EX-99.1 2 d580211dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

Ducommun Reports Results for the

Second Quarter Ended June 29, 2013

Revenue, EBITDA, and Cash Flow Rise as Earnings Reach $0.51 per Diluted Share

LOS ANGELES, California (August 5, 2013) – Ducommun Incorporated (NYSE:DCO) (“Ducommun” or the “Company”) today reported results for its second quarter and the six months ended June 29, 2013.

Second Quarter 2013 Highlights

 

   

Sales were $191.5 million, up 3.7% versus the second quarter of 2012

 

   

The Company reported net income of $5.5 million, or $0.51 per diluted share

 

   

Adjusted EBITDA for the quarter was $22.2 million –11.6% of revenue

 

   

Cash flow from operations was $13.1 million; Ducommun also made another voluntary principal prepayment of $7.5 million on its term loan during the quarter

 

   

The Company’s firm backlog as of June 29, 2013 was $632 million

“Ducommun posted strong results this quarter reflecting both top line growth and solid margins,” said Anthony J. Reardon, chairman, president and chief executive officer. “Revenue benefitted from robust commercial aerospace demand and increased shipments within our defense technologies operations, underscoring the breadth of our integrated solutions and unique applications. We also paid down an additional $7.5 million of debt, as the Company made further strides de-leveraging by improving working capital and driving cash flow.

“In our non-A&D end markets, however, sales fell once again, and we experienced soft bookings. In this regard, we have developed a comprehensive strategy utilizing the full engineering and manufacturing capabilities of the Company to expand our non-A&D product portfolio, with an eye to restoring growth heading into 2014. Despite these challenges, we made great strides this quarter as we continued to improve asset utilization, operating cash flow, and build a stronger Ducommun.”


Second Quarter Results

Net sales for the second quarter of 2013 increased 3.7% to $191.5 million, versus $184.7 million for the second quarter of 2012. The higher revenue reflected increases in the Company’s aerospace and defense end markets, partially offset by lower sales within the Company’s non-aerospace and defense (“non-A&D”) markets.

Net income for the second quarter of 2013 was $5.5 million, or $0.51 per diluted share, compared to $5.5 million, or $0.52 per diluted share, in the second quarter of 2012; the 2012 results included a state tax benefit of $0.15 per diluted share. Pre-tax income increased in the second quarter of 2013 as a result of higher operating income and lower interest expense.

Operating income for the second quarter of 2013 was $15.0 million, or 7.9% of revenue, compared to $14.0 million, or 7.6% of revenue, in the comparable period last year. Adjusted EBITDA for the second quarter of 2013 was $22.2 million, or 11.6% of revenue, compared to $21.3 million, or 11.6% of revenue, for the comparable period last year. Interest expense declined to $7.4 million in the second quarter of 2013, compared to $8.2 million in the previous year’s second quarter, as the Company continued to de-lever its balance sheet.

Cash flow generated from operations during the second quarter of 2013 was $13.1 million, compared to $10.5 million in the prior year’s second quarter. The higher cash provided by operating activities in the second quarter of 2013 reflects improved working capital management and project timing.

Ducommun AeroStructures (DAS)

The Company’s DAS segment reported net sales for the second quarter of $84.0 million, compared to $76.9 million in the prior-year period. Revenue increased 9.2% primarily due to higher sales of large commercial aircraft products, reflecting build rates, partially offset by lower sales of regional aircraft products and commercial helicopter products.

DAS segment operating income was $9.5 million, or 11.3% of revenue, compared to $7.6 million, or 9.9% of revenue, in the second quarter of 2012. The higher operating margin primarily reflects improved mix and operating leverage. EBITDA was $11.9 million for the quarter, or 14.2% of revenue, compared to $9.8 million, or 12.8% of revenue, for the comparable quarter in the prior year.


Ducommun LaBarge Technologies (DLT)

The Company’s DLT segment reported net sales for the second quarter of $107.5 million, compared to $107.8 million in the second quarter of 2012. The defense electronics and commercial aerospace revenue increased 16.5%, offset by a 25.8% decline in the segment’s non-A&D revenue.

DLT’s operating income for the second quarter of 2013 was $11.2 million, or 10.5% of revenue, compared to operating income of $10.5 million, or 9.7% of revenue, in the 2012 second quarter. The increase was primarily due to a richer product mix and the realization of cost synergies achieved following the integration of LaBarge. EBITDA was $15.9 million in the quarter, or 14.8% of revenue, compared to $15.2 million, or 14.1% of revenue, in the comparable quarter of the prior year.

