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Item 1A. Risk Factors

2025-02-26 compared with 2024-02-26 · 188 added, 152 removed, 271 unchanged (56% of the section changed)

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Risks related to our business and operations

We may fail to realize all of the anticipated benefits of the acquisition of Heimbach or those benefits may take longer to realize than expected.

We are devoting significant management attention to integrating the business practices and operations of Heimbach.

We may experience disruptions to our business and, if integrated ineffectively, it could restrict the realization of the full expected benefits of the acquisition.

The failure to meet the challenges involved in the integration process and to realize the anticipated benefits of the acquisition of Heimbach could cause an interruption or loss of momentum in our operations and could adversely affect our business, financial condition and results of operations.

Difficulties in the integration of the acquired business may include rationalizing the operations, processes and systems of the acquired business, retaining and motivating key management and employees, and integrating existing business relationships with suppliers and customers.

Even if integration is successful, the financial and operational results may differ materially from our assumptions and forecasts due to unforeseen expenses, delays, conditions and liabilities.

In addition, we may incur unanticipated costs or expenses following an acquisition, including post-closing asset impairment charges, expenses associated with eliminating duplicate facilities, and other liabilities.

Furthermore, the acquisition of Heimbach may result in material unanticipated problems, expenses, charges, liabilities, competitive responses, loss of customers and other business relationships, and diversion of management’s attention.

Additional integration challenges may include difficulty in achieving anticipated cost savings, synergies, business opportunities and growth prospects from the acquisition;

difficulties in the integration of operations and systems, including pricing and marketing strategies;

and difficulties in conforming standards, controls, procedures, financial reporting and accounting and other policies, business cultures and compensation structures.

Many of these factors will be outside of our control and any one of them could result in increased costs, including restructuring charges, decreases in revenues and diversion of management’s time and energy, which could adversely affect our business, financial condition and results of operations.

Our acquisition of Heimbach involves inherent risks, and presents financial, managerial and operational challenges that may adversely affect our operating results and financial condition.

Our growth strategy includes acquisitions.

Acquisitions involve various inherent risks, such as our ability to assess accurately the value, strengths, weaknesses, internal controls, contingent and other liabilities and potential profitability of Heimbach.

Heimbach was a privately held company that only closed its books and records annually on December 31 st .

Interim financial information was limited and reproducing full historical financial records may be difficult.

As the Company integrates Heimbach, management could encounter material differences between the accounting policies of the two companies or the financial results of Heimbach for the periods after the fiscal year 2022 audited financial statements, including additional liabilities or other financial information that was not available during due diligence or in the initial period after the closing of the acquisition that, had we known, could have resulted in changes to financial projections, assumptions and estimates used in the fair value of assets acquired and liabilities assumed, assessments used to determine the applicability of certain SEC disclosure requirements or the expected benefit of the transaction.

While we conducted financial and other due diligence in connection with this acquisition and we generally seek some form of limited protection, such as warranties from the seller, insurance coverage, and placing a portion of the purchase price in escrow to cover potential tax liabilities, Heimbach may have liabilities that are not accurately assessed or brought to our attention at the time of the acquisition.

Further, indemnities, insurance or escrow arrangements may not fully cover such matters.

The acquisition may present financial, managerial and operational challenges, including, but not limited to:

• Increased foreign operations, often with unique issues relating to corporate culture, compliance with legal and regulatory requirements and other challenges;

• Assumption of known and unknown liabilities, including environmental liabilities, and exposure to litigation;

• Increased levels of debt or dilution to existing stockholders;

• New and proposed regulations limiting the enforcement of noncompetition and nonsolicitation agreements;

• Production delays associated with consolidating acquired facilities and manufacturing operations;

• Potential cybersecurity risks, as acquired systems may not possess the appropriate security measures.

We cannot assure that all potential risks or liabilities are adequately discovered, disclosed, or understood in each instance.

In addition, internal controls over financial reporting of acquired companies may not be compliant with required standards.

Issues may exist that could rise to the level of significant deficiencies or, in some cases, material weaknesses, particularly with respect to foreign companies or non-public U.S.

Customer dissatisfaction or performance problems with an acquired business, technology, service or product could also have a material adverse effect on our reputation and business.

The effects of the COVID-19 pandemic and other potential future public health crises, epidemics, pandemics or similar events on our business, operating results, financial condition and cash flows are uncertain.

