AIN 10-K & 10-Q changes, risk factors and insider trading

Significant consolidation and rationalization in the paper industry in recent years have reduced global consumption of paper machine clothing in certain markets and for certain grades. 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. 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 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 growingincreasing sophisticationchanges within our Asian competitors, particularly in China, heightens the challenge of Asianmaintaining competitorssales exacerbatesin thisthat risk.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.

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. 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.

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.

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 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 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’s production of LEAP engine components is currently located in three facilities. 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, UtahUtah, Boerne, Texas, or Boerne,Queretaro, Texas.Mexico.

Based on our assessment of our manufacturing facilities for natural disaster risk, our three facilities in China and twoan facilitiesoffice 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; 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.

The military invasion of Ukraine by Russia, and the ensuing sanctions are likely to continue to have an impact on our business. 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. 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. Moreover, these same pressures could hinder our customers’ ability to source materials needed for their own manufacturing efforts, thereby reducing or slowing their demand for our products. There can be no assurance that we will be able to pass through input cost increases to our customers or to fully offset them via operational efficiencies. If we are unsuccessful in managing such cost increases, they could have a material adverse effect on our business, financial position, results of operations, and liquidity.

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

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-closingpostclosing asset impairment charges, expenses associated with eliminating duplicate facilities, and other liabilities.

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 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. In 2024,2025, the Company recorded negative cumulative adjustments to the estimated profitability of long-term contracts in the amount of $43.2$165.8 million, primarily related to our CH-53K, Gulfstream,Boeing waste tank, F-35, and GEJoint PlatformsStrike 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; 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. 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.

As part of our ongoing efforts to enhance operational efficiency and support our growth strategy, we are undertakingimplemented 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 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 are subject to numerous laws and regulations designed to protect this information, such as the European Union’s General Data Protection Regulation (“GDPR”) and the United Kingdom’s GDPR, the Cybersecurity Law of the People's Republic of China, as well as various other U.S. federal and state laws governing the protection of privacy, health or other personally identifiable information and data privacy and cybersecurity laws in other regions. We are subject to U.S. federal procurement regulations such as the DFARS clause 252.204-7012, based on the NIST 800-171 framework whose goal is protecting controlled unclassified information in non-federal systems and organizations. In 2024,2025, we continued efforts to comply withachieved the forthcoming U.S. DepartmentDoW CMMC Level 2 certification through an accredited CMMC Third-Party Assessment Organization (C3PAO) in support of Defenseour CybersecurityAEC Maturitybusiness Modelsegment. Certification ("CMMC") program, whichThis 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.

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.and indefinite-lived intangible balances.

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. While weWe are devoting increasing amounts ofsubstantial resources to sustainability reporting to ensure compliance,compliance; however, the reporting landscape is highly dynamic and uncertainty remains. IntensiveImplementing workseparate mustbut beoverlapping donenewly introduced standard-setting initiatives in short timetables tomay complyresult within newly-introducedinconsistencies sustainabilityand standards, with resultanthigher costs. Non-compliance could result in various penalties, including liability for significant monetary damages, fines, enforcement actions and/or criminal prosecution 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.

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.

Global, economic, and political conditions, changes in raw material and commodity prices and supply, labor availability and costs, inflation, interest rates, potential changes in U.S. government policy positions, including changes in Department of Defense policies or priorities, geopolitical conflicts and strained intercountryinternational relations, U.S. and non-U.S. tax law changes, foreign currency exchange rates, sanctions, tariffs, energy costs and supply, and the impact from natural disasters and weather conditions create uncertainties that could impact our businesses.

We believe the MC believes itsegment is well-positioned in key markets, with high-quality, low-cost production in growth markets, substantially lower fixed costs in mature markets, and continued strength in new product development, technical product support, and manufacturing technology. Some of the markets in which MC's products are sold are expected to have volume trends that are in line with global GDP. MC continues to faceDespite pricing pressuresand in all markets. Despite these marketdemand pressures on revenue growth, the MC segment is expected to improve earnings in the future through costtechnological controlsinnovations, andparticularly within the pressing market, manufacturing productivity efficiencies.efficiencies and cost controls.

