SANTA ANA, Calif.,
First Quarter 2019 Highlights
- Revenue increased 14.7% to
$172.6 million - Net income of
$7.5 million , or$0.64 per diluted share - Gross margin increased 290 basis points year-over-year to 20.7%
- Operating margin increased 390 basis points year-over-year to 7.4%
- Adjusted EBITDA increased 49.7% to
$21.7 million
“As we begin 2019, the Company has gotten off to a great start demonstrated by Ducommun’s strong operating performance across the board this quarter,” said
“Operating margins expanded significantly across both our structures and electronics segments, as we continue to win new content based on providing market leading technology, solid execution and strong customer relationships. We also continue to make strategic investments, including our VersaCore Composite™ technology, which is gaining strong momentum within the industry. Based on our new Company culture and focus on delivering results, I believe the Company is in excellent shape to continue posting strong results and delivering higher value for our shareholders in 2019.”
First Quarter Results
Net revenue for the first quarter of 2019 was
$13.1 million higher revenue in the Company’s military and space end-use markets due to increased shipments on various missile platforms; and$11.9 million higher revenue in the Company’s commercial aerospace end-use markets due to additional content and increased build rates on large aircraft platforms; partially offset by$2.9 million lower revenue in the Company’s industrial end-use markets.
Net income for the first quarter of 2019 was
Gross profit for the first quarter of 2019 was
Operating income for the first quarter of 2019 was
Interest expense for the first quarter of 2019 was
Adjusted EBITDA for the first quarter of 2019 was
During the first quarter of 2019, the net cash used in operations was
* The Company defines backlog as potential revenue and is based on customer placed purchase orders and long-term agreements (“LTAs”) with firm fixed price and expected delivery dates of 24 months or less. Backlog as of as of March 30, 2019 was
Business Segment Information
$8.5 million higher revenue within the Company’s military and space end-use markets due to increased shipments on various missile platforms; partially offset by$3.8 million lower revenue within the Company’s commercial aerospace end-use markets due to timing of shipments which unfavorably impacted large aircraft platforms; and$2.9 million lower revenue within the Company's industrial end-use markets.
Structural Systems
Structural Systems segment net revenue for the quarter ended March 30, 2019 was
$15.7 million higher revenue within the Company’s commercial aerospace end-use markets due to additional content and higher build rates on large aircraft platforms; and$4.6 million higher revenue within the Company’s military and space end-use markets due to increased shipments on military rotary-wing aircraft platforms.
Structural Systems segment operating income for the quarter ended March 30, 2019 was
Corporate General and Administrative (“CG&A”) Expenses
CG&A expenses for the first quarter of 2019 were
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About
Forward Looking Statements
This press release and any attachments include “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, in particular, earnings guidance, the Company’s restructuring plan and any statements about the Company’s plans, strategies and prospects. The Company generally uses the words “may,” “will,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “intend” and similar expressions in this press release and any attachments to identify forward-looking statements. The Company bases these forward-looking statements on its current views with respect to future events and financial performance. Actual results could differ materially from those projected in the forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things: whether the anticipated pre-tax restructuring charges will be sufficient to address all anticipated restructuring costs, including related to employee separation, facilities consolidation, inventory write-down and other asset impairments; whether the expected cost savings from the restructuring will ultimately be obtained in the amount and during the period anticipated; whether the restructuring in the affected areas will be sufficient to build a more cost efficient, focused, higher margin enterprise with higher returns for the Company's shareholders; the impact of the Company’s debt service obligations and restrictive debt covenants; the Company’s end-use markets are cyclical; the Company depends upon a selected base of industries and customers; a significant portion of the Company’s business depends upon
Note Regarding Non-GAAP Financial Information
This release contains non-GAAP financial measures, including Adjusted EBITDA (which excludes interest expense, income tax expense [benefit], depreciation, amortization, stock-based compensation expense, and restructuring charges).
