Table
of Contents
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
x
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
|
For the quarterly period ended June 30, 2008
OR
o
|
TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
|
FOR THE TRANSITION PERIOD
FROM TO .
Commission
file number 001-14775
DYNAMIC
MATERIALS CORPORATION
(Exact name of
Registrant as Specified in its Charter)
Delaware
|
|
84-0608431
|
(State
of Incorporation or Organization)
|
|
(I.R.S.
Employer Identification No.)
|
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 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
|
Accelerated filer
x
|
Non-accelerated filer
o
|
Smaller reporting
company
o
|
|
|
(Do not check if a smaller
reporting company)
|
|
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 12,640,027 as of July 31, 2008.
Table
of Contents
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 price and availability of
metal and other raw material; 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
Table of Contents
Part I
- FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated
Financial Statements
DYNAMIC
MATERIALS CORPORATION & SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(Dollars
in Thousands)
|
|
June 30,
|
|
December 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
28,384
|
|
$
|
9,045
|
|
Restricted cash
|
|
|
|
371
|
|
Accounts receivable, net of allowance for doubtful accounts of $662
and $534, respectively
|
|
38,634
|
|
39,833
|
|
Inventories
|
|
38,864
|
|
41,628
|
|
Prepaid expenses and other
|
|
2,973
|
|
2,022
|
|
Related party receivable and loan
|
|
882
|
|
1,103
|
|
Current deferred tax assets
|
|
1,103
|
|
728
|
|
|
|
|
|
|
|
Total current assets
|
|
110,840
|
|
94,730
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT
|
|
55,130
|
|
49,590
|
|
Less - Accumulated depreciation
|
|
(16,799
|
)
|
(14,144
|
)
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
38,331
|
|
35,446
|
|
|
|
|
|
|
|
GOODWILL, net
|
|
49,092
|
|
45,862
|
|
|
|
|
|
|
|
PURCHASED INTANGIBLE ASSETS, net
|
|
61,431
|
|
61,914
|
|
|
|
|
|
|
|
DEFERRED TAX ASSETS
|
|
182
|
|
42
|
|
|
|
|
|
|
|
OTHER ASSETS, net
|
|
1,563
|
|
1,544
|
|
|
|
|
|
|
|
INVESTMENT IN JOINT VENTURES
|
|
1,645
|
|
1,361
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
263,084
|
|
$
|
240,899
|
|
The accompanying notes are
an integral part of these Condensed Consolidated Financial Statements.
4
Table of
Contents
DYNAMIC
MATERIALS CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars
in Thousands, Except Share Data)
|
|
June 30,
|
|
December 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
Accounts payable
|
|
$
|
18,352
|
|
$
|
22,590
|
|
Accrued expenses
|
|
3,851
|
|
8,566
|
|
Dividend payable
|
|
1,894
|
|
|
|
Accrued income taxes
|
|
4,019
|
|
1,212
|
|
Accrued employee compensation and benefits
|
|
4,381
|
|
5,521
|
|
Customer advances
|
|
1,836
|
|
4,593
|
|
Related party accounts payable and loans
|
|
529
|
|
325
|
|
Lines of credit - current
|
|
8,602
|
|
7,587
|
|
Current maturities on long-term debt
|
|
7,792
|
|
8,035
|
|
Current portion of capital lease obligations
|
|
417
|
|
389
|
|
|
|
|
|
|
|
Total current liabilities
|
|
51,673
|
|
58,818
|
|
|
|
|
|
|
|
LINES OF CREDIT
|
|
10,427
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT
|
|
62,540
|
|
61,530
|
|
|
|
|
|
|
|
CAPITAL LEASE OBLIGATIONS
|
|
336
|
|
521
|
|
|
|
|
|
|
|
DEFERRED TAX LIABILITIES
|
|
20,075
|
|
20,604
|
|
|
|
|
|
|
|
OTHER LONG-TERM LIABILITIES
|
|
1,256
|
|
1,147
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
146,307
|
|
142,620
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY:
|
|
|
|
|
|
Preferred stock, $.05 par value; 4,000,000 shares authorized; no
issued and outstanding shares
|
|
|
|
|
|
Common stock, $.05 par value; 25,000,000 shares authorized;12,640,027
and 12,433,768 shares issued and outstanding, respectively
|
|
632
|
|
622
|
|
Additional paid-in capital
|
|
40,151
|
|
38,246
|
|
Retained earnings
|
|
65,432
|
|
55,868
|
|
Other cumulative comprehensive income
|
|
10,562
|
|
3,543
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
116,777
|
|
98,279
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
|
|
$
|
263,084
|
|
$
|
240,899
|
|
The
accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.
5
Table of
Contents
DYNAMIC MATERIALS
CORPORATION & SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX
MONTHS ENDED JUNE 30, 2008 AND 2007
(Dollars in Thousands, Except
Share Data)
(unaudited)
|
|
Three months ended
|
|
Six months ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
NET SALES
|
|
$
|
63,183
|
|
$
|
34,454
|
|
$
|
121,576
|
|
$
|
67,548
|
|
|
|
|
|
|
|
|
|
|
|
COST OF PRODUCTS SOLD
|
|
44,134
|
|
22,375
|
|
84,816
|
|
44,618
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
19,049
|
|
12,079
|
|
36,760
|
|
22,930
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
3,815
|
|
1,854
|
|
6,933
|
|
3,516
|
|
Selling expenses
|
|
2,633
|
|
1,455
|
|
5,474
|
|
3,101
|
|
Amortization expense of purchased intangible assets
|
|
2,464
|
|
|
|
4,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
8,912
|
|
3,309
|
|
17,232
|
|
6,617
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM OPERATIONS
|
|
10,137
|
|
8,770
|
|
19,528
|
|
16,313
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
189
|
|
(13
|
)
|
41
|
|
(20
|
)
|
Interest expense
|
|
(1,471
|
)
|
|
|
(2,734
|
)
|
|
|
Interest income
|
|
99
|
|
177
|
|
323
|
|
365
|
|
Equity in earnings of joint ventures
|
|
273
|
|
|
|
289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
9,227
|
|
8,934
|
|
17,447
|
|
16,658
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX PROVISION
|
|
3,017
|
|
3,275
|
|
5,989
|
|
6,116
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
$
|
6,210
|
|
$
|
5,659
|
|
$
|
11,458
|
|
$
|
10,542
|
|
|
|
|
|
|
|
|
|
|
|
INCOME PER SHARE:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.50
|
|
$
|
0.47
|
|
$
|
0.92
|
|
$
|
0.88
|
|
Diluted
|
|
$
|
0.49
|
|
$
|
0.46
|
|
$
|
0.91
|
|
$
|
0.86
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
12,416,900
|
|
12,048,969
|
|
12,406,210
|
|
12,029,382
|
|
Diluted
|
|
12,566,726
|
|
12,239,256
|
|
12,569,983
|
|
12,232,569
|
|
|
|
|
|
|
|
|
|
|
|
ANNUAL DIVIDENDS DECLARED PER COMMON SHARE
|
|
$
|
0.15
|
|
$
|
0.15
|
|
$
|
0.15
|
|
$
|
0.15
|
|
The accompanying notes are
an integral part of these Condensed Consolidated Financial Statements.