The public health crisis caused by the COVID-19 pandemic and the measures taken by governments, businesses, and the public at large to limit the COVID-19 pandemic's spread has had, and may continue to have, certain negative effects on the markets we serve.

These effects included 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, or a new pandemic, governments’ responses to such pandemic(s), and individuals’ behavior in response to 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:

• During 2023, 2022 and 2021, some employees in various plants contracted the COVID-19 virus, which led to workforce absences of employees that contracted the virus and others that may have been exposed.

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

Although we did not shut down any of our plants due to COVID-19 during the height of the pandemic, production at some plants was affected by government shutdown orders in areas adjacent to those plants.

There is no guarantee that future government shutdown orders, or our own future shutdowns, should they occur, will not have a more significant impact on our production.

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

The above effects could 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;

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

A decline in revenues would lead to lower gross profit on those products and the possibility of unabsorbed fixed manufacturing costs.

• The AEC segment generates a significant portion of its revenue from commercial aerospace programs, as well as from contracts related to U.S.

Department of Defense programs.

The COVID-19 pandemic significantly impacted passenger air travel which, in turn, impacted, and may continue to impact, the commercial aerospace programs that provide a source of revenue for the Company.

Such programs could be delayed or canceled, which, in addition to a loss of revenue and gross profit, could lead to write-offs for Company investments for those programs.

The pandemic has resulted in significant costs for the U.S.

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

• 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.

• While we do not anticipate material impairments on our assets as a result of the COVID-19 pandemic, changes in our expectations for net revenues, 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 net revenues, profitability and cash flow in the Company’s MC and AEC segments.

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

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.

The market for paper machine clothing in recent years has been characterized by continuous pressure to provide more favorable commercial terms, which has in turn placed 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.

The emergence of Asian competitors exacerbates this risk.

Similar pressures in the markets in which AEC competes along with labor shortages could have an impact on AEC revenues.

During 2019, Net revenues under the LEAP contract exceeded $210 million, only to significantly decline in the years that followed due to several factors outside of the Company's control, including the temporary Boeing 737 MAX groundings and the COVID-19 pandemic.

The growing sophistication of Asian competitors exacerbates this risk.

Similar pressures in the markets in which AEC serves are highly competitive and price sensitive.

AEC competes with domestic and international companies that have substantially greater manufacturing, purchasing, marketing, and financial resources than the Company.

Some of AEC's facilities also compete for labor with other industrial and commercial businesses.

If we are unable to successfully compete for new business, our net revenues, growth, and operating margins may decline.

During 2019, net revenues under the LEAP contract exceeded $210 million, only to significantly decline in the years that followed due to several factors outside of the Company's control, including the temporary Boeing 737 MAX groundings, other Boeing production issues, and the COVID-19 pandemic.

Such events drove a reduction in demand for LEAP components and disrupted supply chains for an extended period of time.

While these factors have largely subsided, and Net revenues have recovered steadily year over year and now approach 2019 levels, factors like this can recur without notice, on this or on other programs, and cause a detriment to the AEC segment.

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

While these factors have somewhat subsided, events like this can recur without notice, on this or other programs, and negatively impact the performance of the AEC segment.

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

This has contributed to a relentless focus on capital investments to reduce costs, resulting in continuous pressure for cost reductions and customer pricing improvement throughout the supply chain.

Future consolidation in the aerospace industry could intensify these pressures.

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.

Although customers historically have tended to view the purchase of paper machine clothing and the purchase of paper machines as separate purchasing decisions, the ability to bundle fabrics with new machines and after-market services could provide an advantage to our competitors.

This underscores the importance of our ability to maintain the technological competitiveness and value of our products, and a failure to do so could have a material adverse effect on our business, financial condition, and results of operations.

Moreover, we cannot predict how the nature of competition in this segment may continue to evolve as a result of future consolidation among our competitors, or consolidation involving our competitors and other suppliers to our customers.

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

AEC manufactures and sells products that are incorporated into commercial and military aircraft.

If AEC were to supply products with manufacturing defects, or products that failed to conform to contractual requirements, we could be required to recall and/or replace them, and we could also be subject to substantial contractual damages or warranty claims from our customers, including claims to pay the differential between the original contract price and cost to re-procure defective contract items, net of work accepted from the original contract, or claims to provide transition services to another supplier or the customer.

