10-K 1 a70035e10-k.txt FORM 10-K PERIOD ENDED DECEMBER 31, 2000 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File No. 1-8174 DUCOMMUN INCORPORATED ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 95-0693330 ------------------------------ --------------------------- State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 111 West Ocean Boulevard, Suite 900, Long Beach, California 90802-7901 ----------------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (562) 624-0800 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered ---------------------------- ------------------------ Common Stock, $.01 par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None ----------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] 2 The aggregate market value of the voting stock held by nonaffiliates of the registrant was approximately $92,000,000 as of January 31, 2001. The number of shares of common stock outstanding on January 31, 2001 was 9,604,457. DOCUMENTS INCORPORATED BY REFERENCE The following documents are incorporated by reference: (a) Annual Report to Shareholders (the "2000 Annual Report") for the year ended December 31, 2000, incorporated partially in Part I and Part II hereof (see Exhibit 13), and (b) Proxy Statement for the 2001 Annual Meeting of Shareholders (the "2001 Proxy Statement"), incorporated partially in Part III hereof. FORWARD-LOOKING STATEMENTS AND RISK FACTORS Certain statements in the Form 10-K and documents incorporated by reference contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any such forward-looking statements involve risks and uncertainties. The Company's future financial results could differ materially from those anticipated due to the Company's dependence on conditions in the airline industry, the level of new commercial aircraft orders, the production rates for Boeing commercial aircraft, the C-17 and the Space Shuttle programs, the level of defense spending, competitive pricing pressures, technology and product development risks and uncertainties, product performance, risks associated with acquisitions and dispositions of businesses by the Company, increasing consolidation of customers and suppliers in the aerospace industry, availability of raw materials and components from suppliers, the outcome of the lawsuit by Com Dev Consulting Ltd. against the Company, and other factors beyond the Company's control. 2 3 PART I ITEM 1. BUSINESS During 2000, Ducommun Incorporated ("Ducommun"), through its subsidiaries (collectively, the "Company"), manufactured components and assemblies principally for domestic and foreign commercial and military aircraft and space programs. Domestic commercial aircraft programs include the Boeing 717, 737NG, 747, 757, 767 and 777. Foreign commercial aircraft programs include the Airbus Industrie A330, A340 and A340-600 aircraft, Bombardier Business and Regional Jets, and Dash 8. Major military aircraft programs include the Boeing C-17 and F-18, Lockheed Martin F-16, various Sikorsky, Bell, Boeing and Augusta helicopter programs, and advanced development programs. The Company is a subcontractor to Lockheed Martin on the Space Shuttle external tank and a supplier of components for the Space Shuttle, as well as for the International Space Station. In November 1999, Ducommun, through a wholly-owned subsidiary, acquired the assets and assumed certain liabilities of Parsons Precision Products, Inc. ("Parsons"). In April 1999, Ducommun acquired the capital stock of Sheet Metal Specialties Company ("SMS"). In August 1998, Ducommun sold the capital stock of 3dbm, Inc. ("3dbm"). In June 1998, Ducommun Technologies, Inc., a subsidiary of Ducommun, acquired the capital stock of American Electronics, Inc. ("AEI"). AEROSTRUCTURAL PRODUCTS Aerochem, Inc. Ducommun's subsidiary, Aerochem, Inc. ("Aerochem"), is a major supplier of close tolerance chemical milling services for the aerospace and aircraft industries. Chemical milling removes material in specific patterns to reduce weight in areas where full material thickness is not required. This sophisticated etching process enables Aerochem to produce lightweight, high-strength designs that would be impractical to produce by conventional means. Jet engine components, wing leading edges and fuselage skins are examples of products that require chemical milling. Aerochem offers production-scale chemical milling on aluminum, titanium, steel, nickel-base and super alloys. Aerochem also specializes in very large and complex parts up to 50 feet long. Management believes that Aerochem is the largest independent supplier of chemical milling services in the United States. Many of the parts chemically milled by Aerochem are formed and machined by AHF-Ducommun Incorporated. AHF-Ducommun Incorporated AHF-Ducommun Incorporated ("AHF"), another Ducommun subsidiary, supplies aircraft and aerospace prime contractors with engineering, manufacturing and testing of complex components using stretch forming and thermal forming processes and