Ducommun Incorporated : Amendment to Annual Report (Form 10-K/A)

About this update from Ducommun Incorporated

[{"type":"text","content":" \n Overview \n In this Amendment No. 1 to Form 10-K for the year ended December 31, 2025 (\"Amendment\" or \"Form 10-K/A\"), Ducommun Incorporated (\"Ducommun,\" \"the Company,\" \"we,\" \"us\" or \"our\") amends and restates certain items in our Annual Report on Form 10-K for the year ended December 31, 2025, originally filed with the Securities and Exchange Commission (\"SEC\") on February 26, 2026 (\"Original Filing\"). The Company is restating its previously issued audited consolidated financial statements as of and for the fiscal years ended December 31, 2025 and December 31, 2024, as well as the related unaudited quarterly financial information for each of the fiscal quarters ended June 29, 2024, September 28, 2024, March 29, 2025, June 28, 2025 and September 27, 2025 contained within the Quarterly Reports on Form 10-Q for each such completed quarterly period (the \"Affected Periods\"). Accordingly, this filing includes more information than would normally be included in an Annual Report on Form 10-K/A in order to provide a composite presentation of information for these prior periods for which financial results are being restated herein. \n Restatement Background \n As previously announced in a Form 8-K filed with the SEC on May 1, 2026, while preparing the first quarter 2026 consolidated financial statements, management identified an error in the Company's historical consolidated financial statements as of and for the fiscal years ended December 31, 2025 and December 31, 2024, as well as the related unaudited quarterly financial statements for each of the fiscal quarters ended June 29, 2024, September 28, 2024, March 29, 2025, June 28, 2025 and September 27, 2025, relating to the timing of stock-based compensation expense recognition (the \"Error\"). In particular, the Company did not apply the proper accounting for changes made in April 2024 to the retirement provision in the Company's performance and restricted stock unit award agreements and did not record stock-based compensation expense in the correct periods for retirement eligible employees. As a result of the changes to the stock unit award agreements in April 2024, the stock-based compensation expense for any employee eligible for retirement on or before the grant date should have been accelerated and fully recognized on the grant date. Further, the stock-based compensation expense related to employees expected to become retirement eligible during the vesting period should have been accelerated and recognized from the grant date through the retirement eligible date instead of being recognized over the typical vesting period applicable to other employees. The Error was non-cash in nature and did not impact the Company's net revenues, gross margin or net cash provided by (used in) operating activities. The correction for the Error impacted (i) selling, general and administrative expenses, (ii) accrued and other liabilities, (iii) other long-term liabilities, and (iv) additional paid-in capital. \n Additionally, the Company is correcting certain other immaterial items that were previously corrected out of period and that were previously identified and concluded as immaterial, individually and in the aggregate, to its financial statements during the Affected Periods. These items primarily relate to (i) revenue and cost of sales being recognized in the wrong period, which also impacted accounts receivable, contract assets, and inventory, (ii) employee compensation and benefits costs being recorded in the wrong period which also impacted accrued and other liabilities and other long-term liabilities, and (iii) incorrect netting of contract liabilities against contract assets. In addition, the tax effects of these adjustments impacted other current assets and deferred income taxes. \n As a result, the Company is restating the previously issued financial statements by amending its Annual Report on Form 10-K for the year ended December 31, 2025 (the \"Amended Annual Report\"), which includes restated financial statements for the Affected Periods and is revising for other immaterial adjustments in the accompanying financial statements for the quarter ended and as of March 30, 2024. All material restatement information will be included in the Amended Annual Report (together with the restated financial information for the Affected Periods, the \"Restatement\"). \n Items Amended in this Filing \n The following items in this Form 10-K/A are impacted as a result of the restatement or revision: \n • Forward-Looking Statements and Risk Factors \n • Part I, Item 1, Business \n • Part I, Item 1A, Risk Factors \n • Part I, Item 3, Legal Proceedings \n • Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations Table of Contents \n • Part II, Item 8, Financial Statements and Supplementary Data \n • Part II, Item 9A, Controls and Procedures \n • Part III, Item 11, Executive Compensation \n • Part III, Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters \n • Part IV, Item 15, Exhibits and Financial Statement Schedule \n In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, the Company is including with this Form 10-K/A currently dated certifications from its Chief Executive Officer and its Chief Financial Officer. These certifications are filed or furnished, as applicable, with this Form 10-K/A as Exhibits 31.1, 31.2, and 32, and an updated Consent of Independent Registered Public Accounting Firm is being filed as Exhibit 23. This Form 10-K/A also includes an updated Report of Independent Registered Public Accounting Firm and updated signature page. \n This Form 10-K/A is presented as of the filing date of the Original Form 10-K, does not reflect events occurring after that date, and does not modify or update disclosures in any way other than as required to reflect the restatement of the Affected Periods included in the financial statements and elsewhere in this Form 10-K/A. This Form 10-K/A sets forth the Original Form 10-K in its entirety, as amended to reflect the restatement. Among other things, forward-looking statements made in the Original Form 10-K have not been updated to reflect events that occurred or facts that became known to the Company after the filing of the Original Form 10-K, and such forward-looking statements should be read in their historical context. Unless the context otherwise requires, references to our \"Annual Report on Form 10-K\" herein refer to this Form 10-K/A. \n Internal Control Over Financial Reporting \n The Error and the related restatement were the result of a material weakness in the Company's Internal Control Over Financial Reporting (\"ICFR\"). As a result, management has concluded that the Company's ICFR was not effective as of December 31, 2025, and the Company's disclosure controls and procedures were not effective as of June 29, 2024, September 28, 2024, December 31, 2024, March 29, 2025, June 28, 2025, September 27, 2025, and December 31, 2025. Accordingly, the Audit Committee of the Board concluded that Management's Report on Internal Control over Financial Reporting as of December 31, 2025, should no longer be relied upon. \n The Company's remediation plan is described in more detail in Part II, Item 9A of this Form 10-K/A. \n The Audit Committee and the Board, along with management, discussed with PricewaterhouseCoopers LLP (\"PwC\"), the Company's independent registered public accounting firm, the matters disclosed herein. As a result of the above, PwC's report on the Company's consolidated financial statements as of and for the years ended December 31, 2025 and December 31, 2024 and PwC's report on the effectiveness of the Company's ICFR as of December 31, 2025, should no longer be relied upon. Table of Contents \n DUCOMMUN INCORPORATED AND SUBSIDIARIES Page PART I Explanatory Note 2 Forward-Looking Statements and Risk Factors 3 Item 1. Business 4 Item 1A. Risk Factors 11 Item 1B. Unresolved Staff Comments 23 Item 1C. Cybersecurity 23 Item 2. Properties 24 Item 3. Legal Proceedings 24 Item 4. Mine Safety Disclosures 24 PART II Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 25 Item 6. [Reserved] 25 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 26 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 42 Item 8. Financial Statements and Supplementary Data 42 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures 42 Item 9A. Controls and Procedures 42 Item 9B. Other Information 44 Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections 44 PART III Item 10. Directors, Executive Officers and Corporate Governance 45 Item 11. Executive Compensation 45 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 45 Item 13. Certain Relationships and Related Transactions, and Director Independence 46 Item 14. Principal Accountant Fees and Services 46 PART IV Item 15. Exhibits and Financial Statement Schedules 47 Item 16. Form 10-K/A Summary 119 Signatures 119 Table of Contents \n FORWARD-LOOKING STATEMENTS AND RISK FACTORS \n This Form 10-K/A contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be preceded by, followed by or include words such as \"could,\" \"may,\" \"believe,\" \"expect,\" \"anticipate,\" \"plan,\" \"estimate,\" \"expect,\" \"would,\" or similar expressions. These statements are based on the beliefs and assumptions of our management at the time such statements are made. Generally, forward-looking statements include information concerning our possible or assumed future actions, events or results of operations. Forward-looking statements specifically include, without limitation, the information in this Form 10-K/A regarding: future sales, earnings, cash flow, revenue recognition, uses of cash and other measures of financial performance, projections or expectations for future operations, including costs to complete contracts, goodwill impairment evaluations, useful life of intangible assets, unrecognized tax benefits and effective tax rate, possible labor disruptions, the imposition of tariffs, environmental remediation costs, insurance recoveries, industry trends and expectations, including ramp up times for build rates, our plans with respect to restructuring activities, capital expenditures, completed acquisitions, future acquisitions and dispositions, and expected business opportunities that may be available to us. \n Although we believe that the expectations reflected in the forward-looking statements are based on reasonable assumptions, these forward-looking statements are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected. We cannot guarantee future results, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. All written and oral forward-looking statements made in connection with this Form 10-K/A that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by \"Risk Factors\" contained within Part I, Item 1A of this Form 10-K/A and other cautionary statements included herein. \n There can be no assurance that other factors will not affect the accuracy of these forward-looking statements or that our actual results will not differ materially from the results anticipated in such forward-looking statements. While it is impossible to identify all such factors, some factors that could cause actual results to differ materially from those estimated by us include, but are not limited to, those factors or conditions described under Risk Factors contained within Part I, Item 1A of this Form 10-K/A and the following: \n • the considerable amount of cash needed to run our business and its impact on our ability to service our indebtedness; \n • our indebtedness could limit our financing options; \n • the covenants in our credit facilities impose restrictions that may limit our operating and financial flexibility; \n • the typical trading volume of our common stock may affect an investor's ability to sell significant stock holdings in the future without negatively impacting our stock price; \n • our amount of debt may require us to raise additional capital to fund acquisitions; \n • our end-use markets are cyclical; \n • we depend on a select base of industries and customers; \n • a significant portion of our business depends on the U.S. government defense