Anthony Reardon – Chairman and CEO Joseph Bellino – Vice President, CFO and Treasurer Chris Witty – Investor Relations.

Patrick McCarthy - FBR Capital Markets Edward Marshall - Sidoti & Company Mark Jordan - Noble Financial Ken Herbert – Canaccord Genuity Michael Crawford – B. Riley & Co. Gregory Macosko – Montrose Advisors.

Good day, ladies and gentlemen, and welcome to the First Quarter 2014 Ducommun Earnings Conference Call. My name is Britney and I'll be the operator for today. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions).

As a reminder, this conference is being recorded for replay purposes. I would like to turn the presentation over to your host for today, Chris Witty. Please proceed, sir..

Thank you, and welcome to Ducommun's First 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 on our first earnings call for fiscal 2014. 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.

But first let me set the stage for what we are doing to improve our company. We spent the last 12 months refocusing Ducommun into a strategic business unit, aligning internal capabilities and synergies to sharpen our focus on increased profitability and delivering innovative solutions to our customers.

At the same time, we’ve rebranded the company as one Ducommun and have been going to the market as an integrated multifaceted organization. This allows us to take advantage of our strong product portfolio and leverage our diverse customer base. That said, there are several challenges in the defense market that our entire industry is facing.

So we’ve been working hard to focus our efforts on opportunities presented as a result of the military realignment, particularly in modifications, foreign military sales and the expanded use of electronics.

In addition, we continue to make inroads in the commercial aerospace industry and the strategy we’ve deployed in our non-aerospace sector is starting to show results as well. We have more work to do, but we’ve established a very solid foundation. Now for Q1.

We believe that our first quarter demonstrated the breath of our product portfolio as well as sound operating execution, with our results illustrating the progress we’ve made by expanding our position as an innovative solutions provider.

Revenue rose year-over-year on continued strength across our commercial aerospace offerings and we expanded operating margins to 7. 8%. This, along with lower interest expense, helped drive help drive earnings up $0.42 per diluted share. During the quarter we again paid down $7.5 million of debt, continuing our focus on deleveraging the balance sheet.

Overall we believe it was a very solid quarter and a good start to 2014. Now let me provide some color on our end markets, products and programs.

Starting with the military and space market, revenue was down slightly year-over-year as higher AeroStructure shipments both for fixed wing aircrafts and helicopters were offset by declines in missile systems and defense technologies.

Given the war winding down and the changing requirements across the defense department, we believe that there will be fluctuations in this market until the budget is resolved.

As a result, we continue to see overall revenue across our defense and space markets as being flat to down during 2014, reflecting solid demands for upgrades and additional electronic content being offset by sliding in order schedules and budget cutbacks.

The Black Hawk, which is still our largest military platform, will remain at lower run rates for the foreseeable future as we did discuss in the last quarter.

However, our main challenge in the military market is the replacement of revenue beginning in 2015 from the terminated C-17 program as well as softer demand for avionics and electronics controls products.

We recorded just under $8 million in revenue on the C-17 in the first quarter and anticipate that the revenue on this program will decrease during the year with final shipments to take place in the fourth quarter of 2014.

However, we are actively focused on business development strategy within the commercial aerospace and the non-A&D markets to replace lower demand for military and space products going forward. I’m encouraged by a number of opportunities already in progress.

Moving to the non-A&D markets where our biggest customers are industrial and energy, sales rose 2% in the quarter versus 2013, a welcome development and the first year-over-year increase since 2011.

Our backlog here grew $11 million sequentially from the end of 2013 to just over $65 million, which is also the best level it’s been at in six quarters as our marketing efforts are beginning to gain traction.

We are encouraged by the demand for our capabilities in targeted niche sectors and continue to refine our strategic approach to grow our presence in these areas. We do anticipate slow, steady improvement here as the year unfolds and are actively engaged in a number of opportunities with new and exciting customers alike.

In our commercial aerospace business, we saw a steady growth here in line with robust aircraft build rates as expected. Our overall commercial aerospace business rose 10% year-over-year, driven by a nice pick-up in such programs as the Boeing 787 and increased business in the Airbus programs.

