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<SEC-DOCUMENT>0000892569-01-500082.txt : 20010307
<SEC-HEADER>0000892569-01-500082.hdr.sgml : 20010307
ACCESSION NUMBER: 0000892569-01-500082
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010228
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: DUCOMMUN INC /DE/
CENTRAL INDEX KEY: 0000030305
STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT PART & AUXILIARY EQUIPMENT, NEC [3728]
IRS NUMBER: 950693330
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 001-08174
FILM NUMBER: 1557821
BUSINESS ADDRESS:
STREET 1: 111 WEST OCEAN BOULEVARD
STREET 2: SUITE 900
CITY: LONG BEACH
STATE: CA
ZIP: 90802
BUSINESS PHONE: 5626240800
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>a70035e10-k.txt
<DESCRIPTION>FORM 10-K PERIOD ENDED DECEMBER 31, 2000
<TEXT>
<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 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 No. 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 90802-7901
- ----------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (562) 624-0800
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ---------------------------- ------------------------
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
-----------------
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
<PAGE> 2
The aggregate market value of the voting stock held by nonaffiliates of the
registrant was approximately $92,000,000 as of January 31, 2001.
The number of shares of common stock outstanding on January 31, 2001 was
9,604,457.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference:
(a) Annual Report to Shareholders (the "2000 Annual Report") for the
year ended December 31, 2000, incorporated partially in Part I and Part II
hereof (see Exhibit 13), and
(b) Proxy Statement for the 2001 Annual Meeting of Shareholders (the
"2001 Proxy Statement"), incorporated partially in Part III hereof.
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
Certain statements in the Form 10-K and documents incorporated by
reference contain forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Any such forward-looking statements 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 rates for Boeing commercial aircraft, the C-17 and the Space Shuttle
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, the
outcome of the lawsuit by Com Dev Consulting Ltd. against the Company, and other
factors beyond the Company's control.
2
<PAGE> 3
PART I
ITEM 1. BUSINESS
During 2000, Ducommun Incorporated ("Ducommun"), through its
subsidiaries (collectively, the "Company"), manufactured components and
assemblies principally for domestic and foreign commercial and military aircraft
and space programs. Domestic commercial aircraft programs include the Boeing
717, 737NG, 747, 757, 767 and 777. Foreign commercial aircraft programs include
the Airbus Industrie A330, A340 and A340-600 aircraft, Bombardier Business and
Regional Jets, and Dash 8. Major military aircraft programs include the Boeing
C-17 and F-18, Lockheed Martin F-16, various Sikorsky, Bell, Boeing and Augusta
helicopter programs, and advanced development programs. The Company is a
subcontractor to Lockheed Martin on the Space Shuttle external tank and a
supplier of components for the Space Shuttle, as well as for the International
Space Station.
In November 1999, Ducommun, through a wholly-owned subsidiary, acquired
the assets and assumed certain liabilities of Parsons Precision Products, Inc.
("Parsons"). In April 1999, Ducommun acquired the capital stock of Sheet Metal
Specialties Company ("SMS"). In August 1998, Ducommun sold the capital stock of
3dbm, Inc. ("3dbm"). In June 1998, Ducommun Technologies, Inc., a subsidiary of
Ducommun, acquired the capital stock of American Electronics, Inc. ("AEI").
AEROSTRUCTURAL PRODUCTS
Aerochem, Inc.
Ducommun's subsidiary, Aerochem, Inc. ("Aerochem"), is a major supplier
of close tolerance chemical milling services for the aerospace and aircraft
industries. Chemical milling removes material in specific patterns to reduce
weight in areas where full material thickness is not required. This
sophisticated etching process enables Aerochem to produce lightweight,
high-strength designs that would be impractical to produce by conventional
means. Jet engine components, wing leading edges and fuselage skins are examples
of products that require chemical milling.
Aerochem offers production-scale chemical milling on aluminum, titanium,
steel, nickel-base and super alloys. Aerochem also specializes in very large and
complex parts up to 50 feet long. Management believes that Aerochem is the
largest independent supplier of chemical milling services in the United States.
Many of the parts chemically milled by Aerochem are formed and machined by
AHF-Ducommun Incorporated.
AHF-Ducommun Incorporated
AHF-Ducommun Incorporated ("AHF"), another Ducommun subsidiary, supplies
aircraft and aerospace prime contractors with engineering, manufacturing and
testing of complex components using stretch forming and thermal forming
processes and computer- controlled machining. Stretch forming is a process for
manufacturing large, complex structural shapes primarily from aluminum sheet
metal extrusions. AHF has some of the
3
<PAGE> 4
largest and most sophisticated stretch forming presses in the United States.
Thermal forming is a metal working process conducted at high temperature for
manufacturing close tolerance titanium components. AHF designs and manufactures
the tooling required for the production of parts in both forming processes.
Certain components manufactured by AHF are machined with precision milling
equipment designed and constructed by AHF. AHF also employs computer-aided
design/manufacturing systems with three 5-axis gantry profile milling machines
and five 5-axis numerically-controlled routers to provide computer-controlled
machining and inspection of complex parts up to 100 feet long.
AHF has an integrated operation offering a broad range of capabilities.
From the design specifications of a customer, AHF is able to engineer,
manufacture, test and deliver the desired finished components. This process
depends on the skillful execution of several complex subtasks, including the
design and construction of special equipment. Management believes that the
ability of AHF to provide a full range of integrated capabilities represents a
competitive advantage.
Parsons Precision Products, Inc.
In November 1999, Ducommun, through a wholly-owned subsidiary, acquired
the assets and assumed certain liabilities of Parsons. Parsons is a leading
manufacturer of complex titanium hot-formed subassemblies and components for
commercial and military aerospace applications.
SEATING PRODUCTS
Brice Manufacturing Company, Inc.
Brice Manufacturing Company, Inc. ("Brice"), a subsidiary of Ducommun,
is an after-market supplier of aircraft seating products to many of the world's
largest commercial airlines. Products supplied by Brice include plastic and
metal seat parts, overhauled and refurbished seats, components for installation
of in-flight entertainment equipment, and other cabin interior components for
commercial aircraft.
In 1998, Brice introduced an original equipment manufacture ("OEM") 16G
coach-class aircraft seat. This new aircraft seat represents Brice's first major
OEM product.
ELECTROMECHANICAL PRODUCTS
Ducommun Technologies, Inc. (formerly Jay-El Products, Inc.)
Ducommun Technologies, Inc. ("DTI"), a subsidiary of Ducommun, develops,
designs and manufactures illuminated switches, switch assemblies and keyboard
panels used in many military aircraft, helicopter, commercial aircraft and
spacecraft programs, as well as ground support equipment and naval vessels. DTI
manufactures switches and panels where high reliability is a prerequisite.
Keyboard panels are lighted, feature push button switches, and are available
with sunlight readable displays. Some of the keyboard panels and illuminated
switches manufactured by DTI for military applications are night vision
goggle-compatible.
4
<PAGE> 5
DTI also develops, designs and manufactures microwave switches, filters
and other components used principally on commercial and military aircraft and
telecommunications satellites. DTI has developed several new products that apply
its existing microwave technology to nonaerospace markets, including the
wireless telecommunications industry.
In June 1998, DTI acquired the capital stock of AEI. AEI is a leading
manufacturer of high precision actuators, stepper motors, fractional horsepower
motors and resolvers principally for commercial and military space applications.
MechTronics of Arizona Corp.
MechTronics is a leading manufacturer of mechanical and
electromechanical enclosure products for the defense electronics and commercial
aviation markets. MechTronics has a fully integrated manufacturing capability,
including engineering, fabrication, machining, assembly, electronic integration
and related processes. MechTronics' products include sophisticated radar
enclosures, gyroscopes and indicators, aircraft avionics racks and shipboard
communications and control enclosures.
In April 1999, Ducommun acquired the capital stock of SMS. SMS is a
manufacturer of subassemblies for commercial and military aerospace
applications. SMS remained at its existing Chatsworth, California facility and
reports through MechTronics of Arizona Corp.
OTHER BUSINESS
3dbm, Inc.
In August 1998, Ducommun sold the capital stock of its wireless
communications subsidiary, 3dbm, Inc. ("3dbm"). The Company sold 3dbm because
the level of investment required to ensure the long-term viability of 3dbm in
the wireless system infrastructure business was more than the Company was
willing to commit.
DEFENSE AND SPACE PROGRAMS
A major portion of sales is derived from United States government
defense programs and space programs. Approximately 38 percent of 2000 sales were
related to defense programs and approximately 9 percent of 2000 sales were
related to space programs. These programs could be adversely affected by
reductions in defense spending and other government budgetary pressures which
would result in reductions, delays or stretch-outs of existing and future
programs. In addition, many of the Company's contracts covering defense and
space programs are subject to termination at the convenience of the customer (as
well as for default). In the event of termination for convenience, the customer
generally is required to pay the costs incurred by the Company and certain other
fees through the date of termination.
COMMERCIAL PROGRAMS
Approximately 53 percent of 2000 sales were related to commercial
aircraft programs, and nonaerospace commercial applications. The Company's
commercial sales depend
5
<PAGE> 6
substantially on aircraft manufacturer's production rates, which in turn depend
upon deliveries of new aircraft. Deliveries of new aircraft by aircraft
manufacturers are dependent on the financial capacity of the airlines and
leasing companies to purchase the aircraft. Sales of commercial aircraft could
be affected as a result of changes in new aircraft orders, or the cancellation
or deferral by airlines of purchases of ordered aircraft. The Company's sales
for commercial aircraft programs also could be affected by changes in its
customers' inventory levels and changes in its customers' aircraft production
build rates.
MAJOR CUSTOMERS
The Company had substantial sales to Boeing, Lockheed Martin and
Raytheon. During 2000, sales to Boeing were $61,109,000, or 37% of total sales;
sales to Lockheed Martin were $12,685,000, or 8% of total sales; and sales to
Raytheon were $14,242,000, or 9% of total sales. Sales to Boeing, Lockheed
Martin and Raytheon are diversified over a number of different commercial,
military and space programs.
COMPETITION
The Company competes with various companies, some of which are
substantially larger and have greater financial, technical and personnel
resources. The Company's ability to compete depends on the quality of goods and
services, competitive pricing and the ability to solve specific customer
problems.
BACKLOG
At December 31, 2000, backlog believed to be firm was approximately
$238,600,000, compared to $213,100,000 at December 31, 1999. Approximately
$103,100,000 of total backlog is expected to be delivered during 2001.
ENVIRONMENTAL MATTERS AND LEGAL
Aerochem uses various acid and alkaline solutions in the chemical
milling process, resulting in potential environmental hazards. Despite existing
waste recovery systems and continuing capital expenditures for waste reduction
and management, at least for the immediate future, Aerochem will remain
dependent on the availability and cost of remote hazardous waste disposal sites
or other alternative methods of disposal.
The Aerochem facility located in El Mirage, California has been directed
by California environmental agencies to investigate and take corrective action
for groundwater contamination. Based upon currently available information, the
Company has established a provision for the cost of such investigation and
corrective action. Aerochem expects to spend approximately $1 million for future
investigation and corrective action for groundwater contamination at its El
Mirage location. However, the Company's ultimate liability in connection with
the contamination 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 corrective action.
6
<PAGE> 7
Ducommun's other subsidiaries are also subject to environmental laws and
regulations. However, the quantities of hazardous materials handled, hazardous
wastes generated and air emissions released by these subsidiaries are relatively
small.
The Company anticipates that capital expenditures will continue to be
required for the foreseeable future to upgrade and maintain its environmental
compliance efforts. The Company does not expect to spend a material amount on
capital expenditures for environmental compliance during 2001.
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.
EMPLOYEES
At December 31, 2000, the Company employed 1,134 persons.
BUSINESS SEGMENT INFORMATION
The Company operates principally in only one business segment.
INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
In 2000, 1999 and 1998, foreign sales to manufacturers worldwide were
$26,267,000, $28,313,000 and $29,007,000, respectively.
The amounts of revenue, profitability and identifiable assets
attributable to foreign operations are not material when compared with the
revenue, profitability and identifiable assets attributed to United States
domestic operations during 2000, 1999 and 1998. The Company had no sales to a
foreign country greater than 5% of total sales in 2000, 1999 and 1998.
The Company is not subject to any foreign currency risks since all sales
are made in United States dollars.
ITEM 2. PROPERTIES
The Company occupies approximately 21 facilities with a total office and
manufacturing area of over 1,241,000 square feet, including both owned and
leased properties. At December 31, 2000, facilities which were in excess of
60,000 square feet each were occupied as follows:
7
<PAGE> 8
<TABLE>
<CAPTION>
Square Expiration
Location Company Feet of Lease
--------------------- --------------------------- ------- ----------
<S> <C> <C> <C>
El Mirage, California Aerochem 74,300 Owned
Orange, California Aerochem 76,200 Owned
Carson, California AHF-Ducommun 65,000 2004
Carson, California AHF-Ducommun 69,000 Owned
Carson, California AHF-Ducommun 283,000 Owned
Carson, California Ducommun Technologies 118,000 2002
Phoenix, Arizona MechTronics 100,000 2006
Parsons, Kansas Parsons Precision Products 120,000 Owned
</TABLE>
The Company's facilities are, for the most part, fully utilized,
although excess capacity exists from time to time based on product mix and
demand. Management believes that these properties are in good condition and
suitable for their present use.
Although the Company maintains standard property casualty insurance
covering its properties, the Company does not carry any earthquake insurance
because of the cost of such insurance. Most of the Company's properties are
located in Southern California, an area subject to frequent and sometimes severe
earthquake activity.