6
Table of
Contents
DYNAMIC
MATERIALS CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2008
(Amounts
in Thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
Cumulative
|
|
|
|
Comprehensive
|
|
|
|
Common Stock
|
|
Paid-In
|
|
Retained
|
|
Comprehensive
|
|
|
|
Income
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Earnings
|
|
Income
|
|
Total
|
|
for the Period
|
|
Balances, December 31, 2007
|
|
12,434
|
|
$
|
622
|
|
$
|
38,246
|
|
$
|
55,868
|
|
$
|
3,543
|
|
$
|
98,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for stock option exercises
|
|
49
|
|
2
|
|
133
|
|
|
|
|
|
135
|
|
|
|
Restricted stock awards
|
|
153
|
|
8
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
Shares issued in connection with the employee stock purchase plan
|
|
4
|
|
|
|
105
|
|
|
|
|
|
105
|
|
|
|
Excess tax benefit related to stock options
|
|
|
|
|
|
132
|
|
|
|
|
|
132
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
1,543
|
|
|
|
|
|
1,543
|
|
|
|
Dividends declared
|
|
|
|
|
|
|
|
(1,894
|
)
|
|
|
(1,894
|
)
|
|
|
Net income
|
|
|
|
|
|
|
|
11,458
|
|
|
|
11,458
|
|
11,458
|
|
Derivative valuation, net of tax of $55
|
|
|
|
|
|
|
|
|
|
(90
|
)
|
(90
|
)
|
(90
|
)
|
Change in cumulative foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
7,109
|
|
7,109
|
|
7,109
|
|
Balances, June 30, 2008
|
|
12,640
|
|
$
|
632
|
|
$
|
40,151
|
|
$
|
65,432
|
|
$
|
10,562
|
|
$
|
116,777
|
|
$
|
18,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are
an integral part of these Condensed Consolidated Financial Statements.
7
Table of Contents
DYNAMIC
MATERIALS CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Dollars
in Thousands)
(unaudited)
|
|
2008
|
|
2007
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
Net income
|
|
$
|
11,458
|
|
$
|
10,542
|
|
Adjustments to reconcile net income to net cash provided by (used in)
operating activities -
|
|
|
|
|
|
Depreciation (including capital lease amortization)
|
|
2,354
|
|
910
|
|
Amortization of purchased intangible assets
|
|
4,825
|
|
|
|
Amortization of capitalized debt issuance costs
|
|
114
|
|
|
|
Stock-based compensation
|
|
1,543
|
|
519
|
|
Deferred income tax benefit
|
|
(2,410
|
)
|
(80
|
)
|
Equity in earnings of joint ventures
|
|
(289
|
)
|
|
|
Change in -
|
|
|
|
|
|
Restricted cash
|
|
386
|
|
3,059
|
|
Accounts receivable, net
|
|
1,237
|
|
(4,337
|
)
|
Inventories
|
|
4,731
|
|
(10,943
|
)
|
Prepaid expenses and other
|
|
(844
|
)
|
(636
|
)
|
Accounts payable
|
|
(5,086
|
)
|
1,276
|
|
Customer advances
|
|
(2,859
|
)
|
327
|
|
Accrued expenses and other liabilities
|
|
(3,347
|
)
|
(3,249
|
)
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
11,813
|
|
(2,612
|
)
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
Acquisition of property, plant and equipment
|
|
(4,203
|
)
|
(4,977
|
)
|
Change in other non-current assets
|
|
31
|
|
(13
|
)
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
(4,172
|
)
|
(4,990
|
)
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.
8
Table
of Contents
DYNAMIC
MATERIALS CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Dollars
in Thousands)
(unaudited)
|
|
2008
|
|
2007
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
Borrowings on bank lines of credit, net
|
|
12,081
|
|
|
|
Payment on term loan with French bank
|
|
(443
|
)
|
(385
|
)
|
Payment on Nord LB term loans
|
|
(542
|
)
|
|
|
Payment of capital lease obligations
|
|
(216
|
)
|
|
|
Payment of deferred debt issuance costs
|
|
(140
|
)
|
|
|
Change in other long-tem liabilities
|
|
33
|
|
10
|
|
Net proceeds from issuance of common stock to employees and directors
|
|
240
|
|
382
|
|
Excess tax benefit related to exercise of stock options
|
|
132
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
11,145
|
|
7
|
|
|
|
|
|
|
|
EFFECTS OF EXCHANGE RATES ON CASH
|
|
553
|
|
83
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
19,339
|
|
(7,512
|
)
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, beginning of the period
|
|
9,045
|
|
17,886
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, end of the period
|
|
$
|
28,384
|
|
$
|
10,374
|
|
|
|
|
|
|
|
|
|
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
Table
of Contents
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
one of its consolidated joint ventures.
