Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 8-K
____________________________
 
 CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 5, 2019
____________________________
DUCOMMUN INCORPORATED
(Exact name of registrant as specified in its charter)
____________________________
Delaware
001-08174
 
95-0693330
(State or other jurisdiction
of incorporation)
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
 
 
 
200 Sandpointe Avenue, Suite 700, Santa Ana, California
 
92707-5759
 
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code (657) 335-3665
N/A
(Former name or former address, if changed since last report.)
____________________________ 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, $.01 par value per share
 
DCO
 
New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (240.12b-2 of this chapter).
 
 
 
Emerging growth company
 
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the
 
 
Exchange Act.
 
¨
 






Item 2.02
Results of Operations and Financial Condition.
Ducommun Incorporated issued a press release on August 5, 2019 in the form attached hereto as Exhibit 99.1.
 
Item 9.01
Financial Statements and Exhibits.
(d) Exhibits
 

Exhibit No.
Exhibit Title or Description






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
DUCOMMUN INCORPORATED
(Registrant)
Date: August 5, 2019
 
By:
/s/ Christopher D. Wampler
 
 
 
Christopher D. Wampler
 
 
 
Vice President, Interim Chief Financial Officer and Treasurer, and Controller and Chief Accounting Officer


Exhibit


EXHIBIT 99.1
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13042291&doc=3
NEWS RELEASE

Ducommun Reports Results for the
Second Quarter Ended June 29, 2019
Strong Revenue Growth, Gross Margin Expansion, and Positive Outlook for Remainder of 2019
SANTA ANA, California (August 5, 2019) – Ducommun Incorporated (NYSE:DCO) (“Ducommun” or the “Company”) today reported results for its second quarter ended June 29, 2019.
Second Quarter 2019 Highlights
Revenue increased 16.6% year-over-year to $180.5 million
Net income of $7.8 million, or $0.66 per diluted share
Gross margin increased 40 basis points year-over-year to 21.1%
Operating margin increased 390 basis points year-over-year to 7.5%
Adjusted EBITDA increased 19.7% year-over-year to $22.4 million
“The second quarter of 2019 continued to show the strength of our product lines, solid demand for the key programs and customers we serve along with operational improvements,” said Stephen G. Oswald, chairman, president and chief executive officer. “Even with the ongoing market challenges related to the Boeing 737 MAX program, our revenue grew an impressive 16.6% year-over-year, to $180.5 million. This result was due to an increase in build rates in both commercial and military platforms across our wide and varied customer base along with additional content. At the same time, we posted an increase in operating income on an adjusted basis, of 23.7%, resulting in an operating margin of 7.5%.
“We were also delighted with the announcement last week of our newly signed strategic supplier agreement with Raytheon Missile Systems ('RMS'). Being the first supplier to be selected by RMS for this initiative is a great first step forward for a stronger relationship and higher revenue opportunities for Ducommun in the future. It will allow us to collaborate and compete on every platform, either new or existing. We appreciated as well the recognition of our Monrovia, California performance center being selected in July as a 2019 Raytheon Supplier Excellence PREMIER Award winner.
“The Company also announced at the Paris Air Show that we were on track with our $200 million contract to supply Middle River Aerostructure Systems with LEAP engine nacelle components for the Airbus A320 platform utilizing Ducommun’s VersaCore CompositeTM technology. This was a very important milestone as we take advantage of our proprietary technologies to drive growth in 2020 and subsequent years.
“All in all, the Company remains in very good shape heading into the second half of 2019 with strong momentum in both revenue and earnings.”
Second Quarter Results
Net revenue for the second quarter of 2019 was $180.5 million compared to $154.8 million for the second quarter of 2018. The year-over-year increase of 16.6% was due to the following:
$20.1 million higher revenue in the Company’s commercial aerospace end-use markets due to additional content and higher build rates on large aircraft platforms; and
$6.9 million higher revenue in the Company’s military and space end-use markets due to higher build rates on other military and space platforms; partially offset by
$1.3 million lower revenue in the Company’s industrial end-use markets.

