Ducommun's Strategic Actions Set Stage for Stronger Performance

Estimated reading time: 11 minutes

Ducommun Incorporated today reported results for its fourth quarter and year ended December 31, 2015.

Fourth Quarter 2015 Recap

• Fourth quarter revenue was $156.6 million
• Net loss was $63.6 million, or $5.74 per share, including $90.2 million, pre-tax, in goodwill and intangible charges
• Adjusted EBITDA for the quarter was $11.0 million
• Cash flow from operations was $11.6 million
• Ducommun made voluntary principal prepayments totaling $15.0 million on its term loan during the quarter -- for an aggregate total of $45.0 million in voluntary prepayments during fiscal 2015

“The fourth quarter results mirrored 2015 in total, as both revenue and profitability were impacted by year-over-year declines in military shipments and schedule slides reflecting lower U.S. defense spending,” said Anthony J. Reardon, chairman and chief executive officer. “Our 2015 was a year of transition for Ducommun, during which we reset our cost structure and took decisive action to improve our performance going forward. In short, we did what we set out to do by pursuing supply chain initiatives, reducing headcount, closing certain facilities, consolidating our New York operations, and refinancing our debt. We expect the benefit of such actions to be evident in 2016 and beyond.

“In addition to these actions, we’ve laid the groundwork to streamline our product portfolio and improve Ducommun’s long-term growth trajectory and financial performance. We announced the sale of our Pittsburgh and Miltec operations earlier this year -- neither core to our business -- allowing us to sharpen our strategic focus, provide for additional debt reduction, and leave us in a stronger position to invest in the key aerospace, defense and other related high-technology markets that we serve. We will continue to assess our portfolio and believe that strong commercial aerospace demand, along with greater stability across our military platforms, will lead to improved operating results in 2016. The measures that we have taken should also lead to a more stable and better-performing Company, putting us on a path to increasing shareholder value.”

Portfolio Repositioning Activities

Recent actions resulting from the Company’s assessment of its operational portfolio include:

• The Houston facility, which exclusively served the oil and gas market, was closed in the fourth quarter of 2015 as a result of the significant decline in these markets. Revenue for 2015 was approximately $10 million.
• In the first quarter of 2016, the Pittsburgh operation, which served the heavy industrial and natural resources markets, was sold to focus the Company’s business on the aerospace, defense and other related high-technology markets. Revenue for 2015 was approximately $42 million.
• In the first quarter of 2016, the Company also entered into a definitive agreement to sell the Miltec operation which is a government services business unrelated to any of the Company’s other businesses. Revenue for 2015 was approximately $28 million.

In aggregate, these businesses had 2015 revenue of approximately $80 million and are part of the Company’s Electronic Systems operating segment. Following these actions, the Company anticipates that the composition of its total revenue in 2016 will shift to approximately 90% aerospace and defense and 10% industrial.

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