The Eastern Company (the "Company," "Eastern," "we," "us," or "our") was incorporated under the laws of the State of Connecticut in October, 1912, succeeding a co-partnership established in October, 1858. The businessbusinesses of the Company is the design, manufacture and sale of unique engineered solutions for niche industrial hardware, security products and metal products.markets.

Today, the Company maintains sixteen physical locations across North America and Asia.

On April 3, 2017, the Company completed a Securities Purchase Agreement (the "Securities Purchase Agreement") with Velvac Holdings, Inc., a Delaware corporation ("Velvac"), Jeffery R. Porter, W. Greg Bland, John Backovitch, Dave Otto, Bob Otto, Timothy Rintelman, Robert Brester, Dan Mcgrew, Mark Moeller, and Prospect Partners II, L.P. (collectively, the "Sellers"). Pursuant to the Securities Purchase Agreement, the Company acquired 100% of the issued and outstanding stock of Velvac from the Sellers (the "Velvac Acquisition") for $39.5 million and an earnout consideration contingent upon Velvac achieving minimum earnings performance levels and based on sales of Velvac's new proprietary Road-iQ product line (the "Earnout Consideration"). The Velvac Acquisition was financed with a $31 million term loan from People's United Bank, National Association ("People's"), a $5 million draw down on the Company's $10 million revolving credit facility with People's and $3.5 million in cash. In addition, the Company paid a working capital adjustment of $0.6 million by which working capital exceeded a pre-determined target amount. Please refer to the Company's Current Report on Form 8-K filed on April 7, 2017 and the amendment thereto filed on June 19, 2017 for further details.

The Industrial Hardware business segment consists of Eberhard Manufacturing, Eberhard Hardware Manufacturing Ltd., Eastern Industrial Ltd, Velvac Holdings, Canadian Commercial Vehicles Corporation, Composite Panel Technologies and Sesamee Mexicana, S.A. de C.V. These divisionsbusinesses design, manufacture and market a diverse product line of custom and standard vehicular and industrial hardware, including passenger restraint and vehicular locks, latches, hinges, mirrors, mirror-cameras, light-weight sleeper boxes and truck bodies. These products can be found on tractor-trailer trucks, specialty commercial vehicles, recreational vehicles, fire and rescue vehicles, school buses, military vehicles and other vehicles. In addition, theThe segment also designs and manufactures a wide selection of fasteners and other closure devices used to secure access doors on various types of industrial equipment such as metal cabinets, machinery housings and electronic instruments. The segment sells directly to original equipment manufacturers and to distributors through in-house salesmen and outside sales representatives. Sales, customer engineering and customer service are provided through in-house sales personnel and engineering staff. We believe that in order to service these markets, our divisions offer competitive engineering design, service, quality and price. In addition, we invest in the continued introduction of new or improved product designs and we expand into synergistic product lines in order to maintain and increase market share.  The segment sells directly to original equipment manufacturers ("OEM's") and to distributors through in-house sales personnel and outside sales representatives. Sales, customer engineering and customer service are primarily provided through in-house sales personnel and engineering staff. We believe that in order to service these markets, our divisions offer competitive engineering design, service, quality and price.

The Security Products business segment consists of Illinois Lock Company/CCL Security Products, World Lock Company Ltd., Dongguan Reeworld Security Products Ltd., World Security Industries Ltd., Greenwald Industries ("Greenwald"), and Argo EMS (formerly Argo Transdata).  Illinois Lock Company/CCL Security Products, known in the market as ILC, is a global leader in the design and manufacture of engineered security and access solutions in the form of mechanical, electronic and wireless products.  ILC employs an 80/20 business philosophy to drive focus and efficiency in its end-markets, customers, products and manufacturing processes.  ILC focuses on the industrial, vehicle accessory, outdoor recreational equipment, medical, and point of sale and vending segments.  These products and solutions are specified and sold to OEM's, contract equipment manufacturers ("CEM's"), and industrial distributors globally.  Greenwald designs, manufactures and distributes custom engineeredmarkets payment systems and standard closing and locking systems, including vehicular accessory locks, cabinet locks, cam locks, electric switch locks, tubular key locks and combination padlocks. Some of its products are sold under the names SESAMEE^®, PRESTOLOCK^® andSEARCHALERT™. These products are sold to original equipment manufacturers, distributors, route operators, and locksmiths through in-house salesmen and outside sales representatives. Greenwald manufactures and markets coin acceptors and other coin security products used primarily in the commercial laundry markets.market. Greenwald's products include timers, drop meters, coin chutes, money boxes, meter cases, mobile payment apps, smart cards, value transfer stations, smart card readers, card management software, and access control units.  Argo EMS supplies printed circuit boards and other electronic assemblies to original equipment manufacturers in various industries, including measurement systems, semiconductor equipment manufacturing, and industrial controls, medical and military products. The Security Products segment continuously seeks newevaluates markets, where it can offer competitive engineered solutions that meet manufacturers' security needs.technology and customer requests to develop growth strategies for the future.

The Company believes that its Metal Products business segment, based at the Company's Frazer & Jones facility in Solvay, New York, is the largest and most efficient producer of expansion shells for use in supporting the roofs of underground mines.mines in North America. This segment also manufactures specialty malleable and ductile iron castings.

