Q4 2022 Ducommun Inc Earnings Call
Good day, and thank you for standing by and welcome to the fourth quarter 2020 to Ducommun earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
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Please be advised that today's conference is being recorded I would now like to turn the conference over to Ducommun, Vice President Chee, <unk>, Chief Financial Officer, and controller and Treasurer.
Chris Wampler. Please go ahead.
Thank you and welcome to the Commons 2022 fourth quarter Conference call with me today is Steve Oswald Chairman President and CEO.
To discuss certain limitations to any forward looking statements regarding future events projections or performance that we may make during the prepared remarks or the Q&A session that follows.
Certain statements today that are not historical facts, including any statements as to future market conditions.
Of operations and financial projections are forward looking statements under the private Securities Litigation Reform Act of 1995 and are therefore perspective.
These forward looking statements are subject to risks uncertainties and other factors, which could cause actual results to differ materially from the future results expressed or implied by such forward looking statements. Although we believe that the expectations reflected in our forward looking statements are reasonable we can give no assurance that such expectations will prove to have been correct. In addition estimate.
The future operating results are based on the company's current business, which is subject to change particular risks facing ducommun include among other things the cyclicality of our end use markets the impact of COVID-19 on our operations or customers.
The level of U S government defense spending timing of orders from our customers legal and regulatory risks the cost of expansion and acquisition.
Petition economic and geopolitical developments, pandemics and disasters natural or otherwise these risks and others are described in our annual report on Form 10-K filed with the SEC and our forward looking statements are subject to these risks.
Statements made during this call are only as of the time made and we do not intend to update any statements made in this presentation, except if and as required by regulatory authorities.
This call also includes non-GAAP financial measures. Please refer to our filings with the SEC for a reconciliation of the GAAP to non-GAAP measures referenced on this call.
We filed our 2022 annual report on Form 10-K, with the SEC today I would like now like to turn the call over to Steve Oswald for a review of the operating results Steve.
Okay. Thank you, Chris and thanks, everyone for joining us today for our fourth quarter conference call today, and as usual I'll give an update on the current situation of the company.
Afterwards, Chris will review our financials in detail.
I'm happy to report that the comments fourth quarter top line performance was very strong.
The company delivered year over year revenue growth of 14% to $188 3 million as.
As mentioned in the press release.
This shows that our end markets are in very good shape.
But also highlights the comments operational strength, managing the supply chain and workforce.
Turning to the markets. The continued recovery of commercial aerospace was a real bright spot once again in Q4.
The Boeing 737, Max business up 37% year over year and the Airbus <unk> hundred <unk> you also have any significant growth up 72% year over year.
Overall commercial aerospace with Airbus Boeing Gulfstream and others was.
It was up over 60% from Q4 2021.
The commercial aerospace business as well showed year over year revenue growth now for the sixth consecutive quarter and excellent side as the industry and build rates recover.
The company's defense business. After two years of unprecedented growth in 2020, and 2021 was only down slightly in Q4, but once again delivered solid performance over $100 million in revenue.
As we prepare for increasing Doj budgets in SMS in the years ahead.
The company posted solid gross profit of 25% down year over year due partially to several one time factors, which Chris will cover in his remarks.
The team also posted adjusted operating income margin of eight 1%.
Adjusted EBITDA of $24 5 million.
And increased slightly year over year.
Ducommun had adjusted EBITDA margins of 13% in Q4, as well and we anticipate EBITDA to be solid. This year was much stronger numbers in 2020 for once the plant closures and restructuring activities in 2023.
Are behind us.
Quality of earnings is good with the company, reaching GAAP diluted EPS of <unk> 65, a share versus $9.05 a share for Q4 2021.
Adjustments to diluted EPS of <unk> 85 cents a share was comparable diluted.
Diluted EPS of <unk> 88 in the prior year.
Some key drivers for the lower GAAP diluted EPS include restructuring charges.
In the prior year benefit from the significant gain on lease sell back of our Gardena performance centers industrial property.
One area of our business I would like to highlight as we move out of the pandemic related headwinds in the past few years is a significant improvement of our commercial aerospace business within our structural systems segment during 2022.
Commercial aerospace revenue within structures was $165 million of roughly 55% higher.
