UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _________________________________________________________
FORM 10-K
 

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20162019
OR
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission File Number 1-8174
 

DUCOMMUN INCORPORATED
(Exact name of registrant as specified in its charter)
 

Delaware 95-0693330
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
  
23301 Wilmington200 Sandpointe Avenue, Carson,Suite 700, Santa Ana, California 90745-620992707-5759
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code: (310) 513-7200(657) 335-3665
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s) Name of each exchange on which registered
Common Stock, $.01 par value per share DCONew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x
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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§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. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ¨Accelerated filer x
    
Non-accelerated filer ¨Smaller reporting company ¨
Emerging growth company¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price of which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter ended July 2, 2016June 29, 2019 was $219$519 million.
The number of shares of common stock outstanding on February 21, 20177, 2020 was 11,195,101.11,606,827.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference:
(a) Proxy Statement for the 20172020 Annual Meeting of Shareholders (the “2017“2020 Proxy Statement”), incorporated partially in Part III hereof.
 

DUCOMMUN INCORPORATED AND SUBSIDIARIES
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FORWARD-LOOKING STATEMENTS AND RISK FACTORS
This Annual Report on Form 10-K (“Form 10-K”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be preceded by, followed by or include the words “could,” “may,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate”“estimate,” “expect,” or similar expressions. These statements are based on the beliefs and assumptions of our management. Generally, forward-looking statements include information concerning our possible or assumed future actions, events or results of operations. Forward-looking statements specifically include, without limitation, the information in this Form 10-K regarding: future sales, earnings, cash flow, uses of cash and other measures of financial performance, projections or expectations for future operations, our plans with respect to restructuring activities, completed acquisitions, future acquisitions and dispositions and expected business opportunities that may be available to us.
Although we believe that the expectations reflected in the forward-looking statements are based on reasonable assumptions, these forward-looking statements are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected. We cannot guarantee future results, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. All written and oral forward-looking statements made in connection with this Form 10-K that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by “Risk Factors” contained within Part I, Item 1A of this Form 10-K and other cautionary statements included herein. We are under no duty to update any of the forward-looking statements after the date of this Form 10-K to conform such statements to actual results or to changes in our expectations.
The information in this Form 10-K is not a complete description of our business. There can be no assurance that other factors will not affect the accuracy of these forward-looking statements or that our actual results will not differ materially from the results anticipated in such forward-looking statements. While it is impossible to identify all such factors, some factors that could cause actual results to differ materially from those estimated by us include, but are not limited to, those factors or conditions described under Risk Factors contained within Part I, Item 1A of this Form 10-K and the following:
our ability to manage and otherwise comply with our covenants with respect to our outstanding indebtedness;
our ability to service our indebtedness;
our acquisitions, business combinations, joint ventures, divestitures, or restructuring activities may entail certain operational and financial risks;
the cyclicality of our end-use markets and the level of new commercial and military aircraft orders;
industry and customer concentration;
production rates for various commercial and military aircraft programs;
the level of U.S. Government defense spending, including the impact of sequestration;spending;
compliance with applicable regulatory requirements and changes in regulatory requirements, including regulatory requirements applicable to government contracts and sub-contracts;
further consolidation of customers and suppliers in our markets;
product performance and delivery;
start-up costs, manufacturing inefficiencies and possible overruns on contracts;
increased design, product development, manufacturing, supply chain and other risks and uncertainties associated with our growth strategy to become a Tier 2 supplier of higher-level assemblies;
our ability to manage the risks associated with international operations and sales;
possible additional goodwill and other asset impairments;
economic and geopolitical developments and conditions;
unfavorable developments in the global credit markets;
our ability to operate within highly competitive markets;
technology changes and evolving industry and regulatory standards;
the risk of environmental liabilities;
the risk of cyber security attacks or not being able to detect such attacks; and
litigation with respect to us.

We caution the reader that undue reliance should not be placed on any forward-looking statements, which speak only as of the date of this Form 10-K. We do not undertake any duty or responsibility to update any of these forward-looking statements to reflect events or circumstances after the date of this Form 10-K or to reflect actual outcomes.except as required by law.

PART I
ITEM 1. BUSINESS
GENERAL
Ducommun Incorporated (“Ducommun,” “the Company,” “we,” “us” or “our”) is a leading global provider of engineering and manufacturing services for high-performance products and high-cost-of failure applications used primarily in the aerospace and defense (“A&D”), industrial, medical and other industries (collectively, “Industrial”). Ducommun differentiates itself as a full-service solution-based provider, offering a wide range of value-added advanced products and services in our primary businesses of electronics, structures, and integrated solutions. We operate through two primary business segments: Electronic Systems and Structural Systems. We are the successor to a business that was founded in California in 1849 and reincorporated in Delaware in 1970.
ACQUISITIONS
Acquisitions have been an important element of our growth strategy. We have supplemented our organic growth by identifying, acquiring and integrating acquisition opportunities that result in broader, more sophisticated product and service offerings while diversifying and expanding our customer base and markets.
For example, in June 2011,on October 8, 2019, we acquired all of the outstanding stockequity interests of LaBargeNobles Parent Inc. (the “LaBarge Acquisition”, the parent company of Nobles Worldwide, Inc. (“Nobles”), a providerprivately-held global leader in the design and manufacturing of electronics manufacturing services to aerospace, defensehigh performance ammunition handling systems for a wide range of military platforms including fixed-wing aircraft, rotary-wing aircraft, ground vehicles, and other diverse marketsshipboard systems for $325.3$77.0 million, (netnet of cash acquired, and acquisition costs), funded by internally generated cash, senior unsecured notesdrawing down on our revolving credit facility. The acquisition of Nobles advances our strategy to diversify and a senior secured term loan totaling $390.0 million. The LaBarge Acquisition positioned us to benefit from customers that are increasingly outsourcing their integrated electronic content on their platformsoffer more customized, value-driven engineered products with aftermarket opportunities and consolidating their supplier base to companies with expanded capabilities.is included in our Structural Systems segment.
PRODUCTS AND SERVICES
Business Segment Information
We operate through two primary strategic businesses Electronic Systems and Structural Systems, each of which is a reportable segment. The results of operations among our operating segments vary due to differences in competitors, customers, extent of proprietary deliverables and performance. Electronic Systems designs, engineers and manufactures high-reliability electronic and electromechanical products used in worldwide technology-driven markets including A&D and Industrial end-use markets. Electronic Systems’ product offerings primarily range from prototype development to complex assemblies as discussed in more detail below. Structural Systems designs, engineers and manufactures large,various sizes of complex contoured aerostructure components and assemblies and supplies composite and metal bonded structures and assemblies. Structural Systems’ products are primarily used on commercial aircraft, military fixed-wing aircraft and military and commercial rotary-wing aircraft.
Electronic Systems
Electronic Systems has threemultiple major product offerings in electronics manufacturing for diverse, high-reliability applications: complex cable assemblies and interconnect systems, printed circuit board assemblies, and higher-level electronic, electromechanical, and mechanical assemblies.components and assemblies, and lightning diversion systems. Components, assemblies, and assemblieslightning diversion products are provided principally for domestic and foreign commercial and military fixed-wing aircraft, military and commercial rotary-wing aircraft and space programs. In addition,Further, we provide select industrial high-reliability applications for the industrial, automation and medical, and other end-use markets. We build custom, high-performance electronics and electromechanical systems. Our products include sophisticated radar enclosures, aircraft avionics racks and shipboard communications and control enclosures, printed circuit board assemblies, cable assemblies, wire harnesses, and interconnect systems, lightning diversion strips, surge suppressors, conformal shields and other high-level complex assemblies. Electronic Systems utilizes a highly-integrated production process, including manufacturing, engineering, fabrication, machining, assembly, electronic integration, and related processes. Engineering, technical and program management services including design, development, and integration and testing of circuit card assemblies and cable assemblies, are provided to a wide range of customers.
In response to customer needs and utilizing our in-depth engineering expertise, Electronic Systems is also considered a leading supplier of engineered products including, illuminated pushbutton switches and panels for aviation and test systems, microwave and millimeter switches and filters for radio frequency systems and test instrumentation, and motors and resolvers for motion control.

Electronic Systems also provides engineering expertise for aerospace system design, development, integration, and testing. We leverage the knowledge base, capabilities, talent, and technologies of this focused capability into direct support of our customers.
Structural Systems
Structural Systems has three major product offerings to support a global customer base: commercial aircraft, military fixed-wing aircraft, and military and commercial rotary-wing aircraft. Our applications include structural components, structural assemblies, and bonded (metal and composite) components.components, precision profile extrusions and extruded assemblies, and ammunition handling systems. In the structural components products, Structural Systems designs,provides design services, engineers, and manufacturesmanufacturing of large complex contoured aluminum, titanium and Inconel® aerostructure components for the aerospace industry. Structural assembly products include winglets, engine components, and fuselage structural panels for aircraft. Metal and composite bonded structures and assemblies products include aircraft wing spoilers, large fuselage skins, rotor blades on rotary-wing aircraft and components, flight control surfaces and engine components. To support these products, Structural Systems maintains advanced machine milling, stretch-forming, hot-forming, metal bonding, composite layup, and chemical milling capabilities and has an extensive engineering capability to support both design services and manufacturing.
AEROSPACE AND DEFENSE END-USE MARKETS OVERVIEW
Our largest end-use markets are the aerospace and defense markets and our revenues from these markets represented 89%93% of our total net revenues in 2016.2019. These markets are serviced by suppliers which are stratified, from the lowest value provided to the highest, into four tiers: Tier 3,Three, Tier 2,Two, Tier 1One and original equipment manufacturers (“OEMs”). The OEMs provide the highest value and are also known as prime contractors (“Primes”). We derive a significant portion of our revenues from subcontracts with OEMs. As the prime contractor for various programs and platforms, the OEMs sell to their customers, who may include, depending upon the application, the U.S. Federal Government, foreign, state and local governments, global commercial airline carriers, regional jet carriers and various other customers. The OEMs also sell to global leasing companies that lease commercial aircraft. A significant portion of our revenues is earned from subcontracts with the Primes. Tier 3Three suppliers principally provide components or detailed parts. Tier 2Two suppliers provide more complex, value-added parts and may also assume more design risk, manufacturing risk, supply chain risk and project management risk than Tier 3Three suppliers. Tier 1One suppliers manufacture aircraft sections and purchase assemblies. We currently compete primarily with Tier 2Two and Tier 3Three suppliers. Our business growth strategy is to differentiate ourselves from competitors by providing more complex assemblies to our customers as a Tier 2higher value added supplier.
Commercial Aerospace End-Use Market
The commercial aerospace end-use market is highly cyclical and is impacted by the level of global air passenger traffic in general, which in turn is influenced by global economic conditions, fleet fuel and maintenance costs and geopolitical developments. Revenues from the commercial aerospace end-use market represented 48% of our total net revenues for 2016.2019.
Global economic growth, a primary driver for air travel, was 2.6% in 2019, below the long-term average of three percent. Passenger traffic in 2019 grew at an estimated four percent, close to the long-term average of approximately five percent. The grounding of The Boeing Company’s (“Boeing”) 737 MAX platform and suspension of the 737 MAX deliveries has slowed growth at certain airlines. While growth was estimated at approximately 6% in 2016. Although growth was strongsolid across allmost major world regions, there continues to be significant variation between regions and airline business models. AirlinesDespite some moderation in the growth rates, airlines operating in the Middle East and Asia Pacific regions,and Europe, as well as low-cost-carriers globally, are currently leading the 2019 growth in passenger traffic. Air cargo traffic growth is expected to contract this year due to weak global trade growth.
In addition, airline financial performance also plays a role in the demand for new capacity. Airlines continue to focus on increasing revenuesrevenue through alliances, partnerships, new marketing initiatives, and effective leveraging of ancillary services and related revenues. Airlines are also relentlessly focusing on reducing costs byand renewing fleets to leverage more efficient airplanes andairplanes. Net profits in 2016, continued2019 are expected to benefit significantly from lower fuel costs. As a result, market acceptance is growing for these types of more fuel efficient aircraft from The Boeing Company (“Boeing”) and Airbus Group, formerly known as the European Aeronautic, Defense & Space Company (“EADS”), through their wholly owned subsidiary Airbus (“Airbus”).approximate $26 billion.
Further, the availability of internal or external funding impacts commercial aircraft build rates. Failure of our customers to obtain financing may result in cancellation or deferral of orders.
The long-term outlook for the industry continues to remain positive due to the fundamental drivers of air travel growth:demand: economic growth and the increasing propensity to travel due to increased trade, globalization, and improved airline services driven by liberalization of air traffic rights between countries. Boeing’s 20 year forecast projections in their 20162019 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) estimateprojects a long-term average growth rate of almost 5%five percent per year for passenger traffic and more than 4% per yearfour percent for cargo traffic. This is basedBased on long termlong-term global economic growth projections of almost 3%three percent average annual gross domestic product (“GDP”) growth.growth, Boeing projects a $6.8 trillion market for more than 44,000 new airplanes over the next 20 years. We believe we are well positioned given our

product capabilities to participate in the steady projected growth rate for commercial air traffic and build rates for large commercial aircraft for the airframe manufacturing industry.

Defense End-Use Market
Our defense end-use market includes products used in military and space, including technologies and structures applications. The defense end-use market is highly cyclical and is impacted by the level of government defense spending. Government defense spending is impacted by national defense policies and priorities, political climates, fiscal budgetary constraints, U.S. Federal budget deficits, projected economic growth and the level of global military or security threats, or other conflicts. Revenues from the military and space end-use market in 20162019 represented 41%45% of our total net revenues during 2016.2019.
The new U.S. administration and key membersBipartisan Budget Act of the 115th Congress have expressed a general desire to reverse the effects of the budgetary reductions of the past several years. However,2019 raised the Budget Control Act of 2011 (“2011 Act”), which mandated limits on U.S. governmentfederal discretionary defense and non-defense spending remains in effect through thefor fiscal years 2020 (“FY2020”) and 2021 government fiscal year causing(“FY2021”), reducing budget uncertainty and continuethe risk of future sequestration cuts.sequestration. The consolidated appropriations acts for FY2020, enacted in December 2019, provided FY2020 appropriations for government departments and agencies, including the United States Department of Defense (“U.S. DoD”), the National Aeronautics and Space Administration (“NASA”), and the Federal Aviation Administration (“FAA”).
In addition, there continues to be uncertainty relatedwith respect to program-level appropriations for the U.S. Department of Defense (“U.S. DoD”)DoD and other government agencies, within the overall budgetary framework described above.including NASA. Future budget cuts or investment priority changes, including changes associated with the authorizations and appropriations process, could result in reductions, cancellations, and/or delays of existing contracts or programs. Any of these eventsimpacts could have a material effect on theour results of our operations, financial position, and/or cash flows.
In addition to the risks described above, if Congress is unable to pass appropriations bills in a timely manner, a government shutdown could occur and the impact may be above and beyond those resulting from budget cuts, sequestration, or program-level appropriations. For example, requirements to furlough employees in the U.S. DoD or other government agencies could result in payment delays, impair our ability to perform work on existing contracts, and/or negatively impact future orders. For additional information related to our revenues from customers whose principal sales are to the U.S. Government and our direct sales to the U.S. Government, see “Risk Factors” contained within Part I, Item 1A of this Annual Report on Form 10-K (“Form 10-K”).
INDUSTRIAL END-USE MARKETS OVERVIEW
Our industrial, medical and other (collectively, “Industrial”) end-use markets are diverse and are impacted by the customers’ needs for increasing electronic content and a desire to outsource. Factors expected to impact these markets include capital and industrial goods spending and general economic conditions. Our products are used in heavy industrial manufacturing systems and certain medical applications. Revenues from the Industrial end-use markets were 11%7% of our total net revenues during 2016.2019.
We believe our business in these markets has stabilizedis stable and we are well positioned forin these markets.
SALES AND MARKETING
Our commercial revenues are substantially dependent on airframe manufacturers’ production rates of new aircraft. Deliveries of new aircraft by airframe manufacturers are dependent on the financial capacity of its customers, primarily airlines and leasing companies, to purchase the aircraft. Thus, revenues from 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. Further, our revenues from commercial aircraft programs could be affected by changes in our customers’ inventory levels and changes in our customers’ aircraft production build rates. InEven with the uncertainty related to the Boeing 737 MAX platform, in recent years, both major large aircraft manufacturers, Boeing and Airbus, have announced higher build rates due to increases in production for a majority of their existing programs, including more fully-developed models, and by the introduction of new platforms.
Military components manufactured by us are employed in many of the country’s front-line fighters, bombers, rotary-wing aircraft and support aircraft, as well as land and sea-based applications. Our defense business is diversified among a number of military manufacturers and programs. In the space sector, we continue to support various unmanned launch vehicle and satellite programs.
Our sales into the Industrial end-use markets are customer focused in the various markets and driven primarily by their capital spending and manufacturing outsourcing demands.
We continue to broaden and diversify our customer base in the end-use markets we serve by providing innovative product and service solutions through drawing on our core competencies, experience and technical expertise. Net revenues related to military and space, (defense technologies and defense structures), commercial aerospace, and Industrial end-use markets in 20162019 and 20152018 were as follows:

netrevenues020720.jpg
Many of our contracts are fixed price contracts 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 we have incurred and certain other fees through the date of termination. Larger, long-term government subcontracts may have provisions for milestone payments, progress payments or cash advances for purchase of inventory.
Our marketing efforts primarily consist of developing strong, long-term relationships with our customers, which provide the basis for future sales. These close relationships allow us to gain a better insight into each customer’s business needs, identify ways to provide greater value to the customer, and allow us to be designed in early in various products and/or high volume products.
SEASONALITY
The timing of our revenues is governed by the purchasing patterns of our customers, and, as a result, we may not generate revenues equally during the year. However, no material portion of our business is considered to be seasonal.
MAJOR CUSTOMERS
We currently generate the majority of our revenues from the aerospace and defense industries. As a result, we have significant revenues from certain customers. Boeing, was greater than ten percent and Raytheon Company (“Raytheon”), and Spirit AeroSystems Holdings, Inc. (“Spirit”), and United Technologies Corporation (“United Technologies”) were each were greater than five10 percent of our 20162019 or 2018 net revenues. Revenues from our top ten customers, including Boeing, Raytheon, and Spirit and United Technologies, were 59%64% of total net revenues during 2016.2019. Net revenues by major customer for 20162019 and 20152018 were as follows:
revbycust012920.jpg
Net revenues from our customers, except the U.S. Government, are diversified over a number of different military and space, commercial aerospace, industrial, medical and other products. For additional information on revenues from major customers, see Note 1716 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K.

RESEARCH AND DEVELOPMENT
We perform concurrent engineering with our customers and product development activities under our self-funded programs, as well as under contracts with others. Concurrent engineering and product development activities are performed for commercial, military and space applications.
RAW MATERIALS AND COMPONENTS
Raw materials and components used in the manufacturing of our products include aluminum, titanium, steel and carbon fibers, as well as a wide variety of electronic interconnect and circuit card assemblies and components. These raw materials are generally available from a number of suppliers and are generally in adequate supply. However, from time to time, we have experienced increases in lead times for and limited availability of, aluminum, titanium and certain other raw materials and/or components. Moreover, certain components, supplies and raw materials for our operations are purchased from single source suppliers and occasionally, directed by our customers. In such instances, we strive to develop alternative sources and design modifications to minimize the potential for business interruptions.
COMPETITION
The markets we serve are highly competitive, and our products and services are affected by varying degrees of competition. We compete worldwide with domestic and international companies in most markets. These companies may have competitive advantages as a result of greater financial resources, economies of scale and bundled products and services that we do not offer. Additional information related to competition is discussed in Risk Factors contained within Part I, Item 1A of this Form 10-K. Our ability to compete depends principally upon the breadth of our technical capabilities, the quality of our goods and services, competitive pricing, product performance, design and engineering capabilities, new product innovation, the ability to solve specific customer needs, and customer relationships.
PATENTS AND LICENSES
We have several patents, but we do not believe that our operations are dependent upon any single patent or group of patents. In general, we rely on technical superiority, continual product improvement, exclusive product features, superior lead time, on-time delivery performance, quality, and customer relationships to maintain our competitive advantage.
BACKLOG AND REMAINING PERFORMANCE OBLIGATIONS
We define backlog as potential revenue that is based on customer placed purchase orders (“POs”) and long-term agreements (“LTAs”) with firm fixed price and expected delivery dates of 24 months or less. Backlog is subject to delivery delays or program cancellations, which are beyond our control. Backlog is affected by timing differences in the placement of customer orders and tends to be concentrated in certainseveral programs to a greater extent than our net revenues. Backlog in Industrial markets tends to be of a shorter duration and customers.is generally fulfilled within a three month period. As a result of these factors, trends in our overall level of backlog may not be indicative of trends in our future net revenues. Backlog was $600.3$910.2 million at December 31, 2016,2019, compared to $574.4$863.6 million at December 31, 2015.2018. The net increase in backlog was primarily in the military and space end-use marketsmarkets.
We define remaining performance obligations as customer placed POs with firm fixed price and commercial aerospace end-use markets, partially offset byfirm delivery dates. The majority of the LTAs do not meet the definition of a decrease incontract under Accounting Standards Codification 606 (“ASC 606”) and thus, the industrial end use markets. $480.2backlog amount is greater than the remaining performance obligations amount as defined under ASC 606. Similar to backlog, revenue based on remaining performance obligations is subject to delivery delays or program cancellations, which are beyond our control. Remaining performance obligations were $745.3 million at December 31, 2019.We anticipate recognizing an estimated $484.0 million of total backlog is expected to be deliveredour remaining performance obligations during 2017.

2020.
ENVIRONMENTAL MATTERS
Our business, operations and facilities are subject to numerous stringent federal, state and local environmental laws and regulations issued by government agencies, including the Environmental Protection Agency (“EPA”). Among other matters, these regulatory authorities impose requirements that regulate the emission, discharge, generation, management, transport and disposal of hazardous and non-hazardous materials, pollutants and contaminants. These regulations govern public and private response actions to hazardous or regulated substances that threaten to release or have been released to the environment, or endanger human health, and they require us to obtain and maintain licenses and permits in connection with our operations. We may also be required to investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations. Additionally, this extensive regulatory framework imposes significant compliance burdens and risks on us. We anticipate that capital expenditures will continue to be required for the foreseeable future to upgrade and maintain our

environmental compliance efforts, however, we do not expect such expenditures to be material in 20172020 and the foreseeable future.
Structural Systems has been directed by California environmental agencies to investigate and take corrective action for groundwater contamination at its facilities located in Adelanto (a.k.a., El Mirage) and Monrovia, California. Based on currently available information, we have accrued $1.5 million at December 31, 2019 for our estimated liabilities related to these sites. For further information, see Note 1615 in the accompanying notes to consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K. In addition, see Risk Factors contained within Part I, Item 1A of this Form 10-K for certain risks related to environmental matters.

EMPLOYEES
As of December 31, 2016,2019, we employed 2,7002,800 people, of which 400415 are subject to collective bargaining agreements expiring in June 20182021 and January 2019.April 2022. We believe our relations with our employees are good. See Risk Factors contained within Part I, Item 1A of this Form 10-K for additional information regarding certain risks related to our employees.
AVAILABLE INFORMATION
General information about us can be obtained from our website address at www.ducommun.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, if any, are available free of charge on our website as soon as reasonably practicable after they are filed with or furnished to the SEC. Information included in our website is not incorporated by reference in this Annual Report on Form 10-K. The SEC also maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding SEC registrants, including our company.
ITEM 1A. RISK FACTORS
Our business, financial condition, results of operations and cash flows may be affected by known and unknown risks, uncertainties and other factors. We have summarized below the significant, known material risks to our business. Additional risk factors not currently known to us or that we currently believe are immaterial may also impair our business, financial condition, results of operations and cash flows. Any of these risks, uncertainties and other factors could cause our future financial results to differ materially from recent financial results or from currently anticipated future financial results. The risk factors below should be considered together with the information included elsewhere in this Annual Report on Form 10-K (“Form 10-K”) as well as other required filings by us towith the SEC.
RISKS RELATED TO OUR CAPITAL STRUCTURE
Our indebtedness could limit our financing options, adversely affect our financial condition, and prevent us from fulfilling our debt obligations.
In July 2015,On December 20, 2019, we completed the refinancing of a portion of our existing debt by entering into a new revolving credit facility (“New Revolving Credit Facility”) to replace the existing credit facilities. The newrevolving credit facility consists ofthat was entered into in November 2018 (“2018 Revolving Credit Facility”) and entering into a $275.0 million senior securednew term loan which matures on June 26, 2020 (“New Term Loan”), and. The New Revolving Credit Facility is a $200.0$100.0 million senior secured revolving credit facility (“that matures on December 20, 2024 replacing the $100.0 million 2018 Revolving Credit Facility”), whichFacility that would have matured on November 21, 2023. The New Term Loan is a $140.0 million senior secured term loan that matures on June 26, 2020December 20, 2024. We also have an existing $240.0 million senior secured term loan that was entered into in November 2018 that matures on November 21, 2025 (“2018 Term Loan”). The original amounts available under the New Revolving Credit Facility, New Term Loan, and 2018 Term Loan (collectively, the “Credit Facilities”). in aggregate, totaled $480.0 million. In conjunction with the closing of the New Revolving Credit Facility and the New Term Loan, we drew down the entire $140.0 million on the New Term Loan and used those proceeds to pay off and close the 2018 Revolving Credit Facility of $58.5 million, pay down a portion of the 2018 Term Loan of $56.0 million, pay the accrued interest associated with the amounts being paid down on the 2018 Revolving Credit Facility and 2018 Term Loan, pay the fees related to this transaction, and the remainder will be used for general corporate expenses.
At December 31, 2016,2019, we had $170.0a total of $310.0 million of outstanding long-term debt under the Term Loan.Credit Facilities. The total long-term debt was primarily the direct result of our acquisitions, LaBarge, Acquisition. There are no further required payments under the Credit Facilities until June 2020.Inc. in 2011, Lightning Diversion Systems, LLC (“LDS”) in September 2017, Certified Thermoplastics Co., LLC (“CTP”) in April 2018, and Nobles on October 8, 2019.
Our ability to obtain additional financing or complete a debt refinancing in the future may be limited, as discussed below in this risk factor. We may have to undertake alternative financing plans, such as selling assets; reducing or delaying scheduled expansions and/or capital investments; or seeking various other forms of capital. Our ability to complete reasonable alternative

financing plans may be affected by circumstances and economic events outside of our control. We cannot ensure that we would be able to refinance our debt or enter into alternative financing plans in adequate amounts on commercially reasonable terms, terms acceptable to us or at all, or that such plans guarantee that we would be able to meet our debt obligations.
Our level of debt could:
limit our ability to obtain additional financing to fund future working capital, capital expenditures, investments or acquisitions or other general corporate requirements;
require a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, investments or acquisitions or other general corporate purposes;
increase our vulnerability to adverse changes in general economic, industry and competitive conditions;
place us at a disadvantage compared to other, less leveraged competitors;
expose us to the risk of increased borrowing costs and higher interest rates as approximately one halfalmost 30% of our borrowings under our Credit Facilities bear interest at variable rates, which could further adversely impact our cash flows;
limit our flexibility to plan for and react to changes in our business and the industry in which we compete;
restrict us from making strategic acquisitions or causing us to make non-strategic divestitures;

acquisitions;
expose us to risk of rating agency downgrades and unfavorable changes in the global credit markets; and
make it more difficult for us to satisfy our obligations with respect to the Credit Facilities and our other debt.
The occurrence of any one of these events could have an adverse effect on our business, financial condition, results of operations and ability to satisfy our obligations in respect of our outstanding debt.
We require a considerable amount of cash to servicerun our indebtedness.business.
Our ability to make payments on our debt in the future and to fund planned capital expenditures and working capital needs, will depend upon our ability to generate significant cash in the future. Our ability to generate cash is subject to economic, financial, competitive, legislative, regulatory and other factors that may be beyond our control.
On December 20, 2019, we completed the refinancing of a portion of our existing debt by entering into the New Revolving Credit Facility to replace the 2018 Revolving Credit Facility and entering into the New Term Loan. The New Revolving Credit Facilities bearFacility is a $100.0 million senior secured revolving credit facility that matures on December 20, 2024 replacing the $100.0 million 2018 Revolving Credit Facility that would have matured on November 21, 2023. The New Term Loan is a $140.0 million senior secured term loan that matures on December 20, 2024. We also have the 2018 Term Loan of $240 million senior secured term loan that matures on November 21, 2025. In conjunction with the closing of the New Revolving Credit Facility and the New Term Loan, we drew down the entire $140.0 million on the New Term Loan and used those proceeds to pay off and close the 2018 Revolving Credit Facility of $58.5 million, pay down a portion of the 2018 Term Loan of $56.0 million, pay the accrued interest at our option, atassociated with the amounts being paid down on the 2018 Revolving Credit Facility and 2018 Term Loan, pay the fees related to this transaction, with the remainder to be used for general corporate expenses. We are required to make installment payments of 1.25% of the initial outstanding principal balance of the New Term Loan amount on a rate equalquarterly basis in addition to either (i)making installment payments of 0.25% of the Eurodollar Rate (defined asoutstanding principal balance of the 2018 Term Loan amount on a London Interbank Offered Rate [“LIBOR”]) plusquarterly basis. In addition, if we meet the annual excess cash flow threshold, we will be required to make excess flow payments on an applicable marginannual basis. Further, the undrawn portion of the commitment of the New Revolving Credit Facility is subject to a commitment fee ranging from 1.50%0.175% to 2.75% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%0.275%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 0.50% to 1.75% per year, in each case based upon the consolidated total net adjusted leverage ratio, typically payable quarterly.ratio. In October 2015, we entered into interest rate cap hedges designated as cash flow hedges, with a portion of these interest rate cap hedges maturing on a quarterly basis, and a final quarterly maturity datesdate of June 2020 andwith notional value in aggregate, totaling $135.0 million. At December 31, 2016,2019, the outstanding balance on the Credit Facilities was $170.0$310.0 million with an average interest rate of 3.25%6.87%. Should interest rates increase significantly, even though $135.0$81.0 million of our debt was hedged, our debt service cost will increase. Any inability to generate sufficient cash flow could have a material adverse effect on our financial condition or results of operations.
While we expect to meet all of our financial obligations, we cannot ensure that our business will generate sufficient cash flow from operations in an amount sufficient to enable us to pay our debt or to fund our other liquidity needs.

We require a considerable amount of cash to fund our anticipated voluntary principal prepayments on our Credit Facilities.
Our ability to continue to reduce the debt outstanding under our Credit Facilities through voluntary principal prepayments will be a contributing factor to our ability to meet the leverage ratio covenant and keepingkeep our interest rate towards the lower end of the interest rate range as defined in the Credit Facilities. Our ability to make such prepayments will depend upon our ability to generate significant cash in the future. We cannot ensure that our business will generate sufficient cash flow from operations to fund any such prepayments.
The covenants in the credit agreement to our Credit Facilities impose restrictions that may limit our operating and financial flexibility.
We are required to comply with a leverage covenant as defined in the credit agreement to theNew Revolving Credit Facilities.Facility agreement. The leverage covenant is defined as Consolidated Funded Indebtedness less unrestricted cash and cash equivalents in excess of $10.0$5.0 million, divided by consolidated earnings before interest, taxes and depreciation and amortization (“EBITDA”). The leverage covenant decreases over the term of the Credit Facilities, which will require us to lower our outstanding debt or increase our EBITDA in the future. We believe the voluntary prepayments on the Credit Facilities will help reduce our leverage, as defined in the credit agreement.
At December 31, 2016,2019, we were in compliance with the leverage covenant under the Credit Facility.Facilities. However, there is no assurance that we will continue to be in compliance with the leverage covenant in future periods.
Our credit agreement to theThe Credit FacilitiesFacilities’ agreements contains a number of significant restrictions and covenants that limit our ability, among other things, to incur additional indebtedness, to create liens, to make certain payments, investments, to engage in transactions with affiliates, to sell certain assets or enter into mergers.
These covenants could materially and adversely affect our ability to finance our future operations or capital needs. Furthermore, they may restrict our ability to expand, pursue our business strategies and otherwise conduct our business. Our ability to comply with these covenants may be affected by circumstances and events beyond our control, such as prevailing economic conditions and changes in regulations, and we cannot ensure that we will be able to comply with such covenants. These restrictions also limit our ability to obtain future financings to withstand a future downturn in our business or the economy in general.
A breach of any covenant in credit agreement to the Credit Facilities wouldcould result in a default under the Credit Facilities agreement.agreements. A default, if not waived, could result in acceleration of the debt outstanding under the agreement. A default could permit our lenders to foreclose on any of our assets securing such debt. Even if new financing were available at that time, it

may not be on terms or amounts that are acceptable to us or terms as favorable as our current agreements. If our debt is in default for any reason, our business, results of operations and financial condition could be materially and adversely affected.
We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is determined.
In July 2017, the Financial Conduct Authority, the authority that regulates London Interbank Offering Rate (“LIBOR”), announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee (“ARRC”) has proposed that the Secured Overnight Financing Rate (“SOFR”) is the rate that represents the best practice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR, and organizations are currently working on industry wide and/or company specific transition from LIBOR to an alternative that will not result in financial market disruptions, significant increases in benchmark rates, or financing costs to borrowers. The consequences of these developments cannot be entirely predicted, but could result in an increase in the cost of our variable rate debt.
The typical trading volume of our common stock may affect an investor’s ability to sell significant stock holdings in the future without negatively impacting stock price.
The level of trading activity may vary daily and typically represents only a small percentage of outstanding shares. As a result, a stockholder who sells a significant amount of shares in a short period of time could negatively affect our share price.
Our amount of debt may require us to raise additional capital to fund operations.acquisitions.
We may sell additional shares of common stock or other equity securities to raise capital in the future, which could dilute the value of an investor’s holdings.

RISKS RELATED TO OUR BUSINESS
Our end-use markets are cyclical.
We sell our products into aerospace, defense, and industrial end-use markets, which are cyclical and have experienced periodic declines. Our sales are, therefore, unpredictable and may tend to fluctuate based on a number of factors, including global economic conditions, geopolitical developments and conditions, and other developments affecting our end-use markets and the customers served. Consequently, results of operations in any period should not be considered indicative of the operating results that may be experienced in any future period.
We depend upon a selected base of industries and customers, which subjects us to unique risks which may adversely affect us.
We currently generate a majority of our revenues from customers in the aerospace and defense industry. Our business depends, in part, on the level of new military and commercial aircraft orders. As a result, we have significant sales to certain customers. Sales to theThe Boeing Company (“Boeing”) and Spirit AeroSystems Holdings, Inc. (“Spirit”) comprise the majority of our commercial aerospace end-use market. A significant portion of our net sales in our military and space end-use markets are made under subcontracts with OEMs,original equipment manufacturers (“OEMs”), under their prime contracts with the U. S. Government. We had significant sales to Lockheed Martin Corporation and Raytheon Company in 20162019 in our defense technologies end-use market.
Our customers may experience delays in the launch of new products, labor strikes, diminished liquidity or credit unavailability, weak demand for their products, or other difficulties in their business. In addition, sequestration and a shiftshifts in government spending priorities have caused and may continue to cause additional uncertainty in the placement of orders.
Our sales torevenues from our top ten customers, which represented 59%64% of our total 20162019 net revenues, were diversified over a number of different aerospace and defense and Industrial products. Any significant change in production rates by these customers would have a material effect on our results of operations and cash flows. There is no assurance that our current significant customers will continue to buy products from us at current levels, or that we will retain any or all of our existing customers, or that we will be able to form new relationships with customers upon the loss of one or more of our existing customers. This risk may be further complicated by pricing pressures, intense competition prevalent in our industry and other factors. A significant reduction in sales to any of our major customers, the loss of a major customer, or a default of a major customer on accounts receivable could have a material adverse impact on our financial results.
In December 2019, Boeing announced plans to temporarily suspend 737 MAX production, starting in January 2020. Boeing is our largest customer and the 737 MAX is our highest revenue platform. In January 2020, Boeing then announced they anticipate regulatory approval during mid-2020, which should enable 737 MAX deliveries to resume at that time. Later that same month, Boeing’s President and Chief Executive Officer stated Boeing was committed to restarting production of the 737 MAX as soon as April 2020, in advance of receiving certification from regulators. Spirit, which is also one of our largest customers, announced in January 2020, they had reached an agreement with Boeing to restart production of the 737 MAX during the first quarter of 2020. Spirit anticipates slowly ramping up deliveries throughout the year to reach a total of 216 shipsets of 737 MAX to be delivered to Boeing in 2020. As such, our rate of production of 737 MAX products was impacted beginning in January 2020 and we undertook the necessary steps to adjust our cost structure, including personnel requirements. Further delays in regulatory approval of the 737 MAX will likely have an impact on our production rates though we anticipate resuming shipment of products to Spirit in March 2020 and to Boeing as soon as April 2020. In addition, we expect revenue growth with our other commercial customers and defense OEMs (also known as prime contractors) to help mitigate this risk, with the anticipation we will be able to offset the majority of the 737 MAX impact on our revenues.
We generally make sales under purchase orders and contracts that are subject to cancellation, modification or rescheduling. Changes in the economic environment and the financial condition of the industries we serve could result in customer cancellation of contractual orders or requests for rescheduling. Some of our contracts have specific provisions relating to schedule and performance, and failure to deliver in accordance with such provisions could result in cancellations, modifications, rescheduling and/or penalties, in some cases at the customers’ convenience and without prior notice. While we have normally recovered our direct and indirect costs plus profit, such cancellations, modifications, or rescheduling that cannot be replaced in a timely fashion, could have a material adverse effect on our financial results.
A significant portion of our business depends upon U.S. Government defense spending.
We derive a significant portion of our business from customers whose principal sales are to the U.S. Government and from direct sales by us to the U.S. Government. Accordingly, the success of our business depends upon government spending generally or for specific departments or agencies in particular. Such spending, among other factors, is subject to the uncertainties of governmental appropriations and national defense policies

and priorities, constraints of the budgetary process,

timing and potential changes in these policies and priorities, and the adoption of new laws or regulations or changes to existing laws or regulations.
These and other factors could cause the government and government agencies, or prime contractors that use us as a subcontractor, to reduce their purchases under existing contracts, to exercise their rights to terminate contracts at-willfor convenience or to abstain from exercising options to renew contracts, any of which could have a material adverse effect on our business, financial condition and results of operations.
Further, the levels of U.S. Department of Defense (“U.S. DoD”) spending in future periods are difficult to predict and are impacted by numerous factors such as the political environment, U.S. foreign policy, macroeconomic conditions and the ability of the U.S. Government to enact relevant legislation such as the authorization and appropriations bills. In addition, significant budgetary delays and constraints have already resulted in reduced spending levels, and additional reductions may be forthcoming. The Budget Control Act (“2011 Act”) established limits on U.S. government discretionary spending, including a reduction of defense spending between the 2012 and 2021 U.S. Government fiscal years. Accordingly, long-term uncertainty remains with respect to overall levels of defense spending and it is likely that U.S. Government discretionary spending levels will continue to be subject to pressure.
We are subject to extensive regulation and audit by the Defense Contract Audit Agency.
The accuracy and appropriateness of certain costs and expenses used to substantiate our direct and indirect costs for the U.S. Government contracts are subject to extensive regulation and audit by the Defense Contract Audit Agency, an arm of the U.S. DoD. Such audits and reviews could result in adjustments to our contract costs and profitability. However, we cannot ensure the outcome of any future audits and adjustments may be required to reduce net sales or profits upon completion and final negotiation of audits. If any audit or review were to uncover inaccurate costs or improper activities, we could be subject to penalties and sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from conducting future business with the U.S. Government. Any such outcome could have a material adverse effect on our financial results.
We are subject to a number of procurement laws and regulations. Our business and our reputation could be adversely affected if we fail to comply with these laws.
We must comply with and are affected by laws and regulations relating to the award, administration and performance of U.S. Government contracts. Government contract laws and regulations affect how we do business with our customers and impose certain risks and costs on our business. A violation of specific laws and regulations, by us, our employees, or others working on our behalf, such as a supplier or a venture partner, could harm our reputation and result in the imposition of fines and penalties, the termination of our contracts, suspension or debarment from bidding on or being awarded contracts, loss of our ability to export products or services and civil or criminal investigations or proceedings.
In some instances, these laws and regulations impose terms or rights that are different from those typically found in commercial transactions. For example, the U.S. Government may terminate any of our customers’ government contracts and subcontracts either at its convenience or for default based on our performance. Upon termination for convenience of a fixed-price type contract, we normally are entitled to receive the purchase price for delivered items, reimbursement for allowable costs for work-in-process and an allowance for profit on the contract or adjustment for loss if completion of performance would have resulted in a loss.
Contracts with some of our customers, including Federal government contracts, contain provisions which give our customers a variety of rights that are unfavorable to us and the OEMs to whom we provide products and services, including the ability to terminate a contract at any time for convenience.
Contracts with some of our customers, including Federal government contracts, contain provisions and are subject to laws and regulations that provide rights and remedies not typically found in commercial contracts. These provisions may allow our customers to:
terminate existing contracts, in whole or in part, for convenience, as well as for default, or if funds for contract performance for any subsequent year become unavailable;
suspendterminate existing contracts if we are suspended or debar usdebarred from doing business with the federal government or with a governmental agency;
prohibit future procurement awards with a particular agency as a result of a finding of an organizational conflict of interest based upon prior related work performed for the agency that would give a contractor an unfair advantage over competing contractors; and
claim rights in products and systems produced by us; andus.
control or prohibit the export of the products and related services we offer.
If the U.S. Government terminates a contract for convenience, the counterparty with whom we have contracted on a subcontract may terminate its contract with us. As a result of any such termination, whether on a direct government contract or subcontract, we may recover only our incurred or committed costs, settlement expenses and profit on work completed prior to the termination. If the U.S. Government terminates a direct contract with us for default, we may not even recover those amounts and instead may be liable for excess costs incurred by the U.S. Government in procuring undelivered items and services from another source. Contracts with foreign governments generally contain similar provisions relating to termination at the convenience of the customer.
In addition, the U.S. Government is typically required to open all programs to competitive bidding and, therefore, may not automatically renew any of its prime contracts. If one or more of our customers’ government prime or subcontracts is terminated or canceled, our failure to replace sales generated from such contracts would result in lower sales and could have an adverse effect on our business, results of operations and financial condition.

