What changed in this filing

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Item 1A. Risk Factors

2026-02-27 compared with 2025-02-26 · 66 added, 48 removed, 411 unchanged (22% of the section changed)

7 unchanged sentences

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.

In addition, changes in shipping, fulfillment, and consumer packaging practices—including a shift from traditional corrugated boxes to alternative packaging formats such as bags, lighter‑weight materials, and smaller boxes—have reduced demand growth for certain packaging paper grades, which may further negatively affect demand for paper machine clothing used in those applications.

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.

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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 growing sophistication of Asian competitors exacerbates this risk.

The increasing changes within our Asian competitors, particularly in China, heightens the challenge of maintaining sales in that region.

This challenge is further intensified by a preference among Chinese customers and government entities to source products from domestic manufacturers, which can adversely impact our ability to compete effectively in the Chinese market.

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

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

Net revenues from the LEAP contract peaked at over $210 million in 2019 but dropped sharply in subsequent years due to factors beyond the Company's control, such as Boeing production issues and the COVID-19 pandemic.

Although conditions have improved, similar disruptions could occur again and impact AEC's performance

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.

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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.

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.

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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.

Additionally, although we maintain product liability 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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Fuel costs are a significant part of operating costs for airlines and, in many cases, may constitute a carrier’s single largest operating expense.

A sustained drop in oil prices, and related decline in the price of jet fuel, could prompt airlines to defer orders or delivery dates for such newer, more fuel-efficient airframes and aircraft engines, as the urgency to reduce fuel consumption may be lessened.

may be lessened.

In addition, any economic conditions that led to sustained high interest rates could affect the airline’s ability to finance new aircraft and engine orders.

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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.

Government-related business and based on the CMMC Proposed Rule released by the DoD in December 2023, AEC announced in December 2025 that it had achieved the U.S.

Department of War (DoW) Cybersecurity Maturity Model Certification (CMMC) Level 2 certification through an accredited CMMC Third-Party Assessment Organization (C3PAO).

AEC expects to be required to comply fully with CMMC Level 3 for certain programs as those requirements are further defined.

This will require 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.

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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.

Production of almost all of AEC’s other legacy and growth programs is located primarily in facilities in Salt Lake City, Utah, Boerne, Texas, or Queretaro, Mexico.

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.

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

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.

Based on our assessment of our manufacturing facilities for natural disaster risk, our three facilities in China and an office site 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;

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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.

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

Supply chain disruptions could make it more difficult to find favorable pricing and reliable sources for the raw materials we need, putting upward pressure on our costs and increasing the risk that we may be unable to acquire the materials or services we need to continue to make and deliver certain products.

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

• 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;

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

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

We have previously announced the initiation of a strategic review of our structures assembly business which could include a potential sale of all or part of a production site in Salt Lake City, Utah.

In connection with this review, we will incur costs and expenses and may not succeed in completing any strategic initiatives identified.

A divesture of the business may not materialize or may not be completed without disruption.

We may face additional risks related to such activities.

For example, risks related to our ability to find appropriate buyers, obtain applicable contractual, regulatory, and/or governmental approvals, execute a transaction on favorable terms, separate divested business operations with minimal impact to our remaining operations, and effectively manage any transitional service arrangements.

Further, any divestiture of the business may require us to recognize impairment charges.

Any of these factors could materially and adversely affect our financial condition and operating results.

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.

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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.

In addition, we may incur unanticipated costs or expenses following an acquisition, including postclosing 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.

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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, segment operating 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 AEC segment pose certain risks.

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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.

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.

In 2025, the Company recorded negative cumulative adjustments to the estimated profitability of long-term contracts in the amount of $165.8 million, primarily related to our CH-53K, Boeing waste tank, F-35, and Joint Strike Fighter 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;

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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.

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.

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

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Our customers, suppliers, and subcontractors experience similar security threats and an incident at one of these entities could adversely impact our business.

These entities are typically outside our control and may have access to our information with varying levels of security and cybersecurity resources, expertise, safeguards and capabilities.

These entities are typically outside our control and may have access to

our information with varying levels of security and cybersecurity resources, expertise, safeguards and capabilities.

Breaches in our supply chain could compromise our data and adversely affect customer deliverables.

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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.

As part of our ongoing efforts to enhance operational efficiency and support our growth strategy, we implemented 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.

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

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.

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.

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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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 non-federal systems and organizations.

In 2024 , we continued efforts to comply with the forthcoming U.S.

Department of Defense Cybersecurity Maturity Model Certification ("CMMC") program, which will impact us in the coming years as it is formalized through the DFARS and those regulations are incorporated into our contracts for government programs.

In 2025, we achieved the U.S.

DoW CMMC Level 2 certification through an accredited CMMC Third-Party Assessment Organization (C3PAO) in support of our AEC business segment.

This will impact us in the coming years as it is formalized through the DFARS and those regulations are incorporated into 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.

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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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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.

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.

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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.

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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.

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 and indefinite-lived intangible balances.

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

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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.

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.

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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 anti corruption laws or regulations.

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 anti corruption 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.

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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.

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

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.

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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 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.

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

Changes in sustainability reporting requirements may also 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.

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.

We are devoting substantial resources to sustainability reporting to ensure compliance;

however, the reporting landscape is highly dynamic and uncertainty remains.

Implementing separate but overlapping newly introduced standard-setting initiatives in short timetables may result in inconsistencies and higher costs.

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

Given the reach of new and proposed regulations in the jurisdictions where we operate, there is the possibility that we may not be able to comply, or may not be able to comply in time.

We also may not be able to ensure that relevant companies within our supply chain are compliant with applicable supply chain due diligence acts, which may require us to embark on new due diligence processes with other companies and in some cases parting ways with suppliers.

We closely monitor developments in sustainability- and climate change-related laws, regulations and policies for their potential effect on our business, however, we are currently not able to accurately predict the materiality of any potential costs associated with such developments.

Changes to several international regulatory frameworks including the European Union's Corporate Sustainability Reporting Directive (“CSRD”) and Corporate Sustainability Due Diligence Directive (“CSDDD”) have increased thresholds and moved out compliance timeframes by several years.

We continue to closely monitor developments in sustainability- and climate change-related laws, regulations and policies for their potential effect on our business, however, we are currently not able to accurately predict the materiality of any potential costs associated with such developments.

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.

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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.

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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.

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.

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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