eml_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended July 4, 2026

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ________________ to _______________

Commission File Number 001-35383

THE EASTERN COMPANY

(Exact name of registrant as specified in its charter)

Connecticut		06-0330020
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

3 Enterprise Drive, Suite 408, Shelton, Connecticut		06484
(Address of principal executive offices)		(Zip Code)

(203) 729-2255

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, No Par Value	EML	NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 4, 2026, 6,017,558 shares of the registrant’s common stock, no par value per share, were issued and outstanding.

The Eastern Company

Form 10-Q

FOR THE QUARTERLY PERIOD ENDED JULY 4, 2026

TABLE OF CONTENTS

		Page



PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3.
	Condensed Consolidated Statements of Operations	3.
	Condensed Consolidated Statements of Comprehensive Income	4.
	Condensed Consolidated Balance Sheets	5.
	Condensed Consolidated Statements of Cash Flows	7.
	Condensed Consolidated Statements of Changes in Shareholders’ Equity	8.
	Notes to Condensed Consolidated Financial Statements	9.

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20.

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29.

Item 4.	Controls and Procedures	29.

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	30.

Item 1A.	Risk Factors	30.

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30.

Item 3.	Defaults Upon Senior Securities	30.

Item 4.	Mine Safety Disclosures	30.

Item 5.	Other Information	31.

Item 6.	Exhibits	31.

SIGNATURES		32.

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

THE EASTERN COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended						Six Months Ended
	July 4, 2026			June 28, 2025			July 4, 2026			June 28, 2025
Net sales	$	61,821,757		$	70,164,086		$	121,498,295		$	136,101,298
Cost of products sold		(49,069,618	)		(53,801,184	)		(96,816,475	)		(104,642,211	)
Gross margin		12,752,139			16,362,902			24,681,820			31,459,087

Product development expense		(1,042,688	)		(1,031,716	)		(2,078,000	)		(2,140,902	)
Selling and administrative expenses		(10,051,659	)		(12,188,736	)		(19,621,306	)		(22,534,931	)
Operating profit		1,657,792			3,142,450			2,982,514			6,783,254

Interest expense		(581,318	)		(636,287	)		(1,108,831	)		(1,330,941	)
Bargain purchase gain		6,529,299			-			6,529,299			-
Other income (expense)		(101,234	)		75,210			(88,049	)		(124,495	)
Income before income taxes from continuing operations		7,504,539			2,581,373			8,314,933			5,327,818

Income tax expense		(1,855,254	)		(546,383	)		(2,025,518	)		(1,124,703	)
Net income from continuing operations	$	5,649,285		$	2,034,990		$	6,289,415		$	4,203,115

Discontinued Operations (see note C)
Loss from operations of discontinued unit	$	-		$	(234,237	)	$	-		$	(520,005	)
Income from disposal of discontinued unit		-			2,016,696			-			2,016,696
Income tax expense		-			(377,282	)		-			(315,952	)
Net income from discontinued operations	$	-		$	1,405,177		$	-		$	1,180,739

Net Income	$	5,649,285		$	3,440,167		$	6,289,415		$	5,383,854

Earnings per share from continuing operations:
Basic	$	0.94		$	0.33		$	1.04		$	0.69

Diluted	$	0.94		$	0.33		$	1.04		$	0.69

Earnings per share from discontinued operations:
Basic	$	-		$	0.23		$	-		$	0.19

Diluted	$	-		$	0.23		$	-		$	0.19

Total earnings per share:
Basic	$	0.94		$	0.56		$	1.04		$	0.88

Diluted	$	0.94		$	0.56		$	1.04		$	0.88

Cash dividends per share:	$	0.11		$	0.11		$	0.22		$	0.22

See accompanying notes

Table of Contents

THE EASTERN COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	Three Months Ended					Six Months Ended
	July 4, 2026		June 28, 2025			July 4, 2026		June 28, 2025
Net income	$	5,649,285	$	3,440,167		$	6,289,415	$	5,383,854
Other comprehensive income:

Change in foreign currency translation		300,399		(317,982	)		461,585		397,593

Change in fair value of foreign currency swap		41,907		550,031			141,059		747,203

Change in pension and postretirement benefit costs, net of taxes:
2026 - $124,272; 2025 - $121,925		211,301		205,728			422,601		411,453
Total other comprehensive income		553,607		437,777			1,025,245		1,556,249
Comprehensive income	$	6,202,892	$	3,877,944		$	7,314,660	$	6,940,103

See accompanying notes.

Table of Contents

THE EASTERN COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

	July 4, 2026			January 3, 2026
	(unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	15,108,764		$	7,412,019
Marketable Securities		32,825			-
Accounts receivable, less allowances: 2026 - $681,170; 2025 - $633,391		36,842,066			30,128,669
Inventories		65,989,520			56,343,756
Current portion of notes receivable		28,844			33,844
Prepaid expenses and other current assets		6,754,824			5,349,486
Total Current Assets		124,756,843			99,267,774

Property, Plant and Equipment		66,497,282			60,163,556
Accumulated depreciation		(35,807,530	)		(33,246,213	)
Property, Plant and Equipment, Net		30,689,752			26,917,343

Goodwill		58,666,199			58,631,336
Trademarks		5,082,816			5,082,767
Patents and other intangibles, net of accumulated amortization		4,121,143			5,269,204
Deferred income taxes		5,528,496			5,528,496
Right of use assets		16,170,708			15,979,696
Other long term assets		102,674			-
Total Other Assets		89,672,036			90,491,499

TOTAL ASSETS	$	245,118,631		$	216,676,616

See accompanying notes.

