<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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
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(Exact name of registrant as specified in its charter)
Delaware 95-0693330
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(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.
111 West Ocean Boulevard, Suite 900, Long Beach, California 90802
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(Address of principal executive offices) (Zip Code)
(562) 624-0800
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(Registrant's telephone number, including area code)
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(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 [ ] 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 September 30, 2000, there
were outstanding 9,692,957 shares of common stock.
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DUCOMMUN INCORPORATED
FORM 10-Q
INDEX
Page
----
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 2000 and
December 31, 1999 3
Consolidated Statements of Income for Three Months
Ended September 30, 2000 and October 2, 1999 4
Consolidated Statements of Income for Nine Months
Ended September 30, 2000 and October 2, 1999 5
Consolidated Statements of Cash Flows for Nine
Months Ended September 30, 2000 and October 2, 1999 6
Notes to Consolidated Financial Statements 7 - 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 14
Item 3. Quantitative and Qualitative Disclosure About
Market Risk 15
Part II. Other Information
Item 1. Legal Proceedings 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 111 $ 138
Accounts receivable (less allowance for
doubtful accounts of $477 and $153) 20,460 20,022
Inventories 31,705 26,347
Deferred income taxes 1,718 2,698
Prepaid income taxes 315 1,864
Other current assets 3,597 3,335
--------- ---------
Total Current Assets 57,906 54,404
Property and Equipment, Net 46,701 44,689
Excess of Cost Over Net Assets Acquired (Net of
Accumulated Amortization of $9,639 and $7,504) 39,550 41,895
Other Assets 1,287 814
--------- ---------
$ 145,444 $ 141,802
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt (Note 4) $ 1,399 $ 1,496
Accounts payable 8,599 8,135
Accrued liabilities 14,670 14,911
--------- ---------
Total Current Liabilities 24,668 24,542
Long-Term Debt, Less Current Portion (Note 4) 20,382 26,344
Deferred Income Taxes 2,174 2,174
Other Long-Term Liabilities 903 900
--------- ---------
Total Liabilities 48,127 53,960
--------- ---------
Commitments and Contingencies (Note 6)
Shareholders' Equity:
Common stock -- $.01 par value;
authorized 35,000,000 shares;
issued 9,712,357 shares in 2000 and
10,423,810 shares in 1999 97 104
Additional paid-in capital 36,655 45,597
Retained earnings 60,739 51,269
Less common stock held in treasury -- 19,400 shares
in 2000 and 855,300 shares in 1999 (174) (9,128)
--------- ---------
Total Shareholders' Equity 97,317 87,842
--------- ---------
$ 145,444 $ 141,802
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
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DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For Three Months Ended
---------------------------
September 30, October 2,
2000 1999
------------- ----------
<S> <C> <C>
Net Sales $ 40,881 $ 37,218
Operating Costs and Expenses:
Cost of goods sold 29,119 25,104
Selling, general and administrative expenses 5,355 5,582
Goodwill amortization expense 709 519
-------- --------
Total Operating Costs and Expenses 35,183 31,205
-------- --------
Operating Income 5,698 6,013
Interest Expense (408) (105)
-------- --------
Income Before Taxes 5,290 5,908
Income Tax Expense (2,010) (2,238)
-------- --------
Net Income $ 3,280 $ 3,670
======== ========
Earnings Per Share:
Basic earnings per share $ .34 $ .36
Diluted earnings per share .33 .35
Weighted Average Number of Common Shares Outstanding:
Basic earnings per share 9,683 10,243
Diluted earnings per share 9,840 10,569
</TABLE>
See accompanying notes to consolidated financial statements.
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DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For Nine Months Ended
--------------------------
September 30, October 2,
2000 1999
------------- ----------
<S> <C> <C>
Net Sales $ 123,174 $ 108,225
Operating Costs and Expenses:
Cost of goods sold 87,001 73,756
Selling, general and administrative expenses 17,364 15,956
Goodwill amortization expense 2,147 1,356
--------- ---------
Total Operating Costs and Expenses 106,512 91,068
--------- ---------
Operating Income 16,662 17,157
Interest Expense (1,387) (259)
--------- ---------
Income Before Taxes 15,275 16,898
Income Tax Expense (5,805) (6,634)
--------- ---------
Net Income $ 9,470 $ 10,264
========= =========
Earnings Per Share:
Basic earnings per share $ .98 $ .99
Diluted earnings per share .97 .96
Weighted Average Number of Common Shares Outstanding:
Basic earnings per share 9,649 10,342
Diluted earnings per share 9,758 10,665
</TABLE>
See accompanying notes to consolidated financial statements.
