Good day, ladies and gentlemen, and welcome to the Q2 2014 Ducommun Earnings Call. My name is Sarah and I’ll be your operator for today. At this time, all participants are in listen-only mode. And later we will conduct a question-and-answer session. (Operator Instructions) I would like to turn the conference over to your host for today, Mr. Chris Witty.

Thank you, and welcome to Ducommun’s second quarter conference call. With me today, is Tony Reardon, Chairman and CEO; and Joe Bellino, Vice President, CFO and Treasurer. I would now like to provide a brief Safe Harbor statement. This conference call may include forward-looking statements that represent the Company’s expectations and beliefs concerning future events that involve risks and uncertainties that may cause the Company’s actual performance to be materially different from the performance indicated or implied by such statements. All statements other than statements of historical facts included in this conference call are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company’s expectations are disclosed in this conference call and in the Company’s Annual Report and Form 10-K for the fiscal year ended December 31, 2013. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements. Unless otherwise required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this conference call. I’d like to turn it over now to Tony Reardon for a review of the operating results. Tony?

Thank you, Chris, and thank you, everyone, for joining us today. I’ll begin by providing an overview of the quarter, including some market color, after which I’ll turn the call over to Joe Bellino to go over our financial results in detail. The second quarter was characterized by continued strong commercial aerospace shipments. Solid cash flow and higher margins driven by improved operating performance and aided by some non-recurring items, which Joe will review in a moment. In addition, we’ve begun to see some resilience in our non-A&D end markets where our strategic efforts to engage with customers and expand the scope of our business has resulted in higher backlog and an increase in sales. We focused on implementing a growth strategy for these segments during the past few quarters and are encouraged by the gains that are being made. Overall, we are pleased with the quarter’s financial results, including our 8.9% operating margins and earning $0.59 per diluted share. We ended June with a backlog of $623 million, and once again paid down $7.5 million of debt. Now let me provide some color on our end markets, products and programs. Starting with the military and space, revenue was down approximately 8% year-over-year, primarily due to lower helicopter shipments and declines in the missile systems and defense technologies. While the company continues to support a wide variety of key programs and platforms, fluctuations in the quarterly performance will remain with the wind down of the overseas deployment operations and overall budget consideration. In addition, certain helicopter deliveries were pushed into Q3 from Q2. That said, demand is playing out as expected and is in line with our backlog. We expect to see lower overall revenue from this market through the remainder of the year with electronic upgrades and certain key…

Thank you, Tony, and good day, everyone. After the market closed today, we reported results for the second quarter of 2014, which reflected the continuation of improved financial results this year. And looking at a review of second quarter results, net sales for this quarter were approximately $187 million, roughly 3% down from last year’s $192 million. The revenue decline year-over-year was primarily driven by the 8% decrease in military and space sales, but they were partially offset by a 10% increase in our non-aerospace and defense markets. Ducommun’s net income for the second quarter of 2014 increased nearly 18% to $6.5 million, or $0.59 per diluted share, compared to $5.5 million, or $0.51 per diluted share, for the second quarter last year. As further detailed in the earnings release, pre-tax income expanded 26% to $9.6 million for the quarter, from $7.6 million in last year’s second quarter. The second quarter net income this year was negatively impacted by a 32.5% effective tax rate which reflected no federal R&D tax credits, while the second quarter of 2013 included $0.5 million of such credits, resulting in an effective tax rate of 27.6%. We do expect for the second half of the year an approximate 31% tax rate in 2014. We’re pleased to report 10% higher operating income of nearly $17 million, up $2 million from the $15 million last year. The improvement was due to a variety of factors including a favorable product mix, better operating performance in a $0.8 million workers’ compensation audit refund related to prior years. Our gross margin expanded 60 basis points to 20.1% of revenue and SG&A expenses fell 40 basis points to a 11.2% of revenue, resulting in an overall 100 basis points increase in our operating margin to 8.9%. EBITDA expanded to $24 million…

Thank you, Joe. Before opening the call to questions, I’d just like to again emphasize how proud we are of everything Ducommun has accomplished so far this year. We’ve re-energized our non-A&D business, won new contracts within our expansive commercial aerospace operations, driven margin growth and continue to execute on manufacturing improvement initiatives to increase cash flow and return on equity. We are encouraged by the steady rebound in our industrial end markets, demonstrating both the nature of the overall economic conditions as well as the strategic investments we’ve made to grow this business. Similarly our commercial aerospace expansion has many new wins on important programs, illustrating our drive to be a leader in the industry and our strong relationship with our key OEMs. While the military and defense markets remain unpredictable, it’s one where we have long-standing positions on key platforms and programs, such that as budget priorities are defined, we should win our fare share of technology driven upgrades and awards. Even here there is room to penetrate new platforms and selectively grow the business. We remain focused on improving bottom line results, our balance sheet and our growth trajectory, which all go hand in hand with building and maintain a solid reputation in the marketplace. We owe this to our customers, our employees, and most of all, to our shareholders. With the Sarah, I will turn – or open up the call for questions.

