[X] |
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Connecticut
|
06-0330020
|
(State or other jurisdiction of
|
(I.R.S. Employer
|
incorporation or organization)
|
Identification No.)
|
112 Bridge Street, Naugatuck, Connecticut
|
06770
|
(Address of principal executive offices)
|
(Zip Code)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock, No Par Value
|
EML
|
NASDAQ Global Market
|
Large accelerated filer [ ]
|
Accelerated filer [ X ]
|
Non-accelerated filer [ ]
|
Smaller reporting company [X ]
|
Emerging growth company [ ]
|
Page
|
||
Table of Contents
|
2.
|
|
|
||
|
||
|
||
•
|
Place the Company at a competitive disadvantage relative to the Company’s competitors, some of which have lower debt service obligations and greater financial resources;
|
•
|
Limit our ability to borrow additional funds;
|
•
|
Limit our ability to complete future acquisitions;
|
•
|
Limit our ability to pay dividends;
|
•
|
Limit our ability to make capital expenditures; and
|
•
|
Increase the Company’s vulnerability to general adverse economic and industry conditions.
|
ITEM 2 |
PROPERTIES
|
Equity Compensation Plan Information
|
|||||
Plan category
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
Weighted-average exercise price of outstanding options, warrants and rights
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|
||
(a)
|
(b)
|
(c)
|
|||
Equity compensation plans approved by security holders
|
96,728
|
22.30
|
178,5001
|
||
Equity compensation plans not approved by security holders
|
-
|
-
|
-
|
||
Total
|
96,728
|
22.30
|
178,500
|
2019
|
2018
|
|||||||
Discount rate
|
4.20% - 4.22
|
%
|
3.54% - 3.57
|
%
|
||||
Expected return on plan assets
|
7.5
|
%
|
7.5
|
%
|
||||
Rate of compensation increase
|
0.0
|
%
|
0.0
|
%
|
Year ended
|
||||||||
December 28,
|
December 29
|
|||||||
2019
|
2018
|
|||||||
Discount rate
|
$
|
(12,552,989
|
)
|
$
|
8,537,413
|
|||
Mortality table
|
--
|
--
|
||||||
Additional recognition due to significant event
|
(454,143
|
)
|
14,928
|
|||||
Asset gain or (loss)
|
7,710,082
|
(9,530,411
|
)
|
|||||
Amortization of:
|
||||||||
Unrecognized gain or (loss)
|
1,114,924
|
1,044,520
|
||||||
Unrecognized prior service cost
|
94,308
|
109,750
|
||||||
Other
|
748,512
|
(957,643
|
||||||
Comprehensive income, before tax
|
(3,339,286
|
)
|
(781,443
|
)
|
||||
Income tax
|
(664,279
|
)
|
(578,090
|
)
|
||||
Comprehensive income, net of tax
|
$
|
(2,675,007
|
)
|
$
|
(203,353
|
)
|
2019 Fourth Quarter
|
||||||||||||||||||||
Industrial
|
Security
|
Metal
|
||||||||||||||||||
Hardware
|
Products
|
Products
|
Total
|
|||||||||||||||||
Net sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||||||||
Cost of products sold
|
73.6
|
%
|
66.0
|
%
|
89.5
|
%
|
73.7
|
%
|
||||||||||||
Gross margin
|
26.4
|
%
|
34.0
|
%
|
10.5
|
%
|
26.3
|
%
|
||||||||||||
Product development expense
|
0.3
|
%
|
5.0
|
%
|
— |
|
1.1
|
%
|
||||||||||||
Selling and administrative expense
|
16.5
|
%
|
16.0
|
%
|
9.6
|
%
|
15.8
|
%
|
||||||||||||
Operating profit
|
9.6
|
%
|
13.0
|
%
|
0.9
|
%
|
9.4
|
%
|
||||||||||||
2018 Fourth Quarter
|
||||||||||||||||||||
Industrial
|
Security
|
Metal
|
||||||||||||||||||
Hardware
|
Products
|
Products
|
Total
|
|||||||||||||||||
Net sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||||||||
Cost of products sold
|
73.4
|
%
|
64.9
|
%
|
93.5
|
%
|
74.0
|
%
|
||||||||||||
Gross margin
|
26.6
|
%
|
35.1
|
%
|
6.5
|
%
|
26.0
|
%
|
||||||||||||
Product development expense
|
4.0
|
%
|
3.6
|
%
|
— |
|
3.3
|
%
|
||||||||||||
Selling and administrative expense
|
15.3
|
%
|
17.7
|
%
|
6.2
|
%
|
14.6
|
%
|
||||||||||||
Operating profit
|
7.3
|
%
|
13.8
|
%
|
0.3
|
%
|
8.1
|
%
|
Industrial
|
Security
|
Metal
|
||||||||||||||||||
Hardware
|
Products
|
Products
|
Total
|
|||||||||||||||||
Fiscal Year 2019
|
||||||||||||||||||||
Net sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||||||||
Cost of products sold
|
75.6
|
%
|
68.3
|
%
|
88.9
|
%
|
75.4
|
%
|
||||||||||||
Gross margin
|
24.4
|
%
|
31.7
|
%
|
11.1
|
%
|
24.6
|
%
|
||||||||||||
Product development expense
|
2.1
|
%
|
4.4
|
%
|
— |
|
2.4
|
%
|
||||||||||||
Selling and administrative expense
|
14.5
|
%
|
16.5
|
%
|
7.7
|
%
|
14.2
|
%
|
||||||||||||
Restructuring costs
|
1.1
|
%
|
1.6
|
%
|
— |
|
1.1
|
%
|
||||||||||||
Operating profit
|
6.7
|
%
|
9.2
|
%
|
3.5
|
%
|
6.9
|
%
|
||||||||||||
Fiscal Year 2018
|
||||||||||||||||||||
Net sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||||||||
Cost of products sold
|
75.2
|
%
|
68.6
|
%
|
87.7
|
%
|
74.9
|
%
|
||||||||||||
Gross margin
|
24.8
|
%
|
31.4
|
%
|
12.3
|
%
|
25.1
|
%
|
||||||||||||
Product development expense
|
3.5
|
%
|
3.1
|
%
|
— |
|
3.0
|
%
|
||||||||||||
Selling and administrative expense
|
14.4
|
%
|
17.3
|
%
|
8.3
|
%
|
14.5
|
%
|
||||||||||||
Operating profit
|
6.9
|
%
|
11.0
|
%
|
4.0
|
%
|
7.6
|
%
|
Amount
|
%
|
|||||||
Interest expense
|
$
|
656
|
54
|
%
|
||||
Other income
|
$
|
(327
|
)
|
-35
|
%
|
|||
Income taxes
|
$
|
(144
|
)
|
-5
|
%
|
2019
|
2018
|
|||||||
Current ratio
|
3.6
|
3.4
|
||||||
Average days’ sales in accounts receivable
|
51
|
44
|
||||||
Inventory turnover
|
4.2
|
3.4
|
||||||
Ratio of working capital to sales
|
28.1
|
%
|
30.3
|
%
|
||||
Total debt to shareholders’ equity
|
93.7
|
%
|
29.6
|
%
|
2019
|
2018
|
|||||||
Cash and cash equivalents
|
||||||||
- Held in the United States
|
$
|
9.0
|
$
|
5.6
|
||||
- Held by foreign subsidiary
|
9.0
|
8.3
|
||||||
18.0
|
13.9
|
|||||||
Working capital
|
83.0
|
71.0
|
||||||
Net cash provided by operating activities
|
23.0
|
12.9
|
||||||
Change in working capital impact on net cash
(used)/provided by operating activities
|
(0.3
|
)
|
(5.9
|
)
|
||||
Net cash used in investing activities
|
(85.8
|
)
|
(10.4
|
)
|
||||
Net cash (used in)/provided by financing activities
|
67.0
|
(10.4
|
)
|
December 28
|
December 29
|
|||||||
2019
|
2018
|
|||||||
ASSETS
|
||||||||
Current Assets
|
||||||||
Cash and cash equivalents
|
$
|
17,996,505
|
$
|
13,925,765
|
||||
Marketable securities
|
34,305
|
—
|
||||||
Accounts receivable, less allowances of $556,000 in 2019 and $680,000 in 2018
|
37,941,900
|
30,285,316
|
||||||
Inventories:
|
||||||||
Raw materials and component parts
|
17,225,469
|
17,841,166
|
||||||
Work in process
|
11,009,648
|
8,960,202
|
||||||
Finished goods
|
26,364,149
|
25,971,841
|
||||||
54,599,266
|
52,773,209
|
|||||||
Prepaid expenses and other current assets
|
4,343,507
|
3,071,888
|
||||||
Refundable income taxes
|
—
|
1,133,847
|
||||||
Total Current Assets
|
114,915,483
|
101,190,025
|
||||||
Property, Plant and Equipment
|
||||||||
Land
|
1,341,289
|
1,159,813
|
||||||
Buildings
|
21,830,568
|
16,477,462
|
||||||
Machinery and equipment
|
65,164,386
|
56,131,340
|
||||||
Accumulated depreciation
|
(46,313,630
|
)
|
(43,915,238
|
)
|
||||
42,022,613
|
29,853,377
|
|||||||
Other Assets
|
||||||||
Goodwill
|
79,518,012
|
34,840,376
|
||||||
Trademarks
|
5,404,283
|
3,686,063
|
||||||
Patents, technology and other intangibles net of accumulated amortization
|
26,460,110
|
10,281,720
|
||||||
Right of use assets
|
12,342,475
|
—
|
||||||
Deferred income taxes
|
—
|
1,396,006
|
||||||
123,724,880
|
50,204,165
|
|||||||
TOTAL ASSETS
|
$
|
280,662,976
|
$
|
181,247,567
|
||||
December 28
|
December 39
|
|||||||
2019
|
2018
|
|||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Current Liabilities
|
||||||||
Accounts payable
|
$
|
19,960,507
|
$
|
18,497,626
|
||||
Accrued compensation
|
3,815,186
|
4,159,808
|
||||||
Other accrued expenses
|
2,967,961
|
3,095,666
|
||||||
Contingent liability
|
—
|
2,070,000
|
||||||
Current portion of long-term debt
|
5,187,689
|
2,325,000
|
||||||
Total Current Liabilities
|
31,931,343
|
30,148,100
|
||||||
Deferred income taxes
|
5,270,465
|
1,516,012
|
||||||
Other long-term liabilities
|
2,465,261
|
353,856
|
||||||
Lease liability
|
12,342,475
|
|||||||
Long-term debt, less current portion
|
93,577,544
|
26,350,000
|
||||||
Accrued other postretirement benefits
|
1,007,146
|
648,635
|
||||||
Accrued pension cost
|
28,631,485
|
25,362,325
|
||||||
Commitments and contingencies (See Note 6)
|
||||||||
Shareholders’ Equity
