10-K

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, 2017

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-8174

_________________________________________________________

DUCOMMUN INCORPORATED

(Exact name of registrant as specified in its charter)

_________________________________________________________

Delaware	95-0693330
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
200 Sandpointe Avenue, Suite 700, Santa Ana, California	92707-5759
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (657) 335-3665

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $.01 par value per share	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

_________________________________________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x  No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price of which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter ended July 1, 2017 was $357 million.

The number of shares of common stock outstanding on February 14, 2018 was 11,340,653.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated by reference:

(a) Proxy Statement for the 2018 Annual Meeting of Shareholders (the “2018 Proxy Statement”), incorporated partially in Part III hereof.

DUCOMMUN INCORPORATED AND SUBSIDIARIES

		Page
PART I
	Forward-Looking Statements and Risk Factors	3
Item 1.	Business	4
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	18
Item 2.	Properties	18
Item 3.	Legal Proceedings	19
Item 4.	Mine Safety Disclosures	19
PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	20
Item 6.	Selected Financial Data	22
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 8.	Financial Statements and Supplementary Data	42
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosures	42
Item 9A.	Controls and Procedures	42
Item 9B.	Other Information	43
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	44
Item 11.	Executive Compensation	44
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	44
Item 13.	Certain Relationships and Related Transactions, and Director Independence	45
Item 14.	Principal Accountant Fees and Services	45
PART IV
Item 15.	Exhibits and Financial Statement Schedules	46
Item 16.	Form 10-K Summary	85
	Signatures	85

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FORWARD-LOOKING STATEMENTS AND RISK FACTORS

This Annual Report on Form 10-K (“Form 10-K”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be preceded by, followed by or include the words “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar expressions. These statements are based on the beliefs and assumptions of our management. Generally, forward-looking statements include information concerning our possible or assumed future actions, events or results of operations. Forward-looking statements specifically include, without limitation, the information in this Form 10-K regarding: future sales, earnings, cash flow, uses of cash and other measures of financial performance, projections or expectations for future operations, our plans with respect to restructuring activities, completed acquisitions, future acquisitions and dispositions and expected business opportunities that may be available to us.

Although we believe that the expectations reflected in the forward-looking statements are based on reasonable assumptions, these forward-looking statements are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected. We cannot guarantee future results, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. All written and oral forward-looking statements made in connection with this Form 10-K that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by “Risk Factors” contained within Part I, Item 1A of this Form 10-K and other cautionary statements included herein. We are under no duty to update any of the forward-looking statements after the date of this Form 10-K to conform such statements to actual results or to changes in our expectations.

The information in this Form 10-K is not a complete description of our business. There can be no assurance that other factors will not affect the accuracy of these forward-looking statements or that our actual results will not differ materially from the results anticipated in such forward-looking statements. While it is impossible to identify all such factors, factors that could cause actual results to differ materially from those estimated by us include, but are not limited to, those factors or conditions described under Risk Factors contained within Part I, Item 1A of this Form 10-K and the following:

• our ability to manage and otherwise comply with our covenants with respect to our outstanding indebtedness;

• our ability to service our indebtedness;

• our acquisitions, business combinations, joint ventures, divestitures, or restructuring activities may entail certain operational and financial risks;

• the cyclicality of our end-use markets and the level of new commercial and military aircraft orders;

• industry and customer concentration;

• production rates for various commercial and military aircraft programs;

• the level of U.S. Government defense spending, including the impact of sequestration;

• compliance with applicable regulatory requirements and changes in regulatory requirements, including regulatory requirements applicable to government contracts and sub-contracts;

• further consolidation of customers and suppliers in our markets;

• product performance and delivery;

• start-up costs, manufacturing inefficiencies and possible overruns on contracts;

• increased design, product development, manufacturing, supply chain and other risks and uncertainties associated with our growth strategy to become a Tier Two supplier of higher-level assemblies;

• our ability to manage the risks associated with international operations and sales;

• possible goodwill and other asset impairments;

• economic and geopolitical developments and conditions;

• unfavorable developments in the global credit markets;

• our ability to operate within highly competitive markets;

• technology changes and evolving industry and regulatory standards;

• the risk of environmental liabilities; and

• litigation with respect to us.

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

PART I

ITEM 1. BUSINESS

GENERAL

Ducommun Incorporated (“Ducommun,” “the Company,” “we,” “us” or “our”) is a leading global provider of engineering and manufacturing services for high-performance products and high-cost-of failure applications used primarily in the aerospace and defense (“A&D”), industrial, medical and other industries (collectively, “Industrial”). Ducommun differentiates itself as a full-service solution-based provider, offering a wide range of value-added products and services in our primary businesses of electronics, structures, and integrated solutions. We operate through two primary business segments: Electronic Systems and Structural Systems. We are the successor to a business that was founded in California in 1849 and reincorporated in Delaware in 1970.

ACQUISITIONS

Acquisitions have been an important element of our growth strategy. We have supplemented our organic growth by identifying, acquiring and integrating acquisition opportunities that result in broader, more sophisticated product and service offerings while diversifying and expanding our customer base and markets.

For example, in September 2017, we acquired all the outstanding interests of Lightning Diversion Systems, LLC (the “LDS Acquisition”), a worldwide leader in lightning protection systems serving the aerospace and defense industries for $60.0 million (net of cash acquired), funded by drawing down on our revolving credit facility. The LDS Acquisition is part of our strategy to enhance revenue growth by focusing on advanced proprietary technology on various aerospace and defense platforms.

PRODUCTS AND SERVICES

Business Segment Information

We operate through two primary strategic businesses Electronic Systems and Structural Systems, each of which is a reportable segment. The results of operations among our operating segments vary due to differences in competitors, customers, extent of proprietary deliverables and performance. Electronic Systems designs, engineers and manufactures high-reliability electronic and electromechanical products used in worldwide technology-driven markets including A&D and Industrial end-use markets. Electronic Systems’ product offerings primarily range from prototype development to complex assemblies as discussed in more detail below. Structural Systems designs, engineers and manufactures large, complex contoured aerostructure components and assemblies and supplies composite and metal bonded structures and assemblies. Structural Systems’ products are primarily used on commercial aircraft, military fixed-wing aircraft and military and commercial rotary-wing aircraft.

Electronic Systems

Electronic Systems has multiple major product offerings in electronics manufacturing for diverse, high-reliability applications: complex cable assemblies and interconnect systems, printed circuit board assemblies, higher-level electronic, electromechanical, and mechanical components and assemblies, and lightning diversion systems. Components, assemblies, and lightning diversion products are provided principally for domestic and foreign commercial and military fixed-wing aircraft, military and commercial rotary-wing aircraft and space programs. Further, we provide select industrial high-reliability applications for the industrial automation and medical and other end-use markets. We build custom, high-performance electronics and electromechanical systems. Our products include sophisticated radar enclosures, aircraft avionics racks and shipboard communications and control enclosures, printed circuit board assemblies, cable assemblies, wire harnesses, and interconnect systems, lightning diversion strips, surge suppressors, conformal shields and other high-level complex assemblies. Electronic Systems utilizes a highly-integrated production process, including manufacturing, engineering, fabrication, machining, assembly, electronic integration, and related processes. Engineering, technical and program management services, including design, development, and integration and testing of circuit card assemblies and cable assemblies, are provided to a wide range of customers.

In response to customer needs and utilizing our in-depth engineering expertise, Electronic Systems is also considered a leading supplier of engineered products including, illuminated pushbutton switches and panels for aviation and test systems, microwave and millimeter switches and filters for radio frequency systems and test instrumentation, and motors and resolvers for motion control.

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Electronic Systems also provides engineering expertise for aerospace system design, development, integration, and testing. We leverage the knowledge base, capabilities, talent, and technologies of this focused capability into direct support of our customers.

Structural Systems

Structural Systems has three major product offerings to support a global customer base: commercial aircraft, military fixed-wing aircraft, and military and commercial rotary-wing aircraft. Our applications include structural components, structural assemblies and bonded (metal and composite) components. In the structural components products, Structural Systems designs, engineers, and manufactures large complex contoured aluminum, titanium and Inconel^® aerostructure components for the aerospace industry. Structural assembly products include winglets, engine components, and fuselage structural panels for aircraft. Metal and composite bonded structures and assemblies products include aircraft wing spoilers, large fuselage skins, rotor blades on rotary-wing aircraft and components, flight control surfaces and engine components. To support these products, Structural Systems maintains advanced machine milling, stretch-forming, hot-forming, metal bonding, composite layup, and chemical milling capabilities and has an extensive engineering capability to support both design and manufacturing.

AEROSPACE AND DEFENSE END-USE MARKETS OVERVIEW

Our largest end-use markets are the aerospace and defense markets and our revenues from these markets represented 90% of our total net revenues in 2017. These markets are serviced by suppliers which are stratified, from the lowest value provided to the highest, into four tiers: Tier Three, Tier Two, Tier One and original equipment manufacturers (“OEMs”). The OEMs provide the highest value and are also known as prime contractors (“Primes”). We derive a significant portion of our revenues from subcontracts with OEMs. As the prime contractor for various programs and platforms, the OEMs sell to their customers, who may include, depending upon the application, the U.S. Federal Government, foreign, state and local governments, global commercial airline carriers, regional jet carriers and various other customers. The OEMs also sell to global leasing companies that lease commercial aircraft. A significant portion of our revenues is earned from subcontracts with the Primes. Tier Three suppliers principally provide components or detailed parts. Tier Two suppliers provide more complex, value-added parts and may also assume more design risk, manufacturing risk, supply chain risk and project management risk than Tier Three suppliers. Tier One suppliers manufacture aircraft sections and purchase assemblies. We currently compete primarily with Tier Two and Tier Three suppliers. Our business growth strategy is to differentiate ourselves from competitors by providing more complex assemblies to our customers as a Tier Two supplier.

Commercial Aerospace End-Use Market

The commercial aerospace end-use market is highly cyclical and is impacted by the level of global air passenger traffic in general, which in turn is influenced by global economic conditions, fleet fuel and maintenance costs and geopolitical developments. Revenues from the commercial aerospace end-use market represented 43% of our total net revenues for 2017.

Global economic growth, a primary driver for air travel, has returned to the long-term annual average of approximately three percent. Passenger traffic in 2017 is estimated to grow by more than seven percent, exceeding the long-term trend of approximately five percent. While growth was strong across all major world regions, there continues to be variation between regions and airline business models. Airlines operating in the Asia Pacific regions and Europe, as well as low-cost-carriers globally, are currently leading the growth in passenger traffic.

In addition, airline financial performance also plays a role in the demand for new capacity. Airlines continue to focus on increasing revenue through alliances, partnerships, new marketing initiatives, and effective leveraging of ancillary services and related revenues. Airlines are also focusing on reducing costs and renewing fleets to leverage more efficient airplanes. Net profits in 2017 are expected to approximate $35 billion, consistent with 2016.

Further, the availability of internal or external funding impacts commercial aircraft build rates. Failure of our customers to obtain financing may result in cancellation or deferral of orders.

The long-term outlook for the industry continues to remain positive due to the fundamental drivers of air travel growth: economic growth and the increasing propensity to travel due to increased trade, globalization, and improved airline services driven by liberalization of air traffic rights between countries. The Boeing Company’s (“Boeing”) 20 year forecast projections in their 2017 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) projects a long-term average growth rate of almost five percent per year for passenger traffic and more than four percent for cargo traffic. This is based on long-term global economic growth projections of almost three percent average annual gross domestic product (“GDP”) growth, Boeing projects a $6 trillion market for more than 41,000 new airplanes over the next 20 years. We believe we are well positioned given our product capabilities to participate in the steady projected growth rate for commercial air traffic and build rates for large commercial aircraft for the airframe manufacturing industry.

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Defense End-Use Market

Our defense end-use market includes products used in military and space, including technologies and structures applications. The defense end-use market is highly cyclical and is impacted by the level of government defense spending. Government defense spending is impacted by national defense policies and priorities, political climates, fiscal budgetary constraints, U.S. Federal budget deficits, projected economic growth and the level of global military or security threats, or other conflicts. Revenues from the military and space end-use market in 2017 represented 47% of our total net revenues during 2017.

In November 2017, Congress passed the National Defense Authorization Act for fiscal year 2018 (“FY2018”), which authorizes a U.S. Department of Defense (“U.S. DoD”) budget topline higher than the administration’s budget request from May. While the appropriations process for FY2018 remains incomplete, both the House and Senate appropriations committees have also produced bills that increase the U.S. DoD budget topline above the administration’s request. On February 9, 2018, Congress passed a fifth Continuing Resolution that maintains current funding levels through March 23, 2018 and includes increases to the Budget Control Act caps for defense and non-defense spending for FY2018 and FY2019. However, the Budget Control Act continues to mandate limits on U.S. government discretionary spending and remains in effect. As a result, continued budget uncertainty and the risk of future sequestration cuts will remain unless Congress acts to repeal or suspend this law.

Funding timeliness also remains a risk. If Congress is unable to pass appropriations bills or an omnibus spending bill before the expiration of the current Continuing Resolution, a government shutdown could result which may have impacts above and beyond those resulting from budget cuts, sequestration impacts or program-level appropriations. For example, requirements to furlough employees in the U.S. DoD, the Department of Transportation, or other government agencies could result in payment delays, impair our ability to perform work on existing contracts, and/or negatively impact future orders.

In addition, there continues to be uncertainty with respect to program-level appropriations for the U.S. DoD and other government agencies, including the National Aeronautics and Space Administration (“NASA”), within the overall budgetary framework described above. Future budget cuts or investment priority changes could result in reductions, cancellations and/or delays of existing contracts or programs. Any of these impacts could have a material effect on the results of our operations, financial position, and/or cash flows. For additional information related to our revenues from customers whose principal sales are to the U.S. Government and our direct sales to the U.S. Government, see “Risk Factors” contained within Part I, Item 1A of this Annual Report on Form 10-K (“Form 10-K”).

INDUSTRIAL END-USE MARKETS OVERVIEW

Our industrial, medical and other (collectively, “Industrial”) end-use markets are diverse and are impacted by the customers’ needs for increasing electronic content and a desire to outsource. Factors expected to impact these markets include capital and industrial goods spending and general economic conditions. Our products are used in heavy industrial manufacturing systems and certain medical applications. Revenues from the Industrial end-use markets were 10% of our total net revenues during 2017.

We believe our business in these markets has stabilized and we are well positioned for these markets.

SALES AND MARKETING

Our commercial revenues are substantially dependent on airframe manufacturers’ production rates of new aircraft. Deliveries of new aircraft by airframe manufacturers are dependent on the financial capacity of its customers, primarily airlines and leasing companies, to purchase the aircraft. Thus, revenues from commercial aircraft could be affected as a result of changes in new aircraft orders, or the cancellation or deferral by airlines of purchases of ordered aircraft. Further, our revenues from commercial aircraft programs could be affected by changes in our customers’ inventory levels and changes in our customers’ aircraft production build rates. In recent years, both major large aircraft manufacturers, Boeing and Airbus, have announced higher build rates due to increases in production of existing programs, including more fully-developed models, and by the introduction of new platforms.

Military components manufactured by us are employed in many of the country’s front-line fighters, bombers, rotary-wing aircraft and support aircraft, as well as land and sea-based applications. Our defense business is diversified among a number of military manufacturers and programs. In the space sector, we continue to support various unmanned launch vehicle and satellite programs.

Our sales into the Industrial end-use markets are customer focused in the various markets and driven primarily by their capital spending and manufacturing outsourcing demands.

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We continue to broaden and diversify our customer base in the end-use markets we serve by providing innovative product and service solutions through drawing on our core competencies, experience and technical expertise. Net revenues related to military and space (defense technologies and defense structures), commercial aerospace, and Industrial end-use markets in 2017 and 2016 were as follows:

Many of our contracts are fixed price contracts subject to termination at the convenience of the customer (as well as for default). In the event of termination for convenience, the customer generally is required to pay the costs we have incurred and certain other fees through the date of termination. Larger, long-term government subcontracts may have provisions for milestone payments, progress payments or cash advances for purchase of inventory.

Our marketing efforts primarily consist of developing strong, long-term relationships with our customers, which provide the basis for future sales. These close relationships allow us to gain a better insight into each customer’s business needs, identify ways to provide greater value to the customer, and allow us to be designed in early in various products and/or high volume products.

SEASONALITY

The timing of our revenues is governed by the purchasing patterns of our customers, and, as a result, we may not generate revenues equally during the year. However, no material portion of our business is considered to be seasonal.

MAJOR CUSTOMERS

We currently generate the majority of our revenues from the aerospace and defense industries. As a result, we have significant revenues from certain customers. Boeing and Raytheon Company (“Raytheon”) were each greater than 10 percent and Lockheed Martin Corporation (“Lockheed Martin”), Spirit AeroSystems Holdings, Inc. (“Spirit”), and United Technologies Corporation (“United Technologies”) each were greater than five percent of our 2017 net revenues. Revenues from our top ten customers, including Boeing, Raytheon, Lockheed Martin, Spirit, and United Technologies, were 62% of total net revenues during 2017. Net revenues by major customer for 2017 and 2016 were as follows:

Net revenues from our customers, except the U.S. Government, are diversified over a number of different military and space, commercial aerospace, industrial, medical and other products. For additional information on revenues from major customers, see Note 18 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K.

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RESEARCH AND DEVELOPMENT

We perform concurrent engineering with our customers and product development activities under our self-funded programs, as well as under contracts with others. Concurrent engineering and product development activities are performed for commercial, military and space applications.

RAW MATERIALS AND COMPONENTS

Raw materials and components used in the manufacturing of our products include aluminum, titanium, steel and carbon fibers, as well as a wide variety of electronic interconnect and circuit card assemblies and components. These raw materials are generally available from a number of suppliers and are generally in adequate supply. However, from time to time, we have experienced increases in lead times for and limited availability of, aluminum, titanium and certain other raw materials and/or components. Moreover, certain components, supplies and raw materials for our operations are purchased from single source suppliers and occasionally, directed by our customers. In such instances, we strive to develop alternative sources and design modifications to minimize the potential for business interruptions.

COMPETITION

The markets we serve are highly competitive, and our products and services are affected by varying degrees of competition. We compete worldwide with domestic and international companies in most markets. These companies may have competitive advantages as a result of greater financial resources, economies of scale and bundled products and services that we do not offer. Additional information related to competition is discussed in Risk Factors contained within Part I, Item 1A of this Form 10-K. Our ability to compete depends principally upon the breadth of our technical capabilities, the quality of our goods and services, competitive pricing, product performance, design and engineering capabilities, new product innovation, the ability to solve specific customer needs, and customer relationships.

PATENTS AND LICENSES

We have several patents, but we do not believe that our operations are dependent upon any single patent or group of patents. In general, we rely on technical superiority, continual product improvement, exclusive product features, superior lead time, on-time delivery performance, quality, and customer relationships to maintain our competitive advantage.

BACKLOG

We define backlog as customer placed purchase orders (“POs”) and long-term agreements (“LTAs”) with firm fixed price and firm delivery dates of 24 months or less. Backlog is subject to delivery delays or program cancellations, which are beyond our control. Backlog is affected by timing differences in the placement of customer orders and tends to be concentrated in certain programs and customers. As a result, trends in our overall level of backlog may not be indicative of trends in our future revenues. Backlog was $726.5 million at December 31, 2017, compared to $641.3 million at December 31, 2016. The increase in backlog was primarily in the commercial aerospace and military and space end-use markets. $544.0 million of total backlog is expected to be delivered during 2018.

ENVIRONMENTAL MATTERS

Our business, operations and facilities are subject to numerous stringent federal, state and local environmental laws and regulations issued by government agencies, including the Environmental Protection Agency (“EPA”). Among other matters, these regulatory authorities impose requirements that regulate the emission, discharge, generation, management, transport and disposal of hazardous materials, pollutants and contaminants. These regulations govern public and private response actions to hazardous or regulated substances that threaten to release, or have been released to the environment, and they require us to obtain and maintain licenses and permits in connection with our operations. We may also be required to investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations. Additionally, this extensive regulatory framework imposes significant compliance burdens and risks on us. We anticipate that capital expenditures will continue to be required for the foreseeable future to upgrade and maintain our environmental compliance efforts, however, we do not expect such expenditures to be material in 2018 and the foreseeable future.

Structural Systems has been directed by California environmental agencies to investigate and take corrective action for groundwater contamination at its facilities located in Adelanto (a.k.a., El Mirage) and Monrovia, California. Based on currently available information, we have accrued $1.5 million for our estimated liabilities related to these sites. For further information, see Note 17 in the accompanying notes to consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K. In addition, see Risk Factors contained within Part I, Item 1A of this Form 10-K for certain risks related to environmental matters.

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EMPLOYEES

As of December 31, 2017, we employed 2,600 people, of which 360 are subject to collective bargaining agreements expiring in June 2018 and January 2019. We believe our relations with our employees are good. See Risk Factors contained within Part I, Item 1A of this Form 10-K for additional information regarding certain risks related to our employees.

AVAILABLE INFORMATION

General information about us can be obtained from our website address at www.ducommun.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, if any, are available free of charge on our website as soon as reasonably practicable after they are filed with or furnished to the SEC. Information included in our website is not incorporated by reference in this Annual Report on Form 10-K. The SEC also maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding SEC registrants, including our company.

ITEM 1A. RISK FACTORS

Our business, financial condition, results of operations and cash flows may be affected by known and unknown risks, uncertainties and other factors. We have summarized below the significant, known material risks to our business. Additional risk factors not currently known to us or that we currently believe are immaterial may also impair our business, financial condition, results of operations and cash flows. Any of these risks, uncertainties and other factors could cause our future financial results to differ materially from recent financial results or from currently anticipated future financial results. The risk factors below should be considered together with the information included elsewhere in this Annual Report on Form 10-K (“Form 10-K”) as well as other required filings by us to the SEC.

RISKS RELATED TO OUR CAPITAL STRUCTURE

Our indebtedness could limit our financing options, adversely affect our financial condition, and prevent us from fulfilling our debt obligations.

In July 2015, we completed the refinancing of our existing debt by entering into a new credit facility to replace the existing credit facilities. This credit facility consists of a $275.0 million senior secured term loan, which matures on June 26, 2020 (“Term Loan”), and a $200.0 million senior secured revolving credit facility (“Revolving Credit Facility”), which matures on June 26, 2020 (collectively, the “Credit Facilities”).

At December 31, 2017, we had a total of $218.1 million of outstanding long-term debt which was comprised of $160.0 million under the Term Loan and $58.1 million under the Revolving Credit Facility. The total long-term debt was primarily the result of our acquisitions, LaBarge Inc. in 2011 and LDS in September 2017. There are no further required payments under the Credit Facilities until June 2020.

Our ability to complete a debt refinancing in the future may be limited, as discussed below in this risk factor. We may have to undertake alternative financing plans, such as selling assets; reducing or delaying scheduled expansions and/or capital investments; or seeking various forms of capital. Our ability to complete alternative financing plans may be affected by circumstances and economic events outside of our control. We cannot ensure that we would be able to refinance our debt or enter into alternative financing plans in adequate amounts on commercially reasonable terms, terms acceptable to us or at all, or that such plans guarantee that we would be able to meet our debt obligations.

Our level of debt could:

• limit our ability to obtain additional financing to fund future working capital, capital expenditures, investments or acquisitions or other general corporate requirements;

• require a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, investments or acquisitions or other general corporate purposes;

• increase our vulnerability to adverse changes in general economic, industry and competitive conditions;

• place us at a disadvantage compared to other, less leveraged competitors;

• expose us to the risk of increased borrowing costs and higher interest rates as approximately 40% of our borrowings under our Credit Facilities bear interest at variable rates, which could further adversely impact our cash flows;

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• limit our flexibility to plan for and react to changes in our business and the industry in which we compete;

• restrict us from making strategic acquisitions or causing us to make non-strategic divestitures;

• expose us to risk of unfavorable changes in the global credit markets; and

• make it more difficult for us to satisfy our obligations with respect to the Credit Facilities and our other debt.

The occurrence of any one of these events could have an adverse effect on our business, financial condition, results of operations and ability to satisfy our obligations in respect of our outstanding debt.

We require a considerable amount of cash to service our indebtedness.

Our ability to make payments on our debt in the future and to fund planned capital expenditures and working capital needs, will depend upon our ability to generate significant cash in the future. Our ability to generate cash is subject to economic, financial, competitive, legislative, regulatory and other factors that may be beyond our control.

The Credit Facilities bear interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as a London Interbank Offered Rate [“LIBOR”]) plus an applicable margin ranging from 1.50% to 2.75% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 0.50% to 1.75% per year, in each case based upon the consolidated total net adjusted leverage ratio, typically payable quarterly. In October 2015, we entered into interest rate cap hedges designated as cash flow hedges, with maturity dates of June 2020 and notional value in aggregate, totaling $135.0 million. At December 31, 2017, the outstanding balance on the Credit Facilities was $218.1 million with an average interest rate of 3.73%. Should interest rates increase significantly, even though $135.0 million of our debt was hedged, our debt service cost will increase. Any inability to generate sufficient cash flow could have a material adverse effect on our financial condition or results of operations.

While we expect to meet all of our financial obligations, we cannot ensure that our business will generate sufficient cash flow from operations in an amount sufficient to enable us to pay our debt or to fund our other liquidity needs.

We require a considerable amount of cash to fund our anticipated voluntary principal prepayments on our Credit Facilities.

Our ability to continue to reduce the debt outstanding under our Credit Facilities through voluntary principal prepayments will be a contributing factor to our ability to meet the leverage ratio covenant and keeping our interest rate towards the lower end of the interest rate range as defined in the Credit Facilities. Our ability to make such prepayments will depend upon our ability to generate significant cash in the future. We cannot ensure that our business will generate sufficient cash flow from operations to fund any such prepayments.

The covenants in the credit agreement to our Credit Facilities impose restrictions that may limit our operating and financial flexibility.

We are required to comply with a leverage covenant as defined in the credit agreement to the Credit Facilities. The leverage covenant is defined as Consolidated Funded Indebtedness less unrestricted cash and cash equivalents in excess of $10.0 million, divided by consolidated earnings before interest, taxes and depreciation and amortization (“EBITDA”). The leverage covenant decreases over the term of the Credit Facilities, which will require us to lower our outstanding debt or increase our EBITDA in the future. We believe the voluntary prepayments on the Credit Facilities will help reduce our leverage, as defined in the credit agreement.

At December 31, 2017, we were in compliance with the leverage covenant under the Credit Facility. However, there is no assurance that we will continue to be in compliance with the leverage covenant in future periods.

Our credit agreement to the Credit Facilities contains a number of significant restrictions and covenants that limit our ability, among other things, to incur additional indebtedness, to create liens, to make certain payments, investments, to engage in transactions with affiliates, to sell certain assets or enter into mergers.

These covenants could materially and adversely affect our ability to finance our future operations or capital needs. Furthermore, they may restrict our ability to expand, pursue our business strategies and otherwise conduct our business. Our ability to comply with these covenants may be affected by circumstances and events beyond our control, such as prevailing economic conditions and changes in regulations, and we cannot ensure that we will be able to comply with such covenants. These restrictions also limit our ability to obtain future financings to withstand a future downturn in our business or the economy in general.

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A breach of any covenant in credit agreement to the Credit Facilities would result in a default under the Credit Facilities agreement. A default, if not waived, could result in acceleration of the debt outstanding under the agreement. A default could permit our lenders to foreclose on any of our assets securing such debt. Even if new financing were available at that time, it may not be on terms or amounts that are acceptable to us or terms as favorable as our current agreements. If our debt is in default for any reason, our business, results of operations and financial condition could be materially and adversely affected.

The typical trading volume of our common stock may affect an investor’s ability to sell significant stock holdings in the future without negatively impacting stock price.

The level of trading activity may vary daily and typically represents only a small percentage of outstanding shares. As a result, a stockholder who sells a significant amount of shares in a short period of time could negatively affect our share price.

Our amount of debt may require us to raise additional capital to fund operations.

We may sell additional shares of common stock or other equity securities to raise capital in the future, which could dilute the value of an investor’s holdings.

RISKS RELATED TO OUR BUSINESS

Our end-use markets are cyclical.

We sell our products into aerospace, defense, and industrial end-use markets, which are cyclical and have experienced periodic declines. Our sales are, therefore, unpredictable and tend to fluctuate based on a number of factors, including global economic conditions, geopolitical developments and conditions, and other developments affecting our end-use markets and the customers served. Consequently, results of operations in any period should not be considered indicative of the operating results that may be experienced in any future period.

We depend upon a selected base of industries and customers, which subjects us to unique risks which may adversely affect us.

We currently generate a majority of our revenues from customers in the aerospace and defense industry. Our business depends, in part, on the level of new military and commercial aircraft orders. As a result, we have significant sales to certain customers. Sales to the Boeing Company and Spirit AeroSystems Holdings, Inc. comprise the majority of our commercial aerospace end-use market. A significant portion of our net sales in our military and space end-use markets are made under subcontracts with OEMs, under their prime contracts with the U. S. Government. We had significant sales to Lockheed Martin Corporation, Raytheon Company, and United Technologies Corporation in 2017 in our defense technologies end-use market.

Our customers may experience delays in the launch of new products, labor strikes, diminished liquidity or credit unavailability, weak demand for their products, or other difficulties in their business. In addition, sequestration and a shift in government spending priorities have caused and may continue to cause additional uncertainty in the placement of orders.

Our sales to our top ten customers, which represented 62% of our total 2017 net revenues, were diversified over a number of different aerospace and defense and Industrial products. Any significant change in production rates by these customers would have a material effect on our results of operations and cash flows. There is no assurance that our current significant customers will continue to buy products from us at current levels, or that we will retain any or all of our existing customers, or that we will be able to form new relationships with customers upon the loss of one or more of our existing customers. This risk may be further complicated by pricing pressures, intense competition prevalent in our industry and other factors. A significant reduction in sales to any of our major customers, the loss of a major customer, or a default of a major customer on accounts receivable could have a material adverse impact on our financial results.

In addition, we generally make sales under purchase orders and contracts that are subject to cancellation, modification or rescheduling. Changes in the economic environment and the financial condition of the industries we serve could result in customer cancellation of contractual orders or requests for rescheduling. Some of our contracts have specific provisions relating to schedule and performance, and failure to deliver in accordance with such provisions could result in cancellations, modifications, rescheduling and/or penalties, in some cases at the customers’ convenience and without prior notice. While we have normally recovered our direct and indirect costs, such cancellations, modifications, or rescheduling that cannot be replaced in a timely fashion, could have a material adverse effect on our financial results.

A significant portion of our business depends upon U.S. Government defense spending.

We derive a significant portion of our business from customers whose principal sales are to the U.S. Government and from direct sales by us to the U.S. Government. Accordingly, the success of our business depends upon government spending

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generally or for specific departments or agencies in particular. Such spending, among other factors, is subject to the uncertainties of governmental appropriations and national defense policies and priorities, constraints of the budgetary process, timing and potential changes in these policies and priorities, and the adoption of new laws or regulations or changes to existing laws or regulations.

These and other factors could cause the government and government agencies, or prime contractors that use us as a subcontractor, to reduce their purchases under existing contracts, to exercise their rights to terminate contracts at-will or to abstain from exercising options to renew contracts, any of which could have a material adverse effect on our business, financial condition and results of operations.

Further, the levels of U.S. Department of Defense (“U.S. DoD”) spending in future periods are difficult to predict and are impacted by numerous factors such as the political environment, U.S. foreign policy, macroeconomic conditions and the ability of the U.S. Government to enact relevant legislation such as the authorization and appropriations bills. The Budget Control Act (“2011 Act”) established limits on U.S. government discretionary spending, including a reduction of defense spending between the 2012 and 2021 U.S. Government fiscal years. Accordingly, long-term uncertainty remains with respect to overall levels of defense spending and it is likely that U.S. Government discretionary spending levels will continue to be subject to pressure.

We are subject to extensive regulation and audit by the Defense Contract Audit Agency.

The accuracy and appropriateness of certain costs and expenses used to substantiate our direct and indirect costs for the U.S. Government contracts are subject to extensive regulation and audit by the Defense Contract Audit Agency, an arm of the U.S. DoD. Such audits and reviews could result in adjustments to our contract costs and profitability. However, we cannot ensure the outcome of any future audits and adjustments may be required to reduce net sales or profits upon completion and final negotiation of audits. If any audit or review were to uncover inaccurate costs or improper activities, we could be subject to penalties and sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from conducting future business with the U.S. Government. Any such outcome could have a material adverse effect on our financial results.

We are subject to a number of procurement laws and regulations. Our business and our reputation could be adversely affected if we fail to comply with these laws.

We must comply with and are affected by laws and regulations relating to the award, administration and performance of U.S. Government contracts. Government contract laws and regulations affect how we do business with our customers and impose certain risks and costs on our business. A violation of specific laws and regulations, by us, our employees, others working on our behalf, a supplier or a venture partner, could harm our reputation and result in the imposition of fines and penalties, the termination of our contracts, suspension or debarment from bidding on or being awarded contracts, loss of our ability to export products or services and civil or criminal investigations or proceedings.

In some instances, these laws and regulations impose terms or rights that are different from those typically found in commercial transactions. For example, the U.S. Government may terminate any of our government contracts and subcontracts either at its convenience or for default based on our performance. Upon termination for convenience of a fixed-price type contract, we normally are entitled to receive the purchase price for delivered items, reimbursement for allowable costs for work-in-process and an allowance for profit on the contract or adjustment for loss if completion of performance would have resulted in a loss.

Contracts with some of our customers, including Federal government contracts, contain provisions which give our customers a variety of rights that are unfavorable to us and the OEMs to whom we provide products and services, including the ability to terminate a contract at any time for convenience.

Contracts with some of our customers, including Federal government contracts, contain provisions and are subject to laws and regulations that provide rights and remedies not typically found in commercial contracts. These provisions may allow our customers to:

• terminate existing contracts, in whole or in part, for convenience, as well as for default, or if funds for contract performance for any subsequent year become unavailable;

• terminate existing contracts if we are suspended or debarred from doing business with the federal government or with a governmental agency;

• prohibit future procurement awards with a particular agency as a result of a finding of an organizational conflict of interest based upon prior related work performed for the agency that would give a contractor an unfair advantage over competing contractors;

• claim rights in products and systems produced by us; and

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• control or prohibit the export of the products and related services we offer.

If the U.S. Government terminates a contract for convenience, the counterparty with whom we have contracted on a subcontract may terminate its contract with us. As a result of any such termination, whether on a direct government contract or subcontract, we may recover only our incurred or committed costs, settlement expenses and profit on work completed prior to the termination. If the U.S. Government terminates a direct contract with us for default, we may not even recover those amounts and instead may be liable for excess costs incurred by the U.S. Government in procuring undelivered items and services from another source.

In addition, the U.S. Government is typically required to open all programs to competitive bidding and, therefore, may not automatically renew any of its prime contracts. If one or more of our government prime or subcontracts is terminated or canceled, our failure to replace sales generated from such contracts would result in lower sales and have an adverse effect on our business, results of operations and financial condition.

Further consolidation in the aerospace industry could adversely affect our business and financial results.

The aerospace and defense industry is experiencing significant consolidation, including our customers, competitors and suppliers. Consolidation among our customers may result in delays in the awarding of new contracts and losses of existing business. Consolidation among our competitors may result in larger competitors with greater resources and market share, which could adversely affect our ability to compete successfully. Consolidation among our suppliers may result in fewer sources of supply and increased cost to us.

Our growth strategy includes evaluating selected acquisitions, which entails certain risks to our business and financial performance.

We have historically achieved a portion of our growth through acquisitions and expect to evaluate selected future acquisitions as part of our strategy for growth. Any acquisition of another business entails risks and it is possible that we will not realize the expected benefits from an acquisition or that an acquisition will adversely affect our existing operations. Acquisitions entail certain risks, including:

• difficulty in integrating the operations and personnel of the acquired company within our existing operations or in maintaining uniform standards;

• loss of key employees or customers of the acquired company;

• the failure to achieve anticipated synergies;

• unrecorded liabilities of acquired companies that we fail to discover during our due diligence investigations or that are not subject to indemnification or reimbursement by the seller; and

• management and other personnel having their time and resources diverted to evaluate, negotiate and integrate acquisitions.

We may not be successful in achieving expected operating efficiencies and sustaining or improving operating expense reductions, and may experience business disruptions associated with restructuring, facility consolidations, realignment, cost reduction, and other strategic initiatives.

Over the past year, we have implemented a number of restructuring, realignment, and cost reduction initiatives, including facility consolidations, organizational realignments, and reductions in our workforce. While we have realized some efficiencies from these actions, we may not realize the benefits of these initiatives to the extent we anticipated. Further, such benefits may be realized later than expected, and the ongoing difficulties in implementing these measures may be greater than anticipated, which could cause us to incur additional costs or result in business disruptions. In addition, if these measures are not successful or sustainable, we may have to undertake additional realignment and cost reduction efforts, which could result in significant additional charges. Moreover, if our restructuring and realignment efforts prove ineffective, our ability to achieve our other strategic and business plan goals may be adversely affected.

We rely on our suppliers to meet the quality and delivery expectations of our customers.

Our ability to deliver our products and services on schedule and to satisfy specific quality levels is dependent upon a variety of factors, including execution of internal performance plans, availability of raw materials, internal and supplier produced parts and structures, conversion of raw materials into parts and assemblies, and performance of suppliers and others.

We rely on numerous third-party suppliers for raw materials and a large proportion of the components used in our production process. Certain of these raw materials and components are available only from single sources or a limited number of suppliers,

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or similarly, customers’ specifications may require us to obtain raw materials and/or components from a single source or certain suppliers. Many of our suppliers are small companies with limited financial resources and manufacturing capabilities. We do not currently have the ability to manufacture these components ourselves. These and other factors, including the loss of a critical supplier or raw materials and/or component shortages, could cause disruptions or cost inefficiencies in our operations compared to our competitors that have greater direct purchasing power, which could have a material adverse effect on our financial results.

We use estimates when bidding on fixed-price contracts. Changes in our estimates could adversely affect our financial results.

We enter into contracts providing for a firm, fixed-price for the sale of some of our products regardless of the production costs incurred by us. In many cases, we make multi-year firm, fixed-price commitments to our customers, without assurance that our anticipated production costs will be achieved. Contract bidding and accounting require judgment relative to assessing risks, estimating contract net sales and costs, including estimating cost increases over time and efficiencies to be gained, and making assumptions for supplier sourcing and quality, manufacturing scheduling and technical issues over the life of the contract. Such assumptions can be particularly difficult to estimate for contracts with new customers. Our failure to accurately estimate these costs can result in reduced profits or incurred losses. Due to the significance of the judgments and estimates involved, it is possible that materially different amounts could be obtained if different assumptions were used or if the underlying circumstances were to change. Therefore, any changes in our underlying assumptions, circumstances or estimates could have a material adverse effect on our financial results. For example, in the third quarter of 2015, we recorded a charge in the Structural Systems segment related to a regional jet program for estimated cost overruns of $10.0 million. See “Provision for Estimated Losses on Contracts” in Note 1 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information.

As we move up the value chain to become a Tier Two supplier, enhanced design, product development, manufacturing, supply chain project management and other skills will be required.

We may encounter difficulties as we execute our growth strategy to move up the value chain to become a Tier Two supplier of more complex, value-added assemblies. Difficulties we may encounter include, but are not limited to, the need for enhanced and expanded product design skills, enhanced ability to control and influence our suppliers, enhanced quality control systems and infrastructure, enhanced large-scale project management skills, and expanded industry certifications. Assuming incremental project design responsibilities would require us to assume additional risk in developing cost estimates and could expose us to increased risk of losses. There can be no assurance that we will be successful in obtaining the enhanced skills required to be a Tier Two supplier or that our customers will outsource such functions to us.

Risks associated with operating and conducting our business outside the United States could adversely impact us.

We have manufacturing facilities in Thailand and Mexico and also derive a portion of our net revenues from direct foreign sales. Further, our customers may derive portions of their revenues from non-U.S. customers. As a result, we are subject to the risks of conducting and operating our business internationally, including:

• political instability;

• economic and geopolitical developments and conditions;

• compliance with a variety of international laws, as well as U.S. laws affecting the activities of U.S. companies conducting business abroad, including, but not limited to, the Foreign Corrupt Practices Act;

• imposition of taxes, export controls, tariffs, embargoes and other trade restrictions;

• difficulties repatriating funds or restrictions on cash transfers; and

• potential for new tariffs imposed on imports by the new U.S. administration.

While the impact of these factors is difficult to predict, any one or more of these factors could have a material adverse effect on our financial results.

Goodwill and/or other assets could be impaired in the future, which could result in substantial charges.

Goodwill is tested for impairment on an annual basis during our fourth quarter or more frequently if events or circumstances occur which could indicate potential impairment. For example, our annual goodwill impairment testing in the fourth quarter of 2015 indicated the Structural Systems reporting unit’s carrying value exceeded its fair value as a result of the lowered revenues and cash flows outlook in our military and space end-use markets due to the decrease in U.S. government defense spending and

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thus, requiring us to perform Step Two of the goodwill impairment test. Based on the Step Two test, we impaired the entire goodwill for the Structural Systems reporting unit of $57.2 million in 2015.

We also test intangible assets with indefinite life periods for potential impairment annually and on an interim basis if there are indicators of potential impairment. For example, in performing our annual impairment test in the fourth quarter of 2015, we concluded the fair value of the indefinite-lived trade name to be zero as a result of divesting businesses in Electronic Systems and our discontinuation of the use of the trade name. Thus, we recorded an impairment of $32.9 million, which was the remaining carrying value of the trade name.

In addition, we evaluate amortizable intangible assets, fixed assets, and production cost of contracts for impairment if there are indicators of a potential impairment.

In assessing the recoverability of goodwill, management is required to make certain critical estimates and assumptions. These estimates and assumptions include projected sales levels, including the addition of new customers, programs or platforms and increased content on existing programs or platforms, improvements in manufacturing efficiency, and reductions in operating costs. Due to many variables inherent in the estimation of a business’s fair value and the relative size of our recorded goodwill, differences in estimates and assumptions may have a material effect on the results of our impairment analysis. If any of these or other estimates and assumptions are not realized in the future, or if market multiples decline, we may be required to record an additional impairment charge for goodwill.

Further, additional impairment charges may be incurred against other intangible assets or long-term assets if asset utilization declines, customer demand declines or other circumstances indicate that the asset carrying value may not be recoverable.

Our production cost of contracts as of December 31, 2017 was $11.2 million or 2% of total assets. Our goodwill and other intangible assets as of December 31, 2017 were $232.1 million, or 41% of total assets. See “Goodwill and Indefinite-Lived Intangible Assets” and “Production Cost of Contracts” in Note 8 of our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information.

OTHER RISKS

Our operations are subject to numerous extensive, complex, costly and evolving laws, regulations and restrictions, and failure to comply with these laws, regulations and restrictions could subject us to penalties and sanctions that could harm our business.

Prime contracts with various agencies of the U.S. Government, and subcontracts with other prime contractors, are subject to numerous laws and regulations which affect how we do business with our customers and may impose added costs to our business. As a result, our contracts and operations are subject to numerous, extensive, complex, costly and evolving laws, regulations and restrictions, principally by the U.S. Government or their agencies. These laws, regulations and restrictions govern items including, but not limited to, the formation, administration and performance of U.S. Government contracts, disclosure of cost and pricing data, civil penalties for violations or false claims to the U.S. Government for payment, define reimbursable costs, establish ethical standards for the procurement process and control the import and export of defense articles and services.

