Okay. Good morning, everyone. On behalf of the team and myself, I just want to welcome everyone to our inaugural Investor Day. Appreciate everybody making time. Is this okay in the back? Is the sound okay to you? Okay, great. All right. Just a couple of things before we get started. This is a disclosure, safe harbor. I ask everybody to reference it, along with the materials that we're going to talk about today. I'd appreciate that. As far as our agenda, I'm going to handle the company-wide strategy. I'd like Dave Wilmot to handle electronic systems overview. Dave, you stand up for a sec.
Good morning.
That's Dave. Okay. Jerry is going to handle structural systems. Jerry, if you can stand up, please.
Okay.
Okay. Suman's going to handle M&A, Suman. Finally, Doug's going to handle the financials.
Good morning.
I'll finish up. All right. Again, I want to thank everybody for their participation, and we're going to take a break in the middle, a short break for everybody just to kind of regroup. First, we always like to start with this slide. We think it's interesting. As far as our history, a lot of folks don't know about the history of Ducommun, that we're the oldest continuous company in California, which we think is pretty cool. We don't really talk about it, but that's something that is a part of our legacy. One of the other interesting things, California only became a state in 1848. It became part of the United States in 1848. Charles Ducommun walked across the country. Back then you walked.
He went to Fort Smith, Arkansas, then got with a wagon train and I guess a couple of hundred people and walked to Los Angeles. Then was a watchmaker, but quickly went into the general store business. For a long time, that was Ducommun, and for folks that know some of the history of aerospace, Los Angeles, Southern California became a real hotbed for aerospace in the '30s, '40s, '50s, '60s. Huge aircraft, McDonnell Douglas, lots of things. We got into the metals game, big in that area. Got into other things as we move forward with the space program. Really started working on engineered products in the 2000s. Here we are today. We're going to talk about where we're heading in the future. This is a snapshot.
A lot of you folks know this already, but we focus on complex electronics and structural systems. We have electronics and electrical mechanical products, lots of different structures, which I'll talk about. Our game is commercial aerospace, military, defense, and space. You'll see a little bit of industrial revenue in our presentation today, but that's really not what we focus on, but it's a legacy. We're on some great programs. We'll talk about the 737 as well as the 320. JSF. This is a Tomahawk missile. We're big in missiles. We'll talk about that too, as far as our work with Raytheon on the Tomahawks. This is the Paveway missile, which is a very high-volume missile, which we're big-time players on. Finally, we have a legacy, and we have a good business in rotary aircraft. This is the Apache.
You don't want to wake up one morning and see this coming for you. Not to joke around, this is really an interesting aircraft, very high demand. This is the Black Hawk, which is really kind of the pickup truck of the military. Lots of Black Hawks giving soldiers rides all over the place. That's a little bit of our makeup as far as our programs, and we're proud of it. As far as our team, you've either met folks or they introduced themselves. You'll get to know them better today. Obviously myself, Jerry, Dave, Doug, Suman. The reason I included this slide is I really want to drive home the fact that despite the size of Ducommun, which is, we're working on building that as far as getting much bigger.
I think that the types of folks we have with not only Fortune 100 experience, but also top five private equity. We bring both of those to the table. As investors, when you're thinking about the company, say, "What's the game here?" What's really going to move the needle? A big part of it, I believe, is our experience and the rest of our team as well. I wanted to note that. That's, I think, a big deal. As far as our vision and mission, just to reiterate, we're really dedicated to A&D. There's no looking at other things, we're going to get into medical. Some of our peers will say, "We ought to get into industrial." The answer is no. We're committed to aerospace and defense. We're also committed to being a leader in engineered products. We'll talk about that.
Electronic and structural manufacturing, assembly services. That's really going out and really making things happen for our customers, providing value, and also getting paid for it. Finally, after-market support. We'll talk about that a little bit, even though that's a smaller part of Ducommun right now. You'd be surprised that we do have an after-market, and we're trying to grow it, and we'll talk to you about that as well, which I think is important for any company. The company supplies high-value niche products and services, and we're all about delivering exceptional value to not only our customers, but our shareholders, ourselves. That's what we're about. We don't get up every morning saying, "We're just going to be pretty good today." We get up every morning like, "We're going to move the needle again today." What sets us apart?
We're going to talk a little bit more about our industry-leading proprietary products. I know in the past, a lot of the legacy, a lot of the conversation with Ducommun was build-to-print or contract manufacturing. That's a big part of our business, but we also have other parts, too. We have industry-leading engineered products. I think that's important for investors. We do have these unique capabilities, and we'll talk about those, such as titanium hot form. We'll take titanium sheet at 700 degrees Fahrenheit, and we'll mold it into something that Boeing and Airbus puts on their aircraft. Believe me, it's not easy to do. Believe me, not a lot of people can do it. Those are the kind of things as we go forward. As well as our electronics. We make things that are ruggedized. We'll take interconnect.
It's not just hand work. Well, I'm going to put together this interconnect, we're going to put it in a helicopter, we're going to put it somewhere else. We take the connector, we mold the thermal set around it, we design it a certain way. We do a lot more than just hand work and contract manufacturing in that area. We drive that value, and we expect to get paid for it. Obviously our assemblies, too. We do a lot of box builds, and we'll talk about that. I think our placement in the industry, both on commercial and military, you'll see a lot of narrow body. You won't see a lot of A380. Okay? All right. You'll see F-35s. You'll see Apache, things like that. We're pretty proud of that. We are working on our aftermarket, and we feel good about where we're going.
One other thing about our operating model is that we're not bureaucratic. Okay? We're small enough where I answer the phone. I get involved with problems. We have a very flat organization. We have very little politics. Okay, we're all getting up every day and thinking about how are we going to be better. I think that's important as we move forward to build a company. Again, I talked about the executive leadership. Here's a little bit deeper dive into the products as I get into it here. These are our proprietary industry-leading products. Okay, Dave Wilmot will talk more about that. We do a lot of stuff with cockpits, do a lot of switches with cockpits. We call it HMI, Human Machine Interface. We also do really nice things with Lightning Diversion Systems. That's one of our new acquisitions. That's proprietary.
We have motor controllers, lots of other things, resolvers. This is a real focus point for us, and we're proud of it. Circuit cards, we do a lot of low volume, high mix. We'll get in there with circuit cards with Raytheon for Paveway and for other OEMs. We'll figure out how we can help them. We'll figure out the designs. We'll do the prototyping. We'll bring the whole thing home for them. We're really focused on that value. We do a lot of box builds for, again, for Raytheon and other customers. We'll take the cards, we'll build the boxes, we take the harnesses, we put everything in. Okay? We provide tremendous value to a customer doing all that offsite. The wire harness, it doesn't look like much from the picture, but there's a lot of things that go into wire harnesses.
You know what? You want them to work when you need them. All right? These are all big time, these got to work or else you're going to fail. We like that. Structural. Talked about the Apache. We do a lot of metal bonds and autoclave composite materials. We're proud of that. The spoiler, we've made every 737 spoiler since 1968. A lot of people don't know that. Okay? We've been sole source on the spoiler for the 37 forever out of our Monrovia, California facility. We're proud of that. You can see other things that we do. We're very selective about structures. Okay, especially since I've come on board. Okay, we're just not interested in volume. No.
We're interested in where we can provide value, where we can have some type of barrier to entry, and where we can really have a great runway for future revenue. This titanium form I talked about, this is an engine duct for a helicopter. You can see the complexity for that. It's, I think, really impressive engine ducts, lots of other things. We do aluminum forming, chem mill. Chem milling, a lot of people do chem milling, folks that are in this room know that. We're not interested in doing chem milling for everybody. We have very, very large tanks that we had from the space program that very few people have. We are driving our chem mill business in those areas. Areas where there's legacy things that very few competitors have. We can come in, provide value on F-35, other things.
It's, I think, exciting time for even chem mill at Ducommun. Finally, you have extruded plastics. This is our new acquisition called Certified Thermoplastics. This is all about aircraft interiors, right? We're making electronics. We're making structures. We came across this company. We like aircraft interiors. The reason why this is interesting is because this plastic takes, like, five minutes to burn or smoke. It's called Ultem. I used to sell it. A long, long time ago. The reason they're in the aircraft interior, obviously, if there's a fire or something, you have time before things start to burn, things start to smoke. $18 a pound. Most plastics are $0.50- $1, $1- $1.50 a pound for all your automotive applications, everything. These types of things, very few people can extrude these.
In fact, there's only one other in North America and us. That's what we like, right? Again, I think some really good stuff going on. You can see our facilities here, we have a really nice lineup. We'll talk more about it. You can see our business segments. Structural, the last 12 months, 46%. Electronic, 54%. I think we have nice balance. We also have, I think, excellent balance in commercial and military. I talk about industrial legacy, which will, at some point, be going down a bit, as far as commercial aircraft, commercial aerospace, military demands, we have a really nice balance here, and we're excited about the future. Here's a little take on our revenue.
You can see here that Ducommun actually was higher in the past just because we had C-17, and we had a lot of other programs that were high volume revenue programs that basically just went away. You see it kind of bottomed out, and that's one of the reasons I took the job. I've been here since January 2017, and you ask me, "Why'd you come to Ducommun?" One of the reasons is I thought the company had kind of bottomed out and was on its way up. That's one of the reasons I'm here. I think this is where we're headed. You see our backlog is very good.
Just so you know, the military and space, the lead times are a little shorter than structures, so you're going to see a little less backlog because your structural components take longer to order and to make because of titanium, that type of thing. You'll see a little less on this, but we're excited about our backlog. It's pretty much at a historic rate. What have we been doing since I joined last year? First, streamlined the organization. I'll talk about that. We're working on enhancing our business model. We talked about that as far as industry-leading products. We implemented a new operating system. We're manufacturing people. We got to make things right. We got to make them right the first time. We got to make them without scrap. We got to make them high quality. Finally, our very important capital allocation strategy.
Here's just a little view from the past into the present. When I came on board, it was a real legacy view of the company, slow to adapt. We had lots of layers of management, lots of vice presidents. They were nice people, and they were trying to do their best, but we just didn't need them. Ducommun, we had to flatten the organization. I came in with a fresh perspective with some of the leaders. We're driving excellence and value. We're developing new and existing talent, and we flattened the organization. We took a whole layer out, which is great for communication. Actually, we're performing much better, as you can see from the numbers, with a lot less people. I think that's really important. We had a lot of different business units. Now we've reduced those as well.
I think a very positive story here. Again, looking at the business when I got in, we had some low-margin business. We had contracts that weren't very profitable. We had no M&A activity. Our capacity, we had too much capacity, so we really made some tough decisions last year. In November, we announced this restructuring and rationalized the product portfolio. We closed two acquisitions in the footprint you know about. This is a very, very important piece. They all are, but this is extremely important for us to get out of where we were and get things moving. The new D2 operating system, again, we're manufacturing people, technology people, weak processes. I put a new operating system in focused on lean principles. Everybody gets up every morning at all our factories. They have a meeting every morning.
