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.)
|
|
|
|
200 Sandpointe Avenue, Suite 700, Santa Ana, California
|
|
92707-5759
|
(Address of principal executive offices)
|
|
(Zip code)
|
Title of each class
|
|
Trading Symbol(s)
|
|
Name of each exchange on which registered
|
Common Stock, $.01 par value per share
|
|
DCO
|
|
New York Stock Exchange
|
Large accelerated filer
|
|
¨
|
Accelerated filer
|
|
x
|
|
|
|
|
||
Non-accelerated filer
|
|
¨
|
Smaller reporting company
|
|
¨
|
|
|
|
|
|
|
|
|
|
Emerging growth company
|
|
¨
|
|
|
March 30,
2019 |
|
December 31,
2018 |
||||
Assets
|
|
|
|
|
||||
Current Assets
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
3,727
|
|
|
$
|
10,263
|
|
Accounts receivable, net of allowance for doubtful accounts of $1,239 and $1,135 at March 30, 2019 and December 31, 2018, respectively
|
|
63,134
|
|
|
67,819
|
|
||
Contract assets
|
|
93,306
|
|
|
86,665
|
|
||
Inventories
|
|
103,994
|
|
|
101,125
|
|
||
Production cost of contracts
|
|
11,008
|
|
|
11,679
|
|
||
Other current assets
|
|
7,003
|
|
|
6,531
|
|
||
Total Current Assets
|
|
282,172
|
|
|
284,082
|
|
||
Property and equipment, net of accumulated depreciation of $158,308 and $154,840 at March 30, 2019 and December 31, 2018, respectively
|
|
108,839
|
|
|
107,045
|
|
||
Operating lease right-of-use assets
|
|
18,398
|
|
|
—
|
|
||
Goodwill
|
|
136,057
|
|
|
136,057
|
|
||
Intangibles, net
|
|
109,387
|
|
|
112,092
|
|
||
Non-current deferred income taxes
|
|
313
|
|
|
308
|
|
||
Other assets
|
|
5,543
|
|
|
5,155
|
|
||
Total Assets
|
|
$
|
660,709
|
|
|
$
|
644,739
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
||||
Current Liabilities
|
|
|
|
|
||||
Accounts payable
|
|
$
|
68,785
|
|
|
$
|
69,274
|
|
Contract liabilities
|
|
15,030
|
|
|
17,145
|
|
||
Accrued and other liabilities
|
|
28,986
|
|
|
37,786
|
|
||
Operating lease liabilities
|
|
2,536
|
|
|
—
|
|
||
Current portion of long-term debt
|
|
2,330
|
|
|
2,330
|
|
||
Total Current Liabilities
|
|
117,667
|
|
|
126,535
|
|
||
Long-term debt
|
|
229,125
|
|
|
228,868
|
|
||
Non-current operating lease liabilities
|
|
17,499
|
|
|
—
|
|
||
Non-current deferred income taxes
|
|
18,211
|
|
|
18,070
|
|
||
Other long-term liabilities
|
|
14,429
|
|
|
14,441
|
|
||
Total Liabilities
|
|
396,931
|
|
|
387,914
|
|
||
Commitments and contingencies (Notes 10, 12)
|
|
|
|
|
||||
Shareholders’ Equity
|
|
|
|
|
||||
Common stock - $0.01 par value; 35,000,000 shares authorized; 11,477,771 and 11,417,863 shares issued and outstanding at March 30, 2019 and December 31, 2018, respectively
|
|
115
|
|
|
114
|
|
||
Additional paid-in capital
|
|
83,370
|
|
|
83,712
|
|
||
Retained earnings
|
|
187,564
|
|
|
180,356
|
|
||
Accumulated other comprehensive loss
|
|
(7,271
|
)
|
|
(7,357
|
)
|
||
Total Shareholders’ Equity
|
|
263,778
|
|
|
256,825
|
|
||
Total Liabilities and Shareholders’ Equity
|
|
$
|
660,709
|
|
|
$
|
644,739
|
|
|
|
Three Months Ended
|
||||||
|
|
March 30,
2019 |
|
March 31,
2018 |
||||
Net Revenues
|
|
$
|
172,566
|
|
|
$
|
150,455
|
|
Cost of Sales
|
|
136,872
|
|
|
123,700
|
|
||
Gross Profit
|
|
35,694
|
|
|
26,755
|
|
||
Selling, General and Administrative Expenses
|
|
22,846
|
|
|
19,326
|
|
||
Restructuring Charges
|