Great. (Operator Instructions) Our fist questions comes from Patrick McCarthy from FBR Capital Markets. Patrick J. McCarthy – FBR Capital Markets: Hey good afternoon, guys and thank you very much for taking my question.

Good afternoon, Patrick. Patrick J. McCarthy – FBR Capital Markets: So my first question – yes, my first question is on the DAS margins. You highlighted that you benefited from a pretty decent mix shift in the quarter. I'm just wondering how transitory that is over the next couple of quarters. Is the margin we saw this quarter relatively sustainable?

16.5%: Patrick J. McCarthy – FBR Capital Markets: Okay, perfect, perfect. And then the…

Patrick, let me add a little something to that. I think that one of the things that, as you look forward, you just have to remember that some of these key military programs, which are higher margin-driven programs in the third quarter and fourth quarter will slow down quite a bit. Patrick J. McCarthy – FBR Capital Markets: Okay, fair enough. And then on the non-A&D business, I think in the past, before the strategy shift couple of quarters ago, it looked like the backlog in that business has turned about 50% into the next quarter to revenue. Is that still a fairly decent proxy, given the change in strategy, has anything changed there?

No, that’s still a pretty good proxy. The non-A&D customers, generally, let’s say don’t manage the inventory as effectively as the aerospace and military customers. And so, that 50% ratio I talked about is about the same. We’re really pleased to see our backlogs from a year-ago, increase about 10% and they’ve been trending up in the last couple of quarters.

We turn at about 90 days to 120 days, generally. Patrick J. McCarthy – FBR Capital Markets: Okay, great, great, great. Thanks for taking my questions.

Alright, great. And our next question comes from Ken Herbert from Canaccord. Kenneth Herbert – Canaccord Genuity: Hi, good afternoon. Nice quarter.

Thanks, Ken.

Thanks, Ken. Kenneth Herbert – Canaccord Genuity: First, I just wanted to ask on the DLT segment, again a similar question. I mean, really nice step up sequentially in the operating profit from the first to second quarter. Joe, is this a run rate now at sort of 10% at least from an operating profit standpoint, we should expect to the second half of the year or how should we think about that for the second half?

Well, the GAAP operating income of 10% and it compares to 8.6% for the first six months. As I talked about, having this mix shift and we’re selling less of the higher margin defense electronics products. So, although we’ve been very diligent in managing our cost and improving our mix of business in the non-A&D business and we’ve added some significant commercial aerospace business, this overall shift should result in somewhere between the 8.6% and the 10% for the balance of the year. Kenneth Herbert – Canaccord Genuity: Okay. Okay. That’s helpful. And I wanted to ask you about that. I know you’ve done a lot in terms of specifically on the commercial aerospace side within the electronics business that really came through this quarter. I know you’ve talked publicly about driving a better mix through, maybe, dropping some customers. Can you just talk specifically within the electronics segment, where you are in terms of your commercial aerospace push? I mean, some great numbers this quarter. Are you early on in the process? Is there more we should expect or how would you characterize that in terms of where you are in that process?

Ken, I think we’re actually in the beginning of it. I think we’re seeing – we got good traction. We had nice pickup quarter-over-quarter and year-over-year on the commercial side. We’ve got more opportunities in front of us. I will tell you that between the commercial aerospace and the pickups in a company such as John Deere, we’re really churning through. So we’ve got a lot of work in front of us, a lot of new programs that we have in place that we’re working through. So we may see a flattening before we step back up, but I think there’s a lot more business there for us to garner. So we’re seeing a nice pickup there. And then, we are working with customers that maybe looking for much lower cost than the value-added that we think we’re bringing. And so we’re changing out some of those lower margin customers and working with them to find better solutions for them on new product lines. And I think that some of this is attributed to that effort as well, but I think we’re doing it in the sense that we really want to help the customers get to the level where they understand the value. We’re bringing and changing in the marketplace and they are just looking for cost and maybe we’re not the right guys. Kenneth Herbert – Canaccord Genuity: Okay, great, that’s helpful. And if I could then just, you’re taking on a lot of new customers, obviously, within the electronics segment. You’ve had a lot of new wins, like you highlighted on the Boeing 737 within aerostructures. Can you just give us comfort that either from a contracting or execution standpoint, as you take on these new projects, that maybe the risk profile relative to some earlier issues is better today or is there something we should be concerned about as you take on this new business?