It's called a Gemba meeting, everybody gets out of their offices and gets out on the floor and goes to a board and talks about the day. There's no hiding. Everybody's on the same page. Customer feedback, quality feedback. What do we got to do to be successful today? Everybody's involved. The other thing about our, if you think about just our footprint, we've obviously reduced it by 16%. We have operations that are anywhere from 150 people- 350 people, and that's a perfect size for excellence. It's very hard to run a manufacturing operation with 1,500 people in the building. It just is. To connect with everybody and make sure that you're getting in everybody's head. We feel great about also just how we're footprinted out with our mission to drive excellence.
Finally, capital allocation. Again, not such a great story here, much better story here. We're working hard on getting better. That's a little bit about the last 18 months or so since I joined in January. Let's talk about the future. Profitable top-line growth. I've said this in my other investor meetings. This is my fourth business that I've led, okay, and I've never cut my way to success, okay, and I'm not going to do it here either. All right. I've told everybody. I mean, the way we're going to have long-term success is profitable growth. Okay. We're going to watch our costs, but we're going to really focus on our profitable growth. Drive operational excellence and efficiencies, people first, strategy second, and then all-important acquisitions to drive growth where it's appropriate for us to make sure we continue to strengthen our business model.
I think that's a great story for investors. Obviously, exceptional value here throughout the presentation. We're committed to our shareholders, we're committed to our employees, we're committed to our suppliers, we're committed to our customers. That's it. That's what we do at Ducommun. Let's walk through these a bit. Strategic priorities. I talked about profitable top-line growth, both organic and inorganic, driving profitability, really thinking about, okay, where do we really provide value in the chain? In the supply chain. Where do we really make a difference for customers? Then getting that communicated and implemented, and then obviously getting paid for it. That's a big deal for us. We have a lot of customers out there. For example, we have Raytheon, that's our second biggest customer at Ducommun, is Raytheon. We are far, far away from that at Lockheed.
One of our excitement, things that get us excited is where our share of market at Lockheed for the missile programs and other things are very low. We have a lot of good opportunities there. I talk about on my call about early innings. I think that's really true for us. I really think it's the early innings in a lot of ways. Next is this manufacturing capability. Talked about titanium and lots of things. Our commercial approach, we used to have all our commercial people report into corporate. Okay. Now we have all our commercial people reporting to the strategic business unit leaders. Because they have to be responsible to deliver the backlog, deliver the bookings. That's in the past. Next top right is this operational excellence. We have the operating system metrics. You've all heard this before from other companies.
I like this word intensity. We needed more intensity at Ducommun. We lack intensity. Now we've got a lot of it, and focus, and that's a big reason we're going to be successful. Then our supply chain execution as well. Bottom left here, I talked about taking out the layers. The high-level executives, raising the bar, obviously, and investing. One thing here is people, we're going to talk about this a little bit more, is that we're on the narrow body. We're very good friends with Spirit. We know what Spirit has to do. We're getting the 57 in January. Okay. We are ready for 57. Okay. We have the people in place. We have the capital in place. Okay. This is all the titanium products we make for the 37. We're going to try to be very proactive here.
Suman's role, we talked about this. We have a new M&A function. I've mentioned that in the call. He'll talk about his screening. I think that the track record's been very good. We're excited about our first two acquisitions. Hopefully, investors are as well. Again, exceptional value. What are you doing every day? We're driving exceptional value. Here's a little bit more of the numbers, the growth drivers here. You have, again, I went over these. We have industrial here, but it's not material. Our backlog. Here are the platforms. One other item to note is that before 2016, Ducommun didn't do any business with Airbus. I know it's hard to believe, right? Because we've been in structures for a long time, right? Airbus has been around for a long time, but zero revenue with Airbus. Okay, now we've got a contract.
We are dealing with them directly. We are growing our business with them. Again, this is early innings, right? We're just getting started on a lot of this on this journey here. Great platforms, military, F-18. The F-18 is alive and well. Okay, we're happy about it as far as the things that we provide for the F-18. The Tomahawk, Patriot, F-35 is a great thing as well, Apache. You can see here that we're bullish about the growth. This is over the next three years. 5-7, 2-4. This is something new for our investor meeting. We haven't disclosed this in the past, but we felt this was an important chart for investors to see here. On the left here is what I talked about, the CAGR forecast, three years. This is the Ducommun revenue in dollars. This is for 2018.
All right? Left is the CAGR and bottom is the Ducommun revenue. You can see here that on 37 this year, not like, oh, we're going to do this in the future. This year, we're about $100 million. Okay, you see our missile program, almost $80 million. A lot of that is just at Raytheon. There you go about the theme on early innings. Airbus, this is just getting started, but we'll take close to $20 million from 2016 onward. This continues to grow, the F-35. With 87 is locked in, F-18, and we have our Apache. This is a good example. Now there's more coming, which we're not going to disclose yet because they're not ready, and we don't have contracts in place, but there are other major programs that we're working on. We're not standing still.
We like our position and happy to share this with you today. Okay, just a few final comments on the markets. This is obviously a very tough time for our electronics business. As you can tell from our military exposure. Before I showed up, we suffered a lot with this. Now we're back, and I think, we still believe it's going to be flattish, even after 2020. There's just too many upgrades needed. There's too many global threats. That's our thesis is that, unfortunately, we're still going to run a pretty high level of military, and we have a lot of opportunity here for us. Revitalization, platform upgrades. The other thing is FMS. Okay, FMS in the last administration, not so much. FMS in this administration, a lot. A lot. We're feeling all that as manufacturers. Here's the missile market going a little deeper.
Just to let you know, we work with top-level research companies. We pay a lot of money for it, but we work with some of the best in the industry as far as when we put these things together. This isn't our thoughts. We go out to research companies that are well-known, and they work with us on these. You see right here the missile market and military aircraft. If we step back from it and just say, "Okay, where's Ducommun? Where's their footprint? Where are they?" Okay. They're in growing markets with capture of greater share to come. Can't ask for a better story. As well as our commercial, we've all seen these charts. I won't go over them, but you can see we've got great, at least through 2020 or 2021, we've got great prospects, especially on the narrow body, on commercial.
One thing I'll also say on this, we have some outsourcing. We also have some insourcing. You'll hear from Boeing, you'll hear from Spirit, we're going to take some work in-house, and sometimes they do that. One of the nice things about titanium, at least in our research, is nobody wants to do titanium at that level. Okay? It's really hard to do. It's kind of a smaller niche process. You got to heat, you got big factories, you're heating molds up to 700 degrees Fahrenheit. It's a very tricky thing, and it's hard to do. We feel really good about our investment. Now, our titanium business is 50% of our structures revenue, 5-0. That's meaningful, and we feel good about our position and where we are in the marketplace. Good stuff there. You see our titanium content.
Also, titanium has continued to grow as we go forward here. You can see the A330 from 3% in the A330 to 14, and the build rates. You guys know the backlog and the market forecast. That's, I think, a great story as we go forward. It's my last slide, and I will turn it over to one of my colleagues. As we thought about our day with you and thought about the investment thesis, I think, right out in front, we have these proprietary and unique capabilities. All right? We also have industry-leading brands. We're also working on our aftermarket. I think that's a big part of it. We're continuing to refine and develop our business model. You'll see that as we go forward here, and what we're going to do. We're only interested in winning and winning the right way. Okay? That's it.
I have very little patience for poor performance, and no. Okay? We don't do that here anymore. You can get supported, but you got to deliver. End of story. Okay. Improving financials. I like this word, runway. We used it at one of my last companies, UTC, because that's how I feel. Runway on revenue as far as early innings, and runway on margin expansion. We'll talk more about that as we go forward. Just because of our legacy, we have really strong relationships with OEMs and Tier 1s. Just because Ducommun made the spoilers since the '60s and everything else, we deal directly with Boeing, we deal directly with Airbus, we deal directly with Spirit. We're very well-connected for a company our size. It helps us as far as trying to understand the industry better and service customers better.
I think that's a real positive. Finally, we've always been a good cash flow company, as you can tell from the financials. That's not going to change. It's only going to get better. Okay, with that, I appreciate your attention this morning, and I'm going to turn it over to Dave. Dave?
Thank you, Steve.
You got it, bud.
Morning, everybody.
Morning.
As it says there, Dave Wilmot. Got responsibility for the electronics and the Human Machine Interfaces group within Ducommun. An overview of the electronics systems group. For the context of this presentation, it was splitted into two parts. The Human Machine Interfaces group, which is really the proprietary niche sole source products that we have, and we'll go into detail on those, and then the electronic solutions. In terms of the facilities on the slide that Steve put up earlier, Human Machine Interfaces consist of Huntington Beach in California with a support manufacturing facility in Thailand that really supports the Carson facility products. Is basically acquisition of 2010. That's Appleton, Berryville, Joplin, Huntsville, and Tulsa. Within the Human Machine Interfaces group, what do we focus on? Well, start with Human Machine Interfaces, which really consists of cockpit panel push buttons, toggle switches, rotary switches, and backlit panels.
It's a legacy business that's been around for a long time. The evolution of aircraft today. There's still 130 push button switches and toggle switches on a 737 MAX, for example. It's still a very buoyant market, even though sort of the glass cockpits have come into being. Lightning Protection Systems, and that's just an example over here, which has been a real growth area for us with the in-flight entertainment in the SATCOM business. We're providers of whether this is a Gogo radar, uncertain, a Panasonic radar, a Row 44 radar, and a Viasat radar. From a lightning protection standpoint, all of those products are fitted with Ducommun product. A growing market for us, a great market for us.
As we move forward, it'll go from a retrofit OEM activity to an aftermarket activity when these parts come back for repair and overhaul. On the engineered solutions, also it does read across to some of our motion control devices. An example there is the uncertain. Customers rate them, but we do a number of things there. We do harness assemblies, we do circuit board build. Then we also do some motion control motors as well. Over here on the right, just two examples of the product lines that we support, again, from across the electronics and Human Machine Interfaces business. You've got the V-22, where that's a good program for us from an OEM standpoint. Working with Bell, we do the power distribution and control for the heater mats and the main rotors. That assembly sits up in the hub of the nacelle.
We do some other circuit board and harness assemblies also on that program. Then we've got the F-35, where we've got a building content both with boards, harnesses, and some subassembly build that we do for some sub-tiers that go into the F-35 program. On those programs, we're currently in a dual-source scenario. With our performance on delivery and quality, we expect our share as the F-35 ramps up, that our share will be greater than the 50% share we have today. We see growth there as that platform grows. Fits that we have in the electronic systems businesses, we make robust in a robust environment. That with our card assemblies, when we bring those two together, we add some structural components, and we do our box build.
We can take the elements within the electronics businesses and put that into a value-added subassembly. That's growing because the primes, certainly Raytheon, are starting to put more and more high-level assemblies out to the supply chain, and we've been successful in a number of programs there. Top customers and platforms, as you can see there. Just over 50% of our business in the electronics comes from seven customers. Again, all the well-respected primes and a couple of tier ones. A great base there to build on. Some of them are bigger than others, and that's an intent there to grow. As Steve mentioned, with Raytheon, with the missile business, we have a model there that's worked very well. As you see there, Sikorsky is a customer, but Lockheed itself isn't.
From a runway perspective, there's plenty of ways to go regarding our opportunities as we go forward with the electronics business and indeed engineered products. If you take some of the platforms, the core of our business is missile and missile-related. That's major. That's obviously new manufacture. We have F-35, which is again, new manufacture, and that will increase as the rates build up, as we go forward and our market share grows. F-18 has got a good steady build rate for the foreseeable next 3 to 5 years, and also there's aftermarket. There's a lot of F-18s out there that aren't operational, but we're bringing back into service to increase the size of the fleet that's active. We've got the OE benefit there, and then we get a lot of repair and overhaul.
F-18 is one example where we do box build, we do cable assemblies, but we also make the complete subassembly for the radar box for both the F-18 and the F-15. The F-15 is obviously predominantly aftermarket. In-flight connectivity. We do a lot of work on the lightning protection side, and then with electronics, we're now doing a lot of card build, card assemblies, and some small electronic subassemblies to support the distribution of the in-flight connectivity throughout the aircraft. Again, a growing market for us. A lot of the in-flight connectivity, some of it's being line-fit now at Boeing and Airbus. A lot of it's a retrofit. There's a huge uninstalled fleet that is yet to be fitted out, and it's the way of life now.
Everybody expects to be able to get on the aircraft and be able to connect to Wi-Fi and do whatever we need to do. Huge market runway for us there. Bell V-22, good steady production still going, and the aftermarket that goes with it. For the components that we sell into the V-22 program, they are removed, so there is a significant and a growing amount of repair and overhaul coming through on that program now. Obviously we've got the others. Nice balance there. We've got new programs with the missiles and the F-35. We've got steady aftermarket with the F-18 and the V-22, as well as production, and then the growing in-flight connectivity. A good landscape for us to build on as we move forward. In terms of revenues and backlog.
As you can see there, our revenues, 2016, 2017, was kind of the end of sequestration. As we move into 2018, we're seeing some growth. One of the things around here is in 2017, we went six layers deep within the business, and we really looked at what we had. As Steve said, what we want to be in is value-added, where we add value to the customer and add value to Ducommun. There were some programs that were adding value to the customer but weren't adding value to Ducommun. They weren't in a profitable state. We exited a number of product lines, some in the industrial sector, but also some in the military and space as well. Whilst you only see a relatively small growth there were a number of military and space programs that we did exit.
Just one example was $8 million of revenue in 2017 that we exited, it wasn't there in 2018. Our growth in our new businesses, the parts are greater than that because there's pushes and takes, and there's been some mix in what the customers were taking. Strong backlog from $263 million in 2016 to $307 million in 2018 through the third quarter. We've got strong backlog as we move forward, and we've got a very healthy pipeline with our customers across both the electronics and the Engineered Products Group. Now we'll come on to the Engineered Products Group. We'll just go into a bit more detail around the products, what we do, and what our individual strategies are. We'll start with the Engineered Products, and then we'll move on to the electronic solutions after that. Revenue mix.
What we have within Engineered Products, and again, going back to my second slide, that's the human control or Human Machine Interfaces, the push button switches, the rotary switches, the motion control devices, which are motors and resolvers, the RF business that we have and lightning protection. Within those businesses, we've got a very healthy mix. Currently, it's 55% OEM and 45% aftermarket. If you look at how the vertical market is split, today 30% military and space, 35% commercial aerospace, and 13% of other, which mainly is industrial and comes out of some of the commercial RF work that we do within the Carson facility.
As we move forward, and you'll see as we go through the strategy, the plan is that we're pushing to get the aftermarket growth, and the aftermarket should be more than 50%, and the OEM will become less. We are having a focus on driving the aftermarket growth as we go forward. A few examples of what we have. What is our Engineered Products is about? They're generally sole source proprietary parts that are sold into niche markets. We're one of a few players in that particular marketplace. In some cases, we are number one, in some cases we're two or three. But there's plenty of opportunity for us in those markets, and we'll touch on that in a second. Now we're leaders in on these segments, most of them. If you see here, there's an aircraft cockpit, could be commercial, could be military.
These are our legacy switches. These are our push button switches, which there's an abundance of in every aircraft today. More in commercial than the military right now. But from a legacy standpoint, we have these switches fitted to F-15, F-18, F-16, Cobra, Apache, C-5, Chinook, Black Hawk. From a legacy standpoint, we have a great history, and we have a significant aftermarket content with those parts today. The work we've done over the last 12 months, going six layers deep is, well, what have we done lately? Well, lately we did develop the engine start switch. That's a rotary engine start switch for the 737 MAX. We also came up with some versions. That's compatible now right back to the classics. Any requirement for engine start switch for 737, all generations, we can supply.
We have good build rates with Boeing on the new build, and there's a healthy aftermarket there as well. We came up with improved designs. We worked with Boeing. We came up with a product that was superior to the offering they had in the marketplace, and that was introduced about four years ago. But around the switches, we didn't see that we'd done any development, and there was no reason why. We're going through a process at the moment. We bought the technology in, we're bringing the talent in, we're bringing our push button switch technology up to date, and that's a market that is one we're pursuing in both the OEM side and the aftermarket as part of our strategic plan going forward. Top right, this is our RF business.
We do some very complex RF high-frequency switches that go in from anything really, from industrial applications through to satellites. We've got both switches and we've got converters on programs including Mars 2020, Inmarsat and others. Again, we're dealing with all of the respective primes and sub-tiers in the satellite business. We're dealing with Airbus Defence and Space directly. We deal with MDA, we deal with JPL. We have a broad product base and customer base for those products. Down here, lightning protection systems. Two products, the strips that go on the outside on a radome. Any composite structure that has an antenna underneath needs to be protected. There's our system, and there's really only one other competitor out there in the marketplace. In this business, we've got about an 85% market share, and strong aftermarket.
Surge suppressors, low voltage, high current suppressors that go inside the aircraft in the event there is a lightning event and you get a surge going through the aircraft, then these suppressors are here to protect it. The 787, for example, has 25 of these throughout the aircraft, supporting systems that include the GE Common Core system and the Hamilton Sundstrand Power Distribution and Control. Our strips on the outside protecting the nose radome, the tail radome, the tail fin, and then any SATCOM that gets put on top of the fuselage. On the right-hand side here, you can see on our motors business, our motion control, where we are market leaders. We do what everybody else finds very difficult to do in terms of reliability, precision, and the demands on that product. You've got the motors, we've got the resolvers, and there's just a picture here.
What these can do on a missile system, for example, is they can control the wing deploy mode, the wing deploy system, and they're also used in the control actuation system, the CAS system. For example, on the next generation Tomahawk, there's motor opportunities on both wing deploy, control actuation, and we're active on those programs. In summary, niche products, proprietary products, a good level of technology into it. We believe that we do the difficult stuff. There's a lot of people out there that do the lower spec, lower technology offerings. The trends for Engineered Products. There's a focus. Everybody wants something smaller, lighter, the same level of performance or more, but in a smaller, lighter package. We work towards that across all of the product lines. There's strong growth trends in both commercial and defense segments. The commercial build rates are increasing.
The defense spending is there now, the programs are needing to be supported. There's continued aftermarket growth and demand. There continue to be high barriers to entry because of the niche proprietary nature of the products that we have within Engineered Products. What are we doing about it in terms of our growth strategies? The aftermarket represents significant growth for us. Again, when we went six layers deep, we were looking at our distribution process. Probably around, or a large portion of our sales within the engineered products is aftermarket. A lot of it was going through different distribution channels that weren't necessarily the best value proposition for Ducommun. As of October, we actually partnered with Seal Dynamics, part of a HEICO company. Seal are now doing all of our global distribution for our HMI product line, both civil, commercial, and overseas.
Gives us a level of transparency. It gives a better offering to the end user, it also adds a lot more value to Ducommun. What we were doing prior to that really wasn't adding value to Ducommun at all. We managed to increase both revenue, and that's fallen straight through to the bottom line on our aftermarket plan going forward. We're well-positioned in the market. We have the products, the legacy products. We're working on the newer technology to be compatible with LED, with ADS-B compliance, and everything else. There's a lot of good things going on. There's a lot of share gain opportunities in the marketplace around the complex motors, the Human Machine Interface in terms of the push button switches. It's a big market. We're a relatively small player, again, the runway there is once we get technologies.
We're working, there's a pipeline there now for both aftermarket and OE, and we're working those today. We've built the team to support the growth plan. We've brought technology talent in, we've brought program management talent in, we're bringing operational management talent in to really strengthen the team to make sure that we drive, we hold ourselves accountable, and we see the success. On the electronic solutions side, again, this is the LaBarge acquisition of 2010, 2011, the five business units that we now have there. Again, we've got nearly, well, we have got 60% made up of six customers. Obviously, as I think Steve mentioned, in this sector, Raytheon is our biggest customer and then these other guys share the balance of, and again, well-respected primes. The programs that we're on, 30% of our electronics business is missiles. F-35 in-flight connectivity, F-18.
That's pretty much a summary of the earlier slide, but this is just specific to the market shares and the program shares for the electronic systems group. Again, areas where we're growing on. If we take the value proposition that we have for the electronic solutions part of electronic systems, we are circuit board manufacturers. Now they're not the standard circuit boards. There's a lot of people who make circuit boards. What we make is high mix, low volume, but also for robust environments. We do the difficult stuff where you can't just run it through an SMT line. There's a lot of manual population and finishing in the boards that we make. You've got the cable assemblies.
As I say, it looks like a simple cable assembly, but there's a lot that goes into them to make sure that they themselves in a ruggedized environment. We bring the two together and then we can offer the sub-assembly value-added business. This is where we're growing significantly. This is a box for a shipborne system. This is actually the radar rack for the DDG 51. When you start to bring the circuit boards together, the cables together, we manage the structural assemblies that go around that, and then we do the full population and bring in other electronics and avionics as required, we can offer a much higher level of value to the customer. The customers that we have today, Raytheon and others, are starting to work. They were doing this work previously themselves.
They're now starting to look at putting that out in the market so they can just concentrate on final assembly with their growing opportunities that they have. High complexity, low volume, ruggedized. It's all about the ruggedization of it. Everything that we make within the electronics business goes through a lot of just routine acceptance testing in terms of thermal shock, hot and cold, a lot of vibration, and then all of the other environmental conditions. A key part there to touch on is obsolescence management. Certainly within the circuit board world, there's obsolescence every day. Part of our ongoing activity is we make sure that we manage every day on every product. The industry trends increased defense spending. Most of our increasing across the whole product line.
Just a couple of things here that's also helping our growth is the strong growth in high-speed data management, like included in the F-35 and other programs, and we're there on those programs. Also for the shift in GPS technology to the M-code compatibility. All defense spending from 2017 onwards requires GPS systems and guidance systems to be M-code compatible. That's causing the primes and the high tier ones to come out for alternate systems, and we're working with them on those solutions. A good market for us. Our growth strategy is to leverage the integrated capabilities throughout the business, not just within electronic systems. We take the boards, we take the cables, we come up with the value-added systems.
What we're also doing is taking some of our electronic systems capabilities that we have and matching them with our structures business. For instance, now we're working on a new program for a missile launch system where we're actually making the structural composite launch tube. We're integrating our cable assemblies into it. Again, a much higher level assembly that's going to the customer. Grow our missile business with the defense primes. Steve mentioned, as I've mentioned, Raytheon is a big customer of ours. Lockheed is not. We're taking what we've learned and we're taking that model across and we're trying to take it into the other primes to grow our business with the other primes. Pursue value opportunities with the air, land and sea. We do a lot of cabinets.
We do a lot of large sub-assemblies for shipborne systems, for submarines. So we do a lot of stuff on the Virginia class submarine and the DDG 51 destroyers that goes into companies like General Dynamics, Northrop Grumman, out of our Huntsville business. There's a lot of varied mix there, but they're all ongoing programs, and there's growth in all of them. We're well-positioned to support the current rate increases in the new programs that we're pursuing. We have a good footprint. We've got capacity. We've got the engineering talent and the manufacturing talent to support the growth. In summary, it's my last slide. What are we trying to do? We're trying to extend our leadership position in proprietary niche products where we can add value to Ducommun and add value to the customer. We're growing relationships with the OEMs right across the board.
We want good relationships with all of the primes and the tier ones that are important to us, and that's starting to happen as we move on. Focus on the value-added products and services. Historically, we were really all about building the revenue. We actually very carefully look at every opportunity that we bid, and if it doesn't add value to Ducommun as well as adding value to the customer, then we're not bidding that business. We're being very selective in what we do as we move forward, which is something not necessarily we did well in the past, whereas we would bid every opportunity, and we would price it accordingly to make sure we won it and have seller's remorse later on. We're focusing on innovation on the product lines.
We've got a newly created innovation committee that's supported by the board and led by the board. They'll be working with us within the operating units to identify what technology and the best technology to pursue and invest in as we go forward. We want to grow the missile business. I think we've covered that. Significantly with what we're doing with the products that we have today. Our distribution channels, and also what new products we bring in. Part of the aftermarket strategies, we are looking at PMA opportunities. We are looking at that both our products and the sub-assemblies, the next level assembly that they go into. Again, there's a huge untapped market there that we believe that we can bring value to in the marketplace. That's the end of my slot.
What I'd like to do now is hand over to Jerry Redondo, our senior vice president of operations and also group head of-
Thank you, Dave. Good morning.
Good morning.
As part of our overall transformation, Ducommun, our focus, I'm really excited to talk about our structures business, where we're headed, and the highlights of that. Clearly, we have a vision. I think that's first. We have a very clear vision of where we're headed. We've got a strategy to achieve that, and we're very focused on executing it. With that, we'll talk about the key products. As we talked about, Steve introduced the titanium forming is key. It's 50% of our structures business. What's really key here with the titanium, it's not simply titanium formed into a component. We're taking a very proprietary process, very complex, very difficult parts, both due to the complexity, the size, the contours, the dimensions. We'll talk a little bit more about that, but clearly, an area of emphasis for us. Composites.
We're extremely excited about composites from where we've been. Legacy, we've had metal bond and pure composite. Most recently, we introduced the VersaCore technology. That's a patented Ducommun process, both at the process level, the product level. We're going to see great things from that. Aluminum forming and chemical milling. Again, differentiating ourselves from the competition and from the typical aluminum forming, the characteristics here really focused on high level of complexity, larger part size, and then the contours, the shapes themselves are unique to what we would typically see in more standard fair competition. Extruded plastics, as shared, we're one of two that has that level of plastics and extrusions that are offering to market, both due to the material, the flammability that we talked about. We'll talk more about that.
That was our recent acquisition at CTP, which we're extremely excited about as well. Just to click on the pictures, the top left, that's an H-60 Black Hawk upward exhaust duct. What does that mean? We produced that. We produced that in New York, in our Coxsackie operation. The key there is the value that we're providing to our customer. Certainly, we're providing the product, so we're providing a very high level of delivery and quality, supporting the rate. More importantly, the solution provided here was that the customer needed a different outcome from that product. There was a high level of detectability from radar due to the duct, the exhaust, and how that was detectable.
What we did as additional value, we went in with Sikorsky, and we assisted and participated and contributed to the design so that that wasn't as readable by radar, and that translated to a different design, which we're producing here. Our focus is we're a solution provider, not necessarily just a part provider. The GE LEAP engine. You'll see here it's a minor part. You can see in the picture and then this here. These are the fairings. This comes from our VersaCore technology. It's a VersaCore product, and this is our initial offering. Since then, we've had additional wins that we've announced, which go into the thrust reverser portion. These are the blocker doors, and there's some closeout auxiliary panels that we produce as well. These are leading edges, so leading and trailing edges that we produce for wings and horizontal stabilizers.
For interiors, key focus of our plastics extrusions to focus on the interior. Customers. We're very focused at a tier 1 level, we produce to the OEM direct, and it's a Tier 1 level. Key customers, as you can see, Sikorsky, Boeing, GKN, Airbus, and Spirit. There's a tail that goes beyond that, our key focus here. Platforms, most importantly here, is we're on all the key single aisle, high volume programs. 737 MAX, A320, we're very well positioned on both those programs, and we're continuing to grow both at a market share or work share, as well as additional wins that we're working with our customers on. Key point here is Airbus. You'll see a relatively small percentage today, not indicative of our engagement with Airbus. We have a very close relationship with Airbus.
They spend time in our facility, much time in Parsons. We spend time in Toulouse. I was there two weeks ago. We're collaborating together on the future and how we can align with Airbus to support their sourcing strategy, which we're very much part of. From a revenue standpoint, again, overall structures, you'll see a nice appreciable growth this year, 2018. Our backlog, obviously growing as well from the 422 last year to the 473 this year. The other key point in our backlog is certainly it's an attractive growth rate, but even more than the growth represents is by virtue of the agreements we have with our customers on replenishment. We have vendor-owned inventory. We're providing inventory to our customers. It's pay on consumption. Our lead times are continuing to be worked, to be reduced. Titanium's extended, but we're mitigating that to on-hand and stores in-house.
The key there is the longevity of that backlog and how it gets firmed up is at a lesser window than it was previously. We're able to be agile and react to that. The backlog in its current state, as opposed to what it would've been two years ago based on those same agreements, would've been a higher number. Titanium forming, really want to frame this up to really talk about what that is. We're taking titanium sheets, and we're heating it to 1,600 to 1,700 degrees. We're turning titanium into virtually plastic, is what we're doing. The proprietary process here is that we are taking a design and a concept our customer has, and we're translating that into a finished product.
We're doing that through a design of the process based on the expertise that we have internally through our engineering and our operation. At a high level, we form the part in a die, a very large die. These weigh multiple tons, and they're large parts. They're complex, they're highly contoured, and they're very close tolerance. There's a significant differentiation between that process and what you would typically term titanium forming. With that, the customers, about the same. Added here is GD, Airbus, Spirit, Sikorsky, and Boeing. The platforms, again, we're on the top platforms. We have significant bills and material on the single aisle, 737, A320, and that extends into defense as well with the weighted of that into Black Hawk 787. The process, our value proposition. Again, we're differentiated from typical forming and typical titanium parts.
These are the highest level complexity, size, tolerance, contour, shape. If you look at some of the snapshots here, we've made a considerable investment in the previous two years to be rate ready. We've aligned ourselves for Rate 60 for 737 MAX. We work very closely with Airbus on the R75 Initiative, which says, understand what it takes to be at R75 and being able to take those actions. Today, we've enabled ourselves to be R60. R58, R60, that we're executing to the most immediate forward requirements, and we're positioned, and we understand what it takes to be R75 and are ready to draw on that as required. Some examples of the product that we've invested in. It's kind of a high level. Again, we take a titanium sheet, and we cut the periphery of this part into a flat shape.
That translates into a die, then we form that. There's two versions of the forming. There's what we term hot forming, then there's superplastic forming, both of which translate the sheet into a form into a die. The superplastic forming introduces argon gas additionally, the argon gas creates an environment where the titanium becomes even more pliable and offers an even greater, more contoured, differentiated shape. It's something that I think we're good at. Our customers term this as, "We're at a different dimension from others that do this," that's a quote from them, from our two largest customers. We're vertically integrated, we go out for almost nothing. There's one process we go out for, minimal processing. We go from raw material to finished product. The superplastic forming and the hot forming, the weighted portion of that is in Parsons.
Then the forming, hot forming, both hot and cold, we do in our New York facility. Again, this is a very proprietary process. We're focused on that unique set of parts, that portfolio, we've done a lot of portfolio management across structures in the last year, I think we're well-positioned today to support the growth and the add-on that our customers have available to us. These are two examples. These are exhaust ducts or inlet ducts that go on one of the leading business aircraft. Just to visualize that, those were flat sheets of titanium, there was the forming, then to take that conical shape, there's very detailed welding as well, which is of a very high standard and requirement. All of that work is done internally. Industry trends.
Our customers, Airbus, Spirit, Boeing, very focused on working at a higher level. Their input to us is they want to work at a higher level and have us as their partner as a provider of these very high-level complexity parts. Two key points there is the ability to mutually support rate and to mitigate risk. In some cases, a customer has that capability to a lesser degree, we're partnering with them to produce half the parts, as we get up to full process capability, the second half, based on the strategy, would be to translate that second half back over to us. There's certainly an increased use of titanium parts in new aircraft. As the capabilities increase, the automation increase, it becomes more affordable. It's a lighter solution. It's a strong solution.
Increasing the technology and automation, that's key for us in the industry, I think as we all know. Longer contract terms. Whereas in the past you might have had a two or three-year agreement, the contracts now extend along a much further path, 5-7 years, sometimes termed a lifetime agreement with iterative points of negotiation pricing that we need to take. Our focus, along with the trend, is to really drive customer service. We're a solution provider, deliver quality parts on time, be there with our customers, support rate mitigation, their sourcing strategies, their make-buy strategies, be that provider to them, ensuring we have the capacity to support the rates. As you all know, there's much discussion and concern over rate readiness of the supply chain in order to support Boeing and Airbus.
Our focus has been, we've invested in it greatly over these last two years, are well-positioned today to support rate. Talent. We can buy equipment. Equipment doesn't yield product. People. It's all about people. We're continuing to invest in talent, to developing talent internally, as well as the technologies. As Steve shared, our operating system. We're very focused on that. We act on that daily, and we're seeing much success from that. Quality and delivery, and providing solutions for complex challenges, complex problems that our customers carry. Composites. Composites, kind of 2 iterative levels. We have our metal bond and pure composite, and then we have the new technology that we introduced, VersaCore.
From the introduction of VersaCore, we have the fairings that go in the GE LEAP engine, and then we have the blocker doors that are part of the thrust reverser system that we've introduced as well. We're really excited about it. There's tremendous growth. We've spent a lot of time with our customers. They're very interested in what we're doing. The best example of that is the work we've done with Airbus, where we've worked over the past two years to develop the process-level approval so we can apply VersaCore to critical flight surfaces. We've passed that. In recent, several months ago, we passed that, now we're at a test readiness level 6 relative to VersaCore, now that product technology can be applied to a multitude of applications. Our top customers, you'll see GE, Boeing, and Bell.
Platforms, the common platforms, we're on the single aisles, Apache, Defense, we have Legacy 757 still, some work remaining on 767, there's a tail with other applications we support. Key point here is we've provided the 737 spoilers since the beginning. Since 1965, we've been a provider of the spoilers ship set for 737, and we continue to do that. Our value proposition. The proprietary VersaCore Composite technology, it's a differentiator. The value there is ultra-high quality. We've surpassed all the tests required that draw the equivalent to what was required in the metal or what was required in the previous composite configuration, and it's a value.
I won't say it's a price play, but it's a great value, and our customers see it as a very affordable, high-performing solution, where we spent a lot of time here in the last year, and most recently, we've become an improved Apache blade repair station in Monrovia. We work closely with the government, we work closely with the Army and Boeing, and now we're supporting the repair of Apache tail rotors, which we produce at the OEM level from Legacy and still today. We're also doing the repairs on the main rotor blades for Apache. Composite metal bond, autoclave processing, core. The key there is the technology that we've introduced, the proprietary processes that go with that, the focus, the altitude of the products that we do focus on. It's the higher level, larger, more complex, spoilers being an example of that.
We've spent a lot of time, cross operations or cross Ducommun on our lean focus, our lean operations, continuing to drive that transformation in everything we do. We've spent an incredible amount of time in our Mexico facility in these last 10 months, and we're setting up our operation to execute VersaCore in Guaymas, Mexico. There's really 2 key points there. It's not only that we're producing the product in Mexico versus the U.S. There's some cost, obviously, advantages to that. The key there is we're setting up a best-in-class process and a best-in-class operation. Regardless of where it was, we would be yielding significant results from that. We've invested in that. We invested in that beginning of last year, and we're getting close to finishing that up this year.
We'll be producing VersaCore, the most latest win, in Guaymas, and be shipping from that early next year. Producing, working on the prototypes now. As we shared, the rotorcraft defense applications, we have the Apache tail rotor blades represented in the picture here. The repair station, that's a snapshot of the repair that we do. The parts come in from the depot. We do the disposition ourselves. We translate that into the work required, and then we ship that product back. The flight control services, that's an example of a portion of the 737 spoilers. The VersaCore fairings. Again, right in this area here, these are the products. Today, that's a combination of production in the U.S. and Monrovia, and that's about 50% transferred into Guaymas today, and will be fully transferred into Mexico by mid next year on all VersaCore.
The work we're doing in the U.S. will then translate into Mexico as well. Trends in growth for composites, certainly an adoption in the new wide body designs expected will drive significant growth. Increasing use of composites replacing metal. You look at the percentage today on 787 as an example versus an earlier version of a 737, it's very significant. There's no comparison. Automation at OEMs and tier ones. Higher level assemblies being the pursuit of the OEMs versus component level manufacturing. Even in examples of a product that we were producing today or yesterday, what's that next level that that part goes into? Asking the question for ourselves, is that something that we can align to and provide a solution to our customers for?
Based on their strategy to work at a higher level, that introduces an additional opportunity and solution that we can provide. New manufacturing technologies driving lower costs. Certainly, that's an ongoing trend and a high area of focus in the trend today. Our growth strategy, again, is focusing on the technology and the process of VersaCore. Most recent example there on technology and process is all the VersaCore product, all the composite product, goes through a nondestructive testing, each part 100% inspection. On the fairings today, there's an NDT process that takes about 16 minutes per part. 16 minutes per part. With the introduction of the technology that we're putting into our Guaymas operation, and we've just introduced this, is now we can produce 20 parts in that same 16 minutes. It's 16 minutes a part traditionally in how that process is executed.
Going forward, our Guaymas operation, based on the technology and the process focus, it's 20 parts in that same 16 minutes. That's been our focus, is to look exponentially at what's possible. Key strategies to grow the repair, meaning the blades. Again, we have the tail rotor, the main rotor. There's more opportunity there for us. We're an approved repair station by the army, by the government, and we're going to continue to drive that. Leveraging our position on existing programs and existing platforms. Expanding on missile defense and integrated product technology. Dave spoke a bit about this, but we've introduced a product now where we're doing the composite work in our Monrovia plant, and we're doing the wiring harness in our Joplin, Missouri operation.
The two marry up, and they're integrated into one end item, providing a much higher solution to our customer, which flattened the bill of material, and it's proven to be a good process for us. Again, expansion of our Mexico capabilities and capacity. It's not only low cost country, it's process, it's technology, and setting up a world-class operation and capabilities. Aluminum forming and chemical milling. Two things here. The aluminum forming, again, much like the titanium, is our focus is on the highest level complexity. We have significant capabilities on size, which very much differentiates us from our competition, aligns very closely with the OEMs and their capabilities, in some cases, they're capabilities that they don't have. On the chemical milling, same focus. High level complexity, high dollar parts. We do chem milling for the parts that we produce.
The parts that require chem milling. It's also a differentiator because there's very minimal capabilities for others to do that work, and it was something that they typically would have to outsource, which offers risk, and then there's a capability gap externally for complex chem milling. For us, the chem milling is a differentiator. We focus on titanium and we focus on aluminum. We've done a lot of portfolio management this year on this, so we've aligned our portfolio to where it pegs to that. Right? The high complexity, higher size, difficult to source. We're providing a higher value. Our top customers are noted, the same group. Here you'll see Bombardier and Triumph and GKN. Top platforms, we have a good mix of defense and commercial. Again, we're on the leading platforms. Key points on our value proposition. Again, the proprietary forming methodology.
These are typically larger parts, large parts, complex. Our customers come to us not because they need a part, typically, they come to us because they're having a challenge. They're having a challenge with the design. They need assistance on that. Most regularly, the challenge is on getting the parts configured, quality, delivery, consistency, minimal variation. That's where we come in, and we engineer that solution, and then we apply it to the capital and the equipment and the process strength that we have. Integration. Again, we're going from raw material to a finished product, inclusive of the chem milling, machining, and assembly. Key in our process capability is our tool design and our process design. We have a lot of legacy. We have a lot of engineers with a lot of talent.
We continue to breed that talent to build up our bench strength so we don't lose that. Again, with a highly experienced team, dedicated, committed team. Key points here on the chem milling. Again, the differentiator is titanium, aluminum as well, but very high complexity, very high dollar parts. We do that work to our product as well as just the chem milling for customers that only require that. The high-speed machining, the CNC, the brake press, what's unique about that, as opposed to the typical capital of those descriptions, is the size, the tonnage, and the ability to support and control the tolerancing. We've continued to look at the technology. We've upgraded, we've modified over these last two years to ensure that we are aligned to do that. This is a piece of equipment, the high-speed machine, that we've added these past 18 months.
Industry trends, certainly, it's a niche segment with limited number of competitors. Again, that's at the level of the product that's in that circle that we're focused on. There's a very high cost of capital, the barriers to entry are challenging. There's really a strategic question on whether that's the right thing to do for others. Limited competition with chem milling. The capabilities we have for the complex, large parts, that's certainly a trend in part of the environment. Consolidation through M&A. We're seeing that with our competitors and others that do the forming and the work, typically, that we do. Our strategy going forward is continue to focus on niche capabilities. We're not a big supplier of anything that's formed. It's the complex, the niche. Our focus is on increasing our work share to that degree on the key applications noted.
Leveraging our scale and unique capabilities for the larger, the complex aluminum, the aluminum-lithium, which we do, as well as those applications that require that chem milling, because that in itself draws others out, where otherwise they'd be interested. Extruded plastics. Again, this is our CTP, Certified Thermoplastics, that we've completed the acquisition on here recently. The focus here, as Steve noted, the $0.50, $1 a pound to $18 a pound. This isn't your typical plastics. We're one of two that provide this material to this configuration at this level. It's proprietary materials. It's also a proprietary process. The process engineering as well as the materials puts us in this unique position.
Continue looking at where we can add more value, add the most value, by applying this technology and material, ensuring we have the capacity to support significant growth, which we do today. Key applications, you'll see the product, and you'll see different points in the interiors where the plastic and the extrusions are applied. For trends, thermoplastics, the extrusion's expected to continue to grow. Replacement of metal parts, aluminum parts, and from customers' experience, cabin density changes and upgrades, they're driving spending, driving improvements and upgrades into the interiors, which would translate into requirements that need to be fulfilled, which we're positioned to do. Our growth strategy is driving share gain, continuously doing that from our competitors, expand our capabilities for a higher level, more value-add solutions, the aftermarket, reaching out to the aftermarket on the MRO and various channels to do that.
We're focusing on our strategy and our actions in order to achieve that. Overall, our structures strategy summary. We've been in a very transformational role. We're very excited about structures. We're committed to our strategy. We're committed to our execution. We're seeing those results read through, but we're not even close to being done. We have a lot of opportunity in front of us. Key is extending our leadership position. The proprietary products and solutions is key. Differentiating ourselves. Continuing to draw and build on our strategic relationships, which we have strong relationships today. We're continuing to build upon that. Focusing on the value-added solutions. What we're producing today, it's a good point. What happens next to those products? How does that branch out both vertically and horizontally to a broader span? Focusing on restructuring costs.
Leveraging that, but also our lean practices. Our lean practices, the restructuring happened, we're done with it. Continuing focusing on the lean operations, the innovative engineering, the process to continue to reap those benefits. Airbus is a significant growth customer with us. We're very closely aligned. We're in the midst with them in terms of transformation process, and we're very much part of each other's futures. Expand our presence on the high value and growth platforms. Workshare, additional wings is the key focus there. Driving the technology with VersaCore. We're extremely excited about that. All the production for VersaCore will be executed in our Guaymas operation, Mexico. It's two points. It's low cost country. Even more impactful, we believe, is the process technology innovation that we're putting into those processes in order to achieve customer service, great readiness, and affordability.
With that, I'll introduce Suman Mookerji.
No, we're going to take a break.
We're taking a break.
Everyone, thank you for hanging in there and your attention. Dave and Jerry, thank you for the excellent job. We're going to take a 10-minute break. We'll come back. We got a little more to do, then we'll wrap up. Thank you very much. 10 minutes. Everybody. Thank you again for hanging in there through the first part. This won't be as long, then we'll take some Q&A. If everybody can take their seats, we hit the doors, again, appreciate everybody hanging in there on this. With that, I'm going to turn it over to Suman Mookerji. Suman's going to walk you through our M&A strategy. I'll turn it over to you, Suman.
Thank you, Steve. You've heard a lot about the good things we're doing on the organic side of our business, I'm going to now spend a little bit of time taking through the even more exciting stuff, our inorganic growth agenda. I've been with Ducommun now since April of last year. A lot of the time that I've spent has been setting up our strategy as well as our acquisition and post-acquisition integration function. We haven't had this role in the company. As Steve mentioned, we hadn't done any acquisitions since we bought LaBarge in 2010, 2011. For a period of six or seven years, really, we didn't have anyone covering this role. We didn't have the standard work, the processes needed in order to successfully execute on transactions and execute flawlessly on post-acquisition integration.
We've been, over the course of the two acquisitions that we've done, set up that process, the discipline, and the standard work in order to be able to execute on that going forward as well. What is our vision from an M&A perspective? The vision is, over a period of time, to have built a portfolio of proprietary engineered product businesses in aerospace and defense. Businesses which either are or have a clear path to becoming a leader in a niche segment. That's where we want to be. In order to do that, in order to execute and achieve that mission, what we're going to do is, naturally, over a period of time, keep acquiring such proprietary engineered product businesses. What we're going to do is we're going to, after we acquire them, we're going to aggressively execute on a profit expansion plan.
Because that's really, at the end of the day, what will deliver value to our shareholders from our acquisitions. I'll talk a little bit more in a little bit around what that means, and what our screening criteria is, and how we go about with the expansion plan. How are we working on our pipeline development? How are we screening opportunities that we look at? We have a very proactive approach. We are sort of exhaustively scanning the universe. We work with a search firm. We have been working with consultants to scan the entire A&D landscape to identify segments that would be attractive to us and that fit the criteria that we are looking for. I spend a lot of time attending trade shows and conferences, identifying new candidates that could be a potential fit for us.
I also spend a lot of time with bankers, some of whom are here. Over the period of the last 12 months-18 months, educating the banker network on what really we're looking for. We've historically been known as a structures business and a more contract manufacturing electronics business. My work has been to kind of educate them on our M&A agenda, which is focused on engineered products. I think we've been quite successful in getting that message out there, and we've had very good visibility into the different opportunities that have come into the market over this period.
Finally, working with the tier ones and the primes, and maintaining the relationships with them and their corporate development teams, many of whom I've known, either come to know in the last 18 months or through my prior A&D experience with a large tier one A&D player, have been able to kind of continue to build that network and stay in the loop on opportunities as they come up. With this approach, we've been able to stay on top, not just of all the privately held businesses, family-owned businesses, but also the private equity-owned businesses, as well as any carve-out opportunities from the tier ones and primes. In the last 15 months, we have, applying this approach, seen more than 250 companies. We really had some good success with this approach in looking at a wide gamut of companies.
We have, however, been very disciplined in our evaluation and our screening criteria. We look at screening the businesses at 2 levels. One, at the product segment level to identify whether that specific niche segment is attractive to us. What is the strength of suppliers in that specific niche space? We like businesses that have a moat around them, so there are high barriers to entry, and that often comes from proprietary technology, which is protected in some way or the other. We like businesses with intellectual property. We also like businesses which are specified on platforms. With A&D, if you are specified on the right platforms, you have a long life in terms of revenue potential. We like businesses or product lines where you can get specified on a platform and enjoy the fruits of that platform for a long period of time.
We like businesses which have low capital intensity. We like businesses which have high aftermarket content. Both of those attributes make the business resilient to cycles in the industry and provide good balance to the rest of our business, which may have more of an OEM focus. Those are the attributes that we look at from the product line focus, with one other addition being the size. Today, where we are with our leverage, we want to be very disciplined in maintaining our kind of debt to EBITDA ratios and be responsible. That kind of flows through our M&A identification process as well, because we want to identify niches where within our M&A size constraint, we can be a leading player in that space.
Our typical sweet spot today, as it stands now, is for transactions with an enterprise value of $25 million-$100 million. That's our sweet spot, and we can keep doing those kinds of tuck-in acquisitions over the next couple of years. If we do find opportunities which are really a great strategic fit, we can certainly stretch beyond that at the right time and for the right business case. That kind of explains the product line criteria that we have, and then the company criteria. Once we like a particular product line, that's not kind of the end of the screening. We have to like the specific company within that product segment. Most important of all, the company needs to have runway. Steve talked about runway in our existing business.
There certainly needs to be runway for profit expansion in the business that we acquire. That's really critical. We need to have, before we execute on a transaction, a very clearly defined path to significantly expanding the EBITDA profit in the business over the next three to five years. We have a strong process in actually executing and doing the integration and executing on our plan. We're going to continue to maintain that discipline going forward. The kind of other attributes, we like businesses which, of course, with the A&D content, we want businesses which are a leading brand in that segment.
If we like a segment, we want to make sure that we're either buying a player that is already a leader in that space, or we have, again, a clearly defined path to make it a leader in that space. Those are really critical. Finally, we want businesses that have strong management bench strength. This is sometimes a concern, especially when you're looking at deals within the $25 million-$100 million range. You're looking often at family-owned smaller businesses, with a lot of knowledge residing in the minds of the owner. We want to make sure that when we buy a business, either we have a plan to retain and keep the owner motivated post-acquisition, or we have a clearly laid out succession plan to the current ownership. That's kind of our process.
As you can see, as I mentioned, 250+ companies evaluated in the last 15-18 months. We've closed on 2 acquisitions and there will be more to come. I wanted to take you through the first acquisition we did, of Lightning Diversion Systems, and Dave covered that to some extent in his portion of the presentation. We bought Lightning Diversion Systems in September of last year for $60 million. They're the world leader in lightning protection for radome systems. They're definitely benefiting from the macro trend in more connected aircraft, and we see very strong growth in that business for many years to come as more and more planes get connected. Even today, there is a significant base of legacy aircraft which don't have connectivity, and that just has to happen. We're going to benefit from that.
I spoke about aftermarket being a key consideration for us when we screen acquisitions, there is a huge aftermarket content in this business. Not just from the retrofit business of retrofitting legacy aircraft, but even existing aircraft that have connectivity. The radome, typically on a commercial aircraft, needs to get overhauled every five to seven years. When the radome gets overhauled, our product gets peeled off and thrown away. We are able to resell every lightning protection product or lightning protection strip that we sold five or seven years ago, once again. Terrific aftermarket business. It's not going to go away. You're going to need connectivity on the plane. You're going to need the electronics, the antenna, the receivers, on top of the aircraft. You're going to need a radome, which is going to be made with composite materials covering the antenna and the electronics.
You're going to need lightning protection because the composite material doesn't conduct electricity. Terrific business. Well, before I go into that. Integration, I said we've really put in place a strong process for integration. When we go into a transaction, we make sure we have a clearly defined plan, a day one plan, a first 90-day plan, and a longer-term plan of what we're going to do with the business. When it came to LDS, it was kind of a new platform for us in terms of a product line. The integration was not heavy. We weren't integrating it with an existing business. For all the other integration that we need to do from a functional perspective with regard to compliance, financial reporting, health, and safety, we were able to successfully integrate it in less than a quarter.
In fact, within the first month or two, that the business could get past that and go on to the real objective of growing the business and continue on their growth path. How have we done in this business in the first 12 months? We completed 12 months at the end of the third quarter of this year. You can see that versus our acquisition model, we are ahead on revenue by more than 110%. Over 118% on the EBITDA. That shows you that we're conservative when it comes to modeling out our growth. We're not looking to make aggressive assumptions in order to support a high valuation.
We are very disciplined, and I wouldn't say conservative, but very realistic in our projections, and we make sure that we're able to generate value from the acquisition and don't get carried away in the hype of trying to get things done or get deals done for the sake of getting deals done. What is our plan going forward? What's the outlook for the future? We intend to continue building the pipeline in a very exhaustive and relentless manner, to make sure that we have visibility into everything that's out there or may get out there in the future. We're going to maintain a cadence of doing acquisitions, not at the cost of the discipline, but we feel like there is still a lot of opportunity out there in the market for us to continue doing these add-on acquisitions.
We feel like we'll probably do fewer in the next year or two, based on our leverage. As we continue to build our capacity, we will certainly see more transactions in future years. For every acquisition that we do, as I mentioned, the plan is to aggressively execute on our EBITDA expansion plan, for each and every one of those transactions in a well-planned and disciplined manner. With that, I'll pass it on to our CFO, Doug Groves, to take you over our financial outlook.
Great. Thank you, Suman. Thanks everyone for being here today. It's great to see so many familiar faces. I've got a few slides I'd like to share with you on our financial outlook. We'll go through a brief look back on history and where we've come over the last 18 months with our transformation and how it's reading through in our financials. I'll talk a little bit about the actions that we've taken and will be taking to sustain that financial performance. We'll share with you our capital allocation strategy going forward, which has changed from where it had been in the past with the acquisition strategy that Suman just laid out, and then wrap up with our financial priorities for the next few years. Oh, excuse me.
My comments here will kind of focus really on 2017 and 2018, because I think those are the most relevant as we began the transformation of the company. You can see on the top line revenue, good growth. That does include the impact of ASC 606 adoption this year, which added about, on an LTM basis, $15 million-ish in revenue on the top line. Most importantly is the EBITDA expansion, so 900 basis point expansion in the EBITDA, and that's really been reflective of all the restructuring activity that we've done. I'll talk a little bit about that further in the next slide, but that's certainly helping to boost the margins in the company. Our debt at $227 million at the end of the third quarter.
Up a little bit reflective of the CTP acquisition, which was $30 million, offset by about $18 million of debt paydown so far this year. We do expect to pay down about $25 million in debt this year with the strong cash flow generation of the company, that again, we'll get to on another slide. On a trailing basis, about 3.5 turns levered. As we finish this year, probably expect to be closer to 3.2 turns, and we're certainly comfortable at that level. Steps we've taken so far that are really driving these financial results. As talked about, we streamlined the organization. The last several conference calls, this has been a major topic. We've incurred about $19 million in restructure charges since the beginning of the program.
About $2 million- $3 million more will be incurred in the fourth quarter, the whole program comes to about $21 million- $23 million since we kicked it off in the fourth quarter of last year. The goal all along has stayed consistent, that with this restructuring program, we take about $14 million of costs out of the infrastructure of the company. It's a combination of fixed asset reductions, footprint consolidation, and of course, a reduction in the workforce of roughly 6%. It's setting up nicely for 2019, as we sit here today. Suman just talked about executing two strategic acquisitions, we've got a great process in place to continue to build that funnel and look for the right assets to add to the margin expansion of the company. The rationalization of the product portfolio.
You heard Dave talk about that a little bit earlier with Steve's arrival in the company and putting a fresh lens on a lot of our programs and the profitability of those programs. We have exited some unprofitable programs, that's an ongoing process that will continue. The revenue impacts haven't been that significant, as Dave referenced in his comments, it is an active process that is, I will say, very disciplined in looking at when contracts come up for renewal, whether we're going to stay in those or not. We have an industrial finger of our portfolio that we continue to look at, it probably shrinks as we go forward, just as the other two parts of the business, defense and commercial grow, that that probably gets a little bit smaller. Moving to the middle column. We have optimized and consolidated the supply chain.
You heard a lot today about rate readiness, we've certainly been busy with our supply chain, being sure that they're going to be rate ready as we're rate ready. A tremendous amount of work done to align customer contracts with our supplier contracts, being sure we've got adequate, not only supply, but cost lockdown on those contracts as we see the rates increasing on several of our major platforms the next couple of years. Asset utilization. Through our restructuring program, we've written off almost $10 million in fixed assets, that's certainly helping reduce the overhead of the company. We did announce in our second quarter call the closure of our Phoenix facility, which is well underway and should be completed by the end of the quarter. That facility is being consolidated with our Huntsville, Arkansas facility.
Again, through the restructure, creating higher asset utilization of the assets that we have in the company. With those actions, the expectation certainly is that it's going to deliver much more sustainable operations and continued growth in both margin and top line. The far right-hand column, optimize the capital structure. This week, we actually kicked off the refinancing of the current debt in the company. It was going to become current in the second quarter of next year, so we're just getting out ahead of that now. The refinancing's going to give us a lot more flexibility.
As we think about from a covenant standpoint, the investments that we want to make in the business to grow it organically with some of the initiatives you heard earlier, as well as the M&A strategy we have, the new debt facility will give us certainly more flexibility to execute on those opportunities. The capital allocation strategy, I'll get to that in the next slide, but the fundamental change there is being able to create capacity for the inorganic growth that Suman mentioned, as well as the organic growth opportunities we see in some of the new programs that we're going to be bringing on in the next couple of years. Balance sheet management. The company's always been a pretty strong cash flow generator, and that's going to continue.
We see that there's nothing that would change there, and our goal is to continue to convert greater than 100% of our net income to cash. We've been pretty consistent, and we expect that to continue and probably accelerate as we see margin expansion. Capital allocation. Historically, you heard referenced earlier today, the LaBarge acquisitions, which really levered the company up to over five times, and through discipline and over the years, have brought that leverage down significantly. There were investments continuing to be made in CapEx, particularly in our titanium business. To put it into context, between our New York facility, our Parsons facility, starting in 2015 through 2017, we invested over $30 million in those titanium businesses. We really like those businesses for the reasons that Jerry mentioned.
We're certainly well-positioned now with that capital investment behind us to take advantage of the fruits of that, meaning the rate increases, the additional business, our relationship with Airbus that we'll be able to leverage with those big investments that were made in prior years. As we look forward, we don't see a big need for a lot of CapEx, particularly as we continue to build out the engineered products part of our business with these proprietary products. They're much less capital intensive, so there won't be the need of the CapEx that we've seen of the past, and we should be able to manage to something in that range. As we think about what we'll do with that excess cash flow, we're going to continue to pay down the debt.
We think that's the best use of our cash in the absence of any organic or inorganic investments. As I mentioned, we'll pay down about $25 million this year and continue to expect that rate and then some going forward as we grow the earnings of the company. Lastly, certainly the disciplined M&A process that Suman spoke about. That will become part of our capital allocation as needed when those opportunities arise. Financial priorities for the next couple of years. In Steve's comments, he talked about the commercial aerospace business and where we sit on the major platforms that we've got. We're looking for that part of the portfolio to grow in sort of the 5%-7% range, which has been pretty consistent with what we've messaged in the past.
We think that as rates increase, that could potentially creep up, but that's basically what we're looking at on the defense side of the portfolio, growing that part of the business somewhere between 2%-4%. Again, could do better on that as we expand our growth into the aftermarket that Dave was mentioning on some of those legacy platforms like the F-18, and with new content coming on with the F-35. Again, as you think about the key platforms, you probably couldn't pick too many more that you'd want to be on than the ones that Ducommun's already on. We're pretty optimistic that we're going to see nice top-line growth, at least mid-single digit as we move forward.
On the EBIT or operating income line, the expectation there is that we grow that at a CAGR of double digits now as we get out of 2018, start heading into 2019, as we pick up some of those restructuring savings, as well as just more leverage through the P&L with continued operational efficiencies, but also a growing top line. Second, we'll continue to identify strategic organic investments and inorganic investments. You heard some of those today, particularly in our engineered products, where we're talking about growing the aftermarket, getting more PMAs on some of the products that we've already got. There will be organic investment, but we know exactly what that looks like and are prepared to make that because we think the business case certainly supports it and then some.
Continue with the disciplined capital allocation strategy, which is, as I mentioned, to limit that where necessary, and look to create much higher returns on invested capital than the company has probably had in the past. Use our debt refinancing as needed to have the flexibility for the right investments for the company. Certainly last, converting, as I said earlier, over 100% of the net income to cash. We've historically been well north of that and don't see that certainly changing as we move forward. To wrap up our investment thesis, Steve briefly touched on this, but we think with our unique proprietary products and capabilities and ability to service the aftermarket, that that is the single biggest opportunity that we have that's going to drive value.
The developing business model, you heard Suman talk about what we're going to be doing on the M&A front. We talked about refining the portfolio with a much keener eye on which programs we're going to stay on and which ones we may exit if they're not as profitable as we need them to be. Steve talked about building a winning team and a winning culture. Much higher degree of accountability and results focus than we've had in the past. Again, it's the people that are going to make all these things happen. With the changes we've made, certainly feel good about where we're at and where we're going to go with the new team.
The financials will improve and continue to improve as a result of a lot of the actions that we've already taken, that we plan to take, to reference Steve's comments, we're still in the early innings. We've been at this roughly 18 months, we still got a ways to go, but that's the great thing about the opportunity that's ahead of us is that we are just getting started, and we see a lot of opportunity moving forward. Fifth, the strong customer relationships. You saw the customer logos in the presentations. We're with all the right OEMs and tier ones for the businesses and the platforms that we serve. Lastly, continuing to drive the cash flow in the company. That's going to be the engine that provides us with the investment opportunity to grow the company as we move forward.
At the end of the day, the key priority, deliver exceptional value to all the stakeholders. Again, I think that's evident in some of the initiatives that we've got, and we'll be driving that as we move forward.
With that, I'll turn it over to Steve for some closing remarks.
Okay, great. Thank you, sir. Okay. First, again, thanks for hanging in there this morning and listening attentively. We really appreciate that, and we thank you for coming and making time for Ducommun. Just a couple of closing comments. First, just for context around Dave and Jerry's presentation is that a lot of the things they talked about today weren't happening 18 months ago. All right? Just to put that in context, there wasn't a focus on proprietary products. There wasn't a focus on building aftermarket. There wasn't focus on a lot of things that you heard today. Okay? When you walk out of here today, that's a big, I think, takeaway is that, what you heard today, a lot of that wasn't going on. In the past, there was a lot of firefighting and other things that are more reactive.
Where this is, I feel, much more proactive. That's the first thing. Okay? I just want to comment on that. Second thing is, you might have saw this in the press, is we have a new board member, and her name is Shirley Drazba. I want to mention that for our community here. Shirley has just joined us. She was appointed in October. Terrific leader. She came out of IDEX, which is a world leader in pumps, as well as Honeywell. What we're doing is we're putting together an innovation committee on the board. We're having a new committee, and Shirley's part of it, I'm a part of it, two other board members. That's a whole initiative around us trying to really move the company more in this direction of proprietary products, aftermarket, higher technology. I'm excited about it. Hopefully, you are, too.
We've got, I think, great things there. The board is all in on our presentation. We had a board offsite last month at the NYSE for two days, and spent a lot of time on this. Everybody's connected, everybody's together, and we got the game plan. The other thing I will say is that on capital allocation, it's a big deal for me, and I know it's a big deal for investors. Okay? The companies that I've run in the past were all fairly low capital intensity, and we were super successful. Okay? What I see, at least for the next few years, because we've made some investments and we've gotten support in 2015 and 2016, we're really in good shape to keep that around 2% of sales. I think that would be terrific. Okay?
I think we're in great shape on our capital allocation, and we're doing a lot of things, right? If you think about what you heard today, we're really focused in on proprietary products, focused on aftermarket, focused on niche products in our services businesses. We talk about electronics, where we're really doing things that other people can't, our titanium, those types of things. All right? I think it's a great time for Ducommun. Again, I showed this chart earlier. We do have these industry-leading proprietary products. In the past, we haven't been as open about LDS than today, right? Please don't think we're being cute, because we're not. Okay? All right? Sometimes for proprietary reasons and other things, we might not share everything. We thought today it was important to share that because that acquisition's a home run.
We really wanted to bring it to the investment community today to show you we know what we're doing. Okay. We need that long-term trust as we move forward here, that you can trust us, that we have the right process, we have the right leadership, and we're going to make it happen for everybody. I think that's an important piece. These capabilities we talked about, the platform's terrific. Getting much better at aftermarket. This Apache rotor blade, this thing is huge. Boeing Defense came to us and the government said, "Hey, can you guys help us with this? We've got all these blades all over in all these depots in Texas and other places." Five, six, 7,000 blades all just stacked up. Shot with a gun, damage from the desert, from all these different things. We stood up a repair station rather quickly.
Now we've got a great business for blade repair. I think that's a great comment to Jerry and his team. This flexible model I think is terrific, and finally, just to leave, it's always been my philosophy, it's people first, strategy second. Okay. You can have the greatest strategy in the world, but if you have so-so people, guess what? You're going to get so-so results. I'm excited about this team, excited about our strategy, and again, I appreciate everyone's time today. With that, I'll take questions. Okay. All right. We've got Okay, Ken.
Hi, Steve. Thanks for all the detail. Just the first question.
Sure.
It looks like you've got really good organic growth opportunities across a range of businesses. Do you see similar return opportunities as you go through composites, titanium, chemical milling, you go through all of your electronics opportunities? How do we think about maybe capital allocation reflecting sort of where you see the best return opportunities moving forward?
Yeah. Ken, thanks very much, and thanks for coming today again. I think the leading candidates here are going to be our proprietary products, are going to be composites, are going to be titanium. All right? We like our chem milling business. We like aluminum forming. We like these businesses, and we're certainly going to run them the right way and leverage, if you look at the stars of our company, those are the ones that are going to be really funded, and with the aftermarket as well. I really see that's where we're heading.
Okay, great. If I could, just one follow-up.
Sure
Maybe for Doug. The $14 million benefit you expect from the restructuring activities, how much of that have you seen in 2018, how much then is sort of incremental in 2019 and maybe 2020?
Sure. Good question, Ken. As we look at all the actions we've taken, probably roughly 40% getting recognized in this year, the next 60% next year, shows that in totality, the $14 million does come out of the cost structure, the infrastructure of the company through the reduced headcount, reduced floor space. That's roughly the kind of breakdown how much in between the two years.
Okay, thanks, Ken. Sorry. You back first? I can do Yeah, okay.
Steve, thanks guys for all the information today. Given the strategy, are there any assets in the portfolio that you think don't fit well, maybe aren't core to the strategy that maybe you could monetize, recycle the capital into debt pay down or M&A-
Sure
that just sort of further that?
No, great question. With our markets right now, both the commercial and military, we would say no. Right now, I think we're in good shape with our footprint. We've taken out 16% of our footprint. We have consolidated our facilities. We've done some things to make the footprint a lot tighter. Where we sit right now, we like where we are. Could that change in two years? Sure. We're open-minded and we always like to look at possibilities. Where we're at right now, we're comfortable. That's what I would say. All right, thank you. Front. Chris. Okay.
Hi, thanks. PMA was mentioned several times as a growth opportunity, and traditionally, for an OEM parts manufacturer, I think a PMA has been a threat. Conversely, if you're a HEICO, it's an opportunity issue. I'm wondering which side of the equation you're approaching it from. If you could just elaborate on your PMA approach.
