Dynamic Materials Corporation (DMC) (NASDAQ: BOOM), today reported
financial results for its second quarter ended June 30, 2013.
Second quarter sales were $57.9 million, up 19% from sales of
$48.7 million in the same quarter last year, and a sequential
increase of 25% from $46.3 million reported in the first quarter.
Management's prior forecast called for a sales increase of 11% to
14% versus the second quarter last year. Gross margin was 30%
versus 29% in the second quarter a year ago and 28% in this year's
first quarter.
Operating income increased 65% to $6.0 million from $3.7 million
in last year's second quarter. During this year's first quarter,
DMC reported a loss from operations of $1.1 million due to $3.0
million of non-recurring expenses associated with management
retirements.
Net income in the second quarter was $3.4 million, or $0.25 per
diluted share, a 30% increase from net income of $2.7 million, or
$0.20 per diluted share, in the year-ago second quarter. The
Company's first quarter net income of $215,000, or $0.02 per
diluted share, included the impact of the $3.0 million in
retirement expense, as well as a tax benefit of approximately $1.2
million.
Second quarter Adjusted EBITDA was $9.7 million, up 30% from
$7.5 million in the second quarter last year, and an improvement
from first quarter adjusted EBITDA of $3.3 million. 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 Nobelclad, the Company's Explosive
Metalworking business, reported sales of $32.4 million, up 18% from
$27.4 million in the second quarter last year. Operating income was
$5.2 million, an increase of 46% versus $3.6 million in the same
quarter a year ago. Adjusted EBITDA was $6.7 million, versus $5.0
million in the comparable year-ago quarter. The segment closed the
quarter with an order backlog of $44.2 million versus $47.6 million
at the end of the first quarter.
Oilfield Products Sales at DYNAenergetics, DMC's Oilfield
Products business, were $23.2 million, up 22% from $18.9 million in
last year's second quarter. Operating income was $2.2 million, up
27% versus $1.7 million in the second quarter last year, while
adjusted EBITDA was $3.5 million up 17% versus $3.0 million in the
2012 second quarter.
AMK Welding Sales at DMC's AMK Welding segment were $2.3
million, down 4% from $2.4 million in last year's second quarter.
Operating income improved to $404,000 from $165,000 in the 2012
second quarter. The improvement was due to a large volume of
high-margin repair work during the quarter. Adjusted EBITDA was
$555,000 compared with $290,000 in last year's second quarter.
Six-Month Results Sales for the six-month
period increased 5% to $104.1 million from $98.9 during the same
period a year ago. Gross margin was flat at 29%. Operating income
for the six-month period, which was impacted by $3.0 million in
non-recurring expenses associated with management retirements,
decreased to $5.0 million from $7.8 million in the same period last
year.
Net income, which reflects the retirement expense mentioned
above, as well as a $1.2 million first quarter tax benefit, was
$3.7 million, or $0.27 per diluted share, versus $5.1 million, or
$0.38 per diluted share, in the same period a year ago. Adjusted
EBITDA was $13.0 million versus $15.5 million during the 2012
six-month period. Cash flow from operations increased to $15.4
million from $8.1 million during the first six months of 2012.
The Explosive Metalworking segment reported six-month sales of
$58.6 million, up 7% from $54.9 million in the comparable
prior-year period. Operating income was flat at $7.7 million.
Adjusted EBITDA was $10.6 million versus $10.5 million at the
six-month mark last year.
Six-month sales at DMC's Oilfield Products segment increased 5%
to $41.8 million from $40.0 million in the 2012 six-month period.
The segment reported six-month operating income of $3.9 million, up
4% from $3.7 million in the comparable prior-year period. Adjusted
EBITDA improved to $6.6 million from $6.5 million in the year-ago
period.
AMK Welding recorded six-month sales of $3.7 million, down 9%
from $4.1 million through the first six months of 2012. Operating
income was $110,000 versus $77,000 in the prior year's six-month
period, while adjusted EBITDA was $411,000 versus $326,000.
Management Commentary "Second quarter
sales exceeded our prior forecast thanks to a strong performance by
Nobelclad's U.S. production team, which capitalized on
earlier-than-expected arrival of raw materials that were then
efficiently utilized to meet customer requirements."
Longe said quoting activity at Nobelclad has increased in recent
months, and is ahead of levels seen at the mid-year mark of 2012.