Then in 2021. In addition, Q4 commercial aerospace revenues were $43 million or 45% higher than a year ago.
<unk> seen very nice growth continuing in this part of the business.
I will also add to this includes very little 787 business, which we see as additional catalyst in 2023 through 2025.
Finally, the backlog at the end of Q4 2022.
So the $325 million or 17% higher than Q4 2021.
Set up for excellent growth now and in the future.
Investors should also keep in mind, our structures business component based.
Not wings or other large capital intensive products.
And we strive as well to produce products for moly industry niche technologies, such as titanium hot form and superplastic forming.
Switching to the company's backlog performance the commercial aerospace backlog increased sequentially for the seventh consecutive quarter from $266 million at the end of Q1 2000 $21 million to $450 million at the end of Q4 2022.
That's an increase of 69%.
And this was led by the 737 Max.
Viasat for Insulet in flight Entertainment, the <unk> hundred 20, <unk> hundred 20 at Gulfstream.
Well, what you would expect after we came out of a very tough 2020 in 2021 for this part of the Commerce business.
Defense backlog remains solid in Q4, as well and ended the quarter at $457 million.
For Offloading from defense primes the work continues.
And we did the did meet it significantly exceeded our target of 45 million in 2022 up from roughly $31 million in 2021.
Slide 23 is a big year as well, we're expecting roughly $90 million with a great deal of that in our circuit card business for Raytheon at sites, such as Appleton, Wisconsin in Tulsa, Oklahoma.
Long term run rate of the defense program programs already commercialized or under development for offline will be over $125 million for the common by 2025 as primes continue to drive cost reduction and challenge the reasoning of keeping certain types of production in house.
The company's cost actions and laid organizational structure will continue to pay dividends too.
Our team delivered another excellent quarter as well and in Q4 of managing the supply chain.
And there's not only shows in our financials, but we also could not be in a better place with our customers regarding our on time delivery and quality.
Corporate costs as a percentage of revenue were also very favorable at four 1% compared to five 3% last year in Q4.
I also want to mention a very successful investor day on December eight.
First my thanks to all those participating both in person and virtually and.
And we very much appreciate the great feedback.
We certainly disclose more of that meeting than in the past, especially around our strong results for our four acquisitions.
And the post pandemic game plan now is in place.
The path ahead for the company and the investors is now clear through 2027.
In addition, Chris will provide further details, but we're off to a very good start in 2023 with the plant consolidation and other restructuring activities along with preparing for the planned real estate sales.
Our revenue guidance in 2023, we see the Companys revenue coming in at the low to mid single digit.
Range.
The commercial aerospace industry recovery of contingent of lead the way in revenue result over the quarters ahead, as we see more and more volume return with defense being solid though impacted by some timing on a few programs, but still having a very good backlog.
The two plant closings will also see some slight reduction in revenue as.
As we prune non strategic and low volume business.
We continue as well to be active and opportunistic with acquisition opportunities.
As in the past and believe this is another catalyst to drive us, possibly higher in the year ahead.
Now, let me provide some additional color on our markets products and programs.
Beginning with our military and space sector, we posted fourth quarter revenue of $108 4 million a slight decrease versus 2021.
Despite being down as mentioned earlier was greater than $100 million and solid showing for the business in Q4.
We saw increases in demand for our missile programs Mir and Patriot along with the <unk>.
The fourth quarter military and space revenue represented 58% of the comments revenue in the period down from 69% last year.
And this trend will continue to reflect more balanced with commercial aerospace, which we like we also ended the fourth quarter with a solid backlog of 457 million, which represents nearly 50% of the company's total backlog.
Within our commercial aerospace operations fourth quarter revenue increase year over year to $68 million drill.
Driven mainly by bill rate increases on large aircraft platforms in flight products Viasat and other commercial aerospace platforms.
The common express's continued improvement expect continuing improvement in the commercial aerospace market overall to gain momentum in 2023, and the future's bright across our product offerings.
Our delivery and quality also continues to stand out as we move ahead.
The backlog within commercial aerospace stands at $450 million at the end of the fourth quarter and.
And it was $117 million higher 35, 35% increase year over year from Q4, 2021.
With that I'll have Chris review, our financial results in detail Chris.
