Ducommun (DCO)

2007 Compared to 2006

Net sales in 2007 were $367,297,000, compared to net sales of $319,021,000 for 2006. Net sales in 2007 increased 15% from 2006 primarily due to increases in both military and commercial sales. The Company’s mix of business in 2007 was approximately 60% military,

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37% commercial, and 3% space, compared to 66% military, 32% commercial, and 2% space in 2006. Foreign sales were approximately 8% of total sales in both 2007 and 2006. The Company did not have sales to any foreign country greater than 4% of total sales in 2007 or 2006.

The Company had substantial sales, through both of its business segments, to Boeing, the United States government, and Raytheon. During 2007 and 2006, sales to Boeing, the United States government, and Raytheon were as follows:

At December 31, 2007, trade receivables from Boeing, the United States government and Raytheon were $6,924,000, $2,517,000 and $4,751,000, respectively. The sales and receivables relating to Boeing, the United States government and Raytheon are diversified over a number of different commercial, military and space programs.

Military components manufactured by the Company are employed in many of the country’s front-line fighters, bombers, helicopters and support aircraft, as well as sea-based applications. Engineering, technical and program management services are provided principally for United States defense, space and homeland security programs. The Company’s defense business is diversified among military manufacturers and programs. Sales related to military programs were approximately $219,248,000, or 60% of total sales in 2007, compared to $209,028,000, or 66% of total sales in 2006. The increase in military sales in 2007 resulted principally from a $10,867,000 increase in sales to the F-18 program at Ducommun Technologies, Inc. (“DTI”), a $4,652,000 increase in sales to the C-17 program at Ducommun AeroStructures, Inc (“DAS”), and a $2,252,000 increase in engineering services at DTI, partially offset by a $3,194,000 decrease in sales to the Apache helicopter program at DAS and a $3,016,000 decrease in sales to the F-15 program at DTI. The Apache helicopter program accounted for approximately $53,681,000 in sales in 2007, compared to $56,875,000 in sales in 2006. The C-17 program accounted for approximately $35,535,000 in sales in 2007, compared to $30,883,000 in sales in 2006. The F-18 program accounted for approximately $20,663,000 in sales in 2007, compared to $9,796,000 in sales in 2006. The F-15 program accounted for approximately $8,798,000 in sales in 2007, compared to $11,814,000 in sales in 2006.

The Company’s commercial business is represented on many of today’s major commercial aircraft. Sales related to commercial business were approximately $137,864,000, or 37% of total sales in 2007, compared to $102,438,000, or 32% of total sales in 2006. During 2007, commercial sales were higher, principally because of a $19,430,000 increase in sales for Boeing commercial aircraft programs, a $15,996,000 increase in commercial aftermarket sales and sales from the acquisitions of WiseWave and CMP. Sales to the Boeing 737NG program accounted for approximately $39,558,000 in sales in 2007, compared to $30,300,000 in sales in 2006. The Boeing 777 program accounted for approximately $11,796,000 in sales in 2007, compared to $8,225,000 in sales in 2006.

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In the space sector, the Company produces components for a variety of unmanned launch vehicles and satellite programs and provides engineering services. Sales related to space programs were approximately $10,185,000, or 3% of total sales in 2007, compared to $7,555,000, or 2% of total sales in 2006. The increase in sales for space programs resulted principally from an increase in engineering services at DTI.

Backlog is subject to delivery delays or program cancellations, which are beyond the Company’s control. As of December 31, 2007, backlog believed to be firm was approximately $353,225,000, compared to $320,580,000 at December 31, 2006. The backlog at December 31, 2007 included the following programs:

Trends in the Company’s overall level of backlog, however, may not be indicative of trends in future sales because the Company’s backlog is affected by timing differences in the placement of customer orders and because the Company’s backlog tends to be concentrated in several programs to a greater extent than the Company’s sales.

