What changed in this filing

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Item 1A. Risk Factors

2022-02-25 compared with 2021-02-25 · 172 added, 132 removed, 192 unchanged (61% of the section changed)

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These effects include deteriorating general economic conditions in many regions of the world, increased unemployment, decreases in disposable income, decline in consumer confidence, and changes in consumer spending habits.

and in several other countries these effects appear to be on the wane.

Nevertheless, the evolution of the pandemic, governments’ responses to the pandemic, and individuals’ behavior in response to the pandemic and its effects, in aggregate, continue to impact business conditions in varied and unpredictable ways.

Certain adverse impacts specific to the Company include, without limitation:

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Highly contagious diseases such as COVID-19 create the risk that we may need to shut down one of our facilities for an extended period of time, which could increase our costs and affect our ability to meet commitments to customers.

• We have experienced larger-than-anticipated declines in demand for MC fabrics used to make certain paper grades, specifically publication paper grades, that could be COVID-19 related.

Additionally, behavioral changes that have occurred during the pandemic have impacted demand for various products that are made with MC fabrics.

The above effects are likely to continue to have an adverse impact on demand for publication paper grades, and perhaps other grades of paper, including without limitation packaging paper grades, as well as on demand for non-woven fabrics and fiber cement products used in the construction industry;

During the fourth quarter of 2021, the US facilities in our Albany Engineered Composites segment have implemented policies in full compliance with the US Federal Contractor vaccine mandate, requiring full vaccination for all employees except a small number with approved medical or religious exemptions.

Although we have thus far had no significant operating disruptions due to the pandemic, like all companies, the apparent increased contagiousness of the Omicron variant poses risk to the availability of our workforce.

• Behavioral changes that have occurred during the pandemic have impacted demand for various products that are made with MC fabrics.

The above effects could have an adverse impact on demand for publication paper grades, and perhaps other grades of paper, including without limitation packaging paper grades, as well as on demand for non-woven fabrics and fiber cement products used in the construction industry;

such impacts would in turn adversely impact demand for the MC products used to manufacture such paper grades or building products.

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government, which could lead to program delays or cancellations, and a corresponding decrease in our revenues.

The outcome of the 2020 U.S.

Presidential election could increase the uncertainties associated with DOD programs.

• Disruptions in supply chains may place constraints on our ability to source key raw materials and services which could impact our ability to deliver products to customers as scheduled.

• Disruptions in supply chains have placed constraints on our ability to source key raw materials and services which could impact our ability to deliver products to customers as scheduled.

Additionally, manufacturing or delivery costs could increase.

• During periods of economic weakness, the Company may be exposed to greater credit risk.

Additionally, we could be required to record significant impairment charges with respect to noncurrent assets, including goodwill and other intangible assets, whose fair values may be negatively affected by the effects of the COVID-19 pandemic on our operations.

• While we do not anticipate material impairments on our assets as a result of COVID-19, changes in our expectations for net sales, earnings potential and cash flows associated with our intangible assets and goodwill that fall below our current projections could result in such assets being impaired.

A number of industry factors have had, and in future periods could have, an adverse impact on sales, profitability and cash flow in the Company’s MC and AEC segments

Significant consolidation and rationalization in the paper industry in recent years have reduced global consumption of paper machine clothing in certain markets.

Developments in digital media have adversely affected

demand for newsprint and for printing and writing grades of paper, which has had, and is likely to continue to have, an adverse effect on demand for paper machine clothing in those markets.

Developments in digital media have adversely affected demand for newsprint and for printing and writing grades of paper, which has had, and is likely to continue to have, an adverse effect on demand for paper machine clothing in those markets.

At the same time, technological advances in papermaking, including in paper machine clothing, while contributing to the papermaking efficiency of customers, have in some cases lengthened the useful life of our products and reduced the number of pieces required to produce the same volume of paper.

These factors have had, and in the future are likely to have, an adverse effect on paper machine clothing sales.

The market for paper machine clothing in recent years has been characterized by continuous pressure to provide more favorable commercial terms, which has unfavorably affected our operating results.

The market for paper machine clothing in recent years has been characterized by continuous pressure to provide more favorable commercial terms, which has continued to place pressure on our operating results.

We expect such pressure to remain intense in all paper machine clothing markets, especially during periods of customer consolidation, plant closures, or when major contracts are being renegotiated.

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During 2019, Net sales under the LEAP contract exceeded $210 million.

Due to the grounding of the Boeing 737 MAX and the impact of the pandemic on air travel, 2020 Net sales generated by the LEAP contract declined to less than $95 million.

Additionally, the LEAP long-term supply agreement contains certain events of default that, if triggered, could result in termination of the agreement by the customer, which would also have a material adverse impact on segment sales and profitability.

Due to the grounding of the Boeing 737 MAX, the destocking of the supply chain and the impact of the pandemic on air travel, Net sales generated by the LEAP contract were approximately $100 milllion in each of 2020 and 2021.

The LEAP long-term supply agreement contains certain events of default that, if triggered, could result in termination of the agreement by the customer, which would also have a material adverse impact on segment sales and profitability.

Additionally, many of AEC’s customers, as well as the companies supplied by our customers are under pressure to achieve acceptable returns on their substantial investments in recent years in new technologies, new programs and new product introductions.

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In addition to dealing with these development and manufacturing execution risks, future AEC growth will likely require increasingly larger amounts of cash to fund the investments in equipment, capital, and development efforts needed to achieve this growth.

Until AEC is able to consistently generate positive cash flows, it will remain dependent on the MC segment’s ability to generate cash.

Until AEC is able to consistently generate cash flows sufficient to fund its existing operations and any future investment to support its growth, it will remain dependent on the MC segment’s ability to generate cash.

A significant decline in MC sales, operating income or cash flows could therefore have a material adverse impact on AEC’s growth.

