x
|
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
|
Delaware
|
|
95-0693330
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
|
23301 Wilmington Avenue, Carson, California
|
|
90745-6209
|
(Address of principal executive offices)
|
|
(Zip code)
|
Large accelerated filer
|
|
¨
|
Accelerated filer
|
|
x
|
|
|
|
|
||
Non-accelerated filer
|
|
¨
|
Smaller reporting company
|
|
¨
|
|
|
|
|
|
|
|
|
|
Emerging growth company
|
|
¨
|
|
|
April 1,
2017 |
|
December 31,
2016 |
||||
Assets
|
|
|
|
|
||||
Current Assets
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
7,114
|
|
|
$
|
7,432
|
|
Accounts receivable, net of allowance for doubtful accounts of $518 and $495 at April 1, 2017 and December 31, 2016, respectively
|
|
71,623
|
|
|
76,239
|
|
||
Inventories
|
|
127,201
|
|
|
119,896
|
|
||
Production cost of contracts
|
|
11,052
|
|
|
11,340
|
|
||
Other current assets
|
|
10,589
|
|
|
11,034
|
|
||
Total Current Assets
|
|
227,579
|
|
|
225,941
|
|
||
Property and equipment, net of accumulated depreciation of $138,799 and $135,484 at April 1, 2017 and December 31, 2016, respectively
|
|
104,868
|
|
|
101,590
|
|
||
Goodwill
|
|
82,554
|
|
|
82,554
|
|
||
Intangibles, net
|
|
99,364
|
|
|
101,573
|
|
||
Non-current deferred income taxes
|
|
286
|
|
|
286
|
|
||
Other assets
|
|
3,320
|
|
|
3,485
|
|
||
Total Assets
|
|
$
|
517,971
|
|
|
$
|
515,429
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
||||
Current Liabilities
|
|
|
|
|
||||
Current portion of long-term debt
|
|
$
|
—
|
|
|
$
|
3
|
|
Accounts payable
|
|
63,313
|
|
|
57,024
|
|
||
Accrued liabilities
|
|
28,092
|
|
|
29,279
|
|
||
Total Current Liabilities
|
|
91,405
|
|
|
86,306
|
|
||
Long-term debt, less current portion
|
|
162,156
|
|
|
166,896
|
|
||
Non-current deferred income taxes
|
|
31,949
|
|
|
31,417
|
|
||
Other long-term liabilities
|
|
18,179
|
|
|
18,707
|
|
||
Total Liabilities
|
|
303,689
|
|
|
303,326
|
|
||
Commitments and contingencies (Notes 11, 13)
|
|
|
|
|
||||
Shareholders’ Equity
|
|
|
|
|
||||
Common stock - $0.01 par value; 35,000,000 shares authorized; 11,269,350 and 11,193,813 issued at April 1, 2017 and December 31, 2016, respectively
|
|
113
|
|
|
112
|
|
||
Additional paid-in capital
|
|
76,827
|
|
|
76,783
|
|
||
Retained earnings
|
|
143,402
|
|
|
141,287
|
|
||
Accumulated other comprehensive loss
|
|
(6,060
|
)
|
|
(6,079
|
)
|
||
Total Shareholders’ Equity
|
|
214,282
|
|
|
212,103
|
|
||
Total Liabilities and Shareholders’ Equity
|
|
$
|
517,971
|
|
|
$
|
515,429
|
|
|
|
Three Months Ended
|
||||||
|
|
April 1,
2017 |
|
April 2,
2016 |
||||
Net Revenues
|
|
$
|
136,297
|
|
|
$
|
142,148
|
|
Cost of Sales
|
|
111,370
|
|
|
115,179
|
|
||
Gross Profit
|
|
24,927
|
|
|
26,969
|
|
||
Selling, General and Administrative Expenses
|
|
20,827
|
|
|
22,676
|
|
||
Operating Income
|
|
4,100
|
|
|
4,293
|
|
||
Interest Expense
|
|
(1,593
|
)
|
|
(2,399
|
)
|
||
Gain on Divestitures
|
|
—
|
|
|
18,815
|
|
||
Income Before Taxes
|
|
2,507
|
|
|
20,709
|
|
||
Income Tax Expense
|
|
392
|
|
|
7,159
|
|
||
Net Income
|
|
$
|
2,115
|
|
|
$
|
13,550
|
|
Earnings Per Share
|
|
|
|
|
||||
Basic earnings per share
|
|
$
|
0.19
|
|
|
$
|
1.22
|
|
Diluted earnings per share
|
|
$
|
0.18
|
|
|
$
|
1.21
|
|
Weighted-Average Number of Common Shares Outstanding
|
|
|
|
|
||||
Basic
|
|
11,208
|
|
|
11,100
|
|
||
Diluted
|
|
11,495
|
|
|
11,240
|
|
|
|
Three Months Ended
|
||||||
|
|
April 1,
2017 |
|
April 2,
2016 |
||||
Net Income
|
|
$
|
2,115
|
|
|
$
|
13,550
|
|
Other Comprehensive Income (Loss)
|
|
|
|
|
||||
Amortization of actuarial losses and prior service costs, net of tax benefit of $63 and $68 for the three months ended April 1, 2017 and April 2, 2016, respectively
