EASTERN CO (EML) Business

ITEM 1 BUSINESS

General Development of Business

The Eastern Company was incorporated under the laws of the State of Connecticut in October 1912, succeeding a co-partnership established in October 1858. The businesses of the Company design, manufacture and sell unique engineered solutions for industrial markets.

Today, the Company maintains fourteen physical locations across North America and Asia.

Recent Developments

In the third quarter of 2024, the Company decided to sell Big 3 Mold and determined that the Big 3 Mold business met the criteria to be held for sale and that the assets held for sale qualified for discontinued operations. As such, the financial results of the Big 3 Mold business are reflected in our consolidated statements of income as discontinued operations for all periods presented. Additionally, current and non-current assets and liabilities of discontinued operations are reflected in the consolidated balance sheets for all periods presented.  On April 30, 2025, the Company sold the equipment, workforce and customer list of the ISBM division of Big 3 Mold.  ISBM, which is located in Centralia, Illinois, is an injection stretch blow mold toolmaker.  As of January 3, 2026, the other divisions of Big 3 Mold have been reclassified to continuing operations.

Description of Business

The Eastern Company manages industrial businesses that design, manufacture and sell unique engineered solutions to industrial markets. We believe Eastern’s businesses operate in industries with long-term macroeconomic growth opportunities.

Eastern manages the financial, operational, and strategic performance of its businesses to increase cash generation, operating earnings, and long-term shareholder value. Among other things, Eastern monitors the financial and operational performance of each of its businesses and instills consistent financial discipline. Eastern’s management analyzes and pursues prudent organic growth strategies and works to execute attractive external growth and acquisition opportunities.

In addition, the Company seeks to recruit and retain talented managers to operate its businesses. We look for leaders who are accountable, maintain cost discipline, act quickly, and build strong followership.

The Eastern Company has one reportable segment: Engineered Solutions. The Engineered Solutions segment provides engineered solutions to support our customers’ needs primarily in the commercial transportation and logistics markets. The Chief Operating Decision Maker (CODM), who is the Company’s Chief Executive Officer, uses both segment gross profit and segment profit or loss from operations before interest and income taxes to allocate resources (including employees, property, and financial or capital resources) for the Engineered Solutions segment predominantly in the annual budget and forecasting process.

Company Operations

The Engineered Solutions segment consists of Big 3 Precision, including Big 3 Precision Products Inc. (“Big 3 Products”) and Big 3 Mold, and Hallink Moulds, Inc. (“Hallink Moulds” or “Hallink”); Eberhard Manufacturing Company (“Eberhard Manufacturing”), Eastern Industrial Ltd, World Lock Company Ltd., Dongguan Reeworld Security Products Ltd., and World Security Industries (together, “Eberhard”); and Velvac Holdings Inc. (“Velvac”). These businesses design, manufacture, and market a diverse product line of custom and standard vehicular and industrial hardware, including turnkey returnable packaging solutions, access and security hardware, mirrors, and mirror-cameras.

Big 3 Products’ turnkey returnable packaging solutions are used in the assembly processes of vehicles, aircraft, and durable goods and works with leading original equipment manufacturers (“OEMs”) to design and produce custom returnable transport packaging to integrate with OEM assembly processes.

Big 3 Mold is a global leader in the design and manufacture of blow mold tools and in the production processes of plastic packaging products and packaged consumer goods. Hallink Moulds is a leader in innovative injection blow mold tooling and is a leading supplier of blow molds and change parts to the food, beverage, healthcare, and chemical industries. Hallink specializes in the design, development and manufacture of 2-step stretch blow molds, and related components for the stretch blow molding industry offering integrated turnkey solutions to its customers worldwide.

Eberhard, a global leader in the engineering and manufacturing of access and security hardware, offers a standard product line of rotary latches, compression latches, draw latches, hinges, camlocks, key switches, padlocks, and handles, among other products, as well as comprehensive development and program management services for custom electromechanical and mechanical systems designed for specific OEMs and customer applications. Eberhard’s products are found in an expansive range of applications and products globally.

