Ducommun Incorporated (NYSE: DCO) (“Ducommun” or the “Company”)
today reported results for its third quarter ended
September 30, 2023.
Third Quarter 2023
Recap
- Net revenue was
$196.3 million, a new all-time quarterly record for the
Company
- Net income of $3.2
million, or $0.22 per diluted share
- Adjusted net income
of $10.3 million, or $0.70 per diluted share
- Adjusted EBITDA of
$29.3 million, or 14.9% of revenue, an all-time high for
Ducommun
“Q3 was an outstanding quarter for Ducommun, the
best in many years as we grew our topline both year-over-year and
sequentially, led by continued strength in Commercial Aerospace and
a return to growth of our defense business while also delivering
strong margin expansion in gross and Adjusted EBITDA margins,” said
Stephen G. Oswald, chairman, president and chief executive officer.
“We achieved a new quarterly revenue record of $196.3 million up 5%
over Q3 2022, the previous high being in 2012, with the ramp up in
wide-body aircraft demand driving Commercial Aerospace revenues up
14% year-over-year. The Company's gross margins expanded 200 bps
year-over-year as well from 20.7% to 22.7% for the quarter as we
continue improving operating performance which includes the
meaningful on-going restructuring activities announced in 2022.
“In December 2022, we laid out our Vision 2027
Plan to investors and in the first three quarters of 2023, I am
happy and encouraged to see the significant progress already
towards those targets for both revenue growth and margin expansion.
There are also many positive catalysts happening currently within
the Company that will significantly drive shareholder value in the
quarters and years ahead. In summary, Ducommun is well positioned
to execute our stated strategy over the next four years with
significant runway ahead.”
Third Quarter
Results
Net revenue for the third quarter of 2023 was
$196.3 million compared to $186.6 million for the third quarter of
2022. The year-over-year increase of 5.2% was primarily due to the
following:
- $9.6 million higher
revenue in the Company’s commercial aerospace end-use markets due
to higher build rates on twin-aisle commercial aircraft platforms
as well as the A220 platform, commercial rotary-wing aircraft
platforms, and other commercial aerospace business; and
- $2.4 million higher
revenue in the Company’s military and space end-use markets due to
higher build rates on military rotary-wing aircraft platforms and
other military and space platforms, partially offset by lower build
rates on military fixed-wing aircraft platforms and various missile
platforms.
Net income for the third quarter of 2023 was
$3.2 million, or $0.22 per diluted share, compared to $8.5 million,
or $0.69 per diluted share, for the third quarter of 2022. This
reflects higher selling, general and administrative (“SG&A”)
expenses of $7.4 million, higher restructuring charges of $3.2
million, and higher interest expense of $2.4 million, partially
offset by higher gross profit of $6.0 million. The higher SG&A
expenses were primarily due to BLR Aerospace L.L.C. (“BLR”)
SG&A expenses of $3.6 million (49% of the total increase in
SG&A expenses) which did not exist in the prior year period as
the acquisition of BLR was completed during Q2 2023, and higher
stock-based compensation expense of $2.9 million.
Gross profit for the third quarter of 2023 was
$44.6 million, or 22.7% of revenue, compared to gross profit of
$38.6 million, or 20.7% of revenue, for the third quarter of 2022.
The increase in gross profit as a percentage of net revenue
year-over-year was primarily due to favorable product mix, pricing
actions, and favorable manufacturing volume, partially offset by
unfavorable other manufacturing costs.
Operating income for the third quarter of 2023
was $8.6 million, or 4.4% of revenue, compared to $13.2 million, or
7.1% of revenue, in the comparable period last year. The
year-over-year decrease of $4.6 million was primarily due to higher
SG&A expenses and higher restructuring charges, both of which
were noted above, partially offset by higher gross profit. Adjusted
operating income for the third quarter of 2023 was $17.5 million,
or 8.9% of revenue, compared to $17.2 million, or 9.2% of revenue,
in the comparable period last year. The year-over-year increase was
primarily due to favorable product mix, pricing actions, and
favorable manufacturing volume, partially offset by higher SG&A
expenses, mainly due to the addition of the BLR acquisition.
Interest expense for the third quarter of 2023
was $5.4 million compared to $3.0 million in the comparable period
of 2022. The year-over-year increase was primarily due to higher
interest rates.
Adjusted EBITDA for the third quarter of 2023
was $29.3 million, or 14.9% of revenue, compared to $26.0 million,
or 13.9% of revenue, for the comparable period in 2022.
During the third quarter of 2023, the net cash
provided by operations was $14.3 million compared to a net cash
used in operations of $5.5 million during the third quarter of
2022. The higher net cash provided by operations during the third
quarter of 2023 was primarily due to higher contract liabilities
(resulting from driving more progress payments from its customers)
and higher accrued and other liabilities, partially offset by
higher inventories and lower net income.
