Q2 2024 The Eastern Co Earnings Call
Speaker Change: Greetings, welcome to the Eastern Company's second quarter fiscal year 2024 earnings call. At this time all participants are in a listen-only mode. A question and answer session will follow the formal presentation.
Unknown Executive: At this time, all participants are in listening mode.
Operator: At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Marianne Barr, Treasurer of the Eastern Company. You may begin.
Unknown Executive: A question and answer session will follow the former presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded.
Speaker Change: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Marianne Barr, Treasurer at the Eastern Company. You may begin.
Marianne Barr: I will now turn the conference over to your host, Marianne Barr, Treasurer at the Eastern Company. You may begin. Good morning, and thank you everyone for joining us this morning for a review of the Eastern Company's results. For the second quarter of 2024, with me on the call are Eastern's president and CEO, Mark Hernandez, and Eastern CFO, Nicholas Vlahos. The company issued an earnings press release yesterday after the market closed. If anyone has not yet seen the release, please visit the investor's section of the company's website, www.easterncompany.com, where you will find the release under Financial News.
Marianne Barr: Good morning, and thank you everyone for joining us this morning for a review of the Eastern Company's results for the second quarter of 2024. With me on the call are Eastern President and CEO Mark Hernandez and Eastern CFO Nicholas Vlahos.
Marianne Barr: Good morning, and thank you everyone for joining us this morning for a review of the Eastern Company's results for the second quarter of 2024. With me on the call are Eastern's President and CEO , Mark Hernandez, and Eastern's CFO , Nicholas Vlahos.
Marianne Barr: The company issued an earnings press release yesterday after the market closed. If anyone has not yet seen the release, please visit the investors section of the company's website, www.easterncompany.com, where you will find the release under financial news. Please note that some of the information you will hear during today's call 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 expenses, taxes, and business outlook.
Speaker Change: The company issued an earnings press release yesterday after the market closed. If anyone has not yet seen the release, please visit the investors section of the company's website, www.easterncompany.com, where you will find the release under financial news.
Marianne Barr: Please note that some of the information you will hear during today's call will consist of forward-looking statements about the company's future financial performance and business prospects, including, without limitation, statements regarding revenue, growth margin, operating expenses, other income and expenses, 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 review or update any forward-looking statement to reflect events or circumstances that occur after the call.
Marianne Barr: 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 review 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 the risk factors discussed in our SEC filings, including Form 10-K filed with the SEC on March 12, 2024, for the fiscal year 2023, and Form 10-Q filed with the SEC on August 6, 2024.
Speaker Change: Please note that some of the information you will hear during today's call will consist of forward-looking statements about the company's future financial performance and business prospects, including, without limitation,
Speaker Change: Statements regarding revenue, gross margin, operating expenses, other income and expenses, taxes, and business outlook.
Speaker Change: 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.
Speaker Change: We undertake no obligation to review or update any forward-looking statements to reflect events or circumstances that occur after the call.
Marianne Barr: For more information regarding these risks and uncertainties, please refer to risk factors discussed in our SEC filings, including Form 10-K filed with the SEC on March 12, 2024, for the fiscal year 2023 and Form 10-K filed with the SEC on August 6, 2024.
Speaker Change: For more information regarding these risks and uncertainties.
Speaker Change: Please refer to risk factors discussed in our SEC filings, including Form 10-K filed with the SEC on March 12, 2024, for the fiscal year 2023, and Form 10-Q filed with the SEC on August 6, 2024.
Marianne Barr: 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-gaft measures should be considered in addition to and not as a substitute for or an isolation from gap 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.
Marianne Barr: 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 for, or in 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. With that introduction, I'll turn the call over to Mark. Thank you
Speaker Change: 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.
Speaker Change: These non-GAAP measures should be considered in addition to, and not as a substitute for, or in isolation from, GAAP results.
Speaker Change: 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.
Mark Hernandez: With that introduction, I'll turn the call over to Mark. Thank you, Marianne, and good morning to those who are joining us by phone and also via the web. Over the last several months, we continue to push forward with our transformation program for Eastern. Methodically taking additional steps to enhance the company's day-to-day business operations and strapping customer relationships. Our second quarter results, which include higher sales, increased growth margins, improved net income, demonstrate some of the progress we've made. However, much remains to be done. We are especially pleased that when two of our commercial vehicle customers suddenly experience severe supply disruptions this spring.
