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): May 12, 2015
____________________________
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.) | |
23301 Wilmington Avenue, Carson, California | 90745-6209 | ||
(Address of principal executive offices) | (Zip Code) | ||
Registrant’s telephone number, including area code (310) 513-7200
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)) | |
Item 2.02 | Results of Operations and Financial Condition. |
Ducommun Incorporated issued a press release on May 12, 2015 in the form attached hereto as Exhibit 99.1.
Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits | |
Exhibit No. | Exhibit Title or Description |
99.1 | Ducommun Incorporated press release issued on May 12, 2015. |
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: May 12, 2015 | By: | /s/ James S. Heiser | |
James S. Heiser | |||
Vice President and General Counsel | |||
EXHIBIT 99.1
23301 Wilmington Avenue |  | |
Carson, CA 90745-6209 | ||
310.513.7200 | ||
www.ducommun.com | ||
NEWS RELEASE
FOR IMMEDIATE RELEASE
Ducommun Reports Results for the
First Quarter Ended April 4, 2015
LOS ANGELES, California (May 12, 2015) – Ducommun Incorporated (NYSE:DCO) (“Ducommun” or the “Company”) today reported results for its first quarter ended April 4, 2015.
First Quarter 2015 Recap
• | First quarter revenue was $172.9 million |
• | Net loss was $2.0 million, or $0.18 per share |
• | EBITDA for the quarter was $10.5 million |
• | Made voluntary principal prepayment of $10.0 million on term loan during the quarter |
“We are very disappointed in our 2015 first quarter financial and operational performance and are taking swift action to resolve or mitigate the factors that impeded our execution during the quarter,” said Anthony J. Reardon, chairman and chief executive officer. “The lost revenue from the decline in our military and space business, particularly in our AeroStructures operating segment, caused us to incur higher relative indirect costs at a faster rate than we were able to offset with our cost reduction initiatives. This, coupled with production inefficiencies in certain legacy programs and one-time development costs related to new technology applications, adversely impacted our gross margin. To address these issues, we are working on specific plans to lower operating costs and improve profitability, including additional headcount reductions, where appropriate.
“We continue to see strength in certain of our end-use markets. We are experiencing solid large airframe commercial aerospace demand, up 11% year-over-year. In addition, our industrial sector revenue rose year-over-year, benefiting from ongoing business development efforts. These growth areas -- combined with steps being taken to further streamline our operations -- will lead to improved results for the remainder of 2015. Over the long term, we are committed to diversifying our customer base by investing in new technologies and processes, which will position the Company for stronger performance going forward.”
First Quarter Results
Net revenue for the first quarter of 2015 was $172.9 million compared to $179.8 million for the first quarter of 2014. The net revenue decrease year-over-year primarily reflects 22.4% lower revenue in the Company’s military and space end-use markets partially offset by 19.7% higher revenue in the Company’s commercial aerospace end-use markets and 7.8% higher revenue in the Company’s non-aerospace and defense (“non-A&D”) end-use markets.
The net loss for the first quarter of 2015 was $2.0 million, or $0.18 per share compared to net income of $5.2 million, or $0.46 per diluted share, for the first quarter of 2014. The net loss for the first quarter of 2015 was primarily due to an unfavorable product mix, lower revenues, loss of efficiencies resulting from lower manufacturing volume, higher accrued compensation and benefit costs, and higher professional service fees, partially offset by lower income tax expense and lower interest expense. The current quarter effective income tax benefit rate was 35.0% compared to an income tax rate of 33.0% for the prior year’s quarter.
Operating income for the first quarter of 2015 was $3.6 million, or 2.1% of revenue, compared to $14.8 million, or 8.2% of revenue, in the comparable period last year. The decrease in operating income in the first quarter of 2015 was primarily due to an unfavorable product mix, lower revenues, loss of efficiencies resulting from lower manufacturing volume, higher accrued compensation and benefit costs, and higher professional service fees.
Interest expense decreased to $6.7 million in the first quarter of 2015, compared to $7.1 million in the previous year’s first quarter, primarily due to lower outstanding debt balances as a result of voluntary principal prepayments on the term loan each quarter during 2014 as well as the first quarter of 2015 as the Company continued to de-lever its balance sheet.
EBITDA for the first quarter of 2015 was $10.5 million, or 6.1% of revenue, compared to $22.3 million, or 12.4% of revenue, for the comparable period in 2014.
During the first quarter of 2015, the Company generated $3.5 million of cash from operations compared to cash used in operations of $9.8 million during the first quarter of 2014.
The Company’s firm backlog as of April 4, 2015 was approximately $538 million.
Ducommun AeroStructures (“DAS”)
The Company’s DAS segment reported net revenue for the current first quarter of $72.1 million, compared to $81.7 million for the first quarter of 2014. The lower net revenue was primarily due to a 43.0% decrease in military and space revenue, partially offset by a 10.8% increase in commercial aerospace revenue.
