The Eastern Company (EML) 15 Mar 232022 Q4 Earnings call transcript

Greetings, and welcome to The Eastern Company's Fourth Quarter Fiscal Year 2022 Earnings Call. At this time, all participants are in a listen-only mode, and a question-and-answer session will follow the formal presentation. [Operator Instructions]

It is now my pleasure to turn the conference over to your host, Mr. Ernie Hawkins. ahead. go Please

thank and everyone joining for Good you us. morning, to

call be Speaking After CEO, the Eastern's Mark will that, questions. Hernandez; open Vlahos. and Nicholas President today CFO, and we'll for our

statements significantly discussion business forward-looking risks forward-looking financial expenses uncertainties some regarding projected occur These statements of obligation and subject revenue, are limitation, and forward-looking expenses, statements you reflect during of Please or these any note and no business to and today that company's prospects, to taxes that results the consist future after actual events to that the trends could will update the statements operating circumstances revise statements. other and will income in gross information outlook. from hear margin, call. our cause performance about We undertake without to or forward-looking differ those or including,

and our fiscal risk regarding with to uncertainties the other these refer more filings with filed SEC. XXXX, year XX-K For Form March and the SEC our risks information XX, please on in for discussed factors the

press in The addition In performance. earnings to should tab. today's from, Information directly a GAAP addition, the we results. www.easterncompany.com, A will of we believe available in comparable be reconciliation non-GAAP discuss under the website non-GAAP the at most call found These call, substitute to, Investor in measures isolation of discussed during on are and each measures the of GAAP our can useful release or during not be supplemental for measures financial considered measures measures as non-GAAP today's that Eastern's as

to Mark With that, I'll the turn for opening remarks. over call

the phone participating those morning joined who good us via on and and the have Ernie, to those web. Thanks,

and We full numbers afternoon. our fourth released quarter Form XX-K yesterday year in Eastern's XXXX

of managing community. that under Freightliner years, positioned financial industry as up the international brands. Independent manufacturing serving Eastern like trucks in have in shareholders the to myself am The our well into to the and the mostly an get vehicle Board. for companies would chain supply I operations after XX introduce those I I figures, dynamics make as especially investor on Director been I well Before commercial brands as the understand to Company,

After working invested ratios, growth. other positioned The capital, a of future thorough onshoring and for analysis and on Company operating capital, return Eastern results key solid is

greatest our they and our deliver are course, will Of that people, the asset is the results. team

areas So that performance. of key is one solid of with my operating along focus

the few degrees materials. a continued operations and review creation. focus detailed value I reflect freight cost for to of freight on XXXX of businesses our to shareholder due raw minutes take instability experienced Prior varying the year. year results, represented and long-term growth a to fluctuations on Nick's like and of of for bottlenecks our would to Each and transformation

execute to challenging continued very team in a market Our environment.

disruptions of our actions. in able increase We through raw timely costs increases recovery All businesses experienced and to supply partly freight and these costs. chain cost price offset and were material

as a the We XX.X% and active of XXXX. of with and to capital percentage management XXXX sourcing reduced chain also at ended through working sales of deliveries compared XX.X% supply late end

team In the were quality and execution EMS, to core the our Argo we us non-core focus able divest our built. allow and on capabilities XXXX underscores remaining We in have also last will business, offerings. our I to of all, leadership believe

fourth a year take on more and detailed the quarter results. now will through you commentary Nick full

call Mark, and who Thank on is everyone today. you, to morning good the

of XXXX sales and XX.X%. returnable Prices fourth contributed in new to accessories, primarily fourth and demand and in compared continuing increased growth XX% XXXX, sales net distribution X.X% products automotive quarter of for higher existing due XXXX. to when of products products from quarter the fourth sales $XX.X from fourth packaging XXXX. truck volumes quarter of operations Sales in quarter in million million improved increased $XX.X For the increased the Sales pricing. of to the

products various New mirrors, included truck latches and accessories.

$XXX.X For from year million $XXX.X from to the operations XXXX, continuing million full increased in XXXX. XX% net sales

a of the to XXXX quarter inventory of Gross XX% as higher percentage in The XX% the to and sales for a sales cost the fourth compared reflects in as percentage margin margin the XX% was XX% XXXX decrease Gross freight in XXXX. fourth compared material, combination prior-year of quarter. of write-offs. was for other year

the were flat in $X.X quarter expenses were XXXX. XXXX development to million, fourth fourth Product of the when compared quarter of

quarter compared in As to a new These fourth expenses at in and percentage to are of net the development primarily Eberhard expenses X.X% products XXXX. X.X% were related investment of sales, product Velvac. our

administrative X.X% warehouse consolidation quarter other selling expenses. and Restructuring XXXX increased fourth primarily of increased due in The fourth travel quarter in the the compared payroll increase fourth quarter increased XXXX result of when was the of payroll-related XXXX. and recognized to of to in million Eberhard. expenses expenses, were the Selling $X.X of and expenses

million Net for income the share $X.X per of per decreased million quarter from from XXXX $X.XX diluted diluted to or $X.X $X.XX in share fourth or operations continuing XXXX.