Government’s Department of Defense (“DoD”) Cybersecurity Maturity Model Certification (“CMMC”) program introduces new and unique risks for DoD contractors

Under the applicable federal regulations for DoD contractors, AEC is required to comply with the agencies current cybersecurity regulations.

In addition to these current regulations, AEC will be required to comply with the new CMMC program requirements on future contracts as they are flowed down from our DoD prime customers in the coming years.

Given the current and planned future portfolio of U.S.

Government-related business, AEC expects to be

required to comply fully with the highest levels of the planned CMMC framework and will potentially be subject to third-party, or U.S.

Government, audit to certify our compliance.

The CMMC compliance requirements are complex and the costs are significant.

To the extent that AEC is unable to comply with the CMMC or other related cybersecurity requirements, AEC may be unable to maintain or grow its business on programs with the DoD and its prime customers.

AEC is subject to significant risks related to the potential manufacture and sale of defective or non-conforming products

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AEC could also be subject to product liability claims if such failures were to cause death, injury or losses to third parties, or damage claims resulting from the grounding of aircraft into which such defective or non-conforming products had been incorporated.

While we maintain product liability insurance and other insurance at levels we believe to be prudent and consistent with industry practice to help mitigate these risks, these coverages may not be sufficient to fully cover AEC’s exposure for such risks, which could have a material adverse effect on AEC’s results of operations and cash flows.

We are required to meet, and maintain continuous independent certification, to certain international industry standards including AS/EN9100 quality management system standards and Nadcap Special Processes certifications that are designed to assure rigorous quality standards are maintained throughout the aerospace industry supply chain.

Additionally, we maintain product liability insurance and other insurance at levels we believe to be prudent and consistent with industry practice to help mitigate these risks, these coverages may not be sufficient to fully cover AEC’s exposure for such risks, which could have a material adverse effect on AEC’s results of operations and cash flows.

Deterioration of global economic conditions could have an adverse impact on the Company’s business and results of operations

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Weak or unstable economic conditions also increase the risk that one or more of our customers could be unable to pay outstanding accounts receivable, whether as the result of bankruptcy or an inability to obtain working capital financing from banks or other lenders.

In such a case, we could be forced to write off such accounts, which could have a material adverse effect on our business, financial condition, or operating results.

Furthermore, both the MC and AEC business segments manufacture products that are custom-designed for a specific customer application.

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In the case of AEC, such write-offs could also include investments in equipment, tooling, and non-recurring engineering, some of which could be significant depending on the program.

The Company may experience supply constraints due to a limited number of suppliers of certain raw materials and equipment

There are a limited number of suppliers of polymer fiber and monofilaments, key raw materials used in the manufacture of machine clothing, and of carbon fiber and carbon resin, key raw materials used by AEC.

The Company continues to experience increasing labor, raw material, energy, and logistic costs due to supply chain constraints and inflationary pressures

The Company is a significant user of raw materials that are based on petroleum or petroleum derivatives.

Increases in the prices of petroleum or petroleum derivatives, particularly in regions that are experiencing higher levels of inflation, could increase our costs, and we may not be able to fully offset the effects through price increases, productivity improvements, and cost-reduction programs.

There is a limited number of suppliers of polymer fiber and monofilaments, key raw materials used in the manufacture of machine clothing, and of carbon fiber and carbon resin, key raw materials used by AEC.

In addition, there are a limited number of suppliers of some of the equipment used in each of the MC and AEC segments.

The risks associated with limited suppliers were increased during 2020 as the COVID-19 pandemic put pressure on the supply chain, as well as transportation companies that deliver our products to customers.

While we have always been able to meet our raw material and equipment needs, the limited number of suppliers of these items creates the potential for disruptions in supply.

risks associated with limited suppliers increased as a result of the COVID-19 pandemic, which has put pressure on the supply chain in general, and transportation companies that deliver raw materials to us and our products to customers, in particular.

While we have been able to meet our raw material and equipment needs, the limited number of suppliers of these items creates the potential for disruptions in supply.

AEC currently relies on single suppliers under contracts they have with Safran to meet the carbon fiber and carbon resin requirements for the LEAP program.

Lack of supply, delivery delays, or quality problems relating to supplied raw materials or for our key manufacturing equipment could harm our production capacity, and could require the Company to attempt to qualify one or more additional suppliers, which could be a lengthy, expensive and uncertain process.

Such disruptions could make it difficult to supply our customers with products on time, which could have a negative impact on our business, financial condition, and results of operations.

Lack of supply, delivery delays, or quality issues relating to supplied raw materials or for our key manufacturing equipment could harm our production capacity.

Such could require the Company to attempt to qualify one or more additional suppliers, which could be a lengthy, expensive and uncertain process.

These disruptions could make it difficult to supply our customers with products on time, which could have a negative impact on our business, financial condition, and results of operations.

The Company also relies on the labor market in many regions of the world to meet our operational requirements, advance our technology and differentiate products.

Low rates of unemployment in key geographic areas in which the Company operates can lead to high rates of turnover and loss of critical talent, which could in turn lead to higher labor costs.

Our ability to attract and retain business and employees may depend on our reputation in the marketplace

We believe our brand names and our reputation are important corporate assets that help distinguish our products and services from those of our competitors and also contribute to our efforts to recruit and retain talented employees.

However, our reputation is susceptible to material damage by events such as disputes with customers or competitors, cybersecurity incidents or service outages, internal control deficiencies, delivery failures, compliance violations, government investigations or legal proceedings.

We may also experience reputational damage from employees, advocacy groups, regulators, investors and other stakeholders that disagree with the way we conduct our business.

Similarly, our reputation could be damaged by actions or statements by current or former customers, suppliers, employees, competitors, joint venture partners, adversaries in legal proceedings, legislators or government regulators, as well as members of the investment community or the media, including social media influencers.

Our brand and reputation are also associated with our public commitments to various corporate environmental, social and governance (“ESG”) initiatives, including our goals for sustainability and inclusion and diversity.