The Company obtains materials from domestic, Asian affiliated and nonaffiliated sources. Raw materials and outside services were readily available for all of the Company's segments during 20172018 and are expected to be readily available in 20182019 and the foreseeable future. In in the first half of 2018 and during 2017, the Company experienced price increases for many of the raw materials used in producing its products, including: scrap iron, zinc, brassstainless steel, hot and stainless steel.  In 2016,cold rolled steel, and aluminum.  Since mid-2018, the Company experiencedhas seen a price decline for many of these same materials.  At this time, the Company expectsreduction in zinc and brass raw material prices but expects steel to continue to increase as demand for raw materials increases

None of the Company's division segments are seasonal.

Customers for all business segments are broad-based geographically and by markets, and sales are generally not highly concentrated by customer.  Foreign sales are not significant.  No one customer exceeded 10% of total consolidated sales in 2017, 20162018 or 2015.2017.

The dollar amount of the backlog of orders received by the Company is believed to be firmincreased as of the fiscal year ended December 30, 2017.29, 2018. Such backlogs waswere $46,888,000 at December 29, 2018, as compared to $34,991,000 at December 30, 2017, as compared to $26,993,000 at December 31, 2016.2017.  The primary reasons for the change from 20162017 to 20172018 were the acquisition ofsignificant backlog increases at Eberhard Manufacturing, Velvac, on April 3, 2017Argo EMS, and Frazer & Jones and the timing of orders received from customers.

The Company encounters competition in all of its business segments. Imports from Asia and Latin America with favorable currency exchange rates and low cost labor have created additional pricing pressure. The Company competes successfully by offering high quality custom engineered products on a timely basis. To compete, the Company deploys internal engineering resources, maintains cost effective manufacturing capabilities through its wholly-owned Asian subsidiaries, expands its product lines through product development and acquisitions, and maintains sufficient inventory for fast turnaround of customer orders.

The average number of fulltime employees in 20172018 was 1,189.1,327.

The Company's ratio of working capital to sales improved to 30.3% in 2017 to2018 from 33.7% from 47.1% in 2016 and 41.6% in 2015.2017. The improvement in working capital was the result of a reduction in inventory in the Metal business segmentincreased sales activity and partially the result of the Velvac acquisition.our continued commitment to reducing our working capital.  Working capital includes cash held in various foreign subsidiaries.  With the passage of recent tax legislation cash previously held in foreign countries can be repatriated back to the United States and used for other business needs thus reducing working capital further.  Other factors affecting working capital include our average days' sales in accounts receivable, inventory turnover ratio and payment of vendor accounts payable.  In some cases, the company must hold extra inventory due to extended lead time in receiving products ordered from our foreign subsidiaries to ensure product is available for our customers.  The Company continues to monitor its working capital needs with the goal of reducing our ratio of working capital to sales to 25%.

The Company makes available, free of charge through its Internet website at http://www.easterncompany.com, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (the "SEC").  The public may read and copy any materials that the Company files with the SEC at the SEC's Public Reference Room, 100 F Street, N.E., Washington, DC 20549 or by calling the SEC at 1-800-SEC-0330. The Company's reports filed with, or furnished to, the SEC are also available on the SEC's website at www.sec.gov.

In addition to the other information contained in this Form 10-K and the exhibits hereto and the Company's other filings with the SEC, the following risk factors should be considered carefully in evaluating the Company's business. The Company's business, financial condition or results of operation could be materially adversely affected by any of these risks or additional risks not presently known to the Company, or by risks the Company currently deems immaterial. which may also adversely affect its business, financial condition or results of operations, such as: changes in the economy, including changes in inflation, tax rates, interest rates and currency exchange rates; risk associated with possible disruption in the Company's operations due to terrorism, cybersecurity threats and other manmade or natural disasters; future regulatory actions, legal issues or environmental matters; loss of, or changes in, executive management; and changes in accounting standards that are adverse to the Company.  Additionally, there can be no assurance that the Company has correctly identified and appropriately assessed all factors affecting its business or that information publicly available with respect to these matters is complete and correct.

International operations could be adversely affected by changes in political and economic conditions, trade protection measures, restrictions on repatriation of earnings, differing intellectual property rights and changes in regulatory requirements that restrict the sales of products or increase costs. Changes in exchange rates between the U.S. dollar and foreign currencies could result in increases or decreases in earnings and may adversely affect the value of the Company's assets outside the United States. The Company's operations are also subject to the effects of international trade agreements and regulations. These trade agreements could impose requirements that adversely affect the Company's business, such as, but not limited to, setting quotas on products that may be imported from a particular country into the Company's key markets in North America.

The Company's ability to import products in a timely and cost-effective manner may also be affected by conditions at ports or issues that otherwise affect transportation and warehousing providers, such as port and shipping capacity, labor disputes, severe weather or increased homeland security requirements in the United States or other countries. These issues could delay importation of products or require the Company to locate alternative ports or warehousing providers to avoid disruption to customers. These alternatives may not be available on short notice or could result in higher transit costs, which could have an adverse impact on the Company's business, financial conditions or results of operations.