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 are incorporated.

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, although 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.

The long-term organic growth prospects of AEC are subject to a number of risks.

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In addition, existing and future supply agreements, especially for commercial and defense aerospace, are subject to the same curtailment or cancellation risks as the programs they support.

AEC is currently working on a broad portfolio of potential new product applications in the aerospace industry.

AEC is currently working on potential new product applications in the aerospace industry.

These development projects may or may not result in commercial supply opportunities.

In the event that AEC succeeds in developing products and securing contracts to manufacture and supply them, it will face the same industrialization and manufacturing ramp-up risks that it currently faces in its existing contracts, and AEC may or may not be successful in meeting its obligations under these contracts.

In the event that AEC succeeds in developing products and securing contracts to manufacture and supply them, it will face the same industrialization and manufacturing ramp-up risks that it currently faces on its existing contracts, and AEC may or may not be successful in meeting its obligations under these contracts.

Failure to manage these development, commercialization and execution risks could have a material adverse impact on AEC’s prospects for revenue growth.

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.

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

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

A significant decline in MC net revenues, 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 agency's 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 and based on the CMMC Proposed Rule released by the DoD in December 2023, AEC expects to be required to comply fully with CMMC Level 2 once the rule is finalized, and eventually CMMC Level 3 for certain programs as those requirements are further defined.

This will require a CMMC Third-Party Assessment Organization (C3PAO) assessment for Level 2 certification, as well as a DCMA Defense Industrial Base Cybersecurity Assessment Center (DIBCAC) assessment for any required Level 3 certification.

The CMMC compliance requirements are complex, the costs are significant, and the DoD timelines for certifications are aggressive.

To the extent that AEC is unable to achieve the required CMMC certifications within the timeframes required by the DoD, AEC may be unable to maintain or grow its business 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.

AEC manufactures and sells products that are incorporated into commercial and military aircraft.

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.

A significant decline in MC net revenues, operating income or cash flows could therefore have a material adverse impact on AEC’s ability to invest and deliver on future growth.

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

The Company identifies in this section a number of risks, the effects of which may be exacerbated by an unfavorable economic climate.

For example, a recession could lead to lower consumption in all paper grades including tissue and packaging, which would not only reduce consumption of paper machine clothing but could also increase the risk of greater price competition in the machine clothing industry.

Similarly, in the Company’s AEC segment, a decline in global or regional economic conditions could result in lower orders for aircraft or aircraft engines, or the cancellation of existing orders, which would in turn result in reduced demand for the AEC components utilized on such aircraft or engines.

For example, a recession could lead to lower consumption in all paper grades including tissue and packaging, which would not only reduce consumption of paper machine clothing, but could also increase price competition in the machine clothing industry.

Similarly, in the Company’s AEC segment, a decline in global or regional economic conditions could result in reduced orders for aircraft or aircraft engines, or the cancellation of existing orders, which would in turn result in reduced demand for the AEC components utilized on such aircraft or engines.

Customer demand for AEC’s lightweight composite aircraft components is driven by market demand for the lighter, more fuel-efficient aircraft engine and other applications into which they are incorporated, such as the CFM International LEAP engine.

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

In the event of a customer liquidity issue, the Company could also be required to write off amounts that are included in Contract assets or Inventories.

In the event of a customer liquidity issue, the Company could be required to write off amounts that are included in Contract assets or Inventories.

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

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

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 agency's current cybersecurity regulations.

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

The CMMC compliance requirements are complex, the costs are significant, and the DoD timelines for certifications are aggressive.

The Company continues to experience increasing raw material, energy, logistics, and labor 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 increased as a result of the COVID-19 pandemic, which has put pressure on the supply chain in general, and on 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.

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Such issues 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 our products.

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

The Company also relies on the labor market to meet our operational requirements, advance our technology and differentiate our 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.

We may be unable to maintain effective systems of internal controls while consolidating dispersed corporate functions to our corporate headquarters in New Hampshire.

The Company is relocating corporate staff working remotely or working in offices outside of New Hampshire to the Company's corporate headquarters in New Hampshire.

If we lose critical personnel before transferring roles and responsibilities and fail to maintain an effective system of internal controls, we may be unable to accurately report our results of operations and meet our reporting obligations.

