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Item 2. Management’s Discussion and Analysis

2024-11-05 compared with 2024-08-06 · 112 added, 85 removed, 96 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 six months ended June 29, 2024.

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”).

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

References in this Quarterly Report on Form 10-Q for the quarterly period ended June 29, 2024 (this “Form 10-Q”) to 2023, the 2023 fiscal year or fiscal 2023 mean the 52-week period ended on December 30, 2023, and references to 2024, the 2024 fiscal year or fiscal 2024 mean the 52-week period ending on December 28, 2024.

References in this Quarterly Report on Form 10-Q for the quarterly period ended September 28, 2024 (this “Form 10-Q”) to 2023, the 2023 fiscal year or fiscal 2023 mean the 52-week period ended on December 30, 2023, and references to 2024, the 2024 fiscal year or fiscal 2024 mean the 52-week period ending on December 28, 2024.

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

References to the second quarter of 2023, the second fiscal quarter of 2023 or the three months ended July 1, 2023, mean the 13-week period from April 1, 2023 to July 1, 2023.

References to the second quarter of 2024, the second fiscal quarter of 2024 or the three months ended June 29, 2024 mean the 13-week period from March 31, 2024 to June 29, 2024.

References to the first six months of 2023 or the six months ended July 1, 2023 mean the period from January 1, 2023 to July 1, 2023.

References to the first six months of 2024 or the six months ended June 29, 2024 mean the period from December 31, 2023 to June 29, 2024.

References to the third quarter of 2023, the third fiscal quarter of 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 third quarter of 2024, the third fiscal quarter of 2024 or the three months ended September 28, 2024 mean the 13-week period from June 30, 2024 to September 28, 2024.

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

References to the first nine months of 2024 or the nine months ended September 28, 2024 mean the period from December 31, 2023 to September 28, 2024.

Safe Harbor for Forward-Looking Statements

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costs and liabilities associated with environmental compliance;

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.

the impact of climate change, natural disasters, geopolitical events and elections, including a change in administration from the upcoming U.S.

presidential election, 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 the Middle East, the possible expansion of such conflicts and geopolitical consequences) or terrorist threats and the possible responses by the U.S.

and foreign governments;

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The Company undertakes no obligation to update, alter, or otherwise revise any forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events, or otherwise, except as required by law.

General Overview

Net sales in the second quarter of 2024 increased 7% to $73.2 million from $68.3 million in the corresponding period in 2023.

Net sales for the first six months of 2024 increased 0.2% to $141.1 million from $140.8 million in the corresponding period last year.

Sales increased in the second quarter of 2024 primarily due to increased demand for truck mirror assemblies of $8.0 million and returnable transport packaging products of $0.4 million, offset by lower demand for truck accessories of $3.6 million.

In the second quarter of 2024, truck mirror assemblies volume was favorably impacted by additional orders of approximately $5.0 million from two key customers due to our operational flexibility and competitive advantages.

Sales were relatively flat for the first six months of 2024 compared to the first six months of 2023 with increased demand for truck mirror assemblies of $12.2 million offset by lower demand for truck accessories of $7.6 million and returnable transport packaging products of $4.3 million.

Our backlog as of June 29, 2024 increased 43% to $107.3 million from $75.3 million as of July 1, 2023, driven by increased orders for various truck mirror assemblies and returnable transport packaging products.

Net sales of existing products declined 2% in the second quarter of 2024 and 7% for the first six months of 2024 compared to the corresponding periods in 2023.

Price increases and new products increased net sales by 9% in the second quarter of 2024 and 7% in the first six months of 2024, compared to the corresponding periods in 2023.

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

Cost of products sold increased $1.8 million, or 3%, in the second quarter of 2024 and decreased by $3.5 million, or 3% in the first six months of 2024 compared to the corresponding period in 2023.

The increase in cost of products sold in the second quarter of 2024 are primarily due to higher sales volume.

The decrease in cost of products sold in the first six months of 2024 when compared to the same period last year is primarily due to lower production volumes and other cost savings initiatives.

Additionally, the Company paid tariff costs on China-sourced products of approximately $0.6 million and $1.2 million in the second quarter of 2024 and first six months of 2024 respectively, compared to $0.5 million and $1.1 million in the second quarter of 2023 and first six months of 2023, respectively.

Recent Development

In the third quarter of 2024 we determined that the Big 3 Mold business no longer fits with our long-term strategy, and we have initiated the process of selling the business.

The Mold business is cyclical in nature, requires significant capital investment to remain competitive, and serves different markets than our other businesses.