Velvac is a designer and manufacturer of proprietary vision technology for OEMs and aftermarket applications, and a leading provider of aftermarket components to the heavy-duty truck market in North America. Velvac serves diverse, niche segments within the heavy- and medium-duty truck, motorhome, and bus markets.

Human Capital

We believe our success depends on the skills, experience, and industry knowledge of our key talent. As such, our management team places significant focus and attention on the attraction, development, and retention of employees, as well as ensuring our corporate culture reflects Eastern’s values. Eastern’s values and our Code of Business Conduct and Ethics guide our actions, reflect our culture, and help drive our performance. We have made and continue to make investments in training, and we have a well-established performance management process.

An engaged, innovative, skilled, and collaborative workforce is critical to our continued leadership in the design and manufacture of unique engineered solutions for industrial markets. We operate globally under policies and programs that seek to provide competitive wages, benefits, and terms of employment. We are committed to efforts to foster an inclusive work environment that supports our global workforce and to equitable compensation policies.

The health and safety of our employees is also a top priority. Our focus on the reduction of injuries and illnesses has significantly improved our safety performance. We have attained these improvements by fostering a global safety culture supported with regular training and education that includes robust systems and philosophies centered on personal responsibility and accountability. Our Board of Directors (our “Board”) has an Environmental, Health, and Safety Committee that is responsible for reviewing the overall performance of the Company’s health and safety program and making recommendations to management. There is a high level of leadership engagement, ensuring installation and maintenance of appropriate safety equipment at all our manufacturing sites worldwide combined with vigorous reviews of root causation and systemic corrective actions of any safety incidents that may occur.

Employee levels are managed to align with business demand and management believes it currently has sufficient human capital to operate its business successfully. As of January 3, 2026, we employed 1,246 employees: 612 in the United States and 634 in other countries. Of these employees, less than 15 are employed on a part-time basis.  Approximately 21% of employees in the United States are represented by collective bargaining agreements. We believe that our relations with employees, unions and works’ councils are in good standing.

General

Patent and trademark protection for the various product lines of the Company is limited, but the Company believes the current patents and trademark protection is sufficient to protect the Company’s competitive positions. Patent durations are from 1 to 20 years. No business operation is dependent on any patent, nor would the loss of any patent have any material adverse effect on the Company’s business.

Customers of the Company are broad-based by geography and by market, and sales are not highly concentrated by customer.  One customer exceeded 10% of accounts receivable for the fiscal year 2025 and one customer exceeded 10% of accounts receivable for the fiscal year 2024. Foreign sales were not significant for fiscal years 2025 and 2024.

The Company encounters competition in its business. Imports from Asia and Latin America with favorable currency exchange rates and low-cost labor have created additional pricing pressure. The Company competes successfully by offering high-quality, custom engineered products on a timely basis. To compete, the Company deploys internal engineering resources, maintains cost effective manufacturing capabilities through its wholly owned Asian subsidiaries, expands its product lines through product development and acquisitions, and maintains sufficient inventory for fast turnaround of customer orders.

The Company does not anticipate that compliance with federal, state, or local environmental laws or regulations is likely to have a material effect on the Company’s capital expenditures, earnings, or competitive position.

The Company obtains materials from nonaffiliated domestic sources, as well as from Company-affiliated and unaffiliated sources in Asia.

The Company’s continuing operations ratio of working capital (current assets less current liabilities) to sales was 28.8% in 2025 and 25.1% in 2024. Working capital includes cash held in various foreign subsidiaries. Other factors affecting working capital include our average days’ sales in accounts receivable, inventory turnover ratio, and payment of vendor accounts payable. In some cases, the Company must hold extra inventory due to extended lead time in receiving products ordered from our foreign subsidiaries to ensure the product is available for our customers. The Company continues to monitor working capital needs with the goal of reducing our ratio of working capital to sales.

Available Information

The Company makes available, free of charge through its Internet website at http://www.easterncompany.com, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.  The information posted on the Company’s website is not incorporated into this Form 10-K and is not part of this Form 10-K. The SEC maintains an internet site at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The Company’s reports filed with, or furnished to, the SEC are available on that website.