Business Segment
Information
Electronic Systems
Electronic Systems segment net revenue for the
quarter ended September 30, 2023 was $110.7 million, compared
to $113.4 million for the third quarter of 2022. The year-over-year
decrease was primarily due to the following:
- $3.2 million lower
revenue within the Company’s military and space end-use markets due
to lower build rates on military fixed-wing aircraft platforms,
partially offset by higher build rates on other military and space
platforms; partially offset by
- $2.8 million higher
revenue in the Company’s commercial aerospace end-use markets due
to higher build rates on other commercial aerospace platforms.
Electronic Systems segment operating income for
the quarter ended September 30, 2023 was $12.7 million, or
11.5% of revenue, compared to $13.9 million, or 12.2% of revenue,
for the comparable quarter in 2022. The year-over-year decrease of
$1.2 million was primarily due to higher restructuring charges and
unfavorable other manufacturing costs, partially offset by
favorable product mix and favorable manufacturing volume.
Electronic Systems segment adjusted operating
income for the quarter ended September 30, 2023 was $14.9
million, or 13.4% of revenue, compared to $14.6 million, or
12.9% of revenue, for the comparable quarter in 2022. The
year-over-year increase of $0.3 million was primarily due to
favorable product mix, pricing actions, and favorable manufacturing
volume.
Structural Systems
Structural Systems segment net revenue for the
quarter ended September 30, 2023 was $85.5 million, compared
to $73.2 million for the third quarter of 2022. The year-over-year
increase was primarily due to the following:
- $6.7 million higher
revenue within the Company’s commercial aerospace end-use markets
due to higher build rates on large aircraft platforms; and
- $5.6 million higher
revenue within the Company’s military and space end-use markets due
to higher build rates on military rotary-wing platforms and other
military and space platforms, partially offset by lower build rates
various missile platforms.
Structural Systems segment operating income for
the quarter ended September 30, 2023 was $6.7 million, or 7.9%
of revenue, compared to $6.7 million, or 9.1% of revenue, for the
comparable quarter in 2022. The year-over-year increase of $0.1
million was primarily due to favorable product mix and favorable
manufacturing volume, partially offset by higher restructuring
charges, higher inventory purchase accounting adjustments, and
unfavorable other manufacturing costs.
Structural Systems segment adjusted operating
income for the quarter ended September 30, 2023 was $13.5
million, or 15.7% of revenue, compared to $9.8 million, or 13.3% of
revenue, for the comparable quarter in 2022. The year-over-year
increase of $3.7 million was primarily due to favorable product
mix, pricing actions, and favorable manufacturing volume.
Corporate General and Administrative
(“CG&A”) Expenses
CG&A expenses for the third quarter of 2023
were $10.8 million, or 5.5% of total Company revenue, compared to
$7.4 million, or 3.9% of total Company revenue, for the comparable
quarter in the prior year. The year-over-year increase in CG&A
expenses was primarily due to higher stock-based compensation
expense of $2.8 million.
Conference Call
A teleconference hosted by Stephen G. Oswald,
the Company’s chairman, president and chief executive officer, and
Suman B. Mookerji, the Company’s senior vice president, chief
financial officer will be held today, November 8, 2023 at
10:00 a.m. PT (1:00 p.m. ET) to review these financial results. To
access the conference call, please pre-register using the following
registration link:
https://register.vevent.com/register/BIebbd705905a44130870c88a8bdf92a4a
Registrants will receive a confirmation with
dial-in details. Mr. Oswald and Mr. Mookerji will be speaking on
behalf of the Company and anticipate the call (including Q&A)
to last approximately 45 minutes. A live webcast of the event can
be accessed using the link above. A replay of the webcast will be
available on the Ducommun website at Ducommun.com.
Additional information regarding Ducommun's
results can be found in the Q3 2023 Earnings Presentation available
at Ducommun.com.
About Ducommun Incorporated
Ducommun Incorporated delivers value-added
innovative manufacturing solutions to customers in the aerospace,
defense and industrial markets. Founded in 1849, the Company
specializes in two core areas - Electronic Systems and Structural
Systems - to produce complex products and components for commercial
aircraft platforms, mission-critical military and space programs,
and sophisticated industrial applications. For more information,
visit Ducommun.com.
