3 unchanged sentences
Three Months Ended
−Removed: April 2, 2022
−Removed: April 3, 2021
+Added: Six Months Ended
+Added: $ 138,554,702
+Added: $ 123,021,025
Cost of products sold
1 unchanged sentence
( 47,270,990 )
+Added: ( 107,991,200 )
+Added: ( 93,535,153 )
Product development expense
1 unchanged sentence
( 2,156,372 )
−Removed: Selling and administrative expenses
( 2,105,942 )
+Added: Selling general and administrative expenses
( 10,141,815 )
+Added: ( 9,375,537 )
+Added: ( 20,007,429 )
+Added: ( 18,319,931 )
Operating profit
3 unchanged sentences
( 1,193,877 )
+Added: ( 2,075,002 )
+Added: ( 2,601,424 )
Net income from continuing operations
Discontinued Operations (see note B)
−Removed: Income from operations of discontinued operations
−Removed: Income tax expense
−Removed: Income from discontinued operations
+Added: Gain from operations of discontinued operations
+Added: Loss on classification as held for sale
+Added: ( 10,583,078 )
+Added: ( 10,583,078 )
+Added: Income tax (expense) benefit
+Added: Gain (loss) from discontinued operations
+Added: ( 7,229,134 )
+Added: ( 7,067,665 )
+Added: Net income (loss)
+Added: $ ( 4,473,774 )
Earnings per share from continuing operations:
−Removed: Earnings per share from discontinued operations:
−Removed: Total earnings per share:
+Added: Earnings (loss) per share from discontinued operations:
+Added: Total earnings (loss) per share:
Cash dividends per share:
3 unchanged sentences
Three Months Ended
−Removed: April 2, 2022
−Removed: April 3, 2021
+Added: Six Months Ended
+Added: Net income (loss)
+Added: $ ( 4,473,774 )
Other comprehensive income (loss):
Change in foreign currency translation
−Removed: Change in fair value of interest rate swap, net of tax cost of:
( 1,173,177 )
−Removed: 2021 - $ 130,501
+Added: Change in fair value of interest rate swap, net of tax cost (benefit) of:
+Added: 2022 - $ 93,659 and $ 427,294 respectively;
+Added: 2021 - $ 26,535 and $ 157,036 respectively
Change in pension and postretirement benefit costs, net of taxes of:
−Removed: 2022 - $ 92,235 ;
+Added: 2022 - $ 92,235 and $ 184,470 respectively;
+Added: 2021 - $ 107,961 and $ 200,155 respectively
+Added: Total other comprehensive income (loss)
+Added: Comprehensive income (loss)
$ ( 3,679,567 )
−Removed: Total other comprehensive income
−Removed: Comprehensive income
See accompanying notes.
1 unchanged sentence
CONDENSED CONSOLIDATED BALANCE SHEETS
−Removed: April 2, 2022
January 1, 2022
22 unchanged sentences
CONDENSED CONSOLIDATED BALANCE SHEETS
−Removed: April 2, 2022
January 1, 2022
12 unchanged sentences
Long-term debt, less current portion
−Removed: Accrued other postretirement benefits
+Added: Accrued postretirement benefits
Accrued pension cost
32 unchanged sentences
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
−Removed: Three Months Ended
−Removed: April 2, 2022
−Removed: April 3, 2021
+Added: Six Months Ended
Operating Activities
−Removed: income from discontinued operations
+Added: gain (loss) from discontinued operations
+Added: ( 7,067,665 )
Income from continuing operations
−Removed: Adjustments to reconcile net income to net cash provided by (used in) operating activities:
+Added: Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization
Unrecognized pension and postretirement benefits
+Added: ( 1,722,275 )
Loss (gain) on sale of equipment and other assets
7 unchanged sentences
( 5,237,113 )
+Added: ( 5,763,475 )
Prepaid expenses and other
( 1,228,182 )
+Added: ( 3,057,099 )
Accounts payable
1 unchanged sentence
( 1,711,069 )
−Removed: ( 1,116,703 )
Other accrued expenses
+Added: ( 1,812,968 )
Net cash (used in) provided by operating activities
4 unchanged sentences
Purchases of property, plant and equipment
+Added: ( 1,140,728 )
+Added: ( 1,810,434 )
Net cash provided by investing activities
6 unchanged sentences
Purchase common stock for treasury
+Added: ( 1,423,378 )
Dividends paid
+Added: ( 1,372,101 )
+Added: ( 1,375,509 )
Net cash provided by (used in) financing activities
6 unchanged sentences
Net change in cash and cash equivalents
−Removed: ( 1,400,357 )
Cash and cash equivalents at beginning of period
4 unchanged sentences
Lease liability
−Removed: ¹ includes cash from assets held for sale of $0.1 million as of April 2, 2022 and $1.5 million as of April 3, 2021
+Added: ( 1,595,081 )
+Added: ¹ includes cash from assets held for sale of $0.1 million as of July 2, 2022 and $1.6 million as of July 3, 2021
+Added: See accompanying notes
THE EASTERN COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
−Removed: April 2, 2022
Note A – Basis of Presentation
9 unchanged sentences
In a 52-week fiscal year, each quarter has 13 weeks.