Table of Contents

THE EASTERN COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

	July 4, 2026			January 3, 2026
	(unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	27,192,690		$	16,426,259
Accrued compensation		5,615,457			4,203,720
Other accrued expenses		6,884,543			2,349,400
Current portion of operating lease liability		3,997,516			3,729,769
Current portion of finance lease liability		905,524			908,332
Total Current Liabilities		44,595,730			27,617,480

Other long-term liabilities		464,902			464,902
Operating lease liability, less current portion		12,173,424			12,235,188
Finance lease liability, less current portion		2,772,205			3,080,446
Long-term debt, less current portion		41,683,212			33,902,353
Accrued postretirement benefits		329,767			332,165
Accrued pension cost		13,106,148			14,398,753
Total Liabilities		115,125,388			92,031,287

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		36,525,234			36,337,100
Issued: 9,195,728 shares as of July 4, 2026 and 9,179,288 shares as of January 3, 2026
Outstanding: 6,017,558 shares as of July 4, 2026 and 6,041,767 shares as of January 3, 2026
Treasury Stock: 3,178,170 shares as of July 4, 2026 and 3,137,521 shares as of January 3, 2026		(30,895,650	)		(30,067,777	)
Retained earnings		142,959,790			137,997,382
Accumulated other comprehensive loss:
Foreign currency translation		(975,778	)		(1,437,363	)
Unrealized gain on foreign currency swap, net of tax		711,155			570,097
Unrecognized net pension and postretirement benefit costs, net of tax		(18,331,508	)		(18,754,110	)
Accumulated other comprehensive loss		(18,596,131	)		(19,621,376	)
Total Shareholders’ Equity		129,993,243			124,645,329
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	245,118,631		$	216,676,616

See accompanying notes.

Table of Contents

THE EASTERN COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Six Months Ended
	July 4, 2026			June 28, 2025
Operating Activities
Net income	$	6,289,415		$	5,383,854
Less: Income from discontinued operations		-			1,180,739
Income from continuing operations	$	6,289,415		$	4,203,115
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization		3,209,318			3,178,318
Bargain purchase gain		(6,529,299	)		-
Reduction in carrying amount of ROU assets		1,276,927			1,502,376
Unrecognized pension and postretirement benefit		(1,211,007	)		(397,676	)
(Gain) loss on sale of equipment		(64,661	)		38,479
Provision for doubtful accounts		54,828			14,000
Stock compensation expense		188,134			289,126
Changes in operating assets and liabilities:
Accounts receivable		(4,974,987	)		(2,271,343	)
Inventories		920,744			1,886,960
Prepaid expenses and other		(947,631	)		(314,221	)
Other assets		(144,699	)		124,859
Accounts payable		8,968,808			2,511,193
Accrued compensation		642,535			(445,105	)
Operating lease liability		(1,276,927	)		(1,502,376	)
Other accrued expenses		5,635,050			(6,908,197	)
Net cash provided by operating activities		12,036,548			1,909,508

Investing Activities
Marketable securities		(32,825	)		2,222,059
Acquisition		(8,041,927	)		(421,039	)
Payments received from notes receivable		5,000			14,545
Proceeds from sale of equipment		3,500			800
Proceeds from sale of discontinued operations		-			1,593,646
Purchases of property, plant, and equipment		(1,482,339	)		(1,599,780	)
Net cash (used in) provided by investing activities		(9,548,591	)		1,810,231

Financing Activities
Proceeds from long-term debt		8,000,000			-
Proceeds from promissory note		785,000			-
Principal payments on long-term debt		(1,000,000	)		(5,919,065	)
Financing leases, net		(442,282	)		(393,352	)
Purchase common stock for treasury		(827,873	)		(2,123,705	)
Dividends paid		(1,327,007	)		(1,347,951	)
Net cash provided by (used in) financing activities		5,187,838			(9,784,073	)


Effect of exchange rate changes on cash		20,950			331,115
Net change in cash and cash equivalents		7,696,745			(5,733,219	)

Cash and cash equivalents at beginning of period		7,412,019			14,843,530
Cash and cash equivalents at end of period	$	15,108,764		$	9,110,311

Supplemental disclosure of cash flow information:
Interest	$	1,099,963		$	1,683,412
Income taxes		694,933			1,679,091

Non-cash investing and financing activities
Right of use asset		205,983			3,050,510
Lease liability		104,836			2,836,158

See accompanying notes

Table of Contents

THE EASTERN COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

Common

Treasury

Retained

Accumulated

Other

Comprehensive

Income

Shareholders'

Stock