|
—
|
|
|
2,173
|
|
||
Operating Income
|
|
12,848
|
|
|
5,256
|
|
||
Interest Expense
|
|
(4,351
|
)
|
|
(2,899
|
)
|
||
Income Before Taxes
|
|
8,497
|
|
|
2,357
|
|
||
Income Tax Expense (Benefit)
|
|
1,025
|
|
|
(243
|
)
|
||
Net Income
|
|
$
|
7,472
|
|
|
$
|
2,600
|
|
Earnings Per Share
|
|
|
|
|
||||
Basic earnings per share
|
|
$
|
0.65
|
|
|
$
|
0.23
|
|
Diluted earnings per share
|
|
$
|
0.64
|
|
|
$
|
0.22
|
|
Weighted-Average Number of Common Shares Outstanding
|
|
|
|
|
||||
Basic
|
|
11,434
|
|
|
11,346
|
|
||
Diluted
|
|
11,755
|
|
|
11,613
|
|
|
|
Three Months Ended
|
||||||
|
|
March 30,
2019 |
|
March 31,
2018 |
||||
Net Income
|
|
$
|
7,472
|
|
|
$
|
2,600
|
|
Other Comprehensive Income (Loss), Net of Tax:
|
|
|
|
|
||||
Amortization of actuarial losses and prior service costs, net of tax benefit of $51 and $45 for the three months ended March 30, 2019 and March 31, 2018, respectively
|
|
170
|
|
|
141
|
|
||
Change in unrealized gains and losses on cash flow hedges, net of tax of $54 and $61 for the three months ended March 30, 2019 and March 31, 2018, respectively
|
|
(84
|
)
|
|
194
|
|
||
Other Comprehensive Income (Loss), Net of Tax
|
|
86
|
|
|
335
|
|
||
Comprehensive Income
|
|
$
|
7,558
|
|
|
$
|
2,935
|
|
|
|
Three Months Ended
|
||||||
|
|
March 30,
2019 |
|
March 31,
2018 |
||||
Common Stock and Paid-in-Capital
|
|
|
|
|
||||
Balance, Beginning of Period
|
|
$
|
83,826
|
|
|
$
|
80,336
|
|
Stock Options Exercised
|
|
97
|
|
|
121
|
|
||
Stock Awards Vested
|
|
4,296
|
|
|
2,307
|
|
||
Stock Repurchased Related to Stock Options Exercised and Stock Awards Vested
|
|
(6,198
|
)
|
|
(3,376
|
)
|
||
Stock-Based Compensation
|
|
1,464
|
|
|
1,247
|
|
||
Balance, End of Period
|
|
83,485
|
|
|
80,635
|
|
||
Retained Earnings
|
|
|
|
|
||||
Balance, Beginning of Period
|
|
180,356
|
|
|
161,364
|
|
||
Net Income
|
|
7,472
|
|
|
2,600
|
|
||
Adoption of ASC 842 Adjustment
|
|
(264
|
)
|
|
—
|
|
||
Adoption of ASC 606 Adjustment
|
|
—
|
|
|
8,665
|
|
||
Adoption of ASU 2018-02 Adjustment
|
|
—
|
|
|
1,292
|
|
||
Balance, End of Period
|
|
187,564
|
|
|
173,921
|
|
||
Accumulated Other Comprehensive Loss
|
|
|
|
|
||||
Balance, Beginning of Period
|
|
(7,357
|
)
|
|
(6,117
|
)
|
||
Other Comprehensive Income, Net of Tax
|
|
86
|
|
|
453
|
|
||
Adoption of ASU 2018-02 Adjustment
|
|
—
|
|
|
(1,318
|
)
|
||
Balance, End of Period
|
|
(7,271
|
)
|
|
(6,982
|
)
|
||
Total Stockholders’ Equity
|
|
$
|
263,778
|
|
|
$
|
247,574
|
|
|
|
Three Months Ended
|
||||||
|
|
March 30,
2019 |
|
March 31,
2018 |
||||
Cash Flows from Operating Activities
|
|
|
|
|
||||
Net Income
|
|
$
|
7,472
|
|
|
$
|
2,600
|
|
Adjustments to Reconcile Net Income to
|
|
|
|
|
||||
Net Cash Provided by Operating Activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
6,755
|
|
|
5,981
|
|
||
Amortization of right-of-use assets
|
|
633
|
|
|
—
|
|
||
Property and equipment impairment due to restructuring
|
|
—
|
|
|
1,077
|
|
||
Stock-based compensation expense
|
|
1,464
|
|
|
1,090
|
|
||
Deferred income taxes
|
|
217
|
|
|
(206
|
)
|
||
Provision for (recovery of) doubtful accounts
|
|
104
|
|
|
(143
|
)
|
||
Other
|
|
(19
|
)
|
|
8,810
|
|
||
Changes in Assets and Liabilities:
|
|
|
|
|
||||
Accounts receivable
