EML US Equity☆

ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company’s fiscal year ends on the Saturday nearest to December 31. Fiscal years 2024 and 2023 were each 52 weeks in length. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to results for “2024” or “fiscal year 2024” mean the fiscal year ended December 28, 2024, and references to results for “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.

The following analysis excludes discontinued operations.

Summary

Net sales for 2024 were $272.8 million compared to $258.9 million for 2023. Net income for 2024 was $13.2 million, or $2.13 per diluted share, compared to $11.8 million, or $1.88 per diluted share, for 2023. Sales for the fourth quarter of 2024 were $66.7 million compared to $63.8 million for the same period in 2023. Net income for the fourth quarter of 2024 was $1.6 million, or $0.26 per diluted share compared to $3.9 million, or $0.63 per diluted share, for the comparable 2023 period.

The Company’s backlog was $89.2 million on December 28, 2024, compared to $77.1 million on December 30, 2023, primarily due to an increase of $13.7 million in backlog at Velvac related to the launch of new mirror programs for Class 8 trucks, partially offset by a decrease of $1.7 million in backlog for returnable packaging products at Big 3 Products.

Critical Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Areas of uncertainty that require judgments, estimates and assumptions include items such as the allowance for doubtful accounts; inventory accounting; the testing of goodwill and other intangible assets for impairment; and pensions and other postretirement benefits. Management uses historical experience and all available information to make its estimates and assumptions, but actual results will inevitably differ from the estimates and assumptions that are used to prepare the Company’s financial statements at any given time. Despite these inherent limitations, management believes that Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and related footnotes provide a meaningful and fair presentation of the Company’s financial position and results of operations.

Management believes that the application of these estimates and assumptions on a consistent basis enables the Company to provide the users of the financial statements with useful and reliable information about the Company’s operating results and financial condition.

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company reviews the collectability of its receivables on an ongoing basis, considering a combination of factors that require judgment and estimates, including among others, our customers’ access to capital, customers’ willingness, or ability to pay, customer payment patterns, general economic conditions and geopolitical trends, and our ongoing relationship with our customers. The Company reviews potential problems, such as past due accounts, a bankruptcy filing or deterioration in the customer’s financial condition, to ensure that the Company has adequately accrued for potential loss. Accounts are considered past due based on when payment was originally due. If a customer’s situation changes, such as a bankruptcy or a change in its creditworthiness, or there is a change in the current economic climate, the Company may modify its estimate of the allowance for doubtful accounts. The Company will write off accounts receivable after reasonable collection efforts have been made and the accounts are deemed uncollectible. If our estimates and assumptions as to collectability were materially incorrect, or if any of our significant customers were to develop unexpected and immediate financial problems that would prevent payment of amounts due to us, and our allowance for doubtful accounts were inadequate, this could result in an unexpected loss in profitability.

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As of December 28, 2024 and December 30, 2023, the Company’s allowance for doubtful accounts total was $0.5 million and $0.5 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.

Inventory

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 while Big 3 Precision and Velvac are valued using a first-in, first-out (“FIFO”) method. Accordingly, a LIFO valuation reserve is calculated using the dollar value link chain method.

We review the net realizable value of inventory in detail on an ongoing basis, considering deterioration, obsolescence, estimated future demand, current market conditions, and other factors. Based on these assessments, we provide for an inventory reserve in the period in which an impairment is identified. The reserve fluctuates with market conditions, design cycles, and other economic factors and could vary significantly, whether favorably or unfavorably, from actual results due to, among other things, unanticipated changes in economic conditions, customer demand, or the competitive landscape.

The inventory reserve for excess or obsolete inventory reduced the Company’s inventory valuation by $1.9 million and $1.9 million as of December 28, 2024 and December 30, 2023, respectively.

Goodwill and Other Intangible Assets

Intangible assets with finite useful lives are generally amortized on a straight-line basis over the periods benefited. Goodwill and other intangible assets with indefinite useful lives are not amortized. The Company performs annual qualitative assessments on goodwill and other intangible assets as of the end of each fiscal year by comparing the estimated fair value of each reporting unit with its carrying amount. Additionally, the Company performs an interim analysis 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. Such events or circumstances could include, among other things, increased competition or unexpected loss of market share, significant adverse changes in the markets in which the Company operates, or unexpected business disruptions. If the carrying amount of a reporting unit exceeds its estimated fair value, the Company records an impairment loss based on the difference between fair value and carrying amount not to exceed the associated carrying amount of goodwill. Determining the fair value of a reporting unit involves the use of significant estimates and assumptions, including (i) macroeconomic conditions, (ii) market and industry conditions, (iii) cost factors, (iv) overall financial performance, (v) other relevant entity-specific events, and (vi) events affecting a reporting unit. 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 Big 3 Mold as held for sale.

The Company performed its annual qualitative assessment as of the end of each of fiscal 2024 and 2023 on the carrying value of goodwill and determined that it is more likely than not that no impairment of goodwill existed as of such dates. See Note 3 – Accounting Policies –Goodwill, in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for more detail.

Pension and Other Postretirement Benefits

The amounts recognized in the consolidated financial statements related to pension and other postretirement benefits are determined from actuarial valuations. Inherent in these valuations are assumptions about such factors as expected return on plan assets, discount rates at which liabilities could be settled, rate of increase in future compensation levels, mortality rates, and trends in health insurance costs. These assumptions are reviewed annually and updated as required. In accordance with U.S. GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, affect the expense recognized and obligations recorded in future periods.

The discount rate used is based on a single equivalent discount rate derived 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 Company calculates its service and interest costs in future years by applying the specific spot rates along the selected yield curve to the relevant projected cash flows.

The expected long-term rate of return on assets is also developed with input from the Company’s actuarial firms. We consider the Company’s historical experience with pension fund asset performance, the current and expected allocation of our plan assets and expected long-term rates of return. The long-term rate-of-return assumption used for determining net periodic pension expense was 7.5% for both 2024 and 2023. The Company reviews the long-term rate of return each year.

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Future actual pension income and expenses will depend on future investment performance, changes in future discount rates and various other factors related to the population of participants in the Company’s pension plans.

The Company expects to make cash contributions of approximately $2,900,000 and $42,000 to our pension and other postretirement plans, respectively, in 2025.

In connection with our pension and other postretirement benefits, the Company reported income of $3.0 million and $1.6 million (net of tax) on its Consolidated Statement of Comprehensive Income for fiscal years 2024 and 2023, respectively. The main factor driving this income was the change in the discount rate during the applicable period.

Assumptions used to determine net periodic pension benefit cost for the fiscal years indicated were as follows:

Expected return on plan assets 7.5 % 7.5 %

Rate of compensation increase 0.0 % 0.0 %

Assumptions used to determine net periodic other postretirement benefit cost for the fiscal years indicated were as follows:

Expected return on plan assets 4.0 % 4.0 %

Rate of compensation increase 4.3 % 4.3 %

The changes in assumptions had the following effect on the net periodic pension and other postretirement costs recorded in Other Comprehensive Income as follows:

Year ended

December 28, December 30,

Additional recognition due to significant event -- --

Amortization of:

Unrecognized prior service cost 4,241 4,241

The Plan has been investing a portion of the assets in long-term bonds to better match the impact of changes in interest rates on its assets and liabilities and thus reduce volatility in Other Comprehensive Income. Please refer to Note 10 – Retirement Benefit Plans in Item 8, Financial Statements and Supplementary Data of this Form 10-K for additional disclosures concerning the Company’s pension and other postretirement benefit plans.

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RESULTS OF OPERATIONS

Fourth Quarter 2024 Compared to Fourth Quarter 2023

The following table shows, for the fourth quarter of 2024 and 2023, selected line items from the consolidated statements of income from continuing operations as a percentage of net sales for the Company’s continuing operations. The Company’s continuing operations include (1) Big 3 Products; (2) Eberhard; and (3) Velvac.

Three Months Ended

Cost of Products Sold 77.0 % 73.2 %

Product Development Expense 1.7 % 2.1 %

Selling and Administrative Expense 16.8 % 15.8 %

Restructuring Costs - -

Operating Profit 4.5 % 8.9 %

Net sales in the fourth quarter of 2024 increased 4.5% to $66.7 million from $63.8 million in the fourth quarter of 2023. Sales increases were due to higher demand for returnable transport packaging products, partially offset by lower demand for truck accessories and truck mirror assemblies. Net sales of existing products increased 2.8% while price increases and new products increased net sales by 1.7% in the fourth quarter of 2024 when compared to sales in the fourth quarter of 2023. New products included various truck mirror assemblies, rotary latches, and handles.

Cost of products sold in the fourth quarter of 2024 increased $4.6 million or 10% from the corresponding period in 2023. The increase in cost of products sold is primarily attributable to higher sales volume and a favorable adjustment to the LIFO reserve in the fourth quarter of 2023 that did not recur in the fourth quarter of 2024.

Gross margin as a percentage of net sales for the fourth quarter of 2024 was 23.0% compared to 26.8% in the prior year fourth quarter. The decrease is primarily due to higher material costs in the fourth quarter of 2024 and a favorable adjustment to the LIFO reserve in the fourth quarter of 2023 that did not reoccur in the fourth quarter of 2024.

Product development expenses decreased $0.2 million, or 14%, in the fourth quarter of 2024 compared to the corresponding period in 2023 as we continue to invest in new products at Eberhard, Velvac and Big 3 Products. As a percentage of net sales, product development costs were 1.7% for the fourth quarter of 2024 compared to 2.1% for the corresponding period in 2023.

Selling and administrative expenses in the fourth quarter of 2024 increased 11.0% compared to the fourth quarter of 2023. As a percentage of net sales, selling and administrative costs were 16.8% for the fourth quarter of 2024 compared to 15.8% for the corresponding period in 2023. The increase was primarily the result of increased payroll-related expenses, legal and professional expenses, and selling costs.

Net income for the fourth quarter of 2024 was $1.6 million, or $0.26 per diluted share, from $3.9 million, or $0.63 per diluted share, in 2023.

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Fiscal Year 2024 Compared to Fiscal Year 2023

The following table shows, for fiscal year 2024 and fiscal year 2023, selected line items from the consolidated statements of income as a percentage of net sales for the Company’s operations. The Company’s continuing operations include (1) Big 3 Products; (2) Eberhard; and (3) Velvac.

Fiscal Year Ended

Cost of Products Sold 75.3 % 76.1 %

Product Development Expense 1.8 % 2.2 %

Selling and Administrative Expense 15.5 % 15.1 %

Restructuring Costs - -

Operating Profit 7.4 % 6.6 %

Summary

Net sales for 2024 increased 5% to $272.8 million from $258.9 million in 2023. The sales increase was primarily due to higher demand for truck mirror assemblies and returnable transport packaging products. Net sales of existing products were flat in 2024 compared to 2023 while price increases and new products increased net sales in 2024 by 5%. Sales of new products contributed 4% to sales growth in 2024 and included various new truck mirror assemblies, rotary latches, D-rings, and mirror cams.

Cost of products sold increased $8.4 million or 4% to $205.5 million in 2024 from $197.1 million in 2023. The increase in the cost of products sold is primarily attributable to higher sales volumes and a favorable adjustment to the LIFO reserve in the fourth quarter of 2023 that did not reoccur in the fourth quarter of 2024. Tariffs incurred during 2024 were $2.5 million from China-sourced products as compared to $2.2 million in 2023. Most tariffs were recovered through price increases.

Gross margin as a percentage of sales was 24.7% in 2024 compared to 23.9% in 2023. The increase primarily reflects the impact of improved pricing and various cost-savings initiatives.

Product development expenses as a percentage of sales was 1.8% and 2.2% in 2024 and 2023, respectively, as the Company continues to invest in new products at Eberhard, Velvac and Big 3 Products to better serve our customers.

Selling and administrative expenses increased $3.1 million or 7.9% to $42.2 million in 2024 from $39.1 million in 2023. As a percentage of net sales, selling and administrative expenses were 15.5% for the fiscal year of 2024 compared to 15.1% for the corresponding period in 2023. The increase was primarily the result of increased payroll-related expenses, legal and professional expenses, and travel related expenses.

Other income and expense decreased $1.2 million to $0.3 million of expense in 2024 from $0.9 million of income in 2023. The decrease in other income and expense of $1.2 million was due to a $1.6 million favorable adjustment for the final settlement of our swap agreement with Santander in the second quarter of 2023 that did not recur in 2024, partially offset by an unfavorable working capital adjustment of $0.4 million in the third quarter of 2023 related to the sale of the Greenwald business.

Net income for 2024 increased 12% to $13.2 million, or $2.13 per diluted share, from $11.8 million, or $1.88 per diluted share, in 2023.

Other Items

The following table shows the amount of change from the year ended December 30, 2023 to the year ended December 28, 2024 in other items (dollars in thousands):

Amount %

Interest expense $ (84 ) (3 )%

Interest expense decreased in 2024 from 2023 is primarily due to paydown of principal.

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The effective tax rate for 2024 was 22.6% compared to the 2023 effective tax rate of 21.9%. Total income taxes paid were $5.2 million in 2024 and $6.6 million in 2023.

Liquidity and Sources of Capital

The primary source of the Company’s cash is earnings from operating activities adjusted for cash generated from or used for net working capital. The most significant recurring non-cash items included in net income are depreciation and amortization expense. Changes in working capital fluctuate with the changes in operating activities. As sales increase, there generally is an increased need for working capital. The Company closely monitors inventory levels and attempts to match production to expected market demand, keeping tight control over the collection of receivables, and optimizing payment terms on its trade and other payables. The maintenance of appropriate inventory levels considering demand has been and may continue to be challenged by supply chain disruptions, which have led in some cases to a deficiency inventory that has required us to pay expedited freight fees on some of our products to timely fulfill customer orders. Coupled with increased materials costs, this has decreased our margins. If these disruptions persist and we are unable to maintain sufficient inventory on hand, we may need to cancel or decline orders, and we may be unable to offset increased material and freight costs fully by increasing prices on our products, any of which could have a material adverse impact on our liquidity.

The Company is dependent on continued demand for its products and subsequent collection of accounts receivable from its customers. The Company serves a broad base of customers and industries with a variety of products. As a result, any fluctuations

in demand or payment from a particular industry or customer should not have a material impact on the Company’s sales and collection of receivables. Management expects that the Company’s foreseeable cash needs for operations, capital expenditures, debt service and dividend payments will continue to be met in the next 12 months from December 28, 2024 and beyond by the Company’s operating cash flows and available credit facility.

The following table shows key financial ratios at the end of each fiscal year:

Current ratio 2.6 2.6

Average days’ sales in accounts receivable 50 49

Inventory turnover 3.7 3.4

Ratio of working capital to sales 25.1 % 25.7 %

Total debt to shareholders’ equity 35.0 % 33.2 %

The following table shows important liquidity measures as of the fiscal year-end balance sheet date for each of the preceding two years (in millions):

Cash and cash equivalents

- Held in the United States $ 12.4 $ 6.9

- Held by foreign subsidiaries 1.6 1.1

Net cash provided by operating activities 19.4 25.5

Net cash used in investing activities (7.9 ) (4.6 )

Net cash used in by financing activities (4.8 ) (22.9 )

All cash held by foreign subsidiaries is readily convertible into other currencies, including the U.S. dollar.

Net cash provided by operating activities was $19.4 million in 2024 compared to $25.5 million net cash provided by operating activities in 2023. In 2024, the Company contributed $2.1 million to its defined benefit retirement plan.

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In 2024, reductions in working capital requirements provided $4.9 million, driven primarily by reductions in inventory and prepaid expenses. In 2023, reductions in working capital requirements provided $7.8 million, primarily driven by reductions in accounts receivable and inventory, partially offset by decreases in accounts payable and other accrued liabilities.

The Company used $7.9 million and $4.6 million for investing activities in 2024 and 2023, respectively. In 2024, the Company invested $9.7 million in capital expenditures, invested $1.0 million in marketable securities, received $2.3 million on the sale of one of its buildings, and received payments on notes receivable of $0.5 million. In 2023, the Company invested $5.5 million in capital expenditures, invested $1.0 million in marketable securities, and received payments on notes receivable of $2.3 million. Capital expenditures in fiscal year 2025 are expected to be approximately $9.8 million.

In 2024, the Company made total debt payments of $4.8 million, of which $1.8 million were principal payments on the revolving commitment portion of the credit facility and used $2.7 million for payment of dividends. The Company anticipates dividend payments in fiscal 2025 to be approximately $2.8 million. The Company has $28.3 million available on its revolving line of credit. See Note 6 - Debt in Item 8, Financial Statements and Supplementary Data for further discussion on the Company’s debt facilities.

In 2023, the Company made total debt payments of $79.7 million, of which $59.3 million was an accelerated principal payment and used $2.8 million for payment of dividends.

The Company leases certain equipment and buildings under cancelable and non-cancelable operating leases that expire at various dates for up to ten years. Rent expenses amounted to approximately $4.9 million in 2024 and $4.0 million in 2023.

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 June 16, 2028, the expiration date of the Credit Agreement. 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 0.30%.

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 1.875% to 2.625%, 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 0.875% to 1.625% 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. The Company was in compliance with all covenants as of December 28, 2024 and December 30, 2023. A decrease in earnings due to the impact of current economic conditions and inflationary pressures or the resulting harm to the financial condition of our customers, or an increase in indebtedness incurred to offset such a decrease in earnings, would have a negative impact on our senior net leverage ratio and our fixed charge coverage ratio, which in turn would increase the cost of borrowing under the Credit Agreement and could cause us to fail to comply with the covenants under our Covenant Agreement.

In addition to funding capital requirements, we may use available cash to pay down our indebtedness, to make investments, which may include investments in publicly traded securities, or to make acquisitions that we believe will complement or expand our existing businesses.

As of the end of the fourth quarter of 2024, the Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

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Non-GAAP Financial Measures

The non-GAAP financial measures we provide in this report should be viewed in addition to, and not as an alternative for, results prepared in accordance with U.S. GAAP.

To supplement the consolidated financial statements prepared in accordance with U.S. GAAP, we have presented Adjusted Net Income from Continuing Operations, Adjusted Earnings Per Share from Continuing Operations and Adjusted EBITDA from Continuing Operations, which are considered non-GAAP financial measures. The non-GAAP financial measures presented may differ from similarly titled non-GAAP financial measures presented by other companies, and other companies may not define these non-GAAP financial measures in the same way. These measures are not substitutes for their comparable U.S. GAAP financial measures, such as net sales, net income from continuing operations, diluted earnings per share from continuing operations, or other measures prescribed by U.S. GAAP, and there are limitations to using non-GAAP financial measures.

Adjusted Net Income from Continuing Operations is defined as net income from continuing operations excluding, when incurred, gains or losses that we do not believe reflect our ongoing operations, including, for example, the impacts of impairment losses, gains/losses on the sale of subsidiaries, property and facilities, transaction expenses primarily relating to acquisitions and divestitures, factory start-up costs, factory relocation expenses, executive severance, and restructuring costs. Adjusted Net Income from Continuing Operations is a tool that can assist management and investors in comparing our performance on a consistent basis across periods by removing the impact of certain items that management believes do not directly reflect our underlying operating performance.

Adjusted Earnings Per Share from Continuing Operations is defined as earnings per share from continuing operations excluding, when incurred, certain per share gains or losses that we do not believe reflect our ongoing operations, including, for example, the impacts of impairment losses, gains/losses on the sale of subsidiaries, property and facilities, transaction expenses primarily relating to acquisitions and divestitures, factory start-up costs, factory relocation expenses, executive severance, and restructuring costs. We believe that Adjusted Earnings Per Share from Continuing Operations provides important comparability of underlying operational results, allowing investors and management to access operating performance on a consistent basis from period to period.

Adjusted EBITDA from Operations is defined as net income from continuing operations before interest expense, provision for income taxes, and depreciation and amortization and excluding, when incurred, the impacts of certain losses or gains that we do not believe reflect our ongoing operations, including, for example, impairment losses, gains/losses on sale of subsidiaries, property and facilities, transaction expenses primarily relating to acquisitions and divestitures, factory start-up costs, factory relocation expenses, executive severance, and restructuring expenses. Adjusted EBITDA from Operations is a tool that can assist management and investors in comparing our performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our underlying operations.

Management uses such measures to evaluate performance period over period, to analyze the underlying trends in our business, to assess our performance relative to our competitors, and to establish operational goals and forecasts that are used in allocating resources. These financial measures should not be considered in isolation from, or as a replacement for, U.S. GAAP financial measures.

We believe that presenting non-GAAP financial measures in addition to U.S. GAAP financial measures provides investors greater transparency to the information used by our management for its financial and operational decision-making. We further believe that providing this information better enables our investors to understand our operating performance and to evaluate the methodology used by management to evaluate and measure such performance.

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Reconciliation of Non-GAAP Measures

For the Three and Twelve Months ended December 28, 2024 and December 30, 2023

Three Months Ended Twelve Months Ended

Adjustments:

Greenwald final sale adjustment - - - 390 b

Non-GAAP tax impact of adjustments (1) (342 ) - (342 ) (547 )

Adjusted earnings per share from continuing operations (non-GAAP):

b) Final settlement of working capital adjustment associated with Greenwald sale

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Reconciliation of Non-GAAP Measures

Adjusted EBITDA from Operations Calculation

For the Three and Twelve Months ended December 28, 2024 and December 30, 2023

Three Months Ended Twelve Months Ended

Greenwald final sale adjustment - - - 390 b

Business closure costs - - - 1,448 c

Loss on classification as held for sale - - 23,088 d -

Adjusted EBITDA from discontinued operations $ 97 $ 237 $ (758 ) $ 157

Greenwald final sale adjustment - - - 390 b

Business closure costs - - - 1,448 c

Loss on classification as held for sale - - 23,088 d -

b) Final settlement of working capital adjustment associated with Greenwald sale

c) Associated Toolmakers closure costs

d) Impact of classifying Big 3 Mold business as held for sale

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ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a result of the Company’s status as a smaller reporting company pursuant to Rule 12b-2 of the Exchange Act, the Company is not required to provide information under this Item 7A.

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ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Eastern Company

Consolidated Balance Sheets

December 28, December 30,

ASSETS

Current Assets

Inventories:

Property, Plant and Equipment

Other Assets

Long term note receivable, less current portion 162,102 374,932

Long-term assets held for sale - 22,885,041

See accompanying notes.

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December 28, December 30,

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities

Other current liabilities 505,376 -

Long-term liabilities held for sale - 6,920

Shareholders’ Equity

Voting Preferred Stock, no par value:

Authorized and unissued: 1,000,000 shares

Nonvoting Preferred Stock, no par value:

Authorized and unissued: 1,000,000 shares

Common Stock, no par value, Authorized: 50,000,000 shares

Accumulated other comprehensive loss:

Unrealized loss on foreign currency swap, net of tax (505,376 ) -

See accompanying notes.

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The Eastern Company

Consolidated Statements of Income

Year Ended

December 28, December 30,

Discontinued Operations (see note 2)

Loss from operations of discontinued units $ (2,821,898 ) $ (4,091,155 )

Loss on classification as held for sale (23,087,775 ) -

Earnings per share from continuing operations:

Loss per share from discontinued operations:

Total (loss) earnings per share:

Cash dividends per share: $ 0.44 $ 0.44

See accompanying notes.

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The Eastern Company

Consolidated Statements of Comprehensive Income

Year Ended

December 28, December 30,

Other comprehensive income:

Change in fair value of foreign currency swap (505,376 )

See accompanying notes.

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The Eastern Company

Consolidated Statements of Shareholders’ Equity

Accumulated

Other

Common Common Treasury Treasury Retained Comprehensive Shareholders'

Shares Stock Shares Stock Earnings Income (Loss) Equity

Stock Options Exercised -

Change in fair value of foreigncurrency swap (505,376 ) (505,376 )

Stock Options Exercised -

See accompanying notes.

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THE EASTERN COMPANY

Consolidated Statements of Cash Flows

Year Ended

Operating Activities

Unrecognized pension and postretirement benefits (1,613,436 ) 47,550

Changes in operating assets and liabilities:

Investing Activities

Business acquisition - (444,840 )

Proceeds from sale of building and equipment 2,278,540 -

Financing Activities

Proceeds from short term borrowings (revolver) 3,000,000 -

Principal payments on short-term borrowings (revolver) (1,750,000 ) (300,029 )

Proceeds from new long-term debt refinancing - 60,000,000

Discontinued Operations

Effect of exchange rate changes on cash (711,844 ) (37,555 )

Supplemental disclosure of cash flow information:

Non-cash investing and financing activities

See accompanying notes

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The Eastern Company

Notes to Consolidated Financial Statements

1. DESCRIPTION OF BUSINESS

The Eastern Company, and its subsidiaries (the “Company,” “Eastern,” “we,” “us” or “our”) manage industrial businesses that design, manufacture and sell engineered solutions to industrial markets. Eastern’s businesses operate in industries with long-term macroeconomic growth opportunities. We look to acquire businesses that produce stable and growing earnings and cash flows. Eastern may pursue acquisitions in industries other than those in which its businesses currently operate if an acquisition presents an attractive opportunity.

Eastern manages the financial, operational, and strategic performance of its businesses to increase cash generation, operating earnings, and long-term shareholder value.

Eastern encompasses four operating entities within the United States, one wholly owned Canadian subsidiary located in Cambridge, Ontario, Canada, a wholly owned Taiwanese subsidiary located in Taipei, Taiwan, a wholly owned subsidiary in Hong Kong, two wholly owned Chinese subsidiaries (one located in Shanghai, China, and one located in Dongguan, China), and a wholly owned subsidiary in Reynosa, Mexico.

The Eastern Company has one reportable segment: Engineered Solutions. 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), 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

The Engineered Solutions segment consists of Big 3 Precision, including Big 3 Precision Products, Inc. (“Big 3 Products”) and Big 3 Mold Services, Inc. (“Big 3 Mold”) and Hallink Moulds, Inc. (“Hallink Moulds”); 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. (“Velvac”). These businesses design, manufacture, and market a diverse product line of custom and standard vehicular and industrial hardware, including turnkey returnable packaging solutions, access and security hardware, mirrors, and mirror-cameras.

Big 3 Products and Big 3 Mold’s turnkey returnable packaging solutions are used in the assembly processes of vehicles, aircraft, and durable goods and in the production processes of plastic packaging products, packaged consumer goods and pharmaceuticals. Big 3 Products works with original equipment manufacturers (“OEMs”) to design and produce custom returnable transport packaging to integrate with OEM assembly processes. Big 3 Mold designs and manufactures blow mold tools. Hallink Moulds is a producer of injection blow mold tooling and is a supplier of blow molds and change parts to the food, beverage, healthcare, and chemical industry. 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.

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. Eberhard’s products are found in an expansive range of applications and products globally.

Velvac is a designer and manufacturer of proprietary vision technology for OEMs and aftermarket applications, and a provider of aftermarket components to the heavy-duty truck market in North America. Velvac serves diverse, niche segments within the heavy- and medium-duty truck, motorhome, and bus markets.

Sales are made to customers primarily in North America.

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Notes to Consolidated Financial Statements (continued)

2. DISCONTINUED OPERATIONS

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

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

Year Ended

Loss from discontinued operations before income taxes (25,909,673 ) (4,091,155 )

Loss from discontinued operations, net of tax $ (21,744,741 ) $ (3,195,349 )

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Notes to Consolidated Financial Statements (continued)

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

Property, plant and equipment, net - 4,767,724

Patents and other intangibles net of accumulated amortization - 5,744,312

Non-current assets of discontinued operations - 22,885,041

Note payable, current - -

Current portion of operating lease liability 121,299 94,355

Current portion of financing lease liability 7,371

Non-current liabilities of discontinued operations - 6,920

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Notes to Consolidated Financial Statements (continued)

3. ACCOUNTING POLICIES

Fiscal Year

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.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All intercompany accounts and transactions are eliminated.

Reclassification

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.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S. 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.

Foreign Currency

For foreign operations asset and liability accounts are translated with an exchange rate at the respective balance sheet dates; income statement accounts are translated at the average exchange rate for the years. Resulting translation adjustments are made directly to a separate component of shareholders’ equity – “Accumulated other comprehensive (loss) – Foreign currency translation.” Foreign currency exchange transaction gains and losses are not material in any year.

Cash Equivalents

Highly liquid investments purchased with a maturity of three months or less are considered cash equivalents. The Company has deposits that exceed amounts insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000, but the Company does not consider this a significant concentration of credit risk based on the strength of the financial institution. Approximately 12% of available cash is located outside of the United States in our foreign subsidiaries.

Accounts Receivable

Accounts receivable are stated at their net realizable value. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. 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

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Notes to Consolidated Financial Statements (continued)

adequately accrued for potential loss. Accounts are considered past due based on when payment was originally due. If a customer’s situation changes, such as a bankruptcy or change in creditworthiness, or there is a change in the current economic climate, the Company may modify its estimate of the allowance for doubtful accounts. 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.

Inventories

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. There was no material LIFO quantity liquidation in 2024 or 2023. In addition, as of the balance sheet dates, the Company has recorded reserves for excess/obsolete inventory.

Property, Plant and Equipment and Related Depreciation

Property, plant, and equipment (including equipment under finance lease of $3.8 million) are stated at cost. Depreciation expense ($3.8 million in 2024, $3.5 million in 2023) is computed using the straight-line method based on the following estimated useful lives of the assets: Buildings - 10 to 39.5 years; Machinery and equipment - 3 to 10 years.

Impairment of Long-Lived Assets

In accordance with Accounting Standards Codification (“ASC”) 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company reviews its long-lived assets and certain intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In such an event, the carrying value of long-lived assets is reviewed by management to determine if the value may be impaired. If this review indicates that the carrying amount will not be recoverable, as determined based on the estimated expected future cash flows attributable to the asset over the remaining amortization period, management will reduce the carrying amount to recognize the impairment and recognize an impairment loss. The measurement of the impairment loss to be recognized is to be based on the difference between the fair value and the carrying amount of the asset. Fair value is defined as the amount by which the asset could be bought or sold in a current transaction between willing parties. 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.

Goodwill

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. Such events and circumstances could include, among other things, increased competition or unexpected loss of market share, significant adverse changes in the markets in which the Company operates, or unexpected business disruptions. The Company tests reporting units for impairment by comparing the estimated fair value of each reporting unit with its carrying amount. If the carrying amount of a reporting unit exceeds its estimated fair value, the Company records an impairment loss based on the difference between fair value and carrying amount not to exceed the associated carrying amount of goodwill. Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. 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.

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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.

The Company will continue to perform annual qualitative assessments as of the end of each fiscal year. Additionally, the Company will perform an interim analysis whenever conditions warrant.

Intangible Assets

Patents are recorded at cost and are amortized using the straight-line method over the lives of the patents. Technology and licenses are recorded at cost and are amortized on a straight-line basis over periods ranging from 1 to 20 years. Non-compete agreements and customer relationships are amortized using the straight-line method over their useful lives. Trademarks are deemed to have indefinite lives. 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.

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

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The company utilizes a fair value hierarchy, which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The fair value hierarchy has three levels of inputs that may be used to measure fair value:

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.

Leases

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. The Company elected to account for non-lease components as part of the lease component to which they relate. Lease accounting involves significant judgements, including making estimates related to the lease term, lease payments, and discount rate.

The Company has operating leases for buildings, warehouses, and office equipment as well as finance leases for equipment. 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. ROU assets and lease liabilities are recognized at lease commencement based on the present value of lease payments over the lease term.

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Notes to Consolidated Financial Statements (continued)

Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Many leases include one or more options to renew. The exercise of lease renewal options is at our sole discretion. The Company’s option to extend certain leases ranges from 1–120 months. 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. 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. There are no related party transactions. There are no leases that have not yet commenced that could create significant rights and obligations for the Company. The weighted average remaining lease term is 6.7 years.

Revenue Recognition

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. These factors include that legal title transfers to the customer, the Company has a present right to payment, and the customer has assumed the risk and rewards of ownership at the time of shipment.

Big 3 Mold may employ the efforts expended method for the percentage of completion for revenue recognition for certain transactions. 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.

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.

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. 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.

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

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

Cost of Goods Sold

Cost of goods sold reflects the cost of purchasing, manufacturing, and preparing a product for sale. 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.

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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

Product development costs, charged to expense as incurred, were $4.9 million in 2024 and $5.6 million in 2023 and include costs to develop new or enhance existing products to better serve our customers.

Selling and Administrative Expenses

Selling and administrative expenses include all operating costs of the Company that are not directly related to the cost of purchasing, manufacturing, and preparing a product for sale. These expenses represent selling and administrative expenses for support functions and related overhead.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising costs were $0.6 million in 2024 and $0.4 million in 2023.

Stock - Based Compensation

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. This model requires the Company to make estimates and assumptions including, without limitation, estimates regarding the length of time an employee will retain vested stock awards before exercising them, the estimated volatility of the Company’s common stock price and the number of awards that will be forfeited prior to vesting. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. 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 shares of Company common stock.

Income Taxes

The Company and its U.S. subsidiaries file a consolidated U.S. federal income tax return.

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, Simplifying the Accounting for Income Taxes (“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. As such, the financial statements will reflect expected future tax consequences of uncertain tax positions presuming the taxing authorities’ full knowledge of the position and all relevant facts. See Note 8 - Income Taxes.

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Notes to Consolidated Financial Statements (continued)

4. GOODWILL

The following is a roll-forward of goodwill for 2024 and 2023:

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Notes to Consolidated Financial Statements (continued)

5. INTANGIBLES

Trademarks are not amortized as their lives are deemed to be indefinite. Amortization expense recognized in 2024 and 2023 was $4.0 million. Total amortization expense for each of the next five years is estimated to be as follows: 2025 - $2.5 million; 2026 - $2.5 million; 2027 - $1.8 million; 2028 - $0.2 million and 2029 - $0.1 million.

