EML - Earnings call transcript Q3 2017

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Operator

Good day, everyone, and welcome to The Eastern Company’s Third Quarter Fiscal Year 2017 Earnings Conference Call. Today’s call is being recorded. [Operator Instructions]. At this time for opening remarks and introductions, I would like to turn the call over to Mr. Chris Molten [ph], Head of Corporate Development and Investor Relations for Eastern. Chris. ahead, go Please

Unidentified Company Representative

morning, everyone Good joining and you. for thanks us. Thank

call limitation, and today future after taxes Vlak; performance the you participants. other statements will is today the first company’s our consist business some prospects, CEO, note and without regarding expenses, statements expense, statements. that, including, margin, questions that could cause forward-looking Please Eastern’s risks open income gross These hear And trends actual Speaking and to results the information those from these Sullivan. of and President Gus and projected significantly that forward-looking revenue, financial outlook. of forward-looking of operating subject from John and or we’ll discussion during business are differ to will in CFO, to uncertainties statements

our XX-Q more no refer certain dates. regarding accepted comparable accordance GAAP the XX-K will most respective filed SEC. to financial please update press periodic release, For directly with most reports in X-K the of measures yesterday, measures prepared earnings the assumes with which release. filed filed principles. the call issued our their yesterday, of Form these not financial measures be Reconciliation to with any associated also along to the during Form the risks were uncertainties, accounting include that and generally in speak Form found Eastern’s these yesterday or factors discussed Discussions in U.S. in non-GAAP can with information financial the statements recently and as Eastern information on forward-looking SEC obligation Form X-K and risk and

our remarks. viewed now the earnings at of and substitutes for our I’d introductory Web to be for Any call not measures not measures and like obtain the non-GAAP as U.S. to a by GAAP. over release copy You Gus or presented site financial required may should easterncompany.com. X-K on turn

August Vlak

good and joining us and our earnings morning Chris, first thank for on Thank you, call. quarterly you

XXXX. the to calls report periodic get results through these opportunities starting of way and currently focus result information These quarter, earnings the the factors. Today’s investors of past nine the filings months months quarter financial the for of us September of four $X.XX diluted another XX, for fully generated create our generated our $X.XX and the the In we ask the first We’re fully and will to on chiefly earnings year, we nine call more that to we offer to investor questions. our for diluted per per earnings are share. in

increase and markets. acquisition due year April medium-duty X on significant on which mirror manufacturer earnings levels. this production. for technology, of in for leading vision Class truck, has acquisition First, Velvac and earn-out manufacturers is RVs Velvac premier the and Velvac’s business heavy-duty the this We completed upon believe that recent an designer the $XX.X to X our achieving in overall Velvac motorhome demand in certain contingent and year, for and bus a well strong part proprietary camera original million primarily a plus the equipment performance performed impact and minimum of is had we truck

our strong performance driven core Velvac. core second the that The factor results our is excluding are We businesses that’s continued believe businesses, of sound. our fundamentally

Show the attributable Sales by results both in of nine & to an have investments prior technology which at vision $X.X server which with so tracked and mine-related million into products. Trade of connected period, quarter we that’s and of a about over business launch XX% Road-iQ the Velvac. for of is line strong sales the Frazer growth. month, strong recovery both drivers integrates passive Jones year accelerated to increases these grew of unique our Frazer and And These vehicle the factor A at business Hardware first and prices Security Jones delivered the increase prospects. active which our at end in top both in gas specialty commitment environmental processor of cameras our the division this excluding from to seven of investments, development RV We to and natural a is trucks of represent a platform fast Velvac. months mining the product primarily year. safety third Industrial demand a is new in related expect easing benefitted to Our technology is development regulations, to vehicles. provides products Products third Road-iQ this National up in the coal RVs, development Road-iQ, & other video the Road-iQ the a that Velvac affected created excited its which and at far engineering in acquired of and products this largely version latest telematics and we’re

acquisition costs the one-time operators, related In sum, one-time earnings Velvac the team $X.XX In costs Velvac on million incurred months to Industries development product approximately we year. later of businesses nine our but Together, of in I’ll consumers great based at also about core we now it been our in mobile growth received laundry more pay that’s consumers the the easy year. A relate for over and strong our costs we we’ve to John the gPay for gPay. driven and over of share. primarily is per call talk for factor, to product extremely of investments this facility and in results. our a most first the nonrecurring gPay far feedback install. turn to this laundry to so ongoing our phone. the our call acquisition laundry of share on have in expenses, it’s to payment them on which the financial fourth this performance operators. I’ll has by and $X.X second incurred industry And return laundry addition, from These right a their our detailed solution allows Greenwald quarter. affected for these future, working the commercial

