10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 _________________________________________________________

FORM 10-Q

 _________________________________________________________

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

For the quarterly period ended April 3, 2021

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 001-08174

 _________________________________________________________

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

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value per share	DCO	New York Stock Exchange

 _________________________________________________________

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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).    Yes  x    No  ¨

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

Large accelerated filer	¨	Accelerated 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

As of April 27, 2021, the registrant had 11,849,597 shares of common stock outstanding.

DUCOMMUN INCORPORATED AND SUBSIDIARIES

			Page
PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements (unaudited)	3
		Condensed Consolidated Balance Sheets as of April 3, 2021 and December 31, 2020	3
		Condensed Consolidated Statements of Income for the Three Months Ended April 3, 2021 and March 28, 2020	4
		Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended April 3, 2021 and March 28, 2020	5
		Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended April 3, 2021 and March 28, 2020	6
		Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 3, 2021 and March 28, 2020	7
		Notes to Condensed Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
	Item 4.	Controls and Procedures	29
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	29
	Item 1A.	Risk Factors	29
	Item 4.	Mine Safety Disclosures	29
	Item 6.	Exhibits	30
Signatures			33

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Ducommun Incorporated and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(Dollars in thousands, except share and per share data)

	April 3, 2021		December 31, 2020
Assets
Current Assets
Cash and cash equivalents	$	16,972	$	56,466
Accounts receivable, net (allowance for credit losses of $1,570 and $1,552 at April 3, 2021 and December 31, 2020, respectively	61,124		58,025
Contract assets	173,909		154,028
Inventories	138,287		129,223
Production cost of contracts	7,198		6,971
Other current assets	5,723		5,571
Total Current Assets	403,213		410,284
Property and equipment, net of accumulated depreciation of $172,536 and $169,742 at April 3, 2021 and December 31, 2020, respectively	109,180		109,990
Operating Lease Right-of-Use Assets	15,703		16,348
Goodwill	170,830		170,830
Intangibles, Net	121,506		124,744
Deferred Income Taxes	33		33
Other Assets	5,399		5,118
Total Assets	$	825,864	$	837,347
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	70,235	$	63,980
Contract liabilities	24,257		28,264
Accrued and other liabilities	28,433		40,526
Operating lease liabilities	3,118		3,132
Current portion of long-term debt	7,000		7,000
Total Current Liabilities	133,043		142,902
Long-Term Debt, Less Current Portion	304,344		311,922
Non-Current Operating Lease Liabilities	13,785		14,555
Deferred Income Taxes	17,598		16,992
Other Long-Term Liabilities	21,524		21,642
Total Liabilities	490,294		508,013
Commitments and Contingencies (Notes 6, 8)
Shareholders’ Equity
Common stock - $0.01 par value; 35,000,000 shares authorized; 11,849,597 and 11,728,212 shares issued and outstanding at April 3, 2021 and December 31, 2020, respectively	118		117
Additional paid-in capital	96,385		97,090
Retained earnings	248,422		241,727
Accumulated other comprehensive loss	(9,355)		(9,600)
Total Shareholders’ Equity	335,570		329,334
Total Liabilities and Shareholders’ Equity	$	825,864	$	837,347

See accompanying notes to Condensed Consolidated Financial Statements.

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Ducommun Incorporated and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

(Dollars in thousands, except per share amounts)

	Three Months Ended
	April 3, 2021		March 28, 2020
Net Revenues	$	157,151	$	173,475
Cost of Sales	124,051		136,671
Gross Profit	33,100		36,804
Selling, General and Administrative Expenses	22,490		23,178
Operating Income	10,610		13,626
Interest Expense	(2,806)		(4,246)
Income Before Taxes	7,804		9,380
Income Tax Expense	1,109		1,450
Net Income	$	6,695	$	7,930
Earnings Per Share
Basic earnings per share	$	0.57	$	0.68
Diluted earnings per share	$	0.55	$	0.67
Weighted-Average Number of Common Shares Outstanding
Basic	11,791		11,610
Diluted	12,250		11,855

See accompanying notes to Condensed Consolidated Financial Statements.

4

Ducommun Incorporated and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(Dollars in thousands)

	Three Months Ended
	April 3, 2021		March 28, 2020
Net Income	$	6,695	$	7,930
Other Comprehensive Income, Net of Tax:
Amortization of actuarial loss and prior service costs, net of tax of $76 and $59 for the three months ended April 3, 2021 and March 28, 2020, respectively	245		190
Change in unrealized gains and losses on cash flow hedges, net of tax of zero and $26 for the three months ended April 3, 2021 and March 28, 2020, respectively	—		86
Other Comprehensive Income, Net of Tax	245		276
Comprehensive Income	$	6,940	$	8,206

See accompanying notes to Condensed Consolidated Financial Statements.

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Ducommun Incorporated and Subsidiaries

Condensed Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)

(Dollars in thousands)

	Shares Outstanding	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
Balance at December 31, 2019	11,572,668	$	116	$	88,399	$	212,553	$	(8,268)	$	292,800
Net income	—	—		—		7,930		—		7,930
Other comprehensive loss, net of tax	—	—		—		—		276		276
Employee stock purchase plan	27,104	—		1,112		—		—		1,112
Stock options exercised	1,569	—		39		—		—		39
Stock awards vested	86,523	1		(1)		—		—		—
Stock repurchased related to the exercise of stock options and stock awards vested	(39,247)	(1)		(2,008)		—		—		(2,009)
Stock-based compensation	—	—		2,279		—		—		2,279
Balance at March 28, 2020	11,648,617	$	116	$	89,820	$	220,483	$	(7,992)	$	302,427
Balance at December 31, 2020	11,728,212	$	117	$	97,090	$	241,727	$	(9,600)	$	329,334
Net income	—	—		—		6,695		—		6,695
Other comprehensive loss, net of tax	—	—		—		—		245		245
Employee stock purchase plan	31,580	—		1,558		—		—		1,558
Stock options exercised	17,872	—		610		—		—		610
Stock awards vested	178,827	2		(2)		—		—		—
Stock repurchased related to the exercise of stock options and stock awards vested	(106,894)	(1)		(6,004)		—		—		(6,005)
Stock-based compensation	—	—		3,133		—		—		3,133
Balance at April 3, 2021	11,849,597	$	118	$	96,385	$	248,422	$	(9,355)	$	335,570

See accompanying notes to Condensed Consolidated Financial Statements.

6

Ducommun Incorporated and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)

	Three Months Ended
	April 3, 2021		March 28, 2020
Cash Flows from Operating Activities
Net Income	$	6,695	$	7,930
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and amortization	6,922		7,336
Non-cash operating lease cost	736		811
Stock-based compensation expense	3,133		2,279
Deferred income taxes	606		1,495
Provision for credit losses	18		97
Other	122		194
Changes in Assets and Liabilities:
Accounts receivable	(3,117)		(14,591)
Contract assets	(19,881)		(10,543)
Inventories	(9,064)		(7,269)
Production cost of contracts	(488)		973
Other assets	(369)		871
Accounts payable	8,192		(4,711)
Contract liabilities	(4,007)		13,361
Operating lease liabilities	(784)		(700)
Accrued and other liabilities	(12,069)		(9,567)
Net Cash Used in Operating Activities	(23,355)		(12,034)
Cash Flows from Investing Activities
Purchases of property and equipment	(4,542)		(3,867)
Post closing cash received from the acquisition of Nobles Worldwide, Inc., net	—		190
Net Cash Used in Investing Activities	(4,542)		(3,677)
Cash Flows from Financing Activities
Borrowings from senior secured revolving credit facility	20,000		65,900
Repayments of senior secured revolving credit facility	(25,000)		(15,900)
Repayments of term loans	(2,676)		(7,362)
Repayments of other debt	(84)		(54)
Net cash paid upon issuance of common stock under stock plans	(3,837)		(858)
Net Cash (Used in) Provided by Financing Activities	(11,597)		41,726
Net (Decrease) Increase in Cash and Cash Equivalents	(39,494)		26,015
Cash and Cash Equivalents at Beginning of Period	56,466		39,584
Cash and Cash Equivalents at End of Period	$	16,972	$	65,599

See accompanying notes to Condensed Consolidated Financial Statements.

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Ducommun Incorporated and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1. Summary of Significant Accounting Policies

Description of Business

We are a leading global provider of 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”). Our operations are organized into two primary businesses: the Electronic Systems segment (“Electronic Systems”) and the Structural Systems segment (“Structural Systems”), each of which is a reportable operating segment. Electronic Systems designs, engineers and manufactures high-reliability electronic and electromechanical products used in worldwide technology-driven markets including A&D and Industrial 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 unaudited condensed consolidated financial statements include the accounts of Ducommun Incorporated and its subsidiaries (“Ducommun,” the “Company,” “we,” “us” or “our”), after eliminating intercompany balances and transactions. The December 31, 2020 condensed consolidated balance sheet data was derived from audited financial statements, but does not contain all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”).

Our significant accounting policies were described in Part IV, Item 15(a)(1), “Note 1. Summary of Significant Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2020. The financial information included in this Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020.

In the opinion of management, all adjustments, consisting of recurring accruals, have been made that are necessary to fairly state our condensed consolidated financial position, statements of income, comprehensive income, changes in shareholders’ equity, and cash flows in accordance with GAAP for the periods covered by this Quarterly Report on Form 10-Q. The results of operations for the three months ended April 3, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021.

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 on December 31 for our fourth fiscal quarter. As a result of using fiscal quarters for the first three quarters combined with leap years, our first and fourth fiscal quarters can range between 12 1/2 weeks to 13 1/2 weeks while the second and third fiscal quarters remain at a constant 13 weeks per fiscal quarter.

Certain reclassifications have been made to prior period amounts to conform to the current year’s presentation.

Use of Estimates

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

Supplemental Cash Flow Information

	(Dollars in thousands)
	Three Months Ended
	April 3, 2021		March 28, 2020
Interest paid	$	2,544	$	3,523
Taxes (refunded) paid, net	$	(30)	$	33
Non-cash activities:
Purchases of property and equipment not paid	$	540	$	464

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Earnings Per Share

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

The net income and weighted-average common shares outstanding used to compute earnings per share were as follows:

	(Dollars in thousands, except per share data)
	Three Months Ended
	April 3, 2021		March 28, 2020
Net income	$	6,695	$	7,930
Weighted-average number of common shares outstanding
Basic weighted-average common shares outstanding	11,791		11,610
Dilutive potential common shares	459		245
Diluted weighted-average common shares outstanding	12,250		11,855
Earnings per share
Basic	$	0.57	$	0.68
Diluted	$	0.55	$	0.67

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

	(In thousands)
	Three Months Ended
	April 3, 2021	March 28, 2020
Stock options and stock units	3	253

Fair Value

Assets and liabilities that are measured, recorded or disclosed at fair value on a recurring basis are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine the fair value. Level 1, the highest level, refers to the values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant observable inputs. Level 3, the lowest level, includes fair values estimated using significant unobservable inputs.

We have money market funds and they are included as cash and cash equivalents. We also had interest rate cap hedge agreements for which the fair value of the interest rate cap hedge agreements was determined using pricing models that use observable market inputs as of the balance sheet date, a Level 2 measurement, however, those agreements expired during our second quarter of 2020.

There were no transfers between Level 1, Level 2, or Level 3 financial instruments in the three months ended April 3, 2021.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid instruments purchased with original maturities of three months or less. These assets are valued at cost, which approximates fair value, which we classify as Level 1. See Fair Value above.

Derivative Instruments

We recognize derivative instruments on our condensed consolidated balance sheets at their fair value. On the date that we enter into a derivative contract, we designate the derivative instrument as a fair value hedge, a cash flow hedge, or a derivative instrument that will not be accounted for using hedge accounting methods. As of April 3, 2021, we had no derivative instruments as our cash flow hedges matured in the second quarter of 2020.

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. The majority of our inventory is charged to cost of

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sales as raw materials are placed into production and the related revenue is recognized. Inventoried costs include raw materials, outside processing, direct labor and allocated overhead, adjusted for any abnormal amounts of idle performance center expense, freight, handling costs, and wasted materials (spoilage) incurred. 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. The majority of our revenues are recognized over time, however, for revenue contracts where revenue is recognized using the point in time method, inventory is not reduced until it is shipped or transfer of control to the customer has occurred. Our ending inventory consists of raw materials, work-in-process, and finished goods.

Accumulated Other Comprehensive Loss

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

Revenue Recognition

Our customers typically engage us to manufacture products based on designs and specifications provided by the end-use customer. This requires the building of tooling and manufacturing first article inspection products (prototypes) before volume manufacturing. Contracts with our customers generally include a termination for convenience clause.

We have a significant number of contracts that are started and completed within the same year, as well as contracts derived from long-term agreements and programs that can span several years. We recognize revenue under Accounting Standards Codification 606, “Revenue from Contracts with Customers” (“ASC 606”), which utilizes a five-step model.

The definition of a contract for us is typically defined as a customer purchase order as this is when we achieve an enforceable right to payment. The majority of our contracts are firm fixed-price contracts. The deliverables within a customer purchase order are analyzed to determine the number of performance obligations. At times, in order to achieve economies of scale and based on our customer’s forecasted demand, we may build in advance of receiving a purchase order from our customer. When that occurs, we would not recognize revenue until we have received the customer purchase order.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account under ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, control is transferred and the performance obligation is satisfied. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services are highly interrelated or meet the series guidance. For contracts with multiple performance obligations, we allocate the contract transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate the standalone selling price is the expected cost plus a margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service.

We manufacture most products to customer specifications and the product cannot be easily modified to satisfy another customer’s order. As such, these products are deemed to have no alternative use once the manufacturing process begins. In the event the customer invokes a termination for convenience clause, we would be entitled to costs incurred to date plus a reasonable profit. Contract costs typically include labor, materials, overhead, and when applicable, subcontractor costs. For most of our products, we are building assets with no alternative use and have enforceable right to payment, and thus, we recognize revenue using the over time method.

The majority of our performance obligations are satisfied over time as work progresses. Typically, revenue is recognized over time using an input measure (i.e., costs incurred to date relative to total estimated costs at completion, also known as cost-to-cost plus reasonable profit) to determine progress. Our typical revenue contract is a firm fixed price contract, and the cost of raw materials could make up a significant amount of the total costs incurred. As such, we believe using the total costs incurred input method would be the most appropriate method. While the cost of raw materials could make up a significant amount of the total costs incurred, there is a direct relationship between our inputs and the transfer of control of goods or services to the customer.

Contract estimates are based on various assumptions to project the outcome of future events that can span multiple months or years. These assumptions include labor productivity and availability; the complexity of the work to be performed; the cost and availability of materials; and the performance of subcontractors.

As a significant change in one or more of these estimates could affect the progress completed (and related profitability) on our contracts, we review and update our contract-related estimates on a regular basis. We recognize such adjustments under the cumulative catch-up method. Under this method, the impact of the adjustment is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate.

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The impact of adjustments in contract estimates on our operating earnings can be reflected in either operating costs and expenses or revenue.

Net cumulative catch up adjustments on gross profit recorded were not material for both the three months ended April 3, 2021 and March 28, 2020.

Payments under long-term contracts may be received before or after revenue is recognized. When revenue is recognized before we bill our customer, a contract asset is created for the work performed but not yet billed. Similarly, when we receive payment before we ship our products to our customer, a contract liability is created for the advance or progress payment.

We record provisions for the total anticipated losses on contracts, considering total estimated costs to complete the contract compared to total anticipated revenues, in the period in which such losses are identified. The provisions for estimated losses on contracts require us to make certain estimates and assumptions, including those with respect to the future revenue under a contract and the future cost to complete the contract. Our estimate of the future cost to complete a contract may include assumptions as to changes in manufacturing efficiency, 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 adjust the provisions for estimated losses on contracts. The provision for estimated losses on contracts is included as part of contract liabilities on the condensed consolidated balance sheets. As of April 3, 2021 and December 31, 2020, provision for estimated losses on contracts were $2.0 million and $2.3 million, respectively.

Production cost of contracts includes non-recurring production costs, such as design and engineering costs, and tooling and other special-purpose machinery necessary to build parts as specified in a contract. Production costs of contracts are recorded to cost of sales using the over time revenue recognition model. We review the value of the production cost of contracts on a quarterly basis to ensure when added to the estimated cost to complete, the value is not greater than the estimated realizable value of the related contracts. As of April 3, 2021 and December 31, 2020, production cost of contracts were $7.2 million and $7.0 million, respectively.

Contract Assets and Contract Liabilities

Contract assets consist of our right to payment for work performed but not yet billed. Contract assets are transferred to accounts receivable when we bill our customers. We bill our customers when we ship the products and meet the shipping terms within the revenue contract. Contract liabilities consist of advance or progress payments received from our customers prior to the time transfer of control occurs plus the estimated losses on contracts.

Contract assets and contract liabilities from revenue contracts with customers are as follows:

	(Dollars in thousands)
	April 3, 2021		December 31, 2020
Contract assets	$	173,909	$	154,028
Contract liabilities	$	24,257	$	28,264

The increase in our contract assets as of April 3, 2021 compared to December 31, 2020 was primarily due to a net increase of products in work in process and finished goods in the current period.