Further consolidation in the aerospace industry could adversely affect our business and financial results.
The aerospace and defense industry is experiencing significant consolidation, including our customers, competitors and suppliers. Consolidation among our customers may result in delays in the awarding of new contracts and losses of existing business. Consolidation among our competitors may result in larger competitors with greater resources and market share, which could adversely affect our ability to compete successfully. Consolidation among our suppliers may result in fewer sources of supply and increased cost to us.
Our growth strategy includes evaluating selected acquisitions, which entails certain risks to our business and financial performance.
We have historically achieved a portion of our growth through acquisitions and expect to evaluate selected future acquisitions as part of our strategy for growth. Any acquisition of another business including the LaBarge Acquisition, entails risks and it is possible that we willmay not realize the expected benefits from an acquisition or that an acquisition willcould adversely affect our existing operations. Acquisitions entail certain risks, including:
difficulty in integrating the operations and personnel of the acquired company within our existing operations or in maintaining uniform standards;
loss of key employees or customers of the acquired company;
the failure to achieve anticipated synergies;
unrecorded liabilities of acquired companies that we fail to discover during our due diligence investigations or that are not subject to indemnification or reimbursement by the seller; and
management and other personnel having their time and resources diverted to evaluate, negotiate and integrate acquisitions.
We may not be successful in achieving expected operating efficiencies and sustaining or improving operating expense reductions, and may experience business disruptions associated with restructuring, performance center consolidations, realignment, cost reduction, and other strategic initiatives.
In recent years, we have implemented a number of restructuring, realignment, and cost reduction initiatives, including performance center consolidations, organizational realignments, and reductions in our workforce. While we have realized some efficiencies from these actions, we may not realize the benefits of these initiatives to the extent we anticipated. Further, such benefits may be realized later than expected, and the ongoing difficulties in implementing these measures may be greater than anticipated, which could cause us to incur additional costs or result in business disruptions. In addition, if these measures are not successful or sustainable, we may have to undertake additional realignment and cost reduction efforts, which could result in significant additional charges. Moreover, if our restructuring and realignment efforts prove ineffective, our ability to achieve our other strategic and business plan goals may be adversely impacted.
We rely on our suppliers to meet the quality and delivery expectations of our customers.
Our ability to deliver our products and services on schedule and to satisfy specific quality levels is dependent upon a variety of factors, including execution of internal performance plans, availability of raw materials, internal and supplier produced parts and structures, conversion of raw materials into parts and assemblies, and performance of suppliers and others.
We rely on numerous third-party suppliers for raw materials and a large proportion of the components used in our production process. Certain of these raw materials and components are available only from single sources or a limited number of suppliers, or similarly, customers’ specifications may require us to obtain raw materials and/or components from a single source or certain suppliers. Many of our suppliers are small companies with limited financial resources and manufacturing capabilities. We do

not currently have the ability to manufacture these components ourselves. These and other factors, including import tariffs, the loss of a critical supplier or raw materials and/or component shortages, could cause disruptions or cost inefficiencies in our operations compared tooperations. Additionally, our competitors that have greater direct purchasing power, may have product cost advantages which could have a material adverse effect on our financial results.
We use estimates when bidding on fixed-price contracts. Changes in our estimates could adversely affect our financial results.
We enter into contracts providing for a firm, fixed-price for the sale of some of our products regardless of the production costs incurred by us. In many cases, we make multi-year firm, fixed-price commitments to our customers, without assurance that our anticipated production costs will be achieved. Contract bidding and accounting require judgment relative to assessing risks, estimating contract net sales and costs, including estimating cost increases over time and efficiencies to be gained, and making assumptions for supplier sourcing and quality, manufacturing scheduling and technical issues over the life of the contract. Such assumptions can be particularly difficult to estimate for contracts with new customers. Our failure to accurately estimateInaccurate estimates of these costs cancould result in reduced profits or incurred losses. Due to the significance of the judgments and estimates involved, it is possible that materially different amounts could be obtained if different assumptions were used or if the underlying circumstances were to change. Therefore, any changes in our underlying assumptions, circumstances or estimates could have a material adverse effect on our financial results. For example, in the third quarter of 2015, we recorded a charge in the Structural Systems segment related to a regional jet program for estimated cost overruns of $10.0 million. See “Provision for Estimated Losses on Contracts” in Note 1 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information.

As we move up the value chain to become a Tier 2more value added supplier, enhanced design, product development, manufacturing, supply chain project management and other skills will be required.
We may encounter difficulties as we execute our growth strategy to move up the value chain to become a Tier 2more value added supplier of more complex value-added assemblies. Difficulties we may encounter include, but are not limited to, the need for enhanced and expanded product design skills, enhanced ability to control and influence our suppliers, enhanced quality control systems and infrastructure, enhanced large-scale project management skills, and expanded industry certifications. Assuming incremental project design responsibilities would require us to assume additional risk in developing cost estimates and could expose us to increased risk of losses. There can be no assurance that we will be successful in obtaining the enhanced skills required to be a Tier 2 suppliermove up the value chain or that our customers will outsource such functions to us.
Risks associated with operating and conducting our business outside the United States could adversely impact us.
We have manufacturing facilities in Thailand and Mexico and also derive a portion of our net revenues from direct foreign sales. Further, our customers may derive portions of their revenues from non-U.S. customers. As a result, we are subject to the risks of conducting and operating our business internationally, including:
political instability;
economic and geopolitical developments and conditions;
compliance with a variety of international laws, as well as U.S. laws affecting the activities of U.S. companies conducting business abroad, including, but not limited to, the Foreign Corrupt Practices Act;
imposition of taxes, export controls, tariffs, embargoes and other trade restrictions;
difficulties repatriating funds or restrictions on cash transfers; and
potential for new tariffs imposed on imports by the new U.S. administration.
While the impact of these factors is difficult to predict, we believe any one or more of these factors could have a material adverse effect on our financial results.
Goodwill and/or other assets could be impaired in the future, which could result in substantial charges.
Goodwill is tested for impairment on an annual basis duringas of the first day of our fourth quarter or more frequently if events or circumstances occur which could indicate potential impairment. For example, our annual goodwill impairment testing in the fourth quarter of 2015 indicated the Structural Systems reporting unit’s carrying value exceeded its fair value as a result of the lowered revenues and cash flows outlook in our military and space end-use markets due to the decrease in U.S. government defense spending and thus, requiring us to perform Step Two of the goodwill impairment test. Based on the Step Two test, we impaired the entire goodwill for the Structural Systems reporting unit of $57.2 million in 2015.
We also test intangible assets with indefinite life periods for potential impairment annually and on an interim basis if there are indicators of potential impairment. For example, in performing our annual impairment test in the fourth quarter of 2015, we concluded the fair value of the indefinite-lived trade name to be zero as a result of divesting businesses in Electronic Systems and our discontinuation of the use of the trade name. Thus, we recorded an impairment of $32.9 million, which was the remaining carrying value of the trade name.
In addition, we evaluate amortizable intangible assets, fixed assets, and production cost of contracts for impairment if there are indicators of a potential impairment.
In assessing the recoverability of goodwill, management is required to make certain critical estimates and assumptions. These estimates and assumptions include projected sales levels, including the addition of new customers, programs or platforms and increased content on existing programs or platforms, improvements in manufacturing efficiency, and reductions in operating costs. Due to many variables inherent in the estimation of a business’s fair value and the relative size of our recorded goodwill, differences in estimates and assumptions may have a material effect on the results of our impairment analysis. If any of these or other estimates and assumptions are not realized in the future, or if market multiples decline, we may be required to record an additional impairment charge for goodwill.

We also test intangible assets with indefinite life periods for potential impairment annually and on an interim basis if there are indicators of potential impairment.
In addition, we evaluate amortizable intangible assets, fixed assets, and production cost of contracts for impairment if there are indicators of a potential impairment.
Further, additional impairment charges may be incurred against other intangible assets or long-term assets if asset utilization declines, customer demand declines or other circumstances indicate that the asset carrying value may not be recoverable.
Our production cost of contracts as of December 31, 20162019 was $11.3$9.4 million or 2%1% of total assets. Our goodwill and other intangible assets as of December 31, 20162019 were $184.1$309.3 million, or 36%39% of total assets. See “Goodwill and Indefinite-Lived

Intangible Assets” and “Production Cost of Contracts” in Note 7 of our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information.
OTHER RISKS
Our operations are subject to numerous extensive, complex, costly and evolving laws, regulations and restrictions, and failure to comply with these laws, regulations and restrictions could subject us to penalties and sanctions that could harm our business.
Prime contracts with our major customers that have contracts with various agencies of the U.S. Government and subcontracts with other prime contractors, are subject to numerous laws and regulations which affect how we do business with our customers and may impose added costs onto our business. As a result, our contracts and operations are subject to numerous, extensive, complex, costly and evolving laws, regulations and restrictions, principally by the U.S. Government or their agencies. These laws, regulationregulations and restrictions govern items including, but not limited to, the formation, administration and performance of U.S. Government contracts, disclosure of cost and pricing data, civil penalties for violations orof false claims to the U.S. Government for payment, definedefining reimbursable costs, establishestablishing ethical standards for the procurement process and controlcontrolling the import and export of defense articles and services.
Noncompliance could expose us to liability for penalties, including termination of our U.S. Government contracts and subcontracts, disqualification from bidding on future U.S. Government contracts and subcontracts, suspension or debarment from U.S. Government contracting and various other fines and penalties. Noncompliance found by any one agency could result in fines, penalties, debarment or suspension from receiving additional contracts with all U.S. Government agencies. Given our dependence on U.S. Government business, suspension or debarment could have a material adverse effect on our financial results.
In addition, the U.S. Government may revise its procurement practices or adopt new contract rules and regulations, at any time, including increased usage of fixed-price contracts and procurement reform. Such changes could impair our ability to obtain new contracts or subcontracts or renew contracts or subcontracts under which we currently perform when those contracts are put up for recompetition.competitive bidding. Any new contracting methods could be costly or administratively difficult for us to implement and could adversely affect our future net revenues.
In addition, our international operations subject us to numerous U.S. and foreign laws and regulations, including, without limitation, regulations relating to import-export control, technology transfer restrictions, repatriation of earnings, exchange controls, the Foreign Corrupt Practices Act and the anti-boycott provisions of the U.S. Export Administration Act. Changes in regulations or political environments may affect our ability to conduct business in foreign markets including investment, procurement and repatriation of earnings. Failure by us or our sales representatives or consultants to comply with these laws and regulations could result in certain liabilities and could possibly result in suspension or debarment from government contracts or suspension of our export privileges, which could have a material adverse effect on our financial results.
Customer pricing pressures could reduce the demand and/or price for our products and services.
The markets we serve are highly competitive and price sensitive. We compete worldwide with a number of domestic and international companies that have substantially greater manufacturing, purchasing, marketing and financial resources than we do. Many of our customers have the in-house capability to fulfill their manufacturing requirements. Our larger competitors may be able to compete more effectively for very large-scale contracts than we can by providing different or greater capabilities or benefits such as technical qualifications, past performance on large-scale contracts, geographic presence, price and availability of key professional personnel. If we are unable to successfully compete for new business, our net revenues growth and operating margins may decline.
Several of our major customers have completed extensive cost containment efforts and we expect continued pricing pressures in 20172020 and beyond. Competitive pricing pressures may have an adverse effect on our financial condition and operating results.

Further, there can be no assurance that competition from existing or potential competitors in other segments of our business will not have a material adverse effect on our financial results. If we do not continue to compete effectively and win contracts, our future business, financial condition, results of operations and our ability to meet our financial obligations may be materially compromised.
Our products and processes are subject to risk of obsolescence as a result of changes in technology and evolving industry and regulatory standards.
The future success of our business depends in large part upon our and our customers’ ability to maintain and enhance technological capabilities, develop and market manufacturing services that meet changing customer needs and successfully anticipate or respond to technological advances in manufacturing processes on a cost-effective and timely basis, while meeting

evolving industry and regulatory standards. To address these risks, we invest in product design and development, and incur related capital expenditures. There can be no guarantee that our product design and development efforts will be successful, or that funds required to be invested in product design and development or incurred as capital expenditures will not increase materially in the future.
Environmental liabilities could adversely affect our financial results.
We are subject to various federal, local, and foreign environmental laws and regulations, including those relating to the use, storage, transport, discharge and disposal of hazardous and non-hazardous chemicals and materials used and emissions generated during our manufacturing process. We do not carry insurance for these potential environmental liabilities. Any failure by us to comply with present or future regulations could subject us to future liabilities or the suspension of production, which could have a material adverse effect on our financial results. Moreover, some environmental laws relating to contaminated sites can impose joint and several liability retroactively regardless of fault or the legality of the activities giving rise to the contamination. Compliance with existing or future environmental laws and regulations may require extensive capital expenditures, increase our cost or impact our production capabilities. Even if such expenditures are made, there can be no assurance that we will be able to comply. We have been directed to investigate and take corrective action for groundwater contamination at certain sites. Oursite and our ultimate liability for such matters will depend upon a number of factors. See Note 1615 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information.
Cyber security attacks, internal system or service failures may adversely impact our business and operations.
Any system or service disruptions, including those caused by projects to improve our information technology systems, if not anticipated and appropriately mitigated, could disrupt our business and impair our ability to effectively provide products and related services to our customers and could have a material adverse effect on our business. We could also be subject to systems failures, including network, software or hardware failures, whether caused by us, third-party service providers, intruders or hackers, computer viruses, natural disasters, power shortages or terrorist attacks. Cyber security threats are evolving and include, but are not limited to, malicious software, unauthorized attempts to gain access to sensitive, confidential or otherwise protected information related to us or our products, our employees, customers or suppliers, or other acts that could lead to disruptions in our business. Any such failures could cause loss of data and interruptions or delays in our business, cause us to incur remediation costs, subject us to claims and damage our reputation. In addition, the failure or disruption of our communications or utilities could cause us to interrupt or suspend our operations or otherwise adversely affect our business. Our property and business interruption insurance may be inadequate to compensate us for all losses that may occur as a result of any system or operational failure or disruption which would adversely affect our business, results of operations and financial condition.
We may not have the ability to renew facilities leases on terms favorable to us and relocation of operations presents risks due to business interruption.
Certain of our manufacturing facilities and offices are leased and have lease terms that expire between 20192021 and 2022.2026. The majority of these leases provide renewal options at the fair market rental rate at the time of renewal, which, if renewed, could be significantly higher than our current rental rates. We may be unable to offset these cost increases by charging more for our products and services. Furthermore, continued economic conditions may continue to negatively impact and create greater pressure in the commercial real estate market, causing higher incidences of landlord default and/or lender foreclosure of properties, including properties occupied by us. While we maintain certain non-disturbance rights in most cases, it is not certain that such rights will in all cases be upheld and our continued right of occupancy in such instances iscould be potentially jeopardized. An occurrence of any of these events could have a material adverse effect on our financial results.
Additionally, if we choose to move any of our operations, those operations willmay be subject to additional relocation costs and associated risks of business interruption.

The occurrence of litigation in which we could be named as a defendant is unpredictable.
From time to time, we and our subsidiaries are involved in various legal and other proceedings that are incidental to the conduct of our business. While we believe no current proceedings, if adversely determined, could have a material adverse effect on our financial results, no assurances can be given. Any such claims may divert financial and management resources that would otherwise be used to benefit our operations and could have a material adverse effect on our financial results.
Product liability claims in excess of insurance could adversely affect our financial results and financial condition.
We face potential liability for property damage, personal injury, or death as a result of the failure of products designed or manufactured by us. Although we currently maintain product liability insurance (including aircraft product liability insurance), any material product

liability not covered by insurance could have a material adverse effect on our financial condition, results of operations and cash flows.
Damage or destruction of our facilities caused by storms, earthquake, fires or other causes could adversely affect our financial results and financial condition.
We have operations located in regions of the U.S. that may be exposed to damaging storms, earthquakes, fires and other natural disasters. Although we maintain standard property casualty insurance covering our properties and may be able to recover costs associated with certain natural disasters through insurance, we do not carry any earthquake insurance because of the cost of such insurance. Many of our properties are located in Southern California, an area subject to earthquake activity. Our California facilities generated $190.8$239.5 million in net revenues during 2016.2019. Even if covered by insurance, any significant damage or destruction of our facilities due to storms, earthquakes or other natural disasters could result in our inability to meet customer delivery schedules and may result in the loss of customers and significant additional costs to us. Thus, any significant damage or destruction of our properties could have a material adverse effect on our business, financial condition or results of operations.
We are dependent upon our ability to attract and retain key personnel.
Our success depends in part upon our ability to attract and retain key engineering, technical and managerial personnel, at both the executive and plantperformance center level. We face competition for management, engineering and technical personnel from other companies and organizations. The loss of members of our senior management group, or key engineering and technical personnel, could negatively impact our ability to grow and remain competitive in the future and could have a material adverse effect on our financial results.
Labor disruptions by our employees could adversely affect our business.
As of December 31, 2016,2019, we employed 2,7002,800 people. Two of our operating facilitiesperformance centers are parties to collective bargaining agreements, covering 140175 full time hourly employees in one of those facilitiesperformance centers and 260240 full time hourly employees in the other facility,performance center, and will expire in June 20182021 and January 2019,April 2022, respectively. Although we have not experienced any material labor-related work stoppage and consider our relations with our employees to be good, labor stoppages may occur in the future. If the unionized workers were to engage in a strike or other work stoppage, if we are unable to negotiate acceptable collective bargaining agreements with the unions or if other employees were to become unionized, we could experience a significant disruption of our operations, higher ongoing labor costs and possible loss of customer contracts, which could have an adverse effect on our business and results of operations.
We have identified a material weakness in our internal control over financial reporting which could, if not remediated, adversely impact the reliability of our financial reports, cause us to submit our financial reports in an untimely fashion, result in material misstatements in our financial statements and cause current and potential stockholders to lose confidence in our financial reporting, which in turn could adversely affect the trading price of our common stock.
We have concluded that there is a material weakness in our internal control over financial reporting related to the annual accounting for income taxes. There was an incorrect recording to a deferred tax asset of $1.6 million when this amount should have decreased our income tax benefit for the year and fourth quarter ended December 31, 2015. We assessed the materiality of this error and do not believe it is material to any prior interim or annual periods, however, we determined it was appropriate to revise our consolidated financial statements as of and for the year and quarter ended December 31, 2015 in this Form 10-K. Therefore, we have revised our December 31, 2015 consolidated balance sheet to increase non-current deferred tax liabilities by $1.6 million and revised our consolidated statement of operations for the year ended December 31, 2015 to increase our net loss by $1.6 million. We have also revised all related footnote disclosures in these consolidated financial statements to correct this error. This error had no effect on net cash provided by operating activities on our consolidated cash flow statement for the year ended December 31, 2015, however, management has determined that our internal control over financial reporting relating to the annual accounting for income taxes was not effective as of December 31, 2016.
Under standards established by the Public Company Accounting Oversight Board (“PCAOB”), a material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. The existence of this issue could adversely affect us, our reputation or investor perceptions of us. We have and will continue to take additional measures to remediate the underlying causes of the material weakness noted above. As we continue to evaluate and work to remediate the material weakness, we may determine to take additional measures to address the control deficiency. Also, see Item 9A in Part II of this Form 10-K. We expect to incur additional costs remediating this material weakness.

Although we plan to complete this remediation process as quickly as possible, we cannot at this time estimate how long it will take, and our measures may not prove to be successful in remediating this material weakness. If our remedial measures are insufficient to address the material weakness, or if additional material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results. In addition, if we are unable to successfully remediate this material weakness and if we are unable to produce accurate and timely financial statements, our stock price may be adversely affected and we may be unable to maintain compliance with applicable stock exchange listing requirements and debt covenant requirements.
Future restatements of our consolidated financial statements and possible related events, should they occur, may consume our time and resources and may have an adverse effect on our business and stock price.
In 2014, our Annual Report on Form 10-K included the restatement of our consolidated financial statements to correct errors in prior periods primarily related to (i) a long-term contract (“Contract”) following the discovery of misconduct by employees in the recording of direct labor costs to the Contract from 2009 through the third quarter 2014 which resulted in the identification of a forward loss provision that should have been recorded in 2009 and the impact on subsequent periods of adjustments to the forward loss provision based on information available at the time; and (ii) the year end reconciliation of income taxes payable and deferred tax balances identified errors primarily in 2013, 2012, and 2011.
As with all corporate controls, we cannot be certain that the measures we have taken to remedy the errors since they were discovered will ensure that no errors will occur in the future. Further, the future restatements, if any, may affect investor confidence in the accuracy of our financial reporting and disclosures, may raise reputational issues for our business and may negatively impact our stock price.
Although the restatement was completed in the 2014 Annual Report on Form 10-K that was filed in April 2015, we cannot guarantee that we will not receive regulatory inquiries or be subject to litigation regarding our restated financial statements or related matters. If any such future regulatory inquiries or litigation to occur, regardless of the outcome, such actions would likely consume internal resources and result in additional legal and consulting costs.
Enacted and proposed changes in securities laws and regulations have increased our costs and may continue to increase our costs in the future.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), enacted in July 2010, expands federal regulation of corporate governance matters. While some provisions of the Dodd-Frank Act are effective upon enactment, others will be implemented upon the SEC’s adoption of related rules and regulations. The scope and timing of the adoption of such rules and regulations is uncertain and accordingly, the cost of compliance with the Dodd-Frank Act is also uncertain.
The Dodd-Frank Act contains provisions to improve transparency and accountability concerning the supply of certain minerals originating from the Democratic Republic of Congo and adjoining countries that are believed to be benefiting armed groups (“Conflict Minerals”). The provision does not prevent companies from using conflict minerals; however the SEC mandates due diligence, disclosure and reporting requirements for companies which manufacture products that include components containing such conflict minerals in a Form SD (“Form SD”). These regulations and disclosures in our Form SDs could result in our customers’ request to not use Conflict Minerals in our products they purchase from us. The number of suppliers who provide conflict-free minerals may be limited and thus, decrease the availability and increase the prices of components free of such Conflict Minerals used in our products. In addition, the compliance process will be both time-consuming and costly. Since our supply chain is complex, we may not be able to sufficiently verify the origins of the relevant minerals used in our products through our due diligence procedures, which may harm our reputation with our customers and other stakeholders. In addition, we may be unable to satisfy customers who require that all components included in our products be conflict-free, which could place us at a competitive disadvantage.
Our efforts to comply with the Dodd-Frank Act and other evolving laws, regulations and standards are likely to result in increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities. Further, compliance with new and existing laws, rules, regulations and standards may make it more difficult and expensive for us to maintain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.
Unanticipated changes in our tax provision or exposure to additional income tax liabilities could affect our profitability.
Significant judgment is required in determining our provision for income taxes. In the ordinary course of our business, there are transactions and calculations where the ultimate tax determination is uncertain. Furthermore, changes in income tax laws and

regulations, or their interpretation, could result in higher or lower income tax rates assessed or changes in the taxability of certain sales or the deductibility of certain expenses, thereby affecting our income tax expense and profitability. For example, we recorded provisional estimates of the impact of the Tax Cuts and Jobs Act (the “2017 Tax Act”) enacted on December 22, 2017 in accordance with SEC Staff Accounting Bulletin No. 118 (“SAB 118”) in our 2017 consolidated financial statements. During 2018, these estimates were subject to further analysis and review which could have required adjustments, but no adjustments were required to be made in 2018. In addition, we are regularly under audit by tax authorities. The final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals.
 
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

ITEM 2. PROPERTIES
We occupy 2528 owned or leased facilities, totaling 1.92.0 million square feet of manufacturing area and office space. At December 31, 2016,2019, facilities which were in excess of 50,000 square feet each were occupied as follows:
 
Location Segment 
Square
Feet
 
Expiration
of Lease
 Segment 
Square
Feet
 
Expiration
of Lease
Carson, California Structural Systems 299,000 Owned Structural Systems 299,000 Owned
Monrovia, California Structural Systems 274,000 Owned Structural Systems 274,000 Owned
Parsons, Kansas Structural Systems 176,000 Owned
Coxsackie, New York Structural Systems 168,000 Owned Structural Systems 151,000 Owned
Parsons, Kansas Structural Systems 120,000 Owned
Carson, California Electronic Systems 117,000 2021 Electronic Systems 117,000 2021
Phoenix, Arizona Electronic Systems 100,000 2022 Electronic Systems 100,000 2022
Joplin, Missouri Electronic Systems 92,000 Owned Electronic Systems 92,000 2023
Adelanto, California Structural Systems 88,000 Owned
Orange, California Structural Systems 80,000 Owned
Appleton, Wisconsin Electronic Systems 77,000 Owned Electronic Systems 77,000 Owned
Orange, California Structural Systems 76,000 Owned
Adelanto, California Structural Systems 74,000 Owned
Carson, California Structural Systems 77,000 2024
Huntsville, Arkansas Electronic Systems 69,000 2020 Electronic Systems 69,000 2026
Carson, California Structural Systems 77,000 2019
Joplin, Missouri Electronic Systems 55,000 2021 Electronic Systems 55,000 Owned
Tulsa, Oklahoma Electronic Systems 55,000 Owned Electronic Systems 55,000 Owned
Orange, California Structural Systems 53,000 2024
Berryville, Arkansas Electronic Systems 52,000 Owned Electronic Systems 50,000 Owned
Management believes these properties are adequate to meet our current requirements, are in good condition and are suitable for their present use.

ITEM 3. LEGAL PROCEEDINGS
See Note 1615 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for a description of our legal proceedings.

ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed on the New York Stock Exchange under the symbol DCO. As of December 31, 2016,2019, we had 194173 holders of record of our common stock. We have not paid any dividends since the first quarter of 2011 and we do not expect to pay dividends for the foreseeable future. See “Available Liquidity” in Part II, Item 7, Management’s Discussion and Analysis—Liquidity and Capital Resources—Available Liquidity, of this Annual Report on Form 10-K for further discussion on dividend restrictions under our Credit Facility. The following table sets forth the high and low closing prices per share of our common stock as reported on the New York Stock Exchange for the fiscal periods indicated:
 Years Ended December 31, Years Ended December 31,
 2016 2015 2019 2018
 High Low High Low High Low High Low
First Quarter $16.98
 $12.89
 $27.00
 $24.09
 $46.27
 $34.92
 $30.84
 $26.30
Second Quarter $20.69
 $14.32
 $33.22
 $23.07
 $51.80
 $39.02
 $35.43
 $28.17
Third Quarter $24.41
 $19.02
 $26.12
 $19.14
 $46.97
 $39.33
 $40.84
 $31.63
Fourth Quarter $29.46
 $18.80
 $23.28
 $14.96
 $51.67
 $39.34
 $44.23
 $33.83

See “Part III, Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS” for information relating to shares to be issued under equity compensation plans.
Issuer Purchases of Equity Securities
In 2011, we terminated our stock repurchase program.

None.
Performance Graph
The following graph compares the yearly percentage change in our cumulative total shareholder return with the cumulative total return of the Russell 2000 Index forand the periods indicated,median of our 2020 Proxy Statement peers (“Median of Proxy Peers”) over a five year period, assuming the reinvestment of any dividends. A modified version of this graph over a three year period will be used in our 2020 Proxy Statement, assuming the reinvestment of any dividends. The graph is not necessarily indicative of future price performance:
a5yeargraphfor201912720a03.jpg

ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data should be read in conjunction with Part II, Item 7 and Part IV, Item 15(a) of this Annual Report on Form 10-K (“Form 10-K”):
 
(In thousands, except per share amounts)
Years Ended December 31,
 
(In thousands, except per share amounts)
Years Ended December 31,
 2016(a) 2015(b)(c) 2014 2013(d) 2012 2019(a) 2018(b)(c) 2017(d)(e) 2016(f) 2015(g)(h)
Net Revenues $550,642
 $666,011
 $742,045
 $736,650
 $747,037
 $721,088
 $629,307
 $558,183
 $550,642
 $666,011
Gross Profit as a Percentage of Net Revenues 19.3% 15.1% 18.9% 16.9% 19.3% 21.1% 19.5% 18.5% 19.3% 15.1%
Income (Loss) Before Taxes 38,113
 (106,590) 26,240
 9,385
 24,124
 37,763
 10,271
 7,609
 38,113
 (106,590)
Income Tax Expense (Benefit) 12,852
 (31,711) 6,373
 (1,993) 6,501
 5,302
 1,236
 (12,468) 12,852
 (31,711)
Net Income (Loss) $25,261
 $(74,879) $19,867
 $11,378
 $17,623
 $32,461
 $9,035
 $20,077
 $25,261
 $(74,879)
Per Common Share                    
Basic earnings (loss) per share $2.27
 $(6.78) $1.82
 $1.06
 $1.67
 $2.82
 $0.79
 $1.78
 $2.27
 $(6.78)
Diluted earnings (loss) per share $2.24
 $(6.78) $1.79
 $1.05
 $1.66
 $2.75
 $0.77
 $1.74
 $2.24
 $(6.78)
Working Capital $139,635
 $179,655
 $217,670
 $225,323
 $219,774
 $196,078
 $157,547
 $140,778
 $139,635
 $179,655
Total Assets (e)
 $515,429
 $557,081
 $747,599
 $762,645
 $777,275
 $790,429
 $644,739
 $566,753
 $515,429
 $557,081
Long-Term Debt, Including Current Portion (e)
 $166,899
 $240,687
 $290,052
 $332,702
 $365,744
 $307,887
 $231,198
 $216,055
 $166,899
 $240,687
Total Shareholders’ Equity $212,103
 $185,734
 $256,570
 $234,271
 $215,217
 $292,800
 $256,825
 $235,583
 $212,103
 $185,734

(a)The results for 2019 included Nobles’ results of operations since the date of acquisition of October 8, 2019.
(b)The results for 2018 included CTP’s results of operations since the date of acquisition in April 2018.
(c)The results for 2018 and 2017 included restructuring charges of $14.8 million and $8.8 million, respectively. See Note 4 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information.
(d)The results for 2017 included LDS’ results of operations since the date of acquisition in September 2017.
(e)The results for 2017 included the adoption of the Tax Cuts and Jobs Act and as a result, we recorded a provisional deferred income tax benefit of $13.0 million related to the re-measurement for the year ended December 31, 2017. See Note 14 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information.
(f)The results for 2016 included a gain on divestitures, net in our Electronic Systems operating segment of $17.6 million related to the divestitures of our Pittsburgh and Miltec operations.
(b)(g)The results for 2015 included a goodwill impairment charge in our Structural Systems operating segment and an indefinite-lived trade name intangible asset impairment charge in our Electronic Systems operating segment of $57.2 million and $32.9 million, respectively, resulting from our annual impairment testing.
(c)(h)The results for 2015 included a loss on extinguishment of debt of $14.7 million related to the retirement of the $200.0 million senior unsecured notes and existing credit facility.
(d)The results for 2013 included a $14.1 million in charges related to the Embraer Legacy 450/500 and Boeing 777 wing tip contracts and was comprised of $7.0 million of asset impairment charges for production cost of contracts; $5.2 million of forward loss reserves and $1.9 million of inventory write-offs.
(e)Total assets and long-term debt for the years 2014 - 2012 have not been recasted for the impact of the adoption of Accounting Standards Update 2015-03, as amended by Accounting Standards Update 2015-15, which required the reclassification of certain debt issuance costs from an asset to a liability. See Note 1 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information.


Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Ducommun Incorporated (“Ducommun,” “the Company,” “we,” “us” or “our”) is a leading global provider of engineering and manufacturing services for high-performance products and high-cost-of failure applications used primarily in the aerospace, defense, industrial, natural resources, medical, and other industries. We differentiate ourselves as a full-service solution-based provider, offering a wide range of value-added products and services in our primary businesses of electronics, structures and integrated solutions. We operate through two primary business segments: Electronic Systems and Structural Systems, each of which is a reportable segment.
Recap ofHighlights for the year ended December 31, 2016:
Net revenues were $550.6 million2019:
Net revenues of $721.1 million
Net income was $25.3of $32.5 million, or $2.24$2.75 per diluted share which includes a pre-tax net gain on divestitures of $17.6 million
Adjusted EBITDA was $54.8of $92.3 million
Cash flow from operations increased to $43.3 million
Backlog increased to $600.3 million
Net voluntary principal prepayments on our term loan totaled $75.0 millionCompleted the acquisition of Nobles Worldwide, Inc.
Non-GAAP Financial Measures
Adjusted earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, restructuring charges, inventory purchase accounting adjustments, and amortizationloss on extinguishment of debt (“Adjusted EBITDA”) was $54.8$92.3 million and $49.5$70.7 million for years ended December 31, 20162019 and December 31, 2015,2018, respectively.
When viewed with our financial results prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and accompanying reconciliations, we believe Adjusted EBITDA provides additional useful information to clarify and enhance the understanding of the factors and trends affecting our past performance and future prospects. We define these measures, explain how they are calculated, and provide reconciliations of these measures to the most comparable GAAP measure in the table below. Adjusted EBITDA and the related financial ratios, as presented in this Annual Report on Form 10-K (“Form 10-K”), are supplemental measures of our performance that are not required by, or presented in accordance with, GAAP. They are not a measurement of our financial performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP, or as an alternative to net cash provided by operating activities as measures of our liquidity. The presentation of these measures should not be interpreted to mean that our future results will be unaffected by unusual or nonrecurring items.
We use Adjusted EBITDA non-GAAP operating performance measures internally as complementary financial measures to evaluate the performance and trends of our businesses. We present Adjusted EBITDA and the related financial ratios, as applicable, because we believe that measures such as these provide useful information with respect to our ability to meet our operating commitments.
Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as substitutes for analysis of our results as reported under GAAP. Some of these limitations are:
They do not reflect our cash expenditures, future requirements for capital expenditures or contractual commitments;
They do not reflect changes in, or cash requirements for, our working capital needs;
They do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our debt;
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;
They are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows;
They do not reflect the impact on earnings of charges resulting from matters unrelated to our ongoing operations; and

Other companies in our industry may calculate Adjusted EBITDA differently from us, limiting their usefulness as comparative measures.

Because of these limitations, Adjusted EBITDA and the related financial ratios should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations. You should compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only as supplemental information. See our consolidated financial statements contained in this Form 10-K.
However, in spite of the above limitations, we believe that Adjusted EBITDA is useful to an investor in evaluating our results of operations because these measures:
Are widely used by investors to measure a company’s operating performance without regard to items excluded from the calculation of such terms, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired, among other factors;
Help investors to evaluate and compare the results of our operations from period to period by removing the effect of our capital structure from our operating performance; and
Are used by our management team for various other purposes in presentations to our Board of Directors as a basis for strategic planning and forecasting.
The following financial items have been added back to or subtracted from our net income when calculating Adjusted EBITDA:
Interest expense may be useful to investors for determining current cash flow;
Income tax expense may be useful to investors because it represents the taxes which may be payable for the period and the change in deferred taxes during the period, and may reduce cash flow available for use in our business;
Depreciation may be useful to investors because it generally represents the wear and tear on our property and equipment used in our operations;
Amortization expense may be useful to investors because it represents the estimated attrition of our acquired customer base and the diminishing value of product rights;
Stock-based compensation may be useful to our investors for determining current cash flow;
Net gain on divestituresRestructuring charges may be useful to our investors in evaluating our on-goingcore operating performance;
Purchase accounting inventory step-ups may be useful to our investors as they do not necessarily reflect the current or on-going cash charges related to our core operating performance; and
Loss on extinguishment of debt may be useful to our investors for determining current cash flow;
Asset impairments (including Goodwill and intangible assets) may be useful to our investors because it generally represents a decline in value in our assets used in our operations; and
Restructuring charges may be useful to our investors in evaluating our core operating performance.flow.