Noncompliance could expose us to liability for penalties, including termination of our U.S. Government contracts and subcontracts, disqualification from bidding on future U.S. Government contracts and subcontracts, suspension or debarment from U.S. Government contracting and various other fines and penalties. Noncompliance found by any one agency could result in fines, penalties, debarment or suspension from receiving additional contracts with all U.S. Government agencies. Given our dependence on U.S. Government business, suspension or debarment could have a material adverse effect on our financial results.

In addition, the U.S. Government may revise its procurement practices or adopt new contract rules and regulations, at any time, including increased usage of fixed-price contracts and procurement reform. Such changes could impair our ability to obtain new contracts or subcontracts or renew contracts or subcontracts under which we currently perform when those contracts are put up for competitive bidding. Any new contracting methods could be costly or administratively difficult for us to implement and could adversely affect our future net revenues.

In addition, our international operations subject us to numerous U.S. and foreign laws and regulations, including, without limitation, regulations relating to import-export control, technology transfer restrictions, repatriation of earnings, exchange controls, the Foreign Corrupt Practices Act and the anti-boycott provisions of the U.S. Export Administration Act. Changes in regulations or political environments may affect our ability to conduct business in foreign markets including investment, procurement and repatriation of earnings. Failure by us or our sales representatives or consultants to comply with these laws

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and regulations could result in certain liabilities and could possibly result in suspension or debarment from government contracts or suspension of our export privileges, which could have a material adverse effect on our financial results.

Customer pricing pressures could reduce the demand and/or price for our products and services.

The markets we serve are highly competitive and price sensitive. We compete worldwide with a number of domestic and international companies that have substantially greater manufacturing, purchasing, marketing and financial resources than we do. Many of our customers have the in-house capability to fulfill their manufacturing requirements. Our larger competitors may be able to compete more effectively for very large-scale contracts than we can by providing different or greater capabilities or benefits such as technical qualifications, past performance on large-scale contracts, geographic presence, price and availability of key professional personnel. If we are unable to successfully compete for new business, our net revenues growth and operating margins may decline.

Several of our major customers have completed extensive cost containment efforts and we expect continued pricing pressures in 2018 and beyond. Competitive pricing pressures may have an adverse effect on our financial condition and operating results. Further, there can be no assurance that competition from existing or potential competitors in other segments of our business will not have a material adverse effect on our financial results. If we do not continue to compete effectively and win contracts, our future business, financial condition, results of operations and our ability to meet our financial obligations may be materially compromised.

Our products and processes are subject to risk of obsolescence as a result of changes in technology and evolving industry and regulatory standards.

The future success of our business depends in large part upon our and our customers’ ability to maintain and enhance technological capabilities, develop and market manufacturing services that meet changing customer needs and successfully anticipate or respond to technological advances in manufacturing processes on a cost-effective and timely basis, while meeting evolving industry and regulatory standards. To address these risks, we invest in product design and development, and incur related capital expenditures. There can be no guarantee that our product design and development efforts will be successful, or that funds required to be invested in product design and development or incurred as capital expenditures will not increase materially in the future.

Environmental liabilities could adversely affect our financial results.

We are subject to various federal, local, and foreign environmental laws and regulations, including those relating to the use, storage, transport, discharge and disposal of hazardous chemicals and materials used and emissions generated during our manufacturing process. We do not carry insurance for these potential environmental liabilities. Any failure by us to comply with present or future regulations could subject us to future liabilities or the suspension of production, which could have a material adverse effect on our financial results. Moreover, some environmental laws relating to contaminated sites can impose joint and several liability retroactively regardless of fault or the legality of the activities giving rise to the contamination. Compliance with existing or future environmental laws and regulations may require extensive capital expenditures, increase our cost or impact our production capabilities. Even if such expenditures are made, there can be no assurance that we will be able to comply. We have been directed to investigate and take corrective action for groundwater contamination at certain sites. Our ultimate liability for such matters will depend upon a number of factors. See Note 17 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information.

Cyber security attacks, internal system or service failures may adversely impact our business and operations.

Any system or service disruptions, including those caused by projects to improve our information technology systems, if not anticipated and appropriately mitigated, could disrupt our business and impair our ability to effectively provide products and related services to our customers and could have a material adverse effect on our business. We could also be subject to systems failures, including network, software or hardware failures, whether caused by us, third-party service providers, intruders or hackers, computer viruses, natural disasters, power shortages or terrorist attacks. Cyber security threats are evolving and include, but are not limited to, malicious software, unauthorized attempts to gain access to sensitive, confidential or otherwise protected information related to us or our products, customers or suppliers, or other acts that could lead to disruptions in our business. Any such failures could cause loss of data and interruptions or delays in our business, cause us to incur remediation costs, subject us to claims and damage our reputation. In addition, the failure or disruption of our communications or utilities could cause us to interrupt or suspend our operations or otherwise adversely affect our business. Our property and business interruption insurance may be inadequate to compensate us for all losses that may occur as a result of any system or operational failure or disruption which would adversely affect our business, results of operations and financial condition.

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We may not have the ability to renew facilities leases on terms favorable to us and relocation of operations presents risks due to business interruption.

Certain of our manufacturing facilities and offices are leased and have lease terms that expire between 2019 and 2022. The majority of these leases provide renewal options at the fair market rental rate at the time of renewal, which, if renewed, could be significantly higher than our current rental rates. We may be unable to offset these cost increases by charging more for our products and services. Furthermore, continued economic conditions may continue to negatively impact and create greater pressure in the commercial real estate market, causing higher incidences of landlord default and/or lender foreclosure of properties, including properties occupied by us. While we maintain certain non-disturbance rights in most cases, it is not certain that such rights will in all cases be upheld and our continued right of occupancy in such instances is potentially jeopardized. An occurrence of any of these events could have a material adverse effect on our financial results.

Additionally, if we choose to move any of our operations, those operations will be subject to additional relocation costs and associated risks of business interruption.

The occurrence of litigation in which we could be named as a defendant is unpredictable.

From time to time, we and our subsidiaries are involved in various legal and other proceedings that are incidental to the conduct of our business. While we believe no current proceedings, if adversely determined, could have a material adverse effect on our financial results, no assurances can be given. Any such claims may divert financial and management resources that would otherwise be used to benefit our operations and could have a material adverse effect on our financial results.

Product liability claims in excess of insurance could adversely affect our financial results and financial condition.

We face potential liability for personal injury or death as a result of the failure of products designed or manufactured by us. Although we currently maintain product liability insurance (including aircraft product liability insurance), any material product liability not covered by insurance could have a material adverse effect on our financial condition, results of operations and cash flows.

Damage or destruction of our facilities caused by storms, earthquake or other causes could adversely affect our financial results and financial condition.

We have operations located in regions of the U.S. that may be exposed to damaging storms, earthquakes and other natural disasters. Although we maintain standard property casualty insurance covering our properties and may be able to recover costs associated with certain natural disasters through insurance, we do not carry any earthquake insurance because of the cost of such insurance. Many of our properties are located in Southern California, an area subject to earthquake activity. Our California facilities generated $185.3 million in net revenues during 2017. Even if covered by insurance, any significant damage or destruction of our facilities due to storms, earthquakes or other natural disasters could result in our inability to meet customer delivery schedules and may result in the loss of customers and significant additional costs to us. Thus, any significant damage or destruction of our properties could have a material adverse effect on our business, financial condition or results of operations.

We are dependent upon our ability to attract and retain key personnel.

Our success depends in part upon our ability to attract and retain key engineering, technical and managerial personnel, at both the executive and plant level. We face competition for management, engineering and technical personnel from other companies and organizations. The loss of members of our senior management group, or key engineering and technical personnel, could negatively impact our ability to grow and remain competitive in the future and could have a material adverse effect on our financial results.

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Labor disruptions by our employees could adversely affect our business.

As of December 31, 2017, we employed 2,600 people. Two of our operating facilities are parties to collective bargaining agreements, covering 140 full time hourly employees in one of those facilities and 220 full time hourly employees in the other facility, and will expire in June 2018 and January 2019, respectively. Although we have not experienced any material labor-related work stoppage and consider our relations with our employees to be good, labor stoppages may occur in the future. If the unionized workers were to engage in a strike or other work stoppage, if we are unable to negotiate acceptable collective bargaining agreements with the unions or if other employees were to become unionized, we could experience a significant disruption of our operations, higher ongoing labor costs and possible loss of customer contracts, which could have an adverse effect on our business and results of operations.

We have identified material weaknesses in the past in our internal controls over financial reporting which could, if not remediated, adversely impact the reliability of our financial reports, cause us to submit our financial reports in an untimely fashion, result in material misstatements in our financial statements and cause current and potential stockholders to lose confidence in our financial reporting, which in turn could adversely affect the trading price of our common stock.

In 2016, we concluded that there was a material weakness in our internal control over financial reporting related to the annual accounting for income taxes. There was an incorrect recording to a deferred tax asset of $1.6 million when this amount should have decreased our income tax benefit for the year and fourth quarter ended December 31, 2015. We assessed the materiality of this error and do not believe it is material to any prior interim or annual periods, however, we determined it was appropriate to revise our consolidated financial statements as of and for the year and quarter ended December 31, 2015 in this Form 10-K. Therefore, we have revised our December 31, 2015 consolidated balance sheet to increase non-current deferred tax liabilities by $1.6 million and revised our consolidated statement of operations for the year ended December 31, 2015 to increase our net loss by $1.6 million. We have also revised all related footnote disclosures in these consolidated financial statements to correct this error. This error had no effect on net cash provided by operating activities on our consolidated cash flow statement for the year ended December 31, 2015, however, we determined that our internal control over financial reporting relating to the annual accounting for income taxes was not effective as of December 31, 2016. This material weakness was remediated as of December 31, 2107.

Under standards established by the Public Company Accounting Oversight Board (“PCAOB”), a material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis.

When a material weakness occurs, we plan to complete the remediation process as quickly as possible. If our remedial measures are insufficient to address the material weakness, or if additional material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results. In addition, if we are unable to successfully remediate a material weakness and if we are unable to produce accurate and timely financial statements, our stock price may be adversely affected and we may be unable to maintain compliance with applicable stock exchange listing requirements and debt covenant requirements.

Unanticipated changes in our tax provision or exposure to additional income tax liabilities could affect our profitability.

Significant judgment is required in determining our provision for income taxes. In the ordinary course of our business, there are transactions and calculations where the ultimate tax determination is uncertain. Furthermore, changes in income tax laws and regulations, or their interpretation, could result in higher or lower income tax rates assessed or changes in the taxability of certain sales or the deductibility of certain expenses, thereby affecting our income tax expense and profitability. We recorded provisional estimates of the impact of the Tax Cuts and Jobs Act (the “2017 Tax Act”) enacted on December 22, 2017 in accordance with SEC Staff Accounting Bulletin No. 118 (“SAB 118”). These estimates are subject to further analysis and review which may result in material adjustments in 2018. In addition, we are regularly under audit by tax authorities. The final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

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We occupy 29 owned or leased facilities, totaling 2.1 million square feet of manufacturing area and office space. At December 31, 2017, facilities which were in excess of 50,000 square feet each were occupied as follows:

Location	Segment	Square Feet	Expiration of Lease
Carson, California	Structural Systems	299,000	Owned
Monrovia, California	Structural Systems	274,000	Owned
Parsons, Kansas	Structural Systems	176,000	Owned
Coxsackie, New York	Structural Systems	151,000	Owned
Carson, California	Electronic Systems	117,000	2021
Phoenix, Arizona	Electronic Systems	100,000	2022
Joplin, Missouri	Electronic Systems	92,000	Owned
Adelanto, California	Structural Systems	88,000	Owned
Orange, California	Structural Systems	80,000	Owned
Appleton, Wisconsin	Electronic Systems	77,000	Owned
Carson, California	Structural Systems	77,000	2019
Huntsville, Arkansas	Electronic Systems	69,000	2020
Berryville, Arkansas	Electronic Systems	65,000	Owned
Joplin, Missouri	Electronic Systems	55,000	2021
Tulsa, Oklahoma	Electronic Systems	55,000	Owned
Orange, California	Structural Systems	53,000	2019

Management believes these properties are adequate to meet our current requirements, are in good condition and are suitable for their present use.

ITEM 3. LEGAL PROCEEDINGS

See Note 17 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for a description of our legal proceedings.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

19

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is listed on the New York Stock Exchange under the symbol DCO. As of December 31, 2017, we had 178 holders of record of our common stock. We have not paid any dividends since the first quarter of 2011 and we do not expect to pay dividends for the foreseeable future. See “Available Liquidity” in Part II, Item 7, Management’s Discussion and Analysis—Liquidity and Capital Resources—Available Liquidity, of this Annual Report on Form 10-K for further discussion on dividend restrictions under our Credit Facility. The following table sets forth the high and low closing prices per share of our common stock as reported on the New York Stock Exchange for the fiscal periods indicated:

	Years Ended December 31,
	2017				2016
	High		Low		High		Low
First Quarter	$	32.18	$	24.35	$	16.98	$	12.89
Second Quarter	$	34.46	$	28.12	$	20.69	$	14.32
Third Quarter	$	32.55	$	26.24	$	24.41	$	19.02
Fourth Quarter	$	35.02	$	25.81	$	29.46	$	18.80

See “Part III, Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS” for information relating to shares to be issued under equity compensation plans.

Issuer Purchases of Equity Securities

None.

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Performance Graph

The following graph compares the yearly percentage change in our cumulative total shareholder return with the cumulative total return of the Russell 2000 Index and the Spade Index for the periods indicated, assuming the reinvestment of any dividends. The graph is not necessarily indicative of future price performance:

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ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data should be read in conjunction with Part II, Item 7 and Part IV, Item 15(a) of this Annual Report on Form 10-K (“Form 10-K”):

	(In thousands, except per share amounts) Years Ended December 31,
	2017(a)(b)(c)			2016(d)			2015(e)(f)			2014			2013(g)
Net Revenues	$	558,183		$	550,642		$	666,011		$	742,045		$	736,650
Gross Profit as a Percentage of Net Revenues	18.4		%	19.3		%	15.1		%	18.9		%	16.9		%
Income (Loss) Before Taxes	7,609			38,113			(106,590		)	26,240			9,385
Income Tax (Benefit) Expense	(12,468		)	12,852			(31,711		)	6,373			(1,993		)
Net Income (Loss)	$	20,077		$	25,261		$	(74,879	)	$	19,867		$	11,378
Per Common Share
Basic earnings (loss) per share	$	1.78		$	2.27		$	(6.78	)	$	1.82		$	1.06
Diluted earnings (loss) per share	$	1.74		$	2.24		$	(6.78	)	$	1.79		$	1.05
Working Capital	$	140,778		$	139,635		$	179,655		$	217,670		$	225,323
Total Assets (h)	$	566,753		$	515,429		$	557,081		$	747,599		$	762,645
Long-Term Debt, Including Current Portion (h)	$	216,055		$	166,899		$	240,687		$	290,052		$	332,702
Total Shareholders’ Equity	$	235,583		$	212,103		$	185,734		$	256,570		$	234,271

(a) The results for 2017 included LDS’ results of operations since the date of acquisition of September 2017.

(b) The results for 2017 included the adoption of the Tax Cuts and Jobs Act and as a result, we recorded a provisional deferred income tax benefit of $13.0 million related to the re-measurement for the year ended December 31, 2017. See Note 16 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information.

(c) The results for 2017 included restructuring charges of $8.8 million. See Note 3 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information.

(d) The results for 2016 included a gain on divestitures, net in our Electronic Systems operating segment of $17.6 million related to the divestitures of our Pittsburgh and Miltec operations.

(e) The results for 2015 included a goodwill impairment charge in our Structural Systems operating segment and an indefinite-lived trade name intangible asset impairment charge in our Electronic Systems operating segment of $57.2 million and $32.9 million, respectively, resulting from our annual impairment testing.

(f) The results for 2015 included a loss on extinguishment of debt of $14.7 million related to the retirement of the $200.0 million senior unsecured notes and existing credit facility.

(g) The results for 2013 included a $14.1 million in charges related to the Embraer Legacy 450/500 and Boeing 777 wing tip contracts and was comprised of $7.0 million of asset impairment charges for production cost of contracts; $5.2 million of forward loss reserves and $1.9 million of inventory write-offs.

(h) Total assets and long-term debt for the years 2014 - 2013 have not been recasted for the impact of the adoption of Accounting Standards Update 2015-03, as amended by Accounting Standards Update 2015-15, which required the reclassification of certain debt issuance costs from an asset to a liability. See Note 1 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information.

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Ducommun Incorporated (“Ducommun,” “the Company,” “we,” “us” or “our”) is a leading global provider of engineering and manufacturing services for high-performance products and high-cost-of failure applications used primarily in the aerospace, defense, industrial, natural resources, medical and other industries. We differentiate ourselves as a full-service solution-based provider, offering a wide range of value-added products and services in our primary businesses of electronics, structures and integrated solutions. We operate through two primary business segments: Electronic Systems and Structural Systems, each of which is a reportable segment.

Recap of the year ended December 31, 2017:

• Net revenues of $558.2 million

• Net income of $20.1 million, or $1.74 per diluted share, which includes $12.5 million of income tax benefit primarily due to the adoption of the Tax Cuts and Jobs Act

• Adjusted EBITDA of $53.5 million

• Backlog of $726.5 million

• Completed the acquisition of Lightning Diversion Systems, LLC

Non-GAAP Financial Measures

Adjusted earnings before interest, taxes, depreciation and amortization, and restructuring charges (“Adjusted EBITDA”) was $53.5 million and $54.8 million for years ended December 31, 2017 and December 31, 2016, respectively.

When viewed with our financial results prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and accompanying reconciliations, we believe Adjusted EBITDA provides additional useful information to clarify and enhance the understanding of the factors and trends affecting our past performance and future prospects. We define these measures, explain how they are calculated and provide reconciliations of these measures to the most comparable GAAP measure in the table below. Adjusted EBITDA and the related financial ratios, as presented in this Annual Report on Form 10-K (“Form 10-K”), are supplemental measures of our performance that are not required by, or presented in accordance with, GAAP. They are not a measurement of our financial performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP, or as an alternative to net cash provided by operating activities as measures of our liquidity. The presentation of these measures should not be interpreted to mean that our future results will be unaffected by unusual or nonrecurring items.

We use Adjusted EBITDA non-GAAP operating performance measures internally as complementary financial measures to evaluate the performance and trends of our businesses. We present Adjusted EBITDA and the related financial ratios, as applicable, because we believe that measures such as these provide useful information with respect to our ability to meet our operating commitments.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as substitutes for analysis of our results as reported under GAAP. Some of these limitations are:

• They do not reflect our cash expenditures, future requirements for capital expenditures or contractual commitments;

• They do not reflect changes in, or cash requirements for, our working capital needs;

• They do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our debt;

• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;

• They are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows;

• They do not reflect the impact on earnings of charges resulting from matters unrelated to our ongoing operations; and

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

Because of these limitations, Adjusted EBITDA and the related financial ratios should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations. You should compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only as supplemental information. See our consolidated financial statements contained in this Form 10-K.

However, in spite of the above limitations, we believe that Adjusted EBITDA is useful to an investor in evaluating our results of operations because these measures:

• Are widely used by investors to measure a company’s operating performance without regard to items excluded from the calculation of such terms, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired, among other factors;

• Help investors to evaluate and compare the results of our operations from period to period by removing the effect of our capital structure from our operating performance; and

• Are used by our management team for various other purposes in presentations to our Board of Directors as a basis for strategic planning and forecasting.

The following financial items have been added back to or subtracted from our net income when calculating Adjusted EBITDA:

• Interest expense may be useful to investors for determining current cash flow;

• Income tax expense may be useful to investors because it represents the taxes which may be payable for the period and the change in deferred taxes during the period, and may reduce cash flow available for use in our business;

• Depreciation may be useful to investors because it generally represents the wear and tear on our property and equipment used in our operations;

• Amortization expense may be useful to investors because it represents the estimated attrition of our acquired customer base and the diminishing value of product rights;

• Stock-based compensation may be useful to our investors for determining current cash flow;

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

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

• Net gain on divestitures may be useful to our investors in evaluating our on-going operating performance;

• Loss on extinguishment of debt may be useful to our investors for determining current cash flow;

• Asset impairments (including goodwill and intangible assets) may be useful to our investors as it generally represents a decline in value in our assets used in our operations.

24

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

	(In thousands) Years Ended December 31,
	2017			2016			2015
Net income (loss)	$	20,077		$	25,261		$	(74,879	)
Interest expense	8,261			8,274			18,709
Income tax (benefit) expense	(12,468		)	12,852			(31,711		)
Depreciation	13,162			13,326			15,707
Amortization	9,683			9,534			11,139
Stock-based compensation expense	4,675			3,007			3,495
Restructuring charges (1)	8,838			182			2,125
Inventory purchase accounting adjustments (2)	1,235			—			—
Gain on divestitures, net (3)	—			(17,604		)	—
Loss on extinguishment of debt	—			—			14,720
Goodwill impairment (4)	—			—			57,243
Intangible asset impairment (5)	—			—			32,937
Adjusted EBITDA	$	53,463		$	54,832		$	49,485
% of net revenues	9.6		%	10.0		%	7.4		%

(1) 2017 included $0.5 million of restructuring charges that were recorded as cost of goods sold.

(2) 2017 included inventory purchase accounting adjustments of inventory that was stepped up as part of our purchase price allocation from our acquisition of Lightning Diversion Systems, LLC (“LDS”) in September 2017 and is part of our Electronic Systems operating segment.

(3) 2016 included gain on divestitures, net in our Electronic Systems operating segment related to the divestitures of our Pittsburgh and Miltec operations.

(4) 2015 included goodwill impairment related to our Structural Systems operating segment.

(5) 2015 included intangible asset impairment related to our Electronic Systems operating segment.

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RESULTS OF OPERATIONS

2017 Compared to 2016

The following table sets forth net revenues, selected financial data, the effective (benefit) tax rate and diluted earnings per share:

	(in thousands, except per share data) Years Ended December 31,
	2017			% of Net Revenues		2016			% of Net Revenues
Net Revenues	$	558,183		100.0	%	$	550,642		100.0	%
Cost of Sales	455,363			81.6	%	444,449			80.7	%
Gross Profit	102,820			18.4	%	106,193			19.3	%
Selling, General and Administrative Expenses	79,435			14.2	%	77,443			14.1	%
Restructuring Charges	8,360			1.5	%	182			—	%
Operating Income	15,025			2.7	%	28,568			5.2	%
Interest Expense	(8,261		)	(1.5	)%	(8,274		)	(1.5	)%
Gain on Divestitures, Net	—			—	%	17,604			3.2	%
Other Income, Net	845			0.2	%	215			—	%
Income Before Taxes	7,609			1.4	%	38,113			6.9	%
Income Tax (Benefit) Expense	(12,468		)	nm		12,852			nm
Net Income	$	20,077		3.6	%	$	25,261		4.6	%
Effective (Benefit) Tax Rate	(163.8		)%	nm		33.7		%	nm
Diluted Earnings Per Share	$	1.74		nm		$	2.24		nm

nm = not meaningful

Net Revenues by End-Use Market and Operating Segment

Net revenues by end-use market and operating segment during 2017 and 2016, respectively, were as follows:

				(In thousands) Years Ended December 31,				% of Net Revenues
	Change			2017		2016		2017		2016
Consolidated Ducommun
Military and space
Defense electronics	$	25,979		$	203,164	$	177,185	36.4	%	32.2	%
Defense structures	4,662			56,392		51,730		10.1	%	9.4	%
Commercial aerospace	(15,899		)	240,735		256,634		43.1	%	46.6	%
Industrial	(7,201		)	57,892		65,093		10.4	%	11.8	%
Total	$	7,541		$	558,183	$	550,642	100.0	%	100.0	%
Structural Systems
Military and space (defense structures)	$	4,662		$	56,392	$	51,730	23.4	%	21.0	%
Commercial aerospace	(9,667		)	185,068		194,735		76.6	%	79.0	%
Total	$	(5,005	)	$	241,460	$	246,465	100.0	%	100.0	%
Electronic Systems
Military and space (defense electronics)	$	25,979		$	203,164	$	177,185	64.1	%	58.3	%
Commercial aerospace	(6,232		)	55,667		61,899		17.6	%	20.3	%
Industrial	(7,201		)	57,892		65,093		18.3	%	21.4	%
Total	$	12,546		$	316,723	$	304,177	100.0	%	100.0	%

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Net revenues for 2017 were $558.2 million compared to $550.6 million for 2016. The year-over-year increase was primarily due to the following:

• $30.6 million higher revenues in our military and space end-use markets mainly due to increased demand, which favorably impacted our helicopter, missile, and fixed-wing platforms that was partially offset by the divestiture of our Miltec operations in March 2016; partially offset by

• $15.9 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 regional and business jet end-use markets; and

• $7.2 million lower revenues in our industrial end-use markets.

Net Revenues by Major Customers

A significant portion of our net revenues are from our top ten customers as follows:

	Years Ended December 31,
	2017		2016
Boeing Company	16.4	%	17.3	%
Lockheed Martin Corporation	5.5	%	5.6	%
Raytheon Company	13.5	%	8.4	%
Spirit AeroSystems Holdings, Inc.	8.2	%	8.2	%
United Technologies Corporation	4.7	%	5.3	%
Top ten customers (1)	62.5	%	58.6	%

(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”).

The revenues from Boeing, Lockheed Martin, Raytheon, Spirit, and United Technologies are diversified over a number of commercial, military and space programs and were made by both operating segments.

Gross Profit

Gross profit consists of net revenues less cost of sales. Cost of sales includes the cost of production of finished products and other expenses related to inventory management, manufacturing quality, and order fulfillment. Gross profit margin decreased to 18.4% in 2017 compared to 19.3% in 2016 primarily due to unfavorable product mix, partially offset by higher volume.

Selling, General and Administrative (“SG&A”) Expenses

SG&A expenses increased $2.0 million in 2017 compared to 2016 primarily due to the higher compensation and benefit costs of $3.1 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.

Restructuring Charges

Restructuring charges increased $8.7 million (of which $0.5 million was included in cost of sales) in 2017 compared to 2016 primarily due to the restructuring plan that was implemented in 2017 that is expected to increase operating efficiencies. See Note 3 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information on restructuring activities.

Interest Expense

Interest expense was essentially flat in 2017 compared to 2016 primarily due to a lower outstanding Term Loan balance a result of voluntary principal prepayments on our credit facilities, offset by higher utilization of the Revolving Credit Facility, including the acquisition of LDS. See Note 10 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information on our long-term debt.

Income Tax Expense

We recorded an income tax benefit of $12.5 million (an effective tax benefit rate of 163.8%) in 2017, compared to income tax expense of $12.9 million (an effective tax rate of 33.7%) in 2016. The decrease in the effective tax rate for 2017 compared to 2016 was primarily due to $13.0 million of provisional deferred income tax benefit recorded in connection with the Tax Cuts

27

and Jobs Act (the “2017 Tax Act”). The reduction in the U.S. corporate tax rate from 35.0% to 21.0% required the federal portion of our deferred tax assets and liabilities at December 31, 2017 to be re-measured at the enacted tax rate expected to apply when the temporary differences are to be realized or settled using 21.0%. In addition, the pre-tax income in 2017 was lower compared to 2016 pre-tax income which caused tax incentives such as research and development tax credits and discrete items to have a greater impact on our effective tax rate.

Our unrecognized tax benefits were $5.3 million and $3.0 million in 2017 and 2016, respectively. We record interest and penalty charge, if any, related to uncertain tax positions as a component of tax expense and unrecognized tax benefits. The amounts accrued for interest and penalty charges as of December 31, 2017 and 2016 were not significant. If recognized, $3.4 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.

We file U.S. Federal and state income tax returns. During the fourth quarter of 2017, the Internal Revenue Service (“IRS”) completed the audit of tax years 2013, 2014, and 2015. Consequently, Federal income tax returns after 2015 are subject to examination. California franchise (income) tax returns after 2012 and other state income tax returns after 2012 are subject to examination. 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 authority 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.

Net Income and Earnings per Diluted Share

Net income and earnings per diluted share for 2017 were $20.1 million, or $1.74, compared to net income and earnings per diluted share for 2016 were $25.3 million, or $2.24. The decrease in net income in 2017 compared to 2016 was primarily due to the following:

• Prior year included a pre-tax gain on divestitures, net of our Pittsburgh and Miltec operations of $17.6 million;

• Higher restructuring charges of $8.7 million (of which $0.5 million is included in cost of sales)

• Lower gross profit of $2.9 million (which excludes $0.5 million of restructuring charges in cost of sales); and

• Higher SG&A expenses of $2.0 million; partially offset by

• Lower income tax expense of $25.3 million.

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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 2017 and 2016:

	%		(In thousands) Years Ended December 31,						% of Net  Revenues		% of Net  Revenues
	Change		2017			2016			2017		2016
Net Revenues
Structural Systems	(2.0	)%	$	241,460		$	246,465		43.3	%	44.8	%
Electronic Systems	4.1	%	316,723			304,177			56.7	%	55.2	%
Total Net Revenues	1.4	%	$	558,183		$	550,642		100.0	%	100.0	%
Segment Operating Income
Structural Systems			$	5,477		$	16,497		2.3	%	6.7	%
Electronic Systems			30,940			28,983			9.8	%	9.5	%
			36,417			45,480
Corporate General and Administrative Expenses (1)			(21,392		)	(16,912		)	(3.8	)%	(3.1	)%
Total Operating Income			$	15,025		$	28,568		2.7	%	5.2	%
Adjusted EBITDA
Structural Systems
Operating Income			$	5,477		$	16,497
Other Income			200			141
Depreciation and Amortization			8,860			8,688
Restructuring Charges			5,866			—
			20,403			25,326			8.4	%	10.3	%
Electronic Systems
Operating Income			30,940			28,983
Other Income			645			—
Depreciation and Amortization			13,888			14,087
Restructuring Charges			1,190			182
Inventory purchase accounting adjustments			1,235			—
			47,898			43,252			15.1	%	14.2	%
Corporate General and Administrative Expenses (1)
Operating Loss			(21,392		)	(16,912		)
Other Income			—			74
Depreciation and Amortization			97			85
Stock-Based Compensation Expense			4,675			3,007
Restructuring Charges			1,782			—
			(14,838		)	(13,746		)
Adjusted EBITDA			$	53,463		$	54,832		9.6	%	10.0	%
Capital Expenditures
Structural Systems			$	20,679		$	15,661
Electronic Systems			5,019			3,032
Corporate Administration			775			—
Total Capital Expenditures			$	26,473		$	18,693

(1) Includes costs not allocated to either the Structural Systems or Electronic Systems operating segments.

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Structural Systems

Structural Systems’ net revenues in 2017 compared to 2016 decreased $5.0 million primarily due to the following:

• $9.7 million lower revenues in commercial aerospace end-use markets mainly due to the wind down of a regional jet program and continued softness in demand within the regional and business jet end-use markets; partially offset by

• $4.7 million higher revenues in military and space end-use markets mainly due to increased demand which favorably impacted our helicopter platforms.

The Structural Systems operating income in 2017 compared to 2016 decreased primarily due to restructuring charges of $5.9 million, the impact of new program development on large airframe platforms, and lower manufacturing volume.

Electronic Systems

Electronic Systems’ net revenues in 2017 compared to 2016 increased $12.5 million primarily due to the following:

• $25.9 million higher revenues in our military and space end-use markets mainly due to increased demand, which favorably impacted our missile, fixed-wing, and helicopter platforms; partially offset by

• $7.2 million lower revenues in our Industrial end-use markets; and

• $6.2 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 2017 compared to 2016 increased primarily due to higher manufacturing volume, partially offset by restructuring charges of $1.2 million and unfavorable product mix.

Corporate General and Administrative (“CG&A”) Expenses

CG&A expenses in 2017 compared to 2016 increased primarily due to higher compensation and benefit costs of $3.1 million and restructuring charges of $1.8 million.

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Backlog

We define backlog as customer placed purchase orders (“POs”) and long-term agreements (“LTAs”) with firm fixed price and firm delivery dates of 24 months or less. Backlog is subject to delivery delays and program cancellations, which are beyond our control. Backlog is affected by timing differences in the placement of customer orders and tends to be concentrated in several programs to a greater extent than our net sales. Backlog in Industrial end-use markets tends to be of a shorter duration and is generally fulfilled within a 3-month period. As a result of these factors, trends in our overall level of backlog may not be indicative of trends in our future net sales.

Backlog was $726.5 million at December 31, 2017, compared to $641.3 million at December 31, 2016, as shown in more detail below. The increase in backlog was primarily in the commercial aerospace end-use markets and defense technologies end-use markets. $544.0 million of total backlog is expected to be delivered during 2018. The following table summarizes our backlog for 2017 and 2016:

			(In thousands) December 31,
	Change		2017		2016
Consolidated Ducommun
Military and space
Defense electronics	$	18,931	$	216,508	$	197,577
Defense structures	2,044		60,921		58,877
Commercial aerospace	60,313		417,981		357,668
Industrial	3,938		31,068		27,130
Total	$	85,226	$	726,478	$	641,252
Structural Systems
Military and space (defense structures)	$	2,044	$	60,921	$	58,877
Commercial aerospace	42,068		361,586		319,518
Total	$	44,112	$	422,507	$	378,395
Electronic Systems
Military and space (defense electronics)	$	18,931	$	216,508	$	197,577
Commercial aerospace	18,245		56,395		38,150
Industrial	3,938		31,068		27,130
Total	$	41,114	$	303,971	$	262,857

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2016 Compared to 2015

The following table sets forth net revenues, selected financial data, the effective tax (benefit) rate and diluted earnings (loss) per share:

	(in thousands, except per share data) Years Ended December 31,
	2016			% of Net Revenues 2016		2015			% of Net Revenues 2015
Net Revenues	$	550,642		100.0	%	$	666,011		100.0	%
Cost of Sales	444,449			80.7	%	565,219			84.9	%
Gross Profit	106,193			19.3	%	100,792			15.1	%
Selling, General and Administrative Expenses	77,443			14.1	%	83,796			12.6	%
Goodwill Impairment	—			—	%	57,243			8.6	%
Intangible Asset Impairment	—			—	%	32,937			4.9	%
Restructuring Charges	182			—	%	2,125			0.3	%
Operating Income (Loss)	28,568			5.2	%	(75,309		)	(11.3	)%
Interest Expense	(8,274		)	(1.5	)%	(18,709		)	(2.8	)%
Gain on Divestitures, Net	17,604			3.2	%	—			—	%
Loss on Extinguishment of Debt	—			—	%	(14,720		)	(2.2	)%
Other Income	215			—	%	2,148			0.3	%
Income (Loss) Before Taxes	38,113			6.9	%	(106,590		)	(16.0	)%
Income Tax Expense (Benefit)	12,852			nm		(31,711		)	nm
Net Income (Loss)	$	25,261		4.6	%	$	(74,879	)	(11.2	)%
Effective Tax (Benefit) Rate	33.7		%	nm		(29.7		)%	nm
Diluted Earnings (Loss) Per Share	$	2.24		nm		$	(6.78	)	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 2016 and 2015, respectively, were as follows:

				(In thousands) Years Ended December 31,				% of Net Revenues
	Change			2016		2015		2016		2015
Consolidated Ducommun
Military and space
Defense electronics	$	(35,352	)	$	177,185	$	212,537	32.2	%	31.9	%
Defense structures	(23,364		)	51,730		75,094		9.4	%	11.3	%
Commercial aerospace	7,333			256,634		249,301		46.6	%	37.4	%
Industrial	(63,986		)	65,093		129,079		11.8	%	19.4	%
Total	$	(115,369	)	$	550,642	$	666,011	100.0	%	100.0	%
Structural Systems
Military and space (defense structures)	$	(23,364	)	$	51,730	$	75,094	21.0	%	27.5	%
Commercial aerospace	(3,490		)	194,735		198,225		79.0	%	72.5	%
Total	$	(26,854	)	$	246,465	$	273,319	100.0	%	100.0	%
Electronic Systems
Military and space (defense electronics)	$	(35,352	)	$	177,185	$	212,537	58.3	%	54.1	%
Commercial aerospace	10,823			61,899		51,076		20.3	%	13.0	%
Industrial	(63,986		)	65,093		129,079		21.4	%	32.9	%
Total	$	(88,515	)	$	304,177	$	392,692	100.0	%	100.0	%

Net revenues for 2016 were $550.6 million compared to $666.0 million for 2015. The year-over-year decrease was primarily due to the following:

• $64.0 million lower revenues in our industrial end-use markets mainly due to the divestiture of our Pittsburgh operation in January 2016 and closure of our Houston operation in December 2015;

• $58.7 million lower revenues in our military and space end-use markets mainly due to the divestiture of our Miltec operations in March 2016, as well as program delays and budget changes, which impacted our fixed-wing and helicopter platforms and pushed out scheduled deliveries of these products to customers; partially offset by

• $7.3 million higher revenues in our commercial aerospace end-use markets mainly due to added content with existing customers.

Net Revenues by Major Customers

A significant portion of our net revenues are from our top ten customers as follows:

	Years Ended December 31,
	2016		2015
Boeing	17.3	%	16.0	%
Lockheed Martin	5.6	%	1.2	%
Raytheon	8.4	%	8.7	%
Spirit	8.2	%	7.4	%
United Technologies	5.3	%	6.1	%
Top ten customers (1)	58.6	%	55.7	%

(1) Includes Boeing, Raytheon, Spirit, and United Technologies for 2016 and 2015 and Lockheed Martin for 2016.

The revenues from Boeing, Lockheed Martin, Raytheon, Spirit, and United Technologies are diversified over a number of commercial, military and space programs and were made by both operating segments.

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Gross Profit

Gross profit consists of net revenues less cost of sales. Cost of sales includes the cost of production of finished products and other expenses related to inventory management, manufacturing quality, and order fulfillment. Gross profit margin increased to 19.3% in 2016 compared to 15.1% in 2015 primarily due to the following:

• 2015 included a forward loss reserve charge related to a regional jet program of $12.2 million; and

• Total material costs as a percentage of revenues decreased 1.8% compared to the prior year as a result of our on-going supply chain initiatives and improved operating performance.

Selling, General and Administrative Expenses

SG&A expenses decreased $6.4 million in 2016 compared to 2015 primarily due to the decrease of $9.4 million related to the divestitures of our Pittsburgh and Miltec operations and closures of facilities.

Interest Expense

Interest expense decreased in 2016 compared to 2015 primarily due to a lower outstanding debt balance as a result of net voluntary principal prepayments on our new credit facilities and a lower average interest rate as a result of completing the refinancing of our debt in July 2015. See Note 10 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information on our long-term debt.

Income Tax Expense (Benefit)

We recorded income tax expense of $12.9 million (an effective tax rate of 33.7%) in 2016, compared to an income tax benefit of $31.7 million (an effective tax benefit rate of 29.7%) in 2015. The increase in the effective tax rate for 2016 compared to 2015 was primarily due to pre-tax income in 2016, which included a gain on divestitures, net of our Pittsburgh and Miltec operations of $17.6 million compared to a pre-tax loss in the prior year. The $17.6 million gain on divestitures, net resulted in an increase in our state tax liability in 2016. The increase was partially offset by the U.S. Federal research and development tax credit that was permanently extended in 2015 and the deduction for Qualified Domestic Production Activities.

Our unrecognized tax benefits were $3.0 million in both 2016 and 2015. We record interest and penalty charge, if any, related to uncertain tax positions as a component of tax expense and unrecognized tax benefits. The amounts accrued for interest and penalty charge as of December 31, 2016 and 2015 were not significant. If recognized, $2.0 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.

We file U.S. Federal and state income tax returns. Federal income tax returns after 2012, California franchise (income) tax returns after 2011 and other state income tax returns after 2011 are subject to examination. We are no longer subject to examination prior to those periods, although carryforwards generated prior to those periods may still be adjusted upon examination by the Internal Revenue Service (“IRS”) or state taxing authority if they either have been or will be used in a subsequent period. During 2016, the IRS commenced an audit of our 2014 and 2015 tax years. Although the outcome of tax examinations cannot be predicted with certainty, 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 (Loss) and Earnings (Loss) per Diluted Share

Net income and income per diluted share for 2016 were $25.3 million, or $2.24 per diluted share, compared to a net loss and loss per share for 2015 were $(74.9) million, or $(6.78). The increase in net income in 2016 compared to 2015 was primarily due to the following:

• Prior year included a non-cash pre-tax goodwill impairment charge of $57.2 million;

• Prior year included a non-cash pre-tax charge related to the impairment of an indefinite-lived trade name of $32.9 million;

• Prior year included a loss on extinguishment of debt of $14.7 million related to completing a new credit facility to replace the existing credit facilities along with the redemption of the $200.0 million senior unsecured notes;

• Prior year included a forward loss reserve charge related to a regional jet program of $12.2 million;

• A pre-tax gain on divestitures, net of our Pittsburgh and Miltec operations of $17.6 million;

• Lower interest expense of $10.4 million;

• Lower SG&A expenses related to the divestitures of our Pittsburgh and Miltec operations and closures of facilities in aggregate totaling $9.4 million; and

• Improved operating performance; partially offset by

• Higher income tax expense of $44.6 million.

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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 2016 and 2015:

	%		(In thousands) Years Ended December 31,						% of Net  Revenues		% of Net  Revenues
	Change		2016			2015			2016		2015
Net Revenues
Structural Systems	(9.8	)%	$	246,465		$	273,319		44.8	%	41.0	%
Electronic Systems	(22.5	)%	304,177			392,692			55.2	%	59.0	%
Total Net Revenues	(17.3	)%	$	550,642		$	666,011		100.0	%	100.0	%
Segment Operating Income (Loss)
Structural Systems			$	16,497		$	(53,010	)	6.7	%	(19.4	)%
Electronic Systems			28,983			(4,472		)	9.5	%	(1.1	)%
			45,480			(57,482		)
Corporate General and Administrative Expenses (1)			(16,912		)	(17,827		)	(3.1	)%	(2.7	)%
Total Operating Income (Loss)			$	28,568		$	(75,309	)	5.2	%	(11.3	)%
Adjusted EBITDA
Structural Systems
Operating Income (Loss) (2)(3)			$	16,497		$	(53,010	)
Other Income (4)			141			1,510
Depreciation and Amortization			8,688			9,417
Goodwill Impairment			—			57,243
Restructuring Charges			—			1,294
			25,326			16,454			10.3	%	6.0	%
Electronic Systems
Operating Income (Loss) (3)(5)			28,983			(4,472		)
Other Income			—			712
Depreciation and Amortization			14,087			17,267
Intangible Asset Impairment			—			32,937
Restructuring Charges			182			831
			43,252			47,275			14.2	%	12.0	%
Corporate General and Administrative Expenses (1)
Operating Loss			(16,912		)	(17,827		)
Other Income (Expense)			74			(74		)
Depreciation and Amortization			85			162
Stock-Based Compensation Expense			3,007			3,495
			(13,746		)	(14,244		)
Adjusted EBITDA			$	54,832		$	49,485		10.0	%	7.4	%
Capital Expenditures
Structural Systems			$	15,661		$	11,559
Electronic Systems			3,032			4,419
Corporate Administration			—			10
Total Capital Expenditures			$	18,693		$	15,988

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(1) Includes costs not allocated to either the Structural Systems or Electronic Systems operating segments.

