Legal Proceedings and Other Matters |
3 Months Ended |
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Apr. 04, 2026 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Legal Proceedings and Other Matters | Legal Proceedings and Other Matters Legal Proceedings
One of the Company’s subsidiaries is involved in numerous patent infringement actions brought by Lufthansa Technik AG (“Lufthansa”) in Germany, the United Kingdom (“UK”) and France. The Company is vigorously defending all such litigation and proceedings. Additional information about these legal proceedings can be found in Note 19, Legal Proceedings and Other Matters, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in the 2025 10-K.
As previously disclosed, Lufthansa and AES have filed requests with the German Federal Supreme Court to be granted leave to file appeals against the decision in both the direct and indirect matter. On February 25, 2026, the German Federal Supreme Court rejected Lufthansa’s and AES’s petitions for leave to appeal in both matters. Therefore, the decisions of the Higher Regional Court of Karlsruhe have become final.
The reserve for the German indirect claim and interest was approximately $17.7 million at April 4, 2026 and $17.6 million on December 31, 2025. The Company currently believes it is unlikely that the damages in the German indirect proceedings and related interest will be paid within the next twelve months. Therefore, the liability related to this matter is classified within Other Liabilities (non-current) in the Consolidated Condensed Balance Sheets at April 4, 2026 and December 31, 2025.
In the matter before the UK High Court of Justice, Lufthansa had pleaded its case for monetary compensation at a separate trial which was conducted in October 2024. Both the Company and Lufthansa submitted to the UK High Court of Justice calculations of the estimated profits derived from the reports of the parties’ respective financial experts. The account of profits trial judgment was published on February 21, 2025 by the court in the amount of $11.9 million. Such amount was recorded as a liability in the Company’s Consolidated Financial Statements as of December 31, 2024. Following a consequential hearing on March 20, 2025, the amount was adjusted upwards by $0.5 million related to the resolution of a provisional item. Additionally, on April 30, 2025, the UK High Court of Justice issued a draft order related to interest associated with damages, which obligated the Company to accrue a reserve estimate of $5.7 million relating to such interest associated with the damages. Both of these amounts were recorded in the three months ended March 29, 2025 within Selling, General and Administrative Expenses in the Company’s Consolidated Condensed Statement of Operations.
There was a further consequential hearing on May 16, 2025 which addressed applications concerning interest on the ordered damages, permission to appeal the court’s findings in these matters, as well as the issue of reimbursement of legal fees in the damages phase of the litigation. The Company was ordered to make payments of $5.7 million in relation to the previously accrued interest and $3.5 million for partial reimbursement of Lufthansa’s legal costs. The interest amount was recorded in the first quarter of 2025, while the legal cost reimbursement was recorded in the second quarter.
Both the Company and Lufthansa have been granted permission to appeal the rulings by the UK High Court of Justice. The appeals are scheduled to be heard by the UK Court of Appeal in July 2026.
A liability for reimbursement of Lufthansa’s legal expenses associated with the UK matter, exclusive of the damages phase, was approximately $1.0 million at April 4, 2026 and December 31, 2025, which is expected to be paid within the next twelve months and, as such, is classified in Accrued Expenses and Other Current Liabilities in the accompanying Consolidated Condensed Balance Sheets as of April 4, 2026 and December 31, 2025.
With respect to the proceeding in France, the Court of Appeal of Paris is set to hear the appeal on nullity on October 28, 2026. Should the Court find the patent to be valid, the trial date for the infringement and damages is scheduled for December 2027. As loss exposure is not probable and estimable at this time, the Company has not recorded any liability with respect to the French matter at April 4, 2026 or December 31, 2025.
Each of the German, France and UK claims are separate and distinct. Validity and infringement of the Lufthansa patent in each country is a matter for the courts in each of these countries, whose laws differ from each other. In addition, the principles of calculating damages in each jurisdiction differ substantially. Therefore, the Company has assessed each matter separately and cannot apply the same calculation methodology as in the German direct and indirect matters. However, it is reasonably possible that additional damages and interest could be incurred if the appellate court in France was to rule in favor of Lufthansa, or if damages in the UK matter upon conclusion of the appeal are calculated on a different basis than the initial judgment.
There were no other significant developments in any of these matters during the three months ended April 4, 2026.
Other than these proceedings, we are not party to any significant pending legal proceedings that management believes will result in a material adverse effect on our financial condition or results of operations.
Other Matters
On February 20, 2026, the U.S. Supreme Court struck down certain tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”). Following the Supreme Court decision, the U.S. Administration announced a new 10% global tariff under Section 122 of the Trade Act of 1974, which was subsequently struck down on May 7, 2026 by the U.S. Court of International Trade. As of the filing date, it remains uncertain what impact these decisions will have on our future financial results, including the process and availability of obtaining refunds of amounts previously paid for the IEEPA tariffs or any fluctuations of the level of replacement tariffs imposed or the addition of any new tariffs through other means.
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