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Item 2. Management’s Discussion and Analysis

2024-05-06 compared with 2023-11-07 · 73 added, 107 removed, 87 unchanged (67% of the section changed)

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to highlight significant changes in the financial position and results of operations of The Eastern Company (together with its consolidated subsidiaries, the “Company,” “we,” “us” or “our”) for the three and nine months ended September 30, 2023.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and Notes thereto for the fiscal year ended December 30, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023, which was filed with the Securities and Exchange Commission (the “SEC”) on March 12, 2024 (the “2023 Form 10-K”).

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

References to the third quarter of 2022, the third fiscal quarter of 2022, the third quarter of fiscal 2022 or the three months ended October 1, 2022, mean the period from July 3, 2022 to October 1, 2022.

References to the third quarter of 2023, the third fiscal quarter of 2023, the third quarter of fiscal 2023 or the three months ended September 30, 2023, mean the 13-week period from July 2, 2023 to September 30, 2023.

References to the first nine months of 2022, the first nine months of fiscal 2022 or the nine months ended October 1, 2022 mean the period from January 2, 2022 to October 1, 2022.

References to the first nine months of 2023, the first nine months of fiscal 2023 or the nine months ended September 30, 2023 mean the period from January 1, 2023 to September 30, 2023.

References to the first quarter of 2023, the first fiscal quarter of 2023, the first quarter of fiscal 2023 or the three months ended April 1, 2023, mean the period from January 1, 2023 to April 1, 2023.

References to the first quarter of 2024, the first fiscal quarter of 2024, the first quarter of fiscal 2024, or the three months ended March 30, 2024 mean the 13-week period from December 31, 2023 to March 30, 2024.

Safe Harbor for Forward-Looking Statements

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There are many factors that affect the Company’s business and the results of its operations and that may cause the actual results of operations in future periods to differ materially from those currently expected or anticipated.

These factors include the impact of the COVID-19 pandemic and resulting economic effects, the impact of higher raw material and component costs and cost inflation, supply chain disruptions and shortages, particularly with respect to steel, plastics, scrap iron, zinc, copper and electronic components, rising interest rates, delays in delivery of our products to our customers, the impact of global economic conditions on demand for our products, including the impact, length and degree of economic downturns on the customers and markets we serve, reductions in production levels, the availability, terms and cost of financing, including borrowings under credit arrangements or agreements, the potential impact of bank failures on our ability to access financing or capital markets, and the impact of market conditions on pension plan funded status.

Other factors include, but are not limited to:

These factors include:

the impact of higher raw material and component costs and cost inflation, supply chain disruptions and shortages, particularly with respect to steel, plastics, scrap iron, zinc, copper, and electronic components;

delays in delivery of our products to our customers;

the impact of global economic conditions and rising interest rates, and more specifically conditions in the automotive, construction, aerospace, energy, oil and gas, transportation, electronic, and general industrial markets, including the impact, length and degree of economic downturns on the customers and markets we serve and demand for our products, reductions in production levels, the availability, terms and cost of financing, including borrowings under credit arrangements or agreements, the potential impact of bank failures on our ability to access financing or capital markets, and the impact of market conditions on pension plan funded status;

restrictions on operating flexibility imposed by the agreement governing our credit facility;

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market acceptance of our products;

the inability to attain expected benefits from acquisitions or the inability to effectively integrate such acquisitions and achieve expected synergies;

domestic and international economic conditions, and more specifically conditions in the automotive, construction, aerospace, energy, oil and gas, transportation, electronic, and general industrial markets;

the inability to attain expected benefits from acquisitions or the inability to effectively integrate acquired businesses and achieve expected synergies;

costs and liabilities associated with environmental compliance;

the impact of climate change;

the impact of climate change, natural disasters, geopolitical events, and public health crises, including pandemics (such as COVID-19) and epidemics, and any related Company or government policies or actions;

military conflict (including the Russia/Ukraine conflict, the conflict in Israel and surrounding areas, the possible expansion of such conflicts and geopolitical consequences) or terrorist threats and the possible responses by the U.S.

