SANTA ANA, Calif., May 04, 2021 (GLOBE NEWSWIRE) -- Ducommun Incorporated (NYSE:DCO) (“Ducommun” or the “Company”) today reported results for its first quarter ended April 3, 2021.
First Quarter 2021 Recap
“Our first quarter performance continued to illustrate the resilience of Ducommun’s product portfolio and operating strength, especially in our Defense sector which is building the foundation for a solid year ahead and a return to revenue growth in 2021,” said Stephen G. Oswald, chairman, president and chief executive officer. “Military demand once again served to offset weakness in our commercial business, and continued overall strong product mix resulted in solid gross margins and Adjusted EBITDA across the Company. Looking ahead, we are optimistic that increasing build rates in the second half of 2021 and 2022 will have a positive impact on key aircraft platforms across our customers such as Boeing, Airbus and Gulfstream. We believe pent-up demand in air travel and vaccination progress will ultimately drive increased shipments across a host of programs where Ducommun has a strong market position. While still early, 2021 looks promising for the aerospace industry, and Ducommun is uniquely positioned to benefit as the economy continues to strengthen.”
First Quarter Results
Net revenue for the first quarter of 2021 was $157.2 million compared to $173.5 million for the first quarter of 2020. The year-over-year decrease of 9.4% was primarily due to the following:
Net income for the first quarter of 2021 was $6.7 million, or $0.55 per diluted share, compared to $7.9 million, or $0.67 per diluted share, for the first quarter of 2020. This reflects a $3.7 million decrease in gross profit due to lower revenue, partially offset by lower interest expense of $1.4 million.
Gross profit for the first quarter of 2021 was $33.1 million, or 21.1% of revenue, compared to gross profit of $36.8 million, or 21.2% of revenue, for the first quarter of 2020. Gross profit as a percentage of net revenue year-over-year was essentially flat due to unfavorable manufacturing volume, partially offset by favorable product mix and lower compensation and benefit costs.
Operating income for the first quarter of 2021 was $10.6 million, or 6.8% of revenue, compared to $13.6 million, or 7.8% of revenue, in the comparable period last year. The year-over-year decrease of $3.0 million was due to lower revenue. Adjusted operating income for the first quarter of 2021 was $11.1 million, or 7.1% of revenue, compared to $13.6 million, or 7.8% of revenue, in the comparable period last year.
Interest expense for the first quarter of 2021 was $2.8 million compared to $4.2 million in the comparable period of 2020. The year-over-year decrease was due to lower interest rates and a lower outstanding debt balance.
Adjusted EBITDA for the first quarter of 2021 was $21.1 million, or 13.5% of revenue, compared to $23.2 million, or 13.4% of revenue, for the comparable period in 2020.
During the first quarter of 2021, the net cash used in operations was $23.4 million compared to $12.0 million during the first quarter of 2020. The higher cash used in operations year-over-year was due to higher contract assets, lower accrued and other liabilities, and higher inventories, partially offset by higher accounts payable.
Business Segment Information
Electronic Systems segment net revenue for the quarter ended April 3, 2021 was $99.1 million, compared to $98.1 million for the first quarter of 2020. The year-over-year increase was primarily due to the following:
Electronic Systems segment operating income for the quarter ended April 3, 2021 was $12.5 million, or 12.6% of revenue, compared to $15.1 million, or 15.4% of revenue, for the comparable quarter in 2020. The year-over-year decrease of $2.6 million was due to unfavorable manufacturing volume and unfavorable product mix, partially offset by lower compensation and benefit costs.
Structural Systems segment net revenue for the quarter ended April 3, 2021 was $58.0 million, compared to $75.4 million for the first quarter of 2020. The year-over-year decrease was due to the following:
Structural Systems segment operating income for the quarter ended April 3, 2021 was $5.1 million, or 8.8% of revenue, compared to $5.4 million, or 7.2% of revenue, for the comparable quarter in 2020. The year-over-year decrease of $0.3 million was due to unfavorable manufacturing volume, partially offset by favorable product mix and lower compensation and benefit costs.
Corporate General and Administrative (“CG&A”) Expenses
CG&A expenses for the first quarter of 2021 were $7.0 million, or 4.5% of total Company revenue, compared to $6.9 million, or 4.0% of total Company revenue, for the comparable quarter in the prior year.