|
||||||||
Voting Preferred Stock, no par value:
|
||||||||
Authorized and unissued: 1,000,000 shares
|
||||||||
Nonvoting Preferred Stock, no par value:
|
||||||||
Authorized and unissued: 1,000,000 shares
|
||||||||
Common Stock, no par value:
|
||||||||
Authorized: 50,000,000 shares
|
||||||||
Issued: 8,975,434 shares in 2019 and 8,965,987 shares in 2018
|
||||||||
Outstanding: 6,240,705 shares in 2019 and 6,231,258 shares in 2018
|
30,651,815
|
29,994,890
|
||||||
Treasury Stock: 2,734,729 shares in 2019 and 2,734,729 shares in 2018
|
(20,169,098
|
)
|
(20,169,098
|
)
|
||||
Retained earnings
|
120,189,111
|
109,671,362
|
||||||
Accumulated other comprehensive income (loss):
|
||||||||
Foreign currency translation
|
(2,037,952
|
)
|
(2,106,329
|
)
|
||||
Unrealized gain/(loss) on interest rate swap, net of tax
|
167,018
|
166,444
|
||||||
Unrecognized net pension and other postretirement benefit costs, net of taxes
|
(23,363,637
|
)
|
(20,688,630
|
)
|
||||
Accumulated other comprehensive loss
|
(25,234,571
|
)
|
(22,628,515
|
)
|
||||
Total Shareholders’ Equity
|
105,437,257
|
96,868,639
|
||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
280,662,976
|
$
|
181,247,567
|
Year ended
|
||||||||
December 28
|
December 29
|
|||||||
2019
|
2018
|
|||||||
Net sales
|
$
|
251,742,619
|
$
|
234,275,463
|
||||
Cost of products sold
|
(189,890,070
|
)
|
(175,550,418
|
)
|
||||
Gross margin
|
61,852,549
|
58,725,045
|
||||||
Product development expenses
|
(6,024,567
|
)
|
(6,950,969
|
)
|
||||
Selling and administrative expenses
|
(35,719,188
|
)
|
(33,914,735
|
)
|
||||
Restructuring costs
|
(2,650,940
|
)
|
—
|
|||||
Operating profit
|
17,457,854
|
17,859,341
|
||||||
Interest expense
|
(1,857,961
|
)
|
(1,202,272
|
)
|
||||
Other income
|
606,078
|
933,260
|
||||||
Income before income taxes
|
16,205,971
|
17,590,329
|
||||||
Income taxes
|
2,939,829
|
3,084,392
|
||||||
Net income
|
$
|
13,266,142
|
$
|
14,505,937
|
||||
Earnings per Share:
|
||||||||
Basic
|
$
|
2.13
|
$
|
2.32
|
||||
Diluted
|
$
|
2.12
|
$
|
2.31
|
Year ended
|
||||||||
December 28
|
December 29
|
|||||||
2019
|
2018
|
|||||||
Net income
|
$
|
13,266,142
|
$
|
14,505,937
|
||||
Other comprehensive income/(loss) -
|
||||||||
Change in foreign currency translation
|
68,377
|
(1,163,136
|
)
|
|||||
Change in fair value of interest rate swap, net of tax benefit of: $26
|
574
|
124,687
|
||||||
in 2019 and $26,969 in 2018
|
||||||||
Change in pension and other postretirement benefit costs, net of income taxes (expense)/benefit of: $664,279 in 2019 and $578,090 in 2018
|
(2,675,007
|
)
|
(203,353
|
)
|
||||
Total other comprehensive income/(loss)
|
(2,606,056
|
)
|
(1,241,802
|
)
|
||||
Comprehensive income/(loss)
|
$
|
10,660,086
|
$
|
13,264,135
|
|
Common Shares
|
Common
Stock |
Treasury
Shares |
Treasury
Stock |
Retained
Earnings |
Accumulated
Other Comprehensive Income (Loss) |
Shareholders’
Equity |
|||||||||||||||||||||
Balances at December 30, 2017
|
8,957,974
|
$
|
29,501,123
|
(2,694,729
|
)
|
$
|
(19,105,723
|
)
|
$
|
97,921,903
|
$
|
(21,386,713
|
)
|
$
|
86,930,590
|
|||||||||||||
Net income
|
14,505,937
|
14,505,937
|
||||||||||||||||||||||||||
Cash dividends declared, $.44 per share
|
(2,756,478
|
)
|
(2,756,478
|
)
|
||||||||||||||||||||||||
Currency translation adjustment
|
(1,163,136
|
)
|
(1,163,136
|
)
|
||||||||||||||||||||||||
Change in fair value of interest rate swap
|
124,687
|
124,687
|
||||||||||||||||||||||||||
Change in pension and other postretirement benefit costs, net of tax
|
(203,353
|
)
|
(203,353
|
)
|
||||||||||||||||||||||||
Treasury stock purchases
|
(40,000
|
)
|
(1,063,375
|
)
|
(1,063,375
|
)
|
||||||||||||||||||||||
Issuance of SARS
|
151
|
276,777
|
276,777
|
|||||||||||||||||||||||||
Issuance of Common Stock for directors’ fees
|
7,862
|
216,990
|
216,990
|
|||||||||||||||||||||||||
Balances at December 29, 2018
|
8,965,987
|
$
|
29,994,890
|
(2,734,729
|
)
|
$
|
(20,169,098
|
)
|
$
|
109,671,362
|
$
|
(22,628,515
|
)
|
$
|
96,868,639
|
|||||||||||||
Net income
|
13,266,142
|
13,266,142
|
||||||||||||||||||||||||||
Cash dividends declared, $.44 per share
|
(2,748,393
|
)
|
(2,748,393
|
)
|
||||||||||||||||||||||||
Currency translation adjustment
|
68,377
|
68,377
|
||||||||||||||||||||||||||
Change in fair value of interest rate swap
|
574
|
574
|
||||||||||||||||||||||||||
Change in pension and other postretirement benefit costs, net of tax
|
(2,675,007
|
)
|
(2,675,007
|
)
|
||||||||||||||||||||||||
Issuance of SARS
|
151
|
397,250
|
397,250
|
|||||||||||||||||||||||||
Issuance of Common Stock for directors’ fees
|
9,296
|
259,675
|
259,675
|
|||||||||||||||||||||||||
Balances at December 28, 2019
|
8,975,434
|
$
|
30,651,815
|
(2,734,729
|
)
|
$
|
(20,169,098
|
)
|
$
|
120,189,111
|
$
|
(25,234,571
|
)
|
$
|
105,437,257
|
Year ended
|
||||||||
December 28
|
December 29
|
|||||||
2019
|
2018
|
|||||||
Operating Activities
|
||||||||
Net income
|
$
|
13,266,142
|
$
|
14,505,937
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
6,454,881
|
5,329,208
|
||||||
Unrecognized pension & other postretirement benefits
|
1,844,814
|
(2,226,083
|
)
|
|||||
(Gain) Loss on sale of equipment and other assets
|
(568,956
|
)
|
(413,333
|
)
|
||||
Non cash restructuring charges
|
2,641,890
|
—
|
||||||
Provision for doubtful accounts
|
63,564
|
185,136
|
||||||
Deferred Taxes
|
(2,093,654
|
)
|
947,851
|
|||||
Stock compensation expense
|
656,925
|
493,767
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
5,982,435
|
(3,483,484
|
)
|
|||||
Inventories
|
1,463,409
|
(5,356,646
|
)
|
|||||
Prepaid expenses
|
860,607
|
(761,135
|
)
|
|||||
Other assets
|
(499,010
|
)
|
102,068
|
|||||
Accounts payable
|
(2,337,146
|
)
|
4,106,130
|
|||||
Accrued compensation
|
(1,462,262
|
)
|
(165,828
|
)
|
||||
Other accrued expenses
|
(3,315,476
|
)
|
(387,526
|
)
|
||||
Net cash provided by operating activities
|
22,958,164
|
12,876,062
|
||||||
Investing Activities
|
||||||||
Purchases of property, plant and equipment
|
(5,440,488
|
)
|
(3,596,572
|
)
|
||||
Capitalized software
|
—
|
(1,813,973
|
)
|
|||||
Proceeds from sale of equipment and other assets
|
857,967
|
—
|
||||||
Marketable securities
|
(34,305
|
)
|
—
|
|||||
Business acquisitions, net of cash acquired
|
(81,155,753
|
)
|
(4,994,685
|
)
|
||||
Net cash used in investing activities
|
(85,772,579
|
)
|
(10,405,230
|
)
|
||||
Financing Activities
|
||||||||
Proceeds from issuance of long-term debt
|
100,000,000
|
—
|
||||||
Principal payments on long-term debt
|
(30,285,146
|
)
|
(1,550,000
|
)
|
||||
Proceeds from short-term borrowing (Revolver)
|
—
|
7,000,000
|
||||||
Payments on Revolving Credit Note
|
—
|
(12,000,000
|
)
|
|||||
Purchase Common Stock for Treasury
|
—
|
(1,063,375
|
)
|
|||||
Dividends paid
|
(2,743,993
|
)
|
(2,756,478
|
)
|
||||
Net cash used in financing activities
|
66,970,861
|
(10,369,853
|
)
|
|||||
Effect of exchange rate changes on cash
|
(85,704
|
)
|
(450,691
|
)
|
||||
Net change in cash and cash equivalents
|
4,070,740
|
(8,349,712
|
)
|
|||||
Cash and cash equivalents at beginning of year
|
13,925,765
|
22,275,477
|
||||||
Cash and cash equivalents at end of year
|
$
|
17,996,505
|
$
|
13,925,765
|
Asset Class/Description
|
Amount
|
Weighted-average Life 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
|
Consideration
|
||||
Cash
|
$
|
338,714
|
||
Cash proceeds from debt
|
80,817,039
|
|||
$
|
81,155,753
|
|||
Recognized amounts of identifiable assets acquired and liabilities assumed
|
||||
Accounts receivable
|
$
|
13,649,937
|
||
Inventory
|
3,240,382
|
|||
Prepaid and other assets
|
32,268
|
|||
Property plant and equipment
|
13,770,170
|
|||
Other noncurrent assets
|
1,337,337
|
|||
Other intangible assets
|
21,054,000
|
|||
Current liabilities
|
(4,910,384
|
)
|
||
Deferred revenue
|
(1,585,709
|
)
|
||
Income tax payable
|
(2,039,117
|
)
|
||
Note payable
|
(375,379
|
)
|
||
Deferred tax liabilities
|
(7,114,732
|
)
|
||
Total identifiable net assets
|
37,058,773
|
|||
Goodwill
|
44,096,980
|
|||
$
|
81,155,753
|
Level 1
|
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted
assets or liabilities.
