<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number 1-8174
DUCOMMUN INCORPORATED
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-0693330
------------------------------------- -------------------------------
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.
111 West Ocean Boulevard, Suite 900, Long Beach, California 90802
----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(562) 624-0800
---------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. As of July 4, 1998, there were
outstanding 11,258,837 shares of common stock.
<PAGE> 2
DUCOMMUN INCORPORATED
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets at July 4, 1998 and
December 31, 1997 2
Consolidated Statements of Income for Three Months
Ended July 4, 1998 and June 28, 1997 3
Consolidated Statements of Income for Six Months
Ended July 4, 1998 and June 28, 1997 4
Consolidated Statements of Cash Flows for Six
Months Ended July 4, 1998 and June 28, 1997 5
Notes to Consolidated Financial Statements 6 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 13
Item 3. Quantitative and Qualitative Disclosure About Market Risk 14
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
July 4, December 31,
1998 1997
--------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 879 $ 2,156
Accounts receivable (less allowance for doubtful
accounts of $152 and $359) 22,162 19,189
Inventories 21,676 24,604
Deferred income taxes 3,790 4,612
Prepaid income taxes 227 2,877
Other current assets 3,030 2,053
--------- ---------
Total Current Assets 51,764 55,491
Property and Equipment, Net 39,735 30,594
Deferred Income Taxes 380 380
Excess of Cost Over Net Assets Acquired (Net of Accumulated
Amortization of $5,499 and $4,832) 22,034 16,907
Other Assets 1,002 869
--------- ---------
$ 114,915 $ 104,241
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt (Note 4) $ 1,567 $ 919
Accounts payable 8,664 9,024
Accrued liabilities 16,132 15,366
--------- ---------
Total Current Liabilities 26,363 25,309
Long-Term Debt (Note 4) 5,646 4,884
Other Long-Term Liabilities 345 345
--------- ---------
Total Liabilities 32,354 30,538
--------- ---------
Commitments and Contingencies (Note 6)
Shareholders' Equity (Note 5):
Common stock -- $.01 par value; authorized 35,000,000
shares; issued and outstanding 11,258,837 shares in 1998 and
11,181,297 in 1997 112 74
Additional paid-in capital 59,718 59,497
Retained earnings 22,731 14,132
--------- ---------
Total Shareholders' Equity 82,561 73,703
--------- ---------
$ 114,915 $ 104,241
========= =========
</TABLE>
Share data have been adjusted for the 3-for-2 stock split in June 1998.
See accompanying notes to consolidated financial statements.
-2-
<PAGE> 4
DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For Three Months Ended
-------------------------------
July 4, 1998 June 28, 1997
------------ -------------
<S> <C> <C>
Net Sales $ 45,754 $ 39,384
-------- --------
Operating Costs and Expenses:
Cost of goods sold 29,774 25,630
Selling, general and administrative expenses 7,283 7,216
-------- --------
Total Operating Costs and Expenses 37,057 32,846
-------- --------
Operating Income 8,697 6,538
Interest Expense (125) (194)
-------- --------
Income Before Taxes 8,572 6,344
Income Tax Expense (3,515) (2,664)
-------- --------
Net Income $ 5,057 $ 3,680
======== ========
Earnings Per Share:
Basic earnings per share $ .45 $ .34
Diluted earnings per share .43 .31
Weighted Average Number of Common
Shares for Computation
of Earnings Per Share:
Basic earnings per share 11,236 10,982
Diluted earnings per share 11,811 11,906
</TABLE>
Per-share amounts have been adjusted for the 3-for-2 stock split in June 1998.
See accompanying notes to consolidated financial statements.