|
|
140
|
|
|
123
|
|
||
Change in unrealized gains and losses on cash flow hedges, net of tax of $72 and $239 for the three months ended April 1, 2017 and April 2, 2016, respectively
|
|
(121
|
)
|
|
(408
|
)
|
||
Other Comprehensive Income (Loss)
|
|
19
|
|
|
(285
|
)
|
||
Comprehensive Income
|
|
$
|
2,134
|
|
|
$
|
13,265
|
|
|
|
Three Months Ended
|
||||||
|
|
April 1,
2017 |
|
April 2,
2016 |
||||
Cash Flows from Operating Activities
|
|
|
|
|
||||
Net Income
|
|
$
|
2,115
|
|
|
$
|
13,550
|
|
Adjustments to Reconcile Net Income to
|
|
|
|
|
||||
Net Cash Provided by Operating Activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
5,782
|
|
|
5,855
|
|
||
Gain on divestitures
|
|
—
|
|
|
(18,815
|
)
|
||
Stock-based compensation expense
|
|
1,822
|
|
|
1,000
|
|
||
Deferred income taxes
|
|
532
|
|
|
(2,562
|
)
|
||
Provision for (recovery of) doubtful accounts
|
|
26
|
|
|
(65
|
)
|
||
Other
|
|
(1,860
|
)
|
|
(1,370
|
)
|
||
Changes in Assets and Liabilities:
|
|
|
|
|
||||
Accounts receivable
|
|
4,590
|
|
|
1,972
|
|
||
Inventories
|
|
(7,305
|
)
|
|
(12,366
|
)
|
||
Production cost of contracts
|
|
45
|
|
|
429
|
|
||
Other assets
|
|
610
|
|
|
7,084
|
|
||
Accounts payable
|
|
6,465
|
|
|
7,303
|
|
||
Accrued and other liabilities
|
|
415
|
|
|
3,437
|
|
||
Net Cash Provided by Operating Activities
|
|
13,237
|
|
|
5,452
|
|
||
Cash Flows from Investing Activities
|
|
|
|
|
||||
Purchases of property and equipment
|
|
(6,797
|
)
|
|
(3,801
|
)
|
||
Proceeds from sale of assets
|
|
3
|
|
|
—
|
|
||
Proceeds from divestitures
|
|
—
|
|
|
55,272
|
|
||
Net Cash (Used in) Provided by Investing Activities
|
|
(6,794
|
)
|
|
51,471
|
|
||
Cash Flows from Financing Activities
|
|
|
|
|
||||
Borrowings from senior secured revolving credit facility
|
|
55,600
|
|
|
—
|
|
||
Repayments of senior secured revolving credit facility
|
|
(55,600
|
)
|
|
—
|
|
||
Repayments of senior unsecured notes and term loans
|
|
(5,000
|
)
|
|
(55,000
|
)
|
||
Repayments of other debt
|
|
(3
|
)
|
|
(7
|
)
|
||
Net (cash paid) proceeds from issuance of common stock under stock plans
|
|
(1,758
|
)
|
|
(931
|
)
|
||
Net Cash Used in Financing Activities
|
|
(6,761
|
)
|
|
(55,938
|
)
|
||
Net (Decrease) Increase in Cash and Cash Equivalents
|
|
(318
|
)
|
|
985
|
|
||
Cash and Cash Equivalents at Beginning of Period
|
|
7,432
|
|
|
5,454
|
|
||
Cash and Cash Equivalents at End of Period
|
|
$
|
7,114
|
|
|
$
|
6,439
|
|
|
|
(In thousands)
Three Months Ended
|
||||||
|
|
April 1, 2017
|
|
April 2, 2016
|
||||
Interest paid
|
|
$
|
1,535
|
|
|
$
|
2,081
|
|
Taxes paid
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-cash activities:
|
|
|
|
|
||||
Purchases of property and equipment not paid
|
|
$
|
3,065
|
|
|
$
|
215
|
|
|
|
(In thousands, except per share data)
Three Months Ended
|
||||||
|
|
April 1,
2017 |
|
April 2,
2016 |
||||
Net income
|
|
$
|
2,115
|
|
|
$
|
13,550
|
|
Weighted-average number of common shares outstanding
|
|
|
|
|
||||
Basic weighted-average common shares outstanding
|
|
11,208
|
|
|
11,100
|
|
||
Dilutive potential common shares
|
|
287
|
|
|
140
|
|
||
Diluted weighted-average common shares outstanding
|
|
11,495
|
|
|
11,240
|
|
||
Earnings per share
|
|
|
|
|
||||
Basic
|
|
$
|
0.19
|
|
|
$
|
1.22
|
|
Diluted
|
|
$
|
0.18
|
|
|
$
|
1.21
|
|
|
|
December 31, 2016
|
|
Three Months Ended April 1, 2017
|
|
April 1, 2017
|
||||||||||||||
|
|
Balance
|
|
Charges
|
|
Cash Payments
|
|
Change in Estimates
|
|
Balance
|
||||||||||
Severance and benefits
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Lease termination
|
|
654
|
|
|
—
|
|
|
(78
|
)
|
|
—
|
|
|
576
|
|
|||||
Ending balance
|
|
$
|
654
|
|
|
$
|
—
|
|
|
$
|
(78
|
)
