Ducommun Inc. (DCO) 2020年年度報告「NYSE」.pdf

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1、2020Annual Reportto ShareholderSContentsletter to Shareholders 01 Form 10-K 13Our Visionducommun Incorporated is dedicated to providing the aerospace and defense industry with leading engineered products,electronic and structural manufacturing and assembly services,and aftermarket support.the Compan

2、y supplies high value,niche products and services that deliver superior and sustainable value to our customers and all other stakeholders.Company Profileducommun Incorporated delivers innovative value-added manufacturing solutions to customers in the aerospace&defense,and Industrial markets.Founded

3、in 1849,the Company specializes in two core areas,electronic Systems and Structural Systems,which produce complex products and components for commercial aircraft platforms,mission-critical military and space programs.For more information,visit .DThe number one priority during the year was the health

4、 and safety of our employees and facilities.Designated as an essential business provider of products for Critical Infrastructure Sectors including the Defense Industrial Base,Transportation Systems and Critical Manufacturing Systems,Ducommun continued to operate,produce and ship products to our valu

5、ed customers throughout 2020.I also said it throughout the year,how proud I am of all Ducommun team members,their families and other stakeholders connected to our Company as we all worked together and did our best.The hard work and dedication were evident in many areas,and despite all the challenges

6、,the Company is well positioned for a return to growth in 2021 with hopefully many more good years ahead.The number one priority during the year was the health and safety of our employees and facilities.Designated as an essential business provider of products for Critical Infrastructure Sectors incl

7、uding the Defense Industrial Base,Transportation Systems and Critical Manufacturing Systems,Ducommun continued to operate,produce and ship products to our valued customers throughout 2020.We prioritized employee safety and efficiency,drove operational excellence,and regularly communicated with team

8、members,customers,supply chain and colleagues,and focused on four key areas:Employee health and safety,Customer business continuity,Supply chain integrity and Support for the local communities where we live and work.While Commercial Aerospace demand in 2020 was negatively impacted by the pandemic,al

9、ong with the Boeing 737 MAXs continued grounding,our Military&Space revenue increased by$99.1 million year-over-year,a record,leveraging an array of integral military programs and missile systems.Additionally,our Military&Space backlog increased by$78.4 million to$529.7 million,or 17.4%,bolstering t

10、he outlook across this important part of the business.These results were due to the last several years of hard work with Defense primes and others and it made a big difference in 2020.As we all know,2020 was a very difficult time for the world,the United States,many industries including Commercial A

11、erospace,and Ducommun.It is in the most difficult times,that values need to shine and I am happy to report that our team came together and lived the Companys values of Honesty,Respect,Professionalism,Teamwork and Trust in 2020.Dear Fellow Shareholders,Stephen G.OSwaldChairman,President and Chief Exe

12、cutive OfficerDucommun Incorporated /2020 Annual Report01Despite the pandemics impact,the Company posted revenues of$628.9 million for the year,a decline of only 12.8%year-over-year overcoming a 51.8%reduction in Commercial Aerospace revenue.Strong growth of 30.6%in Military&Space revenues were a cr

13、itical component in keeping Ducommun on track for its long-term goals and significantly offsetting the impact of Commercial Aerospace.Ducommuns performance highlights our portfolios strength and diversity along with the many measures taken to streamline and optimize our operations since I joined the

14、 Company in 2017.The other great story was margin expansion across the board.Gross margins expanded once again in 2020 to 21.9%,up 80 basis points(bps)from one year ago,driving adjusted EBITDA up 120 bps.These increases resulted from improved product mix in defense,effective cost controls,value-adde

15、d pricing and continuous improvement efforts through the DCO Operating System in all of our Performance Centers.Earnings per share(EPS)was also excellent in 2020 with reported EPS of$2.45 per diluted share,compared to$2.75 in 2019.Adjusted EPS was$2.74 per diluted share and roughly flat to 2019 perf

16、ormance of$2.80.Financial Performance and Shareholder ReturnAs previously mentioned,Ducommun posted revenue of$628.9 million in 2020,a decrease of 12.8%from 2019,with gross margins expanding to 21.9%,which is the highest level since 2003 and reflects excellent performance in many different areas of

17、our business and Performance Centers.We maintained strong operating margins of 7.2%,delivering$45.5 million of operating income which resulted in$29.2 million of net income in 2020-down slightly from$32.5 million in 2019.Adjusted EBITDA generation in 2020 reached$87.9 million,down less than 5%compar

18、ed to 2019 despite the revenue decline.Additionally,Ducommuns overall backlog remained strong at$822.0 million,with Military&Space backlog growing 17%to an all time record of$529.7 million.Overall,the 2020 numbers were very strong despite the pandemics impact on Commercial Aerospace,and we are excit

19、ed about the future.Total Shareholder Return(TSR)over the last three years was very strong at 89%,placing Ducommun in the 86th percentile of the Russell 2000 Index for TSR over the period.2020 Net Revenuesof$628.9 MillionTotal Backlog*as ofDecember 31,2020of$822.0 MillionCOMMERCIAL AEROSPACEINDUSTRI

20、ALMILITARY&SPACE27%6%67%33%3%64%$628.9$822.0*We define backlog as potential revenue based on customer purchase orders and long-term agreements with firm fixed prices and expected delivery dates of 24 months or less.02 Employee Safety,Above All Else Ensuring the safety and well-being of Ducommun empl

21、oyees has always been our top priority.With the onset of the COVID-19 pandemic,we immediately developed and deployed company-wide risk mitigation and preventive measures based on guidelines from the Centers for Disease Control&Prevention(CDC),state departments of health,and state and local authoriti

22、es.Included were mandatory social distancing and face masks,enhanced environmental sanitation standards,frequent disinfecting of work areas and equipment,temperature screenings,proper handwashing techniques,and business-critical visitors only with advanced COVID-19 pre-screening.Due to the fluid and

23、 evolving nature of the COVID-19 pandemic,we understood the importance of clear,concise and consistent communication with employees.Since early March,we have provided regular training and education sessions on COVID-19 disease prevention,produced a Safe Workplace Playbook for Ducommun manufacturing

24、facilities operation and distributed a weekly update to every employee.Customer Business Continuity&Supply Chain Integrity As our country faced a genuinely unprecedented situation with the COVID-19 pandemic,Ducommun remained focused on manufacturing and delivering essential products to our customers

25、.Our supply chain worked proactively with all available sources,navigating the challenges to ensure material availability to support Ducommun operation requirements and customer service.Ducommun maintained business continuity plans at multiple levels for all operations.These plans supported risk mit

26、igation for operations,data disaster recovery and materials risk mitigation.Our Supply Chain leadership remained diligently focused on materials risk management and mitigation.We contacted and evaluated our key suppliers.As we worked to ensure our raw materials inventory and supply chain continuity

27、as expeditiously as possible,we seamlessly continued our operations.There was no recorded or specific disruption of our upstream supply chain,and we received a continuous flow of goods and products from suppliers.We were in regular communication with suppliers for inventory updates and requested alt

28、ernative sources for products as needed.Our Pandemic ResponseDucommun Incorporated /2020 annual Report03When the COVID-19 pandemic shut down all but essential businesses in March 2020,there was both an unprecedented need and opportunity to make a difference in the local communities in which Ducommun

29、 operates.Ducommun partnered with The Ducommun Foundation as its main philanthropic avenue and provided more than$1.3 million in 2020 for relief efforts supporting the most vulnerable individuals and families impacted by the pandemic.Charitable organizations were selected by Ducommuns 15 Performance

30、 Center leaders across the U.S.,and The Ducommun Foundation made donations in April,May and November 2020,for an average of$85,000 per Ducommun Performance Center location.Contributions were made to such notable organizations as the United Way,Ronald McDonald House Charities,Mercy Health Foundation,

31、the California Community Foundation,and numerous food banks and non-profit community groups.The Ducommun Foundation in 2020 supported underrepresented students and local communities through donations to NACME(National Action Council for Minorities in Engineering)for student scholarships and the Los

32、Angeles Urban League for small business recovery.In a time of unprecedented need,the Company and its employees stepped up and helped our struggling neighbors and uplifted individuals and families in our local communities.DuCommun PAnDEmIC RElIEF EFFoRtS 2020 California Community Foundations LA Stude

33、nts in Need Campaign Crosslines of Joplin Food Bank Fox Valley Community Foundations COVID-19 Response Fund Labette County Assistance Labette Health Foundation Lafayette House Loaves&Fishes Food Bank of the Ozarks Los Angeles Urban League Small Business Relief&Recovery Fund Madison County Law Enforc

34、ement Auxiliary Pandemic Relief Fund Mercy Health Foundation Merlin Foundation Shelter&Food Bank National Action Council for Minorities in Engineering(NACME)Northwest Arkansas Food Bank Pandemic Relief Parsons Area Community Foundation Parsons Foursquare Church Food Bank Proud Animal Lovers Shelter

35、Regional Food Bank of Northwestern,New York Ronald McDonald House Charities of the Capital Region(RMHC-CR)Pandemic Relief Fund Tulsa City Lights Pandemic Relief Tulsa Community Foundations Tulsa Area COVID-19 Response Fund United Way of Greater Los Angeles County Pandemic Relief Fund United Way of O

36、range County Pandemic Relief Fund United Way of Southwest Missouri&Southwest,Kansas United Way Valley Foundation COVID-19 Response Fund Watered Gardens Homeless ShelterSupport for the Local Communities Where We Live&Work04orange County united Way|Irvine,CaliforniaIn 2020,The Ducommun Foundation cont

