EML - Earnings call transcript Q1 2020

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Operator

Good day, ladies and gentlemen, and welcome to your Eastern Company First Quarter 2020 Earnings Call. All lines have been placed on a listen-only mode and the floor will be opened for your questions and comments following the presentation. [Operator Instructions]

At this time, it is my pleasure to turn the floor over to your host, Chris Moulton, Head of Corporate Development. Sir, the floor is yours.

Chris Moulton

you. Thank thank joining and today. everyone, you, morning, us for Good

open CEO, Eastern’s as Sullivan. Speaking questions. will be and After call Gus we John today will CFO, President Vlak; for our well that, the as

business margins, note expense, including, our today the without regarding during outlook. company’s limitation, Please will financial taxes performance statements gross of discussion some statements information will of you operating that and income hear forward-looking future consist and expenses, about other the business revenue, prospects,

are from statements and statements. that limit to in taken forward-looking the are risks These subject trends of pandemic spread of uncertainties the effects but forward-looking COVID-XX could being to to or not and results speed to these the measures COVID-XX. limited These include, – cause those actual risks differ to, significantly projected the

regarding risk to yesterday. information please more XX-Q factors discussed these risks uncertainties, filed our Form and refer For in

will useful Eastern’s that today’s a measures discuss substitute not In financial call, as non-GAAP These for, addition performance. supplemental addition, as considered to measures should and in results. from we during GAAP in non-GAAP isolation be are measures or believe we of

With to opening Gus call the remarks. that, for turn I’ll over

August Vlak

have and web. XX-Q those yesterday to of Chris, and joined Form full first Wednesday, and the released those Thanks, quarter phone afternoon. us Eastern’s participating you morning the We who on the good also via results last

their to on around and our during openness and healthy very of like would world taking keep to our like And thank working are us exemplary professionals commitment ways the moment their all employees new of of difficult we this frontlines, the also I efforts sacrifices, to I’d time. by work, appreciative embrace the start workers for to acknowledge to safe. healthcare very hard and a

manufacture timeframe. the Convention beds under efforts disaster used the have incredibly at tight across the for of with who Precision, Center. partnered in highlight Big These the TriEnda an to and Boston relief in team our beds hospital X country, thousands including of to frames want I emergency been field

tell In COVID-XX molds tubes for want subsidiary UK-based kits. to for of part designing to test addition, our that I you its are be and testing in efforts going manufacturing COVID-XX about

difficult this our which has leadership way As is our to company That up the across brings been, today. impressive our me things stepped time where as and have in to be teams and really recognized. stand deserves

environment financial clearly could have are it and having still the macroeconomic to significant on to as amount respond company. COVID-XX in to is There continue and result impact of our the a of uncertainty the that a measures

In risk late impact January, would mitigation had with you when us react across the China COVID-XX COVID-XX were in to to and Unfortunately, starting we spread surface the China to news a world, employees. extremely when implemented we in China, rapidly to series we operations reduce soon see that of there already our spoke all across mentioned of began to quickly. the steps of our requiring and

of all procedures operations. and we at great learned businesses, of early on and necessary we locations our broad our our that range Across took since our action North across a safe. China ensure have in to policies implemented from and to listened colleagues remain American We then deal employees a

our enhanced spread reduce hygiene COVID-XX. face advising our personal on the These all as many include implementing staggering as of home work employees social across shifts, to the importance sites for cleaning distancing programs masks strongly of from and staff implementing of and measures, enabling and possible, wearing employees

clean, we’ve and In have rented buses, from enable employees which private that to to safe work. some us locations, even ensure our to transportation access

protect working and work. to sharing learning, everyone are businesses who up our of together All to shows

business maintain our with compliance to operations, continue will order we to these guidance continue ensure governments to to operations. for commercial continuity directives offer As in

Importantly, our open, are at reduced and deemed essential, remained the majority have of albeit levels. businesses accordingly,

closed who the to the at vast open have previously our of customers will customers majority many level. of middle up. some had that begun our And month, April, who week last of of this have expect Beginning resumed we closed had by operations the

Importantly, until and products, have needs. stopped our new that product pace and engineering continuously our year. now, ready to has kept the we’re that support customers departments and new to working our while disruption worth in closed which chain manufacturing plants products new with engineers to later our to development, been will supply continue adding with of work meet products, suppliers in this are sure on some us make customers’ minimal, we launch the on our It’s help

sales $X.X Now highlights years. to Big X $XX.X Precision, for Net X% XXXX, by for August increased or million first per for acquisition million, the in to third for primarily share, XXXX. first first first Net financial $X.XX quarter of quarter of share the income XXXX. by from the of the increased turning quarter we from of diluted quarter. million the the in diluted addition and driven was $XX.X per that’s acquired quarter to many the This in $X.XX million, as $X.X our which or

our the to over now call financial John I’ll results. turn to the over of go details

