UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
x
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QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
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For the quarterly period ended March 31,
2008
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OR
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o
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TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO .
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Commission
file number 0-8328
DYNAMIC
MATERIALS CORPORATION
(Exact name of
Registrant as Specified in its Charter)
Delaware
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84-0608431
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(State
of Incorporation or Organization)
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(I.R.S.
Employer Identification No.)
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5405
Spine Road, Boulder, Colorado 80301
(Address of principal
executive offices, including zip code)
(303) 665-5700
(Registrants telephone
number, including area code)
Indicate by check mark
whether the registrant: (1) has
filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes
x
No
o
Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of large accelerated filer, accelerated filer, and smaller reporting
company in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer
o
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Accelerated
filer
x
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Non-accelerated
filer
o
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Smaller
reporting company
o
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(Do
not check if a smaller reporting company)
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Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 under
the Act). Yes
o
No
x
The number of shares of
Common Stock outstanding was 12,602,768 as of April 30, 2008.
CAUTIONARY NOTE ABOUT FORWARD-LOOKING
STATEMENTS
This
quarterly report on Form 10-Q contains forward-looking statements within
the meaning of section 27A of the Securities Act of 1933 and section 21E of the
Securities Exchange Act of 1934. In particular, we direct your attention to Part I,
Item 1- Financial Statements, Item 2 - Managements Discussion and Analysis of
Financial Condition and Results of Operations and Item 3 - Quantitative and
Qualitative Disclosures About Market Risk and Part II, Item 1A Risk
Factors. We intend the forward-looking statements throughout this quarterly
report on Form 10-Q and the information incorporated by reference herein
to be covered by the safe harbor provisions for forward-looking statements.
Statements contained in this report which are not historical facts are
forward-looking statements that involve risks and uncertainties that could
cause actual results to differ materially from projected results. All
projections and statements regarding our expected financial position and
operating results, our business strategy, our financing plans and the outcome
of any contingencies are forward-looking statements. These statements can
sometimes be identified by our use of forward-looking words such as may, believe,
plan, anticipate, estimate, expect, intend and other phrases of
similar meaning. The forward-looking information is based on information
available as of the date of this quarterly report and on numerous assumptions
and developments that are not within our control. Although we believe that our
expectations as expressed in these forward-looking statements are reasonable,
we cannot assure you that our expectations will turn out to be correct. Factors
that could cause actual results to differ materially include, but are not
limited to, the following: the ability to obtain new contracts at attractive
prices; the size and timing of customer orders and shipment; fluctuations in
customer demand; fluctuations in foreign currencies; competitive factors; the
timely completion of contracts; the timing and size of expenditures; the timely
receipt of government approvals and permits; the adequacy of local labor
supplies at our facilities; current or future limits on manufacturing capacity
at our various operations; the availability and cost of funds; and general
economic conditions, both domestic and foreign, impacting our business and the
business of the end-market users we serve. Readers are cautioned not to place
undue reliance on these forward-looking statements, which reflect managements
analysis only as of the date hereof. We undertake no obligation to publicly
release the results of any revision to these forward-looking statements that
may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
2
Part I
- FINANCIAL INFORMATION
ITEM 1.
Condensed Consolidated Financial Statements
DYNAMIC MATERIALS
CORPORATION & SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(Dollars in Thousands)
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March 31,
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December 31,
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2008
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2007
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(unaudited)
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ASSETS
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CURRENT ASSETS:
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Cash and cash equivalents
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$
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17,610
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$
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9,045
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Restricted cash
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371
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Accounts receivable, net of allowance for
doubtful accounts of $493 and $534, respectively
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35,341
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39,833
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Inventories
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44,293
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41,628
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Prepaid expenses and other
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2,371
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2,022
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Related party receivable and loan
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1,245
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1,103
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Current deferred tax assets
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899
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728
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Total current assets
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101,759
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94,730
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PROPERTY, PLANT AND EQUIPMENT
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53,287
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49,590
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Less - Accumulated depreciation
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(15,552
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)
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(14,144
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)
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Property, plant and equipment, net
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37,735
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35,446
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GOODWILL, net
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49,620
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45,862
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PURCHASED INTANGIBLE ASSETS, net
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63,925
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61,914
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DEFERRED TAX ASSETS
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84
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42
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OTHER ASSETS, net
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1,618
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1,544
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INVESTMENT IN JOINT VENTURES
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1,474
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1,361
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TOTAL ASSETS
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$
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256,215
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$
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240,899
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The accompanying notes are an integral part
of these Condensed Consolidated Financial Statements.
4
DYNAMIC MATERIALS
CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands,
Except Share Data)
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March 31,
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December 31,
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2008
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2007
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(unaudited)
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LIABILITIES
AND STOCKHOLDERS EQUITY
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CURRENT LIABILITIES:
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Accounts payable
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$
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19,703
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$
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22,590
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Accrued expenses
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8,971
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8,566
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Accrued income taxes
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3,286
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1,212
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Accrued employee compensation and benefits
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3,863
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5,521
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Customer advances
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2,563
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4,593
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Related party accounts payable and loans
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351
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325
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Lines of credit - current
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7,265
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7,587
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Current maturities on long-term debt
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8,293
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8,035
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Current portion of capital lease
obligations
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417
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389
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Total current liabilities
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54,712
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58,818
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LINES OF CREDIT
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4,741
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LONG-TERM DEBT
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62,778
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61,530
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CAPITAL LEASE OBLIGATIONS
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448
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521
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DEFERRED TAX LIABILITIES
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21,046
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20,604
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OTHER LONG-TERM LIABILITIES
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1,234
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1,147
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COMMITMENTS AND CONTINGENT LIABILITIES
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Total liabilities
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144,959
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142,620
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STOCKHOLDERS EQUITY:
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Preferred stock, $.05 par value; 4,000,000
shares authorized; no issued and outstanding shares
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Common stock, $.05 par value; 25,000,000
shares authorized; 12,602,768 and 12,433,768 shares issued and outstanding,
respectively
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630
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622
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Additional paid-in capital
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38,995
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38,246
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Retained earnings
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61,113
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55,868
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Other cumulative comprehensive income
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10,518
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3,543
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Total stockholders equity
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111,256
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98,279
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TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
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$
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256,215
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$
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240,899
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The
accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.
5
DYNAMIC MATERIALS
CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
2008 AND 2007
(Dollars in Thousands,
Except Share Data)
(unaudited)
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Three months ended
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March 31,
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2008
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2007
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NET SALES
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$
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58,393
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$
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33,094
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COST OF PRODUCTS SOLD
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40,682
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22,243
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Gross profit
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17,711
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10,851
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COSTS AND EXPENSES:
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General and administrative expenses
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3,119
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1,662
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Selling expenses
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2,841
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1,647
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Amortization expense of purchased
intangible assets
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2,361
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Total costs and expenses
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8,321
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3,309
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INCOME FROM OPERATIONS
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9,390
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7,542
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OTHER INCOME (EXPENSE):
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Other expense
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(149
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)
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(7
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)
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Interest expense
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(1,279
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Interest income
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239
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188
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Equity in earnings of joint ventures
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16
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INCOME BEFORE INCOME TAXES
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8,217
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7,723
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INCOME TAX PROVISION
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2,972
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2,841
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NET INCOME
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$
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5,245
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$
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4,882
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INCOME PER SHARE:
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Basic
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$
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0.42
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$
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0.41
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Diluted
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$
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0.42
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$
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0.40
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
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Basic
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12,377,019
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12,009,577
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Diluted
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12,557,068
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12,222,601
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The accompanying notes are an integral part of these Condensed
Consolidated Financial Statements.
6
DYNAMIC
MATERIALS CORPORATION & SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY
FOR
THE THREE MONTHS ENDED MARCH 31, 2008
(Amounts
in Thousands)
(unaudited)
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Other
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Additional
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Cumulative
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Comprehensive
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Common Stock
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Paid-In
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Retained
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Comprehensive
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Income
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Shares
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Amount
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Capital
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Earnings
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Income
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Total
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for the Period
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Balances,
December 31, 2007
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12,434
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$
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622
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$
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38,246
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$
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55,868
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$
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3,543
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$
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98,279
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Shares issued for
stock option exercises
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25
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1
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92
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93
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Restricted stock
awards
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144
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7
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(7
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)
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Stock-based
compensation
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664
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664
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Net income
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5,245
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5,245
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5,245
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Derivative
valuation, net of tax of $174
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(285
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)
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(285
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)
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(285
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)
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Change in
cumulative foreign currency translation adjustment
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|
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|
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7,260
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7,260
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7,260
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Balances,
March 31, 2008
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12,603
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$
|
630
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$
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38,995
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$
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61,113
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$
|
10,518
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$
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111,256
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$
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12,220
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|
|
|
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The accompanying notes are an
integral part of these Condensed Consolidated Financial Statements.