Selling the Big 3 Mold business will allow management to focus on our core capabilities, offerings, and markets served.

In the third quarter of 2024, we determined that the Big 3 Mold business met the criteria to be held for sale and that the assets held for sale qualify for discontinued operations.

As such, the financial results of the Big 3 Mold business are reflected in our unaudited condensed consolidated statements of operations as discontinued operations for all periods presented.

Additionally, current and non-current assets and liabilities of discontinued operations are reflected in the unaudited condensed consolidated balance sheets for both periods presented.

The loss recognized in the write-down of the Big 3 Mold business to fair value in the third quarter of 2024 was $19.2 million, net of tax.

The following analysis excludes discontinued operations.

Net sales in the third quarter of 2024 increased 15% to $71.3 million from $62.0 million in the corresponding period in 2023.

Net sales for the first nine months of 2024 increased 6% to $206.1 million from $195.1 million in the corresponding period last year.

Sales increased in the third quarter of 2024 primarily due to increased demand for returnable transport packaging products, truck mirror assemblies, and truck accessories of $7.4 million, $1.2 million, and $0.7 million, respectively.

Sales increases in the first nine months of 2024 were driven by increased demand for truck mirror assemblies and returnable transport packaging products of $13.3 million and $4.6 million respectively, offset by lower demand for truck accessories of $6.9 million.

Our backlog as of September 28, 2024 increased 13% to $97.2 million from $86.2 million as of September 30, 2023, primarily driven by increased orders for various truck mirror assemblies of $11.6 million and returnable transport packaging products of $3.2 million.

Net sales of existing products increased 9% in the third quarter of 2024 and decreased 2% for the first nine months of 2024 compared to the corresponding periods in 2023.

Price increases and new products increased net sales by 5% in the third quarter of 2024 and 6% in the first nine months of 2024, compared to the corresponding periods in 2023.

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

Cost of products sold increased $6.5 million, or 14%, in the third quarter of 2024 and increased $3.8 million, or 3% in the first nine months of 2024 compared to the corresponding period in 2023 primarily due to higher sales volume, partially offset by other cost savings initiatives.

Additionally, the Company paid tariff costs on China-sourced products of approximately $0.6 million and $1.9 million in the third quarter of 2024 and first nine months of 2024 respectively, compared to $0.6 million and $1.7 million in the third quarter of 2023 and first nine months of 2023, respectively.

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

Gross margin as a percentage of sales was 25% in the second quarter of 2024 and 24% in the first six months of 2024 compared to 22% in both the second quarter and first six months of 2023.

Our gross margins in the second 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 decreased $0.1 million in the second quarter of 2024 and decreased $0.2 million in the first six months of 2024 compared to the corresponding periods in 2023 as we continue to invest in new products at our Eberhard, Velvac, and Big 3 businesses.

As a percentage of net sales, product development costs were 1.8% for the second quarter of 2024 and 1.9% for the first six months of 2024, compared to 2.1% and 2.0% for the corresponding periods in 2023.

Selling, general and administrative expenses increased $0.2 million, or 2%, in the second quarter of 2024 when compared to the second quarter of 2023 primarily due to higher payroll-related expense of $0.4 million and higher travel expenses of $0.1 million, partially offset by lower legal and professional expenses of $0.1 million, and lower selling costs of $0.2 million.

Selling and administrative expenses decreased $0.2 million, or 1% in the first six months of 2024 when compared to the corresponding period in 2023 primarily due to lower payroll-related expenses of $0.1 million, lower legal and professional expenses of $0.3 million, and lower selling expenses of $0.1 million, partially offset by higher travel and other expenses of $0.3 million.

Interest expense increased $0.1 million in the second quarter of 2024 and $0.2 million in the first six months of 2024 compared to the corresponding period in 2023 due to higher interest rates, partially offset by lower principal balances.

Other income and expense decreased $0.3 million in the second quarter of 2024 and increased $0.4 million in the first six months of 2024 when compared to the corresponding periods in 2023.

The decrease in other income of $0.3 million in the second quarter of 2024 was primarily driven by a $1.6 million favorable adjustment for the final settlement of our swap agreement with Santander Bank, N.A.

(“Santander”) in the second quarter of 2023, partially offset by $1.4 million expense associated with the closure of Associated Toolmakers, Ltd.

in the second quarter of 2023.

The increase in other income of $0.4 million for the first six months of 2024 when compared to the corresponding period in 2023 was primarily driven by $1.4 million of expense associated with the closure of Associated Toolmakers, Ltd.

in the second quarter of 2023, an unfavorable final working capital adjustment of $0.4 million related to the sale of the Greenwald business in the first quarter of 2023, 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.

