[X] |
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended June 30, 2018
|
[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ________________ to _______________
|
Connecticut
|
06-0330020
|
(State or other jurisdiction of
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(I.R.S. Employer
|
incorporation or organization)
|
Identification No.)
|
112 Bridge Street, Naugatuck, Connecticut
|
06770
|
(Address of principal executive offices)
|
(Zip Code)
|
Large accelerated filer [ ]
|
Accelerated filer [X]
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Non-accelerated filer [ ] (Do not check if a smaller reporting company)
|
Smaller reporting company [ ]
|
Emerging growth company [ ]
|
Page
|
||
PART I
|
||
Financial Statements and Footnotes
|
||
22.
|
||
PART II
|
||
22.
|
||
23.
|
||
23.
|
||
23.
|
||
23.
|
||
23.
|
||
24.
|
Six Months Ended
|
Three Months Ended
|
|||||||||||||||
June 30, 2018
|
July 1, 2017
|
June 30, 2018
|
July 1, 2017
|
|||||||||||||
Net sales
|
$
|
120,305,849
|
$
|
94,088,038
|
$
|
60,860,852
|
$
|
58,044,743
|
||||||||
Cost of products sold
|
(90,531,018
|
)
|
(69,829,465
|
)
|
(45,807,496
|
)
|
(42,530,749
|
)
|
||||||||
Gross margin
|
29,774,831
|
24,258,573
|
15,053,356
|
15,513,994
|
||||||||||||
Product development expenses
|
(3,084,258
|
)
|
(2,313,720
|
)
|
(1,581,719
|
)
|
(1,683,309
|
)
|
||||||||
Selling and administrative expenses
|
(18,130,180
|
)
|
(17,222,190
|
)
|
(9,083,131
|
)
|
(11,344,223
|
)
|
||||||||
Operating profit
|
8,560,393
|
4,722,663
|
4,388,506
|
2,486,462
|
||||||||||||
Interest expense
|
(608,390
|
)
|
(332,678
|
)
|
(312,060
|
)
|
(311,654
|
)
|
||||||||
Other income
|
444,500
|
55,765
|
225,769
|
36,112
|
||||||||||||
Income before income taxes
|
8,396,503
|
4,445,750
|
4,302,215
|
2,210,920
|
||||||||||||
Income taxes
|
2,037,831
|
1,462,207
|
1,043,738
|
744,518
|
||||||||||||
Net income
|
$
|
6,358,672
|
$
|
2,983,543
|
$
|
3,258,477
|
$
|
1,466,402
|
||||||||
Earnings per Share:
|
||||||||||||||||
Basic
|
$
|
1.02
|
$
|
.48
|
$
|
.52
|
$
|
.23
|
||||||||
Diluted
|
$
|
1.01
|
$
|
.47
|
$
|
.52
|
$
|
.23
|
||||||||
Cash dividends per share:
|
$
|
.22
|
$
|
.22
|
$
|
.11
|
$
|
.11
|
Six Months Ended
|
Three Months Ended
|
|||||||||||||||
June 30, 2018
|
July 1, 2017
|
June 30, 2018
|
July 1, 2017
|
|||||||||||||
Net income
|
$
|
6,358,672
|
$
|
2,983,543
|
$
|
3,258,477
|
$
|
1,466,402
|
||||||||
Other comprehensive income/(loss):
|
||||||||||||||||
Change in foreign currency translation
|
(274,318
|
)
|
883,823
|
(883,246
|
)
|
411,852
|
||||||||||
Change in marketable securities, net of
|
||||||||||||||||
tax benefit of:
|
||||||||||||||||
2017 - $ $5,553 and $6,345
|
—
|
10,169
|
—
|
11,620
|
||||||||||||
Change in fair value of interest rate swap, net of tax benefit/(cost) of:
2018 – $59,166 and $19,202 respectively
2017 – $41,680
|
226,645
|
(68,005
|
)
|
60,806
|
(68,005
|
)
|
||||||||||
Change in pension and postretirement benefit costs, net of taxes of:
2018 – $131,685 and $65,843 respectively
2017 – $225,727 and $112,864, respectively
|
445,449
|
413,366
|
222,724
|
206,683
|
||||||||||||
Total other comprehensive income
|
397,776
|
1,239,353
|
(599,716
|
)
|
562,150
|
|||||||||||
Comprehensive income
|
$
|
6,756,448
|
$
|
4,222,896
|
$
|
2,658,761
|
$
|
2,028,552
|
ASSETS
|
June 30, 2018
|
December 30, 2017
|
||||||
(Unaudited)
|
||||||||
Current Assets
|
||||||||
Cash and cash equivalents
|
$
|
18,979,924
|
$
|
22,275,477
|
||||
Accounts receivable, less allowances: $667,000 - 2018; $389,000 - 2017
|
30,449,373
|
27,119,910
|
||||||
Inventories
|
49,889,085
|
47,268,757
|
||||||
Prepaid expenses and other assets
|
3,839,937
|
3,401,456
|
||||||
Total Current Assets
|
103,158,319
|
100,065,600
|
||||||
Property, Plant and Equipment
|
72,266,184
|
70,109,077
|
||||||
Accumulated depreciation
|
(42,756,081
|
)
|
(41,075,121
|
)
|
||||
29,510,103
|
29,033,956
|
|||||||
Goodwill
|
34,874,518
|
32,228,891
|
||||||
Trademarks
|
3,686,064
|
3,686,063
|
||||||
Patents and other intangibles net of accumulated amortization
|
11,018,808
|
9,433,596
|
||||||
Deferred income taxes
|
1,840,724
|
2,010,291
|
||||||
51,420,114
|
47,358,841
|
|||||||
TOTAL ASSETS
|
$
|
184,088,536
|
$
|
176,458,397
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
Current Liabilities
|
||||||||
Accounts payable
|
$
|
18,075,133
|
$
|
14,712,414
|
||||
Accrued compensation
|
2,844,041
|
4,376,211
|
||||||
Other accrued expenses
|
4,046,863
|
3,606,057
|
||||||
Contingent liability
|
2,070,000
|
2,070,000
|
||||||
Current portion of long-term debt
|
7,550,000
|
6,550,000
|
||||||
Total Current Liabilities
|
34,586,037
|
31,314,682
|
||||||
Deferred income taxes
|
