QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive offices) | (Zip code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Large accelerated filer | ¨ | x | |||||||||||||||
Non-accelerated filer | ¨ | Smaller reporting company | |||||||||||||||
Emerging growth company |
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. | |||||||||||
June 27, 2020 | December 31, 2019 | |||||||||||||
Assets | ||||||||||||||
Current Assets | ||||||||||||||
Cash and cash equivalents | $ | $ | ||||||||||||
Accounts receivable, net (allowance for credit losses of $ | ||||||||||||||
Contract assets | ||||||||||||||
Inventories | ||||||||||||||
Production cost of contracts | ||||||||||||||
Other current assets | ||||||||||||||
Total Current Assets | ||||||||||||||
Property and equipment, net of accumulated depreciation of $ | ||||||||||||||
Operating Lease Right-of-Use Assets | ||||||||||||||
Goodwill | ||||||||||||||
Intangibles, Net | ||||||||||||||
Deferred Income Taxes | ||||||||||||||
Other Assets | ||||||||||||||
Total Assets | $ | $ | ||||||||||||
Liabilities and Shareholders’ Equity | ||||||||||||||
Current Liabilities | ||||||||||||||
Accounts payable | $ | $ | ||||||||||||
Contract liabilities | ||||||||||||||
Accrued and other liabilities | ||||||||||||||
Operating lease liabilities | ||||||||||||||
Current portion of long-term debt | ||||||||||||||
Total Current Liabilities | ||||||||||||||
Long-Term Debt, Less Current Portion | ||||||||||||||
Non-Current Operating Lease Liabilities | ||||||||||||||
Deferred Income Taxes | ||||||||||||||
Other Long-Term Liabilities | ||||||||||||||
Total Liabilities | ||||||||||||||
Commitments and Contingencies (Notes 8, 10) | ||||||||||||||
Shareholders’ Equity | ||||||||||||||
Common stock - $ | ||||||||||||||
Additional paid-in capital | ||||||||||||||
Retained earnings | ||||||||||||||
Accumulated other comprehensive loss | ( | ( | ||||||||||||
Total Shareholders’ Equity | ||||||||||||||
Total Liabilities and Shareholders’ Equity | $ | $ |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
June 27, 2020 | June 29, 2019 | June 27, 2020 | June 29, 2019 | |||||||||||||||||||||||
Net Revenues | $ | $ | $ | $ | ||||||||||||||||||||||
Cost of Sales | ||||||||||||||||||||||||||
Gross Profit | ||||||||||||||||||||||||||
Selling, General and Administrative Expenses | ||||||||||||||||||||||||||
Restructuring Charges | ||||||||||||||||||||||||||
Operating Income | ||||||||||||||||||||||||||
Interest Expense | ( | ( | ( | ( | ||||||||||||||||||||||
Income Before Taxes | ||||||||||||||||||||||||||
Income Tax Expense | ||||||||||||||||||||||||||
Net Income | $ | $ | $ | $ | ||||||||||||||||||||||
Earnings Per Share | ||||||||||||||||||||||||||
Basic earnings per share | $ | $ | $ | $ | ||||||||||||||||||||||
Diluted earnings per share | $ | $ | $ | $ | ||||||||||||||||||||||
Weighted-Average Number of Common Shares Outstanding | ||||||||||||||||||||||||||
Basic | ||||||||||||||||||||||||||
Diluted |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
June 27, 2020 | June 29, 2019 | June 27, 2020 | June 29, 2019 | |||||||||||||||||||||||
Net Income | $ | $ | $ | $ | ||||||||||||||||||||||
Other Comprehensive Income, Net of Tax: | ||||||||||||||||||||||||||
Amortization of actuarial loss and prior service costs, net of tax of $ | ||||||||||||||||||||||||||
Change in unrealized gains and losses on cash flow hedges, net of tax of $ | ( | ( | ||||||||||||||||||||||||
Other Comprehensive Income, Net of Tax | ||||||||||||||||||||||||||
Comprehensive Income | $ | $ | $ | $ |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
June 27, 2020 | June 29, 2019 | June 27, 2020 | June 29, 2019 | |||||||||||||||||||||||
Common Stock and Paid-in-Capital | ||||||||||||||||||||||||||
Balance, Beginning of Period | $ | $ | $ | $ | ||||||||||||||||||||||
Employee Stock Purchase Plan | — | — | — | |||||||||||||||||||||||
Stock Options Exercised | ||||||||||||||||||||||||||
Stock Awards Vested | — | — | ( | ( | ||||||||||||||||||||||
Stock Repurchased Related to the Exercise of Stock Options and Stock Awards Vested | ( | ( | ( | ( | ||||||||||||||||||||||
Stock-Based Compensation | ||||||||||||||||||||||||||
Balance, End of Period | ||||||||||||||||||||||||||
Retained Earnings | ||||||||||||||||||||||||||
Balance, Beginning of Period | ||||||||||||||||||||||||||
Net Income | ||||||||||||||||||||||||||
Adoption of Adjustment | — | — | — | ( | ||||||||||||||||||||||
Balance, End of Period | ||||||||||||||||||||||||||
Accumulated Other Comprehensive Loss | ||||||||||||||||||||||||||
Balance, Beginning of Period | ( | ( | ( | ( | ||||||||||||||||||||||
Other Comprehensive Income, Net of Tax | ||||||||||||||||||||||||||
Balance, End of Period | ( | ( | ( | ( | ||||||||||||||||||||||
Total Stockholders’ Equity | $ | $ | $ | $ |
Six Months Ended | ||||||||||||||
June 27, 2020 | June 29, 2019 | |||||||||||||
Cash Flows from Operating Activities | ||||||||||||||
Net Income | $ | $ | ||||||||||||
Adjustments to Reconcile Net Income to | ||||||||||||||
Net Cash Provided by Operating Activities: | ||||||||||||||
Depreciation and amortization | ||||||||||||||
Non-cash operating lease cost | ||||||||||||||
Stock-based compensation expense | ||||||||||||||
Deferred income taxes | ||||||||||||||
Recovery of credit losses | ( | ( | ||||||||||||
Other | ( | |||||||||||||
Changes in Assets and Liabilities: | ||||||||||||||
Accounts receivable | ( | ( | ||||||||||||
Contract assets | ( | ( | ||||||||||||
Inventories | ( | ( | ||||||||||||
Production cost of contracts | ( | |||||||||||||
Other assets | ||||||||||||||
Accounts payable | ( | |||||||||||||
Contract liabilities | ( | |||||||||||||
Operating lease liabilities | ( | ( | ||||||||||||
Accrued and other liabilities | ( | ( | ||||||||||||
Net Cash (Used in) Provided by Operating Activities | ( | |||||||||||||
Cash Flows from Investing Activities | ||||||||||||||
Purchases of property and equipment | ( | ( | ||||||||||||
Post closing cash received from the acquisition of Nobles Worldwide, Inc., net | ||||||||||||||
Net Cash Used in Investing Activities | ( | ( | ||||||||||||
Cash Flows from Financing Activities | ||||||||||||||
Borrowings from senior secured revolving credit facility | ||||||||||||||
Repayments of senior secured revolving credit facility | ( | ( | ||||||||||||
Repayments of term loans | ( | ( | ||||||||||||
Repayments of other debt | ( | ( | ||||||||||||
Net cash paid upon issuance of common stock under stock plans | ( | ( | ||||||||||||
Net Cash Provided by (Used in) Financing Activities | ( | |||||||||||||
Net Increase (Decrease) in Cash and Cash Equivalents | ( | |||||||||||||
Cash and Cash Equivalents at Beginning of Period | ||||||||||||||
Cash and Cash Equivalents at End of Period | $ | $ |
(In thousands) | ||||||||||||||
Six Months Ended | ||||||||||||||
June 27, 2020 | June 29, 2019 | |||||||||||||
Interest paid | $ | $ | ||||||||||||
Taxes paid | $ | $ | ||||||||||||
Non-cash activities: | ||||||||||||||
Purchases of property and equipment not paid | $ | $ |
(In thousands, except per share data) | (In thousands, except per share data) | |||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
June 27, 2020 | June 29, 2019 | June 27, 2020 | June 29, 2019 | |||||||||||||||||||||||
Net income | $ | $ | $ | $ | ||||||||||||||||||||||
Weighted-average number of common shares outstanding | ||||||||||||||||||||||||||
Basic weighted-average common shares outstanding | ||||||||||||||||||||||||||
Dilutive potential common shares | ||||||||||||||||||||||||||
Diluted weighted-average common shares outstanding | ||||||||||||||||||||||||||
Earnings per share | ||||||||||||||||||||||||||
Basic | $ | $ | $ | $ | ||||||||||||||||||||||
Diluted | $ | $ | $ | $ |
(In thousands) | (In thousands) | |||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
June 27, 2020 | June 29, 2019 | June 27, 2020 | June 29, 2019 | |||||||||||||||||||||||
Stock options and stock units |