A summary of those transactions for the three and six months ended June 30,
2008 is presented below:
|
|
3 months ended
|
|
6 months ended
|
|
|
|
June 30, 2008
|
|
June 30, 2008
|
|
|
|
|
|
Interest
|
|
|
|
Interest
|
|
|
|
Sales to
|
|
income from
|
|
Sales to
|
|
income from
|
|
Perfoline
|
|
$
|
14
|
|
$
|
13
|
|
$
|
47
|
|
$
|
26
|
|
DYNAenergetics RUS
|
|
1,137
|
|
|
|
1,137
|
|
|
|
Minority Interest Partner
|
|
460
|
|
|
|
984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,612
|
|
$
|
13
|
|
$
|
2,169
|
|
$
|
26
|
|
A summary of related party
balances as of June 30, 2008 and December 31, 2007 is presented
below:
|
|
As of June 30, 2008
|
|
As of December 31, 2007
|
|
|
|
Accounts
|
|
Accounts
|
|
Accounts
|
|
Accounts
|
|
|
|
receivable
|
|
payable
|
|
receivable
|
|
payable
|
|
|
|
and loan to
|
|
and loan from
|
|
and loan to
|
|
and loan from
|
|
Perfoline
|
|
$
|
474
|
|
$
|
130
|
|
$
|
523
|
|
$
|
120
|
|
DYNAenergetics RUS
|
|
147
|
|
|
|
449
|
|
|
|
KazDYNAenergetics
|
|
|
|
|
|
131
|
|
|
|
Minority Interest Partner
|
|
261
|
|
399
|
|
|
|
205
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
882
|
|
$
|
529
|
|
$
|
1,103
|
|
$
|
325
|
|
11
Table
of Contents
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 June 30, 2008
|
|
|
|
|
|
|
|
Per share
|
|
|
|
Income
|
|
Shares
|
|
Amount
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,210
|
|
12,416,900
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
Dilutive effect of options to purchase common stock
|
|
|
|
121,462
|
|
|
|
Dilutive effect of restricted stock awards
|
|
|
|
28,364
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,210
|
|
12,566,726
|
|
$
|
0.49
|
|
|
|
For the
three months ended June 30, 2007
|
|
|
|
|
|
|
|
Per
share
|
|
|
|
Income
|
|
Shares
|
|
Amount
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
5,659
|
|
12,048,969
|
|
$
|
0.47
|
|
|
|
|
|
|
|
|
|
Dilutive effect of options to purchase common stock
|
|
|
|
177,934
|
|
|
|
Dilutive effect of restricted stock awards
|
|
|
|
12,353
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
5,659
|
|
12,239,256
|
|
$
|
0.46
|
|
|
|
For the
six months ended June 30, 2008
|
|
|
|
|
|
|
|
Per
share
|
|
|
|
Income
|
|
Shares
|
|
Amount
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
11,458
|
|
12,406,210
|
|
$
|
0.92
|
|
|
|
|
|
|
|
|
|
Dilutive effect of options to purchase common stock
|
|
|
|
133,370
|
|
|
|
Dilutive effect of restricted stock awards
|
|
|
|
30,403
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
11,458
|
|
12,569,983
|
|
$
|
0.91
|
|
|
|
|
|
|
|
|
|
|
|
|
12
Table of Contents
|
|
For the
six months ended June 30, 2007
|
|
|
|
|
|
|
|
Per
share
|
|
|
|
Income
|
|
Shares
|
|
Amount
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
10,542
|
|
12,029,382
|
|
$
|
0.88
|
|
|
|
|
|
|
|
|
|
Dilutive effect of options to purchase common stock
|
|
|
|
194,728
|
|
|
|
Dilutive effect of restricted stock awards
|
|
|
|
8,459
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
10,542
|
|
12,232,569
|
|
$
|
0.86
|
|
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 implementation date of SFAS
157 for certain assets and liabilities.
The adoption of SFAS 157 in the six months ended June 30, 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 six months ended June 30,
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 of 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.
13
Table of Contents
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, some of which are unconsolidated and accounted for under the equity
method (see Note 4).
The
acquisition was valued at $112,635 and was financed by (i) the payment of
$81,715 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 (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.
14
Table of
Contents
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
|
|
45,919
|
|
Investment in joint ventures
|
|
1,324
|
|
Other assets
|
|
11
|
|
|
|
|
|
Total assets acquired
|
|
148,115
|
|
|
|
|
|
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
|
|
$
|
100,802
|
|
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
|
|
|
|
The Company acquired Goodwill in the amount of $45,919 as a result of
the acquisition of DYNAenergetics. The
amount of goodwill assigned to each reportable segment is as follows:
|
|
Value
|
|
Explosive Metalworking
|
|
$
|
25,222
|
|
Oilfield Products
|
|
20,697
|
|
|
|
|
|
Total goodwill
|
|
$
|
45,919
|
|
Goodwill as of June 30, 2008 amounts to $49,092 and the change
from December 31, 2007 reflects the impact of foreign currency translation
and subsequent purchase price adjustments resulting from the compilation of
additional acquisition related expenses.
15
Table of
Contents
The
following table presents the unaudited, pro-forma combined results of
operations for the three and six months ended June 30, 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:
|
|
Three months
|
|
Six months
|
|
|
|
ended
|
|
ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2007
|
|
2007
|
|
Net sales
|
|
$
|
47,634
|
|
$
|
93,698
|
|
Income from operations
|
|
$
|
8,781
|
|
$
|
15,832
|
|
Net income
|
|
$
|
4,756
|
|
$
|
8,446
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
Basic
|
|
$
|
0.39
|
|
$
|
0.69
|
|
Diluted
|
|
$
|
0.38
|
|
$
|
0.68
|
|
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 and (2) 55% interest in DYNAenergetics RUS which is a Russian
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 $1,645 and $1,361 as of June 30, 2008 and December 31,
2007, respectively.
16
Table of
Contents
Summarized
unaudited financial information for the joint ventures accounted for under the
equity method as of June 30, 2008 and December 31, 2007 and for the
three and six months ended June 30, 2008 is as follows:
|
|
June 30,
|
|
December 31,
|
|
|
|
2008
|
|
2007
|
|
Current assets
|
|
$
|
3,828
|
|
$
|
4,148
|
|
Noncurrent assets
|
|
923
|
|
666
|
|
Total assets
|
|
$
|
4,751
|
|
$
|
4,814
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
673
|
|
$
|
1,400
|
|
Noncurrent liabilities
|
|
1,051
|
|
1,048
|
|
Equity
|
|
3,027
|
|
2,366
|
|
Total liabilities and equity
|
|
$
|
4,751
|
|
$
|
4,814
|
|
|
|
Three months
|
|
Six months
|
|
|
|
ended
|
|
ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2008
|
|
2008
|
|
Net sales
|
|
$
|
2,522
|
|
$
|
4,725
|
|
Gross profit
|
|
$
|
820
|
|
$
|
1,233
|
|
Operating income
|
|
$
|
617
|
|
$
|
788
|
|
Net income
|
|
$
|
549
|
|
$
|
535
|
|
Equity in earnings of joint ventures
|
|
$
|
273
|
|
$
|
289
|
|
5. INVENTORY
The components of inventory are
as follows at June 30, 2008 and December 31, 2007:
|
|
June 30,
|
|
December 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
|
|
Raw materials
|
|
$
|
13,117
|
|
$
|
13,744
|
|
Work-in-process
|
|
20,763
|
|
23,699
|
|
Finished goods
|
|
4,406
|
|
3,564
|
|
Supplies
|
|
578
|
|
621
|
|
|
|
|
|
|
|
|
|
$
|
38,864
|
|
$
|
41,628
|
|
17
Table of
Contents
6. PURCHASED INTANGIBLE ASSETS
The following table
presents details of our purchased intangible assets, other than goodwill, as of
June 30, 2008:
|
|
|
|
Accumulated
|
|
|
|
|
|
Gross
|
|
Amortization
|
|
Net
|
|
Core technology
|
|
$
|
26,444
|
|
$
|
(826)
|
|
$
|
25,618
|
|
Customer relationships
|
|
35,680
|
|
(2,478
|
)
|
33,202
|
|
Trademarks / Trade names
|
|
2,880
|
|
(269
|
)
|
2,611
|
|
Order backlog DYNAplat
|
|
2,686
|
|
(2,686
|
)
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
$
|
67,690
|
|
$
|
(6,259
|
)
|
$
|
61,431
|
|
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 June 30, 2008 is due to the impact of foreign currency
translation.
7. DEBT
Lines of credit consist of the
following at June 30, 2008 and December 31, 2007:
|
|
June 30,
|
|
December 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
|
|
Syndicated credit agreement revolving loan
|
|
$
|
10,427
|
|
$
|
|
|
Commerzbank revolving line of credit
|
|
397
|
|
3,225
|
|
Commerzbank line of credit
|
|
3,950
|
|
1,473
|
|
Deutsche Bank revolving line of credit
|
|
784
|
|
680
|
|
Nord LB line of credit
|
|
3,471
|
|
2,209
|
|
|
|
|
|
|
|
|
|
19,029
|
|
7,587
|
|
Less current portion
|
|
(8,602
|
)
|
(7,587
|
)
|
|
|
|
|
|
|
Long-term lines of credit
|
|
$
|
10,427
|
|
$
|
|
|
18
Table
of Contents
Long-term debt consists of the
following at June 30, 2008 and December 31, 2007:
|
|
June 30,
|
|
December 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
|
|
Syndicated credit agreement term loan
|
|
$
|
45,000
|
|
$
|
45,000
|
|
Syndicated credit agreement Euro term loan
|
|
22,119
|
|
20,621
|
|
Euro term loan - French bank
|
|
|
|
427
|
|
Nord LB 3,000 Euro term loan
|
|
3,081
|
|
3,314
|
|
Nord LB 500 Euro term loan
|
|
132
|
|
203
|
|
|
|
|
|
|
|
|
|
70,332
|
|
69,565
|
|
Less current maturities
|
|
(7,792
|
)
|
(8,035
|
)
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
62,540
|
|
$
|
61,530
|
|
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 June 30, 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 June 30, 2008, the fair value of
the swap agreement was a liability of $382.
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
19
Table
of Contents
marketed to different customer types and
requires different manufacturing processes and technologies. Segment information is presented for the
three and six months ended June 30, 2008 and 2007 as follows:
|
|
Explosive
|
|
|
|
|
|
|
|
|
|
Metalworking
|
|
Oilfield
|
|
AMK
|
|
|
|
|
|
Group
|
|
Products
|
|
Welding
|
|
Total
|
|
For the three months ended June 30, 2008:
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
52,996
|
|
$
|
7,922
|
|
$
|
2,265
|
|
$
|
63,183
|
|
Depreciation and amortization
|
|
$
|
2,660
|
|
$
|
937
|
|
$
|
108
|
|
$
|
3,705
|
|
Income from operations
|
|
$
|
9,815
|
|
$
|
616
|
|
$
|
585
|
|
$
|
11,016
|
|
Equity in earnings of joint ventures
|
|
$
|
|
|
$
|
273
|
|
$
|
|
|
273
|
|
Unallocated amounts:
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
(879
|
)
|
Other income
|
|
|
|
|
|
|
|
189
|
|
Interest expense
|
|
|
|
|
|
|
|
(1,471
|
)
|
Interest income
|
|
|
|
|
|
|
|
99
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated income before income taxes
|
|
|
|
|
|
|
|
$
|
9,227
|
|
|
|
Explosive
|
|
|
|
|
|
|
|
Metalworking
|
|
AMK
|
|
|
|
|
|
Group
|
|
Welding
|
|
Total
|
|
For the three months ended June 30, 2007:
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
33,119
|
|
$
|
1,335
|
|
$
|
34,454
|
|
Depreciation
|
|
$
|
452
|
|
$
|
63
|
|
$
|
515
|
|
Income from operations
|
|
$
|
9,047
|
|
$
|
18
|
|
$
|
9,065
|
|
Unallocated amounts:
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
(295
|
)
|
Other expense
|
|
|
|
|
|
(13
|
)
|
Interest income
|
|
|
|
|
|
177
|
|
|
|
|
|
|
|
|
|
Consolidated income before income taxes
|
|
|
|
|
|
$
|
8,934
|
|
|
|
Explosive
|
|
|
|
|
|
|
|
|
|
Metalworking
|
|
Oilfield
|
|
AMK
|
|
|
|
|
|
Group
|
|
Products
|
|
Welding
|
|
Total
|
|
For the six months ended June 30, 2008:
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
104,638
|
|
$
|
12,373
|
|
$
|
4,565
|
|
$
|
121,576
|
|
Depreciation and amortization
|
|
$
|
5,044
|
|
$
|
1,919
|
|
$
|
216
|
|
$
|
7,179
|
|
Income from operations
|
|
$
|
19,799
|
|
$
|
50
|
|
$
|
1,222
|
|
$
|
21,071
|
|
Equity in earnings of joint ventures
|
|
$
|
|
|
$
|
289
|
|
$
|
|
|
289
|
|
Unallocated amounts:
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
(1,543
|
)
|
Other income
|
|
|
|
|
|
|
|
41
|
|
Interest expense
|
|
|
|
|
|
|
|
(2,734
|
)
|
Interest income
|
|
|
|
|
|
|
|
323
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated income before income taxes
|
|
|
|
|
|
|
|
$
|
17,447
|
|
20
Table
of Contents
|
|
Explosive
|
|
|
|
|
|
|
|
Metalworking
|
|
AMK
|
|
|
|
|
|
Group
|
|
Welding
|
|
Total
|
|
For the six months ended June 30, 2007:
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
64,614
|
|
$
|
2,934
|
|
$
|
67,548
|
|
Depreciation
|
|
$
|
787
|
|
$
|
123
|
|
$
|
910
|
|
Income from operations
|
|
$
|
16,550
|
|
$
|
282
|
|
$
|
16,832
|
|
Unallocated amounts:
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
(519
|
)
|
Other expense
|
|
|
|
|
|
(20
|
)
|
Interest income
|
|
|
|
|
|
365
|
|
|
|
|
|
|
|
|
|
Consolidated income before income taxes
|
|
|
|
|
|
$
|
16,658
|
|
During the three and six months
ended June 30, 2008 and 2007, no sales to any one customer accounted for
more than 10% of total net sales.