1



Net income for the second quarter of 2019 was $7.8 million, or $0.66 per diluted share, compared to $1.6 million, or $0.14 per diluted share, for the second quarter of 2018. This reflects a $6.0 million increase in gross profit due to higher revenue and improved operating performance. Restructuring charges were lower year-over-year by $5.4 million, partially offset by $3.3 million of higher selling, general and administrative expenses, and higher income taxes of $1.1 million.
Gross profit for the second quarter of 2019 was $38.1 million, or 21.1% of revenue compared to gross profit of $32.0 million, or 20.7% of revenue, for the second quarter of 2018. The increase in gross margin year-over-year was due to favorable manufacturing volume, favorable product mix, and manufacturing efficiencies, partially offset by higher other manufacturing costs.
Operating income for the second quarter of 2019 was $13.6 million, or 7.5% of revenue, compared to $5.6 million, or 3.6% of revenue, in the comparable period last year. The year-over-year increase of $8.0 million was due to higher revenue, improved operating performance, and lower restructuring charges in the current year.
Interest expense for the second quarter of 2019 was $4.4 million compared to $3.8 million in the comparable period of 2018. The year-over-year increase was due to a higher outstanding balance on the revolving credit facility reflecting the acquisition of Certified Thermoplastics Co., LLC in April 2018 and higher interest rates.
Adjusted EBITDA for the second quarter of 2019 was $22.4 million, or 12.4% of revenue, compared to $18.7 million, or 12.1% of revenue, for the comparable period in 2018, an increase of 19.7%.
During the second quarter of 2019, the net cash provided by operations was $9.8 million compared to $15.9 million during the second quarter of 2018. The change year-over-year was due to the increase in contract assets and increase in accounts receivable as a result of the increase in net revenue, partially offset by higher net income and increase in accrued and other liabilities.
Business Segment Information
Electronic Systems
Electronic Systems segment net revenue for the quarter ended June 29, 2019 was $89.3 million, compared to $84.5 million for the second quarter of 2018. The year-over-year increase was due to the following:
$5.9 million higher revenue within the Company’s military and space end-use markets due to higher build rates on other military and space platforms; and
$0.2 million higher revenue within the Company’s commercial aerospace end-use markets; partially offset by
$1.3 million lower revenue within the Company's industrial end-use markets.
Electronic Systems segment operating income was $9.9 million, or 11.1% of revenue, for the second quarter of 2019 compared to $8.7 million, or 10.3% of revenue, for the comparable quarter in 2018. The year-over-year increase of $1.2 million was due to favorable product mix and improved manufacturing efficiencies.
Structural Systems
Structural Systems segment net revenue for the quarter ended June 29, 2019 was $91.2 million, compared to $70.3 million for the second quarter of 2018. The year-over-year increase was due to the following:
$20.0 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
$1.0 million higher revenue within the Company’s military and space end-use markets due to higher build rates on military rotary-wing aircraft platforms.
Structural Systems segment operating income for the quarter ended June 29, 2019 was $11.8 million, or 12.9% of revenue, compared to $5.0 million, or 7.1% of revenue, for the second quarter of 2018. The year-over-year increase of $6.7 million was due to favorable manufacturing volume, improved manufacturing efficiencies, and lower restructuring charges in the current year.
Corporate General and Administrative (“CG&A”) Expenses
CG&A expenses for the second quarter of 2019 were $8.1 million, or 4.5% of total Company revenue, compared to $8.1 million, or 5.2% of total Company revenue, for the comparable quarter in the prior year. The year-over-year decrease of