Gross profit, as a percent of sales, increased to 20.6% in 2007 from 19.6% in 2006. The gross profit margin increase was primarily attributable to improvement in operating performance at both DAS and DTI and a favorable change in sales mix, partially offset by higher bonus accruals and higher environmental accruals.

Selling, general and administrative (“SG&A”) expenses increased to $46,191,000, or 12.6% of sales in 2007, compared to $41,867,000, or 13.1% of sales in 2006. The increase in SG&A expenses was primarily due to higher bonus accruals in 2007 and expenses of the WiseWave and CMP businesses, which were acquired in the second and third quarters of 2006, respectively. This increase was partially offset by a gain of $1.2 million from the settlement of the Company’s contract termination claim related to the Space Shuttle program.

Interest expense was $2,395,000 in 2007, compared to $2,601,000 in 2006, primarily due to lower debt in 2007.

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Income tax expense increased to $7,634,000 in 2007, compared to $3,791,000 in 2006. The increase in income tax expense was due to the increase in income before taxes and a higher effective income tax rate. The Company’s effective tax rate for 2007 was 28.0%, compared to 21.0% in 2006. The effective tax rate in 2006 included the benefit of reductions in income tax reserves and research and development tax credits established in prior years. These tax reductions were taken as a result of events occurring during the respective periods, changes in the research and development estimated tax benefit rate, the reduction of income tax reserves and the expiration of tax statutes of limitations. Cash expended to pay income taxes was $6,817,000 in 2007, compared to $5,988,000 in 2006.

Net income for 2007 was $19,621,000, or $1.88 diluted earnings per share, compared to $14,297,000, or $1.39 diluted earnings per share, in 2006.

2007 Compared to 2006

Net sales in 2007 were $367,297,000, compared to net sales of $319,021,000 for 2006. Net sales in 2007 increased 15% from 2006 primarily due to increases in both military and commercial sales. The Company’s mix of business in 2007 was approximately 60% military,

31

37% commercial, and 3% space, compared to 66% military, 32% commercial, and 2% space in 2006. Foreign sales were approximately 8% of total sales in both 2007 and 2006. The Company did not have sales to any foreign country greater than 4% of total sales in 2007 or 2006.

The Company had substantial sales, through both of its business segments, to Boeing, the United States government, and Raytheon. During 2007 and 2006, sales to Boeing, the United States government, and Raytheon were as follows:

At December 31, 2007, trade receivables from Boeing, the United States government and Raytheon were $6,924,000, $2,517,000 and $4,751,000, respectively. The sales and receivables relating to Boeing, the United States government and Raytheon are diversified over a number of different commercial, military and space programs.

Military components manufactured by the Company are employed in many of the country’s front-line fighters, bombers, helicopters and support aircraft, as well as sea-based applications. Engineering, technical and program management services are provided principally for United States defense, space and homeland security programs. The Company’s defense business is diversified among military manufacturers and programs. Sales related to military programs were approximately $219,248,000, or 60% of total sales in 2007, compared to $209,028,000, or 66% of total sales in 2006. The increase in military sales in 2007 resulted principally from a $10,867,000 increase in sales to the F-18 program at Ducommun Technologies, Inc. (“DTI”), a $4,652,000 increase in sales to the C-17 program at Ducommun AeroStructures, Inc (“DAS”), and a $2,252,000 increase in engineering services at DTI, partially offset by a $3,194,000 decrease in sales to the Apache helicopter program at DAS and a $3,016,000 decrease in sales to the F-15 program at DTI. The Apache helicopter program accounted for approximately $53,681,000 in sales in 2007, compared to $56,875,000 in sales in 2006. The C-17 program accounted for approximately $35,535,000 in sales in 2007, compared to $30,883,000 in sales in 2006. The F-18 program accounted for approximately $20,663,000 in sales in 2007, compared to $9,796,000 in sales in 2006. The F-15 program accounted for approximately $8,798,000 in sales in 2007, compared to $11,814,000 in sales in 2006.

