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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _________________________________________________________
FORM 10-Q
 _________________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 001-08174
 _________________________________________________________
DUCOMMUN INCORPORATED
(Exact name of registrant as specified in its charter)
 _________________________________________________________
Delaware 95-0693330
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. 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: (657335-3665
N/A
(Former name, former address and former fiscal year, if changed since last report)
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 DCONew York Stock Exchange
 _________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x  No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer ¨Accelerated filer x
Non-accelerated filer ¨Smaller reporting company 
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.    ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x
As of October 26, 2021, the registrant had 11,923,189 shares of common stock outstanding.


Table of Contents
DUCOMMUN INCORPORATED AND SUBSIDIARIES
  Page
PART I. FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 4.
Item 6.

2

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Ducommun Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands, except share and per share data)
 October 2,
2021
December 31,
2020
Assets
Current Assets
Cash and cash equivalents$8,973 $56,466 
Accounts receivable, net (allowance for credit losses of $1,487 and $1,552 at October 2, 2021 and December 31, 2020, respectively
69,805 58,025 
Contract assets182,759 154,028 
Inventories144,179 129,223 
Production cost of contracts7,630 6,971 
Other current assets7,595 5,571 
Total Current Assets420,941 410,284 
Property and equipment, net of accumulated depreciation of $177,426 and $169,742 at October 2, 2021 and December 31, 2020, respectively
108,973 109,990 
Operating Lease Right-of-Use Assets17,052 16,348 
Goodwill170,830 170,830 
Intangibles, Net114,984 124,744 
Deferred Income Taxes33 33 
Other Assets4,970 5,118 
Total Assets$837,783 $837,347 
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable$65,275 $63,980 
Contract liabilities23,274 28,264 
Accrued and other liabilities35,294 40,526 
Operating lease liabilities3,365 3,132 
Current portion of long-term debt7,000 7,000 
Total Current Liabilities134,208 142,902 
Long-Term Debt, Less Current Portion291,038 311,922 
Non-Current Operating Lease Liabilities14,801 14,555 
Deferred Income Taxes18,395 16,992 
Other Long-Term Liabilities20,393 21,642 
Total Liabilities478,835 508,013 
Commitments and Contingencies (Notes 6, 8)
Shareholders’ Equity
Common stock - $0.01 par value; 35,000,000 shares authorized; 11,922,399 and 11,728,212 shares issued and outstanding at October 2, 2021 and December 31, 2020, respectively
119 117 
Additional paid-in capital101,265 97,090 
Retained earnings266,429 241,727 
Accumulated other comprehensive loss(8,865)(9,600)
Total Shareholders’ Equity358,948 329,334 
Total Liabilities and Shareholders’ Equity$837,783 $837,347 
See accompanying notes to Condensed Consolidated Financial Statements.
3

Table of Contents
Ducommun Incorporated and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except per share amounts)
 Three Months EndedNine Months Ended
 October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
Net Revenues$163,227 $150,371 $480,570 $471,155 
Cost of Sales
127,912 116,906 375,373 368,218 
Gross Profit
35,315 33,465 105,197 102,937 
Selling, General and Administrative Expenses
21,952 22,093 68,132 67,253 
Restructuring Charges
 1,107  1,768 
Operating Income13,363 10,265 37,065 33,916 
Interest Expense(2,770)(3,101)(8,433)(11,068)
Other Income196 99 196 99 
Income Before Taxes10,789 7,263 28,828 22,947 
Income Tax Expense1,205 762 4,126 3,426 
Net Income$9,584 $6,501 $24,702 $19,521 
Earnings Per Share
Basic earnings per share$0.80 $0.56 $2.08 $1.67 
Diluted earnings per share$0.78 $0.54 $2.02 $1.64 
Weighted-Average Number of Common Shares Outstanding
Basic11,920 11,703 11,862 11,660 
Diluted12,242 11,959 12,248 11,886 
See accompanying notes to Condensed Consolidated Financial Statements.
4

Table of Contents
Ducommun Incorporated and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(Dollars in thousands)
 
Three Months EndedNine Months Ended
October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
Net Income$9,584 $6,501 $24,702 $19,521 
Other Comprehensive Income, Net of Tax:
Amortization of actuarial loss and prior service costs, net of tax of $76 and $59 for the three months ended October 2, 2021 and September 26, 2020, respectively, and $229 and $177 for the nine months ended October 2, 2021 and September 26, 2020, respectively
245 189 735 567 
Change in unrealized gains and losses on cash flow hedges, net of tax of zero for both the three months ended October 2, 2021 and September 26, 2020, and zero and $57 for the nine months ended October 2, 2021 and September 26, 2020, respectively
   162 
Other Comprehensive Income, Net of Tax245 189 735 729 
Comprehensive Income$9,829 $6,690 $25,437 $20,250 
See accompanying notes to Condensed Consolidated Financial Statements.
5