(2) Goodwill impairment related to Structural Systems operating segment.

(3) 2015 includes restructuring charges for severance and benefits and loss on early exit from leases of $0.8 million and $1.3 million recorded in the Electronic Systems and Structural Systems operating segments, respectively.

(4) Insurance recoveries related to property and equipment included as other income.

(5) Intangible asset impairment related to Electronic Systems operating segment.

Structural Systems

Structural Systems’ net revenues in 2016 compared to 2015 decreased $26.9 million primarily due to the following:

• $23.4 million decrease in military and space revenues mainly due to program delays and budget changes which impacted scheduled deliveries on our fixed-wing and helicopter platforms; and

• $3.5 million decrease in commercial aerospace revenues mainly due to the wind down of a regional jet program and continued softness in the commercial helicopter end-use market.

The Structural Systems operating income in 2016 compared to 2015 increased primarily due to higher operating margins in 2016 and the prior year included a $57.2 million non-cash goodwill impairment charge and forward loss reserve charge related to a regional jet program of $12.2 million.

Electronic Systems

Electronic Systems’ net revenues in 2016 decreased primarily due to the following:

• $64.0 million decrease in our industrial revenues mainly due to the divestiture of our Pittsburgh operation in January 2016 and closure of our Houston operation in December 2015; and

• $35.3 million decrease in our military and space revenue mainly due to the divestiture of our Miltec operation in March 2016 and program delays and budget changes, which impacted scheduled deliveries on our fixed-wing and helicopter platforms; partially offset by

• $10.8 million increase in our commercial aerospace revenue mainly due to added content with existing customers.

Electronic Systems segment operating income in 2016 compared to 2015 increased primarily due to the prior year included a $32.9 million non-cash impairment charge of an indefinite-lived trade name intangible asset and higher operating margins in 2016.

Corporate General and Administrative Expenses

CG&A expenses in 2016 compared to 2015 decreased primarily due to lower professional services fees of $1.3 million and lower compensation and benefits of $1.1 million, partially offset by one-time retirement charges of $0.9 million.

LIQUIDITY AND CAPITAL RESOURCES

Available Liquidity

Total debt, the weighted-average interest rate, cash and cash equivalents and available credit facilities were as follows:

	(In millions) December 31,
	2017			2016
Total debt, including long-term portion	$	218.1		$	170.0
Weighted-average interest rate on debt	3.73		%	3.25		%
Term Loan interest rate	3.74		%	3.31		%
Cash and cash equivalents	$	2.2		$	7.4
Unused Revolving Credit Facility	$	141.6		$	199.0

Our credit facility consists of a $275.0 million senior secured term loan, which matures on June 26, 2020 (“Term Loan”), and a $200.0 million senior secured revolving credit facility (“Revolving Credit Facility”), which matures on June 26, 2020 (collectively, the “Credit Facilities”). We are required to make mandatory prepayments of amounts outstanding under the Term Loan. As of December 31, 2017, we were in compliance with all covenants required under the Credit Facilities. See Note 10 to

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our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information. The undrawn portions of the commitments of the Credit Facilities are subject to a commitment fee ranging from 0.175% to 0.300%, based upon the consolidated total net adjusted leverage ratio. In July 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.

In September 2017, we acquired all the outstanding interests of 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 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information.

We expect to spend a total of $15.0 million to $17.0 million for capital expenditures in 2018 financed by cash generated from operations, which will be lower than 2017, principally to support new contract awards at Structural Systems and Electronic Systems. As part of our strategic plan to become a Tier Two supplier and win new contract awards, additional up-front investment in tooling will be required for newer programs which have higher engineering content and higher levels of complexity in assemblies.

We believe the ongoing aerospace and defense subcontractor consolidation makes acquisitions an increasingly important component of our future growth. We will continue to make prudent acquisitions and capital expenditures for manufacturing equipment and facilities to support long-term contracts for commercial and military aircraft and defense programs.

We continue to depend on operating cash flow and the availability of our Credit 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.

Cash Flow Summary

2017 Compared to 2016

Net cash provided by operating activities during 2017 decreased to $35.4 million compared to $43.3 million during 2016 primarily due to lower net income as a result of restructuring charges and lower gross margin, and lower accounts payable.

Net cash used in investing activities in 2017 of $86.2 million compared to cash provided by of $34.9 million in 2016 primarily due to the payments for the purchase of LDS, net of cash acquired of $59.8 million in the current year. In addition, the prior year included proceeds from the divestiture of our Pittsburgh and Miltec operations of $51.9 million. Further, 2017 included higher purchases of property and equipment mainly to support the expansion of our Parsons, Kansas facility.

Net cash provided by financing activities during 2017 was $45.5 million compared to cash used in of $76.2 million during 2016 primarily due to net borrowings from the Revolving Credit Facility that was used for the purchase of LDS, partially offset by repayments on the Credit Facilities.

2016 Compared to 2015

Net cash provided by operating activities during 2016 increased to $43.3 million compared to $23.7 million during 2015 primarily due to higher net income as a result of lower interest expense and higher gross margin percentage.

Net cash provided by investing activities in 2016 of $34.9 million primarily due to proceeds from the divestiture of the Pittsburgh and Miltec operations, partially offset by capital expenditures, principally to support new contract awards in both Structural Systems and Electronic Systems.

Net cash used in financing activities during 2016 was $76.2 million compared to $50.4 million during 2015 primarily due to net voluntary principal prepayments on our new credit facilities of $75.0 million primarily as a result of the proceeds received from divestiture of the Pittsburgh and Miltec operations during the current-year.

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Contractual Obligations

A summary of our contractual obligations at December 31, 2017 was as follows (in thousands):

			Payments Due by Period
	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Long-term debt, including current portion	$	218,100	$	—	$	218,100	$	—	$	—
Future interest on long-term debt	28,483		10,266		18,217		—		—
Operating leases	12,360		3,586		5,347		2,874		553
Pension liability	19,387		1,739		3,574		3,806		10,268
Total(1)	$	278,330	$	15,591	$	245,238	$	6,680	$	10,821

(1) As of December 31, 2017, we have recorded $5.3 million in long-term liabilities related to uncertain tax positions. We are not able to reasonably estimate the timing of the long-term payments, or the amount by which our liability may increase or decrease over time, therefore, the liability or uncertain tax positions has not been included in the contractual obligations table.

We have estimated that the fair value of our indemnification obligations as insignificant based upon our history with such obligations and insurance coverage and have included no such obligation in the table above.

Our ultimate liability with respect to groundwater contamination at certain Structural Systems facilities will depend upon a number of factors, including changes in existing laws and regulations, the design and cost of construction, operation and maintenance activities, and the allocation of liability among potentially responsible parties. The above table does not include obligations related to these matters. See Note 17 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for discussion of our environmental liabilities.

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements consist of operating leases and indemnities.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those accounting policies that can have a significant impact on the presentation of our financial condition and results of operations and that require the use of subjective estimates based upon past experience and management’s judgment. Because of the uncertainty inherent in such estimates, actual results may differ from these estimates. Below are those policies applied in preparing our financial statements that management believes are the most dependent on the application of estimates and assumptions. See Note 1 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for additional accounting policies.

Revenue Recognition

Except as described below, we recognize revenue, including revenue from products sold under long-term contracts, when persuasive evidence of an arrangement exists, the price is fixed or determinable, collection is reasonably assured and delivery of products has occurred or services have been rendered.

We have a significant number of contracts for which we recognize revenue under the contract method of accounting and record revenues and cost of sales on each contract in accordance with the percentage-of-completion method of accounting, using the units-of-delivery method. Under the units-of-delivery method, revenue is recognized based upon the number of units delivered during a period and the costs are recognized based on the actual costs allocable to the delivered units. Costs allocable to undelivered units are reported on the balance sheet as inventory. This method is used in circumstances in which a company produces units of a basic product under production-type contracts in a continuous or sequential production process to buyers’ specifications. These contracts are primarily fixed-price contracts that vary widely in terms of size, length of performance period, and expected gross profit margins.

Provision for Estimated Losses on Contracts

We record provisions for 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 management to make certain estimates and assumptions, including those with respect to the future revenue under a contract and the future cost to complete the contract. Management’s estimate of the future cost to complete a contract

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may include assumptions as to improvements in manufacturing efficiency and reductions in operating and material costs. If any of these or other assumptions and estimates do not materialize in the future, we may be required to record additional provisions for estimated losses on contracts.

Production Cost of Contracts

Production cost of contracts includes tooling and other special-purpose machinery necessary to build parts as specified in a contract, and non-recurring production costs such as design and engineering costs. Production costs of contracts are recorded to cost of goods sold using the units of delivery method. We review long-lived assets within production costs of contracts for impairment on an annual basis (which we perform during the fourth quarter) or when events or changes in circumstances indicate that the carrying value of our long-lived assets may not be recoverable. An impairment charge is recognized when the carrying value of an asset exceeds the projected undiscounted future cash flows expected from its use and disposal.

Goodwill and Indefinite-Lived Intangible Asset

Our business acquisitions have resulted in the recognition of goodwill. Goodwill is not amortized but is subject to annual evaluation for impairment (which we perform based on the first day of the fourth fiscal quarter) and between annual tests, if events indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value.

A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include deterioration in general economic conditions, negative developments in equity and credit markets, adverse changes in the markets in which we operate, increases in costs that have a negative effect on earnings and cash flows, or a trend of negative or declining cash flows over multiple periods, among others.

Goodwill is allocated at the reporting unit level, which is defined as an operating segment or one level below an operating segment. We have two internal reporting units: Structural Systems and Electronic Systems. The application of the goodwill impairment test requires significant judgment, including the identification of the reporting units, and the determination of both the carrying value and the fair value of the reporting units. The carrying value of each reporting unit is determined by assigning the assets and liabilities, including existing goodwill, to those reporting units. The determination of the fair value of each reporting unit requires significant judgment, including our estimation of future cash flows, which is dependent upon internal forecasts, estimation of the long-term rate of growth of our businesses, estimation of the useful lives of the assets which will generate the cash flows, determination of our weighted-average cost of capital and other factors. In determining the appropriate discount rate, we considered the weighted-average cost of capital for each reporting unit which, among other factors, considers the cost of common equity capital and the marginal cost of debt of market participants.

The estimates and assumptions used to calculate the fair value of a reporting unit may change from period to period based upon actual operating results, market conditions and our view of the future trends. The estimates and assumptions used to determine whether impairment exists and determine the amount of such impairment, if any, are subject to a high degree of uncertainty. The estimated fair value of a reporting unit would change materially if different assumptions and estimates were used.

We initially perform an assessment of qualitative factors to determine if it is necessary to perform the two-step goodwill impairment test. We test goodwill for impairment using the two-step method if, based on our assessment of the qualitative factors, we determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or if we decide to bypass the qualitative assessment. When performing the two-step impairment test, we use a combination of an income approach, which estimates fair value of the reporting unit based upon future discounted cash flows, and a market approach, which estimates fair value using market multiples for transactions in a set of comparable companies. If the carrying value of the reporting unit exceeds its fair value, we then perform the second step of the impairment test to measure the amount of the impairment loss, if any. The second step compares the implied fair value of goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. The implied fair value of the reporting unit’s goodwill is calculated by creating a hypothetical purchase price allocation as if the reporting unit had just been acquired. This balance sheet contains all assets and liabilities recorded at fair value (including any intangible assets that may not have any corresponding carrying value on our balance sheet). The implied value of the reporting unit’s goodwill is calculated by subtracting the fair value of the net assets from the fair value of the reporting unit. If the carrying amount of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

We perform our annual evaluation for impairment of goodwill based on the first day of the fourth fiscal quarter each year. The carrying amount of goodwill at the date of the most recent annual impairment test for the Electronic Systems internal reporting unit was $117.4 million. As of the date of our 2017 annual evaluation for goodwill impairment, we used a qualitative

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assessment noting it was not more likely than not that the fair value of a reporting unit is less than its carrying amount and thus, goodwill was not deemed impaired.

We review our indefinite-lived intangible asset for impairment on an annual basis or when events or changes in circumstances indicate that the carrying value of our intangible asset may not be recoverable. We may first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test. Impairment indicators include, but are not limited to, cost factors, financial performance, adverse legal or regulatory developments, industry and market conditions and general economic conditions. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, we would recognize an impairment loss in the amount of such excess. In performing our annual impairment test in the fourth quarter of 2015, we concluded the fair value of the indefinite-lived trade name to be zero as a result of divesting businesses in Electronic Systems and our discontinuation of the use of the trade name. Thus, we recorded a $32.9 million of trade name impairment to the Electronic Systems trade name carrying value to decrease its trade name carrying value to zero as of December 31, 2015. See Note 7 in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information.

Other Intangible Assets

We amortize purchased other intangible assets with finite lives over the estimated economic lives of the assets, ranging from three to eighteen years generally using the straight-line method. The value of other intangibles acquired through business combinations has been estimated using present value techniques which involve estimates of future cash flows. Actual results could vary, potentially resulting in impairment charges.

Accounting for Stock-Based Compensation

We use the Black-Scholes-Merton (“Black-Scholes”) valuation model in determining stock-based compensation expense for our options, net of an estimated forfeiture rate, on a straight-line basis over the requisite service period of the award. The stock options typically vest over four years and the estimated forfeiture rate is based on historical experience. The Black-Scholes valuation model requires assumptions and judgments using inputs such as stock price volatility, risk-free interest rates, and expected options terms. As a result, our estimates could differ from actual results.

For performance and restricted stock units, we calculate compensation expense, net of an estimated forfeiture rate, on a straight line basis over the requisite service/performance period of the awards, with fair value being based on the closing stock price on the date of grant except for market condition awards for which fair value was based on a Monte Carlo simulation model. The performance stock units vest based on a three-year performance cycle. The restricted stock units vest over various periods of time ranging from one to three years. We estimate the forfeiture rate based on our historical experience.

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 and charged to cost of sales on a first-in, first-out basis. Market value for raw materials is based on replacement cost and for other inventory classifications it is based on net realizable value. Inventoried costs include raw materials, outside processing, direct labor and allocated overhead, adjusted for any abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) incurred. Costs under long-term contracts are accumulated into, and removed from, inventory on the same basis as other contracts. We assess the inventory carrying value and reduce it, if necessary, to its net realizable value based on customer orders on hand, and internal demand forecasts using management’s best estimates given information currently available. We maintain a reserve for potentially excess and obsolete inventories and inventories that are carried at costs that are higher than their estimated net realizable values.

We net progress payments from customers related to inventory purchases against inventories in the consolidated balance sheets.

Income Taxes

The provision for income taxes is determined using an estimated annual effective tax rate, which is generally less than the U.S. federal statutory rate, primarily as a result of research and development (“R&D”) tax credits available in the United States and deductions available in the United States for domestic production activities. 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 valuation allowances against deferred tax assets, the recognition or derecognition of tax benefits related to uncertain tax positions, expected utilization of R&D tax credits and changes in or the interpretation of tax laws in jurisdictions where we conduct business.

41

Deferred tax assets and liabilities are recognized, using enacted tax rates, for the expected future tax consequences of temporary differences between the book and tax bases of recorded assets and liabilities, operating losses, and tax credit carryforwards. Deferred tax assets are evaluated quarterly and are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Tax positions taken or expected to be taken in a tax return are recognized when it is more-likely-than-not, based on technical merits, to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement, including resolution of related appeals and/or litigation process, if any.

On December 22, 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted. The 2017 Tax Act represents major tax reform legislation that, among other provisions, reduces the U.S. corporate tax rate. Certain provisional amounts for the income tax effects of the 2017 Tax Act, including $13.0 million of deferred income tax benefit recorded principally due to the re-measurement of the federal portion of our deferred tax assets and liabilities, are reflected in our financial results in accordance with SEC Staff Accounting Bulletin No. 118 (“SAB 118”), which provides SEC staff guidance regarding the application of Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes,” in the reporting period in which the 2017 Tax Act became law. See Note 16 in Part IV, Item 15(a) of this Annual Report on Form 10-K for further information.

Environmental Liabilities

Environmental liabilities are recorded when environmental assessments and/or remedial efforts are probable and costs can be reasonably estimated. Generally, the timing of these accruals coincides with the completion of a feasibility study or our commitment to a formal plan of action. Further, we review and update our environmental accruals as circumstances change and/or additional information is obtained that reasonably could be expected to have a meaningful effect on the outcome of a matter or the estimated cost thereof.

Recent Accounting Pronouncements

See Note 1 to our consolidated financial statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for a description of recent accounting pronouncements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our main market risk exposure relates to changes in U.S. interest rates on our outstanding long-term debt. At December 31, 2017, we had borrowings of $218.1 million under our Credit Facilities which bears interest, at our option, at a rate equal to either an alternate base rate or an adjusted LIBOR rate for a one-, two-, three-, or six-month interest period chosen by us, plus an applicable margin percentage. This LIBOR rate has a margin ranging from 1.50% to 2.75%. A hypothetical 10% increase or decrease in the interest rate would have an immaterial impact on our financial condition and results of operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data together with the report thereon of PricewaterhouseCoopers LLP included in Part IV, Item 15(a) 1 and 2 of this Annual Report on Form 10-K and are included herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) are designed to provide reasonable assurance that information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and

42

procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2017.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”). The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management of the Company has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control-Integrated Framework (2013).Based on our assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2017.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2017 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included in Item 15 of this Annual Report on Form 10-K.

Remediation of Prior Year Material Weakness

We previously identified and disclosed in our 2016 Annual Report on Form 10-K, as well as in our Quarterly Report on Form 10-Q (Form “10-Q”) for each interim period in fiscal 2017, a material weakness in our internal control over financial reporting regarding the following:

We did not maintain effective controls related to the quarterly and annual accounting and disclosures for income taxes. Specifically, we did not maintain effective controls related to the preparation, analysis and review of the income tax provision and significant income tax balance sheet accounts required to assess the accuracy and completeness of the income tax amounts reported within the consolidated financial statements and disclosures at period end.

During 2017, we successfully completed the testing necessary to conclude that the controls were operating effectively as of December 31, 2017 and have concluded that the material weakness related to the accounting and disclosures for income taxes has been remediated.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the quarter ended December 31, 2017.

ITEM 9B. OTHER INFORMATION

None.

43

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors of the Registrant

The information under the caption “Election of Directors” in the 2018 Proxy Statement is incorporated herein by reference.

Executive Officers of the Registrant

The information under the caption “Executive Officers of the Registrant” in the 2018 Proxy Statement is incorporated herein by reference.

On December 31, 2017, Anthony J. Reardon resigned as an employee of the Company but will continue to serve as a non-employee Chairman of the Board.

Audit Committee and Audit Committee Financial Expert

The information under the caption “Committees of the Board of Directors” relating to the Audit Committee of the Board of Directors in the 2018 Proxy Statement is incorporated herein by reference.

Compliance with Section 16(a) of the Exchange Act

The information under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in the 2018 Proxy Statement is incorporated herein by reference.

Code of Ethics

The information under the caption “Code of Ethics” in the 2018 Proxy Statement is incorporated herein by reference.

Changes to Procedures to Recommend Nominees

There have been no material changes to the procedures by which security holders may recommend nominees to the Company’s Board of Directors since the date of the Company’s last proxy statement.

ITEM 11. EXECUTIVE COMPENSATION

The information under the captions “Compensation of Executive Officers,” “Compensation of Directors,” “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” in the 2018 Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information under the caption “Security Ownership of Certain Beneficial Owners and Management” in the 2018 Proxy Statement is incorporated herein by reference.

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information about our compensation plans under which equity securities are authorized for issuance:

44

	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b)		Number of  Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))(c)(2)
Equity Compensation Plans
Approved by security holders (1)	713,069	$	23.38	77,693
Not approved by security holders	—	—		—
Total	713,069			77,693

(1) The number of securities to be issued consists of 306,225 for stock options, 185,344 for restricted stock units and 221,500 for performance stock units at target. The weighted average exercise price applies only to the stock options.

(2) Awards are not restricted to any specified form or structure and may include, without limitation, sales or bonuses of stock, restricted stock, stock options, reload stock options, stock purchase warrants, other rights to acquire stock, securities convertible into or redeemable for stock, stock appreciation rights, limited stock appreciation rights, phantom stock, dividend equivalents, performance units or performance shares, and an award may consist of one such security or benefit, or two or more of them in tandem or in alternative.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information under the caption “Election of Directors” in the 2018 Proxy Statement is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information under the caption “Principal Accountant Fees and Services” contained in the 2018 Proxy Statement is incorporated herein by reference.

45

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)	1.      Financial Statements
	The following consolidated financial statements of Ducommun Incorporated and subsidiaries, are incorporated by reference in Item 8 of this report.
		Page
	Report of Independent Registered Public Accounting Firm	47
	Consolidated Balance Sheets - December 31, 2017 and 2016	49
	Consolidated Statements of Operations - Years Ended December 31, 2017, 2016, and 2015	50
	Consolidated Statements of Comprehensive Income (Loss) - Years Ended December 31, 2017, 2016, and 2015	51
	Consolidated Statements of Changes in Shareholders’ Equity - Years Ended December  31, 2017, 2016, and 2015	52
	Consolidated Statements of Cash Flows - Years Ended December 31, 2017, 2016, and 2015	53
	Notes to Consolidated Financial Statements	54
	Supplemental Quarterly Financial Data (Unaudited)	80
	2.      Financial Statement Schedule
	The following schedule for the years ended December 31, 2017, 2016 and 2015 is filed herewith:
	Schedule II - Valuation and Qualifying Accounts	81
	All other schedules have been omitted because they are not applicable, not required, or the information has been otherwise supplied in the financial statements or notes thereto.
	3.      Exhibits
See Item 15(b) for a list of exhibits.		—

ITEM 16. FORM 10-K SUMMARY —

Signatures —

46

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Ducommun Incorporated

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Ducommun Incorporated and its subsidiaries (the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2017, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)2 (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidatedfinancial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidatedfinancial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidatedfinancial statements included performing procedures to assess the risks of material misstatement of the consolidatedfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidatedfinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

47

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Los Angeles, California

February 28, 2018

We have served as the Company’s auditor since 1989.

48

Ducommun Incorporated and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share data)

	December 31,
	2017			2016
Assets
Current Assets
Cash and cash equivalents	$	2,150		$	7,432
Accounts receivable (less allowance for doubtful accounts of $868 and $495 at December 31, 2017 and 2016, respectively)	74,064			76,239
Inventories	122,161			119,896
Production cost of contracts	11,204			11,340
Other current assets	11,435			11,034
Total Current Assets	221,014			225,941
Property and Equipment, Net	110,252			101,590
Goodwill	117,435			82,554
Intangibles, Net	114,693			101,573
Non-Current Deferred Income Taxes	261			286
Other Assets	3,098			3,485
Total Assets	$	566,753		$	515,429
Liabilities and Shareholders’ Equity
Current Liabilities
Current portion of long-term debt	$	—		$	3
Accounts payable	51,907			57,024
Accrued liabilities	28,329			29,279
Total Current Liabilities	80,236			86,306
Long-Term Debt, Less Current Portion	216,055			166,896
Non-Current Deferred Income Taxes	15,981			31,417
Other Long-Term Liabilities	18,898			18,707
Total Liabilities	331,170			303,326
Commitments and Contingencies (Notes 14, 17)
Shareholders’ Equity
Common stock - $0.01 par value; 35,000,000 shares authorized; 11,332,841 and 11,193,813 shares issued and outstanding at December 31, 2017 and 2016, respectively	113			112
Additional paid-in capital	80,223			76,783
Retained earnings	161,364			141,287
Accumulated other comprehensive loss	(6,117		)	(6,079		)
Total Shareholders’ Equity	235,583			212,103
Total Liabilities and Shareholders’ Equity	$	566,753		$	515,429

See accompanying notes to consolidated financial statements.

49

Ducommun Incorporated and Subsidiaries

Consolidated Statements of Operations

(In thousands, except per share amounts)

	Years Ended December 31,
	2017			2016			2015
Net Revenues	$	558,183		$	550,642		$	666,011
Cost of Sales	455,363			444,449			565,219
Gross Profit	102,820			106,193			100,792
Selling, General and Administrative Expenses	79,435			77,443			83,796
Goodwill Impairment	—			—			57,243
Intangible Asset Impairment	—			—			32,937
Restructuring Charges	8,360			182			2,125
Operating Income (Loss)	15,025			28,568			(75,309		)
Interest Expense	(8,261		)	(8,274		)	(18,709		)
Gain on Divestitures, Net	—			17,604			—
Loss on Extinguishment of Debt	—			—			(14,720		)
Other Income, Net	845			215			2,148
Income (Loss) Before Taxes	7,609			38,113			(106,590		)
Income Tax (Benefit) Expense	(12,468		)	12,852			(31,711		)
Net Income (Loss)	$	20,077		$	25,261		$	(74,879	)
Earnings (Loss) Per Share
Basic earnings (loss) per share	$	1.78		$	2.27		$	(6.78	)
Diluted earnings (loss) per share	$	1.74		$	2.24		$	(6.78	)
Weighted-Average Number of Shares Outstanding
Basic	11,290			11,151			11,047
Diluted	11,558			11,299			11,047

See accompanying notes to consolidated financial statements.

50

Ducommun Incorporated and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

	Years Ended December 31,
	2017			2016			2015
Net Income (Loss)	$	20,077		$	25,261		$	(74,879	)
Other Comprehensive Income (Loss), Net of Tax:
Pension Adjustments:
Amortization of actuarial loss included in net income, net of tax benefit of $302, $283, and $330 for 2017, 2016, and 2015, respectively	508			479			557
Actuarial (loss) gain arising during the period, net of tax (benefit) expense of $(194), $(413), and $300 for 2017, 2016, and 2015, respectively	(304		)	(650		)	491
Decrease in net unrealized gains and losses on cash flow hedges, net of tax benefit of $145, $180, and $0 for 2017, 2016, and 2015, respectively	(242		)	(305		)	—
Other Comprehensive (Loss) Income, Net of Tax	(38		)	(476		)	1,048
Comprehensive Income (Loss), Net of Tax	$	20,039		$	24,785		$	(73,831	)

See accompanying notes to consolidated financial statements.

51

Ducommun Incorporated and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

(In thousands, except share data)

	Shares Outstanding		Common Stock			Treasury Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at December 31, 2014	10,952,268		$	110		$	—	$	72,206		$	190,905		$	(6,651	)	$	256,570
Net loss	—		—			—		—			(74,879		)	—			(74,879		)
Other comprehensive income, net of tax	—		—			—		—			—			1,048			1,048
Stock options exercised	167,523		1			—		3,083			—			—			3,084
Stock repurchased related to the exercise of stock options	(137,194	)	(1		)	—		(4,209		)	—			—			(4,210		)
Stock awards vested	101,721		1			—		(1		)	—			—			—
Stock-based compensation	—		—			—		3,495			—			—			3,495
Excess tax benefits from share-based compensation	—		—			—		626			—			—			626
Balance at December 31, 2015	11,084,318		$	111		$	—	$	75,200		$	116,026		$	(5,603	)	$	185,734
Net income	—		—			—		—			25,261			—			25,261
Other comprehensive loss, net of tax	—		—			—		—			—			(476		)	(476		)
Stock options exercised	132,325		1			—		2,121			—			—			2,122
Stock repurchased related to the exercise of stock options	(151,916	)	(1		)	—		(3,464		)	—			—			(3,465		)
Stock awards vested	129,086		1			—		(1		)	—			—			—
Stock-based compensation	—		—			—		3,007			—			—			3,007
Tax shortfall from share-based compensation	—		—			—		(80		)	—			—			(80		)
Balance at December 31, 2016	11,193,813		$	112		$	—	$	76,783		$	141,287		$	(6,079	)	$	212,103
Net income	—		—			—		—			20,077			—			20,077
Other comprehensive loss, net of tax	—		—			—		—			—			(38		)	(38		)
Stock options exercised	212,775		2			—		4,334			—			—			4,336
Stock repurchased related to the exercise of stock options	(219,164	)	(2		)	—		(6,902		)	—			—			(6,904		)
Stock awards vested	145,417		1			—		(1		)	—			—			—
Stock-based compensation	—		—			—		6,009			—			—			6,009
Balance at December 31, 2017	11,332,841		$	113		$	—	$	80,223		$	161,364		$	(6,117	)	$	235,583

See accompanying notes to consolidated financial statements.

52

Ducommun Incorporated and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

	Years Ended December 31,
	2017			2016			2015
Cash Flows from Operating Activities
Net Income (Loss)	$	20,077		$	25,261		$	(74,879	)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Provided by Operating Activities:
Depreciation and amortization	22,845			22,860			26,846
Gain on divestitures, net	—			(17,604		)	—
Goodwill impairment	—			—			57,243
Intangible asset impairment	—			—			32,937
Property and equipment impairment due to restructuring	3,607			—			—
Stock-based compensation expense	4,675			3,007			3,495
Deferred income taxes	(15,411		)	3,519			(29,110		)
Excess tax benefits from stock-based compensation	—			(248		)	(626		)
Provision for doubtful accounts	373			112			132
Noncash loss on extinguishment of debt	—			—			4,970
Other	(1,182		)	(7,204		)	5,628
Changes in Assets and Liabilities:
Accounts receivable	2,720			3,220			4,444
Inventories	(533		)	(5,182		)	20,985
Production cost of contracts	(267		)	(1,536		)	330
Other assets	40			2,974			5,884
Accounts payable	(4,015		)	15,055			(13,978		)
Accrued and other liabilities	2,505			(966		)	(20,623		)
Net Cash Provided by Operating Activities	35,434			43,268			23,678
Cash Flows from Investing Activities
Purchases of property and equipment	(27,610		)	(17,001		)	(15,891		)
Proceeds from sale of assets	913			16			904
Insurance recoveries related to property and equipment	288			—			1,510
Proceeds from divestitures	—			51,893			—
Payments for purchase of Lightning Diversion Systems, LLC, net of cash acquired	(59,798		)	—			—
Net Cash (Used in) Provided by Investing Activities	(86,207		)	34,908			(13,477		)
Cash Flows from Financing Activities
Borrowings from senior secured revolving credit facility	395,900			71,800			65,000
Repayment of senior secured revolving credit facility	(337,800		)	(71,800		)	(65,000		)
Borrowings from term loan	—			—			275,000
Repayments of senior unsecured notes and term loans	(10,000		)	(75,000		)	(320,000		)
Repayments of other debt	(3		)	(23		)	(26		)
Debt issuance costs	—			—			(4,848		)
Excess tax benefits from stock-based compensation	—			248			626
Net cash paid from issuance of common stock under stock plans	(2,606		)	(1,423		)	(1,126		)
Net Cash Provided by (Used in) Financing Activities	45,491			(76,198		)	(50,374		)
Net (Decrease) Increase in Cash and Cash Equivalents	(5,282		)	1,978			(40,173		)
Cash and Cash Equivalents at Beginning of Year	7,432			5,454			45,627
Cash and Cash Equivalents at End of Year	$	2,150		$	7,432		$	5,454

See accompanying notes to consolidated financial statements.

53

DUCOMMUN INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

Description of Business

We are a leading global provider of engineering and manufacturing services for high-performance products and high-cost-of failure applications used primarily in the aerospace and defense, industrial, medical, and other industries. Our subsidiaries are organized into two primary businesses: Electronic Systems segment and Structural Systems segment, each of which is a reportable operating segment. Electronic Systems designs, engineers and manufactures high-reliability electronic and electromechanical products used in worldwide technology-driven markets including aerospace and defense, industrial, medical, and other end-use markets. Electronic Systems’ product offerings primarily range from prototype development to complex assemblies. Structural Systems designs, engineers and manufactures large, complex contoured aerostructure components and assemblies and supplies composite and metal bonded structures and assemblies. Structural Systems’ products are primarily used on commercial aircraft, military fixed-wing aircraft and military and commercial rotary-wing aircraft. All reportable operating segments follow the same accounting principles.

Basis of Presentation

The consolidated financial statements include the accounts of Ducommun Incorporated and its subsidiaries (“Ducommun,” the “Company,” “we,” “us” or “our”), after eliminating intercompany balances and transactions.

In the opinion of management, all adjustments, consisting of recurring accruals, have been made that are necessary to fairly state our consolidated financial position, results of operations, comprehensive income (loss) and cash flows in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Our fiscal quarters typically end on the Saturday closest to the end of March, June and September for the first three fiscal quarters of each year, and ends on December 31 for our fourth fiscal quarter. As a result of using fiscal quarters for the first three quarters combined with leap years, our first and fourth fiscal quarters can range between 12 1/2 weeks to 13 1/2 weeks while the second and third fiscal quarters remain at a constant 13 weeks per fiscal quarter.

Use of Estimates

Certain amounts and disclosures included in the consolidated financial statements required management to make estimates and judgments that affect the amount of assets, liabilities (including forward loss reserves), revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.

Reclassifications

Certain prior period amounts have been reclassified to conform to current year’s presentation.

Supplemental Cash Flow Information

	(In thousands) Years Ended December 31,
	2017		2016		2015
Interest paid	$	7,307	$	6,877	$	26,501
Taxes paid	$	3,125	$	9,778	$	1,150
Non-cash activities:
Purchases of property and equipment not paid	$	2,104	$	3,241	$	1,549

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.

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Level 1, the highest level, refers to the values determined based on quoted prices in active markets. Level 2 refers to fair values estimated using significant observable inputs. Level 3, the lowest level, includes fair values estimated using significant unobservable inputs.. See Note 4 for further information.

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, which we classify as Level 1. See Fair Value above.

Derivative Instruments

We recognize derivative instruments on our consolidated balance sheets at their fair value. On the date that we enter into a derivative contract, we designate the derivative instrument as a fair value hedge, a cash flow hedge, a hedge of a net investment in a foreign operation, or a derivative instrument that will not be accounted for using hedge accounting methods. As of December 31, 2017 and December 31, 2016, all of our derivative instruments were designated as cash flow hedges.

We record changes in the fair value of a derivative instrument that is highly effective and that is designated and qualifies as a cash flow hedge in other comprehensive income (loss), net of tax until our earnings are affected by the variability of cash flows of the underlying hedge. We record any hedge ineffectiveness and amounts excluded from effectiveness testing in current period earnings within interest expense. We report changes in the fair values of derivative instruments that are not designated or do not qualify for hedge accounting in current period earnings. We classify cash flows from derivative instruments on the consolidated statements of cash flows in the same category as the item being hedged or on a basis consistent with the nature of the instrument.

When we determine that a derivative instrument is not highly effective as a hedge, we discontinue hedge accounting prospectively. In all situations in which we discontinue hedge accounting and the derivative instrument remains outstanding, we will carry the derivative instrument at its fair value on our consolidated balance sheets and recognize subsequent changes in its fair value in our current period earnings.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses from the inability of customers to make required payments. The allowance for doubtful accounts is evaluated periodically based on the aging of accounts receivable, the financial condition of customers and their payment history, historical write-off experience and other assumptions, such as current assessment of economic conditions.

Inventories

Inventories are stated at the lower of cost or 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 and charged to cost of sales on a first-in, first-out basis. Inventoried costs include raw materials, outside processing, direct labor and allocated overhead, adjusted for any abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) incurred. Costs under long-term contracts are accumulated into, and removed from, inventory on the same basis as other contracts. We assess the inventory carrying value and reduce it, if necessary, to its net realizable value based on customer orders on hand, and internal demand forecasts using management’s best estimates given information currently available.

We net progress payments from customers related to inventory purchases against inventories in the consolidated balance sheets.

Production Cost of Contracts

Production cost of contracts includes non-recurring production costs, such as design and engineering costs, and tooling and other special-purpose machinery necessary to build parts as specified in a contract. Production costs of contracts are recorded to cost of goods sold using the units of delivery method. We review long-lived assets within production costs of contracts for impairment on an annual basis (which we perform during the fourth quarter) or when events or changes in circumstances indicate that the carrying value of our long-lived assets may not be recoverable. An impairment charge is recognized when the carrying value of an asset exceeds the projected undiscounted future cash flows expected from its use and disposal. As of December 31, 2017 and 2016, production costs of contracts were $11.2 million and $11.3 million, respectively.

Property and Equipment and Depreciation

Property and equipment, including assets recorded under capital leases, are recorded at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets, or the lease term if shorter for leasehold improvements. Repairs and maintenance are charged to expense as incurred. We evaluate long-lived assets for

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recoverability considering undiscounted cash flows, when significant changes in conditions occur, and recognize impairment losses if any, based upon the fair value of the assets.

Goodwill and Indefinite-Lived Intangible Asset

Goodwill is evaluated for impairment on a annual basis on the first day of the fourth fiscal quarter or more frequently if events or changes in circumstances indicate that the asset may be impaired. Our impairment evaluation of goodwill consists of a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If our qualitative assessment indicates it is more likely than not that the estimated fair value of a reporting unit exceeds its carrying value, no further analysis is required and goodwill is not impaired. Otherwise, we will follow a two-step quantitative goodwill impairment test to determine if goodwill is impaired.

In the first step, we determine the fair value of the reporting unit using expected future discounted cash flows and market valuation approaches considering comparable Company revenue and Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) multiples. If the carrying value of the reporting unit exceeds its fair value, we then perform the second step of the impairment test to measure the amount of the goodwill impairment loss, if any.

The second step requires fair valuation of all the reporting unit’s assets and liabilities in a manner similar to a purchase price allocation, with any residual fair value being allocated to goodwill. This residual fair value of goodwill is then compared to the carrying value of goodwill to determine impairment. An impairment charge will be recognized equal to the excess of the carrying value of goodwill over the implied fair value of goodwill.

In 2015, as a result of the annual goodwill impairment test, we recorded $57.2 million of goodwill impairment to the Structural Systems operating segment reducing the goodwill carrying value to zero as of December 31, 2015.

We review our indefinite-lived intangible asset for impairment on an annual basis or when events or changes in circumstances indicate that the carrying value of our intangible asset may not be recoverable. We may first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test. Impairment indicators include, but are not limited to, cost factors, financial performance, adverse legal or regulatory developments, industry and market conditions and general economic conditions. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, we would recognize an impairment loss in the amount of such excess. In performing our annual impairment test in the fourth quarter of 2015, we concluded the fair value of the indefinite-lived trade name to be zero as a result of divesting businesses in Electronic Systems and our discontinuation of the use of the trade name. Thus, we recorded a $32.9 million of trade name impairment to the Electronic Systems trade name carrying value to decrease its trade name carrying value to zero as of December 31, 2015.

Other Intangible Assets

We amortize purchased other intangible assets with finite lives over the estimated economic lives of the assets, ranging from fourteen to eighteen years generally using the straight-line method. The value of other intangibles acquired through business combinations has been estimated using present value techniques which involve estimates of future cash flows. We evaluate other intangible assets for recoverability considering undiscounted cash flows, when significant changes in conditions occur, and recognize impairment losses, if any, based upon the estimated fair value of the assets.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss, as reflected in the consolidated balance sheets under the equity section, was composed of cumulative pension and retirement liability adjustments, net of tax, and unrealized losses on cash flow hedges, net of tax.

Revenue Recognition

Except as described below, we recognize revenue, including revenue from products sold under long-term contracts, when persuasive evidence of an arrangement exists, the price is fixed or determinable, collection is reasonably assured and delivery of products has occurred or services have been rendered.

We have a significant number of contracts for which we recognize revenue under the contract method of accounting and record revenues and cost of sales on each contract in accordance with the percentage-of-completion method of accounting, using the units-of-delivery method. Under the units-of-delivery method, revenue is recognized based upon the number of units delivered during a period and the costs are recognized based on the actual costs allocable to the delivered units. Costs allocable to undelivered units are reported on the balance sheet as inventory. This method is used in circumstances in which a company produces units of a basic product under production-type contracts in a continuous or sequential production process to buyers’ specifications. These contracts are primarily fixed-price contracts that vary widely in terms of size, length of performance period, and expected gross profit margins.

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Provision for Estimated Losses on Contracts

We record provisions for the total anticipated losses on contracts considering total estimated costs to complete the contract compared to total anticipated revenues in the period in which such losses are identified. The provisions for estimated losses on contracts require management to make certain estimates and assumptions, including those with respect to the future revenue under a contract and the future cost to complete the contract. Management's estimate of the future cost to complete a contract may include assumptions as to improvements 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 additional provisions for estimated losses on contracts.

In 2015, we recorded a charge in Structural Systems related to estimated cost overruns as a result of a change in the contract requirements for the remaining contractual period for a regional jet program of $10.0 million. This amount was recorded as part of cost of goods sold in our results of operations and increased accrued liabilities by $7.6 million and other long-term liabilities by $2.4 million.

Income Taxes

The provision for income taxes is determined using an estimated annual effective tax rate, which is generally less than the U.S. federal statutory rate, primarily as a result of research and development (“R&D”) tax credits available in the United States and deductions available in the United States for domestic production activities. 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 valuation allowances against deferred tax assets, the recognition or derecognition of tax benefits related to uncertain tax positions, expected utilization of R&D tax credits and changes in or the interpretation of tax laws in jurisdictions where we conduct business.

Deferred tax assets and liabilities are recognized, using enacted tax rates, for the expected future tax consequences of temporary differences between the book and tax bases of recorded assets and liabilities, operating losses, and tax credit carryforwards. Deferred tax assets are evaluated quarterly and are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Tax positions taken or expected to be taken in a tax return are recognized when it is more-likely-than-not, based on technical merits, to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement, including resolution of related appeals and/or litigation process, if any.

On December 22, 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted. The 2017 Tax Act represents major tax reform legislation that, among other provisions, reduces the U.S. corporate tax rate. Certain provisional amounts for the income tax effects of the 2017 Tax Act, including $13.0 million of deferred income tax benefit recorded principally due to the re-measurement of the federal portion of our deferred tax assets and liabilities, are reflected in our financial results in accordance with SEC Staff Accounting Bulletin No. 118 (“SAB 118”), which provides SEC staff guidance regarding the application of Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes,” in the reporting period in which the 2017 Tax Act became law. See Note 16 for further information.

Litigation and Commitments

In the normal course of business, we are defendants in certain litigation, claims and inquiries, including matters relating to environmental laws. In addition, we make various commitments and incur contingent liabilities. Management’s estimates regarding contingent liabilities could differ from actual results.

Environmental Liabilities

Environmental liabilities are recorded when environmental assessments and/or remedial efforts are probable and costs can be reasonably estimated. Generally, the timing of these accruals coincides with the completion of a feasibility study or our commitment to a formal plan of action. Further, we review and update our environmental accruals as circumstances change and/or additional information is obtained that reasonably could be expected to have a meaningful effect on the outcome of a matter or the estimated cost thereof.

Accounting for Stock-Based Compensation

We measure and recognize compensation expense for share-based payment transactions to our employees and non-employees at their estimated fair value. The expense is measured at the grant date, based on the calculated fair value of the share-based award, and is recognized over the requisite service period (generally the vesting period of the equity award). The fair value of stock options are determined using the Black-Scholes-Merton (“Black-Scholes”) valuation model, which requires assumptions

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and judgments regarding stock price volatility, risk-free interest rates, and expected options terms. Management’s estimates could differ from actual results. The fair value of unvested stock awards is determined based on the closing price of the underlying common stock on the date of grant except for market condition awards for which the fair value was based on a Monte Carlo simulation model.