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, regulatory 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.

We believe our brand names and 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, suppliers, or competitors, cybersecurity incidents or service outages, internal control deficiencies, delivery failures, regulatory compliance violations, government investigations or legal proceedings.

We may also experience reputational damage from employees, advocacy groups, regulators, investors or 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 sustainability strategy, including our public commitments related to climate and the environment and DE&I.

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.

Our brand and reputation are also associated with our sustainability strategy, including our public commitments related to climate, the environment and other matters.

Increasing stakeholder environmental, social and governance expectations, evolving sustainability and social regulation, contractual requirements, and policy requirements may pose risk to our brand and reputation.

Our failure to meet stakeholder expectations could harm our reputation and adversely affect our relationships with customers and suppliers or our talent recruitment and retention efforts, which may impact our ability to achieve our long-term business objectives.

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

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

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Damage to our reputation could also reduce investor confidence in the Company, 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.

This underscores the importance of our ability to maintain the

technological competitiveness and value of our products, and a failure to do so could have a material adverse effect on our business, financial condition, and results of operations.

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.

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

We continue to engage in significant restructuring that has 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.

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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.

Increases in output in remaining manufacturing operations can likewise impose stress on these remaining facilities as they undertake the manufacture of greater volume and, in some cases, a greater variety of products.

Competitors can be quick to attempt to exploit these situations.

Increases in output in remaining manufacturing operations can likewise impose stress on remaining facilities as they undertake the manufacture of greater volume and, in some cases, a greater variety of products.

Competitors can attempt to exploit these situations.

Although we plan each step of the process carefully, and work to reassure customers who could be affected that their requirements will continue to be met, we could lose customers and associated revenues if we fail to execute properly on any restructuring.

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Not all product lines are produced at, or are capable of being produced at, all facilities.

We have certain MC facilities that are located in or near higher risk flood zones in Mexico, China, Italy, Germany, and Switzerland, that may be vulnerable to flood, storm surge or earthquake risks.

Based on our assessment of our manufacturing facilities for natural disaster risk, our three facilities in China and two facilities in Switzerland are located in areas of high risk for flooding.

Our facilities in Belgium, the U.S., and Mexico are

at medium-high risk for flooding.

Physical impacts of climate change such as increased frequency of severe and extreme weather events could materially impact our facilities and production continuity.

We are unable to predict these events with certainty;

however, we perform ongoing assessments of physical risk, including climate risk, to our business.

Weather events such as more extreme and volatile temperatures, increased storm intensity and flooding, and more volatile precipitation leading to changes in lake and river levels may significantly impact our business.

A significant interruption in the operation of any one or more of our plants, whether as the result of a natural disaster or other causes, could significantly impair our ability to timely meet our supply obligations to customers being supplied from an affected facility.

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We currently have manufacturing facilities outside the U.S.

In 2023, 43 percent of consolidated Net revenues were generated by our non-U.S.

subsidiaries.

Operations outside of the U.S.

are subject to a number of risks and uncertainties, including:

governments may impose limitations on our ability to repatriate funds;

which are subject to a number of risks and uncertainties, including:

governments may impose withholding or other taxes on remittances and other payments from our non-U.S.

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The military invasion of Ukraine by Russia, and the ensuing sanctions are likely to continue to have an impact on our business.

We have already stopped shipping our products to Russia and are in the process of winding down a small joint venture in that country which supplied dryer fabrics to local papermakers, resulting in lost sales and possible future write-offs.

However, we also expect that there could be further indirect impacts.

We have previously stopped shipping our products to Russia and abandoned a small joint venture in that country which supplied dryer fabrics to local papermakers, resulting in lost sales.

Net assets were written-off in 2022 and the Company does not expect future write-offs in this country.

However, we expect that there could be further indirect impacts.

For instance, the conflict has already caused disruption in the availability of shipping options between Asia and Europe.

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Geopolitical tensions have heightened elsewhere as well, including between China and Taiwan.

MC has significant manufacturing operations in China and vendors that support AEC import significant materials from China, and any escalation in this region could also disrupt our business.

MC has significant manufacturing operations in China and vendors that support AEC import significant materials from China, and any escalation in this region could disrupt either segment of our business.

These ongoing conflicts, along with other geopolitical uncertainties such as the current conflict in the Middle East, could have broader adverse impacts on macroeconomic factors that impact our business, cash flows, financial condition and results of operations.