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DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
For Nine Months Ended
-------------------------
September 30, October 2,
2000 1999
------------- ----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 9,470 $ 10,264
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and amortization 6,579 5,011
Deferred income tax provision 980 248
Other 221 433
Changes in Assets and Liabilities, Net
Accounts receivable (438) 3,190
Inventories (5,358) (2,550)
Prepaid income taxes 1,549 956
Other assets (735) (810)
Accounts payable 464 (1,029)
Accrued and other liabilities (238) (2,986)
-------- --------
Net Cash Provided by Operating Activities 12,494 12,727
-------- --------
Cash Flows from Investing Activities:
Purchase of Property and Equipment (6,467) (5,120)
Acquisition -- (10,096)
-------- --------
Net Cash Used in Investing Activities (6,467) (15,216)
-------- --------
Cash Flows from Financing Activities:
Net Repayment of Long-Term Debt (6,059) (380)
Purchase of Common Stock (174) (6,200)
Other 179 94
-------- --------
Net Cash Used in Financing Activities (6,054) (6,486)
-------- --------
Net Decrease in Cash and Cash Equivalents (27) (8,975)
Cash and Cash Equivalents, Beginning of Period 138 9,066
-------- --------
Cash and Cash Equivalents, End of Period $ 111 $ 91
======== ========
Supplemental Disclosures of Cash Flows Information:
Interest Expense Paid $ 1,482 $ 536
Income Taxes Paid $ 2,540 $ 6,575
</TABLE>
See accompanying notes to consolidated financial statements.
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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 nine months ended September 30, 2000 and October
2, 1999. 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, 1999.
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
Basic earnings per share is computed by dividing income available to
common shareholders by the weighted average number of common shares
outstanding in each period. Diluted earnings per share is computed by
dividing income available to common shareholders plus income
associated with dilutive stock options 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 September 30, 2000 and
October 2, 1999, income available to common shareholders was
$3,280,000 and $3,670,000, respectively. The weighted average number
of common shares outstanding for the three months ended September 30,
2000 and October 2, 1999 were 9,683,000 and 10,243,000 and the
dilutive shares associated with stock options were 157,000 and
326,000, respectively. For the nine months ended September 30, 2000
and October 2, 1999, income available to common shareholders was
$9,470,000 and $10,264,000, respectively. The weighted average number
of common shares outstanding for the nine months ended September 30,
2000 and October 2, 1999 were 9,649,000 and 10,342,000 and the
dilutive shares associated with stock options were 109,000 and
323,000, respectively.
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Note 4. Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
(In Thousands)
---------------------------
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Bank credit agreement $16,300 $20,990
Term and real estate loans 3,806 4,175
Notes and other liabilities for acquisitions 1,675 2,675
------- -------
Total debt 21,781 27,840
Less current portion 1,399 1,496
------- -------
Total long-term debt $20,382 $26,344
======= =======
</TABLE>
In September 2000, the Company signed a new $100,000,000 revolving
credit facility with a group of banks. The Company's bank credit
agreement provides for a $100,000,000 unsecured revolving credit line
with an expiration date of September 30, 2005. Interest is payable
monthly on the outstanding borrowings based on the bank's prime rate
(9.50% at September 30, 2000) plus a spread based on the leverage
ratio of the Company calculated at the end of each fiscal quarter
(0.00% at September 30, 2000). 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 (1.25% at
September 30, 2000). At September 30, 2000, the Company had
$83,667,000 of unused lines of credit, after deducting $16,300,000 of
loans outstanding and $33,000 for an outstanding standby letter of
credit. The credit agreement includes minimum interest coverage,
maximum leverage, minimum EBITDA and minimum net worth covenants, an
unused commitment fee based on the leverage ratio (0.25% per annum at
September 30, 2000), and limitations on future dispositions of
property, repurchases of common stock, outside indebtedness, capital
expenditures and acquisitions.
