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

_________________________________________________________
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberMarch 30, 20172024
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 1-8174001-08174

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

_________________________________________________________
Delaware95-0693330
Delaware95-0693330
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
200 Sandpointe Avenue, Suite 700, Santa Ana, California92707-5759
(Address of principal executive offices)(Zip code)
Registrant’s telephone number, including area code: (657) 335-3665
N/A
(Former name, former address and former fiscal year, if changed since last report)

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 shareDCONew York Stock Exchange
_________________________________________________________
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)submit).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer¨Accelerated filerx
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
As of October 24, 2017,April 29, 2024, the registrant had 11,328,18514,716,338 shares of common stock outstanding.


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DUCOMMUN INCORPORATED AND SUBSIDIARIES
Page
PART I. FINANCIAL INFORMATION
Forward Looking Statements
3
Item 1.
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35
46
57
8
69
710
Item 2.
2126
Item 3.
3037
Item 4.
3038
PART II. OTHER INFORMATION
Item 1.
3138
Item 1A.
3138
Item 2.
39
Item 3.
39
Item 4.
3139
Item 6.5.
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Item 6.
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FORWARD-LOOKING STATEMENTS AND RISK FACTORS
This Quarterly Report on Form 10-Q (“Form 10-Q”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be preceded by, followed by or include words such as “could,” “may,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “expect,” “would,” or similar expressions. These statements are based on the beliefs and assumptions of our management at the time such statements are made. 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-Q regarding: future sales, earnings, cash flow, revenue recognition, uses of cash and other measures of financial performance, projections or expectations for future operations, including costs to complete contracts, goodwill impairment evaluations, useful life of intangible assets, unrecognized tax benefits and effective tax rate, environmental remediation costs, insurance recoveries, industry trends and expectations, including ramp up times for build rates, our plans with respect to restructuring activities, capital expenditures, 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-Q that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by the “Risk Factors” contained within Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 (“Form 10-K”).
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 our Form 10-K and the following:
•our level of indebtedness;
•our ability to service our indebtedness;
•the covenants in our credit facilities impose restrictions that may limit our operating and financial flexibility;
•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 our stock price;
•our amount of debt may require us to raise additional capital to fund acquisitions;
•our end use markets are cyclical and we depend upon a select base of industries and customers;
•a significant portion of our business depends on the U.S. Government defense spending;
•exports of certain of our products and our production facility in Guaymas, Mexico are subject to various export control regulations and authorizations for proposed sales to certain foreign customers;
•contracts with some of our customers give them 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;
•further consolidation in the aerospace industry;
•our ability to execute our growth strategy, which includes evaluating select 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;
•enhanced design, product development, manufacturing, supply chain project management and other skills will be required as we move up the value chain to become a more value added supplier, and we are dependent upon our ability to attract and retain key personnel;
•risks associated with operating and conducting our business outside the United States;
•customer pricing pressures could reduce the demand and/or price for our products and services;
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•our products and processes are subject to risk of obsolescence as a result of changes in technology and evolving industrial and regulatory standards;
•we may not have the ability to renew facilities leases on terms favorable to us and relocation of operations presents risks due to business interruptions;
•we are subject to a number of procurement laws with which we must comply;
•our operations are subject to numerous extensive, complex, costly and evolving laws, regulations and restrictions, including the Defense Contract Audit Agency and cybersecurity requirements;
•possible goodwill and other asset impairments;
•the risk of environmental liabilities and our environmental, social and governance, and sustainability responsibilities;
•we may be subject to litigation, other legal proceedings and indemnity claims;
•our ability to implement changes in estimates when bidding on fixed-price contracts;
•unanticipated changes in our tax provision or exposure to additional income tax liabilities;
•our ability to accurately report our financial results or prevent fraud if our internal control over financial reporting is not effective;
•labor disruptions and the ability of our suppliers to meet the quality and delivery expectations of our customers;
•cybersecurity attacks;
•assertions by third parties of violations of intellectual property rights;
•damage or destruction of our facilities caused by natural disasters; and
•the effects of the aftermath of the COVID-19 pandemic.
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-Q. 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-Q, except as required by law.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Ducommun Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(InDollars in thousands, except share and per share data)

  September 30,
2017		 December 31,
2016
Assets    
Current Assets    
Cash and cash equivalents $3,689
 $7,432
Accounts receivable, net of allowance for doubtful accounts of $620 and $495 at September 30, 2017 and December 31, 2016, respectively 78,459
 76,239
Inventories 137,157
 119,896
Production cost of contracts 11,389
 11,340
Other current assets 11,090
 11,034
Total Current Assets 241,784
 225,941
Property and equipment, net of accumulated depreciation of $143,662 and $135,484 at September 30, 2017 and December 31, 2016, respectively 114,034
 101,590
Goodwill 117,435
 82,554
Intangibles, net 117,285
 101,573
Non-current deferred income taxes 286
 286
Other assets 3,025
 3,485
Total Assets $593,849
 $515,429
Liabilities and Shareholders’ Equity    
Current Liabilities    
Current portion of long-term debt $—
 $3
Accounts payable 68,509
 57,024
Accrued liabilities 29,799
 29,279
Total Current Liabilities 98,308
 86,306
Long-term debt, less current portion 222,394
 166,896
Non-current deferred income taxes 31,253
 31,417
Other long-term liabilities 17,245
 18,707
Total Liabilities 369,200
 303,326
Commitments and contingencies (Notes 12, 14) 
 
Shareholders’ Equity    
Common stock - $0.01 par value; 35,000,000 shares authorized; 11,324,917 and 11,193,813 issued at September 30, 2017 and December 31, 2016, respectively 113
 112
Additional paid-in capital 78,624
 76,783
Retained earnings 151,880
 141,287
Accumulated other comprehensive loss (5,968) (6,079)
Total Shareholders’ Equity 224,649
 212,103
Total Liabilities and Shareholders’ Equity $593,849
 $515,429
 March 30,
2024		December 31,
2023
Assets
Current Assets
Cash and cash equivalents$32,066 $42,863 
Accounts receivable, net of allowance for credit losses of $2,071 and $2,006 at March 30, 2024 and December 31, 2023, respectively104,499 104,692 
Contract assets197,056 177,686 
Inventories208,959 199,201 
Production cost of contracts7,977 7,778 
Other current assets13,388 17,349 
Total Current Assets563,945 549,569 
Property and Equipment, Net of Accumulated Depreciation of $184,926 and $181,412 at March 30, 2024 and December 31, 2023, respectively112,108 111,379 
Operating Lease Right-of-Use Assets27,489 29,513 
Goodwill244,600 244,600 
Intangibles, Net162,080 166,343 
Deferred Income Taxes641 641 
Other Assets21,190 18,874 
Total Assets$1,132,053 $1,120,919 
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable$84,293 $72,265 
Contract liabilities57,790 53,492 
Accrued and other liabilities29,311 42,260 
Operating lease liabilities7,745 7,873 
Current portion of long-term debt9,375 7,813 
Total Current Liabilities188,514 183,703 
Long-Term Debt, Less Current Portion253,929 256,961 
Non-Current Operating Lease Liabilities21,016 22,947 
Deferred Income Taxes4,439 4,766 
Other Long-Term Liabilities18,608 16,448 
Total Liabilities486,506 484,825 
Commitments and Contingencies (Notes 10, 12)
Shareholders’ Equity
Common Stock - $0.01 par value; 35,000,000 shares authorized; 14,706,626 and 14,600,766 shares issued and outstanding at March 30, 2024 and December 31, 2023, respectively147 146 
Additional Paid-In Capital206,557 206,197 
Retained Earnings428,829 421,980 
Accumulated Other Comprehensive Income10,014 7,771 
Total Shareholders’ Equity645,547 636,094 
Total Liabilities and Shareholders’ Equity$1,132,053 $1,120,919 
See accompanying notes to Condensed Consolidated Financial Statements.

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

 Three Months Ended Nine Months Ended
 September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016
Net Revenues $138,690
 $132,571
 $415,925
 $408,156
Net Revenues
Net Revenues
Cost of Sales
Cost of Sales
Cost of Sales 112,681
 107,348
 338,798
 329,749
Gross Profit 26,009
 25,223
 77,127
 78,407
Gross Profit
Gross Profit
Selling, General and Administrative Expenses 18,814
 17,171
 59,361
 58,796
Selling, General and Administrative Expenses
Selling, General and Administrative Expenses
Restructuring Charges
Restructuring Charges
Restructuring Charges
Operating Income
Operating Income
Operating Income 7,195
 8,052
 17,766
 19,611
Interest Expense (2,088) (1,945) (5,588) (6,279)
Gain on Divestitures —
 —
 —
 18,815
Interest Expense
Interest Expense
Other Income
Other Income
Other Income 488
 141
 488
 141
Income Before Taxes 5,595
 6,248
 12,666
 32,288
Income Before Taxes
Income Before Taxes
Income Tax Expense
Income Tax Expense
Income Tax Expense 940
 1,234
 2,073
 9,863
Net Income $4,655
 $5,014
 $10,593
 $22,425
Net Income
Net Income
Earnings Per Share
Earnings Per Share
Earnings Per Share        
Basic earnings per share $0.41
 $0.45
 $0.94
 $2.01
Basic earnings per share
Basic earnings per share
Diluted earnings per share
Diluted earnings per share
Diluted earnings per share $0.41
 $0.44
 $0.92
 $1.99
Weighted-Average Number of Common Shares Outstanding        
Weighted-Average Number of Common Shares Outstanding
Weighted-Average Number of Common Shares Outstanding
Basic
Basic
Basic 11,241
 11,169
 11,276
 11,141
Diluted 11,486
 11,310
 11,556
 11,261
Diluted
Diluted
See accompanying notes to Condensed Consolidated Financial Statements.

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Ducommun Incorporated and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(InDollars in thousands)
  Three Months Ended Nine Months Ended
  September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016
Net Income $4,655
 $5,014
 $10,593
 $22,425
Other Comprehensive Income (Loss)        
Amortization of actuarial losses and prior service costs, net of tax benefit of $74 and $71 for the three months ended September 30, 2017 and October 1, 2016, respectively, and $225 and $212 for the nine months ended September 30, 2017 and October 1, 2016, respectively 128
 120
 382
 360
Change in unrealized gains and losses on cash flow hedges, net of tax of $17 and zero for the three months ended September 30, 2017 and October 1, 2016, respectively, and $161 and $326 for the nine months ended September 30, 2017 and October 1, 2016, respectively (28) —
 (271) (556)
Other Comprehensive Income (Loss) 100
 120
 111
 (196)
Comprehensive Income $4,755
 $5,134
 $10,704
 $22,229
Three Months Ended
March 30,
2024		April 1,
2023
Net Income$6,849 $5,231 
Other Comprehensive Income, Net of Tax:
Amortization of actuarial losses and prior service costs, net of tax of $14 and $13 for the three months ended March 30, 2024 and April 1, 2023, respectively42 42 
Change in net unrealized gains (losses) on cash flow hedges, net of tax of $672 and $(662) for the three months ended March 30, 2024 and April 1, 2023, respectively2,201 (2,130)
Other Comprehensive Income, Net of Tax2,243 (2,088)
Comprehensive Income$9,092 $3,143 
See accompanying notes to Condensed Consolidated Financial Statements.

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Ducommun Incorporated and Subsidiaries
Condensed Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)
(Dollars in thousands)
 Shares
Outstanding		Common
Stock		Additional
Paid-In
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Total
Shareholders’
Equity
Balance at December 31, 202212,106,285 121 112,042 406,052 7,745 525,960 
Net income— — — 5,231 — 5,231 
Other comprehensive income, net of tax— — — — (2,088)(2,088)
Employee stock purchase plan26,833 — 1,307 — — 1,307 
Stock options exercised25,561 — 737 — — 737 
Stock awards vested173,249 2 (2)— — — 
Stock repurchased related to the exercise of stock options and stock awards vested(100,224)(1)(5,479)— — (5,480)
Stock-based compensation— — 2,717 — — 2,717 
Balance at April 1, 202312,231,704 $122 $111,322 $411,283 $5,657 $528,384 
Balance at December 31, 202314,600,766 146 206,197 421,980 7,771 636,094 
Net income— — — 6,849 — 6,849 
Other comprehensive income, net of tax— — — — 2,243 2,243 
Employee stock purchase plan28,773 — 1,190 — — 1,190 
Stock options exercised1,625 — 47 — — 47 
Stock awards vested152,569 2 (2)— — — 
Stock repurchased related to the exercise of stock options and stock awards vested(77,107)(1)(3,764)— — (3,765)
Stock-based compensation— — 2,889 — — 2,889 
Balance at March 30, 202414,706,626 $147 $206,557 $428,829 $10,014 $645,547 
See accompanying notes to Condensed Consolidated Financial Statements.

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Ducommun Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(InDollars in thousands)
  Nine Months Ended
  September 30,
2017		 October 1,
2016
Cash Flows from Operating Activities    
Net Income $10,593
 $22,425
Adjustments to Reconcile Net Income to    
Net Cash Provided by Operating Activities:    
Depreciation and amortization 17,149
 17,420
Gain on divestitures —
 (18,815)
Stock-based compensation expense 4,264
 2,579
Deferred income taxes (164) (1,602)
Provision for (recovery of) doubtful accounts 125
 (26)
Other (2,217) (4,923)
Changes in Assets and Liabilities:    
Accounts receivable (1,427) 5,777
Inventories (15,529) (15,055)
Production cost of contracts (599) (1,437)
Other assets 458
 7,095
Accounts payable 13,801
 19,586
Accrued and other liabilities 903
 (5,453)
Net Cash Provided by Operating Activities 27,357
 27,571
Cash Flows from Investing Activities    
Purchases of property and equipment (24,599) (12,712)
Proceeds from sale of assets 3
 —
Insurance recoveries related to property and equipment 288
 —
Proceeds from divestitures —
 55,272
Payments for purchase of Lightning Diversion Systems, LLC, net of cash acquired (59,178) —
Net Cash (Used in) Provided by Investing Activities (83,486) 42,560
Cash Flows from Financing Activities    
Borrowings from senior secured revolving credit facility 320,500
 29,700
Repayments of senior secured revolving credit facility (255,800) (29,700)
Repayments of senior unsecured notes and term loans (10,000) (65,000)
Repayments of other debt (3) (22)
Net cash paid upon issuance of common stock under stock plans (2,311) (1,097)
Net Cash Provided by (Used in) Financing Activities 52,386
 (66,119)
Net (Decrease) Increase in Cash and Cash Equivalents (3,743) 4,012
Cash and Cash Equivalents at Beginning of Period 7,432
 5,454
Cash and Cash Equivalents at End of Period $3,689
 $9,466
Three Months Ended
March 30,
2024		April 1,
2023
Cash Flows from Operating Activities
Net Income$6,849 $5,231 
Adjustments to Reconcile Net Income to
Net Cash Used in Operating Activities:
Depreciation and amortization8,353 7,989 
Non-cash operating lease cost2,071 1,967 
Inventory write down and property and equipment impairment due to restructuring— 428 
Stock-based compensation expense4,258 3,081 
Deferred income taxes(1,013)(1,055)
Provision for credit losses65 316 
Recognition of insurance recoveries— (3,886)
Other218 221 
Changes in Assets and Liabilities:
Accounts receivable128 7,868 
Contract assets(19,370)(3,026)
Inventories(9,758)(22,788)
Production cost of contracts(273)(299)
Other assets4,343 352 
Accounts payable12,257 9,117 
Contract liabilities4,298 (7,386)
Operating lease liabilities(2,059)(1,866)
Accrued and other liabilities(12,015)(15,192)
Net Cash Used in Operating Activities(1,648)(18,928)
Cash Flows from Investing Activities
Purchases of property and equipment(4,974)(5,362)
Net Cash Used in Investing Activities(4,974)(5,362)
Cash Flows from Financing Activities
Borrowings from senior secured revolving credit facility10,000 7,500 
Repayments of senior secured revolving credit facility(10,000)(7,500)
Repayments of term loans(1,563)(1,562)
Repayments of other debt(84)(86)
Net cash paid upon issuance of common stock under stock plans(2,528)(3,193)
Net Cash Used in Financing Activities(4,175)(4,841)
Net Decrease in Cash and Cash Equivalents(10,797)(29,131)
Cash and Cash Equivalents at Beginning of Period42,863 46,246 
Cash and Cash Equivalents at End of Period$32,066 $17,115 
See accompanying notes to Condensed Consolidated Financial Statements.

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Ducommun Incorporated and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)


Note 1. Summary of Significant Accounting Policies
Description of Business
We are a leading global provider of engineeringinnovative, value-added proprietary products and manufacturing servicessolutions 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”). Our subsidiariesoperations are organized into two strategicprimary businesses: the Electronic Systems segment (“Electronic Systems”) and the Structural Systems segment (“Structural Systems”), 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, industrialA&D and medical 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. Both reportable operating segments follow the same accounting principles.
Basis of Presentation
The unaudited condensed 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. The December 31, 20162023 condensed consolidated balance sheet data was derived from audited financial statements, but does not contain all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”).
Our significant accounting policies were described in Part IV, Item 15(a)(1), “Note 1. Summary of Significant Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2016. We followed the same accounting policies for interim reporting.2023 (“2023 Form 10-K”). The financial information included in this Quarterly Report on Form 10-Q (“Form 10-Q”) should be read in conjunction with our Annual Report onthe 2023 Form 10-K for the year ended December 31, 2016.10-K.
In the opinion of management, all adjustments, consisting ofincluding recurring accruals, have been made that are necessary to fairly state our condensed consolidated financial position, statements of income, comprehensive income, changes in shareholders’ equity, and cash flows in accordance with GAAP for the periods covered by this Quarterly Report on Form 10-Q. The results of operations for the three and nine months ended SeptemberMarch 30, 20172024 are not necessarily indicative of the results to be expected for the full year ending December 31, 2017.2024.
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.
Certain reclassifications have been made to prior period amounts to conform to the current year’s presentation.
Use of Estimates
Certain amounts and disclosures included in the unaudited condensed consolidated financial statements requiresrequire management to make estimates and judgments that affect the amounts of assets, liabilities (including forward loss reserves)contract liabilities), 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 may differ from these estimates.

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Supplemental Cash Flow Information
  
(In thousands)
Nine Months Ended
  September 30,
2017		 October 1,
2016
Interest paid $4,867
 $5,283
Taxes paid $1,969
 $5,539
Non-cash activities:    
     Purchases of property and equipment not paid $890
 $687
(Dollars in thousands)
Three Months Ended
March 30,
2024		April 1,
2023
Interest paid, net$3,975 $4,010 
Taxes paid, net$92 $8,167 
Non-cash activities:
     Purchases of property and equipment not paid$578 $814 
Earnings 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 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 income and weighted-average number of common shares outstanding used to compute earnings per share were as follows:
(Dollars in thousands,
except per share data)
Three Months Ended
 March 30,
2024		April 1,
2023
Net income$6,849 $5,231 
Weighted-average number of common shares outstanding
Basic weighted-average common shares outstanding14,694 12,195 
Dilutive potential common shares243 343 
Diluted weighted-average common shares outstanding14,937 12,538 
Earnings per share
Basic$0.47 $0.43 
Diluted$0.46 $0.42 
  
(In thousands, except per share data)
Three Months Ended
 
(In thousands, except per share data)
Nine Months Ended
  September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016
Net income $4,655
 $5,014
 $10,593
 $22,425
Weighted-average number of common shares outstanding        
Basic weighted-average common shares outstanding 11,241
 11,169
 11,276
 11,141
Dilutive potential common shares 245
 141
 280
 120
Diluted weighted-average common shares outstanding 11,486
 11,310
 11,556
 11,261
Earnings per share        
Basic $0.41
 $0.45
 $0.94
 $2.01
Diluted $0.41
 $0.44
 $0.92
 $1.99
Potentially dilutive stock options and stock units to purchase common stock,awards, as shown below, were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive. However, these sharesawards may be potentially dilutive common shares in the future.
  
(In thousands)
Three Months Ended
 
(In thousands)
Nine Months Ended
  September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016
Stock options and stock units 166
 515
 142
 617
(In thousands)
Three Months Ended
 March 30,
2024		April 1,
2023
Stock options and stock units2 28 
Fair Value
Assets and liabilities that are measured, recorded or disclosed at fair value on a recurring basis are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs 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 lowest level, includes fair values estimated using significant unobservable inputs.
Divestitures
On January 22, 2016, we entered into an agreement,We have money market funds which are included as cash and completedcash equivalents. We also have forward interest rate swap agreements and the sale on the same date, to sell our operation located in Pittsburgh, Pennsylvania for a preliminary sales price of $38.5 million in cash. We divested this facility as part of our overall strategy to streamline operations, which included consolidating our footprint. However, the salefair value of the Pittsburgh operation did not representforward interest rate swap agreements was determined using pricing models that use observable market inputs as of the balance sheet date, a strategic shift in our business and thus, was includedLevel 2 measurement.
There were no transfers between Level 1, Level 2, or Level 3 financial instruments in the ongoing operating results in the condensed consolidated income statements for all periods presented. Preliminary net assets sold were $24.0 million, net liabilities sold were $4.0 million, and direct transaction costs incurred were $0.2 million, resulting in a preliminary gain on divestiture of

$18.3 million. In the fourth quarter of 2016, we finalized the sale with a final sales price of $38.6 million in cash. The final 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 Huntsville, Alabama and Iuka, Mississippi (collectively, “Miltec”) operations for a preliminary sales price of $14.6 million, in cash, subject to post-closing adjustments. We divested this facility as part of our overall strategy to streamline operations, which included consolidating our footprint. However, the sale of the Miltec operation did not represent a strategic shift in our business and thus, was included in the ongoing operating results in the condensed consolidated income statements for all periods presented. We completed the sale onthree months ended March 25, 2016. Preliminary net assets sold were $15.4 million, net liabilities sold were $2.6 million, and direct transaction costs incurred during the current period were $1.3 million, resulting in a preliminary gain on divestiture of $0.5 million. In the fourth quarter of 2016, we finalized the sale with a final sales price of $13.3 million in cash. The final 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.30, 2024.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid instruments purchased with original maturities of three months or less. These assets are valued at cost, which approximates fair value, whichand we classify as Level 1. See Fair Value above.
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Derivative Instruments
We recognize derivative instruments on our condensed 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. In November 2021, we entered into forward interest rate swap agreements with an aggregate notional amount of $150.0 million, all with an effective date of January 1, 2024 (“Forward Interest Rate Swaps”), to manage our exposure to interest rate movements on a portion of our debt. At the time we entered into the Forward Interest Rate Swaps, there was a high probability of forecasted interest payments on our debts occurring and the swaps were highly effective in offsetting those interest payments; therefore, we elected to apply cash flow hedge accounting. In July 2022, as a result of refinancing all our existing debt, which allowed borrowing based on a Secured Overnight Financing Rate (“SOFR”), we were required to complete an amendment of the Forward Interest Rate Swaps from One Month London Interbank Offered Rate (“LIBOR”) to One Month Term SOFR (“Amended Forward Interest Rate Swaps”), which occurred on the same day. After the transition of the Forward Interest Rate Swaps and debt to SOFR was completed, we determined the hedging relationships were still highly effective as of the amendment date. See Note 4 and Note 8. As of SeptemberMarch 30, 2017,2024, 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.hedged item. 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 in the condensed 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. Prior to the Amended Forward Interest Rate Swaps being effective on January 1, 2024, we only recorded the changes in fair value of the derivative instruments that were highly effective and that were designated and qualified as cash flow hedges prior to the effective date. See Note 4.
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 condensed consolidated balance sheets and recognize subsequent changes in its fair value in our current period earnings.
Inventories
Inventories are stated at the lower of cost or net 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.as raw materials are placed into production. 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.
Production Cost The majority of Contracts
Production cost ofour revenues are recognized over time, however, for revenue 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 soldwhere revenue is recognized using the unitspoint in time method, inventory is not reduced until it is shipped or transfer of delivery method. We review the value of the production cost of contracts on a quarterly basis to ensure when addedcontrol to the estimated cost to complete, the value is not greater than the estimated realizable valuecustomer has occurred. Our ending inventory consists of the related contracts.raw materials, work-in-process, and finished goods.
Accumulated Other Comprehensive LossIncome
Accumulated other comprehensive loss,income, as reflected on the condensed consolidated balance sheets under the equity section, was comprised 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
ProvisionOur customers typically engage us to manufacture products based on designs and specifications provided by the end-use customer. This requires the building of tooling and manufacturing first article inspection products (prototypes) before volume manufacturing. Contracts with our customers generally include a termination for Estimated Lossesconvenience 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, “Revenue from Contracts with Customers” (“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 Contractsour 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.
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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 using the over time method.
The majority of our performance obligations are satisfied over time as work progresses. Typically, revenue is recognized over 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 firm 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, known as estimates at completion (“EACs”), are based on various assumptions to project the outcome of future events that can span multiple months or years. These assumptions include among others, labor productivity and availability; the complexity of the work to be performed; the cost and availability of materials; overhead cost rates; and the performance of subcontractors. As a significant change in one or more of these estimates could affect the progress completed (and related profitability) on our contracts, we review and update our EACs on a regular basis. We recognize such EAC adjustments under the cumulative catch-up method. Under this method, the impact of any adjustment is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate.
Net EAC adjustments had the following impact on our operating results:
(Dollars in thousands)
Three Months Ended
 March 30,
2024		April 1,
2023
Total net revenues$(1,935)$(3,256)
Operating income$(1,935)$(3,256)

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 and have met the shipping terms, a contract liability is created for the advance or progress payment. When a contract liability and a contract asset exist on the same contract, we report it on a net basis.
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 us 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. Our 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. The provision for estimated losses on contracts is included as part of contract liabilities on the condensed consolidated balance sheets. As of March 30, 2024 and December 31, 2023, provision for estimated losses on contracts were $4.8 million and $5.4 million, respectively. It is reasonably possible we may incur additional losses in the future.
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 sales using the over time revenue recognition model. We review the value of the production cost of contracts on a quarterly basis to ensure when added to the estimated cost to complete, the value is not greater than the estimated realizable
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value of the related contracts. As of March 30, 2024 and December 31, 2023, production cost of contracts were $8.0 million and $7.8 million, respectively.
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 time transfer of control occurs plus the estimated losses on contracts. When a contract liability and a contract asset exist on the same contract, we report it on a net basis.
Contract assets and contract liabilities from revenue contracts with customers are as follows:
(Dollars in thousands)
March 30,
2024		December 31,
2023
Contract assets$197,056 $177,686 
Contract liabilities$57,790 $53,492 
The increase in our contract assets as of March 30, 2024 compared to December 31, 2023 was primarily due to a net increase of products in work in process in the current period.
The increase in our contract liabilities as of March 30, 2024 compared to December 31, 2023 was primarily due to a net increase of advance or progress payments received from our customers in the current period. We recognized $16.4 million of the contract liabilities as of December 31, 2023 as revenues during the three months ended March 30, 2024.
Performance obligations are defined as customer placed purchase orders (“POs”) with firm fixed price and firm delivery dates. Our remaining performance obligations as of March 30, 2024, December 31, 2023, and April 1, 2023 totaled $824.1 million, $826.7 million, and $797.1 million, respectively. Prior period amounts have been adjusted to correct for identified misstatements in the calculation of the remaining performance obligations. Of the remaining performance obligations as of March 30, 2024, 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 the remainder of 2025 and beyond.
Revenue by Category
In addition to the revenue categories disclosed above, the following table reflects our revenue disaggregated by major end-use market:
(Dollars in thousands)
Three Months Ended
March 30,
2024		April 1,
2023
Consolidated Ducommun
Military and space$98,929 $97,670 
Commercial aerospace79,917 71,820 
Industrial12,001 11,701 
Total$190,847 $181,191 
Electronic Systems
Military and space$72,505 $73,327 
Commercial aerospace23,033 20,598 
Industrial12,001 11,701 
Total$107,539 $105,626 
Structural Systems
Military and space$26,424 $24,343 
Commercial aerospace56,884 51,222 
Total$83,308 $75,565 
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Recent Accounting Pronouncements
New Accounting Guidance Adopted in 2017
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 was effective for us beginning January 1, 2017. The adoption of this standard did not have a significant impact on our condensed consolidated financial statements.
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 was effective for us beginning January 1, 2017. The adoption of this standard did not have a significant dollar impact on our condensed 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 was effective for us beginning January 1, 2017. The adoption of this standard did not have a significant impact on our condensed consolidated financial statements.
In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330)” (“ASU 2015-11”), which requires inventory within the scope of ASU 2015-11 to be measured at the lower of cost or net realizable value. Subsequent measurement is unchanged for inventory measured using last-in, first-out (“LIFO”) or the retail inventory value. The new guidance was effective for us beginning January 1, 2017. The adoption of this standard did not have a significant impact on our condensed consolidated financial statements.
Recently Issued Accounting Standards
In August 2017,March 2024, the FASBFinancial Accounting Standards Board (“FASB”) issued ASU 2017-12, “Derivatives and Hedging (Topic 815): TargetedAccounting Standards Update (“ASU”) 2024-02, “Codification Improvements - Amendments to Accounting for Hedging”Remove References to the Concepts Statements” (“ASU 2017-12”2024-02”), which intendsremoved references to improvevarious FASB Concepts Statements and simplify accounting rules around hedge accounting. ASU 2017-12 refinesupdates technical corrections such as conforming amendments, clarification to guidance, simplifications to wording or the structure of guidance, 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 face of the financial statements and in the footnotes. The new guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, which will be our interim period beginning January 1, 2019. Early adoption is permitted, including adoption in any interim period after the issuance of ASU 2017-12. We are evaluating the impact of this standard.
In May 2017, the FASB issued ASU 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”), which provides clarity on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. 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, including adoption in any interim period. The amendments should be applied prospectively to an award modified on or after the adoption date. We are evaluating the impact of this standard.
In March 2017, the FASB issued ASU 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs” (“ASU 2017-07”), which require an employer to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments also allow only the service cost component to be eligible for capitalization when applicable. 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 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 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 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.improvements. The new guidance is effective for fiscal years beginning after December 15, 2018, including2024, which is our annual period beginning January 1, 2025. Early adoption is permitted. We are evaluating the impact of this standard.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which provides more transparency about tax information primarily related to the rate reconciliation and the income taxes paid. The new guidance is effective for fiscal years beginning after December 15, 2024, which will be our annual period beginning January 1, 2025. Early adoption is permitted. We are evaluating the impact of this standard.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The new guidance is effective for fiscal years beginning after December 15, 2023, which is our annual period beginning January 1, 2024, and interim periods within those fiscal years beginning after December 15, 2024, which will be our interim period beginning January 1, 2019.2025. Early adoption is permitted. We are evaluating the impact of this standard and currently anticipate it will impact our condensed consolidated financial statements.standard.
In May 2014,October 2023, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative” (“ASU 2014-09”2023-06”), which outlinesincorporates updates to the Accounting Standards Codification to align certain SEC disclosure requirements. The amendments impact a new, single comprehensive model forvariety of topics but are relatively narrow in nature. For entities required to use in accounting for revenue arising 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)comply with the customer, (ii) identifyingSEC’s existing disclosure requirements, 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 wheneffective date for each performance obligation is satisfied. Thus, it depicts the transfer 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 deferredamendment will be 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. Earlythe removal of the disclosure requirement from SEC Regulation S-X or SEC Regulation S-K, with early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.prohibited. The new guidance is effective for us beginning January 1, 2018 and provides us additional time to evaluateamendments should be applied prospectively. We are evaluating the impact that ASU 2014-09 will have on our condensed consolidated financial statements. We are in the process of completing the implementation phase of the project. We have noted that under ASU 2014-09, the percentage of completion, unit of delivery method of recognizing revenue is no longer a viable method for us and production costs will generally not be deferred. Instead, revenue will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). Given the nature of our products and terms and conditions in the majority of our contracts, our customer obtains control as we perform work under the contract. As such, most of our revenues will be recognized sooner as a result of changing to an over time method (i.e., cost-to-cost plus a reasonable profit) from a point-in-time method, which is our current method for recognizing revenue. This will result in eliminating the majority of our work-in-process and finished goods inventory and a significant increase in unbilled accounts receivables (i.e., contract assets). This change will also impact our information technology systems, systems of internal controls over financial reporting, and certain accounting policies, requiring the usage of more judgement in determining our revenue recognition. Further, we have selected a software solution and are in the process of implementing the software solution to comply with this new accounting standard. Finally, we will adopt the new accounting standard using the modified retrospective method, under which the cumulative effect of initially 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 2018.


Note 2. Business CombinationCombinations
On September 11, 2017,BLR Aerospace, L.L.C. Acquisition
In April 2023, we acquired 100.0% of the outstanding equity interests of Lightning Diversion Systems, LLCBLR Aerospace, L.L.C. (“LDS”BLR”), a privately-held worldwide leader in lightning protectionleading provider of aerodynamic systems servingthat enhance the aerospaceproductivity, performance, and defense industries,safety of rotary and fixed-wing aircraft on commercial and military platforms. BLR is located in Huntington Beach, California.Everett, Washington. The acquisition of LDS is part ofBLR added to our strategy to enhance revenue growth by focusing on advanced proprietary technology on various aerospacediversify and defense platforms.offer more customized, value-driven engineered products with aftermarket opportunities.
The initial purchase price for LDSBLR was $60.0$115.0 million, net of cash acquired, all payable in cash. Uponcash, subject to adjustments for working capital. We paid a gross aggregate of $117.0 million in cash upon the closing of the transaction. Subsequent to the closing of the transaction, we paid $61.4 million withduring the remaining $0.6 million paid in October 2017, subsequent to our quarterthree months ended September 30, 2017.2023, the working capital was finalized, resulting in an immaterial adjustment for a final purchase price of $114.4 million, net of cash acquired. We preliminarily allocated the gross purchase price of $62.0$117.0 million to the assets acquired and liabilities assumed at their estimated fair values. The excess of the purchase price over the aggregate fair values isof the net assets was recorded as goodwill. The allocation is subject to revision as the estimates of fair value of current assets, non-current assets, identifiable intangible assets, and current liabilities are based on preliminary information and are subject to refinement. We are in the process of reviewing third party valuations of certain assets.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):
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Estimated
Fair Value
Cash $2,223
Accounts receivable 918
Inventories 1,732
Other current assets 54
Property and equipment 138
Intangible assets 22,400
Goodwill 34,881
Total assets acquired 62,346
Current liabilities (325)
Total liabilities assumed (325)
Total preliminary purchase price allocation $62,021
Estimated
Fair Value
Cash$2,656 
Accounts receivable4,149 
Inventories12,011 
Other current assets891 
Property and equipment2,632 
Operating lease right-of-use assets874 
Intangible assets55,500 
Goodwill41,193 
Total assets acquired119,906 
Current liabilities(2,145)
Other non-current liabilities(727)
Total liabilities assumed(2,872)
Total purchase price allocation$117,034 
 
Useful Life
(In years)
 
Estimated
Fair Value
(In thousands)
Useful Life
(In years)		Useful Life
(In years)		Estimated
Fair Value
(In thousands)
Intangible assets:    
Technology
Technology
Technology
Customer relationships 15 $21,100
Trade name 15 1,300
 
 $22,400
$
The intangible assets acquired of $22.4$55.5 million were preliminarily determined based on the estimated fair values using valuation techniques consistent with the income approach to measure fair value.value, which represented Level 3 fair value measurements. 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 offor technology and trade name were assessed using the identifiable intangible assets were estimated using several valuation methodologies, which represented Level 3 fair value measurements. Therelief from royalty methodology, while the value for customer relationships was estimated based on a multi-period excess earnings approach. Inputs to the income approach whilemodels and other aspects of the value forallocation of the trade name was assessed using the relief from royalty methodology. Further, we analyzedpurchase price require judgment. The more significant inputs used in the technology acquiredintangible asset valuation included (i) future revenues, (ii) the technology decay rate, (iii) the royalty rate, and concluded no fair value should be assigned to it.(iv) the discount rate. The more significant inputs used in the customer relationships intangible asset valuation included (i) future revenues, (ii) the projected earnings before interest, taxes, and amortization (“EBITA”) margins, (iii) the customer attrition rates, and (iv) the discount rate.
The goodwill of $34.9$41.2 million arising from the acquisition is preliminarily 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 ElectronicStructural Systems segment. Since the LDSThe BLR acquisition, for tax purposes, wasis deemed an asset acquisition and thus, the goodwill recognized is deductible for income tax purposes.
Acquisition related transaction costs arewere not included as components of consideration transferred but have been expensed as incurred. Total acquisition-related transaction costs incurred by us were $0.3zero and $0.8 million in bothduring the three months ended March 30, 2024 and nine months ended September 30, 2017April 1, 2023, respectively, and charged to selling, general and administrative expenses.
LDS’BLR’s results of operations have been included in our condensed consolidated statements of income since the date of acquisition as part of the ElectronicStructural Systems segment.segment, and its revenues were less than two percent of total company revenues since the date of acquisition. Pro forma results of operations of the LDSBLR acquisition during the three and nine months ended September 30, 2017 have not been presented as the effect of the LDSBLR acquisition was not material to our financial results.


Note 3. Restructuring Activities
Summary of 2015 Restructuring Plans
In September 2015, management approved and commenced implementation of several restructuring actions, including organizational re-alignment, consolidation and relocation of the New York facilities that was completed in December 2015, closure of the Houston facility that was completed in December 2015, 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 million for severance and benefits and loss on early exit from leases, which were charged to selling, general and administrative expenses. We do not expect to record additional expenses related to these restructuring plans.
As of September 30, 2017, we have accrued $0.4 million for loss on early exit from a lease in the Structural Systems segment.

Summary of 20162022 Restructuring Plan
In May 2016, management approved and commenced implementation of the closure of one of our Tulsa facilities that was completed in June 2016, and was part of our overall strategy to streamline operations. We have recorded cumulative expenses of $0.2 million for severance and benefits and loss on early exit from a lease, which were charged to selling, general and administrative expenses. We do not expect to record additional expenses related to this restructuring plan.
As of September 30, 2017, we have accrued $0.1 million for loss on early exit from a lease in the Electronic Systems segment.
Our restructuring activities in the nine months ended September 30, 2017 were as follows (in thousands):
  December 31, 2016 Nine Months Ended September 30, 2017 September 30, 2017
  Balance Charges Cash Payments Change in Estimates Balance
Lease termination $654
 $—
 $(235) $64
 $483
Ending balance $654
 $—
 $(235) $64
 $483
Summary of 2017 Restructuring Plan
Subsequent to our quarter ended September 30, 2017, in November 2017,April 2022, management approved and commenced a restructuring plan that is expectedwill better position us for stronger performance. The restructuring plan will mainly reduce headcount and consolidate facilities. As a result of this restructuring plan, we analyzed the need to increasewrite-down inventory and impair long-lived assets, including operating efficiencies. We currentlylease right-of-use assets. During
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the three months ended March 30, 2024, we recorded total charges of $1.4 million. Cumulative through the three months ended March 30, 2024, we recorded aggregate total charges of $22.9 million ($0.8 million of which was recorded as cost of sales). As of March 30, 2024, we estimate the remaining amount of charges related to this initiative will result in $22.0be $4.0 million to $25.0$6.0 million in total pre-tax restructuring charges through 2018, with an estimate of $10.5 million to be recorded during the fourth quarter of 2017.2024. Of these charges, we estimate $9.0$3.5 million to $10.0$5.0 million are expected to be cash payments for employee separation and other facility consolidation related expenses, with the remaining $13.0and $0.5 million to $15.0$1.0 million expected to be non-cash charges for write-down of inventory and impairment of long-lived assets. On an annualized basis, beginning in 2019,
In the Electronics Systems segment, we estimate theserecorded charges of $0.4 million and $0.1 million during the three months ended March 30, 2024 for severance and benefits that were classified as restructuring actions will result incharges and other restructuring charges, respectively. Cumulative through the three months ended March 30, 2024, we recorded total savingscharges for severance and benefits that were classified as restructuring charges, accelerated depreciation of $14.0 million.property and equipment that was classified as restructuring charges, charges for inventory write down that was classified as cost of sales, and other restructuring of $10.0 million, $0.3 million, $0.3 million, and $0.2 million, respectively.


Note 4. Fair Value Measurements
Fair value is definedIn the Structural Systems segment, we recorded $0.2 million and $0.7 million during the three months ended March 30, 2024 for severance and benefits that were classified as restructuring charges and other restructuring charges, respectively. Cumulative through the pricethree months ended March 30, 2024, we recorded total charges for severance and benefits that would be receivedwere classified as restructuring charges, accelerated depreciation of property and equipment/impairment of property and equipment that was classified as restructuring charges, charges for an asset or the priceinventory write down 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 usewas classified as cost of observable inputssales, and minimize the useother restructuring 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;$6.1 million, $2.0 million, $0.5 million, 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. $3.5 million, respectively.
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 basisrestructuring activities during the three months ended March 30, 2024 were as follows (in thousands):
December 31, 2023Three Months Ended March 30, 2024March 30, 2024
BalanceChargesCash PaymentsNon-Cash PaymentsChange in EstimatesBalance
Severance and benefits$5,389 $536 $(1,404)$— $— $4,521 
Property and equipment accelerated depreciation due to restructuring— — — — — — 
Inventory write down— — — — — 
Other— 834 (834)— — — 
Ending balance$5,389 $1,370 $(2,238)$— $— $4,521 
  As of September 30, 2017 As of December 31, 2016
  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)
 $96
 $—
 $—
 $96
 $3,751
 $—
 $—
 $3,751
Interest rate cap hedges(2)
 —
 122
 —
 122
 —
 553
 —
 553
Total Assets $96
 $122
 $—
 $218
 $3,751
 $553
 $—
 $4,304
(1) IncludedThe restructuring activities accrual for severance and benefits of $4.5 million as cash and cash equivalents.
(2) Interest rate cap hedge premiumof March 30, 2024 was included as other current assetspart of accrued and other assets.liabilities and is expected to be paid out through 2024.


The fair value of the interest rate cap hedge agreements was 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 the three months ended September 30, 2017.

Note 5.4. Derivative 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 condensed consolidated statements of cash flows’ operating, investing, or financing activities consistent with the cash flows of the hedged item.Cash Flow Hedges

Our interest rate cap hedges were designated as cash flow hedges and deemed highly effective at the inceptionconsists of the hedges. Theseforward interest rate cap hedges mature concurrently with the term loan in June 2020. During the three months ended September 30, 2017, theswaps to manage our exposure to interest rate cap hedges continued to be highly effective and zero, netmovements on a portion of tax, was recognized in other comprehensive income. No amount was recorded in the condensed consolidated income statements during the three months ended September 30, 2017. See Note 9.our debt through January 1, 2031. Our forward interest rate swaps hedge forecasted transactions through January 1, 2031.

The recordednotional amounts of derivative instruments are as follows:

(Dollars in thousands)
March 30,
2024		December 31,
2023
Derivative instruments designated as hedging instruments:
Interest rate contracts$150,000 $150,000 

The following table summarizes the fair value of the derivative financial instrumentsand presentation on the condensed consolidated balance sheets werefor derivative instruments:

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(Dollars in thousands)
Balance Sheet LocationMarch 30,
2024		December 31,
2023
Derivative instruments designated as hedging instruments:
Interest rate contractsOther assets, current$4,844 $4,046 
Other assets14,118 11,595 

Unrealized gains (losses) associated with our hedging transactions recognized in other comprehensive income are presented in the following table:

(Dollars in thousands)
Three Months Ended
March 30,
2024		April 1,
2023
Recognized in other comprehensive income, net of tax:
Interest rate contracts$2,201 $(2,130)

We reclassified gains associated with our cash flow hedges from accumulated other comprehensive income to the condensed income statements when the Forward Interest Rate Swaps became effective as follows:of January 1, 2024 and are presented in the following table:

  
(In thousands)
September 30, 2017
 
(In thousands)
December 31, 2016
  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 $—
 $122
 $—
 $553
Total Derivatives $—
 $122
 $—
 $553
(Dollars in thousands)
Three Months Ended
March 30,
2024		April 1,
2023
Interest rate contracts:
Interest expense$1,340 $— 


The pre-tax deferred gains recorded in other comprehensive income that will mature in the next 12 months total $4.7 million.

Note 6.5. Inventories
Inventories consisted of the following:
(Dollars in thousands)
March 30,
2024		December 31,
2023
Raw materials and supplies$179,474 $174,624 
Work in process26,187 22,060 
Finished goods3,298 2,517 
Total$208,959 $199,201 

  (In thousands)
  September 30,
2017		 December 31,
2016
Raw materials and supplies $70,787
 $64,650
Work in process 66,689
 56,806
Finished goods 12,275
 9,180
  149,751
 130,636
Less progress payments 12,594
 10,740
Total $137,157
 $119,896
We net progress payments from customers related to inventory purchases against inventories on the condensed consolidated balance sheets.

Note 7.6. Goodwill
We perform our annual goodwill impairment test duringas of the first day of the fourth quarter. If certain factors occur, we may have to perform an impairment test prior to the fourth quarter including significant under performanceunderperformance 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 a decision to group individual businesses differently.differently, we may be required to perform an interim impairment test prior to the fourth quarter.
We may use either a qualitative or quantitative approach when testing a reporting unit’s goodwill for impairment. The qualitative approach for potential impairment analysis to determine whether it is more likely than not that the fair value of a reporting unit was less than its carrying amount.
The quantitative approach for potential impairment analysis is performed by comparing the fair value of a reporting unit to its carrying value, including goodwill. Fair value is estimated by management using a combination of the income approach (which is based on a discounted cash flow model) and market approach. Management’s cash flow projections include significant judgments and assumptions, including the amount and timing of expected cash flows, long-term growth rates, and discount rates. The cash flows used in the discounted cash flow model are based on our best estimate of future revenues, gross margins,
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and adjusted after-tax earnings. If any of these assumptions are incorrect, it will impact the estimated fair value of a reporting unit. The market approach also requires management judgment in selecting comparable business acquisitions and the transaction values observed and its related control premiums.
No material adverse factors/changes have occurred since the fourth quarter of 2023 that would require us to perform another qualitative or quantitative assessment. As such, for the first quarter of 2024, it was also not more likely than not that the fair values of the reporting units were less than their carrying amounts and thus, the respective goodwill amounts were not deemed to be impaired.
In April 2023, we completed the acquisition of BLR. The excess of the purchase price over the aggregate fair values of the net assets was recorded as goodwill. See Note 2 for further information.
The carrying amounts of our goodwill all in our Electronic Systems segment, were as follows:
(Dollars in thousands)
Electronic
Systems		Structural
Systems		Consolidated
Ducommun
Gross goodwill$199,157 $127,165 $326,322 
Accumulated goodwill impairment(81,722)— (81,722)
Balance at December 31, 2023$117,435 $127,165 $244,600 
Balance at March 30, 2024$117,435 $127,165 $244,600 

  (In thousands)
Gross goodwill $164,276
Accumulated goodwill impairment (81,722)
Balance at December 31, 2016 82,554
Goodwill from acquisition during the period 34,881
Balance at September 30, 2017 $117,435

Note 8.7. Accrued and Other Liabilities
The components of accrued and other liabilities were as follows:
(Dollars in thousands)
March 30,
2024		December 31,
2023
Accrued compensation$19,879 $35,574 
Accrued income tax and sales tax1,153 177 
Other8,279 6,509 
Total$29,311 $42,260 

  (In thousands)
  September 30,
2017		 December 31,
2016
Accrued compensation $17,259
 $15,455
Accrued income tax and sales tax 1,161
 332
Customer deposits 3,798
 3,204
Provision for forward loss reserves 2,025
 4,780
Other 5,556
 5,508
Total $29,799
 $29,279

Note 9.8. Long-Term Debt
Long-term debt and the current period interest rates were as follows:
(Dollars in thousands)
March 30,
2024		December 31,
2023
Term loans$240,625 $242,188 
Revolving credit facility23,800 23,800 
Total debt264,425 265,988 
Less current portion(9,375)(7,813)
Total long-term debt, less current portion255,050 258,175 
Less debt issuance costs - term loans(1,121)(1,214)
Total long-term debt, net of debt issuance costs - term loans$253,929 $256,961 
Debt issuance costs - revolving credit facility (1)
$1,636 $1,761 
Weighted-average interest rate7.27 %7.53 %
(1) Included as part of other assets.
  (In thousands)
  September 30,
2017		 December 31,
2016
Term loan $160,000
 $170,000
Revolving credit facility 64,700
 —
Other debt (fixed 5.41%) —
 3
Total debt 224,700
 170,003
Less current portion —
 3
Total long-term debt 224,700
 170,000
Less debt issuance costs 2,306
 3,104
Total long-term debt, net of debt issuance costs $222,394
 $166,896
Weighted-average interest rate 3.43% 3.25%

OurIn July 2022, we completed a refinancing of all our existing debt by entering into a new term loan (“2022 Term Loan”) and a new revolving credit facility consists of(“2022 Revolving Credit Facility”). The 2022 Term Loan is a $275.0$250.0 million senior secured term loan whichthat matures on June 26, 2020 (“Term Loan”), andJuly 14, 2027. The 2022 Revolving Credit Facility is a $200.0 million senior secured revolving credit facility (“that matures on July 14, 2027. The 2022 Term Loan and 2022 Revolving Credit Facility”), which matures on June 26, 2020 (collectively,Facility, collectively are the “Creditnew credit facilities (“2022 Credit Facilities”).
The Credit Facilities bear2022 Term Loan bears interest, at our option, at a rate equal to either (i) the EurodollarTerm Secured Overnight Financing Rate (defined as LIBOR)(“Term SOFR”) plus an applicable margin ranging from 1.50%1.375% to 2.75%2.375% per year or (ii) Base Rate (defined as the highest of [a]
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Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] Term SOFR plus 1.00%, and if the Base Rate is less than zero percent, it will be deemed zero percent) plus an applicable margin ranging from 0.375% to 1.375% per year, in each case based upon the consolidated total net adjusted leverage ratio. Interest payments are typically paid either on a monthly or quarterly basis, depending on the interest rate selected, on the last business day each month or quarter. In addition, the 2022 Term Loan requires quarterly amortization payments of 0.625% during year one and year two, 1.250% during year three and year four, and 1.875% during year five of the original outstanding principal balance of the 2022 Term Loan amount, on the last business day each quarter. The required quarterly amortization payments began in the fourth quarter of 2022.
The 2022 Revolving Credit Facility bears interest, at our option, at a rate equal to either (i) Term SOFR plus an applicable margin ranging from 1.375% to 2.375% per year or (ii) 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 RateTerm SOFR plus 1.00%), and if the Base Rate is less than zero percent, it will be deemed zero percent) plus an applicable margin ranging from 0.50%0.375% to 1.75%1.375% per year, in each case based upon the consolidated total net adjusted leverage ratio. Interest payments are typically paid on a monthly or quarterly basis, depending on the interest rate selected, on the last business day each month or quarter. The undrawn portionsportion of the commitmentscommitment of the 2022 Revolving Credit Facilities areFacility is subject to a commitment fee ranging from 0.175% to 0.300%0.275%, based upon the consolidated total net adjusted leverage ratio.
Further, we are required to make mandatory prepayments of amounts outstanding underratio, typically paid on a quarterly basis, on the Term Loan. The mandatory prepayments will be made quarterly, equal to 5.0% per year oflast business day each quarter. However, 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 the2022 Revolving Credit Facility are duedoes not require any principal installment payments.
In conjunction with the closing of the 2022 Credit Facilities, we utilized the entire $250.0 million of proceeds from the 2022 Term Loan plus our existing cash on June 26, 2020. hand to pay off our entire debt balance outstanding of $254.2 million under our prior credit facilities.
For each of the three months ended March 30, 2024 and April 1, 2023, we made the required quarterly amortization payments on the 2022 Term Loan of $1.6 million.
As of SeptemberMarch 30, 2017,2024, we had $176.0 million of unused borrowing capacity under the 2022 Revolving Credit Facility, after deducting $0.2 million for standby letters of credit.
As of March 30, 2024, we were in compliance with all covenants required under the 2022 Credit Facilities.
The 2022 Term Loan was considered a modification of debt for some lenders and an extinguishment of debt for other lenders, and thus, a loss of $0.2 million was recorded related to the extinguishment. In addition, wethe new fees incurred $4.8of $0.8 million were capitalized and will be amortized over the life of the 2022 Term Loan. Further, the remaining debt issuance costs related to the Credit Facilities and those costs were capitalized and are beingprior term loans of $1.0 million as of the modification date will be amortized over the five year life of the Credit Facilities.
On July 14, 2017, we entered into a technical amendment to the Credit Facilities (“First Amendment”) which provides more flexibility to close certain qualified acquisitions permitted under the Credit Facilities.
We made voluntary principal prepayments of zero and $10.0 million under the2022 Term Loan, duringusing the three and nine months ended September 30, 2017, respectively.effective interest method.
On September 11, 2017, we acquired 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 the Revolving Credit Facility. The remaining $0.6 million was paid in October 2017 in cash, also by drawing down on the Revolving Credit Facility. See Note 2 for further information.
As of September 30, 2017, we had $134.5 million of unused borrowing capacity under the2022 Revolving Credit Facility after deducting $64.7 millionthat replaced the prior revolving credit facility was considered a modification of debt except for draw down on the portion related to the creditor that is no longer a part of the 2022 Revolving Credit Facility and in which case, it was considered an extinguishment of debt. As a result, we expensed the portion of the unamortized debt issuance costs related to the prior revolving credit facility that was considered an extinguishment of debt of $0.1 million. In addition, the new fees incurred of $1.7 million as part of the 2022 Revolving Credit Facility were capitalized and will be amortized over the life of the 2022 Revolving Credit Facility. Further, the remaining debt issuance costs related to the prior revolving credit facility of $0.8 million for standby lettersas of credit.the modification date will also be amortized over the life of the 2022 Revolving Credit Facility.
The 2022 Credit Facilities were entered into by us (“Parent Company”) and guaranteed by all of our domestic subsidiaries, other than one subsidiarytwo subsidiaries that were considered minor (“Subsidiary Guarantors”) that was considered minor.. The Subsidiary Guarantors jointly and severally guarantee the 2022 Credit Facilities. The Parent Company has no independent assets or operations and the Subsidiary Guarantors jointly and severally guarantee, on a senior unsecured basis, the Credit Facilities. Therefore,therefore, no condensed consolidating financial information for the Parent Company and its subsidiaries areis presented.
In October 2015,April 2023, we completed the acquisition of BLR. The initial purchase price for BLR was $115.0 million, net of cash acquired, all payable in cash. We paid a gross aggregate of $117.0 million in cash upon the closing of the transaction. We utilized the 2022 Revolving Credit Facility to complete the acquisition. See Note 2 for further information.
In May 2023, we completed a public offering of our common stock resulting in net proceeds of $85.1 million. We utilized the net proceeds plus cash on hand to pay down $85.2 million on the 2022 Revolving Credit Facility. SeeNote 9 for further information.
In November 2021, we entered into derivative contracts, U.S. dollar-one month LIBOR forward interest rate cap hedgesswaps designated as cash flow hedges, all with maturityan effective date of January 1, 2024, for an aggregate total notional amount of $150.0 million, weighted average fixed rate of 1.8%, and all terminating on January 1, 2031 (“Forward Interest Rate Swaps”). The Forward Interest Rate Swaps mature on a monthly basis, with fixed amount payer payment dates on the first day of June 2020, and in aggregate, totaling $135.0 million of our debt. We paid a total of $1.0 million in connection witheach calendar month, commencing on February 1, 2024 through January 1, 2031. The Forward Interest Rate Swaps were deemed to be highly effective upon entering into the interest rate cap hedges.derivative contracts and thus, hedge accounting treatment was utilized. Since the Amended Forward Interest Rate Swaps (as defined below) were not effective until January 1, 2024, we only recorded the changes in fair
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value of the derivative instruments that were highly effective and that were designated and qualified as cash flow hedges through December 31, 2023. See Note 51 and Note 4 for further discussion.information.
In December 2016, we entered into an agreement to purchase $9.9 million of industrial revenue bonds (“IRBs”) issued by the city of Parsons, Kansas (“Parsons”) and concurrently, sold $9.9 million of property and equipment (“Property”) to Parsons as well as entered into a lease agreement to lease the Property from Parsons (“Lease”) with lease payments totaling $9.9 million over the lease term. The sale of the Property and concurrent lease back of the Property did not meet the sale-leaseback accounting requirementsJuly 2022, as a result of completing a refinancing of our continuous involvement withexisting debt, we were required to complete an amendment of the PropertyForward Interest Rate Swaps (“Amended Forward Interest Rate Swaps”). The Forward Interest Rate Swaps were based on U.S. dollar-one month LIBOR and thus,were amended to be based on one month Term SOFR as borrowings using LIBOR were no longer available under the $9.9 million in cash received from Parsons2022 Credit Facilities. Since this was not recordedan amendment of just the reference rate as a sale butresult of the cessation of LIBOR, utilizing the guidance under ASU 2020-04, we determined the Amended Forward Interest Rate Swaps as of the amendment date to continue to be highly effective. The Amended Forward Interest Rate Swaps weighted average fixed rate is 1.7%, as a financing obligation. Further,result of the Lease included a right of offsetdifference between U.S. dollar-one month LIBOR and thus, the financing obligation of $9.9 million was offset against the $9.9 million of IRBs assets and presented net on the condensed consolidated balance sheets with no impact to the condensed consolidated income statements or condensed consolidated cash flow statements.one month Term SOFR.


Note 10.9. Shareholders’ Equity
We are authorized to issue fiveIn May 2023, we completed a public offering of 2.3 million shares of preferred stock. At September 30, 2017our common stock at $40.00 per share, for gross proceeds of $92.0 million. The common stock offering was made under our effective shelf registration statement. We incurred aggregate total out of pocket stock offering related fees of $6.9 million, resulting in net proceeds of $85.1 million. As such, we recorded an increase to common stock at par value of less than $0.1 million with the remaining amount as an increase to additional paid-in capital of $85.1 million. The public stock offering net proceeds along with cash on hand were used to pay down $85.2 million on the 2022 Revolving Credit Facility that was drawn on and December 31, 2016, no preferred shares were issued or outstanding.utilized to complete the acquisition of BLR. See Note 2 and Note 8 for further information.

Note 11. Employee Benefit Plans
The components of net periodic pension expense were as follows:
  (In thousands) (In thousands)
  Three Months Ended Nine Months Ended
  September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016
Service cost $133
 $133
 $398
 $399
Interest cost 332
 341
 997
 1,025
Expected return on plan assets (382) (370) (1,147) (1,111)
Amortization of actuarial losses 202
 191
 607
 572
Net periodic pension cost $285
 $295
 $855
 $885

The components of the reclassifications of net actuarial losses from accumulated other comprehensive loss to net income for the three and nine months ended September 30, 2017 were as follows:
  (In thousands)
  Three Months Ended Nine Months Ended
  September 30,
2017		 September 30,
2017
Amortization of actuarial losses - total before tax (1)
 $(202) $(607)
Tax benefit 74
 225
Net of tax $(128) $(382)
(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.

Note 12.10. 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 facility leases,Additionally, we have indemnified our lessors for certain claims arising from the facility or the lease. We indemnify our directors and officers to the maximum extent permitted under the laws of the State of Delaware.
However, weDelaware and 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. Moreover, in connection with certain performance center leases, we have indemnified our lessors for certain claims arising from the performance center or the lease.
The duration of the guarantees and indemnities varyvaries and, in many cases areis indefinite but subject to applicable statutes of limitations. The majority of guarantees and indemnities do not provide any limitations ofon 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 onin the accompanying condensed consolidated balance sheets.

Note 13.11. Income Taxes
The provision for income taxes is determined using an estimated annual effective tax rate, which is generally less than the U.S. federalFederal statutory rate, primarily due to research and development (“R&D”) tax credits and deductions available for domestic production activities.credits. Our effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as expected utilization of R&D tax credits, valuation allowances against deferred tax assets, the recognition or derecognition of tax benefits related to uncertain tax positions, and changes in or the interpretation of tax laws in jurisdictions where we conduct business. Also, excess tax benefits and tax detriments related to our equity compensation recognized in the condensed consolidated income statement could result in fluctuations in our effective tax rate period-over-period depending on the volatility of our stock price, number of restricted or performance stock units that vests, and stock options exercised during the period. We recognize deferred tax assets and liabilities, using enacted tax rates, for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities along with net operating loss and tax credit carryovers.
We record a valuation allowance against our deferred tax assets to reduce the net carrying value to an amount that we believe is more likely than not to be realized. When we establish or reduce our valuation allowances against our deferred tax assets, the provision for income taxes will increase or decrease, respectively, in the period when that determination is made.
We recorded income tax expense of $0.9$1.9 million (effective tax rate of 16.8%) for the three months ended SeptemberMarch 30, 20172024 compared to $1.2$0.8 million (effective tax rate of 19.8%) for the three months ended OctoberApril 1, 2016.2023. The decreaseincrease in the effectiveincome tax rateexpense for the three months ended September 30, 2017first quarter of 2024 compared to the three months ended October 1, 2016first quarter of 2023 was primarily due to tax benefits recognized from additional U.S. Federal research and development tax credits. FASB ASU 2016-09 became effective beginning January 1, 2017 and required all the tax effects related to share-based payments be recorded through thehigher pre-tax income statement. This could result in fluctuations in our effective tax rate from period to period, depending on the number of awards exercised and/or vested in the first quarter as well asof 2024 compared to the volatilityfirst quarter of our stock price. During the current year three month period, we recognized tax benefits from deductions of share-based payments in excess of compensation cost recognized for financial reporting purposes of $0.1 million, which decreased our effective tax rate by 0.6%.
We recorded2023 and higher discrete income tax expense of $2.1 million (effective tax rate of 16.4%) for the nine months ended September 30, 2017 compared to $9.9 million (effective tax rate of 30.5%) for the nine months ended October 1, 2016. The decreaserecognized in the effective tax rate for the nine months ended September 30, 2017 comparedfirst quarter of 2024 related to the nine months ended October 1, 2016 was primarily due to the preliminary gain on divestitures of our Pittsburgh and Miltec operations of $18.8 million, which resulted in a higher state tax liability, compared to the current year nine month period. In addition, during the current year nine month period, we

recognized tax benefits from deductions of share-based payments in excess of compensation cost recognized for financial reporting purposes of $0.6 million, which decreased the effective tax rate by 4.8%, and we recognized additional tax benefits from U.S. Federal research and development tax credits.stock-based compensation.
Our total amount of unrecognized tax benefits was $3.7$4.6 million and $3.0$4.5 million as of SeptemberMarch 30, 20172024 and December 31, 2016,2023, respectively. If recognized, $2.4$2.8 million would affect the effective tax rate. We dorecord interest and penalty charges, if any,
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related to uncertain tax positions as a component of tax expense and unrecognized tax benefits. The amounts accrued for interest and penalty charges as of March 30, 2024 and December 31, 2023 were not reasonablysignificant. As a result of statute of limitations set to expire in the fourth quarter of 2024, we expect significant increases or decreases to our unrecognized tax benefits of approximately $1.0 million in the next twelve months.
In 2016,We file U.S. Federal and state income tax returns. We are subject to examination by the Internal Revenue Service (“IRS”) commenced an audit of our 2014for tax years after 2019 and 2015by state taxing authorities for tax years. Althoughyears after 2018. While we are no longer subject to examination prior to those periods, carryforwards generated prior to those periods may still be adjusted upon examination by the outcome of tax examinations cannotIRS or state taxing authorities if they either have been or will be predicted with certainty, weused in a subsequent period. We 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.


Note 14.12. Commitments and Contingencies
In December 2020, a representative action under California’s Private Attorneys General Act was filed against us in the Superior Court for the State of California, County of San Bernardino. We received service of process of this complaint in January 2021. The complaint alleged violations of California’s wage and hour laws relating to our current and former employees and sought attorney’s fees and penalties. We vigorously refuted and defended against these claims and reached a tentative settlement of $0.8 million during the fourth quarter 2021, which was subject to court approval. Thus, we recorded accrued liabilities of $0.8 million as of December 31, 2021. During the second quarter of 2022, additional factual information was identified resulting in an increase in the amount of the tentative settlement to $0.9 million. Therefore, we recorded an additional accrued liabilities of $0.1 million for a total accrued liabilities amount of $0.9 million as of the end of the second quarter of 2022 which remained unchanged as of December 31, 2022 as we were awaiting final court approval of this settlement. Subsequent to final court approval and paying of the $0.9 million in January 2023, during the third quarter of 2023 and upon plaintiff's motion, the court re-opened the settlement agreement to determine whether the class list captured all affected employees. We are appealing this decision as being without merit. Any amount of additional liability is still undetermined pending the appeal and as such, there is no amount of loss that is probable and reasonably estimable at this time. Thus, no additional accrual was recorded during the three months ended March 30, 2024.
Structural Systems has been directed by California environmental agencies to investigate and take corrective action for groundwater contamination at itsour facilities located in El Mirage and Monrovia, California. Based on currently available information, Ducommun haswe have established an accrual for its estimated liability for such investigation and corrective action of $1.5 million at both SeptemberMarch 30, 20172024 and December 31, 2016,2023, which is reflected in other long-term liabilities on itsour condensed consolidated balance sheets.
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, Ducommunwe preliminarily estimatesestimate that the range of itsour future liabilities in connection with the landfill located in West Covina, California is between $0.4 million and $3.1 million. Ducommun hasWe have established an accrual for itsthe estimated liability in connection with the West Covina landfill of $0.4 million at Septemberas of both March 30, 2017,2024 and December 31, 2023, which is reflected in other long-term liabilities on itsour condensed consolidated balance sheet. Ducommun’ssheets. Our 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 June 2020, a fire severely damaged our performance center in Guaymas, Mexico, which is part of our Structural Systems segment. There were no injuries; however, property and equipment, inventories, and tooling in this leased facility were damaged. Our Guaymas performance center, comprised of two buildings with an aggregate total of 62,000 square feet, was severely damaged. The loss of production from the Guaymas performance center was absorbed by our other existing performance centers, however, we have reestablished and are in the process of certification with various customers and ramping up our manufacturing capabilities in a different leased facility with 117,000 square feet in Guaymas. A neighboring, non-related manufacturing facility, also suffered fire damage during the same time as the fire that severely damaged our Guaymas performance center, and in November 2023, the occupant of the neighboring facility filed suit against us in U.S. District Court for the Central District of California seeking unspecified amounts for damages relating to the fire. We intend to defend this matter vigorously and believe we have substantial defenses in relation to these claims. As responsibility for the fire is still undetermined, there is no amount of loss that is probable and reasonably estimable at this time. If we are ultimately deemed to be responsible or party responsible, it is possible we could incur a loss in excess of our insurance coverage limits, which could be material to our cash flow, liquidity, or financial results.
Our insurance covers damage, up to a capped amount, to the facility, equipment, unfinished inventory, and other assets at replacement cost, finished goods inventory at selling price, as well as business interruption, third party property damage, and
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recovery related expenses caused by the fire, less our per claim deductible. The anticipated insurance recoveries related to losses and incremental costs incurred are recognized when receipt is probable. The anticipated insurance recoveries in excess of net book value of the damaged operating assets and business interruption will not be recorded until all contingencies related to our claim have been resolved. During the year ended December 31, 2020, $0.8 million of revenue and $0.5 million of related cost of sales were reversed for revenue previously recognized using the over time method as the revenue recognition process for these items were deemed to be interrupted as a result of these inventory items being damaged. Also during the year ended December 31, 2020, we wrote off property and equipment and tooling with an aggregate total net book value of $7.1 million and inventory on hand of $3.4 million that were damaged by the fire. The related anticipated insurance recoveries were also presented within the same financial statement line item in the condensed consolidated statements of income resulting in no net impact, with the anticipated insurance recoveries receivable included as part of other current assets on the condensed consolidated balance sheets.
The insurance claim for damages to our operating assets and business interruption was deemed final and closed by our insurance company during the three months ended July 1, 2023. During both the three months ended March 30, 2024 and April 1, 2023, we received no insurance recoveries. However, the general insurance recoveries, all received in 2020, during the three months ended April 1, 2023, $3.9 million of the general insurance recoveries that were considered gain contingencies were deemed to be resolved and thus, we recorded this amount as other income. The remaining amount of insurance recoveries of $3.8 million were received during the three months ended July 1, 2023. Cumulatively, as of July 1, 2023, we received insurance recoveries in aggregate total of $23.7 million, with $7.5 million for business interruption and $16.2 million for damages to property and equipment, inventories, and tooling. Further, all insurance recovery amounts received related to this claim have been recognized up to the amount of net book value loss and presented within the same financial statement line item in the condensed consolidated statements of income resulting in no net impact, with the remaining amounts recognized as other income in our condensed consolidated statements of income when the contingencies were deemed resolved.
In April 2023, a fire damaged a relatively small portion of one of our performance centers in our Structural Systems reporting segment. There were no injuries; however, subsequent to the fire, we determined that some property and equipment in this company owned facility were damaged. Our insurance covers damage, up to a capped amount, to the property and equipment at replacement cost, as well as business interruption and recovery related expenses caused by the fire, less our per claim deductible. There was a loss of production in this damaged portion of the performance center for a short period of time, but the incident did not otherwise result in significant disruption to customer delivery schedules. Production in this damaged portion resumed later that same quarter. The anticipated insurance recoveries related to losses and incremental costs incurred are recognized when receipt is probable. The anticipated insurance recoveries in excess of net book value of the damaged operating assets and business interruption are not recorded until all contingencies related to our claim are resolved. As such, during the three months ended July 1, 2023, we wrote off property and equipment with an aggregate total net book value of $0.2 million. Also during the three months ended July 1, 2023, we received insurance recoveries of $0.3 million (which was net of our deductible of $0.1 million) and thus, such insurance recoveries were also presented within the same financial statement line item in the condensed consolidated statements of income resulting in no net impact. The amount of the insurance recoveries received in excess of the loss on operating assets was deemed a contingent gain, and since the gain contingencies were deemed resolved, the $0.1 million was also recorded as other income during the three months ended July 1, 2023. Finally, during the three months ended December 31, 2023, the insurance claim was deemed final and closed by our insurance company and we received a final payment of $0.3 million, which was recorded as other income.
Real estate obligations, which include legally binding minimum lease payments for leases executed but not yet commenced, were $5.8 million as of March 30, 2024, and will be paid over the lease term of 10 years.
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.liabilities in the ordinary course of business. 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 condensed consolidated financial position, results of operations or cash flows.

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Note 15.13. 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 a reportable operating segment.



Financial information by reportable operating segment was as follows:
(Dollars in thousands)
Three Months Ended
 March 30,
2024		April 1,
2023
Net Revenues
Electronic Systems$107,539 $105,626 
Structural Systems83,308 75,565 
Total Net Revenues$190,847 $181,191 
Segment Operating Income (1)
Electronic Systems$18,969 $10,011 
Structural Systems2,868 4,745 
21,837 14,756 
Corporate General and Administrative Expenses (2)
(9,215)(8,384)
Total Operating Income$12,622 $6,372 
Depreciation and Amortization Expenses
Electronic Systems$3,632 $3,498 
Structural Systems4,662 4,432 
Corporate Administration59 59 
Total Depreciation and Amortization Expenses$8,353 $7,989 
Capital Expenditures
Electronic Systems$796 $1,851 
Structural Systems1,524 3,130 
Corporate Administration2,425 — 
Total Capital Expenditures$4,745 $4,981 
(1)The results for the three months ended March 30, 2024 include BLR’s results of operations which have been included in our condensed consolidated statements of income since the date of acquisition as part of the Structural Systems segment. See Note 2.
(2)Includes costs not allocated to either the Electronic Systems or Structural Systems operating segments.
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(In thousands)
Three Months Ended
 
(In thousands)
Nine Months Ended
  September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016
Net Revenues        
Structural Systems $59,685
 $60,931
 $176,372
 $185,642
Electronic Systems 79,005
 71,640
 239,553
 222,514
Total Net Revenues $138,690
 $132,571
 $415,925
 $408,156
Segment Operating Income        
Structural Systems $3,466
 $5,893
 $8,147
 $13,347
Electronic Systems 8,234
 6,600
 24,158
 19,769
  11,700
 12,493
 32,305
 33,116
Corporate General and Administrative Expenses (1)
 (4,505) (4,441) (14,539) (13,505)
Operating Income $7,195
 $8,052
 $17,766
 $19,611
Depreciation and Amortization Expenses        
Structural Systems $2,220
 $2,851
 $6,879
 $6,683
Electronic Systems 3,345
 3,232
 10,207
 10,661
Corporate Administration 54
 6
 63
 76
Total Depreciation and Amortization Expenses $5,619
 $6,089
 $17,149
 $17,420
Capital Expenditures        
Structural Systems $4,449
 $3,555
 $17,217
 $10,149
Electronic Systems 1,793
 947
 4,256
��1,701
Corporate Administration 127
 —
 775
 —
Total Capital Expenditures $6,369
 $4,502
 $22,248
 $11,850
(1)Includes costs not allocated to either the Structural Systems or Electronic Systems operating segments.
Segment assets include assets directly identifiable to or allocated to each segment. Our segment assets are as follows:
(Dollars in thousands)
 March 30,
2024		December 31,
2023
Total Assets
Electronic Systems$525,901 $505,371 
Structural Systems (1)
549,233 552,641 
Corporate Administration (2)
56,919 62,907 
Total Assets$1,132,053 $1,120,919 
Goodwill and Intangibles
Electronic Systems$170,891 $173,214 
Structural Systems (1)
235,789 237,729 
Total Goodwill and Intangibles$406,680 $410,943 
(1)In April 2023, we acquired 100.0% of the outstanding equity interests of BLR for an initial purchase price of $115.0 million, net of cash acquired. We allocated the gross purchase price of $117.0 million to the assets acquired and liabilities assumed at their estimated fair values. The excess of the purchase price over the aggregate fair values of the net assets was recorded as goodwill. See Note 2.
(2)Includes assets not specifically identified to or allocated to either the Electronic Systems or Structural Systems operating segments, including cash and cash equivalents.
25
  (In thousands)
  September 30,
2017		 December 31,
2016
Total Assets    
Structural Systems $207,413
 $175,580
Electronic Systems 376,569
 325,780
Corporate Administration (1)
 9,867
 14,069
Total Assets $593,849
 $515,429
Goodwill and Intangibles    
Structural Systems $3,063
 $3,745
Electronic Systems 231,657
 180,382
Total Goodwill and Intangibles $234,720
 $184,127
(1)Includes assets not specifically identified to or allocated to either the Structural Systems or Electronic Systems operating segments, including cash and cash equivalents.

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Item 2. 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 and defense (“A&D”), industrial, medical and other industries (collectively, “Industrial”). 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.
ThirdIn its 2023 Annual Report on Form 10-K, The Boeing Company (“Boeing”) indicated that in 2023, global air traffic largely recovered to 2019 levels with domestic travel continuing to be the most robust and international travel has mostly recovered. For 2024, while both major large aircraft manufacturers, Boeing and Airbus SE, have announced either similar or increases in build rates compared to 2023, the ramp up is slower than expected and below pre-pandemic levels. In addition, Boeing, one of our largest customers, was notified by the Federal Aviation Administration (“FAA”) in early January 2024 that the FAA has initiated an investigation into Boeing’s quality control system. This notification was followed by the FAA announcing actions to increase its oversight of Boeing as well as not approving production rate increases or additional production lines for the 737 MAX until it is satisfied that Boeing is in full compliance with required quality control procedures. Since Boeing is one of our largest customers, if Boeing is unable to meet the full compliance of the FAA’s required quality control procedures, it could have a material adverse impact on our business, results of operations and financial condition.
First quarter 2017 highlights:2024 recap:
•Net revenues of $190.8 million
•Net income of $6.8 million, or 3.6% of net revenues, or $0.46 per diluted share
•Adjusted EBITDA of $27.4 million, or 14.4% of net revenues
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Results of Operations
First Quarter of 2024 Compared to First Quarter of 2023
The following table sets forth net revenues, selected financial data, the effective tax rate and diluted earnings per share:
(Dollars in thousands, except per share data)
Three Months Ended
March 30,
2024		%
of Net  Revenues		April 1,
2023		%
of Net  Revenues
Net Revenues$190,847 100.0 %$181,191 100.0 %
Cost of Sales143,904 75.4 %144,424 79.7 %
Gross Profit46,943 24.6 %36,767 20.3 %
Selling, General and Administrative Expenses32,951 17.3 %26,225 14.5 %
Restructuring Charges1,370 0.7 %4,170 2.3 %
Operating Income12,622 6.6 %6,372 3.5 %
Interest Expense(3,883)(2.0)%(4,219)(2.3)%
Other Income— — %3,886 2.1 %
Income Before Taxes8,739 4.6 %6,039 3.3 %
Income Tax Expense1,890 nm808 nm
Net Income$6,849 3.6 %$5,231 2.9 %
Effective Tax Rate21.6 %nm13.4 %nm
Diluted Earnings Per Share$0.46 nm$0.42 nm
nm = not meaningful
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Net Revenues by End-Use Market and Operating Segment
Net revenues by end-use market and operating segment during the fiscal three months ended March 30, 2024 and April 1, 2023, respectively, were as follows:
Three Months Ended
(Dollars in thousands)% of Net Revenues
ChangeMarch 30,
2024		April 1,
2023		March 30,
2024		April 1,
2023
Consolidated Ducommun
Military and space$1,259 $98,929 $97,670 51.8 %53.9 %
Commercial aerospace8,097 79,917 71,820 41.9 %39.6 %
Industrial300 12,001 11,701 6.3 %6.5 %
Total$9,656 $190,847 $181,191 100.0 %100.0 %
Electronic Systems
Military and space$(822)$72,505 $73,327 67.4 %69.4 %
Commercial aerospace2,435 23,033 20,598 21.4 %19.5 %
Industrial300 12,001 11,701 11.2 %11.1 %
Total$1,913 $107,539 $105,626 100.0 %100.0 %
Structural Systems
Military and space$2,081 $26,424 $24,343 31.7 %32.2 %
Commercial aerospace5,662 56,884 51,222 68.3 %67.8 %
Total$7,743 $83,308 $75,565 100.0 %100.0 %
Net revenues for the three months ended March 30, 2024 were $190.8 million, compared to $181.2 million for the three months ended April 1, 2023. The year-over-year increase was primarily due to the following:
•$8.1 million higher revenues in our commercial aerospace end-use markets due to higher rates on rotary-wing aircraft and both single-aisle and twin-aisle aircraft platforms, partially offset by lower rates on other commercial aerospace platforms; and
•$1.3 million higher revenues in our military and space end-use markets due to higher rates on naval and rotary-wing aircraft platforms, partially offset by lower rates on legacy fixed-wing aircraft platforms.
Net Revenues by Major Customers
A significant portion of $138.7our net revenues are from our top ten customers as follows:
Three Months Ended
March 30,
2024		April 1,
2023
Boeing Company8.0 %7.7 %
General Dynamics Corporation4.0 %5.6 %
Northrop Grumman Corporation5.0 %5.2 %
RTX Corporation14.7 %16.4 %
Spirit AeroSystems Holdings, Inc.6.0 %7.1 %
Viasat, Inc.3.8 %5.4 %
Total top ten customers (1)
54.6 %60.4 %
(1)Includes The Boeing Company (“Boeing”), General Dynamics Corporation (“GD”), Northrop Grumman Corporation (“Northrop”), RTX Corporation (“RTX”), Spirit AeroSystems Holdings, Inc. (“Spirit”), and Viasat, Inc. (“Viasat”) for the three months ended March 30, 2024 and April 1, 2023.
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Boeing, GD, Northrop, RTX, Spirit, and Viasat represented the following percentages of total accounts receivable:
 March 30,
2024		December 31,
2023
Boeing7.6 %7.5 %
GD2.2 %3.3 %
Northrop1.8 %2.5 %
RTX12.9 %16.4 %
Spirit2.6 %4.2 %
Viasat5.9 %8.3 %
The net revenues and accounts receivable from Boeing, GD, Northrop, RTX, Spirit, and Viasat are diversified over a number of commercial, military and space programs and were generated 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 as a percentage of net revenues increased year-over-year with the three months ended March 30, 2024 of 24.6%, compared to the three months ended April 1, 2023 of 20.3% primarily due to favorable product mix and higher manufacturing volume.
Selling, General and Administrative (“SG&A”) Expenses
SG&A expenses increased $6.7 million year-over-year in the three months ended March 30, 2024 compared to the three months ended April 1, 2023 primarily due to BLR SG&A expenses of $5.5 million which did not exist in the prior year period, and higher stock-based compensation expense of $1.0 million.
Restructuring Charges
Restructuring charges decreased $2.8 million year-over-year in the three months ended March 30, 2024, compared to the three months ended April 1, 2023, primarily due to the winding down of the previously disclosed restructuring plan that was approved and commenced in April 2022. See Note 3 for further information.
Interest Expense
Interest expense decreased $0.3 million year-over-year in the three months ended March 30, 2024 compared to the three months ended April 1, 2023, primarily due to the interest rate swaps became effective as of January 1, 2024, partially offset by a higher debt balance during the three months ended March 30, 2024.
Income Tax Expense
We recorded income tax expense of $1.9 million for the three months ended March 30, 2024 compared to $0.8 million for the three months ended April 1, 2023. The increase in income tax expense for the first quarter of 2024 compared to the first quarter of 2023 was primarily due to higher pre-tax income in the first quarter of 2024 compared to the first quarter of 2023 and higher discrete income tax expense recognized in the first quarter of 2024 related to stock-based compensation.
Our total amount of unrecognized tax benefits was $4.6 million and $4.5 million as of March 30, 2024 and December 31, 2023, respectively. If recognized, $2.8 million would affect the effective tax rate. We record interest and penalty charges, if any, related to uncertain tax positions as a component of tax expense and unrecognized tax benefits. The amounts accrued for interest and penalty charges as of March 30, 2024 and December 31, 2023 were not significant. As a result of statute of limitations set to expire in the fourth quarter of 2024, we expect decreases to our unrecognized tax benefits of approximately $1.0 million in the next twelve months.
We file U.S. Federal and state income tax returns. We are subject to examination by the Internal Revenue Service (“IRS”) for tax years after 2019 and by state taxing authorities for tax years after 2018. While we are no longer subject to examination prior to those periods, carryforwards generated prior to those periods may still be adjusted upon examination by the IRS or state taxing authorities if they either have been or will be used in a subsequent period. We 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.
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Net Income and Earnings per Share
Net income of $4.7and earnings per share for the three months ended March 30, 2024 were $6.8 million, or $0.413.6% of revenues, or $0.46 per diluted share,
Adjusted EBITDA compared to $5.2 million, or 2.9% of $14.5revenues, or $0.42 per diluted share, for the three months ended April 1, 2023. The increase in net income for the three months ended March 30, 2024 compared to the three months ended April 1, 2023 was primarily due to higher gross profit of $10.2 million
Backlog and lower restructuring charges of $655.3$2.8 million,
Completed partially offset by higher SG&A expenses of $6.7 million and lower other income of $3.9 million. The higher SG&A expenses were primarily due to BLR SG&A expenses of $5.5 million which did not exist in the prior year period as the acquisition of Lightning DiversionBLR was completed during the three months ended July 1, 2023.
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Business Segment Performance
We report our financial performance based upon the two reportable operating segments: Electronic Systems LLCand Structural Systems. The results of operations differ between our reportable operating segments due to differences in competitors, customers, extent of proprietary deliverables and performance. The following table summarizes our business segment performance for the three months ended March 30, 2024 and April 1, 2023:
Three Months Ended
%(Dollars in thousands)% of Net Revenues
ChangeMarch 30,
2024		April 1,
2023		March 30,
2024		April 1,
2023
Net Revenues
Electronic Systems1.8 %$107,539 $105,626 56.3 %58.3 %
Structural Systems10.2 %83,308 75,565 43.7 %41.7 %
Total Net Revenues5.3 %$190,847 $181,191 100.0 %100.0 %
Segment Operating Income
Electronic Systems$18,969 $10,011 17.6 %9.5 %
Structural Systems2,868 4,745 3.4 %6.3 %
21,837 14,756 
Corporate General and Administrative Expenses (1)
(9,215)(8,384)(4.8)%(4.6)%
Total Operating Income$12,622 $6,372 6.6 %3.5 %
Adjusted EBITDA
Electronic Systems
Operating Income$18,969 $10,011 
Depreciation and Amortization3,632 3,498 
Stock-Based Compensation Expense (2)
80 132 
Restructuring Charges459 1,874 
23,140 15,515 21.5 %14.7 %
Structural Systems
Operating Income2,868 4,745 
Depreciation and Amortization4,662 4,432 
Stock-Based Compensation Expense (3)
86 102 
Restructuring Charges911 2,296 
Guaymas fire related expenses— 1,468 
Inventory Purchase Accounting Adjustments791 — 
9,318 13,043 11.2 %17.3 %
Corporate General and Administrative Expenses (1)
Operating Loss(9,215)(8,384)
Depreciation and Amortization59 59 
Stock-Based Compensation Expense (4)
4,092 2,847 
(5,064)(5,478)
Adjusted EBITDA$27,394 $23,080 14.4 %12.7 %
Capital Expenditures
Electronic Systems$796 $1,851 
Structural Systems1,524 3,130 
Corporate Administration2,425 — 
Total Capital Expenditures$4,745 $4,981 
(1)Includes costs not allocated to either the Electronic Systems or Structural Systems operating segments.
(2)The three months ended March 30, 2024 and April 1, 2023 both included less than $0.1 million of stock-based compensation expense recorded as cost of sales.
(3)The three months ended March 30, 2024 and April 1, 2023 both included $0.1 million of stock-based compensation expense recorded as cost of sales.
(4)The three months ended March 30, 2024 and April 1, 2023 included $1.4 million and $0.4 million, respectively, of stock-based compensation expense for awards with both performance and market conditions that will be settled in cash.

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Electronic Systems
Electronic Systems net revenues in the three months ended March 30, 2024 compared to the three months ended April 1, 2023 increased $1.9 million primarily due to the following:
•$2.4 million higher revenues in our commercial aerospace end-use markets due to higher rates on large aircraft platforms; partially offset by
•$0.8 million lower revenues in our military and space end-use markets due to lower rates on fixed-wing aircraft platforms, partially offset by higher rates on various missile and naval platforms.
Electronic Systems segment operating income in the three months ended March 30, 2024 compared to the three months ended April 1, 2023 increased $9.0 million primarily due to higher manufacturing volume, favorable product mix, and lower restructuring charges.
Structural Systems
Structural Systems net revenues in the three months ended March 30, 2024 compared to the three months ended April 1, 2023 increased $7.7 million primarily due to the following:
•$5.7 million higher revenues in our commercial aerospace end-use markets due to higher rates on rotary-wing and large aircraft platforms, partially offset by lower rates on other commercial platforms; and
•$2.1 million higher revenues in our military and space end-use markets due to higher rates on fixed-wing and rotary-wing platforms, partially offset by lower rates on missile platforms.
The Structural Systems segment operating income in the three months ended March 30, 2024 compared to the three months ended April 1, 2023 decreased $1.9 million primarily due to higher costs associated with the wind down of our Monrovia performance center, partially offset by favorable product mix and lower restructuring charges.
In April 2023, we acquired 100.0% of BLR Aerospace L.L.C. (“BLR”). The initial purchase price for BLR was $115.0 million, net of cash acquired, all payable in cash. We paid a gross aggregate of $117.0 million in cash upon the closing of the transaction. BLR’s results of operations have been included in our condensed consolidated statements of income since the date of acquisition and is a part of the Structural Systems segment. See Note 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for further information.
In June 2020, a fire severely damaged our performance center in Guaymas, Mexico. We have insurance coverage and up to a capped amount, expect these items will be covered, less our deductible. The full financial impact cannot be estimated at this time as we are currently working with our insurance carriers to determine the cause of the fire. The loss of production from the Guaymas performance center was absorbed by our other existing performance centers, however, we have reestablished and are in the process of certification with various customers and ramping up our manufacturing capabilities in a different leased facility in Guaymas. A neighboring, non-related manufacturing facility, also suffered fire damage during the same time as the fire that severely damaged our Guaymas performance center. As responsibility for the fire is still undetermined, there is no amount of loss that is probable and reasonably estimable at this time. If we are ultimately deemed to be responsible or partly responsible, it is possible we could incur a loss in excess of our insurance coverage limits, which could be material to our cash flow, liquidity, or financial results. See Note 12 to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.
In April 2023, a fire damaged a relatively small portion of one of our performance centers in our Structural Systems reporting segment. Our insurance covers damage, up to a capped amount, to the property and equipment at replacement cost, as well as business interruption and recovery related expenses caused by the fire, less our per claim deductible. There was a loss of production in this damaged portion of the performance center for a short period of time, but the incident did not otherwise result in significant disruption to customer delivery schedules. Production in this damaged portion resumed during the three months ended July 1, 2023. See Note 12 to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.
Corporate General and Administrative (“CG&A”) Expenses
CG&A expenses increased $0.8 million for the three months ended March 30, 2024 compared to the three months ended April 1, 2023 primarily due to higher stock-based compensation expense of $1.0 million and higher compensation and benefits costs of $0.6 million, partially offset by lower professional services fees of $0.8 million.

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Non-GAAP Financial Measures
Adjusted earnings before interest, taxes, depreciation, amortization, andstock-based compensation expense, restructuring charges, Guaymas fire related expenses, insurance recoveries related to loss on operating assets, and inventory purchase accounting adjustments (“Adjusted EBITDA”) was $14.5were $27.4 million and $14.9$23.1 million for the three months ended SeptemberMarch 30, 20172024 and OctoberApril 1, 2016,2023, 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 clarifythat clarifies and enhanceenhances the understanding of the factors and trends affecting our past performance and future prospects. We define these measures,this measure, explain how they areit is calculated and provide reconciliationsa reconciliation of these measuresthis measure to the most comparable GAAP measure in the table below. Adjusted EBITDA and the related financial ratios, as presented in this Quarterly Report on Form 10-Q (“Form 10-Q”), 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 as a non-GAAP operating performance measuresmeasure internally as a complementary financial measuresmeasure 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 substitutesa substitute for analysis of our results as reported under GAAP. Some of these limitations include:
They do•It does not reflect our cash expenditures, future requirements for capital expenditures or contractual commitments;
They do•It does not reflect changes in, or cash requirements for, our working capital needs;
They do•It does 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•It is not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows;
They do•It does 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 theirits usefulness as a comparative measures.measure.
BecauseAs a result 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 Condensed Consolidated Financial Statementscondensed consolidated financial statements contained in this Form 10-Q.
However, in spite ofEven with the limitations above, limitations, we believe that Adjusted EBITDA is useful to an investor in evaluating our results of operations because these measures:as this measure:
Are•Is 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•Helps 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•Is 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;
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•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;
Gain on divestitures may be useful to our investors in evaluating our on-going operating performance; and
•Restructuring charges may be useful to our investors in evaluating our core operating performance;
•Guaymas fire related expenses may be useful to our investors in evaluating our core operating performance;
•Insurance recoveries related to loss on operating assets (property and equipment, inventories, and other assets) may be useful to our investors in evaluating our core operating performance; and
•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.
Reconciliations of net income to Adjusted EBITDA and the presentation of Adjusted EBITDA as a percentage of net revenues were as follows:
 
(In thousands)
Three Months Ended
 
(In thousands)
Nine Months Ended
 September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016
Net income$4,655
 $5,014
 $10,593
 $22,425
Interest expense2,088
 1,945
 5,588
 6,279
Income tax expense940
 1,234
 2,073
 9,863
Depreciation3,243
 3,249
 9,910
 10,002
Amortization2,376
 2,840
 7,239
 7,418
Stock-based compensation expense1,100
 594
 4,264
 2,579
Gain on divestitures—
 —
 —
 (18,815)
Restructuring charges64
 —
 64
 —
Adjusted EBITDA$14,466
 $14,876
 $39,731
 $39,751
% of net revenues10.4% 11.2% 9.6% 9.7%


(Dollars in thousands)
Three Months Ended
March 30,
2024		April 1,
2023
Net income$6,849 $5,231 
Interest expense3,883 4,219 
Income tax expense1,890 808 
Depreciation4,016 3,740 
Amortization4,337 4,249 
Stock-based compensation expense (1)
4,258 3,081 
Restructuring charges1,370 4,170 
Guaymas fire related expenses— 1,468 
Insurance recoveries related to loss on operating assets— (3,886)
Inventory purchase accounting adjustments791 — 
Adjusted EBITDA$27,394 $23,080 
Net income as a % of net revenues3.6 %2.9 %
Adjusted EBITDA as a % of net revenues14.4 %12.7 %

Results of Operations
Third Quarter of 2017 Compared to Third Quarter of 2016
(1) The following table sets forth net revenues, selected financial data, the effective tax rate and diluted earnings per share:

  
(in thousands, except per share data)
Three Months Ended
 
(in thousands, except per share data)
Nine Months Ended
  September 30,
2017		 
%
of Net  Revenues
 October 1,
2016		 
%
of Net  Revenues
 September 30,
2017		 
%
of Net  Revenues
 October 1,
2016		 
%
of Net  Revenues
Net Revenues $138,690
 100.0 % $132,571
 100.0 % $415,925
 100.0 % $408,156
 100.0 %
Cost of Sales 112,681
 81.2 % 107,348
 81.0 % 338,798
 81.5 % 329,749
 80.8 %
Gross Profit 26,009
 18.8 % 25,223
 19.0 % 77,127
 18.5 % 78,407
 19.2 %
Selling, General and Administrative Expenses 18,814
 13.6 % 17,171
 12.9 % 59,361
 14.3 % 58,796
 14.4 %
Operating Income 7,195
 5.2 % 8,052
 6.1 % 17,766
 4.2 % 19,611
 4.8 %
Interest Expense (2,088) (1.5)% (1,945) (1.5)% (5,588) (1.3)% (6,279) (1.5)%
Other Income 488
 0.4 % 141
 0.1 % 488
 0.1 % 141
 — %
Gain on Divestitures —
 — % —
 — % —
 — % 18,815
 4.6 %
Income Before Taxes 5,595
 4.1 % 6,248
 4.7 % 12,666
 3.0 % 32,288
 7.9 %
Income Tax Expense 940
 nm
 1,234
 nm
 2,073
 nm
 9,863
 nm
Net Income $4,655
 3.4 % $5,014
 3.8 % $10,593
 2.5 % $22,425
 5.5 %
                 
Effective Tax Rate 16.8% nm
 19.8% nm
 16.4% nm
 30.5% nm
Diluted Earnings Per Share $0.41
 nm
 $0.44
 nm
 $0.92
 nm
 $1.99
 nm
nm = not meaningful

Net Revenues by End-Use Market and Operating Segment
Net revenues by end-use market and operating segment during the first fiscal three and nine months of 2017 and 2016, respectively, were as follows:
  Three Months Ended Nine Months Ended
    (In thousands) % of Net Revenues   (In thousands) % of Net Revenues
  Change September 30
2017		 October 1,
2016		 September 30
2017		 October 1,
2016		 Change September 30
2017		 October 1,
2016		 September 30
2017		 October 1,
2016
Consolidated Ducommun                    
Military and space                    
Defense electronics $7,740
 $50,259
 $42,519
 36.3% 32.1% $27,514
 $153,728
 $126,214
 37.0% 30.9%
Defense structures 318
 12,534
 12,216
 9.0% 9.2% 4,434
 42,041
 37,607
 10.1% 9.2%
Commercial aerospace (2,842) 60,923
 63,765
 43.9% 48.1% (16,820) 176,643
 193,463
 42.5% 47.4%
Industrial 903
 14,974
 14,071
 10.8% 10.6% (7,359) 43,513
 50,872
 10.4% 12.5%
Total $6,119
 $138,690
 $132,571
 100.0% 100.0% $7,769
 $415,925
 $408,156
 100.0% 100.0%
                     
Structural Systems                    
Military and space (defense structures) $318
 $12,534
 $12,216
 21.0% 20.0% $4,434
 $42,041
 $37,607
 23.8% 20.3%
Commercial aerospace (1,564) 47,151
 48,715
 79.0% 80.0% (13,704) 134,331
 148,035
 76.2% 79.7%
Total $(1,246) $59,685
 $60,931
 100.0% 100.0% $(9,270) $176,372
 $185,642
 100.0% 100.0%
                     
Electronic Systems                    
Military and space (defense electronics) $7,740
 $50,259
 $42,519
 63.6% 59.4% $27,514
 $153,728
 $126,214
 64.1% 56.7%
Commercial aerospace (1,278) 13,772
 15,050
 17.4% 21.0% (3,116) 42,312
 45,428
 17.7% 20.4%
Industrial 903
 14,974
 14,071
 19.0% 19.6% (7,359) 43,513
 50,872
 18.2% 22.9%
Total $7,365
 $79,005
 $71,640
 100.0% 100.0% $17,039
 $239,553
 $222,514
 100.0% 100.0%
Net revenues for the three months ended SeptemberMarch 30, 2017 were $138.72024 and April 1, 2023 included $1.4 million compared to $132.6and $0.4 million, respectively, of stock-based compensation expense for theawards with both performance and market conditions that will be settled in cash. The three months ended OctoberMarch 30, 2024 and April 1, 2016.2023 included less than $0.1 million and $0.1 million, respectively, of stock-based compensation expense recorded as cost of sales.
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 year-over-year increase was primarily due tomajority of the following:
$8.1 million higher revenues in our military and space end-use markets mainly due to increased demand, which favorably impacted our fixed-wing, missile, and helicopter platforms; and
$0.9 million higher revenues in our industrial end-use markets; partially offset by
$2.8 million lower revenues in our commercial aerospace end-use markets mainly due toLTAs do not meet the winding downdefinition of a regional jet programcontract under ASC 606 and continued softnessthus, the backlog amount disclosed below is greater than the remaining performance obligations amount disclosed in demand within the business jet market.
Net revenues for the nine months ended September 30, 2017 were $415.9 million, compared to $408.2 million for the nine months ended October 1, 2016. The year-over-year increase was primarily due to the following:
$31.9 million higher revenues in our military and space end-use markets mainly due to increased demand, which favorably impacted our helicopter and fixed-wing platforms, partially offset by the divestiture of our Miltec operation in March 2016. The net increase was partially offset by
$16.8 million lower revenues in our commercial aerospace end-use markets mainly due to the winding down of a regional jet program and continued softness in demand within the business jet market; and
$7.4 million lower revenues in our industrial end-use markets mainly due to exiting certain Industrial customers and the divestiture of our Pittsburgh operation in January 2016.

Net Revenues by Major Customers
A significant portion of our net revenues are from our top ten customers as follows:
  Three Months Ended Nine Months Ended
  September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016
Boeing Company 17.1% 18.1% 16.6% 17.8%
Lockheed Martin Corporation 5.7% 6.6% 5.7% 5.7%
Raytheon Company 14.3% 8.6% 14.1% 7.3%
Spirit Aerosystems Holdings, Inc. 8.0% 8.3% 7.6% 8.2%
United Technologies Corporation 4.5% 5.3% 5.0% 4.9%
Total top ten customers (1)
 64.3% 61.0% 62.8% 57.3%
(1)Includes the Boeing Company (“Boeing”), Lockheed Martin Corporation (“Lockheed Martin”), Raytheon Company (“Raytheon”), Spirit Aerosystems Holdings, Inc. (“Spirit”), and United Technologies Corporation (“United Technologies”).
Boeing, Lockheed Martin, Raytheon, Spirit, and United Technologies represented the following percentages of total accounts receivable:
  September 30,
2017		 December 31,
2016
Boeing 15.4% 7.8%
Lockheed Martin 4.8% 2.9%
Raytheon 6.2% 10.9%
Spirit 10.9% 9.0%
United Technologies 3.0% 7.8%
The net revenues and accounts receivable from Boeing, Lockheed Martin, Raytheon, Spirit, and United Technologies are diversified over a number of commercial, military and space programs and were generated 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 as a percentage of net revenues decreased year-over-year in the three months ended September 30, 2017 to 18.8% compared to the three months ended October 1, 2016 of 19.0% primarily due to unfavorable product mix, partially offset by lower manufacturing costs as a result of ongoing cost reduction initiatives.
Gross profit margin as a percentage of net revenues decreased year-over-year in the nine months ended September 30, 2017 to 18.5% compared to the nine months ended October 1, 2016 of 19.2% primarily due to unfavorable product mix, partially offset by lower manufacturing costs as a result of ongoing cost reduction initiatives and higher manufacturing volume.
Selling, General and Administrative (“SG&A”) Expenses
SG&A expenses increased $1.6 million year-over-year in the three months ended September 30, 2017 compared to the three months ended October 1, 2016 primarily due to higher compensation and benefit costs of $1.5 million.
SG&A expenses increased $0.6 million year-over-year in the nine months ended September 30, 2017 compared to the nine months ended October 1, 2016 primarily due to higher compensation and benefit costs of $2.0 million, partially offset by a decrease due to the divestitures of our Pittsburgh and Miltec operations and closure of certain facilities of $1.3 million.
Interest Expense
Interest expense increased year-over-year in the three months ended September 30, 2017 compared to the three months ended October 1, 2016 primarily due to a higher utilization of the Revolving Credit Facility balance in the current three month period, including the acquisition of Lightning Diversion Systems, LLC (“LDS”), partially offset by a lower Term Loan balance as a result of voluntary principal prepayments on our credit facilities.
Interest expense decreased year-over-year in the nine months ended September 30, 2017 compared to the nine months ended October 1, 2016 primarily due to a lower outstanding Term Loan balance as a result of voluntary principal prepayments on our credit facilities, partially offset by higher utilization of the Revolving Credit Facility in the current nine month period, including the acquisition of LDS.

Gain on Divestitures
There was no gain on divestitures during the three and nine months ended September 30, 2017. The gain on divestitures for the three and nine months ended October 1, 2016 consisted of the divestitures during the first quarter of 2016 of our Pittsburgh operation with a pretax gain of $18.3 million and our Miltec operation with a preliminary pretax gain of $0.5 million. (see Note 1 to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q).
Income Tax Expense
We recorded income tax expense of $0.9 million (effective tax rate of 16.8%) for the three months ended September 30, 2017 compared to $1.2 million (effective tax rate of 19.8%) for the three months ended October 1, 2016. The decrease in the effective tax rate for the three months ended September 30, 2017 compared to the three months ended October 1, 2016 was primarily due to tax benefits recognized from additional U.S. Federal research and development tax credits. FASB ASU 2016-09 “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” became effective beginning January 1, 2017 and required all of the tax effects related to share-based payments to be recorded through the income statement. This could result in fluctuations in our effective tax rate from period to period, depending on the number of awards exercised and/or vested in the quarter as well as the volatility of our stock price. During the current year three month period, we recognized tax benefits from deductions of share-based payments in excess of compensation cost recognized for financial reporting purposes of $0.1 million, which decreased the effective tax rate by 0.6%.
We recorded income tax expense of $2.1 million (effective tax rate of 16.4%) for the nine months ended September 30, 2017 compared to $9.9 million (effective tax rate of 30.5%) for the nine months ended October 1, 2016. The decrease in the effective tax rate for the nine months ended September 30, 2017 compared to the nine months ended October 1, 2016 was primarily due to the preliminary gain on divestitures of our Pittsburgh and Miltec operations of $18.8 million, which resulted in a higher state tax liability, compared to the current nine month period. In addition, during the current nine month period, we recognized tax benefits from deductions of share-based payments in excess of compensation cost recognized for financial reporting purposes of $0.6 million, which decreased the effective tax rate by 4.8%, and we recognized additional tax benefits from U.S. Federal research and development tax credits.
Our total amount of unrecognized tax benefits was $3.7 million and $3.0 million as of September 30, 2017 and December 31, 2016, respectively. If recognized, $2.4 million would affect the effective tax rate. We do not reasonably expect significant increases or decreases to our unrecognized tax benefits in the next twelve months.
In 2016, the Internal Revenue Service (“IRS”) commenced an audit of our 2014 and 2015 tax years. Although the outcome of tax examinations cannot be predicted with certainty, we 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 and Earnings per Share
Net income and earnings per share for the three months ended September 30, 2017 were $4.7 million, or $0.41 per diluted share, compared to $5.0 million, or $0.44 per diluted share, for the three months ended October 1, 2016. The decrease in net income for the three months ended September 30, 2017 compared to the three months ended October 1, 2016 was primarily due to the following:
$1.6 million higher SG&A expense; partially offset by
$0.3 million of lower income tax expense.
Net income and earnings per share for the nine months ended September 30, 2017 were $10.6 million, or $0.92 per diluted share, compared to $22.4 million, or $1.99 per diluted share, for the nine months ended October 1, 2016. The decrease in net income for the nine months ended September 30, 2017 compared to the nine months ended October 1, 2016 was primarily due to the following:
The prior year included a preliminary pre-tax gain on divestitures of our Pittsburgh and Miltec operations of $18.8 million; partially offset by
$7.8 million lower income tax expense.
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 the three and nine months ended September 30, 2017 and October 1, 2016:

  Three Months Ended Nine Months Ended
  % (In thousands) % of Net Revenues % (In thousands) % of Net Revenues
  Change September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016		 Change September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016
Net Revenues                    
Structural Systems (2.0)% $59,685
 $60,931
 43.0 % 46.0 % (5.0)% $176,372
 $185,642
 42.4 % 45.5 %
Electronic Systems 10.3 % 79,005
 71,640
 57.0 % 54.0 % 7.7 % 239,553
 222,514
 57.6 % 54.5 %
Total Net Revenues 4.6 % $138,690
 $132,571
 100.0 % 100.0 % 1.9 % $415,925
 $408,156
 100.0 % 100.0 %
Segment Operating Income                    
Structural Systems   $3,466
 $5,893
 5.8 % 9.7 %   $8,147
 $13,347
 4.6 % 7.2 %
Electronic Systems   8,234
 6,600
 10.4 % 9.2 %   24,158
 19,769
 10.1 % 8.9 %
    11,700
 12,493
       32,305
 33,116
    
Corporate General and Administrative Expenses (1)
   (4,505) (4,441) (3.2)% (3.3)%   (14,539) (13,505) (3.5)% (3.3)%
Total Operating Income   $7,195
 $8,052
 5.2 % 6.1 %   $17,766
 $19,611
 4.3 % 4.8 %
Adjusted EBITDA                    
Structural Systems                    
Operating Income   $3,466
 $5,893
       $8,147
 $13,347
    
Other Income   200
 141
       200
 141
    
Depreciation and Amortization   2,220
 2,851
       6,879
 6,683
    
Restructuring Charges   64
 —
       64
 —
    
    5,950
 8,885
 10.0 % 14.6 %   15,290
 20,171
 8.7 % 10.9 %
Electronic Systems                    
Operating Income   8,234
 6,600
       24,158
 19,769
    
Other Income   288
 —
       288
 —
    
Depreciation and Amortization   3,345
 3,232
       10,207
 10,661
    
    11,867
 9,832
 15.0 % 13.7 %   34,653
 30,430
 14.5 % 13.7 %
Corporate General and Administrative Expenses (1)
                    
Operating Loss   (4,505) (4,441)       (14,539) (13,505)    
Depreciation and Amortization   54
 6
       63
 76
    
Stock-Based Compensation Expense   1,100
 594
       4,264
 2,579
    
    (3,351) (3,841)       (10,212) (10,850)    
Adjusted EBITDA   $14,466
 $14,876
 10.4 % 11.2 %   $39,731
 $39,751
 9.6 % 9.7 %
Capital Expenditures                    
Structural Systems   $4,449
 $3,555
       $17,217
 $10,149
    
Electronic Systems   1,793
 947
       4,256
 1,701
    
Corporate Administration   127
 —
       775
 —
    
Total Capital Expenditures   $6,369
 $4,502
       $22,248
 $11,850
    
(1)Includes costs not allocated to either the Structural Systems or Electronic Systems operating segments.
Structural Systems
Structural Systems’ net revenues in the three months ended September 30, 2017 compared to the three months ended October 1, 2016 decreased $1.2 million primarily due to the following:
$1.6 million lower revenues in our commercial aerospace end-use markets mainly due to the winding down of a regional jet program and continued softness in demand within the business jet market; partially offset by
$0.3 million higher revenues in our military and space end-use markets mainly due to increased demand, which favorably impacted our helicopter platforms.
Structural Systems’ net revenues in the nine months ended September 30, 2017 compared to the nine months ended October 1, 2016 decreased $9.3 million primarily due to the following:

$13.7 million lower revenues in our commercial aerospace end-use markets mainly due to the winding down of a regional jet program and continued softness in demand within the business jet market; partially offset by
$4.4 million higher revenues in our military and space end-use markets mainly due to increased demand, which favorably impacted our helicopter platforms.
The Structural Systems segment operating income in the three and nine months ended September 30, 2017 compared to the three and nine months ended October 1, 2016 decreased $2.4 million and $5.2 million, respectively, primarily due to the impact of new program development on large airframe platforms and lower manufacturing volume.
Electronic Systems
Electronic Systems’ net revenues in the three months ended September 30, 2017 compared to the three months ended October 1, 2016 increased $7.4 million primarily due to the following:
$7.7 million higher revenues in our military and space end-use markets mainly due to increased demand, which favorably impacted our fixed-wing, missile, and helicopter platforms; and
$0.9 million higher revenues in our Industrial end-use markets; partially offset by
$1.3 million lower revenues in our commercial aerospace end-use markets mainly due to continued softness in demand in the business jet market.
Electronic Systems’ net revenues in the nine months ended September 30, 2017 compared to the nine months ended October 1, 2016 increased $17.0 million primarily due to the following:
$27.5 million higher revenues in our military and space end-use markets mainly due to increased demand, which favorably impacted our fixed-wing, helicopter, and missile platforms, partially offset by the divestiture of our Miltec operation in March 2016. The net increase was partially offset by
$7.4 million lower revenues in our Industrial end-use markets mainly due to exiting certain Industrial customers and the divestiture of our Pittsburgh operation in January 2016; and
$3.1 million lower revenues in our commercial aerospace end-use markets mainly due to continued softness in demand in the business jet market.
Electronic Systems’ segment operating income in the three and nine months ended September 30, 2017 compared to the three and nine months ended October 1, 2016 increased $1.6 million and $4.4 million, respectively, primarily due to higher manufacturing volume and lower manufacturing costs as a result of ongoing cost reduction initiatives, partially offset by unfavorable product mix.
Corporate General and Administrative (“CG&A”) Expenses
CG&A expenses increased $0.1 million in the three months ended September 30, 2017 compared to the three months ended October 1, 2016.
CG&A expenses increased $1.0 million in the nine months ended September 30, 2017 compared to the nine months ended October 1, 2016 primarily due to higher compensation and benefit costs of $2.5 million, partially offset by lower professional services fees of $1.3 million.
Backlog
10-Q. 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 several programs to a greater extent than our net revenues. Backlog in industrial 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 revenues. $427.0
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The increase in backlog was primarily in the military and space end-use markets and commercial aerospace end-use markets. $672.0 million of total backlog is expected to be delivered over the next 12 months. The following table summarizes our backlog as of SeptemberMarch 30, 20172024 and December 31, 2016:2023:

(Dollars in thousands)
ChangeMarch 30,
2024		December 31,
2023
Consolidated Ducommun
Military and space$41,859 $569,002 $527,143 
Commercial aerospace12,639 442,133 429,494 
Industrial(2,478)34,453 36,931 
Total$52,020 $1,045,588 $993,568 
Electronic Systems
Military and space$36,425 $434,106 $397,681 
Commercial aerospace9,832 97,826 87,994 
Industrial(2,478)34,453 36,931 
Total$43,779 $566,385 $522,606 
Structural Systems
Military and space$5,434 $134,896 $129,462 
Commercial aerospace2,807 344,307 341,500 
Total$8,241 $479,203 $470,962 

35
  (In thousands)
  Change September 30,
2017		 December 31,
2016
Consolidated Ducommun      
Military and space      
Defense electronics $(7,745) $189,831
 $197,576
Defense structures 7,727
 66,605
 58,878
Commercial aerospace 44,019
 367,408
 323,389
Industrial 4,355
 31,485
 27,130
Total $48,356
 $655,329
 $606,973
Structural Systems      
Military and space (defense structures) $7,727
 $66,605
 $58,878
Commercial aerospace 31,253
 316,492
 285,239
Total $38,980
 $383,097
 $344,117
Electronic Systems      
Military and space (defense electronics) $(7,745) $189,831
 $197,576
Commercial aerospace 12,766
 50,916
 38,150
Industrial 4,355
 31,485
 27,130
Total $9,376
 $272,232
 $262,856

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Liquidity and Capital Resources
Available Liquidity
Total debt, the weighted-average interest rate, cash and cash equivalents and available credit facilities were as follows:
(Dollars in millions)
March 30,December 31,
20242023
Total debt, including long-term portion$264.4 $266.0 
Weighted-average interest rate on debt7.27 %7.53 %
Term Loans interest rate7.24 %6.93 %
Cash and cash equivalents$32.1 $42.9 
Unused Revolving Credit Facility$176.0 $176.0 
  (In millions)
  September 30, December 31,
  2017 2016
Total debt, including long-term portion $224.7
 $170.0
Weighted-average interest rate on debt 3.43% 3.25%
Term Loan interest rate 3.44% 3.31%
Cash and cash equivalents $3.7
 $7.4
Unused Revolving Credit Facility $134.5
 $199.0
OurIn July 2022, we completed a refinancing of all our existing debt by entering into a new term loan (“2022 Term Loan”) and a new revolving credit facility consists of(“2022 Revolving Credit Facility”). The 2022 Term Loan is a $275.0$250.0 million senior secured term loan whichthat matures on June 26, 2020 (“Term Loan”), andJuly 14, 2027. The 2022 Revolving Credit Facility is a $200.0 million senior secured revolving credit facility (“that matures on July 14, 2027. The 2022 Term Loan and 2022 Revolving Credit Facility”), which matures on June 26, 2020 (collectively, the “CreditFacility, collectively, represent our new credit facilities (“2022 Credit Facilities”). WeIn conjunction with the closing of the 2022 Credit Facilities, we utilized the entire $250.0 million of proceeds from the 2022 Term Loan plus our existing cash on hand to pay off our entire debt balance outstanding of $254.2 million under our prior credit facilities. At the same leverage ratio, the interest rate spread in the 2022 Credit Facilities is lower than the interest rate spread under our prior credit facilities. Interest payments are requiredtypically paid either on a monthly or quarterly basis, depending on the interest rate selected, on the last business day each month or quarter. In addition, the 2022 Term Loan requires quarterly amortization payments of 0.625% during year one and year two, 1.250% during year three and year four, and 1.875% during year five of the original outstanding principal balance of the 2022 Term Loan amount, on the last business day each quarter. Further, the undrawn portion of the commitment of the 2022 Revolving Credit Facility is subject to make mandatory prepayments of amounts outstanding undera commitment fee ranging from 0.175% to 0.275%, based upon the Term Loan.consolidated total net adjusted leverage ratio, typically paid on a quarterly basis, on the last business day each quarter. However, the 2022 Revolving Credit Facility does not require any principal installment payments. As of SeptemberMarch 30, 2017,2024, we were in compliance with all covenants required under the 2022 Credit Facilities. See Note 8 to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for further information.
We made the mandatory quarterly amortization payments under our existing term loan of $1.6 million during both three months ended March 30, 2024 and April 1, 2023. We made no voluntary prepayments on our term loans during both three months ended March 30, 2024 and April 1, 2023.
In April 2022, management approved and commenced a restructuring plan that will position us for stronger performance. The restructuring plan will mainly reduce headcount and consolidate facilities. As a result of this restructuring plan, we analyzed the need to write-down inventory and impair long-lived assets, including operating lease right-of-use assets. As of March 30, 2024, we estimate the remaining amount of charges related to this initiative will be $4.0 million to $6.0 million in total pre-tax restructuring charges through 2024. Of these charges, we estimate $3.5 million to $5.0 million to be cash payments for employee separation and other facility consolidation related expenses, and $0.5 million to $1.0 million to be non-cash charges for impairment of long-lived assets. The restructuring accrual for severance and benefits of $4.5 million as of March 30, 2024 are expected to be paid out through 2024. On an annualized basis, we anticipate these restructuring actions will result in total cost savings of $11.0 million to $13.0 million. See Note 3 to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for further information.
In November 2021, we entered into derivative contracts, U.S. dollar-one month LIBOR forward interest rate swaps designated as cash flow hedges, all with an effective date of January 1, 2024, for an aggregate total notional amount of $150.0 million, weighted average fixed rate of 1.8%, and all terminating on January 1, 2031 (“Forward Interest Rate Swaps”). The Forward Interest Rate Swaps mature on a monthly basis, with fixed amount payer payment dates on the first day of each calendar month, commencing on February 1, 2024 through January 1, 2031. See Note 1, Note 4, and Note 8 to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for further information.
In July 2022, as a result of completing a refinancing of our existing debt, we were required to complete an amendment of the Forward Interest Rate Swaps (“Amended Forward Interest Rate Swaps”). The Forward Interest Rate Swaps were based on U.S. dollar-one month LIBOR and were amended to be based on one month Term SOFR as borrowings using LIBOR are no longer available under the 2022 Credit Facilities. The Amended Forward Interest Rate Swaps weighted average fixed rate is 1.7%, as a result of the difference between U.S. dollar-one month LIBOR and one month Term SOFR. See Note 1, Note 4, and Note 8 to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for further information.
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In April 2023, we completed the acquisition of BLR. The initial purchase price for BLR was $115.0 million, net of cash acquired, all payable in cash. We paid a gross aggregate of $117.0 million in cash upon the closing of the transaction. We utilized the 2022 Revolving Credit Facility to complete the acquisition. See Note 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for further information.
In May 2023, we completed a public offering of our common stock resulting in net proceeds of $85.1 million. The public stock offering net proceeds along with cash on hand were used to pay down $85.2 million on the 2022 Revolving Credit Facility that was drawn on and utilized to complete the acquisition of BLR. See Note 2, Note 8, and Note 9 to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for further information. On July 14, 2017, we entered into a technical amendment to the Credit Facilities (“First Amendment”) which provides more flexibility to close certain qualified acquisitions permitted under the Credit Facilities.
In October 2015, we entered into interest rate cap hedges designated as cash flow hedges with maturity dates of June 2020, and 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 September 11, 2017, we acquired 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 the Revolving Credit Facility. The remaining $0.6 million was paid in October 2017 in cash, also by drawing down on the Revolving Credit Facility. See Note 2 for further information.
We expect to spend a total of $26.0$23.0 million to $30.0$25.0 million for capital expenditures in 20172024 financed by cash generated from operations, principally to support the expansion of our Parsons, Kansas facility and new contract awards atin Electronic Systems and 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 monitor our asset base, including the market dynamics of the properties we own, and we may sell such properties and/or enter into sale-leaseback transactions. Such transactions would provide cash for various capital deployment options.
We continue to depend on operating cash flow and the availability of our 2022 Credit Facilities 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.

months from the date of issuance of these financial statements.
Cash Flow Summary
Net cash provided byused in operating activities for the ninethree months ended SeptemberMarch 30, 2017 decreased to $27.42024 was $1.6 million, compared to $27.6$18.9 million for the ninethree months ended OctoberApril 1, 2016.2023. The lower net cash generatedused in operating activities during the first ninethree months of 20172024 was primarilymainly due to lower net income,a smaller increase in inventories and higher contract liabilities, partially offset by higher accounts payable mainly due to the timing of payments.contract assets.
Net cash used in investing activities of $83.5was $5.0 million for the ninethree months ended SeptemberMarch 30, 20172024, compared to net cash provided by of $42.6$5.4 million in the ninethree months ended OctoberApril 1, 2016 primarily due to2023. The lower net cash used in investing activities during the payments for the purchasefirst three months of LDS, net of cash acquired of $59.2 million in the current year nine month period2024 compared to the prior year nine month period which included proceeds from the divestiture of our Pittsburgh and Miltec operations of approximately $55.3 million andwas due to lower purchases of property and equipment mainly to support the expansion of our Parsons, Kansas facility.equipment.
Net cash provided byused in financing activities was $4.2 million for the ninethree months ended SeptemberMarch 30, 20172024, compared to a net cash used in financing activities of $52.4$4.8 million for the three months ended April 1, 2023. The lower net cash used in financing activities during the first three months of 2024 was primarilymainly due to lower net borrowings from the Revolving Credit Facility that was used for the purchasecash paid upon issuance of LDS, partially offset by repayments on the Credit Facilities.

common stock under stock plans.
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, right of offset of industrial revenue bonds and indemnities.associated failed sales-leasebacks on property and equipment, and indemnities, none of which we believe may have a material current or future effect on our financial condition, liquidity, capital resources, or results of operations.
Critical Accounting Policies
The preparation of our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States requires estimation and judgment that affect the reported amounts of net revenues, expenses, assets and liabilities. For a description of our critical accounting policies, please refer to “Critical Accounting Policies” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 20162023 Annual Report on Form 10-K. There have been no material changes in any of our critical accounting policies during the three and nine months ended SeptemberMarch 30, 2017.2024.
Recent Accounting Pronouncements
See “Part I, Item 1. Ducommun Incorporated and Subsidiaries—Notes to Condensed Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—Recent Accounting Pronouncements” for further information.


Item 3. 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 SeptemberMarch 30, 2017,2024, we had total borrowings of $224.7$264.4 million under our 2022 Credit Facilities.
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The 2022 Term Loan and Revolving Credit Facility that bearbears interest, at our option, at a rate equal to either (i) the EurodollarTerm Secured Overnight Financing Rate (defined as LIBOR)(“Term SOFR”) plus an applicable margin ranging from 1.50%1.375% to 2.75%2.375% 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 RateTerm SOFR plus 1.00%), and if the Base Rate is less than zero percent, it will be deemed zero percent) plus an applicable margin ranging from 0.50%0.375% to 1.75%1.375% per year, in each case based upon the consolidated total net adjusted leverage ratio.
The 2022 Revolving Credit Facility bears interest, at our option, at a rate equal to either (i) Term SOFR plus an applicable margin ranging from 1.375% to 2.375% per year or (ii) Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] Term SOFR plus 1.00%, and if the Base Rate is less than zero percent, it will be deemed zero percent) plus an applicable margin ranging from 0.375% to 1.375% 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 4. Controls and Procedures
Disclosure Controls and Procedures
The Company’s chief executive officer (“CEO”) and chief financial officer (“CFO”) have conducted an evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e))1934) as of SeptemberMarch 30, 2017.2024. The Company had previously reported a material weakness in internal control over

financial reporting related to not designing and maintaining effective controls relatedover the accuracy of contract terms and the reasonableness of gross margin assumptions used to recognize revenue. Specifically, the quarterlyCompany did not verify that amendments to purchase orders and annual accounting and disclosures for income taxes. This material weaknessgross margin percentage assumptions used in the Company’s revenue recognition analysis were properly reviewed at a sufficient level of precision, which was described in Item 9A in the Management’s Report on Internal Control Over Financial Reporting in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2023. As a result of the material weakness in the Company’s internal control over financial reporting, which was not remediated as of SeptemberMarch 30, 2017,2024, the CEO and CFO concluded the Company’s disclosure controls and procedures were not effective as of SeptemberMarch 30, 2017.2024.
Management’s Remediation Activitiesof Material Weakness
We are committedhave implemented remediation steps to remediating the control deficiencies that constituteaddress the material weakness described above. Our Chief Financial Officer is responsible for remediating the control deficiency that gave riseabove to the material weakness.
Actions to be taken or in process consist of ensuring we maintain a sustained period of operating effectiveness ofimprove our internal control over financial reportingverification of amendments to purchase orders and the gross margin percentage assumptions used to recognize revenue.
Actions taken:
•We have redesigned our existing controls to expand the selection criteria for contracts requiring an estimate at completion (“EAC”) analysis to support the gross margin percentage used for revenue recognition.
•We have increased the rigor and review of the EAC process, including standardization of the analysis and related documentation and verification of the contract value utilized to the quarterly and annual accounting and disclosures for income taxes.underlying customer purchase order.
•We have implemented additional analytical procedures to ensure the accuracy of gross margin assumptions.
While significant progress has been made to enhance our internal control over financial reporting relating to the material weakness, additional time will be required to assess and ensure the sustainability of these processes and procedures. We expect to complete the remedial actions described above will have had sufficient time to functionassessment and ensure sustainability of these processes and procedures during 2017 to allow management to conclude that the material weakness has been satisfactorily remediated and that the existing controls are operating effectively. However,2024, however, we cannot make any assurances that such actions will be completed during 2017.2024. Until the controls describedremediation steps set forth above have had sufficient time for managementare fully implemented and concluded to conclude that they arebe operating effectively, the material weakness described above will continue to exist.
Changes in Internal Control over Financial Reporting
ThereExcept as otherwise discussed above under “Remediation of Material Weakness,” there were no other changes in our internal controlscontrol over financial reporting during the three months ended SeptemberMarch 30, 20172024 that have materially affected, or are reasonably likely to materially affect, our internal controlscontrol over financial reporting.
 
PART II. OTHER INFORMATION


Item 1. Legal Proceedings
See Note 14 12to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for a description of our legal proceedings.


Item 1A. Risk Factors
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See Part I, Item 1A of our Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 20162023 for a discussion of our risk factors. ThereOther than the risk factor below, there have been no material changes induring the ninethree months ended SeptemberMarch 30, 20172024 to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016.2023.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.

Item 3. Defaults Upon Senior Securities
Not applicable.

Item 4. Mine Safety Disclosures
Not applicable.

Item 5. Other Information
None.
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Table of Contents
Item 6. Exhibits
2.1 Agreement and PlanExhibit
No.    Description
3.1     Restated Certificate of Merger, dated asIncorporation filed with the Delaware Secretary of April 3, 2011, among Ducommun Incorporated, DLBMS, Inc. and LaBarge, Inc.State on May 29, 1990. Incorporated by reference to Exhibit 2.13.1 to Form 8-K filed on April 5, 2011.10-K for the year ended December 31, 1990.
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 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.
2.4 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.
3.1Restated 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.
3.2 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 Amended and Restated Bylaws of Ducommun Incorporated, dated as amended and restated on March 19, 2013.of November 4, 2022. Incorporated by reference to Exhibit 99.13.3 to Form 8-K dated March 22, 2013.10-K for the year ended December 31, 2022.
3.4 Amendment to Bylaws dated January 5, 2017. Incorporated by reference to Exhibit 99.2 to Form 8-K dated January 9, 2017.
*10.1 Credit Agreement, dated as of June 26, 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.2024 Employee Stock Incentive Plan. Incorporated by reference to Exhibit 10.1 to Form 8-K dated June 26, 2015.
10.2 First Amendment to Credit Agreement, dated as of July 14, 2017, 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 10.2 to Form 10-Q for the period ended July 1, 2017.
*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, 2015.25, 2024.
*10.5 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.
*10.6 Form of Stock Option Agreement for 2017 and after. Incorporated by reference to Exhibit 10.5 to Form 10-K for the year ended December 31, 2016.
*10.7 Form of Performance Stock Unit Agreement for 2014 and 2015. Incorporated by reference to Exhibit 10.19 to Form 10-Q dated April 28, 2014.
*10.8 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.
*10.9 Form of Restricted Stock Unit Agreement for 2016 and earlier. Incorporated by reference to Exhibit 10.9 to Form 10-K for the year ended December 31, 2016. *10.10 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.
*10.11 Form of Directors’ Restricted Stock Unit Agreement. Incorporated by reference to Exhibit 99.1 to Form 8-K dated May 10, 2010.
*10.12 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.

*10.13Form 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/OfficerDate of Agreement
Richard A. BaldridgeMarch 19, 2013
Gregory S. ChurchillMarch 19, 2013
Robert C. DucommunDecember 31, 1985
Dean M. FlattNovember 5, 2009
Douglas L. GrovesFebruary 12, 2013
Jay L. HaberlandFebruary 2, 2009
Stephen G. OswaldJanuary 23, 2017
Amy M. PaulJanuary 23, 2017
Robert D. PaulsonMarch 25, 2003
Anthony J. ReardonJanuary 8, 2008
Jerry L. RedondoOctober 1, 2015
Rosalie F. RogersJuly 24, 2008
Christopher D. WamplerJanuary 1, 2016
*10.14 Ducommun Incorporated 2016 Bonus Plan. Incorporated by reference to Exhibit 99.3 to Form 8-K dated March 1, 2016.
*10.15 Ducommun Incorporated 2017 Bonus Plan. Incorporated by reference to Exhibit 99.1 to Form 8-K dated February 27, 2017.
*10.16 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.
*10.17 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.
*10.18 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 and the address for notice:
PersonDate of Agreement
Douglas L. GrovesJanuary 23, 2017
Amy M. PaulJanuary 23, 2017
Anthony J. ReardonJanuary 23, 2017
Jerry L. RedondoJanuary 23, 2017
Rosalie F. RogersJanuary 23, 2017
Christopher D. WamplerJanuary 23, 2017
*10.19 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.
*10.20 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.
*10.21 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 dated January 16, 2017.
*10.22 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.

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.INS    Inline XBRL Instance Document with Embedded Linkbase Documents - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL
101.SCH104    Cover Page Interactive Data File (formatted as Inline 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 Linkbaseand contained in Exhibit 101)
___________________
* Indicates an executive compensation plan or arrangement.



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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DUCOMMUN INCORPORATED
(Registrant)
Date: November 1, 2017May 8, 2024By:/s/ Stephen G. Oswald
Stephen G. Oswald
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
Date: May 8, 2024By:/s/ Suman B. Mookerji
Date: November 1, 2017By:/s/ Douglas L. GrovesSuman B. Mookerji
Douglas L. Groves
Senior Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
Date: November 1, 2017By:/s/ Christopher D. Wampler
Christopher D. Wampler
Vice President, Controller and Chief Accounting Officer
(Principal Accounting Officer)





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