The Eastern Company (EML) 10-Q 4 May 18 2018 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information	3 Months Ended
	Mar. 31, 2018shares
Document and Entity Information [Abstract]
Entity Registrant Name	EASTERN CO
Entity Central Index Key	31,107
Current Fiscal Year End Date	--12-29
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding	6,265,000
Document Fiscal Year Focus	2,018
Document Fiscal Period Focus	Q1
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2018

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) [Abstract]
Net sales	$ 59,444,997	$ 36,043,295
Cost of products sold	(44,723,521)	(27,359,246)
Gross margin	14,721,476	8,684,049
Engineering expenses	(1,389,229)	(630,411)
Selling and administrative expenses	(9,160,360)	(5,877,967)
Operating profit	4,171,887	2,175,671
Interest expense	(296,330)	(21,024)
Other income	218,731	80,183
Income before income taxes	4,094,288	2,234,830
Income taxes	994,093	717,689
Net income	$ 3,100,195	$ 1,517,141
Earnings per Share:
Basic (in dollars per share)	$ 0.49	$ 0.24
Diluted (in dollars per share)	0.49	0.24
Cash dividends per share: (in dollars per share)	$ 0.11	$ 0.11

CONDENSED CONSOLIDATED STATEME3

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($)	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) [Abstract]
Net income	$ 3,100,195	$ 1,517,141
Other comprehensive (loss) income:
Change in foreign currency translation	608,928	471,971
Change in marketable securities, net of tax benefit of: 2018 - 0 and 2017 - ($792)	0	(1,451)
Change in pension and postretirement benefit costs, net of tax expense of: 2018 - $65,842 and 2017 - $112,864	222,725	206,683
Change in fair value of interest rate swap, net of tax benefit of: 2018 - ($65,557)	165,840	0
Total other comprehensive (loss) income	997,463	677,203
Comprehensive income	$ 4,097,688	$ 2,194,344

CONDENSED CONSOLIDATED STATEME4

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (Parenthetical) - USD ($)	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Other comprehensive (loss) income:
Change in marketable securities, income taxes expense (benefit)	$ 0	$ (792)
Change in pension and postretirement benefit costs, income taxes (expense)/benefit	(65,842)	$ (112,864)
Change in fair value of interest rate swap, income taxes expense/(benefit)	$ (65,557)

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($)	Mar. 31, 2018	Dec. 30, 2017
Current Assets
Cash and cash equivalents	$ 16,361,816	$ 22,275,477
Accounts receivable, less allowances: $477,000 - 2018; $389,000 - 2017	30,304,665	27,119,910
Inventories	48,976,948	47,268,757
Prepaid expenses and other assets	3,615,307	3,401,456
Total Current Assets	99,258,736	100,065,600
Property, Plant and Equipment	70,875,801	70,109,077
Accumulated depreciation	(42,007,439)	(41,075,121)
Property, Plant and Equipment, Net	28,868,362	29,033,956
Goodwill	32,200,916	32,228,891
Trademarks	3,686,063	3,686,063
Patents and other intangibles net of accumulated amortization	9,847,216	9,433,596
Deferred income taxes	1,904,485	2,010,291
Total other assets	47,638,680	47,358,841
TOTAL ASSETS	175,765,778	176,458,397
Current Liabilities
Accounts payable	16,943,359	14,712,414
Accrued compensation	2,390,909	4,376,211
Other accrued expenses	3,658,147	3,606,057
Contingent liability	2,070,000	2,070,000
Current portion of long-term debt	2,550,000	6,550,000
Total Current Liabilities	27,612,415	31,314,682
Deferred income taxes	1,723,543	1,723,543
Other long-term liabilities	358,982	358,982
Long-term debt, less current portion	28,287,500	28,675,000
Accrued postretirement benefits	1,015,290	1,032,171
Accrued pension cost	26,343,088	26,423,429
Shareholders' Equity
Preferred Stock, no par value: Authorized and unissued: 2,000,000 shares	0	0
Common Stock, no par value, Authorized: 50,000,000 shares Issued: 8,959,729 shares in 2018 and 8,957,974 shares in 2017	29,608,222	29,501,123
Treasury Stock: 2,694,729 shares in 2018 and 2017	(19,105,723)	(19,105,723)
Retained earnings	100,311,681	97,921,903
Accumulated other comprehensive income (loss):
Foreign currency translation	(334,265)	(943,193)
Unrealized gain on interest rate swap, net of tax	207,597	41,757
Unrecognized net pension and other postretirement benefit costs, net of taxes	(20,262,552)	(20,485,277)
Accumulated other comprehensive loss	(20,389,220)	(21,386,713)
Total Shareholders' Equity	90,424,960	86,930,590
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 175,765,778	$ 176,458,397

CONDENSED CONSOLIDATED BALANCE6

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($)	Mar. 31, 2018	Dec. 30, 2017
Current Assets
Accounts receivable, allowances	$ 477,000	$ 389,000
Shareholders' Equity
Preferred Stock, par value (in dollars per share)	$ 0	$ 0
Preferred Stock, shares authorized (in shares)	2,000,000	2,000,000
Common Stock, par value (in dollars per share)	$ 0	$ 0
Common Stock, shares authorized (in shares)	50,000,000	50,000,000
Common Stock, shares issued (in shares)	8,959,729	8,957,974
Treasury Stock, shares (in shares)	2,694,729	2,694,729

