Bay Street News

Ducommun Incorporated Reports Third Quarter 2024 Results

COSTA MESA, Calif., Nov. 07, 2024 (GLOBE NEWSWIRE) — Ducommun Incorporated (NYSE: DCO) (“Ducommun” or the “Company”) today reported results for its third quarter ended September 28, 2024.

Third Quarter 2024 Recap

“VISION 2027 again this quarter is taking hold in many areas and especially in our margin growth, as our mix of Engineered Products and Aftermarket revenue continues to climb as a percentage of revenue. Q3 was another outstanding quarter for DCO as we once again grew our topline both year-over-year and sequentially, led by strength in both of our Military and Commercial Aerospace segments along with strong quarterly gross margins and Adjusted EBITDA margins,” said Stephen G. Oswald, chairman, president and chief executive officer. “Net revenue for the quarter exceeded $200 million for the first time in our history to $201.4 million, up 3% compared to Q3 2023, with strong demand for select military radar, missile and electronic warfare programs, Airbus platforms and business jets, despite the temporary slowdown in demand on Boeing platforms.

“The Company delivered a new quarterly record for gross margin, expanding 350 bps year-over-year from 22.7% to 26.2%, a very impressive result. Ducommun also reached a new quarterly record for Adjusted EBITDA margins, exceeding $30 million for the first time, expanding 90 bps year-over-year from 14.9% to 15.8%. The Adjusted EBITDA margins growth in Q3 reaffirms the strong momentum we have in meeting our VISION 2027 financial goal of 18%. There were many bright spots in Q3 including continued growth in our higher margin Engineered Products businesses, benefits of favorable product mix and higher manufacturing volume, savings from our on-going restructuring program, value pricing along with productivity and a relentless culture, all critical to our success. DCO is now clearly in position to close out its 175th year in business with its best one yet.

“In December 2022, we laid out our VISION 2027 Plan to investors and as we are now almost through year two of the Plan and by year end will be ahead of schedule. The DCO team is driving the business and despite the continued headwinds from aircraft OEMs, including the labor strike at Boeing that ended this week, remains on track to deliver our long-term goals as we drive to meet our commitments.”

Third Quarter Results

Net revenue for the third quarter of 2024 was $201.4 million compared to $196.3 million for the third quarter of 2023. The year-over-year increase of 2.6% was primarily due to the following in the Company’s key end-use markets:

In addition, revenue for the Company’s industrial end-use markets for the third quarter of 2024 decreased $4.3 million compared to the third quarter of 2023 mainly due to the Company selectively pruning non-core business.

Net income for the third quarter of 2024 was $10.1 million, or 5.0% of revenue, or $0.67 per diluted share, compared to $3.2 million, or 1.6% revenue, or $0.22 per diluted share, for the third quarter of 2023. This reflects higher gross profit of $8.1 million and lower restructuring charges of $2.1 million (including $0.2 million recorded as cost of sales in the prior year period), partially offset by higher selling, general and administrative (“SG&A”) expenses of $3.3 million. A portion of the higher SG&A expenses were due to the unsolicited non-binding offer to acquire all common stock outstanding of Ducommun Incorporated.

Gross profit for the third quarter of 2024 was $52.7 million, or 26.2% of revenue, compared to gross profit of $44.6 million, or 22.7% of revenue, for the third quarter of 2023. The increase in gross profit as a percentage of net revenue year-over-year was primarily due to favorable product mix and higher manufacturing volume, pricing actions, along with benefits from the restructuring initiative, partially offset by higher other manufacturing costs.

Operating income for the third quarter of 2024 was $15.3 million, or 7.6% of revenue, compared to $8.6 million, or 4.4% of revenue, in the comparable period last year. The year-over-year increase of $6.7 million was primarily due to higher gross profit and lower restructuring charges, partially offset by higher SG&A expenses, which was noted above. Non-GAAP adjusted operating income for the third quarter of 2024 was $21.1 million, or 10.5% of revenue, compared to $17.5 million, or 8.9% of revenue, in the comparable period last year. The year-over-year increase was primarily due to higher GAAP operating income, partially offset by lower add backs of restructuring charges and inventory purchase accounting adjustments.

Adjusted EBITDA for the third quarter of 2024 was $31.9 million, or 15.8% of revenue, compared to $29.3 million, or 14.9% of revenue, for the comparable period in 2023.

Interest expense for the third quarter of 2024 was $3.8 million compared to $5.4 million in the comparable period of 2023. The year-over-year decrease was primarily due to the benefit from the interest rate swaps which became effective on January 1, 2024, along with a lower debt balance in the third quarter of 2024.

During the third quarter of 2024, the net cash provided by operations was $13.9 million compared to $14.3 million during the third quarter of 2023. The lower net cash provided by operations during the third quarter of 2024 was primarily due to lower contract liabilities and higher contract assets, partially offset by lower inventories and higher net income.

Business Segment Information

Electronic Systems

Electronic Systems segment net revenue for the quarter ended September 28, 2024 was $115.4 million, compared to $110.7 million for the third quarter of 2023. The year-over-year increase was primarily due to the following in the Company’s key end-use markets:

In addition, revenue for the Company’s industrial end-use markets for the third quarter of 2024 decreased $4.3 million compared to the third quarter of 2023 mainly due to the Company selectively pruning non-core business.

Electronic Systems segment operating income for the quarter ended September 28, 2024 was $18.9 million, or 16.4% of revenue, compared to $12.7 million, or 11.5% of revenue, for the comparable quarter in 2023. The year-over-year increase of $6.2 million was primarily due to favorable product mix, higher manufacturing volume, pricing actions, and lower restructuring charges, partially offset by higher other manufacturing costs. Non-GAAP adjusted operating income for the third quarter of 2024 was $19.4 million, or 16.8% of revenue, compared to $14.9 million, or 13.4% of revenue, in the comparable period last year.

Structural Systems

Structural Systems segment net revenue for the quarter ended September 28, 2024 was $86.0 million, compared to $85.5 million for the third quarter of 2023. The year-over-year increase was primarily due to the following:

Structural Systems segment operating income for the quarter ended September 28, 2024 was $8.3 million, or 9.6% of revenue, compared to $6.7 million, or 7.9% of revenue, for the comparable quarter in 2023. The year-over-year increase of $1.5 million was primarily due to favorable product mix, pricing actions, and lower inventory purchase accounting adjustments. Non-GAAP adjusted operating income for the third quarter of 2024 was $12.6 million, or 14.7% of revenue, compared to $13.5 million, or 15.7% of revenue, in the comparable period last year.

Corporate General and Administrative (“CG&A”) Expenses

CG&A expenses for the third quarter of 2024 were $11.9 million, or 5.9% of total Company revenue, compared to $10.8 million, or 5.5% of total Company revenue, for the comparable quarter in the prior year. The year-over-year increase in CG&A expenses was primarily due to higher professional services fees of $1.2 million, of which $1.0 million was related to the unsolicited non-binding offer to acquire all the shares of Ducommun Incorporated.

Leadership and Board Updates

In a separate press release, the Company appointed two new independent directors, Daniel G. Korte and Daniel L. Boehle, to the Board.

Conference Call

A teleconference hosted by Stephen G. Oswald, the Company’s chairman, president and chief executive officer, and Suman B. Mookerji, the Company’s senior vice president, chief financial officer will be held today, November 7, 2024 at 10:00 a.m. PT (1:00 p.m. ET) to review these financial results. To access the conference call, please pre-register using the following registration link:

https://register.vevent.com/register/BIdf06696d244b40238cb113c5156c0317

Registrants will receive a confirmation with dial-in details. Mr. Oswald and Mr. Mookerji will be speaking on behalf of the Company and anticipate the call (including Q&A) to last approximately 45 minutes. A live webcast of the event can be accessed using the link above. A replay of the webcast will be available on the Ducommun website at Ducommun.com.

Additional information regarding Ducommun’s results can be found in the Q3 2024 Earnings Presentation available 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 Statements

This 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, any statements about the Company’s VISION 2027 Strategy and its progress towards the goals stated therein, as well as expectations relating to the Company’s full year 2024 results. 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 strength of the real estate market, the duration of any lease entered into as part of any sale-leaseback transaction, the amount of commissions owed to brokers, and applicable tax rates; 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, November 7, 2024, 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, restructuring charges, professional fees related to unsolicited non-binding acquisition offer, Guaymas fire related expenses, other fire related expenses, insurance recoveries related to loss on operating assets, insurance recoveries related to business interruption, and inventory purchase accounting adjustments), including as a percentage of revenue, non-GAAP operating income, including as a percentage of net revenues, non-GAAP net income, non-GAAP earnings per share, and backlog. In addition, certain other 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.

