• Ducommun Incorporated Reports Third Quarter 2023 Results

    ソース: Nasdaq GlobeNewswire / 08 11 2023 05:30:01   America/Chicago

    All-Time Record Quarterly Revenue and Adjusted Operating Income; Growth in both Commercial Aerospace and Defense; Strong Margin Expansion Driving Adjusted EBITDA to 14.9%

    SANTA ANA, Calif., Nov. 08, 2023 (GLOBE NEWSWIRE) -- Ducommun Incorporated (NYSE: DCO) (“Ducommun” or the “Company”) today reported results for its third quarter ended September 30, 2023.

    Third Quarter 2023 Recap

    • Net revenue was $196.3 million, a new all-time quarterly record for the Company
    • Net income of $3.2 million, or $0.22 per diluted share
    • Adjusted net income of $10.3 million, or $0.70 per diluted share
    • Adjusted EBITDA of $29.3 million, or 14.9% of revenue, an all-time high for Ducommun

    “Q3 was an outstanding quarter for Ducommun, the best in many years as we grew our topline both year-over-year and sequentially, led by continued strength in Commercial Aerospace and a return to growth of our defense business while also delivering strong margin expansion in gross and Adjusted EBITDA margins,” said Stephen G. Oswald, chairman, president and chief executive officer. “We achieved a new quarterly revenue record of $196.3 million up 5% over Q3 2022, the previous high being in 2012, with the ramp up in wide-body aircraft demand driving Commercial Aerospace revenues up 14% year-over-year. The Company's gross margins expanded 200 bps year-over-year as well from 20.7% to 22.7% for the quarter as we continue improving operating performance which includes the meaningful on-going restructuring activities announced in 2022.

    “In December 2022, we laid out our Vision 2027 Plan to investors and in the first three quarters of 2023, I am happy and encouraged to see the significant progress already towards those targets for both revenue growth and margin expansion. There are also many positive catalysts happening currently within the Company that will significantly drive shareholder value in the quarters and years ahead. In summary, Ducommun is well positioned to execute our stated strategy over the next four years with significant runway ahead.”

    Third Quarter Results

    Net revenue for the third quarter of 2023 was $196.3 million compared to $186.6 million for the third quarter of 2022. The year-over-year increase of 5.2% was primarily due to the following:

    • $9.6 million higher revenue in the Company’s commercial aerospace end-use markets due to higher build rates on twin-aisle commercial aircraft platforms as well as the A220 platform, commercial rotary-wing aircraft platforms, and other commercial aerospace business; and
    • $2.4 million higher revenue in the Company’s military and space end-use markets due to higher build rates on military rotary-wing aircraft platforms and other military and space platforms, partially offset by lower build rates on military fixed-wing aircraft platforms and various missile platforms.

    Net income for the third quarter of 2023 was $3.2 million, or $0.22 per diluted share, compared to $8.5 million, or $0.69 per diluted share, for the third quarter of 2022. This reflects higher selling, general and administrative (“SG&A”) expenses of $7.4 million, higher restructuring charges of $3.2 million, and higher interest expense of $2.4 million, partially offset by higher gross profit of $6.0 million. The higher SG&A expenses were primarily due to BLR Aerospace L.L.C. (“BLR”) SG&A expenses of $3.6 million (49% of the total increase in SG&A expenses) which did not exist in the prior year period as the acquisition of BLR was completed during Q2 2023, and higher stock-based compensation expense of $2.9 million.

    Gross profit for the third quarter of 2023 was $44.6 million, or 22.7% of revenue, compared to gross profit of $38.6 million, or 20.7% of revenue, for the third quarter of 2022. The increase in gross profit as a percentage of net revenue year-over-year was primarily due to favorable product mix, pricing actions, and favorable manufacturing volume, partially offset by unfavorable other manufacturing costs.

    Operating income for the third quarter of 2023 was $8.6 million, or 4.4% of revenue, compared to $13.2 million, or 7.1% of revenue, in the comparable period last year. The year-over-year decrease of $4.6 million was primarily due to higher SG&A expenses and higher restructuring charges, both of which were noted above, partially offset by higher gross profit. Adjusted operating income for the third quarter of 2023 was $17.5 million, or 8.9% of revenue, compared to $17.2 million, or 9.2% of revenue, in the comparable period last year. The year-over-year increase was primarily due to favorable product mix, pricing actions, and favorable manufacturing volume, partially offset by higher SG&A expenses, mainly due to the addition of the BLR acquisition.