Earnings (Loss) Per Share

Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding in each period. Diluted earnings per share are computed by dividing income available to common shareholders plus income associated with dilutive securities by the weighted-average number of common shares outstanding, plus any potential dilutive shares that could be issued if exercised or converted into common stock in each period.

The net earnings (loss) and weighted-average number of common shares outstanding used to compute earnings (loss) per share were as follows:

	(In thousands, except per share data) Years Ended December 31,
	2017		2016		2015
Net income (loss)	$	20,077	$	25,261	$	(74,879	)
Weighted-average number of common shares outstanding
Basic weighted-average common shares outstanding	11,290		11,151		11,047
Dilutive potential common shares	268		148		—
Diluted weighted-average common shares outstanding	11,558		11,299		11,047
Earnings (loss) per share
Basic	$	1.78	$	2.27	$	(6.78	)
Diluted	$	1.74	$	2.24	$	(6.78	)

Potentially dilutive stock options and stock units to purchase common stock, as shown below, were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive. However, these shares may be potentially dilutive common shares in the future.

	(In thousands) Years Ended December 31,
	2017	2016	2015
Stock options and stock units	126	553	778

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

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financial statements.

Recently Issued Accounting Standards

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging” (“ASU 2017-12”), which intends to improve and simplify accounting rules around hedge accounting. ASU 2017-12 refines and expands hedge accounting for both financial (i.e., interest rate) and commodity risks. In addition, it creates more transparency around how economic results are presented, both on the 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 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.

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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. The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, which will be our interim period beginning January 1, 2019. We are evaluating the impact of this standard and currently anticipate it will impact our condensed consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which outlines a new, single comprehensive model for entities 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 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. Additional guidance was issued subsequently as follows:

• December 2016, the FASB issued ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” (“ASU 2016-20”);

• May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”);

• 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”);

• April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” (“ASU 2016-10”); and

• August 2015, the FASB issued ASU 2015-14, “Revenue From Contracts With Customers (Topic 606)” (“ASU 2015-14”).

All of this new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, which will be our interim period beginning January 1, 2018.

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 will no longer be an acceptable 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, the majority of our revenues will be recognized sooner as a result of changing to an over time method (i.e., cost-to-cost plus margin) 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 judgment in determining our revenue recognition. We have selected a software solution and are in the process of implementing the software solution to comply with this new accounting standard. The new accounting standard will be adopted using the modified retrospective method, whereby the cumulative effect of applying the new guidance is recognized as an adjustment to certain captions on the balance sheet, including the opening balance of retained earnings in the first quarter of 2018. We have periodically briefed our Audit Committee of the Board of Directors on the progress made towards the adoption of this revenue recognition accounting standard. Since we have not completed the implementation of the software solution, we currently are unable to determine the exact impact to our consolidated financial statements. However, we expect the impact to be significant on certain captions on our January 1, 2018 opening balance sheet.

Note 2. Business Combination

On September 11, 2017, we acquired 100.0% of the outstanding equity interests of Lightning Diversion Systems, LLC (“LDS”), a privately-held, worldwide leader in lightning protection systems serving the aerospace and defense industries, located in Huntington Beach, California. The acquisition of LDS is part of our strategy to enhance revenue growth by focusing on advanced proprietary technology on various aerospace and defense platforms.

The purchase price for LDS was $60.0 million, net of cash acquired, all payable in cash. Upon the closing of the transaction, we paid $61.4 million with the remaining $0.6 million paid in October 2017. We allocated the gross purchase price of $62.0

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million to the assets acquired and liabilities assumed at estimated fair values. The excess of the purchase price over the aggregate fair values was recorded as goodwill.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):

	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 purchase price allocation	$	62,021

	Useful Life (In years)	Estimated Fair Value (In thousands)
Intangible assets:
Customer relationships	15	$	21,100
Trade name	15	1,300
		$	22,400

The intangible assets acquired of $22.4 million were determined based on the estimated fair values using valuation techniques consistent with the income approach to measure fair value. The useful lives were estimated based on the underlying agreements or the future economic benefit expected to be received from the assets. The fair values of the identifiable intangible assets were estimated using several valuation methodologies, which represented Level 3 fair value measurements. The value for customer relationships was estimated based on a multi-period excess earnings approach, while the value for the trade name was assessed using the relief from royalty methodology. Further, we analyzed the technology acquired and concluded no fair value should be assigned to it.

The goodwill of $34.9 million arising from the acquisition is attributable to the benefits we expect to derive from expected synergies from the transaction, including complementary products that will enhance our overall product portfolio, opportunities within new markets, and an acquired assembled workforce. All the goodwill was assigned to the Electronic Systems segment. Since the LDS acquisition, for tax purposes, was deemed an asset acquisition, the goodwill recognized is deductible for income tax purposes.

Acquisition related transaction costs are not included as components of consideration transferred but have been expensed as incurred. Total acquisition-related transaction costs incurred by us were $0.3 million during 2017 and charged to selling, general and administrative expenses.

LDS’ results of operations have been included in our consolidated statements of operations since the date of acquisition as part of the Electronic Systems segment. Pro forma results of operations of the LDS acquisition have not been presented as the effect of the LDS acquisition was not material to our financial results.

Note 3. Restructuring Activities

Summary of 2017 Restructuring Plan

In November 2017, management approved and commenced a restructuring plan that is expected to increase operating efficiencies. We currently estimate this initiative will result in $19.0 million to $22.0 million in total pre-tax restructuring charges through 2018, with $8.8 million recorded during 2017. We are currently evaluating a number of possible scenarios to execute the second phase of the restructuring plan, which will result in additional restructuring charges during 2018. We anticipate the additional charges will include cash payments for employee separation and non-cash charges for asset

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impairments, depending on the specific plan we develop. On an annualized basis, beginning in 2019, we estimate these restructuring actions will result in total savings of $14.0 million.

In the Electronic Systems segment, we have recorded expenses of $1.2 million for severance and benefits which was charged to restructuring charges.

In the Structural Systems segment, we have recorded expenses of $1.7 million for severance and benefits which was charged to restructuring charges. In addition, we recorded non-cash expenses of $3.6 million for property and equipment impairment which was charged to restructuring charges. Further, we recorded non-cash expenses of $0.5 million for inventory write down which was charged to cost of sales.

In Corporate, we have recorded expenses of $0.4 million for severance and benefits and non-cash expenses of $1.4 million for stock-based compensation awards which were modified, all of which was charged to restructuring charges.

As of December 31, 2017, we have accrued $1.0 million, $1.3 million, and $0.4 million for severance and benefits and loss on early exit from lease in the Electronic Systems segment, Structural Systems segment, and Corporate, respectively.

Summary of 2016 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 is 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, all of which were charged to restructuring charges in 2016. We do not expect to record additional expenses related to this restructuring plan.

As of December 31, 2017, we have accrued less than $0.1 million for loss on early exit from lease in the Electronic Systems segment.

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, all of which were charged to restructuring charges in 2015. We do not expect to record additional expenses related to these restructuring plans.

As of December 31, 2017, all payments have been made on early exit from lease in the Structural Systems segment.

Our restructuring activities for 2017 and 2016 were as follows (in thousands):

	December 31, 2016		2017										December 31, 2017
	Balance		Charges		Cash Payments			Non-Cash Payments			Change in Estimates		Balance
Severance and benefits	$	—	$	3,337	$	(678	)	$	—		$	—	$	2,659
Modification of stock-based compensation awards	—		1,334		—			(1,334		)	—		—
Lease termination	654		18		(670		)	—			64		66
Property and equipment impairment due to restructuring	—		3,607		—			(3,607		)	—		—
Inventory write down	—		478		—			(478		)	—		—
Ending balance	$	654	$	8,774	$	(1,348	)	$	(5,419	)	$	64	$	2,725

Note 4. Fair Value Measurements

Fair value is defined as the price that would be received for an asset or the price that would be paid to transfer a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The accounting standard provides a framework for measuring fair value using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Three levels of inputs that may be used to measure fair value are as follows:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;

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Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Our financial instruments consist primarily of cash and cash equivalents and interest rate cap derivatives designated as cash flow hedging instruments. Assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):

	As of December 31, 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)	$	26	$	—	$	—	$	26	$	3,751	$	—	$	—	$	3,751
Interest rate cap hedges(2)	—		165		—		165		—		553		—		553
Total Assets	$	26	$	165	$	—	$	191	$	3,751	$	553	$	—	$	4,304

(1) Included as cash and cash equivalents.

(2) Interest rate cap hedge premium included as other current assets and other assets.

The fair value of the interest rate cap hedge agreements is determined using pricing models that use observable market inputs as of the balance sheet date, a Level 2 measurement.

There were no transfers between Level 1, Level 2, or Level 3 financial instruments in either 2017 or 2016.

Note 5. Financial Instruments

Derivative Instruments and Hedging Activities

We periodically enter into cash flow derivative transactions, such as interest rate cap agreements, to hedge exposure to various risks related to interest rates. We assess the effectiveness of the interest rate cap hedges at inception of the hedge. We recognize all derivatives at their fair value. For cash flow designated hedges, the effective portion of the changes in fair value of the derivative contract are recorded in accumulated other comprehensive income (loss), net of taxes, and are recognized in net earnings at the time earnings are affected by the hedged transaction. Adjustments to record changes in fair values of the derivative contracts that are attributable to the ineffective portion of the hedges, if any, are recognized in earnings. We present derivative instruments in our consolidated statements of cash flows’ operating, investing, or financing activities consistent with the cash flows of the hedged item.

Our interest rate cap hedges were designated as cash flow hedges and deemed highly effective at the inception of the hedges. These interest rate cap hedges mature concurrently with the term loan in June 2020. In 2017, the interest rate cap hedges continued to be highly effective and $0.2 million, net of tax, was recognized in other comprehensive income. No amount was recorded in the consolidated statements of operations in 2017. See Note 10.

The recorded fair value of the derivative financial instruments in the consolidated balance sheets were as follows:

	(In thousands) December 31, 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	$	—	$	165	$	—	$	553
Total Derivatives	$	—	$	165	$	—	$	553

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Note 6. Inventories

Inventories consisted of the following:

	(In thousands) December 31,
	2017		2016
Raw materials and supplies	$	65,221	$	64,650
Work in process	62,584		56,806
Finished goods	10,665		9,180
	138,470		130,636
Less progress payments	16,309		10,740
Total	$	122,161	$	119,896

We net progress payments from customers related to inventory purchases against inventories on the consolidated balance sheets.

Note 7. Property and Equipment, Net

Property and equipment, net consisted of the following:

	(In thousands) December 31,				Range of Estimated
	2017		2016		Useful Lives
Land	$	15,662	$	15,662
Buildings and improvements	57,024		49,870		5 - 40 Years
Machinery and equipment	146,175		137,555		2 - 20 Years
Furniture and equipment	21,127		21,749		2 - 10 Years
Construction in progress	13,480		12,238
	253,468		237,074
Less accumulated depreciation	143,216		135,484
Total	$	110,252	$	101,590

Depreciation expense was $13.2 million, $13.3 million and $15.7 million, for the years ended December 31, 2017, 2016 and 2015, respectively.

Note 8. Goodwill and Other Intangible Assets

Goodwill

The carrying amounts of goodwill, all in our Electronic Systems segment, for the years ended December 31, 2017 and 2016 were as follows:

	(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 December 31, 2017	$	117,435

Goodwill is evaluated for impairment on a annual basis on the first day of the fourth fiscal quarter or more frequently if events or changes in circumstances indicate that the asset may be impaired. Our impairment evaluation of goodwill consists of a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The qualitative evaluation is an assessment of factors, including reporting unit specific operating results as well as industry, market, and economic conditions, to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If our qualitative assessment indicates it is more likely than not that the

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estimated fair value of a reporting unit exceeds its carrying value, no further analysis is required and goodwill is not impaired. Otherwise, we will follow a two-step quantitative goodwill impairment test to determine if goodwill is impaired.

In the fourth quarter of 2017, the carrying amount of goodwill at the date of the most recent annual impairment evaluation was $117.4 million, all of which was in our Electronic Systems operating segment. As of the date of our 2017 annual evaluation for goodwill impairment, we used a qualitative assessment noting it was not more likely than not that the fair value of a reporting unit is less than its carrying amount and thus, goodwill was not deemed impaired. Our most recent step-one goodwill impairment analysis was in the prior year fourth quarter of 2016 and the fair value of the Electronic Systems internal reporting unit exceeded its carrying value at that time by 32% and thus, was not deemed impaired.

In September 2017, we acquired 100.0% of the outstanding equity interests of LDS for a purchase price of $60.0 million, net of cash acquired. We allocated the gross purchase price of $62.0 million to the assets acquired and liabilities assumed at estimated fair values. The excess of the purchase over the aggregate fair values was recorded as goodwill. See Note 2.

Other intangible assets are related to acquisitions, including LDS, and recorded at fair value at the time of the acquisition. Other intangible assets with finite lives are generally amortized on the straight-line method over periods ranging from fourteen to eighteen years. Intangible assets are as follows:

		(In thousands)
		December 31, 2017						December 31, 2016
	Wtd. Avg Life (Yrs)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Finite-lived assets
Customer relationships	17	$	180,300	$	67,449	$	112,851	$	159,200	$	58,352	$	100,848
Trade names	15	1,300		26		1,274		—		—		—
Contract renewal	14	1,845		1,493		352		1,845		1,362		483
Technology	15	400		184		216		400		158		242
Total		$	183,845	$	69,152	$	114,693	$	161,445	$	59,872	$	101,573

The carrying amount of other intangible assets by operating segment as of December 31, 2017 and 2016 was as follows:

	(In thousands)
	December 31, 2017						December 31, 2016
	Gross		Accumulated Amortization		Net Carrying Value		Gross		Accumulated Amortization		Net Carrying Value
Other intangible assets
Structural Systems	$	19,300	$	16,464	$	2,836	$	19,300	$	15,555	$	3,745
Electronic Systems	164,545		52,688		111,857		142,145		44,317		97,828
Total	$	183,845	$	69,152	$	114,693	$	161,445	$	59,872	$	101,573

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Amortization expense of other intangible assets was $9.3 million, $9.0 million and $10.0 million for the years ended December 31, 2017, 2016 and 2015, respectively. Future amortization expense by operating segment is expected to be as follows:

	(In thousands)
	Structural Systems		Electronic Systems		Consolidated Ducommun
2018	$	737	$	9,420	$	10,157
2019	591		9,419		10,010
2020	490		9,348		9,838
2021	381		9,287		9,668
2022	320		9,288		9,608
Thereafter	317		65,095		65,412
	$	2,836	$	111,857	$	114,693

Note 9. Accrued Liabilities

The components of accrued liabilities consisted of the following:

	(In thousands) December 31,
	2017		2016
Accrued compensation	$	18,925	$	15,455
Accrued income tax and sales tax	71		332
Customer deposits	3,970		3,204
Provision for forward loss reserves	1,226		4,780
Other	4,137		5,508
Total	$	28,329	$	29,279

Note 10. Long-Term Debt

Long-term debt and the current period interest rates were as follows:

	(In thousands) December 31,
	2017			2016
Term loan	$	160,000		$	170,000
Revolving credit facility	58,100			—
Other debt (fixed 5.41%)	—			3
Total debt	218,100			170,003
Less current portion	—			3
Total long-term debt	218,100			170,000
Less debt issuance costs	2,045			3,104
Total long-term debt, net of debt issuance costs	$	216,055		$	166,896
Weighted-average interest rate	3.73		%	3.25		%

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Future long-term debt payments at December 31, 2017 were as follows:

	(In thousands)
2018	$	—
2019	—
2020	218,100
2021	—
2022	—
Total	$	218,100

Our credit facility consists of a $275.0 million senior secured term loan, which matures on June 26, 2020 (“Term Loan”), and a $200.0 million senior secured revolving credit facility (“Revolving Credit Facility”), which matures on June 26, 2020 (collectively, the “Credit Facilities”). The Credit Facilities bear interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as LIBOR) plus an applicable margin ranging from 1.50% to 2.75% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 0.50% to 1.75% per year, in each case based upon the consolidated total net adjusted leverage ratio. The undrawn portions of the commitments of the Credit Facilities are subject to a commitment fee ranging from 0.175% to 0.300%, based upon the consolidated total net adjusted leverage ratio.

Further, we are required to make mandatory prepayments of amounts outstanding under the Term Loan. The mandatory prepayments will be made quarterly, equal to 5.0% per year of the original aggregate principal amount during the first two years and increase to 7.5% per year during the third year, and increase to 10.0% per year during the fourth year and fifth years, with the remaining balance payable on June 26, 2020. The loans under the Revolving Credit Facility are due on June 26, 2020. As of December 31, 2017, we were in compliance with all covenants required under the Credit Facilities.

In addition, we incurred $4.8 million of debt issuance costs related to the Credit Facilities and those costs were capitalized and are being amortized over the five year life of the Credit Facilities.

In September 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.

In July 2017, we entered into a technical amendment to the Credit Facilities (“First Amendment”) which provided more flexibility to close certain qualified acquisitions permitted under the Credit Facilities.

We made voluntary principal prepayments of $10.0 million under the Term Loan during 2017.

As of December 31, 2017, we had $141.6 million of unused borrowing capacity under the Revolving Credit Facility, after deducting $58.1 million for draw down on the Revolving Credit Facility and $0.3 million for standby letters of credit.

The Existing Notes were issued by us (“Parent Company”) and guaranteed by all of our subsidiaries, other than one subsidiary that was considered minor (“Subsidiary Guarantors”). The Subsidiary Guarantors jointly and severally guarantee the Existing Notes and Credit Facilities. The Parent Company has no independent assets or operations and therefore, no consolidating financial information for the Parent Company and its subsidiaries are presented.

In October 2015, we entered into interest rate cap hedges designated as cash flow hedges with 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 the interest rate cap hedges. See Note 5 for further information.

In December 2017 and 2016, we entered into agreements to purchase $14.2 million and $9.9 million of industrial revenue bonds (“IRBs”) issued by the city of Parsons, Kansas (“Parsons”) and concurrently, sold $14.2 million and $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 $14.2 million and $9.9 million over the lease term, respectively. The sale of the Property and concurrent lease back of the Property in December 2017 and 2016 did not meet the sale-leaseback accounting requirements as a result of our continuous involvement with the Property and thus, the $14.2 million and $9.9 million in cash received from Parsons was not recorded as a sale but as a financing obligation, respectively. Further, the Lease included a right of offset so long as we continue to own the IRBs and thus, the financing obligation of $14.2 million and $9.9 million was offset against the $14.2 million and $9.9 million, respectively, of IRBs assets and are presented net on the consolidated balance sheets with no impact to the consolidated statements of operations or consolidated cash flow statements.

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Note 11. Shareholders’ Equity

We are authorized to issue five million shares of preferred stock. At December 31, 2017 and 2016, no preferred shares were issued or outstanding.

Note 12. Stock-Based Compensation

Stock Incentive Compensation Plans

We have two stock incentive plans: the 2007 Stock Incentive Plan (the “2007 Plan”), as amended effective March 20, 2007, and the 2013 Stock Incentive Plan (the “2013 Plan”), collectively referred to as (the “Stock Incentive Plans”). The Stock Incentive Plans permit awards of stock options, restricted stock units, performance stock units and other stock-based awards to our officers, key employees and non-employee directors on terms determined by the Compensation Committee of the Board of Directors (the “Committee”). The aggregate number of shares available for issuance under the 2007 Plan and 2013 Plan is 1,200,000 and 1,040,000, respectively. Under the 2007 Plan, no more than an aggregate of 400,000 shares are available for issue of stock-based awards other than stock options and stock appreciation rights. As of December 31, 2017, shares available for future grant under the 2007 Plan and 2013 Plan are zero and 77,693, respectively. Prior the adoption of the 2007 Plan, we granted stock-based awards to purchase shares of our common stock to officers, key employees and non-employee directors under certain predecessor plans. No further awards can be granted under the 2007 Plan or these predecessor plans.

Stock Options

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

Stock option activity for the year ended December 31, 2017 were as follows:

	Number of Stock Options		Weighted- Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2017	439,550		$	20.07
Granted	129,400		$	29.19
Exercised	(212,775	)	$	20.38
Expired	(5,800	)	$	21.12
Forfeited	(44,150	)	$	22.19
Outstanding at December 31, 2017	306,225		$	23.38	5.2	$	1,654
Exerciseable at December 31, 2017	86,425		$	20.78	2.9	$	663

Changes in nonvested stock options for the year ended December 31, 2017 were as follows:

	Number of Stock Options		Weighted- Average Grant Date Fair Value
Nonvested at January 1, 2017	225,175		$	8.77
Granted	129,400		$	11.88
Vested	(90,625	)	$	8.87
Forfeited	(44,150	)	$	7.93
Nonvested at December 31, 2017	219,800		$	11.07

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The aggregate intrinsic value of stock options represents the amount by which the market price of our common stock exceeds the exercise price of the stock option. The aggregate intrinsic value of stock options exercised for the years ended December 31, 2017, 2016 and 2015 was $2.5 million, $1.3 million, and $2.3 million, respectively. Cash received from stock options exercised for the years ended December 31, 2017, 2016 and 2015 was $4.3 million, $2.1 million, and $3.1 million, respectively, with related tax benefits of $0.9 million, $0.5 million, and $0.9 million, respectively. The total amount of stock options vested and expected to vest in the future is 306,225 shares with a weighted-average exercise price of $23.38 and an aggregate intrinsic value of $1.7 million. These stock options have a weighted-average remaining contractual term of 5.2 years.

The share-based compensation cost expensed for stock options for the years ended December 31, 2017, 2016, and 2015 (before tax benefits) was $0.7 million, $0.8 million, and $1.2 million, respectively, and is included in selling, general and administrative expenses on the consolidated income statements. At December 31, 2017, total unrecognized compensation cost (before tax benefits) related to stock options of $1.5 million is expected to be recognized over a weighted-average period of 3.1 years. The total fair value of stock options vested during the years ended December 31, 2017, 2016, and 2015 was $0.8 million, $0.9 million, and $1.3 million, respectively.

We apply fair value accounting for stock-based compensation based on the grant date fair value estimated using a Black-Scholes-Merton (“Black-Scholes”) valuation model. The assumptions used to compute the fair value of stock option grants under the Stock Incentive Plans for years ended December 31, 2017, 2016, and 2015 were as follows:

	Years Ended December 31,
	2017		2016		2015
Risk-free interest rate	1.75	%	1.20	%	1.13	%
Expected volatility	50.37	%	51.79	%	53.72	%
Expected dividends	—		—		—
Expected term (in months)	48		48		47

We recognize compensation expense, net of an estimated forfeiture rate, on a straight-line basis over the requisite service period of the award. We have one award population with an option vesting term of four years. We estimate the forfeiture rate based on our historic experience, attempting to determine any discernible activity patterns. The expected life computation is based on historic exercise patterns and post-vesting termination behavior. The risk-free interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is derived from historical volatility of our common stock. We suspended payments of dividends after the first quarter of 2011.

Restricted Stock Units

We granted restricted stock units (“RSUs”) to certain officers, key employees and non-employee directors of 135,350, 139,450, and 108,500 RSUs during the years ended December 31, 2017, 2016, and 2015, respectively, with weighted-average grant date fair values (equal to the fair market value of our stock on the date of grant) of $28.97, $15.97, and $25.15 per share, respectively. RSUs represent a right to receive a share of stock at future vesting dates with no cash payment required from the holder. The RSUs typically have a three year vesting term of 33%, 33% and 34% on the first, second and third anniversaries of the date of grant, respectively. If an employee terminates employment, their non-vested portion of the RSUs will not vest and all rights to the non-vested portion will terminate.

Restricted stock unit activity for the year ended December 31, 2017 was as follows:

	Number of Restricted Stock Units		Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2017	193,382		$	18.88
Granted	135,350		$	28.97
Vested	(101,930	)	$	19.66
Forfeited	(41,458	)	$	21.93
Outstanding at December 31, 2017	185,344		$	25.14

The share-based compensation cost expensed for RSUs for the years ended December 31, 2017, 2016, and 2015 (before tax benefits) was $2.0 million, $1.8 million, and $1.8 million respectively, and is included in selling, general and administrative expenses on the consolidated income statements. At December 31, 2017, total unrecognized compensation cost (before tax benefits) related to RSUs of $3.0 million is expected to be recognized over a weighted average period of 2.0 years. The total

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fair value of RSUs vested for the years ended December 31, 2017, 2016, and 2015 was $3.0 million, $1.3 million, and $1.8 million, respectively. The tax benefit realized from vested RSUs for the years ended December 31, 2017, 2016, and 2015 was $1.1 million, $0.7 million, and $0.7 million, respectively.

Performance Stock Units

We granted performance stock awards (“PSUs”) to certain key employees of 126,000, 62,500, and 64,000 PSUs during the years ended December 31, 2017, 2016, and 2015, respectively, with weighted-average grant date fair values of $26.31, $15.92, and $25.51 per share, respectively. PSU awards are subject to the attainment of performance goals established by the Committee, the periods during which performance is to be measured, and all other limitations and conditions applicable to the awarded shares. Performance goals are based on a pre-established objective formula that specifies the manner of determining the number of performance stock awards that will be granted if performance goals are attained. If an employee terminates employment, their non-vested portion of the PSUs will not vest and all rights to the non-vested portion will terminate.

Performance stock activity for the year ended December 31, 2017 was as follows:

	Number of Performance Stock Units		Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2017	121,637		$	20.39
Granted	126,000		$	26.31
Adjustment for target performance	37,350		$	25.48
Vested	(43,487	)	$	24.98
Forfeited	(20,000	)	$	22.63
Outstanding at December 31, 2017	221,500		$	23.52

The share-based compensation cost expensed for PSUs for the years ended December 31, 2017, 2016, and 2015 (before tax benefits) was $2.0 million, $0.4 million and $0.5 million, respectively, and is included in selling, general and administrative expenses on the consolidated income statements. At December 31, 2017, total unrecognized compensation cost (before tax benefits) related to PSUs of $2.4 million is expected to be recognized over a weighted-average period of 1.7 years. The total fair value of PSUs vested during the years ended December 31, 2017, 2016, and 2015, was $1.2 million, $1.1 million, and $0.9 million, respectively. The tax benefit realized from PSUs for the years ended December 31, 2017, 2016, and 2015 were $0.5 million, $0.2 million, and $0.3 million, respectively.

Note 13. Employee Benefit Plans

Supplemental Retirement Plans

We have three unfunded supplemental retirement plans. The first plan was suspended in 1986, but continues to cover certain former executives. The second plan was suspended in 1997, but continues to cover certain current and retired directors. The third plan covers certain current and retired employees and further employee contributions to this plan were suspended on August 5, 2011. The liability for the third plan and interest thereon is included in accrued employee compensation and long-term liabilities and was $0.1 million and $0.7 million, respectively, at December 31, 2017 and $0.6 million and $0.8 million, respectively, at December 31, 2016. The accumulated benefit obligations of the first two plans at December 31, 2017 and December 31, 2016 were $0.6 million and $0.7 million, respectively, and are included in accrued liabilities.

Defined Contribution 401(K) Plans

We sponsor a 401(k) defined contribution plan for all our employees. The plan allows the employees to make annual voluntary contributions not to exceed the lesser of an amount equal to 25% of their compensation or limits established by the Internal Revenue Code. Under this plan, we generally provide a match equal to 50% of the employee’s contributions up to the first 6% of compensation, except for union employees who are not eligible to receive the match. Our provision for matching and profit sharing contributions for the three years ended December 31, 2017, 2016, and 2015 was $2.7 million, $2.7 million, and $3.2 million, respectively.

Other Plans

We have a defined benefit pension plan covering certain hourly employees of a subsidiary (the “Pension Plan”). Pension Plan benefits are generally determined on the basis of the retiree’s age and length of service. Assets of the Pension Plan are

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composed primarily of fixed income and equity securities. We also have a retirement plan covering certain current and retired employees (the “LaBarge Retirement Plan”).

The components of net periodic pension cost for both plans are as follows:

	(In thousands) Years Ended December 31,
	2017			2016			2015
Service cost	$	531		$	531		$	785
Interest cost	1,329			1,367			1,350
Expected return on plan assets	(1,530		)	(1,482		)	(1,495		)
Amortization of actuarial losses	810			762			887
Net periodic pension cost	$	1,140		$	1,178		$	1,527

The components of the reclassifications of net actuarial losses from accumulated other comprehensive loss to net income for 2017 were as follows:

	(In thousands) Year Ended December 31,
	2017
Amortization of actuarial loss - total before tax (1)	$	810
Tax benefit	(302		)
Net of tax	$	508

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

The estimated net actuarial loss for both plans that will be amortized from accumulated other comprehensive loss into net periodic cost during 2018 is $0.7 million.

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

	(In thousands) December 31,
	2017			2016
Change in benefit obligation(1)
Beginning benefit obligation (January 1)	$	33,154		$	31,510
Service cost	531			531
Interest cost	1,329			1,367
Actuarial loss	2,449			1,132
Benefits paid	(1,461		)	(1,386		)
Ending benefit obligation (December 31)	$	36,002		$	33,154
Change in plan assets
Beginning fair value of plan assets (January 1)	$	22,015		$	19,933
Return on assets	3,481			1,551
Employer contribution	1,611			1,917
Benefits paid	(1,461		)	(1,386		)
Ending fair value of plan assets (December 31)	$	25,646		$	22,015
Funded status (underfunded)	$	(10,356	)	$	(11,139	)
Amounts recognized in the consolidated balance sheet
Current liabilities	$	560		$	544
Non-current liabilities	$	9,796		$	10,595
Unrecognized loss included in accumulated other comprehensive loss
Beginning unrecognized loss, before tax (January 1)	$	9,220		$	8,919
Amortization	(810		)	(762		)
Liability loss	2,449			1,132
Asset gain	(1,951		)	(69		)
Ending unrecognized loss, before tax (December 31)	8,908			9,220
Tax impact	(3,309		)	(3,425		)
Unrecognized loss included in accumulated other comprehensive loss, net of tax	$	5,599		$	5,795

(1) Projected benefit obligation equals the accumulated benefit obligation for the plans.

On December 31, 2017, our annual measurement date, the accumulated benefit obligation exceeded the fair value of the plans assets by $10.4 million. Such excess is referred to as an unfunded accumulated benefit obligation. We recorded unrecognized loss included in accumulated other comprehensive loss, net of tax at December 31, 2017 and 2016 of $5.6 million and $5.8 million, respectively, which decreased shareholders’ equity. This charge to shareholders’ equity represents a net loss not yet recognized as pension expense. This charge did not affect reported earnings, and would be decreased or be eliminated if either interest rates increase or market performance and plan returns improve which will cause the Pension Plan to return to fully funded status.

Our Pension Plan asset allocations at December 31, 2017 and 2016, by asset category, were as follows:

	December 31,
	2017		2016
Equity securities	70	%	65	%
Cash and equivalents	1	%	2	%
Debt securities	29	%	33	%
Total(1)	100	%	100	%

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

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Cash	0-5%
Fixed income securities	15-75%
Equities	30-80%

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

	(In thousands) Year Ended December 31, 2017
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	135	$	—	$	—	$	135
Fixed income securities	3,494		—		—		3,494
Equities(1)	1,625		—		—		1,625
Other investments	910		—		—		910
Total plan assets at fair value	$	6,164	$	—	$	—	6,164
Pooled funds							19,482
Total fair value of plan assets							$	25,646

	(In thousands) Year Ended December 31, 2016
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	366	$	—	$	—	$	366
Fixed income securities	3,468		—		—		3,468
Equities(1)	1,611		—		—		1,611
Other investments	760		—		—		760
Total plan assets at fair value	$	6,205	$	—	$	—	6,205
Pooled funds							15,810
Total fair value of plan assets							$	22,015

(1) Represents mutual funds and commingled accounts which invest primarily in equities, but may also hold fixed income securities, cash and other investments. Commingled funds with publicly quoted prices and actively traded are classified as Level 1 investments.

Pooled funds are measured using the net asset value (“NAV”) as a practical expedient for fair value as permissible under the accounting standard for fair value measurements and have not been categorized in the fair value hierarchy in accordance with ASU 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).” Pooled fund NAVs are provided by the trustee and are determined by reference to the fair value of the underlying securities of the trust, less its liabilities, which are valued primarily through the use of directly or indirectly observable inputs. Depending on the pooled fund, underlying securities may include marketable equity securities or fixed income securities.

The assumptions used to determine the benefit obligations and expense for our two plans are presented in the tables below. The expected long-term return on assets, noted below, represents an estimate of long-term returns on investment portfolios consisting of a mixture of fixed income and equity securities. The estimated cash flows from the plans for all future years are determined based on the plans’ population at the measurement date. We used the expected benefit payouts from the plans for each year into the future and discounted them back to the present using the Wells Fargo yield curve rate for that duration.

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

	Years Ended December 31,
	2017		2016		2015
Discount rate used to determine pension expense
Pension Plan	4.18	%	4.55	%	4.25	%
LaBarge Retirement Plan	3.75	%	4.00	%	3.70	%

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

	December 31,
	2017		2016		2015
Discount rate used to determine value of obligations
Pension Plan	3.64	%	4.18	%	4.55	%
LaBarge Retirement Plan	3.40	%	3.75	%	4.00	%
Long-term rate of return - Pension Plan only	7.00	%	7.50	%	7.50	%

The following benefit payments under both plans, which reflect expected future service, as appropriate, are expected to be paid:

	(In thousands)
	Pension Plan		LaBarge Retirement Plan
2018	$	1,178	$	561
2019	1,212		546
2020	1,288		528
2021	1,365		506
2022	1,453		482
2023 - 2027	8,246		2,022

Our funding policy is to contribute cash to our plans so that the minimum contribution requirements established by government funding and taxing authorities are met. We expect to make contributions of $0.9 million to the plans in 2018.

Note 14. 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, 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, we have a directors and officers insurance policy that may reduce our exposure in certain circumstances and may enable us to recover a portion of future amounts that may be payable, if any. The duration of the guarantees and indemnities varies and, in many cases is indefinite but subject to statute of limitations. The majority of guarantees and indemnities do not provide any limitations of the maximum potential future payments we could be obligated to make. Historically, payments related to these guarantees and indemnities have been immaterial. We estimate the fair value of our indemnification obligations as insignificant based on this history and insurance coverage and have, therefore, not recorded any liability for these guarantees and indemnities in the accompanying consolidated balance sheets.

Note 15. Leases

We lease certain facilities and equipment for periods ranging from one to ten years. The leases generally are renewable and provide for the payment of property taxes, insurance and other costs relative to the property. Rental expense in 2017, 2016, and 2015 was $5.0 million, $4.9 million, and $8.5 million, respectively. Future minimum rental payments under operating leases having initial or remaining non-cancelable terms in excess of one year at December 31, 2017 were as follows:

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	(In thousands)
2018	$	3,586
2019	2,793
2020	2,554
2021	1,927
2022	947
Thereafter	553
Total	$	12,360

Note 16. Income Taxes

Our pre-tax income attributable to foreign operations was not material. The provision for income tax (benefit) expense consisted of the following:

	(In thousands) Years Ended December 31,
	2017			2016		2015
Current tax expense (benefit)
Federal	$	2,387		$	5,953	$	(1,511	)
State	525			2,982		(418		)
	2,912			8,935		(1,929		)
Deferred tax (benefit) expense
Federal	(15,515		)	3,876		(28,011		)
State	135			41		(1,771		)
	(15,380		)	3,917		(29,782		)
Income tax (benefit) expense	$	(12,468	)	$	12,852	$	(31,711	)

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the “2017 Tax Act”) which, among a broad range of tax reform measures, reduced the U.S. corporate tax rate from 35.0% to 21.0% effective January 1, 2018. The reduction in the corporate tax rate required the federal portion of our deferred tax assets and liabilities at December 31, 2017 to be re-measured at the enacted tax rate expected to apply when the temporary differences are to be realized or settled using 21.0%. As a result, we recorded a provisional deferred income tax benefit of $13.0 million related to the re-measurement for the year ended December 31, 2017. SEC Staff Accounting Bulletin No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act” (“SAB 118”), allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Since the 2017 Tax Act was passed late in the fourth quarter of 2017, and ongoing guidance and accounting interpretation are expected over the next 12 months, we consider the accounting of the deferred tax re-measurement and other items to be incomplete due to the forthcoming guidance and our ongoing analysis of final year-end data and tax positions. We expect to complete our analysis within the measurement period in accordance with SAB 118.

ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”), became effective beginning January 1, 2017 and required all the tax effects related to share-based payments be recorded through the income statement. We recognized net income tax benefits from deductions of share-based payments in excess of compensation cost recognized for financial reporting purposes of $0.6 million for the year ended December 31, 2017. Prior to January 1, 2017, the current income tax expense (benefit) excluded net (tax shortfalls) excess tax benefits which were previously recorded directly to additional paid-in-capital in the amounts of $(0.1) million, and $0.6 million for the years ended December 31, 2016 and 2015, respectively.

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Deferred tax (liabilities) assets were comprised of the following:

	(In thousands) December 31,
	2017			2016
Deferred tax assets:
Accrued expenses	$	313		$	760
Allowance for doubtful accounts	208			184
Contract overrun reserves	294			1,776
Deferred compensation	177			507
Employment-related accruals	2,091			2,888
Environmental reserves	501			769
Federal tax credit carryforwards	5,613			4,234
Inventory reserves	1,315			2,313
Pension obligation	2,398			4,002
State net operating loss carryforwards	86			63
State tax credit carryforwards	9,051			6,585
Stock-based compensation	1,480			1,950
Workers’ compensation	75			122
Other	1,492			2,098
Total gross deferred tax assets	25,094			28,251
Valuation allowance	(9,013		)	(6,607		)
Total gross deferred tax assets, net of valuation allowance	16,081			21,644
Deferred tax liabilities:
Depreciation	(7,976		)	(13,167		)
Goodwill	(2,902		)	(3,909		)
Intangibles	(20,611		)	(35,071		)
Prepaid insurance	(312		)	(626		)
Unbilled receivables	—			(2		)
Total gross deferred tax liabilities	(31,801		)	(52,775		)
Net deferred tax liabilities	$	(15,720	)	$	(31,131	)

We have net operating losses in various states of $1.8 million as of December 31, 2017. The state net operating loss carryforwards include $1.3 million that is not expected to be realized under ASC Subtopic 740-10 and has been reduced by a valuation allowance. If not realized, the state net operating loss carryforwards will begin to expire in 2030.

We have federal and state tax credit carryforwards of $6.6 million and $12.8 million, respectively, as of December 31, 2017. A valuation allowance of $11.3 million has been provided on state tax credit carryforwards that are not expected to be realized under ASC Subtopic 740-10. If not realized, the federal and state tax credit carryforwards will expire between 2018 and 2037.

We believe it is more likely than not that we will generate sufficient taxable income to realize the benefit of the remaining deferred tax assets.

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The principal reasons for the variation between the statutory and effective tax rates were as follows:

	Years Ended December 31,
	2017	2016	2015
Statutory federal income tax (benefit) rate	35.0%	35.0%	(35.0)%
State income taxes (net of federal benefit)	2.5	5.7	(1.2)
Qualified domestic production activities	(2.6)	(2.0)	0.5
Stock-based compensation expense	(8.2)	—	—
Research and development tax credits	(50.6)	(8.6)	(2.9)
Other tax credits	(7.5)	—	—
Goodwill impairment	—	—	8.1
Changes in valuation allowance	10.6	0.9	0.6
Non-deductible book expenses	1.1	0.2	0.2
Changes in deferred tax assets	15.4	1.5	0.1
Re-measurement of deferred taxes for 2017 Tax Act	(171.3)	—	—
Changes in tax reserves	11.4	—	0.1
Other	0.4	1.0	(0.2)
Effective income tax (benefit) rate	(163.8)%	33.7%	(29.7)%

The deduction for qualified domestic production activities is treated as a “special deduction” which has no effect on deferred tax assets and liabilities. Instead, the impact of this deduction is reported in our rate reconciliation. No deduction for qualified domestic production has been recognized in 2015 due to a taxable loss. As part of the 2017 Tax Act, the qualified domestic production deduction is repealed for tax years beginning after December 31, 2017.

We recorded a goodwill impairment charge related to the Structural Systems operating segment in 2015. A portion of this goodwill impairment charge was nondeductible for tax purposes and was a permanent impact to our income tax provision of $8.7 million.

Our total amount of unrecognized tax benefits was $5.3 million, $3.0 million, and $3.0 million at December 31, 2017, 2016, and 2015, respectively. We record interest and penalty charge, if any, related to uncertain tax positions as a component of tax expense and unrecognized tax benefits. The amounts accrued for interest and penalty charges as of December 31, 2017, 2016, and 2015 were not significant. If recognized, $3.4 million would affect the effective income tax rate. We do not reasonably expect significant increases or decreases to our unrecognized tax benefits in the next twelve months.

A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:

	(In thousands) Years Ended December 31,
	2017			2016			2015
Balance at January 1,	$	3,036		$	2,963		$	2,803
Additions for tax positions related to the current year	422			476			702
Additions for tax positions related to prior years	1,953			385			—
Reductions for tax positions related to prior years	(99		)	(567		)	(48		)
Reductions for lapse of statute of limitations	(41		)	(221		)	(494		)
Balance at December 31,	$	5,271		$	3,036		$	2,963

We file U.S. Federal and state income tax returns. During the fourth quarter of 2017, the Internal Revenue Service (“IRS”) completed the audit of tax years 2013, 2014, and 2015. Consequently, Federal income tax returns after 2015 are subject to examination. California franchise (income) tax returns after 2012 and other state income tax returns after 2012 are subject to examination. 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 authority 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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Note 17. Contingencies

Structural Systems has been directed by California environmental agencies to investigate and take corrective action for groundwater contamination at its facilities located in El Mirage and Monrovia, California. Based on currently available information, Ducommun has established an accrual for its estimated liability for such investigation and corrective action of $1.5 million at December 31, 2017, which is reflected in other long-term liabilities on its consolidated balance sheet.

Structural Systems also faces liability as a potentially responsible party for hazardous waste disposed at landfills located in Casmalia and West Covina, California. Structural Systems and other companies and government entities have entered into consent decrees with respect to these landfills with the United States Environmental Protection Agency and/or California environmental agencies under which certain investigation, remediation and maintenance activities are being performed. Based on currently available information, Ducommun preliminarily estimates that the range of its future liabilities in connection with the landfill located in West Covina, California is between $0.4 million and $3.1 million. Ducommun has established an accrual for its estimated liability in connection with the West Covina landfill of $0.4 million at December 31, 2017, which is reflected in other long-term liabilities on its consolidated balance sheet. Ducommun’s ultimate liability in connection with these matters will depend upon a number of factors, including changes in existing laws and regulations, the design and cost of construction, operation and maintenance activities, and the allocation of liability among potentially responsible parties.

In the normal course of business, Ducommun and its subsidiaries are defendants in certain other litigation, claims and inquiries, including matters relating to environmental laws. In addition, Ducommun makes various commitments and incurs contingent liabilities. While it is not feasible to predict the outcome of these matters, Ducommun does not presently expect that any sum it may be required to pay in connection with these matters would have a material adverse effect on its consolidated financial position, results of operations or cash flows.