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trade policy with foreign countries, or other changes in U.S.

laws and policies governing foreign trade, as well as any responsive or retaliatory changes in regulations or policies by such countries, could have an adverse impact on our business, either directly or in the form of increased costs due to their impacts on our supply chain.

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.

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 our supply chain will be reflected in higher costs from affected suppliers.

In addition, 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.

The implementation of trade tariffs could result in significant impacts on our business operations, financial condition, and overall market environment.

In 2024, the Company imported over $100 million into the U.S.

from other countries, of which approximately 45% of the imports were from Mexico and 29% of the imports were from Canada.

Tariffs on imported goods may lead to higher costs for raw materials, components, or finished products that we procure from affected countries.

These increased costs may not be fully absorbed or passed on to customers, thereby impacting our profit margins.

Tariffs may lead to disruptions in our supply chain if suppliers face increased costs or decide to relocate production.

Delays or shortages could also affect our ability to meet customer demand on time.

Trade partners affected by these tariffs may impose retaliatory tariffs on goods exported from the United States.

This could reduce demand for our products in international markets and limit our growth opportunities.

Tariff-related policies could further create price volatility and uncertainty in global markets.

This may lead to fluctuations in customer demand and difficulty in forecasting revenues.

Higher costs stemming from tariffs could lead customers to seek alternative products or services from competitors in regions not affected by such trade policies.

Navigating the complexities of new trade regulations and compliance requirements may increase administrative burdens and operational costs.

We continue to monitor developments regarding trade tariffs and assess their potential impact on our business.

While we are exploring strategies to mitigate these risks, the full extent of tariffs' impact on our operations remains uncertain and may vary depending on the scope and duration of the policies.

Our growth strategy includes evaluating selected acquisitions, which entails certain risks to our business, and presents financial, managerial and operational challenges that may adversely affect our operating results and financial condition.

Our growth strategy includes acquisitions.

Acquisitions involve various inherent risks, such as our ability to assess accurately the fair value, strengths, weaknesses, internal controls, contingent and other liabilities and potential profitability of the acquired business.

We cannot assure that all potential risks or liabilities are adequately discovered, disclosed, or understood in each instance.

We may fail to achieve anticipated synergies and lose key employees of the acquired business.

In addition, internal controls over financial reporting of acquired companies may not be compliant with required standards.

Issues may exist that could rise to the level of significant deficiencies or, in some cases, material weaknesses, particularly with respect to foreign companies or non-public U.S.

Customer dissatisfaction or performance problems with an acquired business, technology, service or product could also have a material adverse effect on our reputation and business.

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 have a history of making acquisitions, entering new markets, and pursuing joint ventures and we expect to opportunistically seek to make acquisitions, invest in strategic growth initiatives including possible entry into new markets, or enter into joint ventures in the future.

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

• We may invest time and capital pursuing acquisitions, joint ventures, or new products 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 may not achieve anticipated revenue and cost benefits from the acquisitions, joint ventures, or new product development;

• We may encounter unforeseen difficulties in integrating acquired operations, joint ventures, or new businesses into our existing operations;

• Our past or future acquisitions, joint ventures, or new businesses might not ultimately improve our competitive position and business.

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

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

We may fail to realize all of the anticipated benefits of the acquisition of Heimbach or those benefits may take longer to realize than expected.

We continue to devote significant management attention to integrating the business practices and operations of Heimbach.

We may experience disruptions to our business and, if integrated ineffectively, it could restrict the realization of the full expected benefits of the acquisition.

Even if integration is successful, the financial and operational results may differ materially from our assumptions and forecasts due to unforeseen expenses, delays, conditions and liabilities.

Additional integration challenges may include difficulty in achieving anticipated cost savings, synergies, business opportunities and growth prospects from the acquisition;

difficulties in the integration of operations and systems, including pricing and marketing strategies;

and difficulties in conforming standards, controls, procedures, financial reporting and accounting and other policies, business cultures and compensation structures.

Risks related to our contracts

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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, changes in the customers’ requirements that may not entitle AEC to additional compensation or payment, or the occurrence of similar events over which AEC has no or limited control.

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 customers, the termination of such contracts or orders, changes in the customers’ requirements that may not entitle AEC to additional compensation or payment, 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.