Reconciliations of net income (loss) to Adjusted EBITDA and the presentation of Adjusted EBITDA as a percentage of net revenues were as follows:

 
(In thousands)
Years Ended December 31,
 
(Dollars in thousands)
Years Ended December 31,
 2016 2015 2014 2019 2018 2017
Net income (loss) $25,261
 $(74,879) $19,867
Net income $32,461
 $9,035
 $20,077
Interest expense 8,274
 18,709
 28,077
 18,290
 13,024
 8,870
Income tax expense (benefit) 12,852
 (31,711) 6,373
 5,302
 1,236
 (12,468)
Depreciation 13,326
 15,707
 15,277
 13,519
 13,501
 13,162
Amortization 9,534
 11,139
 13,747
 14,786
 11,795
 9,683
Stock-based compensation expense 3,007
 3,495
 3,725
 7,161
 5,040
 4,675
Gain on divestitures, net (1)
 (17,604) 
 
Restructuring charges (1)
 
 14,792
 8,838
Inventory purchase accounting adjustments (2)
 511
 622
 1,235
Loss on extinguishment of debt 
 14,720
 
 180
 926
 
Goodwill impairment (2)
 
 57,243
 
Intangible asset impairment (3)
 
 32,937
 
Restructuring charges 182
 2,125
 
Other debt refinancing costs 77
 697
 
Adjusted EBITDA $54,832
 $49,485
 $87,066
 $92,287
 $70,668
 $54,072
% of net revenues 10.0% 7.4% 11.7% 12.8% 11.2% 9.7%

(1)20162018 and 2017 included gain on divestitures, net in our Electronic Systems operating segment related to the divestitures$0.1 million and $0.5 million, respectively, of our Pittsburgh and Miltec operations.restructuring charges that were recorded as cost of goods sold.
(2)20152019, 2018, and 2017 included goodwill impairment related toinventory purchase accounting adjustments of inventory that was stepped up as part of our purchase price allocation from our acquisitions of Nobles Worldwide, Inc. (“Nobles”), Certified Thermoplastics Co., LLC (“CTP”) and Lightning Diversion Systems, LLC (“LDS”) on October 8, 2019, April 2018, and September 2017, respectively, and is part of our Structural Systems, operating segment.
(3)2015 included intangible asset impairment related to ourStructural Systems, and Electronic Systems operating segment.segment, respectively.


RESULTS OF OPERATIONS
20162019 Compared to 20152018
The following table sets forth net revenues, selected financial data, the effective tax (benefit) rate and diluted earnings per share:

  
(in thousands, except per share data)
Years Ended December 31,
  2016 
%
of Net Revenues
 2015 
%
of Net Revenues
Net Revenues $550,642
 100.0 % $666,011
 100.0 %
Cost of Sales 444,449
 80.7 % 565,219
 84.9 %
Gross Profit 106,193
 19.3 % 100,792
 15.1 %
Selling, General and Administrative Expenses 77,625
 14.1 % 85,921
 12.9 %
Goodwill Impairment 
  % 57,243
 8.6 %
Intangible Asset Impairment 
  % 32,937
 4.9 %
Operating Income (Loss) 28,568
 5.2 % (75,309) (11.3)%
Interest Expense (8,274) (1.5)% (18,709) (2.8)%
Gain on Divestitures, Net 17,604
 3.2 % 
  %
Loss on Extinguishment of Debt 
  % (14,720) (2.2)%
Other Income, Net 215
  % 2,148
 0.3 %
Income (Loss) Before Taxes 38,113
 6.9 % (106,590) (16.0)%
Income Tax Expense (Benefit) 12,852
 nm
 (31,711) nm
Net Income (Loss) $25,261
 4.6 % $(74,879) (11.2)%
         
Effective Tax Rate (Benefit) 33.7% nm
 (29.7)% nm
Diluted Earnings (Loss) Per Share $2.24
 nm
 $(6.78) nm
  
(Dollars in thousands, except per share data)
Years Ended December 31,
  2019 
%
of Net Revenues
 2018 
%
of Net Revenues
Net Revenues $721,088
 100.0 % $629,307
 100.0 %
Cost of Sales 568,891
 78.9 % 506,711
 80.5 %
Gross Profit 152,197
 21.1 % 122,596
 19.5 %
Selling, General and Administrative Expenses 95,964
 13.3 % 84,007
 13.3 %
Restructuring Charges 
  % 14,671
 2.3 %
Operating Income 56,233
 7.8 % 23,918
 3.9 %
Interest Expense (18,290) (2.6)% (13,024) (2.1)%
Loss on Extinguishment of Debt (180)  % (926) (0.1)%
Other Income, Net 
  % 303
  %
Income Before Taxes 37,763
 5.2 % 10,271
 1.7 %
Income Tax Expense 5,302
 nm
 1,236
 nm
Net Income $32,461
 4.5 % $9,035
 1.4 %
         
Effective Tax Rate 14.0% nm
 12.0% nm
Diluted Earnings Per Share $2.75
 nm
 $0.77
 nm
nm = not meaningful

Net Revenues by End-Use Market and Operating Segment
Net revenues by end-use market and operating segment during 20162019 and 2015,2018, respectively, were as follows:

   
(In thousands)
Years Ended December 31,
 % of Net Sales   
(Dollars in thousands)
Years Ended December 31,
 % of Net Revenues
 Change 2016 2015 2016 2015 Change 2019 2018 2019 2018
Consolidated Ducommun                    
Military and space           $46,208
 $323,800
 $277,592
 44.9% 44.1%
Defense technologies $(37,342) $175,195
 $212,537
 31.8% 31.9%
Defense structures (21,716) 53,378
 75,094
 9.7% 11.3%
Commercial aerospace 44,981
 348,503
 303,522
 48.3% 48.2%
Industrial 592
 48,785
 48,193
 6.8% 7.7%
Total $91,781
 $721,088
 $629,307
 100.0% 100.0%
          
Electronic Systems          
Military and space $28,526
 $244,245
 $215,719
 67.8% 63.8%
Commercial aerospace 14,221
 263,522
 249,301
 47.9% 37.4% (6,613) 67,343
 73,956
 18.7% 21.9%
Industrial (70,532) 58,547
 129,079
 10.6% 19.4% 592
 48,785
 48,193
 13.5% 14.3%
Total $(115,369) $550,642
 $666,011
 100.0% 100.0% $22,505
 $360,373
 $337,868
 100.0% 100.0%
                    
Structural Systems                    
Military and space (defense structures) $(21,716) $53,378
 $75,094
 21.7% 27.5%
Military and space $17,682
 $79,555
 $61,873
 22.1% 21.2%
Commercial aerospace (5,138) 193,087
 198,225
 78.3% 72.5% 51,594
 281,160
 229,566
 77.9% 78.8%
Total $(26,854) $246,465
 $273,319
 100.0% 100.0% $69,276
 $360,715
 $291,439
 100.0% 100.0%
          
Electronic Systems          
Military and space (defense technologies) $(37,342) $175,195
 $212,537
 57.6% 54.1%
Commercial aerospace 19,359
 70,435
 51,076
 23.2% 13.0%
Industrial (70,532) 58,547
 129,079
 19.2% 32.9%
Total $(88,515) $304,177
 $392,692
 100.0% 100.0%

Net revenues for 20162019 were $550.6$721.1 million compared to $666.0$629.3 million for 2015.2018. The year-over-year decreaseincrease was primarily due to the following:
$70.546.2 million lower revenues in our industrial end-use markets mainly due to the divestiture of our Pittsburgh operation in January 2016 and closure of our Houston operation in December 2015;
$59.1 million lowerhigher revenues in our military and space end-use markets mainly due to the divestiture of our Miltec operations in March 2016, as well as program delayshigher build rates on other military and budget changes, which impacted our fixed-wing and helicopterspace platforms, higher build rates on various missile platforms, and pushed out scheduled deliveries of these products to customers; partially offset byhigher build rates on various military fixed-wing aircraft platforms; and
$14.245.0 million higher revenues in our commercial aerospace end-use markets mainly due to addedadditional content with existing customers.and higher build rates on large aircraft platforms.
Net Revenues by Major Customers
A significant portion of our net revenues are from our top ten customers as follows:
 Years Ended December 31, Years Ended December 31,
 2016 2015 2019 2018
Boeing Company 17.3% 16.0% 16.6% 17.0%
Raytheon Company 8.4% 8.7% 11.0% 11.7%
Spirit AeroSystems Holdings, Inc. 8.2% 7.4% 12.2% 9.5%
United Technologies Corporation 6.0% 6.1%
Top ten customers (1)
 58.6% 55.7% 63.5% 62.9%
(1) Includes theThe Boeing Company (“Boeing”), Raytheon Company (“Raytheon”), and Spirit AeroSystems Holdings, Inc. (“Spirit”), and United Technologies Corporation (“United Technologies”).
The revenues from Boeing, Raytheon, Spirit, and United TechnologiesSpirit are diversified over a number of commercial, military and space programs and were madegenerated by both operating segments.

Gross Profit
Gross profit consists of net revenues less cost of sales. Cost of sales includes the cost of production of finished products and other expenses related to inventory management, manufacturing quality, and order fulfillment. Gross profit margin increased to 19.3%21.1% in 20162019 compared to 15.1%19.5% in 2015 primarily2018 due to the following:
2015 included a forward loss reserve charge related to a regional jet program of $12.2 million;favorable product mix and
Total material costs as a percentage of revenues decreased 1.8% compared to the prior year as a result of our on-going supply chain initiatives and improved operating performance. favorable manufacturing volume, partially offset by higher other manufacturing costs.
Selling, General and Administrative (“SG&A”) Expenses
SG&A expenses decreased $8.3increased $12.0 million in 20162019 compared to 2015 primarily2018 due to higher compensation and benefit costs of $5.5 million, higher one-time severance charges of $1.7 million, and higher acquisition related costs of $0.8 million.
Restructuring Charges
Restructuring charges decreased $14.8 million (of which zero and $0.1 million, respectively, was included in cost of sales) in 2019 compared to 2018 due to the decreaserestructuring plan that began in 2017 that was expected to increase operating efficiencies. See Note 4 to our consolidated financial statements included in Part IV, Item 15(a) of $9.4 million related to the divestitures of our Pittsburgh and Miltec operations and closures of facilities.this Annual Report on Form 10-K for further information on restructuring activities.
Interest Expense
Interest expense decreasedincreased in 20162019 compared to 2015 primarily2018 due to a lowerhigher outstanding debt balance as a resulton the Credit Facilities, reflecting the acquisitions of net voluntary principal prepaymentsNobles Worldwide, Inc. (“Nobles”) on our new credit facilitiesOctober 8, 2019 and a lower averageCertified Thermoplastics Co., LLC (“CTP”) in April 2018, and higher interest rate as a result of completing the refinancing of our debt in July 2015.rates. See Note 9 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information on our long-term debt.
Loss on Extinguishment of Debt
Loss on extinguishment of debt for 2019 was related to the refinancing of our existing Credit Facilities in December 2019 which resulted in writing off of a portion of the unamortized debt issuance costs associated with the existing Credit Facilities of $0.2 million. The New Credit Facilities were utilized to pay off the existing Revolving Credit Facility and a portion of the existing Term Loan. See Note 9 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information on our long-term debt.

Income Tax Expense (Benefit)
We recorded an income tax expense of $12.9$5.3 million (an effective tax rate of 33.7%14.0%) in 2016,2019, compared to an income tax benefit of $31.7$1.2 million (an effective tax benefit rate of 29.7%12.0%) in 2015.2018. The increase in the effective tax rate for 20162019 compared to 20152018 was primarily due to pre-tax income in 2016, which included a gain on divestitures, net of our Pittsburgh and Miltec operations of $17.6 million compared to a pre-tax loss in the prior year. The $17.6 million gain on divestitures, net resulted in an increase in our statepre-tax income from $10.3 million in 2018 to $37.8 million in 2019 which caused tax liability in 2016. The increase was partially offset by the U.S. Federalincentives such as research and development tax credit that was permanently extended in 2015credits and the deduction for Qualified Domestic Production Activities.various discrete items to have an overall lower impact on our effective tax rate.
Our unrecognized tax benefits were $3.0$5.7 million and $5.3 million in both 20162019 and 2015.2018, respectively. We record interest and penalty charge, if any, related to uncertain tax positions as a component of tax expense and unrecognized tax benefits. The amounts accrued for interest and penalty chargecharges as of December 31, 20162019 and 20152018 were not significant. If recognized, $2.0$4.0 million would affect the effective income tax rate. We do not reasonablyAs a result of statute of limitations set to expire in 2020, we expect significant increases or decreases to our unrecognized tax benefits of approximately $2.0 million in the next twelve months.
We file U.S. Federal and state income tax returns. Federal income tax returns after 2012, California franchise (income) tax returns after 2011 and other state income tax returns after 2011We are subject to examination. Weexamination by the Internal Revenue Service (“IRS”) for tax years after 2015 and by state taxing authorities for tax years after 2014. While we are no longer subject to examination prior to those periods, although carryforwards generated prior to those periods may still be adjusted upon examination by the Internal Revenue Service (“IRS”)IRS or state taxing authority if they either have been or will be used in a subsequent period. During 2016, the IRS commenced an audit of our 2014 and 2015 tax years. Although the outcome of tax examinations cannot be predicted with certainty, weWe believe we have adequately accrued for tax deficiencies or reductions in tax benefits, if any, that could result from the examination and all open audit years.
Net Income (Loss) and Earnings (Loss) per Diluted Share
Net income and incomeearnings per diluted share for 20162019 were $25.3$32.5 million, or $2.24$2.75, compared to net income and earnings per diluted share compared to a net loss and loss per share for 2015 were $(74.9)2018 of $9.0 million, or $(6.78).$0.77. The increase in net income in 20162019 compared to 20152018 was primarily due to the following:
Prior year included a non-cash pre-tax goodwill impairment chargean increase of $57.2 million;
Prior year included a non-cash pre-tax charge related$29.6 million in gross profit that was due to the impairmenthigher revenues and improved operating performance and lower restructuring charges of an indefinite-lived trade name$14.8 million. The increases were partially offset by higher selling, general and administrative expenses of $32.9 million;
Prior year included a loss on extinguishment of debt of $14.7$12.0 million, related to completing a new credit facility to replace the existing credit facilities along with the redemption of the $200.0 million senior unsecured notes;
Prior year included a forward loss reserve charge related to a regional jet program of $12.2 million;
A pre-tax gain on divestitures, net of our Pittsburgh and Miltec operations of $17.6 million;
Lowerhigher interest expense of $10.4 million;

Lower SG&A expenses related to the divestitures of our Pittsburgh$5.3 million, and Miltec operations and closures of facilities in aggregate totaling $9.4 million; and
Improved operating performance; partially offset by
Higher income tax expense of $44.6$4.1 million.

Business Segment Performance
We report our financial performance based upon the two reportable operating segments: StructuralElectronic Systems and ElectronicStructural Systems. The results of operations differ between our reportable operating segments due to differences in competitors, customers, extent of proprietary deliverables and performance. The following table summarizes our business segment performance for 20162019 and 2015:2018:
 
 % 
(In thousands)
Years Ended December 31,
 
%
of Net Sales
 
%
of Net Sales
 % 
(Dollars in thousands)
Years Ended December 31,
 
%
of Net  Revenues
 
%
of Net  Revenues
 Change 2016 2015 2016 2015 Change 2019 2018 2019 2018
Net Revenues                    
Electronic Systems 6.7% $360,373
 $337,868
 50.0 % 53.7 %
Structural Systems (9.8)% $246,465
 $273,319
 44.8 % 41.0 % 23.8% 360,715
 291,439
 50.0 % 46.3 %
Total Net Revenues 14.6% $721,088
 $629,307
 100.0 % 100.0 %
Segment Operating Income          
Electronic Systems (22.5)% 304,177
 392,692
 55.2 % 59.0 %   $38,613
 $30,916
 10.7 % 9.2 %
Total Net Revenues (17.3)% $550,642
 $666,011
 100.0 % 100.0 %
Segment Operating Income (Loss)          
Structural Systems   $16,497
 $(53,010) 6.7 % (19.4)%   46,836
 19,063
 13.0 % 6.5 %
Electronic Systems   28,983
 (4,472) 9.5 % (1.1)%
   45,480
 (57,482)       85,449
 49,979
    
Corporate General and Administrative Expenses (1)
   (16,912) (17,827) (3.1)% (2.7)%   (29,216) (26,061) (4.1)% (4.1)%
Total Operating Income (Loss)   $28,568
 $(75,309) 5.2 % (11.3)%
Total Operating Income   $56,233
 $23,918
 7.8 % 3.9 %
Adjusted EBITDA                    
Structural Systems          
Operating Income (Loss) (2)(3)
   $16,497
 $(53,010)    
Other Income (4)
   141
 1,510
    
Electronic Systems          
Operating Income   $38,613
 $30,916
    
Other Income   
 119
    
Depreciation and Amortization   8,688
 9,417
       14,170
 14,223
    
Goodwill Impairment   
 57,243
    
Restructuring Charges   
 1,294
       
 4,776
    
   25,326
 16,454
 10.3 % 6.0 %   52,783
 50,034
 14.6 % 14.8 %
Electronic Systems          
Operating Income (Loss) (3)(5)
   28,983
 (4,472)    
Structural Systems          
Operating Income   46,836
 19,063
    
Other Income   
 712
       
 184
    
Depreciation and Amortization   14,087
 17,267
       13,663
 10,525
    
Intangible Asset Impairment   
 32,937
    
Restructuring Charges   182
 831
       
 7,897
    
Inventory purchase accounting adjustments   511
 622
    
   43,252
 47,275
 14.2 % 12.0 %   61,010
 38,291
 16.9 % 13.1 %
Corporate General and Administrative Expenses (1)
                    
Operating Loss   (16,912) (17,827)       (29,216) (26,061)    
Other Expense (Income)   74
 (74)    
Depreciation and Amortization   85
 162
       472
 548
    
Stock-Based Compensation Expense   3,007
 3,495
       7,161
 5,040
    
Restructuring Charges   
 2,119
    
Other Debt Refinancing Costs   77
 697
    
   (13,746) (14,244)       (21,506) (17,657)    
Adjusted EBITDA   $54,832
 $49,485
 10.0 % 7.4 %   $92,287
 $70,668
 12.8 % 11.2 %
Capital Expenditures                    
Electronic Systems   $5,508
 $6,719
    
Structural Systems   $15,661
 $11,559
       13,338
 9,104
    
Electronic Systems   3,032
 4,419
    
Corporate Administration   
 10
       
 514
    
Total Capital Expenditures   $18,693
 $15,988
       $18,846
 $16,337
    
(1)Includes costs not allocated to either the Structural Systems or Electronic Systems operating segments.

(2)Goodwill impairment related to Structural Systems operating segment.
(3)2015 includes restructuring charges for severance and benefits and loss on early exit from leases of $0.8 million and $1.3 million recorded in the Electronic Systems and Structural Systems operating segments, respectively.
(4)Insurance recoveries related to property and equipment included as other income.
(5)Intangible asset impairment related to Electronic Systems operating segment.
Structural Systems
Structural Systems’ net revenues in 2016 compared to 2015 decreased $26.9 million primarily due to the following:
$21.7 million decrease in military and space revenues mainly due to program delays and budget changes which impacted scheduled deliveries on our fixed-wing and helicopter platforms; and
$5.1 million decrease in commercial aerospace revenues mainly due to the wind down of a regional jet program and continued softness in the commercial helicopter end-use market.
The Structural Systems operating income in 2016 compared to 2015 increased primarily due to higher operating margins in 2016 and the prior year included a $57.2 million non-cash goodwill impairment charge and forward loss reserve charge related to a regional jet program of $12.2 million.
Electronic Systems
Electronic Systems’ net revenues in 2016 decreased primarily2019 compared to 2018 increased $22.5 million due to the following:
$70.528.5 million decrease in our industrialhigher revenues mainly due to the divestiture of our Pittsburgh operation in January 2016 and closure of our Houston operation in December 2015; and
$37.3 million decrease in our military and space revenue mainlyend-use markets due to the divestiture of our Miltec operation in March 2016increased demand on other military and program delays and budget changes, which impacted scheduled deliveries on ourspace platforms, increased demand for military fixed-wing and helicopter platforms;aircraft, increased demand for various missile platforms, partially offset by lower build rates military rotary-wing aircraft; partially offset by
$19.46.6 million increaselower revenues in our commercial aerospace revenue mainlyend-use markets due to added content with existing customers.lower build rates on other commercial aerospace and lower build rates on large aircraft platforms, partially offset by higher demand for commercial rotary-wing aircraft.
Electronic Systems segment operating income in 20162019 compared to 20152018 increased primarily$7.7 million due to favorable product mix and lower restructuring charges, partially offset by unfavorable manufacturing volume.
Structural Systems
Structural Systems’ net revenues in 2019 compared to 2018 increased $69.3 million due to the prior year included a $32.9following:
$51.6 million non-cash impairment charge of an indefinite-lived trade name intangible assethigher revenues in commercial aerospace end-use markets due to higher build rates on large aircraft platforms; and
$17.7 million higher revenues in military and space end-use markets due to higher build rates on military rotary-wing aircraft platforms and higher build rates on other military and space platforms.
The Structural Systems operating marginsincome in 2016.2019 compared to 2018 increased $27.8 million due to favorable product mix, favorable manufacturing volume, lower restructuring charges, and improved operating performance, partially offset by higher other manufacturing costs.
Corporate General and Administrative (“CG&A”) Expenses
CG&A expenses in 20162019 compared to 2015 decreased primarily2018 increased $3.2 million due to lower professional services feeshigher compensation and benefit costs of $1.3$2.7 million, one-time severance charges of $1.7 million, and lower compensation and benefitshigher other corporate related expenses of $1.1$0.9 million, partially offset by one-time retirementlower restructuring charges of $0.9$2.1 million.
Backlog
We define backlog as customer placed purchase orders (“POs”) and long-term agreements (“LTAs”) with firm fixed price and expected delivery dates of 24 months or less. The majority of the LTAs do not meet the definition of a contract under ASC 606 and thus, the backlog amount disclosed below is greater than the remaining performance obligations amount disclosed in Note 1 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K. Backlog is subject to delivery delays andor program cancellations, which are beyond our control. Backlog is affected by timing differences in the placement of customer orders and tends to be concentrated in several programs to a greater extent than our net sales.revenues. Backlog in Industrial end-useindustrial markets tends to be of a shorter duration and is generally fulfilled within a 3-monththree month period. As a result of these factors, trends in our overall level of backlog may not be indicative of trends in our future net sales.revenues.
Backlog was $600.3 million at December 31, 2016, compared to $574.4 million at December 31, 2015, as shown in more detail below.
The increase in backlog was primarily in the defense technologiesmilitary and space end-use markets and commercial aerospace end-use markets, partially offset by a decrease in Industrial end-use markets. $480.2 million of total backlog is expected to be delivered during 2017. The following table summarizes our backlog for 20162019 and 2015:

2018:

    
(In thousands)
December 31,
  Change 2016 2015
Consolidated Ducommun (1)
      
Military and space      
Defense technologies $29,482
 $198,043
 $168,561
Defense structures 608
 59,379
 58,771
Commercial aerospace 20,013
 317,797
 297,784
Industrial (24,199) 25,036
 49,235
Total $25,904
 $600,255
 $574,351
Structural Systems      
Military and space (defense structures) $608
 $59,379
 $58,771
Commercial aerospace 25,394
 278,020
 252,626
Total $26,002
 $337,399
 $311,397
Electronic Systems (1)
      
Military and space (defense technologies) $29,482
 $198,043
 $168,561
Commercial aerospace (5,381) 39,777
 45,158
Industrial (24,199) 25,036
 49,235
Total $(98) $262,856
 $262,954

(1)2015 backlog included an aggregate total of $16.1 million related to our Pittsburgh, Pennsylvania operation that was sold in January 2016 and our Miltec operation that was sold in March 2016.

    
(Dollars in thousands)
December 31,
  Change 2019 2018
Consolidated Ducommun      
Military and space $109,213
 $451,293
 $342,080
Commercial aerospace (53,093) 430,642
 483,735
Industrial (9,488) 28,286
 37,774
Total $46,632
 $910,221
 $863,589
       
Electronic Systems      
Military and space $67,186
 $311,027
 $243,841
Commercial aerospace 30,332
 75,719
 45,387
Industrial (9,488) 28,286
 37,774
Total $88,030
 $415,032
 $327,002
       
Structural Systems      
Military and space $42,027
 $140,266
 $98,239
Commercial aerospace (83,425) 354,923
 438,348
Total $(41,398) $495,189
 $536,587

20152018 Compared to 20142017
The following table sets forth net revenues, selected financial data, the effective tax (benefit) rateSee Item 7. Management’s Discussion and diluted earnings per share:

  
(in thousands, except per share data)
Years Ended December 31,
  2015 
%
of Net Sales 2015
 2014 
%
of Net Sales 2014
Net Revenues $666,011
 100.0 % $742,045
 100.0 %
Cost of Sales 565,219
 84.9 % 601,713
 81.1 %
Gross Profit 100,792
 15.1 % 140,332
 18.9 %
Selling, General and Administrative Expenses 85,921
 12.9 % 88,565
 11.9 %
Goodwill Impairment 57,243
 8.6 % 
  %
Intangible Asset Impairment 32,937
 4.9 % 
  %
Operating (Loss) Income (75,309) (11.3)% 51,767
 7.0 %
Interest Expense (18,709) (2.8)% (28,077) (3.8)%
Loss on Extinguishment of Debt (14,720) (2.2)% 
  %
Other Income $2,148
 0.3 % $2,550
 0.3 %
(Loss) Income Before Taxes (106,590) (16.0)% 26,240
 3.5 %
Income Tax (Benefit) Expense (31,711) nm
 6,373
 nm
Net (Loss) Income $(74,879) (11.2)% $19,867
 2.7 %
         
Effective (Benefit) Tax Rate (29.7)% nm
 24.3% nm
Diluted (Loss) Earnings Per Share $(6.78) nm
 $1.79
 nm
nm = not meaningful

Net Revenues by End-Use MarketAnalysis of Financial Condition and Operating Segment
Net revenues by end-use market and operating segment during 2015 and 2014, respectively, were as follows:

    
(In thousands)
Years Ended December 31,
 % of Net Sales
  Change 2015 2014 2015 2014
Consolidated Ducommun          
Military and space          
Defense technologies $(29,046) $212,537
 $241,583
 31.9% 32.6%
Defense structures (49,204) 75,094
 124,298
 11.3% 16.7%
Commercial aerospace 7,158
 249,301
 242,143
 37.4% 32.6%
Industrial (4,942) 129,079
 134,021
 19.4% 18.1%
Total $(76,034) $666,011
 $742,045
 100.0% 100.0%
           
Structural Systems          
Military and space (defense structures) $(49,204) $75,094
 $124,298
 27.5% 38.8%
Commercial aerospace 2,567
 198,225
 195,658
 72.5% 61.2%
Total $(46,637) $273,319
 $319,956
 100.0% 100.0%
           
Electronic Systems          
Military and space (defense technologies) $(29,046) $212,537
 $241,583
 54.1% 57.2%
Commercial aerospace 4,591
 51,076
 46,485
 13.0% 11.0%
Industrial (4,942) 129,079
 134,021
 32.9% 31.8%
Total $(29,397) $392,692
 $422,089
 100.0% 100.0%
Net revenues for 2015 were $666.0 million compared to $742.0 million for 2014. The year-over-year decrease was due to the following:
21.4% lower revenuesResults of Operations in our military and space end-use markets mainly due to a decrease in U.S. government defense spending and shifting spending priorities, which impacted our fixed-wing and helicopter platforms and pushed out scheduled deliveries of these products to customers; and
3.7% lower revenues from Industrial end-use markets; partially offset by
3.0% increase in revenues in commercial aerospace end-use markets.
Net Revenues by Major Customers
A significant portion of our net revenues are from our top ten customers as follows:
  Years Ended December 31,
  2015 2014
Boeing Company 16.0% 19.4%
Raytheon Company 8.7% 9.4%
Spirit AeroSystems Holdings, Inc. 7.4% 6.4%
United Technologies Corporation 6.1% 5.5%
Top ten customers (1)
 55.7% 59.2%
(1) Includes the Boeing Company (“Boeing”), Raytheon Company (“Raytheon”), Spirit AeroSystems Holdings, Inc. (“Spirit”), and United Technologies Corporation (“United Technologies”).
The revenues from Boeing, Raytheon, Spirit, and United Technologies are diversified over a number of commercial, military and space programs and were made by both operating segments.

Gross Profit
Gross profit consists of net revenues less cost of sales. Cost of sales includes the cost of production of finished products and other expenses related to inventory management, manufacturing quality, and order fulfillment. Gross profit margin decreased to 15.1% in 2015 compared to 18.9% in 2014 primarily due to higher cost of sales relative to net revenues primarily the result of a $14.0 million attributable to lower manufacturing volume and $10.6 million of higher forward loss reserves related to a regional jet program. Another factor contributing to the reduction in gross profit include $7.8 million due to unfavorable product mix. The difference in the results was also impacted by a 2014 nonrecurring reversal of $3.4 million forward loss reserve related to a customer settlement.
Selling, General and Administrative (“SG&A”) Expenses
SG&A expenses decreased in 2015 primarily due to lower accrued compensation and benefit costs of $2.9 million and lower discretionary expenses as a result of the cost savings initiatives we have implemented, partially offset by higher professional service fees of $1.9 million and restructuring charges related to severance and benefits and early termination of leases of $2.1 million.
Goodwill Impairment
In 2015, the non-cash charge from the impairment of the entire goodwill in the Structural Systems reporting unit was the result of the annual impairment test during the fourth quarter of 2015 that indicated the carrying value exceeded the fair value. The decrease in fair value was due to the lowered revenues outlook in our military and space end-use markets caused by the decrease in U.S. government defense spending. Therefore, requiring us to perform Step Two of the goodwill impairment test. Based on the Step Two test, we impaired the entire goodwill for the Structural Systems reporting unit of $57.2 million. No such impairment was required in 2014.
Intangible Asset Impairment
In 2015, the non-cash charge from the impairment of a trade name intangible asset in Electronic Systems was due to divesting businesses in Electronic Systems and discontinued use of the indefinite-lived trade name intangible asset going forward of $32.9 million. No such impairment was required in 2014. See Note 1 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K
Interest Expense
Interest expense decreased in 2015 compared to 2014 primarily due to lower outstanding debt balance and lower interest rate on our outstanding debt as a result of completing the refinancing of our debt in July 2015. See Note 9 to our consolidated financial statements included in Part IV, Item 15(a) of this2018 Annual Report on Form 10-K for further information on our long-term debt.
Loss on Extinguishment of Debt and Other Income
Loss on extinguishment of debt for 2015 was made up of the call premium to retire the existing $200.0 million senior unsecured notes in July 2015 of $9.8 million, the write off of the unamortized debt issuance costs associatedfiled with the existing $200.0 million senior unsecured notes of $2.1 million, the write off of the unamortized debt issuance costs associated with the existing senior secured term loan and existing senior secured revolving credit facility of $2.8 million when the existing senior secured term loan was paid off with both debt instruments being replaced with the Credit Facilities. See Note 9 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information on our long-term debt.
Other income decreased in 2015 compared to 2014 primarily due to lower insurance recoveries related to property and equipment of $1.1 million.
Income Tax (Benefit) Expense
We recorded income tax benefit of $31.7 million (an effective tax benefit rate of 29.7%) in 2015, compared to an income tax expense of $6.4 million (an effective tax rate of 24.3%) in 2014. The change in effective tax rate in 2015 compared to 2014 was primarily due to the pre-tax loss in 2015, which can be carried back to reduce income taxes paid in 2014 and 2013 or carried forward. This was partially offset by the tax impact of the goodwill impairment of $8.7 million and a reduction in Internal Revenue Code (“IRC”) Section 199 deduction for qualified domestic production activities of $1.1 million.
Our effective tax benefit rate of 29.7% for 2015 includes a research and development (“R&D”) benefit of $2.6 million in 2015 compared to a benefit of $2.4 million in 2014. The benefit recorded in 2015 was due to the President of the United States

signing into law on December 18, 2015, the Protecting Americans from Tax Hikes Act (“PATH”), which permanently extends the research and development credit.
Net (Loss) Income and (Loss) Earnings per Diluted Share
Net loss and loss per share for 2015 were $(74.9) million, or $(6.78) per share, compared to $19.9 million, or $1.79 per diluted share, for 2014. The net loss in 2015 was primarily the result of a $57.2 non-cash pre-tax goodwill impairment charge in the Structural Systems segment and a $39.5 million of lower gross profit mainly due to lower revenues. Other factors contributing to the reduction in net income from the prior year include a $32.9 million non-cash pre-tax charge related to the impairment of the indefinite-lived trade name in the Electronic Systems segment and a $14.7 million loss on extinguishment of debt. These items were partially offset by lower 2015 income tax expense of $38.1 million and lower interest expense of $9.4 million.


Business Segment Performance
We report our financial performance based upon the two reportable operating segments; Structural Systems and Electronic Systems. The results of operations differ between our reportable operating segments due to differences in competitors, customers, extent of proprietary deliverables and performance. The following table summarizes our business segment performance for 2015 and 2014:
  % 
(In thousands)
Years Ended December 31,
 
%
of Net Sales
 
%
of Net Sales
  Change 2015 2014 2015 2014
Net Revenues          
Structural Systems (14.6)% $273,319
 $319,956
 41.0 % 43.1 %
Electronic Systems (7.0)% 392,692
 422,089
 59.0 % 56.9 %
Total Net Revenues (10.2)% $666,011
 $742,045
 100.0 % 100.0 %
Segment Operating (Loss) Income          
Structural Systems   $(53,010) $34,949
 (19.4)% 10.9 %
Electronic Systems   (4,472) 34,599
 (1.1)% 8.2 %
    (57,482) 69,548
    
Corporate General and Administrative Expenses (1)
   (17,827) (17,781) (2.7)% (2.4)%
Total Operating (Loss) Income   $(75,309) $51,767
 (11.3)% 7.0 %
Adjusted EBITDA          
Structural Systems          
Operating (Loss) Income (2)(3)
   $(53,010) $34,949
    
Other Income (4)
   1,510
 2,550
    
Depreciation and Amortization   9,417
 10,959
    
Goodwill Impairment   57,243
 
    
Restructuring Charges   1,294
 
    
    16,454
 48,458
 6.0 % 15.1 %
Electronic Systems          
Operating (Loss) Income (3)(5)
   (4,472) 34,599
    
Other Income   712
 
    
Depreciation and Amortization   17,267
 17,928
    
Intangible Asset Impairment   32,937
 
    
Restructuring Charges   831
 
    
    47,275
 52,527
 12.0 % 12.4 %
Corporate General and Administrative Expenses (1)
          
Operating Loss   (17,827) (17,781)    
Other Expense   (74) 
    
Depreciation and Amortization   162
 137
    
Stock-Based Compensation Expense   3,495
 3,725
    
    (14,244) (13,919)    
Adjusted EBITDA   $49,485
 $87,066
 7.4 % 11.7 %
Capital Expenditures          
Structural Systems   $11,559
 $12,742
    
Electronic Systems   4,419
 5,782
    
Corporate Administration   10
 30
    
Total Capital Expenditures   $15,988
 $18,554
    

(1)Includes costs not allocated to either the Structural Systems or Electronic Systems operating segments.
(2)Goodwill impairment related to Structural Systems operating segment.

(3)Includes restructuring charges for severance and benefits and loss on early exit from leases of $0.8 million and $1.3 million recorded in the Electronic Systems and Structural Systems operating segments, respectively.
(4)Insurance recoveries related to property and equipment included as other income.
(5)Intangible asset impairment related to Electronic Systems operating segment.
Structural Systems
Structural Systems’ net revenues in 2015 decreased 14.6% compared to 2014 primarily due to a 39.6% decrease in military and space revenues mainly due to the decrease in U.S. government defense spending and shifting spending priorities which impacted scheduled deliveries on our fixed-wing and helicopter platforms, partially offset by a 1.3% increase in commercial aerospace revenues.
Structural Systems’ operating income decreased in 2015 compared to 2014 primarily as a result of a $57.2 million non-cash goodwill impairment charge and higher forward loss reserves related to a regional jet program of $10.6 million. Other factors contributing to the reduction in operating income from the prior year include a $8.0 million due to lower manufacturing volume and a $7.3 million due to unfavorable product mix. The difference in the results was also impacted by a 2014 nonrecurring reversal of a $3.4 million forward loss reserve related to a customer settlement. An additional factor contributing to the reduction in operating income from the prior year include $1.3 million of higher costs associated with moving into a new facility.
Adjusted EBITDA was $16.5 million or 6.0% of revenues for 2015, compared to $48.5 million or 15.1% of revenues for 2014.
Electronic Systems
Electronic Systems’ net revenues in 2015 decreased 7.0% compared to 2014 primarily due to a 12.0% decrease in military and space revenues mainly due to the decrease in U.S. government defense spending and shifting spending priorities which impacted scheduled deliveries on our fixed-wing and helicopter platforms and a 3.7% decrease in Industrial markets revenues, partially offset by a 9.9% increase in commercial aerospace revenues.
Electronic Systems’ segment operating income decreased in 2015 compared to 2014 primarily due to a non-cash charge of $32.9 million from the impairment of an indefinite-lived trade name intangible asset and $6.0 million from lower manufacturing volume.
Adjusted EBITDA was $47.3 million or 12.0% of revenues for 2015, compared to $52.5 million or 12.4% of revenues for 2014.
Corporate General and Administrative (“CG&A”) Expenses
CG&A expenses were essentially flat in 2015 compared to 2014 primarily due to $1.0 million of higher professional service fees, partially offset by $0.7 million of lower accrued compensation and benefit costs and lower discretionary expenses as a result of the cost savings initiatives we have implemented.SEC.