(In thousands) | ||||||||||||||
June 27, 2020 | December 31, 2019 | |||||||||||||
Contract assets | $ | $ | ||||||||||||
Contract liabilities | $ | $ |
(In thousands) | (In thousands) | |||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
June 27 2020 | June 29, 2019 | June 27 2020 | June 29, 2019 | |||||||||||||||||||||||
Consolidated Ducommun | ||||||||||||||||||||||||||
Military and space | $ | $ | $ | $ | ||||||||||||||||||||||
Commercial aerospace | ||||||||||||||||||||||||||
Industrial | ||||||||||||||||||||||||||
Total | $ | $ | $ | $ | ||||||||||||||||||||||
Electronic Systems | ||||||||||||||||||||||||||
Military and space | $ | $ | $ | $ | ||||||||||||||||||||||
Commercial aerospace | ||||||||||||||||||||||||||
Industrial | ||||||||||||||||||||||||||
Total | $ | $ | $ | $ | ||||||||||||||||||||||
Structural Systems | ||||||||||||||||||||||||||
Military and space | $ | $ | $ | $ | ||||||||||||||||||||||
Commercial aerospace | ||||||||||||||||||||||||||
Total | $ | $ | $ | $ |
Estimated Fair Value | ||||||||
Cash | $ | |||||||
Accounts receivable | ||||||||
Inventories | ||||||||
Other current assets | ||||||||
Property and equipment | ||||||||
Intangible assets | ||||||||
Goodwill | ||||||||
Other non-current assets | ||||||||
Total assets acquired | ||||||||
Current liabilities | ( | |||||||
Net non-current deferred tax liability | ( | |||||||
Other non-current liabilities | ( | |||||||
Total liabilities assumed | ( | |||||||
Total purchase price allocation | $ |
Useful Life (In years) | Estimated Fair Value (In thousands) | |||||||||||||
Intangible assets: | ||||||||||||||
Customer relationships | $ | |||||||||||||
Trade names and trademarks | ||||||||||||||
$ |
(In thousands) | ||||||||||||||
June 27, 2020 | December 31, 2019 | |||||||||||||
Raw materials and supplies | $ | $ | ||||||||||||
Work in process | ||||||||||||||
Finished goods | ||||||||||||||
Total | $ | $ |
Electronic Systems | Structural Systems | Consolidated Ducommun | ||||||||||||||||||
Gross goodwill | $ | $ | $ | |||||||||||||||||
Accumulated goodwill impairment | ( | ( | ||||||||||||||||||
Balance at December 31, 2019 | ||||||||||||||||||||
Purchase price allocation refinements | ( | ( | ||||||||||||||||||
Balance at June 27, 2020 | $ | $ | $ |
(In thousands) | ||||||||||||||
June 27, 2020 | December 31, 2019 | |||||||||||||
Accrued compensation | $ | $ | ||||||||||||
Accrued income tax and sales tax | ||||||||||||||
Other | ||||||||||||||
Total | $ | $ |
(In thousands) | ||||||||||||||
June 27, 2020 | December 31, 2019 | |||||||||||||
Term loans | $ | $ | ||||||||||||
Revolving credit facility | ||||||||||||||
Total debt | ||||||||||||||
Less current portion | ||||||||||||||
Total long-term debt, less current portion | ||||||||||||||
Less debt issuance costs - term loans | ||||||||||||||
Total long-term debt, net of debt issuance costs - term loans | $ | $ | ||||||||||||
Debt issuance costs - revolving credit facility (1) | $ | $ | ||||||||||||
Weighted-average interest rate | % | % |
(In thousands) | (In thousands) | |||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
June 27, 2020 | June 29, 2019 | June 27, 2020 | June 29, 2019 | |||||||||||||||||||||||
Service cost | $ | $ | $ | $ | ||||||||||||||||||||||
Interest cost | ||||||||||||||||||||||||||
Expected return on plan assets | ( | ( | ( | ( | ||||||||||||||||||||||
Amortization of actuarial losses | ||||||||||||||||||||||||||
Net periodic pension cost | $ | $ | $ | $ |
(In thousands) | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 27, 2020 | June 27, 2020 | |||||||||||||
Amortization of actuarial losses - total before tax (1) | $ | $ | ||||||||||||
Tax benefit | ( | ( | ||||||||||||
Net of tax | $ | $ |
(In thousands) Three Months Ended | (In thousands) Six Months Ended | |||||||||||||||||||||||||
June 27, 2020 | June 29, 2019 | June 27, 2020 | June 29, 2019 | |||||||||||||||||||||||
Net Revenues | ||||||||||||||||||||||||||
Electronic Systems | $ | $ | $ | $ | ||||||||||||||||||||||
Structural Systems | ||||||||||||||||||||||||||
Total Net Revenues | $ | $ | $ | $ | ||||||||||||||||||||||
Segment Operating Income | ||||||||||||||||||||||||||
Electronic Systems | $ | $ | $ | $ | ||||||||||||||||||||||
Structural Systems | ||||||||||||||||||||||||||
Corporate General and Administrative Expenses (1) | ( | ( | ( | ( | ||||||||||||||||||||||
Operating Income | $ | $ | $ | $ | ||||||||||||||||||||||
Depreciation and Amortization Expenses | ||||||||||||||||||||||||||
Electronic Systems | $ | $ | $ | $ | ||||||||||||||||||||||
Structural Systems | ||||||||||||||||||||||||||
Corporate Administration | ||||||||||||||||||||||||||
Total Depreciation and Amortization Expenses | $ | $ | $ | $ | ||||||||||||||||||||||
Capital Expenditures | ||||||||||||||||||||||||||
Electronic Systems | $ | $ | $ | $ | ||||||||||||||||||||||
Structural Systems | ||||||||||||||||||||||||||
Corporate Administration | ||||||||||||||||||||||||||
Total Capital Expenditures | $ | $ | $ | $ |
(In thousands) | ||||||||||||||
June 27, 2020 | December 31, 2019 | |||||||||||||
Total Assets | ||||||||||||||
Electronic Systems | $ | $ | ||||||||||||
Structural Systems | ||||||||||||||
Corporate Administration (1) | ||||||||||||||
Total Assets | $ | $ | ||||||||||||
Goodwill and Intangibles | ||||||||||||||
Electronic Systems | $ | $ | ||||||||||||
Structural Systems | ||||||||||||||
Total Goodwill and Intangibles | $ | $ |
(Dollars in thousands) Three Months Ended | (Dollars in thousands) Six Months Ended | ||||||||||||||||||||||
June 27, 2020 | June 29, 2019 | June 27, 2020 | June 29, 2019 | ||||||||||||||||||||
Net income | $ | 5,090 | $ | 7,815 | $ | 13,020 | $ | 15,287 | |||||||||||||||
Interest expense | 3,721 | 4,426 | 7,967 | 8,777 | |||||||||||||||||||
Income tax expense | 1,214 | 1,363 | 2,664 | 2,388 | |||||||||||||||||||
Depreciation | 3,552 | 3,351 | 6,988 | 6,835 | |||||||||||||||||||
Amortization | 3,775 | 3,653 | 7,675 | 6,924 | |||||||||||||||||||
Stock-based compensation expense | 2,250 | 1,807 | 4,529 | 3,271 | |||||||||||||||||||
Restructuring charges | 661 | — | 661 | — | |||||||||||||||||||
Adjusted EBITDA | $ | 20,263 | $ | 22,415 | $ | 43,504 | $ | 43,482 | |||||||||||||||
% of net revenues | 13.8 | % | 12.4 | % | 13.6 | % | 12.3 | % |
(Dollars in thousands, except per share data) Three Months Ended | (Dollars in thousands, except per share data) Six Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
June 27, 2020 | % of Net Revenues | June 29, 2019 | % of Net Revenues | June 27, 2020 | % of Net Revenues | June 29, 2019 | % of Net Revenues | |||||||||||||||||||||||||||||||||||||||||||
Net Revenues | $ | 147,309 | 100.0 | % | $ | 180,495 | 100.0 | % | $ | 320,784 | 100.0 | % | $ | 353,061 | 100.0 | % | ||||||||||||||||||||||||||||||||||
Cost of Sales | 114,641 | 77.8 | % | 142,430 | 78.9 | % | 251,312 | 78.3 | % | 279,302 | 79.1 | % | ||||||||||||||||||||||||||||||||||||||
Gross Profit | 32,668 | 22.2 | % | 38,065 | 21.1 | % | 69,472 | 21.7 | % | 73,759 | 20.9 | % | ||||||||||||||||||||||||||||||||||||||
Selling, General and Administrative Expenses | 21,982 | 15.0 | % | 24,461 | 13.6 | % | 45,160 | 14.1 | % | 47,307 | 13.4 | % | ||||||||||||||||||||||||||||||||||||||
Restructuring Charges | 661 | 0.4 | % | — | — | % | 661 | 0.2 | % | — | — | % | ||||||||||||||||||||||||||||||||||||||
Operating Income | 10,025 | 6.8 | % | 13,604 | 7.5 | % | 23,651 | 7.4 | % | 26,452 | 7.5 | % | ||||||||||||||||||||||||||||||||||||||
Interest Expense | (3,721) | (2.5) | % | (4,426) | (2.4) | % | (7,967) | (2.5) | % | (8,777) | (2.5) | % | ||||||||||||||||||||||||||||||||||||||
Income Before Taxes | 6,304 | 4.3 | % | 9,178 | 5.1 | % | 15,684 | 4.9 | % | 17,675 | 5.0 | % | ||||||||||||||||||||||||||||||||||||||
Income Tax Expense | 1,214 | nm | 1,363 | nm | 2,664 | nm | 2,388 | nm | ||||||||||||||||||||||||||||||||||||||||||
Net Income | $ | 5,090 | 3.5 | % | $ | 7,815 | 4.3 | % | $ | 13,020 | 4.1 | % | $ | 15,287 | 4.3 | % | ||||||||||||||||||||||||||||||||||