The Company’s commercial business is represented on many of today’s major commercial aircraft. Sales related to commercial business were approximately $137,864,000, or 37% of total sales in 2007, compared to $102,438,000, or 32% of total sales in 2006. During 2007, commercial sales were higher, principally because of a $19,430,000 increase in sales for Boeing commercial aircraft programs, a $15,996,000 increase in commercial aftermarket sales and sales from the acquisitions of WiseWave and CMP. Sales to the Boeing 737NG program accounted for approximately $39,558,000 in sales in 2007, compared to $30,300,000 in sales in 2006. The Boeing 777 program accounted for approximately $11,796,000 in sales in 2007, compared to $8,225,000 in sales in 2006.

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In the space sector, the Company produces components for a variety of unmanned launch vehicles and satellite programs and provides engineering services. Sales related to space programs were approximately $10,185,000, or 3% of total sales in 2007, compared to $7,555,000, or 2% of total sales in 2006. The increase in sales for space programs resulted principally from an increase in engineering services at DTI.

Backlog is subject to delivery delays or program cancellations, which are beyond the Company’s control. As of December 31, 2007, backlog believed to be firm was approximately $353,225,000, compared to $320,580,000 at December 31, 2006. The backlog at December 31, 2007 included the following programs:

Trends in the Company’s overall level of backlog, however, may not be indicative of trends in future sales because the Company’s backlog is affected by timing differences in the placement of customer orders and because the Company’s backlog tends to be concentrated in several programs to a greater extent than the Company’s sales.

Gross profit, as a percent of sales, increased to 20.6% in 2007 from 19.6% in 2006. The gross profit margin increase was primarily attributable to improvement in operating performance at both DAS and DTI and a favorable change in sales mix, partially offset by higher bonus accruals and higher environmental accruals.

Selling, general and administrative (“SG&A”) expenses increased to $46,191,000, or 12.6% of sales in 2007, compared to $41,867,000, or 13.1% of sales in 2006. The increase in SG&A expenses was primarily due to higher bonus accruals in 2007 and expenses of the WiseWave and CMP businesses, which were acquired in the second and third quarters of 2006, respectively. This increase was partially offset by a gain of $1.2 million from the settlement of the Company’s contract termination claim related to the Space Shuttle program.

Interest expense was $2,395,000 in 2007, compared to $2,601,000 in 2006, primarily due to lower debt in 2007.

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Income tax expense increased to $7,634,000 in 2007, compared to $3,791,000 in 2006. The increase in income tax expense was due to the increase in income before taxes and a higher effective income tax rate. The Company’s effective tax rate for 2007 was 28.0%, compared to 21.0% in 2006. The effective tax rate in 2006 included the benefit of reductions in income tax reserves and research and development tax credits established in prior years. These tax reductions were taken as a result of events occurring during the respective periods, changes in the research and development estimated tax benefit rate, the reduction of income tax reserves and the expiration of tax statutes of limitations. Cash expended to pay income taxes was $6,817,000 in 2007, compared to $5,988,000 in 2006.

Net income for 2007 was $19,621,000, or $1.88 diluted earnings per share, compared to $14,297,000, or $1.39 diluted earnings per share, in 2006.

2007 Compared to 2006

Net sales in 2007 were $367,297,000, compared to net sales of $319,021,000 for 2006. Net sales in 2007 increased 15% from 2006 primarily due to increases in both military and commercial sales. The Company’s mix of business in 2007 was approximately 60% military, 37% commercial, and 3% space, compared to 66% military, 32% commercial, and 2% space in 2006. Foreign sales were approximately 8% of total sales in both 2007 and 2006. The Company did not have sales to any foreign country greater than 4% of total sales in 2007 or 2006.

The Company had substantial sales, through both of its business segments, to Boeing, the United States government, and Raytheon. During 2007 and 2006, sales to Boeing, the United States government, and Raytheon were as follows:

At December 31, 2007, trade receivables from Boeing, the United States government and Raytheon were $6,924,000, $2,517,000 and $4,751,000, respectively. The sales and receivables relating to Boeing, the United States government and Raytheon are diversified over a number of different commercial, military and space programs.