Thank you Steve as a reminder, please see the company's 10-K and Q4 earnings release for further description of information mentioned on today's call.
As Steve discussed our fourth quarter results reflect another quarter of strong performance. The fourth quarter's results. The significant increase once again in commercial aerospace revenue. We remain encouraged by the continued strength in domestic and global travel, which should help support higher long term demand and shipments going forward. There are a multitude of positive themes as we closed out 2022, and combined with actions being taken through a restructuring.
<unk> program, we're looking forward to building on our 2022 performance.
Now turning to our fourth quarter results revenue for the fourth quarter of 2022 was $188 3 million versus $164 8 million for the fourth quarter of 2021 year over year increase reflects $26 $4 million of growth across our commercial aerospace platforms, partially offset by $4 7 million of lower revenue within the military.
<unk> sector.
The year over year increase is directly attributable to <unk>, which we acquired in December 2021, that's our overall growth was a combination of organic and inorganic growth.
<unk> overall backlog at the end of the fourth quarter was approximately $961 million. This reflects recent growth across our commercial aerospace platforms. Our defense backlog was $457 million and we remain positioned for solid continued solid performance as we begin the new year with our defense business.
As a reminder, 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.
We posted total gross profit of $38 6 million for the quarter versus $37 3 million in the prior year period, while gross margins were 25% and 22, 6% in 2022 and 2021, respectively.
Adjusted basis, gross margins were 21% and 23% and 22 2022 and 2021, respectively.
2022, we had we've had adjustments for items, such as climates fire related costs Maxiell inventory step up amortization and cost of sales related restructure expenses as we finished 2022 and head into 2023, we expect these types of adjustments to wind down by mid year.
While gross margins of 20% to 21% plus are good from a from a historical perspective for desio. They continue to lag the levels. We ran out in 2021 the.
The globally recognized challenges around supply chain and labor availability have had some impact I've had some some level of impact on nearly all manufacturing companies. However, as Steve mentioned, we continue to manage through without significant supply chain impacts due to the proactive supply chain efforts executing strategic buys leveraging our performance center flexibility in utilizing <unk>.
Inventory investments.
But we have seen certain performance centers continue to have more of a challenge on various program flow through product mix and profitability two of which of our Monrovia, California and variable Arkansas operations as mentioned during our Investor day dialogue in December 2022.
We anticipate repositioning production from these facilities during the first half of 2023, the consolidations, we will redeploy the production from these performance centers, which have been unable to perform at expected profitability levels and allow us to better utilize our low cost manufacturing facility in Guaymas, Mexico.
In addition to taking out these fixed costs, we continue to aggressively manage our discretionary spending all with the purpose of driving margin expansion.
Ducommun reported operating income for the fourth quarter of $9 7 million or five 1% of revenue compared to $11 8 million or seven 2% of revenue in the prior year period. Adjusted operating income was $15 2 million or eight 1% of revenue this quarter compared to $15 3 million or nine 3% of revenue.
In the comparable prior period last year.
The company reported net income for the fourth quarter of 2022 of $8 1 million or <unk> 65 per diluted share compared to net income of $110 8 million or $9 <unk> per diluted share a year ago.
On an adjusted basis. The company reported net income of $10 6 million or <unk> 85 per diluted share compared to net income of $10 8 million or <unk> 88.
In 2021.
That EBITDA for the fourth quarter was $24 5 million or 13% of revenue compared to $24 4 million or 14, 8% of revenue for the comparable period in 2021.
Now, let me turn to the segment results are.
Our system, our structural systems segment posted revenue of $68 2 million in the fourth quarter of 2022 versus $58 8 million last year. The year over year increase reflects $13 4 million of higher sales across our commercial aerospace applications, partially offset by $4 million of lower revenue within the company's military and space markets.
Structural systems operating income for the quarter was $4 4 million or six 4% of revenue compared to $5 1 million or eight 6% of revenue last year. The year over year operating margin decrease was primarily due to unfavorable product mix and higher restructuring charges, partially offset by favorable manufacturing volume.
Excluding restructure charges and other adjustments in both years. The segment operating margin was 10, 8% in 2022 versus 12, 2%. In 2021. This is a solid operating performance from the structural systems segment.
As a reminder, the results of our Mexico business, which was acquired in Q4 2021 are part of the structures business.