Note 5. Shareholders' Equity
Since 1998, the Company's Board of Directors has authorized the
repurchase of up to $30,000,000 of its common stock. During 1998 and
1999, the Company repurchased in the open market 1,809,062 shares of
its common stock for a total of $24,066,000, and cancelled 953,762
shares of treasury stock. During the first nine months of 2000, the
Company repurchased in the open market 19,400 shares of its common
stock for a total of $174,000 and cancelled 855,300 shares of
treasury stock.
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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 October 1999, Com Dev Consulting Ltd. ("Com Dev") filed a
complaint in the United States District Court against the Company and
certain of its officers relating to the sale of the capital stock of
3dbm, Inc. ("3dbm") by the Company to Com Dev in August 1998. On
February 3, 2000, the United States District Court dismissed the
complaint without prejudice. On April 7, 2000, Com Dev filed another
complaint in California Superior Court against the Company and
certain of its officers relating to the sale of the capital stock of
3dbm by the Company to Com Dev. The Company intends to vigorously
defend the matter. While it is not feasible to predict the outcome of
this matter, the Company presently believes that the final resolution
of the matter will not have a material adverse effect on its
consolidated financial position or results of operations.
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. Acquisitions
In November 1999, the Company, through a wholly-owned subsidiary,
acquired the assets and assumed certain liabilities of Parsons
Precision Products, Inc. ("Parsons") for $22,073,000 in cash. Parsons
is a leading manufacturer of complex titanium hot-formed
subassemblies and components for commercial and military aerospace
applications. In April 1999, the Company acquired the capital stock
of Sheet Metal Specialties Company ("SMS") for $10,096,000 in cash,
net of cash acquired and payments of other liabilities of SMS, and a
$1,500,000 note. SMS is a manufacturer of subassemblies for
commercial and military aerospace applications.
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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.
ACQUISITIONS
In November 1999, the Company, through a wholly-owned subsidiary, acquired the
assets and assumed certain liabilities of Parsons Precision Products, Inc.
("Parsons") for $22,073,000 in cash. Parsons is a leading manufacturer of
complex titanium hot-formed subassemblies and components for commercial and
military aerospace applications. In April 1999, the Company acquired the capital
stock of Sheet Metal Specialties Company ("SMS") for $10,096,000 in cash, net of
cash acquired and payments of other liabilities of SMS, and a $1,500,000 note.
SMS is a manufacturer of subassemblies for commercial and military aerospace
applications.
RESULTS OF OPERATIONS
Third Quarter of 2000 Compared to Third Quarter of 1999
Net sales increased 10% to $40,881,000 in the third quarter of 2000. The
increase was due primarily to sales in the third quarter of 2000 from the
Parsons acquisition, as well as sales from the new contract at AHF-Ducommun for
the C-17 fuselage panels, partially offset by lower sales for the Space Shuttle
program and lower commercial and military aftermarket sales. Sales for space
programs were lower due to timing differences in production scheduling. The
Company expects reduced sales to space programs to continue to adversely impact
sales at least through the fourth quarter of 2000. Excluding the Parsons
acquisition, sales increased 1% in the third quarter of 2000 from the comparable
period in 1999.
The Company had substantial sales to Boeing, Raytheon and Lockheed Martin.
During the third quarters of 2000 and 1999, sales to Boeing were approximately
$15,082,000 and $9,912,000, respectively; sales to Raytheon were approximately
$3,709,000 and $2,426,000, respectively; and sales to Lockheed Martin were
approximately $3,239,000 and $4,195,000, respectively. The sales relating to
Boeing, Raytheon and Lockheed Martin are diversified over a number of different
commercial, space and military programs.
Gross profit, as a percentage of sales, was 28.8% for the third quarter of 2000
compared to 32.5% in 1999. This decrease was primarily the result of changes in
sales mix, pricing pressures from customers and production costs for new
programs.
Selling, general and administrative expenses, as a percentage of sales, were
13.1% for the third quarter of 2000 compared to 15.0% in 1999. The decrease in
these expenses as a percentage of sales was
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primarily the result of higher sales volume and lower personnel costs partially
offset by an increase in related variable period costs.
Goodwill amortization expense, as a percentage of sales, was 1.7% in 2000,
compared to 1.4% in 1999. The increase was primarily the result of higher
goodwill amortization expense related to the Parsons acquisition in 1999.
Interest expense increased to $408,000 in the third quarter of 2000 compared to
$105,000 for 1999. The increase in interest expense was primarily due to higher
debt levels.
Income tax expense decreased to $2,010,000 in the third quarter of 2000 compared
to $2,238,000 for 1999. The decrease in income tax expense was primarily due to
the decrease in income before taxes. Cash paid for income taxes was $1,069,000
in the third quarter of 2000, compared to $1,595,000 in 1999. Net income for the
third quarter of 2000 was $3,280,000, or $0.33 per diluted share, compared to
$3,670,000, or $0.35 per diluted share, in 1999. The diluted earnings per share
for 2000 include the benefit of a reduction of approximately 729,000 in average
diluted shares outstanding as a result of the Company's stock repurchase
program.
Nine Months of 2000 Compared to Nine Months of 1999
Net sales increased 14% to $123,174,000 in the first nine months of 2000. The
increase was due primarily to increased sales in the first nine months of 2000
from the SMS and Parsons acquisitions, as well as sales from the new contract at
AHF-Ducommun for the C-17 fuselage panels, partially offset by lower sales for
the Space Shuttle program and lower commercial and military aftermarket sales.
Sales for space programs were lower due to timing differences in production
scheduling. The Company expects reduced sales to space programs to continue to
adversely impact sales at least through the fourth quarter of 2000. Excluding
acquisitions, sales increased 3% in the first nine months of 2000 from the
comparable period in 1999.
The Company had substantial sales to Boeing, Raytheon and Lockheed Martin.
During the first nine months of 2000 and 1999, sales to Boeing were
approximately $44,355,000 and $30,308,000, respectively; sales to Raytheon were
approximately $11,742,000 and $6,928,000, respectively; and sales to Lockheed
Martin were approximately $9,711,000 and $12,042,000, respectively. The sales
relating to Boeing, Raytheon and Lockheed Martin are diversified over a number
of different commercial, space and military programs.
At September 30, 2000, backlog believed to be firm was approximately
$232,432,000 compared to $213,100,000 at December 31, 1999. Approximately
$38,000,000 of backlog is expected to be delivered during 2000. In April 2000
the Company announced that its AHF-Ducommun subsidiary signed the largest
contract in the Company's history with Boeing-Long Beach valued at $49,000,000
to produce fuselage skin panels for the C-17 aircraft. Performance under the
contract began in the first quarter of
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2000 and is expected to continue through 2003. In addition, AHF-Ducommun signed
an option contract with Boeing-Long Beach for the production of C-17 fuselage
skin panels for the period 2003 - 2007. The option contract, if fully exercised
by Boeing, is valued at $62,000,000.
Gross profit, as a percentage of sales, was 29.4% for the first nine months of
2000 compared to 31.8% in 1999. This decrease was primarily the result of
changes in sales mix, pricing pressures from customers and production costs for
new programs.
Selling, general and administrative expenses, as a percentage of sales, were
14.1% for the first nine months of 2000 compared to 14.7% in 1999. The benefits
of higher sales volume were offset by increases in related variable costs and
higher personnel costs.
Goodwill amortization expense, as a percentage of sales, was 1.7% in 2000,
compared to 1.3% in 1999. This increase was primarily the result of higher
goodwill amortization expense related to the SMS and Parsons acquisitions in
1999.
Interest expense increased to $1,387,000 in the first nine months of 2000
compared to $259,000 for 1999. The increase in interest expense was primarily
due to higher debt levels.
Income tax expense decreased to $5,805,000 in the first nine months of 2000
compared to $6,634,000 for 1999. The decrease in income tax expense was
primarily due to the decrease in income before taxes and an effective income tax
rate of 38% for 2000 compared to 39.3% for 1999. The decrease in the tax rate
was primarily due to certain tax credits that became available to the Company.
Cash paid for income taxes was $2,540,000 in the first nine months of 2000,
compared to $6,575,000 in 1999. Net income for the first nine months of 2000 was
$9,470,000, or $0.97 per diluted share, compared to $10,264,000, or $0.96 per
diluted share, in 1999. Diluted earnings per share rose 1% on a year to year
basis, despite a decline in net income, due to a reduction of approximately
907,000 in average diluted shares outstanding as a result of the Company's stock
repurchase program.