Forward Looking Statements
This press release and any attachments include
“forward-looking statements,” within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, including, in
particular, any statements about the Company's expectations
relating to the results of its restructuring initiative and
continued improvement of its operating performance, the continuing
commercial aerospace recovery, and the execution of its strategy
and driving shareholder value in the years ahead. The Company
generally uses the words “may,” “will,” “could,” “expect,”
“anticipate,” “believe,” “estimate,” “plan,” “intend,” “continue”
and similar expressions in this press release and any attachments
to identify forward-looking statements. The Company bases these
forward-looking statements on its current views with respect to
future events and financial performance. Actual results could
differ materially from those projected in the forward-looking
statements. These forward-looking statements are subject to risks,
uncertainties and assumptions, including, among other things:
whether the anticipated pre-tax restructuring charges will be
sufficient to address all anticipated restructuring costs,
including related to employee separation, facilities consolidation,
inventory write-down and other asset impairments; whether the
expected cost savings from the restructuring will ultimately be
obtained in the amount and during the period anticipated; whether
the restructuring in the affected areas will be sufficient to build
a more cost efficient, focused, higher margin enterprise with
higher returns for the Company's shareholders; the strength of the
real estate market, the duration of any lease entered into as part
of any sale-leaseback transaction, the amount of commissions owed
to brokers, and applicable tax rates; the impact of the Company’s
debt service obligations and restrictive debt covenants; the
Company’s end-use markets are cyclical; the Company depends upon a
selected base of industries and customers; a significant portion of
the Company’s business depends upon U.S. Government defense
spending; the Company is subject to extensive regulation and audit
by the Defense Contract Audit Agency; contracts with some of the
Company’s customers contain provisions which give the its customers
a variety of rights that are unfavorable to the Company; further
consolidation in the aerospace industry could adversely affect the
Company’s business and financial results; the Company’s ability to
successfully make acquisitions, including its ability to
successfully integrate, operate or realize the projected benefits
of such businesses; the Company relies on its suppliers to meet the
quality and delivery expectations of its customers; the Company
uses estimates when bidding on fixed-price contracts which
estimates could change and result in adverse effects on its
financial results; the impact of existing and future laws and
regulations; the impact of existing and future accounting standards
and tax rules and regulations; environmental liabilities could
adversely affect the Company’s financial results; cyber security
attacks, internal system or service failures may adversely impact
the Company’s business and operations; the ultimate geographic
spread, duration and severity of the coronavirus (COVID-19)
outbreak, and the effectiveness of actions taken, or actions that
may be taken, by governmental authorities to contain the outbreak
or treat its impact, and other risks and uncertainties, including
those detailed from time to time in the Company’s periodic reports
filed with the Securities and Exchange Commission. You should not
put undue reliance on any forward-looking statements. You should
understand that many important factors, including those discussed
herein, could cause the Company’s results to differ materially from
those expressed or suggested in any forward-looking statement.
Except as required by law, the Company does not undertake any
obligation to update or revise these forward-looking statements to
reflect new information or events or circumstances that occur after
the date of this news release, November 8, 2023, or to reflect
the occurrence of unanticipated events or otherwise. Readers are
advised to review the Company’s filings with the Securities and
Exchange Commission (which are available from the SEC’s EDGAR
database at www.sec.gov).
Note Regarding Non-GAAP Financial
Information
This release contains non-GAAP financial
measures, including Adjusted EBITDA (which excludes interest
expense, income tax expense, depreciation, amortization,
stock-based compensation expense, restructuring charges, Guaymas
fire related expenses, other fire related expenses, insurance
recoveries related to loss on operating assets, insurance
recoveries related to business interruption, inventory purchase
accounting adjustments, loss on extinguishment of debt, and other
debt refinancing costs), non-GAAP operating income and as a
percentage of net revenues, non-GAAP earnings, non-GAAP earnings
per share, and backlog. In addition, certain other prior period
amounts have been reclassified to conform to current year’s
presentation.
The Company believes the presentation of these
non-GAAP measures provide important supplemental information to
management and investors regarding financial and business trends
relating to its financial condition and results of operations. The
Company’s management uses these non-GAAP financial measures along
with the most directly comparable GAAP financial measures in
evaluating the Company’s actual and forecasted operating
performance, capital resources and cash flow. The non-GAAP
financial information presented herein should be considered
supplemental to, and not as a substitute for, or superior to,
financial measures calculated in accordance with GAAP. The Company
discloses different non-GAAP financial measures in order to provide
greater transparency and to help the Company’s investors to more
meaningfully evaluate and compare Ducommun’s results to its
previously reported results. The non-GAAP financial measures that
the Company uses may not be comparable to similarly titled
financial measures used by other companies.
The Company defines backlog as potential revenue
and is based on customer placed purchase orders and long-term
agreements (“LTAs”) with firm fixed price and expected delivery
dates of 24 months or less. The majority of the LTAs do not meet
the definition of a contract under ASC 606 and thus, the backlog
amount disclosed herein is greater than the remaining performance
obligations disclosed under ASC 606. Backlog is subject to delivery
delays or program cancellations, which are beyond the Company’s
control. Backlog is affected by timing differences in the placement
of customer orders and tends to be concentrated in several programs
to a greater extent than the Company’s net revenues. As a result of
these factors, trends in the Company’s overall level of backlog may
not be indicative of trends in the Company’s future net
revenues.