Sure, absolutely. Thanks. Dave, why don't you handle this, okay, with PMA?
Yeah. The question was how are we handling the PMA as we go forward? There's two approaches. If we look at our product line, there's some of it that we can do under licensed PMAs with the OEMs, and there's other parts where we'll just PMA directly through the computational analysis route. At the moment, we're open-minded to which route we take. There's a number of products that we have where we can do it directly on our own, without affecting our other relationships with the OEMs. There are some areas where we may well approach those OEMs and do it under a license agreement arrangement.
Yeah. First of all, we make a lot of switches. HMI, lots of different switches, those types of things. We know how to do that well. We're not the leader in everything. We're looking at where can we get into some interesting opportunities with PMA and repairs as well. We're going to just play to our strengths. We're not going to go and do PMA on turbine blades. We're going to sit where we are. Yeah.
Great. Just a quick follow-up on that.
Sure
If I could. When you do get a license agreement from the OEM, I would assume that they then capture part of that revenue share of that, what's typically a highly profitable revenue stream. Just wondering how the profitability of those license deals compares to more traditional PMA. Thanks.
If you look at it depends on what those royalty rates are. In my past, which was GKN Aerospace, and we had a lot of licensed PMAs with Boeing around cabin windows, cockpit windows, and everything else. Looking at how that would reflect in this market, in terms of if you take the Boeing list price or Airbus list price or something, there's plenty of runway there in terms of having a competitive product where you can still make a good return for Ducommun and fund a royalty payment to the OEM.
Yeah. This is, again, this is something new. 18 months ago, we weren't talking about PMAs. We weren't talking about PMA. This is something we're going to explore. We think we have some good talent that understands the market, with Dave's experience and some of the folks we've brought in. Some more to come. Yes, sir.
Yes, good. Suman.
Sure.
I'm sure you've covered this in the conference calls, I apologize for not being up to date on it. On the plastics acquisition, it seems out of your wheelhouse compared to Lightning Diversion Systems and titanium. Could you just comment on how that fits? It doesn't seem to me it fits, obviously it does because you've done your homework.
Yeah. That's, in some ways structures for interiors. We're not necessarily looking to just add to our core business. We are open to adding new platforms where it makes sense and where we can find a path to significantly growing shares and getting to a leadership position. We felt like we could do that with plastic extrusions for interiors. That's why it made a lot of sense. It didn't necessarily have to fit like a glove with an existing business of ours. We have channels to market, familiarity with the same customers where we thought we can add value to the business. It was an under-managed business with a family-owned business where we could bring in a lot of value versus how it was being managed in the past. We didn't talk about that.
It's only five months into that acquisition, that business is performing well. We've invested in sales people to grow that business faster, it's doing really well, that one is ahead of plan as well so far.
Thank you very much.
Yeah. Thank you. More to come on CTP, okay? We're early innings on that. Next meeting we have, we'll be able to hopefully have a similar report out than LDS. Yeah, thank you.
Hey.
Yeah, hey.
I wanted to know if you could frame up the growth rates that you're looking at for the two different businesses. Is this industry growth rates that you're thinking about and then market penetration, market share gains on new products, and price is additive to those numbers?
No, when we talk about 5%-7% growth, it's common based upon our portfolio of products and where we see our ability to grow going forward. Those aren't industry growth rates, but it does encompass some share gain, some business that we'll exit, as we talked about as part of the portfolio management, as well as pricing initiatives that we've got in place in certain parts of the business. There are certain parts of the business that lend itself to pricing opportunities more so than others. Those rates that I quoted of 5%-7% in commercial, 2%-4% in defense are our view on our portfolio for the next couple of years. As I mentioned, probably some upside as we get some of these other initiatives off the ground that we've shared today.
Got it. I'm assuming that doesn't include anything that Suman and his team might bring to the-
Absolutely.
Absolutely.
Yeah.
Okay.
Upside.
Secondly, I wanted to ask about Apache.
Sure.
That was a program you used to produce the metal bonded blades on an OE basis.
Yeah.
That was taken in-house. I'm curious, as you're doing aftermarket now with the composites, is that an outsource opportunity for Boeing maybe on the OE side?
The legacy of the company, as everyone knows, is we made the main rotor blade and the back blade as well, okay? I don't know how long ago, it was maybe eight, 10, six years ago, Boeing said, "We're taking the main blade inside." Okay? They're doing that inside now. We still do the back blade, okay, which is a really nice metal bond part. Apache has a whole new life now with FMS and the new defense budget, everything is moving in the right direction. We still do the OE on the back blades, but not on the regular blades. The opportunity for us is that, and I was proud of the team, and we stood up a repair center fairly quickly, which we never did before, right? We're not doing repair in Monrovia. We set up a really nice process.
We had the government come in, we had Boeing come in, they approved everything. It wasn't like this thing, we're trying to get this thing off the ground for a year. It went fairly smoothly. What we like to do is say, "Hey, look, we're on blade repair now. Where else are we going to go? Let's go to Bell. Let's go to Sikorsky. Let's see what else we can do." Because now we got something going. That's a great example of what wasn't happening in the past. Where now we're sole sourced on the repair. We have people that can hopefully scale it. All right? We can make a lot more money down the road. I think overall, the Apache's going to be terrific for us. Yeah. Thank you, Ed. Okay. Yes, in the back. Thanks, Chris.
Hey, Tony Bancroft from Gabelli. You said you just mentioned Sikorsky and Bell for blades. The SB-1 Defiant and the V-280, have you discussed anything about that as potential opportunities?
You got anything on that?
The FVL?
Are you talking about the Bell?
Yeah, the V-280, the FVL.
Yeah, the replacement? Yeah. We're still early on that. We're working with Bell. We do stuff for Bell out of Monrovia. We don't really have anything to report on those platforms yet.
Sure. Then, for content, you had up there, I might be wrong, but it went from titanium, it went from 3%- 14%, I guess, for the A350.
Yeah.
For NMA potential, I know it's obviously generally, but what kind of growth factor potentially could it be? Is it 14% sort of fully maxed out amount that titanium needs to be on a.
That's a good question. You got any thoughts on the NMA?
Yeah, it's difficult too, we don't know what the material content will be from an aerostructure perspective on the NMA. I think a lot of decisions haven't been made as yet. In general, across not just the platforms you saw in the presentation, but we've seen over the last 30 years increasing titanium content. You're seeing-
Of course
move from aluminum to composite, and you're seeing growth in titanium.
Potentially some room to grow, right?
Yeah. The one thing I would say is that, in the last six months, we've done a lot of work. We worked with ICF, we learned with a lot of high-end research companies. Everything we're hearing about titanium as far as increased content, whether it's NMA or whatever, the future's bright.
Right. Of course.
Yeah.
Lastly, you talked about Tomahawk and the wing deployment. Obviously, it was a big article, and it's been going on for a while with hypersonics.
Yeah.
Any thoughts on being on any hypersonics?
Absolutely.
Right.
There's only so much I can say, but we're right in the middle of it.
Roger that. Thank you.
Okay. Right in the middle of it.
Sure.
It's important.
Yeah.
It's going to be a big deal.
Of course. Thanks.
Be a big deal for the country. Okay, I want to thank everybody. I'm just going to wrap up.
Are there any callers online?
Excuse me? Sorry. Right. We got two people online. Anything from our guests online?
Christian from Noble Capital's online.
Yes.
Hi, guys.
Hi.
Can everybody hear me okay?
We can hear you, yes.
Okay. I'm just interested in your VersaCore Composite technology.
Sure.
Earlier this year, you announced a $200 million award there. As you're going through the development and design process, are you seeing any potential to expand beyond that contract, or expand to other applications? Just trying to get a sense of.
Yeah, no, it's a great question, and we're excited. I'm going to have Jerry Redondo cover that.
Hello. Yeah, the initial application was on the fairing for the GE LEAP engines, and now the award, the most recent that we announced for was on the blocker doors, which is part of the structural virtual assembly. There's 10 blocker doors per engine, 20 per ship set. That's the beginning, it's not the ending. The answer is yes. Since the answer is yes, the application of the technology is being worked today to be aligned to additional applications at the OEM level and the tier 1 level.
Okay, great. Thanks.
Thank you for the question.
Yeah, just to comment on VersaCore. We're getting into the cell. We make the fairing, which is okay. It's a nice part on the side of the engine itself. We're getting involved in this big contract. We still report on it further once we get a little further down the road, but it's going to be a big deal, and I'm excited about it. Anything else on the phone? We got Mike there.
Mike from B. Riley.
Yes. Hi, Mike.
Hi. Hey, Steve. Just further on that VersaCore.
Yeah.
I think you called it test readiness level 6 with Airbus. What exactly does that mean, and when
Yeah
do you move beyond that?
Yeah. Okay, Jerry. Yep.
Yeah. Airbus has a tiered level of test readiness, and test readiness level 6 is an altitude that says that the qualification of the process, the materials in the process, all the attributes that process would be intended to fulfill, goes through a physical and analytical testing qualification. It yields that capable of an application. In the case of VersaCore, that TRL6 level, it goes through one up through six. At that level, the integrity of the process, the product, the material strength, the tensile strength, all the parameters that would have to be in place to apply that to, in this example, would be a flight control surface. It could be a lower tier level, like a TRL3 or so, four, and it would be applicable to a utility door, as an example.
It'd be a utility door that was a cover, certainly important, but not a functioning flight control surface. The key for us is, the highest level that the technology would be applied to is supported by having a TRL6 capability, and it's a passing score. It was a two-year process. Airbus put together a team, and that team was dedicated in concert with our team. It was a collaboration agreement, and from that agreement, the achievement of a TRL6 passing was in place. We're qualified to be looking at and working with Airbus on applying the technology to all levels of products, but up to a critical flight control surface.
Okay. Thank you, Jerry. Yeah, just one follow-up. VersaCore is our own proprietary process, right? We show up at Boeing, and it's like, "What is this thing?" You know what I mean? We have to spend a couple of years with Airbus and Boeing to educate them, and then they want to test it, right? They want to make sure. You're talking about flight safety issues, okay? You're going to go to the nth degree, right? They should. We all fly on planes. That's sort of a little bit more color on TRL6. We're at a point now where they say, "Okay, we trust VersaCore. Now let's see what we can do to deploy it in the plane." Which is kind of cool. Okay.
Okay, thanks.
Yep.
A final question is-
Yeah
you talked about going deeper into missiles, and you also talked about capturing greater share there, and separately, you've talked about seeing more opportunity with Lockheed Martin. I just want to clarify whether you already have captured missile programs with Lockheed Martin, or that's more of a pursuit at this point.
It's very light with Lockheed. It's an upside for us, okay? We do have some opportunity, but it's nothing like we have at Raytheon. That's what we're trying to do. We're going to truly try to build that share.
Okay, great. Thank you very much.
Thank you very much. Okay, I'm going to wrap it up again. I want to thank everybody for coming today, making time for Ducommun. We appreciate it. We also appreciate your continued support. All the best. Have a great weekend, and again, if you have any questions, please follow up with us. Thank you.