Note 18. Major Customers and Concentrations of Credit Risk

We provide proprietary products and services to the Department of Defense and various United States Government agencies, and most of the aerospace and aircraft manufacturers who receive contracts directly from the U.S. Government as an original equipment manufacturer (“prime manufacturers”). In addition, we also service technology-driven markets in the industrial, medical and other end-use markets. As a result, we have significant net revenues from certain customers. Accounts receivable were diversified over a number of different commercial, military and space programs and were made by both operating segments. Net revenues from our top ten customers, including The Boeing Company (“Boeing”), Lockheed Martin Corporation (“Lockheed Martin”), Raytheon Company (“Raytheon”), Spirit AeroSystems Holdings, Inc. (“Spirit”), and United Technologies Corporation (“United Technologies”), represented the following percentages of total net sales:

	Years Ended December 31,
	2017		2016		2015
Boeing	16.4	%	17.3	%	16.0	%
Lockheed Martin	5.5	%	5.6	%	1.2	%
Raytheon	13.5	%	8.4	%	8.7	%
Spirit	8.2	%	8.2	%	7.4	%
United Technologies	4.7	%	5.3	%	6.1	%
Top ten customers (1)	62.5	%	58.6	%	55.7	%

(1) Includes Boeing, Raytheon, Spirit, and United Technologies for 2017, 2016, and 2015 and Lockheed Martin for 2017 and 2016.

Boeing, Lockheed Martin, Raytheon, Spirit, and United Technologies represented the following percentages of total accounts receivable:

	December 31,
	2017		2016
Boeing	7.8	%	7.8	%
Lockheed Martin	5.9	%	2.9	%
Raytheon	1.4	%	10.9	%
Spirit	13.5	%	9.0	%
United Technologies	2.3	%	7.8	%

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In 2017, 2016 and 2015, net revenues from foreign customers based on the location of the customer were $57.2 million, $56.4 million and $60.2 million, respectively. No net revenues from a foreign country were greater than 3.0% of total net revenues in 2017, 2016, and 2015. We have manufacturing facilities in Thailand and Mexico. Our net revenues, profitability and identifiable long-lived assets attributable to foreign revenues activity were not material compared to our net revenues, profitability and identifiable long-lived assets attributable to our domestic operations during 2017, 2016, and 2015. We are not subject to any significant foreign currency risks as all our sales are made in United States dollars.

Note 19. Business Segment Information

We supply products and services primarily to the aerospace and defense industries. Our subsidiaries are organized into two strategic businesses, Structural Systems and Electronic Systems, each of which is an operating segment as well as a reportable segment.

Financial information by reportable segment was as follows:

	(In thousands) Years Ended December 31,
	2017			2016			2015
Net Revenues
Structural Systems	$	241,460		$	246,465		$	273,319
Electronic Systems	316,723			304,177			392,692
Total Net Revenues	$	558,183		$	550,642		$	666,011
Segment Operating Income (Loss) (1)(2)
Structural Systems	$	5,477		$	16,497		$	(53,010	)
Electronic Systems	30,940			28,983			(4,472		)
	36,417			45,480			(57,482		)
Corporate General and Administrative Expenses (1)(2)	(21,392		)	(16,912		)	(17,827		)
Operating Income (Loss)	$	15,025		$	28,568		$	(75,309	)
Depreciation and Amortization Expenses
Structural Systems	$	8,860		$	8,688		$	9,417
Electronic Systems	13,888			14,087			17,267
Corporate Administration	97			85			162
Total Depreciation and Amortization Expenses	$	22,845		$	22,860		$	26,846
Capital Expenditures
Structural Systems	$	20,679		$	15,661		$	11,559
Electronic Systems	5,019			3,032			4,419
Corporate Administration	775			—			10
Total Capital Expenditures	$	26,473		$	18,693		$	15,988

(1) Includes cost not allocated to either the Structural Systems or Electronic Systems operating segments.

(2) The results for 2017 includes LDS’ results of operations which have been included in our consolidated statements of operations since the date of acquisition as part of the Electronic Systems segment. See Note 2.

Segment assets include assets directly identifiable with each segment. Corporate assets include assets not specifically identified with a business segment, including cash. The following table summarizes our segment assets for 2017 and 2016:

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	(In thousands) December 31,
	2017		2016
Total Assets
Structural Systems	$	193,600	$	175,580
Electronic Systems	362,831		325,780
Corporate Administration	10,322		14,069
Total Assets	$	566,753	$	515,429
Goodwill and Intangibles
Structural Systems	$	2,836	$	3,745
Electronic Systems	229,292		180,382
Total Goodwill and Intangibles	$	232,128	$	184,127

In September 2017, we acquired 100.0% of the outstanding equity interests of LDS for a purchase price of $60.0 million, net of cash acquired. We allocated the gross purchase price of $62.0 million to the assets acquired and liabilities assumed at estimated fair values. The excess of the purchase over the aggregate fair values was recorded as goodwill. See Note 2.

In the first quarter of 2016, we entered into and completed the sale of our Pittsburgh, Pennsylvania and Miltec operations, both of which were part of our Electronic Systems operating segment.

Note 20. Supplemental Quarterly Financial Data (Unaudited)

	(In thousands, except per share amounts)
	Three Months Ended 2017									Three Months Ended 2016
	Dec 31			Sep 30		Jul 1		Apr 1		Dec 31		Oct 1		Jul 2		Apr 2
Net Revenues	$	142,258		$	138,690	$	140,938	$	136,297	$	142,486	$	132,571	$	133,437	$	142,148
Gross Profit	25,693			26,009		26,191		24,927		27,786		25,223		26,215		26,969
(Loss) Income Before Taxes	(5,057		)	5,595		4,564		2,507		5,825		6,248		5,331		20,709
Income Tax (Benefit) Expense	(14,541		)	940		741		392		2,989		1,234		1,470		7,159
Net Income	$	9,484		$	4,655	$	3,823	$	2,115	$	2,836	$	5,014	$	3,861	$	13,550
Earnings Per Share
Basic earnings per share	$	0.84		$	0.41	$	0.34	$	0.19	$	0.25	$	0.45	$	0.35	$	1.22
Diluted earnings per share	$	0.82		$	0.41	$	0.33	$	0.18	$	0.25	$	0.44	$	0.34	$	1.21

In the fourth quarter of 2017, we adopted the Tax Cuts and Jobs Act and as a result, recorded a provisional deferred income tax benefit of $13.0 million related to the re-measurement for the year ended December 31, 2017. See Note 16. In addition, we commenced a restructuring plan and recorded restructuring charges of $8.8 million (with $0.5 million recorded as costs of sales). See Note 3.

In the third quarter of 2017, we acquired 100.0% of the outstanding equity interests of LDS and LDS’ results of operations have been included in our consolidated statements of operations since the date of acquisition as part of the Electronic Systems segment. See Note 2.

In the first quarter of 2016, we entered into and completed the sale of our Pittsburgh, Pennsylvania and Miltec operations, both of which were part of our Electronic Systems operating segment. We recorded a preliminary pre-tax gain of $18.8 million.

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DUCOMMUN INCORPORATED AND SUBSIDIARIES

CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

YEARS ENDED DECEMBER 31, 2017, 2016, AND 2015

(in thousands)

SCHEDULE II

Description	Balance at Beginning of Period		Charged to Costs and Expenses (1)			Deductions/(Recoveries)			Balance at End of Period
2017
Allowance for Doubtful Accounts	$	495	$	334		$	(39	)	$	868
Valuation Allowance on Deferred Tax Assets	6,607		2,406			—			9,013
2016
Allowance for Doubtful Accounts	$	359	$	233		$	97		$	495
Valuation Allowance on Deferred Tax Assets	7,477		(870		)	—			6,607
2015
Allowance for Doubtful Accounts (1)	$	252	$	235		$	128		$	359
Valuation Allowance on Deferred Tax Assets	6,882		595			—			7,477

(1) Included amount that was part of assets held for sale.

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EXHIBIT INDEX

Exhibit

No.    Description

2.1 Agreement and Plan of Merger, dated as of April 3, 2011, among Ducommun Incorporated, DLBMS, Inc. and LaBarge, Inc. Incorporated by reference to Exhibit 2.1 to Form 8-K filed on April 5, 2011.

2.2 Agreement and Plan of Merger, dated as of September 11, 2017, among Ducommun LaBarge Technologies, Inc., LS Holdings Company LLC, and DLS Company LLC. Incorporated by reference to Exhibit 2.1 to Form 8-K filed on September 11, 2017.

2.3 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.

3.1 Restated Certificate of Incorporation filed with the Delaware Secretary of State on May 29, 1990. Incorporated by reference to Exhibit 3.1 to Form 10-K for the year ended December 31, 1990.

3.2 Certificate of Amendment of Certificate of Incorporation filed with the Delaware Secretary of State on May 27, 1998. Incorporated by reference to Exhibit 3.2 to Form 10-K for the year ended December 31, 1998.

3.3 Bylaws as amended and restated on March 19, 2013. Incorporated by reference to Exhibit 99.1 to Form 8-K dated March 22, 2013.

3.4 Amendment to Bylaws dated January 5, 2017. Incorporated by reference to Exhibit 99.2 to Form 8-K dated January 9, 2017.

3.5 Amendment to Bylaws dated February 21, 2018. Incorporated by reference to Exhibit 3.1 to Form 8-K dated February 26, 2018.

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. 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.

*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 Performance Stock Unit Agreement for 2017. Incorporated by reference to Exhibit 10.21 to Form 10-Q for the period ended April 1, 2017.

*10.10 Form of Restricted Stock Unit Agreement for 2016 and earlier. Incorporated by reference to Exhibit 99.1 to Form 8-K dated May 8, 2007.

*10.11 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.

*10.12 Form of Directors’ Restricted Stock Unit Agreement. Incorporated by reference to Exhibit 99.1 to Form 8-K dated May 10, 2010.

82

Exhibit

No.    Description

*10.13 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.

*10.14 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
Richard A. Baldridge	March 19, 2013
Gregory S. Churchill	March 19, 2013
Robert C. Ducommun	December 31, 1985
Dean M. Flatt	November 5, 2009
Douglas L. Groves	February 12, 2013
Jay L. Haberland	February 2, 2009
Stephen G. Oswald	January 23, 2017
Amy M. Paul	January 23, 2017
Robert D. Paulson	March 25, 2003
Anthony J. Reardon	January 8, 2008
Jerry L. Redondo	October 1, 2015
Rosalie F. Rogers	July 24, 2008
Christopher D. Wampler	January 1, 2016

*10.15 Ducommun Incorporated 2016 Bonus Plan. Incorporated by reference to Exhibit 99.3 to Form 8-K dated March 1, 2016.

*10.16 Ducommun Incorporated 2017 Bonus Plan. Incorporated by reference to Exhibit 99.1 to Form 8-K dated February 27, 2017.

*10.17 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.

*10.18 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.

*10.19 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:

Person	Date of Agreement
Douglas L. Groves	January 23, 2017
Amy M. Paul	January 23, 2017
Anthony J. Reardon	January 23, 2017
Jerry L. Redondo	January 23, 2017
Rosalie F. Rogers	January 23, 2017
Christopher D. Wampler	January 23, 2017

*10.20 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.

*10.21 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.

*10.22 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.

83

Exhibit

No.    Description

21 Subsidiaries of the registrant.

23 Consent of Independent Registered Public Accounting Firm.

31.1 Certification of Principal Executive Officer.

31.2 Certification of Principal Financial Officer.

32 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS XBRL Instance Document

101.SCH    XBRL Taxonomy Extension Schema

101.CAL    XBRL Taxonomy Extension Calculation Linkbase

101.DEF    XBRL Taxonomy Extension Definition Linkbase

101.LAB    XBRL Taxonomy Extension Label Linkbase

101.PRE        XBRL Taxonomy Extension Presentation Linkbase

___________________

* Indicates an executive compensation plan or arrangement.

84

ITEM 16. FORM 10-K SUMMARY

Not applicable.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		DUCOMMUN INCORPORATED
Date: February 28, 2018	By:	/s/ Stephen G. Oswald
		Stephen G. Oswald
		President and Chief Executive Officer

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been duly signed below by the following persons on behalf of the registrant and in the capacities indicated on February 28, 2018.

Signature	Title
/s/ Stephen G. Oswald	President and Chief Executive Officer
Stephen G. Oswald	(Principal Executive Officer)
/s/ Douglas L. Groves	Vice President, Chief Financial Officer and Treasurer
Douglas L. Groves	(Principal Financial Officer)
/s/ Christopher D. Wampler	Vice President, Controller and Chief Accounting Officer
Christopher D. Wampler	(Principal Accounting Officer)
/s/ Anthony J. Reardon	Chairman of the Board
Anthony J. Reardon
/s/ Richard A. Baldridge	Director
Richard A. Baldridge
/s/ Gregory S. Churchill	Director
Gregory S. Churchill
/s/ Robert C. Ducommun	Director
Robert C. Ducommun
/s/ Dean M. Flatt	Director
Dean M. Flatt
/s/ Jay L. Haberland	Director
Jay L. Haberland
/s/ Robert D. Paulson	Director
Robert D. Paulson

85

EX-21

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

Following is a list of the subsidiaries of the Company⁽¹⁾:

Name of Subsidiary	Jurisdiction of Incorporation
CMP Display Systems, Inc.	California
Composite Structures, LLC	Delaware
Ducommun AeroStructures, Inc.	Delaware
Ducommun AeroStructures Mexico, LLC	Delaware
Ducommun AeroStructures New York, Inc.	New York
Ducommun (England) LTD	England
Ducommun LaBarge Technologies, Inc.	Arizona
Ducommun LaBarge Technologies, Inc.	Delaware
Ducommun Technologies (Thailand) Ltd.	Thailand
LaBarge/STC, Inc.	Texas
LaBarge Acquisition Company, Inc.	Missouri
Lightning Diversion Systems, LLC	Delaware
LS Holdings Company, LLC	Delaware

(1) As of December 31, 2017.

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-188630) and Form S-8 (Nos. 333-214408, 333-188460, 333-167731, and 333-145008) of Ducommun Incorporated of our report dated February 28, 2018 relating to the consolidated financial statements, consolidated financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Los Angeles, California

February 28, 2018

EX-31.1

EXHIBIT 31.1

Certification of Principal Executive Officer

Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, Stephen G. Oswald, certify that:

1. I have reviewed this Annual Report of Ducommun Incorporated (the “registrant”) on Form 10-K for the period ended December 31, 2017;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f), and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 28, 2018

/s/ Stephen G. Oswald

Stephen G. Oswald

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification of Principal Financial Officer

Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, Douglas L. Groves, certify that:

1. I have reviewed this Annual Report of Ducommun Incorporated (the “registrant”) on Form 10-K for the period ended December 31, 2017;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 28, 2018

/s/ Douglas L. Groves

Douglas L. Groves

Vice President, Chief Financial Officer and Treasurer

EX-32

EXHIBIT 32

Certification Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of

the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Ducommun Incorporated (the “Company”) on Form 10-K for the period ending December 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen G. Oswald, President and Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Stephen G. Oswald
	Stephen G. Oswald
	President and Chief Executive Officer
	February 28, 2018

In connection with the Annual Report of Ducommun Incorporated (the “Company”) on Form 10-K for the period ending December 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Douglas L. Groves, Vice President, Chief Financial Officer and Treasurer of the Company, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Douglas L. Groves
	Douglas L. Groves
	Vice President, Chief Financial Officer and Treasurer
	February 28, 2018

The foregoing certification is accompanying the Form 10-K solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and is not being filed as part of the Form 10-K or as a separate disclosure document.

XML

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Feb. 14, 2018	Jul. 01, 2017
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Trading Symbol	DCO
Entity Registrant Name	DUCOMMUN INC /DE/
Entity Central Index Key	0000030305
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		11,340,653
Entity Public Float			$ 357

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Current Assets
Cash and cash equivalents	$ 2,150	$ 7,432
Accounts receivable (less allowance for doubtful accounts of $868 and $495 at December 31, 2017 and 2016, respectively)	74,064	76,239
Inventories	122,161	119,896
Production cost of contracts	11,204	11,340
Other current assets	11,435	11,034
Total Current Assets	221,014	225,941
Property and Equipment, Net	110,252	101,590
Goodwill	117,435	82,554
Intangibles, Net	114,693	101,573
Non-Current Deferred Income Taxes	261	286
Other Assets	3,098	3,485
Total Assets	566,753	515,429
Current Liabilities
Current portion of long-term debt	0	3
Accounts payable	51,907	57,024
Accrued liabilities	28,329	29,279
Total Current Liabilities	80,236	86,306
Long-Term Debt, Less Current Portion	216,055	166,896
Non-Current Deferred Income Taxes	15,981	31,417
Other Long-Term Liabilities	18,898	18,707
Total Liabilities	331,170	303,326
Commitments and Contingencies (Notes 14, 17)
Shareholders’ Equity
Common stock - $0.01 par value; 35,000,000 shares authorized; 11,332,841 and 11,193,813 shares issued and outstanding at December 31, 2017 and 2016, respectively	113	112
Additional paid-in capital	80,223	76,783
Retained earnings	161,364	141,287
Accumulated other comprehensive loss	(6,117)	(6,079)
Total Shareholders’ Equity	235,583	212,103
Total Liabilities and Shareholders’ Equity	$ 566,753	$ 515,429

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 868	$ 495
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	35,000,000	35,000,000
Common stock, shares issued	11,332,841	11,193,813
Common stock, shares outstanding	11,332,841	11,193,813

XML

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income Statement [Abstract]
Net Revenues	$ 558,183	$ 550,642	$ 666,011
Cost of Sales	455,363	444,449	565,219
Gross Profit	102,820	106,193	100,792
Selling, General and Administrative Expenses	79,435	77,443	83,796
Goodwill Impairment	0	0	57,243
Intangible Asset Impairment	0	0	32,937
Restructuring Charges	8,360	182	2,125
Operating Income (Loss)	15,025	28,568	(75,309)
Interest Expense	(8,261)	(8,274)	(18,709)
Gain on Divestitures, Net	0	17,604	0
Loss on Extinguishment of Debt	0	0	(14,720)
Other Income, Net	845	215	2,148
Income (Loss) Before Taxes	7,609	38,113	(106,590)
Income Tax (Benefit) Expense	(12,468)	12,852	(31,711)
Net Income (Loss)	$ 20,077	$ 25,261	$ (74,879)
Earnings (Loss) Per Share
Basic earnings (loss) per share (in dollars per share)	$ 1.78	$ 2.27	$ (6.78)
Diluted earnings (loss) per share (in dollars per share)	$ 1.74	$ 2.24	$ (6.78)
Weighted-Average Number of Shares Outstanding
Basic (in shares)	11,290	11,151	11,047
Diluted (in shares)	11,558	11,299	11,047

XML

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement of Comprehensive Income [Abstract]
Net Income	$ 20,077	$ 25,261	$ (74,879)
Pension Adjustments:
Amortization of actuarial loss included in net income, net of tax benefit of $302, $283, and $330 for 2017, 2016, and 2015, respectively	508	479	557
Actuarial (loss) gain arising during the period, net of tax (benefit) expense of $(194), $(413), and $300 for 2017, 2016, and 2015, respectively	(304)	(650)	491
Decrease in net unrealized gains and losses on cash flow hedges, net of tax benefit of $145, $180, and $0 for 2017, 2016, and 2015, respectively	(242)	(305)	0
Other Comprehensive (Loss) Income, Net of Tax	(38)	(476)	1,048
Comprehensive Income (Loss), Net of Tax	$ 20,039	$ 24,785	$ (73,831)

XML

Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement of Comprehensive Income [Abstract]
Amortization of actuarial (loss) gain, tax	$ 302	$ 283	$ 330
Actuarial gain (loss) arising during the period, tax expense (benefit)	(194)	(413)	300
Unrealized gain (loss) on cash flow hedges, tax	$ 145	$ 180	$ 0

XML

Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Treasury Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Loss
Beginning Balance (in shares) at Dec. 31, 2014		10,952,268
Beginning Balance at Dec. 31, 2014	$ 256,570	$ 110	$ 0	$ 72,206	$ 190,905	$ (6,651)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	(74,879)				(74,879)
Other comprehensive income (loss), net of tax	1,048					1,048
Stock options exercised (in shares)		167,523
Stock options exercised	3,084	$ 1		3,083
Stock repurchased related to the exercise of stock options (in shares)		(137,194)
Stock repurchased related to the exercise of stock options	(4,210)	$ (1)		(4,209)
Stock awards vested (in shares)		101,721
Stock awards vested	0	$ 1		(1)
Stock-based compensation	3,495			3,495
Excess tax benefits or shortfall from share-based compensation	626			626
Ending Balance (in shares) at Dec. 31, 2015		11,084,318
Ending Balance at Dec. 31, 2015	185,734	$ 111	0	75,200	116,026	(5,603)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	25,261				25,261
Other comprehensive income (loss), net of tax	(476)					(476)
Stock options exercised (in shares)		132,325
Stock options exercised	2,122	$ 1		2,121
Stock repurchased related to the exercise of stock options (in shares)		(151,916)
Stock repurchased related to the exercise of stock options	(3,465)	$ (1)		(3,464)
Stock awards vested (in shares)		129,086
Stock awards vested	0	$ 1		(1)
Stock-based compensation	3,007			3,007
Excess tax benefits or shortfall from share-based compensation	(80)			(80)
Ending Balance (in shares) at Dec. 31, 2016		11,193,813
Ending Balance at Dec. 31, 2016	212,103	$ 112	0	76,783	141,287	(6,079)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	20,077				20,077
Other comprehensive income (loss), net of tax	$ (38)					(38)
Stock options exercised (in shares)	212,775	212,775
Stock options exercised	$ 4,336	$ 2		4,334
Stock repurchased related to the exercise of stock options (in shares)		(219,164)
Stock repurchased related to the exercise of stock options	(6,904)	$ (2)		(6,902)
Stock awards vested (in shares)		145,417
Stock awards vested	0	$ 1		(1)
Stock-based compensation	6,009			6,009
Ending Balance (in shares) at Dec. 31, 2017		11,332,841
Ending Balance at Dec. 31, 2017	$ 235,583	$ 113	$ 0	$ 80,223	$ 161,364	$ (6,117)

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash Flows from Operating Activities
Net Income	$ 20,077	$ 25,261	$ (74,879)
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities
Depreciation and amortization	22,845	22,860	26,846
Gain on divestitures, net	0	(17,604)	0
Goodwill impairment	0	0	57,243
Intangible asset impairment	0	0	32,937
Property and equipment impairment due to restructuring	3,607	0	0
Stock-based compensation expense	4,675	3,007	3,495
Deferred income taxes	(15,411)	3,519	(29,110)
Excess tax benefits from stock-based compensation	0	(248)	(626)
Provision for doubtful accounts	373	112	132
Noncash loss on extinguishment of debt	0	0	4,970
Other	(1,182)	(7,204)	5,628
Changes in Assets and Liabilities:
Accounts receivable	2,720	3,220	4,444
Inventories	(533)	(5,182)	20,985
Production cost of contracts	(267)	(1,536)	330
Other assets	40	2,974	5,884
Accounts payable	(4,015)	15,055	(13,978)
Accrued and other liabilities	2,505	(966)	(20,623)
Net Cash Provided by Operating Activities	35,434	43,268	23,678
Cash Flows from Investing Activities
Purchases of property and equipment	(27,610)	(17,001)	(15,891)
Proceeds from sale of assets	913	16	904
Insurance recoveries related to property and equipment	288	0	1,510
Proceeds from divestitures	0	51,893	0
Payments for purchase of Lightning Diversion Systems, LLC, net of cash acquired	(59,798)	0	0
Net Cash (Used in) Provided by Investing Activities	(86,207)	34,908	(13,477)
Cash Flows from Financing Activities
Borrowings from senior secured revolving credit facility	395,900	71,800	65,000
Repayment of senior secured revolving credit facility	(337,800)	(71,800)	(65,000)
Borrowings from term loan	0	0	275,000
Repayments of senior unsecured notes and term loans	(10,000)	(75,000)	(320,000)
Repayments of other debt	(3)	(23)	(26)
Debt issuance costs	0	0	(4,848)
Excess tax benefits from stock-based compensation	0	248	626
Net cash paid from issuance of common stock under stock plans	(2,606)	(1,423)	(1,126)
Net Cash Provided by (Used in) Financing Activities	45,491	(76,198)	(50,374)
Net (Decrease) Increase in Cash and Cash Equivalents	(5,282)	1,978	(40,173)
Cash and Cash Equivalents at Beginning of Year	7,432	5,454	45,627
Cash and Cash Equivalents at End of Year	$ 2,150	$ 7,432	$ 5,454

XML

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Description of Business

We are a leading global provider of engineering and manufacturing services for high-performance products and high-cost-of failure applications used primarily in the aerospace and defense, industrial, medical, and other industries. Our subsidiaries are organized into two primary businesses: Electronic Systems segment and Structural Systems segment, each of which is a reportable operating segment. Electronic Systems designs, engineers and manufactures high-reliability electronic and electromechanical products used in worldwide technology-driven markets including aerospace and defense, industrial, medical, and other end-use markets. Electronic Systems’ product offerings primarily range from prototype development to complex assemblies. Structural Systems designs, engineers and manufactures large, complex contoured aerostructure components and assemblies and supplies composite and metal bonded structures and assemblies. Structural Systems’ products are primarily used on commercial aircraft, military fixed-wing aircraft and military and commercial rotary-wing aircraft. All reportable operating segments follow the same accounting principles.

Basis of Presentation

The consolidated financial statements include the accounts of Ducommun Incorporated and its subsidiaries (“Ducommun,” the “Company,” “we,” “us” or “our”), after eliminating intercompany balances and transactions.

In the opinion of management, all adjustments, consisting of recurring accruals, have been made that are necessary to fairly state our consolidated financial position, results of operations, comprehensive income (loss) and cash flows in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Our fiscal quarters typically end on the Saturday closest to the end of March, June and September for the first three fiscal quarters of each year, and ends on December 31 for our fourth fiscal quarter. As a result of using fiscal quarters for the first three quarters combined with leap years, our first and fourth fiscal quarters can range between 12 1/2 weeks to 13 1/2 weeks while the second and third fiscal quarters remain at a constant 13 weeks per fiscal quarter.

Use of Estimates

Certain amounts and disclosures included in the consolidated financial statements required management to make estimates and judgments that affect the amount of assets, liabilities (including forward loss reserves), revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.

Reclassifications

Certain prior period amounts have been reclassified to conform to current year’s presentation.

Supplemental Cash Flow Information

	(In thousands) Years Ended December 31,
	2017		2016		2015
Interest paid	$	7,307	$	6,877	$	26,501
Taxes paid	$	3,125	$	9,778	$	1,150
Non-cash activities:
Purchases of property and equipment not paid	$	2,104	$	3,241	$	1,549

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. Level 2 refers to fair values estimated using significant observable inputs. Level 3, the lowest level, includes fair values estimated using significant unobservable inputs.. See Note 4 for further information.

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, which we classify as Level 1. See Fair Value above.

Derivative Instruments

We recognize derivative instruments on our consolidated balance sheets at their fair value. On the date that we enter into a derivative contract, we designate the derivative instrument as a fair value hedge, a cash flow hedge, a hedge of a net investment in a foreign operation, or a derivative instrument that will not be accounted for using hedge accounting methods. As of December 31, 2017 and December 31, 2016, all of our derivative instruments were designated as cash flow hedges.

We record changes in the fair value of a derivative instrument that is highly effective and that is designated and qualifies as a cash flow hedge in other comprehensive income (loss), net of tax until our earnings are affected by the variability of cash flows of the underlying hedge. We record any hedge ineffectiveness and amounts excluded from effectiveness testing in current period earnings within interest expense. We report changes in the fair values of derivative instruments that are not designated or do not qualify for hedge accounting in current period earnings. We classify cash flows from derivative instruments on the consolidated statements of cash flows in the same category as the item being hedged or on a basis consistent with the nature of the instrument.

When we determine that a derivative instrument is not highly effective as a hedge, we discontinue hedge accounting prospectively. In all situations in which we discontinue hedge accounting and the derivative instrument remains outstanding, we will carry the derivative instrument at its fair value on our consolidated balance sheets and recognize subsequent changes in its fair value in our current period earnings.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses from the inability of customers to make required payments. The allowance for doubtful accounts is evaluated periodically based on the aging of accounts receivable, the financial condition of customers and their payment history, historical write-off experience and other assumptions, such as current assessment of economic conditions.

Inventories

Inventories are stated at the lower of cost or 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 and charged to cost of sales on a first-in, first-out basis. Inventoried costs include raw materials, outside processing, direct labor and allocated overhead, adjusted for any abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) incurred. Costs under long-term contracts are accumulated into, and removed from, inventory on the same basis as other contracts. We assess the inventory carrying value and reduce it, if necessary, to its net realizable value based on customer orders on hand, and internal demand forecasts using management’s best estimates given information currently available.

We net progress payments from customers related to inventory purchases against inventories in the consolidated balance sheets.

Production Cost of Contracts

Production cost of contracts includes non-recurring production costs, such as design and engineering costs, and tooling and other special-purpose machinery necessary to build parts as specified in a contract. Production costs of contracts are recorded to cost of goods sold using the units of delivery method. We review long-lived assets within production costs of contracts for impairment on an annual basis (which we perform during the fourth quarter) or when events or changes in circumstances indicate that the carrying value of our long-lived assets may not be recoverable. An impairment charge is recognized when the carrying value of an asset exceeds the projected undiscounted future cash flows expected from its use and disposal. As of December 31, 2017 and 2016, production costs of contracts were $11.2 million and $11.3 million, respectively.

Property and Equipment and Depreciation

Property and equipment, including assets recorded under capital leases, are recorded at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets, or the lease term if shorter for leasehold improvements. Repairs and maintenance are charged to expense as incurred. We evaluate long-lived assets for recoverability considering undiscounted cash flows, when significant changes in conditions occur, and recognize impairment losses if any, based upon the fair value of the assets.

Goodwill and Indefinite-Lived Intangible Asset

Goodwill is evaluated for impairment on a annual basis on the first day of the fourth fiscal quarter or more frequently if events or changes in circumstances indicate that the asset may be impaired. Our impairment evaluation of goodwill consists of a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If our qualitative assessment indicates it is more likely than not that the estimated fair value of a reporting unit exceeds its carrying value, no further analysis is required and goodwill is not impaired. Otherwise, we will follow a two-step quantitative goodwill impairment test to determine if goodwill is impaired.

In the first step, we determine the fair value of the reporting unit using expected future discounted cash flows and market valuation approaches considering comparable Company revenue and Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) multiples. If the carrying value of the reporting unit exceeds its fair value, we then perform the second step of the impairment test to measure the amount of the goodwill impairment loss, if any.

The second step requires fair valuation of all the reporting unit’s assets and liabilities in a manner similar to a purchase price allocation, with any residual fair value being allocated to goodwill. This residual fair value of goodwill is then compared to the carrying value of goodwill to determine impairment. An impairment charge will be recognized equal to the excess of the carrying value of goodwill over the implied fair value of goodwill.

In 2015, as a result of the annual goodwill impairment test, we recorded $57.2 million of goodwill impairment to the Structural Systems operating segment reducing the goodwill carrying value to zero as of December 31, 2015.

We review our indefinite-lived intangible asset for impairment on an annual basis or when events or changes in circumstances indicate that the carrying value of our intangible asset may not be recoverable. We may first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test. Impairment indicators include, but are not limited to, cost factors, financial performance, adverse legal or regulatory developments, industry and market conditions and general economic conditions. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, we would recognize an impairment loss in the amount of such excess. In performing our annual impairment test in the fourth quarter of 2015, we concluded the fair value of the indefinite-lived trade name to be zero as a result of divesting businesses in Electronic Systems and our discontinuation of the use of the trade name. Thus, we recorded a $32.9 million of trade name impairment to the Electronic Systems trade name carrying value to decrease its trade name carrying value to zero as of December 31, 2015.

Other Intangible Assets

We amortize purchased other intangible assets with finite lives over the estimated economic lives of the assets, ranging from fourteen to eighteen years generally using the straight-line method. The value of other intangibles acquired through business combinations has been estimated using present value techniques which involve estimates of future cash flows. We evaluate other intangible assets for recoverability considering undiscounted cash flows, when significant changes in conditions occur, and recognize impairment losses, if any, based upon the estimated fair value of the assets.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss, as reflected in the consolidated balance sheets under the equity section, was composed of cumulative pension and retirement liability adjustments, net of tax, and unrealized losses on cash flow hedges, net of tax.

Revenue Recognition

Except as described below, we recognize revenue, including revenue from products sold under long-term contracts, when persuasive evidence of an arrangement exists, the price is fixed or determinable, collection is reasonably assured and delivery of products has occurred or services have been rendered.

We have a significant number of contracts for which we recognize revenue under the contract method of accounting and record revenues and cost of sales on each contract in accordance with the percentage-of-completion method of accounting, using the units-of-delivery method. Under the units-of-delivery method, revenue is recognized based upon the number of units delivered during a period and the costs are recognized based on the actual costs allocable to the delivered units. Costs allocable to undelivered units are reported on the balance sheet as inventory. This method is used in circumstances in which a company produces units of a basic product under production-type contracts in a continuous or sequential production process to buyers’ specifications. These contracts are primarily fixed-price contracts that vary widely in terms of size, length of performance period, and expected gross profit margins.

Provision for Estimated Losses on Contracts

We record provisions for the total anticipated losses on contracts considering total estimated costs to complete the contract compared to total anticipated revenues in the period in which such losses are identified. The provisions for estimated losses on contracts require management to make certain estimates and assumptions, including those with respect to the future revenue under a contract and the future cost to complete the contract. Management's estimate of the future cost to complete a contract may include assumptions as to improvements 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 additional provisions for estimated losses on contracts.

In 2015, we recorded a charge in Structural Systems related to estimated cost overruns as a result of a change in the contract requirements for the remaining contractual period for a regional jet program of $10.0 million. This amount was recorded as part of cost of goods sold in our results of operations and increased accrued liabilities by $7.6 million and other long-term liabilities by $2.4 million.

Income Taxes

The provision for income taxes is determined using an estimated annual effective tax rate, which is generally less than the U.S. federal statutory rate, primarily as a result of research and development (“R&D”) tax credits available in the United States and deductions available in the United States for domestic production activities. 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 valuation allowances against deferred tax assets, the recognition or derecognition of tax benefits related to uncertain tax positions, expected utilization of R&D tax credits and changes in or the interpretation of tax laws in jurisdictions where we conduct business.

Deferred tax assets and liabilities are recognized, using enacted tax rates, for the expected future tax consequences of temporary differences between the book and tax bases of recorded assets and liabilities, operating losses, and tax credit carryforwards. Deferred tax assets are evaluated quarterly and are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Tax positions taken or expected to be taken in a tax return are recognized when it is more-likely-than-not, based on technical merits, to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement, including resolution of related appeals and/or litigation process, if any.

On December 22, 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted. The 2017 Tax Act represents major tax reform legislation that, among other provisions, reduces the U.S. corporate tax rate. Certain provisional amounts for the income tax effects of the 2017 Tax Act, including $13.0 million of deferred income tax benefit recorded principally due to the re-measurement of the federal portion of our deferred tax assets and liabilities, are reflected in our financial results in accordance with SEC Staff Accounting Bulletin No. 118 (“SAB 118”), which provides SEC staff guidance regarding the application of Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes,” in the reporting period in which the 2017 Tax Act became law. See Note 16 for further information.

Litigation and Commitments

In the normal course of business, we are defendants in certain litigation, claims and inquiries, including matters relating to environmental laws. In addition, we make various commitments and incur contingent liabilities. Management’s estimates regarding contingent liabilities could differ from actual results.

Environmental Liabilities

Environmental liabilities are recorded when environmental assessments and/or remedial efforts are probable and costs can be reasonably estimated. Generally, the timing of these accruals coincides with the completion of a feasibility study or our commitment to a formal plan of action. Further, we review and update our environmental accruals as circumstances change and/or additional information is obtained that reasonably could be expected to have a meaningful effect on the outcome of a matter or the estimated cost thereof.

Accounting for Stock-Based Compensation

We measure and recognize compensation expense for share-based payment transactions to our employees and non-employees at their estimated fair value. The expense is measured at the grant date, based on the calculated fair value of the share-based award, and is recognized over the requisite service period (generally the vesting period of the equity award). The fair value of stock options are determined using the Black-Scholes-Merton (“Black-Scholes”) valuation model, which requires assumptions and judgments regarding stock price volatility, risk-free interest rates, and expected options terms. Management’s estimates could differ from actual results. The fair value of unvested stock awards is determined based on the closing price of the underlying common stock on the date of grant except for market condition awards for which the fair value was based on a Monte Carlo simulation model.

Earnings (Loss) Per Share

Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding in each period. Diluted earnings per share are computed by dividing income available to common shareholders plus income associated with dilutive securities by the weighted-average number of common shares outstanding, plus any potential dilutive shares that could be issued if exercised or converted into common stock in each period.

The net earnings (loss) and weighted-average number of common shares outstanding used to compute earnings (loss) per share were as follows:

	(In thousands, except per share data) Years Ended December 31,
	2017		2016		2015
Net income (loss)	$	20,077	$	25,261	$	(74,879	)
Weighted-average number of common shares outstanding
Basic weighted-average common shares outstanding	11,290		11,151		11,047
Dilutive potential common shares	268		148		—
Diluted weighted-average common shares outstanding	11,558		11,299		11,047
Earnings (loss) per share
Basic	$	1.78	$	2.27	$	(6.78	)
Diluted	$	1.74	$	2.24	$	(6.78	)

Potentially dilutive stock options and stock units to purchase common stock, as shown below, were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive. However, these shares may be potentially dilutive common shares in the future.

	(In thousands) Years Ended December 31,
	2017	2016	2015
Stock options and stock units	126	553	778

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, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging” (“ASU 2017-12”), which intends to improve and simplify accounting rules around hedge accounting. ASU 2017-12 refines and expands hedge accounting for both financial (i.e., interest rate) and commodity risks. In addition, it creates more transparency around how economic results are presented, both on the 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 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 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. The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, which will be our interim period beginning January 1, 2019. We are evaluating the impact of this standard and currently anticipate it will impact our condensed consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which outlines a new, single comprehensive model for entities 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 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. Additional guidance was issued subsequently as follows:

• December 2016, the FASB issued ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” (“ASU 2016-20”);

• May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”);

• 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”);

• April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” (“ASU 2016-10”); and

• August 2015, the FASB issued ASU 2015-14, “Revenue From Contracts With Customers (Topic 606)” (“ASU 2015-14”).

All of this new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, which will be our interim period beginning January 1, 2018.

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 will no longer be an acceptable 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, the majority of our revenues will be recognized sooner as a result of changing to an over time method (i.e., cost-to-cost plus margin) 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 judgment in determining our revenue recognition. We have selected a software solution and are in the process of implementing the software solution to comply with this new accounting standard. The new accounting standard will be adopted using the modified retrospective method, whereby the cumulative effect of applying the new guidance is recognized as an adjustment to certain captions on the balance sheet, including the opening balance of retained earnings in the first quarter of 2018. We have periodically briefed our Audit Committee of the Board of Directors on the progress made towards the adoption of this revenue recognition accounting standard. Since we have not completed the implementation of the software solution, we currently are unable to determine the exact impact to our consolidated financial statements. However, we expect the impact to be significant on certain captions on our January 1, 2018 opening balance sheet.

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Business Combination

12 Months Ended

Dec. 31, 2017

Business Combinations [Abstract]

Business Combination

Business Combination

On September 11, 2017, we acquired 100.0% of the outstanding equity interests of Lightning Diversion Systems, LLC (“LDS”), a privately-held, worldwide leader in lightning protection systems serving the aerospace and defense industries, located in Huntington Beach, California. The acquisition of LDS is part of our strategy to enhance revenue growth by focusing on advanced proprietary technology on various aerospace and defense platforms.

The purchase price for LDS was $60.0 million, net of cash acquired, all payable in cash. Upon the closing of the transaction, we paid $61.4 million with the remaining $0.6 million paid in October 2017. We allocated the gross purchase price of $62.0 million to the assets acquired and liabilities assumed at estimated fair values. The excess of the purchase price over the aggregate fair values was recorded as goodwill.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):

	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 purchase price allocation	$	62,021

	Useful Life (In years)	Estimated Fair Value (In thousands)
Intangible assets:
Customer relationships	15	$	21,100
Trade name	15	1,300
		$	22,400

The intangible assets acquired of $22.4 million were determined based on the estimated fair values using valuation techniques consistent with the income approach to measure fair value. The useful lives were estimated based on the underlying agreements or the future economic benefit expected to be received from the assets. The fair values of the identifiable intangible assets were estimated using several valuation methodologies, which represented Level 3 fair value measurements. The value for customer relationships was estimated based on a multi-period excess earnings approach, while the value for the trade name was assessed using the relief from royalty methodology. Further, we analyzed the technology acquired and concluded no fair value should be assigned to it.

The goodwill of $34.9 million arising from the acquisition is attributable to the benefits we expect to derive from expected synergies from the transaction, including complementary products that will enhance our overall product portfolio, opportunities within new markets, and an acquired assembled workforce. All the goodwill was assigned to the Electronic Systems segment. Since the LDS acquisition, for tax purposes, was deemed an asset acquisition, the goodwill recognized is deductible for income tax purposes.

Acquisition related transaction costs are not included as components of consideration transferred but have been expensed as incurred. Total acquisition-related transaction costs incurred by us were $0.3 million during 2017 and charged to selling, general and administrative expenses.

LDS’ results of operations have been included in our consolidated statements of operations since the date of acquisition as part of the Electronic Systems segment. Pro forma results of operations of the LDS acquisition have not been presented as the effect of the LDS acquisition was not material to our financial results.

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Restructuring Activities

12 Months Ended

Dec. 31, 2017

Restructuring and Related Activities [Abstract]

Restructuring Activities

Restructuring Activities

Summary of 2017 Restructuring Plan

In November 2017, management approved and commenced a restructuring plan that is expected to increase operating efficiencies. We currently estimate this initiative will result in $19.0 million to $22.0 million in total pre-tax restructuring charges through 2018, with $8.8 million recorded during 2017. We are currently evaluating a number of possible scenarios to execute the second phase of the restructuring plan, which will result in additional restructuring charges during 2018. We anticipate the additional charges will include cash payments for employee separation and non-cash charges for asset impairments, depending on the specific plan we develop. On an annualized basis, beginning in 2019, we estimate these restructuring actions will result in total savings of $14.0 million.

In the Electronic Systems segment, we have recorded expenses of $1.2 million for severance and benefits which was charged to restructuring charges.

In the Structural Systems segment, we have recorded expenses of $1.7 million for severance and benefits which was charged to restructuring charges. In addition, we recorded non-cash expenses of $3.6 million for property and equipment impairment which was charged to restructuring charges. Further, we recorded non-cash expenses of $0.5 million for inventory write down which was charged to cost of sales.

In Corporate, we have recorded expenses of $0.4 million for severance and benefits and non-cash expenses of $1.4 million for stock-based compensation awards which were modified, all of which was charged to restructuring charges.

As of December 31, 2017, we have accrued $1.0 million, $1.3 million, and $0.4 million for severance and benefits and loss on early exit from lease in the Electronic Systems segment, Structural Systems segment, and Corporate, respectively.

Summary of 2016 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 is 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, all of which were charged to restructuring charges in 2016. We do not expect to record additional expenses related to this restructuring plan.