We also saw growth in the regional jet market and expect this to continue for the next couple of quarters. Our commercial aerospace backlog remains near record levels, and just as importantly we’re bidding on a number of new opportunities and winning additional content on some very important platforms such as the Boeing 737 MAX program.

While these awards have not yet been announced, they are key wins for us. For example we were recently selected as the sole source supplier for a titanium assembly on this next generation commercial aerospace program. Production on new contracts is expected to begin later this year and continue through 2024.

This expands our business space with Boeing and with Spirit in the process. Such wins we believe illustrate the power of our product portfolio, our technology and our ability to partner with leading aircraft manufacturers to bring advanced fuel efficient solutions to the market.

We look forward to strengthening our relationship via opportunities such as the MAX and we’ll be able to provide more color on these wins as we move forward in the near future. We’re also excited about a pick-up in revenue with Airbus and the additional growth opportunities we see going forward with this key OEM.

We continue to expand our work here, which now includes the A320 series, A350, A380 and the A330 and the A340 platforms. And our teams are working on a number of new business development initiatives which we believe will significantly enhance our Airbus relationship in the quarters to come.

We think we’re very close on some key A340 awards and we hope to be able to announce these details in the near future. Overall the quarter showed our strengths of our capabilities, our team and our market strategies designed to grow both margins and revenue and transform Ducommun into a leaner more responsive and less cyclical business going forward.

With that I would like to now turn the call to Joe Bellino to review our financial details.

Joe?.

Thanks Tony and good day everyone. After the market closed today we reported our results for the first quarter of 2014. Overall our sales of nearly $180 million were 2% higher than the $176 million in last year’s first quarter.

Revenue growth year-over-year was primarily attributable to our continued growth in our commercial aerospace sector, but also modest gains in both our military products as well as non-aerospace defense products, partially offset by a 9% decrease in our defense technologies revenues.

Ducommun’s net income for the first quarter of 2014 increased 25% to $4.6 million or $0.42 per diluted share compared with net income of $3.7 million or $.35 per diluted share for the first quarter of 2013.

As further detailed in our earnings release, our pretax income expanded to $6.9 million for the quarter, from $2.5 million in the first quarter of 2013. This year’s first quarter net income was negatively impacted by a 32% tax rate that did not include any state or federal research and development tax credits.

In last year’s first quarter it reflected -- it was impacted favorably by a $2.5 million R&D income tax credit, resulting in an effective tax benefit last year of nearly 50%. We’re pleased to report higher operating income of nearly $14 million in the first quarter or 2014 compared to $10.3 million in last year’s first quarter.

Contributors included favorable year-over-year trends as sales increased, gross margins expanded 80 points to 19.5 % gross margin as a percentage of revenue. And Selling, General and Administrative expenses decreased 110 basis points to 11.7% of revenue, representing a solid operating income increase of 190 basis points to 7.8% of revenues.

EBITDA expanded to $21.4 million or 11.9% of revenues in the first quarter of 2014 from $17.3 million or 9.9% of revenues for the comparable period last year. Let me now look at results by business segments, first starting with Ducommun AeroStructures, DAS.

In reviewing the results by business segment, DAS reported 12.3% increase in net sales from nearly $82 million for this year’s first quarter compared to $73 million in last year’s first quarter.

DAS’s sales increased in both commercial aerospace and military aircraft end users, buoyed by a 12% and 13% increases year-over-year respectively in those two product areas.

In the commercial aerospace sector, we benefited from increased sales that Tony mentioned to Airbus and the Boeing 787 aircraft program and we saw solid growth in defense products as well.

The DAS segment operating income benefited from the 12% sales increase and in improved product mix, resulting in operating income expanding to $10.3 million or 12.5% of revenues in this year’s first quarter compared to $6.6 million or 9.1% of revenues in the comparable period last year.

EBITDA expanded 320 basis points to $12.7 million for the quarter or 15.5% of revenues compared to $9 million or 12.3% of revenues for the comparable period last year.

Next in reviewing our Ducommun and LaBarge Technologies or DLT segment, net sales for the first quarter were $98 million, compares to about $103 million for the first quarter last year.