Effective Tax Rate | 19.3 | % | nm | 14.9 | % | nm | 17.0 | % | nm | 13.5 | % | nm | ||||||||||||||||||||||||||||||||||||||
Diluted Earnings Per Share | $ | 0.43 | nm | $ | 0.66 | nm | $ | 1.10 | nm | $ | 1.30 | nm |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | % of Net Revenues | (Dollars in thousands) | % of Net Revenues | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change | June 27, 2020 | June 29, 2019 | June 27, 2020 | June 29, 2019 | Change | June 27 2020 | June 29, 2019 | June 27 2020 | June 29, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Ducommun | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Military and space | $ | 17,408 | $ | 94,597 | $ | 77,189 | 64.2 | % | 42.8 | % | $ | 43,202 | $ | 194,088 | $ | 150,886 | 60.5 | % | 42.7 | % | ||||||||||||||||||||||||||||||||||||||||||
Commercial aerospace | (51,570) | 40,418 | 91,988 | 27.4 | % | 51.0 | % | (76,188) | 104,268 | 180,456 | 32.5 | % | 51.1 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
Industrial | 976 | 12,294 | 11,318 | 8.4 | % | 6.2 | % | 709 | 22,428 | 21,719 | 7.0 | % | 6.2 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | (33,186) | $ | 147,309 | $ | 180,495 | 100.0 | % | 100.0 | % | $ | (32,277) | $ | 320,784 | $ | 353,061 | 100.0 | % | 100.0 | % | ||||||||||||||||||||||||||||||||||||||||||
Electronic Systems | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Military and space | $ | 7,749 | $ | 68,021 | $ | 60,272 | 74.0 | % | 67.5 | % | $ | 23,446 | $ | 141,150 | $ | 117,704 | 74.3 | % | 67.9 | % | ||||||||||||||||||||||||||||||||||||||||||
Commercial aerospace | (6,035) | 11,635 | 17,670 | 12.6 | % | 19.8 | % | (7,542) | 26,492 | 34,034 | 13.9 | % | 19.6 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
Industrial | 976 | 12,294 | 11,318 | 13.4 | % | 12.7 | % | 709 | 22,428 | 21,719 | 11.8 | % | 12.5 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 2,690 | $ | 91,950 | $ | 89,260 | 100.0 | % | 100.0 | % | $ | 16,613 | $ | 190,070 | $ | 173,457 | 100.0 | % | 100.0 | % | ||||||||||||||||||||||||||||||||||||||||||
Structural Systems | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Military and space | $ | 9,659 | $ | 26,576 | $ | 16,917 | 48.0 | % | 18.5 | % | $ | 19,756 | $ | 52,938 | $ | 33,182 | 40.5 | % | 18.5 | % | ||||||||||||||||||||||||||||||||||||||||||
Commercial aerospace | (45,535) | 28,783 | 74,318 | 52.0 | % | 81.5 | % | (68,646) | 77,776 | 146,422 | 59.5 | % | 81.5 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | (35,876) | $ | 55,359 | $ | 91,235 | 100.0 | % | 100.0 | % | $ | (48,890) | $ | 130,714 | $ | 179,604 | 100.0 | % | 100.0 | % |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
June 27, 2020 | June 29, 2019 | June 27, 2020 | June 29, 2019 | |||||||||||||||||||||||
Boeing Company | 12.6 | % | 16.5 | % | 10.4 | % | 18.2 | % | ||||||||||||||||||
Lockheed Martin Corporation | 5.6 | % | 4.1 | % | 4.8 | % | 4.0 | % | ||||||||||||||||||
Northrop Grumman Corporation | 5.3 | % | 2.2 | % | 5.5 | % | 3.3 | % | ||||||||||||||||||
Raytheon Technologies Corporation | 21.7 | % | 17.1 | % | 19.9 | % | 16.2 | % | ||||||||||||||||||
Spirit Aerosystems Holdings, Inc. | 0.7 | % | 14.9 | % | 3.3 | % | 13.5 | % | ||||||||||||||||||
Total top ten customers (1) | 60.4 | % | 67.9 | % | 56.8 | % | 68.2 | % |
June 27, 2020 | December 31, 2019 | |||||||||||||
Boeing | 5.6 | % | 5.9 | % | ||||||||||
Lockheed Martin | 3.8 | % | 1.3 | % | ||||||||||
Northrop | 7.7 | % | 6.5 | % | ||||||||||
Raytheon | 11.5 | % | 6.7 | % | ||||||||||
Spirit | 0.7 | % | 2.0 | % | ||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
% | (Dollars in thousands) | % of Net Revenues | % | (Dollars in thousands) | % of Net Revenues | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change | June 27, 2020 | June 29, 2019 | June 27, 2020 | June 29, 2019 | Change | June 27, 2020 | June 29, 2019 | June 27, 2020 | June 29, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Electronic Systems | 3.0 | % | $ | 91,950 | $ | 89,260 | 62.4 | % | 49.5 | % | 9.6 | % | $ | 190,070 | $ | 173,457 | 59.3 | % | 49.1 | % | ||||||||||||||||||||||||||||||||||||||||||
Structural Systems | (39.3) | % | 55,359 | 91,235 | 37.6 | % | 50.5 | % | (27.2) | % | 130,714 | 179,604 | 40.7 | % | 50.9 | % | ||||||||||||||||||||||||||||||||||||||||||||||
Total Net Revenues | (18.4) | % | $ | 147,309 | $ | 180,495 | 100.0 | % | 100.0 | % | (9.1) | % | $ | 320,784 | $ | 353,061 | 100.0 | % | 100.0 | % | ||||||||||||||||||||||||||||||||||||||||||
Segment Operating Income | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Electronic Systems | $ | 10,438 | $ | 9,912 | 11.4 | % | 11.1 | % | $ | 25,560 | $ | 19,093 | 13.4 | % | 11.0 | % | ||||||||||||||||||||||||||||||||||||||||||||||
Structural Systems | 6,214 | 11,773 | 11.2 | % | 12.9 | % | 11,604 | 22,322 | 8.9 | % | 12.4 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
16,652 | 21,685 | 37,164 | 41,415 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate General and Administrative Expenses (1) | (6,627) | (8,081) | (4.5) | % | (4.5) | % | (13,513) | (14,963) | (4.2) | % | (4.2) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total Operating Income | $ | 10,025 | $ | 13,604 | 6.8 | % | 7.5 | % | $ | 23,651 | $ | 26,452 | 7.4 | % | 7.5 | % | ||||||||||||||||||||||||||||||||||||||||||||||
Adjusted EBITDA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Electronic Systems | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Income | $ | 10,438 | $ | 9,912 | $ | 25,560 | $ | 19,093 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation and Amortization | 3,524 | 3,531 | 7,099 | 7,033 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Charges | 28 | — | 28 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
13,990 | 13,443 | 15.2 | % | 15.1 | % | 32,687 | 26,126 | 17.2 | % | 15.1 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
Structural Systems | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Income | 6,214 | 11,773 | 11,604 | 22,322 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation and Amortization | 3,739 | 3,400 | 7,428 | 6,400 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Charges | 633 | — | 633 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
10,586 | 15,173 | 19.1 | % | 16.6 | % | 19,665 | 28,722 | 15.0 | % | 16.0 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate General and Administrative Expenses (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Loss | (6,627) | (8,081) | (13,513) | (14,963) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation and Amortization | 64 | 73 | 136 | 326 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation Expense | 2,250 | 1,807 | 4,529 | 3,271 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(4,313) | (6,201) | (8,848) | (11,366) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjusted EBITDA | $ | 20,263 | $ | 22,415 | 13.8 | % | 12.4 | % | $ | 43,504 | $ | 43,482 | 13.6 | % | 12.3 | % | ||||||||||||||||||||||||||||||||||||||||||||||
Capital Expenditures | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Electronic Systems | $ | 2,117 | $ | 2,216 | $ | 2,932 | $ | 3,052 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Structural Systems | 467 | 3,672 | 2,604 | 7,361 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate Administration | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Capital Expenditures | $ | 2,584 | $ | 5,888 | $ | 5,536 | $ | 10,413 |
(Dollars in thousands) | ||||||||||||||||||||
Change | June 27, 2020 | December 31, 2019 | ||||||||||||||||||
Consolidated Ducommun | ||||||||||||||||||||
Military and space | $ | 53,896 | $ | 505,189 | $ | 451,293 | ||||||||||||||
Commercial aerospace | (123,768) | 306,874 | 430,642 | |||||||||||||||||
Industrial | (9,689) | 18,597 | 28,286 | |||||||||||||||||
Total | $ | (79,561) | $ | 830,660 | $ | 910,221 | ||||||||||||||
Electronic Systems | ||||||||||||||||||||