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

In 2024, the Company recorded negative cumulative adjustments to the estimated profitability of long-term contracts in the amount of $43.2 million, primarily related to our CH-53K, Gulfstream, F-35, and GE Platforms programs.

Because of the significance of management’s judgments and estimation processes, it is likely that materially different estimates could be recorded in the future 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 aft transition assembly including skins and longerons for the CH-53K helicopter.

As a result, while AEC reasonably expects to continue as a supplier on these programs as long as it meets its obligations, there can be no assurance that this will be the case, or that, in programs where it is currently a sole supplier, this sole supplier status will continue.

Such programs include airframe components for the F-35;

forward fuselage frames for the Boeing 787;

AFT assembly including skins and longerons, sponson assemblies, tail rotor pylon and the horizontal stabilizer for the CH-53K helicopter, and other long-term programs.

As a result, while AEC reasonably expects to continue as a supplier on these programs for so long as it meets its obligations, there can be no assurance that this will be the case, or that, in programs where it is currently a sole supplier, this sole supplier status will continue.

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.

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 revenues and segment operating income.

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 revenues and segment operating income.

AEC derives a significant portion of its revenue from contracts related to U.S.

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See also “The U.S.

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

Government’s Department of Defense ("DoD") 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 Net revenues and profitability.

Our customer Safran accounted for approximately 39 percent of Net revenues in the AEC segment in 2023, substantially all of which was under an exclusive long-term supply agreement relating to parts for the LEAP engine.

In the AEC segment, our customer Safran accounted for approximately 37% of AEC's Net revenues in 2024, 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, and although this is a cost-plus-fee arrangement, 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 AEC’s Net revenues and profitability.

LEAP engines are currently used on the Boeing 737 MAX, Airbus A320neo and COMAC 919 aircraft.

LEAP engines are currently used on the Boeing 737 MAX, Airbus A320neo, Airbus A321neo and COMAC 919 aircraft.

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 Net revenues and profitability.

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The failure to prevent attacks on our operational systems and/or infrastructure or our cloud-based providers 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 the increasing reliance on, and use of, mobile technologies and cloud-based services, and as many of our employees continue to work remotely following the coronavirus pandemic, the risk of security incidents and cyberattacks has increased.

As the breadth and complexity of this infrastructure continues to grow, including the increasing reliance on, and use of, mobile technologies and cloud-based services , and as some of our global employees work remotely, t he 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.

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We also rely on our supply chain to adequately detect and report cyber incidents, which could affect our ability to report or respond to cybersecurity incidents effectively or in a timely manner.

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

Our information technology systems, processes, sites and cloud-based providers may suffer interruptions or failures, or we may experience disruptions or challenges arising from the implementation or upgrading of new information technology systems, 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.

As part of our ongoing efforts to enhance operational efficiency and support our growth strategy, we are undertaking a significant upgrade to our Enterprise Resource Planning (ERP) system by transitioning to a cloud-based platform.

This upgrade is expected to streamline our business processes, improve data accessibility, and provide greater scalability.

However, the implementation of this new ERP system involves substantial operational and internal controls risks.

We are committed to managing these risks through careful planning, rigorous testing, and ongoing monitoring.

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

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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

Risks related to our liquidity and financial matters

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

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Net revenues are denominated in currencies other than the currency in which most costs of such sales are incurred.

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.

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 reflected in our Consolidated Statements of Income.

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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 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 2024.

From time to time, we use interest rate swaps to manage the interest cost associated with our borrowings.

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.

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

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.

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

The determination of our pension and other post-retirement 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.

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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 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.

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.

Goodwill and other intangible assets represent a significant portion of our assets, and any impairment of these assets could negatively impact our results of operations and financial conditions.

Goodwill and other intangible assets that have indefinite useful lives must be evaluated at least annually for impairment.

The specific guidance for testing goodwill and other non-amortized intangible assets for impairment requires management to make certain estimates and assumptions when allocating goodwill to reporting units and determining the fair value of reporting unit net assets and liabilities, including, among other things, an assessment of market conditions, projected cash flows, investment rates, cost of capital and growth rates, which could significantly impact the reported value of goodwill and other intangible assets.

Changes in our estimates and assumptions could adversely impact projected cash flows and the fair value of reporting units.

Fair value is generally determined using a combination of the discounted cash flow, market multiple and market capitalization valuation approaches.

