BOULDER, CO--(Marketwire - October 30, 2008) -
Selected Highlights
-- Q3 diluted EPS reported at $0.57 on 33% gross margin and lower tax
rate
-- Revenue of $52.4M up 24% versus 2007 third quarter
-- Year-to-date Adjusted EBITDA increases 41% to $41.1M versus 2007 nine-
month period
-- Management reports steady bookings and strong quoting activity
Dynamic Materials Corporation (DMC) (
NASDAQ:
BOOM), the world's leading
provider of explosion-welded clad metal plates, today reported financial
results for its third quarter and nine-month fiscal period ended Sept. 30,
2008.
DMC reported third quarter net income of $7.2 million, or $0.57 per diluted
share, on revenue of $52.4 million, which compares with net income of $7.1
million, or $0.58 per diluted share, on sales of $42.1 million in the third
quarter a year ago. The better-than-anticipated bottom-line results in this
year's third quarter are primarily attributable to strong gross margin
performance and a decrease in the Company's effective tax rate.
Third quarter gross margin was 33% compared with 34% in last year's third
quarter, and a forecasted range of 28% to 29%. Gross margin was better
than expected due to a favorable product mix at DMC's new Oilfield Products
segment, a sharp increase in sales at the Company's AMK Welding segment,
and higher-than-expected proportionate sales by DMC's U.S. explosion
welding business, which generally enjoys higher gross margins than the
Company's European explosion welding businesses.
DMC's effective tax rate for the 2008 third quarter was 7.0% versus 34.2%
in the third quarter of 2007, and was well below the Company's previously
forecasted full-year effective tax rate range of 32% to 33%. The variance
arose primarily from the completion during the third quarter of an Internal
Revenue Service examination, and from adjustments that were identified
during the third quarter 2008 preparation of the Company's 2007 federal and
state tax returns. The closure of the IRS examination enabled DMC to
record previously unrecognized tax benefits of approximately $300,000. The
"book-to-return" adjustments related primarily to apportionment factors
utilized to compute state income taxes, and favorably impacted the third
quarter tax provision by approximately $1.1 million.
Third quarter income from operations was $9.4 million versus $10.6 million
in the third quarter a year-ago. The decrease is primarily attributable to
a $3.2 million decline in third quarter sales at DMC's legacy explosion
welding businesses and lower margin on those sales. Adjusted EBITDA for
the third quarter increased 12% to $12.8 million from $11.5 million in the
third quarter last year. 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.
Explosive Metalworking
Third quarter sales at the Company's Explosive Metalworking segment
increased 6% to $42.7 million from $40.3 million in the third quarter last
year. The increase reflects a $5.6 million sales contribution from the clad
business of DYNAenergetics, which was acquired by DMC in November 2007.
This contribution offset a $3.2 million decrease in sales at DMC's legacy
explosive metalworking divisions. Operating income was $8.6 million versus
$10.6 million in last year's third quarter. Adjusted EBITDA was $10.2
million versus $11.0 million in the third quarter a year ago.
Order backlog for the Explosive Metalworking segment at the end of the
third quarter was $99 million versus $105 million reported at the end of
this year's second quarter and $77 million recorded at the end of last
year's third quarter. Approximately $4 million of the sequential decrease
in backlog was related to changes in foreign exchange rates.
Oilfield Products
DMC's new Oilfield Products segment recorded third quarter sales of $6.8
million and operating income of $725,000. Third quarter adjusted EBITDA was
$1.7 million.
AMK Welding
Third quarter sales at DMC's AMK Welding segment increased 65% to $2.9
million from $1.8 million in the third quarter last year. Operating income
increased 169% to $874,000 from $325,000 in the comparable year-ago
quarter. Adjusted EBITDA advanced 142% to $983,000 from $407,000 in the
same quarter last year.
Management Commentary
Yvon Cariou, president and CEO, said, "Each of our three business segments
exceeded internal third quarter forecasts, and this helped us achieve
better-than-expected sales and earnings results. Bookings remained steady
during the quarter, and we have maintained this momentum into the early
stages of Q4. In fact we added $5 million to our explosive metalworking
backlog on the first day of the fourth quarter, thanks to a significant
order for plates to be used in a refinery project."