spending, which could be impacted by a prolonged U.S. federal government shutdown; \n • exports of certain of our products and our production facility in Guaymas, Mexico are subject to various export control regulations and authorizations for proposed sales to certain foreign customers; \n • existing and new tariffs imposed by the U.S. administration or foreign governments could impact the operation and conduct of our business outside the United States, including our production facility in Mexico, the sale of products to customers outside the United States and the import of raw materials and equipment from suppliers outside the United States; \n • contracts with some of our customers give them a variety of rights that are unfavorable to us and the OEMs (as defined below) to whom we provide products and services, including the ability to terminate a contract at any time for convenience; \n • further consolidation in the aerospace industry could adversely affect our business; \n • risks related to our ability to execute our growth strategy, which includes evaluating select acquisitions; Table of Contents \n • we may not be successful in achieving expected operating efficiencies and sustaining or improving operating expense reductions, and may experience business disruptions associated with restructuring, performance center consolidations, realignment, cost reduction, and other strategic initiatives; \n • risks related to enhanced design, product development, manufacturing, supply chain project management and other skills will be required as we move up the value chain to become a more value added supplier; \n • risks associated with operating and conducting our business outside the United States; \n • customer pricing pressures could reduce the demand and/or price for our products and services; \n • our products and processes are subject to risk of obsolescence as a result of changes in technology and evolving industrial and regulatory standards; \n • we may not have the ability to renew facilities leases on terms favorable to us, and relocation of operations present risks due to business interruptions; \n • we may be subject to litigation, other legal proceedings, indemnity and product liability claims, including claims that could exceed the limits of our insurance coverage and subrogation claims asserted by third-party insurers, including the Mexican-based carrier of the entity that initiated a lawsuit against us in federal court in California for losses incurred during the June 2020 fire in Guaymas, Mexico, which may become material; \n • our operations are subject to numerous extensive, complex, costly and evolving laws, regulations and restrictions, including the Defense Contract Audit Agency and cybersecurity requirements; \n • we are subject to a number of procurement laws with which we must comply; \n • risks associated with unanticipated changes in our tax provision or exposure to additional income tax liabilities; \n • possible goodwill and other asset impairments could result in substantial charges; \n • the risk of environmental liabilities and our sustainability responsibilities; \n • risks associated with our ability to implement changes in estimates when bidding on fixed-price contracts; \n • risks related to the identified material weakness in our internal control over financial reporting; \n • risks related to the restatement of our prior consolidated financial statements; \n • risks related to our ability to accurately report our financial results or prevent fraud if our internal control over financial reporting is not effective; \n • risks related to our dependence upon our ability to attract and retain key personnel; \n • risks associated with labor disruptions and the ability of our suppliers to meet the quality and delivery expectations of our customers; \n • risks related to our reliance on our suppliers to meet quality and delivery expectations of our customers; \n • risks associated with cybersecurity preparedness and attacks; \n • risks related to assertions by third parties of violations of intellectual property rights or the inability to successfully enjoin the misappropriation of our intellectual property rights; and \n • damage or destruction of our facilities caused by natural disasters could affect our financial results. \n We caution the reader that undue reliance should not be placed on any forward-looking statements, which speak only as of the date of this Form 10-K/A. We do not undertake any duty or responsibility to update any of these forward-looking statements to reflect events or circumstances after the date of this Form 10-K/A except as required by law. \n PART I \n ITEM 1. BUSINESS \n Except for updates to refer to this filing as a Form 10-K/A and to update references to the notes to our consolidated financial statements included in Part IV, Item 15(a) of this Amendment, this section has not been otherwise modified and does not reflect any information or events occurring after February 26, 2026, the filing date of the Original Filing, or modify or update those disclosures affected by events that occurred at a later date or facts that subsequently became known to us, except to the extent they are otherwise required to be included and discussed herein. Table of Contents \n GENERAL \n Ducommun Incorporated (\"Ducommun,\" \"the Company,\" \"we,\" \"us\" or \"our\") is a leading designer and manufacturer of and provider of manufacturing solutions for high-performance products often used in high-cost-of failure applications primarily in the aerospace and defense (\"A&D\"), industrial, medical and other industries (collectively, \"Industrial\"). Ducommun differentiates itself as a full-service solution-based provider, offering innovative, value-added proprietary products and manufacturing solutions to our customers in our primary businesses of electronics, structures, and integrated solutions. We operate through two primary business segments: Electronic Systems and Structural Systems. We are the successor to a business that was founded in California in 1849 and reincorporated in Delaware in 1970. \n ACQUISITIONS \n Acquisitions have been an important element of our growth strategy. We have supplemented our organic growth by identifying, acquiring and integrating businesses that result in broader, more sophisticated product and service offerings while diversifying and expanding our customer base and markets. \n For example, in April 2023, we acquired 100% of the outstanding equity interests of BLR Aerospace L.L.C. (\"BLR\"), a privately-held leading provider of aerodynamic systems that enhance the productivity, performance, and safety of rotary and fixed-wing aircraft on commercial and military platforms. The initial purchase price was $115.0 million, net of cash acquired. We paid a gross aggregate of $117.0 million in cash upon the closing of the transaction. We utilized the 2022 Revolving Credit Facility (as defined below) to complete the acquisition. The acquisition of BLR added to our strategy to diversify and offer more customized, value-driven engineered products with aftermarket opportunities, and was included in our Structural Systems segment. \n PRODUCTS AND SERVICES \n Business Segment Information \n We operate through two primary strategic businesses, Electronic Systems and Structural Systems, each of which is a reportable segment. The results of operations among our operating segments vary due to differences in competitors, customers, extent of proprietary deliverables and performance. Electronic Systems designs, engineers and manufactures high-reliability electronic and electromechanical products used in worldwide technology-driven markets including A&D and Industrial end-use markets. Electronic Systems' product offerings primarily range from prototype development to complex assemblies as discussed in more detail below. Structural Systems designs, engineers and manufactures various sizes of complex contoured aerostructure components and assemblies and supplies composite and metal bonded structures and assemblies. Structural Systems' products are primarily used on commercial aircraft, military fixed-wing aircraft and military and commercial rotary-wing aircraft. \n Electronic Systems \n Electronic Systems has multiple major product offerings in electronics manufacturing for diverse, high-reliability applications: complex cable assemblies and interconnect systems, printed circuit board assemblies, higher-level electronic, electromechanical, and mechanical components and assemblies, and lightning diversion systems. Components, assemblies, and lightning diversion products are provided principally for domestic and foreign commercial and military fixed-wing aircraft, military and commercial rotary-wing aircraft and space programs. Further, we provide select industrial high-reliability applications for the industrial, medical, and other end-use markets. We build custom, high-performance electronics and electromechanical systems. Our products include sophisticated radar enclosures, aircraft avionics racks and shipboard communications and control enclosures, printed circuit board assemblies, cable assemblies, wire harnesses, and interconnect systems, lightning diversion strips, surge suppressors, conformal shields and other high-level complex assemblies. Electronic Systems utilizes a highly-integrated production process, including manufacturing, engineering, fabrication, machining, assembly, electronic integration, and related processes. Engineering, technical and program management services are provided to a wide range of customers. \n In response to customer needs and utilizing our in-depth engineering expertise, Electronic Systems is also considered a leading supplier of engineered products, including illuminated pushbutton switches and panels for aviation and test systems, microwave and millimeter switches and filters for radio frequency systems and test instrumentation, motors and resolvers for motion control, and lightning diversion systems. \n Electronic Systems also provides engineering expertise for aerospace system design, development, integration, and testing. We leverage the knowledge base, capabilities, talent, and technologies of this focused capability into direct support of our customers. Table of Contents \n Structural Systems \n Structural Systems product offerings support a global customer base with end-use applications across commercial aircraft, military fixed-wing aircraft, military and commercial rotary-wing aircraft, and military ground vehicles. Products include structural components, structural assemblies, bonded (metal and composite) components, precision profile extrusions and extruded assemblies, ammunition handling systems, seals, and aerodynamic systems. In the structural components products, Structural Systems provides design services, engineers, and manufacturing of large complex contoured aluminum, titanium and Inconel aerostructure components for the aerospace industry. Structural assembly products include winglets, engine components, and fuselage structural panels for aircraft. Metal and composite bonded structures and assemblies products include aircraft wing spoilers, large fuselage skins, rotor blades on rotor wing aircraft, flight control surfaces and engine nacelle components. Ammunition handling systems include feed and eject chutes, storage magazines and custom gun mounts for fixed-wing and rotary-wing military aircraft and military ground vehicles. Seals include magnetic, mechanical and lip seals and O-rings for various military and industrial applications. Aerodynamic systems include engineered structural components for rotorcraft and business jets. To support these products, Structural Systems maintains extensive engineering capacity to support both design and manufacturing and also maintains advanced machine milling, stretch-forming, hot-forming, metal bonding, composite layup, and chemical milling capabilities. \n AEROSPACE AND DEFENSE END-USE MARKETS OVERVIEW \n Our largest end-use markets are the aerospace and defense markets, and our revenues from these markets represented 96% of our total net revenues in 2025. These markets are serviced by suppliers which are stratified, from the highest value provided to the lowest, into four tiers: original