Products

5 unchanged sentences

Security Products

( 3,237,527 )

( 2,293,298 )

Metal Products

1 unchanged sentence

Operating Profit (loss)

( 2,242,207 )

Interest expense

( 1,434,217 )

$ ( 2,431,843 )

Note M - Recent Accounting Pronouncements

12 unchanged sentences

The Company has established credit limits for customers and monitors their balances to mitigate the risk of loss.

As of October 3, 2020, there was one significant concentration of credit risk with a customer, who has receivables representing 13 % of our total accounts receivable.

One single customer represented more than 10 % of the Company’s net accounts receivable as of December 28, 2019.

The maximum exposure to credit risk is primarily represented by the carrying amount of the Company’s accounts receivable.

1 unchanged sentence

The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s debt, which bears interest at variable rates based on the LIBOR rate plus a margin spread of 1.25 % to 2.25 %.

The Company has an interest rate swap with a notional amount of $ 48,750,000 on June 27, 2020, to convert a portion the borrowing under the Credit Agreement from variable to fixed rates.

The Company has an interest rate swap with a notional amount of $ 47,500,000 on October 3, 2020, to convert a portion the borrowing under the Credit Agreement from variable to fixed rates.

The valuation of this swap is determined using the one month LIBOR rate index and mitigates the Company’s exposure to interest rate risk.

2 unchanged sentences

Currency Exchange Rate Risk

The Company’s currency exposure is concentrated in the Canadian dollar, Mexican peso, New Taiwan dollar, Chinese RMB and the Hong Kong dollar.

The Company’s currency exposure is concentrated in the British pound, Canadian dollar, Mexican peso, New Taiwan dollar, Chinese RMB and the Hong Kong dollar.

Because of the Company’s limited exposure to any single foreign market, any currency gains or losses have not been material and are not expected to be material in the future.

As a result, the Company does not attempt to mitigate its foreign currency exposure through the acquisition of any speculative or leveraged financial instruments.

Note O - Divestiture

In June 2020, the Company completed the divestiture of its subsidiary, Canadian Commercial Vehicles Corporation to 1252256 B.C.

for $ 1.3 million in a promissory note.

Under the terms of the agreement, 1252256 B.C.

acquired the stock of our manufacturing facility in Kelowna, British Columbia at book value.

Note O – Business Acquisition

Effective August 10, 2020 the Company acquired certain assets of Hallink, RSB Inc.

(“Hallink”) including accounts receivable, inventories, furniture, fixtures and equipment, intellectual property rights, assumption of certain liabilities and rights existing under all sales and purchase agreements.

Hallink is a leader in innovative injection blow mold tooling and is a leading supplier of blow molds and change parts to the food, beverage, healthcare and chemical industry.

Hallink specializes in the design, development and manufacture of 2-step stretch blow molds, and related components for the stretch blow molding industry offering integrated turnkey solutions to its customers worldwide.

Hallink is included in the Industrial Hardware segment of the Company from the date of the acquisition.

The cost of the acquisition of Hallink was approximately $ 7,173,000 .

The above acquisition was accounted for under ASU 2014-18, Business Combinations (Topic 805).

The acquired business is included in the consolidated operating results of the Company from the effective date of the acquisition.

The excess of the cost of Hallink over the fair market value of the net assets acquired of $ 2,302,000 has been recorded as goodwill.

In connection with the above acquisition, the Company recorded the following intangible assets:

Asset Class/Description

Weighted-Average Period in Years

Patents, technology, and licenses

Customer relationships

Intellectual property

Non-compete agreements

There is no anticipated residual value relating to these intangible assets.

Neither the actual results nor the pro forma effects of the acquisition of Hallink are material to the Company’s financial statements.

Note P – Subsequent Events

Except as provided below, the Company evaluated its June 27, 2020 unaudited condensed consolidated financial statements for subsequent events through the date the financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements.

In July 2020, the Company signed an Asset Purchase Agreement to acquire the assets of and assume the liabilities of Hallink RSB Inc.

for approximately $ 7.0 million in cash.

The closing is scheduled to take place in or around August 2020.

Hallink RSB Inc.

is a manufacturer of PET blow mold tooling operating from its manufacturing facility in Ontario, Canada.

The Company evaluated its October 3, 2020 unaudited condensed consolidated financial statements for subsequent events through the date the financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements