SOURCE: Dynamic Materials Corp.

July 31, 2008 16:05 ET

Dynamic Materials Reports Second Quarter and Year-to-Date Financial Results

Selected Highlights: Q2 Net Income Reaches $6.2M, or $0.49 Per Diluted Share, on Revenue of $63.2M; Adjusted EBITDA Improves 54% to $14.7M Versus 2007 Second Quarter; Backlog at Explosive Metalworking Segment Increases to $105M

BOULDER, CO--(Marketwire - July 31, 2008) - 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 fiscal period ended June 30, 2008.

Second quarter sales increased 83% to $63.2 million from $34.5 million in the second quarter last year and included a $16.5 million contribution from the recently acquired businesses of Germany-based DYNAenergetics. Gross margin was 30% versus 35% in the comparable year-ago quarter. The gross margin decline is largely attributable to a higher proportion of sales generated in Europe following the DYNAenergetics acquisition. Gross margin performance at European explosion welding businesses has historically been lower than in the United States. Additionally, DYNAenergetics' Oilfield Services business has traditionally delivered gross margins comparable to those of its explosion-welding counterpart.

Second quarter income from operations increased 16% to $10.1 million from $8.8 million in the same quarter a year-ago. Net income increased 10% to $6.2 million, or $0.49 per diluted share, from $5.7 million, or $0.46 per diluted share, in the comparable year-ago quarter.

Adjusted EBITDA for the second quarter increased 54% to $14.7 million from $9.6 million in the second quarter last year. Adjusted EBITDA is a non-GAAP (generally accepted accounting principal) 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 the company's Explosive Metalworking segment increased 60% to $53.0 million from $33.1 million in the second quarter last year. The increase reflects an $8.6 million sales contribution from the explosive welding business of DYNAenergetics, as well as an $11.3 million, or 34%, increase in sales from DMC's legacy explosion welding divisions. Operating income increased 8% to $9.8 million from $9.0 million in last year's second quarter. Adjusted EBITDA increased 31% to $12.5 million from $9.5 million in the comparable year-ago quarter.

Order backlog at the end of the second quarter was $105 million, up from $102 million reported at the end of this year's first quarter and $85 million recorded at the end of last year's second quarter.

Oilfield Products

DMC's new Oilfield Products segment recorded second quarter sales of $7.9 million and operating income of $616,000. Second quarter adjusted EBITDA was $1.6 million.

AMK Welding

Second quarter sales at DMC's AMK Welding segment increased 70% to $2.3 million from $1.3 million in the second quarter last year. Operating income increased to $585,000 from $18,000 in the comparable year-ago quarter. Adjusted EBITDA advanced to $693,000 from $81,000 in the same quarter last year.

Management Commentary

Yvon Cariou, president and CEO, said, "Second quarter sales exceeded our expectations thanks largely to a strong end-of-quarter performance at our Mt. Braddock, Penn. facility, where our production teams capitalized on late-quarter metal deliveries to process and ship several orders before the close of the fiscal period."

"In spite of the challenges resulting from longer delivery lead times on carbon steel, our backlog and overall business remain strong and we are enjoying widespread demand for our products," Cariou added. "Our hot list remains very healthy and includes prospective projects that span the globe and involve nearly all of our traditional end markets. While it now appears that order timing and metal supplies will impact our prior financial forecasts during the second half of the year, we see no signs that there has been a pullback in overall demand. We therefore remain encouraged by our prospects for continued long-term growth."

Rick Santa, senior vice president and chief financial officer, said that although year-to-date bookings have been strong, longer lead times on the delivery of carbon steel in the United States are expected to result in sales during the second half of 2008 that will be approximately 5% less than the first half of the year. Sales in the third quarter are expected to be up to 20% less than second quarter sales, while fourth quarter sales are expected to be equal to or above those of the second quarter. Gross margin in the third quarter is expected to be between 28% and 29% as a result of lower sales spread over a fixed manufacturing and overhead expense base. Fourth quarter gross margin is expected to improve to levels comparable to those in the first and second quarters based upon anticipated fourth quarter sales that should approximate or exceed those of the second quarter.

As previously reported, full-year operating income will be impacted by approximately $7.7 million of amortization expense associated with the DYNAenergetics acquisition, while pre-tax income will be impacted by approximately $5.0 million of interest expense. Santa said that recent refinements to estimates of pre-tax earnings, as well as permanent differences between book and taxable income for the full-year 2008, have reduced DMC's expected 2008 blended effective tax rate to a range of 32% to 33%.