equipment manufacturers (\"OEMs\"), Tier One, Tier Two, and Tier Three. The OEMs provide the highest value and are also known as prime contractors (\"Primes\"). We derive a significant portion of our revenues from subcontracts with OEMs. As the Primes for various programs and platforms, the OEMs sell to their customers, who may include, depending upon the application, the U.S. Federal Government, foreign, state and local governments, global commercial airline carriers, regional jet carriers and various other customers. The OEMs also sell to global leasing companies that lease commercial aircraft. A significant portion of our revenues is earned from subcontracts with the Primes. Tier One suppliers manufacture aircraft sections and purchase assemblies. Tier Two suppliers provide more complex, value-added parts and may also assume more design risk, manufacturing risk, supply chain risk and project management risk than Tier Three suppliers. Tier Three suppliers principally provide components or detailed parts. We currently compete with Tier One, Tier Two, and Tier Three suppliers. Our business growth strategy is to differentiate ourselves from competitors by providing more complex assemblies to our customers as a higher value added supplier. \n Commercial Aerospace End-Use Market \n The commercial aerospace end-use market is highly cyclical and is impacted by the level of global air passenger traffic in general, which in turn is influenced by global economic conditions, fleet fuel and maintenance costs, geopolitical developments, pandemics, supply chain issues, and inflationary forces. Revenues from the commercial aerospace end-use market represented 38% of our total net revenues for 2025. \n The elevated interest rates, inflation rate, supply chain issues, the imposition of tariffs and retaliatory measures, geopolitical developments, and other events have contributed and/or continues to contribute to a general slowdown in the global economy. Further, one of our largest customers, The Boeing Company (\"Boeing\"), was notified by the Federal Aviation Administration (\"FAA\") in early January 2024 it initiated an investigation into Boeing's quality control system. This notification was followed by the FAA announcing actions to increase its oversight of Boeing as well as declining to approve production rate increases or additional production lines for the 737 MAX until it is satisfied that Boeing attained full compliance with required quality control procedures. In July 2024, Boeing also pled guilty to conspiracy fraud charges, which resulted in additional external oversight on its manufacturing and quality control process. The combination of these factors has, in turn, created a significant challenge for some of our customers and the entire commercial aerospace manufacturing and services sector. Recently, Boeing announced that the FAA cleared Boeing's plan to raise 737 MAX production from 38 to 42 airplanes per month. Airline financial performance, which influences demand for new aircraft, is benefiting from the resilient demand for travel. According to the International Air Transport Association (\"IATA\"), it is estimating industry-wide profits of $39.5 billion for 2025, an increase from $28.3 billion in 2024. For 2026, IATA is forecasting $41 billion in profits for the industry globally. Thus, the overall outlook continues to stabilize. We face uncertainties in the environment in the near-to medium-term as airlines are facing persistently high and volatile costs even as fuel prices have declined. The global economy is expecting a continued easing of inflation and interest rates, with regional economic and geopolitical difficulties adding uncertainty to the outlook and the financial viability of some airlines and regions. \n In Boeing's 2025 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the \"SEC\"), they indicated that in 2025, global air traffic expanded to near historical trend rates on an annual basis. The growth occurred despite a lower than usual contribution from the North America market, which had stagnant demand, particularly in the low-cost space. Table of Contents \n International demand outpaced domestic demand on an annual basis as international demand continued to build on the recovery momentum from 2024, including in China, thereby lifting demand for wide-body airplanes. Based on these trends, both single-aisle and wide-body demand remain above current industry supply levels. Overall, Boeing is experiencing strong demand from their airplane customers globally. \n Airbus SE (\"Airbus\") is aligned with Boeing's view on international demand as its Global Services Forecast for Asia-Pacific (including China and India) anticipates that total services demand in the region will grow at a 5.2% compound annual growth rate through 2044, reaching an estimated market value of $138.7 billion. This sustained growth is expected to be underpinned by expanding air traffic and fleet growth. The region is also expected to remain the world's fastest growing air travel market, with passenger traffic expected to rise 4.4% annually, well above the global average of 3.6%. \n We believe that the long-term outlook for the industry remains positive due to the fundamental drivers of air travel demand: economic growth, increasing propensity to travel, increased trade, globalization and improved airline services driven by liberalization of air traffic rights between countries. Boeing's commercial market outlook forecast projects a 3.1% growth rate in the global fleet over a 20 year period. Based on long-term global economic growth projections of 2.3% in average annual gross domestic product (\"GDP\") growth, Boeing projects demand for 43,600 new airplanes over the next 20 years. Airbus' demand projections are similar at 43,420 passenger plus freighter aircraft over the next 20 years. However, the industry remains vulnerable to various developments including fuel price spikes, potential new or increased tariffs, changing energy policies, credit market fluctuations, acts of terrorism, natural disasters, conflicts, epidemics, pandemics, and increased global environmental regulations. We believe we are well positioned given our product capabilities, investment in inventories and contract assets, and our initiatives to increase operating efficiencies to participate in the near-term recovery and the long term projected growth rate for commercial air traffic and build rates for large commercial aircraft for the airframe manufacturing industry. If the recovery is slower than anticipated or any of those various developments occur, it could have a material adverse effect on our results of operations, financial position, and/or cash flows. \n Defense End-Use Market \n Our defense end-use market includes products used in military and space, including technologies and structures applications. The defense end-use market is highly cyclical and is impacted by the level of government defense spending. Government defense spending is impacted by national defense policies and priorities, political climates, fiscal budgetary constraints, U.S. Federal budget deficits, projected economic growth and the level of global military or security threats, or other conflicts. Revenues from the military and space end-use market in 2025 represented 58% of our total net revenues during 2025. \n On November 12, 2025, the U.S. Government enacted a continuing resolution (\"CR\") to keep the government funded through January 30, 2026 while Congress works to enact full year fiscal year 2026 (\"FY26\") remaining appropriation bills or an additional CR to fund government departments and agencies after January 30, 2026. Subsequently, on February 3, 2026, President Trump signed into law a funding package to end the brief U.S. Government shutdown. The legislation will ensure full year funding for the federal government through the end of September 2026, with the lone exception of the Department of Homeland Security. Also, on January 7, 2026, President Trump called for increasing the FY27 U.S. military budget to $1.5 trillion, significantly higher than the $901 billion approved by Congress for FY26. However, such increase in the military budget would require congressional authorization. We, and a number of our customers, rely on the U.S. Government in various aspects of our defense and commercial businesses. In the event of a future shutdown, requirements to furlough employees in the U.S. Department of War (\"U.S. DoW\") or other government agencies could result in payment delays, impair our ability to perform work on existing contracts or otherwise impact our operations, negatively impact future orders, and/or cause other disruptions or delays. \n The U.S. Government could experience a disruption to its operations and/or payments in 2026 as a result of the U.S. Treasury exhausting extraordinary measures after reaching its debt limit. In addition, U.S. Government discretionary spending in fiscal years 2024 (\"FY24\") and 2025 (\"FY25\"), including defense spending, was capped by the Fiscal Responsibility Act of 2023 (\"FRA23\"). The discretionary spending caps that were put in place by FRA23 are no longer binding for FY26, though the legislation implies that Congress could continue to implement the caps by raising spending one percent above the FY25 level. Congress has not yet taken action to address this issue. These potential disruptions, and any other broader macroeconomic impacts, could affect our current programs and contracts and have a material effect on our financial position, results of operations and/or cash flows. For additional information related to our revenues from customers whose principal sales are to the U.S. Government and our direct sales to the U.S. Government, see \"Risk Factors\" contained within Part I, Item 1A of this Annual Report on Form 10-K/A (\"Form 10-K/A\"). \n INDUSTRIAL END-USE MARKETS OVERVIEW \n Our industrial, medical and other (collectively, \"Industrial\") end-use markets are diverse and are impacted by the customers' needs for increasing electronic content and a desire to outsource. Factors expected to impact these markets include capital and Table of Contents \n industrial goods spending and general economic conditions. Our products are used in heavy industrial manufacturing systems and certain medical applications. Revenues from the Industrial end-use markets were 4% of our total net revenues during 2025. \n Industrial end-use markets are not part of our core business. We will continue to selectively prune this non-core business which should result in additional capacity for our core business. \n SALES AND MARKETING \n Our commercial revenues are substantially dependent on airframe manufacturers' production rates of new aircraft. Deliveries of new aircraft by airframe manufacturers are dependent on the demand and financial capacity of its customers, primarily airlines and leasing companies, to purchase the aircraft. Thus, revenues from commercial aircraft could be affected as a result of changes in new aircraft orders, or the cancellation or deferral by airlines of purchases of ordered aircraft. Further, our revenues from commercial aircraft programs could be affected by changes in our customers' inventory levels and changes in our customers' aircraft production build rates as a result of changing demand by their end customers or in order to comply with regulatory requirements. Due to the effects from supply chain issues or regulatory compliance requirements, while Boeing and Airbus expect improved build rates, it will take longer to reach pre-COVID-19 pandemic levels. While the ramp up in production and demand will be slower in the near- and medium-term, we will continue to identify opportunities to expand our presence and offerings with both major large aircraft manufacturers and their supply chain. \n Military components manufactured by us are employed in many of the country's front-line fighters, bombers, rotary-wing aircraft and support aircraft, as well as land and sea-based applications. Our defense business is diversified among a number of military manufacturers and programs. In the space sector, we continue to support various satellite programs. \n Our sales into the Industrial end-use markets are customer focused in various markets