|
Level 2
|
Quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for
substantially the full term of the asset or liability.
|
Level 3
|
Prices or valuation techniques that require inputs that are both significant to the fair value measurement and
unobservable.
|
Industrial
Hardware Segment |
Security
Products Segment |
Metal
Products Segment |
Total |
|||||||||||||
2019
|
||||||||||||||||
Beginning balance
|
$
|
19,086,634
|
$
|
15,753,742
|
$
|
—
|
$
|
34,840,376
|
||||||||
Investment in Big 3
|
44,636,744
|
—
|
—
|
44,636,744
|
||||||||||||
Foreign exchange
|
40,892
|
—
|
—
|
40,892
|
||||||||||||
Ending balance
|
$
|
63,764,270
|
$
|
15,753,742
|
$
|
—
|
$
|
79,518,012
|
Industrial
Hardware Segment |
Security
Products Segment |
Metal
Products Segment |
Total |
|||||||||||||
2018
|
||||||||||||||||
Beginning balance
|
$
|
19,169,849
|
$
|
13,059,042
|
$
|
—
|
$
|
32,228,891
|
||||||||
Investment in Load N Lock
|
—
|
2,694,700
|
—
|
2,694,700
|
||||||||||||
Foreign exchange
|
(83,215
|
)
|
—
|
—
|
(83,215
|
)
|
||||||||||
Ending balance
|
$
|
19,086,634
|
$
|
15,753,742
|
$
|
—
|
$
|
34,840,376
|
Industrial Hardware Segment |
Security Products Segment |
Metal Products Segment |
Total |
Weighted-Average
Amortization Period (Years) |
||||||||||||||||
2019 Gross Amount
|
||||||||||||||||||||
Patents and developed technology
|
$
|
5,375,680
|
$
|
1,618,950
|
$
|
—
|
$
|
6,994,630
|
10.2
|
|||||||||||
Customer relationships
|
22,899,000
|
1,139,381
|
—
|
24,038,381
|
9.6
|
|||||||||||||||
Non-compete agreements
|
12,000
|
459,570
|
—
|
471,570
|
1.9
|
|||||||||||||||
Intellectual property
|
—
|
307,370
|
—
|
307,370
|
2.0
|
|||||||||||||||
Total Gross Intangibles
|
$
|
28,286,680
|
$
|
3,525,271
|
$
|
—
|
$
|
31,811,951
|
9.5
|
|||||||||||
2019 Accumulated Amortization
|
||||||||||||||||||||
Patents and developed technology
|
$
|
1,505,097
|
$
|
789,056
|
$
|
—
|
$
|
2,294,153
|
||||||||||||
Customer relationships
|
1,751,225
|
581,262
|
—
|
2,332,487
|
||||||||||||||||
Non-compete agreements
|
800
|
417,032
|
—
|
417,832
|
||||||||||||||||
Intellectual property
|
—
|
307,369
|
—
|
307,369
|
||||||||||||||||
Accumulated Amortization
|
$
|
3,257,122
|
$
|
2,094,719
|
$
|
—
|
$
|
5,351,841
|
||||||||||||
Net 2019 per Balance Sheet
|
$
|
25,029,558
|
$
|
1,430,552
|
$
|
—
|
$
|
26,460,110
|
||||||||||||
2018 Gross Amount
|
||||||||||||||||||||
Patents and developed technology
|
$
|
7,884,498
|
$
|
1,648,731
|
$
|
—
|
$
|
9,533,229
|
10.2
|
|||||||||||
Customer relationships
|
3,650,000
|
1,139,381
|
—
|
4,789,381
|
8.1
|
|||||||||||||||
Non-compete agreements
|
—
|
459,570
|
—
|
459,570
|
4.4
|
|||||||||||||||
Intellectual property
|
—
|
307,370
|
—
|
307,370
|
5.0
|
|||||||||||||||
Total Gross Intangibles
|
$
|
11,534,498
|
$
|
3,555,052
|
$
|
—
|
$
|
15,089,550
|
9.2
|
|||||||||||
2018 Accumulated Amortization
|
||||||||||||||||||||
Patents and developed technology
|
$
|
2,448,380
|
$
|
737,276
|
$
|
—
|
$
|
3,185,656
|
||||||||||||
Customer relationships
|
638,750
|
408,233
|
—
|
1,046,983
|
||||||||||||||||
Non-compete agreements
|
—
|
329,296
|
—
|
329,296
|
||||||||||||||||
Intellectual property
|
—
|
245,895
|
—
|
245,895
|
||||||||||||||||
Accumulated Amortization
|
$
|
3,087,130
|
$
|
1,720,700
|
$
|
—
|
$
|
4,807,830
|
||||||||||||
Net 2018 per Balance Sheet
|
$
|
8,447,368
|
$
|
1,834,352
|
$
|
—
|
$
|
10,281,720
|
||||||||||||
2019
|
2018
|
|||||||
Term loans
|
$
|
98,765,233
|
$
|
28,675,000
|
||||
Revolving credit loan
|
—
|
—
|
||||||
98,765,233
|
28,675,000
|
|||||||
Less current portion
|
5,187,689
|
2,325,000
|
||||||
$
|
93,577,544
|
$
|
26,350,000
|
2020
|
$
|
5,187,689
|
||
2021
|
6,437,689
|
|||
2022
|
7,500,000
|
|||
2023
|
8,750,000
|
|||
2024
|
70,889,855
|
|||
Thereafter
|
—
|
|||
$
|
98,765,233
|
Year Ended
December 28, 2019
|
Year Ended
December 29, 2018
|
|||||||||||||||
Units
|
Weighted - Average Exercise Price
|
Units
|
Weighted - Average Exercise Price
|
|||||||||||||
Outstanding at beginning of period
|
189,167
|
$
|
21.46
|
141,500
|
$
|
20.36
|
||||||||||
Issued
|
96,000
|
23.65
|
51,000
|
24.90
|
||||||||||||
Exercised
|
(1,667
|
)
|
19.10
|
—
|
—
|
|||||||||||
Forfeited
|
(7,500
|
)
|
21.20
|
(3,333
|
)
|
19.10
|
||||||||||
Outstanding at end of period
|
276,000
|
22.30
|
189,167
|
21.46
|
||||||||||||
SARs Outstanding and Exercisable
|
||||||||||||||||||||||||||
Range of Exercise Prices
|
Outstanding as of
December 28, 2019
|
Weighted- Average Remaining Contractual Life
|
Weighted- Average Exercise Price
|
Exercisable as of
December 28, 2019
|
Weighted- Average Remaining Contractual Life
|
Weighted- Average Exercise Price
|
||||||||||||||||||||
$
|
19.10-26.30
|
276,000
|
3.3
|
$
|
22.30
|
38,003
|
2.3
|
19.10
|
Year Ended
December 28, 2019
|
Year Ended
December 29, 2018
|
|||||||||||||||
Shares
|
Weighted - Average Exercise Price
|
Shares
|
Weighted - Average Exercise Price
|
|||||||||||||
Outstanding at beginning of period
|
25,000
|
$
|
—
|
25,000
|
$
|
—
|
||||||||||
Issued
|
—
|
—
|
—
|
—
|
||||||||||||
Forfeited
|
—
|
—
|
—
|
—
|
||||||||||||
Outstanding at end of period
|
25,000
|
—
|
25,000
|
—
|
Stock Grants Outstanding and Exercisable
|
||||||||||||||||||||||||||
Range of Exercise Prices
|
Outstanding as of
December 28, 2019
|
Weighted- Average Remaining Contractual Life
|
Weighted- Average Exercise Price
|
Exercisable as of
December 28, 2019
|
Weighted- Average Remaining Contractual Life
|
Weighted- Average Exercise Price
|
||||||||||||||||||||
$
|
0.00
|
25,000
|
2.3
|
—
|
—
|
—
|
—
|
2019
|
2018
|
|||||||
Property, plant and equipment
|
$
|
4,638,141
|
$
|
2,582,792
|
||||
Right of Use Asset
|
2,933,189
|
--
|
||||||
Intangible assets
|
9,236,711
|
4,710,052
|
||||||
Other
|
380,336
|
218,710
|
||||||
Foreign Withholding Tax
|
315,747
|
540,761
|
||||||
Total deferred income tax liabilities
|
17,504,124
|
8,052,315
|
||||||
Other postretirement benefits
|
(239,348
|
)
|
(156,710
|
)
|
||||
Inventories
|
(1,422,472
|
)
|
(1,133,427
|
)
|
||||
Allowance for doubtful accounts
|
(123,172
|
)
|
(146,576
|
)
|
||||
Accrued compensation
|
(311,125
|
)
|
(200,232
|
)
|
||||
Lease Obligation
|
(2,933,189
|
)
|
--
|
|||||
Pensions
|
(6,804,275
|
)
|
(6,127,538
|
)
|
||||
Foreign Tax Credit
|
(400,078
|
)
|
(167,826
|
)
|
||||
Total deferred income tax assets
|
(12,233,659
|
)
|
(7,932,309
|
)
|
||||
Net deferred income tax (assets) liabilities
|
$
