Ducommun reports results for the second quarter ended july 2, 2016
Los angeles--(business wire)--ducommun incorporated (nyse:dco) (“ducommun” or the “company”) today reported results for its second quarter ended july 2, 2016. second quarter 2016 highlights second quarter revenues were $133.4 million net income was $3.9 million, or $0.34 per diluted share adjusted ebitda for the quarter was $13.7 million “we are pleased to report that ducommun continued to show improved financial performance as a result of the many strategic initiatives undertaken this past year to reduce costs and streamline operations. at the same time, we have sharpened our focus on the key markets we serve and invested in attractive, long-term growth opportunities,” said anthony j. reardon, chairman, president and chief executive officer. “revenue for the quarter was roughly flat sequentially, net of our miltec and pittsburgh divestitures, and we posted strong margins as well as solid bottom line results. although our backlog and sales were slightly impacted by temporary program delays, we expect our improved performance to continue in the second half of 2016. we remain upbeat about our supply chain initiatives, our focus on both customers and shareholders, and our drive towards improving the company’s balance sheet as well as top line growth.” second quarter results net revenues for the second quarter of 2016 were $133.4 million compared to $174.8 million for the second quarter of 2015. the net revenues decrease year-over-year was primarily due to the following: $17.1 million lower revenues within the company’s industrial end-use markets mainly due to the divestiture of the pittsburgh operation in january 2016 and the closure of the houston operation in december 2015; and $25.8 million lower revenues within the company’s military and space end-use markets mainly due to the divestiture of the miltec operations in march 2016 and program cancellations and budget changes in the prior year; which impacted the company’s fixed-wing and helicopter platforms and pushed out scheduled deliveries. net income for the second quarter of 2016 was $3.9 million, or $0.34 per diluted share, compared to net income of $1.8 million, or $0.16 per diluted share, for the second quarter of 2015. the increase in net income for the second quarter of 2016 compared to the second quarter of 2015 was primarily due to lower interest expense of $4.5 million and improved operating performance, partially offset by the effect of lower revenues. gross profit for the second quarter of 2016 was $26.2 million, or 19.6% of revenues, compared to gross profit of $31.2 million, or 17.8% of revenue, for the second quarter of 2015. the higher gross margin percentage was primarily due to total material costs as a percentage of sales decreasing 2% or $2.8 million year-over-year as a result of the company’s ongoing supply chain initiatives, improved operating performance, and favorable product mix. operating income for the second quarter of 2016 was $7.3 million, or 5.4% of revenue, compared to $10.8 million, or 6.2% of revenue, in the comparable period last year. the decrease in operating income was primarily due to the effect of lower revenues. interest expense decreased to $1.9 million in the second quarter of 2016, compared to $6.4 million in the previous year’s second quarter, primarily due to a lower outstanding debt balance as a result of voluntary principal prepayments on the term loan and a lower average interest rate as a result of completing the refinancing of the company’s debt in july 2015. adjusted ebitda for the second quarter of 2016 was $13.7 million, or 10.3% of revenue, compared to $19.7 million, or 11.3% of revenue, for the comparable period in 2015. during the second quarter of 2016, the company generated $6.6 million of cash from operations compared to $14.1 million during the second quarter of 2015. the decrease in cash flow from operations was primarily due to higher inventories and other assets, partially offset by higher net income as a result of higher gross margin percentage in the current-year quarter. the company’s firm backlog as of july 2, 2016 was $537 million, which decreased $26 million sequentially, primarily due to a $28 million decrease in commercial aerospace backlog as a result of the timing of commercial aerospace orders. structural systems the structural systems segment net revenues for the current-year second quarter were $60.7 million, compared to $76.1 million for the second quarter of 2015. the lower net revenues were primarily due to the following: $10.8 million decrease in military and space revenues mainly due to program cancellations and budget changes in the prior year which impacted scheduled deliveries on the company’s fixed-wing and helicopter platforms; and $4.6 million decrease in commercial aerospace revenue related to the timing of certain shipments on a large airframe platform and the wind down of a regional jet program. structural systems segment operating income for the current-year second quarter was $4.7 million, or 7.8% of revenue, compared to operating income of $6.9 million, or 9.0% of revenue, for the second quarter of 2015. the decrease in operating income was primarily due to the effect of lower revenues. structural systems segment adjusted ebitda was $6.5 million for the current quarter, or 10.7% of revenue, compared to $10.5 million, or 13.8% of revenue, for the comparable quarter in the prior year. electronic systems the electronic systems segment net revenues for the current-year second quarter were $72.7 million, compared to $98.8 million for the second quarter of 2015. the lower net revenues were primarily due to the following: $17.1 million decrease in industrial revenues mainly due to the divestiture of the pittsburgh operations in january 2016 and the closure of the houston operation in december 2015; and $15.0 million decrease in military and space revenue mainly due to the divestiture of the miltec operation in march 2016 and program cancellations and budget changes in the prior year; which impacted scheduled deliveries on the company’s fixed-wing and helicopter platforms; partially offset by $6.1 million increase in commercial aerospace revenue mainly due to added content with the company’s existing customers. electronic systems’ segment operating income for the current-year second quarter was $6.8 million, or 9.3% of revenue, compared to $7.7 million, or 7.8% of revenue, for the second quarter of 2015. the decrease in operating income was primarily due to the effect of lower revenues. electronic systems segment adjusted ebitda was $10.5 million for the current-year quarter, or 14.4% of revenue, compared to $12.1 million, or 12.2% of revenue, for the comparable quarter in the prior year. corporate general and administrative expenses (“cg&a”) cg&a expenses for the second quarter of 2016 were $4.2 million, or 3.2% of total company revenue, compared to $3.7 million, or 2.1% of total company revenue, for the comparable quarter in the prior year. the increase in cg&a expenses in the current year quarter was primarily due to higher compensation and benefit costs of $1.0 million partially offset by other cost reduction initiatives of $0.5 million. conference call a teleconference hosted by anthony j. reardon, the company’s chairman, president and chief executive officer, and douglas l. groves, the company’s vice president, chief financial officer and treasurer, will be held today, august 4, 2016 at 2:00 p.m. pt (5:00 p.m. et) to review these financial results. to participate in the teleconference, please call 844-239-5278 (international 574-990-1017) approximately ten minutes prior to the conference time. the participant passcode is 52428953. mr. reardon and mr. groves 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 855-859-2056, passcode 52428953. about ducommun incorporated ducommun incorporated delivers 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 www.ducommun.com. forward looking statements 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 the 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, 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. 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, gain on divestitures, and loss on extinguishment of debt). 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. total current liabilities change of net revenues 2016 of net revenues 2015 change of net revenues 2016 of net revenues 2015 includes correction of an error for the three months ended april 2, 2016 related to a credit of general and administrative expenses being reflected in the electronic systems operating segment instead of corporate general and administrative expenses of $0.7 million in the six months ended july 2, 2016 results. there was no impact to total consolidated operating income. costs not allocated to either the electronic systems or structural systems operating segments.