The decrease in our contract liabilities as of April 3, 2021 compared to December 31, 2020 was primarily due to a net decrease of advance or progress payments received from our customers in the current period. We recognized $7.2 million of the contract liabilities as of December 31, 2020 as revenues during the three months ended April 3, 2021.

Performance obligations are defined as customer placed purchase orders (“POs”) with firm fixed price and firm delivery dates. Our remaining performance obligations as of April 3, 2021 totaled $690.3 million. We anticipate recognizing an estimated 70% of our remaining performance obligations as revenue during the next 12 months with the remaining performance obligations being recognized in the remainder of 2022 and beyond.

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Revenue by Category

In addition to the revenue categories disclosed above, the following table reflects our revenue disaggregated by major end-use market:

	(Dollars in thousands)
	Three Months Ended
	April 3 2021		March 28, 2020
Consolidated Ducommun
Military and space	$	114,127	$	101,899
Commercial aerospace	35,377		60,582
Industrial	7,647		10,994
Total	$	157,151	$	173,475
Electronic Systems
Military and space	$	81,733	$	74,317
Commercial aerospace	9,724		12,809
Industrial	7,647		10,994
Total	$	99,104	$	98,120
Structural Systems
Military and space	$	32,394	$	27,582
Commercial aerospace	25,653		47,773
Total	$	58,047	$	75,355

Recent Accounting Pronouncements

New Accounting Guidance Adopted in 2021

In October 2020, the FASB issued ASU 2020-10, “Codification Improvements” (“ASU 2020-10”), which affect a wide variety of Topics in the Accounting Standards Codification (“Codification”). ASU 2020-10, among other things, contains amendments that improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50). Many of the amendments arose as the FASB provided an option to give certain information either on the face of the financial statements or in the notes to financial statements and that option only was included in the Other Presentation Matters Section (Section 45) of the Codification. Those amendments are not expected to change current practice. The new guidance is effective for fiscal years beginning after December 15, 2020, which was our interim period beginning January 1, 2021. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which removes certain exceptions and provides guidance on various areas of tax accounting. The new guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, which was our interim period beginning January 1, 2021. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans” (“ASU 2018-14”), which will remove disclosures that no longer are considered cost-beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The new guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, which was our interim period beginning January 1, 2021. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

Recently Issued Accounting Standards

In August 2020, the FASB issued ASU 2020-06, “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies reporting or provides clarification on various topics, including clarification that an entity should use the weighted-average share count from each quarter when calculating the year-to-date weighted-average share count. The new guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, which will be our interim period beginning January 1, 2022. Early adoption is

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permitted. We are evaluating the impact of this standard.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides optional guidance for a limited time for contracts that reference London Interbank Offered Rate (“LIBOR”), to ease the potential burden in accounting for, or recognizing the effects, of reference rate reform on financial reporting as a result of the cessation of LIBOR. The new guidance is effective at any time after March 12, 2020 but no later than December 31, 2022. We are evaluating the impact of this standard.

Note 2. Inventories

Inventories consisted of the following:

	(Dollars in thousands)
	April 3, 2021		December 31, 2020
Raw materials and supplies	$	121,756	$	107,983
Work in process	12,502		15,895
Finished goods	4,029		5,345
Total	$	138,287	$	129,223

Note 3. Goodwill

We perform our annual goodwill impairment test as of the first day of the fourth quarter. If certain factors occur, including significant under performance of our business relative to expected operating results, significant adverse economic and industry trends, significant decline in our market capitalization for an extended period of time relative to net book value, a decision to divest individual businesses within a reporting unit, or a decision to group individual businesses differently, we may be required to perform an interim impairment test prior to the fourth quarter.

We may use either a qualitative or quantitative approach when testing a reporting unit’s goodwill for impairment. The qualitative approach for potential impairment analysis is performed to determine whether it is more likely than not that the fair value of a reporting unit was less than its carrying amount.

The quantitative approach for potential impairment analysis is performed by comparing the fair value of a reporting unit to its carrying value, including goodwill. Fair value is estimated by management using a combination of the income approach (which is based on a discounted cash flow model) and market approach. Management’s cash flow projections include significant judgments and assumptions, including the amount and timing of expected cash flows, long-term growth rates, and discount rates. The cash flows used in the discounted cash flow model are based on our best estimate of future revenues, gross margins, and adjusted after-tax earnings. If any of these assumptions are incorrect, it will impact the estimated fair value of a reporting unit. The market approach also requires significant management judgment in selecting comparable business acquisitions and the transaction values observed and its related control premiums.

For our most recent annual goodwill impairment test of our Electronic Systems reporting unit as of the first day of the fourth quarter of 2020, we used a qualitative assessment and determined it was not more likely than not that the fair value of the reporting unit was less than its carrying amount. For our most recent annual goodwill impairment test of our Structural Systems reporting unit as of the first day of the fourth quarter of 2020, we performed a step one goodwill impairment test where the fair value of our Structural Systems reporting unit exceeded its carrying value by 69% and thus, goodwill was not deemed to be impaired. While our business continues to be negatively impacted during the three months ended April 3, 2021 as a result of the COVID-19 pandemic, no material adverse factors/changes have occurred since the fourth quarter of 2020 that would require us to perform another qualitative assessment. As such, for the first quarter of 2021, it was also not more likely than not that the fair values of the reporting units were less than their carrying amounts and thus, the respective goodwill amounts were not deemed to be impaired.

The carrying amounts of our goodwill were as follows:

	(Dollars in thousands)
	Electronic Systems		Structural Systems		Consolidated Ducommun
Gross goodwill	$	199,157	$	53,395	$	252,552
Accumulated goodwill impairment	(81,722)		—		(81,722)
Balance at December 31, 2020	$	117,435	$	53,395	$	170,830
Balance at April 3, 2021	$	117,435	$	53,395	$	170,830

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Note 4. Accrued and Other Liabilities

The components of accrued and other liabilities were as follows:

	(Dollars in thousands)
	April 3, 2021		December 31, 2020
Accrued compensation	$	15,386	$	28,432
Accrued income tax and sales tax	558		80
Other	12,489		12,014
Total	$	28,433	$	40,526

Note 5. Long-Term Debt

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

	(Dollars in thousands)
	April 3, 2021			December 31, 2020
Term loans	$	292,962		$	295,638
Revolving credit facility	20,000			25,000
Total debt	312,962			320,638
Less current portion	7,000			7,000
Total long-term debt, less current portion	305,962			313,638
Less debt issuance costs - term loans	1,618			1,716
Total long-term debt, net of debt issuance costs - term loans	$	304,344		$	311,922
Debt issuance costs - revolving credit facility (1)	$	1,421		$	1,515
Weighted-average interest rate	3.16		%	3.59		%

(1) Included as part of other assets.

In December 2019, we completed the refinancing of a portion of our existing debt by entering into a new revolving credit facility (“2019 Revolving Credit Facility”) to replace the then existing revolving credit facility that was entered into in November 2018 (“2018 Revolving Credit Facility”) and entered into a new term loan (“2019 Term Loan”). The 2019 Revolving Credit Facility is a $100.0 million senior secured revolving credit facility that matures on December 20, 2024 replacing the $100.0 million 2018 Revolving Credit Facility that would have matured on November 21, 2023. The 2019 Term Loan is a $140.0 million senior secured term loan that matures on December 20, 2024. We also have an existing $240.0 million senior secured term loan that was entered into in November 2018 that matures on November 21, 2025 (“2018 Term Loan”). The original amounts available under the 2019 Revolving Credit Facility, 2019 Term Loan, and 2018 Term Loan (collectively, the “Credit Facilities”) in aggregate, totaled $480.0 million.

The 2019 Term Loan bears interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as the London Interbank Offered Rate [“LIBOR”]) plus an applicable margin ranging from 1.50% to 2.50% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 0.50% to 1.50% per year, in each case based upon the consolidated total net adjusted leverage ratio, typically payable quarterly. In addition, the 2019 Term Loan requires installment payments of 1.25% of the original outstanding principal balance of the 2019 Term Loan amount on a quarterly basis, on the last day of the calendar quarter. For the three months ended April 3, 2021, we made the required quarterly payment of $1.8 million.

The 2019 Revolving Credit Facility bears interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as LIBOR) plus an applicable margin ranging from 1.50% to 2.50% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 0.50% to 1.50% per year, in each case based upon the consolidated total net adjusted leverage ratio, typically payable quarterly. The undrawn portion of the commitment of the 2019 Revolving Credit Facility is subject to a commitment fee ranging from 0.175% to 0.275%, based upon the consolidated total net adjusted leverage ratio. However, the 2019 Revolving Credit Facility does not require any principal installment payments.

The 2018 Term Loan bears interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as LIBOR plus an applicable margin ranging from 3.75% to 4.00% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from

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3.75% to 4.00% per year, in each case based upon the consolidated total net adjusted leverage ratio, typically payable quarterly. In addition, the 2018 Term Loan required installment payments of 0.25% of the outstanding principal balance of the 2018 Term Loan amount on a quarterly basis.

Further, under the Credit Facilities, if we exceed the annual excess cash flow threshold, we are required to make an annual additional principal payment based on the consolidated adjusted leverage ratio. The annual mandatory excess cash flow payment is based on (i) 50% of the excess cash flow amount if the adjusted leverage ratio is greater than 3.25 to 1.0, (ii) 25% of the excess cash flow amount if the adjusted leverage ratio is less than or equal to 3.25 to 1.0 but greater than 2.50 to 1.0, and (iii) zero percent of the excess cash flow amount if the consolidated adjusted leverage ratio is less than or equal to 2.50 to 1.0. During the three months ended April 3, 2021, we made the required 2020 annual excess cash flow payment of $0.9 million. As of April 3, 2021, we were in compliance with all covenants required under the Credit Facilities.

During the three months ended April 3, 2021, we made net voluntary prepayments of $5.0 million on the 2019 Revolving Credit Facility.

In conjunction with entering into the 2019 Revolving Credit Facility and the 2019 Term Loan, we drew down the entire $140.0 million on the 2019 Term Loan and used those proceeds to pay off and close the 2018 Revolving Credit Facility of $58.5 million, paid down a portion of the 2018 Term Loan of $56.0 million, paid the accrued interest associated with the amounts being paid down on the 2018 Revolving Credit Facility and 2018 Term Loan, paid the fees related to this transaction, and the remainder available for general corporate purposes. The $56.0 million pay down on the 2018 Term Loan paid all the required quarterly installment payments on the 2018 Term Loan until maturity.

The 2019 Term Loan and 2018 Term Loan were considered a modification of debt and thus, no gain or loss was recorded. Instead, the new fees paid to the lenders of $0.6 million were capitalized and are being amortized over the life of the 2019 Term Loan. The remaining debt issuance costs related to the 2018 Term Loan of $1.5 million as of the modification date will continue to be amortized over its remaining life.

The 2019 Revolving Credit Facility that replaced the 2018 Revolving Credit Facility was considered an extinguishment of debt except for the portion related to the creditors that were part of both the 2019 Revolving Credit Facility and the 2018 Revolving Credit Facility and in which case, it was considered a modification of debt. As a result, we expensed the portion of the unamortized debt issuance costs related to the 2018 Revolving Credit Facility that was considered an extinguishment of debt of $0.5 million. In addition, the new fees paid to the lenders of $0.5 million as part of the 2019 Revolving Credit Facility were capitalized and are being amortized over its remaining life. Further, the remaining debt issuance costs related to the 2018 Revolving Credit Facility of $1.1 million as of the modification date will also be amortized over its remaining life.

As of April 3, 2021, we had $79.8 million of unused borrowing capacity under the 2019 Revolving Credit Facility, after deducting $0.2 million for standby letters of credit.

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

In October 2015, we entered into interest rate cap hedges designated as cash flow hedges with a portion of these interest rate cap hedges maturing on a quarterly basis, and a final quarterly maturity date of June 2020, in aggregate, totaling $135.0 million of our debt. We paid a total of $1.0 million in connection with entering into the interest rate cap hedges. The interest rate cap hedges matured during our second quarter of 2020 and as such, all remaining amounts related to the interest rate cap hedges were fully amortized and unrealized gains and losses recorded in accumulated other comprehensive income were also realized at that time.

Note 6. 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 performance center leases, we have indemnified our lessors for certain claims arising from the performance center or the lease. We indemnify our directors and officers to the maximum extent permitted under the laws of the State of Delaware.

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

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Note 7. 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 due to research and development (“R&D”) tax credits. Our effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as expected utilization of R&D tax credits, valuation allowances against deferred tax assets, recognition or derecognition of tax benefits related to uncertain tax positions, and changes in or the interpretation of tax laws in jurisdictions where we conduct business. Also, excess tax benefits and tax detriments related to our equity compensation recognized in the income statement could result in fluctuations in our effective tax rate period-over-period depending on the volatility of our stock price, number of restricted or performance stock units that vests, and stock options exercised during the period. We recognize deferred tax assets and liabilities, using enacted tax rates, for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities along with net operating loss and tax credit carryovers.

We record a valuation allowance against our deferred tax assets to reduce the net carrying value to an amount that we believe is more likely than not to be realized. When we establish or reduce our valuation allowances against our deferred tax assets, the provision for income taxes will increase or decrease, respectively, in the period when that determination is made.

We recorded income tax expense of $1.1 million for the three months ended April 3, 2021 compared to $1.5 million for the three months ended March 28, 2020. The decrease in income tax expense for the first quarter of 2021 compared to the first quarter of 2020 was primarily due to lower pre-tax income for the first quarter of 2021 compared to the first quarter of 2020 and higher discrete tax benefits recognized in the first quarter of 2021 for net tax windfalls related to stock-based compensation.

We evaluated the amendments in ASU 2019-12 for the three months ended April 3, 2021 and determined they do not have an impact on our income taxes.

On March 11, 2021, the U.S. enacted the American Rescue Plan Act of 2021 (“Rescue Plan”) aimed at mitigating the continuing effects of the COVID-19 pandemic. We considered the provisions of the Rescue Plan and determined they do not have a material impact on our income taxes.

Our total amount of unrecognized tax benefits was $4.1 million as of both April 3, 2021 and December 31, 2020. If recognized, $2.4 million would affect the effective tax rate. We record interest and penalty charges, if any, related to uncertain tax positions as a component of tax expense and unrecognized tax benefits. The amounts accrued for interest and penalty charges as of April 3, 2021 and December 31, 2020 were not significant. We do not expect the total amount of unrecognized tax benefits to increase or decrease by a material amount in the next twelve months.

We file U.S. Federal and state income tax returns. We are subject to examination by the Internal Revenue Service (“IRS”) for tax years after 2016 and by state taxing authorities for tax years after 2015. 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.

Note 8. Commitments and Contingencies

In December 2020, a representative action under California’s Private Attorneys General Act was filed against us in the Superior Court for the State of California, County of San Bernardino. We received service of process of this complaint on January 28, 2021. The complaint alleges violations of California’s wage and hour laws relating to our current and former employees and seeks attorney’s fees and penalties. We believe these claims are baseless, are without merit and intend to vigorously defend against them. We do not currently have enough information to make a reasonable estimate as to the likelihood or amount of loss, or a range of reasonably possible losses as a result of this claim, so there has been no related accrual for estimated liability recorded as of April 3, 2021.

Structural Systems has been directed by California environmental agencies to investigate and take corrective action for groundwater contamination at our facilities located in El Mirage and Monrovia, California. Based on currently available information, we have established an accrual for its estimated liability for such investigation and corrective action of $1.5 million at both April 3, 2021 and December 31, 2020, which is reflected in other long-term liabilities on our condensed consolidated balance sheets.

Structural Systems also faces liability as a potentially responsible party for hazardous waste disposed at landfills located in Casmalia and West Covina, California. Structural Systems and other companies and government entities have entered into consent decrees with respect to these landfills with the United States Environmental Protection Agency and/or California

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environmental agencies under which certain investigation, remediation and maintenance activities are being performed. Based on currently available information, we preliminarily estimate that the range of our future liabilities in connection with the landfill located in West Covina, California is between $0.4 million and $3.1 million. We have established an accrual for the estimated liability in connection with the West Covina landfill of $0.4 million at April 3, 2021, which is reflected in other long-term liabilities on our condensed consolidated balance sheets. Our ultimate liability in connection with these matters will depend upon a number of factors, including changes in existing laws and regulations, the design and cost of construction, operation and maintenance activities, and the allocation of liability among potentially responsible parties.

In June 2020, a fire severely damaged our performance center in Guaymas, Mexico, which is part of our Structural Systems segment. There were no injuries, however, property and equipment, inventories, and tooling in this leased facility were damaged. Our Guaymas performance center is comprised of two buildings with an aggregate total of 62,000 square feet. The loss of production from the Guaymas performance center is being absorbed by our other existing performance centers. A neighboring, non-related manufacturing facility, also suffered fire damage during the same time as the fire that severely damaged our Guaymas performance center. The cause of the fire is still undetermined and as such, there is no amount of loss that is probable and reasonably estimable at this time.

