View printer-friendly versionFourth Quarter 2020 Recap
- Revenue of
$157.8 million - GAAP net income of
$9.7 million , or$0.80 per diluted share - Adjusted net income for the quarter of
$10.8 million , or$0.89 per diluted share - Gross margin increased 60 basis points year-over-year to 22.1%
- Adjusted EBITDA of
$22.8 million , or 14.4% of revenues, an increase of 90 basis points year-over-year
“I am proud of the Ducommun team continuing to move forward in the fourth quarter and delivering excellent results. The numbers show the strength of our product lines, diversity of our customer base and performance positions us well for the future,” said
“With a defense backlog* at all time highs and some forecasted stability in our commercial business, we are optimistic about the quarters to come. Given improving fundamentals in aircraft production, and pent up demand for air travel post pandemic, the Company is in great shape to weather the remaining headwinds and drive higher growth in the second half of 2021, with the 2022 outlook being even better. I want to thank our employees for their dedication to our success, Ducommun's investors for their support, and our customers for their loyalty throughout 2020.”
Fourth Quarter Results
Net revenue for the fourth quarter of 2020 was
$42.2 million lower revenue within the Company’s commercial aerospace end-use markets due to lower build rates on large aircraft platforms; and$10.1 million lower revenue within the Company’s Industrial end-use markets due to timing of customer requirements; partially offset by$23.2 million higher revenue within the Company’s military and space end-use markets due to higher build rates on various missile platforms and military fixed-wing aircraft platforms.
Net income for the fourth quarter of 2020 was
Gross profit for the fourth quarter of 2020 was
Operating income for the fourth quarter of 2020 was
Interest expense for the fourth quarter of 2020 was
Adjusted EBITDA for the fourth quarter of 2020 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 expected delivery dates of 24 months or less. Backlog as of
Business Segment Information
Electronic Systems
Electronic Systems reported net revenue for the current quarter of
$17.6 million higher revenue within the Company’s military and space end-use markets due to higher build rates on various missile platforms and military fixed-wing aircraft platforms; partially offset by$10.1 million lower revenue within the Company’s Industrial end-use markets due to timing of customer requirements; and$4.7 million lower revenue within the Company’s commercial aerospace end-use markets due lower build rates on other commercial aerospace platforms, regional and business aircraft platforms, and large aircraft platforms.
Electronic Systems operating income for the current year fourth quarter of
Structural Systems
Structural Systems reported net revenue for the current quarter of
$37.6 million lower revenue within the Company’s commercial aerospace end-use markets due to lower build rates on large aircraft platforms; partially offset by$5.7 million higher revenue within the Company’s military and space end-use markets due to higher build rates on various missile 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 2020 was
Conference Call
A teleconference hosted by
This call is being webcast and can be accessed directly at the Ducommun website at Ducommun.com. Conference call replay will be available after that time at the same link or by dialing 855-859-2056, passcode 1085599.