|
|
4,581
|
|
|
9,292
|
|
||
Contract assets
|
|
(6,641
|
)
|
|
(78,163
|
)
|
||
Inventories
|
|
(2,869
|
)
|
|
36,229
|
|
||
Production cost of contracts
|
|
105
|
|
|
(55
|
)
|
||
Other assets
|
|
(450
|
)
|
|
412
|
|
||
Accounts payable
|
|
(1,789
|
)
|
|
12,213
|
|
||
Contract liabilities
|
|
(2,115
|
)
|
|
15,723
|
|
||
Accrued and other liabilities
|
|
(9,154
|
)
|
|
(4,524
|
)
|
||
Net Cash (Used in) Provided by Operating Activities
|
|
(1,706
|
)
|
|
10,336
|
|
||
Cash Flows from Investing Activities
|
|
|
|
|
||||
Purchases of property and equipment
|
|
(3,225
|
)
|
|
(3,341
|
)
|
||
Proceeds from sale of assets
|
|
—
|
|
|
41
|
|
||
Net Cash Used in Investing Activities
|
|
(3,225
|
)
|
|
(3,300
|
)
|
||
Cash Flows from Financing Activities
|
|
|
|
|
||||
Borrowings from senior secured revolving credit facility
|
|
61,900
|
|
|
76,700
|
|
||
Repayments of senior secured revolving credit facility
|
|
(58,700
|
)
|
|
(83,300
|
)
|
||
Repayments of term loan
|
|
(3,000
|
)
|
|
—
|
|
||
Net cash paid upon issuance of common stock under stock plans
|
|
(1,805
|
)
|
|
(789
|
)
|
||
Net Cash Used in Financing Activities
|
|
(1,605
|
)
|
|
(7,389
|
)
|
||
Net Increase (Decrease) in Cash and Cash Equivalents
|
|
(6,536
|
)
|
|
(353
|
)
|
||
Cash and Cash Equivalents at Beginning of Period
|
|
10,263
|
|
|
2,150
|
|
||
Cash and Cash Equivalents at End of Period
|
|
$
|
3,727
|
|
|
$
|
1,797
|
|
|
|
(In thousands)
|
||||||
|
|
Three Months Ended
|
||||||
|
|
March 30,
2019 |
|
March 31,
2018 |
||||
Interest paid
|
|
$
|
3,984
|
|
|
$
|
2,405
|
|
Taxes paid
|
|
$
|
5
|
|
|
$
|
—
|
|
Non-cash activities:
|
|
|
|
|
||||
Purchases of property and equipment not paid
|
|
$
|
2,124
|
|
|
$
|
3,026
|
|
|
|
(In thousands, except per share data)
|
||||||
|
|
Three Months Ended
|
||||||
|
|
March 30,
2019 |
|
March 31,
2018 |
||||
Net income
|
|
$
|
7,472
|
|
|
$
|
2,600
|
|
Weighted-average number of common shares outstanding
|
|
|
|
|
||||
Basic weighted-average common shares outstanding
|
|
11,434
|
|
|
11,346
|
|
||
Dilutive potential common shares
|
|
321
|
|
|
267
|
|
||
Diluted weighted-average common shares outstanding
|
|
11,755
|
|
|
11,613
|
|
||
Earnings per share
|
|
|
|
|
||||
Basic
|
|
$
|
0.65
|
|
|
$
|
0.23
|
|
Diluted
|
|
$
|
0.64
|
|
|
$
|
0.22
|
|
•
|
July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements” (“ASU 2018-11”); and
|
•
|
July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”)
|
•
|
Need not reassess whether any expired or existing contracts are or contain leases;
|
•
|
Need not reassess the lease classification for any expired or existing leases;
|
•
|
Need not reassess initial direct costs for any existing leases;
|
•
|
As an accounting policy election by class of underlying asset, choose not to separate nonlease components from lease components and instead to account for each separate lease component and the nonlease components associated with that lease component as a single lease component; and
|
•
|
As an accounting policy election not to apply the recognition requirements in ASC 842 to short term leases (a lease at commencement date has a lease term of 12 months or less and does not contain a purchase option that the lessee is reasonably certain to exercise).