37、ributed to Orange County United Ways Pandemic Relief Fund,which provides rental,food,utility,academic and other emergency assistance to those most at risk including low-income individuals,families and students.In this time of uncertainty,we are all united.Ronald mcDonald House Charities of the Capit

38、al Region|Albany,new YorkChildren of all ages continue to face serious health challenges during the pandemic.The Ducommun Foundations donation to support Ronald McDonald House Charities of the Capital Region(RMHC-CR)Pandemic Relief provides needed resources for families during this unprecedented tim

39、e.mercy Health Foundation|Berryville,ArkansasThe Ducommun Foundation donated to Mercy Hospital in Berryville,Arkansas for the creation of two“negative pressure”room environments.These specialized rooms safely isolate patients with symptoms of infectious diseases,including COVID-19.These rooms will c

40、ontinue to serve patients and help protect the community long after the pandemic is over.Our Donations are Helping those Who Need it MostCourtesy of RMHC-CRDucommun Incorporated /2020 Annual Report05A Culture of Continuous InnovationOnce again,in 2020,the businesss development and transformation thr

41、ough innovation continued to be a top priority for Ducommun.In March,Lightning Diversion Systems signed a technology licensing agreement with Wichita State University for wind turbine lightning protection.The agreement allows us to commercialize advanced lightning protection technology further to of

42、fer wind turbine operators and OEMs better,more cost-effective protection against lightning strikes.In June,our Performance Center in Carson,California delivered Variable Reluctance Resolvers to our customer Leonardo Electronics in Florence,Italy.Leonardo is responsible for building the JIRAM Imagin

43、g Spectrometer,a collaboration between NASA and ASI(Italian Space Agency),which is used to acquire infrared images on the historic Juno Mission to Jupiter.Through process innovation and value engineering,we delivered our first integrated TOW missile case to Raytheon,a milestone for Ducommun that com

44、bined two of our core capabilities Aerostructures composites and electronic wiring harnesses.This was the first major integration of capabilities from both the Structural and Electronic segments of Ducommun.In July,Ducommun contributed to the historic Mars 2020 Mission Perseverance Rover through inn

45、ovative manufacturing and engineered products we built at our Performance Center in Carson,California.Ducommun manufactured high reliability Resolvers for the Jet Propulsion Laboratory(JPL)and NASA that support key functions on the rover,including sample handling,bit carousel docking assembly and ro

46、tor mechanism.In 2020,our Joplin,Missouri Performance Center drove business transformation focused on Courtesy NASA/JPL-Caltech06manufacturing innovations for the future growth of Unmanned Aerial Vehicles(UAVs).Our team in Joplin transformed an available manufacturing area into an advanced state-of-

47、the-art manufacturing cell,producing complex interconnects that support General Atomics Aeronautical Systems Predator,Gray Eagle and other UAV programs.Our Joplin technical team also delivered advanced interconnect products to Northrop Grumman Space Systems for NASAs Space Launch System(SLS)boosters

48、.The SLS rocket is the backbone of the Artemis Program,which is the next step in lunar exploration.Artemis is part of NASAs Moon to Mars exploration approach,which will enable the first woman and next man to step foot on the Moon by 2024,and will establish sustainable exploration and feature innovat

49、ive engineered manufacturing solutions developed by Ducommun.Environmental,Health&Safety In support of our pledge to deliver exceptional value to all stakeholders,in 2020,we remained committed to the following environmental management practices:Strove to avoid adverse impact and harm to the environm

50、ent in the communities where we do business and to identify business partners who share these values.Promoted compliance with all applicable laws and regulations pertaining to the environment and natural resources.Continually improved our Environmental Management System,employee awareness and perfor

51、mance.Ducommun Incorporated /2020 annual Report07 Strove to establish meaningful goals and objectives in the pursuit of Environmental,Health and Safety excellence,including but not limited to,implementing metrics established by the Sustainability Accounting Standards Board(SASB)applicable to our ope

52、rations.For example,between 2018 and 2020,we reduced carbon dioxide emissions by 15%and our total energy usage by 13%as depicted in the graphs above.Throughout the year,we continued to place a premium on the safety of our employees.We established an incident investigation policy to identify the root

53、 cause of accidents that resulted in lost time,implemented corrective measures and improved training to reduce occupational accidents.In addition,we tracked the number of lost time incidents incurred by our employees as a measure of the effectiveness of our health and safety programs.Lost time incid

54、ents are defined as incidents that resulted in days away from work and are similar to the days away,restricted or transferred metric utilized by the Occupational Safety and Health Administration(OSHA).During the three-year period between January 1,2018 and December 31,2020,the Companys lost work inc

55、ident rate decreased by over 52%and the total recordable incident rate decreased by 35%.Employee Engagement&Well-being Programs Against the backdrop of a nationwide pandemic,Ducommun continued its transformation into a high-performance organization in 2020,focusing on all Ducommun employees total ph

56、ysical,emotional and financial well-being.We increased benefits to take care of COVID-19 testing and co-payments,and we paid our employees during COVID-19 quarantine or illness.We developed and deployed our company-wide Healthy Minds at Work campaign to promote the wide range of mental health servic

57、es available to employees and their families who may be experiencing stress and anxiety because of the pandemic or other life challenges.Our Employee Stock Purchase Plan(ESPP)was introduced in 2019,and in 2020,it continued to grow,with a 35%increase in participation since the program was launched.Ou

58、r 401K program has 86%of eligible employees actively participating,with annual meetings and monthly educational sessions held at each Ducommun location.Despite the pandemic-related challenges impacting Ducommun in 2020,the Company paid bonuses to all eligible employees for the third year in a row.Du

59、e to cost-cutting and other measures,we set aside a bonus pool to continue awarding pay-for-performance for all eligible employees across the Company,ensuring that every person has a stake in our success.Total Energy Use(GigaJoules)Carbon Dioxide(Tons)2018202020182020310,000320,000330,000340,000350,

60、000360,000370,000390,000380,0006,5007,0007,5008,0008,5009,00008As a leader in the Aerospace and Defense industry,we continued to support community-based Science,Technology,Engineering and Math(STEM)programs and initiatives that nurture and develop the next generation of innovators,thinkers and techn

61、icians.In 2020,we marked our third year in partnership with the Los Angeles Chargers and University of California,Irvine,to sponsor STEM on the Sidelines,a regional competition promoting STEM education in Los Angeles and Orange County,California high schools.The 2020 contest shifted to an online for

62、mat,where we focused on innovation and engagement with students,despite challenges presented by pandemic restrictions.More than 20 high schools embraced the competition and managed COVID-related challenges this year,bringing the total to more than 400 students who have benefited from their involveme

63、nt in STEM on the Sidelines since 2018.The Ducommun Scholars is a college scholarship program available exclusively to the children and grandchildren of Ducommun employees.These merit-based awards are given to deserving students who attend a four-year college or university or two-year accredited tec

64、hnical or vocational college.In September 2020,we named 25 new Ducommun Scholars.They each received a$2,000 or$3,000 scholarship for college expenses during the 2020-2021 academic year.They may be eligible for the scholarship to be renewed each year for the remainder of their education.Congratulatio

65、ns to the 2020 Ducommun ScholarSDucommun Awards 25 College Scholarships for the 2020-2021 Academic YearDucommun Incorporated (NYSE:DCO)has named 25 Ducommun Scholars who will each receive a$2,000 or$3,000 scholarship for college expenses during the 2020-2021 academic year.Starting in 2020,each schol

66、arship award will be renewable for 2 to 3 years based on student eligibility.The program is available exclusively to Ducommun full-time employees children and grandchildren who attend a 4-year college/university or 2-year accredited technical or vocational college.“Congratulations to our 2020 Ducomm

67、un Scholars!It is great to see these deserving students starting a new beginning and I am thrilled that the Company is able to support them.We are committed for either the next two or four years,depending on the program,to ensure they graduate and wish them all the best pursuing their goals and drea

68、ms,”said Stephen G.Oswald,chairman,president and chief executive officer.Ducommun Scholars are selected each year by Scholarship Management Services,a division of Scholarship America,which independently administers the application,eligibility and award selection process.Ducommun scholarship awards a

69、re based solely on merit.Criteria include academic record,demonstrated leadership,and participation in school and community activities.Hailey MitcHellSUNY College at BrockportField oF StudyBiologyDaughter ofAnthony MitchellCoxsackie,NYtaylor oBrienPittsburg State UniversityField oF StudyBusiness Man

70、agementGrandson ofLarry TaylorParsons,KSBianca PadillaCalifornia State University,Long BeachField oF StudyFamily Life EducationDaughter ofErika PadillaGardena,CAakesHa PoynerNorth Arkansas CollegeField oF StudyChild EducationDaughter ofHeather WeelborgBerryville,ARJennifer MarinoWorcester State Univ

71、ersityField oF StudyCommunication Disorders/Speech PathologyDaughter ofAnthony MarinoMerrimack,NHcarlos rodriguezCalifornia State University,FullertonField oF StudyCommunications/PRSon ofVictor RodriguezGardena,CAsusan roManCalifornia State University,Long BeachField oF StudyFamily&Consumer Sciences

72、Daughter ofMaria LopezCarson,CAWilliaM saltsOklahoma State UniversityField oF StudyAerospace EngineeringSon ofChonta SaltsJoplin,MOalaina sHutterSiena CollegeField oF StudyHealth StudiesDaughter ofTom ShutterCoxsackie,NYrayna Van HandelUniversity of Wisconsin-Eau ClaireField oF StudyNursingDaughter