DAS segment operating income for the current first quarter was $2.1 million, or 3.0% of revenue, compared to operating income of $11.1 million, or 13.6% of revenue, for the first quarter of 2014. The lower operating income was primarily due to an unfavorable product mix, lower revenues, and loss of efficiencies resulting from lower manufacturing volume. EBITDA was $4.7 million for the current quarter, or 6.5% of revenue, compared to $13.5 million, or 16.5% of revenue, for the comparable quarter in the prior year.
Ducommun LaBarge Technologies (“DLT”)
The Company’s DLT segment reported net revenue for the current first quarter of $100.9 million, compared to $98.1 million for first quarter 2014. The higher net revenue reflected a 66.9% increase in commercial aerospace electronics revenue and a 7.8% increase in non-A&D revenue, partially offset by a 10.0% decrease in military and space revenue.
DLT’s operating income for the current first quarter was $6.3 million, or 6.2% of revenue, compared to $7.0 million, or 7.2% of revenue, for the first quarter of 2014, primarily due to an unfavorable product mix that was partially offset by higher revenues. EBITDA was $10.6 million for the current quarter, or 10.6% of revenue, compared to $12.1 million, or 12.3% of revenue, in the comparable quarter of the prior year.
Corporate General and Administrative Expenses (“CG&A”)
CG&A expenses for the first quarter of 2015 were $4.8 million, or 2.8% of total Company revenue, an increase from $3.3 million, or 1.8% of total Company revenue in the prior-year period. CG&A expenses increased primarily due to higher accrued compensation and benefit costs and higher professional service fees.
Conference Call
A teleconference hosted by Anthony J. Reardon, the Company’s chairman and chief executive officer, and Joseph P. Bellino, the Company’s vice president, chief financial officer and treasurer, will be held today, May 12, 2015 at 2:00 p.m. PT (5:00 p.m. ET) to review these financial results. To participate in the teleconference, please call 866-700-6293 (international 617-213-8835) approximately ten minutes prior to the conference time. The participant passcode is 98130727. Mr. Reardon and Mr. Bellino will be speaking on behalf of the Company and anticipate the meeting and Q&A period to last approximately 45 minutes.
This call is being webcast by Thomson Reuters 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 888-286-8010, passcode 85960209.
About Ducommun Incorporated
Founded in 1849, Ducommun Incorporated provides engineering and manufacturing services to the aerospace, defense, and other industries through a wide spectrum of electronic and structural applications. The company is an established supplier of critical components and assemblies for commercial aircraft and military and space vehicles as well as for the energy market, medical field, and industrial automation. It operates through two primary business units – Ducommun AeroStructures (“DAS”) and Ducommun LaBarge Technologies (“DLT”). Additional information can be found at www.ducommun.com.
Statements contained in this press release regarding other than recitation of historical facts are forward-looking statements. These statements are identified by words such as “may,” “will,” “ begin,” “ look forward,” “expect,” “believe,” “intend,” “anticipate,” “should,” “potential,” “estimate,” “continue,” “momentum” and other words referring to events to occur in the future. These statements reflect the Company’s current view of future events and are based on its assessment of, and are subject to, a variety of risks and uncertainties beyond its control, including, but not limited to, the state of the world financial, credit, commodities and stock markets, and uncertainties regarding the Company, its businesses and the industries in which it operates, which are described in the Company’s filings with the Securities and Exchange Commission. The Company is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise.
CONTACTS:
Joseph P. Bellino, Vice President, Chief Financial Officer and Treasurer, 310.513.7211 | ||||||
Chris Witty, Investor Relations, 646.438.9385, cwitty@darrowir.com | ||||||
[Financial Tables Follow]
DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
April 4, 2015 | December 31, 2014 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 32,705 | $ | 45,627 | ||||
Accounts receivable, net | 90,912 | 91,060 | ||||||