Absent any impairment indicators, we generally perform our evaluations annually, using available forecast information.

If at any time we determine an impairment has occurred, we are required to reflect the reduction in value as an expense within operating income, resulting in a reduction of earnings and a corresponding reduction in our net asset value in the period such impairment is identified.

In the event there is deterioration in business conditions or estimated cash flows beyond amounts previously or currently forecasted, there is a risk of impairments on our goodwill balance.

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

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As of December 31, 2024, we have approximately $140.3 million of net operating loss (“NOL”) carryforwards 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.

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Risks related to our legal and regulatory environment

The Company may fail to adequately protect its proprietary technology, which would allow competitors or others to take advantage of its research and development efforts.

The Company may fail to adequately protect its proprietary technology or intellectual property, which would allow competitors or others to take advantage of its research and development efforts.

Proprietary trade secrets are a source of competitive advantage in each of our segments.

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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.

Our success depends on our ability to protect our intellectual property.

We rely on a combination of patents, trade secrets, and contractual agreements to safeguard our intellectual property.

However, there is a risk that these measures may not be sufficient to prevent the unauthorized use or infringement of our intellectual property rights.

We may also face intellectual property disputes and litigation.

These disputes could arise from allegations of infringement

by third parties of our intellectual property or from claims that our operations infringe the intellectual property rights of others.

Such litigation can be costly, time-consuming, and may divert management's attention and resources from other business operations.

If we are unsuccessful in defending our intellectual property, or if our intellectual property rights are deemed invalid or unenforceable, we may lose valuable competitive advantages.

This could result in a decline in market share, reduced revenue, and a material adverse effect on our business, financial condition, and results of operations.

Furthermore, we may be required to license our technology to third parties or to license technology from third parties to settle intellectual property disputes.

Such licenses may not be available on commercially reasonable terms, or at all, which could further harm our business and financial performance.

The Company is subject to legal proceedings and legal compliance risks.

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Our global operations are subject to increasing environmental, social and governance regulatory requirements, increasing operational and compliance costs, as well as the risk of noncompliance.

Increasing stakeholder environmental, social and governance expectations, physical and transition risks associated with climate change, emerging sustainability and social regulation, contractual requirements, and policy requirements may pose risk to our market outlook, brand and reputation, financial outlook, cost of capital, global

supply chain and production continuity, which may impact our ability to achieve long-term business objectives.

Changes in environmental and climate change laws or regulations could lead to additional operational restrictions and compliance requirements upon us or our products, require new or additional investment in product designs, result in carbon offset investments or otherwise could negatively impact our business and/or competitive position.

Evolving sustainability and social regulation, contractual requirements, and policy requirements, including transition risks associated with climate change, may pose risk to our market outlook, brand and reputation, financial outlook,

cost of capital, global supply chain, and production continuity, which may impact our ability to achieve long-term business objectives.

Changes in environmental and climate change laws or regulations could lead to additional operational restrictions and compliance requirements upon us or our products, require new or additional investment in product and packaging designs, result in carbon offset investments or otherwise could negatively impact our business and/or competitive position.

Increasing industry performance standards, increasing sustainability disclosure requirements in the U.S.

and globally, and requirements on manufacturing and product air pollutant emissions, especially GHG emissions, may result in increased costs or reputational risks and could limit our ability to manufacture and/or market certain of our products at acceptable costs, or at all.

Physical impacts of climate change, increasing global chemical restrictions and bans, and water and waste requirements may drive increased costs to us and our suppliers and impact our production continuity and data facilities.

Increasing global chemical restrictions and bans, increasing regulation related to product end-of-life and packaging materials, and water and waste requirements may drive increased costs to us and our suppliers and impact our production continuity and data facilities.

For example, the European Union's Corporate Sustainability Reporting Directive (“CSRD”) requires new and expansive disclosures related to sustainability risks and opportunities, and its Corporate Sustainability Due Diligence Directive (“CSDDD”) requires extensive due diligence and reporting of actual and potential adverse impacts on human rights and the environment arising from our own operations and across our value chains, and to remediate any such adverse impacts.

Changes in laws and regulations could also mandate significant and costly changes to the way we conduct our business, including increasing the cost of compliance, 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.

Changes in sustainability reporting requirements may impact our global operations as we begin collecting information for reports to be published according to new standards.