CONTACT:
Suman Mookerji, Senior Vice
President, Chief Financial Officer, 657.335.3665 |
DUCOMMUN INCORPORATED AND SUBSIDIARIESCONDENSED
CONSOLIDATED BALANCE SHEETS(Unaudited)(Dollars in thousands)
|
|
September 30,2023 |
|
December 31,2022 |
Assets |
|
|
|
|
Current Assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
27,195 |
|
$ |
46,246 |
Accounts receivable, net |
|
|
104,551 |
|
|
103,958 |
Contract assets |
|
|
191,151 |
|
|
191,290 |
Inventories |
|
|
215,189 |
|
|
171,211 |
Production cost of contracts |
|
|
5,861 |
|
|
5,693 |
Other current assets |
|
|
12,770 |
|
|
8,938 |
Total Current Assets |
|
|
556,717 |
|
|
527,336 |
Property and Equipment, Net |
|
|
111,894 |
|
|
106,225 |
Operating Lease Right-of-Use
Assets |
|
|
31,827 |
|
|
34,632 |
Goodwill |
|
|
244,600 |
|
|
203,407 |
Intangibles, Net |
|
|
170,665 |
|
|
127,201 |
Other Assets |
|
|
26,648 |
|
|
22,705 |
Total
Assets |
|
$ |
1,142,351 |
|
$ |
1,021,506 |
Liabilities and
Shareholders’ Equity |
|
|
|
|
Current Liabilities |
|
|
|
|
Accounts payable |
|
$ |
78,455 |
|
$ |
90,143 |
Contract liabilities |
|
|
51,477 |
|
|
47,068 |
Accrued and other liabilities |
|
|
45,920 |
|
|
48,820 |
Operating lease liabilities |
|
|
8,001 |
|
|
7,155 |
Current portion of long-term debt |
|
|
6,250 |
|
|
6,250 |
Total Current Liabilities |
|
|
190,103 |
|
|
199,436 |
Long-Term Debt, Less Current
Portion |
|
|
264,992 |
|
|
240,595 |
Non-Current Operating Lease
Liabilities |
|
|
24,836 |
|
|
28,841 |
Deferred Income Taxes |
|
|
10,624 |
|
|
13,953 |
Other Long-Term Liabilities |
|
|
16,394 |
|
|
12,721 |
Total Liabilities |
|
|
506,949 |
|
|
495,546 |
Commitments and
Contingencies |
|
|
|
|
Shareholders’ Equity |
|
|
|
|
Common Stock |
|
|
146 |
|
|
121 |
Additional Paid-In Capital |
|
|
204,993 |
|
|
112,042 |
Retained Earnings |
|
|
416,870 |
|
|
406,052 |
Accumulated Other Comprehensive
Income |
|
|
13,393 |
|
|
7,745 |
Total Shareholders’ Equity |
|
|
635,402 |
|
|
525,960 |
Total Liabilities and
Shareholders’ Equity |
|
$ |
1,142,351 |
|
$ |
1,021,506 |
DUCOMMUN INCORPORATED AND SUBSIDIARIESCONDENSED
CONSOLIDATED STATEMENTS OF INCOME(Unaudited)(Dollars in thousands,
except per share amounts)
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30,2023 |
|
October 1,2022 |
|
September 30,2023 |
|
October 1,2022 |
Net Revenues |
|
$ |
196,250 |
|
|
$ |
186,590 |
|
|
$ |
564,761 |
|
|
$ |
524,269 |
|
Cost of Sales |
|
|
151,648 |
|
|
|
148,003 |
|
|
|
443,270 |
|
|
|
418,565 |
|
Gross Profit |
|
|
44,602 |
|
|
|
38,587 |
|
|
|
121,491 |
|
|
|
105,704 |
|
Selling, General and
Administrative Expenses |
|
|
32,182 |
|
|
|
24,803 |
|
|
|
88,755 |
|
|
|
72,340 |
|
Restructuring Charges |
|
|
3,811 |
|
|
|
567 |
|
|
|
12,750 |
|
|
|
3,270 |
|
Operating Income |
|
|
8,609 |
|
|
|
13,217 |
|
|
|
19,986 |
|
|
|
30,094 |
|
Interest Expense |
|
|
(5,370 |
) |
|
|
(2,998 |
) |
|
|
(15,324 |
) |
|
|
(8,056 |
) |
Loss on Extinguishment of
Debt |
|
|
— |
|
|
|
(295 |
) |
|
|
— |
|
|
|
(295 |
) |
Other Income |
|
|
— |
|
|
|
— |
|
|
|
7,945 |
|
|
|
3,000 |
|
Income Before Taxes |
|
|
3,239 |
|
|
|
9,924 |
|
|
|
12,607 |
|
|
|
24,743 |
|
Income Tax Expense |
|
|
26 |
|
|
|
1,462 |
|
|
|
1,789 |
|
|
|
4,035 |
|
Net Income |
|
$ |
3,213 |
|
|
$ |
8,462 |
|
|
$ |
10,818 |
|
|
$ |
20,708 |
|
Earnings Per Share |
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
0.22 |
|
|
$ |
0.70 |
|
|
$ |
0.81 |
|
|
$ |
1.72 |
