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8-K - FORM 8-K - DUCOMMUN INC /DE/d8k.htm

Exhibit 99.1

LOGO

FOR IMMEDIATE RELEASE

Ducommun Incorporated Reports Results for the

Second Quarter Ended July 2, 2011

LOS ANGELES, California (August 8, 2011) - Ducommun Incorporated (NYSE:DCO) today reported results for its second quarter and six months ended July 2, 2011.

Recent Highlights

 

   

Successfully completed LaBarge acquisition, bolstering the Company’s growth outlook

 

   

Net sales increased 5% for the second quarter of 2011 versus the second quarter of 2010, reflecting stronger shipment of commercial products

 

   

Net income, excluding transaction-related expenses, was $0.45 per fully diluted share

 

   

Generated $12.5 million in cash flow from operations in second quarter 2011, excluding transaction-related costs

As previously announced, on June 28, 2011 the Company completed its acquisition of LaBarge, Inc. (“LaBarge”) and combined the entity with Ducommun Technologies to form Ducommun LaBarge Technologies (“DLT”).

Sales for the second quarter of 2011 rose 5% to $108.0 million, as compared to $102.9 million for the second quarter of 2010, reflecting increased sales from commercial aerospace products. Due to transaction-related expenses, the Company incurred a net loss for the second quarter of 2011of $(3.0) million, or $(0.28) per fully diluted share, compared to net income of $5.7 million, or $0.53 per diluted share, for the comparable period last year. The second quarter 2011 results include pre-tax transaction-related expenses of $10.9 million ($7.8 million after tax, or $0.73 per fully diluted share). Excluding transaction-related expenses, net income was $4.8 million, or $0.45 per fully diluted share. During the quarter, the Company generated $12.5 million of cash flow from operations, excluding $10.1 million of transaction-related costs.


“We remained focused on improving operating performance this quarter even as we worked diligently to close the LaBarge acquisition on time. Ducommun benefitted from strengthening demand, with top line growth driven by increased commercial shipments across a wide variety of platforms,” said Anthony J. Reardon, president and chief executive officer. “Commercial revenue represented 47% of our total business this period, up significantly from last year’s 40%. In addition, we saw our gross margins increase sequentially from the first quarter, a trend we believe will continue going forward. The second half of 2011 is looking to be one of growth for Ducommun, and the LaBarge acquisition strengthens our product portfolio heading into 2012.”

The increase in sales for the second quarter of 2011 versus the prior-year period was primarily due to higher revenues of commercial products for large and regional fixed wing aircraft, offset somewhat by lower revenues of military aircraft and engineering services. LaBarge contributed $0.9 million in sales for the 2011 period. The Company’s mix of business in the second quarter of 2011 was approximately 53% military/space and 47% commercial, compared to 60% military/space and 40% commercial in the second quarter of 2010.

Gross profit, as a percent of sales, was 19.4% in the second quarter of 2011 compared to 21.7% in the comparable period in 2010. Gross profit margins were lower in the 2011 period primarily due to an increased portion of sales of lower margin programs and slightly lower operating performance at Ducommun AeroStructures (“DAS”), partially offset by a favorable product mix at DLT. Gross profit, as a percent of sales, in the second quarter of 2010 had also been favorably impacted by an adjustment to operating expenses of $1.1 million, or 1.1 percentage points, relating to the reversal of certain accounts payable accruals recorded in prior periods.

Selling, general and administrative (“SG&A”) expenses increased to $23.6 million, or 21.8% of sales, in the second quarter of 2011, compared to $13.3 million, or 12.9% of sales, in the second quarter of 2010. The second quarter of 2011 included approximately $10.1 million of transaction-related expenses. Excluding transaction-related expenses, SG&A would have been $13.5 million, or 12.5% of sales.


The net loss of $(3.0) million for the second quarter of 2011 compared unfavorably to net income of $5.7 million reported in the second quarter of 2010 and was due primarily as a result of the transaction-related expenses. In addition, interest expenses were higher by $0.8 million in 2011 due to the write-off of unamortized financing costs as a result of the company’s transaction-related refinancing of debt. The Company’s effective tax benefit for the second quarter 2011 was approximately 28% as a result of recognition of various tax benefits related to research and development tax credits. The Company’s effective tax rate for the second quarter 2010 was 33% and reflected no research and development tax benefits.

Sales for the first six months of 2011 of $207.6 million were in line with the $207.2 million reported for the first six months of 2010. LaBarge contributed $0.9 million in sales for the six months of 2011. Net income for the first six months of 2011 was break-even, or $0.00 per fully diluted share including pre-tax transaction-related expenses of $12.3 million, compared to $9.9 million, or $0.94 per fully diluted share, for the first six months of 2010. Excluding transaction-related expenses, net income was $8.7 million, or $0.82 per diluted share.

Net sales for the first six months of 2011, compared to the same period last year, reflect a change in market dynamics, with increased revenue from commercial aerospace products, mainly regional jet and large commercial aircraft, offset by lower sales for military aircraft and engineering services. The Company’s mix of business in the first six months of 2011 was approximately 54% military/space and 46% commercial, compared to 60% military/space and 40% commercial in the first six months of 2010.

Gross profit, as a percent of sales, was 19.0% in the first six months of 2011 compared to 20.1% in the comparable period last year. Gross profit margins were lower primarily due to a slight decline in operating performance, with an unfavorable change in sales mix at both DAS and DLT. Gross profit, as a percent of sales, in the first six months of 2010 was also favorably impacted by an adjustment to operating expenses of $1.1 million, or 0.5 percentage points, relating to the reversal of certain accounts payable accruals recorded in prior periods.