Our failure to achieve our commitments could harm our reputation and adversely affect our relationships with customers and suppliers or our talent recruitment and retention efforts.

In addition, positions we take or do not take on social issues may be unpopular with some of our employees or with our customers or potential customers, which may in the future impact our ability to attract or retain employees or customers.

We also may choose not to conduct business with potential customers or suppliers or discontinue or not expand business with existing customers due to these positions.

There is a risk that negative or inaccurate information about the Company, even if based on rumor or misunderstanding, could adversely affect our business.

Damage to our reputation could be difficult, expensive and time-consuming to repair, could make potential or existing customers reluctant to select us for new opportunities or could negatively impact our relationships with existing customers and suppliers, resulting in a loss of business, and could adversely affect our talent recruitment and retention efforts.

Damage to our reputation could also reduce investor confidence in us, materially adversely affecting our share price.

Some of the Company’s competitors in the MC segment have the capability to make and sell paper machines and papermaking equipment as well as other engineered fabrics

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Conditions in the paper industry have required, and could further require, the Company to reorganize its operations, which could result in significant expense and could pose risks to the Company’s operations

During the last several years, we have engaged in significant restructuring that included the closing of manufacturing operations.

In the recent past, we engaged in significant restructuring that included the closing of manufacturing operations.

These restructuring activities were intended to match manufacturing capacity to shifting global demand, and also to improve the efficiency of manufacturing and administrative processes.

Future shifting of

customer demand, the need to reduce costs, or other factors could cause us to determine in the future that additional restructuring steps are required.

Future shifting of customer demand, the need to reduce costs, or other factors could cause us to determine in the future that additional restructuring steps are required.

Restructuring involves risks such as employee work stoppages, slowdowns, or strikes, which can threaten uninterrupted production, maintenance of high product quality, meeting of customers’ delivery deadlines, and maintenance of administrative processes.

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AEC’s production of LEAP engine components is currently located in three facilities.

A natural disaster at any of these locations would have a significant adverse effect on AEC’s ability to timely satisfy orders for LEAP components.

Production of almost all of AEC’s other legacy and growth programs – including components for the F-35, fuselage components for the Boeing 787, components for the CH-53K helicopter, vacuum waste tanks for Boeing 7-Series aircraft, and missile bodies for Lockheed Martin’s JASSM air-to-surface missiles – is located primarily in facilities in Salt Lake City, Utah or Boerne, Texas.

A natural disaster at any of these locations could have a significant adverse effect on AEC’s ability to timely satisfy orders for LEAP components.

Production of almost all of AEC’s other legacy and growth programs – including components for the F-35, fuselage components for the Boeing 787, components for the CH-53K helicopter, and missile bodies for Lockheed Martin’s JASSM air-to-surface missiles – is located primarily in facilities in Salt Lake City, Utah or Boerne, Texas.

Significant consolidation of manufacturing operations in our MC segment over the past decade has reduced the number of facilities available to produce our products, and increased utilization significantly at remaining facilities.

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Although we carry property and business interruption insurance to help mitigate the risk of property loss or business interruption that could result from the occurrence of such events, such coverage may not be adequate to compensate us for all loss or damage that we may incur.

Inflation as a result of changes in prices of commodities and labor costs may adversely impact our financial results of operations

The Company is a significant user of raw materials that are based on petroleum or petroleum derivatives.

The Company also relies on the labor market in many regions of the world to meet our operational requirements, advance our technology and differentiate products.

Low rates of unemployment in key geographic areas in which the Company operates can lead to high rates of turnover and loss of critical talent, which could in turn lead to higher labor costs.

The Company’s insurance coverage may be inadequate to cover other significant risk exposures

In addition to asbestos-related claims, the Company may be exposed to other liabilities related to the products and services we provide.

See " The Company is subject to legal proceedings and legal compliance risks, and has been named as defendant in a large number of suits relating to the actual or alleged exposure to asbestos-containing products." In addition to asbestos-related claims, the Company may be exposed to other liabilities related to the products and services we provide.

AEC is engaged in designing, developing, and manufacturing components for commercial jet aircraft and defense and technology systems and products.

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or governments may impose or increase investment barriers or other restrictions affecting our business.

In addition, emerging markets pose other uncertainties, including the protection of our intellectual property, pressure on the pricing of our products, and risks of political instability.

In addition, emerging markets pose other uncertainties, including the protection of our

intellectual property, pressure on the pricing of our products, and risks of political instability.

The occurrence of any of these conditions could disrupt our business or prevent us from conducting business in particular countries or regions of the world.

We have significant manufacturing operations outside of the United States.

Changes in U.S.

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While the direct impact to date of recent developments in global trade and tariff policy has not been significant, there is a risk that the impact of such developments on companies in our supply chain will be reflected in higher costs from affected suppliers.

In addition, the Company has manufacturing operations in the United Kingdom that could be impacted by uncertainties surrounding Brexit.

Our global presence subjects us to certain risks, including controls on foreign exchange and the repatriation of funds.

While we have been able to repatriate current earnings in excess of working capital requirements from certain countries in which we operate without substantial governmental restrictions, there can be no assurance that we will be able to cost effectively repatriate foreign earnings in the future.

We might not be successful at acquiring, investing in or integrating businesses, entering into joint ventures or divesting businesses

We have a history of making acquisitions and we expect to opportunistically seek to make acquisitions in the future.

We are subject to numerous risks as a result of our acquisition strategy, including, but not limited to, the following:

• We may invest time and capital pursuing acquisitions that do not materialize

• We may incur costs and expenses associated with any unidentified or potential liabilities of the acquired companies

• We may not achieve anticipated revenue and cost benefits from the acquisitions

• We may encounter unforeseen difficulties in integrating the acquired operations into our existing operations

Our past or future acquisitions might not ultimately improve our competitive position and business.

We also periodically evaluate, and have engaged in, the disposition of assets and businesses.

