Ducommun Incorporated (NYSE:DCO) (“Ducommun” or the “Company”)
today reported results for its first quarter ended April 4,
2015.
First Quarter 2015 Recap
- First quarter revenue was $172.9
million
- Net loss was $2.0 million, or $0.18 per
share
- EBITDA for the quarter was $10.5
million
- Made voluntary principal prepayment of
$10.0 million on term loan during the quarter
“We are very disappointed in our 2015 first quarter financial
and operational performance and are taking swift action to resolve
or mitigate the factors that impeded our execution during the
quarter,” said Anthony J. Reardon, chairman and chief executive
officer. “The lost revenue from the decline in our military and
space business, particularly in our AeroStructures operating
segment, caused us to incur higher relative indirect costs at a
faster rate than we were able to offset with our cost reduction
initiatives. This, coupled with production inefficiencies in
certain legacy programs and one-time development costs related to
new technology applications, adversely impacted our gross margin.
To address these issues, we are working on specific plans to lower
operating costs and improve profitability, including additional
headcount reductions, where appropriate.
“We continue to see strength in certain of our end-use markets.
We are experiencing solid large airframe commercial aerospace
demand, up 11% year-over-year. In addition, our industrial sector
revenue rose year-over-year, benefiting from ongoing business
development efforts. These growth areas -- combined with steps
being taken to further streamline our operations -- will lead to
improved results for the remainder of 2015. Over the long term, we
are committed to diversifying our customer base by investing in new
technologies and processes, which will position the Company for
stronger performance going forward.”
First Quarter Results
Net revenue for the first quarter of 2015 was $172.9 million
compared to $179.8 million for the first quarter of 2014. The net
revenue decrease year-over-year primarily reflects 22.4% lower
revenue in the Company’s military and space end-use markets
partially offset by 19.7% higher revenue in the Company’s
commercial aerospace end-use markets and 7.8% higher revenue in the
Company’s non-aerospace and defense (“non-A&D”) end-use
markets.
The net loss for the first quarter of 2015 was $2.0 million, or
$0.18 per share compared to net income of $5.2 million, or $0.46
per diluted share, for the first quarter of 2014. The net loss for
the first quarter of 2015 was primarily due to an unfavorable
product mix, lower revenues, loss of efficiencies resulting from
lower manufacturing volume, higher accrued compensation and benefit
costs, and higher professional service fees, partially offset by
lower income tax expense and lower interest expense. The current
quarter effective income tax benefit rate was 35.0% compared to an
income tax rate of 33.0% for the prior year’s quarter.
Operating income for the first quarter of 2015 was $3.6 million,
or 2.1% of revenue, compared to $14.8 million, or 8.2% of revenue,
in the comparable period last year. The decrease in operating
income in the first quarter of 2015 was primarily due to an
unfavorable product mix, lower revenues, loss of efficiencies
resulting from lower manufacturing volume, higher accrued
compensation and benefit costs, and higher professional service
fees.
Interest expense decreased to $6.7 million in the first quarter
of 2015, compared to $7.1 million in the previous year’s first
quarter, primarily due to lower outstanding debt balances as a
result of voluntary principal prepayments on the term loan each
quarter during 2014 as well as the first quarter of 2015 as the
Company continued to de-lever its balance sheet.
EBITDA for the first quarter of 2015 was $10.5 million, or 6.1%
of revenue, compared to $22.3 million, or 12.4% of revenue, for the
comparable period in 2014.
During the first quarter of 2015, the Company generated $3.5
million of cash from operations compared to cash used in operations
of $9.8 million during the first quarter of 2014.
The Company’s firm backlog as of April 4, 2015 was approximately
$538 million.
Ducommun AeroStructures (“DAS”)
The Company’s DAS segment reported net revenue for the current
first quarter of $72.1 million, compared to $81.7 million for the
first quarter of 2014. The lower net revenue was primarily due to a
43.0% decrease in military and space revenue, partially offset by a
10.8% increase in commercial aerospace revenue.
DAS segment operating income for the current first quarter was
$2.1 million, or 3.0% of revenue, compared to operating income of
$11.1 million, or 13.6% of revenue, for the first quarter of 2014.
The lower operating income was primarily due to an unfavorable
product mix, lower revenues, and loss of efficiencies resulting
from lower manufacturing volume. EBITDA was $4.7 million for the
current quarter, or 6.5% of revenue, compared to $13.5 million, or
16.5% of revenue, for the comparable quarter in the prior year.
Ducommun LaBarge Technologies
(“DLT”)
The Company’s DLT segment reported net revenue for the current
first quarter of $100.9 million, compared to $98.1 million for
first quarter 2014. The higher net revenue reflected a 66.9%
increase in commercial aerospace electronics revenue and a 7.8%
increase in non-A&D revenue, partially offset by a 10.0%
decrease in military and space revenue.
DLT’s operating income for the current first quarter was $6.3
million, or 6.2% of revenue, compared to $7.0 million, or 7.2% of
revenue, for the first quarter of 2014, primarily due to an
unfavorable product mix that was partially offset by higher
revenues. EBITDA was $10.6 million for the current quarter, or
10.6% of revenue, compared to $12.1 million, or 12.3% of revenue,
in the comparable quarter of the prior year.