As of December 31, 2017, we have accrued less than $0.1 million for loss on early exit from lease in the Electronic Systems segment.

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, all of which were charged to restructuring charges in 2015. We do not expect to record additional expenses related to these restructuring plans.

As of December 31, 2017, all payments have been made on early exit from lease in the Structural Systems segment.

Our restructuring activities for 2017 and 2016 were as follows (in thousands):

	December 31, 2016		2017										December 31, 2017
	Balance		Charges		Cash Payments			Non-Cash Payments			Change in Estimates		Balance
Severance and benefits	$	—	$	3,337	$	(678	)	$	—		$	—	$	2,659
Modification of stock-based compensation awards	—		1,334		—			(1,334		)	—		—
Lease termination	654		18		(670		)	—			64		66
Property and equipment impairment due to restructuring	—		3,607		—			(3,607		)	—		—
Inventory write down	—		478		—			(478		)	—		—
Ending balance	$	654	$	8,774	$	(1,348	)	$	(5,419	)	$	64	$	2,725

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Fair Value Measurements

12 Months Ended

Dec. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Fair value is defined as the price that would be received for an asset or the price that would be paid to transfer a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The accounting standard provides a framework for measuring fair value using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Three levels of inputs that may be used to measure fair value are as follows:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Our financial instruments consist primarily of cash and cash equivalents and interest rate cap derivatives designated as cash flow hedging instruments. Assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):

	As of December 31, 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)	$	26	$	—	$	—	$	26	$	3,751	$	—	$	—	$	3,751
Interest rate cap hedges(2)	—		165		—		165		—		553		—		553
Total Assets	$	26	$	165	$	—	$	191	$	3,751	$	553	$	—	$	4,304

(1) Included as cash and cash equivalents.

(2) Interest rate cap hedge premium included as other current assets and other assets.

The fair value of the interest rate cap hedge agreements is determined using pricing models that use observable market inputs as of the balance sheet date, a Level 2 measurement.

There were no transfers between Level 1, Level 2, or Level 3 financial instruments in either 2017 or 2016.

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Financial Instruments

12 Months Ended

Dec. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments

Financial Instruments

Derivative Instruments and Hedging Activities

We periodically enter into cash flow derivative transactions, such as interest rate cap agreements, to hedge exposure to various risks related to interest rates. We assess the effectiveness of the interest rate cap hedges at inception of the hedge. We recognize all derivatives at their fair value. For cash flow designated hedges, the effective portion of the changes in fair value of the derivative contract are recorded in accumulated other comprehensive income (loss), net of taxes, and are recognized in net earnings at the time earnings are affected by the hedged transaction. Adjustments to record changes in fair values of the derivative contracts that are attributable to the ineffective portion of the hedges, if any, are recognized in earnings. We present derivative instruments in our consolidated statements of cash flows’ operating, investing, or financing activities consistent with the cash flows of the hedged item.

Our interest rate cap hedges were designated as cash flow hedges and deemed highly effective at the inception of the hedges. These interest rate cap hedges mature concurrently with the term loan in June 2020. In 2017, the interest rate cap hedges continued to be highly effective and $0.2 million, net of tax, was recognized in other comprehensive income. No amount was recorded in the consolidated statements of operations in 2017. See Note 10.

The recorded fair value of the derivative financial instruments in the consolidated balance sheets were as follows:

	(In thousands) December 31, 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	$	—	$	165	$	—	$	553
Total Derivatives	$	—	$	165	$	—	$	553

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Inventories

12 Months Ended

Dec. 31, 2017

Inventory Disclosure [Abstract]

Inventories

Inventories

Inventories consisted of the following:

	(In thousands) December 31,
	2017		2016
Raw materials and supplies	$	65,221	$	64,650
Work in process	62,584		56,806
Finished goods	10,665		9,180
	138,470		130,636
Less progress payments	16,309		10,740
Total	$	122,161	$	119,896

We net progress payments from customers related to inventory purchases against inventories on the consolidated balance sheets.

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Property and Equipment, Net

12 Months Ended

Dec. 31, 2017

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

Property and Equipment, Net

Property and equipment, net consisted of the following:

	(In thousands) December 31,				Range of Estimated
	2017		2016		Useful Lives
Land	$	15,662	$	15,662
Buildings and improvements	57,024		49,870		5 - 40 Years
Machinery and equipment	146,175		137,555		2 - 20 Years
Furniture and equipment	21,127		21,749		2 - 10 Years
Construction in progress	13,480		12,238
	253,468		237,074
Less accumulated depreciation	143,216		135,484
Total	$	110,252	$	101,590

Depreciation expense was $13.2 million, $13.3 million and $15.7 million, for the years ended December 31, 2017, 2016 and 2015, respectively.

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Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

Goodwill

The carrying amounts of goodwill, all in our Electronic Systems segment, for the years ended December 31, 2017 and 2016 were as follows:

	(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 December 31, 2017	$	117,435

Goodwill is evaluated for impairment on a annual basis on the first day of the fourth fiscal quarter or more frequently if events or changes in circumstances indicate that the asset may be impaired. Our impairment evaluation of goodwill consists of a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The qualitative evaluation is an assessment of factors, including reporting unit specific operating results as well as industry, market, and economic conditions, to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If our qualitative assessment indicates it is more likely than not that the estimated fair value of a reporting unit exceeds its carrying value, no further analysis is required and goodwill is not impaired. Otherwise, we will follow a two-step quantitative goodwill impairment test to determine if goodwill is impaired.

In the fourth quarter of 2017, the carrying amount of goodwill at the date of the most recent annual impairment evaluation was $117.4 million, all of which was in our Electronic Systems operating segment. As of the date of our 2017 annual evaluation for goodwill impairment, we used a qualitative assessment noting it was not more likely than not that the fair value of a reporting unit is less than its carrying amount and thus, goodwill was not deemed impaired. Our most recent step-one goodwill impairment analysis was in the prior year fourth quarter of 2016 and the fair value of the Electronic Systems internal reporting unit exceeded its carrying value at that time by 32% and thus, was not deemed impaired.

In September 2017, we acquired 100.0% of the outstanding equity interests of LDS for a purchase price of $60.0 million, net of cash acquired. We allocated the gross purchase price of $62.0 million to the assets acquired and liabilities assumed at estimated fair values. The excess of the purchase over the aggregate fair values was recorded as goodwill. See Note 2.

Other intangible assets are related to acquisitions, including LDS, and recorded at fair value at the time of the acquisition. Other intangible assets with finite lives are generally amortized on the straight-line method over periods ranging from fourteen to eighteen years. Intangible assets are as follows:

		(In thousands)
		December 31, 2017						December 31, 2016
	Wtd. Avg Life (Yrs)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Finite-lived assets
Customer relationships	17	$	180,300	$	67,449	$	112,851	$	159,200	$	58,352	$	100,848
Trade names	15	1,300		26		1,274		—		—		—
Contract renewal	14	1,845		1,493		352		1,845		1,362		483
Technology	15	400		184		216		400		158		242
Total		$	183,845	$	69,152	$	114,693	$	161,445	$	59,872	$	101,573

The carrying amount of other intangible assets by operating segment as of December 31, 2017 and 2016 was as follows:

	(In thousands)
	December 31, 2017						December 31, 2016
	Gross		Accumulated Amortization		Net Carrying Value		Gross		Accumulated Amortization		Net Carrying Value
Other intangible assets
Structural Systems	$	19,300	$	16,464	$	2,836	$	19,300	$	15,555	$	3,745
Electronic Systems	164,545		52,688		111,857		142,145		44,317		97,828
Total	$	183,845	$	69,152	$	114,693	$	161,445	$	59,872	$	101,573

Amortization expense of other intangible assets was $9.3 million, $9.0 million and $10.0 million for the years ended December 31, 2017, 2016 and 2015, respectively. Future amortization expense by operating segment is expected to be as follows:

	(In thousands)
	Structural Systems		Electronic Systems		Consolidated Ducommun
2018	$	737	$	9,420	$	10,157
2019	591		9,419		10,010
2020	490		9,348		9,838
2021	381		9,287		9,668
2022	320		9,288		9,608
Thereafter	317		65,095		65,412
	$	2,836	$	111,857	$	114,693

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Accrued Liabilities

12 Months Ended

Dec. 31, 2017

Payables and Accruals [Abstract]

Accrued Liabilities

Accrued Liabilities

The components of accrued liabilities consisted of the following:

	(In thousands) December 31,
	2017		2016
Accrued compensation	$	18,925	$	15,455
Accrued income tax and sales tax	71		332
Customer deposits	3,970		3,204
Provision for forward loss reserves	1,226		4,780
Other	4,137		5,508
Total	$	28,329	$	29,279

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Long-Term Debt

12 Months Ended

Dec. 31, 2017

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

Long-term debt and the current period interest rates were as follows:

	(In thousands) December 31,
	2017			2016
Term loan	$	160,000		$	170,000
Revolving credit facility	58,100			—
Other debt (fixed 5.41%)	—			3
Total debt	218,100			170,003
Less current portion	—			3
Total long-term debt	218,100			170,000
Less debt issuance costs	2,045			3,104
Total long-term debt, net of debt issuance costs	$	216,055		$	166,896
Weighted-average interest rate	3.73		%	3.25		%

Future long-term debt payments at December 31, 2017 were as follows:

	(In thousands)
2018	$	—
2019	—
2020	218,100
2021	—
2022	—
Total	$	218,100

Our credit facility consists of a $275.0 million senior secured term loan, which matures on June 26, 2020 (“Term Loan”), and a $200.0 million senior secured revolving credit facility (“Revolving Credit Facility”), which matures on June 26, 2020 (collectively, the “Credit Facilities”). The Credit Facilities bear interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as LIBOR) plus an applicable margin ranging from 1.50% to 2.75% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 0.50% to 1.75% per year, in each case based upon the consolidated total net adjusted leverage ratio. The undrawn portions of the commitments of the Credit Facilities are subject to a commitment fee ranging from 0.175% to 0.300%, based upon the consolidated total net adjusted leverage ratio.

Further, we are required to make mandatory prepayments of amounts outstanding under the Term Loan. The mandatory prepayments will be made quarterly, equal to 5.0% per year of the original aggregate principal amount during the first two years and increase to 7.5% per year during the third year, and increase to 10.0% per year during the fourth year and fifth years, with the remaining balance payable on June 26, 2020. The loans under the Revolving Credit Facility are due on June 26, 2020. As of December 31, 2017, we were in compliance with all covenants required under the Credit Facilities.

In addition, we incurred $4.8 million of debt issuance costs related to the Credit Facilities and those costs were capitalized and are being amortized over the five year life of the Credit Facilities.

In September 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.

In July 2017, we entered into a technical amendment to the Credit Facilities (“First Amendment”) which provided more flexibility to close certain qualified acquisitions permitted under the Credit Facilities.

We made voluntary principal prepayments of $10.0 million under the Term Loan during 2017.

As of December 31, 2017, we had $141.6 million of unused borrowing capacity under the Revolving Credit Facility, after deducting $58.1 million for draw down on the Revolving Credit Facility and $0.3 million for standby letters of credit.

The Existing Notes were issued by us (“Parent Company”) and guaranteed by all of our subsidiaries, other than one subsidiary that was considered minor (“Subsidiary Guarantors”). The Subsidiary Guarantors jointly and severally guarantee the Existing Notes and Credit Facilities. The Parent Company has no independent assets or operations and therefore, no consolidating financial information for the Parent Company and its subsidiaries are presented.

In October 2015, we entered into interest rate cap hedges designated as cash flow hedges with 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 the interest rate cap hedges. See Note 5 for further information.

In December 2017 and 2016, we entered into agreements to purchase $14.2 million and $9.9 million of industrial revenue bonds (“IRBs”) issued by the city of Parsons, Kansas (“Parsons”) and concurrently, sold $14.2 million and $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 $14.2 million and $9.9 million over the lease term, respectively. The sale of the Property and concurrent lease back of the Property in December 2017 and 2016 did not meet the sale-leaseback accounting requirements as a result of our continuous involvement with the Property and thus, the $14.2 million and $9.9 million in cash received from Parsons was not recorded as a sale but as a financing obligation, respectively. Further, the Lease included a right of offset so long as we continue to own the IRBs and thus, the financing obligation of $14.2 million and $9.9 million was offset against the $14.2 million and $9.9 million, respectively, of IRBs assets and are presented net on the consolidated balance sheets with no impact to the consolidated statements of operations or consolidated cash flow statements.

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Shareholders' Equity

12 Months Ended

Dec. 31, 2017

Equity [Abstract]

Shareholders' Equity

Shareholders’ Equity

We are authorized to issue five million shares of preferred stock. At December 31, 2017 and 2016, no preferred shares were issued or outstanding.

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Stock-Based Compensation

12 Months Ended

Dec. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

Stock Incentive Compensation Plans

We have two stock incentive plans: the 2007 Stock Incentive Plan (the “2007 Plan”), as amended effective March 20, 2007, and the 2013 Stock Incentive Plan (the “2013 Plan”), collectively referred to as (the “Stock Incentive Plans”). The Stock Incentive Plans permit awards of stock options, restricted stock units, performance stock units and other stock-based awards to our officers, key employees and non-employee directors on terms determined by the Compensation Committee of the Board of Directors (the “Committee”). The aggregate number of shares available for issuance under the 2007 Plan and 2013 Plan is 1,200,000 and 1,040,000, respectively. Under the 2007 Plan, no more than an aggregate of 400,000 shares are available for issue of stock-based awards other than stock options and stock appreciation rights. As of December 31, 2017, shares available for future grant under the 2007 Plan and 2013 Plan are zero and 77,693, respectively. Prior the adoption of the 2007 Plan, we granted stock-based awards to purchase shares of our common stock to officers, key employees and non-employee directors under certain predecessor plans. No further awards can be granted under the 2007 Plan or these predecessor plans.

Stock Options

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

Stock option activity for the year ended December 31, 2017 were as follows:

	Number of Stock Options		Weighted- Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2017	439,550		$	20.07
Granted	129,400		$	29.19
Exercised	(212,775	)	$	20.38
Expired	(5,800	)	$	21.12
Forfeited	(44,150	)	$	22.19
Outstanding at December 31, 2017	306,225		$	23.38	5.2	$	1,654
Exerciseable at December 31, 2017	86,425		$	20.78	2.9	$	663

Changes in nonvested stock options for the year ended December 31, 2017 were as follows:

	Number of Stock Options		Weighted- Average Grant Date Fair Value
Nonvested at January 1, 2017	225,175		$	8.77
Granted	129,400		$	11.88
Vested	(90,625	)	$	8.87
Forfeited	(44,150	)	$	7.93
Nonvested at December 31, 2017	219,800		$	11.07

The aggregate intrinsic value of stock options represents the amount by which the market price of our common stock exceeds the exercise price of the stock option. The aggregate intrinsic value of stock options exercised for the years ended December 31, 2017, 2016 and 2015 was $2.5 million, $1.3 million, and $2.3 million, respectively. Cash received from stock options exercised for the years ended December 31, 2017, 2016 and 2015 was $4.3 million, $2.1 million, and $3.1 million, respectively, with related tax benefits of $0.9 million, $0.5 million, and $0.9 million, respectively. The total amount of stock options vested and expected to vest in the future is 306,225 shares with a weighted-average exercise price of $23.38 and an aggregate intrinsic value of $1.7 million. These stock options have a weighted-average remaining contractual term of 5.2 years.

The share-based compensation cost expensed for stock options for the years ended December 31, 2017, 2016, and 2015 (before tax benefits) was $0.7 million, $0.8 million, and $1.2 million, respectively, and is included in selling, general and administrative expenses on the consolidated income statements. At December 31, 2017, total unrecognized compensation cost (before tax benefits) related to stock options of $1.5 million is expected to be recognized over a weighted-average period of 3.1 years. The total fair value of stock options vested during the years ended December 31, 2017, 2016, and 2015 was $0.8 million, $0.9 million, and $1.3 million, respectively.

We apply fair value accounting for stock-based compensation based on the grant date fair value estimated using a Black-Scholes-Merton (“Black-Scholes”) valuation model. The assumptions used to compute the fair value of stock option grants under the Stock Incentive Plans for years ended December 31, 2017, 2016, and 2015 were as follows:

	Years Ended December 31,
	2017		2016		2015
Risk-free interest rate	1.75	%	1.20	%	1.13	%
Expected volatility	50.37	%	51.79	%	53.72	%
Expected dividends	—		—		—
Expected term (in months)	48		48		47

We recognize compensation expense, net of an estimated forfeiture rate, on a straight-line basis over the requisite service period of the award. We have one award population with an option vesting term of four years. We estimate the forfeiture rate based on our historic experience, attempting to determine any discernible activity patterns. The expected life computation is based on historic exercise patterns and post-vesting termination behavior. The risk-free interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is derived from historical volatility of our common stock. We suspended payments of dividends after the first quarter of 2011.

Restricted Stock Units

We granted restricted stock units (“RSUs”) to certain officers, key employees and non-employee directors of 135,350, 139,450, and 108,500 RSUs during the years ended December 31, 2017, 2016, and 2015, respectively, with weighted-average grant date fair values (equal to the fair market value of our stock on the date of grant) of $28.97, $15.97, and $25.15 per share, respectively. RSUs represent a right to receive a share of stock at future vesting dates with no cash payment required from the holder. The RSUs typically have a three year vesting term of 33%, 33% and 34% on the first, second and third anniversaries of the date of grant, respectively. If an employee terminates employment, their non-vested portion of the RSUs will not vest and all rights to the non-vested portion will terminate.

Restricted stock unit activity for the year ended December 31, 2017 was as follows:

	Number of Restricted Stock Units		Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2017	193,382		$	18.88
Granted	135,350		$	28.97
Vested	(101,930	)	$	19.66
Forfeited	(41,458	)	$	21.93
Outstanding at December 31, 2017	185,344		$	25.14

The share-based compensation cost expensed for RSUs for the years ended December 31, 2017, 2016, and 2015 (before tax benefits) was $2.0 million, $1.8 million, and $1.8 million respectively, and is included in selling, general and administrative expenses on the consolidated income statements. At December 31, 2017, total unrecognized compensation cost (before tax benefits) related to RSUs of $3.0 million is expected to be recognized over a weighted average period of 2.0 years. The total fair value of RSUs vested for the years ended December 31, 2017, 2016, and 2015 was $3.0 million, $1.3 million, and $1.8 million, respectively. The tax benefit realized from vested RSUs for the years ended December 31, 2017, 2016, and 2015 was $1.1 million, $0.7 million, and $0.7 million, respectively.

Performance Stock Units

We granted performance stock awards (“PSUs”) to certain key employees of 126,000, 62,500, and 64,000 PSUs during the years ended December 31, 2017, 2016, and 2015, respectively, with weighted-average grant date fair values of $26.31, $15.92, and $25.51 per share, respectively. PSU awards are subject to the attainment of performance goals established by the Committee, the periods during which performance is to be measured, and all other limitations and conditions applicable to the awarded shares. Performance goals are based on a pre-established objective formula that specifies the manner of determining the number of performance stock awards that will be granted if performance goals are attained. If an employee terminates employment, their non-vested portion of the PSUs will not vest and all rights to the non-vested portion will terminate.

Performance stock activity for the year ended December 31, 2017 was as follows:

	Number of Performance Stock Units		Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2017	121,637		$	20.39
Granted	126,000		$	26.31
Adjustment for target performance	37,350		$	25.48
Vested	(43,487	)	$	24.98
Forfeited	(20,000	)	$	22.63
Outstanding at December 31, 2017	221,500		$	23.52

The share-based compensation cost expensed for PSUs for the years ended December 31, 2017, 2016, and 2015 (before tax benefits) was $2.0 million, $0.4 million and $0.5 million, respectively, and is included in selling, general and administrative expenses on the consolidated income statements. At December 31, 2017, total unrecognized compensation cost (before tax benefits) related to PSUs of $2.4 million is expected to be recognized over a weighted-average period of 1.7 years. The total fair value of PSUs vested during the years ended December 31, 2017, 2016, and 2015, was $1.2 million, $1.1 million, and $0.9 million, respectively. The tax benefit realized from PSUs for the years ended December 31, 2017, 2016, and 2015 were $0.5 million, $0.2 million, and $0.3 million, respectively.

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2017

Retirement Benefits [Abstract]

Employee Benefit Plans

Employee Benefit Plans

Supplemental Retirement Plans

We have three unfunded supplemental retirement plans. The first plan was suspended in 1986, but continues to cover certain former executives. The second plan was suspended in 1997, but continues to cover certain current and retired directors. The third plan covers certain current and retired employees and further employee contributions to this plan were suspended on August 5, 2011. The liability for the third plan and interest thereon is included in accrued employee compensation and long-term liabilities and was $0.1 million and $0.7 million, respectively, at December 31, 2017 and $0.6 million and $0.8 million, respectively, at December 31, 2016. The accumulated benefit obligations of the first two plans at December 31, 2017 and December 31, 2016 were $0.6 million and $0.7 million, respectively, and are included in accrued liabilities.

Defined Contribution 401(K) Plans

We sponsor a 401(k) defined contribution plan for all our employees. The plan allows the employees to make annual voluntary contributions not to exceed the lesser of an amount equal to 25% of their compensation or limits established by the Internal Revenue Code. Under this plan, we generally provide a match equal to 50% of the employee’s contributions up to the first 6% of compensation, except for union employees who are not eligible to receive the match. Our provision for matching and profit sharing contributions for the three years ended December 31, 2017, 2016, and 2015 was $2.7 million, $2.7 million, and $3.2 million, respectively.

Other Plans

We have a defined benefit pension plan covering certain hourly employees of a subsidiary (the “Pension Plan”). Pension Plan benefits are generally determined on the basis of the retiree’s age and length of service. Assets of the Pension Plan are composed primarily of fixed income and equity securities. We also have a retirement plan covering certain current and retired employees (the “LaBarge Retirement Plan”).

The components of net periodic pension cost for both plans are as follows:

	(In thousands) Years Ended December 31,
	2017			2016			2015
Service cost	$	531		$	531		$	785
Interest cost	1,329			1,367			1,350
Expected return on plan assets	(1,530		)	(1,482		)	(1,495		)
Amortization of actuarial losses	810			762			887
Net periodic pension cost	$	1,140		$	1,178		$	1,527

The components of the reclassifications of net actuarial losses from accumulated other comprehensive loss to net income for 2017 were as follows:

	(In thousands) Year Ended December 31,
	2017
Amortization of actuarial loss - total before tax (1)	$	810
Tax benefit	(302		)
Net of tax	$	508

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

The estimated net actuarial loss for both plans that will be amortized from accumulated other comprehensive loss into net periodic cost during 2018 is $0.7 million.

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

	(In thousands) December 31,
	2017			2016
Change in benefit obligation(1)
Beginning benefit obligation (January 1)	$	33,154		$	31,510
Service cost	531			531
Interest cost	1,329			1,367
Actuarial loss	2,449			1,132
Benefits paid	(1,461		)	(1,386		)
Ending benefit obligation (December 31)	$	36,002		$	33,154
Change in plan assets
Beginning fair value of plan assets (January 1)	$	22,015		$	19,933
Return on assets	3,481			1,551
Employer contribution	1,611			1,917
Benefits paid	(1,461		)	(1,386		)
Ending fair value of plan assets (December 31)	$	25,646		$	22,015
Funded status (underfunded)	$	(10,356	)	$	(11,139	)
Amounts recognized in the consolidated balance sheet
Current liabilities	$	560		$	544
Non-current liabilities	$	9,796		$	10,595
Unrecognized loss included in accumulated other comprehensive loss
Beginning unrecognized loss, before tax (January 1)	$	9,220		$	8,919
Amortization	(810		)	(762		)
Liability loss	2,449			1,132
Asset gain	(1,951		)	(69		)
Ending unrecognized loss, before tax (December 31)	8,908			9,220
Tax impact	(3,309		)	(3,425		)
Unrecognized loss included in accumulated other comprehensive loss, net of tax	$	5,599		$	5,795

(1) Projected benefit obligation equals the accumulated benefit obligation for the plans.

On December 31, 2017, our annual measurement date, the accumulated benefit obligation exceeded the fair value of the plans assets by $10.4 million. Such excess is referred to as an unfunded accumulated benefit obligation. We recorded unrecognized loss included in accumulated other comprehensive loss, net of tax at December 31, 2017 and 2016 of $5.6 million and $5.8 million, respectively, which decreased shareholders’ equity. This charge to shareholders’ equity represents a net loss not yet recognized as pension expense. This charge did not affect reported earnings, and would be decreased or be eliminated if either interest rates increase or market performance and plan returns improve which will cause the Pension Plan to return to fully funded status.

Our Pension Plan asset allocations at December 31, 2017 and 2016, by asset category, were as follows:

	December 31,
	2017		2016
Equity securities	70	%	65	%
Cash and equivalents	1	%	2	%
Debt securities	29	%	33	%
Total(1)	100	%	100	%

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

Cash	0-5%
Fixed income securities	15-75%
Equities	30-80%

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

	(In thousands) Year Ended December 31, 2017
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	135	$	—	$	—	$	135
Fixed income securities	3,494		—		—		3,494
Equities(1)	1,625		—		—		1,625
Other investments	910		—		—		910
Total plan assets at fair value	$	6,164	$	—	$	—	6,164
Pooled funds							19,482
Total fair value of plan assets							$	25,646

	(In thousands) Year Ended December 31, 2016
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	366	$	—	$	—	$	366
Fixed income securities	3,468		—		—		3,468
Equities(1)	1,611		—		—		1,611
Other investments	760		—		—		760
Total plan assets at fair value	$	6,205	$	—	$	—	6,205
Pooled funds							15,810
Total fair value of plan assets							$	22,015

(1) Represents mutual funds and commingled accounts which invest primarily in equities, but may also hold fixed income securities, cash and other investments. Commingled funds with publicly quoted prices and actively traded are classified as Level 1 investments.

Pooled funds are measured using the net asset value (“NAV”) as a practical expedient for fair value as permissible under the accounting standard for fair value measurements and have not been categorized in the fair value hierarchy in accordance with ASU 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).” Pooled fund NAVs are provided by the trustee and are determined by reference to the fair value of the underlying securities of the trust, less its liabilities, which are valued primarily through the use of directly or indirectly observable inputs. Depending on the pooled fund, underlying securities may include marketable equity securities or fixed income securities.

The assumptions used to determine the benefit obligations and expense for our two plans are presented in the tables below. The expected long-term return on assets, noted below, represents an estimate of long-term returns on investment portfolios consisting of a mixture of fixed income and equity securities. The estimated cash flows from the plans for all future years are determined based on the plans’ population at the measurement date. We used the expected benefit payouts from the plans for each year into the future and discounted them back to the present using the Wells Fargo yield curve rate for that duration.

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

	Years Ended December 31,
	2017		2016		2015
Discount rate used to determine pension expense
Pension Plan	4.18	%	4.55	%	4.25	%
LaBarge Retirement Plan	3.75	%	4.00	%	3.70	%

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

	December 31,
	2017		2016		2015
Discount rate used to determine value of obligations
Pension Plan	3.64	%	4.18	%	4.55	%
LaBarge Retirement Plan	3.40	%	3.75	%	4.00	%
Long-term rate of return - Pension Plan only	7.00	%	7.50	%	7.50	%

The following benefit payments under both plans, which reflect expected future service, as appropriate, are expected to be paid:

	(In thousands)
	Pension Plan		LaBarge Retirement Plan
2018	$	1,178	$	561
2019	1,212		546
2020	1,288		528
2021	1,365		506
2022	1,453		482
2023 - 2027	8,246		2,022

Our funding policy is to contribute cash to our plans so that the minimum contribution requirements established by government funding and taxing authorities are met. We expect to make contributions of $0.9 million to the plans in 2018.

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Indemnifications

12 Months Ended

Dec. 31, 2017

Disclosure of Guarantees and Indemnifications [Abstract]

Indemnifications

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, 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, we have a directors and officers insurance policy that may reduce our exposure in certain circumstances and may enable us to recover a portion of future amounts that may be payable, if any. The duration of the guarantees and indemnities varies and, in many cases is indefinite but subject to statute of limitations. The majority of guarantees and indemnities do not provide any limitations of the maximum potential future payments we could be obligated to make. Historically, payments related to these guarantees and indemnities have been immaterial. We estimate the fair value of our indemnification obligations as insignificant based on this history and insurance coverage and have, therefore, not recorded any liability for these guarantees and indemnities in the accompanying consolidated balance sheets.

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Leases

12 Months Ended

Dec. 31, 2017

Leases [Abstract]

Leases

Leases

We lease certain facilities and equipment for periods ranging from one to ten years. The leases generally are renewable and provide for the payment of property taxes, insurance and other costs relative to the property. Rental expense in 2017, 2016, and 2015 was $5.0 million, $4.9 million, and $8.5 million, respectively. Future minimum rental payments under operating leases having initial or remaining non-cancelable terms in excess of one year at December 31, 2017 were as follows:

	(In thousands)
2018	$	3,586
2019	2,793
2020	2,554
2021	1,927
2022	947
Thereafter	553
Total	$	12,360

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Income Taxes

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Our pre-tax income attributable to foreign operations was not material. The provision for income tax (benefit) expense consisted of the following:

	(In thousands) Years Ended December 31,
	2017			2016		2015
Current tax expense (benefit)
Federal	$	2,387		$	5,953	$	(1,511	)
State	525			2,982		(418		)
	2,912			8,935		(1,929		)
Deferred tax (benefit) expense
Federal	(15,515		)	3,876		(28,011		)
State	135			41		(1,771		)
	(15,380		)	3,917		(29,782		)
Income tax (benefit) expense	$	(12,468	)	$	12,852	$	(31,711	)

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the “2017 Tax Act”) which, among a broad range of tax reform measures, reduced the U.S. corporate tax rate from 35.0% to 21.0% effective January 1, 2018. The reduction in the corporate tax rate required the federal portion of our deferred tax assets and liabilities at December 31, 2017 to be re-measured at the enacted tax rate expected to apply when the temporary differences are to be realized or settled using 21.0%. As a result, we recorded a provisional deferred income tax benefit of $13.0 million related to the re-measurement for the year ended December 31, 2017. SEC Staff Accounting Bulletin No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act” (“SAB 118”), allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Since the 2017 Tax Act was passed late in the fourth quarter of 2017, and ongoing guidance and accounting interpretation are expected over the next 12 months, we consider the accounting of the deferred tax re-measurement and other items to be incomplete due to the forthcoming guidance and our ongoing analysis of final year-end data and tax positions. We expect to complete our analysis within the measurement period in accordance with SAB 118.

ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”), became effective beginning January 1, 2017 and required all the tax effects related to share-based payments be recorded through the income statement. We recognized net income tax benefits from deductions of share-based payments in excess of compensation cost recognized for financial reporting purposes of $0.6 million for the year ended December 31, 2017. Prior to January 1, 2017, the current income tax expense (benefit) excluded net (tax shortfalls) excess tax benefits which were previously recorded directly to additional paid-in-capital in the amounts of $(0.1) million, and $0.6 million for the years ended December 31, 2016 and 2015, respectively.

Deferred tax (liabilities) assets were comprised of the following:

	(In thousands) December 31,
	2017			2016
Deferred tax assets:
Accrued expenses	$	313		$	760
Allowance for doubtful accounts	208			184
Contract overrun reserves	294			1,776
Deferred compensation	177			507
Employment-related accruals	2,091			2,888
Environmental reserves	501			769
Federal tax credit carryforwards	5,613			4,234
Inventory reserves	1,315			2,313
Pension obligation	2,398			4,002
State net operating loss carryforwards	86			63
State tax credit carryforwards	9,051			6,585
Stock-based compensation	1,480			1,950
Workers’ compensation	75			122
Other	1,492			2,098
Total gross deferred tax assets	25,094			28,251
Valuation allowance	(9,013		)	(6,607		)
Total gross deferred tax assets, net of valuation allowance	16,081			21,644
Deferred tax liabilities:
Depreciation	(7,976		)	(13,167		)
Goodwill	(2,902		)	(3,909		)
Intangibles	(20,611		)	(35,071		)
Prepaid insurance	(312		)	(626		)
Unbilled receivables	—			(2		)
Total gross deferred tax liabilities	(31,801		)	(52,775		)
Net deferred tax liabilities	$	(15,720	)	$	(31,131	)

We have net operating losses in various states of $1.8 million as of December 31, 2017. The state net operating loss carryforwards include $1.3 million that is not expected to be realized under ASC Subtopic 740-10 and has been reduced by a valuation allowance. If not realized, the state net operating loss carryforwards will begin to expire in 2030.

We have federal and state tax credit carryforwards of $6.6 million and $12.8 million, respectively, as of December 31, 2017. A valuation allowance of $11.3 million has been provided on state tax credit carryforwards that are not expected to be realized under ASC Subtopic 740-10. If not realized, the federal and state tax credit carryforwards will expire between 2018 and 2037.

We believe it is more likely than not that we will generate sufficient taxable income to realize the benefit of the remaining deferred tax assets.

The principal reasons for the variation between the statutory and effective tax rates were as follows:

	Years Ended December 31,
	2017	2016	2015
Statutory federal income tax (benefit) rate	35.0%	35.0%	(35.0)%
State income taxes (net of federal benefit)	2.5	5.7	(1.2)
Qualified domestic production activities	(2.6)	(2.0)	0.5
Stock-based compensation expense	(8.2)	—	—
Research and development tax credits	(50.6)	(8.6)	(2.9)
Other tax credits	(7.5)	—	—
Goodwill impairment	—	—	8.1
Changes in valuation allowance	10.6	0.9	0.6
Non-deductible book expenses	1.1	0.2	0.2
Changes in deferred tax assets	15.4	1.5	0.1
Re-measurement of deferred taxes for 2017 Tax Act	(171.3)	—	—
Changes in tax reserves	11.4	—	0.1
Other	0.4	1.0	(0.2)
Effective income tax (benefit) rate	(163.8)%	33.7%	(29.7)%

The deduction for qualified domestic production activities is treated as a “special deduction” which has no effect on deferred tax assets and liabilities. Instead, the impact of this deduction is reported in our rate reconciliation. No deduction for qualified domestic production has been recognized in 2015 due to a taxable loss. As part of the 2017 Tax Act, the qualified domestic production deduction is repealed for tax years beginning after December 31, 2017.

We recorded a goodwill impairment charge related to the Structural Systems operating segment in 2015. A portion of this goodwill impairment charge was nondeductible for tax purposes and was a permanent impact to our income tax provision of $8.7 million.

Our total amount of unrecognized tax benefits was $5.3 million, $3.0 million, and $3.0 million at December 31, 2017, 2016, and 2015, respectively. We record interest and penalty charge, if any, related to uncertain tax positions as a component of tax expense and unrecognized tax benefits. The amounts accrued for interest and penalty charges as of December 31, 2017, 2016, and 2015 were not significant. If recognized, $3.4 million would affect the effective income tax rate. We do not reasonably expect significant increases or decreases to our unrecognized tax benefits in the next twelve months.

A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:

	(In thousands) Years Ended December 31,
	2017			2016			2015
Balance at January 1,	$	3,036		$	2,963		$	2,803
Additions for tax positions related to the current year	422			476			702
Additions for tax positions related to prior years	1,953			385			—
Reductions for tax positions related to prior years	(99		)	(567		)	(48		)
Reductions for lapse of statute of limitations	(41		)	(221		)	(494		)
Balance at December 31,	$	5,271		$	3,036		$	2,963

We file U.S. Federal and state income tax returns. During the fourth quarter of 2017, the Internal Revenue Service (“IRS”) completed the audit of tax years 2013, 2014, and 2015. Consequently, Federal income tax returns after 2015 are subject to examination. California franchise (income) tax returns after 2012 and other state income tax returns after 2012 are subject to examination. 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 authority 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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Contingencies

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Contingencies

Structural Systems has been directed by California environmental agencies to investigate and take corrective action for groundwater contamination at its facilities located in El Mirage and Monrovia, California. Based on currently available information, Ducommun has established an accrual for its estimated liability for such investigation and corrective action of $1.5 million at December 31, 2017, which is reflected in other long-term liabilities on its consolidated balance sheet.

Structural Systems also faces liability as a potentially responsible party for hazardous waste disposed at landfills located in Casmalia and West Covina, California. Structural Systems and other companies and government entities have entered into consent decrees with respect to these landfills with the United States Environmental Protection Agency and/or California environmental agencies under which certain investigation, remediation and maintenance activities are being performed. Based on currently available information, Ducommun preliminarily estimates that the range of its future liabilities in connection with the landfill located in West Covina, California is between $0.4 million and $3.1 million. Ducommun has established an accrual for its estimated liability in connection with the West Covina landfill of $0.4 million at December 31, 2017, which is reflected in other long-term liabilities on its consolidated balance sheet. Ducommun’s ultimate liability in connection with these matters will depend upon a number of factors, including changes in existing laws and regulations, the design and cost of construction, operation and maintenance activities, and the allocation of liability among potentially responsible parties.

In the normal course of business, Ducommun and its subsidiaries are defendants in certain other litigation, claims and inquiries, including matters relating to environmental laws. In addition, Ducommun makes various commitments and incurs contingent liabilities. While it is not feasible to predict the outcome of these matters, Ducommun does not presently expect that any sum it may be required to pay in connection with these matters would have a material adverse effect on its consolidated financial position, results of operations or cash flows.

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Major Customers and Concentrations of Credit Risk

12 Months Ended

Dec. 31, 2017

Risks and Uncertainties [Abstract]

Major Customers and Concentrations of Credit Risk

Major Customers and Concentrations of Credit Risk

We provide proprietary products and services to the Department of Defense and various United States Government agencies, and most of the aerospace and aircraft manufacturers who receive contracts directly from the U.S. Government as an original equipment manufacturer (“prime manufacturers”). In addition, we also service technology-driven markets in the industrial, medical and other end-use markets. As a result, we have significant net revenues from certain customers. Accounts receivable were diversified over a number of different commercial, military and space programs and were made by both operating segments. Net revenues from our top ten customers, including The Boeing Company (“Boeing”), Lockheed Martin Corporation (“Lockheed Martin”), Raytheon Company (“Raytheon”), Spirit AeroSystems Holdings, Inc. (“Spirit”), and United Technologies Corporation (“United Technologies”), represented the following percentages of total net sales:

	Years Ended December 31,
	2017		2016		2015
Boeing	16.4	%	17.3	%	16.0	%
Lockheed Martin	5.5	%	5.6	%	1.2	%
Raytheon	13.5	%	8.4	%	8.7	%
Spirit	8.2	%	8.2	%	7.4	%
United Technologies	4.7	%	5.3	%	6.1	%
Top ten customers (1)	62.5	%	58.6	%	55.7	%

(1) Includes Boeing, Raytheon, Spirit, and United Technologies for 2017, 2016, and 2015 and Lockheed Martin for 2017 and 2016.

Boeing, Lockheed Martin, Raytheon, Spirit, and United Technologies represented the following percentages of total accounts receivable:

	December 31,
	2017		2016
Boeing	7.8	%	7.8	%
Lockheed Martin	5.9	%	2.9	%
Raytheon	1.4	%	10.9	%
Spirit	13.5	%	9.0	%
United Technologies	2.3	%	7.8	%

In 2017, 2016 and 2015, net revenues from foreign customers based on the location of the customer were $57.2 million, $56.4 million and $60.2 million, respectively. No net revenues from a foreign country were greater than 3.0% of total net revenues in 2017, 2016, and 2015. We have manufacturing facilities in Thailand and Mexico. Our net revenues, profitability and identifiable long-lived assets attributable to foreign revenues activity were not material compared to our net revenues, profitability and identifiable long-lived assets attributable to our domestic operations during 2017, 2016, and 2015. We are not subject to any significant foreign currency risks as all our sales are made in United States dollars.

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Business Segment Information

12 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

Business Segment Information

Business Segment Information

We supply products and services primarily to the aerospace and defense industries. Our subsidiaries are organized into two strategic businesses, Structural Systems and Electronic Systems, each of which is an operating segment as well as a reportable segment.

Financial information by reportable segment was as follows:

	(In thousands) Years Ended December 31,
	2017			2016			2015
Net Revenues
Structural Systems	$	241,460		$	246,465		$	273,319
Electronic Systems	316,723			304,177			392,692
Total Net Revenues	$	558,183		$	550,642		$	666,011
Segment Operating Income (Loss) (1)(2)
Structural Systems	$	5,477		$	16,497		$	(53,010	)
Electronic Systems	30,940			28,983			(4,472		)
	36,417			45,480			(57,482		)
Corporate General and Administrative Expenses (1)(2)	(21,392		)	(16,912		)	(17,827		)
Operating Income (Loss)	$	15,025		$	28,568		$	(75,309	)
Depreciation and Amortization Expenses
Structural Systems	$	8,860		$	8,688		$	9,417
Electronic Systems	13,888			14,087			17,267
Corporate Administration	97			85			162
Total Depreciation and Amortization Expenses	$	22,845		$	22,860		$	26,846
Capital Expenditures
Structural Systems	$	20,679		$	15,661		$	11,559
Electronic Systems	5,019			3,032			4,419
Corporate Administration	775			—			10
Total Capital Expenditures	$	26,473		$	18,693		$	15,988

(1) Includes cost not allocated to either the Structural Systems or Electronic Systems operating segments.

(2) The results for 2017 includes LDS’ results of operations which have been included in our consolidated statements of operations since the date of acquisition as part of the Electronic Systems segment. See Note 2.

Segment assets include assets directly identifiable with each segment. Corporate assets include assets not specifically identified with a business segment, including cash. The following table summarizes our segment assets for 2017 and 2016:

	(In thousands) December 31,
	2017		2016
Total Assets
Structural Systems	$	193,600	$	175,580
Electronic Systems	362,831		325,780
Corporate Administration	10,322		14,069
Total Assets	$	566,753	$	515,429
Goodwill and Intangibles
Structural Systems	$	2,836	$	3,745
Electronic Systems	229,292		180,382
Total Goodwill and Intangibles	$	232,128	$	184,127

In September 2017, we acquired 100.0% of the outstanding equity interests of LDS for a purchase price of $60.0 million, net of cash acquired. We allocated the gross purchase price of $62.0 million to the assets acquired and liabilities assumed at estimated fair values. The excess of the purchase over the aggregate fair values was recorded as goodwill. See Note 2.

In the first quarter of 2016, we entered into and completed the sale of our Pittsburgh, Pennsylvania and Miltec operations, both of which were part of our Electronic Systems operating segment.

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Supplemental Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2017

Quarterly Financial Information Disclosure [Abstract]

Supplementary Quarterly Financial Data (Unaudited)

Supplemental Quarterly Financial Data (Unaudited)

	(In thousands, except per share amounts)
	Three Months Ended 2017									Three Months Ended 2016
	Dec 31			Sep 30		Jul 1		Apr 1		Dec 31		Oct 1		Jul 2		Apr 2
Net Revenues	$	142,258		$	138,690	$	140,938	$	136,297	$	142,486	$	132,571	$	133,437	$	142,148
Gross Profit	25,693			26,009		26,191		24,927		27,786		25,223		26,215		26,969
(Loss) Income Before Taxes	(5,057		)	5,595		4,564		2,507		5,825		6,248		5,331		20,709
Income Tax (Benefit) Expense	(14,541		)	940		741		392		2,989		1,234		1,470		7,159
Net Income	$	9,484		$	4,655	$	3,823	$	2,115	$	2,836	$	5,014	$	3,861	$	13,550
Earnings Per Share
Basic earnings per share	$	0.84		$	0.41	$	0.34	$	0.19	$	0.25	$	0.45	$	0.35	$	1.22
Diluted earnings per share	$	0.82		$	0.41	$	0.33	$	0.18	$	0.25	$	0.44	$	0.34	$	1.21

In the fourth quarter of 2017, we adopted the Tax Cuts and Jobs Act and as a result, recorded a provisional deferred income tax benefit of $13.0 million related to the re-measurement for the year ended December 31, 2017. See Note 16. In addition, we commenced a restructuring plan and recorded restructuring charges of $8.8 million (with $0.5 million recorded as costs of sales). See Note 3.