|
Diluted earnings per share |
|
$ |
0.22 |
|
|
$ |
0.69 |
|
|
$ |
0.79 |
|
|
$ |
1.68 |
|
Weighted-Average Number of Common
Shares Outstanding |
|
|
|
|
|
|
|
|
Basic |
|
|
14,625 |
|
|
|
12,112 |
|
|
|
13,408 |
|
|
|
12,057 |
|
Diluted |
|
|
14,814 |
|
|
|
12,350 |
|
|
|
13,661 |
|
|
|
12,346 |
|
|
|
|
|
|
|
|
|
|
Gross Profit % |
|
|
22.7 |
% |
|
|
20.7 |
% |
|
|
21.5 |
% |
|
|
20.2 |
% |
SG&A % |
|
|
16.4 |
% |
|
|
13.3 |
% |
|
|
15.7 |
% |
|
|
13.8 |
% |
Operating Income % |
|
|
4.4 |
% |
|
|
7.1 |
% |
|
|
3.5 |
% |
|
|
5.7 |
% |
Net Income % |
|
|
1.6 |
% |
|
|
4.5 |
% |
|
|
1.9 |
% |
|
|
3.9 |
% |
Effective Tax Rate |
|
|
0.8 |
% |
|
|
14.7 |
% |
|
|
14.2 |
% |
|
|
16.3 |
% |
DUCOMMUN INCORPORATED AND SUBSIDIARIESBUSINESS
SEGMENT PERFORMANCE(Unaudited)(Dollars in thousands)
|
|
Three Months Ended |
|
|
|
Nine Months Ended |
|
|
|
|
%Change |
|
|
September 30,2023 |
|
October 1,2022 |
|
%of Net Revenues2023 |
|
|
%of Net Revenues2022 |
|
|
%Change |
|
September 30,2023 |
|
October 1,2022 |
|
%of Net Revenues2023 |
|
|
%of Net Revenues2022 |
|
Net
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic Systems |
|
(2.4 |
) |
% |
|
$ |
110,707 |
|
|
$ |
113,404 |
|
|
56.4 |
|
% |
|
60.8 |
|
% |
|
0.9 |
% |
|
$ |
323,457 |
|
|
$ |
320,602 |
|
|
57.3 |
|
% |
|
61.2 |
|
% |
Structural Systems |
|
16.9 |
|
% |
|
|
85,543 |
|
|
|
73,186 |
|
|
43.6 |
|
% |
|
39.2 |
|
% |
|
18.5 |
% |
|
|
241,304 |
|
|
|
203,667 |
|
|
42.7 |
|
% |
|
38.8 |
|
% |
Total Net Revenues |
|
5.2 |
|
% |
|
$ |
196,250 |
|
|
$ |
186,590 |
|
|
100.0 |
|
% |
|
100.0 |
|
% |
|
7.7 |
% |
|
$ |
564,761 |
|
|
$ |
524,269 |
|
|
100.0 |
|
% |
|
100.0 |
|
% |
Segment Operating
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic Systems |
|
|
|
|
$ |
12,710 |
|
|
$ |
13,881 |
|
|
11.5 |
|
% |
|
12.2 |
|
% |
|
|
|
$ |
32,249 |
|
|
$ |
36,902 |
|
|
10.0 |
|
% |
|
11.5 |
|
% |
Structural Systems |
|
|
|
|
|
6,743 |
|
|
|
6,687 |
|
|
7.9 |
|
% |
|
9.1 |
|
% |
|
|
|
|
16,873 |
|
|
|
12,839 |
|
|
7.0 |
|
% |
|
6.3 |
|
% |
|
|
|
|
|
|
19,453 |
|
|
|
20,568 |
|
|
|
|
|
|
|
|
|
|
|
49,122 |
|
|
|
49,741 |
|
|
|
|
|
|
|
Corporate General and Administrative Expenses (1) |
|
|
|
|
|
(10,844 |
) |
|
|
(7,351 |
) |
|
(5.5 |
) |
% |
|
(3.9 |
) |
% |
|
|
|
|
(29,136 |
) |
|
|
(19,647 |
) |
|
(5.2 |
) |
% |
|
(3.7 |
) |
% |
Total Operating Income |
|
|
|
|
$ |
8,609 |
|
|
$ |
13,217 |
|
|
4.4 |
|
% |
|
7.1 |
|
% |
|
|
|
$ |
19,986 |
|
|
$ |
30,094 |
|
|
3.5 |
|
% |
|
5.7 |
|
% |
Adjusted
EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic Systems |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
|
|
$ |
12,710 |
|
|
$ |
13,881 |
|
|
|
|
|
|
|
|
|
|
$ |
32,249 |
|
|
$ |
36,902 |
|
|
|
|
|
|
|
Other Income |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
222 |
|
|
|
— |
|
|
|
|
|
|
|
Depreciation and Amortization |
|
|
|
|
|
3,567 |
|
|
|
3,510 |
|
|
|
|
|
|
|
|
|
|
|
10,626 |
|
|
|
10,500 |
|
|
|
|
|
|
|
Stock-Based Compensation Expense (2) |
|
|
|
|
|
97 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
321 |
|
|
|
— |
|
|
|
|
|
|
|
Restructuring Charges |
|
|
|
|
|
1,794 |
|
|
|
340 |
|
|
|
|
|
|
|
|
|
|
|
5,739 |
|
|
|
1,624 |
|
|
|
|
|
|
|
|
|
|
|
|
|
18,168 |
|
|
|
17,731 |
|
|
16.4 |
|
% |
|
15.6 |
|
% |
|
|
|
|
49,157 |
|
|
|
49,026 |
|
|
15.2 |
|
% |
|
15.3 |
|
% |
Structural Systems |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
|
|
|
6,743 |
|
|
|
6,687 |
|
|
|
|
|