As of December, 31, 2017,29, 2018, the Company had $35,225,000$28,675,000 in total consolidated indebtedness. Subject to restrictions contained in our credit facility, the Company may incur additional indebtedness in the future, including indebtedness incurred to finance acquisitions. The level of indebtedness and servicing costs associated with that indebtedness could have important effects on our operation and business strategy. For example, the indebtedness could:

The Company's ability to make scheduled principal payments, to pay interest on, or to refinance our indebtedness and to satisfy other debt obligations will depend upon future operating performance, which may be affected by factors beyond the Company's

control. In addition, there can be no assurance that future borrowings or the issuance of equity would be available to the Company on favorable terms for the payment or refinancing of the Company's debt. If the Company is unable to service its indebtedness, the business, financial condition and results of operation would be materially adversely affected.

The Company's credit facility contains covenants requiring the Company to achieve certain financial and operations results and maintain compliance with specified financial ratios. The Company's ability to meet the financial covenants or requirements in its credit facility may be affected by events beyond our control, and the Company may not be able to satisfy such covenants and requirements. A breach of these covenants or the Company's inability to comply with the financial ratios, tests or other restrictions contained in our credit facility could result in an event of default under such credit facility. Upon the occurrence of an event of default under our credit facility and/or the expiration of any grace periods, the lenders could elect to declare all amounts outstanding under our credit facility, together with accrued interest, to be immediately due and payable. If this were to occur, the Company's assets may not be sufficient to fully repay the amounts due under our credit facility or the Company's other indebtedness.  See also "ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK" of this Form 10-K.

In addition, the Company's growth strategy involves expanding sales of its products into foreign markets. There is no guarantee that the Company's products will be accepted by foreign customers or how long it may take to develop sales of the Company's products in these foreign markets.

Raw materials needed to manufacture products are obtained from numerous suppliers. Under normal market conditions, these raw materials are readily available on the open market from a variety of producers. However, from time to time, the prices and availability of these raw materials fluctuate, which could impair the Company's ability to procure the required raw materials for its operations or increase the cost of manufacturing its products. If the price of raw materials increases, the Company may be unable to pass these increases on to its customers and could experience reductions to its profit margins. Also, any decrease in the availability of raw materials could impair the Company's ability to meet production requirements in a timely manner.

The Company obtains raw materials including stainless steel used in the production of its products from domestic, Asian affiliated and nonaffiliated sources.  The PresidentEffective September 24, 2018, the Office of the United States recently announced a proposalU.S. Trade Representative (the "USTR") imposed 10% tariffs on approximately $200 billion worth of Chinese imports.  The impact of the 10% tariffs on Chinese produced goods has been negligible in 2018, as the majority of the tariffs have been recovered from our customers.  For 2019, the USTR anticipates the level of the additional tariffs to impose tariffsincrease to 25% and could expand to include an additional $267 billion worth of 25 percentChinese imports.  If the proposed 25% tariff goes into effect in 2019 on imported steel and 10 percent on imported aluminum through the issuance of an executive order.  If implemented, such tariffs may cause an increase in costs for all domestic entities, including the Company, that purchase imported steel or aluminum.   Because steel are raw materials usedChinese purchased goods, it could result in a wide-rangeloss of business and possible reduced margins if the Company's products, a broad-based cost increase would resulttariffs cannot be recovered in an increase in the Company's cost of goods sold, which may require us to increase prices for some of our products.  However, our inability to pass along such price increases to our customers, or an inability of our suppliers to meet our raw material requirements, may have a material adverse impact on our business, results of operations or financial condition.higher selling prices.

Any change in competition may result in lost market share or reduced prices, which could result in reduced profits and margins. This may impair the ability to grow or even maintain current levels of revenues and earnings.  While the Company has an extensive customer base, loss of certain customers could adversely affect the Company's business, financial condition or results of operations until such business is replaced, and no assurances can be made that the Company would be able to regain or replace any lost customers.

The Company is an "accelerated filer" as defined in Rule 12b-2 under the Exchange Act and is thus required to comply with Section 404 of the Sarbanes-Oxley Act of 2002. Section 404 requires the Company to include in its report management's assessment of the effectiveness of the Company's internal control over financial reporting as of the end of the fiscal period for which the Company is filing its Annual Report on Form 10-K. This report must also include disclosure of any material weaknesses in internal control over financial reporting that the Company has identified. Additionally, the Company's independent registered public accounting firm is required to issue a report on the Company's internal control over financial reporting and their evaluation

of the operating effectiveness of the Company's internal control over financial reporting. The Company's assessment requires it to make subjective judgments, and the independent registered public accounting firm may not agree with the Company's assessment. If the Company or its independent registered public accounting firm were unable to complete the assessments within the period prescribed by Section 404 and thus be unable to conclude that the internal control over financial reporting is effective, investors could lose confidence in the Company's reported financial information, which could have an adverse effect on the market price of the Company's common stock or impact the Company's borrowing ability. In addition, changes in operating conditions and changes in compliance with policies and procedures currently in place may result in inadequate internal control over financial reporting in the future.

Demand for new products and the inability to develop and introduce new competitive products at favorable profit margins could adversely affect the Company's performance and prospects for future growth, and the Company would not be positioned to maintain current levels of revenues and earnings. The uncertainties associated with developing and introducing new products, such as the market demands and the costs of development and production, may impede the successful development and introduction of new products. Acceptance of the new products may not meet sales expectations due to several factors, such as the Company's potential inability to accurately predict market demand or to resolve technical issues in a timely and cost effective manner. Additionally, the inability to develop new products on a timely basis could result in the loss of business to competitors.