Our electrical electronic systems segment posted revenue of $120 million in the fourth quarter of 2022 versus $106 million in the prior year period.
These results reflect $13 million of higher commercial aerospace revenue, partially offset by $7 million of lower revenue across the company's military and space customers.
Electronic systems operating income for the fourth quarter was $13 million or 10, 8% of revenue versus $15 4 million or 14, 6% of revenue in the prior year period, primarily reflecting unfavorable product mix and higher restructuring charges, partially offset by favorable manufacturing volumes.
Excluding restructuring charges and other adjustments in both years. The segment operating margin was 12, 9% from 2022 versus 15, 8% in 2021 will not at the top end of the range. This segment has operated this was a solid quarter for the electronics segment.
As a reminder, and discussed at our recent Investor Day, we commenced the restructure initiative back in Q2 2022.
The identified restructure actions are being taken to accelerate the achievement of our strategic goals and better position the company for stronger performance in the short and long term.
During Q4, 2022, we incurred $2 9 million in restructuring charges. The majority of these charges were severance and benefit related we expect to incur an additional $12 million to $16 million in restructure expense for facility consolidations and severance and impairment of long lived assets during 2023.
Most of the expected remaining charges relate to the repositioning of a portion of our restructure of initiative that I mentioned earlier the majority of the production being moved is going to our low cost operation in Guaymas, Mexico with the remainder going to other existing performance centers in the United States.
Once we wind down production at Monroeville variable, we anticipate selling the associated land and building at both locations. These initiatives are progressing as expected and when complete with a reason when complete with a restructure we anticipate our efforts will generate annualized savings of $11 million to $13 million.
We have available liquidity of $246 million as of the end of the fourth quarter. The fourth quarter of each year is typically our strongest from a cash flow generation perspective. In 2022 was no exception and we were pleased with the generation of $32 1 million of cash flow from operations this quarter cash.
Cash flow from operations in Q4 of 2021 was $11 7 million.
Our 12 months debt to adjusted EBITDA ratio was 2.2 and is amongst the lowest in the last several years.
We finished 2022 with a full year effective tax rate of 13, 6% versus 25% in 2021 the rate was lower this year as the majority of the tax in 2021 related to our gain on sale and leaseback transaction, which was taxed at a rate in excess of our effective rate excluding such transactions interest.
For the full year 2022 was $11 6 million versus $11 2 million in 2021, while.
While our debt refinancing during 2022 was timely and beneficial the rising interest rate environment drove the increase year over year.
Assuming no pivot on interest rates. During 2022, we expect interest expense to be approximately $18 million in 2023, and when our interest rate hedge becomes effective January one 2024, we anticipate it will provide significant beneficial offset in the longer term.
Just one additional comment for me 2022 was a third consecutive year with an environment of significant market and macro economical change and during the time, we've attempted to continually assess and adjust our priorities as we focus on daily execution to deliver for our customers and all other stakeholders and we look forward to building on the strong foundation, we have established as we move through two.
'twenty three and beyond.
I'll now turn it back over to Steve for closing remarks, Steve.
Okay, Chris Thank you.
Well it certainly was a strong quarter I hope you are pleased in the year in 2022 was our best topline since 2019. So so we feel good about it.
As mentioned earlier in the past is now clear coming out of our Investor meeting in December I think we're off to a very good start in 2023.
What to do and I think it's all going to provide a lot of value.
To shareholders and to the company.
Going forward in.
In addition, all the meetings that I've been having in attending an industry news I've read shows I think there's great opportunities as we all know ahead over the next several years.
The common theme will be ready to capture the upside when.
When available.
My Thanks, as always to our employees and investors for their support as we include again, a very good year and lots of positive things that hit.
So again, thank you for listening I'll now open up for questions.
As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again please.
Please stand by while we compile the Q&A roster.
Our first question comes from the line of Ken Herbert from RBC Capital markets. Your line is open.
Hey, good morning, guys Stephen Chris.
Hey, good morning can join us.
Yeah, Hey, maybe just wanted to first talk about the low to mid single top line expectations for 'twenty, three and I wondered Steve if you can break out a part a little bit by by market It looks like.
