Fourth Quarter 2019 Highlights
- Revenue of
$186.9 million - GAAP net income of
$8.9 million , or$0.75 per diluted share - Adjusted net income for the quarter of
$9.5 million , or$0.80 per diluted share - Gross margin increased 160 basis points year-over-year to 21.5%
- Adjusted EBITDA increased 29.6% year-over-year to
$25.2 million - Completed the acquisition of
Nobles Worldwide, Inc. (“Nobles”)
“I am delighted with our strong fourth quarter performance as we close a very important year for the Company,” said
“Ducommun’s fourth quarter revenue rose 14% year-over-year and the Company ended 2019 with an all-time high backlog* of
“During the quarter, we also continued to work closely with
“As we begin 2020, the Company is off to a strong start in many areas, and we look forward to continued high performance as we drive for excellence and industry leading customer satisfaction across the Company.”
Fourth Quarter Results
Net revenue for the fourth quarter of 2019 was
$16.1 million higher revenue within the Company’s military and space end-use markets due to higher demand on the Company’s various military fixed-wing aircraft platforms and other military and space platforms; and$3.6 million higher revenue in the Company’s commercial aerospace end-use markets due to additional content and higher demand for the Company’s large aircraft platforms.
Net income for the fourth quarter of 2019 was
Gross profit for the fourth quarter of 2019 was
Operating income for the fourth quarter of 2019 was
Interest expense for the fourth quarter of 2019 was
Adjusted EBITDA for the fourth quarter of 2019 was
* 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 firm delivery dates of 24 months or less. Backlog as of December 31, 2019 was
Business Segment Information
$9.3 million higher revenue within the Company’s military and space end-use markets due to increased demand, which favorably impacted the Company’s fixed-wing aircraft platforms; partially offset by$1.4 million lower revenue within the Company’s commercial aerospace end-use markets due lower build rates on the Company’s other commercial aerospace platforms.
Structural Systems
Structural Systems reported net revenue for the current quarter of
$6.8 million higher revenue within the Company’s military and space end-use markets due to increased demand for the Company’s other military and space platforms and rotary-wing aircraft platforms; and$4.9 million higher revenue within the Company’s commercial aerospace end-use markets due to additional content and increased demand on the Company’s large aircraft platforms.
Structural Systems operating income for the current-year fourth quarter was
Corporate General and Administrative (“CG&A”) Expense
CG&A expense for the fourth quarter of 2019 was
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About
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, earnings guidance, the Company’s restructuring plan and any statements about the Company’s plans, strategies and prospects. The Company generally uses the words “may,” “will,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “intend,” “look forward” 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 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
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, inventory purchase accounting adjustments, loss on extinguishment of debt, and other debt refinancing costs). In addition, certain 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. We define 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 our 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 our net revenues. Backlog in industrial markets tends to be of a shorter duration and is generally fulfilled within a three month period. As a result of these factors, trends in our overall level of backlog may not be indicative of trends in our future net revenues.