73、ofDawna Van HandelAppleton,WIalessandra VargasUniversity of California,DavisField oF StudyDesignDaughter ofCarlos VargasSanta Clarita,CAdylan WalkerMissouri Southern State UniversityField oF StudyNursingSon ofDavid WalkerParsons,KSdestiny calicoUniversity of ArkansasField oF StudyBiology/Pre-Pharmac

74、yDaughter ofMichael CalicoHuntsville,ARJessica cHengSan Diego State UniversityField oF StudySoftware Engineering/Product ManagementDaughter ofXiaoyan WangCarson,CAryli coPelandCrowder CollegeField oF StudyNursingGranddaughter ofPamela SmithJoplin,MOlily dangUniversity of Missouri,Kansas CityField oF

75、 StudyBiology/Pre-Med Daughter ofTien DangJoplin,MOroBBy daVisMissouri University of Science&TechnologyField oF StudyChemical EngineeringGrandson ofDeborah RobertsHuntsville,ARkezia deckerColumbia-Greene Community CollegeField oF StudyNursingDaughter ofMatthew DeckerCoxsackie,NYJeoVanny dillonUniver

76、sity of California,Los AngelesField oF StudyPsychologySon ofJose DillonGardena,CAransoM HerringArkansas Tech UniversityField oF StudyNursingDaughter ofSayward HerringHuntsville,ARaMBerlyn JarManUniversity of Kansas Medical CenterField oF StudyNursingDaughter ofTiffany JarmanParsons,KSallison JoHnson

77、The Paul Mitchell SchoolField oF StudyCosmetologyGranddaughter ofDeborah RobertsHuntsville,ARBrenda kennedyCalifornia State University,FullertonField oF StudyPsychologyDaughter ofEdmund KennedyMonrovia,CAsydney lancasterKansas State UniversityField oF StudyPolitical ScienceDaughter ofMartha Lancaste

78、rParsons,KSlauren laneUniversity of California,Santa BarbaraField oF StudyEnglish LiteratureDaughter ofRobert LaneMonrovia,CACOPYRIGHT 2020 DUCOMMUN INCORPORATED.ALL RIGHTS RESERVED.|DCO Scholars Poster 09/15/2020Community InvolvementDucommun Incorporated /2020 Annual Report0910Diversity&InclusionIn

79、 2020,we began seeing the results of the diversity and inclusion initiatives we implemented in 2019.We achieved a 22%year-over-year increase in women being promoted into leadership roles and a 20%year-over-year increase in minorities being promoted into such positions during the past year.The total

80、percentage of women and minorities in leadership positions at the Company as of December 31,2020,is 33%women and 23%minorities.We continue to focus on developing a diverse talent pipeline to support our ongoing focus on innovation,creativity and improving results.In 2020 we partnered with establishe

81、d and recognized diversity job boards and college internship programs that provide access to highly qualified and diverse Science,Technology,Engineering and Math(STEM)students.These programs are intended to augment our existing internship matching process by providing access to more than 12,000 tale

82、nted,highly qualified and diverse STEM students while offering students work experience and access to future job opportunities.Recognition In February 2020,Ducommun was recognized by Boeing as meeting performance criteria for participation in their initial launch of the“Boeing Premier Bidding”progra

83、m.This recognition was given to select suppliers who have demonstrated high level quality and delivery performance among other criteria.We are excited about the program and the opportunity to further build upon our partnership as a key product provider to Boeing.In March 2020,Ducommuns Performance C

84、enter in Coxsackie,New York,received the Sikorsky Black Hawk Supplier of the Year 2019.This award recognizes the Coxsackie team for overall performance,customer service and support of Sikorsky initiatives that enabled this significant accomplishment.Ducommun Incorporated /2020 annual Report11In Nove

85、mber 2020,Ducommun Incorporated was named to the Orange County,California Business Journals(OCBJ)2020 List of Fastest-Growing Public Companies.Ducommun ranked 5th among large public companies,a significant increase from our position as the 11th fastest-growing public Company in 2019.In December 2020

86、,Ducommuns Performance Center in Huntsville,Arkansas,received the Gold Medallion Award from BAE Combat Mission Systems,which recognizes suppliers ability to deliver quality products on time and on budget throughout the year.outlookAs I mentioned at the beginning of my letter to you,2020 was a very d

87、ifficult time.The circumstances during the year required a great deal of resolve,and the Ducommun team strived to do its very best.My hope is you will see it in this years report.I also want to take this time to thank our dedicated shareholders who continue to believe in our team and future.I know e

88、veryone looks forward to better days ahead for the entire world in 2021,and we are ready to be a part of the recovery.Finally,my sincere thanks to our team members and their families who supported them,as they showed up and delivered every day despite all the issues.I am proud of you and personally

89、grateful for your support!Sincerely,Stephen G.Oswald Chairman,President and Chief Executive Officer12UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549 _FORM 10-K _ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 3

90、1,2020 ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For 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 ofincorporat

91、ion or organization)(I.R.S.EmployerIdentification No.)200 Sandpointe Avenue,Suite 700,Santa Ana,California 92707-5759(Address of principal executive offices)(Zip code)Registrants telephone number,including area code:(657)335-3665Securities registered pursuant to Section 12(b)of the Act:Title of each

92、 class Trading Symbol(s)Name of each exchange on which registeredCommon Stock,$.01 par value per share DCONew York Stock Exchange _Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No xIndicate by check mark if the registrant is

93、 not required to file reports pursuant to Section 13 or Section 15(d)of the Act.Yes No xIndicate 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 th

94、at 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 and posted pursuant to Rule 405 of Reg

95、ulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes x No Table of ContentsIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a sma

96、ller 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 xNon-accelerated filer Smaller reporting compan

97、y Emerging growth companyIf 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 whet

98、her the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reporting under Section 404(b)of the Sarbanes-Oxley Act by the registered public accounting firm that prepared or issued its audit report.Indicate by che

99、ck mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No xThe aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price of which the common equity was last sold,or the average bid and aske

100、d price of such common equity,as of the last business day of the registrants most recently completed second fiscal quarter ended June 27,2020 was$381 million.The number of shares of common stock outstanding on February 3,2021 was 11,763,468.DOCUMENTS INCORPORATED BY REFERENCEThe following documents

101、are incorporated by reference:(a)Proxy Statement for the 2021 Annual Meeting of Shareholders(the“2021 Proxy Statement”),incorporated partially in Part III hereof.Table of ContentsDUCOMMUN INCORPORATED AND SUBSIDIARIES PagePART IForward-Looking Statements and Risk Factors3Item 1.Business4Item 1A.Risk

102、 Factors10Item 1B.Unresolved Staff Comments21Item 2.Properties21Item 3.Legal Proceedings21Item 4.Mine Safety Disclosures22PART IIItem 5.Market for the Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities22Item 6.Selected Financial Data22Item 7.Managements D

103、iscussion and Analysis of Financial Condition and Results of Operations23Item 7A.Quantitative and Qualitative Disclosures About Market Risk36Item 8.Financial Statements and Supplementary Data37Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosures37Item 9A.Contr

104、ols and Procedures37Item 9B.Other Information38PART IIIItem 10.Directors,Executive Officers and Corporate Governance38Item 11.Executive Compensation38Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters38Item 13.Certain Relationships and Related Tran

105、sactions,and Director Independence39Item 14.Principal Accountant Fees and Services39PART IVItem 15.Exhibits and Financial Statement Schedules40Item 16.Form 10-K Summary82Signatures82Table of Contents2PART I Forward-Looking Statements and Risk Factors 3Item 1.Business 4Item 1A.Risk Factors 10Item 1B.

106、Unresolved Staff Comments 21Item 2.Properties 21Item 3.Legal Proceedings 21Item 4.Mine Safety Disclosures 22PART IIItem 5.Market for the Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities 22Item 6.Selected Financial Data 22Item 7.Managements Discussion an

107、d Analysis of Financial Condition and Results of Operations 23Item 7A.Quantitative and Qualitative Disclosures About Market Risk 36Item 8.Financial Statements and Supplementary Data 37Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosures 37Item 9A.Controls and

108、Procedures 37Item 9B.Other Information 38PART IIIItem 10.Directors,Executive Officers and Corporate Governance 38Item 11.Executive Compensation 38Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 38Item 13.Certain Relationships and Related Transac

109、tions,and Director Independence 39Item 14.Principal Accountant Fees and Services 39PART IVItem 15.Exhibits and Financial Statement Schedules 40Item 16.Form 10-K Summary 82 Signatures 82FORWARD-LOOKING STATEMENTS AND RISK FACTORSThis Annual Report on Form 10-K(“Form 10-K”)contains forward-looking sta

110、tements within the meaning of Section 27A of the Securities Act of 1933,Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995.Forward-looking statements may be preceded by,followed by or include the words“could,”“may,”“believe,”“expect,”“anticipa

111、te,”“plan,”“estimate,”“expect,”or similar expressions.These statements are based on the beliefs and assumptions of our management.Generally,forward-looking statements include information concerning our possible or assumed future actions,events or results of operations.Forward-looking statements spec

112、ifically include,without limitation,the information in this Form 10-K regarding:future sales,earnings,cash flow,uses of cash and other measures of financial performance,projections or expectations for future operations,industry trends and expectations,our plans with respect to restructuring activiti

113、es,completed acquisitions,future acquisitions and dispositions and expected business opportunities that may be available to us.Although we believe that the expectations reflected in the forward-looking statements are based on reasonable assumptions,these forward-looking statements are subject to num

114、erous factors,risks and uncertainties that could cause actual outcomes and results to be materially different from those projected.We cannot guarantee future results,performance or achievements.Moreover,neither we nor any other person assumes responsibility for the accuracy and completeness of the f