"We are bidding on projects that span a broad cross section of
industrial end markets, and inquiries from the chemical, energy and
power generation markets have been strong."
Nobelclad is actively pursuing orders related to several
international chemical projects, which involve both new-build and
upgrade work. The projects are expected to be awarded during the
second half of 2013, although specific timing is difficult to
forecast.
"Our DYNAenergetics team has also been active, and shipped the
full value of a $3.2 million Indian tender order during the second
quarter," Longe said. "DYNAenergetics also recently commenced
marketing its DYNAselect System, an advanced new product offering
designed to enhance the reliability and efficiency of the well
perforation process."
Equipment installation at DYNAenergetics' new shaped charge
facility in Blum, Texas has been completed, and production testing
is underway. Commercial production is expected to begin by the
anticipated September 1 start date. In addition, construction on
DYNAenergetics' new perforating gun and shaped charge facilities in
Russia is on schedule.
"We are encouraged by the impact of our organizational
enhancements, which are reflected in DMC's improved operating cash
flow performance during the first half of 2013," Longe said. "The
continued operational progress at both DYNAenergetics and AMK
Welding is also very gratifying.
"We are reasonably optimistic that developments in several of
Nobelclad's industrial end markets foretell an increase in capital
spending. While order timing will always be unpredictable, it
appears overall activity is improving."
Guidance Rick Santa, senior vice president
and chief financial officer, said, "Although we anticipate
Nobelclad will receive multiple large orders from the chemical
industry during the second half of the year, uncertainty associated
with their specific timing and our ability to deliver them by the
close of the fourth quarter has led us to adjust our full year
sales forecast, which now anticipates an increase of 6% to 8%
versus a previously forecast increase of 8% to 10% over 2012 sales.
Our full-year gross margin forecast is unchanged at 27% to
29%."
Santa said DMC's expected blended effective tax rate for the
full-year has been revised to 24% to 26% from the previously
forecasted range of 21% to 23%. The revision relates principally to
approximately $400,000 in non-recurring second quarter tax expense
resulting from a recent German tax audit. Excluding the impact of a
previously discussed $900,000 first quarter tax benefit and the
$400,000 of second quarter non-recurring expense, the blended
effective tax rate for fiscal 2013 is projected to be in a range of
28% to 30% versus the prior forecasted range of 26% to 28%.
For the third fiscal quarter, management anticipates sales will
increase by 10% to 12% versus sales of $50.1 million in the third
quarter of 2012. Gross margin is expected to be in a range of 27%
to 29%.
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. Webcast
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 August 6, 2013, by calling 877-660-6853
(201-612-7415 for international callers) and entering the
Conference ID #417878.
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 customers in the energy, infrastructure and industrials
markets through two core business segments -- Nobelclad and
DYNAenergetics -- as well as a specialized industrial service
provider, AMK Welding. The Nobelclad 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. DYNAenergetics 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.com.
Safe Harbor Language Except for the
historical information contained herein, this news release contains
forward-looking statements, including our guidance for third
quarter and full-year 2013 sales, margins, tax rates and tax
benefits, expectations regarding our global growth and operational
initiatives, Nobelclad sales opportunities in the chemical and
other end markets, completion of the new DYNAenergetics shaped
charge plant, and the other prospects we are pursuing at each of
our three business segments. 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
execute upon international growth opportunities; the success of
planned senior leadership transition; 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, 2012.