Net income for the second quarter of fiscal 2024 was $3.5 million, or $0.56 per diluted share compared to net income of $1.4 million, or $0.22 per diluted share, for the comparable period in 2023.

In the first six months of 2024 net income was $5.5 million, or $0.87 per diluted share compared to net income of $2.0 million, or $0.32 per diluted share for the comparable period in 2023.

Gross margin as a percentage of sales was 25.5% in the third quarter of 2024 and 25.2% in the first nine months of 2024 compared to 24.9% in the third quarter of 2023 and 22.9% in the first nine months of 2023.

Our gross margins in the third 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 decreased $0.3 million in the third quarter of 2024 and decreased $0.5 million in the first nine months of 2024 compared to the corresponding periods in 2023 as we continue to invest in new products at our Eberhard, Velvac, and Big 3 businesses.

As a percentage of net sales, product development costs were 1.5% for the third quarter of 2024 and 1.8% for the first nine months of 2024, compared to 2.3% and 2.2% for the corresponding periods in 2023.

Selling, general and administrative expenses increased $1.9 million, or 22.1%, in the third quarter of 2024 when compared to the third quarter of 2023 primarily due to higher payroll-related expenses of $1.2 million, legal and professional expenses of $0.3 million, travel expenses of $0.1 million, and other selling and administrative expenses of $0.3 million.

Selling and administrative expenses increased $2.0 million, or 6.8%, in the first nine months of 2024 when compared to the corresponding period in 2023 primarily due to higher payroll-related expenses of $1.7 million and other administrative costs.

Interest expense decreased $0.1 million in the third quarter of 2024 and was flat in the first nine months of 2024 compared to the corresponding periods in 2023 due to lower principal balances, partially offset by higher interest rates.

Other income and expense increased $0.1 million in the third quarter of 2024 and decreased $1.1 million in the first nine months of 2024 when compared to the corresponding periods in 2023.

The increase in other income and expense of $0.1 million in the third quarter of 2024 was primarily driven by lower pension expense of $0.1 million when compared to the third quarter of 2023.

The decrease in other income and expense of $1.1 million for the first nine months of 2024 when compared to the corresponding period in 2023 was primarily driven by $0.3 million lower pension expense in the second quarter of 2023, and an unfavorable final working capital adjustment of $0.4 million related to the sale of the Greenwald business in the first quarter of 2023, 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.

Net income for the third quarter of fiscal 2024 was $4.7 million, or $0.75 per diluted share compared to net income of $3.5 million, or $0.55 per diluted share, for the comparable period in 2023.

In the first nine months of 2024 net income was $11.7 million, or $1.87 per diluted share compared to net income of $7.8 million, or $1.24 per diluted share for the comparable period in 2023.

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

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Three Months Ended

Six Months Ended

June 29, 2024

Nine Months Ended

September 28, 2024

September 30, 2023

September 28, 2024

September 30, 2023

Cost of products sold

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Operating Profit

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

June 29, 2024

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

September 28, 2024

Operating Profit

Liquidity and Sources of Capital

The Company generated $10.3 million of cash from operations during the first six months of fiscal 2024 compared to generating $13.6 million during the first six months of fiscal 2023.

Cash flow from operations in the first six 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 $2.8 million and $2.0 million for the first six months of 2024 and 2023, respectively.

As of June 29, 2024, there was approximately $3.0 million of outstanding commitments for capital expenditures.

The Company generated $8.3 million of cash from operations during the first nine months of fiscal 2024 compared to generating $18.2 million during the first nine months of fiscal 2023.

Cash flow from operations in the first nine months of 2024 was lower when compared to the corresponding period in 2023 primarily due to increases in accounts receivable of $11.7 million due to increases in revenue in the third quarter of 2024 when compared to the corresponding period in 2023 and approximately $3.0 million in accounts receivable due to the pre-billing to cover material costs on a specific job.

Additions to property, plant, and equipment were $7.6 million and $4.1 million for the first nine months of 2024 and 2023, respectively.

As of September 28, 2024, there were approximately $4.0 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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Net cash provided by operating activities

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

Change in working capital impact on net cash

used in operating activities

Net cash used in investing activities

Net cash used in financing activities

Inventories of $56.9 million as of June 29, 2024 declined by $2.4 million, or 4.0%, when compared to $59.3 million at the end of fiscal year 2023 and declined $0.6 million, or 1.0%, when compared to $57.5 million at the end of the second quarter of fiscal 2023.