115、orward-looking statements.All written and oral forward-looking statements made in connection with this Form 10-K that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by“Risk Factors”contained within Part I,Item 1A of this Form 10-K and other cautionar

116、y statements included herein.The information in this Form 10-K is not a complete description of our business.There can be no assurance that other factors will not affect the accuracy of these forward-looking statements or that our actual results will not differ materially from the results anticipate

117、d in such forward-looking statements.While it is impossible to identify all such factors,some factors that could cause actual results to differ materially from those estimated by us include,but are not limited to,those factors or conditions described under Risk Factors contained within Part I,Item 1

118、A of this Form 10-K and the following:our ability to manage and otherwise comply with our covenants with respect to our outstanding indebtedness;our ability to service our indebtedness;our acquisitions,business combinations,joint ventures,divestitures,or restructuring activities may entail certain o

119、perational and financial risks;the cyclicality of our end-use markets and the level of new commercial and military aircraft orders;industry and customer concentration;production rates for various commercial and military aircraft programs;the level of U.S.Government defense spending;compliance with a

120、pplicable regulatory requirements and changes in regulatory requirements,including regulatory requirements applicable to government contracts and sub-contracts;further consolidation of customers and suppliers in our markets;product performance and delivery;start-up costs,manufacturing inefficiencies

121、 and possible overruns on contracts;increased design,product development,manufacturing,supply chain and other risks and uncertainties associated with our growth strategy to become a supplier of higher-level assemblies;our ability to manage the risks associated with international operations and sales

122、;economic and geopolitical developments and conditions;pandemics,such as COVID-19,significantly impacting the global economy and specifically,the commercial aerospace end-use market;disasters,natural or otherwise,damaging or disrupting our operations;unfavorable developments in the global credit mar

123、kets;our ability to operate within highly competitive markets;Table of Contents3technology changes and evolving industry and regulatory standards;possible goodwill and other asset impairments;the risk of environmental liabilities;the risk of cyber security attacks or not being able to detect such at

124、tacks;andlitigation with respect to us.We caution the reader that undue reliance should not be placed on any forward-looking statements,which speak only as of the date of this Form 10-K.We do not undertake any duty or responsibility to update any of these forward-looking statements to reflect events

125、 or circumstances after the date of this Form 10-K except as required by law.PART IITEM 1.BUSINESSGENERALDucommun 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 appli

126、cations used primarily in the aerospace and defense(“A&D”),industrial,medical and other industries(collectively,“Industrial”).Ducommun differentiates itself as a full-service solution-based provider,offering a wide range of value-added advanced products and services in our primary businesses of elec

127、tronics,structures,and integrated solutions.We operate through two primary business segments:Electronic Systems and Structural Systems.We are the successor to a business that was founded in California in 1849 and reincorporated in Delaware in 1970.ACQUISITIONSAcquisitions have been an important elem

128、ent of our growth strategy.We have supplemented our organic growth by identifying,acquiring and integrating acquisition opportunities that result in broader,more sophisticated product and service offerings while diversifying and expanding our customer base and markets.For example,in October 2019,we

129、acquired all the outstanding equity interests of Nobles Parent Inc.,the parent company of Nobles Worldwide,Inc.(“Nobles”),a privately-held global leader in the design and manufacturing of high performance ammunition handling systems for a wide range of military platforms including fixed-wing aircraf

130、t,rotary-wing aircraft,ground vehicles,and shipboard systems for$76.8 million,net of cash acquired,funded by drawing down on our revolving credit facility.The acquisition of Nobles advanced our strategy to diversify and offer more customized,value-driven engineered products with aftermarket opportun

131、ities and is included in our Structural Systems segment.PRODUCTS AND SERVICESBusiness Segment InformationWe operate through two primary strategic businesses,Electronic Systems and Structural Systems,each of which is a reportable segment.The results of operations among our operating segments vary due

132、 to differences in competitors,customers,extent of proprietary deliverables and performance.Electronic Systems designs,engineers and manufactures high-reliability electronic and electromechanical products used in worldwide technology-driven markets including A&D and Industrial end-use markets.Electr

133、onic 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 s

134、tructures and assemblies.Structural Systems products are primarily used on commercial aircraft,military fixed-wing aircraft and military and commercial rotary-wing aircraft.Electronic SystemsElectronic Systems has multiple major product offerings in electronics manufacturing for diverse,high-reliabi

135、lity 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

136、domestic and foreign commercial and military fixed-wing aircraft,military and commercial rotary-wing aircraft and space programs.Further,we provide select industrial high-reliability applications for the industrial,medical,and other end-use markets.We build custom,high-performance electronics Table

137、of Contents4and electromechanical systems.Our products include sophisticated radar enclosures,aircraft avionics racks and shipboard communications and control enclosures,printed circuit board assemblies,cable assemblies,wire harnesses,and interconnect systems,lightning diversion strips,surge suppres

138、sors,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

139、provided to a wide range of customers.In response to customer needs and utilizing our in-depth engineering expertise,Electronic Systems is also considered a leading supplier of engineered products including,illuminated pushbutton switches and panels for aviation and test systems,microwave and millim

140、eter switches and filters for radio frequency systems and test instrumentation,and motors and resolvers for motion control.Electronic Systems also provides engineering expertise for aerospace system design,development,integration,and testing.We leverage the knowledge base,capabilities,talent,and tec

141、hnologies of this focused capability into direct support of our customers.Structural SystemsStructural Systems has three major product offerings to support a global customer base:commercial aircraft,military fixed-wing aircraft,and military and commercial rotary-wing aircraft.Our applications includ

142、e structural components,structural assemblies,bonded(metal and composite)components,precision profile extrusions and extruded assemblies,and ammunition handling systems.In the structural components products,Structural Systems provides design services,engineers,and manufacturing of large complex cont

143、oured 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 fusel

144、age skins,rotor blades on rotary-wing aircraft and components,flight control surfaces,engine components,and ammunition handling systems.To support these products,Structural Systems maintains advanced machine milling,stretch-forming,hot-forming,metal bonding,composite layup,and chemical milling capab

145、ilities and has an extensive engineering capability to support both design services and manufacturing.AEROSPACE AND DEFENSE END-USE MARKETS OVERVIEWOur largest end-use markets are the aerospace and defense markets and our revenues from these markets represented 94%of our total net revenues in 2020.T

146、hese markets are serviced by suppliers which are stratified,from the lowest value provided to the highest,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”).We derive a signifi

147、cant portion of our revenues from subcontracts with OEMs.As the prime contractor for various programs and platforms,the OEMs sell to their customers,who may include,depending upon the application,the U.S.Federal Government,foreign,state and local governments,global commercial airline carriers,region

148、al jet carriers and various other customers.The OEMs also sell to global leasing companies that lease commercial aircraft.A significant portion of our revenues is earned from subcontracts with the Primes.Tier One suppliers manufacture aircraft sections and purchase assemblies.Tier Two suppliers prov

149、ide 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.We currently compete primarily with Tier Two and Tier Three supplie

150、rs.Our business growth strategy is to differentiate ourselves from competitors by providing more complex assemblies to our customers as a higher value added supplier.Commercial Aerospace End-Use MarketThe commercial aerospace end-use market is highly cyclical and is impacted by the level of global a

151、ir passenger traffic in general,which in turn is influenced by global economic conditions,fleet fuel and maintenance costs and geopolitical developments.Revenues from the commercial aerospace end-use market represented 27%of our total net revenues for 2020.The COVID-19 pandemic has caused an unprece

152、dented adverse impact to demand for civil air travel,creating a significant challenge for some of our customers and the entire commercial aerospace manufacturing and services sector.Global economic growth,a primary driver for air travel,is expected to have declined to between negative four percent a

153、nd negative five percent in 2020.The latest International Air Transport Association(“IATA”)forecast projected full-year 2020 passenger traffic to be down more than 60%compared to 2019 as global economic activity slows due to COVID-19,and governments severely restricted travel to contain the spread o

154、f the virus.The recovery remains slow and uneven as travel restrictions and varying regional travel protocols continue to impact air travel.Generally,it is expected that domestic travel will recover Table of Contents5faster than international travel.The pace of the commercial market recovery will be

155、 heavily dependent on COVID-19 infection rates,progress on testing,government travel restrictions,and timing and availability of vaccines.In addition,airline financial performance,which also plays a role in the demand for new capacity,has been adversely impacted by the COVID-19 pandemic.According to

156、 IATA,net losses in 2020 for the airline industry are expected to be approximately$118 billion,compared to net profits of$26 billion in 2019.Our customers are taking actions to combat the effects of the COVID-19 pandemic on the market by preserving liquidity.This comes in many forms such as deferral

157、 of advances and other payments to suppliers,deferrals of deliveries,reduced spending,and in some cases,cancellation of orders.We face a challenging environment in the near and medium future as airlines adjust to reduced air traffic,which in turn,will lower demand for commercial aerospace products.T

158、he current environment is also affecting the financial viability of some airlines.In The Boeing Companys(“Boeing”)2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission(the“SEC”),they indicated that they expect it will take approximately three years for worldwide travel to

159、 return to 2019 levels and a few years beyond that for the industry to return to the long-term trend growth of five percent.The long-term outlook for the industry continues to remain positive due to the fundamental drivers of air travel demand:economic growth,increasing propensity to travel due to i

160、ncreased trade,globalization,and improved airline services driven by liberalization of air traffic rights between countries.The COVID-19 pandemic has reduced the near to medium term demand,but Boeings commercial market outlook forecast projects a four percent growth rate for passenger and cargo traf

161、fic over a 20 year period.Based on long-term global economic growth projections of two and a half percent average annual gross domestic product(“GDP”)growth,Boeing projects a demand for 43,000 new airplanes over the next 20 years.However,the industry remains vulnerable to various developments includ

