View printer-friendly versionJuly 3, 2010
LOS ANGELES, Aug 02, 2010 (BUSINESS WIRE) --
Ducommun Incorporated (NYSE:DCO) today reported results for its second quarter and six months ended July 3, 2010.
Sales for the second quarter of 2010 decreased 1% to $102.9 million, as compared to sales of $103.8 million for the second quarter of 2009. Net income for the second quarter of 2010 increased 23% to $5.7 million, or $0.53 per diluted share, compared to net income of $4.6 million, or $0.44 per diluted share, for the comparable period last year.
"As expected, this quarter saw general stability in our military markets and slow, steady improvement in the outlook for our commercial platforms," said Anthony J. Reardon, president and chief executive officer. "We continued to invest in new business development initiatives and were very pleased by the number of recent program announcements with leading OEMs including Boeing, Embraer, and Airbus further strengthening our position for the quarters to come. Our operating margins increased, even with slightly lower revenue, as we took additional measures to drive operating efficiencies."
The slight decrease in sales for the second quarter of 2010 was due to lower year-over-year revenues of engineering services. Product sales in the second quarter of 2010 increased due to growth in sales for large fixed wing commercial and military aircraft programs, partially offset by lower sales for helicopter programs. The Company's mix of business in the second quarter of 2010 was approximately 58% military, 40% commercial and 2% space, compared to 58% military, 39% commercial and 3% space in the second quarter of 2009.
Gross profit, as a percent of sales, increased to 21.7% in the second quarter of 2010, compared to 19.0% in the second quarter of 2009. Gross profit margins for the second quarter of 2010 were favorably impacted by a richer revenue mix and improved operating efficiencies.
Gross profit was negatively impacted in the second quarter of 2010 by $1.1 million, or 1.7 percentage points, due to the continuation of 2010 start-up and development costs for several new programs which generated approximately $2.8 million in sales. In addition, gross profit for the second quarter of 2010 was favorably impacted by an adjustment to operating expenses, also of approximately $1.1 million, or 1.1 percentage points, relating to the reversal of certain accounts payable accruals recorded in prior periods. Gross profit for the second quarter of 2009 was adversely impacted by an inventory valuation adjustment of $0.8 million, or 0.8 percentage points.
Selling, general and administrative ("SG&A") expenses increased to $13.3 million, or 12.9% of sales, in the second quarter of 2010, compared to $12.1 million, or 11.7% of sales, in the second quarter of 2009. The increase in SG&A expenses was primarily due to higher expenses from the amortization of intangible assets and higher stock-based compensation expenses.
Net income for the second quarter of 2010 increased 23% from the second quarter of 2009 primarily due to higher operating income and slightly lower interest expense. The Company's effective tax rate was 32.9% and 33.0% in the second quarters of 2010 and 2009, respectively.
Sales for the first six months of 2010 decreased 4% to $207.2 million from $215.2 million for the comparable period in 2009. Net income for the first six months of 2010 increased 37% to $9.9 million, or $0.94 per diluted share, compared to net income of $7.2 million, or $0.69 per diluted share, for the comparable period last year.
The decrease in sales for the first six months of 2010 from the same period last year was due to lower sales of engineering services, partially offset by growth in product sales of commercial and military aircraft programs. The Company's mix of business in the first six months of 2010 was approximately 58% military, 40% commercial and 2% space, compared to 60% military, 38% commercial and 2% space in the first six months of 2009.
Gross profit, as a percent of sales, increased to 20.1% in the six months of 2010, compared to 17.2% in the six months of 2009.
Gross profit margins were negatively impacted in the six months of 2010 by $2.9 million, or 2.0 percentage points, due to start-up and development costs on several new programs which generated approximately $5.9 million in sales. Gross profit in the six months of 2010 was favorably impacted by an adjustment to operating expenses of approximately $1.1 million, or 0.5 percentage points, relating to the reversal of certain accounts payable accruals recorded in prior periods. Gross profit for the six months of 2009 was negatively impacted by $5.1 million, or 2.4 percentage points, due to an inventory reserve of $4.3 million related to the Eclipse Aviation Corporation bankruptcy filing in March 2009 and an inventory valuation adjustment of $0.8 million.
SG&A expenses increased to $25.8 million, or 12.4% of sales, in the six months of 2010, compared to $24.9 million, or 11.6% of sales, in the six months of 2009. The increase in SG&A expenses was primarily due to higher expenses from the amortization of intangible assets of approximately $1.2 million.
Net income for the first six months of 2010 increased 37% from the first six months of 2009 primarily due to the reasons stated above along with slightly lower interest expense on reduced debt levels. The Company's effective tax rate for the first six months of both 2010 and 2009 was 33.0%.
Mr. Reardon concluded, "As we continue to look towards the future for Ducommun, 2010 is a year in which we are laying the groundwork for long term financial and operational improvement. With the overall aerospace market recovery becoming more apparent, we are optimistic that we will benefit from new program wins and expect our backlog to climb going forward. In addition, we will continue to focus on operating efficiencies and effective working capital management to improve Ducommun's financial results."
Conference Call
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, August 3, 2010 at 8:00 AM PT (11:00 AM ET). To participate in the teleconference, please call 866-825-1709 (International 617-213-8060) approximately ten minutes prior to the conference time stated above. The participant passcode is 66949316. 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 Ducommun Incorporated website at www.ducommun.com. Conference call replay will be available after that time at the same link. The webcast is also being distributed over Thomson/CCBN's Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through Thomson/CCBN's individual investor center at www.earnings.com or by visiting any of the investor sites in Thomson/CCBN's Individual Investor Network. Institutional investors can access the call via Thomson/CCBN's password-protected event management site, StreetEvents (www.streetevents.com).