9. COMPREHENSIVE
INCOME
The Company
s comprehensive income for the three and six months ended June 30,
2008 and 2007 was as follows:
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Net income for the period
|
|
$
|
6,210
|
|
$
|
5,659
|
|
$
|
11,458
|
|
$
|
10,542
|
|
Interest rate swap valuation adjustment, net of tax
|
|
195
|
|
|
|
(90
|
)
|
|
|
Foreign currency translation adjustment
|
|
(148
|
)
|
200
|
|
7,109
|
|
260
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
6,257
|
|
$
|
5,859
|
|
$
|
18,477
|
|
$
|
10,802
|
|
Accumulated
other cumulative comprehensive income as of June 30, 2008 and December 31,
2007 consisted of the following:
|
|
June 30,
|
|
December 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
|
|
Currency translation adjustment
|
|
$
|
10,799
|
|
$
|
3,690
|
|
Interest rate swap valuation adjustment, net of tax of $145 and $90,
respectively
|
|
(237
|
)
|
(147
|
)
|
|
|
|
|
|
|
|
|
$
|
10,562
|
|
$
|
3,543
|
|
21
Table of Contents
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 six months ended
June 30, 2008, Explosive Metalworking accounted for 86% of our net sales
and 94% 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 10%, respectively, of our first half 2008 net
sales.
Our net sales for the
six months ended June 30, 2008, which include $31,722 of sales from our
recently acquired DYNAenergetics businesses, increased by $54,028 (80.0%)
compared to the first six months of 2007, reflecting year-to-year net sales
increases of $40,024 (61.9%) and $1,631 (55.6%) for our Explosive Metalworking
and AMK Welding segments, respectively, and a sales contribution of $12,373
from our new Oilfield Products segment.
Income from operations increased by 19.7% to $19,528 in the first six
months of 2008 from $16,313 in the first six months of 2007, reflecting
improvements in Explosive Metalworkings and AMK Weldings operating income of
$3,249 and $940, respectively, that were partially offset by a $1,024 increase
in stock-based compensation expense. Our
Oilfield Products segment reported operating income of $50. Our net income increased by 8.7% to $11,458
for the six months ended June 30, 2008 from $10,542 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,
22
Table
of Contents
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, boosters and 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 34.3% for the first half of
2008 from 36.7% for the first half of 2007.
Income tax provisions on the earnings of Nobelclad, Nitro Metall,
DYNAenergetics and our German and Luxembourg holding companies have been
provided based upon the respective French, Swedish, German and Luxembourg
statutory tax rates. Based upon existing
tax regulations and current federal, state and foreign statutory tax rates, we
expect our full
23
Table of Contents
year 2008 blended effective tax rate on our consolidated pre-tax income
to range between 32% to 33%.
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 $104,871 at June 30,
2008 from approximately $102,106 at March 31, 2008 and approximately
$100,000 at December 31, 2007.
Three and Six Months Ended June 30, 2008 Compared
to Three and Six Months Ended June 30, 2007
Net sales
|
|
Three Months Ended
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Net sales
|
|
$
|
63,183
|
|
$
|
34,454
|
|
$
|
28,729
|
|
83.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Net sales
|
|
$
|
121,576
|
|
$
|
67,548
|
|
$
|
54,028
|
|
80.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales for the second
quarter of 2008 increased 83.4% to $63,183 from $34,454 in the second quarter
of 2007. Explosive Metalworking sales
increased 60.0% to $52,996 in the three months ended June 30, 2008 (84% of
total sales) from $33,119 in the same period of 2007 (96% of total sales). The significant increase in Explosive
Metalworking sales reflects a sales contribution of $8,605 from the DYNAplat
division of DYNAenergetics and increased sales of $11,272 from our other DMC
Clad divisions which reflect the continued strong economic condition of the
industries this business segment serves.
Oilfield Products
contributed $7,922 to second quarter 2008 sales (12% of total sales).
AMK Welding contributed $2,265 to second quarter 2008 sales (4% of
total sales), which represents a 69.7% increase from sales of $1,335 in the
second quarter of 2007 (4% of total sales).
The increases in AMKs sales relates principally to increased revenues
from ground-based gas turbine work.
Net sales for the first
half of 2008 increased 80.0% to $121,576 from $67,548 in the first half of
2007. Explosive Metalworking sales
increased 61.9% to $104,638 in the six months ended June 30, 2008 (86% of
total sales) from $64,614 in the same period of 2007 (96% of total sales).
24
Table of Contents
The significant increase in Explosive
Metalworking sales reflects a sales contribution of $19,349 from the DYNAplat
division of DYNAenergetics and increased sales of $20,675 from our other DMC
Clad divisions which reflect the continued strong economic condition of the
industries this business segment serves.
Due to longer lead times on carbon steel supply in the United States,
sales for the second half of 2008 are expected to be up to 8% lower than those
reported for the first half of the year, with third quarter 2008 sales expected
to be up to 20% less than the $52,996 in sales that we reported in the second
quarter.