ITEM 3. LEGAL PROCEEDINGS
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 complaint seeks recovery of damages in excess of
$10,000,000, restitution of the $17,250,000 purchase price paid for 3dbm, and
recovery of punitive damages, costs and attorneys' fees. A jury trial of the
lawsuit is currently scheduled to begin on April 23, 2001. 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. However, because of the nature and inherent
uncertainties of litigation, should the outcome of this matter be unfavorable,
the Company may be required to pay damages and other expenses, which could have
a material adverse effect on its consolidated financial position and results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
8
<PAGE> 9
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information under the caption "Quarterly Common Stock Price
Information" on page 12 of the 2000 Annual Report is incorporated herein by
reference. No dividends were paid during 1999 or 2000 (see Exhibit 13).
ITEM 6. SELECTED FINANCIAL DATA
The information under the caption "Selected Financial Data" appearing on
page 12 of the 2000 Annual Report is incorporated herein by reference (see
Exhibit 13).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations" appearing on pages 13 through
16 of the 2000 Annual Report is incorporated herein by reference (see Exhibit
13).
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data under the captions
"Consolidated Statements of Income," "Consolidated Balance Sheets,"
"Consolidated Statements of Cash Flows," "Consolidated Statements of Changes in
Shareholders' Equity," and "Notes to Consolidated Financial Statements,"
together with the report thereon of PricewaterhouseCoopers LLP dated February
20, 2001, appearing on pages 17 through 28 of the 2000 Annual Report are
incorporated herein by reference (see Exhibit 13).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
9
<PAGE> 10
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of the Registrant
The information under the caption "Election of Directors" in the 2001
Proxy Statement is incorporated herein by reference.
Executive Officers of the Registrant
The following table sets forth the names and ages of all executive
officers of the Company (including subsidiary presidents), all positions and
offices held with the Company and brief accounts of business experience during
the past five years. Executive officers do not serve for any specified terms,
but are typically elected annually by the Board of Directors of the Company or,
in the case of subsidiary presidents, by the Board of Directors of the
respective subsidiaries.
<TABLE>
<CAPTION>
Positions and Offices Other Business
Held With Company Experience
Name (Age) (Year Elected) (Past Five Years)
- ----------------------- ----------------------------------------- ------------------------------------
<S> <C> <C>
Joseph C. Berenato (54) President (1996), Chief Executive Executive Vice President (1995),
Officer (1997) and Chairman of the Board Chief Operating Officer (1995-1996),
(1999) and Chief Financial Officer
(1991-1996) of the Company
Robert A. Borlet (60) Vice President, Manufacturing Operations President of Ducommun Technologies,
(1999) Inc. (1988 -1999)
James S. Heiser (44) Vice President (1990), --
Chief Financial Officer (1996), General
Counsel (1988), Secretary (1987), and
Treasurer (1995)
Kenneth R. Pearson (65) Vice President-Human Resources (1988) --
Michael W. Williams (46) Vice President, Corporate Development Vice President of Operations at H.R.
(1998) Textron; (1995 - 1998)
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
Positions and Offices Other Business
Held With Company Experience
Name (Age) (Year Elected) (Past Five Years)
- ----------------------- ----------------------------------------- ------------------------------------
<S> <C> <C>
Samuel D. Williams (52) Vice President (1991) and Controller --
(1988)
Jeffrey P. Abbott (49) President, Aerochem, Inc. (1998) Vice President of Operations
(1992-1997); Executive Vice President
and General Manager (1997-1998) of
Aerochem
Paul L. Graham (56) President of Ducommun Technologies, Inc. President of 3dbm, Inc.
(1999) (1995-1998); President of Com Dev
Wireless Systems (1998-1999)
Robert B. Hahn (58) President of MechTronics of Arizona President of Aerochem, Inc.
Corp. (1997) (1987-1997)
Robert L. Hansen (47) President, AHF-Ducommun --
Incorporated (1989)
Richard A. Klisz (45) President of Brice Manufacturing Vice President, Sales and Marketing
Company, Inc. (2000) of Aerochem, Inc. (1994-2000)
</TABLE>
ITEM 11. EXECUTIVE COMPENSATION
The information under the caption "Compensation of Executive Officers"
in the 2001 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the 2001 Proxy Statement is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the caption "Election of Directors" contained in
the paragraph immediately following the table in the 2001 Proxy Statement is
incorporated herein by reference.
11
<PAGE> 12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following consolidated financial statements of Ducommun Incorporated
and subsidiaries, included in the 2000 Annual Report, are incorporated
by reference in Item 8 of this report. Page numbers refer to the 2000
Annual Report:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Statements of Income - Years ended December 31, 2000, 1999
and 1998 17
Consolidated Balance Sheets - December 31, 2000 and 1999 18
Consolidated Statements of Cash Flows - Years ended December 31,
2000, 1999 and 1998 19
Consolidated Statements of Changes in Shareholders' Equity - Years 20
Ended December 31, 2000, 1999 and 1998
Notes to Consolidated Financial Statements 21-27
Report of Independent Accountants 28
</TABLE>
2. Financial Statement Schedule
The following schedule for the years ended December 31, 2000, 1999 and
1998 is filed herewith:
Schedule VIII - Valuation and Qualifying Accounts and Reserves
All other schedules have been omitted because they are not applicable,
not required, or the information has been otherwise supplied in the
financial statements or notes thereto.
(b) Reports on Form 8-K
None.
(c) Exhibits
12
<PAGE> 13
3.1 Restated Certificate of Incorporation filed with the Delaware
Secretary of State on May 29, 1990. Incorporated by reference to Exhibit
3.1 to Form 10-K for the year ended December 31, 1990.
3.2 Certificate of Amendment of Certificate of Incorporation filed with
the Delaware Secretary of State on May 27, 1998. Incorporated by
reference to Exhibit 3.2 to Form 10-K for the year ended December 31,
1998.
3.3 Bylaws as amended and restated on May 3, 2000.
4.1 Credit Agreement dated as of September 29, 2000 among Ducommun
Incorporated and the lenders referred to therein. Incorporated by
reference to Exhibit 4.1 to Form 10-Q for the quarter ended September
30, 2000.
4.2 Rights Agreement dated as of February 17, 1999 by and between
Ducommun Incorporated and Harris Trust Company of California as Rights
Agent. Incorporated by reference to Exhibit 4.2 to Form 8-K dated
February 17, 1999.
4.3 Conversion Agreement dated July 22, 1992 between Ducommun and the
holders of the 9% Convertible Subordinated Notes due 1998. Incorporated
by reference to Exhibit 1 to Form 8-K dated July 29, 1992.
* 10.1 1981 Stock Incentive Plan as amended and restated March 21, 1990.
Incorporated by reference to Exhibit 10.2 to Form 10-K for the year
ended December 31, 1989.
* 10.2 1990 Stock Option Plan. Incorporated by reference to Exhibit 10.4
to Form 10-K for the year ended December 31, 1990.
* 10.3 1994 Stock Incentive Plan, as amended May 7, 1998. Incorporated
by reference to Exhibit 10.3 to Form 10-K for the year ended December
31, 1997.
* 10.4 Form of Nonqualified Stock Option Agreement, for grants to
employees prior to January 1, 1999, under the 1994 Stock Incentive Plan,
the 1990 Stock Option Plan and the 1981 Stock Incentive Plan.
Incorporated by reference to Exhibit 10.5 to Form 10-K for the year
ended December 31, 1990.
* 10.5 Form of Nonqualified Stock Option Agreement, for grants to
employees after January 1, 1999, under the 1994 Stock Incentive Plan and
the 1990 Stock Option Plan. Incorporated by reference to Exhibit 10.5 to
Form 10-K for the year ended December 31, 1999.
* 10.6 Form of Incentive Stock Option Agreement under the 1994 Stock
Incentive Plan. Incorporated by reference to Exhibit 10.5 to Form 10-K
for the year ended December 31, 1996.
13
<PAGE> 14
* 10.7 Form of Nonqualified Stock Option Agreement for nonemployee
directors under the 1994 Stock Incentive Plan. Incorporated by reference
to Exhibit 10.7 to Form 10-K for the year ended December 31, 1999.
* 10.8 Form of Key Executive Severance Agreement entered with ten
current executive officers of Ducommun or its subsidiaries. Incorporated
by reference to Exhibit 10.7 to Form 10-K for the year ended December
31, 1999. All of the Key Executive Severance Agreements are identical
except for the name of the executive officer and the date of the
Agreement:
<TABLE>
<CAPTION>
Executive Officer Date of Agreement
----------------- -----------------
<S> <C>
Jeffrey P. Abbott April 10, 2000
Joseph C. Berenato November 4, 1991
Robert A. Borlet July 27, 1988
Paul L. Graham April 10, 2000
Robert B. Hahn July 27, 1988
Robert L. Hansen May 5, 1993
James S. Heiser July 27, 1988
Kenneth R. Pearson July 27, 1988
Michael W. Williams October 25, 1999
Samuel D. Williams June 21, 1989
</TABLE>
* 10.9 Form of Indemnity Agreement entered with all directors and
officers of Ducommun. Incorporated by reference to Exhibit 10.8 to Form
10-K for the year ended December 31, 1990. All of the Indemnity
Agreements are identical except for the name of the director or officer
and the date of the Agreement:
<TABLE>
<CAPTION>
Director/Officer Date of Agreement
---------------- -----------------
<S> <C>
Norman A. Barkeley July 29, 1987
Joseph C. Berenato November 4, 1991
Eugene P. Conese, Jr. January 26, 2000
Ralph D. Crosby, Jr. January 26, 2000
James S. Heiser May 6, 1987
Kenneth R. Pearson July 27, 1988
Michael W. Williams February 26, 1999
Samuel D. Williams November 11, 1988
H. Frederick Christie October 23, 1985
Robert C. Ducommun December 31, 1985
Kevin S. Moore October 15, 1994
Thomas P. Mullaney April 8, 1987
</TABLE>
* 10.10 Description of 2001 Executive Officer Bonus Arrangement.
14
<PAGE> 15
* 10.11 Directors' Deferred Compensation and Retirement Plan, as amended
October 29, 1993. Incorporated by reference to Exhibit 10.9 to Form 10-K
for the year ended December 31, 1993.
* 10.12 Ducommun Incorporated Executive Retirement Plan dated May 5,
1993. Incorporated by reference to Exhibit 10.2 to Form 10-Q for the
quarter ended July 3, 1993.
* 10.13 Ducommun Incorporated Executive Compensation Deferral Plan dated
May 5, 1993. Incorporated by reference to Exhibit 10.3 to Form 10-Q for
the quarter ended July 3, 1993.
* 10.14 Ducommun Incorporated Executive Compensation Deferral Plan No. 2
dated October 15, 1994. Incorporated by reference to Exhibit 10.12 to
Form 10-K for the year ended December 31, 1994.
10.15 Asset Purchase and Sale Agreement dated as of November 8, 1999
among Ducommun Incorporated, Ducommun Acquisition Corporation, Jordan
Industries, Inc., and Parsons Precision Products, Inc. Incorporated by
reference to Exhibit 2.1 to Form 8-K dated November 23, 1999.
11 Reconciliation of the Numerators and Denominators of the Basic and
Diluted Earnings Per Share Computations
13 2000 Annual Report to Shareholders (not deemed to be filed except as
previously incorporated by reference).
21 Subsidiaries of registrant
23 Consent of PricewaterhouseCoopers LLP
- -------------------
* Indicates an executive compensation plan or arrangement.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and 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
Date: February 23, 2001 By: /s/ Joseph C. Berenato
--------------------------------
Joseph C. Berenato
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been duly signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: February 23, 2001 By: /s/ Joseph C. Berenato
--------------------------------
Joseph C. Berenato
Chairman of the Board, President
and Chief Executive Officer
(Principal Executive Officer)
Date: February 23, 2001 By: /s/ James S. Heiser
--------------------------------
James S. Heiser
Vice President,
Chief Financial Officer,
General Counsel,
Secretary and Treasurer
(Principal Financial Officer)
Date: February 23, 2001 By: /s/ Samuel D. Williams
--------------------------------
Samuel D. Williams
Vice President,
Controller and Assistant
Treasurer
(Principal Accounting Officer)
16
<PAGE> 17
DIRECTORS
By: /s/ Norman A. Barkeley
------------------------------------ Date: February 23, 2001
Norman A. Barkeley
By: /s/ Joseph C. Berenato Date: February 23, 2001
------------------------------------
Joseph C. Berenato
By: /s/ Eugene P. Conese, Jr. Date: February 23, 2001
------------------------------------
Eugene P. Conese, Jr.
By: /s/ Ralph D. Crosby, Jr. Date: February 23, 2001
------------------------------------
Ralph D. Crosby, Jr.
By: /s/ H. Frederick Christie Date: February 23, 2001
------------------------------------
H. Frederick Christie
By: /s/ Robert C. Ducommun Date: February 23, 2001
------------------------------------
Robert C. Ducommun
By: /s/ Kevin S. Moore Date: February 23, 2001
------------------------------------
Kevin S. Moore
By: /s/ Thomas P. Mullaney Date: February 23, 2001
------------------------------------
Thomas P. Mullaney
17
<PAGE> 18
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors
of Ducommun Incorporated:
Our audits of the consolidated financial statements referred to in our report
dated February 20, 2001 appearing in the 2000 Annual Report to Shareholders of
Ducommun Incorporated (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the financial statement schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Los Angeles, California
February 20, 2001
18
<PAGE> 19
DUCOMMUN INCORPORATED
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
SCHEDULE VIII
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------------------- ---------- ------------------------------- ------------- ----------
Additions
-------------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
- -------------------- ---------- ---------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 2000
Allowance for
Doubtful Accounts $ 153,000 $1,061,000 $ 34,000(a) $ 67,000(b) $1,160,000
$ 18,000(c) $ 39,000(c)
FOR THE YEAR ENDED DECEMBER 31, 1999
Allowance for
Doubtful Accounts $ 125,000 $ 25,000 $ 39,000(c) $ 36,000(b) $ 153,000
FOR THE YEAR ENDED DECEMBER 31, 1998
Allowance for
Doubtful Accounts $ 359,000 $ 7,000 $ -- $ 194,000(a) $ 125,000
$ 47,000(b)
</TABLE>
(a) Collections on previously written off accounts.