That’s a great question, Ken. I think that we’ve changed the business. I think that one of the things that Joel Benkie and his team has done is realigned the businesses. So there’s been a major change in our new product introduction. That’s not to say that we don’t have more work to do there. Also, we got a much more focused effort on our supply chain management, both of which have been attributable to some of the issues that we faced in the past on our new product development, but that’s not to say that we don’t have more work to do, but I think we’re comfortable that we have a lot of work to do and really trying to pace ourselves with the customers, so that we don’t over-promise and under-deliver. So I think that the program management situation – we talked earlier and I know we’ve had some previous with regards to what we’re doing in our area of operational excellence, but really putting together the office of operational excellence and combining our supply chain management with our operational excellence, with our product development, our program management, new product development as well as our engineering team and product integrity has really proven, so that we come through on our full circle of execution and are really working the new programs hard. So we’ve got a lot of new things going on. We are very focused on the program management side of the business and I think we’re making real nice strides there. Kenneth Herbert – Canaccord Genuity: Great. Thank you very much.

Thank you.

All right, great. Our next question comes from Mark Jordan from Noble Financial. Mark Conrad Jordan – Noble Financial Capital Markets: Good afternoon, gentlemen.

Hi, Mark. Mark Conrad Jordan – Noble Financial Capital Markets: Question relative to depreciation and amortization by segment and I’m looking at this sequentially. If you look at DAS, you were up $1.1 million sequentially after it’d been in previous quarters pretty flat, at about $2.5 million per quarter. And then at DLT, sequentially, D&A was down $1 million to $4 million from $5 million. Net, net, obviously, D&A is roughly the same quarter over quarter, but there’s some significant shifts. Is there any unique things that happened in the quarter to cause those shifts and what’s our run rate moving forward?

Mark, I think where we are in the quarter is pretty much the run rate, with a nominal increase, because we continue to make investments equal to our depreciation every year. While we saw $1 million, $1.1 million in the DAS sector was – they’re a function of we began to amortize tooling, which is associated with new contract awards on the commercial side. And so, as we build out those projects and start shifting product, which we did in the second quarter, we’re able to amortize that tooling. On the DLT side, we have some legacy assets, where the depreciation dropped off. Primarily, it’s not so much the amortization component of that relates to the purchase price, but we’ve been very modest and as you know it’s not a very highly capital intensive. And so, after the normal depreciation timelines, those assets are still in play and useful and yet we fully depreciated some. Mark Conrad Jordan – Noble Financial Capital Markets: Thank you. I looked at it and it just looked odd. Thank you for the explanation. Secondly, we’re now getting within striking distance, I guess, of July 2015, when you would have the opportunity, if you so chose, to refinance your debt. Obviously, that the 9.75% debt is expensive. Do you have an estimate of a range of annualized interest savings, if you were to look, at right now, in the second quarter, you’re at $28 million annualized interest expense. If you were to refinance your overall debt structure in July of 2015, what range of potential interest savings you might be able to realize on an annual basis?

Given that the chairman of the Federal Reserve has indicated intermediate-term, short and intermediate-term rates will stay modest for another 12 months to 15 months. We believe that we can refinance our $317 million, which will be down by another $15 million if we keep paying them down. We believe that we can save $8 million to $10 million of interest a year and our all-in rate would be closer to 5% versus 8% today. Mark Conrad Jordan – Noble Financial Capital Markets: Thank you very much.

Thanks Mark.

Alright, great. (Operator Instructions) And our next question comes from J.B. Groh from D.A. Davidson. J.B. Groh – D.A. Davidson: Hey, guys.

Hey, J.B. J.B. Groh – D.A. Davidson: You’ve obviously done a great job winning these new Boeing 737 deals. Can you sort of give us a frame of reference on that? At the current rates, does that new content make up for what you are losing on C-17?

Not exactly, J.B., but it is a good start. Right? So, as you look across the C-17, that was running at a rate in the $25 million a year range, something of that nature the last couple of years. And, although, these will add at the highest run rates for the Boeing 737, give us double-digit growth at one point, make up that avenue. But we do have other programs that we’re working on to fill that gap, both on the commercial side as well as the military. J.B. Groh – D.A. Davidson: Yes. And then, Joe, maybe you could talk about the cash deployment strategy. Obviously, paying down the debts at a pretty good clip here. Any other thoughts on other cash deployment portfolio of acquisition?