Commercial Aero should continue to see some obviously nice growth based on the backlog and build rates what is your assumptions for growth in that market and then and then what are your assumptions for growth in defense.
Well, it's certainly going to grow in commercial Aero Kenyan over a little bit.
As we've talked about.
We're ready to go right. So we're a little bit with spirit and Airbus and Boeing were so sort of I wouldn't say, we're capped but we're absolutely going to see growth in commercial Aero this year, but.
We certainly.
Our churn for them to get to the next level of production. So thats. The first thing I would say the same thing as I've mentioned in my remarks of defense I mean, we have a couple of programs that either through timing.
Order.
The order situation right now we are going to appreciably green defense and probably right around flat too.
To this year, but we're encouraged with our backlog and we think 2024 is going to be.
Better year, but we think this year with a couple of things <unk>, we have a little bit of a program there and Apache and a few others that are just more timing based.
We're going to be above 100, but we're going to be pretty.
They are pretty flattish.
Okay. That's helpful and for defense does that flattish reflect as well it looks like you've got an incremental call it $45 million or so $40 million to $45 million from from Offloading benefits in 'twenty three relative to 'twenty two.
Yes, it is kind of it won't be that high it's going to be we came in I didn't want to I don't want to break down the number there, but we're probably going to get tailwind of say 30 from the from the from the offload maybe 35, because he came in pretty good shape, but again these off loads are.
Also helping with some of the timing on these programs. So it's definitely going to help us we're going to certainly hold serve as they say.
And going into 'twenty, four because you have to understand where we're moving.
Cards for the Patriot it for other things I mean, these have a long long tail as far as getting everything over to Tulsa as I've mentioned earlier some of these programs and Raytheon.
But we continue to make progress and I mentioned in my remarks that.
Prime Prime who are eager for cost reduction and they're certainly challenging and questioning their in house operations. So that is helping us.
If I could just one yes.
Yes, just just I appreciate that just one final question on the on the defense outlook.
Budgets are up sort of 10% in fiscal 'twenty three there's obviously some uncertainty around fiscal 'twenty four but we're seeing higher international spend do you <unk>.
Called out timing on a couple of programs.
Maybe those help at the latter part of the year, but do we see then a sort of a material inflection positively in defense into 'twenty four or how do you think about this longer term because you look flattish sales I can appreciate because it's consistent with what a lot of other companies have talked about but I'm just curious Steve your view on when we start to see the funding catch up.
Or get better reflected in your results.
Yes, we feel much better about 2020 for Ken.
Okay. We have is certainly with.
Once where we're seeing I mean, we.
Even though we don't disclose in our electronic systems defense business has had a great order quarter in Q4.
Which was sequentially I'll, just give you that number actually probably at least over 40% to 45% versus Q3. So our orders are coming in I mean, obviously, there's timing on deliveries is going to be $2023 2024, we feel good about 2024 as far as being able to move forward again.
One other comment to kind of just.
As we've seen everything turning from order to delivery to shipment.
Is pushing out slightly as you've come through the last couple of years. So.
That's why we've got we're looking at this next 12 months and say and sort of hold serve in and then start to see a pickup in general sense of Mercy, a little bit of other suppliers for these brands that are struggling or have other issues and other issues were.
Certainly a little bit of challenge for us because it would be where.
We're pretty much ready to deliver but there's other things happening with some of these programs either hiring.
Hiring challenges that some of the times, where there's other suppliers at a late so we're feeling a little bit of that to this year.
Hoping for a much better.
Activity in next year.
Great Alright, thanks, Steve Thanks, Chris Thanks.
The question I appreciate it.
One moment for our next question.
Our next question will come from the line of Mike Crawford from B Riley Your line is open.
Alright. Thank you I think would you agree that supply chain constraints are easing if so.
How much of an opportunity is there to bring in some working capital to take that back in the cash.
Good question I think that it is easing I think.
It's a little bit of sort of down the middle on commercial Aero because one of the reasons, where we've been winning more as that.
We have titanium sheets, and we have other things that maybe some of the suppliers don't we're able to kind of come in and help so I would say that second half of the year, we see that in a better place easing.
We are certainly interested in getting our turns up.
Okay and then.
Are there any.
Are there specific programs that you are really aiming to be a <unk>.
<unk> business via Offloading from primes or are you just don't want to get into that level of detail on this call.