Divestitures could involve difficulties in the separation of operations, services, products and personnel, the diversion of management’s attention, the disruption of our business and the potential loss of key employees.

After reaching an agreement with a buyer for the disposition of a business, the transaction may be subject to the satisfaction of pre-closing conditions, including obtaining necessary regulatory and government approvals, which, if not satisfied or obtained, may prevent us from completing the transaction.

Divestitures may also involve continued financial involvement in or liability with respect to the divested assets and businesses, such as indemnities or other financial obligations, in which the performance of the divested assets or businesses could impact our results of operations.

Any divestiture we undertake could adversely affect our results of operations.

Risks related to our contracts

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AEC’s ability to realize its full financial objectives will depend on how effectively it meets these challenges.

Failure to accomplish these customer quality, delivery, and cost targets on any key program could result in material losses to the Company and have a material adverse impact on the amount and timing of anticipated AEC revenues, income, and cash flows, which could in turn have a material adverse impact on our consolidated financial results.

Failure to accomplish these customer quality, delivery, and cost targets on any key program could result in material losses to the Company and have a material adverse impact on the amount and timing of anticipated AEC revenues, segment operating income, and cash flows, which could in turn have a material adverse impact on our consolidated financial results.

Long-term supply contracts in our Albany Engineered Composites segment pose certain risks

AEC has a number of long-term contracts with fixed pricing, and is likely to enter into similar contracts in the future.

While long-term contracts provide an opportunity to realize steady and reliable revenues for extended periods, they pose a number of risks, such as program cancellations, reductions or delays in orders by AEC’s customers under these contracts, the termination of such contracts or orders, or the occurrence of similar events over which AEC has no or limited control.

The occurrence of one or more of these events could have a material adverse effect on AEC revenues and earnings in any period.

Such events could also result in the write-off of deferred charges that have been accumulated in anticipation of future revenues.

Additionally, we may enter into contracts that are expected to generate profits over the life of the contract but, under current accounting standards, we could be required to recognize a loss at the inception of the contract.

While long-term fixed-price contracts also provide AEC with the opportunity to enjoy increased profits as the result of cost reductions and efficiencies, their profitability is dependent on estimates and assumptions regarding contract performance costs over the life of the contract, which in some cases can last for many years.

Such estimates and assumptions are subject to many variables, and may prove over time to have been inaccurate when made, or may become inaccurate over time, which can lead to volatility of AEC’s earnings in any period.

Additionally, many of

the parts AEC agrees to develop and produce have highly complex designs, and challenging technical, quality, and engineering specifications.

Manufacturing or development challenges, disagreements over technical, quality or other contract requirements, and other variables may arise during development or production that result in higher costs, or an inability to achieve required specifications.

If actual production and/or development costs should prove higher, or revenues prove lower, than AEC’s estimates, our expected profits may be reduced, or if such costs should exceed contract prices, we may be required to recognize losses for current or future periods.

One or more of these events could have a material adverse effect on AEC’s revenues or operating results in any period.

Such events could also result in the write-off of deferred charges that have been or could be accumulated in anticipation of future revenues.

Each quarter, the Company updates its outlook for each of its long-term contracts and records the effect of the change in estimated profitability.

While the Company believes its estimates on long-term contracts to be accurate based on available information, new information may become available in future periods, or other changes in the program could occur, which may lead to additional program losses, which could have a material effect on operating results in future periods.

Sales of components for a number of programs that are currently considered to be important to the future sales growth of AEC are pursuant to short-term purchase orders for a finite period or number of parts, or short-term supply agreements with terms of one to four years.

these contracts, the termination of such contracts or orders, or the occurrence of similar events over which AEC has no or limited control.

Accounting for long-term contracts and related assets requires estimates and judgments related to our progress toward completion and the long-term performance on the contract.

Significant judgments include potential risks associated with the ability and cost to achieve program schedule, including customer-directed delays or reductions in scheduled deliveries, and technical and other specific contract requirements including customer activity levels and variable consideration based upon that activity.

Due to the size and long-term nature of many of AEC contracts, the estimation of total revenues and cost at completion is complicated and subject to many variables.

Management must make assumptions and estimates regarding contract revenue and cost (which may include estimates of variable consideration, including award fees and penalties), including, but not limited to, labor productivity and availability, complexity and scope of the work to be performed, availability and cost of materials, length of time to complete the performance obligation, availability and timing of funding from our customers, as well as overhead cost rates.

Because of the significance of management’s judgments and estimation processes, it is likely that materially different amounts could be recorded if we used different assumptions or if the underlying circumstances were to change.

Changes in underlying assumptions, circumstances or estimates may adversely affect our future results of operations and financial condition.

Sales of components for a number of programs that are currently considered to be important to the future revenue-growth of AEC are pursuant to short-term purchase orders for a finite period or number of parts, or short-term supply agreements with terms of one to four years.

Such programs include airframe components for the F-35, forward fuselage frames for the Boeing 787, and sponsons, tail-rotor pylons, horizontal stabilizers and struts for the CH-53K helicopter.

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Even if AEC’s status as a supplier is extended or renewed, there can be no assurance that such extension or renewal will be on the same or similar commercial or other terms.

Any failure by AEC to maintain its current supplier status under these programs, or any material change in their commercial or other terms, could have a material adverse effect on AEC’s future sales and operating income.

AEC derives a significant portion of its revenue from contracts with the U.S.

government, which are subject to unique risks

The funding of U.S.

government programs is subject to congressional appropriations.

Many of the U.S.

government programs in which we participate may last several years, but they are normally funded annually.

Government's Department of Defense, which are subject to unique risks

The funding of DoD programs is subject to congressional appropriations.

Many of the DoD programs in which we participate may last several years, but they are normally funded annually.

Changes in military strategy and priorities may affect future opportunities and/or existing programs.

Long-term government contracts and related orders are subject to cancellation, delay or restructure, if appropriations for subsequent performance periods are not made.