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 and any statements about the Company’s plans, growth in the second half of 2021, outlook for 2022, strategies, future demand, and prospects. 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 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, Guaymas fire related expenses, inventory purchase accounting adjustments, and other debt refinancing costs), non-GAAP operating income and as a percentage of net revenues, non-GAAP earnings, and non-GAAP earnings per share. 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:
[Financial Tables Follow]
DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars In thousands)
2020 |
2019 |
|||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 56,466 | $ | 39,584 | ||||
| Accounts receivable, net | 58,025 | 67,133 | ||||||
| Contract assets | 154,028 | 106,670 | ||||||
| Inventories | 129,223 | 112,482 | ||||||
| Production cost of contracts | 6,971 | 9,402 | ||||||
| Other current assets | 5,571 | 5,497 | ||||||
| Total Current Assets | 410,284 | 340,768 | ||||||
| Property and Equipment, Net | 109,990 | 115,216 | ||||||
| Operating lease right-of-use assets | 16,348 | 19,105 | ||||||
| 170,830 | 170,917 | |||||||
| Intangibles, Net | 124,744 | 138,362 | ||||||
| Deferred Income Taxes | 33 | 55 | ||||||
| Other Assets | 5,118 | 6,006 | ||||||
| Total Assets | $ | 837,347 | $ | 790,429 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 63,980 | $ | 82,597 | ||||
| Contract liabilities | 28,264 | 14,517 | ||||||
| Accrued and other liabilities | 40,526 | 37,620 | ||||||
| Operating lease liabilities | 3,132 | 2,956 | ||||||
| Current portion of long-term debt | 7,000 | 7,000 | ||||||
| Total Current Liabilities | 142,902 | 144,690 | ||||||
| Long-Term Debt, Less Current Portion | 311,922 | 300,887 | ||||||
| Non-Current Operating Lease Liabilities | 14,555 | 17,565 | ||||||
| Deferred Income Taxes | 16,992 | 16,766 | ||||||
| Other Long-Term Liabilities | 21,642 | 17,721 | ||||||
| Total Liabilities | 508,013 | 497,629 | ||||||
| Commitments and Contingencies | ||||||||
| Shareholders’ Equity | ||||||||
| Common stock | 117 | 116 | ||||||
| Additional paid-in capital | 97,090 | 88,399 | ||||||
| Retained earnings | 241,727 | 212,553 | ||||||
| Accumulated other comprehensive loss | (9,600 | ) | (8,268 | ) | ||||
| Total Shareholders’ Equity | 329,334 | 292,800 | ||||||
| Total Liabilities and Shareholders’ Equity | $ | 837,347 | $ | 790,429 | ||||
DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Quarterly Information Unaudited)
(Dollars in thousands, except per share amounts)
| Three Months Ended | Years Ended | |||||||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||||||
| Net Revenues | $ | 157,786 | $ | 186,926 | $ | 628,941 | $ | 721,088 | ||||||||||||
| Cost of Sales | 122,985 | 146,815 | 491,203 | 568,891 | ||||||||||||||||
| Gross Profit | 34,801 | 40,111 | 137,738 | 152,197 | ||||||||||||||||
| Selling, General and Administrative Expenses | 22,555 | 24,933 | 89,808 | 95,964 | ||||||||||||||||
| Restructuring Charges | 656 | — | 2,424 | — | ||||||||||||||||
| Operating Income | 11,590 | 15,178 | 45,506 | 56,233 | ||||||||||||||||
| Interest Expense | (2,585 | ) | (5,150 | ) | (13,653 | ) | (18,290 | ) | ||||||||||||
| Loss on Extinguishment of Debt | — | (180 | ) | — | (180 | ) | ||||||||||||||
| Other Income, Net | 29 | — | 128 | — | ||||||||||||||||
| Income Before Taxes | 9,034 | 9,848 | 31,981 | 37,763 | ||||||||||||||||
| Income Tax (Benefit) Expense | (619 | ) | 977 | 2,807 | 5,302 | |||||||||||||||
| Net Income | $ | 9,653 | $ | 8,871 | $ | 29,174 | $ | 32,461 | ||||||||||||
| Earnings Per Share | ||||||||||||||||||||
| Basic earnings per share | $ | 0.82 | $ | 0.77 | $ | 2.50 | $ | 2.82 | ||||||||||||
| Diluted earnings per share | $ | 0.80 | $ | 0.75 | $ | 2.45 | $ | 2.75 | ||||||||||||
| Weighted-Average Number of Common Shares Outstanding | ||||||||||||||||||||
| Basic | 11,720 | 11,568 | 11,676 | 11,518 | ||||||||||||||||
| Diluted | 12,070 | 11,837 | 11,932 | 11,792 | ||||||||||||||||
| Gross Profit % | 22.1 | % | 21.5 | % | 21.9 | % | 21.1 | % | ||||||||||||
| SG&A % | 14.3 | % | 13.3 | % | 14.3 | % | 13.3 | % | ||||||||||||
| Operating Income % | 7.3 | % | 8.1 | % | 7.2 | % | 7.8 | % | ||||||||||||
| Net Income % | 6.1 | % | 4.7 | % | 4.6 | % | 4.5 | % | ||||||||||||
| Effective Tax (Benefit) Rate | (6.9 | ) | % | 9.9 | % | 8.8 | % | 14.0 | % | |||||||||||
DUCOMMUN INCORPORATED AND SUBSIDIARIES
BUSINESS SEGMENT PERFORMANCE
(Unaudited)
(Dollars in thousands)
| Three Months Ended | Years Ended | |||||||||||||||||||||||||||||||||||||||||||
| % Change |
December 31, 2020 |
December 31, 2019 |
% of Net Revenues 2020 |
% of Net Revenues 2019 |
% Change |
December 31, 2020 |
December 31, 2019 |
% of Net Revenues 2020 |
% of Net Revenues 2019 |
|||||||||||||||||||||||||||||||||||
| Net Revenues | ||||||||||||||||||||||||||||||||||||||||||||
| Electronic Systems | 2.9 | % | $ | 99,093 | $ | 96,328 | 62.8 | % | 51.5 | % | 9.0 | % | $ | 392,633 | $ | 360,373 | 62.4 | % | 50.0 | % | ||||||||||||||||||||||||
| Structural Systems | (35.2 | ) | % | 58,693 | 90,598 | 37.2 | % | 48.5 | % | (34.5 | ) | % | 236,308 | 360,715 | 37.6 | % | 50.0 | % | ||||||||||||||||||||||||||
| Total Net Revenues | (15.6 | ) | % | $ | 157,786 | $ | 186,926 | 100.0 | % | 100.0 | % | (12.8 | ) | % | $ | 628,941 | $ | 721,088 | 100.0 | % | 100.0 | % | ||||||||||||||||||||||
| Segment Operating Income | ||||||||||||||||||||||||||||||||||||||||||||
| Electronic Systems | $ | 11,467 | $ | 9,863 | 11.6 | % | 10.2 | % | $ | 51,894 | $ | 38,613 | 13.2 | % | 10.7 | % | ||||||||||||||||||||||||||||
| Structural Systems | 6,211 | 11,637 | 10.6 | % | 12.8 | % | 19,584 | 46,836 | 8.3 | % | 13.0 | % | ||||||||||||||||||||||||||||||||
| 17,678 | 21,500 | 71,478 | 85,449 | |||||||||||||||||||||||||||||||||||||||||
| Corporate General and Administrative Expenses (1) | (6,088 | ) | (6,322 | ) | (3.9 | ) | % | (3.4 | ) | % | (25,972 | ) | (29,216 | ) | (4.1 | ) | % | (4.1 | ) | % | ||||||||||||||||||||||||
| Total Operating Income | $ | 11,590 | $ | 15,178 | 7.3 | % | 8.1 | % | $ | 45,506 | $ | 56,233 | 7.2 | % | 7.8 | % | ||||||||||||||||||||||||||||
| Adjusted EBITDA | ||||||||||||||||||||||||||||||||||||||||||||
| Electronic Systems | ||||||||||||||||||||||||||||||||||||||||||||
| Operating Income | $ | 11,467 | $ | 9,863 | $ | 51,894 | $ | 38,613 | ||||||||||||||||||||||||||||||||||||
| Depreciation and Amortization | 3,447 | 3,568 | 14,038 | 14,170 | ||||||||||||||||||||||||||||||||||||||||