Our insurance covers damage to the facility, equipment, unfinished inventory, and other assets at replacement cost, finished goods inventory at selling price, as well as business interruption, third party property damage, and recovery related expenses caused by the fire, less our per claim deductible. The anticipated insurance recoveries related to losses and incremental costs incurred are recognized when receipt is probable. The anticipated insurance recoveries in excess of net book value of the damaged operating assets and business interruption will not be recorded until all contingencies related to our claim have been resolved. During the year ended December 31, 2020, $0.8 million of revenue and $0.5 million of related cost of sales were reversed for revenue previously recognized using the over time method as the revenue recognition process for these items were deemed to be interrupted as a result of these inventory items being damaged. Also during the year ended December 31, 2020, we wrote off property and equipment and tooling with an aggregate total net book value of $7.1 million and inventory on hand of $3.4 million that were damaged by the fire. The related anticipated insurance recoveries were also presented within the same financial statement line item in the condensed consolidated statements of income resulting in no net impact, with the anticipated insurance recoveries receivable included as part of other current assets on the condensed consolidated balance sheets. As of April 3, 2021, $13.5 million of general insurance recoveries have been received to date. The timing of and the remaining amounts of insurance recoveries, including for business interruption, are not known at this time.

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 in the ordinary course of business. While it is not feasible to predict the outcome of these matters, Ducommun does not presently expect that any sum it may be required to pay in connection with these matters would have a material adverse effect on its condensed consolidated financial position, results of operations or cash flows.

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Note 9. Business Segment Information

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

Financial information by reportable operating segment was as follows:

	(Dollars in thousands) Three Months Ended
	April 3, 2021		March 28, 2020
Net Revenues
Electronic Systems	$	99,104	$	98,120
Structural Systems	58,047		75,355
Total Net Revenues	$	157,151	$	173,475
Segment Operating Income
Electronic Systems	$	12,491	$	15,122
Structural Systems	5,128		5,390
	17,619		20,512
Corporate General and Administrative Expenses (1)	(7,009)		(6,886)
Operating Income	$	10,610	$	13,626
Depreciation and Amortization Expenses
Electronic Systems	$	3,423	$	3,575
Structural Systems	3,440		3,689
Corporate Administration	59		72
Total Depreciation and Amortization Expenses	$	6,922	$	7,336
Capital Expenditures
Electronic Systems	$	624	$	815
Structural Systems	1,989		2,137
Corporate Administration	—		—
Total Capital Expenditures	$	2,613	$	2,952

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

Segment assets include assets directly identifiable to or allocated to each segment. Our segment assets are as follows:

	(Dollars in thousands)
	April 3, 2021		December 31, 2020
Total Assets
Electronic Systems	$	469,323	$	448,606
Structural Systems	333,084		325,604
Corporate Administration (1)	23,457		63,137
Total Assets	$	825,864	$	837,347
Goodwill and Intangibles
Electronic Systems	$	198,755	$	201,077
Structural Systems	93,581		94,497
Total Goodwill and Intangibles	$	292,336	$	295,574

(1)Includes assets not specifically identified to or allocated to either the Electronic Systems or Structural Systems operating segments, including cash and cash equivalents.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

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

COVID-19 Pandemic Impact on Our Business

The COVID-19 pandemic has had a significant impact on our overall business during the three months ended April 3, 2021. As a result of the COVID-19 pandemic, precautionary measures were instituted by governments and businesses to mitigate its spread, including the imposition of travel restrictions, quarantines, shelter in place directives, and shutting down of non-essential businesses.

The safety of our workforce is our top priority. We have implemented numerous well-being protocols related to health and welfare at all of our facilities. Safety protocols consistent with guidelines provided by state and local governments and the Centers for Disease Control and Prevention (“CDC”) have been put into practice, including social distancing, provision of personal protective equipment, enhanced cleaning, and flexible work arrangements wherever possible. We have also offered enhanced leave and benefits to our employees and provide frequent updates to ensure our workforce is kept apprised of evolving regulations and safety measures.

In March 2020, the U.S. enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which provides tax relief to individuals and businesses affected by the coronavirus pandemic. We have not requested or accepted any loans or payments that are available under the CARES Act, however, we have utilized the option to defer payment of the employer portion of payroll taxes (Social Security) that would otherwise be required to be made during the period beginning March 27, 2020 to December 31, 2020. One half of the deferred amount is required to be paid by December 31, 2021, with the remaining 50% to be paid by December 31, 2022. As of April 3, 2021, we have deferred $6.1 million, which is included as part of accrued liabilities and other long-term liabilities on the condensed consolidated balance sheets.

The COVID-19 pandemic has and continues to contribute to a general slowdown in the global economy and specifically, the commercial aerospace end-use market. In 2020, both major large aircraft manufacturers, The Boeing Company and Airbus SE, announced lower build rates for the near and medium future. In its 2020 Annual Report on Form 10-K, Boeing indicated it expects it will take approximately three years for worldwide travel to return to 2019 levels and a few years beyond that for the industry to return to a long-term trend growth of five percent. While the full extent and impact of the COVID-19 pandemic cannot be reasonably estimated with certainty at this time, COVID-19 has had a significant impact on our business, the businesses of our customers and suppliers, as well as our results of operations and financial condition, and may have a material adverse impact on our business, results of operations and financial condition for the reminder of 2021 and beyond.

First quarter 2021 recap:

•Revenues of $157.2 million

•Net income of $6.7 million, or $0.55 per diluted share

•Adjusted EBITDA of $21.1 million, or 13.5% of revenues

Non-GAAP Financial Measures

Adjusted earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, and Guaymas fire related expenses (“Adjusted EBITDA”) was $21.1 million and $23.2 million for the three months ended April 3, 2021 and March 28, 2020, 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 this measure, explain how it is calculated and provide a reconciliation of this measure to the most comparable GAAP measure in the table below. Adjusted EBITDA and the related financial ratios, as presented in this Quarterly Report on Form 10-Q (“Form 10-Q”), are supplemental measures of our performance that are not required by, or presented in accordance with, GAAP. They are not a measurement of our financial performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP, or as an alternative to net

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cash provided by operating activities as measures of our liquidity. The presentation of these measures should not be interpreted to mean that our future results will be unaffected by unusual or nonrecurring items.

We use Adjusted EBITDA as a non-GAAP operating performance measure internally as a complementary financial measure 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 a substitute for analysis of our results as reported under GAAP. Some of these limitations include:

•It does not reflect our cash expenditures, future requirements for capital expenditures or contractual commitments;

•It does not reflect changes in, or cash requirements for, our working capital needs;

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

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

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

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

•Other companies in our industry may calculate Adjusted EBITDA differently from us, limiting its usefulness as a comparative measure.

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 Condensed Consolidated Financial Statements contained in this Form 10-Q.

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

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

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

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

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

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

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

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

•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; and

•Guaymas fire related expenses may be useful to our investors in evaluating our core operating performance.

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

	(Dollars in thousands) Three Months Ended
	April 3, 2021			March 28, 2020
Net income	$	6,695		$	7,930
Interest expense	2,806			4,246
Income tax expense	1,109			1,450
Depreciation	3,423			3,436
Amortization	3,499			3,900
Stock-based compensation expense	3,133			2,279
Guaymas fire related expenses	475			—
Adjusted EBITDA	$	21,140		$	23,241
% of net revenues	13.5		%	13.4		%

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Results of Operations

First Quarter of 2021 Compared to First Quarter of 2020

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

	(Dollars in thousands, except per share data) Three Months Ended
	April 3, 2021			% of Net  Revenues		March 28, 2020			% of Net  Revenues
Net Revenues	$	157,151		100.0	%	$	173,475		100.0	%
Cost of Sales	124,051			78.9	%	136,671			78.8	%
Gross Profit	33,100			21.1	%	36,804			21.2	%
Selling, General and Administrative Expenses	22,490			14.3	%	23,178			13.4	%
Operating Income	10,610			6.8	%	13,626			7.8	%
Interest Expense	(2,806)			(1.8)	%	(4,246)			(2.4)	%
Income Before Taxes	7,804			5.0	%	9,380			5.4	%
Income Tax Expense	1,109			nm		1,450			nm
Net Income	$	6,695		4.3	%	$	7,930		4.6	%
Effective Tax Rate	14.2		%	nm		15.5		%	nm
Diluted Earnings Per Share	$	0.55		nm		$	0.67		nm

nm = not meaningful

22

Net Revenues by End-Use Market and Operating Segment

Net revenues by end-use market and operating segment during the fiscal three months ended April 3, 2021 and March 28, 2020, respectively, were as follows:

	Three Months Ended
			(Dollars in thousands)				% of Net Revenues
	Change		April 3, 2021		March 28, 2020		April 3, 2021		March 28, 2020
Consolidated Ducommun
Military and space	$	12,228	$	114,127	$	101,899	72.6	%	58.7	%
Commercial aerospace	(25,205)		35,377		60,582		22.5	%	34.9	%
Industrial	(3,347)		7,647		10,994		4.9	%	6.4	%
Total	$	(16,324)	$	157,151	$	173,475	100.0	%	100.0	%
Electronic Systems
Military and space	$	7,416	$	81,733	$	74,317	82.5	%	75.7	%
Commercial aerospace	(3,085)		9,724		12,809		9.8	%	13.1	%
Industrial	(3,347)		7,647		10,994		7.7	%	11.2	%
Total	$	984	$	99,104	$	98,120	100.0	%	100.0	%
Structural Systems
Military and space	$	4,812	$	32,394	$	27,582	55.8	%	36.6	%
Commercial aerospace	(22,120)		25,653		47,773		44.2	%	63.4	%
Total	$	(17,308)	$	58,047	$	75,355	100.0	%	100.0	%

Net revenues for the three months ended April 3, 2021 were $157.2 million, compared to $173.5 million for the three months ended March 28, 2020. The year-over-year decrease was primarily due to the following:

•$25.2 million lower revenues in our commercial aerospace end-use markets due to lower build rates on large aircraft platforms and regional and business aircraft platforms; partially offset by

•$12.2 million higher revenues in our military and space end-use markets due to higher build rates on military fixed-wing aircraft platforms and other military and space platforms.

Net Revenues by Major Customers

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

	Three Months Ended
	April 3, 2021		March 28, 2020
Boeing Company	7.4	%	8.4	%
Lockheed Martin Corporation	5.3	%	4.1	%
Northrop Grumman Corporation	6.1	%	5.6	%
Raytheon Technologies Corporation	22.7	%	18.4	%
Spirit AeroSystems Holdings, Inc.	2.7	%	5.6	%
Total top ten customers (1)	58.5	%	56.7	%

(1)Includes The Boeing Company (“Boeing”), Lockheed Martin Corporation (“Lockheed”), Northrop Grumman Corporation (“Northrop”), Raytheon Technologies Corporation (“Raytheon”), and Spirit AeroSystems Holdings, Inc. (“Spirit”).

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Boeing, Lockheed, Northrop, Raytheon, and Spirit represented the following percentages of total accounts receivable:

	April 3, 2021		December 31, 2020
Boeing	6.1	%	4.8	%
Lockheed	1.7	%	2.4	%
Northrop	9.7	%	12.3	%
Raytheon	12.6	%	15.0	%
Spirit	0.9	%	1.1	%

The net revenues and accounts receivable from Boeing, Lockheed, Northrop, Raytheon, and Spirit are diversified over a number of commercial, military and space programs and were generated by both operating segments.

Gross Profit

Gross profit consists of net revenues less cost of sales. Cost of sales includes the cost of production of finished products and other expenses related to inventory management, manufacturing quality, and order fulfillment. Gross profit as a percentage of net revenues was essentially flat year-over-year with the three months ended April 3, 2021 of 21.1%, compared to the three months ended March 28, 2020 of 21.2% primarily due to unfavorable manufacturing volume, partially offset by favorable product mix and lower compensation and benefit costs.

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

SG&A expenses decreased $0.7 million year-over-year in the three months ended April 3, 2021 compared to the three months ended March 28, 2020 primarily due to lower professional services fees of $0.4 million and lower compensation and benefit costs of $0.3 million.

Interest Expense

Interest expense decreased in the three months ended April 3, 2021 compared to the three months ended March 28, 2020 due to lower interest rates and a lower outstanding debt balance.

Income Tax Expense

We recorded income tax expense of $1.1 million for the three months ended April 3, 2021, compared to $1.5 million for the three months ended March 28, 2020. The decrease in income tax expense for the first quarter of 2021 compared to the first quarter of 2020 was primarily due to lower pre-tax income for the first quarter of 2021 compared to the first quarter of 2020 and higher discrete tax benefits recognized in the first quarter of 2021 for net tax windfalls related to stock-based compensation.

We evaluated the amendments in ASU 2019-12 for the three months ended April 3, 2021 and determined they do not have an impact on our income taxes.

We considered the provisions of the Rescue Plan and determined they do not have a material impact on our income taxes.

Our total amount of unrecognized tax benefits was $4.1 million as of both April 3, 2021 and December 31, 2020. If recognized, $2.4 million would affect the effective tax rate. We record interest and penalty charges, if any, related to uncertain tax positions as a component of tax expense and unrecognized tax benefits. The amounts accrued for interest and penalty charges as of April 3, 2021 and December 31, 2020 were not significant. We do not expect the total amount of unrecognized tax benefits to increase or decrease by a material amount in the next twelve months.

We file U.S. Federal and state income tax returns. We are subject to examination by the Internal Revenue Service (“IRS”) for tax years after 2016 and by state taxing authorities for tax years after 2015. 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 Share

Net income and earnings per share for the three months ended April 3, 2021 were $6.7 million, or $0.55 per diluted share, compared to $7.9 million, or $0.67 per diluted share, for the three months ended March 28, 2020. The decrease in net income for the three months ended April 3, 2021 compared to the three months ended March 28, 2020 was due to $3.7 million of lower gross profit as a result of lower revenues, partially offset by lower interest expense of $1.4 million.

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Business Segment Performance

We report our financial performance based upon the two reportable operating segments: Electronic Systems and Structural Systems. The results of operations differ between our reportable operating segments due to differences in competitors, customers, extent of proprietary deliverables and performance. The following table summarizes our business segment performance for the three months ended April 3, 2021 and March 28, 2020:

	Three Months Ended
	%		(Dollars in thousands)				% of Net Revenues
	Change		April 3, 2021		March 28, 2020		April 3, 2021		March 28, 2020
Net Revenues
Electronic Systems	1.0	%	$	99,104	$	98,120	63.1	%	56.6	%
Structural Systems	(23.0)	%	58,047		75,355		36.9	%	43.4	%
Total Net Revenues	(9.4)	%	$	157,151	$	173,475	100.0	%	100.0	%
Segment Operating Income
Electronic Systems			$	12,491	$	15,122	12.6	%	15.4	%
Structural Systems			5,128		5,390		8.8	%	7.2	%
			17,619		20,512
Corporate General and Administrative Expenses (1)			(7,009)		(6,886)		(4.5)	%	(4.0)	%
Total Operating Income			$	10,610	$	13,626	6.8	%	7.8	%
Adjusted EBITDA
Electronic Systems
Operating Income			$	12,491	$	15,122
Depreciation and Amortization			3,423		3,575
			15,914		18,697		16.1	%	19.1	%
Structural Systems
Operating Income			5,128		5,390
Depreciation and Amortization			3,440		3,689
Guaymas fire related expenses			475		—
			9,043		9,079		15.6	%	12.0	%
Corporate General and Administrative Expenses (1)
Operating Loss			(7,009)		(6,886)
Depreciation and Amortization			59		72
Stock-Based Compensation Expense			3,133		2,279
			(3,817)		(4,535)
Adjusted EBITDA			$	21,140	$	23,241	13.5	%	13.4	%
Capital Expenditures
Electronic Systems			$	624	$	815
Structural Systems			1,989		2,137
Corporate Administration			—		—
Total Capital Expenditures			$	2,613	$	2,952

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

Electronic Systems

Electronic Systems net revenues in the three months ended April 3, 2021 compared to the three months ended March 28, 2020 increased $1.0 million primarily due to the following:

•$7.4 million higher revenues in our military and space end-use markets due to higher build rates on other military and space platforms; partially offset by

•$3.1 million lower revenues in our commercial aerospace end-use markets due to lower build rates on large aircraft platforms, regional and business aircraft platforms, and other commercial aerospace platforms.

Electronic Systems segment operating income in the three months ended April 3, 2021 compared to the three months ended March 28, 2020 decreased $2.6 million primarily due to unfavorable manufacturing volume and unfavorable product mix, partially offset by lower compensation and benefit costs.

Structural Systems

Structural Systems net revenues in the three months ended April 3, 2021 compared to the three months ended March 28, 2020 decreased $17.3 million due to the following:

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•$22.1 million lower revenues in our commercial aerospace end-use markets due to lower build rates on large aircraft platforms and regional and business aircraft platforms; partially offset by

•$4.8 million higher revenues in our military and space end-use markets due to higher build rates on various missile platforms.

