Fourth Quarter Results
Sales for the fourth quarter of 2009 increased 4% to $105.7 million from $101.4 million for the fourth quarter of 2008. Ducommun had a net loss in the fourth quarter of 2009 of $3.2 million, or ($0.30) per diluted share, compared to a net loss of $4.2 million, or ($0.40) per diluted share, in the prior year period. Net income was impacted by a non-cash, after-tax charge of $7.8 million, or $0.74 per diluted share, in the fourth quarter of 2009, and $8.0 million, or $0.76 per diluted share, in the fourth quarter of 2008.
"We continued to take the necessary steps this quarter to position the Company for an eventual rebound in our end markets," said Anthony J. Reardon, president and chief executive officer. "Excluding the goodwill impairment charge, our operating performance reflected Ducommun's strong breadth of programs and lean manufacturing initiatives. Our ability to manage the Company's cost structure even at lower output levels has helped Ducommun navigate through a difficult demand environment, while generating solid cash flow. Ducommun's platforms and customer relationships are our biggest strategic asset, which we are leveraging to pursue - and win - the commercial and military contracts that will drive future growth."
The 4% increase in revenue for the fourth quarter of 2009 was due to the Company's acquisition of DynaBil Industries, Inc. (DAS-NY), partially offset by lower year-over-year sales for the Apache helicopter and regional and business aircraft. DAS-NY contributed approximately $9.8 million in fourth quarter 2009 revenue, compared to $0.9 million for the fourth quarter of 2008. The Company's mix of business in the fourth quarter of 2009 was approximately 62% military, 36% commercial and 2% space, compared to 63% military, 35% commercial and 2% space in the fourth quarter of 2008.
Gross profit, as a percentage of sales, was 18.2% in the fourth quarter of 2009, in line with the fourth quarter of 2008. The fourth quarter 2009 gross profit was negatively impacted by a $0.7 million reserve for sales tax liability on past tooling sales.
Selling, general and administration (SG&A) expenses decreased to $12.0 million, or 11.4% of sales, in the fourth quarter of 2009, compared to $14.6 million, or 14.4% of sales, in the fourth quarter of 2008. The decrease in SG&A resulted principally from a $2.2 million reduction in environmental reserves established in prior years and corporate-wide cost control initiatives, partially offset by a full quarter of SG&A expense from the acquisition of DAS-NY and an increase in amortization of intangible assets of $0.7 million, again related to the acquisition of DAS-NY.
The pre-tax non-cash goodwill impairment charge of $12.9 million recorded during the fourth quarter of 2009 related to the Company's Miltec subsidiary and resulted from management's reassessment of the future prospects of this business in view of a reduction in the U.S. government's budgetary forecast and funding levels in military markets. Because the majority of Miltec's business is U.S. government related, the multi-year forecast of Miltec's sales and cash flow from operations was reduced, resulting in an unfavorable impact on the unit's fair market value assessment. During the fourth quarter of 2008, the Company also recorded a pre-tax non-cash goodwill impairment charge relating to Miltec in the amount of $13.1 million.
The Company's net loss for the fourth quarter of 2009 decreased from the fourth quarter of 2008 primarily due to the reasons stated above. The fourth quarter included an effective tax benefit of 49%, compared to a tax benefit of 55% for the fourth quarter of 2008.
Full Year Results
Revenue for the full year 2009 rose 7% to $430.7 million from $403.8 million for the year 2008. Net income for 2009 was $10.2 million, or $0.97 per diluted share, compared to net income of $13.1 million, or $1.23 per diluted share, in 2008. Net income prior to the goodwill impairment charges was $1.71 and $1.99 per diluted share in 2009 and 2008, respectively.
The 7% revenue increase in 2009 was due to the Company's acquisition of DAS-NY, partially offset by lower year-over-year sales for the Apache helicopter and regional and business aircraft. DAS-NY contributed approximately $42.1 million in revenue during 2009, compared to $0.9 million in 2008. The Company's mix of business for 2009 was approximately 62% military, 36% commercial and 2% space, compared to 59% military, 39% commercial and 2% space for the year 2008.
Gross profit, as a percentage of sales, decreased to 18.3% in 2009 from 20.3% in 2008. The Company's gross profit margin in 2009 was negatively impacted by inventory valuation adjustments and sales tax reserves of $5.8 million.
Selling, general and administration (SG&A) expenses decreased to $49.6 million, or 11.5% of sales, for 2009, compared to $50.5 million, or 12.5% of sales, for 2008. The decline in SG&A resulted principally from a $2.2 million reduction in environmental reserves established in prior years along with corporate-wide cost control initiatives, partially offset by a full year of SG&A expense from the acquisition of DAS-NY and an increase in amortization of intangible assets of $1.5 million, again related to the acquisition of DAS-NY.
