Ducommun Incorporated Reports Results for the Third Quarter and Year-to-Date Ended October 3, 2009

November 2, 2009 7:30 AM EST

LOS ANGELES--(BUSINESS WIRE)-- Ducommun Incorporated (NYSE: DCO) today reported results for its third quarter and first nine months ended October 3, 2009.

Sales for the third quarter of 2009 increased 9% to $109.9 million from $100.9 million for the third quarter of 2008. Net income for the third quarter of 2009 was $6.2 million, or $0.59 per diluted share, compared to net income of $6.3 million, or $0.59 per diluted share, for the comparable period last year.

The increase in sales for the third quarter of 2009 from the same period last year was due to the December 2008 acquisition of DynaBil Industries, Inc. (DAS-NY). Net sales from DAS-NY were $11.1 million in the third quarter of 2009. The Company's mix of business in the third quarter of 2009 was approximately 65% military, 33% commercial and 2% space, compared to 56% military, 41% commercial and 3% space in the third quarter of 2008.

Gross profit, as a percentage of sales, was 20.5% in the third quarter of 2009, compared to 20.6% in the third quarter of 2008.

Selling, general and administration (SG&A) expenses increased to $12.6 million, or 11.5% of sales, in the third quarter of 2009, compared to $11.5 million, or 11.4% of sales, in the third quarter of 2008. The increase in SG&A expenses in the third quarter of 2009 was primarily due to the acquisition of DAS-NY and included a year-over-year increase in amortization of intangible assets of $0.8 million, partially offset by corporate wide cost controls and reductions.

Net income for the third quarter of 2009 decreased 1% from the third quarter of 2008 due to higher interest expense on higher debt levels and a higher effective tax rate in the third quarter of 2009. The Company's effective tax rate for the third quarter of 2009 was 33.0%, compared to 30.3% in the third quarter of 2008.

Sales for the first nine months of 2009 increased 8% to $325.1 million from $302.4 million for the first nine months of 2008. Net income for the first nine months of 2009 was $13.4 million, or $1.27 per diluted share, compared to net income of $17.3 million, or $1.63 per diluted share, for the comparable period last year.

The increase in sales for the first nine months of 2009 from the same period last year was due to the December 2008 acquisition of DAS-NY. Net sales from DAS-NY were $32.3 million in the first nine months of 2009. The Company's mix of business in the first nine months of 2009 was approximately 62% military, 36% commercial and 2% space, compared to 58% military, 40% commercial and 2% space in the first nine months of 2008.

Gross profit, as a percentage of sales, was 18.3% in the first nine months of 2009, compared to 21.0% in the first nine months of 2008. Gross profit in the first nine months of 2009 was negatively impacted by a previously reported inventory valuation adjustment of $5.1 million, including an inventory reserve of $4.4 million related to the Eclipse Aviation Corporation Chapter 7 bankruptcy filing in March 2009.

SG&A expenses increased to $37.6 million, or 11.6% of sales, for the first nine months of 2009, compared to $35.9 million, or 11.9% of sales, in the first nine months of 2008. The increase in SG&A expenses resulted from the acquisition of DAS-NY and included a year-over-year increase in amortization of intangible assets of $0.7 million.

Net income for the first nine months of 2009 decreased 23% from the first nine months of 2008 primarily due to the reasons stated above and higher interest expense on higher debt levels, partially offset by the benefit of a lower effective tax rate in the first nine months of 2009. The Company's effective tax rate for the first nine months of 2009 was 33.0%, compared to 34.6% in the first nine months of 2008. The Company's effective tax rate in 2009 included the benefit of research and development credits which were not available to the same extent in the first nine months of 2008. The Company expects its full year effective tax rate for 2009 to be approximately 30% to 32%.

Joseph C. Berenato, chairman and chief executive officer, stated, "Ducommun's third quarter results reflect the strength of our diversified portfolio of programs and products. Sales increased by $9 million on the strength of the December 2008 acquisition of DAS-NY. Excluding the acquisition, year-over-year sales were largely flat, notwithstanding a precipitous decline in commercial aircraft sales particularly for regional and business jets. The third quarter of 2009 benefited from a substantial increase in military sales for such programs as the Northrop Grumman X-47B UCAS, the Boeing C-17 aircraft and radar system upgrades for military fighter aircraft. A substantial increase in sales for the Sikorsky Blackhawk helicopter more than offset the decline in sales for the Boeing Apache helicopter."

Mr. Berenato continued, "Despite a difficult commercial aerospace market, tight control of operating expenses allowed us to maintain our profit margins in the quarter. As a result, we were able to continue to make substantial investments in new programs without sacrificing current profitability. These new programs offer Ducommun the opportunity for meaningful growth in future years."

Founded in 1849, Ducommun Incorporated provides engineering and manufacturing services to the aerospace and defense industry.