The Company's future growth may partly depend on its ability to acquire and successfully integrate new businesses. The Company intends to seek additional acquisition opportunities, both to expendexpand into new markets and to enhance the Company's position in existing markets. However, there can be no assurances that the Company will be able to successfully identify suitable candidates, negotiate appropriate terms, obtain financing on acceptable terms, complete proposed acquisitions, successfully integrate acquired businesses or expand into new markets. Once acquired, operations may not achieve anticipated levels of revenues or profitability.

Acquisitions involve risk, including difficulties in the integration of the operations, technologies, services and products of the acquired companies and the diversion of management's attention from other business concerns. Although the Company's management will endeavor to evaluate the risks inherent in any particular transaction, there can be no assurances that the Company's management will properly ascertain all such risks. In addition, prior acquisitions have resulted, and future acquisitions could result in the incurrence of substantial debt and other expenses. Future acquisitions may also result in potentially dilutive issuances of equity securities. Difficulties encountered with acquisitions may have a material adverse effect on our business, financial condition and results of operations.

The Company's operations and properties are subject to laws and regulations relating to environmental protection, including air emissions, water discharges, waste management and workplace safety. These laws and regulations can result in the imposition of substantial fines and sanctions for violations and could require the installation of pollution control equipment or operational changes to limit pollution emissions and/or decrease the likelihood of accidental hazardous substance releases. The Company must conform its operations and properties to these laws and adapt to regulatory requirements in the countries in which the Company's divisions operate as these requirements change.

The Company uses and generates hazardous substances and wastes in its operations and, as a result, could be subject to potentially material liabilities relating to the investigation and clean-up of contaminated properties and to claims alleging personal injury. The Company has experienced, and expects to continue to experience, costs relating to compliance with environmental laws and regulations. In connection with the Company's acquisitions, the Company may assume significant environmental liabilities, some of which it may not be aware of at the time of acquisition. In addition, new laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination or the imposition of new clean-up requirements could require the Company to incur costs or become the basis for new or increased liabilities that could have a material adverse effect on our business, financial condition and results of operations.

Some of the Company's products rely on proprietary technology; therefore, the Company believes that the development and protection of intellectual property rights through patents, copyrights, trade secrets, trademarks, confidentiality agreements and other contractual provisions are important to the future success of its business. Despite the Company's efforts to protect proprietary rights, unauthorized parties or competitors may copy or otherwise obtain and use the Company's products or technology. Actions to enforce these rights may result in substantial costs and diversion of resources and the Company make no assurances that any such actions will be successful.

The Company's business operations are dependent upon information technology networks and systems to securely transmit, process and store electronic information and to communicate among its locations around the world and with clients and vendors. A shut-down of, or inability to access, one or more of the Company's facilities, a power outage or a failure of one or more of the Company's information technology, telecommunications or other systems could significantly impair the Company's ability to perform such functions on a timely basis. Computer viruses, cyberattacks, other external hazards and human error could result in the misappropriation of assets or sensitive information, corruption of data or operational disruption. If sustained or repeated, such a business interruption, system failure, service denial or data loss and damage could result in a deterioration of the Company's ability to write and process orders, provide customer service or perform other necessary business functions.

If the Company's security measures are breached, an unauthorized party may obtain access to the Company's data or users' or customers' data. In addition, cyber-attacks and similar acts could lead to interruptions and delays in customer processing or a loss or breach of a customer's data. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, the Company may be unable to anticipate these techniques or to implement adequate preventative measures. The risk that these types of events could seriously harm the Company's business is likely to increase as the Company expands the number of web-based products we offer,  the services we provide, and our global operations.

Regulatory authorities around the world are considering a number of legislative and regulatory proposals concerning data protection. In addition, the interpretation and application of consumer and data protection laws in the United States and elsewhere are often uncertain and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with the Company's data practices. If so, in addition to the possibility of fines, this could result in an order requiring that the Company change its data practices, which could have an adverse effect on its business and results of operations.

Any security breaches for which the Company is, or is perceived to be, responsible, in whole or in part, could subject us to legal claims or legal proceedings, including regulatory investigations, which could harm the Company's reputation and result in significant litigation costs and damage awards or settlement amounts. Any imposition of liability, particularly liability that is not covered by insurance or is in excess of insurance coverage, could materially harm our operating results and financial condition. Security breaches also could cause the Company to lose current and potential customers, which could have an adverse effect on

From time to time, the Company's operations are parties to or targets of lawsuits, claims, investigations and proceedings, including product liability, personal injury, patent and intellectual property, commercial, contract, and environmental and employment matters, which are defended and settled in the ordinary course of business. While the Company is unable to predict the outcome

of any of these matters, it does not believe, based upon currently available information, that the resolution of any pending matter will have a material adverse effect on its business, financial condition or results of operations. See "ITEM 3 – LEGAL PROCEEDINGS" in this Form 10-K for a discussion of current litigation.