CONDENSED CONSOLIDATED STATEME7

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Operating Activities
Net income	$ 3,100,195	$ 1,517,141
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,150,204	955,614
Unrecognized pension and postretirement benefits	191,344	127,926
(Gain)/loss on sale of equipment and other assets	21,024	33,098
Provision for doubtful accounts	9,136	6,381
Issuance of Common Stock for directors' fees	107,099	41,509
Changes in operating assets and liabilities:
Accounts receivable	(3,514,532)	(1,719,513)
Inventories	(1,540,703)	1,689,822
Prepaid expenses and other	(144,757)	(84,755)
Other assets	(90,073)	(35,208)
Accounts payable	2,256,432	901,500
Accrued compensation	(2,012,189)	(1,321,648)
Other accrued expenses	562,695	279,730
Net cash provided by operating activities	95,875	2,391,597
Investing Activities
Marketable securities	0	(215,923)
Capitalized software	(733,842)	0
Purchases of property, plant and equipment	(605,655)	(487,169)
Net cash used in investing activities	(1,339,497)	(703,092)
Financing Activities
Principal payments on long-term debt	(4,387,500)	(357,142)
Dividends paid	(689,133)	(688,340)
Net cash used in financing activities	(5,076,633)	(1,045,482)
Effect of exchange rate changes on cash	406,594	212,902
Net change in cash and cash equivalents	(5,913,661)	855,925
Cash and cash equivalents at beginning of period	22,275,477	22,725,376
Cash and cash equivalents at end of period	$ 16,361,816	$ 23,581,301

Basis of Presentation

Basis of Presentation	3 Months Ended
	Mar. 31, 2018
Basis of Presentation [Abstract]
Basis of Presentation	Note A – Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. Refer to the Company's consolidated financial statements and notes thereto included in its Form 10-K for the year ended December 30, 2017 for additional information. The accompanying condensed consolidated financial statements are unaudited. However, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for interim periods have been reflected therein. All intercompany accounts and transactions are eliminated. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. The condensed consolidated balance sheet as of December 30, 2017 has been derived from the audited consolidated balance sheet at that date. Commencing with Quarterly Report on Form 10-Q for the period ended September 30, 2017, engineering expenses have been separately identified for all periods presented. These expenses have been reclassified from cost of products sold and selling and administrative expenses. Engineering expense is not necessarily a cost of product sold. Rather, these expenses are related to product development. This reclass of April 1, 2017 amounts does not change the overall results. Commencing with this Quarterly Report on Form 10-Q, in accordance with ASC 715 – Compensation – Retirement Benefits, net periodic pension costs have been separately identified for all periods presented. These expenses have been reclassified from cost of products sold to other income.

Earnings Per Share

Earnings Per Share	3 Months Ended
	Mar. 31, 2018
Earnings Per Share [Abstract]
Earnings Per Share	Note B – Earnings Per Share The denominators used in the earnings per share computations follow: Three Months Ended March 31, 2018 April 1, 2017 Basic: Weighted average shares outstanding 6,263,553 6,256,496 Diluted: Weighted average shares outstanding 6,263,553 6,256,496 Dilutive stock units 28,173 - Denominator for diluted earnings per share 6,291,726 6,256,496

Inventories

Inventories	3 Months Ended
	Mar. 31, 2018
Inventories [Abstract]
Inventories	Note C – Inventories The components of inventories follow: March 31, 2018 December 30, 2017 Raw material and component parts $ 14,849,839 $ 14,331,915 Work in process 7,997,305 7,718,379 Finished goods 26,129,804 25,218,463 $ 48,976,948 $ 47,268,757

Segment Information

Segment Information	3 Months Ended
	Mar. 31, 2018
Segment Information [Abstract]
Segment Information	Note D – Segment Information Segment financial information follows: Three Months Ended March 31, 2018 April 1, 2017 Revenues: Sales to unaffiliated customers: Industrial Hardware $ 36,557,043 $ 15,442,825 Security Products 15,119,328 13,917,489 Metal Products 7,768,626 6,682,981 $ 59,444,997 $ 36,043,295 Income before income taxes: Industrial Hardware $ 2,766,444 $ 540,571 Security Products 985,138 969,125 Metal Products 420,305 665,975 Operating Profit 4,171,887 2,175,671 Interest expense (296,330 ) (21,024 ) Other income 218,731 80,183 Income before income taxes $ 4,094,288 $ 2,234,830

Recent Accounting Pronouncement

Recent Accounting Pronouncements	3 Months Ended
	Mar. 31, 2018
Recent Accounting Pronouncements [Abstract]
Recent Accounting Pronouncements	Note E – Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 requires leases to present right-of-use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. The guidance is to be applied using a modified retrospective approach at the beginning of the earliest comparative period in the financial statements and is effective for years beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact of the new guidance. In February 2017, the FASB issued ASU No. 2017-06, Plan Accounting: Defined Benefit Pension Plans (Topic 960); Defined Contribution Pension Plans (Topic 962); Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting. ASU 2017-06 provides guidance for reporting by an employee benefit plan for its interest in a master trust. The amendment is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The amendment should be applied retrospectively with earlier application permitted as of the beginning of an interim or annual reporting period after December 15, 2018. The Company is in the process of determining the effect that the adoption of ASU 2017-06 will have on the accompanying financial statements. The Company has implemented all new accounting pronouncements that are in effect and that could impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued, but are not yet effective, that might have a material impact on the consolidated financial statements of the Company.