162、ing business travel may not return to pre-pandemic levels due to the use of virtual meeting platforms,fuel price spikes,credit market fluctuations,acts of terrorism,natural disasters,conflicts,epidemics,pandemics,and increased global environmental regulations.We believe we are well positioned given

163、our product capabilities and our initiatives to increase operating efficiencies to participate in the near term recovery and the long term projected growth rate for commercial air traffic and build rates for large commercial aircraft for the airframe manufacturing industry.If the recovery is slower

164、than anticipated or any of the developments occur,it could have a material adverse effect on our results of operations,financial position,and/or cash flows.Defense End-Use MarketOur defense end-use market includes products used in military and space,including technologies and structures applications

165、.The defense end-use market is highly cyclical and is impacted by the level of government defense spending.Government defense spending is impacted by national defense policies and priorities,political climates,fiscal budgetary constraints,U.S.Federal budget deficits,projected economic growth and the

166、 level of global military or security threats,or other conflicts.Revenues from the military and space end-use market in 2020 represented 67%of our total net revenues during 2020.The Omnibus appropriations acts for fiscal year 2021(“FY2021”),enacted in December 2020,provided FY2021 appropriations for

167、 government departments and agencies,including the United States Department of Defense(“U.S.DoD”),the National Aeronautics and Space Administration(“NASA”),and the Federal Aviation Administration(“FAA”),reducing budget uncertainty and the risk of sequestration.However,there continues to be uncertain

168、ty with respect to future program-level appropriations for the U.S.DoD and other government agencies,including NASA.Future budget cuts or investment priority changes,including changes associated with the authorizations and appropriations process,could result in reductions,cancellations,and/or delays

169、 of existing contracts or programs.Any of these impacts could have a material effect on our results of operations,financial position,and/or cash flows.For additional information related to our revenues from customers whose principal sales are to the U.S.Government and our direct sales to the U.S.Gov

170、ernment,see“Risk Factors”contained within Part I,Item 1A of this Annual Report on Form 10-K(“Form 10-K”).INDUSTRIAL END-USE MARKETS OVERVIEWOur industrial,medical and other(collectively,“Industrial”)end-use markets are diverse and are impacted by the customers needs for increasing electronic content

171、 and a desire to outsource.Factors expected to impact these markets include capital and industrial goods spending and general economic conditions.Our products are used in heavy industrial manufacturing systems and certain medical applications.Revenues from the Industrial end-use markets were 6%of ou

172、r total net revenues during 2020.We believe our business in these markets in the long-term,is stable and we are well positioned in these markets even though the COVID-19 pandemic has had and will continue to have at least a near term impact on our on our business.Table of Contents6SALES AND MARKETIN

173、GOur 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.T

174、hus,revenues from commercial aircraft could be affected as a result of changes in new aircraft orders,or the cancellation or deferral by airlines of purchases of ordered aircraft.Further,our revenues from commercial aircraft programs could be affected by changes in our customers inventory levels and

175、 changes in our customers aircraft production build rates.As a result of the COVID-19 pandemic,both major large aircraft manufacturers,Boeing and Airbus SE(“Airbus”),have announced lower build rates for the near and medium future.While the ramp up in production and demand will be slower in the near

176、and medium future,we will continue to identify opportunities to expand our presence and offerings with both major large aircraft manufacturers and their supply chain.Military components manufactured by us are employed in many of the countrys front-line fighters,bombers,rotary-wing aircraft and suppo

177、rt aircraft,as well as land and sea-based applications.Our defense business is diversified among a number of military manufacturers and programs.In the space sector,we are expanding our presence with unmanned aerial vehicles and continue to support various satellite programs.Our sales into the Indus

178、trial end-use markets are customer focused in the various markets and driven primarily by their capital spending and manufacturing outsourcing demands.We continue to broaden and diversify our customer base in the end-use markets we serve by providing innovative product and service solutions by drawi

179、ng on our core competencies,experience and technical expertise.Net revenues related to military and space,commercial aerospace,and Industrial end-use markets in 2020 and 2019 were as follows:Many of our contracts are firm fixed price contracts subject to termination at the convenience of the custome

180、r(as well as for default).In the event of termination for convenience,the customer generally is required to pay the costs we have incurred and certain other fees through the date of termination,plus a reasonable profit.Larger,long-term government subcontracts may have provisions for milestone paymen

181、ts,progress payments or cash advances for purchase of inventory.Our marketing efforts primarily consist of developing strong,long-term relationships with our customers,which provide the basis for future sales.These close relationships allow us to gain a better insight into each customers business ne

182、eds,identify ways to provide greater value to the customer,and allow us to be designed in early in various products and/or high volume products.SEASONALITYThe timing of our revenues is governed by the purchasing patterns of our customers,and,as a result,we may not generate revenues equally during th

183、e year.However,no material portion of our business is considered to be seasonal.MAJOR CUSTOMERSWe currently generate the majority of our revenues from the aerospace and defense industries.As a result,we have significant revenues from certain customers.The Boeing Company(“Boeing”)and Raytheon Technol

184、ogies Corporation(“Raytheon”)were our largest customers,both generating more than 10 percent of our 2020 net revenues.Revenues from our Table of Contents748%7%45%2020 Net Revenues of$628.9 Million2019 Net Revenues of$721.1 Million27%6%67%$628.9$721.1COMMERCIAL AEROSPACEINDUSTRIALMILITARY&SPACEtop 10

185、 customers,including Boeing and Raytheon were 61%of total net revenues during 2020.Net revenues by major customer for 2020 and 2019 were as follows:Net revenues from our customers,except the U.S.Government,are diversified over a number of different military and space,commercial aerospace,industrial,

186、medical and other products.For additional information on revenues from major customers,see Note 15 to our consolidated financial statements included in Part IV,Item 15(a)of this Form 10-K.RESEARCH AND DEVELOPMENTWe perform concurrent engineering with our customers and product development activities

187、under our self-funded programs,as well as under contracts with others.Concurrent engineering and product development activities are performed for commercial,military and space applications.RAW MATERIALS AND COMPONENTSRaw materials and components used in the manufacturing of our products include alum

188、inum,titanium,steel and carbon fibers,as well as a wide variety of electronic interconnect and circuit card assemblies and components.These raw materials are generally available from a number of suppliers and are generally in adequate supply.However,from time to time,we have experienced increases in

189、 lead times for and limited availability of,aluminum,titanium and certain other raw materials and/or components.Moreover,certain components,supplies and raw materials for our operations are purchased from single source suppliers and occasionally,directed by our customers.In such instances,we strive

190、to develop alternative sources and design modifications to minimize the potential for business interruptions.COMPETITIONThe markets we serve are highly competitive,and our products and services are affected by varying degrees of competition.We compete worldwide with domestic and international compan

191、ies in most markets.These companies may have competitive advantages as a result of greater financial resources,economies of scale and bundled products and services that we do not offer.Additional information related to competition is discussed in Risk Factors contained within Part I,Item 1A of this

192、Form 10-K.Our ability to compete depends principally upon the breadth of our technical capabilities,the quality of our goods and services,competitive pricing,product performance,design and engineering capabilities,new product innovation,the ability to solve specific customer needs,and customer relat

193、ionships.PATENTS AND LICENSESWe have several patents,but we do not believe that our operations are dependent upon any single patent or group of patents.In general,we rely on technical superiority,continual product improvement,exclusive product features,superior lead time,on-time delivery performance

194、,quality,and customer relationships to maintain our competitive advantage.BACKLOG AND REMAINING PERFORMANCE OBLIGATIONSWe define backlog as potential revenue that is based on customer placed purchase orders(“POs”)and long-term agreements(“LTAs”)with firm fixed price and expected delivery dates of 24

195、 months or less.Backlog is subject to delivery delays or program cancellations,which are beyond our control.Backlog is affected by timing differences in the placement of customer Table of Contents82020 Net Revenues by Major CustomerLockheed Martin:5%Boeing:11%Raytheon:21%Northrop:9%Spirit:3%Next Top

196、 Five Customers:12%All Other Customers:39%202011%5%9%21%3%12%39%2019 Net Revenues by Major CustomerLockheed Martin:4%Boeing:17%Raytheon:16%Northrop:4%Spirit:12%Next Top Five Customers:12%All Other Customers:35%201917%4%4%16%12%12%35%orders and tends to be concentrated in several programs to a greate

197、r 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.Backlog was$822.0 milli

198、on at December 31,2020,compared to$910.2 million at December 31,2019.The decrease in backlog was primarily in the commercial aerospace end-use market.We define remaining performance obligations as customer placed POs with firm fixed price and firm delivery dates.The majority of the LTAs do not meet

199、the definition of a contract under Accounting Standards Codification 606(“ASC 606”)and thus,the backlog amount is greater than the remaining performance obligations amount as defined under ASC 606.Similar to backlog,revenue based on remaining performance obligations is subject to delivery delays or

200、program cancellations,which are beyond our control.Remaining performance obligations were$779.7 million at December 31,2020.We anticipate recognizing an estimated 65%or$507.0 million of our remaining performance obligations during 2021.ENVIRONMENTAL MATTERSOur business,operations and facilities are

201、subject to numerous stringent federal,state and local environmental laws and regulations issued by government agencies,including the Environmental Protection Agency(“EPA”).Among other matters,these regulatory authorities impose requirements that regulate the emission,discharge,generation,management,

202、transport and disposal of hazardous and non-hazardous materials,pollutants and contaminants.These regulations govern public and private response actions to hazardous or regulated substances that threaten to release or have been released to the environment,or endanger human health,and they require us