The MC segment has been a significant generator of cash for the Company. The Company seeks to maintain the cash-generating potential of this business by maintaining lower costs through a continued focus on cost-reduction initiatives and strategic investment, and by vigorously using our differentiated and technically superior products to reduce our customers’ total cost of operation andwhile improveimproving their paper quality.quality, and by maintaining lower costs through a continued focus on cost-reduction initiatives and strategic investment.

In August, 2023, the Company acquired Heimbach, a privately-held manufacturer of paper machine clothing headquartered in Düren, Germany, which provides the MC segment with an increase in scale and complementary technology that further drives MC's differentiated manufacturing sales and service network. Unlocking the full benefits and value ofThe Heimbach is a complex integration process that is well underway and tracking to expectations. It is a multi-year program that started with harmonizing Heimbach operations with our legacy MRP systems and establishing a new global customer and operations organization. There is a disciplined focus to realize not only the combined benefits from procurement and overhead, but also to leverage best practices in manufacturing and a deep realignment of our operational footprint. During 2024, the Company announced several initiatives to further rationalize MC's operating footprint, including the closure of the South Korea facility, the consolidation of activities and facilities across the United Kingdom and the closure of Heimbach's Switzerland facility.

The AEC segment's strategy is to continue to build on its global brand by leveraging its industry leading performance to drive future growth through technology differentiation. This includes continued investment in AEC's proprietary 3D-woven technology to accelerate solutions that can be offered across a set of broader applications; and by leveraging the AEC's non-3D technology capabilities and capacity, on high-value aerospace (both commercial and defense) applications, and other emerging markets such as space and advance air mobility ("AAM"). The AEC segment provides longer-term growth potential for the Company andas theit AECramps segmentcurrent continues to penetrate newproduction programs and applications,captures asnew well as ramping up production on certain long-term programs, such as the CH-53Kcommercial and otherdefense commercial aircraft programs that have not yet returned to pre-COVID production rates.opportunities.

The AEC segment's current portfolio of non-3D programs includes components for the CH-53K helicopter, components for the F-35, missile bodies for Lockheed Martin’s JASSM air-to-surface missiles, fuselage components for the Boeing 787 aircraft, vacuum waste tanks for Boeing commercial aircraft and components and structures for other commercial, business jet, defense, and space and AAM programs. In 2024,2025, approximately 36%35% of AEC net revenues were related to U.S. government contracts or programs.

The AEC segment is dependent on global supply chains and has experienced disruptions in recent years. In addition, higher inflation levels increased material costs, higher labor rates and other supplier costs that have impacted the AEC segment’s results of operations. The AEC segment attempts to mitigate raw material and supplier costs by entering into long-term supply agreements. However, in some cases, higher raw material and supplier costs adversely impacted certain firm-fixed price programs resulting in lower program gross margins. In addition, as the AEC segment ramps-up larger complex programs, such as CH-53Kthose andassociated Gulfstream,with the CH-53 program, it continues to face challenges in staffing and training its workforce to support production rates, which has impacted operational productivity, particularly at its Salt Lake City facility, and contributed to increased labor and scrap costs.

Net Revenues and Gross Profit

The following table summarizes our Consolidated Net revenues byand businessGross segmentprofit:

Consolidated Net revenues increaseddecreased 7.2%4% compared to 2023,2024, driven by anreduced increasedemand offor NetMC revenuesproducts fromin Asia and AEC revenue adjustments primarily related to the HeimbachCH-53K acquisitionprogram inbased 2023on andour marginallylong-term highercontract Netestimates. revenuesThese indecreases AEC,are partially offset by lowerhigher organicrevenue Neton revenuesthe atAEC MC.LEAP program.

The decrease in Consolidated Gross profit during 2024,2025, as compared to 2023,2024, was driven primarily by increased cost assumptions that adjusted the expected profitability of certain long-term contracts in the AEC segment.segments CH-53K long-term contracts. Gross profit as a percentage of revenues was as follows:21%.

