Ducommun Profile
Ducommun Incorporated (Ducommun) operates as a 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'); and industrial, medical and other industries (collectively, 'Industrial').
Ducommun differentiates itself as a full-service solution-based provider, offering value-added proprietary products and manufacturing solutions to the company's customers in its primary businesses of electronics, structures, and integrated solutions.
The company sells its products into aerospace, defense, and industrial end-use markets, which are cyclical and have experienced periodic declines. The company generates the majority of its revenues from customers in the aerospace and defense industry.
Acquisitions
Acquisitions have been an important element of the company's growth strategy. The company has supplemented its organic growth by identifying, acquiring, and integrating acquisition opportunities that result in broader, more sophisticated product and service offerings while diversifying and expanding the company's customer base and markets.
For example, on April 25, 2023, the company acquired 100% of the outstanding equity interests of BLR Aerospace L.L.C. ('BLR'), a privately-held leading provider of aerodynamic systems that enhance the productivity, performance, and safety of rotary and fixed-wing aircraft on commercial and military platforms. The acquisition of BLR adds to the company's strategy to diversify and offer more customized, value-driven engineered products with aftermarket opportunities, and was included in the company's Structural Systems segment.
Products and Services, and Segments
The company operates through two primary business segments: Electronic Systems and Structural Systems.
Electronic Systems designs, engineers and manufactures high-reliability electronic and electromechanical products used in worldwide technology-driven markets, including A&D and Industrial end-use markets. Electronic Systems' product offerings primarily range from prototype development to complex assemblies as discussed in more detail below.
Structural Systems designs, engineers and manufactures various sizes of complex contoured aerostructure components and assemblies and supplies composite and metal bonded structures and assemblies. Structural Systems' products are primarily used on commercial aircraft, military fixed-wing aircraft and military and commercial rotary-wing aircraft.
Electronic Systems
Electronic Systems has multiple major product offerings in electronics manufacturing for diverse, high-reliability applications: complex cable assemblies and interconnect systems, printed circuit board assemblies, higher-level electronic, electromechanical, and mechanical components and assemblies, and lightning diversion systems. Components, assemblies, and lightning diversion products are provided principally for domestic and foreign commercial and military fixed-wing aircraft, military and commercial rotary-wing aircraft and space programs. Further, the company provides select industrial high-reliability applications for the industrial, medical, and other end-use markets. The company builds custom, high-performance electronics and electromechanical systems.
The company's products include sophisticated radar enclosures, aircraft avionics racks and shipboard communications and control enclosures, printed circuit board assemblies, cable assemblies, wire harnesses, and interconnect systems, lightning diversion strips, surge suppressors, conformal shields and other high-level complex assemblies. Electronic Systems utilizes a highly-integrated production process, including manufacturing, engineering, fabrication, machining, assembly, electronic integration, and related processes. Engineering, technical and program management services are provided to a wide range of customers.
In response to customer needs and utilizing the company's in-depth engineering expertise, Electronic Systems is also considered a leading supplier of engineered products, including illuminated pushbutton switches and panels for aviation and test systems, microwave and millimeter switches and filters for radio frequency systems and test instrumentation, motors and resolvers for motion control, and lightning diversion systems.
Electronic Systems also provides engineering expertise for aerospace system design, development, integration, and testing. The company leverages the knowledge base, capabilities, talent, and technologies of this focused capability into direct support of the company's customers.
Structural Systems
Structural Systems has three major product offerings to support a global customer base: commercial aircraft, military fixed-wing aircraft, and military and commercial rotary-wing aircraft. The company's applications include structural components, structural assemblies, bonded (metal and composite) components, precision profile extrusions and extruded assemblies, ammunition handling systems, magnetic seals, and aerodynamic systems. In the structural components products, Structural Systems provides design services, engineers, and manufacturing of large complex contoured aluminum, titanium and Inconel aerostructure components for the aerospace industry. Structural assembly products include winglets, engine components, and fuselage structural panels for aircraft. Metal and composite bonded structures and assemblies products include aircraft wing spoilers, large fuselage skins, rotor blades on rotary-wing aircraft and components, flight control surfaces, engine components, ammunition handling systems, magnetic seals, and aerodynamic systems. To support these products, Structural Systems maintains advanced machine milling, stretch-forming, hot-forming, metal bonding, composite layup, and chemical milling capabilities and has an extensive engineering capability to support both design services and manufacturing.