The year-over-year decline reflects a 9% decrease in military and space revenues, reflecting softer sales of avionics and electronic control products, which was partially offset by a 2% increase in sales for our non-Aerospace and Defense products.

We attribute the decline in defense technology sales to timing differences and softer backlogs and we were pleased to see the non-A&D revenue had stabilized and our marketing development efforts are beginning to show positive results.

DLT’s operating income for the first quarter of 2014 was $7 million or 7.2% of revenues compared to $7.9 million or 7.7% of revenues in the first quarter of 2013. Reported EBITDA was $12.1 million in the quarter or 12.3% of revenues compared to $12.6 million or 12.2% of revenues in the comparable period last year.

The lower operating income was primarily impacted by the lower revenues. Corporate General and Administrative Expenses, CG&A. CG&A expenses for the first quarter were $3.3 million or 1.8% of revenues, down from $4.2 million or 2.4% of revenues in the prior period. We attribute this to solid cost management.

In addition, the first quarter of last year included our debt repricing fees of $0.5 million, non-recurring professional expenses, as well as slightly higher benefit related costs. Our overall backlog remained solid at $605 million, despite a decline year-over-year in the backlog for our defense technology products.

We expect to finalize additional orders on various commercial aerospace and defense technology programs where we continue to see numerous opportunities. Our non-A&D markets have stabilized and recent activity suggests that an uptick in some of these end use markets may be in the offing.

Next on liquidity and capital resources, as Tony mentioned, during the quarter, we continued to delever our balance sheet. We prepaid another $7.5 million of our debt, reducing our debt to $325 million at quarter end, and our net debt has been reduced to $296 million, with trailing 12 month EBITDA of $82 million.

This equates to 3.6x net funded debt-to- EBITDA. During the balance of 2014, we continue to voluntary prepay our debt approximately $7.5 million per quarter. We remain committed on achieving our goal of [delevering] to the 2.75 to 3x by the end of 2015.

In the first quarter of 2014 we used nearly $10 million of cash in operations, compared to $6 million in last year’s first quarter. We remain diligent in effective working capital management and we expect our net cash flow to be similar to historic seasonal patterns over the balance of the next three quarters.

We anticipate capital expenditures for the full year of 2014 to be approximately $16 million and we use this CapEx to support the expansion of our manufacturing capabilities and new contract awards.

In closing, we continue to focus on achieving sustainable operating and EBITDA margins, which along with diligent expense management and continued focus on working capital efficiencies should permit the company to generate adequate cash flows going forward. I’d like now to turn the program over to Tony for his closing remarks.

Tony?.

Thank you, Joe. Before opening the call to questions, I'd like to wrap up with a few comments about the quarter and the outlook for 2014. We’re pleased that this year is off to a good start in terms of revenues, margins and earnings and we are staying focused on several areas to position the company for 2014 and beyond.

First, is new business development, in particular broadening our customer base, growing our non-A&D revenue and winning new commercial aerospace programs with key customers such as Boeing, Airbus and Spirit.

We are making good headway here and we’ll continue to aggressively look for attractive opportunities to bolster our roll on new platforms and diversify our business.

In addition, we are focused on driving our One Ducommun strategy in the marketplace; cutting costs, improving the efficiency of our operations, paying down debt and increasing the returns on our assets with the goal of expanding and sustaining long term attractive margins for the company.

With that, Britney, if you’ll open up the call for questions, we’ll take those on now. .

(Operator Instructions) And your first question comes from the line of Patrick McCarthy with FBR Capital Markets. Please proceed. .

I was wondering if you could talk about how much granularity you have in your business with Raytheon.

And what I’m really wondering is whether the uncertainty on your Tomahawk program is causing you guys any concern at all and whether or not it might have an impact down the road?.

I think that still has to be played out. Pat, it’s Tony. That still had -- the issues with Raytheon has to be played out. But we are on the Tomahawk program with them and we would anticipate that if that program is actually slowed down significantly that there will be some impact with (inaudible). .

Would you think it’s a material intact or has anybody tried maybe to quantify it, but give some sort of sense as to how much concern we should have?.