The following table summarizes technicalConsolidated and researchOperating expenses by business segmentclassification:

Consolidated Technical and research expenses increased 13.5%4.2% as compared to 20232024 and as a percentage of Net revenues increased from 3.5% in 2023 to 3.7% in 2024.2024 to 4.1% in 2025. This change is primarily driven by increased activity within our New Business Ventures group.

At MC, restructuring actions were taken throughout 2024 and 2025 in order to cease operations at several facilities,facilities. includingPrior year actions at the Company's MC forming fabric manufacturing facility in Chungju, South Korea, at the Company's Heimbach engineered fabric manufacturing facility in Rochdale, UK, and at the Company's Heimbach paper machine clothing facility in Olten, Switzerland.Switzerland, concluded in 2025. Additional actions were announced in 2025 to close engineered fabric facilities in Ballo, Italy and Saint Junien, France as well as a facility in Manchester, United Kingdom. These actions drove $11.2$8.3 million of restructuring charges during 2024,2025, ofcompared whichto $9.5$11.2 million in Restructuring2024, expenses,a netdecrease wasthat dueis to workforce reductions, fixed asset impairments, and related costs and $1.7 million in Costs of goods sold wasprimarily due to the write-offtiming of inventory.the announced actions, workforce reductions, and related costs. We expect to incur additional restructuring expenses related to these actions into 2025.2026.

At AEC, restructuring activities were related to reductions in the workforce at various AEC locations, which resulted in restructuring expenses of $3.3 million for the year ended 2025 and $3.6 million for the year ended 2024.

During the first quarter of 2025, the Company decided to consolidate headquarters in Portsmouth, NH. This change impacts approximately 100 employees, will take place over the next year and a half,employees and will costcontinue anthrough estimatedthe $7first half of 2026. Through December 31, 2025, this has resulted in expenses of $2.0 million over that period related to retention, relocation, severance, and professional costs.

Interest Expense/(income),Expense, net

Interest expense/(income),expense, net,net decreasedincreased by $8.1 million over the prior year primarily due to lowerhigher average debt balances,borrowings, in part offset by less$1.1 million of greater interest income earned on cash equivalents during the current year. In addition, our 2021 interest rate swap contracts expired in the fourth quarter of 2024. Although we entered into new interest rate swap contracts in the fourth quarter, our interest cost will increase significantly in 2025 and beyond. For more information, see Note 17, Financial Instruments, of the Notes to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Other (income)/expense, net included foreign currency related transactions that resulted in gainslosses of $8.9 million in 2025 as compared to $3.9 million inof 2024 and $2.9 milliongains in 2023.2024. In addition, changes in the fair value of derivative instruments included gains of $3.7 million in 2025 and losses of $3.5 million in 2024 and gains of $0.4 million in 2023,2024, driven by currency rate movements, most notably the Brazilian Real and Mexican Peso. Other (income)/expense also included bank fees, amortization of debt issuance costs, and rental income. See Note 6, Other (Income)/Expense, net, of the Notes to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for additional information.

The Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of 15% effective on January 1, 2024. While the U.S. has indicated that it will not adopt the Pillar Two rules,framework at this time, various otherjurisdictions governmentsin aroundwhich we operate have enacted, or are in the worldprocess areof enactingenacting, legislation.legislation Asto currentlyimplement designed,these rules. Based on their current design, the Pillar Two willrules ultimatelyare expected to apply to our worldwideglobal operations. We have evaluated the impact of these rules and have determined that it did not materially increase our global tax costs in 2024.2025. We will continue to monitor U.S. and global legislative action related to Pillar Two for potential impacts.

Gross profit increaseddecreased by $14.5$22.3 million as compared to 2023,2024, primarily driven by the highervolume salesdeclines noted above; however,with gross profit margin decreasedalso decreasing slightly from 49.4% in 2023 to 46.1% in 2024.2024 Thisto margin45.7% decreasein was primarily driven by lower gross margins at Heimbach.2025.

