The Eastern Company reported its second-quarter 2025 financial results, with net income of $3.4 million, or $0.56 per diluted share. Net sales for the quarter decreased by 3% to $70.2 million compared to the prior year, primarily due to a $3.5 million decline in truck mirror assembly sales. The company is navigating macroeconomic headwinds in its key heavy truck and automotive markets.
Gross margin as a percentage of sales compressed to 23.3% in Q2 2025, down from 25.4% in Q2 2024. This was largely attributed to increased raw material costs during a transition to in-house sourcing on a significant mirror project. Selling, general and administrative expenses increased by $1.0 million, including $1.8 million in restructuring charges.
Despite these pressures, the company's aggressive tariff management, particularly at Velvac and Eberhard, has been effective. Most tariffs on China-sourced products, totaling $2.4 million in Q2 2025 and $3.0 million in H1 2025, were recovered through price increases, neutralizing their impact on the P&L. The company maintains a senior net leverage ratio of 1.32x and $50 million in available revolving credit as of June 28, 2025.
Net cash provided by operating activities in H1 2025 was $1.9 million, lower than $11.2 million in H1 2024, due to changes in receivables and inventory. Capital allocation priorities included $1.6 million in property, plant, and equipment investments and $1.35 million in dividend payments in H1 2025. Management anticipates a recovery in heavy truck and automotive markets in the coming months and quarters, with Eberhard and Velvac positioned for growth in 2025.
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