|
|
$
|
—
|
|
|
$
|
576
|
|
|
|
As of April 1, 2017
|
|
As of December 31, 2016
|
||||||||||||||||||||||||||||
|
|
Fair Value Measurements Using
|
|
|
|
Fair Value Measurements Using
|
|
|
||||||||||||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Balance
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Balance
|
||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Money market funds
(1)
|
|
$
|
3,892
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,892
|
|
|
$
|
3,751
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,751
|
|
Interest rate cap hedges
(2)
|
|
—
|
|
|
360
|
|
|
—
|
|
|
360
|
|
|
—
|
|
|
553
|
|
|
—
|
|
|
553
|
|
||||||||
Total Assets
|
|
$
|
3,892
|
|
|
$
|
360
|
|
|
$
|
—
|
|
|
$
|
4,252
|
|
|
$
|
3,751
|
|
|
$
|
553
|
|
|
$
|
—
|
|
|
$
|
4,304
|
|
|
|
(In thousands)
|
||||||
|
|
April 1,
2017 |
|
December 31,
2016 |
||||
Raw materials and supplies
|
|
$
|
69,153
|
|
|
$
|
64,650
|
|
Work in process
|
|
59,268
|
|
|
56,806
|
|
||
Finished goods
|
|
10,147
|
|
|
9,180
|
|
||
|
|
138,568
|
|
|
130,636
|
|
||
Less progress payments
|
|
11,367
|
|
|
10,740
|
|
||
Total
|
|
$
|
127,201
|
|
|
$
|
119,896
|
|
|
|
(In thousands)
|
||||||
|
|
April 1,
2017 |
|
December 31,
2016 |
||||
Accrued compensation
|
|
$
|
17,703
|
|
|
$
|
15,455
|
|
Accrued income tax and sales tax
|
|
73
|
|
|
332
|
|
||
Customer deposits
|
|
2,854
|
|
|
3,204
|
|
||
Interest payable
|
|
10
|
|
|
273
|
|
||
Provision for forward loss reserves
|
|
2,650
|
|
|
4,780
|
|
||
Other
|
|
4,802
|
|
|
5,235
|
|
||
Total
|
|
$
|
28,092
|
|
|
$
|
29,279
|
|
|
|
(In thousands)
|
||||||
|
|
April 1,
2017 |
|
December 31,
2016 |
||||
Term loan
|
|
$
|
165,000
|
|
|
$
|
170,000
|
|
Revolving credit facility
|
|
—
|
|
|
—
|
|
||
Other debt (fixed 5.41%)
|
|
—
|
|
|
3
|
|
||
Total debt
|
|
165,000
|
|
|
170,003
|
|
||
Less current portion
|
|
—
|
|
|
3
|
|
||
Total long-term debt
|
|
165,000
|
|
|
170,000
|
|
||
Less debt issuance costs
|
|
2,844
|
|
|
3,104
|
|
||
Total long-term debt, net of debt issuance costs
|
|
$
|
162,156
|
|
|
$
|
166,896
|
|
Weighted-average interest rate
|
|
3.14
|
%
|
|
3.25
|
%
|
|
|
(In thousands)
|
||||||
|
|
Three Months Ended
|
||||||
|
|
April 1,
2017 |
|
April 2,
2016 |
||||
Service cost
|
|
$
|
133
|
|
|
$
|
133
|
|
Interest cost
|
|
332
|
|
|
342
|
|
||
Expected return on plan assets
|
|
(383
|
)
|
|
(370
|
)
|
||
Amortization of actuarial losses
|
|
203
|
|
|
191
|
|
||
Net periodic pension cost
|
|
$
|
285
|
|
|
$
|
296
|
|
(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.
|
|
|
(In thousands)
Three Months Ended
|
||||||
|
|
April 1,
2017 |
|
April 2,
2016 |
||||
Net Revenues
|
|
|
|
|
||||
Structural Systems
|
|
$
|
57,575
|
|
|
$
|
64,017
|
|
Electronic Systems
|
|
78,722
|
|
|
78,131
|
|
||
Total Net Revenues
|
|
$
|
136,297
|
|
|
$
|
142,148
|
|
Segment Operating Income
|
|
|
|
|
||||
Structural Systems
|
|
$
|
2,632
|
|
|
$
|
2,724
|
|
Electronic Systems
|
|
7,104
|
|
|
6,387
|
|
||
|
|
9,736
|
|
|
9,111
|
|
||
Corporate General and Administrative Expenses
(1)
|
|
(5,636
|
)
|
|
(4,818
|
)
|
||
Operating Income
|
|
$
|
4,100
|
|
|
$
|
4,293
|
|
Depreciation and Amortization Expenses
|
|
|
|
|
||||
Structural Systems
|
|
$
|
2,352
|
|
|
$
|
2,057
|
|
Electronic Systems
|
|
3,423
|
|
|
3,761
|
|
||
Corporate Administration
|
|
7
|
|
|
37
|
|
||
Total Depreciation and Amortization Expenses
|
|
$
|
5,782
|
|
|
$
|
5,855
|
|
Capital Expenditures
|
|
|
|
|
||||
Structural Systems
|
|
$
|
5,188
|
|
|
$
|
2,054
|
|
Electronic Systems
|
|
1,433
|
|
|
347
|
|
||
Total Capital Expenditures
|
|
$
|
6,621
|
|
|
$
|
2,401
|
|
(1)
|
Includes costs not allocated to either the Structural Systems or Electronic Systems operating segments.