203、 to obtain and maintain licenses and permits in connection with our operations.We may also be required to investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations.Additionally,this extensive regulatory framework imposes signif

204、icant compliance burdens and risks on us.We anticipate that capital expenditures will continue to be required for the foreseeable future to upgrade and maintain our environmental compliance efforts,however,we do not expect such expenditures to be material in 2021 and the foreseeable future.Structura

205、l Systems has been directed by California environmental agencies to investigate and take corrective action for groundwater contamination at its facilities located in Adelanto(a.k.a.,El Mirage)and Monrovia,California.Based on currently available information,we have accrued$1.5 million at December 31,

206、2020 for our estimated liabilities related to these sites.For further information,see Note 14 in the accompanying notes to consolidated financial statements included in Part IV,Item 15(a)of this Form 10-K.In addition,see Risk Factors contained within Part I,Item 1A of this Form 10-K for certain risk

207、s related to environmental matters.HUMAN CAPITALOur employees are critical to our success.We attract,develop,and retain employee talent by offering competitive compensation packages and fostering a culture of care about their well being.As such,we strive to make the safety of our workforce our highe

208、st priority as evidenced by our response to the COVID-19 pandemic.To this end,we focus on protecting the health and safety of our employees and establishing a safe work environment by following the COVID-19 safety recommendations issued by the Centers for Disease Control and Prevention at all of our

209、 facilities.In addition,we endeavor to be a proactive corporate citizen by being responsive and supportive of the needs of our employees to attract qualified talent.We strive to provide opportunities for qualified members of underrepresented communities and women for advancement within our company a

210、nd award scholarships to the children and grandchildren of our employees so that they may develop the skills that will support their entry into the workforce.In addition,in 2018,we implemented an Employee Stock Purchase Plan(“ESPP”)to provide employees the opportunity to share in the ownership of ou

211、r company and benefit from our performance through the purchase of our companys stock.The ESPP allows eligible employees to accumulate contributions through after-tax payroll deductions to purchase shares of our companys stock at a 15%discount and serves as a key retention mechanism for our human ca

212、pital.As of December 31,2020,we employed 2,450 people,of which 445 are subject to collective bargaining agreements expiring in June 2021 and April 2022.We believe our relations with our employees are good.See Risk Factors contained within Part I,Item 1A of this Form 10-K for additional information r

213、egarding certain risks related to our employees.AVAILABLE INFORMATIONGeneral information about us can be obtained from our website address at .Our Annual Reports on Form 10-K,Quarterly Reports on Form 10-Q,Current Reports on Form 8-K,and amendments to those reports,if any,are Table of Contents9avail

214、able free of charge on our website as soon as reasonably practicable after they are filed with or furnished to the SEC.Information included on our website is not incorporated by reference in this Annual Report on Form 10-K.The SEC also maintains a website at www.sec.gov that contains reports,proxy s

215、tatements and other information regarding SEC registrants,including our company.ITEM 1A.RISK FACTORSOur business,financial condition,results of operations and cash flows may be affected by known and unknown risks,uncertainties and other factors.We have summarized below the significant,known material

216、 risks to our business.Additional risk factors not currently known to us or that we currently believe are immaterial may also impair our business,financial condition,results of operations and cash flows.Any of these risks,uncertainties and other factors could cause our future financial results to di

217、ffer materially from recent financial results or from currently anticipated future financial results.The risk factors below should be considered together with the information included elsewhere in this Annual Report on Form 10-K(“Form 10-K”)as well as other required filings by us with the SEC.CAPITA

218、L STRUCTURE RISKSOur indebtedness could limit our financing options,adversely affect our financial condition,and prevent us from fulfilling our debt obligations.In December 2019,we completed the refinancing of a portion of our existing debt by entering into both a new revolving credit facility(“New

219、Revolving Credit Facility”)and a new term loan(“New Term Loan”).These replaced the existing revolving credit facility that was entered into in November 2018(“2018 Revolving Credit Facility”).The New Revolving Credit Facility is a$100.0 million senior secured revolving credit facility that matures on

220、 December 20,2024 replacing the$100.0 million 2018 Revolving Credit Facility that would have matured on November 21,2023.The New 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 int

221、o in November 2018 that matures on November 21,2025(“2018 Term Loan”).The original amounts available under the New Revolving Credit Facility,New Term Loan,and 2018 Term Loan(collectively,the“Credit Facilities”)in aggregate,totaled$480.0 million.In conjunction with the closing of the New Revolving Cr

222、edit Facility and the New Term Loan,we drew down the entire$140.0 million on the New 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 amoun

223、ts being paid down on the 2018 Revolving Credit Facility and 2018 Term Loan,paid the fees related to this transaction,and the remainder used for general corporate expenses.At December 31,2020,we had a total of$320.6 million of outstanding long-term debt under the Credit Facilities.The total long-ter

224、m debt was primarily the result of our acquisitions,LaBarge,Inc.in 2011,Lightning Diversion Systems,LLC(“LDS”)in September 2017,Certified Thermoplastics Co.,LLC(“CTP”)in April 2018,and Nobles in October 2019.Our ability to obtain additional financing or complete a debt refinancing in the future may

225、be limited.Should we not have ready access to capital markets,we may have to undertake alternative financing plans,such as selling assets;reducing or delaying scheduled expansions and/or capital investments;or seeking various other forms of capital.Our ability to complete reasonable alternative fina

226、ncing plans may be affected by circumstances and economic events outside of our control.We cannot ensure that we would be able to refinance our debt or enter into alternative financing plans in adequate amounts on commercially reasonable terms,terms acceptable to us or at all,or that such plans guar

227、antee that we would be able to meet our debt obligations.Our level of debt could:limit our ability to obtain additional financing to fund capital expenditures,investments or acquisitions or other general corporate requirements;require a portion of our cash flows to be dedicated to debt service payme

228、nts instead of other purposes,thereby reducing the amount of cash flows available for working capital,capital expenditures,investments or acquisitions or other general corporate purposes;increase our vulnerability to adverse changes in general economic,industry and competitive conditions;place us at

229、 a disadvantage compared to other,less leveraged competitors;Table of Contents10expose us to the risk of increased borrowing costs and higher interest rates as all of our borrowings under our Credit Facilities bear interest at variable rates,which could further adversely impact our cash flows;limit

230、our flexibility to plan for and react to changes in our business and the industry in which we compete;restrict us from making strategic acquisitions;expose us to risk of unfavorable changes in the global credit markets;andmake it more difficult for us to satisfy our obligations with respect to the C

231、redit Facilities and our other debt.The occurrence of any one of these events could have an adverse effect on our business,financial condition,results of operations and ability to satisfy our obligations in respect of our outstanding debt.We require a considerable amount of cash to run our business.

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

233、 factors that may be beyond our control.In December 2019,we completed the refinancing of a portion of our existing debt by entering into the New Revolving Credit Facility to replace the 2018 Revolving Credit Facility and entered into the New Term Loan.The New Revolving Credit Facility is a$100.0 mil

234、lion 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 New Term Loan is a$140.0 million senior secured term loan that matures on December 20,2024.We also have the 2018 T

235、erm Loan of$240.0 million that is a senior secured term loan that matures on November 21,2025.In conjunction with the closing of the New Revolving Credit Facility and the New Term Loan,we drew down the entire$140.0 million on the New Term Loan and used those proceeds to pay off and close the 2018 Re

236、volving 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,with the remainder used for gener

237、al corporate expenses.The terms of the New Term Loan require that we make installment payments of 1.25%of the initial outstanding principal balance on a quarterly basis,on the last day of each calendar quarter.We were required to make installment payments of 0.25%of the outstanding principal balance

238、 of the 2018 Term Loan amount on a quarterly basis,however,the$56.0 million we paid as part of the December 2019 refinancing paid all the required quarterly installment payments on the 2018 Term Loan until maturity.In addition,if we exceed the annual excess cash flow threshold,we are required to mak

239、e an annual additional principal payment based on the consolidated adjusted leverage ratio.Further,the undrawn portion of the commitment of the New 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.In O

240、ctober 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,with notional value in aggregate,totaling$135.0 million.However,all of these interest rate cap hedges matured in June 2020.At December 31

241、,2020,the outstanding balance on the Credit Facilities was$320.6 million with an average interest rate of 3.59%.Should interest rates increase significantly,our debt service cost will increase.Any inability to generate sufficient cash flow could have a material adverse effect on our financial condit

242、ion or results of operations.While we expect to meet all of our financial obligations,we cannot ensure that our business will generate sufficient cash flow from operations in an amount sufficient to enable us to pay our debt or to fund our other liquidity needs.We require a considerable amount of ca

243、sh to fund our anticipated voluntary principal prepayments on our Credit Facilities.Our ability to continue to reduce the debt outstanding under our Credit Facilities through voluntary principal prepayments will be a contributing factor to our ability to keep our interest rate towards the lower end

244、of the interest rate range as defined in the Credit Facilities.Our ability to make such prepayments will depend upon our ability to generate significant cash in the future.We cannot ensure that our business will generate sufficient cash flow from operations to fund any such prepayments.Table of Cont

245、ents11The covenants in our Credit Facilities impose restrictions that may limit our operating and financial flexibility.We are required to comply with a leverage covenant as defined in the New Revolving Credit Facility agreement.The leverage covenant is defined as Consolidated Funded Indebtedness le

246、ss unrestricted cash and cash equivalents in excess of$5.0 million,divided by consolidated earnings before interest,taxes and depreciation and amortization(“EBITDA”)and other adjustments.At December 31,2020,we were in compliance with the leverage covenant under the Credit Facilities.However,there is