Military and space | $ | 45,019 | $ | 356,046 | $ | 311,027 | ||||||||||||||
Commercial aerospace | (7,383) | 68,336 | 75,719 | |||||||||||||||||
Industrial | (9,689) | 18,597 | 28,286 | |||||||||||||||||
Total | $ | 27,947 | $ | 442,979 | $ | 415,032 | ||||||||||||||
Structural Systems | ||||||||||||||||||||
Military and space | $ | 8,877 | $ | 149,143 | $ | 140,266 | ||||||||||||||
Commercial aerospace | (116,385) | 238,538 | 354,923 | |||||||||||||||||
Total | $ | (107,508) | $ | 387,681 | $ | 495,189 |
(Dollars in millions) | ||||||||||||||
June 27, | December 31, | |||||||||||||
2020 | 2019 | |||||||||||||
Total debt, including long-term portion | $ | 350.9 | $ | 310.0 | ||||||||||
Weighted-average interest rate on debt | 4.04 | % | 6.87 | % | ||||||||||
Term Loans interest rate | 4.31 | % | 6.28 | % | ||||||||||
Cash and cash equivalents | $ | 70.8 | $ | 39.6 | ||||||||||
Unused Revolving Credit Facility | $ | 49.8 | $ | 99.8 |
Director/Officer | Date of Agreement | |||||||||||||
Richard A. Baldridge | March 19, 2013 | |||||||||||||
Gregory S. Churchill | March 19, 2013 | |||||||||||||
Shirley G. Drazba | October 18, 2018 | |||||||||||||
Robert C. Ducommun | December 31, 1985 | |||||||||||||
Dean M. Flatt | November 5, 2009 | |||||||||||||
Jay L. Haberland | February 2, 2009 | |||||||||||||
Stephen G. Oswald | January 23, 2017 | |||||||||||||
Jerry L. Redondo | October 1, 2015 | |||||||||||||
Rosalie F. Rogers | July 24, 2008 | |||||||||||||
Rajiv A. Tata | January 24, 2020 | |||||||||||||
Christopher D. Wampler | January 1, 2016 |
Person | Date of Agreement | |||||||||||||
Jerry L. Redondo | January 23, 2017 | |||||||||||||
Rosalie F. Rogers | January 23, 2017 | |||||||||||||
Rajiv A. Tata | January 24, 2020 | |||||||||||||
Christopher D. Wampler | January 23, 2017 |
Date: July 30, 2020 | By: | /s/ Stephen G. Oswald | |||||||||
Stephen G. Oswald | |||||||||||
Chairman, President and Chief Executive Officer | |||||||||||
(Principal Executive Officer) | |||||||||||
Date: July 30, 2020 | By: | /s/ Christopher D. Wampler | |||||||||
Christopher D. Wampler | |||||||||||
Vice President, Interim Chief Financial Officer and Treasurer, and Controller and Chief Accounting Officer | |||||||||||
(Principal Financial and Principal Accounting Officer) | |||||||||||
Diluted Earnings Per Share | 20__ | 20__ | 20__ | Total @ Target | ||||||||||
Threshold Vesting % of Target Units | ||||||||||||||
Target Vesting % of Target Units | ||||||||||||||
Maximum Vesting % of Target Units |
Relative Total Shareholder Return v. Russell 2000 Index | |||||
Total Shareholder Return Percentile Rank | Total Vested Units Modifier | ||||
81% - 100% | 1.25 | ||||
71% - 80% | 1.15 | ||||
61% - 70% | 1.10 | ||||
41% - 60% | 1.00 | ||||
31% - 40% | .90 | ||||
21% - 30% | .85 | ||||
0% - 20% | .75 |
/s/ Stephen G. Oswald | ||
Stephen G. Oswald | ||
Chairman, President and Chief Executive Officer |
/s/ Christopher D. Wampler | ||
Christopher D. Wampler | ||
Vice President, Interim Chief Financial Officer and Treasurer, and Controller and Chief Accounting Officer |
By: | /s/ Stephen G. Oswald | |||||||
Stephen G. Oswald | ||||||||
Chairman, President and Chief Executive Officer | ||||||||
July 30, 2020 |
By: | /s/ Christopher D. Wampler | |||||||
Christopher D. Wampler | ||||||||
Vice President, Interim Chief Financial Officer and Treasurer, and Controller and Chief Accounting Officer | ||||||||
July 30, 2020 |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Jun. 27, 2020 |
Dec. 31, 2019 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for credit loss | $ 1,318 | $ 1,321 |
Property and equipment, accumulated depreciation | $ 169,721 | $ 162,920 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 35,000,000 | 35,000,000 |
Common stock, shares issued (in shares) | 11,683,131 | 11,572,668 |
Common Stock, shares outstanding (in shares) | 11,683,131 | 11,572,668 |
Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 27, 2020 |
Jun. 29, 2019 |
Jun. 27, 2020 |
Jun. 29, 2019 |
|
Income Statement [Abstract] | ||||
Net Revenues | $ 147,309 | $ 180,495 | $ 320,784 | $ 353,061 |
Cost of Sales | 114,641 | 142,430 | 251,312 | 279,302 |
Gross Profit | 32,668 | 38,065 | 69,472 | 73,759 |
Selling, General and Administrative Expenses | 21,982 | 24,461 | 45,160 | 47,307 |
Restructuring Charges | 661 | 0 | 661 | 0 |
Operating Income | 10,025 | 13,604 | 23,651 | 26,452 |
Interest Expense | (3,721) | (4,426) | (7,967) | (8,777) |
Income Before Taxes | 6,304 | 9,178 | 15,684 | 17,675 |
Income Tax Expense | 1,214 | 1,363 | 2,664 | 2,388 |
Net Income | $ 5,090 | $ 7,815 | $ 13,020 | $ 15,287 |
Earnings Per Share | ||||
Basic earnings per share (in dollars per share) | $ 0.44 | $ 0.68 | $ 1.12 | $ 1.33 |
Diluted earnings per share (in dollars per share) | $ 0.43 | $ 0.66 | $ 1.10 | $ 1.30 |
Weighted-Average Number of Common Shares Outstanding | ||||
Basic (in shares) | 11,665 | 11,513 | 11,638 | 11,475 |
Diluted (in shares) | 11,828 | 11,758 | 11,845 | 11,754 |
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 27, 2020 |
Jun. 29, 2019 |
Jun. 27, 2020 |
Jun. 29, 2019 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net Income | $ 5,090 | $ 7,815 | $ 13,020 | $ 15,287 |
Other Comprehensive Income, Net of Tax: | ||||
Amortization of actuarial loss and prior service costs, net of tax of $59 and $51 for the three months ended June 27, 2020 and June 29, 2019, respectively, and $118 and $103 for the six months ended June 27, 2020 and June 29, 2019, respectively | 188 | 170 | 378 | 340 |
Change in unrealized gains and losses on cash flow hedges, net of tax of $31 and $5 for the three months ended June 27, 2020 and June 29, 2019, respectively, and $57 and $27 for the six months ended June 27, 2020 and June 29, 2019, respectively | 76 | (7) | 162 | (91) |
Other Comprehensive Income, Net of Tax | 264 | 163 | 540 | 249 |
Comprehensive Income | $ 5,354 | $ 7,978 | $ 13,560 | $ 15,536 |
Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 27, 2020 |
Jun. 29, 2019 |
Jun. 27, 2020 |
Jun. 29, 2019 |
|
Statement of Comprehensive Income [Abstract] | ||||
Amortization of actuarial losses and prior service costs, tax benefits | $ 59 | $ 51 | $ 118 | $ 103 |
Change in unrealized gains and losses on cash flow hedges, tax benefit | $ 31 | $ 5 | $ 57 | $ 27 |
Summary of Significant Accounting Policies |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | 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. All 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, 2019 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, 2019. 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, 2019. 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 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 six months ended June 27, 2020 are not necessarily indicative of the results to be expected for the full year ending December 31, 2020. 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 ends 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 forward loss reserves), 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. Subsequent Event On June 29, 2020, subsequent to our quarter ended June 27, 2020, a fire severely damaged our performance center in Guaymas, Mexico, which is part of our Structural Systems segment. There were no injuries, however, inventories and property and equipment in this leased facility were damaged. We have insurance coverage and expect the majority, if not all, of these items will be covered, less our deductible. However, the full financial impact cannot be estimated at this time as we are currently working with our insurance carrier to determine specific damages and coverage. 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 will be absorbed by our other existing performance centers. Supplemental Cash Flow Information
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:
Potentially dilutive stock awards to purchase common stock, 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.