Table of Contents
Ducommun Incorporated and Subsidiaries
Condensed Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)
(Dollars in thousands)
 Shares
Outstanding
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
Balance at December 31, 201911,572,668 $116 $88,399 $212,553 $(8,268)$292,800 
Net income— — — 13,020 — 13,020 
Other comprehensive income, net of tax— — — — 540 540 
Employee stock purchase plan27,104 — 1,112 — — 1,112 
Stock options exercised10,770 — 270 — — 270 
Stock awards vested131,886 2 (2)— —  
Stock repurchased related to the exercise of stock options and stock awards vested(59,297)(1)(2,663)— — (2,664)
Stock-based compensation— — 4,529 — — 4,529 
Balance at June 27, 202011,683,131 117 91,645 225,573 (7,728)309,607 
Net income— — — 6,501 — 6,501 
Other comprehensive income, net of tax— — — — 189 189 
Employee stock purchase plan30,181 — 1,085 — — 1,085 
Stock options exercised2,557 — 79 — — 79 
Stock awards vested1,205 — — — —  
Stock repurchased related to the exercise of stock options and stock awards vested(2,484)— (102)— — (102)
Stock-based compensation— — 2,076 — — 2,076 
Balance at September 26, 202011,714,590 $117 $94,783 $232,074 $(7,539)$319,435 
Balance at December 31, 202011,728,212 $117 $97,090 $241,727 $(9,600)$329,334 
Net income— — — 15,118 — 15,118 
Other comprehensive income, net of tax— — — — 490 490 
Employee stock purchase plan31,580 — 1,558 — — 1,558 
Stock options exercised31,527 — 1,120 — — 1,120 
Stock awards vested244,008 3 (3)— —  
Stock repurchased related to the exercise of stock options and stock awards vested(140,520)(1)(7,891)— — (7,892)
Stock-based compensation— — 5,742 — — 5,742 
Balance at July 3, 202111,894,807 119 97,616 256,845 (9,110)345,470 
Net income— — — 9,584 — 9,584 
Other comprehensive income, net of tax— — — — 245 245 
Employee stock purchase plan24,944 — 1,345 — — 1,345 
Stock options exercised8,557 — 280 — — 280 
Stock awards vested1,365 — — — —  
Stock repurchased related to the exercise of stock options and stock awards vested(7,274)— (383)— — (383)
Stock-based compensation— — 2,407 — — 2,407 
Balance at October 2, 202111,922,399 $119 $101,265 $266,429 $(8,865)$358,948 
See accompanying notes to Condensed Consolidated Financial Statements.

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Ducommun Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
 