"Worldwide quoting activity has remained very strong in recent months,"
Cariou added. "During August and September, the total pool of projects
tracked on our 'hot list' was higher than at anytime in the past 12 months.
Moreover, in spite of global economic challenges, we have not seen material
signs of project postponements or cancellations related to orders important
to DMC. While it is difficult to predict how current macroeconomic
conditions might impact bookings in 2009, we remain confident about the
position we have established within our end markets as a key supplier of
high-value components that help enhance the ROI of industrial
infrastructure. We therefore are very optimistic about our prospects for
continued long-term success."
Cariou said strong demand for pressure-vessel-quality steel plate has kept
the supply chain for these specialized metals tight, but added that the
Company's effort to diversify its network of providers is showing clear
signs of progress.
Rick Santa, senior vice president and chief financial officer, said sales
during the fourth quarter are expected to increase to a level comparable to
the $63.2 million reported in the second quarter. Based on these
anticipated sales volumes and normal fluctuations in product mix, fourth
quarter gross margin is expected to be approximately 30%, which also would
be comparable to DMC's second quarter performance. As a result of the third
quarter tax provision adjustments, Santa said DMC's full-year 2008 blended
effective tax rate is expected to approximate 27%. This rate is expected
to increase to a range of 31% to 32% in fiscal 2009.
Santa added that fourth quarter operating income will be impacted by
approximately $1.2 million of amortization expense associated with the
DYNAenergetics acquisition. Pre-tax income will be impacted by
approximately $1.2 million of interest expense.
Nine-month Results
Sales through nine months increased 58% to $174.0 million from $110.0
million in the comparable nine-month period of 2007. This year's nine-month
sales results included $44.1 million of contributions from the
DYNAenergetics businesses. Gross margin was 31% versus 34% in the same
period a year ago.
Nine-month operating income increased 7% to $28.9 million from $26.9
million in the comparable prior-year period. Net income through nine months
was $18.7 million, or $1.49 per diluted share, up 6% from net income of
$17.7 million, or $1.44 per diluted share, in the same period last year.
Adjusted EBITDA increased 41% to $41.1 million from $29.2 million at the
nine-month mark of fiscal 2007.
The Explosive Metalworking segment reported nine-month sales of $147.3
million, up 40% from sales of $105.3 million in the first nine months of
2007. The explosion welding business of DYNAenergetics contributed $25.0
million to sales through nine months. Operating income increased 4% to
$28.4 million from $27.2 million in the prior year's nine-month period.
Adjusted EBITDA increased 23% to $35.0 million from $28.4 million in the
same period a year ago.
Nine-month sales at DMC's Oilfield Products segment were $19.1 million.
Operating income for the period was $775,000 and adjusted EBITDA was $3.6
million.
AMK Welding recorded nine-month sales of $7.5 million, an increase of 59%
from $4.7 million in the comparable year-ago period. Operating income
increased 246% to $2.1 million from $606,000 in the prior-year period.
Adjusted EBITDA at the nine-month mark was $2.4 million, up 199% versus
$810,000 in the same period a year ago.
Conference call information
Management will hold a conference call to discuss third 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 69051992. 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
November 1, 2008, by calling 800-642-1687 (706-645-9291 for international
callers) and entering the passcode 69051992.