Military components manufactured by the Company are employed in many of the country’s front-line fighters, bombers, helicopters and support aircraft, as well as sea-based applications. Engineering, technical and program management services are provided principally for United States defense, space and homeland security programs. The Company’s defense business is diversified among military manufacturers and programs. Sales related to military programs were approximately $219,248,000, or 60% of total sales in 2007, compared to $209,028,000, or 66% of total sales in 2006. The increase in military sales in 2007 resulted principally from a $10,867,000 increase in sales to the F-18 program at Ducommun Technologies, Inc. (“DTI”), a $4,652,000 increase in sales to the C-17 program at Ducommun AeroStructures, Inc (“DAS”), and a $2,252,000 increase in engineering services at DTI, partially offset by a $3,194,000 decrease in sales to the Apache helicopter program at DAS and a $3,016,000 decrease in sales to the F-15 program at DTI. The Apache helicopter program accounted for approximately $53,681,000 in sales in 2007, compared to $56,875,000 in sales in 2006. The C-17 program accounted for approximately $35,535,000 in sales in 2007, compared to $30,883,000 in sales in 2006. The F-18 program accounted for approximately $20,663,000 in sales in 2007, compared to $9,796,000 in sales in 2006. The F-15 program accounted for approximately $8,798,000 in sales in 2007, compared to $11,814,000 in sales in 2006.

The Company’s commercial business is represented on many of today’s major commercial aircraft. Sales related to commercial business were approximately $137,864,000, or 37% of total sales in 2007, compared to $102,438,000, or 32% of total sales in 2006. During 2007, commercial sales were higher, principally because of a $19,430,000 increase in sales for Boeing commercial aircraft programs, a $15,996,000 increase in commercial aftermarket sales and sales

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from the acquisitions of WiseWave and CMP. Sales to the Boeing 737NG program accounted for approximately $39,558,000 in sales in 2007, compared to $30,300,000 in sales in 2006. The Boeing 777 program accounted for approximately $11,796,000 in sales in 2007, compared to $8,225,000 in sales in 2006.

In the space sector, the Company produces components for a variety of unmanned launch vehicles and satellite programs and provides engineering services. Sales related to space programs were approximately $10,185,000, or 3% of total sales in 2007, compared to $7,555,000, or 2% of total sales in 2006. The increase in sales for space programs resulted principally from an increase in engineering services at DTI.

Backlog is subject to delivery delays or program cancellations, which are beyond the Company’s control. As of December 31, 2007, backlog believed to be firm was approximately $353,225,000, compared to $320,580,000 at December 31, 2006. Approximately $280,000,000 of total backlog is expected to be delivered during 2008. The backlog at December 31, 2007 included the following programs:

Trends in the Company’s overall level of backlog, however, may not be indicative of trends in future sales because the Company’s backlog is affected by timing differences in the placement of customer orders and because the Company’s backlog tends to be concentrated in several programs to a greater extent than the Company’s sales.

Gross profit, as a percent of sales, increased to 20.6% in 2007 from 19.6% in 2006. The gross profit margin increase was primarily attributable to improvement in operating performance at both DAS and DTI and a favorable change in sales mix, partially offset by higher bonus accruals and higher environmental accruals.

Selling, general and administrative (“SG&A”) expenses increased to $46,191,000, or 12.6% of sales in 2007, compared to $41,867,000, or 13.1% of sales in 2006. The increase in SG&A expenses was primarily due to higher bonus accruals in 2007 and expenses of the WiseWave and CMP businesses, which were acquired in the second and third quarters of 2006, respectively. This increase was partially offset by a gain of $1.2 million from the settlement of the Company’s contract termination claim related to the Space Shuttle program.

Interest expense was $2,395,000 in 2007, compared to $2,601,000 in 2006, primarily due to lower debt in 2007.