7
DYNAMIC MATERIALS CORPORATION &
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Dollars in Thousands)
(unaudited)
|
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2008
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2007
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CASH FLOWS FROM OPERATING ACTIVITIES:
|
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Net income
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$
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5,245
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$
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4,882
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Adjustments to reconcile net income to net
cash provided by operating activities -
|
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|
|
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Depreciation (including capital lease
amortization)
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1,113
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395
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|
Amortization of purchased intangible assets
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2,361
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Amortization of capitalized debt issuance
costs
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60
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Stock-based compensation
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664
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224
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Deferred income tax benefit
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|
(1,174
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)
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(46
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)
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Equity in earnings of joint ventures
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(16
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)
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|
Change in -
|
|
|
|
|
|
Restricted cash
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|
377
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3,059
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Accounts receivable, net
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5,968
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|
553
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|
Inventories
|
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(670
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)
|
(2,487
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)
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Prepaid expenses and other
|
|
(580
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)
|
6
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|
Accounts payable
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|
(3,837
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)
|
(2,011
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)
|
Customer advances
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|
(2,144
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)
|
46
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|
Accrued expenses and other liabilities
|
|
(118
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)
|
212
|
|
|
|
|
|
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Net cash provided by operating activities
|
|
7,249
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4,833
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|
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CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
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Acquisition of property, plant and
equipment
|
|
(2,361
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)
|
(3,257
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)
|
Change in other non-current assets
|
|
15
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
(2,346
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)
|
(3,257
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)
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.
8
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Dollars in Thousands)
(unaudited)
|
|
2008
|
|
2007
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
Payment on Nord LB term loans
|
|
(265
|
)
|
|
|
Borrowings on bank lines of credit, net
|
|
3,665
|
|
|
|
Payment of capital lease obligations
|
|
(105
|
)
|
|
|
Payment of deferred debt issuance costs
|
|
(125
|
)
|
|
|
Change in other long-tem liabilities
|
|
16
|
|
5
|
|
Net proceeds from issuance of common stock
to employees and directors
|
|
93
|
|
278
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
3,279
|
|
283
|
|
|
|
|
|
|
|
EFFECTS OF EXCHANGE RATES ON CASH
|
|
383
|
|
34
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
|
8,565
|
|
1,893
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, beginning of the
period
|
|
9,045
|
|
17,886
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, end of the
period
|
|
$
|
17,610
|
|
$
|
19,779
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part
of these Condensed Consolidated Financial Statements.
9
DYNAMIC MATERIALS
CORPORATION & SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands, Except Share and Per
Share Data)
(unaudited)
1. BASIS OF PRESENTATION
The information included in the Condensed Consolidated Financial
Statements is unaudited but includes all normal and recurring adjustments
which, in the opinion of management, are necessary for a fair presentation of
the interim periods presented. These Condensed Consolidated Financial
Statements should be read in conjunction with the financial statements that are
included in the Companys Annual Report filed on Form 10-K for the year
ended December 31, 2007.
2. SIGNIFICANT ACCOUNTING
POLICIES
Principles
of Consolidation
The
Condensed Consolidated Financial Statements include the accounts of the Company
and its subsidiaries. Only subsidiaries
in which controlling interests are maintained are consolidated. The equity method is used to account for our
ownership in subsidiaries where we do not have controlling interest. All significant intercompany accounts,
profits and transactions have been eliminated in consolidation.
Foreign Operations and Foreign Exchange Rate Risk
The
functional currency for the
Companys foreign operations is the applicable local currency for each
affiliate company. Assets and liabilities of foreign subsidiaries for which the
functional currency is the local currency are translated at exchange rates in
effect at period-end, and the statements of operations are translated at the
average exchange rates during the period.
Exchange rate fluctuations on translating foreign currency financial
statements into U.S. dollars that result in unrealized gains or losses are
referred to as translation adjustments. Cumulative translation adjustments are
recorded as a separate component of stockholders equity and are included in
other cumulative comprehensive income. Transactions denominated in currencies
other than the local currency are recorded based on exchange rates at the time
such transactions arise. Subsequent changes in exchange rates result in
transaction gains and losses which are reflected in income as unrealized (based
on period-end translations) or realized upon settlement of the transactions.
Cash flows from the Companys operations in foreign countries are translated at
actual exchange rates when known, or at the average rate for the period. As a
result, amounts related to assets and liabilities reported in the consolidated
statements of cash flows will not conform with changes in the corresponding
balances in the Consolidated Balance Sheets. The effects of exchange rate
changes on cash balances held in foreign currencies are reported as a separate
line item below cash flows from financing activities.
10
Revenue Recognition
Sales of
clad metal products and welding services are generally based upon customer
specifications set forth in customer purchase orders and require the Company to
provide certifications relative to metals used, services performed and the
results of any non-destructive testing that the customer has requested be
performed. All issues of conformity of
the product to specifications are resolved before the product is shipped and
billed. Products related to the oilfield
products segment, which include detonating cords, detonators, bi-directional
boosters and shaped charges, as well as, seismic related explosives and
accessories, are standard in nature. In
all cases, revenue is recognized only when all four of the following criteria
have been satisfied: persuasive evidence of an arrangement exists; the price is
fixed or determinable; delivery has occurred; and collection is reasonably
assured. For contracts that require
multiple shipments, revenue is recorded only for the units included in each
individual shipment. If, as a contract
proceeds toward completion, projected total cost on an individual contract
indicates a potential loss, the Company will account for such anticipated loss.
Related
Party Transactions
The
Company has related party transactions with its unconsolidated joint ventures,
as well as with the minority partner of its consolidated joint venture. A summary of those transactions and balances
as of March 31, 2008 and for the three months ended March 31, 2008 is
presented below:
|
|
|
|
|
|
|
|
Minority Interest
|
|
|
|
|
|
Perfoline
|
|
DYNAenergetics RUS
|
|
KazDYNAenergetics
|
|
Partner
|
|
Total
|
|
Sales to
|
|
33
|
|
|
|
235
|
|
524
|
|
792
|
|
Interest income
from
|
|
13
|
|
|
|
|
|
|
|
13
|
|
Accounts
receivable and loan to
|
|
559
|
|
1
|
|
316
|
|
369
|
|
1,245
|
|
Accounts payable
and loan from
|
|
112
|
|
|
|
|
|
239
|
|
351
|
|
A summary of related party balances as of December 31,
2007 is presented below:
|
|
|
|
|
|
|
|
Minority Interest
|
|
|
|
|
|
Perfoline
|
|
DYNAenergetics RUS
|
|
KazDYNAenergetics
|
|
Partner
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable and loan to
|
|
523
|
|
449
|
|
131
|
|
|
|
1,103
|
|
Accounts payable
and loan from
|
|
120
|
|
|
|
|
|
205
|
|
325
|
|
11
Earnings
Per Share
Basic
earnings per share (EPS) is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period. Diluted EPS recognizes the potential dilutive
effects of dilutive securities. The
following represents a reconciliation of the numerator and denominator used in
the calculation of basic and diluted EPS:
|
|
For the three months ended March 31, 2008
|
|
|
|
|
|
|
|
Per share
|
|
|
|
Income
|
|
Shares
|
|
Amount
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
5,245
|
|
12,377,019
|
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
Dilutive effect of options to purchase
common stock
|
|
|
|
144,717
|
|
|
|
Dilutive effect of restricted stock awards
|
|
|
|
35,332
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
5,245
|
|
12,557,068
|
|
$
|
0.42
|
|
|
|
For the three months ended March 31, 2007
|
|
|
|
|
|
|
|
Per share
|
|
|
|
Income
|
|
Shares
|
|
Amount
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
4,882
|
|
12,009,577
|
|
$
|
0.41
|
|
|
|
|
|
|
|
|
|
Dilutive effect of options to purchase
common stock
|
|
|
|
209,141
|
|
|
|
Dilutive effect of restricted stock awards
|
|
|
|
3,883
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
4,882
|
|
12,222,601
|
|
$
|
0.40
|
|
Recent
Accounting Pronouncements
In September 2006, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 157,
Fair Value Measurements
(SFAS
157). SFAS 157 defines fair value, establishes a framework for measuring fair
value in accordance with accounting principles generally accepted in the United
States, and expands disclosures about fair value measurements. SFAS No. 157
was initially effective for financial statements issued for fiscal years
beginning after November 15, 2007.