Oilfield Products
contributed $12,373 to first half 2008 sales (10% of total sales). Sales during the second half of 2008 are
expected to be 20% to 30% higher than those of the first half with most of this
increase coming in the fourth quarter.
AMK Welding contributed $4,565 to first half 2008 sales (4% of total
sales), which represented a 55.6% increase from sales of $2,934 in the first
half of 2007 (4% of total sales). The
increases in AMKs sales relates principally to increased revenues from
ground-based gas turbine work. Second
half 2008 sales at AMK Welding are expected to be comparable to or slightly
higher than those for the first half of the year.
Gross profit
|
|
Three Months Ended
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Gross profit
|
|
$
|
19,049
|
|
$
|
12,079
|
|
$
|
6,970
|
|
57.7
|
%
|
Consolidated gross profit margin rate
|
|
30.1
|
%
|
35.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Gross profit
|
|
$
|
36,760
|
|
$
|
22,930
|
|
$
|
13,830
|
|
60.3
|
%
|
Consolidated gross profit margin rate
|
|
30.2
|
%
|
33.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit increased by 57.7% to $19,049 for the three months ended June 30,
2008 from $12,079 for the three months ended June 30, 2007. Our second
quarter 2008 consolidated gross profit margin rate decreased to 30.1% from
35.1% in the second quarter of 2007. The gross profit margin rate for Explosive
Metalworking decreased from 35.7% in the second quarter of 2007 to 29.7% in the
second quarter of 2008, for the reasons discussed below. The gross profit margin rate for AMK Welding
increased to 34.3% in the second quarter of 2008 from 21.9% in the second
quarter of 2007, with this improvement being largely attributable to the 69.7%
increase in AMKs sales volume as discussed above. Oilfield Products reported a gross profit
margin rate of 33.6% on its second quarter 2008 sales of $7,922, which was
higher than the normal gross margin level for this business due to a favorable
second quarter product and customer mix.
For
the six months ended June 30, 2008, gross profit increased to $36,760 from
$22,930 for the same period of 2007, a 60.3% increase. Our year to date consolidated gross profit
margin grate decreased to 30.2% from 33.9% for the first six months of
2007. The gross profit margin rate for
Explosive Metalworking decreased to 30.2% from 34.4%. For the six months ended June 30, 2007,
the gross profit margin rate for AMK Welding increased to 35.3% from 25.7% for
the same
25
Table of Contents
period of
2007. Oilfield Products reported gross
profit margin rate of 30.6% for the first half of 2008, which is considered
somewhat higher than the normal gross margin range for this business.
The
decreased second quarter and first half 2008 gross profit margin rates for
Explosive Metalworking relates primarily to a higher proportion of sales by our
European divisions in the first half of 2008 than in the first half of 2007 as
a result of the DYNAenergetics acquisition.
As mentioned above, the DYNAplat division of DYNAenergetics reported
first half 2008 sales of $19,349. Historically,
gross margins for our European explosion welding divisions, including those of
the DYNAplat division, have generally been lower than those reported by our
U.S. divisions.
Due
to an expected decline in consolidated third quarter 2008 sales compared to
sales reported in first and second quarter of 2008, we expect our third quarter
gross margin rate on consolidated sales to decline to 28% and 29% of sales as a
result spreading fixed manufacturing overhead expenses over a reduced sales
base. Based upon our expectation that
fourth quarter consolidated sales will
approximate or exceed those of the second quarter, we expect our fourth
consolidated gross margin to be comparable to the gross margin rates that we
reported in the first and second quarters.
General and administrative expenses
|
|
Three Months Ended
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
General & administrative expenses
|
|
$
|
3,815
|
|
$
|
1,854
|
|
$
|
1,961
|
|
105.8
|
%
|
Percentage of net sales
|
|
6.0
|
%
|
5.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
General & administrative expenses
|
|
$
|
6,933
|
|
$
|
3,516
|
|
$
|
3,417
|
|
97.2
|
%
|
Percentage of net sales
|
|
5.7
|
%
|
5.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative expenses increased by $1,961, or 105.8%, to $3,815 in the second
quarter of 2008 from $1,854 in the second quarter of 2007. Excluding $1,447 of incremental general and
administrative expenses that resulted from the DYNAenergetics acquisition, our
general and administrative expenses increased by $514 or 27.7%. This increase reflects a $378 increase in
stock-based compensation and an impact of $32 from annual salary adjustments
and staffing changes. As a percentage of
net sales, general and administrative expenses increased to 6.0% in the second
quarter of 2008 from 5.4% in the second quarter of 2007.
General and
administrative expenses for the six months ended June 30, 2008 totaled
$6,933 compared to $3,516 for the same period of 2007. This reflects an increase of 97.2%. Excluding $2,339 of incremental general and
administrative expenses for DYNAenergetics for the first half of 2008, our
general and administrative expenses increased by $1,078 or 30.7%. This increase reflects a $651 increase in
stock-based compensation, an impact of $159 from annual salary adjustments and
staffing changes, and a $118 increase in legal and consulting expenses. As a percentage of net sales, general and
administrative expenses increased to 5.7% in the first half of 2008 from 5.2%
in the first half of 2007.
26
Table of Contents
Selling
expenses
|
|
Three Months Ended
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Selling expenses
|
|
$
|
2,633
|
|
$
|
1,455
|
|
$
|
1,178
|
|
81.0
|
%
|
Percentage of net sales
|
|
4.2
|
%
|
4.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Selling expenses
|
|
$
|
5,474
|
|
$
|
3,101
|
|
$
|
2,373
|
|
76.5
|
%
|
Percentage of net sales
|
|
4.5
|
%
|
4.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
expenses, which include sales commissions of $309 in 2008 and $291 in 2007,
increased by 81.0% to $2,633 in the second quarter of 2008 from $1,455 in the
second quarter of 2007. Excluding $809
of incremental selling expenses that resulted from the DYNAenergetics
acquisition, our selling expenses increased by $369 or 25.4%. This increase reflects an increase in
stock-based compensation expense of $142 and an impact of $128 from annual
salary adjustments and staffing changes.
As a percentage of net sales, selling expenses remained at 4.2% in the
second quarter of 2008 and 2007.
