Ducommun (DCO) 6 Aug 182018 Q2 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Second Quarter 2018 Ducommun Conference Call. [Operator Instructions].

As a reminder, today's conference is being recorded. I would now like to turn the call over to the Investor Relations Advisor. Sir, you may begin.

to Second welcome Conference and you, Ducommun's Quarter XXXX Call. Thank Chairman, today Chief CEO; Treasurer. are me President Financial Steve and President, With Vice Oswald, and Groves, and Officer Doug regarding limitations may we during the the the any certain question-and-answer performance, for make discuss remarks -- to projections or going forward-looking I'm statements, question-and-answer future prepared session events, that follows. to or that financial future historical projections, market the Securities that today therefore, any including statements restructuring under facts, plans forward-looking our are or are not and results statements Federal conditions, Litigation as of Certain of Reform perspective. operations, to XXXX statements Private Act and, by statements are forward-looking forward-looking differ other results statements. uncertainties and to factors, implied which materially from These results such to cause future actual subject could the risks, or expressed

reflected forward-looking prove the are that Although statements we no that will such can expectations we believe in correct. our give assurance be expectations to reasonable,

authorities. we results business, Ducommun to call on as of annual the described regulatory acquisitions the except if not are statements SEC, intend In and based regulatory only and the government this are level estimates are others, statements presentation, XX-K of are our of among do These the our include, Particular competition. made report during -- filed any and current as company's in time required forward-looking our Statements risks to risks. subject Form change. on legal changes, of with and and cyclicality made, made U.S. in the update to cost our the the future end-use addition, by those risks, and spending, and of expansion markets, subject is risks operating defense others which management facing

financial ASC covering the comparison for change call the recognition also recognize policy, filings comparisons revenue XXX. company's see the ASC, measures measures. all now policies refer turn results. over further our XXX, to Please the call FASB Topic to a measures. the on of filings of of SEC like to this on and non-GAAP with call description addition, referenced In GAAP non-GAAP a current to operating Steve the for This on reconciliation Please review Steve? Codification, call Oswald Standards would the similar or results. Accounting includes this I to for prior a implementation Mr. the today's most of

for Thanks, joining Call. our thank us Second for everyone XXXX Chris, you, Quarter today and Conference

of step enhance certainly our significant in As will rose $XXX.X recent our for nearly every of quarter line see growth, usual, I'll to in expand top from overview forward the generally margins initiatives nearly of good by put in shows performance. It's Doug results consistent, begin results. arrival million of efforts great produce positive the XXXX my key to financial wins benefited more on developments aspect place since a the after very we strong financial our as company. January for the top providing XX% many is impact from performance the year-over-year QX review which as to clearly an drive benefits The recent company, Revenue and platforms detail. growth line and demand across business. progress

our I aerospace and pleased as technology focus and in been broader strong X.X% since margin, mix. the margin XXX and climbed points arrived, our a key two advanced for and which Notably, from company's to basis XXXX. are you, the I'm addition, focus X.X% excellence, has Ducommun's operating applications strengthening us to provider structural tell structure's and rose points basis volumes sequentially year, XXX adjusted as last in product expected. X.X% basis XXX progress for electronic of nicely and was in our from points by industry. is quarter operational encouraging adjusted array XX.X% I'm gross acquisitions In on XX.X% improved increased from favorable the defense rose you'll to And The QX and reflecting this and a Ducommun margin operating position QX. this helped agree grew of quarter margins mix very unique XX.X% higher basis X.X% the and that volume. sure XXX from points,

XX% We of many across forward. another will reduce streamlining including booked, in by restructuring organization. by top savings of all our We our the in forward year-end and million our $XX of about connection target $X.X And will facets annual of with already of in that group, California. million efficiency remain quarter, track this our previously completed space eliminate electronic restructuring on of improvements also cut the took to that charges various which on previously roughly within segment. capacity our most of the We've going result X%, structures million cost remaining announced $XX initiatives excess

year-end. to team the time $XXX Arizona recognize I professionalism. We take During Phoenix,, quarter, well to of improvement for facility and leaving also company our with growth want backlog our performance further the into that again, our announced quarter, heading to this we strong and closure plant, Huntsville, Arkansas Phoenix of once the positioned we're ended for fiscal capability by the their million, XXXX. moving

same in technology the year-to-date. generated fully broadening contributing and LDS in during addition, $XX.X our $XX.X cash and In At integrated, of million portfolio. Ducommun's we from flow the million of time, resulting financially are acquisitions operations CTP period, cash

