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, 2009.
Fourth quarter sales, which slightly exceeded management's
forecast, were $42.6 million versus $58.6 million in the prior
year's fourth quarter and $34.7 million in the 2009 third quarter.
Gross margin was 23% versus 29% in the comparable prior year
quarter and 25% in the third quarter. This year's fourth quarter
gross margin was negatively impacted in part by certain lower
margin explosion welding orders the Company is producing for
customers in the oil and gas sector.
Fourth quarter income from operations was $2.4 million versus
$9.2 million in the prior year's fourth quarter and $2.5 million in
the 2009 third quarter. Net income was $1.0 million, or $0.08 per
diluted share, versus net income of $5.4 million, or $0.42 per
diluted share, in the comparable 2008 quarter and $1.1 million, or
$0.08 per diluted share, in the third quarter.
Fourth quarter adjusted EBITDA was $5.9 million versus $12.1
million in the fourth quarter last year and $6.0 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 $31.7 million compared with sales of $47.7 million in the
2008 fourth quarter. Operating income was $3.5 million versus $9.1
million in the prior year's fourth quarter. Adjusted EBITDA was
$5.0 million as compared with $10.0 million in the 2008 fourth
quarter. The segment ended the fourth quarter with an order backlog
of $50 million versus $63 million at the end of the 2009 third
quarter.
Oilfield Products
DMC's Oilfield Products segment reported fourth quarter sales of
$8.6 million versus $8.7 million in the 2008 fourth quarter. The
segment reported an operating loss of $728,000 versus operating
income of $697,000 in the prior year's fourth quarter. The decline
in operating income resulted from lower sales levels at the
segment's German operations and a small operating loss at the
Company's recently acquired LRI Oil Tools business. Adjusted EBITDA
was $318,000 as compared with $1.7 million in the 2008 fourth
quarter.
AMK Welding
DMC's AMK Welding segment reported fourth quarter sales of $2.3
million versus $2.3 million in the same quarter of 2008. Operating
income increased to $448,000 versus $267,000 in the comparable
prior year quarter. The segment recorded adjusted EBITDA of
$562,000 versus $378,000 in the comparable quarter last year.
Management Commentary
Yvon Cariou, president and CEO, said, "During the final quarter
of 2009 we continued to build our presence in the upstream energy
sector, which has quickly become the most active segment of the oil
and gas industry for our explosion welding business. While
competitive conditions in this market put pressure on our fourth
quarter gross margin, our entrance into this sector has given our
products and technical capabilities added exposure with a range of
new end users. Our efforts may open the door to a sizeable
opportunity in the specialized clad pipe market for both upstream
and downstream applications. We believe these developments could
significantly enhance our long-term revenue opportunities."
Cariou added, "We recently received our first order from the
transportation sector, where our explosion welded transition joints
will be used in an advanced new line of rail cars. We anticipate we
could see follow-on orders related to this initial contract, and
believe future demand could build from this end market given the
international push toward next-generation rail systems."
"Although explosion welding order volume has been relatively
weak in recent months, we continue to see indications from multiple
end markets that demand could improve later in 2010 and into 2011.
In addition to upstream energy, the aluminum production industry
continues to represent a bright spot within our end markets."
Cariou added, "We also expect our Oilfield Products segment to
benefit from improving market conditions, and are focused on
expanding DMC's presence in this industry. We recently signed a
definitive agreement to acquire the assets of Texas-based Austin
Explosives Company, which has been a long-time distributor of our
shaped charges."
Austin Explosives recorded sales of approximately $10.7 million
in 2009, and DMC has agreed to purchase the business for $7.0
million. The acquisition will be structured as an asset purchase,
and DMC will pay $3.5 million of the price in cash and the balance
in DMC stock, cash or a combination of both, at DMC's election. The
acquisition is expected to close during the second fiscal
quarter.
Rick Santa, senior vice president and chief financial officer,
said, "Despite the challenging business environment, we delivered
full-year operating cash flow of $29.5 million as compared with
$34.0 million in 2008. We also reduced our net indebtedness by
$19.3 million and finished the year with a cash position of $22.4
million, up from $14.4 million at the end of 2008. We have kept a
tight leash on operating costs and will continue to do so as we
work through the recovery."
Santa noted that the Company has completed the annual testing of
goodwill at its Oilfield Products segment, and has determined that
there is no impairment to goodwill.
Guidance
"We currently are anticipating that 2010 revenue will be in a
range of flat to down 5% versus our 2009 top-line performance,"
Santa said. "Our efforts to capture additional market share in the
upstream oil and gas industry, coupled with increased pricing
pressure should result in full-year gross margins in a range of 22%
to 24%. As the global economy gains strength and the competitive
landscape returns to more normalized levels, we do believe that
DMC's long-term margin performance will benefit."
Santa continued, "We expect a slow start to the year as we are
making final manufacturing adjustments to plates related to our
Gorgon order, and this situation has delayed certain shipments.
First quarter revenue is expected to be down approximately 30%
versus the 2009 fourth quarter, and first quarter gross margin is
expected to be in a range of 20% to 22%."