computer- controlled machining. Stretch forming is a process for manufacturing large, complex structural shapes primarily from aluminum sheet metal extrusions. AHF has some of the 3 4 largest and most sophisticated stretch forming presses in the United States. Thermal forming is a metal working process conducted at high temperature for manufacturing close tolerance titanium components. AHF designs and manufactures the tooling required for the production of parts in both forming processes. Certain components manufactured by AHF are machined with precision milling equipment designed and constructed by AHF. AHF also employs computer-aided design/manufacturing systems with three 5-axis gantry profile milling machines and five 5-axis numerically-controlled routers to provide computer-controlled machining and inspection of complex parts up to 100 feet long. AHF has an integrated operation offering a broad range of capabilities. From the design specifications of a customer, AHF is able to engineer, manufacture, test and deliver the desired finished components. This process depends on the skillful execution of several complex subtasks, including the design and construction of special equipment. Management believes that the ability of AHF to provide a full range of integrated capabilities represents a competitive advantage. Parsons Precision Products, Inc. In November 1999, Ducommun, through a wholly-owned subsidiary, acquired the assets and assumed certain liabilities of Parsons. Parsons is a leading manufacturer of complex titanium hot-formed subassemblies and components for commercial and military aerospace applications. SEATING PRODUCTS Brice Manufacturing Company, Inc. Brice Manufacturing Company, Inc. ("Brice"), a subsidiary of Ducommun, is an after-market supplier of aircraft seating products to many of the world's largest commercial airlines. Products supplied by Brice include plastic and metal seat parts, overhauled and refurbished seats, components for installation of in-flight entertainment equipment, and other cabin interior components for commercial aircraft. In 1998, Brice introduced an original equipment manufacture ("OEM") 16G coach-class aircraft seat. This new aircraft seat represents Brice's first major OEM product. ELECTROMECHANICAL PRODUCTS Ducommun Technologies, Inc. (formerly Jay-El Products, Inc.) Ducommun Technologies, Inc. ("DTI"), a subsidiary of Ducommun, develops, designs and manufactures illuminated switches, switch assemblies and keyboard panels used in many military aircraft, helicopter, commercial aircraft and spacecraft programs, as well as ground support equipment and naval vessels. DTI manufactures switches and panels where high reliability is a prerequisite. Keyboard panels are lighted, feature push button switches, and are available with sunlight readable displays. Some of the keyboard panels and illuminated switches manufactured by DTI for military applications are night vision goggle-compatible. 4 5 DTI also develops, designs and manufactures microwave switches, filters and other components used principally on commercial and military aircraft and telecommunications satellites. DTI has developed several new products that apply its existing microwave technology to nonaerospace markets, including the wireless telecommunications industry. In June 1998, DTI acquired the capital stock of AEI. AEI is a leading manufacturer of high precision actuators, stepper motors, fractional horsepower motors and resolvers principally for commercial and military space applications. MechTronics of Arizona Corp. MechTronics is a leading manufacturer of mechanical and electromechanical enclosure products for the defense electronics and commercial aviation markets. MechTronics has a fully integrated manufacturing capability, including engineering, fabrication, machining, assembly, electronic integration and related processes. MechTronics' products include sophisticated radar enclosures, gyroscopes and indicators, aircraft avionics racks and shipboard communications and control enclosures. In April 1999, Ducommun acquired the capital stock of SMS. SMS is a manufacturer of subassemblies for commercial and military aerospace applications. SMS remained at its existing Chatsworth, California facility and reports through MechTronics of Arizona Corp. OTHER BUSINESS 3dbm, Inc. In August 1998, Ducommun sold the capital stock of its wireless communications subsidiary, 3dbm, Inc. ("3dbm"). The Company sold 3dbm because the level of investment required to ensure the long-term viability of 3dbm in the wireless system infrastructure business was more than the Company was willing to commit. DEFENSE AND SPACE PROGRAMS A major portion of sales is derived from United States government defense programs and space programs. Approximately 38 percent of 2000 sales were related to defense programs and approximately 9 percent of 2000 sales were related to space programs. These programs could be adversely affected by reductions in defense spending and other