Nine Months Ended
October 2,
2021
September 26,
2020
Cash Flows from Operating Activities
Net Income$24,702 $19,521 
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and amortization21,112 21,741 
Non-cash operating lease cost2,586 2,325 
Stock-based compensation expense8,149 6,605 
Deferred income taxes1,403 1,715 
(Recovery of) provision for credit losses(65)102 
Insurance recoveries related to loss on operating assets 2,220 
Other531 579 
Changes in Assets and Liabilities:
Accounts receivable(11,715)4,226 
Contract assets(28,731)(34,047)
Inventories(14,956)(17,991)
Production cost of contracts(1,481)(658)
Other assets(2,678)133 
Accounts payable2,074 (16,584)
Contract liabilities(4,990)12,316 
Operating lease liabilities(2,545)(2,188)
Accrued and other liabilities(5,667)1,506 
Net Cash (Used in) Provided by Operating Activities(12,271)1,521 
Cash Flows from Investing Activities
Purchases of property and equipment(10,798)(8,239)
Proceeds from sale of assets551 4 
Insurance recoveries related to property and equipment 2,780 
Proceeds from life insurance439  
Post closing cash received from the acquisition of Nobles Worldwide, Inc., net 190 
Net Cash Used in Investing Activities(9,808)(5,265)
Cash Flows from Financing Activities
Borrowings from senior secured revolving credit facility21,000 65,900 
Repayments of senior secured revolving credit facility(36,000)(15,900)
Repayments of term loans(6,176)(10,862)
Repayments of other debt(266)(203)
Net cash paid upon issuance of common stock under stock plans(3,972)(220)
Net Cash (Used in) Provided by Financing Activities(25,414)38,715 
Net (Decrease) Increase in Cash and Cash Equivalents(47,493)34,971 
Cash and Cash Equivalents at Beginning of Period56,466 39,584 
Cash and Cash Equivalents at End of Period$8,973 $74,555 
See accompanying notes to Condensed Consolidated Financial Statements.
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Ducommun Incorporated and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1. Summary of Significant Accounting Policies
Description of Business
We are a leading global provider of engineering and manufacturing services for high-performance products and high-cost-of failure applications used primarily in the aerospace and defense (“A&D”), industrial, medical and other industries (collectively, “Industrial”). Our operations are organized into two primary businesses: the Electronic Systems segment (“Electronic Systems”) and the Structural Systems segment (“Structural Systems”), each of which is a reportable operating segment. Electronic Systems designs, engineers and manufactures high-reliability electronic and electromechanical products used in worldwide technology-driven markets including A&D and Industrial end-use markets. Electronic Systems’ product offerings primarily range from prototype development to complex assemblies. Structural Systems designs, engineers and manufactures large, complex contoured aerostructure components and assemblies and supplies composite and metal bonded structures and assemblies. Structural Systems’ products are primarily used on commercial aircraft, military fixed-wing aircraft, and military and commercial rotary-wing aircraft. Both reportable operating segments follow the same accounting principles.
Basis of Presentation
The unaudited condensed consolidated financial statements include the accounts of Ducommun Incorporated and its subsidiaries (“Ducommun,” the “Company,” “we,” “us” or “our”), after eliminating intercompany balances and transactions. The December 31, 2020 condensed consolidated balance sheet data was derived from audited financial statements, but does not contain all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”).
Our significant accounting policies were described in Part IV, Item 15(a)(1), “Note 1. Summary of Significant Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2020. The financial information included in this Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020.
In the opinion of management, all adjustments, consisting of recurring accruals, have been made that are necessary to fairly state our condensed consolidated financial position, statements of income, comprehensive income, changes in shareholders’ equity, and cash flows in accordance with GAAP for the periods covered by this Quarterly Report on Form 10-Q. The results of operations for the three and nine months ended October 2, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021.
Our fiscal quarters typically end on the Saturday closest to the end of March, June and September for the first three fiscal quarters of each year, and on December 31 for our fourth fiscal quarter. As a result of using fiscal quarters for the first three quarters combined with leap years, our first and fourth fiscal quarters can range between 12 1/2 weeks to 13 1/2 weeks while the second and third fiscal quarters remain at a constant 13 weeks per fiscal quarter.
Certain reclassifications have been made to prior period amounts to conform to the current year’s presentation.
Use of Estimates
Certain amounts and disclosures included in the unaudited condensed consolidated financial statements require management to make estimates and judgments that affect the amounts of assets, liabilities (including contract liabilities), revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
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Supplemental Cash Flow Information
(Dollars in thousands)
Nine Months Ended
October 2,
2021
September 26,
2020
Interest paid$7,672 $8,825 
Taxes paid, net$3,082 $2,559 
Non-cash activities:
     Purchases of property and equipment not paid$1,698 $1,059 
Earnings Per Share
Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding in each period. Diluted earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding, plus any potentially dilutive shares that could be issued if exercised or converted into common stock in each period.
The net income and weighted-average common shares outstanding used to compute earnings per share were as follows:
(Dollars in thousands,
except per share data)
(Dollars in thousands,
except per share data)
Three Months EndedNine Months Ended
 October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
Net income$9,584 $6,501 $24,702 $19,521 
Weighted-average number of common shares outstanding
Basic weighted-average common shares outstanding11,920 11,703 11,862 11,660 
Dilutive potential common shares322 256 386 226 
Diluted weighted-average common shares outstanding12,242 11,959 12,248 11,886 
Earnings per share
Basic$0.80 $0.56 $2.08 $1.67 
Diluted$0.78 $0.54 $2.02 $1.64 
Potentially dilutive stock awards, as shown below, were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive. However, these awards may be potentially dilutive common shares in the future.
(In thousands)(In thousands)
Three Months EndedNine Months Ended
 October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
Stock options and stock units9 341 6 340 
Fair Value
Assets and liabilities that are measured, recorded or disclosed at fair value on a recurring basis are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine the fair value. Level 1, the highest level, refers to the values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant observable inputs. Level 3, the lowest level, includes fair values estimated using significant unobservable inputs.
We have money market funds and they are included as cash and cash equivalents. We also had interest rate cap hedge agreements for which the fair value of the interest rate cap hedge agreements was determined using pricing models that use observable market inputs as of the balance sheet date, a Level 2 measurement, however, those agreements expired during our second quarter of 2020.
There were no transfers between Level 1, Level 2, or Level 3 financial instruments in the three months ended October 2, 2021.
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Cash and Cash Equivalents
Cash equivalents consist of highly liquid instruments purchased with original maturities of three months or less. These assets are valued at cost, which approximates fair value, which we classify as Level 1. See Fair Value above.
Derivative Instruments
We recognize derivative instruments on our condensed consolidated balance sheets at their fair value. On the date that we enter into a derivative contract, we designate the derivative instrument as a fair value hedge, a cash flow hedge, or a derivative instrument that will not be accounted for using hedge accounting methods. As of October 2, 2021, we had no derivative instruments as our cash flow hedges matured in the second quarter of 2020.
Inventories
Inventories are stated at the lower of cost or net realizable value with cost being determined using a moving average cost basis for raw materials and actual cost for work-in-process and finished goods. The majority of our inventory is charged to cost of sales as raw materials are placed into production. Inventoried costs include raw materials, outside processing, direct labor and allocated overhead, adjusted for any abnormal amounts of idle performance center expense, freight, handling costs, and wasted materials (spoilage) incurred. We assess the inventory carrying value and reduce it, if necessary, to its net realizable value based on customer orders on hand, and internal demand forecasts using management’s best estimates given information currently available. The majority of our revenues are recognized over time, however, for revenue contracts where revenue is recognized using the point in time method, inventory is not reduced until it is shipped or transfer of control to the customer has occurred. Our ending inventory consists of raw materials, work-in-process, and finished goods.
Restructuring Charges
In May 2020, management approved and commenced a restructuring plan in the Structural Systems segment mainly to reduce headcount in response to the impact from the COVID-19 pandemic on commercial aerospace demand outlook. We completed the restructuring plan as of December 31, 2020. We recorded an aggregate total of zero and $1.1 million for severance and benefits costs which were charged to restructuring charges during the three months ended October 2, 2021 and September 26, 2020, respectively. We recorded an aggregate total of zero and $1.8 million for severance and benefits costs which were charged to restructuring charges during the nine months ended October 2, 2021 and September 26, 2020, respectively.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss, as reflected on the condensed consolidated balance sheets under the equity section, was comprised of cumulative pension and retirement liability adjustments, net of tax, and change in net unrealized gains and losses on cash flow hedges, net of tax.
Revenue Recognition
Our customers typically engage us to manufacture products based on designs and specifications provided by the end-use customer. This requires the building of tooling and manufacturing first article inspection products (prototypes) before volume manufacturing. Contracts with our customers generally include a termination for convenience clause.