1,723,543
|
1,723,543
|
||||||
Other long-term liabilities
|
358,982
|
358,982
|
||||||
Long-term debt, less current portion
|
27,900,000
|
28,675,000
|
||||||
Accrued postretirement benefits
|
1,000,409
|
1,032,171
|
||||||
Accrued pension cost
|
25,994,635
|
26,423,429
|
||||||
Shareholders' Equity
|
||||||||
Preferred Stock, no par value:
|
||||||||
Authorized and unissued: 2,000,000 shares
|
||||||||
Common Stock, no par value, Authorized: 50,000,000 shares
|
29,715,945
|
29,501,123
|
||||||
Issued: 8,961,640 shares in 2018 and 8,957,974 shares in 2017
|
||||||||
Treasury Stock: 2,694,729 shares in 2018 and 2017
|
(19,105,723
|
)
|
(19,105,723
|
)
|
||||
Retained earnings
|
102,903,644
|
97,921,903
|
||||||
Accumulated other comprehensive income (loss):
|
||||||||
Foreign currency translation
|
(1,217,511
|
)
|
(943,193
|
)
|
||||
Unrealized gain on interest rate swap, net of tax
|
268,402
|
41,757
|
||||||
Unrecognized net pension and postretirement benefit costs, net of tax
|
(20,039,828
|
)
|
(20,485,277
|
)
|
||||
Accumulated other comprehensive loss
|
(20,988,937
|
)
|
(21,386,713
|
)
|
||||
Total Shareholders' Equity
|
92,524,929
|
86,930,590
|
||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
$
|
184,088,536
|
$
|
176,458,397
|
Six Months Ended
|
||||||||
June 30, 2018
|
July 1, 2017
|
|||||||
Operating Activities
|
||||||||
Net income
|
$
|
6,358,672
|
$
|
2,983,543
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
2,314,985
|
1,536,319
|
||||||
Unrecognized pension and postretirement benefits
|
116,578
|
231,005
|
||||||
Loss on sale of equipment and other assets
|
50,348
|
48,618
|
||||||
Provision for doubtful accounts
|
201,552
|
24,866
|
||||||
Issuance of Common Stock for directors' fees
|
214,821
|
81,970
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(3,717,778
|
)
|
(4,519,266
|
)
|
||||
Inventories
|
(2,658,358
|
)
|
3,249,443
|
|||||
Prepaid expenses and other
|
(339,385
|
)
|
(1,636,168
|
)
|
||||
Other assets
|
(58,426
|
)
|
970,284
|
|||||
Accounts payable
|
3,712,586
|
956,626
|
||||||
Accrued compensation
|
(1,527,545
|
)
|
(822,861
|
)
|
||||
Other accrued expenses
|
946,368
|
3,204,161
|
||||||
Net cash provided by operating activities
|
5,614,417
|
6,308,540
|
||||||
Investing Activities
|
||||||||
Marketable securities
|
—
|
(318,039
|
)
|
|||||
Business Acquisition, net of cash acquired
|
(4,994,685
|
)
|
(42,148,000
|
)
|
||||
Capitalized software
|
(1,444,459
|
)
|
—
|
|||||
Purchases of property, plant and equipment
|
(1,236,375
|
)
|
(708,499
|
)
|
||||
Net cash used in investing activities
|
(7,675,519
|
)
|
(43,174,538
|
)
|
||||
Financing Activities
|
||||||||
Proceeds from issuance of long-term debt
|
—
|
31,000,000
|
||||||
Proceeds from short term borrowings
|
7,000,000
|
6,614,611
|
||||||
Payments on revolving credit note
|
(6,000,000
|
)
|
(1,614,611
|
)
|
||||
Principal payments on long-term debt
|
(775,000
|
)
|
(1,785,714
|
)
|
||||
Dividends paid
|
(1,378,456
|
)
|
(1,376,914
|
)
|
||||
Net cash used in financing activities
|
(1,153,456
|
)
|
32,837,372
|
|||||
Effect of exchange rate changes on cash
|
(80,996
|
)
|
382,052
|
|||||
Net change in cash and cash equivalents
|
(3,295,553
|
)
|
(3,646,574
|
)
|
||||
Cash and cash equivalents at beginning of period
|
22,275,477
|
22,725,376
|
||||||
Cash and cash equivalents at end of period
|
$
|
18,979,924
|
$
|
19,078,802
|
Six Months Ended
|
Three Months Ended
|
|||||||||||||||
June 30, 2018
|
July 1, 2017
|
June 30, 2018
|
July 1, 2017
|
|||||||||||||
Basic:
|
||||||||||||||||
Weighted average shares outstanding
|
6,264,435
|
6,257,482
|
6,265,315
|
6,258,467
|
||||||||||||
Diluted:
|
||||||||||||||||
Weighted average shares outstanding
|
6,264,435
|
6,257,482
|
6,265,315
|
6,258,467
|
||||||||||||
Dilutive stock options
|
27,002
|
13,436
|
27,002
|
26,872
|
||||||||||||
Denominator for diluted earnings per share
|
6,291,437
|
6,270,918
|
6,292,317
|
6,285,339
|
June 30, 2018
|
December 30, 2017
|
|||||||
Raw material and component parts
|
$
|
15,126,400
|
$
|
14,331,915
|
||||
Work in process
|
8,146,245
|
7,718,379
|
||||||
Finished goods
|
26,616,440
|
25,218,463
|
||||||
Total inventories
|
$
|
49,889,085
|
$
|
47,268,757
|
Six Months Ended
|
Three Months Ended
|
|||||||||||||||
June 30, 2018
|
July 1, 2017
|
June 30, 2018
|
July 1, 2017
|
|||||||||||||
Revenues:
|
||||||||||||||||
Sales to unaffiliated customers:
|
||||||||||||||||
Industrial Hardware
|
$
|
72,410,627
|
$
|
50,541,057
|
$
|
35,853,583
|
$
|
35,098,231
|
||||||||
Security Products
|
33,007,356
|
30,117,055
|
17,888,028
|
16,199,567
|
||||||||||||
Metal Products
|
14,887,866
|
13,429,926
|
7,119,241
|
6,746,945
|
||||||||||||
$
|
120,305,849