government budgetary pressures which would result in reductions, delays or stretch-outs of existing and future programs. In addition, many of the Company's contracts covering defense and space programs are subject to termination at the convenience of the customer (as well as for default). In the event of termination for convenience, the customer generally is required to pay the costs incurred by the Company and certain other fees through the date of termination. COMMERCIAL PROGRAMS Approximately 53 percent of 2000 sales were related to commercial aircraft programs, and nonaerospace commercial applications. The Company's commercial sales depend 5 6 substantially on aircraft manufacturer's production rates, which in turn depend upon deliveries of new aircraft. Deliveries of new aircraft by aircraft manufacturers are dependent on the financial capacity of the airlines and leasing companies to purchase the aircraft. Sales of commercial aircraft could be affected as a result of changes in new aircraft orders, or the cancellation or deferral by airlines of purchases of ordered aircraft. The Company's sales for commercial aircraft programs also could be affected by changes in its customers' inventory levels and changes in its customers' aircraft production build rates. MAJOR CUSTOMERS The Company had substantial sales to Boeing, Lockheed Martin and Raytheon. During 2000, sales to Boeing were $61,109,000, or 37% of total sales; sales to Lockheed Martin were $12,685,000, or 8% of total sales; and sales to Raytheon were $14,242,000, or 9% of total sales. Sales to Boeing, Lockheed Martin and Raytheon are diversified over a number of different commercial, military and space programs. COMPETITION The Company competes with various companies, some of which are substantially larger and have greater financial, technical and personnel resources. The Company's ability to compete depends on the quality of goods and services, competitive pricing and the ability to solve specific customer problems. BACKLOG At December 31, 2000, backlog believed to be firm was approximately $238,600,000, compared to $213,100,000 at December 31, 1999. Approximately $103,100,000 of total backlog is expected to be delivered during 2001. ENVIRONMENTAL MATTERS AND LEGAL Aerochem uses various acid and alkaline solutions in the chemical milling process, resulting in potential environmental hazards. Despite existing waste recovery systems and continuing capital expenditures for waste reduction and management, at least for the immediate future, Aerochem will remain dependent on the availability and cost of remote hazardous waste disposal sites or other alternative methods of disposal. The Aerochem facility located in El Mirage, California has been directed by California environmental agencies to investigate and take corrective action for groundwater contamination. Based upon currently available information, the Company has established a provision for the cost of such investigation and corrective action. Aerochem expects to spend approximately $1 million for future investigation and corrective action for groundwater contamination at its El Mirage location. However, the Company's ultimate liability in connection with the contamination will depend upon a number of factors, including changes in existing laws and regulations, and the design and cost of the construction, operation and maintenance of the corrective action. 6 7 Ducommun's other subsidiaries are also subject to environmental laws and regulations. However, the quantities of hazardous materials handled, hazardous wastes generated and air emissions released by these subsidiaries are relatively small. The Company anticipates that capital expenditures will continue to be required for the foreseeable future to upgrade and maintain its environmental compliance efforts. The Company does not expect to spend a material amount on capital expenditures for environmental compliance during 2001. In the normal course of business, Ducommun and its subsidiaries are defendants in certain other litigation, claims and inquiries, including matters relating to environmental laws. In addition, the Company makes various commitments and incurs contingent liabilities. While it is not feasible to predict the outcome of these matters, the Company does not presently expect that any sum it may be required to pay in connection with these matters would have a material adverse effect on its consolidated financial position or results of operations. EMPLOYEES At December 31, 2000, the Company employed 1,134 persons. BUSINESS SEGMENT INFORMATION The Company operates principally in only one business segment. INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES In 2000, 1999 and 1998, foreign sales to manufacturers worldwide were $26,267,000, $28,313,000 and $29,007,000, respectively. The amounts of revenue, profitability and identifiable assets attributable to foreign operations are not material when compared with the revenue, profitability and identifiable assets attributed to United States domestic operations during 2000, 1999 and 1998. The Company had no sales to a foreign country greater than 5% of total sales in 2000, 1999 and 1998. The Company is not subject to any foreign currency risks since all sales are made in United States dollars. ITEM 2. PROPERTIES The Company occupies approximately 21 facilities with a total office and manufacturing area of over 1,241,000 square feet, including both owned and leased properties. At December 31, 2000, facilities which were in excess of 60,000 square feet each were occupied as follows: 7 8