2



less than $0.1 million was due to lower restructuring charges in the current year of $1.1 million and lower professional services fees of $1.0 million, partially offset by one-time severance charges of $1.7 million.
Conference Call
A teleconference hosted by Stephen G. Oswald, the Company’s chairman, president, and chief executive officer, and Christopher D. Wampler, the Company’s vice president, interim chief financial officer and treasurer, and controller and chief accounting officer will be held today, August 5, 2019 at 2:00 p.m. PT (5:00 p.m. ET) to review these financial results. To participate in the teleconference, please call 844-239-5278 (international 574-990-1017) approximately ten minutes prior to the conference time. The participant passcode is 8785215. Mr. Oswald and Mr. Wampler will be speaking on behalf of the Company and anticipate the call (including Q&A) to last approximately 45 minutes.
This call is being webcast and can be accessed directly at the Ducommun website at www.ducommun.com. Conference call replay will be available after that time at the same link or by dialing 855-859-2056, passcode 8785215.
About Ducommun Incorporated
Ducommun Incorporated delivers value-added innovative manufacturing solutions to customers in the aerospace, defense and industrial markets. As the successor to a business that was founded in 1849, the Company specializes in two core areas - Electronic Systems and Structural Systems - to produce complex products and components for commercial aircraft platforms, mission-critical military and space programs, and sophisticated industrial applications. For more information, visit www.ducommun.com.
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 U.S. Government defense spending; the Company is subject to extensive regulation and audit by the Defense Contract Audit Agency; contracts with some of the Company’s customers contain provisions which give the its customers a variety of rights that are unfavorable to the Company; further consolidation in the aerospace industry could adversely affect the Company’s business and financial results; the Company’s ability to successfully make acquisitions, including its ability to successfully integrate, operate or realize the projected benefits of such businesses; the Company relies on its suppliers to meet the quality and delivery expectations of its customers; the Company uses estimates when bidding on fixed-price contracts which estimates could change and result in adverse effects on its financial results; the impact of existing and future laws and regulations; the impact of existing and future accounting standards and tax rules and regulations; environmental liabilities could adversely affect the Company’s financial results; cyber security attacks, internal system or service failures may adversely impact the Company’s business and operations; and other risks and uncertainties, including those detailed from time to time in the Company’s periodic reports filed with the Securities and Exchange Commission. You should not put undue reliance on any forward-looking statements. You should understand that many important factors, including those discussed herein, could cause the Company’s results to differ materially from those expressed or suggested in any forward-looking statement. Except as required by law, the Company does not undertake any obligation to update or revise these forward-looking statements to reflect new information or events or circumstances that occur after the date of this news release, August 5, 2019, or to reflect the occurrence of unanticipated events or otherwise. Readers are advised to review the Company’s filings with the Securities and Exchange Commission (which are available from the SEC’s EDGAR database at www.sec.gov, at various SEC reference facilities in the United States and through the Company’s website).

3



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, restructuring charges, and inventory purchase accounting adjustments).
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:
Christopher D. Wampler, Vice President, Interim Chief Financial Officer and Treasurer, and Controller and Chief Accounting Officer, 657.335.3665
Chris Witty, Investor Relations, 646.438.9385, cwitty@darrowir.com
[Financial Tables Follow]

4




DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
 
 
 
June 29,
2019
 
December 31,
2018
Assets
 
 
 
 
Current Assets
 
 
 
 
Cash and cash equivalents
 
$
3,287

 
$
10,263

Restricted cash
 
757

 

Accounts receivable, net
 
69,355

 
67,819

Contract assets
 
100,527

 
86,665

Inventories
 
109,327

 
101,125

Production cost of contracts
 
11,298

 
11,679

Other current assets
 
5,929

 
6,531

Total Current Assets
 
300,480

 
284,082

Property and equipment, Net
 
111,373

 
107,045

Operating lease right-of-use assets
 
19,148

 

Goodwill
 
136,057

 
136,057

Intangibles, net
 
106,710

 
112,092

Non-current deferred income taxes
 
313

 
308

Other assets
 
5,514

 
5,155

Total Assets
 
$
679,595

 
$
644,739

Liabilities and Shareholders’ Equity
 
 
 
 
Current Liabilities
 
 
 
 
Accounts payable
 
$
79,279

 
$
69,274

Contract liabilities
 
13,183

 
17,145

Accrued and other liabilities
 
33,349

 
37,786

Operating lease liabilities
 
2,858

 

Current portion of long-term debt
 
2,281

 
2,330

Total Current Liabilities
 
130,950

 
126,535

Long-term debt
 
225,605

 
228,868

Non-current operating lease liabilities
 
17,911

 

Non-current deferred income taxes
 
18,175

 
18,070

Other long-term liabilities
 
14,724

 
14,441

Total Liabilities
 
407,365

 
387,914

Commitments and contingencies
 
 
 
 
Shareholders’ Equity
 
 
 
 
Common stock
 
115

 
114

Additional paid-in capital
 
83,844

 
83,712

Retained earnings
 
195,379

 
180,356

Accumulated other comprehensive loss
 
(7,108
)
 
(7,357
)
Total Shareholders’ Equity
 
272,230

 
256,825

Total Liabilities and Shareholders’ Equity
 
$
679,595

 
$
644,739


5



DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
 
 
 
Three Months Ended
 
Six Months Ended
 
 
June 29,
2019
 
June 30,
2018
 
June 29,
2019
 
June 30,
2018
Net Revenues
 
$
180,495

 
$
154,827

 
$
353,061

 
$
305,282

Cost of Sales
 
142,430

 
122,799

 
279,302

 
246,499

Gross Profit
 
38,065

 
32,028

 
73,759

 
58,783

Selling, General and Administrative Expenses
 
24,461

 
21,194

 
47,307

 
40,521

Restructuring Charges
 

 
5,238

 

 
7,411

Operating Income
 
13,604


5,596


26,452


10,851

Interest Expense
 
(4,426
)
 
(3,763
)
 
(8,777
)
 
(6,661
)
Income Before Taxes
 
9,178

 
1,833

 
17,675

 
4,190

Income Tax Expense (Benefit)
 
1,363

 
242

 
2,388

 
(1
)
Net Income
 
$
7,815

 
$
1,591

 
$
15,287

 
$
4,191

Earnings Per Share
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
0.68

 
$
0.14

 
$
1.33

 
$
0.37

Diluted earnings per share
 
$
0.66

 
$
0.14

 
$
1.30

 
$
0.36

Weighted-Average Number of Common Shares Outstanding
 
 
 
 
 
 
 
 
Basic
 
11,513

 
11,394

 
11,475

 
11,370

Diluted
 
11,758

 
11,624

 
11,754

 
11,609

 
 
 
 
 
 
 
 
 
Gross Profit %
 
21.1
%
 
20.7
%
 
20.9
%
 
19.3
 %
SG&A %
 
13.6
%
 
13.7
%
 
13.4
%
 
13.3
 %
Operating Income %
 
7.5
%
 
3.6
%
 
7.5
%
 
3.6
 %
Net Income %
 
4.3
%
 
1.0
%
 
4.3
%
 
1.4
 %
Effective Tax (Benefit) Rate
 
14.9
%
 
13.2
%
 
13.5
%
 
 %

6



DUCOMMUN INCORPORATED AND SUBSIDIARIES
BUSINESS SEGMENT PERFORMANCE
(Unaudited)
(Dollars in thousands)
 
 
 
Three Months Ended
 
Six Months Ended
 
 
%
Change
 
June 29,
2019
 
June 30,
2018
 
%
of Net  Revenues
2019
 
%
of Net  Revenues
2018
 
%
Change
 
June 29,
2019
 
June 30,
2018
 
%
of Net  Revenues
2019
 
%
of Net  Revenues
2018
Net Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Electronic Systems
 
5.6
%
 
$
89,260

 
$
84,502

 
49.5
 %
 
54.6
 %
 
3.9
%
 
$
173,457

 
$
166,910

 
49.1
 %
 
54.7
 %
Structural Systems
 
29.7
%
 
91,235

 
70,325

 
50.5
 %
 
45.4
 %
 
29.8
%
 
179,604

 
138,372

 
50.9
 %
 
45.3
 %
Total Net Revenues
 
16.6
%
 
$
180,495

 
$
154,827

 
100.0
 %
 
100.0
 %
 
15.7
%
 
$
353,061

 
$
305,282

 
100.0
 %
 
100.0
 %
Segment Operating Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Electronic Systems
 
 
 
$
9,912

 
$
8,668

 
11.1
 %
 
10.3
 %
 
 
 
$
19,093

 
$
14,412

 
11.0
 %
 
8.6
 %
Structural Systems
 
 
 
11,773

 
5,026

 
12.9
 %
 
7.1
 %
 
 
 
22,322

 
9,417

 
12.4
 %
 
6.8
 %
 
 
 
 
21,685

 
13,694

 
 
 
 
 
 
 
41,415

 
23,829

 
 
 
 
Corporate General and Administrative Expenses (1)
 
 
 
(8,081
)
 
(8,098
)
 
(4.5
)%
 
(5.2
)%
 
 
 
(14,963
)
 
(12,978
)
 
(4.2
)%
 
(4.3
)%
Total Operating Income
 
 
 
$
13,604

 
$
5,596

 
7.5
 %
 
3.6
 %
 
 
 
$
26,452

 
$
10,851

 
7.5
 %
 
3.6
 %
Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Electronic Systems
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income
 
 
 
$
9,912

 
$
8,668

 
 
 
 
 
 
 
$
19,093

 
$
14,412

 
 
 
 
Depreciation and Amortization
 
 
 
3,531

 
3,683

 
 
 
 
 
 
 
7,033

 
7,315

 
 
 
 
Restructuring Charges
 
 
 

 
735

 
 
 
 
 
 
 

 
1,255

 
 
 
 
 
 
 
 
13,443

 
13,086

 
15.1
 %
 
15.5
 %
 
 
 
26,126

 
22,982

 
15.1
 %
 
13.8
 %
Structural Systems
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income
 
 
 
11,773

 
5,026

 
 
 
 
 
 
 
22,322

 
9,417

 
 
 
 
Depreciation and Amortization
 
 
 
3,400

 
2,618

 
 
 
 
 
 
 
6,400

 
4,934

 
 
 
 
Restructuring Charges
 
 
 

 
3,610

 
 
 
 
 
 
 

 
5,137

 
 
 
 
Inventory Purchase Accounting Adjustments
 
 
 

 
329

 
 
 
 
 
 
 

 
329

 
 
 
 
 
 
 
 
15,173

 
11,583

 
16.6
 %
 
16.5
 %
 
 
 
28,722

 
19,817

 
16.0
 %
 
14.3
 %
Corporate General and Administrative Expenses (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating loss
 
 
 
(8,081
)
 
(8,098
)
 
 
 
 
 
 
 
(14,963
)
 
(12,978
)
 
 
 
 
Depreciation and Amortization
 
 
 
32

 
33

 
 
 
 
 
 
 
326

 
66

 
 
 
 
Stock-Based Compensation Expense
 
 
 
1,807

 
1,025

 
 
 
 
 
 
 
3,271

 
2,115

 
 
 
 
Restructuring Charges
 
 
 

 
1,061

 
 
 
 
 
 
 

 
1,187

 
 
 
 
 
 
 
 
(6,242
)
 
(5,979
)
 
 
 
 
 
 
 
(11,366
)
 
(9,610
)
 
 
 
 
Adjusted EBITDA
 
 
 
$
22,374

 
$
18,690

 
12.4
 %
 
12.1
 %
 
 
 
$
43,482

 
$
33,189

 
12.3
 %
 
10.9
 %
Capital Expenditures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Electronic Systems
 
 
 
$
2,216

 
$
1,478

 
 
 
 
 
 
 
$
3,052

 
$
4,212

 
 
 
 
Structural Systems
 
 
 
3,672

 
1,101

 
 
 
 
 
 
 
7,361

 
2,630

 
 
 
 
Corporate Administration
 
 
 

 
190

 
 
 
 
 
 
 

 
190

 
 
 
 
Total Capital Expenditures
 
 
 
$
5,888

 
$
2,769

 
 
 
 
 
 
 
$
10,413

 
$
7,032

 
 
 
 
(1)
Includes costs not allocated to either the Electronic Systems or Structural Systems operating segments.

7



DUCOMMUN INCORPORATED AND SUBSIDIARIES
GAAP TO NON-GAAP OPERATING INCOME RECONCILIATION
(Unaudited)
(Dollars in thousands)
 
 
 
Three Months Ended
 
Six Months Ended
GAAP To Non-GAAP Operating Income
 
June 29,
2019
 
June 30,
2018
 
%
of Net  Revenues
2019
 
%
of Net  Revenues
2018
 
June 29,
2019
 
June 30,
2018
 
%
of Net  Revenues
2019
 
%
of Net  Revenues
2018
GAAP Operating income
 
$
13,604

 
$
5,596

 
 
 
 
 
$
26,452

 
$
10,851

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Operating income - Electronic Systems
 
$
9,912

 
$
8,668

 
 
 
 
 
$
19,093

 
$
14,412

 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges
 

 
735

 
 
 
 
 

 
1,255

 
 
 
 
Adjusted operating income - Electronic Systems
 
9,912

 
9,403

 
11.1
%
 
11.1
%
 
19,093

 
15,667

 
11.0
%
 
9.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Operating income - Structural Systems
 
