Dynamic Materials Corporation (NASDAQ: BOOM)
Selected Highlights
-- Fourth Quarter diluted EPS of $0.10 on sales of $44.8 million
-- Explosive Metalworking backlog advances 37% to $56.5 million from $41.2
million at end of Q3
-- Oilfield Products sales up 92% versus 2009 fourth quarter on organic
growth and acquisitions
-- Long-term debt reduced by $23.4 million, or 49%, during fiscal 2010
Dynamic Materials Corporation (DMC) (NASDAQ: BOOM), the world's
leading provider of explosion-welded clad metal plates, today
reported financial results for its fourth quarter and full fiscal
year ended December 31, 2010.
Fourth quarter sales were $44.8 million, up 5% versus sales of
$42.6 million in the fourth quarter last year, and a sequential
improvement of 9% versus 2010 third quarter sales of $41.3 million.
Gross margin was 22% versus 23% in the comparable year-ago quarter
and 26% in the third quarter.
Fourth quarter operating income was $1.5 million versus $2.4
million in the prior year's fourth quarter and $2.9 million in the
2010 third quarter. The year-over-year decline was largely due to a
31% increase in selling and distribution expenses resulting from
the Company's 2010 acquisitions of new oilfield product businesses.
Net income was $1.3 million, or $0.10 per diluted share, up from
$1.0 million, or $0.08 per diluted share, in last year's fourth
quarter, and flat versus net income of $1.3 million, or $0.10 per
diluted share, in the third quarter.
Fourth quarter adjusted EBITDA was $5.4 million versus $5.9
million in last year's fourth quarter and $6.7 million in the third
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, as well as a
reconciliation of adjusted EBITDA to GAAP measures.
Explosive Metalworking
DMC's Explosive Metalworking segment recorded fourth quarter
sales of $25.6 million, down 19% versus sales of $31.7 million in
the same quarter of 2009. Operating income was $630,000 compared
with $3.5 million, while adjusted EBITDA was $2.2 million versus
$5.0 million in the 2009 fourth quarter.
The segment's order backlog increased 37% to $56.5 million
compared with $41.2 million at the end of the 2010 third
quarter.
Oilfield Products
DMC's Oilfield Products segment reported fourth quarter sales of
$16.5 million, up 92% from $8.6 million in the 2009 fourth quarter.
Excluding $3.3 million of incremental sales from acquired
operations, the segment reported a fourth quarter sales increase of
$4.6 million, or 53%. Operating income was $1.3 million versus a
loss from operations of $728,000 in the prior year's fourth
quarter. Adjusted EBITDA was $2.5 million compared with $318,000 in
the 2009 fourth quarter.
AMK Welding
DMC's AMK Welding segment reported fourth quarter sales of $2.7
million, up 16% from $2.3 million in the same quarter of 2009.
Operating income increased to $592,000 from $448,000 in the
comparable prior year quarter. The segment recorded adjusted EBITDA
of $713,000 versus $562,000 in the comparable quarter last
year.
Management Commentary
Yvon Cariou, president and CEO, said, "Our explosion welding
business experienced a spike in order volume during the final
quarter of 2010, and this helped elevate our Explosive Metalworking
order backlog to its highest level since the third quarter of 2009.
Several of these orders had been on our 'hot list' of prospective
contracts for many months, so it was encouraging when customers
ultimately began moving them into production."
Cariou said the orders came from a broad cross section of
customers and end markets. "We booked two large contracts for clad
plates that will be used in both upstream and downstream oil and
gas processing equipment in the Middle East. We also received
sizeable orders associated with alternative energy projects; one in
solar and the other in coal gasification. Fourth quarter bookings
also included an order from the chemical sector for an acetic acid
project, several orders for metal processing operations, a contract
for a special U.S. naval project and multiple orders from the
industrial refrigeration sector.
"The combination of encouraging macro-economic news in our end
markets, continued strong quoting activity and the spike in fourth
quarter bookings has reinforced our belief that our Explosive
Metalworking business has turned the corner."
Cariou added, "Our Oilfield Products business exceeded internal
forecasts during 2010, and continues to benefit from very active
oil and gas drilling activity, particularly in North America. The
strategic acquisitions we made in the United States, Canada and
Russia during the past 18 months have delivered significant sales
and margin contributions to the organic growth of our legacy
Oilfield Products businesses. The expected continuation of healthy
shipping activity combined with a full year of contributions from
the business we acquired in 2010 should lead to another year of
solid growth during 2011.
"Our AMK Welding business weathered the market downturn very
well, and delivered year-over-year sales and operating income
improvements of 20% and 59%, respectively, during 2010. Going
forward, we are focused on further diversifying AMK's service
offerings and customer base to enhance our growth
opportunities."
Guidance
Rick Santa, senior vice president and chief financial officer,
said, "The backlog increase at our Explosive Metalworking segment,
combined with the anticipated growth of our Oilfield Products and
AMK Welding segments, is expected to result in a 2011 consolidated
sales increase of 20% to 25% versus 2010. We expect gross margins
to improve to a range of 24% to 26%."
Santa said first quarter revenue is expected to be relatively
flat versus the 2010 fourth quarter, however, first quarter gross
margin is expected to increase to a range of 23% to 24% from the
22% reported in the fourth quarter."
Based on changes to projected pre-tax income and the expected
tax jurisdictions in which income is earned, DMC's blended
effective tax rate for fiscal 2011 is projected to be in a range of
27% to 29%. That rate is expected to rise to a normalized level of
between 30% and 32% in years thereafter.
Full-Year Results
Fiscal 2010 sales were $154.7 million versus $164.9 million in
2009. Gross margin was 24% versus 26% in 2009. Operating income was
$6.8 million versus $16.2 million in the prior year. Full-year net
income, which included a second quarter gain of $2.1 million on
step acquisitions of two Russian joint ventures, was $5.3 million,
or $0.40 per diluted share, versus $8.5 million, or $0.66 per
diluted share, in 2009. Full-year adjusted EBITDA was $21.0 million
compared with $29.8 million in the prior year.
The Explosive Metalworking segment reported 2010 sales of $98.6
million, down 27% from sales of $134.1 million in 2009. Full-year
operating income was $5.0 million versus $20.8 million in the prior
year. Adjusted EBITDA was $10.9 million versus $26.8 million in
2009.
Full-year sales at DMC's Oilfield Products segment were $45.3
million, an increase of 108% compared with sales of $21.8 million
in 2009. Excluding $15.4 million in incremental contributions from
acquired operations, the segment's full-year sales increased by
$8.1 million, or 37%. Operating income was $2.7 million versus an
operating loss of $2.7 million in 2009. Full-year adjusted EBITDA
was $7.1 million compared with $920,000 in the prior year.
AMK Welding recorded full-year sales of $10.8 million, up 20%
from $9.0 million in 2009. Operating income was $2.5 million versus
$1.6 million in the prior year. Adjusted EBITDA was $3.0 million
compared with $2.0 million in 2009.
During fiscal 2010, DMC reduced its long-term debt by $23.4
million, or 49%.
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 43649649. 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 February 28, 2011, by
calling 800-642-1687 (706-645-9291 for international callers) and
entering the passcode 43649649.
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 first quarter and full-year 2011 sales, margins and
tax rates, growth and diversification prospects, as well as quoting
and booking expectations, 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,
2009.
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Share Data)
(unaudited)
Three months ended Twelve months ended
December 31, December 31,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
NET SALES $ 44,826 $ 42,630 $ 154,739 $ 164,898
COST OF PRODUCTS SOLD 34,971 32,747 117,789 121,779
---------- ---------- ---------- ----------
Gross profit 9,855 9,883 36,950 43,119
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
General and administrative
expenses 3,706 3,661 13,696 12,980
Selling and distribution
expenses 3,217 2,461 11,135 8,837
Amortization of purchased
intangible assets 1,417 1,355 5,330 5,064
---------- ---------- ---------- ----------
Total costs and expenses 8,340 7,477 30,161 26,881
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 1,515 2,406 6,789 16,238
OTHER INCOME (EXPENSE):
Gain on step acquisition
of joint ventures - - 2,117 -
Other income (expense),
net 611 285 209 (275)
Interest income (expense),
net (569) (882) (2,972) (3,257)
Equity in earnings of
joint ventures - 51 255 221
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 1,557 1,860 6,398 12,927
INCOME TAX PROVISION 242 838 1,133 4,378
---------- ---------- ---------- ----------
NET INCOME $ 1,315 $ 1,022 $ 5,265 $ 8,549
========== ========== ========== ==========
INCOME PER SHARE:
Basic $ 0.10 $ 0.08 $ 0.40 $ 0.67
========== ========== ========== ==========
Diluted $ 0.10 $ 0.08 $ 0.40 $ 0.66
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING:
Basic 12,970,214 12,662,512 12,869,666 12,640,069
========== ========== ========== ==========
Diluted 12,980,471 12,676,231 12,881,754 12,662,440
========== ========== ========== ==========
DIVIDENDS DECLARED PER
COMMON SHARE $ 0.04 $ 0.04 $ 0.16 $ 0.12
========== ========== ========== ==========
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
(Dollars in Thousands)
(unaudited)
ASSETS 2010 2009
--------- ---------
Cash and cash equivalents $ 4,572 $ 22,411
Accounts receivable, net 27,567 25,807
Inventories 35,880 32,501
Other current assets 4,716 7,255
--------- ---------
Total current assets 72,735 87,974
Property, plant and equipment, net 39,806 42,052
Goodwill, net 39,173 43,164
Purchased intangible assets, net 48,490 49,079
Other long-term assets 1,189 2,907
--------- ---------
Total assets $ 201,393 $ 225,176
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 16,109 $ 9,183
Customer advances 1,531 6,528
Dividend payable 529 515
Accrued income taxes 477 1,485
Other current liabilities 7,529 9,162
Lines of credit 2,621 1,777
Current portion of long-term debt 9,596 13,485
--------- ---------
Total current liabilities 38,392 42,135
Long-term debt 14,579 34,120
Deferred tax liabilities 12,083 15,217
Other long-term liabilities 1,415 1,593
Stockholders' equity 134,924 132,111
--------- ---------
Total liabilities and stockholders' equity $ 201,393 $ 225,176
========= =========
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2010 AND 2009
(Dollars in Thousands)
(unaudited)
2010 2009
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,265 $ 8,549
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation (including capital lease
amortization) 5,383 5,042
Amortization of purchased intangible assets 5,330 5,064
Amortization of capitalized debt issuance costs 587 297
Stock-based compensation 3,501 3,425
Deferred income tax benefit (1,708) (2,784)
Equity in earnings of joint ventures (255) (221)
Gain on step acquisition of joint ventures (2,117) -
Loss on sale of property, plant and equipment 34 -
Change in working capital, net 673 10,168
-------- --------
Net cash provided by operating activities 16,693 29,540
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Austin Explosives Company (3,620) -
Step acquisition of joint ventures, net of cash
acquired (2,065) -
Acquisition of LRI, net of cash acquired - (284)
Acquisition of property, plant and equipment (3,527) (3,917)
Change in other non-current assets (53) 59
-------- --------
Net cash used in investing activities (9,265) (4,142)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on syndicated term loans (22,124) (13,614)
Borrowings (repayments) on lines of credit, net 780 (952)
Payments on long-term debt (797) (2,107)
Payments on capital lease obligations (304) (203)
Payment of dividends (2,089) (1,028)
Payment of deferred debt issuance costs - (341)
Net proceeds from issuance of common stock 188 425
Tax impact of stock-based compensation (601) 90
-------- --------
Net cash used in financing activities (24,947) (17,730)
-------- --------
EFFECTS OF EXCHANGE RATES ON CASH (320) 383
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (17,839) 8,051
CASH AND CASH EQUIVALENTS, beginning of the period 22,411 14,360
-------- --------
CASH AND CASH EQUIVALENTS, end of the period $ 4,572 $ 22,411
======== ========
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASUREMENTS TO MOST
DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
(Dollars in thousands)
Three months ended Twelve months ended
December 31, December 31,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
(unaudited) (unaudited)
Explosive Metalworking Group $ 25,649 $ 31,693 $ 98,570 $ 134,096
Oilfield Products 16,464 8,593 45,332 21,764
AMK Welding 2,713 2,344 10,837 9,038
--------- --------- --------- ---------
Net sales $ 44,826 $ 42,630 $ 154,739 $ 164,898
========= ========= ========= =========
Explosive Metalworking Group $ 630 $ 3,453 $ 5,039 $ 20,835
Oilfield Products 1,257 (728) 2,747 (2,742)
AMK Welding 592 448 2,504 1,570
Unallocated expenses (964) (767) (3,501) (3,425)
--------- --------- --------- ---------
Income from operations $ 1,515 $ 2,406 $ 6,789 $ 16,238
========= ========= ========= =========
For the three months ended December 31, 2010
-------------------------------------------------------------
Explosive
Metalworking Oilfield AMK Unallocated
Group Products Welding Expenses Total
------------ ---------- ----------- ----------- -----------
(unaudited)
Income from
operations $ 630 $ 1,257 $ 592 $ (964) $ 1,515
Adjustments:
Stock-based
compensation - - - 964 964
Depreciation 985 369 121 1,475
Amortization
of purchased
intangibles 565 852 - - 1,417
------------ ---------- ----------- ----------- -----------
Adjusted
EBITDA $ 2,180 $ 2,478 $ 713 $ - $ 5,371
============ ========== =========== =========== ===========
For the three months ended December 31, 2009
-------------------------------------------------------------
Explosive
Metalworking Oilfield AMK Unallocated
Group Products Welding Expenses Total
------------ ---------- ----------- ----------- -----------
(unaudited)
Income (loss)
from
operations $ 3,453 $ (728) $ 448 $ (767) $ 2,406
Adjustments:
Stock-based
compensation - - - 767 767
Depreciation 900 328 114 - 1,342
Amortization
of purchased
intangibles 637 718 - - 1,355
------------ ---------- ----------- ----------- -----------
Adjusted
EBITDA $ 4,990 $ 318 $ 562 $ - $ 5,870
============ ========== =========== =========== ===========
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASUREMENTS TO MOST
DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
(Dollars in thousands)
For the twelve months ended December 31, 2010
-------------------------------------------------------------
Explosive
Metalworking Oilfield AMK Unallocated
Group Products Welding Expenses Total
------------ ---------- ----------- ----------- -----------
(unaudited)
Income from
operations $ 5,039 $ 2,747 $ 2,504 $ (3,501) $ 6,789
Adjustments:
Stock-based
compensation - - - 3,501 3,501
Depreciation 3,620 1,292 471 - 5,383
Amortization
of purchased
intangibles 2,271 3,059 - - 5,330
------------ ---------- ----------- ----------- -----------
Adjusted
EBITDA $ 10,930 $ 7,098 $ 2,975 $ - $ 21,003
============ ========== =========== =========== ===========
For the twelve months ended December 31, 2009
-------------------------------------------------------------
Explosive
Metalworking Oilfield AMK Unallocated
Group Products Welding Expenses Total
------------ ---------- ----------- ----------- -----------
(unaudited)
Income (loss)
from
operations $ 20,835 $ (2,742) $ 1,570 $ (3,425) $ 16,238
Adjustments:
Stock-based
compensation - - - 3,425 3,425
Depreciation 3,581 1,005 456 - 5,042
Amortization
of purchased
intangibles 2,407 2,657 - - 5,064
------------ ---------- ----------- ----------- -----------
Adjusted
EBITDA $ 26,823 $ 920 $ 2,026 $ - $ 29,769
============ ========== =========== =========== ===========
Three months ended Twelve months ended
December 31, December 31,
-------------------- --------------------
2010 2009 2010 2009
-------- -------- -------- --------
(unaudited) (unaudited)
Net income $ 1,315 $ 1,022 $ 5,265 $ 8,549
Interest expense 573 952 3,046 3,473
Interest income (4) (70) (74) (216)
Provision for income taxes 242 838 1,133 4,378
Depreciation 1,475 1,342 5,383 5,042
Amortization of purchased
intangible assets 1,417 1,355 5,330 5,064
-------- -------- -------- --------
EBITDA 5,018 5,439 20,083 26,290
Stock-based compensation 964 767 3,501 3,425
Other (income) expense, net (611) (285) (2,326) 275
Equity in earnings of
joint ventures - (51) (255) (221)
-------- -------- -------- --------
Adjusted EBITDA $ 5,371 $ 5,870 $ 21,003 $ 29,769
======== ======== ======== ========
CONTACT: Pfeiffer High Investor Relations, Inc. Geoff High
303-393-7044
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