|
5,270,465
|
$
|
120,006
|
||||
2019
|
2018
|
|||||||
Domestic
|
$
|
12,537,168
|
$
|
12,431,889
|
||||
Foreign
|
3,668,803
|
5,158,440
|
||||||
$
|
16,205,971
|
$
|
17,590,329
|
2019
|
2018
|
|||||||
Current:
|
||||||||
Federal
|
$
|
2,783,481
|
$
|
484,451
|
||||
Foreign
|
1,001,270
|
753,521
|
||||||
State
|
489,921
|
347,199
|
||||||
Deferred:
|
||||||||
Federal
|
(756,206
|
)
|
815,858
|
|||||
Foreign
|
(225,014
|
)
|
153,726
|
|||||
State
|
(353,623
|
)
|
529,637
|
|||||
$
|
2,939,829
|
$
|
3,084,392
|
2019
|
2018
|
|||||||||||||||
Amount
|
Percent
|
Amount
|
Percent
|
|||||||||||||
Income taxes using U.S. federal statutory rate
|
$
|
3,403,254
|
21
|
%
|
$
|
3,693,968
|
21
|
%
|
||||||||
State income taxes, net of federal benefit
|
117,276
|
1
|
692,698
|
4
|
||||||||||||
Impact on Foreign Repatriation Tax Reform
|
--
|
0
|
(83,479
|
)
|
(1
|
)
|
||||||||||
Impact of foreign subsidiaries on effective tax rate
|
(239,823
|
)
|
(2
|
)
|
(401,992
|
)
|
(2
|
)
|
||||||||
Impact of New Tax Law
|
--
|
0
|
(507,847
|
)
|
(2
|
)
|
||||||||||
Impact of Research & Development tax credit
|
(411,090
|
)
|
(3
|
)
|
(216,675
|
)
|
(1
|
)
|
||||||||
Impact of manufacturers deduction on effective tax rate
|
0
|
0
|
0
|
0
|
||||||||||||
Other—net
|
70,212
|
1
|
(92,281
|
)
|
(1
|
)
|
||||||||||
2,939,829
|
18
|
%
|
3,084,392
|
18
|
%
|
2019
|
2018
|
|||||||
Balance at beginning of year
|
$
|
299,722
|
$
|
299,734
|
||||
Increases for positions taken during the current period
|
137,927
|
0
|
||||||
Increases for positions taken during the prior period
|
2,039,117
|
74,219
|
||||||
Decreases resulting from the expiration of the statute of limitations
|
(69,384
|
)
|
(74,231
|
)
|
||||
Balance at end of year
|
$
|
2,407,382
|
$
|
299,722
|
2020
|
$
|
4,721,598
|
||
2021
|
2,935,895
|
|||
2022
|
1,743,488
|
|||
2023
|
955,255
|
|||
2024
|
647,597
|
|||
$
|
11,003,833
|
2019
|
2018
|
|||||||
Service cost
|
$
|
1,055,410
|
$
|
1,319,841
|
||||
Interest cost
|
3,516,318
|
3,107,164
|
||||||
Expected return on plan assets
|
(4,761,320
|
)
|
(5,219,515
|
)
|
||||
Amortization of prior service cost
|
99,380
|
114,822
|
||||||
Amortization of the net loss
|
1,162,196
|
1,110,111
|
||||||
Net periodic benefit cost
|
$
|
1,071,984
|
$
|
432,423
|
2019
|
2018
|
|||||||
Discount rate
|
||||||||
- Pension plans
|
4.20% - 4.22
|
%
|
3.54% - 3.57
|
%
|
||||
- Supplemental pension plans
|
3.81
|
%
|
3.10
|
%
|
||||
Expected return on plan assets
|
7.5
|
%
|
7.5
|
%
|
||||
Rate of compensation increase
|
0
|
%
|
0
|
%
|
2019
|
2018
|
|||||||
Service cost
|
$
|
33,287
|
$
|
37,024
|
||||
Interest cost
|
56,755
|
77,161
|
||||||
Expected return on plan assets
|
(28,033
|
)
|
(55,650
|
)
|
||||
Amortization of prior service cost
|
(5,072
|
)
|
(5,072
|
)
|
||||
Amortization of the net loss
|
(47,272
|
)
|
(65,591
|
)
|
||||
Net periodic benefit cost
|
$
|
9,665
|
$
|
(12,128
|
)
|
2019
|
2018
|
|||||||
Discount rate
|
4.26
|
%
|
3.60
|
%
|
||||
Expected return on plan assets
|
4.0
|
%
|
4.0
|
%
|
Pension Benefit
|
Other Postretirement Benefit
|
|||||||||||||||
2019
|
2018
|
2019
|
2018
|
|||||||||||||
Benefit obligation at beginning of year
|
$
|
91,533,200
|
$
|
98,522,201
|
$
|
2,096,761
|
$
|
2,423,410
|
||||||||
Change in discount rate
|
12,313,831
|
(8,319,874
|
)
|
239,138
|
(217,539
|
)
|
||||||||||
Service cost
|
1,055,410
|
1,319,841
|
33,287
|
37,024
|
||||||||||||
Interest cost
|
3,516,318
|
3,107,164
|
56,755
|
77,161
|
||||||||||||
Actuarial (gain)/loss
|
(1,508,935
|
)
|
531,799
|
77,813
|
(89,664
|
)
|
||||||||||
Significant Event
|
--
|
--
|
(902,719
|
)
|
--
|
|||||||||||
Benefits paid
|
(3,918,781
|
)
|
(3,627,931
|
)
|
(35,016
|
)
|
(133,631
|
)
|
||||||||
Benefit obligation at end of year
|
$
|
102,991,043
|
$
|
91,533,200
|
$
|
1,566,019
|
$
|
2,096,761
|
2019
|
2018
|
2019
|
2018
|
|||||||||||||
Fair value of plan assets at beginning of year
|
$
|
66,170,875
|
$
|
72,098,772
|
$
|
1,448,126
|
$
|
1,391,239
|
||||||||
Actual return on plan assets
|
11,803,359
|
(4,827,641
|
)
|
13,466
|
56,887
|
|||||||||||
Employer contributions
|
304,105
|
2,527,675
|
35,016
|
133,631
|
||||||||||||
Significant Event
|
--
|
--
|
(902,719
|
)
|
--
|
|||||||||||
Benefits paid
|
(3,918,781
|
)
|
(3,627,931
|
)
|
(35,016
|
)
|
(133,631
|
)
|
||||||||
Fair value of plan assets at end of year
|
$
|
74,359,558
|
$
|
66,170,875
|
$
|
558,873
|
$
|
1,448,126
|
Pension Benefit
|
Other Postretirement Benefit
|
|||||||||||||||
Funded Status
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
Net amount recognized in the balance sheet
|
$
|
(28,631,485
|
)
|
$
|
(25,362,325
|
)
|
$
|
(1,007,146
|
)
|
$
|
(648,635
|
)
|
Amounts recognized in accumulated other comprehensive income consist of:
|
||||||||||||||||
Pension Benefit
|
Other Postretirement Benefit
|
|||||||||||||||
2019
|
2018
|
2019
|
2018
|
|||||||||||||
Net (loss)/gain
|
$
|
(36,315,245
|
)
|
$
|
(33,714,584
|
)
|
$
|
499,701
|
$
|
1,332,634
|
||||||
Prior service (cost) credit
|
(265,012
|
)
|
(364,392
|
)
|
8,253
|
13,325
|
||||||||||
$
|
(36,580,257
|
)
|
$
|
(34,078,976
|
)
|
$
|
507,954
|
$
|
1,345,959
|
Pension Benefit
|
Other Postretirement Benefit
|
|||||||||||||||
2019
|
2018
|
2019
|
2018
|
|||||||||||||
Balance at beginning of period
|
$
|
(34,078,976
|
)
|
$
|
(33,059,756
|
)
|
$
|
1,345,959
|
$
|
1,108,182
|
||||||
Change due to availability of final actual assets and census data
|
---
|
---
|
--
|
--
|
||||||||||||
Charged to net periodic benefit cost
|
||||||||||||||||
Prior service cost
|
99,380
|
114,822
|
(5,072
|
)
|
(5,072
|
)
|
||||||||||
Net loss (gain)
|
1,162,196
|
1,110,111
|
(47,272
|
)
|
(65,591
|
)
|
||||||||||
Liability (gains)/losses
|
||||||||||||||||
Discount rate
|
(12,313,831
|
)
|
8,319,874
|
(239,138
|
)
|
217,539
|
||||||||||
Asset (gains)/losses deferred
|
7,724,649
|
(9,531,647
|
)
|
(14,567
|
)
|
1,237
|
||||||||||
Significant Event
|
--
|
--
|
(454,143
|
)
|
--
|
|||||||||||
Additional recognition due to plan amendment
|
--
|
14,928
|
—
|
—
|
||||||||||||
Other
|
826,325
|
(1,047,308
|
)
|
(77,813
|
)
|
89,664
|
||||||||||
Balance at end of period
|
$
|
(36,580,257
|
)
|
$
|
(34,078,976
|
)
|
$
|
507,954
|
$
|
1,345,959
|
2019
|
2018
|
||||||||||
Discount rate
|
|||||||||||
-
|
Pension plans
|
3.18% - 3.23
|
%
|
4.20% - 4.22
|
%
|
||||||
-
|
Supplemental pension plans
|
2.61
|
%
|
3.81
|
%
|
||||||
-
|
Other postretirement plan