Corporate General and Administrative
Expenses (“CG&A”)
CG&A expenses for the first quarter of 2015 were $4.8
million, or 2.8% of total Company revenue, an increase from $3.3
million, or 1.8% of total Company revenue in the prior-year period.
CG&A expenses increased primarily due to higher accrued
compensation and benefit costs and higher professional service
fees.
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, May 12, 2015 at 2:00 p.m. PT (5:00 p.m. ET) to
review these financial results. To participate in the
teleconference, please call 866-700-6293 (international
617-213-8835) approximately ten minutes prior to the conference
time. The participant passcode is 98130727. 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 85960209.
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) April 4,
December 31, 2015 2014
Assets Current Assets Cash and cash equivalents $ 32,705 $
45,627 Accounts receivable, net 90,912 91,060 Inventories 141,443
142,842 Production cost of contracts 11,115 11,727 Deferred income
taxes 13,783 13,783 Other current assets 19,485
23,702 Total Current Assets 309,443 328,741 Property
and Equipment, Net 99,998 99,068 Goodwill 157,569 157,569
Intangibles, Net 152,596 155,104 Other Assets 6,321
7,117
Total Assets $ 725,927 $ 747,599
Liabilities and Shareholders’ Equity Current
Liabilities Current portion of long-term debt $ 27 $ 26 Accounts
payable 58,577 58,979 Accrued liabilities 41,659
52,066 Total Current Liabilities 100,263 111,071
Long-Term Debt, Less Current Portion 280,019 290,026 Deferred
Income Taxes 70,199 69,448 Other Long-Term Liabilities
19,938 20,484 Total Liabilities 470,419
491,029 Commitments and Contingencies
Shareholders’ Equity Common stock 110 110 Additional paid-in
capital 72,992 72,206 Retained earnings 188,932 190,905 Accumulated
other comprehensive loss (6,526 ) (6,651 ) Total
Shareholders’ Equity 255,508 256,570
Total Liabilities and Shareholders’ Equity $ 725,927
$ 747,599 DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In
thousands, except per share amounts) Three Months
Ended April 4, March 29, 2015 2014
As Restated Net Revenues $ 172,920 $ 179,753 Cost of
Sales 146,159 143,838 Gross Profit
26,761 35,915 Selling, General and Administrative Expenses
23,134 21,087 Operating Income 3,627 14,828
Interest Expense (6,661 ) (7,125 ) (Loss) Income
Before Taxes (3,034 ) 7,703 Income Tax (Benefit) Expense
(1,061 ) 2,544 Net (Loss) Income $ (1,973 ) $ 5,159
(Loss) Earnings Per Share Basic (loss) earnings per share $
(0.18 ) $ 0.48 Diluted (loss) earnings per share $ (0.18 ) $ 0.46
Weighted-Average Number of Common Shares Outstanding Basic 10,964
10,844 Diluted 10,964 11,107 Gross Profit % 15.5 % 20.0 %
SG&A % 13.4 % 11.7 % Operating Income % 2.1 % 8.2 % Net (Loss)
Income % (1.1 )% 2.9 % Effective Tax (Benefit) Rate (35.0 )% 33.0 %
DUCOMMUN INCORPORATED AND SUBSIDIARIES BUSINESS SEGMENT
PERFORMANCE (Unaudited) (In thousands) Three Months
Ended % % % April 4, March 29, of Net
Revenues of Net Revenues Change 2015 2014
2015 2014 As Restated As Restated
Net
Revenues DAS (11.8 )% $ 72,058 $ 81,654 41.7 % 45.4 % DLT 2.8 %
100,862 98,099 58.3 % 54.6 % Total Net
Revenues (3.8 )% $ 172,920 $ 179,753 100.0 % 100.0 %
Segment Operating Income DAS $ 2,138 $ 11,092 3.0 % 13.6 %
DLT 6,285 7,044 6.2 % 7.2 % 8,423
18,136
Corporate General and Administrative Expenses
(1) (4,796 ) (3,308 ) (2.8 )% (1.8 )% Total
Operating Income $ 3,627 $ 14,828 2.1 % 8.2 %
EBITDA DAS Operating Income $ 2,138 $ 11,092 Depreciation
and Amortization 2,513 2,416 4,651
13,508 6.5 % 16.5 % DLT Operating Income 6,285 7,044 Depreciation
and Amortization 4,359 5,008 10,644
12,052 10.6 % 12.3 % Corporate General and Administrative Expenses
Operating loss (4,796 ) (3,308 ) Depreciation and Amortization
42 2 (4,754 ) (3,306 )
EBITDA $ 10,541 $ 22,254 6.1 % 12.4 %
Capital
Expenditures DAS $ 3,334 $ 1,285 DLT 1,490 897 Corporate
Administration 4 10 Total Capital
Expenditures $ 4,828 $ 2,192
(1) Includes costs not allocated to either
the DLT or DAS operating segments.
Ducommun IncorporatedJoseph P. Bellino, Vice President, Chief
Financial Officer and Treasurer310.513.7211orChris Witty, Investor
Relations646.438.9385cwitty@darrowir.com
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