Dynamic Materials Corporation (DMC) (NASDAQ: BOOM), the world's
leading provider of explosion-welded clad metal plates, today
reported financial results for its first fiscal quarter ended March
31, 2009.
First quarter sales were $49.8 million versus $58.4 million in
the comparable quarter a year ago. Approximately 42% of the sales
decline was related to changes in currency exchange rates. Gross
margin increased to 31% from 30% in the 2008 first quarter. Income
from operations was $8.3 million versus $9.4 million in the
year-ago first quarter, and net income was $4.9 million, or $0.38
per diluted share, versus net income of $5.2 million, or $0.41 per
diluted share, in the 2008 first quarter.
Adjusted EBITDA for the first quarter was $11.5 million versus
$13.5 million in prior-year first quarter. Adjusted EBITDA is a
non-GAAP (generally accepted accounting principle) financial
measure used by management to measure operating performance. See
additional information about adjusted EBITDA at the end of this
news release.
Explosive Metalworking
First quarter sales at DMC's Explosive Metalworking segment were
$43.5 million versus sales of $51.6 million in last year's first
quarter. Operating income was $9.4 million versus $10.0 million in
the comparable year-ago period. Adjusted EBITDA was $10.9 million
versus $12.4 million in the first quarter of 2008. The Explosive
Metalworking segment finished the quarter with an order backlog of
$74 million versus $97 million at December 31, 2008.
Oilfield Products
First quarter sales at DMC's Oilfield Products segment were $4.0
million versus $4.5 million in the same quarter last year. The
segment reported an operating loss of $694,000 versus an operating
loss of $565,000 in the first quarter a year ago. First quarter
adjusted EBITDA was $154,000 versus $418,000 in the comparable
prior-year quarter.
AMK Welding
First quarter sales at DMC's AMK Welding segment were $2.3
million versus $2.3 million in the same quarter last year.
Operating income was $375,000 versus $637,000 in the comparable
quarter last year, while adjusted EBITDA was $489,000 versus
$745,000 in the comparable year-ago quarter.
Management Commentary
"Our first quarter financial results were on the high side of
our expectations, thanks primarily to a strong performance by our
U.S. explosion welding business," said Yvon Cariou, president and
CEO. "Our sales teams have been active processing quote requests
associated with a broad spectrum of large order opportunities.
However, as evidenced by the dip in our explosion welding order
backlog, there has been a marked slowdown in the transition of
quotes into firm bookings.
"It appears that factors ranging from project financing
limitations, to re-budgeting efforts, to a general 'wait-and-see'
approach to major capital expenditures and the economy as a whole
have converged to negatively impact our explosion welding order
flow. We nevertheless are optimistic that a large portion of the
orders we are pursuing -- many of which are directly related to
important international infrastructure projects -- will ultimately
move forward. A recent letter-of-intent for a sizeable
hydrometallurgy project we have been pursuing was an encouraging
sign of progress. We also believe we could see an improvement later
this year in order flow at our Oilfield Products business, which
historically has experienced a slow first quarter, but is currently
pursuing an array of international new business opportunities. In
the meantime, we are taking a conservative approach to our
company-wide capital expenditures and are maintaining a tight rein
on operational costs."
Cariou said that DMC is currently bidding on a select number of
specific projects that represent significant revenue opportunities,
but could have lower-than-normal contribution margins. "While these
prospective orders may not be as profitable as many of our
traditional large contracts, they could expand our presence in the
strategically important Middle Eastern region, where we are
attempting to build market share."
Cariou added, "Our end-market development efforts in the
transportation, nuclear power, defense and alternative energy
sectors all are proceeding as planned."
Rick Santa, chief financial officer, said management expects
second quarter sales will be 10% to 14% below the first quarter,
while second quarter gross margin is expected to be in a range of
27% to 29%. Due to the recent slowdown in order volume and
continued uncertainty associated with macro-economic conditions,
management is now forecasting that revenue for fiscal 2009 will
decline between 17% and 23% versus fiscal 2008. The Company's prior
forecast was for a year-over-year revenue decline in a range of 12%
and 20%. Full-year gross margin is expected to be between 27% and
29%, and as previously forecast, the Company's full-year tax rate
is expected to be between 30% and 32%.
Conference call information
Management will hold a conference call to discuss these results
today at 5:00 p.m. Eastern (3:00 p.m. Mountain). Investors are
invited to listen to the call live via the Internet at
www.dynamicmaterials.com, or by dialing into the teleconference at
866-394-8610 (706-758-0876 for international callers) and entering
the passcode 95457533. Participants should access the website at
least 15 minutes early to register and download any necessary audio
software. A replay of the webcast will be available for 30 days and
a telephonic replay will be available through May 4, 2009, by
calling 800-642-1687 (706-645-9291 for international callers) and
entering the passcode 95457533.
Use of Non-GAAP Financial Measures
Non-GAAP results are presented only as a supplement to the
financial statements based on U.S. generally accepted accounting
principles (GAAP). The non-GAAP financial information is provided
to enhance the reader's understanding of DMC's financial
performance, but no non-GAAP measure should be considered in
isolation or as a substitute for financial measures calculated in
accordance with GAAP. Reconciliations of the most directly
comparable GAAP measures to non-GAAP measures are provided within
the schedules attached to this release.
EBITDA is defined as net income plus or minus net interest plus
taxes, depreciation and amortization. Adjusted EBITDA excludes from
EBITDA stock-based compensation and, when appropriate, other items
that management does not utilize in assessing DMC's operating
performance (as further described in the attached financial
schedules). None of these non-GAAP financial measures are
recognized terms under GAAP and do not purport to be an alternative
to net income as an indicator of operating performance or any other
GAAP measure.
Management uses these non-GAAP measures in its operational and
financial decision-making, believing that it is useful to eliminate
certain items in order to focus on what it deems to be a more
reliable indicator of ongoing operating performance and the
company's ability to generate cash flow from operations. As a
result, internal management reports used during monthly operating
reviews feature the adjusted EBITDA. Management also believes that
investors may find non-GAAP financial measures useful for the same
reasons, although investors are cautioned that non-GAAP financial
measures are not a substitute for GAAP disclosures. EBITDA and
adjusted EBITDA are also used by research analysts, investment
bankers and lenders to assess operating performance. For example, a
measure similar to EBITDA is required by the lenders under DMC's
credit facility.
Because not all companies use identical calculations, DMC's
presentation of non-GAAP financial measures may not be comparable
to other similarly titled measures of other companies. However,
these measures can still be useful in evaluating the company's
performance against its peer companies because management believes
the measures provide users with valuable insight into key
components of GAAP financial disclosures. For example, a company
with greater GAAP net income may not be as appealing to investors
if its net income is more heavily comprised of gains on asset
sales. Likewise, eliminating the effects of interest income and
expense moderates the impact of a company's capital structure on
its performance.
All of the items included in the reconciliation from net income
to EBITDA and adjusted EBITDA are either (i) non-cash items (e.g.,
depreciation, amortization of purchased intangibles and stock-based
compensation) or (ii) items that management does not consider to be
useful in assessing DMC's operating performance (e.g., income taxes
and gain on sale of assets). In the case of the non-cash items,
management believes that investors can better assess the company's
operating performance if the measures are presented without such
items because, unlike cash expenses, these adjustments do not
affect DMC's ability to generate free cash flow or invest in its
business. For example, by adjusting for depreciation and
amortization in computing EBITDA, users can compare operating
performance without regard to different accounting determinations
such as useful life. In the case of the other items, management
believes that investors can better assess operating performance if
the measures are presented without these items because their
financial impact does not reflect ongoing operating
performance.