FINANCIAL CONDITION
Liquidity and Capital Resources
Cash flows from operating activities for the nine months ended September 30,
2000 was $12,494,000 compared to $12,727,000 for the nine months ended October
2, 1999. During the first nine months of 2000, the Company spent $6,059,000 to
repay principal on its outstanding bank borrowings, promissory notes, and term
and commercial real estate loans, $6,467,000 on capital expenditures and
$174,000 to repurchase shares of the Company's common stock. 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 2000.
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In September 2000, the Company signed a new $100,000,000 revolving credit
facility with a group of banks. The Company's bank credit agreement provides for
a $100,000,000 unsecured revolving credit line with an expiration date of
September 30, 2005. Interest is payable monthly on the outstanding borrowings
based on the bank's prime rate (9.50% at September 30, 2000) plus a spread based
on the leverage ratio of the Company calculated at the end of each fiscal
quarter (0.00% at September 30, 2000). 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 (1.25% at September 30, 2000). At September 30, 2000, the
Company had $83,667,000 of unused lines of credit, after deducting $16,300,000
of loans outstanding and $33,000 for an outstanding standby letter of credit.
The credit agreement includes minimum interest coverage, maximum leverage,
minimum EBITDA and minimum net worth covenants, an unused commitment fee based
on the leverage ratio (0.25% per annum at September 30, 2000), and limitations
on future dispositions of property, repurchases of common stock, outside
indebtedness, capital expenditures and acquisitions.
The Company spent $6,467,000 on capital expenditures during the first nine
months of 2000 and expects to spend less than $8,500,000 in the aggregate for
capital expenditures in 2000. 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 off-load requirements from its
customers. In connection with the C-17 contract signed by the Company's
AHF-Ducommun subsidiary, AHF-Ducommun is acquiring a 1,500-ton stretch press and
a 5-axis CNC Torres router with a flexible pogo positioning system. AHF-Ducommun
also is in the process of completing a 185,000 square foot building addition to
support the C-17 contract as well as other off-load opportunities from its
customers.
Since 1998, the Company's Board of Directors has authorized the repurchase of up
to $30,000,000 of its common stock. During 1998 and 1999, the Company
repurchased in the open market 1,809,062 shares of its common stock for a total
of $24,066,000, and cancelled 953,762 shares of treasury stock. During the first
nine months of 2000, the Company repurchased in the open market 19,400 shares of
its common stock for a total of $174,000 and cancelled 855,300 shares of
treasury stock. Repurchases will be made from time to time on the open market at
prevailing prices.
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
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<PAGE> 14
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 October 1999, Com Dev Consulting Ltd. ("Com Dev") filed a complaint in the
United States District Court against the Company and certain of its officers
relating to the sale of the capital stock of 3dbm, Inc. ("3dbm") by the Company
to Com Dev in August 1998. On February 3, 2000, the United States District Court
dismissed the complaint without prejudice. On April 7, 2000, Com Dev filed
another complaint in California Superior Court against the Company and certain
of its officers relating to the sale of the capital stock of 3dbm by the Company
to Com Dev. The Company intends to vigorously defend the matter. While it is not
feasible to predict the outcome of this matter, the Company presently believes
that the final resolution of the matter will not have a material adverse effect
on its consolidated financial position or results of operations.
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.
FUTURE ACCOUNTING REQUIREMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 will become effective for the
Company in 2001. The adoption of SFAS 133 is not expected to have a material
effect on the Company's financial position, results of operations or cash flow.
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
Any forward-looking statements made in this Form 10-Q 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 and other space programs, 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, availability of raw materials
and components from suppliers, and other factors beyond the Company's control.
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Item 3. Quantitative and Qualitative Disclosure About Market Risk
Not applicable.
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<PAGE> 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Com Dev Consulting Ltd. has filed a complaint, against the Company and
certain officers of the Company in connection with the sale of the
capital stock of 3dbm by the Company to Com Dev in August 1998. See
the Company's quarterly report on Form 10-Q for the period ended April
1, 2000.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed with this report:
4.1 Credit Agreement dated September 29, 2000 among
Ducommun Incorporated and the lenders referred to therein.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
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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: October 25, 2000
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EXHIBIT INDEX
Exhibit
Number Description
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4.1 Credit Agreement dated September 29, 2000 among
Ducommun Incorporated and the lenders referred to therein.
27 Financial Data Schedule