Debt

Debt	3 Months Ended
	Mar. 31, 2018
Debt [Abstract]
Debt	Note F – Debt On April 3, 2017, the Company signed an amended and restated loan agreement (the "Restated Loan Agreement") with People's United Bank that included a $31 million term portion and a $10 million revolving credit portion. Proceeds of the loan were used to repay the remaining outstanding term loan of the Company (approximately $1,429,000) and to acquire 100% of the common stock of Velvac Holdings, Inc. The term portion of the loan requires quarterly principal payments of $387,500 for a two-year period beginning July 3, 2017. The repayment amount then increases to $775,000 per quarter beginning July 1, 2019. The term loan is a five-year loan with the remaining balance due on March 1, 2022. The revolving credit portion has a quarterly commitment fee ranging from 0.2% to 0.375% based on operating results. The revolving credit portion has a maturity date of April 1, 2022. On April 3, 2017, the Company borrowed approximately $6.6 million on the revolving credit facility. The Company subsequently paid off $1.6 million during 2017 and an additional $4 million during the first 3 months of 2018 on the revolving credit facility leaving a balance on the credit of $1 million as of March 31, 2018 The interest rates on the term and revolving credit portion of the Restated Loan Agreement vary. The interest rates may vary based on the LIBOR rate plus a margin spread of 1.75% to 2.50%. The margin spread is based on operating results calculated on a rolling-four-quarter basis. The Company may also borrow funds at the lender's prime rate. On March 31, 2018, the interest rate for one half ($14.9 million) of the term portion was 3.44%, using a 1 month LIBOR rate and 3.41% on the remaining balance ($14.9 million) of the term loan based on a 3 month LIBOR rate. The interest rate on the $1 million of the revolving credit portion was 4.0%, the bank's prime rate. The Company's loan covenants under the Restated Loan Agreement require the Company to maintain a consolidated minimum debt service coverage ratio of at least 1.1 to 1 for periods through December 31, 2018 and 1.2 to 1 thereafter to be tested quarterly on a twelve-month trailing basis. In addition, the Company will be required to show a maximum total leverage ratio of 4.0x for periods through December 31, 2018, 3.5x for the period January 1, 2019 through December 31, 2019, 3.25x for the period January 1, 2020 through December 31, 2020 and 3.0x thereafter. The Company was in compliance with all covenants in 2017 and 2018. On April 4, 2017, the Company entered into an interest rate swap contract with the lender with an original notational amount of $15,500,000, which is equal to 50% of the outstanding balance of the term loan on that date. The notational amount will decrease on a quarterly basis beginning July 3, 2017 following the principal repayment schedule of the term loan. The Company has a fixed interest rate of 1.92% on the swap contract and will pay the difference between the fixed rate and LIBOR when LIBOR is below 1.92% and will receive interest when the LIBOR rate exceeds 1.92%.

Retirement Benefit Plans

Retirement Benefit Plans	3 Months Ended
	Mar. 31, 2018
Retirement Benefit Plans [Abstract]
Retirement Benefit Plans	Note G – Retirement Benefit Plans The Company has non-contributory defined benefit pension plans covering certain U.S. employees. Plan benefits are generally based upon age at retirement, years of service and, for its salaried plan, the level of compensation. The Company also sponsors unfunded nonqualified supplemental retirement plans that provide certain current and former officers with benefits in excess of limits imposed by federal tax law. In addition, the Company provides health care and life insurance for retired salaried employees in the U.S.who meet specific eligibility requirements. Significant disclosures relating to these benefit plans for the first quarter of fiscal 2018 and 2017 follow: Pension Benefits Postretirement Benefits Three Months Ended Three Months Ended March 31, 2018 April 1, 2017 March 31, 2018 April 1, 2017 Service cost $ 329,960 $ 317,360 $ 9,256 $ 6,847 Interest cost 776,792 791,057 19,290 20,207 Expected return on plan assets (1,304,880 ) (1,195,895 ) (13,913 ) (12,874 ) Amortization of prior service cost 32,691 36,438 (1,268 ) (5,361 ) Amortization of the net loss 277,528 307,870 (16,398 ) (19,400 ) Net periodic benefit cost $ 112,091 $ 256,830 $ (3,033 ) $ (10,581 ) The Company's funding policy with respect to its qualified plans is to contribute at least the minimum amount required by applicable laws and regulations. In the year 2018, the Company expects to contribute $510,000 into its pension plans and $105,000 into its postretirement plan. As of March 31, 2018, the Company has not made contributions into its pension plans and has contributed $36,000 to its postretirement plan and will make the remaining contributions as required during the remainder of the year. The Company has a contributory savings plan under Section 401(k) of the Internal Revenue Code covering substantially all U.S. non-union employees. The plan allows participants to make voluntary contributions their annual compensation on a pretax basis, subject to IRS limitations. The plan provides for contributions by the Company at its discretion. The Company made contributions to the plan as follows: For the Three Months Ended March 31, 2018 April 1, 2017 Regular matching contribution $ 166,015 $ 116,475 Transitional credit contribution 124,108 135,370 Non-discretionary contribution 524,373 307,568 Total contributions made for the period $ 814,496 $ 559,413 The non-discretionary contribution of $502,617 made in the period of March 31, 2018 was expensed in the prior fiscal year.

