Legal Proceedings and Other Matters |
9 Months Ended |
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Oct. 03, 2026 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Legal Proceedings and Other Matters | Legal Proceedings and Other Matters Legal Proceedings
One of the Company’s Aerospace 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 our subsidiary, Astronics Advanced Electronic Systems Corp. (“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 $17.9 million at October 3, 2026 and $17.6 million at December 31, 2025. While Lufthansa has initiated a claim for indirect damages and a hearing is expected to be scheduled in 2027, the Company believes it is unlikely that 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 October 3, 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 within Selling, General and Administrative Expenses in the Company’s Consolidated Condensed Statement of Operations during the first quarter of 2025.
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 previously accrued interest and $3.5 million for partial reimbursement of Lufthansa’s legal costs. The legal cost reimbursement was recorded within Selling, General and Administrative Expenses in the Company’s Consolidated Condensed Statement of Operations during the second quarter of 2025.
During the three and nine months ended September 27, 2025, the Company made payments totaling $21.6 million, in satisfaction of the liabilities for damages, interest and provisional legal fee reimbursement.
Both the Company and Lufthansa were granted permission to appeal the rulings by the UK High Court of Justice. The appeals were heard by the UK Court of Appeal in July 2026 and judgment was handed down on July 27, 2026. The Court's judgment is that Lufthansa failed in its appeal and the Company succeeded in one of its appeals. Approximately $2.2 million (including interest) of the damages paid by the Company to Lufthansa following the judgments in February 2025 and April 2025 has been repaid to the Company by Lufthansa as ordered by the Court of Appeal. The Company also obtained an order from the Court of Appeal that a portion of its legal expense for the appeals and the first instance damages trial is reimbursed and, further, that legal fee reimbursement paid by the Company to Lufthansa following the first instance damages trial be re-paid to the Company. As a result of those orders, in relation to legal fees, Lufthansa has paid to the Company approximately $2.2 million. The Company received these amounts in cash and recorded the gain for the damages repayment as well as the legal fee reimbursement as an offset to Selling, General and Administrative Expense in the quarter ended October 3, 2026. Neither side sought permission to appeal to the UK Supreme Court. As a result, the UK dispute on the merits is concluded.
A liability for reimbursement of Lufthansa’s legal expenses associated with the UK matter, exclusive of the damages phase and its associated appeal, was approximately $1.0 million at October 3, 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 October 3, 2026 and December 31, 2025.
With respect to the proceeding in France, the Court of Appeal of Paris heard the appeal on nullity on October 28, 2026. The decision of the Court of Appeal on validity is due on December 9, 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 October 3, 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 UK matter or 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 on both nullity and infringement.
There were no other significant developments in any of these matters during the three months ended October 3, 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 and expired on July 24, 2026. Following the expiration of the Section 122 tariff, the U.S. Administration implemented tariffs under Section 301 of the Trade Act of 1974 imposing tariffs of 10% to 12.5% on non-exempt goods depending on the country of origin, and from which civil aircraft parts and components and goods qualifying under the United States-Mexico-Canada Agreement are exempt. Refunds of previously paid tariffs represent gain contingencies under ASC 450-30. Consistent with this guidance, the Company recognizes such refunds as a reduction of Cost of Products
Sold in the period in which the gain is realized or realizable, generally when cash is received. Refunds that remain subject to appeal, further agency action, or other contingencies, are not recognized until realization criteria are met.
As a result, during the three and nine months ended October 3, 2026, the Company received $1.9 million and $3.9 million in IEEPA tariff refunds in the Consolidated Condensed Statement of Operations. The ultimate impact of these developments on our future financial results remains uncertain, including the timing and extent of any future refunds of tariffs previously paid under IEEPA and the nature, scope, and rate of any replacement tariffs or other trade measures that may be implemented.
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