DUCOMMUN INC /DE/DCO
DUCOMMUN INC /DE/ Goodwill & Intangibles Disclosure
Goodwill and Other Intangible Assets
Goodwill
The carrying amounts of goodwill, by operating segment, for the years ended December 31, 2025 and 2024 were as follows:
| (In thousands) | ||||||||||||||||||||
| Electronic Systems | Structural Systems | Consolidated Ducommun | ||||||||||||||||||
| Gross goodwill | $ | 199,157 | $ | 127,165 | $ | 326,322 | ||||||||||||||
| Accumulated goodwill impairment | (81,722) | — | (81,722) | |||||||||||||||||
| Balance at December 31, 2024 | 117,435 | 127,165 | 244,600 | |||||||||||||||||
| Balance at December 31, 2025 | $ | 117,435 | $ | 127,165 | $ | 244,600 | ||||||||||||||
We perform our annual goodwill impairment test as of the first day of the fourth fiscal quarter. If certain factors occur, including significant under performance of our business relative to expected operating results, significant adverse economic and industry trends, significant decline in our market capitalization for an extended period of time relative to net book value, a decision to divest individual businesses within a reporting unit, or a decision to group individual businesses differently, we may be required to perform an interim impairment test prior to the fourth quarter.
We may use either a qualitative or quantitative approach when testing a reporting unit’s goodwill for impairment. The qualitative approach for potential impairment analysis is performed by evaluating a number of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit was less than its carrying amount. If the qualitative assessment indicates that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value, we perform a quantitative assessment.
The quantitative approach for potential impairment analysis is performed by comparing the fair value of a reporting unit to its carrying value, including goodwill. Fair value is estimated by management using a combination of the income approach (which is based on a discounted cash flow model) and market approach. Management’s cash flow projections include significant judgments and assumptions, including the amount and timing of expected cash flows, long-term growth rates, and discount rates. The cash flows used in the discounted cash flow model are based on our best estimate of future revenues, gross margins, and adjusted after-tax earnings. If any of these assumptions are incorrect, it will impact the estimated fair value of a reporting unit. The market approach also requires management judgment in selecting comparable companies, business acquisitions and the transaction values observed and its related control premiums.
Our most recent step one goodwill impairment test for our Electronic Systems and Structural Systems reporting units was as of the first day of the fourth fiscal quarter of 2024 where the fair values of both reporting units exceeded their respective carrying values. No material adverse factors/changes have occurred since the fourth quarter of 2024 other than the Guaymas fire
litigation and related subrogation claims settlements, which we do not expect such settlements associated with the Guaymas fire to affect our ongoing operations. See Note 15. Thus, for our annual goodwill impairment test of our Electronic Systems and Structural Systems reporting units as of the first day of the fourth fiscal quarter of 2025, we used a qualitative assessment and determined it was not more likely than not that the fair value of each reporting unit was less than their respective carrying amount. Thus, the respective goodwill amounts were not deemed impaired.
Other Intangible Assets
Other intangible assets are related to acquisitions and recorded at fair value at the time of the acquisition. Other intangible assets with finite lives are generally amortized on the straight-line method over periods ranging from 2 to 23 years. Intangible assets are as follows:
| (In thousands) | |||||||||||||||||||||||||||||||||||||||||
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||
| Wtd. Avg Life (Yrs) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||||||||||||||||||
| Finite-lived assets | |||||||||||||||||||||||||||||||||||||||||
| Customer relationships | 17 | $ | 261,300 | $ | 171,420 | $ | 89,880 | $ | 261,300 | $ | 156,921 | $ | 104,379 | ||||||||||||||||||||||||||||
| Trade names and trademarks | 16 | 10,400 | 3,616 | 6,784 | 10,400 | 2,937 | 7,463 | ||||||||||||||||||||||||||||||||||
| Contract renewal | 14 | 1,845 | 1,845 | — | 1,845 | 1,845 | — | ||||||||||||||||||||||||||||||||||
| Technology | 23 | 36,000 | 4,525 | 31,475 | 36,000 | 2,951 | 33,049 | ||||||||||||||||||||||||||||||||||
| Backlog | 2 | 600 | 600 | — | 600 | 600 | — | ||||||||||||||||||||||||||||||||||
| Total finite-lived assets | 310,145 | 182,006 | 128,139 | 310,145 | 165,254 | 144,891 | |||||||||||||||||||||||||||||||||||
| Indefinite-lived assets | |||||||||||||||||||||||||||||||||||||||||
| Trade names and trademarks | 4,700 | — | 4,700 | 4,700 | — | 4,700 | |||||||||||||||||||||||||||||||||||
| Total | $ | 314,845 | $ | 182,006 | $ | 132,839 | $ | 314,845 | $ | 165,254 | $ | 149,591 | |||||||||||||||||||||||||||||
The carrying amount of other intangible assets by operating segment as of December 31, 2025 and 2024 was as follows:
| (In thousands) | ||||||||||||||||||||||||||||||||||||||
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||
| Gross | Accumulated Amortization | Net Carrying Value | Gross | Accumulated Amortization | Net Carrying Value | |||||||||||||||||||||||||||||||||
| Other intangible assets | ||||||||||||||||||||||||||||||||||||||
| Electronic Systems | $ | 164,545 | $ | 127,342 | $ | 37,203 | $ | 164,545 | $ | 118,054 | $ | 46,491 | ||||||||||||||||||||||||||
| Structural Systems | 150,300 | 54,664 | 95,636 | 150,300 | 47,200 | 103,100 | ||||||||||||||||||||||||||||||||
| Total | $ | 314,845 | $ | 182,006 | $ | 132,839 | $ | 314,845 | $ | 165,254 | $ | 149,591 | ||||||||||||||||||||||||||
Amortization expense of other intangible assets was $16.8 million, $16.8 million and $16.4 million for the years ended December 31, 2025, 2024 and 2023, respectively. Future amortization expense by operating segment is expected to be as follows:
| (In thousands) | ||||||||||||||||||||
| Electronic Systems | Structural Systems | Consolidated Ducommun | ||||||||||||||||||
| 2026 | $ | 9,288 | $ | 7,440 | $ | 16,728 | ||||||||||||||
| 2027 | 9,288 | 7,437 | 16,725 | |||||||||||||||||
| 2028 | 9,288 | 6,892 | 16,180 | |||||||||||||||||
| 2029 | 5,276 | 6,627 | 11,903 | |||||||||||||||||
| 2030 | 1,493 | 6,627 | 8,120 | |||||||||||||||||
| Thereafter | 2,570 | 55,913 | 58,483 | |||||||||||||||||
| $ | 37,203 | $ | 90,936 | $ | 128,139 | |||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 11, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Mar 6, 2017 | |
| 2015 | Mar 14, 2016 | |
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.