|
(1)
|
Includes assets not specifically identified to either the Structural Systems or Electronic Systems operating segments, including cash and cash equivalents.
|
•
|
Revenues were
$136.3 million
|
•
|
Net income was
$2.1 million
, or
$0.18
per diluted share
|
•
|
Adjusted EBITDA was
$11.7 million
|
•
|
Cash flow from operations was
$13.2 million
|
•
|
Net voluntary principal prepayments on credit facilities totaled $5.0 million
|
•
|
They do not reflect our cash expenditures, future requirements for capital expenditures or contractual commitments;
|
•
|
They do not reflect changes in, or cash requirements for, our working capital needs;
|
•
|
They do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our debt;
|
•
|
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;
|
•
|
They are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows;
|
•
|
They do not reflect the impact on earnings of charges resulting from matters unrelated to our ongoing operations; and
|
•
|
Other companies in our industry may calculate Adjusted EBITDA differently from us, limiting their usefulness as comparative measures.
|
•
|
Are widely used by investors to measure a company’s operating performance without regard to items excluded from the calculation of such terms, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired, among other factors;
|
•
|
Help investors to evaluate and compare the results of our operations from period to period by removing the effect of our capital structure from our operating performance; and
|
•
|
Are used by our management team for various other purposes in presentations to our Board of Directors as a basis for strategic planning and forecasting.
|
•
|
Interest expense may be useful to investors for determining current cash flow;
|
•
|
Income tax expense may be useful to investors because it represents the taxes which may be payable for the period and the change in deferred taxes during the period, and may reduce cash flow available for use in our business;
|
•
|
Depreciation may be useful to investors because it generally represents the wear and tear on our property and equipment used in our operations;
|
•
|
Amortization expense may be useful to investors because it represents the estimated attrition of our acquired customer base and the diminishing value of product rights;
|
•
|
Stock-based compensation may be useful to our investors for determining current cash flow; and
|
•
|
Gain on divestitures may be useful to our investors in evaluating our on-going operating performance.
|
|
|
(in thousands, except per share data)
Three Months Ended
|
||||||||||||
|
|
April 1,
2017 |
|
%
of Net Revenues
|
|
April 2,
2016 |
|
%
of Net Revenues
|
||||||
Net Revenues
|
|
$
|
136,297
|
|
|
100.0
|
%
|
|
$
|
142,148
|
|
|
100.0
|
%
|
Cost of Sales
|
|
111,370
|
|
|
81.7
|
%
|
|
115,179
|
|
|
81.0
|
%
|
||
Gross Profit
|
|
24,927
|
|
|
18.3
|
%
|
|
26,969
|
|
|
19.0
|
%
|
||
Selling, General and Administrative Expenses
|
|
20,827
|
|
|
15.3
|
%
|
|
22,676
|
|
|
16.0
|
%
|
||
Operating Income
|
|
4,100
|
|
|
3.0
|
%
|
|
4,293
|
|
|
3.0
|
%
|
||
Interest Expense
|
|
(1,593
|
)
|
|
(1.2
|
)%
|
|
(2,399
|
)
|
|
(1.7
|
)%
|
||
Gain on Divestitures
|
|
—
|
|
|
—
|
%
|
|
18,815
|
|
|
13.3
|
%
|
||
Income Before Taxes
|
|
2,507
|
|
|
1.8
|
%
|
|
20,709
|
|
|
14.6
|
%
|
||
Income Tax Expense
|
|
392
|
|
|
nm
|
|
|
7,159
|
|
|
nm
|
|
||
Net Income
|
|
$
|
2,115
|
|
|
1.6
|
%
|
|
$
|
13,550