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 fourth
quarter and 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 NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(Dollars in Thousands, Except Share Data)
(unaudited)
Three months ended Nine months ended
September 30, September 30,
---------------------- ----------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
NET SALES $ 52,380 $ 42,099 $ 173,957 $ 109,964
COST OF PRODUCTS SOLD 35,355 27,807 120,171 72,741
---------- ---------- ---------- ----------
Gross profit 17,025 14,292 53,786 37,223
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
General and administrative
expenses 3,679 1,903 10,612 5,419
Selling expenses 2,611 1,811 8,085 4,913
Amortization expense of
purchased intangible
assets 1,363 - 6,188 -
---------- ---------- ---------- ----------
Total costs and
expenses 7,653 3,714 24,885 10,332
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 9,372 10,578 28,901 26,891
OTHER INCOME (EXPENSE):
Other income (expense) (268) 23 (227) 3
Interest expense (1,469) (20) (4,203) (20)
Interest income 153 233 477 598
Equity in earnings
(losses) of joint
ventures (19) - 270 -
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 7,769 10,814 25,218 27,472
INCOME TAX PROVISION 546 3,697 6,535 9,813
---------- ---------- ---------- ----------
NET INCOME $ 7,223 $ 7,117 $ 18,683 $ 17,659
========== ========== ========== ==========
INCOME PER SHARE:
Basic $ 0.58 $ 0.59 $ 1.50 $ 1.47
========== ========== ========== ==========
Diluted $ 0.57 $ 0.58 $ 1.49 $ 1.44
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING:
Basic 12,463,060 12,094,181 12,426,369 12,039,593
========== ========== ========== ==========
Diluted 12,567,912 12,301,772 12,572,226 12,245,212
========== ========== ========== ==========
ANNUAL DIVIDENDS DECLARED
PER COMMON SHARE $ - $ - $ 0.15 $ 0.15
========== ========== ========== ==========
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
September 30, December 31,
2008 2007
ASSETS (unaudited)
------------- -------------
Cash and cash equivalents $ 30,508 $ 9,045
Restricted cash - 371
Accounts receivable, net 31,031 39,833
Inventories 40,900 41,628
Other current assets 7,729 3,853
------------- -------------
Total current assets 110,168 94,730
Property, plant and equipment, net 38,709 35,446
Goodwill, net 44,797 45,862
Purchased intangible assets, net 54,876 61,914
Other long-term assets 2,878 2,947
------------- -------------
Total assets $ 251,428 $ 240,899
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 18,722 $ 22,590
Accrued income taxes 993 1,212
Other current liabilities 14,476 19,394
Lines of credit - current 4,785 7,587
Current portion of long-term debt 7,471 8,035
------------- -------------
Total current liabilities 46,447 58,818
Lines of credit 9,536 -
Long-term debt 60,440 61,530
Deferred tax liabilities 18,040 20,604
Other long-term liabilities 1,125 1,668
Stockholders' equity 115,840 98,279
------------- -------------
Total liabilities and stockholders' equity $ 251,428 $ 240,899
============= =============
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(Dollars in Thousands)
(unaudited)
2008 2007
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 18,683 $ 17,659
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation (including capital lease
amortization) 3,621 1,394
Amortization of purchased intangible assets 6,188 -
Amortization of capitalized debt issuance costs 210 -
Stock-based compensation 2,363 912
Provision for deferred income taxes (2,735) (239)
Equity in earnings of joint ventures (270) -
Change in working capital, net (3,255) (6,925)
-------- --------
Net cash provided by operating activities 24,805 12,801
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (7,325) (7,347)
Change in other non-current assets 50 (11)
-------- --------
Net cash used in investing activities (7,275) (7,358)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on lines of credit, net 7,247 -
Payments on long-term debt (1,251) (389)
Payments on capital lease obligations (308) -
Payment of dividends (1,894) (1,821)
Payment of deferred debt issuance costs (167) -
Net proceeds from issuance of common stock 333 563
Excess tax benefit related to stock options 9 5
-------- --------
Net cash provided by (used in) financing