Square Expiration Location Company Feet of Lease --------------------- --------------------------- ------- ---------- El Mirage, California Aerochem 74,300 Owned Orange, California Aerochem 76,200 Owned Carson, California AHF-Ducommun 65,000 2004 Carson, California AHF-Ducommun 69,000 Owned Carson, California AHF-Ducommun 283,000 Owned Carson, California Ducommun Technologies 118,000 2002 Phoenix, Arizona MechTronics 100,000 2006 Parsons, Kansas Parsons Precision Products 120,000 Owned
The Company's facilities are, for the most part, fully utilized, although excess capacity exists from time to time based on product mix and demand. Management believes that these properties are in good condition and suitable for their present use. Although the Company maintains standard property casualty insurance covering its properties, the Company does not carry any earthquake insurance because of the cost of such insurance. Most of the Company's properties are located in Southern California, an area subject to frequent and sometimes severe earthquake activity. ITEM 3. LEGAL PROCEEDINGS In October 1999, Com Dev Consulting Ltd. ("Com Dev") filed a complaint in the United States District Court against the Company and certain of its officers relating to the sale of the capital stock of 3dbm, Inc. ("3dbm") by the Company to Com Dev in August 1998. On February 3, 2000, the United States District Court dismissed the complaint without prejudice. On April 7, 2000, Com Dev filed another complaint in California Superior Court against the Company and certain of its officers relating to the sale of the capital stock of 3dbm by the Company to Com Dev. The complaint seeks recovery of damages in excess of $10,000,000, restitution of the $17,250,000 purchase price paid for 3dbm, and recovery of punitive damages, costs and attorneys' fees. A jury trial of the lawsuit is currently scheduled to begin on April 23, 2001. The Company intends to vigorously defend the matter. While it is not feasible to predict the outcome of this matter, the Company presently believes that the final resolution of the matter will not have a material adverse effect on its consolidated financial position or results of operations. However, because of the nature and inherent uncertainties of litigation, should the outcome of this matter be unfavorable, the Company may be required to pay damages and other expenses, which could have a material adverse effect on its consolidated financial position and results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 8 9 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information under the caption "Quarterly Common Stock Price Information" on page 12 of the 2000 Annual Report is incorporated herein by reference. No dividends were paid during 1999 or 2000 (see Exhibit 13). ITEM 6. SELECTED FINANCIAL DATA The information under the caption "Selected Financial Data" appearing on page 12 of the 2000 Annual Report is incorporated herein by reference (see Exhibit 13). ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing on pages 13 through 16 of the 2000 Annual Report is incorporated herein by reference (see Exhibit 13). ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary data under the captions "Consolidated Statements of Income," "Consolidated Balance Sheets," "Consolidated Statements of Cash Flows," "Consolidated Statements of Changes in Shareholders' Equity," and "Notes to Consolidated Financial Statements," together with the report thereon of PricewaterhouseCoopers LLP dated February 20, 2001, appearing on pages 17 through 28 of the 2000 Annual Report are incorporated herein by reference (see Exhibit 13). ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 9 10 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Directors of the Registrant The information under the caption "Election of Directors" in the 2001 Proxy Statement is incorporated herein by reference. Executive Officers of the Registrant The following table sets forth the names and ages of all executive officers of the Company (including subsidiary presidents), all positions and offices held with the Company and brief accounts of business experience during the past five years. Executive officers do not serve for any specified terms, but are typically elected annually by the Board of Directors of the Company or, in the case of subsidiary presidents, by the Board of Directors of the respective subsidiaries.