11,773

 
5,026

 
 
 
 
 
22,322

 
9,417

 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges
 

 
3,610

 


 
 
 

 
5,137

 
 
 
 
Inventory purchase accounting adjustments
 

 
329

 
 
 
 
 

 
329

 
 
 
 
Adjusted operating income - Structural Systems
 
11,773

 
8,965

 
12.9
%
 
12.7
%
 
22,322

 
14,883

 
12.4
%
 
10.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Operating loss - Corporate
 
(8,081
)
 
(8,098
)
 
 
 
 
 
(14,963
)
 
(12,978
)
 
 
 
 
Adjustment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges
 

 
1,061

 
 
 
 
 

 
1,187

 
 
 
 
Adjusted operating loss - Corporate
 
(8,081
)
 
(7,037
)
 

 

 
(14,963
)
 
(11,791
)
 
 
 
 
Total adjustments
 

 
5,406

 


 


 

 
7,579

 
 
 
 
Adjusted operating income
 
$
13,604

 
$
11,002

 
7.5
%
 
7.1
%
 
$
26,452

 
$
18,430

 
7.5
%
 
6.0
%


8



DUCOMMUN INCORPORATED AND SUBSIDIARIES
GAAP TO NON-GAAP EARNINGS AND EARNINGS PER SHARE RECONCILIATION
(Unaudited)
(Dollars in thousands, except per share amounts)
 
 
 
Three Months Ended
 
Six Months Ended
GAAP To Non-GAAP Earnings
 
June 29,
2019
 
June 30,
2018
 
June 29,
2019
 
June 30,
2018
GAAP Net income
 
$
7,815

 
$
1,591

 
$
15,287

 
$
4,191

Adjustments:
 
 
 
 
 
 
 
 
Restructuring charges (1)
 

 
4,487

 

 
6,291

Inventory purchase accounting adjustments (1)
 

 
273

 

 
273

Total adjustments
 

 
4,760

 

 
6,564

Adjusted net income
 
$
7,815

 
$
6,351

 
$
15,287

 
$
10,755


 
 
Three Months Ended
 
Six Months Ended
GAAP Earnings Per Share To Non-GAAP Earnings Per Share
 
June 29,
2019
 
June 30,
2018
 
June 29,
2019
 
June 30,
2018
GAAP Diluted earnings per share (“EPS”)
 
$
0.66

 
$
0.14

 
$
1.30

 
$
0.36

Adjustments:
 
 
 
 
 
 
 
 
Restructuring charges (1)
 

 
0.39

 

 
0.54

Inventory purchase accounting adjustments (1)
 

 
0.02

 

 
0.02

Total adjustments
 

 
0.41

 

 
0.56

Adjusted diluted EPS
 
$
0.66

 
$
0.55

 
$
1.30

 
$
0.92

 
 
 
 
 
 
 
 
 
Shares used for adjusted diluted EPS
 
11,758

 
11,624

 
11,754

 
11,609

(1)
Includes effective tax rate of 17.0% for 2018 adjustments.

9



DUCOMMUN INCORPORATED AND SUBSIDIARIES
NON-GAAP BACKLOG* BY REPORTING SEGMENT
(Unaudited)
(Dollars in thousands)
 
 
 
(In thousands)
 
 
June 29,
2019
 
December 31,
2018
Consolidated Ducommun
 
 
 
 
Military and space
 
$
365,778

 
$
339,443

Commercial aerospace
 
453,203

 
487,232

Industrial
 
33,722

 
37,774

Total
 
$
852,703

 
$
864,449

Electronic Systems
 
 
 
 
Military and space
 
$
270,439

 
$
241,196

Commercial aerospace
 
66,881

 
48,032

Industrial
 
33,722

 
37,774

Total
 
$
371,042

 
$
327,002

Structural Systems
 
 
 
 
Military and space
 
$
95,339

 
$
98,247

Commercial aerospace
 
386,322

 
439,200

Total
 
$
481,661

 
$
537,447

* 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 June 29, 2019 was $852.7 million compared to $864.4 million as of December 31, 2018. Under ASC 606, the Company defines remaining performance obligations as customer placed purchase orders with firm fixed price and firm delivery dates. The remaining performance obligations disclosed under ASC 606 were $666.5 million.


10