|
$
|
94,088,038
|
$
|
60,860,852
|
$
|
58,044,743
|
|||||||||
Income before income taxes:
|
||||||||||||||||
Industrial Hardware
|
$
|
5,284,529
|
$
|
1,064,263
|
$
|
2,518,086
|
$
|
497,471
|
||||||||
Security Products
|
2,649,180
|
2,685,795
|
1,664,041
|
1,691,358
|
||||||||||||
Metal Products
|
626,684
|
972,605
|
206,379
|
297,633
|
||||||||||||
Operating Profit
|
8,560,393
|
4,722,663
|
4,388,506
|
2,486,462
|
||||||||||||
Interest expense
|
(608,390
|
)
|
(332,678
|
)
|
(312,060
|
)
|
(311,654
|
)
|
||||||||
Other income
|
444,500
|
55,765
|
225,769
|
36,112
|
||||||||||||
$
|
8,396,503
|
$
|
4,445,750
|
$
|
4,302,215
|
$
|
2,210,920
|
Pension Benefits
|
||||||||||||||||
Six Months Ended
|
Three Months Ended
|
|||||||||||||||
June 30, 2018
|
July 1, 2017
|
June 30, 2018
|
July 1, 2017
|
|||||||||||||
Service cost
|
$
|
659,922
|
$
|
634,718
|
$
|
329,901
|
$
|
317,358
|
||||||||
Interest cost
|
1,553,583
|
1,582,112
|
776,791
|
791,055
|
||||||||||||
Expected return on plan assets
|
(2,609,758
|
)
|
(2,391,787
|
)
|
(1,304,878
|
)
|
(1,195,892
|
)
|
||||||||
Amortization of prior service cost
|
65,381
|
72,874
|
32,690
|
36,436
|
||||||||||||
Amortization of the net loss
|
555,056
|
615,743
|
277,528
|
307,873
|
||||||||||||
Net periodic benefit cost
|
$
|
224,184
|
$
|
513,660
|
$
|
112,032
|
$
|
256,830
|
Postretirement Benefits
|
||||||||||||||||
Six Months Ended
|
Three Months Ended
|
|||||||||||||||
June 30, 2018
|
July 1, 2017
|
June 30, 2018
|
July 1, 2017
|
|||||||||||||
Service cost
|
$
|
18,512
|
$
|
13,695
|
$
|
9,256
|
$
|
6,848
|
||||||||
Interest cost
|
38,581
|
40,414
|
19,291
|
20,207
|
||||||||||||
Expected return on plan assets
|
(27,825
|
)
|
(25,747
|
)
|
(13,912
|
)
|
(12,873
|
)
|
||||||||
Amortization of prior service cost
|
(2,536
|
)
|
(10,722
|
)
|
(1,268
|
)
|
(5,361
|
)
|
||||||||
Amortization of the net loss
|
(32,796
|
)
|
(38,801
|
)
|
(16,398
|
)
|
(19,401
|
)
|
||||||||
Net periodic benefit cost
|
$
|
(6,064
|
)
|
$
|
(21,161
|
)
|
$
|
(3,031
|
)
|
$
|
(10,580
|
)
|
Six Months Ended
|
Three Months Ended
|
|||||||||||||||
June 30, 2018
|
July 1, 2017
|
June 30, 2018
|
July 1, 2017
|
|||||||||||||
Regular matching contribution
|
$
|
306,121
|
$
|
235,423
|
$
|
140,106
|
$
|
118,947
|
||||||||
Transitional credit contribution
|
205,614
|
231,072
|
81,506
|
95,702
|
||||||||||||
Non-discretionary contribution
|
540,831
|
323,232
|
16,458
|
15,664
|
||||||||||||
Total contributions for the period
|
$
|
1,052,566
|
$
|
789,727
|
$
|
238,070
|
$
|
230,313
|
Six Months Ended
June 30, 2018
|
Year Ended
December 30, 2017
|
|||||||||||||||
Units
|
Weighted - Average Exercise Price
|
Units
|
Weighted - Average Exercise Price
|
|||||||||||||
Outstanding at beginning of period
|
141,500
|
$
|
20.36
|
--
|
$
|
--
|
||||||||||
Issued
|
51,000
|
24.90
|
149,500
|
20.39
|
||||||||||||
Forfeited
|
(2,000
|
)
|
19.10
|
(8,000
|
)
|
21.10
|
||||||||||
Outstanding at end of period
|
190,500
|
21.44
|
141,500
|
20.36
|
SARs Outstanding and Exercisable
|
||||||||||||||||||||||||||
Range of Exercise Prices
|
Outstanding as of
June 30, 2018
|
Weighted- Average Remaining Contractual Life
|
Weighted- Average Exercise Price
|
Exercisable as of
June 30, 2018
|
Weighted- Average Remaining Contractual Life
|
Weighted- Average Exercise Price
|
||||||||||||||||||||
$
|
19.10-24.90
|
190,500
|
4.0
|
$
|
21.44
|
20,670
|
3.7
|
$
|
19.10
|
Six Months Ended
June 30, 2018
|
Year Ended
December 30, 2017
|
|||||||||||||||
Shares
|
Weighted - Average Exercise Price
|
Shares
|
Weighted - Average Exercise Price
|
|||||||||||||
Outstanding at beginning of period
|
25,000
|
$
|
—
|
—
|
$
|
—
|
||||||||||
Issued
|
—
|
—
|
25,000
|
—
|
||||||||||||
Forfeited
|
—
|
—
|
—
|
—
|
||||||||||||
Outstanding at end of period
|
25,000
|
—
|
25,000
|
—
|
||||||||||||
Restricted Stock Grants Outstanding and Exercisable
|
||||||||||||||||||||||||||
Range of Exercise Prices
|
Outstanding as of
June 30, 2018
|
Weighted- Average Remaining Contractual Life
|
Weighted- Average Exercise Price
|
Exercisable as of
June 30, 2018
|
Weighted- Average Remaining Contractual Life
|
Weighted- Average Exercise Price
|
||||||||||||||||||||
$
|
0.00
|
25,000
|
3.8
|
—
|
—
|
—
|
—
|
Fair Value
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Financial Receivable
Interest rate swap
|
$
|
353,161
|
$
|
—
|
$
|
353,161
|
$
|
—
|
||||||||
Total assets
|
$
|
353,161
|
$
|
—
|
$
|
353,161
|
$
|
—
|
Asset Class/Description
|
Amount
|
Weighted-average Period in Years
|
||||||
Patents, technology, and licenses
|
||||||||
Customer relationships
|
$
|
689,675
|
8.3
|
|||||
Intellectual property
|
586,762
|
8.3
|
||||||
Non-compete agreements
|
52,570
|
8.3
|