LIQUIDITY AND CAPITAL RESOURCES
Available Liquidity
Total debt, the weighted-average interest rate, cash and cash equivalents and available credit facilities were as follows:

 
(In millions)
December 31,
 
(Dollars in millions)
December 31,
 2016 2015 2019 2018
Total debt, including long-term portion $170.0
 $245.0
 $310.0
 $233.0
Weighted-average interest rate on debt 3.25% 3.07% 6.87% 4.71%
Term Loan interest rate 3.31% 3.07%
Term Loans interest rate 6.28% 4.15%
Cash and cash equivalents $7.4
 $5.5
 $39.6
 $10.3
Unused Revolving Credit Facility $199.0
 $198.5
 $99.8
 $99.7
In June 2015,On December 20, 2019, we completed the refinancing of a portion of our existing debt by entering into a new revolving credit facility (“New Revolving Credit Facility”) to replace the Existing Credit Facilities. The newexisting revolving credit facility consists ofthat was entered into in November 2018 (“2018 Revolving Credit Facility”) and entering into a $275.0 million senior securednew term loan which matures on June 26, 2020 (“New Term Loan”), and. The New Revolving Credit Facility is a $200.0$100.0 million senior secured revolving credit facility (“that matures on December 20, 2024 replacing the $100.0 million 2018 Revolving Credit Facility”), whichFacility that would have matured on November 21, 2023. The New Term Loan is a $140.0 million senior secured term loan that matures on June 26, 2020December 20, 2024. We also have an existing $240.0 million senior secured term loan that was entered into in November 2018 that matures on November 21, 2025 (“2018 Term Loan”). The original amounts available under the New Revolving Credit Facility, New Term Loan, and 2018 Term Loan (collectively, the “Credit Facilities”). The Credit Facilities bear interest, at our option, at in aggregate, totaled $480.0 million. We are required to make installment payments of 1.25% of the original outstanding principal balance of the New Term Loan amount on a rate equal to either (i)quarterly basis. In addition, if we meet the Eurodollar Rate (defined as LIBOR) plus anannual excess

applicable margincash flow threshold, we will be required to make excess flow payments on an annual basis. Further, the undrawn portion of the commitment of the New Revolving Credit Facility is subject to a commitment fee ranging from 1.50%0.175% to 2.75% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%0.275%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 0.50% to 1.75% per year, in each case based upon the consolidated total net adjusted leverage ratio. As of December 31, 2019, we were in compliance with all covenants required under the Credit Facilities. See Note 9 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information.
In November 2018, we completed credit facilities to replace the then existing credit facilities. The undrawn portionsNovember 2018 credit facilities consisted of the commitments2018 Term Loan and the 2018 Revolving Credit Facility (collectively, the “2018 Credit Facilities”). We are required to make installment payments of 0.25% of the outstanding principal balance of the 2018 Term Loan amount on a quarterly basis. In addition, if we meet the annual excess cash flow threshold, we will be required to make excess flow payments on an annual basis. Further, the undrawn portion of the commitment of the 2018 Revolving Credit Facilities areFacility is subject to a commitment fee ranging from 0.175%0.200% to 0.300%, based upon the consolidated total net adjusted leverage ratio. See Note 9 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information.
Further,In October 2015, we are required to make mandatory prepaymentsentered into interest rate cap hedges designated as cash flow hedges with a portion of amounts outstanding under the Term Loan. The mandatory prepayments will be made quarterly, equal to 5.0% per year of the original aggregate principal amount during the first two years and increase to 7.5% per year during the third year, and increase to 10.0% per year during the fourth year and fifth years, with the remaining balance payable on June 26, 2020. The loans under the Revolving Credit Facility are due on June 26, 2020. As of December 31, 2016, we were in compliance with all covenants required under the Credit Facilities.
We have been making voluntary principal prepaymentsthese interest rate cap hedges maturing on a quarterly basis, and a final quarterly maturity date of June 2020, in aggregate, totaling $135.0 million of our debt. We paid a total of $1.0 million in connection with entering into the interest rate cap hedges.
On October 8, 2019, we acquired Nobles Parent Inc., the parent company of Nobles Worldwide, Inc. (“Nobles”) for a purchase price of $77.0 million, net of cash acquired, all payable in cash. We paid an aggregate of $77.3 million in cash by drawing down on the 2018 Revolving Credit Facility. See Note 3 to our senior secured term loan andconsolidated financial statements included in conjunction withPart IV, Item 15(a) of this Annual Report on Form 10-K for further information.
In April 2018, we acquired Certified Thermoplastics Co., LLC (“CTP”) for a purchase price of $30.7 million, net of cash acquired, all payable in cash. We paid an aggregate of $30.8 million in cash by drawing down on the 2018 Revolving Credit Facility. See Note 3 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information.
In September 2017, we acquired Lightning Diversion Systems, LLC (“LDS”) for a purchase price of $60.0 million, net of cash acquired, all payable in cash. Upon the closing of the Credit Facilitiestransaction, we paid $61.4 million in June 2015, we drew down $65.0 million on the Revolving Credit Facility and used those proceeds along with current cash on hand to extinguish the existing senior secured term loan of $80.0 million. We expensed the unamortized debt issuance costs related to the existing senior secured term loan of $2.8 million as part of extinguishing the existing senior secured term loan during 2015. We also incurred $4.8 million of debt issuance costs related to the Credit Facilities and those costs are capitalized and being amortized over the five year life of the Credit Facilities.
In addition, we retired all of the $200.0 million senior unsecured notes (“Existing Notes”) in July 2015. We drewby drawing down on the Term Loanthen existing revolving credit facility. The remaining $0.6 million was paid in the amount of $275.0 million. Along with the call notice amount and paying the call premium of $9.8 million, weOctober 2017 in cash, also paidby drawing down the $65.0 million drawn on the Revolving Credit Facility in June 2015. We expensed the call premium of $9.8 million and debt issuance costs related to the Existing Notes of $2.1 million upon extinguishing the Existing Notes during 2015.
Further, we made voluntary principal prepayments of $75.0 million under the Term Loan during 2016.
In January 2016, we entered into an agreement, and completed the sale on the same date, to sell our operation located in Pittsburgh, Pennsylvania for a final sales price of $38.6 million in cash. We divested this facility as part of our overall strategy to streamline operations, which includes consolidating our footprint. Net assets sold were $24.0 million, net liabilities sold were $4.0 million, and direct transaction costs incurred were $0.3 million, resulting in a gain on divestiture of $18.3 million.
In February 2016, we entered into an agreement to sell our Miltec operation for a final sales price of $13.3 million, in cash. We divested this facility as part of our overall strategy to streamline operations, which includes consolidating our footprint. We completed the sale in March 2016. Net assets sold were $15.4 million, net of liabilities sold were $2.7 million, and direct transaction costs incurred were $1.3 million, resulting in a loss on divestiture of $0.7 million.then existing revolving credit facility.
We expect to spend a total of $22.0$16.0 million to $26.0$18.0 million for capital expenditures in 20172020 financed by cash generated from operations, which will be higher than 2016, principally to support the expansion of our Parsons, Kansas facility and new contract awards at Structural Systems and Electronic Systems. As part of our strategic plan to become a Tier 2 supplier of higher-level assemblies and win new contract awards, additional up-front investment in tooling will be required for newer programs which have higher engineering content and higher levels of complexity in assemblies.
We believe the ongoing aerospace and defense subcontractor consolidation makes acquisitions an increasingly important component of our future growth. We will continue to make prudent acquisitions and capital expenditures for manufacturing equipment and facilities to support long-term contracts for commercial and military aircraft and defense programs.
We continue to depend on operating cash flow and the availability of our Credit FacilityFacilities to provide short-term liquidity. Cash generated from operations and bank borrowing capacity is expected to provide sufficient liquidity to meet our obligations during the next twelve months.

Cash Flow Summary
20162019 Compared to 20152018
Net cash provided by operating activities during 20162019 increased to $43.3$51.0 million compared to $23.7$46.2 million during 2015 primarily2018 due to higher net income as a result of lower interest expense and higher gross margin percentage.
Net cash provided by investing activities in 2016 of $34.9 million primarily due to proceeds from the divestiture of the Pittsburgh and Miltec operations, partially offset by capital expenditures, principally to support new contract awardsno restructuring charges in both Structural Systems and Electronic Systems.
Net cash used in financing activities during 2016 was $76.2 million compared to $50.4 million during 2015 primarily due to net

voluntary principal prepayments on our new credit facilities of $75.0 million primarily as a result of the proceeds received from divestiture of the Pittsburgh and Miltec operations during the current-year.
2015 Compared to 2014
Net cash generated by operating activities during 2015 decreased to $23.7 million compared to $53.4 million during 2014 primarily due to lower net income that was partially offset by improved working capital management.current year.
Net cash used in investing activities during 2015in 2019 was $13.5$94.9 million compared to $15.5$47.9 million during 2014 primarilyin 2018 due to lower capital expenditures that was partially offset by lower insurance recoveries related to property and equipment.higher payments for acquisition.
Net cash used inprovided by financing activities during 20152019 was $50.4$73.2 million compared to $41.2$9.8 million during 2014 primarily2018 due to voluntary principal prepaymentshigher net borrowings on the credit facilities.

2018 Compared to 2017
See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our existing and new term loans of approximately $45.0 million, call premium paid to redeem2018 Annual Report on Form 10-K filed with the $200.0 million Existing Notes of approximately $9.8 million, that was partially offset by proceeds from the Term Loan net of redemption of the $200.0 million Existing Notes and repayment of the Revolving Credit Facility of approximately $65.0 million.SEC.
Contractual Obligations
A summary of our contractual obligations at December 31, 20162019 was as follows (in(dollars in thousands):
   Payments Due by Period   Payments Due by Period
 Total 
Less Than
1 Year
 1-3 Years 3-5 Years 
More Than
5 Years
 Total 
Less Than
1 Year
 1-3 Years 3-5 Years 
More Than
5 Years
Long-term debt, including current portion $170,003
 $3
 $
 $170,000
 $
 $310,000
 $7,000
 $14,000
 $119,000
 $170,000
Future interest on notes payable and long-term debt 28,700
 5,525
 10,744
 12,431
 
Future interest on long-term debt 97,088
 18,050
 34,570
 34,024
 10,444
Purchase orders (1)
 187,428
 144,999
 42,429
 
 
Operating leases 15,969
 4,270
 6,237
 4,356
 1,106
 25,531
 4,178
 7,903
 6,428
 7,022
Pension liability 18,649
 1,608
 3,445
 3,655
 9,941
 20,865
 1,841
 3,905
 4,105
 11,014
Total(1)
 $233,321
 $11,406
 $20,426
 $190,442
 $11,047
Total (2)
 $640,912
 $176,068
 $102,807
 $163,557
 $198,480
(1)Purchase orders include non-cancelable commitments as of December 31, 2019 in which a written purchase order has been issued but the goods have not been received.
(2)As of December 31, 2016,2019, we have recorded $3.0$5.7 million in long-term liabilities related to uncertain tax positions. We are not able to reasonably estimate the timing of the long-term payments, or the amount by which our liability may increase or decrease over time, therefore, the liability or uncertain tax positions has not been included in the contractual obligations table.
We have estimated that the fair value of our indemnification obligations as insignificant based upon our history with such obligations and insurance coverage and have included no such obligation in the table above.
Our ultimate liability with respect to groundwater contamination at certain Structural Systems facilities will depend upon a number of factors, including changes in existing laws and regulations, the design and cost of construction, operation and maintenance activities, and the allocation of liability among potentially responsible parties. The above table does not include obligations related to these matters. See Note 1615 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for discussion of our environmental liabilities.
Off-Balance Sheet Arrangements
Our off-balance sheet arrangements consist of operating and finance leases not recorded as a result of the practical expedients utilized as a part of the adoption of ASC 842 as of January 1, 2019 and indemnities.
CRITICAL ACCOUNTING POLICIES
Critical accounting policies are those accounting policies that can have a significant impact on the presentation of our financial condition and results of operations and that require the use of subjective estimates based upon past experience and management’s judgment. Because of the uncertainty inherent in such estimates, actual results may differ from these estimates. Below are those policies applied in preparing our financial statements that management believes are the most dependent on the application of estimates and assumptions. See Note 1 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for additional accounting policies.
Revenue Recognition
Except as described below, we recognize revenue, including revenue fromOur customers typically engage us to manufacture products sold under long-term contracts, when persuasive evidencebased on designs and specifications provided by the end-use customer. This requires the building of an arrangement exists, the price is fixed or determinable, collection is reasonably assuredtooling and delivery ofmanufacturing first article inspection products has occurred or services have been rendered.

(prototypes) before volume manufacturing. Contracts with our customers generally include a termination for convenience clause.
We have a significant number of contracts that are started and completed within the same year, as well as contracts derived from long-term agreements and programs that can span several years. We recognize revenue under ASC 606, which utilizes a five-step model.
The definition of a contract for us is typically defined as a customer purchase order as this is when we achieve an enforceable right to payment. The majority of our contracts are firm fixed-price contracts. The deliverables within a customer purchase

order are analyzed to determine the number of performance obligations. In addition, at times, in order to achieve economies of scale and based on our customer’s forecasted demand, we may build in advance of receiving a purchase order from our customer. When that occurs, we would not recognize revenue until we have received the customer purchase order.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account under ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, control is transferred and the performance obligation is satisfied. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services are highly interrelated or met the series guidance. For contracts with multiple performance obligations, we allocate the contract transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate the standalone selling price is the expected cost plus a margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service.
We manufacture most products to customer specifications and the product cannot be easily modified for another customer. As such, these products are deemed to have no alternative use once the manufacturing process begins. In the event the customer invokes a termination for convenience clause, we would be entitled to costs incurred to date plus a reasonable profit. Contract costs typically include labor, materials, overhead, and when applicable, subcontractor costs. For most of our products, we are building assets with no alternative use and have enforceable right to payment, and thus, we recognize revenue under the contract method of accounting and record revenues and cost of sales on each contract in accordance with the percentage-of-completion method of accounting, using the units-of-deliveryover time method. Under the units-of-delivery method,
The majority of our performance obligations are satisfied over time as work progresses. Typically, revenue is recognized based upon the number of units delivered duringover time using an input measure (i.e., costs incurred to date relative to total estimated costs at completion, also known as cost-to-cost plus reasonable profit) to measure progress. Our typical revenue contract is a periodfirm fixed price contract, and the cost of raw materials could make up a significant amount of the total costs incurred. As such, we believe using the total costs incurred input method would be the most appropriate method. While the cost of raw materials could make up a significant amount of the total costs incurred, there is a direct relationship between our inputs and the transfer of control of goods or services to the customer.
Contract estimates are recognized based on various assumptions to project the actual costs allocableoutcome of future events that can span multiple months or years. These assumptions include labor productivity and availability; the complexity of the work to be performed; the delivered units. Costs allocablecost and availability of materials; and the performance of subcontractors.
As a significant change in one or more of these estimates could affect the profitability of our contracts, we review and update our contract-related estimates on a regular basis. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to undelivered units are reporteddate is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the balance sheet as inventory. This methodcontract, we recognize the total loss in the quarter it is usedidentified.
The impact of adjustments in circumstancescontract estimates on our operating earnings can be reflected in which a company produces unitseither operating costs and expenses or revenue. See Note 1 to our consolidated financial statements included in Part IV, Item 15(a) of a basic product under production-type contracts in a continuous or sequential production processthis Annual Report on Form 10-K for the net impact of these adjustments to buyers’ specifications. These contracts are primarily fixed-price contracts that vary widely in terms of size, length of performance period, and expected gross profit margins.our consolidated financial statements for 2019.
Provision for Estimated Losses on Contracts
We record provisions for the total anticipated losses on contracts, considering total estimated costs to complete the contract compared to total anticipated revenues, in the period in which such losses are identified. The provisions for estimated losses on contracts require managementus to make certain estimates and assumptions, including those with respect to the future revenue under a contract and the future cost to complete the contract. Management’sOur estimate of the future cost to complete a contract may include assumptions as to improvementschanges in manufacturing efficiency, and reductions in operating and material costs.costs, and our ability to resolve claims and assertions with our customers. If any of these or other assumptions and estimates do not materialize in the future, we may be required to record additionaladjust the provisions for estimated losses on contracts.

The provision for estimated losses on contracts is included as part of contract liabilities on the consolidated balance sheets.
Production Cost of Contracts
Production cost of contracts includes non-recurring production costs, such as design and engineering costs, and tooling and other special-purpose machinery necessary to build parts as specified in a contract, and non-recurring production costs such as design and engineering costs.contract. Production costs of contracts are recorded to cost of goods soldsales using the units of delivery method.over time revenue recognition model. We review long-lived assets withinthe value of the production costscost of contracts for impairment on an annuala quarterly basis (which we perform duringto ensure when added to the fourth quarter) or when events or changes in circumstances indicate thatestimated cost to complete, the carryingvalue is not greater than the estimated realizable value of our long-lived assets may not be recoverable. An impairment charge is recognized when the carrying value of an asset exceeds the projected undiscounted future cash flows expected from its use and disposal.related contracts.

Goodwill and Indefinite-Lived Intangible Asset
Our business acquisitions have resulted in the recognition of goodwill. Goodwill is not amortized but is subject to annual evaluation for impairment tests (which we perform duringbased on the first day of the fourth fiscal quarter). If certain factors occur, including significant under performance of our business relative to expected operating results, significant adverse economic and between annual tests, if events indicate it is more likely than not that the fairindustry trends, significant decline in our market capitalization for an extended period of time relative to net book value, ofa decision to divest individual businesses within a reporting unit, is less than its carrying value.
A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include deterioration in general economic conditions, negative developments in equity and credit markets, adverse changes in the markets in which we operate, increases in costs that have a negative effect on earnings and cash flows, or a trend of negative or declining cash flows over multiple periods, among others.
Goodwill is allocated atdecision to group individual businesses differently, we may perform an impairment test prior to the reporting unit level,fourth quarter. In addition, we early adopted ASU 2017-04 on January 1, 2019 which is defined as an operating segment or one level below an operating segment. We have two internal reporting units: Structural Systems and Electronic Systems. The applicationsimplified our goodwill impairment testing by eliminating Step Two of the goodwill impairment test requires significant judgment, including the identificationtest. See Note 1 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K.
We acquired Certified Thermoplastics Co., LLC (“CTP”) in April 2018 and recorded goodwill of $18.6 million in our Structural Systems segment, which is also our reporting unit. Since a goodwill impairment analysis is required to be performed within one year of the reporting units, and the determinationacquisition date or sooner upon a triggering event, we performed a Step One goodwill impairment analysis as of both the carrying value and theApril 2019 for our Structural Systems segment. The fair value of the reporting units. Theour Structural Systems segment exceeded its carrying value by 85% and thus, was not deemed impaired.
In the fourth quarter of each2019, the carrying amount of goodwill at the date of the most recent annual impairment evaluation for Electronic Systems and Structural Systems was $117.4 million and $18.6 million, respectively. As of the date of our 2019 annual evaluation for goodwill impairment, for the Electronic Systems segment, which is also our reporting unit, is determined by assigning the assetswe elected to perform a Step One goodwill impairment analysis and liabilities, including existing goodwill,will continue to those reporting units.do so from time to time. The determination of the fair value of each reporting unit requires significant judgment, including our estimation of future cash flows, which is dependent upon internal forecasts, estimationElectronic Systems segment exceeded its carrying value by 44% and thus, was not deemed impaired.
As of the long-term rate of growthdate of our businesses, estimation2019 annual evaluation for goodwill impairment, for the Structural Systems segment, we used a qualitative assessment including 1) margin of the useful lives of the assets which will generate the cash flows, determination of our weighted-average cost of capitalpassing most recent step 1 analysis, 2) earnings before interest, taxes, depreciation, and other factors. In determining the appropriate discountamortization, 3) long-term growth rate, we considered the weighted-average cost of capital for each reporting unit which, among other4) analyzing material adverse factors/changes between valuation dates, 5) general macroeconomic factors, considers the cost of common equity capital and the marginal cost of debt of market participants.
The estimates6) industry and assumptions used to calculate the fair value of a reporting unit may change from period to period based upon actual operating results, market conditions, and our view of the future trends. The estimates and assumptions used to determine whether impairment exists and determine the amount of such impairment, if any, are subject to a high degree of uncertainty. The estimated fair value of a reporting unit would change materially if different assumptions and estimates were used.
We initially perform an assessment of qualitative factors to determine ifnoting it is necessary to perform the two-step goodwill impairment test. We test goodwill for impairment using the two-step method if, based on our assessment of the qualitative factors, we determined that it iswas not more likely than not that the fair value of a reporting unit is less than its carrying amount or if we decide to bypass the qualitative assessment. When performing the two-step impairment test, we use a combination of an income approach, which estimates fair value of the reporting unit based upon future discounted cash flows, and a market

approach, which estimates fair value using market multiples for transactions in a set of comparable companies. If the carrying value of the reporting unit exceeds its fair value, we then perform the second step of the impairment test to measure the amount of the impairment loss, if any. The second step compares the implied fair value of goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. The implied fair value of the reporting unit’s goodwill is calculated by creating a hypothetical purchase price allocation as if the reporting unit had just been acquired. This balance sheet contains all assets and liabilities recorded at fair value (including any intangible assets that may not have any corresponding carrying value on our balance sheet). The implied value of the reporting unit’s goodwill is calculated by subtracting the fair value of the net assets from the fair value of the reporting unit. If the carrying amount of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.
We perform our annual goodwill impairment test during the fourth quarter each year. The carrying amount of goodwill at the date of the most recent annual impairment test for the Electronic Systems internal reporting unit was $82.6 million. As of the date of our 2016 annual goodwill impairment test, the fair value of the Electronic Systems internal reporting unit exceeded the carrying value by 32% and thus, goodwill was not deemed impaired.
We review our indefinite-lived intangible asset for impairment on an annual basis or when events or changes in circumstances indicate that the carrying value of our intangible asset may not be recoverable. We may first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test. Impairment indicators include, but are not limited to, cost factors, financial performance, adverse legal or regulatory developments, industry and market conditions and general economic conditions. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, we would recognize an impairment loss in the amount of such excess. In performing our annual impairment test in the fourth quarter of 2015, we concluded the fair value of the indefinite-lived trade name to be zero as a result of divesting businesses in Electronic Systems and our discontinuation of the use of the trade name. Thus, we recorded a $32.9 million of trade name impairment to the Electronic Systems trade name carrying value to decrease its trade name carrying value to zero as of December 31, 2015. See Note 7 in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information.
Other Intangible Assets
We amortize purchasedacquired other intangible assets with finite lives over the estimated economic lives of the assets, ranging from three10 years to eighteen18 years generally using the straight-line method. The value of other intangibles acquired through business combinations has been estimated using present value techniques which involve estimates of future cash flows. Actual results could vary, potentially resultingWe evaluate other intangible assets for recoverability considering undiscounted cash flows, when significant changes in conditions occur, and recognize impairment charges.losses, if any, based upon the estimated fair value of the assets.
Accounting for Stock-Based Compensation
We usemeasure and recognize compensation expense for share-based payment transactions to our employees and non-employees at their estimated fair value. The expense is measured at the grant date, based on the calculated fair value of the share-based award, and is recognized over the requisite service period (generally the vesting period of the equity award). The fair value of stock options are determined using the Black-Scholes-Merton (“Black-Scholes”) valuation model, in determining stock-based compensation expense for our options, net of an estimated forfeiture rate, on a straight-line basis over the requisite service period of the award. The stock options typically vest over four years and the estimated forfeiture rate is based on historical experience. The Black-Scholes valuation modelwhich requires assumptions and judgments using inputs such asregarding stock price volatility, risk-free interest rates, and expected options terms. As a result, ourManagement’s estimates could differ from actual results.
For performance and restricted stock units, we calculate compensation expense, net of an estimated forfeiture rate, on a straight line basis over the requisite service/performance period of the awards, with The fair value beingof unvested stock awards is determined based on the closing price of the underlying common stock price on the date of grant. The performance stock units vestgrant except for market condition awards for which the fair value was based on a three-year performance cycle. The restricted stock units vest over various periods of time ranging from one to three years. We estimate the forfeiture rate based on our historical experience.Monte Carlo simulation model.
Inventories
Inventories are stated at the lower of cost or marketnet realizable value with cost being determined using a moving average cost basis for raw materials and actual cost for work-in-process and finished goods, with units being relieved andgoods. The majority of our inventory is charged to cost of sales on a first-in, first-out basis. Market value foras raw materials are placed into production and the related revenue is based on replacement cost and for other inventory classifications it is based on net realizable value.recognized. Inventoried costs include raw materials, outside processing, direct labor and allocated overhead, adjusted for any abnormal amounts of idle facilityperformance center expense, freight, handling costs, and wasted materials (spoilage) incurred. Costs under long-term contracts are accumulated into, and removed from, inventory on the same basis as other contracts. We assess the inventory carrying value and reduce it, if necessary, to its net realizable value based on customer orders on hand, and internal demand forecasts using management’s best estimates given information currently available. We maintainThe majority of our revenues are recognized over time, however, for revenue contracts where revenue is recognized using the point in time method, inventory is not reduced until it is shipped or transfer of control to the customer has occurred. Our ending inventory consists of raw materials, work-in-process, and finished goods.

Income Taxes
Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized, using enacted tax rates, for the expected future tax consequences of temporary differences between the book and tax bases of recorded assets and liabilities, operating losses, and tax credit carryforwards. Deferred tax assets are evaluated quarterly and are reduced by a reserve for potentially excess and obsolete inventories and inventoriesvaluation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Tax positions taken or expected to be taken in a tax return are carried at costsrecognized when it is more-likely-than-not, based on technical merits, to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that are higheris greater than their estimated net realizable values.
We net progress payments from customers50% likely of being realized upon ultimate settlement, including resolution of related to inventory purchases against inventories in the consolidated balance sheets.

appeals and/or litigation process, if any.
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 our commitment to a formal plan of action. Further, we review and update our environmental accruals as circumstances change and/or additional information is obtained that reasonably could be expected to have a meaningful effect on the outcome of a matter or the estimated cost thereof.
Recent Accounting Pronouncements
See Note 1 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for a description of recent accounting pronouncements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our main market risk exposure relates to changes in U.S. and U.K. interest rates on our outstanding long-term debt. At December 31, 2016,2019, we had borrowings of $170.0$310.0 million under our Credit Facilities.
The New Term Loan which bears interest, at our option, at a rate equal to either an alternate base rate or an adjusted LIBOR rate for a one-, two-, three-, or six-month interest period chosen by us,(i) the Eurodollar Rate (defined as the London Interbank Offered Rate [“LIBOR”]) plus an applicable margin percentage. This LIBORranging from 1.50% to 2.50% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, hasand [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 0.50% to 1.50% per year, in each case based upon the consolidated total net adjusted leverage ratio.
The New Revolving Credit Facility bears interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as LIBOR) plus an applicable margin ranging from 1.50% to 2.50% per year or (ii) the Base Rate (defined as the highest of 2.25%. [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 0.50% to 1.50% per year, in each case based upon the consolidated total net adjusted leverage ratio.
A hypothetical 10% increase or decrease in the interest rate would have an immaterial impact on our financial condition and results of operations.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data together with the report thereon of PricewaterhouseCoopers LLP included in Part IV, Item 15(a) 1 and 2 of this Annual Report on Form 10-K and are included herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
 
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) are designed to provide reasonable assurance that information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in

the rules and forms of the SEC and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
Under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of December 31, 2016 because of a material weakness in internal control over financial reporting as described below.2019.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934.Act. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”). The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management of the Company has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016.2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control-Integrated Framework (2013).
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, suchBased on our assessment and those criteria, management concluded that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In connection with management’s assessment of our internal control over financial reporting, management has identified a control deficiency that constituted a material weakness in ourCompany maintained effective internal control over financial reporting as of December 31, 2016.
We did not maintain effective controls related to the quarterly and annual accounting and disclosures for income taxes. Specifically, we did not maintain effective controls related to the preparation, analysis and review of the income tax provision and significant income tax balance sheet accounts required to assess the accuracy and completeness of the income tax amounts reported within the consolidated financial statements and disclosures at period end.
Although this material weakness did not result in a material misstatement of our historical financial statements, management determined that it was appropriate to revise our consolidated financial statements as of and for the year and quarter ended December 31, 2015 to correct for a $1.6 million error in the income tax expense (benefit) and related deferred tax asset associated with the impairment of Structural Systems goodwill at December 31, 2015. Additionally, this material weakness could result in a misstatement of aforementioned account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
As a result of the material weakness, management concluded our internal control over financial reporting was not effective as of December 31, 2016 based on criteria in Internal Control-Integrated Framework (2013) issued by the COSO.2019.
The effectiveness of ourthe Company’s internal control over financial reporting as of December 31, 20162019 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included in Item 15 of this Annual Report on Form 10-K.
Managements Remediation Activities
We are committed to maintaining strong internal control over financial reporting. With regard to internal control over financial reporting related to income taxes, our Chief Financial Officer is responsible for implementing changes and improvements in internal control over financial reporting and for remediating the control deficiency that gave rise to a material weakness, are operating effectively.
In order to address the material weakness related to income taxes first described in the Company’s 2014 Annual Report on Form 10-K, the Company implemented numerous control enhancements during 2015 including the engagement of third party tax advisors to assist with the Company’s methodology of estimating and reconciling tax entries and new controls and improvements to existing controls over income tax accounts, including the reconciliation of current and deferred tax asset and liability accounts. In addition, during 2016 we hired a new tax director and a tax manager, both of whom have significant skills and experience in preparing income tax provisions and disclosures in accordance with US GAAP.
While operating the improved controls to prepare and review the 2016 tax provision, management identified the $1.6 million error in the income tax expense (benefit) and related deferred tax asset associated with goodwill described above. As described in Note 1 to the consolidated financial statements included in this 2016 Annual Report on Form 10-K, management concluded that a revision of the Company’s 2015 consolidated financial statements to correct this error was appropriate. While management believes that the Company’s current internal control over financial reporting related to income taxes are adequately designed, we have determined that a sustained period of operating effectiveness is required in order to conclude that the controls are operating effectively.
We expect the remedial actions described above will have had sufficient time to function during 2017 to allow management to conclude that the material weakness has been satisfactorily remediated and that the controls implemented are operating effectively. However, we cannot make any assurances that such actions will be completed during 2017. Until the controls described above have had sufficient time for management to conclude that they are operating effectively, the material weakness described above will continue to exist.
Remediation of Prior Year Material Weakness
We previously identified and disclosed in our 2015 Annual Report on Form 10-K, as well as in our Quarterly Report on Form 10-Q (Form “10-Q”) for each interim period in fiscal year 2016, a material weakness in our internal control over financial reporting regarding the following:

We did not design and maintain effective monitoring controls over the accuracy and appropriate classification of reported labor hours associated with contracts accounted for under the percentage-of-completion method using units of delivery. Specifically, we did not maintain proper monitoring controls over the accuracy and appropriate classification of underlying direct and indirect labor hour data which were used in our estimates to identify and record contract forward loss reserves.
Throughout 2015 and 2016, we re-designed and implemented new monitoring controls across all of our facilities over the review of labor utilization rates, transfers of labor hours between projects, and overhead absorption rates. These labor hour distributions are used in our estimates of anticipated costs used in the forward loss reserve analysis.
During the fourth quarter of 2016, we successfully completed the testing necessary to conclude that the controls were operating effectively and have concluded that the material weakness related to these monitoring controls has been remediated.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal controlscontrol over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the quarter ended December 31, 2016.2019.
 
ITEM 9B. OTHER INFORMATION
None.

PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors of the Registrant
The information under the caption “Election of Directors” in the 20172020 Proxy Statement is incorporated herein by reference.
Subsequent to our year ended December 31, 2016, on January 23, 2017, Stephen G. Oswald was appointed as a member of the Board of Directors of the Company.
Executive Officers of the Registrant
The information under the caption “Executive Officers of the Registrant” in the 20172020 Proxy Statement is incorporated herein by reference.
Subsequent to our year ended December 31, 2016, on January 23, 2017, Anthony J. Reardon resigned as President and Chief Executive Officer of the Company but will continue to serve as Chairman of the Board. In addition, on January 23, 2017, Stephen G. Oswald was appointed President and Chief Executive Officer of the Company.
Audit Committee and Audit Committee Financial Expert
The information under the caption “Committees of the Board of Directors” relating to the Audit Committee of the Board of Directors in the 20172020 Proxy Statement is incorporated herein by reference.
Compliance with Section 16(a) of the Exchange Act
The information under the caption “Section“Delinquent Section 16(a) Beneficial Ownership Reporting Compliance”Reports” in the 20172020 Proxy Statement is incorporated herein by reference.
Code of Business Conduct and Ethics
The information under the caption “Code of Business Conduct and Ethics” in the 20172020 Proxy Statement is incorporated herein by reference.
Changes to Procedures to Recommend Nominees
There have been no material changes to the procedures by which security holders may recommend nominees to the Company’s Board of Directors since the date of the Company’s last proxy statement.
 
ITEM 11. EXECUTIVE COMPENSATION
The information under the captions “Compensation of Executive Officers,” “Compensation of Directors,” “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” in the 20172020 Proxy Statement is incorporated herein by reference.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information under the caption “Security Ownership of Certain Beneficial Owners and Management” in the 20172020 Proxy Statement is incorporated herein by reference.

Securities Authorized for Issuance under Equity Compensation Plan Plans
The following table provides information about our compensation plans under which equity securities are authorized for issuance:
 

  
Number of Securities
to be Issued Upon
Exercise of
Outstanding
Options,
Warrants and Rights
(a)
 
Weighted-Average
Exercise Price of
Outstanding
Options,
Warrants and Rights
(b)
 
Number of  Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected
in Column
(a)(c)(2)
Equity Compensation Plans      
Approved by security holders (1)
 754,569
 $20.07
 398,589
Not approved by security holders 
 
 
Total 754,569
   398,589
  
Number of Securities
to be Issued Upon
Exercise of
Outstanding
Options,
Warrants and Rights
(a)
 
Weighted-Average
Exercise Price of
Outstanding
Options,
Warrants and Rights
(b)
 
Number of  Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected
in Column
(a))(c)(3)
Equity Compensation Plans approved by security holders(1)
 771,815
 $34.68
 222,132
Employee stock purchase plan approved by security holders(2)
 
 
 723,479
Equity compensation plans not approved by security holders 
 
 
Total 771,815
   945,611
 
(1)Consists of the 2007 Stock Incentive Plan (“2007 Plan”) and the 2013 Stock Incentive Plan (“2013 Plan”), although the 2007 Plan has expired and no new grants can be made out of the 2007 Plan. The number of securities to be issued consists of 439,550446,818 for stock options, 193,382127,423 for restricted stock units and 121,637197,574 for performance stock units at target. The weighted average exercise price applies only to the stock options.
(2)The 2018 Employee Stock Purchase Plan enables employees to purchase our common stock at a 15% discount to the lower of the market value at the beginning or end of each six month offering period. As such, the number of share that may be issued during a given six month period and the purchase price of such shares cannot be determined in advance. See Note 11 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K.
(3)Awards are not restricted to any specified form or structure and may include, without limitation, sales or bonuses of stock, restricted stock, stock options, reload stock options, stock purchase warrants, other rights to acquire stock, securities convertible into or redeemable for stock, stock appreciation rights, limited stock appreciation rights, phantom stock, dividend equivalents, performance units or performance shares, and an award may consist of one such security or benefit, or two or more of them in tandem or in alternative.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information under the caption “Election of Directors”“Certain Relationships and Related Transactions” in the 20172020 Proxy Statement is incorporated herein by reference.
 
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information under the caption “Principal Accountant Fees and Services” contained in the 20172020 Proxy Statement is incorporated herein by reference.


PART IV
 
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
1.      Financial Statements
 
  
 The following consolidated financial statements of Ducommun Incorporated and subsidiaries, are incorporated by reference in Item 8 of this report.
   
  Page
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
2.      Financial Statement Schedule
 
   
 The following schedule for the years ended December 31, 2016, 20152019, 2018 and 20142017 is filed herewith: 
   
 Schedule II - Consolidated Valuation and Qualifying Accounts
   
 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. 
   
 
3.      Exhibits
 
  
See Item 15(b) for a list of exhibits.
ITEM 16. FORM 10-K SUMMARY

Signatures


Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Ducommun Incorporated:Incorporated
Opinions on the Financial Statements and Internal Control over Financial Reporting
In our opinion,We have audited the accompanying consolidated balance sheets of Ducommun Incorporated and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations, ofincome, comprehensive income, (loss), 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, 2016 and 2015, and the results of their operations and theircash flows for each of the three years in the period ended December 31, 20162019, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)2 (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidatedfinancial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)2 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company did not maintain,maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016,2019, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations ofCOSO.
Change in Accounting Principle
As discussed in Note 1 to the Treadway Commission (COSO) becausematerial weakness in internal control overconsolidated financial reporting existed as of that date asstatements, the Company did not maintain effective controls related tochanged the quarterlymanner in which it accounts for leases in 2019 and annual accounting and disclosuresthe manner in which it accounts for income taxes. A material weakness is a deficiency, or a combination of deficiencies,revenues from contracts with customers in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness referred to above is described in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. We considered this material weakness in determining the nature, timing, and extent of audit tests applied in our audit of the 2016 consolidated2018.
Basis for Opinions
financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements. The Company’s management is responsible for these consolidated financial statements, and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in management’s report referred to above.Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these the Company’s consolidatedfinancial statements on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidatedfinancial statements included performing procedures to assess the risks of material misstatement of the consolidatedfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidatedfinancial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, andas well as evaluating the overall presentation of the consolidatedfinancial statement presentation.statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Los Angeles,Irvine, California
March 6, 2017February 20, 2020
We have served as the Company’s auditor since 1989.