The FASB issued a staff position statement (FSP) in February 2008
that deferred the required interpretation date of SFAS 157 for certain assets
and liabilities. The adoption of SFAS
157 in the three months ended March 31, 2008 did not have a material
impact on the Companys results of operations or financial position.
12
In February 2007,
the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities Including an Amendment of FASB Statement No. 115.
This Statement permits entities to measure many financial instruments and
certain other items at fair value. This election is made on an
instrument-by-instrument basis and is irrevocable. Unrealized gains and losses
on items for which the fair value option has been elected are reported in
earnings. This statement is effective for fiscal years beginning after November 15,
2007. The Company did not elect the fair value option for any of its existing
financial assets and liabilities during the three months ended March 31,
2008.
In December 2007, the FASB issued SFAS No. 141(R),
Business Combinations
and SFAS No. 160,
Accounting and Reporting of Noncontrolling Interest
in Consolidated Financial Statements
, an amendment of ARB No. 51.
These new standards will significantly change the accounting for and reporting
of business combination transactions and noncontrolling (minority) interests in
consolidated financial statements. SFAS Nos. 141(R) and 160 are
required to be adopted simultaneously and are effective for the first annual
reporting period beginning on or after December 15, 2008. Thus, we are
required to adopt these Standards on January 1, 2009. Earlier adoption is
prohibited. The Company is in the process of determining the effect, if any,
the adoption SFAS Nos. 141(R) and 160 will have on its results of
operations or financial position.
In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging
Activities
. SFAS 161 requires additional disclosures related
to the use of derivative instruments, the accounting for derivatives and how
derivatives impact financial statements. SFAS No. 161 is effective
for fiscal years and interim periods beginning after November 15, 2008.
We are currently evaluating the impact of adopting SFAS No. 161 on
our consolidated financial statements.
3.
ACQUISITION
On
November 15, 2007, the Company and a newly-formed subsidiary,
DYNAenergetics Holding GmbH (the Purchaser), entered into a Purchase, Sale
and Assignment Agreement (the Purchase Agreement) with Rolf Rospek, Patrick
Xylander, Uwe Gessel, and Oag Beteiligungs-GmbH, a German limited liability
company (collectively the Sellers). Pursuant to the terms of the Purchase
Agreement, on November 15, 2007 the Purchaser acquired 100% of the issued
and outstanding shares of DYNAenergetics Beteiligungs-GmbH and all of the interests
in DYNAenergetics GmbH and Co. KG (collectively, DYNAenergetics) from the
Sellers.
DYNAenergetics
manufactures clad metal plates and various explosives-related oilfield products
and operates under two business segments: Explosive Metalworking and Oilfield
Products. The acquisition enhances the Companys ability to address growing
worldwide demand for clad metal plates and expands the Companys position in
the global explosion welding market. The addition of the Oilfield Products
business segment will augment the Companys involvement in specialized
explosive manufacturing processes and position the Company within the growing
international oil and gas services industry.
As
part of the Oilfield Products business segment, the Company has several joint
ventures, most of which are unconsolidated and accounted for under the equity
method (see Note 4).
The
acquisition was valued at $112,587 and was financed by (i) the payment of
$81,667 in cash, net of cash acquired of $1,870 and transaction related taxes
of $3,708 (2,530 Euros) due from one of the sellers and withheld by the
Purchaser, (ii) the issuance of 251,041 shares of common stock of the
Company (valued at $13,509), and (iii) the assumption of approximately
$11,833
13
(8,074
Euros) of DYNAenergetics debt. The cash portion of the purchase price was
financed using proceeds from the new syndicated credit agreement and existing
available cash.
The purchase price of the acquisition was allocated to the Companys
tangible and identifiable intangible assets based on their estimated fair
values as set forth below. Property, plant and equipment were recorded at fair
values based on appraisals performed as of the acquisition date. The
preliminary allocation to identifiable intangible assets was based on
preliminary valuation data and the estimates and assumptions are subject to
change. The excess of the purchase price over the tangible and identifiable
intangible assets was recorded as goodwill. The Company is still in the process
of analyzing other potential purchase accounting adjustments including
compiling remaining acquisition related expenses.
The preliminary allocation of the purchase price to the assets and
liabilities of DYNAenergetics is as follows:
Current assets
|
|
$
|
30,222
|
|
Property, plant and equipment
|
|
7,845
|
|
Intangible assets
|
|
62,794
|
|
Goodwill
|
|
45,871
|
|
Investment in joint ventures
|
|
1,324
|
|
Other assets
|
|
11
|
|
Total assets acquired
|
|
148,067
|
|
|
|
|
|
Current liabilities
|
|
14,524
|
|
Long term debt
|
|
11,833
|
|
Deferred tax liabilities
|
|
19,850
|
|
Other long term liabilities
|
|
1,096
|
|
Minority interest
|
|
10
|
|
Total liabilities acquired
|
|
47,313
|
|
Net assets acquired
|
|
$
|
100,754
|
|
The Company acquired identifiable finite-lived intangible assets as a
result of the acquisition of DYNAenergetics. The finite-lived intangible assets
acquired are preliminarily classified and valued as follows:
|
|
|
|
Weighted Average
|
|
|
|
|
|
Amortization
|
|
|
|
Value
|
|
Period
|
|
Core technology
|
|
$
|
24,531
|
|
20
years
|
|
Customer relationships
|
|
33,099
|
|
9
years
|
|
Trademarks / Trade names
|
|
2,672
|
|
9
years
|
|
Order backlog DYNAplat
|
|
2,492
|
|
Within
1 year
|
|
Total intangible assets
|
|
$
|
62,794
|
|
|
|
14
The Company acquired Goodwill in the amount of $45,871 as a result of
the acquisition of DYNAenergetics. The amount of goodwill assigned to each
reportable segment is as follows:
|
|
Value
|
|
Explosive Metalworking
|
|
$
|
25,196
|
|
Oilfield Products
|
|
20,675
|
|
Total goodwill
|
|
$
|
45,871
|
|
Goodwill as of March 31, 2008 amounts to $49,620 and the change
from December 31, 2007 primarily reflects the impact of foreign currency
translation.
The
following table presents the unaudited, pro-forma combined results of
operations for the three months ended March 31, 2007 assuming (i) the
acquisition had occurred on January 1, 2007; (ii) pro-forma
amortization expense of the purchased intangible assets and (iii) pro-forma
interest expense assuming the Company utilized its syndicated credit agreement
to finance the acquisition:
|
|
2007
|
|
Net sales
|
|
$
|
46,064
|
|
Income from operations
|
|
$
|
7,050
|
|
Net income
|
|
$
|
3,690
|
|
|
|
|
|
Net income per share:
|
|
|
|
Basic
|
|
$
|
0.30
|
|
Diluted
|
|
$
|
0.30
|
|
The pro-forma results above are not necessarily indicative of the
operating results that would have actually occurred if the acquisition had been
in effect on the dates indicated, nor are they necessarily indicative of future
results of the combined companies.
4.
INVESTMENT
IN JOINT VENTURES
Operating
results include the Companys proportionate share of income from joint
ventures, which consist of unconsolidated joint ventures accounted for under
the equity method. These investments (all of which resulted from the
acquisition of DYNAenergetics and pertain to the Companys Oilfield Products
business segment) include the following: (1) 53.5% interest in Perfoline,
which is a Russian manufacturer of perforating gun systems; (2) 55%
interest in DYNAenergetics RUS which is a Russian trading company that sells
the Companys oilfield products and (3) 60% interest in KazDYNAenergetics
which is a Kazakhstan trading company that sells the Companys oilfield
products. Due to certain minority interest veto rights that effectively require
the minority interest shareholders to participate in ordinary course of
business decisions, these joint ventures have been accounted for under the
equity method instead of being consolidated in these financial statements. Investments
in these joint ventures totaled $1,474 and $1,361 as of March 31, 2008 and
December 31, 2007, respectively.