The Company is subject to income tax laws of the United States, its states and municipalities and those of other foreign jurisdictions in which the Company has business operations.  These laws are complex and subject to interpretations by the taxpayer and the relevant governmental taxing authorities. Significant judgment and interpretation is required in determining the Company's worldwide provision for income taxes. In the ordinary course of business, transactions arise where the ultimate tax determination is uncertain. Although the Company believes that our tax estimates are reasonable, the final outcome of tax audits and any related litigation could be materially different from that which is reflected in historical income tax provisions and accruals. Based on the status of a given tax audit or related litigation, a material effect on the Company's income tax provision or net income may result during the period or periods from the initial recognition of a particular matter in the Company's reported financial results to the final closure of that tax audit or settlement of related litigation when the ultimate tax and related cash flow is known with certainty.

Under accounting principles generally accepted in the United States, goodwill and indefinite-lived intangible assets are not amortized but are reviewed for impairment at least annually. Future operating results used in the assumptions, such as sales or profit forecasts, may not materialize, and the Company could be required to record a significant charge to earnings in the financial statements during the period in which any impairment is determined, resulting in an unfavorable impact on our results of operations. Numerous assumptions are used in the evaluation of impairment, and there is no guarantee that the Company's independent registered public accounting firm would reach the same conclusion as the Company or an independent valuation firm, which could result in a disagreement between management and the Company's independent registered public accounting firm.

From time-to-time, the Company has historically relied on outside financing to fund expanded operations, capital expenditure programs and acquisitions. The Company may require additional capital in the future to fund operations or strategic opportunities. The Company cannot be assured that additional financing will be available on favorable terms, or at all. In addition, the terms of available financing may place limits on the Company's financial and operating flexibility. If the Company is unable to obtain sufficient capital in the future, the Company may not be able to expand or acquire complementary businesses and may not be able to continue to develop new products or otherwise respond to changing business conditions or competitive pressures.

The Company's stock price may change dramatically when buyers seeking to purchase shares of the Company's common stock exceed the shares available on the market, or when there are no buyers to purchase shares of the Company's common stock when shareholders are trying to sell their shares.

During 2018,2019, union contracts covering approximately 9%1% of the Company's total workforce will expire.  The Company has been successful in negotiating new contracts over the years, but cannot guarantee that will continue. Failure to negotiate new union contracts could result in the disruption of production, inability to deliver product or a number of unforeseen circumstances, any of which could have an unfavorable material impact on the Company's results of operations or financial condition.

Included as a significant asset on the Company's balance sheet are accounts receivable from our customers.  If several large customers become insolvent or are otherwise unable to pay for products, or become unwilling or unable to make payments in a timely manner, it could have an unfavorable material impact on the Company's results of operations or financial condition.

Although the Company is not dependent on any one customer, deterioration in several large customers at the same time could have an unfavorable material impact on the Company's results of operations or financial condition.  No one customer exceeded 10% of total accounts receivable for 2017, 20162018 or 2015.2017.

The Company's operating results may fluctuate as a result of a number of factors, many of which are outside of our control.  As a result, comparing the Company's operating results on a period-to-period basis may not be meaningful, and past results should not be relied upon as an indication of future performance.  Quarterly, year to date and annual costs and expenses as a percentage of revenues may differ significantly from historical or projected levels.  Future operating results may fall below expectations.  These types of events could cause the price of the Company's stock to fall.

The Company is subject to a variety of laws in both the U.S. and foreign countries that are costly to comply with, can result in negative publicity and diversion of management time and effort and can subject the Company to claims or other remedies.

None.

The corporate office of the Company is located in Naugatuck, Connecticut in a two-story, 8,000 square foot administrative building on 3.2 acres of land.

All of the Company's properties are owned or leased and are adequate to satisfy current requirements. All of the Company's properties have the necessary flexibility to cover any long-term expansion requirements.

The Eberhard Manufacturing Division in Strongsville, Ohio owns 9.6 acres of land and a building containing 157,580 square feet, located in an industrial park. The building is steel frame, is one-story and has curtain walls of brick, glass and insulated steel panels. The building has two high bays, one of which houses two units of automated warehousing.

Eberhard Hardware Manufacturing, Ltd., a wholly-owned Canadian subsidiary in Tillsonburg, Ontario, owns 4.4 acres of land and a building containing 31,000 square feet in an industrial park. The building is steel frame, is one-story, and has curtain walls of brick, glass and insulated steel panels. It is particularly suited for light fabrication, assembly and warehousing and is adequate for long-term expansion requirements.

Velvac de Reynosa, S. De R.L De C.V., a maquiladora wholly-owned in Reynosa, Tamaulipas, Mexico, leases 90,000 square feet of building space located in an industrial park identified as Buildings 19, 20 and 21 and on a tract of land with an area of 165,507 square feet.  The building is one level and is made from brick and concrete.  The building is protected by a 24 hour security system and onsite security.  The current lease expires on August 31, 2021.

Velvac, Inc. also leases a 9,300 square foot building in Bellingham, Washington. The premises are used solely for software development and research and development. The current lease expires on September 30, 2021.

The Illinois Lock Company/CCL Security Products Division owns 2.5 acres of land and a building containing 44,000 square feet in Wheeling, Illinois. The building is brick and is located in an industrial park.

The Argo EMS Division leases approximately 17,000 square feet of space in a building located in an industrial park in Clinton, Connecticut.  The building is a two-story steel frame structure and is situated on 2.9 acres of land.  The current lease expires on March 31, 2019.

The Frazer and& Jones Division in Solvay, New York owns 17.9 acres of land and buildings containing 205,000 square feet constructed for foundry use. These facilities are well adapted to handle the division's current and future casting requirements.