Ducommun Incorporated and Subsidiaries
Consolidated Balance Sheets
(InDollars in thousands, except share and per share data)

 December 31, December 31,
 2016 2015 2019 2018
Assets        
Current Assets        
Cash and cash equivalents $7,432
 $5,454
 $39,584
 $10,263
Accounts receivable (less allowance for doubtful accounts of $495 and $359 at December 31, 2016 and 2015, respectively) 76,239
 77,089
Accounts receivable (net of allowance for doubtful accounts of $1,321 and $1,135 at December 31, 2019 and 2018, respectively) 67,133
 67,819
Contract assets 106,670
 86,665
Inventories 119,896
 115,404
 112,482
 101,125
Production cost of contracts 11,340
 10,290
 9,402
 11,679
Other current assets 11,034
 13,389
 5,497
 6,531
Assets held for sale 
 41,636
Total Current Assets 225,941
 263,262
 340,768
 284,082
Property and Equipment, Net 101,590
 96,551
 115,216
 107,045
Operating lease right-of-use assets 19,105
 
Goodwill 82,554
 82,554
 170,917
 136,057
Intangibles, Net 101,573
 110,621
 138,362
 112,092
Non-Current Deferred Income Taxes 286
 324
 55
 308
Other Assets 3,485
 3,769
 6,006
 5,155
Total Assets $515,429
 $557,081
 $790,429
 $644,739
Liabilities and Shareholders’ Equity        
Current Liabilities        
Accounts payable $82,597
 $69,274
Contract liabilities 14,517
 17,145
Accrued liabilities 37,620
 37,786
Operating lease liabilities 2,956
 
Current portion of long-term debt $3
 $26
 7,000
 2,330
Accounts payable 57,024
 40,343
Accrued liabilities 29,279
 36,458
Liabilities held for sale 
 6,780
Total Current Liabilities 86,306
 83,607
 144,690
 126,535
Long-Term Debt, Less Current Portion 166,896
 240,661
 300,887
 228,868
Non-Current Operating Lease Liabilities 17,565
 
Non-Current Deferred Income Taxes 31,417
 28,125
 16,766
 18,070
Other Long-Term Liabilities 18,707
 18,954
 17,721
 14,441
Total Liabilities 303,326
 371,347
 497,629
 387,914
Commitments and Contingencies (Notes 13, 16) 
 
Commitments and Contingencies (Notes 13, 15) 
 
Shareholders’ Equity        
Common stock - $0.01 par value; 35,000,000 shares authorized; 11,193,813 and 11,084,318 shares issued and outstanding at December 31, 2016 and 2015, respectively 112
 111
Common stock - $0.01 par value; 35,000,000 shares authorized; 11,572,668 and 11,417,863 shares issued and outstanding at December 31, 2019 and 2018, respectively 116
 114
Additional paid-in capital 76,783
 75,200
 88,399
 83,712
Retained earnings 141,287
 116,026
 212,553
 180,356
Accumulated other comprehensive loss (6,079) (5,603) (8,268) (7,357)
Total Shareholders’ Equity 212,103
 185,734
 292,800
 256,825
Total Liabilities and Shareholders’ Equity $515,429
 $557,081
 $790,429
 $644,739
See accompanying notes to consolidated financial statements.

Ducommun Incorporated and Subsidiaries
Consolidated Statements of OperationsIncome
(InDollars in thousands, except per share amounts)

 Years Ended December 31, Years Ended December 31,
 2016 2015 2014 2019 2018 2017
Net Revenues $550,642
 $666,011
 $742,045
 $721,088
 $629,307
 $558,183
Cost of Sales 444,449
 565,219
 601,713
 568,891
 506,711
 455,050
Gross Profit 106,193
 100,792
 140,332
 152,197
 122,596
 103,133
Selling, General and Administrative Expenses 77,625
 85,921
 88,565
 95,964
 84,007
 79,139
Goodwill Impairment 
 57,243
 
Intangible Asset Impairment 
 32,937
 
Operating Income (Loss) 28,568
 (75,309) 51,767
Restructuring Charges 
 14,671
 8,360
Operating Income 56,233
 23,918
 15,634
Interest Expense (8,274) (18,709) (28,077) (18,290) (13,024) (8,870)
Gain on Divestitures, Net 17,604
 
 
Loss on Extinguishment of Debt 
 (14,720) 
 (180) (926) 
Other Income, Net 215
 2,148
 2,550
 
 303
 845
Income (Loss) Before Taxes 38,113
 (106,590) 26,240
Income Before Taxes 37,763
 10,271
 7,609
Income Tax Expense (Benefit) 12,852
 (31,711) 6,373
 5,302
 1,236
 (12,468)
Net Income (Loss) $25,261
 $(74,879) $19,867
Earnings (Loss) Per Share      
Basic earnings (loss) per share $2.27
 $(6.78) $1.82
Diluted earnings (loss) per share $2.24
 $(6.78) $1.79
Net Income $32,461
 $9,035
 $20,077
Earnings Per Share      
Basic earnings per share $2.82
 $0.79
 $1.78
Diluted earnings per share $2.75
 $0.77
 $1.74
Weighted-Average Number of Shares Outstanding            
Basic 11,151
 11,047
 10,897
 11,518
 11,390
 11,290
Diluted 11,299
 11,047
 11,126
 11,792
 11,659
 11,558
See accompanying notes to consolidated financial statements.

Ducommun Incorporated and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(InDollars in thousands)
 
  Years Ended December 31,
  2016 2015 2014
Net Income (Loss) $25,261
 $(74,879) $19,867
Other comprehensive (loss) income, net of tax:      
Pension Adjustments:      
Amortization of actuarial loss included in net income, net of tax benefit of $283, $330, and $156 for 2016, 2015, and 2014, respectively 479
 557
 263
Actuarial (loss) gain arising during the period, net of tax (benefit) expense of $(413), $300, and $(1,810) for 2016, 2015, and 2014, respectively (650) 491
 (3,052)
Decrease in net unrealized gains and losses on cash flow hedges, net of tax benefit of $180, $0, and $0 for 2016, 2015, and 2014, respectively (305) 
 
Other Comprehensive (Loss) Income, Net of Tax (476) 1,048
 (2,789)
Comprehensive Income (Loss), Net of Tax $24,785
 $(73,831) $17,078
  Years Ended December 31,
  2019 2018 2017
Net Income $32,461
 $9,035
 $20,077
Other Comprehensive (Loss) Income, Net of Tax:      
Pension Adjustments:      
Amortization of actuarial losses and prior service costs, net of tax of $209, $173, and $302 for 2019, 2018, and 2017, respectively 676
 570
 508
Actuarial losses arising during the period, net of tax benefit of $502, $302, and $194 for 2019, 2018, and 2017, respectively (1,682) (899) (304)
Change in net unrealized gains (losses) on cash flow hedges, net of tax expense (benefit) of $29, $121, and $(145) for 2019, 2018, and 2017, respectively 95
 407
 (242)
Other Comprehensive (Loss) Income, Net of Tax (911) 78
 (38)
Comprehensive Income, Net of Tax $31,550
 $9,113
 $20,039
See accompanying notes to consolidated financial statements.

Ducommun Incorporated and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity
(InDollars in thousands, except share data)
 
 
Shares
Outstanding
 
Common
Stock
 
Treasury
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total
Shareholders’
Equity
 
Shares
Outstanding
 
Common
Stock
 
Treasury
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total
Shareholders’
Equity
Balance at December 31, 2013 10,816,754
 $110
 $(1,924) $68,909
 $171,038
 $(3,862) $234,271
Balance at December 31, 2016 11,193,813
 $112
 $
 $76,783
 $141,287
 $(6,079) $212,103
Net income 
 
 
 
 19,867
 
 19,867
 
 
 
 
 20,077
 
 20,077
Other comprehensive loss, net of tax 
 
 
 
 
 (2,789) (2,789) 
 
 
 
 
 (38) (38)
Stock options exercised 117,149
 1
 
 2,275
 
 
 2,276
 212,775
 2
 
 4,334
 
 
 4,336
Stock repurchased related to the exercise of stock options (34,597) (1) 
 (919) 
 
 (920) (219,164) (2) 
 (6,902) 
 
 (6,904)
Stock awards vested 52,962
 1
 
 (1) 
 
 
 145,417
 1
 
 (1) 
 
 
Stock-based compensation 
 
 
 3,725
 
 
 3,725
 
 
 
 6,009
 
 
 6,009
Excess tax benefits from share-based compensation 
 
 
 140
 
 
 140
Retirement of treasury stock 
 (1) 1,924
 (1,923) 
 
 
Balance at December 31, 2014 10,952,268
 $110
 $
 $72,206
 $190,905
 $(6,651) $256,570
Net loss 
 
 
 
 (74,879) 
 (74,879)
Balance at December 31, 2017 11,332,841
 $113
 $
 $80,223
 $161,364
 $(6,117) $235,583
Net income 
 
 
 
 9,035
 
 9,035
Other comprehensive income, net of tax 
 
 
 
 
 1,048
 1,048
 
 
 
 
 
 78
 78
Adoption of ASC 606 adjustment 
 
 
 
 8,665
 
 8,665
Adoption of ASU 2018-02 adjustment 
 
 
 
 1,292
 (1,318) (26)
Stock options exercised 167,523
 1
 
 3,083
 
 
 3,084
 84,800
 1
 
 1,821
 
 
 1,822
Stock repurchased related to the exercise of stock options (137,194) (1) 
 (4,209) 
 
 (4,210) (98,438) (1) 
 (3,371) 
 
 (3,372)
Stock awards vested 101,721
 1
 
 (1) 
 
 
 98,660
 1
 
 (1) 
 
 
Stock-based compensation 
 
 
 3,495
 
 
 3,495
 
 
 
 5,040
 
 
 5,040
Excess tax benefits from share-based compensation 
 
 
 626
 
 
 626
Balance at December 31, 2015 11,084,318
 $111
 $
 $75,200
 $116,026
 $(5,603) $185,734
Balance at December 31, 2018 11,417,863
 $114
 $
 $83,712
 $180,356
 $(7,357) $256,825
Net income 
 
 
 
 25,261
 
 25,261
 
 
 
 
 32,461
 
 32,461
Other comprehensive income, net of tax 
 
 
 
 
 (476) (476)
Other comprehensive loss, net of tax 
 
 
 
 
 (911) (911)
Adoption of ASC 842 adjustment 
 
 
 
 (264) 
 (264)
Employee stock purchase plan 26,521
 
 
 1,118
 

 

 1,118
Stock options exercised 132,325
 1
 
 2,121
 
 
 2,122
 80,693
 1
 
 2,014
 
 
 2,015
Stock repurchased related to the exercise of stock options (151,916) (1) 
 (3,464) 
 
 (3,465) (123,192) (1) 
 (5,604) 
 
 (5,605)
Stock awards vested 129,086
 1
 
 (1) 
 
 
 170,783
 2
 
 (2) 
 
 
Stock-based compensation 
 
 
 3,007
 
 
 3,007
 
 
 
 7,161
 
 
 7,161
Tax shortfall from share-based compensation 
 
 
 (80) 
 
 (80)
Balance at December 31, 2016 11,193,813
 $112
 $
 $76,783
 $141,287
 $(6,079) $212,103
Balance at December 31, 2019 11,572,668
 $116
 $
 $88,399
 $212,553
 $(8,268) $292,800
See accompanying notes to consolidated financial statements.

Ducommun Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
(InDollars in thousands)
 
 Years Ended December 31, Years Ended December 31,
 2016 2015 2014 2019 2018 2017
Cash Flows from Operating Activities            
Net Income (Loss) $25,261
 $(74,879) $19,867
Adjustments to Reconcile Net Income (Loss) to      
Net Income $32,461
 $9,035
 $20,077
Adjustments to Reconcile Net Income to      
Net Cash Provided by Operating Activities:            
Depreciation and amortization 22,860
 26,846
 29,024
 28,305
 25,296
 22,845
Gain on divestitures, net (17,604) 
 
Goodwill impairment 
 57,243
 
Intangible asset impairment 
 32,937
 
Non-cash operating lease cost 2,669
 
 
Property and equipment impairment due to restructuring 
 6,207
 3,607
Stock-based compensation expense 3,007
 3,495
 3,725
 7,161
 5,040
 4,675
Deferred income taxes 3,519
 (29,110) 345
 (1,830) 2,042
 (15,411)
Excess tax benefits from stock-based compensation (248) (626) (140)
Provision for (recovery of) doubtful accounts 112
 132
 (237)
Provision for doubtful accounts 186
 267
 373
Noncash loss on extinguishment of debt 
 4,970
 
 180
 926
 
Other (7,204) 5,628
 (5,713) 942
 11,659
 (1,182)
Changes in Assets and Liabilities:            
Accounts receivable 3,220
 4,444
 1,086
 2,380
 7,495
 2,720
Contract assets (20,005) (86,665) 
Inventories (5,182) 20,985
 (2,335) (8,491) 23,243
 (533)
Production cost of contracts (1,536) 330
 (3,513) (1,079) (1,569) (267)
Other assets 2,974
 5,884
 4,800
 1,358
 1,881
 40
Accounts payable 15,055
 (13,978) 410
 11,620
 18,496
 (4,015)
Contract liabilities (2,628) 17,145
 
Accrued and other liabilities (966) (20,623) 6,103
 (2,198) 5,739
 2,505
Net Cash Provided by Operating Activities 43,268
 23,678
 53,422
 51,031
 46,237
 35,434
Cash Flows from Investing Activities            
Purchases of property and equipment (17,001) (15,891) (18,096) (18,290) (17,617) (27,610)
Proceeds from sale of assets 16
 904
 91
 3
 396
 913
Insurance recoveries related to property and equipment 
 1,510
 2,550
 
 
 288
Proceeds from divestitures 51,893
 
 
Net Cash Provided by (Used in) Investing Activities 34,908
 (13,477) (15,455)
Payments for acquisition of Lightning Diversion Systems, LLC, net of cash acquired 
 
 (59,798)
Payments for acquisition of Certified Thermoplastics Co., LLC, net of cash acquired 
 (30,712) 
Payments for acquisition of Nobles Worldwide, Inc. net of cash acquired (76,647) 
 
Net Cash Used in Investing Activities (94,934) (47,933) (86,207)
Cash Flows from Financing Activities            
Borrowings from senior secured revolving credit facility 71,800
 65,000
 
 298,400
 296,400
 395,900
Repayment of senior secured revolving credit facility (71,800) (65,000) (42,650) (298,400) (354,500) (337,800)
Borrowings from term loan 
 275,000
 
Repayments of senior unsecured notes and term loans (75,000) (320,000) 
Borrowings from term loans 140,000
 240,000
 
Repayments of term loans (63,000) (167,000) (10,000)
Repayments of other debt (23) (26) 
 (169) 
 (3)
Debt issuance costs 
 (4,848) 
 (1,135) (3,541) 
Excess tax benefits from stock-based compensation 248
 626
 140
Net (cash paid) proceeds from issuance of common stock under stock plans (1,423) (1,126) 1,356
Net Cash Used in Financing Activities (76,198) (50,374) (41,154)
Net cash paid from issuance of common stock under stock plans (2,472) (1,550) (2,606)
Net Cash Provided by Financing Activities 73,224
 9,809
 45,491
Net Increase (Decrease) in Cash and Cash Equivalents 1,978
 (40,173) (3,187) 29,321
 8,113
 (5,282)
Cash and Cash Equivalents at Beginning of Year 5,454
 45,627
 48,814
 10,263
 2,150
 7,432
Cash and Cash Equivalents at End of Year $7,432
 $5,454
 $45,627
 $39,584
 $10,263
 $2,150
Supplemental Disclosures of Cash Flow Information      
Interest paid $6,877
 $26,501
 $25,105
Taxes paid $9,778
 $1,150
 $3,476
Non-cash activities:      
Purchases of property and equipment not yet paid $3,241
 $1,549
 $1,458
See accompanying notes to consolidated financial statements.

DUCOMMUN INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 1. Summary of Significant Accounting Policies
Description of Business
We are a leading global provider of engineering and manufacturing services for high-performance products and high-cost-of failure applications used primarily in the aerospace and defense (“A&D”), industrial, medical, and other industries.industries (collectively, “Industrial”). Our subsidiariesoperations are organized into two primary businesses: Electronic Systems segment and Structural Systems segment, each of which is a reportable operating segment. Electronic Systems designs, engineers and manufactures high-reliability electronic and electromechanical products used in worldwide technology-driven markets including aerospace, defense, industrial, medical,A&D and otherIndustrial end-use markets. Electronic Systems’ product offerings primarily range from prototype development to complex assemblies. Structural Systems designs, engineers and manufactures large, complex contoured aerospace structuralaerostructure components and assemblies and supplies composite and metal bonded structures and assemblies. Structural Systems’ products are primarily used on commercial aircraft, military fixed-wing aircraft and military and commercial rotary-wing aircraft. All reportable operating segments follow the same accounting principles.
Basis of Presentation
The consolidated financial statements include the accounts of Ducommun Incorporated and its subsidiaries (“Ducommun,” the “Company,” “we,” “us” or “our”), after eliminating intercompany balances and transactions.
In the opinion of management, all adjustments, consisting of recurring accruals, have been made that are necessary to fairly statepresent our consolidated financial position, resultsstatements of operations,income, comprehensive income, (loss) and cash flows in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Our fiscal quarters typically end on the Saturday closest to the end of March, June and September for the first three fiscal quarters of each year, and ends on December 31 for our fourth fiscal quarter. As a result of using fiscal quarters for the first three quarters combined with leap years, our first and fourth fiscal quarters can range between 12 1/2 weeks to 13 1/2 weeks while the second and third fiscal quarters remain at a constant 13 weeks per fiscal quarter.
Changes in Accounting Policies
We adopted Accounting Standards Codification (“ASC”) 842, “Leases” (“ASC 842”), on January 1, 2019. As a result, we changed our accounting policy for lease accounting as discussed in Note 2.
We applied ASC 842 using the additional transition method and therefore, recognized the cumulative effect of initially applying ASC 842 as an adjustment to the opening consolidated balance sheet at January 1, 2019. Therefore, the comparative information has not been adjusted and continues to be reported under the previous lease accounting standard, ASC 840, “Leases” (“ASC 840”). The details of the significant changes and quantitative impact of the changes are described in Note 2.
We adopted ASC 606, “Revenue from Contracts with Customers” (“ASC 606”), on January 1, 2018. As a result, we changed our accounting policy for revenue recognition and the majority of our revenues began being recognized over time. The majority of our inventory began being charged to cost of sales as raw materials are placed into production and the related revenue is recognized. Revenues recognized before billing are classified as contract assets. Payments received from customers prior to our billing are classified as contract liabilities. The determination of our provision for estimated losses on contracts was also changed as the definition of a contract for us became the customer purchase order instead of the long-term arrangements and are classified as contract liabilities.
We applied ASC 606 using the modified retrospective method (also known as the cumulative effect method) and as such, recognized the cumulative effect of initially applying ASC 606 as an adjustment to the opening consolidated balance sheet at January 1, 2018. Therefore, the comparative information has not been adjusted and continues to be reported under the previous revenue recognition accounting standard, ASC 605, “Revenue Recognition” (“ASC 605”).
Use of Estimates
Certain amounts and disclosures included in the consolidated financial statements required management to make estimates and judgments that affect the amount of assets, liabilities (including forward loss reserves), revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making

judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.
Reclassifications
Certain prior period amounts have been reclassified to conform to current year’s presentation.
Revision of 2015 Financial StatementsSupplemental Cash Flow Information
During
  
(Dollars in thousands)
Years Ended December 31,
  2019 2018 2017
Interest paid $16,474
 $11,573
 $7,307
Taxes paid $5,699
 $316
 $3,125
Non-cash activities:      
     Purchases of property and equipment not paid $1,380
 $824
 $2,104
Fair Value
Assets and liabilities that are measured, recorded or disclosed at fair value on a recurring basis are categorized using the fourth quarter of 2016, we determined that we improperly calculatedfair value hierarchy. The fair value hierarchy has three levels based on the tax impactreliability of the goodwill impairment charge recordedinputs used to determine the fair value. Level 1, the highest level, refers to the values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant observable inputs. Level 3, the fourth quarterlowest level, includes fair values estimated using significant unobservable inputs.
We have money market funds and they are included as cash and cash equivalents. We also have interest rate cap hedge agreements and the fair value of 2015. Asthe interest rate cap hedge agreements were determined using pricing models that use observable market inputs as of the balance sheet date, a result, $1.6 millionLevel 2 measurement. The interest rate cap hedge premium was incorrectly recorded as a deferred tax assetzero as of December 31, 2015, however, this amount should have decreased our income tax benefit for the year ended December 31, 2015. Therefore, we have revised our December 31, 2015 consolidated balance sheet to increase non-current deferred tax liabilities by $1.6 million and revised our consolidated statement of operations for the year ended December 31, 2015 to increase our net loss by $1.6 million. We have also revised all related footnote disclosures2019.
There were no transfers between Level 1, Level 2, or Level 3 financial instruments in these consolidated financial statements to correct this error. This error had no effect on net cash provided by operating activities on our consolidated cash flow statement for the year ended December 31, 2015. We assessed the materiality of this error and do not believe it is material to any prior interimeither 2019 or annual periods.

Fair Value
We measure certain assets and liabilities at fair value based on the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. See Note 3 for further information.2018.
Cash Equivalents
Cash equivalents consist of highly liquid instruments purchased with original maturities of three months or less.Theseless. These assets are valued at cost, which approximates fair value, which we classify as Level 1. See Fair Value above.
Derivative Instruments
We recognize derivative instruments on our consolidated balance sheets at their fair value. On the date that we enter into a derivative contract, we designate the derivative instrument as a fair value hedge, a cash flow hedge, a hedge of a net investment in a foreign operation, or a derivative instrument that will not be accounted for using hedge accounting methods. As of December 31, 20162019 and December 31, 2015,2018, all of our derivative instruments were designated as cash flow hedges.
We record changes in the fair value of a derivative instrument that is highly effective and that is designated and qualifies as a cash flow hedge in other comprehensive income (loss), net of tax until our earnings are affected by the variability of cash flows of the underlying hedge. We record any hedge ineffectiveness and amounts excluded from effectiveness testing in current period earnings within interest expense. We report changes in the fair values of derivative instruments that are not designated or do not qualify for hedge accounting in current period earnings. We classify cash flows from derivative instruments onin the consolidated statements of cash flows in the same category as the item being hedged or on a basis consistent with the nature of the instrument. In 2019, the impact of cash flow hedges was insignificant.
When we determine that a derivative instrument is not highly effective as a hedge, we discontinue hedge accounting prospectively. In all situations in which we discontinue hedge accounting and the derivative instrument remains outstanding, we will carry the derivative instrument at its fair value on our consolidated balance sheets and recognize subsequent changes in its fair value in our current period earnings.
Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts for estimated losses from the inability of customers to make required payments. The allowance for doubtful accounts is evaluated periodically based on the aging of accounts receivable, the

financial condition of customers and their payment history, historical write-off experience and other assumptions, such as current assessment of economic conditions.
Inventories
Inventories are stated at the lower of cost or marketnet realizable value with cost being determined using a moving average cost basis for raw materials and actual cost for work-in-process and finished goods, with units being relieved fromgoods. The majority of our inventory andis charged to cost of sales on a first-in, first-out basis. Market value foras raw materials are placed into production and the related revenue is based on replacement cost and for other inventory classifications it is based on net realizable value.recognized. Inventoried costs include raw materials, outside processing, direct labor and allocated overhead, adjusted for any abnormal amounts of idle facilityperformance center expense, freight, handling costs, and wasted materials (spoilage) incurred. Costs under long-term contracts are accumulated into, and removed from, inventory on the same basis as other contracts. We assess the inventory carrying value and record write-downs,reduce it, if necessary, to its net realizable value based on customer orders on hand, and internal demand forecasts using management’s best estimates given information currently available. We maintain a reserveThe majority of our revenues are recognized over time, however, for excessrevenue contracts where revenue is recognized using the point in time method, inventory is not reduced until it is shipped or transfer of control to the customer has occurred. Our ending inventory consists of raw materials, work-in-process, and obsolete inventories and inventories that are carried at costs that are higher than their estimated net realizable values.
We net progress payments from customers related to inventory purchases against inventories in the consolidated balance sheets.finished goods.
Production Cost of Contracts
Production cost of contracts includes non-recurring production costs, such as design and engineering costs, and tooling and other special-purpose machinery necessary to build parts as specified in a contract. Production costs of contracts are recorded to cost of goods soldsales using the units of delivery method.over time revenue recognition model. We review long-lived assets withinthe value of the production costscost of contracts for impairment on an annuala quarterly basis (which we perform duringto ensure when added to the fourth quarter) or when events or changes in circumstances indicate thatestimated cost to complete, the carryingvalue is not greater than the estimated realizable value of our long-lived assets may not be recoverable. An impairment charge is recognized when the carrying value of an asset exceeds the projected undiscounted future cash flows expected from its use and disposal.related contracts. As of December 31, 20162019 and 2015,2018, production costs of contracts were $11.3$9.4 million and $10.3$11.7 million, respectively.

Assets Held For Sale
In the fourth quarter of 2015, we made the decision to sell our Huntsville, Alabama and Iuka, Mississippi (collectively, “Miltec”) operations and our Pittsburgh, Pennsylvania operation, both of which are part of our Electronic Systems operating segment, and as a result, we met the criteria for assets held for sale. However, the proposed sale of these two operations did not represent a strategic shift in our business and thus, were included in the ongoing operating results in the consolidated statements of operations for all periods presented.
On January 22, 2016, we entered into an agreement, and completed the sale on the same date, to sell our operation located in Pittsburgh, Pennsylvania for a final sales price of $38.6 million in cash. We divested this facility as part of our overall strategy to streamline operations, which includes consolidating our footprint. Net assets sold were $24.0 million, net liabilities sold were $4.0 million, and direct transaction costs incurred were $0.3 million, resulting in a gain on divestiture of $18.3 million.
In February 2016, we entered into an agreement to sell our Miltec operation for a final sales price of $13.3 million, in cash. We divested this facility as part of our overall strategy to streamline operations, which includes consolidating our footprint. We completed the sale on March 25, 2016. Net assets sold were $15.4 million, net liabilities sold were $2.7 million, and direct transaction costs incurred were $1.3 million, resulting in a loss on divestiture of $0.7 million.
The carrying values of the major classes of assets and liabilities related to these assets held for sale were as follows:
  (In thousands)
  December 31,
2016
 December 31,
2015
Assets    
Accounts receivable (less allowance for doubtful accounts of zero and $24 at December 31, 2016 and December 31, 2015, respectively) $
 $9,395
Inventory 
 6,453
Deferred income taxes 
 1,246
Other current assets 
 3,315
Total current assets 
 20,409
Property and equipment, net of accumulated depreciation of zero and $8,509 at December 31, 2016 and December 31, 2015, respectively 
 1,941
Goodwill 
 17,772
Other Intangible Assets 
 1,514
  $
 $41,636
Liabilities    
Accounts payable $
 $4,836
Accrued liabilities 
 1,944
  $
 $6,780
Property and Equipment and Depreciation
Property and equipment, including assets recorded under capitaloperating and finance leases, are recorded at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets, or the lease term if shorter for leasehold improvements. Repairs and maintenance are charged to expense as incurred. We evaluate long-lived assets for recoverability considering undiscounted cash flows, when significant changes in conditions occur, and recognize impairment losses if any, based upon the fair value of the assets.
Goodwill and Indefinite-Lived Intangible Asset
Goodwill is tested for impairment utilizing a two-step method. In the first step, we determine the fair value of the reporting unit using expected future discounted cash flows and market valuation approaches considering comparable Company revenue and Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) multiples. If the carrying value of the reporting unit exceeds its fair value, we then perform the second step of the impairment test to measure the amount of the goodwill impairment loss, if any. The second step requires fair valuation of all the reporting unit’s assets and liabilities in a manner similar to a purchase price allocation, with any residual fair value being allocated to goodwill. This residual fair value of goodwill is then compared to the carrying value of goodwill to determine impairment. An impairment charge will be recognized equal to the excess of the carrying value of goodwill over the implied fair value of goodwill.

In 2015, as a result of the annual goodwill impairment test, we recorded $57.2 million of goodwill impairment to the Structural Systems operating segment reducing the goodwill carrying value to zero as of December 31, 2015. See Note 7 for further information.
We review our indefinite-lived intangible assetevaluated for impairment on an annual basis on the first day of the fourth fiscal quarter. If certain factors occur, including significant under performance of our business relative to expected operating results, significant adverse economic and industry trends, significant decline in our market capitalization for an extended period of time relative to net book value, a decision to divest individual businesses within a reporting unit, or when eventsa decision to group individual businesses differently, we may perform an impairment test prior to the fourth quarter. In addition, we early adopted ASU 2017-04 on January 1, 2019 which simplified our goodwill impairment testing by eliminating Step Two of the goodwill impairment test. See Note 1.
We acquired Certified Thermoplastics Co., LLC (“CTP”) in April 2018 and recorded goodwill of $18.6 million in our Structural Systems segment, which is also our reporting unit. Since a goodwill impairment analysis is required to be performed within one year of the acquisition date or changes in circumstances indicate that the carryingsooner upon a triggering event, we performed a Step One goodwill impairment analysis as of April 2019 for our Structural Systems segment. The fair value of our intangible asset mayStructural Systems segment exceeded its carrying value by 85% and thus, was not be recoverable. We may first assessdeemed impaired.
In the fourth quarter of 2019, the carrying amount of goodwill at the date of the most recent annual impairment evaluation for Electronic Systems and Structural Systems was $117.4 million and $18.6 million, respectively. As of the date of our 2019 annual evaluation for goodwill impairment, for the Electronic Systems segment, which is also our reporting unit, we elected to perform a Step One goodwill impairment analysis and will continue to do so from time to time. The fair value of our Electronic Systems segment exceeded its carrying value by 44% and thus, was not deemed impaired.
As of the date of our 2019 annual evaluation for goodwill impairment, for the Structural Systems segment, we used a qualitative assessment including 1) margin of passing most recent step 1 analysis, 2) earnings before interest, taxes, depreciation, and amortization, 3) long-term growth rate, 4) analyzing material adverse factors/changes between valuation dates, 5) general macroeconomic factors, to determine whetherand 6) industry and market conditions, noting it iswas not more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test. Impairment indicators include, but are not limited to, cost factors, financial performance, adverse legal or regulatory developments, industry and market conditions and general economic conditions. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, we would recognize an impairment loss in the amount of such excess. In performing our annual impairment test in the fourth quarter of 2015, we concluded the fair value of the indefinite-lived trade name to be zero as a result of divesting businesses in Electronic Systemsreporting unit is less than its carrying amount and our discontinuation of the use of the trade name. Thus, we recorded a $32.9 million of trade name impairment to the Electronic Systems trade name carrying value to decrease its trade name carrying value to zero as of December 31, 2015. See Note 7 for further information.thus, goodwill was not deemed impaired.

Other Intangible Assets
We amortize purchasedacquired other intangible assets with finite lives over the estimated economic lives of the assets, ranging from fourteen10 to eighteen18 years generally using the straight-line method. The value of other intangibles acquired through business combinations has been estimated using present value techniques which involve estimates of future cash flows. We evaluate other intangible assets for recoverability considering undiscounted cash flows, when significant changes in conditions occur, and recognize impairment losses, if any, based upon the estimated fair value of the assets.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss, as reflected inon the consolidated balance sheets under the equity section, was composedcomprised of cumulative pension and retirement liability adjustments, net of tax, and change in net unrealized gains and losses on cash flow hedges, net of tax.
Revenue Recognition
Except as described below, we recognize revenue, including revenue fromOur customers typically engage us to manufacture products sold under long-term contracts, when persuasive evidencebased on designs and specifications provided by the end-use customer. This requires the building of an arrangement exists, the price is fixed or determinable, collection is reasonably assuredtooling and delivery ofmanufacturing first article inspection products has occurred or services have been rendered.(prototypes) before volume manufacturing. Contracts with our customers generally include a termination for convenience clause.
We have a significant number of contracts that are started and completed within the same year, as well as contracts derived from long-term agreements and programs that can span several years. We recognize revenue under ASC 606, which utilizes a five-step model.
The definition of a contract for us is typically defined as a customer purchase order as this is when we achieve an enforceable right to payment. The majority of our contracts are firm fixed-price contracts. The deliverables within a customer purchase order are analyzed to determine the number of performance obligations. In addition, at times, in order to achieve economies of scale and based on our customer’s forecasted demand, we may build in advance of receiving a purchase order from our customer. When that occurs, we would not recognize revenue until we have received the customer purchase order.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account under ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, control is transferred and the performance obligation is satisfied. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services are highly interrelated or met the series guidance. For contracts with multiple performance obligations, we allocate the contract transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate the standalone selling price is the expected cost plus a margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service.
We manufacture most products to customer specifications and the product cannot be easily modified for another customer. As such, these products are deemed to have no alternative use once the manufacturing process begins. In the event the customer invokes a termination for convenience clause, we would be entitled to costs incurred to date plus a reasonable profit. Contract costs typically include labor, materials, overhead, and when applicable, subcontractor costs. For most of our products, we are building assets with no alternative use and have enforceable right to payment, and thus, we recognize revenue under the contract method of accounting and record revenues and cost of sales on each contract in accordance with the percentage-of-completion method of accounting, using the units-of-deliveryover time method. Under the units-of-delivery method,
The majority of our performance obligations are satisfied over time as work progresses. Typically, revenue is recognized based upon the number of units delivered duringover time using an input measure (i.e., costs incurred to date relative to total estimated costs at completion, also known as cost-to-cost plus reasonable profit) to measure progress. Our typical revenue contract is a periodfirm fixed price contract, and the cost of raw materials could make up a significant amount of the total costs incurred. As such, we believe using the total costs incurred input method would be the most appropriate method. While the cost of raw materials could make up a significant amount of the total costs incurred, there is a direct relationship between our inputs and the transfer of control of goods or services to the customer.
Contract estimates are recognized based on various assumptions to project the actualoutcome of future events that can span multiple months or years. These assumptions include labor productivity and availability; the complexity of the work to be performed; the cost and availability of materials; and the performance of subcontractors.
As a significant change in one or more of these estimates could affect the profitability of our contracts, we review and update our contract-related estimates on a regular basis. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the quarter it is identified.

The impact of adjustments in contract estimates on our operating earnings can be reflected in either operating costs allocableand expenses or revenue.
Net cumulative catch-up adjustments on profit recorded were not material for the year ended December 31, 2019.
Payments under long-term contracts may be received before or after revenue is recognized. When revenue is recognized before we bill our customer, a contract asset is created for the work performed but not yet billed. Similarly, when we receive payment before we ship our products to our customer, a contract liability is created for the advance or progress payment.
Contract Assets and Contract Liabilities
Contract assets consist of our right to payment for work performed but not yet billed. Contract assets are transferred to accounts receivable when we bill our customers. We bill our customers when we ship the products and meet the shipping terms within the revenue contract. Contract liabilities consist of advance or progress payments received from our customers prior to the delivered units. Costs allocabletime transfer of control occurs plus the estimated losses on contracts.
Contract assets and contract liabilities from revenue contracts with customers are as follows:
  (Dollars in thousands)
  December 31,
2019
 December 31,
2018
Contract assets $106,670
 $86,665
Contract liabilities $14,517
 $17,145
Remaining performance obligations is defined as customer placed purchase orders (“POs”) with firm fixed price and firm delivery dates. Our remaining performance obligations as of December 31, 2019 totaled $745.3 million. We anticipate recognizing an estimated 65% of our remaining performance obligations as revenue during the next 12 months with the remaining performance obligations being recognized in 2021 and beyond.
Revenue by Category
In addition to undelivered units are reported on the balance sheet as inventory. This method is used in circumstances in which a company produces units of a basic product under production-type contracts in a continuous or sequential production process to buyers’ specifications. These contracts are primarily fixed-price contracts that vary widely in terms of size, length of performance period, and expected gross profit margins.revenue categories disclosed above, the following table reflects our revenue disaggregated by major end-use market:
    
(Dollars in thousands)
Years Ended December 31,
 % of Net Revenues
  Change 2019 2018 2019 2018
Consolidated Ducommun          
Military and space $46,208
 $323,800
 $277,592
 44.9% 44.1%
Commercial aerospace 44,981
 348,503
 303,522
 48.3% 48.2%
Industrial 592
 48,785
 48,193
 6.8% 7.7%
Total $91,781
 $721,088
 $629,307
 100.0% 100.0%
           
Electronic Systems          
Military and space $28,526
 $244,245
 $215,719
 67.8% 63.8%
Commercial aerospace (6,613) 67,343
 73,956
 18.7% 21.9%
Industrial 592
 48,785
 48,193
 13.5% 14.3%
Total $22,505
 $360,373
 $337,868
 100.0% 100.0%
           
Structural Systems          
Military and space $17,682
 $79,555
 $61,873
 22.1% 21.2%
Commercial aerospace 51,594
 281,160
 229,566
 77.9% 78.8%
Total $69,276
 $360,715
 $291,439
 100.0% 100.0%
Provision for Estimated Losses on Contracts
We record provisions for the total anticipated losses on contracts, considering total estimated costs to complete the contract compared to total anticipated revenues, in the period in which such losses are identified. The provisions for estimated losses on

contracts require managementus to make certain estimates and assumptions, including those with respect to the future revenue under a contract and the future cost to complete the contract. Management'sOur estimate of the future cost to complete a contract may include assumptions as to improvementschanges in manufacturing efficiency, reductions in operating and material costs, and our ability to resolve claims and assertions with our customers. If any of these or other assumptions and estimates do not materialize in the future, we may be required to record additionaladjust the provisions for estimated losses on contracts.
In 2015, we recorded a charge in Structural Systems related to The provision for estimated cost overruns as a result of a change in the contract requirements for the remaining contractual period for a regional jet program of $10.0 million. This amount was recordedlosses on contracts is included as part of costcontract liabilities on the consolidated balance sheets. As of goods sold in our results of operationsDecember 31, 2019 and increased accrued liabilities by $7.62018, provision for estimated losses on contracts were $4.2 million and other long-term liabilities by $2.4 million.

$5.3 million, respectively.
Income Taxes
Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized, using enacted tax rates, for the expected future tax consequences of temporary differences between the book and tax bases of recorded assets and liabilities, operating losses, and tax credit carryforwards. Deferred tax assets are evaluated quarterly and are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Tax positions taken or expected to be taken in a tax return are recognized when it is more-likely-than-not, based on technical merits, to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement, including resolution of related appeals and/or litigation process, if any.
We elected to early adopt ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” and on a prospective basis for the year ended December 31, 2015.
Litigation and Commitments
In the normal course of business, we are defendants in certain litigation, claims and inquiries, including matters relating to environmental laws. In addition, we make various commitments and incur contingent liabilities. Management’s estimates regarding contingent liabilities could differ from actual results.
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 our commitment to a formal plan of action. Further, we review and update our environmental accruals as circumstances change and/or additional information is obtained that reasonably could be expected to have a meaningful effect on the outcome of a matter or the estimated cost thereof.
Accounting for Stock-Based Compensation
We measure and recognize compensation expense for share-based payment transactions to our employees and non-employees at their estimated fair value. The expense is measured at the grant date, based on the calculated fair value of the share-based award, and is recognized over the requisite service period (generally the vesting period of the equity award). The fair value of stock options are determined using the Black-Scholes-Merton (“Black-Scholes”) valuation model, which requires assumptions and judgments regarding stock price volatility, risk-free interest rates, and expected options terms. Management’s estimates could differ from actual results. The fair value of unvested stock awards is determined based on the closing price of the underlying common stock on the date of grant.grant except for market condition awards for which the fair value was based on a Monte Carlo simulation model.
Earnings (Loss) Per Share
Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding in each period. Diluted earnings per share areis 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 potentialpotentially dilutive shares that could be issued if exercised or converted into common stock in each period.