John Sullivan

Thank the compared of share the XXXX include which you. third sales quarter the Velvac to Overall, in now third when Sales XXXX. XXXX. quarter by quarter of with XXXX third increased increased sales of in XX% existing you the quarter of of XX% of quarter compared products, results third third to of I’ll the of volume XXXX. the products,

third by when third compared of generated Hardware in result quarter sales quarter of XXXX, introduction the primarily Sales of to in third of increased as products by was segment quarter Industrial of XXXX XXXX The the Velvac the acquisition. which affected by XXX% sales the X%. the favorably from new a increased

Products Sales in XXXX. XX% Security third in increased of products Products nine the and water new the included compared pipe the The oil, in of connecting the a and of the nine of included primarily increased a Hardware Industrial products the XX% XXXX quarter brackets, the XXXX, market. and new and gas for to of compared in sales new XX% fittings periods Sales included products truck prior XX% motorcycle Excluding in gas types as in rods respected Net Industrial numerous paddles, XXXX Sales for to the was corresponding of first the the increased Velvac compared XXXX. quarter locking introduction sales increased the segment the market Class Velvac the sales Hardware year the primarily in first of in kits result increase quarter of product the of when XXXX of in months corresponding when the third of for third of X% third in segment of the latch XXXX to Metal compared sales of result acquisition. new market. lock third industries. tumbler segment Sales vehicle segment X the in panels. period, quarter and for the to quarter months segment Sales increased the vehicle Metal XXXX. of

the the compared results for months new the ending increased by to months XXXX first first nine months of of which of Sales Velvac increased segment months the to when months X, X% affected which of sales Security XXXX. to nine XXXX. XX, by of first segment by of and sales XX% increased products nine first nine Hardware XX% in XX, of segment sales sales the the X% nine compared XX% sales existing September in the as ending XXXX. compared XXXX. compared introduction The of Velvac, Hardware sale the the Metal Products sales XXXX ending Products were favorably October as increased XX%, September increased nine segment Industrial months products, to the nine The Excluding months include Industrial products, XXXX, volume increased

for to the For for compared price fourth the through of of gross costs our acquisition, margin September XXXX. XXXX months year the ending are period. result the shift In increases to was XX% efficiencies the comparable helped of XXXX, period decrease The along XX% mix possible. three quarter compared Velvac XX, was price of primarily product when nine the increase with rising components of months reduction XX% Cost and these the raw increased prices commodity were was to Gross to of gross manufacturing material XXXX in exclude expected in material costs. margin XXXX, XX% first recover to XXXX. minimize you nine We The seek quarter for when in margins impact increases. XXXX first prior compared third the XX% in Velvac. and of months general, the to during

XXXX costs September XX, This the as third to third XX% compared the sales acquisition. X% the compared primarily For of nine result to of XXXX, in primarily the Velvac of of engineering was a the X.X quarter of due a period months acquisition. was and or expenses and Selling X% inclusion increase percentage as three ending administrative for XXXX, the to XXXX. comparable million the quarter of Velvac increased

and administrative of nine Selling of million administrative compared first months to Velvac's the third X.X selling or and Excluding quarter quarter costs in third the the the of administrative costs XXXX. X% XXXX, increased costs X.X XXXX in XX% to months increased nine XXXX. million and or of compared selling first

one-time million and charges, compared XXXX, Security our by were personnel Products the of costs segment. segment, acquisition nine increased costs nine of of X.X million in several generating Metal segment, environmental Velvac's in X.X first operations in million million and Selling first Hardware costs XX.X cash costs and of same in the to the administrative charges to impacted Excluding XXXX. selling or of the in months adversely X.X Gus? million nine from the XXXX million compared costs included and which selling Products X.X during XX% months the XXXX. administrative months during X approximately period Industrial We generated of of administrative

