Delaware | 001-08174 | 95-0693330 | |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |
200 Sandpointe Avenue, Suite 700, Santa Ana, California | 92707-5759 | ||
(Address of principal executive offices) | (Zip Code) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
Ducommun Incorporated issued a press release on February 28, 2018 in the form attached hereto as Exhibit 99.1. |
Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits |
Exhibit No. | Exhibit Title or Description |
99.1 |
DUCOMMUN INCORPORATED (Registrant) | |||
Date: February 28, 2018 | By: | /s/ Douglas L. Groves | |
Douglas L. Groves | |||
Vice President, Chief Financial Officer and Treasurer |
• | Revenue of $142.3 million |
• | GAAP net income of $9.5 million, or $0.82 per diluted share |
• | Adjusted net income for the quarter was $4.6 million, or $0.41 per diluted share, which excludes net of tax, $12.6 million tax benefit from adoption of Tax Cuts Jobs Act, $6.9 million restructuring charges, and $0.9 million inventory purchase accounting adjustment |
• | Adjusted EBITDA of $13.6 million |
• | Backlog of $726.5 million |
• | $1.3 million lower revenue within the Company’s military and space end-use markets mainly due to timing of certain orders which impacted scheduled deliveries on the Company’s fixed-wing and helicopter platforms; partially offset by |
• | $0.9 million higher revenue in the Company’s commercial aerospace end-use markets mainly due to added content with existing customers; and |
• | $0.2 million higher revenue within the Company’s industrial, medical and other (“Industrial”) end-use markets. |
• | $17.5 million lower income tax expense mainly due to the reduction of the U.S. corporate tax rate as a result of the Tax Cuts and Jobs Act (“Tax Act”) enacted in December 2017 which required the Company to remeasure its deferred tax assets and liabilities at December 31, 2017; partially offset by |
• | $8.7 million (of which, $0.5 million was recorded as cost of sales) higher restructuring charges as a result of the Company approving and commencing a restructuring plan in November 2017 that is expected to increase operating efficiencies; |
• | $1.4 million higher selling, general, and administrative (“SG&A”) expense mainly due to higher compensation and benefit costs and higher professional service fees; and |
• | $1.1 million of inventory purchase accounting adjustments in the fourth quarter of 2017. |
• | $4.1 million higher revenue within the Company’s commercial aerospace end-use markets mainly due to build rate increases and added content with existing customers, which favorably impacted the Company’s large airframe platforms; and |
• | $0.2 million higher revenue within the Company’s military and space end-use markets mainly due to higher demand, which favorably impacted the Company’s helicopter platforms. |
• | $3.2 million lower revenue within the Company’s commercial aerospace end-use markets mainly due to timing of certain orders which impacted scheduled deliveries on certain of the Company’s large airframe programs; and |
• | $1.5 million lower revenue within the Company’s military and space end-use markets mainly due to timing of certain orders which impacted scheduled deliveries on certain of the Company’s fixed-wing and helicopter platforms; partially offset by |
