Ducommun Incorporated (NYSE:DCO) today reported results for its third quarter and nine months ended October 1, 2011.

Recent Highlights
  • Net sales increased 86% for the third quarter of 2011 versus the third quarter of 2010, reflecting increased sales of $83.8 million from the LaBarge, Inc. (“LaBarge”) acquisition
  • Diluted earnings per share for the third quarter of 2011 were $0.09 and, excluding merger-related expenses, were $0.34
  • Firm backlog at the end of the third quarter 2011 was approximately $611.7 million

“We are pleased to report our first full quarter of financial results that include LaBarge under the Ducommun umbrella,” said Anthony J. Reardon, president and chief executive officer. “The integration of our operations remains on track, with the combined Ducommun LaBarge Technologies benefiting from strong demand across a diverse set of end markets. In addition, Ducommun AeroStructures saw revenue grow in the third quarter by 11% year-over-year, reflecting increases in both commercial and military sales. We expect further expansion in the quarters to come along with margin improvement driven by higher operating leverage and the impact of synergies from our acquisition.”

Sales for the third quarter of 2011 increased 86% to $185.1 million, compared to $99.4 million for the third quarter of 2010, reflecting revenue of $83.8 million from the LaBarge acquisition and 2% organic growth, primarily from increased sales of products for commercial aircraft. Net income for the third quarter was $1.0 million, or $0.09 per diluted share, compared to net income of $5.8 million, or $0.55 per diluted share, for the comparable period last year. Excluding pre-tax acquisition-related expenses (including cost of sales relating to the write-up of LaBarge inventory) of $3.9 million, or $0.25 per diluted share, net income was $3.7 million, or $0.34 per diluted share, in the third quarter of 2011. During the quarter, the Company generated $3.7 million of cash flow from operations, excluding $9.7 million of acquisition-related costs.

SG&A expenses in the third quarter of 2011 increased by $10.9 million from the comparable period last year. This increase resulted from SG&A expenses of $11.3 million from the newly acquired LaBarge organization, including approximately $2.7 million of acquisition-related expenses and $1.9 million of amortization of intangibles.

Ducommun AeroStructures (DAS)

The DAS segment reported net sales for the third quarter of 2011 of $75.1 million, compared to $67.6 million in 2010, representing an increase of 11%. The higher sales were primarily the result of increased shipments of commercial aerospace and military products. Operating income for the third quarter of 2011 was $6.5 million, or 8.7% of revenue, compared to $6.7 million, or 9.9% of revenue, for the prior-year period. Operating income was negatively impacted in 2011 by a higher proportion of sales of lower margin products.

Ducommun LaBarge Technologies (DLT)

The DLT segment reported net sales for the third quarter of 2011 of $110.0 million, compared to $31.8 million in 2010. The primary reason for the substantial increase was $83.8 million in sales from the LaBarge acquisition. Operating income for the third quarter of 2011 was $7.3 million, or 6.6% of revenue, compared to $3.1 million, or 9.8% of revenue, for the prior-year period. Excluding pre-tax acquisition-related expenses (including cost of sales relating to the write-up of LaBarge inventory) of $3.6 million, DLT operating income was $10.9 million, or 9.9% of sales.

Corporate General and Administrative Expenses (CG&A)

CG&A expenses represent the portion of SG&A expenses that are not identifiable or allocated to the DAS and DLT segments. CG&A expenses for the third quarter of 2011 were $4.1 million, as compared to $3.6 million in the third quarter of 2010. Excluding acquisition-related expenses of $0.3 million, CG&A expenses were $3.8 million, or 2.1% of sales in the third quarter of 2011, compared to 3.6% of sales in the prior-year period.

Year-to-Date Results

Sales for the first nine months of 2011 increased 28% to $392.7 million, compared to $306.6 million for the first nine months of 2010, reflecting revenue of $84.7 million from the LaBarge acquisition as well as an increase in sales of products for commercial aircraft. Net income for the first nine months of 2011 was $0.9 million, or $0.09 per diluted share, compared to net income of $15.6 million, or $1.48 per diluted share, for the comparable period last year. Excluding pre-tax acquisition-related expenses (including cost of sales relating to the write-up of LaBarge inventory) of $15.3 million, or $1.05 per diluted share, net income was $12.1 million, or $1.13 per diluted share in the first nine months of 2011. During the first nine months of 2011, the Company used $10.8 million of cash flow from operations, excluding $18.1 million of acquisition-related costs.