Income tax expense increased to $7,634,000 in 2007, compared to $3,791,000 in 2006. The increase in income tax expense was due to the increase in income before taxes and a higher effective income tax rate. The Company’s effective tax rate for 2007 was 28.0%, compared to 21.0% in 2006. The effective tax rate in 2006 included the benefit of reductions in

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income tax reserves and research and development tax credits established in prior years. These tax reductions were taken as a result of events occurring during the respective periods, changes in the research and development estimated tax benefit rate, the reduction of income tax reserves and the expiration of tax statutes of limitations. Cash expended to pay income taxes was $6,817,000 in 2007, compared to $5,988,000 in 2006.

Net income for 2007 was $19,621,000, or $1.88 diluted earnings per share, compared to $14,297,000, or $1.39 diluted earnings per share, in 2006.

Nine Months 2007 Compared to Nine Months 2006

Net sales in the first nine months of 2007 were $273,821,000, compared to net sales of $231,195,000 for the first nine months of 2006. Net sales in the first nine months of 2007 increased 18% from the same period last year primarily due to increases in both military and commercial sales. The Company’s mix of business in the first nine months of 2007 was approximately 61% military, 37% commercial, and 2% space, compared to 67% military, 31% commercial, and 2% space in the first nine months of 2006.

The Company had substantial sales, through both of its business segments, to Boeing, the United States government and Raytheon. During the first nine months of 2007 and 2006, sales to these customers were as follows:

At September 29, 2007, trade receivables from Boeing, the United States government and Raytheon were $8,580,000, $1,934,000 and $4,621,000, respectively. The sales and receivables relating to these customers are diversified over a number of different commercial, space and military programs.

Military components manufactured by the Company are employed in many of the country’s front-line fighters, bombers, helicopters and support aircraft, as well as many sea-based vehicles. Engineering, technical and program management services are provided principally for United States defense and homeland security programs. The Company’s defense business is diversified among military

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manufacturers and programs. Sales related to military programs were approximately $165,311,000, or 61% of total sales in the first nine months of 2007, compared to $154,107,000, or 67% of total sales in the first nine months of 2006. The increase in military sales in the first nine months of 2007 resulted principally from an increase in military sales from the acquisition of CMP, an increase in sales to the C-17 program, an increase in sales to the F-18 program and an increase in government engineering and technical services sales, partially offset by a decrease in sales to the Apache helicopter program. The Apache helicopter program accounted for approximately $39,329,000 in sales in the first nine months of 2007, compared to $43,081,000 in sales in the first nine months of 2006. The C-17 program accounted for approximately $25,135,000 in sales in the first nine months of 2007, compared to $23,671,000 in sales in the first nine months of 2006.

The Company’s commercial business is represented on many of today’s major commercial aircraft. Sales related to commercial business were approximately $101,998,000, or 37% of total sales in the first nine months of 2007, compared to $72,616,000, or 31% of total sales in the first nine months of 2006. The increase in commercial sales in the first nine months of 2007 resulted principally from an increase in sales to the Boeing 737NG and Boeing 777 programs, an increase in commercial after market sales and sales from the acquisition of CMP. The Boeing 737NG program accounted for approximately $29,341,000 in sales in the first nine months of 2007, compared to $21,505,000 in sales in the first nine months of 2006. The Boeing 777 program accounted for approximately $9,282,000 in sales in the first nine months of 2007, compared to $5,600,000 in sales in the first nine months of 2006.

In the space sector, the Company produced components for a variety of unmanned launch vehicles and satellite programs and provides engineering services. Sales related to space programs were approximately $6,512,000, or 2% of total sales in the first nine months of 2007, compared to $4,472,000, or 2% of total sales in the first nine months of 2006.

