Dynamic Materials Corporation (DMC) (NASDAQ: BOOM)
Selected Highlights:
- Revenue increases 10% to $50.2 million versus
year-ago first quarter, exceeding management forecasts
- Gross margin improves to 29% from 23% in Q1
last year, also surpassing forecasts
- Net income increases 224% to $2.4 million, or
$0.18 per share, versus 2011 Q1
- Backlog at Explosive Metalworking segment
climbs to $57 million, up 28% from most recent quarter
Dynamic Materials Corporation (DMC) (NASDAQ: BOOM), a
diversified provider of industrial products and services, and the
world's leading manufacturer of explosion-welded clad metal plates,
today reported financial results for its first quarter ended March
31, 2012.
First quarter sales were $50.2 million, up 10% from $45.6
million in last year's first quarter and down 7% from fourth
quarter 2011 sales of $54.3 million. Sales exceeded management
forecasts, which anticipated results would be flat to up 3% versus
last year's first quarter. Gross margin improved to 29% from 23% in
the year-ago first quarter and 27% in the 2011 fourth quarter.
Management forecasted first quarter gross margin would be in a
range of 26% to 27%.
Operating income was $4.1 million, up 177% from $1.5 million in
last year's first quarter and down 20% from $5.2 million in the
fourth quarter. Net income was $2.4 million, or $0.18 per diluted
share, up 224% from net income of $750,000, or $0.06 per diluted
share, in the year-ago first quarter and down from net income of
$3.6 million, or $0.27 per diluted share, in the fourth
quarter.
Adjusted EBITDA was $8.1 million, up 59% from $5.1 in last
year's first quarter, and down 8% from $8.7 million in last year's
fourth quarter. Adjusted EBITDA is a non-GAAP (generally accepted
accounting principles) 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
reported sales of $27.5 million, up 6% from sales of $26.1 million
in the first quarter last year. Operating income increased 164% to
$4.1 million from $1.6 million in the 2011 first quarter. Adjusted
EBITDA was $5.5 million, an improvement of 83% from $3.0 million in
the comparable year-ago quarter. The segment closed the quarter
with an order backlog of $57 million, up 28% from $45 million at
the end of fiscal 2011.
Oilfield Products Sales at DMC's Oilfield Products segment
increased 23% to $21.0 million from $17.1 million in the prior
year's first quarter. Operating income was $2.0 million, up 121%
from $924,000 in last year's first quarter, while adjusted EBITDA
was up 64% to $3.5 million from $2.1 million in the 2011 first
quarter.
AMK Welding DMC's AMK Welding segment reported first quarter
sales of $1.7 million, down 30% from $2.4 million in the prior
year's first quarter. The top-line decline is related to AMK's
anticipated wind down of work on a customer's ground power program.
AMK is now focused on expanding its customer base and entering new
end markets. The segment reported an operating loss of $87,000
compared with operating income of $468,000 in the same quarter of
2011. Adjusted EBITDA was $37,000 versus $590,000 in the prior
year's first quarter.
Management Commentary "First quarter sales
exceeded our forecasts thanks to stronger-than-expected U.S. sales
of our oilfield products and favorable timing of certain shipments
out of our U.S. Explosive Metalworking facility," said Yvon Cariou,
president and CEO. "Gross margin also exceeded our expectations,
reflecting the positive impact of strong sales at our higher-margin
Oilfield Products segment, as well as the improved pricing
environment within certain of our explosion welding end
markets.
"We are especially encouraged by the improvement in clad-plate
booking volume, which fueled a 28% sequential increase in our
Explosive Metalworking order backlog. This booking momentum
continued after the close of the quarter, and included a $7.3
million chemical industry order that was booked into backlog during
the first week of April."
Cariou said the chemical, petrochemical, oil and gas, and
aluminum smelting industries continue to be DMC's most active
explosion welding end markets. "The hot list of global order
prospects we are tracking remains healthy and includes some large
industrial infrastructure projects. Our worldwide sales teams are
actively and aggressively pursuing these opportunities."
Cariou added, "The continued growth of our Oilfield Products
business reflects the positive impact of our acquisition program
and organic growth initiatives. It appears that well completion and
re-completion efforts by the global exploration and production
industry will be very active for the foreseeable future, and we
believe our Oilfield Products business is ideally positioned to
capitalize on this market opportunity."
Guidance Rick Santa, senior vice president
and chief financial officer, re-affirmed management's 2012 sales
growth forecast of 7% to 10% versus the $208.9 reported in fiscal
2011. However, he elevated the Company's full-year gross margin
forecast to 29% to 30% versus the prior forecast range of 28% to
29%. Based on projected full-year 2012 pre-tax income, the
Company's anticipated blended effective tax rate for fiscal 2012
has been increased to a range of 28% to 32% from a prior range of
27% to 30%.
Santa said consolidated sales during the second fiscal quarter
are expected to be down 10% to 14% versus the second quarter last
year. The anticipated decline relates principally to the expected
timing of shipments out of the Company's Explosive Metalworking
order backlog. Gross margin is expected to remain flat at
approximately 29% versus the second quarter last year.
"Given the growth of our explosion welding backlog and the
sustained strength of our oilfield products business, we obviously
believe sales during the second half of fiscal 2012 will be much
stronger than the first half, and this is reflected in our full
year sales forecast," Santa said.
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 877-407-8031 (201-689-8031
for international callers). No passcode is necessary. 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 90 days and a telephonic replay will be available
through May 8, 2012, by calling 877-660-6853 (201-612-7415 for
international callers) and entering the Account Number 286 and the
passcode 392910.
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 serves a global
network of industrial customers through two core business segments
-- Explosive Metalworking and Oilfield Products -- as well as a
specialized industrial service provider, AMK Welding. The Explosive
Metalworking segment is the world's largest manufacturer of
explosion-welded clad metal plates, which are used to fabricate
capital equipment utilized within various process industries and
other industrial sectors. Oilfield Products is an international
manufacturer and marketer of advanced explosive components and
systems used to perforate oil and gas wells. AMK Welding utilizes
various specialized technologies to weld components for use in
power-generation turbines, and 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 2012 sales, margins and tax rates, as well as
expectations about customer demand, business conditions and growth
opportunities, 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; our ability to successfully source and execute upon
greenfield growth as well as acquisition opportunities;
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 annual
report on Form 10-K for the year ended December 31, 2011.
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(Dollars in Thousands, Except Share and Per Share Data)
(unaudited)
Three months ended
March 31,
--------------------------
2012 2011
------------ ------------
NET SALES $ 50,212 $ 45,574
COST OF PRODUCTS SOLD 35,835 35,272
------------ ------------
Gross profit 14,377 10,302
------------ ------------
COSTS AND EXPENSES:
General and administrative expenses 4,505 3,675
Selling and distribution expenses 4,190 3,726
Amortization of purchased intangible assets 1,544 1,405
------------ ------------
Total costs and expenses 10,239 8,806
------------ ------------
INCOME FROM OPERATIONS 4,138 1,496
OTHER INCOME (EXPENSE):
Other income (expense), net (200) (203)
Interest expense (211) (410)
Interest income 6 3
------------ ------------
INCOME BEFORE INCOME TAXES 3,733 886
INCOME TAX PROVISION 1,342 148
------------ ------------
NET INCOME 2,391 738
Less: Net loss attributable to non-controlling
interest (37) (12)
------------ ------------
NET INCOME ATTRIBUTABLE TO DYNAMIC MATERIALS
CORPORATION $ 2,428 $ 750
============ ============
NET INCOME PER SHARE:
Basic $ 0.18 $ 0.06
============ ============
Diluted $ 0.18 $ 0.06
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic 13,183,000 13,045,600
============ ============
Diluted 13,190,193 13,055,619
============ ============
DIVIDENDS DECLARED PER COMMON SHARE $ 0.04 $ 0.04
============ ============
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
March 31, December 31,
2012 2011
ASSETS (unaudited)
------------- -------------
Cash and cash equivalents $ 7,533 $ 5,276
Accounts receivable, net 36,415 36,368
Inventories 46,646 43,218
Other current assets 6,263 6,327
------------- -------------
Total current assets 96,857 91,189
Property, plant and equipment, net 45,493 41,402
Goodwill, net 38,399 37,507
Purchased intangible assets, net 47,168 42,054
Other long-term assets 2,120 1,274
------------- -------------
Total assets $ 230,037 $ 213,426
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 13,713 $ 14,753