|
|
(In years)
|
Operating leases
|
7
|
Finance leases
|
4
|
Operating leases
|
6.5
|
%
|
Finance leases
|
6.5
|
%
|
|
|
December 31, 2018
|
|
Three Months Ended March 30, 2019
|
|
March 30, 2019
|
||||||||||
|
|
Balance
|
|
Cash Payments
|
|
Adoption of ASU 842 Adjustment
|
|
Balance
|
||||||||
Severance and benefits
|
|
$
|
2,631
|
|
|
$
|
(1,652
|
)
|
|
$
|
—
|
|
|
$
|
979
|
|
Lease termination
|
|
861
|
|
|
(126
|
)
|
|
(735
|
)
|
|
—
|
|
||||
Professional service fees
|
|
43
|
|
|
(43
|
)
|
|
—
|
|
|
—
|
|
||||
Other
|
|
416
|
|
|
(416
|
)
|
|
—
|
|
|
—
|
|
||||
Total charged to restructuring charges
|
|
3,951
|
|
|
(2,237
|
)
|
|
(735
|
)
|
|
979
|
|
||||
Inventory reserve
|
|
50
|
|
|
—
|
|
|
—
|
|
|
50
|
|
||||
Total charged to cost of sales
|
|
50
|
|
|
—
|
|
|
—
|
|
|
50
|
|
||||
Ending balance
|
|
$
|
4,001
|
|
|
$
|
(2,237
|
)
|
|
$
|
(735
|
)
|
|
$
|
1,029
|
|
|
|
(In thousands)
|
||||||
|
|
March 30,
2019 |
|
December 31,
2018 |
||||
Raw materials and supplies
|
|
$
|
91,664
|
|
|
$
|
89,767
|
|
Work in process
|
|
9,810
|
|
|
9,199
|
|
||
Finished goods
|
|
2,520
|
|
|
2,159
|
|
||
Total
|
|
$
|
103,994
|
|
|
$
|
101,125
|
|
|
|
|
||||||||||
|
|
Electronic
Systems
|
|
Structural
Systems
|
|
Consolidated
Ducommun
|
||||||
Gross goodwill
|
|
$
|
199,157
|
|
|
$
|
18,622
|
|
|
$
|
217,779
|
|
Accumulated goodwill impairment
|
|
(81,722
|
)
|
|
—
|
|
|
(81,722
|
)
|
|||
Balance at December 31, 2018
|
|
$
|
117,435
|
|
|
$
|
18,622
|
|
|
$
|
136,057
|
|
Balance at March 30, 2019
|
|
$
|
117,435
|
|
|
$
|
18,622
|
|
|
$
|
136,057
|
|
|
|
(In thousands)
|
||||||
|
|
March 30,
2019 |
|
December 31,
2018 |
||||
Accrued compensation
|
|
$
|
20,686
|
|
|
$
|
29,616
|
|
Accrued income tax and sales tax
|
|
1,117
|
|
|
82
|
|
||
Other
|
|
7,183
|
|
|
8,088
|
|
||
Total
|
|
$
|
28,986
|
|
|
$
|
37,786
|
|
|
|
(In thousands)
|
||||||
|
|
March 30,
2019 |
|
December 31,
2018 |
||||
Term loan
|
|
$
|
230,000
|
|
|
$
|
233,000
|
|
Revolving credit facility
|
|
3,200
|
|
|
—
|
|
||
Total debt
|
|
233,200
|
|
|
233,000
|
|
||
Less current portion
|
|
2,330
|
|
|
2,330
|
|
||
Total long-term debt, less current portion
|
|
230,870
|
|
|
230,670
|
|
||
Less debt issuance costs - term loan
|
|
1,745
|
|
|
1,802
|
|
||
Total long-term debt, net of debt issuance costs - term loan
|
|
229,125
|
|
|
228,868
|
|
||
Less debt issuance costs - revolving credit facility
(1)
|
|
1,803
|
|
|
1,907
|
|
||
Total long-term debt, net of debt issuance costs
|
|
$
|
227,322
|
|
|
$
|
226,961
|
|
Weighted-average interest rate
|
|
6.84
|
%
|
|
4.71
|
%
|
|
|
(In thousands)
|
||||||
|
|
Three Months Ended
|
||||||
|
|
March 30,
2019 |
|
March 31,