Positions and Offices Other Business Held With Company Experience Name (Age) (Year Elected) (Past Five Years) ----------------------- ----------------------------------------- ------------------------------------ Joseph C. Berenato (54) President (1996), Chief Executive Executive Vice President (1995), Officer (1997) and Chairman of the Board Chief Operating Officer (1995-1996), (1999) and Chief Financial Officer (1991-1996) of the Company Robert A. Borlet (60) Vice President, Manufacturing Operations President of Ducommun Technologies, (1999) Inc. (1988 -1999) James S. Heiser (44) Vice President (1990), -- Chief Financial Officer (1996), General Counsel (1988), Secretary (1987), and Treasurer (1995) Kenneth R. Pearson (65) Vice President-Human Resources (1988) -- Michael W. Williams (46) Vice President, Corporate Development Vice President of Operations at H.R. (1998) Textron; (1995 - 1998)
10 11
Positions and Offices Other Business Held With Company Experience Name (Age) (Year Elected) (Past Five Years) ----------------------- ----------------------------------------- ------------------------------------ Samuel D. Williams (52) Vice President (1991) and Controller -- (1988) Jeffrey P. Abbott (49) President, Aerochem, Inc. (1998) Vice President of Operations (1992-1997); Executive Vice President and General Manager (1997-1998) of Aerochem Paul L. Graham (56) President of Ducommun Technologies, Inc. President of 3dbm, Inc. (1999) (1995-1998); President of Com Dev Wireless Systems (1998-1999) Robert B. Hahn (58) President of MechTronics of Arizona President of Aerochem, Inc. Corp. (1997) (1987-1997) Robert L. Hansen (47) President, AHF-Ducommun -- Incorporated (1989) Richard A. Klisz (45) President of Brice Manufacturing Vice President, Sales and Marketing Company, Inc. (2000) of Aerochem, Inc. (1994-2000)
ITEM 11. EXECUTIVE COMPENSATION The information under the caption "Compensation of Executive Officers" in the 2001 Proxy Statement is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information under the caption "Security Ownership of Certain Beneficial Owners and Management" in the 2001 Proxy Statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information under the caption "Election of Directors" contained in the paragraph immediately following the table in the 2001 Proxy Statement is incorporated herein by reference. 11 12 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. Financial Statements The following consolidated financial statements of Ducommun Incorporated and subsidiaries, included in the 2000 Annual Report, are incorporated by reference in Item 8 of this report. Page numbers refer to the 2000 Annual Report:
Page ---- Consolidated Statements of Income - Years ended December 31, 2000, 1999 and 1998 17 Consolidated Balance Sheets - December 31, 2000 and 1999 18 Consolidated Statements of Cash Flows - Years ended December 31, 2000, 1999 and 1998 19 Consolidated Statements of Changes in Shareholders' Equity - Years 20 Ended December 31, 2000, 1999 and 1998 Notes to Consolidated Financial Statements 21-27 Report of Independent Accountants 28
2. Financial Statement Schedule The following schedule for the years ended December 31, 2000, 1999 and 1998 is filed herewith: Schedule VIII - Valuation and Qualifying Accounts and Reserves All other schedules have been omitted because they are not applicable, not required, or the information has been otherwise supplied in the financial statements or notes thereto. (b) Reports on Form 8-K None. (c) Exhibits 12 13 3.1 Restated Certificate of Incorporation filed with the Delaware Secretary of State on May 29, 1990. Incorporated by reference to Exhibit 3.1 to Form 10-K for the year ended December 31, 1990. 3.2 Certificate of Amendment of Certificate of Incorporation filed with the Delaware Secretary of State on May 27, 1998. Incorporated by reference to Exhibit 3.2 to Form 10-K for the year ended December 31, 1998. 3.3 Bylaws as amended and restated on May 3, 2000. 4.1 Credit Agreement dated as of September 29, 2000 among Ducommun Incorporated and the lenders referred to therein. Incorporated by reference to Exhibit 4.1 to Form 10-Q for the quarter ended September 30, 2000. 4.2 Rights Agreement dated as of February 17, 1999 by and between Ducommun Incorporated and Harris Trust Company of California as Rights Agent. Incorporated by reference to Exhibit 4.2 to Form 8-K dated February 17, 1999. 