-3-
<PAGE> 5
DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For Six Months Ended
-------------------------------
July 4, 1998 June 28, 1997
------------ -------------
<S> <C> <C>
Net Sales $ 89,015 $ 74,689
-------- --------
Operating Costs and Expenses:
Cost of goods sold 59,251 49,831
Selling, general and administrative expenses 14,981 13,581
-------- --------
Total Operating Costs and Expenses 74,232 63,412
-------- --------
Operating Income 14,783 11,277
Interest Expense (208) (395)
-------- --------
Income Before Taxes 14,575 10,882
Income Tax Expense (5,976) (4,572)
-------- --------
Net Income $ 8,599 $ 6,310
======== ========
Earnings Per Share:
Basic earnings per share $ .77 $ .58
Diluted earnings per share .73 .53
Weighted Average Number of Common
Shares for Computation of Earnings Per Share:
Basic earnings per share 11,215 10,971
Diluted earnings per share 11,783 11,881
</TABLE>
Per-share amounts have been adjusted for the 3-for-2 stock split in June 1998.
See accompanying notes to consolidated financial statements
-4-
<PAGE> 6
DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
For Six Months Ended
--------------------------------
July 4, 1998 June 28, 1997
------------ -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 8,599 $ 6,310
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and amortization 2,857 2,642
Deferred income tax provision 348 3,158
Changes in Assets and Liabilities, Net of Effects from
Acquisition:
Accounts receivable (2,537) (3,834)
Inventories 4,257 (3,329)
Prepaid income taxes 2,650 --
Other assets (861) 326
Accounts payable (444) 678
Accrued and other liabilities (654) (1,738)
-------- --------
Net Cash Provided by Operating Activities 14,215 4,213
-------- --------
Cash Flows from Investing Activities:
Purchase of Property and Equipment (7,309) (3,329)
Acquisition (8,146) --
Other 194 --
-------- --------
Net Cash Used in Investing Activities (15,261) (3,329)
-------- --------
Cash Flows from Financing Activities:
Net Repayments of Long-Term Debt (490) (1,496)
Other 259 109
-------- --------
Net Cash Provided/(Used) in Financing Activities (231) (1,387)
-------- --------
Net Increase (Decrease) in Cash and Cash Equivalents (1,277) (503)
Cash and Cash Equivalents, Beginning of Period 2,156 571
-------- --------
Cash and Cash Equivalents, End of Period $ 879 $ 68
======== ========
Supplemental Disclosures of Cash Flows Information:
Interest Expense Paid $ 243 $ 459
Income Taxes Paid $ 2,165 $ 2,510
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE> 7
DUCOMMUN INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
Note 1. The consolidated balance sheets, consolidated statements of income and
consolidated statements of cash flows are unaudited as of and for the
three months and six months ended July 4, 1998 and June 28, 1997. The
financial information included in the quarterly report should be read in
conjunction with the Company's consolidated financial statements and the
related notes thereto included in its annual report to shareholders for
the year ended December 31, 1997.
Note 2. Certain amounts and disclosures included in the consolidated financial
statements required management to make estimates which could differ from
actual results.
Note 3. Earnings Per Share
The Company effected a three-for-two stock split of the Company's common
stock in the form of a stock dividend, which was paid on June 10, 1998
to shareholders of record as of May 20, 1998, and is reflected in all
references to the number of common shares and per-share amounts in this
report.
Basic earnings per share is computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding in each period. Diluted earnings per share is computed by
dividing income available to common stockholders by the weighted average
number of common shares outstanding plus any potential dilution that
could occur if stock options were exercised or converted into common
stock in each period. For the three months ended July 4, 1998 and June
28, 1997, income available to common stockholders was $5,057,000 and
$3,680,000, respectively. The weighted average number of common shares
outstanding for the three months ended July 4, 1998 and June 28, 1997
were 11,236,000 and 10,982,000 and the dilutive shares associated with
stock options were 575,000 and 924,000, respectively. For the six months
ended July 4, 1998 and June 28, 1997, income available to common
stockholders was $8,599,000 and $6,310,000, respectively. The weighted
average number of common shares outstanding for the six months ended
July 4, 1998 and June 28, 1997 were 11,215,000 and 10,971,000 and the
dilutive shares associated with stock options were 568,000 and 910,000,
respectively.
