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Q4 2012 Earnings Call
March 04, 2013 5:00 pm ET
Previous Statements by DCO
» Ducommun Inc. Q3 2009 Earnings Call Transcript
» Ducommun Inc. Q4 2008 Earnings Call Transcript
» Ducommun Inc. Q3 2008 Earnings Call Transcript
Joseph P. Bellino - Chief Financial Officer and Vice President
Mark C. Jordan - Noble Financial Group, Inc., Research Division
Kenneth Herbert - Imperial Capital, LLC, Research Division
Michael Crawford - B. Riley & Co., LLC, Research Division
Bhakti Pavani - C. K. Cooper & Company, Inc., Research Division
J. B. Groh - D.A. Davidson & Co., Research Division
Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2012 Ducommun Earnings Conference Call. My name is Darcelle, and I will be your operator for today. [Operator Instructions] I would now like to turn the conference over to your host for today, Mr. Chris Witty. Please proceed, sir.
Thank you, and welcome to Ducommun's fourth quarter conference call. With me today is Tony Reardon, Chairman, President and CEO; and Joe Bellino, Vice President and CFO.
I would now like to provide a brief Safe Harbor statement. This conference call may include forward-looking statements that represent the company's expectations and beliefs concerning future events that involve risks and uncertainties and may cause the company's actual performance to be materially different from the performance indicated or implied by such statements. All statements, other than statements of historical facts, included in this conference call are forward-looking statements.
Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the company's expectations are disclosed in this conference call and in the company's annual report and Form 10-K for the fiscal year ended December 31, 2012.
All subsequent written and oral forward-looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements. Unless otherwise required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this conference call.
I'd like to turn it over now to Tony Reardon for a review of the operating results. Tony?
Anthony J. Reardon
Thank you, Chris, and thank you, everybody, for joining us today. I'll begin by providing an overview of the quarter and the year end, including some of the market color, after which I'll turn the call over to Joe Bellino to go over our financial results in detail.
For Ducommun, fiscal 2012 was clearly a year of accomplishment even in a challenging operating environment that included federal budget uncertainty and softness in some of our non-A&D markets, issues which continue right up through today. While the sequestration deadline has now come and gone, there still remains a lack of clarity as to how things will ultimately play out this year and next. I'll provide some more color on that in a moment.
But first of all, we're very proud of Ducommun's achievement in 2012, and we feel confident about our ability to manage the business from a position of strength going forward. Among 2012's notable accomplishments, we fully integrated LaBarge, our largest acquisition ever. We exceeded our expectations in terms of post-merger synergies. We expanded margins, streamlined our operating -- our operations, posted strong cash flow, and paid down $25 million of debt. Even with the softness on our non-A&D markets, we ended the year with a backlog of $657 million, as much an indication of the strength of our broad capabilities as it is our customers who we serve. This level of book business, the highest in the company's history, provides a clear indication of our ability to grow heading into 2013.
We achieved record revenue of $194 million in the fourth quarter, fueled by strong demand within our military and space business across both operations. We also posted earnings of $0.32 per diluted share in the quarter and $1.55 for the year. However, a onetime state income tax charge impacted the quarter by $0.21 per diluted share, so the year-over-year EPS comparison does not fully reflect our operating improvement, as Joe will review in a moment.
Adjusted EBITDA was $85 million, or 11.4% of revenue, in 2012, up from 57.7 million or 9.9% of the revenue in 2011. We also generated $48 million in operating cash flow in 2012, as we focused on improving asset utilization, increasing inventory turns, reducing debt and delevering our balance sheet. We're in a much better position as we enter into 2013.
Now let me provide some more in-depth color on the markets and platforms and programs. Starting with our non-A&D markets, we ended the year with weaker-than-expected results. Sales were down sequentially from Q3 within our industrial, medical and natural resources end markets due to both order timing as well as ongoing customer destocking. Several key clients, as we have discussed in the past, are working through inventory built up in 2012, and we see this process continuing through the first half of 2013.
The backlog for this sector has come down considerably, reflecting destocking along with economic and seasonal factors. But we see this softness in demand as bottoming out in the months to come. We have strong customer relations and believe that the second half of 2013 will show improvement in these areas. We're also putting some -- a great deal of emphasis on growth as economic conditions continue to improve, and in the meantime, we remain focused on reducing cost and utilizing our expanded technologies to explore new business opportunities.