    Interest expense for the third quarter of 2023 was $5.4 million compared to $3.0 million in the comparable period of 2022. The year-over-year increase was primarily due to higher interest rates.

    Adjusted EBITDA for the third quarter of 2023 was $29.3 million, or 14.9% of revenue, compared to $26.0 million, or 13.9% of revenue, for the comparable period in 2022.

    During the third quarter of 2023, the net cash provided by operations was $14.3 million compared to a net cash used in operations of $5.5 million during the third quarter of 2022. The higher net cash provided by operations during the third quarter of 2023 was primarily due to higher contract liabilities (resulting from driving more progress payments from its customers) and higher accrued and other liabilities, partially offset by higher inventories and lower net income.

    Business Segment Information

    Electronic Systems

    Electronic Systems segment net revenue for the quarter ended September 30, 2023 was $110.7 million, compared to $113.4 million for the third quarter of 2022. The year-over-year decrease was primarily due to the following:

    • $3.2 million lower revenue within the Company’s military and space end-use markets due to lower build rates on military fixed-wing aircraft platforms, partially offset by higher build rates on other military and space platforms; partially offset by
    • $2.8 million higher revenue in the Company’s commercial aerospace end-use markets due to higher build rates on other commercial aerospace platforms.

    Electronic Systems segment operating income for the quarter ended September 30, 2023 was $12.7 million, or 11.5% of revenue, compared to $13.9 million, or 12.2% of revenue, for the comparable quarter in 2022. The year-over-year decrease of $1.2 million was primarily due to higher restructuring charges and unfavorable other manufacturing costs, partially offset by favorable product mix and favorable manufacturing volume.

    Electronic Systems segment adjusted operating income for the quarter ended September 30, 2023 was $14.9 million, or 13.4% of revenue, compared to $14.6 million, or 12.9% of revenue, for the comparable quarter in 2022. The year-over-year increase of $0.3 million was primarily due to favorable product mix, pricing actions, and favorable manufacturing volume.

    Structural Systems

    Structural Systems segment net revenue for the quarter ended September 30, 2023 was $85.5 million, compared to $73.2 million for the third quarter of 2022. The year-over-year increase was primarily due to the following:

    • $6.7 million higher revenue within the Company’s commercial aerospace end-use markets due to higher build rates on large aircraft platforms; and
    • $5.6 million higher revenue within the Company’s military and space end-use markets due to higher build rates on military rotary-wing platforms and other military and space platforms, partially offset by lower build rates various missile platforms.

    Structural Systems segment operating income for the quarter ended September 30, 2023 was $6.7 million, or 7.9% of revenue, compared to $6.7 million, or 9.1% of revenue, for the comparable quarter in 2022. The year-over-year increase of $0.1 million was primarily due to favorable product mix and favorable manufacturing volume, partially offset by higher restructuring charges, higher inventory purchase accounting adjustments, and unfavorable other manufacturing costs.

    Structural Systems segment adjusted operating income for the quarter ended September 30, 2023 was $13.5 million, or 15.7% of revenue, compared to $9.8 million, or 13.3% of revenue, for the comparable quarter in 2022. The year-over-year increase of $3.7 million was primarily due to favorable product mix, pricing actions, and favorable manufacturing volume.

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

    CG&A expenses for the third quarter of 2023 were $10.8 million, or 5.5% of total Company revenue, compared to $7.4 million, or 3.9% 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 stock-based compensation expense of $2.8 million.

    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 8, 2023 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/BIebbd705905a44130870c88a8bdf92a4a