-6-
<PAGE> 8
Note 4. Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
(In thousands)
-----------------------
July 4, December 31,
1998 1997
------- ------------
<S> <C> <C>
Term and real estate loans $4,878 $5,181
Promissory notes related to acquisitions 2,335 622
------ ------
Total debt 7,213 5,803
Less current portion 1,567 919
------ ------
Long-term debt, less current portion $5,646 $4,884
====== ======
</TABLE>
The Company's bank credit agreement provides for a $40,000,000 unsecured
revolving credit line with an expiration date of July 1, 1999. Interest
is payable monthly on the outstanding borrowings based on the bank's
prime rate (8.50% per annum at July 4, 1998) minus 0.25%. A Eurodollar
pricing option is also available to the Company for terms of up to six
months at the Eurodollar rate plus a spread based on the leverage ratio
of the Company calculated at the end of each fiscal quarter (1.00% at
July 4, 1998). At July 4, 1998, the Company had $40,000,000 of unused
lines of credit available. The credit agreement includes fixed charge
coverage and maximum leverage ratios, and limitations on future dividend
payments and outside indebtedness.
The carrying amount of long-term debt approximates fair value based on
the terms of the related debt, recent transactions and estimates using
interest rates currently available to the Company for debt with similar
terms and remaining maturities.
Note 5. Shareholders' Equity
In May 1998 the shareholders of Ducommun Incorporated authorized the
amendment of its Certificate of Incorporation to increase the Company's
authorized common stock from 12,500,000 shares to 35,000,000 shares.
The Company effected a three-for-two stock split of the Company's common
stock in the form of a stock dividend, which was paid on June 10, 1998
to shareholders of record as of May 20, 1998, and is reflected in all
references to the number of common shares and per-share amounts in this
report. Average shares outstanding at July 4, 1998 and June 28, 1997,
after adjusting for the stock split, were 11,215,000 and 10,971,000,
respectively.
-7-
<PAGE> 9
In July 1998 the Board of Directors authorized the repurchase of up to
$15,000,000 of its common stock.
Note 6. Commitments and Contingencies
Ducommun's subsidiary, Aerochem, Inc. ("Aerochem"), is a major supplier
of chemical milling services for the aerospace industry. Aerochem has
been directed by California environmental agencies to investigate and
take corrective action for groundwater contamination at its El Mirage,
California facility (the "Site"). Aerochem expects to spend
approximately $1 million for future investigation and corrective action
at the Site, and the Company has established a provision for such costs.
However, the Company's ultimate liability in connection with the Site
will depend upon a number of factors, including changes in existing laws
and regulations, and the design and cost of the construction, operation
and maintenance of the correction action.
In the normal course of business, Ducommun and its subsidiaries are
defendants in certain other litigation, claims and inquiries, including
matters relating to environmental laws. In addition, the Company makes
various commitments and incurs contingent liabilities. While it is not
feasible to predict the outcome of these matters, the Company does not
presently expect that any sum it may be required to pay in connection
with these matters would have a material adverse effect on its
consolidated financial position or results of operations.
Note 7. Acquisition
In June 1998, the Company acquired the capital stock of American
Electronics, Inc. ("AEI") for $8,146,000 in cash and $1,900,000 in notes
and other liabilities. AEI is a leading manufacturer of high-precision
actuators, stepper motors, fractional horsepower motors and resolvers
principally for commercial and military space applications. Calendar
1997 sales of AEI exceeded $7.1 million, of which approximately 60% were
related to space programs. The acquisition of AEI was accounted for
under the purchase method of accounting, and based on preliminary
allocation of the purchase price, the Company recorded goodwill of
$5,794,000. The consolidated statements of income include the operating
results for AEI since the date of the acquisition.
The acquisition was funded from internally generated cash, notes payable
to sellers and borrowings under the Company's credit agreement with its
bank. The acquisition will strengthen the Company's position in the
aerospace industry, add complementary lines of business and improve
utilization of existing manufacturing facilities and overhead structure.
-8-
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL STATEMENT PRESENTATION
- --------------------------------
The interim financial statements reflect all adjustments, consisting only of
normal recurring adjustments, which are, in the opinion of the Company,
necessary for a fair presentation of the results for the interim periods
presented.