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. 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 the Company’s 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 the Company’s net revenues. As a result of these factors, trends in the Company’s overall level of backlog may not be indicative of trends in the Company’s future net revenues.

CONTACT:

Suman Mookerji, Senior Vice President, Chief Financial Officer, 657.335.3665

DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
 
    September 28,
2024
  December 31,
2023
Assets        
Current Assets        
Cash and cash equivalents   $ 37,266   $ 42,863
Accounts receivable, net     107,730     104,692
Contract assets     221,434     177,686
Inventories     185,773     199,201
Production cost of contracts     5,650     7,778
Other current assets     12,507     17,349
Total Current Assets     570,360     549,569
Property and Equipment, Net     109,652     111,379
Operating Lease Right-of-Use Assets     30,613     29,513
Goodwill     244,600     244,600
Intangibles, Net     153,779     166,343
Deferred income taxes     5,107     641
Other Assets     15,806     18,874
Total Assets   $ 1,129,917   $ 1,120,919
Liabilities and Shareholders’ Equity        
Current Liabilities        
Accounts payable   $ 75,430   $ 72,265
Contract liabilities     36,875     53,492
Accrued and other liabilities     46,126     42,260
Operating lease liabilities     8,328     7,873
Current portion of long-term debt     10,938     7,813
Total Current Liabilities     177,697     183,703
Long-Term Debt, Less Current Portion     245,988     256,961
Non-Current Operating Lease Liabilities     23,361     22,947
Deferred Income Taxes     496     4,766
Other Long-Term Liabilities     16,803     16,448
Total Liabilities     464,345     484,825
Commitments and Contingencies        
Shareholders’ Equity        
Common Stock     148     146
Additional Paid-In Capital     213,471     206,197
Retained Earnings     446,701     421,980
Accumulated Other Comprehensive Income     5,252     7,771
Total Shareholders’ Equity     665,572     636,094
Total Liabilities and Shareholders’ Equity   $ 1,129,917   $ 1,120,919
DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
 
    Three Months Ended   Nine Months Ended
    September 28,
2024
  September 30,
2023
  September 28,
2024
  September 30,
2023
Net Revenues   $ 201,412     $ 196,250     $ 589,259     $ 564,761  
Cost of Sales     148,736       151,648       438,401       443,270  
Gross Profit     52,676       44,602       150,858       121,491  
Selling, General and Administrative Expenses     35,486       32,182       104,498       88,755  
Restructuring Charges     1,924       3,811       4,548       12,750  
Operating Income     15,266       8,609       41,812       19,986  
Interest Expense     (3,829 )     (5,370 )     (11,687 )     (15,324 )
Other Income                       7,945  
Income Before Taxes     11,437       3,239       30,125       12,607  
Income Tax Expense     1,289       26       5,404       1,789  
Net Income   $ 10,148     $ 3,213     $ 24,721     $ 10,818  
Earnings Per Share                
Basic earnings per share   $ 0.69     $ 0.22     $ 1.68     $ 0.81  
Diluted earnings per share   $ 0.67     $ 0.22     $ 1.65     $ 0.79  
Weighted-Average Number of Common Shares Outstanding                
Basic     14,806       14,625       14,758       13,408  
Diluted     15,039       14,814       14,981       13,661  
                 
Gross Profit %     26.2 %     22.7 %     25.6 %     21.5 %
SG&A %     17.6 %     16.4 %     17.7 %     15.7 %
Operating Income %     7.6 %     4.4 %     7.1 %     3.5 %
Net Income %     5.0 %     1.6 %     4.2 %     1.9 %
Effective Tax Rate     11.3 %     0.8 %     17.9 %     14.2 %
DUCOMMUN INCORPORATED AND SUBSIDIARIES
GAAP TO NON-GAAP NET INCOME TO ADJUSTED EBITDA RECONCILIATION
(Unaudited)
(Dollars in thousands)
 