All owned properties are free and clear of any encumbrances.

The Company is party to various legal proceedings and claimsfrom time to time related to its normal business operations.  In the opinion of management,Currently, the Company has substantial and meritorious defenses for these claims and proceedingsis not involved in which it is a defendant, and believes these matters will ultimately be resolved without a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company.  The aggregate provision for losses related to contingencies arising in the ordinary course of business was not material to operating results for any year presented.legal proceedings.

In 2010, the Company was contacted by the State of Illinois regarding potential ground contamination at its plant in Wheeling, Illinois. The Company entered into a voluntary remediation program in Illinois and has engaged an environmental clean-up company to perform testing and develop a remediation plan. Since 2010, the environmental company has completed a number of tests and the design of a final remediation system is currently being reviewed and is expected to bewas approved in the firstsecond quarter of 2018. As of the end of the third quarter of 2018, the remediation plan was completed. The State of Illinois has received the documentation related to the remediation and is in the process of signing off on the documentation.  The total estimated cost for the proposed remediation system is anticipated to be approximately $50,000.$50,000 which the Company accrued for and expensed.

In 2016, the Company created a plan to remediate a landfill of spent foundry sand maintained at the Company's Metal Castingmetal casting facility in New York. This plan was presentedagreed to by the New York Department of Environmental Conservation (the "DEC") for approval in the first quarter ofon March 27, 2018. The Company is in final negotiations with the DEC, and, basedBased on estimates provided by the Company's environmental engineers, the anticipated cost to remediate and monitor the landfill is $380,000.$430,000. The Company accrued for and expensed such estimated costthe entire $430,000 in the secondfirst quarter of 2018 and third quartersin fiscal 2017.  In the Fall of 2017.

Not applicable.

The Company's common stock is quoted on the NASDAQ Global Market under the symbol "EML". The approximate number of record holders of the Company common stock on December 30, 201729, 2018 was 354.337.

The following table sets forth the high and low per share sales prices of the Company's common stock, and the per share quarterly dividend declared on the Company's common stock, for each quarter of the immediately preceding two years as reported on the NASDAQ Global Market.

The Company expects to continue its policy of paying regular cash dividends, although there can be no assurance as to future dividends because they are dependent on future earnings, capital requirements and financial condition. The payment of dividends is subject to the restrictions of the Company's loan agreement if such payment would result in an event of default. See Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations, and Note 5 to the Company's financial statements included in Item 8 of this Form 10-K.

The following table sets forth information regarding securities authorized for issuance under the Company's equity compensation plans as of December 30, 2017,29, 2018, consisting of the Company's 2010 Executive Stock Incentive Plan (the "2010 Plan").

The Company did not have any share repurchase plans or programs in effect during fiscal year 2017.

Sales for fiscal year 20172018 were $204.2$234.3 million compared to $137.6$204.2 million for fiscal year 2016.2017.  Net income for fiscal year 20172018 was $14.5 million, or $2.31 per diluted share, compared to $5.0 million, or $0.80 per diluted share, compared to $7.8 million, or $1.25 per diluted share, for fiscal year 2016.2017.  Sales for the fourth quarter of 20172018 were $54.1$56.6 million compared to $34.1$54.1 million for the same period in 2016.2017.  Net income for the fourth quarter of 20172018 was ($0.2)$4.4 million, or ($0.03)$0.70 per diluted share compared to $2.6a loss of ($0.2) million, or $0.42a loss of ($0.03) per diluted share, for the comparable 20162017 period.  The fourth quarter 2017 earnings were adversely affected by a one-time tax charge of $2.5 million related to the passage of the Tax Cuts and Jobs Act in December 2017.

The Company anticipates solidcontinued growth in sales and earnings in fiscal 20182019 primarily as a result of a new mirror program for Class 8 trucks awarded to our Velvac subsidiary and the acquisition of Velvacspecific assets of Load N Lock Systems, Inc. in June of 2018 and new products launches at Eberhard Manufacturing and Illinois Lock.  Load N Lock provides innovative truck cap and tonneau cover locks that keep truck contents safe and secure.  Load N Lock developed and patented the first integrated power lock for the automotive industry and has developed numerous truck cap and tonneau cover lock related products.    Load N Lock has been successfully integrated into our investments in Illinois Lock Company division and brings new product development. We expectcapabilities to start seeing returns on our investments in Road-iQ in the second half of the year.  We believe that sales and earnings will also benefit from strong demand in several of our core markets, including Class 8 trucks and recreational vehicles. A reduction in the Company's taxes will also contribute to earnings growth.

The following table shows, for the fourth quarter of 20172018 and 2016,2017, selected line items from the consolidated statements of income as a percentage of net sales, by segment.