The termination or reduction of funding for existing or new U.S.

government programs could result in a material adverse effect on our earnings, cash flow and financial position.

Additionally, our business with the U.S.

government is subject to specific procurement regulations and our contract costs are subject to audits by U.S.

Long-term DoD contracts and related orders are subject to cancellation, delay or restructure, if appropriations for subsequent performance periods are not made.

The termination or reduction of funding for existing or new DoD programs could result in a material adverse effect on our earnings, cash flow and financial position.

Additionally, our business funded by the U.S.

Government is subject to extensive federal and DoD agency acquisition regulations.

As a result, specific business systems and processes, as well as our proposed contract costs, are subject to audits by U.S.

Government agencies.

government representatives may audit our compliance with government regulations, and such audits could result in adjustments to our contract costs.

Government representatives may audit our compliance with these required federal regulations, and such audits could result in adjustments to allowable contract costs.

Any costs found to be improperly allocated to a specific contract will not be reimbursed, and such costs already reimbursed must be refunded.

Certain business systems or processes found to be non-compliant to federal and agency regulations could result in a suspension of work until such compliance issues are corrected.

If any audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S.

government, which could result in a material adverse effect on our earnings, cash flow and financial position.

Realization of any of these risks could result in a material adverse effect on our earnings, cash flow and financial position.

See also “The U.S.

Government’s Department of Defense Cybersecurity Maturity Model Certification (“CMMC”) program introduces new and unique risks for DoD contractors”

The loss of one or more major customers could have a material adverse effect on sales and profitability

One customer (Safran) accounted for approximately 36 percent of Net sales in the AEC segment in 2021, substantially all of which was under an exclusive long-term supply agreement relating to parts for the LEAP engine.

Although we are an exclusive supplier of such parts, our customer is not obligated to purchase any minimum quantity of parts, and cancellation or significant reduction in demand for the LEAP program would have a material adverse impact on segment sales and profitability.

LEAP engines are currently used on the Boeing 737 MAX, Airbus A320neo and COMAC aircraft.

The grounding of the Boeing 737 MAX during 2019 and 2020 led to lower deliveries of parts and could result in significantly lower revenue in future periods than previously expected.

The grounding of the Boeing 737 MAX led to lower deliveries of parts, resulting in lower revenues during 2020 and 2021.

While the grounding has now been lifted, the Boeing 737 MAX orders and deliveries have yet to return to pre-grounding levels, which could result in longer than expected return to such levels in the future and in lower LEAP revenues for a longer period.

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Our top ten customers in the MC segment accounted for a significant portion of our Net sales in 2021.

The loss of one or more of these customers, or a significant decrease in the amount of machine clothing they purchase from us, could have a material adverse impact on segment sales and profitability.

The loss of one or more of these customers, or a significant decrease in the amount of machine clothing they purchase from us, could have a material adverse impact on MC's net sales and profitability.

We could also be subject to similar impacts if one or more such customers were to suffer financial difficulties and be unable to pay us for products they have purchased.

While we normally enter into long-term supply agreements with significant MC customers, the agreements generally do not obligate the customer to purchase any products from us, and may be terminated by the customer at any time with appropriate notice.

Risks related to cybersecurity

The Company is increasingly dependent on information technology and our business, systems, assets and infrastructure face certain risks, including cybersecurity and data leakage risks.

The failure to prevent attacks on our operational systems or infrastructure could result in disruptions to our businesses, or the loss or disclosure of confidential and proprietary intellectual property or other assets

As our dependence on information technology and communication systems has increased, so have the risks associated with cyber-attacks from third parties attempting to gain access to our systems, data, or assets using varied means, from electronic “hacking” to traditional social engineering aimed at our employees.

The Company has been the target of such attacks, none of which have had, individually or in the aggregate, a material impact on the Company.

We will likely continue to be the target of such attacks which could have a material impact in future periods.

Any significant breakdown, invasion, destruction or interruption of our business systems by employees, others with authorized access to our systems, or unauthorized persons could negatively impact operations.

There is also a risk that we could experience a business interruption, theft of information or other assets, or reputational damage.

While we have made, and will continue to make, significant investments in business systems, information technology infrastructure, internal controls systems and employee training to attempt to reduce these risks, there can be no assurance that our efforts will prevent breakdowns, losses or breaches that could have a material adverse effect on our business, financial position and results of operations.

Risks related to information technology and cybersecurity

We are dependent on information technology networks and systems to securely process, transmit and store electronic information and to communicate among our locations around the world and with our employees, customers and suppliers.

The failure to prevent attacks on our operational systems or infrastructure could result in disruptions to our businesses, loss or disclosure of regulated data, or the loss or disclosure of confidential and proprietary intellectual property or other assets

As the breadth and complexity of this infrastructure continues to grow, including as a result of the increasing reliance on, and use of, mobile technologies and cloud-based services, and as more of our employees are working remotely during the coronavirus pandemic, the risk of security incidents and cyberattacks has increased.

Cybersecurity threats are constantly expanding and evolving, becoming increasingly sophisticated and complex, increasing the difficulty of detecting and defending against them and maintaining effective security measures and protocols.

Our information technology systems, processes and sites may suffer interruptions or failures which may affect our ability to conduct our business

Our information technology systems may be damaged or cease to function properly due to any number of causes, such as catastrophic events, power outages and security breaches (including destructive malware such as ransomware) resulting in unauthorized access or cyber-attacks.

If our business continuity plans, incident response capabilities, and security controls do not function effectively, we may experience partial or complete interruptions in our operations, which may adversely impact our business, financial condition, results of operations and cash flows.

We face legal, reputational and financial risks from any failure to protect customer and/or Company data from security incidents or cyberattacks

Such incidents could lead to shutdowns or disruptions of or damage to our systems and those of our customers and suppliers, and unauthorized disclosure of sensitive or confidential information, potentially including personal data and proprietary business information.