CONTACTS:
Christopher D. Wampler, Vice President, Interim Chief Financial Officer and Treasurer, and Controller and Chief Accounting Officer, 657.335.3665 |
Chris Witty, Investor Relations, 646.438.9385, cwitty@darrowir.com |
[Financial Tables Follow]
DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars In thousands)
December 31, 2019 |
December 31, 2018 |
|||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 39,584 | $ | 10,263 | ||||
Accounts receivable, net | 67,133 | 67,819 | ||||||
Contract assets | 106,670 | 86,665 | ||||||
Inventories | 112,482 | 101,125 | ||||||
Production cost of contracts | 9,402 | 11,679 | ||||||
Other current assets | 5,497 | 6,531 | ||||||
Total Current Assets | 340,768 | 284,082 | ||||||
Property and Equipment, Net | 115,216 | 107,045 | ||||||
Operating lease right-of-use assets | 19,105 | — | ||||||
Goodwill | 170,917 | 136,057 | ||||||
Intangibles, Net | 138,362 | 112,092 | ||||||
Non-Current Deferred Income Taxes | 55 | 308 | ||||||
Other Assets | 6,006 | 5,155 | ||||||
Total Assets | $ | 790,429 | $ | 644,739 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 82,597 | $ | 69,274 | ||||
Contract liabilities | 14,517 | 17,145 | ||||||
Accrued liabilities | 37,620 | 37,786 | ||||||
Operating lease liabilities | 2,956 | — | ||||||
Current portion of long-term debt | 7,000 | 2,330 | ||||||
Total Current Liabilities | 144,690 | 126,535 | ||||||
Long-Term Debt, Less Current Portion | 300,887 | 228,868 | ||||||
Non-Current Operating Lease Liabilities | 17,565 | — | ||||||
Non-Current Deferred Income Taxes | 16,766 | 18,070 | ||||||
Other Long-Term Liabilities | 17,721 | 14,441 | ||||||
Total Liabilities | 497,629 | 387,914 | ||||||
Commitments and Contingencies | ||||||||
Shareholders’ Equity | ||||||||
Common stock | 116 | 114 | ||||||
Additional paid-in capital | 88,399 | 83,712 | ||||||
Retained earnings | 212,553 | 180,356 | ||||||
Accumulated other comprehensive loss | (8,268 | ) | (7,357 | ) | ||||
Total Shareholders’ Equity | 292,800 | 256,825 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 790,429 | $ | 644,739 | ||||
DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Quarterly Information Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended | Years Ended | |||||||||||||||
December 31, 2019 |
December 31, 2018 |
December 31, 2019 |
December 31, 2018 |
|||||||||||||
Net Revenues | $ | 186,926 | $ | 164,183 | $ | 721,088 | $ | 629,307 | ||||||||
Cost of Sales | 146,815 | 131,486 | 568,891 | 506,711 | ||||||||||||
Gross Profit | 40,111 | 32,697 | 152,197 | 122,596 | ||||||||||||
Selling, General and Administrative Expenses | 24,933 | 22,531 | 95,964 | 84,007 | ||||||||||||
Restructuring Charges | — | 3,887 | — | 14,671 | ||||||||||||
Operating Income | 15,178 | 6,279 | 56,233 | 23,918 | ||||||||||||
Interest Expense | (5,150 | ) | (3,838 | ) | (18,290 | ) | (13,024 | ) | ||||||||
Loss on Extinguishment of Debt | (180 | ) | (926 | ) | (180 | ) | (926 | ) | ||||||||
Other Income, Net | — | 276 | — | 303 | ||||||||||||
Income Before Taxes | 9,848 | 1,791 | 37,763 | 10,271 | ||||||||||||
Income Tax Expense | 977 | 1,118 | 5,302 | 1,236 | ||||||||||||
