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| Dynamic Materials Reports Fourth Quarter and Full-Year Financial Results |
Fourth quarter sales increased 55% to $55.2 million from $35.7 million in the fourth quarter last year. The increase resulted from continued strong global demand for the Company's explosion welded plates, as well as $6.9 million in revenue contributions from DYNAenergetics, which was acquired by DMC on Nov. 15, 2007. Revenue from DYNAenergetics was comprised of $4.4 million from its explosion welding business and $2.5 million from its Oilfield Products division. Gross margin was 32% versus a record 41% in the fourth quarter a year ago. Last year's fourth quarter gross margin benefited from highly favorable terms received on an $11 million order, while gross margin in the most recent quarter reflected a more normalized product mix from DMC pre-acquisition explosion welding business, lower gross margins on incremental sales from DYNAenergetics, and the impact of a $0.3 million purchase-accounting adjustment to cost of goods sold related to the acquired inventory of DYNAenergetics. Fourth quarter general and administrative expense was $2.6 million, or 4.8% of revenue, versus $1.9 million, or 5.2% of revenue, in last year's fourth quarter. Selling expense was $2.0 million, or 3.6% of revenue, versus $3.0 million, 8.3% of revenue, in the comparable year ago quarter. Selling expense in last year's fourth quarter included unusually high commissions associated with the previously mentioned $11 million order. The 2007 fourth quarter included $1.2 million of amortization expense and $0.8 million of interest expense associated with the DYNAenergetics acquisition. DMC did not record any amortization and had net interest income of $0.3 million in the 2006 fourth quarter. Income from operations advanced 24% to $12.0 million from $9.7 million in the fourth quarter a year ago. Net income was $6.9 million, or $0.56 per share, versus $6.6 million, or $0.54 per diluted share, in last year's fourth quarter. