Form 10-Q - Quarterly report [Sections 13 or 15(d)]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended September 28, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ________________ to _______________

Commission File Number 001-35383

THE EASTERN COMPANY

(Exact name of registrant as specified in its charter)

Connecticut		06-0330020
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

3 Enterprise Drive, Suite 408, Shelton, Connecticut		06484
(Address of principal executive offices)		(Zip Code)

(203)-729-2255

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, No Par Value	EML	NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of September 28, 2024, 6,183,179 shares of the registrant’s common stock, no par value per share, were issued and outstanding.

The Eastern Company

Form 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 28, 2024

TABLE OF CONTENTS

		Page

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	3.
	Condensed Consolidated Statements of Operations	3.
	Condensed Consolidated Statements of Comprehensive Income	4.
	Condensed Consolidated Balance Sheets	5.
	Condensed Consolidated Statements of Cash Flows	7.
	Notes to Condensed Consolidated Financial Statements	8.

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18.

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27.

Item 4.	Controls and Procedures	27.

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	28.

Item 1A.	Risk Factors	28.

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28.

Item 3.	Defaults Upon Senior Securities	28.

Item 4.	Mine Safety Disclosures	28.

Item 5.	Other Information	28.

Item 6	Exhibits	29.

SIGNATURES		30.

Table of Contents

PART 1 – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

THE EASTERN COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended						Nine Months Ended
	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Net sales	$	71,274,757		$	62,001,347		$	206,068,490		$	195,062,061
Cost of products sold		(53,085,087	)		(46,556,952	)		(154,161,980	)		(150,371,589	)
Gross margin		18,189,670			15,444,395			51,906,510			44,690,472

Product development expense		(1,077,930	)		(1,425,159	)		(3,739,214	)		(4,257,468	)
Selling and administrative expenses		(10,316,788	)		(8,452,163	)		(31,014,022	)		(29,051,436	)
Operating profit		6,794,952			5,567,073			17,153,274			11,381,568

Interest expense		(709,680	)		(854,223	)		(2,049,655	)		(2,059,912	)
Other (expense) income		(82,703	)		(135,839	)		(92,415	)		1,025,582
Income from continuing operations before income taxes		6,002,569			4,577,011			15,011,204			10,347,238

Income tax expense		(1,333,771	)		(1,113,587	)		(3,335,489	)		(2,574,393	)
Net income from continuing operations	$	4,668,798		$	3,463,424		$	11,675,715		$	7,772,845

Discontinued Operations (see note B)
Loss from operations of discontinued unit	$	(766,990	)	$	(530,764	)	$	(2,750,844	)	$	(3,600,060	)
Loss on classification as held for sale		(23,087,775	)		-			(23,087,775	)		-
Income tax benefit		3,888,522			129,298			4,320,904			895,695
Loss on discontinued operations	$	(19,966,243	)	$	(401,466	)	$	(21,517,715	)	$	(2,704,365	)

Net (loss) income	$	(15,297,445	)	$	3,061,958		$	(9,842,000	)	$	5,068,480

Earnings per share from continuing operations:
Basic	$	0.75		$	0.55		$	1.88		$	1.25

Diluted	$	0.75		$	0.55		$	1.87		$	1.24

Loss per share from discontinued operations:
Basic	$	(3.22	)	$	(0.06	)	$	(3.46	)	$	(0.43	)

Diluted	$	(3.21	)	$	(0.06	)	$	(3.45	)	$	(0.43	)

Total (loss) earnings per share:
Basic	$	(2.47	)	$	0.49		$	(1.58	)	$	0.82

Diluted	$	(2.46	)	$	0.49		$	(1.58	)	$	0.81

Cash dividends per share	$	0.11		$	0.11		$	0.33		$	0.33

See accompanying notes.

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THE EASTERN COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	Three Months Ended						Nine Months Ended
	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Net (loss) income	$	(15,297,445	)	$	3,061,958		$	(9,842,000	)	$	5,068,480
Other comprehensive (loss) income:

Change in foreign currency translation		(120,191	)		(87,572	)		(527,862	)		(182,029	)

Change in fair value of foreign currency swap, net of tax benefit of:
2024 - $(106,076) and $(123,179) respectively		(355,123	)		-			(412,382	)		-

Change in fair value of interest rate swap, net of tax benefit of:
2023 - $0 and $(274,957) respectively		-			-			-			(1,449,754	)

Change in pension and postretirement benefit costs, net of taxes of:
2024 - $71,355 and $214,065 respectively; 2023 - $74,360 and $223,079 respectively		237,501			252,668			718,338			758,006
Total other comprehensive (loss) income		(237,813	)		165,096			(221,906	)		(873,777	)
Comprehensive (loss) income	$	(15,535,258	)	$	3,227,054		$	(10,063,906	)	$	4,194,703

See accompanying notes.

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THE EASTERN COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 28, 2024			December 30, 2023
	(unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	7,670,541		$	8,048,127
Marketable securities		2,034,602			986,477
Accounts receivable, less allowances: 2024 - $470,870; 2023 - $534,476		45,999,803			34,204,581
Inventories		58,125,362			58,396,679
Current portion of notes receivable		239,261			573,269
Prepaid expenses and other assets		2,356,524			5,443,778
Current assets held for sale		9,643,534			4,583,797
Total Current Assets		126,069,627			112,236,708

Property, Plant and Equipment		59,890,704			52,684,476
Accumulated depreciation		(31,095,676	)		(29,162,438	)
Property, Plant and Equipment, Net		28,795,028			23,522,038

Goodwill		58,576,197			58,576,198
Trademarks		3,946,651			3,914,409
Patents and other intangibles net of accumulated amortization		9,373,296			11,182,167
Long-term notes receivable, less current portion		238,002			374,932
Deferred Income Taxes		2,536,357			2,283,571
Right of Use Assets		14,645,336			17,064,137
Other Long-Term Assets		42,510			-
Long-term assets held for sale		-			22,885,041
Total Other Assets		89,358,349			116,280,455

TOTAL ASSETS	$	244,223,004		$	252,039,201

See accompanying notes.

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THE EASTERN COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 28, 2024			December 30, 2023
	(unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	23,988,401		$	24,554,117
Accrued compensation		5,142,966			5,194,830
Other accrued expenses		8,252,803			3,965,335
Current portion of operating lease liability		3,373,500			4,336,794
Current portion of finance lease liability		721,178			175,231
Current portion of long-term debt		3,228,935			2,871,870
Other current liabilities		578,071			-
Current liabilities held for sale		2,541,189			1,635,549
Total Current Liabilities		47,827,043			42,733,726

Other long-term liabilities		640,724			730,970
Operating lease liability, less current portion		11,271,835			12,727,344
Finance lease liability, less current portion		3,050,529			715,669
Long-term debt, less current portion		41,487,366			41,063,865
Accrued postretirement benefits		594,167			554,758
Accrued pension cost		20,111,130			21,025,365
Long-term liabilities held for sale		-			6,920
Total Liabilities		124,982,794			119,558,617

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		34,864,634			33,950,859
Issued: 9,127,700 shares as of 2024 and 9,091,815 shares as of 2023
Outstanding: 6,183,179 shares as of 2024 and 6,217,370 shares as of 2023
Treasury Stock: 2,894,521 shares as of 2024 and 2,874,445 shares as of 2023		(25,196,598	)		(23,280,467	)
Retained earnings		132,912,235			144,805,168
Accumulated other comprehensive loss:
Foreign currency translation		(1,394,461	)		(866,599	)
Unrealized loss on foreign currency swap, net of tax		(535,561	)		-
Unrecognized net pension and postretirement benefit costs, net of tax		(21,410,039	)		(22,128,377	)
Accumulated other comprehensive loss		(23,340,061	)		(22,994,976	)
Total Shareholders’ Equity		119,240,210			132,480,584
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	244,223,004		$	252,039,201

See accompanying notes.

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THE EASTERN COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine Months Ended
	September 28, 2024			September 30, 2023
Operating Activities
Net (loss) income	$	(9,842,000	)	$	5,068,480
Less: Loss from discontinued operations		(21,517,715	)		(2,704,365	)
Income from continuing operations	$	11,675,715		$	7,772,845
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization		4,266,038			3,914,160
Reduction in carrying amount of ROU assets		2,418,801			3,579,223
Unrecognized pension and postretirement benefits		(353,257	)		635,677
Loss on sale of equipment and other assets		53,311			331,474
Provision for doubtful accounts		(24,570	)		(88,353	)
Stock compensation expense		913,775			151,300
Changes in operating assets and liabilities:
Accounts receivable		(11,739,823	)		1,069,630
Inventories		300,720			4,501,969
Prepaid expenses and other		2,874,825			1,108,094
Other assets		(236,934	)		(262,212	)
Accounts payable		693,653			1,821,223
Accrued compensation		(190,904	)		353,773
Change in operating lease liability		(2,418,801	)		(3,579,223	)
Other accrued expenses		115,403			(3,152,809	)
Net cash provided by operating activities		8,347,952			18,156,771

Investing Activities
Marketable securities		(999,960	)		-
Business acquisition		-			(547,638	)
Payments received from notes receivable		470,937			2,265,730
Proceeds from sale of equipment		18,925			-
Purchases of property, plant, and equipment		(7,634,265	)		(4,089,705	)
Net cash used in investing activities		(8,144,363	)		(2,371,613	)

Financing Activities
Proceeds from new long-term debt financing		-			60,000,000
Principal payments on long-term debt		(2,365,500	)		(74,919,004	)
Proceeds (payments) on short term borrowings (revolver)		3,000,000			(300,029	)
Financing leases, net		2,819,262			674,558
Purchase common stock for treasury		(1,916,130	)		(245,546	)
Dividends paid		(2,050,933	)		(2,069,043	)
Net cash used in financing activities		(513,301	)		(16,859,064	)

Discontinued Operations
Cash provided by operating activities		411,778			1,092,876
Cash used in investing activities		(217,101	)		(628,968	)
Cash provided by discontinued operations		194,677			463,908

Effect of exchange rate changes on cash		(67,874	)		(36,737	)
Net change in cash and cash equivalents		(182,909	)		(646,735	)

Cash and cash equivalents at beginning of period		8,299,453			10,187,521
Cash and cash equivalents at end of period ¹	$	8,116,544		$	9,540,786

Supplemental disclosure of cash flow information
Interest	$	2,443,448		$	2,574,890
Income taxes		3,945,295			1,321,170

Non-cash investing and financing activities
Right of use asset		2,418,801			3,579,222
Lease liability		(462,004	)		(4,484,838	)

¹ includes cash from assets held for sale of $0.4 million as of September 28, 2024 and $0.7 million as of September 30, 2023

See accompanying notes

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THE EASTERN COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

September 28, 2024

Note A – Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X and do not include all the information and footnotes required by generally accepted accounting principles in the United States (“GAAP”) for complete financial statements. Refer to the consolidated financial statements of The Eastern Company (together with its consolidated subsidiaries, the “Company,” “we,” “us” or “our”) and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 30, 2023, filed with the Securities and Exchange Commission on March 12, 2024 (the “2023 Form 10-K”), for additional information.

The accompanying condensed consolidated financial statements are unaudited. However, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for interim periods have been reflected therein. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. All intercompany accounts and transactions are eliminated.

The condensed consolidated balance sheet as of December 30, 2023 has been derived from the audited consolidated balance sheet at that date.

The Company’s fiscal year is a 52-53-week fiscal year ending on the Saturday nearest to December 31. References in this Quarterly Report on Form 10-Q for the quarterly period ended September 28, 2024 (this “Form 10-Q”) to 2023, the 2023 fiscal year or fiscal 2023 mean the 52-week period ended on December 30, 2023, and references to 2024, the 2024 fiscal year or fiscal 2024 mean the 52-week period ending on December 28, 2024. In a 52-week fiscal year, each quarter has 13 weeks. References to the third quarter of 2023, the third fiscal quarter of 2023 or the three months ended September 30, 2023 mean the 13-week period from July 2, 2023 to September 30, 2023. References to the third quarter of 2024, the third fiscal quarter of 2024 or the three months ended September 28, 2024, mean the 13-week period from June 30, 2024 to September 28, 2024. References to the first nine months of 2023 or the nine months ended September 30, 2023 mean the period from January 1, 2023 to September 30, 2023. References to the first nine months of 2024 or the nine months ended September 28, 2024 mean the period from December 31, 2023 to September 28, 2024.

Certain amounts in the 2023 financial statements have been reclassified to conform with the 2024 presentation with no impact or change to previously reported net income or shareholders’ equity. See Note B, Discontinued Operations, for additional information.

Note B – Discontinued Operations

In the third quarter of 2024 we determined that the Big 3 Mold business no longer fits with our long-term strategy, and we have initiated the process of selling the business. The Mold business is cyclical in nature, requires significant capital investment to remain competitive, and serves different markets than our core businesses. Selling the Big 3 Mold business will allow management to focus on our core capabilities, offerings, and markets served.

In the third quarter of 2024, we determined that the Big 3 Mold business meets 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 unaudited condensed consolidated statements of operations as discontinued operations for all periods presented. Additionally, current and non-current assets and liabilities of discontinued operations are reflected in the unaudited condensed consolidated balance sheets for both periods presented.

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Summarized Financial Information of Discontinued Operations

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

	Three Months Ended						Nine Months Ended
	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net sales	$	3,360,405		$	3,634,333		$	9,647,649		$	11,406,778
Cost of products sold		(2,804,743	)		(2,703,362	)		(8,402,175	)		(9,076,341	)
Gross margin		555,662			930,971			1,245,474			2,330,437

Selling and administrative expenses		(1,145,232	)		(1,248,179	)		(3,483,904	)		(3,875,579	)
Restructuring costs		(23,087,775	)		-			(23,087,775	)		-
Operating loss		(23,677,345	)		(317,208	)		(25,326,205	)		(1,545,142	)

Other expense		-			-			-			(1,539,940	)
Interest expense		(177,420	)		(213,556	)		(512,414	)		(514,978	)
Loss from discontinued operations before income taxes		(23,854,765	)		(530,764	)		(25,838,619	)		(3,600,060	)

Income tax benefit		3,888,522			129,298			4,320,904			895,695
Loss from discontinued operations, net of tax	$	(19,966,243	)	$	(401,466	)	$	(21,517,715	)	$	(2,704,365	)

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

	September 28, 2024		December 30, 2023
	(unaudited)
Cash	$	446,003	$	251,326
Accounts receivable		2,480,148		2,852,907
Inventories		1,211,011		875,528
Prepaid expenses		828,471		604,036
Property, plant and equipment, net		4,432,723		4,767,723
Patents and other intangibles net of accumulated amortization		-		5,744,312
Goodwill		73,528		12,200,695
Right of use assets		171,650		172,311
Total assets of discontinued operations	$	9,643,534	$	27,468,838

Current assets of discontinued operations¹	$	9,643,534	$	4,583,797
Non-current assets of discontinued operations		-		22,885,041
Total assets of discontinued operations	$	9,643,534	$	27,468,838

Accounts payable	$	1,564,105	$	765,356
Accrued compensation and other accrued expenses		789,875		775,838
Current portion of lease liability		138,642		94,355
Other long-term liabilities		48,567		6,920
Total liabilities of discontinued operations	$	2,541,189	$	1,642,469

Current liabilities of discontinued operations¹	$	2,541,189	$	1,635,549
Non-current liabilities of discontinued operations		-		6,920
Total liabilities of discontinued operations	$	2,541,189	$	1,642,469

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

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Note C – Earnings Per Share

The denominators used to calculate earnings per share are as follows:

Three Months Ended

Nine Months Ended

September 28, 2024

September 30, 2023

September 28, 2024

September 30, 2023

Basic:

Weighted average shares outstanding

6,203,753

6,241,796

6,217,342

6,233,493

Diluted:

Weighted average shares outstanding

6,203,753

6,241,796

6,217,342

6,233,493

Dilutive stock appreciation rights

25,374

32,462

25,374

32,462

Denominator for diluted earnings per share

6,229,127

6,274,258

6,242,716

6,265,955

Note D – Fair Value of 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:

Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2	Quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable.

The Company’s financial instruments are primarily investments in marketable securities (Level 1), designated foreign currency hedge contracts – see Note P, Financial Instruments and Fair Value Measurements, and pension assets, see Note M, Retirement Benefit Plans.

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

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Note E – Inventories

Inventories consist of the following components:

	September 28, 2024		December 30, 2023

Raw material and component parts	$	24,526,610	$	24,500,087
Work in process		9,967,847		9,957,068
Finished goods		24,841,916		24,815,052
Total inventories¹	$	59,336,373	$	59,272,207

¹ Includes inventory of discontinued operations of $1.2 million and $0.9 million as of September 28, 2024 and September 30, 2023, respectively.

Note F - Goodwill

The aggregate carrying amount of goodwill from continuing operations is approximately $58.6 million as of September 28, 2024. A goodwill write-off of approximately $12.1 million was recognized in discontinued operations when classifying the disposal group as held for sale. See Note B – Discontinued Operations for further discussion.

The Company evaluates 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.

Note G – 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 accounts 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. 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. 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. Most leases include one or more options to renew. The exercise of lease renewal options is at our sole discretion. 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 17 operating leases with a lease liability of $14.8 million and five finance leases with a lease liability of $3.8 million as of September 28, 2024. The 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 lease transactions. There are no leases that have not yet commenced that could create significant rights and obligations for the Company.

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

	Operating			Finance
2024	$	1.1		$	0.2
2025		3.1			0.7
2026		2.5			0.7
2027		2.1			0.7
2028		1.9			0.7
thereafter		6.4			1.6
		17.1			4.7
Less effects of discounting		(2.3	)		(0.9	)
Lease liabilities recognized	$	14.8		$	3.8

As of September 28, 2024, the weighted average lease term for all operating and finance leases was 6.9 and 6.5 years, respectively. The weighted average discount rate associated with operating and finance leases was 6.3% and 6.8%, respectively, as of such date.

Note H - 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 of 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%. The Company has $3.0 million of outstanding borrowings under the revolving commitment portion of the credit facility as of September 28, 2024.

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 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 its covenants under the Credit Agreement on September 28, 2024, and through the date of filing this Form 10-Q.

Note I - Stock Options and Awards

On February 19, 2020, the Board of Directors of the Company (the “Board”) adopted The Eastern Company 2020 Stock Incentive Plan (the “2020 Plan”). On April 29, 2020, at the Company’s 2020 Annual Meeting of Shareholders, the shareholders of the Company approved and adopted the 2020 Plan. The Company has no other existing plan pursuant to which equity awards may be granted.

Incentive stock options 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 options are granted. Restricted stock awards may also be granted to participants under the 2020 Plan with restrictions determined by the Compensation Committee of the Board. Under the 2020 Plan, non-qualified stock options granted to participants will have exercise prices determined by the Compensation Committee of the Board. During the first nine months of fiscal 2024 and 2023, the Company granted stock awards with respect to 92,016 and 79,500 shares of Company common stock, respectively, that were subject to the meeting of performance measurements or time based. For the first nine months of fiscal years 2024 and 2023, the Company used fair market value to determine the associated expense with stock awards.

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The 2020 Plan also permits the issuance of Stock Appreciation Rights (“SARs”). The SARs are in the form of an option with a cashless exercise price equal to the difference between the fair value of the Company’s common stock at the date of grant and the fair value as of the exercise date resulting in the issuance of the Company’s common stock. The Company did not issue any SARs during the first nine months of fiscal 2024 and 2023.

Stock-based compensation (income) expense, including forfeitures, in connection with SARs and stock awards previously granted to employees was approximately $168,000 and $5,000 in the third quarter of 2024 and the third quarter of 2023, respectively, and was approximately $582,000 and $(158,000) in the first nine months of fiscal years 2024 and 2023, respectively.

As of September 28, 2024, there were 792,300 shares of Company common stock reserved and available for future grant under the 2020 Plan.

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

	Nine Months Ended					Year Ended
	September 28, 2024					December 30, 2023
	Units			Weighted Average Exercise Price		Units			Weighted Average Exercise Price
Outstanding at beginning of period		13,000		$	24.19		146,166		$	23.22
Expired		(9,000	)		26.30		(50,833	)		24.24
Exercised		(2,500	)		20.20		(33,333	)		21.10
Forfeited		-			-		(49,000	)		22.80
Outstanding at end of period		1,500			20.20		13,000			24.19

SARs Outstanding and Exercisable
Range of Exercise Prices		Outstanding as of September 28, 2024		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Exercisable as of September 28, 2024		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price

$	20.20		1,500		0.6	$	20.20		1,500		0.6	$	20.20

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

	Nine Months Ended			Year Ended
	September 28, 2024			December 30, 2023
	Shares			Shares
Outstanding at beginning of period		89,400			64,500
Issued		92,016			82,800
Exercised		(23,734	)		(10,600	)
Forfeited		(12,994	)		(47,300	)
Outstanding at end of period		144,688			89,400

As of September 28, 2024, outstanding SARs and stock awards had an intrinsic value of $3,254,000.

Note J – Share Repurchase Program

On August 21, 2023, the Company announced that the Board had approved a new share repurchase program authorizing the Company to repurchase up to 200,000 shares of the Company’s common stock through August 20, 2028. The Company’s share repurchase program does not obligate it to acquire the Company’s common stock at any specific cost per share. Under this program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

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Below is a summary of the Company’s shares repurchased during the third quarter of 2024 under the new share repurchase program.

Period

Total Number of Shares Purchased

Average Price Paid Per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum Number of Shares that may yet be Purchased Under the Plans or Programs

Balance as of June 29, 2024

60,076

20.27

60,076

139,924

June 30, 2024 – September 28, 2024

50,000

28.68

50,000

89,924

Balance as of September 28, 2024

110,076

24.09

110,076

89,924

Note K – Revenue Recognition

The Company’s revenues result from the sale of goods and services and reflect the consideration to which the Company expects to be entitled. The Company records revenues in accordance with FASB Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers.” The Company has defined purchase orders as contracts in accordance with ASC Topic 606. For its customer contracts, the Company identifies its performance obligations, which are delivering goods or services, determines the transaction price, allocates the contract transaction price to the performance obligations (when applicable), and recognizes the revenue when (or as) the performance obligation is transferred to the customer. A good or service is transferred when the customer obtains control of that good or service. The Company’s revenues are recorded at a point in time from the sale of tangible products. Revenues are recognized when products are shipped.

Customer volume rebates, product returns, discount and allowance are variable considerations and are recorded as a reduction of revenue in the same period that the related sales are recorded. The Company has reviewed the overall sales transactions for variable consideration and has determined that these costs are not material.

The Company has no future performance obligations and does not capitalize costs to obtain or fulfill contracts.

Note L - Income Taxes

The Company files income tax returns in the U.S. at the federal and state levels, and in foreign jurisdictions. With limited exceptions, the Company is no longer subject to U.S. federal, state, and local income tax examinations by tax authorities for years before 2019 and is no longer subject to non-U.S. income tax examinations by foreign tax authorities for years prior to 2017.

The total amount of unrecognized tax benefits could increase or decrease within the next 12 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 FASB ASC Topic 740, “Income Taxes.” There have been no significant changes to the value of unrecognized tax benefits during the nine months ended September 28, 2024. The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits will not increase or decrease significantly over the next twelve months.

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Note M - Retirement Benefit Plans

The Company has four non-contributory defined benefit pension plans covering most U.S. employees. All of these pension plans are frozen and participants in these plans have not accrued benefits since the date on which these plans were frozen. Plan benefits are generally based upon age at retirement, years of service and, for the plan covering salaried employees, 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.

Significant disclosures relating to these benefit plans for the third quarter and first nine months of fiscal years 2024 and 2023 are as follows:

	Pension Benefits
	Three Months Ended						Nine Months Ended
	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Service cost	$	178,003		$	216,153		$	534,010		$	648,459
Interest cost		966,701			990,053			2,900,107			2,970,160
Expected return on plan assets		(1,099,034	)		(1,049,016	)		(3,297,103	)		(3,147,046	)
Amortization of prior service cost		-			-			-			-
Amortization of the net loss		327,363			342,866			982,091			1,028,596
Net periodic benefit cost	$	373,033		$	500,056		$	1,119,105		$	1,500,169

	Other Postretirement Benefits
	Three Months Ended						Nine Months Ended
	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Service cost	$	3,574		$	6,486		$	10,722		$	19,458
Interest cost		12,951			14,533			38,853			43,599
Expected return on plan assets		(4,684	)		(4,849	)		(14,052	)		(14,547	)
Amortization of prior service cost		1,060			1,060			3,180			3,180
Amortization of the net loss		(19,567	)		(16,895	)		(58,701	)		(50,685	)
Net periodic (benefit) cost	$	(6,666	)	$	335		$	(19,998	)	$	1,005

The Company’s funding policy with respect to its qualified plans is to contribute at least the minimum amount required by applicable laws and regulations. In fiscal year 2024, the Company expects to make cash contributions to its qualified pension plans of approximately $2,100,000 and approximately $50,000 into its other postretirement plan. As of September 28, 2024, the Company has contributed $1,572,000 to its pension plans and $25,000 to its postretirement plan in fiscal year 2024 and expects to make the remaining contributions as required during the remainder of the fiscal year.

The Company has a contributory savings plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”) covering substantially all U.S. non-union employees. The 401(k) Plan allows participants to make voluntary contributions from their annual compensation on a pre-tax basis, subject to limitations under the Internal Revenue Code. The 401(k) Plan provides for contributions by the Company at its discretion.

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The Company made contributions to the 401(k) Plan as follows:

	Three Months Ended				Nine Months Ended
	September 28, 2024		September 30, 2023		September 28, 2024		September 30, 2023
Regular matching contribution	$	263,074	$	241,487	$	810,630	$	747,913
Transitional credit contribution		20,688		23,271		71,558		83,935
Non-discretionary contribution		80,465		83,302		294,228		654,552
Total contributions for the period	$	364,227	$	348,060	$	1,176,416	$	1,486,400

The non-discretionary contribution of $328,953 made in the nine months ended September 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.

Note N - Recent Accounting Pronouncements

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which amends the reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We do not expect this new standard to have a significant impact on our disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740), 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. We do not expect this new standard to have a significant impact on 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.

Note O - 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 September 28, 2024, there were two significant concentrations of credit risk with customers, who had receivables representing 18% and 11% respectively, of our net accounts receivable. As of December 30, 2023, there was one customer that represented 12% of the Company’s net accounts receivable. The maximum exposure to credit risk is primarily represented by the carrying amount of the Company’s accounts receivable.

The Company has deposits that exceed amounts up to $250,000 that are insured by the Federal Deposit Insurance Corporation (FDIC), but the Company does not consider this a significant concentration of credit risk based on the strength of the financial institution.

Interest Rate Risk

The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s debt under the Credit Agreement, 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.

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Note P – 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 September 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 $12.6 million as of September 28, 2024 and $0.0 million as of December 30, 2023. As of September 28, 2024 a loss of $0.4 million, net of tax, will be reclassified to earnings within the next fifteen months. All currency cash flow hedges outstanding as of September 28, 2024 mature within fifteen months.

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 unaudited Condensed Consolidated Statements of Operations for the nine months ended September 28, 2024:

Derivative Instruments		Amount of Loss Recognized in Accumulated Other Comprehensive Income				Amount of Loss Reclassified from Accumulated Other Comprehensive Income into Earnings				Location in Condensed Consolidated Statement of Operations
Designated foreign currency hedge contracts, net of tax		$	(412,382	)		$	(148,657	)		Cost of products sold

ASC 815 requires all derivative instruments to be recognized at their fair values as either assets or liabilities on the balance sheet. The Company determines the fair value of its derivative instruments using the framework prescribed by ASC 820, “Fair Value Measurements and Disclosures,” by considering the estimated amount it would receive or pay to sell or transfer these instruments at the reporting date. Generally, the Company uses inputs that include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; other observable inputs for the asset or liability; and inputs derived principally from, or corroborated by, observable market data by correlation or other means. As of September 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 September 28, 2024 and December 30, 2023:

	Location in Condensed Consolidated Balance Sheets	As of September 28, 2024		As of December 30, 2023
Derivative Assets:
Designated foreign currency hedge contracts	Other long-term assets	$	42,510	$	-

Derivative Liabilities:
Designated foreign currency hedge contracts	Other current liabilities	$	578,071	$	-

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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to highlight significant changes in the financial position and results of operations of The Eastern Company (together with its consolidated subsidiaries, the “Company,” “we,” “us” or “our”) for the three and nine months ended September 28, 2024. This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and Notes thereto for the fiscal year ended December 30, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023, which was filed with the Securities and Exchange Commission (the “SEC”) on March 12, 2024 (the “2023 Form 10-K”).

The Company’s fiscal year is a 52-53-week fiscal year ending on the Saturday nearest to December 31. References in this Quarterly Report on Form 10-Q for the quarterly period ended September 28, 2024 (this “Form 10-Q”) to 2023, the 2023 fiscal year or fiscal 2023 mean the 52-week period ended on December 30, 2023, and references to 2024, the 2024 fiscal year or fiscal 2024 mean the 52-week period ending on December 28, 2024. In a 52-week fiscal year, each quarter has 13 weeks. References to the third quarter of 2023, the third fiscal quarter of 2023 or the three months ended September 30, 2023 mean the 13-week period from July 2, 2023 to September 30, 2023. References to the third quarter of 2024, the third fiscal quarter of 2024 or the three months ended September 28, 2024 mean the 13-week period from June 30, 2024 to September 28, 2024. References to the first nine months of 2023 or the nine months ended September 30, 2023 mean the period from January 1, 2023 to September 30, 2023. References to the first nine months of 2024 or the nine months ended September 28, 2024 mean the period from December 31, 2023 to September 28, 2024.

Safe Harbor for Forward-Looking Statements

Statements contained in this Form 10-Q that are not based on historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of forward-looking terminology such as “would,” “should,” “could,” “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue,” “plan,” “potential,” “opportunities,” or similar terms or variations of those terms or the negative of those terms. There are many factors that affect the Company’s business and the results of its operations and that may cause the actual results of operations in future periods to differ materially from those currently expected or anticipated. These factors include:

	·	the impact of higher raw material and component costs and cost inflation, supply chain disruptions and shortages, particularly with respect to steel, plastics, scrap iron, zinc, copper, and electronic components;

	·	delays in delivery of our products to our customers;

	·	the impact of global economic conditions and rising interest rates, and more specifically conditions in the automotive, construction, aerospace, energy, oil and gas, transportation, electronic, and general industrial markets, including the impact, length and degree of economic downturns on the customers and markets we serve and demand for our products, reductions in production levels, the availability, terms and cost of financing, including borrowings under credit arrangements or agreements, the potential impact of bank failures on our ability to access financing or capital markets, and the impact of market conditions on pension plan funded status;

	·	restrictions on operating flexibility imposed by the agreement governing our credit facility;

	·	risks associated with doing business overseas, including fluctuations in exchange rates and the inability to repatriate foreign cash, the impact on cost structure and on economic conditions as a result of actual and threatened increases in trade tariffs and the impact of political, economic, and social instability;

	·	the inability to achieve the savings expected from global sourcing of materials;

	·	lower-cost competition;

	·	our ability to design, introduce and sell new or updated products and related components;

	·	market acceptance of our products;

	·	the inability to attain expected benefits from acquisitions or the inability to effectively integrate acquired businesses and achieve expected synergies;

	·	costs and liabilities associated with environmental compliance;

	·	the impact of climate change, natural disasters, geopolitical events and elections, including a change in administration from the upcoming U.S. presidential election, and public health crises, including pandemics (such as COVID-19) and epidemics, and any related Company or government policies or actions;

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	·	military conflict (including the Russia/Ukraine conflict, the conflict in the Middle East, the possible expansion of such conflicts and geopolitical consequences) or terrorist threats and the possible responses by the U.S. and foreign governments;

	·	failure to protect our intellectual property;

	·	cyberattacks; and

	·	materially adverse or unanticipated legal judgments, fines, penalties, or settlements.

The Company is also subject to other risks identified and discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, in Part I, Item 1A, Risk Factors, and in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the 2023 Form 10-K, and that may be identified from time to time in our quarterly reports on Form 10-Q, current reports on Form 8-K and other filings we make with the SEC.

Although the Company believes it has an appropriate business strategy and the resources necessary for its operations, future revenue and margin trends cannot be reliably predicted, and the Company may alter its business strategies to address changing conditions. Also, the Company makes estimates and assumptions that may materially affect reported amounts and disclosures. These relate to valuation allowances for accounts receivable and excess and obsolete inventories, accruals for pensions and other postretirement benefits (including forecasted future cost increases and returns on plan assets), provisions for depreciation (estimating useful lives), uncertain tax positions, and, on occasion, accruals for contingent losses. The Company undertakes no obligation to update, alter, or otherwise revise any forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events, or otherwise, except as required by law.

Recent Development

In the third quarter of 2024 we determined that the Big 3 Mold business no longer fits with our long-term strategy, and we have initiated the process of selling the business. The Mold business is cyclical in nature, requires significant capital investment to remain competitive, and serves different markets than our other businesses. Selling the Big 3 Mold business will allow management to focus on our core capabilities, offerings, and markets served.

In the third quarter of 2024, we 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 unaudited condensed consolidated statements of operations as discontinued operations for all periods presented. Additionally, current and non-current assets and liabilities of discontinued operations are reflected in the unaudited condensed consolidated balance sheets for both periods presented.

The loss recognized in the write-down of the Big 3 Mold business to fair value in the third quarter of 2024 was $19.2 million, net of tax.

The following analysis excludes discontinued operations.

Net sales in the third quarter of 2024 increased 15% to $71.3 million from $62.0 million in the corresponding period in 2023. Net sales for the first nine months of 2024 increased 6% to $206.1 million from $195.1 million in the corresponding period last year. Sales increased in the third quarter of 2024 primarily due to increased demand for returnable transport packaging products, truck mirror assemblies, and truck accessories of $7.4 million, $1.2 million, and $0.7 million, respectively. Sales increases in the first nine months of 2024 were driven by increased demand for truck mirror assemblies and returnable transport packaging products of $13.3 million and $4.6 million respectively, offset by lower demand for truck accessories of $6.9 million. Our backlog as of September 28, 2024 increased 13% to $97.2 million from $86.2 million as of September 30, 2023, primarily driven by increased orders for various truck mirror assemblies of $11.6 million and returnable transport packaging products of $3.2 million.

Net sales of existing products increased 9% in the third quarter of 2024 and decreased 2% for the first nine months of 2024 compared to the corresponding periods in 2023. Price increases and new products increased net sales by 5% in the third quarter of 2024 and 6% in the first nine months of 2024, compared to the corresponding periods in 2023. New products included various truck mirror assemblies, rotary latches, D-rings, handles, and mirror cams.

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Cost of products sold increased $6.5 million, or 14%, in the third quarter of 2024 and increased $3.8 million, or 3% in the first nine months of 2024 compared to the corresponding period in 2023 primarily due to higher sales volume, partially offset by other cost savings initiatives. Additionally, the Company paid tariff costs on China-sourced products of approximately $0.6 million and $1.9 million in the third quarter of 2024 and first nine months of 2024 respectively, compared to $0.6 million and $1.7 million in the third quarter of 2023 and first nine months of 2023, respectively. Most tariffs on China-sourced products have been recovered through price increases.

Gross margin as a percentage of sales was 25.5% in the third quarter of 2024 and 25.2% in the first nine months of 2024 compared to 24.9% in the third quarter of 2023 and 22.9% in the first nine months of 2023. Our gross margins in the third quarter of 2024 primarily reflect the impact of price increases to customers to recover increases in raw material costs and other cost savings initiatives.

Product development expenses decreased $0.3 million in the third quarter of 2024 and decreased $0.5 million in the first nine months of 2024 compared to the corresponding periods in 2023 as we continue to invest in new products at our Eberhard, Velvac, and Big 3 businesses. As a percentage of net sales, product development costs were 1.5% for the third quarter of 2024 and 1.8% for the first nine months of 2024, compared to 2.3% and 2.2% for the corresponding periods in 2023.

Selling, general and administrative expenses increased $1.9 million, or 22.1%, in the third quarter of 2024 when compared to the third quarter of 2023 primarily due to higher payroll-related expenses of $1.2 million, legal and professional expenses of $0.3 million, travel expenses of $0.1 million, and other selling and administrative expenses of $0.3 million. Selling and administrative expenses increased $2.0 million, or 6.8%, in the first nine months of 2024 when compared to the corresponding period in 2023 primarily due to higher payroll-related expenses of $1.7 million and other administrative costs.

Interest expense decreased $0.1 million in the third quarter of 2024 and was flat in the first nine months of 2024 compared to the corresponding periods in 2023 due to lower principal balances, partially offset by higher interest rates.

Other income and expense increased $0.1 million in the third quarter of 2024 and decreased $1.1 million in the first nine months of 2024 when compared to the corresponding periods in 2023. The increase in other income and expense of $0.1 million in the third quarter of 2024 was primarily driven by lower pension expense of $0.1 million when compared to the third quarter of 2023. The decrease in other income and expense of $1.1 million for the first nine months of 2024 when compared to the corresponding period in 2023 was primarily driven by $0.3 million lower pension expense in the second quarter of 2023, and an unfavorable final working capital adjustment of $0.4 million related to the sale of the Greenwald business in the first quarter of 2023, partially offset by a $1.6 million favorable adjustment for the final settlement of our swap agreement with Santander in the second quarter of 2023.

Net income for the third quarter of fiscal 2024 was $4.7 million, or $0.75 per diluted share compared to net income of $3.5 million, or $0.55 per diluted share, for the comparable period in 2023. In the first nine months of 2024 net income was $11.7 million, or $1.87 per diluted share compared to net income of $7.8 million, or $1.24 per diluted share for the comparable period in 2023.

A more detailed analysis of the Company’s results of operations and financial condition follows.

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Results of Operations

The following table shows, for the periods indicated, selected line items from the condensed consolidated statements of operations as a percentage of net sales:

	Three Months Ended						Nine Months Ended
	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023

Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of products sold		74.5	%		75.1	%		74.8	%		77.1	%
Gross margin		25.5	%		24.9	%		25.2	%		22.9	%
Product development expense		1.5	%		2.3	%		1.8	%		2.2	%
Selling and administrative expense		14.5	%		13.6	%		15.1	%		14.9	%
Operating Profit		9.5	%		9.0	%		8.3	%		5.8	%

The following table shows the change in sales and operating profit for the third quarter and first nine months of 2024 compared to the third quarter and first nine months of 2023 (dollars in thousands):

	Three Months			Nine Months
	Ended			Ended
	September 28, 2024			September 28, 2024

Net Sales	$	9,273		$	11,006

Volume		9.3	%		-1.6	%
Price		0.1	%		1.4	%
New products		4.3	%		4.7	%
		13.7	%		4.5	%

Operating Profit	$	1,227		$	5,772

Liquidity and Sources of Capital

The Company generated $8.3 million of cash from operations during the first nine months of fiscal 2024 compared to generating $18.2 million during the first nine months of fiscal 2023. Cash flow from operations in the first nine months of 2024 was lower when compared to the corresponding period in 2023 primarily due to increases in accounts receivable of $11.7 million due to increases in revenue in the third quarter of 2024 when compared to the corresponding period in 2023 and approximately $3.0 million in accounts receivable due to the pre-billing to cover material costs on a specific job.

Additions to property, plant, and equipment were $7.6 million and $4.1 million for the first nine months of 2024 and 2023, respectively. As of September 28, 2024, there were approximately $4.0 million of outstanding commitments for capital expenditures.

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The following table shows key financial ratios at the end of each specified period:

	Third Quarter 2024			Third Quarter 2023			Fiscal Year 2023
Current ratio		2.6			2.6			2.6
Average days’ sales in accounts receivable		62			53			48
Inventory turnover		3.8			3.4			3.5
Total debt to shareholders’ equity		37.5	%		37.8	%		33.2	%

The following table shows important liquidity measures as of the balance sheet date for each specified period or for the period, as applicable (in millions):

	Third			Third			Fiscal
	Quarter			Quarter			Year
	2024			2023			2023
Cash and cash equivalents
- Held in the United States	$	5.9		$	6.9		$	6.9
- Held by a foreign subsidiary		1.7			2.0			1.1
		7.6			8.9			8.0

Working capital		78.2			73.5			69.5
Net cash provided by operating activities		8.3			5.4			9.7
Change in working capital impact on net cash used in operating activities		(8.2	)		7.0			9.7
Net cash used in investing activities		(8.1	)		(2.4	)		(5.4	)
Net cash used in financing activities		(0.5	)		(16.9	)		(22.9	)

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Inventories of $58.1 million as of September 28, 2024 declined by $0.3 million, or 0.5%, when compared to $59.3 million at the end of fiscal year 2023 and declined $1.9 million, or 3.2%, when compared to $60.0 million at the end of the third quarter of fiscal 2023. Accounts receivable, less allowances, were $46.0 million as of September 28, 2024, as compared to $34.2 million at 2023 fiscal year end and $40.0 million at the end of the third quarter of fiscal 2023. Accounts receivable as of September 28, 2024 included approximately $3.0 million for pre-billing to cover material costs on a specific job and adversely impacted average days sales in accounts receivable by 4 days.

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”), and incurred indebtedness under the Credit Agreement in the aggregate principal amount of $60 million in the form of a term loan, the proceeds of which were used to repay the Company’s remaining outstanding term loan and to terminate its existing credit facility with Santander. See Note H Debt, for additional information regarding the terms of the Credit Agreement, including repayment terms, interest rates, and applicable loan covenants. Under the terms of the Credit Agreement, the Company is subject to restrictive covenants that limit our ability to, among other things, incur additional indebtedness, pay dividends, or make other distributions, and consolidate, merge, sell or otherwise dispose of assets, as well as financial covenants that require us to maintain a fixed charge coverage ratio and a maximum senior net leverage ratio. These covenants may limit how we conduct our business, and in the event of certain defaults, our repayment obligations may be accelerated. We were in compliance with all of our covenants as of September 28, 2024 and had no outstanding borrowings under the revolving commitment portion of the credit facility as of such date. On September 6, 2024, the Company drew down $3.0 million on its revolving credit facility to support ongoing working capital requirements. The Company has $27.0 million available on its revolving line of credit.

Cash, cash flow from operating activities and funds available under the revolving credit portion of the Credit Agreement are expected to be sufficient to cover future foreseeable working capital requirements in the short-term (i.e., the next 12 months from September 28, 2024) and separately in the long-term (i.e., beyond the next 12 months). However, the Company cannot provide any assurances of the availability of future financing or the terms on which it might be available. In addition, the interest rate on borrowings under the Credit Agreement varies based on our senior net leverage ratio, and the Credit Agreement requires us to maintain a senior net leverage ratio not to exceed 3.50 to 1 and a fixed charge coverage ratio to be not less than 1.25 to 1. 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 Credit 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 third 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.

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. For a full description of our critical accounting estimates, refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of the 2023 Form 10-K. While there have been no material changes to our critical accounting estimates since the filing of the 2023 Form 10-K, we continue to monitor the methodologies and assumptions underlying such critical accounting estimates.

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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 condensed 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, Adjusted EBITDA from Continuing Operations, Adjusted EBITDA from Discontinued Operations and Adjusted EBITDA, 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, diluted earnings per share, 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 Continuing 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 Continuing 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.

Adjusted EBITDA from Discontinued Operations is defined as net income from discontinued 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 Discontinued 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.

Adjusted EBITDA is defined as net income 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 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
Adjusted Net Income from Continuing Operations and Adjusted Earnings per Share
from Continuing Operations Calculation
For the Three and Nine Months ended September 28, 2024 and September 30, 2023
($000's)

	Three Months Ended				Nine Months Ended
	September 28, 2024		September 30, 2023		September 28, 2024		September 30, 2023
Net income from continuing operations as reported per generally accepted accounting principles (GAAP)	$	4,669	$	3,463	$	11,676	$	7,773

Earnings per share from continuing operations as reported under generally accepted accounting principles (GAAP):

Basic	$	0.75	$	0.55	$	1.88	$	1.25
Diluted	$	0.75	$	0.55	$	1.87	$	1.24

Adjustments:
Severance and accrued compensation		-		-		-		1,799	a
Greenwald final sale adjustment		-		-		-		390	b
Non-GAAP tax impact of adjustments (1)		-		-		-		(909	)
Total adjustments (non-GAAP)	$	-	$	-	$	-	$	1,280

Adjusted net income from continuing operations (non-GAAP)	$	4,669	$	3,463	$	11,676	$	9,053

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

Basic	$	0.75	$	0.56	$	1.88	$	1.45
Diluted	$	0.75	$	0.55	$	1.87	$	1.44

(1) We estimate the tax effect of the items identified to determine a non-GAAP annual effective tax rate applied to the pre-tax amount in order to calculate the non-GAAP provision for income taxes

a) Severance expenses associated with accrued compensation and severance related to the elimination of the Chief Operating Officer position and the departure of the Chief Executive Officer

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

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Reconciliation of Non-GAAP Measures
Calculations of Adjusted EBITDA from Continuing Operations, Adjusted EBITDA from Discontinued Operations and Adjusted EBITDA
For the Three and Nine Months ended September 28, 2024 and September 30, 2023
($000's)
	Three Months Ended						Nine Months Ended
	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Net income from continuing operations as reported per generally accepted accounting principles (GAAP)	$	4,669		$	3,463		$	11,676		$	7,773

Interest expense		710			854			2,050			2,060
Provision for income taxes		1,334			1,114			3,335			2,574
Depreciation and amortization		2,033			1,317			4,266			3,914
Severance and accrued compensation		-			-			-			1,799	a
Greenwald final sale adjustment		-			-			-			390	b
Adjusted EBITDA from continuing operations (non-GAAP)	$	8,745		$	6,748		$	21,327		$	18,510
Net income from discontinued operations as reported per generally accepted accounting principles (GAAP)	$	(19,966	)	$	(401	)	$	(21,518	)	$	(2,704	)

Interest expense		177			214			512			515
Provision for income taxes		(3,889	)		(129	)		(4,321	)		(896	)
Depreciation and amortization		546			534			1,595			1,558
Loss on classification as held for sale		23,088	c		-			23,088	c		-
Adjusted EBITDA from discontinued operations (non-GAAP)	$	(44	)	$	217		$	(644	)	$	(1,527	)

Net income as reported per generally accepted accounting principles (GAAP)	$	(15,297	)	$	3,062		$	(9,842	)	$	5,068

Interest expense		887			1,068			2,562			2,575
Provision for income taxes		(2,555	)		984			(985	)		1,679
Depreciation and amortization		2,579			1,851			5,861			5,472
Severance and accrued compensation		-			-			-			1,799	a
Greenwald final sale adjustment		-			-			-			390	b
Loss on classification as held for sale		23,088	c		-			23,088	c		-
Adjusted EBITDA (non-GAAP)	$	8,701		$	6,965		$	20,683		$	16,983

a) Severance expenses associated with accrued compensation and severance related to the elimination of the Chief Operating Officer position and the departure of the Chief Executive Officer

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

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

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ITEM 3 – 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is not required to provide information under this Item 3.

ITEM 4 – CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures:

As of September 28, 2024, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (the “CEO”) and the Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) pursuant to Exchange Act Rule 13a-15. As defined in Exchange Act Rules 13a-15(e) and 15d-15(e), “the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.”

The Company believes that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and the CEO and CFO have concluded that these controls and procedures are effective at the “reasonable assurance” level as of September 28, 2024.

Changes in Internal Control Over Financial Reporting:

During the period covered by this Form 10-Q, there were no changes in the Company’s internal control over financial reporting that have materially affected or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

The Company is a party to various legal proceedings from time to time related to its normal business operations. As of the end of the quarter ended September 28, 2024, the Company does not have any material pending legal proceedings, other than as set forth in Part I, Item 3, Legal Proceedings, of the 2023 Form 10-K, or any material legal proceedings known to be contemplated by governmental authorities.

ITEM 1A – RISK FACTORS

The Company’s business is subject to several risks, some of which are beyond its control. In addition to the other information set forth in this Quarterly Report on Form 10-Q, the Company’s shareholders should carefully consider the risk factors discussed in Part I, Item 1A, Risk Factors, of the 2023 Form 10-K. These risk factors could have a material adverse effect on the Company’s business, results of operations, financial condition and/or liquidity and could cause our operating results to vary significantly from period to period. As of September 28, 2024, there have been no material changes to the risk factors disclosed in the 2023 Form 10-K. The Company may disclose changes to such risk factors or disclose additional risk factors from time to time in its future filings with the SEC. Additional risks and uncertainties not currently known to the Company or that it currently deems to be immaterial also may materially adversely affect its business, financial condition, or operating results.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On August 21, 2023, the Company announced that the Board of Directors of the Company had approved a new share repurchase program authorizing the Company to repurchase up to 200,000 shares of the Company’s common stock through August 20, 2028. The Company’s new share repurchase program does not obligate it to acquire the Company’s common stock at any specific cost per share. Under this program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act. Below is a summary of the Company’s share repurchases during the third quarter of 2024 under the new share repurchase program.

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that may yet be Purchased Under the Plans or Programs
June 30, 2024 - August 3, 2024		17,081	$	27.45		17,081		122,843

August 4, 2024 - August 31, 2024		12,919		28.77		12,919		109,924

September 1, 2024 - September 28, 2024		20,000		29.68		20,000		89,924

Total		50,000	$	28.68		50,000		89,924

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 – MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 – OTHER INFORMATION

(a) None.

(b) None.

(c) During the third quarter of 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1trading arrangement” or “non-Rule 10b5-1trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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ITEM 6 – EXHIBITS

3.1)	Restated Certificate of Incorporation of the Company, as amended (conformed copy) (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed on May 6, 2020).

3.2)	Amended and Restated By-Laws of the Company, as amended through March 11, 2022 (incorporated by reference to Exhibit 3(ii) to the Company’s Current Report on Form 8-K filed on March 11, 2022).

31)	Certifications required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32)	Certifications pursuant to Rule 13a-14(b) and 18 USC 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

101)	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 28, 2024, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 28, 2024 and September 30, 2023; (ii) Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended September 28, 2024, and September 30, 2023; (iii) Condensed Consolidated Balance Sheets (Unaudited) as of September 28, 2024 and December 30, 2023; (iv) Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 28, 2024 and September 30, 2023; and (iv) Notes to Condensed Consolidated Financial Statements (Unaudited).**

104)	Cover Page Interactive Data File (formatted as Inline XBRL and included in Exhibit 101). **

* Filed herewith.

** Furnished herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	THE EASTERN COMPANY
	(Registrant)
DATE: November 5, 2024	/s/James Mitarotonda
	James Mitarotonda Chairman of the Board

DATE: November 5, 2024	/s/Nicholas Vlahos
	Nicholas Vlahos Vice President and Chief Financial Officer

nullnull

Cover	9 Months Ended
Cover	Sep. 28, 2024 shares
Cover [Abstract]
Entity Registrant Name	THE EASTERN COMPANY
Entity Central Index Key	0000031107
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Document Period End Date	Sep. 28, 2024
Entity Filer Category	Accelerated Filer
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2024
Entity Common Stock Shares Outstanding	6,183,179
Entity File Number	001-35383
Entity Incorporation State Country Code	CT
Entity Tax Identification Number	06-0330020
Entity Address Address Line 1	3 Enterprise Drive
Entity Address Address Line 2	Suite 408
Entity Address City Or Town	Shelton
Entity Address State Or Province	CT
Entity Address Postal Zip Code	06484
City Area Code	203
Local Phone Number	729-2255
Security 12b Title	Common Stock, No Par Value
Trading Symbol	EML
Security Exchange Name	NASDAQ
Document Quarterly Report	true
Document Transition Report	false
Entity Interactive Data Current	Yes

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 28, 2024	Sep. 28, 2023	Sep. 28, 2024	Sep. 28, 2023
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Net sales	$ 71,274,757	$ 62,001,347	$ 206,068,490	$ 195,062,061
Cost of products sold	(53,085,087)	(46,556,952)	(154,161,980)	(150,371,589)
Gross margin	18,189,670	15,444,395	51,906,510	44,690,472
Product development expense	(1,077,930)	(1,425,159)	(3,739,214)	(4,257,468)
Selling and administrative expenses	(10,316,788)	(8,452,163)	(31,014,022)	(29,051,436)
Operating profit	6,794,952	5,567,073	17,153,274	11,381,568
Interest expense	(709,680)	(854,223)	(2,049,655)	(2,059,912)
Other (expense) income	(82,703)	(135,839)	(92,415)	1,025,582
Income from continuing operations before income taxes	6,002,569	4,577,011	15,011,204	10,347,238
Income tax expense	(1,333,771)	(1,113,587)	(3,335,489)	(2,574,393)
Net income from continuing operations	4,668,798	3,463,424	11,675,715	7,772,845
Discontinued Operations (see note B)
Loss from operations of discontinued unit	(766,990)	(530,764)	(2,750,844)	(3,600,060)
Loss on classification as held for sale	(23,087,775)	0	(23,087,775)	0
Income tax benefit	3,888,522	129,298	4,320,904	895,695
Loss on discontinued operations	(19,966,243)	(401,466)	(21,517,715)	(2,704,365)
Net (loss) income	$ (15,297,445)	$ 3,061,958	$ (9,842,000)	$ 5,068,480
Earnings per share from continuing operations:
Basic	$ 0.75	$ 0.55	$ 1.88	$ 1.25
Diluted	0.75	0.55	1.87	1.24
Loss per share from discontinued operations:
Basic	(3.22)	(0.06)	(3.46)	(0.43)
Diluted	(3.21)	(0.06)	(3.45)	(0.43)
Total (loss) earnings per share:
Basic	(2.47)	0.49	(1.58)	0.82
Diluted	(2.46)	0.49	(1.58)	0.81
Cash dividends per share	$ 0.11	$ 0.11	$ 0.33	$ 0.33

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 28, 2024	Sep. 28, 2023	Sep. 28, 2024	Sep. 28, 2023
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Net (loss) income	$ (15,297,445)	$ 3,061,958	$ (9,842,000)	$ 5,068,480
Change in foreign currency translation	(120,191)	(87,572)	(527,862)	(182,029)
Change in fair value of foreign currency swap, net of tax benefit of: 2024 - $(106,076) and $(123,179) respectively	355,123	0	412,382	0
Change in fair value of interest rate swap, net of tax benefit of: 2023 - $0 and $(274,957) respectively	0	0	0	(1,449,754)
Change in pension and postretirement benefit costs, net of taxes of: 2024 - $71,355 and $214,065 respectively; 2023 - $74,360 and $223,079 respectively	237,501	252,668	718,338	758,006
Total other comprehensive (loss) income	(237,813)	165,096	(221,906)	(873,777)
Comprehensive (loss) income	$ (15,535,258)	$ 3,227,054	$ (10,063,906)	$ 4,194,703

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Sep. 28, 2024	Dec. 30, 2023
Current Assets
Cash and cash equivalents	$ 7,670,541	$ 8,048,127
Marketable securities	2,034,602	986,477
Accounts receivable, less allowances: 2024 - $470,870; 2023 - $534,476	45,999,803	34,204,581
Inventories	58,125,362	58,396,679
Current portion of notes receivable	239,261	573,269
Prepaid expenses and other assets	2,356,524	5,443,778
Current assets held for sale	9,643,534	4,583,797
Total Current Assets	126,069,627	112,236,708
Property, Plant and Equipment	59,890,704	52,684,476
Accumulated depreciation	(31,095,676)	(29,162,438)
Property, Plant and Equipment, Net	28,795,028	23,522,038
Goodwill	58,576,197	58,576,198
Trademarks	3,946,651	3,914,409
Patents and other intangibles net of accumulated amortization	9,373,296	11,182,167
Long-term notes receivable, less current portion	238,002	374,932
Deferred Income Taxes	2,536,357	2,283,571
Right of Use Assets	14,645,336	17,064,137
Other Long-Term Assets	42,510	0
Long-term liabilities held for sale	0	6,920
Total Other Assets	89,358,349	116,280,455
TOTAL ASSETS	244,223,004	252,039,201
Current Liabilities
Accounts payable	23,988,401	24,554,117
Accrued compensation	5,142,966	5,194,830
Other accrued expenses	8,252,803	3,965,335
Current portion of operating lease liability	3,373,500	4,336,794
Current portion of finance lease liability	721,178	175,231
Current portion of long-term debt	3,228,935	2,871,870
Other current liabilities	578,071	0
Current liabilities held for sale	2,541,189	1,635,549
Total Current Liabilities	47,827,043	42,733,726
Other long-term liabilities	640,724	730,970
Operating lease liability, less current portion	11,271,835	12,727,344
Finance lease liability, less current portion	3,050,529	715,669
Long-term debt, less current portion	41,487,366	41,063,865
Accrued postretirement benefits	594,167	554,758
Accrued pension cost	20,111,130	21,025,365
Long-term assets held for sale	0	22,885,041
Total Liabilities	124,982,794	119,558,617
Shareholders' Equity
Common Stock, no par value, Authorized: 50,000,000 shares Issued: 9,127,700 shares as of 2024 and 9,091,815 shares as of 2023 Outstanding: 6,183,179 shares as of 2024 and 6,217,370 shares as of 2023	34,864,634	33,950,859
Treasury Stock: 2,894,521 shares as of 2024 and 2,874,445 shares as of 2023	(25,196,598)	(23,280,467)
Retained earnings	132,912,235	144,805,168
Accumulated other comprehensive loss:
Foreign currency translation	(1,394,461)	(866,599)
Unrealized loss on foreign currency swap, net of tax	(535,561)	0
Unrecognized net pension and postretirement benefit costs, net of tax	(21,410,039)	(22,128,377)
Accumulated other comprehensive loss	(23,340,061)	(22,994,976)
Total Shareholders' Equity	119,240,210	132,480,584
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 244,223,004	$ 252,039,201

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Sep. 28, 2024	Dec. 30, 2023
CONDENSED CONSOLIDATED BALANCE SHEETS
Accounts receivable, allowance for doubtful accounts	$ 470,870	$ 534,476
Voting Preferred Stock, par value (in dollars per share)	$ 0.00	$ 0.00
Voting Preferred Stock, shares authorized (in shares)	1,000,000	1,000,000
Nonvoting Preferred Stock, par value (in dollars per share)	$ 0.00	$ 0.00
Nonvoting Preferred Stock, shares authorized (in shares)	1,000,000	1,000,000
Common Stock, par value (in dollars per share)	$ 0.00	$ 0.00
Common Stock, shares authorized (in shares)	50,000,000	50,000,000
Common Stock, shares issued (in shares)	9,127,700	9,091,815
Common Stock, shares outstanding (in shares)	6,183,179	6,217,370
Treasury Stock, shares (in shares)	2,894,521	2,874,445

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)	9 Months Ended
	Sep. 28, 2024	Sep. 30, 2023
Operating Activities
Net (loss) income	$ (9,842,000)	$ 5,068,480
Less: Loss from discontinued operations	(21,517,715)	(2,704,365)
Income from continuing operations	11,675,715	7,772,845
Adjustments to reconcile net income to net cash provided
Depreciation and amortization	4,266,038	3,914,160
Reduction in carrying amount of ROU assets	2,418,801	3,579,223
Unrecognized pension and postretirement benefits	(353,257)	635,677
Loss on sale of equipment and other assets	53,311	331,474
Provision for doubtful accounts	(24,570)	(88,353)
Stock compensation expense	913,775	151,300
Changes in operating assets and liabilities:
Accounts receivable	(11,739,823)	1,069,630
Inventories	300,720	4,501,969
Prepaid expenses and other	2,874,825	1,108,094
Other assets	(236,934)	(262,212)
Accounts payable	693,653	1,821,223
Accrued compensation	(190,904)	353,773
Change in operating lease liability	(2,418,801)	(3,579,223)
Other accrued expenses	115,403	(3,152,809)
Net cash provided by operating activities	8,347,952	18,156,771
Investing Activities
Marketable securities	(999,960)	0
Business acquisition	0	547,638
Payments received from notes receivable	470,937	2,265,730
Proceeds from sale of equipment	18,925	0
Purchases of property, plant, and equipment	(7,634,265)	(4,089,705)
Net cash used in investing activities	(8,144,363)	(2,371,613)
Financing Activities
Proceeds from new long-term debt financing	0	60,000,000
Principal payments on long-term debt	(2,365,500)	(74,919,004)
Proceeds (payments) on short term borrowings (revolver)	3,000,000	(300,029)
Financing leases, net	2,819,262	674,558
Purchase common stock for treasury	(1,916,130)	(245,546)
Dividends paid	(2,050,933)	(2,069,043)
Net cash used in financing activities	(513,301)	(16,859,064)
Discontinued Operations
Cash provided by operating activities	411,778	1,092,876
Cash used in investing activities	(217,101)	(628,968)
Cash provided by discontinued operations	194,677	463,908
Effect of exchange rate changes on cash	(67,874)	(36,737)
Net change in cash and cash equivalents	(182,909)	(646,735)
Cash and cash equivalents at beginning of period	8,299,453	10,187,521
Cash and cash equivalents at end of period ?	8,116,544	9,540,786
Supplemental disclosure of cash flow information
Interest	2,443,448	2,574,890
Income taxes	3,945,295	1,321,170
Non-cash investing and financing activities
Right of use asset	2,418,801	3,579,222
Lease liability	$ (462,004)	$ (4,484,838)

Basis of Presentation

9 Months Ended

Sep. 28, 2024

Basis of Presentation

Basis of Presentation

Note A – Basis of Presentation

The condensed consolidated balance sheet as of December 30, 2023 has been derived from the audited consolidated balance sheet at that date.

Discontinued Operations

9 Months Ended

Sep. 28, 2024

Discontinued Operations

Discontinued Operations

Note B – Discontinued Operations

Summarized Financial Information of Discontinued Operations

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

	Three Months Ended						Nine Months Ended
	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net sales	$	3,360,405		$	3,634,333		$	9,647,649		$	11,406,778
Cost of products sold		(2,804,743	)		(2,703,362	)		(8,402,175	)		(9,076,341	)
Gross margin		555,662			930,971			1,245,474			2,330,437

Selling and administrative expenses		(1,145,232	)		(1,248,179	)		(3,483,904	)		(3,875,579	)
Restructuring costs		(23,087,775	)		-			(23,087,775	)		-
Operating loss		(23,677,345	)		(317,208	)		(25,326,205	)		(1,545,142	)

Other expense		-			-			-			(1,539,940	)
Interest expense		(177,420	)		(213,556	)		(512,414	)		(514,978	)
Loss from discontinued operations before income taxes		(23,854,765	)		(530,764	)		(25,838,619	)		(3,600,060	)

Income tax benefit		3,888,522			129,298			4,320,904			895,695
Loss from discontinued operations, net of tax	$	(19,966,243	)	$	(401,466	)	$	(21,517,715	)	$	(2,704,365	)

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

	September 28, 2024		December 30, 2023
	(unaudited)
Cash	$	446,003	$	251,326
Accounts receivable		2,480,148		2,852,907
Inventories		1,211,011		875,528
Prepaid expenses		828,471		604,036
Property, plant and equipment, net		4,432,723		4,767,723
Patents and other intangibles net of accumulated amortization		-		5,744,312
Goodwill		73,528		12,200,695
Right of use assets		171,650		172,311
Total assets of discontinued operations	$	9,643,534	$	27,468,838

Current assets of discontinued operations¹	$	9,643,534	$	4,583,797
Non-current assets of discontinued operations		-		22,885,041
Total assets of discontinued operations	$	9,643,534	$	27,468,838

Accounts payable	$	1,564,105	$	765,356
Accrued compensation and other accrued expenses		789,875		775,838
Current portion of lease liability		138,642		94,355
Other long-term liabilities		48,567		6,920
Total liabilities of discontinued operations	$	2,541,189	$	1,642,469

Current liabilities of discontinued operations¹	$	2,541,189	$	1,635,549
Non-current liabilities of discontinued operations		-		6,920
Total liabilities of discontinued operations	$	2,541,189	$	1,642,469

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

Earnings Per Share

9 Months Ended

Sep. 28, 2024

Earnings Per Share

Earnings Per Share

Note C – Earnings Per Share

The denominators used to calculate earnings per share are as follows:

Three Months Ended

Nine Months Ended

September 28, 2024

September 30, 2023

September 28, 2024

September 30, 2023

Basic:

Weighted average shares outstanding

6,203,753

6,241,796

6,217,342

6,233,493

Diluted:

Weighted average shares outstanding

6,203,753

6,241,796

6,217,342

6,233,493

Dilutive stock appreciation rights

25,374

32,462

25,374

32,462

Denominator for diluted earnings per share

6,229,127

6,274,258

6,242,716

6,265,955

Fair Value of Instruments

9 Months Ended

Sep. 28, 2024

Earnings Per Share

Fair Value of Instruments

Note D – Fair Value of Instruments

Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2	Quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable.

Inventories

9 Months Ended

Sep. 28, 2023

Inventories

Inventories

Note E – Inventories

Inventories consist of the following components:

	September 28, 2024		December 30, 2023

Raw material and component parts	$	24,526,610	$	24,500,087
Work in process		9,967,847		9,957,068
Finished goods		24,841,916		24,815,052
Total inventories¹	$	59,336,373	$	59,272,207

¹ Includes inventory of discontinued operations of $1.2 million and $0.9 million as of September 28, 2024 and September 30, 2023, respectively.

Goodwill

9 Months Ended

Sep. 28, 2024

Goodwill

Goodwill

Note F - Goodwill

Leases

9 Months Ended

Sep. 28, 2024

Leases

Leases

Note G – Leases

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

	Operating			Finance
2024	$	1.1		$	0.2
2025		3.1			0.7
2026		2.5			0.7
2027		2.1			0.7
2028		1.9			0.7
thereafter		6.4			1.6
		17.1			4.7
Less effects of discounting		(2.3	)		(0.9	)
Lease liabilities recognized	$	14.8		$	3.8

Debt

9 Months Ended

Sep. 28, 2024

Debt

Debt

Note H - Debt

Stock Options and Awards

9 Months Ended

Sep. 28, 2024

Stock Options and Awards

Stock Options and Awards

Note I - Stock Options and Awards

As of September 28, 2024, there were 792,300 shares of Company common stock reserved and available for future grant under the 2020 Plan.

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

	Nine Months Ended					Year Ended
	September 28, 2024					December 30, 2023
	Units			Weighted Average Exercise Price		Units			Weighted Average Exercise Price
Outstanding at beginning of period		13,000		$	24.19		146,166		$	23.22
Expired		(9,000	)		26.30		(50,833	)		24.24
Exercised		(2,500	)		20.20		(33,333	)		21.10
Forfeited		-			-		(49,000	)		22.80
Outstanding at end of period		1,500			20.20		13,000			24.19

SARs Outstanding and Exercisable
Range of Exercise Prices		Outstanding as of September 28, 2024		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Exercisable as of September 28, 2024		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price

$	20.20		1,500		0.6	$	20.20		1,500		0.6	$	20.20

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

	Nine Months Ended			Year Ended
	September 28, 2024			December 30, 2023
	Shares			Shares
Outstanding at beginning of period		89,400			64,500
Issued		92,016			82,800
Exercised		(23,734	)		(10,600	)
Forfeited		(12,994	)		(47,300	)
Outstanding at end of period		144,688			89,400

As of September 28, 2024, outstanding SARs and stock awards had an intrinsic value of $3,254,000.

Share Repurchase Program

9 Months Ended

Sep. 28, 2024

Share Repurchase Program

Share Repurchase Program

Note J – Share Repurchase Program

Below is a summary of the Company’s shares repurchased during the third quarter of 2024 under the new share repurchase program.

Period

Total Number of Shares Purchased

Average Price Paid Per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum Number of Shares that may yet be Purchased Under the Plans or Programs

Balance as of June 29, 2024

60,076

20.27

60,076

139,924

June 30, 2024 – September 28, 2024

50,000

28.68

50,000

89,924

Balance as of September 28, 2024

110,076

24.09

110,076

89,924

Revenue Recognition

9 Months Ended

Sep. 28, 2024

Revenue Recognition

Revenue Recognition

Note K – Revenue Recognition

The Company has no future performance obligations and does not capitalize costs to obtain or fulfill contracts.

Income Taxes

9 Months Ended

Sep. 28, 2024

Income Taxes

Income Taxes

Note L - Income Taxes

Retirement Benefit Plans

9 Months Ended

Sep. 28, 2024

Retirement Benefit Plans

Retirement Benefit Plans

Note M - Retirement Benefit Plans

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

Significant disclosures relating to these benefit plans for the third quarter and first nine months of fiscal years 2024 and 2023 are as follows:

	Pension Benefits
	Three Months Ended						Nine Months Ended
	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Service cost	$	178,003		$	216,153		$	534,010		$	648,459
Interest cost		966,701			990,053			2,900,107			2,970,160
Expected return on plan assets		(1,099,034	)		(1,049,016	)		(3,297,103	)		(3,147,046	)
Amortization of prior service cost		-			-			-			-
Amortization of the net loss		327,363			342,866			982,091			1,028,596
Net periodic benefit cost	$	373,033		$	500,056		$	1,119,105		$	1,500,169

	Other Postretirement Benefits
	Three Months Ended						Nine Months Ended
	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Service cost	$	3,574		$	6,486		$	10,722		$	19,458
Interest cost		12,951			14,533			38,853			43,599
Expected return on plan assets		(4,684	)		(4,849	)		(14,052	)		(14,547	)
Amortization of prior service cost		1,060			1,060			3,180			3,180
Amortization of the net loss		(19,567	)		(16,895	)		(58,701	)		(50,685	)
Net periodic (benefit) cost	$	(6,666	)	$	335		$	(19,998	)	$	1,005

The Company made contributions to the 401(k) Plan as follows:

	Three Months Ended				Nine Months Ended
	September 28, 2024		September 30, 2023		September 28, 2024		September 30, 2023
Regular matching contribution	$	263,074	$	241,487	$	810,630	$	747,913
Transitional credit contribution		20,688		23,271		71,558		83,935
Non-discretionary contribution		80,465		83,302		294,228		654,552
Total contributions for the period	$	364,227	$	348,060	$	1,176,416	$	1,486,400

The non-discretionary contribution of $328,953 made in the nine months ended September 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.

Recent Accounting Pronouncements

9 Months Ended

Sep. 28, 2024

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Note N - Recent Accounting Pronouncements

Concentration of Risk

9 Months Ended

Sep. 28, 2024

Concentration of Risk

Concentration of Risk

Note O - Concentration of Risk

Credit Risk

Interest Rate Risk

Financial Instruments and Fair Value Measurements

9 Months Ended

Sep. 28, 2024

Financial Instruments and Fair Value Measurements

Financial Instruments and Fair Value Measurements

Note P – Financial Instruments and Fair Value Measurements

Designated Foreign Currency Hedge Contracts

Fair Value of Derivative Instruments

Derivative Instruments		Amount of Loss Recognized in Accumulated Other Comprehensive Income				Amount of Loss Reclassified from Accumulated Other Comprehensive Income into Earnings				Location in Condensed Consolidated Statement of Operations
Designated foreign currency hedge contracts, net of tax		$	(412,382	)		$	(148,657	)		Cost of products sold

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

	Location in Condensed Consolidated Balance Sheets	As of September 28, 2024		As of December 30, 2023
Derivative Assets:
Designated foreign currency hedge contracts	Other long-term assets	$	42,510	$	-

Derivative Liabilities:
Designated foreign currency hedge contracts	Other current liabilities	$	578,071	$	-

Discontinued Operations (Tables)

9 Months Ended

Sep. 28, 2024

Discontinued Operations

Schedule income from discontinued operations

	Three Months Ended						Nine Months Ended
	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net sales	$	3,360,405		$	3,634,333		$	9,647,649		$	11,406,778
Cost of products sold		(2,804,743	)		(2,703,362	)		(8,402,175	)		(9,076,341	)
Gross margin		555,662			930,971			1,245,474			2,330,437

Selling and administrative expenses		(1,145,232	)		(1,248,179	)		(3,483,904	)		(3,875,579	)
Restructuring costs		(23,087,775	)		-			(23,087,775	)		-
Operating loss		(23,677,345	)		(317,208	)		(25,326,205	)		(1,545,142	)

Other expense		-			-			-			(1,539,940	)
Interest expense		(177,420	)		(213,556	)		(512,414	)		(514,978	)
Loss from discontinued operations before income taxes		(23,854,765	)		(530,764	)		(25,838,619	)		(3,600,060	)

Income tax benefit		3,888,522			129,298			4,320,904			895,695
Loss from discontinued operations, net of tax	$	(19,966,243	)	$	(401,466	)	$	(21,517,715	)	$	(2,704,365	)

Schedule of Assets AndLiabilities from discontinued operations

	September 28, 2024		December 30, 2023
	(unaudited)
Cash	$	446,003	$	251,326
Accounts receivable		2,480,148		2,852,907
Inventories		1,211,011		875,528
Prepaid expenses		828,471		604,036
Property, plant and equipment, net		4,432,723		4,767,723
Patents and other intangibles net of accumulated amortization		-		5,744,312
Goodwill		73,528		12,200,695
Right of use assets		171,650		172,311
Total assets of discontinued operations	$	9,643,534	$	27,468,838

Current assets of discontinued operations¹	$	9,643,534	$	4,583,797
Non-current assets of discontinued operations		-		22,885,041
Total assets of discontinued operations	$	9,643,534	$	27,468,838

Accounts payable	$	1,564,105	$	765,356
Accrued compensation and other accrued expenses		789,875		775,838
Current portion of lease liability		138,642		94,355
Other long-term liabilities		48,567		6,920
Total liabilities of discontinued operations	$	2,541,189	$	1,642,469

Current liabilities of discontinued operations¹	$	2,541,189	$	1,635,549
Non-current liabilities of discontinued operations		-		6,920
Total liabilities of discontinued operations	$	2,541,189	$	1,642,469

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

Earnings Per Share (Tables)

9 Months Ended

Sep. 28, 2024

Earnings Per Share

Schedule of Denominators Used in Earnings Per Share Computations

Three Months Ended

Nine Months Ended

September 28, 2024

September 30, 2023

September 28, 2024

September 30, 2023

Basic:

Weighted average shares outstanding

6,203,753

6,241,796

6,217,342

6,233,493

Diluted:

Weighted average shares outstanding

6,203,753

6,241,796

6,217,342

6,233,493

Dilutive stock appreciation rights

25,374

32,462

25,374

32,462

Denominator for diluted earnings per share

6,229,127

6,274,258

6,242,716

6,265,955

Inventories (Tables)

9 Months Ended

Sep. 28, 2024

Inventories

Schedule Of inventories from continue operation

	September 28, 2024		December 30, 2023

Raw material and component parts	$	24,526,610	$	24,500,087
Work in process		9,967,847		9,957,068
Finished goods		24,841,916		24,815,052
Total inventories¹	$	59,336,373	$	59,272,207

Leases (Tables)

9 Months Ended

Sep. 28, 2024

Leases

Schedule of impact of leases in the balance sheet

	Operating			Finance
2024	$	1.1		$	0.2
2025		3.1			0.7
2026		2.5			0.7
2027		2.1			0.7
2028		1.9			0.7
thereafter		6.4			1.6
		17.1			4.7
Less effects of discounting		(2.3	)		(0.9	)
Lease liabilities recognized	$	14.8		$	3.8

Stock Options and awards (Tables)

9 Months Ended

Sep. 28, 2024

Stock Options and Awards

Schedule of Stock Appreciation Rights Activity

	Nine Months Ended					Year Ended
	September 28, 2024					December 30, 2023
	Units			Weighted Average Exercise Price		Units			Weighted Average Exercise Price
Outstanding at beginning of period		13,000		$	24.19		146,166		$	23.22
Expired		(9,000	)		26.30		(50,833	)		24.24
Exercised		(2,500	)		20.20		(33,333	)		21.10
Forfeited		-			-		(49,000	)		22.80
Outstanding at end of period		1,500			20.20		13,000			24.19

Schedule of SARs Outstanding and Exercisable

SARs Outstanding and Exercisable
Range of Exercise Prices		Outstanding as of September 28, 2024		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Exercisable as of September 28, 2024		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price

$	20.20		1,500		0.6	$	20.20		1,500		0.6	$	20.20

Schedule of Outstanding Stock Grants

	Nine Months Ended			Year Ended
	September 28, 2024			December 30, 2023
	Shares			Shares
Outstanding at beginning of period		89,400			64,500
Issued		92,016			82,800
Exercised		(23,734	)		(10,600	)
Forfeited		(12,994	)		(47,300	)
Outstanding at end of period		144,688			89,400

Share Repurchase Program (Tables)

9 Months Ended

Sep. 28, 2023

Share Repurchase Program

Schedule of Company's shares repurchased

Period

Total Number of Shares Purchased

Average Price Paid Per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum Number of Shares that may yet be Purchased Under the Plans or Programs

Balance as of June 29, 2024

60,076

20.27

60,076

139,924

June 30, 2024 – September 28, 2024

50,000

28.68

50,000

89,924

Balance as of September 28, 2024

110,076

24.09

110,076

89,924

Retirement Benefit Plans (Tables)

9 Months Ended

Sep. 28, 2024

Retirement Benefit Plans

Schedule of Significant Disclosures Relating to Benefit Plans

	Pension Benefits
	Three Months Ended						Nine Months Ended
	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Service cost	$	178,003		$	216,153		$	534,010		$	648,459
Interest cost		966,701			990,053			2,900,107			2,970,160
Expected return on plan assets		(1,099,034	)		(1,049,016	)		(3,297,103	)		(3,147,046	)
Amortization of prior service cost		-			-			-			-
Amortization of the net loss		327,363			342,866			982,091			1,028,596
Net periodic benefit cost	$	373,033		$	500,056		$	1,119,105		$	1,500,169

	Other Postretirement Benefits
	Three Months Ended						Nine Months Ended
	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Service cost	$	3,574		$	6,486		$	10,722		$	19,458
Interest cost		12,951			14,533			38,853			43,599
Expected return on plan assets		(4,684	)		(4,849	)		(14,052	)		(14,547	)
Amortization of prior service cost		1,060			1,060			3,180			3,180
Amortization of the net loss		(19,567	)		(16,895	)		(58,701	)		(50,685	)
Net periodic (benefit) cost	$	(6,666	)	$	335		$	(19,998	)	$	1,005

Schedule of Company made contributions towards benefit plans

	Three Months Ended				Nine Months Ended
	September 28, 2024		September 30, 2023		September 28, 2024		September 30, 2023
Regular matching contribution	$	263,074	$	241,487	$	810,630	$	747,913
Transitional credit contribution		20,688		23,271		71,558		83,935
Non-discretionary contribution		80,465		83,302		294,228		654,552
Total contributions for the period	$	364,227	$	348,060	$	1,176,416	$	1,486,400

Financial Instruments and Fair Value Measurements (Tables)

9 Months Ended

Sep. 28, 2024

Financial Instruments and Fair Value Measurements

Schedule of Fair Value of Derivative Instruments

Derivative Instruments		Amount of Loss Recognized in Accumulated Other Comprehensive Income				Amount of Loss Reclassified from Accumulated Other Comprehensive Income into Earnings				Location in Condensed Consolidated Statement of Operations
Designated foreign currency hedge contracts, net of tax		$	(412,382	)		$	(148,657	)		Cost of products sold

Schedule of Fair Value of Derivative Condensed Consolidated Balance Sheets

	Location in Condensed Consolidated Balance Sheets	As of September 28, 2024		As of December 30, 2023
Derivative Assets:
Designated foreign currency hedge contracts	Other long-term assets	$	42,510	$	-

Derivative Liabilities:
Designated foreign currency hedge contracts	Other current liabilities	$	578,071	$	-

Discontinued Operations (Details) - Discontinued Operations [Member] - USD ($)	3 Months Ended		9 Months Ended
	Sep. 28, 2024	Sep. 30, 2023	Sep. 28, 2024	Sep. 30, 2023
Net sales	$ 3,360,405	$ 3,634,333	$ 9,647,649	$ 11,406,778
Costs of goods sold	(2,804,743)	(2,703,362)	(8,402,175)	(9,076,341)
Gross margin	555,662	930,971	1,245,474	2,330,437
Selling and administrative expenses	(1,145,232)	(1,248,179)	(3,483,904)	(3,875,579)
Restructuring costs	(23,087,775)	0	(23,087,775)	0
Operating loss	(23,677,345)	(317,208)	(25,326,205)	(1,545,142)
Other expense	0	0	0	(1,539,940)
Interest expense	(177,420)	(213,556)	(512,414)	(514,978)
Loss from discontinued operations before income taxes	(23,854,765)	(530,764)	(25,838,619)	(3,600,060)
Income tax benefit	3,888,522	129,298	4,320,904	895,695
Loss from discontinued operations, net of tax	$ (19,966,243)	$ (401,466)	$ (21,517,715)	$ (2,704,365)

Discontinued Operations (Details 1) - Discontinued Operations [Member] - USD ($)	Sep. 28, 2024	Dec. 30, 2023
Cash	$ 446,003	$ 251,326
Accounts receivable	2,480,148	2,852,907
Inventories	1,211,011	875,528
Prepaid expenses	828,471	604,036
Property, plant and equipment, net	4,432,723	4,767,723
Patents and other intangibles net of accumulated amortization		5,744,312
Goodwill	73,528	12,200,695
Right of use assets	171,650	172,311
Total assets of discontinued operations	9,643,534	27,468,838
Current assets of discontinued operations	9,643,534	4,583,797
Non-current assets of discontinued operations	0	22,885,041
Total assets of discontinued operation	9,643,534	27,468,838
Accounts payable	1,564,105	765,356
Accrued compensation and other accrued expenses	789,875	775,838
Current portion of lease liability	138,642	94,355
Other long-term liabilities	48,567	6,920
Total liabilities of discontinued operations	2,541,189	1,642,469
Current liabilities of discontinued operations	2,541,189	1,635,549
Non-current liabilities of discontinued operations	0	6,920
Total liabilities of discontinued operation	$ 2,541,189	$ 1,642,469