15
Summarized
unaudited financial information for the joint ventures accounted for under the
equity method as of March 31, 2008 and December 31, 2007 and for the
three months ended March 31, 2008 is as follows:
|
|
March 31,
|
|
December 31,
|
|
|
|
2008
|
|
2007
|
|
Current assets
|
|
$
|
4,191
|
|
$
|
4,148
|
|
Noncurrent assets
|
|
713
|
|
666
|
|
Total assets
|
|
$
|
4,904
|
|
$
|
4,814
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
946
|
|
$
|
1,400
|
|
Noncurrent liabilities
|
|
1,447
|
|
1,048
|
|
Equity
|
|
2,511
|
|
2,366
|
|
Total liabilities and equity
|
|
$
|
4,904
|
|
$
|
4,814
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
2,203
|
|
|
|
Gross profit
|
|
$
|
413
|
|
|
|
Operating income
|
|
$
|
171
|
|
|
|
Net loss
|
|
$
|
(14
|
)
|
|
|
Equity in earnings of joint ventures
|
|
$
|
16
|
|
|
|
5.
INVENTORY
The components of inventory are
as follows at March 31, 2008 and December 31, 2007:
|
|
March 31,
|
|
December 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
|
|
Raw materials
|
|
$
|
13,545
|
|
$
|
13,744
|
|
Work-in-process
|
|
25,536
|
|
23,699
|
|
Finished goods
|
|
4,614
|
|
3,564
|
|
Supplies
|
|
598
|
|
621
|
|
|
|
$
|
44,293
|
|
$
|
41,628
|
|
6.
PURCHASED
INTANGIBLE ASSETS
The following table
presents details of our purchased intangible assets, other than goodwill, as of
March 31, 2008:
|
|
|
|
Accumulated
|
|
|
|
|
|
Gross
|
|
Amortization
|
|
Net
|
|
Core technology
|
|
$
|
26,446
|
|
$
|
(496
|
)
|
$
|
25,950
|
|
Customer relationships
|
|
35,683
|
|
(1,487
|
)
|
34,196
|
|
Trademarks / Trade names
|
|
2,880
|
|
(162
|
)
|
2,718
|
|
Order backlog DYNAplat
|
|
2,686
|
|
(1,625
|
)
|
1,061
|
|
Total intangible assets
|
|
$
|
67,695
|
|
$
|
(3,770
|
)
|
$
|
63,925
|
|
16
The following table
presents details of our purchased intangible assets, other than goodwill, as of
December 31, 2007:
|
|
|
|
Accumulated
|
|
|
|
|
|
Gross
|
|
Amortization
|
|
Net
|
|
Core technology
|
|
$
|
24,653
|
|
$
|
(154
|
)
|
$
|
24,499
|
|
Customer relationships
|
|
33,263
|
|
(461
|
)
|
32,802
|
|
Trademarks / Trade names
|
|
2,685
|
|
(50
|
)
|
2,635
|
|
Order backlog DYNAplat
|
|
2,504
|
|
(526
|
)
|
1,978
|
|
Total intangible assets
|
|
$
|
63,105
|
|
$
|
(1,191
|
)
|
$
|
61,914
|
|
The
increase in the gross value of our purchased intangible assets from December 31,
2007 to March 31, 2008 is due to the impact of foreign currency
translation.
7.
DEBT
Lines of credit consist of the
following at March 31, 2008 and December 31, 2007:
|
|
March 31,
|
|
December 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
|
|
Syndicated credit agreement revolving loan
|
|
$
|
4,741
|
|
$
|
|
|
Commerzbank revolving line of credit
|
|
1,388
|
|
3,225
|
|
Commerzbank line of credit
|
|
1,580
|
|
1,473
|
|
Deutsche Bank revolving line of credit
|
|
788
|
|
680
|
|
Nord LB line of credit
|
|
3,509
|
|
2,209
|
|
|
|
12,006
|
|
7,587
|
|
Less current portion
|
|
(7,265
|
)
|
(7,587
|
)
|
Long-term lines of credit
|
|
$
|
4,741
|
|
$
|
|
|
Long-term debt consists of the
following at March 31, 2008 and December 31, 2007:
|
|
March 31,
|
|
December 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
|
|
Syndicated credit agreement term loan
|
|
$
|
45,000
|
|
$
|
45,000
|
|
Syndicated credit agreement Euro term loan
|
|
22,120
|
|
20,621
|
|
Euro term loan - French bank
|
|
458
|
|
427
|
|
Nord LB 3,000 Euro term loan
|
|
3,318
|
|
3,314
|
|
Nord LB 500 Euro term loan
|
|
175
|
|
203
|
|
|
|
71,071
|
|
69,565
|
|
Less current maturities
|
|
(8,293
|
)
|
(8,035
|
)
|
Long-term debt
|
|
$
|
62,778
|
|
$
|
61,530
|
|
17
Loan
Covenants and Restrictions
The
Companys existing loan agreements include various covenants and restrictions,
certain of which relate to the incurrence of additional indebtedness,
mortgaging, pledging or disposition of major assets, limits on capital
expenditures and maintenance of specified financial ratios. As of March 31,
2008, the Company was in compliance with all financial covenants and other
provisions of its debt agreements.
Swap
Agreement
On
November 15, 2007, the Company entered into an interest swap agreement
that effectively converted the LIBOR based variable rate borrowings under the
$45,000 term loan to a fixed rate of 6.34%. The company has designated the swap
agreement as an effective cash flow hedge with matched terms in accordance with
SFAS No. 133,
Accounting for Derivative
Instruments and Hedging Activities,
and as a result, changes in the
fair value of the swap agreement are recorded in other comprehensive income
with the offset as a swap asset or liability. As of March 31, 2008, the
fair value of the swap agreement was a liability of $696. The swap agreement
expires on November 16, 2008.
8.
BUSINESS
SEGMENTS
The Company is organized in the following three segments: Explosive
Metalworking, Oilfield Products and AMK Welding. The Explosive Metalworking
segment uses explosives to perform metal cladding and shock synthesis of industrial
diamonds. The most significant product of this group is clad metal which is
used in the fabrication of pressure vessels, heat exchangers and transition
joints for various industries, including upstream oil and gas, oil refinery,
petrochemicals, hydrometallurgy, aluminum production, shipbuilding, power
generation, industrial refrigeration and similar industries. The Oilfield
Products segment manufactures, markets and sells oilfield perforating equipment
and explosives, including detonating cords, detonators, bi-directional boosters
and shaped charges, and seismic related explosives and accessories. AMK Welding
utilizes a number of welding technologies to weld components for manufacturers
of jet engines and ground-based turbines.
The accounting policies
of all the segments are the same as those described in the summary of
significant accounting policies. The Companys reportable segments are
separately managed strategic business units that offer different products and
services. Each segments products are marketed to different customer types and
requires different manufacturing processes and technologies. Segment
information is presented for the three months ended March 31, 2008 and
2007 as follows:
18
|
|
Explosive
|
|
|
|
|
|
|
|
|
|
Metalworking
|
|
Oilfield
|
|
AMK
|
|
|
|
|
|
Group
|
|
Products
|
|
Welding
|
|
Total
|
|
For the three months ended March 31, 2008:
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
51,644
|
|
$
|
4,450
|
|
$
|
2,299
|
|
$
|
58,393
|
|
Depreciation and amortization
|
|
$
|
2,384
|
|
$
|
982
|
|
$
|
108
|
|
$
|
3,474
|
|
Income (loss) from operations
|
|
$
|
9,982
|
|
$
|
(565
|
)
|
$
|
637
|
|
$
|
10,054
|
|
Equity in earnings of joint ventures
|
|
$
|
|
|
$
|
16
|
|
$
|
|
|
16
|
|
Unallocated amounts:
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
(664
|
)
|
Other expense
|
|
|
|
|
|
|
|
(149
|
)
|
Interest expense
|
|
|
|
|
|
|
|
(1,279
|
)
|
Interest income
|
|
|
|
|
|
|
|
239
|
|
Consolidated income before income taxes
|
|
|
|
|
|
|
|
$
|
8,217
|
|
|
|
Explosive
|
|
|
|
|
|
|
|
Metalworking
|
|
AMK
|
|
|
|
|
|
Group
|
|
Welding
|
|
Total
|
|
For the three months ended March 31, 2007:
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
31,495
|
|
$
|
1,599
|
|
$
|
33,094
|
|
Depreciation
|
|
$
|
335
|
|
$
|
60
|
|
$
|
395
|
|
Income from operations
|
|
$
|
7,502
|
|
$
|
264
|
|
$
|
7,766
|
|
Unallocated amounts:
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
(224
|
)
|
Other expense
|
|
|
|
|
|
(7
|
)
|
Interest income
|
|
|
|
|
|
188
|
|
Consolidated income before income taxes
|
|
|
|
|
|
$
|
7,723
|
|
During the three months ended March 31,
2008, sales to one customer represented approximately $5,974 (10.2%) of total
net sales. During the three months ended March 31, 2007, sales to one
customer represented approximately $5,417 (16%) of total net sales.