(b) Write-offs on uncollectible accounts.
(c) Changes in allowance for doubtful accounts related to acquisitions in
1999.
19
<PAGE> 20
EXHIBIT INDEX
Number
------
3.1 Restated Certificate of Incorporation filed with the Delaware
Secretary of State on May 29, 1990. Incorporated by reference to Exhibit
3.1 to Form 10-K for the year ended December 31, 1990.
3.2 Certificate of Amendment of Certificate of Incorporation filed with
the Delaware Secretary of State on May 27, 1998. Incorporated by
reference to Exhibit 3.2 to Form 10-K for the year ended December 31,
1998.
3.3 Bylaws as amended and restated on May 3, 2000.
4.1 Credit Agreement dated as of September 29, 2000 among Ducommun
Incorporated and the lenders referred to therein. Incorporated by
reference to Exhibit 4.1 to Form 10-Q for the quarter ended September
30, 2000.
4.2 Rights Agreement dated as of February 17, 1999 by and between
Ducommun Incorporated and Harris Trust Company of California as Rights
Agent. Incorporated by reference to Exhibit 4.2 to Form 8-K dated
February 17, 1999.
4.3 Conversion Agreement dated July 22, 1992 between Ducommun and the
holders of the 9% Convertible Subordinated Notes due 1998. Incorporated
by reference to Exhibit 1 to Form 8-K dated July 29, 1992.
* 10.1 1981 Stock Incentive Plan as amended and restated March 21, 1990.
Incorporated by reference to Exhibit 10.2 to Form 10-K for the year
ended December 31, 1989.
* 10.2 1990 Stock Option Plan. Incorporated by reference to Exhibit 10.4
to Form 10-K for the year ended December 31, 1990.
* 10.3 1994 Stock Incentive Plan, as amended May 7, 1998. Incorporated
by reference to Exhibit 10.3 to Form 10-K for the year ended December
31, 1997.
* 10.4 Form of Nonqualified Stock Option Agreement, for grants to
employees prior to January 1, 1999, under the 1994 Stock Incentive Plan,
the 1990 Stock Option Plan and the 1981 Stock Incentive Plan.
Incorporated by reference to Exhibit 10.5 to Form 10-K for the year
ended December 31, 1990.
* 10.5 Form of Nonqualified Stock Option Agreement, for grants to
employees after January 1, 1999, under the 1994 Stock Incentive Plan and
the 1990 Stock Option Plan. Incorporated by reference to Exhibit 10.5 to
Form 10-K for the year ended December 31, 1999.
* 10.6 Form of Incentive Stock Option Agreement under the 1994 Stock
Incentive Plan. Incorporated by reference to Exhibit 10.5 to Form 10-K
for the year ended December 31, 1996.
<PAGE> 21
* 10.7 Form of Nonqualified Stock Option Agreement for nonemployee
directors under the 1994 Stock Incentive Plan. Incorporated by reference
to Exhibit 10.7 to Form 10-K for the year ended December 31, 1999.
* 10.8 Form of Key Executive Severance Agreement entered with ten
current executive officers of Ducommun or its subsidiaries. Incorporated
by reference to Exhibit 10.7 to Form 10-K for the year ended December
31, 1999. All of the Key Executive Severance Agreements are identical
except for the name of the executive officer and the date of the
Agreement:
<TABLE>
<CAPTION>
Executive Officer Date of Agreement
----------------- -----------------
<S> <C>
Jeffrey P. Abbott April 10, 2000
Joseph C. Berenato November 4, 1991
Robert A. Borlet July 27, 1988
Paul L. Graham April 10, 2000
Robert B. Hahn July 27, 1988
Robert L. Hansen May 5, 1993
James S. Heiser July 27, 1988
Kenneth R. Pearson July 27, 1988
Michael W. Williams October 25, 1999
Samuel D. Williams June 21, 1989
</TABLE>
* 10.9 Form of Indemnity Agreement entered with all directors and
officers of Ducommun. Incorporated by reference to Exhibit 10.8 to Form
10-K for the year ended December 31, 1990. All of the Indemnity
Agreements are identical except for the name of the director or officer
and the date of the Agreement:
<TABLE>
<CAPTION>
Director/Officer Date of Agreement
---------------- -----------------
<S> <C>
Norman A. Barkeley July 29, 1987
Joseph C. Berenato November 4, 1991
Eugene P. Conese, Jr. January 26, 2000
Ralph D. Crosby, Jr. January 26, 2000
James S. Heiser May 6, 1987
Kenneth R. Pearson July 27, 1988
Michael W. Williams February 26, 1999
Samuel D. Williams November 11, 1988
H. Frederick Christie October 23, 1985
Robert C. Ducommun December 31, 1985
Kevin S. Moore October 15, 1994
Thomas P. Mullaney April 8, 1987
</TABLE>
* 10.10 Description of 2001 Executive Officer Bonus Arrangement.
<PAGE> 22
* 10.11 Directors' Deferred Compensation and Retirement Plan, as amended
October 29, 1993. Incorporated by reference to Exhibit 10.9 to Form 10-K
for the year ended December 31, 1993.
* 10.12 Ducommun Incorporated Executive Retirement Plan dated May 5,
1993. Incorporated by reference to Exhibit 10.2 to Form 10-Q for the
quarter ended July 3, 1993.
* 10.13 Ducommun Incorporated Executive Compensation Deferral Plan dated
May 5, 1993. Incorporated by reference to Exhibit 10.3 to Form 10-Q for
the quarter ended July 3, 1993.
* 10.14 Ducommun Incorporated Executive Compensation Deferral Plan No. 2
dated October 15, 1994. Incorporated by reference to Exhibit 10.12 to
Form 10-K for the year ended December 31, 1994.
10.15 Asset Purchase and Sale Agreement dated as of November 8, 1999
among Ducommun Incorporated, Ducommun Acquisition Corporation, Jordan
Industries, Inc., and Parsons Precision Products, Inc. Incorporated by
reference to Exhibit 2.1 to Form 8-K dated November 23, 1999.
11 Reconciliation of the Numerators and Denominators of the Basic and
Diluted Earnings Per Share Computations
13 2000 Annual Report to Shareholders (not deemed to be filed except as
previously incorporated by reference).
21 Subsidiaries of registrant
23 Consent of PricewaterhouseCoopers LLP
- -------------------
* Indicates an executive compensation plan or arrangement.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.3
<SEQUENCE>2
<FILENAME>a70035ex3-3.txt
<DESCRIPTION>EXHIBIT 3.3
<TEXT>
<PAGE> 1
EXHIBIT 3.3
As Amended May 3, 2000
BYLAWS
OF
DUCOMMUN INCORPORATED
ARTICLE I
Offices
Section 1. Registered Office. The Registered Office of Ducommun
Incorporated (hereinafter called the Corporation) in the State of Delaware shall
be at 32 Loockerman Square, Suite L-100, in the City of Dover 19901, County of
Kent, and the name of the Registered Agent in charge thereof shall be
Prentice-Hall Corporation System, Inc.
Section 2. Principal Office. The principal office for the transaction of
business of the Corporation shall be 111 West Ocean Boulevard, Suite 900, in the
City of Long Beach, County of Los Angeles, State of California. The Board of
Directors has full power and authority to change said principal office from one
location to another, whether within or outside said City, County or State, by
amendment of this Section 2.
Section 3. Other Offices. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors may from time to time determine as the
business of the Corporation may require.
ARTICLE II
Stockholders
Section 1. Annual Meetings. The Annual Meeting of Stockholders shall be
held at 9:00 o'clock a.m. Pacific Time on the first Wednesday of May each year,
if not a legal holiday, in which case the annual meeting shall be held on the
next business day following, or on such other date as shall be designated by the
Board of Directors, for the purpose of electing Directors and for the
transaction of such other business as may be brought before the meeting. If such
annual meeting is not held, or the Directors are not elected thereat, Directors
may be elected at a special meeting held for that purpose, and it shall be the
duty of the Chairman of the Board of Directors, the President, any Executive
Vice President, any Senior Vice President, any Vice President or the Secretary,
upon the demand of any stockholder entitled to vote, to call such special
meeting.
Section 2. Special Meetings. Special meetings of the stockholders for
any purpose or purposes may be called at any time by the Board of Directors or
by a majority of the members of the Board of Directors.
2
<PAGE> 2
Section 3. Notice of Meetings. Except as otherwise required by law,
notice of meetings of stockholders, annual or special, shall be given to
stockholders entitled to vote thereat by the Secretary or an Assistant Secretary
or other person charged with that duty not less than ten (10) nor more than
sixty (60) days before the date of any such meeting. Such notice may be printed,
typewritten, or in handwriting, and may be given to any stockholder either
personally or by sending a copy of the notice through the mail, or by telegram,
charges prepaid, to his address appearing on the books of the Corporation or
supplied by him to the Corporation for the purpose of notice. Except as
otherwise expressly required by law, no publication of any notice of a meeting
of the stockholders shall be required. Every notice of a meeting of the
stockholders shall state the place, date and hour of the meeting, and in the
case of a special meeting, the purpose or purposes for which the meeting is
called.
Section 4. Place of Meetings. All meetings of the stockholders shall be
held at the principal office of the Corporation in the State of California or at
such other place within or without the State of Delaware as the Board of
Directors may from time to time designate.
Section 5. Quorum. A quorum at any meeting of the stockholders shall
consist of stockholders holding a majority of the voting power of the shares of
this Corporation outstanding and entitled to vote thereat, represented either in
person or by proxy, except as otherwise specifically provided by law or in the
Certificate of Incorporation. In the absence of a quorum, any meeting of
stockholders may be adjourned from time to time by the vote of a majority of the
voting stock, the holders of which are either present in person or represented
by proxy thereat. The stockholders present at a meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
Section 6. Adjournments. When a meeting is adjourned for thirty (30)
days or more, notice of the adjourned meeting shall be given as in the case of
the original meeting, but when a meeting is adjourned for less than thirty (30)
days it is not necessary to give any notice of the time and place of the
adjourned meeting or of the business to be transacted thereat other than by
announcement at the meeting at which the adjournment is taken. At any such
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
noticed.
Section 7. Organization. The Chairman of the Board of Directors, or, in
his absence, the President, or in the absence of the Chairman of the Board of
Directors and the President, the Executive Vice President, a Senior Vice
President or a Vice President shall call meetings of stockholders to order, and
shall act as Chairman of such meetings. In the absence of the Chairman of the
Board of Directors, the President, the Executive Vice President, any Senior Vice
President and the Vice Presidents, the stockholders shall appoint a Chairman for
such meeting. The Secretary of the Corporation shall act as Secretary at all
meetings of the stockholders, but in the absence of the Secretary at any meeting
of the stockholders, the presiding officer may appoint any person to act as
Secretary of the meeting.
Section 8. Voting
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
3
<PAGE> 3
(i) on the date fixed pursuant to ARTICLE II, Section 11
of these Bylaws as the record date for the determination of
stockholders entitled to notice of and to vote at such meeting,
or
(ii) if no such record date shall have been so fixed,
then (a) at the close of business on the day next preceding the
day on which notice of the meeting shall be given, or (b) if
notice of the meeting shall be waived, at the close of business
on the day next preceding the day on which the meeting shall be
held.
(b) Shares of its own stock belonging to the Corporation shall not be
entitled to vote. Persons holding in a fiduciary capacity stock of the
Corporation shall be entitled to vote such stock so held. A person whose stock
is pledged shall be entitled to vote such stock, unless in the transfer by the
pledger on the books of the Corporation he shall have expressly empowered the
pledgee to vote thereon, in which case only the pledgee, or his proxy, may
represent such stock and vote thereon. Stock having voting power standing of
record in the names of two or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the entirety or
otherwise, or with respect to which two or more persons have the same fiduciary
relationship, shall be voted in accordance with the provisions of the General
Corporation Law of the State of Delaware.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder or by his attorney thereunto authorized
and delivered to the Secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the Secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders all
matters, except as otherwise provided in the Certificate of Incorporation, these
Bylaws or bylaw, shall be decided by the vote of majority in voting interest of
the stockholders present in person or by proxy and entitled to vote thereat and
thereon, a quorum being present. The vote at any meeting of the stockholders on
any question need not be by ballot, unless so directed by the Chairman of the
meeting. On a vote by ballot each ballot shall be signed by the stockholder
voting, or by his proxy, if there be such proxy, and it shall state the number
of shares voted.
Section 9. Inspectors of Election. In advance of any meeting of
stockholders, the Board of Directors may appoint inspectors of election to act
at such meeting or any adjournment thereof. If inspectors of election be not so
appointed, the Chairman of any such meeting may make such appointment at the
meeting. The number of inspectors shall be either one or three.
Section 10. Consent of Absentees. The transactions of any meeting of
stockholders, either annual or special, however called and noticed, shall be as
valid as though had at a meeting duly held after regular call and notice, if a
quorum be present either in person or by proxy, and if, either before or after
the meeting, each of the stockholders entitled to vote, not present in person or
by proxy, signs a written waiver of notice. All such waivers shall be filed with
the corporate records or made a part of the minutes of the meeting. Attendance
of a person at a meeting of stockholders shall constitute a waiver of notice of
such meeting, except when the stockholder attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
4
<PAGE> 4
Section 11. Record Date and Closing Stock Books. The Board of Directors
may fix a record date for the determination of the stockholders entitled to
notice of and to vote at any meeting of stockholders, or for the determination
of the stockholders entitled to receive any dividend or distribution or any
allotment of rights, or to exercise rights in respect to any change, conversion
or exchange of shares. The record date so fixed shall not be more than sixty
(60) nor less than ten (10) days before the date of any such meeting, nor more
than sixty (60) days prior to any other action. When a record date is so fixed,
only stockholders who are such of record on that date are entitled to notice of
and to vote at the meeting or to receive the dividend, distribution, or
allotment of rights, or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the Corporation after
the record date. The Board of Directors may close the books of the Corporation
against transfers of shares during the whole or any part of a period not more
than sixty (60) days prior to the date of a stockholders' meeting, the date when
the right to any dividend, distribution, or allotment of rights vests, or the
effective date of any change, conversion or exchange of shares. A determination
of stockholders entitled to notice of or to vote at a meeting of stockholders
shall apply to any adjournment of such meeting; provided, however, that the
Board of Directors may fix a new record date for the adjourned meeting.
