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About This
Company Founded
in 1858, the Eastern Company of Naugatuck, Connecticut,
manufactures and sells industrial hardware, custom locks and
other security products, and metal products from nine locations
in the United States, Canada, Mexico, Taiwan, and China. The
company's customers are mainly original equipment manufacturers,
distributors, and locksmiths.
Bronson Beecher Tuttle had
a genius for making things. His friend John Howard Whittemore
had a genius for figures. In the summer of 1858, when the hoe
shop of Bronson's father Eben burned to the ground, Bronson
talked his father into letting him start a malleable iron
business on the site. Together, the younger Tuttle and
Whittemore went into business on October 4, 1858, opening a
small foundry. In a single small building with a handful of
craftsmen, the co-owners pulled in annual salaries of $600, a
fair income at the time.
They succeeded because
they caught a wave. Their business--making
malleable iron castings--was a relatively new process in the
19th century. Malleable iron
vastly outperformed the more common material of the day-cast
iron. Cast iron could not
withstand a heavy blow and often broke when dropped on a
hard surface. Malleable iron withstood enormous pressures,
sustained severe and repeated shocks, resisted
corrosion, and had great flexibility in comparison to cast
iron. In the second half of the 19th century, the country's
growth demanded huge quantities of metals for wagons, saddlery
hardware, farm implements, railroads, guns, and hundreds of
other products that were made with metal parts. In the company's
early years, carriage irons and
harness trimmings comprised nearly half the business. Iron
farm implements were also a staple.
The Civil War required new
production peaks to meet the demands for war products--guns,
wagons, gun-carriages, railroad train parts, and many other
implements. After the war, the company made major sales in
castings for "steel-laid" shears, a product that would remain
its primary source of revenue for the next 50 years, and the
Naugatuck foundry was soon supplying all the chief shear-makers
in the United States.
By 1870, Tuttle and
Whittemore's initial capital investment of $10,000 had tripled
to $31,000, and the company's work force of 90 in 1870 more than
quadrupled by 1883 to 368. The business expanded by buying
malleable iron foundries in Troy, New York, and
Bridgeport and New Britain, Connecticut. Later it held
interests in plants in at least nine other cities, including one
in Denver. By 1887, capitalization reached $100,000. The company
name, The Naugatuck Malleable Iron Company, no longer fit its
expanding operations. Tuttle and Whittemore renamed it The
Eastern Malleable Iron Company.
Over the following decades, Eastern changed its product mix
with the changes in the U.S. economy. When transportation
shifted from the horse and wagon to the automobile at the turn
of the 20th century, Eastern kept right on rolling. Metals that
previously would have been crafted into buggies and railroad
cars flowed into cars and trucks instead. Eastern produced
hundreds of parts for an early car called the Maxwell.
Whittemore was still
remembered for major contributions to the center of the
company's home town of Naugatuck 144 years after Eastern's
founding. He engaged a leading architectural firm to design many
of Naugatuck's town buildings, including the Naugatuck National
Bank (1893), Salem School (1894), the Whittemore Library (1894),
the Congregational Church (1903), and Hillside School (1904),
all of which were still in use nearly a hundred years later.
Shortly after the deaths
of both owners (Tuttle in 1903; Whittemore in 1910) the company
began to struggle. Competition increased greatly. The country's
economy became much more complex. And the company had grown
overly dependent on a limited product line.
In 1928, Eastern had
several plants--three in Connecticut and one each in New York
and Delaware. A survey the next year concluded that the
company's plants produced similar products and were so close
together that they competed with each other. Company management
faced two other major problems. Many of the industries Eastern
served had moved to the Midwest, where the company had no
plants. As a consequence of these factors, sales at the
foundries had dwindled.
Management did not unite
behind the need for action until 1935. By then, the decision
makers at Eastern agreed that
drastic reforms were required as well as a strong leader to
implement these changes. They wanted someone from outside the
malleable iron industry, so he would not be bound by the iron
industry's traditional methods of operating.
All the company's problems
were not of its own doing. Hanging over Eastern and the entire
country at this time was the Great Depression. Combined with
company internal problems and industry-wide challenges, the
Depression nearly brought Eastern down.