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materially adverse or unanticipated legal judgments, fines, penalties, or settlements.

and other risks identified and discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 1A, Risk Factors , and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , of the 2022 Form 10-K and that may be identified from time to time in our quarterly reports on Form 10-Q, current reports on Form 8-K and other filings we make with the SEC.

The Company is also subject to other risks identified and discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, in Item 1A, Risk Factors , and in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , of the 2023 Form 10-K, and that may be identified from time to time in our quarterly reports on Form 10-Q, current reports on Form 8-K and other filings we make with the SEC.

Although the Company believes it has an appropriate business strategy and the resources necessary for its operations, future revenue and margin trends cannot be reliably predicted, and the Company may alter its business strategies to address changing conditions.

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General Overview

The following analysis excludes discontinued operations.

Net sales in the third quarter of 2023 decreased 8% to $65.6 million from $71.6 million in the corresponding period in 2022.

Net sales for the first nine months of 2023 decreased 2% to $206.5 million from $210.2 million in the same period last year.

Sales declined in both the third quarter of 2023 and first nine months of 2023 primarily due to lower demand for truck accessories and returnable transport packaging products.

Our backlog as of September 30, 2023 increased 4% to $89.4 million from $85.7 million as of October 1, 2022.

Net sales of existing products declined 14% in the third quarter of 2023 and 5% for the first nine months of 2023 compared to the corresponding periods in 2022.

Price increases and new products increased net sales by 6% in the third quarter of 2023 and 3% in the first nine months of 2023, compared to the corresponding periods in 2022.

Net sales in the first quarter of 2024 decreased 6% to $67.9 million from $72.5 million in the corresponding period in 2023.

Sales declined in the first quarter of 2024 primarily due to lower demand for truck accessories and returnable transport packaging products, partially offset by increased demand for truck mirror assemblies.

Our backlog as of March 30, 2024 increased 35% to $97.4 million from $72.0 million as of April 1, 2023, driven by increased orders for various truck mirror assemblies.

Net sales of existing products declined 11% in the first quarter of 2024 compared to the corresponding period in 2023.

Price increases and new products increased net sales by 5% in the first quarter of 2024 compared to the corresponding period in 2023.

New products included various truck mirror assemblies, rotary latches, D-rings, and mirror cams.

Price increases primarily reflect our efforts to recover increases in raw material and freight costs.

Cost of products sold decreased $5.8 million, or 11%, in the third quarter of 2023 and decreased $3.6 million, or 2% in the first nine months of 2023 compared to the corresponding periods in 2022.

The decreases in the third quarter and first nine months of 2023 are primarily due to lower sales volumes.

Additionally, the Company paid tariff costs on China-sourced products of approximately $0.6 million and $1.7 million in the third quarter and first nine months of 2023, respectively, compared to $0.8 million and $2.5 million in the third quarter and first nine months of fiscal 2022, respectively.

Cost of products sold decreased $5.3 million, or 9%, in the first quarter of 2024 compared to the corresponding period in 2023.

The decreases in the first quarter of 2024 are primarily due to lower sales volumes.

Additionally, the Company paid tariff costs on China-sourced products of approximately $0.7 million in the first quarter of 2024 compared to $0.6 million in the first quarter of fiscal 2023.

Most tariffs on China-sourced products have been recovered through price increases.

Gross margin as a percentage of sales was 25% in the third quarter and 23% in the first nine months of 2023 compared to 23% in the third quarter and 22% in the first nine months of fiscal 2022.

Our gross margins in the third quarter and first nine months of 2023 reflect the impact of price increases to customers to recover increases in raw material costs.

Product development expense increased $0.4 million, or 41%, in the third quarter of 2023 and increased $1.1 million, or 34%, in the first nine months of 2023 compared to the corresponding periods in 2022 as we continue to invest in new products at Eberhard, Velvac and Big 3.

As a percentage of net sales, product development costs were 2.2% and 2.1% for the third quarter and first nine months of 2023, respectively, compared to 1.4% and 1.5% for the corresponding periods in 2022.

Selling general and administrative expenses decreased $0.4 million, or 4%, in the third quarter of 2023 when compared to the third quarter of 2022 primarily due to lower legal, professional, and selling costs and payroll-related expenses.