The Company believes the presentation of these non-GAAP measures provide important supplemental information to management and investors regarding financial and business trends relating to its financial condition and results of operations. The Company’s management uses these non-GAAP financial measures along with the most directly comparable GAAP financial measures in evaluating the Company’s actual and forecasted operating performance, capital resources and cash flow. The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company discloses different non-GAAP financial measures in order to provide greater transparency and to help the Company’s investors to more meaningfully evaluate and compare Ducommun’s results to its previously reported results. The non-GAAP financial measures that the Company uses may not be comparable to similarly titled financial measures used by other companies. We define backlog as potential revenue and is based on customer placed purchase orders and long-term agreements (“LTAs”) with firm fixed price and expected delivery dates of 24 months or less. The majority of the LTAs do not meet the definition of a contract under ASC 606 and thus, the backlog amount disclosed herein is greater than the remaining performance obligations disclosed under ASC 606. 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 several programs to a greater extent than our net revenues. Backlog in industrial markets tends to be of a shorter duration and is generally fulfilled within a three month period. As a result of these factors, trends in our overall level of backlog may not be indicative of trends in our future net revenues.
CONTACTS:
Douglas L. Groves, Vice President, Chief Financial Officer and Treasurer, 657.335.3665 |
Chris Witty, Investor Relations, 646.438.9385, cwitty@darrowir.com |
[Financial Tables Follow]
DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
March 30, 2019 |
December 31, 2018 |
|||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 3,727 | $ | 10,263 | ||||
Accounts receivable, net | 63,134 | 67,819 | ||||||
Contract assets | 93,306 | 86,665 | ||||||
Inventories | 103,994 | 101,125 | ||||||
Production cost of contracts | 11,008 | 11,679 | ||||||
Other current assets | 7,003 | 6,531 | ||||||
Total Current Assets | 282,172 | 284,082 | ||||||
Property and equipment, Net | 108,839 | 107,045 | ||||||
Operating lease right-of-use assets | 18,398 | — | ||||||
Goodwill | 136,057 | 136,057 | ||||||
Intangibles, net | 109,387 | 112,092 | ||||||
Non-current deferred income taxes | 313 | 308 | ||||||
Other assets | 5,543 | 5,155 | ||||||
Total Assets | $ | 660,709 | $ | 644,739 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 68,785 | $ | 69,274 | ||||
Contract liabilities | 15,030 | 17,145 | ||||||
Accrued and other liabilities | 28,986 | 37,786 | ||||||
Operating lease liabilities | 2,536 | — | ||||||
Current portion of long-term debt | 2,330 | 2,330 | ||||||
Total Current Liabilities | 117,667 | 126,535 | ||||||
Long-term debt | 229,125 | 228,868 | ||||||
Non-current operating lease liabilities | 17,499 | — | ||||||
Non-current deferred income taxes | 18,211 | 18,070 | ||||||
Other long-term liabilities | 14,429 | 14,441 | ||||||
Total Liabilities | 396,931 | 387,914 | ||||||