Net Income | $ | 8,871 | $ | 673 | $ | 32,461 | $ | 9,035 | ||||||||
Earnings Per Share | ||||||||||||||||
Basic earnings per share | $ | 0.77 | $ | 0.06 | $ | 2.82 | $ | 0.79 | ||||||||
Diluted earnings per share | $ | 0.75 | $ | 0.06 | $ | 2.75 | $ | 0.77 | ||||||||
Weighted-Average Number of Common Shares Outstanding | ||||||||||||||||
Basic | 11,568 | 11,415 | 11,518 | 11,390 | ||||||||||||
Diluted | 11,837 | 11,713 | 11,792 | 11,659 | ||||||||||||
Gross Profit % | 21.5 | % | 19.9 | % | 21.1 | % | 19.5 | % | ||||||||
SG&A % | 13.3 | % | 13.7 | % | 13.3 | % | 13.3 | % | ||||||||
Operating Income % | 8.1 | % | 3.8 | % | 7.8 | % | 3.9 | % | ||||||||
Net Income % | 4.7 | % | 0.4 | % | 4.5 | % | 1.4 | % | ||||||||
Effective Tax Rate | 9.9 | % | 62.4 | % | 14.0 | % | 12.0 | % | ||||||||
DUCOMMUN INCORPORATED AND SUBSIDIARIES
BUSINESS SEGMENT PERFORMANCE
(Unaudited)
(Dollars in thousands)
Three Months Ended | Years Ended | |||||||||||||||||||||||||||||||||
% Change |
December 31, 2019 |
December 31, 2018 |
% of Net Revenues 2019 |
% of Net Revenues 2018 |
% Change |
December 31, 2019 |
December 31, 2018 |
% of Net Revenues 2019 |
%of Net Revenues 2018 |
|||||||||||||||||||||||||
Net Revenues | ||||||||||||||||||||||||||||||||||
Electronic Systems | 13.0 | % | $ | 96,328 | $ | 85,262 | 51.5 | % | 51.9 | % | 6.7 | % | $ | 360,373 | $ | 337,868 | 50.0 | % | 53.7 | % | ||||||||||||||
Structural Systems | 14.8 | % | 90,598 | 78,921 | 48.5 | % | 48.1 | % | 23.8 | % | 360,715 | 291,439 | 50.0 | % | 46.3 | % | ||||||||||||||||||
Total Net Revenues | 13.9 | % | $ | 186,926 | $ | 164,183 | 100.0 | % | 100.0 | % | 14.6 | % | $ | 721,088 | $ | 629,307 | 100.0 | % | 100.0 | % | ||||||||||||||
Segment Operating Income | ||||||||||||||||||||||||||||||||||
Electronic Systems | $ | 9,863 | $ | 7,453 | 10.2 | % | 8.7 | % | $ | 38,613 | $ | 30,916 | 10.7 | % | 9.2 | % | ||||||||||||||||||
Structural Systems | 11,637 | 5,683 | 12.8 | % | 7.2 | % | 46,836 | 19,063 | 13.0 | % | 6.5 | % | ||||||||||||||||||||||
21,500 | 13,136 | 85,449 | 49,979 | |||||||||||||||||||||||||||||||
Corporate General and Administrative Expenses (1) | (6,322 | ) | (6,857 | ) | (3.4 | )% | (4.2 | )% | (29,216 | ) | (26,061 | ) | (4.1 | )% | (4.1 | )% | ||||||||||||||||||
Total Operating Income | $ | 15,178 | $ | 6,279 | 8.1 | % | 3.8 | % | $ | 56,233 | $ | 23,918 | 7.8 | % | 3.9 | % | ||||||||||||||||||
Adjusted EBITDA | ||||||||||||||||||||||||||||||||||
Electronic Systems | ||||||||||||||||||||||||||||||||||
Operating Income | $ | 9,863 | $ | 7,453 | $ | 38,613 | $ | 30,916 | ||||||||||||||||||||||||||
Other Income | — | 92 | — | 119 | ||||||||||||||||||||||||||||||
Depreciation and Amortization | 3,568 | 3,201 | 14,170 | 14,223 | ||||||||||||||||||||||||||||||
Restructuring Charges | — | 2,370 | — | 4,776 | ||||||||||||||||||||||||||||||
13,431 | 13,116 | 13.9 | % | 15.4 | % | 52,783 | 50,034 | 14.6 | % | 14.8 | % | |||||||||||||||||||||||
Structural Systems | ||||||||||||||||||||||||||||||||||
Operating Income | 11,637 | 5,683 | 46,836 | 19,063 | ||||||||||||||||||||||||||||||
Other Income | — | 184 | — | 184 | ||||||||||||||||||||||||||||||