Section 12. Conduct of Meetings. The Chairman of the Board of Directors
shall have complete authority to establish rules of conduct governing all
meetings of stockholders. These rules may include, but shall not be limited to,
rules related to attendance, questions from the audience and similar matters.
Notwithstanding the above, the nomination at any meeting of stockholders of any
person to serve as a Director shall not be valid unless (i) the nomination of
such person has been approved by resolution of the Board of Directors of the
Corporation, or (ii) notice of the nomination of such person has been delivered
to the Secretary of the Corporation not less than 120 days prior to the date of
the meeting of stockholders.
5
<PAGE> 5
(Section 1(b) and 1(c) Amended 5/03/00)
ARTICLE III
Board of Directors
Section 1(a). Powers. The corporate powers, business and property of
this Corporation shall be exercised, conducted and controlled by a Board of
Directors. In addition to the powers and authorities expressly conferred upon it
by these Bylaws, the Board may exercise all such powers and do all such lawful
acts and things as are not by statute or by these Bylaws directed or required to
be exercised or done by the stockholders. Directors need not be stockholders.
Section 1(b). Minimum and Maximum Number. The authorized number of
Directors of this Corporation shall be not less than six (6) nor more than eight
(8) until changed by an amendment of this Bylaw; the exact number of Directors
shall be fixed, within the limits specified in this Section 1(b), by a Bylaw or
amendment thereof to be numbered as Section 1(c).
Section 1(c). Exact Number of Directors. The exact number of Directors
of this Corporation is eight (8) until changed within the limits specified in
Section 1(b) or this ARTICLE III by a Bylaw duly adopted amending this Section
1(c).
Section 2. Vacancies. In case of a vacancy in the Directors through
death, resignation, disqualification, or other cause, the remaining Directors,
though less than a quorum, by affirmative vote of a majority thereof, or the
sole remaining Director, may elect a successor or successors to hold office for
the unexpired portion of the term of the Director whose place shall be vacant,
and until the election of his successor.
Section 3. Place of Meeting. The Directors may hold their meetings and
have an office and keep the books of the Corporation in such place or places
within or without the State of Delaware as the Board may from time to time
determine.
Section 4(a). Regular Meetings. By resolution and notice thereof to all
the Directors at the time in office, the Board of Directors may provide that
regular meetings of said Board shall be held at stated intervals and at a place
to be fixed in such resolution. In case such regular meetings are provided for,
it shall not be necessary to give notice of any such meetings, or of the
business to be transacted. A meeting of the Board of Directors may be held
without notice immediately after the Annual Meeting of Stockholders.
Section 4(b). Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman or the Board of Directors, the
President, any two Vice Presidents, any two Directors, or by the sole remaining
Director. Written notice of the time and place of special meetings shall be
delivered personally to each Director or sent to each Director by mail or other
form of written communication, charges prepaid, addressed at his business
address or his residence address, as either may be shown upon the records of the
Corporation, or if not so shown, or not readily ascertainable, at the principal
office of the Corporation. In case such notice is delivered personally it shall
be delivered at least twenty-four hours prior to the time of the holding of the
meeting. In case such notice is sent by TWX, Telex, or Telegram, it shall be
transmitted or delivered to the telegraph company nearest to the principal
office of the Corporation at least
6
<PAGE> 6
twenty-four hours prior to the time of the holding of the meeting. In case such
notice is mailed, it shall be deposited in the United States mail at least sixty
hours prior to the time of the holding of the meeting. Except where otherwise
required by law or by these Bylaws, notice of the purpose of a special meeting
need not be given. Notice of any meeting of the Board of Directors shall not be
required to be given to any Director who shall have waived such notice and such
notice shall be deemed to have been waived by any Director who is present at
such meeting.
Section 5. Quorum. A majority of the authorized number of Directors
shall constitute a quorum for the transaction of business, but if at any meeting
of the Board there shall be less than a quorum present, a majority of those
present may adjourn the meeting from time to time. Every act or decision done or
made by a majority of the Directors present at a meeting duly held at which a
quorum is present shall be regarded as the act of the Board of Directors, unless
a greater number be required by law or by the Certificate of Incorporation.
Section 6. Action Without Meeting. Any action required or permitted to
be taken by the Board of Directors may be taken without a meeting if all members
of the Board shall individually or collectively consent in writing to such
action and such written consent or consents shall be filed with the minutes of
the proceedings of the Board. Such action by written consent shall have the same
force and effect as a unanimous vote of the Directors.
Section 7. Compensation of Directors. Unless otherwise provided by the
Certificate of Incorporation, the Board of Directors shall have authority to fix
the compensation of Directors. Directors may be paid a fixed sum for attendance
at each meeting of the Board of Directors and may be paid a stated compensation
for serving as Directors. Directors may also be paid their expenses, if any, for
attending each meeting of the Board of Directors. No payments to Directors shall
preclude any Director from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 8. Presiding Officers. At all meetings of the Board of
Directors, the Chairman of the Board of Directors, or, in his absence, the
President of the Corporation, or in the absence of the Chairman of the Board of
Directors and the President, a Chairman chosen by the Directors present shall
preside.
Section 9. Election of Officers. At the first meeting of the Board of
Directors each year (at which a quorum shall be present) held next after the
Annual Meeting of Stockholders, the Board of Directors shall proceed to the
election of the Officers of the Corporation.
Section 10. Committees of the Board of Directors. The Board of Directors
may by resolution appoint an Executive Committee and other committees. Such
Executive Committee and other committees shall be composed of two or more
members of this Board of Directors and shall have such powers as may be
expressly delegated to them by resolution of the Board of Directors, except that
no such committee shall have the power to amend the Certificate of
Incorporation, to adopt an agreement of merger or consolidation, to recommend to
the stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, to recommend to the stockholders the
dissolution of the Corporation or a revocation of a dissolution, or to adopt,
amend or repeal Bylaws. The Executive Committee, if there shall be one, shall
have the right and authority to declare dividends. The Board of Directors shall
have the authority to fix the compensation of members of the committees for
attending committee meetings.
7
<PAGE> 7
Section 11. Advisory Directors. The Board of Directors may elect one or
more Advisory Directors who shall have such powers and perform such duties as
the Directors shall assign to them. Advisory Directors shall, upon election,
serve until the next Annual Meeting of Stockholders. Advisory Directors shall
receive notice of all meetings of the Board of Directors in the same manner and
at the same time as the Directors. They shall attend such meetings in an
advisory capacity, but shall not cast a vote or be counted to determine a
quorum. Any Advisory Director may be removed, either with or without cause, by a
majority of the Directors. The Advisory Directors shall not receive any stated
compensation for their services as Advisory Directors, but by resolution of the
Board of Directors a fixed fee and expenses of attendance may be allowed for
attendance at each meeting. Nothing herein shall be construed to preclude any
Advisory Director from serving the Corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
8
<PAGE> 8
(New Section 9 Added 10/21/92)
ARTICLE IV
Officers
Section 1. Officers. The Officers of the Corporation shall be a
President, a Secretary and a Treasurer, who shall be elected by the Directors at
their first meeting after the Annual Meeting of Stockholders, and who shall hold
office until their successors are elected and qualify. The Board of Directors
may also elect at its discretion a Chairman of the Board, one or more Executive
Vice Presidents, one or more Senior Vice Presidents, one or more Vice
Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers,
and such other Officers as the business of the Corporation may require. The
Chairman of the Board, if there shall be such an officer, and the President must
be members of the Board of Directors. So far as is permitted by law any two or
more offices may be held by the same person.
Section 2(a). Chairman of the Board. The Chairman of the Board of
Directors, if there shall be such an officer, shall preside at meetings of the
stockholders and of the Board of Directors, and shall perform such other duties,
in major policy areas or otherwise, consistent with his office, as may be
assigned to him by the Board of Directors.
Section 2(b). Vice Chairman of the Board. The Vice Chairman of the Board
of Directors, if there shall be such an officer, shall, during any period when
so requested by the Chairman of the Board of Directors or during the absence of
the Chairman of the Board of Directors or his inability to act, have the powers
and perform the duties of the Chairman. The vice Chairman shall perform such
other duties consistent with his office as from time to time may be assigned to
him by the Board of Directors.
Section 3. President. The President shall be the chief executive officer
of the Corporation. Subject to the control of the Board of Directors, he shall
have general executive powers concerning, and active management and supervision
over, the property, business and affairs of the Corporation and its several
officers. He shall have the powers and shall perform the duties usually incident
to the office of President and, during any period when so requested by the
Chairman of the Board of Directors, or during the absence of the Chairman and
the Vice Chairman of the Board of Directors or the inability of both to act,
shall also have the powers and perform the duties of the Chairman of the Board
of Directors. The President shall perform such other duties consistent with his
office as from time to time may be assigned to him by the Board of Directors.
Section 4(a). Executive Vice President. The Executive Vice President(s),
if there shall be such an officer, shall, subject to such powers as shall be
assigned to him from time to time by the Board of Directors or by the President,
have such managerial responsibility and authority and shall exercise such
supervisory powers as shall be assigned to him from time to time by the Board of
Directors or by the President. He shall exercise the functions of the President
during the absence or disability of the President.
Section 4(b). Senior Vice President. The Senior Vice President(s) shall
exercise general supervision over and have executive control of such departments
of the Corporation's business and shall have such powers and discharge such
duties as may be assigned to him from time to time by
9
<PAGE> 9
the Board of Directors. The Senior Vice President, as designated by the Board of
Directors, shall exercise the functions of the President during the absence or
disability of the President and the Executive Vice President.
Section 4(c). Vice Presidents. The Vice Presidents shall exercise
general supervision over and have executive control of such departments of the
Corporation's business and shall have such powers and discharge such duties as
may be assigned to each of them from time to time by the Board of Directors. The
Vice Presidents in order of their rank, or if not ranked, as designated by the
Board of Directors, shall exercise the functions of the President during the
absence or disability of the President, the Executive Vice President and the
Senior Vice President.
Section 5. Secretary. The Secretary shall issue due notice to
stockholders and Directors in accordance with these Bylaws and as required by
law, shall record all the proceedings of the meetings of the stockholders and
Directors in a book to be kept for that purpose, shall have charge of the
corporate seal, shall keep or cause to be kept a share register of stockholders
of the Corporation, and shall make such reports and perform such other duties as
are incident to his office, or assigned to him by the Board of Directors.
Section 6. Assistant Secretary. The Assistant Secretaries shall, in the
absence or disability of the Secretary, perform the duties and exercise the
power of the Secretary.
Section 7. Treasurer. The Treasurer shall have the custody of all monies
and securities of the Corporation and shall keep regular books of account. He
shall disburse the funds of the Corporation in payment of the just demands
against the Corporation, or as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements, and shall render to the Board of
Directors from time to time, as may be required of him, an account of all his
transactions as Treasurer and of the financial condition of the Corporation.
Section 8. Assistant Treasurer. The Assistant Treasurer shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer.
Section 9. General Counsel. The General Counsel shall provide legal
advice to the Corporation, render legal opinions as necessary in connection with
the business of the Corporation, exercise general supervision over the legal
affairs of the Corporation and perform such other duties as assigned to him by
the Board of Directors.
Section 10. Duties. Except as otherwise provided in this Section, the
said Officers shall have all the usual powers and shall perform all the usual
duties incident to their respective offices and shall, in addition, perform such
other duties as shall be assigned to them from time to time by the Board of
Directors.
Section 11. Delegation of Duties. In the absence or disability of any
Officer of the Corporation, the Board of Directors may, subject to the
provisions of this Section, delegate his powers and duties to any other
Executive Officer, or to any Director, during such absence or disability, and
the person so delegated shall, for the time being, be the Officer whose powers
and duties he so assumes.
Section 12. Vacancies. A vacancy in any office existing at any time may
be filled by the Directors at any regular or special meeting.
10
<PAGE> 10
Section 13. Other Officers. The Board of Directors may appoint such
other Officers and agents as it shall deem necessary or expedient, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board of Directors.
Section 14. Salaries. The salaries of all Officers of the Corporation
shall be approved by the Board of Directors.
Section 15. Bonds. The Board of Directors may require any and all
Officers, respectively, to give a bond for the faithful performance of their
respective duties in such sum as said Board of Directors may determine, such
bond to be executed by a reliable surety company, but the expense of obtaining
the same shall be borne by the Corporation.
Section 16. Representation of Shares of Other Corporations. The
President or any Vice President and the Secretary or any Assistant Secretary of
this Corporation are authorized to vote, represent and exercise on behalf of
this Corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of this Corporation. The
authority herein granted to said Officers to vote or represent on behalf of this
Corporation any and all shares held by this Corporation in any other corporation
or corporations may be exercised either by such Officers in person or by any
person authorized so to do by proxy or power of attorney duly executed by said
Officers.
Section 17. Removal of Officers. Any Officer may be removed at any time
by the affirmative vote of a majority of the Board of Directors.
11
<PAGE> 11
(Section 5 of Article V deleted in its entirety 10/18/96)
ARTICLE V
Certificates of Stock
Section 1. Form and Execution of Certificate. The certificates of shares
of stock of the Corporation shall be in such form as shall be approved by the
Board of Directors. All certificates shall be signed by the President or a Vice
President, and by the Secretary or an Assistant Secretary or by the Treasurer or
an Assistant Treasurer; provided, however, that if any such certificate is
countersigned by a transfer agent other than the Corporation or its employee, or
by a registrar other than the Corporation or its employee, the signatures of
such President or Vice President and of such Secretary or Assistant Secretary or
Treasurer or Assistant Treasurer may be facsimiles.
