Completes New Credit Facility, Strengthens
Balance Sheet, and Continues to Streamline Operations
Ducommun Incorporated (NYSE:DCO) (“Ducommun” or the “Company”)
today reported results for its second quarter ended July 4,
2015.
Second Quarter 2015 Recap
- Second quarter revenue was $174.8
million
- Net income was $1.8 million, or $0.16
per diluted share
- EBITDA for the quarter was $18.9
million
- New $475 million credit facility
completed and, on July 27, redeemed all $200 million of the
Company’s senior unsecured notes
“During the second quarter, Ducommun made solid progress on a
number of fronts to further strengthen the Company’s position going
forward,” said Anthony J. Reardon, chairman and chief executive
officer. “While again posting revenue growth in commercial
aerospace and winning new business on several key aircraft, we are
executing on initiatives to right-size certain operations, reduce
costs and working capital, and expand overall margins. Our military
and oil and gas end-use markets continue to be down year-over-year,
but we expect to see run rates stabilize in the second half of
2015.
“Cash flow remains strong, and we completed a new credit
facility that is expected to save Ducommun a significant amount of
interest expense annually -- a major accomplishment that will have
an immediate, positive impact on net income. Given our improved
financial profile, continued focus on margins, and additional
streamlining activities, we are setting the stage for Ducommun to
be on sound footing heading into 2016.”
Second Quarter Results
Net revenue for the second quarter of 2015 was $174.8 million
compared to $186.5 million for the second quarter of 2014. The net
revenue decrease year-over-year primarily reflects 16.9% lower
revenue in the Company’s military and space end-use markets and
4.3% lower revenue in the Company’s non-aerospace and defense
(“non-A&D”) end-use markets, partially offset by 9.4% higher
revenue in the Company’s commercial aerospace end-use markets.
The net income for the second quarter of 2015 was $1.8 million,
or $0.16 per diluted share compared to $6.6 million, or $0.60 per
diluted share, for the second quarter of 2014. The lower net income
for the second quarter of 2015 was primarily due to lower revenue,
loss of efficiencies resulting from lower manufacturing volume,
loss on extinguishment of debt, unfavorable product mix, and higher
forward loss reserves, partially offset by lower income tax
expense, lower compensation and benefit costs, insurance recoveries
related to property and equipment, and lower interest expense. The
current quarter effective income tax rate was 41.8% compared to an
effective income tax rate of 32.6% for the comparable prior year’s
quarter.
Operating income for the second quarter of 2015 was $10.8
million, or 6.2% of revenue, compared to $16.8 million, or 9.0% of
revenue, in the comparable period last year. The decrease in
operating income in the second quarter of 2015 was primarily due to
lower revenue, loss of efficiencies resulting from lower
manufacturing volume, unfavorable product mix, and higher forward
loss reserves, partially offset by lower compensation and benefit
costs.
During the three months ended July 4, 2015, the Company recorded
a $2.8 million loss on extinguishment of debt as part of paying off
the existing senior secured term loan and $1.5 million of other
income for insurance recoveries related to property and equipment
and none in the comparable prior year period.
Interest expense decreased to $6.4 million in the second quarter
of 2015, compared to $7.0 million in the previous year’s second
quarter, primarily due to lower outstanding debt balances as a
result of voluntary principal prepayments on the term loan each
quarter during 2014 and the first quarter of 2015 as the Company
continued to de-lever its balance sheet.
EBITDA for the second quarter of 2015 was $18.9 million, or
10.8% of revenue, compared to $24.5 million, or 13.1% of revenue,
for the comparable period in 2014.
During the second quarter of 2015, the Company generated $14.1
million of cash from operations compared to $25.3 million during
the second quarter of 2014.
The Company’s firm backlog as of July 4, 2015 was approximately
$524 million.
Ducommun AeroStructures (“DAS”)
The Company’s DAS segment net revenue for the current second
quarter was $76.1 million, compared to $78.6 million for the second
quarter of 2014. The lower net revenue was primarily due to a 25.5%
decrease in military and space revenue, partially offset by a 10.8%
increase in commercial aerospace revenue.