Aerospace and Defense End-Use Markets
The company's largest end-use markets are the aerospace and defense markets and the company's revenues from these markets represented 94% of the company's total net revenues in 2023. These markets are serviced by suppliers, which are stratified, from the highest value provided to the lowest, into four tiers: original equipment manufacturers ('OEMs'), Tier One, Tier Two, and Tier Three. The OEMs provide the highest value and are also known as prime contractors ('Primes'). The company derives a significant portion of its revenues from subcontracts with OEMs.
As the Primes for various programs and platforms, the OEMs sell to their customers, who may include, depending upon the application, the U.S. Federal Government, foreign, state and local governments, global commercial airline carriers, regional jet carriers and various other customers. The OEMs also sell to global leasing companies that lease commercial aircraft. A significant portion of the company's revenues is earned from subcontracts with the Primes. Tier One suppliers manufacture aircraft sections and purchase assemblies. Tier Two suppliers provide more complex, value-added parts and may also assume more design risk, manufacturing risk, supply chain risk and project management risk than Tier Three suppliers. Tier Three suppliers principally provide components or detailed parts. The company's business growth strategy is to differentiate itself from competitors by providing more complex assemblies to the company's customers as a higher value added supplier.
Commercial Aerospace End-Use Market
Revenues from the commercial aerospace end-use market represented 41% of the company's total net revenues for 2023.
One of the company's largest customers, The Boeing Company ('Boeing'), was notified by the Federal Aviation Administration ('FAA') in early January 2024 it has initiated an investigation into Boeing's quality control system. This was followed by the FAA announcing actions to increase its oversight of Boeing, as well as not approving production rate increases or additional production lines for the 737 MAX until it is satisfied that Boeing is in full compliance with required quality control procedures. While there continues to be uncertainty, Boeing is continuing to work with airlines and government officials on delivery timing and expect to deliver most of the aircraft in inventory by the end of 2024.
Defense End-Use Market
The company's defense end-use market includes products used in military and space, including technologies and structures applications. Revenues from the military and space end-use market in 2023 represented 53% of the company's total net revenues during 2023.
Industrial End-Use Markets
The company's industrial, medical and other (collectively, 'Industrial') end-use markets are diverse and are impacted by the customers' needs for increasing electronic content and a desire to outsource. The company's products are used in heavy industrial manufacturing systems and certain medical applications. Revenues from the Industrial end-use markets were 6% of the company's total net revenues during 2023.
Sales and Marketing
The company's commercial revenues are substantially dependent on airframe manufacturers' production rates of new aircraft. Deliveries of new aircraft by airframe manufacturers are dependent on the demand and financial capacity of its customers, primarily airlines and leasing companies, to purchase the aircraft.
Military components manufactured by the company is employed in many of the country's front-line fighters, bombers, rotary-wing aircraft and support aircraft, as well as land and sea-based applications. The company's defense business is diversified among a number of military manufacturers and programs. In the space sector, the company is expanding its presence with unmanned aerial vehicles and continue to support various satellite programs.
The company's sales into the Industrial end-use markets are customer focused on various markets and driven primarily by their capital spending and manufacturing outsourcing demands.
Major Customers
The company generates the majority of its revenues from the aerospace and defense industries. As a result, the company has significant revenues from certain customers. Boeing and RTX Corporation (f/k/a Raytheon Technologies Corporation) ('RTX') were the company's largest customers, with Boeing generating 8.2% and RTX generating 16.8% of the company's 2023 net revenues. Revenues from the company's top 10 customers, including Boeing and RTX, were 59% of total net revenues during 2023.
Sales to The Boeing Company ('Boeing'), Spirit AeroSystems Holdings, Inc. ('Spirit'), and Viasat, Inc. ('Viasat') comprise a significant portion of the company's commercial aerospace end-use market in 2023. A significant portion of the company's net sales in its military and space end-use markets are made under subcontracts with original equipment manufacturers ('OEMs'), under their prime contracts with the U.S. Government. The company had significant sales to General Dynamics Corporation ('GD'), Northrop Grumman Corporation ('Northrop'), and RTX Corporation (f/k/a Raytheon Technologies Corporation) ('RTX') in 2023 in the company's defense technologies end-use market.
Environmental Matters
The company's business, operations and facilities are subject to numerous stringent federal, state and local environmental laws and regulations issued by government agencies, including the Environmental Protection Agency ('EPA').
History
Ducommun Incorporated was founded in 1849. The company was first incorporated in California in 1907 and reincorporated in Delaware in 1970.
