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Everything Old Is New Again
Eastern Co.
(AMEX: EML)
112 Bridge St. P.O. Box 460
Naugatuck 06770
203-729-2255
President and chief executive officer:
Leonard F. Leganza
Revenues (FYE December 31, 2001): $82.8 million
Profit Margin (FYE December 31, 2001): 4.68%
Market capitalization (4/29/02): $56.61 million
No. employees: 596
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Business New Haven
5/13/2002
By: Nancy Barnes
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The key to corporate longevity is diversification and a broad, customer base - or so the history of the Naugatuck-based Eastern Co. suggests. The 144-year-old company, which incorporated in 1912, succeeded a partnership established before the Civil War.
At first, the partnership produced a malleable iron gooseneck hoe. Today, the company manufactures and sells industrial hardware, security products and metal products. The company maintains a total of nine physical locations - five in the U.S. and one each in Canada, Taiwan, Hong Kong and Mexico.
The products in Eastern's line range from dead-bolt latches to vehicular locks for emergency and service vehicles. Its security segment manufactures electronic and mechanical locking devices for the electronics, vending and gaming industries.
For businesses such as commercial laundries and municipal parking facilities it offers “Smart Card” technology. From its metal segment comes specialty castings and mine roof support anchors.
Overwhelmingly, both its sales and manufacturing operations are focused on domestic markets. Last year, none of the company's customers - which include such household names as Maytag, Sun Microsystems and IBM - individually accounted for more than ten percent of the company's consolidated revenues. The company has paid consecutive quarterly dividends for the last 62 years.
A tumult of domestic events has impacted the company's sales. In 2001, increased demand for energy together with the high price of natural gas and the energy crisis in California led to the re-opening of domestic coal mines. That resulted in an unexpected 16 percent rise in sales for the mine roof anchors Eastern manufactures. According to President and Chief Executive Officer Leonard F. Leganza, the anchors' increased sales have continued in 2002.
On the downside, last year's weak computer market cut into sales of the security devices the company makes for the electronics market. The swift decline in travel following the September terrorist attacks cut sharply into sales of the locks the company supplies to the luggage industry as well as to industries related to travel and entertainment, such as vending and gaming.
A sluggish economy also took its toll on the manufacturer. Overall, 2001 sales totaled $82.8 million, down from $88.2 million in the preceding fiscal year. Sales were $20.3 million in the first quarter of 2002, compared to $22.7 million for the same period in 2001.
To cut costs last year the company reduced its workforce. It also ceased manufacturing in New Britain (it retains a customer-service division there), and consolidated its security lock operations at a facility in Wheeling, Ill.
Also last year, research and development expenditures amounted to one percent of the company's gross revenues or slightly less than $1 million - well in excess of the $176,000 the company spent the preceding fiscal year. The monies were directed primarily toward mechanical drop meter and “Smart Card” technologies.
Among the products the company expects to introduce this year is a smaller-sized proprietary mine roof support anchor. In addition, its security group recently completed development of a remote keyless entry system for use with tonneau covers and truck toolboxes.
From a 52-week low of 11.65 on December 19, Eastern's stock rose to a 52-week high of 16.25 on March 28. On April 29, its stock closed at 15.50, and its market capitalization stood at $56.61 million. The stock's last split - a three-for-two - took place in 1999. The common per-share dividend the company paid on March 15 was 11 cents. Its diluted earnings per basic share for the first quarter were 46 cents.
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