DUCOMMUN INC /DE/

Previous wording

In its 2024 Annual Report on Form 10-K, The Boeing Company (“Boeing”) indicated that in 2024, global air traffic continued to expand beyond 2019 levels with domestic travel continuing to be the most robust and the single-aisle market following closely. International travel also surpassed pre-pandemic levels during 2024 and the wide-body market continued to improve with the international travel recovery. Therefore, the transition in the international commercial market from recovery to normal market conditions continued to progress as China international travel remains below 2019 levels. For 2025, while both major large aircraft manufacturers, Boeing and Airbus SE, have indicated they expect increases in build rates compared to 2024, the ramp up to date has been slower than initially expected and below pre-pandemic levels. In addition, Boeing, one of our largest customers, was notified by the Federal Aviation Administration (“FAA”) in early January 2024 that the FAA had initiated an investigation into Boeing’s quality control system. This notification was followed by the FAA announcing actions to increase its oversight of Boeing as well as not approving production rate increases or additional production lines for the 737 MAX until it is satisfied that Boeing is in full compliance with required quality control procedures. In July 2024, Boeing also pleaded guilty to conspiracy fraud charges, which may result in additional external oversight on its manufacturing and quality control process. Further, in September 2024, the International Association of Machinists and Aerospace Workers District 751 voted to initiate a labor strike affecting more than 30,000 Boeing manufacturing employees primarily located in Washington state, and the manufacturing employees, after rejecting the contract offer in October, voted to approve the revised contract offer in November 2024. Moreover, in Boeing’s Q1 2025 Quarterly Report on Form 10-Q, it stated various countries have announced plans for and/or have already implemented new or modified tariffs (discussed further below). Boeing’s first quarter results reflect its best estimate of the impacts of the tariffs enacted as of March 31, 2025, and certain potential mitigations. These tariffs and any retaliatory actions from other countries could have a material impact on Boeing’s financial position, results of operations and/or cash flows. In April 2025, certain customers in China informed Boeing they will not accept deliveries. Since Boeing is one of our largest customers, if Boeing is unable to meet the full compliance of the FAA’s required quality control procedures, and/or recover from the impact of the labor strike in the near term along with the tariffs (already imposed or will be imposed), it could have a material adverse impact on our business, results of operations and financial condition.

Current wording

The Boeing Company (“Boeing”) is one of our largest customers and was notified by the Federal Aviation Administration (“FAA”) in early January 2024 that the FAA had initiated an investigation into Boeing’s quality control system. This notification was followed by the FAA announcing actions to increase its oversight of Boeing as well as not approving production rate increases or additional production lines for the 737 MAX until it is satisfied that Boeing is in full compliance with required quality control procedures. In addition, in July 2024, Boeing also pleaded guilty to conspiracy fraud charges, which may result in additional external oversight on its manufacturing and quality control process. Further, in Boeing’s Q1 2025 Quarterly Report on Form 10-Q, it stated various countries have announced plans for and/or have already implemented new or modified tariffs (discussed further below). Boeing’s first quarter results reflect its best estimate of the impacts of the tariffs enacted as of March 31, 2025, and certain potential mitigations. These tariffs and any retaliatory actions from other countries could have a material impact on Boeing’s financial position, results of operations and/or cash flows. In April 2025, certain customers in China informed Boeing they will not accept deliveries. Since Boeing is one of our largest customers, if Boeing is unable to meet the full compliance of the Federal Aviation Administration’s required quality control procedures, along with the tariffs (already imposed or will be imposed), it could have a material adverse impact on our business, results of operations and financial condition.