||||||
$
|
1,329,007
|
8.3
|
Three Months Ended June 30, 2018
|
||||||||||||||||
Industrial
|
Security
|
Metal
|
||||||||||||||
Hardware
|
Products
|
Products
|
Total
|
|||||||||||||
Net sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||||
Cost of products sold
|
75.3
|
%
|
70.3
|
%
|
87.5
|
%
|
75.3
|
%
|
||||||||
Gross margin
|
24.7
|
%
|
29.7
|
%
|
12.5
|
%
|
24.7
|
%
|
||||||||
Product development expense
|
3.1
|
%
|
2.6
|
%
|
—
|
2.6
|
%
|
|||||||||
Selling and administrative expense
|
14.6
|
%
|
17.8
|
%
|
9.6
|
%
|
14.9
|
%
|
||||||||
Operating profit
|
7.0
|
%
|
9.3
|
%
|
2.9
|
%
|
7.2
|
%
|
||||||||
Three Months Ended July 1, 2017
|
||||||||||||||||
Industrial
|
Security
|
Metal
|
||||||||||||||
Hardware
|
Products
|
Products
|
Total
|
|||||||||||||
Net sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||||
Cost of products sold
|
73.4
|
%
|
68.9
|
%
|
83.3
|
%
|
73.3
|
%
|
||||||||
Gross margin
|
26.6
|
%
|
31.1
|
%
|
16.7
|
%
|
26.7
|
%
|
||||||||
Product development expense
|
3.6
|
%
|
2.7
|
%
|
—
|
2.9
|
%
|
|||||||||
Selling and administrative expense
|
21.6
|
%
|
18.0
|
%
|
12.3
|
%
|
19.5
|
%
|
||||||||
Operating profit
|
1.4
|
%
|
10.4
|
%
|
4.4
|
%
|
4.3
|
%
|
Industrial
|
Security
|
Metal
|
||||||||||||||
Hardware
|
Products
|
Products
|
Total
|
|||||||||||||
Net sales
|
$
|
755
|
$
|
1,689
|
$
|
372
|
$
|
2,816
|
||||||||
Volume
|
-0.3
|
%
|
5.9
|
%
|
-9.0
|
%
|
0.4
|
%
|
||||||||
Prices
|
1.0
|
%
|
0.6
|
%
|
2.1
|
%
|
1.0
|
%
|
||||||||
New products
|
1.5
|
%
|
3.9
|
%
|
12.4
|
%
|
3.5
|
%
|
||||||||
2.2
|
%
|
10.4
|
%
|
5.5
|
%
|
4.9
|
%
|
|||||||||
Operating profit
|
$
|
2,020
|
$
|
(27
|
)
|
$
|
(91
|
)
|
$
|
1,902
|
||||||
406.5
|
%
|
-1.6
|
%
|
-30.7
|
%
|
76.5
|
%
|
|||||||||
Six Months Ended June 30, 2018
|
||||||||||||||||
Industrial
|
Security
|
Metal
|
||||||||||||||
Hardware
|
Products
|
Products
|
Total
|
|||||||||||||
Net sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||||
Cost of products sold
|
75.1
|
%
|
70.6
|
%
|
86.5
|
%
|
75.2
|
%
|
||||||||
Gross margin
|
24.9
|
%
|
29.4
|
%
|
13.5
|
%
|
24.8
|
%
|
||||||||
Product development expense
|
2.9
|
%
|
2.9
|
%
|
—
|
2.6
|
%
|
|||||||||
Selling and administrative expense
|
14.7
|
%
|
18.5
|
%
|
9.3
|
%
|
15.1
|
%
|
||||||||
Operating profit
|
7.3
|
%
|
8.0
|
%
|
4.2
|
%
|
7.1
|
%
|
||||||||
Six Months Ended July 1, 2017
|
||||||||||||||||
Industrial
|
Security
|
Metal
|
||||||||||||||
Hardware
|
Products
|
Products
|
Total
|
|||||||||||||
Net sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||||
Cost of products sold
|
74.8
|
%
|
69.4
|
%
|
82.7
|
%
|
74.2
|
%
|
||||||||
Gross margin
|
25.2
|
%
|
30.6
|
%
|
17.3
|
%
|
25.8
|
%
|
||||||||
Product development expense
|
2.8
|
%
|
2.9
|
%
|
—
|
2.5
|
%
|
|||||||||
Selling and administrative expense
|
20.3
|
%
|
18.8
|
%
|
10.0
|
%
|
18.3
|
%
|
||||||||
Operating profit
|
2.1
|
%
|
8.9
|
%
|
7.3
|
%
|
5.0
|
%
|
Industrial
|
Security
|
Metal
|
||||||||||||||
Hardware
|
Products
|
Products
|
Total
|
|||||||||||||
Net sales
|
$
|
21,870
|
$
|
2,890
|
$
|
1,458
|
$
|
26,218
|
||||||||
Volume
|
40.9
|
%
|
4.8
|
%
|
-6.8
|
%
|
22.5
|
%
|
||||||||
Prices
|
0.8
|
%
|
0.6
|
%
|
2.2
|
%
|
1.0
|
%
|
||||||||
New products
|
1.6
|
%
|
4.2
|
%
|
15.4
|
%
|
4.4
|
%
|
||||||||
43.3
|
%
|
9.6
|
%
|
10.8
|
%
|
27.9
|
%
|
|||||||||
Operating profit
|
$
|
4,221
|
$
|
(37
|
)
|
$
|
(346
|
)
|
$
|
3,838
|
||||||
396.7
|
%
|
-1.4
|
%
|
-35.6
|
%
|
81.3
|
%
|
Second
Quarter
2018
|
Second
Quarter
2017
|
Year
End
2017
|
||||||||||
Current ratio
|
3.0
|
3.2
|
3.2
|
|||||||||
Average days' sales in accounts receivable
|
46
|
56
|
46
|
|||||||||
Inventory turnover
|
3.6
|
3.3
|
3.4
|
|||||||||
Total debt to shareholders' equity
|
38.3
|
%
|
42.2
|
%
|
40.5
|
%
|
Second
|
Second
|
Year
|
||||||||||
Quarter
|
Quarter
|
End
|
||||||||||
2018
|
2017
|
2017
|
||||||||||
Cash and cash equivalents
|
||||||||||||
- Held in the United States
|
$
|
4.1
|
$
|
6.4
|
$
|
7.9
|
||||||
- Held by a foreign subsidiary
|
14.9
|
12.6
|
14.4
|
|||||||||
19.0
|
19.0
|
22.3
|
||||||||||
Working capital
|
68.6
|
66.3
|
68.8
|
|||||||||
Net cash provided by operating activities
|
5.6
|
6.3
|
11.2
|
|||||||||
Change in working capital impact on net cash
(used) in operating activities
|
(3.5
|
)
|
1.4
|
2.4
|
||||||||
Net cash (used) in investing activities
|
(7.7
|
)
|
(43.2
|
)
|
(44.7
|
)
|
||||||
Net cash (used) in financing activities
|
(1.2
|
)
|
32.8
|
30.7
|
THE EASTERN COMPANY
|
|
(Registrant)
|
|
DATE: August 6, 2018
|
/s/August M. Vlak
|
August M. Vlak
President and Chief Executive Officer
|
|
DATE: August 6, 2018
|
/s/John L. Sullivan III
|
John L. Sullivan III
Vice President and Chief Financial Officer
|
|
1.