2018 |
||||
Service cost
|
|
$
|
126
|
|
|
$
|
150
|
|
Interest cost
|
|
347
|
|
|
317
|
|
||
Expected return on plan assets
|
|
(411
|
)
|
|
(446
|
)
|
||
Amortization of actuarial losses
|
|
221
|
|
|
186
|
|
||
Net periodic pension cost
|
|
$
|
283
|
|
|
$
|
207
|
|
(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
|
||||||
|
|
March 30,
2019 |
|
March 31,
2018 |
||||
Net Revenues
|
|
|
|
|
||||
Electronic Systems
|
|
$
|
84,197
|
|
|
$
|
82,409
|
|
Structural Systems
|
|
88,369
|
|
|
68,046
|
|
||
Total Net Revenues
|
|
$
|
172,566
|
|
|
$
|
150,455
|
|
Segment Operating Income
|
|
|
|
|
||||
Electronic Systems
|
|
$
|
9,181
|
|
|
$
|
5,744
|
|
Structural Systems
|
|
10,549
|
|
|
4,391
|
|
||
|
|
19,730
|
|
|
10,135
|
|
||
Corporate General and Administrative Expenses
(1)
|
|
(6,882
|
)
|
|
(4,879
|
)
|
||
Operating Income
|
|
$
|
12,848
|
|
|
$
|
5,256
|
|
Depreciation and Amortization Expenses
|
|
|
|
|
||||
Electronic Systems
|
|
$
|
3,844
|
|
|
$
|
3,632
|
|
Structural Systems
|
|
3,250
|
|
|
2,316
|
|
||
Corporate Administration
|
|
294
|
|
|
33
|
|
||
Total Depreciation and Amortization Expenses
|
|
$
|
7,388
|
|
|
$
|
5,981
|
|
Capital Expenditures
|
|
|
|
|
||||
Electronic Systems
|
|
$
|
836
|
|
|
$
|
2,734
|
|
Structural Systems
|
|
3,689
|
|
|
1,529
|
|
||
Total Capital Expenditures
|
|
$
|
4,525
|
|
|
$
|
4,263
|
|
(1)
|
Includes costs not allocated to either the Electronic Systems or Structural Systems operating segments.
|
(1)
|
Includes assets not specifically identified to or allocated to either the Electronic Systems or Structural Systems operating segments, including cash and cash equivalents.
|
•
|
Revenues of
$172.6 million
|
•
|
Net income of
$7.5 million
, or
$0.64
per diluted share
|
•
|
Adjusted EBITDA of
$21.7 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
|
•
|
Restructuring charges may be useful to our investors in evaluating our core operating performance.
|
|
|
(in thousands, except per share data)
Three Months Ended
|
||||||||||||
|
|
March 30,
2019 |
|
%
of Net Revenues
|
|
March 31,
2018 |
|
%
of Net Revenues
|
||||||
Net Revenues
|
|
$
|
172,566
|
|
|
100.0
|
%
|
|
$
|
150,455
|
|
|
100.0
|
%
|
Cost of Sales
|
|
136,872
|
|
|
79.3
|
%
|
|
123,700
|
|
|
82.2
|
%
|
||
Gross Profit
|
|
35,694
|
|
|
20.7
|
%
|
|
26,755
|
|
|
17.8
|
%
|
||
Selling, General and Administrative Expenses
|
|
22,846
|
|
|
13.3
|
%
|
|
19,326
|
|
|
12.8
|
%
|
||
Restructuring Charges
|
|
—
|
|
|
—
|
%
|
|
2,173
|
|
|
1.5
|
%
|
||
Operating Income
|
|
12,848
|
|
|
7.4
|
%
|
|
5,256
|
|
|
3.5
|
%
|
||
Interest Expense
|
|
(4,351
|
)
|
|
(2.5
|
)%
|
|
(2,899
|
)
|
|
(1.9
|
)%
|
||
Income Before Taxes