9.
COMPREHENSIVE INCOME
The Company
s comprehensive income for the three months ended March 31, 2008
and 2007 was as follows:
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2008
|
|
2007
|
|
Net income for the period
|
|
$
|
5,245
|
|
$
|
4,882
|
|
Interest rate swap valuation adjustment, net of tax
|
|
(285
|
)
|
|
|
Foreign currency translation adjustment
|
|
7,260
|
|
61
|
|
Comprehensive income
|
|
$
|
12,220
|
|
$
|
4,943
|
|
19
Accumulated
other cumulative comprehensive income as of March 31, 2008 and December 31,
2007 consisted of the following:
|
|
March 31,
|
|
December 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
|
|
Currency translation adjustment
|
|
$
|
10,950
|
|
$
|
3,690
|
|
Interest rate swap valuation adjustment, net of tax
|
|
(432
|
)
|
(147
|
)
|
|
|
$
|
10,518
|
|
$
|
3,543
|
|
20
ITEM 2. Managements
Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our
historical consolidated financial statements and notes, as well as the selected
historical consolidated financial data that are included in the Companys
Annual Report filed on Form 10-K for the year ended December 31,
2007.
Unless stated
otherwise, all dollar figures in this discussion are presented in thousands
(000s).
Executive Overview
Historically, our
business has been organized into two segments:
Explosive Metalworking (which we also refer to as DMC Clad) and AMK
Welding. On November 15, 2007, we
acquired 100% ownership of a German company, DYNAenergetics. DYNAenergetics operates two distinct
businesses which have historically been known as DYNAplat and DYNAwell. DYNAplat is a manufacturer of explosion clad
products similar to those manufactured by DMC Clad and its operating results
from the date of acquisition are included in our Explosive Metalworking
segment. DYNAwell manufactures a number
of products for the perforation of oil and gas wells and also distributes a
line of seismic products for oil and gas exploration activities. DYNAwells operating results from the date of
acquisition are reported under a new segment that we have named Oilfield
Products.
For the three months
ended March 31, 2008, Explosive Metalworking accounted for 88% of our net
sales and 99% of our income from operations before consideration of stock-based
compensation expense, which is not allocated to our business segments. Our AMK Welding and Oilfield Products
segments accounted for 4% and 8%, respectively, of our first quarter 2008 net
sales.
Our net sales for the
three months ended March 31, 2008, which include $15,194 of sales from our
recently acquired DYNAenergetics businesses, increased by $25,299 (76.4%)
compared to the first three months of 2007, reflecting year-to-year net sales
increases of $20,149 (64.0%) and $700 (43.8%) for our Explosive Metalworking
and AMK Welding segments, respectively, and a sales contribution of $4,450 from
our new Oilfield Products segment.
Income from operations increased by 24.5% to $9,390 in the first three
months of 2008 from $7,542 in the first three months of 2007, reflecting
improvements in Explosive Metalworkings and AMK Weldings operating income of
$2,480 and $373, respectively, that were partially offset by an operating loss
of $565 that was reported by our Oilfield Products segment and a $440 increase
in stock-based compensation expense. Our net income increased by 7.4% to $5,245
for the three months ended March 31, 2008 from $4,882 in the same period
of 2007.
Net sales
Explosive
Metalworkings net sales are generated principally from sales of clad metal
plates and sales of transition joints, which are made from clad plates, to
customers that fabricate industrial equipment for various industries, including
oil and gas, petrochemicals, alternative energy, hydrometallurgy, aluminum
production, shipbuilding, power generation, industrial refrigeration and
similar industries. While demand for our
clad metal products in the United States is largely driven by new plant
construction and large plant expansion projects, maintenance and retrofit
projects at existing chemical processing, petrochemical processing and oil
refining facilities also account for a significant portion of total demand. In
contrast to the U.S. market,
21
demand for our clad
products in Europe and Asia is more dependent on new construction projects,
such as the building of new Purified Terephthalic Acid (PTA) plants in
different parts of the world, including China, and on sales of electrical
transition joints that are used in the aluminum production industry.
Oilfield
Products net sales are generated principally from sales of shaped charges,
detonators and detonating cord and bidirectional booster sand perforating guns
to customers who perform the perforation of oil and gas wells and from sales of
seismic products to customers involved in oil and gas exploration activities.
AMK
Weldings net sales are generated from welding, heat treatment and inspection
services that are provided with respect to customer-supplied parts for
customers primarily involved in the power generation industry and aircraft
engine markets.
A
significant portion of our net sales is derived from a relatively small number
of customers; therefore, the failure to complete existing contracts on a timely
basis, and to receive payment for such services in a timely manner, or to enter
into future contracts at projected volumes and profitability levels could
adversely affect our ability to meet cash requirements exclusively through
operating activities. We attempt to minimize the risk of losing customers or
specific contracts by continually improving product quality, delivering product
on time and competing favorably on the basis of price.
DMC
Clads business is cyclical since it is linked to its customers end-market
activity. For example, the construction
cycle for new manufacturing capacity in the chemical industry has historically
been one characterized by significant amplitude. It is driven both by global economic demand
growth and capacity utilization. As
capacity starts to become tight for various chemicals and prices begin to rise,
new manufacturing capacity is added in relatively large incremental amounts.
Gross profit and cost of products
sold
Cost
of products sold for Explosive Metalworking include the cost of metals and
alloys used to manufacture clad metal plates, the cost of explosives, employee
compensation and benefits, freight, outside processing costs, depreciation of
manufacturing facilities and equipment, manufacturing supplies and other
manufacturing overhead expenses.
Cost
of products sold for Oilfield Products include the cost of metals, explosives
and other raw materials used to manufacture shaped charges, detonating products
and perforating guns as well as employee compensation and benefits,
depreciation of manufacturing facilities and equipment, manufacturing supplies
and other manufacturing overhead expenses.
AMK
Weldings cost of products sold consists principally of employee compensation
and benefits, welding supplies (wire and gas), depreciation of manufacturing
facilities and equipment, outside services and other manufacturing overhead
expenses.
Income taxes
Our effective
income tax rate decreased to 36.2% for the first three months of 2008 from
36.8% for the first three months of 2007.
Income tax provisions on the earnings of Nobelclad, Nitro Metall and
DYNAenergetics have been provided based upon the respective French, Swedish and
German statutory tax rates. Going
forward, based upon existing tax regulations and current federal, state and
foreign statutory tax rates, we expect our effective tax rate on our
consolidated pre-tax income to range between 36% and 37%.
22
Backlog
We
use backlog as a primary means of measuring the immediate outlook for our
business. We define backlog at any
given point in time to consist of all firm, unfulfilled purchase orders and
commitments at that time. Generally
speaking, we expect to fill most backlog orders within the following 12 months. From
experience, most firm purchase orders and commitments are realized. However, since orders may be rescheduled or
canceled, and a significant portion of our net sales is derived from a small
number of customers, backlog is not necessarily indicative of future sales
levels. Moreover, we cannot be sure of
when during the future 12-month period we will be able to recognize revenue
corresponding to our backlog nor can we be sure that revenues corresponding to
our backlog will not fall into periods beyond the 12-month horizon.
Our backlog with respect
to the Explosive Metalworking segment increased to approximately $102,106 at March 31,
2008 from approximately $100,000 at December 31, 2007.
Three Months Ended March 31, 2008 Compared to
Three Months Ended March 31, 2007
Net sales
|
|
Three Months Ended
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Net sales
|
|
$
|
58,393
|
|
$
|
33,094
|
|
$
|
25,299
|
|
76.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales for the first
quarter of 2008 increased 76.4% to $58,393 from $33,094 in the first quarter of
2007. Explosive Metalworking sales
increased 64.0% to $51,644 in the three months ended March 31, 2008 (88%
of total sales) from $31,495 in the same period of 2007 (95% of total
sales). The significant increase in
Explosive Metalworking sales reflects a sales contribution of $10,744 from the
DYNAplat division of DYNAenergetics and increased sales of $9,405 from our
other DMC Clad divisions which reflect the continued strong economic condition
of the industries this business segment serves.
Oilfield Products contributed
$4,450 to first quarter 2008 sales (8% of total sales).
