What changed in this filing

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Item 9A. Controls and Procedures

2023-03-14 compared with 2022-03-17 · 66 added, 48 removed, 131 unchanged (47% of the section changed)

9 unchanged sentences

Evaluation of Disclosure Controls and Procedures

As of the end of the fiscal year ended January 1, 2022, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 240.13a-15.

As of the end of the fiscal year ended December 31, 2022, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 240.13a-15.

As defined in Exchange Act Rules 240.13a-15(e) and 240.15d-15(e), “the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (15 U.S.C.

78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.” Based upon that evaluation, the CEO and CFO concluded that the Company’s current disclosure controls and procedures were effective as of the January 1, 2022 evaluation date.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.” Based upon that evaluation, the CEO and CFO concluded that the Company’s current disclosure controls and procedures were effective as of the December 31, 2022 evaluation date.

The Company believes that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

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Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our evaluation under this framework, our management concluded that our control over financial reporting was effective as of January 1, 2022.

Based on our evaluation under this framework, our management concluded that our control over financial reporting was effective as of December 31, 2022.

The Company’s registered public accounting firm, Fiondella, Milone & LaSaracina LLP, has issued an attestation report on the Company’s internal control over financial reporting.

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Opinion on Internal Control over Financial Reporting

We have audited The Eastern Company’s (the Company’s) internal control over financial reporting as of January 1, 2022, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 1, 2022, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

We have audited The Eastern Company’s (the Company’s) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows of the Company, and our report dated March 14, 2023, expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting under Item 9A.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information concerning directors is incorporated herein by reference to the Company’s definitive proxy statement (the “Proxy Statement”) for the 2022 Annual Meeting of Shareholders, which will be filed with the SEC pursuant to Regulation 14A not later than 120 days after January 1, 2022, under the captions “Item No.

1 – Election of Directors” and “Director Compensation in Fiscal 2021.”

The information concerning the Company’s executive officers is incorporated herein by reference to the Proxy Statement under the captions “Executive Compensation,” “Stock Based Awards,” “Outstanding Equity Awards at Fiscal Year-End,” and “Termination of Employment and Change in Control Arrangements.”

The information concerning the Company’s Audit Committee is incorporated herein by reference to the Proxy Statement under the captions “Audit Committee Financial Expert,” “Report of the Audit Committee” and “The Board of Directors and Committees.” The Audit Committee Charter is also available on the Company’s website at http://www.easterncompany.com by clicking on Corporate Governance.

The information concerning compliance with Section 16(a) of the Exchange Act is incorporated herein by reference to our Proxy Statement under the caption “Delinquent Section 16(a) Reports.”

The information concerning directors is incorporated herein by reference to the information under the captions “Item No.

1 – Election of Directors” in the Company’s definitive proxy statement (the “Proxy Statement”) for the 2023 Annual Meeting of Shareholders, which will be filed with the SEC pursuant to Regulation 14A not later than 120 days after December 31, 2022.

The information concerning the Company’s executive officers is incorporated herein by reference to the information under the caption “Executive Officer Biographies” in the Proxy Statement.

The information concerning the Company’s Audit Committee is incorporated herein by reference to the information under the captions “Audit Committee Financial Expert” and “The Board of Directors and Committees” in the Proxy Statement.

The Audit Committee Charter is also available on the Company’s website at http://www.easterncompany.com by clicking on Corporate Governance in the “About Us” menu.

The information concerning compliance with Section 16(a) of the Exchange Act is incorporated herein by reference to the information under the caption “Delinquent Section 16(a) Reports” if any, in the Proxy Statement.

The Company’s Board of Directors has adopted a Code of Business Conduct and Ethics that applies to the Company’s Chief Executive Officer, Chief Financial Officer, and the Company’s other financial professionals.

The Code of Business Conduct and Ethics is available on the Company’s website at https://www.easterncompany.com/ by clicking on Corporate Governance.

The Code of Business Conduct and Ethics is available on the Company’s website at https://www.easterncompany.com/ by clicking on Corporate Governance in the “About Us” menu.

We intend to disclose any amendment or waiver to the Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or person performing similar functions, on our website within four business days after such amendment or waiver.

ITEM 11 EXECUTIVE COMPENSATION

Information concerning director and executive compensation is incorporated herein by reference to portions of the Proxy Statement under the captions “Director Compensation in Fiscal 2020,” “Executive Compensation,” “Stock Based Awards,” “Outstanding Equity Awards at Fiscal Year-End,” and “Termination of Employment and Change in Control Arrangements.” The Compensation Committee of the Board of Directors operates under the Compensation Committee Charter, which can be found on the Company’s website at https://www.easterncompany.com/ by clicking on Corporate Governance.

Information concerning director and executive compensation is incorporated herein by reference to the information under the captions “Director Compensation in Fiscal 2022,” “Executive Compensation,” “Stock Based Awards,” “Outstanding Equity Awards at Fiscal Year-End,” and “Termination of Employment and Change in Control Arrangements” in the Proxy Statement.