XXXX, impacted a by $X.X For related restructuring of tax income net million the was consolidation fourth Eberhard. costs to into negatively warehouse quarter of net of

$X.XX income $XX.X net share. diluted to For from or XX% decreased full per share $XX.X million or the per year $X.XX XXXX, million

of X% XXXX. the Adjusted from in EBITDA year in $XX.X million decreased to compared XXXX XXXX. operations million from fourth million the full quarter EBITDA $X.X for from Adjusted operations million $X.X continuing to quarter were for $XX.X fourth the continuing of

summary quick a highlights. and flow Finally, balance sheet cash of

to million In compared XXXX. we For benefit net XXXX, in contributed net $X.X XXXX, retirement plans. cash cash our in provided used was million defined million by $X.X operating activities $X.X activities operating to

support which cash demands capital requirements of working million. support chain to was constraints. requirements $X.X during In primarily focus to customer capital supply on used to million, XXXX, cash due management's $XX.X XXXX, current inventory additional was additional During meet used availability to was ensuring working

expect expenditures we million, were Total in and fiscal $X.X approximately $X.X of capital capital expenditures XXXX for million. XXXX

payments made of of XXXX, repayment $XX XXXX. million the In company of revolving which during a was facility $XX million, debt $XX.X credit the under drawn million the total

cash and XX, of As we million. equivalents $XX.X cash of had December

at ratio net Our XXXX. was end XXXX of X.XX from X.XX, down at the the of fiscal leverage end

With that, to call I'll Ernie for questions. over the turn

I'd see we Nick. the Thanks, like I We'll have questions to questions Operator, that then the to questions some the webcast. from questions. line. turn And for open line those first. address on

question is So, the affect our management Eastern's strategy? first how change in does overall

and Ernie. that operations. people, acquisitions. our take organic processes one, we the and improve I'll commitment to In focus our We plan to term, short systems to growth maintain on

Okay.

downturn? your likelihood the what is on an and next question, Our view economic impact of

-- not is demand know quickly ready Right customers, softening our demand conditions encouraging also see strong. change many just if We by you on demand to strong us. Industry remains so markets of We we these for by customers. end signs, but how see our Despite we their we can are and are and our any of respond began solid. backlog our monitoring demand our remain to now, fast prepare that if closely plans forecast markets.

We eliminated have all other and hiring discretionary non-essential travel, expenses.

Okay.

rates? increases system is in continued Eastern the reacting banking and question. Another the recent interest to in turmoil How

Sure.

engage reviews During with. our banks of the to we process, loan want we credit perform syndication that

minimizes outstanding our We $XX interest of of also of the operating of banks rates. an maintain by Over redundancy rising in -- interest is impact XX% covered debt agreement, million for rate interest accounts. which swap

Okay.

his how up? relevant plans getting his detail? and operational question. And Another are Mark it's in and what Can to describe immediate excellence experience more margins

direct companies, supply all like a you So, XX OEM supplier, as OEM I running they're look years our chain. sense across my as introduction, direct being vehicles. tied well And well I three -- vehicles as said some commercial if supplier, in spent as in well in and Velvac Eberhard as commercial as from to

situation. returnable racks the understand I So,

eye say, doing necessarily them manufacturing can a have My going don't to ways at that, and facts the move means we people, which forward. improve that to but us and me that with I so have in involve there's we of decisions, some numbers of on how may make taught table that keep McKinsey has time our involve our need they at are performance operating to point. that tough to is the front on forward, that would the people may deal ratios Being the but lean expert, always to we

Okay.

strategy focus is your a you can comment From perspective, question. that each growth. please on much for your forward of appears more XX,XXX-foot going on now organic Another businesses? It core your

Now that start your divestitures to good acquisitions are in complete, these wouldn't now scale time be a build to businesses? seeking

and ratios our current analysis in Along price Yes. well results. are margins holdings, cost on some and our we our are opportunity one effective with sure a increasing complete companies that business line make our each where and we with not and as of things of did came looking that the background, can our so offerings we're at was my where I within operating as with the of

good. Okay. Very

have the do further Operator, any we on Okay. line? questions

Yes, sir.