In the third quarter of 2017, we acquired 100.0% of the outstanding equity interests of LDS and LDS’ results of operations have been included in our consolidated statements of operations since the date of acquisition as part of the Electronic Systems segment. See Note 2.

In the first quarter of 2016, we entered into and completed the sale of our Pittsburgh, Pennsylvania and Miltec operations, both of which were part of our Electronic Systems operating segment. We recorded a preliminary pre-tax gain of $18.8 million.

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Consolidated Valuation And Qualifying Accounts

12 Months Ended

Dec. 31, 2017

Valuation and Qualifying Accounts [Abstract]

Consolidated Valuation And Qualifying Accounts

DUCOMMUN INCORPORATED AND SUBSIDIARIES

CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

YEARS ENDED DECEMBER 31, 2017, 2016, AND 2015

(in thousands)

SCHEDULE II

Description	Balance at Beginning of Period		Charged to Costs and Expenses (1)			Deductions/(Recoveries)			Balance at End of Period
2017
Allowance for Doubtful Accounts	$	495	$	334		$	(39	)	$	868
Valuation Allowance on Deferred Tax Assets	6,607		2,406			—			9,013
2016
Allowance for Doubtful Accounts	$	359	$	233		$	97		$	495
Valuation Allowance on Deferred Tax Assets	7,477		(870		)	—			6,607
2015
Allowance for Doubtful Accounts (1)	$	252	$	235		$	128		$	359
Valuation Allowance on Deferred Tax Assets	6,882		595			—			7,477

(1) Included amount that was part of assets held for sale.

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Description of Business

Description of Business

We are a leading global provider of engineering and manufacturing services for high-performance products and high-cost-of failure applications used primarily in the aerospace and defense, industrial, medical, and other industries. Our subsidiaries are organized into two primary businesses: Electronic Systems segment and Structural Systems segment, each of which is a reportable operating segment. Electronic Systems designs, engineers and manufactures high-reliability electronic and electromechanical products used in worldwide technology-driven markets including aerospace and defense, industrial, medical, and other end-use markets. Electronic Systems’ product offerings primarily range from prototype development to complex assemblies. Structural Systems designs, engineers and manufactures large, complex contoured aerostructure components and assemblies and supplies composite and metal bonded structures and assemblies. Structural Systems’ products are primarily used on commercial aircraft, military fixed-wing aircraft and military and commercial rotary-wing aircraft. All reportable operating segments follow the same accounting principles.

Basis of Presentation

Basis of Presentation

The consolidated financial statements include the accounts of Ducommun Incorporated and its subsidiaries (“Ducommun,” the “Company,” “we,” “us” or “our”), after eliminating intercompany balances and transactions.

In the opinion of management, all adjustments, consisting of recurring accruals, have been made that are necessary to fairly state our consolidated financial position, results of operations, comprehensive income (loss) and cash flows in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Use of Estimates

Use of Estimates

Certain amounts and disclosures included in the consolidated financial statements required management to make estimates and judgments that affect the amount of assets, liabilities (including forward loss reserves), revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.

Reclassifications

Reclassifications

Certain prior period amounts have been reclassified to conform to current year’s presentation.

Fair Value

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. Level 2 refers to fair values estimated using significant observable inputs. Level 3, the lowest level, includes fair values estimated using significant unobservable inputs.. See Note 4 for further information.

Cash Equivalents

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, which we classify as Level 1. See Fair Value above.

Derivative Instruments

Derivative Instruments

We recognize derivative instruments on our consolidated balance sheets at their fair value. On the date that we enter into a derivative contract, we designate the derivative instrument as a fair value hedge, a cash flow hedge, a hedge of a net investment in a foreign operation, or a derivative instrument that will not be accounted for using hedge accounting methods. As of December 31, 2017 and December 31, 2016, all of our derivative instruments were designated as cash flow hedges.

We record changes in the fair value of a derivative instrument that is highly effective and that is designated and qualifies as a cash flow hedge in other comprehensive income (loss), net of tax until our earnings are affected by the variability of cash flows of the underlying hedge. We record any hedge ineffectiveness and amounts excluded from effectiveness testing in current period earnings within interest expense. We report changes in the fair values of derivative instruments that are not designated or do not qualify for hedge accounting in current period earnings. We classify cash flows from derivative instruments on the consolidated statements of cash flows in the same category as the item being hedged or on a basis consistent with the nature of the instrument.

When we determine that a derivative instrument is not highly effective as a hedge, we discontinue hedge accounting prospectively. In all situations in which we discontinue hedge accounting and the derivative instrument remains outstanding, we will carry the derivative instrument at its fair value on our consolidated balance sheets and recognize subsequent changes in its fair value in our current period earnings.

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses from the inability of customers to make required payments. The allowance for doubtful accounts is evaluated periodically based on the aging of accounts receivable, the financial condition of customers and their payment history, historical write-off experience and other assumptions, such as current assessment of economic conditions.

Inventories

Inventories

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 and charged to cost of sales on a first-in, first-out basis. Inventoried costs include raw materials, outside processing, direct labor and allocated overhead, adjusted for any abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) incurred. Costs under long-term contracts are accumulated into, and removed from, inventory on the same basis as other contracts. We assess the inventory carrying value and reduce it, if necessary, to its net realizable value based on customer orders on hand, and internal demand forecasts using management’s best estimates given information currently available.

We net progress payments from customers related to inventory purchases against inventories in the consolidated balance sheets.

Production Cost of Contracts

Production Cost of Contracts

Production cost of contracts includes non-recurring production costs, such as design and engineering costs, and tooling and other special-purpose machinery necessary to build parts as specified in a contract. Production costs of contracts are recorded to cost of goods sold using the units of delivery method. We review long-lived assets within production costs of contracts for impairment on an annual basis (which we perform during the fourth quarter) or when events or changes in circumstances indicate that the carrying value of our long-lived assets may not be recoverable. An impairment charge is recognized when the carrying value of an asset exceeds the projected undiscounted future cash flows expected from its use and disposal.

Property and Equipment and Depreciation

Property and Equipment and Depreciation

Property and equipment, including assets recorded under capital leases, are recorded at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets, or the lease term if shorter for leasehold improvements. Repairs and maintenance are charged to expense as incurred. We evaluate long-lived assets for recoverability considering undiscounted cash flows, when significant changes in conditions occur, and recognize impairment losses if any, based upon the fair value of the assets.

Goodwill and Indefinite-Lived Intangible Asset

Goodwill and Indefinite-Lived Intangible Asset

Goodwill is evaluated for impairment on a annual basis on the first day of the fourth fiscal quarter or more frequently if events or changes in circumstances indicate that the asset may be impaired. Our impairment evaluation of goodwill consists of a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If our qualitative assessment indicates it is more likely than not that the estimated fair value of a reporting unit exceeds its carrying value, no further analysis is required and goodwill is not impaired. Otherwise, we will follow a two-step quantitative goodwill impairment test to determine if goodwill is impaired.

In the first step, we determine the fair value of the reporting unit using expected future discounted cash flows and market valuation approaches considering comparable Company revenue and Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) multiples. If the carrying value of the reporting unit exceeds its fair value, we then perform the second step of the impairment test to measure the amount of the goodwill impairment loss, if any.

The second step requires fair valuation of all the reporting unit’s assets and liabilities in a manner similar to a purchase price allocation, with any residual fair value being allocated to goodwill. This residual fair value of goodwill is then compared to the carrying value of goodwill to determine impairment. An impairment charge will be recognized equal to the excess of the carrying value of goodwill over the implied fair value of goodwill.

In 2015, as a result of the annual goodwill impairment test, we recorded $57.2 million of goodwill impairment to the Structural Systems operating segment reducing the goodwill carrying value to zero as of December 31, 2015.

We review our indefinite-lived intangible asset for impairment on an annual basis or when events or changes in circumstances indicate that the carrying value of our intangible asset may not be recoverable. We may first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test. Impairment indicators include, but are not limited to, cost factors, financial performance, adverse legal or regulatory developments, industry and market conditions and general economic conditions. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, we would recognize an impairment loss in the amount of such excess.

Other Intangible Assets

Other Intangible Assets

We amortize purchased other intangible assets with finite lives over the estimated economic lives of the assets, ranging from fourteen to eighteen years generally using the straight-line method. The value of other intangibles acquired through business combinations has been estimated using present value techniques which involve estimates of future cash flows. We evaluate other intangible assets for recoverability considering undiscounted cash flows, when significant changes in conditions occur, and recognize impairment losses, if any, based upon the estimated fair value of the assets.

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss, as reflected in the consolidated balance sheets under the equity section, was composed of cumulative pension and retirement liability adjustments, net of tax, and unrealized losses on cash flow hedges, net of tax.

Revenue Recognition

Revenue Recognition

Except as described below, we recognize revenue, including revenue from products sold under long-term contracts, when persuasive evidence of an arrangement exists, the price is fixed or determinable, collection is reasonably assured and delivery of products has occurred or services have been rendered.

We have a significant number of contracts for which we recognize revenue under the contract method of accounting and record revenues and cost of sales on each contract in accordance with the percentage-of-completion method of accounting, using the units-of-delivery method. Under the units-of-delivery method, revenue is recognized based upon the number of units delivered during a period and the costs are recognized based on the actual costs allocable to the delivered units. Costs allocable to undelivered units are reported on the balance sheet as inventory. This method is used in circumstances in which a company produces units of a basic product under production-type contracts in a continuous or sequential production process to buyers’ specifications. These contracts are primarily fixed-price contracts that vary widely in terms of size, length of performance period, and expected gross profit margins.

Provision for Estimated Losses on Contracts

Provision for Estimated Losses on Contracts

We record provisions for the total anticipated losses on contracts considering total estimated costs to complete the contract compared to total anticipated revenues in the period in which such losses are identified. The provisions for estimated losses on contracts require management to make certain estimates and assumptions, including those with respect to the future revenue under a contract and the future cost to complete the contract. Management's estimate of the future cost to complete a contract may include assumptions as to improvements 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 additional provisions for estimated losses on contracts.

Income Taxes

Income Taxes

The provision for income taxes is determined using an estimated annual effective tax rate, which is generally less than the U.S. federal statutory rate, primarily as a result of research and development (“R&D”) tax credits available in the United States and deductions available in the United States for domestic production activities. 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 valuation allowances against deferred tax assets, the recognition or derecognition of tax benefits related to uncertain tax positions, expected utilization of R&D tax credits and changes in or the interpretation of tax laws in jurisdictions where we conduct business.

Deferred tax assets and liabilities are recognized, using enacted tax rates, for the expected future tax consequences of temporary differences between the book and tax bases of recorded assets and liabilities, operating losses, and tax credit carryforwards. Deferred tax assets are evaluated quarterly and are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Tax positions taken or expected to be taken in a tax return are recognized when it is more-likely-than-not, based on technical merits, to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement, including resolution of related appeals and/or litigation process, if any.

Litigation and Commitments

Litigation and Commitments

In the normal course of business, we are defendants in certain litigation, claims and inquiries, including matters relating to environmental laws. In addition, we make various commitments and incur contingent liabilities. Management’s estimates regarding contingent liabilities could differ from actual results.

Environmental Liabilities

Environmental Liabilities

Environmental liabilities are recorded when environmental assessments and/or remedial efforts are probable and costs can be reasonably estimated. Generally, the timing of these accruals coincides with the completion of a feasibility study or our commitment to a formal plan of action. Further, we review and update our environmental accruals as circumstances change and/or additional information is obtained that reasonably could be expected to have a meaningful effect on the outcome of a matter or the estimated cost thereof.

Accounting for Stock-Based Compensation

Accounting for Stock-Based Compensation

We measure and recognize compensation expense for share-based payment transactions to our employees and non-employees at their estimated fair value. The expense is measured at the grant date, based on the calculated fair value of the share-based award, and is recognized over the requisite service period (generally the vesting period of the equity award). The fair value of stock options are determined using the Black-Scholes-Merton (“Black-Scholes”) valuation model, which requires assumptions and judgments regarding stock price volatility, risk-free interest rates, and expected options terms. Management’s estimates could differ from actual results. The fair value of unvested stock awards is determined based on the closing price of the underlying common stock on the date of grant except for market condition awards for which the fair value was based on a Monte Carlo simulation model.

Earnings (Loss) per Share

Earnings (Loss) Per Share

Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding in each period. Diluted earnings per share are computed by dividing income available to common shareholders plus income associated with dilutive securities by the weighted-average number of common shares outstanding, plus any potential dilutive shares that could be issued if exercised or converted into common stock in each period.

Recent Accounting Pronouncements

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, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging” (“ASU 2017-12”), which intends to improve and simplify accounting rules around hedge accounting. ASU 2017-12 refines and expands hedge accounting for both financial (i.e., interest rate) and commodity risks. In addition, it creates more transparency around how economic results are presented, both on the 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 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 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. The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, which will be our interim period beginning January 1, 2019. We are evaluating the impact of this standard and currently anticipate it will impact our condensed consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which outlines a new, single comprehensive model for entities 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 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. Additional guidance was issued subsequently as follows:

• December 2016, the FASB issued ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” (“ASU 2016-20”);

• May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”);

• 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”);

• April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” (“ASU 2016-10”); and

• August 2015, the FASB issued ASU 2015-14, “Revenue From Contracts With Customers (Topic 606)” (“ASU 2015-14”).

All of this new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, which will be our interim period beginning January 1, 2018.

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 will no longer be an acceptable 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, the majority of our revenues will be recognized sooner as a result of changing to an over time method (i.e., cost-to-cost plus margin) 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 judgment in determining our revenue recognition. We have selected a software solution and are in the process of implementing the software solution to comply with this new accounting standard. The new accounting standard will be adopted using the modified retrospective method, whereby the cumulative effect of applying the new guidance is recognized as an adjustment to certain captions on the balance sheet, including the opening balance of retained earnings in the first quarter of 2018. We have periodically briefed our Audit Committee of the Board of Directors on the progress made towards the adoption of this revenue recognition accounting standard. Since we have not completed the implementation of the software solution, we currently are unable to determine the exact impact to our consolidated financial statements. However, we expect the impact to be significant on certain captions on our January 1, 2018 opening balance sheet.

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Schedule of Cash Flow, Supplemental Disclosures

Supplemental Cash Flow Information

	(In thousands) Years Ended December 31,
	2017		2016		2015
Interest paid	$	7,307	$	6,877	$	26,501
Taxes paid	$	3,125	$	9,778	$	1,150
Non-cash activities:
Purchases of property and equipment not paid	$	2,104	$	3,241	$	1,549

Weighted Average Number of Shares Outstanding Used to Compute Earnings Per Share

The net earnings (loss) and weighted-average number of common shares outstanding used to compute earnings (loss) per share were as follows:

	(In thousands, except per share data) Years Ended December 31,
	2017		2016		2015
Net income (loss)	$	20,077	$	25,261	$	(74,879	)
Weighted-average number of common shares outstanding
Basic weighted-average common shares outstanding	11,290		11,151		11,047
Dilutive potential common shares	268		148		—
Diluted weighted-average common shares outstanding	11,558		11,299		11,047
Earnings (loss) per share
Basic	$	1.78	$	2.27	$	(6.78	)
Diluted	$	1.74	$	2.24	$	(6.78	)

Weighted Average Number of Shares Outstanding Excluded from Computation of Diluted Earnings

Potentially dilutive stock options and stock units to purchase common stock, as shown below, were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive. However, these shares may be potentially dilutive common shares in the future.

	(In thousands) Years Ended December 31,
	2017	2016	2015
Stock options and stock units	126	553	778

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Business Combination (Tables)

12 Months Ended

Dec. 31, 2017

Business Combinations [Abstract]

Schedule of Business Acquisitions, by Acquisition

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):

	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 purchase price allocation	$	62,021

Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination

	Useful Life (In years)	Estimated Fair Value (In thousands)
Intangible assets:
Customer relationships	15	$	21,100
Trade name	15	1,300
		$	22,400

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Restructuring Activities (Tables)

12 Months Ended

Dec. 31, 2017

Restructuring and Related Activities [Abstract]

Schedule of Restructuring Activities

Our restructuring activities for 2017 and 2016 were as follows (in thousands):

	December 31, 2016		2017										December 31, 2017
	Balance		Charges		Cash Payments			Non-Cash Payments			Change in Estimates		Balance
Severance and benefits	$	—	$	3,337	$	(678	)	$	—		$	—	$	2,659
Modification of stock-based compensation awards	—		1,334		—			(1,334		)	—		—
Lease termination	654		18		(670		)	—			64		66
Property and equipment impairment due to restructuring	—		3,607		—			(3,607		)	—		—
Inventory write down	—		478		—			(478		)	—		—
Ending balance	$	654	$	8,774	$	(1,348	)	$	(5,419	)	$	64	$	2,725

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Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2017

Fair Value Disclosures [Abstract]

Schedule of Fair Value Measurements

Assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):

	As of December 31, 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)	$	26	$	—	$	—	$	26	$	3,751	$	—	$	—	$	3,751
Interest rate cap hedges(2)	—		165		—		165		—		553		—		553
Total Assets	$	26	$	165	$	—	$	191	$	3,751	$	553	$	—	$	4,304

(1) Included as cash and cash equivalents.

(2) Interest rate cap hedge premium included as other current assets and other assets.

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Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments

The recorded fair value of the derivative financial instruments in the consolidated balance sheets were as follows:

	(In thousands) December 31, 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	$	—	$	165	$	—	$	553
Total Derivatives	$	—	$	165	$	—	$	553

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Inventories (Tables)

12 Months Ended

Dec. 31, 2017

Inventory Disclosure [Abstract]

Summary of Inventories

Inventories consisted of the following:

	(In thousands) December 31,
	2017		2016
Raw materials and supplies	$	65,221	$	64,650
Work in process	62,584		56,806
Finished goods	10,665		9,180
	138,470		130,636
Less progress payments	16,309		10,740
Total	$	122,161	$	119,896

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Property and Equipment, Net (Tables)

12 Months Ended

Dec. 31, 2017

Property, Plant and Equipment [Abstract]

Summary of Property and Equipment

Property and equipment, net consisted of the following:

	(In thousands) December 31,				Range of Estimated
	2017		2016		Useful Lives
Land	$	15,662	$	15,662
Buildings and improvements	57,024		49,870		5 - 40 Years
Machinery and equipment	146,175		137,555		2 - 20 Years
Furniture and equipment	21,127		21,749		2 - 10 Years
Construction in progress	13,480		12,238
	253,468		237,074
Less accumulated depreciation	143,216		135,484
Total	$	110,252	$	101,590

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Goodwill and Other Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The carrying amounts of goodwill, all in our Electronic Systems segment, for the years ended December 31, 2017 and 2016 were as follows:

	(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 December 31, 2017	$	117,435

Other Intangible Assets

Intangible assets are as follows:

		(In thousands)
		December 31, 2017						December 31, 2016
	Wtd. Avg Life (Yrs)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Finite-lived assets
Customer relationships	17	$	180,300	$	67,449	$	112,851	$	159,200	$	58,352	$	100,848
Trade names	15	1,300		26		1,274		—		—		—
Contract renewal	14	1,845		1,493		352		1,845		1,362		483
Technology	15	400		184		216		400		158		242
Total		$	183,845	$	69,152	$	114,693	$	161,445	$	59,872	$	101,573

The carrying amount of other intangible assets by operating segment as of December 31, 2017 and 2016 was as follows:

	(In thousands)
	December 31, 2017						December 31, 2016
	Gross		Accumulated Amortization		Net Carrying Value		Gross		Accumulated Amortization		Net Carrying Value
Other intangible assets
Structural Systems	$	19,300	$	16,464	$	2,836	$	19,300	$	15,555	$	3,745
Electronic Systems	164,545		52,688		111,857		142,145		44,317		97,828
Total	$	183,845	$	69,152	$	114,693	$	161,445	$	59,872	$	101,573

Summary of Future Amortization Expense

Future amortization expense by operating segment is expected to be as follows:

	(In thousands)
	Structural Systems		Electronic Systems		Consolidated Ducommun
2018	$	737	$	9,420	$	10,157
2019	591		9,419		10,010
2020	490		9,348		9,838
2021	381		9,287		9,668
2022	320		9,288		9,608
Thereafter	317		65,095		65,412
	$	2,836	$	111,857	$	114,693

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Accrued Liabilities (Tables)

12 Months Ended

Dec. 31, 2017

Payables and Accruals [Abstract]

Summary of Accrued Liabilities

The components of accrued liabilities consisted of the following:

	(In thousands) December 31,
	2017		2016
Accrued compensation	$	18,925	$	15,455
Accrued income tax and sales tax	71		332
Customer deposits	3,970		3,204
Provision for forward loss reserves	1,226		4,780
Other	4,137		5,508
Total	$	28,329	$	29,279

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Long-Term Debt (Tables)

12 Months Ended

Dec. 31, 2017

Debt Disclosure [Abstract]

Long Term Debt Summary

Long-term debt and the current period interest rates were as follows:

	(In thousands) December 31,
	2017			2016
Term loan	$	160,000		$	170,000
Revolving credit facility	58,100			—
Other debt (fixed 5.41%)	—			3
Total debt	218,100			170,003
Less current portion	—			3
Total long-term debt	218,100			170,000
Less debt issuance costs	2,045			3,104
Total long-term debt, net of debt issuance costs	$	216,055		$	166,896
Weighted-average interest rate	3.73		%	3.25		%

Future Long Term Debt Payments

Future long-term debt payments at December 31, 2017 were as follows:

	(In thousands)
2018	$	—
2019	—
2020	218,100
2021	—
2022	—
Total	$	218,100

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Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Option Activity

Stock option activity for the year ended December 31, 2017 were as follows:

	Number of Stock Options		Weighted- Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2017	439,550		$	20.07
Granted	129,400		$	29.19
Exercised	(212,775	)	$	20.38
Expired	(5,800	)	$	21.12
Forfeited	(44,150	)	$	22.19
Outstanding at December 31, 2017	306,225		$	23.38	5.2	$	1,654
Exerciseable at December 31, 2017	86,425		$	20.78	2.9	$	663

Schedule of Nonvested Options Activity

Changes in nonvested stock options for the year ended December 31, 2017 were as follows:

	Number of Stock Options		Weighted- Average Grant Date Fair Value
Nonvested at January 1, 2017	225,175		$	8.77
Granted	129,400		$	11.88
Vested	(90,625	)	$	8.87
Forfeited	(44,150	)	$	7.93
Nonvested at December 31, 2017	219,800		$	11.07

Schedule of Assumptions Used

The assumptions used to compute the fair value of stock option grants under the Stock Incentive Plans for years ended December 31, 2017, 2016, and 2015 were as follows:

	Years Ended December 31,
	2017		2016		2015
Risk-free interest rate	1.75	%	1.20	%	1.13	%
Expected volatility	50.37	%	51.79	%	53.72	%
Expected dividends	—		—		—
Expected term (in months)	48		48		47

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

	Years Ended December 31,
	2017		2016		2015
Discount rate used to determine pension expense
Pension Plan	4.18	%	4.55	%	4.25	%
LaBarge Retirement Plan	3.75	%	4.00	%	3.70	%

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

	December 31,
	2017		2016		2015
Discount rate used to determine value of obligations
Pension Plan	3.64	%	4.18	%	4.55	%
LaBarge Retirement Plan	3.40	%	3.75	%	4.00	%
Long-term rate of return - Pension Plan only	7.00	%	7.50	%	7.50	%

Schedule of Restricted Stock Units Activity

Restricted stock unit activity for the year ended December 31, 2017 was as follows:

	Number of Restricted Stock Units		Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2017	193,382		$	18.88
Granted	135,350		$	28.97
Vested	(101,930	)	$	19.66
Forfeited	(41,458	)	$	21.93
Outstanding at December 31, 2017	185,344		$	25.14

Schedule of Performance-based Units Activity

Performance stock activity for the year ended December 31, 2017 was as follows:

	Number of Performance Stock Units		Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2017	121,637		$	20.39
Granted	126,000		$	26.31
Adjustment for target performance	37,350		$	25.48
Vested	(43,487	)	$	24.98
Forfeited	(20,000	)	$	22.63
Outstanding at December 31, 2017	221,500		$	23.52

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Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2017

Retirement Benefits [Abstract]

Components of Net Periodic Pension Cost

The components of net periodic pension cost for both plans are as follows:

	(In thousands) Years Ended December 31,
	2017			2016			2015
Service cost	$	531		$	531		$	785
Interest cost	1,329			1,367			1,350
Expected return on plan assets	(1,530		)	(1,482		)	(1,495		)
Amortization of actuarial losses	810			762			887
Net periodic pension cost	$	1,140		$	1,178		$	1,527

Reclassification out of Accumulated Other Comprehensive Income

The components of the reclassifications of net actuarial losses from accumulated other comprehensive loss to net income for 2017 were as follows:

	(In thousands) Year Ended December 31,
	2017
Amortization of actuarial loss - total before tax (1)	$	810
Tax benefit	(302		)
Net of tax	$	508

(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.

Obligation and Funded Status of Defined Benefit Pension Plan and Retirement Plan

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

	(In thousands) December 31,
	2017			2016
Change in benefit obligation(1)
Beginning benefit obligation (January 1)	$	33,154		$	31,510
Service cost	531			531
Interest cost	1,329			1,367
Actuarial loss	2,449			1,132
Benefits paid	(1,461		)	(1,386		)
Ending benefit obligation (December 31)	$	36,002		$	33,154
Change in plan assets
Beginning fair value of plan assets (January 1)	$	22,015		$	19,933
Return on assets	3,481			1,551
Employer contribution	1,611			1,917
Benefits paid	(1,461		)	(1,386		)
Ending fair value of plan assets (December 31)	$	25,646		$	22,015
Funded status (underfunded)	$	(10,356	)	$	(11,139	)
Amounts recognized in the consolidated balance sheet
Current liabilities	$	560		$	544
Non-current liabilities	$	9,796		$	10,595
Unrecognized loss included in accumulated other comprehensive loss
Beginning unrecognized loss, before tax (January 1)	$	9,220		$	8,919
Amortization	(810		)	(762		)
Liability loss	2,449			1,132
Asset gain	(1,951		)	(69		)
Ending unrecognized loss, before tax (December 31)	8,908			9,220
Tax impact	(3,309		)	(3,425		)
Unrecognized loss included in accumulated other comprehensive loss, net of tax	$	5,599		$	5,795

(1) Projected benefit obligation equals the accumulated benefit obligation for the plans.

Company's Pension Plan Asset Allocation, by Asset Category

	(In thousands) Year Ended December 31, 2017
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	135	$	—	$	—	$	135
Fixed income securities	3,494		—		—		3,494
Equities(1)	1,625		—		—		1,625
Other investments	910		—		—		910
Total plan assets at fair value	$	6,164	$	—	$	—	6,164
Pooled funds							19,482
Total fair value of plan assets							$	25,646

	(In thousands) Year Ended December 31, 2016
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	366	$	—	$	—	$	366
Fixed income securities	3,468		—		—		3,468
Equities(1)	1,611		—		—		1,611
Other investments	760		—		—		760
Total plan assets at fair value	$	6,205	$	—	$	—	6,205
Pooled funds							15,810
Total fair value of plan assets							$	22,015

(1) Represents mutual funds and commingled accounts which invest primarily in equities, but may also hold fixed income securities, cash and other investments. Commingled funds with publicly quoted prices and actively traded are classified as Level 1 investments.

Our Pension Plan asset allocations at December 31, 2017 and 2016, by asset category, were as follows:

	December 31,
	2017		2016
Equity securities	70	%	65	%
Cash and equivalents	1	%	2	%
Debt securities	29	%	33	%
Total(1)	100	%	100	%

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

Cash	0-5%
Fixed income securities	15-75%
Equities	30-80%

Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost

The assumptions used to compute the fair value of stock option grants under the Stock Incentive Plans for years ended December 31, 2017, 2016, and 2015 were as follows:

	Years Ended December 31,
	2017		2016		2015
Risk-free interest rate	1.75	%	1.20	%	1.13	%
Expected volatility	50.37	%	51.79	%	53.72	%
Expected dividends	—		—		—
Expected term (in months)	48		48		47

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

	Years Ended December 31,
	2017		2016		2015
Discount rate used to determine pension expense
Pension Plan	4.18	%	4.55	%	4.25	%
LaBarge Retirement Plan	3.75	%	4.00	%	3.70	%

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

	December 31,
	2017		2016		2015
Discount rate used to determine value of obligations
Pension Plan	3.64	%	4.18	%	4.55	%
LaBarge Retirement Plan	3.40	%	3.75	%	4.00	%
Long-term rate of return - Pension Plan only	7.00	%	7.50	%	7.50	%

Expected Future Benefit Payments Under Pension Plans

The following benefit payments under both plans, which reflect expected future service, as appropriate, are expected to be paid:

	(In thousands)
	Pension Plan		LaBarge Retirement Plan
2018	$	1,178	$	561
2019	1,212		546
2020	1,288		528
2021	1,365		506
2022	1,453		482
2023 - 2027	8,246		2,022

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Leases (Tables)

12 Months Ended

Dec. 31, 2017

Leases [Abstract]

Future Minimum Rental Payments Under Operating Leases

Future minimum rental payments under operating leases having initial or remaining non-cancelable terms in excess of one year at December 31, 2017 were as follows:

	(In thousands)
2018	$	3,586
2019	2,793
2020	2,554
2021	1,927
2022	947
Thereafter	553
Total	$	12,360

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Summary of Provision for Income Tax Expense (Benefit)

The provision for income tax (benefit) expense consisted of the following:

	(In thousands) Years Ended December 31,
	2017			2016		2015
Current tax expense (benefit)
Federal	$	2,387		$	5,953	$	(1,511	)
State	525			2,982		(418		)
	2,912			8,935		(1,929		)
Deferred tax (benefit) expense
Federal	(15,515		)	3,876		(28,011		)
State	135			41		(1,771		)
	(15,380		)	3,917		(29,782		)
Income tax (benefit) expense	$	(12,468	)	$	12,852	$	(31,711	)

Summary of Deferred Tax Assets (Liabilities)

Deferred tax (liabilities) assets were comprised of the following:

	(In thousands) December 31,
	2017			2016
Deferred tax assets:
Accrued expenses	$	313		$	760
Allowance for doubtful accounts	208			184
Contract overrun reserves	294			1,776
Deferred compensation	177			507
Employment-related accruals	2,091			2,888
Environmental reserves	501			769
Federal tax credit carryforwards	5,613			4,234
Inventory reserves	1,315			2,313
Pension obligation	2,398			4,002
State net operating loss carryforwards	86			63
State tax credit carryforwards	9,051			6,585
Stock-based compensation	1,480			1,950
Workers’ compensation	75			122
Other	1,492			2,098
Total gross deferred tax assets	25,094			28,251
Valuation allowance	(9,013		)	(6,607		)
Total gross deferred tax assets, net of valuation allowance	16,081			21,644
Deferred tax liabilities:
Depreciation	(7,976		)	(13,167		)
Goodwill	(2,902		)	(3,909		)
Intangibles	(20,611		)	(35,071		)
Prepaid insurance	(312		)	(626		)
Unbilled receivables	—			(2		)
Total gross deferred tax liabilities	(31,801		)	(52,775		)
Net deferred tax liabilities	$	(15,720	)	$	(31,131	)

Principle Reasons for Variation Between Expected and Effective Tax Rate

The principal reasons for the variation between the statutory and effective tax rates were as follows:

	Years Ended December 31,
	2017	2016	2015
Statutory federal income tax (benefit) rate	35.0%	35.0%	(35.0)%
State income taxes (net of federal benefit)	2.5	5.7	(1.2)
Qualified domestic production activities	(2.6)	(2.0)	0.5
Stock-based compensation expense	(8.2)	—	—
Research and development tax credits	(50.6)	(8.6)	(2.9)
Other tax credits	(7.5)	—	—
Goodwill impairment	—	—	8.1
Changes in valuation allowance	10.6	0.9	0.6
Non-deductible book expenses	1.1	0.2	0.2
Changes in deferred tax assets	15.4	1.5	0.1
Re-measurement of deferred taxes for 2017 Tax Act	(171.3)	—	—
Changes in tax reserves	11.4	—	0.1
Other	0.4	1.0	(0.2)
Effective income tax (benefit) rate	(163.8)%	33.7%	(29.7)%

Reconciliation of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:

	(In thousands) Years Ended December 31,
	2017			2016			2015
Balance at January 1,	$	3,036		$	2,963		$	2,803
Additions for tax positions related to the current year	422			476			702
Additions for tax positions related to prior years	1,953			385			—
Reductions for tax positions related to prior years	(99		)	(567		)	(48		)
Reductions for lapse of statute of limitations	(41		)	(221		)	(494		)
Balance at December 31,	$	5,271		$	3,036		$	2,963

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Major Customers and Concentrations of Credit Risk (Tables)

12 Months Ended

Dec. 31, 2017

Risks and Uncertainties [Abstract]

Schedule of Concentration Risk by Major Customers

Net revenues from our top ten customers, including The Boeing Company (“Boeing”), Lockheed Martin Corporation (“Lockheed Martin”), Raytheon Company (“Raytheon”), Spirit AeroSystems Holdings, Inc. (“Spirit”), and United Technologies Corporation (“United Technologies”), represented the following percentages of total net sales:

	Years Ended December 31,
	2017		2016		2015
Boeing	16.4	%	17.3	%	16.0	%
Lockheed Martin	5.5	%	5.6	%	1.2	%
Raytheon	13.5	%	8.4	%	8.7	%
Spirit	8.2	%	8.2	%	7.4	%
United Technologies	4.7	%	5.3	%	6.1	%
Top ten customers (1)	62.5	%	58.6	%	55.7	%

(1) Includes Boeing, Raytheon, Spirit, and United Technologies for 2017, 2016, and 2015 and Lockheed Martin for 2017 and 2016.

Boeing, Lockheed Martin, Raytheon, Spirit, and United Technologies represented the following percentages of total accounts receivable:

	December 31,
	2017		2016
Boeing	7.8	%	7.8	%
Lockheed Martin	5.9	%	2.9	%
Raytheon	1.4	%	10.9	%
Spirit	13.5	%	9.0	%
United Technologies	2.3	%	7.8	%

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Business Segment Information (Tables)

12 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

Financial Information by Reportable Segment

Financial information by reportable segment was as follows:

	(In thousands) Years Ended December 31,
	2017			2016			2015
Net Revenues
Structural Systems	$	241,460		$	246,465		$	273,319
Electronic Systems	316,723			304,177			392,692
Total Net Revenues	$	558,183		$	550,642		$	666,011
Segment Operating Income (Loss) (1)(2)
Structural Systems	$	5,477		$	16,497		$	(53,010	)
Electronic Systems	30,940			28,983			(4,472		)
	36,417			45,480			(57,482		)
Corporate General and Administrative Expenses (1)(2)	(21,392		)	(16,912		)	(17,827		)
Operating Income (Loss)	$	15,025		$	28,568		$	(75,309	)
Depreciation and Amortization Expenses
Structural Systems	$	8,860		$	8,688		$	9,417
Electronic Systems	13,888			14,087			17,267
Corporate Administration	97			85			162
Total Depreciation and Amortization Expenses	$	22,845		$	22,860		$	26,846
Capital Expenditures
Structural Systems	$	20,679		$	15,661		$	11,559
Electronic Systems	5,019			3,032			4,419
Corporate Administration	775			—			10
Total Capital Expenditures	$	26,473		$	18,693		$	15,988

(1) Includes cost not allocated to either the Structural Systems or Electronic Systems operating segments.

(2) The results for 2017 includes LDS’ results of operations which have been included in our consolidated statements of operations since the date of acquisition as part of the Electronic Systems segment. See Note 2

Segment Assets

Corporate assets include assets not specifically identified with a business segment, including cash. The following table summarizes our segment assets for 2017 and 2016:

	(In thousands) December 31,
	2017		2016
Total Assets
Structural Systems	$	193,600	$	175,580
Electronic Systems	362,831		325,780
Corporate Administration	10,322		14,069
Total Assets	$	566,753	$	515,429
Goodwill and Intangibles
Structural Systems	$	2,836	$	3,745
Electronic Systems	229,292		180,382
Total Goodwill and Intangibles	$	232,128	$	184,127

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Supplemental Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2017

Quarterly Financial Information Disclosure [Abstract]

Schedule of Quarterly Financial Information

	(In thousands, except per share amounts)
	Three Months Ended 2017									Three Months Ended 2016
	Dec 31			Sep 30		Jul 1		Apr 1		Dec 31		Oct 1		Jul 2		Apr 2
Net Revenues	$	142,258		$	138,690	$	140,938	$	136,297	$	142,486	$	132,571	$	133,437	$	142,148
Gross Profit	25,693			26,009		26,191		24,927		27,786		25,223		26,215		26,969
(Loss) Income Before Taxes	(5,057		)	5,595		4,564		2,507		5,825		6,248		5,331		20,709
Income Tax (Benefit) Expense	(14,541		)	940		741		392		2,989		1,234		1,470		7,159
Net Income	$	9,484		$	4,655	$	3,823	$	2,115	$	2,836	$	5,014	$	3,861	$	13,550
Earnings Per Share
Basic earnings per share	$	0.84		$	0.41	$	0.34	$	0.19	$	0.25	$	0.45	$	0.35	$	1.22
Diluted earnings per share	$	0.82		$	0.41	$	0.33	$	0.18	$	0.25	$	0.44	$	0.34	$	1.21

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Summary of Significant Accounting Policies - Additional Information (Detail)	3 Months Ended									12 Months Ended
	Dec. 31, 2017 USD ($)	Sep. 30, 2017 USD ($)	Jul. 01, 2017 USD ($)	Apr. 01, 2017 USD ($)	Dec. 31, 2016 USD ($)	Oct. 01, 2016 USD ($)	Jul. 02, 2016 USD ($)	Apr. 02, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2017 USD ($) Segment	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Significant Accounting Policies [Line Items]
Number of reportable segments | Segment										2
Non-current deferred income taxes	$ 15,981,000				$ 31,417,000					$ 15,981,000	$ 31,417,000
Net (loss) income	9,484,000	$ 4,655,000	$ 3,823,000	$ 2,115,000	2,836,000	$ 5,014,000	$ 3,861,000	$ 13,550,000		$ 20,077,000	25,261,000	$ (74,879,000)
Cash equivalent maturity period										three months or less
Production cost of contracts	11,204,000				11,340,000					$ 11,204,000	11,340,000
Goodwill impairment										0	0	57,243,000
Goodwill	117,435,000				82,554,000					117,435,000	82,554,000
Carrying value of trade names									$ 0			0
Provision for forward loss reserves	$ 1,226,000				$ 4,780,000					1,226,000	$ 4,780,000
Tax Cuts And Jobs Act of 2017, deferred Income tax benefit										$ 13,000,000
Minimum
Significant Accounting Policies [Line Items]
Estimated useful life of intangible assets (in years)										14 years
Income tax benefit percentage										50.00%
Maximum
Significant Accounting Policies [Line Items]
Estimated useful life of intangible assets (in years)										18 years
Accrued Liabilities
Significant Accounting Policies [Line Items]
Provision for forward loss reserves									7,600,000			7,600,000
Other Long-term Liabilities
Significant Accounting Policies [Line Items]
Provision for forward loss reserves									2,400,000			2,400,000
Structural Systems
Significant Accounting Policies [Line Items]
Goodwill impairment												57,200,000
Goodwill									0			0
Forward loss provision												$ 10,000,000
Trade name
Significant Accounting Policies [Line Items]
Impairment of trade names									$ 32,900,000

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Summary of Significant Accounting Policies - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Supplemental Cash Flow Information [Abstract]
Interest paid	$ 7,307	$ 6,877	$ 26,501
Taxes paid	3,125	9,778	1,150
Non-cash activities:
Purchases of property and equipment not paid	$ 2,104	$ 3,241	$ 1,549

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Summary of Significant Accounting Policies - Weighted Average Number of Shares Outstanding Used to Compute Earnings Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jul. 01, 2017	Apr. 01, 2017	Dec. 31, 2016	Oct. 01, 2016	Jul. 02, 2016	Apr. 02, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Accounting Policies [Abstract]
Net Income	$ 9,484	$ 4,655	$ 3,823	$ 2,115	$ 2,836	$ 5,014	$ 3,861	$ 13,550	$ 20,077	$ 25,261	$ (74,879)
Weighted-average number of common shares outstanding
Basic weighted-average common shares outstanding (in shares)									11,290	11,151	11,047
Dilutive potential common shares (in shares)									268	148	0
Diluted weighted-average common shares outstanding (in shares)									11,558	11,299	11,047
Earnings (Loss) Per Share
Basic (in dollars per share)	$ 0.84	$ 0.41	$ 0.34	$ 0.19	$ 0.25	$ 0.45	$ 0.35	$ 1.22	$ 1.78	$ 2.27	$ (6.78)
Diluted (in dollars per share)	$ 0.82	$ 0.41	$ 0.33	$ 0.18	$ 0.25	$ 0.44	$ 0.34	$ 1.21	$ 1.74	$ 2.24	$ (6.78)

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Summary of Significant Accounting Policies - Weighted Average Number of Shares Outstanding Excluded from Computation of Diluted Earnings (Detail) - shares shares in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Stock Options And Restricted Stock Units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options and stock units	126	553	778

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Business Combination - Narrative (Details) - USD ($) $ in Thousands		1 Months Ended	12 Months Ended
	Sep. 11, 2017	Oct. 31, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Sep. 30, 2017
Business Acquisition [Line Items]
Purchase price, net of cash acquired			$ 59,798	$ 0	$ 0
Goodwill			117,435	$ 82,554
Lightning Diversion Systems, Inc.
Business Acquisition [Line Items]
Equity interest acquired	100.00%					100.00%
Purchase price, net of cash acquired	$ 60,000
Payments to acquire business	61,400	$ 600
Gross purchase price	62,021
Intangible assets	22,400
Goodwill	$ 34,881
Acquisition related costs			$ 300

XML

Business Combination - Fair Value of Assets and Liabilities Acquired (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Sep. 11, 2017	Dec. 31, 2016
Business Acquisition [Line Items]
Goodwill	$ 117,435		$ 82,554
Lightning Diversion Systems, Inc.
Business Acquisition [Line Items]
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 purchase price allocation		$ 62,021