Customer advances 3,494 1,918
Dividend payable 539 535
Accrued income taxes 1,424 780
Other current liabilities 9,281 10,158
Lines of credit 1,315 13
Current portion of long-term debt 63 1,153
------------- -------------
Total current liabilities 29,829 29,310
Lines of credit 35,240 26,462
Long-term debt 104 118
Deferred tax liabilities 10,889 10,185
Other long-term liabilities 1,263 1,308
Stockholders' equity 152,712 146,043
------------- -------------
Total liabilities and stockholders' equity $ 230,037 $ 213,426
============= =============
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(Dollars in Thousands)
(unaudited)
2012 2011
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,391 $ 738
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation (including capital lease
amortization) 1,367 1,356
Amortization of purchased intangible assets 1,544 1,405
Amortization of deferred debt issuance costs 35 53
Stock-based compensation 969 792
Deferred income tax benefit (305) (586)
Change in working capital, net 732 (2,441)
------------ ------------
Net cash provided by operating activities 6,733 1,317
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (2,633) (1,087)
Acquisition of TRX Industries (10,294) -
Change in other non-current assets 116 36
------------ ------------
Net cash used in investing activities (12,811) (1,051)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on lines of credit, net 9,840 668
Payments on long-term debt (1,127) (205)
Payments on capital lease obligations (24) (76)
Payment of dividends (535) (529)
Contribution from non-controlling stockholder - 42
Net proceeds from issuance of common stock - 5
Tax impact of stock-based compensation 19 (128)
------------ ------------
Net cash provided by (used in) financing
activities 8,173 (223)
------------ ------------
EFFECTS OF EXCHANGE RATES ON CASH 162 145
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,257 188
CASH AND CASH EQUIVALENTS, beginning of the
period 5,276 4,572
------------ ------------
CASH AND CASH EQUIVALENTS, end of the period $ 7,533 $ 4,760
============ ============
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASUREMENTS TO MOST
DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
(Dollars in thousands)
(unaudited)
Three months ended
March 31,
---------------------
2012 2011
----------- --------
Explosive Metalworking $ 27,533 $ 26,074
Oilfield Products 20,974 17,056
AMK Welding 1,705 2,444
----------- --------
Net sales $ 50,212 $ 45,574
=========== ========
Explosive Metalworking $ 4,099 $ 1,554
Oilfield Products 2,046 924
AMK Welding (87) 468
Unallocated expenses (1,920) (1,450)
----------- --------
Income (loss) from
operations $ 4,138 $ 1,496
=========== ========
For the three months ended March 31, 2012
-----------------------------------------------------
Explosive Oilfield AMK Unallocated
Metalworking Products Welding Expenses Total
------------ --------- -------- ----------- -------
Income (loss) from
operations $ 4,099 $ 2,046 $ (87) $ (1,920) $ 4,138
Adjustments:
Net loss
attributable to
non-controlling
interest - 37 - - 37
Stock-based
compensation - - - 969 969
Depreciation 879 364 124 1,367
Amortization of
purchased
intangibles 523 1,021 - - 1,544
------------ --------- -------- ----------- -------
Adjusted EBITDA $ 5,501 $ 3,468 $ 37 $ (951) $ 8,055
============ ========= ======== =========== =======
For the three months ended March 31, 2011
-----------------------------------------------------
Explosive Oilfield AMK Unallocated
Metalworking Products Welding Expenses Total
------------ --------- -------- ----------- -------
Income from operations $ 1,554 $ 924 $ 468 $ (1,450) $ 1,496
Adjustments:
Net loss
attributable to
non-controlling
interest - 12 - - 12
Stock-based
compensation - - - 792 792
Depreciation 913 321 122 - 1,356
Amortization of
purchased
intangibles 546 859 - - 1,405
------------ --------- -------- ----------- -------
Adjusted EBITDA $ 3,013 $ 2,116 $ 590 $ (658) $ 5,061
============ ========= ======== =========== =======
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASUREMENTS TO MOST
DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
(Dollars in thousands)
(unaudited)
Three months ended
March 31,
---------------------
2012 2011
---------- ----------
Net income attributable to DMC $ 2,428 $ 750
Interest expense 211 410
Interest income (6) (3)
Provision for income taxes 1,342 148
Depreciation 1,367 1,356
Amortization of purchased intangible assets 1,544 1,405
---------- ----------
EBITDA 6,886 4,066
Stock-based compensation 969 792
Other (income) expense, net 200 203
---------- ----------
Adjusted EBITDA $ 8,055 $ 5,061
========== ==========
CONTACT: Pfeiffer High Investor Relations, Inc. Geoff High
303-393-7044
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