−Removed: References to the first quarter of 2021, the first fiscal quarter of 2021 or the three months ended April 3, 2021 mean the period from January 3, 2021 to April 3, 2021.
−Removed: References to the first quarter of 2022, the first fiscal quarter of 2022 or the three months ended April 2, 2022, mean the 13-week period from January 2, 2022 to April 2, 2022.
−Removed: Certain amounts in the 2021 financial statements have been reclassified to conform with the 2022 presentation with no impact or change to previously reported net income or shareholder’s equity.
+Added: References to the second quarter of 2021, the second fiscal quarter of 2021 or the three months ended July 3, 2021 mean the period from April 4, 2021 to July 3, 2021.
+Added: References to the second quarter of 2022, the second fiscal quarter of 2022 or the three months ended July 2, 2022, mean the 13-week period from April 3, 2022 to July 2, 2022.
+Added: Certain amounts in the financial statements have been reclassified to conform with the current presentation with no impact or change to previously reported net income or shareholder’s equity.
Note B – Discontinued Operations
In the second quarter of 2021, the Company determined that the companies included in our former Diversified Products segment no longer fit with our long-term strategy and the Company initiated the process of selling the companies within the Diversified Products segment.
−Removed: Selling the companies within this segment will allow management to focus on our core capabilities and offerings.
+Added: We believe that selling the companies within this segment will allow management to focus on our core capabilities and offerings.
The former Diversified Products segment met the criteria to be held for sale and furthermore, we determined that the assets held for sale qualify for discontinued operations.
10 unchanged sentences
Three Months Ended
−Removed: April 2, 2022
−Removed: April 3, 2021
+Added: Six Months Ended
Cost of products sold
1 unchanged sentence
( 11,139,886 )
−Removed: Selling and administrative expenses
( 3,287,057 )
−Removed: Operating income
+Added: ( 21,044,606 )
+Added: Selling, general and administrative expenses
+Added: ( 1,280,570 )
+Added: ( 2,313,397 )
+Added: Restructuring costs
+Added: ( 10,583,078 )
+Added: ( 10,583,078 )
+Added: Operating income (loss)
+Added: ( 9,310,077 )
+Added: ( 8,923,182 )
Interest expense
−Removed: Income from discontinued operations before income taxes
−Removed: Income tax expense
−Removed: Income from discontinued operations, net of tax
+Added: Gain (Loss) from discontinued operations before income taxes
+Added: ( 9,454,792 )
+Added: ( 9,243,611 )
+Added: Income tax (expense) benefit
+Added: Income (loss) from discontinued operations, net of tax
+Added: $ ( 7,229,134 )
+Added: $ ( 7,067,665 )
The following table represents the assets and liabilities from discontinued operations:
−Removed: April 2, 2022
January 1, 2022
9 unchanged sentences
Total liabilities of discontinued operations¹
−Removed: ¹ The total assets and liabilities of discontinued operations are classified as current in the April 2, 2022 and
−Removed: January 1, 2022 balance sheets, as we expect to sell the discontinued operations and collect proceeds within one year.
+Added: ¹ The total assets and liabilities of discontinued operations are presented as current in the July 2, 2022 and January 1, 2022 balance sheets as we expect to sell the discontinued operations and collect proceeds within one year of the applicable balance sheet date.