and are driven primarily by their capital spending and manufacturing outsourcing demands. \n We continue to broaden and diversify our customer base in the end-use markets we serve by providing innovative product and service solutions by drawing on our core competencies, experience and technical expertise. Net revenues related to military and space, commercial aerospace, and Industrial end-use markets in 2025 and 2024 were as follows: \n Many of our contracts are firm fixed price contracts subject to termination at the convenience of the customer (as well as for default). In the event of termination for convenience, the customer generally is required to pay the costs we have incurred and certain other fees through the date of termination, plus a reasonable profit. Larger, long-term government subcontracts may have provisions for milestone payments, progress payments or cash advances for purchase of inventory. \n Our marketing efforts primarily consist of developing strong, long-term relationships with our customers, which provide the basis for future sales. These close relationships allow us to gain a better insight into each customer's business needs, identify ways to provide greater value to the customer, and allow us to be designated early in the design process for various products and/or high volume products. \n SEASONALITY \n The timing of our revenues is governed by the purchasing patterns of our customers, and, as a result, we may not generate revenues equally during the year. However, no material portion of our business is considered to be seasonal. Table of Contents \n MAJOR CUSTOMERS \n We currently generate the majority of our revenues from the aerospace and defense industries. As a result, we have significant revenues from certain customers. For 2025, Boeing and RTX Corporation (f/k/a Raytheon Technologies Corporation) (\"RTX\") were our largest customers, with Boeing generating 13% and RTX generating 18% of our 2025 net revenues. Revenues from our top 10 customers, including Boeing and RTX, were 61% of total net revenues during 2025. Net revenues by major customer for 2025 and 2024 were as follows: \n * Boeing completed its acquisition of all of Spirit Aerosystems Holdings, Inc.'s Boeing-related commercial operations, based on Boeing's announcement on December 8, 2025. \n ** TransDigm Group Inc. (\"TransDigm\") completed its acquisition of the Simmonds Precision Products, Inc. business of Goodrich Corporation from RTX, based on TransDigm's announcement on October 6, 2025. \n Net revenues from our customers, except the U.S. Government, are diversified over a number of different military and space, commercial aerospace, industrial, medical and other products. For additional information on revenues from major customers, see Note 16 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K/A. \n RESEARCH AND DEVELOPMENT \n We perform concurrent engineering with our customers and product development activities under our self-funded programs, as well as under contracts with others. Concurrent engineering and product development activities are performed for commercial, military and space applications. \n RAW MATERIALS AND COMPONENTS \n Raw materials and components used in the manufacturing of our products include aluminum, titanium, steel and carbon fibers, as well as a wide variety of electronic interconnect and circuit card assemblies and components. These raw materials are generally available from a number of suppliers and are generally in adequate supply. However, from time to time, and due to lingering supply chain issues, we have experienced increases in lead times and limited availability of various items including aluminum, titanium and certain other raw materials and/or components. Moreover, certain components, supplies and raw materials for our operations are purchased from single source suppliers and occasionally, directed by our customers. In such instances, we strive to develop alternative sources and design modifications to minimize the potential for business interruptions. \n COMPETITION \n The markets we serve are highly competitive, and our products and services are affected by varying degrees of competition. We compete worldwide with domestic and international companies in most markets. These companies may have competitive advantages as a result of greater financial resources, economies of scale and bundled products and services that we do not offer. Additional information related to competition is discussed in Risk Factors contained within Part I, Item 1A of this Form 10-K/A. Our ability to compete depends principally upon the breadth of our technical capabilities, the quality of our goods and services, competitive pricing, product performance, design and engineering capabilities, new product innovation, the ability to solve specific customer needs, and customer relationships. Table of Contents \n PATENTS AND LICENSES \n We have several patents, but we do not believe that our operations are dependent upon any single patent or group of patents. In general, we rely on technical superiority, continual product improvement, exclusive product features, superior lead time, on-time delivery performance, quality, and customer relationships to maintain our competitive advantage. \n REMAINING PERFORMANCE OBLIGATIONS AND BACKLOG \n We define performance obligations as customer placed purchase orders (\"POs\") with firm fixed price and firm delivery dates. The majority of the long-term agreements (\"LTAs\") we enter into do not meet the definition of a contract under Accounting Standards Codification 606 (\"ASC 606\"), and thus, the backlog amount may or may not be greater than the remaining performance obligations amount as defined under ASC 606. Revenue based on remaining performance obligations is subject to delivery delays or program cancellations, which are beyond our control. Remaining performance obligations were $1,106.0 million at December 31, 2025. We anticipate recognizing an estimated 70% or $774.0 million of our remaining performance obligations during 2026. \n We define backlog as customer placed POs and LTAs with firm fixed price and expected delivery dates of 24 months or less. Backlog is subject to delivery delays or program cancellations, which are beyond our control. Backlog is affected by timing differences in the placement of customer orders and tends to be concentrated in certain programs to a greater extent than our net revenues. As a result of these factors, trends in our overall level of backlog may not be indicative of trends in our future net revenues. Backlog was $1,202.9 million at December 31, 2025, compared to $1,060.8 million at December 31, 2024. The increase in backlog was primarily in the military and space and commercial aerospace end-use markets. \n ENVIRONMENTAL MATTERS \n Our business, operations and facilities are subject to numerous stringent federal, state and local environmental laws and regulations issued by government agencies, including but not limited to the Environmental Protection Agency (\"EPA\") and similar state agencies. Among other matters, these regulatory authorities impose requirements that regulate the emission, discharge, generation, management, transport and disposal of hazardous and non-hazardous materials, pollutants and contaminants. These regulations govern public and private response actions to hazardous or regulated substances that could be or have been released into the environment, or endanger human health and safety, and they require us to obtain and maintain licenses and permits in connection with our operations. We may also be required to investigate and remediate the effects of a release or the possible disposal of materials at sites associated with our past and present operations. Additionally, this extensive regulatory framework imposes significant compliance burdens and risks on us. For example, in 2023, California passed two wide-reaching bills that were expected to impose significant and mandatory climate-related reporting requirements for large public and private companies doing business in the state. The bills were subsequently amended in 2024 and may ultimately require annual disclosure of audited Scope 1 and 2 greenhouse gas (\"GHG\") emissions and biennial disclosure related to certain climate risks. On January 20, 2026, the California Air Resources Board issued an initial statement of reasons for a public hearing to be held on May 28, 2026 to consider the proposed amendments to the Regulation for the Mandatory Reporting of GHG. We anticipate that capital expenditures will continue to be required for the foreseeable future to upgrade and maintain our environmental compliance efforts; however, we currently do not expect such expenditures to be material in 2026 and the near term. \n Structural Systems has been directed by California environmental agencies to investigate and take corrective action for groundwater contamination at its facilities located in Adelanto (a.k.a., El Mirage) and Monrovia, California. Based on currently available information, we have accrued $1.5 million at December 31, 2025 for our estimated liabilities related to these sites. For further information, see Note 15 in the accompanying notes to consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K/A. In addition, see Risk Factors contained within Part I, Item 1A of this Form 10-K/A for certain risks related to environmental matters. \n HUMAN CAPITAL \n Our employees are critical to our success. We promote a culture of honesty, respect, trust, and teamwork through our Code of Business Conduct. Also, we have been engaged in a number of social matters and issues, both within the Company in our management of human capital, and externally with our community based initiatives. \n Employee Safety and Health \n The safety of our workforce remains our highest priority. To this end, we continue to focus on protecting the health and safety of our employees and maintaining a safe work environment. \n In 2025, we utilized health and safety software tools implemented to track and engage our performance centers to continue to reduce our lost time and total recordable incident rates. Table of Contents \n Human Capital Management \n We promote fairness and equal opportunities through our employment practices and processes and continue to drive a merit-based culture throughout our company. These priorities are demonstrated by fostering employees' well-being and encouraging the sharing of ideas and unique perspectives, promoting innovation, creativity, collaboration and supporting the development, growth and advancement of individual contributions. Since 2020, we have partnered with the Fund II Foundation to utilize its innovative internX platform to provide access to highly qualified and diverse science, technology, engineering and math (\"STEM\") students. We believe that broadening our pool of potential qualified applicants at the intern level will support our efforts in identifying and recruiting talented candidates that can grow into leadership positions as our interns continue in their careers. \n Talent Acquisition, Retention, and Development \n We attract, develop, and retain employee talent by offering competitive compensation packages and fostering a culture of care about their well-being. In addition, we endeavor to be a proactive corporate citizen by being responsive and supportive of the needs of our employees to attract qualified talent. We strive to provide equal opportunities for advancement to all our employees within our company based on individual merit and award merit-based scholarships to the children and grandchildren of our employees so that they may develop the skills that will support their entry into the workforce. In addition, we have an Employee Stock Purchase Plan (\"ESPP\") to provide employees the opportunity to share in the ownership of our company and benefit from our performance through the purchase of our company's stock. The ESPP allows eligible employees to accumulate contributions through after-tax payroll deductions to purchase shares of our Company's stock at a 15% discount and serves as one of the key retention mechanisms for our human capital. \n Workforce Demographics \n As of December 31, 2025, we had a highly skilled workforce of 