We have a significant number of contracts that are started and completed within the same year, as well as contracts derived from long-term agreements and programs that can span several years. We recognize revenue under Accounting Standards Codification 606, “Revenue from Contracts with Customers” (“ASC 606”), which utilizes a five-step model.
The definition of a contract for us is typically defined as a customer purchase order as this is when we achieve an enforceable right to payment. The majority of our contracts are firm fixed-price contracts. The deliverables within a customer purchase order are analyzed to determine the number of performance obligations. At times, in order to achieve economies of scale and based on our customer’s forecasted demand, we may build in advance of receiving a purchase order from our customer. When that occurs, we would not recognize revenue until we have received the customer purchase order.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account under ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, control is transferred and the performance obligation is satisfied. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services are highly interrelated or meet the series guidance. For contracts with multiple performance obligations, we allocate the contract transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate the standalone selling price is the expected cost plus a margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or
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service.
We manufacture most products to customer specifications and the product cannot be easily modified to satisfy another customer’s order. As such, these products are deemed to have no alternative use once the manufacturing process begins. In the event the customer invokes a termination for convenience clause, we would be entitled to costs incurred to date plus a reasonable profit. Contract costs typically include labor, materials, overhead, and when applicable, subcontractor costs. For most of our products, we are building assets with no alternative use and have enforceable right to payment, and thus, we recognize revenue using the over time method.
The majority of our performance obligations are satisfied over time as work progresses. Typically, revenue is recognized over time using an input measure (i.e., costs incurred to date relative to total estimated costs at completion, also known as cost-to-cost plus reasonable profit) to determine progress. Our typical revenue contract is a firm fixed price contract, and the cost of raw materials could make up a significant amount of the total costs incurred. As such, we believe using the total costs incurred input method would be the most appropriate method. While the cost of raw materials could make up a significant amount of the total costs incurred, there is a direct relationship between our inputs and the transfer of control of goods or services to the customer.
Contract estimates are based on various assumptions to project the outcome of future events that can span multiple months or years. These assumptions include labor productivity and availability; the complexity of the work to be performed; the cost and availability of materials; and the performance of subcontractors.
As a significant change in one or more of these estimates could affect the progress completed (and related profitability) on our contracts, we review and update our contract-related estimates on a regular basis. We recognize such adjustments under the cumulative catch-up method. Under this method, the impact of the adjustment is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate.
The impact of adjustments in contract estimates on our operating earnings can be reflected in either operating costs and expenses or revenue.
Net cumulative catch up adjustments on gross profit recorded were not material for both the three and nine months ended October 2, 2021 and September 26, 2020.
Payments under long-term contracts may be received before or after revenue is recognized. When revenue is recognized before we bill our customer, a contract asset is created for the work performed but not yet billed. Similarly, when we receive payment before we ship our products to our customer, a contract liability is created for the advance or progress payment.
We record provisions for the total anticipated losses on contracts, considering total estimated costs to complete the contract compared to total anticipated revenues, in the period in which such losses are identified. The provisions for estimated losses on contracts require us to make certain estimates and assumptions, including those with respect to the future revenue under a contract and the future cost to complete the contract. Our estimate of the future cost to complete a contract may include assumptions as to changes in manufacturing efficiency, operating and material costs, and our ability to resolve claims and assertions with our customers. If any of these or other assumptions and estimates do not materialize in the future, we may be required to adjust the provisions for estimated losses on contracts. The provision for estimated losses on contracts is included as part of contract liabilities on the condensed consolidated balance sheets. As of October 2, 2021 and December 31, 2020, provision for estimated losses on contracts were $2.2 million and $2.3 million, respectively.
Production cost of contracts includes non-recurring production costs, such as design and engineering costs, and tooling and other special-purpose machinery necessary to build parts as specified in a contract. Production costs of contracts are recorded to cost of sales using the over time revenue recognition model. We review the value of the production cost of contracts on a quarterly basis to ensure when added to the estimated cost to complete, the value is not greater than the estimated realizable value of the related contracts. As of October 2, 2021 and December 31, 2020, production cost of contracts were $7.6 million and $7.0 million, respectively.
Contract Assets and Contract Liabilities
Contract assets consist of our right to payment for work performed but not yet billed. Contract assets are transferred to accounts receivable when we bill our customers. We bill our customers when we ship the products and meet the shipping terms within the revenue contract. Contract liabilities consist of advance or progress payments received from our customers prior to the time transfer of control occurs plus the estimated losses on contracts.
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Contract assets and contract liabilities from revenue contracts with customers are as follows:
(Dollars in thousands)
October 2,
2021
December 31,
2020
Contract assets$182,759 $154,028 
Contract liabilities$23,274 $28,264 
The increase in our contract assets as of October 2, 2021 compared to December 31, 2020 was primarily due to a net increase of products in work in process in the current period.
The decrease in our contract liabilities as of October 2, 2021 compared to December 31, 2020 was primarily due to a net decrease of advance or progress payments received from our customers in the current period. We recognized $16.5 million of the contract liabilities as of December 31, 2020 as revenues during the nine months ended October 2, 2021.
Performance obligations are defined as customer placed purchase orders (“POs”) with firm fixed price and firm delivery dates. Our remaining performance obligations as of October 2, 2021 totaled $736.0 million. We anticipate recognizing an estimated 70% of our remaining performance obligations as revenue during the next 12 months with the remaining performance obligations being recognized in the remainder of 2022 and beyond.
Revenue by Category
In addition to the revenue categories disclosed above, the following table reflects our revenue disaggregated by major end-use market:
(Dollars in thousands)(Dollars in thousands)
Three Months EndedNine Months Ended
October 2
2021
September 26,
2020
October 2
2021
September 26,
2020
Consolidated Ducommun
Military and space$113,622 $111,058 $340,757 $307,479 
Commercial aerospace
41,150 30,731 114,104 130,948 
Industrial8,455 8,582 25,709 32,728 
Total$163,227 $150,371 $480,570 $471,155 
Electronic Systems
Military and space$81,365 $80,209 $243,853 $223,692 
Commercial aerospace14,901 14,679 37,060 37,120 
Industrial8,455 8,582 25,709 32,728 
Total$104,721 $103,470 $306,622 $293,540 
Structural Systems
Military and space$32,257 $30,849 $96,904 $83,787 
Commercial aerospace26,249 16,052 77,044 93,828 
Total$58,506 $46,901 $173,948 $177,615 
Recent Accounting Pronouncements
New Accounting Guidance Adopted in 2021
In October 2020, the FASB issued ASU 2020-10, “Codification Improvements” (“ASU 2020-10”), which affects a wide variety of Topics in the Accounting Standards Codification (“Codification”). ASU 2020-10, among other things, contains amendments that improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50). Many of the amendments arose as the FASB provided an option to give certain information either on the face of the financial statements or in the notes to financial statements and that option only was included in the Other Presentation Matters Section (Section 45) of the Codification. Those amendments are not expected to change current practice. The new guidance is effective for fiscal years beginning after December 15, 2020, which was our interim period beginning January 1, 2021. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.
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In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which removes certain exceptions and provides guidance on various areas of tax accounting. The new guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, which was our interim period beginning January 1, 2021. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.
In August 2018, the FASB issued ASU 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans” (“ASU 2018-14”), which removes disclosures that no longer are considered cost-beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The new guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, which was our interim period beginning January 1, 2021. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.
Recently Issued Accounting Standards
In August 2020, the FASB issued ASU 2020-06, “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies reporting or provides clarification on various topics, including clarification that an entity should use the weighted-average share count from each quarter when calculating the year-to-date weighted-average share count. The new guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, which will be our interim period beginning January 1, 2022. Early adoption is permitted. We are evaluating the impact of this standard.
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides optional guidance for a limited time for contracts that reference London Interbank Offered Rate (“LIBOR”), to ease the potential burden in accounting for, or recognizing the effects, of reference rate reform on financial reporting as a result of the cessation of LIBOR. The new guidance is effective at any time after March 12, 2020 but no later than December 31, 2022. We are evaluating the impact of this standard.

