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Ducommun Inc. (DCO)
Q4 2008 Earnings Call
February 23, 2009 10:30 am ET
Joseph Berenato – Chairman and Chief Executive Officer
Anthony Reardon – President and Chief Operating Officer
Joseph Bellino – Vice President and Chief Financial Officer
Troy Lahr – Stifel Nicolaus
Edward Marshall – Sidoti & Company
Michael Lewis – BB&T Capital Markets
Alex Hamilton – Jesup & Lamont Securities Corporation
Previous Statements by DCO
» Ducommun Inc. Q3 2009 Earnings Call Transcript
» Ducommun Inc. Q3 2008 Earnings Call Transcript
» Ducommun Inc. Second Quarter 2008 Earnings Call Transcript
Thank you, [Tanya]. Good morning, I'm Joe Berenato, CEO of Ducommun and joining me this morning are Tony Reardon, our President and Chief Operating Officer and Joe Bellino, our Chief Financial Officer.
Welcome to Ducommun's Fourth Quarter and Year End 2008 Conference Call. Actually, we had two press releases today. One was our 2008 year end results and the second was a $50 million Embraer for flight control surfaces for the new Legacy aircraft. Joe Bellino will cover the financial update, Tony Reardon will follow with an operations review, and then I will make some comments on the business environment.
Joe, over to you.
Thanks, Joe and good morning. Earlier today for the quarter, we reported a net loss of $4.2 million or $.040 per fully diluted share versus $5.4 million or $0.51 per diluted share a year ago. The reported results reflect a number of items which I'll discuss, including the impact of the non-cash after-tax goodwill impairment charge of approximately $8 million or $0.76 per diluted share.
Regarding the impairment charge, the test at year end itself indicated that the book value of our Miltec subsidiary exceeded the fair value of the business. The impairment charge was primarily driven by adverse equity market conditions that caused a decrease in market multiples and stock price as of year end.
Ducommun's fourth quarter sales of $101 million were up 8.5% from the $93 million a year ago, as both of our segments, Aerostructures and Technologies showed solid gains year-over-year. Aerostructures grew by 5% being driven by higher commercial sales, although the Boeing strike impacted company sales by $6.5 million during the quarter. Our newest acquisition, DynaBil, which we now refer to as DAS New York, which was completed on December 23rd, contributed nearly $1 million in sales.
Ducommun Technologies realized growth was 13% during the quarter, as we benefited by increased revenues in the Phalanx program and various other military applications. The Boeing strike also affected our business mix as we saw a greater percentage of business in military than we have seen in recent quarters.
Q4 2008 sales comprised of 63% military, 35% commercial, and 2% space, and this compares to last year's similar quarter of 58% military, 38% commercial, and 3% space. As of December 31, 2008, the company's record backlog increased 34% to approximately $475 million and this compares to $353 million a year ago. The DAS New York acquisition added $41 million to that backlog. Overall, we expect to deliver at least $236 million of that backlog in the current year.
When we look at operating income, excluding the goodwill impairment charge it was $3.9 million for the quarter, this compares to $7 million for the same quarter last year. The adjusted operating income was impacted by approximately $1.8 million from the Boeing strike and $1.2 million increase in reserves for doubtful accounts.
Our combined effective income tax rate for the fourth quarter was a 55% tax benefit, as compared to a 19% effective tax rate in the fourth quarter of 2007. We benefited from recording full year R&D tax credits in the fourth quarter as the legislation was enacted in October 2008; this legislation will extend through the full year 2009 and as a result for modeling purposes, we estimate our effective tax rate will be in the 30 to 31% range each quarter for the entire year of 2009.
Turning to full year 2008 results, full year net income was $13.1 million or $1.23 per diluted share as compared to $19.6 million or $1.88 per diluted share for 2007. Again, the $1.23 takes into consideration – is after the goodwill impairment charge of $0.76 per share.
Full year sales increased 10% to $404 million as compared to $367 million for 2007. Overall, our commercial sales increased by 14% despite the Boeing strike, and were largely attributable to higher after-market sales and increases in sales to Carson Helicopter.
Our military sales also increased, they went up 8% as we enjoyed sales increases for the Chinook and Blackhawk helicopters in the Phalanx program. Looking at the full year's mix of business, it was 59% military, 39% commercial, and 2% space. This compares to 60% military, 37% commercial, and 2% space for 2007.
From a larger customer perspective, we continue to see broader diversification in our Blue Chip customer base. Of our major customers, we showed slight sales increases to Boeing and to the U.S. Government, and a 10% increase to Raytheon.
When we look at the real growth of our business in 2008, it was a result of growth in helicopter programs, after-market sales, and a variety of new programs we have been developing in recent years. Tony will talk a little bit more about program growth in 2009 after my remarks.