Mark Hernandez: Thank you, Marianne, and good morning to those who are joining us by phone and also via the web. Over the last several months, we've continued to push forward with our transformation program for Eastern, methodically taking additional steps to enhance the company's day-to-day business operations and strengthen customer relationships. Our second quarter results, which include higher sales, increased gross margins, and improved net income, demonstrate some of the progress we've made. However, much remains to be done.
Speaker Change: With that introduction, I'll turn the call over to Mark.
Mark Hernandez: Thank you, Marianne, and good morning to those who are joining us by phone and also via the web.
Mark Hernandez: Over the last several months, we've continued to push forward with our transformation program for Eastern, methodically taking additional steps to enhance the company's day-to-day business operations and strengthen customer relationships.
Mark Hernandez: Our second quarter results, which include higher sales, increased gross margins, improved net income, demonstrate some of the progress we've made. However, much remains to be done.
Mark Hernandez: We are especially pleased that when two of our commercial vehicle customers suddenly experienced severe supply disruptions this spring, the actions we've taken to enhance Eastern's business agility enabled us to jump on the opportunity and respond quickly to their needs, improving our own financial results in the process. Some of you who haven't dealt with supply and logistics issues for as many years as I have might ask, what exactly do you mean by agility in this context?
Mark Hernandez: We are especially pleased that when two of our commercial vehicle customers suddenly experienced severe supply disruptions this spring.
Mark Hernandez: The actions we've taken to enhance Eastern's business agility enabled us to jump on the opportunity and respond quickly to their needs, improving our own financial results in the process.
Mark Hernandez: The actions we've taken to enhance Eastern's business agility enabled us to jump on the opportunity and respond quickly to their needs, improving our own financial results in the process.
Mark Hernandez: Justice. Some of you who haven't dealt with supply and logistics issues for as many years as I have might ask, what exactly do you mean by agility in this case? So I'd like to take a few minutes to explain the steps that we've taken to make Eastern more agile and set us apart from our competitors. And agile solutions providers, one that consistently emphasize efficient processes, empowered employees, and fast access to information so that it is nimble enough to respond smoothly to sudden changes in supply and demand. An agile approach allows the company to quickly and decisively seize new business opportunities and achieve positive outcomes.
Speaker Change: Some of you who haven't dealt with supply and logistics issues for as many years as I have might ask, what exactly do you mean by agility in this case?
Mark Hernandez: So I'd like to take a few minutes to explain the steps that we've taken to make Eastern more agile and set us apart from our competitors. An agile solutions provider is one that consistently emphasizes efficient processes, empowered employees, and fast access to information so that it is nimble enough to respond smoothly to sudden changes in supply and demand.
Speaker Change: So I'd like to take a few minutes to explain the steps that we've taken to make Eastern more agile and set us apart from our competitors.
Speaker Change: An Agile Solutions Provider is one that consistently emphasizes efficient processes, empowered employees, and fast access to information so that it is nimble enough to respond smoothly to sudden changes in supply and demand.
Mark Hernandez: An agile approach allows the company to quickly and decisively seize new business opportunities and achieve positive outcomes. At Eastern, the actions we've taken in the recent months to establish ourselves as an agile solutions provider include implementing cellular manufacturing systems to better organize our machines, parts, tools, and workstations; fabricating our own assembly lines and error proofing the applications so assembly cannot be done incorrectly.
Speaker Change: An agile approach allows the company to quickly and decisively seize new business opportunities and achieve positive outcomes.
Mark Hernandez: At Eastern, the actions we've taken in the recent months to establish ourselves as an agile solutions provider include implementing cellular manufacturing systems to better organize our machines, parts, tools, and workstations, fabricating our own assembly lines, and error-proofing the applications so assembly cannot be done incorrectly. To be clear, we're not pursuing high-price solutions, but pragmatic ones that will enable the company to work faster and be more profitable. These steps help position us to respond to our customers' unexpected needs this spring, in the process contributing to our solid 42 results. These actions are also contributing to our goal of changing the way Eastern is viewed from simply a product manufacturer into a true partner to our customers.
Speaker Change: At Eastern, the actions we've taken in the recent months to establish ourselves as an Agile Solutions Provider include implementing cellular manufacturing systems to better organize our machines, parts, tools, and workstations.
Speaker Change: Fabricating our own assembly lines and error-proofing the applications so assembly cannot be done incorrectly.
Mark Hernandez: To be clear, we're not pursuing high-priced solutions but pragmatic ones that will enable the company to work faster and be more profitable. These steps help position us to respond to our customers' unexpected needs this spring and, in the process, contribute to our Solid Quarter 2 results. These actions are also contributing to our goal of changing the way Eastern is viewed from simply a product manufacturer to a true partner to our customers.