Note 2. Inventories
Inventories consisted of the following:
(Dollars in thousands)
October 2,
2021
December 31,
2020
Raw materials and supplies$122,752 $107,983 
Work in process17,312 15,895 
Finished goods4,115 5,345 
Total$144,179 $129,223 

Note 3. Goodwill
We perform our annual goodwill impairment test as of the first day of the fourth quarter. If certain factors occur, including significant under performance of our business relative to expected operating results, significant adverse economic and industry trends, significant decline in our market capitalization for an extended period of time relative to net book value, a decision to divest individual businesses within a reporting unit, or a decision to group individual businesses differently, we may be required to perform an interim impairment test prior to the fourth quarter.
We may use either a qualitative or quantitative approach when testing a reporting unit’s goodwill for impairment. The qualitative approach for potential impairment analysis is performed to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
The quantitative approach for potential impairment analysis is performed by comparing the fair value of a reporting unit to its carrying value, including goodwill. Fair value is estimated by management using a combination of the income approach (which is based on a discounted cash flow model) and market approach. Management’s cash flow projections include significant judgments and assumptions, including the amount and timing of expected cash flows, long-term growth rates, and discount rates. The cash flows used in the discounted cash flow model are based on our best estimate of future revenues, gross margins, and adjusted after-tax earnings. If any of these assumptions are incorrect, it will impact the estimated fair value of a reporting unit. The market approach also requires significant management judgment in selecting comparable business acquisitions and the transaction values observed and its related control premiums.
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For our most recent annual goodwill impairment test of our Electronic Systems reporting unit as of the first day of the fourth quarter of 2020, we used a qualitative assessment and determined it was not more likely than not that the fair value of the reporting unit was less than its carrying amount. For our most recent annual goodwill impairment test of our Structural Systems reporting unit as of the first day of the fourth quarter of 2020, we performed a step one goodwill impairment test where the fair value of our Structural Systems reporting unit exceeded its carrying value by 69% and thus, goodwill was not deemed to be impaired. While our business continues to be negatively impacted during the three and nine months ended October 2, 2021 as a result of the COVID-19 pandemic, no material adverse factors/changes have occurred since the fourth quarter of 2020 that would require us to perform another qualitative assessment. As such, for the third quarter of 2021, it was also not more likely than not that the fair values of the reporting units were less than their carrying amounts and thus, the respective goodwill amounts were not deemed to be impaired.
The carrying amounts of our goodwill were as follows:
(Dollars in thousands)
Electronic
Systems
Structural
Systems
Consolidated
Ducommun
Gross goodwill$199,157 $53,395 $252,552 
Accumulated goodwill impairment(81,722) (81,722)
Balance at December 31, 2020$117,435 $53,395 $170,830 
Balance at October 2, 2021$117,435 $53,395 $170,830 

Note 4. Accrued and Other Liabilities
The components of accrued and other liabilities were as follows:
(Dollars in thousands)
October 2,
2021
December 31,
2020
Accrued compensation$21,715 $28,432 
Accrued income tax and sales tax453 80 
Other13,126 12,014 
Total$35,294 $40,526 