The net earnings (loss)income and weighted-average number of common shares outstanding used to compute earnings (loss) per share were as follows:
 
 
(In thousands, except per share data)
Years Ended December 31,
 
(In thousands, except per share data)
Years Ended December 31,
 2016 2015 2014 2019 2018 2017
Net income (loss) $25,261
 $(74,879) $19,867
Net income $32,461
 $9,035
 $20,077
Weighted-average number of common shares outstanding            
Basic weighted-average common shares outstanding 11,151
 11,047
 10,897
 11,518
 11,390
 11,290
Dilutive potential common shares 148
 
 229
 274
 269
 268
Diluted weighted-average common shares outstanding 11,299
 11,047
 11,126
 11,792
 11,659
 11,558
Earnings (loss) per share      
Earnings per share      
Basic $2.27
 $(6.78) $1.82
 $2.82
 $0.79
 $1.78
Diluted $2.24
 $(6.78) $1.79
 $2.75
 $0.77
 $1.74
Potentially dilutive stock options and stock unitsawards to purchase common stock, as shown below, were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive. However, these shares may be potentially dilutive common shares in the future.
  
(In thousands)
Years Ended December 31,
  2016 2015 2014
Stock options and stock units 553
 778
 218
  
(In thousands)
Years Ended December 31,
  2019 2018 2017
Stock options and stock units 127
 208
 126
Recent Accounting Pronouncements

New Accounting Guidance Adopted in 20162019
In August 2015,July 2019, the FASB issued ASU 2015-15, “Imputation of Interest (Subtopic 835-30)”2019-07, “Codification Updates to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization, and Miscellaneous Updates” (“ASU 2015-15”2019-07”), which provides guidanceimprove, update, and simplify its regulations on the presentationfinancial reporting and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. Other guidance does not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. Thus, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement.disclosure. The new guidance was effective for us beginning January 1, 2016. We did not have debt issuance costs associated with line-of-credit arrangements and thus, the adoption of this new guidance did not have a significant impact onwhen issued, which is our consolidated financial statements.
In June 2015, the FASB issued ASU 2015-10, “Technical Corrections and Improvements” (“ASU 2015-10”), which covers a wide range of Topics in the Codification. The amendments in ASU 2015-10 represent changes to make minor corrections or minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost on most entities. The amendments in this new guidance that require transition guidance were effective for us beginning January 1, 2016.interim period ending September 28, 2019. The adoption of this standard did not have a significantmaterial impact on our consolidated financial statements.
In June 2015,August 2017, the FASB issued ASU 2015-7, “Fair Value Measurement (820)2017-12, “Derivatives and Hedging (Topic 815): DisclosuresTargeted Improvements to Accounting for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)”Hedging” (“ASU 2015-7”2017-12”), which permits a reporting entity, as a practical expedient,intends to measureimprove and simplify accounting rules around hedge accounting. ASU 2017-12 refines and expands hedge accounting for both financial (i.e., interest rate) and commodity risks. In addition, it creates more transparency around how economic results are presented, both on the fair value of certain investments using the net asset value per shareface of the investment. The amendmentsfinancial statements and in ASU 2015-7 remove the requirement to categorize investments for which fair values are measured using the net asset value per share practical expedient. It also limits disclosures to investments for which the entity has elected to measure the fair value using the practical expedient.footnotes. The new guidance wasis effective for usannual periods beginning after December 15, 2018, including interim periods within those annual periods, which is our interim period beginning January 1, 2016.. As a result2019. Early adoption is permitted, including adoption in any interim period after the issuance of the adoption of this new guidance, we are disclosing certain investments using the net asset value per share of the investment and prior amounts have been reclassified to conform to current year presentation. See Note 12.
In April 2015, the FASB issued ASU 2015-05, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement” (“ASU 2015-05”), which provides guidance on fees paid by a customer in a cloud computing arrangement. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The new guidance was effective for us beginning January 1, 2016.2017-12. The adoption of this standard did not have a significantmaterial impact on our consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”), which changes the presentation of debt issuance costs in financial statements. Under ASU 2015-03, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of those costs is reported as interest expense. The new guidance was effective for us beginning January 1, 2016. As a result of the adoption of this new guidance, we reclassed $3.1 million of debt issuance costs against $170.0 million of total debt as of December 31, 2016 and prior period amounts have been reclassified to conform to current year presentation. See Note 9.
In January 2015, the FASB issued ASU 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20)” (“ASU 2015-01”), which eliminates from U.S. GAAP the concept of extraordinary items. Current guidance requires separate classification, presentation, and disclosure of extraordinary events and transactions. In addition, an event or transaction is presumed to be an ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. The new guidance was effective for us beginning January 1, 2016. The adoption of this standard did not have a significant impact on our consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”), which defines

management’s responsibility to evaluate whether there is substantial doubt about a company’s ability to continue as a going concern. ASU 2014-15 also provide principles and definitions that are intended to reduce diversity in the timing and content of disclosures in the financial statement footnotes. The new guidance was effective for us for our annual year ending December 31, 2016, and interim periods beginning January 1, 2017. The adoption of this standard did not have a significant impact on our consolidated financial statements.
In June 2014, the FASB issued ASU 2014-12, “Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved after the Requisite Service Period” (“ASU 2014-12”), which requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. Thus, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The new guidance was effective for us beginning January 1, 2016. The adoption of this standard did not have a significant impact on our consolidated financial statements.
Recently Issued Accounting Standards
In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”), which simplifies the subsequent measurement of goodwill, the amendments eliminate Step Two from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step Two of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The new guidance is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are evaluating the impact of this standard.
In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”), which clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. The new guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods, which will be our interim period beginning January 1, 2018. We are evaluating the impact of this standard.
In December 2016, the FASB issued ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” (“ASU 2016-20”), which cover a variety of Topics in the Codification related to the new revenue recognition standard (ASU 2014-09). The amendments in ASU 2016-20 represent changes to make minor corrections or minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The new guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods, which will be our interim period beginning January 1, 2018. We are evaluating the impact of this standard.
In December 2016, the FASB issued ASU 2016-19, “Technical Corrections and Improvements” (“2016-19”), which cover a variety of Topics in the Codification. The amendments in ASU 2016-19 represent changes to make corrections or improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The new guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods, which will be our interim period beginning January 1, 2017. We are evaluating the impactadoption of this standard and currently dodid not anticipate it will have a significant impact on our consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”), which addresses the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (“COLIs”) (including bank-owned life insurance policies [“BOLIs”]); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The new guidance is effective for annual periods beginning after December 15,

2017, including interim periods within those annual periods, which will be our interim period beginning January 1, 2018. We are evaluating the impact of this standard.
In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”), which amends the guidance in the new revenue standard on collectability, noncash consideration, presentation of sales tax, and transition. The amendments are intended to address implementation issues and provide additional practical expedients to reduce the cost and complexity of applying the new revenue standard. The new guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods, which will be our interim period beginning January 1, 2018. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods with that reporting period. We are evaluating the impact of this standard.
In May 2016, the FASB issued ASU 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-06 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting” (“ASU 2016-11”), which clarifies revenue and expense recognition for freight costs, accounting for shipping and handling fees and costs, and accounting for consideration given by a vendor to a customer. The new guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods, which will be our interim period beginning January 1, 2018. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods with that reporting period. We are evaluating the impact of this standard.
In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” (“ASU 2016-10”), which clarifies the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The new guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods, which will be our interim period beginning January 1, 2018. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods with that reporting period. We are evaluating the impact of this standard.
In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”), which is intended to improve the accounting for employee share-based payments. The new guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, which will be our interim period beginning January 1, 2017. Early adoption is permitted in any interim or annual reporting period. We are evaluating the impact of this standard and currently do not anticipate it will have a significant impact on our consolidated financial statements.
In March 2016, the FASB issued ASU 2016-05, “Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships” (“ASU 2016-05”), which clarifies that a change in the counter party to a derivative instrument designated as a hedging instrument does not require dedesignation of that hedging relationship, provided that all other hedge accounting criteria are met. The new guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, which will be our interim period beginning January 1, 2017. Early adoption is permitted as of the beginning of an interim period on a modified retrospective basis. We are evaluating the impact of this standard and currently do not anticipate it will have a significantmaterial impact on our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which requires lessees to present right-of-use assets and lease liabilities on the balance sheet. Lessees are required to apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements.

statements or the additional transition method. Under the additional transition method, the cumulative effect of applying the new guidance is recognized as an adjustment to certain captions on the balance sheet, including the opening balance of retained earnings in the first quarter of 2019, and the prior years’ financial information will be presented under the prior accounting standard, ASC 840, “Leases,” (“ASC 840”). Additional guidance was issued subsequently as follows:
July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements” (“ASU 2018-11”); and
July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”)
All the new guidance was effective for us beginning January 1, 2019. The cumulative impact to our retained earnings at January 1, 2019 was a net decrease of $0.3 million. See Note 2.
Recently Issued Accounting Standards
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which removes certain exceptions and provides guidance on various areas of tax accounting. The new guidance is effective for fiscal years beginning after December 15, 2018,2020, including interim periods within those fiscal years, which will be our interim period beginning January 1, 2019.2021. Early adoption is permitted. We are evaluating the impact of this standard and currently anticipate it will impact our consolidated financial statements.standard.
In July 2015,April 2019, the FASB issued ASU 2015-11, “Inventory (Topic 330)”2019-04, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Statements” (“ASU 2015-11”2019-04”), which requires inventory withinclarify, correct, and improve various aspects of the scope ofguidance in ASU 2015-11 to be measured at the lower of cost2016-01, ASU 2016-13, and net realizable value. Subsequent measurement is unchanged for inventory measured using last-in, first-out (“LIFO”) or the retail inventory value.ASU 2017-12. The new guidance is effective for fiscal years beginning after December 15, 2016,2019, including interim periods within those fiscal years, which will be our interim period beginning January 1, 2017. Early adoption is permitted as of the beginning of an interim or annual reporting period.2020. We are evaluating the impact of this standard, but currently do not anticipate it will have a significant impact on our consolidated financial statements.standard.
In May 2014,March 2019, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers2019-01, “Leases (Topic 606)”842): Codification Improvements” (“ASU 2014-09”2019-01”), which outlines a new, single comprehensive model for entities to use in accounting for revenue arisingaddresses various lessor implementation issues and clarifies that lessees and lessors are exempt from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition

model provides a five-step analysis in determining when and how revenue is recognized. It requires entities to exercise judgment when considering the terms of the contract(s) which include (i) identifying the contract(s)certain interim disclosure requirements associated with the customer, (ii) identifying the separate performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the separate performance obligations, and (v) recognizing revenue when each performance obligation is satisfied. Thus, it depicts the transferadoption of promised goods or services to customers in an amount that reflects the consideration an entity expects to receive in exchange for those goods or services. Companies have the option of applying the provisions of ASU 2014-09 either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this guidance recognized at the date of initial application. In August 2015, the FASB issued ASU 2015-14, “Revenue From Contracts With Customers (Topic 606)” (“ASU 2015-14”), which defer the effective date of ASU 2014-09 by one year to annual periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.ASC 842. The new guidance is effective for usfiscal years beginning after December 15, 2019, including interim periods within those fiscal years, which will be our interim period beginning January 1, 2018 and will provide us additional time to evaluate the method and impact that ASU 2014-09 will have on our consolidated financial statements.2020. Early adoption is permitted. We are evaluating the impact of this standard,standard.
In August 2018, the FASB issued ASU 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans” (“ASU 2018-14”), which will remove disclosures that no longer are considered cost-beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The new guidance is effective for fiscal years ending after December 15, 2020 and no amendments are made to the interim disclosure requirements. Early adoption is permitted. We are evaluating the impact of this standard.
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”), which should improve the effectiveness of fair value measurement disclosures by removing certain requirements, modifying certain requirements, and adding certain new requirements. The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, which will be our interim period beginning January 1, 2020. Early adoption is permitted. We are evaluating the impact of this standard.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. ASU 2016-13 requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, which will be our interim period beginning January 1, 2020. We are evaluating the impact of this standard.

Note 2. Adoption of Accounting Standards Codification 842
We adopted ASC 842 with an initial application as of January 1, 2019. We utilized the additional transition method, under which the cumulative effect of initially applying the new guidance is recognized as an adjustment to certain captions on the consolidated balance sheet, including the opening balance of retained earnings in the year ended December 31, 2019. As part of the adoption of ASC 842, we have elected to utilize the following practical expedients that are permitted under ASC 842:
Need not reassess whether any expired or existing contracts are or contain leases;
Need not reassess the lease classification for any expired or existing leases;
Need not reassess initial direct costs for any existing leases;
As an accounting policy election by class of underlying asset, choose not to separate nonlease components from lease components and instead to account for each separate lease component and the nonlease components associated with that lease component as a single lease component; and
As an accounting policy election not to apply the recognition requirements in ASC 842 to short term leases (a lease at commencement date has a lease term of 12 months or less and does not contain a purchase option that the lessee is reasonably certain to exercise).
The net impact to the various captions on our January 1, 2019 opening consolidated balance sheets was as follows:
  (Dollars in thousands)
  December 31, 2018   January 1, 2019
Unaudited Consolidated Balance Sheets Balances Without Adoption of ASC 842 Effect of Adoption Balances With Adoption of ASC 842
Assets      
Other current assets $6,531
 $(208) $6,323
Operating lease right-of-use assets $
 $18,985
 $18,985
Non-current deferred income taxes $308
 $5
 $313
Other assets $5,155
 $254
 $5,409
Liabilities      
Operating lease liabilities $
 $2,544
 $2,544
Accrued and other liabilities $37,786
 $(329) $37,457
Non-current operating lease liabilities $
 $18,117
 $18,117
Non-current deferred income taxes $18,070
 $(76) $17,994
Other long-term liabilities $14,441
 $(956) $13,485
Shareholders’ Equity      
Retained earnings $180,356
 $(264) $180,092
The net impact to retained earnings as a result of adopting ASC 842 on the January 1, 2019 opening balance sheet was shown as a change in “other” on the consolidated statements of cash flows.
We have operating and finance leases for manufacturing facilities, corporate offices, and various equipment. Our leases have remaining lease terms of 1 to 11 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year.
The components of lease expense for the year ended December 31, 2019 were as follows:
 (In thousands)
Operating leases expense$3,963
  
Finance leases expense: 
Amortization of right-of-use assets$216
Interest on lease liabilities42
Total finance lease expense$258

Short term and variable lease expense for the year ended December 31, 2019 were not material.
Supplemental cash flow information related to leases for the year ended December 31, 2019 was as follows:
 (In thousands)
Cash paid for amounts included in the measurement of lease liabilities: 
Operating cash flows from operating leases$4,030
Operating cash flows from finance leases$39
Financing cash flows from finance leases$169
  
Right-of-use assets obtained in exchange for lease obligations: 
Operating leases$2,574
Finance leases$483
The weighted average remaining lease terms as of December 31, 2019 were as follows:
(In years)
Operating leases7
Finance leases4
When a lease is identified, we recognize a right-of-use asset and a corresponding lease liability based on the present value of the lease payments over the lease term discounted using our incremental borrowing rate, unless an implicit rate is readily determinable. As the discount rate in our leases is usually not readily available, we use our own incremental borrowing rate as the discount rate. Our incremental borrowing rate is based on the interest rate on our term loan, which is a secured rate. The interest rate on our term loan is based on London Interbank Offered Rate (“LIBOR”) plus an applicable margin. The difference between a three year, five year, or seven year LIBOR rate was not deemed significant and thus, we have chosen to use the five year incremental borrowing rate for all our leases.
The weighted average discount rates as of December 31, 2019 were as follows:
Operating leases6.5%
Finance leases6.5%
Maturity of operating and finance lease liabilities are as follows:
  (In thousands)
  Operating Leases Finance Leases
2020 $4,178
 $242
2021 4,147
 229
2022 3,756
 92
2023 3,425
 53
2024 3,003
 26
Thereafter 7,022
 46
Total lease payments 25,531
 688
Less imputed interest 5,010
 74
Total $20,521
 $614
Operating lease payments include $11.4 million related to options to extend lease terms that are reasonably certain of being exercised. As of December 31, 2019, there are no legally binding minimum lease payments for leases signed but not yet commenced.
Finance lease payments related to options to extend lease terms that are reasonably certain of being exercised are not significant. As of December 31, 2019, it excludes $1.3 million of legally binding minimum lease payments for leases signed but not yet commenced. These finance leases will commence during 2020 with lease terms of 7 years to 10 years.

As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous accounting maturities of lease liabilities were as follows as of December 31, 2018:
 (In thousands)
2019$3,680
20203,405
20212,789
20221,404
2023980
Thereafter580
Total$12,838

Note 3. Business Combinations
Nobles Worldwide, Inc.
On October 8, 2019, we acquired 100.0% of the outstanding equity interests of Nobles Parent Inc., the parent company of Nobles Worldwide, Inc. (“Nobles”), a privately-held global leader in the design and manufacturing of high performance ammunition handling systems for a wide range of military platforms including fixed-wing aircraft, rotary-wing aircraft, ground vehicles, and shipboard systems. Nobles is located in St. Croix Falls, Wisconsin. The acquisition of Nobles advances our strategy to diversify and offer more customized, value-driven engineered products with aftermarket opportunities.
The purchase price for Nobles was $77.0 million, net of cash acquired, all payable in cash. We paid $77.3 million upon the closing of the transaction. We preliminarily allocated the gross purchase price of $77.3 million to the assets acquired and liabilities assumed at estimated fair values. The excess of the purchase price over the aggregate fair values of the net assets was recorded as goodwill. The allocation is subject to revision as the estimates of fair value of the assets acquired and liabilities assumed are based on preliminary information and are subject to refinement. We are in the process of reviewing third party valuation of the assets and liabilities.
The following table summarizes the preliminary estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):
  
Estimated
Fair Value
Cash $658
Accounts receivable 1,880
Inventories 2,866
Other current assets 168
Property and equipment 2,319
Intangible assets 37,700
Goodwill 34,860
Other non-current assets 675
Total assets acquired 81,126
Current liabilities (2,285)
Net non-current deferred tax liability (861)
Other non-current liabilities (675)
Total liabilities assumed (3,821)
Total purchase price allocation $77,305
  Useful Life
(In years)
 
Estimated
Fair Value
(In thousands)
Intangible assets:    
Customer relationships 15-16 $34,700
Trade names and trademarks 15 3,000
    $37,700

The intangible assets acquired of $37.7 million were preliminarily determined based on the estimated fair values using valuation techniques consistent with the percentageincome approach to measure fair value. The useful lives were estimated based on the underlying agreements or the future economic benefit expected to be received from the assets. The fair values of completion, unitthe identifiable intangible assets were estimated using several valuation methodologies, which represented Level 3 fair value measurements. The value for customer relationships was estimated based on a multi-period excess earnings approach, while the value for trade names and trademarks was assessed using the relief from royalty methodology.
The goodwill of delivery method$34.9 million arising from the acquisition is attributable to the benefits we expect to derive from expected synergies from the transaction, including complementary products that will enhance our overall product portfolio, opportunities within new markets, and an acquired assembled workforce. All the goodwill was assigned to the Structural Systems segment. The Nobles acquisition, for tax purposes, is also deemed a stock acquisition and thus, the goodwill recognized is not deductible for income tax purposes except for $6.7 million of recognizing revenue being eliminated under ASU 2014-09, we currently anticipate our revenue, costpre-acquisition goodwill that is tax deductible.
Acquisition related transaction costs were not included as components of sales,consideration transferred but have been expensed as incurred. Total acquisition-related transaction costs incurred by us were $0.8 million during 2019 and related items oncharged to selling, general and administrative expenses.
Nobles’ results of operations have been included in our consolidated statements of income since the date of acquisition as part of the Structural Systems segment. Pro forma results of operations of the Nobles acquisition have not been presented as the effect of the Nobles acquisition was not material to our financial results.
Certified Thermoplastics Co., LLC
In April 2018, we acquired 100.0% of the outstanding equity interests of Certified Thermoplastics Co., LLC (“CTP”), a privately-held leader in precision profile extrusions and extruded assemblies of engineered thermoplastic resins, compounds, and alloys for a wide range of commercial aerospace, defense, medical, and industrial applications. CTP is located in Santa Clarita, California. The acquisition of CTP was part of our strategy to diversify towards more customized, higher value, engineered products with greater aftermarket potential.
The purchase price for CTP was $30.7 million, net of cash acquired, all payable in cash. We paid an aggregate of $30.8 million in cash related to this transaction. We allocated the gross purchase price of $30.8 million to the assets acquired and liabilities assumed at estimated fair values. The estimated fair value of the assets acquired included $8.1 million of intangible assets, $2.2 million of inventories, $1.5 million of accounts receivable, $0.6 million of property and equipment, $0.1 million of cash, less than $0.1 million of other current assets, and $0.4 million of liabilities assumed. The excess of the purchase price over the aggregate fair values of the assets acquired and liabilities assumed of $18.6 million was recorded as goodwill. The intangible assets acquired were comprised of $6.9 million for customer relationships and $1.2 million for trade names and trademarks, all of which were assigned an estimated useful life of 10 years. All the goodwill was assigned to the Structural Systems segment. Since the CTP acquisition, for tax purposes, was deemed an asset acquisition, the goodwill recognized is deductible for income tax purposes.
CTP’s results of operations have been included in our consolidated statements will be impacted.of income since the date of acquisition as part of the Structural Systems segment.

Note 2.4. Restructuring Activities
Summary of 2015 Restructuring Plans
In September 2015,November 2017, management approved and commenced implementation of severala restructuring actions, including organizational re-alignment, consolidation and relocation of the New York facilitiesplan that was intended to increase operating efficiencies (“2017 Restructuring Plan”). We completed inthe 2017 Restructuring Plan as of December 2015, closure of the Houston facility that was completed in December 2015,31, 2018 and closure of the St. Louis facility that was completed in April 2016, all of which are part of our overall strategy to streamline operations. We have recorded cumulative expenses of $2.2$23.6 million, with $14.8 million recorded during 2018, and $8.8 million recorded during 2017.
In the Electronic Systems segment, we recorded cumulative expenses of $3.8 million for severance and benefits and loss on early exit from leases, all of which were charged to selling, general and administrative expenses in 2015.classified as restructuring charges. We do not expect to record additional expenses related to these restructuring plans.
Asrecorded cumulative of December 31, 2016, we have accrued $0.6$0.9 million for loss on early exit from lease in the Structural Systems segment.
Summarytermination which was classified as restructuring charges. We also recorded cumulative expenses of 2016 Restructuring Plan
$0.9 million of other expenses which were classified as restructuring charges. In May 2016, management approved and commenced implementation of the closure of one of our Tulsa facilities that was completed in June 2016, and is part of our overall strategy to streamline operations. We haveaddition, we recorded cumulative expenses of $0.2 million for professional service fees which were classified as restructuring charges. Further, we recorded cumulative non-cash expenses of $0.1 million for inventory write down which were classified as cost of sales. Finally, we recorded cumulative non-cash expenses of $0.1 million for property and equipment impairment which were classified as restructuring charges.
In the Structural Systems segment, we recorded cumulative expenses of $3.0 million for severance and benefits which were classified as restructuring charges. We recorded cumulative non-cash expenses of $9.8 million for property and loss on early exit from a lease,equipment impairment which were classified as restructuring charges. We also recorded cumulative non-cash expenses of $0.5 million for inventory write down which were classified as cost of sales. Further, we recorded cumulative other expenses of $0.4 million which were classified as restructuring charges.

In Corporate, we recorded cumulative expenses of $1.4 million for severance and benefits which was classified as restructuring charges. We recorded cumulative non-cash expenses of $1.4 million for stock-based compensation awards which were modified, all of which were charged to selling, general and administrativeclassified as restructuring charges. We also recorded cumulative expenses in 2016. We do not expect to record additional expenses related to thisof $1.0 million for professional service fees which were classified as restructuring plan.charges.
As of December 31, 2016, we2019, all restructuring activities have accrued $0.1 million for loss on early exit from lease in the Electronic Systems segment.been completed and thus, there were no accruals remaining.
Our restructuring activities for 2016 and 20152019 were as follows (in thousands):
 December 31, 2015 2016 December 31, 2016 December 31, 2018 2019 December 31, 2019
 Balance Charges Cash Payments Change in Estimates Balance Balance Charges Cash Payments Adoption of ASC 842 Adjustment Change in Estimates Balance
Severance and benefits $722
 $49
 $(779) $8
 $
 $2,631
 $
 $(2,631) $
 $
 $
Lease termination 1,181
 133
 (674) 14
 654
 861
 
 (126) (735) 
 
Professional service fees 43
 
 (43) 
 
 
Other 416
 
 (416) 
 
 
Total charged to restructuring charges 3,951
 
 (3,216) (735) 
 
Inventory reserve 50
 
 
 
 (50) 
Total charged to cost of sales 50
 
 
 
 (50) 
Ending balance $1,903
 $182
 $(1,453) $22
 $654
 $4,001
 $
 $(3,216) $(735) $(50) $

Note 3. Fair Value Measurements
Fair value is defined as the price that would be received for an asset or the price that would be paid to transfer a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The accounting standard provides a framework for measuring fair value using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Three levels of inputs that may be used to measure fair value are as follows:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Our financial instruments consist primarily of cash and cash equivalents and interest rate cap derivatives designated as cash flow hedging instruments. Assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):
  As of December 31, 2016 As of December 31, 2015
  Fair Value Measurements Using   Fair Value Measurements Using  
  Level 1 Level 2 Level 3 Total Balance Level 1 Level 2 Level 3 Total Balance
Assets                
Money market funds(1)
 $3,751
 $
 $
 $3,751
 $4,587
 $
 $
 $4,587
Interest rate cap hedges(2)
 
 553
 
 553
 
 963
 
 963
Total Assets $3,751
 $553
 $
 $4,304
 $4,587
 $963
 $
 $5,550
(1) Included as cash and cash equivalents.
(2) Interest rate cap hedge premium included as other current assets and other assets.
The fair value of the interest rate cap hedge agreements is determined using pricing models that use observable market inputs as of the balance sheet date, a Level 2 measurement.

There were no transfers between Level 1, Level 2, or Level 3 financial instruments in either 2016 or 2015.

Note 4. Financial Instruments
Derivative Instruments and Hedging Activities
We periodically enter into cash flow derivative transactions, such as interest rate cap agreements, to hedge exposure to various risks related to interest rates. We assess the effectiveness of the interest rate cap hedges at inception of the hedge. We recognize all derivatives at their fair value. For cash flow designated hedges, the effective portion of the changes in fair value of the derivative contract are recorded in accumulated other comprehensive income (loss), net of taxes, and are recognized in net earnings at the time earnings are affected by the hedged transaction. Adjustments to record changes in fair values of the derivative contracts that are attributable to the ineffective portion of the hedges, if any, are recognized in earnings. We present derivative instruments in our consolidated statements of cash flows’ operating, investing, or financing activities consistent with the cash flows of the hedged item.
Our interest rate cap hedges were designated as cash flow hedges and deemed highly effective at the inception of the hedges. These interest rate cap hedges mature concurrently with the term loan in June 2020. In 2016, the interest rate cap hedges continued to be highly effective and $0.3 million, net of tax, was recognized in other comprehensive income. No amount was recorded in the consolidated statements of operations in 2016. See Note 9.
The recorded fair value of the derivative financial instruments in the consolidated balance sheets were as follows:
  
(In thousands)
December 31, 2016
 (In thousands)
December 31, 2015
  Other Current Assets Other Long Term Assets Other Current Assets Other Long Term Assets
Derivatives Designated as Hedging Instruments        
Cash Flow Hedges:        
Interest rate cap premiums $
 $553
 $1
 $962
         
Total Derivatives $
 $553
 $1
 $962


Note 5. Inventories
Inventories consisted of the following:
 
  
(In thousands)
December 31,
  2016 2015
Raw materials and supplies $64,650
 $61,840
Work in process 56,806
 49,299
Finished goods 9,180
 10,073
  130,636
 121,212
Less progress payments 10,740
 5,808
Total $119,896
 $115,404
We net progress payments from customers related to inventory purchases against inventories on the consolidated balance sheets.
  
(In thousands)
December 31,
  2019 2018
Raw materials and supplies $98,151
 $89,767
Work in process 10,887
 9,199
Finished goods 3,444
 2,159
Total $112,482
 $101,125
 
Note 6. Property and Equipment, Net
Property and equipment, net consisted of the following:
 
 
(In thousands)
December 31,
 
Range of
Estimated
 
(In thousands)
December 31,
 
Range of
Estimated
 2016 2015 Useful Lives 2019 2018 Useful Lives
Land $15,662
 $15,454
   $15,765
 $15,662
  
Buildings and improvements 49,870
 44,313
 5 - 40 Years 61,626
 57,642
 5 - 40 Years
Machinery and equipment 137,555
 127,934
 2 - 20 Years 167,688
 160,163
 2 - 20 Years
Furniture and equipment 21,749
 24,187
 2 - 10 Years 18,714
 19,676
 2 - 10 Years
Construction in progress 12,238
 13,196
  14,343
 8,742
 
 237,074
 225,084
  278,136
 261,885
 
Less accumulated depreciation 135,484
 128,533
  162,920
 154,840
 
Total $101,590
 $96,551
  $115,216
 $107,045
 
Depreciation expense was $13.3$13.5 million, $15.7$13.5 million, and $15.3$13.2 million, for the years ended December 31, 2016, 20152019, 2018 and 2014,2017, respectively.
 

Note 7. Goodwill and Other Intangible Assets
Goodwill
The carrying amounts of goodwill, by operating segment, for the years ended December 31, 20162019 and 20152018 were as follows:
 
  (In thousands)
  
Structural
Systems
 
Electronic
Systems
 
Consolidated
Ducommun
Gross goodwill $57,243
 $182,048
 $239,291
Accumulated goodwill impairment (57,243) (81,722) (138,965)
Transfer to assets held for sale 
 (17,772) (17,772)
Balance at December 31, 2015 $
 $82,554
 $82,554
Balance at December 31, 2016 $
 $82,554
 $82,554

  (In thousands)
  
Electronic
Systems
 
Structural
Systems
 
Consolidated
Ducommun
Gross goodwill $199,157
 $18,622
 $217,779
Accumulated goodwill impairment (81,722) 
 (81,722)
Balance at December 31, 2018 117,435
 18,622
 136,057
Goodwill from acquisition during the period 
 34,860
 34,860
Balance at December 31, 2019 $117,435
 $53,482
 $170,917
We perform our annual goodwill impairment test duringas of the first day of the fourth quarter each year. In the fourth quarterquarter. See Note 1.
We acquired Certified Thermoplastics Co., LLC (“CTP”) in April 2018 and recorded goodwill of 2016, the carrying amount of$18.6 million in our Structural Systems segment. Since a goodwill at the dateimpairment analysis is required to be performed within one year of the most recent annual impairment test was $82.6 million, all of which was in our Electronic Systems operating segment. In performing our annualacquisition date or sooner upon a triggering event, we performed a Step One goodwill impairment test in the fourth quarteranalysis as of 2016, theApril 2019 for our Structural Systems segment, which is also our reporting unit. The fair value of our ElectronicStructural Systems internal reporting unit exceedingsegment exceeded its carrying value by 32%85% and thus, was not deemed impaired.

InOn October 8, 2019, we acquired 100.0% of the fourth quarteroutstanding equity interests of 2015, we metNobles for a purchase price of $77.0 million, net of cash acquired. We allocated the criteria for assets held for sale for our Pittsburgh, Pennsylvania (“Pittsburgh”) operation and Miltec (“Miltec”) operation (both are partgross purchase price of our Electronic Systems operating segment). Assets held for sale, other than goodwill, is tested for impairment prior$77.3 million to the testing of goodwill for impairment. No impairment was noted of these assets held for sale. Our Pittsburgh operationacquired and Miltec operation were sold in January 2016 and March 2016, respectively. Asliabilities assumed at estimated fair values. The excess of the date ofpurchase over the 2015 annualaggregate fair values was recorded as goodwill impairment test, the fair value of the Electronic Systems and Miltec internal reporting units exceeded their carrying values by 42% and 18%, respectively, and thus, not deemed impaired. However, the fair value of the Structural Systems reporting unit was less than the carrying value as a result of the lowered revenue outlook in our military and space end-use markets due to the decrease in U.S. government defense spending. As a result, the second step (“Step Two”) of the goodwill impairment test was performed forwithin the Structural Systems reporting unit. The implied fair value of goodwill was determined by allocating the fair valueSee Note 3.
In April 2018, we acquired 100.0% of the tangible and intangible assets and liabilities in a manner similar tooutstanding equity interests of CTP for a purchase price allocation. As a result of this analysis, we$30.7 million, net of cash acquired. We allocated the gross purchase price of $30.8 million to the assets acquired and liabilities assumed at estimated fair values. The excess of the purchase over the aggregate fair values was recorded $57.2 million ofas goodwill impairment thereby reducingwithin the Structural Systems operating segment’s its goodwill carrying value to zero as of December 31, 2015.
In the fourth quarter of 2015, the carrying value of the trade-name indefinite-lived intangible asset at the date of the impairment test was approximately $32.9 million. In performing our annual impairment test in the fourth quarter of 2015, we concluded the fair value of the indefinite-lived trade name to be zero as a result of divesting businesses in Electronic Systems and our discontinuation of the use of the trade name. Thus, we recorded an impairment of approximate $32.9 million, which was the remaining carrying value of the trade name.
Other Intangible Assetsreporting unit. See Note 3.
Other intangible assets are related to acquisitions, including Nobles, and recorded at fair value at the time of the acquisition. Other intangible assets with finite lives are generally amortized on the straight-line method over periods ranging from fourteen10 to eighteen18 years. Intangible assets are as follows:
 
 (In thousands) (In thousands)
 December 31, 2016 December 31, 2015 December 31, 2019 December 31, 2018
Wtd. Avg Life (Yrs) 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Wtd. Avg Life (Yrs) 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Finite-lived assets                        
Customer relationships18 $159,200
 $58,352
 $100,848
 $159,200
 $49,463
 $109,737
17 $221,900
 $88,838
 $133,062
 $187,200
 $77,824
 $109,376
Trade names and trademarks14 5,500
 450
 5,050
 2,500
 193
 2,307
Contract renewal14 1,845
 1,362
 483
 1,845
 1,230
 615
14 1,845
 1,757
 88
 1,845
 1,625
 220
Technology15 400
 158
 242
 400
 131
 269
15 400
 238
 162
 400
 211
 189
Total $161,445
 $59,872
 $101,573
 $161,445
 $50,824
 $110,621
 $229,645
 $91,283
 $138,362
 $191,945
 $79,853
 $112,092

The carrying amount of other intangible assets by operating segment as of December 31, 20162019 and 20152018 was as follows:
 
 (In thousands) (In thousands)
 December 31, 2016 December 31, 2015 December 31, 2019 December 31, 2018
 Gross 
Accumulated
Amortization
 
Net
Carrying
Value
 Gross 
Accumulated
Amortization
 
Net
Carrying
Value
 Gross 
Accumulated
Amortization
 
Net
Carrying
Value
 Gross 
Accumulated
Amortization
 
Net
Carrying
Value
Other intangible assets                        
Electronic Systems $164,545
 $71,527
 $93,018
 $164,545
 $62,108
 $102,437
Structural Systems $19,300
 $15,555
 $3,745
 $19,300
 $14,433
 $4,867
 65,100
 19,756
 45,344
 27,400
 17,745
 9,655
Electronic Systems 142,145
 44,317
 97,828
 142,145
 36,391
 105,754
Total $161,445
 $59,872
 $101,573
 $161,445
 $50,824
 $110,621
 $229,645
 $91,283
 $138,362
 $191,945
 $79,853
 $112,092
Amortization expense of other intangible assets was $9.0$11.4 million, $10.0$10.7 million and $10.4$9.3 million for the years ended December 31, 2016, 20152019, 2018 and 2014,2017, respectively. Future amortization expense by operating segment is expected to be as follows:
 

 (In thousands) (In thousands)
 
Structural
Systems
 
Electronic
Systems
 
Consolidated
Ducommun
 
Electronic
Systems
 
Structural
Systems
 
Consolidated
Ducommun
2017 $907
 $7,927
 $8,834
2018 737
 7,927
 8,664
2019 591
 7,926
 8,517
2020 490
 7,883
 8,373
 $9,348
 $3,719
 $13,067
2021 381
 7,794
 8,175
 9,287
 3,614
 12,901
2022 9,288
 3,553
 12,841
2023 9,287
 3,495
 12,782
2024 9,288
 3,260
 12,548
Thereafter 639
 58,371
 59,010
 46,520
 27,703
 74,223
 $3,745
 $97,828
 $101,573
 $93,018
 $45,344
 $138,362
 
Note 8. Accrued Liabilities
The components of accrued liabilities consisted of the following:
 
 
(In thousands)
December 31,
 
(In thousands)
December 31,
 2016 2015 2019 2018
Accrued compensation $15,455
 $13,521
 $31,342
 $29,616
Accrued income tax and sales tax 332
 1,513
 163
 82
Customer deposits 3,204
 1,758
Interest payable 273
 58
Provision for forward loss reserves 4,780
 11,925
Other 5,235
 7,683
 6,115
 8,088
Total $29,279
 $36,458
 $37,620
 $37,786



Note 9. Long-Term Debt
Long-term debt and the current period interest rates were as follows:

  
(In thousands)
December 31,
  2016 2015
Term loan $170,000
 $245,000
Other debt (fixed 5.41%) 3
 26
Total debt 170,003
 245,026
Less current portion 3
 26
Total long-term debt 170,000
 245,000
Less debt issuance costs 3,104
 4,339
Total long-term debt, net of debt issuance costs $166,896
 $240,661
Weighted-average interest rate 3.25% 3.07%
  
(In thousands)
December 31,
  2019 2018
Term loans $310,000
 $233,000
Revolving credit facility 
 
Total debt 310,000
 233,000
Less current portion 7,000
 2,330
Total long-term debt, less current portion 303,000
 230,670
Less debt issuance costs - term loans 2,113
 1,802
Total long-term debt, net of debt issuance costs - term loans $300,887
 $228,868
Debt issuance costs - revolving credit facility (1)
 $1,894
 $1,907
Weighted-average interest rate 6.87% 4.71%

(1) Included as part of other assets.
Future long-term debt payments at December 31, 20162019 were as follows:

(In thousands)(In thousands)
2017$3
2018
2019
2020170,000
$7,000
2021
7,000
20227,000
20237,000
2024112,000
Thereafter170,000
Total$170,003
$310,000
In June 2015,On December 20, 2019, we completed the refinancing of a portion of our existing debt by entering into a new revolving credit facility (“New Revolving Credit Facility”) to replace the Existing Credit Facilities. The newexisting revolving credit facility consists ofthat was entered into in November 2018 (“2018 Revolving Credit Facility”) and entering into a $275.0 million senior securednew term loan which matures on June 26, 2020 (“New Term Loan”), and. The New Revolving Credit Facility is a $200.0$100.0 million senior secured revolving credit facility (“that matures on December 20, 2024 replacing the $100.0 million 2018 Revolving Credit Facility”), whichFacility that would have matured on November 21, 2023. The New Term Loan is a $140.0 million senior secured term loan that matures on June 26, 2020December 20, 2024. We also have an existing $240.0 million senior secured term loan that was entered into in November 2018 that matures on November 21, 2025 (“2018 Term Loan”). The original amounts available under the New Revolving Credit Facility, New Term Loan, and 2018 Term Loan (collectively, the “Credit Facilities”). in aggregate, totaled $480.0 million.
The New Term Loan bears interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as the London Interbank Offered Rate [“LIBOR”]) plus an applicable margin ranging from 1.50% to 2.50% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 0.50% to 1.50% per year, in each case based upon the consolidated total net adjusted leverage ratio, typically payable quarterly. In addition, the New Term Loan requires installment payments of 1.25% of the original outstanding principal balance of the New Term Loan amount on a quarterly basis.
The New Revolving Credit Facilities bearFacility bears interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as LIBOR) plus an applicable margin ranging from 1.50% to 2.50% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 0.50% to 1.50% per year, in each case based upon the consolidated total net adjusted leverage ratio, typically payable quarterly. The undrawn portion of the commitment of the New Revolving Credit Facility is subject to a commitment fee ranging from 0.175% to 0.275%, based upon the consolidated total net adjusted leverage ratio.
In November 2018, we completed credit facilities to replace the then existing credit facilities. The November 2018 credit facilities consisted of the 2018 Term Loan and the 2018 Revolving Credit Facility.