|
|
|
|
|
|
16,873 |
|
|
|
12,839 |
|
|
|
|
|
|
|
Depreciation and Amortization |
|
|
|
|
|
4,852 |
|
|
|
4,100 |
|
|
|
|
|
|
|
|
|
|
|
13,619 |
|
|
|
12,659 |
|
|
|
|
|
|
|
Stock-Based Compensation Expense (3) |
|
|
|
|
|
76 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
259 |
|
|
|
— |
|
|
|
|
|
|
|
Restructuring Charges |
|
|
|
|
|
2,205 |
|
|
|
227 |
|
|
|
|
|
|
|
|
|
|
|
7,113 |
|
|
|
2,174 |
|
|
|
|
|
|
|
Guaymas fire related expenses |
|
|
|
|
|
548 |
|
|
|
1,496 |
|
|
|
|
|
|
|
|
|
|
|
3,896 |
|
|
|
3,451 |
|
|
|
|
|
|
|
Other fire related expenses |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
477 |
|
|
|
— |
|
|
|
|
|
|
|
Inventory Purchase Accounting Adjustments |
|
|
|
|
|
2,041 |
|
|
|
107 |
|
|
|
|
|
|
|
|
|
|
|
2,807 |
|
|
|
1,381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
16,465 |
|
|
|
12,617 |
|
|
19.2 |
|
% |
|
17.2 |
|
% |
|
|
|
|
45,044 |
|
|
|
32,504 |
|
|
18.7 |
|
% |
|
16.0 |
|
% |
Corporate General and Administrative Expenses (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
|
|
|
(10,844 |
) |
|
|
(7,351 |
) |
|
|
|
|
|
|
|
|
|
|
(29,136 |
) |
|
|
(19,647 |
) |
|
|
|
|
|
|
Depreciation and Amortization |
|
|
|
|
|
59 |
|
|
|
59 |
|
|
|
|
|
|
|
|
|
|
|
176 |
|
|
|
176 |
|
|
|
|
|
|
|
Stock-Based Compensation Expense (4) |
|
|
|
|
|
5,479 |
|
|
|
2,714 |
|
|
|
|
|
|
|
|
|
|
|
13,189 |
|
|
|
7,904 |
|
|
|
|
|
|
|
Restructuring Charges |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
86 |
|
|
|
— |
|
|
|
|
|
|
|
Other Debt Refinancing Costs |
|
|
|
|
|
— |
|
|
|
224 |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,306 |
) |
|
|
(4,354 |
) |
|
|
|
|
|
|
|
|
|
|
(15,685 |
) |
|
|
(11,343 |
) |
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
$ |
29,327 |
|
|
$ |
25,994 |
|
|
14.9 |
|
% |
|
13.9 |
|
% |
|
|
|
$ |
78,516 |
|
|
$ |
70,187 |
|
|
13.9 |
|
% |
|
13.4 |
|
% |
Capital
Expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic Systems |
|
|
|
|
$ |
978 |
|
|
$ |
3,192 |
|
|
|
|
|
|
|
|
|
|
$ |
4,752 |
|
|
$ |
7,831 |
|
|
|
|
|
|
|
Structural Systems |
|
|
|
|
|
3,802 |
|
|
|
1,175 |
|
|
|
|
|
|
|
|
|
|
|
11,043 |
|
|
|
7,033 |
|
|
|
|
|
|
|
Corporate Administration |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
Total Capital Expenditures |
|
|
|
|
$ |
4,780 |
|
|
$ |
4,367 |
|
|
|
|
|
|
|
|
|
|
$ |
15,795 |
|
|
$ |
14,864 |
|
|
|
|
|
|
|
|
(1) Includes costs not allocated to either the
Electronic Systems or Structural Systems operating segments.
(2) The three and nine months ended
September 30, 2023 included less than $0.1 million and $0.1
million, respectively, of stock-based compensation expense recorded
as cost of sales. The three and nine months ended October 1,
2022 both included zero stock-based compensation expense recorded
as cost of sales.
(3) The three and nine months ended
September 30, 2023 included $0.1 million and $0.2 million,
respectively, of stock-based compensation expense recorded as cost
of sales. The three and nine months ended October 1, 2022 both
included zero stock-based compensation expense recorded as cost of
sales.
(4) The three and nine months ended
September 30, 2023 included $1.4 million and $2.7 million,
respectively, and the three and nine months ended October 1,
2022 included $0.3 million and $0.8 million, respectively, of
stock-based compensation expense for awards with both performance
and market conditions that will be settled in cash.