Corporate General and Administrative Expenses (CG&A)

CG&A expenses for the second quarter of 2013 were $5.7 million, or 3.0% of revenue, up from $4.0 million, or 2.2% of revenue, in the prior-year period, due to a workers’ compensation insurance payroll audit charge of $0.6 million and $0.4 million in higher professional fees.

Year to Date Results

Net sales for the first six months of 2013 were $367.4 million versus $369.0 million for the same period of 2012. Revenue reflected growth in the defense technology and commercial aerospace end markets, offset by softness in the Company’s non-A&D markets.

Net income for the first six months of 2013 was $9.2 million, or $0.86 per diluted share, compared to $7.9 million, or $0.75 per diluted share, for the comparable period of 2012. Pre-tax income for the first six months of 2013 increased as the impact of somewhat lower net sales and operating margin were more than offset by lower interest expense. Diluted earnings per share for the six-month period of 2013 included a federal research and development tax benefit of $0.28 per diluted share while the 2012 period included no such benefit. The six-month period of 2012 included a state tax benefit of $0.15 per diluted share.

The effective tax rate for the six months ended June 29, 2013 included $2.0 million of 2012 federal research and development tax credit benefits recognized in the first quarter of 2013. The Company recognized total federal research and development tax credit benefits of $2.5 million and $0.5 million in the first quarter and second quarter of 2013, respectively. The Company expects to continue to recognize approximately $0.5 million per quarter for these benefits throughout 2013. The effective tax rate for the six months ended June 30, 2012 included no federal research and development tax credit benefits. The effective tax rate for the six months ended June 30, 2012 included a state tax benefit of $1.6 million as a result of the 2011 acquisition of LaBarge.


Operating income for the first six months of 2013 was $25.3 million, or 6.9% of revenue, compared to $25.9 million, or 7.0% of revenue, for the comparable period last year. Operating margin decreased due to higher SG&A costs for a one-time charge of $0.5 million related to the debt repricing and professional fees.

Adjusted EBITDA for the first six months of 2013 was $39.5 million, or 10.8% of revenue, compared to $40.4 million, or 10.9% of revenue, for the comparable period last year. Interest expense declined to $15.3 million in the year-to-date period of 2013, compared to $16.5 million in the prior-year period as the Company continued to de-lever its balance sheet.

During the first six months of 2013, the Company generated $6.9 million of cash from operations compared to $5.7 million in the prior-year period. The higher cash provided by operating activities in the first six months of 2013 reflected improved working capital management and higher net income and certain timing differences.

Ducommun AeroStructures (DAS)

The Company’s DAS segment reported net sales for the first six months 2013 of $156.7 million, compared to $151.2 million in the prior-year period. The 3.7% increase in revenue was due to higher sales of large commercial aircraft products, partially offset by lower sales of military helicopter products.

DAS segment operating income was $16.1 million, or 10.3% of revenue, compared to $14.2 million, or 9.4% of revenue, in the same period of 2012. The higher operating margin primarily reflects improved product mix and operating efficiencies. EBITDA was $20.9 million for first six months, or 13.3% of revenue, compared to $18.5 million, or 12.2% of revenue, for the prior-year period.

Ducommun LaBarge Technologies (DLT)

The Company’s DLT segment reported net sales for the first six months of 2013 of $210.7 million, down 3.3% from $217.9 million in the prior-year period. Defense electronics and commercial aerospace revenue increased 14.1%, offset by a 28.8% decline in the segment’s non-A&D revenue.

DLT’s operating income for the first six months of 2013 was $19.2 million, or 9.1% of revenue, compared to $18.8 million, or 8.6% of revenue, in the comparable period of 2012. The increase in operating margin was


primarily due to a richer product mix and the realization of cost synergies achieved following the LaBarge acquisition. EBITDA was $28.5 million, or 13.5% of revenue, compared to $28.2 million, or 13.0% of revenue, in the prior-year period.

Corporate General and Administrative Expenses (CG&A)

CG&A expenses for the first half of 2013 were $10.0 million, or 2.7% of revenue, up from $7.1 million, or 1.9% of revenue, in the prior-year period. CG&A expenses increased in 2013 primarily due to higher benefit costs, a workers’ compensation insurance payroll audit charge, expenses related to the Company’s debt repricing transaction and certain professional fees.