Unauthorized disclosure of, denial of access to, or other incidents involving sensitive or confidential Company, employee, customer or supplier data, whether through systems failure, employee negligence, fraud, misappropriation, or cybersecurity, ransomware or malware attacks, or other intentional or unintentional acts, could damage our reputation and our competitive positioning in the marketplace, disrupt our or our customer’s business, cause us to lose customers and result in significant financial exposure and legal liability.

We are subject to numerous laws and regulations designed to protect this information, such as the European Union’s General Data Protection Regulation (“GDPR”) and the United Kingdom’s GDPR, as well as various other U.S.

federal and state laws governing the protection of privacy, health or other personally identifiable information and data privacy and cybersecurity laws in other regions.

We are subject to U.S.

federal procurement regulations such as the DFARS clause 252.204-7012, based on the NIST 800-171 framework whose goal is protecting controlled unclassified information in nonfederal systems and organizations.

In 2021 we began efforts to comply with the U.S.

Department of Defense Cybersecurity Maturity Model Certification (CMMC) which will impact us in the coming years as it is incorporated into DFARS 252.204-7012 clauses in our contracts for government programs.

These laws and regulations continue to evolve, are increasing in complexity and number and increasingly conflict among the various countries in which we operate, which has resulted in greater compliance risk and cost for us.

Various privacy laws impose compliance obligations regarding the handling of personal data, including the cross-border transfer of data, and significant financial penalties for noncompliance.

If any person, including any of our employees, negligently disregards or intentionally breaches our established controls with respect to Company, employee, customer or supplier data, or otherwise mismanages or misappropriates that data, we could be subject to significant litigation, monetary damages, regulatory enforcement actions, fines and/or criminal prosecution in one or more jurisdictions.

These monetary damages might not be subject to a contractual limit of liability or an exclusion of consequential or indirect damages and could be significant.

In addition, our liability insurance, which includes cyber insurance, might not be sufficient in type or amount to cover us against claims related to security incidents, cyberattacks and other related incidents.

Risks related to our financial matters

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At the same time, the geographic sources of materials purchased (and the currencies in which these purchases are denominated) can vary depending on market forces, and the Company may also shift production of its products between manufacturing locations, which can result in a change in the currency in which certain costs to produce such products are incurred.

Changes in exchange rates can result in revaluation gains and losses that are recorded in Selling, general and administrative expenses or Other expense, net.

Revaluation gains and losses occur when our business units have cash, intercompany or third-party trade receivable or payable balances in a currency other than their local reporting (or functional) currency.

Operating results can also be affected by the translation of sales and costs, for each non-U.S.

subsidiary, from the local functional currency to the U.S.

The translation effect on the income statement is dependent on our net income or expense position in each non-U.S.

currency in which we do business.

A net income position exists when sales realized in a particular currency exceed expenses paid in that currency;

a net expense position exists if the opposite is true.

As a result of these exposures to foreign currency transactions and balances, changes in currency rates could adversely affect the Company’s business, financial condition or results of operations.

Changes in exchange rates can result in revaluation gains and losses that are reflected in our Consolidated Statements of Income.

Revaluation gains and losses occur when our business units hold financial assets or liabilities denominated in a currency other than their functional currency.

Operating results can also be affected by the translation of sales and costs from each non-U.S.

subsidiary’s functional currency to the U.S.

An increase in the value of foreign currencies relative to the U.S.

dollar could increase the U.S.

dollar cost of our operating expenses which are denominated and payable in those currencies.

Changes in currency exchange rates could adversely affect the Company’s business, financial condition or results of operations.

We have a substantial amount of indebtedness.

At December 31, 2021, the Company had outstanding long-term debt of $350 million

At December 31, 2020, our leverage ratio (as defined in our primary borrowing agreement) was 1.34 to 1.00, and we had borrowed $398 million under our $700 million revolving credit facility.

At December 31, 2021, our leverage ratio (as defined in our primary borrowing agreement) was 1.04, and we had borrowed $350 million under our $700 million revolving credit facility.

While we feel that we generate sufficient cash from operations and have sufficient borrowing capacity to make required capital expenditures to maintain and grow our business, any decrease in our cash generation could result in higher leverage.

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Depending on prevailing economic conditions at the time, the Company might find it difficult to modify or restructure the debt on attractive terms, or at all.

We use interest rate swap agreements to help manage the interest cost associated with our borrowings.

We account for those swaps as a hedge of future cash flows and, accordingly, changes in the fair value of the swaps are recorded in Other comprehensive income.

We use interest rate swaps to manage the interest cost associated with our borrowings.

Borrowings under the revolving credit facility and the interest rate swaps are currently based on LIBOR, which is expected to be phased out and replaced starting in 2022.

Future changes in the interest rate benchmark could affect the Company’s cash flows, or the effectiveness of the swap agreements, which could have an effect on net income.

Future changes in the interest rate benchmark could affect the Company’s cost of borrowing and its cash flows, or the effectiveness of the hedges, which could have an effect on net income.

As of December 31, 2021, we had approximately $350 million of additional borrowing capacity under our $700 million revolving credit facility.

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In addition, any such indebtedness could contain terms that are more restrictive than our current facilities.

Changes in actuarial assumptions and differences between actual experience and assumptions could adversely affect our pension and postretirement benefit costs and liabilities

Although we have reduced pension liabilities by a significant amount during the past few years, as of December 31, 2020, remaining net liabilities under our defined benefit pension plans exceeded plan assets by $6.7 million ($4.5 million for the U.S.

plan, $2.2 million for non-U.S.

Additionally, the liability for unfunded postretirement welfare benefits, principally in the United States, totaled $48.0 million.

Annual expense associated with these plans, as well as annual cash contributions, are subject to a number of variables, including discount rates, return on plan assets, mortality, and differences between actuarial assumptions and actual experience.

Those liabilities include $61.2 million of deferred costs which are included in Accumulated other comprehensive income.