Stock Based Compensation

Stock Based Compensation	3 Months Ended
	Mar. 31, 2018
Stock Based Compensation [Abstract]
Stock Based Compensation	Note H – 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 stock options granted using the Black-Scholes valuation model. This model requires the Company to make estimates and assumptions including, among other things, estimates regarding the length of time an employee will retain vested stock options before exercising them, the estimated volatility of our common stock price and the number of options that will be forfeited prior to vesting. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Changes in these estimates and assumptions 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. As of March 31, 2018, the Company had one stock option plan, the 2010 Executive Stock Incentive Plan (the "2010 Plan"), for officers, other key employees, and non-employee directors. Incentive stock options granted under the 2010 plan must have exercise prices that are not less than 100% of the fair market value of the stock on the dates the options are granted. Restricted stock awards may also be granted to participants under the 2010 Plan with restrictions determined by the Compensation Committee of the Company's Board of Directors (the "Compensation Committee"). Under the 2010 Plan, non-qualified stock options granted to participants will have exercise prices determined by the Compensation Committee. No options or restricted stock were granted in the first quarters of fiscal years 2018 or 2017. The 2010 Plan also permits the issuance of stock appreciation rights ("SARs"). The SARs are in the form of an option with a cashless exercise price equal to the fair value of the Company's common stock at the date of grant. During the first quarter of 2018, the Company issued 51,000 SARs at an exercise price of $24.90. The SARs will vest on February 1, 2021 and are subject to meeting performance measurements. When exercised, the Company will issue shares of the Company' common stock with a value equal to the difference between the closing stock price on the date of exercise and the exercise price of the SARs. Stock-based compensation expense in connection with SARs granted to employees and directors in the first quarter of 2018 and 2017 was approximately $56,000 and $7,000, respectively. As of March 31, 2018, there were 275,000 units reserved and available for future grant under the above noted 2010 plan. Three Months Ended March 31, 2018 Year Ended December 30, 2017 Units Weighted - Average Exercise Price Units Weighted - Average Exercise Price Outstanding at beginning of period 141,500 $ 20.36 -- $ -- Issued 51,000 24.90 149,500 20.39 Forfeited (2,000 ) 19.10 (8,000 ) 21.10 Outstanding at end of period 190,500 21.44 141,500 20.36 SARs Outstanding and Exercisable Range of Exercise Prices Outstanding as of December 30, 2017 Weighted- Average Remaining Contractual Life Weighted- Average Exercise Price Exercisable as of March 31, 2018 Weighted- Average Remaining Contractual Life Weighted- Average Exercise Price $ 19.10-24.90 190,500 4.2 $ 21.44 20,670 4.0 19.10 The following tables set forth the outstanding stock grants for the period specified: Three Months Ended March 31, 2018 Year Ended December 30, 2017 Shares Weighted - Average Exercise Price Shares Weighted - Average Exercise Price Outstanding at beginning of period 25,000 $ — — $ — Issued — — 25,000 — Forfeited — — — — Outstanding at end of period 25,000 — 25,000 — Stock Grants Outstanding and Exercisable Range of Exercise Prices Outstanding as of March 31, 2018 Weighted- Average Remaining Contractual Life Weighted- Average Exercise Price Exercisable as of December 30, 2017 Weighted- Average Remaining Contractual Life Weighted- Average Exercise Price $ 0.00 25,000 4.0 — — — — At March 31, 2018, outstanding SARs and options had an intrinsic value of $2,040,450.

Income Taxes

Income Taxes	3 Months Ended
	Mar. 31, 2018
Income Taxes [Abstract]
Income Taxes	Note I – Income Taxes The Company files income tax returns in the U.S. federal jurisdiction, and in various states and foreign jurisdictions. With limited exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2013 and is no longer subject to non-U.S. income tax examinations by foreign tax authorities for years prior to 2011. The Tax Cuts and Jobs Act (the "2017 Tax Act") was enacted into law on December 22, 2017. The 2017 Tax Act, significantly changes U.S. corporate income tax laws by, among other provisions, reducing the maximum U.S. corporate income tax rate from 35% to 21% starting in 2018, and creating a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings of U.S. subsidiaries. The final impact on the Company resulting from the 2017 Tax Act's transition tax legislation may differ from the aforementioned reasonable estimate due to the complexity of calculating and supporting with primary evidence U.S. tax attributes, such as accumulated foreign earnings and profits, foreign tax paid, and other tax components involved in foreign tax credit calculations for prior years back to 1986. Such differences could be material, due to, among other things, changes in interpretations of the 2017 Tax Act, future legislative action to address questions that arise because of the 2017 Tax Act, changes in accounting standards for income taxes or related interpretations in response to the 2017 Tax Act, or any updates or changes to estimates the Company has utilized to calculate the reasonable estimate of the transition tax. Pursuant to the SAB118, the company is allowed a measurement period of up to one year after the enactment date of the 2017 Tax Act to finalize the recording of the related tax impacts. During the three months ending March 31, 2018, no measurement period adjustments were recorded. The total amount of unrecognized tax benefits could increase or decrease within the next 12 months for a number of reasons, including the closure of federal, state and foreign tax years by expiration of the statute of limitations and the recognition and measurement considerations under FASB ASC Topic 740, "Income Taxes." There have been no significant changes to the amount of unrecognized tax benefits during the three months ended March 31, 2018. The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits will not increase or decrease significantly over the next twelve months.