Conference Call

A teleconference hosted by Anthony J. Reardon, the Company’s chairman, president and chief executive officer, and Joseph P. Bellino, the Company’s vice president, treasurer and chief financial officer, will be held today, August 5, 2013 at 2:00 p.m. PT (5:00 p.m. ET) to review these financial results. To participate in the teleconference, please call 877-415-3179 (international 857-244-7322) approximately ten minutes prior to the conference time stated above. The participant passcode is 66505373. 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 65005492.

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.

 

CONTACT:         
   Joseph P. Bellino      or       Chris Witty
   Vice President, Treasurer and Chief Financial Officer       Investor Relations
   (310) 513-7211       (646) 438-9385/cwitty@darrowir.com


DUCOMMUN INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)

 

     Three Months Ended     Six Months Ended  
     June 29,
2013
    June 30,
2012
    June 29,
2013
    June 30,
2012
 

Net Sales

   $ 191,472      $ 184,705      $ 367,387      $ 369,048   

Cost of Sales

     154,156        148,754        297,218        298,626   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

     37,316        35,951        70,169        70,422   

Selling, General and Administrative Expenses

     22,273        21,939        44,824        44,551   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income

     15,043        14,012        25,345        25,871   

Interest Expense

     7,442        8,234        15,265        16,473   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income Before Taxes

     7,601        5,778        10,080        9,398   

Income Tax Expense

     2,097        271        869        1,501   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

   $ 5,504      $ 5,507      $ 9,211      $ 7,897   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Earnings Per Share

        

Basic earnings per share

   $ 0.52      $ 0.52      $ 0.87      $ 0.75   

Diluted earnings per share

   $ 0.51      $ 0.52      $ 0.86      $ 0.75   

 

Weighted-Average Number of Common Shares Outstanding

        

Basic

     10,648        10,582        10,624        10,565   

Diluted

     10,790        10,582        10,731        10,565   

 

Gross Profit %

     19.5     19.5     19.1     19.1

SG&A %

     11.6     11.9     12.2     12.1

Operating Income %

     7.9     7.6     6.9     7.0

Net Income %

     2.9     3.0     2.5     2.1

Effective Tax Rate

     27.6     4.7     8.6     16.0


DUCOMMUN INCORPORATED AND SUBSIDARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

 

          June 29,    
2013
    December 31,
2012
 

Assets

    

Current Assets

    

Cash and cash equivalents

   $ 33,510      $ 46,537   

Accounts receivable, net

     105,577        97,300   

Unbilled receivables

     4,093        3,556   

Inventories

     148,906        148,318   

Production cost of contracts

     19,049        17,960   

Deferred income taxes

     7,016        10,459   

Other current assets

     13,912        10,441   
  

 

 

   

 

 

 

Total Current Assets

     332,063        334,571   

Property and Equipment, Net

     95,602        98,383   

Goodwill

     161,940        161,940   

Intangibles, Net

     170,911        176,356   

Other Assets

     12,310        13,824   
  

 

 

   

 

 

 

Total Assets

   $ 772,826      $ 785,074   
  

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

    

Current Liabilities

    

Current portion of long-term debt

   $ 3,033      $ 3,042   

Accounts payable

     50,864        52,578   

Accrued liabilities

     48,392        52,716   
  

 

 

   

 

 

 

Total Current Liabilities

     102,289        108,336   

Long-Term Debt, Less Current Portion

     347,690        362,702   

Deferred Income Taxes

     65,980        67,808   

Other Long-Term Liabilities

     22,900        23,553   
  

 

 

   

 

 

 

Total Liabilities

     538,859        562,399   
  

 

 

   

 

 

 

Commitments and Contingencies

    

Shareholders’ Equity

    

Common stock

     108        107   

Treasury stock

     (1,924     (1,924

Additional paid-in capital

     68,211        66,475   

Retained earnings

     174,696        165,485   

Accumulated other comprehensive loss

     (7,124     (7,468
  

 

 

   

 

 

 

Total Shareholders’ Equity

     233,967        222,675   
  

 

 

   

 

 

 

Total Liabilities and Shareholders’ Equity

   $ 772,826      $ 785,074   
  

 

 

   

 

 

 


DUCOMMUN INCORPORATED AND SUBSIDIARIES

BUSINESS SEGMENT PERFORMANCE

(Unaudited)

