Good afternoon, ladies and gentlemen, and welcome to the First Quarter 2018 Ducommun Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to your moderator, Mr. Chris Witty.

Thank you, and welcome to Ducommun's 2018 first quarter conference call. With me today are Steve Oswald, Chairman, President and CEO; and Doug Groves, Vice President, CFO and Treasurer. I'm going to discuss certain limitations to any forward-looking statements, regarding future events, projections or performance that we may make during the prepared remarks or the question-and-answer session that follows. Certain statements that are not historical facts, including any statements as to future market conditions, results of operations, our restructuring plan and financial projections are forward-looking statements under the Federal Private Securities Litigation Reform Act of 1995, and therefore, our perspective. These forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Although, we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. In addition, estimates of future operating results are based on the company's current business, which is subject to change. Particular risks facing Ducommun include, among others, the cyclicality of our end-use markets, the level of U.S. government defense spending, legal and regulatory risks, management changes, the cost of expansion and acquisitions and competition. These risks and others are described in our annual report on Form 10-K and filed with the SEC, and our forward-looking statements are subject to those risks. Statements made during this call are only as of the time made, and we do not intend to update any statements made in this presentation, except if and as required by regulatory authorities. In addition, all comparisons on today's call recognize the implementation of the FASB accounting standards codification our ASC, topic 606, covering revenue recognition policies on current results. Please see the comment's filings for further description of this change and a comparison to the prior policy, ASC 605. This call also includes non-GAAP financial measures. Please refer to our filings with the SEC for reconciliation of the non-GAAP measures referenced in this call to the most similar GAAP measures. We've filed our Form 10-K with the SEC today, and you'll find all our filings on company's website under the Investor Relations tab. I would now like to turn the call over to Mr. Steve Oswald for a review of the operating results. Steve?

Thanks, Chris, and thank you for everyone for joining us today for our 2018 first quarter conference call. I'll begin by providing an overview of the recent developments of the company after which Doug will review our financial results in detail. First, I'm very pleased to give an update on many changes taking place at Ducommun. As we drive to position the business for higher growth and stronger operating results going forward. We continue to rationalize our footprints this quarter, resulting a $2.2 million of restructuring charges, on top of the $8.8 million taken last year. Our most recent actions involved the write-down or consolidation of additional assets, along with severance cost. Similar to Q4, as we work to reduce about 70% of our total manufacturing force base along with staff reduction of above 6% by the end of 2018. As previously discussed, we are on track to take restructuring charges of approximately $20 million to $22 million over the entire life of the program. And we will meet the committed savings of roughly $14 million annually, beginning in 2019. We do not take these actions lightly. And I also want to share that the team has done a very effective job, implementing the changes, which will strengthen the company today in the many years ahead. At the same time, we haven't let our actions impact our customer performance or our internal organization. As we strive to provide the very best customer service, quality and on-time product delivery. As proof of our actions, Ducommun's backlog serves again this quarter to roughly $820 million. That's up nearly 13% or $94 million sequentially from Q4 and more than $200 million over this time a year ago. This is truly exciting and speaks to our capabilities and trust that customers have put in…

Thank you Steve, and good day everyone. As we mentioned during the Safe Harbor introductory statements, all of our comparisons on today's call are a year-over-year basis and recognize the implementation of the FASB accounting standards classification, ASC topic 606, covering revenue recognition policies on current year results. We are using the modified retrospective method of adoption since the past financial results have not been adjusted for comparison purposes. Please see the company's filings in today's press release for further description of this versus the prior policy, ASC 605. So turning to the first quarter results. Revenue for the first quarter of 2018 was $150.5 million versus $136.3 million in the first quarter of 2017. This performance primarily reflects $14.1 million of higher sales with the company's Commercial Aerospace customers due to increased shipments for large fixed wing platforms, such as the Boeing 737. Ducommun's backlog rose to nearly $820 million at the end of the quarter, its highest level ever, up nearly $94 million sequentially from Q4 and over $200 million from a year ago, as Steve just mentioned. Moving to gross profit. Our gross margin was 17.8% in the first quarter versus 18.3% in the prior year's comparable period. The decline in gross margin year-over-year was primarily due to higher other manufacturing costs, partially offset by higher manufacturing volume. SG&A was $19.3 million in the first quarter versus $20.8 million in 2017, with the decrease primarily reflecting lower compensation and benefit costs as a result of the restructuring activities and that was partially offset by higher professional service fees. The company reported an operating income for the first quarter of $5.3 million or 3.5% of revenue, versus operating income of $4.3 million or 3.1% of revenue in the prior-year period. On an adjusted basis, operating income was $5.6…