Net income for 2009 decreased 22% from 2008 primarily due to the reasons stated above and higher interest expense on higher debt levels. The Company's effective tax rate for 2009 was 26.0%, compared to 23.1% for 2008.
Mr. Reardon concluded, "As we begin 2010, we continue to have an enviable position on key commercial and military programs, a solid backlog, and a strong balance sheet, with significant cash flow generation due to effective working capital management. We remain committed to improving Ducommun's financial results even as we navigate through some near-term uncertainty. Given our resources and liquidity to fund future growth, we are optimistic about the future."
About Ducommun Incorporated
Founded in 1849, Ducommun Incorporated provides engineering and manufacturing services to the aerospace and defense industry. The Company is a supplier of critical components and assemblies for commercial aircraft, military aircraft, and missile and space programs through its three business units: Ducommun AeroStructures (DAS), Ducommun Technologies (DTI), and Miltec. Additional information can be found at www.ducommun.com.
A teleconference hosted by Anthony J. Reardon, the Company's president and chief executive officer, and Joseph P. Bellino, the Company's vice president and chief financial officer, will be held tomorrow, February 23, 2010 at 8:00 AM PT (11:00 AM ET). To participate in the teleconference, please call 800-299-6183 (international 617-801-9713) approximately ten minutes prior to the conference time stated above. The participant passcode is 17920037. Mr. Reardon and Mr. Bellino will be speaking on behalf of the Company and anticipate the meeting and Q&A period to last approximately 40 minutes. This call is being webcast by Thomson/CCBN and can be accessed directly at the Thomson Reuters website. Conference call replay will be available after that time at the same link or at the Company's web site, www.ducommun.com.
The statements made in this press release include forward-looking statements that involve risks and uncertainties.The Company's future financial results could differ materially from those anticipated due to the Company's dependence on conditions in the airline industry, the level of new commercial aircraft orders, production rates for Boeing commercial aircraft, the C-17and Apache helicopter rotor blade programs, the level of defense spending, competitive pricing pressures, manufacturing inefficiencies, start-up costs and possible overruns on new contracts, technology and product development risks and uncertainties, product performance, risks associated with acquisitions and dispositions of businesses by the Company, increasing consolidation of customers and suppliers in the aerospace industry, possible goodwill impairment,and other factors beyond the Company's control.See the Company's Form 10-K for the year ended December 31, 2009 for a more detailed discussion of these and other risk factors and contingencies.
|CONSOLIDATED INCOME STATEMENT|
|(In thousands, except per share amounts)|
|Three Months Ended||
|Dec. 31,||Dec. 31,||Dec. 31,||Dec. 31,|
|Sales and Service Revenues|
|Operating Costs and Expenses:|
|Cost of product sales||77,488||69,539||305,705||273,974|
|Cost of service revenues||8,916||13,389||46,210||47,926|
|Selling, general & administrative expenses||12,024||14,606||49,615||50,548|
|Income Tax Expense||3,015||5,233||(3,577||)||(3,937||)|
|Earnings Per Share|
|Basic earnings per share||$||(0.31||)||$||(0.40||)||$||0.97||$||1.24|
|Diluted earnings per share||$||(0.30||)||$||(0.40||)||$||0.97||$||1.23|
|Weighted Averaged Number of|
|Common Shares Outstanding:|
|Consolidated Balance Sheets|
|(In thousands, except share data)|
|Cash and cash equivalents||$||18,629||$||3,508|
|Accounts receivable (less allowance for doubtful|
|accounts of $570 and $1,694)||48,378||50,090|
|Production cost of contracts||12,882||10,087|
|Deferred income taxes||4,794||9,172|
|Other current assets||7,452||6,172|
|Total Current Assets||164,091||159,173|
|Property and Equipment, Net||60,923||61,954|
|Liabilities and Shareholders' Equity|
|Current portion of long-term debt||$||4,963||$||2,420|
|Total Current Liabilities||78,266||89,501|
|Long-Term Debt, Less Current Portion||23,289||28,299|
|Deferred Income Taxes||7,732||9,902|
|Other Long-Term Liabilities||10,736||14,038|
|Commitments and Contingencies|
|Common stock -- $.01 par value; authorized 35,000,000|
|shares; issued 10,593,726 shares in 2009 and|
|10,580,586 shares in 2008||106||106|
|Treasury stock -- held in treasury 143,300 shares in 2009 and|
|69,000 shares in 2008||(1,924||)||(986||)|
|Additional paid-in capital||58,498||56,040|
|Accumulated other comprehensive loss||(3,554||)||(4,432||)|
|Total Shareholders' Equity||233,886||224,446|
SOURCE: Ducommun Incorporated
Joseph P. Bellino
Vice President and Chief Financial Officer