Note C – Earnings Per Share
1 unchanged sentence
Three Months Ended
−Removed: April 2, 2022
−Removed: April 3, 2021
+Added: Six Months Ended
Weighted average shares outstanding
4 unchanged sentences
Inventories from continuing operations consist of the following components:
−Removed: April 2, 2022
January 1, 2022
4 unchanged sentences
Note E - Goodwill
−Removed: The aggregate carrying amount of goodwill from continuing operations is approximately $ 72.2 million as of April 2, 2022.
−Removed: No impairment was recognized in the first quarter of 2022.
+Added: The aggregate carrying amount of goodwill from continuing operations is approximately $ 72.1 million as of July 2, 2022.
+Added: No impairment was recognized in the second quarter of 2022.
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.
17 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.
−Removed: Currently, the Company has 25 operating leases and three finance leases with a lease liability of $ 11.8 million as of April 2, 2022.
+Added: Currently, the Company has 25 operating leases and three finance leases with a lease liability of $ 13.2 million as of July 2, 2022.
The finance lease arrangements are immaterial.
23 unchanged sentences
The revolving commitment portion has a maturity date of August 30, 2024.
−Removed: As of April 2, 2022, the Company has borrowed $ 5,000,000 on the revolving commitment portion of the facility at an interest rate of 1.71 %.
+Added: As of July 2, 2022, the Company has borrowed $ 10,000,000 on the revolving commitment portion of the facility at an interest rate of 2.59 %.
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 .
−Removed: The Company was in compliance with all of its covenants under the Credit Agreement on April 2, 2022, and through the date of filing this Form 10-Q.
+Added: The Company was in compliance with all of its covenants under the Credit Agreement on July 2, 2022, and through the date of filing this Form 10-Q.
On August 30, 2019, the Company entered an interest rate swap contract with Santander Bank, N.A., with an original notional 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%.
−Removed: On April 2, 2022, the interest rate for approximately half ($ 26.8 million) of the term portion was 1.71%, using a one-month LIBOR rate, and 2.94 % on the remaining balance ($ 42.8 million) of the term loan based on a one-month LIBOR rate.
+Added: On July 2, 2022, the interest rate for approximately half ($ 25.9 million) of the term portion was 2.81%, using a one-month LIBOR rate, and 3.19 % on the remaining balance ($ 41.9 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 phasing out of LIBOR.
6 unchanged sentences
dollar LIBOR settings scheduled to be discontinued after June 30, 2023.
−Removed: The Alternative Reference Rates Committee (ARRC), a financial industry group convened by the Federal Reserve Board, has recommended the use of SOFR to replace LIBOR.
+Added: The Alternative Reference Rates Committee (ARRC), a financial industry group convened by the Federal Reserve Board, has recommended the use of a secured overnight financing rate (“SOFR”) to replace LIBOR.
+Added: In addition, on March 15, 2022, the Adjustable Interest Rate Act (the “LIBOR Act”) was signed into law, which provided a replacement framework for outstanding financial contracts tied to LIBOR once LIBOR ceases to be published.
+Added: The LIBOR Act provides a statutory mechanism and safe harbor that applies on a nationwide basis to replace LIBOR with a benchmark rate, selected by the Federal Reserve Board based on SOFR, for certain contracts that reference LIBOR and contain no or insufficient fallback provisions.
+Added: The LIBOR Act preempts and supersedes any state or local law, statute, rule, regulation or standard relating to the selection or use of a benchmark replacement or related changes and allows parties that already have effective fallback provisions to opt out of the legislation.
The difference between LIBOR and SOFR is that LIBOR is a forward-looking rate which means the interest rate is set at the beginning of the period with payment due at the end.
3 unchanged sentences
We cannot predict the effect of the potential changes to LIBOR or the establishment and use of alternative rates or benchmarks at this time.
−Removed: We are working with our senior lender and may need to renegotiate our credit facilities as LIBOR phases out in June 2023.
Note H - Stock Options and Awards
7 unchanged sentences
Under the 2020 Plan, non-qualified stock options granted to participants will have exercise prices determined by the Compensation Committee of the Board.
−Removed: During the first three months of fiscal 2022, the Company granted 36,200 stock awards that were subject to the meeting of performance measurements.
−Removed: The Company granted 27,300 stock awards in the first three months of fiscal 2021.