SG&A expenses in the first nine months of 2011 rose by $22.8 million from the comparable period last year. This increase resulted from SG&A expenses of $11.8 million from the newly acquired LaBarge organization, along with $11.8 million of acquisition-related expenses at Corporate, partially offset by $0.8 million reduction in other expenses.

Ducommun AeroStructures (DAS)

The DAS segment reported net sales for the first nine months of 2011 of $223.9 million, compared to $206.0 million in 2010, an increase of 9%. The higher sales were primarily the result of increased shipments of commercial aerospace and military products. Operating income for the first nine months of 2011 was $22.4 million, or 10.0% of sales, compared to $23.3 million, or 11.3% of sales, in the prior-year period. Operating income was negatively impacted in 2011 by a higher proportion of sales of lower margin products.

Ducommun LaBarge Technologies (DLT)

The DLT segment reported net sales for the first nine months of 2011 of $168.8 million, compared to $100.7 million in 2010. The primary reason for the increase was $84.7 million in sales from the LaBarge acquisition. Operating income for the first nine months of 2011 was $12.1 million, or 7.2% of sales, compared to $8.9 million, or 8.9% of sales, in the prior-year period. Excluding pre-tax acquisition-related expenses (including cost of sales relating to the write-up of LaBarge inventory) of $3.6 million year-to-date, DLT operating income was $15.7 million, or 9.3% of sales.

Corporate General and Administrative Expenses (CG&A)

CG&A expenses for the first nine months of 2011 were $23.2 million compared to $10.1 million in the prior-year period. Excluding acquisition-related expenses of $11.8 million, CG&A expenses in the first nine months of 2011 were $11.4 million, or 2.9% of sales, compared to 3.3% of sales in 2010.

“We couldn’t be happier with the LaBarge acquisition and how it has bolstered our technology profile, market position, and growth outlook,” Mr. Reardon continued. “Given our solid position on key platforms and programs, and in light of our positive outlook on the commercial aerospace market, Ducommun is on sound footing to post stronger operating performance going forward. We are now able to offer more sophisticated electronic and structural assemblies to our customers – providing access to a pipeline of new, attractive opportunities. With our diversified military business and commercial markets expanding, we remain focused on increasing margins and driving cash flow to pay down debt. Ducommun is clearly aligned with its shareholders in looking to enhance financial results in 2012 and beyond.”

Conference Call

A teleconference hosted by Anthony J. Reardon, the Company's president and chief executive officer, and Joseph P. Bellino, the Company's vice president and chief financial officer, will be held on Tuesday, November 8, 2011 at 10:00 AM PT (1:00 PM ET) to review these financial results. To participate in the teleconference, please call 800-706-7745 (international 617-614-3472) approximately ten minutes prior to the conference time stated above. The participant passcode is 15105099. 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 89506569.

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 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, any difficulties, delays or failure in, or unanticipated costs of, realizing the expected synergies of the LaBarge acquisition, 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.
   
DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
(Unaudited)
October 1, December 31,
2011 2010
Assets
Current Assets:
Cash and cash equivalents $ 19,376 $ 10,268
Accounts receivable 97,429 47,949
Unbilled receivables 5,670 3,856
Inventories 168,161 72,597
Production cost of contracts 16,672 16,889
Deferred income taxes 11,119 5,085
Other current assets   18,588     4,748  
Total Current Assets 337,015 161,392
Property and Equipment, Net 99,122 59,461
Goodwill 216,314 100,442
Intangibles 190,740 21,992
Other Assets   17,638     2,165  
$ 860,829   $ 345,452  
 
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of long-term debt $ 1,961 $ 187
Accounts payable 59,708 39,925
Accrued liabilities   59,271     31,174  
Total Current Liabilities 120,940 71,286
Long-Term Debt, Less Current Portion 390,773 3,093
Deferred Income Taxes 81,437 7,691
Other Long-Term Liabilities   10,688     9,197  
Total Liabilities   603,838     91,267  
Commitments and Contingencies
Shareholders' Equity:
Common stock 107 106
Treasury stock (1,924 ) (1,924 )
Additional paid-in capital 64,368 61,684
Retained earnings 197,542 197,421
Accumulated other comprehensive loss   (3,102 )   (3,102 )
Total Shareholders' Equity   256,991     254,185  
$ 860,829   $ 345,452  
 