Inventories | 141,443 | 142,842 | ||||||
Production cost of contracts | 11,115 | 11,727 | ||||||
Deferred income taxes | 13,783 | 13,783 | ||||||
Other current assets | 19,485 | 23,702 | ||||||
Total Current Assets | 309,443 | 328,741 | ||||||
Property and Equipment, Net | 99,998 | 99,068 | ||||||
Goodwill | 157,569 | 157,569 | ||||||
Intangibles, Net | 152,596 | 155,104 | ||||||
Other Assets | 6,321 | 7,117 | ||||||
Total Assets | $ | 725,927 | $ | 747,599 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current Liabilities | ||||||||
Current portion of long-term debt | $ | 27 | $ | 26 | ||||
Accounts payable | 58,577 | 58,979 | ||||||
Accrued liabilities | 41,659 | 52,066 | ||||||
Total Current Liabilities | 100,263 | 111,071 | ||||||
Long-Term Debt, Less Current Portion | 280,019 | 290,026 | ||||||
Deferred Income Taxes | 70,199 | 69,448 | ||||||
Other Long-Term Liabilities | 19,938 | 20,484 | ||||||
Total Liabilities | 470,419 | 491,029 | ||||||
Commitments and Contingencies | ||||||||
Shareholders’ Equity | ||||||||
Common stock | 110 | 110 | ||||||
Additional paid-in capital | 72,992 | 72,206 | ||||||
Retained earnings | 188,932 | 190,905 | ||||||
Accumulated other comprehensive loss | (6,526 | ) | (6,651 | ) | ||||
Total Shareholders’ Equity | 255,508 | 256,570 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 725,927 | $ | 747,599 | ||||
DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended | ||||||||
April 4, 2015 | March 29, 2014 | |||||||
As Restated | ||||||||
Net Revenues | $ | 172,920 | $ | 179,753 | ||||
Cost of Sales | 146,159 | 143,838 | ||||||
Gross Profit | 26,761 | 35,915 | ||||||
Selling, General and Administrative Expenses | 23,134 | 21,087 | ||||||
Operating Income | 3,627 | 14,828 | ||||||
Interest Expense | (6,661 | ) | (7,125 | ) | ||||
(Loss) Income Before Taxes | (3,034 | ) | 7,703 | |||||
Income Tax (Benefit) Expense | (1,061 | ) | 2,544 | |||||
Net (Loss) Income | $ | (1,973 | ) | $ | 5,159 | |||
(Loss) Earnings Per Share | ||||||||
Basic (loss) earnings per share | $ | (0.18 | ) | $ | 0.48 | |||
Diluted (loss) earnings per share | $ | (0.18 | ) | $ | 0.46 | |||
Weighted-Average Number of Common Shares Outstanding | ||||||||
Basic | 10,964 | 10,844 | ||||||
Diluted | 10,964 | 11,107 | ||||||
Gross Profit % | 15.5 | % | 20.0 | % | ||||
SG&A % | 13.4 | % | 11.7 | % | ||||
Operating Income % | 2.1 | % | 8.2 | % | ||||
Net (Loss) Income % | (1.1 | )% | 2.9 | % | ||||
Effective Tax (Benefit) Rate | (35.0 | )% | 33.0 | % | ||||
DUCOMMUN INCORPORATED AND SUBSIDIARIES
BUSINESS SEGMENT PERFORMANCE
(Unaudited)
(In thousands)
Three Months Ended | |||||||||||||||||
% Change | April 4, 2015 | March 29, 2014 | % of Net Revenues 2015 | % of Net Revenues 2014 | |||||||||||||
As Restated | As Restated | ||||||||||||||||
Net Revenues | |||||||||||||||||
DAS | (11.8 | )% | $ | 72,058 | $ | 81,654 | 41.7 | % | 45.4 | % | |||||||
DLT | 2.8 | % | 100,862 | 98,099 | 58.3 | % | 54.6 | % | |||||||||
Total Net Revenues | (3.8 | )% | $ | 172,920 | $ | 179,753 | 100.0 | % | 100.0 | % | |||||||
Segment Operating Income | |||||||||||||||||
DAS | $ | 2,138 | $ | 11,092 | 3.0 | % | 13.6 | % | |||||||||
DLT | 6,285 | 7,044 | 6.2 | % | 7.2 | % | |||||||||||
8,423 | 18,136 | ||||||||||||||||
Corporate General and Administrative Expenses (1) | (4,796 | ) | (3,308 | ) | (2.8 | )% | (1.8 | )% | |||||||||
Total Operating Income | $ | 3,627 | $ | 14,828 | 2.1 | % | 8.2 | % | |||||||||
EBITDA | |||||||||||||||||
DAS | |||||||||||||||||
Operating Income | $ | 2,138 | $ | 11,092 | |||||||||||||
Depreciation and Amortization | 2,513 | 2,416 | |||||||||||||||
4,651 | 13,508 | 6.5 | % | 16.5 | % | ||||||||||||
DLT | |||||||||||||||||
Operating Income | 6,285 | 7,044 | |||||||||||||||
Depreciation and Amortization | 4,359 | 5,008 | |||||||||||||||
10,644 | 12,052 | 10.6 | % | 12.3 | % | ||||||||||||
Corporate General and Administrative Expenses | |||||||||||||||||
Operating loss | (4,796 | ) | (3,308 | ) | |||||||||||||
Depreciation and Amortization | 42 | 2 | |||||||||||||||
(4,754 | ) | (3,306 | ) | ||||||||||||||
EBITDA | $ | 10,541 | $ | 22,254 | 6.1 | % | 12.4 | % | |||||||||
Capital Expenditures | |||||||||||||||||
DAS | $ | 3,334 | $ | 1,285 | |||||||||||||
DLT | 1,490 | 897 | |||||||||||||||
Corporate Administration | 4 | 10 | |||||||||||||||
Total Capital Expenditures | $ | 4,828 | $ | 2,192 | |||||||||||||
(1) | Includes costs not allocated to either the DLT or DAS operating segments. |