The Structural Systems segment operating income in the three months ended April 3, 2021 compared to the three months ended March 28, 2020 decreased $0.3 million primarily due to unfavorable manufacturing volume, partially offset by favorable product mix and lower compensation and benefit costs.

In June 2020, a fire severely damaged our performance center in Guaymas, Mexico, which is part of our Structural Systems segment. There were no injuries, however, property and equipment, inventory, and tooling in this leased facility were damaged. We have insurance coverage and expect the majority, if not all, of these items will be covered, less our deductible. The full financial impact cannot be estimated at this time as we are currently working with our insurance carriers to determine the cause of the fire. Our Guaymas performance center is comprised of two buildings with an aggregate total of 62,000 square feet. The loss of production from the Guaymas performance center is being absorbed by our other existing performance centers. See Note 8 to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.

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

CG&A expenses were essentially flat for the three months ended April 3, 2021 compared to the three months ended March 28, 2020.

Backlog

We define backlog as customer placed purchase orders (“POs”) and long-term agreements (“LTAs”) with firm fixed price and expected delivery dates of 24 months or less. The majority of the LTAs do not meet the definition of a contract under ASC 606 and thus, the backlog amount disclosed below is greater than the remaining performance obligations amount disclosed in Note 1 to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q. Backlog is subject to delivery delays or program cancellations, which are beyond our control. Backlog is affected by timing differences in the placement of customer orders and tends to be concentrated in several programs to a greater extent than our net revenues. Backlog in industrial markets tends to be of a shorter duration and is generally fulfilled within a three month period. As a result of these factors, trends in our overall level of backlog may not be indicative of trends in our future net revenues.

The increase in backlog was primarily in the industrial end-use markets. $555.0 million of total backlog is expected to be delivered over the next 12 months. The following table summarizes our backlog as of April 3, 2021 and December 31, 2020:

	(Dollars in thousands)
	Change		April 3, 2021		December 31, 2020
Consolidated Ducommun
Military and space	$	1,028	$	516,424	$	515,396
Commercial aerospace	(1,926)		266,400		268,326
Industrial	3,290		27,309		24,019
Total	$	2,392	$	810,133	$	807,741
Electronic Systems
Military and space	$	(4,251)	$	385,626	$	389,877
Commercial aerospace	(2,620)		54,099		56,719
Industrial	3,290		27,309		24,019
Total	$	(3,581)	$	467,034	$	470,615
Structural Systems
Military and space	$	5,279	$	130,798	$	125,519
Commercial aerospace	694		212,301		211,607
Total	$	5,973	$	343,099	$	337,126

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Liquidity and Capital Resources

Available Liquidity

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

	(Dollars in millions)
	April 3,			December 31,
	2021			2020
Total debt, including long-term portion	$	313.0		$	320.6
Weighted-average interest rate on debt	3.16		%	3.59		%
Term Loans interest rate	3.23		%	3.81		%
Cash and cash equivalents	$	17.0		$	56.5
Unused Revolving Credit Facility	$	79.8		$	74.8

In December 2019, we completed the refinancing of a portion of our existing debt by entering into a new revolving credit facility (“2019 Revolving Credit Facility”) to replace the then existing revolving credit facility that was entered into in November 2018 (“2018 Revolving Credit Facility”) and entered into a new term loan (“2019 Term Loan”). The 2019 Revolving Credit Facility is a $100.0 million senior secured revolving credit facility that will mature on December 20, 2024, replacing the $100.0 million 2018 Revolving Credit Facility that would have matured on November 21, 2023. The 2019 Term Loan is a $140.0 million senior secured term loan that will mature on December 20, 2024. We also have an existing $240.0 million senior secured term loan that was entered into in November 2018 that will mature on November 21, 2025 (“2018 Term Loan”). The original amounts available under the 2019 Revolving Credit Facility, 2019 Term Loan, and 2018 Term Loan (collectively, the “Credit Facilities”) in aggregate, totaled $480.0 million. We are required to make installment payments of 1.25% of the original outstanding principal balance of the 2019 Term Loan amount on a quarterly basis, on the last day of the calendar quarter. We made the mandatory quarterly principal prepayment under the 2019 Term Loan during the three months ended April 3, 2021 of $1.8 million. In addition, if we meet the annual excess cash flow threshold, we are required to make an annual additional principal payment on the 2018 Term Loan based on the consolidated adjusted leverage ratio. During the first quarter of 2021, we made the required 2020 annual excess cash flow principal payment of $0.9 million. Further, the undrawn portion of the commitment of the 2019 Revolving Credit Facility is subject to a commitment fee ranging from 0.175% to 0.275%, based upon the consolidated total net adjusted leverage ratio. As of April 3, 2021, we were in compliance with all covenants required under the Credit Facilities. See Note 5 to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for further information.

We drew down $50.0 million on the 2019 Revolving Credit Facility during the first quarter of 2020 to hold as cash on hand, $25.0 million of which was repaid during the fourth quarter of 2020. We made net voluntary prepayments of $5.0 million on the 2019 Revolving Credit Facility during the first quarter of 2021.

In November 2018, we completed credit facilities to replace the then existing credit facilities. The November 2018 credit facilities consisted of the 2018 Term Loan and the 2018 Revolving Credit Facility (collectively, the “2018 Credit Facilities”). We were required to make installment payments of 0.25% of the outstanding principal balance of the 2018 Term Loan amount on a quarterly basis, however, in conjunction with the 2019 refinancing where we paid down $56.0 million on the 2018 Term Loan, it paid all the required quarterly installment payments on the 2018 Term Loan until maturity.

In October 2015, we entered into interest rate cap hedges that were designated as cash flow hedges, which matured during our second quarter of 2020.

We expect to spend a total of $16.0 million to $18.0 million for capital expenditures in 2021 (excluding capital expenditures we will spend to restore the manufacturing capabilities related to our Guaymas performance center that was severely damaged by fire in June 2020), financed by cash generated from operations, principally to support new contract awards in Electronic Systems and Structural Systems. As part of our strategic plan to become a supplier of a wider range of higher-level assemblies and win new contract awards, additional up-front investment in tooling will be required for newer programs which have higher engineering content and higher levels of complexity in assemblies. However, some portion of the expected capital expenditures in 2021 could be delayed as a result of the COVID-19 pandemic.

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.

27

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 from the date of issuance of these financial statements.

Cash Flow Summary

Net cash used in operating activities for the three months ended April 3, 2021 was $23.4 million, compared to $12.0 million for the three months ended March 28, 2020. The higher cash used in operating activities during the first three months of 2021 was due to higher contract assets, lower accrued and other liabilities, and higher inventories, partially offset by higher accounts payable.

Net cash used in investing activities was $4.5 million for the three months ended April 3, 2021, compared to $3.7 million in the three months ended March 28, 2020. The higher net cash used during the first three months of 2021 compared to the prior year period was due to higher purchases of property and equipment.

Net cash used in financing activities was $11.6 million for the three months ended April 3, 2021, compared to net cash provided by financing activities of $41.7 million for the three months ended March 28, 2020. The higher net cash used in financing activities during the first three months of 2021 was mainly due to lower net draw downs on the 2019 Revolving Credit Facility, partially offset by lower repayments of term loans.

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements consist of operating and finance leases not recorded as a result of the practical expedients utilized, right of offset of industrial revenue bonds and associated failed sales-leasebacks on property and equipment, and indemnities, none of which we believe may have a material current or future effect on our financial condition, liquidity, capital resources, or results of operations.

Critical Accounting Policies

The preparation of our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States requires estimation and judgment that affect the reported amounts of net revenues, expenses, assets and liabilities. For a description of our critical accounting policies, please refer to “Critical Accounting Policies” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2020 Annual Report on Form 10-K. There have been no material changes in any of our critical accounting policies during the three months ended April 3, 2021.

Recent Accounting Pronouncements

See “Part I, Item 1. Ducommun Incorporated and Subsidiaries—Notes to Condensed Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—Recent Accounting Pronouncements” for further information.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our main market risk exposure relates to changes in U.S. and U.K. interest rates on our outstanding long-term debt. At April 3, 2021, we had total borrowings of $313.0 million under our Credit Facilities.

The 2019 Term Loan bears interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as the London Interbank Offered Rate [“LIBOR”]) plus an applicable margin ranging from 1.50% to 2.50% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 0.50% to 1.50% per year, in each case based upon the consolidated total net adjusted leverage ratio.

The 2019 Revolving Credit Facility bears interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as LIBOR) plus an applicable margin ranging from 1.50% to 2.50% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 0.50% to 1.50% per year, in each case based upon the consolidated total net adjusted leverage ratio.

The 2018 Term Loan bears interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as LIBOR plus an applicable margin ranging from 3.75% to 4.00% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 3.75% to 4.00% per year, in each case based upon the consolidated total net adjusted leverage ratio.

A hypothetical 10% increase or decrease in the interest rate would have an immaterial impact on our financial condition and results of operations.

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Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company’s chief executive officer (“CEO”) and chief financial officer (“CFO”) have conducted an evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934), and concluded that such disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended April 3, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See Note 8 to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for a description of our legal proceedings.

Item 1A. Risk Factors

See Part I, Item 1A of our Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2020 for a discussion of our risk factors. There have been no material changes during the three months ended April 3, 2021 to the risk factors disclosed in our Form 10-K for the year ended December 31, 2020.

Item 4. Mine Safety Disclosures

Not applicable.

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Item 6. Exhibits

2.1 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.

2.2 Agreement and Plan of Merger, dated as of October 8, 2019, among Ducommun LaBarge Technologies, Inc., DLT Acquisition, Inc., Nobles Parent Inc., and the Stockholder Representative. Incorporated by reference to Exhibit 2.1 to Form 8-K filed on October 9, 2019.

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.

3.6 Amendment to Bylaws dated March 5, 2021. Incorporated by reference to Exhibit 3.1 to Form 8-K dated March 8, 2021.

4.1 Description of Ducommun Incorporated Securities Registered under Section 12 of the Exchange Act. Incorporated by reference to Exhibit 4.1 to Form 10-K for the year ended December 31, 2019.

10.1 Incremental Term Loan Lender Joinder Agreement and Additional Credit Extension Amendment, dated as of December 20, 2019, by and among Ducommun Incorporated, as Borrower, the subsidiaries of the Borrower party thereto, as Guarantors, Bank of America, N.A., as Administrative Agent, Swingline Lender and an L.C. Issuer, and the lender party thereto. Incorporated by reference to Exhibit 10.1 to Form 8-K filed on December 20, 2019.

10.2 Credit Agreement, dated as of November 21, 2018, among Ducommun Incorporated, certain of its subsidiaries, Bank of America, N.A., as administrative agent, swingline lender and issuing bank, and other lenders party thereto. Incorporated by reference to Exhibit 10.1 to Form 8-K filed on November 26, 2018.

*10.3 2013 Stock Incentive Plan (Amended and Restated May 2, 2018). Incorporated by reference to Appendix A of Definitive Proxy Statement on Schedule 14a, filed on March 23, 2018.

*10.4 2020 Employee Stock Incentive Plan. Incorporated by reference to Appendix A of Definitive Proxy Statement on Schedule 14a, filed on March 20, 2020.

*10.5 2018 Employee Stock Purchase Plan. Incorporated by reference to Appendix B of Definitive Proxy Statement on Schedule 14a, filed on March 23, 2018.

*10.6 2020 Employee Stock Purchase Plan. Incorporated by reference to Appendix A of Definitive Proxy Statement on Schedule 14a, filed on March 20, 2020.

*10.7 Form of Stock Option Agreement for 2016 and earlier. Incorporated by reference to Exhibit 10.8 to Form 10-K for the year ended December 31, 2003.

*10.8 Form of Stock Option Agreement for 2017. Incorporated by reference to Exhibit 10.5 to Form 10-K for the year ended December 31, 2016.

*10.9 Form of Stock Option Agreement for 2018 and after. Incorporated by reference to Exhibit 4.7 to Form S-8, filed on May 10, 2018.

*10.10 Form of Restricted Stock Unit Agreement for 2017 through 2019. Incorporated by reference to Exhibit 10.9 to Form 10-K for the year ended December 31, 2016.

*10.11 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.

*10.12 Form of Performance Stock Unit Agreement for 2020 and after. Incorporated by reference to Exhibit 10.18 to Form 10-Q for the period ended June 27, 2020.

*10.13 Form of Restricted Stock Unit Agreement for Non-Qualified Deferred Compensation Plan Participants for 2020 and after. Incorporated by reference to Exhibit 10.19 to Form 10-Q for the period ended June 27, 2020.

30

Exhibit

No.        Description

*10.14 Form of Restricted Stock Unit Agreement for 2020 and after. Incorporated by reference to Exhibit 10.20 to Form 10-Q for the period ended June 27, 2020.

*10.15 Form of Stock Option Agreement for 2020 and after. Incorporated by reference to Exhibit 10.21 to Form 10-Q for the period ended June 27, 2020.

*10.16 Form of Performance Restricted Stock Unit Agreement for 2020. Incorporated by reference to Exhibit 10.22 to Form 10-Q for the period ended June 27, 2020.

*10.17    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
Shirley G. Drazba	October 18, 2018
Robert C. Ducommun	December 31, 1985
Dean M. Flatt	November 5, 2009
Jay L. Haberland	February 2, 2009
Stephen G. Oswald	January 23, 2017
Jerry L. Redondo	October 1, 2015
Rosalie F. Rogers	July 24, 2008
Rajiv A. Tata	January 24, 2020
Christopher D. Wampler	January 1, 2016

*10.18 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.

*10.19 Non Qualified Deferred Compensation. Incorporated by reference to Exhibit 4.6 to Form S-8 dated November 26, 2019.

*10.20 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.

*10.21 Form of Key Executive Severance Agreement between Ducommun Incorporated and each of the individuals listed below. Incorporated by reference to Exhibit 99.2 to Form 8-K dated January 27, 2017. All of the Key Executive Severance Agreements are identical except for the name of the person, the address for notice, and the date of the Agreement:

Person	Date of Agreement
Jerry L. Redondo	January 23, 2017
Rosalie F. Rogers	January 23, 2017
Rajiv A. Tata	January 24, 2020
Christopher D. Wampler	January 23, 2017

*10.22 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.

*10.23 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.

*10.24 Transition Services Letter Agreement dated January 10, 2017 between Ducommun Incorporated and James S. Heiser. Incorporated by reference to Exhibit 99.1 to Form 8-K filed on January 17, 2017.

*10.25 Separation and Release Agreement dated May 14, 2018 between Ducommun Incorporated and Amy M. Paul. Incorporated by reference to Exhibit 10.1 to Form 8-K filed on May 23, 2018.

*10.26 Separation and Release Agreement dated June 26, 2019 between Ducommun Incorporated and Douglas L. Groves. Incorporated by reference to Exhibit 10.1 to Form 8-K filed on June 28, 2019.

31

Exhibit

No.        Description

31.1 Certification of Principal Executive Officer.

31.2 Certification of Principal Financial Officer.

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

101.INS     Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL

101.SCH    Inline XBRL Taxonomy Extension Schema

101.CAL    Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF    Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB    Inline XBRL Taxonomy Extension Label Linkbase

101.PRE    Inline XBRL Taxonomy Extension Presentation Linkbase

104    Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

___________________

* Indicates an executive compensation plan or arrangement.