4.3 Conversion Agreement dated July 22, 1992 between Ducommun and the holders of the 9% Convertible Subordinated Notes due 1998. Incorporated by reference to Exhibit 1 to Form 8-K dated July 29, 1992. * 10.1 1981 Stock Incentive Plan as amended and restated March 21, 1990. Incorporated by reference to Exhibit 10.2 to Form 10-K for the year ended December 31, 1989. * 10.2 1990 Stock Option Plan. Incorporated by reference to Exhibit 10.4 to Form 10-K for the year ended December 31, 1990. * 10.3 1994 Stock Incentive Plan, as amended May 7, 1998. Incorporated by reference to Exhibit 10.3 to Form 10-K for the year ended December 31, 1997. * 10.4 Form of Nonqualified Stock Option Agreement, for grants to employees prior to January 1, 1999, under the 1994 Stock Incentive Plan, the 1990 Stock Option Plan and the 1981 Stock Incentive Plan. Incorporated by reference to Exhibit 10.5 to Form 10-K for the year ended December 31, 1990. * 10.5 Form of Nonqualified Stock Option Agreement, for grants to employees after January 1, 1999, under the 1994 Stock Incentive Plan and the 1990 Stock Option Plan. Incorporated by reference to Exhibit 10.5 to Form 10-K for the year ended December 31, 1999. * 10.6 Form of Incentive Stock Option Agreement under the 1994 Stock Incentive Plan. Incorporated by reference to Exhibit 10.5 to Form 10-K for the year ended December 31, 1996. 13 14 * 10.7 Form of Nonqualified Stock Option Agreement for nonemployee directors under the 1994 Stock Incentive Plan. Incorporated by reference to Exhibit 10.7 to Form 10-K for the year ended December 31, 1999. * 10.8 Form of Key Executive Severance Agreement entered with ten current executive officers of Ducommun or its subsidiaries. Incorporated by reference to Exhibit 10.7 to Form 10-K for the year ended December 31, 1999. All of the Key Executive Severance Agreements are identical except for the name of the executive officer and the date of the Agreement:
Executive Officer Date of Agreement ----------------- ----------------- Jeffrey P. Abbott April 10, 2000 Joseph C. Berenato November 4, 1991 Robert A. Borlet July 27, 1988 Paul L. Graham April 10, 2000 Robert B. Hahn July 27, 1988 Robert L. Hansen May 5, 1993 James S. Heiser July 27, 1988 Kenneth R. Pearson July 27, 1988 Michael W. Williams October 25, 1999 Samuel D. Williams June 21, 1989
* 10.9 Form of Indemnity Agreement entered with all directors and officers of Ducommun. Incorporated by reference to Exhibit 10.8 to Form 10-K for the year ended December 31, 1990. All of the Indemnity Agreements are identical except for the name of the director or officer and the date of the Agreement:
Director/Officer Date of Agreement ---------------- ----------------- Norman A. Barkeley July 29, 1987 Joseph C. Berenato November 4, 1991 Eugene P. Conese, Jr. January 26, 2000 Ralph D. Crosby, Jr. January 26, 2000 James S. Heiser May 6, 1987 Kenneth R. Pearson July 27, 1988 Michael W. Williams February 26, 1999 Samuel D. Williams November 11, 1988 H. Frederick Christie October 23, 1985 Robert C. Ducommun December 31, 1985 Kevin S. Moore October 15, 1994 Thomas P. Mullaney April 8, 1987
* 10.10 Description of 2001 Executive Officer Bonus Arrangement. 14 15 * 10.11 Directors' Deferred Compensation and Retirement Plan, as amended October 29, 1993. Incorporated by reference to Exhibit 10.9 to Form 10-K for the year ended December 31, 1993. * 10.12 Ducommun Incorporated Executive Retirement Plan dated May 5, 1993. Incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended July 3, 1993. * 10.13 Ducommun Incorporated Executive Compensation Deferral Plan dated May 5, 1993. Incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended July 3, 1993. * 10.14 Ducommun Incorporated Executive Compensation Deferral Plan No. 2 dated October 15, 1994. Incorporated by reference to Exhibit 10.12 to Form 10-K for the year ended December 31, 1994. 10.15 Asset Purchase and Sale Agreement dated as of November 8, 1999 among Ducommun Incorporated, Ducommun Acquisition Corporation, Jordan Industries, Inc., and Parsons Precision Products, Inc. Incorporated by reference to Exhibit 2.1 to Form 8-K dated November 23, 1999. 11 Reconciliation of the Numerators and Denominators of the Basic and Diluted Earnings Per Share Computations 13 2000 Annual Report to Shareholders (not deemed to be filed except as previously incorporated by reference). 