Section 2. Certificates to be Entered. All certificates shall be
consecutively numbered and the names in which they are issued, the number of
shares and the date of issue shall be entered in the Corporation's books.
Section 3. Transfer of Shares. Shares shall be transferred only on the
books of the Corporation by the holder thereof, in person or by his attorney,
upon the surrender and cancellation of certificates for a like number of shares.
Section 4. Regulations. The Board of Directors shall have power and
authority to make all such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates of stock, and
may appoint a transfer agent or transfer agents and a registrar or registrars of
transfers, and may require all stock certificates to bear the signature of any
such transfer agent and registrar of transfers.
ARTICLE VI
Seal
The Board of Directors shall provide a corporate seal, which shall be in
the form of a circle and shall bear the name of the Corporation in words and
figures showing that it was incorporated in the State of Delaware in the year
1970.
ARTICLE VII
Indemnification
Section 1. Indemnification of Directors and Officers. The Corporation
shall, to the fullest extent permitted by law, indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil,
12
<PAGE> 12
criminal, administrative or investigative (including without limitation any
action by or in the right of the Corporation) by reason of the fact that he is
or was a Director or Officer of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, that he had
reasonable cause to believe that his conduct was unlawful. The right of
indemnity provided herein shall not be exclusive, and the Corporation may
provide indemnification to any person, by agreement or otherwise, on such terms
and conditions as the Board of Directors may approve. Any agreement for
indemnification of any Director, Officer, employee or other person may provide
indemnification rights which are broader or otherwise different from those set
forth herein.
Section 2. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a Director, Officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this ARTICLE.
ARTICLE VIII
Fiscal Year
The fiscal year of the Corporation shall commence on January 1, and end
on December 31 of each year.
ARTICLE IX
Amendments
These Bylaws may be adopted, amended or repealed by the vote of
stockholders as set forth in the Certificate of Incorporation. Subject to the
right of stockholders to adopt, amend or repeal Bylaws, Bylaws may be adopted,
amended or repealed by the Board of Directors.
Bylaws
13
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.10
<SEQUENCE>3
<FILENAME>a70035ex10-10.txt
<DESCRIPTION>EXHIBIT 10.10
<TEXT>
<PAGE> 1
EXHIBIT 10.10
DUCOMMUN INCORPORATED
DESCRIPTION OF
2001 EXECUTIVE OFFICER BONUS ARRANGEMENT
The Ducommun Incorporated 2001 Executive Officer Bonus Arrangement (the
"Arrangement") is designed to reward achievement of annual operating plan
objectives in order to build profitability and provide competitive compensation
levels. The Arrangement contains a formula-based incentive plan driven by sales,
net income, cash flow and return on asset performance in excess of established
thresholds. The participants in the Arrangement are the six Ducommun corporate
officers and five subsidiary officers.
The Arrangement provides for bonus awards ranging from 0 to 100% of
annual base salary depending on position. The targeted bonus award under the
Arrangement is half of the maximum bonus eligibility for each individual. Bonus
awards are based on a combination of total corporate performance and on
individual performance of executive officers. The subsidiary officers are also
measured based upon the financial performance of their respective operating
units. All awards are subject to the approval of the Compensation Committee of
the Board of Directors.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11
<SEQUENCE>4
<FILENAME>a70035ex11.txt
<DESCRIPTION>EXHIBIT 11
<TEXT>
<PAGE> 1
EXHIBIT 11
DUCOMMUN INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF THE NUMERATORS AND DENOMINATORS OF
THE BASIC AND DILUTED EARNINGS PER SHARE COMPUTATIONS
<TABLE>
<CAPTION>
For the Year Ended December 31, 2000
---------------------------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ----------- -----------
<S> <C> <C> <C>
BASIC EPS
Income Available to Common Stockholders $12,720,000 9,650,000 $ 1.32
===========
EFFECT OF DILUTIVE SECURITIES
Stock Options -- 111,000
----------- -----------
DILUTED EPS
Income Available to Common Stockholders
+ Assumed Conversions $12,720,000 $ 9,761,000 $ 1.30
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended December 31, 1999
---------------------------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- -----------
<S> <C> <C> <C>
BASIC EPS
Income Available to Common Stockholders $13,444,000 10,209,000 $ 1.32
===========
EFFECT OF DILUTIVE SECURITIES
Stock Options -- 309,000
----------- -----------
DILUTED EPS
Income Available to Common Stockholders
+ Assumed Conversions $13,444,000 $10,518,000 $ 1.28
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended December 31, 1998
---------------------------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- -----------
<S> <C> <C> <C>
BASIC EPS
Income Available to Common Stockholders $23,693,000 11,149,000 $ 2.13
===========
EFFECT OF DILUTIVE SECURITIES
Stock Options -- 469,000
----------- -----------
DILUTED EPS
Income Available to Common Stockholders
+ Assumed Conversions $23,693,000 11,618,000 $ 2.04
=========== =========== ===========
</TABLE>
Note: Share-related data have been adjusted for the 3-for-2 stock split in June
1998.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>5
<FILENAME>a70035ex13.txt
<DESCRIPTION>EXHIBIT 13
<TEXT>
<PAGE> 1
EXHIBIT 13
DUCOMMUN INCORPORATED
ANNUAL REPORT
The following portions of Ducommun Incorporated and Subsidiaries 2000 Annual
Report are incorporated by reference in Items 5, 6, 7, and 8 of this report.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Selected Financial Data 12
Quarterly Common Stock Price Information 12
Management's Discussion and Analysis of Financial Condition and Results of Operations 13-16
Consolidated Statements of Income 17
Consolidated Balance Sheets 18
Consolidated Statements of Cash Flows 19
Consolidated Statements of Changes in Shareholders' Equity 20
Notes to Consolidated Financial Statements 21-27
Report of Independent Accountants 28
</TABLE>
<PAGE> 2
DUCOMMUN INCORPORATED POSITIONED FOR GROWTH TWELVE
- --------------------------------------------------------------------------------
SELECTED
FINANCIAL
DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31, 2000 1999 1998 1997 1996
- ----------------------------------------- --------- --------- --------- --------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net Sales $ 165,711 $ 146,054 $ 170,772 $ 157,287 $ 118,357
--------- --------- --------- --------- ---------
Gross Profit as a Percentage of Sales 28.9% 31.7% 33.3% 32.0% 32.6%
--------- --------- --------- --------- ---------
Operating Income 22,305 22,502 29,795 25,288 15,478
--------- --------- --------- --------- ---------
Operating Income as a Percentage of Sales 13.5% 15.4% 17.4% 16.1% 13.1%
--------- --------- --------- --------- ---------
Gain on Sale of Subsidiary -- -- 9,249 -- --
--------- --------- --------- --------- ---------
Income Before Taxes 20,517 21,892 38,919 24,653 14,325
Income Tax Expense (7,797) (8,448) (15,226) (10,356) (4,040)
--------- --------- --------- --------- ---------
Net Income $ 12,720 $ 13,444 $ 23,693 $ 14,297 $ 10,285
========= ========= ========= ========= =========
Earnings Per Share:
Income Before Gain on Sale of Subsidiary $ 1.30 $ 1.28 $ 1.51 $ 1.20 $ .90
Gain on Sale of Subsidiary -- -- .53 -- --
--------- --------- --------- --------- ---------
Diluted Earnings Per Share $ 1.30 $ 1.28 $ 2.04 $ 1.20 $ .90
========= ========= ========= ========= =========
Working Capital $ 31,403 $ 29,862 $ 30,793 $ 30,182 $ 17,286
Total Assets 148,474 141,802 117,204 104,241 95,814
Long-Term Debt Including Current Portion 19,654 27,840 6,784 5,803 10,290
Total Shareholders' Equity 99,529 87,842 83,705 73,703 59,188
</TABLE>
Share-related data have been adjusted for the 3-for-2 stock split in June 1998.
QUARTERLY COMMON STOCK PRICE INFORMATION
<TABLE>
<CAPTION>
2000 1999 1998
------------------ ------------------ ------------------
High Low High Low High Low
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $11.00 $ 8.75 $14.94 $ 9.38 $23.33 $19.42
Second Quarter 12.44 8.88 12.75 8.75 23.50 18.94
Third Quarter 15.38 12.13 14.94 10.75 20.75 17.19
Fourth Quarter 14.13 10.56 10.88 8.75 18.75 13.13
</TABLE>
The common stock of the Company (DCO) is listed on the New York Stock Exchange.
On December 31, 2000, the Company had approximately 592 holders of record of
common stock.
<PAGE> 3
2000 ANNUAL REPORT THIRTEEN
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
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. In June 1998, the Company acquired the capital stock of American
Electronics, Inc. ("AEI") for $8,165,000 in cash and $1,900,000 in other
liabilities. AEI is a leading manufacturer of high precision actuators, stepper
motors, fractional horsepower motors and resolvers principally for space
applications. The acquisitions of Parsons, SMS and AEI were accounted for under
the purchase method of accounting. These acquisitions accounted for
approximately $30,099,000 and $30,086,000 of the excess of cost over net assets
acquired at December 31, 2000, and December 31, 1999, respectively, which is
being amortized on a straight-line basis over 15 to 20 years. The consolidated
statements of income include the operating results for Parsons, SMS and AEI
since the dates of the acquisitions.
The acquisitions were funded from internally generated cash, notes and
other accounts payable to sellers, and borrowings under the Company's credit
agreement (see Financial Condition for additional information). These
acquisitions strengthened the Company's position in the aerospace industry and
added complementary lines of business.
DISPOSITIONS
In August 1998, the Company sold the capital stock of its wireless
communications subsidiary, 3dbm, Inc. ("3dbm"). The subsidiary was sold for
$17,250,000 in cash, resulting in a pretax gain of $9,249,000 on the sale and an
after-tax gain of $6,206,000, or $0.53 per diluted share, which was recorded in
the third quarter of 1998. The Company sold 3dbm because the level of investment
required to ensure the long-term viability of 3dbm in the wireless systems
infrastructure business was more than the Company was willing to commit.
RESULTS OF OPERATIONS
2000 Compared to 1999 - Net sales increased 13% to $165,711,000 in 2000. The
increase resulted primarily from an increase in the Company's sales from the SMS
and Parsons acquisitions, as well as sales from a new contract at AHF-Ducommun
for C-17 fuselage panels. Sales to the C-17 program increased approximately
$11,300,000 in 2000. The acquisitions of SMS and Parsons increased sales by
approximately $13,000,000 in 2000. Excluding the SMS and Parsons acquisitions,
sales increased 5% in 2000 compared to 1999. The Company's mix of business was
approximately 53% commercial, 38% military and 9% space in 2000. Foreign sales
decreased to 16% of sales from 19% in 1999. The Company did not have sales to
any foreign country greater than 5% of total sales in 2000 or 1999.
The Company had substantial sales to Boeing, Lockheed Martin and
Raytheon. During 2000 and 1999, sales to Boeing were $61,109,000 and
$40,310,000, respectively; sales to Lockheed Martin were $12,685,000 and
$15,470,000, respectively; and sales to Raytheon were $14,242,000 and
$10,138,000, respectively. At December 31, 2000, trade receivables from Boeing,
Lockheed Martin and Raytheon were $6,318,000, $1,390,000 and $1,826,000,
respectively. The sales and receivables relating to Boeing, Lockheed Martin and
Raytheon are diversified over a number of different commercial, space and
military programs.
The Company's commercial business is represented on virtually all of
today's major commercial aircraft. During 2000, commercial sales for Boeing
aircraft were slightly higher, principally because of the acquisitions of
Parsons and SMS. Sales related to commercial business were approximately
$88,515,000, or 53% of total sales in 2000.
Military components manufactured by the Company are employed in many of
the country's front-line fighters, bombers, helicopters and support aircraft, as
well as many land and sea-based vehicles. The Company's defense business is
widely diversified among military manufacturers and programs. Sales related to
military programs were approximately $62,569,000, or 38% of total sales in 2000.
The C-17 program accounted for approximately $19,594,000 in sales in 2000.
In the space sector, the Company produces components for the expendable
fuel tanks which help boost the Space Shuttle vehicle into orbit. Components are
also produced for a variety of unmanned launch vehicles and satellite programs.
During 2000, sales related to space programs were lower due to timing
differences in production scheduling for the Space Shuttle program. Sales
related to space programs were approximately $14,627,000, or 9% of total sales
in 2000.
<PAGE> 4
DUCOMMUN INCORPORATED POSITIONED FOR GROWTH FOURTEEN
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
At December 31, 2000, backlog believed to be firm was approximately
$238,600,000, compared to $213,100,000 at December 31, 1999. The backlog
increase from December 31, 1999 was due primarily to a contract with Boeing for
production of fuselage skin panels for the C-17 aircraft. The contract was
valued at $49,000,000 at the time of the award. There is also an option contract
with Boeing 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
million. Taken together, the $111 million contract is the largest contract award
in the Company's history. The Company also experienced backlog growth at
December 31, 2000 of approximately $10,800,000 for the F-18 program.
Approximately $103,100,000 of the total backlog is expected to be delivered
during 2001.
Gross profit, as a percentage of sales, decreased to 28.9% in 2000 from
31.7% 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 13.8% in 2000, compared to 14.9% in 1999. Selling, general and
administrative expenses in 2000 included an approximately $715,000 increase in
the allowance for doubtful accounts resulting from the bankruptcy of two of the
Company's airline customers during the fourth quarter of 2000. In early January
2001, the Company embarked on steps to integrate the marketing, engineering and
manufacturing capabilities of its AHF-Ducommun, Aerochem and Parsons
subsidiaries to offer a full range of structural components and subassemblies to
the Company's customers.