Accounts receivable, less allowances, were $42.3 million as of June 29, 2024, as compared to $37.1 million at 2023 fiscal year end and $42.0 million at the end of the second quarter of fiscal 2023.

Inventories of $58.1 million as of September 28, 2024 declined by $0.3 million, or 0.5%, when compared to $59.3 million at the end of fiscal year 2023 and declined $1.9 million, or 3.2%, when compared to $60.0 million at the end of the third quarter of fiscal 2023.

Accounts receivable, less allowances, were $46.0 million as of September 28, 2024, as compared to $34.2 million at 2023 fiscal year end and $40.0 million at the end of the third quarter of fiscal 2023.

Accounts receivable as of September 28, 2024 included approximately $3.0 million for pre-billing to cover material costs on a specific job and adversely impacted average days sales in accounts receivable by 4 days.

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.

See Note G Debt , for additional information regarding the terms of the Credit Agreement, including repayment terms, interest rates and applicable loan covenants.

See Note H Debt , for additional information regarding the terms of the Credit Agreement, including repayment terms, interest rates, and applicable loan covenants.

Under the terms of the Credit Agreement, the Company is subject to restrictive covenants that limit our ability to, among other things, incur additional indebtedness, pay dividends, or make other distributions, and consolidate, merge, sell or otherwise dispose of assets, as well as financial covenants that require us to maintain a fixed charge coverage ratio and a maximum senior net leverage ratio.

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 of our covenants as of June 29, 2024 and had no outstanding borrowings under the revolving commitment portion of the credit facility as of such 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 June 29, 2024) and separately in the long-term (i.e., beyond the next 12 months).

We were in compliance with all of our covenants as of September 28, 2024 and had no outstanding borrowings under the revolving commitment portion of the credit facility as of such date.

On September 6, 2024, the Company drew down $3.0 million on its revolving credit facility to support ongoing working capital requirements.

The Company has $27.0 million available on its revolving line of credit.

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 28, 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 second 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.

As of the end of the third 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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The non-GAAP financial measures we provide in this report should be viewed in addition to, and not as an alternative for, results prepared in accordance with U.S.

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

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

To supplement the condensed 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, Adjusted EBITDA from Continuing Operations, Adjusted EBITDA from Discontinued Operations 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.

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

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 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 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 EBITDA from Discontinued Operations is defined as net income from discontinued 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 Discontinued 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 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.

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Reconciliation of Non-GAAP Measures

Adjusted Net Income and Adjusted Earnings per Share Calculation

For the Three and Six Months ended June 29, 2024 and July 1, 2023

Adjusted Net Income from Continuing Operations and Adjusted Earnings per Share

from Continuing Operations Calculation

For the Three and Nine Months ended September 28, 2024 and September 30, 2023

Three Months Ended

Six Months Ended

June 29, 2024

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

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

Nine Months Ended

September 28, 2024

September 30, 2023

September 28, 2024

September 30, 2023

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):

Severance and accrued compensation

Greenwald final sale adjustment

Associated Toolmakers, Ltd.

Non-GAAP tax impact of adjustments (1)

Total adjustments (non-GAAP)

Adjusted net income

Adjusted earnings per share (non-GAAP):

Adjusted net income from continuing operations (non-GAAP)

Adjusted earnings per share from continuing operations (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

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

Final settlement of working capital adjustment associated with Greenwald sale

Associated Toolmakers, Ltd.

closure costs

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 Calculation

For the Three and Six Months ended June 29, 2024 and July 1, 2023

Calculations of Adjusted EBITDA from Continuing Operations, Adjusted EBITDA from Discontinued Operations and Adjusted EBITDA

For the Three and Nine Months ended September 28, 2024 and September 30, 2023

Three Months Ended

Six Months Ended

June 29, 2024

Nine Months Ended

September 28,

September 30,

September 28,

September 30,

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

Interest expense

Provision for income taxes

Depreciation and amortization

Severance and accrued compensation

Greenwald final sale adjustment

Adjusted EBITDA from continuing operations (non-GAAP)

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

Interest expense

Provision for income taxes

Depreciation and amortization

Loss on classification as held for sale

Adjusted EBITDA from discontinued operations (non-GAAP)

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

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Greenwald final sale adjustment

Associated Toolmakers, Ltd.

Adjusted EBITDA

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

Final settlement of working capital adjustment associated with Greenwald sale

Associated Toolmakers, Ltd.

closure costs

Loss on classification as held for sale

Adjusted EBITDA (non-GAAP)

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

c) Impact of classifying Big 3 Mold business as held for 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