This quarterly report and the documents incorporated or deemed to be incorporated by reference in this quarterly report contain statements concerning our future results and performance and other matters that are “forward-looking” statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” "forecast," ”look for,” “will,” “should,” “guidance,” “guide” and similar expressions identify forward-looking statements, which generally are not historical in nature. Because forward-looking statements are subject to certain risks and uncertainties, (including, without limitation, those set forth in the Company’s most recent Annual Report on Form 10-K or prior Quarterly Reports on Form 10-Q) actual results may differ materially from those expressed or implied by such forward-looking statements. These forward-looking statements are qualified in their entirety by the specific cautionary factors identified below and the more detailed risk factor discussions contained in those filings. Investors should not place undue reliance on any forward-looking statement.

•ProposedChanges tariffsin trade policy, tariffs, or import/export restrictions that may significantly and adversely impact our results of operations;

Further information concerning important factors that could cause actual events or results to be materially different from the forward-looking statements can be found in the “Business Environment Overview and Trends” sections of this quarterly report, as well as in the Item 1A-“Risk Factors” section of our most recent Annual Report on Form 10-K. The risk factors enumerated above and in those filings are intended to be meaningful cautionary statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and such factors are specifically incorporated by reference herein. Although we believe the expectations reflected in our other forward-looking statements are based on reasonable assumptions, it is not possible to foresee or identify all factors that could have a material and negative impact on our future performance. The forward-looking statements included or incorporated by reference in this report are made on the basis of our assumptions and analyses, as of the time the statements are made, in light of our experience and perception of historical conditions, expected future developments, and other factors believed to be appropriate under the circumstances.

Global, economic, and political conditions, changes in raw material and commodity prices and supply, labor availability and costs, inflation, interest rates, potential changes in U.S. government policy positions, including changes in Department of Defense policies or priorities, geopolitical conflicts and strained international relations, U.S. and non- U.S.non-U.S. tax law changes, foreign currency exchange rates, sanctions, tariffs, energy costs and supply, and the impact from natural disasters and weather conditions create uncertainties that could impact our businesses.

The MC segment continues to deliver resilient performance, with several areas performing well despite uneven market dynamics. In Asia, softer demand—across Paper Machine Clothing & Engineered Fabrics—continues to contribute to regional pressure. Packaging and Tissue continue to perform well, supported by growth across most regions. Looking ahead to the remainder of 2026, we expect Packaging and Tissue to remain positive contributors, with sales in Europe and the Americas holding broadly stable, while Asia’s trajectory remainsin uncertain.the Americas is impacted by cyclical moderation tied to customer consolidations. Publication grades remained under structural pressure, and the MC segment expects publication grade paper demand to continue declining through 2026 and beyond, offset by growing demand for tissue grade products.

We believe the MC segment is well-positioned in key markets, with high-quality, low-cost production in growth markets, substantially lower fixed costs in mature markets, and continued strength in new product development, technical product support, and manufacturing technology. Some of the markets in which MC's products are sold are expected to have volume trends that are in line with global GDP. Despite pricing and demand pressures on revenue growth, the MC segment is expected to improve earnings in the future through technological innovations, manufacturing productivity efficienciesefficiencies, global footprint optimization, and cost controls.

The AEC segment's strategy is to continue to build on its global brand by leveraging its industry leading performance to drive future growth through technology differentiation. This includes continued investment in AEC's proprietary 3D-woven technology to accelerate solutions that can be offered across a set of broader applications;applications, and by leveraging the AEC's non-3D technology capabilities and capacity, on high-value aerospace (both commercial and defense) applications, and other emerging markets such as space and advanced air mobility ("AAM"). The AEC segment provides longer-term growth potential for the Company as it ramps current production programs and captures new commercial and defense opportunities.