Revenue Recognition

Revenue Recognition	3 Months Ended
	Mar. 31, 2018
Revenue Recognition [Abstract]
Revenue Recognition	Note J – Revenue Recognition The Company's revenues result from the sale of goods and services and reflect the consideration to which the Company expects to be entitled. The Company records revenues based on a five-step model in accordance with FASB ASC Topic 606, "Revenue from Contracts with Customers." The Company has defined purchase orders as contracts in accordance with ASC Topic 606. For its customer contracts, the Company identifies it's performance obligations, which is delivering goods or services, determines the transaction price, allocates the contract transaction price to the performance obligations (when applicable), and recognizes the revenue when (or as) the performance obligation is transferred to the customer. A good or service is transferred when the customer obtains control of that good or service. The Company's revenues are recorded at a point in time from the sale of tangible products. Revenues are recognized when products are shipped. The Company has elected the Modified Retrospective Method (the "Cumulate Effect Method") to comply with ASC Topic 606. The Cumulative Effect Method does not affect the amounts for the prior periods, but requires that the current period be reported in accordance with as if ASC Topic 606. ASC Topic 606 was adopted on December 31, 2017 which was the first day of the Company's 2018 fiscal year. The financial effect of ASC Topic 606 on the March 31, 2018 financial statements was not significant. Customer volume rebates, product returns, discount and allowance are variable consideration and are recorded as a reduction of revenue in the same period that the related sales is recorded. The Company has reviewed the overall sales transactions for variable consideration and has determined that these costs are not significant. Refer to Note D for revenues reported by segment. The Company has not experienced any impairment losses, has no future performance obligations and does not capitalize costs to obtain or fulfill contracts.

Financial Instruments and Fair

Financial Instruments and Fair Value Measurements	3 Months Ended
	Mar. 31, 2018
Financial Instruments and Fair Value Measurements [Abstract]
Financial Instruments and Fair Value Measurements	Note K - Financial Instruments and Fair Value Measurements Financial Risk Management Objectives and Policies The Company is exposed primarily to credit, interest rate and currency exchange rate risks which arise in the normal course of business. Credit Risk Credit risk is the potential financial loss resulting from the failure of a customer or counterparty to settle its financial and contractual obligations to the Company, as and when they become due. The primary credit risk for the Company is its receivable accounts with customers. The Company has established credit limits for customers and monitors their balances to mitigate the risk of loss. At March 31, 2018 and December 30, 2017, there were no significant concentrations of credit risk. No one customer represented more than 10% of the Company's net trade receivables at March 31, 2018 or at December 30, 2017. The maximum exposure to credit risk is primarily represented by the carrying amount of the Company's accounts receivable. Interest Rate Risk The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's debt, which bears interest at variable rates based on the LIBOR rate plus a margin spread of 1.75% to 2.50%. The Company has an interest rate swap with a notional amount of $14,918,750 on March 31, 2018 to convert a portion of its 2017 Term Loan from variable to fixed rates. The valuation of this swap is determined using the three month LIBOR rate index and mitigates the Company's exposure to interest rate risk. Currency Exchange Rate Risk The Company's currency exposure is concentrated in the Canadian dollar, Mexican peso, New Taiwan dollar, Chinese RMB and the Hong Kong dollar. Because of the Company's limited exposure to any single foreign market, any exchange gains or losses have not been material and are not expected to be material in the future. As a result, the Company does not attempt to mitigate its foreign currency exposure through the acquisition of any speculative or leveraged financial instruments. Fair Value Measurements Assets and liabilities that require fair value measurement are recorded at fair value using market and income valuation approaches and considering the Company's and counterparty's credit risk. The Company uses the market approach and the income approach to value assets and liabilities as appropriate. The assets or liabilities requiring fair value measurements on March 31, 2018 are as follows: Fair Value Level 1 Level 2 Level 3 Financial Receivable Interest rate swap $ 273,154 $ — $ 273,154 $ — Total assets $ 273,154 $ — $ 273,154 $ — 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 assets.

Earnings Per Share (Tables)

Earnings Per Share (Tables)	3 Months Ended
	Mar. 31, 2018
Earnings Per Share [Abstract]
Denominators used in the earnings per share computations	The denominators used in the earnings per share computations follow: Three Months Ended March 31, 2018 April 1, 2017 Basic: Weighted average shares outstanding 6,263,553 6,256,496 Diluted: Weighted average shares outstanding 6,263,553 6,256,496 Dilutive stock units 28,173 - Denominator for diluted earnings per share 6,291,726 6,256,496

Inventories (Tables)

Inventories (Tables)	3 Months Ended
	Mar. 31, 2018
Inventories [Abstract]
Components of inventories	The components of inventories follow: March 31, 2018 December 30, 2017 Raw material and component parts $ 14,849,839 $ 14,331,915 Work in process 7,997,305 7,718,379 Finished goods 26,129,804 25,218,463 $ 48,976,948 $ 47,268,757