As of September 29, 2007, backlog believed to be firm was approximately $333,366,000, compared to $320,580,000 at December 31, 2006. Approximately $84,000,000 of total backlog is expected to be delivered during the remainder of 2007. The backlog at September 29, 2007 included the following programs:

Trends in the Company’s overall level of backlog may not be indicative of trends in future sales because the Company’s backlog is affected by timing differences in the placement of customer orders and because the Company’s backlog tends to be concentrated in several programs to a greater extent than the Company’s sales. Backlog is also subject to delivery delays or program cancellations, which are beyond the Company’s control.

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Gross profit, as a percent of sales, increased to 21.5% in the first nine months of 2007 from 20.2% in the first nine months of 2006. The gross profit margin increase was primarily attributable to improvement in operating performance at both DAS and DTI and a favorable change in sales mix. Gross profit in the first nine months of 2006 was negatively impacted by an $860,000 increase in inventory reserves related to a canceled contract at Ducommun Technologies.

Selling, general and administrative (“SG&A”) expenses increased to $36,191,000, or 13.2% of sales in the first nine months of 2007, compared to $29,609,000, or 12.8% of sales in the first nine months of 2006. The increase in SG&A expense was primarily due to higher bonus accruals in 2007 and expenses of the WiseWave and CMP businesses, which were acquired in the second and third quarters of 2006, respectively.

Interest expense was $2,045,000 in the first nine months of 2007, compared to interest expense of $1,868,000 in the first nine months of 2006, resulting principally from the use of cash in the first nine months of 2007, compared to the first nine months of 2006.

Income tax expense increased to $6,362,000 in the first nine months of 2007, compared to $5,181,000 in the first nine months of 2006. The increase in income tax expense was due to the increase in income before taxes, partially offset by a lower effective income tax rate. The Company’s effective tax rate for the first nine months of 2007 was 30.9%, compared to 34.1% in the first nine months of 2006, because of the applicability of the R&D tax credit in the first nine months of 2007.

Net income for the first nine months of 2007 was $14,203,000, or $1.36 diluted earnings per share, compared to $10,029,000, or $0.97 diluted earnings per share, in the first nine months of 2006.

Six Months 2007 Compared to Six Months 2006

Net sales in the first six months of 2007 were $179,156,000, compared to net sales of $149,638,000 for the first six months of 2006. Net sales in the first six months of 2007 increased 20% from the same period last year primarily due to a strong increase in commercial sales. The Company’s mix of business in the first six months of 2007 was approximately 61% military, 37% commercial, and 2% space, compared to 67% military, 32% commercial, and 1% space in the first six months of 2006.

The Company had substantial sales, through both of its business segments, to Boeing, the United States government and Raytheon. During the first six months of 2007 and 2006, sales to these customers were as follows:

At June 30, 2007, trade receivables from Boeing, the United States government and Raytheon were $4,070,000, $3,975,000 and $4,540,000, respectively. The sales and receivables relating to these customers are diversified over a number of different commercial, space and military programs.

Military components manufactured by the Company are employed in many of the country’s front-line fighters, bombers, helicopters and support aircraft, as well as many sea-based vehicles. Engineering, technical and program management services are provided principally for United States defense and homeland security programs. The Company’s defense business is diversified among military

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manufacturers and programs. Sales related to military programs were approximately $108,265,000, or 61% of total sales in the first six months of 2007, compared to $100,359,000, or 67% of total sales in the first six months of 2006. The increase in military sales in the first six months of 2007 resulted principally from an increase in military sales from the acquisition of CMP, an increase in sales to the C-17 programs, an increase in sales to the F-18 program and an increase in government engineering and technical services sales, partially offset by a decrease in sales to the Apache helicopter program. The Apache helicopter program accounted for approximately $24,858,000 in sales in the first six months of 2007, compared to $29,541,000 in sales in the first six months of 2006. The C-17 program accounted for approximately $16,298,000 in sales in the first six months of 2007, compared to $15,027,000 in sales in the first six months of 2006.

