Ducommun Reports Results for the First Quarter Ended March 30, 2019

SANTA ANA, Calif., May 06, 2019 (GLOBE NEWSWIRE) -- Ducommun Incorporated DCO ("Ducommun" or the "Company") today reported results for its first quarter ended March 30, 2019.

First Quarter 2019 Highlights

  • Revenue increased 14.7% to $172.6 million
  • Net income of $7.5 million, or $0.64 per diluted share
  • Gross margin increased 290 basis points year-over-year to 20.7%
  • Operating margin increased 390 basis points year-over-year to 7.4%
  • Adjusted EBITDA increased 49.7% to $21.7 million

"As we begin 2019, the Company has gotten off to a great start demonstrated by Ducommun's strong operating performance across the board this quarter," said Stephen G. Oswald, chairman, president and chief executive officer. "Revenue grew 14.7% year-over-year, to $172.6 million, while we posted an impressive gross margin of 20.7% due to ongoing operating initiatives, rationalization of the product portfolio and the many cost reduction actions undertaken last year. At the same time, our backlog* rose to a record $884 million, positioning the Company for solid results going forward.

"Operating margins expanded significantly across both our structures and electronics segments, as we continue to win new content based on providing market leading technology, solid execution and strong customer relationships. We also continue to make strategic investments, including our VersaCore Composite™ technology, which is gaining strong momentum within the industry. Based on our new Company culture and focus on delivering results, I believe the Company is in excellent shape to continue posting strong results and delivering higher value for our shareholders in 2019."

First Quarter Results

Net revenue for the first quarter of 2019 was $172.6 million compared to $150.5 million for the first quarter of 2018. The year-over-year increase of 14.7% was due to the following:

  • $13.1 million higher revenue in the Company's military and space end-use markets due to increased shipments on various missile platforms; and
  • $11.9 million higher revenue in the Company's commercial aerospace end-use markets due to additional content and increased build rates on large aircraft platforms; partially offset by
  • $2.9 million lower revenue in the Company's industrial end-use markets.

Net income for the first quarter of 2019 was $7.5 million, or $0.64 per diluted share, compared to $2.6 million, or $0.22 per diluted share, for the first quarter of 2018. This reflects a $8.9 million increase in gross profit due to higher revenue and improved operating performance. Restructuring charges were lower year-over-year by $2.2 million, offset by $3.5 million of higher selling, general and administrative expenses, $1.5 million of higher interest expense, and higher income taxes of $1.3 million.

Gross profit for the first quarter of 2019 was $35.7 million, or 20.7% of revenue compared to gross profit of $26.8 million, or 17.8% of revenue, for the first quarter of 2018. The increase in gross margin percentage year-over-year was due to higher manufacturing volume, favorable product mix, and manufacturing efficiencies, partially offset by higher other manufacturing costs.

Operating income for the first quarter of 2019 was $12.8 million, or 7.4% of revenue, compared to $5.3 million, or 3.5% of revenue, in the comparable period last year. The year-over-year increase of $7.6 million was due to higher revenue, improved operating performance, and lack of restructuring charges.

Interest expense for the first quarter of 2019 was $4.4 million compared to $2.9 million in the comparable period of 2018. The year-over-year increase was due to a higher outstanding balance on the revolving credit facility reflecting the acquisition of Certified Thermoplastics Co., LLC in April 2018 and higher interest rates.

Adjusted EBITDA for the first quarter of 2019 was $21.7 million, or 12.6% of revenue, compared to $14.5 million, or 9.6% of revenue, for the comparable period in 2018, an increase of 49.7%.

During the first quarter of 2019, the net cash used in operations was $1.7 million compared to net cash provided by operations of $10.3 million during the first quarter of 2018. The change year-over-year was due to the decrease in accrued and other liabilities, partially offset by higher net income.