Segment Information (Tables)

Segment Information (Tables)	3 Months Ended
	Mar. 31, 2018
Segment Information [Abstract]
Segment financial information	Segment financial information follows: Three Months Ended March 31, 2018 April 1, 2017 Revenues: Sales to unaffiliated customers: Industrial Hardware $ 36,557,043 $ 15,442,825 Security Products 15,119,328 13,917,489 Metal Products 7,768,626 6,682,981 $ 59,444,997 $ 36,043,295 Income before income taxes: Industrial Hardware $ 2,766,444 $ 540,571 Security Products 985,138 969,125 Metal Products 420,305 665,975 Operating Profit 4,171,887 2,175,671 Interest expense (296,330 ) (21,024 ) Other income 218,731 80,183 Income before income taxes $ 4,094,288 $ 2,234,830

Retirement Benefit Plans (Table

Retirement Benefit Plans (Tables)	3 Months Ended
	Mar. 31, 2018
Retirement Benefit Plans [Abstract]
Significant disclosures relating to benefit plans	Significant disclosures relating to these benefit plans for the first quarter of fiscal 2018 and 2017 follow: Pension Benefits Postretirement Benefits Three Months Ended Three Months Ended March 31, 2018 April 1, 2017 March 31, 2018 April 1, 2017 Service cost $ 329,960 $ 317,360 $ 9,256 $ 6,847 Interest cost 776,792 791,057 19,290 20,207 Expected return on plan assets (1,304,880 ) (1,195,895 ) (13,913 ) (12,874 ) Amortization of prior service cost 32,691 36,438 (1,268 ) (5,361 ) Amortization of the net loss 277,528 307,870 (16,398 ) (19,400 ) Net periodic benefit cost $ 112,091 $ 256,830 $ (3,033 ) $ (10,581 )
Defined Contribution Plan	The Company made contributions to the plan as follows: For the Three Months Ended March 31, 2018 April 1, 2017 Regular matching contribution $ 166,015 $ 116,475 Transitional credit contribution 124,108 135,370 Non-discretionary contribution 524,373 307,568 Total contributions made for the period $ 814,496 $ 559,413

Stock Based Compensation (Table

Stock Based Compensation (Tables)	3 Months Ended
	Mar. 31, 2018
Stock Based Compensation [Abstract]
Stock appreciation rights activity	As of March 31, 2018, there were 275,000 units reserved and available for future grant under the above noted 2010 plan. Three Months Ended March 31, 2018 Year Ended December 30, 2017 Units Weighted - Average Exercise Price Units Weighted - Average Exercise Price Outstanding at beginning of period 141,500 $ 20.36 -- $ -- Issued 51,000 24.90 149,500 20.39 Forfeited (2,000 ) 19.10 (8,000 ) 21.10 Outstanding at end of period 190,500 21.44 141,500 20.36
SARs outstanding and exercisable	SARs Outstanding and Exercisable Range of Exercise Prices Outstanding as of December 30, 2017 Weighted- Average Remaining Contractual Life Weighted- Average Exercise Price Exercisable as of March 31, 2018 Weighted- Average Remaining Contractual Life Weighted- Average Exercise Price $ 19.10-24.90 190,500 4.2 $ 21.44 20,670 4.0 19.10
Stock option activity	The following tables set forth the outstanding stock grants for the period specified: Three Months Ended March 31, 2018 Year Ended December 30, 2017 Shares Weighted - Average Exercise Price Shares Weighted - Average Exercise Price Outstanding at beginning of period 25,000 $ — — $ — Issued — — 25,000 — Forfeited — — — — Outstanding at end of period 25,000 — 25,000 —
Schedule of stock grants outstanding and exercisable	Stock Grants Outstanding and Exercisable Range of Exercise Prices Outstanding as of March 31, 2018 Weighted- Average Remaining Contractual Life Weighted- Average Exercise Price Exercisable as of December 30, 2017 Weighted- Average Remaining Contractual Life Weighted- Average Exercise Price $ 0.00 25,000 4.0 — — — —

Financial Instruments and Fai24

Financial Instruments and Fair Value Measurements (Tables)	3 Months Ended
	Mar. 31, 2018
Financial Instruments and Fair Value Measurements [Abstract]
Assets or liabilities measured at fair value measurements	The assets or liabilities requiring fair value measurements on March 31, 2018 are as follows: Fair Value Level 1 Level 2 Level 3 Financial Receivable Interest rate swap $ 273,154 $ — $ 273,154 $ — Total assets $ 273,154 $ — $ 273,154 $ —

Earnings Per Share (Details)

Earnings Per Share (Details) - shares	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Basic [Abstract]
Weighted average shares outstanding (in shares)	6,263,553	6,256,496
Diluted [Abstract]
Weighted average shares outstanding (in shares)	6,263,553	6,256,496
Dilutive stock units (in shares)	28,173	0
Denominator for diluted earnings per share (in shares)	6,291,726	6,256,496

Inventories (Details)

Inventories (Details) - USD ($)	Mar. 31, 2018	Dec. 30, 2017
Components of inventories [Abstract]
Raw material and component parts	$ 14,849,839	$ 14,331,915
Work in process	7,997,305	7,718,379
Finished goods	26,129,804	25,218,463
Inventories, net	$ 48,976,948	$ 47,268,757