The Company’s commercial business is represented on many of today’s major commercial aircraft. Sales related to commercial business were approximately $66,566,000, or 37% of total sales in the first six months of 2007, compared to $47,660,000, or 32% of total sales in the first six months of 2006. The increase in commercial sales in the first six months of 2007 resulted principally from an increase in sales to the Boeing 737NG and Boeing 777 programs, an increase in commercial after market sales and sales from the acquisition of CMP. The Boeing 737NG program accounted for approximately $19,131,000 in sales in the first six months of 2007, compared to $13,886,000 in sales in the first six months of 2006. The Boeing 777 program accounted for approximately $6,152,000 in sales in the first six months of 2007, compared to $3,396,000 in sales in the first six months of 2006.

In the space sector, the Company produced components for a variety of unmanned launch vehicles and satellite programs and provides engineering services. Sales related to space programs were approximately $4,325,000, or 2% of total sales in the first six months of 2007, compared to $1,619,000, or 1% of total sales in the first six months of 2006.

As of June 30, 2007, backlog believed to be firm was approximately $371,000,000, compared to $320,580,000 at December 31, 2006. Approximately $139,000,000 of total backlog is expected to be delivered during the remainder of 2007. The backlog at June 30, 2007 included the following programs:

Trends in the Company’s overall level of backlog may not be indicative of trends in future sales because the Company’s backlog is affected by timing differences in the placement of customer orders and because the Company’s backlog tends to be concentrated in several programs to a greater extent than the Company’s sales. Backlog is also subject to delivery delays or program cancellations, which are beyond the Company’s control.

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Gross profit, as a percent of sales, increased to 21.4% in the first six months of 2007 from 19.9% in the first six months of 2006. The gross profit margin increase was primarily attributable to improvement in operating performance at both DAS and DTI and a change in sales mix.

Selling, general and administrative (“SG&A”) expenses increased to $24,360,000, or 13.6% of sales in the first six months of 2007, compared to $19,235,000, or 12.9% of sales in the first six months of 2006. The increase in SG&A expense was primarily due to higher bonus accruals in 2007 and expenses of the WiseWave and CMP businesses, which were acquired in the second and third quarters of 2006, respectively.

Interest expense was $1,417,000 in the first six months of 2007, compared to interest expense of $1,164,000 in the first six months of 2006, resulting from the use of cash and increase debt in the first six months of 2007, compared to the first six months of 2006.

Income tax expense increased to $4,123,000 in the first six months of 2007, compared to $3,413,000 in the first six months of 2006. The increase in income tax expense was due to the increase in income before taxes, partially offset by a lower effective income tax rate. The Company’s effective tax rate for the first six months of 2007 was 33.0%, compared to 36.5% in the first six months of 2006, because of the applicability of the R&D tax credit in the first six months of 2007.

Net income for the first six months of 2007 was $8,371,000, or $0.80 diluted earnings per share, compared to $5,930,000, or $0.58 diluted earnings per share, in the first six months of 2006.

First Quarter of 2007 Compared to First Quarter of 2006

Net sales in the first quarter of 2007 were $88,052,000, compared to net sales of $72,158,000 for 2006. Net sales in the first quarter of 2007 increased 22% from the same period last year primarily due to a strong increase in commercial sales. The Company’s mix of business in the first quarter of 2007 was approximately 59% military, 38% commercial, and 3% space, compared to 67% military, 32% commercial, and 1% space in the first quarter of 2006.

The Company had substantial sales, through both of its business segments, to Boeing, the United States government and Raytheon. During the first quarter of 2007 and 2006, sales to these customers were as follows:

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At March 31, 2007, trade receivables from Boeing, the United States government and Raytheon were $7,009,000, $3,266,000 and $3,029,000, respectively. The sales and receivables relating to these customers are diversified over a number of different commercial, space and military programs.

