Ducommun Incorporated Reports Results for the Second Quarter Ended July 2, 2011

LOS ANGELES—(EON: Enhanced Online News)—Ducommun Incorporated (NYSE:DCO) today reported results for its second quarter and six months ended July 2, 2011.

Recent Highlights

Successfully completed LaBarge acquisition, bolstering the Company’s growth outlook
Net sales increased 5% for the second quarter of 2011 versus the second quarter of 2010, reflecting stronger shipment of commercial products
Net income, excluding transaction-related expenses, was $0.45 per fully diluted share
Generated $12.5 million in cash flow from operations in second quarter 2011, excluding transaction-related costs
As previously announced, on June 28, 2011 the Company completed its acquisition of LaBarge, Inc. (“LaBarge”) and combined the entity with Ducommun Technologies to form Ducommun LaBarge Technologies (“DLT”).

Sales for the second quarter of 2011 rose 5% to $108.0 million, as compared to $102.9 million for the second quarter of 2010, reflecting increased sales from commercial aerospace products. Due to transaction-related expenses, the Company incurred a net loss for the second quarter of 2011 of $(3.0) million, or $(0.28) per fully diluted share, compared to net income of $5.7 million, or $0.53 per diluted share, for the comparable period last year. The second quarter 2011 results include pre-tax transaction-related expenses of $10.9 million ($7.8 million after tax, or $0.73 per fully diluted share). Excluding transaction-related expenses, net income was $4.8 million, or $0.45 per fully diluted share. During the quarter, the Company generated $12.5 million of cash flow from operations, excluding $10.1 million of transaction-related costs.

“We remained focused on improving operating performance this quarter even as we worked diligently to close the LaBarge acquisition on time. Ducommun benefitted from strengthening demand, with top line growth driven by increased commercial shipments across a wide variety of platforms,” said Anthony J. Reardon, president and chief executive officer. “Commercial revenue represented 47% of our total business this period, up significantly from last year’s 40%. In addition, we saw our gross margins increase sequentially from the first quarter, a trend we believe will continue going forward. The second half of 2011 is looking to be one of growth for Ducommun, and the LaBarge acquisition strengthens our product portfolio heading into 2012.”

The increase in sales for the second quarter of 2011 versus the prior-year period was primarily due to higher revenues of commercial products for large and regional fixed wing aircraft, offset somewhat by lower revenues of military aircraft and engineering services. LaBarge contributed $0.9 million in sales for the 2011 period. The Company’s mix of business in the second quarter of 2011 was approximately 53% military/space and 47% commercial, compared to 60% military/space and 40% commercial in the second quarter of 2010.

Gross profit, as a percent of sales, was 19.4% in the second quarter of 2011 compared to 21.7% in the comparable period in 2010. Gross profit margins were lower in the 2011 period primarily due to an increased portion of sales of lower margin programs and slightly lower operating performance at Ducommun AeroStructures (“DAS”), partially offset by a favorable product mix at DLT. Gross profit, as a percent of sales, in the second quarter of 2010 had also been favorably impacted by an adjustment to operating expenses of $1.1 million, or 1.1 percentage points, relating to the reversal of certain accounts payable accruals recorded in prior periods.

Selling, general and administrative (“SG&A”) expenses increased to $23.6 million, or 21.8% of sales, in the second quarter of 2011, compared to $13.3 million, or 12.9% of sales, in the second quarter of 2010. The second quarter of 2011 included approximately $10.1 million of transaction-related expenses. Excluding transaction-related expenses, SG&A would have been $13.5 million, or 12.5% of sales.

The net loss of $(3.0) million for the second quarter of 2011 compared unfavorably to net income of $5.7 million reported in the second quarter of 2010 and was due primarily as a result of the transaction-related expenses. In addition, interest expenses were higher by $0.8 million in 2011 due to the write-off of unamortized financing costs as a result of the company’s transaction-related refinancing of debt. The Company’s effective tax benefit for the second quarter 2011 was approximately 28% as a result of recognition of various tax benefits related to research and development tax credits. The Company’s effective tax rate for the second quarter 2010 was 33% and reflected no research and development tax benefits.

Sales for the first six months of 2011 of $207.6 million were in line with the $207.2 million reported for the first six months of 2010. LaBarge contributed $0.9 million in sales for the six months of 2011. Net income for the first six months of 2011 was break-even, or $0.00 per fully diluted share including pre-tax transaction-related expenses of $12.3 million, compared to $9.9 million, or $0.94 per fully diluted share, for the first six months of 2010. Excluding transaction-related expenses, net income was $8.7 million, or $0.82 per diluted share.

Net sales for the first six months of 2011, compared to the same period last year, reflect a change in market dynamics, with increased revenue from commercial aerospace products, mainly regional jet and large commercial aircraft, offset by lower sales for military aircraft and engineering services. The Company’s mix of business in the first six months of 2011 was approximately 54% military/space and 46% commercial, compared to 60% military/space and 40% commercial in the first six months of 2010.

Gross profit, as a percent of sales, was 19.0% in the first six months of 2011 compared to 20.1% in the comparable period last year. Gross profit margins were lower primarily due to a slight decline in operating performance, with an unfavorable change in sales mix at both DAS and DLT. Gross profit, as a percent of sales, in the first six months of 2010 was also favorably impacted by an adjustment to operating expenses of $1.1 million, or 0.5 percentage points, relating to the reversal of certain accounts payable accruals recorded in prior periods.

SG&A expenses increased to $37.7 million, or 18.2% of sales, in the six months of 2011, compared to $25.8 million, or 12.4% of sales, in the six months of 2010. Excluding the transaction-related expenses of $11.4 million in the first six months of 2011, SG&A would have been $26.3 million, or 12.7% of sales.

Net income for the first six months of 2011 decreased primarily due to transaction-related expenses and higher interest expense of $0.8 million related to the company’s refinancing of its debt in connection with the transaction, partially offset by lower income tax expenses. The Company’s effective tax benefit for the first six months of 2011 was 60% as a result of recognition of various tax benefits related to research and development tax credits. The Company’s effective tax rate for the first six months of 2010 was 33% and reflected no research and development tax benefits.

“With the acquisition of LaBarge completed, we are focused on driving the integration of these two strong companies and leveraging our presence in key markets and platforms,” Mr. Reardon continued. “We remain on track to achieve the projected synergies in coming quarters. Given the added capabilities of LaBarge, Ducommun will now offer higher level structural and electronic assemblies to support our customers’ growing demand, as we see the global commercial markets provide many opportunities to fuel growth and enhance operating margins. We also expect to utilize anticipated solid cash flow going forward to pay down debt and provide the capital for improved results in 2012 and beyond.”