Six-month Results

Sales through six months increased 80% to $121.6 million from $67.5 million in the comparable six-month period of 2007. This year's six-month sales results included a $31.7 million contribution from DYNAenergetics. Gross margin was 30% versus 34% in the same period a year ago. Income from operations increased 20% to $19.5 million from $16.3 million in the comparable 2007 period. Net income through six months was $11.5 million, or $0.91 per diluted share, up 9% from net income of $10.5 million, or $0.86 per diluted share, in the same period last year. Adjusted EBITDA increased 59% to $28.3 million from $17.7 million in the first six months of fiscal 2007.

The Explosive Metalworking segment reported six-month sales of $104.6 million, up 62% from sales of $64.6 million in the first half of 2007. The explosive welding business of DYNAenergetics contributed $19.3 million to first half 2008 sales. Operating income increased 20% to $19.8 million from $16.6 million in the prior year's six-month period. Adjusted EBITDA increased 43% to $24.8 million from $17.3 million in the same period a year ago.

Six-month sales at DMC's new Oilfield Products segment were $12.4 million. Operating income for the period was $50,000 and adjusted EBITDA was $2.0 million.

AMK Welding recorded six-month sales of $4.6 million, up 56% from $2.9 million in the comparable year-ago period. Operating income increased 333% to $1.2 million from $282,000 in the prior-year period. Adjusted EBITDA at the six-month mark was $1.4 million, an increase of 255% versus $405,000 in the same period a year ago.

Conference call information

Management will hold a conference call to discuss second quarter 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 56630645. 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, 2008, by calling 800-642-1687 (706-645-9291 for international callers) and entering the passcode 56630645.

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' 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 2008 revenue, margins, income, expenses and tax rates, that 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 successfully integrate and operate the recently-acquired DYNAenergetics businesses; 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, 2007.

               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
                            ==========  ==========  ==========  ==========



               DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                          (Dollars in Thousands)

                                                    June 30,   December 31,
                                                      2008         2007
ASSETS                                            (unaudited)
                                                  ------------ ------------

Cash and cash equivalents                         $     28,384 $      9,045
Restricted cash                                              -          371
Accounts receivable, net                                38,634       39,833
Inventories                                             38,864       41,628
Other current assets                                     4,958        3,853
                                                  ------------ ------------
  Total current assets                                 110,840       94,730

Property, plant and equipment, net                      38,331       35,446
Goodwill, net                                           49,092       45,862
Purchased intangible assets, net                        61,431       61,914
Other long-term assets                                   3,390        2,947
                                                  ------------ ------------
Total assets                                      $    263,084 $    240,899
                                                  ============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable                                  $     18,352 $     22,590
Dividend payable                                         1,894            -
Accrued income taxes                                     4,019        1,212
Other current liabilities                               11,014       19,394
Lines of credit - current                                8,602        7,587
Current portion of long-term debt                        7,792        8,035
                                                  ------------ ------------
  Total current liabilities                             51,673       58,818

Lines of credit                                         10,427            -
Long-term debt                                          62,540       61,530
Deferred tax liabilities                                20,075       20,604
Other long-term liabilities                              1,592        1,668
Stockholders' equity                                   116,777       98,279
                                                  ------------ ------------
Total liabilities and stockholders' equity        $    263,084 $    240,899
                                                  ============ ============




               DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
              CONDENSED 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
     Provision for deferred income taxes                  (2,410)      (80)
     Equity in earnings of joint ventures                   (289)        -
     Change in working capital, net                       (5,782)  (14,503)
                                                        --------  --------
      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)
                                                        --------  --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings on lines of credit, net                      12,081         -
  Payments on long-term debt                                (985)     (385)
  Payments on capital lease obligations                     (216)        -
  Payment of deferred debt issuance costs                   (140)        -
  Net proceeds from issuance of common stock                 240       382
  Excess tax benefit related to stock options                132         -
  Other cash flows from financing activities                  33        10
                                                        --------  --------
                    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
                                                        ========  ========