|
|
|
9.5
|
%
|
|
|
|
|
|
|
|
|
|
||||||
Effective Tax Rate
|
|
15.6
|
%
|
|
nm
|
|
|
34.6
|
%
|
|
nm
|
|
||
Diluted Earnings Per Share
|
|
$
|
0.18
|
|
|
nm
|
|
|
$
|
1.21
|
|
|
nm
|
|
|
|
Three Months Ended
|
||||||||||||||||
|
|
|
|
(In thousands)
|
|
% of Net Revenues
|
||||||||||||
|
|
Change
|
|
April 1
2017 |
|
April 2,
2016 |
|
April 1
2017 |
|
April 2,
2016 |
||||||||
Consolidated Ducommun
|
|
|
|
|
|
|
|
|
|
|
||||||||
Military and space
|
|
|
|
|
|
|
|
|
|
|
||||||||
Defense electronics
|
|
$
|
5,160
|
|
|
$
|
48,507
|
|
|
$
|
43,347
|
|
|
35.6
|
%
|
|
30.5
|
%
|
Defense structures
|
|
737
|
|
|
14,521
|
|
|
13,784
|
|
|
10.6
|
%
|
|
9.7
|
%
|
|||
Commercial aerospace
|
|
(5,951
|
)
|
|
59,814
|
|
|
65,765
|
|
|
43.9
|
%
|
|
46.3
|
%
|
|||
Industrial
|
|
(5,797
|
)
|
|
13,455
|
|
|
19,252
|
|
|
9.9
|
%
|
|
13.5
|
%
|
|||
Total
|
|
$
|
(5,851
|
)
|
|
$
|
136,297
|
|
|
$
|
142,148
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Structural Systems
|
|
|
|
|
|
|
|
|
|
|
||||||||
Military and space (defense structures)
|
|
$
|
737
|
|
|
$
|
14,521
|
|
|
$
|
13,784
|
|
|
25.2
|
%
|
|
21.5
|
%
|
Commercial aerospace
|
|
(7,179
|
)
|
|
43,054
|
|
|
50,233
|
|
|
74.8
|
%
|
|
78.5
|
%
|
|||
Total
|
|
$
|
(6,442
|
)
|
|
$
|
57,575
|
|
|
$
|
64,017
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Electronic Systems
|
|
|
|
|
|
|
|
|
|
|
||||||||
Military and space (defense electronics)
|
|
$
|
5,160
|
|
|
$
|
48,507
|
|
|
$
|
43,347
|
|
|
61.6
|
%
|
|
55.5
|
%
|
Commercial aerospace
|
|
1,228
|
|
|
16,760
|
|
|
15,532
|
|
|
21.3
|
%
|
|
19.9
|
%
|
|||
Industrial
|
|
(5,797
|
)
|
|
13,455
|
|
|
19,252
|
|
|
17.1
|
%
|
|
24.6
|
%
|
|||
Total
|
|
$
|
591
|
|
|
$
|
78,722
|
|
|
$
|
78,131
|
|
|
100.0
|
%
|
|
100.0
|
%
|
•
|
$6.0 million lower revenues in our commercial aerospace end-use markets mainly due to the winding down of a regional jet program and the transition in a large aircraft program; and
|
•
|
$5.8 million lower revenues in our industrial end-use markets mainly due to the closure of one of our Tulsa operations in June 2016 and the divestiture of our Pittsburgh operation in January 2016; partially offset by
|
•
|
$5.9 million higher revenues in our military and space end-use markets mainly due to the resumption of scheduled deliveries by the U.S. Department of Defense, which favorably impacted our helicopter and fixed-wing platforms, partially offset by the divestiture of our Miltec operation in March 2016.
|
|
|
Three Months Ended
|
||||
|
|
April 1,
2017 |
|
April 2,
2016 |
||
Boeing Company
|
|
16.1
|
%
|
|
18.5
|
%
|
Lockheed Martin Corporation
|
|
6.3
|
%
|
|
4.6
|
%
|
Raytheon Company
|
|
13.0
|
%
|
|
7.2
|
%
|
Spirit Aerosystems Holdings, Inc.
|
|
7.5
|
%
|
|
8.0
|
%
|
United Technologies Corporation
|
|
6.3
|
%
|
|
4.6
|
%
|
Total top ten customers
(1)
|
|
63.3
|
%
|
|
58.2
|
%
|
(1)
|
Includes the Boeing Company, Lockheed Martin Corporation, Raytheon Company, Spirit Aerosystems Holdings, Inc., and United Technologies Corporation.
|
|
|
April 1,
2017 |
|
December 31,
2016 |
||
Boeing
|
|
9.5
|
%
|
|
7.8
|
%
|
Lockheed Martin
|
|
5.0
|
%
|
|
2.9
|
%
|
Raytheon
|
|
6.3
|
%
|
|
10.9
|
%
|
Spirit
|
|
11.3
|
%
|
|
9.0
|
%
|
United Technologies
|
|
6.8
|
%
|
|
7.8
|
%
|
•
|
The prior year included a preliminary pretax gain on divestitures of our Pittsburgh and Miltec operations of $18.8 million; partially offset by
|
•
|
$6.8 million of lower income tax expense.