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 or other customers.

Changes in sustainability reporting requirements may impact our global operations as we continue collecting information for reports to be published according to new standards.

We will face significant challenges in being able to implement separate but overlapping standard-setting initiatives, which may contain inconsistencies.

As we devote increasing amounts of resources to sustainability reporting, there remains uncertainty about how to address various sustainability issues, including enforcement in voluntary frameworks.

Intensive work will need to be done in short timetables to comply with newly-introduced sustainability standards, with resultant transition costs.

While we are devoting increasing amounts of resources to sustainability reporting to ensure compliance, the reporting landscape is highly dynamic and uncertainty remains.

Intensive work must be done in short timetables to comply with newly-introduced sustainability standards, with resultant costs.

Non-compliance could result in various penalties, including liability for significant monetary damages, fines, enforcement actions and/or criminal prosecution or sanctions.

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In addition, climate change-related litigation and investigations have increased in recent years and any claims or investigations against us could be costly to defend, and our business could be adversely affected by the outcome.

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.

Certain provisions under our Certificate of Incorporation, our Bylaws and Delaware law could discourage, delay or prevent a transaction involving a change in control of the Company, even if doing so would benefit our stockholders.

These provisions could delay or prevent a change in control and could limit the price that investors might be willing to pay in the future for shares of our Class A Common Stock.

These provisions could delay or prevent a change in control and could limit the price that investors might be willing to pay in the future for shares of our Common Stock.

Our Certificate of Incorporation authorizes our Board of Directors to issue new series of preferred stock without stockholder approval.

Depending on the rights and terms of any new series created, and the reaction of the market to the series, the rights or value of our Class A Common Stock could be negatively affected.

Depending on the rights and terms of any new series created, and the reaction of the market to the series, the rights or value of our Common Stock could be negatively affected.

For example, subject to applicable law, our Board of Directors could create a series of preferred stock with superior voting rights to our existing common stock.

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There can be no assurance, however, that we will pay dividends in the future in the amounts that we have in the past, or at all.

Our Board of Directors may change the timing and amount of any future dividend payments or eliminate the payment of future dividends in its sole discretion, without any prior notice to our stockholders.

Our Board of Directors may change

the timing and amount of any future dividend payments or eliminate the payment of future dividends in its sole discretion, without any prior notice to our stockholders.

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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As of February 18, 2025, we had 30.9 million shares of Class A Common Stock outstanding.

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

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

Shareholder activism can have a significant impact on our operations, strategy, and overall performance.

Activist shareholders may attempt to influence or enact changes in our corporate governance, business strategies, or financial decisions.

This can lead to substantial disruptions and pose various risks.

Activist campaigns can divert the attention of our management team and board of directors from executing our business strategy and managing day-to-day operations.

The need to respond to shareholder activists' demands or proposals can be time-consuming and may detract from our ability to focus on long-term goals.

Shareholder activists may propose changes to our board composition, executive compensation, or other governance practices.

Proposed changes could lead to instability or conflict within our leadership, potentially affecting the company's strategic direction and decision-making processes.

Shareholder activism often brings increased scrutiny from the media, investors, and analysts.

Negative publicity or heightened market perception of instability could adversely affect our stock price, investor confidence, and overall market reputation.

This could also lead to increased volatility in our stock and potential loss of shareholder value.

Activist shareholders may push for changes in our business strategies, such as divestitures, acquisitions, cost-cutting measures, or shifts in focus.

While some suggestions may align with broader market trends or opportunities, others may conflict with our long-term vision or operational capabilities, potentially leading to suboptimal business outcomes.

Engaging with activist shareholders may also increase the risk of legal challenges or regulatory scrutiny.

Activist campaigns can result in proxy battles, litigation, or regulatory investigations, which can be costly, time-consuming, and damaging to our reputation.

Prolonged activist campaigns and the associated uncertainty can negatively affect employee morale and retention.

Employees may become concerned about the stability of their positions or the overall direction of the company, potentially leading to decreased productivity and higher turnover rates.

Implementing changes advocated by activists may involve substantial costs or capital expenditures, which could impact our financial position and operating results.

We are vigilant in monitoring and addressing potential activism to safeguard our long-term interests and those of our shareholders.

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What changed 10-K

Item 1A. Risk Factors