What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-03-11 compared with 2024-03-12 · 268 added, 152 removed, 935 unchanged (31% of the section changed)

13 unchanged sentences

Prepaid expenses and other assets

Current assets held for sale

Total Current Assets

9 unchanged sentences

Right of use assets

Long-term assets held for sale

Total Other Assets

10 unchanged sentences

Current portion of long-term debt

Other current liabilities

Current liabilities held for sale

Total Current Liabilities

5 unchanged sentences

Accrued pension cost

Long-term liabilities held for sale

Total Liabilities

18 unchanged sentences

( 2,276,590 )

Unrealized gain on interest rate swap, net of tax

Unrealized loss on foreign currency swap, net of tax

Unrecognized net pension and postretirement benefit costs, net of tax

22 unchanged sentences

( 39,146,727 )

Restructuring costs

Operating profit

8 unchanged sentences

Discontinued Operations (see note 2)

Gain from operations of discontinued units

Gain (loss) on sale of businesses

Income tax (expense) benefit

Net gain (loss) on discontinued operations

Loss from operations of discontinued units

$ ( 2,821,898 )

$ ( 4,091,155 )

Loss on classification as held for sale

( 23,087,775 )

Income tax benefit

Net loss on discontinued operations

$ ( 21,744,741 )

$ ( 3,195,349 )

Net (loss) income

$ ( 8,529,217 )

Earnings per share from continuing operations:

Gain (loss) per share from discontinued operations:

Total earnings per share:

Loss per share from discontinued operations:

Total (loss) earnings per share:

Cash dividends per share:

2 unchanged sentences

Consolidated Statements of Comprehensive Income

Net (loss) income

$ ( 8,529,217 )

Other comprehensive income:

1 unchanged sentence

( 1,409,991 )

Change in fair value of foreign currency swap

Change in fair value of interest rate swap, net of tax cost of:

$(426,659) in 2023 and $531,425 in 2022

$(426,659) in 2023

( 1,449,754 )

2 unchanged sentences

Total other comprehensive income

Comprehensive income

Comprehensive (loss) income

$ ( 7,493,212 )

See accompanying notes.

4 unchanged sentences

Income (Loss)

Balances at January 1, 2022

Balances at December 31, 2022

( 2,834,445 )

7 unchanged sentences

Currency translation adjustment

Change in fair value of interest rate swap

( 1,449,754 )

Change in fair value of interest rate swap

Change in pension and other postretirement benefit costs, net of tax

1 unchanged sentence

Treasury Stock Purchase

( 1,637,071 )

Issuance of SARS

Issuance of stock awards, net

Issuance of Common Stock for directors' fees

5 unchanged sentences

$ 132,480,584

( 8,529,217 )

Cash dividends declared, $0.44 per share

( 2,730,281 )

Currency translation adjustment

Change in fair value of interest rate swap

( 1,409,991 )

Change in fair value of foreign currency swap

Change in pension and other postretirement benefit costs, net of tax

1 unchanged sentence

Treasury Stock Purchase

( 3,057,842 )

Issuance of stock awards, net

9 unchanged sentences

Consolidated Statements of Cash Flows

December 30, 2023

December 31, 2022

Operating Activities

Gain from discontinued operations

Net (loss) income

$ ( 8,529,217 )

Loss from discontinued operations

( 21,744,741 )

( 3,195,349 )

Income from continuing operations

4 unchanged sentences

( 3,114,396 )

Change in operating lease liability

Unrecognized pension and postretirement benefits

( 1,613,436 )

Loss (gain) on sale of equipment and other assets

Loss on sale of equipment and other assets

Provision for doubtful accounts

2 unchanged sentences

( 4,700,137 )

( 3,047,762 )

Changes in operating assets and liabilities:

1 unchanged sentence

( 1,322,130 )

( 5,298,977 )

Prepaid expenses and other

3 unchanged sentences

Accrued compensation

Change in operating lease liability

Other accrued expenses

4 unchanged sentences

Business acquisition

Issuance of notes receivable

Payments received from notes receivable

Proceeds from sale of businesses

Proceeds from sale of building and equipment

2 unchanged sentences

( 5,544,914 )

Net cash (used in) provided by investing activities

Net cash used in investing activities

( 7,888,050 )

( 4,641,379 )

Financing Activities

Proceeds from issuance of long-term debt and notes payable

Proceeds from short term borrowings (revolver)

Principal payments on short-term borrowings (revolver)

( 1,750,000 )

Proceeds from new long-term debt refinancing

13 unchanged sentences

Cash provided by operating activities

Cash used in investing activities

Cash provided by discontinued operations

7 unchanged sentences

Right of use asset

( 2,883,273 )

Lease liability

( 4,981,696 )

¹ includes cash from assets held for sale of $0.8 million as of December 28, 2024 and $0.3 million as of December 30, 2023

See accompanying notes

11 unchanged sentences

The Engineered Solutions segment provides engineered solutions to support our customer’s needs primarily in the commercial transportation and logistics markets.

The Chief Operating Decision Maker (CODM) uses both segment gross profit and segment profit or loss from operations before interest and income taxes to allocate resources (including employees, property, and financial or capital resources) for the Engineered Solutions segment predominantly in the annual budget and forecasting process.

The Chief Operating Decision Maker (CODM), who is the Company’s Chief Executive Officer, uses both segment gross profit and segment profit or loss from operations before interest and income taxes to allocate resources (including employees, property, and financial or capital resources) for the Engineered Solutions segment predominantly in the annual budget and forecasting process.

Company Operations

3 unchanged sentences

(“Hallink Moulds”);

Eberhard Manufacturing Company (“Eberhard Manufacturing”), Eberhard Hardware Manufacturing Ltd.

(“Eberhard Hardware”), Eastern Industrial Ltd, World Lock Company Ltd., Dongguan Reeworld Security Products Ltd., and World Security Industries (together “Eberhard”);

Eberhard Manufacturing Company (“Eberhard Manufacturing”), Eastern Industrial Ltd, World Lock Company Ltd., Dongguan Reeworld Security Products Ltd., and World Security Industries (together “Eberhard”);

and Velvac Holdings Inc.

5 unchanged sentences

Hallink specializes in the design, development and manufacture of 2-step stretch blow molds, and related components for the stretch blow molding industry, offering integrated turnkey solutions to its customers worldwide.

In 2020, we combined all businesses associated with Eberhard Manufacturing and Illinois Lock Company to create Eberhard, which specializes in the engineering and manufacturing of access and security hardware.

Eberhard specializes in the engineering and manufacturing of access and security hardware.

Eberhard offers a standard product line of rotary latches, compression latches, draw latches, hinges, camlocks, key switches, padlocks, and handles among other products, as well as comprehensive development and program management services for custom electromechanical and mechanical systems designed for specific OEMs and customer applications.

6 unchanged sentences

DISCONTINUED OPERATIONS

In the second quarter of 2021, we determined that the companies previously included in our former Diversified Products segment no longer fit with our long-term strategy and initiated the process of selling the companies within the former Diversified Products segment to allow management to focus on our core capabilities and offerings.

The former Diversified Products segment met the criteria to be held for sale and furthermore, we determined that the assets held for sale qualified for discontinued operations.

As such, the financial results of Argo EMS are reflected in our condensed consolidated statements of operations as discontinued operations for 2022.

On October 19, 2022, the Company sold its Argo EMS business (“Argo”).

Argo supplied printed circuit boards and other electronic assemblies to original equipment manufacturers in various industries, including measurement systems, semiconductor equipment manufacturing, and industrial control, medical, and military products.

On November 3, 2021, the Company sold its Greenwald Industries, Inc.

division (“Greenwald”).

Greenwald, located in Chester, CT, is an OEM manufacturer offering a range of payment solutions from coin-vending products to smart card systems and payment applications.

On November 22, 2021, the Company sold its Frazer & Jones Company division (“Frazer & Jones”).

Frazer & Jones is a ductile and malleable iron foundry located in Syracuse, NY.

Eastern has exited the mining business to focus on our three core businesses.

The Eastern Company

Notes to Consolidated Financial Statements (continued)

In the third quarter of 2024, the Company decided to sell Big 3 Mold and determined that the Big 3 Mold business met the criteria to be held for sale and that the assets held for sale qualify for discontinued operations.

As such, the financial results of the Big 3 Mold business are reflected in our consolidated statements of income as discontinued operations for all periods presented.

Additionally, current and non-current assets and liabilities of discontinued operations are reflected in the consolidated balance sheets for all periods presented.

Summarized Financial Information of Discontinued Operations

2 unchanged sentences

( 11,573,847 )

( 11,416,639 )

Selling and administrative expenses

Restructuring benefit (costs)

Operating income (loss)

( 4,296,484 )

( 5,030,732 )

Operating loss

( 2,141,569 )

( 1,849,894 )

Other expense

( 23,087,775 )

( 1,539,941 )

Interest expense

Income (loss) from discontinued operations before income taxes

Income tax (expense) benefit

Gain (loss) from discontinued operations, net of tax

Loss from discontinued operations before income taxes

( 25,909,673 )

( 4,091,155 )

Income tax benefit

Loss from discontinued operations, net of tax

$ ( 21,744,741 )

$ ( 3,195,349 )

The Eastern Company

Notes to Consolidated Financial Statements (continued)

The following table represents the assets and liabilities from discontinued operations:

Accounts receivable

Prepaid expenses

Property, plant and equipment, net

Patents and other intangibles net of accumulated amortization

Right of use assets

Total assets of discontinued operations

Current assets of discontinued operations¹

Non-current assets of discontinued operations

Total assets of discontinued operations

Accounts payable

Accrued compensation and other accrued expenses

Note payable, current

Current portion of operating lease liability

Current portion of financing lease liability

Other long-term liabilities

Total liabilities of discontinued operations

Current liabilities of discontinued operations¹

Non-current liabilities of discontinued operations

Total liabilities of discontinued operations

¹ the total assets and liabilities of discontinued operations are presented as current in the December 28, 2024 consolidated balance sheet as we expect to sell the discontinued operations and collect proceeds within one year.

The Eastern Company

Notes to Consolidated Financial Statements (continued)

ACCOUNTING POLICIES

2 unchanged sentences

References in these Notes to the consolidated financial statements to “2024” or “fiscal year 2024” mean the fiscal year ended December 28, 2024, and references to “2023” or “fiscal year 2023” mean the fiscal year ended December 30, 2023.

References to the “fourth quarter of 2023” or the “fourth fiscal quarter of 2023” mean the thirteen-week period from October 1, 2023 to December 30, 2023, and references to the “fourth quarter of 2022” or the “fourth fiscal quarter of 2022” mean the thirteen-week period from October 2, 2022 to December 31, 2022.

References to the “fourth quarter of 2024” or the “fourth fiscal quarter of 2024” mean the thirteen-week period from September 29, 2024 to December 28, 2024, and references to the “fourth quarter of 2023” or the “fourth fiscal quarter of 2023” mean the thirteen-week period from October 1, 2023 to December 30, 2023.

Principles of Consolidation

2 unchanged sentences

Reclassification

Product development expense is not a cost of product sold.

Rather, these expenses are related to product development.

The reclassification of these expenses does not affect the net income reported.

Certain prior year amounts have been reclassified for consistency with the current year presentation.

These reclassifications had no effect on the reported results of operations.

Eastern Company

Notes to Consolidated Financial Statements (continued)

Use of Estimates

15 unchanged sentences

The Company reviews the collectability of its receivables on an ongoing basis considering a combination of factors.

The Company reviews potential problems, such as past due accounts, a bankruptcy filing or deterioration in the customer’s financial condition, to ensure the Company is adequately accrued for potential loss.

The Company reviews potential problems, such as past due accounts, a bankruptcy filing or deterioration in the customer’s financial condition, to ensure the Company has

Eastern Company

Notes to Consolidated Financial Statements (continued)

adequately accrued for potential loss.

Accounts are considered past due based on when payment was originally due.

14 unchanged sentences

Machinery and equipment - 3 to 10 years.

Eastern Company

Notes to Consolidated Financial Statements (continued)

Impairment of Long-Lived Assets

12 unchanged sentences

The values assigned to the key assumptions represent management’s assessment of future trends in the relevant industry and have been based on historical data from both external and internal sources.

In the third quarter of 2024 a goodwill impairment of approximately $ 12.1 million was recognized in discontinued operations when classifying the disposal group as held for sale.

See Note 2 – Discontinued Operations for further discussion of discontinued operations.

Eastern Company

Notes to Consolidated Financial Statements (continued)

The Company performed qualitative assessments of goodwill as of the end of fiscal 2024 and 2023 and determined that no impairment existed at the end of 2024 and 2023.

1 unchanged sentence

Additionally, the Company will perform an interim analysis whenever conditions warrant.

Eastern Company

Notes to Consolidated Financial Statements (continued)

Intangible Assets

4 unchanged sentences

If facts and circumstances indicate that the carrying value of the intangible assets, including definite life intangible assets, may be impaired, an evaluation is performed to determine if a write-down is required.

No impairment losses were recognized for the years ended December 30, 2023 and December 31, 2022.

In the third quarter of 2024 an impairment loss of approximately $ 4.7 million was recognized in discontinued operations when classifying the disposal group as held for sale.

See Note 2 – Discontinued Operations for further discussion of discontinued operations.

No other impairment losses were recognized for the years ended December 28, 2024 and December 30, 2023.

Fair Value of Financial Instruments

15 unchanged sentences

ROU assets and lease liabilities are recognized at lease commencement based on the present value of lease payments over the lease term.

Eastern Company

Notes to Consolidated Financial Statements (continued)

Leases with an initial term of 12 months or less are not recorded on the balance sheet;

4 unchanged sentences

All options to extend, when it is reasonably certain the option will be exercised, have been included in the calculation of the ROU asset and lease liability.

Eastern Company

Notes to Consolidated Financial Statements (continued)

Currently, the Company has 22 operating leases with a lease liability of $ 17.2 million and two finance leases with a lease liability of $ 0.9 million as of December 30, 2023.

Currently, the Company has 19 operating leases with a lease liability of $ 14.2 million and six finance leases with a lease liability of $ 3.8 million as of December 28, 2024.

The basis, terms, and conditions of the leases are determined by the individual agreements.

The leases do not contain residual value guarantees, restrictions, or covenants that could cause the Company to incur additional financial obligations.

We rent or sublease one real estate property to two unrelated third parties.

There are no related party transactions.

2 unchanged sentences

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606 when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

The Company considers several factors in determining that control transfers to the customer upon shipment of products.

10 unchanged sentences

The Company notes that it is impracticable to provide revenues from external customers for each product and service.

See Note 12 – Geographic Information regarding the Company’s revenue disaggregated by geography.

See Note 12 – Segment and Geographic Information regarding the Company’s revenue disaggregated by geography.

Cost of Goods Sold

1 unchanged sentence

These costs generally represent the expenses to acquire or manufacture products for sale (including an allocation of depreciation and amortization) and are primarily comprised of direct materials, direct labor, and overhead, which includes indirect labor, facility and equipment costs, inbound freight, receiving, inspection, purchasing, warehousing, and any other costs related to the purchasing, manufacturing, or preparation of a product for sale.

Shipping and Handling Costs

Shipping and handling costs are included in the cost of goods sold.

Eastern Company

Notes to Consolidated Financial Statements (continued)

Shipping and Handling Costs

Shipping and handling costs are included in the cost of goods sold.

Product Development Costs

7 unchanged sentences

Stock - Based Compensation

The Company accounts for its stock-based awards in accordance with ASC 718-10, Compensation, which requires a fair value measurement and recognition of compensation expense for all share-based payment awards made to its employees and Directors, including employee stock awards and restricted stock awards.

The Company accounts for its stock-based awards in accordance with ASC 718-10, Compensation-Stock Compensation , which requires a fair value measurement and recognition of compensation expense for all share-based payment awards made to its employees and Directors, including employee stock awards and restricted stock awards.

The Company estimates the fair value of granted stock awards at the date of grant.

2 unchanged sentences

Changes in these estimates and assumptions can materially affect the determination of the fair value of stock-based compensation and consequently, the related amount recognized in the Company’s consolidated statements of operations.

Under the terms of the Director’s Fee Program, the directors receive their director’s fees in common shares of the Company.

Under the terms of the Director’s Fee Program, the directors receive their director’s fees in shares of Company common stock.

The Company and its U.S.

2 unchanged sentences

Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

The Company accounts for uncertain tax positions pursuant to the provisions of ASC 740 which clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements.

The Company accounts for uncertain tax positions pursuant to the provisions of ASC 740, Simplifying the Accounting for Income Tax es (“ASC 740”), which clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements.

These provisions detail how companies should recognize, measure, present, and disclose uncertain tax positions that have or are expected to be taken.

5 unchanged sentences

Beginning Balance

Impairment Charge

( 12,081,578 )

Foreign Exchange

1 unchanged sentence

Beginning Balance

( 1,225,226 )

Foreign Exchange

41 unchanged sentences

Currently, the commitment fee is 0.25%.

As of September 30, 2023, the Company has not borrowed any funds on the revolving commitment portion of the credit facility.

As of December 28, 2024 and December 30, 2023, the Company has borrowed $ 1,250,000 and $ 0 , respectively, on the revolving commitment portion of the credit facility.

The term loan bears interest at a variable rate based on the term secured overnight financing rate (“SOFR”), plus an adjustment of ten basis points, plus an applicable margin of 1.87 5% to 2.62 5%, depending on the Company’s senior net leverage ratio.

24 unchanged sentences

The SARs are in the form of an award with a cashless exercise price equal to the difference between the fair value of the Company’s common stock at the date of grant and the fair value as of the exercise date resulting in the issuance of the Company’s common stock.

The Company did not issue SARs in 2023 or 2022.

Stock-based compensation (income)/expense, including forfeitures, in connection with stock awards and SARs previously granted to employees was $( 74,277 ) and $ 504,694 for fiscal years 2023 and 2022, respectively.

The Company issued 53,568 and 0 SARs in 2024 and 2023, respectively.

For the period of 2024, the Company used several assumptions which included an expected term of 3 years, volatility deviation of 38.30 % and a risk-free rate of 4.51 %.

Stock-based compensation expense/(income), including forfeitures, in connection with stock awards and SARs previously granted to employees was $ 1,030,000 and $( 74,277 ) for fiscal years 2024 and 2023, respectively.

The Company used fair market value to determine the associated expense with stock awards for the 2024 and 2023 fiscal years.

As of December 28, 2024, there were 854,482 shares of common stock reserved and available for future grant under 2020 Plan.

The Eastern Company

Notes to Consolidated Financial Statements (continued)

STOCK OPTIONS AND AWARDS (continued)

The following tables set forth the outstanding SARs for the period specified:

December 30, 2023

December 31, 2022

Year Ended December 28, 2024

Year Ended December 30, 2023

Weighted - Average Exercise Price

2 unchanged sentences

Outstanding at end of period

The Eastern Company

Notes to Consolidated Financial Statements (continued)

STOCK OPTIONS AND AWARDS (continued)

SARs Outstanding and Exercisable

2 unchanged sentences

December 28, 2024

Weighted- Average Remaining Contractual Life

Weighted- Average Exercise Price

Weighted- Average Remaining Contractual

Weighted- Average Exercise

Exercisable as of

December 28, 2024

Weighted- Average Remaining Contractual Life

Weighted- Average Exercise Price

Weighted- Average Remaining Contractual

Weighted- Average Exercise

$ 20.20 - $ 28.69

12 unchanged sentences

Intangible assets

Foreign Withholding Tax

Total deferred income tax liabilities

2 unchanged sentences

( 1,587,374 )

Intangible assets

( 2,342,735 )

Allowance for doubtful accounts

7 unchanged sentences

( 1,209,583 )

( 1,110,534 )

Total deferred income tax assets

11 unchanged sentences

Total Income Statement

$ ( 26,029,224 )

$ ( 12,666,484 )

$ ( 25,909,673 )

$ ( 8,835,353 )

The provision for income taxes follows:

9 unchanged sentences

( 1,371,310 )

$ ( 4,164,932 )

$ ( 306,136 )

The Eastern Company

Notes to Consolidated Financial Statements (continued)

INCOME TAXES (continued)

A reconciliation of income taxes computed using the U.S.

2 unchanged sentences

federal statutory rate

$ ( 1,855,424 )

State income taxes, net of federal benefit

Impact of goodwill impairment charge

Impact on Foreign Repatriation Tax Reform

2 unchanged sentences

Uncertain tax positions reserve

$ ( 306,136 )

A reconciliation of income taxes computed using the U.S.

11 unchanged sentences

federal statutory rate

$ ( 5,441,031 )

State income taxes, net of federal benefit

Impact of foreign subsidiaries on effective tax rate

Impact of goodwill impairment charge

$ ( 4,164,932 )

Total income taxes paid were $ 5,166,195 in 2024 and $ 6,608,084 in 2023.

5 unchanged sentences

It is not practicable to estimate the unrecognized deferred tax liability for withholding taxes on these undistributed earnings.

The Eastern Company

Notes to Consolidated Financial Statements (continued)

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes.

The list of changes is comprehensive.

The changes include removing exceptions to incremental intraperiod tax allocation of losses and gains from different financial statement components, exceptions to the method of recognizing income taxes on interim period losses and exceptions to deferred tax liability recognition related to foreign subsidiary investments.

The changes include removing exceptions to incremental intraperiod tax allocation of losses and gains from

different financial statement components, exceptions to the method of recognizing income taxes on interim period losses and exceptions to deferred tax liability recognition related to foreign subsidiary investments.

In addition, ASU 2019-12 requires that entities recognize franchise tax based on an incremental method, requires an entity to evaluate the accounting for step-ups in the tax basis of goodwill as inside or outside of a business combination, and removes the requirement to allocate the current and deferred tax provision among entities in standalone financial statement reporting.

2 unchanged sentences

The Company adopted ASU 2019-12 in the first interim period of 2021.

The Eastern Company

Notes to Consolidated Financial Statements (continued)

INCOME TAXES (continued)

On December 14, 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures which applies to all entities subject to income taxes.

41 unchanged sentences

Lease assets obtained in exchange for new operating lease liabilities were $ 0.4 million and $ 8.5 million for the fiscal years ended December 28, 2024 and December 30, 2023, respectively.

Cash paid included in the measurement of finance lease liabilities was $ 0.1 million for the fiscal year ended December 30, 2023 which was included within the financing cash flow section of the consolidated statements of cash flows for the fiscal years ended December 30, 2023.

Cash paid included in the measurement of finance lease liabilities was $ 0.4 million and $ 0.1 million for the fiscal years ended December 28, 2024 and December 30, 2023, respectively, which were included within the financing cash flow section of the consolidated statements of cash flows for the fiscal years ended December 28, 2024 and December 30, 2023, respectively.

Total operating lease expense was $ 4.9 million and $ 4.0 million for the fiscal years ended December 28, 2024 and December 30, 2023, respectively.

Total financing lease expense was $ 0.1 million for the fiscal year ended December 30, 2023.

Total financing lease expense was $ 0.1 million and $ 0.1 million for the fiscal years ended December 28, 2024 and December 30, 2023, respectively.

The Eastern Company

Notes to Consolidated Financial Statements (continued)

LEASES (continued)

The future payments (in millions) due under non-cancelable operating and finance leases as of December 28, 2024 are as follows:

2027 and thereafter

Less effects of discounting

15 unchanged sentences

Net periodic benefit cost

$ ( 704,361 )

Service costs are reported in the cost of products sold and the other components of net periodic benefit costs are reported in other income in the consolidated statements of income.

Assumptions used to determine net periodic benefit cost for the Company’s pension benefit plans for the fiscal year indicated were as follows:

The Eastern Company

1 unchanged sentence

RETIREMENT BENEFIT PLANS (continued)

Assumptions used to determine net periodic benefit cost for the Company’s pension benefit plans for the fiscal year indicated were as follows:

Discount rate

19 unchanged sentences

Benefit obligation at beginning of year

$ 107,420,338

Change in discount rate

1 unchanged sentence

Interest cost

Plan amendment

Actuarial (gain)/loss

5 unchanged sentences

Actual return on plan assets

( 17,701,556 )

Employer contributions

37 unchanged sentences

( 2,149,183 )

( 1,612,199 )

Plan amendments

Balance at end of period

9 unchanged sentences

On December 28, 2024 and December 30, 2023, the accumulated benefit obligation for all qualified and nonqualified defined benefit pension plans was $ 75,916,060 and $ 81,862,011 , respectively.

Information for the under-funded pension plans with a projected benefit obligation and an accumulated benefit obligation in excess of plan assets:

The Eastern Company

1 unchanged sentence

RETIREMENT BENEFIT PLANS (continued)

Information for the under-funded pension plans with a projected benefit obligation and an accumulated benefit obligation in excess of plan assets:

Number of plans

14 unchanged sentences

In 2024, as in 2023, we developed each plan’s discount rate with the assistance of our actuaries by matching expected future benefit payments in each year to the corresponding spot rates from the FTSE Pension Liability Yield Curve, comprised of high quality (rated AA or better) corporate bonds.

The fair values of the Company’s pension plan assets on December 28, 2024 and December 30, 2023, utilizing the fair value hierarchy discussed in Note 3 – Accounting Policies – Fair Value of Financial Instruments , follow:

The Eastern Company

1 unchanged sentence

RETIREMENT BENEFIT PLANS (continued)

The fair values of the Company’s pension plan assets on December 30, 2023 and December 31, 2022, utilizing the fair value hierarchy discussed in Note 3 – Accounting Policies – Fair Value of Financial Instruments , follow:

December 28, 2024

9 unchanged sentences

RITC Global Listed Infrastructure Fund (g)

RITC Commodities Fund (h)

RIIFL High Yield Bond Fund (i)

RIIFL High Yield Bond Fund (h)

RITC Commodities Fund (i)

Russell Global Private Credit Fund (j)

RITC Mult-Manager Bond Fund (k)

Fixed Income:

Common/collective trust funds

Target Duration LDI Fixed Income Funds (j)

Target Duration LDI Fixed Income Funds (l)

• Russell 25 Year LDI Fixed Income Fund

• Russell 14 Year LDI Fixed Income Fund

STRIPS Fixed Income Funds (k)

STRIPS Fixed Income Funds (m)

• Russell 15 to 20 Year STRIPS Fixed Income Fund

7 unchanged sentences

The Eastern Company Common Stock

Common/collective trust funds

Russell Multi Asset Core Plus Fund (l)

RITC Russell Investments Russell 1000® Index Fund (a)

RITC Small Cap Fund (b)

RITC International Fund (c)

RITC Emerging Markets Fund (d)

RITC World Equity Fund (e)

RITC Global Real Estate Securities Fund (f)

RITC Global Listed Infrastructure Fund (g)

RIIFL High Yield Bond Fund (h)

RITC Commodities Fund (i)

Fixed Income:

Common/collective trust funds

Target Duration LDI Fixed Income Funds (j)

Target Duration LDI Fixed Income Funds (l)

• Russell 25 Year LDI Fixed Income Fund

• Russell 14 Year LDI Fixed Income Fund

STRIPS Fixed Income Funds (k)

STRIPS Fixed Income Funds (m)

• Russell 15 to 20 Year STRIPS Fixed Income Fund

41 unchanged sentences

Employs multiple managers with complementary strategies with each manager expected to take an active management approach with a ’pure play’ bias - meaning they select companies with assets that tend to be monopolistic, highly regulated, long-lived, with steady cash flows.

The RITC Commodities Fund is designed to provide the potential for long-term growth of capital and income.

It seeks to outperform the Bloomberg Commodity Index Total Return with above-average consistency over a full market cycle.

The Fund invests in commodity index-linked securities, other commodity-linked securities, derivative instruments, cash, and fixed income securities that together are intended to provide exposure to the performance of the collateralized commodity futures market.

Combines strategies with different payoffs over different phases of an economic and stock market cycle.

Multiple advisors, funds and strategies are employed to reduce style or strategy concentration risk.

The RIIFL High Yield Bond Fund seeks to provide current income and capital appreciation.

3 unchanged sentences

dollar denominated.

The Target Duration LDI Fixed Income Funds seek to outperform their respective Barclays-Russell LDI Indexes over a full market cycle.

The RITC Commodities Fund is designed to provide the potential for long-term growth of capital and income.

It seeks to outperform the Bloomberg Commodity Index Total Return with above-average consistency over a full market cycle.

Combines strategies with different payoffs over different phases of an economic and stock market cycle.

Multiple advisors, funds and strategies are employed to reduce style or strategy concentration risk.

The Global Private Credit Fund seeks to outperform the public credit markets in the long term, in an effort to provide further diversification of income streams for income-focused investors, through directly investments in a diversified portfolio of private markets funds and separately managed accounts.

The Fund is expected to target investment opportunities in private debt and related investments and to focus on opportunities are secured by cash flows as well as hard assets, which may also include equity and/or equity related securities in associated transactions.

The RITC Multi-Manager Bond Fund is designed to provide current income, and as a secondary objective, capital appreciation through a variety of diversified strategies.

It seeks to outperform the Bloomberg U.S.

Aggregate Bond Index† over an interest rate cycle.

The Fund employs multiple advisors with distinct but complementary investment styles that generally have similar universes of investable securities, but different sectors of specialization and expertise and utilize varied methods of identifying value in intermediate duration fixed income markets.

The RITC Target Duration LDI Fixed Income Funds seek to outperform their respective Barclays-Russell LDI Indexes over a full market cycle.

These Funds invest primarily in investment grade corporate bonds that closely match those found in discount curves used to value U.S.

2 unchanged sentences

Generally, for use in combination with other bond funds to gain additional credit exposure, with the goal of reducing the mismatch between a plan’s assets and liabilities.

The STRIPS (Separate Trading of Registered Interest and Principal of Securities) Funds seek to provide duration and Treasury exposure by investing in an optimized subset of the STRIPS universe with a similar duration profile as the Barclays U.S.

The RITC STRIPS (Separate Trading of Registered Interest and Principal of Securities) Funds seek to provide duration and Treasury exposure by investing in an optimized subset of the STRIPS universe with a similar duration profile as the Barclays U.S.

Treasury STRIPS 10–15 year, 15-20 year or 25+ year Index.

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This will help reduce the mismatch between a plan’s assets and liabilities.

The investment objective of the RITC (formerly Russell) Multi-Asset Core Plus Fund seeks to provide long-term growth of capital over a market cycle by offering a diversified portfolio of funds and separate accounts investing in global stock, return seeking fixed income, commodities, global real estate, and opportunistic investments.

They hold a dynamic mix of underlying Russell Investments funds and/or separate accounts.

Russell Investments is a strong proponent of disciplined strategic asset allocation and rebalancing strategies and believes that unstable movements in the market have the potential to create opportunities.

By identifying short-term mispricing and making small tactical adjustments to the Multi-Asset Core Plus Fund, they believe there is potential to enhance returns while continuing to manage risks.

The investment portfolio contains a diversified blend of common stocks, bonds, cash equivalents, and other investments, which may reflect varying rates of return.

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It is expected that, as the funded status of the plans improves, more assets will be invested in long-duration fixed income instruments.

The Eastern Company

Notes to Consolidated Financial Statements (continued)

RETIREMENT BENEFIT PLANS (continued)

The plans’ assets include 217,018 shares of the common stock of the Company having a market value of $ 5,759,658 and $ 4,774,396 on December 28, 2024 and December 30, 2023, respectively.

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Dividends received during 2024 and 2023 on the common stock of the Company were $ 95,488 and $ 95,488 , respectively.

salaried and non-union hourly employees and most employees of the Company’s Canadian subsidiaries are covered by defined contribution plans.

salaried and non-union hourly employees are covered by defined contribution plans.

The Eastern Company

Notes to Consolidated Financial Statements (continued)

Retirement Benefit Plans (continued)

The Company has a contributory savings plan under Section 401(k) of the Internal Revenue Code covering substantially all U.S.

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The non-discretionary contribution of $ 328,953 made in the twelve months ended December 30, 2023 was accrued for and expensed in the prior fiscal year.

As of December 31, 2022, the Company had accrued $ 379,090 for the non-discretionary safe harbor contribution.

This amount was expensed in 2022 and was contributed to the plan in January 2023.

Effective January 1, 2023, the non-discretionary contributions are being contributed on a weekly basis.

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Notes to Consolidated Financial Statements (continued)

GEOGRAPHIC INFORMATION

SEGMENT AND GEOGRAPHIC INFORMATION

The Company has one reportable segment, and the Chief Executive Officer is the Company’s chief operating decision maker (CODM).

The CODM uses the following reported measures to assess performance and make decisions on resource allocation throughout the Company:

Engineered Solutions Segment

$ 272,751,967

$ 258,857,380

Material cost

( 142,280,064 )

( 136,675,688 )

( 13,809,443 )

( 11,600,272 )

Other variable and fixed overhead¹

( 49,395,300 )

( 48,809,114 )

Product development expense

( 4,888,496 )

( 5,592,355 )

Selling and administrative expenses

( 42,229,660 )

( 39,146,727 )

Operating Profit

Reconciliation of operating profit

Adjustments and reconciling items

Consolidated operating profit

¹ Other variable and fixed overhead items included in segment operating profit include manufacturing salaries, indirect labor, insurance, lease expense, depreciation, and other overhead expenses.

Geographic Information:

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$ 252,039,201

The Eastern Company

Notes to Consolidated Financial Statements (continued)

RECENT ACCOUNTING PRONOUNCEMENTS

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which amends the reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

This standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

We do not expect this new standard to have a significant impact to our disclosures.

In December 2023, the FASB issued ASU No.

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Currently, the Company is not involved in any legal proceedings.

In 2016, the Company created a plan to remediate a landfill of spent foundry sand maintained at the Company’s previously owned metal casting facility in New York.

This plan was agreed to by the New York State Department of Environmental Conservation (the “NYSDEC”) on March 27, 2018.

Based on estimates provided by the Company’s environmental engineers, the anticipated cost to remediate and monitor the landfill was $ 430,000 .

The Company accrued for and expensed the entire $ 430,000 in the first quarter of 2018 and fiscal 2017.

In the fall of 2018, detailed construction drawings were prepared by an outside consultant in conjunction with informal progress reviews by the NYSDEC.

Long-term groundwater monitoring commenced in April 2019.

Verbal approval for the closure plan was received from the NYSDEC in May 2019, and written approval was received in October 2020.

Construction of the closure remedies, including improved drainage system, regrading, and installation of a low permeability cap was completed in October 2021.

A closure report and long-term maintenance plan were submitted to the NYSDEC in November 2021.

In July 2023, the Company received NYSDEC approval for the closure report and long-term maintenance plan.

The 30-year annual groundwater monitoring and site maintenance program is underway and will continue through 2048.

CONCENTRATION OF RISK

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In 2024, this customer had revenues totaling $ 35.6 million ( 12 % of Engineered Solutions segment total revenue).

In 2022, no customer had sales exceeding 10% of total Engineered Solutions total revenue.

In 2023, this customer had sales of $ 29.2 million ( 10 % of Engineered Solutions segment total revenue).

