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Ducommun Reports Results for the Fourth Quarter and Year Ended December 31, 2011

Dépèche transmise le 5 mars 2012 par Business Wire

Ducommun Reports Results for the Fourth Quarter and Year Ended December 31, 2011

Ducommun Reports Results for the Fourth Quarter and Year Ended December 31, 2011

LOS ANGELES--(BUSINESS WIRE)--Ducommun Incorporated (NYSE:DCO) today reported results for its fourth quarter and twelve months ended December 31, 2011.

“While we still have work to do, particularly with regard to improving margins, we feel very confident about the future given the strengths of a more capable and multifaceted Ducommun”

Highlights

  • Net sales increased 85% to $188.2 million for the fourth quarter of 2011 versus the fourth quarter of 2010, reflecting increased sales of $90.6 million from the acquisition of LaBarge, Inc. (“LaBarge”)
  • The Company reported a net loss of $(4.60) per diluted share for the fourth quarter of 2011, reflecting a pre-tax non-cash goodwill impairment charge of $54.3 million and acquisition-related expenses. Excluding goodwill impairment charges and acquisition-related expenses, the Company’s net income was $0.27 per diluted share in the quarter. The non-cash charge does not impact the Company's ongoing business operations nor does it affect liquidity, cash flow from operations or financial covenant compliance for any of the Company's outstanding debt
  • Cash flow from operations was $27.9 million in the fourth quarter 2011 and $22.6 million for the full year 2011, excluding acquisition-related expenses
  • Ducommun’s record backlog at December 31, 2011 was approximately $636 million

“Ducommun ended 2011 much stronger and better positioned than when the year began, with our operations bolstered by the addition of LaBarge,” said Anthony J. Reardon, president and chief executive officer. “The integration of our two organizations is now effectively complete. We have reduced corporate overhead, and our staffs are working together seamlessly to improve and grow the new Ducommun. Our backlog stands at a record $636 million, and the legacy LaBarge business is providing many new growth avenues, offsetting some weakness in a few of our legacy military applications. At the same time, Ducommun AeroStructures continues to show top-line expansion -- driven by robust commercial aerospace demand. With our focus on margins, all factors are coming together for improved performance in 2012.”

Fourth Quarter Results

Sales for the fourth quarter of 2011 increased 85% to $188.2 million, compared with $101.8 million for the fourth quarter of 2010, reflecting $90.6 million in revenue from the acquisition of LaBarge. The Company reported a net loss of $48.5 million, or $(4.60) per fully diluted share, compared with net income of $4.2 million, or $0.39 per fully diluted share, for the comparable period last year. Excluding pre-tax acquisition-related expenses (including cost of sales related to the write-up of LaBarge inventory) of $3.2 million and a pre-tax non-cash goodwill impairment charge of $54.3 million, net income for the fourth quarter of 2011 was $2.8 million, or $0.27 per fully diluted share. The $54.3 million goodwill impairment charge was related to the Company’s Ducommun LaBarge Technologies subsidiary and was driven by a decline in the Company’s market value as of December 31, 2011, following the LaBarge acquisition and a softening defense market. The non-cash charge does not impact the Company's ongoing business operations nor does it affect liquidity, cash flow from operations or financial covenant compliance for any of the Company's outstanding debt.

During the quarter, the Company generated $27.9 million of cash flow from operations, excluding $2.0 million of transaction-related costs.

Ducommun AeroStructures (DAS)

The DAS segment reported net sales for the fourth quarter of $68.9 million compared with $65.6 million in the prior-year period, representing an increase of 5%. The higher revenues were primarily the result of increased shipments of commercial aerospace products. Operating income for the 2011 fourth quarter was $3.4 million, or 4.9% of revenues, compared with $5.4 million, or 8.2% of revenues, for the prior-year period. The lower operating results were primarily due to start-up costs associated with new programs. These costs negatively impacted operating margins by $3.0 million, or 5.1 percentage points, on revenues of $4.9 million in the 2011 fourth quarter, compared with an impact of $1.3 million, or 2.4 percentage points, on revenues of $2.5 million in the comparable period of 2010.

Ducommun LaBarge Technologies (DLT)

The DLT segment reported net sales for the fourth quarter of $119.4 million compared with $36.2 million in the fourth quarter of 2010. The reason for the substantial increase in revenues was $90.6 million of contribution from LaBarge, covering a broad set of industrial and commercial end markets, partially offset by lower revenues tied to the Company’s engineering services business and delayed orders for F-15 and F-18 radar products. Operating loss for the fourth quarter of 2011 was $45.5 million, compared with operating income of $4.2 million in the 2010 fourth quarter. Excluding acquisition-related expenses (including cost of sales related to the write-up of LaBarge inventory) of $2.5 million and goodwill impairment charges of $54.3 million, DLT’s operating income was $11.3 million, or 9.5% of revenues, as compared with $4.2 million, or 11.7% of revenues, in the prior year period.

