First Quarter 2018 Highlights*
- Revenue of
$150.5 million - Net income of
$2.6 million , or$0.22 per diluted share - Adjusted net income of
$2.9 million , or$0.25 per diluted share - Adjusted EBITDA of
$14.5 million - Backlog of
$820 million - Completed the acquisition of
Certified Thermoplastics Co., LLC after quarter end
“I’m pleased to report that we had another good quarter of progress at
“Even while implementing major changes and significant cost-saving initiatives, our high level of dedication, service and teamwork has prevented any major customer or organizational disruptions. In fact, we again hit a record backlog this quarter -- now nearly
*All financial statements in this report (and henceforth) recognize the implementation of the FASB Accounting Standards Codification Topic 606 (“ASC 606”), covering policies on revenue recognition. In some instances herein a reference is made to the prior ASC, Topic 605 (“ASC 605”), for comparative purposes. Please see the non-GAAP measures starting on page 8 herein and the Company’s Annual Report on Form 10-K and Form 10-Q filings with the
First Quarter Results
Net revenue for the first quarter of 2018 was
$14.1 million higher revenue in the Company’s commercial aerospace end-use markets:$5.8 million of the increase was related to the adoption of ASC 606 with the remaining mainly due to increased build rates which favorably impacted the Company’s large aircraft platforms; and$2.9 million higher revenue in the Company’s military and space end-use markets:$6.5 million of the increase was related to the adoption of ASC 606 with the remaining decrease mainly due to shipment timing; partially offset by$2.8 million lower revenue in the Company’s industrial end-use markets:$0.4 million of the decrease was related to the adoption of ASC 606.
Net income for the first quarter of 2018 was
$1.8 million of higher gross profit mainly due to higher revenue;$1.5 million of lower selling, general and administrative expenses; and$0.6 million of lower income tax expense; partially offset by$2.2 million of higher restructuring charges; and$1.2 million of higher interest expense.
Gross profit for the first quarter of 2018 was
Operating income for the first quarter of 2018 was
Interest expense for the first quarter of 2018 was
Adjusted EBITDA for the first quarter of 2018 was
During the first quarter of 2018, the Company generated
The Company’s backlog as of
$5.6 million higher revenue within the Company’s military and space end-use markets:$6.1 million of the increase was related to the adoption of ASC 606 with the remaining decrease mainly due to shipment timing; and$0.9 million higher revenue within the Company’s commercial aerospace end-use markets:$0.8 million of the increase was related to the adoption of ASC 606; partially offset by$2.8 million lower revenue within the Company's Industrial end-use markets:$0.4 million of the decrease was related to the adoption of ASC 606.
Electronic Systems’ segment operating income was
Structural Systems
Structural Systems segment net revenue for the current-year first quarter was
$13.2 million higher revenue within the Company’s commercial aerospace end-use markets:$5.8 million of the increase was related to the adoption of ASC 606 with the remaining mainly due to increased build rates which favorably impacted the Company’s large aircraft platforms; partially offset by$2.7 million lower revenue within the Company’s military and space end-use markets:$0.6 million increase was related to the adoption of ASC 606 with the remaining mainly due to shipment timing.
Structural Systems segment operating income for the current-year first quarter was
Corporate General and Administrative (“CG&A”) Expenses
CG&A expenses for the first quarter of 2018 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 [benefit] expense, 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 firm 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 backlog amount 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 31, 2018 |
December 31, 2017 |
|||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 1,797 | $ | 2,150 | ||||
Accounts receivable, net | 64,915 | 74,064 | ||||||
Contract assets | 78,163 | — | ||||||