|
|
8,497
|
|
|
4.9
|
%
|
|
2,357
|
|
|
1.6
|
%
|
||
Income Tax Expense (Benefit)
|
|
1,025
|
|
|
nm
|
|
|
(243
|
)
|
|
nm
|
|
||
Net Income
|
|
$
|
7,472
|
|
|
4.3
|
%
|
|
$
|
2,600
|
|
|
1.7
|
%
|
|
|
|
|
|
|
|
|
|
||||||
Effective Tax (Benefit) Rate
|
|
12.1
|
%
|
|
nm
|
|
|
(10.3
|
)%
|
|
nm
|
|
||
Diluted Earnings Per Share
|
|
$
|
0.64
|
|
|
nm
|
|
|
$
|
0.22
|
|
|
nm
|
|
|
|
Three Months Ended
|
||||||||||||||||
|
|
|
|
(In thousands)
|
|
% of Net Revenues
|
||||||||||||
|
|
Change
|
|
March 30,
2019 |
|
March 31,
2018 |
|
March 30,
2019 |
|
March 31,
2018 |
||||||||
Consolidated Ducommun
|
|
|
|
|
|
|
|
|
|
|
||||||||
Military and space
|
|
$
|
13,096
|
|
|
$
|
76,661
|
|
|
$
|
63,565
|
|
|
44.4
|
%
|
|
42.3
|
%
|
Commercial aerospace
|
|
11,865
|
|
|
85,496
|
|
|
73,631
|
|
|
49.6
|
%
|
|
48.9
|
%
|
|||
Industrial
|
|
(2,850
|
)
|
|
10,409
|
|
|
13,259
|
|
|
6.0
|
%
|
|
8.8
|
%
|
|||
Total
|
|
$
|
22,111
|
|
|
$
|
172,566
|
|
|
$
|
150,455
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Electronic Systems
|
|
|
|
|
|
|
|
|
|
|
||||||||
Military and space
|
|
$
|
8,487
|
|
|
$
|
60,387
|
|
|
$
|
51,900
|
|
|
71.7
|
%
|
|
63.0
|
%
|
Commercial aerospace
|
|
(3,849
|
)
|
|
13,401
|
|
|
17,250
|
|
|
15.9
|
%
|
|
20.9
|
%
|
|||
Industrial
|
|
(2,850
|
)
|
|
10,409
|
|
|
13,259
|
|
|
12.4
|
%
|
|
16.1
|
%
|
|||
Total
|
|
$
|
1,788
|
|
|
$
|
84,197
|
|
|
$
|
82,409
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Structural Systems
|
|
|
|
|
|
|
|
|
|
|
||||||||
Military and space
|
|
$
|
4,609
|
|
|
$
|
16,274
|
|
|
$
|
11,665
|
|
|
18.4
|
%
|
|
17.1
|
%
|
Commercial aerospace
|
|
15,714
|
|
|
72,095
|
|
|
56,381
|
|
|
81.6
|
%
|
|
82.9
|
%
|
|||
Total
|
|
$
|
20,323
|
|
|
$
|
88,369
|
|
|
$
|
68,046
|
|
|
100.0
|
%
|
|
100.0
|
%
|
•
|
$13.1 million higher revenues in our military and space end-use markets due to increased shipments on various missile platforms; and
|
•
|
$11.9 million higher revenues in our commercial aerospace end-use markets due to additional content and higher build rates on large aircraft platforms; partially offset by
|
•
|
$2.9 million lower revenues in our industrial end-use markets.
|
|
|
Three Months Ended
|
||||
|
|
March 30,
2019 |
|
March 31,
2018 |
||
Boeing Company
|
|
19.9
|
%
|
|
17.7
|
%
|
Northrop Grumman Corporation
|
|
4.3
|
%
|
|
5.9
|
%
|
Raytheon Company
|
|
10.5
|
%
|
|
11.0
|
%
|
Spirit Aerosystems Holdings, Inc.
|
|
11.9
|
%
|
|
9.0
|
%
|
Total top ten customers
(1)
|
|
67.1
|
%
|
|
64.2
|
%
|
(1)
|
Includes the Boeing Company (“Boeing”), Northrop Grumman Corporation (“Northrop”), Raytheon Company (“Raytheon”), and Spirit Aerosystems Holdings, Inc. (“Spirit”).