AMK Welding contributed $2,299 to first quarter 2008 sales (4% of total
sales), which represented a 43.8% increase from sales of $1,599 in the first
quarter of 2007 (5% of total sales). The
increases in AMKs sales relates principally to increased revenues from H
System ground-based gas turbine work.
Gross profit
|
|
Three Months Ended
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Gross profit
|
|
$
|
17,711
|
|
$
|
10,851
|
|
$
|
6,860
|
|
63.2
|
%
|
Consolidated gross profit margin rate
|
|
30.3
|
%
|
32.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit increased by 63.2% to $17,711 for the three months ended March 31,
2008 from $10,851 for the three months ended March 31, 2007. Our first
quarter 2008 consolidated
23
gross profit
margin rate decreased to 30.3% from 32.8% in the first quarter of 2007. The
gross profit margin for Explosive Metalworking decreased from 33.1% in the
first quarter of 2007 to 30.6% in the first quarter of 2008. The gross profit margin for AMK Welding
increased to 36.4% in the first quarter of 2008 from 28.8% in the first quarter
of 2007, with this improvement being largely attributable to the 43.8% increase
in AMKs sales volume as discussed above.
Oilfield Products reported a gross margin of 25.3% on its first quarter
2008 sales of $4,450, which is considered to be within the range of normal for
this business.
The
decreased first quarter 2008 gross margin rate for Explosive Metalworking
relates primarily to a higher proportion of sales by our European operations in
the first quarter of 2008 than in the first quarter of 2007 as a result of the
DYNAenergetics acquisition. As mentioned
above, the DYNAplat division of DYNAenegetics reported first quarter 2008 sales
of $10,744. Gross margins for our
European operations, including those of the DYNAplat division, are generally
lower than those reported by our U.S. Operation. Additionally, the acquired order backlog of
DYNAplat included certain orders that were booked at lower than customary
margin levels for DYNAplat and that shipped during the first quarter of
2008. While we expect an upward trend in
our reported gross margins during the remainder of 2008, future quarterly gross
margin rates for our Explosive Metalworking segment are expected to fluctuate
based upon anticipated fluctuations in quarterly sales volume and product mix.
General
and administrative expenses
|
|
Three Months Ended
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
General & administrative expenses
|
|
$
|
3,119
|
|
$
|
1,662
|
|
$
|
1,457
|
|
87.7
|
%
|
Percentage of net sales
|
|
5.3
|
%
|
5.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative expenses increased by $1,457, or 87.7%, to $3,119 in the first
quarter of 2008 from $1,662 in the first quarter of 2007. Excluding $892 of incremental general and
administrative expenses that resulted from the DYNAenergetics acquisition, our
general and administrative expenses increased by $565 or 34.0%. This increase reflects a $272 increase in
stock-based compensation, a $136 increase in legal and consulting expenses and
an impact of $113 from annual salary adjustments and staffing changes. As a percentage of net sales, general and
administrative expenses increased to 5.3% in the first quarter of 2008 from
5.0% in the first quarter of 2007.
Selling
expenses
|
|
Three Months Ended
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Selling expenses
|
|
$
|
2,841
|
|
$
|
1,647
|
|
$
|
1,194
|
|
72.5
|
%
|
Percentage of net sales
|
|
4.9
|
%
|
5.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses,
which include sales commissions of $313 in 2008 and $423 in 2007, increased by
72.5% to $2,841 in the first quarter of 2008 from $1,647 in the first quarter
of 2007. Excluding $855 of incremental
selling expenses that resulted from the DYNAenergetics
24
acquisition, our selling expenses increased by $339 or 20.6%. This increase reflects an increase in
stock-based compensation expense of $124 and an impact of $98 from annual
salary adjustments and staffing changes.
As a percentage of net sales, selling expenses decreased to 4.9% in the
first quarter of 2008 from 5.0% in the first quarter of 2007.
Amortization expenses
|
|
Three Months Ended
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Amortization expense of purchased intangible
assets
|
|
$
|
2,361
|
|
$
|
|
|
$
|
2,361
|
|
NA
|
|
Percentage of net sales
|
|
4.0
|
%
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense relates entirely to the amortization of values
assigned to intangible assets in connection with the November 15, 2007
acquisition of DYNAenergetics.
Amortization expense for the three months ended March 31, 2008
includes $1,006, $940, $313 and $102 relating to values assigned to order
backlog, customer relationships, core technology and trademarks/trade names,
respectively. Based upon the preliminary
purchase price allocation and current foreign exchange rates, we expect
amortization expense for 2008 to approximate $7,700.
Income from operations
|
|
Three Months Ended
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Income from operations
|
|
$
|
9,390
|
|
$
|
7,542
|
|
$
|
1,848
|
|
24.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
increased by 24.5% to $9,390 in the first quarter of 2008 from $7,542 in the
first quarter of 2007. Explosive
Metalworking reported income from operations of $9,982 in the first quarter of
2008 as compared to $7,502 in the first quarter of 2007. This 33.1% increase is largely attributable
to the 64.0% sales increase as discussed above.
Oilfield Products
reported a loss from operations of $565 for the first three months of 2008.
AMK Welding reported
income from operations of $637 for the three months ended March 31, 2008
as compared to $264 for the same period of 2007. This significant increase is attributable to
the $700, or 43.8%, increase in sales as discussed above.
Income from operations
for the three months ended March 31, 2008 and 2007 includes $664 and $224,
respectively, of stock-based compensation expense. This expense is not allocated to our business
segments and thus is not included in the above first quarter operating income
totals for Explosive Metalworking, Oilfield Products and AMK Welding.
25
Interest income (expense), net
|
|
Three Months Ended
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Interest income (expense), net
|
|
$
|
(1,040
|
)
|
$
|
188
|
|
$
|
(1,228
|
)
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded
net interest expense of $1,040 in the first three months of 2008 compared to
net interest income of $188 in the same time period of 2007. During the first three months of 2007, we
were in a positive cash position and earned interest on investment of excess
cash balances. In connection with
acquisition of DYNAenergetics, we borrowed approximately $65,000 under our new
$100,000 five-year credit facility, assumed approximately $12,000 of
DYNAenergetics debt outstanding as of the acquisition date, and used
approximately $16,000 of our existing cash balances to finance the acquisition.
As a result of this new indebtedness and a decrease in our cash position, we
reported a significant amount of interest expense during the first three months
of 2008.
Income tax provision
|
|
Three Months Ended
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Income tax provision
|
|
$
|
2,972
|
|
$
|
2,841
|
|
$
|
131
|
|
4.6
|
%
|
Effective tax rate
|
|
36.2
|
%
|
36.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded an income tax provision of $2,972 in the first quarter of
2008 compared to $2,841 in the first quarter of 2007. The effective tax rate decreased to 36.2% in
the first quarter of 2008 from 36.8% in the first quarter of 2007. The income tax provisions for the three
months ended March 31, 2008 and 2007 include $2,951 and $2,102,
respectively, related to U.S. taxes, with the remainder relating to foreign
taxes associated with the operations of Nobelclad and its Swedish subsidiary,
Nitro Metall, as well as the newly acquired DYNAenergetics division.
Liquidity and Capital Resources
We
have historically financed our operations from a combination of internally
generated cash flow, revolving credit borrowings, various long-term debt
arrangements and the issuance of common stock.
Prior to the November 15, 2007 acquisition of DYNAenergetics, we
had no outstanding borrowings under our $10,000 revolving credit facility with
a U.S. bank and term debt outstanding of 290 Euros (approximately $458) under a
term loan with a French bank. In
connection with the acquisition of DYNAenergetics, we terminated our $10,000
revolving credit facility and entered into a five-year syndicated credit
agreement. The credit agreement, which
provides for term loans of $45,000 and 14,000 Euros and revolving loans of
$25,000 and 7,000 Euros, is through a syndicate of seven banks. The credit facility in the approximate amount
of $100,000 expires on November 16, 2012.
As of March 31, 2008, term loans of $45,000 and 14,000 Euros
($22,120) and revolving loans of 3,000 Euros ($4,741) were outstanding under
the new credit facility. Additionally, we have assumed outstanding debt
obligations of DYNAenergetics, including lines of credit loans and term loans
with outstanding amounts of $7,265 and $3,493, respectively, as of March 31,
2008.