247、 no assurance that we will continue to be in compliance with the leverage covenant in future periods.The Credit Facilities agreements contains a number of significant restrictions and covenants that limit our ability,among other things,to incur additional indebtedness,to create liens,to make certain

248、 payments,investments,to engage in transactions with affiliates,to sell certain assets or enter into mergers.These covenants could materially and adversely affect our ability to finance our future operations or capital needs.Furthermore,they may restrict our ability to expand,pursue our business str

249、ategies and otherwise conduct our business.Our ability to comply with these covenants may be affected by circumstances and events beyond our control,such as prevailing economic conditions and changes in regulations,and we cannot ensure that we will be able to comply with such covenants.These restric

250、tions also limit our ability to obtain future financings to withstand a future downturn in our business or the economy in general.A breach of any covenant in the Credit Facilities could result in a default under the Credit Facilities.A default,if not waived,could result in acceleration of the debt o

251、utstanding under the agreement.A default could permit our lenders to foreclose on any of our assets securing such debt.Even if new financing were available at that time,it may not be on terms or amounts that are acceptable to us or terms as favorable as our current agreements.If our debt is in defau

252、lt for any reason,our business,results of operations and financial condition could be materially and adversely affected.We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is determined.In July 2017,the Financial Conduct Authority,the authority that regu

253、lates London Interbank Offering Rate(“LIBOR”),announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021.The Alternative Reference Rates Committee(“ARRC”)has proposed that the Secured Overnight Financing Rate(“SOFR”)is the rate that represents the best prac

254、tice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR.ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR,and organizations are currently working on industry wide and/or company specific transition from L

255、IBOR to an alternative that will not result in financial market disruptions,significant increases in benchmark rates,or financing costs to borrowers.The consequences of these developments cannot be entirely predicted,but could result in an increase in the cost of our variable rate debt.The typical t

256、rading volume of our common stock may affect an investors ability to sell significant stock holdings in the future without negatively impacting stock price.The level of trading activity may vary daily and typically represents only a small percentage of outstanding shares.As a result,a stockholder wh

257、o sells a significant amount of shares in a short period of time could negatively affect our share price.Our amount of debt may require us to raise additional capital to fund acquisitions.We may sell additional shares of common stock or other equity securities to raise capital in the future,which co

258、uld dilute the value of an investors holdings.BUSINESS AND OPERATIONAL RISKSOur end-use markets are cyclical.We sell our products into aerospace,defense,and industrial end-use markets,which are cyclical and have experienced periodic declines.Our sales are,therefore,unpredictable and may tend to fluc

259、tuate based on a number of factors,including global economic conditions,geopolitical developments and conditions,pandemics,and other developments affecting our end-Table of Contents12use markets and the customers served.Consequently,results of operations in any period should not be considered indica

260、tive of the operating results that may be experienced in any future period.We depend upon a selected base of industries and customers,which subjects us to unique risks which may adversely affect us.We currently generate a majority of our revenues from customers in the aerospace and defense industry.

261、Our business depends,in part,on the level of new military and commercial aircraft orders.As a result,we have significant sales to certain customers.Sales to The Boeing Company(“Boeing”)and Spirit AeroSystems Holdings,Inc.(“Spirit”)comprise a significant portion of our commercial aerospace end-use ma

262、rket.A significant portion of our net sales in our military and space end-use markets are made under subcontracts with original equipment manufacturers(“OEMs”),under their prime contracts with the U.S.Government.We had significant sales to Lockheed Martin Corporation(“Lockheed”),Northrop Grumman Cor

263、poration(“Northrop”),and Raytheon Technologies Corporation(“Raytheon”)in 2020 in our defense technologies end-use market.Our customers may experience delays in the launch of new products,labor strikes,diminished liquidity or credit unavailability,weak demand for their products,or other difficulties

264、in their business.In addition,shifts in government spending priorities have caused and may continue to cause additional uncertainty in the placement of orders.Our revenues from our top ten customers,which represented 61%of our total 2020 net revenues,were diversified over a number of different aeros

265、pace and defense products.Any significant change in production rates by these customers would have a material effect on our results of operations and cash flows.There is no assurance that our current significant customers will continue to buy products from us at current levels,or that we will retain

266、 any or all of our existing customers,or that we will be able to form new relationships with customers upon the loss of one or more of our existing customers.This risk may be further complicated by pricing pressures,competition prevalent in our industry and other factors.A significant reduction in s

267、ales to any of our major customers,the loss of a major customer,or a default of a major customer on accounts receivable could have a material adverse impact on our financial results.Boeing was our largest customer prior to 2020 and remains one of our largest customers in 2020,and the 737 MAX was our

268、 highest revenue platform prior to 2020.Boeing recently received regulatory approval of the 737 MAX and as such,we expect to begin a modest ramp up in our production rates.Revenue growth with our other commercial customers and defense OEMs(also known as prime contractors)has helped to mitigate a sig

269、nificant portion of this risk for the time being.However,the COVID-19 pandemic has dampened civil air travel demand significantly,and if traveler confidence does not return in the near future,it may make it difficult to continue to offset a significant portion of this risk.We generally make sales un

270、der purchase orders and contracts that are subject to cancellation,modification or rescheduling.Changes in the economic environment and the financial condition of the industries we serve could result in customer cancellation of contractual orders or requests for rescheduling.Some of our contracts ha

271、ve specific provisions relating to schedule and performance,and failure to deliver in accordance with such provisions could result in cancellations,modifications,rescheduling and/or penalties,in some cases at the customers convenience and without prior notice.While we have normally recovered our dir

272、ect and indirect costs plus profit,such cancellations,modifications,or rescheduling that cannot be replaced in a timely fashion,could have a material adverse effect on our financial results.A significant portion of our business depends upon U.S.Government defense spending.We derive a significant por

273、tion of our business from customers whose principal sales are to the U.S.Government.Accordingly,the success of our business depends upon government spending generally or for specific departments or agencies in particular.Such spending,among other factors,is subject to the uncertainties of government

274、al appropriations and national defense policies and priorities,constraints of the budgetary process,timing and potential changes in these policies and priorities,and the adoption of new laws or regulations or changes to existing laws or regulations.These and other factors could cause the government

275、and government agencies,or prime contractors that use us as a subcontractor,to reduce their purchases under existing contracts,to exercise their rights to terminate contracts for convenience or to abstain from exercising options to renew contracts,any of which could have a material adverse effect on

276、 our business,financial condition and results of operations.Further,the levels of U.S.Department of Defense(“U.S.DoD”)spending in future periods are difficult to predict and are impacted by numerous factors such as the political environment,U.S.foreign policy,macroeconomic conditions and the ability

277、 of the U.S.Government to enact relevant legislation such as the authorization and appropriations bills.The Budget Control Act(“2011 Act”)established limits on U.S.government discretionary spending,including a reduction of defense Table of Contents13spending between the 2012 and 2021 U.S.Government

278、fiscal years.Accordingly,long-term uncertainty remains with respect to overall levels of defense spending and it is likely that U.S.Government discretionary spending levels will continue to be subject to pressure.Exports of certain of our products are subject to various export control regulations an

279、d authorizations,and we may not be successful in obtaining the necessary U.S.Government approvals and related export licenses for proposed sales to certain foreign customers.We must comply with numerous laws and regulations relating to the export of some of our products before we are permitted to se

280、ll those products outside the United States.Compliance often entails the submission and timely receipt of the necessary export approvals,licenses,or authorizations from the U.S.Government.Over the last several years,the U.S.export licensing environment for munitions has been adversely affected by a

281、number of factors,including,but not limited to,the changing geopolitical environment and heightened tensions with other countries(which shift and evolve over time).Accordingly,we can give no assurance that we will be successful in obtaining,in a timely manner or at all,the approvals,licenses or auth

282、orizations we need to sell our products outside the United States,which may result in the cancellation of orders and significant penalties to our customers if we do not make deliveries and fulfill our contractual commitments.Any significant delay in,or impairment of,our ability to sell products outs

283、ide of the United States could have a material adverse effect on our business,financial condition and results of operations.Contracts with some of our customers,including Federal government contracts,contain provisions which give our customers a variety of rights that are unfavorable to us and the O

284、EMs to whom we provide products and services,including the ability to terminate a contract at any time for convenience.Contracts with some of our customers,including Federal government contracts,contain provisions and are subject to laws and regulations that provide rights and remedies not typically

285、 found in commercial contracts.These provisions may allow our customers to:terminate existing contracts,in whole or in part,for convenience,as well as for default,or if funds for contract performance for any subsequent year become unavailable;terminate existing contracts if we are suspended or debar

286、red from doing business with the federal government or with a governmental agency;prohibit future procurement awards with a particular agency as a result of a finding of an organizational conflict of interest based upon prior related work performed for the agency that would give a contractor an unfa

287、ir advantage over competing contractors;andclaim rights in products and systems produced by us.If the U.S.Government terminates a contract for convenience,the counterparty with whom we have contracted on a subcontract may terminate its contract with us.As a result of any such termination,whether on

288、a direct government contract or subcontract,we may recover only our incurred or committed costs,settlement expenses and profit on work completed prior to the termination.If the U.S.Government terminates a direct contract with us for default,we may not even recover those amounts and instead may be li

289、able for excess costs incurred by the U.S.Government in procuring undelivered items and services from another source.In addition,the U.S.Government is typically required to open all programs to competitive bidding and,therefore,may not automatically renew any of its prime contracts.If one or more of

290、 our customers government prime or subcontracts is terminated or canceled,our failure to replace sales generated from such contracts would result in lower sales and could have an adverse effect on our business,results of operations and financial condition.Further consolidation in the aerospace indus