During the fourth quarter of 2025, we announced thatplans we willto commence a strategic review of the Amelia Earhart Drive facility in Salt Lake City. This review is progressing according to our planned timeline, and we have received multiple indications of interest with regards to a sale of the facility. We continue to engage closely with our customers throughout the strategic assessment process. This review is expected to be completed by the end of 2026, and management expects the review to result in a sale of the facility, including the CH-53K contract work.2026. As of December 31, 2025, we determined that the assets and liabilities of this group meet the held-for-sale criteria, and they have been classified as such within our consolidated balance sheets for all periods presented. Upon classification as held for sale, the Company ceased depreciation and amortization of the related long-lived assets in accordance with applicable accounting guidance.

Net revenues for the three months ended MarchJune 31,30, 2026 increased 7.8%$18.1 million or 5.8% as compared to the three months ended MarchJune 31,30, 2025 primarily due to higher volumeactivity levels in the AEC segment partially offset by softness in the USMC business as a result of reduced activity levels in the Americas region and temporary production interruptions in the MC business. Additionally, changes in currency translation rates increased comparative segment net revenues by $9.3$4.0 million as compared to the prior year.

The increase in gross profit of $10.4 million for the three months ended MarchJune 31,30, 2026, as compared to the three months ended MarchJune 31,30, 2025, was primarily driven by the increased sales volumevolume. in AEC. Despite the favorable change to gross profit, increased production costs resulting from changes in the product mix within the MC business are the primary driver for the slight grossGross profit margin decreaseincreased slightly to 32.1%32.7% from 33.4%31.3% for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively.

Consolidated Selling, general and administrative ("SG&A") expenses increaseddecreased $4.5$2.4 million or 8.3%4.2% as compared to the three months ended MarchJune 31,30, 2025. The overall changes are primarily the result of highercost personnelcontrol costsactions asand wellfavorable asforeign costscurrency incurredimpacts relatedparticularly toin the strategicMC review of the Amelia Earhart Drive facility.business.

Consolidated Technical and research expenses increaseddecreased by $1.1$0.8 million as compared to the three months ended MarchJune 31,30, 2025, primarily due to newlower businessintellectual venturesproperty-related initiativesdefense costs in 2026.the current year.

Restructuring expenses, net,net of $3.2$8.0 million in the three months ended MarchJune 31,30, 2026, increased by $0.7$3.8 million compared to $2.5$4.2 million in the three months ended MarchJune 31,30, 2025. The changeincrease in restructuring actionsexpenses for the three month period areis primarily a result of workforcehigher reductionsasset transfer costs related to site consolidations and globalhigher productionconsulting consolidation activities.costs.

See the Segment Results of Operations section of this ManagementManagement's Discussion and Analysis of Financial Condition and Results of Operations for significant drivers of Operating income/(loss) for each business segment.

Other (income)/expense, net, included foreign currency related transactionsactivity which resulted in gains of $(2.2)$0.5 million and $2.7 million in the three and six months ended MarchJune 31,30, 2026, as compared to losses of $3.2$5.7 million and $8.8 million in the same periodperiods last year. These changes were primarily the result of unrealized gains and losses on intercompany loans. In addition, changes in the fair value of derivative instruments included gains of $1.2$0.2 million and $1.5 million in the three and six months ended MarchJune 31,30, 2026, as compared to gains of $2.5$0.7 million and $3.3 million for the three and six months ended MarchJune 31,30, 2025. Unrealized gains and losses on both derivative instruments and intercompany loans were driven by currency rate movements, most notably the Brazilian Real and Mexican Peso. Components of net periodic pension and postretirement costs other than service costs constituted expenses of $1.5 million and $3.0 million in the three and six months ended June 30, 2026, as compared to income of $0.5 million for the three months ended June 30, 2025 and expenses of $0.3 million for the six months ended June 30, 2025. See Note 6, Other (Income)/Expense, net, in the Notes to the Consolidated Financial Statements in Item 1, which is incorporated herein by reference.