| Restructuring Charges | 264 | — | 596 | — | ||||||||||||||||||||||||||||||||||||||||
| 15,178 | 13,431 | 15.3 | % | 13.9 | % | 66,528 | 52,783 | 16.9 | % | 14.6 | % | |||||||||||||||||||||||||||||||||
| Structural Systems | ||||||||||||||||||||||||||||||||||||||||||||
| Operating Income | 6,211 | 11,637 | 19,584 | 46,836 | ||||||||||||||||||||||||||||||||||||||||
| Depreciation and Amortization | 3,603 | 3,913 | 14,559 | 13,663 | ||||||||||||||||||||||||||||||||||||||||
| Restructuring Charges | 392 | — | 1,828 | — | ||||||||||||||||||||||||||||||||||||||||
| Inventory Purchase Accounting Adjustments | — | 511 | — | 511 | ||||||||||||||||||||||||||||||||||||||||
| Guaymas Fire Related Expenses | 682 | — | 1,704 | — | ||||||||||||||||||||||||||||||||||||||||
| 10,888 | 16,061 | 18.6 | % | 17.7 | % | 37,675 | 61,010 | 15.9 | % | 16.9 | % | |||||||||||||||||||||||||||||||||
| Corporate General and Administrative Expenses (1) | ||||||||||||||||||||||||||||||||||||||||||||
| Operating loss | (6,088 | ) | (6,322 | ) | (25,972 | ) | (29,216 | ) | ||||||||||||||||||||||||||||||||||||
| Other Income | 29 | — | 128 | — | ||||||||||||||||||||||||||||||||||||||||
| Depreciation and Amortization | 59 | 73 | 253 | 472 | ||||||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation Expense | 2,694 | 1,839 | 9,299 | 7,161 | ||||||||||||||||||||||||||||||||||||||||
| Other Debt Refinancing Costs | — | 77 | — | 77 | ||||||||||||||||||||||||||||||||||||||||
| (3,306 | ) | (4,333 | ) | (16,292 | ) | (21,506 | ) | |||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 22,760 | $ | 25,159 | 14.4 | % | 13.5 | % | $ | 87,911 | $ | 92,287 | 14.0 | % | 12.8 | % | ||||||||||||||||||||||||||||
| Capital Expenditures | ||||||||||||||||||||||||||||||||||||||||||||
| Electronic Systems | $ | 1,519 | $ | 688 | $ | 5,037 | $ | 5,508 | ||||||||||||||||||||||||||||||||||||
| Structural Systems | 4,170 | 3,230 | 8,570 | 13,338 | ||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Total Capital Expenditures | $ | 5,689 | $ | 3,918 | $ | 13,607 | $ | 18,846 | ||||||||||||||||||||||||||||||||||||
(1) Includes costs not allocated to either the Electronic Systems or Structural Systems operating segments.
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, 2020 |
December 31, 2019 |
% of Net Revenues 2020 |
% of Net Revenues 2019 |
December 31, 2020 |
December 31, 2019 |
% of Net Revenues 2020 |
% of Net Revenues 2019 |
||||||||||||||||||||
| GAAP Operating income | $ | 11,590 | $ | 15,178 | $ | 45,506 | $ | 56,233 | ||||||||||||||||||||
| GAAP Operating income - Electronic Systems | $ | 11,467 | $ | 9,863 | $ | 51,894 | $ | 38,613 | ||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||
| Restructuring charges | 264 | — | 596 | — | ||||||||||||||||||||||||
| Adjusted operating income - Electronic Systems | 11,731 | 9,863 | 11.8 | % | 10.2 | % | 52,490 | 38,613 | 13.4 | % | 10.7 | % | ||||||||||||||||
| GAAP Operating income - Structural Systems | 6,211 | 11,637 | 19,584 | 46,836 | ||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||
| Restructuring charges | 392 | — | 1,828 | — | ||||||||||||||||||||||||
| Inventory purchase accounting adjustments | — | 511 | — | 511 | ||||||||||||||||||||||||
| Guaymas fire related expenses | 682 | — | 1,704 | — | ||||||||||||||||||||||||