Previous wording

•Net income of $10.5 million, or 5.4% of net revenues, or $0.69 per diluted share

Current wording

•Net income of $12.6 million, or 6.2% of net revenues, or $0.82 per diluted share

Previous wording

Net revenues by end-use market and operating segment during the fiscal three months ended March 29, 2025 and March 30, 2024, respectively, were as follows:

Current wording

Net revenues by end-use market and operating segment during the fiscal three and six months ended June 28, 2025 and June 29, 2024, respectively, were as follows:

Previous wording

Net revenues for the three months ended March 29, 2025 were $194.1 million, compared to $190.8 million for the three months ended March 30, 2024. The year-over-year increase in our key end-use markets were primarily due to the following:

Current wording

Net revenues for the three months ended June 28, 2025 were $202.3 million, compared to $197.0 million for the three months ended June 29, 2024. The year-over-year increase in our key end-use markets were primarily due to the following:

Previous wording

•$12.3 million higher revenues in our military and space end-use markets due to higher rates on electronic warfare and selected missiles and radar platforms; partially offset by

Current wording

•$16.5 million higher revenues in our military and space end-use markets due to higher rates on a classified program, selected missile, rotary-wing aircraft, and radar platforms; partially offset by

Previous wording

•$14.6 million higher revenues in our military and space end-use markets due to higher rates on selected missile, electronic warfare, radar, and rotary-wing platforms; partially offset by

Current wording

•$31.1 million higher revenues in our military and space end-use markets due to higher rates on selected missile, classified program, radar, and rotary-wing aircraft, and electronic warfare platforms; partially offset by

Previous wording

•$8.2 million lower revenues in our commercial aerospace end-use markets due to lower revenues from Boeing 737 MAX and in-flight entertainment products, and lower rates on rotary-wing aircraft platforms.

Current wording

•$17.2 million lower revenues in our commercial aerospace end-use markets due to lower revenues from Boeing 737 MAX and in-flight entertainment products, and lower rates on rotary-wing aircraft platforms, partially offset by growth in selected business jet platforms.

Previous wording

(1)Includes The Boeing Company (“Boeing”), Lockheed Martin Corporation (“Lockheed”), Northrop Grumman Corporation (“Northrop”), RTX Corporation (“RTX”), and Spirit AeroSystems Holdings, Inc. (“Spirit”) for the three months ended March 29, 2025 and March 30, 2024.

Current wording

(1)Includes The Boeing Company (“Boeing”), Lockheed Martin Corporation (“Lockheed”), Northrop Grumman Corporation (“Northrop”), RTX Corporation (“RTX”), Spirit AeroSystems Holdings, Inc. (“Spirit”), and Viasat, Inc. (“Viasat”) for the three and six months ended June 28, 2025 and June 29, 2024.

Previous wording

Boeing, Lockheed, Northrop, RTX, and Spirit represented the following percentages of total accounts receivable:

Current wording

Boeing, Lockheed, Northrop, RTX, Spirit, and Viasat represented the following percentages of total accounts receivable:

Previous wording

The net revenues and accounts receivable from Boeing, Lockheed, Northrop, RTX, and Spirit were diversified over a number of commercial, military and space programs and were generated by both operating segments.

Current wording

The net revenues and accounts receivable from Boeing, Lockheed, Northrop, RTX, Spirit, and Viasat were diversified over a number of commercial, military and space programs and were generated by both operating segments.

Previous wording

Gross profit consists of net revenues less cost of sales. Cost of sales includes the cost of production of finished products and other expenses related to inventory management, manufacturing quality, and order fulfillment. Gross profit as a percentage of net revenues increased year-over-year with the three months ended March 29, 2025 of 26.6%, compared to the three months ended March 30, 2024 of 24.6% primarily due to favorable product mix and higher manufacturing volume.

Current wording

Gross profit consists of net revenues less cost of sales. Cost of sales includes the cost of production of finished products and other expenses related to inventory management, manufacturing quality, and order fulfillment. Gross profit as a percentage of net revenues increased year-over-year with the three months ended June 28, 2025 of 26.6%, compared to the three months ended June 29, 2024 of 26.0% primarily due to lower other manufacturing costs and lower restructuring charges as a result of nearing the completion of the wind down of our Monrovia performance center, partially offset by unfavorable product mix and lower manufacturing volume.

Previous wording

SG&A expenses increased $1.6 million year-over-year in the three months ended March 29, 2025 compared to the three months ended March 30, 2024 primarily due to higher compensation and benefits expense of $1.7 million and higher professional services fees of $0.6 million, partially offset by lower other SG&A expenses of $0.7 million.