I'm Regarding this investors on on of accomplished keenly operating taking where transformation Overall, is our level positive want and driving stand we've acquisitions, I'd decisions. we the team company about executive-level and that to the had acquisition Fortune terms important talent next to process focused of our leading also excellence. is what company. very to the XXX in emphasize

keep certain provide for and deliveries higher $XX.X F-XX programs posted from continued are as the color growth platforms on programs. programs. last anticipate Hill our We budget key poor-performing markets, that year, our strong XXXX. million, as Beginning by-products and our from forward of -- space slightly and expect me for fiscal products some for reflecting defense with military you formulated and well up Please Capitol spending across second defense support and let end always F-XX on priorities Now rationalizing in revenue shipments we've always quarter going are as programs. sector, we increased and reviewing and mind missile also

grew and large, to AXXX and for approximately driven again million. space growth operations, once aerospace million our roughly rose by the $XX.X backlog QX. commercial family. military as during high aircraft quarter to $XXX modestly build well sales Our Airbus significant the XXX platforms applications, We up quarter, across fixed-wing saw Boeing Then rates from XX% year-over-year second

our generating benefit shown levels better margin operational are these earlier, structures mentioned combined restructuring expansion, I performance, and As increased of measures within our in typically with production, group.

we've can operating We expect mix. vary commercial orders this in future we and although leverage QX's for GXXX the seen platforms, record and aerospace due But business indicator a solid at Gulfstream remains further from going program, good to levels. Backlog as pickup which restructuring XXX trends $XXX XXX product a down overall production the forward. within on quarter-over-quarter our million, results is continue in slightly for

the core aerospace, our we've Our to is structures business, investments, capital utilization within technologies also taken on asset particularly know, as increase from not steps in only benefiting you processes. but return and commercial from

is Kansas investing our capabilities value summary, not now New building only we For are developed important operations, point moving customers the and but results Parsons, long-term forward that, pleased Doug of Ducommun I'm in also company in and York, financial for example, are efficiency and have as strong has for operation's track solid both to Doug? our cost-cutting both and future. I'll for Coxsackie, stronger, titanium shareholders. record In out review This it detail. is the With a results.

you, good day, Thank Steve, everyone. and

XXX and of this today's results. further Accounting the second XXXX release Standards XXX, As the XXX. versus prior see on covering Codification, press a ASC the $XXX.X reminder, policy, call of on recognition of year as and in Revenue are the XXXX. to recognize implementation $XX.X higher Boeing the versus or company's mentioned. second for million for gross today's of commercial of ASC, platforms, customers FASB quarter profit. aerospace the of sales codification QX. primarily This my increased a revenue the was performance year-over-year Please policies AXXX, million as comparisons current to $XXX fixed-wing company's on slightly in million to the quarter, the up $XXX.X basis and such Topic quarter rose for from the million backlog at million filings description $XXX moving Ducommun's large, end And to Steve reflects the shipments due Airbus

in an million X.X% increase for up X year's second primarily operating quarter income revenue million XX.X% $XX.X second manufacturing operating was was prior versus XXXX sales, On the professional with compensation included year-over-year. CTP the year the prior quarter. of XX% was the versus year-over-year versus X.X% which X.X% period. was $XXX,XXX period. operating benefit company and $X.X of XXXX, fees, income in SG&A me, adjusted increase favorable of and acquisition basis, The in in to for noted. $XX.X quarter the for Our $X.X higher revenue primarily second or excuse in of $X.X income costs gross an was This million as or comparable the versus million of million product reflecting higher service for mix -- about cost reported of about due volumes increase second and the XX.X% margin quarter in

Structural activities $X.X Systems restructuring million. in and $X.X equaled $X.X million QX approximately $X.X to at our segment, million aggregate of within corporate Systems million charges within the Our level, which Electronic included

to square to XX% work As by X% mentioned previously, by year-end, we and about approximately $XX footage annualized operating less XXXX. as with million be fewer staff we eliminate in manufacturing expenses expect

$XX was quarter to in expect XXXX share million to LDS XXXX. in take the $X.XX year, reported in per bringing current $X higher last Additional income second quarter share And per rate rest the second $X.X in incur the or program to million or or expense of and per began tax CTP our this million million $X we for since about $X.XX year, the for of of of second diluted half due $X.XX restructuring during the rates. net $X.X total diluted the second million $X.X primarily for of utilization company Interest of place income to $X.X restructuring second charges will acquisitions share, along facility revolving $X.X million our million Adjusted with compared $XX diluted XXXX, was versus the million million quarter was quarter. interest and credit to of higher of XX%. to 'XX. QX The year we of the net

be approximately compared to revenue XX% rate $XX.X was the in the for for going before Our $XX.X of EBITDA of restructuring quarter or XX.X% to XX% million second tax comparable of revenue period Adjusted XXXX XXXX. expected charges forward. or will any million X.X%

results. segment our to turn me let Now

of quarter revenue and XX.X% results slight posted segment of aerospace in military XX.X% $XX.X million posted Systems period. for offset million prior period. second quarter year declines Electronic versus the our $XX.X in the markets. XXXX prior our some shipments million of million end commercial $X.X revenue or sales $X.X Electronic in of Our higher operating in of by the of These customers, to versus within income industrial $X.X or year million second revenue the reflect Systems

ASC impact the Excluding the margin was quarter of adjusted XXX, restructuring second operating for XX.X% of charges, XXXX. electronics the

primarily or last the large-jet, segment operating X.X% commercial of million million Structural was the million sales compared the in $XX.X our last higher aerospace of on of million due single-aisle increase quarter or posted $XX.X $XX.X Systems particularly, income The posted for of million Structural year-over-year year. XXXX, of of second to $X revenue year. income applications, Systems operating Our $X.X of across revenue versus quarter X.X% to platforms. revenue

the of and for operating adjusted XXX, structures Excluding restructuring adjustments XXXX charges, impact margin the XX.X% accounting ASC quarter. was purchase second

vary pleased Steve rates, with to timing. restructuring well discussed, build product as due as performance while reflects mix can improved the that quarter-to-quarter As we're program increased our and platform the margins

liquidity the or better expense in million second continue XXXX. X.X% second due We previously resources. last charge CG&A to to revenue $X.X of expenses. or cash million compared XXXX the million in of enterprise. on Coming Corporate million $X.X million consistently quarter to $X.X company capital expense from our business primarily versus higher $XX.X benefits and service costs as focus higher The total to general of of year. was across operations well CG&A generated X.X% margins $X mentioned, for producing revenue was administrative entire quarter increased compensation restructured the We as and professional fees. and

million additional down paid acquisitions. expect also debt $X.X debt $XX the $XX off absent any during of million to quarter for to XXXX, We and pay in million

strategy like still anticipate we're $X.X XXXX reflects I'd Once program this quarter. implementation improving the company. wins. and spent his now passion Steve? with back And quarters the serve a restructuring a reiterate returns in streamlining Steve our we of $XX approximately that our of execution remarks. the it to $XX CapEx, optimistic planning careful over we pleased in we're well-thought-out support spending customers, to again, million to to of higher million performance terms closing second turn In to the which initiatives and I'll during come. across about for Through to the continued new year, million

