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Ducommun Incorporated Reports Results for the Second Quarter Ended June 30, 2007

LOS ANGELES, California (July 30, 2007) -- Ducommun Incorporated (NYSE: DCO) today reported results for its second quarter ended June 30, 2007.

Sales for the second quarter of 2007 were $91.1 million, compared to $77.5 million for the second quarter of 2006. Net income for the second quarter of 2007 was $4.6 million, or $0.44 per diluted share, compared to net income of $3.2 million, or $0.31 per diluted share, for the same period last year.

Sales for the second quarter of 2007 increased 18% from the same period last year primarily due to a strong increase in commercial sales. The Company’s mix of business in the second quarter of 2007 was approximately 61% military, 37% commercial and 2% space, compared to 67% military, 32% commercial and 1% space in the second quarter of 2006.

Gross profit, as a percentage of sales, increased to 21.7% in the second quarter of 2007 from 19.7% in the second quarter of 2006. Selling, general and administrative (SG&A) expenses, as a percentage of sales, increased to 13.3% in the second quarter of 2007 from 12.4% in the second quarter of 2006. The increase in SG&A expenses, as a percentage of sales, was primarily the result of higher bonus accruals in 2007 and the expenses of the CMP business which was acquired in the third quarter of 2006.

Net income for the second quarter of 2007 increased 44% from the second quarter of 2006 primarily due to the reasons stated above and a lower effective tax rate, partially offset by higher interest expense in the second quarter of 2007. The Company’s effective tax rate for the second quarter of 2007 was 33.7% compared to 36.3% in the second quarter of 2006.

Sales for the first six months of 2007 were $179.2 million, compared to $149.6 million for the first six months of 2006. Net income for the first six months of 2007 was $8.4 million, or $0.80 per diluted share, compared to net income of $5.9 million, or $0.58 per diluted share, for the comparable period last year.

Sales for the first six months of 2007 increased 20% from the same period last year primarily due to a strong increase in commercial sales. The Company’s mix of business in the first six months of 2007 was approximately 61% military, 37% commercial and 2% space, compared to 67% military, 32% commercial and 1% space in the first six months of 2006.

Gross profit, as a percentage of sales, increased to 21.4% in the first six months of 2007 from 19.9% in the first six months of 2006. SG&A expenses, as a percentage of sales, increased to 13.6% in the first six months of 2007 from 12.9% in the first six months of 2006. The increase in SG&A expenses, as a percentage of sales, was primarily the result of higher bonus accruals in 2007 and the expenses of the WiseWave and CMP businesses which were acquired in the second and third quarters of 2006, respectively.

Net income for the first six months of 2007 increased 41% from the first six months of 2006 primarily due to the reasons stated above and a lower effective tax rate, partially offset by higher interest expense in the first six months of 2007. The Company’s effective tax rate for the first six months of 2007 was 33.0% compared to 36.5% in the first six months of 2006.

Joseph C. Berenato, chairman, president and chief executive officer, stated, “We continue to benefit from healthy aerospace markets and the success of our Lean and Six Sigma initiatives. As a result, we are enjoying growth in new business opportunities and a broadening of our customer base. We expect to complement this internal growth with continuing acquisitions which will help us enhance our product offering and increase our design and manufacturing engineering capabilities. We are driving Ducommun forward through our key initiatives of One Company, Operational Excellence and Profitable Growth in order to become a global partner to our key customers. Our recently announced manufacturing facility in Guaymas, Mexico will complement our Thailand facility and is a further indication of our efforts to support our customer base.”

Founded in 1849, Ducommun Incorporated provides engineering and manufacturing services to the aerospace and defense industry.

A teleconference with Joseph C. Berenato, the Company’s chairman, president and chief executive officer, and Gregory A. Hann, the Company’s vice president, chief financial officer and treasurer, will be held today at 7:30 AM PT (10:30 AM ET). To participate in the teleconference, please call 866-202-3048 (international 617-213-8843) approximately ten minutes prior to the conference time stated above. The participant passcode is 68596280. Mr. Berenato and Mr. Hann 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 at Thomson/CCBN. Conference call replay will be available after that time at the same link.

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-17 and 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, availability of raw materials and components from suppliers, and other factors beyond the Company’s control. See the Company’s Form 10-K for the year ended December 31, 2006 and Form 10-Q for the quarter ended June 30, 2007 for a more detailed discussion of these and other risk factors and contingencies.

[Financial Table Follows]

DUCOMMUN INCORPORATED AND SUBSIDIARIES

COMPARATIVE DATA

CONSOLIDATED INCOME STATEMENT

 

 

Three Months Ended

Six Months Ended

 

 

June 30, 2007

July 1, 2006

June 30, 2007

July 1, 2006

 

 

 

 

 

 

 

Net Sales

$  91,104,000

$77,480,000

$  179,156,000

$  149,638,000

 

 

 

 

 

 

 

Operating Costs and Expenses:

 

 

 

 

 

    Cost of Goods Sold

71,310,000

62,255,000

140,885,000

119,896,000

 

    Selling, General &

    Administrative Expenses

12,134,000

9,599,000

24,360,000

19,235,000

 

Total

83,444,000

71,854,000

165,245,000

139,131,000

 

 

 

 

 

 

 

Operating Income

7,660,000

5,626,000

13,911,000

10,507,000

 

Interest Expense

(765,000)

(649,000)

(1,417,000)

(1,164,000)

Income Tax Expense

(2,324,000)

(1,809,000)

(4,123,000)

(3,413,000)

Net Income

$  4,571,000

$  3,168,000

$  8,371,000

$  5,930,000

 

 

 

 

 

 

 

Earnings Per Share:

 

 

 

 

 

    Basic Earnings Per Share

$           0.44

$           0.31

$           0.81

$          0.58

 

    Diluted Earnings Per Share

0.44

0.31

0.80

0.58

 

 

 

 

 

 

 

Weighted Averaged Number of

 

 

 

 

 

Common Shares Outstanding:

 

 

 

 

 

    Basic

10,361,000

10,222,000

10,331,000

10,178,000

 

    Diluted

10,474,000

10,312,000

10,436,000

10,266,000

 









 

 

- more -
DUCOMMUN INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

(Unaudited)

June 30, 2007

 

December 31, 2006

Assets

 

 

Current Assets:

 

 

     Cash and cash equivalents

559

378

     Accounts receivable, less allowance for doubtful accounts

45,504

42,658

     Unbilled receivables

3,883

3,482

     Inventories

74,877

64,587

     Deferred income taxes

6,099

6,116

     Other current assets

    4,889

    5,521

          Total Current Assets

135,811

122,742

Property and Equipment, Net

54,030

52,987

Goodwill, Net

106,632

106,628

Other Assets

  13,431

  14,676

 

$309,904

$297,033

Liabilities and Shareholders’ Equity

 

 

Current Liabilities:

 

 

     Current portion of long-term debt

$1,851

$1,196

     Accounts payable

22,040

32,948

     Accrued liabilities

   32,207

   33,243

          Total Current Liabilities

56,098

67,387

Long-Term Debt, Less Current Portion

39,918

29,240

Deferred Income Taxes

5,477

6,670

Other Long-Term Liabilities

   9,900

   6,711

          Total Liabilities

111,393

110,008

Commitments and Contingencies

 

 

Shareholders’ Equity:

 

 

     Common Stock

104

103

     Additional paid-in-capital

49,107

46,320

     Retained earnings

150,941

142,760

     Accumulated other comprehensive loss

  (1,641)

  (2,158)

          Total Shareholders’ Equity

 198,511

 187,025

 

$309,904

$297,033

 


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