A teleconference hosted by Stephen G. Oswald, the Company’s chairman, president and chief executive officer, and Christopher D. Wampler, the Company’s vice president, chief financial officer, controller and treasurer will be held today, May 4, 2021 at 2:00 p.m. PT (5:00 p.m. ET) to review these financial results. To participate in the teleconference, please call 800-697-5978 (international 630-691-2750) approximately 10 minutes prior to the conference time. The participant passcode is 9871258. Mr. Oswald and Mr. Wampler will be speaking on behalf of the Company and anticipate the call (including Q&A) to last approximately 45 minutes.
This call is being webcast and can be accessed directly at the Ducommun website at Ducommun.com.
About Ducommun Incorporated
Ducommun Incorporated 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, visit Ducommun.com.
Forward Looking StatementsThis 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 growth and outlook for the second half of 2021 and 2022, estimated build rates for key customer platforms, future demand for, and shipments related to the Company's products, and the recovery of the aerospace industry and air travel in light of the COVID-19 pandemic. 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 U.S. Government defense spending; the Company is subject to extensive regulation and audit by the Defense Contract Audit Agency; contracts with some of the Company’s customers contain provisions which give the its customers a variety of rights that are unfavorable to the Company; further consolidation in the aerospace industry could adversely affect the Company’s business and financial results; the Company’s ability to successfully make acquisitions, including its ability to successfully integrate, operate or realize the projected benefits of such businesses; the Company relies on its suppliers to meet the quality and delivery expectations of its customers; the Company uses estimates when bidding on fixed-price contracts which estimates could change and result in adverse effects on its financial results; the impact of existing and future laws and regulations; the impact of existing and future accounting standards and tax rules and regulations; environmental liabilities could adversely affect the Company’s financial results; cyber security attacks, internal system or service failures may adversely impact the Company’s business and operations; the ultimate geographic spread, duration and severity of the coronavirus (COVID-19) outbreak, and the effectiveness of actions taken, or actions that may be taken, by governmental authorities to contain the outbreak or treat its impact, and other risks and uncertainties, including those detailed from time to time in the Company’s periodic reports filed with the Securities and Exchange Commission. You should not put undue reliance on any forward-looking statements. You should understand that many important factors, including those discussed herein, could cause the Company’s results to differ materially from those expressed or suggested in any forward-looking statement. Except as required by law, the Company does not undertake any obligation to update or revise these forward-looking statements to reflect new information or events or circumstances that occur after the date of this news release, May 4, 2021, or to reflect the occurrence of unanticipated events or otherwise. Readers are advised to review the Company’s filings with the Securities and Exchange Commission (which are available from the SEC’s EDGAR database at www.sec.gov).
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, and Guaymas fire related expenses), 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:Christopher D. Wampler, Vice President, Chief Financial Officer, Controller and Treasurer, 657.335.3665Chris Witty, Investor Relations, 646.438.9385, email@example.com
DUCOMMUN INCORPORATED AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)(Dollars in thousands)
DUCOMMUN INCORPORATED AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME(Unaudited)(Dollars in thousands, except per share amounts)
DUCOMMUN INCORPORATED AND SUBSIDIARIESBUSINESS SEGMENT PERFORMANCE(Unaudited)(Dollars in thousands)
DUCOMMUN INCORPORATED AND SUBSIDIARIESGAAP TO NON-GAAP OPERATING INCOME RECONCILIATION(Unaudited)(Dollars in thousands)
DUCOMMUN INCORPORATED AND SUBSIDIARIESGAAP TO NON-GAAP EARNINGS AND EARNINGS PER SHARE RECONCILIATION(Unaudited)(Dollars in thousands, except per share amounts)
DUCOMMUN INCORPORATED AND SUBSIDIARIESNON-GAAP BACKLOG* BY REPORTING SEGMENT(Unaudited)(Dollars in thousands)
* 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 April 3, 2021 was $810.1 million compared to $807.7 million as of December 31, 2020. Under ASC 606, the Company defines performance obligations as customer placed purchase orders with firm fixed price and firm delivery dates. The remaining performance obligations disclosed under ASC 606 as of April 3, 2021 were $690.3 million.
Source: Ducommun Incorporated