Segment Information (Details)

Segment Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Segment Reporting Information [Line Items]
Revenues, sales to unaffiliated customers	$ 59,444,997	$ 36,043,295
Operating Profit	4,171,887	2,175,671
Interest expense	(296,330)	(21,024)
Other income	218,731	80,183
Income before income taxes	4,094,288	2,234,830
Operating Segments [Member] | Industrial Hardware [Member]
Segment Reporting Information [Line Items]
Revenues, sales to unaffiliated customers	36,557,043	15,442,825
Operating Profit	2,766,444	540,571
Operating Segments [Member] | Security Products [Member]
Segment Reporting Information [Line Items]
Revenues, sales to unaffiliated customers	15,119,328	13,917,489
Operating Profit	985,138	969,125
Operating Segments [Member] | Metal Products [Member]
Segment Reporting Information [Line Items]
Revenues, sales to unaffiliated customers	7,768,626	6,682,981
Operating Profit	$ 420,305	$ 665,975

Debt (Details)

Debt (Details) - USD ($)	Apr. 04, 2017	Apr. 03, 2017	Sep. 30, 2019	Mar. 31, 2018	Dec. 30, 2017	Jun. 30, 2019
Debt Instrument [Line Items]
Original notional amount				$ 14,918,750
Velvac Holdings, Inc [Member]
Debt Instrument [Line Items]
Percentage of common stock acquired		100.00%
LIBOR [Member]
Debt Instrument [Line Items]
Term of variable rate				3 months
LIBOR [Member] | Minimum [Member]
Debt Instrument [Line Items]
Basis spread on variable rate				1.75%
LIBOR [Member] | Maximum [Member]
Debt Instrument [Line Items]
Basis spread on variable rate				2.50%
Restated Loan Agreement [Member] | Minimum [Member]
Debt Instrument [Line Items]
Fixed charge coverage ratio as multiple, 2018				1.1
Fixed charge coverage ratio as multiple, thereafter				1.2
Restated Loan Agreement [Member] | Maximum [Member]
Debt Instrument [Line Items]
Leverage ratio as multiple, through 2018				4
Leverage ratio as multiple, through 2019				3.5
Leverage ratio as multiple, through 2020				3.25
Leverage ratio as multiple, there after				3
Term Loan [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity				$ 31,000,000
Proceeds from credit facility		$ 1,429,000
Maturity date of loan				Mar. 1, 2022
Period for quarterly principal payment				2 years
Term of loan				5 years
Term Loan [Member] | Forecast [Member]
Debt Instrument [Line Items]
Quarterly principal payment			$ 775,000			$ 387,500
Term Loan [Member] | Interest Rate Swap [Member]
Debt Instrument [Line Items]
Fixed rate of interest	1.92%
Original notional amount	$ 15,500,000
Percentage of outstanding balance of term loan	50.00%
Term Loan [Member] | 1 Month LIBOR [Member]
Debt Instrument [Line Items]
Fixed rate of interest				3.44%
Revolving credit loan				$ 14,900,000
Term of variable rate				1 month
Term Loan [Member] | 3 Month LIBOR [Member]
Debt Instrument [Line Items]
Fixed rate of interest				3.41%
Revolving credit loan				$ 14,900,000
Term of variable rate				3 months
Revolving Credit Loan [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity				$ 10,000,000
Proceeds from credit facility		$ 6,600,000
Fixed rate of interest				4.00%
Maturity date of loan				Apr. 1, 2022
Revolving credit loan				$ 1,000,000
Payments on revolving credit note				$ (4,000,000)	$ (1,614,611)
Revolving Credit Loan [Member] | Minimum [Member]
Debt Instrument [Line Items]
Quarterly commitment fee percentage				0.20%
Revolving Credit Loan [Member] | Maximum [Member]
Debt Instrument [Line Items]
Quarterly commitment fee percentage				0.375%
Revolving Credit Loan [Member] | LIBOR [Member] | Minimum [Member]
Debt Instrument [Line Items]
Basis spread on variable rate				1.75%
Revolving Credit Loan [Member] | LIBOR [Member] | Maximum [Member]
Debt Instrument [Line Items]
Basis spread on variable rate				2.50%

Retirement Benefit Plans (Detai

Retirement Benefit Plans (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Pension Benefits [Member]
Components of the net periodic benefit cost [Abstract]
Service cost	$ 329,960	$ 317,360
Interest cost	776,792	791,057
Expected return on plan assets	(1,304,880)	(1,195,895)
Amortization of prior service cost	32,691	36,438
Amortization of the net loss	277,528	307,870
Net periodic benefit cost	112,091	256,830
Additional information [Abstract]
Contributions required by the Company in defined benefit plan	510,000
Employer contributions made	0
Postretirement Benefits [Member]
Components of the net periodic benefit cost [Abstract]
Service cost	9,256	6,847
Interest cost	19,290	20,207
Expected return on plan assets	(13,913)	(12,874)
Amortization of prior service cost	(1,268)	(5,361)
Amortization of the net loss	(16,398)	(19,400)
Net periodic benefit cost	(3,033)	$ (10,581)
Additional information [Abstract]
Contributions required by the Company in defined benefit plan	105,000
Employer contributions made	$ 36,000