* The Company defines backlog as potential revenue and is based on customer placed purchase orders and long-term agreements ("LTAs") with firm fixed price and expected delivery dates of 24 months or less. Backlog as of as of March 30, 2019 was $883.8 million compared to $864.4 million as of December 31, 2018. Under ASC 606, the Company defines remaining performance obligations as customer placed purchase orders with firm fixed price and firm delivery dates. The remaining performance obligations disclosed under ASC 606 were $697.5 million.

Business Segment Information

Electronic Systems

Electronic Systems segment net revenue for the quarter ended March 30, 2019 was $84.2 million, compared to $82.4 million for the first quarter of 2018. The year-over-year increase was due to the following:

  • $8.5 million higher revenue within the Company's military and space end-use markets due to increased shipments on various missile platforms; partially offset by
  • $3.8 million lower revenue within the Company's commercial aerospace end-use markets due to timing of shipments which unfavorably impacted large aircraft platforms; and
  • $2.9 million lower revenue within the Company's industrial end-use markets.

Electronic Systems segment operating income was $9.2 million, or 10.9% of revenue, for the first quarter of 2019 compared to $5.7 million, or 7.0% of revenue, for the comparable quarter in 2018. The year-over-year increase of $3.4 million was due to favorable product mix and improved manufacturing efficiencies.

Structural Systems

Structural Systems segment net revenue for the quarter ended March 30, 2019 was $88.4 million, compared to $68.0 million for the first quarter of 2018. The year-over-year increase was due to the following:

  • $15.7 million higher revenue within the Company's commercial aerospace end-use markets due to additional content and higher build rates on large aircraft platforms; and
  • $4.6 million higher revenue within the Company's military and space end-use markets due to increased shipments on military rotary-wing aircraft platforms.

Structural Systems segment operating income for the quarter ended March 30, 2019 was $10.5 million, or 11.9% of revenue, compared to $4.4 million, or 6.5% of revenue, for the first quarter of 2018. The year-over-year increase of $6.2 million was due to favorable manufacturing volume, favorable product mix, improved manufacturing efficiencies, and lack of restructuring charges in the current year.

Corporate General and Administrative ("CG&A") Expenses

CG&A expenses for the first quarter of 2019 were $6.9 million, or 4.0% of total Company revenue, compared to $4.9 million, or 3.2% of total Company revenue, for the comparable quarter in the prior year. The year-over-year increase was due to higher compensation and benefit costs of $1.6 million.

Conference Call

A teleconference hosted by Stephen G. Oswald, the Company's chairman, president, and chief executive officer, and Douglas L. Groves, the Company's vice president, chief financial officer and treasurer, will be held today, May 6, 2019 at 2:00 p.m. PT (5:00 p.m. ET) to review these financial results. To participate in the teleconference, please call 844-239-5278 (international 574-990-1017) approximately ten minutes prior to the conference time. The participant passcode is 3498485. Mr. Oswald and Mr. Groves will be speaking on behalf of the Company and anticipate the call (including Q&A) to last approximately 45 minutes.

This call is being webcast 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 855-859-2056, passcode 3498485.

About Ducommun Incorporated

Ducommun Incorporated delivers value-added innovative manufacturing solutions to customers in the aerospace, defense and industrial markets. Founded in 1849, the Company specializes in two core areas - Electronic Systems and Structural Systems - to produce complex products and components for commercial aircraft platforms, mission-critical military and space programs, and sophisticated industrial applications. For more information, visit www.ducommun.com.