    Three Months Ended   Nine Months Ended
    September 28,
2024
  September 30,
2023
  September 28,
2024
  September 30,
2023
GAAP net income   $ 10,148     $ 3,213     $ 24,721     $ 10,818  
Non-GAAP Adjustments:                
Interest expense     3,829       5,370       11,687       15,324  
Income tax expense     1,289       26       5,404       1,789  
Depreciation     4,285       4,020       12,339       11,692  
Amortization     4,246       4,458       12,790       12,729  
Stock-based compensation expense (1)     4,467       5,652       12,753       13,769  
Restructuring charges (2)     1,924       3,999       5,405       12,938  
Professional fees related to unsolicited non-binding acquisition offer     1,033             2,407        
Guaymas fire related expenses           548             3,896  
Other fire related expenses                       477  
Insurance recoveries related to loss on operating assets                       (5,563 )
Insurance recoveries related to business interruption                       (2,160 )
Inventory purchase accounting adjustments     663       2,041       1,745       2,807  
Adjusted EBITDA   $ 31,884     $ 29,327     $ 89,251     $ 78,516  
Net income as a % of net revenues     5.0 %     1.6 %     4.2 %     1.9 %
Adjusted EBITDA as a % of net revenues     15.8 %     14.9 %     15.1 %     13.9 %

(1) The three and nine months ended September 28, 2024 included $0.9 million and $2.8 million, respectively, of stock-based compensation expense for awards with both performance and market conditions that will be settled in cash. The three and nine months ended September 30, 2023 included $1.4 million and $2.7 million, respectively, of stock-based compensation expense for awards with both performance and market conditions that will be settled in cash. The three and nine months ended September 28, 2024 included $0.1 million and $0.3 million, respectively, of stock-based compensation expense recorded as cost of sales. The three and nine months ended September 30, 2023 included $0.1 million and $0.3 million, respectively, of stock-based compensation expense recorded as cost of sales.

(2) The three and nine months ended September 28, 2024 included zero and $0.9 million, respectively, of restructuring charges that were recorded as cost of sales. The three and nine months ended September 30, 2023 each included $0.2 million of restructuring charges that were recorded as cost of sales.

DUCOMMUN INCORPORATED AND SUBSIDIARIES
BUSINESS SEGMENT PERFORMANCE
(Unaudited)
(Dollars in thousands)
 
    Three Months Ended   Nine Months Ended
    %
Change
  September 28,
2024
  September 30,
2023
  %
of Net Revenues
2024
  %
of Net Revenues
2023
  %
Change
  September 28,
2024
  September 30,
2023
  %
of Net Revenues
2024
  %
of Net Revenues
2023
Net Revenues                                        
Electronic Systems   4.2 %   $ 115,412     $ 110,707     57.3 %   56.4 %   0.3 %   $ 324,391     $ 323,457     55.1 %   57.3 %
Structural Systems   0.5 %     86,000       85,543     42.7 %   43.6 %   9.8 %     264,868       241,304     44.9 %   42.7 %
Total Net Revenues   2.6 %   $ 201,412     $ 196,250     100.0 %   100.0 %   4.3 %   $ 589,259     $ 564,761     100.0 %   100.0 %
Segment Operating Income                                        
Electronic Systems       $ 18,910     $ 12,710     16.4 %   11.5 %       $ 54,685     $ 32,249     16.9 %   10.0 %
Structural Systems         8,289       6,743     9.6 %   7.9 %         21,716       16,873     8.2 %   7.0 %
          27,199       19,453                   76,401       49,122          
Corporate General and Administrative Expenses (1)         (11,933 )     (10,844 )   (5.9)  %   (5.5) %         (34,589 )     (29,136 )   (5.9) %   (5.2) %
Total Operating Income       $ 15,266     $ 8,609     7.6 %   4.4 %       $ 41,812     $ 19,986     7.1 %   3.5 %
Adjusted EBITDA                                        
Electronic Systems                                        
Operating Income       $ 18,910     $ 12,710                 $ 54,685     $ 32,249          
Other Income                                       222          
Depreciation and Amortization         3,575       3,567                   10,869       10,626          
Stock-Based Compensation Expense (2)         70       124                   241       348          
Restructuring Charges         91       1,794                   562       5,739          
          22,646       18,195     19.6 %   16.4 %         66,357       49,184     20.5 %   15.2 %
Structural Systems                                        
Operating Income         8,289       6,743                   21,716       16,873          
Depreciation and Amortization         4,849       4,852                   14,058       13,619          
Stock-Based Compensation Expense (3)         105       97                   261       280          
Restructuring Charges         1,833       2,205                   4,843       7,113          
Guaymas fire related expenses               548                         3,896          
Other fire related expenses                                       477          
Inventory Purchase Accounting Adjustments         663       2,041                   1,745       2,807          
          15,739       16,486     18.3 %   19.3 %         42,623       45,065     16.1 %   18.7 %
Corporate General and Administrative Expenses (1)                                        
Operating loss         (11,933 )     (10,844 )                 (34,589 )     (29,136 )        
Depreciation and Amortization         107       59                   202       176          
Stock-Based Compensation Expense (4)         4,292       5,431                   12,251       13,141          
Restructuring Charges                                       86          
Professional Fees Related to Unsolicited Non-Binding Acquisition Offer         1,033                         2,407                
          (6,501 )     (5,354 )                 (19,729 )     (15,733 )        
Adjusted EBITDA       $ 31,884     $ 29,327     15.8 %   14.9 %       $ 89,251     $ 78,516     15.1 %   13.9 %
Capital Expenditures                                        
Electronic Systems       $ 1,011     $ 978                 $ 2,950     $ 4,752          
Structural Systems         1,295       3,802                   4,172       11,043          
Corporate Administration                                 3,024                
Total Capital Expenditures       $ 2,306     $ 4,780                 $ 10,146     $ 15,795          