Note 5. Long-Term Debt
Long-term debt and the current period interest rates were as follows:
(Dollars in thousands)
October 2,
2021
December 31,
2020
Term loans$289,462 $295,638 
Revolving credit facility10,000 25,000 
Total debt299,462 320,638 
Less current portion(7,000)(7,000)
Total long-term debt, less current portion292,462 313,638 
Less debt issuance costs - term loans(1,424)(1,716)
Total long-term debt, net of debt issuance costs - term loans$291,038 $311,922 
Debt issuance costs - revolving credit facility (1)
$1,231 $1,515 
Weighted-average interest rate3.24 %3.59 %
(1) Included as part of other assets.
In December 2019, we completed the refinancing of a portion of our existing debt by entering into a new revolving credit facility (“2019 Revolving Credit Facility”) to replace the then existing revolving credit facility that was entered into in November 2018 (“2018 Revolving Credit Facility”) and entered into a new term loan (“2019 Term Loan”). The 2019 Revolving Credit Facility is a $100.0 million senior secured revolving credit facility that matures on December 20, 2024 replacing the $100.0 million 2018 Revolving Credit Facility that would have matured on November 21, 2023. The 2019 Term Loan is a $140.0 million senior secured term loan that matures on December 20, 2024. We also have an existing $240.0 million senior secured term loan that was entered into in November 2018 that matures on November 21, 2025 (“2018 Term Loan”). The
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original amounts available under the 2019 Revolving Credit Facility, 2019 Term Loan, and 2018 Term Loan (collectively, the “Credit Facilities”) in aggregate, totaled $480.0 million.
The 2019 Term Loan bears interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as the London Interbank Offered Rate [“LIBOR”]) plus an applicable margin ranging from 1.50% to 2.50% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 0.50% to 1.50% per year, in each case based upon the consolidated total net adjusted leverage ratio, typically payable quarterly. In addition, the 2019 Term Loan requires installment payments of 1.25% of the original outstanding principal balance of the 2019 Term Loan amount on a quarterly basis, on the last day of the calendar quarter. For the three and nine months ended October 2, 2021, we made the required quarterly payments totaling $1.8 million and $5.3 million, respectively.
The 2019 Revolving Credit Facility bears interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as LIBOR) plus an applicable margin ranging from 1.50% to 2.50% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 0.50% to 1.50% per year, in each case based upon the consolidated total net adjusted leverage ratio, typically payable quarterly. The undrawn portion of the commitment of the 2019 Revolving Credit Facility is subject to a commitment fee ranging from 0.175% to 0.275%, based upon the consolidated total net adjusted leverage ratio. However, the 2019 Revolving Credit Facility does not require any principal installment payments.
The 2018 Term Loan bears interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as LIBOR plus an applicable margin ranging from 3.75% to 4.00% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 3.75% to 4.00% per year, in each case based upon the consolidated total net adjusted leverage ratio, typically payable quarterly. In addition, the 2018 Term Loan required installment payments of 0.25% of the outstanding principal balance of the 2018 Term Loan amount on a quarterly basis.
Further, under the Credit Facilities, if we exceed the annual excess cash flow threshold, we are required to make an annual additional principal payment based on the consolidated adjusted leverage ratio. The annual mandatory excess cash flow payment is based on (i) 50% of the excess cash flow amount if the adjusted leverage ratio is greater than 3.25 to 1.0, (ii) 25% of the excess cash flow amount if the adjusted leverage ratio is less than or equal to 3.25 to 1.0 but greater than 2.50 to 1.0, and (iii) zero percent of the excess cash flow amount if the consolidated adjusted leverage ratio is less than or equal to 2.50 to 1.0. During the first quarter of 2021, we made the required 2020 annual excess cash flow payment of $0.9 million. As of October 2, 2021, we were in compliance with all covenants required under the Credit Facilities.
During the three and nine months ended October 2, 2021, we made net voluntary prepayments totaling $5.0 million and $15.0 million, respectively, on the 2019 Revolving Credit Facility.
In conjunction with entering into the 2019 Revolving Credit Facility and the 2019 Term Loan, we drew down the entire $140.0 million on the 2019 Term Loan and used those proceeds to pay off and close the 2018 Revolving Credit Facility of $58.5 million, paid down a portion of the 2018 Term Loan of $56.0 million, paid the accrued interest associated with the amounts being paid down on the 2018 Revolving Credit Facility and 2018 Term Loan, paid the fees related to this transaction, and the remainder available for general corporate purposes. The $56.0 million pay down on the 2018 Term Loan paid all the required quarterly installment payments on the 2018 Term Loan until maturity.
The 2019 Term Loan and 2018 Term Loan were considered a modification of debt and thus, no gain or loss was recorded. Instead, the new fees paid to the lenders of $0.6 million were capitalized and are being amortized over the life of the 2019 Term Loan. The remaining debt issuance costs related to the 2018 Term Loan of $1.5 million as of the modification date will continue to be amortized over its remaining life.
The 2019 Revolving Credit Facility that replaced the 2018 Revolving Credit Facility was considered an extinguishment of debt except for the portion related to the creditors that were part of both the 2019 Revolving Credit Facility and the 2018 Revolving Credit Facility and in which case, it was considered a modification of debt. As a result, we expensed the portion of the unamortized debt issuance costs related to the 2018 Revolving Credit Facility that was considered an extinguishment of debt of $0.5 million. In addition, the new fees paid to the lenders of $0.5 million as part of the 2019 Revolving Credit Facility were capitalized and are being amortized over its remaining life. Further, the remaining debt issuance costs related to the 2018 Revolving Credit Facility of $1.1 million as of the modification date will also be amortized over its remaining life.
As of October 2, 2021, we had $89.8 million of unused borrowing capacity under the 2019 Revolving Credit Facility, after deducting $0.2 million for standby letters of credit.
The Credit Facilities were entered into by us (“Parent Company”) and guaranteed by all of our domestic subsidiaries, other than two subsidiaries that were considered minor (“Subsidiary Guarantors”). The Subsidiary Guarantors jointly and severally
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guarantee the Credit Facilities. The Parent Company has no independent assets or operations and therefore, no consolidating financial information for the Parent Company and its subsidiaries are presented.
In October 2015, we entered into interest rate cap hedges designated as cash flow hedges with a portion of these interest rate cap hedges maturing on a quarterly basis, and a final quarterly maturity date of June 2020, in aggregate, totaling $135.0 million of our debt. We paid a total of $1.0 million in connection with entering into the interest rate cap hedges. The interest rate cap hedges matured during our second quarter of 2020 and as such, all remaining amounts related to the interest rate cap hedges were fully amortized and unrealized gains and losses recorded in accumulated other comprehensive income were also realized at that time.