John Sullivan

to the to morning, of quarter the Eastern’s XXXX, as Thank on first quarter this I’m In focus compared you, Gus. for results XXXX. first my remarks going of

from and – XXXX, to X Sale while growth of contributed price Big of quarter increases new first products first Sales million XXXX. net of first products – sales X%. the the the existing increased was largely by quarter the and increased X% price Precision. new X%, to For $XX.X new in inclusion attributable in $XX.X quarter million

top and include latch, pull the door power a bar industry. plate a a handle and an lock finger latch, mount emergency mount module, water cross and various New serving a castings lock assembly, products industrial gas assembly

XXXX. Sales million of in segment quarter from $XX.X XX% in the increased in the of by first XXXX industrial hardware first the to million $XX.X quarter

decreased XXXX. Precision, of quarter the the in compared sales X Big segment to XX% first Hardware first Industrial quarter in Excluding the

the and parts. replacement markets in certain and operations taken off-highway military Especially distribution, last-half COVID-XX. closed truck, to they during sufficient to specialty the offset truck when sales in of vehicle, declines spread had help aftermarket to customers were not of recreational due stop their March, Class X the Increased actions vehicle

XXXX decreased distribution, majority the of XX% the Security to to Products of in lower serve, we quarter including the industrial, Sales quarter due first segment XXXX the markets first in XXXX demand compared across the of vehicular of supply as in systems for generated and accessories door mechatronic and XXXX. in of a did laundry, not sales latches, as loss commercial reoccur quarter RV contracts the that first padlock which well

Metal first the the to first mining of casting of XXXX. of in quarter decreased first the Products first Sales to products XX% decreased sale decreased compared compared the XX% and quarter in quarter the quarter industrial XXXX. segment in products of Sale XX%

Mining capacity, sales quarter, energy in the warm extremely on unusually first and led growing usage. the which first back renewable natural impacted gas coal quarter weather cut utilities prices were a combination low by of in to

of internally. had their to XXXX, Sales were products negatively customer facility by of been the production castings a sourced from at us that quarter a which would loss in impacted otherwise of temporarily products the shutdown due fire who in first industrial have temporarily sourced

the from addition, a serving were contracts to In sales completion impacted negatively industry. of transit customer due the

the sold the X a XXXX, inclusion result Cost quarter in first primarily quarter first Precision. of million, compared increased of products Big of to the as X% $X.X or

cost sold by Precision, have the Big decreased Excluding products sales reduced X of levels. reflecting would XX%,

million, first Gross XX% The expenses reduction XXXX. strategic XXXX. to adopt sales quarter in in development relates to the leaner XX% margin decision to the the the in made to Product was first first of of this place a of vision operation or approach of as Road-IQ of took XX% $X.X Washington, decreased a to percent a in first closure of development Bellingham, the quarter, in compared which the quarter development new quarter XXXX, compared in products. quarter second the expense Velvac the

and $X.X of result the of primarily inclusion expenses million, Selling or quarter compared Precision. XXXX, as first in the X first Big XX% a the to administrative quarter increased

or X expenses by million. the from $X.X this million, in Precision, payroll XXXX. to have the contributing $X.X expenses decrease Excluding factor and Big decreased payroll-related XXXX a selling most first quarter of significant reduction first in The administrative of quarter X% and would was

million of quarter million $X.X generated $X.X the for by sheet first operating balance was cash first the and with Cash first the compared million million line of review generated $X.X flows. to of quick first approximately during was in during the the activities XXXX. approximately a quarter $X.X expenditures For XXXX. quarter quarter XXXX, of XXXX, Capital for

expenditures uncertainties, As approximately the commitments to for limit capital $X.X of we remainder of In $X to XX, was million XXXX call. we critical investment on XXXX, XXXX. return of decision point light capital the maintenance, regulatory, strategic made the as those had outstanding safety, current of March on with to the QX XXXX, immediate earnings our and that compared previously – year fiscal the projects special communicated fiscal for for million there

March of XX, equivalents $XX.X of covenants. and million, we and with and total $XX.X our approximately of in we cash were approximately XXXX, As bank cash had total debt million compliance

the for questions. turn over now call I’ll to Chris

Chris Moulton

Operator, for I’d up Thanks, John. to like questions. call open the

the have While come have in questions we queue, that for webcast. we a via do wait

you So let’s return start then with for and callers. telephone back to them, I’ll