Current wording

SG&A expenses decreased $0.1 million year-over-year in the three months ended June 28, 2025 compared to the three months ended June 29, 2024, primarily due to lower professional services fees of $0.9 million, partially offset by higher other SG&A expenses of $0.6 million.

Previous wording

Restructuring charges decreased $0.9 million year-over-year in the three months ended March 29, 2025, compared to the three months ended March 30, 2024 primarily due to the winding down of the previously disclosed restructuring plan that was approved and commenced in April 2022. See Note 2 for further information.

Current wording

Restructuring charges decreased $1.5 million and $2.4 million (including $0.9 million recorded as cost of sales in both periods) year-over-year in the three and six months ended June 28, 2025, compared to the three and six months ended June 29, 2024, respectively, primarily due to the winding down of the previously disclosed restructuring plan that was approved and commenced in April 2022. See Note 2 for further information.

Previous wording

Interest expense decreased $0.6 million year-over-year in the three months ended March 29, 2025, compared to the three months ended March 30, 2024, primarily due to lower interest rates along with a lower debt balance.

Current wording

Interest expense decreased $1.0 million and $1.6 million year-over-year in the three and six months ended June 28, 2025, compared to the three and six months ended June 29, 2024, respectively, primarily due to lower interest rates along with a lower debt balance.

Previous wording

We recorded income tax expense of $2.8 million for the three months ended March 29, 2025 compared to $1.9 million for the three months ended March 30, 2024. The increase in income tax expense for the first quarter of 2025 compared to the first quarter of 2024 was primarily due to higher pre-tax income in the first quarter of 2025 compared to the first quarter of 2024.

Current wording

We recorded income tax expense of $3.4 million for the three months ended June 28, 2025 compared to $2.2 million for the three months ended June 29, 2024. The increase in income tax expense for the second quarter of 2025 compared to the second quarter of 2024 was primarily due to higher pre-tax income in the second quarter of 2025 compared to the second quarter of 2024.

Previous wording

Our total amount of unrecognized tax benefits was $4.7 million and $4.5 million as of March 29, 2025 and December 31, 2024, respectively. If recognized, $2.7 million would affect the effective tax rate. We record interest and penalty charges, if any, related to uncertain tax positions as a component of tax expense and unrecognized tax benefits. The amounts accrued for interest and penalty charges as of March 29, 2025 and December 31, 2024 were not significant. As a result of statute of limitations set to expire in the fourth quarter of 2025, we expect decreases to our unrecognized tax benefits of approximately $0.5 million in the next twelve months.

Current wording

Our total amount of unrecognized tax benefits was $4.9 million and $4.5 million as of June 28, 2025 and December 31, 2024, respectively. If recognized, $2.9 million would affect the effective tax rate. We record interest and penalty charges, if any, related to uncertain tax positions as a component of tax expense and unrecognized tax benefits. The amounts accrued for interest and penalty charges as of June 28, 2025 and December 31, 2024 were not significant. As a result of statute of limitations set to expire in the fourth quarter of 2025, we expect decreases to our unrecognized tax benefits of approximately $0.5 million in the next twelve months.

Previous wording

Net income, net income as a percentage of revenues, and earnings per share for the three months ended March 29, 2025 were $10.5 million, or 5.4% of revenues, or $0.69 per diluted share, respectively, compared to $6.8 million, or 3.6% of revenues, or $0.46 per diluted share, respectively, for the three months ended March 30, 2024. The increase in net income for the three months ended March 29, 2025 compared to the three months ended March 30, 2024 was primarily due to higher gross profit of $4.7 million and lower restructuring charges of $0.9 million, partially offset by higher SG&A expenses of $1.6 million.

Current wording

Net income, net income as a percentage of revenues, and earnings per share for the three months ended June 28, 2025 were $12.6 million, or 6.2% of revenues, or $0.82 per diluted share, respectively, compared to $7.7 million, or 3.9% of revenues, or $0.52 per diluted share, respectively, for the three months ended June 29, 2024. The increase in net income for the three months ended June 28, 2025 compared to the three months ended June 29, 2024 was primarily due to higher gross profit of $2.5 million, higher other income of $1.7 million, and lower restructuring charges of $1.5 million (the prior year included $0.9 million recorded as cost of sales), partially offset by higher income tax expense of $1.1 million.