Thanks, Doug. As I said earlier, I'm proud of the steady improvement here at Ducommun. I think it should be noted by investors that the reduced cost by $14 million this year, we're expanding margins, driving top line and bottom line improvements, winning new business, we're going through acquisitions, and reaching a record backlog levels. In that spirit, I want to thank all of our employees for all our efforts and resolve as we are off to a very good start. I'm confident that our investors will see the benefits as we lay the groundwork for approved operating results this year in 2019. With that, operator, we'll now open the call for questions.

Thank you. [Operator Instructions] And our first question comes from Edward Marshall from Sidoti. Your line is now open.

Good evening, guys. Good afternoon. How are you?

Hi, Ed. Great. How are you?

I am doing well. So I just want to ask, did you guys think upon your backlog in any way?

Yes. So Ed, with adoption of 606, you'll see our 10-Q under 606, we defined backlog for 606 purposes as customers from fixed price POs. The backlog that we're reporting as the consistent reporting we've had over a number of years, which is from fixed price PO, open POs, plus firm fixed price, firm delivery dates on LTA's that go out 24 months. So the definition that we're using has remained consistent as we've put into the press release.

So there's no change in policy aside from the 606, which isn't the 800?

No, the 606 number and the 10-Q is substantially less.

So - and CTP, by the way, wasn't in backlog at all, that happened after the quarter?

No, yes, exactly. That happened in April.

Okay. Just I mean I'm looking at a pretty aggressive ramp-up last year and I guess that's a testament to projects that you already called out…

Well, if you look at the commercial backlog, two thirds of that is on the single aisle platforms, which really correlates well with the build rates that we're seeing right, 52 to 57 to 60 over the next couple of years there so. And that's largely in our structures business.

Got it. And just one more point of clarification and I think this is probably adjusted by the 606. But are these firm delivery dates? Or is it just predicted backlog that you have with what you reported?

No, these are firm delivery especially on the structures stuff because supply chain, they go out that far because of the nature of the products. So firm delivery dates, firm fixed prices.

Got it. And then the second question I have was the structures adjusted looks good. I want to understand you're including the adjustments for 606. I understand why there was competitive reasons year-over-year, but you probably lost profits in revenue in the quarter that went to last year as well. And this is a more smoothly effect for the rest of the year. So I might like to think that, I guess if you kind of leave the adoption of 606 in there that the margin looks closer to - I think it's 8.5 or 9 for structures business?

Well, no, not yet. I mean with the adoption of 606, what that means is that we're now recognizing revenue on things that are in work in progress and finished goods in our inventory. So we have to go to a full estimate to complete accounting so recognizing revenue over time, versus as a point in time under 605. And 605, you would generally recognize revenue when it left the warehouse, depending upon the shipping terms. Now we're recognizing revenue as we complete our performance obligations. So I think, the numbers that are represented here are just...

Yes, I understand the GAAP numbers that are reported include that - they are 606, correct? And you extract that number from the margin profile but on a go...

Yes, exactly.

But on a go forward smoothing out, so this is kind of a representation of what this business is going to be doing on go forward basis with the 606 adjustment included that numbers, is that the right way to think about it?

It is. As we've said, with all the restructuring that we're doing and improvements in the business, we're get going this business back up to high single digits. We've been pretty consistently in that message

And it looks like here today is basically that reported structure says today?

Right.

100 basis points.

Okay. And then the electronics adjustment margin was a little bit lower than anticipated. Was there anything, in particular, that might've happened? It looks like maybe 606, kind of adjusted some of that revenue that you may recognize in this particular quarter in prior years. I am just trying to look at that because, it's a little bit lower over the last year?

No. As we've talked about in previous calls, the electronics business has the shorter cycle - it's a shorter cycle business. And we tend to have the margins that move around depending upon the product mix in the quarter and we did have some timing issues as well. So we don't see this as anything that's our problem and if you look at the margins in that business, somewhere between nine and 11, pretty consistently quarter-over-quarter. So small depth here. But we don't see anything that's problematic.

We'll be back there.