The 2018 Term Loan bears interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as LIBOR plus an applicable margin ranging from 3.75% to 4.00% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 3.75% to 4.00% per year, in each case based upon the consolidated total net adjusted leverage ratio, typically payable quarterly. In addition, the 2018 Term Loan requires installment payments of 0.25% of the outstanding principal balance of the 2018 Term Loan amount on a quarterly basis.
The 2018 Revolving Credit Facility bears interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as LIBOR) plus an applicable margin ranging from 1.75% to 2.75% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 0.50%0.75% to 1.75% per year, in each case based upon the consolidated total net adjusted leverage ratio.ratio, typically payable quarterly. The undrawn portionsportion of the commitmentscommitment of the 2018 Revolving Credit Facilities areFacility is subject to a commitment fee ranging from 0.175%0.200% to 0.300%, based upon the consolidated total net adjusted leverage ratio.
Further, under the Credit Facilities, if we aremeet the annual excess cash flow threshold, we will be required to make excess flow payments. The annual mandatory prepayments of amounts outstanding under the Term Loan. The mandatory prepaymentsexcess cash flow payments will be made quarterly,based on (i) 50% of the excess cash flow amount if the adjusted leverage ratio is greater than 3.25 to 1.0, (ii) 25% of the excess cash flow amount if the adjusted leverage ratio is less than or equal to 5.0% per year3.25 to 1.0 but greater than 2.50 to 1.0, and (iii) zero percent of the original aggregate principalexcess cash flow amount duringif the first two years and increaseadjusted leverage ratio is less than or equal to 7.5% per year during the third year, and increase2.50 to 10.0% per year during the fourth year and fifth years, with the remaining balance payable on June 26, 2020. The loans under the Revolving Credit Facility are due on June 26, 2020.1.0. As of December 31, 2016,2019, we were in compliance with all covenants required under the Credit Facilities.
We have been making periodic voluntary principal prepayments on our credit facilities, however, during 2019, as a quarterly basisresult of drawing down on our senior secured term loanthe New Term Loan, we made no net aggregate voluntary prepayments.
In conjunction with entering into the New Revolving Credit Facility and the New Term Loan, we drew down the entire $140.0 million on the New Term Loan and used those proceeds to pay off and close the 2018 Revolving Credit Facility of $58.5 million, pay down a portion of the 2018 Term Loan of $56.0 million, pay the accrued interest associated with the amounts being paid down on the 2018 Revolving Credit Facility and 2018 Term Loan, pay the fees related to this transaction, and the remainder will be used for general corporate expenses. The New Term Loan and 2018 Term Loan were considered a modification of debt and thus, no gain or loss was recorded. Instead, the new fees paid to the lenders of $0.6 million were capitalized and are being amortized over the life of the New Term Loan. The remaining debt issuance costs related to the 2018 Term Loan of $1.5 million will continue to be amortized over its remaining life.
The New Revolving Credit Facility that replaced the 2018 Revolving Credit Facility was considered an extinguishment of debt except for the portion related to the creditors that were part of both the New Revolving Credit Facility and the 2018 Revolving Credit Facility and in which case, it was considered a modification of debt. As a result, we expensed the portion of the unamortized debt issuance costs related to the 2018 Revolving Credit Facility that was considered an extinguishment of debt of $0.5 million. In addition, the new fees paid to the lenders of $0.5 million as part of the New Revolving Credit Facility were capitalized and are being amortized over its remaining life. Further, the remaining debt issuance costs related to the 2018 Revolving Credit Facility of $1.1 million will also be amortized its remaining life.
In conjunction with entering into the closing of the2018 Credit Facilities in June 2015,November 2018, we drew down $65.0the entire $240.0 million on the 2018 Term Loan, $7.9 million on the 2018 Revolving Credit Facility and used those proceeds along with current cash on hand to extinguishpay off the then existing senior securedcredit facilities of $247.9 million. The 2018 Term Loan replaced the term loan that was a part of $80.0 million. Wethe then existing credit facilities was considered an extinguishment of debt except for the portion related to a creditor that was part of the then existing term loan and the 2018 Term Loan and in which case, it was considered a modification of debt. As a result, we expensed the portion of the unamortized debt issuance costs related to the then existing senior secured term loan that was considered an extinguishment of $2.8 million asdebt of $0.4 million. In addition, the 2018 Revolving Credit Facility replaced the then existing revolving credit facility that was part of extinguishing the then existing senior securedcredit facilities was considered an extinguishment of debt except for the portion related to the creditors that were part of the then existing revolving credit facility and the 2018 Revolving Credit Facility and in which case, it was considered a modification of debt. As a result, we expensed the portion of the unamortized debt issuance costs related to the 2018 Revolving Credit Facility that was considered an extinguishment of debt of $0.5 million. As such, an aggregate total loss on extinguishment of debt of $0.9 million was recorded in 2018.
Further, we incurred $3.5 million of new debt issuance costs that can be capitalized related to the 2018 Credit Facilities, of which $1.7 million were allocated to the 2018 Term Loan and the remaining $1.8 million was allocated to the 2018 Revolving Credit Facility. The 2018 Term Loan new debt issuance costs of $1.7 million and remaining unamortized then existing term loan during 2015. We also incurred $4.8debt issuance costs of $0.1 million, for an aggregate total of $1.8 million of debt issuance costs related to the Credit Facilities2018 Term Loan were capitalized and those costs are capitalized and being amortized over the fiveseven year life of the Credit Facilities.
In addition, we retired all of the $200.0 million senior unsecured notes (“Existing Notes”) in July 2015. We drew down on the2018 Term Loan in the amount of $275.0 million. Along with the call notice amount and paying the call premium of $9.8 million, we also paid down the $65.0 million drawn on theLoan. The 2018 Revolving Credit Facility in June 2015. We expensed the call premiumnew debt issuance costs of $9.8$1.8 million and remaining unamortized then existing revolving credit facility debt issuance

costs of $0.2 million, for an aggregate total of $2.0 million of debt issuance costs related to the Existing Notes2018 Revolving Credit Facility were capitalized and were being amortized over the five years life of $2.1the 2018 Revolving Credit Facility.
On October 8, 2019, we acquired 100.0% of the outstanding equity interests of Nobles for a purchase price of $77.0 million, upon extinguishingnet of cash acquired, all payable in cash. Upon the Existing Notes during 2015.closing of the transaction, we paid $77.3 million in cash by drawing down on the 2018 Revolving Credit Facility. See Note 3.
In April 2018, we acquired CTP for a purchase price of $30.7 million, net of cash acquired, all payable in cash. We made voluntary principal prepaymentspaid an aggregate of $75.0$30.8 million underin cash by drawing down on the Term Loan during 2016.then existing revolving credit facility. See Note 3.
In September 2017, we acquired Lightning Diversion Systems, LLC (“LDS”) for a purchase price of $60.0 million, net of cash acquired, all payable in cash. Upon the closing of the transaction, we paid $61.4 million in cash by drawing down on our then existing revolving credit facility. The remaining $0.6 million was paid in October 2017 in cash, also by drawing down on our then existing revolving credit facility.
As of December 31, 2016,2019, we had $199.0$99.8 million of unused borrowing capacity under the New Revolving Credit Facility, after deducting $1.0$0.2 million for standby letters of credit.
The Existing NotesNew Credit Facilities were issuedentered into by us (“Parent Company”) and guaranteed by all of our subsidiaries, other than one subsidiarytwo subsidiaries that waswere considered minor (“Subsidiary Guarantors”). The Subsidiary Guarantors jointly and severally guarantee the Existing Notes andNew Credit Facilities. The Parent Company has no independent assets or operations and therefore, no consolidating financial information for the Parent Company and its subsidiaries are presented.
In October 2015, we entered into interest rate cap hedges designated as cash flow hedges with a portion of these interest rate cap hedges maturing on a quarterly basis, and a final quarterly maturity datesdate of June 2020, and in aggregate, totaling $135.0 million of our debt. We paid a total of $1.0 million in connection with the interest rate cap hedges. See Note 41 for further information.
In December 2016,2018 and 2017, we entered into an agreementagreements to purchase $9.9$2.2 million and $14.2 million of industrial revenue bonds (“IRBs”) issued by the city of Parsons, Kansas (“Parsons”) and concurrently, sold $9.9$2.2 million and $14.2 million of property and equipment (“Property”) to Parsons as well as entered into a lease agreementagreements to lease the Property from Parsons (“Lease”) with lease payments totaling $9.9$2.2 million and $14.2 million over the lease term.terms, respectively. The sale of the Property and concurrent lease back of the Property in December 2018 and 2017 did not meet the sale-leaseback accounting requirements as a result of our continuous involvement with the Property and thus, the $9.9$2.2 million and $14.2 million in cash received from Parsons was not recorded as a sale but as a financing obligation.obligation, respectively. Further, the Lease included a right of offset so long as we continue to own the IRBs and thus, the

financing obligationobligations of $9.9$2.2 million wasand $14.2 million were offset against the $9.9$2.2 million and $14.2 million, respectively, of IRBs assets and are presented net on the consolidated balance sheets with no impact to the consolidated statements of operationsincome or consolidated cash flow statements.

Note 10. Shareholders’ Equity
We are authorized to issue five million shares of preferred stock. At December 31, 20162019 and 2015,2018, no preferred shares were issued or outstanding.
 
Note 11. Stock-Based Compensation
Stock Incentive Compensation Plans
We currently have two stock incentive plans: the 2007 Stock Incentive Plan (the “2007 Plan”), as amended effective March 20, 2007, andi) the 2013 Stock Incentive Plan, as amended (the “2013 Plan”), collectively referred to as (the “Stockwhich expires on May 2, 2028, provided that Incentive Plans”Stock Options may not be granted after February 21, 2028, and ii) the 2018 Employee Stock Purchase Plan (“ESPP”). The Stock Incentive Plans2013 Plan permit awards of stock options, restricted stock units, performance stock units and other stock-based awards to our officers, key employees and non-employee directors on terms determined by the Compensation Committee of the Board of Directors (the “Committee”“Compensation Committee”). The aggregate number of shares available for issuance under the 2007 Plan and 2013 Plan is 1,200,000 and 1,040,000, respectively.1,690,000. Under the 20072013 Plan, no more than an aggregate of 400,000337,693 shares are available for issue of stock-based awards other than stock options and stock appreciation rights.rights after December 31, 2017. As of December 31, 2016,2019, shares available for future grant under the 2007 Plan and 2013 Plan are 78,417 and 320,172, respectively.222,132. Prior to the adoption of the 20072013 Plan, we granted stock-based awards to purchase shares of our common stock to officers, key employees and non-employee directors under certain predecessor plans. No further awards can be granted under these predecessor plans.
Employee Stock Purchase Plan
The ESPP was adopted by the Board of Directors and approved by the shareholders in 2018, including 750,000 shares that can be awarded. The first offering period closed on July 31, 2019. Under the ESPP, our employees who elect to participate have the

right to purchase common stock at a 15% discount from the lower of the market value of the common stock at the beginning or the end of each six month offering period and the discount will be treated as compensation to those employees. Employees purchase common stock using payroll deductions, which may not exceed 10% of their eligible compensation and other limitations. The Compensation Committee administers the ESPP. As of December 31, 2019, there are 723,479 shares available for future award grants.
Stock Options

In the years ended December 31, 2016, 2015,2019, 2018, and 2014,2017, we granted stock options to our officers and key employees of 189,170, 176,940, and non-employee directors of 123,500, 73,000, and 71,000,129,400, respectively, with weighted-average grant date fair values of $6.53, $10.63,$15.95, $12.87, and $12.62,$11.88, respectively. Stock options have been granted with an exercise price equal to the fair market value of our stock on the date of grant and expire not more than seventen years from the date of grant. The stock options typically vest over a period of three or four years from the date of grant. The option price and number of shares are subject to adjustment under certain dilutive circumstances. If an employee terminates employment, the non-vested portion of the stock options will not vest and all rights to the non-vested portion will terminate completely.

Stock option activity for the year ended December 31, 20162019 were as follows:
 
Number
of Stock Options
 
Weighted-
Average
Exercise
Price Per Share
 Weighted-Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands) 
Number
of Stock Options
 
Weighted-
Average
Exercise
Price Per Share
 Weighted-Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2016 483,491
 $20.08
  
Outstanding at January 1, 2019 363,225
 $28.33
  
Granted 123,500
 $15.92
   189,170
 $41.97
  
Exercised (132,325) $16.04
   (80,693) $24.97
  
Expired (19,516) $22.66
   (2,857) $20.09
  
Forfeited (15,600) $18.54
   (22,027) $29.99
  
Outstanding at December 31, 2016 439,550
 $20.07
 4.4 $2,414
Exerciseable at December 31, 2016 214,375
 $20.24
 3.3 $1,141
Outstanding at December 31, 2019 446,818
 $34.68
 7.7 $7,319
Exerciseable at December 31, 2019 96,947
 $27.70
 5.3 $2,265

Changes in nonvested stock options for the year ended December 31, 20162019 were as follows:
 Number of Stock Options 
Weighted-
Average
Grant
Date Fair Value
 Number of Stock Options 
Weighted-
Average
Grant
Date Fair Value
Nonvested at January 1, 2016 231,600
 $10.03
Nonvested at January 1, 2019 292,013
 $12.20
Granted 123,500
 $6.53
 189,170
 $15.95
Vested (114,325) $7.95
 (109,285) $11.95
Forfeited (15,600) $8.08
 (22,027) $10.24
Nonvested at December 31, 2016 225,175
 $8.77
Nonvested at December 31, 2019 349,871
 $14.33
The aggregate intrinsic value of stock options represents the amount by which the market price of our common stock exceeds the exercise price of the stock option. The aggregate intrinsic value of stock options exercised for the years ended December 31, 2016, 20152019, 2018 and 20142017 was $1.8 million, $1.3 million, $2.3 million, and $1.0$2.5 million, respectively. Cash received from stock options exercised for the years ended December 31, 2016, 20152019, 2018 and 20142017 was $2.1$2.6 million, $3.1$1.8 million, and $2.3$4.3 million, respectively, with related tax benefits of $0.5$0.6 million, $0.9$0.3 million, and $0.4$0.9 million, respectively. The total amount of stock options vested and expected to vest in the future is 439,550446,818 shares with a weighted-average exercise price of $20.07$34.68 and an aggregate intrinsic value of $2.4$7.3 million. These stock options have a weighted-average remaining contractual term of 4.47.7 years.
The share-based compensation cost expensed for stock options for the years ended December 31, 2016, 2015,2019, 2018, and 20142017 (before tax benefits) was $0.8$1.6 million, $1.2$0.9 million, and $1.5$0.7 million, respectively, and is included in selling, general and administrative expenses on the consolidated income statements. At December 31, 2016,2019, total unrecognized compensation cost (before tax benefits) related to stock options of $1.3$3.7 million is expected to be recognized over a weighted-average period of 2.32.0 years. The total fair value of stock options vested during the years ended December 31, 2016, 2015,2019, 2018, and 20142017 was $0.9 million, $1.3 million, $0.8 million, and $1.3$0.8 million, respectively.

We apply fair value accounting for stock-based compensation based on the grant date fair value estimated using a Black-Scholes-Merton (“Black-Scholes”) valuation model. The assumptions used to compute the fair value of stock option grants under the Stock Incentive Plans for years ended December 31, 2016, 2015,2019, 2018, and 20142017 were as follows:
 Years Ended December 31, Years Ended December 31,
 2016 2015 2014 2019 2018 2017
Risk-free interest rate 1.20% 1.13% 1.67% 1.92% 2.65% 1.75%
Expected volatility 51.79% 53.72% 55.27% 40.44% 53.66% 50.37%
Expected dividends 
 
 
 
 
 
Expected term (in months) 48
 47
 66
 60
 36
 48
We recognize compensation expense, net of an estimated forfeiture rate, on a straight-line basis over the requisite service period of the award. We have one award populationpopulations with an option vesting termterms of three and four years. We estimate the forfeiture rate based on our historic experience, attempting to determine any discernible activity patterns. The expected life computation is based on historic exercise patterns and post-vesting termination behavior. The risk-free interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is derived from historical volatility of our common stock. We suspended payments of dividends after the first quarter of 2011.
Restricted Stock Units
We granted restricted stock units (“RSUs”) to certain officers, key employees and non-employee directors of 139,450, 108,500,62,520, 81,230, and 86,300135,350 RSUs during the years ended December 31, 2016, 2015,2019, 2018, and 2014,2017, respectively, with weighted-average grant date fair values (equal to the fair market value of our stock on the date of grant) of $15.97, $25.15,$41.04, $32.36, and $24.74$28.97 per share, respectively. RSUs represent a right to receive a share of stock at future vesting dates with no cash payment required from the holder. The RSUs typically have a three year vesting term of 33%, 33% and 34% on the first, second and third anniversaries of the date of grant, respectively. If an employee terminates employment, their non-vested portion of the RSUs will not vest and all rights to the non-vested portion will terminate.


Restricted stock unit activity for the year ended December 31, 20162019 was as follows:
 Number of Restricted Stock Units 
Weighted-
Average
Grant
Date Fair Value
 Number of Restricted Stock Units 
Weighted-
Average
Grant
Date Fair Value
Outstanding at January 1, 2016 155,191
 $24.24
Outstanding at January 1, 2019 157,937
 $28.96
Granted 139,450
 15.97
 62,520
 $41.04
Vested (84,107) 23.34
 (85,279) $27.94
Forfeited (17,152) 21.76
 (7,755) $30.80
Outstanding at December 31, 2016 193,382
 $18.88
Outstanding at December 31, 2019 127,423
 $36.22
The share-based compensation cost expensed for RSUs for the years ended December 31, 2016, 2015,2019, 2018, and 20142017 (before tax benefits) was $1.8$2.4 million, $1.8$2.1 million, and $1.3$2.0 million respectively, and is included in selling, general and administrative expenses on the consolidated income statements. At December 31, 2016,2019, total unrecognized compensation cost (before tax benefits) related to RSUs of $2.2$2.9 million is expected to be recognized over a weighted average period of 1.71.4 years. The total fair value of RSUs vested for the years ended December 31, 2016, 2015,2019, 2018, and 20142017 was $1.3$2.4 million, $1.8$2.7 million, and $1.3$3 million, respectively. The tax benefit realized from vested RSUs for the years ended December 31, 2016, 2015,2019, 2018, and 20142017 was $0.7$0.6 million, $0.7$0.6 million, and $0.5$1.1 million, respectively.
Performance Stock Units
We granted performance stock awards (“PSUs”) to certain key employees of 62,500, 64,000,58,178, 64,700, and 67,500126,000 PSUs during the years ended December 31, 2016, 2015,2019, 2018, and 2014,2017, respectively, with weighted-average grant date fair values of $15.92, $25.51,$43.80, $35.16, and $24.90$26.31 per share, respectively. PSU awards are subject to the attainment of performance goals established by the Compensation Committee, the periods during which performance is to be measured, and all other limitations and conditions applicable to the awarded shares. Performance goals are based on a pre-established objective formula that specifies the manner of determining the number of performance stock awards that will be granted if performance goals are attained. If an employee terminates employment, their non-vested portion of the PSUs will not vest and all rights to the non-vested portion will terminate.


Performance stock activity for the year ended December 31, 20162019 was as follows:
 Number of Performance Stock Units 
Weighted-
Average
Grant
Date Fair Value
 Number of Performance Stock Units 
Weighted-
Average
Grant
Date Fair Value
Outstanding at January 1, 2016 133,497
 $22.86
Outstanding at January 1, 2019 236,700
 $26.21
Granted 62,500
 15.92
 58,178
 $43.80
Vested (44,979) 18.36
 (85,504) $19.05
Forfeited (29,381) 25.22
 (11,800) $33.21
Outstanding at December 31, 2016 121,637
 $20.39
Outstanding at December 31, 2019 197,574
 $33.98
The share-based compensation cost expensed for PSUs for the years ended December 31, 2016, 2015,2019, 2018, and 20142017 (before tax benefits) was $0.4$3.2 million, $0.5$1.9 million and $1.0$2.0 million, respectively, and is included in selling, general and administrative expenses on the consolidated income statements. At December 31, 2016,2019, total unrecognized compensation cost (before tax benefits) related to PSUs of $1.1$3.2 million is expected to be recognized over a weighted-average period of 1.32.3 years. The total fair value of PSUs vested during the years ended December 31, 2016, 2015,2019, 2018, and 2014,2017, was $1.1$3.8 million, $0.9$0.3 million, and zero,$1.2 million, respectively. The tax benefit realized from PSUs for the years ended December 31, 2016, 2015,2019, 2018, and 20142017 were $0.2$0.9 million, 0.3$0.1 million, and zero,$0.5 million, respectively.

Note 12. Employee Benefit Plans
Supplemental Retirement Plans
We have three unfunded supplemental retirement plans. The first plan was suspended in 1986, but continues to cover certain former executives. The second plan was suspended in 1997, but continues to cover certain current and retired directors. The third plan covers certain current and retired employees and further employee contributions to this plan were suspended on August 5, 2011. The liability for the third plan and interest thereon is included in accrued employee compensation and long-

termlong-term liabilities and was $0.6 millionzero and $0.8$0.1 million, respectively, at December 31, 20162019 and $0.5$0.7 million and $1.7$0.1 million, respectively, at December 31, 2015.2018. The accumulated benefit obligations of the first two plans at December 31, 20162019 and December 31, 20152018 were $1.1$0.4 million and $0.9$0.6 million, respectively, and are included in accrued liabilities.
Defined Contribution 401(K) Plans
We sponsor a 401(k) defined contribution plan for all our employees. The plan allows the employees to make annual voluntary contributions not to exceed the lesser of an amount equal to 25% of their compensation or limits established by the Internal Revenue Code. Under this plan, we generally provide a match equal to 50% of the employee’s contributions up to the first 6% of compensation, except for union employees who are not eligible to receive the match. Our provision for matching and profit sharing contributions for the three years ended December 31, 2016, 2015,2019, 2018, and 20142017 was $2.7 million, $3.2$2.6 million, and $3.3$2.7 million, respectively.
Other Plans
We have a defined benefit pension plan covering certain hourly employees of a subsidiary (the “Pension Plan”). Pension Plan benefits are generally determined on the basis of the retiree’s age and length of service. Assets of the Pension Plan are composed primarily of fixed income and equity securities. We also have a retirement plan covering certain current and retired employees (the “LaBarge Retirement Plan”). As part of the acquisition of CTP, we acquired their defined benefit pension plan (the “CTP Pension Plan”), which covered certain current and retired employees that were fully funded by CTP as of the acquisition date in April 2018. The CTP Pension Plan was suspended as of the acquisition date but continued to cover certain current and former CTP employees. The CTP Pension Plan gross assets, liabilities, and current year expense were immaterial for disclosure purposes. The CTP Pension Plan was subsequently liquidated in November 2019 with no loss recorded as a pension plan escrow fund was established as part of the acquisition to cover any losses until it was liquidated.

The components of net periodic pension cost for both plansthe Pension Plan and LaBarge Retirement Plan in aggregate are as follows:
 
(In thousands)
Years Ended December 31,
 
(In thousands)
Years Ended December 31,
 2016 2015 2014 2019 2018 2017
Service cost $531
 $785
 $693
 $503
 $601
 $531
Interest cost 1,367
 1,350
 1,278
 1,388
 1,268
 1,329
Expected return on plan assets (1,482) (1,495) (1,400) (1,644) (1,784) (1,530)
Amortization of actuarial losses 762
 887
 419
 885
 743
 810
Net periodic pension cost $1,178
 $1,527
 $990
 $1,132
 $828
 $1,140
The components of the reclassifications of net actuarial losses from accumulated other comprehensive loss to net income for 20162019 were as follows:
 
(In thousands)
Year Ended December 31,
 
(In thousands)
Year Ended December 31,
 2016 2019
Amortization of actuarial loss - total before tax (1)
 $762
 $885
Tax benefit (283) (209)
Net of tax $479
 $676

(1)The amortization expense is included in the computation of periodic pension cost and is a decrease to net income upon reclassification from accumulated other comprehensive loss.

The estimated net actuarial loss for both plans that will be amortized from accumulated other comprehensive loss into net periodic cost during 20172020 is $0.8$0.9 million.


The obligations, fair value of plan assets, and funded status of both plans are as follows:

 
(In thousands)
December 31,
 
(In thousands)
December 31,
 2016 2015 2019 2018
Change in benefit obligation(1)
        
Beginning benefit obligation (January 1) $31,510
 $33,299
 $33,951
 $36,002
Service cost 531
 785
 503
 601
Interest cost 1,367
 1,350
 1,388
 1,268
Actuarial loss (gain) 1,132
 (2,599)
Actuarial (gain) loss 4,769
 (2,415)
Benefits paid (1,386) (1,325) (1,526) (1,505)
Ending benefit obligation (December 31) $33,154
 $31,510
 $39,085
 $33,951
Change in plan assets        
Beginning fair value of plan assets (January 1) $19,933
 $19,725
 $23,749
 $25,646
Return on assets 1,551
 (296) 4,347
 (1,951)
Employer contribution 1,917
 1,829
 1,873
 1,559
Benefits paid (1,386) (1,325) (1,526) (1,505)
Ending fair value of plan assets (December 31) $22,015
 $19,933
 $28,443
 $23,749
Funded status (underfunded) $(11,139) $(11,577) $(10,642) $(10,202)
Amounts recognized in the consolidated balance sheet        
Current liabilities $545
 $527
 $
 $580
Non-current liabilities $10,595
 $11,050
 $10,642
 $9,622
Unrecognized loss included in accumulated other comprehensive loss        
Beginning unrecognized loss, before tax (January 1) $8,919
 $10,614
 $9,485
 $8,908
Amortization (762) (887) (885) (743)
Liability (gain) loss 1,132
 (2,599) 4,769
 (2,415)
Asset (loss) gain (69) 1,791
Asset loss (gain) (2,709) 3,735
Ending unrecognized loss, before tax (December 31) 9,220
 8,919
 10,660
 9,485
Tax impact (3,425) (3,316) (2,544) (2,263)
Unrecognized loss included in accumulated other comprehensive loss, net of tax $5,795
 $5,603
 $8,116
 $7,222

(1)Projected benefit obligation equals the accumulated benefit obligation for the plans.
On December 31, 2016,2019, our annual measurement date, the accumulated benefit obligation exceeded the fair value of the plans assets by $11.1$10.6 million. Such excess is referred to as an unfunded accumulated benefit obligation. We recorded unrecognized loss included in accumulated other comprehensive loss, net of tax at December 31, 20162019 and 20152018 of $5.8$8.1 million and $5.6$7.2 million, respectively, which decreased shareholders’ equity. This charge to shareholders’ equity represents a net loss not yet recognized as pension expense. This charge did not affect reported earnings, and would be decreased or be eliminated if either interest rates increase or market performance and plan returns improve which will cause the Pension Plan to return to fully funded status.
Our Pension Plan asset allocations at December 31, 20162019 and 2015,2018, by asset category, were as follows:

 December 31, December 31,
 2016 2015 2019 2018
Equity securities 65% 74% 69% 57%
Cash and equivalents 2% 6% 1% 1%
Debt securities 33% 20% 30% 42%
Total(1)
 100% 100% 100% 100%

(1)Our overall investment strategy is to achieve an asset allocation within the following ranges to achieve an appropriate rate of return relative to risk.

Cash0-5%0-10%
Fixed income securities0-25%15-75%
Equities25-95%30-80%
Pension Plan assets consist primarily of listed stocks and bonds and do not include any of the Company’s securities. The return on assets assumption reflects the average rate of return expected on funds invested or to be invested to provide for the benefits included in the projected benefit obligation. We select the return on asset assumption by considering our current and target asset allocation. We consider information from various external investment managers, forward-looking information regarding expected returns by asset class and our own judgment when determining the expected returns.

 
(In thousands)
Year Ended December 31, 2016
 
(In thousands)
Year Ended December 31, 2019
 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Cash and cash equivalents $366
 $
 $
 $366
 $232
 $
 $
 $232
Fixed income securities 3,468
 
 
 3,468
 3,247
 
 
 3,247
Equities(1)
 1,611
 
 
 1,611
 2,645
 
 
 2,645
Other investments 760
 
 
 760
 1,552
 
 
 1,552
Total plan assets at fair value $6,205
 $
 $
 6,205
 $7,676
 $
 $
 7,676
Pooled funds       15,810
       20,767
Total fair value of plan assets 

 

 

 $22,015
 

 

 

 $28,443

 
(In thousands)
Year Ended December 31, 2015
 
(In thousands)
Year Ended December 31, 2018
 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Cash and cash equivalents $1,149
 $
 $
 $1,149
 $153
 $
 $
 $153
Fixed income securities 3,986
 
 
 3,986
 3,647
 
 
 3,647
Equities(1)
 9,468
 
 
 9,468
 1,475
 
 
 1,475
Other investments 
 
 
 
 851
 
 
 851
Total plan assets at fair value $14,603
 $
 $
 14,603
 $6,126
 $
 $
 6,126
Pooled funds       5,330
       17,623
Total fair value of plan assets 

 

 

 $19,933
 

 

 

 $23,749

(1)Represents mutual funds and commingled accounts which invest primarily in equities, but may also hold fixed income securities, cash and other investments. Commingled funds with publicly quoted prices and actively traded are classified as Level 1 investments.
Pooled funds are measured using the net asset value (“NAV”) as a practical expedient for fair value as permissible under the accounting standard for fair value measurements and have not been categorized in the fair value hierarchy in accordance with ASU 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).” Pooled fund NAVs are provided by the trustee and are determined by reference to the fair value of the underlying securities of the trust, less its liabilities, which are valued primarily through the use of directly or indirectly observable inputs. Depending on the pooled fund, underlying securities may include marketable equity securities or fixed income securities.
The assumptions used to determine the benefit obligations and expense for our two plans are presented in the tables below. The expected long-term return on assets, noted below, represents an estimate of long-term returns on investment portfolios consisting of a mixture of fixed income and equity securities. The estimated cash flows from the plans for all future years are determined based on the plans’ population at the measurement date. We used the expected benefit payouts from the plans for each year into the future and discounted them back to the present using the Wells Fargo yield curve rate for that duration.

The weighted-average assumptions used to determine the net periodic benefit costs under the two plans were as follows:

 Years Ended December 31, Years Ended December 31,
 2016 2015 2014 2019 2018 2017
Discount rate used to determine pension expense            
Pension Plan 4.55% 4.25% 4.75% 3.22% 3.64% 4.18%
LaBarge Retirement Plan 4.00% 3.70% 4.00% 2.85% 3.40% 3.75%

The weighted-average assumptions used to determine the benefit obligations under the two plans were as follows:

 December 31, December 31,
 2016 2015 2014 2019 2018 2017
Discount rate used to determine value of obligations            
Pension Plan 4.18% 4.55% 4.25% 4.23% 4.23% 3.64%
LaBarge Retirement Plan 3.75% 4.00% 3.70% 4.00% 4.00% 3.40%
Long-term rate of return - Pension Plan only 7.00% 7.50% 7.50% 7.00% 7.00% 7.00%
The following benefit payments under both plans, which reflect expected future service, as appropriate, are expected to be paid:

  (In thousands)
  Pension Plan 
LaBarge
Retirement
Plan
2017 $1,063
 $545
2018 1,174
 535
2019 1,215
 521
2020 1,297
 504
2021 1,369
 485
2022 - 2026 7,862
 2,079
  (In thousands)
  Pension Plan 
LaBarge
Retirement
Plan
2020 $1,252
 $589
2021 1,339
 569
2022 1,452
 545
2023 1,495
 517
2024 1,607
 486
2025 - 2029 9,002
 2,012
Our funding policy is to contribute cash to our plans so that the minimum contribution requirements established by government funding and taxing authorities are met. We expect to make contributions of $0.9 million to the plans in 2017.2020.
 
Note 13. Indemnifications
We have made guarantees and indemnities under which we may be required to make payments to a guaranteed or indemnified party, in relation to certain transactions, including revenue transactions in the ordinary course of business. In connection with certain facilityperformance center leases, we have indemnified our lessors for certain claims arising from the facilityperformance center or the lease. We indemnify our directors and officers to the maximum extent permitted under the laws of the State of Delaware.
However, we have a directors and officers insurance policy that may reduce our exposure in certain circumstances and may enable us to recover a portion of future amounts that may be payable, if any. The duration of the guarantees and indemnities varies and, in many cases is indefinite but subject to statute of limitations. The majority of guarantees and indemnities do not provide any limitations of the maximum potential future payments we could be obligated to make. Historically, payments related to these guarantees and indemnities have been immaterial. We estimate the fair value of our indemnification obligations as insignificant based on this history and insurance coverage and have, therefore, not recorded any liability for these guarantees and indemnities in the accompanying consolidated balance sheets.
 

Note 14. Leases
We lease certain facilities and equipment for periods ranging from one to ten 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 2016, 2015, and 2014 was $4.9 million, $8.5 million, and $7.3 million, respectively. Future minimum rental payments under operating leases having initial or remaining non-cancelable terms in excess of one year at December 31, 2016 were as follows:


 (In thousands)
2017$4,270
20183,505
20192,732
20202,492
20211,864
Thereafter1,106
Total$15,969
Note 15. Income Taxes
Our pre-tax income attributable to foreign operations was not material. The provision for income tax (benefit) expense (benefit) consisted of the following:

 
(In thousands)
Years Ended December 31,
 
(In thousands)
Years Ended December 31,
 2016 2015 2014 2019 2018 2017
Current tax expense (benefit)      
Current tax expense      
Federal $5,953
 $(1,511) $5,258
 $5,802
 $474
 $2,387
State 2,982
 (418) 244
 1,067
 1,260
 525
 8,935
 (1,929) 5,502
 6,869
 1,734
 2,912
Deferred tax expense (benefit)      
Deferred tax (benefit) expense      
Federal 3,876
 (28,011) 1,186
 (650) (789) (15,515)
State 41
 (1,771) (315) (917) 291
 135
 3,917
 (29,782) 871
 (1,567) (498) (15,380)
Income tax expense (benefit) $12,852
 $(31,711) $6,373
 $5,302
 $1,236
 $(12,468)
On December 22, 2017, the U. S. enacted the Tax Cuts and Jobs Act (the “2017 Tax Act”) which, among a broad range of tax reform measures, reduced the U.S. corporate tax rate from 35.0% to 21.0% effective January 1, 2018. The currentreduction in the corporate tax rate required the federal portion of our deferred tax assets and liabilities at December 31, 2017 to be re-measured at the enacted tax rate expected to apply when the temporary differences are to be realized or settled using 21.0%. As a result, we recorded a provisional deferred income tax expense (benefit) excludesbenefit of $13.0 million related to the re-measurement for the year ended December 31, 2017. SEC Staff Accounting Bulletin No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act” (“SAB 118”), allowed us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Since the 2017 Tax Act was passed late in the fourth quarter of 2017, and ongoing tax guidance and accounting interpretation were expected during 2018, we considered the accounting of the deferred tax re-measurement and other items to be incomplete as of December 31, 2017. Based on our review of proposed tax regulations and related guidance issued and available as of December 22, 2018, we determined that no refinements were needed to the tax positions and provisional amounts recorded in the fourth quarter of 2017 and finalized the accounting of the tax effects of the 2017 Tax Act as of December 31, 2018.
We recognized net (tax shortfalls) excessincome tax benefits recorded directly to additional paid-in-capital related tofrom deductions of share-based payments in excess of compensation cost recognized for financial reporting purposes of $(0.1)$0.8 million, $0.6$0.2 million, and $0.1$0.6 million for the years ended December 31, 2016, 2015,2019, 2018, and 2014,2017, respectively.