32

SIGNATURES

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

Date: May 4, 2021	By:	/s/ Stephen G. Oswald
		Stephen G. Oswald
		Chairman, President and Chief Executive Officer
		(Principal Executive Officer)
Date: May 4, 2021	By:	/s/ Christopher D. Wampler
		Christopher D. Wampler
		Vice President, Chief Financial Officer, Controller and Treasurer
		(Principal Financial and Principal Accounting Officer)

33

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 Quarterly Report of Ducommun Incorporated (the “registrant”) on Form 10-Q for the period ended April 3, 2021;

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: May 4, 2021

/s/ Stephen G. Oswald

Stephen G. Oswald

Chairman, 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, Christopher D. Wampler, certify that:

1.I have reviewed this Quarterly Report of Ducommun Incorporated (the “registrant”) on Form 10-Q for the period ended April 3, 2021;

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: May 4, 2021

/s/ Christopher D. Wampler

Christopher D. Wampler

Vice President, Chief Financial Officer, Controller 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 Quarterly Report of Ducommun Incorporated (the “Company”) on Form 10-Q for the period ending April 3, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen G. Oswald, Chairman, 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 my 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
	Chairman, President and Chief Executive Officer
	May 4, 2021

In connection with the Quarterly Report of Ducommun Incorporated (the “Company”) on Form 10-Q for the period ending April 3, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher D. Wampler, Vice President, Chief Financial Officer, Controller 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 my 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/ Christopher D. Wampler
	Christopher D. Wampler
	Vice President, Chief Financial Officer, Controller and Treasurer
	May 4, 2021

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

XML

Cover - shares	3 Months Ended
	Apr. 03, 2021	Apr. 27, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Apr. 03, 2021
Document Transition Report	false
Entity File Number	001-08174
Entity Registrant Name	DUCOMMUN INCORPORATED
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	95-0693330
Entity Address, Address Line One	200 Sandpointe Avenue, Suite 700
Entity Address, City or Town	Santa Ana
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92707-5759
City Area Code	657
Local Phone Number	335-3665
Title of 12(b) Security	Common Stock, $.01 par value per share
Trading Symbol	DCO
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		11,849,597
Amendment Flag	false
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Central Index Key	0000030305

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Apr. 03, 2021	Dec. 31, 2020
Current Assets
Cash and cash equivalents	$ 16,972	$ 56,466
Accounts receivable, net (allowance for credit losses of $1,570 and $1,552 at April 3, 2021 and December 31, 2020, respectively	61,124	58,025
Contract assets	173,909	154,028
Inventories	138,287	129,223
Production cost of contracts	7,198	6,971
Other current assets	5,723	5,571
Total Current Assets	403,213	410,284
Property and equipment, net of accumulated depreciation of $172,536 and $169,742 at April 3, 2021 and December 31, 2020, respectively	109,180	109,990
Operating Lease Right-of-Use Assets	15,703	16,348
Goodwill	170,830	170,830
Intangibles, Net	121,506	124,744
Deferred Income Taxes	33	33
Other Assets	5,399	5,118
Total Assets	825,864	837,347
Current Liabilities
Accounts payable	70,235	63,980
Contract liabilities	24,257	28,264
Accrued and other liabilities	28,433	40,526
Operating lease liabilities	3,118	3,132
Current portion of long-term debt	7,000	7,000
Total Current Liabilities	133,043	142,902
Long-Term Debt, Less Current Portion	304,344	311,922
Non-Current Operating Lease Liabilities	13,785	14,555
Deferred Income Taxes	17,598	16,992
Other Long-Term Liabilities	21,524	21,642
Total Liabilities	490,294	508,013
Commitments and Contingencies
Shareholders’ Equity
Common stock - $0.01 par value; 35,000,000 shares authorized; 11,849,597 and 11,728,212 shares issued and outstanding at April 3, 2021 and December 31, 2020, respectively	118	117
Additional paid-in capital	96,385	97,090
Retained earnings	248,422	241,727
Accumulated other comprehensive loss	(9,355)	(9,600)
Total Shareholders’ Equity	335,570	329,334
Total Liabilities and Shareholders’ Equity	$ 825,864	$ 837,347

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Apr. 03, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Accounts receivable, allowance for credit loss	$ 1,570	$ 1,552
Property and equipment, accumulated depreciation	$ 172,536	$ 169,742
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	35,000,000	35,000,000
Common stock, shares issued (in shares)	11,849,597	11,728,212
Common Stock, shares outstanding (in shares)	11,849,597	11,728,212

XML

Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Apr. 03, 2021	Mar. 28, 2020
Income Statement [Abstract]
Net Revenues	$ 157,151	$ 173,475
Cost of Sales	124,051	136,671
Gross Profit	33,100	36,804
Selling, General and Administrative Expenses	22,490	23,178
Operating Income	10,610	13,626
Interest Expense	(2,806)	(4,246)
Income Before Taxes	7,804	9,380
Income Tax Expense	1,109	1,450
Net Income	$ 6,695	$ 7,930
Earnings Per Share
Basic earnings per share (in dollars per share)	$ 0.57	$ 0.68
Diluted earnings per share (in dollars per share)	$ 0.55	$ 0.67
Weighted-Average Number of Common Shares Outstanding
Basic (in shares)	11,791	11,610
Diluted (in shares)	12,250	11,855

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Apr. 03, 2021	Mar. 28, 2020
Statement of Comprehensive Income [Abstract]
Net Income	$ 6,695	$ 7,930
Other Comprehensive Income, Net of Tax:
Amortization of actuarial loss and prior service costs, net of tax of $76 and $59 for the three months ended April 3, 2021 and March 28, 2020, respectively	245	190
Change in unrealized gains and losses on cash flow hedges, net of tax of zero and $26 for the three months ended April 3, 2021 and March 28, 2020, respectively	0	86
Other Comprehensive Income, Net of Tax	245	276
Comprehensive Income	$ 6,940	$ 8,206

XML

Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Apr. 03, 2021	Mar. 28, 2020
Statement of Comprehensive Income [Abstract]
Amortization of actuarial losses and prior service costs, tax benefits	$ 76	$ 59
Change in unrealized gains and losses on cash flow hedges, tax benefit	$ 0	$ 26

XML

Condensed Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Loss
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance (in shares)		11,572,668
Beginning Balance (in shares)		11,648,617
Beginning Balance at Dec. 31, 2019	$ 292,800	$ 116	$ 88,399	$ 212,553	$ (8,268)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	7,930			7,930
Other comprehensive loss, net of tax	276				276
Employee stock purchase plan (in shares)		27,104
Employee stock purchase plan	1,112		1,112
Stock options exercised (in shares)		1,569
Stock options exercised	39		39
Stock awards vested (in shares)		86,523
Stock awards vested	0	$ 1	(1)
Stock repurchased related to the exercise of stock options and stock awards vested (in shares)		(39,247)
Stock repurchased related to the exercise of stock options and stock awards vested	(2,009)	$ (1)	(2,008)
Stock-based compensation	2,279		2,279
Ending Balance (in shares) at Mar. 28, 2020		11,648,617
Ending Balance at Mar. 28, 2020	302,427	$ 116	89,820	220,483	(7,992)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance (in shares)		11,648,617
Beginning Balance (in shares)		11,728,212
Beginning Balance (in shares)		11,849,597
Beginning Balance at Dec. 31, 2020	329,334	$ 117	97,090	241,727	(9,600)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	6,695			6,695
Other comprehensive loss, net of tax	245				245
Employee stock purchase plan (in shares)		31,580
Employee stock purchase plan	1,558		1,558
Stock options exercised (in shares)		17,872
Stock options exercised	610		610
Stock awards vested (in shares)		178,827
Stock awards vested	0	$ 2	(2)
Stock repurchased related to the exercise of stock options and stock awards vested (in shares)		(106,894)
Stock repurchased related to the exercise of stock options and stock awards vested	(6,005)	$ (1)	(6,004)
Stock-based compensation	3,133		3,133
Ending Balance (in shares) at Apr. 03, 2021		11,849,597
Ending Balance at Apr. 03, 2021	$ 335,570	$ 118	$ 96,385	$ 248,422	$ (9,355)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance (in shares)		11,849,597

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Apr. 03, 2021	Mar. 28, 2020
Cash Flows from Operating Activities
Net Income	$ 6,695	$ 7,930
Net Cash Provided by Operating Activities:
Depreciation and amortization	6,922	7,336
Non-cash operating lease cost	736	811
Stock-based compensation expense	3,133	2,279
Deferred income taxes	606	1,495
Provision for credit losses	18	97
Other	122	194
Changes in Assets and Liabilities:
Accounts receivable	(3,117)	(14,591)
Contract assets	(19,881)	(10,543)
Inventories	(9,064)	(7,269)
Production cost of contracts	(488)	973
Other assets	(369)	871
Accounts payable	8,192	(4,711)
Contract liabilities	(4,007)	13,361
Operating lease liabilities	(784)	(700)
Accrued and other liabilities	(12,069)	(9,567)
Net Cash Used in Operating Activities	(23,355)	(12,034)
Cash Flows from Investing Activities
Purchases of property and equipment	(4,542)	(3,867)
Post closing cash received from the acquisition of Nobles Worldwide, Inc., net	0	190
Net Cash Used in Investing Activities	(4,542)	(3,677)
Cash Flows from Financing Activities
Borrowings from senior secured revolving credit facility	20,000	65,900
Repayments of senior secured revolving credit facility	(25,000)	(15,900)
Repayments of term loans	(2,676)	(7,362)
Repayments of other debt	(84)	(54)
Net cash paid upon issuance of common stock under stock plans	(3,837)	(858)
Net Cash (Used in) Provided by Financing Activities	(11,597)	41,726
Net (Decrease) Increase in Cash and Cash Equivalents	(39,494)	26,015
Cash and Cash Equivalents at Beginning of Period	56,466	39,584
Cash and Cash Equivalents at End of Period	$ 16,972	$ 65,599

XML

Summary of Significant Accounting Policies

3 Months Ended

Apr. 03, 2021

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 (“A&D”), industrial, medical and other industries (collectively, “Industrial”). Our operations are organized into two primary businesses: the Electronic Systems segment (“Electronic Systems”) and the Structural Systems segment (“Structural Systems”), each of which is a reportable operating segment. Electronic Systems designs, engineers and manufactures high-reliability electronic and electromechanical products used in worldwide technology-driven markets including A&D and Industrial 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 unaudited condensed consolidated financial statements include the accounts of Ducommun Incorporated and its subsidiaries (“Ducommun,” the “Company,” “we,” “us” or “our”), after eliminating intercompany balances and transactions. The December 31, 2020 condensed consolidated balance sheet data was derived from audited financial statements, but does not contain all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”).

Our significant accounting policies were described in Part IV, Item 15(a)(1), “Note 1. Summary of Significant Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2020. The financial information included in this Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020.

In the opinion of management, all adjustments, consisting of recurring accruals, have been made that are necessary to fairly state our condensed consolidated financial position, statements of income, comprehensive income, changes in shareholders’ equity, and cash flows in accordance with GAAP for the periods covered by this Quarterly Report on Form 10-Q. The results of operations for the three months ended April 3, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021.

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 on December 31 for our fourth fiscal quarter. As a result of using fiscal quarters for the first three quarters combined with leap years, our first and fourth fiscal quarters can range between 12 1/2 weeks to 13 1/2 weeks while the second and third fiscal quarters remain at a constant 13 weeks per fiscal quarter.

Certain reclassifications have been made to prior period amounts to conform to the current year’s presentation.

Use of Estimates

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

Supplemental Cash Flow Information

	(Dollars in thousands)
	Three Months Ended
	April 3, 2021		March 28, 2020
Interest paid	$	2,544	$	3,523
Taxes (refunded) paid, net	$	(30)	$	33
Non-cash activities:
Purchases of property and equipment not paid	$	540	$	464

Earnings Per Share

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

The net income and weighted-average common shares outstanding used to compute earnings per share were as follows:

	(Dollars in thousands, except per share data)
	Three Months Ended
	April 3, 2021		March 28, 2020
Net income	$	6,695	$	7,930
Weighted-average number of common shares outstanding
Basic weighted-average common shares outstanding	11,791		11,610
Dilutive potential common shares	459		245
Diluted weighted-average common shares outstanding	12,250		11,855
Earnings per share
Basic	$	0.57	$	0.68
Diluted	$	0.55	$	0.67

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

	(In thousands)
	Three Months Ended
	April 3, 2021	March 28, 2020
Stock options and stock units	3	253

Fair Value

Assets and liabilities that are measured, recorded or disclosed at fair value on a recurring basis are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine the fair value. Level 1, the highest level, refers to the values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant observable inputs. Level 3, the lowest level, includes fair values estimated using significant unobservable inputs.

We have money market funds and they are included as cash and cash equivalents. We also had interest rate cap hedge agreements for which the fair value of the interest rate cap hedge agreements was determined using pricing models that use observable market inputs as of the balance sheet date, a Level 2 measurement, however, those agreements expired during our second quarter of 2020.

There were no transfers between Level 1, Level 2, or Level 3 financial instruments in the three months ended April 3, 2021.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid instruments purchased with original maturities of three months or less. These assets are valued at cost, which approximates fair value, which we classify as Level 1. See Fair Value above.

Derivative Instruments

We recognize derivative instruments on our condensed consolidated balance sheets at their fair value. On the date that we enter into a derivative contract, we designate the derivative instrument as a fair value hedge, a cash flow hedge, or a derivative instrument that will not be accounted for using hedge accounting methods. As of April 3, 2021, we had no derivative instruments as our cash flow hedges matured in the second quarter of 2020.

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. The majority of our inventory is charged to cost of

sales as raw materials are placed into production and the related revenue is recognized. Inventoried costs include raw materials, outside processing, direct labor and allocated overhead, adjusted for any abnormal amounts of idle performance center expense, freight, handling costs, and wasted materials (spoilage) incurred. 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. The majority of our revenues are recognized over time, however, for revenue contracts where revenue is recognized using the point in time method, inventory is not reduced until it is shipped or transfer of control to the customer has occurred. Our ending inventory consists of raw materials, work-in-process, and finished goods.

Accumulated Other Comprehensive Loss

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

Revenue Recognition

Our customers typically engage us to manufacture products based on designs and specifications provided by the end-use customer. This requires the building of tooling and manufacturing first article inspection products (prototypes) before volume manufacturing. Contracts with our customers generally include a termination for convenience clause.

We have a significant number of contracts that are started and completed within the same year, as well as contracts derived from long-term agreements and programs that can span several years. We recognize revenue under Accounting Standards Codification 606, “Revenue from Contracts with Customers” (“ASC 606”), which utilizes a five-step model.

The definition of a contract for us is typically defined as a customer purchase order as this is when we achieve an enforceable right to payment. The majority of our contracts are firm fixed-price contracts. The deliverables within a customer purchase order are analyzed to determine the number of performance obligations. At times, in order to achieve economies of scale and based on our customer’s forecasted demand, we may build in advance of receiving a purchase order from our customer. When that occurs, we would not recognize revenue until we have received the customer purchase order.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account under ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, control is transferred and the performance obligation is satisfied. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services are highly interrelated or meet the series guidance. For contracts with multiple performance obligations, we allocate the contract transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate the standalone selling price is the expected cost plus a margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service.

We manufacture most products to customer specifications and the product cannot be easily modified to satisfy another customer’s order. As such, these products are deemed to have no alternative use once the manufacturing process begins. In the event the customer invokes a termination for convenience clause, we would be entitled to costs incurred to date plus a reasonable profit. Contract costs typically include labor, materials, overhead, and when applicable, subcontractor costs. For most of our products, we are building assets with no alternative use and have enforceable right to payment, and thus, we recognize revenue using the over time method.

The majority of our performance obligations are satisfied over time as work progresses. Typically, revenue is recognized over time using an input measure (i.e., costs incurred to date relative to total estimated costs at completion, also known as cost-to-cost plus reasonable profit) to determine progress. Our typical revenue contract is a firm fixed price contract, and the cost of raw materials could make up a significant amount of the total costs incurred. As such, we believe using the total costs incurred input method would be the most appropriate method. While the cost of raw materials could make up a significant amount of the total costs incurred, there is a direct relationship between our inputs and the transfer of control of goods or services to the customer.

Contract estimates are based on various assumptions to project the outcome of future events that can span multiple months or years. These assumptions include labor productivity and availability; the complexity of the work to be performed; the cost and availability of materials; and the performance of subcontractors.

As a significant change in one or more of these estimates could affect the progress completed (and related profitability) on our contracts, we review and update our contract-related estimates on a regular basis. We recognize such adjustments under the cumulative catch-up method. Under this method, the impact of the adjustment is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate.

The impact of adjustments in contract estimates on our operating earnings can be reflected in either operating costs and expenses or revenue.

Net cumulative catch up adjustments on gross profit recorded were not material for both the three months ended April 3, 2021 and March 28, 2020.

Payments under long-term contracts may be received before or after revenue is recognized. When revenue is recognized before we bill our customer, a contract asset is created for the work performed but not yet billed. Similarly, when we receive payment before we ship our products to our customer, a contract liability is created for the advance or progress payment.

We record provisions for the total anticipated losses on contracts, considering total estimated costs to complete the contract compared to total anticipated revenues, in the period in which such losses are identified. The provisions for estimated losses on contracts require us to make certain estimates and assumptions, including those with respect to the future revenue under a contract and the future cost to complete the contract. Our estimate of the future cost to complete a contract may include assumptions as to changes in manufacturing efficiency, 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 adjust the provisions for estimated losses on contracts. The provision for estimated losses on contracts is included as part of contract liabilities on the condensed consolidated balance sheets. As of April 3, 2021 and December 31, 2020, provision for estimated losses on contracts were $2.0 million and $2.3 million, respectively.

Production cost of contracts includes non-recurring production costs, such as design and engineering costs, and tooling and other special-purpose machinery necessary to build parts as specified in a contract. Production costs of contracts are recorded to cost of sales using the over time revenue recognition model. We review the value of the production cost of contracts on a quarterly basis to ensure when added to the estimated cost to complete, the value is not greater than the estimated realizable value of the related contracts. As of April 3, 2021 and December 31, 2020, production cost of contracts were $7.2 million and $7.0 million, respectively.

Contract Assets and Contract Liabilities

Contract assets consist of our right to payment for work performed but not yet billed. Contract assets are transferred to accounts receivable when we bill our customers. We bill our customers when we ship the products and meet the shipping terms within the revenue contract. Contract liabilities consist of advance or progress payments received from our customers prior to the time transfer of control occurs plus the estimated losses on contracts.