DYNAMIC MATERIALS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(Amounts in Thousands, Except Share and Per Share Data)
(unaudited)
Three months ended Six months ended
June 30, June 30,
------------------------ ------------------------
2013 2012 2013 2012
----------- ----------- ----------- -----------
NET SALES $ 57,859 $ 48,687 $ 104,129 $ 98,899
COST OF PRODUCTS SOLD 40,796 34,748 74,347 70,583
----------- ----------- ----------- -----------
Gross profit 17,063 13,939 29,782 28,316
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
General and
administrative
expenses 5,158 4,641 13,296 9,146
Selling and
distribution expenses 4,324 4,128 8,375 8,319
Amortization of
purchased intangible
assets 1,568 1,520 3,153 3,064
----------- ----------- ----------- -----------
Total costs and
expenses 11,050 10,289 24,824 20,529
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS 6,013 3,650 4,958 7,787
OTHER INCOME (EXPENSE):
Other income
(expense), net (420) 409 (124) 209
Interest expense (183) (196) (355) (407)
Interest income 1 3 4 8
----------- ----------- ----------- -----------
INCOME BEFORE INCOME
TAXES AND
NON-CONTROLLING INTEREST 5,411 3,866 4,483 7,597
INCOME TAX PROVISION 1,956 1,167 785 2,509
----------- ----------- ----------- -----------
NET INCOME 3,455 2,699 3,698 5,088
Less: Net income
attributable to non-
controlling interest 15 46 43 9
----------- ----------- ----------- -----------
NET INCOME ATTRIBUTABLE
TO DYNAMIC MATERIALS
CORPORATION $ 3,440 $ 2,653 $ 3,655 $ 5,079
=========== =========== =========== ===========
INCOME PER SHARE:
Basic $ 0.25 $ 0.20 $ 0.27 $ 0.38
=========== =========== =========== ===========
Diluted $ 0.25 $ 0.20 $ 0.27 $ 0.38
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING:
Basic 13,526,623 13,205,620 13,523,028 13,203,310
=========== =========== =========== ===========
Diluted 13,530,588 13,209,732 13,527,011 13,207,562
=========== =========== =========== ===========
DIVIDENDS DECLARED PER
COMMON SHARE $ 0.04 $ 0.04 $ 0.08 $ 0.08
=========== =========== =========== ===========
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
June 30, December 31,
2013 2012
ASSETS (unaudited)
------------- -------------
Cash and cash equivalents $ 2,323 $ 8,200
Accounts receivable, net 41,511 36,981
Inventory 45,563 48,320
Other current assets 7,507 7,165
------------- -------------
Total current assets 96,904 100,666
Property, plant and equipment, net 59,860 53,976
Goodwill, net 36,447 37,431
Purchased intangible assets, net 38,121 41,958
Other long-term assets 1,011 1,400
------------- -------------
Total assets $ 232,343 $ 235,431
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 14,203 $ 11,281
Customer advances 4,763 1,363
Dividend payable 549 540
Accrued income taxes 906 406
Other current liabilities 9,538 9,742
Lines of credit - 981
Current portion of long-term debt 63 65
------------- -------------
Total current liabilities 30,022 24,378
Lines of credit 28,843 37,779
Long-term debt 20 55
Deferred tax liabilities 8,430 9,211
Other long-term liabilities 1,668 1,452
Stockholders' equity 163,360 162,556
------------- -------------
Total liabilities and stockholders' equity $ 232,343 $ 235,431
============= =============
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(Amounts in Thousands)
(unaudited)
2013 2012
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,698 $ 5,088
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation (including capital lease
amortization) 2,874 2,729
Amortization of purchased intangible assets 3,153 3,064
Amortization of deferred debt issuance costs 51 66
Stock-based compensation 2,057 1,935
Deferred income tax provision (benefit) 196 (459)
Loss on disposal of property, plant and
equipment 21 (2)
Change in working capital, net 3,348 (4,346)
------------ ------------
Net cash provided by operating activities 15,398 8,075
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (9,726) (5,595)
Acquisition of TRX Industries - (10,294)
Change in other non-current assets 192 126
------------ ------------
Net cash used in investing activities (9,534) (15,763)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (repayments) on bank lines of
credit, net (9,811) 9,924
Payments on long-term debt (32) (1,138)
Payments on capital lease obligations (25) (40)
Payment of dividends (1,088) (1,074)
Net proceeds from issuance of common stock 163 98
Tax impact of stock-based compensation (836) (11)
------------ ------------
Net cash provided by (used in) financing
activities (11,629) 7,759
------------ ------------
EFFECTS OF EXCHANGE RATES ON CASH (112) (132)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (5,877) (61)
CASH AND CASH EQUIVALENTS, beginning of the