Don't you know what I mean, just because I want to be sensitive to the customer.
The customers, so, but I would just tell you that especially in the card area.
And I would put that note appleton being over $100 million, which is a 70000 square foot plant, which is that's all cards and thats all people coming and saying Hey, we want you to do it here as well as you know Tulsa now has us on to the next.
Phase and we're expecting really good things and again I mentioned, a little bit about one program just because I mentioned earlier.
Taking something out of a.
As a major operation.
Equipment at those types of things I mean, it's these things need to take timely ship.
So.
That's why we're more bullish in the 2024 period.
Okay. Thank you and then last question might be more for some on but.
What if any change.
Strangers or opportunities are you seeing that.
M&A side or you are looking for more of these niche.
Suppliers.
And protected.
No.
Yes, no I appreciate the question and Thats the thing Thats, why I kind of put it in my remarks as well. So look we're as I mentioned, we are more forthcoming and rightly so at our Investor day in December and hopefully everybody was pleased with those with all four of our operations because we really I think done a nice job at all.
And I would just say that we are active the model works for us It does accelerate our margins doesn't lots of things for us and Thats kind of where we're heading right now Mike at least for the next year or two.
The same kind of profile of acquisitions, you've seen in the past.
Okay, great. Thank you.
Thanks, Mike.
And as a reminder, that star 101 for questions.
One moment for our next question.
Our next question comes from the line of Pete Australian from Chris Your line is open.
Thanks, Steve and Chris Thanks for taking my questions today.
So first of all we've heard a few different things across the supply chain about expected build rates this year, particularly for the 737 Max So just wanted to know what build rate are you currently producing yet on the Max and are you actively planning for production rate increases this year and Thats something thats reflected in your sales guidance or would that represent upside if it were to materialize.
Yeah. So look we are.
We've been down this road of lot whole energy right. So we're taking a <unk> 31, a month at least for this year okay.
We hope that Thats going to go up and certainly we do not have that fully baked in I will tell you that so that as some upside for us I will tell you a bright spot would be the tier one spirit.
Because they are obviously ahead of ahead of the chain saw Boeing as China to wrap up what we're going to feel that in the spirit ahead of time and again, we've been more modest with our bill rates. This year, just because we want to make sure that we're.
We're not.
Too far out over our skis as they say because.
We're concerned about other supplier deliveries are concerned about the amendment of hire enough mechanics and people to get the work done. So I would say if things go if things break right way, we're going to we're going to have a better year.
That's very helpful. Thanks, and then just as a follow up I know you Didnt give specific guidance on mix I was wondering if you could just help calibrate us on margins for the upcoming year.
So just any color you could give on pricing versus cost inflation do you expect that to be a headwind. This year and just in general should we be thinking about seeing margins up this year as sales grow and you're starting to see the benefits of your restructuring or just how are you thinking about that.
Yes.
So yes, I think as you look at this year and you see where our jump off point is yes, we would say and then we sort of signaled this in some of the dialogue at the Investor Day, We do view it as sort of a transition year on margins. I mean were those same pressures are still there. So we don't we don't think there's going to be incremental headwind. We think we're going to just continue to work through it and again hopeful.
Ali we will find our way to some type of improvements as we go through the first half of the year, especially with where we were last year and then the restructuring benefits in the back half of the year as we finish up and Thats, where thats, where it will start to get the more significant lift just on the base business when the growth hits to that that's always going to be another.
Another element to it but as you've sort of heard.
The forecast we have it's not it's not a growth driven year, it's going to be more about what we can do with the business. What we can do with the cost structure and the repositioning to take part of that yes.
Yes, let me just jump in here so look.
As I mentioned is to divest <unk>.
We don't take plant consolidation lately here.
But I will tell you the two factories that were going to close didn't really help us in 2022, okay from a margin perspective I'll leave it I'll leave it there you can interpret that but.
The second point is that once we consolidate those into all of our centers, we take all the expense out.
That's going to I think.
<unk> delivered very nicely in the midterm for farmer margins therapy.
All right very helpful. Thank you.
Thanks for calling in I appreciate it and moment for next question.
One moment for our next question.
And our next question will come from the line of Ken Herbert from RBC capital markets. Your line is open.
