What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2026-03-03 compared with 2025-03-11 · 234 added, 199 removed, 1004 unchanged (30% of the section changed)

25 unchanged sentences

Right of use assets

Long-term assets held for sale

Total Other Assets

2 unchanged sentences

See accompanying notes.

The Eastern Company

Consolidated Balance Sheets

LIABILITIES AND SHAREHOLDERS’ EQUITY

36 unchanged sentences

( 1,437,363 )

Unrealized loss on foreign currency swap, net of tax

( 2,276,590 )

Unrealized gain (loss) on foreign currency swap, net of tax

Unrecognized net pension and postretirement benefit costs, net of tax

26 unchanged sentences

( 2,721,318 )

Other (expense) income

Other expense

Income from continuing operations before income taxes

6 unchanged sentences

$ ( 2,821,898 )

Loss on classification as held for sale

( 23,087,775 )

Income tax benefit

Net loss on discontinued operations

Gain (loss) on classification as held for sale

( 23,087,775 )

Income tax (expense) benefit

Net income (loss) on discontinued operations

$ ( 21,744,741 )

Net (loss) income

Net income (loss)

$ ( 8,529,217 )

Earnings per share from continuing operations:

Loss per share from discontinued operations:

Total (loss) earnings per share:

Earnings (loss) per share from discontinued operations:

Total earnings (loss) per share:

Cash dividends per share:

2 unchanged sentences

Consolidated Statements of Comprehensive Income

Net (loss) income

Net income (loss)

$ ( 8,529,217 )

3 unchanged sentences

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

( 1,449,754 )

Change in pension and other postretirement benefit costs, net of taxes of:

1 unchanged sentence

Total other comprehensive income

Comprehensive (loss) income

Comprehensive income (loss)

$ ( 7,493,212 )

11 unchanged sentences

$ 132,480,584

( 8,529,217 )

Cash dividends declared, $0.44 per share

2 unchanged sentences

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

6 unchanged sentences

$ 120,691,399

( 8,529,217 )

Cash dividends declared, $0.44 per share

2 unchanged sentences

Currency translation adjustment

( 1,409,991 )

Change in fair value of foreign currency swap

6 unchanged sentences

Issuance of Common Stock for directors' fees

Balances at December 28, 2024

Balances at January 3, 2026

( 3,137,521 )

9 unchanged sentences

$ ( 8,529,217 )

Loss from discontinued operations

( 21,744,741 )

Gain (loss) from discontinued operations

( 21,744,741 )

7 unchanged sentences

( 1,197,126 )

( 1,613,436 )

Loss on refinancing of credit agreement

Loss on sale of equipment and other assets

11 unchanged sentences

Accrued compensation

( 1,094,203 )

Change in operating lease liability

6 unchanged sentences

Payments received from notes receivable

Proceeds from sale of business

Proceeds from sale of building and equipment

4 unchanged sentences

( 7,888,050 )

( 4,641,379 )

Financing Activities

2 unchanged sentences

( 1,750,000 )

Financing fees paid

Proceeds from new long-term debt refinancing

5 unchanged sentences

( 3,729,468 )

( 3,057,841 )

Dividends paid

16 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

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

See accompanying notes

37 unchanged sentences

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

On April 30, 2025, the Company sold the equipment, workforce and customer list of the ISBM division of Big 3 Mold.

ISBM, which is located in Centralia, Illinois, is an injection stretch blow mold toolmaker.

From April 30, 2025, the assets and liabilities and results of operations have been included in continuing operations.

Summarized Financial Information of Discontinued Operations

The following table represents income from discontinued operations, net of tax:

The following table represents income (loss) from discontinued operations, net of tax:

Cost of products sold

3 unchanged sentences

( 4,296,484 )

( 5,030,732 )

Operating loss

( 2,141,569 )

( 1,849,894 )

Other expense

( 23,087,775 )

Other income (expense)

( 23,087,775 )

Interest expense

Loss from discontinued operations before income taxes

( 25,909,673 )

( 4,091,155 )

Income tax benefit

Loss from discontinued operations, net of tax

Income (Loss) from discontinued operations before income taxes

( 25,909,673 )

Income tax (expense) benefit

Income (Loss) from discontinued operations, net of tax

$ ( 21,744,741 )

4 unchanged sentences

Prepaid expenses

Property, plant and equipment, net

Patents and other intangibles net of accumulated amortization

Right of use assets

1 unchanged sentence

Current assets of discontinued operations¹

Non-current assets of discontinued operations

Total assets of discontinued operations

1 unchanged sentence

Accrued compensation and other accrued expenses

Note payable, current

Current portion of operating lease liability

3 unchanged sentences

Current liabilities of discontinued operations¹

Non-current liabilities of discontinued operations

Total liabilities of discontinued operations

4 unchanged sentences

The Company’s year ends on the Saturday nearest to December 31.

Based on this policy, fiscal years 2024 and 2023 were each comprised of 52 weeks.

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 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.

Based on this policy, fiscal year 2025 was comprised of 53 weeks and fiscal year 2024 was comprised of 52 weeks.

References in these Notes to the consolidated financial statements to “2025” or “fiscal year 2025” mean the fiscal year ended January 3.

2026, and references to “2024” or “fiscal year 2024” mean the fiscal year ended December 28, 2024.

References to the “fourth quarter of 2025” or the “fourth fiscal quarter of 2025” mean the fourteen-week period from September 28, 2025 to January 3, 2026, and 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.

Principles of Consolidation

7 unchanged sentences

GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period.

On an ongoing basis the Company evaluates its estimates, including those related to product returns, bad debts, carrying value of inventories, intangible and other long-lived assets, income taxes, pensions, and other postretirement benefits.

Actual results could differ from those estimates.

11 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 has

Eastern Company

Notes to Consolidated Financial Statements (continued)

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 adequately accrued for potential loss.

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

1 unchanged sentence

The Company will write off accounts receivable after reasonable collection efforts have been made and the accounts are deemed uncollectible.

As of December 28, 2024 and December 30, 2023, the Company’s allowance for doubtful accounts total was $ 0.6 million and $ 0.6 million, respectively.

As of December 28, 2024, and December 30, 2023, the Company’s bad debt expense was $ 0.1 million and $ 0.1 million, respectively.

As of January 3, 2026 and December 28, 2024, the Company’s allowance for doubtful accounts total was $ 0.6 million and $ 0.5 million, respectively.

As of January 3, 2026 and December 28, 2024, the Company’s bad debt expense was $ 0.1 million and $ 0.1 million, respectively.

The Eastern Company

Notes to Consolidated Financial Statements (continued)

Inventories are valued at the lower of cost or net realizable value.

Cost is determined by the last-in, first-out (LIFO) method at Eberhard ($ 19.9 million on December 28, 2024) and by the first-in, first-out (FIFO) method for inventories at Big 3 Precision, Velvac and outside the U.S.

($ 36.1 million on December 28, 2024).

Cost exceeded the LIFO carrying value by approximately $ 3.8 million on December 28, 2024 and $ 3.7 million on December 30, 2023.

Cost is determined by the last-in, first-out (LIFO) method at Eberhard ($ 19.1 million on January 3, 2026 and $ 19.9 million December 28, 2024) and by the first-in, first-out (FIFO) method for inventories at Big 3 Precision, Velvac and outside the U.S.

($ 37.2 million on January 3, 2026 and $ 36.1 million on December 28, 2024).

Cost exceeded the LIFO carrying value by approximately $ 3.8 million on January 3, 2026 and $ 3.8 million on December 28, 2024.

There was no material LIFO quantity liquidation in 2025 or 2024.

12 unchanged sentences

Where quoted market prices in active markets are not available, management would estimate fair value based on the best information available in the circumstances such as the price of similar assets, a discounted cash flow analysis or other techniques.

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

The Company tests its reporting units for impairment annually in December, or more frequently if events or circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

6 unchanged sentences

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

Eastern Company

Less than $ 0.1 million were recognized as impairment losses for the year ending January 3, 2026.

The Eastern Company

Notes to Consolidated Financial Statements (continued)

10 unchanged sentences

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.

No impairment losses were recognized for the year ended January 3, 2026.

Fair Value of Financial Instruments

7 unchanged sentences

The Company’s financial instruments are primarily investments in marketable securities (Level 1) and pension assets, see Note 10 - Retirement Benefit Plans .

The carrying amounts of other financial instruments (cash and cash equivalents, marketable securities, accounts receivable, accounts payable and debt) as of December 28, 2024 and December 30, 2023, approximate fair value because of their short-term nature and market-based interest rates.

The carrying amounts of other financial instruments (cash and cash equivalents, marketable securities, accounts receivable, accounts payable and debt) as of January 3, 2026 and December 28, 2024, approximate fair value because of their short-term nature and market-based interest rates.

The Company presents right-of-use (“ROU”) assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-02, Leases.

3 unchanged sentences

The Company determines whether an arrangement is, or contains, a lease at contract inception.

An arrangement contains a lease if the Company has the right to direct the use of and obtain substantially all the economic benefits of an identified asset.

An arrangement contains a lease if t

Company has the right to direct the use of and obtain substantially all the economic benefits of an identified asset.

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

Eastern Company

The Eastern Company

Notes to Consolidated Financial Statements (continued)

5 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.

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.

Currently, the Company has 17 operating leases with a lease liability of $ 16.0 million and 8 finance leases with a lease liability of $ 4.0 million as of January 3, 2026.

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

9 unchanged sentences

The efforts expended method calculates the proportion of effort expended to date in comparison to the total effort expected to be expended for the contract.

The amount of revenue recognized by employing the percentage of completion method was $ 2.3 million for the year ended December 28, 2024 and $ 1.1 million for the year ended December 30, 2023.

The amount of revenue recognized by employing the percentage of completion method was $ 0.8 million for the year ended January 3, 2026 and $ 2.3 million for the year ended December 28, 2024.

Based on historical experience, product returns have been immaterial, and the Company does not accrue a reserve for product returns.

For the years ended December 28, 2024 and December 30, 2023, the Company recorded sales returns of $ 0.8 million and $ 0.9 million, respectively, as a reduction to revenue.

For the years ended January 3, 2026 and December 28, 2024, the Company recorded sales returns of $ 0.5 million and $ 0.8 million, respectively, as a reduction to revenue.

Sales and similar taxes that are imposed on the Company’s sales and collected from the customer are excluded from revenues.

Costs for shipping and handling activities, including those activities that occur after transfer of control to the customer, are recorded as cost of sales and are expensed as incurred.

For the years ended December 28, 2024 and December 30, 2023, the Company recorded no revenues related to performance obligations satisfied in prior periods.

For the years ended January 3, 2026 and December 28, 2024, the Company recorded no revenues related to performance obligations satisfied in prior periods.

The Company has elected to use the practical expedient to exclude disclosure of transaction prices allocated to remaining performance obligations, and when the Company expects to recognize such revenue, for all periods prior to the date of initial application of the standard.

1 unchanged sentence

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

The Eastern Company

Notes to Consolidated Financial Statements (continued)

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.

Eastern Company

Notes to Consolidated Financial Statements (continued)

Shipping and Handling Costs

28 unchanged sentences

Impairment Charge

( 12,081,578 )

Foreign Exchange

1 unchanged sentence

Beginning Balance

Impairment Charge

( 12,081,578 )

Foreign Exchange

3 unchanged sentences

Trademarks are not amortized as their lives are deemed to be indefinite.

Amortization expense recognized in 2024 and 2023 was $ 4.0 million.

Amortization expense recognized $ 2.6 million in 2025 and $ 4.0 million in 2024.

Total amortization expense for each of the next five years is estimated to be as follows:

27 unchanged sentences

Notes to Consolidated Financial Statements (continued)

On June 16, 2023, the Company entered into a credit agreement with TD Bank, N.A., Wells Fargo Bank, Bank of America, and M&T Bank as lenders (the “Credit Agreement”), that included a $ 60 million term portion and a $ 30 million revolving commitment portion.

The proceeds of the term loan were used to repay the Company’s remaining outstanding term loan and to terminate its existing credit facility with Santander Bank, N.A.

(approximately $ 59 million).

The term loan portion of the credit facility requires quarterly principal payments of (i) $ 750,000 beginning on September 30, 2023 through June 30, 2025, (ii) $ 1,125,000 beginning on September 30, 2025 through June 30, 2027, and (iii) $ 1,500,000 beginning on September 30, 2027 through March 31, 2028, with the balance of the term loan payable on the maturity date of June 16, 2028 .

Amounts outstanding under the revolving portion of the credit facility are generally due and payable on the expiration date of the Credit Agreement (June 16, 2028).

The Company can elect to prepay some or all the outstanding balance from time to time without penalty.

A commitment fee is payable on the unused portion of the revolving credit facility based on the Company’s consolidated ratio of net debt to adjusted EBITDA from time to time.

Currently, the commitment fee is 0.25%.

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.

Borrowings under the revolving portion bear interest at a variable rate based on, at the Company’s election, a base rate plus an applicable margin of 0.87 5% to 1.62 5% or term SOFR, plus an adjustment of ten basis points, plus an applicable margin of 1.875% to 2.625%, with such margins determined based on the Company’s senior net leverage ratio.

The Company’s obligations under the Credit Agreement are secured by a lien on certain of the Company’s and its subsidiaries’ assets pursuant to a Pledge and Security Agreement, dated as of June 16, 2023, with TD Bank, N.A., as administrative agent.

The Company’s loan covenants under the Credit Agreement require the Company to maintain a senior net leverage ratio not to exceed 3.5 to 1.

In addition, the Company is required to maintain a fixed charge coverage ratio to be not less than 1.25 to 1 .

On October 28, 2025, the Company entered into a Credit Agreement with Citizens Bank, N.A.

that provides for the extension of credit to the Company in the form of revolving loans, swing line loans and letters of credit (the “Credit Agreement”).

The Credit Agreement provides the Company with a $ 100 million five-year senior secured revolving credit facility.

Under the revolving credit facility, up to $ 5 million is available for letters of credit and up to $5 million is available for swing line loans.

The Company can elect to increase the revolving commitment under the Credit Agreement by up to $ 75 million, provided that one or more lending institutions (whether or not existing lenders under the Credit Agreement) voluntarily agree to provide the additional commitment.

Revolving loans under the Credit Agreement bear interest at a variable rate based on the term secured overnight financing rate (“SOFR”) plus an applicable margin of 1.375 % to 2.125 % depending on the Company’s senor net leverage ratio.

The Company’s obligations under the Credit Agreement are secured by a lien on substantially all of the Company’s and its subsidiaries’ assets pursuant to a Pledge and Security Agreement dated as of October 28, 2025.

Amounts outstanding under the Credit Agreement are generally due and payable on the expiration date of the Credit Agreement (October 28, 2030) or the earlier termination of the revolving commitments thereunder.

The Company can elect to prepay some or all of the outstanding balance from time to time without penalty.

Debt consists of:

1 unchanged sentence

Less current portion

Amounts are net of unamortized discounts and debt issuance costs of $ 74,500 as of December 28, 2024 and $ 564,265 as of December 30, 2023.

Amounts are net of unamortized discounts and debt issuance costs of $ 113,500 as of January 3, 2026 and $ 74,500 as of December 28, 2024.

The Company paid interest of $ 2,458,000 in 2025 and $ 3,224,798 in 2024.

The Company’s loan covenants under the Credit Agreement require the Company to maintain a consolidated fixed charge coverage ratio of at least 1.25 to 1, which is to be tested quarterly on a twelve-month trailing basis.

In addition, the Company is required to show a senior net leverage ratio not to exceed 3.5 to 1 .

Additionally, the Company has restrictions on, among other things, new capital leases, purchases or redemptions of its capital stock, mergers and divestitures, and new borrowings.

The Company was in compliance with all covenants as of December 28, 2024 and December 30, 2023.

The Company’s loan covenants under the Credit Agreement require the Company to maintain a senior net leverage ratio not to exceed 3.50 to 1.00, which is to be tested quarterly on a trailing twelve-month basis.

In addition, the Company is required to maintain an interest coverage ratio not less than 3.00 to 1.00 .

The Company was in compliance with all covenants as of January 3, 2026 and December 28, 2024.

As of January 3, 2026, scheduled annual principal maturities of long-term debt, net of deferred financing fees, for each of the next five years follow:

The Eastern Company

Notes to Consolidated Financial Statements (continued)

DEBT (continued)

As of December 28, 2024, scheduled annual principal maturities of long-term debt, net of deferred financing fees, for each of the next five years follow:

STOCK OPTIONS AND AWARDS

As of December 28, 2024, the Company has one incentive stock award plan, The Eastern Company 2020 Stock Incentive Plan (the “2020 Plan”), for officers, other key employees, and non-employee directors.

Incentive stock awards granted under the 2020 Plan must have exercise prices that are not less than 100% of the fair market value of the Company’s common stock on the dates the stock awards are granted.

Restricted stock awards may also be granted to participants under the 2020 Plan with restrictions determined by the Compensation Committee of the Company’s Board of Directors.

Under the 2020 Plan, non-qualified stock awards granted to participants will have exercise prices determined by the Compensation Committee of the Company’s Board of Directors.

The Company granted 92,016 and 82,800 awards during 2024 and 2023, respectively.

The 2020 Plan also permits the issuance of Stock Appreciation Rights (“SARs”).

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 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.

As of January 3, 2026, the Company has one incentive stock award plan, The Eastern Company 2020 Stock Incentive Plan (the “2020 Plan”), for officers, other key employees, and non-employee directors.

Restricted stock awards or restricted stock units may be granted to participants under the 2020 Plan with restrictions determined by the Compensation Committee of the Company’s Board of Directors.

The Company granted 88,416 and 92,016 restricted stock unit awards during 2025 and 2024, respectively.

The 2020 Plan also permits the issuance of stock options.

Stock option awards granted under the 2020 Plan will have exercise prices determined by the Compensation Committee of the Company’s Board of Directors that are not less than 100% of the fair market value of the Company’s common stock on the dates the stock awards are granted.

The Company issued 50,688 and 53,568 stock options in 2025 and 2024, respectively.

For the year of 2025, the Company used several assumptions which included an expected term of 3 years, volatility deviation of 42.54 % and 40.34 % and a risk-free rate of 3.73 % and 4.34 %.

For the year 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, including forfeitures, in connection with stock awards and stock options previously granted to employees was $ 254,000 and $ 1,030,000 for fiscal years 2025 and 2024, respectively.

The Company used fair market value to determine the associated expense with stock awards for the 2025 and 2024 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:

Year Ended December 28, 2024

Year Ended December 30, 2023

As of January 3, 2026, there were 780,962 shares of common stock reserved and available for future grant under 2020 Plan.

The following tables set forth the outstanding stock options for the period specified:

January 3, 2026

December 28, 2024

Weighted - Average Exercise Price

2 unchanged sentences

Outstanding at end of period

SARs Outstanding and Exercisable

Stock Options Outstanding and Exercisable

Range of Exercise Prices

Outstanding as of

December 28, 2024

Weighted- Average Remaining Contractual

Weighted- Average Exercise

January 3, 2026

Weighted- Average Remaining Contractual Life

Weighted- Average Exercise Price

Exercisable as of

December 28, 2024

Weighted- Average Remaining Contractual

Weighted- Average Exercise

January 3, 2026

Weighted- Average Remaining Contractual Life

Weighted- Average Exercise Price

$ 21.52 - $ 28.69

The Eastern Company

Notes to Consolidated Financial Statements (continued)

The following tables set forth the outstanding stock grants for the period specified:

December 24, 2024

December 30, 2023

Outstanding at beginning of period

Outstanding at end of period

As of December 28, 2024, outstanding SARs and awards had an intrinsic value of $ 1,062,000 .

The Eastern Company

Notes to Consolidated Financial Statements (continued)

As of January 3, 2026, outstanding stock options and awards had an intrinsic value of $ 951,000 .

Deferred income taxes are provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and those for income tax reporting purposes.

2 unchanged sentences

Right of Use Asset

Intangible assets

Total deferred income tax liabilities

4 unchanged sentences

( 1,450,035 )

( 2,342,735 )

Allowance for doubtful accounts

14 unchanged sentences

$ ( 6,611,518 )

The Eastern Company

Notes to Consolidated Financial Statements (continued)

Income before income taxes consists of:

24 unchanged sentences

Notes to Consolidated Financial Statements (continued)

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

federal statutory rate to that reflected in operations follows:

The Company adopted ASU 2023-09 "Income Taxes (Topic 740):

Improvements To Income Tax Disclosures" on a prospective basis beginning with the year ended January 3, 2026.

The following table presents required disclosure pursuant to ASU 2023-09 and reconciles the U.S.

federal statutory tax amount and rate to our actual global effective amount and rate for the year ended January 3, 2026.

federal statutory tax rate

State and local income taxes, net of federal income tax effect (1)

Foreign tax effects:

Statutory tax rate difference between China and the United States

Statutory tax rate difference between Mexico and the United States

Other countries

Effect of changes in tax laws or rates enacted in the current period

Effect of cross-border tax laws

Global intangible low-taxed income

Foreign partnership inclusion

Research and development tax credits

Foreign tax credits

Changes in valuation allowances

Nontaxable or nondeductible items

Meals and entertainment

Changes in unrecognized tax benefits

Other adjustments

Provision for income taxes and effective tax rate

During the year ended January 3, 2026, state taxes in Wisconsin and New Jersey made up the majority of tax effects in this category.

The Eastern Company

Notes to Consolidated Financial Statements (continued)

The following table presents required disclosure pursuant to ASU 2023-09 and reconciles the U.S.

federal statutory tax amount and rate to our actual global effective amount and rate for continuing operations for the year ended January 3, 2026:

federal statutory tax rate

State and local income taxes, net of federal income tax effect (1)

Foreign tax effects

Statutory tax rate difference between China and the United States

Statutory tax rate difference between Mexico and the United States

Other countries

Effect of changes in tax laws or rates enacted in the current period

Effect of cross-border tax laws

Global intangible low-taxed income

Foreign partnership inclusion

Research and development tax credits

Foreign tax credits

Changes in valuation allowances

Nontaxable or nondeductible items

Meals and entertainment

Changes in unrecognized tax benefits

Other adjustments

Provision for income taxes and effective tax rate

During the year ended January 3, 2026, state taxes in Wisconsin and New Jersey made up the majority of tax effects in this category.

The Eastern Company

Notes to Consolidated Financial Statements (continued)

The following table presents required disclosure pursuant to ASU 2023-09 and reconciles the U.S.

federal statutory tax amount and rate to our actual global effective amount and rate for discontinued operations for the year ended January 3, 2026:

federal statutory tax rate

State and local income taxes, net of federal income tax effect (1)

Foreign tax effects

Effect of changes in tax laws or rates enacted in the current period

Effect of cross-border tax laws

Changes in valuation allowances

Nontaxable or nondeductible items

Changes in unrecognized tax benefits

Other adjustments

Provision for income taxes and effective tax rate

During the year ended January 3, 2026, state taxes in Wisconsin made up the majority of tax effects in this category.

The following table presents the required disclosures prior to the adoption of ASU 2023-09 and reconciles the U.S.

federal statutory income tax rate to the actual global effective income tax rate for the year ended December 28, 2024:

Income taxes using U.S.

8 unchanged sentences

$ ( 306,136 )

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

federal statutory rate to that reflected in operations follows for continuing operations:

The Eastern Company

Notes to Consolidated Financial Statements (continued)

The following table presents the required disclosures prior to the adoption of ASU 2023-09 and reconciles the U.S.

federal statutory income tax rate to the actual global effective income tax rate for continuing operations for the year ended December 28, 2024:

Income taxes using U.S.

5 unchanged sentences

Uncertain tax positions reserve

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

federal statutory rate to that reflected in operations follows for discontinued operations:

The following table presents the required disclosures prior to the adoption of ASU 2023-09 and reconciles the U.S.

federal statutory income tax rate to the actual global effective income tax rate for discontinued operations for the year ended December 28, 2024:

Income taxes using U.S.

5 unchanged sentences

$ ( 4,164,932 )

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

The Company adopted ASU 2023-09 on a prospective basis for the year ended January 3, 2026 and has included the following table as a result of adoption, which presents income taxes paid (net of refunds received) for the year ended January 3, 2026:

Other countries

Total foreign

Total cash paid for income taxes, net of refunds

The Company had income taxes paid of $ 5,166,195 for the year ended December 28, 2024, prior to the adoption of ASU 2023-09.

Under accounting standards (ASC 740), a deferred tax liability is not recorded for the excess of the financial reporting (book) basis over the tax basis of an investment in a foreign subsidiary if the indefinite reinvestment criteria are met.

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A provision has not been made for additional U.S.

federal and foreign taxes on December 28, 2024 on approximately $ 12,667,000 of undistributed earnings of foreign subsidiaries because the Company intends to reinvest these funds indefinitely.

federal and foreign taxes on January 3, 2026 of undistributed earnings of foreign subsidiaries because the Company intends to reinvest these funds indefinitely.

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

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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.

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.

The ASU also now requires that an entity reflect enacted changes in tax laws in the annual effective rate, and other Codification adjustments have been made to employee stock ownership plans.

For public business entities, the amendments in ASU 2019-12 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

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

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

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The guidance will be applied on a prospective basis with the option to apply the standard retrospectively.

The Company is currently in the process of evaluating the effect of this guidance on its financial statements.

The Company adopted ASU 2023-09 on a prospective basis for the year ending January 3, 2026.

A reconciliation of the beginning and ending amount of unrecognized tax benefits are as follows:

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income tax examinations by tax authorities prior to 2019.

Included in the balance as of December 28, 2024, are $ 390,544 of unrecognized tax benefits that would affect the annual effective tax rate.

Included in the balance as of January 3, 2026, are $ 315,916 of unrecognized tax benefits that would affect the annual effective tax rate.

In 2025, the Company recognized accrued interest related to unrecognized tax benefits in income tax expense.

The Company had approximately $ 52,039 of accrued interest as of December 28, 2024.

The Company had approximately $ 65,008 and $ 52,039 of accrued interest as of January 3, 2026 and December 28, 2024, respectively.

The amount of interest reflected in the statement of operations was an expense of $ 12,969 and a benefit of $ 17,791 for the years ending January 3, 2026 and December 28, 2024, respectively.

The total amount of unrecognized tax benefits could increase or decrease within the next twelve months for several reasons, including the closure of federal, state, and foreign tax years by expiration of the statute of limitations and the recognition and measurement considerations under ASC 740.

The Company believes that the total amount of unrecognized tax benefits will not increase or decrease significantly over the next twelve months.

The Eastern Company

Notes to Consolidated Financial Statements (continued)

The Company enters into leases for manufacturing facilities, warehouses, sales offices, plant equipment, vehicles, and certain other equipment with varying end dates from April 2025 to April 2033, including renewal options.

The Company enters into leases for manufacturing facilities, warehouses, sales offices, plant equipment, vehicles, and certain other equipment with varying end dates from February 2026 to April 2033, including renewal options

The following table (in millions) represents the impact of leasing on the consolidated balance sheets:

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Total lease liabilities

Cash paid included in the measurement of operating lease liabilities was $ 4.3 million and $ 4.3 million for the fiscal years ended December 28, 2024 and December 30, 2023, respectively, all of which were included within the operating cash flow section of the consolidated statements of cash flows.

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 $ 0.4 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 and $ 0.1 million for the fiscal years ended December 28, 2024 and December 30, 2023, respectively.

Cash paid included in the measurement of operating lease liabilities was $ 4.0 million and $ 4.3 million for the fiscal years ended January 3, 2026 and December 28, 2024, respectively, all of which were included within the operating cash flow section of the consolidated statements of cash flows.

Lease assets obtained in exchange for new operating lease liabilities were $ 4.5 million and $ 0.4 million for the fiscal years ended January 3, 2026 and December 28, 2024, respectively.

Cash paid included in the measurement of finance lease liabilities was $ 0.9 million and $ 0.4 million for the fiscal years ended January 3, 2026 and December 28, 2024, respectively, which were included within the financing cash flow section of the consolidated statements of cash flows for the fiscal years ended January 3, 2026 and December 28, 2024, respectively.

Total operating lease expense was $ 4.5 million and $ 4.9 million for the fiscal years ended January 3, 2026 and December 28, 2024, respectively.

Total financing lease expense was $ 0.3 million and $ 0.1 million for the fiscal years ended January 3, 2026 and December 28, 2024, respectively.

The Eastern Company

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LEASES (continued)

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

The future payments (in millions) due under non-cancelable operating and finance leases as of January 3, 2026 are as follows:

Less effects of discounting

Lease liabilities recognized

As of December 28, 2024, the weighted average lease term for all operating and finance leases is 6.9 and 6.2 years, respectively.

As of January 3, 2026, the weighted average lease term for all operating and finance leases is 5.9 and 5.2 years, respectively.

The weighted average discount rate associated with operating leases was 7.0 % while the weighted average discount rate associated with finance leases was 7.2 %.

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( 4,396,137 )

Amortization of prior service cost

Amortization of the net loss

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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

Notes to Consolidated Financial Statements (continued)

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

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Rate of compensation increase

As of December 28, 2024, and December 30, 2023, the status of the Company’s pension benefit plans and other postretirement benefit plan was as follows:

As of January 3, 2026 and December 28, 2024, the status of the Company’s pension benefit plans and other postretirement benefit plan was as follows:

Pension Benefit

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Actuarial (gain)/loss

( 1,317,379 )

Benefits paid

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Notes to Consolidated Financial Statements (continued)

RETIREMENT BENEFIT PLANS (continued)

Pension Benefit

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- Other postretirement plan

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:

On January 3, 2026 and December 28, 2024, the accumulated benefit obligation for all qualified and nonqualified defined benefit pension plans was $ 75,493,395 and $ 75,916,060 , respectively.

The Eastern Company

Notes to Consolidated Financial Statements (continued)

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

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In 2025, as in 2024, 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

Notes to Consolidated Financial Statements (continued)

RETIREMENT BENEFIT PLANS (continued)

December 28, 2024

The fair values of the Company’s pension plan assets on January 3, 2026 and December 28, 2024, utilizing the fair value hierarchy discussed in Note 3 – Accounting Policies – Fair Value of Financial Instruments , follow:

January 3, 2026

Cash and Equivalents:

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Fixed Income:

Common/collective trust funds

Target Duration LDI Fixed Income Funds (l)

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Notes to Consolidated Financial Statements (continued)

RETIREMENT BENEFIT PLANS (continued)

December 28, 2024

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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 (l)

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Level 2 investments include commingled funds valued at unit values provided by the investment managers, which are based on the fair value of the underlying publicly traded securities.

The Eastern Company

Notes to Consolidated Financial Statements (continued)

RETIREMENT BENEFIT PLANS (continued)

The RITC Russell Investments Russell 1000® Index Fund - Series I seeks to replicate the performance of the Russell 1000® Index as closely as possible before the deduction of Fund expenses.

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undervalued or under-researched companies, special situations, emerging growth, asset plays and turnarounds.

The Eastern Company

Notes to Consolidated Financial Statements (continued)

The RITC International Fund seeks to provide long-term growth of capital.

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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 Eastern Company

Notes to Consolidated Financial Statements (continued)

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.

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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 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.

The plans’ assets include 217,018 shares of the common stock of the Company having a market value of $ 4,273,084 and $ 5,759,658 on January 3, 2026 and December 28, 2024, respectively.

No shares were purchased in 2025 or 2024 nor were any shares sold in either period.

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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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Total contributions made for the period

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.

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

The Eastern Company

Notes to Consolidated Financial Statements (continued)

EARNINGS PER SHARE

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Engineered Solutions Segment

January 3, 2026

December 28, 2024

$ 248,970,345

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The Company has implemented all new accounting pronouncements that are in effect and that could impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued, but are not yet effective, that might have a material impact on the consolidated financial statements of the Company.

The Eastern Company

Notes to Consolidated Financial Statements (continued)

CONTINGENCIES

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The Company has established credit limits for customers and monitors their balances to mitigate the risk of loss.

As of December 28, 2024 and December 30, 2023, there was one significant concentration of credit risk.

As of January 3, 2026 and December 28, 2024, there was one significant concentration of credit risk.

One customer represented 13 % of total accounts receivable for 2025 and one customer represented 14 % of total accounts receivable in 2024.

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In 2025, this customer had revenues totaling $ 33.1 million ( 13 % of Engineered Solutions segment total revenue).

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

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

Interest Rate Risk

The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s debt, which bears interest at variable rates based on term 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.

The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s debt, which bears interest at a variable rate based on the term secured overnight financing rate (“SOFR”) plus an applicable margin of 1.37 5% to 2.12 5% depending on the Company’s senor net leverage ratio.

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

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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”).

All of the Company’s designated foreign currency hedge contracts as of January 3, 2026 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.

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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 Company had designated foreign currency hedge contracts outstanding in the contract amount of $ 8.4 million as of January 3, 2026 and $ 9.6 million as of December 28, 2024.

As of January 3, 2026, a gain of $ 0.6 million, net of tax, will be reclassified to earnings within the next twelve months.

All currency cash flow hedges outstanding as of January 3, 2026 mature within twelve months.

The Eastern Company

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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

Amount of Gain Recognized in Accumulated Other Comprehensive Loss

Amount of Loss Reclassified from Accumulated Other Comprehensive Income into Loss

Location in Condensed

Consolidated Statement of Income

Designated foreign currency hedge contracts, net of tax

$ ( 389,139 )

$ ( 459,100 )

Cost of products sold

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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,

As of January 3, 2026, 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 January 3, 2026 and December 28, 2024:

Location in Condensed

Consolidated Balance Sheets

Derivative Assets:

Designated foreign currency hedge contracts

Other current assets

Derivative Liabilities:

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The Eastern Company

Naugatuck, Connecticut

Shelton, Connecticut

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of The Eastern Company (the Company) as of December 28, 2024 and December 30, 2023, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 28, 2024, including the related notes and financial statement schedule appearing under Item 15(a)(2) on Form 10-K (collectively referred to as the financial statements).

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 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.

We have audited the accompanying consolidated balance sheets of The Eastern Company (the Company) as of January 3, 2026 and December 28, 2024, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the two-year period ended January 3, 2026, including the related notes and financial statement schedule appearing under Item 15(a)(2) on Form 10-K (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 3, 2026 and December 28, 2024, 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 January 3, 2026, 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 3, 2026 expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

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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.

As described in Notes 3 and 4 to the financial statements, the Company’s consolidated goodwill balance is $58.6 million as of January 3, 2026.

Management tests reporting units for impairment annually in December, or more frequently if events or circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

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/s/ Fiondella, Milone & LaSaracina LLP

Fiondella, Milone & LaSaracina LLP

Fiondella, Milone & LaSaracina LLP, PCAOB ID 2230

We have served as the Company’s auditor since 2009.

3 unchanged sentences

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