DUCOMMUN INCORPORATED AND SUBSIDIARIESGAAP TO
NON-GAAP OPERATING INCOME RECONCILIATION(Unaudited)(Dollars in
thousands)
|
|
Three Months Ended |
|
Nine Months Ended |
GAAP To Non-GAAP
Operating Income |
|
September 30, 2023 |
|
October 1, 2022 |
|
%of Net Revenues2023 |
|
%of Net Revenues2022 |
|
September 30, 2023 |
|
October 1, 2022 |
|
%of Net Revenues2023 |
|
%of Net Revenues2022 |
GAAP Operating income |
|
$ |
8,609 |
|
|
$ |
13,217 |
|
|
|
|
|
|
$ |
19,986 |
|
|
$ |
30,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating income -
Electronic Systems |
|
$ |
12,710 |
|
|
$ |
13,881 |
|
|
|
|
|
|
$ |
32,249 |
|
|
$ |
36,902 |
|
|
|
|
|
Adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
222 |
|
|
|
— |
|
|
|
|
|
Restructuring charges |
|
|
1,794 |
|
|
|
340 |
|
|
|
|
|
|
|
5,739 |
|
|
|
1,624 |
|
|
|
|
|
Amortization of
acquisition-related intangible assets |
|
|
373 |
|
|
|
374 |
|
|
|
|
|
|
|
1,120 |
|
|
|
1,120 |
|
|
|
|
|
Adjusted operating income - Electronic Systems |
|
|
14,877 |
|
|
|
14,595 |
|
|
13.4 |
% |
|
12.9 |
% |
|
|
39,330 |
|
|
|
39,646 |
|
|
12.2 |
% |
|
12.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating income -
Structural Systems |
|
|
6,743 |
|
|
|
6,687 |
|
|
|
|
|
|
|
16,873 |
|
|
|
12,839 |
|
|
|
|
|
Adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges |
|
|
2,205 |
|
|
|
227 |
|
|
|
|
|
|
|
7,113 |
|
|
|
2,174 |
|
|
|
|
|
Guaymas fire related
expenses |
|
|
548 |
|
|
|
1,496 |
|
|
|
|
|
|
|
3,896 |
|
|
|
3,451 |
|
|
|
|
|
Other fire related
expenses |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
477 |
|
|
|
— |
|
|
|
|
|
Inventory purchase accounting
adjustments |
|
|
2,041 |
|
|
|
107 |
|
|
|
|
|
|
|
2,807 |
|
|
|
1,381 |
|
|
|
|
|
Amortization of
acquisition-related intangible assets |
|
|
1,935 |
|
|
|
1,236 |
|
|
|
|
|
|
|
4,873 |
|
|
|
3,719 |
|
|
|
|
|
Adjusted operating income -
Structural Systems |
|
|
13,472 |
|
|
|
9,753 |
|
|
15.7 |
% |
|
13.3 |
% |
|
|
36,039 |
|
|
|
23,564 |
|
|
14.9 |
% |
|
11.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating loss -
Corporate |
|
|
(10,844 |
) |
|
|
(7,351 |
) |
|
|
|
|
|
|
(29,136 |
) |
|
|
(19,647 |
) |
|
|
|
|
Adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
86 |
|
|
|
— |
|
|
|
|
|
Other debt refinancing
costs |
|
|
— |
|
|
|
224 |
|
|
|
|
|
|
|
— |
|
|
|
224 |
|
|
|
|
|
Adjusted operating loss -
Corporate |
|
|
(10,844 |
) |
|
|
(7,127 |
) |
|
|
|
|
|
|
(29,050 |
) |
|
|
(19,423 |
) |
|
|
|
|
Total adjustments |
|
|
8,896 |
|
|
|
4,004 |
|
|
|
|
|
|
|
26,333 |
|
|
|
13,693 |
|
|
|
|
|
Adjusted operating income |
|
$ |
17,505 |
|
|
$ |
17,221 |
|
|
8.9 |
% |
|
9.2 |
% |
|
$ |
46,319 |
|
|
$ |
43,787 |
|
|
8.2 |
% |
|
8.4 |
% |
DUCOMMUN INCORPORATED AND SUBSIDIARIESGAAP TO
NON-GAAP EARNINGS AND EARNINGS PER SHARE
RECONCILIATION(Unaudited)(Dollars in thousands, except per share
amounts)
|
|
Three Months Ended |
|
Nine Months Ended |
GAAP To Non-GAAP
Earnings |
|
September 30,2023 |
|
October 1,2022 |
|
September 30,2023 |
|
October 1,2022 |
GAAP Net income |
|
$ |
3,213 |
|
$ |
8,462 |
|
$ |
10,818 |
|
|
$ |
20,708 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Restructuring charges (1) |
|
|
3,199 |
|
|
453 |
|
|
10,350 |
|
|
|
3,038 |
|
Guaymas fire related expenses
(1) |
|
|
439 |
|
|
1,197 |
|
|
3,117 |
|
|
|
2,761 |
|
Other fire related expenses
(1) |
|
|
— |
|
|
— |
|
|
382 |
|
|
|
— |
|
Insurance recoveries related
to loss on operating assets (1) |
|
|
— |
|
|
— |
|
|
(4,450 |
) |
|
|
— |
|
Insurance recoveries related