Okay.
Hey, Steve I, just wanted to follow up on the on your last comments on the restructuring.
How much of the how much of the work at Monrovia, and Barry though have you already transitioned.
And how much is left to do there and then how much of a working capital headwind is that this year as I'm sure you've built safety stock and inventory and provisions in anticipation of the move.
Yeah. Okay couple thanks, guys I'll, let Chris handle the second part of that let me just handle the first part look we.
We've had I think excellent.
As you can eventually can expect announcements.
Two the teams okay.
Yes.
I'm happy to say that for the most part.
Still have teams working hard in those facilities.
We are actively either engaging with customers as far as I said mentioned earlier pruning some things that really just aren't good for us and for shareholders going into long term. So we're actively doing that.
We're also putting plans in place and as we go forward building buffer.
For to be effective and to have this thing sort of.
Nocuous through customer experience with ducommun. So we are active we pretty much were probably going to be gone through the first quarter is pretty much tied with the group and then we're going to start moving out on on moving things accelerating so but as I mentioned earlier I'm happy how we started off again these things are always tricky.
<unk>.
And we're off to a very good start and we feel we have the plans and we have now.
The right practice for keeping people on the team for all the things you need to do to be effective to move to work in place and climate as well as.
As we mentioned in the I think it was in the Investor call. We we have another building down there now so we're we're in very good shape with our floor space and workforce to take the majority of this work in Mexico, not everything, but a majority of it and then just on the.
Inventory or the investment Ken I would say modest investment here. The first half of the year, Steve mentioned, a little bit of safety stock I mean, there is an element of that but we do view that sort of being first half of the year transitions are happening working it down and so by the time you get to the end of the year.
It's nominal and sort of what the full year view would look like but there could be a little bit of investment here in the first half of the year.
Okay helpful and if I could one other quick follow up.
Airbus today announced some some aggressive or planned aggressive rate moves on their wide body portfolio with maybe.
The rate increases on the <unk> hundred 20 family pushed out to the right a bit.
Can you level set us on where you are with Airbus, maybe as a maybe as a percent of your aerospace business and opportunities with their supply chain disruption and issues to either take share and how much would you participate in the accelerated production on their on their wide body aircraft for $333 50.
Can I, just say that I know what I only briefly.
Just briefly some of the thanks, So first of all just as a highlight.
We're in fairly good shape on the <unk> hundred <unk>. So.
We're not that optimistic about a couple of years ago, so to see that moving in the right direction and that's something that we actually were players on.
I won't get into exactly what the percentages, but we're going to that's going to benefit as the <unk> hundred 30, <unk>. We're in the middle of trying and and as you know these things take time to to get a position on the <unk> hundred 50, which is something that we are engaged and actively so more to come there we like to see those increases I think the the.
The year over year number that I said about the <unk> hundred 20, and Airbus was pretty dramatic we think that.
That's going to continue.
As I mentioned in my Investor Day back in December you have to always be a little bit careful with Airbus. They are a lot of analysis of feed and but they need the parts to produce and we're pretty much even though it might be a slightly off now we're pretty much been 100, 100% on time at Airbus for over three years.
Maybe one or two misses here or there. So we're in great shape with Airbus that really.
Ready to go.
Really on what the disclosure is the amount of business, but it continues to grow.
And we're hopeful and we feel good that if these if they're running hard we're going to feel share gain.
And that's what we want.
Great. Thanks, Steve.
Thank you Kent.
Thank you.
And I'm not showing any further questions into Q.
At this time, so pass it back to Steve Oswald for any closing remarks.
Okay. Thank you and thank you again, everyone for joining us it's always a very good very good.
Q&A as well as hopefully.
He felt the script was helpful.
We have a lot going on in the company.
We're going to I think if things go our way, we're going to hopefully do a little bit better than our revenue guidance, but we always try to be thoughtful and we want to be as transparent as we can on these calls and help investors and help our our analyst partners. So while we feel good.
Very good about 2024.
We're closing these factories for a reason, it's all going to benefit for the mid to long term, especially in the margin area and other things. We're excited about our Atlantis operation go onto the next level, which is a big part of our future.
Active with acquisitions in.
We're feeling good so again, we appreciate your support and thank you again for listening.
This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
Okay.
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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