Note 6. Indemnifications
We have made guarantees and indemnities under which we may be required to make payments to a guaranteed or indemnified party, in relation to certain transactions, including revenue transactions in the ordinary course of business. In connection with certain performance center leases, we have indemnified our lessors for certain claims arising from the performance center or the lease. We indemnify our directors and officers to the maximum extent permitted under the laws of the State of Delaware.
However, we have a directors and officers insurance policy that may reduce our exposure in certain circumstances and may enable us to recover a portion of future amounts that may be payable, if any. The duration of the guarantees and indemnities varies and, in many cases is indefinite but subject to statute of limitations. The majority of guarantees and indemnities do not provide any limitations of the maximum potential future payments we could be obligated to make. Historically, payments related to these guarantees and indemnities have been immaterial. We estimate the fair value of our indemnification obligations as insignificant based on this history and insurance coverage and have, therefore, not recorded any liability for these guarantees and indemnities in the accompanying condensed consolidated balance sheets.
 
Note 7. Income Taxes
The provision for income taxes is determined using an estimated annual effective tax rate, which is generally less than the U.S. Federal statutory rate, primarily due to research and development (“R&D”) tax credits. Our effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as expected utilization of R&D tax credits, valuation allowances against deferred tax assets, recognition or derecognition of tax benefits related to uncertain tax positions, and changes in or the interpretation of tax laws in jurisdictions where we conduct business. Also, excess tax benefits and tax detriments related to our equity compensation recognized in the condensed consolidated income statement could result in fluctuations in our effective tax rate period-over-period depending on the volatility of our stock price, number of restricted or performance stock units that vests, and stock options exercised during the period. We recognize deferred tax assets and liabilities, using enacted tax rates, for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities along with net operating loss and tax credit carryovers.
We record a valuation allowance against our deferred tax assets to reduce the net carrying value to an amount that we believe is more likely than not to be realized. When we establish or reduce our valuation allowances against our deferred tax assets, the provision for income taxes will increase or decrease, respectively, in the period when that determination is made.
We recorded income tax expense of $1.2 million for the three months ended October 2, 2021 compared to $0.8 million for the three months ended September 26, 2020. The increase in income tax expense for the third quarter of 2021 compared to the third quarter of 2020 was primarily due to higher pre-tax income for the third quarter of 2021 compared to the third quarter of 2020. The increase in income tax expense was partially offset by higher income tax benefits recognized in the third quarter of 2021 related to the U.S. Federal research and development tax credit.
We recorded income tax expense of $4.1 million for the nine months ended October 2, 2021, compared to $3.4 million for the nine months ended September 26, 2020. The increase in income tax expense for the first nine months of 2021 compared to the first nine months of 2020 was primarily due to higher pre-tax income for the first nine months of 2021 compared to the first nine months of 2020. The increase in income tax expense was partially offset by higher income tax benefits related to the U.S. Federal research and development tax credit and higher discrete income tax benefits related to net tax windfalls from stock-based compensation.
On March 11, 2021, the U.S. enacted the American Rescue Plan Act of 2021 (“Rescue Plan”) aimed at mitigating the continuing effects of the COVID-19 pandemic. We considered the provisions of the Rescue Plan and determined they do not have a material impact on our income taxes.
Our total amount of unrecognized tax benefits was $4.5 million and $4.1 million as of October 2, 2021 and December 31, 2020, respectively. If recognized, $2.8 million would affect the effective tax rate. We record interest and penalty charges, if any, related to uncertain tax positions as a component of tax expense and unrecognized tax benefits. The amounts accrued for
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interest and penalty charges as of October 2, 2021 and December 31, 2020 were not significant. We do not expect the total amount of unrecognized tax benefits to increase or decrease by a material amount in the next twelve months.
We file U.S. Federal and state income tax returns. We are subject to examination by the Internal Revenue Service (“IRS”) for tax years after 2016 and by state taxing authorities for tax years after 2015. While we are no longer subject to examination prior to those periods, carryforwards generated prior to those periods may still be adjusted upon examination by the IRS or state taxing authorities if they either have been or will be used in a subsequent period. We believe we have adequately accrued for tax deficiencies or reductions in tax benefits, if any, that could result from the examination and all open audit years.