SG&A expenses increased to $37.7 million, or 18.2% of sales, in the six months of 2011, compared to $25.8 million, or 12.4% of sales, in the six months of 2010. Excluding the transaction-related expenses of $11.4 million in the first six months of 2011, SG&A would have been $26.3 million, or 12.7% of sales.

Net income for the first six months of 2011 decreased primarily due to transaction-related expenses and higher interest expense of $0.8 million related to the company’s refinancing of its debt in connection with the transaction, partially offset by lower income tax expenses. The Company’s effective tax benefit for the first six months of 2011 was 60% as a result of recognition of various tax benefits related to research and development tax credits. The Company’s effective tax rate for the first six months of 2010 was 33% and reflected no research and development tax benefits.

“With the acquisition of LaBarge completed, we are focused on driving the integration of these two strong companies and leveraging our presence in key markets and platforms,” Mr. Reardon continued. “We remain on track to achieve the projected synergies in coming quarters. Given the added capabilities of LaBarge, Ducommun will now offer higher level structural and electronic assemblies to support our customers’ growing demand, as we see the global commercial markets provide many opportunities to fuel growth and enhance operating margins. We also expect to utilize anticipated solid cash flow going forward to pay down debt and provide the capital for improved 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, August 9, 2011 at 10:00 AM PT (1:00 PM ET) to review these financial results. To participate in the teleconference, please call 866-510-0705 (international 617-597-5363) approximately ten minutes prior to the conference time stated above. The participant passcode is 16330402. 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 14177793.

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 three primary business units: Ducommun AeroStructures (DAS), Ducommun LaBarge Technologies (DLT), and Miltec. 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.

CONTACT:

Joseph P. Bellino

   or    Chris Witty

Vice President and Chief Financial Officer

      Investor Relations

(310) 513-7211

      (646) 438-9385/cwitty@darrowir.com


DUCOMMUN INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended     Six Months Ended  
     July 2,
2011
    July 3,
2010
    July 2,
2011
    July 3,
2010
 

Sales and Service Revenues:

        

Product sales

   $ 100,945      $ 92,294      $ 192,278      $ 184,682   

Service revenues

     7,098        10,643        15,318        22,511   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Sales

     108,043        102,937        207,596        207,193   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Costs and Expenses:

        

Cost of product sales

     81,542        72,066        156,381        147,667   

Cost of service revenues

     5,497        8,528        11,803        17,865   

Selling, general and administrative expenses

     23,597     13,316        37,746     25,779   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Costs and Expenses

     110,636        93,910        205,930        191,311   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income

     (2,593     9,027        1,666        15,882   

Interest Expense, Net

     (1,531 )**      (596     (1,791 )**      (1,148
  

 

 

   

 

 

   

 

 

   

 

 

 

Income Before Taxes

     (4,124     8,431        (125     14,734   

Income Tax Expense, Net

     1,151        (2,778     75        (4,858
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

   $ (2,973   $ 5,653      $ (50   $ 9,876   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings Per Share:

        

Basic earnings per share

   $ (0.28   $ 0.54      $ —        $ 0.94   

Diluted earnings per share

   $ (0.28   $ 0.53      $ —        $ 0.94   

Weighted Average Number of Common

        

Shares Outstanding:

        

Basic

     10,536        10,485        10,531        10,475   

Diluted

     10,696        10,576        10,656        10,546   

 

* Includes $10,076 and $11,476 of transaction-releated expenses associated with the acquisiton of LaBarge for the three months and six months ended July 2, 2011, respectively.
** Includes $831 of transaction-related expenses associated with the acquisition of LaBarge for both the three months and six months ended July 2, 2011.


DUCOMMUN INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

     (Unaudited)        
     July  2,
2011
    December  31,
2010
 

Assets

    

Current Assets:

    

Cash and cash equivalents

   $ 31,350      $ 10,268   

Accounts receivable

     105,240        47,949   

Unbilled receivables

     3,477        3,856   

Inventories

     161,784        72,597   

Production cost of contracts

     15,286        16,889   

Deferred income taxes

     12,731        5,085   

Other current assets

     16,628        4,748   
  

 

 

   

 

 

 

Total Current Assets

     346,496        161,392   

Property and Equipment, Net

     97,880        59,461   

Goodwill

     216,897        100,442   

Intangibles

     193,530        21,992   

Other Assets

     18,116        2,165   
  

 

 

   

 

 

 
   $ 872,919      $ 345,452   
  

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

    

Current Liabilities:

    

Current portion of long-term debt

   $ 2,191      $ 187   

Accounts payable

     73,439        39,925   

Accrued liabilities

     58,113        31,174   
  

 

 

   

 

 

 

Total Current Liabilities

     133,743        71,286   

Long-Term Debt, Less Current Portion

     391,164        3,093   

Deferred Income Taxes

     81,067        7,691   

Other Long-Term Liabilities

     11,844        9,197   
  

 

 

   

 

 

 

Total Liabilities

     617,818        91,267   
  

 

 

   

 

 

 

Commitments and Contingencies

    

Shareholders’ Equity:

    

Common stock

     107        106   

Treasury stock

     (1,924     (1,924

Additional paid-in capital

     63,439        61,684   

Retained earnings

     196,581        197,421   

Accumulated other comprehensive loss

     (3,102     (3,102
  

 

 

   

 

 

 

Total Shareholders’ Equity

     255,101        254,185   
  

 

 

   

 

 

 
   $ 872,919      $ 345,452