ACQUISITION
- -----------
In June 1998, the Company acquired the capital stock of American Electronics,
Inc. ("AEI") for $8,146,000 in cash and $1,900,000 in notes and other
liabilities. AEI is a leading manufacturer of high-precision actuators, stepper
motors, fractional horsepower motors and resolvers principally for commercial
and military space applications. Calendar 1997 sales of AEI exceeded $7.1
million, of which approximately 60% were related to space programs. The
acquisition of AEI was accounted for under the purchase method of accounting,
and based on preliminary allocation of the purchase price, the Company recorded
goodwill of $5,794,000. The consolidated statements of income include the
operating results for AEI since the date of the acquisition.
The acquisition was funded from internally generated cash, notes payable to
sellers and borrowings under the Company's credit agreement with its bank. The
acquisition will strengthen the Company's position in the aerospace industry,
add complementary lines of business and improve utilization of existing
manufacturing facilities and overhead structure.
RESULTS OF OPERATIONS
- ---------------------
Second Quarter of 1998 Compared to Second Quarter of 1997
- ---------------------------------------------------------
Net sales increased 16% to $45,754,000 in the second quarter of 1998. The
increase resulted from a broad-based increase in sales in most of the Company's
product lines due to improved industry conditions and new contract awards.
The Company had substantial sales to Boeing and Lockheed Martin. During the
second quarter of 1998 and 1997, sales to Boeing were approximately $14,238,000
and $8,321,000, respectively; and sales to Lockheed Martin were approximately
-9-
<PAGE> 11
$5,676,000 and $4,424,000, respectively. The sales relating to
Boeing and Lockheed Martin are diversified over a number of different
commercial, space and military programs.
Gross profit, as a percentage of sales, was 34.9% for the second quarter of 1998
and the second quarter of 1997.
Selling, general and administrative expenses, as a percentage of sales, were
15.9% for the second quarter of 1998 compared to 18.3% in 1997. The decrease in
these expenses as a percentage of sales was primarily the result of higher sales
volume partially offset by an increase in related period costs.
Interest expense decreased approximately 36% to $125,000 in the second quarter
of 1998 compared to $194,000 for 1997. The decrease in interest expense was
primarily due to lower debt levels.
Income tax expense increased to $3,515,000 in the second quarter of 1998
compared to $2,664,000 for 1997. The increase in income tax expense was
primarily due to the increase in income before taxes. Cash paid for income taxes
was $2,111,000 in the second quarter of 1998, compared to $2,160,000 in 1997.
Net income for the second quarter of 1998 was $5,057,000, or $0.43 diluted
earnings per share, compared to $3,680,000, or $0.31 diluted earnings per share,
in 1997.
Six Months of 1998 Compared to Six Months of 1997
- -------------------------------------------------
Net sales increased 19% to $89,015,000 in the first six months of 1998. The
increase resulted from a broad-based increase in sales in most of the Company's
product lines due to increased outsourcing from the primes and first tier
subcontractors as well as new contract awards.
The Company had substantial sales to Boeing and Lockheed Martin. During the
first six months of 1998 and 1997, sales to Boeing were approximately
$25,634,000 and $16,419,000, respectively; and sales to Lockheed Martin were
approximately $10,412,000 and $8,558,000, respectively. The sales relating to
Boeing and Lockheed Martin are diversified over a number of different
commercial, space and military programs.
At July 4, 1998, backlog believed to be firm was approximately $169,200,000
compared to $153,500,000 at June 28, 1997 and $155,700,000 at December 31, 1997.
Approximately $71,000,000 of the total backlog is expected to be delivered
during 1998.
-10-
<PAGE> 12
Gross profit, as a percentage of sales, was 33.4% for the first six months of
1998 compared to 33.3% in 1997.
Selling, general and administrative expenses, as a percentage of sales, were
16.8% for the first six months of 1998 compared to 18.2% in 1997. The decrease
in these expenses as a percentage of sales was primarily the results of higher
sales volume partially offset by an increase in related period costs.
Interest expense decreased approximately 47% to $208,000 in the first six months
of 1998 compared to $395,000 for 1997. The decrease in interest expense was
primarily due to lower debt levels.
Income tax expense increased to $5,976,000 in the first six months of 1998
compared to $4,572,000 for 1997. The increase in income tax expense was
primarily due to the increase in income before taxes. Cash paid for income taxes
was $2,165,000 in the first six months of 1998, compared to $2,510,000 in 1997.