XML

Business Combination - Estimated Fair Value of Intangible Assets Acquired (Details) - USD ($) $ in Thousands		12 Months Ended
	Sep. 11, 2017	Dec. 31, 2017
Lightning Diversion Systems, Inc.
Business Acquisition [Line Items]
Intangible assets	$ 22,400
Customer relationships
Business Acquisition [Line Items]
Useful Life (In years)		17 years
Customer relationships | Lightning Diversion Systems, Inc.
Business Acquisition [Line Items]
Useful Life (In years)	15 years
Intangible assets	$ 21,100
Trade name
Business Acquisition [Line Items]
Useful Life (In years)		15 years
Trade name | Lightning Diversion Systems, Inc.
Business Acquisition [Line Items]
Useful Life (In years)	15 years
Intangible assets	$ 1,300

XML

Restructuring Activities (Detail) $ in Thousands	1 Months Ended	3 Months Ended	12 Months Ended
	May 31, 2016 facility	Dec. 31, 2017 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Restructuring Cost and Reserve [Line Items]
Number of facilities closed | facility	1
Restructuring Reserve [Roll Forward]
Beginning balance				$ 654
Charges		$ 8,800		8,360	$ 182	$ 2,125
Ending balance		2,725		2,725	654
Severance and benefits
Restructuring Reserve [Roll Forward]
Beginning balance				0
Ending balance		2,659		2,659	0
Modification of stock-based compensation awards
Restructuring Reserve [Roll Forward]
Beginning balance				0
Ending balance		0		0	0
Lease termination
Restructuring Reserve [Roll Forward]
Beginning balance				654
Ending balance		66		66	654
Property and equipment impairment due to restructuring
Restructuring Reserve [Roll Forward]
Beginning balance				0
Ending balance		0		0	0
Inventory write down
Restructuring Reserve [Roll Forward]
Beginning balance				0
Ending balance		0		0	$ 0
Electronic Systems
Restructuring Cost and Reserve [Line Items]
Accrued severance and loss on early exit		1,000		1,000
Electronic Systems | Severance and benefits
Restructuring Reserve [Roll Forward]
Charges				1,200
Structural Systems
Restructuring Cost and Reserve [Line Items]
Inventory Write-down				500
Accrued severance and loss on early exit		1,300		1,300
Structural Systems | Severance and benefits
Restructuring Reserve [Roll Forward]
Charges				1,700
Corporate Segment
Restructuring Cost and Reserve [Line Items]
Accrued severance and loss on early exit		400		400
Corporate Segment | Severance and benefits
Restructuring Reserve [Roll Forward]
Charges				400
Corporate Segment | Modification of stock-based compensation awards
Restructuring Reserve [Roll Forward]
Charges				1,400
Restructuring Plan, 2017
Restructuring Reserve [Roll Forward]
Charges				8,774
Cash Payments				(1,348)
Non-Cash Payments				5,419
Change in Estimates				64
Restructuring Plan, 2017 | Severance and benefits
Restructuring Reserve [Roll Forward]
Charges				3,337
Cash Payments				(678)
Non-Cash Payments				0
Change in Estimates				0
Restructuring Plan, 2017 | Modification of stock-based compensation awards
Restructuring Reserve [Roll Forward]
Charges				1,334
Cash Payments				0
Non-Cash Payments				1,334
Change in Estimates				0
Restructuring Plan, 2017 | Lease termination
Restructuring Reserve [Roll Forward]
Charges				18
Cash Payments				(670)
Non-Cash Payments				0
Change in Estimates				64
Restructuring Plan, 2017 | Property and equipment impairment due to restructuring
Restructuring Reserve [Roll Forward]
Charges				3,607
Cash Payments				0
Non-Cash Payments				3,607
Change in Estimates				0
Restructuring Plan, 2017 | Inventory write down
Restructuring Reserve [Roll Forward]
Charges				478
Cash Payments				0
Non-Cash Payments				478
Change in Estimates				0
Restructuring Plan, 2016 | Severance and benefits
Restructuring Cost and Reserve [Line Items]
Restructuring costs incurred to date		200		200
Restructuring Plan, 2016 | Electronic Systems
Restructuring Reserve [Roll Forward]
Ending balance		100		100
Restructuring Plan, 2015 | Severance and benefits
Restructuring Cost and Reserve [Line Items]
Restructuring costs incurred to date		2,200		2,200
Minimum | Restructuring Plan, 2017
Restructuring Cost and Reserve [Line Items]
Expected restructuring cost		19,000		19,000
Maximum | Restructuring Plan, 2017
Restructuring Cost and Reserve [Line Items]
Expected restructuring cost		$ 22,000		$ 22,000
Scenario, Forecast | Restructuring Plan, 2017
Restructuring Reserve [Roll Forward]
Effect on Future Earnings, Amount			$ 14,000

XML

Fair Value Measurements (Details) - Recurring Measurement - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	$ 26	$ 3,751
Interest rate cap hedges	165	553
Total Assets	191	4,304
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	26	3,751
Interest rate cap hedges	0	0
Total Assets	26	3,751
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	0	0
Interest rate cap hedges	165	553
Total Assets	165	553
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	0	0
Interest rate cap hedges	0	0
Total Assets	$ 0	$ 0

XML

Financial Instruments (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Derivative [Line Items]
Interest rate cap hedges recognized in other comprehensive income, net of tax	$ (242,000)	$ (305,000)	$ 0
Other Current Assets
Derivative [Line Items]
Derivative asset	0	0
Other Long Term Assets
Derivative [Line Items]
Derivative asset	165,000	553,000
Interest rate cap premiums
Derivative [Line Items]
Interest rate cap hedges recognized in other comprehensive income, net of tax	200,000
Gain (loss) on derivative, net	0
Cash Flow Hedging | Designated as Hedging Instrument | Interest rate cap premiums | Other Current Assets
Derivative [Line Items]
Derivative asset	0	0
Cash Flow Hedging | Designated as Hedging Instrument | Interest rate cap premiums | Other Long Term Assets
Derivative [Line Items]
Derivative asset	$ 165,000	$ 553,000

XML

Inventories (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Inventory Disclosure [Abstract]
Raw materials and supplies	$ 65,221	$ 64,650
Work in process	62,584	56,806
Finished goods	10,665	9,180
Total inventory, gross	138,470	130,636
Less progress payments	16,309	10,740
Total	$ 122,161	$ 119,896

XML

Property and Equipment, Net (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 253,468	$ 237,074
Less accumulated depreciation	143,216	135,484
Total	110,252	101,590
Depreciation expense	13,200	13,300	$ 15,700
Land
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	15,662	15,662
Buildings and improvements
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 57,024	49,870
Buildings and improvements | Minimum
Property, Plant and Equipment [Line Items]
Useful life	5 years
Buildings and improvements | Maximum
Property, Plant and Equipment [Line Items]
Useful life	40 years
Machinery and equipment
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 146,175	137,555
Machinery and equipment | Minimum
Property, Plant and Equipment [Line Items]
Useful life	2 years
Machinery and equipment | Maximum
Property, Plant and Equipment [Line Items]
Useful life	20 years
Furniture and equipment
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 21,127	21,749
Furniture and equipment | Minimum
Property, Plant and Equipment [Line Items]
Useful life	2 years
Furniture and equipment | Maximum
Property, Plant and Equipment [Line Items]
Useful life	10 years
Construction in progress
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 13,480	$ 12,238

XML

Goodwill and Other Intangible Assets - Carrying Amount of Goodwill (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Goodwill [Roll Forward]
Goodwill, beginning balance	$ 82,554
Goodwill, ending balance	117,435
Electronic Systems
Goodwill [Line Items]
Gross goodwill		$ 164,276
Accumulated goodwill impairment		$ (81,722)
Goodwill [Roll Forward]
Goodwill, beginning balance	82,554
Goodwill from acquisition during the period	34,881
Goodwill, ending balance	$ 117,435

XML

Goodwill and Other Intangible Assets - Additional Information (Detail) - USD ($) $ in Thousands		12 Months Ended
	Sep. 11, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Sep. 30, 2017
Goodwill And Intangible Assets [Line Items]
Goodwill		$ 117,435	$ 82,554
Purchase price, net of cash acquired		59,798	0	$ 0
Amortization expense of intangible asset		$ 9,300	9,000	$ 10,000
Minimum
Goodwill And Intangible Assets [Line Items]
Acquired intangible assets amortization period		14 years
Maximum
Goodwill And Intangible Assets [Line Items]
Acquired intangible assets amortization period		18 years
Electronic Systems
Goodwill And Intangible Assets [Line Items]
Goodwill		$ 117,435	$ 82,554
Goodwill fair value in excess of carrying value			32.00%
Lightning Diversion Systems, Inc.
Goodwill And Intangible Assets [Line Items]
Goodwill	$ 34,881
Equity interest acquired	100.00%				100.00%
Purchase price, net of cash acquired	$ 60,000
Gross purchase price	$ 62,021

XML

Goodwill and Other Intangible Assets - Carrying Amount of Finite-lived and Other Intangible Assets (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 183,845	$ 161,445
Accumulated Amortization	69,152	59,872
Net Carrying Amount	114,693	101,573
Structural Systems
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	19,300	19,300
Accumulated Amortization	16,464	15,555
Net Carrying Amount	2,836	3,745
Electronic Systems
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	164,545	142,145
Accumulated Amortization	52,688	44,317
Net Carrying Amount	$ 111,857	97,828
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Estimated useful life of intangible assets (in years)	17 years
Gross Carrying Amount	$ 180,300	159,200
Accumulated Amortization	67,449	58,352
Net Carrying Amount	$ 112,851	100,848
Trade Names
Finite-Lived Intangible Assets [Line Items]
Estimated useful life of intangible assets (in years)	15 years
Gross Carrying Amount	$ 1,300	0
Accumulated Amortization	26	0
Net Carrying Amount	$ 1,274	0
Contract renewal
Finite-Lived Intangible Assets [Line Items]
Estimated useful life of intangible assets (in years)	14 years
Gross Carrying Amount	$ 1,845	1,845
Accumulated Amortization	1,493	1,362
Net Carrying Amount	$ 352	483
Technology
Finite-Lived Intangible Assets [Line Items]
Estimated useful life of intangible assets (in years)	15 years
Gross Carrying Amount	$ 400	400
Accumulated Amortization	184	158
Net Carrying Amount	$ 216	$ 242

XML

Goodwill and Other Intangible Assets - Future Amortization Expense of Other Intangible Assets (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
2018	$ 10,157
2019	10,010
2020	9,838
2021	9,668
2022	9,608
Thereafter	65,412
Net Carrying Amount	114,693	$ 101,573
Structural Systems
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
2018	737
2019	591
2020	490
2021	381
2022	320
Thereafter	317
Net Carrying Amount	2,836	3,745
Electronic Systems
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
2018	9,420
2019	9,419
2020	9,348
2021	9,287
2022	9,288
Thereafter	65,095
Net Carrying Amount	$ 111,857	$ 97,828

XML

Accrued Liabilities (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Payables and Accruals [Abstract]
Accrued compensation	$ 18,925	$ 15,455
Accrued income tax and sales tax	71	332
Customer deposits	3,970	3,204
Provision for forward loss reserves	1,226	4,780
Other	4,137	5,508
Total	$ 28,329	$ 29,279

XML

Long-Term Debt - Summary (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Long-term debt, gross	$ 218,100	$ 170,003
Less current portion	0	3
Total long-term debt	218,100	170,000
Less debt issuance costs	2,045	3,104
Total long-term debt, net of debt issuance costs	$ 216,055	$ 166,896
Weighted-average interest rate (percent)	3.73%	3.25%
Term Loan
Debt Instrument [Line Items]
Long-term debt, gross	$ 160,000	$ 170,000
Revolving Credit Facility
Debt Instrument [Line Items]
Long-term debt, gross	58,100	0
Other Debt
Debt Instrument [Line Items]
Long-term debt, gross	$ 0	$ 3
Fixed rate (percent)	5.41%

XML

Long-Term Debt - Future Long-Term Debt Payment (Detail) $ in Thousands	Dec. 31, 2017 USD ($)
Long-term Debt, Fiscal Year Maturity [Abstract]
2018	$ 0
2019	0
2020	218,100
2021	0
2022	0
Total Debt	$ 218,100

XML

Long-Term Debt - Additional information (Detail) - USD ($)		1 Months Ended			12 Months Ended
	Sep. 11, 2017	Oct. 31, 2017	Dec. 31, 2016	Oct. 31, 2015	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Purchase price, net of cash acquired					$ 59,798,000	$ 0	$ 0
Interest rate cap premiums
Debt Instrument [Line Items]
Hedging asset				$ 135,000,000
Payments for hedging asset				$ 1,000,000
New Credit Facilities | First Two Years
Debt Instrument [Line Items]
Prepayment percentage of principal					5.00%
New Credit Facilities | Third Year
Debt Instrument [Line Items]
Prepayment percentage of principal					7.50%
New Credit Facilities | Fourth and Fifth Year
Debt Instrument [Line Items]
Prepayment percentage of principal					10.00%
New Credit Facilities | Federal Funds Rate
Debt Instrument [Line Items]
Fixed rate spread (percent)					0.50%
New Credit Facilities | Eurodollar Rate
Debt Instrument [Line Items]
Fixed rate spread (percent)					1.00%
New Credit Facilities | Minimum
Debt Instrument [Line Items]
Commitment fee (percent)					0.175%
New Credit Facilities | Minimum | LIBOR Rate
Debt Instrument [Line Items]
Variable rate spread (percent)					1.50%
New Credit Facilities | Minimum | Base Rate
Debt Instrument [Line Items]
Variable rate spread (percent)					0.50%
New Credit Facilities | Maximum
Debt Instrument [Line Items]
Commitment fee (percent)					0.30%
New Credit Facilities | Maximum | LIBOR Rate
Debt Instrument [Line Items]
Variable rate spread (percent)					2.75%
New Credit Facilities | Maximum | Base Rate
Debt Instrument [Line Items]
Variable rate spread (percent)					1.75%
New Credit Facilities | Term Loan
Debt Instrument [Line Items]
Face amount of instrument					$ 275,000,000.0
Term of debt instrument					5 years
Repayments of line of credit					$ 10,000,000
New Credit Facilities | Revolving Credit Facility
Debt Instrument [Line Items]
Face amount of instrument					200,000,000.0
Debt issuance costs					4,800,000
Remaining borrowing capacity					141,600,000
Proceeds from line of credit					58,100,000
Outstanding standby letters of credit					300,000
Parsons, KS | Municipal Bonds
Debt Instrument [Line Items]
Purchase of industrial revenue bonds			$ 9,900,000		14,200,000	9,900,000
Parsons, KS
Debt Instrument [Line Items]
Proceeds received from sale of property to be leased back			9,900,000		14,200,000
Total lease liability from assets sold			$ 9,900,000		$ 14,200,000	$ 9,900,000
Lightning Diversion Systems, Inc.
Debt Instrument [Line Items]
Purchase price, net of cash acquired	$ 60,000,000
Payments to acquire business	$ 61,400,000	$ 600,000

XML

Shareholders' Equity (Detail) - shares	Dec. 31, 2017	Dec. 31, 2016
Equity [Abstract]
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0

XML

Stock-Based Compensation - Additional Information (Detail) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2017 USD ($) plan $ / shares shares	Dec. 31, 2016 USD ($) $ / shares shares	Dec. 31, 2015 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of incentive plans | plan	2
Options, Granted (in shares) | shares	129,400
Weighted-average fair value of grants (in dollars per share) | $ / shares	$ 11.88
Outstanding at end of period, Weighted average remaining contractual term	5 years 2 months 12 days
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, Granted (in shares) | shares	129,400	123,500	73,000
Weighted-average fair value of grants (in dollars per share) | $ / shares	$ 11.88	$ 6.53	$ 10.63
Expiration period from date of grant	7 years
Option vesting term	4 years
Aggregate intrinsic value of stock options exercised	$ 2.5	$ 1.3	$ 2.3
Cash received from the exercise of options	4.3	2.1	3.1
Tax benefits realized for the tax deductions from options exercised	$ 0.9	0.5	0.9
Options vested (in shares) | shares	306,225
Weighted average exercise price (in dollars per share) | $ / shares	$ 23.38
Aggregate intrinsic value	$ 1.7
Outstanding at end of period, Weighted average remaining contractual term	5 years 2 months 12 days
Share-based compensation expense	$ 0.7	0.8	1.2
Unrecognized compensation cost related to stock option	$ 1.5
Weighted average period	3 years 1 month 6 days
Total fair value of options expensed before tax benefits	$ 0.8	0.9	1.3
Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option vesting term	3 years
Share-based compensation expense	$ 2.0	$ 1.8	$ 1.8
Weighted average period	2 years
Awards, Granted (in shares) | shares	135,350	139,450	108,500
Weighted average grant date fair value (in dollars per share) | $ / shares	$ 28.97	$ 15.97	$ 25.15
Vesting percentage in year one	33.00%
Vesting percentage in year two	33.00%
Vesting percentage in year three	34.00%
Compensation not yet recognized	$ 3.0
Fair value of awards vested in period	3.0	$ 1.3	$ 1.8
Tax benefit realized on vesting of options	1.1	0.7	0.7
Performance Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	$ 2.0	$ 0.4	$ 0.5
Weighted average period	1 year 8 months 12 days
Awards, Granted (in shares) | shares	126,000	62,500	64,000
Weighted average grant date fair value (in dollars per share) | $ / shares	$ 26.31	$ 15.92	$ 25.51
Compensation not yet recognized	$ 2.4
Fair value of awards vested in period	1.2	$ 1.1	$ 0.9
Tax benefit realized on vesting of options	$ 0.5	$ 0.2	$ 0.3
2007 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (in shares) | shares	1,200,000
Shares reserved for future issuance other than stock options | shares	400,000
Shares reserved for future issuance | shares	0
2013 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (in shares) | shares	1,040,000
Shares reserved for future issuance | shares	77,693

XML

Stock-Based Compensation - Option Activity (Detail) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) $ / shares shares
Number of Shares
Options, Outstanding Beginning Balance (in shares) | shares	439,550
Options, Granted (in shares) | shares	129,400
Options, Exercised (in shares) | shares	(212,775)
Option, Expired (in shares) | shares	(5,800)
Options, Forfeited (in shares) | shares	(44,150)
Options, Outstanding Ending Balance (in shares) | shares	306,225
Options, Exercisable at end of period (in shares) | shares	86,425
Weighted-Average Exercise Price Per Share
Options, Beginning Balance (in dollars per share) | $ / shares	$ 20.07
Options, Granted (in dollars per share) | $ / shares	29.19
Options, Exercised (in dollars per share) | $ / shares	20.38
Options, Expired, (in dollars per share) | $ / shares	21.12
Options, Forfeited (in dollars per share) | $ / shares	22.19
Options, Ending Balance (in dollars per share) | $ / shares	23.38
Options, Exercisable at end of period (in dollars per share) | $ / shares	$ 20.78
Options, Outstanding at end of period, Weighted Average Remaining Contractual Life (Years)	5 years 2 months 12 days
Options, Exercisable at end of period, Weighted Average Remaining Contractual Life (Years)	2 years 10 months 24 days
Options, Outstanding at end of period, Aggregate Intrinsic Value | $	$ 1,654
Options, Exercisable at end of period, Aggregate Intrinsic Value | $	$ 663

XML

Stock-Based Compensation - Changes in Nonvested Stock Options (Details)	12 Months Ended
	Dec. 31, 2017 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares [Roll Forward]
Options, Nonvested, Beginning balance (shares) | shares	225,175
Options, Nonvested, Granted (in shares) | shares	129,400
Options, Nonvested, Vested (shares) | shares	(90,625)
Options, Nonvested, Forfeited (shares) | shares	(44,150)
Options, Nonvested, Ending balance (shares) | shares	219,800
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Options, Nonvested, Weighted Average Grant Date Fair Value, Beginning balance, (in dollars per share) | $ / shares	$ 8.77
Options, Nonvested, Weighted Average Grant Date Fair Value, Granted, (in dollars per share) | $ / shares	11.88
Options, Nonvested, Weighted Average Grant Date Fair Value, Vested, (in dollars per share) | $ / shares	8.87
Options, Nonvested, Weighted Average Grant Date Fair Value, Forfeited, (in dollars per share) | $ / shares	7.93
Options, Nonvested, Weighted Average Grant Date Fair Value, Ending balance, (in dollars per share) | $ / shares	$ 11.07

XML

Stock-Based Compensation - Assumptions Used for Estimating Fair Value of Share Based Payment Award (Detail) - Stock Options - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate (percent)	1.75%	1.20%	1.13%
Expected volatility (percent)	50.37%	51.79%	53.72%
Expected dividends	$ 0	$ 0	$ 0
Expected term (in months)	48 months	48 months	47 months

XML

Stock-Based Compensation - Restricted Stock Activity (Detail) - $ / shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Weighted Average Grant Date Fair Value
Adjustment for target performance, Weighted Average Grant Date Fair Value (in dollars per share)	$ 25.48
Restricted Stock Units
Outstanding
Awards, Outstanding at beginning of period (in shares)	193,382
Awards, Granted (in shares)	135,350	139,450	108,500
Awards, Vested (in shares)	(101,930)
Awards, Forfeited (in shares)	(41,458)
Awards, Outstanding at ending of period (in shares)	185,344	193,382
Weighted Average Grant Date Fair Value
Outstanding at beginning of period, Weighted Average Grant Date Fair Value (in dollars per share)	$ 18.88
Granted, Weighted Average Grant Date Fair Value (in dollars per share)	28.97	$ 15.97	$ 25.15
Vested, Weighted Average Grant Date Fair Value (in dollars per share)	19.66
Forfeited, Weighted Average Grant Date Fair Value (in dollars per share)	21.93
Outstanding at ending of period, Weighted Average Grant Date Fair Value (in dollars per share)	$ 25.14	$ 18.88
Performance Stock Units
Outstanding
Awards, Outstanding at beginning of period (in shares)	121,637
Awards, Granted (in shares)	126,000	62,500	64,000
Adjustment for target performance (in shares)	37,350
Awards, Vested (in shares)	(43,487)
Awards, Forfeited (in shares)	(20,000)
Awards, Outstanding at ending of period (in shares)	221,500	121,637
Weighted Average Grant Date Fair Value
Outstanding at beginning of period, Weighted Average Grant Date Fair Value (in dollars per share)	$ 20.39
Granted, Weighted Average Grant Date Fair Value (in dollars per share)	26.31	$ 15.92	$ 25.51
Vested, Weighted Average Grant Date Fair Value (in dollars per share)	24.98
Forfeited, Weighted Average Grant Date Fair Value (in dollars per share)	22.63
Outstanding at ending of period, Weighted Average Grant Date Fair Value (in dollars per share)	$ 23.52	$ 20.39

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Employee Benefit Plans - Additional Information (Detail) $ in Millions	12 Months Ended
	Dec. 31, 2017 USD ($) CompensationPlan	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Defined Benefit Plan Disclosure [Line Items]
Number of unfunded supplemental retirement plans | CompensationPlan	3
Accumulated benefit obligations	$ 0.6	$ 0.7
Number of company sponsored 401(K) defined contribution plans | CompensationPlan	1
Provision for matching and profit sharing contribution	$ 2.7	2.7	$ 3.2
Estimated net actuarial loss for the defined benefit pension plan	0.7
Excess of accumulated benefit obligation over fair value of plan assets	10.4
Pension liability	5.6	5.8
Estimated employer Contribution to pension plan in next fiscal year	$ 0.9
Plan One covering all employees, other than employees of Miltec
Defined Benefit Plan Disclosure [Line Items]
Contribution by employee towards defined benefit plan	25.00%
Contribution by employer towards defined benefit plan	50.00%
Employee contribution compensation limit	6.00%
Deferred Compensation Plan
Defined Benefit Plan Disclosure [Line Items]
Liability for LaBarge Deferred Compensation Plan	$ 0.1	0.6
Interest on LaBarge Deferred Compensation Plan	$ 0.7	$ 0.8
Executives and Directors
Defined Benefit Plan Disclosure [Line Items]
Number of unfunded supplemental retirement plans | CompensationPlan	2

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Employee Benefit Plans - Components of Net Periodic Pension Cost for Defined Benefit Pension Plan and Retirement Plan (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Retirement Benefits [Abstract]
Service cost	$ 531	$ 531	$ 785
Interest cost	1,329	1,367	1,350
Expected return on plan assets	(1,530)	(1,482)	(1,495)
Amortization of actuarial losses	810	762	887
Net periodic pension cost	$ 1,140	$ 1,178	$ 1,527

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Employee Benefit Plans - Reclassifications from Accumulated Other Comprehensive Income (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Retirement Benefits [Abstract]
Amortization of actuarial loss - total before tax	$ 810
Tax benefit	(302)	$ (283)	$ (330)
Net of tax	$ 508	$ 479	$ 557

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Employee Benefit Plans - Obligation and Funded Status of Defined Benefit Pension Plan and Retirement Plan (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Change in benefit obligation
Benefit obligation at beginning of year	$ 33,154	$ 31,510
Service cost	531	531	$ 785
Interest cost	1,329	1,367	1,350
Actuarial loss	2,449	1,132
Benefits paid	(1,461)	(1,386)
Ending benefit obligation	36,002	33,154	31,510
Change in plan assets
Fair value of plan assets at beginning of year	22,015	19,933
Return on assets	3,481	1,551
Employer contribution	1,611	1,917
Benefits paid	(1,461)	(1,386)
Fair value of plan assets at end of year	25,646	22,015	19,933
Funded status (underfunded)	(10,356)	(11,139)
Amounts recognized in the consolidated balance sheet
Current liabilities	560	544
Non-current liabilities	9,796	10,595
Unrecognized loss included in accumulated other comprehensive loss
Unrecognized loss before tax, beginning balance	9,220	8,919
Amortization	(810)	(762)
Liability loss	2,449	1,132
Asset gain	(1,951)	(69)
Unrecognized loss before tax, ending balance	8,908	9,220	$ 8,919
Tax impact	(3,309)	(3,425)
Unrecognized loss included in accumulated other comprehensive loss, net of tax	$ 5,599	$ 5,795

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Employee Benefit Plans - Pension Plan Asset Allocations (Detail)	Dec. 31, 2017	Dec. 31, 2016
Defined Benefit Plan Disclosure [Line Items]
Plan Assets	100.00%	100.00%
Equity securities
Defined Benefit Plan Disclosure [Line Items]
Plan Assets	70.00%	65.00%
Cash and equivalents
Defined Benefit Plan Disclosure [Line Items]
Plan Assets	1.00%	2.00%
Debt securities
Defined Benefit Plan Disclosure [Line Items]
Plan Assets	29.00%	33.00%

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Employee Benefit Plans - Asset Allocation Ranges (Detail)	Dec. 31, 2017
Minimum | Cash
Defined Benefit Plan Disclosure [Line Items]
Minimum %	0.00%
Minimum | Fixed income securities
Defined Benefit Plan Disclosure [Line Items]
Minimum %	15.00%
Minimum | Equity securities
Defined Benefit Plan Disclosure [Line Items]
Minimum %	30.00%
Maximum | Cash
Defined Benefit Plan Disclosure [Line Items]
Minimum %	5.00%
Maximum | Fixed income securities
Defined Benefit Plan Disclosure [Line Items]
Minimum %	75.00%
Maximum | Equity securities
Defined Benefit Plan Disclosure [Line Items]
Minimum %	80.00%

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Employee Benefit Plans - Return on Current and Target Asset Allocation (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Defined Benefit Plan Disclosure [Line Items]
Pension plan assets	$ 25,646	$ 22,015	$ 19,933
Total fair value of plan assets, not including pooled funds	6,164	6,205
Pooled funds	19,482	15,810
Cash and cash equivalents
Defined Benefit Plan Disclosure [Line Items]
Pension plan assets	135	366
Fixed income securities
Defined Benefit Plan Disclosure [Line Items]
Pension plan assets	3,494	3,468
Equity securities
Defined Benefit Plan Disclosure [Line Items]
Pension plan assets	1,625	1,611
Other Investments
Defined Benefit Plan Disclosure [Line Items]
Pension plan assets	910	760
Level 1
Defined Benefit Plan Disclosure [Line Items]
Total fair value of plan assets, not including pooled funds	6,164	6,205
Level 1 | Cash and cash equivalents
Defined Benefit Plan Disclosure [Line Items]
Pension plan assets	135	366
Level 1 | Fixed income securities
Defined Benefit Plan Disclosure [Line Items]
Pension plan assets	3,494	3,468
Level 1 | Equity securities
Defined Benefit Plan Disclosure [Line Items]
Pension plan assets	1,625	1,611
Level 1 | Other Investments
Defined Benefit Plan Disclosure [Line Items]
Pension plan assets	910	760
Level 2
Defined Benefit Plan Disclosure [Line Items]
Total fair value of plan assets, not including pooled funds	0	0
Level 2 | Cash and cash equivalents
Defined Benefit Plan Disclosure [Line Items]
Pension plan assets	0	0
Level 2 | Fixed income securities
Defined Benefit Plan Disclosure [Line Items]
Pension plan assets	0	0
Level 2 | Equity securities
Defined Benefit Plan Disclosure [Line Items]
Pension plan assets	0	0
Level 2 | Other Investments
Defined Benefit Plan Disclosure [Line Items]
Pension plan assets	0	0
Level 3
Defined Benefit Plan Disclosure [Line Items]
Total fair value of plan assets, not including pooled funds	0	0
Level 3 | Cash and cash equivalents
Defined Benefit Plan Disclosure [Line Items]
Pension plan assets	0	0
Level 3 | Fixed income securities
Defined Benefit Plan Disclosure [Line Items]
Pension plan assets	0	0
Level 3 | Equity securities
Defined Benefit Plan Disclosure [Line Items]
Pension plan assets	0	0
Level 3 | Other Investments
Defined Benefit Plan Disclosure [Line Items]
Pension plan assets	$ 0	$ 0

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Employee Benefit Plans - Weighted-average Assumptions Used to Determine Benefit Obligations (Detail)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Pension Plan
Discount rate used to determine pension expense :
Discount rate	4.18%	4.55%	4.25%
Discount rate used to determine value of obligations
Discount rate	3.64%	4.18%	4.55%
Long term rate of return	7.00%	7.50%	7.50%
Retirement Plan | La Barge
Discount rate used to determine pension expense :
Discount rate	3.75%	4.00%	3.70%
Discount rate used to determine value of obligations
Discount rate	3.40%	3.75%	4.00%

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Employee Benefit Plans - Future Benefit Payments Under Pension Plans (Detail) $ in Thousands	Dec. 31, 2017 USD ($)
Pension Plan
Defined Benefit Plan, Expected Future Benefit Payment [Abstract]
2018	$ 1,178
2019	1,212
2020	1,288
2021	1,365
2022	1,453
2023 - 2027	8,246
Retirement Plan | La Barge
Defined Benefit Plan, Expected Future Benefit Payment [Abstract]
2018	561
2019	546
2020	528
2021	506
2022	482
2023 - 2027	$ 2,022

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Leases - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Leases [Abstract]
Lease term, Minimum	1 year
Lease term, Maximum	10 years
Lease rental expense	$ 5.0	$ 4.9	$ 8.5

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Leases - Rental Payments Under Operating Lease (Detail) $ in Thousands	Dec. 31, 2017 USD ($)
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2018	$ 3,586
2019	2,793
2020	2,554
2021	1,927
2022	947
Thereafter	553
Total	$ 12,360

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Income Taxes - Schedule of Components of Provision (Benefit) for Income Taxes (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jul. 01, 2017	Apr. 01, 2017	Dec. 31, 2016	Oct. 01, 2016	Jul. 02, 2016	Apr. 02, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Current tax expense (benefit)
Federal									$ 2,387	$ 5,953	$ (1,511)
State									525	2,982	(418)
Current Income Tax Expense (Benefit), Total									2,912	8,935	(1,929)
Deferred tax (benefit) expense
Federal									(15,515)	3,876	(28,011)
State									135	41	(1,771)
Deferred Income Tax (Benefit) Expense, Total									(15,380)	3,917	(29,782)
Income tax (benefit) expense	$ (14,541)	$ 940	$ 741	$ 392	$ 2,989	$ 1,234	$ 1,470	$ 7,159	$ (12,468)	$ 12,852	$ (31,711)

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Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Tax Credit Carryforward [Line Items]
Tax Cuts and Jobs Act of 2017, tax benefit	$ 13,000
Excess tax benefit over compensation cost recognized, amount	600
Excess tax (benefits) or shortfall from share-based compensation		$ (80)	$ 626
Operating loss carryforward not expected to be realized under ASC subtopic 740-10	1,300
Tax credit carryforwards	5,613	4,234
Tax credit carryforwards valuation allowance	9,013	6,607
Permanent book to tax difference from goodwill impairment			8,700
Unrecognized tax benefits	5,271	$ 3,036	$ 2,963	$ 2,803
Unrecognized tax benefits that would impact effective tax rate	3,400
State
Tax Credit Carryforward [Line Items]
Net operating loss carryforwards	1,800
Tax credit carryforwards	12,800
Tax credit carryforwards valuation allowance	11,300
Federal
Tax Credit Carryforward [Line Items]
Tax credit carryforwards	$ 6,600

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Income Taxes - Schedule of Deferred Income Taxes (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Deferred tax assets:
Accrued expenses	$ 313	$ 760
Allowance for doubtful accounts	208	184
Contract overrun reserves	294	1,776
Deferred compensation	177	507
Employment-related accruals	2,091	2,888
Environmental reserves	501	769
Federal tax credit carryforwards	5,613	4,234
Inventory reserves	1,315	2,313
Pension obligation	2,398	4,002
State net operating loss carryforwards	86	63
State tax credit carryforwards	9,051	6,585
Stock-based compensation	1,480	1,950
Workers’ compensation	75	122
Other	1,492	2,098
Total gross deferred tax assets	25,094	28,251
Valuation allowance	(9,013)	(6,607)
Total gross deferred tax assets, net of valuation allowance	16,081	21,644
Deferred tax liabilities:
Depreciation	(7,976)	(13,167)
Goodwill	(2,902)	(3,909)
Intangibles	(20,611)	(35,071)
Prepaid insurance	(312)	(626)
Unbilled receivables	0	(2)
Total gross deferred tax liabilities	(31,801)	(52,775)
Net deferred tax liabilities	$ (15,720)	$ (31,131)

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Income Taxes - Variation Between Expected and Effective Tax Rate (Detail)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income Tax Disclosure [Abstract]
Statutory federal income tax (benefit) rate	35.00%	35.00%	35.00%
State income taxes (net of federal benefit)	2.50%	5.70%	1.20%
Qualified domestic production activities	(2.60%)	(2.00%)	(0.50%)
Stock-based compensation expense	(8.20%)	0.00%	0.00%
Research and development tax credits	(50.60%)	(8.60%)	2.90%
Other tax credits	(7.50%)	(0.00%)	(0.00%)
Goodwill impairment	0.00%	0.00%	(8.10%)
Changes in valuation allowance	10.60%	0.90%	(0.60%)
Non-deductible book expenses	1.10%	0.20%	(0.20%)
Changes in deferred tax assets	15.40%	1.50%	(0.10%)
Re-measurement of deferred taxes for 2017 Tax Act	(171.30%)	0.00%	0.00%
Changes in tax reserves	11.40%	0.00%	(0.10%)
Other	0.40%	1.00%	0.20%
Effective income tax (benefit) rate	(163.80%)	33.70%	29.70%

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Income Taxes - Schedule of Changes in Unrecognized Tax Benefit (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
Beginning Balance	$ 3,036	$ 2,963	$ 2,803
Additions for tax positions related to the current year	422	476	702
Additions for tax positions related to prior years	1,953	385	0
Reductions for tax positions related to prior years	(99)	(567)	(48)
Reductions for lapse of statute of limitations	(41)	(221)	(494)
Ending Balance	$ 5,271	$ 3,036	$ 2,963

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Contingencies (Detail) - Ducommun AeroStructures $ in Millions	Dec. 31, 2017 USD ($)
El Mirage and Monrovia, California
Loss Contingencies [Line Items]
Reserve for estimated liability	$ 1.5
Casmalia and West Covina, California
Loss Contingencies [Line Items]
Reserve for estimated liability	0.4
Minimum | Casmalia and West Covina, California
Loss Contingencies [Line Items]
Estimate of possible loss	0.4
Maximum | Casmalia and West Covina, California
Loss Contingencies [Line Items]
Estimate of possible loss	$ 3.1

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Major Customers and Concentrations of Credit Risk - Sales to Major Customers (Detail) - Customer Concentration Risk - Sales Revenue, Net	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Boeing
Revenue, Major Customer [Line Items]
Concentration percentage	16.40%	17.30%	16.00%
Lockheed Martin
Revenue, Major Customer [Line Items]
Concentration percentage	5.50%	5.60%	1.20%
Raytheon
Revenue, Major Customer [Line Items]
Concentration percentage	13.50%	8.40%	8.70%
Spirit
Revenue, Major Customer [Line Items]
Concentration percentage	8.20%	8.20%	7.40%
United Technologies
Revenue, Major Customer [Line Items]
Concentration percentage	4.70%	5.30%	6.10%
Top Ten Customers
Revenue, Major Customer [Line Items]
Concentration percentage	62.50%	58.60%	55.70%

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Major Customers and Concentrations of Credit Risk - Receivables from Customers (Detail) - Customer Concentration Risk - Accounts Receivable	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Boeing
Concentration Risk [Line Items]
Concentration percentage	7.80%	7.80%
Lockheed Martin
Concentration Risk [Line Items]
Concentration percentage	5.90%	2.90%
Raytheon
Concentration Risk [Line Items]
Concentration percentage	1.40%	10.90%
Spirit
Concentration Risk [Line Items]
Concentration percentage	13.50%	9.00%
United Technologies
Concentration Risk [Line Items]
Concentration percentage	2.30%	7.80%

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Major Customers and Concentrations of Credit Risk - Additional Information (Detail) - Foreign Customers Worldwide - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Concentration Risk [Line Items]
Revenues	$ 57.2	$ 56.4	$ 60.2
Maximum
Concentration Risk [Line Items]
Percentage of sales	3.00%	3.00%	3.00%

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Business Segment Information - Additional Information (Detail) $ in Thousands		12 Months Ended
	Sep. 11, 2017 USD ($)	Dec. 31, 2017 USD ($) Segment	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Sep. 30, 2017
Segment Reporting [Abstract]
Number of reportable segments | Segment		2
Segment Reporting Information [Line Items]
Purchase price, net of cash acquired		$ 59,798	$ 0	$ 0
Lightning Diversion Systems, Inc.
Segment Reporting Information [Line Items]
Equity interest acquired	100.00%				100.00%
Purchase price, net of cash acquired	$ 60,000
Gross purchase price	$ 62,021

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Business Segment Information - Financial Information by Reportable Segment (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jul. 01, 2017	Apr. 01, 2017	Dec. 31, 2016	Oct. 01, 2016	Jul. 02, 2016	Apr. 02, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Segment Reporting Information [Line Items]
Net Revenues	$ 142,258	$ 138,690	$ 140,938	$ 136,297	$ 142,486	$ 132,571	$ 133,437	$ 142,148	$ 558,183	$ 550,642	$ 666,011
Segment Operating Income (Loss)									36,417	45,480	(57,482)
Corporate General and Administrative Expenses									(21,392)	(16,912)	(17,827)
Operating Income (Loss)									15,025	28,568	(75,309)
Depreciation and amortization									22,845	22,860	26,846
Capital Expenditures									26,473	18,693	15,988
Operating Segments | Structural Systems
Segment Reporting Information [Line Items]
Net Revenues									241,460	246,465	273,319
Segment Operating Income (Loss)									5,477	16,497	(53,010)
Depreciation and amortization									8,860	8,688	9,417
Capital Expenditures									20,679	15,661	11,559
Operating Segments | Electronic Systems
Segment Reporting Information [Line Items]
Net Revenues									316,723	304,177	392,692
Segment Operating Income (Loss)									30,940	28,983	(4,472)
Depreciation and amortization									13,888	14,087	17,267
Capital Expenditures									5,019	3,032	4,419
Corporate Administration
Segment Reporting Information [Line Items]
Depreciation and amortization									97	85	162
Capital Expenditures									$ 775	$ 0	$ 10

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Business Segment Information - Segment Assets (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Segment Reporting Information [Line Items]
Total Assets	$ 566,753	$ 515,429
Goodwill and Intangibles	232,128	184,127
Operating Segments | Structural Systems
Segment Reporting Information [Line Items]
Total Assets	193,600	175,580
Goodwill and Intangibles	2,836	3,745
Operating Segments | Electronic Systems
Segment Reporting Information [Line Items]
Total Assets	362,831	325,780
Goodwill and Intangibles	229,292	180,382
Corporate Administration
Segment Reporting Information [Line Items]
Total Assets	$ 10,322	$ 14,069

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Supplemental Quarterly Financial Data (Unaudited) (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jul. 01, 2017	Apr. 01, 2017	Dec. 31, 2016	Oct. 01, 2016	Jul. 02, 2016	Apr. 02, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Quarterly Financial Information Disclosure [Abstract]
Net Revenues	$ 142,258	$ 138,690	$ 140,938	$ 136,297	$ 142,486	$ 132,571	$ 133,437	$ 142,148	$ 558,183	$ 550,642	$ 666,011
Gross Profit	25,693	26,009	26,191	24,927	27,786	25,223	26,215	26,969	102,820	106,193	100,792
(Loss) Income Before Taxes	(5,057)	5,595	4,564	2,507	5,825	6,248	5,331	20,709	7,609	38,113	(106,590)
Income Tax (Benefit) Expense	(14,541)	940	741	392	2,989	1,234	1,470	7,159	(12,468)	12,852	(31,711)
Net Income	$ 9,484	$ 4,655	$ 3,823	$ 2,115	$ 2,836	$ 5,014	$ 3,861	$ 13,550	$ 20,077	$ 25,261	$ (74,879)
Earnings Per Share
Basic earnings (loss) per share (in dollars per share)	$ 0.84	$ 0.41	$ 0.34	$ 0.19	$ 0.25	$ 0.45	$ 0.35	$ 1.22	$ 1.78	$ 2.27	$ (6.78)
Diluted earnings (loss) per share (in dollars per share)	$ 0.82	$ 0.41	$ 0.33	$ 0.18	$ 0.25	$ 0.44	$ 0.34	$ 1.21	$ 1.74	$ 2.24	$ (6.78)

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Supplemental Quarterly Financial Data (Unaudited) - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Dec. 31, 2017	Apr. 02, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Sep. 30, 2017	Sep. 11, 2017
Segment Reporting Information [Line Items]
Tax Cuts and Jobs Act of 2017, provisional income tax benefit	$ 13,000
Restructuring Charges	8,800		$ 8,360	$ 182	$ 2,125
Pittsburgh and Miltec Operations [Member]
Segment Reporting Information [Line Items]
Gain (loss) on disposition of assets		$ 18,800
Lightning Diversion Systems, Inc.
Segment Reporting Information [Line Items]
Equity interest acquired						100.00%	100.00%
Cost of Sales
Segment Reporting Information [Line Items]
Restructuring Charges	$ 500

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Valuation and Qualifying Accounts (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Allowance for Doubtful Accounts
Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at Beginning of Period	$ 495	$ 359	$ 252
Additions Charged to Costs and Expenses	334	233	235
Deductions/(Recoveries)	(39)	97	128
Balance at End of Period	868	495	359
Valuation Allowance of Deferred Tax Assets
Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at Beginning of Period	6,607	7,477	6,882
Additions Charged to Costs and Expenses	2,406	(870)	595
Deductions/(Recoveries)	0	0	0
Balance at End of Period	$ 9,013	$ 6,607	$ 7,477