|
|
|
March 30,
2019 |
|
December 31,
2018 |
||
Boeing
|
|
9.4
|
%
|
|
7.9
|
%
|
Northrop
|
|
1.5
|
%
|
|
3.7
|
%
|
Raytheon
|
|
4.7
|
%
|
|
3.1
|
%
|
Spirit
|
|
2.6
|
%
|
|
0.2
|
%
|
|
|
Three Months Ended
|
|||||||||||||||
|
|
%
|
|
(In thousands)
|
|
% of Net Revenues
|
|||||||||||
|
|
Change
|
|
March 30,
2019 |
|
March 31,
2018 |
|
March 30,
2019 |
|
March 31,
2018 |
|||||||
Net Revenues
|
|
|
|
|
|
|
|
|
|
|
|||||||
Electronic Systems
|
|
2.2
|
%
|
|
$
|
84,197
|
|
|
$
|
82,409
|
|
|
48.8
|
%
|
|
54.8
|
%
|
Structural Systems
|
|
29.9
|
%
|
|
88,369
|
|
|
68,046
|
|
|
51.2
|
%
|
|
45.2
|
%
|
||
Total Net Revenues
|
|
14.7
|
%
|
|
$
|
172,566
|
|
|
$
|
150,455
|
|
|
100.0
|
%
|
|
100.0
|
%
|
Segment Operating Income
|
|
|
|
|
|
|
|
|
|
|
|||||||
Electronic Systems
|
|
|
|
$
|
9,181
|
|
|
$
|
5,744
|
|
|
10.9
|
%
|
|
7.0
|
%
|
|
Structural Systems
|
|
|
|
10,549
|
|
|
4,391
|
|
|
11.9
|
%
|
|
6.5
|
%
|
|||
|
|
|
|
19,730
|
|
|
10,135
|
|
|
|
|
|
|||||
Corporate General and Administrative Expenses
(1)
|
|
|
|
(6,882
|
)
|
|
(4,879
|
)
|
|
(4.0
|
)%
|
|
(3.2
|
)%
|
|||
Total Operating Income
|
|
|
|
$
|
12,848
|
|
|
$
|
5,256
|
|
|
7.4
|
%
|
|
3.5
|
%
|
|
Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|||||||
Electronic Systems
|
|
|
|
|
|
|
|
|
|
|
|||||||
Operating Income
|
|
|
|
$
|
9,181
|
|
|
$
|
5,744
|
|
|
|
|
|
|||
Depreciation and Amortization
|
|
|
|
3,844
|
|
|
3,632
|
|
|
|
|
|
|||||
Restructuring Charges
|
|
|
|
—
|
|
|
520
|
|
|
|
|
|
|||||
|
|
|
|
13,025
|
|
|
9,896
|
|
|
15.5
|
%
|
|
12.0
|
%
|
|||
Structural Systems
|
|
|
|
|
|
|
|
|
|
|
|||||||
Operating Income
|
|
|
|
10,549
|
|
|
4,391
|
|
|
|
|
|
|||||
Depreciation and Amortization
|
|
|
|
3,250
|
|
|
2,316
|
|
|
|
|
|
|||||
Restructuring Charges
|
|
|
|
—
|
|
|
1,526
|
|
|
|
|
|
|||||
|
|
|
|
13,799
|
|
|
8,233
|
|
|
15.6
|
%
|
|
12.1
|
%
|
|||
Corporate General and Administrative Expenses
(1)
|
|
|
|
|
|
|
|
|
|
|
|||||||
Operating Loss
|
|
|
|
(6,882
|
)
|
|
(4,879
|
)
|
|
|
|
|
|||||
Depreciation and Amortization
|
|
|
|
294
|
|
|
33
|
|
|
|
|
|
|||||
Stock-Based Compensation Expense
|
|
|
|
1,464
|
|
|
1,090
|
|
|
|
|
|
|||||
Restructuring Charges
|
|
|
|
—
|
|
|
127
|
|
|
|
|
|
|||||
|
|
|
|
(5,124
|
)
|
|
(3,629
|
)
|
|
|
|
|
|||||
Adjusted EBITDA
|
|
|
|
$
|
21,700
|
|
|
$
|
14,500
|
|
|
12.6
|
%
|
|
9.6
|
%
|
|
Capital Expenditures
|
|
|
|
|
|
|
|
|
|
|
|||||||
Electronic Systems
|
|
|
|
$
|
836
|
|
|
$
|
2,734
|
|
|
|
|
|
|||
Structural Systems
|
|
|
|
3,689
|
|
|
1,529
|
|
|
|
|
|
|||||
Total Capital Expenditures
|
|
|
|
$
|
4,525
|
|
|
$
|
4,263
|
|
|
|
|
|
(1)
|
Includes costs not allocated to either the Electronic Systems or Structural Systems operating segments.