Goodwill amortization expense, as a percentage of sales, was 1.7% in
2000, compared to 1.4% in 1999. This increase was primarily the result of a full
year of goodwill amortization expense in 2000 related to the SMS and Parsons
acquisitions made in 1999.
Interest expense increased 193% to $1,788,000 in 2000 primarily due to
higher debt levels and interest rates in 2000 compared to 1999.
Income tax expense decreased to $7,797,000 in 2000, compared to
$8,448,000 in 1999. The decrease in income tax expense was primarily due to the
decrease in income before taxes and an effective income tax rate of 38.0% for
2000 compared to 38.6% for 1999. The decrease in the tax rate was primarily due
to certain tax credits that became available to the Company. Cash expended to
pay income taxes decreased to $5,084,000 in 2000, compared to $8,170,000 in
1999.
Net income for 2000 was $12,720,000, or $1.30 diluted earnings per
share, compared to $13,444,000, or $1.28 diluted earnings per share, in 1999.
Diluted earnings per share rose $0.02 per diluted share on a year-to-year basis,
despite a decline in net income, due to a reduction of approximately 757,000 in
average diluted shares outstanding in 2000, compared to 1999.
1999 Compared to 1998 - Net sales decreased 14% to $146,054,000 in 1999. The
decrease resulted primarily from a reduction in the Company's sales of
commercial and military after-market products in its aircraft seating and
electromechanical switch businesses, lower sales for Boeing commercial aircraft,
lower sales for space programs, and lower sales for certain commercial and
military programs due to a lack of titanium availability. The acquisitions of
SMS and Parsons increased sales by approximately $7,624,000 in 1999. The
Company's mix of business was approximately 58% commercial, 31% military and 11%
space in 1999. Foreign sales increased to 19% of sales from 17% in 1998. The
Company did not have sales to any foreign country greater than 5% of total sales
in 1999 or 1998.
The Company had substantial sales to Boeing, Lockheed Martin and
Raytheon. During 1999 and 1998, sales to Boeing were $40,310,000 and
$48,334,000, respectively; sales to Lockheed Martin were $15,470,000 and
$18,465,000, respectively; and sales to Raytheon were $10,138,000 and
$12,596,000, respectively. At December 31, 1999, trade receivables from Boeing,
Lockheed Martin and Raytheon were $3,940,000, $1,906,000 and $1,819,000,
respectively. The sales and receivables relating to Boeing, Lockheed Martin and
Raytheon are diversified over a number of different commercial, space and
military programs.
The Company's commercial business is represented on virtually all of
today's major commercial aircraft. During 1999, sales for Boeing aircraft were
lower, principally because of lower commercial aircraft production rates and
what the Company believes are ongoing inventory reductions by Boeing and its
major suppliers. Sales related to commercial business were approximately
$84,943,000, or 58% of total sales in 1999.
Military components manufactured by the Company are employed in many of
the country's front-line fighters, bombers, helicopters and support aircraft, as
well as many land and sea-based vehicles. The Company's defense business is
widely diversified among military manufacturers and programs. Sales related to
military programs were approximately $44,919,000, or 31% of total sales in 1999.
The C-17 program accounted for approximately $8,270,000 in sales in 1999.
In the space sector, the Company produces components for the expendable
fuel tanks which help boost the Space Shuttle vehicle into orbit. Components are
also produced for a variety of unmanned launch vehicles and satellite programs.
Sales related to space programs were approximately $16,192,000, or 11% of total
sales in 1999.
<PAGE> 5
2000 ANNUAL REPORT FIFTEEN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At December 31, 1999, backlog believed to be firm was approximately
$213,100,000, compared to $138,200,000 at December 31, 1998. The backlog
increase from December 31, 1998 was due primarily to the award of follow-on
contracts by Lockheed Martin for the Space Shuttle program. These contracts,
valued in excess of $93,000,000, extend the Company's scope of work through
2006. The Company also experienced backlog growth at December 31, 1999 of
approximately $29,000,000 from the acquisitions of SMS and Parsons in 1999.
Gross profit, as a percentage of sales, decreased to 31.7% in 1999 from
33.3% in 1998. This decrease was primarily the result of changes in sales mix,
pricing pressures from customers, and nonvariable production costs spread over
lower sales.
Selling, general and administrative expenses, as a percentage of sales,
were 14.9% in 1999, compared to 15.0% in 1998.
Goodwill amortization expense, as a percentage of sales, was 1.4% in
1999, compared to 0.8% in 1998. This increase was primarily the result of higher
goodwill amortization expense related to the SMS and Parsons acquisitions in
1999.
Interest expense increased 388% to $610,000 in 1999 primarily due to
higher debt levels in 1999 compared to 1998.
Income tax expense decreased to $8,448,000 in 1999, compared to
$15,226,000 in 1998. The decrease in income tax expense was primarily due to the
decrease in income before taxes and a decrease of $3,043,000 of income taxes
related to the gain on the sale of 3dbm in 1998. Cash expended to pay income
taxes decreased to $8,170,000 in 1999, compared to $9,464,000 in 1998, primarily
as a result of taxes paid in 1998 on the gain on the sale of 3dbm.
Net income for 1999 was $13,444,000, or $1.28 diluted earnings per
share, compared to $23,693,000, or $2.04 diluted earnings per share, in 1998.
Net income for 1998 included an after-tax gain of $6,206,000, or $0.53 per
diluted share, on the sale of the capital stock of 3dbm.
FINANCIAL CONDITION
Liquidity and Capital Resources - Cash flow from operating activities for 2000
was $20,687,000, compared to $18,655,000 in 1999. The increase in cash flow from
operating activities resulted principally from a reduction in prepaid income
taxes and increases in accounts payable and accrued and other liabilities,
partially offset by lower net income and increases in accounts receivables and
inventories. During 2000, the Company spent $10,803,000 on capital expenditures
and $1,230,000 to repurchase shares of the Company's common stock, and repaid
$8,186,000 of principal on outstanding borrowings.
In November 1999, the Company, through a wholly-owned subsidiary,
acquired the assets and assumed certain liabilities of Parsons for $22,073,000
in cash. In April 1999, the Company acquired the capital stock of SMS for
$10,096,000 in cash, net of cash acquired and payments of other liabilities of
SMS, and a $1,500,000 note. In June 1998, the Company acquired the capital stock
of AEI for $8,165,000 in cash and $1,900,000 in other liabilities. The
acquisitions were funded from internally generated cash, notes and other
accounts payable to sellers, and borrowings under the Company's credit
agreement. These acquisitions strengthened the Company's position in the
aerospace industry and added complementary lines of business.
In August 1998, the Company sold the capital stock of its wireless
communications subsidiary, 3dbm, Inc. The subsidiary was sold for $17,250,000 in
cash, resulting in a pretax gain of $9,249,000 on the sale.
The Company's bank credit agreement provides for a $100,000,000
unsecured revolving credit line declining to $60,000,000 at maturity on
September 30, 2005. At December 31, 2000, the Company had $85,667,000 of unused
lines of credit, after deducting $14,300,000 of loans outstanding and $33,000
for an outstanding standby letter of credit.
The Company continues to depend on operating cash flow and the
availability of its bank credit agreement 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 2001.
Aggregate maturities of long-term debt during the next five years are as
follows: 2001, $1,409,000; 2002, $1,375,000; 2003, $560,000; 2004, $2,010,000;
2005, $14,300,000.
The Company expects to spend less than $10,000,000 for capital
expenditures in 2001. The Company believes that the ongoing subcontractor
consolidation makes acquisitions an increasingly important component of the
Company's future growth. Accordingly, the Company plans to continue to seek
attractive acquisition opportunities and to make substantial capital
expenditures for manufacturing equipment and facilities to support long-term
contracts for both commercial and military aircraft and space programs.
Since 1998, the Company's Board of Directors has authorized the
repurchase of up to $30,000,000 of its common stock. The Company repurchased in
the open market 931,762 shares of its common stock in 1998 for a total of
$14,652,000; 877,300 shares of its common stock in 1999 for a total of
$9,414,000 and 109,900 shares of its common stock in 2000 for a total of
$1,230,000. In April 1999, the Company cancelled 953,762 shares of treasury
stock and in January 2000 cancelled 855,300 shares of treasury stock.
<PAGE> 6
DUCOMMUN INCORPORATED POSITIONED FOR GROWTH SIXTEEN
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
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 corrective action.
Com Dev Consulting Ltd. ("Com Dev") has filed a complaint against the
Company and certain of its officers relating to the sale of the capital stock of
3dbm by the Company to Com Dev in August 1998. The complaint seeks recovery of
damages in excess of $10,000,000, restitution of the $17,250,000 purchase price
paid for 3dbm and recovery of punitive damages, costs and attorneys' fees. A
jury trial is currently scheduled for April 23, 2001. 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. However, because of the nature and inherent
uncertainties of litigation, should the outcome of this matter be unfavorable,
the Company may be required to pay damages and other expenses, which could have
a material adverse effect on its consolidated financial position and 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 STATEMENT AND RISK FACTORS
Any forward-looking statements made in this Annual 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, production rates
for Boeing commercial aircraft, the C-17 and the Space Shuttle 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, the outcome of the lawsuit
brought by Com Dev, and other factors beyond the Company's control.
<PAGE> 7
2000 ANNUAL REPORT SEVENTEEN
- --------------------------------------------------------------------------------
CONSOLIDATED
STATEMENTS
OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31, 2000 1999 1998
--------- --------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C>
Net Sales $ 165,711 $ 146,054 $ 170,772
--------- --------- ---------
Operating Costs and Expenses:
Cost of goods sold 117,750 99,725 113,929
Selling, general and administrative expenses 22,804 21,791 25,603
Goodwill amortization expense 2,852 2,036 1,445
--------- --------- ---------
Total Operating Costs and Expenses 143,406 123,552 140,977
--------- --------- ---------
Operating Income 22,305 22,502 29,795
Interest Expense (1,788) (610) (125)
Gain on Sale of Subsidiary -- -- 9,249
--------- --------- ---------
Income Before Taxes 20,517 21,892 38,919
Income Tax Expense (7,797) (8,448) (15,226)
--------- --------- ---------
Net Income $ 12,720 $ 13,444 $ 23,693
========= ========= =========
Earnings Per Share:
Basic earnings per share $ 1.32 $ 1.32 $ 2.13
Diluted earnings per share 1.30 1.28 2.04
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 8
DUCOMMUN INCORPORATED POSITIONED FOR GROWTH EIGHTEEN
- --------------------------------------------------------------------------------
CONSOLIDATED
BALANCE
SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 2000 1999
--------- ---------
(In thousands, except share data)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 100 $ 138
Accounts receivable (less allowance for doubtful
accounts of $1,161 and $153) 20,844 20,022
Inventories 32,240 26,347
Deferred income taxes 3,624 2,698
Prepaid income taxes 134 1,864
Other current assets 3,326 3,335
--------- ---------
Total Current Assets 60,268 54,404
Property and Equipment, Net 49,579 44,689
Deferred Income Taxes 165 --
Excess of Cost Over Net Assets Acquired (Net of Accumulated
Amortization of $10,355 and $7,504) 39,056 41,895
Other Assets 1,296 814
--------- ---------
$ 150,364 $ 141,802
========= =========
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of long-term debt $ 1,409 $ 1,496
Accounts payable 11,552 8,135
Accrued liabilities 15,904 14,911
--------- ---------
Total Current Liabilities 28,865 24,542
Long-Term Debt, Less Current Portion 18,245 26,344
Deferred Income Taxes 2,409 2,174
Other Long-Term Liabilities 1,316 900
--------- ---------
Total Liabilities 50,835 53,960
--------- ---------
Commitments and Contingencies
Shareholders' Equity:
Common stock -- $.01 par value; authorized
35,000,000 shares; issued 9,714,357
shares in 2000 and
10,423,810 shares in 1999 97 104
Additional paid-in capital 36,673 45,597
Retained earnings 63,989 51,269
Less common stock held in treasury -- 109,900 shares in
2000 and 855,300 shares in 1999 (1,230) (9,128)
--------- ---------
Total Shareholders' Equity 99,529 87,842
--------- ---------
$ 150,364 $ 141,802
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 9
2000 ANNUAL REPORT NINETEEN
- --------------------------------------------------------------------------------
CONSOLIDATED
STATEMENT
OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31, 2000 1999 1998
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 12,720 $ 13,444 $ 23,693
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Depreciation and amortization 8,750 6,846 5,868
Deferred income tax (benefit) provision (856) 2,211 1,783
Income tax benefit related to the exercise of
nonqualified stock options 703 193 1,375
Allowance for doubtful accounts 876 28 (234)
Gain on sale of subsidiary and other assets -- (163) (9,249)
Changes in Assets and Liabilities, Net of Effects
From Acquisitions and Disposition:
Accounts receivable (1,698) 2,443 (1,564)
Inventories (5,893) (2,237) 4,313
Prepaid income taxes 1,730 (545) 1,594
Other assets (473) (891) (613)
Accounts payable 3,417 60 (1,064)
Accrued and other liabilities 1,411 (2,734) 645
-------- -------- --------
Net Cash Provided by Operating Activities 20,687 18,655 26,547
-------- -------- --------
Cash Flows from Investing Activities:
Purchase of Property and Equipment (10,803) (5,778) (11,827)
Acquisition of Businesses -- (32,169) (8,165)
Proceeds from Sale of Subsidiary -- -- 17,250
Cash Payments Related to Sale of Subsidiary -- -- (1,143)
Proceeds from Sale of Assets -- 310 233
-------- -------- --------
Net Cash Used in Investing Activities (10,803) (37,637) (3,652)
-------- -------- --------
Cash Flows from Financing Activities:
Net (Repayment) Borrowings of Long-Term Debt (8,186) 19,556 (919)
Purchase of Common Stock for Treasury (1,230) (9,414) (14,652)
Net Repurchases Related to Exercise of Stock Options (506) (88) (414)
-------- -------- --------
Net Cash (Used in) Provided by Financing Activities (9,922) 10,054 (15,985)
-------- -------- --------
Net (Decrease) Increase in Cash and Cash Equivalents (38) (8,928) 6,910
Cash and Cash Equivalents - Beginning of Year 138 9,066 2,156
-------- -------- --------
Cash and Cash Equivalents - End of Year $ 100 $ 138 $ 9,066
======== ======== ========
Supplemental Disclosures of Cash Flow Information:
Interest Expense Paid $ 1,769 $ 745 $ 401
Income Taxes Paid $ 5,084 $ 8,170 $ 9,464
Supplemental information for Non-Cash Investing and
Financing Activities:
See Note 2 for non-cash investing activities related
to the acquisition of businesses
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 10
<TABLE>
DUCOMMUN INCORPORATED POSITIONED FOR GROWTH TWENTY
- -----------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT
OF CHANGES IN
SHAREHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Additional Total
Shares Common Paid-In Retained Treasury Shareholders'
Outstanding Stock Capital Earnings Stock Equity
----------- ------ ---------- -------- -------- -------------
(In thousands, except share data)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998 7,454,198 $ 74 $ 59,497 $14,132 $ -- $ 73,703
Stock options exercised 198,550 2 981 -- -- 983
Stock repurchased related to the
exercise of stock options (55,562) -- (1,397) -- -- (1,397)
Income tax benefit related to the
exercise of nonqualified stock options -- -- 1,375 -- -- 1,375
Adjustment for stock split 3,748,069 37 (37) -- -- --
Common stock held in treasury (931,762) -- -- -- (14,652) (14,652)
Net Income -- -- -- 23,693 -- 23,693
----------- ----- -------- ------- -------- --------
Balance at December 31, 1998 10,413,493 113 60,419 37,825 (14,652) 83,705
Stock options exercised 52,475 1 190 -- -- 191
Stock repurchased related to the
exercise of stock options (20,158) -- (277) -- -- (277)
Income tax benefit related to the
exercise of nonqualified stock options -- -- 193 -- -- 193
Common stock repurchased for treasury (877,300) -- -- -- (9,414) (9,414)
Treasury stock retired -- (10) (14,928) -- 14,938 --
Net Income -- -- -- 13,444 -- 13,444
----------- ----- -------- ------- -------- --------
Balance at December 31, 1999 9,568,510 104 45,597 51,269 (9,128) 87,842
Stock options exercised 313,025 3 1,171 -- -- 1,174
Stock repurchased related to the
exercise of stock options (167,178) (2) (1,678) -- -- (1,680)
Income tax benefit related to the
exercise of nonqualified stock options -- -- 703 -- -- 703
Common stock repurchased for treasury (109,900) -- -- -- (1,230) (1,230)
Treasury stock retired -- (8) (9,120) -- 9,128 --
Net Income -- -- -- 12,720 -- 12,720
----------- ----- -------- ------- -------- --------
Balance at December 31, 2000 9,604,457 $ 97 $ 36,673 $63,989 $ (1,230) $ 99,529
=========== ===== ======== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 11
2000 ANNUAL REPORT TWENTY ONE
- --------------------------------------------------------------------------------
NOTES TO
CONSOLIDATED
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation: The consolidated financial statements include the accounts of the
Company and its subsidiaries, after eliminating significant intercompany
balances and transactions.