(1) Includes costs not allocated to either the Electronic Systems or Structural Systems operating segments.

(2) The three and nine months ended September 28, 2024 each included $0.1 million of stock-based compensation expense recorded as cost of sales. The three and nine months ended September 30, 2023 included less than $0.1 million and $0.1 million, respectively, of stock-based compensation expense recorded as cost of sales.

(3) The three and nine months ended September 28, 2024 included $0.1 million and $0.2 million, respectively, of stock-based compensation expense recorded as cost of sales. The three and nine months ended September 30, 2023 included $0.1 million and $0.2 million, respectively, of stock-based compensation expense recorded as cost of sales.

(4) The three and nine months ended September 28, 2024 included $0.9 million and $2.8 million, respectively, of stock-based compensation expense for awards with both performance and market conditions that will be settled in cash. The three and nine months ended September 30, 2023 included $1.4 million and $2.7 million, respectively, of stock-based compensation expense for awards with both performance and market conditions that will be settled in cash.

DUCOMMUN INCORPORATED AND SUBSIDIARIES
GAAP TO NON-GAAP OPERATING INCOME RECONCILIATION
(Unaudited)
(Dollars in thousands)
 
    Three Months Ended   Nine Months Ended
GAAP To Non-GAAP Operating Income   September 28, 2024   September 30, 2023   %
of Net Revenues
2024
  %
of Net Revenues
2023
  September 28, 2024   September 30, 2023   %
of Net Revenues
2024
  %
of Net Revenues
2023
GAAP operating income   $ 15,266     $ 8,609             $ 41,812     $ 19,986          
                                 
GAAP operating income – Electronic Systems   $ 18,910     $ 12,710             $ 54,685     $ 32,249          
Adjustments to GAAP operating income – Electronic Systems:                                
Other income                               222          
Restructuring charges     91       1,794               562       5,739          
Amortization of acquisition-related intangible assets     373       373               1,120       1,120          
Total adjustments to GAAP operating income – Electronic Systems     464       2,167               1,682       7,081          
Non-GAAP adjusted operating income – Electronic Systems     19,374       14,877     16.8 %   13.4 %     56,367       39,330     17.4 %   12.2 %
                                 
GAAP operating income – Structural Systems     8,289       6,743               21,716       16,873          
Adjustments to GAAP operating income – Structural Systems:                                
Restructuring charges     1,833       2,205               4,843       7,113          
Guaymas fire related expenses           548                     3,896          
Other fire related expenses                               477          
Inventory purchase accounting adjustments     663       2,041               1,745       2,807          
Amortization of acquisition-related intangible assets     1,859       1,935               5,578       4,873          
Total adjustments to GAAP operating income – Structural Systems     4,355       6,729               12,166       19,166          
Non-GAAP adjusted operating income – Structural Systems     12,644       13,472     14.7 %   15.7 %     33,882       36,039     12.8 %   14.9 %
                                 