Commitments and contingencies | ||||||||
Shareholders’ Equity | ||||||||
Common stock | 115 | 114 | ||||||
Additional paid-in capital | 83,370 | 83,712 | ||||||
Retained earnings | 187,564 | 180,356 | ||||||
Accumulated other comprehensive loss | (7,271 | ) | (7,357 | ) | ||||
Total Shareholders’ Equity | 263,778 | 256,825 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 660,709 | $ | 644,739 |
DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended | ||||||||
March 30, 2019 |
March 31, 2018 |
|||||||
Net Revenues | $ | 172,566 | $ | 150,455 | ||||
Cost of Sales | 136,872 | 123,700 | ||||||
Gross Profit | 35,694 | 26,755 | ||||||
Selling, General and Administrative Expenses | 22,846 | 19,326 | ||||||
Restructuring Charges | — | 2,173 | ||||||
Operating Income | 12,848 | 5,256 | ||||||
Interest Expense | (4,351 | ) | (2,899 | ) | ||||
Income Before Taxes | 8,497 | 2,357 | ||||||
Income Tax Expense (Benefit) | 1,025 | (243 | ) | |||||
Net Income | $ | 7,472 | $ | 2,600 | ||||
Earnings Per Share | ||||||||
Basic earnings per share | $ | 0.65 | $ | 0.23 | ||||
Diluted earnings per share | $ | 0.64 | $ | 0.22 | ||||
Weighted-Average Number of Common Shares Outstanding | ||||||||
Basic | 11,434 | 11,346 | ||||||
Diluted | 11,755 | 11,613 | ||||||
Gross Profit % | 20.7 | % | 17.8 | % | ||||
SG&A % | 13.3 | % | 12.8 | % | ||||
Operating Income % | 7.4 | % | 3.5 | % | ||||
Net Income % | 4.3 | % | 1.7 | % | ||||
Effective Tax (Benefit) Rate | 12.1 | % | (10.3 | )% |
DUCOMMUN INCORPORATED AND SUBSIDIARIES
BUSINESS SEGMENT PERFORMANCE
(Unaudited)
(In thousands)
Three Months Ended | |||||||||||||||||
% Change |
March 30, 2019 |
March 31, 2018 |
% of Net Revenues 2019 |
% of Net Revenues 2018 |
|||||||||||||
Net Revenues | |||||||||||||||||
Electronic Systems | 2.2 | % | $ | 84,197 | $ | 82,409 | 48.8 | % | 54.8 | % | |||||||
Structural Systems | 29.9 | % | 88,369 | 68,046 | 51.2 | % | 45.2 | % | |||||||||
Total Net Revenues | 14.7 | % | $ | 172,566 | $ | 150,455 | 100.0 | % | 100.0 | % | |||||||
Segment Operating Income | |||||||||||||||||
Electronic Systems | $ | 9,181 | $ | 5,744 | 10.9 | % | 7.0 | % | |||||||||
Structural Systems | 10,549 | 4,391 | 11.9 | % | 6.5 | % | |||||||||||
19,730 | 10,135 | ||||||||||||||||
Corporate General and Administrative Expenses (1) | (6,882 | ) | (4,879 | ) | (4.0 | )% | (3.2 | )% | |||||||||
Total Operating Income | $ | 12,848 | $ | 5,256 | 7.4 | % | 3.5 | % | |||||||||
Adjusted EBITDA | |||||||||||||||||
Electronic Systems | |||||||||||||||||
Operating Income | $ | 9,181 | $ | 5,744 | |||||||||||||
Depreciation and Amortization | 3,844 | 3,632 | |||||||||||||||
Restructuring Charges | — | 520 | |||||||||||||||
13,025 | 9,896 | 15.5 | % | 12.0 | % | ||||||||||||
Structural Systems | |||||||||||||||||
Operating Income | 10,549 | 4,391 | |||||||||||||||
Depreciation and Amortization | 3,250 | 2,316 | |||||||||||||||
Restructuring Charges | — | 1,526 | |||||||||||||||
13,799 | 8,233 | 15.6 | % | 12.1 | % | ||||||||||||
Corporate General and Administrative Expenses (1) | |||||||||||||||||
Operating loss | (6,882 | ) | (4,879 | ) | |||||||||||||
Depreciation and Amortization | 294 | 33 | |||||||||||||||
Stock-Based Compensation Expense | 1,464 | 1,090 | |||||||||||||||