Weighted-Average

Amortization

Gross Amount

Patents and developed technology $ 7,312,228 4.0

Accumulated Amortization

Patents and developed technology $ 4,134,929

Non-compete agreements 18,061

Gross Amount

Patents and developed technology $ 7,677,970 4.1

Accumulated Amortization

Patents and developed technology $ 4,045,572

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Notes to Consolidated Financial Statements (continued)

6. DEBT

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 1.875% to 2.625%, 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 0.875% to 1.625% 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.

Debt consists of:

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.

The Company paid interest of $3,224,798 in 2024 and $3,388,347 in 2023.

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.

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Notes to Consolidated Financial Statements (continued)

6. 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:

Thereafter —

7. STOCK OPTIONS AND AWARDS

Stock 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. 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.

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Notes to Consolidated Financial Statements (continued)

7. STOCK OPTIONS AND AWARDS (continued)

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

Units Weighted - Average Exercise Price Units Weighted - Average Exercise Price

SARs Outstanding and Exercisable

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

Shares Shares

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

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Notes to Consolidated Financial Statements (continued)

8. INCOME TAXES

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. Deferred income tax (assets) liabilities relate to:

Net deferred income tax (assets) liabilities $ (6,611,518 ) $ (2,283,571 )

Income before income taxes consists of:

The provision for income taxes follows:

Current

Deferred:

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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:

Amount Percent Amount Percent

Impact of goodwill impairment charge 1,638,143 (18 ) - 0

Impact of foreign subsidiaries on effective tax rate (95,924 ) 1 (297,728 ) (3 )

Impact of Research & Development tax credit (472,561 ) 5 (136,343 ) (1 )

A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows for continuing operations:

Amount Percent Amount Percent

Impact of Research & Development tax credit (472,561 ) (2 ) (136,343 ) (1 )

A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows for discontinued operations:

Amount Percent Amount Percent

Income taxes using U.S. federal statutory rate $ (5,441,031 ) 21 % - 0 %

State income taxes, net of federal benefit (368,621 ) 1 - 0

Impact of foreign subsidiaries on effective tax rate 6,577 0 - 0

Impact of goodwill impairment charge 1,638,143 (6 ) - 0

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

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. Effective for foreign earnings after December 30, 2017, if such earnings are distributed in the form of cash dividends, the Company would not be subject to additional U.S. income taxes but could be subject to foreign income and withholding taxes. 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. 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. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. For public business entities (PBEs), the new requirements will be effective for annual periods beginning after December 15, 2024. 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.

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

Increase for positions taken during the current period (2,303 ) 34,293

Increase (decrease) for positions taken during the prior period - (59,779 )

The Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state, and local income tax examinations by tax authorities for years before 2020 and non-U.S. income tax examinations by tax authorities prior to 2018.

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

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Notes to Consolidated Financial Statements (continued)

9. LEASES

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

Balance Sheet Classification December 28,2024 December 30,2023

Assets:

Operating lease assets, net Right of use assets $ 14.2 $ 17.1

Total leased assets, net 18.0 18.0

Liabilities:

Total lease liabilities $ 18.0 $ 18.0

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.

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The Eastern Company

Notes to Consolidated Financial Statements (continued)

9. LEASES(continued)

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

Operating Finance

Less effects of discounting (2.1 ) (0.9 )

Lease liabilities recognized $ 14.2 $ 3.8

As of December 28, 2024, the weighted average lease term for all operating and finance leases is 6.9 and 6.2 years, respectively. The weighted average discount rate associated with operating leases was 6.3% while the weighted average discount rate associated with finance leases was 6.8%.

10. RETIREMENT BENEFIT PLANS

The Company has non-contributory defined benefit pension plans covering some U.S. employees. Plan benefits are generally based upon age at retirement, years of service and, for its salaried plan, the level of compensation. The Company also sponsors unfunded non-qualified supplemental retirement plans that provide certain former officers with benefits in excess of limits imposed by federal tax law.

The Company also provides health care and life insurance for retired salaried employees in the United States who meet specific eligibility requirements.

Components of the net periodic benefit cost of the Company’s pension benefit plans for the fiscal year indicated were as follows:

Amortization of prior service cost - -

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:

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The Eastern Company

Notes to Consolidated Financial Statements (continued)

10. RETIREMENT BENEFIT PLANS(continued)

Discount rate

- Supplemental pension plans 4.72 % 4.92 %

Expected return on plan assets 7.5 % 7.5 %

Rate of compensation increase 0 % 0 %

Components of the net periodic benefit cost of the Company’s other postretirement benefit plan were as follows:

Amortization of prior service cost 4,241 4,241

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

Expected return on plan assets 4.0 % 4.0 %

Rate of compensation increase 4.3 % 4.3 %

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:

Pension Benefit Other Postretirement Benefit

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The Eastern Company

Notes to Consolidated Financial Statements (continued)

10. RETIREMENT BENEFIT PLANS(continued)

Pension Benefit Other Postretirement Benefit

Amounts recognized in accumulated other comprehensive income consist of:

Pension Benefit Other Postretirement Benefit

Prior service (cost) credit - - 21,092 -

Change in the components of accumulated other comprehensive income consist of:

Pension Benefit Other Postretirement Benefit

Charged to net periodic benefit cost

Liability (gains)/losses

Assumptions used to determine the projected benefit obligations for the Company’s pension benefit plans and other postretirement benefit plan for the fiscal year indicated were as follows:

Discount rate

- Supplemental pension plans 5.16 % 4.72 %

- Other postretirement plan 5.65 % 5.04 %

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:

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The Eastern Company

Notes to Consolidated Financial Statements (continued)

10. RETIREMENT BENEFIT PLANS(continued)

Number of plans 5 5

Estimated future benefit payments to participants of the Company’s pension plans are $5.4 million in 2025, $5.4 million in 2026, $5.5 million in 2027, $5.7 million in 2028, $5.7 million in 2029 and a total of $28.8 million from 2030 through 2034.

Estimated future benefit payments to participants of the Company’s other postretirement plan are $42,000 in 2025, $44,000 in 2026, $44,000 in 2027, $46,000 in 2028, $49,000 in 2029 and a total of $261,000 from 2030 through 2034.

The Company expects to make cash contributions to its qualified pension plans of approximately $2,900,000 and to its other postretirement plan of approximately $42,000 in 2025.

We consider a number of factors in determining and selecting assumptions for the overall expected long-term rate of return on plan assets. We consider the historical long-term return experience of our assets, the current and expected allocation of our plan assets, and expected long-term rates of return. We derive these expected long-term rates of return with the assistance of our investment advisors and generally base these rates on a 10-year horizon for various asset classes and consider the expected positive impact of active investment management. We base our expected allocation of plan assets on a diversified portfolio consisting of domestic and international equity securities and fixed income securities.

We consider a variety of factors in determining and selecting our assumptions for the discount rate at the end of the year. 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:

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The Eastern Company

Notes to Consolidated Financial Statements (continued)

10. RETIREMENT BENEFIT PLANS(continued)

Level 1 Level 2 Level 3 Total

Cash and Equivalents:

Equities:

Fixed Income:

Common/collective trust funds

Target Duration LDI Fixed Income Funds (l)

STRIPS Fixed Income Funds (m)

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The Eastern Company

Notes to Consolidated Financial Statements (continued)

10. RETIREMENT BENEFIT PLANS (continued)

Level 1 Level 2 Level 3 Total

Cash and Equivalents:

Equities:

Fixed Income:

Common/collective trust funds

Target Duration LDI Fixed Income Funds (l)

STRIPS Fixed Income Funds (m)

Equity common funds primarily hold publicly traded common stock of both U.S and international companies selected for purposes of total return and to maintain equity exposure consistent with policy allocations. The Level 1 investment is made up of shares of The Eastern Company Common Stock and is valued at market price. 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.

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The Eastern Company

Notes to Consolidated Financial Statements (continued)

10. RETIREMENT BENEFIT PLANS(continued)

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The investment portfolio contains a diversified blend of common stocks, bonds, cash equivalents, and other investments, which may reflect varying rates of return. The investments are further diversified within each asset classification. The portfolio diversification provides protection against a single security or class of securities having a disproportionate impact on aggregate performance. The Company has elected to change its investment strategy to better match the assets with the underlying plan liabilities. Currently, the long-term target allocations for plan assets are 50% in equities and 50% in fixed income although the actual plan asset allocations may be within a range around these targets. The actual asset allocations are reviewed and rebalanced on a periodic basis to maintain the target allocations. 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. No shares were purchased in 2024 or 2023 nor were any shares sold in either period. Dividends received during 2024 and 2023 on the common stock of the Company were $95,488 and $95,488, respectively.

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

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The Eastern Company

Notes to Consolidated Financial Statements (continued)

10. 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. non-union employees. This plan allows participants to make voluntary contributions of up to 100% of their annual compensation on a pretax basis, subject to IRS limitations. The plan provides for contributions by the Company at its discretion.

The Eastern Company Savings and Investment Plan as amended effective April 1, 2023 (“401(k) Plan Amendment”) provides for a match of 50% of the first 6% of employee contributions. The 401(k) Plan Amendment also provides for an additional non-discretionary contribution (the “transitional credit”) for certain non-union U.S. employees. The amount of this non-discretionary contribution ranges from 0% to 4% of wages, based on the age of the individual on June 1, 2016. The 401(k) Plan Amendment provides a non-discretionary safe harbor contribution of 3%. All non-union U.S. employees are eligible to join the plan.

The Company made contributions to the plan as follows:

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.

11. EARNINGS PER SHARE

The denominators used in the earnings per share computations follow:

Basic:

Diluted:

There were no anti-dilutive stock equivalents in 2024 or 2023.

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The Eastern Company

Notes to Consolidated Financial Statements (continued)

12. 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

Less:

Reconciliation of operating profit

Adjustments and reconciling items - -

Geographic Information:

Net Sales:

Foreign sales are primarily to customers in North America.

Identifiable Assets:

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The Eastern Company

Notes to Consolidated Financial Statements (continued)

13. RECENT ACCOUNTING PRONOUNCEMENTS

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 240), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit disaggregated between domestic and foreign and (3) income tax expense or benefit from continuing operations disaggregated by Federal, state, and foreign. The update also requires entities to disclose their income tax payments to various jurisdictions. This standard is effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025. We do not expect this new standard to have a significant impact to our disclosures.

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.

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Notes to Consolidated Financial Statements (continued)

14. CONTINGENCIES

The Company is party to various legal proceedings from time to time related to its normal business operations. Currently, the Company is not involved in any legal proceedings.

15. CONCENTRATION OF RISK

Credit Risk

Credit risk is the potential financial loss resulting from the failure of a customer or counterparty to settle its financial and contractual obligations to the Company, as and when they become due. The primary credit risk for the Company is its accounts receivable due from customers. 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. One customer represented 14% of total accounts receivable for 2024 and one customer represented 12% of total accounts receivable in 2023. The maximum exposure to credit risk is primarily represented by the carrying amount of the Company’s accounts receivable. In 2024, this customer had revenues totaling $35.6 million (12% of Engineered Solutions segment total revenue). In 2023, this customer had sales of $29.2 million (10% 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 1.875% to 2.625%, depending on the Company’s senior net leverage ratio. See Note 6 – Debt for more information regarding the Company’s debt facility.

16. 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.

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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:

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: