Good day, ladies and gentlemen. And welcome to The Eastern Company's Fourth Quarter Fiscal Year 2019 Earnings Conference Call. [Operator Instructions] At this time, it my pleasure to turn the floor over to your host for today, Mr. Chris Moulton. Sir, the floor is yours.

Thank you. Good morning, and thank everyone for joining us today. Speaking today will be Eastern’s President and CEO, Gus Vlak; and our CFO, John Sullivan. 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. For more information regarding these risks and uncertainties, please refer to risk factors discussed in our Form 10-K filed yesterday. In addition, during today's call, we will discuss certain 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 an isolation from GAAP results. With that, I will turn the call over to Gus for opening remarks.

Thanks Chris, and good morning to those of you who have joined us on the phone and those participating via the web. We released Eastern's fourth quarter and full year numbers last Friday, and the full Form 10-K yesterday afternoon. Before John reviews the detailed results with you, I'd like to take a few minutes to reflect on our progress and take stock of where we are, especially as events are moving so fast these days. I want to emphasize that we brought 2019 to a strong close and that we are on the right track to increase shareholder value by optimizing our portfolio of businesses strengthening execution and keeping our balance sheet strong. I am pleased with Eastern's accomplishment in 2019. To call out just a few. First, our acquisition of Big 3 Precision in August was an important step towards our long-term goal of building a larger stronger company with significant presence with key customers. We completed a seamless integration of Big 3 Precision into Eastern in just a few months. And we are working with the management team to realize the full potential of this business. And we're already seeing some early synergies between Big 3 Precision and some of our other businesses. The acquisition also made a substantial contribution to our fourth quarter results. And as I forecasted last quarter, was accretive for 2019 as a whole, that's before transaction costs. Second, we've been generating strong sales from new products. Including, for example, a new hood mount truck mirror, which we launched with a leading truck OEM that addresses some functionality concerns raised by the market replacing a fixed mirror with a pivoting mirror. We also introduced a new modular toolbox latching system that will be available through dealerships and is branded as an OEM toolbox.…

Thank you, Gus. My remarks this morning will focus primarily on Eastern’s results for the fourth quarter of 2019. Our full year results are available in yesterday's 10-K filing and are also summarized in last Friday's press release. For the fourth quarter, net sales increased 21% to $68.7 million from $56.6 million a year earlier. Sales growth reflects the Big 3 acquisition, which we acquired on August 30, 2019. Sales increased in the industrial hardware segment by 46% to $49.2 million in the fourth quarter of 2019 from $33.7 million a year earlier. Excluding Big 3 Precision, sales decreased 3% due to lower sales in Class A trucks and specialty vehicles partly offset by the impact of new product launches and stronger sales to military customers. Sales in the security product segment decreased 13% compared to the fourth quarter of 2018 as late year product launches didn't completely offset lower demand for commercial launch payment products, and point of sale security products, as well as the loss of supply contracts for mechatronic padlock systems in Load N Lock [ph]. Sales in the middle product segment decreased 18% compared to sales in the fourth quarter 2018. Sales of mining products decreased 11% while sale of industrial casting products decreased 30% as compared to the fourth quarter of 2018. Mining sales were impacted by a business combination between two customers and the filing for bankruptcy protection from one of the largest coal mines in the U.S. Industrial castings were negatively affected by the loss of a customer was suffered a foundry fire in 2018 and as temporarily sourced these products from our facility. Cost of products sold in the fourth quarter of 2019 increased by $8.8 million, 21% from last year's fourth quarter. The increase was attributable to the Big 3 acquisition.…

Thank you, John. Operator, do we have any participants who have dialed-in for questions.

[Operator Instructions]

And while we wait, we do have a couple questions that come in via the webcast. So let's get to those. First question, will you continue to have onetime charges?

Well, the onetime charges are related to transactions and to restructuring costs. Right now we have no plans on restructuring costs. If we do make some small bolt-on acquisitions, that would be transaction costs. But they usually would be smaller.

Our second question, what is the impact of a downturn in Class A trucks to the business?

Well, Class A trucks is obviously an important market for us. And despite the downturn in that end market, we do believe we can continue to grow our business because we fell into many end markets. And when the Class A trucks market turns down, we have the opportunity to take advantage of growth with other customers in other markets. And at the same time we are growing our share of programs in Class A trucks. These are programs that have very long lead time. So we have ample visibility into the revenue rank up there.

And then we have a third question, what does it mean when your factory is at 60%?

That percent refers both to the percent of employees that are back at work, as well as the factory's ability to meet demand. There's a very close relationship between those two. So at the end of next week, we anticipate that approximately 25% of employees of our East China factory will have passed the 14 day quarantine period and they will be allowed to work which brings the factory percentage up from the current 60% to 85%. That's important to note that we do have other ways to meet our customers' orders. Just because our factory is operating at 60%. And we can ship out of inventory or in some cases, we've got other production options.

Okay. Operator, do we have any callers, questions?

So far, I do not have any questions from the phone line.

Okay. It appears that we have no further webcast questions. So I'd like to turn the call back to Gus for closing remarks. Thanks.

Well, thanks, everyone for joining us this morning. As you've heard, we're very carefully monitoring and responding to the impact of the coronavirus on our business. While at the same time we are steadfastly adhering to our roadmap to increase shareholder value by optimizing our portfolio of companies, enhancing execution and keeping our balance sheet strong. 2020 marks Eastern's 163rd year and our 80th consecutive year of paying quarterly dividends. And we look forward to another good year in 2020. Thanks again for joining us and your interest in The Eastern Company.

Thank you. With that, we'll turn the call back to the operator.

Thank you. Ladies and gentlemen, that does conclude today's call. We thank you for your participation. You may disconnect at this time and have a great day.