Inventories | 85,932 | 122,161 | ||||||
Production cost of contracts | 11,181 | 11,204 | ||||||
Other current assets | 12,503 | 11,435 | ||||||
Total Current Assets | 254,491 | 221,014 | ||||||
Property and equipment, Net | 110,031 | 110,252 | ||||||
Goodwill | 117,435 | 117,435 | ||||||
Intangibles, net | 112,154 | 114,693 | ||||||
Non-current deferred income taxes | 147 | 261 | ||||||
Other assets | 3,311 | 3,098 | ||||||
Total Assets | $ | 597,569 | $ | 566,753 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 65,042 | $ | 51,907 | ||||
Contract liabilities | 15,723 | — | ||||||
Accrued liabilities | 22,469 | 28,329 | ||||||
Total Current Liabilities | 103,234 | 80,236 | ||||||
Long-term debt, less current portion | 209,710 | 216,055 | ||||||
Non-current deferred income taxes | 15,775 | 15,981 | ||||||
Other long-term liabilities | 21,543 | 18,898 | ||||||
Total Liabilities | 350,262 | 331,170 | ||||||
Commitments and contingencies | ||||||||
Shareholders’ Equity | ||||||||
Common stock | 114 | 113 | ||||||
Additional paid-in capital | 80,523 | 80,223 | ||||||
Retained earnings | 173,652 | 161,364 | ||||||
Accumulated other comprehensive loss | (6,982 | ) | (6,117 | ) | ||||
Total Shareholders’ Equity | 247,307 | 235,583 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 597,569 | $ | 566,753 | ||||
DUCOMMUN INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts) |
||||||||
Three Months Ended | ||||||||
March 31, 2018 |
April 1, 2017 |
|||||||
Net Revenues | $ | 150,455 | $ | 136,297 | ||||
Cost of Sales | 123,700 | 111,292 | ||||||
Gross Profit | 26,755 | 25,005 | ||||||
Selling, General and Administrative Expenses | 19,326 | 20,753 | ||||||
Restructuring Charges | 2,173 | — | ||||||
Operating Income | 5,256 | 4,252 | ||||||
Interest Expense | (2,899 | ) | (1,745 | ) | ||||
Income Before Taxes | 2,357 | 2,507 | ||||||
Income Tax (Benefit) Expense | (243 | ) | 392 | |||||
Net Income | $ | 2,600 | $ | 2,115 | ||||
Earnings Per Share | ||||||||
Basic earnings per share | $ | 0.23 | $ | 0.19 | ||||
Diluted earnings per share | $ | 0.22 | $ | 0.18 | ||||
Weighted-Average Number of Common Shares Outstanding | ||||||||
Basic | 11,346 | 11,208 | ||||||
Diluted | 11,613 | 11,495 | ||||||
Gross Profit % | 17.8 | % | 18.3 | % | ||||
SG&A % | 12.8 | % | 15.2 | % | ||||
Operating Income % | 3.5 | % | 3.1 | % | ||||
Net Income % | 1.7 | % | 1.6 | % | ||||
Effective Tax (Benefit) Rate | (10.3 | )% | 15.6 | % | ||||
DUCOMMUN INCORPORATED AND SUBSIDIARIES BUSINESS SEGMENT PERFORMANCE (Unaudited) (In thousands) |
|||||||||||||||||
Three Months Ended | |||||||||||||||||
% Change |
March 31, 2018 |
April 1, 2017 |
% of Net Revenues 2018 |
% of Net Revenues 2017 |
|||||||||||||
Net Revenues | |||||||||||||||||
Structural Systems | 18.2 | % | $ | 68,046 | $ | 57,575 | 45.2 | % | 42.2 | % | |||||||
Electronic Systems | 4.7 | % | 82,409 | 78,722 | 54.8 | % | 57.8 | % | |||||||||
Total Net Revenues | 10.4 | % | $ | 150,455 | $ | 136,297 | 100.0 | % | 100.0 | % | |||||||
Segment Operating Income | |||||||||||||||||
Structural Systems | $ | 4,391 | $ | 2,784 | 6.5 | % | 4.8 | % | |||||||||
Electronic Systems | 5,744 | 7,104 | 7.0 | % | 9.0 | % | |||||||||||
10,135 | 9,888 | ||||||||||||||||
Corporate General and Administrative Expenses (1) | (4,879 | ) | (5,636 | ) | (3.2 | )% | (4.1 | )% | |||||||||
Total Operating Income | $ | 5,256 | $ | 4,252 | 3.5 | % | 3.1 | % | |||||||||
Adjusted EBITDA | |||||||||||||||||
Structural Systems | |||||||||||||||||
Operating Income | $ | 4,391 | $ | 2,784 | |||||||||||||
Depreciation and Amortization | 2,316 | 2,352 | |||||||||||||||
Restructuring Charges | 1,526 | — | |||||||||||||||
8,233 | 5,136 | 12.1 | % | 8.9 | % | ||||||||||||
Electronic Systems | |||||||||||||||||
Operating Income | 5,744 | 7,104 | |||||||||||||||
Depreciation and Amortization | 3,632 | 3,423 | |||||||||||||||
Restructuring Charges | 520 | — | |||||||||||||||
9,896 | 10,527 | 12.0 | % | 13.4 | % | ||||||||||||
Corporate General and Administrative Expenses (1) | |||||||||||||||||
Operating loss | (4,879 | ) | (5,636 | ) | |||||||||||||
Depreciation and Amortization | 33 | 7 | |||||||||||||||
Stock-Based Compensation Expense | 1,090 | 1,822 | |||||||||||||||