The deferred costs will be amortized into expense in future periods, or a significant charge could be recorded if we were to settle pension or postretirement obligations.

Although the Company has taken actions to hedge certain pension plan assets to the pension liabilities, weakness in investment returns on plan assets, changes in discount rates or actuarial assumptions, and actual future experience could result in higher benefit plan expense and the need to increase pension plan contributions in future years.

Significant changes in critical estimates and assumptions related to pension and other postretirement benefit (“OPEB”) costs and liabilities could affect our earnings and pension contributions in future periods

The determination of our pension and other postretirement benefit plans’ expense or income involves significant judgments, specifically related to our discount rate, long-term return on assets, and other actuarial assumptions.

We establish our discount rate assumption annually and review whether to change our long-term return on assets assumption annually.

These estimates and actuarial assumptions could change significantly as a result to changes in economic, legislative, and/or demographic profiles.

Such changes could result in unfavorable changes to our pension and OPEB expense and funded status, and our cash contributions thereof, which could have a negative impact on our results of operations.

Further, the difference between actual investment returns and our long-term return on asset assumptions would result in a change to our pension and OPEB expense, funded status, as well as our required contributions to the plans.

We manage our plan assets in accordance with our investment management objectives, and they are subject to market volatility and other conditions.

Differences may also arise due to changes in regulatory, accounting and other requirements applicable to pension.

The Company is exposed to the risk of increased expense in health-care related costs

We are largely self-insured for some employee and business risks, including health care and workers’ compensation programs in the United States.

We are largely self-insured for some employee and business risks, including health care programs in the United States.

Losses under all of these programs are accrued based upon estimates of the ultimate liability for claims reported and an estimate of claims incurred but not reported, with assistance from third-party actuaries and service providers.

However, these liabilities are difficult to assess and estimate due to unknown factors, including the severity of an illness or injury and the number of incidents not reported.

However, these liabilities are difficult to assess and estimate due to unknown factors, including the severity of an illness and the number of incidents not reported.

The accruals are based upon known facts and historical trends, and management believes such accruals to be adequate.

The Company also maintains stop-loss insurance policies to protect against catastrophic claims above certain limits.

actual results significantly differ from estimates, our financial condition, results of operations, and cash flows could be materially impacted by losses under these programs, as well as higher stop-loss premiums in future periods.

Changes in or interpretations of tax rules, structures, country profitability mix, and regulations may adversely affect our effective tax rate

We are a United States-based multinational company subject to tax in the United States and foreign tax jurisdictions.

Unanticipated changes in tax rates, or tax policies in the countries in which we operate, could affect our future results of operations.

Our future effective tax rate could be unfavorably affected by changes in or interpretation of tax rules and regulations in the jurisdictions in which we do business, by structural changes in the Company’s businesses, by unanticipated decreases in the amount of revenue or earnings in countries with low statutory tax rates, or by changes in the valuation of our deferred tax assets and liabilities.

Additionally, changes in the tax laws in any country may be difficult to interpret without additional guidance, which could lead to future adjustments to our financial statements.

The Company has substantial deferred tax assets that could become impaired, resulting in a charge to earnings

The Company has substantial deferred tax assets in several tax jurisdictions, including the U.S.

The realization of deferred tax assets is dependent upon many factors, including the generation of future taxable income in specific countries (See Note 7 of the Consolidated Financial Statements, included under Item 8 of this Form 10-K, which is incorporated herein, for a discussion of this matter).

Lower than expected operating results, organizational changes, or changes in tax laws could result in those deferred tax assets becoming impaired, thus resulting in a charge to earnings.

Our business could be adversely affected by adverse outcomes of pending or future tax audits

The Company is currently under audit in certain jurisdictions and is likely to be audited in the future.

While the Company believes its tax filings to be correct, a final adverse outcome with respect to pending or future audits could have a material adverse impact on the Company’s results in any period in which it occurs.

If actual results significantly differ from estimates, our financial condition, results of operations, and cash flows could be materially impacted by losses under these programs, as well as higher stop-loss premiums in future periods.

Unanticipated changes in tax laws or exposure to additional tax liabilities could affect our future profitability

We are subject to income taxes in both the United States and various non-U.S.

jurisdictions.

Unanticipated changes in foreign and domestic tax laws, regulations, or policies, or their interpretation and application by regulatory bodies, or exposure to additional tax liabilities could affect our future profitability and cash flows.

Our domestic and

international tax liabilities are dependent upon the distribution of income among these jurisdictions.

Our future results of operations could be adversely affected by changes in the effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, as well as changes in the overall profitability of the Company, tax legislation, and generally accepted accounting principles.

As of December 31, 2021, we have approximately $69.1 million net operating loss (“NOL”) carryforward in various taxing jurisdictions.

Our ability to utilize the NOL carryforward could be adversely impacted by several factors, including but not limited to significant changes to tax legislation and lower than expected future earnings of the Company.

We are subject to tax audits by various tax authorities in many jurisdictions.

The open tax years in these jurisdictions range from 2012 to 2021.

We regularly assess the potential outcomes of examinations by tax authorities in determining the adequacy of our provision for income taxes.

The results of tax audits and examinations of previously filed tax returns or related litigation and continuing assessments of our tax exposures could materially affect our financial results.

Risks related to our legal and regulatory environment

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Despite such measures, our employees, consultants, and third parties to whom such information may be disclosed in the ordinary course of our business may breach their obligations not to reveal such information, and any legal remedies available to us may be insufficient to compensate our damages.

The Company is subject to legal proceedings and legal compliance risks, and has been named as defendant in a large number of suits relating to the actual or alleged exposure to asbestos-containing products

The Company is subject to legal proceedings and legal compliance risks

We are subject to a variety of legal proceedings.

Pending proceedings that the Company determines are material are disclosed in Note 21 of the Consolidated Financial Statements, included under Item 8 of this Form 10-K, which is incorporated herein.