(In thousands)

 

    Three Months Ended     Six Months Ended  
                      %     %                       %     %  
    %
Change
    June 29,
2013
    June 30,
2012
    of Net Sales
2013
    of Net Sales
2012
    %
Change
    June 29,
2013
    June 30,
2012
    of Net Sales
2013
    of Net Sales
2012
 

Net Sales

                   

DAS

    9.2   $ 83,992      $ 76,890        43.9     41.6     3.7   $ 156,697      $ 151,177        42.7     41.0

DLT

    (0.3 )%      107,480        107,815        56.1     58.4     (3.3 )%      210,690        217,871        57.3     59.0
   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

 

Total Net Sales

    3.7   $ 191,472      $ 184,705        100.0     100.0     (0.5 )%    $ 367,387      $ 369,048        100.0     100.0
   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

 

Segment Operating Income

                   

DAS

    $ 9,502      $ 7,574        11.3     9.9     $ 16,133      $ 14,165        10.3     9.4

DLT (2)

      11,242        10,486        10.5     9.7       19,176        18,788        9.1     8.6
   

 

 

   

 

 

         

 

 

   

 

 

     
      20,744        18,060              35,309        32,953       

Corporate General and Administrative Expenses (1) (2) (3)

      (5,701     (4,048     (3.0 )%      (2.2 )%        (9,964     (7,082     (2.7 )%      (1.9 )% 
   

 

 

   

 

 

         

 

 

   

 

 

     

Total Operating Income

    $ 15,043      $ 14,012        7.9     7.6     $ 25,345      $ 25,871        6.9     7.0
   

 

 

   

 

 

         

 

 

   

 

 

     

EBITDA (1)

                   

DAS

                   

Operating Income

    $ 9,502      $ 7,574            $ 16,133      $ 14,165       

Depreciation and Amortization

      2,438        2,241              4,765        4,297       
   

 

 

   

 

 

         

 

 

   

 

 

     
      11,940        9,815        14.2     12.8       20,898        18,462        13.3     12.2

DLT

                   

Operating Income

      11,242        10,486              19,176        18,788       

Depreciation and Amortization

      4,660        4,732              9,323        9,429       
   

 

 

   

 

 

         

 

 

   

 

 

     
      15,902        15,218        14.8     14.1       28,499        28,217        13.5     13.0

Corporate General and Administrative Expenses

                   

Operating Loss

      (5,701     (4,048           (9,964     (7,082    

Depreciation and Amortization

      42        30              85        81       
   

 

 

   

 

 

         

 

 

   

 

 

     
      (5,659     (4,018           (9,879     (7,001    
   

 

 

   

 

 

         

 

 

   

 

 

     

EBITDA

    $ 22,183      $ 21,015            $ 39,518      $ 39,678       
   

 

 

   

 

 

         

 

 

   

 

 

     

Adjusted EBITDA

                   

Merger-related expenses (2)

    $ —        $ 328            $ —        $ 695       
   

 

 

   

 

 

         

 

 

   

 

 

     

Adjusted EBITDA

    $ 22,183      $ 21,343        11.6     11.6     $ 39,518      $ 40,373        10.8     10.9
   

 

 

   

 

 

         

 

 

   

 

 

     

Capital Expenditures

                   

DAS

    $ 1,495      $ 1,829            $ 3,049      $ 4,286       

DLT

      1,128        2,012              2,180        4,449       

Corporate Administration

      18        5              24        28       
   

 

 

   

 

 

         

 

 

   

 

 

     

Total Capital Expenditures

    $ 2,641      $ 3,846            $ 5,253      $ 8,763       
   

 

 

   

 

 

         

 

 

   

 

 

     

 

(1) 

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

(2) 

The three- and six-month periods of 2012 include merger-related transaction costs of $0.1 million and $0.3 million, respectively, in Corporate General and Administrative Expenses and $0.2 million and $0.4 million, respectively, in DLT resulting from a change in control provision for certain key executives and employees arising in connection with the acquisition of LaBarge Inc. in June 2011.

(3) 

The three- and six-month periods of 2013 include $0.9 million and $1.1 million, respectively, of workers’ compensation insurance expenses included in gross profit and not allocated to the operating segments. The three- and six-month periods of 2012 include $0.4 million and $0.6 million, respectively, of workers’ compensation insurance expenses included in gross profit and not allocated to the operating segments.