Restructuring Charges | 127 | — | |||||||||||||||
(3,629 | ) | (3,807 | ) | ||||||||||||||
Adjusted EBITDA | $ | 14,500 | $ | 11,856 | 9.6 | % | 8.7 | % | |||||||||
Capital Expenditures | |||||||||||||||||
Structural Systems | $ | 1,529 | $ | 5,188 | |||||||||||||
Electronic Systems | 2,734 | 1,433 | |||||||||||||||
Corporate Administration | — | — | |||||||||||||||
Total Capital Expenditures | $ | 4,263 | $ | 6,621 |
(1) Includes costs not allocated to either the Structural Systems or
DUCOMMUN INCORPORATED AND SUBSIDIARIES GAAP TO NON-GAAP REVENUE AND OPERATING INCOME RECONCILIATION (Unaudited) (In thousands) |
||||||||
Three Months Ended | ||||||||
GAAP To Non-GAAP Net Revenues | March 31, 2018 |
April 1, 2017 |
||||||
Total Ducommun Net Revenues | $ | 150,455 | $ | 136,297 | ||||
Effect of Adoption of ASC 606 | (11,997 | ) | — | |||||
Adjusted Total Ducommun Net Revenues | $ | 138,458 | $ | 136,297 | ||||
Structural Systems Net Revenues | $ | 68,046 | $ | 57,575 | ||||
Effect of Adoption of ASC 606 | (5,560 | ) | — | |||||
Adjusted Structural Systems Net Revenues | $ | 62,486 | $ | 57,575 | ||||
Electronic Systems Net Revenues | $ | 82,409 | $ | 78,722 | ||||
Effect of Adoption of ASC 606 | (6,437 | ) | — | |||||
Adjusted Electronic Systems Net Revenues | $ | 75,972 | $ | 78,722 | ||||
Three Months Ended | ||||||||||||||
GAAP To Non-GAAP Operating Income | March 31, 2018 |
April 1, 2017 |
% of Net Revenues 2018 |
% of Net Revenues 2017 |
||||||||||
GAAP Operating income | $ | 5,256 | $ | 4,252 | ||||||||||
GAAP Operating income - Structural Systems | $ | 4,391 | $ | 2,784 | ||||||||||
Adjustments: | ||||||||||||||
Effect of Adoption of ASC 606 | (2,298 | ) | — | |||||||||||
Restructuring charges | 1,526 | — | ||||||||||||
Adjusted operating income - Structural Systems | 3,619 | 2,784 | 5.8% | 4.8% | ||||||||||
GAAP Operating income - Electronic Systems | 5,744 | 7,104 | ||||||||||||
Adjustments: | ||||||||||||||
Effect of Adoption of ASC 606 | 504 | — | ||||||||||||
Restructuring charges | 520 | — | ||||||||||||
Adjusted operating income - Electronic Systems | 6,768 | 7,104 | 8.9% | 9.0% | ||||||||||
GAAP Operating loss - Corporate | (4,879 | ) | (5,636 | ) | ||||||||||
Adjustment: | ||||||||||||||
Restructuring charges | 127 | — | ||||||||||||
Adjusted operating loss - Corporate | (4,752 | ) | (5,636 | ) | ||||||||||
Total adjustments | $ | 379 | $ | — | ||||||||||
Adjusted operating income | $ | 5,635 | $ | 4,252 | 4.1% | 3.1% | ||||||||
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 31, 2018 |
April 1, 2017 |
||||||
GAAP Net income | $ | 2,600 | $ | 2,115 | ||||
Adjustments: | ||||||||
Effect of Adoption of ASC 606 (1)(2) | (1,489 | ) | — | |||||
Restructuring charges (2) | 1,804 | — | ||||||
Total adjustments | 315 | — | ||||||
Adjusted net income | $ | 2,915 | $ | 2,115 | ||||
Three Months Ended | ||||||||
GAAP Earnings Per Share To Non-GAAP Earnings Per Share | March 31, 2018 |
April 1, 2017 |
||||||
GAAP Diluted Earnings Per Share (“EPS”) | $ | 0.22 | $ | 0.18 | ||||
Adjustments: | ||||||||
Effect of Adoption of ASC 606 (1)(2) | (0.13 | ) | — | |||||
Restructuring charges (2) | 0.16 | — | ||||||
Total adjustments | 0.03 | — | ||||||
Adjusted Diluted EPS | $ | 0.25 | $ | 0.18 | ||||
Shares used for adjusted diluted EPS | 11,613 | 11,495 |
(1) Net impact of Adoption of ASC 606.
(2) 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 31, 2018 |
December 31, 2017 |
|||||||
Consolidated Ducommun | ||||||||
Military and space | ||||||||
Defense electronics | $ | 245,773 | $ | 216,508 | ||||
Defense structures | 73,183 | 60,921 | ||||||
Commercial aerospace | 469,630 | 417,981 | ||||||
Industrial | 31,177 | 31,068 | ||||||
Total | $ | 819,763 | $ | 726,478 | ||||
Structural Systems | ||||||||
Military and space (defense structures) | $ | 73,183 | $ | 60,921 | ||||
Commercial aerospace | 408,526 | 361,586 | ||||||
Total | $ | 481,709 | $ | 422,507 | ||||
Electronic Systems | ||||||||
Military and space (defense electronics) | $ | 245,773 | $ | 216,508 | ||||
Commercial aerospace | 61,104 | 56,395 | ||||||
Industrial | 31,177 | 31,068 | ||||||
Total | $ | 338,054 | $ | 303,971 |
Source: Ducommun Incorporated