2,130 employees, of which 282 are subject to a collective bargaining agreement expiring in April 2028. Historically, we have been successful in negotiating renewals to expiring agreements without material disruption of operating activities, and believe our relations with our employees are good. See Risk Factors contained within Part I, Item 1A of this Form 10-K/A for additional information regarding certain risks related to our employees. \n AVAILABLE INFORMATION \n General information about us can be obtained from our website address at www.ducommun.com . We may use our website as a distribution channel of material company information. In addition, we file electronically with the SEC required reports on Form 8-K, Form 10-Q, and Form 10-K; proxy materials; ownership reports for insiders as required by Section 16 of the Securities Exchange Act of 1934, as amended (the \"Exchange Act\"), registration statements on Forms S-3 and S-8, as necessary; and other forms or reports as required. Our Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, if any, are available free of charge on our website as soon as reasonably practicable after they are filed with or furnished to the SEC. Information included on our website is not incorporated by reference in this Form 10-K/A. The SEC also maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding SEC registrants, including our company. \n ITEM 1A. RISK FACTORS \n Except for revisions to refer to this filing as a Form 10-K/A and revisions to add the risk factors entitled, \"Management has identified a material weakness in our internal control over financial reporting that could, if not remediated, adversely impact the reliability of our financial reports, cause us to submit our financial reports in an untimely fashion, result in material misstatements in our financial statements and/or cause current and potential stockholders to lose confidence in our financial reporting\" and \"We have restated our prior consolidated financial statements, which may lead to additional risks and uncertainties, including loss of investor confidence and negative impacts on our stock price\", this section has not been otherwise modified and does not reflect any information or events occurring after February 26, 2026, the filing date of the Original Filing, or modify or update those disclosures affected by events that occurred at a later date or facts that subsequently became known to us, except to the extent they are otherwise required to be included and discussed herein. \n Our business, financial condition, results of operations and cash flows may be affected by known and unknown risks, uncertainties and other factors. We have summarized below the significant, known material risks to our business. Additional risk factors not currently known to us or that we currently believe are immaterial may also impair our business, financial condition, results of operations and cash flows. These disclosures reflect our beliefs and opinions as to factors that could materially and adversely affect us and our securities in the future. References to past events are provided by way of example only and not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or Table of Contents \n their likelihood of occurring in the future. The risk factors below should be considered together with the information included elsewhere in this Form 10-K/A as well as other required filings by us with the SEC. \n CAPITAL STRUCTURE RISKS \n We require a considerable amount of cash to run our business. \n Our ability to make payments on our debt in the future and to fund planned capital expenditures and working capital needs will depend upon our ability to generate significant cash in the future. Our ability to generate cash is subject to economic, financial, competitive, legislative, regulatory and other factors that may be beyond our control. \n The terms of the 2025 Term Loan require us to make installment payments of 0.625% of the initial outstanding principal balance on a quarterly basis during years one and two, 1.250% during years three and four, and 1.875% during year five, on the last business day of each calendar quarter. In addition, the undrawn portion of the commitment of the 2025 Revolving Credit Facility is subject to a commitment fee ranging from 0.175% to 0.250%, based upon the consolidated total net adjusted leverage ratio. \n As of December 31, 2025, the outstanding balance on the 2025 Credit Facilities (as defined below) was $305.0 million with an average interest rate of 6.10%. Should interest rates increase significantly, our debt service cost on the variable portion of our debt will increase. Any inability to generate sufficient cash flow could have a material adverse effect on our financial condition or results of operations. See Note 1, Note 3, and Note 9 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K/A for further discussion. \n While we expect to meet all of our financial obligations, we cannot ensure that our business will generate sufficient cash flow from operations in an amount sufficient to enable us to pay our debt or to fund our other liquidity needs. \n Our indebtedness could limit our financing options, adversely affect our financial condition, and prevent us from fulfilling our debt obligations. \n On November 24, 2025, we completed a refinancing of our existing debt by entering into a new term loan (\"2025 Term Loan\") and a new revolving credit facility (\"2025 Revolving Credit Facility\"). The 2025 Term Loan is a $200.0 million senior secured loan that matures in November 2030. The 2025 Revolving Credit Facility is a $450.0 million senior secured revolving credit facility that matures on November 24, 2030. The 2025 Term Loan replaced the 2022 Term Loan (\"2022 Term Loan\") which was a $250.0 million senior secured loan. The 2025 Revolving Credit Facility replaced the 2022 Revolving Credit Facility (\"2022 Revolving Credit Facility\") which was a $200.0 million senior secured revolving credit facility. The 2025 Term Loan and 2025 Revolving Credit Facility, collectively are the new credit facilities (\"2025 Credit Facilities\"). The terms of the 2025 Term Loan require us to make installment payments of 0.625% of the initial outstanding principal balance on a quarterly basis during years one and two, 1.250% during years three and four, and 1.875% during year five, on the last business day of each calendar quarter. The terms of the 2025 Revolving Credit Facility do not require us to make installment payments. However, the undrawn portion of the commitment of the 2025 Revolving Credit Facility is subject to a commitment fee ranging from 0.175% to 0.250%, based upon the consolidated total net adjusted leverage ratio. \n At December 31, 2025, we had a total of $305.0 million of outstanding long-term debt under the 2025 Credit Facilities. The total long-term debt was primarily the result of our acquisitions, including Lightning Diversion Systems, LLC (\"LDS\") in September 2017, Certified Thermoplastics Co., LLC (\"CTP\") in April 2018, and Nobles Worldwide, Inc. (\"Nobles\") in October 2019, and litigation settlement and related costs, net during the fourth quarter of 2025. \n Our ability to obtain additional financing or complete a debt refinancing in the future may be limited. Should we not have ready access to capital markets, we may have to undertake alternative financing plans, such as selling assets; reducing or delaying scheduled expansions, acquisitions and/or capital investments; or seeking various other forms of capital. Our ability to complete reasonable alternative financing plans may be affected by circumstances and economic events outside of our control. We cannot ensure that we would be able to refinance our debt or enter into alternative financing plans in adequate amounts on commercially reasonable terms, terms acceptable to us or at all, or that such plans guarantee that we would be able to meet our debt obligations. \n Our level of debt could: \n • limit our ability to obtain additional financing to fund capital expenditures, investments or acquisitions or other general corporate requirements; \n • require a portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, investments or acquisitions or other general corporate purposes; \n • increase our vulnerability to adverse changes in general economic, industry and competitive conditions; Table of Contents \n • place us at a disadvantage compared to other, less leveraged competitors; \n • expose us to the risk of increased borrowing costs and rising or high interest rates as a portion of our current borrowings under our 2025 Credit Facilities bear interest at variable rates (however, we have interest rate swaps that were effective on January 1, 2024, with an aggregate total notional amount of $150.0 million with a seven year tenor), which could further adversely impact our cash flows; \n • limit our flexibility to plan for and react to changes in our business and the industry in which we compete; \n • restrict us from making strategic acquisitions; \n • expose us to risk of unfavorable changes in the global credit markets; and \n • make it more difficult for us to satisfy our obligations with respect to the 2025 Credit Facilities and our other debt. \n The occurrence of any one of these events could have an adverse effect on our business, financial condition, results of operations and ability to satisfy our obligations in respect of our outstanding debt. \n The covenants in our credit facilities impose restrictions that may limit our operating and financial flexibility. \n We are required to comply with a leverage covenant as defined in the 2025 Credit Facilities. The leverage covenant is defined as Consolidated Funded Indebtedness less unrestricted cash and cash equivalents, divided by consolidated earnings before interest, taxes and depreciation and amortization (\"EBITDA\") and other adjustments. In addition, we are required to comply with a Consolidated Interest Coverage Ratio covenant. The Consolidated Interest Coverage Ratio is defined as consolidated EBITDA and other adjustments to consolidated interest charges paid in cash. \n At December 31, 2025, we were in compliance with all covenants under the 2025 Credit Facilities. However, there is no assurance that we will continue to be in compliance with all the covenants in future periods. \n The 2025 Credit Facilities' agreements contain a number of significant restrictions and covenants that limit our ability, among other things, to incur additional indebtedness, to create liens, to make certain payments, to make certain investments, to engage in transactions with affiliates, to sell certain assets or enter into mergers. \n These covenants could materially and adversely affect our ability to finance our future operations or capital needs. Furthermore, they may restrict our ability to expand, pursue our business strategies and otherwise conduct our business. Our ability to comply with these covenants may be affected by circumstances and events beyond our control, such as prevailing economic conditions and changes in regulations, and we cannot ensure that we will be able to comply with such covenants. These restrictions also limit our ability to obtain future financings to withstand a future downturn in our business or the economy in general. \n A breach of any covenant in the 2025 Credit Facilities could result in a default under the 2025 Credit Facilities. A default, if not waived, could result in acceleration of the debt outstanding under the agreement. A default could permit our lenders to foreclose on any of our assets securing such debt. Even if new financing were available at that time, it may not be on terms or amounts that are acceptable to us or terms as favorable as our current agreements. If our debt is in default for any reason, our business, results of operations and financial condition could be materially and adversely affected. \n The typical trading volume of our common stock may affect an investor's ability to sell significant stock holdings in the future without negatively impacting stock price. \n The level of trading activity of our common stock may vary daily and typically represents only a small percentage of outstanding shares. As a result, a stockholder who sells a significant amount of shares in a short period of time could negatively affect our share price. \n Our amount of debt may require us to raise additional capital to fund acquisitions. \n We may sell additional shares of common stock or other equity securities to raise capital in the future, which could dilute the value of an investor's holdings. \n BUSINESS AND OPERATIONAL RISKS \n Our end-use markets are cyclical. \n We sell our products into aerospace, defense, and industrial end-use markets, which are cyclical and have experienced periodic declines. Our sales are, therefore, unpredictable and may tend to fluctuate based on a number of factors, including global economic conditions, U.S. defense budgetary spending, geopolitical developments and conditions, pandemics, supply chain shortages, rising or high interest rates and other developments affecting our end-use markets and the customers served. Consequently, results of operations in any period should not be considered indicative of the operating results that may be experienced in any future period. Table of Contents \n We depend upon a select base of industries and customers, which subjects us to unique risks which may adversely affect us. \n We currently generate the majority of our revenues from customers in the aerospace and defense industry. Our business depends, in part, on the level of new military and commercial aircraft orders. As a result, we have significant sales to certain customers. Sales to The Boeing Company (\"Boeing\"), which now includes Spirit AeroSystems Holdings, Inc. (\"Spirit\"), based on Boeing's December 8, 2025 announcement confirming the closing of its acquisition of all of Spirit's Boeing-related commercial operations, comprise a significant portion of our commercial aerospace end-use market in 2025. A significant portion of our net sales in our military and space end-use markets are made under subcontracts with original equipment manufacturers (\"OEMs\"), pursuant to their prime contracts with the U. S. Government. We had significant sales in 2025 to Lockheed Martin Corporation (\"Lockheed\"), Northrop Grumman Corporation (\"Northrop\"), RTX Corporation (\"RTX\"), and TransDigm Group Inc. (\"TransDigm\"), which completed its acquisition of the Simmonds Precision Products, Inc. business of Goodrich Corporation from RTX Corporation based on TransDigm's announcement on October 6, 2025, in our defense technologies end-use market. \n Our customers may experience delays in the launch and certification of new products, labor strikes, diminished liquidity or credit unavailability, weak demand for their products, or other difficulties in their business. In addition, shifts in government spending priorities have caused and may continue to cause additional uncertainty in the placement of orders. \n Our revenues from our top ten customers, which represented 61% of our total 2025 net revenues, were diversified over a number of different aerospace and defense products. Any significant change in production rates by these customers would have a material effect on our results of operations and cash flows. There is no assurance that our current significant customers will continue to buy products from us at current levels, or that we will retain any or all of our existing customers, or that we will be able to form new relationships with customers upon the loss of one or more of our existing customers. This risk may be further complicated by pricing pressures, competition prevalent in our industry and other factors. A significant reduction in sales to any of our major customers, the loss of a major customer, or a default of a major customer on accounts receivable could have a material adverse impact on our financial results. \n Boeing was one of our largest customers in 2025, and the 737 MAX was one of our highest commercial end use market revenue platforms. In early January 2024, the Federal Aviation Administration (\"FAA\") initiated an investigation into Boeing's quality control system, which was followed by the agency announcing actions to increase its oversight of Boeing as well as not approving production rate increases or additional production lines for the 737 MAX until it was satisfied that Boeing attained full compliance with required quality control procedures. Subsequently, in July 2024, Boeing pleaded guilty to conspiracy fraud charges, which may result in additional external oversight on its manufacturing and quality control processes. More recently, Boeing announced the FAA has cleared Boeing's plan to raise 737 MAX production from 38 airplanes to 42 airplanes per month. Revenue growth with our other commercial customers, including Airbus SE (\"Airbus\"), and continued solid demand from defense OEMs (also known as prime contractors) have helped to mitigate a significant portion of this risk for the time being. However, the industry remains vulnerable to various developments including fuel spikes, inflationary forces, supply chain issues, and elevated high interest rates. \n We generally make sales under purchase orders and contracts that are subject to cancellation, modification or rescheduling. Changes in the economic environment and the financial condition of the industries we serve could result in customer cancellation of contractual orders or requests for rescheduling. Some of our contracts have specific provisions relating to schedule and performance, and failure to deliver in accordance with such provisions could result in cancellations, modifications, rescheduling and/or penalties, in some cases at the customers' convenience and without prior notice. While we have normally recovered our direct and indirect costs plus profit, such cancellations, modifications, or rescheduling that cannot be replaced in a timely fashion, could have a material adverse effect on our financial results. \n A significant portion of our business depends upon U.S. Government defense spending. \n We derive a significant portion of our business from customers whose principal sales are to the U.S. Government. Accordingly, the success of our business depends upon government spending generally or for specific departments or agencies. Such spending, among other factors, is subject to the uncertainties of governmental appropriations and national defense policies and priorities, constraints of the budgetary process, timing and potential changes in these policies and priorities, and the adoption of new laws or regulations or changes to existing laws or regulations. \n These and other factors could cause the government and government agencies, or prime contractors that use us as a subcontractor, to reduce their purchases under existing contracts, to exercise their rights to terminate contracts for convenience or to abstain from exercising options to renew contracts, any of which could have a material adverse effect on our business, financial condition and results of operations. \n Further, the levels of U.S. Department of War (\"U.S. DoW\") spending in future periods are difficult to predict and are impacted by numerous factors such as the political environment, U.S. foreign policy, macroeconomic conditions and the ability of the U.S. Government to enact relevant legislation such as the authorization and appropriations bills. For instance, during the U.S. Table of Contents \n Government shutdown between October 1, 2025 and November 12, 2025, the U.S. Government enacted a continuing resolution (\"CR\") to keep the government funded through January 30, 2026 at FY25 levels while the Congress works to enact full year fiscal year 2026 (\"FY26\") legislation for the remaining appropriation bills to avoid another government shutdown. Subsequently, on February 3, 2026, President Trump signed into law, a funding package to end the brief U.S. Government shutdown. The legislation will ensure full year funding for the federal government through the end of September 2026, with the lone exception of funding for the Department of Homeland Security. We, and a number of our customers rely on the U.S. Government in various aspects of our defense and commercial businesses. In the event of a future shutdown, requirements to furlough employees in the U.S. DoW or other government agencies could result in payment delays, the inability to obtain export licenses, impair our ability to perform work on existing contracts or otherwise impact our operations, negatively impact future orders, and/or cause other disruptions or delays. \n The U.S. Government could experience a disruption to its operations and/or payments in 2026 as a result of the U.S. Treasury exhausting extraordinary measures after reaching its debt limit. For instance, the U.S. Government discretionary spending in FY24 and FY25, including defense spending, was capped by the Fiscal Responsibility Act of 2023 (\"FRA23\"). These potential disruptions, and any other broader macroeconomic impacts, could affect our current programs and contracts and have a material effect on our financial position, results of operations and/or cash flows. \n Exports of certain of our products and our production facility in Guaymas, Mexico are subject to various export control regulations and authorizations, and we may not be successful in obtaining the necessary U.S. Government approvals and related export licenses for proposed sales to certain foreign customers. \n We must comply with numerous laws and regulations relating to the export of some of our products before we are permitted to sell or manufacture those products outside the United States. Compliance often entails the submission and timely receipt of the necessary export approvals, licenses, or authorizations from the U.S. Government. Over the last several years, the U.S. export licensing environment for munitions has been adversely affected by a number of factors, including, but not limited to, the changing geopolitical environment and heightened tensions with other countries (which shift and evolve over time). Moreover, in the event Congress is unable to enact legislation to fund appropriations bills and avoid another government shutdown in the future, our ability to obtain required export licenses could be negatively impacted. Accordingly, we can give no assurance that we will be successful in obtaining, in a timely manner or at all, the approvals, licenses or authorizations we need to sell or manufacture our products outside the United States, which may result in the cancellation of orders and significant penalties to our customers if we do not make deliveries and fulfill our contractual commitments. Any significant delay in, or impairment of, our ability to sell products outside of the United States could have a material adverse effect on our business, financial condition and results of operations. \n Risks associated with existing and new tariffs imposed by the U.S. administration or foreign governments potentially impacting the operation and conduct of our business outside the United States, including our production facility in Mexico, and the sale of products to customers outside the United States. \n Since February 2025, the U.S. government has issued several executive orders (\"Executive Orders\"), under various statutes, imposing tariffs on imports from most countries with whom the U.S. engages in trade. As such, during 2025, the United States reached bilateral trade agreements that recognize tariff-free trade of products within the scope of the World Trade Organization Agreement on Trade in Civil Aircraft with the United Kingdom, Japan, and the European Union. Moreover, the United States applies a diverse range of reciprocal tariffs to imports originating from countries that have not concluded bilateral trade agreements with the United States. On February 20, 2026, the U.S. Supreme Court struck down the sweeping tariffs that the U.S. government had imposed through the Executive Orders issued pursuant to International Emergency Economic Powers Act (\"IEEPA\") of 1977. However, the U.S. government subsequently imposed a global tariff of 10% (which could potentially increase to 15%) that went into effect on February 24, 2026, and which would be effective for 150 days unless they are extended by the U.S Congress. \n If the imposition of current tariff levels is sustained, our profitability, cash flows and the estimates inherent in our financial statements could be negatively affected to the extent we are either unable to claim duty exemptions or are unable to pass on such incremental tariffs to our customers. The actual financial impacts of tariffs are dependent upon various factors, most notably, the scope of goods covered by tariffs, the value of our imports subject to tariffs, the rate of tariffs applied, the timing and duration of tariffs, the implementation of tariff and non-tariff countermeasures by countries subject to U.S. tariffs, and our ability to mitigate the impacts of tariffs by availing ourselves of applicable exemptions. Changes in any of these factors and actual tariff costs incurred could significantly affect the estimates inherent in our financial statements, including those used in our estimates-at-completion (\"EACs\"), and estimates supporting the recoverability of our inventories, contract assets, intangible assets, and goodwill, and could have a material effect on our results of operations and cash flows in the periods recognized and paid. Table of Contents \n The inability to obtain raw materials and equipment from suppliers could harm our business. \n We are affected by the availability and price of raw materials and equipment that we use to manufacture our products. Our ability to manage inventory and meet delivery requirements may be constrained by our suppliers' ability to adjust delivery of long-lead time products, especially during times of volatile demand. Our supply chain could be disrupted by external events such as governmental actions pertaining to tariffs, legislative or regulatory changes, labor disputes, and pandemics. For example, tariffs, duties or other trade policy changes affecting the import or export of raw materials and equipment could increase costs or limit the availability of critical inputs to our business. As a result, our suppliers may fail to provide the raw materials and/or equipment we require to fulfill our customer contracts, which could result in reduced revenues and profits, contract penalties or terminations, and damage to our customer relationships and reputation. Further, if we are unable to pass along the increased costs to our customers, it could have a material impact on our financial position, results of operations and/or cash flows. \n Contracts with some of our customers, including Federal government contracts, contain provisions which give our customers a variety of rights that are unfavorable to us and the OEMs to whom we provide products and services, including the ability to terminate a contract at any time for convenience. \n Contracts with some of our customers, including Federal government contracts, contain provisions and are subject to laws and regulations that provide rights and remedies not typically found in commercial contracts. These provisions may allow our customers to: \n • terminate existing contracts, in whole or in part, for convenience, as well as for default, or if funds for contract performance for any subsequent year become unavailable; \n • terminate existing contracts if we are suspended or debarred from doing business with the federal government or with a governmental agency; \n • prohibit future procurement awards with a particular agency as a result of a finding of an organizational conflict of interest based upon prior related work performed for the agency that would give a contractor an unfair advantage over competing contractors; and \n • claim rights in products and systems produced by us. \n If the U.S. Government terminates a contract for convenience, the counterparty with whom we have contracted may terminate its subcontract with us. As a result of any such termination, whether on a direct government contract or subcontract, we may recover only our incurred or committed costs, settlement expenses and profit on work completed prior to the termination. If the U.S. Government terminates a direct contract with us for default, we may not even recover those amounts and instead may be liable for excess costs incurred by the U.S. Government in procuring undelivered items and services from another source. \n In addition, the U.S. Government is typically required to open all programs to competitive bidding and, therefore, may not automatically renew any of its prime contracts. If one or more of our customers' government prime or subcontracts is terminated or canceled, our failure to replace sales generated from such contracts would result in lower revenues and could have an adverse effect on our business, results of operations and financial condition. \n Further consolidation in the aerospace industry could adversely affect our business and financial results. \n The aerospace and defense industry has and continues to experience significant consolidation, including with respect to our customers, competitors and suppliers. Specifically, consolidation among our customers may result in delays in the awarding of new contracts and losses of existing business; consolidation among our competitors may result in larger competitors with greater resources and market share, which could adversely affect our ability to negotiate reasonable contractual terms and compete successfully; and consolidation among our suppliers may result in fewer sources of supply and increased cost to us. \n Our growth strategy includes evaluating selected acquisitions, which entails certain risks to our business and financial performance. \n We have historically achieved a portion of our growth through acquisitions and expect to evaluate selected future acquisitions as part of our strategy for growth. Any acquisition of another business entails risks and it is possible that we may not realize the expected benefits from an acquisition or that an acquisition could adversely affect our existing operations. Acquisitions entail certain risks, including: \n • difficulty in integrating the operations and personnel of the acquired company within our existing operations or in maintaining uniform standards; \n • loss of key employees or customers of the acquired company; \n • the failure to achieve anticipated synergies and/or future revenue growth; Table of Contents \n • unrecorded liabilities of acquired companies that we fail to discover during our due diligence investigations or that are not subject to indemnification or reimbursement by the seller; and \n • management and other personnel having their time and resources diverted to evaluate, negotiate and integrate acquisitions. \n We may not be successful in achieving expected operating efficiencies and sustaining or improving operating expense reductions, and may experience business disruptions associated with restructuring, footprint consolidations, realignment, cost reduction, and other strategic initiatives. \n In recent years, we have implemented a number of restructuring, realignment, and cost reduction initiatives, including footprint consolidations, organizational realignments, and reductions in our workforce. While we have realized some efficiencies from these actions, we may not realize the benefits of these initiatives to the extent we anticipated. Further, such benefits may be realized later than expected, and the ongoing difficulties in implementing these measures may be greater than anticipated, which could cause us to incur additional costs or result in business disruptions. In addition, if these measures are not successful or sustainable, we may have to undertake additional realignment and cost reduction efforts, which could result in significant additional charges. Moreover, if our restructuring and realignment efforts prove ineffective, our ability to achieve our other strategic and business plan goals, such as our VISION 2027 game plan for investors, may be adversely impacted. \n As we move up the value chain to become a more value added supplier, enhanced design, product development, manufacturing, supply chain project management and other skills will be required. \n We may encounter difficulties as we execute our growth strategy to move up the value chain to become a more value added supplier of more complex assemblies. Difficulties we may encounter include, but are not limited to, the need for enhanced and expanded product design skills, enhanced ability to control and influence our suppliers, enhanced quality control systems and infrastructure, enhanced large-scale project management skills, and expanded industry certifications. Assuming incremental project design responsibilities would require us to bear additional risk in developing cost estimates and could expose us to increased risk of losses. Moreover, there can be no assurance that we will be successful in obtaining the enhanced skills required to move up the value chain or that our customers will outsource such functions to us. \n Risks associated with operating and conducting our business outside the United States could adversely impact us. \n We have a manufacturing facility that we lease in Mexico and also derive a portion of our net revenues from direct foreign sales. Further, our customers may derive portions of their revenues from non-U.S. customers. As a result, we are subject to the risks of conducting and operating our business internationally, including: \n • political instability that may result in price fluctuations of raw materials; \n • economic and geopolitical developments and conditions; \n • pandemics and disasters, natural or otherwise; \n • compliance with a variety of international laws, as well as U.S. laws affecting the activities of U.S. companies conducting business abroad, including, but not limited to, the Foreign Corrupt Practices Act; \n • imposition of taxes, export control approvals or licenses, tariffs, embargoes and other trade restrictions; \n • difficulties repatriating funds or restrictions on cash transfers; and \n • potential for new and/or increase in tariffs imposed on imports by the U.S. administration that may affect our ability to import raw materials into the U.S. and finished goods from our leased manufacturing facility in Mexico and increase the cost of such imports. \n While the impact of these factors is difficult to predict, we believe any one or more of these factors could have a material adverse effect on our financial results. \n Customer pricing pressures could reduce the demand and/or price for our products and services. \n The markets we serve are highly competitive and price sensitive. We compete worldwide with a number of domestic and international companies that have substantially greater manufacturing, purchasing, marketing and financial resources than we do, which could exert downward pressure on the prices we are able to charge for our products. Additionally, many of our customers have the in-house capability to fulfill their manufacturing requirements, which could reduce the demand for our products. Our larger competitors may be able to compete more effectively for very large-scale contracts than we can by providing different or greater capabilities or benefits such as technical qualifications, past performance on large-scale contracts, geographic presence, price and availability of key professional personnel. If we are unable to successfully compete for new business, our net revenues growth and operating margins may decline. Table of Contents \n Some of our major customers have completed extensive cost containment efforts and we expect continued pricing pressures in 2026 and beyond. Competitive pricing pressures may have an adverse effect on our financial condition and operating results. Further, there can be no assurance that competition from existing or potential competitors in other segments of our business will not have a material adverse effect on our financial results. If we do not continue to compete effectively and win contracts, our future business, financial condition, results of operations and our ability to meet our financial obligations may be materially compromised. \n Our products and processes are subject to risk of obsolescence as a result of changes in technology and evolving industry and regulatory standards. \n The future success of our business depends in large part upon our and our customers' ability to maintain and enhance technological