−Removed: For the first three months of fiscal 2022, the Company used an assumption which included an expected term of 4.0 years, volatility deviation of 47.15 % and a risk-free rate 2.04 % for the purposes of measuring compensation under the Black Scholes Method.
−Removed: For the first three months of fiscal 2021, the Company used several assumptions which included an expected term of 4.0 years, volatility deviation between 47.25 % to 47.54 % and a risk-free rate between 0.18 % to 0.20 % for the purposes of measuring compensation under the Black Scholes Method.
+Added: During the first six months of fiscal 2022, the Company granted 43,300 stock awards that were subject to the meeting of performance measurements.
+Added: The Company granted 27,300 stock awards in the first six months of fiscal 2021 that were subject to the meeting of performance measurements.
+Added: For the first six months of fiscal 2022, the Company used assumptions which included an expected term of 4.0 years, volatility deviation between 47.15 % to 47.70 % and a risk-free rate between 2.04 % to 2.66 % for the purposes of measuring compensation under the Black Scholes Method.
+Added: For the first six months of fiscal 2021, the Company used several assumptions which included an expected term of 4.0 years, volatility deviation between 47.25 % to 48.55 % and a risk-free rate between 0.18 % to 0.35 % for the purposes of measuring compensation under the Black Scholes Method.
The 2020 Plan also permits 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.
−Removed: During the first three months of fiscal 2022 and 2021 the Company did not issue any SARs.
−Removed: Stock-based compensation expense in connection with SARs previously granted to employees was approximately $ 113,000 and $ 113,000 in the first quarter of 2022 and the first quarter of 2021.
−Removed: As of April 2, 2022, there were 763,968 shares of Company common stock reserved and available for future grant under the 2020 Plan.
+Added: During the first six months of fiscal 2022 and 2021 the Company did not issue any SARs.
+Added: Stock-based compensation expense in connection with SARs previously granted to employees was approximately $ 136,000 and $ 100,000 in the second quarter of 2022 and the second quarter of 2021, respectively and was approximately $ 250,000 and $ 214,000 in the first six months of fiscal years 2022 and 2021, respectively.
+Added: As of July 2, 2022, there were 766,433 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:
−Removed: Three Months Ended
−Removed: April 2, 2022
+Added: Six Months Ended
January 1, 2022
5 unchanged sentences
Range of Exercise Prices
−Removed: Outstanding as of April 2, 2022
+Added: Outstanding as of July 2, 2022
Weighted Average Remaining Contractual Life
Weighted Average Exercise Price
−Removed: Exercisable as of April 2, 2022
+Added: Exercisable as of July 2, 2022
Weighted Average Remaining Contractual Life
2 unchanged sentences
The following tables set forth the outstanding stock awards for the period specified:
−Removed: Three Months Ended
−Removed: April 2, 2022
+Added: Six Months Ended
January 1, 2022
1 unchanged sentence
Outstanding at end of period
−Removed: As of April 2, 2022, outstanding SARs and stock awards had an intrinsic value of $ 1,722,000 .
+Added: As of July 2, 2022, outstanding SARs and stock awards had an intrinsic value of $ 1,337,000 .
Note I – Share Repurchase Program
On May 2, 2018, the Company announced that the Board of Directors of the Company had authorized a new program to repurchase up to 200,000 shares of the Company’s common stock.
−Removed: The Company’s share repurchase program does not obligate it to acquire the Company’s common stock at any specific cost per share.
−Removed: 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”).
−Removed: Below is a summary of the Company’s share repurchases during the first quarter of 2022.
+Added: The Company’s share repurchase program does not obligate it to acquire the Company’s common stock at any specific price per share.
+Added: Under this program, shares of common stock 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”).
+Added: Below is a summary of the Company’s share repurchases during the second quarter of 2022.
Total Number of Shares Purchased
2 unchanged sentences
Maximum Number of Shares that may yet be Purchased Under the Plans or Programs
−Removed: Balance as of January 1, 2022
−Removed: January 2, 2022 - April 2, 2022
Balance as of April 2, 2022
+Added: April 3, 2022 - July 2, 2022
+Added: Balance as of July 2, 2022
Note J – Revenue Recognition
15 unchanged sentences
income tax examinations by foreign tax authorities for years prior to 2015.