    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 2023 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 expectations relating to the results of its restructuring initiative and continued improvement of its operating performance, the continuing commercial aerospace recovery, and the execution of its strategy and driving shareholder value in the years ahead. 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 8, 2023, 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, Guaymas fire related expenses, other fire related expenses, insurance recoveries related to loss on operating assets, insurance recoveries related to business interruption, inventory purchase accounting adjustments, loss on extinguishment of debt, and other debt refinancing costs), non-GAAP operating income and as a percentage of net revenues, non-GAAP earnings, 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 30,
    2023
     December 31,
    2022
    Assets    
    Current Assets    
    Cash and cash equivalents $27,195 $46,246
    Accounts receivable, net  104,551  103,958
    Contract assets  191,151  191,290
    Inventories  215,189  171,211
    Production cost of contracts  5,861  5,693
    Other current assets  12,770  8,938
    Total Current Assets  556,717  527,336
    Property and Equipment, Net  111,894  106,225
    Operating Lease Right-of-Use Assets  31,827  34,632
    Goodwill  244,600  203,407
    Intangibles, Net  170,665  127,201
    Other Assets  26,648  22,705
    Total Assets $1,142,351 $1,021,506
    Liabilities and Shareholders’ Equity    
    Current Liabilities    
    Accounts payable $78,455 $90,143
    Contract liabilities  51,477  47,068
    Accrued and other liabilities  45,920  48,820
    Operating lease liabilities  8,001  7,155
    Current portion of long-term debt  6,250  6,250
    Total Current Liabilities  190,103  199,436
    Long-Term Debt, Less Current Portion  264,992  240,595
    Non-Current Operating Lease Liabilities  24,836  28,841
    Deferred Income Taxes  10,624  13,953
    Other Long-Term Liabilities  16,394  12,721
    Total Liabilities  506,949  495,546
    Commitments and Contingencies    
    Shareholders’ Equity    
    Common Stock  146  121
    Additional Paid-In Capital  204,993  112,042
    Retained Earnings  416,870  406,052
    Accumulated Other Comprehensive Income  13,393  7,745
    Total Shareholders’ Equity  635,402  525,960
    Total Liabilities and Shareholders’ Equity $1,142,351 $1,021,506


    DUCOMMUN INCORPORATED AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF INCOME
    (Unaudited)
    (Dollars in thousands, except per share amounts)

      Three Months Ended Nine Months Ended
      September 30,
    2023
     October 1,
    2022
     September 30,
    2023
     October 1,
    2022
    Net Revenues $196,250  $186,590  $564,761  $524,269 
    Cost of Sales  151,648   148,003   443,270   418,565 
    Gross Profit  44,602   38,587   121,491   105,704 
    Selling, General and Administrative Expenses  32,182   24,803   88,755   72,340 
    Restructuring Charges  3,811   567   12,750   3,270 
    Operating Income  8,609   13,217   19,986   30,094 
    Interest Expense  (5,370)  (2,998)  (15,324)  (8,056)
    Loss on Extinguishment of Debt     (295)     (295)
    Other Income        7,945   3,000 
    Income Before Taxes  3,239   9,924   12,607   24,743 
    Income Tax Expense  26   1,462   1,789   4,035 
    Net Income $3,213  $8,462  $10,818  $20,708 
    Earnings Per Share        
    Basic earnings per share $0.22  $0.70  $0.81  $1.72 
    Diluted earnings per share $0.22  $0.69  $0.79  $1.68 
    Weighted-Average Number of Common Shares Outstanding        
    Basic  14,625   12,112   13,408   12,057 
    Diluted  14,814   12,350   13,661   12,346 
             
    Gross Profit %  22.7%  20.7%  21.5%  20.2%
    SG&A %  16.4%  13.3%  15.7%  13.8%
    Operating Income %  4.4%  7.1%  3.5%  5.7%
    Net Income %  1.6%  4.5%  1.9%  3.9%
    Effective Tax Rate  0.8%  14.7%  14.2%  16.3%


    DUCOMMUN INCORPORATED AND SUBSIDIARIES
    BUSINESS SEGMENT PERFORMANCE
    (Unaudited)
    (Dollars in thousands)

      Three Months Ended   Nine Months Ended  
      %
    Change
      September
    30,
    2023
     October
    1,
    2022
     %
    of Net  Revenues
    2023
      %
    of Net  Revenues
    2022
      %
    Change
     September
    30,
    2023
     October
    1,
    2022
     %
    of Net  Revenues
    2023
      %
    of Net 
    Revenues
    2022
     