The Compensation Committee of the Board of Directors operates under the Compensation Committee Charter, which can be found on the Company’s website at https://www.easterncompany.com/ by clicking on Corporate Governance in the “About Us” menu.

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information regarding securities authorized for issuance under the Company’s equity compensation plans as of January 1, 2022, consisting of the Company’s 2021 Executive Stock Incentive Plan (the “2021 Plan”).

Securities authorized for issuance under equity compensation plans

The following table sets forth information regarding securities authorized for issuance under the Company’s equity compensation plans as of December 31, 2022, consisting of the Company’s 2020 Executive Stock Incentive Plan (the “2020 Plan”).

Equity Compensation Plan Information

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Equity compensation plans approved by security holders

43,300 $ 23.56 808,101

Equity compensation plans not approved by security holders

43,300 $ 23.56 808,101

Security ownership of certain beneficial owners and management:

Information concerning security ownership of certain beneficial owners is incorporated herein by reference to the Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management”.

Information concerning security ownership of management is incorporated herein by reference to the Proxy Statement under the captions “Security Ownership of Certain Beneficial Owners and Management”, “Executive Compensation”, “Stock Based Awards”, “Awards Exercised in Fiscal 2021”, and “Outstanding Equity Awards at Fiscal Year-End”.

See also the equity compensation plan information in Item 5 of this Form 10-K.

Information concerning security ownership of certain beneficial owners is incorporated herein by reference to the information under the caption “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement.

Information concerning security ownership of management is incorporated herein by reference to the information under the captions “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement.

Changes in Control

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information regarding director independence is incorporated herein by reference to the Company’s Proxy Statement to be filed with the SEC pursuant to Regulation 14A not later than 120 days after January 1, 2022 under the captions “Item No.1 – Election of Directors” and “The Board of Directors and Committees”.

Information regarding transactions with related persons is incorporated herein by reference to information under the caption “Policies and Procedures Concerning Related Persons Transactions” in the Proxy Statement.

Information regarding director independence is incorporated herein by reference to the information under the captions “Item No.1 – Election of Directors” and “The Board of Directors and Committees” in the Proxy Statement.

ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES

Information concerning principal accountant fees and services is incorporated herein by reference to the Company’s Proxy Statement to be filed with the SEC pursuant to Regulation 14A not later than 120 days after January 1, 2022 under the caption “Item No.

3 – Ratification of Appointment of Independent Registered Public Accounting Firm”.

ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULE

Information concerning principal accountant fees and services is incorporated herein by reference to the information under the caption “Item No.

3 – Ratification of Appointment of Independent Registered Public Accounting Firm” in the Proxy Statement.

ITEM 15 EXHIBITSAND FINANCIAL STATEMENT SCHEDULE

(a) Documents filed as part of this Form 10-K:

(1) Financial statements

Consolidated Balance Sheets — January 1, 2022 and January 2, 2021

Consolidated Statements of Income — Fiscal years ended January 1, 2022 and January 2, 2021

Consolidated Statements of Comprehensive Income — Fiscal years ended January 1, 2022 and January 2, 2021

Consolidated Statements of Shareholders’ Equity — Fiscal years ended January 1, 2022 and January 2, 2021

Consolidated Statements of Cash Flows — Fiscal years ended January 1, 2022 and January 2, 2021

Consolidated Balance Sheets — December 31, 2022 and January 1, 2022

Consolidated Statements of Income — Fiscal years ended December 31, 2022 and January 1, 2022

Consolidated Statements of Comprehensive Income — Fiscal years ended December 31, 2022 and January 1, 2022

Consolidated Statements of Shareholders’ Equity — Fiscal years ended December 31, 2022 and January 1, 2022

Consolidated Statements of Cash Flows — Fiscal years ended December 31, 2022 and January 1, 2022

Notes to Consolidated Financial Statements

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Exhibit Index

Exhibits to this Form 10-K listed but not included herein will be provided upon written request sent to the Company’s executive offices.

Stock Purchase Agreement dated August 30, 2019, among the Company, Eastern Engineered Systems, Inc., Big 3 Holdings, LLC, Big 3 Precision Mold Services, Inc., Industrial Design Innovations, LLC, Sur-Form, LLC, Associated Toolmakers Limited, TVV Capital Partners III, L.P., TVV Capital Partners III-A, L.P, Alan Scheidt, Todd Riley, Clinton Hyde and Big 3 Holdings, LLC, as the initial Seller Representative (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K (SEC File No.

001-35383) filed on September 3, 2019).

Restated Certificate of Incorporation of the Company (conformed copy) (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 28, 2020 (SEC File No.

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001-35383) filed on March 11, 2022).

Description of Securities (filed herewith).

Description of Securities (incorporated by reference to Exhibit 4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 28, 2020 (SEC File No.

001-35383) filed on May 6, 2020).

Amended and Restated Employment Agreement, dated as of January 1, 2018, between the Company and August M.