Selling general and administrative expenses increased $2.8 million, or 9%, in the first nine months of 2023 when compared to the corresponding period in 2022 primarily due to severance and other accrued compensation expenses of $1.8 million related to the elimination of the chief operating officer position and the departure of our previous chief executive officer during the first quarter of 2023 and legal, professional, and selling costs and payroll-related expenses during the first six months of 2023.

The increase in selling expenses reflects our investments in sales capabilities and change in management personnel.

Interest expense increased $0.4 million in the third quarter and $1.0 million in the first nine months of 2023 compared to the corresponding periods in 2022 due to higher borrowing rates.

Other income decreased $1.3 million in the third quarter of 2023 and decreased $2.6 million in the first nine months of 2023 compared to the corresponding periods in 2022.

The decrease in other income of $1.3 million in the third quarter of 2023 was primarily driven by unfavorable pension costs of $0.3 million in the third quarter of 2023, while in the third quarter of 2022 the Company had a favorable pension cost adjustment of $0.4 million, and a $0.6 million gain on the sale of the Company’s corporate office building in the third quarter of 2022.

The decrease in other income of $2.6 million for the first nine months of 2023 when compared to the corresponding period in 2022 was primarily driven by unfavorable pension costs of $0.9 million for the first nine months of 2023, while in the first nine months of 2022 the Company had favorable pension cost adjustments of $1.3 million, $1.4 million expense associated with the closure of Associated Toolmakers, Ltd.

in the second quarter of 2023, an unfavorable working capital adjustment of $0.4 million in the first quarter of 2023 related to the sale of the Greenwald business, partially offset by a $1.6 million favorable adjustment for the final settlement of our swap agreement with Santander in the second quarter of 2023, while in the first quarter of 2022 the Company had a loss on the sale of the Wheeling, IL building of $0.3 million and a gain of $0.6 million on the sale of the Company’s corporate office building in the third quarter of 2022.

Net income from continuing operations for the third quarter of fiscal 2023 was $3.1 million, or $0.49 per diluted share compared to net income from continuing operations of $4.5 million, or $0.72 per diluted share, for the comparable period in 2022.

In the first nine months of 2023 net income from continuing operations was $5.1 million, or $0.81 per diluted share, compared to net income from continuing operations of $10.9 million, or $1.74 per diluted share, for the comparable period in 2022.

Gross margin as a percentage of sales was 24% in the first quarter of 2024 compared to 21% in the first quarter of fiscal 2023.

Our gross margins in the first quarter of 2024 primarily reflect the impact of price increases to customers to recover increases in raw material costs and other cost savings initiatives.

Product development expenses were flat in the first quarter of 2024 compared to the corresponding period in 2023 as we continue to invest in new products at Eberhard, Velvac and Big 3.

As a percentage of net sales, product development costs were 2.0% for the first quarter of 2024 compared to 1.9% for the corresponding period in 2023.

Selling, general and administrative expenses decreased $0.4 million, or 4%, in the first quarter of 2024 when compared to the first quarter of 2023 primarily due to lower legal, professional, and selling costs and payroll-related expenses.

In the first quarter of 2023, selling, general and administrative expenses included severance and other accrued compensation expenses of $1.8 million related to the elimination of the chief operating officer position and the departure of our previous chief executive officer.

Interest expense increased $0.1 million in the first quarter of 2024 compared to the corresponding period in 2023 due to higher interest rates.

Other income and expense of $0.0 million increased $0.6 million in the first quarter of 2024 when compared to the corresponding period in 2023.

The increase in other income of $0.6 million in the first quarter of 2024 was primarily driven by an unfavorable final working capital adjustment of $0.4 million related to the sale of the Greenwald business in the first quarter of 2023.

Net income for the first quarter of fiscal 2024 was $1.9 million, or $0.31 per diluted share compared to net income of $0.6 million, or $0.10 per diluted share, for the comparable period in 2023.

A more detailed analysis of the Company’s results of operations and financial condition follows.