DAS segment operating income for the current second quarter was
$6.9 million, or 9.0% of revenue, compared to operating income of
$10.1 million, or 12.8% of revenue, for the second quarter of 2014.
The lower operating income was primarily due to unfavorable product
mix, higher forward loss reserves, loss of efficiencies resulting
from lower manufacturing volume, and lower revenue, partially
offset by lower compensation and benefit costs. EBITDA was $10.5
million for the current quarter, or 13.8% of revenue, compared to
$13.6 million, or 17.3% of revenue, for the comparable quarter in
the prior year.
Ducommun LaBarge Technologies
(“DLT”)
The Company’s DLT segment net revenue for the current second
quarter was $98.8 million, compared to $107.9 million for second
quarter 2014. The lower net revenue reflected a 12.8% decrease in
military and space revenue and a 4.3% decrease in non-A&D
revenue.
DLT’s operating income for the current second quarter was $7.7
million, or 7.8% of revenue, compared to $10.8 million, or 10.0% of
revenue, for the second quarter of 2014, primarily due to loss of
efficiencies resulting from lower manufacturing volume and lower
revenue. EBITDA was $12.1 million for the current quarter, or 12.2%
of revenue, compared to $14.8 million, or 13.7% of revenue, in the
comparable quarter of the prior year.
Corporate General and Administrative
Expenses (“CG&A”)
CG&A expenses for the second quarter of 2015 were $3.7
million, or 2.1% of total Company revenue, a decrease from $4.0
million, or 2.2% of total Company revenue in the comparable
prior-year period. CG&A expenses decreased primarily due to
lower compensation and benefit costs.
New Five Year, $475 Million Credit
Facility
As announced on June 26, 2015, the Company completed a new five
year, $475 million credit agreement (“New Credit Facility”)
consisting of a $200 million revolving credit facility (“New
Revolving Credit Facility”) and a $275 million term loan facility
(“New Term Loan Facility”). The New Credit Facility has a final
maturity date of June 2020. Upon closing of the New Credit
Facility, the Company repaid the $80 million existing term loan.
Subsequent to the quarter end, on July 27, 2015, the Company
completed the redemption of all $200 million of its senior
unsecured notes by paying a call premium of $9.75 million and will
also write off the associated unamortized debt issuance costs of
approximately $2.1 million in the Company’s fiscal third quarter.
The variable interest rate on the New Revolving Credit Facility and
the New Term Loan Facility will initially be at LIBOR plus 2.50%,
subject to adjustments based on the Company’s leverage ratio. The
Company estimates the initial effective interest rate will be
approximately 3.50%.
Year-To-Date Results
Net revenue for the six months ended July 4, 2015 was $347.8
million compared to $366.3 million for the six months ended June
28, 2014. The net revenue decrease year-over-year primarily
reflects 19.7% lower revenue in the Company’s military and space
end-use markets partially offset by 12.4% higher revenue in the
Company’s commercial aerospace end-use markets and 5.2% higher
revenue in the Company’s non-A&D end-use markets.
The net loss for the six months ended July 4, 2015 was $(0.2)
million, or $(0.02) per share compared to net income of $11.8
million, or $1.06 per diluted share, for the six months ended June
28, 2014. The lower net income for the first six months of 2015 was
primarily due to unfavorable product mix, lower revenue, loss of
efficiencies resulting from lower manufacturing volume, loss on
extinguishment of debt, and higher professional service fees,
partially offset by lower income tax expense, insurance recoveries
related to property and equipment, and lower interest expense. The
current six month period effective income tax rate was 807.4%
compared to an income tax rate of 32.8% for the comparable period
of 2014.