I would not say it’s material. In the aggregate it’s not that -- it’s not that large of a piece of business that we have with Raytheon.. .

Okay. Great, and then just on the defense backlog, it was down sequentially again.

Any sense as to when you think that that bottoms out? Is it 2014? Do you think it’s further out after [or rather] C-17 is completely flushed through?.

You know what will help us is when we see the budget for 2015. I think that that’s really going to be able to tell us a lot. But I think that we should see some [bottoming] up this year, yes. And we’ll have a good understanding of when the platforms will be, Patrick. .

And your next question comes from the line of Edward Marshall with Sidoti. Please proceed. .

I’m curious, you point out mix and I’m just --I want to see if we -- is this the legacy AeroStructures business that had the mix improvement? Obviously these are much stronger margins that we've seen since I don’t know 2009 perhaps.

Is it one off or is it something that you did last year that right sized the business and we should see this kind of level going forward or? Help me parse all those comments together if you will. .

Ed, when we looked at it and there’s more information in the Q on the sales that are $81 million of business are up almost $10 million. The sales was driven a combination of both units. Our military and defense structure business was up $4 million and our commercial aerospace business was up in like $6 million.

And your question is about mix and what the mix is, we are selling more products that are in the commercial aerospace business that have attractive margin and that’s why we refer to that. And of course the defense portfolio has always had a little higher margin than the commercial side of the portfolio.

And so we enjoyed both of those during the quarter. And it’s really a nice trend that we have and hope to continue..

If I can add something there Ed and then -- a little bit. With regards to the sales for the quarter, if you look at the defense side, that was up for us and you’ll see some of that data in the Q, but on the military side of the business. Actually it was a little bit of a pull forward on the C-17 program.

So we had actually had higher sales there and that helped bolster the margin. We did have a non-recurring pickup that will not probably go forward that happened during the quarter from subsequent negotiations that we did get a pickup there, so which also was effective on the C-17 program. There are a couple of pick-ups there that we did have, yeah..

With the change in the business and kind of bear with me because this has been quite volatile over the last year or so and I know you’ve made some changes and this isn’t a representation of what I should expect for the rest of the years based on what I hear you saying.

Is this a 10% margin business, 10 ½ % margin businesses for you throughout 2014 or how do you look at this besides when some of the changes you’ve made there?.

You’re referring to operating margins. .

Operating margins on the air….

Operating margins, just to put into perspective, operating margins a year ago were 9.1% and in this quarter they were 12.5%. Certainly even though we had a few smaller non-recurring, we certainly would like to be closer to 12.5 on a sustain basis.

As it may, it could vary 50 basis points either way in any given quarter because volume and mix have so much to do with it, Ed as you know. So we look at it more in a full year results or year-to-date results.

But we certainly believe that we have made improvements in our cost structure and we are targeting some growth product lines within the commercial aerospace sector that we’re benefiting from those in our financials. .

Now, this is a margin you haven’t seen in this business since again ’08 or ’09. You are targeting some growth markets, but I assume that has to take so much larger portion of the mix in order for that to be a sustainable margin for the rest of the year. .

That’s true..

So help me think about, what I should be thinking from a margin perspective for this business for the remainder of the year.

Is it going to fall back to that 9%, 9 ½ % range or do you anticipate being above that?.

We anticipate that it’ll be probably in the 11% range to 12%..

Okay. And then as I look at customers, the non-seasonal -- some of the non –A&D business and I’m looking at the K here and the Q rather, I note that you had the slip up in military and you kind of addressed that.

Is there some seasonal impact in maybe the medical and other business that kind of run through that business line that I should be aware of? Because it seems like it picked up pretty heavily from the last three quarters..

It’s been -- if you look at, if you go back like three quarters or two quarters the non-A&D specifically has been inching off a little bit on the backlog side. We had a relatively stronger backlog let’s say Q4 (inaudible) Q3, but there’s cyclicality in the business.

But from our standpoint, we’ve been working hard on the new business side and we’re starting to see some pick-ups there. A good example is that we were named for the second year in a row as the partner to John Deere and we had nice pick up in the business on that side. So it’s really about working hard to get the customers.