DMC's 2010 full-year tax rate is expected to be in a range of
33% to 35%.
Full-Year Results
Sales in fiscal 2009 were $164.9 million versus $232.6 million
in the prior year. Full-year gross margin was 26% versus 30% in
2008. Operating income was $16.2 million versus $38.1 million in
the prior year. Full-year net income was $8.5 million, or $0.66 per
diluted share, compared with net income of $24.1 million, or $1.87
per diluted share, in 2008. Full-year adjusted EBITDA was $29.8
million compared with $53.2 million in the prior year.
The Explosive Metalworking segment reported 2009 sales of $134.1
million versus $195.0 million in 2008. Full-year operating income
was $20.8 million compared with $37.5 million in the prior year.
Adjusted EBITDA was $26.8 million versus $45.0 million in 2008.
Full-year sales at DMC's Oilfield Products segment were $21.8
million versus $27.8 million last year. The segment reported an
operating loss of $2.7 million versus operating income of $1.5
million in 2008. Full-year adjusted EBITDA was $920,000 versus $5.4
million in the prior year.
AMK Welding recorded full-year sales of $9.0 million compared
with $9.7 million in 2008. Operating income was $1.6 million versus
$2.4 million in the prior year. Adjusted EBITDA was $2.0 million
compared with $2.8 million in 2008.
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 55936657. 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 March 8, 2010, by
calling 800-642-1687 (706-645-9291 for international callers) and
entering the passcode 55936657.
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 2010 sales, margins and
tax rates, planned control of operating costs, quoting and booking
expectations, our long-range strategy of growing the market share,
distribution capabilities and product offerings of our Oilfield
Products business, consummation and timing of the planned Austin
Explosives acquisition, and prospects for growth for new
applications as well as 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 realize sales from
our backlog; our ability to obtain new contracts at attractive
prices; the size and timing of customer orders and shipments;
fluctuations in customer demand; fluctuations in foreign
currencies, changes to customer orders; the cyclicality of our
business; competitive factors; the timely completion of contracts;
the timing and size of expenditures; the timely receipt of
government approvals and permits; the timing and price of metal and
other raw material; the adequacy of local labor supplies at our
facilities; current or future limits on manufacturing capacity at
our various operations; the availability and cost of funds; and
general economic conditions, both domestic and foreign, impacting
our business and the business of the end-market users we serve; as
well as the other risks detailed from time to time in the Company's
SEC reports, including the report on Form 10-K for the year ended
December 31, 2008.
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Share Data)
(unaudited)
Three months ended Twelve months ended
December 31, December 31,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
NET SALES $ 42,630 $ 58,621 $ 164,898 $ 232,577
COST OF PRODUCTS SOLD 32,747 41,561 121,779 161,732
---------- ---------- ---------- ----------
Gross profit 9,883 17,060 43,119 70,845
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
General and administrative
expenses 3,661 3,644 12,980 14,256
Selling expenses 2,461 3,070 8,837 11,155
Amortization expense of
purchased intangible
assets 1,355 1,193 5,064 7,382
---------- ---------- ---------- ----------
Total costs and expenses 7,477 7,907 26,881 32,793
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 2,406 9,153 16,238 38,052
OTHER INCOME (EXPENSE):
Other income (expense),
net 285 (40) (275) (269)
Interest income (expense),
net (882) (1,057) (3,257) (4,783)
Equity in earnings of
joint ventures 51 4 221 274
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 1,860 8,060 12,927 33,274
INCOME TAX PROVISION 838 2,670 4,378 9,206
---------- ---------- ---------- ----------
NET INCOME $ 1,022 $ 5,390 $ 8,549 $ 24,068
========== ========== ========== ==========
INCOME PER SHARE:
Basic $ 0.08 $ 0.42 $ 0.67 $ 1.89
========== ========== ========== ==========
Diluted $ 0.08 $ 0.42 $ 0.66 $ 1.87
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING -
Basic 12,662,512 12,488,898 12,640,069 12,445,685
========== ========== ========== ==========
Diluted 12,676,231 12,555,407 12,662,440 12,554,402
========== ========== ========== ==========
DIVIDENDS DECLARED PER
COMMON SHARE $ 0.04 $ - $ 0.12 $ 0.15
========== ========== ========== ==========
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(unaudited)
ASSETS 2009 2008
----------- -----------
Cash and cash equivalents $ 22,411 $ 14,360
Accounts receivable, net 25,807 34,719
Inventories 32,501 35,300
Other current assets 7,255 6,670
----------- -----------
Total current assets 87,974 91,049
Property, plant and equipment, net 42,052 40,457
Goodwill, net 43,164 43,066
Purchased intangible assets, net 49,079 52,264
Other long-term assets 2,907 2,750
----------- -----------
Total assets $ 225,176 $ 229,586
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 9,183 $ 15,402
Dividend payable 515 -
Accrued income taxes 1,485 846
Other current liabilities 15,690 15,049
Lines of credit 1,777 -
Current portion of long-term debt 13,485 14,450
----------- -----------
Total current liabilities 42,135 45,747
Long-term debt 34,120 46,178
Deferred tax liabilities 15,217 16,833
Other long-term liabilities 1,593 2,326
Stockholders' equity 132,111 118,502
----------- -----------
Total liabilities and stockholders' equity $ 225,176 $ 229,586
=========== ===========
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2009 AND 2008
(Dollars in Thousands)
(unaudited)
2009 2008
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,549 $ 24,068
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation (including capital lease
amortization) 5,042 4,531
Amortization of purchased intangible assets 5,064 7,382
Amortization of capitalized debt issuance costs 297 279
Stock-based compensation 3,425 3,237
Deferred income tax benefit (2,784) (2,079)
Equity in earnings of joint ventures (221) (274)
Change in working capital, net 10,168 (3,141)
-------- --------
Net cash provided by operating activities 29,540 34,003
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of LRI, net of cash acquired (284) -
Acquisition of DYNAenergetics, net of cash acquired - (559)
Acquisition of property, plant and equipment (3,917) (9,925)
Change in other non-current assets 59 20
-------- --------
Net cash used in investing activities (4,142) (10,464)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on syndicated credit agreement (13,614) (6,282)
Repayments on lines of credit, net (952) (7,579)
Payments on long-term debt (2,107) (1,471)
Payments on capital lease obligations (203) (389)
Payment of dividends (1,028) (1,894)
Payment of deferred debt issuance costs (341) (218)
Net proceeds from issuance of common stock 425 441
Excess tax benefit related to stock options 90 143
-------- --------
Net cash used in financing activities (17,730) (17,249)
-------- --------
EFFECTS OF EXCHANGE RATES ON CASH 383 (975)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 8,051 5,315
CASH AND CASH EQUIVALENTS, beginning of the period 14,360 9,045
-------- --------
CASH AND CASH EQUIVALENTS, end of the period $ 22,411 $ 14,360
======== ========
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,
-------------------- --------------------
2009 2008 2009 2008
--------- --------- --------- ---------
(unaudited) (unaudited)
Explosive Metalworking Group $ 31,693 $ 47,656 $ 134,096 $ 194,999
Oilfield Products 8,593 8,705 21,764 27,833
AMK Welding 2,344 2,260 9,038 9,745
--------- --------- --------- ---------
Net sales $ 42,630 $ 58,621 $ 164,898 $ 232,577
========= ========= ========= =========
Explosive Metalworking Group $ 3,453 $ 9,063 $ 20,835 $ 37,454
Oilfield Products (728) 697 (2,742) 1,472
AMK Welding 448 267 1,570 2,363
Unallocated expenses (767) (874) (3,425) (3,237)
--------- --------- --------- ---------
Income from operations $ 2,406 $ 9,153 $ 16,238 $ 38,052
========= ========= ========= =========
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
============ =========== ============ =========== =======
For the three months ended December 31, 2008
------------------------------------------------------------
Explosive
Metalworking Oilfield AMK Unallocated
Group Products Welding Expenses Total
------------ ------------ ------------ ----------- --------
(unaudited)
Income from
operations $ 9,063 $ 697 $ 267 $ (874) $ 9,153
Adjustments:
Stock-
based
compensation - - - 874 874
Depreciation 396 402 111 - 909
Amortization
of purchased
intangibles 569 624 - - 1,193
------------ ------------ ------------ ----------- --------
Adjusted
EBITDA $ 10,028 $ 1,723 $ 378 $ - $ 12,129
============ ============ ============ =========== ========
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, 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
=========== ========== =========== ========== ===========
For the twelve months ended December 31, 2008
-----------------------------------------------------------
Explosive
Metalworking Oilfield AMK Unallocated
Group Products Welding Expenses Total
----------- ----------- ----------- ---------- -----------
(unaudited)
Income from
operations $ 37,454 $ 1,472 $ 2,363 $ (3,237) $ 38,052
Adjustments:
Stock-based
compensation - - - 3,237 3,237
Depreciation 2,989 1,107 435 - 4,531
Amortization
of purchased
intangibles 4,596 2,786 - - 7,382
----------- ----------- ----------- ---------- -----------
Adjusted EBITDA $ 45,039 $ 5,365 $ 2,798 $ - $ 53,202
=========== =========== =========== ========== ===========
Three months ended Twelve months ended
December 31, December 31,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
(unaudited) (unaudited)
Net income $ 1,022 $ 5,390 $ 8,549 $ 24,068
Interest expense 952 1,269 3,473 5,472
Interest income (70) (212) (216) (689)
Provision for income taxes 838 2,670 4,378 9,206
Depreciation 1,342 909 5,042 4,531
Amortization of purchased
intangible assets 1,355 1,193 5,064 7,382
---------- ---------- ---------- ----------
EBITDA 5,439 11,219 26,290 49,970
Stock-based compensation 767 874 3,425 3,237
Other expense (285) 40 275 269
Equity in earnings of
joint ventures (51) (4) (221) (274)
---------- ---------- ---------- ----------
Adjusted EBITDA $ 5,870 $ 12,129 $ 29,769 $ 53,202
========== ========== ========== ==========
CONTACT: Pfeiffer High Investor Relations, Inc. Geoff High
303-393-7044
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