Contract assets and contract liabilities from revenue contracts with customers are as follows:

	(Dollars in thousands)
	April 3, 2021		December 31, 2020
Contract assets	$	173,909	$	154,028
Contract liabilities	$	24,257	$	28,264

The increase in our contract assets as of April 3, 2021 compared to December 31, 2020 was primarily due to a net increase of products in work in process and finished goods in the current period.

The decrease in our contract liabilities as of April 3, 2021 compared to December 31, 2020 was primarily due to a net decrease of advance or progress payments received from our customers in the current period. We recognized $7.2 million of the contract liabilities as of December 31, 2020 as revenues during the three months ended April 3, 2021.

Performance obligations are defined as customer placed purchase orders (“POs”) with firm fixed price and firm delivery dates. Our remaining performance obligations as of April 3, 2021 totaled $690.3 million. We anticipate recognizing an estimated 70% of our remaining performance obligations as revenue during the next 12 months with the remaining performance obligations being recognized in the remainder of 2022 and beyond.

Revenue by Category

In addition to the revenue categories disclosed above, the following table reflects our revenue disaggregated by major end-use market:

	(Dollars in thousands)
	Three Months Ended
	April 3 2021		March 28, 2020
Consolidated Ducommun
Military and space	$	114,127	$	101,899
Commercial aerospace	35,377		60,582
Industrial	7,647		10,994
Total	$	157,151	$	173,475
Electronic Systems
Military and space	$	81,733	$	74,317
Commercial aerospace	9,724		12,809
Industrial	7,647		10,994
Total	$	99,104	$	98,120
Structural Systems
Military and space	$	32,394	$	27,582
Commercial aerospace	25,653		47,773
Total	$	58,047	$	75,355

Recent Accounting Pronouncements

New Accounting Guidance Adopted in 2021

In October 2020, the FASB issued ASU 2020-10, “Codification Improvements” (“ASU 2020-10”), which affect a wide variety of Topics in the Accounting Standards Codification (“Codification”). ASU 2020-10, among other things, contains amendments that improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50). Many of the amendments arose as the FASB provided an option to give certain information either on the face of the financial statements or in the notes to financial statements and that option only was included in the Other Presentation Matters Section (Section 45) of the Codification. Those amendments are not expected to change current practice. The new guidance is effective for fiscal years beginning after December 15, 2020, which was our interim period beginning January 1, 2021. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which removes certain exceptions and provides guidance on various areas of tax accounting. The new guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, which was our interim period beginning January 1, 2021. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans” (“ASU 2018-14”), which will remove disclosures that no longer are considered cost-beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The new guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, which was our interim period beginning January 1, 2021. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

Recently Issued Accounting Standards

In August 2020, the FASB issued ASU 2020-06, “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies reporting or provides clarification on various topics, including clarification that an entity should use the weighted-average share count from each quarter when calculating the year-to-date weighted-average share count. The new guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, which will be our interim period beginning January 1, 2022. Early adoption is

permitted. We are evaluating the impact of this standard.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides optional guidance for a limited time for contracts that reference London Interbank Offered Rate (“LIBOR”), to ease the potential burden in accounting for, or recognizing the effects, of reference rate reform on financial reporting as a result of the cessation of LIBOR. The new guidance is effective at any time after March 12, 2020 but no later than December 31, 2022. We are evaluating the impact of this standard.

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Inventories

3 Months Ended

Apr. 03, 2021

Inventory Disclosure [Abstract]

Inventories

Inventories

Inventories consisted of the following:

	(Dollars in thousands)
	April 3, 2021		December 31, 2020
Raw materials and supplies	$	121,756	$	107,983
Work in process	12,502		15,895
Finished goods	4,029		5,345
Total	$	138,287	$	129,223

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Goodwill

3 Months Ended

Apr. 03, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill

We perform our annual goodwill impairment test as of the first day of the fourth quarter. If certain factors occur, including significant under performance of our business relative to expected operating results, significant adverse economic and industry trends, significant decline in our market capitalization for an extended period of time relative to net book value, a decision to divest individual businesses within a reporting unit, or a decision to group individual businesses differently, we may be required to perform an interim impairment test prior to the fourth quarter.

We may use either a qualitative or quantitative approach when testing a reporting unit’s goodwill for impairment. The qualitative approach for potential impairment analysis is performed to determine whether it is more likely than not that the fair value of a reporting unit was less than its carrying amount.

The quantitative approach for potential impairment analysis is performed by comparing the fair value of a reporting unit to its carrying value, including goodwill. Fair value is estimated by management using a combination of the income approach (which is based on a discounted cash flow model) and market approach. Management’s cash flow projections include significant judgments and assumptions, including the amount and timing of expected cash flows, long-term growth rates, and discount rates. The cash flows used in the discounted cash flow model are based on our best estimate of future revenues, gross margins, and adjusted after-tax earnings. If any of these assumptions are incorrect, it will impact the estimated fair value of a reporting unit. The market approach also requires significant management judgment in selecting comparable business acquisitions and the transaction values observed and its related control premiums.

For our most recent annual goodwill impairment test of our Electronic Systems reporting unit as of the first day of the fourth quarter of 2020, we used a qualitative assessment and determined it was not more likely than not that the fair value of the reporting unit was less than its carrying amount. For our most recent annual goodwill impairment test of our Structural Systems reporting unit as of the first day of the fourth quarter of 2020, we performed a step one goodwill impairment test where the fair value of our Structural Systems reporting unit exceeded its carrying value by 69% and thus, goodwill was not deemed to be impaired. While our business continues to be negatively impacted during the three months ended April 3, 2021 as a result of the COVID-19 pandemic, no material adverse factors/changes have occurred since the fourth quarter of 2020 that would require us to perform another qualitative assessment. As such, for the first quarter of 2021, it was also not more likely than not that the fair values of the reporting units were less than their carrying amounts and thus, the respective goodwill amounts were not deemed to be impaired.

The carrying amounts of our goodwill were as follows:

	(Dollars in thousands)
	Electronic Systems		Structural Systems		Consolidated Ducommun
Gross goodwill	$	199,157	$	53,395	$	252,552
Accumulated goodwill impairment	(81,722)		—		(81,722)
Balance at December 31, 2020	$	117,435	$	53,395	$	170,830
Balance at April 3, 2021	$	117,435	$	53,395	$	170,830

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Accrued and Other Liabilities

3 Months Ended

Apr. 03, 2021

Payables and Accruals [Abstract]

Accrued and Other Liabilities

Accrued and Other Liabilities

The components of accrued and other liabilities were as follows:

	(Dollars in thousands)
	April 3, 2021		December 31, 2020
Accrued compensation	$	15,386	$	28,432
Accrued income tax and sales tax	558		80
Other	12,489		12,014
Total	$	28,433	$	40,526

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Long-Term Debt

3 Months Ended

Apr. 03, 2021

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

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

	(Dollars in thousands)
	April 3, 2021			December 31, 2020
Term loans	$	292,962		$	295,638
Revolving credit facility	20,000			25,000
Total debt	312,962			320,638
Less current portion	7,000			7,000
Total long-term debt, less current portion	305,962			313,638
Less debt issuance costs - term loans	1,618			1,716
Total long-term debt, net of debt issuance costs - term loans	$	304,344		$	311,922
Debt issuance costs - revolving credit facility (1)	$	1,421		$	1,515
Weighted-average interest rate	3.16		%	3.59		%

(1) Included as part of other assets.

In December 2019, we completed the refinancing of a portion of our existing debt by entering into a new revolving credit facility (“2019 Revolving Credit Facility”) to replace the then existing revolving credit facility that was entered into in November 2018 (“2018 Revolving Credit Facility”) and entered into a new term loan (“2019 Term Loan”). The 2019 Revolving Credit Facility is a $100.0 million senior secured revolving credit facility that matures on December 20, 2024 replacing the $100.0 million 2018 Revolving Credit Facility that would have matured on November 21, 2023. The 2019 Term Loan is a $140.0 million senior secured term loan that matures on December 20, 2024. We also have an existing $240.0 million senior secured term loan that was entered into in November 2018 that matures on November 21, 2025 (“2018 Term Loan”). The original amounts available under the 2019 Revolving Credit Facility, 2019 Term Loan, and 2018 Term Loan (collectively, the “Credit Facilities”) in aggregate, totaled $480.0 million.

The 2019 Term Loan bears interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as the London Interbank Offered Rate [“LIBOR”]) plus an applicable margin ranging from 1.50% to 2.50% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 0.50% to 1.50% per year, in each case based upon the consolidated total net adjusted leverage ratio, typically payable quarterly. In addition, the 2019 Term Loan requires installment payments of 1.25% of the original outstanding principal balance of the 2019 Term Loan amount on a quarterly basis, on the last day of the calendar quarter. For the three months ended April 3, 2021, we made the required quarterly payment of $1.8 million.

The 2019 Revolving Credit Facility bears interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as LIBOR) plus an applicable margin ranging from 1.50% to 2.50% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from 0.50% to 1.50% per year, in each case based upon the consolidated total net adjusted leverage ratio, typically payable quarterly. The undrawn portion of the commitment of the 2019 Revolving Credit Facility is subject to a commitment fee ranging from 0.175% to 0.275%, based upon the consolidated total net adjusted leverage ratio. However, the 2019 Revolving Credit Facility does not require any principal installment payments.

The 2018 Term Loan bears interest, at our option, at a rate equal to either (i) the Eurodollar Rate (defined as LIBOR plus an applicable margin ranging from 3.75% to 4.00% per year or (ii) the Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] the Eurodollar Rate plus 1.00%) plus an applicable margin ranging from

3.75% to 4.00% per year, in each case based upon the consolidated total net adjusted leverage ratio, typically payable quarterly. In addition, the 2018 Term Loan required installment payments of 0.25% of the outstanding principal balance of the 2018 Term Loan amount on a quarterly basis.

Further, under the Credit Facilities, if we exceed the annual excess cash flow threshold, we are required to make an annual additional principal payment based on the consolidated adjusted leverage ratio. The annual mandatory excess cash flow payment is based on (i) 50% of the excess cash flow amount if the adjusted leverage ratio is greater than 3.25 to 1.0, (ii) 25% of the excess cash flow amount if the adjusted leverage ratio is less than or equal to 3.25 to 1.0 but greater than 2.50 to 1.0, and (iii) zero percent of the excess cash flow amount if the consolidated adjusted leverage ratio is less than or equal to 2.50 to 1.0. During the three months ended April 3, 2021, we made the required 2020 annual excess cash flow payment of $0.9 million. As of April 3, 2021, we were in compliance with all covenants required under the Credit Facilities.

During the three months ended April 3, 2021, we made net voluntary prepayments of $5.0 million on the 2019 Revolving Credit Facility.

In conjunction with entering into the 2019 Revolving Credit Facility and the 2019 Term Loan, we drew down the entire $140.0 million on the 2019 Term Loan and used those proceeds to pay off and close the 2018 Revolving Credit Facility of $58.5 million, paid down a portion of the 2018 Term Loan of $56.0 million, paid the accrued interest associated with the amounts being paid down on the 2018 Revolving Credit Facility and 2018 Term Loan, paid the fees related to this transaction, and the remainder available for general corporate purposes. The $56.0 million pay down on the 2018 Term Loan paid all the required quarterly installment payments on the 2018 Term Loan until maturity.

The 2019 Term Loan and 2018 Term Loan were considered a modification of debt and thus, no gain or loss was recorded. Instead, the new fees paid to the lenders of $0.6 million were capitalized and are being amortized over the life of the 2019 Term Loan. The remaining debt issuance costs related to the 2018 Term Loan of $1.5 million as of the modification date will continue to be amortized over its remaining life.

The 2019 Revolving Credit Facility that replaced the 2018 Revolving Credit Facility was considered an extinguishment of debt except for the portion related to the creditors that were part of both the 2019 Revolving Credit Facility and the 2018 Revolving Credit Facility and in which case, it was considered a modification of debt. As a result, we expensed the portion of the unamortized debt issuance costs related to the 2018 Revolving Credit Facility that was considered an extinguishment of debt of $0.5 million. In addition, the new fees paid to the lenders of $0.5 million as part of the 2019 Revolving Credit Facility were capitalized and are being amortized over its remaining life. Further, the remaining debt issuance costs related to the 2018 Revolving Credit Facility of $1.1 million as of the modification date will also be amortized over its remaining life.

As of April 3, 2021, we had $79.8 million of unused borrowing capacity under the 2019 Revolving Credit Facility, after deducting $0.2 million for standby letters of credit.

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

In October 2015, we entered into interest rate cap hedges designated as cash flow hedges with a portion of these interest rate cap hedges maturing on a quarterly basis, and a final quarterly maturity date of June 2020, in aggregate, totaling $135.0 million of our debt. We paid a total of $1.0 million in connection with entering into the interest rate cap hedges. The interest rate cap hedges matured during our second quarter of 2020 and as such, all remaining amounts related to the interest rate cap hedges were fully amortized and unrealized gains and losses recorded in accumulated other comprehensive income were also realized at that time.

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Indemnifications

3 Months Ended

Apr. 03, 2021

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 performance center leases, we have indemnified our lessors for certain claims arising from the performance center or the lease. We indemnify our directors and officers to the maximum extent permitted under the laws of the State of Delaware.

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

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Income Taxes

3 Months Ended

Apr. 03, 2021

Income Tax Disclosure [Abstract]

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 due to research and development (“R&D”) tax credits. Our effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as expected utilization of R&D tax credits, valuation allowances against deferred tax assets, recognition or derecognition of tax benefits related to uncertain tax positions, and changes in or the interpretation of tax laws in jurisdictions where we conduct business. Also, excess tax benefits and tax detriments related to our equity compensation recognized in the income statement could result in fluctuations in our effective tax rate period-over-period depending on the volatility of our stock price, number of restricted or performance stock units that vests, and stock options exercised during the period. We recognize deferred tax assets and liabilities, using enacted tax rates, for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities along with net operating loss and tax credit carryovers.

We record a valuation allowance against our deferred tax assets to reduce the net carrying value to an amount that we believe is more likely than not to be realized. When we establish or reduce our valuation allowances against our deferred tax assets, the provision for income taxes will increase or decrease, respectively, in the period when that determination is made.

We recorded income tax expense of $1.1 million for the three months ended April 3, 2021 compared to $1.5 million for the three months ended March 28, 2020. The decrease in income tax expense for the first quarter of 2021 compared to the first quarter of 2020 was primarily due to lower pre-tax income for the first quarter of 2021 compared to the first quarter of 2020 and higher discrete tax benefits recognized in the first quarter of 2021 for net tax windfalls related to stock-based compensation.

We evaluated the amendments in ASU 2019-12 for the three months ended April 3, 2021 and determined they do not have an impact on our income taxes.

On March 11, 2021, the U.S. enacted the American Rescue Plan Act of 2021 (“Rescue Plan”) aimed at mitigating the continuing effects of the COVID-19 pandemic. We considered the provisions of the Rescue Plan and determined they do not have a material impact on our income taxes.

Our total amount of unrecognized tax benefits was $4.1 million as of both April 3, 2021 and December 31, 2020. If recognized, $2.4 million would affect the effective tax rate. We record interest and penalty charges, if any, related to uncertain tax positions as a component of tax expense and unrecognized tax benefits. The amounts accrued for interest and penalty charges as of April 3, 2021 and December 31, 2020 were not significant. We do not expect the total amount of unrecognized tax benefits to increase or decrease by a material amount in the next twelve months.

We file U.S. Federal and state income tax returns. We are subject to examination by the Internal Revenue Service (“IRS”) for tax years after 2016 and by state taxing authorities for tax years after 2015. 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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Commitments and Contingencies

3 Months Ended

Apr. 03, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

In December 2020, a representative action under California’s Private Attorneys General Act was filed against us in the Superior Court for the State of California, County of San Bernardino. We received service of process of this complaint on January 28, 2021. The complaint alleges violations of California’s wage and hour laws relating to our current and former employees and seeks attorney’s fees and penalties. We believe these claims are baseless, are without merit and intend to vigorously defend against them. We do not currently have enough information to make a reasonable estimate as to the likelihood or amount of loss, or a range of reasonably possible losses as a result of this claim, so there has been no related accrual for estimated liability recorded as of April 3, 2021.

Structural Systems has been directed by California environmental agencies to investigate and take corrective action for groundwater contamination at our facilities located in El Mirage and Monrovia, California. Based on currently available information, we have established an accrual for its estimated liability for such investigation and corrective action of $1.5 million at both April 3, 2021 and December 31, 2020, which is reflected in other long-term liabilities on our condensed consolidated balance sheets.

Structural Systems also faces liability as a potentially responsible party for hazardous waste disposed at landfills located in Casmalia and West Covina, California. Structural Systems and other companies and government entities have entered into consent decrees with respect to these landfills with the United States Environmental Protection Agency and/or California

environmental agencies under which certain investigation, remediation and maintenance activities are being performed. Based on currently available information, we preliminarily estimate that the range of our future liabilities in connection with the landfill located in West Covina, California is between $0.4 million and $3.1 million. We have established an accrual for the estimated liability in connection with the West Covina landfill of $0.4 million at April 3, 2021, which is reflected in other long-term liabilities on our condensed consolidated balance sheets. Our ultimate liability in connection with these matters will depend upon a number of factors, including changes in existing laws and regulations, the design and cost of construction, operation and maintenance activities, and the allocation of liability among potentially responsible parties.