So as we said in our comments, I think that what we’ll see on the non-A&D market sector is some steady improvement as we go along and it’s significantly down from its levels in 2011. So we’ve got a long way to go before we say we’re there and one quarter doesn’t make a trend. We’ll be pushing along there..

Now, last question and this is on the C-17 program. I think you said there was $8 million in the quarter, but you said there was some pull forward on that and I understand the margin impact of that business.

If I look at the cadence of the C-17 program through the rest of the year, help me kind of -- because I’m assuming this is not a $32 million program for you in 2014..

No..

No. Help me figure out what the cadence in the wind down of this revenue is on a quarterly basis so I can think about that from a modeling perspective..

I think in the last quarter we said that the C-17 would be in the mid 20’s for the year. So you can see that we had a pretty solid first quarter.

And as I try to elude to in my remarks that I believe that it would be stepping down quarter over quarter, with second quarter being a little weaker and third quarter again weaker and then fourth quarter will be clean up. So it will step down significantly as we go forward. .

Your next question comes from the line of Mark Jordan with Noble Financial. Please proceed..

Good morning. First just a question on the tax rate. On the earnings call, yearend earnings call you were guiding to about a 31% tax rate. This quarter was a little bit higher.

Do you think it’s appropriate to goose that tax rate a little bit or do you still think the balance of the year will be in the 31% range?.

Mark, I think 31% full year it gets the tax rate generally and it doesn’t include any federal R&D tax credit, which we think the outlook’s fairly positive, but we don’t book it based on it until the legislation is passed. But in the second half of the year we have passed income tax returns expire and we relieved the liability out of FIN 48.

So we generally get some benefits and we get audits, regular audits resolved favorably. And so we’re able to reflect the slightly lower tax rate in the second half of the year which for planning purposes we have planned punitively 31%. .

Okay. In the press release you talked about marketing efforts where you’re using technology driven customer development strategies.

Could you give us a couple of specific examples of what piece of the business you’re targeting and how you’re presenting yourself fully in terms of your skills and capabilities and who are the primary targets you have?.

I think the target list is pretty broad based, but let me, Mark talk about a couple. I think that -- in the middle of last year we announced a pretty nice win with Parker Aerospace on the A320, A350 aircraft for fuel transfer development.

And the reason that we won that business is because we really stepped up and supported their prototype development from breadboard to initial production phases and I think that working with John Deere in the same vein on that type of program, we were also able to offer solutions to Spirit on some additional work where we helped them redesign some products that we thought could be more cost effective from a manufacturing standpoint.

So it’s pretty broad based. We’re bringing the same type of approach to all of our customers and that is that we’re there to help them solve problems and we try to do it from a technology standpoint and in our know-how and try to drive the customer issues and help them solve problems with the technical base that we bring.

Hopefully that helps you there. .

Yeah. I think also in prior comments you’ve made that you’ve been disappointed in the oil and gas sector in part because of the low level of technology that you were deploying.

Are you finding success in terms of upgrading your business through this area?.

Yeah, we have. We’ve had a couple of nice wins there, but overall I think it’ still in a -- we have to still prove to ourselves that it’s a marketplace that we can be successful in. There are a couple of areas where we are very successful and there are some areas that have not been as successful as we’d like them to be.

So we do have more work there, but we have been able to go out and generate new customers if you will and help then support their efforts in the field and we still have more work to do on some other customers. So it’s a mixed bag in the oil and gas market. .

Final question.

Has (inaudible) stabilized for you?.

Yes, at a much lower level. But as a result of that, we’re able to pick up some business with another customer and we’re able to support them through our supplier base.

So I think that we’ve got a nice strategy there and in the end (inaudible) will be fully supported and we’ll probably be in a position in the near future where we have a little bit stronger base with them. .

Your next question comes from the line of Ken Hubert with Canaccord. Please proceed..

I just wanted to first dig a little bit into the DLT segment. The margins in this segment I think lower than we were looking for. Is that any one time issue there? I know clearly you saw flat to up sales pretty much in each of the segments with some nice increases with the exception of the technologies, I’m sorry, the defense business within DLT.