Results of Operations

The following table shows, for the periods indicated, selected line items from the condensed consolidated statements of income as a percentage of net sales:

The following table shows, for the periods indicated, selected line items from the condensed consolidated statements of operations as a percentage of net sales:

Three Months Ended

Nine Months Ended

September 30, 2023

October 1, 2022

September 30, 2023

October 1, 2022

March 30, 2024

April 1, 2023

Cost of products sold

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Operating Profit

The following table shows the change in sales and operating profit for the third quarter and first nine months of 2023 compared to the third quarter and first nine months of 2022 (dollars in thousands):

September 30, 2023

The following table shows the change in sales and operating profit for the first quarter of 2024 compared to the first quarter of 2023 (dollars in thousands):

March 30, 2024

Operating Profit

Liquidity and Sources of Capital

The Company generated approximately $19.2 million of cash from continuing operations during the first nine months of fiscal 2022 compared to consuming approximately $0.3 million during the first nine months of fiscal 2022.

Cash flow from operations in the first nine months of 2023 was higher when compared to the corresponding period in 2022 primarily due to reductions in inventory and accounts receivable.

See Note G - Debt for further discussion on the Company’s debt facilities.

Additions to property, plant and equipment for continuing operations were approximately $4.7 million and $1.7 million for the first nine months of 2023 and 2022, respectively.

As of September 30, 2023, there were approximately $1.5 million of outstanding commitments for capital expenditures.

The Company generated $3.6 million of cash from operations during the first three months of fiscal 2024 compared to generating $6.9 million during the first three months of fiscal 2023.

Cash flow from operations in the first three months of 2024 was lower when compared to the corresponding period in 2023 primarily due to increases in accounts receivable and lower reductions in inventory, partially offset by increases in accounts payable.

Additions to property, plant, and equipment were $1.8 million and $1.2 million for the first three months of 2024 and 2023, respectively.

As of March 30, 2024, there was approximately $3.0 million of outstanding commitments for capital expenditures.

The following table shows key financial ratios at the end of each specified period:

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The following table shows important liquidity measures as of the balance sheet date for each specified period or for the period, as applicable (in millions):

Cash and cash equivalents

- Held in the United States

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Working capital

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Change in working capital impact on net cash used in operating activities

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Net cash used in financing activities

Inventories of $60.6 million as of September 30, 2023, represent a decrease of 6.2% as compared to $64.6 million at the end of fiscal year 2022 and a decrease of 10.2% as compared to $67.5 million at the end of the third quarter of fiscal 2022.

Accounts receivable, less allowances, were $42.8 million as of September 30, 2023, as compared to $42.9 million at 2022 fiscal year end and $50.9 million at the end of the third quarter of fiscal 2022.

Inventories of $55.8 million as of March 30, 2024 declined by $3.4 million, or 5.8%, when compared to $59.3 million at the end of fiscal year 2023 and declined $1.8 million, or 3.1%, when compared to $57.7 million at the end of the first quarter of fiscal 2023.

Accounts receivable, less allowances, were $42.9 million as of March 30, 2024, as compared to $37.1 million at 2023 fiscal year end and $44.5 million at the end of the first quarter of fiscal 2023.

On June 16, 2023, the Company entered into a credit agreement with TD Bank, N.A., Wells Fargo Bank, Bank of America, and M&T Bank as lenders (the “Credit Agreement”), and incurred indebtedness under the Credit Agreement in the aggregate principal amount of $60 million in the form of a term loan, the proceeds of which were used to repay the Company’s remaining outstanding term loan and to terminate its existing credit facility with Santander Bank.

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These covenants may limit how we conduct our business, and in the event of certain defaults, our repayment obligations may be accelerated.

We were in compliance with all our covenants as of September 30, 2023.

Cash, cash flow from operating activities and funds available under the revolving credit portion of the Credit Agreement are expected to be sufficient to cover future foreseeable working capital requirements in the short-term (i.e., the next 12 months from September 30, 2023) and separately in the long-term (i.e., beyond the next 12 months).

We were in compliance with all our covenants as of March 30, 2024 and had no outstanding borrowings under the revolving commitment portion of the credit facility as of this date.

Cash, cash flow from operating activities and funds available under the revolving credit portion of the Credit Agreement are expected to be sufficient to cover future foreseeable working capital requirements in the short-term (i.e., the next 12 months from March 30, 2024) and separately in the long-term (i.e., beyond the next 12 months).