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 the three months ended June 27, 2020. There were no transfers between Level 1, Level 2, or Level 3 financial instruments in the three months ended June 27, 2020. 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, a hedge of a net investment in a foreign operation, or a derivative instrument that will not be accounted for using hedge accounting methods. As of June 27, 2020, we had no derivative instruments as all of our derivative instruments that were designated as cash flow hedges matured during the three months ended June 27, 2020. We record changes in the fair value of a derivative instrument that is highly effective and that is designated and qualifies as a cash flow hedge in other comprehensive income (loss), net of tax until our earnings are affected by the variability of cash flows of the underlying hedge. We report changes in the fair values of derivative instruments that are not designated or do not qualify for hedge accounting in current period earnings. We classify cash flows from derivative instruments in the condensed consolidated statements of cash flows in the same category as the item being hedged or on a basis consistent with the nature of the instrument. For the three and six months ended June 27, 2020, the impact of cash flow hedges in the respective periods were insignificant and all of our cash flow hedges matured during the three months ended June 27, 2020. When we determine that a derivative instrument is not highly effective as a hedge, we discontinue hedge accounting prospectively. In all situations in which we discontinue hedge accounting and the derivative instrument remains outstanding, we will carry the derivative instrument at its fair value on our condensed consolidated balance sheets and recognize subsequent changes in its fair value in our current period earnings. 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 and the related revenue is recognized. Inventoried costs include raw materials, outside processing, direct labor and allocated overhead, adjusted for any abnormal amounts of idle facility 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 the commercial aerospace demand outlook. We recorded an aggregate total of $0.7 million for severance and benefit costs which were charged to restructuring charges during the three months ended June 27, 2020. Provision for Estimated Losses on Contracts 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. 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 when control of the promised goods is transferred to our customers, in an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods. We apply a five-step approach in determining the amount and timing of revenue to be recognized: (1) identifying the contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations in the contract; and (5) recognizing revenue when or as the corresponding performance obligation is satisfied. Each distinct promise to transfer products is considered an identified performance obligation for which revenue is recognized upon transfer of control of the products to our customer. The majority of our contracts have a single performance obligation as the promise to transfer the individual good is not separately identifiable from other promises in the contract and is, therefore, not distinct. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Orders for our products generally correspond to the production schedules of our customers and are supported with purchase orders with firm fixed price and firm delivery dates. Our customers have continuous control of the work-in-process and finished goods throughout the manufacturing process, as products are built to customer specifications with no alternative use, and there is an enforceable right to payment for work performed to date. As a result, we recognize revenue over time based on the extent of progress towards satisfaction of the performance obligation. The majority of our contracts are production-type contracts for which we have significant historical manufacturing experience. From time to time, we may enter into development type contracts which require more judgment to determine our total estimated costs at completion, including estimates of materials and labor costs to complete the contract. Revenue recognized is based on the cost-to-cost method as it best depicts the transfer of control to our customer which takes place as we incur costs. Under the cost-to-cost measure of progress, the extent of progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion. Revenues are recorded proportionally as costs are incurred. We also have some contracts where we recognize revenue at a point in time upon transfer of control of the products to the customer. Point in time recognition was determined as the customer does not simultaneously receive or consume the benefits provided by our performance and the asset being manufactured has alternative uses to us. Our manufacturing costs include materials, labor, and overhead. A component of materials costs is production cost of contracts. 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 a significant change in estimated costs at completion could affect the estimated gross profit recorded for our contracts, we review and update our estimated costs at completion on a regular basis. We recognize adjustments in estimated gross profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on gross profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the period it is identified. 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 six months ended June 27, 2020 and June 29, 2019. Contract Assets and Contract Liabilities 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. 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. Contract assets and contract liabilities from revenue contracts with customers are as follows:
Remaining performance obligations are defined as customer placed purchase orders (“POs”) with firm fixed price and firm delivery dates. Our remaining performance obligations as of June 27, 2020 totaled $732.2 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 2021 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:
Recent Accounting Pronouncements New Accounting Guidance Adopted in 2020 In March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments” (“ASU 2020-03”), which provides clarity to, or address various specific issues, including modifications of debt instruments. The new guidance was effective upon issuance of this final accounting standards update. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. In February 2020, the FASB issued ASU 2020-02, “Financial Statements - Credit losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Relating to Accounting Standards Update No. 2016-02, Leases (Topic 842)” (“ASU 2020-02”), which provides guidance on the measurement and requirements related to credit losses. The new guidance was effective upon issuance of this final accounting standards update. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Statements” (“ASU 2019-04”), which clarify, correct, and improve various aspects of the guidance in ASU 2016-01, ASU 2016-13, and ASU 2017-12. The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, which was our interim period beginning January 1, 2020. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. In March 2019, the FASB issued ASU 2019-01, “Leases (Topic 842): Codification Improvements” (“ASU 2019-01”), which addresses various lessor implementation issues and clarifies that lessees and lessors are exempt from certain interim disclosure requirements associated with the adoption of ASC 842. The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, which was our interim period beginning January 1, 2020. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”), which should improve the effectiveness of fair value measurement disclosures by removing certain requirements, modifying certain requirements, and adding certain new requirements. The new guidance was effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, which was our interim period beginning January 1, 2020. Early adoption was permitted. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. ASU 2016-13 requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. The new guidance was effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, which was our interim period beginning January 1, 2020. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. Recently Issued Accounting Standards 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. 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 will be our interim period beginning January 1, 2021. Early adoption is permitted. We are evaluating the impact of this standard. 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 will remove 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 will be our interim period beginning January 1, 2021. Early adoption is permitted. We are evaluating the impact of this standard.
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Business Combinations |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations | Business Combinations In October 2019, we acquired 100.0% of the outstanding equity interests of Nobles Parent Inc., the parent company of Nobles Worldwide, Inc. (“Nobles”), a privately-held global leader in the design and manufacturing of high performance ammunition handling systems for a wide range of military platforms including fixed-wing aircraft, rotary-wing aircraft, ground vehicles, and shipboard systems. Nobles is located in St. Croix Falls, Wisconsin. The acquisition of Nobles advances our strategy to diversify and offer more customized, value-driven engineered products with aftermarket opportunities. The original purchase price for Nobles was $77.0 million, net of cash acquired, all payable in cash. We paid a gross total aggregate of $77.3 million in cash upon the closing of the transaction. Subsequent to the closing of the transaction, during the three months ended March 28, 2020, we received $0.2 million back from the seller which lowered the purchase price to $76.8 million, net of cash acquired. We allocated the gross purchase price of $77.1 million to the assets acquired and liabilities assumed at estimated fair values. The excess of the purchase price over the aggregate fair values of the net assets was recorded as goodwill. The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):
The intangible assets acquired of $37.2 million were determined based on the estimated fair values using valuation techniques consistent with the income approach to measure fair value. The useful lives were estimated based on the underlying agreements or the future economic benefit expected to be received from the assets. The fair values of the identifiable intangible assets were estimated using several valuation methodologies, which represented Level 3 fair value measurements. The value for customer relationships was estimated based on a multi-period excess earnings approach, while the value for trade names and trademarks was assessed using the relief from royalty methodology. The goodwill of $34.9 million arising from the acquisition is attributable to the benefits we expect to derive from expected synergies from the transaction, including complementary products that will enhance our overall product portfolio, opportunities within new markets, and an acquired assembled workforce. All the goodwill was assigned to the Structural Systems segment. The Nobles acquisition, for tax purposes, is also deemed a stock acquisition and thus, the goodwill recognized is not deductible for income tax purposes except for $6.7 million of pre-acquisition goodwill that is tax deductible. Acquisition related transaction costs were not included as components of consideration transferred but have been expensed as incurred. Total acquisition-related transaction costs incurred by us were $0.8 million during 2019 and charged to selling, general and administrative expenses. Nobles’ results of operations have been included in our condensed consolidated statements of income since the date of acquisition as part of the Structural Systems segment. Pro forma results of operations of the Nobles acquisition have not been presented as the effect of the Nobles acquisition was not material to our financial results.