activities 3,969 (1,642)
-------- --------
EFFECTS OF EXCHANGE RATES ON CASH (36) 357
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 21,463 4,158
CASH AND CASH EQUIVALENTS, beginning of the period 9,045 17,886
-------- --------
CASH AND CASH EQUIVALENTS, end of the period $ 30,508 $ 22,044
======== ========
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASUREMENTS TO MOST
DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
(Dollars in thousands)
Three months ended Nine months ended
September 30, September 30,
-------------------- --------------------
2008 2007 2008 2007
--------- --------- --------- ---------
(unaudited) (unaudited)
Explosive Metalworking Group $ 42,703 $ 40,326 $ 147,344 $ 105,257
Oilfield Products 6,756 - 19,128 -
AMK Welding 2,921 1,773 7,485 4,707
--------- --------- --------- ---------
Net sales $ 52,380 $ 42,099 $ 173,957 $ 109,964
========= ========= ========= =========
Explosive Metalworking Group $ 8,593 $ 10,646 $ 28,393 $ 27,197
Oilfield Products 725 - 775 -
AMK Welding 874 325 2,096 606
Unallocated Expenses (820) (393) (2,363) (912)
--------- --------- --------- ---------
Income from operations $ 9,372 $ 10,578 $ 28,901 $ 26,891
========= ========= ========= =========
For the three months ended September 30, 2008
------------------------------------------------
Explosive
Metalworking Oilfield AMK Unallocated
Group Products Welding Expenses Total
---------- -------- -------- -------- ---------
(unaudited)
Income from operations $ 8,593 $ 725 $ 874 $ (820) $ 9,372
Adjustments:
Stock-based compensation - - - 820 820
Depreciation 924 234 109 - 1,267
Amortization of purchased
intangibles 650 713 - - 1,363
---------- -------- -------- -------- ---------
Adjusted EBITDA $ 10,167 $ 1,672 $ 983 $ - $ 12,822
========== ======== ======== ======== =========
For the three months ended
September 30, 2007
-------------------------------------
Explosive
Metalworking AMK Unallocated
Group Welding Expenses Total
-------- -------- -------- ---------
(unaudited)
Income from operations $ 10,646 $ 325 $ (393) $ 10,578
Adjustments:
Stock-based compensation - - 393 393
Depreciation 402 82 - 484
-------- -------- -------- ---------
Adjusted EBITDA $ 11,048 $ 407 $ - $ 11,455
======== ======== ======== =========
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASUREMENTS TO MOST
DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
(Dollars in thousands)
For the nine months ended September 30, 2008
---------------------------------------------------
Explosive
Metalworking Oilfield AMK Unallocated
Group Products Welding Expenses Total
----------- --------- --------- -------- ---------
(unaudited)
Income from operations $ 28,393 $ 775 $ 2,096 $ (2,363) $ 28,901
Adjustments:
Stock-based
compensation - - - 2,363 2,363
Depreciation 2,593 704 324 - 3,621
Amortization of
purchased intangibles 4,026 2,162 - - 6,188
----------- --------- --------- -------- ---------
Adjusted EBITDA $ 35,012 $ 3,641 $ 2,420 $ - $ 41,073
=========== ========= ========= ======== =========
For the nine months ended
September 30, 2007
---------------------------------------
Explosive
Metalworking AMK Unallocated
Group Welding Expenses Total
--------- --------- -------- ---------
(unaudited)
Income from operations $ 27,197 $ 606 $ (912) $ 26,891
Adjustments:
Stock-based
compensation - - 912 912
Depreciation 1,190 204 - 1,394
--------- --------- -------- ---------
Adjusted EBITDA $ 28,387 $ 810 $ - $ 29,197
========= ========= ======== =========
Three months ended Nine months ended
September 30, September 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
(unaudited) (unaudited)
Net income $ 7,223 $ 7,117 $ 18,683 $ 17,659
Interest expense 1,469 20 4,203 20
Interest income (153) (233) (477) (598)
Provision for income taxes 546 3,697 6,535 9,813
Depreciation 1,267 484 3,621 1,394
Amortization of purchased
intangible assets 1,363 - 6,188 -
-------- -------- -------- --------
EBITDA 11,715 11,085 38,753 28,288
Stock-based compensation 820 393 2,363 912
Other (income) expense 268 (23) 227 (3)
Equity in (earnings) losses of
joint ventures 19 - (270) -
-------- -------- -------- --------
Adjusted EBITDA $ 12,822 $ 11,455 $ 41,073 $ 29,197
======== ======== ======== ========
Contact Information: CONTACT:
Pfeiffer High Investor Relations, Inc.
Geoff High
303-393-7044