The Eastern Company

Good day, ladies and gentlemen, and welcome to the second quarter fiscal year 2022 earnings call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Nicholas Vallejos, Vice President of Finance, Treasurer, and Secretary. Sir, the floor is yours.

Thank you. Good morning and thank you everyone for joining us. Speaking today will be Eastern's President and CEO, Gus Black, and our CFO, Peter O'Hara. After that, we'll open the call for questions. Please note that some of the information you will hear during our discussion today will consist of forward-looking statements about the company's future financial performance and business prospects, including, without limitation, statements regarding revenue, gross margin, operating expenses, other income and expense, taxes, and business outlook. These forward looking statements are subject to risks and uncertainties that could cause actual results or trends to differ significantly from those projected in these forward looking statements. We undertake no obligation to revise or update any forward looking statements to reflect events or circumstances that occur after the call. For more information regarding these risks and uncertainties, please refer to risk factors discussed in our Form 10-K for the fiscal year filed with the SEC on March 5, 2022, and any other filings with the SEC. In addition, during today's call, we will discuss non-GAAP financial measures that we believe are useful as supplemental measures of Eastern's performance. These non-GAAP measures should be considered in addition to and not as a substitute or an isolation from GAAP results. A reconciliation of each of the non-GAAP measures discussed during today's call to the most directly comparable GAAP measure can be found in the earnings press release available on our website at www.easterncompany.com under the Investor Information tab. With that, I'll turn the call over to Gus for opening remarks.

Thanks, Nick. And good morning to those who have joined us on the phone and those participating via the web. We released Eastern's second quarter numbers on our Forum 10Q yesterday afternoon. And before Peter reviews the detailed results with you, I'd like to take a few minutes to reflect on the quarter. This was another strong quarter for Eastern with solid revenue growth. Net sales from continuing operations grew to 69.5 million in the second quarter of 2022. That's an increase of 14% over the second quarter of 2021. And it's another quarterly sales record this year over Eastern's 164-year history. Customer orders were strong, and importantly, our backlog at the end of the second quarter was 82.8 million, stable from where it stood at the end of the second quarter of last year as well as the beginning of 2022. Strong backlog positions as well for the coming quarters. Sales growth underscores effective execution by each of our businesses to benefit from favorable demand trends across our core markets. For example, our Big Three precision team remains well positioned for the anticipated growth in returnable packaging over the remainder of this year and beyond as the pace of new vehicle launches accelerates. Sales from our returnable transport packaging products grew nearly 47% in the quarter compared to the prior year. At the same time, sales of our recently launched truck mirror programs continue to gain momentum as truck builds for these programs ramp up. According to FDR Transportation Intelligence, demand for new Class A trucks is expected to remain robust into 2023. Now, while raw material cost increases began to moderate for certain key commodities in the second quarter, we continue to operate at a much higher material cost structure than in prior years. We also still experience ongoing labor shortages and supply chain constraints. As such, we remain focused on the need for price adjustments across all of our businesses, most of which took effect towards the latter half of the second quarter and in the beginning of the third quarter of 2022. We expect to see the ongoing benefits of these actions, and we'll start to take more full impact in the third quarter. We have clearly sustained a momentum from last year with strong sales, a healthy pipeline, and growing end markets. These results reflect solid execution by our teams, and we're well positioned to finish 2022 in record territory. That said, we're not ignoring the macroeconomic warning signs that are out there. Global inflationary pressures and the reaction of the central banks across the world may trigger a natural cyclical contraction, and we will be prepared. For example, we're focusing our efforts on inventory reduction opportunities. Inventory, as you know, increased in part for a couple of reasons, including protracted supply chains from China and a desire to protect sales during the pandemic and aftershocks with greater safety stocks, and general inflationary cost increases that are also capitalized when the product remains on hand. All that said, we're looking for every opportunity to reduce inventory and have two focus teams at our Velvac and Everhart operation, the largest consumers of our inventory due to the structure of our business, to review each of their overall supply chains for opportunities. At the same time, we're establishing very specific plans at each of our businesses for operating cost reductions should we see certain factors change in a market. At this time, our order intake and backlog across most of our businesses do not suggest the need to deploy these plans on a company-wide basis, but we're going to remain vigilant and ready for such a scenario. Finally, I think it's important to stress that our balance sheet remains solid. Our liquidity continues to improve. demonstrated by a very strong current ratio of 3.0 times for the second quarter of 2022. We were also able to deploy capital in order to repurchase over 29,000 shares of common stock in a quarter. Moreover, we believe that we're prepared for a rising interest rate environment with over 50% of our term debt locked in at fixed interest rates through an interest rate swap agreement. With that, I'll hand it over to Peter to take you through the detailed commentary on the second quarter results.