Is it a mix issue for this segment or was there anything else one time that should repeatedly go through the year that was a drag on margins?.

No. I think that the revenue as we talked about, the revenue actually drove the margin issue. I think that what we saw was some delay in orders and some slowdown in some orders and there were a couple of programs that were cut, not that large.

And then we’re also seeing on the radar side we were expecting to win on the F-15 program for example in South Korea for the modernization for the radar systems and that didn’t happen. So the F-15 program is winding down on the side, some of that dropping revenues on the radar rack application.

So the rest of it is a mixed issue with some programs being slow to lease and other programs slowing down as a result of the war winding down quite frankly..

Okay, that’s helpful. And as you think about, you talked positively it sounds like specifically within the DLT segment some of the non-A&D opportunities and the work with Parker and what you’re seeing on the commercial aerospace side there.

How do you think through this year and into next year margins within DLT can improve as you continue to gain traction in some of these none -- your non-core defense markets? And at what point does it become sort of a nice offset and accretive to the segment relative to maybe a bit of a drag historically to the margins we’ve seen?.

I think we’re working our way through that now. I think we do have some nice applications on the commercial non-A&D side that are at relatively good margins. But we really have to work through the phases that we’re going through. There are still some programs in there that have less than attractive margins for us, which we’re working our way through.

So from a business based standpoint on that marketplace, I’d say that from a pickup standpoint we’re probably looking towards the latter half of the year before we start seeing any pick-up on the non-A&D and the commercial aerospace stuff for the DLT programs. .

Okay, great. And just finally, you’ve talked a few times about some wins with Airbus and specifically in the A320 and I know you’ve announced some nice awards there.

Can you just remind us again what Airbus represents maybe in ‘13 and what you’re looking for in ’14? How much of that upside do we see this year versus maybe what more is into ‘15 and ‘16?.

I think that the growth for Airbus is going to be more towards the ‘15 and ‘16 timeframe. We had a nice pickup this year and that’s some of the programs that we won the last two years coming to maturity. So it’s about a $20 million program for us all up right now and we see that expanding as some of the production programs pick up going forward. . .

(Operator instructions) And your next question comes from the line of Mike Crawford with B. Riley and company. Please proceed. .

Thank you. You also said you saw the regional jet demand improving.

So, what do you attribute that improvement to and what if any specific platforms are you seeing more success with?.

Mike, thanks for the question, but the reason jet picked up was on the Bombardier 700 and 900 series. We saw an increase in the build rate going from two to four. So they actually picked that up in the last quarter of last year. And so we figured that will even out over the quarter of this year.

So they just -- we do the same fuselage assembly for that series aircraft. So it manifested itself in a little bit higher build rate. So they’re actually back to the build rate they were at two years ago. .

Tony, the 787 picked up for you. Now Boeing said that actual deliveries of 787 were only I think 18 in Q1, but they expected to be more the 27 rate for the year.

Did you see a similar pattern? Is there a revenue effect for you or is it more steady state?.

It’s more steady state. We’re of course behind their revenue base from a delivery standpoint. So we are probably six months to eight months ahead of their delivery. So we are running pretty close to the eight to 10 aircraft a month right now in that program. .

Okay, great. And then on the Blackhawk, we know demand is down 14% I think. We’ve seen some eight year plan budget that works for at least US Army demand for the UH-60M to increase a bit in the next couple of years, and we’ve seen recent orders coming in from, potentially from Mexico and maybe some other foreign military sales.

Would you say that any of this possible pickup or foreign military sales leads to a little bit of upside related trend projections on how that winds down or not?.

Mike, I think it’s pretty hard to tell, but I would say that we are in a five year program with them. And so I think a lot of these will just flow into that delivery plan. So we expect the build rate to be down slightly this year and probably flatten out going forward. And I think all these will fill into their aircraft build rates.

So I don’t think we would see much of an uptake in -- If we do it certainly will be welcomed. .

Okay, thank you. And then last question relates to operationally as you are ramping into new programs and learning how to build things most efficiently, margins are a little lower and they improve bit by bit as you learn more.