However, the Company cannot provide any assurances of the availability of future financing or the terms on which it might be available.

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In addition to funding capital requirements, we may use available cash to pay down our indebtedness, to make investments, which may include investments in publicly traded securities, or to make acquisitions that we believe will complement or expand our existing businesses.

As of the end of the third quarter of 2023, the Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

As of the end of the first quarter of 2024, the Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Estimates

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To supplement the consolidated financial statements prepared in accordance with U.S.

GAAP, we have presented Adjusted Net Income from Continuing Operations, Adjusted Earnings Per Share from Continuing Operations and Adjusted EBITDA from Continuing Operations, which are considered non-GAAP financial measures.

GAAP, we have presented Adjusted Net Income, Adjusted Earnings Per Share and Adjusted EBITDA, which are considered non-GAAP financial measures.

The non-GAAP financial measures presented may differ from similarly titled non-GAAP financial measures presented by other companies, and other companies may not define these non-GAAP financial measures in the same way.

These measures are not substitutes for their comparable U.S.

GAAP financial measures, such as net sales, net income from continuing operations, diluted earnings per share from continuing operations, or other measures prescribed by U.S.

GAAP financial measures, such as net sales, net income, diluted earnings per share, or other measures prescribed by U.S.

GAAP, and there are limitations to using non-GAAP financial measures.

Adjusted Net Income from Continuing Operations is defined as net income from continuing operations excluding, when incurred, gains or losses that we do not believe reflect our ongoing operations, including, for example, the impacts of impairment losses, gains/losses on the sale of subsidiaries, property and facilities, transaction expenses primarily relating to acquisitions and divestitures, factory start-up costs, factory relocation expenses, executive severance, and restructuring costs.

Adjusted Net Income from Continuing Operations is a tool that can assist management and investors in comparing our performance on a consistent basis across periods by removing the impact of certain items that management believes do not directly reflect our underlying operating performance.

Adjusted Earnings Per Share from Continuing Operations is defined as earnings per share from continuing operations excluding, when incurred, certain per share gains or losses that we do not believe reflect our ongoing operations, including, for example, the impacts of impairment losses, gains/losses on the sale of subsidiaries, property and facilities, transaction expenses primarily relating to acquisitions and divestitures, factory start-up costs, factory relocation expenses, executive severance, and restructuring costs.

We believe that Adjusted Earnings Per Diluted Share from Continuing Operations provides important comparability of underlying operational results, allowing investors and management to access operating performance on a consistent basis from period to period.

Adjusted EBITDA from Continuing Operations is defined as net income from continuing operations before interest expense, provision for income taxes, and depreciation and amortization and excluding, when incurred, the impacts of certain losses or gains that we do not believe reflect our ongoing operations, including, for example, impairment losses, gains/losses on sale of subsidiaries, property and facilities, transaction expenses primarily relating to acquisitions and divestitures, factory start-up costs, factory relocation expenses, executive severance, and restructuring expenses.

Adjusted EBITDA from Continuing Operations is a tool that can assist management and investors in comparing our performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our underlying operations.

Adjusted Net Income is defined as net income excluding, when incurred, gains or losses that we do not believe reflect our ongoing operations, including, for example, the impacts of impairment losses, gains/losses on the sale of subsidiaries, property and facilities, transaction expenses primarily relating to acquisitions and divestitures, factory start-up costs, factory relocation expenses, executive severance, and restructuring costs.

Adjusted Net Income is a tool that can assist management and investors in comparing our performance on a consistent basis across periods by removing the impact of certain items that management believes do not directly reflect our underlying operating performance.

Adjusted Earnings Per Share is defined as earnings per share excluding, when incurred, certain per share gains or losses that we do not believe reflect our ongoing operations, including, for example, the impacts of impairment losses, gains/losses on the sale of subsidiaries, property and facilities, transaction expenses primarily relating to acquisitions and divestitures, factory start-up costs, factory relocation expenses, executive severance, and restructuring costs.

We believe that Adjusted Earnings Per Share provides important comparability of underlying operational results, allowing investors and management to access operating performance on a consistent basis from period to period.