New our thanks, York. comments. since board many to XXXX, my in And host it's Basically, will a first on we January years, announce before coming just that Okay, Doug. in Ducommun to final November questions, on what an accomplished go I'm we've in Day, of few Investor X happy

near and other stakeholders And really obviously, we some will in but, in look plans investors the forward most future. X coming Invitations of achievements key So our York. important, November be to to our showcasing, analyst, for future. institutional New

stronger just XXXX. in share The and finally, really and don't I investors with results seeing Ducommun, And a open more see our I you. So -- questions? positioning paying the we're future. And in think line think, well this significant the growth higher even forward later why many to people customers for we've company, operator, to looking for we With it's year discussed, that, that initiatives, wanted completing off. and

Instructions]. [Operator

question of line Marshall comes of first from & Edward Company. the Sidoti Our

structures I business I want And to a think see a the to talk could, second. I if it's So I [indiscernible] early want to restructuring benefits. little the about for

been there behind in you've can the What's for we calling 'XX think half 'XX into the for structures? I majority that. of at back of Maybe the [indiscernible]? improvement look

Ed. of through. reading Certainly Yes, people the the piece restructuring is

pricing quarters the excess XXX%. Some review exited a more portfolio. the [indiscernible] aren't expecting. we've part of will capacity the to is that we're And a as out read we as improvement getting taken in programs are through that rates few that of mentioned, the business Those of need Steve meeting out the

compensating volume fortunate So -- customers, that we've gains -- on those giving with share to revenue particularly, we're been for that back we're the the of in with increase single-aisle demand, increases. single-aisle we've any the

we well have the pieces us this that's there probably a quarter in the was see the quarter. help improvement in margin. So two biggest Then that mix that as product didn't last

obviously, work Doug. and is Parsons that, take I'll online as pretty things And much one well. their finished other with getting -- now

As you know, we're just better.

lots producing better Okay? the things, benefiting that We're operationally. improvements. We're less scrap. Well, I margin doing of we're are think,

to think so, I'm we're that are coming things not And together. yet, I happy report there fully

Do this you're Doug, structures You'll see it build prepared other volatile that into get-better-kind-of on program they the restructuring at upon structures I initiatives? is do to vision the think, next? that for look and What's the your of the as baseline mean remainder businesses? remarks, year your the for be the for you Or continue improve can in you business businesses? something how the and I quarter-to-quarter. you going said to lumpy now? this

this clearly, X.X% still marching Sure. we're with this at quarter. towards exiting year. Well, very high halfway But here. pleased mark single-digit We're the we're

the new within an certainly that's is baseline on the think distance our some single-digit. working double-digit year, of on be with of mix. quoted. the adjusted don't -- things just this product striking the you saw full for benefactor we at But some we've was to quarter that along I basis the a That that So the high been as of

know the the increase you just want service moves kind on that on business kind level? there X: I adjustments in compensation corporate I any from the any that. the and and be wonder down corporate restructuring, clear then level segment segments, Was too the I But to individual fees that of noted or professional increase with the of in the Got line? that in to line. adjustment there's if it. expense

projects working little normal for reclassifications. no quarter, in some as but that's were there well a some no, SG&A of as on. fees higher it other the costs No, we're was some acquisition-related The professional this than

Yes, so restructuring And corporate. bucket, the at it's same Ed. all I mean,

Could number the service you was that me? fees? what So for quantify professional

of we're Well, fees related other then projects on. professional acquisition to sure, the some well, special we there $XXX,XXX for CTP. working some of the about service was had And that

going we're to them, how talk So on are -- spending our not important those or other are about than to plans. what go-forward projects much we're just they

benefit from the quantify you did line And CTP? profit maybe it. Got and [indiscernible]

than is further a structures a is about Xx said revenues small margin area. we our of the that the business, better the in structures when single-digit which business, we in CTP, anything last not existing it's of profile, about No, about high talked quarter -- business, that what than with X% call,

So that's ...