|
•
|
$8.5 million higher revenues in our military and space end-use markets due to increased shipments on various missile platforms; partially offset by
|
•
|
$3.8 million lower revenues in our commercial aerospace end-use markets due to timing of shipments which unfavorably impacted our large aircraft platforms; and
|
•
|
$2.9 million lower revenues in our industrial end-use markets.
|
•
|
$15.7 million higher revenues in our commercial aerospace end-use markets due to additional content and higher build rates on large aircraft platforms; and
|
•
|
$4.6 million higher revenues in our military and space end-use markets due to increased shipments on military rotary-wing aircraft platforms.
|
|
|
(In millions)
|
||||||
|
|
March 30,
|
|
December 31,
|
||||
|
|
2019
|
|
2018
|
||||
Total debt, including long-term portion
|
|
$
|
233.2
|
|
|
$
|
233.0
|
|
Weighted-average interest rate on debt
|
|
6.84
|
%
|
|
4.71
|
%
|
||
Term Loan interest rate
|
|
6.53
|
%
|
|
4.15
|
%
|
||
Cash and cash equivalents
|
|
$
|
3.7
|
|
|
$
|
10.3
|
|
Unused Revolving Credit Facility
|
|
$
|
96.6
|
|
|
$
|
99.7
|
|
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.
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*10.16
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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:
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Director/Officer
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Date of Agreement
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Richard A. Baldridge
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March 19, 2013
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Gregory S. Churchill
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March 19, 2013
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Shirley G. Drazba
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October 18, 2018
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Robert C. Ducommun
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December 31, 1985
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Dean M. Flatt
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November 5, 2009
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Douglas L. Groves
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February 12, 2013
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Jay L. Haberland
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February 2, 2009
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Stephen G. Oswald
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January 23, 2017
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Robert D. Paulson
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March 25, 2003
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Jerry L. Redondo
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October 1, 2015
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Rosalie F. Rogers
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July 24, 2008
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Christopher D. Wampler
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January 1, 2016
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Person
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Date of Agreement
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Douglas L. Groves
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January 23, 2017
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Jerry L. Redondo
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January 23, 2017
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Rosalie F. Rogers
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January 23, 2017
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Christopher D. Wampler
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January 23, 2017
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Date: May 6, 2019
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By:
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/s/ Stephen G. Oswald
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Stephen G. Oswald
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Chairman, President and Chief Executive Officer
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(Principal Executive Officer)
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Date: May 6, 2019
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By:
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/s/ Douglas L. Groves
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Douglas L. Groves
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Vice President, Chief Financial Officer and Treasurer
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(Principal Financial Officer)
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Date: May 6, 2019
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By:
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/s/ Christopher D. Wampler
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Christopher D. Wampler
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Vice President, Controller and Chief Accounting Officer
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(Principal Accounting Officer)
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1.
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I have reviewed this Quarterly Report of Ducommun Incorporated (the “registrant”) on Form 10-Q for the period ended
March 30, 2019
;
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2.
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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;
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3.
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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;
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4.
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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:
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a.
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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;
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b.
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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;
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c.
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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
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d.
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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
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5.
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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):
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a.
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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
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b.
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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.
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/s/ Stephen G. Oswald
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Stephen G. Oswald
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Chairman, President and Chief Executive Officer
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1.
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I have reviewed this Quarterly Report of Ducommun Incorporated (the “registrant”) on Form 10-Q for the period ended
March 30, 2019
;
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2.
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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;
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3.
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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;
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4.
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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:
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a.
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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;
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b.
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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;
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c.
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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
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d.
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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
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5.
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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):
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a.
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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
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b.
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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.
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/s/ Douglas L. Groves
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Douglas L. Groves
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Vice President, Chief Financial Officer and Treasurer
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By:
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/s/ Stephen G. Oswald
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Stephen G. Oswald
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Chairman, President and Chief Executive Officer
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May 6, 2019
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By:
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/s/ Douglas L. Groves
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Douglas L. Groves
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Vice President, Chief Financial Officer and Treasurer
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May 6, 2019
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