Ducommun Reports Revenue of $136.3 Million in Q1 2017


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Ducommun Inc. has reported revenue of $136.3 million and net income of $2.1 million for its first quarter ended April 1, 2017.

"Ducommun's first quarter results reflect the demand dynamics of our various end-use markets at the start of what we expect to be a solid year ahead," said Stephen G. Oswald, president and chief executive officer. "Net of divestitures, revenue was up slightly year-over-year, benefiting from an increase in defense shipments and solid sales across several large commercial platforms. We also paid down an additional $5 million of debt, more than doubled capital expenditures, after generating $13.2 million in cash from operations during the quarter. 

"Even as we've accomplished a great deal these past twelve months—resulting in a more focused organization and improved cost structure—we see room for higher operating performance going forward. As I begin my new role, we are assessing all areas of the company for new ways to streamline manufacturing, further increase margins, and enhance return on capital. This is a priority heading into the second half, and we have already hired select staff to focus on initiatives that will bolster Ducommun's growth trajectory and strengthen bottom line results. For example, we have filled a new role in the company to lead strategic initiatives that will drive inorganic growth and a higher level of strategic thinking. We are setting the stage to take the Company to the next level—leveraging our people, technology expertise and the current attractive economic environment."

First Quarter Results 

Net revenue for the first quarter of 2017 was $136.3 million compared to $142.1 million for the first quarter of 2016. The year-over-year decrease was primarily due to the following: 

  • $6.0 million lower revenue within the company's commercial aerospace end-use markets mainly due to the winding down of a regional jet program and the platform transition of a large aircraft program; and
  • $5.8 million lower revenue within the company's industrial end-use markets mainly due to the closure of one of the company's Tulsa operations in June 2016 and divestiture of the Company’s Pittsburgh operation in January 2016; partially offset by
  • $5.9 million higher revenue within the Company’s military and space end-use markets mainly due to the resumption of scheduled deliveries by the U.S. Department of Defense, which favorably impacted the Company’s helicopter and fixed-wing platforms, partially offset by the divestiture of the Company’s Miltec operation in March 2016.

Net income for the first quarter of 2017 was $2.1 million, or $0.18 per diluted share, compared to $13.6 million, or $1.21 per diluted share, for the first quarter of 2016. The decrease in net income year-over-year was primarily due to the following: 

  • The prior year included a preliminary pretax gain on divestitures of the company's Pittsburgh and Miltec operations of $18.8 million; partially offset by $6.8 million of lower income tax expense.
  • Gross profit for the first quarter of 2017 was $24.9 million, or 18.3% of revenue, compared to gross profit of $27.0 million, or 19.0% of revenue, for the first quarter of 2016. The decrease in gross margin percentage year-over-year was primarily due to unfavorable product mix.

Operating income for the first quarter of 2017 was $4.1 million, or 3% of revenue, compared to $4.3 million, or 3% of revenue, in the comparable period last year. The decrease in operating income was primarily due to the following: 

  • Decrease in gross margin percentage as a result of unfavorable product mix; partially offset by
  • Lower selling, general and administrative expenses as a result of the divestiture of the Company’s Pittsburgh operation and closure of certain facilities.

Interest expense decreased to $1.6 million in the first quarter of 2017, compared to $2.4 million in the previous year’s first quarter, primarily due to a lower outstanding debt balance as a result of net voluntary principal prepayments on the Company’s credit facilities. 

Adjusted EBITDA for the first quarter of 2017 was $11.7 million, or 8.6% of revenue, compared to $11.1 million, or 7.8% of revenue, for the comparable period in 2016. 

During the first quarter of 2017, the company generated $13.2 million of cash from operations compared to $5.5 million during the first quarter of 2016. The increase in cash flow from operations reflects a reduction in accounts receivable and higher deferred income taxes.

The company's firm backlog as of April 1, 2017 was $581 million compared to $600 million as of December 31, 2016, reflecting a $7 million decrease in the company's commercial aerospace backlog and a $13 million decrease in its military and space backlog, both due to timing of orders. 

Structural Systems 

Structural Systems segment net revenue for the current-year first quarter was $57.6 million, compared to $64.0 million for the first quarter of 2016. The year-over-year decrease was primarily due to a $7.2 million decline in commercial aerospace shipments as a result of the winding down of a regional jet program as well as the platform transition of a large aircraft program. 

Structural Systems segment operating income for the current-year first quarter was $2.6 million, or 4.6% of revenue, compared to $2.7 million, or 4.3% of revenue, for the first quarter of 2016. 

Structural Systems segment Adjusted EBITDA was $5.0 million for the current-year quarter, or 8.7% of revenue, compared to $4.8 million, or 7.5% of revenue, for the comparable quarter in the prior year. 

Electronic Systems 

Electronic Systems segment net revenue for the current-year first quarter was $78.7 million, compared to $78.1 million for the first quarter of 2016. The increase in revenue year-over-year was primarily due to the following: 

  • $5.2 million higher revenue within the company's military and space end-use markets mainly due to the resumption of scheduled deliveries by the U.S. Department of Defense, which favorably impacted the company's fixed-wing and helicopter platforms, partially offset by the divestiture of the company's Miltec operation in March 2016; and
  • $1.2 million higher revenue within the company's commercial aerospace end-use markets mainly due to additional content with the company's existing customers; partially offset by
  • $5.8 million lower revenue in the company's industrial end-use markets mainly due to the closure of one of the Company’s Tulsa operations in June 2016 and the divestiture of the company's Pittsburgh operation in January 2016.

Electronic Systems' segment operating income was $7.1 million, or 9% of revenue, for the first quarter of 2017 compared to $6.4 million, or 8.2% of revenue, for the comparable quarter in 2016. The increase in operating income was primarily due to lower selling, general and administrative expenses as a result of the divestiture of the company's Pittsburgh operation and closure of certain facilities.

Electronic Systems segment Adjusted EBITDA was $10.5 million for the quarter, or 13.4% of revenue, compared to $10.1 million, or 13.0% of revenue, for the comparable quarter in the prior year. 

Corporate General and Administrative (CG&A) Expenses 

CG&A expenses for the first quarter of 2017 were $5.6 million, or 4.1% of total company revenue, compared to $4.8 million, or 3.4% of total company revenue, for the comparable quarter in the prior year. The increase in CG&A expenses was primarily due to higher compensation and benefit costs of $1.1 million, partially offset by lower professional services fees.

About Ducommun

Ducommun Inc. delivers value-added innovative manufacturing solutions to customers in the aerospace, defense and industrial markets. Founded in 1849, the Company specializes in two core areas - Electronic Systems and Structural Systems - to produce complex products and components for commercial aircraft platforms, mission-critical military and space programs, and sophisticated industrial applications. For more information, click here.

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