• | $0.2 million higher revenue within the Company’s Industrial end-use markets. |
Douglas L. Groves, Vice President, Chief Financial Officer and Treasurer, 657.335.3665 | ||||||
Chris Witty, Investor Relations, 646.438.9385, cwitty@darrowir.com |
December 31, 2017 | December 31, 2016 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 2,150 | $ | 7,432 | ||||
Accounts receivable, net | 74,064 | 76,239 | ||||||
Inventories | 122,161 | 119,896 | ||||||
Production cost of contracts | 11,204 | 11,340 | ||||||
Other current assets | 11,435 | 11,034 | ||||||
Total Current Assets | 221,014 | 225,941 | ||||||
Property and Equipment, Net | 110,252 | 101,590 | ||||||
Goodwill | 117,435 | 82,554 | ||||||
Intangibles, Net | 114,693 | 101,573 | ||||||
Non-Current Deferred Income Taxes | 261 | 286 | ||||||
Other Assets | 3,098 | 3,485 | ||||||
Total Assets | $ | 566,753 | $ | 515,429 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current Liabilities | ||||||||
Current portion of long-term debt | $ | — | $ | 3 | ||||
Accounts payable | 51,907 | 57,024 | ||||||
Accrued liabilities | 28,329 | 29,279 | ||||||
Total Current Liabilities | 80,236 | 86,306 | ||||||
Long-Term Debt, Less Current Portion | 216,055 | 166,896 | ||||||
Non-Current Deferred Income Taxes | 15,981 | 31,417 | ||||||
Other Long-Term Liabilities | 18,898 | 18,707 | ||||||
Total Liabilities | 331,170 | 303,326 | ||||||
Commitments and Contingencies | ||||||||
Shareholders’ Equity | ||||||||
Common stock | 113 | 112 | ||||||
Additional paid-in capital | 80,223 | 76,783 | ||||||
Retained earnings | 161,364 | 141,287 | ||||||
Accumulated other comprehensive loss | (6,117 | ) | (6,079 | ) | ||||
Total Shareholders’ Equity | 235,583 | 212,103 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 566,753 | $ | 515,429 |
Three Months Ended | Years Ended | |||||||||||||||
December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||
Net Revenues | $ | 142,258 | $ | 142,486 | $ | 558,183 | $ | 550,642 | ||||||||
Cost of Sales | 116,565 | 114,700 | 455,363 | 444,449 | ||||||||||||
Gross Profit | 25,693 | 27,786 | 102,820 | 106,193 | ||||||||||||
Selling, General and Administrative Expenses | 20,074 | 18,647 | 79,435 | 77,443 | ||||||||||||
Restructuring Charges | 8,360 | 182 | 8,360 | 182 | ||||||||||||
Operating (Loss) Income | (2,741 | ) | 8,957 | 15,025 | 28,568 | |||||||||||
Interest Expense | (2,673 | ) | (1,995 | ) | (8,261 | ) | (8,274 | ) | ||||||||
(Loss) Gain on Divestitures, Net | — | (1,211 | ) | — | 17,604 | |||||||||||
Other Income, Net | 357 | 74 | 845 | 215 | ||||||||||||
(Loss) Income Before Taxes | (5,057 | ) | 5,825 | 7,609 | 38,113 | |||||||||||
Income Tax (Benefit) Expense | (14,541 | ) | 2,989 | (12,468 | ) | 12,852 | ||||||||||
Net Income | $ | 9,484 | $ | 2,836 | $ | 20,077 | $ | 25,261 | ||||||||
Earnings Per Share | ||||||||||||||||
Basic earnings per share | $ | 0.84 | $ | 0.25 | $ | 1.78 | $ | 2.27 | ||||||||
Diluted earnings per share | $ | 0.82 | $ | 0.25 | $ | 1.74 | $ | 2.24 | ||||||||
Weighted-Average Number of Common Shares Outstanding | ||||||||||||||||
Basic | 11,246 | 11,182 | 11,290 | 11,151 | ||||||||||||
Diluted | 11,504 | 11,383 | 11,558 | 11,299 | ||||||||||||
Gross Profit % | 18.1 | % | 19.5 | % | 18.4 | % | 19.3 | % | ||||||||
SG&A % | 14.1 | % | 13.1 | % | 14.2 | % | 14.1 | % | ||||||||