Previous wording

We report our financial performance based upon the two reportable operating segments: Electronic Systems and Structural Systems. The results of operations differ between our reportable operating segments due to differences in competitors, customers, extent of proprietary deliverables and performance. The following table summarizes our business segment performance for the three months ended March 29, 2025 and March 30, 2024:

Current wording

We report our financial performance based upon our two reportable operating segments: Electronic Systems and Structural Systems. The results of operations differ between our reportable operating segments due to differences in competitors, customers, extent of proprietary deliverables and performance. The following table summarizes our business segment performance for the three and six months ended June 28, 2025 and June 29, 2024:

Previous wording

(2)The three months ended March 29, 2025 and March 30, 2024 each included less than $0.1 million of stock-based compensation expense recorded as cost of sales.

Current wording

(2)The three and six months ended June 28, 2025 each included $0.1 million of stock-based compensation expense recorded as cost of sales. The three and six months ended June 29, 2024 each included less than $0.1 million of stock-based compensation expense recorded as cost of sales.

Previous wording

(3)The three months ended March 29, 2025 and March 30, 2024 included less than $0.1 million and $0.1 million, respectively, of stock-based compensation expense recorded as cost of sales.

Current wording

(3)The three and six months ended June 28, 2025 each included $0.1 million of stock-based compensation expense recorded as cost of sales. The three and six months ended June 29, 2024 included less than $0.1 million and $0.1 million, respectively, of stock-based compensation expense recorded as cost of sales.

Previous wording

(1) The three months ended March 29, 2025 and March 30, 2024 included $0.8 million and $1.4 million, respectively, of stock-based compensation expense for awards with both performance and market conditions that will be settled in cash. The three months ended March 29, 2025 and March 30, 2024 each included less than $0.1 million of stock-based compensation expense recorded as cost of sales.

Current wording

(4)The three and six months ended June 28, 2025 included $0.6 million and $1.4 million, respectively, of stock-based compensation expense for awards with both performance and market conditions that will be settled in cash. The three and six months ended June 29, 2024 included $0.5 million and $1.9 million, respectively, of stock-based compensation expense for awards with both performance and market conditions that will be settled in cash.

Previous wording

Electronic Systems net revenues in the three months ended March 29, 2025 compared to the three months ended March 30, 2024 increased $2.2 million primarily due to the following in our key end-use markets:

Current wording

Electronic Systems net revenues in the three months ended June 28, 2025 compared to the three months ended June 29, 2024 increased $8.8 million primarily due to the following in our key end-use markets:

Previous wording

•$7.0 million lower revenues in our commercial aerospace end-use markets due to lower in-flight entertainment revenues and lower rates on large aircraft platforms.

Current wording

•$2.7 million lower revenues in our commercial aerospace end-use markets due to lower in-flight entertainment revenues and lower rates on large aircraft platforms.

Previous wording

The Structural Systems segment operating income in the three months ended March 29, 2025 compared to the three months ended March 30, 2024 increased $7.5 million primarily due to higher manufacturing volume, favorable product mix, and lower other manufacturing costs.

Current wording

Electronic Systems segment operating income in the three months ended June 28, 2025 compared to the three months ended June 29, 2024 increased $4.2 million primarily due to favorable product mix, higher manufacturing volume, and lower other manufacturing costs.

Previous wording

•$2.3 million higher revenues in our military and space end-use markets due to higher rates on selected rotary-wing aircraft platforms, partially offset by lower rates on selected fixed-wing aircraft platforms; partially offset by

Current wording

•$2.7 million higher revenues in our military and space end-use markets due to higher rates on selected rotary-wing aircraft platforms, partially offset by lower rates on selected fixed-wing aircraft platforms.

Previous wording

•$1.3 million lower revenues in our commercial aerospace end-use markets due to lower revenues from Boeing 737 MAX and lower rates on rotary-wing aircraft platforms.

Current wording

•$7.5 million lower revenues in our commercial aerospace end-use markets due to lower revenues from Boeing 737 MAX and lower rates on rotary-wing aircraft platforms, partially offset by growth in selected business jet platforms; partially offset by

Previous wording

In June 2020, a fire severely damaged our performance center in Guaymas, Mexico, which is part of our Structural Systems segment. We have insurance coverage up to a capped amount, less our deductible. The full financial impact cannot be estimated at this time. We have been working with our insurance carriers to determine ultimate responsibility for the fire. The loss of production from the Guaymas performance center was absorbed by our other existing performance centers, however, we have reestablished and are in the process of ramping up our manufacturing capabilities in a different leased facility in Guaymas. A neighboring, non-related manufacturing facility, also suffered fire damage during the same time as the fire that severely damaged our Guaymas performance center and filed a lawsuit against us seeking recovery for its losses. Subsequently, in July 2024, we received a subrogation demand from our landlord’s insurer, who also serves as one of our excess carriers, and with whom we have since entered into an informed consent and conflict of waiver agreement. In the interim, discovery in the litigation is ongoing, and we intend to defend these matters vigorously. Ultimate responsibility for the fire is still undetermined and damages to our former neighbor’s facility have yet to be quantified, and as such, there is no amount of loss that is probable and reasonably estimable at this time. If we are ultimately deemed to be responsible or partly responsible, it is possible we could incur a loss in excess of our insurance coverage limits, which could be material to our cash flow, liquidity, or financial results. See Note 10 to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.

Current wording

In June 2020, a fire severely damaged our performance center in Guaymas, Mexico, which is part of our Structural Systems segment. The loss of production from the Guaymas performance center was absorbed by our other existing performance centers, however, we have reestablished our operations and are in the process of certification with various customers and ramping up our manufacturing capabilities in a different leased facility in Guaymas. We have insurance coverage up to a capped amount, less our deductible. The insurance claim for damages to our operating assets and business interruption was deemed final and closed by our insurance company during the three months ended July 1, 2023.

Previous wording

CG&A expenses increased $2.7 million for the three months ended March 29, 2025 compared to the three months ended March 30, 2024 primarily due to higher compensation and benefits costs of $1.7 million and higher other corporate expenses of $0.9 million.

Current wording

CG&A expenses increased $2.6 million for the six months ended June 28, 2025 compared to the six months ended June 29, 2024, primarily due to higher compensation and benefits costs of $2.3 million and higher other corporate expenses of $1.3 million, partially offset by lower professional services fees of $0.9 million.

Previous wording

Adjusted earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, restructuring charges, and inventory purchase accounting adjustments (“Adjusted EBITDA”) were $30.9 million and $27.4 million for the three months ended March 29, 2025 and March 30, 2024, respectively.

Current wording

Adjusted earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, restructuring charges, and inventory purchase accounting adjustments (“Adjusted EBITDA”) were $32.4 million and $30.0 million for the three months ended June 28, 2025 and June 29, 2024, respectively.

Previous wording

•Restructuring charges may be useful to our investors in evaluating our core operating performance; and

Current wording

•Restructuring charges may be useful to our investors in evaluating our core operating performance;

Previous wording

•Purchase accounting inventory step-ups may be useful to our investors as they do not necessarily reflect the current or on-going cash charges related to our core operating performance.

Current wording

•Purchase accounting inventory step-ups may be useful to our investors as they do not necessarily reflect the current or on-going cash charges related to our core operating performance; and

Previous wording

The decrease in backlog was primarily in the military and space and commercial aerospace end-use markets, partially offset by an increase in industrial end-use markets. $756.0 million of total backlog is expected to be delivered over the next 12 months. The following table summarizes our backlog as of March 29, 2025 and December 31, 2024:

Current wording

The decrease in backlog was primarily in the military and space and commercial aerospace end-use markets. $714.0 million of total backlog is expected to be delivered over the next 12 months. The following table summarizes our backlog as of June 28, 2025 and December 31, 2024:

Previous wording

For each of the three months ended March 29, 2025 and March 30, 2024, we made the required quarterly amortization payments on the 2022 Term Loan of zero and $1.6 million, respectively. The required quarterly amortization payment due on March 31, 2025 is in our second fiscal quarter of 2025. We made no voluntary prepayments on our term loans during each of the three months ended March 29, 2025 and March 30, 2024.

Current wording

For the three months ended June 28, 2025 and June 29, 2024, we made the required quarterly amortization payments on the 2022 Term Loan of $3.1 million and $1.6 million, respectively. For each of the six months ended June 28, 2025 and June 29, 2024, we made the required quarterly amortization payments on the 2022 Term Loan of $3.1 million. The required quarterly amortization payments due on March 31, 2025 and June 30, 2025 were in our second and third fiscal quarters of 2025, respectively. We made no voluntary prepayments on our term loans during each of the three and six months ended June 28, 2025 and June 29, 2024.

Previous wording

In April 2022, management approved and commenced a restructuring plan that will position us for stronger performance. The restructuring plan will mainly reduce headcount and consolidate facilities. As a result of this restructuring plan, we analyzed the need to write-down inventory and impair long-lived assets, including operating lease right-of-use assets. As of March 29, 2025, we estimate the remaining amount of charges related to this initiative will be $0.5 million to $1.0 million of total pre-tax restructuring charges during 2025 for facility consolidation related expenses. The restructuring accrual for severance and benefits and other of $1.3 million as of March 29, 2025 are expected to be paid out during 2025. On an annualized basis, we anticipate these restructuring actions will result in total cost savings of $11.0 million to $13.0 million. See Note 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for further information.

Current wording

In April 2022, we approved and commenced a restructuring plan that will position us for stronger performance. The restructuring plan will mainly reduce headcount and consolidate facilities. As a result of this restructuring plan, we analyzed the need to write-down inventory and impair long-lived assets, including operating lease right-of-use assets. As of June 28, 2025, we estimate the remaining amount of charges related to this initiative will be $0.5 million to $1.0 million of total pre-tax restructuring charges during 2025 for facility consolidation related expenses. The restructuring accrual for severance and benefits and other of $1.2 million as of June 28, 2025 are expected to be paid out during 2025. On an annualized basis, we anticipate these restructuring actions will result in total cost savings of $11.0 million to $13.0 million. See Note 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for further information.

Previous wording

Net cash provided by operating activities for the three months ended March 29, 2025 was $0.8 million, compared to net cash used in operating activities of $1.6 million for the three months ended March 30, 2024. The higher net cash provided by operating activities during the first three months of 2025 was mainly due to a smaller increase in contract assets, smaller increase in inventories, and higher net income, partially offset by higher accounts receivable and a smaller increase in accounts payable.

Current wording

Net cash provided by operating activities for the six months ended June 28, 2025 was $23.2 million compared to $1.8 million for the six months ended June 29, 2024. The higher net cash provided by operating activities during the first six months of 2025 was mainly due to a smaller increase in contract assets, higher net income, and higher accounts payable, partially offset by higher accounts receivable.

Previous wording

Net cash used in investing activities was $4.8 million for the three months ended March 29, 2025, compared to $5.0 million in the three months ended March 30, 2024. The lower net cash used in investing activities during the first three months of 2025 was mainly due to lower purchases of property and equipment.

Current wording

Net cash used in investing activities was $7.0 million for the six months ended June 28, 2025, compared to $8.3 million in the six months ended June 29, 2024. The lower net cash used in investing activities during the first six months of 2025 was mainly due to proceeds from the sale of our Berryville, Arkansas facility. See Note 1 to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for further information.

Previous wording

Net cash used in financing activities was $2.4 million for the three months ended March 29, 2025, compared to $4.2 million for the three months ended March 30, 2024. The lower net cash used in financing activities during the first three months of 2025 was mainly due to lower repayments on our term loan that was due and paid on March 31, 2025, which occurred in our second fiscal quarter of 2025.

Current wording

Net cash used in financing activities was $16.2 million for the six months ended June 28, 2025, compared to $7.0 million for the six months ended June 29, 2024. The higher net cash used in financing activities during the first six months of 2025 was mainly due to higher repayments on our revolving credit facility.