period 8,200 5,276
------------ ------------
CASH AND CASH EQUIVALENTS, end of the period $ 2,323 $ 5,215
============ ============
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASUREMENTS TO MOST
DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
(Amounts in thousands)
(unaudited)
Three months ended Six months ended
June 30, June 30,
-------------------- --------------------
2013 2012 2013 2012
--------- --------- --------- ---------
Explosive Metalworking $ 32,390 $ 27,374 $ 58,572 $ 54,908
Oilfield Products 23,164 18,924 41,818 39,898
AMK Welding 2,305 2,389 3,739 4,093
--------- --------- --------- ---------
Net sales $ 57,859 $ 48,687 $ 104,129 $ 98,899
========= ========= ========= =========
Explosive Metalworking $ 5,245 $ 3,589 $ 7,689 $ 7,688
Oilfield Products 2,157 1,701 3,880 3,747
AMK Welding 404 165 110 77
Unallocated expenses (1,793) (1,805) (6,721) (3,725)
--------- --------- --------- ---------
Income from operations $ 6,013 $ 3,650 $ 4,958 $ 7,787
========= ========= ========= =========
For the three months ended June 30, 2013
-----------------------------------------------------
Explosive Oilfield AMK Unallocated
Metalworking Products Welding Expenses Total
------------ -------- --------- ----------- -------
Income from
operations $ 5,245 $ 2,157 $ 404 $ (1,793) $ 6,013
Adjustments:
Net income
attributable to
non-controlling
interest - (15) - - (15)
Stock-based
compensation - - - 635 635
Depreciation 946 360 151 1,457
Amortization of
purchased
intangibles 521 1,047 - - 1,568
------------ -------- --------- ----------- -------
Adjusted EBITDA $ 6,712 $ 3,549 $ 555 $ (1,158) $ 9,658
============ ======== ========= =========== =======
For the three months ended June 30, 2012
-----------------------------------------------------
Explosive Oilfield AMK Unallocated
Metalworking Products Welding Expenses Total
------------ -------- --------- ----------- -------
Income from
operations $ 3,589 $ 1,701 $ 165 $ (1,805) $ 3,650
Adjustments:
Net income
attributable to
non-controlling
interest - (46) - - (46)
Stock-based
compensation - - - 966 966
Depreciation 865 372 125 - 1,362
Amortization of
purchased
intangibles 513 1,007 - - 1,520
------------ -------- --------- ----------- -------
Adjusted EBITDA $ 4,967 $ 3,034 $ 290 $ (839) $ 7,452
============ ======== ========= =========== =======
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASUREMENTS TO MOST
DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
(Amounts in thousands)
(unaudited)
For the six months ended June 30, 2013
-----------------------------------------------------
Explosive Oilfield AMK Unallocated
Metalworking Products Welding Expenses Total
------------ -------- --------- ----------- -------
(unaudited)
Income from
operations $ 7,689 $ 3,880 $ 110 $ (6,721) $ 4,958
Adjustments:
Net income
attributable to
non-controlling
interest - (43) - - (43)
Stock-based
compensation - - - 2,057 2,057
Depreciation 1,874 699 301 - 2,874
Amortization of
purchased
intangibles 1,049 2,104 - - 3,153
------------ -------- --------- ----------- -------
Adjusted EBITDA $ 10,612 $ 6,640 $ 411 $ (4,664) $12,999
============ ======== ========= =========== =======
For the six months ended June 30, 2012
-----------------------------------------------------
Explosive Oilfield AMK Unallocated
Metalworking Products Welding Expenses Total
------------ -------- --------- ----------- -------
(unaudited)
Income from
operations $ 7,688 $ 3,747 $ 77 $ (3,725) $ 7,787
Adjustments:
Net income
attributable to
non-controlling
interest - (9) - - (9)
Stock-based
compensation - - - 1,935 1,935
Depreciation 1,744 736 249 - 2,729
Amortization of
purchased
intangibles 1,036 2,028 - - 3,064
------------ -------- --------- ----------- -------
Adjusted EBITDA $ 10,468 $ 6,502 $ 326 $ (1,790) $15,506
============ ======== ========= =========== =======
Three months ended Six months ended
June 30, June 30,
-------------------- --------------------
2013 2012 2013 2012
--------- --------- --------- ---------
Net income attributable to DMC $ 3,440 $ 2,653 $ 3,655 $ 5,079
Interest expense 183 196 355 407
Interest income (1) (3) (4) (8)
Provision for income taxes 1,956 1,167 785 2,509
Depreciation 1,457 1,362 2,874 2,729
Amortization of purchased
intangible assets 1,568 1,520 3,153 3,064
--------- --------- --------- ---------
EBITDA 8,603 6,895 10,818 13,780
Stock-based compensation 635 966 2,057 1,935
Other (income) expense, net 420 (409) 124 (209)
--------- --------- --------- ---------
Adjusted EBITDA $ 9,658 $ 7,452 $ 12,999 $ 15,506
========= ========= ========= =========
CONTACT: Pfeiffer High Investor Relations, Inc. Geoff
High 303-393-7044
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