Operating (Loss) Income % | (1.9 | )% | 6.3 | % | 2.7 | % | 5.2 | % | ||||||||
Net Income % | 6.7 | % | 2.0 | % | 3.6 | % | 4.6 | % | ||||||||
Effective Tax (Benefit) Rate | (287.5 | )% | 51.3 | % | (163.8 | )% | 33.7 | % |
Three Months Ended | Years Ended | |||||||||||||||||||||||||||||||||
% Change | December 31, 2017 | December 31, 2016 | % of Net Revenues 2017 | % of Net Revenues 2016 | % Change | December 31, 2017 | December 31, 2016 | % of Net Revenues 2017 | % of Net Revenues 2016 | |||||||||||||||||||||||||
Net Revenues | ||||||||||||||||||||||||||||||||||
Structural Systems | 7.0 | % | $ | 65,088 | $ | 60,823 | 45.8 | % | 42.7 | % | (2.0 | )% | $ | 241,460 | $ | 246,465 | 43.3 | % | 44.8 | % | ||||||||||||||
Electronic Systems | (5.5 | )% | 77,170 | 81,663 | 54.2 | % | 57.3 | % | 4.1 | % | 316,723 | 304,177 | 56.7 | % | 55.2 | % | ||||||||||||||||||
Total Net Revenues | (0.2 | )% | $ | 142,258 | $ | 142,486 | 100.0 | % | 100.0 | % | 1.4 | % | $ | 558,183 | $ | 550,642 | 100.0 | % | 100.0 | % | ||||||||||||||
Segment Operating (Loss) Income | ||||||||||||||||||||||||||||||||||
Structural Systems | $ | (2,670 | ) | $ | 3,150 | (4.1 | )% | 5.2 | % | $ | 5,477 | $ | 16,497 | 2.3 | % | 6.7 | % | |||||||||||||||||
Electronic Systems | 6,782 | 9,214 | 8.8 | % | 11.3 | % | 30,940 | 28,983 | 9.8 | % | 9.5 | % | ||||||||||||||||||||||
4,112 | 12,364 | 36,417 | 45,480 | |||||||||||||||||||||||||||||||
Corporate General and Administrative Expenses (1) | (6,853 | ) | (3,407 | ) | (4.8 | )% | (2.4 | )% | (21,392 | ) | (16,912 | ) | (3.8 | )% | (3.1 | )% | ||||||||||||||||||
Total Operating (Loss) Income | $ | (2,741 | ) | $ | 8,957 | (1.9 | )% | 6.3 | % | $ | 15,025 | $ | 28,568 | 2.7 | % | 5.2 | % | |||||||||||||||||
Adjusted EBITDA | ||||||||||||||||||||||||||||||||||
Structural Systems | ||||||||||||||||||||||||||||||||||
Operating (Loss) Income | $ | (2,670 | ) | $ | 3,150 | $ | 5,477 | $ | 16,497 | |||||||||||||||||||||||||
Other Income | — | — | 200 | 141 | ||||||||||||||||||||||||||||||
Depreciation and Amortization | 1,981 | 2,005 | 8,860 | 8,688 | ||||||||||||||||||||||||||||||
Restructuring Charges | 5,802 | — | 5,866 | — | ||||||||||||||||||||||||||||||
5,113 | 5,155 | 7.9 | % | 8.5 | % | 20,403 | 25,326 | 8.4 | % | 10.3 | % | |||||||||||||||||||||||
Electronic Systems | ||||||||||||||||||||||||||||||||||
Operating Income | 6,782 | 9,214 | 30,940 | 28,983 | ||||||||||||||||||||||||||||||
Other Income | 357 | — | 645 | — | ||||||||||||||||||||||||||||||
Depreciation and Amortization | 3,681 | 3,426 | 13,888 | 14,087 | ||||||||||||||||||||||||||||||
Restructuring Charges | 1,190 | 182 | 1,190 | 182 | ||||||||||||||||||||||||||||||
Inventory Purchase Accounting Adjustments | 1,111 | — | 1,235 | — | ||||||||||||||||||||||||||||||
13,121 | 12,822 | 17.0 | % | 15.7 | % | 47,898 | 43,252 | 15.1 | % | 14.2 | % | |||||||||||||||||||||||
Corporate General and Administrative Expenses (1) | ||||||||||||||||||||||||||||||||||
Operating loss | (6,853 | ) | (3,407 | ) | (21,392 | ) | (16,912 | ) | ||||||||||||||||||||||||||
Other Income | — | 74 | — | 74 | ||||||||||||||||||||||||||||||
Depreciation and Amortization | 34 | 9 | 97 | 85 | ||||||||||||||||||||||||||||||
Stock-Based Compensation Expense | 411 | 428 | 4,675 | 3,007 | ||||||||||||||||||||||||||||||