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, and depreciation and amortization and excluding, when incurred, the impacts of certain losses or gains that we do not believe reflect our ongoing operations, including, for example, impairment losses, gains/losses on sale of subsidiaries, property and facilities, transaction expenses primarily relating to acquisitions and divestitures, factory start-up costs, factory relocation expenses, executive severance, and restructuring expenses.

Adjusted EBITDA is a tool that can assist management and investors in comparing our performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our underlying operations.

Management uses such measures to evaluate performance period over period, to analyze the underlying trends in our business, to assess our performance relative to our competitors, and to establish operational goals and forecasts that are used in allocating resources.

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Reconciliation of Non-GAAP Measures

Adjusted Net Income and EPS from Continuing Operations Calculation

For the Three and Nine Months ended September 30, 2023 and October 1, 2022

Adjusted Net Income and Adjusted Earnings per Share Calculation

For the Three Months ended March 30, 2024 and April 1, 2023

Three Months Ended

Nine Months Ended

September 30, 2023

October 1, 2022

September 30, 2023

October1,2022

Net income from continuing operations as reported per generally accepted accounting principles (GAAP)

Earnings per share from continuing operations as reported under generally accepted accounting principles (GAAP):

Loss on sale of Wheeling, IL building, net of tax

Gain on sale of Eastern corporate office building, net of tax

Severance and accrued compensation, net of tax

March 30, 2024

April 1, 2023

Net income as reported per generally accepted accounting principles (GAAP)

Earnings per share as reported under generally accepted accounting principles (GAAP):

Severance and accrued compensation

Greenwald final sale adjustment

Associated Toolmakers, Ltd.

closure, net of tax

Non-GAAP tax impact of adjustments (1)

Total adjustments (non-GAAP)

Adjusted net income from continuing operations

Adjusted earnings per share from continuing operations (non-GAAP):

A) Loss on sale of building in Wheeling, IL

B) Gain on sale of Eastern corporate office building

C) Severance expenses associated with accrued compensation and severance related to the elimination of the

Chief Operating Officer position and the departure of the former Chief Executive Officer

D) Final settlement of working capital adjustment associated with Greenwald sale

E) Associated Toolmakers, Ltd.

closure costs

Adjusted net income

Adjusted earnings per share (non-GAAP):

(1) We estimate the tax effect of the items identified to determine a non-GAAP annual effective tax rate applied to the pre-tax amount in order to calculate the non-GAAP provision for income taxes

a) Severance expenses associated with accrued compensation and severance related to the elimination of the Chief Operating Officer position and the departure of the Chief Executive Officer

b) Final settlement of working capital adjustment associated with Greenwald sale

Reconciliation of Non-GAAP Measures

Adjusted EBITDA from Continuing Operations Calculation

For the Three and Nine Months ended September 30, 2023 and October 1, 2022

Adjusted EBITDA Calculation

For the Three Months ended March 30, 2024 and April 1, 2023

Three Months Ended

Nine Months Ended

September 30, 2023

October 1, 2022

September 30, 2023

October1,2022

Net income from continuing operations as reported per generally accepted accounting principles (GAAP)

March 30, 2024

April 1, 2023

Net income as reported per generally accepted accounting principles (GAAP)

Interest expense

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Depreciation and amortization

Loss on sale of Wheeling, IL building

Gain on sale of Eastern corporate office building

Severance and accrued compensation

Greenwald final sale adjustment

Associated Toolmakers, Ltd.

closure, net of tax

Adjusted EBITDA from continuing operations

A) Loss on sale of building in Wheeling, IL

B) Gain on sale of Eastern corporate office building

C) Severance expenses associated with accrued compensation and severance related to the elimination of the

Chief Operating Officer position and the departure of the former Chief Executive Officer

D) Final settlement of working capital adjustment associated with Greenwald sale

E) Associated Toolmakers, Ltd.

closure costs

Adjusted EBITDA

a) Severance expenses associated with accrued compensation and severance related to the elimination of the Chief Operating Officer position and the departure of the Chief Executive Officer

b) Final settlement of working capital adjustment associated with Greenwald sale

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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 2. Management’s Discussion and Analysis