Ducommun Reports Results for the First Quarter Ended March 29, 2014

Commercial Aerospace Revenue Growth and Margin Expansion Highlight Solid Start to 2014

LOS ANGELES--(BUSINESS WIRE)--Apr. 28, 2014-- Ducommun Incorporated (NYSE:DCO) (“Ducommun” or the “Company”) today reported results for its first quarter ended March 29, 2014.

First Quarter 2014 Highlights

First quarter revenue grew to $179.8 million from $175.9 million in the prior-year period
The company reported net income of $4.6 million, or $0.42 per diluted share
EBITDA for the quarter was $21.4 million
Ducommun made voluntary principal prepayments totaling $7.5 million on its term loan during the quarter
The Company’s firm backlog as of March 29, 2014 was $605 million

“The first quarter of 2014 showed the diversity of Ducommun's product portfolio and strength of our operating leverage,” said Anthony J. Reardon, chairman and chief executive officer. “Top line growth was driven by gains across our commercial aerospace business, including a further pickup in revenue with Airbus and on Boeing's 787 platform. Operating margins expanded year-over-year reflecting higher revenues and an improved product mix. In addition, marketing initiatives designed to grow Ducommun's non-A&D sales have begun to show traction.

“We continue our efforts to reduce costs, improve profitability and penetrate the most compelling markets and platforms going forward,” continued Mr. Reardon. “In that vein, as we work to replace the C-17 business rolling off at the end of 2014, we have implemented technology-driven customer development strategies -- already yielding results -- to position Ducommun for growth in the years to come. At the same time, we remain steadfast in paying down debt, lowering interest expense, and strengthening the balance sheet for improved shareholder returns.”

First Quarter Results

Net sales for the first quarter of 2014 were $179.8 million, a 2.2% increase, compared to $175.9 million for the first quarter of 2013. The revenue increase year-over-year primarily reflects higher sales within the Company’s commercial aerospace, military aircraft, and non aerospace and defense (“non-A&D”) end-use markets, partially offset by decreased sales in defense technologies end-use markets.

Net income for the first quarter of 2014 was $4.6 million, or $0.42 per diluted share, compared to net income of $3.7 million, or $0.35 per diluted share, for the first quarter of 2013. The first quarter of 2013 included a $2.5 million federal research and development tax credit (“Federal R&D Tax Credit”) benefit -- a combination of Federal R&D Tax Credits for fiscal 2012 (as a result of the American Taxpayer Relief Act [the “Act”] passed in January 2013) and Federal R&D Tax Credits for the first quarter of fiscal 2013. For the first quarter of fiscal 2014, there were no comparable Federal R&D Tax Credit benefit recorded, as a similar Act has not been extended at this time.

Operating income for the first quarter of 2014 was $14.0 million, or 7.8% of revenue, compared to $10.3 million, or 5.9% of revenue, in the comparable period last year. Operating income in the first quarter of 2014 was favorably impacted by higher sales, change in product mix and improved operating performance.

EBITDA for the first quarter of 2014 was $21.4 million, or 11.9% of revenue, compared to $17.3 million, or 9.9% of revenue, for the comparable period in 2013. Interest expense declined to $7.1 million in the first quarter of 2014, compared to $7.8 million in the previous year’s first quarter, as the Company continued to de-lever its balance sheet.

During the first quarter of 2014 the Company used $9.7 million of cash in operations compared to a use of $6.1 million during the first quarter of 2013. The higher cash usage year-over-year primarily reflected an increase in accounts receivable and inventory due to payment and order timing differences with certain customers.

Ducommun AeroStructures (“DAS”)

The Company’s DAS segment reported net sales for the first quarter of $81.7 million compared to $72.7 million for the first quarter of 2013. The increase in revenue was primarily due to a 12.1% increase in sales of commercial aerospace products and a 12.6% increase in military aircraft products.

DAS segment operating income was $10.2 million, or 12.5% of revenue, compared to operating income of $6.6 million, or 9.1% of revenue, in the first quarter of 2013. The higher operating margin was a result of increased sales and improved product mix. EBITDA was $12.7 million for the current quarter, or 15.5% of revenue, compared to $9.0 million, or 12.3% of revenue, for the comparable quarter in the prior year.

Ducommun LaBarge Technologies (“DLT”)

The Company’s DLT segment reported net sales for the first quarter of $98.1 million compared to $103.2 million for the first quarter of 2013. The year-over-year decline reflected a 9.3% decrease in defense technology products partially offset by a 2.1% increase in non-A&D products.

DLT’s operating income for the first quarter of 2014 was $7.0 million, or 7.2% of revenue, compared to $7.9 million, or 7.7% of revenue, for the first quarter of 2013 due to lower net sales. EBITDA was $12.1 million in the quarter, or 12.3% of revenue, compared to $12.6 million, or 12.2% 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 2014 were $3.3 million, or 1.8% of total Company revenue, down from $4.2 million, or 2.4% of total Company revenue, in the prior-year period. CG&A expenses for the first quarter of the prior year included a $0.5 million charge related to the Company's debt repricing transaction, $0.3 million in non-recurring professional fees, and higher benefit related costs.