|
|
|
Three Months Ended
|
|||||||||||||||
|
|
%
|
|
(In thousands)
|
|
% of Net Revenues
|
|||||||||||
|
|
Change
|
|
April 1,
2017 |
|
April 2,
2016 |
|
April 1,
2017 |
|
April 2,
2016 |
|||||||
Net Revenues
|
|
|
|
|
|
|
|
|
|
|
|||||||
Structural Systems
|
|
(10.1
|
)%
|
|
$
|
57,575
|
|
|
$
|
64,017
|
|
|
42.2
|
%
|
|
45.0
|
%
|
Electronic Systems
|
|
0.8
|
%
|
|
78,722
|
|
|
78,131
|
|
|
57.8
|
%
|
|
55.0
|
%
|
||
Total Net Revenues
|
|
(4.1
|
)%
|
|
$
|
136,297
|
|
|
$
|
142,148
|
|
|
100.0
|
%
|
|
100.0
|
%
|
Segment Operating Income
|
|
|
|
|
|
|
|
|
|
|
|||||||
Structural Systems
|
|
|
|
$
|
2,632
|
|
|
$
|
2,724
|
|
|
4.6
|
%
|
|
4.3
|
%
|
|
Electronic Systems
|
|
|
|
7,104
|
|
|
6,387
|
|
|
9.0
|
%
|
|
8.2
|
%
|
|||
|
|
|
|
9,736
|
|
|
9,111
|
|
|
|
|
|
|||||
Corporate General and Administrative Expenses
(1)
|
|
|
|
(5,636
|
)
|
|
(4,818
|
)
|
|
(4.1
|
)%
|
|
(3.4
|
)%
|
|||
Total Operating Income
|
|
|
|
$
|
4,100
|
|
|
$
|
4,293
|
|
|
3.0
|
%
|
|
3.0
|
%
|
|
Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|||||||
Structural Systems
|
|
|
|
|
|
|
|
|
|
|
|||||||
Operating Income
|
|
|
|
$
|
2,632
|
|
|
$
|
2,724
|
|
|
|
|
|
|||
Depreciation and Amortization
|
|
|
|
2,352
|
|
|
2,057
|
|
|
|
|
|
|||||
|
|
|
|
4,984
|
|
|
4,781
|
|
|
8.7
|
%
|
|
7.5
|
%
|
|||
Electronic Systems
|
|
|
|
|
|
|
|
|
|
|
|||||||
Operating Income
|
|
|
|
7,104
|
|
|
6,387
|
|
|
|
|
|
|||||
Depreciation and Amortization
|
|
|
|
3,423
|
|
|
3,761
|
|
|
|
|
|
|||||
|
|
|
|
10,527
|
|
|
10,148
|
|
|
13.4
|
%
|
|
13.0
|
%
|
|||
Corporate General and Administrative Expenses
(1)
|
|
|
|
|
|
|
|
|
|
|
|||||||
Operating Loss
|
|
|
|
(5,636
|
)
|
|
(4,818
|
)
|
|
|
|
|
|||||
Depreciation and Amortization
|
|
|
|
7
|
|
|
37
|
|
|
|
|
|
|||||
Stock-Based Compensation Expense
|
|
|
|
1,822
|
|
|
1,000
|
|
|
|
|
|
|||||
|
|
|
|
(3,807
|
)
|
|
(3,781
|
)
|
|
|
|
|
|||||
Adjusted EBITDA
|
|
|
|
$
|
11,704
|
|
|
$
|
11,148
|
|
|
8.6
|
%
|
|
7.8
|
%
|
|
Capital Expenditures
|
|
|
|
|
|
|
|
|
|
|
|||||||
Structural Systems
|
|
|
|
$
|
5,188
|
|
|
$
|
2,054
|
|
|
|
|
|
|||
Electronic Systems
|
|
|
|
1,433
|
|
|
347
|
|
|
|
|
|
|||||
Corporate Administration
|
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|||||
Total Capital Expenditures
|
|
|
|
$
|
6,621
|
|
|
$
|
2,401
|
|
|
|
|
|
(1)
|
Includes costs not allocated to either the Structural Systems or Electronic Systems operating segments.
|
•
|
$7.2 million lower revenues in our commercial aerospace end-use markets mainly due to the winding down of a regional jet program as well as the platform transition in a large aircraft program; partially offset by
|
•
|
$0.8 million higher revenues in our military and space end-use markets mainly due to the resumption of scheduled deliveries by the U.S. Department of Defense, which favorably impacted our helicopter platforms.
|
•
|
$5.2 million higher revenues in our military and space end-use markets mainly due to the resumption of scheduled deliveries by the U.S. Department of Defense, which favorably impacted our helicopter and fixed-wing platforms, partially offset by the divestiture of our Miltec operation in March 2016; and
|
•
|
$1.2 million higher revenues in our commercial aerospace end-use markets mainly due to additional content with our existing customers; partially offset by
|
•
|
$5.8 million lower revenues in our industrial end-use markets mainly due to the closure of one of our Tulsa operations in June 2016 and the divestiture of our Pittsburgh operation in January 2016.
|
|
|
(In thousands)
|
||||||||||
|
|
Change
|
|
April 1,
2017 |
|
December 31,
2016 |
||||||
Consolidated Ducommun
|
|
|
|
|
|
|
||||||
Military and space
|
|
|
|
|
|
|
||||||
Defense electronics
|
|
$
|
(14,152
|
)
|
|
$
|
183,424
|
|
|
$
|
197,576
|
|
Defense structures
|
|
1,462
|
|
|
60,340
|
|
|
58,878
|
|
|||
Commercial aerospace
|
|
(6,646
|
)
|
|
310,025
|
|
|
316,671
|
|
|||
Industrial
|
|
(68
|
)
|
|
27,062
|
|
|
27,130
|
|
|||
Total
|
|
$
|
(19,404
|
)
|
|
$
|
580,851
|
|
|
$
|
600,255
|
|
Structural Systems
|
|
|
|
|
|
|
||||||
Military and space (defense structures)
|
|
$
|
1,462
|
|
|
$
|
60,340
|
|
|
$
|
58,878
|
|
Commercial aerospace
|
|
(10,656
|
)
|
|
267,865
|
|
|
278,521
|
|
|||
Total
|
|
$
|
(9,194
|
)
|
|
$
|
328,205
|
|
|
$
|
337,399
|
|
Electronic Systems
|
|
|
|
|
|
|
||||||
Military and space (defense electronics)
|
|
$
|
(14,152
|
)
|
|
$
|
183,424
|
|
|
$
|
197,576
|
|
Commercial aerospace
|
|
4,010
|
|
|
42,160
|
|
|
38,150
|
|
|||
Industrial
|
|
(68
|
)
|
|
27,062
|
|
|
27,130
|
|
|||
Total
|
|
$
|
(10,210
|
)
|
|
$
|
252,646
|
|
|
$
|
262,856
|
|
|
|
(In millions)
|
||||||
|
|
April 1,
|
|
December 31,
|
||||
|
|
2017
|
|
2016
|
||||
Total debt, including long-term portion
|
|
$
|
165.0
|
|
|
$
|
170.0
|
|
Weighted-average interest rate on debt
|
|
3.14
|
%
|
|
3.25
|
%
|
||
Term Loan interest rate
|
|
3.18
|
%
|
|
3.31
|
%
|
||
Cash and cash equivalents
|
|
$
|
7.1
|
|
|
$
|
7.4
|
|
Unused Revolving Credit Facility
|
|
$
|
199.0
|
|
|
$
|
199.0
|
|
2.1
|
Agreement and Plan of Merger, dated as of April 3, 2011, among Ducommun Incorporated, DLBMS, Inc. and LaBarge, Inc. Incorporated by reference to Exhibit 2.1 to Form 8-K filed on April 5, 2011.