Any comments you can make on CTP about, may be size or profitability in that business?

Sure. So it's a relatively small business. The revenues were less than 4% of the total structures revenue, which is where we're going to be reporting that business going forward. But it is the margin profile substantially better than the current margin profile of our structures business. So on the operating level the margins are roughly three expected than what we see in structures business that we have.

Is that on the EBIT or an EBITDA basis?

EBIT.

Thank you very much. I appreciate that.

Thanks, Ed. Appreciate it.

Thank you. And our next question comes from Ken Herbert from Canaccord. You line is now open.

Hi, this is actually Parry on for Ken. Thanks for taking my question. I wanted to add my delayed congratulation on your second acquisition.

Thank you for that.

Can I talk about your pipeline a little bit, just it would help a little bit more color on where you're seeing the most potential opportunity and also maybe something you're focusing on right now?

Parry, just acquisition or sales, which?

CTP?

Okay, acquisitions. I'll take this, this is Steve. So we have [indiscernible] with us now, and so we continue as we've been talking about. We're going on a journey and get started in 2018. I mean we're still focused on these bolt-on acquisitions, we're looking as we file with CTP and LDS, okay. We're looking for products that or product produces that have a niche and that have a good position in the marketplace and have aftermarket opportunity. So we use that funnel obviously we also like low capital intensity businesses so we also have that in our model and I think that year at least for this year, and early in the next year, that sort of a posture with our pipeline and our [indiscernible] acquisitions.

Got it. Thank you. And also, would you mind speaking a little bit too gross margin and how you maybe trending sequentially through 2018, considering restructuring activities and likely volume increase such as 737?

Sure, so we would expect to continue the margins to continue to increase as we mentioned our structural impact really start to show up in the second half of the year where we're about halfway through those activities now we're continuing. So I mean, historically, if you look at Ducommun's margins, they've been in the 19-plus range, and we would expect them to get back there over the next couple of quarters.

Got it. Great. Thanks for your time. I appreciate it.

Thank you. [Operator Instructions] Our next question comes from Aman Gulani with B. Riley FBR. You line is now open.

Hi, guys. Thanks for taking my question. Just wanted to know, we have any insight on potential helicopter volume or other platforms, relevant to Ducommun from the armed services committee marketplace today?

Well I'll just say we're very encouraged. I mean the Blackhawk is a very large platform for us. We're a number of different applications both structural or electronics on that platform. Of course we've been manufacturing more relates for the Apache for decades. So we're certainly encouraged to see the funding for that as well as the support for retrofit and some of those birds [ph] as well. So think it's all boarding very positively, and I think we're encouraged by what we've seen.

I think also just to comment what we're thrilled with is now we're doing repairs on the Apache blades, okay. So we're through that business as well. That's just starting get going on in early facility, but so I think everything is sort of moving in our direction in a positive light.

Got it, thanks. That's very helpful. And then last question for me. So now that you've got two acquisitions under your belt, September are you still looking to do more bolt-on acquisitions? And if so, are you able to sort of comment on the type of capabilities that you're looking for?

Okay, I'll take that again. Look, as you know, acquisitions are optimistic, right. So it has to be - we have to everything has to come together on appropriately. So we're certainly still looking, we're certainly active. As I mentioned earlier, we really looking for these interesting companies that have good niche positions in the marketplace that have aftermarket opportunities that something we can really do something with, you know and I think both these companies we bought [indiscernible] investors that we're going to integrate a CTP just like LDS and it's going to be fine, okay. So we got the right team. We have people on the staff that have integrated companies over $1 billion. So these things are something we can handle, and I think that's a good thing for investors and good thing for our customers. So I'd say that.

Okay. Got it. Thank you. I'll pass it on.

Okay. Thanks so much.

Thank you. And I'm showing no further questions in queue. I will turn it back to Mr. Oswald for any closing remarks.

Okay, thanks. Let me just wrap up here. Again, as I mentioned in my remarks, certainly pleased with where we are we have a lot of work to still do, but I think we've really seen a lot of benefit through a lots of our actions and I'm optimistic about 2018. I like our market. I like where we are, I like a lot of the moment we picked up. So I think again, just to close I want to thank our team and thank our dedicated shareholders as well, okay, who have really supported Ducommun. So I'll leave it there. Again, thank you for your time, and hope to speak to you soon.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.