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Inventories |
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Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories Inventories consisted of the following:
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Goodwill |
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Goodwill | 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 perform an impairment test prior to the fourth quarter. As a result of the COVID-19 pandemic, which significantly impacted our business in the United States and the rest of the world during the six months ended June 27, 2020, we assessed our goodwill for potential impairment indicators. The most recent goodwill impairment test for our Electronic Systems reporting unit was the annual goodwill impairment test as of the first day of the fourth quarter of 2019 where the fair value of our Electronic Systems reporting unit exceeded its carrying value by 44% and thus, goodwill was not deemed impaired at that time. During the first quarter of 2020, we performed a qualitative assessment including consideration of 1) margin of passing most recent Step 1 analysis, 2) earnings before interest, taxes, depreciation, and amortization, 3) long-term growth rate, 4) analyzing material adverse factors/changes between valuation dates, 5) general macroeconomic factors, and 6) industry and market conditions. We determined for the first quarter of 2020 it was not more likely than not that the fair value of a reporting unit was less than its carrying amount and thus, goodwill was not deemed impaired. For the second quarter of 2020, no material adverse factors/changes have occurred since the first quarter of 2020 that would require us to perform another qualitative assessment. As such, for the second quarter of 2020 it was also not more likely than not that the fair value of a reporting unit was less than its carrying amount and thus, goodwill was not deemed impaired. The most recent Step 1 goodwill impairment test for our Structural Systems reporting unit was April 2019, where the fair value of our Structural Systems reporting unit exceeded its carrying value by 85%. As such, for our annual goodwill impairment test as of the first day of the fourth quarter of 2019, we used a qualitative assessment and determined it was not more likely than not that the fair value of a reporting unit was less than its carrying amount and thus, goodwill was not deemed impaired at that time. During the first quarter of 2020, we performed a qualitative assessment including consideration of 1) margin of passing most recent step 1 analysis, 2) earnings before interest, taxes, depreciation, and amortization, 3) long-term growth rate, 4) analyzing material adverse factors/changes between valuation dates, 5) general macroeconomic factors, and 6) industry and market conditions. We determined for the first quarter of 2020 it was not more likely than not that the fair value of a reporting unit was less than its carrying amount and thus, goodwill was not deemed impaired. For the second quarter of 2020, no material adverse factors/changes have occurred since the first quarter of 2020 that would require us to perform another qualitative assessment. As such, for the second quarter of 2020 it was also not more likely than not that the fair value of a reporting unit was less than its carrying amount and thus, goodwill was not deemed impaired. We acquired Nobles Worldwide, Inc. (“Nobles”) in October 2019 and recorded goodwill of $34.9 million in our Structural Systems segment. See Note 2. The carrying amounts of our goodwill were as follows:
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Accrued and Other Liabilities |
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Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued and Other Liabilities | Accrued and Other Liabilities The components of accrued and other liabilities were as follows:
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Long-Term Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt | Long-Term Debt Long-term debt and the current period interest rates were as follows:
(1) Included as part of other assets. On December 20, 2019, we completed the refinancing of a portion of our existing debt by entering into a new revolving credit facility (“New Revolving Credit Facility”) to replace the existing revolving credit facility that was entered into in November 2018 (“2018 Revolving Credit Facility”) and entering into a new term loan (“New Term Loan”). The New 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 New 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 original amounts available under the New Revolving Credit Facility, New Term Loan, and 2018 Term Loan (collectively, the “Credit Facilities”) in aggregate, totaled $480.0 million. The New 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 New Term Loan requires installment payments of 1.25% of the original outstanding principal balance of the New Term Loan amount on a quarterly basis, on the last day of each calendar quarter. For the three and six months ended June 27, 2020, we made the one required quarterly payment totaling $1.8 million. The New 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 New 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. 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 requires 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 meet the annual excess cash flow threshold, we will be required to make excess flow payments. The annual mandatory excess cash flow payments will be 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 adjusted leverage ratio is less than or equal to 2.50 to 1.0. During our first quarter of 2020, we made the required 2019 annual excess cash flow payment of $7.4 million. As of June 27, 2020, we were in compliance with all covenants required under the Credit Facilities. During the three and six months ended months ended June 27, 2020, as a result of drawing down $50.0 million on the New Revolving Credit Facility during our first quarter of 2020 to hold as cash, we made no net aggregate voluntary prepayments. In conjunction with entering into the New Revolving Credit Facility and the New Term Loan, we drew down the entire $140.0 million on the New Term Loan and used those proceeds to pay off and close the 2018 Revolving Credit Facility of $58.5 million, pay down a portion of the 2018 Term Loan of $56.0 million, pay the accrued interest associated with the amounts being paid down on the 2018 Revolving Credit Facility and 2018 Term Loan, pay the fees related to this transaction, and the remainder will be used for general corporate expenses. The New Revolving Credit Facility does not require any principal installment payments, however, the undrawn portion is subject to a commitment fee ranging from 0.175% to 0.275%, based upon the consolidated total net adjusted leverage ratio. The New Term Loan requires installment payments of 1.25% of the initial principal balance outstanding on a quarterly basis. The $56.0 million pay down paid all the required quarterly principal installment payments on the 2018 Term Loan until it matures. The New 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 New Term Loan. The remaining debt issuance costs related to the 2018 Term Loan of $1.5 million will continue to be amortized over its remaining life. The New 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 New 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 New 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 will also be amortized over its remaining life. In October 2019, we acquired 100.0% of the outstanding equity interests of Nobles for an original purchase price of $77.0 million, net of cash acquired, all payable in cash. Upon the closing of the transaction, we paid a gross total aggregate of $77.3 million in cash upon the closing of the transaction by drawing down on the 2018 Revolving Credit Facility. See Note 2. As of June 27, 2020, we had $49.8 million of unused borrowing capacity under the New 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 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, with a final quarterly maturity date in June 2020, and 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 the three months ended June 27, 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.
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Employee Benefit Plans |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee Benefit Plans | Employee Benefit Plans The components of net periodic pension expense were as follows:
The components of the reclassifications of net actuarial losses from accumulated other comprehensive loss to net income for the three and six months ended June 27, 2020 were as follows:
(1)The amortization expense is included in the computation of periodic pension cost and is a decrease to net income upon reclassification from accumulated other comprehensive loss.
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Indemnifications |
6 Months Ended |
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Jun. 27, 2020 | |
Disclosure of Guarantees and Indemnifications [Abstract] | |
Indemnifications | 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 facility leases, we have indemnified our lessors for certain claims arising from our use of the facility under our 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 vary and, in many cases, are subject to statutes 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 amount of our indemnification obligations as insignificant based on this history and our insurance coverage and therefore, have not recorded any liability for these guarantees and indemnities on the accompanying condensed consolidated balance sheets. Further, when considered with our insurance coverage, although recorded through different captions on our condensed consolidated balance sheets, the potential impact is further mitigated.
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Income Taxes |
6 Months Ended |
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Jun. 27, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income TaxesThe 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, the 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 income statement could result in fluctuations in our effective tax rate period-over-period depending on the volatility of our stock price and how many units vest and options exercised in 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 June 27, 2020 compared to $1.4 million for the three months ended June 29, 2019. The decrease in income tax expense for the second quarter of 2020 compared to the second quarter of 2019 was primarily due to lower pre-tax income for the second quarter of 2020 compared to the second quarter of 2019, net of lower discrete tax benefits recognized in the second quarter of 2020, mainly related to net windfalls from stock-based compensation and changes to deferred income taxes. We recorded income tax expense of $2.7 million for the six months ended June 27, 2020 compared to $2.4 million for the six months ended June 29, 2019. The increase in income tax expense for the first six months of 2020 compared to the first six months of 2019 was primarily due to lower discrete tax benefits recognized in the first six months of 2020, mainly related to net windfalls from stock-based compensation and changes to deferred income taxes net of lower pre-tax income for the first six months ended of 2020 compared to the first six months ended of 2019. On March 27, 2020, the U.S. enacted the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") that provides tax relief to individuals and businesses affected by the coronavirus pandemic. We considered the provisions of the CARES Act and determined they do not have a material impact to our income taxes. Our total amount of unrecognized tax benefits was $5.8 million and $5.7 million as of June 27, 2020 and December 31, 2019, respectively. If recognized, $4.2 million would affect the effective tax rate. As a result of statute of limitations set to expire in the fourth quarter of 2020, we expect decreases to our unrecognized tax benefits of approximately $2.0 million in the next twelve months.
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Contingencies |
6 Months Ended |
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Jun. 27, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Contingencies Structural Systems has been directed by California environmental agencies to investigate and take corrective action for groundwater contamination at its facilities located in El Mirage and Monrovia, California. Based on currently available information, Ducommun has established an accrual for its estimated liability for such investigation and corrective action of $1.5 million at both June 27, 2020 and December 31, 2019, which is reflected in other long-term liabilities on its 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, Ducommun preliminarily estimates that the range of its future liabilities in connection with the landfill located in West Covina, California is between $0.4 million and $3.1 million. Ducommun has established an accrual for its estimated liability in connection with the West Covina landfill of $0.4 million at June 27, 2020, which is reflected in other long-term liabilities on its condensed consolidated balance sheet. Ducommun’s 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 the normal course of business, Ducommun and its subsidiaries are defendants in certain other litigation, claims and inquiries, 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.
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Business Segment Information |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segment Information | 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:
(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:
(1)Includes assets not specifically identified to or allocated to either the Electronic Systems or Structural Systems operating segments, including cash and cash equivalents.
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Summary of Significant Accounting Policies (Policies) |
6 Months Ended |
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Jun. 27, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | 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, 2019 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, 2019. 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, 2019. 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 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 six months ended June 27, 2020 are not necessarily indicative of the results to be expected for the full year ending December 31, 2020. 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 ends 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.
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Use of Estimates | Use of EstimatesCertain 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 forward loss reserves), 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. |
Earnings Per Share | 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.
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Fair Value | 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 the three months ended June 27, 2020.
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Cash and Cash Equivalents | Cash and Cash EquivalentsCash 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. |
Derivatives Instruments | 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, a hedge of a net investment in a foreign operation, or a derivative instrument that will not be accounted for using hedge accounting methods. As of June 27, 2020, we had no derivative instruments as all of our derivative instruments that were designated as cash flow hedges matured during the three months ended June 27, 2020. We record changes in the fair value of a derivative instrument that is highly effective and that is designated and qualifies as a cash flow hedge in other comprehensive income (loss), net of tax until our earnings are affected by the variability of cash flows of the underlying hedge. We report changes in the fair values of derivative instruments that are not designated or do not qualify for hedge accounting in current period earnings. We classify cash flows from derivative instruments in the condensed consolidated statements of cash flows in the same category as the item being hedged or on a basis consistent with the nature of the instrument. For the three and six months ended June 27, 2020, the impact of cash flow hedges in the respective periods were insignificant and all of our cash flow hedges matured during the three months ended June 27, 2020. When we determine that a derivative instrument is not highly effective as a hedge, we discontinue hedge accounting prospectively. In all situations in which we discontinue hedge accounting and the derivative instrument remains outstanding, we will carry the derivative instrument at its fair value on our condensed consolidated balance sheets and recognize subsequent changes in its fair value in our current period earnings.
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Inventories | 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 and the related revenue is recognized. Inventoried costs include raw materials, outside processing, direct labor and allocated overhead, adjusted for any abnormal amounts of idle facility 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.
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Accumulated Other Comprehensive Loss | 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.