|
2.2
|
Stock Purchase Agreement dated January 22, 2016, by and among Ducommun Incorporated, Ducommun LaBarge Technologies, Inc., as Seller, LaBarge Electronics, Inc., and Intervala, LLC, as Buyer. Incorporated by reference to Exhibit 2.1 to Form 8-K dated January 25, 2016.
|
2.3
|
Stock Purchase Agreement dated February 24, 2016, by and between Ducommun LaBarge Technologies, Inc., as Seller, and General Atomics, as Buyer. Incorporated by reference to Exhibit 2.1 to Form 8-K dated February 24, 2016.
|
3.1
|
Restated Certificate of Incorporation filed with the Delaware Secretary of State on May 29, 1990. Incorporated by reference to Exhibit 3.1 to Form 10-K for the year ended December 31, 1990.
|
3.2
|
Certificate of Amendment of Certificate of Incorporation filed with the Delaware Secretary of State on May 27, 1998. Incorporated by reference to Exhibit 3.2 to Form 10-K for the year ended December 31, 1998.
|
3.3
|
Bylaws as amended and restated on March 19, 2013. Incorporated by reference to Exhibit 99.1 to Form 8-K dated March 22, 2013.
|
3.4
|
Amendment to Bylaws dated January 5, 2017. Incorporated by reference to Exhibit 99.2 to Form 8-K dated January 9, 2017.
|
10.1
|
Credit Agreement, dated as of June 29, 2015, among Ducommun Incorporated, certain of its subsidiaries, Bank of America, N.A., as administrative agent, swingline lender and issuing bank, and other lenders party thereto. Incorporated by reference to Exhibit 10.1 to Form 8-K dated June 29, 2015.
|
*10.2
|
2007 Stock Incentive Plan. Incorporated by reference to Appendix B of Definitive Proxy Statement on Schedule 14a, filed on March 29, 2010.
|
*10.3
|
2013 Stock Incentive Plan (Amended and Restated March 18, 2015). Incorporated by reference to Appendix B of Definitive Proxy Statement on Schedule 14a, filed on April 22, 2015.
|
*10.4
|
Form of Stock Option Agreement for 2016 and earlier. Incorporated by reference to Exhibit 10.8 to Form 10-K for the year ended December 31, 2003.
|
*10.5
|
Form of Stock Option Agreement for 2017 and after. Incorporated by reference to Exhibit 10.5 to Form 10-K for the year ended December 31, 2016.
|
*10.6
|
Form of Performance Stock Unit Agreement for 2014 and 2015. Incorporated by reference to Exhibit 10.19 to Form 8-K dated April 28, 2014.
|
*10.7
|
Form of Performance Stock Unit Agreement for 2016. Incorporated by reference to Exhibit 10.6 to Form 10-Q for the period ended April 2, 2016.
|
*10.8
|
Form of Restricted Stock Unit Agreement for 2016 and earlier. Incorporated by reference to Exhibit 99.1 to Form 8-K dated May 10, 2010.
|
*10.9
|
Form of Restricted Stock Unit Agreement for 2017 and after. Incorporated by reference to Exhibit 10.9 to Form 10-K for the year ended December 31, 2016.
|
*10.10
|
Form of Directors’ Restricted Stock Unit Agreement. Incorporated by reference to Exhibit 99.1 to Form 8-K dated May 10, 2010.
|
*10.11
|
Performance Restricted Stock Unit Agreement dated January 23, 2017 between Ducommun Incorporated and Stephen G. Oswald. Incorporated by reference to Exhibit 10.11 to Form 10-K for the year ended December 31, 2016.