In June 2020, a fire severely damaged our performance center in Guaymas, Mexico, which is part of our Structural Systems segment. There were no injuries, however, property and equipment, inventories, and tooling in this leased facility were damaged. Our Guaymas performance center is comprised of two buildings with an aggregate total of 62,000 square feet. The loss of production from the Guaymas performance center is being absorbed by our other existing performance centers. A neighboring, non-related manufacturing facility, also suffered fire damage during the same time as the fire that severely damaged our Guaymas performance center. The cause of the fire is still undetermined and as such, there is no amount of loss that is probable and reasonably estimable at this time.

Our insurance covers damage to the facility, equipment, unfinished inventory, and other assets at replacement cost, finished goods inventory at selling price, as well as business interruption, third party property damage, and recovery related expenses caused by the fire, less our per claim deductible. The anticipated insurance recoveries related to losses and incremental costs incurred are recognized when receipt is probable. The anticipated insurance recoveries in excess of net book value of the damaged operating assets and business interruption will not be recorded until all contingencies related to our claim have been resolved. During the year ended December 31, 2020, $0.8 million of revenue and $0.5 million of related cost of sales were reversed for revenue previously recognized using the over time method as the revenue recognition process for these items were deemed to be interrupted as a result of these inventory items being damaged. Also during the year ended December 31, 2020, we wrote off property and equipment and tooling with an aggregate total net book value of $7.1 million and inventory on hand of $3.4 million that were damaged by the fire. The related anticipated insurance recoveries were also presented within the same financial statement line item in the condensed consolidated statements of income resulting in no net impact, with the anticipated insurance recoveries receivable included as part of other current assets on the condensed consolidated balance sheets. As of April 3, 2021, $13.5 million of general insurance recoveries have been received to date. The timing of and the remaining amounts of insurance recoveries, including for business interruption, are not known at this time.

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 in the ordinary course of business. While it is not feasible to predict the outcome of these matters, Ducommun does not presently expect that any sum it may be required to pay in connection with these matters would have a material adverse effect on its condensed consolidated financial position, results of operations or cash flows.

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Business Segment Information

3 Months Ended

Apr. 03, 2021

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, Electronic Systems and Structural Systems, each of which is a reportable operating segment.

Financial information by reportable operating segment was as follows:

	(Dollars in thousands) Three Months Ended
	April 3, 2021		March 28, 2020
Net Revenues
Electronic Systems	$	99,104	$	98,120
Structural Systems	58,047		75,355
Total Net Revenues	$	157,151	$	173,475
Segment Operating Income
Electronic Systems	$	12,491	$	15,122
Structural Systems	5,128		5,390
	17,619		20,512
Corporate General and Administrative Expenses (1)	(7,009)		(6,886)
Operating Income	$	10,610	$	13,626
Depreciation and Amortization Expenses
Electronic Systems	$	3,423	$	3,575
Structural Systems	3,440		3,689
Corporate Administration	59		72
Total Depreciation and Amortization Expenses	$	6,922	$	7,336
Capital Expenditures
Electronic Systems	$	624	$	815
Structural Systems	1,989		2,137
Corporate Administration	—		—
Total Capital Expenditures	$	2,613	$	2,952

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

Segment assets include assets directly identifiable to or allocated to each segment. Our segment assets are as follows:

	(Dollars in thousands)
	April 3, 2021		December 31, 2020
Total Assets
Electronic Systems	$	469,323	$	448,606
Structural Systems	333,084		325,604
Corporate Administration (1)	23,457		63,137
Total Assets	$	825,864	$	837,347
Goodwill and Intangibles
Electronic Systems	$	198,755	$	201,077
Structural Systems	93,581		94,497
Total Goodwill and Intangibles	$	292,336	$	295,574

(1)Includes assets not specifically identified to or allocated to either the Electronic Systems or Structural Systems operating segments, including cash and cash equivalents.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Apr. 03, 2021

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The unaudited condensed consolidated financial statements include the accounts of Ducommun Incorporated and its subsidiaries (“Ducommun,” the “Company,” “we,” “us” or “our”), after eliminating intercompany balances and transactions. The December 31, 2020 condensed consolidated balance sheet data was derived from audited financial statements, but does not contain all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”).

Our significant accounting policies were described in Part IV, Item 15(a)(1), “Note 1. Summary of Significant Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2020. The financial information included in this Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020.

In the opinion of management, all adjustments, consisting of recurring accruals, have been made that are necessary to fairly state our condensed consolidated financial position, statements of income, comprehensive income, changes in shareholders’ equity, and cash flows in accordance with GAAP for the periods covered by this Quarterly Report on Form 10-Q. The results of operations for the three months ended April 3, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021.

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 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

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

Earnings Per Share

Earnings Per Share

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

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 for identical assets. Level 2 refers to fair values estimated using significant observable inputs. Level 3, the lowest level, includes fair values estimated using significant unobservable inputs.

We have money market funds and they are included as cash and cash equivalents. We also had interest rate cap hedge agreements for which the fair value of the interest rate cap hedge agreements was determined using pricing models that use observable market inputs as of the balance sheet date, a Level 2 measurement, however, those agreements expired during our second quarter of 2020.

Cash and Cash Equivalents

Cash and Cash EquivalentsCash 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.

Derivatives Instruments

Derivative InstrumentsWe recognize derivative instruments on our condensed consolidated balance sheets at their fair value. On the date that we enter into a derivative contract, we designate the derivative instrument as a fair value hedge, a cash flow hedge, or a derivative instrument that will not be accounted for using hedge accounting methods. As of April 3, 2021, we had no derivative instruments as our cash flow hedges matured in the second quarter of 2020.

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. The majority of our inventory is charged to cost of

sales as raw materials are placed into production and the related revenue is recognized. Inventoried costs include raw materials, outside processing, direct labor and allocated overhead, adjusted for any abnormal amounts of idle performance center expense, freight, handling costs, and wasted materials (spoilage) incurred. 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. The majority of our revenues are recognized over time, however, for revenue contracts where revenue is recognized using the point in time method, inventory is not reduced until it is shipped or transfer of control to the customer has occurred. Our ending inventory consists of raw materials, work-in-process, and finished goods.

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

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

Revenue Recognition

Revenue Recognition

Our customers typically engage us to manufacture products based on designs and specifications provided by the end-use customer. This requires the building of tooling and manufacturing first article inspection products (prototypes) before volume manufacturing. Contracts with our customers generally include a termination for convenience clause.

We have a significant number of contracts that are started and completed within the same year, as well as contracts derived from long-term agreements and programs that can span several years. We recognize revenue under Accounting Standards Codification 606, “Revenue from Contracts with Customers” (“ASC 606”), which utilizes a five-step model.

The definition of a contract for us is typically defined as a customer purchase order as this is when we achieve an enforceable right to payment. The majority of our contracts are firm fixed-price contracts. The deliverables within a customer purchase order are analyzed to determine the number of performance obligations. At times, in order to achieve economies of scale and based on our customer’s forecasted demand, we may build in advance of receiving a purchase order from our customer. When that occurs, we would not recognize revenue until we have received the customer purchase order.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account under ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, control is transferred and the performance obligation is satisfied. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services are highly interrelated or meet the series guidance. For contracts with multiple performance obligations, we allocate the contract transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate the standalone selling price is the expected cost plus a margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service.

We manufacture most products to customer specifications and the product cannot be easily modified to satisfy another customer’s order. As such, these products are deemed to have no alternative use once the manufacturing process begins. In the event the customer invokes a termination for convenience clause, we would be entitled to costs incurred to date plus a reasonable profit. Contract costs typically include labor, materials, overhead, and when applicable, subcontractor costs. For most of our products, we are building assets with no alternative use and have enforceable right to payment, and thus, we recognize revenue using the over time method.

The majority of our performance obligations are satisfied over time as work progresses. Typically, revenue is recognized over time using an input measure (i.e., costs incurred to date relative to total estimated costs at completion, also known as cost-to-cost plus reasonable profit) to determine progress. Our typical revenue contract is a firm fixed price contract, and the cost of raw materials could make up a significant amount of the total costs incurred. As such, we believe using the total costs incurred input method would be the most appropriate method. While the cost of raw materials could make up a significant amount of the total costs incurred, there is a direct relationship between our inputs and the transfer of control of goods or services to the customer.

Contract estimates are based on various assumptions to project the outcome of future events that can span multiple months or years. These assumptions include labor productivity and availability; the complexity of the work to be performed; the cost and availability of materials; and the performance of subcontractors.

As a significant change in one or more of these estimates could affect the progress completed (and related profitability) on our contracts, we review and update our contract-related estimates on a regular basis. We recognize such adjustments under the cumulative catch-up method. Under this method, the impact of the adjustment is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate.

The impact of adjustments in contract estimates on our operating earnings can be reflected in either operating costs and expenses or revenue.

Net cumulative catch up adjustments on gross profit recorded were not material for both the three months ended April 3, 2021 and March 28, 2020.

Payments under long-term contracts may be received before or after revenue is recognized. When revenue is recognized before we bill our customer, a contract asset is created for the work performed but not yet billed. Similarly, when we receive payment before we ship our products to our customer, a contract liability is created for the advance or progress payment.

We record provisions for the total anticipated losses on contracts, considering total estimated costs to complete the contract compared to total anticipated revenues, in the period in which such losses are identified. The provisions for estimated losses on contracts require us to make certain estimates and assumptions, including those with respect to the future revenue under a contract and the future cost to complete the contract. Our estimate of the future cost to complete a contract may include assumptions as to changes in manufacturing efficiency, 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 adjust the provisions for estimated losses on contracts. The provision for estimated losses on contracts is included as part of contract liabilities on the condensed consolidated balance sheets. As of April 3, 2021 and December 31, 2020, provision for estimated losses on contracts were $2.0 million and $2.3 million, respectively.

Production cost of contracts includes non-recurring production costs, such as design and engineering costs, and tooling and other special-purpose machinery necessary to build parts as specified in a contract. Production costs of contracts are recorded to cost of sales using the over time revenue recognition model. We review the value of the production cost of contracts on a quarterly basis to ensure when added to the estimated cost to complete, the value is not greater than the estimated realizable value of the related contracts. As of April 3, 2021 and December 31, 2020, production cost of contracts were $7.2 million and $7.0 million, respectively.

Contract Assets and Contract Liabilities

Contract assets consist of our right to payment for work performed but not yet billed. Contract assets are transferred to accounts receivable when we bill our customers. We bill our customers when we ship the products and meet the shipping terms within the revenue contract. Contract liabilities consist of advance or progress payments received from our customers prior to the time transfer of control occurs plus the estimated losses on contracts.

April 3, 2021 totaled $690.3 million. We anticipate recognizing an estimated 70% of our remaining performance obligations as revenue during the next 12 months with the remaining performance obligations being recognized in the remainder of 2022 and beyond.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

New Accounting Guidance Adopted in 2021

In October 2020, the FASB issued ASU 2020-10, “Codification Improvements” (“ASU 2020-10”), which affect a wide variety of Topics in the Accounting Standards Codification (“Codification”). ASU 2020-10, among other things, contains amendments that improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50). Many of the amendments arose as the FASB provided an option to give certain information either on the face of the financial statements or in the notes to financial statements and that option only was included in the Other Presentation Matters Section (Section 45) of the Codification. Those amendments are not expected to change current practice. The new guidance is effective for fiscal years beginning after December 15, 2020, which was our interim period beginning January 1, 2021. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which removes certain exceptions and provides guidance on various areas of tax accounting. The new guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, which was our interim period beginning January 1, 2021. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans” (“ASU 2018-14”), which will remove disclosures that no longer are considered cost-beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The new guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, which was our interim period beginning January 1, 2021. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

Recently Issued Accounting Standards

In August 2020, the FASB issued ASU 2020-06, “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies reporting or provides clarification on various topics, including clarification that an entity should use the weighted-average share count from each quarter when calculating the year-to-date weighted-average share count. The new guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, which will be our interim period beginning January 1, 2022. Early adoption is

permitted. We are evaluating the impact of this standard.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides optional guidance for a limited time for contracts that reference London Interbank Offered Rate (“LIBOR”), to ease the potential burden in accounting for, or recognizing the effects, of reference rate reform on financial reporting as a result of the cessation of LIBOR. The new guidance is effective at any time after March 12, 2020 but no later than December 31, 2022. We are evaluating the impact of this standard.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Apr. 03, 2021

Accounting Policies [Abstract]

Schedule of Supplemental Cash Flow Information

Supplemental Cash Flow Information

	(Dollars in thousands)
	Three Months Ended
	April 3, 2021		March 28, 2020
Interest paid	$	2,544	$	3,523
Taxes (refunded) paid, net	$	(30)	$	33
Non-cash activities:
Purchases of property and equipment not paid	$	540	$	464

Weighted Average Number of Shares Outstanding Used to Compute Earnings Per Share

The net income and weighted-average common shares outstanding used to compute earnings per share were as follows:

	(Dollars in thousands, except per share data)
	Three Months Ended
	April 3, 2021		March 28, 2020
Net income	$	6,695	$	7,930
Weighted-average number of common shares outstanding
Basic weighted-average common shares outstanding	11,791		11,610
Dilutive potential common shares	459		245
Diluted weighted-average common shares outstanding	12,250		11,855
Earnings per share
Basic	$	0.57	$	0.68
Diluted	$	0.55	$	0.67

Weighted Average Number of Shares Outstanding Excluded from Computation of Diluted Earnings

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

	(In thousands)
	Three Months Ended
	April 3, 2021	March 28, 2020
Stock options and stock units	3	253

Contract with Customer, Asset and Liability

Contract assets and contract liabilities from revenue contracts with customers are as follows:

	(Dollars in thousands)
	April 3, 2021		December 31, 2020
Contract assets	$	173,909	$	154,028
Contract liabilities	$	24,257	$	28,264

Disaggregation of Revenue

In addition to the revenue categories disclosed above, the following table reflects our revenue disaggregated by major end-use market:

	(Dollars in thousands)
	Three Months Ended
	April 3 2021		March 28, 2020
Consolidated Ducommun
Military and space	$	114,127	$	101,899
Commercial aerospace	35,377		60,582
Industrial	7,647		10,994
Total	$	157,151	$	173,475
Electronic Systems
Military and space	$	81,733	$	74,317
Commercial aerospace	9,724		12,809
Industrial	7,647		10,994
Total	$	99,104	$	98,120
Structural Systems
Military and space	$	32,394	$	27,582
Commercial aerospace	25,653		47,773
Total	$	58,047	$	75,355

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Inventories (Tables)

3 Months Ended

Apr. 03, 2021

Inventory Disclosure [Abstract]

Summary of Inventories

Inventories consisted of the following:

	(Dollars in thousands)
	April 3, 2021		December 31, 2020
Raw materials and supplies	$	121,756	$	107,983
Work in process	12,502		15,895
Finished goods	4,029		5,345
Total	$	138,287	$	129,223

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Goodwill (Tables)

3 Months Ended

Apr. 03, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The carrying amounts of our goodwill were as follows:

	(Dollars in thousands)
	Electronic Systems		Structural Systems		Consolidated Ducommun
Gross goodwill	$	199,157	$	53,395	$	252,552
Accumulated goodwill impairment	(81,722)		—		(81,722)
Balance at December 31, 2020	$	117,435	$	53,395	$	170,830
Balance at April 3, 2021	$	117,435	$	53,395	$	170,830

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Accrued and Other Liabilities (Tables)

3 Months Ended

Apr. 03, 2021

Payables and Accruals [Abstract]

Summary of Accrued and Other Liabilities

The components of accrued and other liabilities were as follows:

	(Dollars in thousands)
	April 3, 2021		December 31, 2020
Accrued compensation	$	15,386	$	28,432
Accrued income tax and sales tax	558		80
Other	12,489		12,014
Total	$	28,433	$	40,526

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Long-Term Debt (Tables)

3 Months Ended

Apr. 03, 2021

Debt Disclosure [Abstract]

Long Term Debt Summary

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

	(Dollars in thousands)
	April 3, 2021			December 31, 2020
Term loans	$	292,962		$	295,638
Revolving credit facility	20,000			25,000
Total debt	312,962			320,638
Less current portion	7,000			7,000
Total long-term debt, less current portion	305,962			313,638
Less debt issuance costs - term loans	1,618			1,716
Total long-term debt, net of debt issuance costs - term loans	$	304,344		$	311,922
Debt issuance costs - revolving credit facility (1)	$	1,421		$	1,515
Weighted-average interest rate	3.16		%	3.59		%

(1) Included as part of other assets.