Note 8. Commitments and Contingencies
In December 2020, a representative action under California’s Private Attorneys General Act was filed against us in the Superior Court of California, County of San Bernardino. We received service of process of this complaint on January 28, 2021. The complaint alleges violations of California’s wage and hour laws relating to our current and former employees and seeks attorney’s fees and penalties. We believe these claims are baseless, are without merit and intend to vigorously defend against them. We do not currently have enough information to make a reasonable estimate as to the likelihood or amount of loss, or a range of reasonably possible losses as a result of this claim, so there has been no related accrual for estimated liability recorded as of October 2, 2021.
Structural Systems has been directed by California environmental agencies to investigate and take corrective action for groundwater contamination at our facilities located in El Mirage and Monrovia, California. Based on currently available information, we have established an accrual for its estimated liability for such investigation and corrective action of $1.5 million at both October 2, 2021 and December 31, 2020, which is reflected in other long-term liabilities on our condensed consolidated balance sheets.
Structural Systems also faces liability as a potentially responsible party for hazardous waste disposed at landfills located in Casmalia and West Covina, California. Structural Systems and other companies and government entities have entered into consent decrees with respect to these landfills with the United States Environmental Protection Agency and/or California environmental agencies under which certain investigation, remediation and maintenance activities are being performed. Based on currently available information, we preliminarily estimate that the range of our future liabilities in connection with the landfill located in West Covina, California is between $0.4 million and $3.1 million. We have established an accrual for the estimated liability in connection with the West Covina landfill of $0.4 million as of both October 2, 2021 and December 31, 2020, which is reflected in other long-term liabilities on our condensed consolidated balance sheets. Our ultimate liability in connection with these matters will depend upon a number of factors, including changes in existing laws and regulations, the design and cost of construction, operation and maintenance activities, and the allocation of liability among potentially responsible parties.
In June 2020, a fire severely damaged our performance center in Guaymas, Mexico, which is part of our Structural Systems segment. There were no injuries, however, property and equipment, inventories, and tooling in this leased facility were damaged. Our Guaymas performance center is comprised of two buildings with an aggregate total of 62,000 square feet. The loss of production from the Guaymas performance center is being absorbed by our other existing performance centers. A neighboring, non-related manufacturing facility, also suffered fire damage during the same time as the fire that severely damaged our Guaymas performance center. The cause of the fire is still undetermined and as such, there is no amount of loss that is probable and reasonably estimable at this time.
Our insurance covers damage to the facility, equipment, unfinished inventory, and other assets at replacement cost, finished goods inventory at selling price, as well as business interruption, third party property damage, and recovery related expenses caused by the fire, less our per claim deductible. The anticipated insurance recoveries related to losses and incremental costs incurred are recognized when receipt is probable. The anticipated insurance recoveries in excess of net book value of the damaged operating assets and business interruption will not be recorded until all contingencies related to our claim have been resolved. During the year ended December 31, 2020, $0.8 million of revenue and $0.5 million of related cost of sales were reversed for revenue previously recognized using the over time method as the revenue recognition process for these items were deemed to be interrupted as a result of these inventory items being damaged. Also during the year ended December 31, 2020, we wrote off property and equipment and tooling with an aggregate total net book value of $7.1 million and inventory on hand of $3.4 million that were damaged by the fire. The related anticipated insurance recoveries were also presented within the same financial statement line item in the condensed consolidated statements of income resulting in no net impact, with the anticipated insurance recoveries receivable included as part of other current assets on the condensed consolidated balance sheets. As of October 2, 2021, $13.5 million of general insurance recoveries have been received to date. The timing of and the remaining amounts of insurance recoveries, including for business interruption, are not known at this time.
In the normal course of business, Ducommun and its subsidiaries are defendants in certain other litigation, claims and inquiries,
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including matters relating to environmental laws. In addition, Ducommun makes various commitments and incurs contingent liabilities in the ordinary course of business. While it is not feasible to predict the outcome of these matters, Ducommun does not presently expect that any sum it may be required to pay in connection with these matters would have a material adverse effect on its condensed consolidated financial position, results of operations or cash flows.
 
Note 9. Business Segment Information
We supply products and services primarily to the aerospace and defense industries. Our subsidiaries are organized into two strategic businesses, Electronic Systems and Structural Systems, each of which is a reportable operating segment.

Financial information by reportable operating segment was as follows:
(Dollars in thousands)
Three Months Ended
(Dollars in thousands)
Nine Months Ended
 October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
Net Revenues
Electronic Systems$104,721 $103,470 $306,622 $293,540 
Structural Systems58,506 46,901 173,948 177,615 
Total Net Revenues$163,227 $150,371 $480,570 $471,155 
Segment Operating Income
Electronic Systems$15,319 $14,867 $42,185 $40,427 
Structural Systems4,457 1,769 15,177 13,373 
19,776 16,636 57,362 53,800 
Corporate General and Administrative Expenses (1)
(6,413)(6,371)(20,297)(19,884)
Operating Income$13,363 $10,265 $37,065 $33,916 
Depreciation and Amortization Expenses
Electronic Systems$3,547 $3,492 $10,396 $10,591 
Structural Systems3,599 3,528 10,540 10,956 
Corporate Administration58 58 176 194 
Total Depreciation and Amortization Expenses$7,204 $7,078 $21,112 $21,741 
Capital Expenditures
Electronic Systems$1,964 $586 $3,865 $3,518 
Structural Systems1,598 1,796 6,154 4,400 
Corporate Administration    
Total Capital Expenditures$3,562 $2,382 $10,019 $7,918 
(1)Includes costs not allocated to either the Electronic Systems or Structural Systems operating segments.
Segment assets include assets directly identifiable to or allocated to each segment. Our segment assets are as follows:
(Dollars in thousands)
 October 2,
2021
December 31,
2020
Total Assets
Electronic Systems$496,616 $448,606 
Structural Systems325,165 325,604 
Corporate Administration (1)
16,002 63,137 
Total Assets$837,783 $837,347 
Goodwill and Intangibles
Electronic Systems$194,111 $201,077