               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,
                                --------------------  --------------------
                                  2008       2007       2008       2007
                                ---------  ---------  ---------  ---------
                                    (unaudited)           (unaudited)
Explosive Metalworking Group    $  52,996  $  33,119  $ 104,638  $  64,614
Oilfield Products                   7,922          -     12,373          -
AMK Welding                         2,265      1,335      4,565      2,934
                                ---------  ---------  ---------  ---------
Net sales                       $  63,183  $  34,454  $ 121,576  $  67,548
                                =========  =========  =========  =========

Explosive Metalworking Group    $   9,815  $   9,047  $  19,799  $  16,550
Oilfield Products                     616          -         50          -
AMK Welding                           585         18      1,222        282
Unallocated Expenses                 (879)      (295)    (1,543)      (519)
                                ---------  ---------  ---------  ---------
Income from operations          $  10,137  $   8,770  $  19,528  $  16,313
                                =========  =========  =========  =========


                             For the three months ended June 30, 2008
                       ----------------------------------------------------
                        Explosive
                       Metalworking Oilfield   AMK    Unallocated
                          Group     Products Welding    Expenses    Total
                       ------------ -------- -------- -----------  --------
                                       (unaudited)
Income from operations $      9,815 $    616 $    585 $      (879) $ 10,137
Adjustments:
 Stock-based compensation         -        -        -         879       879
 Depreciation                   936      197      108           -     1,241
 Amortization of
  purchased intangibles       1,724      740        -           -     2,464
                       ------------ -------- -------- -----------  --------
Adjusted EBITDA        $     12,475 $  1,553 $    693 $         -  $ 14,721
                       ============ ======== ======== ===========  ========


                                  For the three months ended June 30, 2007
                                  -----------------------------------------
                                   Explosive
                                  Metalworking   AMK   Unallocated
                                     Group     Welding   Expenses   Total
                                  ------------ ------- -----------  -------
                                                  (unaudited)
Income from operations            $      9,047 $    18 $      (295) $ 8,770
Adjustments:
 Stock-based compensation                    -       -         295      295
 Depreciation                              452      63           -      515
                                  ------------ ------- -----------  -------
Adjusted EBITDA                   $      9,499 $    81 $         -  $ 9,580
                                  ============ ======= ===========  =======



               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, 2008
                    -------------------------------------------------------
                     Explosive
                    Metalworking Oilfield    AMK     Unallocated
                       Group     Products  Welding     Expenses     Total
                    ------------ --------- --------- -----------  ---------
                                      (unaudited)
Income from
 operations         $     19,799 $      50 $   1,222 $    (1,543) $  19,528
Adjustments:
 Stock-based
  compensation                 -         -         -       1,543      1,543
 Depreciation              1,668       470       216           -      2,354
 Amortization of
  purchased
  intangibles              3,376     1,449         -           -      4,825
                    ------------ --------- --------- -----------  ---------
Adjusted EBITDA     $     24,843 $   1,969 $   1,438 $         -  $  28,250
                    ============ ========= ========= ===========  =========


                                  For the six months ended June 30, 2007
                                -------------------------------------------
                                 Explosive
                                Metalworking   AMK    Unallocated
                                   Group     Welding    Expenses    Total
                                ------------ -------- -----------  --------
                                                 (unaudited)
Income from operations          $     16,550 $    282 $      (519) $ 16,313
Adjustments:
 Stock-based compensation                  -        -         519       519
 Depreciation                            787      123           -       910
                                ------------ -------- -----------  --------
Adjusted EBITDA                 $     17,337 $    405 $         -  $ 17,742
                                ============ ======== ===========  ========


                                    Three months ended   Six months ended
                                         June 30,            June 30,
                                    ------------------  ------------------
                                      2008      2007      2008      2007
                                    --------  --------  --------  --------
                                        (unaudited)         (unaudited)
Net income                          $  6,210  $  5,659  $ 11,458  $ 10,542
 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)        -
 Provision for income taxes            3,017     3,275     5,989     6,116
 Depreciation                          1,241       515     2,354       910
 Amortization of purchased
  intangible assets                    2,464         -     4,825         -
                                    --------  --------  --------  --------
EBITDA                                13,842     9,285    26,707    17,223
 Stock-based compensation                879       295     1,543       519
                                    --------  --------  --------  --------
Adjusted EBITDA                     $ 14,721  $  9,580  $ 28,250  $ 17,742
                                    ========  ========  ========  ========

Contact Information

  • CONTACT:
    Pfeiffer High Investor Relations, Inc.
    Geoff High
    303-393-7044