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Business Segment Information (Tables)

3 Months Ended

Apr. 03, 2021

Segment Reporting [Abstract]

Financial Information by Reportable Segment

Financial information by reportable operating segment was as follows:

	(Dollars in thousands) Three Months Ended
	April 3, 2021		March 28, 2020
Net Revenues
Electronic Systems	$	99,104	$	98,120
Structural Systems	58,047		75,355
Total Net Revenues	$	157,151	$	173,475
Segment Operating Income
Electronic Systems	$	12,491	$	15,122
Structural Systems	5,128		5,390
	17,619		20,512
Corporate General and Administrative Expenses (1)	(7,009)		(6,886)
Operating Income	$	10,610	$	13,626
Depreciation and Amortization Expenses
Electronic Systems	$	3,423	$	3,575
Structural Systems	3,440		3,689
Corporate Administration	59		72
Total Depreciation and Amortization Expenses	$	6,922	$	7,336
Capital Expenditures
Electronic Systems	$	624	$	815
Structural Systems	1,989		2,137
Corporate Administration	—		—
Total Capital Expenditures	$	2,613	$	2,952

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

Segment Assets

Our segment assets are as follows:

	(Dollars in thousands)
	April 3, 2021		December 31, 2020
Total Assets
Electronic Systems	$	469,323	$	448,606
Structural Systems	333,084		325,604
Corporate Administration (1)	23,457		63,137
Total Assets	$	825,864	$	837,347
Goodwill and Intangibles
Electronic Systems	$	198,755	$	201,077
Structural Systems	93,581		94,497
Total Goodwill and Intangibles	$	292,336	$	295,574

(1)Includes assets not specifically identified to or allocated to either the Electronic Systems or Structural Systems operating segments, including cash and cash equivalents.

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Summary of Significant Accounting Policies - Narrative (Details) $ in Thousands	3 Months Ended	12 Months Ended
	Apr. 03, 2021 USD ($) segment	Dec. 31, 2020 USD ($)
Accounting Policies [Abstract]
Number of reportable segments | segment	2
Losses on contracts	$ 2,000	$ 2,300
Production cost of contracts	7,198	6,971
Remaining performance obligation	$ 690,300
Revenue recognized in contract liabilities		$ 7,200

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Summary of Significant Accounting Policies - Supplemental Cash Flow Items (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 03, 2021	Mar. 28, 2020
Supplemental Disclosures of Cash Flow Information
Interest paid	$ 2,544	$ 3,523
Taxes (refunded) paid, net	(30)	33
Non-cash activities:
Purchases of property and equipment not paid	$ 540	$ 464

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Summary of Significant Accounting Policies - Weighted Average Number of Shares Outstanding Used to Compute Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Apr. 03, 2021	Mar. 28, 2020
Accounting Policies [Abstract]
Net income	$ 6,695	$ 7,930
Weighted-average number of common shares outstanding
Basic weighted-average common shares outstanding (in shares)	11,791	11,610
Dilutive potential common shares (in shares)	459	245
Diluted weighted-average common shares outstanding (in shares)	12,250	11,855
Earnings per share
Basic (in dollars per share)	$ 0.57	$ 0.68
Diluted (in dollars per share)	$ 0.55	$ 0.67

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Summary of Significant Accounting Policies - Weighted Average Number of Shares Outstanding Excluded from Computation of Diluted Earnings (Details) - shares shares in Thousands	3 Months Ended
	Apr. 03, 2021	Mar. 28, 2020
Stock options and stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options and stock units (in shares)	3	253

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Summary of Significant Accounting Policies - Contract Assets and Liabilities (Details) - USD ($) $ in Thousands	Apr. 03, 2021	Dec. 31, 2020
Accounting Policies [Abstract]
Contract assets	$ 173,909	$ 154,028
Contract liabilities	$ 24,257	$ 28,264

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Summary of Significant Accounting Policies - Remaining Performance Obligation (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-04-04	Apr. 03, 2021
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, percentage	70.00%
Remaining performance obligation, period	12 months

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Summary of Significant Accounting Policies - Disaggregated Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 03, 2021	Mar. 28, 2020
Disaggregation of Revenue [Line Items]
Revenue	$ 157,151	$ 173,475
Electronic Systems
Disaggregation of Revenue [Line Items]
Revenue	99,104	98,120
Structural Systems
Disaggregation of Revenue [Line Items]
Revenue	58,047	75,355
Military and space
Disaggregation of Revenue [Line Items]
Revenue	114,127	101,899
Military and space | Electronic Systems
Disaggregation of Revenue [Line Items]
Revenue	81,733	74,317
Military and space | Structural Systems
Disaggregation of Revenue [Line Items]
Revenue	32,394	27,582
Commercial aerospace
Disaggregation of Revenue [Line Items]
Revenue	35,377	60,582
Commercial aerospace | Electronic Systems
Disaggregation of Revenue [Line Items]
Revenue	9,724	12,809
Commercial aerospace | Structural Systems
Disaggregation of Revenue [Line Items]
Revenue	25,653	47,773
Industrial
Disaggregation of Revenue [Line Items]
Revenue	7,647	10,994
Industrial | Electronic Systems
Disaggregation of Revenue [Line Items]
Revenue	$ 7,647	$ 10,994

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Inventories (Details) - USD ($) $ in Thousands	Apr. 03, 2021	Dec. 31, 2020
Inventory Disclosure [Abstract]
Raw materials and supplies	$ 121,756	$ 107,983
Work in process	12,502	15,895
Finished goods	4,029	5,345
Total	$ 138,287	$ 129,223

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Goodwill - Narrative (Details)	Dec. 31, 2020
Structural Systems
Goodwill [Line Items]
Percentage of fair value in excess of carrying amount	69.00%

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Goodwill - (Details) - USD ($) $ in Thousands	Apr. 03, 2021	Dec. 31, 2020
Goodwill [Line Items]
Gross goodwill		$ 252,552
Accumulated goodwill impairment		(81,722)
Goodwill [Roll Forward]
Goodwill	$ 170,830	170,830
Electronic Systems
Goodwill [Line Items]
Gross goodwill		199,157
Accumulated goodwill impairment		(81,722)
Goodwill [Roll Forward]
Goodwill	117,435	117,435
Structural Systems
Goodwill [Line Items]
Gross goodwill		53,395
Accumulated goodwill impairment		0
Goodwill [Roll Forward]
Goodwill	$ 53,395	$ 53,395

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Accrued and Other Liabilities (Details) - USD ($) $ in Thousands	Apr. 03, 2021	Dec. 31, 2020
Payables and Accruals [Abstract]
Accrued compensation	$ 15,386	$ 28,432
Accrued income tax and sales tax	558	80
Other	12,489	12,014
Total	$ 28,433	$ 40,526

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Long-Term Debt - Summary (Details) - USD ($) $ in Thousands	Apr. 03, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Long-term debt	$ 312,962	$ 320,638
Current portion of long-term debt	7,000	7,000
Total long-term debt, less current portion	305,962	313,638
Less debt issuance costs - term loans	1,618	1,716
Total long-term debt, net of debt issuance costs - term loans	$ 304,344	$ 311,922
Weighted-average interest rate (percent)	3.16%	3.59%
Term loans
Debt Instrument [Line Items]
Long-term debt	$ 292,962	$ 295,638
Revolving credit facility
Debt Instrument [Line Items]
Long-term debt	20,000	25,000
Less debt issuance costs - term loans	$ 1,421	$ 1,515

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Long-Term Debt - Narrative (Details)		1 Months Ended		3 Months Ended		12 Months Ended
	Dec. 20, 2019 USD ($)	Nov. 30, 2018 USD ($)	Oct. 31, 2015 USD ($)	Apr. 03, 2021 USD ($) subsidiary	Mar. 28, 2020 USD ($)	Dec. 31, 2019 USD ($)
Debt Instrument [Line Items]
Repayments of secured debt				$ 2,676,000	$ 7,362,000
Interest Rate Cap
Debt Instrument [Line Items]
Interest rate hedge			$ 135,000,000.0
Payments made for interest rate hedge			$ 1,000,000.0
Credit Facilities
Debt Instrument [Line Items]
Debt amount						$ 480,000,000.0
New Credit Facilities
Debt Instrument [Line Items]
Number of subsidiaries that are not guarantors on debt | subsidiary				2
Revolving Credit Facility | 2019 Revolving Credit Facility Due December 20, 2024
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity						$ 100,000,000.0
Proceeds from lines of credit				$ 5,000,000.0
Fees paid to lenders to be capitalized	$ 500,000
Revolving Credit Facility | 2019 Revolving Credit Facility Due December 20, 2024 | Minimum
Debt Instrument [Line Items]
Commitment fee						0.175%
Revolving Credit Facility | 2019 Revolving Credit Facility Due December 20, 2024 | Maximum
Debt Instrument [Line Items]
Commitment fee						0.275%
Revolving Credit Facility | 2019 Revolving Credit Facility Due December 20, 2024 | LIBOR | Minimum
Debt Instrument [Line Items]
Spread on variable rate						1.50%
Revolving Credit Facility | 2019 Revolving Credit Facility Due December 20, 2024 | LIBOR | Maximum
Debt Instrument [Line Items]
Spread on variable rate						2.50%
Revolving Credit Facility | 2019 Revolving Credit Facility Due December 20, 2024 | Federal Funds Rate
Debt Instrument [Line Items]
Spread on variable rate						0.50%
Revolving Credit Facility | 2019 Revolving Credit Facility Due December 20, 2024 | Eurodollar Rate
Debt Instrument [Line Items]
Spread on base rate						1.00%
Revolving Credit Facility | 2019 Revolving Credit Facility Due December 20, 2024 | Base Rate | Minimum
Debt Instrument [Line Items]
Spread on variable rate						0.50%
Revolving Credit Facility | 2019 Revolving Credit Facility Due December 20, 2024 | Base Rate | Maximum
Debt Instrument [Line Items]
Spread on variable rate						1.50%
Revolving Credit Facility | 2018 Revolving Credit Facility Maturing November 21, 2023
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		$ 100,000,000.0
Percentage of excess cash flow payment when leverage ratio is greater than 3.25		50.00%
Percentage of excess cash flow payment when leverage ratio is less than or equal to 3.25 but greater than 2.50		25.00%
Percentage of excess cash flow payment when leverage ratio is less than or equal to 2.50		0.00%
Repayments of lines of credit	58,500,000
Amortization of debt issuance costs		$ 500,000
Debt issuance costs, line of credit arrangements	1,100,000
Revolving Credit Facility | 2018 Term Loan
Debt Instrument [Line Items]
Fees paid to lenders to be capitalized	1,500,000
Revolving Credit Facility | New Credit Facilities
Debt Instrument [Line Items]
Remaining borrowing capacity				79,800,000
Outstanding standby letters of credit				200,000
Secured Debt | 2019 Term Loan Maturing December 20, 2024
Debt Instrument [Line Items]
Debt amount						$ 140,000,000.0
Prepayment amount of principal outstanding						1.25%
Periodic payment				1,800,000
Proceeds from lines of credit	140,000,000.0
Fees paid to lenders to be capitalized				600,000
Secured Debt | 2019 Term Loan Maturing December 20, 2024 | LIBOR | Minimum
Debt Instrument [Line Items]
Spread on variable rate						1.50%
Secured Debt | 2019 Term Loan Maturing December 20, 2024 | LIBOR | Maximum
Debt Instrument [Line Items]
Spread on variable rate						2.50%
Secured Debt | 2019 Term Loan Maturing December 20, 2024 | Federal Funds Rate
Debt Instrument [Line Items]
Spread on variable rate						0.50%
Secured Debt | 2019 Term Loan Maturing December 20, 2024 | Eurodollar Rate
Debt Instrument [Line Items]
Spread on base rate						1.00%
Secured Debt | 2019 Term Loan Maturing December 20, 2024 | Base Rate | Minimum
Debt Instrument [Line Items]
Spread on variable rate						0.50%
Secured Debt | 2019 Term Loan Maturing December 20, 2024 | Base Rate | Maximum
Debt Instrument [Line Items]
Spread on variable rate						1.50%
Secured Debt | 2018 Term Loan
Debt Instrument [Line Items]
Debt amount		$ 240,000,000.0
Prepayment amount of principal outstanding		0.25%
Repayments of debt	$ 56,000,000.0
Secured Debt | 2018 Term Loan | LIBOR | Minimum
Debt Instrument [Line Items]
Spread on variable rate		3.75%
Secured Debt | 2018 Term Loan | LIBOR | Maximum
Debt Instrument [Line Items]
Spread on variable rate		4.00%
Secured Debt | 2018 Term Loan | Federal Funds Rate
Debt Instrument [Line Items]
Spread on variable rate		0.50%
Secured Debt | 2018 Term Loan | Eurodollar Rate
Debt Instrument [Line Items]
Spread on base rate		1.00%
Secured Debt | 2018 Term Loan | Base Rate | Minimum
Debt Instrument [Line Items]
Spread on variable rate		3.75%
Secured Debt | 2018 Term Loan | Base Rate | Maximum
Debt Instrument [Line Items]
Spread on variable rate		4.00%
Secured Debt | Credit Facilities
Debt Instrument [Line Items]
Repayments of secured debt				$ 900,000

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 03, 2021	Mar. 28, 2020	Dec. 31, 2020
Income Tax Disclosure [Abstract]
Income tax expense (benefit)	$ 1,109	$ 1,450
Unrecognized tax benefits	4,100		$ 4,100
Expected change in unrecognized tax benefits	$ 2,400

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Commitments and Contingencies (Details) ft² in Thousands, $ in Thousands	3 Months Ended		12 Months Ended
	Apr. 03, 2021 USD ($)	Mar. 28, 2020 USD ($)	Dec. 31, 2020 USD ($)	Jun. 29, 2020 ft² building
Loss Contingencies [Line Items]
Revenue	$ 157,151	$ 173,475
Related cost of sales	124,051	136,671
Structural Systems
Loss Contingencies [Line Items]
Revenue	58,047	$ 75,355
El Mirage and Monrovia, California | Structural Systems
Loss Contingencies [Line Items]
Reserve for estimated liability	1,500		$ 1,500
West Covina, California | Structural Systems
Loss Contingencies [Line Items]
Reserve for estimated liability	400
West Covina, California | Minimum | Structural Systems
Loss Contingencies [Line Items]
Possible loss	400
West Covina, California | Maximum | Structural Systems
Loss Contingencies [Line Items]
Possible loss	3,100
Facility Fire In Guaymas, Mexico | Damage from Facility Fire
Loss Contingencies [Line Items]
Number of buildings | building				2
Real estate property (in sqft) | ft²				62
Loss contingency, receivable, proceeds	$ 13,500
Facility Fire In Guaymas, Mexico | Damage from Facility Fire | Property, Plant and Equipment
Loss Contingencies [Line Items]
Carrying value of impaired assets			7,100
Facility Fire In Guaymas, Mexico | Damage from Facility Fire | Inventories
Loss Contingencies [Line Items]
Carrying value of impaired assets			3,400
Facility Fire In Guaymas, Mexico | Damage from Facility Fire | Revision of Prior Period, Reclassification, Adjustment
Loss Contingencies [Line Items]
Revenue			800
Related cost of sales			$ 500

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Business Segment Information - Narrative (Details)	3 Months Ended
	Apr. 03, 2021 segment
Segment Reporting [Abstract]
Number of reportable segments	2

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Business Segment Information - Financial Information by Reportable Segment (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 03, 2021	Mar. 28, 2020
Segment Reporting Information [Line Items]
Revenue	$ 157,151	$ 173,475
Operating Income	10,610	13,626
Depreciation and Amortization Expenses	6,922	7,336
Capital Expenditures	2,613	2,952
Operating Segments
Segment Reporting Information [Line Items]
Operating Income	17,619	20,512
Segment Reconciling Items
Segment Reporting Information [Line Items]
Corporate General and Administrative Expenses	(7,009)	(6,886)
Corporate Administration
Segment Reporting Information [Line Items]
Depreciation and Amortization Expenses	59	72
Capital Expenditures	0	0
Electronic Systems
Segment Reporting Information [Line Items]
Revenue	99,104	98,120
Electronic Systems | Operating Segments
Segment Reporting Information [Line Items]
Operating Income	12,491	15,122
Depreciation and Amortization Expenses	3,423	3,575
Capital Expenditures	624	815
Structural Systems
Segment Reporting Information [Line Items]
Revenue	58,047	75,355
Structural Systems | Operating Segments
Segment Reporting Information [Line Items]
Operating Income	5,128	5,390
Depreciation and Amortization Expenses	3,440	3,689
Capital Expenditures	$ 1,989	$ 2,137

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Business Segment Information - Segment Assets (Details) - USD ($) $ in Thousands	Apr. 03, 2021	Dec. 31, 2020
Segment Reporting Information [Line Items]
Total Assets	$ 825,864	$ 837,347
Total Goodwill and Intangibles	292,336	295,574
Operating Segments | Electronic Systems
Segment Reporting Information [Line Items]
Total Assets	469,323	448,606
Total Goodwill and Intangibles	198,755	201,077
Operating Segments | Structural Systems
Segment Reporting Information [Line Items]
Total Assets	333,084	325,604
Total Goodwill and Intangibles	93,581	94,497
Corporate Administration
Segment Reporting Information [Line Items]
Total Assets	$ 23,457	$ 63,137