Speaker Change: To be clear, we're not pursuing high-priced solutions, but pragmatic ones that will enable the company to work faster and be more profitable.
Speaker Change: These steps help position us to respond to our customers' unexpected needs this spring, in process, contributing to our solid quarter two results.
Speaker Change: These actions are also contributing to our goal of changing the way Eastern is viewed from simply a product manufacturer into a true partner to our customers.
Mark Hernandez: As I described during our first quarter call, our goal is for Eastern to be the company our customers want to do business with so that they actually look for opportunities to work with us and are invested in our success. The higher backlog we have now, up 43% from a year ago, demonstrates our approach to having a positive impact. Going forward, we expect our proven ability to react swiftly to our customer supply chain issues to help us tap previously untapped business opportunities. Although the situation hasn't yet normalized, as our customers look to reinforce their supply bases and avoid being tied to any one source, we believe there's an excellent opportunity for us to gain additional business.
Mark Hernandez: As I described during our first quarter call, our goal is for Eastern to be the company our customers want to do business with so that they actually look for opportunities to work with us and are invested in our success. The higher backlog we have now, up 43% from a year ago, demonstrates our approach to having a positive impact. Going forward, we expect our proven ability to react swiftly to our customer supply chain issues to help us tap previously untapped business opportunities.
Speaker Change: As I described during our first quarter call, our goal is for Eastern to be the company our customers want to do business with so that they actually look for opportunities to work with us and are invested in our success.
Speaker Change: The higher backlog we have now, up 43% from a year ago, demonstrates our approach is having a positive impact.
Speaker Change: Going forward, we expect our proven ability to react swiftly to our customer supply chain issues to help us tap previously untapped business opportunities.
Mark Hernandez: Although the situation hasn't yet normalized, as our customers look to reinforce their supply bases and avoid being tied to any one source, we believe there's an excellent opportunity for us to gain additional business. And, of course, agility isn't tied exclusively to new business opportunities. It also means being nimble and changing course within the organization to establish a stronger business foundation, adjust to the market as it changes, and recalibrate our business to serve our customers' changing needs. I've talked about this in the past.
Speaker Change: Although the situation hasn't yet normalized, as our customers look to reinforce their supply bases and avoid being tied to any one source, we believe there's an excellent opportunity for us to gain additional business.
Mark Hernandez: Of course, agility isn't tied exclusively to new business opportunities. It also means being nimble and changing course within the organization to establish a stronger business foundation, adjust the market as it changes, and recalibrate our business to service our customers' changing needs. I've talked in the past earnings calls about four pillars we're using in our value creation strategy: discipline operations, effective capital utilization, focused commercial business, and value added acquisitions. All of these contribute to the company's business agility and throughput, and although we've made a lot of progress since I joined Eastern last year, there's still work to be done and still many opportunities to use the pillars to improve the company's business performance.
Speaker Change: And of course, agility isn't tied exclusively to new business opportunities. It also means being nimble and changing course within the organization to establish stronger business foundation, adjust to market as it changes and recalibrate our business to serve, to service our customers changing needs.
Mark Hernandez: Dr. Pat's earnings calls about four pillars we're using in our value creation strategy: disciplined operations, effective capital utilization, focus commercial business, and value-added acquisitions. All of these contribute to the company's business agility and through and although we've made a lot of progress since I joined Eastern last year, there's still work to be done and still many opportunities to use the pillars to improve the company's business performance. Before we turn to that part of today's agenda, I'll turn the call over to Nick for a quick review of our quarter two financial results. Thank you.
Speaker Change: I've talked in the past.
Speaker Change: Talked to Pat's earnings calls about four pillars we're using in our value creation strategy.
Speaker Change: Discipline Operations, Effective Capital Utilization, Focused Commercial Business, and Value-Added Acquisitions. All of these contribute to the company's business agility, and although we've made a lot of progress since I joined Eastern last year,
Speaker Change: There is still work to be done and still many opportunities to use the pillars to improve companies' business performance.
Nicholas Vlahos: Before we turn to that part of today's agenda, I'll turn all over to Nick for a quick review of our quarter two financial results. Nick, thank you, Mark, and good morning everyone. As Mark said, I'll run through our results for the second quarter of 2024. For the period, net sales increased 7% to 73.2 million from 68.3 million in the 2023 period. Primarily due to increased demand for truck mirror assemblies and returnable transport packaging products, offset by lower demand for truck success.
Nick: Before we turn to that part of today's agenda, I'll turn the call over to Nick for a quick review of our quarter two financial results. Nick. Thank you, Mark. And good morning, everyone. As Mark said, I'll run through our results for the second quarter of 2024.