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 U.S. Government defense spending; the Company is subject to extensive regulation and audit by the Defense Contract Audit Agency; contracts with some of the Company's customers contain provisions which give the its customers a variety of rights that are unfavorable to the Company; further consolidation in the aerospace industry could adversely affect the Company's business and financial results; the Company's ability to successfully make acquisitions, including its ability to successfully integrate, operate or realize the projected benefits of such businesses; the Company relies on its suppliers to meet the quality and delivery expectations of its customers; the Company uses estimates when bidding on fixed-price contracts which estimates could change and result in adverse effects on its financial results; the impact of existing and future laws and regulations; the impact of existing and future accounting standards and tax rules and regulations; environmental liabilities could adversely affect the Company's financial results; cyber security attacks, internal system or service failures may adversely impact the Company's business and operations; and other risks and uncertainties, including those detailed from time to time in the Company's periodic reports filed with the Securities and Exchange Commission. You should not put undue reliance on any forward-looking statements. You should understand that many important factors, including those discussed herein, could cause the Company's results to differ materially from those expressed or suggested in any forward-looking statement. Except as required by law, the Company does not undertake any obligation to update or revise these forward-looking statements to reflect new information or events or circumstances that occur after the date of this news release, May 6, 2019, or to reflect the occurrence of unanticipated events or otherwise. Readers are advised to review the Company's filings with the Securities and Exchange Commission (which are available from the SEC's EDGAR database at www.sec.gov, at various SEC reference facilities in the United States and through the Company's website).

Note Regarding Non-GAAP Financial Information

This release contains non-GAAP financial measures, including Adjusted EBITDA (which excludes interest expense, income tax expense [benefit], 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 expected 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 remaining performance obligations 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 30,

 2019
 December 31,

 2018
Assets    
Current Assets    
Cash and cash equivalents $3,727  $10,263 
Accounts receivable, net 63,134  67,819 
Contract assets 93,306  86,665 
Inventories 103,994  101,125 
Production cost of contracts 11,008  11,679 
Other current assets 7,003  6,531 
Total Current Assets 282,172  284,082 
Property and equipment, Net 108,839  107,045 
Operating lease right-of-use assets 18,398   
Goodwill 136,057  136,057 
Intangibles, net 109,387  112,092 
Non-current deferred income taxes 313  308 
Other assets 5,543  5,155 
Total Assets $660,709  $644,739 
Liabilities and Shareholders' Equity    
Current Liabilities    
Accounts payable $68,785  $69,274 
Contract liabilities 15,030  17,145 
Accrued and other liabilities 28,986  37,786 
Operating lease liabilities 2,536   
Current portion of long-term debt 2,330  2,330 
Total Current Liabilities 117,667  126,535 
Long-term debt 229,125  228,868 
Non-current operating lease liabilities 17,499   
Non-current deferred income taxes 18,211  18,070 
Other long-term liabilities 14,429  14,441 
Total Liabilities 396,931  387,914 
Commitments and contingencies    
Shareholders' Equity    
Common stock 115  114 
Additional paid-in capital 83,370  83,712 
Retained earnings 187,564  180,356 
Accumulated other comprehensive loss (7,271) (7,357)
Total Shareholders' Equity 263,778  256,825 
Total Liabilities and Shareholders' Equity $660,709  $644,739 





DUCOMMUN INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)

  Three Months Ended
  March 30,

 2019
 March 31,

 2018
Net Revenues $172,566  $150,455 
Cost of Sales 136,872  123,700 
Gross Profit 35,694  26,755 
Selling, General and Administrative Expenses 22,846  19,326 
Restructuring Charges   2,173 
Operating Income 12,848  5,256 
Interest Expense (4,351) (2,899)
Income Before Taxes 8,497  2,357 
Income Tax Expense (Benefit) 1,025  (243)
Net Income $7,472  $2,600 
Earnings Per Share    
Basic earnings per share $0.65  $0.23 
Diluted earnings per share $0.64  $0.22 
Weighted-Average Number of Common Shares Outstanding    
Basic 11,434  11,346 
Diluted 11,755  11,613 
     
Gross Profit % 20.7% 17.8%
SG&A % 13.3% 12.8%
Operating Income % 7.4% 3.5%
Net Income % 4.3% 1.7%
Effective Tax (Benefit) Rate 12.1% (10.3)%





DUCOMMUN INCORPORATED AND SUBSIDIARIES

BUSINESS SEGMENT PERFORMANCE

(Unaudited)

(In thousands)