Net sales in the fourth quarter of 20172018 increased 59%5% to $54.1$56.6 million from $34.1$54.1 million a year earlier.  Sales growth reflectsincreased in the acquisitionIndustrial Hardware Segment by 6% for the fourth quarter of Velvac, which closed on April 3, 2017,2018 as well as organic growth of approximately 13%compared to sales in the fourth quarter of 2017 compared to the same period in 2016. Sales increased in the Industrial Hardware business segment by 107% and, excluding Velvac, increased 6% as compared to the fourth quarter sales in 2016 a result of strong sales growth to Class 8 Trucks, service bodiesdistribution, specialty vehicles and bustruck accessories customers.  Sales of new products contributed 6%5% and included tumbler paddles, handle assemblies, latch bracketsa new hood mount truck mirror, a modular toolbox latching system, an electronic activated latching system and lightweightvarious composite panels for the class 8 trucking, off highway and industrial customers.panels.  Sales forin the Security Products business segmentSegment increased by 2% for the fourth quarter of 2017 increased by 9%2018 compared to the fourth quarter of 2016 as the result of increased sales volume from our investment2017.  Sales in growth in Illinois Lock and Argo EMS.  Sales for the Metal Products business segmentSegment increased 45%5% for the fourth quarter of 2018 from sales in the fourth quarter of 20162017 as a result of a resurgencean increase in sales to mining customers and diversification to other industrial casting markets.customers.

Cost of products sold in the fourth quarter of 2018 increased $17.0$1.4 million or 73%3% from 2016 tothe corresponding period in 2017.  The increase in the cost of products soldprimarily reflects increased material cost associated with increased sales volume and higher cost for scrap iron, which was up15% used in the four quarter of 2017 when compared to the respective corresponding prior year period primarily reflects cost of products sold attributable to the Velvac Acquisition.

Gross margin as a percentage of net sales for the fourth quarter of 20172018 was 26% compared to 32%and 25% in the fourth quarter of 2016.  The decrease is primarily the result of product mix, material cost increases and the Velvac Acquisition noted above. 2017.

EngineeringProduct development expenses as a percentage of sales increased in the fourth quarter of 2018 and 2017 towere comparable at 3% from 2% in the fourth quarter of 2016.  This increase was primarily the result of the Velvac Acquisition..

Selling and administrative expenses for the fourth quarter of 2017 increased $1.9 million or 30% compared to the prior year quarter. The most significant factor resulting in changes in selling and administrative expenses in2018 were comparable with the fourth quarter of 2017 compared to 2016 fourth quarter was:at approximately $8 million or 15% of sales.

Net income (loss) for the fourth quarter of 2017 decreased2018 increased to $4.4 million or $0.70 per diluted share from a loss of ($0.2) million or ($0.03) per diluted share from $2.6 million or $.420.3) per diluted share for the comparable period in 2016.2017.  In the fourth quarter of 2017, we incurred an incremental one-time charge of $2.5 million, or $0.41 per fully diluted share, consisting of a $2.0 million charge on undistributed earnings of foreign subsidiaries as well as a charge of $0.5 million related to the impact of the tax reformTax Cuts and Jobs Act on our deferred tax asset.

The following table shows, for fiscal year 20172018 and fiscal year 2016,2017, selected line items from the consolidated statements of income as a percentage of net sales, by segment.

Net sales for 20172018 increased 48%15% to $234.3 million from $204.2 million from $137.6 million in 2016.2017.  Sales growth in 2018 reflects a full year of sales from the acquisition of Velvac Acquisition, which closed on April 3, 2017, as well as organiccompared to 9 months of sales from Velvac in 2017.  Excluding the effects of Velvac, sales growth ofwas approximately 14%6% in 2017.2018.  Net sales in the Industrial Hardware segment increased approximately 89%22% in 2017,2018, and excluding Velvac, sales increased 11%7% as compared to the same period in 2016.  2017.  Sales volume of existing products increased 83%19% in 20172018 primarily as the result of the Velvac Acquisition, as well as strongacquisition and increased sales growth from our existing Class 8 truck, service bodiesdistribution, specialty vehicles and bustruck accessory customers.  Net sales in the Security Products segment increased approximately 7%6% in 2017 primary a2018 primarily as result of increased sales volume from our investment in growth at our Illinois Lock and Argo EMS divisions.Greenwald Industries.  The Metal Products business segment's net sales increased approximately 45%4% in 20172018 compared to the prior year period.  Sales volume increased 34%decreased 13% in mine roof products sold to our customers as a result of a resurgencelower demand for coal in the coal mining industry due to higher natural gas prices and an easing of regulatory restriction in the coal mining industry.  Net sales also increased 127%68% in industrial casting products through our continued efforts to diversify away from mining products.  Net income for 2017 decreased 35%2018 increased 187% to $14.5 million, or $2.31 per diluted share, from $5.0 million, or $0.80 per diluted share, from $7.8 million, or $1.25 per diluted share, in 2016. The decrease in2017. In 2017, net income was primarily the result ofadversely affected by the recognition of one-time charges of $2.5 million related to the enactment of the Tax Cuts and Jobs Act in 2017 and $1.8 million, net of tax expenses, related to the Velvac Acquisition,acquisition, environmental remediation expenses and personnel related expenses.  Excluding these one-time charges, we generated adjusted earnings of $1.49 per fully diluted share in 2017.  Adjusted earnings per share is a non-GAAP measure.