Net income for the first six months of 1998 was $8,599,000, or $0.73 diluted
earnings per share, compared to $6,310,000, or $0.53 diluted earnings per share,
in 1997.
FINANCIAL CONDITION
- -------------------
Liquidity and Capital Resources
- -------------------------------
Cash flow from operating activities for the six months ended July 4, 1998 was
$14,215,000, compared to $4,213,000 for the six months ended June 28, 1997. The
increase in cash flow from operating activities resulted principally from an
increase in net income, a decrease in inventory, and a reduction during 1998 in
prepaid income taxes. The Company continues to depend on operating cash flow and
the availability of its bank line of credit to provide short-term liquidity.
Cash from operations and bank borrowing capacity are expected to provide
sufficient liquidity to meet the Company's obligations during 1998. The
Company's bank credit agreement provides for a $40,000,000 unsecured revolving
credit line with an expiration date of July 1, 1999. At July 4, 1998, the
Company had $40,000,000 of unused lines of credit available. See Note 4 to the
Notes to Consolidated Financial Statements.
In June 1998, the Company acquired the capital stock of American Electronics,
Inc. ("AEI") for $8,146,000 in cash and $1,900,000 in notes and other
liabilities. AEI is a leading manufacturer of high-precision actuators, stepper
motors, fractional horsepower motors and resolvers principally for commercial
and military space applications. Calendar 1997 sales of AEI exceeded $7.1
million, of which approximately 60% were related to space programs. The
acquisition of AEI was accounted for under the purchase method of accounting,
-11-
<PAGE> 13
and based on preliminary allocation of the purchase price, the Company recorded
goodwill of $5,794,000. The consolidated statements of income include the
operating results for AEI since the date of the acquisition.
The acquisition was funded from internally generated cash, notes payable to
sellers and borrowings under the Company's credit agreement with its bank. The
acquisition will strengthen the Company's position in the aerospace industry,
add complementary lines of business and improve utilization of existing
manufacturing facilities and overhead structure.
The Company spent $7,309,000 on capital expenditures during the first six months
of 1998 and expects to spend approximately $16,000,000 in aggregate for capital
expenditures in 1998. The Company plans to make these capital expenditures in
1998 primarily for manufacturing equipment and facilities to support long-term
aerospace structure contracts for both commercial and military aircraft and
space programs. These expenditures are expected to place the Company in a
favorable competitive position among aerospace subcontractors, and to allow the
Company to take advantage of the offload requirements from its customers.
In May 1998 the shareholders of the Company authorized the amendment of its
Certificate of Incorporation to increase the Company's authorized common stock
from 12,500,000 shares to 35,000,000 shares. The Company effected a
three-for-two stock split of the Company's common stock in the form of a stock
dividend, which was paid on June 10, 1998 to shareholders of record as of May
20, 1998.
In July 1998 the Company's Board of Directors authorized the repurchase of up to
$15 million of its common stock. Repurchases will be made from time to time on
the open market at prevailing prices. The shares initially will be held as
treasury stock.
Ducommun's subsidiary, Aerochem, Inc. ("Aerochem"), is a major supplier of
chemical milling services for the aerospace industry. Aerochem has been directed
by California environmental agencies to investigate and take corrective action
for groundwater contamination at its El Mirage, California facility (the
"Site"). Aerochem expects to spend approximately $1 million for future
investigation and corrective action at the Site, and the Company has established
a provision for such costs. However, the Company's ultimate liability in
connection with the Site will depend upon a number of factors, including changes
in existing laws and regulations, and the design and cost of the construction,
operation and maintenance of the correction action.
In the normal course of business, Ducommun and its subsidiaries are defendants
in certain other litigation, claims and inquiries, including matters relating to
environmental laws. In addition, the Company makes various commitments and
-12-
<PAGE> 14
incurs contingent liabilities. While it is not feasible to predict the outcome
of these matters, the Company does not presently expect that any sum it may be
required to pay in connection with these matters would have a material adverse
effect on its consolidated financial position or results of operations.