| Adjusted operating income - Structural Systems | 7,285 | 12,148 | 12.4 | % | 13.4 | % | 23,116 | 47,347 | 9.8 | % | 13.1 | % | ||||||||||||||||
| GAAP Operating loss - Corporate | (6,088 | ) | (6,322 | ) | (25,972 | ) | (29,216 | ) | ||||||||||||||||||||
| Adjustment: | ||||||||||||||||||||||||||||
| Other debt refinancing costs | — | 77 | — | 77 | ||||||||||||||||||||||||
| Adjusted operating loss - Corporate | (6,088 | ) | (6,245 | ) | (25,972 | ) | (29,139 | ) | ||||||||||||||||||||
| Total adjustments | 1,338 | 588 | 4,128 | 588 | ||||||||||||||||||||||||
| Adjusted operating income | $ | 12,928 | $ | 15,766 | 8.2 | % | 8.4 | % | $ | 49,634 | $ | 56,821 | 7.9 | % | 7.9 | % | ||||||||||||
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 | 2020 |
2019 |
2020 |
2019 |
||||||||||||
| GAAP Net income | $ | 9,653 | $ | 8,871 | $ | 29,174 | $ | 32,461 | ||||||||
| Adjustments: | ||||||||||||||||
| Restructuring charges (1) | 551 | — | 2,036 | — | ||||||||||||
| Guaymas fire related expenses (1) | 573 | — | 1,431 | — | ||||||||||||
| Inventory purchase accounting adjustments (2) | — | 409 | — | 409 | ||||||||||||
| Loss on extinguishment of debt (2) | — | 144 | — | 144 | ||||||||||||
| Other debt refinancing costs (2) | — | 62 | — | 62 | ||||||||||||
| Total adjustments | 1,124 | 615 | 3,467 | 615 | ||||||||||||
| Adjusted net income | $ | 10,777 | $ | 9,486 | $ | 32,641 | $ | 33,076 | ||||||||
| Three Months Ended | Years Ended | |||||||||||||||
| GAAP Earnings Per Share To Non-GAAP Earnings Per Share | 2020 |
2019 |
2020 |
2019 |
||||||||||||
| GAAP Diluted Earnings Per Share (“EPS”) | $ | 0.80 | $ | 0.75 | $ | 2.45 | $ | 2.75 | ||||||||
| Adjustments: | ||||||||||||||||
| Restructuring charges (1) | 0.04 | — | 0.17 | — | ||||||||||||
| Guaymas fire related expenses (1) | 0.05 | — | 0.12 | — | ||||||||||||
| Inventory purchase accounting adjustments (2) | — | 0.03 | — | 0.03 | ||||||||||||
| Loss on extinguishment of debt (2) | — | 0.01 | — | 0.01 | ||||||||||||
| Other debt refinancing costs (2) | — | 0.01 | — | 0.01 | ||||||||||||
| Total adjustments | 0.09 | 0.05 | 0.29 | 0.05 | ||||||||||||
| Adjusted Diluted EPS | $ | 0.89 | $ | 0.80 | $ | 2.74 | $ | 2.80 | ||||||||
| Shares used for adjusted diluted EPS | 12,070 | 11,837 | 11,932 | 11,792 | ||||||||||||
(1) Includes tax rate of 16.0% for 2020 adjustments.
(2) Includes tax rate of 20.0% for 2019 adjustments.
DUCOMMUN INCORPORATED AND SUBSIDIARIES
NON-GAAP BACKLOG* BY REPORTING SEGMENT
(Unaudited)
(Dollars in thousands)
| (In thousands) | ||||||||
2020 |
2019 |
|||||||
| Consolidated Ducommun | ||||||||
| Military and space | $ | 529,663 | $ | 451,293 | ||||
| Commercial aerospace | 268,326 | 430,642 | ||||||
| Industrial | 24,019 | 28,286 | ||||||
| Total | $ | 822,008 | $ | 910,221 | ||||
| Electronic Systems | ||||||||
| Military and space | $ | 404,144 | $ | 311,027 | ||||
| Commercial aerospace | 56,719 | 75,719 | ||||||
| Industrial | 24,019 | 28,286 | ||||||
| Total | $ | 484,882 | $ | 415,032 | ||||
| Structural Systems | ||||||||
| Military and space | $ | 125,519 | $ | 140,266 | ||||
| Commercial aerospace | 211,607 | 354,923 | ||||||
| Total | $ | 337,126 | $ | 495,189 | ||||
* 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
Source: Ducommun Incorporated