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Revenue Recognition | 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 when control of the promised goods is transferred to our customers, in an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods. We apply a five-step approach in determining the amount and timing of revenue to be recognized: (1) identifying the contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations in the contract; and (5) recognizing revenue when or as the corresponding performance obligation is satisfied. Each distinct promise to transfer products is considered an identified performance obligation for which revenue is recognized upon transfer of control of the products to our customer. The majority of our contracts have a single performance obligation as the promise to transfer the individual good is not separately identifiable from other promises in the contract and is, therefore, not distinct. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Orders for our products generally correspond to the production schedules of our customers and are supported with purchase orders with firm fixed price and firm delivery dates. Our customers have continuous control of the work-in-process and finished goods throughout the manufacturing process, as products are built to customer specifications with no alternative use, and there is an enforceable right to payment for work performed to date. As a result, we recognize revenue over time based on the extent of progress towards satisfaction of the performance obligation. The majority of our contracts are production-type contracts for which we have significant historical manufacturing experience. From time to time, we may enter into development type contracts which require more judgment to determine our total estimated costs at completion, including estimates of materials and labor costs to complete the contract. Revenue recognized is based on the cost-to-cost method as it best depicts the transfer of control to our customer which takes place as we incur costs. Under the cost-to-cost measure of progress, the extent of progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion. Revenues are recorded proportionally as costs are incurred. We also have some contracts where we recognize revenue at a point in time upon transfer of control of the products to the customer. Point in time recognition was determined as the customer does not simultaneously receive or consume the benefits provided by our performance and the asset being manufactured has alternative uses to us. Our manufacturing costs include materials, labor, and overhead. A component of materials costs is production cost of contracts. 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 a significant change in estimated costs at completion could affect the estimated gross profit recorded for our contracts, we review and update our estimated costs at completion on a regular basis. We recognize adjustments in estimated gross profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on gross profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the period it is identified. 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 six months ended June 27, 2020 and June 29, 2019. Contract Assets and Contract Liabilities 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. 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. Remaining performance obligations are defined as customer placed purchase orders (“POs”) with firm fixed price and firm delivery dates. Our remaining performance obligations as of June 27, 2020 totaled $732.2 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 2021 and beyond.
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Provision for Estimated Losses on Contracts | Provision for Estimated Losses on Contracts 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.
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Recent Accounting Pronouncements and Recently Issued Accounting Standards | Recent Accounting Pronouncements New Accounting Guidance Adopted in 2020 In March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments” (“ASU 2020-03”), which provides clarity to, or address various specific issues, including modifications of debt instruments. The new guidance was effective upon issuance of this final accounting standards update. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. In February 2020, the FASB issued ASU 2020-02, “Financial Statements - Credit losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Relating to Accounting Standards Update No. 2016-02, Leases (Topic 842)” (“ASU 2020-02”), which provides guidance on the measurement and requirements related to credit losses. The new guidance was effective upon issuance of this final accounting standards update. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Statements” (“ASU 2019-04”), which clarify, correct, and improve various aspects of the guidance in ASU 2016-01, ASU 2016-13, and ASU 2017-12. The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, which was our interim period beginning January 1, 2020. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. In March 2019, the FASB issued ASU 2019-01, “Leases (Topic 842): Codification Improvements” (“ASU 2019-01”), which addresses various lessor implementation issues and clarifies that lessees and lessors are exempt from certain interim disclosure requirements associated with the adoption of ASC 842. The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, which was our interim period beginning January 1, 2020. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”), which should improve the effectiveness of fair value measurement disclosures by removing certain requirements, modifying certain requirements, and adding certain new requirements. The new guidance was effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, which was our interim period beginning January 1, 2020. Early adoption was permitted. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. ASU 2016-13 requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. The new guidance was effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, which was our interim period beginning January 1, 2020. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. Recently Issued Accounting Standards 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. 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 will be our interim period beginning January 1, 2021. Early adoption is permitted. We are evaluating the impact of this standard. 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 will remove 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 will be our interim period beginning January 1, 2021. Early adoption is permitted. We are evaluating the impact of this standard.
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Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Supplemental Cash Flow Information | Supplemental Cash Flow Information
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Weighted Average Number of Shares Outstanding Used to Compute Earnings Per Share | The net income and weighted-average common shares outstanding used to compute earnings per share were as follows:
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Weighted Average Number of Shares Outstanding Excluded from Computation of Diluted Earnings | Potentially dilutive stock awards to purchase common stock, 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.
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Contract with Customer, Asset and Liability | Contract assets and contract liabilities from revenue contracts with customers are as follows:
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Disaggregation of Revenue | In addition to the revenue categories disclosed above, the following table reflects our revenue disaggregated by major end-use market:
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Business Combinations (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Business Acquisitions, by Acquisition | The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):
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Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination |
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Inventories (Tables) |
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Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Inventories | Inventories consisted of the following:
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Goodwill (Tables) |
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Schedule of Goodwill | The carrying amounts of our goodwill were as follows:
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Accrued and Other Liabilities (Tables) |
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Summary of Accrued Liabilities | The components of accrued and other liabilities were as follows:
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Long-Term Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long Term Debt Summary | Long-term debt and the current period interest rates were as follows:
(1) Included as part of other assets.
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Employee Benefit Plans (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Retirement Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Net Periodic Pension Cost | The components of net periodic pension expense were as follows:
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Reclassification out of Accumulated Other Comprehensive Income | The components of the reclassifications of net actuarial losses from accumulated other comprehensive loss to net income for the three and six months ended June 27, 2020 were as follows:
(1)The amortization expense is included in the computation of periodic pension cost and is a decrease to net income upon reclassification from accumulated other comprehensive loss.
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Business Segment Information (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 27, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Information by Reportable Segment | Financial information by reportable operating segment was as follows:
(1)Includes costs not allocated to either the Electronic Systems or Structural Systems operating segments.
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Segment Assets | Our segment assets are as follows:
(1)Includes assets not specifically identified to or allocated to either the Electronic Systems or Structural Systems operating segments, including cash and cash equivalents.
|
Summary of Significant Accounting Policies - Additional Information (Details) $ in Millions |