Operating income for the six months ended July 4, 2015 was $14.5
million, or 4.2% of revenue, compared to $31.6 million, or 8.6% of
revenue, in the comparable period last year. The decrease in
operating income in the first six months of 2015 was primarily due
to unfavorable product mix, lower revenue, loss of efficiencies
resulting from lower manufacturing volume, higher compensation and
benefit costs, and higher professional service fees.
During the six months ended July 4, 2015, the Company recorded a
$2.8 million loss on extinguishment of debt as part of paying off
the existing senior secured term loan and $1.5 million of other
income for insurance recoveries related to property and equipment
and none in the comparable prior year period.
Interest expense decreased to $13.1 million for the six months
ended July 4, 2015, compared to $14.1 million in the previous
year’s comparable six months, primarily due to lower outstanding
debt balances as a result of voluntary principal prepayments on the
term loan each quarter during 2014 and the first quarter of 2015 as
the Company continued to de-lever its balance sheet.
EBITDA for the six months ended July 4, 2015 was $29.4 million,
or 8.5% of revenue, compared to $46.8 million, or 12.8% of revenue,
for the comparable period in 2014.
During the six months ended July 4, 2015, the Company generated
$17.6 million of cash from operations compared to $15.5 million
during the comparable period in 2014.
Ducommun AeroStructures (“DAS”)
The Company’s DAS segment net revenue for the six months ended
July 4, 2015 was $148.1 million, compared to $160.3 million for the
six months ended June 28, 2014. The lower net revenue was primarily
due to a 34.9% decrease in military and space revenue, partially
offset by a 10.8% increase in commercial aerospace revenue.
DAS segment operating income for the six months ended July 4,
2015 was $9.0 million, or 6.1% of revenue, compared to operating
income of $21.2 million, or 13.2% of revenue, for the six months
ended June 28, 2014. The lower operating income was primarily due
to unfavorable product mix, loss of efficiencies resulting from
lower manufacturing volume, higher forward loss reserves, and lower
revenue. EBITDA was $15.1 million for the current six month period,
or 10.2% of revenue, compared to $27.1 million, or 16.9% of
revenue, for the comparable six month period in the prior year.
Ducommun LaBarge Technologies
(“DLT”)
The Company’s DLT segment net revenue for the six months ended
July 4, 2015 was $199.6 million, compared to $206.0 million for six
months ended June 28, 2014. The lower net revenue reflected a 11.5%
decrease in military and space revenue, partially offset by a 19.7%
increase in commercial aerospace electronics revenue and a 5.2%
increase in non-A&D revenue.
DLT’s operating income for the six months ended July 4, 2015 was
$14.0 million, or 7.0% of revenue, compared to $17.8 million, or
8.6% of revenue, for the six months ended June 28, 2014, primarily
due to loss of efficiencies resulting from lower manufacturing
volume, lower revenue, higher forward loss reserves, and
unfavorable product mix. EBITDA was $22.7 million for the current
six month period, or 11.4% of revenue, compared to $26.9 million,
or 13.0% of revenue, in the comparable six month period of the
prior year.
Corporate General and Administrative
Expenses (“CG&A”)
CG&A expenses for the six months ended July 4, 2015 were
$8.5 million, or 2.4% of total Company revenue, an increase from
$7.3 million, or 2.0% of total Company revenue in the comparable
six month period in prior-year. CG&A expenses increased
primarily due to higher professional service fees and higher
compensation and benefit costs.
Conference Call
A teleconference hosted by Anthony J. Reardon, the Company’s
chairman and chief executive officer, and Joseph P. Bellino, the
Company’s vice president, chief financial officer and treasurer,
will be held today, August 5, 2015 at 2:00 p.m. PT (5:00 p.m. ET)
to review these financial results. To participate in the
teleconference, please call 866-271-6130 (international
617-213-8894) approximately ten minutes prior to the conference
time. The participant passcode is 23701061. Mr. Reardon and Mr.
Bellino will be speaking on behalf of the Company and anticipate
the meeting and Q&A period to last approximately 45
minutes.