to business interruption (1) |
|
|
— |
|
|
— |
|
|
(1,728 |
) |
|
|
(2,400 |
) |
Inventory purchase accounting
adjustments (1) |
|
|
1,633 |
|
|
86 |
|
|
2,246 |
|
|
|
1,105 |
|
Amortization of
acquisition-related intangible assets (1) |
|
|
1,846 |
|
|
1,288 |
|
|
4,794 |
|
|
|
3,871 |
|
Loss on extinguishment of debt
(1) |
|
|
— |
|
|
236 |
|
|
— |
|
|
|
236 |
|
Other debt refinancing costs
(1) |
|
|
— |
|
|
179 |
|
|
— |
|
|
|
179 |
|
Total adjustments |
|
|
7,117 |
|
|
3,439 |
|
|
14,711 |
|
|
|
8,790 |
|
Adjusted net income |
|
$ |
10,330 |
|
$ |
11,901 |
|
$ |
25,529 |
|
|
$ |
29,498 |
|
|
|
Three Months Ended |
|
Nine Months Ended |
GAAP Earnings Per
Share To Non-GAAP Earnings Per Share |
|
September 30,2023 |
|
October 1,2022 |
|
September 30,2023 |
|
October 1,2022 |
GAAP Diluted earnings per share (“EPS”) |
|
$ |
0.22 |
|
$ |
0.69 |
|
$ |
0.79 |
|
|
$ |
1.68 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Restructuring charges (1) |
|
|
0.22 |
|
|
0.03 |
|
|
0.76 |
|
|
|
0.25 |
|
Guaymas fire related expenses
(1) |
|
|
0.03 |
|
|
0.10 |
|
|
0.23 |
|
|
|
0.22 |
|
Other fire related expenses
(1) |
|
|
— |
|
|
— |
|
|
0.03 |
|
|
|
— |
|
Insurance recoveries related
to loss on operating assets (1) |
|
|
— |
|
|
— |
|
|
(0.33 |
) |
|
|
— |
|
Insurance recoveries related
to business interruption (1) |
|
|
— |
|
|
— |
|
|
(0.13 |
) |
|
|
(0.19 |
) |
Inventory purchase accounting
adjustments (1) |
|
|
0.11 |
|
|
0.01 |
|
|
0.17 |
|
|
|
0.09 |
|
Amortization of
acquisition-related intangible assets (1) |
|
|
0.12 |
|
|
0.10 |
|
|
0.35 |
|
|
|
0.31 |
|
Loss on extinguishment of debt
(1) |
|
|
— |
|
|
0.02 |
|
|
— |
|
|
|
0.02 |
|
Other debt refinancing costs
(1) |
|
|
— |
|
|
0.01 |
|
|
— |
|
|
|
0.01 |
|
Total adjustments |
|
|
0.48 |
|
|
0.27 |
|
|
1.08 |
|
|
|
0.71 |
|
Adjusted diluted EPS |
|
$ |
0.70 |
|
$ |
0.96 |
|
$ |
1.87 |
|
|
$ |
2.39 |
|
|
|
|
|
|
|
|
|
|
Shares used for adjusted
diluted EPS |
|
|
14,814 |
|
|
12,350 |
|
|
13,661 |
|
|
|
12,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes effective tax rate of 20.0% for both 2023 and 2022
adjustments.
DUCOMMUN INCORPORATED AND SUBSIDIARIESNON-GAAP
BACKLOG* BY REPORTING SEGMENT(Unaudited)(Dollars in thousands)
|
|
September 30,2023 |
|
December 31,2022 |
Consolidated
Ducommun |
|
|
|
|
Military and space |
|
$ |
494,447 |
|
$ |
457,354 |
Commercial aerospace |
|
|
422,728 |
|
|
450,092 |
Industrial |
|
|
41,371 |
|
|
53,374 |
Total |
|
$ |
958,546 |
|
$ |
960,820 |
Electronic
Systems |
|
|
|
|
Military and space |
|
$ |
368,036 |
|
$ |
361,582 |
Commercial aerospace |
|
|
91,801 |
|
|
125,590 |
Industrial |
|
|
41,371 |
|
|
53,374 |
Total |
|
$ |
501,208 |
|
$ |
540,546 |
Structural
Systems |
|
|
|
|
Military and space |
|
$ |
126,411 |
|
$ |
95,772 |
Commercial aerospace |
|
|
330,927 |
|
|
324,502 |
Total |
|
$ |
457,338 |
|
$ |
420,274 |
|
* The Company defines backlog as potential
revenue and is based on customer placed purchase orders and
long-term agreements (“LTAs”) with firm fixed price and expected
delivery dates of 24 months or less. Backlog as of
September 30, 2023 was $958.5 million compared to $960.8
million as of December 31, 2022. Under ASC 606, the Company
defines performance obligations as customer placed purchase orders
with firm fixed price and firm delivery dates. The remaining
performance obligations disclosed under ASC 606 as of
September 30, 2023 were $947.9 million compared to $853.0
million as of December 31, 2022.
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