|
3.35
|
%
|
4.26
|
%
|
2019
|
2018
|
|||||||
Number of plans
|
5
|
5
|
||||||
Projected benefit obligation
|
$
|
102,991,043
|
$
|
91,533,200
|
||||
Accumulated benefit obligation
|
102,991,043
|
91,533,200
|
||||||
Fair value of plan assets
|
74,359,558
|
66,170,875
|
||||||
Net amount recognized in accrued benefit liability
|
(28,631,485
|
)
|
(25,362,325
|
)
|
December 28, 2019
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Cash and Equivalents:
|
||||||||||||||||
Common/collective trust funds
|
$
|
—
|
$
|
334,138
|
$
|
—
|
$
|
334,138
|
||||||||
Equities:
|
||||||||||||||||
The Eastern Company Common Stock
|
6,625,560
|
—
|
6,625,560
|
|||||||||||||
Common/collective trust funds
|
||||||||||||||||
Russell Multi Asset Core Plus Fund (a)
|
—
|
33,413,819
|
—
|
33,413,819
|
||||||||||||
Fixed Income:
|
||||||||||||||||
Common/collective trust funds
|
||||||||||||||||
Target Duration LDI Fixed Income Funds (b)
|
||||||||||||||||
• Russell 8 Year LDI Fixed Income Fund
|
—
|
12,796,482
|
—
|
12,796,482
|
||||||||||||
• Russell 14 Year LDI Fixed Income Fund
|
—
|
11,387,626
|
—
|
11,387,626
|
||||||||||||
STRIPS Fixed Income Funds (c)
|
||||||||||||||||
• Russell 15 Year STRIPS Fixed Income Fund
|
—
|
3,050,389
|
—
|
3,050,389
|
||||||||||||
• Russell 10 Year STRIPS Fixed Income Fund
|
—
|
4,616,924
|
—
|
4,616,924
|
||||||||||||
• Russell 28 to 29 Year STRIPS Fixed Income Fund
|
—
|
2,134,620
|
—
|
2,134,620
|
||||||||||||
Total
|
$
|
6,625,560
|
$
|
67,733,998
|
$
|
—
|
$
|
74,359,558
|
December 29, 2018
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Cash and Equivalents:
|
||||||||||||||||
Common/collective trust funds
|
$
|
—
|
$
|
306,882
|
$
|
—
|
$
|
306,882
|
||||||||
Equities:
|
||||||||||||||||
The Eastern Company Common Stock
|
5,247,495
|
—
|
5,247,495
|
|||||||||||||
Common/collective trust funds
|
||||||||||||||||
Russell Multi Asset Core Plus Fund (a)
|
—
|
30,611,519
|
—
|
30,611,519
|
||||||||||||
Fixed Income:
|
||||||||||||||||
Common/collective trust funds
|
||||||||||||||||
Target Duration LDI Fixed Income Funds (b)
|
||||||||||||||||
• Russell 8 Year LDI Fixed Income Fund
|
—
|
5,735,993
|
—
|
5,735,993
|
||||||||||||
• Russell 14 Year LDI Fixed Income Fund
|
—
|
17,044,596
|
—
|
17,044,596
|
||||||||||||
STRIPS Fixed Income Funds (c)
|
||||||||||||||||
• Russell 15 Year STRIPS Fixed Income Fund
|
—
|
1,811,436
|
—
|
1,811,436
|
||||||||||||
• Russell 10 Year STRIPS Fixed Income Fund
|
—
|
3,408,879
|
—
|
3,408,879
|
||||||||||||
• Russell 28 to 29 Year STRIPS Fixed Income Fund
|
—
|
2,004,075
|
—
|
2,004,075
|
||||||||||||
Total
|
$
|
5,247,495
|
$
|
60,923,380
|
$
|
—
|
$
|
66,170,875
|
(a)
|
The investment objective of the RITC (formerly Russell) Multi-Asset Core Plus Fund seeks to provide long-term growth of capital over a market cycle by offering a diversified portfolio of funds and separate
accounts investing in global stock, return seeking fixed income, commodities, global real estate and opportunistic investments. They hold a dynamic mix of underlying Russell Investments funds and/or separate accounts. Russell Investments is a
strong proponent of disciplined strategic asset allocation and rebalancing strategies, and believes that unstable movements in the market have the potential to create opportunities. By identifying short-term mispricing, and making small
tactical adjustments to the Multi-Asset Core Plus Fund, they believe there is potential to enhance returns while continuing to manage risks.
|
(b)
|
The Target Duration LDI Fixed Income Funds seek to outperform their respective Barclays-Russell LDI Indexes over a full market cycle. These Funds invest primarily in investment grade corporate bonds that closely
match those found in discount curves used to value U.S. pension liabilities. They seek to provide additional incremental return through modest interest rate timing, security selection and tactical use of non-credit sectors. Generally, for use
in combination with other bond funds to gain additional credit exposure, with the goal of reducing the mismatch between a plan’s assets and liabilities.
|
(c)
|
The STRIPS (Separate Trading of Registered Interest and Principal of Securities) Funds seek to provide duration and Treasury exposure by investing in an optimized subset of the STRIPS universe with a similar
duration profile as the Barclays U.S. Treasury STRIPS 10-11 year, 16-16 year or 28-29 year Index. These passively managed funds are generally used with other bond funds to add additional duration to the asset portfolio. This will help reduce
the mismatch between a plan’s assets and liabilities.
|
2019
|
2018
|
|||||||
Regular matching contributions
|
$
|
540,693
|
$
|
551,046
|
||||
Transitional credit contributions
|
305,226
|
349,062
|
||||||
Non-discretionary contributions
|
638,745
|
578,373
|
||||||
Total contributions made for the period
|
$
|
1,484,664
|
$
|
1,478,481
|
2019
|
2018
|
|||||||
Basic:
|
||||||||
Weighted average shares outstanding
|
6,235,098
|
6,258,277
|
||||||
Diluted:
|
||||||||
Weighted average shares outstanding
|
6,235,098
|
6,258,277
|
||||||
Dilutive stock options
|
34,910
|
15,697
|
||||||
Denominator for diluted earnings per share
|
6,270,008
|
6,273,974
|
2019
|
2018
|
|||||||
Sales:
|
||||||||
Sales to unaffiliated customers:
|
||||||||
Industrial Hardware
|
$
|
164,505,888
|
$
|
140,293,409
|
||||
Security Products
|
58,324,085
|
64,897,871
|
||||||
Metal Products
|
28,912,646
|
29,084,183
|
||||||
$
|
251,742,619
|
$
|
234,275,463
|
|||||
Inter-segment Sales:
|
||||||||
Industrial Hardware
|
$
|
61,557
|
$
|
366,381
|
||||
Security Products
|
3,382,791
|
3,365,695
|
||||||
Metal Products
|
11,731
|
13,421
|
||||||
$
|
3,456,079
|
$
|
3,745,497
|
|||||
Income Before Income Taxes:
|
||||||||
Industrial Hardware
|
$
|
11,067,011
|
$
|
9,588,185
|
||||
Security Products
|
5,389,612
|
7,122,640
|
||||||
Metal Products
|
1,001,231
|
1,148,516
|
||||||
Operating Profit
|
17,457,854
|
17,859,341
|
||||||
Interest expense
|
(1,857,961
|
)
|
(1,202,272
|
)
|
||||
Other income
|
606,078
|
933,260
|
||||||
$
|
16,205,971
|
$
|
17,590,329
|
|||||
Geographic Information:
|
||||||||
Net Sales:
|
||||||||
United States
|
$
|
230,920,619
|
$
|
207,789,058
|
||||
Foreign
|
20,822,000
|
26,486,405
|
||||||
$
|
251,742,619
|
$
|
234,275,463
|
|||||
Foreign sales are primarily to customers in North America.