291、try could adversely affect our business and financial results.The aerospace and defense industry is experiencing significant consolidation,including our customers,competitors and suppliers.Consolidation among our customers may result in delays in the awarding of new contracts and losses of existing

292、business.Consolidation among our competitors may result in larger competitors with greater resources and market share,which could adversely affect our ability to compete successfully.Consolidation among our suppliers may result in fewer sources of supply and increased cost to us.Table of Contents14O

293、ur growth strategy includes evaluating selected acquisitions,which entails certain risks to our business and financial performance.We have historically achieved a portion of our growth through acquisitions and expect to evaluate selected future acquisitions as part of our strategy for growth.Any acq

294、uisition of another business entails risks and it is possible that we may not realize the expected benefits from an acquisition or that an acquisition could adversely affect our existing operations.Acquisitions entail certain risks,including:difficulty in integrating the operations and personnel of

295、the acquired company within our existing operations or in maintaining uniform standards;loss of key employees or customers of the acquired company;the failure to achieve anticipated synergies;unrecorded liabilities of acquired companies that we fail to discover during our due diligence investigation

296、s or that are not subject to indemnification or reimbursement by the seller;and management and other personnel having their time and resources diverted to evaluate,negotiate and integrate acquisitions.We may not be successful in achieving expected operating efficiencies and sustaining or improving o

297、perating expense reductions,and may experience business disruptions associated with restructuring,performance center consolidations,realignment,cost reduction,and other strategic initiatives.In recent years,we have implemented a number of restructuring,realignment,and cost reduction initiatives,incl

298、uding performance center consolidations,organizational realignments,and reductions in our workforce.While we have realized some efficiencies from these actions,we may not realize the benefits of these initiatives to the extent we anticipated.Further,such benefits may be realized later than expected,

299、and the ongoing difficulties in implementing these measures may be greater than anticipated,which could cause us to incur additional costs or result in business disruptions.In addition,if these measures are not successful or sustainable,we may have to undertake additional realignment and cost reduct

300、ion efforts,which could result in significant additional charges.Moreover,if our restructuring and realignment efforts prove ineffective,our ability to achieve our other strategic and business plan goals may be adversely impacted.As we move up the value chain to become a more value added supplier,en

301、hanced design,product development,manufacturing,supply chain project management and other skills will be required.We may encounter difficulties as we execute our growth strategy to move up the value chain to become a more value added supplier of more complex assemblies.Difficulties we may encounter

302、include,but are not limited to,the need for enhanced and expanded product design skills,enhanced ability to control and influence our suppliers,enhanced quality control systems and infrastructure,enhanced large-scale project management skills,and expanded industry certifications.Assuming incremental

303、 project design responsibilities would require us to assume additional risk in developing cost estimates and could expose us to increased risk of losses.There can be no assurance that we will be successful in obtaining the enhanced skills required to move up the value chain or that our customers wil

304、l outsource such functions to us.Risks associated with operating and conducting our business outside the United States could adversely impact us.We have manufacturing facilities in Thailand and Mexico and also derive a portion of our net revenues from direct foreign sales.Further,our customers may d

305、erive portions of their revenues from non-U.S.customers.As a result,we are subject to the risks of conducting and operating our business internationally,including:political instability;economic and geopolitical developments and conditions;pandemics and disasters,natural or otherwise;compliance with

306、a variety of international laws,as well as U.S.laws affecting the activities of U.S.companies conducting business abroad,including,but not limited to,the Foreign Corrupt Practices Act;imposition of taxes,export controls,tariffs,embargoes and other trade restrictions;difficulties repatriating funds o

307、r restrictions on cash transfers;andTable of Contents15potential for new tariffs imposed on imports by the U.S.administration.While the impact of these factors is difficult to predict,we believe any one or more of these factors could have a material adverse effect on our financial results.Customer p

308、ricing pressures could reduce the demand and/or price for our products and services.The markets we serve are highly competitive and price sensitive.We compete worldwide with a number of domestic and international companies that have substantially greater manufacturing,purchasing,marketing and financ

309、ial resources than we do.Many of our customers have the in-house capability to fulfill their manufacturing requirements.Our larger competitors may be able to compete more effectively for very large-scale contracts than we can by providing different or greater capabilities or benefits such as technic

310、al qualifications,past performance on large-scale contracts,geographic presence,price and availability of key professional personnel.If we are unable to successfully compete for new business,our net revenues growth and operating margins may decline.Several of our major customers have completed exten

311、sive cost containment efforts and we expect continued pricing pressures in 2021 and beyond.Competitive pricing pressures may have an adverse effect on our financial condition and operating results.Further,there can be no assurance that competition from existing or potential competitors in other segm

312、ents of our business will not have a material adverse effect on our financial results.If we do not continue to compete effectively and win contracts,our future business,financial condition,results of operations and our ability to meet our financial obligations may be materially compromised.Our produ

313、cts and processes are subject to risk of obsolescence as a result of changes in technology and evolving industry and regulatory standards.The future success of our business depends in large part upon our and our customers ability to maintain and enhance technological capabilities,develop and market

314、manufacturing services that meet changing customer needs and successfully anticipate or respond to technological advances in manufacturing processes on a cost-effective and timely basis,while meeting evolving industry and regulatory standards.To address these risks,we invest in product design and de

315、velopment,and incur related capital expenditures.There can be no guarantee that our product design and development efforts will be successful,or that funds required to be invested in product design and development or incurred as capital expenditures will not increase materially in the future.We may

316、not have the ability to renew facilities leases on terms favorable to us and relocation of operations presents risks due to business interruption.Certain of our manufacturing facilities and offices are leased and have lease terms that expire between 2021 and 2026.The majority of these leases provide

317、 renewal options at the fair market rental rate at the time of renewal,which,if renewed,could be significantly higher than our current rental rates.We may be unable to offset these cost increases by charging more for our products and services.Furthermore,continued economic conditions may continue to

318、 negatively impact and create greater pressure in the commercial real estate market,causing higher incidences of landlord default and/or lender foreclosure of properties,including properties occupied by us.While we maintain certain non-disturbance rights in most cases,it is not certain that such rig

319、hts will in all cases be upheld and our continued right of occupancy in such instances could be potentially jeopardized.An occurrence of any of these events could have a material adverse effect on our financial results.Additionally,if we choose to move any of our operations,those operations may be s

320、ubject to additional relocation costs and associated risks of business interruption.LEGAL,REGULATORY,TAX,AND ACCOUNTING RISKSWe are subject to extensive regulation and audit by the Defense Contract Audit Agency.The accuracy and appropriateness of certain costs and expenses used to substantiate our d

321、irect and indirect costs for the U.S.Government contracts are subject to extensive regulation and audit by the Defense Contract Audit Agency,an arm of the U.S.DoD.Such audits and reviews could result in adjustments to our contract costs and profitability.However,we cannot ensure the outcome of any f

322、uture audits and adjustments may be required to reduce net sales or profits upon completion and final negotiation of audits.If any audit or review were to uncover inaccurate costs or improper activities,we could be subject to penalties and sanctions,including termination of contracts,forfeiture of p

323、rofits,suspension of payments,fines and suspension Table of Contents16or prohibition from conducting future business with the U.S.Government.Any such outcome could have a material adverse effect on our financial results.We are subject to a number of procurement laws and regulations.Our business and

324、our reputation could be adversely affected if we fail to comply with these laws.We must comply with and are affected by laws and regulations relating to the award,administration and performance of U.S.Government contracts.Government contract laws and regulations affect how we do business with our cu

325、stomers and impose certain risks and costs on our business.A violation of specific laws and regulations,by us,our employees,or others working on our behalf,such as a supplier or a venture partner,could harm our reputation and result in the imposition of fines and penalties,the termination of our con

326、tracts,suspension or debarment from bidding on or being awarded contracts,loss of our ability to export products or services and civil or criminal investigations or proceedings.In some instances,these laws and regulations impose terms or rights that are different from those typically found in commer

327、cial transactions.For example,the U.S.Government may terminate any of our customers government contracts and subcontracts either at its convenience or for default based on our performance.Upon termination for convenience of a fixed-price type contract,we normally are entitled to receive the purchase

328、 price for delivered items,reimbursement for allowable costs for work-in-process and an allowance for profit on the contract or adjustment for loss if completion of performance would have resulted in a loss.Our operations are subject to numerous extensive,complex,costly and evolving laws,regulations

329、 and restrictions,including cybersecurity requirements,and failure to comply with these laws,regulations and restrictions could subject us to penalties and sanctions that could harm our business.Prime contracts with our major customers that have contracts with various agencies of the U.S.Government

330、are subject to numerous laws and regulations which affect how we do business with our customers and may impose added costs to our business.As a result,our contracts and operations are subject to numerous,extensive,complex,costly and evolving laws,regulations and restrictions,principally by the U.S.G

331、overnment or their agencies.These laws,regulations and restrictions govern items including,but not limited to,the formation,administration and performance of U.S.Government contracts,disclosure of cost and pricing data,civil penalties for violations of false claims to the U.S.Government for payment,

332、defining reimbursable costs,establishing ethical standards for the procurement process,controlling the import and export of defense articles and services,and cybersecurity requirements.Noncompliance could expose us to liability for penalties,including termination of our contracts and subcontracts,di

333、squalification from bidding on future U.S.Government contracts and subcontracts,suspension or debarment from U.S.Government contracting and various other fines and penalties.Noncompliance found by any one agency could result in fines,penalties,debarment or suspension from receiving additional contracts with all U.S.Government agencies.Given our dependence on U.S.Government business,suspension or d