Our strategy and the commitment we made to the credit agencies and to ourselves is to continue to pay down debt, so we can get that leverage, J.B., at 2.75 to 3. We’re really pleased to see we’ve had some acceleration this quarter down to 3.2 net debt-to-EBITDA, which was driven by a combination of EBIT is going north and the debt is going south. We feel that it’ll give us really good leverage if we’re 2.75 to 3 when we refinance ours. And as I didn’t explain before, but the trigger is our $200 million high yield bonds are first callable at an affordable price in July 15 of 2015 and that’s really been our trigger point to refinance. So, we have another four quarters to go. But our cash deployment strategy, we pay that down, we get this financing targeted at 5% that we can with a variety of financial instruments. And then after that, then we can go back and look at some strategic initiatives of growing the business possibly by some modest acquisitions that we can fill some gaps. J.B. Groh – D.A. Davidson: Okay. Thank you. Great job on the markets, guys. Thank you.

Thank you.

Thank you.

Great. (Operator Instructions) Our next question comes from Mike Crawford from B. Riley and Company. Mike Crawford – B. Riley & Co.: Thank you. I know you were recently at the Farm Bureau show and I am wondering if you could share what kind of conversations you had with partners at the show and how they feel about performance metrics, like on-time delivery and quality metrics versus what you’re targeting? Thank you.

Well, I think they were targeting the same thing, Mike, as the customers are requesting with regards to on-time delivery and quality. But I think we had real good meetings at the show. We met with every one of our major customers. We met with most of our prospective customers. We met with potential partners for growth. We also had some pretty in-depth operational reviews with a few of our customers. But as we look at where the marketplace is, I think that everybody is bullish on the commercial side of the business and I think there’s still some opportunities on the military side of business as well. However, when you look at the expectations with regards to the customers, I think we’re driving the same expectations that they have. If you look at United Technologies, for example, we’ve got – we’re a Gold supplier on three of our divisions and driving for full Ducommun Gold supplier. We want to be Gold suppliers across all of our customers and that means improving our on-time delivery and our quality. Year-to-date, we’ve driven down our past due deliveries to our customers significantly and we’re in line with our targets on that aspect of our business. So we’ve really improved our operating performance across the board as well as driving the working capital. So when you look at the things that we talk to our investors about in terms of how we are going to manage the business, as we started this process, we said we’re going to drive our debt down and we’ve done that. We are going to improve our working capital and we’ve done that. We are going to grow our business and we’re in the process of doing that. And the aspects of growing the business are driven primarily around our ability to improve our on-time delivery, offer really solid solutions to customer problems, and put ourselves in position where we deliver 100% quality every time we ship product out the door. Mike Crawford – B. Riley & Co.: Okay, thanks, Tony. And then, just further to that point. Clearly you’re growing the commercial aerospace business with more content and in higher build rates by the industry itself. The non-A&D stuff looks good as well. Now on the military and space, we do know that this backlog is down some, nearly $50 million-ish year-over-year. And I think, just given the slowdown in military spending to pull out from overseas, et cetera, that that business has to be down next year. But given the positive things happening in the other aspects of Ducommun’s business, do you think that it would be possible to grow the overall business in 2015 versus 2014 given the headwinds in the military and space side?

We think we can. Mike, we think there’s opportunity. I think it’s going to be a very small growth, but I think that you’ll see somewhere in the 1% to 2%. We think that’s manageable given the things that are falling out. Now, with the C-17 down, that’s a big program for us Apache, bulling as robust sales on the CH-47 in the Apache, but it is not really translating to large sales for us, because of the pull back from the war. So you get a combination there, but we think the military helicopter business as solid there are couple of missile defense systems that we are working with Raytheon that if they win, we should be in good shape on some new business there. We do have some nice opportunities with Raytheon and the military side to kind of shore up a couple of programs there. With there are some headwinds with regards to some of the programs that around, but we really on some really nice platforms. I think that sustainability of those platforms going forward is very good. Albeit, they may be at lower rate. So our goal is to continue to drive the growth platforms that we see and input ourselves in the position to pick up 1% or 2% next year, but we are still in the process of evaluating them right now, be quite frank with you. Mike Crawford – B. Riley & Co.: Okay, thank you. And then final question, just relates to what you are talking about with Raytheon so, you said you are -- if they win some missile defense systems work now, do you mean if they win the protest of the awards that were already issued but under protest is that what you mean?

They have a couple of programs that they are working on right now that, I don’t think they have announced. But some of them are the ones under protest as well, yes. Mike Crawford – B. Riley & Co.: Okay, great. Thank you very much.

All right, great. Looks like there no further questions in queue. So, I’ll turn the call back over to Mr. Tony Reardon for closing remarks.

Okay. Thank you, Sarah, and thank you, everyone for joining us today. And we look forward to talk until next quarter. So thank you for join us. Bye now.

Great. This does conclude today’s conference. Thanks for your participation. You can disconnect and have a wonderful day.