A teleconference with Joseph C. Berenato, the Company's chairman and chief executive officer, Anthony J. Reardon, the Company's president and chief operating officer, and Joseph P. Bellino, the Company's vice president, chief financial officer, will be held today at 7:30 AM PT (10:30 AM ET). To participate in the teleconference, please call 866.202.0886 (international 617.213.8841) approximately ten minutes prior to the conference stated above. The participant passcode is 81094345. Mr. Berenato, Mr. Reardon and Mr. Bellino will be speaking on behalf of the Company and anticipate the meeting and Q&A period to last approximately 40 minutes.

This call is being webcast by Thomson/CCBN and can be accessed directly at the Ducommun Incorporated website at www.ducommun.com. Conference call reply will be available after that time at the same link or at the Company's website at www.ducommun.com.

The statements made in this press release include forward-looking statements that involve risks and uncertainties. The Company's future financial results could differ materially from those anticipated due to the Company's dependence on conditions in the airline industry, the level of new commercial aircraft orders, production rates for Boeing commercial aircraft, the C-17 and Apache helicopter rotor blade programs, the level of defense spending, competitive pricing pressures, manufacturing inefficiencies, start-up costs and possible overruns on new contracts, technology and product development risks and uncertainties, product performance, risks associated with acquisitions and dispositions of businesses by the Company, increasing consolidation of customers and suppliers in the aerospace industry, possible goodwill impairment, availability of raw materials and components from suppliers, and other factors beyond the Company's control. See the Company's Form 10-K for the year ended December 31, 2008 and Form 10-Q for the quarter ended October 3, 2009 for a more detailed discussion of these and other risk factors and contingencies.

DUCOMMUN INCORPORATED AND SUBSIDIARIES

COMPARATIVE DATA

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

                             Three Months Ended         Nine Months Ended

                             Oct. 3,      Sept. 27,     Oct. 3,      Sept. 27,

                             2009         2008          2009         2008

Sales and Service Revenues

Product sales                $ 95,227     $ 86,299      $ 277,993    $ 259,200

Service revenues               14,676       14,557        47,090       43,179

Total                          109,903      100,856       325,083      302,379

Operating Costs and
Expenses:

Cost of product sales          76,015       68,462        228,217      204,435

Cost of service revenues       11,350       11,571        37,294       34,537

Selling, general and           12,647       11,484        37,591       35,942
administrative expenses

Total                          100,012      91,517        303,102      274,914

Operating Income               9,891        9,339         21,981       27,465

Interest Expense, Net          (652    )    (355    )     (2,005  )    (948    )

Income Before Taxes            9,239        8,984         19,976       26,517

Income Tax Expense             (3,049  )    (2,720  )     (6,592  )    (9,170  )

Net Income                   $ 6,190      $ 6,264       $ 13,384     $ 17,347

Earnings Per Share:

Basic earnings per share     $ 0.59       $ 0.59        $ 1.28       $ 1.64

Diluted earnings per share   $ 0.59       $ 0.59        $ 1.27       $ 1.63

Weighted Average Number of
Common Shares Outstanding:

Basic                          10,449       10,578        10,465       10,567

Diluted                        10,491       10,693        10,502       10,671

DUCOMMUN INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

                                                   October 3,    December 31,

                                                   2009          2008

Assets

Current Assets:

Cash and cash equivalents                          $ 823         $ 3,508

Accounts receivable, less allowance for doubtful     60,249        50,090
accounts

Unbilled receivables                                 4,250         7,074

Inventories                                          89,966        83,157

Deferred income taxes                                9,381         9,172

Other current assets                                 6,083         6,172

Total Current Assets                                 170,752       159,173

Property and Equipment, Net                          61,273        61,954

Goodwill, Net                                        113,378       114,002

Other Assets                                         29,423        31,057

                                                   $ 374,826     $ 366,186

Liabilities and Shareholders' Equity

Current Liabilities:

Current portion of long-term debt                  $ 4,972       $ 2,420

Accounts payable                                     32,116        35,358

Accrued liabilities                                  34,279        51,723

Total Current Liabilities                            71,367        89,501

Long-Term Debt, Less Current Portion                 42,400        28,299

Deferred Income Taxes                                11,014        9,902

Other Long-Term Liabilities                          13,587        14,038

Total Liabilities                                    138,368       141,740

Commitments and Contingencies

Shareholders' Equity:

Common stock                                         106           106

Treasury stock                                       (1,924  )     (986    )

Additional paid-in capital                           57,705        56,040

Retained earnings                                    184,744       173,718

Accumulated other comprehensive loss                 (4,173  )     (4,432  )

Total Shareholders' Equity                           236,458       224,446

                                                   $ 374,826     $ 366,186

    Source: Ducommun Incorporated

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