In 1935, Lewis A. Dibble
took over the company
reins. The company board found Dibble right in Naugatuck. He
had been president of the Risdon Tool and Machine Company, an
operation he had built into one of the country's leading
producers of precision sheet brass and wire products. Dibble
acted quickly. He eliminated four of Eastern's six plants,
keeping only the Naugatuck and Wilmington, Delaware, facilities.
Skilled workmen from the closed plants were offered jobs with
the remaining operations--an unusual move in those days when the
nation was still mired in an economic depression.
Dibble used savings from
the plant closings to explore new market niches and make
promising acquisitions. In February 1936, Eastern spent about
$800,000 to buy Cleveland's Eberhard Manufacturing Company.
Eberhard, formerly one of the strongest foundries in the
Midwest, did malleable work, but it also boasted a strong line
of proprietary transportation hardware products such as locks
and hinges for truck doors. Eberhard had fallen on financial
hard times. Dibble sent Charles Brust to Cleveland to turn the
new subsidiary around.
In 1944, Eastern bought a
company founded in 1845, the Frazer & Jones malleable iron works
of Syracuse, New York. Frazer & Jones was one of the oldest
foundries in the industry and served a special market niche--the
railroad. Three years later Eastern made a third acquisition,
the Eastern Castings Corporation of
Newburgh, New York. The Newburgh facility made aluminum
castings.
By eliminating four
plants, then making these three strategic purchases, Dibble met
the goal of diversifying operations and expanding the company
geographically. These changes meant Eastern could become a
leader in heavy malleable castings, light malleable castings,
machined castings, steel castings, and aluminum castings. The
Naugatuck plant continued to lead the company. It produced a
wider variety of metals than any of the other four foundries,
plus it housed the central research laboratory and an
experimental foundry that all five plants used.
Dibble's business approach
became the company's philosophy. Eastern sought to be a
domineering factor in
niche markets rather than one of many players in larger
markets. Among his beliefs was the idea that "it is far better
for a plant to be too small than to be too large."
Combined, the five
foundries had about 2,000 employees and served some 2,800
customers. In the early 1950s, sales reached $15 million.
Eastern was considered one of the nation's dominant firms in
sheet metal production and precision wire products.
After World War II,
Eastern began moving into more modern markets. Now the chairman
of the board, Dibble, along with company president Charlie Brust,
put the firm's future under the
microscope again. Eastern was basically a casting company
with five non-competing plants with very different capabilities.
Its business was highly cyclical. Dibble and Brust led a company
pursuit for products it could call its own and at the same time
would help reduce its financial ups and downs.
Dibble and Brust studied
one of Frazer & Jones's biggest customers--the Pattin
Manufacturing Company of Marietta, Ohio. Pattin had a mine roof
support product that largely replaced timbers as a means of
preventing underground mine roof collapses. The Eastern
executives liked the product. They purchased Pattin in 1955 to
help assure Eastern's production stability and to secure a
profitable product. At about the same time, Eastern decided to
abandon the foundry jobbing business and become a manufacturer
of proprietary products, primarily in the transportation
hardware sector.
The company closed its
large Wilmington foundry in 1961 because that facility had
mainly served the railroad industry, a sector that was drying
up. To emphasize the new focus, the company changed names again.
Eastern Malleable Iron Company officially adopted the name The
Eastern Company on February 22, 1961.
A second surge of
acquisitions took place during the 1960s. In 1961, the company
spent a total of $1,084,000 to buy Wilfrid O. White & Sons, Inc.
of Boston and Thompson Materials Company of Belleville, New
Jersey. Other acquisitions that decade included Illinois Lock
Company of Wheeling, Illinois (1965); K-S Marine Products, Inc.
(1966); and Local Steel & Supply Company of Mineola, New York
(1968). Expansion into Canada came in 1968 when Eastern spent
about $1 million to build the Eber-East Products, Ltd. plant as
a subsidiary of Eberhard in Tillsonburg, Ontario.
In the 1960s, the company
faced a major decision--should it upgrade or abandon its
remaining foundries£ The foundries were old and basically used
19th-century methods. Eastern had increasing difficulty finding
workers interested in lugging heavy ladles of metal around from
its coal-fired melting furnaces. Management also worried about
pollution.
Studies showed a future in
Eastern's specialized area of the foundry business. The company
modernized its foundries in Syracuse and Naugatuck in the 1960s
at a cost of more than $3 million. It automated operations,
added labor-saving equipment, and switched to electric induction
furnaces.