This call is being webcast by Thomson Reuters and can be
accessed directly at the Ducommun website at www.ducommun.com. Conference call replay will be
available after that time at the same link or by dialing
888-286-8010, passcode 65449729.
About Ducommun
Incorporated
Founded in 1849, Ducommun Incorporated provides engineering and
manufacturing services to the aerospace, defense, and other
industries through a wide spectrum of electronic and structural
applications. The company is an established supplier of critical
components and assemblies for commercial aircraft and military and
space vehicles as well as for the energy market, medical field, and
industrial automation. It operates through two primary business
units – Ducommun AeroStructures (“DAS”) and Ducommun LaBarge
Technologies (“DLT”). Additional information can be found at
www.ducommun.com.
Statements contained in this press release regarding other than
recitation of historical facts are forward-looking statements.
These statements are identified by words such as “may,” “will,” “
begin,” “ look forward,” “expect,” “believe,” “intend,”
“anticipate,” “should,” “potential,” “estimate,” “continue,”
“momentum” and other words referring to events to occur in the
future. These statements reflect the Company’s current view of
future events and are based on its assessment of, and are subject
to, a variety of risks and uncertainties beyond its control,
including, but not limited to, the state of the world financial,
credit, commodities and stock markets, and uncertainties regarding
the Company, its businesses and the industries in which it
operates, which are described in the Company’s filings with the
Securities and Exchange Commission. The Company is under no
obligation to (and expressly disclaims any such obligation to)
update or alter its forward-looking statements whether as a result
of new information, future events or otherwise.
[Financial Tables Follow]
DUCOMMUN INCORPORATED AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) July
4,2015 December 31,2014
Assets Current Assets Cash and cash
equivalents $ 26,842 $ 45,627 Accounts receivable, net 91,194
91,060 Inventories 138,014 142,842 Production cost of contracts
9,772 11,727 Deferred income taxes 12,371 13,783 Other current
assets 16,835 23,702 Total Current Assets 295,028
328,741 Property and Equipment, Net 99,347 99,068 Goodwill 157,569
157,569 Intangibles, Net 150,088 155,104 Other Assets 7,938
7,117
Total Assets $ 709,970 $ 747,599
Liabilities and Shareholders’ Equity Current Liabilities
Current portion of long-term debt $ 27 $ 26 Accounts payable 55,313
58,979 Accrued liabilities 41,901 52,066 Total
Current Liabilities 97,241 111,071 Long-Term Debt, Less Current
Portion 265,012 290,026 Deferred Income Taxes 69,613 69,448 Other
Long-Term Liabilities 19,583 20,484 Total Liabilities
451,449 491,029 Commitments and Contingencies
Shareholders’ Equity Common stock 111 110 Additional paid-in
capital 74,069 72,206 Retained earnings 190,714 190,905 Accumulated
other comprehensive loss (6,373 ) (6,651 ) Total Shareholders’
Equity 258,521 256,570
Total Liabilities and
Shareholders’ Equity $ 709,970 $ 747,599
DUCOMMUN INCORPORATED AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands,
except per share amounts) Three Months Ended Six Months
Ended July 4,2015 June 28,2014 July 4,2015 June