Cash Equivalents: Cash equivalents consist of highly liquid instruments
purchased with original maturities of three months or less.
Revenue Recognition: Revenue, including sales under fixed price contracts, is
recognized when persuasive evidence of an arrangement exists, the price is fixed
or determinable, collection is reasonably assured and delivery of products has
occurred or services have been rendered. The effects of revisions in contract
value or estimated costs of completion are recognized over the remaining terms
of the agreement. Provisions for estimated losses on contracts are recorded in
the period identified.
Inventory Valuation: Inventories are stated at the lower of cost or market. Cost
is determined based upon the first-in, first-out method. Costs on fixed price
contracts in progress included in inventory represent accumulated recoverable
costs less the portion of such costs allocated to delivered units and applicable
progress payments received.
Property and Depreciation: Property and equipment, including assets recorded
under capital leases, are recorded at cost. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives ranging
from 2 to 40 years and, in the case of leasehold improvements, over the shorter
of the lives of the improvements or the lease term.
Income Taxes: Income taxes are accounted for using an asset and liability
approach that requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been recognized in
the Company's financial statements or tax returns.
Excess of Costs Over Net Assets Acquired: The cost of acquired businesses in
excess of the fair market value of their underlying net assets is amortized on
the straight-line basis over periods ranging from 15 to 40 years. The Company
assesses the recoverability of cost in excess of net assets of acquired
businesses by determining whether the amortization of this intangible asset over
its remaining life can be recovered through future operating cash flows.
Environmental Liabilities: Environmental liabilities are recorded when
environmental assessments and/or remedial efforts are probable, and costs can be
reasonably estimated. Generally, the timing of these accruals coincides with the
completion of a feasibility study or the Company's commitment to a formal plan
of action.
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 year. Diluted earnings per share is computed by dividing
income available to common shareholders plus income associated with dilutive
securities by the weighted average number of common shares outstanding plus any
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock in each year. In
2000, 1999 and 1998, income available to common shareholders was $12,720,000,
$13,444,000 and $23,693,000, respectively. In 2000, 1999 and 1998, the weighted
average number of common shares outstanding was 9,650,000, 10,209,000 and
11,149,000, respectively, and the dilutive shares associated with stock options
were 111,000, 309,000 and 469,000, respectively.
Comprehensive Income: In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130"). SFAS 130 was effective for the Company
during 1998. This statement divides comprehensive income into net income and
other comprehensive income. The Company has no items of other comprehensive
income in any period presented.
Use of Estimates: Certain amounts and disclosures included in the consolidated
financial statements required management to make estimates which could differ
from actual results.
NOTE 2. ACQUISITIONS AND DISPOSITION
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. In June 1998, the Company acquired the capital stock of American
Electronics, Inc. ("AEI") for $8,165,000 in cash and $1,900,000 in other
liabilities. AEI is a leading manufacturer of high-precision actuators, stepper
motors, fractional horsepower motors and resolvers principally for space
applications.
The acquisitions of Parsons, SMS and AEI were accounted for under the
purchase method of accounting and, accordingly, the operating results for
Parsons, SMS and AEI have been included in the consolidated statements of income
since the dates of the respective acquisitions. The cost of the acquisitions was
allocated on the basis of the estimated fair value of assets acquired and
liabilities assumed. These acquisitions accounted for approximately $30,099,000
and $30,086,000 of the excess of cost over net assets acquired at December 31,
2000 and December 31, 1999, respectively, which is being amortized on a
straight-line basis over 15 to 20 years.
The following table presents unaudited pro forma consolidated operating
results for the Company for the years ended December 31, 1999 and December 31,
1998, as if the SMS and Parsons acquisitions had occurred as of the beginning of
the periods presented.
<PAGE> 12
DUCOMMUN INCORPORATED POSITIONED FOR GROWTH TWENTY TWO
- --------------------------------------------------------------------------------
NOTES TO
CONSOLIDATED
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
-------- --------
(In thousands,except per share amounts)
<S> <C> <C>
Net sales $159,838 $191,249
Net earnings 13,931 23,465
Basic earnings per share 1.36 2.10
Diluted earnings per share 1.32 2.02
</TABLE>
The unaudited pro forma consolidated operating results of the Company
are not necessarily indicative of the operating results that would have been
achieved had the SMS and Parsons acquisitions been consummated at the beginning
of the periods presented, and should not be construed as representative of
future operating results.
In August 1998, the Company sold the capital stock of its wireless
communications subsidiary, 3dbm, Inc. The subsidiary was sold for $17,250,000 in
cash, resulting in a pretax gain of $9,249,000 on the sale.
NOTE 3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, 2000 1999
- ------------ ------- -------
(In thousands)
<S> <C> <C>
Raw materials and supplies $ 9,827 $ 9,122
Work in process 21,912 16,614
Finished goods 1,630 2,192
------- -------
33,369 27,928
Less progress payments 1,129 1,581
------- -------
Total $32,240 $26,347
======= =======
</TABLE>
Work in process inventories include amounts under long-term fixed price
contracts aggregating $13,979,000 and $10,975,000 at December 31, 2000 and 1999,
respectively.
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
Range of
Estimated
December 31, 2000 1999 Useful Lives
- ------------ ---- ---- ------------
(In thousands)
<S> <C> <C> <C>
Land $ 9,690 $ 9,690
Buildings and improvements 22,859 16,207 5 - 40 Years
Machinery and equipment 53,852 50,690 2 - 20 Years
Furniture and equipment 7,989 7,252 2 - 10 Years
Construction in progress 1,272 1,046
------- -------
95,662 84,885
Less accumulated depreciation and amortization 46,083 40,196
------- -------
Total $49,579 $44,689
======= =======
</TABLE>
Depreciation expense was $5,911,000, $5,071,000 and $4,423,000 for the
years ended December 31, 2000, 1999 and 1998, respectively.
NOTE 5. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
December 31, 2000 1999
- ------------- ------- -------
(In thousands)
<S> <C> <C>
Accrued compensation $ 7,812 $ 7,147
Provision for environmental costs 2,175 2,111
Customer deposits 760 702
Accrued state franchise and sales tax 1,337 141
Other 3,820 4,810
------- -------
Total $15,904 $14,911
======= =======
</TABLE>
<PAGE> 13
2000 ANNUAL REPORT TWENTY THREE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 6. LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
December 31, 2000 1999
- -------------- ------- -------
(In thousands)
<S> <C> <C>
Bank credit agreement $14,300 $20,990
Term and real estate loans 3,679 4,175
Notes and other liabilities for acquisitions 1,675 2,675
------- -------
Total debt 19,654 27,840
Less current portion 1,409 1,496
------- -------
Total long-term debt $18,245 $26,344
======= =======
</TABLE>
In September 2000, the Company signed a new $100,000,000 revolving
credit facility with a group of banks. The agreement provides for a $100,000,000
unsecured revolving credit line declining to $60,000,000 at maturity on
September 30, 2005. Interest is payable monthly on the outstanding borrowings
based on the bank's prime rate (9.50% at December 31, 2000) plus a spread based
on the leverage ratio of the Company calculated at the end of each fiscal
quarter (0.00% at December 31, 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 December 31, 2000). At December 31, 2000, the
Company had $85,667,000 of unused lines of credit, after deducting $14,300,000
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 December 31, 2000), and limitations on
future dispositions of property, repurchases of common stock, outside
indebtedness, capital expenditures and acquisitions.
The weighted average interest rate on borrowings outstanding was 7.89%
and 7.09% at December 31, 2000 and 1999, respectively.
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.
Aggregate maturities of long-term debt during the next five years are as
follows: 2001, $1,409,000; 2002, $1,375,000; 2003, $560,000; 2004, $2,010,000;
2005, $14,300,000.
NOTE 7. SHAREHOLDERS' EQUITY
At December 31, 2000 and 1999, no preferred shares were issued or outstanding.
Since 1998, the Company's Board of Directors has authorized the
repurchase of up to $30,000,000 of its common stock. The Company repurchased in
the open market 931,762 shares of its common stock in 1998 for a total of
$14,652,000; 877,300 shares of its common stock in 1999 for a total of
$9,414,000, and 109,900 shares of its common stock in 2000 for a total of
$1,230,000. In April 1999 and January 2000, the Company cancelled 953,762 and
855,300 shares of treasury stock, respectively.
NOTE 8. STOCK OPTIONS
The Company has three stock option or incentive plans. Stock awards may be made
to directors, officers and key employees under the stock plans on terms
determined by the Compensation Committee of the Board of Directors or, with
respect to directors, on terms determined by the Board of Directors. Stock
options have been and may be granted to directors, officers and key employees
under the stock plans at prices not less than 100% of the market value on the
date of grant, and expire not more than ten years from the date of grant. The
option price and number of shares are subject to adjustment under certain
dilutive circumstances. At December 31, 2000 and 1999, options for 438,000 and
612,866 shares of common stock were exercisable, respectively.
The Company has adopted Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS 123"). In accordance with
the provisions of SFAS 123, the Company applies APB Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its plans and does not recognize compensation expense for its stock-based
compensation plans based on the fair value method. If the Company had elected to
recognize compensation expense based upon the fair value at the grant date for
awards under these plans consistent with the methodology prescribed by SFAS 123,
the Company's net income and earnings per share would be reduced to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
Year ended December 31, 2000 1999 1998
- ---------------------------------------- ---------- ---------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C>
Net Income:
As reported $ 12,720 $ 13,444 $ 23,693
Pro forma 12,229 12,851 23,150
Earnings per common share:
As reported:
Basic $ 1.32 $ 1.32 $ 2.13
Diluted 1.30 1.28 2.04
Pro forma:
Basic $ 1.27 $ 1.26 $ 2.08
Diluted 1.25 1.22 1.99
</TABLE>
<PAGE> 14
DUCOMMUN INCORPORATED POSITIONED FOR GROWTH TWENTY FOUR
- --------------------------------------------------------------------------------
NOTES TO
CONSOLIDATED
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
These pro forma amounts may not be representative of future disclosures
since the estimated fair value of stock options is amortized to expense over the
vesting period, and additional options may be granted in future years. The fair
value of these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions for 2000, 1999 and 1998, respectively: dividend yields of zero
percent; expected monthly volatility of 39.23, 36.15 and 29.17 percent;
risk-free interest rates of 6.53, 4.88 and 5.53 percent; and expected option
life of four years for 2000, 1999 and 1998. The weighted average fair value of
options granted during 2000, 1999 and 1998, for which the exercise price equals
the market price on the grant date, was $4.24, $4.45 and $10.02.