Depreciation and Amortization | 3,913 | 3,015 | 13,663 | 10,525 | ||||||||||||||||||||||||||||||
Restructuring Charges | — | 1,149 | — | 7,897 | ||||||||||||||||||||||||||||||
Inventory Purchase Accounting Adjustments | 511 | — | 511 | 622 | ||||||||||||||||||||||||||||||
16,061 | 10,031 | 17.7 | % | 12.7 | % | 61,010 | 38,291 | 16.9 | % | 13.1 | % | |||||||||||||||||||||||
Corporate General and Administrative Expenses (1) | ||||||||||||||||||||||||||||||||||
Operating loss | (6,322 | ) | (6,857 | ) | (29,216 | ) | (26,061 | ) | ||||||||||||||||||||||||||
Depreciation and Amortization | 73 | 445 | 472 | 548 | ||||||||||||||||||||||||||||||
Stock-Based Compensation Expense | 1,839 | 1,626 | 7,161 | 5,040 | ||||||||||||||||||||||||||||||
Restructuring Charges | — | 321 | — | 2,119 | ||||||||||||||||||||||||||||||
Other Debt Refinancing Costs | 77 | 697 | 77 | 697 | ||||||||||||||||||||||||||||||
(4,333 | ) | (3,768 | ) | (21,506 | ) | (17,657 | ) | |||||||||||||||||||||||||||
Adjusted EBITDA | $ | 25,159 | $ | 19,379 | 13.5 | % | 11.8 | % | $ | 92,287 | $ | 70,668 | 12.8 | % | 11.2 | % | ||||||||||||||||||
Capital Expenditures | ||||||||||||||||||||||||||||||||||
Electronic Systems | $ | 688 | $ | 1,628 | $ | 5,508 | $ | 6,719 | ||||||||||||||||||||||||||
Structural Systems | 3,230 | 2,539 | 13,338 | 9,104 | ||||||||||||||||||||||||||||||
Corporate Administration | — | 139 | — | 514 | ||||||||||||||||||||||||||||||
Total Capital Expenditures | $ | 3,918 | $ | 4,306 | $ | 18,846 | $ | 16,337 |
(1) Includes costs not allocated to either the
DUCOMMUN INCORPORATED AND SUBSIDIARIES
GAAP TO NON-GAAP OPERATING INCOME AND AS A PERCENTAGE OF NET REVENUES RECONCILIATION
(Unaudited)
(Dollars in thousands)
Three Months Ended | Years Ended | |||||||||||||||||||||||||||
GAAP To Non-GAAP Operating Income | December 31, 2019 |
December 31, 2018 |
% of Net Revenues 2019 |
% of Net Revenues 2018 |
December 31, 2019 |
December 31, 2018 |
% of Net Revenues 2019 |
% of Net Revenues 2018 |
||||||||||||||||||||
GAAP Operating income | $ | 15,178 | $ | 6,279 | $ | 56,233 | $ | 23,918 | ||||||||||||||||||||
GAAP Operating income - Electronic Systems | $ | 9,863 | $ | 7,453 | $ | 38,613 | $ | 30,916 | ||||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||||||
Restructuring charges | — | 2,370 | — | 4,776 | ||||||||||||||||||||||||
Adjusted operating income - Electronic Systems | 9,863 | 9,823 | 10.2 | % | 11.5 | % | 38,613 | 35,692 | 10.7 | % | 10.6 | % | ||||||||||||||||
GAAP Operating income - Structural Systems | 11,637 | 5,683 | 46,836 | 19,063 | ||||||||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||||||
Restructuring charges | — | 1,149 | — | 7,897 | ||||||||||||||||||||||||
Inventory purchase accounting adjustments | 511 | — | 511 | 622 | ||||||||||||||||||||||||
Adjusted operating income - Structural Systems | 12,148 | 6,832 | 13.4 | % | 8.7 | % | 47,347 | 27,582 | 13.1 | % | 9.5 | % | ||||||||||||||||
GAAP Operating loss - Corporate | (6,322 | ) | (6,857 | ) | (29,216 | ) | (26,061 | ) | ||||||||||||||||||||
Adjustment: | ||||||||||||||||||||||||||||