Selling expenses increased
by 76.5% to $5,474 in the first half of 2008 from $3,101 in the same period of
2007. These expenses include sales
commission of $622 and $714 for 2008 and 2007 respectively. Excluding $1,664 of incremental selling
expenses from DYNAenergetics, our selling expenses increased by $709 or
22.8%. This increase reflects an
increase in stock-based compensation expense of $266, an impact of $238 from
annual salary adjustments and staffing changes, and a $155 increase in travel
expenses. As a percentage of net sales,
selling expenses decreased to 4.5% in the first half of 2008 from 4.6% in the
first half of 2007.
Amortization expenses
|
|
Three Months Ended
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Amortization expense of purchased intangible
assets
|
|
$
|
2,464
|
|
$
|
|
|
$
|
2,464
|
|
NA
|
|
Percentage of net sales
|
|
3.9
|
%
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Amortization expense of purchased intangible
assets
|
|
$
|
4,825
|
|
$
|
|
|
$
|
4,825
|
|
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
27
Table of Contents
expense for the three months ended June 30,
2008 includes $1,050, $981, $327 and $107 relating to values assigned to order
backlog, customer relationships, core technology and trademarks/trade names,
respectively. Amortization expense for
the six months ended June 30, 2008 includes $2,055, $1,921, $640 and $209
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
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Income from operations
|
|
$
|
10,137
|
|
$
|
8,770
|
|
$
|
1,367
|
|
15.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Income from operations
|
|
$
|
19,528
|
|
$
|
16,313
|
|
$
|
3,215
|
|
19.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
increased by 15.6% to $10,137 in the second quarter of 2008 from $8,770 in the
second quarter of 2007. Explosive
Metalworking reported income from operations of $9,815 in the second quarter of
2008 as compared to $9,047 in the second quarter of 2007. This 8.5% increase is largely attributable to
the 60.0% sales increase as discussed above.
Oilfield Products reported income from operations of $616 for the second
quarter of 2008. AMK Welding reported
income from operations of $585 for the three months ended June 30, 2008 as
compared to $18 for the same period of 2007.
This significant increase is attributable to the $930, or 69.7%,
increase in sales as discussed above.
Income from operations
increased by 19.7% to $19,528 in the first six months of 2008 from $16,313 in
the first six months of 2007. Explosive
Metalworking reported income from operations of $19,799 in the first half of
2008 as compared to $16,550 in the first half of 2007. This 19.6% increase is largely attributable
to the 61.9% sales increase discussed above.
Oilfield Products reported income from operations of $50 for the first
half of 2008. AMK Welding reported
income from operations of $1,222 for the first six months of 2008 as compared
to $282 for the first six months of 2007.
Income from operations
for the three and six months ended June 30, 2008 includes $879 and $1,543,
respectively, of stock-based compensation expense compared to the stock-based
compensation expense for the three and six months ended June 30, 2007 of
$295 and $519, respectively. This
expense is not allocated to our business segments and thus is not included in
the above second quarter and year to date operating income totals for Explosive
Metalworking, Oilfield Products and AMK Welding.
Interest income (expense), net
|
|
Three Months Ended
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Interest income (expense), net
|
|
$
|
(1,372
|
)
|
$
|
177
|
|
$
|
(1,549
|
)
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
Table of Contents
|
|
Six Months Ended
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Interest income (expense), net
|
|
$
|
(2,411
|
)
|
$
|
365
|
|
$
|
(2,776
|
)
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded
net interest expense of $1,372 in the three months ended June 30, 2008
compared to net interest income of $177 in the same time period of 2007. We recorded net interest expense of $2,411
in the first half of 2008 compared to net interest income of $365 in the first
half of 2007. During the first six
months of 2007, we were in a positive net cash position and earned interest on
investment of excess cash balances. In
connection with the 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 and six months of 2008.
Income tax provision
|
|
Three Months Ended
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Income tax provision
|
|
$
|
3,017
|
|
$
|
3,275
|
|
$
|
(258
|
)
|
(7.9
|
)%
|
Effective tax rate
|
|
32.7
|
%
|
36.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
|
2008
|
|
2007
|
|
Change
|
|
Change
|
|
Income tax provision
|
|
$
|
5,989
|
|
$
|
6,116
|
|
$
|
(127
|
)
|
(2.1
|
)%
|
Effective tax rate
|
|
34.3
|
%
|
36.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded an income tax provision of $3,017 in the second quarter of
2008 compared to $3,275 in the second quarter of 2007. The effective tax rate decreased to 32.7% in
the second quarter of 2008 from 36.7% in the second quarter of 2007. The income tax provisions for the three
months ended June 30, 2008 and 2007 include $2,609 and $2,941,
respectively, related to U.S. taxes, with the remainder relating to foreign
taxes and foreign tax benefits associated with the operations of Nobelclad and
its Swedish subsidiary, Nitro Metall, as well as the newly acquired
DYNAenergetics division and related holding companies in Germany and
Luxembourg. During the second quarter,
we refined our estimates of pre-tax earnings and permanent differences between
book and taxable income for the full year 2008.
Based upon our current estimate of full year earnings and the impact of certain
significant permanent differences, we currently expect our full year 2008
blended effective tax rate on our consolidated pre-tax income to range between
32% to 33%.
For
the six months ended June 30, 2008, we recorded an income tax provision of
$5,989 compared to $6,116 for the same period of 2007. The effective tax rate decreased to 34.3% for
the first six months of 2008 from 36.7% for the first six months of 2007. The income tax provisions for the six months
ended June 30, 2008 and 2007 include $5,560 and $5,043, respectively,
related to U.S. taxes, with the remainder relating to foreign taxes and foreign
tax benefits associated with
29
Table of Contents
the operations of Nobelclad, Nitro Metall, DYNAenergetics and our
holding
companies in Germany and Luxembourg
.
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 June 30, 2008, term loans of $45,000 and 14,000 Euros
($22,119) and revolving loans of 6,600 Euros ($10,427) 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 $8,602 and $3,213, respectively, as of June 30,
2008.
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 DYNAenergetics 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 June 30, 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 half of 2008 totaled $11,813. Significant sources of operating cash flow
included net income of $11,458, non-cash depreciation and amortization expense
of $7,293 and stock-based compensation of $1,543. These sources of operating cash flow were
partially offset by a deferred income tax benefit of $2,410, $289 for equity in
earnings of joint ventures and net negative changes in various components of
working capital in the amount of $5,782.