Litigation is an inherently unpredictable process and unanticipated negative outcomes are always possible.

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We are also subject to a variety of legal compliance risks.

While we believe that we have adopted appropriate risk management and compliance programs, the global and diverse nature of our operations means that legal compliance risks will continue to exist and related legal proceedings and other contingencies, the outcome of which

cannot be predicted with certainty, are likely to arise from time to time.

Failure to resolve successfully any legal proceedings related to compliance matters could have an adverse impact on our results in any period.

The Company is subject to laws and regulations worldwide, changes to which could increase our costs and have a material adverse effect on our financial condition or results of operations

The Company is subject to laws and regulations relating to employment practices and benefits, taxes, import and export matters, corruption, foreign-exchange controls, competition, workplace health and safety, intellectual property, health-care, the environment and other areas.

These laws and regulations have a significant impact on our domestic and international operations.

We incur significant expenses to comply with laws and regulations.

Changes or additions to laws and regulations could increase these expenses, which could have an adverse impact on our financial condition and results of operations.

Such changes could also have an adverse impact on our customers and suppliers, which in turn could adversely impact the Company.

Changes in laws and regulations could also place restrictions on our ability to sell certain products, or to source certain input products from certain suppliers, both of which could have an adverse impact on our financial condition and results of operations.

While we have implemented policies and training programs designed to ensure compliance, there can be no assurance that our employees or agents will not violate such laws, regulations or policies, which could have a material adverse impact on our financial condition or results of operations.

The Standish Family continues to have considerable influence over the management and affairs of the Company and matters requiring stockholder approval

As of December 31, 2020, the Standish Family had held in the aggregate shares entitling them to cast 34.5 percent of the combined votes entitled to be cast by all stockholders of the Company.

T he Standish Family continue s to have considerable influence over the management and affairs of the Company and matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions.

This could have the effect of delaying or preventing a change in control or a merger, consolidation, or other business combination at a premium price, even if such transaction were favored by our other stockholders.

Our global operations expose us to numerous and sometimes conflicting legal and regulatory requirements, and violation of these regulations could harm our business

We are subject to numerous, and sometimes conflicting, legal regimes on matters as diverse as anticorruption, import/export controls, content requirements, trade restrictions, tariffs, taxation, sanctions, immigration, internal and disclosure control obligations, securities regulation, ESG initiatives, anti-competition, anti-money-laundering, data privacy and protection, government compliance, wage-and-hour standards, employment and labor relations and human rights.

The global nature of our operations further increases the difficulty of compliance.

Compliance with diverse legal requirements is costly, time-consuming and requires significant resources.

Violations of one or more of these regulations in the conduct of our business could result in significant fines, enforcement actions or criminal sanctions against us and/or our employees, prohibitions on doing business and damage to our reputation.

Violations of these regulations in connection with the performance of our obligations to our customers also could result in liability for significant monetary damages, fines, enforcement actions and/or criminal prosecution or sanctions, unfavorable publicity and other reputational damage and restrictions on our ability to effectively carry out our contractual obligations and thereby expose us to potential claims from our customers.

the varying degrees of development of the legal systems of the countries in which we operate, local laws may not be well developed or provide sufficiently clear guidance and may be insufficient to protect our rights.

In particular, in many parts of the world, including countries in which we operate and/or seek to expand, practices in the local business community might not conform to international business standards and could violate anticorruption laws, or regulations, including the U.S.

Foreign Corrupt Practices Act and the U.K.

Bribery Act 2010.

The Company provides and all employees must participate in regular training activities with respect to the Company's business ethics standards and expectations.

Our employees, subcontractors, suppliers, and agents, any companies we may acquire and their employees, subcontractors, suppliers and agents, and other third parties with which we associate, could take actions that violate policies or procedures designed to promote legal and regulatory compliance or applicable anticorruption laws or regulations.

Violations of these laws or regulations by us, our employees or any of these third parties could subject us to criminal or civil enforcement actions (whether or not we participated or knew about the actions leading to the violations), including fines or penalties, disgorgement of profits and suspension or disqualification from work, including U.S.

federal contracting, any of which could materially adversely affect our business, including our results of operations and our reputation.

Changes in laws and regulations could also mandate significant and costly changes to the way we conduct our business or could impose additional taxes.

Such changes may result in contracts being terminated, greater costs to us, or could have a negative impact on our ability to obtain future work from government customers.

Certain provisions of our Certificate of Incorporation, our Bylaws and Delaware law could hinder, delay or prevent a change in control of us that you might consider favorable, which could also adversely affect the price of our Class A Common Stock

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Our ability to pay dividends will depend upon many factors, including our financial position and liquidity, results of operations, legal requirements, restrictions that may be imposed by the terms of our current and future credit facilities and other debt obligations and other factors deemed relevant by our board of directors.

to maintain and grow our business, any decrease in our cash generation could result in higher leverage.

For example, we have a substantial amount of indebtedness and while we feel that we generate sufficient cash from operations and have sufficient borrowing capacity to make required capital expenditures to maintain and grow our business, any decrease in our cash generation could result in higher leverage.

Higher leverage could hinder our ability to make acquisitions, capital expenditures, or other investments in our businesses, pay dividends, or withstand business and economic downturns.

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Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could cause the market price of our common stock to decline or might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

As of February 19, 2021 we had 30,706,635 shares of Class A Common Stock outstanding and 1,617,998 shares of Class B Common Stock outstanding, each of which is convertible at any time into an equal number of shares of Class A Common Stock.

As of February 18, 2022 we had 31,860 thousand shares of Class A Common Stock outstanding and less than 1 thousand shares of Class B Common Stock outstanding, each of which is convertible at any time into an equal number of shares of Class A Common Stock.

In addition, shares of Class A Common Stock are issuable upon the exercise of outstanding stock options or the vesting of outstanding equity awards, and certain shares are reserved for future issuance under our equity compensation plans.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors