Dynamic Materials Corporation (DMC) (NASDAQ: BOOM), the world's
leading provider of explosion-welded clad metal plates, today
reported financial results for its second quarter and six-month
period ended June 30, 2010.
Sales for the quarter were $38.3 million, up slightly from $37.8
million reported in last year's second quarter, and a 26% increase
when compared with sales of $30.4 million in the 2010 first
quarter. Management, which had previously forecast a top-line
increase of 10% to 15% versus the first quarter, said sales results
across all segments were better than expected. Second quarter gross
margin was 24% versus 24% in the comparable quarter a year ago and
23% in this year's first quarter.
Second quarter income from operations was $2.1 million versus
$3.0 million in last year's second quarter and $245,000 in the 2010
first quarter. Net income was $3.0 million, or $0.23 per diluted
share, compared with net income of $1.5 million, or $0.12 per
diluted share, in the year-ago second quarter and a net loss of
$411,000, or $0.03 per diluted share, in the first quarter. In
addition to stronger-than-anticipated sales, net income benefited
from a $2.1 million, one-time gain associated with the previously
announced acquisition of the remaining interest in two Russian
joint ventures. Net income also benefited from the tax treatment of
the gain, which reduced DMC's effective tax rate for the first half
of fiscal 2010 to 11.8%.
Adjusted EBITDA was $5.5 million versus $6.4 million in the
second quarter a year ago and $3.5 million in this year's 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
Second quarter sales at DMC's Explosive Metalworking segment
were $26.7 million compared with $31.6 million in the same quarter
a year ago. Operating income was $2.0 million versus $4.6 million
in the comparable year-ago quarter. Adjusted EBITDA was $3.3
million versus $6.0 million in the second quarter of 2009. Order
backlog at the Explosive Metalworking segment was $39.9 million
versus $51.4 million at the end of this year's first quarter.
Oilfield Products
Second quarter sales at DMC's Oilfield Products segment were
$8.7 million compared with $4.0 million in the second quarter last
year. The segment reported operating income of $203,000 versus an
operating loss of $906,000 in the second quarter a year ago. Second
quarter adjusted EBITDA was $1.2 million compared with a negative
$49,000 in the comparable prior-year quarter.
AMK Welding
DMC's AMK Welding segment reported second quarter sales of $2.9
million, which equaled an all-time quarterly high and represented a
32% increase versus sales of $2.2 million in the same quarter last
year. Operating income increased 170% to $826,000 from $306,000 in
the comparable quarter last year. The segment recorded adjusted
EBITDA of $941,000, up 124% from $421,000 in the comparable
year-ago quarter.
Management Commentary
"Each of our business segments exceeded our second quarter sales
expectations," said Yvon Cariou, president and CEO. "We are
particularly pleased with the activity at our Oilfield Products and
AMK Welding segments, which are benefiting from a rebound in
customer spending and an improvement in the broader economy. While
our explosion welding business tends to react to economic trends
later in the cycle, the segment is experiencing a marked increase
in quoting activity. In fact our U.S. sales office reported that
quoting volume during June reached a four-year high."
Cariou said the conversion of quotes to bookings remains
challenging within the explosion welding business, and this is
reflected in the reduction of the segment's order backlog. "Despite
this dip in booked business, we remain confident that it is a
matter of time before order volume improves. The long-term
uncertainty about the direction of the economy has resulted in very
low levels of both new investments and basic maintenance spending
within our end markets, and we believe this is likely resulting in
a significant build up of unaddressed demand."
Cariou said management is particularly encouraged by the
progress within DMC's Oilfield Products business. "Even after
excluding the impact of several recent strategic acquisitions,
Oilfield Product sales increased 13% versus the second quarter last
year," he said. "We are optimistic this growth will continue for
the foreseeable future, as we are effectively capturing new market
share and expect to receive some sizeable orders that would likely
extend into 2011."
Rick Santa, senior vice president and chief financial officer,
said that in light of the current explosion welding backlog and
uncertainty about order timing, full-year 2010 sales are now
expected to be down approximately 5% from fiscal 2009 sales
results, which compares to a prior sales forecast of flat to down
5% versus last year. However, the Company's has maintained its
prior full-year gross margin forecast of between 22% and 24%. Sales
in the third quarter are expected to be 5% to 10% greater than
sales reported in the second quarter.
Santa said that if the gain on the Russian joint venture
acquisitions were excluded, DMC's effective tax rate on the
remaining ordinary pretax income for the first six months of 2010
was 34%. "We expect to return to a normalized effective tax rate of
33% to 35% beginning the third quarter, and anticipate a blended
effective tax rate for 2010 in a range of 25% to 28%."
Six-month Results
Sales for the six-month period were $68.6 million versus $87.6
million in the comparable period of 2009. Gross margin was 24%
versus 28% in the same period a year ago. Operating income was $2.3
million versus $11.3 million in the prior year's six-month period.
Net income was $2.6 million, or $0.20 per diluted share, compared
with net income of $6.4 million, or $0.50 per diluted share, at the
six-month mark last year. Adjusted EBITDA was $9.0 million compared
with $18.0 million in the same period a year ago.
The Explosive Metalworking segment reported six-month sales of
$48.0 million versus $75.1 million in the first half of 2009. The
segment reported operating income of $3.2 million compared with
$14.0 million in the same period a year ago. Adjusted EBITDA was
$5.9 million versus $16.9 million in the comparable year-ago
period.
Six-month sales at DMC's Oilfield Products segment were $15.7
million versus $8.0 million in last year's six-month period. The
segment reduced its operating loss to $201,000 from an operating
loss of $1.6 million in the same period a year ago. Six-month
adjusted EBITDA was $1.8 million versus $104,000 in the
prior-year's six-month period.
AMK Welding recorded six-month sales of $5.0 million compared
with $4.5 million in the comparable year-ago period. Operating
income was $1.1 million versus $681,000 in the prior-year period.
Adjusted EBITDA at the six-month mark was $1.3 million compared
with $909,000 in the same period a year ago.
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 88274852. 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 August 2, 2010, by
calling 800-642-1687 (706-645-9291 for international callers) and
entering the passcode 88274852.
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, gain on step
acquisitions 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 2010 sales, margins and
tax rates, quoting and booking expectations, our anticipation of
future customer demand, our long-range strategy of growing market
share, and improving investment activity within certain industrial
processing sectors, all of which involve risks and uncertainties.
These risks and uncertainties include, but are not limited to, the
following: our ability to obtain new contracts at attractive
prices; the size and timing of customer orders and shipments; our
ability to realize sales from our backlog; 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 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,
2009.
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(Dollars in Thousands, Except Share Data)
(unaudited)
Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
NET SALES $ 38,258 $ 37,819 $ 68,615 $ 87,578
COST OF PRODUCTS SOLD 29,000 28,665 52,373 63,096
---------- ---------- ---------- ----------
Gross profit 9,258 9,154 16,242 24,482
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
General and administrative
expenses 3,358 3,043 6,503 6,569
Selling expenses 2,550 1,840 4,871 4,164
Amortization of purchased
intangible assets 1,264 1,232 2,537 2,416
---------- ---------- ---------- ----------
Total costs and expenses 7,172 6,115 13,911 13,149
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 2,086 3,039 2,331 11,333
OTHER INCOME (EXPENSE):
Gain on step acquisition
of joint ventures 2,117 - 2,117 -
Other income (expense), net (115) 191 14 74
Interest expense (662) (867) (1,806) (1,769)
Interest income 29 38 65 104
Equity in earnings of
joint ventures 86 127 255 79
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 3,541 2,528 2,976 9,821
INCOME TAX PROVISION 505 1,013 351 3,389
---------- ---------- ---------- ----------
NET INCOME $ 3,036 $ 1,515 $ 2,625 $ 6,432
========== ========== ========== ==========
INCOME PER SHARE:
Basic $ 0.23 $ 0.12 $ 0.20 $ 0.50
========== ========== ========== ==========
Diluted $ 0.23 $ 0.12 $ 0.20 $ 0.50
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING:
Basic 12,774,316 12,595,551 12,742,589 12,570,640
========== ========== ========== ==========
Diluted 12,786,976 12,611,430 12,755,565 12,601,160
========== ========== ========== ==========
DIVIDENDS DECLARED PER
COMMON SHARE $ 0.04 $ 0.04 $ 0.08 $ 0.04
========== ========== ========== ==========
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
June 30, December 31,
2010 2009
ASSETS (unaudited)
------------ ------------
Cash and cash equivalents $ 9,794 $ 22,411
Accounts receivable, net 23,108 25,807
Inventories 37,850 32,501
Other current assets 4,694 7,255
------------ ------------
Total current assets 75,446 87,974
Property, plant and equipment, net 39,266 42,052
Goodwill, net 36,517 43,164
Purchased intangible assets, net 47,768 49,079
Other long-term assets 7,134 2,907
------------ ------------
Total assets $ 206,131 $ 225,176
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 13,281 $ 9,183
Customer advances 7,817 6,528
Dividend payable 528 515
Accrued income taxes 211 1,485
Other current liabilities 7,096 9,162
Lines of credit 3,560 1,777
Current portion of long-term debt 7,483 13,485
------------ ------------
Total current liabilities 39,976 42,135
Long-term debt 23,701 34,120
Deferred tax liabilities 17,700 15,217
Other long-term liabilities 1,320 1,593
Stockholders' equity 123,434 132,111
------------ ------------
Total liabilities and stockholders' equity $ 206,131 $ 225,176
============ ============
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(Dollars in Thousands)
(unaudited)
2010 2009
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,625 $ 6,432
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation (including capital lease amortization) 2,404 2,441
Amortization of purchased intangible assets 2,537 2,416
Amortization of capitalized debt issuance costs 383 141
Stock-based compensation 1,702 1,760
Deferred income tax benefit (961) (954)
Equity in earnings of joint ventures (255) (79)
Gain on step acquisition of joint ventures (2,117) -
Change in working capital, net 3,377 214
-------- --------
Net cash provided by operating activities 9,695 12,371
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Austin Explosives (3,544) -
Step acquisition of joint ventures, net of cash
acquired (2,065) -
Acquisition of property, plant and equipment (1,445) (2,231)
Change in other non-current assets (125) 23
-------- --------
Net cash used in investing activities (7,179) (2,208)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on syndicated credit agreement (15,374) (3,885)
Borrowings on lines of credit, net 1,998 143
Payments on long-term debt (399) (438)
Payments on capital lease obligations (146) (102)
Payment of dividends (1,033) -
Payment of deferred debt issuance costs - (19)
Net proceeds from issuance of common stock 70 373
Excess tax benefit related to stock options 2 93
-------- --------
Net cash used in financing activities (14,882) (3,835)
-------- --------
EFFECTS OF EXCHANGE RATES ON CASH (251) 106
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (12,617) 6,434
CASH AND CASH EQUIVALENTS, beginning of the period 22,411 14,360
-------- --------
CASH AND CASH EQUIVALENTS, end of the period $ 9,794 $ 20,794
======== ========
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASUREMENTS TO MOST
DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
(Dollars in thousands)
Three months ended Six months ended
June 30, June 30,
------------------ ------------------
2010 2009 2010 2009
-------- -------- -------- --------
(unaudited) (unaudited)
Explosive Metalworking Group $ 26,690 $ 31,604 $ 47,996 $ 75,076
Oilfield Products 8,654 4,014 15,660 8,048
AMK Welding 2,914 2,201 4,959 4,454
-------- -------- -------- --------
Net sales $ 38,258 $ 37,819 $ 68,615 $ 87,578
======== ======== ======== ========
Explosive Metalworking Group $ 1,967 $ 4,601 $ 3,184 $ 14,012
Oilfield Products 203 (906) (201) (1,600)
AMK Welding 826 306 1,050 681
Unallocated expenses (910) (962) (1,702) (1,760)
-------- -------- -------- --------
Income from operations $ 2,086 $ 3,039 $ 2,331 $ 11,333
======== ======== ======== ========
For the three months ended June 30, 2010
--------------------------------------------------
Explosive
Metalworking Oilfield AMK Unallocated
Group Products Welding Expenses Total
----------- -------- ------- ---------- --------
(unaudited)
Income from operations $ 1,967 $ 203 $ 826 $ (910) $ 2,086
Adjustments:
Stock-based compensation - - - 910 910
Depreciation 814 321 115 - 1,250
Amortization of
purchased intangibles 551 713 - - 1,264
----------- -------- ------- ---------- --------
Adjusted EBITDA $ 3,332 $ 1,237 $ 941 $ - $ 5,510
=========== ======== ======= ========== ========
For the three months ended June 30, 2009
--------------------------------------------------
Explosive
Metalworking Oilfield AMK Unallocated
Group Products Welding Expenses Total
----------- -------- ------- ---------- --------
(unaudited)
Income (loss) from
operations $ 4,601 $ (906) $ 306 $ (962) $ 3,039
Adjustments:
Stock-based compensation - - - 962 962
Depreciation 847 212 115 - 1,174
Amortization of
purchased intangibles 588 645 - - 1,233
----------- -------- ------- ---------- --------
Adjusted EBITDA $ 6,036 $ (49) $ 421 $ - $ 6,408
=========== ======== ======= ========== ========
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASUREMENTS TO MOST
DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
(Dollars in thousands)
For the six months ended June 30, 2010
--------------------------------------------------
Explosive
Metalworking Oilfield AMK Unallocated
Group Products Welding Expenses Total
----------- -------- ------- ---------- --------
(unaudited)
Income (loss) from
operations $ 3,184 $ (201) $ 1,050 $ (1,702) $ 2,331
Adjustments:
Stock-based compensation - - - 1,702 1,702
Depreciation 1,583 591 230 - 2,404
Amortization of
purchased intangibles 1,149 1,388 - - 2,537
----------- -------- ------- ---------- --------
Adjusted EBITDA $ 5,916 $ 1,778 $ 1,280 $ - $ 8,974
=========== ======== ======= ========== ========
For the six months ended June 30, 2009
--------------------------------------------------
Explosive
Metalworking Oilfield AMK Unallocated
Group Products Welding Expenses Total
----------- -------- ------- ---------- --------
(unaudited)
Income (loss) from
operations $ 14,012 $ (1,600) $ 681 $ (1,760) $ 11,333
Adjustments:
Stock-based compensation - - - 1,760 1,760
Depreciation 1,773 440 228 - 2,441
Amortization of
purchased intangibles 1,152 1,264 - - 2,416
----------- -------- ------- ---------- --------
Adjusted EBITDA $ 16,937 $ 104 $ 909 $ - $ 17,950
=========== ======== ======= ========== ========
Three months ended Six months ended
June 30, June 30,
------------------ ------------------
2010 2009 2010 2009
-------- -------- -------- --------
(unaudited) (unaudited)
Net income $ 3,036 $ 1,515 $ 2,625 $ 6,432
Interest expense 662 867 1,806 1,769
Interest income (29) (38) (65) (104)
Provision for income taxes 505 1,013 351 3,389
Depreciation 1,250 1,174 2,404 2,441
Amortization of purchased
intangible assets 1,264 1,233 2,537 2,416
-------- -------- -------- --------
EBITDA 6,688 5,764 9,658 16,343
Stock-based compensation 910 962 1,702 1,760
Other income (2,002) (191) (2,131) (74)
Equity in earnings of joint
ventures (86) (127) (255) (79)
-------- -------- -------- --------
Adjusted EBITDA $ 5,510 $ 6,408 $ 8,974 $ 17,950
======== ======== ======== ========
CONTACT: Pfeiffer High Investor Relations, Inc. Geoff High
303-393-7044
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