Corporate General and Administrative Expenses (CG&A)

CG&A expenses for the fourth quarter 2011 were $3.3 million, as compared with $5.3 million in the 2010 fourth quarter. Excluding acquisition-related expenses of $0.6 million, CG&A was $2.7 million, or 1.4% of sales, as compared with $5.3 million, or 5.2% of sales, in the prior year period.

Full Year Results

Sales for the twelve months of 2011 increased 42% to $580.9 million, compared with $408.4 million in 2010, reflecting revenue of $175.4 million from the LaBarge acquisition. The Company posted a net loss in 2011 of $47.6 million, or $(4.52) per fully diluted share, compared with net income of $19.8 million, or $1.87 per fully diluted share, in 2010. Excluding pre-tax acquisition-related expenses (including cost of sales related to the write-up of LaBarge inventory) of $18.5 million and a pre-tax non-cash goodwill impairment charge of $54.3 million, net income was $14.9 million, or $1.40 per fully diluted share. In 2011, the Company generated $22.6 million of cash flow from operations, excluding $25.6 million of acquisition-related costs.

Ducommun AeroStructures (DAS)

The DAS segment reported net sales for the twelve months of 2011 of $292.8 million, compared with $271.6 million in 2010, an increase of 8%. The higher revenues were primarily the result of increased shipments of commercial aerospace products. Operating income in 2011 was $25.8 million, or 8.8% of revenues, compared with $28.7 million, or 10.6% of revenues, in the prior year period. The lower operating results were primarily due to start-up costs for new programs. These costs negatively impacted operating margins by $8.8 million, or 4.0 percentage points, on revenues of $21.6 million in 2011, compared with an impact of $4.6 million, or 2.1 percentage points, on revenues of $9.4 million in 2010.

Ducommun LaBarge Technologies (DLT)

The DLT segment reported net sales for the twelve months of 2011 of $288.2 million compared with $136.8 million in 2010. The primary reason for the increase in revenues was $175.4 million of contribution from LaBarge representing a broad set of industrial and commercial end markets, partially offset by lower revenues for engineering services and certain legacy Ducommun manufactured technology products. Operating loss in 2011 was $33.4 million compared with operating income of $13.2 million in 2010. Excluding acquisition-related expenses (including cost of sales related to the write-up of LaBarge inventory) and pre-tax non-cash goodwill impairment charges, DLT’s operating income was $27.0 million, or 9.4% of revenues, as compared with $13.2 million, or 9.6% of revenues, in 2010.

Corporate General and Administrative Expenses (CG&A)

CG&A expenses in 2011 were $26.5 million, compared with $15.4 million in 2010. Excluding acquisition-related expenses of $12.4 million, CG&A was $14.1 million, or 2.4% of sales, in 2011, as compared with $15.4 million, or 3.8% of sales, in 2010.

“While we still have work to do, particularly with regard to improving margins, we feel very confident about the future given the strengths of a more capable and multifaceted Ducommun,” Mr. Reardon continued. “We now have additional talent to deploy, more technical and manufacturing expertise to provide, and a broader base of customers with which to partner. We knew that the last half of 2011 would present some challenges, but we did an excellent job integrating DLT and had solid operating performance within that segment as a result. Furthermore, we won and began development on 14 new aerostructure programs last year, and, while these startup contracts adversely impacted 2011 performance, we believe that investing in such programs and customers will help drive higher revenue and profit margins over the long term. Our immediate goal is to continue to generate solid cash flow, retire debt and reduce our leverage. Some challenges surely remain as we drive to improve operating results, but the outlook is bright for Ducommun.”

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, March 6, 2012 at 10:00 AM PT (1:00 PM ET) to review these financial results. To participate in the teleconference, please call 866.700.6293 (international 617.213.8835) approximately ten minutes prior to the conference time stated above. The participant passcode is 18224938. 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 98348927.