|
I have reviewed this report on Form 10-Q of The Eastern Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
1.
|
I have reviewed this report on Form 10-Q of The Eastern Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
1) |
The Company's Quarterly Report on Form 10-Q for the Period ended June 30, 2018, and to which this certification is attached as Exhibit 32 (the "Periodic Report") fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
|
2) |
The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
By: /s/August M. Vlak
|
|
August M. Vlak
CEO
|
|
By: /s/John L. Sullivan III
|
|
John L. Sullivan III
CFO
|
|
Document and Entity Information |
6 Months Ended |
---|---|
Jun. 30, 2018
shares
| |
Document and Entity Information [Abstract] | |
Entity Registrant Name | EASTERN CO |
Entity Central Index Key | 0000031107 |
Current Fiscal Year End Date | --12-29 |
Entity Well-known Seasoned Issuer | Yes |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Filer Category | Accelerated Filer |
Entity Common Stock, Shares Outstanding | 6,266,911 |
Document Fiscal Year Focus | 2018 |
Document Fiscal Period Focus | Q2 |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | Jun. 30, 2018 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jul. 01, 2017 |
Jun. 30, 2018 |
Jul. 01, 2017 |
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) [Abstract] | ||||
Net sales | $ 60,860,852 | $ 58,044,743 | $ 120,305,849 | $ 94,088,038 |
Cost of products sold | (45,807,496) | (42,530,749) | (90,531,018) | (69,829,465) |
Gross margin | 15,053,356 | 15,513,994 | 29,774,831 | 24,258,573 |
Product development expenses | (1,581,719) | (1,683,309) | (3,084,258) | (2,313,720) |
Selling and administrative expenses | (9,083,131) | (11,344,223) | (18,130,180) | (17,222,190) |
Operating profit | 4,388,506 | 2,486,462 | 8,560,393 | 4,722,663 |
Interest expense | (312,060) | (311,654) | (608,390) | (332,678) |
Other income | 225,769 | 36,112 | 444,500 | 55,765 |
Income before income taxes | 4,302,215 | 2,210,920 | 8,396,503 | 4,445,750 |
Income taxes | 1,043,738 | 744,518 | 2,037,831 | 1,462,207 |
Net income | $ 3,258,477 | $ 1,466,402 | $ 6,358,672 | $ 2,983,543 |
Earnings per Share: | ||||
Basic (in dollars per share) | $ 0.52 | $ 0.23 | $ 1.02 | $ 0.48 |
Diluted (in dollars per share) | 0.52 | 0.23 | 1.01 | 0.47 |
Cash dividends per share: (in dollars per share) | $ 0.11 | $ 0.11 | $ 0.22 | $ 0.22 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (Parenthetical) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jul. 01, 2017 |
Jun. 30, 2018 |
Jul. 01, 2017 |
|
Other comprehensive income/(loss): | ||||
Change in marketable securities, income taxes benefit | $ 6,345 | $ 5,553 | ||
Change in fair value of interest rate swap, income taxes benefit (cost) | $ 19,202 | $ 59,166 | 41,680 | |
Change in pension and postretirement benefit costs, income taxes benefit | $ 65,843 | $ 112,864 | $ 131,685 | $ 225,727 |
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) |
Jun. 30, 2018 |
Dec. 30, 2017 |
---|---|---|
Current Assets | ||
Accounts receivable, allowances | $ 667,000 | $ 389,000 |
Shareholders' Equity | ||
Preferred Stock, par value (in dollars per share) | $ 0 | $ 0 |
Preferred Stock, shares authorized (in shares) | 2,000,000 | 2,000,000 |
Common Stock, par value (in dollars per share) | $ 0 | $ 0 |
Common Stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Common Stock, shares issued (in shares) | 8,961,640 | 8,957,974 |
Treasury Stock, shares (in shares) | 2,694,729 | 2,694,729 |
Basis of Presentation |
6 Months Ended |
---|---|
Jun. 30, 2018 | |
Basis of Presentation [Abstract] | |
Basis of Presentation | Note A – Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Regulation S-X 10-01 and do not include all of the information and footnotes required by generally accepted accounting principles in the United States ("GAAP") for complete financial statements. Refer to the Company's consolidated financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 30, 2017 (the 2017 For 10-K filed with the Securities and Exchange Commission on March 15, 2018) for additional information. The accompanying condensed consolidated financial statements are unaudited. However, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for interim periods have been reflected therein. All intercompany accounts and transactions are eliminated. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. The condensed consolidated balance sheet as of December 30, 2017 has been derived from the audited consolidated balance sheet at that date. Commencing with Quarterly Report on Form 10-Q for the period ended September 30, 2017, product development expenses have been separately identified for all periods presented. These expenses have been reclassified from cost of products sold and selling and administrative expenses. Product development expenses are not necessarily a cost of product sold. This reclass of June 30, 2018 amounts do not change the overall results. Commencing with this Quarterly Report on Form 10-Q, in accordance with ASU 2017-07 – Compensation – Retirement Benefits, net periodic pension costs have been separately identified for all periods presented. These expenses have been reclassified to cost of products sold from other income. |
Earnings Per Share |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Note B – Earnings Per Share The denominators used to calculate earnings per share are as follow:
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Inventories |
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Note C – Inventories Inventories consist of the following components:
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Segment Information |
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Segment Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Note D – Segment Information Financial information by segment is as follows:
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Recent Accounting Pronouncements |
6 Months Ended |
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Jun. 30, 2018 | |
Recent Accounting Pronouncements [Abstract] | |
Recent Accounting Pronouncements | Note E – Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2016-02, Leases (Topic 842). ASU 2016-02 requires leases to present right-of-use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. The guidance is to be applied using a modified retrospective approach at the beginning of the earliest comparative period in the financial statements and is effective for years beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact of the new guidance. In February 2017, the FASB issued ASU No. 2017-06, Plan Accounting: Defined Benefit Pension Plans (Topic 960); Defined Contribution Pension Plans (Topic 962); Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting. ASU 2017-06 provides guidance for reporting by an employee benefit plan for its interest in a master trust. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. This ASU should be applied retrospectively with earlier application permitted as of the beginning of an interim or annual reporting period after December 15, 2018. The Company is in the process of determining the effect that the adoption of ASU 2017-06 will have on the accompanying financial statements. The Company has implemented all new accounting pronouncements that are in effect and that could impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued, but are not yet effective, that might have a material impact on the consolidated financial statements of the Company. |
Debt |
6 Months Ended |
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Jun. 30, 2018 | |
Debt [Abstract] | |