Military components manufactured by the Company are employed in many of the country’s front-line fighters, bombers, helicopters and support aircraft, as well as many sea-based vehicles. Engineering, technical and program management services are provided principally for United States defense and homeland security programs. The Company’s defense business is diversified among military manufacturers and programs. Sales related to military programs were approximately $52,260,000, or 59% of total sales in the first quarter of 2007, compared to $48,179,000, or 67% of total sales in the first quarter of 2006. The increase in military sales in the first quarter of 2007 resulted principally from approximately $3,952,000 increase in military sales from the acquisitions of Miltec, WiseWave and CMP, an increase in sales to the C-17 program at Ducommun AeroStructures, Inc. (“DAS”), an increase in sales to the F-15 and F-18 programs at Ducommun Technologies, Inc. (“DTI”), partially offset by a decrease in sales to the Apache helicopter program at DAS. The Apache helicopter program accounted for approximately $12,007,000 in sales in the first quarter of 2007, compared to $15,091,000 in sales in first quarter of 2006. The C-17 program accounted for approximately $8,186,000 in sales in the first quarter of 2007, compared to $6,366,000 in sales in the first quarter of 2006.

The Company’s commercial business is represented on many of today’s major commercial aircraft. Sales related to commercial business were approximately $33,203,000, or 38% of total sales in the first quarter of 2007, compared to $23,082,000, or 32% of total sales in the first quarter of 2006. During the first quarter of 2007, commercial sales were higher, principally because of an increase in commercial aftermarket sales at both DAS and DTI, sales to the Boeing 737NG program and Boeing 777 program and sales from the acquisitions of WiseWave and CMP. Sales to the Boeing 737NG program accounted for approximately $8,410,000 in sales in the first quarter of 2007, compared to $7,185,000 in sales in the first quarter of 2006.

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In the space sector, the Company produced components for a variety of unmanned launch vehicles and satellite programs. Sales related to space programs were approximately $2,589,000, or 3% of total sales in 2007, compared to $897,000, or 1% of total sales in the first quarter of 2006. The increase in sales for the Space programs was principally due to an increase in space related sales at Miltec.

As of March 31, 2007, backlog believed to be firm was approximately $381,774,000, compared to $320,580,000 at December 31, 2006. Approximately $180,000,000 of total backlog is expected to be delivered during the remainder of 2007. The backlog at March 31, 2007 included the following programs:

Trends in the Company’s overall level of backlog may not be indicative of trends in future sales because the Company’s backlog is affected by timing differences in the placement of customer orders and because the Company’s backlog tends to be concentrated in several programs to a greater extent than the Company’s sales. Backlog is also subject to delivery delays or program cancellations, which are beyond the Company’s control.

Gross profit, as a percent of sales, increased to 21.0% in the first quarter of 2007 from 20.1% in the first quarter of 2006. The gross profit margin increase was primarily attributable to improvement in operating performance at both DAS and DTI and a change in sales mix.

Selling, general and administrative (“SG&A”) expenses increased to $12,226,000, or 13.9% of sales, in the first quarter of 2007, compared to $9,636,000, or 13.4% of sales in the first quarter of 2006. The increase in SG&A expense was primarily due to higher bonus accruals in 2007 and expenses of the WiseWave and CMP businesses, which were acquired in the second and third quarters of 2006, respectively.

Interest expense was $652,000 in the first quarter of 2007, compared to interest expense of $515,000 in the first quarter of 2006, primarily due to the use of cash and increase debt in the first quarter of 2007, compared to the first quarter of 2006, as a result of the WiseWave and CMP acquisitions, made after the first quarter of 2006.

Income tax expense increased to $1,799,000 in the first quarter of 2007, compared to $1,604,000 in first quarter of 2006. The increase in income tax expense was due to the increase in income before taxes, partially offset by a lower effective income tax rate. The Company’s effective tax rate for the first quarter of 2007 was 32.1%, compared to 36.7% in the first quarter of 2006, because of the applicability of the R&D tax credit in the first quarter of 2007.

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Net income for the first quarter of 2007 was $3,800,000, or $0.37 diluted earnings per share, compared to $2,762,000, or $0.27 diluted earnings per share, in the first quarter of 2006.