|
||||||||
Identifiable Assets:
|
||||||||
United States
|
$
|
263,295,787
|
$
|
166,665,767
|
||||
Foreign
|
17,367,189
|
14,581,800
|
||||||
$
|
280,662,976
|
$
|
181,247,567
|
|||||
Industrial Hardware
|
$
|
66,008,663
|
$
|
47,600,805
|
||||
Security Products
|
54,804,360
|
54,593,837
|
||||||
Metal Products
|
19,439,404
|
19,909,256
|
||||||
140,252,427
|
122,103,898
|
|||||||
General corporate
|
140,410,549
|
59,143,669
|
||||||
$
|
280,662,976
|
$
|
181,247,567
|
2019
|
2018
|
|||||||
Depreciation and Amortization:
|
||||||||
Industrial Hardware
|
$
|
4,015,017
|
$
|
2,978,324
|
||||
Security Products
|
1,281,008
|
1,135,811
|
||||||
Metal Products
|
1,158,856
|
1,215,073
|
||||||
$
|
6,454,881
|
$
|
5,329,208
|
|||||
Capital Expenditures:
|
||||||||
Industrial Hardware
|
$
|
3,603,863
|
$
|
3,029,406
|
||||
Security Products
|
935,722
|
1,482,267
|
||||||
Metal Products
|
897,573
|
901,400
|
||||||
5,437,158
|
5,413,073
|
|||||||
Currency translation adjustment
|
3,330
|
(9,014
|
)
|
|||||
General corporate
|
—
|
6,486
|
||||||
$
|
5,440,488
|
$
|
5,410,545
|
(a) |
Information concerning security ownership of certain beneficial owners is incorporated herein by reference to the Proxy Statement under the caption “Security Ownership of Certain Beneficial Shareholders and Management”.
|
(b) |
Information concerning security ownership of management is incorporated herein by reference to the Proxy Statement under the captions “Security Ownership of Certain Beneficial Shareholders and Management”, “Executive Compensation”,
“Stock Based Awards”, “Options Exercised in Fiscal 2019”, and “Outstanding Equity Awards at Fiscal Year-End”. See also the equity compensation plan information in Item 5 of this Form 10-K.
|
(c) |
Changes in Control
|
(1)
|
Financial statements
|
Consolidated Balance Sheets — December 28, 2019 and December 29, 2018………..……
|
27.
|
||
Consolidated Statements of Income — Fiscal years ended December 28, 2019,
|
|||
December 29, 2018………………………………………………..………………………….
|
29.
|
||
Consolidated Statements of Comprehensive Income — Fiscal years ended
|
|||
December 28, 2019, December 29, 2018…………………………………………………….
|
29.
|
||
Consolidated Statements of Shareholders’ Equity — Fiscal years ended
|
|||
December 28, 2019, December 29, 2018………………………….…………………………
|
30.
|
||
Consolidated Statements of Cash Flows — Fiscal years ended December 28, 2019,
|
|||
December 29, 2018……………..……………………………………………………………
|
31.
|
||
Notes to Consolidated Financial Statements…………………………………………………
|
32.
|
||
Report of Independent Registered Public Accounting Firm………………………………….
|
61.
|
Exhibit No.
|
Description
|
||
2.1
|
Asset Purchase Agreement, dated June 2, 2018, by and among the Company and Load N Lock Systems, Inc. (incorporated
herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K (SEC File No. 001-35383) filed on June 4, 2018).
|
||
2.2
|
Stock Purchase Agreement dated August 30, 2019, among the Company, Eastern Engineered Systems, Inc., Big 3 Holdings, LLC, Big 3 Precision Mold Services, Inc., Industrial Design Innovations, LLC, Sur-Form, LLC,
Associated Toolmakers Limited, TVV Capital Partners III, L.P., TVV Capital Partners III-A, L.P, Alan Scheidt, Todd Riley, Clinton Hyde and Big 3 Holdings, LLC, as the initial Seller Representative (incorporated herein by reference to Exhibit
2.1 to the Company’s Current Report on Form 8-K (SEC File No. 001-35383) filed on September 3, 2019).
|
||
3.1
|
Restated Certificate of Incorporation of the Company (conformed copy) (filed herewith).
|
||
3.2
|
Amended and Restated By-Laws of the Company, as Amended through April 27, 2016 (conformed copy) (filed herewith).
|
||
4
|
Description of Securities (filed herewith).
|
||
10.1*
|
Amended and Restated Employment Agreement, dated as of January 1, 2018, between the Company and August M. Vlak
(incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (SEC File No. 001-35383), filed January 22, 2018).
|
||
10.2*
|
The Company’s Directors’ Fee Program, effective as of October 1, 1996 (incorporated herein by reference to the Company’s
Registration Statement on Form S-8, as amended (SEC File No. 333-21351) filed on February 7, 1997).
|
||
10.3*
|
The Company’s 2010 Executive Stock Incentive Plan, effective July 20, 2010 (incorporated herein by reference
to Exhibit 4a to the Company’s Registration Statement on Form S-8 (SEC File No. 333-169169), filed on September 2, 2010).
|
||
10.4
|
Credit Agreement dated August 30, 2019 among the Company, the lenders from time to time party hereto), and Santander Bank, N.A., as the administrative agent, an LC Issuer (as there defined), and as the Swing Line Lender (as therein defined)
(incorporated herein by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K (SEC File No. 001-35383), filed on September 3, 2019).
|
||
10.5
|
Pledge and Security Agreement, dated August 30, 2019 among the Company, certain of its Subsidiaries (as defined therein), and Santander Bank, N.A., as administrative agent for the benefit of the Secured Creditors (as defined therein)
(incorporated herein by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K (SEC File No. 001-35383), filed on September 3, 2019).
|
||
21
|
Subsidiaries of the Company (filed herewith).
|
||
23
|
Consent of Fiondella, Milone & LaSaracina LLP (filed herewith).
|
||
31
|
Rule 13a-14(a) Certification of Chief Executive Officer and Chief Financial Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
||
32
|
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
Exhibit No.
|
Description
|
|
99
|
Letter to our shareholders from the Annual Report 2019 (filed herewith).
|
|
101
|
The following materials from the Company’s Annual Report on Form 10-K for the year ended December 28, 2019, formatted in Inline Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets
as of December 28, 2019 and December 29, 2018; (ii) the Consolidated Statements of Income for the fiscal years ended December 28, 2019 and December 29, 2018; (iii) the Consolidated Statements of Comprehensive Income for the fiscal years ended
December 28, 2019 and December 29, 2018; (iv) the Consolidated Statements of Shareholders’ Equity for the fiscal years ended December 28, 2019 and December 29, 2018; (v) the Consolidated Statements of Cash Flows for the fiscal years ended
December 28, 2019 and December 29, 2018; and (vi) the Notes to the Consolidated Financial Statements (filed herewith).
|
COL. A
|
COL. B
|
COL. C
|
COL. D
|
COL. E
|
||||||||||||||||
ADDITIONS
|
||||||||||||||||||||
Description
|
Balance at Beginning
of Period
|
(1)
Charged to Costs
and Expenses
|
(2)
Charged to Other
Accounts-Describe
|
Deductions –
Describe
|
Balance at End
of Period
|
|||||||||||||||
Fiscal year ended December 28, 2019: Deducted from asset accounts: Allowance for doubtful accounts |
$
|
680,000
|
$
|
202,000
|
$
|
78,000
|
(b)
|
$
|
0
|
(a)
|
$
|
556,000
|
||||||||
|
||||||||||||||||||||
Fiscal year ended December 29, 2018: Deducted from asset accounts: Allowance for doubtful accounts |
$
|
470,000
|
$
|
220,000
|
$
|
0
|
$
|
10,000
|
(a)
|
$
|
680,000
|
|||||||||
|
(a)
|
Uncollectible accounts written off, net of recoveries.
|
(b)
|
Acquired company opening balance.
|
Dated: March 5, 2020
|
THE EASTERN COMPANY
|
By /s/ John L. Sullivan III
John L. Sullivan III Vice President and Chief Financial Officer |
/s/ August M. Vlak
|
March 5, 2020
|
|
August M. Vlak
President, Chief Executive Officer and Director |
||
/s/ John L. Sullivan III
|
March 5, 2020
|
|
John L. Sullivan III
Vice President and Chief Financial Officer |
||
/s/ James A. Mitarotonda
|
March 5, 2020
|
|
James A. Mitarotonda
Chairman of the Board |
||
/s/ Fredrick D. DiSanto
|
March 5, 2020
|
|
Fredrick D. DiSanto
Director
|
||
/s/ John W. Everets
|
March 5, 2020
|
|
John W. Everets
Director |
||
/s/ Charles W. Henry
|
March 5, 2020
|
|
Charles W. Henry
Director |
||
/s/ Michael A. McManus
|
March 5, 2020
|
|
Michael A. McManus
Director |
||
/s/ Peggy Scott
|
March 5, 2020
|
|
Peggy Scott
Director |
Name of Division
|
State or Other Jurisdiction of
Incorporation or Organization
|
|
Argo EMS
|
Connecticut
|
|
Frazer & Jones Company
|
New York
|
|
Eberhard Manufacturing
|
Ohio
|
|
Greenwald Industries
|
Connecticut
|
|
Illinois Lock Company
|
Illinois
|
|
Name of Subsidiary
|
||
Associated Toolmakers Ltd.