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
COMPARATIVE DATA
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
         
Three Months Ended Year Ended
 
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2011 2010 2011 2010
 
Sales and Service Revenues
Product sales $ 181,645 $ 93,408 $ 552,408 $ 367,563
Service revenues 6,593   8,362   28,506   40,843  
Total 188,238   101,770   580,914   408,406  
Operating Costs and Expenses:
Cost of product sales 151,532 76,396 453,473 296,104
Cost of service revenues 4,371 6,826 21,505 32,156
Selling, general & administrative expenses 23,487 14,194 85,790 53,678
Goodwill impairment 54,273   -   54,273   -  
Total 233,663   97,416   615,041   381,938  
 
Operating (Loss)/Income (45,425 ) 4,354 (34,127 ) 26,468
Interest Expense (8,151 ) (113 ) (18,198 ) (1,805 )
(Loss)/Income Before Taxes (53,576 ) 4,241 (52,325 ) 24,663
Income Tax Benefit/(Expense) 5,082   (82 ) 4,742   (4,855 )
Net (Loss)/Income $ (48,494 ) $ 4,159   $ (47,583 ) $ 19,808  
Earnings Per Share
Basic (loss)/earnings per share $ (4.60 ) $ 0.40 $ (4.52 ) $ 1.89
Diluted (loss)/earnings per share $ (4.60 ) $ 0.39 $ (4.52 ) $ 1.87
 
Weighted Averaged Number of
Common Shares Outstanding:
Basic 10,541 10,504 10,536 10,488
Diluted 10,565 10,626 10,621 10,596
 
DUCOMMUN INCORPORATED AND SUBSIDARIES
COMPARATIVE DATA
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
 
Year Ended December 31,
  2011     2010  
 
Assets
Current Assets:
Cash and cash equivalents $ 41,449 $ 10,268
Accounts receivable (less allowance for doubtful
accounts of $488 and $415) 96,174 47,949
Unbilled receivables 3,286 3,856
Inventories 154,503 72,597
Production cost of contracts 18,711 16,889
Deferred income taxes 12,020 5,085
Other current assets   14,648     4,748  
Total Current Assets 340,791 161,392
Property and Equipment, Net 98,477 59,461
Goodwill 163,845 100,442
Intangibles 187,854 21,992
Other Assets   17,120     2,165  
$ 808,087   $ 345,452  
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of long-term debt $ 1,960 $ 187
Accounts payable 60,675 39,925
Accrued liabilities   53,823     31,174  
Total Current Liabilities 116,458 71,286
Long-Term Debt, Less Current Portion 390,280 3,093
Deferred Income Taxes 72,043 7,691
Other Long-Term Liabilities   25,022     9,197  
Total Liabilities   603,803     91,267  
 
Commitments and Contingencies
Shareholders' Equity:
Common stock -- $.01 par value; authorized 35,000,000
shares; issued 10,683,863 shares in 2011 and
10,650,443 shares in 2010 107 106
Treasury stock -- held in treasury 143,300 shares in 2011
and 2010 (1,924 ) (1,924 )
Additional paid-in capital 64,378 61,684
Retained earnings 149,048 197,421
Accumulated other comprehensive loss   (7,325 )   (3,102 )
Total Shareholders' Equity   204,284     254,185  
$ 808,087   $ 345,452  
 

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DUCOMMUN INCORPORATED AND SUBSIDIARIES

BUSINESS SEGMENT PERFORMANCE

(In thousands)

(Unaudited)
           
Fourth Quarter December 31, Year Ended December 31,
  2011     2010   Change   2011     2010   Change
Net Sales:
Ducommun AeroStructures $ 68,870 $ 65,590 5.0 % $ 292,759 $ 271,572 7.8 %
Ducommun LaBarge Technologies   119,368     36,180   229.9 %   288,155     136,834   110.6 %
Total Net Sales $ 188,238   $ 101,770   85.0 % $ 580,914   $ 408,406   42.2 %
 
Segment Operating (Loss)/Income (1)
Ducommun AeroStructures $ 3,385 $ 5,397 $ 25,798 $ 28,738
Ducommun LaBarge Technologies (2)(6)   (45,520 )   4,236     (33,390 )   13,151  
(42,135 ) 9,633 (7,592 ) 41,889
Corporate General and Administrative Expenses (3)(5)   (3,290 )   (5,279 )   (26,535 )   (15,421 )
Total Operating (Loss)/Income $ (45,425 ) $ 4,354   $ (34,127 ) $ 26,468  
 
EBITDA (1)
Ducommun AeroStructures
Operating Income $ 3,385 $ 5,397 $ 25,798 $ 28,738
Depreciation and Amortization   2,241     2,556     9,953     9,666  
5,626 7,953 35,751 38,404
Ducommun LaBarge Technologies
Operating (Loss)/Income (2) (45,520 ) 4,236 (33,390 ) 13,151
Depreciation and Amortization   4,718     978     11,445     3,880  
(40,802 ) 5,214 (21,945 ) 17,031
Corporate General and Administrative Expenses (3)(4)(5)
Operating Loss (3,290 ) (5,279 ) (26,535 ) (15,421 )
Depreciation and Amortization   22     (7 )   60     51  
  (3,268 )   (5,286 )   (26,475 )   (15,370 )
EBITDA - Excluding Goodwill Impairment $ (38,444 ) $ 7,881