Nicholas Vlahos: Thank you, Mark, and good morning, everyone. As Mark said, I'll run through our results for the second quarter of 2024. For the period, net sales increased 7% to $73.2 million from $68.3 million in the 2023 period, primarily due to increased demand for truck mirror assemblies and returnable transport packaging products offset by lower demand for truck accessories. Truck mirror assembly volume was favorably impacted by additional orders of approximately five million from two key customers due to our operational flexibility and competitive advantages, as Mark has described.
Nick: For the period, net sales increased 7% to $73.2M from $68.3M in the 2023 period, primarily due to increased demand for truck mirror assemblies and returnable transport packaging products, offset by lower demand for truck accessories.
Nicholas Vlahos: Saries. Truck mirror assembly volume was favorably impacted by additional orders of approximately five million from two key customers due to our operational flexibility and competitive advantage, as Mark has described. Our backlog as of June 29th, 2024, rose 43% to 107 million compared to 75 million as of July 1st, 2023. The increase was driven by increased orders for various truck mirror assemblies and returnable transport packaging products. Gross margin as a percentage of sales in the second quarter was 25% compared to 22% in the 2023 period. The increase in margin primarily reflected improved price-cost alignment and other cost savings initiatives.
Speaker Change: Truck mirror assembly volume was favorably impacted by additional orders of approximately 5 million from two key customers due to our operational flexibility and competitive advantages as Mark has described.
Nicholas Vlahos: Our backlog as of June 29th, 2024 rose 43% to 107 million compared to 75 million as of July 1st, 2023. The increase was driven by increased orders for various truck mirror assemblies and returnable transport packaging products.
Speaker Change: Our backlog as of June 29, 2024, rose 43% to 107 million.
Speaker Change: compared to 75 million.
Speaker Change: as of July 1st, 2023. The increase was driven by increased orders for various truck mirror assemblies and returnable transport packaging products.
Nicholas Vlahos: Gross margin as a percentage of sales in the second quarter was 25% compared to 22% in the 2023 period. The increase in margin primarily reflects improved price cost alignment and other cost savings initiatives. As a percentage of net sales, product development costs were 1.8% for the second quarter of 2024 compared to 2.1% in the 2023 period; selling and administrative expenses increased 2% in the second quarter of 2024 compared to last year's period.
Speaker Change: Gross margin as a percentage of sales in the second quarter was 25% compared to 22% in the 2023 period. The increase in margin primarily reflected improved price-cost alignment and other cost savings initiatives.
Nicholas Vlahos: As a percentage in that sales, product development costs were 1.8% for the second quarter of 2024 compared to 2.1% in the 2023 period. Stealing an administrative expenses increased 2% the second quarter of 2024 compared to last year's period. The increase was primarily due to higher payroll-related and travel expenses, partially offset by lower legal and professional expenses and lower selling costs. Other income and expense in the second quarter of 2024 decreased 0.3 million compared to the 2023 period. The decrease in other income of 0.3 million was primarily driven by favorable adjustment. The final settlement of our swap agreement was Santander Bank, partially offset by expense associated with the closure of associated toolmakers in Q2 of 2023.
Speaker Change: As a percentage of net sales, product development costs were 1.8% for the second quarter of 2024, compared to 2.1% in the 2023 period.
Nicholas Vlahos: The increase was primarily due to higher payroll-related and travel expenses, partially offset by lower legal and professional expenses and lower selling costs. Other income and expense in the second quarter of 2024 decreased $0.3 million compared to the 2023 period. The decrease in other income of $0.3 million was primarily driven by a favorable adjustment to the final settlement of our swap agreement with Santander Bank, partially offset by expenses associated with the closure of associated toolmakers in Q2 of 2023.
Speaker Change: Selling and administrative expenses increased 2% the second quarter of 2024 compared to last year's period.
Speaker Change: The increase was primarily due to higher payroll-related and travel expenses, partially offset by lower legal and professional expenses and lower selling costs.
Speaker Change: Other income and expense in the second quarter of 2024 decreased 0.3 million compared to the 2023 period.
Speaker Change: The decrease in other income of $0.3 million was primarily driven by favorable adjustment to the final settlement of our swap agreement.
Speaker Change: with Santander Bank, partially offset by expense associated with the closure of Associated Toolmakers in Q2 of 2023.