21 Subsidiaries of registrant 23 Consent of PricewaterhouseCoopers LLP ------------------- * Indicates an executive compensation plan or arrangement. 15 16 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DUCOMMUN INCORPORATED Date: February 23, 2001 By: /s/ Joseph C. Berenato -------------------------------- Joseph C. Berenato Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been duly signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: February 23, 2001 By: /s/ Joseph C. Berenato -------------------------------- Joseph C. Berenato Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) Date: February 23, 2001 By: /s/ James S. Heiser -------------------------------- James S. Heiser Vice President, Chief Financial Officer, General Counsel, Secretary and Treasurer (Principal Financial Officer) Date: February 23, 2001 By: /s/ Samuel D. Williams -------------------------------- Samuel D. Williams Vice President, Controller and Assistant Treasurer (Principal Accounting Officer) 16 17 DIRECTORS By: /s/ Norman A. Barkeley ------------------------------------ Date: February 23, 2001 Norman A. Barkeley By: /s/ Joseph C. Berenato Date: February 23, 2001 ------------------------------------ Joseph C. Berenato By: /s/ Eugene P. Conese, Jr. Date: February 23, 2001 ------------------------------------ Eugene P. Conese, Jr. By: /s/ Ralph D. Crosby, Jr. Date: February 23, 2001 ------------------------------------ Ralph D. Crosby, Jr. By: /s/ H. Frederick Christie Date: February 23, 2001 ------------------------------------ H. Frederick Christie By: /s/ Robert C. Ducommun Date: February 23, 2001 ------------------------------------ Robert C. Ducommun By: /s/ Kevin S. Moore Date: February 23, 2001 ------------------------------------ Kevin S. Moore By: /s/ Thomas P. Mullaney Date: February 23, 2001 ------------------------------------ Thomas P. Mullaney 17 18 Report of Independent Accountants on Financial Statement Schedule To the Board of Directors of Ducommun Incorporated: Our audits of the consolidated financial statements referred to in our report dated February 20, 2001 appearing in the 2000 Annual Report to Shareholders of Ducommun Incorporated (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PricewaterhouseCoopers LLP Los Angeles, California February 20, 2001 18 19 DUCOMMUN INCORPORATED AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES SCHEDULE VIII
Column A Column B Column C Column D Column E -------------------- ---------- ------------------------------- ------------- ---------- Additions ------------------------------- Balance at Charged to Charged to Balance at Beginning Costs and Other End of Description of Period Expenses Accounts Deductions Period -------------------- ---------- ---------- ------------- ------------- ---------- FOR THE YEAR ENDED DECEMBER 31, 2000 Allowance for Doubtful Accounts $ 153,000 $1,061,000 $ 34,000(a) $ 67,000(b) $1,160,000 $ 18,000(c) $ 39,000(c) FOR THE YEAR ENDED DECEMBER 31, 1999 Allowance for Doubtful Accounts $ 125,000 $ 25,000 $ 39,000(c) $ 36,000(b) $ 153,000 FOR THE YEAR ENDED DECEMBER 31, 1998 Allowance for Doubtful Accounts $ 359,000 $ 7,000 $ -- $ 194,000(a) $ 125,000 $ 47,000(b)
(a) Collections on previously written off accounts. (b) Write-offs on uncollectible accounts. (c) Changes in allowance for doubtful accounts related to acquisitions in 1999. 19 20 EXHIBIT INDEX Number ------ 3.1 Restated Certificate of Incorporation filed with the Delaware Secretary of State on May 29, 1990. Incorporated by reference to Exhibit 3.1 to Form 10-K for the year ended December 31, 1990. 3.2 Certificate of Amendment of Certificate of Incorporation filed with the Delaware Secretary of State on May 27, 1998. Incorporated by reference to Exhibit 3.2 to Form 10-K for the year ended December 31, 1998. 3.3 Bylaws as amended and restated on May 3, 2000. 4.1 Credit Agreement dated as of September 29, 2000 among Ducommun Incorporated and the lenders referred to therein. Incorporated by reference to Exhibit 4.1 to Form 10-Q for the quarter ended September 30, 2000. 4.2 Rights Agreement dated as of February 17, 1999 by and between Ducommun Incorporated and Harris Trust Company of California as Rights Agent. Incorporated by reference to Exhibit 4.2 to Form 8-K dated February 17, 1999. 