|
*10.12
|
Form of Indemnity Agreement entered with all directors and officers of Ducommun. Incorporated by reference to Exhibit 10.8 to Form 10-K for the year ended December 31, 1990. All of the Indemnity Agreements are identical except for the name of the director or officer and the date of the Agreement:
|
|
Director/Officer
|
|
Date of Agreement
|
|
|
Kathryn M. Andrus
|
|
January 30, 2008
|
|
|
Richard A. Baldridge
|
|
March 19, 2013
|
|
|
Joseph C. Berenato
|
|
November 4, 1991
|
|
|
Gregory S. Churchill
|
|
March 19, 2013
|
|
|
Robert C. Ducommun
|
|
December 31, 1985
|
|
|
Dean M. Flatt
|
|
November 5, 2009
|
|
|
Douglas L. Groves
|
|
February 12, 2013
|
|
|
Jay L. Haberland
|
|
February 2, 2009
|
|
|
James S. Heiser
|
|
May 6, 1987
|
|
|
Stephen G. Oswald
|
|
January 23, 2017
|
|
|
Amy M. Paul
|
|
January 23, 2017
|
|
|
Robert D. Paulson
|
|
March 25, 2003
|
|
|
Anthony J. Reardon
|
|
January 8, 2008
|
|
|
Jerry L. Redondo
|
|
October 1, 2015
|
|
|
Rosalie F. Rogers
|
|
July 24, 2008
|
|
|
Christopher D. Wampler
|
|
January 1, 2016
|
|
*10.13
|
Ducommun Incorporated 2016 Bonus Plan. Incorporated by reference to Exhibit 99.3 to Form 8-K dated March 1, 2016.
|
*10.14
|
Ducommun Incorporated 2017 Bonus Plan. Incorporated by reference to Exhibit 99.1 to Form 8-K dated February 27, 2017.
|
*10.15
|
Directors’ Deferred Compensation and Retirement Plan, as amended and restated February 2, 2010. Incorporated by reference to Exhibit 10.15 to Form 10-K for the year ended December 31, 2009.
|
*10.16
|
Key Executive Severance Agreement between Ducommun Incorporated and Stephen G. Oswald dated January 23, 2017. Incorporated by reference to Exhibit 99.1 to Form 8-K dated January 27, 2017.
|
*10.17
|
Form of Key Executive Severance Agreement between Ducommun Incorporated and each of the individuals listed below. Incorporated by reference to Exhibit 99.2 to Form 8-K dated January 27, 2017. All of the Key Executive Severance Agreements are identical except for the name of the person and the address for notice:
|
|
Person
|
|
Date of Agreement
|
|
|
Kathryn M. Andrus
|
|
January 23, 2017
|
|
|
Douglas L. Groves
|
|
January 23, 2017
|
|
|
James S. Heiser
|
|
January 23, 2017
|
|
|
Amy M. Paul
|
|
January 23, 2017
|
|
|
Anthony J. Reardon
|
|
January 23, 2017
|
|
|
Jerry L. Redondo
|
|
January 23, 2017
|
|
|
Rosalie F. Rogers
|
|
January 23, 2017
|
|
|
Christopher D. Wampler
|
|
January 23, 2017
|
|
*10.18
|
Employment Letter Agreement dated January 3, 2017 between Ducommun Incorporated and Stephen G. Oswald. Incorporated by reference to Exhibit 99.1 to Form 8-K dated January 9, 2017.
|
*10.19
|
Employment Letter Agreement dated December 19, 2016 between Ducommun Incorporated and Amy M. Paul. Incorporated by reference to Exhibit 10.19 to Form 10-K for the year ended December 31, 2016.
|
*10.20
|
Transition Services Letter Agreement dated January 10, 2017 between Ducommun Incorporated and James S. Heiser. Incorporated by reference to Exhibit 99.1 to Form 8-K dated January 16, 2017.
|
*10.21
|
Form of Performance Stock Unit Agreement for 2017.
|
31.1
|
Certification of Principal Executive Officer.
|
31.2
|
Certification of Principal Financial Officer.
|
32
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
Date: May 4, 2017
|
By:
|
|
/s/ Stephen G. Oswald
|
|
|
|
Stephen G. Oswald
|
|
|
|
President and Chief Executive Officer
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
Date: May 4, 2017
|
By:
|
|
/s/ Douglas L. Groves
|
|
|
|
Douglas L. Groves
|
|
|
|
Vice President, Chief Financial Officer and Treasurer
|
|
|
|
(Principal Financial Officer)
|
|
|
|
|
Date: May 4, 2017
|
By:
|
|
/s/ Christopher D. Wampler
|
|
|
|
Christopher D. Wampler
|
|
|
|
Vice President, Controller and Chief Accounting Officer
|
|
|
|
(Principal Accounting Officer)
|
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
|
1.
|
I have reviewed this Quarterly Report of Ducommun Incorporated (the “registrant”) on Form 10-Q for the period ended
April 1, 2017
;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f), and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Stephen G. Oswald
|
Stephen G. Oswald
|
President and Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report of Ducommun Incorporated (the “registrant”) on Form 10-Q for the period ended
April 1, 2017
;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Douglas L. Groves
|
Douglas L. Groves
|
Vice President, Chief Financial Officer and Treasurer
|
|
|
|
|
By:
|
/s/ Stephen G. Oswald
|
|
|
Stephen G. Oswald
|
|
|
President and Chief Executive Officer
|
|
|
May 4, 2017
|
|
|
|
|
By:
|
/s/ Douglas L. Groves
|
|
|
Douglas L. Groves
|
|
|
Vice President, Chief Financial Officer and Treasurer
|
|
|
May 4, 2017
|