    Net Revenues                         
    Electronic Systems (2.4)% $110,707  $113,404  56.4 % 60.8 % 0.9% $323,457  $320,602  57.3 % 61.2 %
    Structural Systems 16.9 %  85,543   73,186  43.6 % 39.2 % 18.5%  241,304   203,667  42.7 % 38.8 %
    Total Net Revenues 5.2 % $196,250  $186,590  100.0 % 100.0 % 7.7% $564,761  $524,269  100.0 % 100.0 %
    Segment Operating Income                         
    Electronic Systems    $12,710  $13,881  11.5 % 12.2 %   $32,249  $36,902  10.0 % 11.5 %
    Structural Systems     6,743   6,687  7.9 % 9.1 %    16,873   12,839  7.0 % 6.3 %
          19,453   20,568           49,122   49,741       
    Corporate General and Administrative Expenses (1)     (10,844)  (7,351) (5.5)% (3.9)%    (29,136)  (19,647) (5.2)% (3.7)%
    Total Operating Income    $8,609  $13,217  4.4 % 7.1 %   $19,986  $30,094  3.5 % 5.7 %
    Adjusted EBITDA                         
    Electronic Systems                         
    Operating Income    $12,710  $13,881          $32,249  $36,902       
    Other Income                   222          
    Depreciation and Amortization     3,567   3,510           10,626   10,500       
    Stock-Based Compensation Expense (2)     97              321          
    Restructuring Charges     1,794   340           5,739   1,624       
          18,168   17,731  16.4 % 15.6 %    49,157   49,026  15.2 % 15.3 %
    Structural Systems                         
    Operating Income     6,743   6,687           16,873   12,839       
    Depreciation and Amortization     4,852   4,100           13,619   12,659       
    Stock-Based Compensation Expense (3)     76              259          
    Restructuring Charges     2,205   227           7,113   2,174       
    Guaymas fire related expenses     548   1,496           3,896   3,451       
    Other fire related expenses                   477          
    Inventory Purchase Accounting Adjustments     2,041   107           2,807   1,381       
          16,465   12,617  19.2 % 17.2 %    45,044   32,504  18.7 % 16.0 %
    Corporate General and Administrative Expenses (1)                         
    Operating loss     (10,844)  (7,351)          (29,136)  (19,647)      
    Depreciation and Amortization     59   59           176   176       
    Stock-Based Compensation Expense (4)     5,479   2,714           13,189   7,904       
    Restructuring Charges                   86          
    Other Debt Refinancing Costs        224              224       
          (5,306)  (4,354)          (15,685)  (11,343)      
    Adjusted EBITDA    $29,327  $25,994  14.9 % 13.9 %   $78,516  $70,187  13.9 % 13.4 %
    Capital Expenditures                         
    Electronic Systems    $978  $3,192          $4,752  $7,831       
    Structural Systems     3,802   1,175           11,043   7,033       
    Corporate Administration                             
    Total Capital Expenditures    $4,780  $4,367          $15,795  $14,864       
     

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

    (2)   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. The three and nine months ended October 1, 2022 both included zero stock-based compensation expense recorded as cost of sales.

    (3)   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. The three and nine months ended October 1, 2022 both included zero stock-based compensation expense recorded as cost of sales.

    (4)   The three and nine months ended September 30, 2023 included $1.4 million and $2.7 million, respectively, and the three and nine months ended October 1, 2022 included $0.3 million and $0.8 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
    30, 2023
     October
    1, 2022
     %
    of Net
      Revenues
    2023
     %
    of Net 
    Revenues
    2022
     September
    30, 2023
     October
    1, 2022
     %
    of Net 
    Revenues
    2023
     %
    of Net 
    Revenues
    2022
    GAAP Operating income $8,609  $13,217      $19,986  $30,094     
                     
    GAAP Operating income - Electronic Systems $12,710  $13,881      $32,249  $36,902     
    Adjustment:                
    Other income            222        
    Restructuring charges  1,794   340       5,739   1,624     
    Amortization of acquisition-related intangible assets  373   374       1,120   1,120     
    Adjusted operating income - Electronic Systems  14,877   14,595  13.4% 12.9%  39,330   39,646  12.2% 12.4%
                     
    GAAP Operating income - Structural Systems  6,743   6,687       16,873   12,839     
    Adjustment:                
    Restructuring charges  2,205   227       7,113   2,174     
    Guaymas fire related expenses  548   1,496       3,896   3,451     
    Other fire related expenses            477        
    Inventory purchase accounting adjustments  2,041   107       2,807   1,381     
    Amortization of acquisition-related intangible assets  1,935   1,236       4,873   3,719     
    Adjusted operating income - Structural Systems  13,472   9,753  15.7% 13.3%  36,039   23,564  14.9% 11.6%
                     