Deferred tax (liabilities) assets were comprised of the following:
  
(In thousands)
December 31,
  2016 2015
Deferred tax assets:    
Accrued expenses $760
 $1,363
Allowance for doubtful accounts 184
 134
Contract overrun reserves 1,776
 4,412
Deferred compensation 507
 491
Employment-related accruals 2,888
 2,463
Environmental reserves 769
 772
Federal tax credit carryforwards 4,234
 7,031
Inventory reserves 2,313
 2,703
Investment in common stock 
 297
Pension obligation 4,002
 3,299
State net operating loss carryforwards 63
 1,402
State tax credit carryforwards 6,585
 5,937
Stock-based compensation 1,950
 2,165
Workers’ compensation 122
 133
Other 2,098
 1,595
Total gross deferred tax assets 28,251
 34,197
Valuation allowance (6,607) (7,477)
Total gross deferred tax assets, net of valuation allowance 21,644
 26,720
Deferred tax liabilities:    
Depreciation (13,167) (11,802)
Goodwill (3,909) (3,632)
Intangibles (35,071) (37,891)
Prepaid insurance (626) (514)
Section 481(a) adjustment 
 (682)
Unbilled receivables (2) 
Total gross deferred tax liabilities (52,775) (54,521)
Net deferred tax liabilities $(31,131) $(27,801)
We elected to early adopt ASU 2015-17, prospectively, beginning with the annual period ended December 31, 2015, which required that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. The adoption of this new guidance had no impact on our results of operations or cash flows for 2015.
  
(In thousands)
December 31,
  2019 2018
Deferred tax assets:    
Accrued expenses $776
 $704
Allowance for doubtful accounts 314
 267
Contract overrun reserves 1,004
 1,263
Deferred compensation 94
 302
Employment-related accruals 5,049
 4,252
Environmental reserves 494
 479
Federal tax credit carryforwards 84
 288
Inventory reserves 2,334
 1,757
Pension obligation 2,552
 2,324
Federal and state net operating loss carryforwards 6,251
 51
State tax credit carryforwards 8,900
 9,075
Stock-based compensation 1,672
 1,661
Workers’ compensation 43
 51
Other 1,409
 1,538
Total gross deferred tax assets 30,976
 24,012
Valuation allowance (9,375) (9,083)
Total gross deferred tax assets, net of valuation allowance 21,601
 14,929
Deferred tax liabilities:    
Deferred revenue (256) (649)
Depreciation (8,852) (7,951)
Goodwill (4,109) (3,963)
Intangibles (24,749) (19,905)
Prepaid insurance (346) (223)
Total gross deferred tax liabilities (38,312) (32,691)
Net deferred tax liabilities $(16,711) $(17,762)
We have federal and state tax net operating losses in various states of $1.7$22.5 million and $26.5 million, respectively, as of December 31, 2016.2019. The federal net operating losses acquired from the acquisition of Nobles are subject to an annual limitation under Internal Revenue Code Section 382; however, we expect to fully realize them under ASC Subtopic 740-10 before they begin to expire in 2033. The state net operating loss carryforwards include $1.3$16.9 million that is not expected to be realized under ASC Subtopic 740-10due to various limitations and has been reduced by a valuation allowance. If not realized, the state net operating loss carryforwards will begin to expire in 2032.2027.
We have federal and state tax credit carryforwards of $4.9$0.1 million and $11.1$12.8 million, respectively, as of December 31, 2016.2019. A valuation allowance of $10.1$10.7 million has been provided on state tax credit carryforwards that are not expected to be realized under ASC Subtopic 740-10. If not realized, the federal and state tax credit carryforwards will begin to expire between 2017 and 2030.in 2020.
We believe it is more likely than not that we will generate sufficient taxable income to realize the benefit of the remaining deferred tax assets.

The principal reasons for the variation between the statutory and effective tax rates were as follows:
 Years Ended December 31, Years Ended December 31,
 2016 2015 2014 2019 2018 2017
Statutory federal income tax (benefit) rate 35.0% (35.0)% 35.0%
Statutory federal income tax rate 21.0% 21.0% 35.0%
State income taxes (net of federal benefit) 5.7 (1.2) 0.9 3.6 5.3 2.5
Foreign derived intangible income deduction (1.2)  
Qualified domestic production activities (2.0) 0.5 (2.3)   (2.6)
Stock-based compensation expense (2.1) (1.9) (8.2)
Research and development tax credits (8.6) (2.9) (11.3) (7.8) (32.0) (50.6)
Goodwill impairment  8.1 
Other tax credits  (1.2) (7.5)
Changes in valuation allowance 0.9 0.6 8.5 (1.6) 0.7 10.6
Non-deductible book expenses 0.2 0.2 0.9 3.9 8.2 1.1
Changes in deferred tax assets 1.5 0.1 (5.0) (2.2) 12.1 15.4
Remeasurement of deferred taxes for changes in state tax law   (1.9)
Re-measurement of deferred taxes for 2017 Tax Act   (171.3)
Changes in tax reserves  0.1 (0.7) 1.2 1.2 11.4
Other 1.0 (0.2) 0.2 (0.8) (1.4) 0.4
Effective income tax (benefit) rate 33.7% (29.7)% 24.3% 14.0% 12.0% (163.8)%
The deduction for qualified domestic production activities is treated as a “special deduction” which has no effect on deferred tax assets and liabilities. Instead, the impact of this deduction is reported in our rate reconciliation. No deduction for qualified domestic production has been recognized in 2015 due to a taxable loss. The loss has been carried back to 2014 and 2013, reducing the deduction for qualified domestic production in those years.
We recorded a goodwill impairment charge related to the Structural Systems operating segment in 2015. A portion of this goodwill impairment charge was nondeductible for tax purposes and was a permanent impact to our income tax provision of $8.7 million.
On December 18, 2015, the President of the United States signed into law the Protecting Americans from Tax Hikes Act (“PATH”). The PATH Act permanently extended the research and development credit. As a result of the 2017 Tax Act, we recorded a benefitbegan utilizing the enacted U.S. corporate rate of $2.2 million and $2.6 million21.0% for the U.S. Federal R&D credit in 2016tax year 2018 and 2015, respectively. In December 2014, the federal research and development tax credit was retroactively extended from the beginning of 2014. We recorded total federal research and development tax credits of $2.4 million in 2014.beyond.
Our total amount of unrecognized tax benefits was $3.0$5.7 million, $3.0$5.3 million, and $2.8$5.3 million at December 31, 2016, 2015,2019, 2018, and 2014,2017, respectively. We record interest and penalty charge, if any, related to uncertain tax positions as a component of tax expense and unrecognized tax benefits. The amounts accrued for interest and penalty chargecharges as of December 31, 2016, 2015,2019, 2018, and 20142017 were not significant. If recognized, $2.0$4.0 million would affect the effective income tax rate. We do not reasonablyAs a result of statute of limitations set to expire in 2020, we expect significant increases or decreases to our unrecognized tax benefits of approximately $2.0 million in the next twelve months.
A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:
 
(In thousands)
Years Ended December 31,
 
(In thousands)
Years Ended December 31,
 2016 2015 2014 2019 2018 2017
Balance at January 1, $2,963
 $2,803
 $2,297
 $5,283
 $5,271
 $3,036
Additions for tax positions related to the current year 476
 702
 668
 408
 419
 422
Additions for tax positions related to prior years 385
 
 31
 
 92
 1,953
Reductions for tax positions related to prior years (567) (48) (22) (28) (499) (99)
Reductions for lapse of statute of limitations (221) (494) (171) 
 
 (41)
Balance at December 31, $3,036
 $2,963
 $2,803
 $5,663
 $5,283
 $5,271
We file U.S. Federal and state income tax returns. Federal income tax returns after 2012, California franchise (income) tax returns after 2011 and other state income tax returns after 2011We are subject to examination. Weexamination by the Internal Revenue Service (“IRS”) for tax years after 2015 and by state taxing authorities for tax years after 2014. While we are no longer subject to examination prior to those periods, although carryforwards generated prior to those periods may still be adjusted upon examination by the Internal Revenue Service (“IRS”)IRS or state taxing authorityauthorities if they either have been or will be used in a subsequent period. During 2016, the IRS commenced an audit of our 2014 and 2015 tax years. Although the outcome of tax examinations cannot be predicted with certainty, weWe believe we have adequately accrued for tax deficiencies or reductions in tax benefits, if any, that could result from the examination as well asand all open audit years.

 
Note 16.15. Contingencies
On October 8, 2014, the United States District Court for the District of Kansas (the “District Court”) granted summary judgment in favor of The Boeing Company (“Boeing”) and Ducommun and dismissed the lawsuit entitled United States of America ex rel Taylor Smith, Jeannine Prewitt and James Ailes v. The Boeing Company and Ducommun Inc. The lawsuit was a qui tam action brought by three former Boeing employees (“Relators”) against Boeing and Ducommun on behalf of the United States of America for violations of the United States False Claims Act. On June 13, 2016, the United States Court of Appeals for the Tenth Circuit affirmed the District Court’s decision and on July 8, 2016, denied Relators’ petition for rehearing.
Structural Systems has been directed by California environmental agencies to investigate and take corrective action for groundwater contamination at its facilities located in El Mirage and Monrovia, California. Based on currently available information, Ducommun has established a reservean accrual for its estimated liability for such investigation and corrective action of $1.5 million at December 31, 2016,2019, which is reflected in other long-term liabilities on its consolidated balance sheet.
Structural Systems also faces liability as a potentially responsible party for hazardous waste disposed at landfills located in Casmalia and West Covina, California. Structural Systems and other companies and government entities have entered into consent decrees with respect to these landfills with the United States Environmental Protection Agency and/or California environmental agencies under which certain investigation, remediation and maintenance activities are being performed. Based

on currently available information, Ducommun preliminarily estimates that the range of its future liabilities in connection with the landfill located in West Covina, California is between $0.4 million and $3.1 million. Ducommun has established a reservean accrual for its estimated liability in connection with the West Covina landfill of $0.4 million at December 31, 2016,2019, which is reflected in other long-term liabilities on its consolidated balance sheet. Ducommun’s ultimate liability in connection with these matters will depend upon a number of factors, including changes in existing laws and regulations, the design and cost of construction, operation and maintenance activities, and the allocation of liability among potentially responsible parties.
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, Ducommun makes various commitments and incurs contingent liabilities. While it is not feasible to predict the outcome of these matters, Ducommun 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, results of operations or cash flows.
 
Note 17.16. Major Customers and Concentrations of Credit Risk
We provide proprietary products and services to the Department of Defense and various United States Government agencies, and most of the aerospace and aircraft manufacturers who receive contracts directly from the U.S. Government as an original equipment manufacturer (“prime manufacturers”Primes”). In addition, we also service technology-driven markets in the industrial, medical and other end-use markets. As a result, we have significant net revenues from certain customers. Accounts receivable were diversified over a number of different commercial, military and space programs and were made by both operating segments. Net revenues from our top ten customers, including theThe Boeing Company (“Boeing”), Lockheed Martin Corporation (“Lockheed Martin”), Raytheon Company (“Raytheon”), and Spirit AeroSystems Holdings, Inc. (“Spirit”), and United Technologies Corporation (“United Technologies”), represented the following percentages of total net sales:

 Years Ended December 31, Years Ended December 31,
 2016 2015 2014 2019 2018 2017
Boeing 17.3% 16.0% 19.4% 16.6% 17.0% 16.3%
Lockheed Martin 4.0% 4.4% 5.5%
Raytheon 8.4% 8.7% 9.4% 11.0% 11.7% 13.5%
Spirit 8.2% 7.4% 6.4% 12.2% 9.5% 8.2%
United Technologies 6.0% 6.1% 5.5%
Top ten customers (1)
 58.6% 55.7% 59.2% 63.5% 62.9% 62.5%
(1) Includes the Boeing, Lockheed Martin, Raytheon, Spirit, and United Technologies.Spirit.
Boeing, Lockheed Martin, Raytheon, Spirit, and United TechnologiesSpirit represented the following percentages of total accounts receivable:

 December 31, December 31,
 2016 2015 2019 2018
Boeing 7.8% 13.3% 5.9% 8.0%
Lockheed Martin 0.8% 2.5%
Raytheon 10.9% 11.5% 3.3% 3.2%
Spirit 9.0% 7.1% 2.0% %
United Technologies 7.8% 5.0%
In 2016, 20152019, 2018 and 2014,2017, net revenues from foreign customers based on the location of the customer were $56.4$81.6 million, $60.2$71.9 million and $66.7$57.2 million, respectively. No net revenues from a foreign country were greater than 3.0%4.0% of total net revenues in 2016, 2015,2019, 2018, and 2014.2017. We have manufacturing facilities in Thailand and Mexico. Our net revenues, profitability and identifiable long-lived assets attributable to foreign revenues activity were not material compared to our net revenues, profitability and identifiable long-lived assets attributable to our domestic operations during 2016, 2015,2019, 2018, and 2014.2017. We are not subject to any significant foreign currency risks as all our sales are made in United States dollars.
 
Note 18.17. Business Segment Information
We supply products and services primarily to the aerospace and defense industries. Our subsidiaries are organized into two strategic businesses, StructuralElectronic Systems and ElectronicStructural Systems, each of which is an operating segment as well as a reportable segment.

Financial information by reportable segment was as follows:
 
(In thousands)
Years Ended December 31,
 
(In thousands)
Years Ended December 31,
 2016 2015 2014 2019 2018 2017
Net Revenues            
Electronic Systems $360,373
 $337,868
 $316,723
Structural Systems $246,465
 $273,319
 $319,956
 360,715
 291,439
 241,460
Total Net Revenues $721,088
 $629,307
 $558,183
Segment Operating Income (Loss) (1)(2)(3)
      
Electronic Systems 304,177
 392,692
 422,089
 $38,613
 $30,916
 $31,236
Total Net Revenues $550,642
 $666,011
 $742,045
Segment Operating (Loss) Income (1)
      
Structural Systems (2)
 $16,497
 $(53,010) $34,949
Electronic Systems (3)
 28,983
 (4,472) 34,599
Structural Systems 46,836
 19,063
 5,790
 45,480
 (57,482) 69,548
 85,449
 49,979
 37,026
Corporate General and Administrative Expenses (1)(4)
 (16,912) (17,827) (17,781)
Operating (Loss) Income $28,568
 $(75,309) $51,767
Corporate General and Administrative Expenses (4)
 (29,216) (26,061) (21,392)
Operating Income $56,233
 $23,918
 $15,634
Depreciation and Amortization Expenses            
Electronic Systems $14,170
 $14,223
 $13,888
Structural Systems $8,688
 $9,417
 $10,959
 13,663
 10,525
 8,860
Electronic Systems 14,087
 17,267
 17,928
Corporate Administration 85
 162
 137
 472
 548
 97
Total Depreciation and Amortization Expenses $22,860
 $26,846
 $29,024
 $28,305
 $25,296
 $22,845
Capital Expenditures            
Electronic Systems $5,508
 $6,719
 $5,019
Structural Systems $15,661
 $11,559
 $12,742
 13,338
 9,104
 20,679
Electronic Systems 3,032
 4,419
 5,782
Corporate Administration 
 10
 30
 
 514
 775
Total Capital Expenditures $18,693
 $15,988
 $18,554
 $18,846
 $16,337
 $26,473
 
(1)Includes cost not allocated to eitherThe results for 2019 includes Nobles’ results of operations which have been included in our consolidated statements of income since the date of acquisition as part of the Structural Systems or Electronic Systems operating segments.segment. See Note 3.
(2)The results for 20152018 includes CTP’s results of operations which have been included $57.2 millionin our consolidated statements of goodwill impairment charge.income since the date of acquisition as part of the Structural Systems segment. See Note 3.
(3)The results for 20152017 includes LDS’ results of operations which have been included $32.9 millionin our consolidated statements of an intangible asset impairment charge.income since the date of acquisition as part of the Electronic Systems segment.
(4)The results for 2014 included $1.2 million of workers’ compensation insurance expenses included in gross profit andIncludes cost not allocated to either the Electronic Systems or Structural Systems operating segments.
Segment assets include assets directly identifiable with each segment. Corporate assets include assets not specifically identified with a business segment, including cash. The following table summarizes our segment assets for 20162019 and 2015:

2018:
 
(In thousands)
December 31,
 
(In thousands)
December 31,
 2016 2015 2019 2018
Total Assets        
Electronic Systems $411,981
 $405,743
Structural Systems $175,580
 $179,134
 328,718
 220,993
Electronic Systems 325,780
 363,227
Corporate Administration 14,069
 14,720
 49,730
 18,003
Total Assets $515,429
 $557,081
 $790,429
 $644,739
Goodwill and Intangibles        
Electronic Systems $210,453
 $219,872
Structural Systems $3,745
 $4,866
 98,826
 28,277
Electronic Systems 180,382
 207,595
Total Goodwill and Intangibles $184,127
 $212,461
 $309,279
 $248,149
On October 8, 2019, we acquired 100.0% of the outstanding equity interests of Nobles for a purchase price of $77.0 million, net of cash acquired. We allocated the gross purchase price of $77.3 million to the assets acquired and liabilities assumed at preliminary estimated fair values. The excess of the purchase price over the aggregate fair values of the net assets was recorded as goodwill. See Note 3.

In April 2018, we acquired 100.0% of the first quarteroutstanding equity interests of 2016, we entered intoCTP for a purchase price of $30.7 million, net of cash acquired. We allocated the gross purchase price of $30.8 million to the assets acquired and completedliabilities assumed at estimated fair values. The excess of the salepurchase price over the aggregate fair values of our Pittsburgh, Pennsylvania and Miltec operations, both of which were part of our Electronic Systems operating segment.the net assets was recorded as goodwill. See Note 13.
In September 2017, we acquired 100.0% of the outstanding equity interests of LDS for additional information.a purchase price of $60.0 million, net of cash acquired. We allocated the gross purchase price of $62.0 million to the assets acquired and liabilities assumed at estimated fair values. The excess of the purchase over the aggregate fair values was recorded as goodwill.

Note 19.18. Supplemental Quarterly Financial Data (Unaudited)
  (In thousands, except per share amounts)
  
Three Months Ended
2016
 
Three Months Ended
2015
  Dec 31 Oct 1 Jul 2 Apr 2 Dec 31 Oct 3 Jul 4 Apr 4
Net Revenues $142,486
 $132,571
 $133,437
 $142,148
 $156,576
 $161,670
 $174,845
 $172,920
Gross Profit 27,786
 25,223
 26,215
 26,969
 22,796
 20,028
 31,207
 26,761
Income (Loss) Before Taxes 5,825
 6,248
 5,331
 20,709
 (90,170) (16,447) 3,061
 (3,034)
Income Tax Expense (Benefit) 2,989
 1,234
 1,470
 7,159
 (24,997) (6,932) 1,279
 (1,061)
Net Income (Loss) $2,836
 $5,014
 $3,861
 $13,550
 $(65,173) $(9,515) $1,782
 $(1,973)
Earnings (Loss) Per Share                
Basic earnings (loss) per share $0.25
 $0.45
 $0.35
 $1.22
 $(5.88) $(0.86) $0.16
 $(0.18)
Diluted earnings (loss) per share $0.25
 $0.44
 $0.34
 $1.21
 $(5.88) $(0.86) $0.16
 $(0.18)
  (In thousands, except per share amounts)
  Three Months Ended
2019
 Three Months Ended
2018
  Dec 31 Sep 28 Jun 29 Mar 30 Dec 31 Sep 29 Jun 30 Mar 31
Net Revenues $186,926
 $181,101
 $180,495
 $172,566
 $164,183
 $159,842
 $154,827
 $150,455
Gross Profit 40,111
 38,327
 38,065
 35,694
 32,697
 31,116
 32,028
 26,755
Income Before Taxes 9,848
 10,240
 9,178
 8,497
 1,791
 4,290
 1,833
 2,357
Income Tax Expense (Benefit) 977
 1,937
 1,363
 1,025
 1,118
 119
 242
 (243)
Net Income $8,871
 $8,303
 $7,815
 $7,472
 $673
 $4,171
 $1,591
 $2,600
Earnings Per Share                
Basic earnings per share $0.77
 $0.72
 $0.68
 $0.65
 $0.06
 $0.37
 $0.14
 $0.23
Diluted earnings per share $0.75
 $0.70
 $0.66
 $0.64
 $0.06
 $0.36
 $0.14
 $0.22
In the fourth quarter of 2019, we acquired 100.0% of the outstanding equity interests of Nobles and Nobles’ results of operations have been included in our consolidated statements of income since the date of acquisition as part of the Structural Systems segment. See Note 3.
In the fourth quarter of 2018, we recorded restructuring charges of $3.8 million as part of a restructuring plan that commenced during the fourth quarter of 2017. See Note 4.
In the third quarter of 2018, we recorded restructuring charges of $3.4 million as part of a restructuring plan that commenced during the fourth quarter of 2017. See Note 4.
In the second quarter of 2018, we acquired 100.0% of the outstanding equity interests of CTP and CTP’s results of operations have been included in our consolidated statements of income since the date of acquisition as part of the Structural Systems segment. See Note 3. In addition, we recorded restructuring charges of $5.4 million as part of a restructuring plan that commenced during the fourth quarter of 2017. See Note 4.
In the first quarter of 2016,2018, we entered into and completed the salerecorded restructuring charges of our Pittsburgh, Pennsylvania and Miltec operations, both of which were$2.2 million as part of our Electronic Systems operating segment. We recorded a preliminary pre-tax gain of $18.8 million. See Note 1 for additional information.
Inrestructuring plan that commenced during the fourth quarter of 2015, we recorded a goodwill impairment charge in our Structural Systems operating segment of $57.2 million. In addition, we recorded an intangible asset impairment charge in our Electronic Systems operating segment of $32.9 million related to the write off an indefinite-lived trade name intangible asset.2017. See Note 4.
In the third quarter of 2015, we recorded loss on extinguishment of debt of $11.9 million which was made up of the call premium to retire the existing $200.0 million senior unsecured notes in July 2015 of $9.8 million and the write off of the unamortized debt issuance costs associated with the existing $200.0 million senior unsecured notes of $2.1 million.
Also in the third quarter of 2015, we recorded a charge in our Structural Systems operating segment related to estimated cost overruns as a result of a change in the contract requirements for the remaining contractual period for a regional jet program of $10.0 million. This amount was recorded as part of cost of goods sold in our results of operations and increased accrued liabilities by $7.6 million and other long-term liabilities by $2.4 million.
In the second quarter of 2015, we recorded loss on extinguishment of debt of $2.8 million which was made up of the write off of the unamortized debt issuance costs associated with the existing senior secured term loan and existing senior secured revolving credit facility when the existing senior secured term loan was paid off in June 2015 and both were replaced with the Credit Facilities.

DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2016, 2015,2019, 2018, AND 20142017
(Dollars in thousands)
SCHEDULE II
 
Description 
Balance at
Beginning
of Period
 
Charged to
Costs and
Expenses (1)
 Deductions 
Balance at End
of Period
 
Balance at
Beginning
of Period
 
Charged to
(Reduction of) Costs and
Expenses
 Deductions/(Recoveries) 
Other(1)
 Balance at  End of Period
2016        
2019          
Allowance for Doubtful Accounts $359
 $233
 $97
 $495
 $1,135
 $219
 $33
 $
 $1,321
Valuation Allowance on Deferred Tax Assets 7,477
 (870) 
 6,607
 $9,083
 $(593) $
 $885
 $9,375
2015        
2018          
Allowance for Doubtful Accounts (1)
 $252
 $235
 $128
 $359
 $868
 $776
 $509
 $
 $1,135
Valuation Allowance on Deferred Tax Assets 6,882
 595
 
 7,477
 $9,013
 $70
 $
 $
 $9,083
2014        
2017          
Allowance for Doubtful Accounts $489
 $166
 $403
 $252
 $495
 $334
 $(39) $
 $868
Valuation Allowance on Deferred Tax Assets 4,650
 2,232
 
 6,882
 $6,607
 $2,406
 $
 $
 $9,013
(1) Includes opening balances of Nobles Worldwide, Inc. acquired in October 2019.
 
(1)Included amount that was part of assets held for sale.

EXHIBIT INDEX

Exhibit
No.        Description
2.1Agreement and Plan of Merger, dated as of April 3, 2011, among Ducommun Incorporated, DLBMS, Inc. and LaBarge, Inc. Incorporated by reference to Exhibit 2.1 to Form 8-K filed on April 5, 2011.
2.2Stock Purchase Agreement dated January 22, 2016, by and among Ducommun Incorporated, Ducommun LaBarge Technologies, Inc., as Seller, LaBarge Electronics, Inc., and Intervala, LLC, as Buyer. Incorporated by reference to Exhibit 2.1 to Form 8-K dated January 25, 2016.
2.3Stock Purchase Agreement dated February 24, 2016, by and between Ducommun LaBarge Technologies, Inc., as Seller, and General Atomics, as Buyer. Incorporated by reference to Exhibit 2.1 to Form 8-K dated February 24, 2016.
3.1Restated 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.
3.2Certificate 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.
3.3Bylaws as amended and restated on March 19, 2013. Incorporated by reference to Exhibit 99.1 to Form 8-K dated March 22, 2013.
3.4Amendment to Bylaws dated January 5, 2017. Incorporated by reference to Exhibit 99.2 to Form 8-K dated January 9, 2017.
10.1Credit Agreement, dated as of June 29, 2015, among Ducommun Incorporated, certain of its subsidiaries, Bank of America, N.A., as administrative agent, swingline lender and issuing bank, and other lenders party thereto. Incorporated by reference to Exhibit 10.1 to Form 8-K dated June 29, 2015.
*10.22007 Stock Incentive Plan. Incorporated by reference to Appendix B of Definitive Proxy Statement on Schedule 14a, filed on March 29, 2010.
*10.32013 Stock Incentive Plan (Amended and Restated March 18, 2015). Incorporated by reference to Appendix B of Definitive Proxy Statement on Schedule 14a, filed on April 22, 2015.
*10.4Form of Stock Option Agreement for 2016 and earlier. Incorporated by reference to Exhibit 10.8 to Form 10-K for the year ended December 31, 2003.
*10.5Form of Stock Option Agreement for 2017 and after.
*10.6Form of Performance Stock Unit Agreement for 2014 and 2015. Incorporated by reference to Exhibit 10.19 to Form 8-K dated April 28, 2014.
*10.7Form of Performance Stock Unit Agreement for 2016. Incorporated by reference to Exhibit 10.6 to Form 10-Q for the period ended April 2, 2016.
*10.8Form of Restricted Stock Unit Agreement for 2016 and earlier. Incorporated by reference to Exhibit 99.1 to Form 8-K dated May 10, 2010.
*10.9Form of Restricted Stock Unit Agreement for 2017 and after.
*10.10Form of Directors’ Restricted Stock Unit Agreement. Incorporated by reference to Exhibit 99.1 to Form 8-K dated May 10, 2010.
*10.11Performance Restricted Stock Unit Agreement dated January 23, 2017 between Ducommun Incorporated and Stephen G. Oswald.
2.1 Agreement and Plan of Merger, dated as of April 3, 2011, among Ducommun Incorporated, DLBMS, Inc. and LaBarge, Inc. Incorporated by reference to Exhibit 2.1 to Form 8-K filed on April 5, 2011.
2.2 Agreement and Plan of Merger, dated as of September 11, 2017, among Ducommun LaBarge Technologies, Inc., LS Holdings Company LLC, and DLS Company LLC. Incorporated by reference to Exhibit 2.1 to Form 8-K filed on September 11, 2017.
2.3 Agreement and Plan of Merger, dated as of October 8, 2019, among Ducommun LaBarge Technologies, Inc., DLT Acquisition, Inc., Nobles Parent Inc., and the Stockholder Representative. Incorporated by reference to Exhibit 2.1 to Form 8-K filed on October 9, 2019.
2.4 Stock Purchase Agreement dated January 22, 2016, by and among Ducommun Incorporated, Ducommun LaBarge Technologies, Inc., as Seller, LaBarge Electronics, Inc., and Intervala, LLC, as Buyer. Incorporated by reference to Exhibit 2.1 to Form 8-K dated January 25, 2016.
2.5 Stock Purchase Agreement dated February 24, 2016, by and between Ducommun LaBarge Technologies, Inc., as Seller, and General Atomics, as Buyer. Incorporated by reference to Exhibit 2.1 to Form 8-K dated February 24, 2016.
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 March 19, 2013. Incorporated by reference to Exhibit 99.1 to Form 8-K dated March 22, 2013.
3.4 Amendment to Bylaws dated January 5, 2017. Incorporated by reference to Exhibit 99.2 to Form 8-K dated January 9, 2017.
3.5 Amendment to Bylaws dated February 21, 2018. Incorporated by reference to Exhibit 3.1 to Form 8-K dated February 26, 2018.
4.1 Description of Ducommun Incorporated Securities Registered under Section 12 of the Exchange Act.
10.1 Incremental Term Loan Lender Joinder Agreement and Additional Credit Extension Amendment, dated as of December 20, 2019, by and among Ducommun Incorporated, as Borrower, the subsidiaries of the Borrower party thereto, as Guarantors, Bank of America, N.A., as Administrative Agent, Swingline Lender and an L/C Issuer, and the lender party thereto. Incorporated by reference to Exhibit 10.1 to Form 8-K filed on December 20, 2019.
10.2 Credit Agreement, dated as of November 21, 2018, among Ducommun Incorporated, certain of its subsidiaries, Bank of America, N.A., as administrative agent, swingline lender and issuing bank, and other lenders party thereto. Incorporated by reference to Exhibit 10.1 to Form 8-K filed on November 26, 2018.
*10.3 2007 Stock Incentive Plan. Incorporated by reference to Appendix B of Definitive Proxy Statement on Schedule 14a, filed on March 29, 2010.
*10.4 2013 Stock Incentive Plan (Amended and Restated March 18, 2015). Incorporated by reference to Appendix B of Definitive Proxy Statement on Schedule 14a, filed on April 22, 2015.
*10.5 2013 Stock Incentive Plan (Amended and Restated May 2, 2018). Incorporated by reference to Appendix A of Definitive Proxy Statement on Schedule 14a, filed on March 23, 2018.
*10.6 2018 Employee Stock Purchase Plan. Incorporated by reference to Appendix B of Definitive Proxy Statement on Schedule 14a, filed on March 23, 2018.
*10.7 Form of Stock Option Agreement for 2016 and earlier. Incorporated by reference to Exhibit 10.8 to Form 10-K for the year ended December 31, 2003.
*10.8 Form of Stock Option Agreement for 2017. Incorporated by reference to Exhibit 10.5 to Form 10-K for the year ended December 31, 2016.
*10.9 Form of Stock Option Agreement for 2018 and after. Incorporated by reference to Exhibit 4.7 to Form S-8 filed on May 10, 2018.

Exhibit
No.        Description
*10.10 Form of Performance Stock Unit Agreement for 2014 and 2015. Incorporated by reference to Exhibit 10.19 to Form 10-Q for the period ended March 29, 2014.
*10.11 Form of Performance Stock Unit Agreement for 2016. Incorporated by reference to Exhibit 10.6 to Form 10-Q for the period ended April 2, 2016.
*10.12 Form of Performance Stock Unit Agreement for 2017. Incorporated by reference to Exhibit 10.21 to Form 10-Q for the period ended April 1, 2017.
*10.13 Form of Restricted Stock Unit Agreement for 2016 and earlier. Incorporated by reference to Exhibit 99.1 to Form 8-K filed on May 8, 2007.
*10.14 Form of Restricted Stock Unit Agreement for 2017 and after. Incorporated by reference to Exhibit 10.9 to Form 10-K for the year ended December 31, 2016.
*10.15 Form of Directors’ Restricted Stock Unit Agreement. Incorporated by reference to Exhibit 99.1 to Form 8-K filed on May 10, 2010.
*10.16 Performance Restricted Stock Unit Agreement dated January 23, 2017 between Ducommun Incorporated and Stephen G. Oswald. Incorporated by reference to Exhibit 10.11 to Form 10-K for the year ended December 31, 2016.
*10.1210.17Form 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:
 Director/Officer Date of Agreement 
 Kathryn M. AndrusJanuary 30, 2008
Richard A. Baldridge March 19, 2013 
 Joseph C. BerenatoNovember 4, 1991
Gregory S. Churchill March 19, 2013
Shirley G. DrazbaOctober 18, 2018 
 Robert C. Ducommun December 31, 1985 
 Dean M. Flatt November 5, 2009 
 Douglas L. GrovesFebruary 12, 2013
Jay L. Haberland February 2, 2009
James S. HeiserMay 6, 1987 
 Stephen G. Oswald January 23, 2017 
 Amy M. PaulJanuary 23, 2017
Robert D. Paulson March 25, 2003
Anthony J. ReardonJanuary 8, 2008 
 Jerry L. Redondo October 1, 2015 
 Rosalie F. Rogers July 24, 2008 
 Rajiv A. TataJanuary 24, 2020
Christopher D. Wampler January 1, 2016 
*10.13Ducommun Incorporated 2016 Bonus Plan. Incorporated by reference to Exhibit 99.3 to Form 8-K dated March 1, 2016.
*10.14Ducommun Incorporated 2017 Bonus Plan. Incorporated by reference to Exhibit 99.1 to Form 8-K dated February 27, 2017.
*10.15Directors’ Deferred Compensation and Retirement Plan, as amended and restated February 2, 2010. Incorporated by reference to Exhibit 10.15 to Form 10-K for the year ended December 31, 2009.
*10.16Key Executive Severance Agreement between Ducommun Incorporated and Stephen G. Oswald dated January 23, 2017. Incorporated by reference to Exhibit 99.1 to Form 8-K dated January 27, 2017.
*10.17Form of Key Executive Severance Agreement between Ducommun Incorporated and each of the individuals listed below. Incorporated by reference to Exhibit 99.2 to Form 8-K dated January 27, 2017. All of the Key Executive Severance Agreements are identical except for the name of the person and the address for notice:
*10.18 Ducommun Incorporated 2016 Bonus Plan. Incorporated by reference to Exhibit 99.3 to Form 8-K dated March 1, 2016.
*10.19 Ducommun Incorporated 2017 Bonus Plan. Incorporated by reference to Exhibit 99.1 to Form 8-K dated February 27, 2017.
*10.20 Directors’ Deferred Compensation and Retirement Plan, as amended and restated February 2, 2010. Incorporated by reference to Exhibit 10.15 to Form 10-K for the year ended December 31, 2009.
*10.21 Non Qualified Deferred Compensation. Incorporated by reference to Exhibit 4.6 to Form S-8 dated November 26, 2019.
*10.22 Key Executive Severance Agreement between Ducommun Incorporated and Stephen G. Oswald dated January 23, 2017. Incorporated by reference to Exhibit 99.1 to Form 8-K dated January 27, 2017.

Exhibit
No.    Description
*10.23 Form of Key Executive Severance Agreement between Ducommun Incorporated and each of the individuals listed below. Incorporated by reference to Exhibit 99.2 to Form 8-K dated January 27, 2017. All of the Key Executive Severance Agreements are identical except for the name of the person, the address for notice, and the date of the Agreement:
 Person Date of Agreement
Kathryn M. AndrusJanuary 23, 2017
Douglas L. GrovesJanuary 23, 2017
James S. HeiserJanuary 23, 2017
Amy M. PaulJanuary 23, 2017
Anthony J. ReardonJanuary 23, 2017 
 Jerry L. Redondo January 23, 2017 
 Rosalie F. Rogers January 23, 2017 
 Rajiv A. TataJanuary 24, 2020
Christopher D. Wampler January 23, 2017 
*10.18Employment Letter Agreement dated January 3, 2017 between Ducommun Incorporated and Stephen G. Oswald. Incorporated by reference to Exhibit 99.1 to Form 8-K dated January 9, 2017.
*10.19Employment Letter Agreement dated December 19, 2016 between Ducommun Incorporated and Amy M. Paul.
*10.20Transition Services Letter Agreement dated January 10, 2017 between Ducommun Incorporated and James S. Heiser. Incorporated by reference to Exhibit 99.1 to Form 8-K dated January 16, 2017.

*10.24 Employment Letter Agreement dated January 3, 2017 between Ducommun Incorporated and Stephen G. Oswald. Incorporated by reference to Exhibit 99.1 to Form 8-K dated January 9, 2017.
*10.25 Employment Letter Agreement dated December 19, 2016 between Ducommun Incorporated and Amy M. Paul. Incorporated by reference to Exhibit 10.19 to Form 10-K for the year ended December 31, 2016.
No.    Description*10.26 Transition Services Letter Agreement dated January 10, 2017 between Ducommun Incorporated and James S. Heiser. Incorporated by reference to Exhibit 99.1 to Form 8-K filed on January 17, 2017.
21Subsidiaries of the registrant.
23Consent of Independent Registered Public Accounting Firm.
31.1Certification of Principal Executive Officer.
31.2Certification of Principal Financial Officer.
32Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*10.27 Separation and Release Agreement dated May 14, 2018 between Ducommun Incorporated and Amy M. Paul. Incorporated by reference to Exhibit 10.1 to Form 8-K filed on May 23, 2018.
*10.28 Separation and Release Agreement dated June 26, 2019 between Ducommun Incorporated and Douglas L. Groves. Incorporated by reference to Exhibit 10.1 to Form 8-K filed on June 28, 2019.
21 Subsidiaries of the registrant.
23 Consent of Independent Registered Public Accounting Firm.
31.1 Certification of Principal Executive Officer.
31.2 Certification of Principal Financial Officer.
32 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INSXBRL Instance Document
101.SCH    XBRL Taxonomy Extension Schema
101.CAL    XBRL Taxonomy Extension Calculation Linkbase
101.DEF    XBRL Taxonomy Extension Definition Linkbase
101.LAB    XBRL Taxonomy Extension Label Linkbase
101.PRE        XBRL Taxonomy Extension Presentation Linkbase
___________________
* Indicates an executive compensation plan or arrangement.


ITEM 16. FORM 10-K SUMMARY
Not applicable.

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: March 6, 2017February 20, 2020By: /s/ Stephen G. Oswald
   Stephen G. Oswald
   Chairman, 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 indicated on March 6, 2017.February 20, 2020.
 
Signature  Title
    
/s/ Stephen G. Oswald  Chairman, President and Chief Executive Officer
Stephen G. Oswald  (Principal Executive Officer)
    
/s/ Douglas L. GrovesVice President, Chief Financial Officer and Treasurer
Douglas L. Groves(Principal Financial Officer)
/s/ Christopher D. Wampler  Vice President, Interim Chief Financial Officer and Treasurer, and Controller and Chief Accounting Officer
Christopher D. Wampler  (Principal Financial and Principal Accounting Officer)
/s/ Anthony J. ReardonChairman of the Board
Anthony J. Reardon
    
/s/ Richard A. Baldridge  Director
Richard A. Baldridge   
    
/s/ Joseph C. BerenatoGregory S. Churchill  Director
Joseph C. BerenatoGregory S. Churchill   
    
/s/ Gregory S. ChurchillShirley G. Drazba  Director
Gregory S. ChurchillShirley G. Drazba   
    
/s/ Robert C. Ducommun  Director
Robert C. Ducommun   
    
/s/ Dean M. Flatt  Director
Dean M. Flatt   
    
/s/ Jay L. Haberland  Director
Jay L. Haberland   
    
/s/ Robert D. Paulson  Director
Robert D. Paulson   


8682