About Dynamic Materials Corporation
Based in Boulder, Colorado, Dynamic Materials Corporation is a
leading international metalworking company. Its products, which are
typically used in industrial capital projects, include
explosion-welded clad metal plates and other metal fabrications for
use in a variety of industries, including oil and gas,
petrochemicals, alternative energy, hydrometallurgy, aluminum
production, shipbuilding, power generation, industrial
refrigeration and similar industries. The Company operates three
business segments: Explosive Metalworking, which uses proprietary
explosive processes to fuse different metals and alloys; Oilfield
Products, which manufactures, markets and sells specialized
explosive components and systems used to perforate oil and gas
wells; and AMK Welding, which utilizes various technologies to weld
components for use in power-generation turbines, as well as
commercial and military jet engines. For more information, visit
the Company's websites at http://www.dynamicmaterials.com and
http://www.dynaenergetics.de.
Safe Harbor Language
Except for the historical information contained herein, this
news release contains forward-looking statements, including our
guidance for second quarter and full-year 2009 revenue, margins and
tax rates, as well as the successful conversion by our explosion
welding business of a large portion of prospective orders into
bookings, a near-term improvement in order flow and our Oilfield
Products business and our entry into a new end market that could
ultimately be very meaningful to our future revenue growth, all of
which involve risks and uncertainties. These risks and
uncertainties include, but are not limited to, the following: our
ability to realize sales from our backlog; our ability to obtain
new contracts at attractive prices; the size and timing of customer
orders and shipments; fluctuations in customer demand; fluctuations
in foreign currencies, changes to customer orders; the cyclicality
of our business; competitive factors; the timely completion of
contracts; the timing and size of expenditures; the timely receipt
of government approvals and permits; the timing and price 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; as
well as the other risks detailed from time to time in the Company's
SEC reports, including the report on Form 10-K for the year ended
December 31, 2008.
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
(Dollars in Thousands, Except Share Data)
(unaudited)
Three months ended
March 31,
----------------------
2009 2008
---------- ----------
NET SALES $ 49,759 $ 58,393
COST OF PRODUCTS SOLD 34,431 40,682
---------- ----------
Gross profit 15,328 17,711
---------- ----------
COSTS AND EXPENSES:
General and administrative expenses 3,526 3,119
Selling expenses 2,324 2,841
Amortization expense of purchased intangible
assets 1,183 2,361
---------- ----------
Total costs and expenses 7,033 8,321
---------- ----------
INCOME FROM OPERATIONS 8,295 9,390
OTHER INCOME (EXPENSE):
Other expense (117) (149)
Interest expense (902) (1,279)
Interest income 65 239
Equity in earnings (losses) of joint ventures (49) 16
---------- ----------
INCOME BEFORE INCOME TAXES 7,292 8,217
INCOME TAX PROVISION 2,376 2,972
---------- ----------
NET INCOME $ 4,916 $ 5,245
========== ==========
INCOME PER SHARE:
Basic $ 0.38 $ 0.42
========== ==========
Diluted $ 0.38 $ 0.41
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING -
Basic 12,527,452 12,377,019
========== ==========
Diluted 12,569,879 12,521,736
========== ==========
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
March 31, December 31,
2009 2008
ASSETS (unaudited)
-------------- --------------
Cash and cash equivalents $ 16,278 $ 14,360
Accounts receivable, net 36,545 34,719
Inventories 36,497 35,300
Other current assets 5,671 6,670
-------------- --------------
Total current assets 94,991 91,049
Property, plant and equipment, net 39,256 40,457
Goodwill, net 40,176 43,066
Purchased intangible assets, net 47,773 52,264
Other long-term assets 2,651 2,750
-------------- --------------
Total assets $ 224,847 $ 229,586
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 16,863 $ 15,402
Accrued income taxes 2,026 846
Other current liabilities 10,472 15,049
Lines of credit - current 1,429 -
Current portion of long-term debt 10,316 14,450
-------------- --------------
Total current liabilities 41,106 45,747
Lines of credit 2,800 -
Long-term debt 44,935 46,178