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.
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.
| DUCOMMUN INCORPORATED AND SUBSIDIARIES | |||||||||||||||||||
| COMPARATIVE DATA | |||||||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| Three Months Ended | Year-To-Date | ||||||||||||||||||
| Jul. 3, | Jul. 4, | Jul. 3, | Jul. 4, | ||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||||||||
| Sales and Service Revenues | |||||||||||||||||||
| Product sales | $ | 92,294 | $ | 88,789 | $ | 184,682 | $ | 182,766 | |||||||||||
| Service revenues | 10,643 | 15,036 | 22,511 | 32,414 | |||||||||||||||
| Total | 102,937 | 103,825 | 207,193 | 215,180 | |||||||||||||||
| Operating Costs and Expenses: | |||||||||||||||||||
| Cost of product sales | 72,066 | 72,230 | 147,667 | 152,202 | |||||||||||||||
| Cost of service revenues | 8,528 | 11,867 | 17,865 | 25,944 | |||||||||||||||
| Selling, general & administrative expenses | 13,316 | 12,135 | 25,779 | 24,944 | |||||||||||||||
| Total | 93,910 | 96,232 | 191,311 | 203,090 | |||||||||||||||
| Operating Income | 9,027 | 7,593 | 15,882 | 12,090 | |||||||||||||||
| Interest Expense | (596 | ) | (714 | ) | (1,148 | ) | (1,353 | ) | |||||||||||
| Income Tax Expense | (2,778 | ) | (2,270 | ) | (4,858 | ) | (3,543 | ) | |||||||||||
| Net Income | $ | 5,653 | $ | 4,609 | $ | 9,876 | $ | 7,194 | |||||||||||
| Earnings Per Share | |||||||||||||||||||
| Basic earnings per share | $ | 0.54 | $ | 0.44 | $ | 0.94 | $ | 0.69 | |||||||||||
| Diluted earnings per share | $ | 0.53 | $ | 0.44 | $ | 0.94 | $ | 0.69 | |||||||||||
| Weighted Averaged Number of | |||||||||||||||||||
| Common Shares Outstanding: | |||||||||||||||||||
| Basic | 10,485 | 10,449 | 10,475 | 10,472 | |||||||||||||||
| Diluted | 10,576 | 10,481 | 10,546 | 10,500 | |||||||||||||||
| DUCOMMUN INCORPORATED AND SUBSIDIARIES | |||||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||||
| (In thousands, except share data) | |||||||||||||
| (Unaudited) | |||||||||||||
| Jul. 3, | Dec. 31, | ||||||||||||
| 2010 | 2009 | ||||||||||||
| Assets | |||||||||||||
| Current Assets: | |||||||||||||
| Cash and cash equivalents | $ | 1,099 | $ | 18,629 | |||||||||
| Accounts receivable, less allowance for doubtful accounts | 53,869 | 48,378 | |||||||||||
| Unbilled receivables | 4,550 | 4,207 | |||||||||||
| Inventories | 74,077 | 67,749 | |||||||||||
| Production cost of contracts | 14,572 | 12,882 | |||||||||||
| Deferred income taxes | 4,813 | 4,794 | |||||||||||
| Other current assets | 6,610 | 7,452 | |||||||||||
| Total Current Assets | 159,590 | 164,091 | |||||||||||
| Property and Equipment, Net | 60,464 | 60,923 | |||||||||||
| Goodwill, Net | 100,442 | 100,442 | |||||||||||
| Other Assets | 26,281 | 28,453 | |||||||||||
| $ | 346,777 | $ | 353,909 | ||||||||||
| Liabilities and Shareholders' Equity | |||||||||||||
| Current Liabilities: | |||||||||||||
| Current portion of long-term debt | $ | 939 | $ | 4,963 | |||||||||
| Accounts payable | 33,893 | 39,434 | |||||||||||
| Accrued liabilities | 25,271 | 33,869 | |||||||||||
| Total Current Liabilities | 60,103 | 78,266 | |||||||||||
| Long-Term Debt, Less Current Portion | 24,222 | 23,289 | |||||||||||
| Deferred Income Taxes | 8,480 | 7,732 | |||||||||||
| Other Long-Term Liabilities | 10,032 | 10,736 | |||||||||||
| Total Liabilities | 102,837 | 120,023 | |||||||||||
| Commitments and Contingencies | |||||||||||||
| Shareholders' Equity: | |||||||||||||
| Common Stock | 106 | 106 | |||||||||||
| Treasury Stock | (1,924 | ) | (1,924 | ) | |||||||||
| Additional paid-in-capital | 59,977 | 58,498 | |||||||||||
| Retained earnings | 189,064 | 180,760 | |||||||||||
| Accumulated other comprehensive loss | (3,283 | ) | (3,554 | ) | |||||||||
| Total Shareholders' Equity | 243,940 | 233,886 | |||||||||||
| $ | 346,777 | $ | 353,909 | ||||||||||
SOURCE: Ducommun Incorporated
Ducommun Incorporated
Joseph P. Bellino
Vice President and Chief Financial Officer
310-513-7211
or
Chris Witty
Investor Relations
646-438-9385
cwitty@darrowir.com