26
We
believe that cash flow from operations and funds available under our current
credit facilities and any future replacement thereof will be sufficient to fund
the working capital, debt service and capital expenditure requirements of our
current business operations for the foreseeable future. Nevertheless, our ability to generate
sufficient cash flows from operations will depend upon our success in executing
our strategies. If we are unable to (i) realize sales from our backlog; (ii) secure
new customer orders at attractive prices; (iii) successfully integrate the
recently-acquired DYNAenergetcis businesses; and (iv) continue to
implement cost-effective internal processes, our ability to meet cash
requirements through operating activities could be impacted. Furthermore, any restriction on the
availability of borrowings under our credit facilities could negatively affect
our ability to meet future cash requirements.
Debt
and other contractual obligations and commitments
Our existing
loan agreements include various covenants and restrictions, certain of which
relate to the payment of dividends or other distributions to stockholders,
redemption of capital stock, incurrence of additional indebtedness, mortgaging,
pledging or disposition of major assets and maintenance of specified financial
ratios. As of March 31, 2008, we
were in compliance with all financial covenants and other provisions of our
debt agreements.
The Companys principal cash flows related to debt obligations and other
contractual obligations and commitments have not materially changed since December 31,
2007.
Cash flows
from operating activities
Net cash flows provided
by operating activities for the first quarter of 2008 totaled $7,249. Significant sources of operating cash flow
included net income of $5,245, non-cash depreciation and amortization expense of
$3,534 and stock-based compensation of $664.
These sources of operating cash flow were partially offset by a deferred
income tax benefit of $1,174 and net negative changes in various components of
working capital in the amount of $1,004.
Net negative changes in working capital included increases in
inventories and prepaid expenses of $670 and $580, respectively, and decreases
in accounts payable and customer advances of $3,837 and $2,144,
respectively. These negative changes in
working capital were partially offset by decreases in restricted cash and
accounts receivable of $377 and $5,968, respectively.
Net cash flows provided
by operating activities for the first quarter of 2007 totaled $4,833. Significant sources of operating cash flow
included net income of $4,882, non-cash depreciation and amortization expense
of $395 and stock-based compensation of $224.
These sources of operating cash flow were partially offset by net
negative changes in various components of working capital in the amount of
$622. Net negative changes in working
capital included increases in inventories of $2,487 and decreases in accounts
payable of $2,011. These negative
changes in working capital were largely offset by decreases in restricted cash
and accounts receivable of $3,059 and $553, respectively.
Cash flows from investing
activities
Net cash flows used by
investing activities for the first quarter of 2008 totaled $2,346 and consisted
almost entirely of capital expenditures.
Net cash flows used by
investing activities for the first quarter of 2007 totaled $3,257 and consisted
entirely of capital expenditures.
27
Cash flows from financing
activities
Net cash flows provided
by financing activities for the first quarter of 2008 were $3,279, which
consisted primarily of net borrowings on bank lines of credit of $3,665 and $93
in net proceeds from the issuance of common stock relating to the exercise of
stock options. These sources of cash
flow were partially offset by a $265 principal payment on a Nord LB term loan,
payments of deferred debt issuance costs of $125 and payment on capital lease
obligations of $105.
Net cash flows provided
by financing activities for the first quarter of 2007 were $283, which
consisted primarily of net proceeds from the issuance of common stock relating
to the exercise of stock options.
Payment of Dividends
We paid annual dividends
in 2007 and may continue to pay annual dividends in the future subject to
capital availability and periodic determinations that cash dividends are in the
best interests of our stockholders, but we cannot assure you that such payments
will continue. Future dividends may be
affected by, among other items, our views on potential future capital
requirements, future business prospects, changes in federal income tax law and
any other factors that our board of directors deems relevant. Any decision to pay cash dividends is and
will continue to be at the discretion of the board of directors.
Critical Accounting Policies
Our
historical consolidated financial statements and notes to our historical
consolidated financial statements contain information that is pertinent to our
managements discussion and analysis of financial condition and results of
operations. Preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires that our management
make estimates, judgments and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses, and the disclosure of contingent
assets and liabilities. However, the accounting principles used by us generally
do not change our reported cash flows or liquidity. Interpretation of the
existing rules must be done and judgments made on how the specifics of a
given rule apply to us.
In
managements opinion, the more significant reporting areas impacted by
managements judgments and estimates are revenue recognition, asset
impairments,, business combinations, goodwill, intangible assets subject to
amortization, impact of foreign currency exchange rate risks, income taxes and
stock-based compensation expense. Managements judgments and estimates in these
areas are based on information available from both internal and external
sources, and actual results could differ from the estimates, as additional
information becomes known. We believe
the following to be our most critical accounting policies.
Revenue
recognition
Sales of clad metal products and
welding services are generally based upon customer specifications set forth in
customer purchase orders and require us to provide certifications relative to
metals used, services performed and the results of any non-destructive testing
that the customer has requested be performed.
All issues of conformity of the product to specifications are resolved
before the product is shipped and billed.
Products related to the oilfield products segment, which include detonating
cords, detonators, bi-directional boosters and shaped charges, as well as,
seismic related explosives and accessories, are standard in nature. In all cases, revenue is recognized only when
all four of the following criteria have been satisfied: persuasive evidence of
28
an arrangement exists; the price is fixed
or determinable; delivery has occurred; and collection is reasonably
assured. For contracts that require
multiple shipments, revenue is recorded only for the units included in each
individual shipment. If, as a contract
proceeds toward completion, projected total cost on an individual contract
indicates a potential loss, the Company will account for such anticipated loss.
Asset
impairments
We
review our long-lived assets and held and used by us for impairment whenever
events or changes in circumstances indicate their carrying amount may not be
recoverable. In so doing, we estimate the future net cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of
the expected future net cash flows (undiscounted and without interest charges)
is less than the carrying amount of the asset, an impairment loss is recognized
to reduce the asset to its estimated fair value. Otherwise, an impairment loss
is not recognized. Long-lived assets to
be disposed of, if any, are reported at the lower of carrying amount or fair
value less cost to sell.
Business
Combinations
We
accounted for our business acquisition in accordance with the provisions of
SFAS No. 141, Business Combinations, using the purchase method of
accounting. We allocated the total cost of the acquisition to the underlying
net assets based on their respective estimated fair values. As part of this allocation
process, we identified and attributed values and estimated lives to the
intangible assets acquired. These determinations involved significant estimates
and assumptions regarding multiple, highly subjective variables, including
those with respect to future cash flows, discount rates, asset lives, and the
use of different valuation models and therefore require considerable judgment.
Our estimates and assumptions were based, in part, on the availability of
listed market prices or other transparent market data. These determinations
affect the amount of amortization expense recognized in future periods. We
based our fair value estimates on assumptions we believe to be reasonable but
are inherently uncertain.
Goodwill
In accordance with SFAS No. 142, we test goodwill for impairment
on a reporting unit level as defined by reference to SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information on at least
an annual basis. A reporting unit is a group of businesses (i) for which
discrete financial information is available and (ii) that have similar
economic characteristics. We test goodwill for impairment using the following
two-step approach:
We first determine the fair value of each reporting unit. If the fair
value of a reporting unit is less than its carrying value, this is an indicator
that the goodwill assigned to that reporting unit might be impaired, which
requires performance of the second step. We determine the fair value of our
reporting units based on projected future discounted cash flows, which, in
turn, are based on our views of uncertain variables such as growth rates,
anticipated future economic conditions and the appropriate discount rates
relative to risk and estimates of residual values.
In the second step, we allocate the fair value of the reporting unit to
the assets and liabilities of the reporting unit as if it had just been
acquired in a business combination and as if the purchase price was equivalent
to the fair value of the reporting unit.
The excess of the fair value of the reporting unit over the amounts
assigned to its assets and liabilities is referred to as the implied fair value
of goodwill. We then compare that implied fair value of the reporting units
goodwill to the
29
carrying value of that goodwill. If the implied fair value is less than
the carrying value we recognize an impairment loss for the excess.
The use of different estimates or assumptions within our discounted
cash flow model when determining the fair value of our reporting units or using
a methodology other than a discounted cash flow model could result in different
values for reporting units and could result in an impairment charge.
Intangible assets subject to amortization
An intangible asset that is subject to amortization is reviewed when
impairment indicators are present in accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. We compare the
expected undiscounted future operating cash flows associated with finite-lived
assets to their respective carrying values to determine if the asset is fully
recoverable. If the expected future operating cash flows are not sufficient to
recover the carrying value, we estimate the fair value of the asset. Impairment
is recognized when the carrying amount of the asset is not recoverable and when
the carrying value exceeds fair value. The projected cash flows require several
assumptions related to, among other things, relevant market factors, revenue
growth, if any, and operating margins. While we believe our assumptions are
reasonable, changes in these assumptions may have a material impact on our
financial results.