  Three Months Ended
  %

Change
 March 30,

 2019
 March 31,

 2018
 %

of Net  Revenues

2019
 %

of Net  Revenues

2018
Net Revenues          
Electronic Systems 2.2% $84,197  $82,409  48.8% 54.8%
Structural Systems 29.9% 88,369  68,046  51.2% 45.2%
Total Net Revenues 14.7% $172,566  $150,455  100.0% 100.0%
Segment Operating Income          
Electronic Systems   $9,181  $5,744  10.9% 7.0%
Structural Systems   10,549  4,391  11.9% 6.5%
    19,730  10,135     
Corporate General and Administrative Expenses (1)   (6,882) (4,879) (4.0)% (3.2)%
Total Operating Income   $12,848  $5,256  7.4% 3.5%
Adjusted EBITDA          
Electronic Systems          
Operating Income   $9,181  $5,744     
Depreciation and Amortization   3,844  3,632     
Restructuring Charges     520     
    13,025  9,896  15.5% 12.0%
Structural Systems          
Operating Income   10,549  4,391     
Depreciation and Amortization   3,250  2,316     
Restructuring Charges     1,526     
    13,799  8,233  15.6% 12.1%
Corporate General and Administrative Expenses (1)          
Operating loss   (6,882) (4,879)    
Depreciation and Amortization   294  33     
Stock-Based Compensation Expense   1,464  1,090     
Restructuring Charges     127     
    (5,124) (3,629)    
Adjusted EBITDA   $21,700  $14,500  12.6% 9.6%
Capital Expenditures          
Electronic Systems   $836  $2,734     
Structural Systems   3,689  1,529     
Total Capital Expenditures   $4,525  $4,263     

(1)  Includes costs not allocated to either the Electronic Systems or Structural Systems operating segments.





DUCOMMUN INCORPORATED AND SUBSIDIARIES

GAAP TO NON-GAAP OPERATING INCOME RECONCILIATION

(Unaudited)

(In thousands)

  Three Months Ended
GAAP To Non-GAAP Operating Income March 30,

 2019
 March 31,

 2018
 %

of Net  Revenues

2019
 %

of Net  Revenues

2018
GAAP Operating income $12,848  $5,256     
         
GAAP Operating income - Electronic Systems $9,181  $5,744     
Adjustments:        
Restructuring charges   520     
Adjusted operating income - Electronic Systems 9,181  6,264  10.9% 7.6%
         
GAAP Operating income - Structural Systems 10,549  4,391     
Adjustments:        
Restructuring charges   1,526     
Adjusted operating income - Structural Systems 10,549  5,917  11.9% 8.7%
         
GAAP Operating loss - Corporate (6,882) (4,879)    
Adjustment:        
Restructuring charges   127     
Adjusted operating loss - Corporate (6,882) (4,752)    
  Total adjustments   2,173     
Adjusted operating income $12,848  $7,429  7.4% 4.9%





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 30,

 2019
 March 31,

 2018
GAAP Net income $7,472  $2,600 
Adjustments:    
Restructuring charges (1)   1,804 
Adjusted net income $7,472  $4,404 



  Three Months Ended
GAAP Earnings Per Share To Non-GAAP Earnings Per Share March 30,

 2019
 March 31,

 2018
GAAP Diluted earnings per share ("EPS") $0.64  $0.22 
Adjustments:    
Restructuring charges (1)   0.16 
Adjusted diluted EPS $0.64  $0.38 
     
Shares used for adjusted diluted EPS 11,755  11,613 

(1)  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 30,

 2019
 December 31,

 2018
Consolidated Ducommun    
Military and space $346,959  $339,443 
Commercial aerospace 499,473  487,232 
Industrial 37,333  37,774 
Total $883,765  $864,449 
Electronic Systems    
Military and space $249,302  $241,196 
Commercial aerospace 65,022  48,032 
Industrial 37,333  37,774 
Total $351,657  $327,002 
Structural Systems    
Military and space $97,657  $98,247 
Commercial aerospace 434,451  439,200 
Total $532,108  $537,447 

 

Ducommun Logo.JPG

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Date
ticker
name
Actual EPS
EPS Surprise
Actual Rev
Rev Surprise
Posted In: EarningsPress Releases
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!