The tax rate is affected by recurring items, such as the income tax rate in the U.S. and non-U.S. jurisdictions and the mix of pre-tax income earned in those jurisdictions. The tax rate is also affected by U.S. tax costs on foreign pre-tax earnings, and by discrete items that may occur in any given year but are not consistent from year to year. The Company’s effective tax rate for the firstsix quartermonths ofended June 30, 2026 was 33.1%,32.5%, compared to 26.6%28.3% for the same period in 2025, mainly due to unfavorable discrete tax adjustments recognized in the current period, partially offset by favorable discrete tax adjustments, compared to favorable discrete tax adjustments recognized in the prior period. For more information, see Note 7, Income Taxes, in the Notes to the Consolidated Financial Statements in Item 1, which is incorporated herein by reference.

The Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of 15 percent intended to be effective on January 1, 2024. While theThe U.S. has not yet adopted the Pillar Two rules,rules; however, various other governments around the world are enacting legislation. As currently designed, Pillar Two will ultimately apply to our worldwide operations. AlthoughCertain weforeign subsidiaries subject to the Pillar Two regime file reports to comply with locally enacted guidance. On January 1, 2026, the Pillar Two Side-by-Side (SbS) Safe Harbor agreement became effective, and the US is a Qualified SbS Regime. Therefore, a qualified US-headquartered multinational corporation may elect the SbS Safe Harbor and be exempt from minimum top-up tax. AIC intends to make the election. We do not expect thesethe Pillar Two rules to materially increase our global tax costs in 2026, therethough uncertainty remains uncertainty as to the finalrules Pillar Two model rules.develop. We will continue to monitor U.S. and global legislative action related to Pillar Two for potential impacts.

The MC segment accounted for 53.3% of our consolidated revenues for the three months ended March 31, 2026. A summary of MC's selected financial results is as follows:

Net revenues for the three months ended MarchJune 31,30, 2026 decreased 5.0%1.2% as compared to the three months ended MarchJune 31,30, 2025, driven by reduced sales volumedemand in the USAmericas region,region primarily due to temporary production interruptions, including scheduled maintenance at certain plants. This decline is slightlypartially offset by a strong performance within the European market,market particularlyand relatedstable toperformance thein Engineered Fabrics program.Asia. Further, changes in currency translation rates had the effect of increasing Net revenues by $6.1$2.1 million for the three months ended MarchJune 31,30, 2026, as compared to this period in 2025.

Gross profit for the three months ended MarchJune 31,30, 2026 decreased by $4.8$2.8 million as compared to the three months ended MarchJune 31,30, 2025, primarily driven by the volume declines noted above;above, with gross profit margin also decreasing slightly from 45.7%46.3% to 45.2%45.3% in the three months ended MarchJune 31,30, 2025 and 2026, respectively.

Operating income for the three months ended MarchJune 31,30, 2026 decreased $6.5$3.0 million or 16.9%7.9% as compared to the three months ended MarchJune 31,30, 2025, primarily as a result of gross profit declines and higher restructuring costs.costs, offset by SG&A cost containment. Incremental restructuring expenses were primarily a result of manufacturinghigher footprintasset optimizationtransfer incosts connectionrelated withto thesite Heimbachconsolidations acquisition.and higher consulting costs.

The AEC segment accounted for 46.7% of our consolidated net revenues for the three months ended March 31, 2026. AEC has contracts with certain customers, including its contract for the LEAP program, where revenue is determined by a cost-plus-fee agreement. Revenue earned under thesethis arrangementsarrangement accounted for approximately 33%34% and 35%34% of segment revenue for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

Net revenues for the three months ended MarchJune 31,30, 2026 increased 27.4%,15.6%, primarily driven by higher activity levels on various programs including ASC, GE LEAP Platforms, andplatforms, B787 Frames, and Boeing Tanks, as well as lower unfavorable long-term contract adjustments. Further, changes in currency translation rates had the effect of increasing Net revenues by $3.1$1.8 million for the three months ended MarchJune 31,30, 2026, as compared to this period in 2025.