       
DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
Three Months Ended Nine Months Ended
October 1, October 2, October 1, October 2,
2011 2010 2011 2010
Sales and Service Revenues:
Product sales $ 178,485 $ 89,473 $ 370,763 $ 274,155
Service revenues   6,595     9,970     21,913     32,481  
Net Sales   185,080     99,443     392,676     306,636  
Operating Costs and Expenses:
Cost of product sales 145,560 72,041 301,941 219,708
Cost of service revenues 5,331 7,465 17,134 25,330
Selling, general and administrative expenses   24,557     13,705     62,303     39,484  
Total Operating Costs and Expenses   175,448     93,211     381,378     284,522  
Operating (Loss)/Income 9,632 6,232 11,298 22,114
Interest Expense, Net   (8,256 )   (544 )   (10,047 )   (1,692 )
(Loss)/Income Before Taxes 1,376 5,688 1,251 20,422
Income Tax Expense, Net   (415 )   85     (340 )   (4,773 )
Net (Loss)/Income $ 961   $ 5,773   $ 911   $ 15,649  
(Loss)/Earnings Per Share:
Basic (loss)/earnings per share $ 0.09 $ 0.55 $ 0.09 $ 1.49
Diluted (loss)/earnings per share $ 0.09 $ 0.55 $ 0.09 $ 1.48
Weighted Average Number of Common Shares Outstanding:
Basic 10,539 10,499 10,534 10,483
Diluted 10,631 10,583 10,658 10,564
 
                       
DUCOMMUN INCORPORATED AND SUBSIDIARIES
BUSINESS SEGMENT PERFORMANCE
(In thousands, except per share amounts)
(Unaudited)
 
(In thousands)
Three Months Nine Months
October 1, October 2, % October 1, October 2, %
2011 2010 Change   2011 2010 Change
Net Sales:
Ducommun AeroStructures $ 75,076 $ 67,634 11.0 % $ 223,890 $ 205,982 8.7 %
Ducommun LaBarge Technologies   110,004     31,809   245.8 %   168,786     100,654   67.7 %
Total Net Sales $ 185,080   $ 99,443   86.1 % $ 392,676   $ 306,636   28.1 %
 
Segment Operating (Loss)/Income (1)
Ducommun AeroStructures $ 6,503 $ 6,725 $ 22,414 $ 23,343
Ducommun LaBarge Technologies   7,287     3,120     12,129     8,912  
13,790 9,845 34,543 32,255
Corporate General and Administrative Expenses (2)   (4,158 )   (3,613 )   (23,245 )   (10,141 )
Total Operating (Loss)/Income $ 9,632   $ 6,232   $ 11,298   $ 22,114  
 
EBITDA (1)
Ducommun AeroStructures
Operating (Loss)/Income $ 6,503 $ 6,725 $ 22,414 $ 23,343
Depreciation and Amortization   2,681     2,243     7,710     7,110  
9,184 8,968 30,124 30,453
Ducommun LaBarge Technologies
Operating (Loss)/Income 7,285 3,120 12,129 8,912
Depreciation and Amortization   4,745     983     6,725     2,902  
12,030 4,103 18,854 11,814
Corporate General and Administrative Expenses (2)(3)
Operating (Loss)/Income (4,156 ) (3,613 ) (23,245 ) (10,141 )
Depreciation and Amortization 29 4 37 58
Non-Cash Stock-Based Compensation   888     652     2,352     1,621  
  (3,239 )   (2,957 )   (20,856 )   (8,462 )
EBITDA $ 17,975   $ 10,114   $ 28,122   $ 33,805  
 
Adjusted EBITDA
Inventory step-up writeoff (3) 1,178 - 1,178 -
Merger-related transaction expenses (4) 308 - 11,785 -
Merger-related change-in-control compensation expenses (5)   2,374     -     2,374     -  
  3,860     -     15,337     -  
Adjusted EBITDA $ 21,835   $ 10,114   $ 43,459   $ 33,805  
 
Capital Expenditures:
Ducommun AeroStructures $ 2,838 $ 734 $ 6,972 $ 3,363
Ducommun LaBarge Technologies 2,494 532 3,970 1,622
Corporate Administration   50     9     244     69  
Total Capital Expenditures $ 5,382   $ 1,275   $ 11,186   $ 5,054  
 

(1)
 

Before certain allocated corporate overhead.

(2)

Includes approximately $0.3 million and $11.8 million of merger-related transaction expenses in the three months 2011 and nine months 2011, respectively, related to the LaBarge acquisition.

(3)

Certain expenses, previously incurred by the operating units, are now included in the corporate general and administrative expenses as a result of the Company's organizational changes.

(4)

Includes investment banking, accounting, legal, tax and valuation expenses as a direct result of the LaBarge acquisition.

(5)

Merger-related transaction costs resulting from a change-in-control provision for certain LaBarge key executives and employees arising in connection with the LaBarge acquisition.

 

Copyright Business Wire 2010

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