August Vlak

sheet. opportunities add that in continue to strategy believe our look We to our us to continue including believe like John. three-part bolt-on our building we’ll have I’d build end strong you, strengthens portfolio economics that we that of the that addition our Thank progress with for scale and and and In portfolio, conclusion, optimizing balance acquisition help make markets. some we execution Velvac attractive improving

investing gPay to talked drive growth. capabilities, In strong. each at well in in sheet at of addition, products Industries. our the to in sales new about businesses vision third, of And Road-iQ and our We’ve operations believe technology balance already and as you marketing order products, remains our to our core ongoing we’re Greenwald commitment development as we in

turn With have the that, of quarter Our can million. any over $XX.X position to questions. us it cash questions. if tell at total to we the end I’d Chris, like third you was

Unidentified Company Representative

do. actually we Yes,

Our first pensions. regarding are the What pension funding of the plans? question is requirements

John Sullivan

certain several on of covering plans the at defined pension employees. and has retirement, non-contributory salary based U.S. benefits Eastern generally for the level Plan our years are of age plan, service compensation. benefit

laws policy into respect required to expect a contribute qualified regulations. XXX,XXX we XXXX, funding our least plans amount applicable In the minimum and to to post-retirement pension Our plans. and contribute plan is at with by XXX,XXX into

of and pension As required will the plans in of remainder year. our during September as XX, and remaining plans post-retirement into contributions our the make XXX,XXX have XXX,XXX contributed XXXX, we the

August Vlak

another question? Okay. Do we have

Unidentified Company Representative

you of did fund How the Velvac? acquisition

John Sullivan

and financed our from debt loan in Bank, $XX term end the X.X on million $X million third million revolving shareholder was the acquisition to The equity Eastern’s United $XX of People's a quarter, At XX.X%. a drawdown with was total cash. with million credit People's facility

Unidentified Company Representative

in Security question, increasing XX% suggest are prices the raw by the material you Products Third as in segment XX-Q?

August Vlak

cost raw the prices are the material the the materials by quarter XX-Q prices take that. also the in Raw so of some of XX% to we it raw I’ll refers in purchased. in And volume any year. much increasing raw as increased rapidly. prior materials have the figure indeed as compared changes total of The and third to includes materials

these to mentioned, and – to we increase price in raw and try materials John increases improve areas finding As efficiencies costs. increases other by through reduce

Unidentified Company Representative

question, the what Another securities does hold? company marketable

August Vlak

of additional quarter. marketable securities And end quarter, hand. equal investment don’t we primarily approximately at securities marketable any didn’t held the to we purchase third disclose the $XXX,XXX. By the buy last we marketable We issue but securities purposes, the during for

Unidentified Company Representative

Velvac? Impressions of

August Vlak

the production. Well, the believe Road-iQ. that has for overall part this for continued as truck the RVs mirror At the significant to in well about same on we prospects we’re positive pickup a due acquisition in I performed very demand and traditional time, and mentioned And year, had our Velvac’s performance. camera excited before, X impact business OEM Class strong

a passive competitive very other solution trucks for and product of some like As compelling safety core RVs, offers we specialty markets and drivers it, of and see active vehicles. this our

Unidentified Company Representative

you have businesses? question. Are divest We to still another looking

August Vlak

are opportunities a we We we in acquisitions this do. fair portfolio. remain deal our pursuing any And optimize actively in to to divestitures investors our that get sure process that or making committed

Unidentified Company Representative

looks like we estate? real up in follow What to that. Okay. And a divesting about it have

August Vlak

Today, and facilities Tillsonburg, Naugatuck, in Wheeling, Strongsville, Canada; we Connecticut; Secaucus. Connecticut, as Ohio; well as own Illinois; Chester,

overall facilities of looking Although for including we balance balance the just optimize small are our opportunities these is portion estate. of real the the combined value a sheet, to sheet,

Unidentified Company Representative

it Okay. is It questions. that looks like for

interest that, appreciate turn Company. a operator. your the that’s back and in I’ll if Have With call the Thank So case, the you. day. Eastern nice to The we time

Operator

We Thank does you. today’s for webcast. conclude you your thank This participation.

this disconnect You time. at lines your may

The Eastern Company (EML) 10 Nov 172017 Q3 Earnings call transcript