Dynamic Materials Reports First Quarter Financial Results
Tuesday, May 01, 2012 4:05:10 PM ET Dynamic Materials Corporation (DMC) (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) (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
SOURCE: Dynamic Materials Corp.