6 Months Ended |
---|---|
Jun. 27, 2020
USD ($)
Segment
| |
Accounting Policies [Abstract] | |
Number of reportable segments | Segment | 2 |
Remaining performance obligation | $ | $ 732.2 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-06-28 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation, percentage | 70.00% |
Remaining performance obligation, period | 12 months |
Summary of Significant Accounting Policies - Supplemental Cash Flow Items (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 27, 2020 |
Jun. 29, 2019 |
|
Supplemental Disclosures of Cash Flow Information | ||
Interest paid | $ 6,114 | $ 7,985 |
Taxes paid | 495 | 3,389 |
Non-cash activities: | ||
Purchases of property and equipment not paid | $ 1,914 | $ 3,671 |
Summary of Significant Accounting Policies - Weighted Average Number of Shares Outstanding Used to Compute Earnings Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 27, 2020 |
Jun. 29, 2019 |
Jun. 27, 2020 |
Jun. 29, 2019 |
|
Accounting Policies [Abstract] | ||||
Net income | $ 5,090 | $ 7,815 | $ 13,020 | $ 15,287 |
Weighted-average number of common shares outstanding | ||||
Basic weighted-average common shares outstanding (in shares) | 11,665 | 11,513 | 11,638 | 11,475 |
Dilutive potential common shares (in shares) | 163 | 245 | 207 | 279 |
Diluted weighted-average common shares outstanding (in shares) | 11,828 | 11,758 | 11,845 | 11,754 |
Earnings per share | ||||
Basic (in dollars per share) | $ 0.44 | $ 0.68 | $ 1.12 | $ 1.33 |
Diluted (in dollars per share) | $ 0.43 | $ 0.66 | $ 1.10 | $ 1.30 |
Summary of Significant Accounting Policies - Weighted Average Number of Shares Outstanding Excluded from Computation of Diluted Earnings (Detail) - shares shares in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 27, 2020 |
Jun. 29, 2019 |
Jun. 27, 2020 |
Jun. 29, 2019 |
|
Stock options and stock units | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Potentially dilutive stock options and stock units to purchase common stock (in shares) | 450 | 66 | 352 | 55 |
Summary of Significant Accounting Policies - Restructuring Charges (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 27, 2020 |
Jun. 29, 2019 |
Jun. 27, 2020 |
Jun. 29, 2019 |
|
Accounting Policies [Abstract] | ||||
Restructuring charges | $ 661 | $ 0 | $ 661 | $ 0 |
Summary of Significant Accounting Policies - Contract Assets and Liabilities (Details) - USD ($) $ in Thousands |
Jun. 27, 2020 |
Dec. 31, 2019 |
---|---|---|
Accounting Policies [Abstract] | ||
Contract assets | $ 122,877 | $ 106,670 |
Contract liabilities | $ 27,082 | $ 14,517 |
Business Combinations - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Oct. 08, 2019 |
Mar. 28, 2020 |
Jun. 27, 2020 |
Jun. 29, 2019 |
Dec. 31, 2019 |
|
Business Acquisition [Line Items] | |||||
Proceeds from previous acquisition | $ 190 | $ 0 | |||
Goodwill | 170,907 | $ 170,917 | |||
Nobles Worldwide, Inc. | |||||
Business Acquisition [Line Items] | |||||
Percentage of outstanding common stock acquired | 100.00% | ||||
Purchase price of acquisition | $ 77,000 | $ 76,800 | |||
Payments to acquire business | 77,300 | ||||
Proceeds from previous acquisition | $ 200 | ||||
Purchase price allocation, fair value | 77,115 | ||||
Intangible assets | 37,200 | ||||
Goodwill | $ 34,850 | ||||
Goodwill, expected tax deductible amount | $ 6,700 | ||||
Acquisition related costs | $ 800 |
Business Combinations - Fair Value of Assets and Liabilities Acquired (Details) - USD ($) $ in Thousands |
Jun. 27, 2020 |
Dec. 31, 2019 |
Oct. 08, 2019 |
---|---|---|---|
Business Acquisition [Line Items] | |||
Goodwill | $ 170,907 | $ 170,917 | |
Nobles Worldwide, Inc. | |||
Business Acquisition [Line Items] | |||
Cash | $ 658 | ||
Accounts receivable | 1,880 | ||
Inventories | 2,866 | ||
Other current assets | 288 | ||
Property and equipment | 2,319 | ||
Intangible assets | 37,200 | ||
Goodwill | 34,850 | ||
Other assets | 675 | ||
Total assets acquired | 80,736 | ||
Current liabilities | (2,187) | ||
Net non-current deferred tax liability | (759) | ||
Other non-current liabilities | (675) | ||
Total liabilities assumed | (3,621) | ||
Total purchase price allocation | $ 77,115 |
Business Combinations - Estimated Fair Value of Intangible Assets Acquired (Details) - Nobles Worldwide, Inc. $ in Thousands |
Oct. 08, 2019
USD ($)
|
---|---|
Business Acquisition [Line Items] | |
Intangible assets | $ 37,200 |
Customer relationships | |
Business Acquisition [Line Items] | |
Intangible assets | $ 34,200 |
Trade names and trademarks | |
Business Acquisition [Line Items] | |
Useful life (in years) | 15 years |
Intangible assets | $ 3,000 |
Minimum | Customer relationships | |
Business Acquisition [Line Items] | |
Useful life (in years) | 15 years |
Maximum | Customer relationships | |
Business Acquisition [Line Items] | |
Useful life (in years) | 16 years |
Inventories (Detail) - USD ($) $ in Thousands |
Jun. 27, 2020 |
Dec. 31, 2019 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials and supplies | $ 108,522 | $ 98,151 |
Work in process | 14,382 | 10,887 |
Finished goods | 5,705 | 3,444 |
Total | $ 128,609 | $ 112,482 |
Goodwill - Narrative (Detail) - USD ($) $ in Thousands |
Jun. 27, 2020 |
Dec. 31, 2019 |
Oct. 08, 2019 |
---|---|---|---|
Goodwill [Line Items] | |||
Goodwill | $ 170,907 | $ 170,917 | |
Electronic Systems | |||
Goodwill [Line Items] | |||
Percentage of fair value in excess of carrying amount | 44.00% | ||
Goodwill | $ 117,435 | 117,435 | |
Structural Systems | |||
Goodwill [Line Items] | |||
Percentage of fair value in excess of carrying amount | 85.00% | ||
Goodwill | $ 53,472 | $ 53,482 | |
Nobles Worldwide, Inc. | |||
Goodwill [Line Items] | |||
Goodwill | $ 34,850 | ||
Nobles Worldwide, Inc. | Structural Systems | |||
Goodwill [Line Items] | |||
Goodwill | $ 34,900 |
Goodwill (Detail) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 27, 2020 |
Dec. 31, 2019 |
|
Goodwill [Line Items] | ||
Gross goodwill | $ 252,639 | |
Accumulated goodwill impairment | (81,722) | |
Balance at December 31, 2019 | $ 170,917 | |
Purchase price allocation refinements | (10) | |
Balance at June 27, 2020 | 170,907 | |
Electronic Systems | ||
Goodwill [Line Items] | ||
Gross goodwill | 199,157 | |
Accumulated goodwill impairment | (81,722) | |
Balance at December 31, 2019 | 117,435 | |
Purchase price allocation refinements | 0 | |
Balance at June 27, 2020 | 117,435 | |
Structural Systems | ||
Goodwill [Line Items] | ||
Gross goodwill | 53,482 | |
Accumulated goodwill impairment | $ 0 | |
Balance at December 31, 2019 | 53,482 | |
Purchase price allocation refinements | (10) | |
Balance at June 27, 2020 | $ 53,472 |
Accrued and Other Liabilities (Detail) - USD ($) $ in Thousands |
Jun. 27, 2020 |
Dec. 31, 2019 |
---|---|---|
Payables and Accruals [Abstract] | ||
Accrued compensation | $ 22,619 | $ 31,342 |
Accrued income tax and sales tax | 443 | 163 |
Other | 6,060 | 6,115 |
Total | $ 29,122 | $ 37,620 |
Long-Term Debt - Summary (Details) - USD ($) $ in Thousands |
Jun. 27, 2020 |
Dec. 31, 2019 |
---|---|---|
Debt Instrument [Line Items] | ||
Long-term debt | $ 350,888 | $ 310,000 |
Less current portion | 7,000 | 7,000 |
Total long-term debt, less current portion | 343,888 | 303,000 |
Less debt issuance costs - term loans | 1,913 | 2,113 |
Total long-term debt, net of debt issuance costs - term loans | $ 341,975 | $ 300,887 |
Weighted-average interest rate (percent) | 4.04% | 6.87% |
Term loans | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 300,888 | $ 310,000 |
Revolving credit facility | ||
Debt Instrument [Line Items] | ||
Long-term debt | 50,000 | 0 |
Less debt issuance costs - term loans | $ 1,705 | $ 1,894 |
Employee Benefit Plans - Components of Net Periodic Pension Cost for Defined Benefit Pension Plan and Retirement Plan (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 27, 2020 |
Jun. 29, 2019 |
Jun. 27, 2020 |
Jun. 29, 2019 |
|
Retirement Benefits [Abstract] | ||||
Service cost | $ 156 | $ 126 | $ 311 | $ 251 |
Interest cost | 303 | 347 | 605 | 694 |
Expected return on plan assets | (441) | (411) | (881) | (822) |
Amortization of actuarial losses | 247 | 221 | 496 | 443 |
Net periodic pension cost | $ 265 | $ 283 | $ 531 | $ 566 |
Employee Benefit Plans - Reclassifications from Accumulated Other Comprehensive Income (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 27, 2020 |
Jun. 27, 2020 |
|
Retirement Benefits [Abstract] | ||
Amortization of actuarial loss - total before tax | $ 247 | $ 496 |
Tax benefit | (59) | (118) |
Net of tax | $ 188 | $ 378 |
Income Taxes (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 27, 2020 |
Jun. 29, 2019 |
Jun. 27, 2020 |
Jun. 29, 2019 |
Dec. 31, 2019 |
|
Income Tax Disclosure [Abstract] | |||||
Income tax expense (benefit) | $ 1,214 | $ 1,363 | $ 2,664 | $ 2,388 | |
Unrecognized tax benefits | 5,800 | 5,800 | $ 5,700 | ||
Expected change in unrecognized tax benefits | 4,200 | 4,200 | |||
Decrease in unrecognized tax benefits in next twelve months | $ 2,000 | $ 2,000 |
Contingencies (Detail) - Structural Systems - USD ($) $ in Millions |
Jun. 27, 2020 |
Dec. 31, 2019 |
---|---|---|
El Mirage and Monrovia, California | ||
Loss Contingencies [Line Items] | ||
Reserve for estimated liability | $ 1.5 | $ 1.5 |
West Covina, California | ||
Loss Contingencies [Line Items] | ||
Reserve for estimated liability | 0.4 | |
Minimum | West Covina, California | ||
Loss Contingencies [Line Items] | ||
Possible loss | 0.4 | |
Maximum | West Covina, California | ||
Loss Contingencies [Line Items] | ||
Possible loss | $ 3.1 |
Business Segment Information - Additional Information (Detail) |
6 Months Ended |
---|---|
Jun. 27, 2020
Segment
| |
Segment Reporting [Abstract] | |
Number of reportable segments | 2 |
Business Segment Information - Segment Assets (Detail) - USD ($) $ in Thousands |
Jun. 27, 2020 |
Dec. 31, 2019 |
---|---|---|
Segment Reporting Information [Line Items] | ||
Total Assets | $ 841,637 | $ 790,429 |
Total Goodwill and Intangibles | 302,131 | 309,279 |
Operating Segments | Electronic Systems | ||
Segment Reporting Information [Line Items] | ||
Total Assets | 427,750 | 411,981 |
Total Goodwill and Intangibles | 205,743 | 210,453 |
Operating Segments | Structural Systems | ||
Segment Reporting Information [Line Items] | ||
Total Assets | 334,789 | 328,718 |
Total Goodwill and Intangibles | 96,388 | 98,826 |
Corporate Administration | ||
Segment Reporting Information [Line Items] | ||
Total Assets | $ 79,098 | $ 49,730 |
Label | Element | Value |
---|---|---|
Accounting Standards Update [Extensible List] | us-gaap_AccountingStandardsUpdateExtensibleList | us-gaap:AccountingStandardsUpdate201602Member |
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