|
England
|
|
Big 3 Precision Products, Inc.
|
Delaware
|
|
Big 3 Precision Mold Services, Inc.
|
Delaware
|
|
Canadian Commercial Vehicles Corporation
|
Canada
|
|
Dongguan Reeworld Security Products Ltd.
|
China
|
|
Eastern Engineered Systems, Inc.
|
Delaware
|
|
Eastern Industrial Ltd
|
China
|
|
Eberhard Hardware Manufacturing Ltd.
|
Canada
|
|
Eberworld S.A. de C.V.
|
Mexico
|
|
Sesamee Mexicana, S.A. de C.V.
|
Mexico
|
|
Velvac Holdings, Inc.
|
Delaware
|
|
Velvac, Inc.
|
Delaware
|
|
Velvac International, Inc.
|
Delaware
|
|
Velvac de Reynosa, S. De R.L. De C.v.
|
Mexico
|
|
World Lock Company Ltd.
|
Taiwan
|
|
World Security Industries Co. Ltd.
|
Hong Kong
|
1. |
I have reviewed this report on Form 10-K 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-K 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 Annual Report on Form 10-K for the period ended December 28, 2019, 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.
|
STOCK OPTIONS AND AWARDS (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 28, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options and Awards [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Appreciation Rights Activity | The following tables set forth the outstanding SARs for the period specified:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SARs Outstanding and Exercisable |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Option Activity | The following tables set forth the outstanding stock grants for the period specified:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Grants Outstanding and Exercisable |
|
EARNINGS PER SHARE (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 28, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earning Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Denominators Used in the Earnings Per Share Computations | The denominators used in the earnings per share computations follow:
|
ACCOUNTING POLICIES, Cash Equivalents and Inventories (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 28, 2019 |
Dec. 29, 2018 |
|
Cash Equivalents [Abstract] | ||
Amount of deposits insured by Federal Deposit Insurance Corporation (FDIC) | $ 250,000 | |
Percentage of available cash located in foreign subsidiaries | 50.00% | |
Inventories [Abstract] | ||
LIFO inventory amount | $ 31,011,130 | |
FIFO inventory amount | 7,295,793 | |
Excess of current cost over LIFO carrying value | $ 6,712,162 | $ 6,957,972 |
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 28, 2019 |
Dec. 29, 2018 |
|
Other comprehensive income/(loss) | ||
Change in fair value of interest rate swap, taxes benefit | $ 26 | $ 26,969 |
Change in pension and postretirement benefit costs, income taxes (expense)/ benefit | $ 664,279 | $ 578,090 |
STOCK OPTIONS AND AWARDS |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 28, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options and Awards [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options and Awards | 7. Stock Options and Awards Stock Options As of December 28, 2019, the Company had one stock option plan, The Eastern Company 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 Company’s common stock on the dates the stock 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. Under the 2010 Plan, non-qualified stock options granted to participants will have exercise prices determined by the Compensation Committee of the Company’s Board of Directors. During 2019 and 2018, no stock options or restricted stock were granted that were subject to the meeting of performance measurements. For the period of 2019, the Company used several assumptions which included an expected term of 3.5 to 4 years, volatility deviation of 28.88% and 32.33% and a risk free rate of 1.42% to 2.48%. For the period of 2018, the Company used several assumptions which included an expected term of 3.5 years, volatility deviation of 29.5% and a risk free rate of 2.33%. 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 difference between the fair value of the Company’s common stock at the date of grant and the fair value as of the exercise date resulting in the issuance of the Company’s common stock. During 2019, the Company issued 96,000 SARs and during 2018 51,000 SARs were issued. Stock-based compensation expense in connection with SARs granted to employees during fiscal year 2019 was $397,250 and for 2018 was $276,778. As of December 28, 2019, there were 178,500 shares of common stock reserved and available for future grant under the above noted 2010 Plan. The following tables set forth the outstanding SARs for the period specified:
The following tables set forth the outstanding stock grants for the period specified:
As of December 28, 2019, outstanding SARs and options had an intrinsic value of $2,898,945. |
ACCOUNTING POLICIES |
12 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Dec. 28, 2019 | |||||||
ACCOUNTING POLICIES [Abstract] | |||||||
ACCOUNTING POLICIES | 3. Accounting Policies Fiscal Year The Company’s year ends on the Saturday nearest to December 31. Fiscal years, 2019 and 2018, were 52 weeks each. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All intercompany accounts and transactions are eliminated. Reclassification Commencing with the first quarter of 2018, pension service costs have been broken out and reclassified from the gains and losses associated with the pension assets. The reclassification of these expenses does not affect the net income reported. Product development expense is not necessarily a cost of product sold. Rather, these expenses are related to product development. The reclassification of these expenses does not affect the net income reported. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. On an ongoing basis the Company evaluates its estimates, including those related to product returns, bad debts, carrying value of inventories, intangible and other long-lived assets, income taxes, pensions and other postretirement benefits. Actual results could differ from those estimates. Foreign Currency For foreign operations asset and liability accounts are translated with an exchange rate at the respective balance sheet dates; income statement accounts are translated at the average exchange rate for the years. Resulting translation adjustments are made directly to a separate component of shareholders’ equity – “Accumulated other comprehensive income (loss) – Foreign currency translation”. Foreign currency exchange transaction gains and losses are not material in any year. Cash Equivalents Highly liquid investments purchased with a maturity of three months or less are considered cash equivalents. The Company has deposits that exceed amounts insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000, but the Company does not consider this a significant concentration of credit risk based on the strength of the financial institution. Approximately 50% of available cash is located outside of the United States in our foreign subsidiaries. Accounts Receivable Accounts receivable are stated at their net realizable value. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company reviews the collectability of its receivables on an ongoing basis taking into account a combination of factors. The Company reviews potential problems, such as past due accounts, a bankruptcy filing or deterioration in the customer’s financial condition, to ensure the Company is adequately accrued for potential loss. Accounts are considered past due based on when payment was originally due. If a customer’s situation changes, such as a bankruptcy or creditworthiness, or there is a change in the current economic climate, the Company may modify its estimate of the allowance for doubtful accounts. The Company will write off accounts receivable after reasonable collection efforts have been made and the accounts are deemed uncollectible. Inventories Inventories are valued at the lower of cost or net realizable value. Cost is determined by the last-in, first-out (LIFO) method in the U.S. ($31,011,130 for U.S. inventories at December 28, 2019, excluding Big 3 and Velvac) and by the first-in, first-out (FIFO) method for inventories outside the U.S. ($7,295,793 for inventories outside the U.S. at December 28, 2019). Cost exceeds the LIFO carrying value by approximately $6,712,162 at December 28, 2019 and $6,957,972 at December 29, 2018. There was no material LIFO quantity liquidation in 2019 or 2018. In addition, as of the balance sheet dates, the Company has recorded reserves for excess/obsolete inventory. Property, Plant and Equipment and Related Depreciation Property, plant and equipment (including equipment under capital lease) are stated at cost. Depreciation ($4,722,758 in 2019, $4,329,136 in 2018) is computed generally using the straight-line method based on the following estimated useful lives of the assets: Buildings 10 to 39.5 years; Machinery and equipment 3 to 10 years. Impairment of Long-Lived Assets In accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long Lived Assets, the Company reviews it long lived assets and certain intangible assets for impairment whenever events or changes in circumstances indicate the that carrying amount may not be recoverable. In such an event, the carrying value of long lived assets is reviewed by management to determine if the value may be impaired. If this review indicates that the carrying amount will not be recoverable, as determined based on the estimated expected future cash flows attributable to the asset over the remaining amortization period, management will reduce the carrying amount to recognize the impairment and recognize an impairment loss. The measurement of the impairment loss to be recognized is to be based on the difference between the fair value and the carrying amount of the asset. Fair value is defined as the amount of which the asset could be bought or sold in a current transaction between willing parties. Where quoted market prices in active markets are not available, management would estimate fair value based on the best information available in the circumstances such as the price of similar assets, a discounted cash flow analysis or other techniques. No impairment losses were recognized for the period ended December 28, 2019 and for the period December 29, 2018. Goodwill The Company performed qualitative assessments of goodwill as of the end of fiscal 2019 and fiscal 2018 and determined it is more likely than not that no impairment of goodwill existed at the end of 2019 or 2018. The Company will perform annual qualitative assessments in subsequent years as of the end of each fiscal year. Additionally, the Company will perform interim analysis whenever conditions warrant. Goodwill would be considered impaired whenever the historical carrying amount exceeds the fair value. Pursuant to the qualitative assessment performed, goodwill was not impaired in 2019 or 2018. Should we reach a different conclusion in the future, additional work would be performed to determine the amount of the non-cash impairment charge to be recognized. The maximum future impairment of goodwill that could occur is the amount recognized on our balance sheet. Intangible Assets Patents are recorded at cost and are amortized using the straight-line method over the lives of the patents. Technology and licenses are recorded at cost and are generally amortized on a straight-line basis over periods ranging from 5 to 17 years. Generally, non-compete agreements and customer relationships are being amortized using the straight-line method over a period of 5 years. Amortization expense in 2019 and 2018 was $1,726,539 and $1,452,084, respectively. In the event that facts and circumstances indicate that the carrying value of the intangible assets, including definite life intangible assets, may be impaired, an evaluation is performed to determine if a write-down is required. Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The company utilizes a fair value hierarchy, which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The fair value hierarchy has three levels of inputs that may be used to measure fair value:
The Company’s financial instruments are primarily investments in pension assets, see footnote 11, and consists of an interest rate swap. The Company’s interest rate swap is not an exchange-traded instrument. However, it is valued based on observable inputs for similar liabilities and accordingly is classified as Level 2. The amount of the interest rate swap is included in other accrued liabilities. The carrying amounts of other financial instruments (cash and cash equivalents, accounts receivable, accounts payable and debt) as of December 28, 2019 and December 29, 2018, approximate fair value based on the expected future cash flows of the related instruments. Right of Use Assets In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (“Topic 842”). ASU 2016-02 requires lessees to present right-of-use (“ROU”) assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. See Note 13 – Recent Accounting Pronouncements. In calculating the effect of ASU 2016-02, the Company elected the transition method thereby not restating comparable periods. The Company elected to account for non-lease components as part of the lease component to which they relate. Lease accounting involves significant judgments, including making estimates related to the lease term, lease payments, and discount rate. In accordance with the guidance, the Company recognized ROU assets and lease liabilities for all leases with a term greater than 12 months. The Company has operating leases for buildings, warehouses and office equipment. Currently, the Company has 45 operating leases with a ROU asset and lease liability totaling $12,342,000 as of December 28, 2019. The basis, terms and conditions of the leases are determined by the individual agreements. The Company’s option to extend certain leases ranges from 12 – 140 months. All options to extend have been included in the calculation of the ROU asset and lease liability. The leases do not contain residual value guarantees, restrictions, or covenants that could incur additional financial obligations to the Company. There are no subleases, sale-leaseback, or related party transactions. Revenue Recognition The Company recognizes revenue in accordance with ASC 606 when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company generates wholesale revenues primarily from the sale of products to original equipment manufacturers and distributers in the United States. The Company recognizes revenue upon shipment or transfer of title to the customer as that is when the customer obtains control of the promised goods. The Company typically extends credit terms to its customers based on their creditworthiness and generally does not receive advance payments. As such, the Company records accounts receivable at the time of shipment, when the Company’s right to the consideration becomes unconditional. Accounts receivable from the Company’s customers are typically due within 30 days of invoicing. An allowance for doubtful accounts is provided based on a periodic analysis of individual account balances, including an evaluation of days outstanding, payment history, recent payment trends and the Company’s assessment of the customer’s credit worthiness. As of December 28, 2019 and December 29, 2018, the Company’s allowance for doubtful accounts total was $556,000 and $680,000, respectively. As of December 28, 2019 and December 29, 2018, the Company’s bad debt expense was $64,000 and $220,000, respectively. The Company considers several factors in determining that control transfers to the customer upon shipment of products. These factors include that legal title transfers to the customer, the Company has a present right to payment, and the customer has assumed the risk and rewards of ownership at the time of shipment. Big 3 Mold division may employ the efforts expended method for the percentage of completion for revenue recognition for certain transactions. The efforts expended method calculates the proportion of effort expended to date in comparison to the total effort expected to be expended for the contract. The amount of revenue recognized employing the percentage of completion method was $576,000 for the year ended December 28, 2019. No revenue was recognized employing the percentage of completion method for the year ended December 29, 2018. Based on historical experience, the Company does not accrue a reserve for product returns. For the years ended December 28, 2019 and December 29, 2018, the Company recorded sales returns of $613,000 and $725,000, respectively, as a reduction of revenue. Greenwald Industries generates subscription services revenue from access provided to customers to the division’s specific online databases. For the years ended December 28, 2019 and December 29, 2018, Greenwald Industries subscription services revenue was $567,000 and $448,000, respectively. Sales and similar taxes that are imposed on the Company’s sales and collected from the customer are excluded from revenues. Costs for shipping and handling activities, including those activities that occur subsequent to transfer of control to the customer, are recorded as cost of sales and are expensed as incurred. For the years ended December 28, 2019 and December 29, 2018, the Company recorded no revenues related to performance obligations satisfied in prior periods. As part of the Company’s adoption of the new revenue standard, the Company has elected to use the practical expedient to exclude disclosure of transaction prices allocated to remaining performance obligations, and when the Company expects to recognize such revenue, for all periods prior to the date of initial application of the standard. There was no subscription services revenue from remaining performance obligations as of December 28, 2019. See footnote 12 regarding the Company’s revenue disaggregated by reporting segment, intersegment sales by reporting segment and geography. Cost of Goods Sold Cost of goods sold reflects the cost of purchasing, manufacturing and preparing a product for sale. These costs generally represent the expenses to acquire or manufacture products for sale (including an allocation of depreciation and amortization) and are primarily comprised of direct materials, direct labor, and overhead, which includes indirect labor, facility and equipment costs, inbound freight, receiving, inspection, purchasing, warehousing and any other costs related to the purchasing, manufacturing or preparation of a product for sale. Shipping and Handling Costs Shipping and handling costs are included in cost of goods sold. Product Development Costs Product development costs, charged to expense as incurred, were $6,024,567 in 2019, $6,950,969 in 2018. Selling and Administrative Expenses Selling and administrative expenses include all operating costs of the Company that are not directly related to the cost of purchasing, manufacturing and preparing a product for sale. These expenses generally represent administrative expenses for support functions and related overhead. Advertising Costs The Company expenses advertising costs as incurred. Advertising costs were $462,911 in 2019, $501,615 in 2018. Software Development Costs Software development costs, are primarily costs to develop software sold, leased, or otherwise marketed, that are incurred subsequent to the establishment of technological feasibility are capitalized if significant. Capitalized software development costs are amortized using the straight-line amortization method over the estimated useful life of the applicable software. There were no capitalized software development costs in the 2019. For the year ended December 29, 2018 capitalized software development costs were $1,813,973. Stock Based Compensation The Company accounts for its stock based awards in accordance with Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”), 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 granted stock options using the Black-Scholes valuation model. This model requires the Company to make estimates and assumptions including, without limitation, estimates regarding the length of time an employee will retain vested stock options before exercising them, the estimated volatility of the Company’s 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 can materially affect the determination of the fair value of stock-based compensation and consequently, the related amount recognized in the Company’s consolidated statements of operations. For the year ended December 28, 2019, there were 96,000 SARs granted under the 2010 Plan. Under the terms of the Director’s Fee Program, the directors can elect to receive their Director’s fees in cash or in common shares of the Company. This election is made at the beginning of each fiscal year and remains in effect for the entire year. Income Taxes The Company and its U.S. subsidiaries file a consolidated federal income tax return. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. On December, 22, 2017, SAB 118 was issued due to the complexities involved in accounting for the enacted Tax Act. SAB 118 requires the company to include in its financial statements a reasonable estimate of the impact of the Tax Act on earnings to the extent such estimate has been determined. Accordingly, the U.S. provision for income tax for 2017 was based on the reasonable estimate guidance provided by SAB 118. The company has assessed the impact from the Tax Act and recorded the impact in the fourth quarter of 2018. The Company accounts for uncertain tax positions pursuant to the provisions of FASB Accounting Standards Codification (“ASC”) 740 which clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements. These provisions detail how companies should recognize, measure, present and disclose uncertain tax positions that have or are expected to be taken. As such, the financial statements will reflect expected future tax consequences of uncertain tax positions presuming the taxing authorities’ full knowledge of the position and all relevant facts. See Note 7 Income Taxes. |
CONCENTRATION OF RISK (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 28, 2019
USD ($)
Customer
|
Dec. 29, 2018
Customer
|
Aug. 30, 2019
USD ($)
|
|
Term Loan [Member] | Interest Rate Swap [Member] | |||
Interest Rate Risk [Abstract] | |||
Interest rate swap, notional amount | $ | $ 50,000,000 | $ 50,000,000 | |
Term Loan [Member] | LIBOR [Member] | |||
Interest Rate Risk [Abstract] | |||
Term of variable rate | 3 months | ||
Term Loan [Member] | LIBOR [Member] | Minimum [Member] | |||
Interest Rate Risk [Abstract] | |||
Basis spread on variable rate | 1.25% | ||
Term Loan [Member] | LIBOR [Member] | Maximum [Member] | |||
Interest Rate Risk [Abstract] | |||
Basis spread on variable rate | 2.25% | ||
Accounts Receivable [Member] | Customer Concentration Risk [Member] | |||
Accounts Receivable, Net [Abstract] | |||
Number of major customers | Customer | 1 | 0 | |
Threshold percentage of concentration risk | 10.00% | 10.00% |
ACCOUNTING POLICIES, Goodwill (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 28, 2019 |
Dec. 29, 2018 |
|
Goodwill [Abstract] | ||
Impairment of goodwill | $ 0 | $ 0 |
ACCOUNTING POLICIES, Stock Based Compensation (Details) - shares |
12 Months Ended | |
---|---|---|
Dec. 28, 2019 |
Dec. 29, 2018 |
|
Stock Appreciation Rights (SARs) [Member] | ||
Stock Based Compensation [Abstract] | ||
Options granted (in shares) | 96,000 | 51,000 |