And performing well.

we on Yes, months the had -- because a look it's that. well, more in so here, only X.X doing come only to

Good news.

line And the our B. Mike from of FBR. next Crawford question comes of Riley

commercial been been Washington. piling the that with of you're to from business, suppliers? Relative slow any some of up some kind XXX some your is this fixed-wing that rate maybe reports that Has in customers? of seeing your growth there's affecting deliveries Is

I'll rates. say We're seen the marching no, we to haven't still that.

any anyone heard far from or slowing We down. haven't any as communication as issues

running. XXX% we're So

Okay, then pipeline. great. on your And M&A

you've the higher mix would proprietary a of and way businesses at these great today? the with margins. job acquiring products So pipeline done you're you How of looking characterize

Steve it's Well, again.

it's I this. mentioned people discipline Obviously, we think good. I had of excellent a it around that. working earlier, some lot certainly have

right? constantly, it's -- when as on on. So So you they opportunistic, have we're acquisitions know, come good come we properties

value. some we're rest at we're just road possibly but where and detail things -- seeing that the assured everything, add scrubbing So looking can down

like particular and in All jump right, was Industrial your backlog. It a then is: thanks final looks there question,

that business a that a is of timing thing? improving? kind actually just is Or -- So

short bit are as pretty purchase in so backlog revenue even it thing. just perspective orders as -- get a generally it's does that perspective. well of part Those the portfolio, around little a No, jump we order from they a a from timing

Instructions]. [Operator

Our next Ben Markets. from line question of comes Klieve Capital the NOBLE of

be you acquisitions. the as to efforts? X acquired think rate the that too development in the from effort than in the or grow product here such kind on of is quantify overall -- faster about two half to really the you'll year gain you of with the question company Have still traction early can been those business you of traction of revenue the lines XXXX? First customers legacy Or growth the to back this back your able of able

Yes, so but there able of proposition into value for is to get to maybe is some in the OEMs that part customers, them overlap some of the in weren't before. be they these our companies

working say top on Show booth it's a line from representation going through we're air that, us. it's to the both with and the than, read So nice weeks had at LDS we yet Air ago, say I but show other business example, would few to early at there the for actively our Farmborough CTP at too our

getting are they exposed well. customers as to So our

there to regards I cash have flow. And are then few questions a

CapEx you up touched a million, do with this do that's First, you believe, for point, year? on see $XX At XXXX next that for expectations all picking or you you reasonable million level XXXX. said at to $XX I think

runs of big we to probably it's the mean, Parsons get Obviously, support capital we're average couple right that within last going if range. had our those. spend we the big to expansion, generally No, range. absent but initiatives years with more it that's like certainly in any that facility the been wins, staying some can I over historical

Right.

Okay, activities. on regards cash to then the And with [indiscernible] restructuring perfect.

the the here than to expect so think cash -- the to year that the side much do from Given electronics that have second it and in the is seems roughly far? less be seen complete, structuring Or half will you the be same? pretty impact structures do you'd a you side you've be of

impacted same, be going to the because that it. by facility the particularly we're with of, are the and exit think there of Phoenix that employees it then Yes, get I the there's will lease a out about obviously,

on Okay, cash flow then here. perfect. last me, one question And again, from

slower? Given -- your next, especially in working over XX will do the at, the where that with you to expansion revenue maybe it do a working Do looking Kind you it ramp to here months? side, coming see you're up? along be capital how to think relative going do of growth? will think you you XX you Or the see it's grow today do where capital commercial position grow say, bit

there's moves. to we're min-max facilities, up particularly the moving And inventory, got we're a to do, as we're that customers as in we've time, protect enough going going stock ramp, always certainly, sure safety our right, rates to well requirements be to have time during have of buildup Sure. structures, with. keep we from because to

a but little level, bit, got XX%, a So historical of initiatives the XX% that stays of so to to inventory probably revenue number place and in that we've a increases moderate manage capital try lot intact. our working

[Operator questions not this at further showing Instructions]. time. I'm any

Okay.

step just opening the what let the seeing Again, me create certainly Okay. shareholders. like remarks, and company. intensity, for customer forward focus, all in need you Certainly, it mentioned the to activity, all throughout: the things a value I'm for really I that the wrap those I for up. as the my

and thank investors, their else for rest our are. a we just day and to, have again, where nice of want continued everyone pleased the analysts I I'm So and evening. support,

thank and program, you gentlemen, in conclude today's does day. This for you a and conference. Everyone, all may Ladies great participating the have disconnect.