Debt | Note F – Debt On April 3, 2017, the Company signed an amended and restated loan agreement (the "Restated Loan Agreement") with People's United Bank that included a $31 million term portion and a $10 million revolving credit portion. Proceeds of the loan were used to repay the remaining outstanding term loan of the Company (approximately $1,429,000) and to acquire 100% of the common stock of Velvac Holdings, Inc. ("Velvac"). The term portion of the Restated Loan Agreement requires quarterly principal payments of $387,500 for a two-year period beginning July 3, 2017. The repayment amount then increases to $775,000 per quarter beginning July 1, 2019. The term loan is a five-year loan with the remaining balance due on March 1, 2022. The revolving credit portion of the Restated Loan Agreement has a quarterly commitment fee ranging from 0.2% to 0.375% based on operating results. The revolving credit portion has a maturity date of April 1, 2022. On April 3, 2017, the Company borrowed approximately $6.6 million on the revolving credit facility. The Company subsequently paid off $1.6 million during 2017 and drew down an additional net of $1 million during the first six months of 2018 on the revolving credit facility leaving a balance on the revolving credit facility of $6 million as of June 30, 2018. The interest rates on the term and revolving credit portions of the Restated Loan Agreement vary. The interest rates vary based on the LIBOR rate plus a margin spread of 1.75% to 2.50%. The margin spread is based on operating results calculated on a rolling-four-quarter basis. The Company may also borrow funds at the lender's prime rate. On June 30, 2018, the interest rate for one half ($14.7 million) of the term portion of the Restated Loan Agreement was 3.73%, using a one month LIBOR rate, and the interest rate for the remaining balance ($14.7 million) of the term portion was 4.05%, based on a three month LIBOR rate. As of June 30, 2018, the interest rate for the $6 million balance of the revolving credit portion of the Restated Loan Agreement was 3.73%, based on a one month LIBOR rate. The Company's loan covenants under the Restated Loan Agreement require the Company to maintain a consolidated minimum debt service coverage ratio of at least 1.1 to 1 for periods through December 31, 2018 and of at least 1.2 to 1 for subsequent periods. This ratio is to be tested quarterly on a 12 month trailing basis. In addition, the Company will be required to show a maximum total leverage ratio of 4.0x for periods through December 31, 2018, 3.5x for the period January 1, 2019 through December 31, 2019, 3.25x for the period of January 1, 2020 through December 31, 2020 and 3.0x thereafter. The Company was in compliance with all covenants in 2017 and 2018. On April 4, 2017, the Company entered into an interest rate swap contract with the lender with an original notional amount of $15,500,000, which is equal to 50% of the outstanding balance of the term portion of the Restated Loan Agreement on that date. The notional amount will decrease on a quarterly basis beginning July 3, 2017 in accordance with the principal repayment schedule of the term portion of the Restated Loan Agreement. The Company has a fixed interest rate of 1.92% on the swap contract and will pay the difference between the fixed interest rate and the LIBOR when LIBOR rate is below 1.92% and the Company will receive interest when the LIBOR rate exceeds 1.92%. |
Retirement Benefit Plans |
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Retirement Benefit Plans [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefit Plans | Note G – Retirement Benefit Plans The Company has non-contributory defined benefit pension plans covering certain U.S. employees. Plan benefits are generally based upon age at retirement, years of service and, for its salaried plan, the level of compensation. The Company also sponsors unfunded nonqualified supplemental retirement plans that provide certain current and former officers with benefits in excess of limits imposed by federal tax law. In addition, the Company provides health care and life insurance for retired salaried employees in the U.S.who meet specific eligibility requirements. Significant disclosures relating to these benefit plans for the second quarter and first six months of fiscal years 2018 and 2017 are as follows:
The Company's funding policy with respect to its qualified plans is to contribute at least the minimum amount required by applicable laws and regulations. In fiscal year 2018, the Company expects to contribute $510,000 into its pension plans and $105,000 into its postretirement plan. As of June 30, 2018, the Company has not made contributions into its pension plans, has contributed $64,000 to its postretirement plan and intends to make the remaining contributions as required during the remainder of the year. The Company has a contributory savings plan under Section 401(k) of the Internal Revenue Code (the "401(k) Plan") covering substantially all U.S. non-union employees. The 401(k) Plan allows participants to make voluntary contributions from their annual compensation on a pre-tax basis, subject to limitations under the Internal Revenue Code. The 401(k) Plan provides for contributions by the Company at its discretion. The Company made contributions to the plan as follows:
The non-discretionary contribution of $502,617 made in the six months ended June 30, 2018 was expensed in the prior fiscal year. |
Stock Based Compensation |
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Stock Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Based Compensation | Note H – Stock Based Compensation The Company accounts for its stock based awards in accordance with FASB Accounting Standards Codification (ASC) 718-10, Compensation – Stock Compensation, which requires a fair value measurement and recognition of compensation expense for all share-based payment awards made to its employees and directors, including employee stock options and restricted stock awards. The Company estimates the fair value of stock options granted using the Black-Scholes valuation model. This model requires the Company to make estimates and assumptions including, among other things, estimates regarding the length of time an employee will retain vested stock options before exercising them, the estimated volatility of our common stock price and the number of options that will be forfeited prior to vesting. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Changes in these estimates and assumptions could materially affect the determination of the fair value of stock-based compensation, which, in turn, could materially affect the related amount recognized in the Company's consolidated statements of operations. As of June 30, 2018, the Company had one stock option plan, the 2010 Executive Stock Incentive Plan (the "2010 Plan"), for officers, other key employees, and non-employee directors. Incentive stock options granted under the 2010 plan must have exercise prices that are not less than 100% of the fair market value of the stock on the dates the options are granted. Restricted stock awards may also be granted to participants under the 2010 Plan with restrictions determined by the Compensation Committee of the Company's Board of Directors (the "Compensation Committee"). Under the 2010 Plan, non-qualified stock options granted to participants will have exercise prices determined by the Compensation Committee. No options or restricted stock were granted in the second quarter of fiscal year 2018 and 25,000 stock options were granted in the second quarter of 2017. The 2010 Plan also permits the issuance of stock appreciation rights (SARs). The SARs are in the form of an option with a cashless exercise price equal to the fair value of the Company's common stock at the date of grant. During the second quarter of 2018, the Company did not issue any SARs. Stock-based compensation expense in connection with SARs granted to employees and directors in the second quarter of 2018 and 2017 was approximately $74,000 and $56,000, respectively, and for the six months of fiscal 2018 and 2017 was approximately $130,000 and $63,000 respectively. As of June 30, 2018, there were 275,000 units reserved and available for future grant under the 2010 Plan. The following tables set forth the outstanding SARs for the periods specified:
The following tables set forth the outstanding restricted stock grants for the period specified:
At June 30, 2018, outstanding SARs and grants had an intrinsic value of $1,943,000. |
Income Taxes |
6 Months Ended |
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Jun. 30, 2018 | |
Income Taxes [Abstract] | |
Income Taxes | Note I – Income Taxes The Company files income tax returns in the U.S. federal jurisdiction, and in various states and foreign jurisdictions. With limited exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2013 and is no longer subject to non-U.S. income tax examinations by foreign tax authorities for years prior to 2011. The Tax Cuts and Jobs Act (the "2017 Tax Act") was enacted into law on December 22, 2017. The 2017 Tax Act, significantly changes U.S. corporate income tax laws by, among other provisions, reducing the maximum U.S. corporate income tax rate from 35% to 21% starting in 2018, and creating a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings of U.S. subsidiaries. The final impact on the Company resulting from the 2017 Tax Act's transition tax legislation may differ from the aforementioned reasonable estimate due to the complexity of calculating and supporting with primary evidence U.S. tax attributes, such as accumulated foreign earnings and profits, foreign tax paid, and other tax components involved in foreign tax credit calculations for prior years back to 1986. Such differences could be material, due to, among other things, changes in interpretations of the 2017 Tax Act, future legislative action to address questions that arise because of the 2017 Tax Act, changes in accounting standards for income taxes or related interpretations in response to the 2017 Tax Act, or any updates or changes to estimates the Company has utilized to calculate the reasonable estimate of the transition tax. Pursuant to the SAB118, the company is allowed a measurement period of up to one year after the enactment date of the 2017 Tax Act to finalize the recording of the related tax impacts. During the six months ending June 30, 2018, no measurement period adjustments were recorded. The total amount of unrecognized tax benefits could increase or decrease within the next 12 months for a number of reasons, including the closure of federal, state and foreign tax years by expiration of the statute of limitations and the recognition and measurement considerations under FASB ASC Topic 740, "Income Taxes." There have been no significant changes to the amount of unrecognized tax benefits during the six months ended June 30, 2018. The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits will not increase or decrease significantly over the next twelve months. |
Revenue Recognition |
6 Months Ended |
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Jun. 30, 2018 | |
Revenue Recognition [Abstract] | |
Revenue Recognition | Note J – Revenue Recognition The Company's revenues result from the sale of goods and services and reflect the consideration to which the Company expects to be entitled. The Company records revenues based on a five-step model in accordance with FASB ASC Topic 606, "Revenue from Contracts with Customers." The Company has defined purchase orders as contracts in accordance with ASC Topic 606. For its customer contracts, the Company identifies it's performance obligations, which is delivering goods or services, determines the transaction price, allocates the contract transaction price to the performance obligations (when applicable), and recognizes the revenue when (or as) the performance obligation is transferred to the customer. A good or service is transferred when the customer obtains control of that good or service. The Company's revenues are recorded at a point in time from the sale of tangible products. Revenues are recognized when products are shipped. The Company has elected the Modified Retrospective Method (the "Cumulate Effect Method") to comply with ASC Topic 606. The Cumulative Effect Method does not affect the amounts for the prior periods, but requires that the current period be reported in accordance with as if ASC Topic 606. ASC Topic 606 was adopted on December 31, 2017 which was the first day of the Company's 2018 fiscal year. The financial effect of ASC Topic 606 on the June 30, 2018 financial statements was not material. Customer volume rebates, product returns, discount and allowance are variable consideration and are recorded as a reduction of revenue in the same period that the related sales are recorded. The Company has reviewed the overall sales transactions for variable consideration and has determined that these costs are not material. Refer to Note D for revenues reported by segment. The Company has not experienced any impairment losses, has no future performance obligations and does not capitalize costs to obtain or fulfill contracts. |
Financial Instruments and Fair Value Measurements |
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Financial Instruments and Fair Value Measurements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments and Fair Value Measurements | Note K - Financial Instruments and Fair Value Measurements Financial Risk Management Objectives and Policies The Company is exposed primarily to credit, interest rate and currency exchange rate risks which arise in the normal course of business. Credit Risk Credit risk is the potential financial loss resulting from the failure of a customer or counterparty to settle its financial and contractual obligations to the Company, as and when they become due. The primary credit risk to the Company is its accounts receivable with customers. The Company has established credit limits for customers and monitors their balances to mitigate the risk of loss. At June 30, 2018 and December 30, 2017, there were no significant concentrations of credit risk. No one customer represented more than 10% of the Company's net trade receivables at June 30, 2018 or at December 30, 2017. The maximum exposure to credit risk is primarily represented by the carrying amount of the Company's accounts receivable. Interest Rate Risk The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's debt, which bears interest at variable rates based on the LIBOR rate plus a margin spread of 1.75% to 2.50%. The Company has an interest rate swap with a notional amount of $14,725,000 on June 30, 2018 to convert a portion of its 2017 Term Loan from variable to fixed rates. The valuation of this swap is determined using the three month LIBOR rate index and mitigates the Company's exposure to interest rate risk. Currency Exchange Rate Risk The Company's currency exposure is concentrated in the Canadian dollar, Mexican peso, New Taiwan dollar, Chinese RMB and the Hong Kong dollar. Because of the Company's limited exposure to any single foreign market, any exchange gains or losses have not been material and are not expected to be material in the future. As a result, the Company does not attempt to mitigate its foreign currency exposure through the acquisition of any speculative or leveraged financial instruments. Fair Value Measurements Assets and liabilities that require fair value measurement are recorded at fair value using market and income valuation approaches and considering the Company's and counterparty's credit risk. The Company uses the market approach and the income approach to value assets and liabilities as appropriate. The assets or liabilities requiring fair value measurements on June 30, 2018 are as follows:
The Company's interest rate swap is not an exchange-traded instrument. However, it is valued based on observable inputs for similar liabilities and thus classified as Level 2. The amount of the interest rate swap is included in other accrued assets. |