How would you describe your overall level in this cycle of things ramping up and things?.

I think that’s exactly the cycle we see though. I think it starts out at lower margins, then we drive to our projected margins. We are doing a lot of work and we have done a lot of work over the last year and a half to two years with regards to our new product introduction to try and smooth out that process and move down the curve faster.

So we will have some learning going forward in some of these new programs that will impact margins and we hope to be able to offset that by some of the efficiency we pick up on some of the older programs..

Right, so that’s my question.

So if you had to guess what’s just winning out in the next couple of quarters? Are you benefiting more from how much you learn or are you going to be ahead by starting up on some new programs that will be great for revenues in the long term but you might have a little drag on consolidated margins as those ramp up? Which is the more important factor?.

It seems Mike we’ve gone through really in 2012 and 2013 the early stages of ramp up of newer products. We talked about the 24 products we brought on board and those other ones, the 22 main ones and they are getting to a more mature stage.

And so the way we look at our business; one, we are aligned to be able to meet the growing demands -- future demands of 737, the current demands of 787 which we handled very well going from three a month to seven a month to now almost 10 a month in deliveries. And that program has increased proportionally, plus with some new items on Airbus.

So your question that relates to, where are we? We are not way at the top of the learning curve or well along it. We still have a little ways to go, but we are executing very and the delivery of these newer products that have come on in the last two years. And they are being reflected in the results that you saw this quarter. .

Okay. Thank you, Joe. And then last question just relates to your balance sheet, your senior unsecured notes are callable next summer.

And have you put in more in thought on to what you might replace them with? Are you up to using your unsecured notes again?.

Your question relative to the $200 million senior unsecured notes that are first callable in July of the 2015 at 104.875% of CAR, yes, we will probably move to more of a banking credit facility, whether that’s a revolver pro rata loans or a term loan B as we have.

But we know that such a structure will continue to allow us to have flexibility or lower our interest expenses and also support our organic and acquisitive growth aspirations..

And your next questions come from the line of Gregory Macosko with Montrose Advisors. Please proceed..

Gregory Macosko – Montrose Advisors:.

. :.

With Raytheon specific terms, Greg?.

Yes, in specific groups or in more general terms, either one. .

I think overall what we’ve been able to do very successfully is present the full product portfolio of our company. And I think that’s actually into this behind driving more in Ducommun and going to the market as one company.

So and then specific with Raytheon, we’ve been able to do a nice job of putting multiple divisions in front of them and working through some of their new programs and working with some of their development programs, and we have a number of applications that we’re working on with them right now in the RFP phase.

So it’s pretty much of a cross production level, but in the end it all depends on the specific customer and the problems that they’re trying to solve as to how well we can cross sell if you will into their program.

So we try to understand the problem base first and then go in and give them a solution that fits the manufacturing capabilities that we have in place..

Okay, fine. And then just there has been a lot of questions about probability and the two different divisions, sort of one up, one down and some shift.

Just stepping back and put and takes, stepping back a little bit, if we look at on a common basis, is it fair to say that the incremental profit as we go forward if we could adjust for mix and that sort of thing, is that incremental profitability improving as we go forward?.

That’s the game plan. That’s really what we’re trying to do is pick that up. And we had a good solid quarter year here and we’re trying to project that forward to make sure that the things that went well stay in the pipeline, Gregory.

We do have -- the last caller indicated that we do have some mix going forward in some of the new development programs and that can be somewhat of a drag. Then the real unknown is what happens on the military budget. So some of these things have been moving fast and some have been extremely slow with regards to follow on orders.

So our goal is to stay and continue to improve the profitability as we go forward. And we have a number of initiatives in our operating performance to improve profitability as well as manage our working capital. So I think that we like to say we’re in a position where we can stabilize things going forward. That’s not the (inaudible)..

And at this time, I will now turn the presentation over to Tony Reardon for final remarks. .

Thank you very much everyone for joining the call today and we look forward to talking to you the next quarter thank you..

Ladies and gentlemen, that concludes the presentation for today’s conference. You may now disconnect and have a wonderful day..