Impact
of foreign currency exchange rate risks
The
functional currency for our foreign operations is the applicable local currency
for each affiliate company. Assets and liabilities of foreign subsidiaries for
which the functional currency is the local currency are translated at exchange
rates in effect at period-end, and the statements of operations are translated
at the average exchange rates during the period. Exchange rate fluctuations on translating
foreign currency financial statements into U.S. dollars that result in
unrealized gains or losses are referred to as translation adjustments. Cumulative
translation adjustments are recorded as a separate component of stockholders
equity and are included in other cumulative comprehensive income (loss).
Transactions denominated in currencies other than the local currency are
recorded based on exchange rates at the time such transactions arise.
Subsequent changes in exchange rates result in transaction gains and losses,
which are reflected in income as unrealized (based on period-end translations)
or realized upon settlement of the transactions. Cash flows from our operations
in foreign countries are translated at actual exchange rates when known, or at
the average rate for the period. As a result, amounts related to assets and
liabilities reported in the consolidated statements of cash flows will not agree
to changes in the corresponding balances in the consolidated balance sheets.
The effects of exchange rate changes on cash balances held in foreign
currencies are reported as a separate line item below cash flows from financing
activities.
Income
taxes
We
account for income taxes in accordance with Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS 109), which
requires the recognition of deferred tax assets and deferred tax liabilities
for the expected future income tax consequences of transactions that have been
included in our financial statements but not our tax returns. Deferred tax assets and liabilities are
determined based on the temporary differences between the Consolidated
Financial Statement basis and the tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse. We routinely evaluate
deferred tax assets to determine if they will, more likely than not, be
recovered from future projected taxable income and; if not, we record an
appropriate valuation allowance.
30
During 2005, we completed an analysis of prior year tax credits and
related items. As a result of the
analysis, we filed amended federal and state income tax returns. The amended state returns reported additional
net operating losses and credits above the amounts we had previously recorded
in our books and records. In assessing
these additional losses and credits, we determined that the utilization of a
portion of these did not meet the more likely than not criteria, due to
potential changes in the states in which we have income tax nexus. Thus, we recorded a net valuation allowance of
approximately $177 against the deferred tax assets during 2005. As of March 31, 2008, the balance of
this allowance is $111.
Stock-Based Compensation Expense
We
account for stock-based compensation in accordance with the provisions of
Statement of Financial Accounting Standards No. 123 (revised 2004),
Share-Based Payment (SFAS 123R). Under
the fair value recognition provisions of SFAS 123R, stock-based compensation
cost is estimated at the grant date based on the value of the award and is
recognized as expense ratably over the requisite service period of the
award. The fair value of restricted
stock awards is based on the fair value of the Companys stock on the date of
grant. Determining the appropriate fair
value model and calculating the fair value of stock options at the grant date requires
judgment, including estimating stock price volatility, forfeiture rates and
expected option life.
Recent Accounting Pronouncements
In September 2006,
the FASB issued SFAS No. 157,
Fair Value Measurements
(SFAS 157). SFAS 157 defines fair value, establishes a framework for
measuring fair value in accordance with accounting principles generally
accepted in the United States, and expands disclosures about fair value
measurements. SFAS No. 157 was initially effective for financial
statements issued for fiscal years beginning after November 15, 2007. The FASB issued a staff position statement (FSP)
in February 2008 that deferred the required interpretation date of SFAS
157 for certain assets and liabilities.
The adoption of SFAS 157 in the three months ended March 31, 2008
did not have a material impact on the Companys results of operations or
financial position.
In February 2007,
the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities Including an Amendment of FASB Statement No. 115.
This Statement permits entities to measure many financial instruments and
certain other items at fair value. This election is made on an
instrument-by-instrument basis and is irrevocable. Unrealized gains and losses
on items for which the fair value option has been elected are reported in
earnings. This statement is effective for fiscal years beginning after November 15,
2007. The Company did not elect the fair value option for any of its existing
financial assets and liabilities during the three months ended March 31,
2008.
In December 2007,
the FASB issued SFAS No. 141(R), Business Combinations and SFAS No. 160,
Accounting and Reporting of Noncontrolling Interest in Consolidated Financial
Statements, an amendment of ARB No. 51. These new standards will
significantly change the accounting for and reporting of business combination
transactions and noncontrolling (minority) interests in consolidated financial
statements. SFAS Nos. 141(R) and 160 are required to be adopted simultaneously
and are effective for the first annual reporting period beginning on or after December 15,
2008. Thus, we are required to adopt these Standards on January 1, 2009.
Earlier adoption is prohibited. The Company is in the process of determining the
effect, if any, the adoption SFAS Nos. 141(R) and 160 will have on
its results of operations or financial position.
31
In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging
Activities
. SFAS 161 requires additional disclosures related
to the use of derivative instruments, the accounting for derivatives and how
derivatives impact financial statements. SFAS No. 161 is effective
for fiscal years and interim periods beginning after November 15, 2008.
We are currently evaluating the impact of adopting SFAS No. 161 on
our consolidated financial statements.
ITEM 3. Quantitative and Qualitative Disclosure
about Market Risk
There have been no
events that materially affect our quantitative and qualitative disclosure about
market risk from that reported in our Annual Report on Form 10-K for the
year ended December 31, 2007.
ITEM 4.
Controls and Procedures
The Company
maintains disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the Companys Exchange Act reports is
accurately recorded, processed, summarized and reported within the time periods
specified in the SECs rules and forms, and that such information is accumulated
and communicated to the Companys management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired
control objectives, and management necessarily applied its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
As of March 31,
2008, the Company carried out an evaluation, under the supervision and with the
participation of the Companys management, including the Companys Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Companys disclosure controls and procedures (as
defined in Exchange Act Rule 13a-15(e)).
Based on that evaluation, the Companys Chief Executive Officer and
Chief Financial Officer concluded that the Companys disclosure controls and
procedures were effective. There have
been no changes in the Companys internal controls during the quarter ended March 31,
2008 or in other factors that could materially affect the Companys internal
controls over financial reporting.
Managements
assessment of and conclusion on the effectiveness of internal control over
financial reporting did not include the internal controls of DYNAenergetics,
which is included in the March 2008 consolidated financial statements of
Dynamic Materials Corporation and constituted $154 million and $3 million of
total and net assets, respectively, as of March 31, 2008 and $15.2 million
and $1.9 million of revenues and net loss, respectively, for the quarter then
ended.
The Companys
management, including the Companys Chief Executive Officer and Chief Financial
Officer, does not expect that the Companys disclosure controls or its internal
controls will prevent all errors and all fraud.
Further, the design of a control system must reflect the fact that there
are resource constraints, and the benefits of controls must be considered
relative to their costs. As a result of
the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected.
These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. As a result of the
inherent limitations in a cost-effective control system, misstatements due to
error
32
or fraud may occur and not be detected.
Accordingly, the Companys disclosure controls and procedures are
designed to provide reasonable, not absolute, assurance that the disclosure
controls and procedures are met.
33
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk
Factors
Our 2007 Annual Report on Form 10-K includes a detailed discussion
of our risk factors. The information
presented below updates and should be read in conjunction with the risk factors
and information disclosed in our Form 10-K.
Our backlog figures may not accurately predict future sales.
We define backlog at any given point in time to
consist of all firm, unfulfilled purchase orders and commitments at that
time. Generally speaking, we expect to
fill most items of backlog within the following 12 months. However, since orders may be rescheduled or
canceled, and a significant portion of our net sales is derived from a small
number of customers, backlog is not necessarily indicative of future sales levels. Moreover, we cannot be sure of when during
the future 12-month period we will be able to recognize revenue corresponding
to our backlog; nor can we be sure that revenues corresponding to our backlog
will not fall into periods beyond the 12-month horizon.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of
Security Holders
None.
Item 5. Other Information
None.
Item 6.
Exhibits
31.1
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Certification of the President and Chief Executive Officer pursuant
to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
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31.2
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Certification of the Vice President and Chief Financial Officer
pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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34
32.1
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Certification of the President and Chief Executive Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
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32.2
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Certification of the Vice President and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
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35
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
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DYNAMIC MATERIALS CORPORATION
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(Registrant)
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Date: May 2, 2008
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/s/ Richard A. Santa
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Richard A. Santa, Senior Vice President and Chief
Financial Officer (Duly Authorized Officer and
Principal Financial and Accounting Officer)
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36
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