Restructuring Charges | — | 127 | |||||||||||||||
(5,124 | ) | (3,629 | ) | ||||||||||||||
Adjusted EBITDA | $ | 21,700 | $ | 14,500 | 12.6 | % | 9.6 | % | |||||||||
Capital Expenditures | |||||||||||||||||
Electronic Systems | $ | 836 | $ | 2,734 | |||||||||||||
Structural Systems | 3,689 | 1,529 | |||||||||||||||
Total Capital Expenditures | $ | 4,525 | $ | 4,263 |
(1) Includes costs not allocated to either the
DUCOMMUN INCORPORATED AND SUBSIDIARIES
GAAP TO NON-GAAP OPERATING INCOME RECONCILIATION
(Unaudited)
(In thousands)
Three Months Ended | ||||||||||||||
GAAP To Non-GAAP Operating Income | March 30, 2019 |
March 31, 2018 |
% of Net Revenues 2019 |
% of Net Revenues 2018 |
||||||||||
GAAP Operating income | $ | 12,848 | $ | 5,256 | ||||||||||
GAAP Operating income - Electronic Systems | $ | 9,181 | $ | 5,744 | ||||||||||
Adjustments: | ||||||||||||||
Restructuring charges | — | 520 | ||||||||||||
Adjusted operating income - Electronic Systems | 9,181 | 6,264 | 10.9 | % | 7.6 | % | ||||||||
GAAP Operating income - Structural Systems | 10,549 | 4,391 | ||||||||||||
Adjustments: | ||||||||||||||
Restructuring charges | — | 1,526 | ||||||||||||
Adjusted operating income - Structural Systems | 10,549 | 5,917 | 11.9 | % | 8.7 | % | ||||||||
GAAP Operating loss - Corporate | (6,882 | ) | (4,879 | ) | ||||||||||
Adjustment: | ||||||||||||||
Restructuring charges | — | 127 | ||||||||||||
Adjusted operating loss - Corporate | (6,882 | ) | (4,752 | ) | ||||||||||
Total adjustments | — | 2,173 | ||||||||||||
Adjusted operating income | $ | 12,848 | $ | 7,429 | 7.4 | % | 4.9 | % |
DUCOMMUN INCORPORATED AND SUBSIDIARIES
GAAP TO NON-GAAP EARNINGS AND EARNINGS PER SHARE RECONCILIATION
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended | ||||||||
GAAP To Non-GAAP Earnings | March 30, 2019 |
March 31, 2018 |
||||||
GAAP Net income | $ | 7,472 | $ | 2,600 | ||||
Adjustments: | ||||||||
Restructuring charges (1) | — | 1,804 | ||||||
Adjusted net income | $ | 7,472 | $ | 4,404 |
Three Months Ended | ||||||||
GAAP Earnings Per Share To Non-GAAP Earnings Per Share | March 30, 2019 |
March 31, 2018 |
||||||
GAAP Diluted earnings per share (“EPS”) | $ | 0.64 | $ | 0.22 | ||||
Adjustments: | ||||||||
Restructuring charges (1) | — | 0.16 | ||||||
Adjusted diluted EPS | $ | 0.64 | $ | 0.38 | ||||
Shares used for adjusted diluted EPS | 11,755 | 11,613 |
(1) Includes effective tax rate of 17.0% for 2018 adjustments.
DUCOMMUN INCORPORATED AND SUBSIDIARIES
NON-GAAP BACKLOG BY REPORTING SEGMENT
(Unaudited)
(In thousands)
(In thousands) | ||||||||
March 30, 2019 |
December 31, 2018 |
|||||||
Consolidated Ducommun | ||||||||
Military and space | $ | 346,959 | $ | 339,443 | ||||
Commercial aerospace | 499,473 | 487,232 | ||||||
Industrial | 37,333 | 37,774 | ||||||
Total | $ | 883,765 | $ | 864,449 | ||||
Electronic Systems | ||||||||
Military and space | $ | 249,302 | $ | 241,196 | ||||
Commercial aerospace | 65,022 | 48,032 | ||||||
Industrial | 37,333 | 37,774 | ||||||
Total | $ | 351,657 | $ | 327,002 | ||||
Structural Systems | ||||||||
Military and space | $ | 97,657 | $ | 98,247 | ||||
Commercial aerospace | 434,451 | 439,200 | ||||||
Total | $ | 532,108 | $ | 537,447 |
Source: Ducommun Incorporated