Restructuring Charges | 1,782 | — | 1,782 | — | ||||||||||||||||||||||||||||||
(4,626 | ) | (2,896 | ) | (14,838 | ) | (13,746 | ) | |||||||||||||||||||||||||||
Adjusted EBITDA | $ | 13,608 | $ | 15,081 | 9.6 | % | 10.6 | % | $ | 53,463 | $ | 54,832 | 9.6 | % | 10.0 | % | ||||||||||||||||||
Capital Expenditures | ||||||||||||||||||||||||||||||||||
Structural Systems | $ | 3,462 | $ | 5,512 | $ | 20,679 | $ | 15,661 | ||||||||||||||||||||||||||
Electronic Systems | 763 | 1,331 | 5,019 | 3,032 | ||||||||||||||||||||||||||||||
Corporate Administration | — | — | 775 | — | ||||||||||||||||||||||||||||||
Total Capital Expenditures | $ | 4,225 | $ | 6,843 | $ | 26,473 | $ | 18,693 |
(1) | Includes costs not allocated to either the Structural Systems or Electronic Systems operating segments. |
Three Months Ended | Years Ended | |||||||||||||||
GAAP To Non-GAAP Earnings | December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | ||||||||||||
GAAP Net income | $ | 9,484 | $ | 2,836 | $ | 20,077 | $ | 25,261 | ||||||||
Adjustments: | ||||||||||||||||
Tax Cuts Jobs Act (1) | (12,590 | ) | — | (12,590 | ) | — | ||||||||||
Restructuring charges (2) | 6,879 | — | 6,929 | — | ||||||||||||
Inventory purchase accounting adjustments (2) | 871 | — | 968 | — | ||||||||||||
Divestiture of Miltec operation net working capital adjustment (3) | — | 1,211 | — | 1,211 | ||||||||||||
Divestiture of Miltec operation tax basis adjustment (4) | — | 795 | — | 795 | ||||||||||||
Gain on divestitures, net (4) | — | — | — | (13,625 | ) | |||||||||||
Total adjustments | (4,840 | ) | 2,006 | (4,693 | ) | (11,619 | ) | |||||||||
Adjusted net income | $ | 4,644 | $ | 4,842 | $ | 15,384 | $ | 13,642 |
Three Months Ended | Years Ended | |||||||||||||||
GAAP Earnings Per Share To Non-GAAP Earnings Per Share | December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | ||||||||||||
GAAP Diluted Earnings Per Share (“EPS”) | $ | 0.82 | $ | 0.25 | $ | 1.74 | $ | 2.24 | ||||||||
Adjustments: | ||||||||||||||||
Tax Cuts Jobs Act (1) | (1.09 | ) | — | (1.09 | ) | — | ||||||||||
Restructuring charges (2) | 0.60 | — | 0.60 | — | ||||||||||||
Inventory purchase accounting adjustments (2) | 0.08 | — | 0.08 | — | ||||||||||||
Divestiture of Miltec operation net working capital adjustment (3) | — | 0.11 | — | 0.11 | ||||||||||||
Divestiture of Miltec operation tax basis adjustment (4) | — | 0.07 | — | 0.07 | ||||||||||||
Gain on divestitures, net (4) | — | — | — | (1.21 | ) | |||||||||||
Total adjustments | (0.41 | ) | 0.18 | (0.41 | ) | (1.03 | ) | |||||||||
Adjusted Diluted EPS | $ | 0.41 | $ | 0.43 | $ | 1.33 | $ | 1.21 | ||||||||
Shares used for adjusted diluted EPS | 11,504 | 11,383 | 11,558 | 11,299 |
(1) | Net impact of Tax Cuts Jobs Act and $0.5 million in 2016 state income tax adjustments. |
(2) | Includes effective tax rate of 21.6% for 2017 adjustments. |
(3) | Net working capital adjustment did not have an impact on our effective tax rate and thus, no effective tax rate was applied to this item. |
(4) | Includes effective tax rate of 22.6% for 2016 adjustments. |
Three Months Ended | Years Ended | |||||||||||||||
GAAP To Non-GAAP Operating Income | December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | ||||||||||||
GAAP Operating (loss) income | $ | (2,741 | ) | $ | 8,957 | $ | 15,025 | $ | 28,568 | |||||||