Restructuring charges | — | 321 | — | 2,119 | ||||||||||||||||||||||||
Other debt refinancing costs | 77 | 697 | 77 | 697 | ||||||||||||||||||||||||
Adjusted operating loss - Corporate | (6,245 | ) | (5,839 | ) | (29,139 | ) | (23,942 | ) | ||||||||||||||||||||
Total adjustments | 588 | 4,537 | 588 | 16,111 | ||||||||||||||||||||||||
Adjusted operating income | $ | 15,766 | $ | 10,816 | 8.4 | % | 6.6 | % | $ | 56,821 | $ | 40,029 | 7.9 | % | 6.4 | % | ||||||||||||
DUCOMMUN INCORPORATED AND SUBSIDIARIES
GAAP TO NON-GAAP EARNINGS AND EARNINGS PER SHARE RECONCILIATION
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended | Years Ended | |||||||||||||||
GAAP To Non-GAAP Earnings | December 31, 2019 |
December 31, 2018 |
December 31, 2019 |
December 31, 2018 |
||||||||||||
GAAP Net income | $ | 8,871 | $ | 673 | $ | 32,461 | $ | 9,035 | ||||||||
Adjustments: | ||||||||||||||||
Restructuring charges (2) | — | 3,187 | — | 12,277 | ||||||||||||
Inventory purchase accounting adjustments (1) | 409 | — | 409 | 516 | ||||||||||||
Loss on extinguishment of debt (1)(2) | 144 | 769 | 144 | 769 | ||||||||||||
Other debt refinancing costs (1)(2) | 62 | 579 | 62 | 579 | ||||||||||||
Total adjustments | 615 | 4,535 | 615 | 14,141 | ||||||||||||
Adjusted net income | $ | 9,486 | $ | 5,208 | $ | 33,076 | $ | 23,176 |
Three Months Ended | Years Ended | |||||||||||||||
GAAP Earnings Per Share To Non-GAAP Earnings Per Share | December 31, 2019 |
December 31, 2018 |
December 31, 2019 |
December 31, 2018 |
||||||||||||
GAAP Diluted Earnings Per Share (“EPS”) | $ | 0.75 | $ | 0.06 | $ | 2.75 | $ | 0.77 | ||||||||
Adjustments: | ||||||||||||||||
Restructuring charges (2) | — | 0.27 | — | 1.05 | ||||||||||||
Inventory purchase accounting adjustments (1)(2) | 0.03 | — | 0.03 | 0.05 | ||||||||||||
Loss on extinguishment of debt (1)(2) | 0.01 | 0.06 | 0.01 | 0.07 | ||||||||||||
Other debt refinancing costs (2) | 0.01 | 0.05 | 0.01 | 0.05 | ||||||||||||
Total adjustments | 0.05 | 0.38 | 0.05 | 1.22 | ||||||||||||
Adjusted Diluted EPS | $ | 0.80 | $ | 0.44 | $ | 2.80 | $ | 1.99 | ||||||||
Shares used for adjusted diluted EPS | 11,837 | 11,713 | 11,792 | 11,659 |
(1) Includes tax rate of 20.0% for 2019 adjustments.
(2) Includes tax rate of 17.0% for 2018 adjustments.
DUCOMMUN INCORPORATED AND SUBSIDIARIES
NON-GAAP BACKLOG* BY REPORTING SEGMENT
(Unaudited)
(Dollars in thousands)
(In thousands) | ||||||||
December 31, 2019 |
December 31, 2018 |
|||||||
Consolidated Ducommun | ||||||||
Military and space | $ | 451,293 | $ | 342,080 | ||||
Commercial aerospace | 430,642 | 483,735 | ||||||
Industrial | 28,286 | 37,774 | ||||||
Total | $ | 910,221 | $ | 863,589 | ||||
Electronic Systems | ||||||||
Military and space | $ | 311,027 | $ | 243,841 | ||||
Commercial aerospace | 75,719 | 45,387 | ||||||
Industrial | 28,286 | 37,774 | ||||||
Total | $ | 415,032 | $ | 327,002 | ||||
Structural Systems | ||||||||
Military and space | $ | 140,266 | $ | 98,239 | ||||
Commercial aerospace | 354,923 | 438,348 | ||||||
Total | $ | 495,189 | $ | 536,587 |
* 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 as of December 31, 2019 was
Source: Ducommun Incorporated