GAAP operating loss – Corporate     (11,933 )     (10,844 )             (34,589 )     (29,136 )        
Adjustments to GAAP Operating Income – Corporate                                
Restructuring charges                               86          
Professional fees related to unsolicited non-binding acquisition offer     1,033                     2,407                
Total adjustments to GAAP Operating Income – Corporate     1,033                     2,407       86          
Non-GAAP adjusted operating loss – Corporate     (10,900 )     (10,844 )             (32,182 )     (29,050 )        
Total non-GAAP adjustments to GAAP operating income     5,852       8,896               16,255       26,333          
Non-GAAP adjusted operating income   $ 21,118     $ 17,505     10.5 %   8.9 %   $ 58,067     $ 46,319     9.9 %   8.2 %
DUCOMMUN INCORPORATED AND SUBSIDIARIES
GAAP TO NON-GAAP NET INCOME AND EARNINGS PER SHARE RECONCILIATION
(Unaudited)
(Dollars in thousands, except per share amounts)
 
    Three Months Ended   Nine Months Ended
GAAP To Non-GAAP Net Income   September 28,
2024
  September 30,
2023
  September 28,
2024
  September 30,
2023
GAAP net income   $ 10,148     $ 3,213     $ 24,721     $ 10,818  
Adjustments to GAAP net income:                
Restructuring charges     1,924       3,999       5,405       12,938  
Professional fees related to unsolicited non-binding acquisition offer     1,033             2,407        
Guaymas fire related expenses           548             3,896  
Other fire related expenses                       477  
Insurance recoveries related to loss on operating assets                       (5,563 )
Insurance recoveries related to business interruption                       (2,160 )
Inventory purchase accounting adjustments     663       2,041       1,745       2,807  
Amortization of acquisition-related intangible assets     2,232       2,308       6,698       5,993  
Total adjustments to GAAP net income before provision for income taxes     5,852       8,896       16,255       18,388  
Income tax effect on non-GAAP adjustments (1)     (1,170 )     (1,779 )     (3,251 )     (3,677 )
Non-GAAP adjusted net income   $ 14,830     $ 10,330     $ 37,725     $ 25,529  
    Three Months Ended   Nine Months Ended
GAAP Earnings Per Share To Non-GAAP Earnings Per Share   September 28,
2024
  September 30,
2023
  September 28,
2024
  September 30,
2023
GAAP diluted earnings per share (“EPS”)   $ 0.67     $ 0.22     $ 1.65     $ 0.79  
Adjustments to GAAP diluted EPS:                
Restructuring charges     0.13       0.27       0.36       0.95  
Professional fees related to unsolicited non-binding acquisition offer     0.07             0.16        
Guaymas fire related expenses           0.04             0.29  
Other fire related expenses                       0.03  
Insurance recoveries related to loss on operating assets                       (0.41 )
Insurance recoveries related to business interruption                       (0.16 )
Inventory purchase accounting adjustments     0.05       0.14       0.12       0.21  
Amortization of acquisition-related intangible assets     0.15       0.15       0.45       0.44  
Total adjustments to GAAP diluted EPS before provision for income taxes     0.40       0.60       1.09       1.35  
Income tax effect on non-GAAP adjustments (1)     (0.08 )     (0.12 )     (0.22 )     (0.27 )
Non-GAAP adjusted diluted EPS   $ 0.99     $ 0.70     $ 2.52     $ 1.87  
                 
Shares used for non-GAAP adjusted diluted EPS     15,039       14,814       14,981       13,661  

(1) Effective tax rate of 20.0% used for both 2024 and 2023 adjustments.

DUCOMMUN INCORPORATED AND SUBSIDIARIES
NON-GAAP BACKLOG* BY REPORTING SEGMENT
(Unaudited)
(Dollars in thousands)
 
    September 28,
2024
  December 31,
2023
Consolidated Ducommun        
Military and space   $ 591,642   $ 527,143
Commercial aerospace     430,743     429,494
Industrial     21,528     36,931
Total   $ 1,043,913   $ 993,568
Electronic Systems        
Military and space   $ 459,770   $ 397,681
Commercial aerospace     80,405     87,994
Industrial     21,528     36,931
Total   $ 561,703   $ 522,606
Structural Systems        
Military and space   $ 131,872   $ 129,462
Commercial aerospace     350,338     341,500
Total   $ 482,210   $ 470,962

* 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 September 28, 2024 were $957.0 million. 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 September 28, 2024 was $1,043.9 million compared to $993.6 million as of December 31, 2023.


Bay Street News