GAAP Operating (loss) income - Structural Systems | $ | (2,670 | ) | $ | 3,150 | $ | 5,477 | $ | 16,497 | |||||||
Adjustment: | ||||||||||||||||
Restructuring charges | 5,802 | — | 5,866 | — | ||||||||||||
Adjusted operating income - Structural Systems | 3,132 | 3,150 | 11,343 | 16,497 | ||||||||||||
GAAP Operating income - Electronic Systems | 6,782 | 9,214 | 30,940 | 28,983 | ||||||||||||
Adjustments: | ||||||||||||||||
Restructuring charges | 1,190 | 182 | 1,190 | 182 | ||||||||||||
Inventory purchase accounting adjustments | 1,111 | — | 1,235 | — | ||||||||||||
Adjusted operating income - Electronic Systems | 9,083 | 9,396 | 33,365 | 29,165 | ||||||||||||
GAAP Operating loss - Corporate | (6,853 | ) | (3,407 | ) | (21,392 | ) | (16,912 | ) | ||||||||
Adjustment: | ||||||||||||||||
Restructuring charges | 1,782 | — | 1,782 | — | ||||||||||||
Adjusted operating income - Corporate | (5,071 | ) | (3,407 | ) | (19,610 | ) | (16,912 | ) | ||||||||
Total adjustments | $ | 9,885 | $ | 182 | $ | 10,073 | $ | 182 | ||||||||
Adjusted operating income | $ | 7,144 | $ | 9,139 | $ | 25,098 | $ | 28,750 |
Three Months Ended | Years Ended | |||||||||||
GAAP To Non-GAAP Operating Income As A Percentage of Net Revenues | December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | ||||||||
GAAP Operating (loss) income as a % of net revenues | (1.9 | )% | 6.3 | % | 2.7 | % | 5.2 | % | ||||
GAAP Operating (loss) income - Structural Systems | (4.1 | )% | 5.2 | % | 2.3 | % | 6.7 | % | ||||
Adjustment: | ||||||||||||
Restructuring charges | 8.9 | % | — | % | 2.4 | % | — | % | ||||
Adjusted operating income - Structural Systems | 4.8 | % | 5.2 | % | 4.7 | % | 6.7 | % | ||||
GAAP Operating income - Electronic Systems | 8.8 | % | 11.3 | % | 9.8 | % | 9.5 | % | ||||
Adjustments: | ||||||||||||
Restructuring charges | 1.5 | % | 0.2 | % | 0.4 | % | 0.1 | % | ||||
Inventory purchase accounting adjustments | 1.4 | % | — | % | 0.4 | % | — | % | ||||
Adjusted operating income - Electronic Systems | 11.7 | % | 11.5 | % | 10.6 | % | 9.6 | % | ||||
GAAP Operating loss - Corporate | (4.8 | )% | (2.4 | )% | (3.8 | )% | (3.1 | )% | ||||
Adjustment: | ||||||||||||
Restructuring charges | 1.3 | % | — | % | 0.3 | % | — | % | ||||
Adjusted operating income - Corporate | (3.5 | )% | (2.4 | )% | (3.5 | )% | (3.1 | )% | ||||
Total adjustments | 6.9 | % | 0.1 | % | 1.8 | % | — | % | ||||
Adjusted operating income as a % of net revenues | 5.0 | % | 6.4 | % | 4.5 | % | 5.2 | % |
(In thousands) December 31, | ||||||||
2017 | 2016 | |||||||
Consolidated Ducommun | ||||||||
Military and space | ||||||||
Defense electronics | $ | 216,508 | $ | 197,577 | ||||
Defense structures | 60,921 | 58,877 | ||||||
Commercial aerospace | 417,981 | 357,668 | ||||||
Industrial | 31,068 | 27,130 | ||||||
Total | $ | 726,478 | $ | 641,252 | ||||
Structural Systems | ||||||||
Military and space (defense structures) | $ | 60,921 | $ | 58,877 | ||||
Commercial aerospace | 361,586 | 319,518 | ||||||
Total | $ | 422,507 | $ | 378,395 | ||||
Electronic Systems | ||||||||
Military and space (defense electronics) | $ | 216,508 | $ | 197,577 | ||||
Commercial aerospace | 56,395 | 38,150 | ||||||
Industrial | 31,068 | 27,130 | ||||||
Total | $ | 303,971 | $ | 262,857 |
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