Retirement Benefit Plans, Defin

Retirement Benefit Plans, Defined Contribution Plan (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Defined Contribution Plan Disclosure [Line Items]
Total contributions made for the period	$ 814,496	$ 559,413
Regular Matching Contribution [Member]
Defined Contribution Plan Disclosure [Line Items]
Total contributions made for the period	166,015	116,475
Transitional Credit Contribution [Member]
Defined Contribution Plan Disclosure [Line Items]
Total contributions made for the period	124,108	135,370
Non-discretionary Contribution [Member]
Defined Contribution Plan Disclosure [Line Items]
Total contributions made for the period	524,373	$ 307,568
Non-Union U.S. Employees [Member]
Defined Contribution Plan Disclosure [Line Items]
Total contributions made for the period	$ 502,617

Stock Based Compensation (Detai

Stock Based Compensation (Details)	3 Months Ended		12 Months Ended
	Mar. 31, 2018USD ($)Plan$ / sharesshares	Apr. 01, 2017USD ($)$ / sharesshares	Dec. 30, 2017$ / sharesshares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of plans that have shares reserved for further issuance | Plan	1
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of fair market value of stock on grant date for exercise price	100.00%
Stock Appreciation Rights (SARs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense | $	$ 56,000	$ 7,000
Number of Units [Roll Forward]
Outstanding at beginning of period (in shares) | shares	141,500	0	0
Issued (in shares) | shares	51,000		149,500
Forfeited (in shares) | shares	(2,000)		(8,000)
Outstanding at end of period (in shares) | shares	190,500		141,500
Weighted - Average Exercise Price [Roll Forward]
Outstanding at beginning of period (in dollars per share)	$ 20.36	$ 0	$ 0
Issued (in dollars per share)	24.90		20.39
Forfeited (in dollars per share)	19.10		21.10
Outstanding at end of period (in dollars per share)	21.44		$ 20.36
SARs Grants Outstanding and Exercisable [Abstract]
Minimum Range of Exercise Prices (in dollars per share)	19.10
Maximum Range of Exercise Prices (in dollars per share)	$ 24.90
Outstanding (in shares) | shares	190,500
Weighted- Average Remaining Contractual Life	4 years 2 months 12 days
Weighted- Average Exercise Price (in dollars per share)	$ 21.44
Exercisable (in shares) | shares	20,670
Exercisable, Weighted- Average Remaining Contractual life	4 years
Exercisable, Weighted- Average Exercise Price (in dollars per share)	$ 19.10
Stock Options [Member]
Number of Units [Roll Forward]
Outstanding at beginning of period (in shares) | shares	25,000	0	0
Issued (in shares) | shares	0	0	25,000
Forfeited (in shares) | shares	0		0
Outstanding at end of period (in shares) | shares	25,000		25,000
Weighted - Average Exercise Price [Roll Forward]
Outstanding at beginning of period (in dollars per share)	$ 0	$ 0	$ 0
Issued (in dollars per share)	0		0
Forfeited (in dollars per share)	0		0
Outstanding at end of period (in dollars per share)	0		$ 0
SARs Grants Outstanding and Exercisable [Abstract]
Maximum Range of Exercise Prices (in dollars per share)	$ 0
Outstanding (in shares) | shares	25,000
Weighted- Average Remaining Contractual Life	4 years
Weighted- Average Exercise Price (in dollars per share)	$ 0
Exercisable (in shares) | shares	0
Exercisable, Weighted- Average Remaining Contractual life	0 years
Exercisable, Weighted- Average Exercise Price (in dollars per share)	$ 0
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock granted (in shares) | shares	0	0
Stock Options and SARs [Member]
SARs Grants Outstanding and Exercisable [Abstract]
Outstanding options, intrinsic value | $	$ 2,040,450
2010 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for future grant (in shares) | shares	275,000

Income Taxes (Details)

Income Taxes (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 30, 2017
Income Taxes [Abstract]
Corporate income tax rate	21.00%	35.00%
Significant changes to the amount of unrecognized tax benefits	$ 0

Financial Instruments and Fai33

Financial Instruments and Fair Value Measurements (Details)	3 Months Ended
	Mar. 31, 2018USD ($)Customer	Dec. 30, 2017Customer
Interest Rate Risk [Abstract]
Interest rate swap, notional amount	$ 14,918,750
Financial Receivable [Abstract]
Interest rate swap	273,154
Total assets	$ 273,154
LIBOR [Member]
Interest Rate Risk [Abstract]
Term of variable rate	3 months
LIBOR [Member] | Minimum [Member]
Interest Rate Risk [Abstract]
Debt instrument, variable interest rate	1.75%
LIBOR [Member] | Maximum [Member]
Interest Rate Risk [Abstract]
Debt instrument, variable interest rate	2.50%
Level 1 [Member]
Financial Receivable [Abstract]
Interest rate swap	$ 0
Total assets	0
Level 2 [Member]
Financial Receivable [Abstract]
Interest rate swap	273,154
Total assets	273,154
Level 3 [Member]
Financial Receivable [Abstract]
Interest rate swap	0
Total assets	$ 0
Credit Concentration Risk [Member]
Credit Risk [Abstract]
Number of customers that represented more than 10% of trade receivables | Customer	1	1