capabilities, develop and market manufacturing services that meet changing customer needs and successfully anticipate or respond to technological advances in manufacturing processes such as the incorporation of artificial intelligence and other disruptive technologies on a cost-effective and timely basis, while meeting evolving industry and regulatory standards. To address these risks, we invest in product design and development and incur related capital expenditures. There can be no guarantee that our product design and development efforts will be successful, that funds required to be invested in product design and development or incurred as capital expenditures will not increase materially in the future, or that our products and processes will satisfy evolving regulatory standards. \n We may not have the ability to renew facilities leases on terms favorable to us and relocation of operations presents risks due to business interruption. \n Certain of our manufacturing facilities and offices are leased and have lease terms that expire between 2026 and 2038. The majority of these leases include options to extend at the fair market rental rate upon expiration of their original terms, which, if renewed, could be significantly higher than our current rental rates. We may be unable to offset these cost increases by charging more for our products and services. Furthermore, economic conditions may continue to negatively impact and create greater pressure in the commercial real estate market, causing higher incidences of landlord default and/or lender foreclosure of properties, including properties occupied by us. While we maintain certain non-disturbance rights in most cases, it is not certain that such rights will in all cases be upheld and our continued right of occupancy in such instances could be potentially jeopardized. An occurrence of any of these events could have a material adverse effect on our financial results. \n Additionally, if we choose to move any of our operations, those operations may be subject to additional relocation and recertification costs and associated risks of business interruption. \n LEGAL, REGULATORY, TAX, AND ACCOUNTING RISKS \n We may be subject to litigation, other legal proceedings and indemnity claims, and, if any of these are resolved adversely against us in amounts that exceed the limits of our insurance coverage, it could have a material adverse effect on our business, financial condition, and results of operations. \n From time to time, we and our subsidiaries are involved in various legal and other proceedings that are incidental to the conduct of our business. Any litigation, other legal proceedings or indemnity claims could result in an unfavorable judgment that may not be reversed upon appeal or in payments of substantial monetary damages or fines that may exceed our insurance coverage limits, or we may decide to settle on similarly unfavorable terms, any of which could adversely affect our business, financial condition, and results of operations. For instance, on October 17, 2025, we entered into a settlement agreement (\"Settlement Agreement\") to resolve the Guaymas fire litigation (\"Guaymas Fire Litigation\") against us. The Settlement Agreement provided for, among other things, the final dismissal of the Guaymas Fire Litigation with prejudice and a release of claims against us in exchange for the issuance of a payment of $150.0 million, $56.0 million of which was funded by our insurance carriers. We could also suffer an adverse impact on our reputation and a diversion of management's attention and resources, which could have a material adverse effect on our business, financial condition, and results of operations. See Note 13 and Note 15 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K/A for further information. \n Product liability claims in excess of insurance could adversely affect our financial results and financial condition. \n We face potential liability for property damage, personal injury, or death as a result of the failure of products designed or manufactured by us. Although we currently maintain product liability insurance (including aircraft product liability), any material product liability not covered by insurance could have a material adverse effect on our financial condition, results of operations and cash flows. \n We are subject to extensive regulation and audit by the Defense Contract Audit Agency. \n The accuracy and appropriateness of certain costs and expenses used to substantiate our direct and indirect costs for the U.S. Government contracts are subject to extensive regulation and audit by the Defense Contract Audit Agency, an arm of the U.S. Table of Contents \n DoW. Such audits and reviews could result in adjustments to our contract costs and profitability. However, we cannot ensure the outcome of any future audits and adjustments may be required to reduce net sales or profits upon the completion and final negotiation of such audits. If any audit or review were to uncover inaccurate costs or improper activities, we could be subject to penalties and sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from conducting future business with the U.S. Government. Any such outcome could have a material adverse effect on our financial results. \n Our operations are subject to numerous extensive, complex, costly and evolving laws, regulations and restrictions, including cybersecurity requirements, and failure to comply with these laws, regulations and restrictions could subject us to penalties and sanctions that could harm our business. \n Prime contracts with our major customers that have contracts with various agencies of the U.S. Government are subject to numerous laws, regulations and certifications, which affect how we do business with our customers and may impose added costs to our operations. As a result, our business and contracts are subject to numerous extensive, complex, costly and evolving laws, regulations and restrictions, principally by the U.S. Government or its agencies. These laws, regulations and restrictions govern items including, but not limited to, the formation, administration and performance of U.S. Government contracts, disclosure of cost and pricing data, civil penalties for violations of false claims to the U.S. Government for payment, defining reimbursable costs, establishing ethical standards for the procurement process, controlling the import and export of defense articles and services, and cybersecurity requirements, such as Cybersecurity Maturity Model Certification (\"CMMC\"). \n Noncompliance could expose us to liability for penalties, including termination of our contracts and subcontracts, disqualification from bidding on future U.S. Government contracts and subcontracts, suspension or debarment from U.S. Government contracting and various other fines and penalties . Noncompliance found by any one agency could result in fines, penalties, debarment or suspension from receiving additional contracts with all U.S. Government agencies. Given our dependence on U.S. Government business, suspension or debarment could have a material adverse effect on our financial results. \n In addition, the U.S. Government may revise its procurement practices or adopt new contract rules and regulations at any time, including increased usage of fixed-price contracts, procurement reform, and compliance with cybersecurity requirements. Such changes could impair our ability to obtain new contracts or subcontracts or renew contracts or subcontracts under which we currently perform when those contracts expire and are subsequently opened for competitive bidding. Any new contracting methods could be costly or administratively difficult for us to implement and could adversely affect our future net revenues. \n In addition, our international operations subject us to numerous U.S. and foreign laws and regulations, including, without limitation, regulations relating to import-export control, technology transfer restrictions, repatriation of earnings, exchange controls, the Foreign Corrupt Practices Act and other similar antibribery laws, and the anti-boycott provisions of the U.S. Export Administration Act. Changes in regulations or political environments may affect our ability to obtain export licenses to deliver products to our international customers, and conduct business in foreign markets including investment, procurement and repatriation of earnings. Failure by us or our sales representatives or consultants to comply with these laws and regulations could result in certain liabilities and could possibly result in suspension or debarment from government contracts or suspension of our export privileges, which could have a material adverse effect on our financial results. \n We are subject to a number of procurement laws and regulations. Our business and our reputation could be adversely affected if we fail to comply with these laws. \n We must comply with and are affected by laws and regulations relating to the award, administration and performance of U.S. Government contracts. Government contract laws and regulations affect how we do business with our customers and impose certain risks and costs on our business. A violation of specific laws and regulations by us, our employees, or others working on our behalf, such as a supplier or a venture partner, could harm our reputation and result in the imposition of fines and penalties, the termination of our contracts, suspension or debarment from bidding on or being awarded contracts, loss of our ability to export products or services and civil or criminal investigations or proceedings. \n In some instances, these laws and regulations impose terms or rights that are different from those typically found in commercial transactions. For example, the U.S. Government may terminate any of our customers' government contracts and subcontracts either at its convenience or for default based on our performance. Upon termination for convenience of a fixed-price type contract, we normally are entitled to receive the purchase price for delivered items, reimbursement for allowable costs for work-in-process and an allowance for profit on the contract or adjustment for loss if completion of performance would have resulted in a loss. \n Unanticipated changes in our tax provision or exposure to additional income tax liabilities could affect our profitability. \n Significant judgment is required in determining our provision for income taxes. In the ordinary course of our business, there are transactions and calculations where the ultimate tax determination is uncertain. Furthermore, changes in income tax laws and regulations, or their interpretation, could result in higher or lower income tax rates assessed or changes in the taxability of Table of Contents \n certain sales or the deductibility of certain expenses, thereby affecting our income tax expense and profitability. In addition, we are regularly under audit by tax authorities. The final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals. \n Goodwill and/or other assets could be impaired in the future, which could result in substantial charges. \n Goodwill is tested for impairment on an annual basis as of the first day of our fiscal fourth quarter or more frequently if events or circumstances occur which could indicate potential impairment. In assessing the recoverability of goodwill, management is required to make certain critical estimates and assumptions. These estimates and assumptions include projected revenue levels, including the addition of new customers, programs or platforms and increased content on existing programs or platforms, improvements in manufacturing efficiency, and reductions in operating costs. Due to many variables inherent in the estimation of a business's fair value and the relative size of our recorded goodwill, changes in estimates and assumptions may have a material effect on the results of our impairment analysis. If any of these or other estimates and assumptions are not realized in the future, or if market multiples decline, we may be required to record an impairment charge for goodwill. \n We also test intangible assets with indefinite life periods for potential impairment annually...

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