The 1970s brought two more
additions. In May 1971, Eastern picked up the Digital Depth
Indicator line from Lykes Brothers, Inc. of
Clearwater, Florida. With 22,000 shares of common stock,
Eastern bought Marion Mine Service, Inc. in Marion, Illinois.
While most companies were
on buying sprees in the 1980s, Eastern slimmed down its
operations. After buying Danforth Anchors in 1969, it sold the
firm in 1983. Local Steel & Supply was sold in 1986. A year
later, Eastern sold Pattin Manufacturing Division for $6
million. That same year it unloaded Marion Mine Service. From
1940 through approximately 1988, Eastern was one of only a few
publicly-traded U.S. corporations to record an
unbroken string of paying consecutive quarterly dividends.
By the 1990s, the company
hardly resembled its early foundry-based operation. Then, in May
1990, the board approved a plan to discontinue its malleable
iron business. A year and a half later, the board voted to end
the company's high
alloy stainless steel castings business. Eastern continued
to evolve when it sold all the substantial assets of its
construction segment in August 1995.
In 1997, sluggish
performance caused a major shareholder, New York-based Millbrook
Capital Management, to try to gain a
foothold on the board of directors. The group also offered
to buy the company for $15 per share in cash or $42 million in
July of that year. Senior analyst Shirley Westcott, of the
Institutional Shareholder Services, called the company's
performance "pretty
pathetic," claiming an investor would have gotten a higher
return investing in U.S. Treasury notes. Eastern representatives
claimed the company had made a financial
turnaround and was far ahead of 1997 targets. Both the
purchase and
proxy attempts failed, but shortly afterwards the company
chief executive left and was replaced by Leonard F. Leganza.
In 2001, Eastern had three
major divisions: the industrial hardware group, security
products, and metal products. The industrial hardware group
supplied latches, locks and other security hardware to the
industrial sector, especially transportation companies. This
division's operations, headed up Eberhard, spanned Canada, the
United States, and Mexico. Sesamee Mexicana also produced
products for this division. Eberhard gear could be found in
tractor-trailer trucks, moving vans, off-road construction and
farming equipment, school buses, military vehicles, and
recreational boats. The industrial hardware group's
fasteners and closure devices were used on equipment such as
metal cabinets, machinery housings, and electronic instruments.
In 2000, about 39 percent of the company's sales and 49 percent
of its earnings came from this division.
The security products
group included the Illinois Lock Division, Greenwald Industries
Division, CCL Security Products, World Lock Company, and World
Security Industries. This group manufactured products to
safeguard property and control access. Illinois Lock made
keyed, electric switch, and high-security locks for original
equipment manufacturers (OEM's). CCL Security products included
brand-name keyless locks like Sesamee, Presto, and Huski.
Business sectors using this group's products included the
computer, electronic, vending, and gaming industries. Eastern's
security products group also supplied product to the
luggage, furniture, and laboratory equipment industries. A
mid-2000 year addition to the fold, Greenwald Industries,
produced coin accepters and metering systems used in
self-service
laundry facilities. Greenwald also offered Smart Cards for
use in parking meters and laundry facilities. This group of
Eastern's operations accounted for 36 percent of sales and 30
percent of earnings in 2000.
Frazer & Jones headed
Eastern's metal products group. Its anchoring devices for
supporting underground mine roofs had become an
industry-accepted safety standard. The Canadian, Australian, and
U.S. mining industries all used Frazer & Jones metal products.
Eastern's metal products group also produced precision,
small-size castings used by the construction and electrical
industries. In 2000, the company derived 25 percent of its sales
and 21 percent of its earnings from this group.
Based on sales, the
company's new direction seemed to work. In 1996, sales were $56
million. Sales grew four consecutive years through 2000,
reaching $88.19 million. The company focused on strengthening
and expanding its industrial hardware and security product
segments. Acquisition of Ashtabula Industrial Hardware Company,
a designer and manufacturer of door control hardware for school
and courtesy buses, gave Eastern a new market for products from
its Canadian Eberhard operation. Eberhard's product line was
expanded when Eastern acquired two latching products from Hansen
International in 2000.
Source: www.answers.com |