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001-35383), filed January 19, 2022).

The Company’s Directors’ Fee Program, effective as of October 1, 1996 (incorporated herein by reference to the Company’s Registration Statement on Form S-8, as amended (SEC File No.

Offer Letter, dated March 16, 2022, between the Company and Peter O’Hara (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended April 2, 2022 (SEC File No.

001-35383), filed May 9, 2022).

Termination Agreement, dated as of March 16, 2022, between the Company and Peter O’Hara (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (SEC File No.

001-35383), filed March 17, 2022).

Employment Agreement, dated as of January 9, 2023, between the Company and Mark Anthony Hernandez (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (SEC File No.

001-35383), filed January 13, 2023).

Offer Letter, dated February 1, 2023, between the Company and Nicholas Vlahos (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (SEC File No.

001-35383), filed February 6, 2023).

Severance Agreement, dated as of February 1, 2023, between the Company and Nicholas Vlahos (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (SEC File No.

001-35383), filed February 6, 2023).

The Company’s Directors’ Fee Program, effective as of October 1, 1996 (incorporated herein by reference to Exhibit 4(a) to the Company’s Registration Statement on Form S-8, as amended (SEC File No.

333-21351) filed on February 7, 1997).

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333-238565), filed on May 21, 2020).

Credit Agreement dated August 30, 2019 among the Company, the lenders from time to time party hereto), and Santander Bank, N.A., as the administrative agent, an LC Issuer (as there defined), and as the Swing Line Lender (as therein defined) (incorporated herein by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K (SEC File No.

Credit Agreement dated as of August 30, 2019 among the Company, the lenders from time to time party thereto, and Santander Bank, N.A., as the administrative agent, an LC Issuer (as therein defined), and as the Swing Line Lender (as therein defined) (incorporated herein by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K (SEC File No.

001-35383), filed on September 3, 2019).

Pledge and Security Agreement, dated August 30, 2019 among the Company, certain of its Subsidiaries (as defined therein), and Santander Bank, N.A., as administrative agent for the benefit of the Secured Creditors (as defined therein) (incorporated herein by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K (SEC File No.

Pledge and Security Agreement, dated as of August 30, 2019 among the Company, certain of its subsidiaries (as grantors), and Santander Bank, N.A., as administrative agent for the benefit of the Secured Creditors (as defined therein) (incorporated herein by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K (SEC File No.

001-35383), filed on September 3, 2019).

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Letter to our shareholders from the Annual Report 2022 (filed herewith).

The following materials from the Company’s Annual Report on Form 10-K for the year ended January 1, 2022, formatted in Inline Extensible Business Reporting Language (iXBRL):

(i) the Consolidated Balance Sheets as of January 1, 2022 and January 2, 2021;

(ii) the Consolidated Statements of Income for the fiscal years ended January 1, 2022 and January 2, 2021;

(iii) the Consolidated Statements of Comprehensive Income for the fiscal years ended January 1, 2022 and January 2, 2021;

(iv) the Consolidated Statements of Shareholders’ Equity for the fiscal years ended January 1, 2022 and January 2, 2021;

(v) the Consolidated Statements of Cash Flows for the fiscal years ended January 1, 2022 and January 2, 2021;

The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, formatted in Inline Extensible Business Reporting Language (iXBRL):

(i) the Consolidated Balance Sheets as of December 31, 2022 and January 1, 2022;

(ii) the Consolidated Statements of Income for the fiscal years ended December 31, 2022 and January 1, 2022;

(iii) the Consolidated Statements of Comprehensive Income for the fiscal years ended December 31, 2022 and January 1, 2022;

(iv) the Consolidated Statements of Shareholders’ Equity for the fiscal years ended December 31, 2022 and January 1, 2022;

(v) the Consolidated Statements of Cash Flows for the fiscal years ended December 31, 2022 and January 1, 2022;

and (vi) the Notes to the Consolidated Financial Statements (filed herewith).

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

* Management contract, compensatory plan or arrangement.

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Balance at Beginning

Charged to Costs

Charged to Other

Accounts-Describe

(1) Charged to Costs and Expenses

(2) Charged to Other Accounts-Describe

Balance at End

Fiscal year ended January 1, 2022:

Fiscal year ended December 31, 2022:

Deducted from asset accounts:

Allowance for doubtful accounts

$ -72,000 (b)

$ -467,000 (a)

Fiscal year ended January 1, 2022:

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THE EASTERN COMPANY

Sullivan III Vice President and Chief Financial Officer

/s/ Nicholas Vlahos

Nicholas Vlahos

Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ August M.

March 14, 2023

President, Chief Executive Officer and Director

(Principal Executive Officer)

President, Chief Executive Officer, and

Director (Principal Executive Officer)

/s/ Nicholas Vlahos

March 14, 2023

Nicholas Vlahos

Vice President and Chief Financial Officer

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March 14, 2023

/s/ Michael J.

March 14, 2023

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-K

Item 9A. Controls and Procedures