4.3 Conversion Agreement dated July 22, 1992 between Ducommun and the holders of the 9% Convertible Subordinated Notes due 1998. Incorporated by reference to Exhibit 1 to Form 8-K dated July 29, 1992. * 10.1 1981 Stock Incentive Plan as amended and restated March 21, 1990. Incorporated by reference to Exhibit 10.2 to Form 10-K for the year ended December 31, 1989. * 10.2 1990 Stock Option Plan. Incorporated by reference to Exhibit 10.4 to Form 10-K for the year ended December 31, 1990. * 10.3 1994 Stock Incentive Plan, as amended May 7, 1998. Incorporated by reference to Exhibit 10.3 to Form 10-K for the year ended December 31, 1997. * 10.4 Form of Nonqualified Stock Option Agreement, for grants to employees prior to January 1, 1999, under the 1994 Stock Incentive Plan, the 1990 Stock Option Plan and the 1981 Stock Incentive Plan. Incorporated by reference to Exhibit 10.5 to Form 10-K for the year ended December 31, 1990. * 10.5 Form of Nonqualified Stock Option Agreement, for grants to employees after January 1, 1999, under the 1994 Stock Incentive Plan and the 1990 Stock Option Plan. Incorporated by reference to Exhibit 10.5 to Form 10-K for the year ended December 31, 1999. * 10.6 Form of Incentive Stock Option Agreement under the 1994 Stock Incentive Plan. Incorporated by reference to Exhibit 10.5 to Form 10-K for the year ended December 31, 1996. 21 * 10.7 Form of Nonqualified Stock Option Agreement for nonemployee directors under the 1994 Stock Incentive Plan. Incorporated by reference to Exhibit 10.7 to Form 10-K for the year ended December 31, 1999. * 10.8 Form of Key Executive Severance Agreement entered with ten current executive officers of Ducommun or its subsidiaries. Incorporated by reference to Exhibit 10.7 to Form 10-K for the year ended December 31, 1999. All of the Key Executive Severance Agreements are identical except for the name of the executive officer and the date of the Agreement:
Executive Officer Date of Agreement ----------------- ----------------- Jeffrey P. Abbott April 10, 2000 Joseph C. Berenato November 4, 1991 Robert A. Borlet July 27, 1988 Paul L. Graham April 10, 2000 Robert B. Hahn July 27, 1988 Robert L. Hansen May 5, 1993 James S. Heiser July 27, 1988 Kenneth R. Pearson July 27, 1988 Michael W. Williams October 25, 1999 Samuel D. Williams June 21, 1989
* 10.9 Form of Indemnity Agreement entered with all directors and officers of Ducommun. Incorporated by reference to Exhibit 10.8 to Form 10-K for the year ended December 31, 1990. All of the Indemnity Agreements are identical except for the name of the director or officer and the date of the Agreement:
Director/Officer Date of Agreement ---------------- ----------------- Norman A. Barkeley July 29, 1987 Joseph C. Berenato November 4, 1991 Eugene P. Conese, Jr. January 26, 2000 Ralph D. Crosby, Jr. January 26, 2000 James S. Heiser May 6, 1987 Kenneth R. Pearson July 27, 1988 Michael W. Williams February 26, 1999 Samuel D. Williams November 11, 1988 H. Frederick Christie October 23, 1985 Robert C. Ducommun December 31, 1985 Kevin S. Moore October 15, 1994 Thomas P. Mullaney April 8, 1987
* 10.10 Description of 2001 Executive Officer Bonus Arrangement. 22 * 10.11 Directors' Deferred Compensation and Retirement Plan, as amended October 29, 1993. Incorporated by reference to Exhibit 10.9 to Form 10-K for the year ended December 31, 1993. * 10.12 Ducommun Incorporated Executive Retirement Plan dated May 5, 1993. Incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended July 3, 1993. * 10.13 Ducommun Incorporated Executive Compensation Deferral Plan dated May 5, 1993. Incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended July 3, 1993. * 10.14 Ducommun Incorporated Executive Compensation Deferral Plan No. 2 dated October 15, 1994. Incorporated by reference to Exhibit 10.12 to Form 10-K for the year ended December 31, 1994. 10.15 Asset Purchase and Sale Agreement dated as of November 8, 1999 among Ducommun Incorporated, Ducommun Acquisition Corporation, Jordan Industries, Inc., and Parsons Precision Products, Inc. Incorporated by reference to Exhibit 2.1 to Form 8-K dated November 23, 1999. 11 Reconciliation of the Numerators and Denominators of the Basic and Diluted Earnings Per Share Computations 13 2000 Annual Report to Shareholders (not deemed to be filed except as previously incorporated by reference). 21 Subsidiaries of registrant 23 Consent of PricewaterhouseCoopers LLP ------------------- * Indicates an executive compensation plan or arrangement.