Nicholas Vlahos: Net income for the second quarter of 2024 was 3.5 million, or 56 cents per diluted share, compared to net income of 1.4 million, or 22 cents per diluted share, for the 2023 period. Adjusted net income, a non-GAAP measure for the second quarter of 2024, was 3.5 million or 56 cents per diluted share compared to adjusted net income of 2.5 million or 40 cents per diluted share for the prior year period. Adjusted EBITDA, a non-GAAP measure for the second quarter of 2024, was 7.2 million compared to 5.9 million per 2023 period. At the end of the second quarter, our senior net leverage ratio was 1.2 to 1 compared to 1.4 to 1 at the end of the first quarter.
Nicholas Vlahos: Net income for the second quarter of 2024 was $3.5 million, or $0.56 per diluted share, compared to net income of $1.4 million, or $0.22 per diluted share, for the 2023 period. Adjusted net income, a non-GAAP measure, was $3.5 million, or $0.56 per diluted share, compared to adjusted net income of $2.5 million, or $0.40 per diluted share, for the prior year period. Adjusted EBITDA, a non-gap measure, for the second quarter of 2024 was $7.2 million compared to $5.9 million for the 2023 period.
Speaker Change: Net income for the second quarter of 2024 was $3.5 million or $0.56 per diluted share compared to net income of $1.4 million or $0.22 per diluted share for the 2023 period.
Speaker Change: Adjusted net income, a non-GAAP measure for the second quarter of 2024, was $3.5 million, or $0.56 per diluted share, compared to adjusted net income of $2.5 million, or $0.40 per diluted share, for the prior year period.
Speaker Change: Adjusted EBITDA, a non-GAAP measure for the second quarter of 2024, was $7.2 million compared to $5.9 million for the 2023 period.
Nicholas Vlahos: At the end of the second quarter, our senior net leverage ratio was 1.2 to 1, compared to 1.4 to 1 at the end of the first quarter. In addition, we invested $2.8 million in capital and paid dividends of $1.4 million during the first six months of 2024. We generated 10.3 million of cash from operations during the first six months of fiscal 2024 compared to 13.6 million during the first six months of 2023.
Speaker Change: At the end of the second quarter, our senior net leverage ratio was 1.2 to 1 compared to 1.4 to 1 at the end of the first quarter.
Nicholas Vlahos: In addition, we invested 2.8 million in capital and paid dividends of 1.4 million in the first six months of 2024. We generated 10.3 million of cash from operations during the first six months of fiscal 2024, compared to 13.6 million during the first six months of 2023. Cash flow from operating activities in the first six months of 2024 was lower compared to last year's period primarily due to increases in the accounts receivable and lower reductions. and inventory, partially offset by increases in accounts payable. As of June 29, 2024, inventory's totaled 56.9 million, a decrease of 2.4 million from the end of fiscal year 2023, in a decline of 0.6 million from the end of last year's second quarter.
Speaker Change: In addition, we invested $2.8 million in capital and paid dividends of $1.4 million in the first six months of 2024.
Speaker Change: We generated $10.3 million of cash from operations during the first six months of fiscal 2024 compared to $13.6 million
Nicholas Vlahos: Cash flow from operating activities in the first six months of 2024 was lower compared to last year's period primarily due to increases in accounts receivable and lower reductions, partially offset by increases in accounts payable. As of June 29, 2024, inventories totaled $56.9 million, a decrease of $2.4 million from the end of fiscal year 2023 and a decline of $0.6 million from the end of last year's second quarter. During the second quarter of 2024, we repurchased 10,000 shares of common stock under the share repurchase program our board authorized in August of 2020, bringing us to a total of approximately 60,000 shares repurchased under the buyback program. That completes my financial review. I'll now turn the call back over to Mark.
Speaker Change: during the first six months of 2023. Cash flow from operating activities in the first six months of 2024 was lower compared to last year's period, primarily due to increases in accounts receivable and lower reductions in inventory.
Nicholas Vlahos: During the second quarter of 2024, we repurchased 10,000 shares of common stock under the Share Repurchase Program, our board authorized in August of 2023, bringing us to a total of approximately 60,000 shares repurchased under the buyback program.
Speaker Change: bringing us to a total of approximately 60,000 shares repurchased under the buyback program.
Nicholas Vlahos: That completes my financial review.
Mark Hernandez: I'll now turn the call back over to Mark.
Mark Hernandez: Thanks, Nick. At this point, we'll turn to our strategies and actions for the remainder of the year. Although we have made a lot of progress in the last 18 months by tackling the highest opportunity areas first, we are pleased with our quarter two results. There is still a lot to be done in the pursuit of operational excellence and stronger customer relationships and consistent results throughout our organization. In addition, there's been some softening in the commercial vehicle market and in certain electric vehicle programs, which has been negatively impacting our demand for customer custom returnable packaging solutions.
Mark Hernandez: Thanks, Nick. At this point, let's turn to our strategies and actions for the remainder of the year. Although we made a lot of progress in the last 18 months by tackling the highest opportunity areas, first, we are pleased with our quarter two results. There's still a lot to be done in a pursuit of operational excellence and stronger customer relationships, and consistent results throughout our organization. In addition, there's been some softening in the commercial vehicle market and in certain electric vehicle programs, which has been negatively impacting our demand for customer, customer returnable packages solutions. As a result, we're facing some headwinds in the second half of 2024 that we didn't expect the beginning of the year.
Speaker Change: Thanks Nick at this point
Speaker Change: We are pleased with our quarter two results. There's still a lot to be done in the pursuit of operational excellence and stronger customer relationships and consistent results throughout our organization.
Mark Hernandez: As a result, we're facing some headwinds in the second half of 2024 that we didn't expect at the beginning of the year. Of course, there are always bumps in the road. But whatever they may be, we're determined to position Eastern to come out stronger on the other side, to help reach our basic goal of consistently delivering solid financial results and creating shareholder value. We're continuing to evaluate all our businesses for long-term performance.
Speaker Change: which has been negatively impacting our demand for customer custom returnable packages solutions as a result. We're facing some headwinds in the second half of 2024 that we didn't expect at the beginning of the year.
Mark Hernandez: Of course, there's always bumps in the road at whatever they may be. We're determined to position Eastern to come out stronger on the other side to help reach our basic goal of consistently delivering solid financial results and creating shareholder value. We're continuing to evaluate all our businesses for long-term performance. We're doing a deep dive into each operating division, looking at the profitability of their products versus the cost of goods sold, evaluating their manufacturing agility, analyzing their ability to deliver their products on time, and reviewing the accuracy of their forecasts and improving the quality of their decision-making process.
Mark Hernandez: We're doing deep dives into each operating division, looking at the profitability of their products versus the cost of goods sold, evaluating their manufacturing agility, analyzing their ability to deliver their products on time, reviewing the accuracy of their forecast, and improving the quality of their decision making process. Obviously, this process will take some time.
Mark Hernandez: Obviously, this process will take some time, so we'll give you an update in future quarters.
Mark Hernandez: So we'll give you an update in the next quarter. Another important priority for the second half of 2024 is to focus on our backlog. We want to maintain it at a higher level we've now reached while at the same time making sure production efficiency is converted to cash smoothly and quickly as possible. And it's also properly reflected in our forecasting process. A couple other points before we turn to the question and answer portion of our call. We've been gradually moving ahead with the plastics manufacturing pilot program I mentioned last quarter.
Speaker Change: and improving the quality of their decision-making process.
Mark Hernandez: Another important priority for the second half of 2024 is to focus on our backlog. We want to maintain it at a higher level we've now reached, while at the same time making sure, through production efficiency, it's converted to cash smoothly and quickly as possible and is also properly reflected in our forecasting processes.
Mark Hernandez: A couple of other points before we turn to the question and answer portion of our call, we've been gradually moving ahead with the plastics manufacturing pilot program I mentioned last quarter. As you recall, we've been planning an investment of 3.5 million in plastics manufacturing capabilities to help build the business of all three of our operating divisions. We purchased one machine in the second quarter that is now being installed, and two other machines are coming soon. So we'll be well on our way to launching this effort. Although it's a relatively modest initiative, it's a good example of the opportunities for vertical integration I talked about in our quarter one call that will help us capture cost savings in our cost of goods sold and drive gross margin improvement.
Mark Hernandez: As you recall, we've been planning an investment of 3.5 million in plastics manufacturing capabilities to help build the business of all three of our operating divisions. We purchased one machine in the second quarter that is now being installed, and two other machines are coming soon. So we'll be well on our way to launching this effort. Although it's a relatively modest initiative, it's a good example of the opportunities for vertical integration I talked about in our quarter one call that will help us capture cost savings in our cost of goods sold and drive gross margin improvement. With that overview of recent developments, we're ready to open the floor to questions. Operator.
Speaker Change: So we'll be able, we'll be well on our way to launching this effort. Although it's a relatively modest initiative, it's a good example of the opportunities for vertical integration I talked about in our quarter one call that will help us capture cost savings in our cost of goods sold and drive gross margin improvement.
Mark Hernandez: with that overview of recent developments. We're ready to open a forward to questions, operator. Thank you.
Speaker Change: With that overview of recent developments, we're ready to open the floor to questions. Operator.
Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is busy. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Unknown Executive: At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker recruitment, it may be necessary to pick up your handset before pressing the star keys. Once again, please press star one on your phone at this time if you wish to ask a question.
Speaker Change: Thank you. At this time we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, please press star 1 on your phone at this time if you wish to ask a question.
Operator: Once again, please press star 1 on your phone at this time if you wish to ask a question. And while we poll for questions, I will hand the call off to Mark Hernandez for some pre-submitted questions. Thank you.
Mark Hernandez: And while we pull for questions, I will hand the call off to Mark Hernandez for some pre-submitted questions.
Speaker Change: And while we poll for questions, I will hand the call off to Mark Hernandez for some pre-submitted questions. Mark?
Mark Hernandez: Mark. Thank you.
Mark Hernandez: Thank you. I'd like to kick off today's question and answer session with some shareholder questions we recently received that I think will be of interest to the wider investment community. And now that we've reported our Q2 results, we can address them more fully. So the first question is, how do you expect the current more uncertain economic environment to impact Eastern? And how are you adjusting your approach to the business?
Mark Hernandez: I'd like to kick off today's question and answer with some shareholder questions. We recently received that I think will be of interest to the wider investment community. And now that we've reported our queue to results, we can address more fully.
Mark Hernandez: Thank you. I'd like to kick off today's question and answer with some shareholder questions we've recently received that I think will be of interest to the wider investment community. And now that we've reported our Q2 results, we can address more fully.
Mark Hernandez: So the first question is how do you expect the current more uncertain economic environment to impact Eastern and how are you adjusting your approach to the business? As we've seen in the recent economics results of the stock market, we think that we're impacted just as much as anybody else. However, we're in the commercial vehicle industry, and I've been in the cyclical business for 30 plus years. And we think that the commercial vehicle industry provides a soft floor of how much we will go down. At the same time, our agility and our ability to address the decline or the cyclical nature of our business allows us to position ourselves to maintain profitability as the businesses cycle.
Mark Hernandez: So the first question is how do you expect the current more uncertain economic environment to impact Eastern and how are you adjusting your approach to the business?
Mark Hernandez: As we've seen in the recent economic results of the stock market, we think that, You know, we're impacted just as much as anybody else. However, we're in the commercial vehicle industry, and I've been in the cyclical business for 30 plus years. And we think that the commercial vehicle industry provides a soft floor for how much we will go down. At the same time, our agility and our ability to address the decline or the cyclical nature of our business allows us to position ourselves to maintain profitability as the businesses cycle on the commercial vehicle side.
Mark Hernandez: As we've seen in the recent economic results of the stock market, we think that
Speaker Change: we're impacted just as much as anybody else. However, we're in the commercial vehicle industry and I've been in the cyclical business for 30 plus years. And we think that the commercial vehicle industry provides a soft floor of how,
Speaker Change: how much we will go down. At the same time, our agility and our ability to address
Mark Hernandez: On the commercial vehicle side, interest rates are heavily impacting the commercial vehicle industry. However, the replacement cycle of trucks at large fleets will still continue, as these machines are getting outdated and need to be replaced going forward. So we'll be positioned to take advantage of that.
Mark Hernandez: You know, interest rates are heavily impacting the commercial vehicle industry. However, the replacement cycle of trucks at large fleets will still continue as these are machines that are getting outdated and need to be replaced going forward. So we'll be positioned to take advantage of that.
Speaker Change: On the commercial vehicle side, you know, interest rates are heavily impacting the commercial vehicle industry. However, the replacement cycle of trucks at large fleets will still continue as these machines are getting outdated and need to be replaced going forward. So we'll be positioned to take advantage of that.
Mark Hernandez: The second question we've been getting relates to the direction of the commercial vehicle industry for how long do you think electrification can be pushed out and why is this happening? Well, we've seen in the automotive and in the truck business that electrification is being pushed out. I have the fortunate knowledge of being an engineer and working on propulsion systems for my whole career, and that the technology of what's being produced today is we're not ready for it on the infrastructure side as well as for the larger trucks that go along distances. We'll be looking forward to participating in that going forward.
Mark Hernandez: The second question we've been getting relates to the direction of the commercial vehicle industry. For how long do you think electrification can be pushed out, and why is this happening? Well, we've seen in the automotive and the truck business that electrification is being pushed out. I have the fortunate knowledge of being an engineer and working on propulsion systems for pretty much my whole career, and that the technology of what's being produced today is we're not ready for it on the infrastructure side, as well as for the larger trucks that go long distances. And we'll be, you know, We'll be looking forward to participating in that going forward.
Speaker Change: The second question we've been getting relates to the direction of the commercial vehicle industry. For how long do you think electrification can be pushed out and why is this happening?
Speaker Change: Well, we've seen in the automotive and the truck business that electrification is being pushed out.
Speaker Change: and that the technology of what's being produced today is, we're not ready for it on the infrastructure side, as well as for the larger trucks that go long distances and will be, you know,
Mark Hernandez: And we see this in some of our divisions and how we position ourselves in returnable packaging solutions with lighter solutions, lighter products that we're working confidentially with one of our largest customers to improve the weight load of a trailer coming in, which saves them money on inbound logistics, as well as participating in battery cell packaging solutions so that, you know, as the cell manufacturers produce batteries, we participate in that. Full electric vehicles take a lot of batteries, and that's getting pushed out. However, there's a shift to hybrid electric, which has a battery solution, albeit smaller than the current 100% fully electric version that we will be participating in going forward.
Mark Hernandez: And we see this in some of our divisions and how we position ourselves in returnable packaging solutions with lighter solutions, lighter products that we're working confidentially with one of our largest customers to improve the weight load of a trailer coming in, which saves them money on inbound logistics, as well as participating in battery cell packaging solutions so that as the cell manufacturers produce batteries, that we participate in that. Full electric vehicles take a lot of batteries, and that's getting pushed out. However, there's a shift to hybrid electric, which has a battery solution, albeit smaller than the current 100% fully electric version that we will be participating in going forward.
Speaker Change: We'll be looking forward to participate in that going forward, and we see this in some of our divisions and how we position ourselves in returnable packaging solutions with lighter solutions, lighter products that we're working on.
Speaker Change: You know, confidentially with with one of our largest customers to improve the the weight load of a trailer coming in, which saves them money on inbound logistics, as well as participating in battery cell packaging solutions. So that as the cell manufacturers produce batteries that we participate in that.
Speaker Change: Full electric vehicles take a lot of batteries and that's getting pushed out. However, there's a shift to hybrid electric, which has a battery solution, albeit smaller than the current 100% fully electric version that we will be participating going forward.
Mark Hernandez: With that, we have one question coming in online, and the question was, what was the debt reduction for the second quarter? The debt reduction for the second quarter was $750,000.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00.00 We're focused on achieving consistent earnings and profitability quarter over quarter and year over year even within cyclical markets and in more uncertainty economic environment. Fortunately, we're continuing to move forward with our action plans, efficiency efforts, and discipline operational execution in the second half of 2024. We're staying deliberate in our strategy for Eastern and believe we are well positioned both to service our current customers and grow our businesses.
Speaker Change: With that,
Nicholas Vlahos: So we have one question coming in online, and the question was, what was the debt reduction for the second quarter? The debt reduction for the second quarter was $750,000. It's our normal scheduled debt reduction for the quarter.
Operator: All right, do we have any other questions, operator?
Mark Hernandez: There were no questions from the lines at this time. I would now like to hand the call back to Mark Hernandez for closing remarks.
Speaker Change: Do we have any other questions, operator?
Speaker Change: There were no questions from the lines at this time.
Speaker Change: I would now like to hand the call back to Mark Hernandez for closing remarks.
Mark Hernandez: Thank you for your time today. As you know, we're focused on achieving consistent earnings and profitability quarter over quarter and year over year, even within cyclical markets and a more uncertain economic environment. Importantly, we're continuing to move forward with our action plans, efficiency efforts, and disciplined operational execution in the second half of 2024. We're staying deliberate in our strategy for Eastern and believe we are well positioned, both to serve our current customers and grow our business. We look forward to giving you an update in November. In the meantime, if you have any additional questions or need additional information, please feel free to reach out to us.
Mark Hernandez: Thank you for your time today. As you know, we're focused on achieving consistent earnings and profitability quarter over quarter and year over year, even within cyclical markets and a more uncertain economic environment.
Mark Hernandez: Reportedly, we're continuing to move forward with our action plans, efficiency efforts, and discipline, operational execution in the second half of 2024. We're staying deliberate in our strategy for Eastern and believe we are well positioned.
Mark Hernandez: We look forward to giving you an update in November. In the meantime, if you need additional information, please feel free to reach out to us. Thank you.
Mark Hernandez: both to service our current customers and grow our businesses.
Mark Hernandez: If you need additional information, please feel free to reach out to us.
Operator: Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.
Unknown Executive: This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation. Thank you.
Mark Hernandez: Thank you.
Speaker Change: Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.