Interest Rate Risk

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See Note 6 – Debt for more information regarding the Company’s debt facility.

Currency Exchange Rate Risk

The Company’s currency exposure is concentrated in the Canadian dollar, Mexican peso, New Taiwan dollar, Chinese RMB, and Hong Kong dollar.

Because of the Company’s limited exposure to any single foreign market, any exchange gains or losses have not been material and are not expected to be material in the future.

As a result, the Company does not attempt to mitigate its foreign currency exposure through the acquisition of any speculative or leveraged financial instruments.

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

The Company incurs certain manufacturing, marketing, and selling costs in international markets in local currency.

Accordingly, earnings and cash flows are exposed to market risk from changes in foreign currency exchange rates relative to the U.S.

dollar, the Company’s reporting currency.

The Company has a program in place that is designed to mitigate the exposure to changes in foreign currency exchange rates.

The program includes the use of derivative financial instruments to minimize, for a period of time, the impact on its financial results from changes in foreign exchange rates.

The Company utilizes foreign currency forward contracts to hedge the anticipated cash flows from transactions denominated in foreign currencies, namely Mexican pesos.

This does not eliminate the impact of the volatility of foreign exchange rates.

However, because the Company generally enters into forward contracts twelve to eighteen months out, rates are fixed for a twelve-to-eighteen-month period, thereby facilitating financial planning and resource allocation.

Designated Foreign Currency Hedge Contracts

All of the Company’s designated foreign currency hedge contracts as of December 28, 2024 were cash flow hedges under ASC 815, Derivatives and Hedging (“ASC 815”).

The Company records the effective portion of any change in the fair value of designated foreign currency hedge contracts in other comprehensive income until the related third-party transaction occurs.

Once the related third-party transaction occurs, the Company reclassifies the effective portion of any related gain or loss on the designated foreign currency hedge contracts to earnings.

In the event the hedged forecasted transaction does not occur, or it becomes probable that it will not occur, the Company will reclassify the amount of any gain or loss on the related cash flow hedge to earnings at that time.

The Company had designated foreign currency hedge contracts outstanding in the contract amount of $ 9.6 million as of December 28, 2024 and $ 0.0 million as of December 30, 2023.

As of December 28, 2024 a loss of $ 0.4 million, net of tax, will be reclassified to earnings within the next twelve months.

All currency cash flow hedges outstanding as of December 28, 2024 mature within twelve months.

The Eastern Company

Notes to Consolidated Financial Statements (continued)

Fair Value of Derivative Instruments

The following table presents the effect of the Company’s derivative instruments designated as cash flow hedges under ASC 815 in its Condensed Consolidated Statements of Income for the twelve months ended December 28, 2024:

Derivative Instruments

Amount of Loss Recognized in Accumulated Other Comprehensive Income

Amount of Loss Reclassified from Accumulated Other Comprehensive Income into Earnings

Location in Condensed Consolidated Statement of Operations

Designated foreign currency hedge contracts, net of tax

$ ( 389,139 )

$ ( 459,100 )

Cost of products sold

ASC 815 requires all derivative instruments to be recognized at their fair values as either assets or liabilities on the balance sheet.

The Company determines the fair value of its derivative instruments using the framework prescribed by ASC 820, Fair Value Measurements and Disclosures , by considering the estimated amount it would receive or pay to sell or transfer these instruments at the reporting date.

Generally, the Company uses inputs that include quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities in markets that are not active;

other observable inputs for the asset or liability;

and inputs derived principally from, or corroborated by, observable market data by correlation or other means.

As of December 28, 2024, the Company has classified its derivative assets and liabilities within Level 2 of the fair value hierarchy prescribed by ASC 815, as discussed below, because these observable inputs are available for substantially the full term of its derivative instruments.

The following tables present the fair value of the Company’s derivative instruments as they appear in its Condensed Consolidated Balance Sheets as of December 28, 2024 and December 30, 2023:

Location in Condensed Consolidated Balance Sheets

As of September 28,

As of December 30,

Derivative Liabilities:

Designated foreign currency hedge contracts

Other current liabilities

Report of Independent Registered Public Accounting Firm

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The Eastern Company

Shelton, Connecticut

Naugatuck, Connecticut

Opinion on the Financial Statements

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 28, 2024 and December 30, 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 28, 2024, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 30, 2023, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 12, 2024 expressed an unqualified opinion.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 28, 2024, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 11, 2025 expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

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Impairment Assessment of Goodwill

Description of the Critical Audit Matter and the Relevant Accounts and Disclosures

Critical Audit Matter Description

As described in Notes 3 and 4 to the financial statements, the Company’s consolidated goodwill balance is $58.5 million as of December 28, 2024.

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As disclosed by management, reporting units are tested for impairment by utilizing qualitative factors that include a) macroeconomic conditions, b) market and industry conditions, c) cost factors, d) overall financial performance, e) other relevant entity-specific events, and f) events affecting a reporting unit.

Principal Considerations for the Designation of the Critical Audit Matter

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments is a critical audit matter are (i) the significant judgments and assumptions used by management when developing the qualitative factors that are part of the impairment assessment;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data