Net sales in the Industrial Hardware business segmentSegment increased 89%22% in 20172018 from the 20162017 level.  Sales volume of existing products increased 83% in 2017 as the result of19%, however excluding the Velvac Acquisition.  Excluding Velvac, the Industrial Hardware business segment had strong organicacquisition, sales volume increased 3% from growth in Class 8 trucks, service bodiesdistribution, specialty vehicles and bustruck accessory customers, whichwhile price and new products contributed 11%  in increased sales volume in 2017, whereas new2% respectively.  New product sales of tumbler paddles, handle assemblies, latch bracketsinclude a new hood mount truck mirror, modular toolbox latching system, an electronic activated latching system and various composite panels contributed 6% in 2017, each as compared to 2016.  From the date on which the acquisition of Velvac closed, April 3, 2017, to December 30, 2017, Velvac sales were $ 47.3 million and earnings were $(0.1) million.panels.

Cost of products sold forin the Industrial Hardware segmentSegment increased $43.2$17.8 million or 97%20% from 2016 to 2017.2017 level.  The increase in the cost of products sold in the annual period of 2017 when compared to the annual period of 2016 primarily reflects cost of products sold attributable to the Velvac Acquisition.

Gross margin as a percentage of sales increased to 25% in 2018 from 24% in 2017 in the Industrial Hardware business segment decreased to 24% in 2017 from 27% in 2016.Segment.  The decreaseincrease reflects the combination of favorable product mix, greater utilization of products producedproductive capacity and the changes in costnon-recurrence of products sold.  Also affecting gross margin in fiscal 2017 was a one-time changecharges of $1.2 million to cost of goods sold, for $1.2 million, as a result ofrelated to the impact of the purchase accounting in connection with the Velvac acquisition.  In addition, rising pricesacquisition in raw material such as stainless steel, cold roll steel, hot rolled steel and zinc increased from 10% on stainless steel to 37% on zinc materials used in our products during 2017.  As a result of these cost increases, our margins were negatively affected and could not be fully recovered in price increases to customers or offset through operational improvements.

EngineeringProduct development expenses as a percentage of sales increased to 4% in 2017 to2018 from 3% from 0.8% in 2016.2017.  This increase was primarily the result of thea new truck hood mount mirror program awarded to Velvac Acquisition.

Net sales in the Security Products business segmentSegment increased 7%6% in 20172018 from the 20162017 level.  The increase in sales in 2017 in the Security Products segment compared to the prior year period was a resultSales volume of our investment in growth in Illinois Lockexisting products increased 3% while price and Argo EMS.new products contributed 1% and 2% respectively.  New product sales included a zinc branded puckcustom designed lock core for a removable tie down system, a backrest docking system, a miniature tubular lock, a spring return lock, a push buttonflip cover modular lock, and a mini cam lock.power lock module.

Cost of products sold forin the Security Products business segmentSegment increased $3.0by $2.3 million or 8%5% in 2018 from 2016 to 2017.  The most significant factors resulting in changesincrease in cost of productsgoods sold in 2017 comparedwas primarily attributable to 2016 included:

Gross margin as a percentage of sales in the Security Products business segment increasedSegment remained comparable to 31% in 2017 from 28% in 2016.  The increase reflects the mixlevel of products sold and higher utilization of fixed charges on increased volume. Our margins were negatively impacted by higher31%.  Lower material costs, primarily in zinc which was up 37%, and brass, which was up 23%down year over year by 19% and 11%, from the prior year.respectively, helped to offset higher factory payroll cost in our Asian factory.

EngineeringProduct development expenses as a percentage of sales decreased toremained level with 2017 at 3% in 2017 from 4% in 2016..

Selling and administrative expenses in the Security Products business segmentSegment increased by $0.5$0.4 million or 5%4% in 20172018 from the 2016 level.2017.  The most significant factors resulting in changes in selling and administrative expenses were bad debt expense of $0.2 million and an increase of $0.2 million in the Security Products segment in 2017 compared to 2016 included:

Net sales in the Metal Products business segmentSegment increased 45%3.9% in 20172018 compared to the prior year period.  Sales volume increased 34% in mine roofdecreased 11% while price and new products sold to our customers a resultwere up 2% and 13% respectively.  Sales of a resurgence in the coal mining industry due to higher natural gas prices and an easing of regulatory restriction in the coal mining industry.  Net sales also increased 127% inproducts declined 13% year over year while industrial casting productsincreased 92% over 2017 level.  Although coal demand is expected to decline slightly through our continued efforts to diversify away from mining products.2023 the company is placing more effort in attracting additional industrial casting customers.  New product sales include a bomb plug for the military, torque bolt and segment flute for the utilities market and various casting for the oil water and gas industries.

Cost of products sold for the Metal Products segmentSegment increased $6.8$1.1 million or 38%5% from 2016 to 2017.2017 level.  The most significant factors resulting in changes in cost of products sold in 2017 compared to 2016 included:2018 was higher raw materials (scrap iron) increasing for the year by 25%.

Gross margin as a percentage of sales in the Metal Products business segment increasedSegment decreased to 12% in 2018 from 13% in 2017 from 9% in 2016.2017.  The increase reflects the mix of products produced and the utilization of productive capacity.  Our margins were negatively impacted by a 48% increase in raw material scrap iron prices.  Not all increaseshigher metal cost could not be fully recovered in the prices of raw materials could be recovered from price increases to customers.

Selling and administrative expenses in the Metal Products segment increased $0.7decreased $0.1 million or 35%5% from 2016 to 2017.  The most significant factors, resulting in changesthe decrease in selling and administrative expenses was a reduction in the Metal Products business segment in 2017 compared to 2016 were:payroll and payroll related charges.