Gross profit for the three months months ended MarchJune 31,30, 2026 increased $8.1$13.2 million as compared to the three months ended MarchJune 31,30, 2025, and Gross profit margin increased from 14.5%10.5% to 17.0%17.9% in the three months ended MarchJune 31,30, 2025 and 2026, respectively. The change was driven primarily by increases in revenue,revenue and lower depreciation related to held for sale accounting, as well as performance improvements on various programs, resulting in lower unfavorable EAClong-term contract adjustments.

Operating Income/(Loss)

Operating income for the three months ended MarchJune 31,30, 2026 increased $7.0$14.1 million as compared to the three months ended MarchJune 31,30, 2025, principally due to favorable changes to Gross profit as noted above and the conclusion of restructuring activities from 2025. ThisOperating income was slightlyfurther offsetincreased by ana increaseslight decrease in SG&A expenses of $1.5$0.5 million from the prior period, driven by personnel-related costs. Additionally, Technical and research expenses increased $0.9 million for the three months ended March 31, 2026period as compareda toresult theof threecost monthscontainment ended March 31, 2025, driven by increased consulting costs to assist with continued innovation within the segment.efforts.

Net cash provided by operating activities during the threesix months ended MarchJune 31,30, 2026 was $5.6$3.0 million, compared to $2.1$34.8 million in the threesix months ended MarchJune 31,30, 2025. The increasedecrease was primarily driven by improvedlower cash generated by working capital management primarily drivenrelated byto favorableinventory cashgrowth collectionin activitiesconnection atwith seasonal activity levels in MC and customer demand in AEC.

Net cash used in investing activities included capital expenditures totaling $9.3$21.2 million and $15.6$30.5 million for the threesix months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively, with continued maintenancegrowth capital and capital designed to improve operating efficiencies across the Company.

Net cash providedused byin financing activities was $13.8$19.2 million for the threesix months ended MarchJune 31,30, 2026 as compared to net cash used of $15.1$24.5 million for the threesix months ended MarchJune 31,30, 2025. During 2026, we had net borrowingsrepayments of $23.0debt of $2.0 million as compared to $94.0$113.9 million of borrowings in the prior year, which were offset by share repurchases of $69.2$120.4 million. Additionally, the Company has returned cash to shareholders through dividends of $7.9$15.9 million in the first threesix months of 2026.2026, a $0.8 million improvement in cash flow as compared to prior year.

We finance our business activities principally with cash generated from operations and borrowings, largely through our revolving credit agreement as discussed below. As of MarchJune 31,30, 2026, $476.5$450.7 million of borrowings were outstanding under our $800 million unsecured committed Amended Credit Agreement.

As of MarchJune 31,30, 2026, we had cash and cash equivalents of $122.6$77.3 million and borrowing capacity under our Amended Credit Agreement of $323.5$349.3 million, for a total liquidity of approximately $446.0$426.7 million. We believe cash flows from operations and the availability of funds under our Amended Credit Agreement will be adequate to fund our operations and business needs over the next twelve months.

As of MarchJune 31,30, 2026, $101.2$68.2 million of our total cash and cash equivalents were held by non-U.S. subsidiaries. The accumulated undistributed earnings of the Company’s foreign operations not targeted for repatriation to the U.S. were in excess of $158.9$156.1 million, as of MarchJune 31,30, 2026 and are intended to remain indefinitely invested in foreign operations. Our cash planning strategy includes repatriating current earnings in excess of working capital requirements from certain countries in which our subsidiaries operate. While we have been successful in such endeavor to date, there can be no assurance that we will be able to cost effectively repatriate funds in the future. Repatriating such cash from certain jurisdictions, which is currently considered to be indefinitely reinvested in foreign operations, may also result in additional taxes.

The Company is party to certain off-balance sheet arrangements, including certain guarantees. The Company provides financial assurance, such as payment guaranteeguarantees and letters of credit and surety bonds, primarily to support workers’ compensation programs and customs clearance, of less than $11$10 million. There were no material changes in the Company’s off-balance sheet arrangements during the firstsecond quarter of 2026.