Earnings Per Share (Details) - shares	3 Months Ended		9 Months Ended
Earnings Per Share (Details) - shares	Sep. 28, 2024	Sep. 30, 2023	Sep. 28, 2024	Sep. 30, 2023
Basic:
Weighted Average Shares Outstanding	6,203,753	6,217,342	6,241,796	6,233,493
Diluted :
Weighted Average Shares Outstanding	6,203,753	6,217,342	6,241,796	6,233,493
Dilutive Stock Appreciation Rights	25,374	25,374	32,462	32,462
Denominator For Diluted Earnings Per Share (in Shares)	6,229,127	6,242,716	6,274,258	6,265,955

Inventories (Details) - USD ($)	Sep. 28, 2024	Dec. 30, 2023
Inventories
Raw Material And Component Parts	$ 24,526,610	$ 24,500,087
Work In Process	9,967,847	9,957,068
Finished Goods	24,841,916	24,815,052
Total Inventories	$ 59,336,373	$ 59,272,207

Inventories (Details Narrative) - USD ($) $ in Millions	Sep. 28, 2024	Dec. 30, 2023
Inventories
Inventory of discontinued operations	$ 1.2	$ 0.9

Goodwill (Details Narrative) $ in Millions	Sep. 28, 2024 USD ($)
Goodwill
Goodwill write-off	$ 12.1
Aggregate carrying amount of goodwill	$ 58.6

Leases (Details) $ in Millions	Sep. 28, 2024 USD ($)
Leases
2024 operating lease	$ 1.1
2025 operating lease	3.1
2026 operating lease	2.5
2027 operating lease	2.1
2028 operating lease	1.9
Thereafter finance lease	6.4
Operating leases, future minimum payments due gross	17.1
Less effects of discounting OperatingLeases	(2.3)
Lease liabilities recognized Operating Leases	14.8
2024 Finance lease	0.2
2025 finance lease	0.7
2026 finance lease	0.7
2027 financ lease	0.7
2028 Finance lease	0.7
Thereafter finance lease	1.6
Finance leases, future minimum payments due gross	4.7
Less effects of discounting Finance Leases	(0.9)
Lease liabilities recognized financing Leases	$ 3.8

Leases (Details Narrative) $ in Millions	9 Months Ended
Leases (Details Narrative) $ in Millions	Sep. 28, 2024 USD ($)
Leases
Operating lease liabilities	$ 14.8
Finance lease liabilities	$ 3.8
Weighted average lease term for operating leases	6 years 10 months 24 days
Weighted average lease term for finance leases	6 years 6 months
Weighted average discount rate operating leases	6.30%
Weighted average discount rate finance leases	6.80%

Debt (Details Narrative) - USD ($)	1 Months Ended	9 Months Ended
Debt (Details Narrative) - USD ($)	Jun. 16, 2023	Sep. 28, 2024
Credit Agreement [Member] \| Maximum [Member]
Variable Interest Rate Based On Senior Net Leverage Ratio		2.625
Credit Agreement [Member] \| Minimum [Member]
Variable Interest Rate Based On Senior Net Leverage Ratio		1.875
Line Of Credit Member [Member]
Annual Commitment Fee Percentage	30.00%
Outstanding borrowings		$ 3,000,000.0
Medium Term Notes [Member] \| Maximum [Member]
Variable Interest Rate Based On Senior Net Leverage Ratio		1.625
Medium Term Notes [Member] \| Minimum [Member]
Variable Interest Rate Based On Senior Net Leverage Ratio		0.875
Medium Term Notes [Member] \| September 30, 2023 through June 30, 2025 [Member]
Quarterly Principal Payment		$ 750,000
Medium Term Notes [Member] \| September 30, 2025 through June 30, 2027 [Member]
Quarterly Principal Payment		1,125,000
Medium Term Notes [Member] \| September 30, 2027 through March 31, 2028 [Member]
Quarterly Principal Payment		$ 1,500,000
Interest Rate Swap [Member] \| Medium Term Notes [Member]
Revolving Commitment Portion	$ 30,000,000
Term portion loan	$ 60,000,000

Stock Options and Awards (Details) - Stcok Options [Member] - $ / shares	9 Months Ended	12 Months Ended
	Sep. 28, 2024	Dec. 30, 2023
Number of units outstanding at beginning of period	13,000	146,166
Number of units, Expired	9,000	50,833
Number of units, Exercised	(2,500)	(33,333)
Number of units, Forfeited	0	(49,000)
Number of units outstanding at end of period	1,500	13,000
Weighted average exercise price, beginning balance	$ 24.19	$ 23.22
Weighted average exercise price, Expired	26.30	24.24
Weighted average exercise price, exercised	20.20	21.10
Weighted average exercise price, forfeited	0	22.80
Weighted average exercise price, ending balance	$ 20.20	$ 24.19

Stock Options and Awards (Details 1)	9 Months Ended
Stock Options and Awards (Details 1)	Sep. 28, 2024 $ / shares shares
Outstanding \| shares	1,500
Exercisable \| shares	1,500
Range of Exercise Prices (in dollar per share)	$ 20.20
SAR [Member] \| Minimum [Member]
Weighted- Average Remaining Contractual Life	7 months 6 days
Weighted avaerage exercise price	$ 20.20
SAR [Member] \| Maximum [Member]
Weighted- Average Remaining Contractual Life	7 months 6 days
Weighted avaerage exercise price	$ 20.20

Stock Options and Awards (Details 2) - Stock Options [Member] - shares	9 Months Ended	12 Months Ended
	Sep. 28, 2024	Dec. 30, 2023
Number of units outstanding at beginning of period	89,400	64,500
Number of units, Issued	92,016	82,800
Number of units, Exercised	23,734	10,600
Number of units, Forfeited	(12,994)	(47,300)
Number of units outstanding at end of period	144,688	89,400

Stock Options and Awards (Details Narrative) - USD ($)	9 Months Ended		12 Months Ended
Stock Options and Awards (Details Narrative) - USD ($)	Sep. 28, 2024	Sep. 28, 2023	Dec. 30, 2023	Jun. 29, 2024
Stock compensation expense	$ 168,000	$ 5,000
Intrinsic value				$ 792,300
2020 Plan [Member]
Intrinsic value				$ 3,254,000
Stock Option Granted	92,016	79,500
Stock Options [Member]
Stock compensation expense	$ 582,000	$ 158,000
Stock Option Granted	92,016		82,800

Share Repurchase Program (Details)	3 Months Ended
Share Repurchase Program (Details)	Sep. 28, 2024 $ / shares shares
Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs [Member]
Maximum Number Of Shares That May Yet Be Purchased Under The Plans Or Programs, Beginning Balance	139,924
Maximum Number Of Shares That May Yet Be Purchased Under The Plans Or Programs	89,924
Maximum Number Of Shares That May Yet Be Purchased Under The Plans Or Programs, Ending Balance	89,924
Average Price Paid Per Share [Member]
Average Price Paid Per Share, Beginning Balance \| $ / shares	$ 20.27
Average Price Paid Per Share During The Period \| $ / shares	28.68
Average Price Paid Per Share, Ending Balance \| $ / shares	$ 24.09
Total Number of Shares Purchased [Member]
Total Number Of Shares Purchased, Beginning Balance	60,076
Total Number Of Shares Purchased	50,000
Total Number Of Shares Purchased,ending Balance	110,076
Total Number of Shares Purchased As Part of Publicly Announced Plansor Programs [Member]
Total Number Of Shares Purchased As Part Of Publicly Announced Plansor Programs, Beginning Balance	60,076
Total Number Of Shares Purchased As Part Of Publicly Announced Plansor Programs	50,000
Total Number Of Shares Purchased As Part Of Publicly Announced Plansor Programs, Ending Balance	110,076

Share Repurchase Program (Details Narrative)	Aug. 21, 2023 shares
Share Repurchase Program
Number of shares authorized to be repurchased	200,000

Retirement Benefit Plans (Details) - USD ($)	3 Months Ended		9 Months Ended
Retirement Benefit Plans (Details) - USD ($)	Sep. 28, 2024	Sep. 30, 2023	Sep. 28, 2024	Sep. 30, 2023
Pension Benefit [Member]
Service cost	$ 178,003	$ 216,153	$ 534,010	$ 648,459
Interest cost	966,701	990,053	2,900,107	2,970,160
Expected return on plan assets	(1,099,034)	(1,049,016)	(3,297,103)	(3,147,046)
Amortization of prior service cost	0	0	0	0
Amortization of the net loss	327,363	342,866	982,091	1,028,596
Net periodic benefit cost	373,033	500,056	1,119,105	1,500,169
Other Postretirement Benefit [Member]
Service cost	3,574	6,486	10,722	19,458
Interest cost	12,951	14,533	38,853	43,599
Expected return on plan assets	(4,684)	(4,849)	(14,052)	(14,547)
Amortization of prior service cost	1,060	1,060	3,180	3,180
Amortization of the net loss	(19,567)	(16,895)	(58,701)	(50,685)
Net periodic benefit cost	$ (6,666)	$ 335	$ (19,998)	$ 1,005

Retirement Benefit Plans (Details 1) - USD ($)	3 Months Ended		9 Months Ended
Retirement Benefit Plans (Details 1) - USD ($)	Sep. 28, 2024	Sep. 30, 2023	Sep. 28, 2024	Sep. 30, 2023
Total contributions for the period	$ 364,227	$ 348,060	$ 1,176,416	$ 1,486,400
Regular Matching Contributions [Member]
Total contributions for the period	263,074	241,487	810,630	747,913
Transitional Credit Contributions [Member]
Total contributions for the period	20,688	23,271	71,558	83,935
Non-Discretionary Contributions [Member]
Total contributions for the period	$ 80,465	$ 83,302	$ 294,228	$ 654,552

Retirement Benefit Plans (Details Narrative) - USD ($)	9 Months Ended
Retirement Benefit Plans (Details Narrative) - USD ($)	Sep. 28, 2024	Sep. 30, 2023
Accrued amount for non discretionary safe harbor contribution		$ 328,953
Pension Benefit [Member]
2024	$ 2,100,000
Cash contributions	1,572,000
Other Postretirement Benefit [Member]
2024	50,000
Cash contributions	$ 25,000

Concentration of Risk (Details Narrative) - USD ($)	9 Months Ended	12 Months Ended
Concentration of Risk (Details Narrative) - USD ($)	Sep. 28, 2023	Dec. 30, 2023	Sep. 28, 2024
Federal Deposit Insurance Corporation (FDIC)			$ 250,000
Line Of Credit Member [Member] \| LIBOR [Member] \| Minimum [Member]
Basis spread on variable rate	1.875%
Line Of Credit Member [Member] \| LIBOR [Member] \| Maximum [Member]
Basis spread on variable rate	2.625%
Accounts Receivable [Member] \| Customer Concentration Risk [Member]
Threshold percentage of concentration risk	18.00%	12.00%
Accounts Receivable [Member] \| Two Customer Concentration Risk [Member]
Threshold percentage of concentration risk	11.00%

Financial Instruments and Fair Value Measurements (Details)	9 Months Ended
	Sep. 28, 2024 USD ($)
Loss Reclassified from OCI to Earnings [Member]
Designated foreign currency hedge contracts, net of tax	$ (148,657)
Loss in Accumulated Other Comprehensive Income [Member]
Designated foreign currency hedge contracts, net of tax	$ (412,382)

Financial Instruments and Fair Value Measurements (Details 1) - USD ($)	Sep. 28, 2024	Dec. 30, 2023
Derivative Assets [Member]
Designated foreign currency hedge contracts assets	$ 42,510	$ 0
Derivative Liabilities [Member]
Designated foreign currency hedge contracts liabilities	$ 578,071	$ 0

Financial Instruments and Fair Value Measurements (Details Narrative) - USD ($) $ in Millions	Sep. 28, 2024	Dec. 30, 2023
Financial Instruments and Fair Value Measurements
Foreign currency hedge contracts outstanding	$ 12.6	$ 0.0
Loss reclassified to earnings net of tax	$ 0.4

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