We have from with Banneton Ross ahead. Capital. a go question Please Davisson

Hey, morning. Thanks ask what down, hoping sequentially. change? kind pieces big larger on both what obviously, from more wanted and but There question. margin also gross about there prior taking led I the are I the step to for good you even detail moving of to the was some a of specifically. was could kind year, that provide

Yes.

capitalization This adjustments of we the see inventory. the of not some to inventory a to issue our increases have in adjust And our more to addition of recorded freight from completely actions. inventory that flushed QX timing material and costs that, a So, in the continue to yet. through in P&L inventory is we

quantify a or adjustment. how like Thanks. are It Okay. one-time was to And able that? willing sounds you much

right that quantify cannot We now.

its like generally, the you maybe I to successful And been materials and businesses, an guess, on year recovering Okay. changes, across different feel those albeit more has understatement. have just in do is Eastern, year-to-date, back with lag? and able stepping raw a volatile, been obviously, Reflecting

getting as deal needed probably vehicle Yes, especially we were very we In some that's, in in in we strong when we But indices recoveries. business, as a the commercial be. to industry, other something aggressive cases, (ph) our change. cost weren't cases, in [except] cyclical with

Going other make freight on will businesses. we're sold seeing sure that is of well not we're aspects forward, in forward or cost at reasonable our though, as as costs going what we and to indices covering based be looking of our indices goods increases

of about there reacting a mean, this still kind over would margin or gross historical That's was -- think business, where looking Great. do those expect quarter you around wrap you how to if I where I trying arms I'm Thanks. the in be just of rates are lower guess to gross margin much And just time? is and to feel just my just helpful. -- change sort you ahead,

back anything of timing past more get was rates. to expect than our do we year. to issues It the gross margin Yes, historical in

activity share of getting hoping lot just last the sort comment new you feel then EVs. around switching gears. And And new Obviously, a sort I -- Okay. you just seeing? as there towards your you the of are you're business what fair like was with that platforms question, sort as business of OEMs platforms? evolves could with there's do OEMs, the of

of and electrification. the participating OEMs with their we're So, development their transport

As the relevant the vehicle heavy-duty be and going is electrical drag to to more more become over-the-road very air significant. trucks space,

the bid partner their we OEMs feel to they be with So, processes over-the-road strategic to transition. with participate a I the them well develop those help we're with very vehicles. favorably positioned in the as OEMs

I thanks, Thanks, Nick. appreciate great. Well, Mark. it. Okay,

Thank you.

question go ahead. Brooks] (ph), who is an investor. We Please from have [Roger a

year, two year. to of getting and it costs like supply where restraints even should and stakeholder January back somewhat weren't to Good on in have of with this just I looked they baton you're know team wish back, it luck. normalcy, large handed morning, the this were the train best quarter was though as a previous well the But Number chain as to freight and I that stated getting Mark, regard fourth a me going shareholder the Eastern to how you of and you that questions. a be. approach getting XX as management to you wreck to completely, one, back third I'd

return to performance. cost SG&A goods have And we and they're Roger. our line as that on they've thing well Freight as head, off top we haven't of forward. XX%, costs -- recovered the means expected our our One Hello, in with our my still look, about and by -- about I sales make looking at on operating return capital. believe, for focus but is, -- going ratios invested on sure look only sold of sales

do on pieces, what either wait we're or. piece what have both. we're We the margin the are the can't to We pricing what to cost -- focus looking -- at Roger, going piece? is piece? both And is And

period So, or forward necessary to recovery going this to now we this transition things in while like cutting out all it's spending consistent of we as dig going be right do be XXXX. is going

the Now I in demand. that market know strong vehicle do still is commercial

that margins back need So, cost to and side look activities both pricing of with that we the to those so we get the business we're the starting position to already, be. where they can the

Okay.

to of that the hope, expense cleaned So and certainly second and the first I to stock follow-up much won't proud if pretty question. management, up try the I'm would with quarter I'm today answer just fourth a that on And not. of and And on Board NASDAQ. carry is Directors you be what's I'm forward side it a be hoping to trying that question. common quarter sure not everyone but I'm is of wonder not appears negative, me and could that into going somehow XXXX. that

Unfortunately, guidance, that, for don't provide that's and Roger. we future guidance future providing

Okay. hopeful and Well, luck, is, (ph) the I'm the company down today. not of that again, XX% once best [mirroring] stock just almost what XX%, is

So, this team football we by going new once you better the forward management, reports you. Thank let's and look and Nick, get again. to

Thank you.

Thank you.

further I time, queue comments no for hand it will this questions Hawkins at may have Ernie back to we As you in any have. Mr. closing

Okay.

remarks. the for I'll So, turn closing with call Mark to over that,

for this everyone, Thanks, joining morning. us

deal across products our a comfort our the We by are strength provides businesses. acceleration backlog demand pleased and and continued The of in our us great of with services all of of in Supply and quarters. chain will the future. across longer-term remainder year optimistic we aside, our coming we confidence are inflation-related the pressures businesses and sustain this that our about growth

Over last raw increasingly drastically team and our effective supply material and volatile have year, throughput. the been has at driven managing costs better pressures

Our capable optimism great what the are we are challenges for prepared a capture team sense us. is urgency well positioned of We we share ahead, delivering. to in committed, and truly to front of resilient the all and you opportunities show and of

that, With the back Mark. call I'll to hand the Thanks, operator.

Thank today's you, This gentlemen. does conclude ladies and call. conference

at time, a your this wonderful and your You thank may lines we for and have disconnect you participation. day,