Net negative changes in working capital included increases in prepaid
expenses of $844 and decreases in accounts payable, customer advances and
accrued expenses and other liabilities of $5,086, $2,859 and $3,347,
respectively. These negative changes
30
Table of Contents
in working capital were partially offset by
decreases in restricted cash, accounts receivable and inventories of $386,
$1,237 and $4,731, respectively.
Net cash flows used in
operating activities for the six months ended June 30, 2007 totaled
$2,612. Significant sources of operating
cash flow included net income of $10,542, non-cash depreciation expense of $910
and stock-based compensation of $519. These
sources of operating cash flow were offset by net negative changes in various
components of working capital in the amount of $14,503. Net negative changes in working capital
included increases in accounts receivable, inventories and prepaid expenses of
$4,337, $10,943 and $636, respectively, and decreases in accrued expenses and
other liabilities of $3,249. These
negative changes in working capital were partially offset by a decrease in
restricted cash of $3,059 and increases in accounts payable and customer advances
of $1,276 and $327, respectively. The
net negative changes in working capital are reflective of the growth in our
business from 2006 to 2007.
Cash
flows from investing activities
Net cash flows used by
investing activities for the first six months of 2008 totaled $4,172 and
consisted almost entirely of capital expenditures.
Net cash flows used in
investing activities for the first six months of 2007 totaled $4,990 and
consisted primarily of capital expenditures.
Cash flows from financing
activities
Net cash flows provided
by financing activities for the first six months of 2008 were $11,145, which
consisted primarily of net borrowings on bank lines of credit of $12,081 and
$240 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 final principal payment on a term loan with
French bank of $443, a $542 principal payment on a Nord LB term loan, payments
of deferred debt issuance costs of $140 and payment on capital lease
obligations of $216.
Net cash flows provided
by financing activities for the first six months of 2007 were $7, which
consisted primarily of net proceeds from the issuance of common stock relating
to the exercise of stock options of $382 that was offset by a $385 principal
payment on a term loan with French bank.
Payment of Dividends
On June 13, 2008,
our board of directors declared a $.15 per share cash dividend which was paid
on July 11, 2008. The dividend
totaled $1,894 and was payable to shareholders of record as of June 27, 2008.
We 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 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
31
Table of Contents
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
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
32
Table of Contents
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, if required, 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 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
33
Table of Contents
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; if not, we record an
appropriate valuation allowance.
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 June 30, 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 implementation date of
34
Table of Contents
SFAS 157 for
certain assets and liabilities. The
adoption of SFAS 157 in the six months ended June 30, 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 six months ended June 30,
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.
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 June 30, 2008, the Company carried out an
evaluation, under the supervision and with the participation of the Companys
management, including the Companys Chief Executive
35
Table of Contents
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 June 30, 2008 or in other
factors that could materially affect the Companys internal controls over
financial reporting.
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 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.
36
Table of Contents
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
The Companys
Annual
Meeting of Stockholders was held on June 5, 2008. At the Annual Meeting, the stockholders of
the Company (i) elected the persons listed below to serve as directors of
the Company until the 2009 Annual Meeting of Stockholders (ii) approved
the Companys Short Term Incentive Plan and (iii) ratified the appointment
of Ernst & Young LLP as the Companys independent registered public
accounting firm for the fiscal year ending December 31, 2008.
The
Company
had 12,604,269 shares of Common Stock outstanding as of April 18, 2008,
the record date for the Annual Meeting.
At the Annual Meeting, holders of a total of 11,508,685 shares of Common
Stock were present in person or represented by proxy. The following sets forth information
regarding the results of the voting at the Annual Meeting:
37
Table
of Contents
Proposal
1
|
|
Shares Voted
|
|
Shares
|
|
Election of Directors
|
|
For
|
|
Withheld
|
|
|
|
|
|
|
|
Dean K.
Allen
|
|
11,319,449
|
|
189,236
|
|
Yvon Pierre
Cariou
|
|
11,368,885
|
|
139,800
|
|
Bernard
Hueber
|
|
11,361,852
|
|
146,833
|
|
Gerard
Munera
|
|
11,353,990
|
|
154,695
|
|
Richard P.
Graff
|
|
11,348,868
|
|
159,817
|
|
Rolf Rospek
|
|
11,267,756
|
|
240,929
|
|
Proposal 2
To approve the Companys Short Term Incentive
Plan
Shares Voted
|
|
Shares Voted
|
|
Shares Voted
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
Non-votes
|
|
|
|
|
|
|
|
|
|
8,715,768
|
|
624,439
|
|
347,479
|
|
1,820,999
|
|
Proposal 3
To ratify the appointment of Ernst &
Young LLP as the Companys independent registered public accounting firm for
the fiscal year ending December 31, 2008.
Shares Voted
|
|
Shares Voted
|
|
Shares Voted
|
|
For
|
|
Against
|
|
Abstain
|
|
|
|
|
|
|
|
11,209,184
|
|
291,227
|
|
8,274
|
|
Item 5. Other Information
None.
Item 6.
Exhibits
10.1
Form of
Indemnification Agreement (incorporated by reference to the Companys Form 8-K
filed with the Commission on April 28, 2008). *
10.2
Employment Agreement
dated as of April 23, 2008, between the Company and Yvon Pierre Cariou
(incorporated by reference to the Companys Form 8-K filed with the
Commission on April 28, 2008). *
10.3
Employment Agreement
dated as of April 23, 2008, between the Company and Richard A. Santa
(incorporated by reference to the Companys Form 8-K filed with the
Commission on April 28, 2008). *
10.4
Employment Agreement
dated as of April 23, 2008, between the Company and John G. Banker
(incorporated by reference to the Companys Form 8-K filed with the
Commission on April 28, 2008). *
38
Table of Contents
10.5
2008 Dynamic Materials
Corporation Short Term Incentive Plan (incorporated by reference to Appendix A
to the Companys Proxy Statement filed with the Commission on April 30,
2008). *
31.1
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.
31.2
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.
32.1
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.
32.2
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.
* Management contract or compensatory plan.
39
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.
|
DYNAMIC MATERIALS CORPORATION
|
|
(Registrant)
|
|
|
|
|
Date: August 1, 2008
|
/s/ Richard A. Santa
|
|
Richard A. Santa, Senior Vice President and Chief
Financial Officer (Duly Authorized Officer and
Principal Financial and Accounting Officer)
|
40
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