−Removed: The total amount of unrecognized tax benefits could increase or decrease within the next 12 months for several 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 value of unrecognized tax benefits during the three months ended April 2, 2022.
−Removed: 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.
+Added: The total amount of unrecognized tax benefits could increase or decrease within the next 12 months following July 2, 2022 for several 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 value of unrecognized tax benefits during the six months ended July 2, 2022.
+Added: 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 following July 2, 2022.
Note L - Retirement Benefit Plans
5 unchanged sentences
The Company also provides health care and life insurance for retired salaried employees in the United States who meet specific eligibility requirements.
−Removed: Significant disclosures relating to these benefit plans for the first quarter of fiscal years 2022 and 2021 are as follows:
+Added: Significant disclosures relating to these benefit plans for the first three months and first six months 2022 and 2021 are as follows:
Pension Benefits
Three Months Ended
−Removed: April 2, 2022
−Removed: April 3, 2021
+Added: Six Months Ended
Interest cost
2 unchanged sentences
( 1,448,675 )
+Added: ( 2,921,322 )
+Added: ( 2,897,349 )
Amortization of prior service cost
3 unchanged sentences
$ ( 215,205 )
+Added: $ ( 352,179 )
+Added: $ ( 430,407 )
Other Postretirement Benefits
Three Months Ended
−Removed: April 2, 2022
−Removed: April 3, 2021
+Added: Six Months Ended
Interest cost
Expected return on plan assets
−Removed: Gain on significant event
Amortization of prior service cost
2 unchanged sentences
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.
−Removed: In fiscal year 2022, the Company expects to contribute $ 300,000 into its pension plans and $ 50,000 into its postretirement plan.
−Removed: As of April 2, 2022, the Company has not made any contributions into its pension plans, has contributed $ 3,000 to its postretirement plan, and expects to make the remaining contributions as required during the remainder of the fiscal year.
+Added: In 2022, the Company expects to contribute $ 300,000 into its pension plans and $ 50,000 into its postretirement plan.
+Added: As of July 2, 2022, the Company has not made any contributions into its pension plans, has contributed $ 13,000 to its postretirement plan, and expects to make the remaining contributions as required during the remainder of the fiscal year.
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
−Removed: April 2, 2022
−Removed: April 3, 2021
+Added: Six Months Ended
Regular matching contribution
2 unchanged sentences
Total contributions for the period
−Removed: The non-discretionary contribution of $ 323,082 made in the three months ended April 2, 2022, was accrued for and expensed in the prior fiscal year.
+Added: The non-discretionary contribution of $ 323,082 made in the six months ended July 2, 2022, was accrued for and expensed in the prior fiscal year.
Note M - Recent Accounting Pronouncements
10 unchanged sentences
The Company has established credit limits for customers and monitors their balances to mitigate the risk of loss.
−Removed: As of April 2, 2022, there was one significant concentration of credit risk with a customer, who has receivables representing 10 % of our total accounts receivable.
+Added: As of July 2, 2022, there was one significant concentration of credit risk with a customer, who has receivables representing 11 % of our total accounts receivable.
One single customer represented more than 11 % of the Company’s net accounts receivable as of January 1, 2022.
3 unchanged sentences
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 %.
−Removed: The Company has an interest rate swap with a notional amount of $ 42.8 million on April 2, 2022, to convert a portion of the borrowing under the Credit Agreement from variable to fixed rates.
+Added: The Company has an interest rate swap with a notional amount of $ 41.9 million on July 2, 2022, to convert a portion of 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.
Additionally, interest rates on the Company's debt are susceptible to changes to the method that LIBOR rates are determined and to the potential phasing out of LIBOR after 2021.
−Removed: The potential phasing out of LIBOR is discussed in greater detail in Note G — Debt hereof and under the heading “The phaseout of the London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with a different reference rate, may adversely affect interest rates” in Part II, Item 8 of the 2021 Form 10-K.
+Added: The potential phasing out of LIBOR is discussed in greater detail in Note G — Debt hereof and under the heading “The phaseout of the London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with a different reference rate, may adversely affect interest rates” in Part I, Item 1A of the 2021 Form 10-K.
Currency Exchange Rate Risk
3 unchanged sentences
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.