28,2014 As Restated As Restated Net Revenues $
174,845 $ 186,516 $ 347,765 $ 366,269 Cost of Sales 143,638
148,838 289,797 292,676 Gross Profit 31,207
37,678 57,968 73,593 Selling, General and Administrative Expenses
20,368 20,868 43,502 41,955 Operating
Income 10,839 16,810 14,466 31,638 Interest Expense (6,446 ) (6,994
) (13,107 ) (14,119 ) Loss on Extinguishment of Debt (2,842 ) —
(2,842 ) — Other Income 1,510 — 1,510 —
Income Before Taxes 3,061 9,816 27 17,519 Income Tax Expense 1,279
3,197 218 5,741 Net Income (Loss) $
1,782 $ 6,619 $ (191 ) $ 11,778 Earnings
(Loss) Per Share Basic earnings (loss) per share $ 0.16 $ 0.61 $
(0.02 ) $ 1.08 Diluted earnings (loss) per share $ 0.16 $ 0.60 $
(0.02 ) $ 1.06 Weighted-Average Number of Common Shares Outstanding
Basic 11,062 10,871 11,012 10,864 Diluted 11,276 11,045 11,012
11,122 Gross Profit % 17.8 % 20.2 % 16.7 % 20.1 % SG&A %
11.6 % 11.2 % 12.5 % 11.5 % Operating Income % 6.2 % 9.0 % 4.2 %
8.6 % Net Income (Loss) % 1.0 % 3.5 % (0.1 )% 3.2 % Effective Tax
Rate 41.8 % 32.6 % 807.4 % 32.8 % DUCOMMUN
INCORPORATED AND SUBSIDIARIES BUSINESS SEGMENT PERFORMANCE
(Unaudited) (In thousands) Three Months Ended Six Months
Ended %
Change
July 4,2015 June 28,2014 %
of Net Revenues
2015
%
of Net Revenues
2014
%
Change
July 4,2015 June 28,2014 %
of Net Revenues
2015
%
of Net Revenues
2014
As Restated As Restated As Restated As
Restated
Net Revenues DAS (3.2 )% $ 76,078 $ 78,616 43.5 %
42.1 % (7.6 )% $ 148,136 $ 160,270 42.6 % 43.8 % DLT (8.5 )% 98,767
107,900 56.5 % 57.9 % (3.1 )% 199,629 205,999
57.4 % 56.2 % Total Net Revenues (6.3 )% $ 174,845 $
186,516 100.0 % 100.0 % (5.1 )% $ 347,765 $ 366,269
100.0 % 100.0 %
Segment Operating Income DAS $ 6,870
$ 10,068 9.0 % 12.8 % $ 9,008 $ 21,159 6.1 % 13.2 % DLT 7,692
10,757 7.8 % 10.0 % 13,977 17,801 7.0 %
8.6 % 14,562 20,825 22,985 38,960
Corporate General and
Administrative Expenses (1) (3,723 ) (4,015 ) (2.1 )%
(2.2 )% (8,519 ) (7,322 ) (2.4 )% (2.0 )% Total Operating Income $
10,839 $ 16,810 6.2 % 9.0 % $ 14,466 $ 31,638
4.2 % 8.6 %
EBITDA DAS Operating Income $ 6,870 $
10,068 $ 9,008 $ 21,159 Other Income (2) 1,510 — 1,510 —
Depreciation and Amortization 2,111 3,554 4,624
5,970 10,491 13,622 13.8 % 17.3 % 15,142 27,129 10.2
% 16.9 % DLT Operating Income 7,692 10,757 13,977 17,801
Depreciation and Amortization 4,361 4,043 8,720
9,051 12,053 14,800 12.2 % 13.7 % 22,697 26,852 11.4
% 13.0 % Corporate General and Administrative Expenses Operating
loss (3,723 ) (4,015 ) (8,519 ) (7,322 ) Depreciation and
Amortization 42 102 84 104 (3,681 )
(3,913 ) (8,435 ) (7,218 ) EBITDA $ 18,863 $ 24,509
10.8 % 13.1 % $ 29,404 $ 46,763 8.5 % 12.8 %
Capital Expenditures DAS $ 2,417 $ 1,435 $ 5,751 $ 2,720 DLT
948 2,078 2,438 2,975 Corporate Administration 2 14 6
24 Total Capital Expenditures $ 3,367 $ 3,527
$ 8,195 $ 5,719
(1) Includes costs not allocated to either the DLT or DAS
operating segments.(2) Insurance recoveries related to property and
equipment.
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version on businesswire.com: http://www.businesswire.com/news/home/20150805006420/en/
Ducommun IncorporatedJoseph P. Bellino, Vice President, Chief
Financial Officer and Treasurer310.513.7211orChris Witty, Investor
Relations646.438.9385cwitty@darrowir.com
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