At December 31, 2000, 110,876 common shares were available for future
grants and 776,850 common shares were reserved for the exercise of outstanding
options. Option activity during the three years ended December 31, 2000 was as
follows:
<TABLE>
<CAPTION>
Weighted Average
Number Exercise Price of
Of Shares Options Outstanding
--------- -------------------
<S> <C> <C>
Outstanding at January 1, 1998 920,787 $ 5.614
Granted 206,450 21.283
Exercised (232,088) 4.237
Forfeited (14,624) 17.177
---------
Outstanding at December 31, 1998 880,525 9.479
Granted 200,000 12.593
Exercised (52,475) 3.626
Forfeited (24,138) 14.775
---------
Outstanding at December 31, 1999 1,003,912 10.278
Granted 118,500 10.628
Exercised (313,025) 3.751
Forfeited (32,537) 15.187
---------
Outstanding at December 31, 2000 776,850 $12.755
=========
</TABLE>
The following table summarizes information concerning currently
outstanding and exercisable stock options:
<TABLE>
<CAPTION>
Average Weighted Weighted
Number of Remaining Average Average
Range of Outstanding Contractual Exercise Number Exercise
Exercise Prices Options Life Price Exercisable Price
- --------------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$2.333 - $2.999 71,375 2.83 $ 2.333 71,375 $ 2.333
$3.000 - $4.999 27,500 1.00 3.083 27,500 3.083
$5.000 - $11.999 235,125 3.06 9.893 128,625 9.386
$12.000 - $17.999 265,200 3.61 13.358 121,675 13.817
$18.000 - $23.210 177,650 2.11 21.328 88,825 21.328
------- -------
Total 776,850 2.94 $12.755 438,000 $11.494
======= =======
</TABLE>
NOTE 9. EMPLOYEE BENEFIT PLANS
The Company has an unfunded supplemental retirement plan that was suspended in
1986, but which continues to cover certain former executives. The accumulated
benefit obligations under the plan at December 31, 2000 and December 31, 1999
were $549,000 and $567,000, respectively, which are included in accrued
liabilities.
The Company provides certain health care benefits for retired employees.
Employees become eligible for these benefits if they meet minimum age and
service requirements, are eligible for retirement benefits and agree to
contribute a portion of the cost. As of December 31, 2000, there were 124
current and retired employees and dependents eligible for such benefits.
Eligibility for additional employees to become covered by retiree health
benefits was terminated in 1988. The Company accrues postretirement health care
benefits over the period in which active employees become eligible for such
benefits. The accrued postretirement benefit cost under these plans is included
in accrued liabilities.
The components of net periodic postretirement benefits cost for these
plans are as follows:
<TABLE>
<CAPTION>
Year ended December 31, 2000 1999 1998
- ---------------------- ----- ----- -----
(In thousands)
<S> <C> <C> <C>
Service cost $ -- $ -- $ 1
Interest cost 98 87 92
Amortization of net transition obligation 84 84 84
Amortization of actuarial gain (19) (18) (22)
----- ----- -----
Net periodic postretirement benefit cost $ 163 $ 153 $ 155
===== ===== =====
</TABLE>
<PAGE> 15
2000 ANNUAL REPORT TWENTY FIVE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The actuarial liabilities for these postretirement benefits are as
follows:
<TABLE>
<CAPTION>
December 31, 2000 1999
- -------------- ------- -------
(In thousands)
<S> <C> <C>
Beginning obligation (January 1) $ 1,310 $ 1,398
Service cost -- --
Interest cost 98 87
Actuarial gain 91 (106)
Benefits paid (172) (69)
------- -------
Benefit obligation (December 31) 1,327 1,310
Unrecognized net transition obligation (403) (487)
Unrecognized prior service cost -- --
Unrecognized net gain 380 490
------- -------
Accrued benefit cost $ 1,304 $ 1,313
======= =======
</TABLE>
The accumulated postretirement benefit obligations at December 31, 2000
and 1999 were determined using an assumed discount rate of 7.75% and 7.75%,
respectively. For measurement purposes, an 11.0% annual rate of increase in the
per capita cost of covered health care benefits was assumed for 2001; the rate
was assumed to decrease gradually to 6.00% in the year 2009 and remain at that
level thereafter over the projected payout period of the benefits.
A 1% increase in the assumed annual health care cost trend rate would
increase the present value of the accumulated postretirement benefit obligation
at December 31, 2000 by $300, and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for the year then ended
by $24.
NOTE 10. LEASES
The Company leases certain facilities and equipment for periods ranging from 1
to 9 years. The leases generally are renewable and provide for the payment of
property taxes, insurance and other costs relative to the property. Rental
expense in 2000, 1999 and 1998, was $3,561,000, $3,487,000 and $3,483,000,
respectively. Future minimum rental payments under operating leases having
initial or remaining noncancelable terms in excess of one year at December 31,
2000 are as follows:
<TABLE>
<CAPTION>
Lease
Commitments
-----------
(In thousands)
<S> <C>
2001 $2,996
2002 2,324
2003 1,336
2004 664
2005 556
Thereafter 315
------
Total $8,191
======
</TABLE>
NOTE 11. INCOME TAXES
The provision for income tax expense/(benefit) consists of the following:
<TABLE>
<CAPTION>
Year ended December 31, 2000 1999 1998
- ----------------------- ------- ------- -------
(In thousands)
<S> <C> <C> <C>
Current tax expense:
Federal $ 7,686 $ 5,390 $11,355
State 967 847 2,088
------- ------- -------
8,653 6,237 13,443
------- ------- -------
Deferred tax expense/(benefit):
Federal (589) 1,947 1,747
State (267) 264 36
------- ------- -------
(856) 2,211 1,783
------- ------- -------
Income Tax Expense $ 7,797 $ 8,448 $15,226
======= ======= =======
</TABLE>
<PAGE> 16
DUCOMMUN INCORPORATED POSITIONED FOR GROWTH TWENTY SIX
- --------------------------------------------------------------------------------
NOTES TO
CONSOLIDATED
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Deferred tax assets (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
December 31, 2000 1999
- -------------- ------- -------
(In thousands)
<S> <C> <C>
Allowance for doubtful accounts $ 477 $ 48
Employment-related reserves 1,416 1,527
Environmental reserves 769 741
Inventory reserves 1,197 787
State tax credit carryforwards 165 --
Warranty reserves 123 79
Other 615 507
------- -------
4,762 3,689
Depreciation (3,383) (3,165)
------- -------
Net deferred tax assets $ 1,379 $ 524
======= =======
</TABLE>
The principal reasons for the variation from the customary relationship
between income taxes and income from continuing operations before income taxes
are as follows:
<TABLE>
<CAPTION>
Year ended December 31, 2000 1999 1998
- ----------------------- ---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes (net of federal benefit) 3.3 3.3 4.1
Goodwill amortization 2.5 2.2 0.5
Benefit of foreign sales corporation (0.5) (0.8) (0.4)
Benefit of state tax credit carryforwards (0.8) -- --
Other (1.4) (1.1) (0.1)
---- ---- ----
Effective Income Tax Rate 38.0% 38.6% 39.1%
==== ==== ====
</TABLE>
Note 12. 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.
Com Dev Consulting Ltd. ("Com Dev") has filed a complaint against the
Company and certain of its officers relating to the sale of the capital stock of
3dbm by the Company to Com Dev in August 1998. The complaint seeks recovery of
damages in excess of $10,000,000, restitution of the $17,250,000 purchase price
paid for 3dbm and recovery of punitive damages, costs and attorneys' fees. A
jury trial is currently scheduled for April 23, 2001. 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. However, because of the nature and inherent
uncertainties of litigation, should the outcome of this matter be unfavorable,
the Company may be required to pay damages and other expenses, which could have
a material adverse effect on its consolidated financial position and 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.
<PAGE> 17
2000 ANNUAL REPORT TWENTY SEVEN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Note 13. Major Customers and Concentrations of Credit Risk
The Company provides proprietary products and services to most of the prime
aerospace and aircraft manufacturers. As a result, the Company's sales and trade
receivables are concentrated principally in the aerospace industry.
The Company had substantial sales to Boeing, Lockheed Martin and
Raytheon. During 2000, 1999 and 1998, sales to Boeing were $61,109,000,
$40,310,000 and $48,334,000, respectively; sales to Lockheed Martin were
$12,685,000, $15,470,000 and $18,465,000, respectively; and sales to Raytheon
were $14,242,000, $10,138,000 and $12,596,000, respectively. At December 31,
2000, trade receivables from Boeing, Lockheed Martin and Raytheon were
$6,318,000, $1,390,000 and $1,826,000, respectively. The sales and receivables
relating to Boeing, Lockheed Martin and Raytheon are diversified over a number
of different commercial, space and military programs.
In 2000, 1999 and 1998, foreign sales to manufacturers worldwide were
$26,267,000, $28,313,000 and $29,007,000, respectively. The Company had no sales
to a foreign country greater than 5% of total sales in 2000, 1999 and 1998,
respectively. The amounts of revenue, profitability and identifiable assets
attributable to foreign operations are not material when compared with revenue,
profitability and identifiable assets attributed to United States domestic
operations during 2000, 1999 and 1998.
NOTE 14. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
-------------------------------------------------- --------------------------------------------------
Three months ended Dec 31 Sep 30 Jul 1 Apr 1 Dec 31 Oct 2 Jul 3 Apr 3
- -------------------- -------- -------- -------- -------- -------- -------- -------- --------
(in thousands,except
per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales and Earnings
Net Sales $ 42,537 $ 40,881 $ 42,439 $ 39,854 $ 37,829 $ 37,218 $ 36,470 $ 34,537
-------- -------- -------- -------- -------- -------- -------- --------
Gross Profit 11,788 11,762 12,240 12,171 11,860 12,114 11,592 10,763
-------- -------- -------- -------- -------- -------- -------- --------
Income Before Taxes 5,242 5,290 5,259 4,726 4,994 5,908 5,647 5,343
Income Tax Expense (1,992) (2,010) (1,999) (1,796) (1,814) (2,238) (2,258) (2,138)
-------- -------- -------- -------- -------- -------- -------- --------
Net Income $ 3,250 $ 3,280 $ 3,260 $ 2,930 $ 3,180 $ 3,670 $ 3,389 $ 3,205
======== ======== ======== ======== ======== ======== ======== ========
Earnings Per Share:
Basic $ .34 $ .34 $ .34 $ .30 $ .32 $ .36 $ .33 $ .31
Diluted $ .33 $ .33 $ .33 $ .30 $ .32 $ .35 $ .32 $ .30
</TABLE>
<PAGE> 18
DUCOMMUN INCORPORATED POSITIONED FOR GROWTH TWENTY EIGHT
- --------------------------------------------------------------------------------
REPORT OF
INDEPENDENT
ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Ducommun Incorporated
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Ducommun Incorporated and its subsidiaries at December 31, 2000 and 1999, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
Los Angeles, California
February 20, 2001
<PAGE> 19
CORPORATE INFORMATION
BOARD OF DIRECTORS
Joseph C. Berenato
Chairman of the Board,
President and Chief Executive Officer,
Ducommun Incorporated
Norman A. Barkeley
Chairman Emeritus
H. Frederick Christie
Consultant; Retired President
and Chief Executive Officer,
The Mission Group
(subsidiary of SCEcorp)
Eugene P. Conese, Jr.
President and Chief Executive Officer,
Aero Capital LLC
Ralph D. Crosby, Jr.
President,
Integrated Systems Sector
Northrop Grumman Corporation
Robert C. Ducommun
Management Consultant
Kevin S. Moore
President,
The Clark Estates, Inc.
Thomas P. Mullaney
General Partner,
Matthews, Mullaney & Company
<PAGE> 20
OFFICERS
Joseph C. Berenato
Chairman of the Board,
President and Chief Executive Officer
Robert A. Borlet
Vice President, Manufacturing Operations
James S. Heiser
Vice President, Chief Financial Officer,
General Counsel, Secretary and Treasurer
Kenneth R. Pearson
Vice President, Human Resources
Michael W. Williams
Vice President, Corporate Development
Samuel D. Williams
Vice President and Controller
MAJOR SUBSIDIARIES
Jeffrey P. Abbott
President
Aerochem, Inc.
Paul L. Graham
President
Ducommun Technologies, Inc.
Robert B. Hahn
President
MechTronics of Arizona Corp.
Robert L. Hansen
President
AHF-Ducommun Incorporated
Richard A. Klisz
President
Brice Manufacturing Company, Inc.
<PAGE> 21
COMMON STOCK
Ducommun Incorporated common stock is
listed on the New York Stock Exchange
(Symbol DCO)
FORM 10-K
A copy of the Annual Report on Form 10-K, filed with the Securities and Exchange
Commission, may be obtained by shareholders without charge by writing to the
Secretary of the Company
REGISTRAR AND TRANSFER AGENT
Mellon Investor Services L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660
(800) 522-6645
www.mellon-investor.com
WORLD WIDE WEBSITE
www.ducommun.com
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>6
<FILENAME>a70035ex21.txt
<DESCRIPTION>EXHIBIT 21
<TEXT>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
As of December 31, 2000, the active subsidiaries of the Company were:
Aerochem, Inc., a California corporation
AHF-Ducommun Incorporated, a California corporation
American Electronics, Inc., a California corporation
Brice Manufacturing Company, Inc., a California corporation
Ducommun Technologies, Inc., a California corporation
MechTronics of Arizona Corp., an Arizona corporation
Parsons Precision Products, Inc., a Delaware corporation
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>7
<FILENAME>a70035ex23.txt
<DESCRIPTION>EXHIBIT 23
<TEXT>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-31777, 33-82164, 33-36415, 33-9383, 2-83732,
2-77309 and 2-64222) of Ducommun Incorporated of our report dated February 20,
2001 relating to the financial statements, which appears in the Annual Report to
Shareholders, which is incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report dated February 20, 2001
relating to the financial statement schedule, which appears in Form 10-K.
PricewaterhouseCoopers LLP
Los Angeles, California
February 26, 2001
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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