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
- -------------------------------------------
Any forward looking statements made in this Form 10-Q report involve risks and
uncertainties. The Company's future financial results could differ materially
from those anticipated due to the Company's dependence on conditions in the
airline industry, the level of new commercial aircraft orders, the production
rate for the Space Shuttle program, the level of defense spending, competitive
pricing pressures, technology and product development risks and uncertainties,
product performance, risks associated with acquisitions and dispositions of
businesses by the Company, increasing consolidation of customers and suppliers
in the aerospace industry, and other factors beyond the Company's control.
FUTURE ACCOUNTING REQUIREMENTS
- ------------------------------
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Comprehensive Income" ("SFAS 130"), and
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). In February 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 132, "Employers' Disclosures
about Pension and Other Postretirement Benefits" ("SFAS 132"). SFAS 130, 131 and
132 will become effective for the Company in 1998. The adoption of SFAS 130, 131
and 132 is not expected to have a material effect on the Company's financial
statements.
YEAR 2000
- ---------
The Company has commenced, for its systems, a year 2000 date conversion project
to address necessary code changes, testing, and implementation. Project
completion is planned for the beginning of 1999 at a cost that is not expected
to be material to the Company. The Company expects its year 2000 date conversion
project to be completed on a timely basis. However, there can be no assurance
that the systems of other companies on which the Company's systems rely also
will be timely converted or that any such failure to convert by another company
would not have an adverse effect on the Company's systems. Maintenance or
modification costs will be expensed as incurred, while the cost of new software
will be capitalized and amortized over the software's useful life.
-13-
<PAGE> 15
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Inapplicable.
-14-
<PAGE> 16
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
1998 annual meeting of the Company was held on May 6, 1998. At the meeting,
Norman A. Barkeley, H. Frederick Christie and Kevin S. Moore were elected as
directors of the Company to serve for three-year terms expiring at the annual
meeting in 2001. In the election of directors, the shareholder vote was as
follows: Norman A. Barkeley, For - 6,911,685, Abstain - 206,309; H. Frederick
Christie, For - 6,911,935, Abstain - 206,059; Kevin S. Moore, For - 6,912,285,
Abstain - 205,709. The directors whose terms of office continued after the
annual meeting are: Joseph C. Berenato, Robert C. Ducommun, Thomas P. Mullaney,
Richard J. Pearson and Arthur W. Schmutz.
In addition, at the annual meeting the shareholders approved an amendment to the
Restated Certificate of Incorporation. In approving the amendment to the
Restated Certificate of Incorporation to increase to 35,000,000 the number of
authorized shares of Common Stock thereunder, the shareholder vote was as
follows: For - 5,531,894, Against - 1,570,467, Abstain - 15,633.
Item 6. Exhibits and Reports on Form 8-K.
(a) 27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
-15-
<PAGE> 17
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DUCOMMUN INCORPORATED
---------------------
(Registrant)
By: /s/ James S. Heiser
--------------------------------------
James S. Heiser
Vice President, Chief Financial
Officer and General Counsel
(Duly Authorized Officer of the
Registrant)
By: /s/ Samuel D. Williams
--------------------------------------
Samuel D. Williams
Vice President and Controller
(Chief Accounting Officer of the
Registrant)
Date: July 28, 1998
-16-
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<C> <S>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUL-04-1998
<CASH> 879
<SECURITIES> 0
<RECEIVABLES> 22,314
<ALLOWANCES> 152
<INVENTORY> 21,676
<CURRENT-ASSETS> 51,764
<PP&E> 79,092
<DEPRECIATION> 39,357
<TOTAL-ASSETS> 114,915
<CURRENT-LIABILITIES> 26,363
<BONDS> 0
0
0
<COMMON> 112
<OTHER-SE> 82,449
<TOTAL-LIABILITY-AND-EQUITY> 114,915
<SALES> 89,015
<TOTAL-REVENUES> 89,015
<CGS> 59,251
<TOTAL-COSTS> 59,251
<OTHER-EXPENSES> 14,981
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 208
<INCOME-PRETAX> 14,575
<INCOME-TAX> 5,976
<INCOME-CONTINUING> 8,599
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,599
<EPS-PRIMARY> .77
<EPS-DILUTED> .73
</TABLE>