Business Acquisition |
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Business Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition | Note L – Business Acquisition Effective June 1, 2018 the Company acquired certain assets of Load N Lock Systems, Inc. ("Load N Lock") including accounts receivable, inventories, furniture, fixtures and equipment, intellectual property rights, assumption of certain liabilities and rights existing under all sales and purchase agreements. Load N Lock is a leader in innovative truck cap and tonneau cover locks that keep truck contents safe and secure. Load N Lock developed and patented the first integrated power lock for the industry and has developed numerous truck cap and tonneau cover lock related products. Load N Lock provides its innovative products and solutions to the industry's leading manufacturers in the United States and Asia. Load N Lock is included in the Security Products segment of the Company from the date of the acquisition. The cost of the acquisition of Load N Lock was approximately $4,995,000. The above acquisition was accounted for under ASC 805. The acquired business is included in the consolidated operating results of the Company from the date of acquisition. The excess of the cost of Load N Lock over the fair market value of the net assets acquired of $2,694,700 has been recorded as goodwill. In connection with the above acquisition, the Company recorded the following intangible assets:
There is no anticipated residual value relating to these intangible assets. Neither the actual results nor the pro forma effects of the acquisition of Load N Lock are material to the Company's financial statements. |
Earnings Per Share (Tables) |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Denominators Used in the Earnings Per Share Computations | The denominators used to calculate earnings per share are as follow:
|
Inventories (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Inventories | Inventories consist of the following components:
|
Segment Information (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Financial Information | Financial information by segment is as follows:
|
Retirement Benefit Plans (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefit Plans [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant Disclosures Relating to Benefit Plans | Significant disclosures relating to these benefit plans for the second quarter and first six months of fiscal years 2018 and 2017 are as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Contribution Plan | The Company made contributions to the plan as follows:
|
Stock Based Compensation (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Appreciation Rights Activity | The following tables set forth the outstanding SARs for the periods specified:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SARs Outstanding and Exercisable |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Activity | The following tables set forth the outstanding restricted stock grants for the period specified:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Grants Outstanding and Exercisable |
|
Financial Instruments and Fair Value Measurements (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments and Fair Value Measurements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets or Liabilities Measured at Fair Value Measurements | The assets or liabilities requiring fair value measurements on June 30, 2018 are as follows:
|
Business Acquisition (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets | In connection with the above acquisition, the Company recorded the following intangible assets:
|
Earnings Per Share (Details) - shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jul. 01, 2017 |
Jun. 30, 2018 |
Jul. 01, 2017 |
|
Basic [Abstract] | ||||
Weighted average shares outstanding (in shares) | 6,265,315 | 6,258,467 | 6,264,435 | 6,257,482 |
Diluted [Abstract] | ||||
Weighted average shares outstanding (in shares) | 6,265,315 | 6,258,467 | 6,264,435 | 6,257,482 |
Dilutive stock options (in shares) | 27,002 | 26,872 | 27,002 | 13,436 |
Denominator for diluted earnings per share (in shares) | 6,292,317 | 6,285,339 | 6,291,437 | 6,270,918 |
Inventories (Details) - USD ($) |
Jun. 30, 2018 |
Dec. 30, 2017 |
---|---|---|
Components of inventories [Abstract] | ||
Raw material and component parts | $ 15,126,400 | $ 14,331,915 |
Work in process | 8,146,245 | 7,718,379 |
Finished goods | 26,616,440 | 25,218,463 |
Total inventories | $ 49,889,085 | $ 47,268,757 |
Retirement Benefit Plans, Defined Contribution Plan (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jul. 01, 2017 |
Jun. 30, 2018 |
Jul. 01, 2017 |
|
Defined Contribution Plan [Abstract] | ||||
Total contributions for the period | $ 238,070 | $ 230,313 | $ 1,052,566 | $ 789,727 |
Regular Matching Contribution [Member] | ||||
Defined Contribution Plan [Abstract] | ||||
Total contributions for the period | 140,106 | 118,947 | 306,121 | 235,423 |
Transitional Credit Contribution [Member] | ||||
Defined Contribution Plan [Abstract] | ||||
Total contributions for the period | 81,506 | 95,702 | 205,614 | 231,072 |
Non-discretionary Contribution [Member] | ||||
Defined Contribution Plan [Abstract] | ||||
Total contributions for the period | $ 16,458 | $ 15,664 | 540,831 | $ 323,232 |
Non-Union U.S. Employees [Member] | ||||
Defined Contribution Plan [Abstract] | ||||
Total contributions for the period | $ 502,617 |
Income Taxes (Details) - USD ($) |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2018 |
Dec. 30, 2017 |
|
Income Taxes [Abstract] | ||
Corporate income tax rate | 21.00% | 35.00% |
Significant changes to the amount of unrecognized tax benefits | $ 0 |
Financial Instruments and Fair Value Measurements (Details) |
6 Months Ended |
---|---|
Jun. 30, 2018
USD ($)
| |
Interest Rate Risk [Abstract] | |
Interest rate swap, notional amount | $ 14,725,000 |
Financial Receivable [Abstract] | |
Interest rate swap | 353,161 |
Total assets | $ 353,161 |
LIBOR [Member] | |
Interest Rate Risk [Abstract] | |
Term of variable rate | 3 months |
LIBOR [Member] | Minimum [Member] | |
Interest Rate Risk [Abstract] | |
Debt instrument, variable interest rate | 1.75% |
LIBOR [Member] | Maximum [Member] | |
Interest Rate Risk [Abstract] | |
Debt instrument, variable interest rate | 2.50% |
Level 1 [Member] | |
Financial Receivable [Abstract] | |
Interest rate swap | $ 0 |
Total assets | 0 |
Level 2 [Member] | |
Financial Receivable [Abstract] | |
Interest rate swap | 353,161 |
Total assets | 353,161 |
Level 3 [Member] | |
Financial Receivable [Abstract] | |
Interest rate swap | 0 |
Total assets | $ 0 |
Business Acquisition (Details) - USD ($) |
1 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Dec. 30, 2017 |
|
Recognized amounts of identifiable assets acquired and liabilities assumed [Abstract] | ||
Goodwill | $ 34,874,518 | $ 32,228,891 |
Load N Lock [Member] | ||
Recognized amounts of identifiable assets acquired and liabilities assumed [Abstract] | ||
Acquisition costs | 4,995,000 | |
Goodwill | 2,694,700 | |
Intangible Assets Acquired [Abstract] | ||
Intangible assets | $ 1,329,007 | |
Weighted-average period | 8 years 3 months 18 days | |
Load N Lock [Member] | Customer Relationships [Member] | ||
Intangible Assets Acquired [Abstract] | ||
Intangible assets | $ 689,675 | |
Weighted-average period | 8 years 3 months 18 days | |
Load N Lock [Member] | Intellectual Property [Member] | ||
Intangible Assets Acquired [Abstract] | ||
Intangible assets | $ 586,762 | |
Weighted-average period | 8 years 3 months 18 days | |
Load N Lock [Member] | Non-compete Agreements [Member] | ||
Intangible Assets Acquired [Abstract] | ||
Intangible assets | $ 52,570 | |
Weighted-average period | 8 years 3 months 18 days |
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