Deferred tax liabilities 15,292 16,833
Other long-term liabilities 2,085 2,326
Stockholders' equity 118,629 118,502
-------------- --------------
Total liabilities and stockholders' equity $ 224,847 $ 229,586
============== ==============
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
(Dollars in Thousands)
(unaudited)
2009 2008
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,916 $ 5,245
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation (including capital lease
amortization) 1,267 1,113
Amortization of purchased intangible
assets 1,183 2,361
Amortization of capitalized debt
issuance costs 69 60
Stock-based compensation 798 664
Deferred income tax benefit (605) (1,174)
Equity in earnings of joint ventures 49 (16)
Change in working capital, net (4,440) (1,004)
------------- -------------
Net cash provided by operating
activities 3,237 7,249
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and
equipment (1,170) (2,361)
Change in other non-current assets 8 15
------------- -------------
Net cash used in investing activities (1,162) (2,346)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on syndicated credit agreement (3,862) -
Borrowings on lines of credit, net 4,215 3,665
Payments on long-term debt (233) (265)
Payments on capital lease obligations (71) (105)
Payment of deferred debt issuance costs (19) (125)
Net proceeds from issuance of common stock 236 93
Excess tax benefit related to stock
options 57 -
Other cash flows from financing activities - 16
------------- -------------
Net cash provided by financing
activities 323 3,279
------------- -------------
EFFECTS OF EXCHANGE RATES ON CASH (480) 383
------------- -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,918 8,565
CASH AND CASH EQUIVALENTS, beginning of the
period 14,360 9,045
------------- -------------
CASH AND CASH EQUIVALENTS, end of the period $ 16,278 $ 17,610
============= =============
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASUREMENTS TO MOST
DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
(Dollars in thousands)
Three months ended
March 31,
--------------------
2009 2008
--------- ---------
(unaudited)
Explosive Metalworking Group $ 43,472 $ 51,644
Oilfield Products 4,034 4,450
AMK Welding 2,253 2,299
Net sales $ 49,759 $ 58,393
========= =========
Explosive Metalworking Group $ 9,412 $ 9,982
Oilfield Products (694) (565)
AMK Welding 375 637
Unallocated expenses (798) (664)
Income from operations $ 8,295 $ 9,390
========= =========
For the three months ended March 31, 2009
------------------------------------------------------
Explosive
Metalworking Oilfield AMK Unallocated
Group Products Welding Expenses Total
---------- --------- ---------- --------- ----------
(unaudited)
Income from
operations $ 9,412 $ (694) $ 375 $ (798) $ 8,295
Adjustments:
Stock-based
compensation - - - 798 798
Depreciation 924 229 114 1,267
Amortization of
purchased
intangibles 564 619 - - 1,183
---------- --------- ---------- --------- ----------
Adjusted EBITDA $ 10,900 $ 154 $ 489 $ - $ 11,543
========== ========= ========== ========= ==========
For the three months ended March 31, 2008
------------------------------------------------------
Explosive
Metalworking Oilfield AMK Unallocated
Group Products Welding Expenses Total
---------- --------- ---------- --------- ----------
(unaudited)
Income from
operations $ 9,982 $ (565) $ 637 $ (664) $ 9,390
Adjustments:
Stock-based
compensation - - - 664 664
Depreciation 731 274 108 - 1,113
Amortization of
purchased
intangibles 1,652 709 - - 2,361
---------- --------- ---------- --------- ----------
Adjusted EBITDA $ 12,365 $ 418 $ 745 $ - $ 13,528
========== ========= ========== ========= ==========
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASUREMENTS TO MOST
DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
(Dollars in thousands)
Three months ended
March 31,
--------------------
2009 2008
--------- ---------
(unaudited)
Net income $ 4,916 $ 5,245
Interest expense 902 1,279
Interest income (65) (239)
Provision for income taxes 2,376 2,972
Depreciation 1,267 1,113
Amortization of purchased intangible assets 1,183 2,361
--------- ---------
EBITDA 10,579 12,731
Stock-based compensation 798 664
Other expense 117 149
Equity in earnings (losses) of joint ventures 49 (16)
--------- ---------
Adjusted EBITDA $ 11,543 $ 13,528
========= =========
CONTACT: Pfeiffer High Investor Relations, Inc. Geoff High
303-393-7044
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