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, treasurer and chief financial officer, will be held today, April 28, 2014 at 2:00 p.m. PT (5:00 p.m. ET) to review these financial results. To participate in the teleconference, please call 877-415-3186 (international 857-244-7329) prior to the conference time. The participant passcode is 40119763. 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 93225179.

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.

[Financial Tables Follow]

DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)

	March 29,			December 31,
		2014			2013
Assets
Current Assets
Cash and cash equivalents	$	29,415		$	48,814
Accounts receivable, net		100,570			91,909
Inventories		148,895			140,507
Production cost of contracts		10,479			11,599
Deferred income taxes		13,836			10,850
Other current assets		21,664			27,085
Total Current Assets		324,859			330,764
Property and Equipment, Net		94,168			96,090
Goodwill		161,940			161,940
Intangibles, Net		162,875			165,465
Other Assets		9,320			9,940
Total Assets	$	753,162		$	764,199
Liabilities and Shareholders’ Equity
Current Liabilities
Current portion of long-term debt	$	25		$	25
Accounts payable		53,973			58,111
Accrued liabilities		39,628			45,453
Total Current Liabilities		93,626			103,589
Long-Term Debt, Less Current Portion		325,171			332,677
Deferred Income Taxes		70,556			68,489
Other Long-Term Liabilities		18,922			19,750
Total Liabilities		508,275			524,505
Commitments and Contingencies
Shareholders’ Equity
Common stock		110			110
Treasury stock		(1,924	)		(1,924	)
Additional paid-in capital		71,037			70,542
Retained earnings		179,457			174,828
Accumulated other comprehensive loss		(3,793	)		(3,862	)
Total Shareholders’ Equity		244,887			239,694
Total Liabilities and Shareholders’ Equity	$	753,162		$	764,199


DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Unaudited)
(In thousands, except per share amounts)

	First Quarters
		2014			2013
Net Sales	$	179,753		$	175,915
Cost of Sales		144,683			143,062
Gross Profit		35,070			32,853
Selling, General and Administrative Expenses		21,087			22,551
Operating Income		13,983			10,302
Interest Expense		7,125			7,823
Income Before Taxes		6,858			2,479
Income Tax Expense (Benefit)		2,229			(1,228	)
Net Income	$	4,629		$	3,707
Earnings Per Share
Basic earnings per share	$	0.43		$	0.35
Diluted earnings per share	$	0.42		$	0.35
Weighted-Average Number of Common Shares Outstanding
Basic		10,844			10,600
Diluted		11,107			10,670

Gross Profit %		19.5	%		18.7	%
SG&A %		11.7	%		12.8	%
Operating Income %		7.8	%		5.9	%
Net Income %		2.6	%		2.1	%
Effective Tax Rate (Benefit)		32.5	%		(49.5	)%


DUCOMMUN INCORPORATED AND SUBSIDIARIES
BUSINESS SEGMENT PERFORMANCE
(Unaudited)
(In thousands)

	First Quarters
									%		%
	%								of Net Sales		of Net Sales
	Change			2014			2013		2014		2013
Net Sales
DAS	12.3	%	$	81,654		$	72,705		45.4	%	41.3	%
DLT	(5.0	)%		98,099			103,210		54.6	%	58.7	%
Total Net Sales	2.2	%	$	179,753		$	175,915		100.0	%	100.0	%
Segment Operating Income
DAS			$	10,247		$	6,631		12.5	%	9.1	%
DLT				7,044			7,934		7.2	%	7.7	%
				17,291			14,565
Corporate General and Administrative Expenses ⁽¹⁾				(3,308	)		(4,263	)	(1.8	)%	(2.4	)%
Total Operating Income			$	13,983		$	10,302		7.8	%	5.9	%
EBITDA
DAS
Operating Income			$	10,247		$	6,631
Depreciation and Amortization				2,416			2,327
				12,663			8,958		15.5	%	12.3	%
DLT
Operating Income				7,044			7,934
Depreciation and Amortization				5,008			4,663
				12,052			12,597		12.3	%	12.2	%
Corporate General and Administrative Expenses
Operating loss				(3,308	)		(4,263	)
Depreciation and Amortization				2			43
				(3,306	)		(4,220	)	(1.8	)%	(2.4	)%
EBITDA			$	21,409		$	17,335		11.9	%	9.9	%
Capital Expenditures
DAS			$	1,285		$	1,319
DLT				897			1,052
Corporate Administration				10			241
Total Capital Expenditures			$	2,192		$	2,612

(1) Includes costs not allocated to either the DLT or DAS operating segments.

Source: Ducommun Incorporated

Ducommun Incorporated
Joseph P. Bellino, Vice President and Chief Financial Officer
310-513-7211
or
Chris Witty, Investor Relations
646-438-9385
cwitty@darrowir.com

News Release