    GAAP Operating loss - Corporate  (10,844)  (7,351)      (29,136)  (19,647)    
    Adjustment:                
    Restructuring charges            86        
    Other debt refinancing costs     224          224     
    Adjusted operating loss - Corporate  (10,844)  (7,127)      (29,050)  (19,423)    
    Total adjustments  8,896   4,004       26,333   13,693     
    Adjusted operating income $17,505  $17,221  8.9% 9.2% $46,319  $43,787  8.2% 8.4%


    DUCOMMUN INCORPORATED AND SUBSIDIARIES
    GAAP TO NON-GAAP EARNINGS AND EARNINGS PER SHARE RECONCILIATION
    (Unaudited)
    (Dollars in thousands, except per share amounts)

      Three Months Ended Nine Months Ended
    GAAP To Non-GAAP Earnings September 30,
    2023
     October 1,
    2022
     September 30,
    2023
     October 1,
    2022
    GAAP Net income $3,213 $8,462 $10,818  $20,708 
    Adjustments:        
    Restructuring charges (1)  3,199  453  10,350   3,038 
    Guaymas fire related expenses (1)  439  1,197  3,117   2,761 
    Other fire related expenses (1)      382    
    Insurance recoveries related to loss on operating assets (1)      (4,450)   
    Insurance recoveries related to business interruption (1)      (1,728)  (2,400)
    Inventory purchase accounting adjustments (1)  1,633  86  2,246   1,105 
    Amortization of acquisition-related intangible assets (1)  1,846  1,288  4,794   3,871 
    Loss on extinguishment of debt (1)    236     236 
    Other debt refinancing costs (1)    179     179 
    Total adjustments  7,117  3,439  14,711   8,790 
    Adjusted net income $10,330 $11,901 $25,529  $29,498 


      Three Months Ended Nine Months Ended
    GAAP Earnings Per Share To Non-GAAP Earnings Per Share September 30,
    2023
     October 1,
    2022
     September 30,
    2023
     October 1,
    2022
    GAAP Diluted earnings per share (“EPS”) $0.22 $0.69 $0.79  $1.68 
    Adjustments:        
    Restructuring charges (1)  0.22  0.03  0.76   0.25 
    Guaymas fire related expenses (1)  0.03  0.10  0.23   0.22 
    Other fire related expenses (1)      0.03    
    Insurance recoveries related to loss on operating assets (1)      (0.33)   
    Insurance recoveries related to business interruption (1)      (0.13)  (0.19)
    Inventory purchase accounting adjustments (1)  0.11  0.01  0.17   0.09 
    Amortization of acquisition-related intangible assets (1)  0.12  0.10  0.35   0.31 
    Loss on extinguishment of debt (1)    0.02     0.02 
    Other debt refinancing costs (1)    0.01     0.01 
    Total adjustments  0.48  0.27  1.08   0.71 
    Adjusted diluted EPS $0.70 $0.96 $1.87  $2.39 
             
    Shares used for adjusted diluted EPS  14,814  12,350  13,661   12,346 
                   

    (1) Includes effective tax rate of 20.0% for both 2023 and 2022 adjustments.


    DUCOMMUN INCORPORATED AND SUBSIDIARIES
    NON-GAAP BACKLOG* BY REPORTING SEGMENT
    (Unaudited)
    (Dollars in thousands)

      September 30,
    2023
     December 31,
    2022
    Consolidated Ducommun    
    Military and space $494,447 $457,354
    Commercial aerospace  422,728  450,092
    Industrial  41,371  53,374
    Total $958,546 $960,820
    Electronic Systems    
    Military and space $368,036 $361,582
    Commercial aerospace  91,801  125,590
    Industrial  41,371  53,374
    Total $501,208 $540,546
    Structural Systems    
    Military and space $126,411 $95,772
    Commercial aerospace  330,927  324,502
    Total $457,338 $420,274
     

    * 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 30, 2023 was $958.5 million compared to $960.8 million as of December 31, 2022. 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 30, 2023 were $947.9 million compared to $853.0 million as of December 31, 2022.


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