First currently closed? question, are your customers many of still

August Vlak

temporary of really our automotive March nonautomotive of last this products. our industries the initiated some And and starting an for these varying the the on impact shutdowns obviously customers adverse our had shutdowns Well, in both week degrees year. of of in demand

and we’re week and week, to of the the will week are that. open have of our those the are And seeing and reopened back believe remaining that due customers by the that opening end customers majority the this following week. we But the after in next

Chris Moulton

to believe if Okay. finish And, I’m sorry, you like operator, for telephone instructions providing callers, that? you’re I

Operator

The answered questions. will the you. web after questions Instructions] floor Thank opened we’ve [Operator for be

Chris Moulton

impact have great. the And COVID-XX was QX? do more webcast. on via company’s Okay, in we of performance What some the questions the

John Sullivan

China. in us. ways. we were affected were to unable operations Basically, of and first to closures, some government-led Shanghai three in Dongguan those we products to due in our China. from our affected COVID-XX manufacture of source We products about ship XX% And and Yes.

Second of the last-half thing March. was in

our the began to due of COVID-XX. spread manufacturing customers trying to Some of contain close operations to

did of first businesses, of but And our then of have to finally, companies COVID-XX. we single one a shutdown in believe are that case of most our we quarter because facilities essential the

the on be that virus estimate to we net of impact first due tax. this this, to approximately our profits $XXX,XXX financial adverse quarter of operating All

Chris Moulton

then company get third sufficient have to the the via question webcast. we cash Okay. Will the through pandemic? this And have

August Vlak

do multiple Well, any we but scenarios, anticipate, which have be today, dire for on the run in available to we’ve including don’t we case. the we based outlooks year, prepared which pretty want information some that for

will agreement flow believe funds analysis, sufficient our on of credit we requirements. this and cash, to under portion cover And our that cash based credit available cash be foreseeable from revolving our operations

I any the know based you I conditions that surrounding uncertainty that assurances. However, think and can’t and COVID-XX, understand the on offer current we macroeconomic

Chris Moulton

have John, Okay. another of we question, you have And level that do in reduction XXXX. on debt hand? then

John Sullivan

Yes. X acquisition, big Big a accelerated basically, portion finance when we paid to we in had the payment. debt But we debt the order Well, on have increase that. of made down our to

we had. included we that So million about debt, ended loans $XX which of from with $XXX up million the previous

Chris Moulton

Okay. provide other the we guidance, in difficulties some still one XXXX? via question around with Gus, can – have record you world, the webcast. and even a revenues earnings expect And little a don’t but for maybe, more year the color we We then do can provide

August Vlak

is company that for the withdrawing whether uncertainty XXXX. us a record every year time experience I hard has be will Well, guidance think, their for guidance it’s environment, when the surrounding this because predict offering to year at economic of a

over to current successful that think I make we environment, the the well well both long-term. positioned necessary and position to investments be do business medium are to this businesses enough thrive to are to period that our continue navigate the well-positioned through the

Chris Moulton

great. Okay,

So, we callers any via line? have the operator, telephone do

Operator

appears [Operator phone. Instructions] there are questions It over the no

Chris Moulton

Okay. Gus?

August Vlak

in navigating we significant you. we’re value. to Look, while mitigate shareholder our the COVID-XX, deliver very remain on Thank of confident impact of to the long-term strategy focused spread the measures

of with it Precision long-term portfolio our our to performance. We includes most which work recent position continue to X optimizing and optimize acquisition, Big working businesses, on its growth for

focused current sheet, us environment, balance We maximizing the ensure short-term the are we remain as in we our very results of growth. each on as the position are of business’ maintaining carefully managing of to future to businesses, course, strength our from our generation. well both strength, where And cash especially for now

Importantly, has robust of across at end the our first remained the businesses, our quarter. backlog

actions that even and economic I period to to that businesses soon one downturn emphasize them more prolonged that we we manage economic have Our are to can believe well execute businesses resilient, they positioned confident as withstand activity have like an should our the this very we’re would rebounds. as transpire. difficult during taken

to As always, that you out ask reach have. questions and please us may any us Thank you.

Chris Moulton

I’ll that, hand operator. back to With Gus. call the Thanks, the

Operator

gentlemen. teleconference. Thank ladies We conclude you This thank you, for participation. and does today’s your

time disconnect this may your at and have great lines You a day.

Chris Moulton	Head of Corporate Development
August Vlak	President and Chief Executive Officer, Director, Member of the Pension Investment Review Committee
John Sullivan	Chief Financial Officer and Vice President

The Eastern Company (EML) 11 May 202020 Q1 Earnings call transcript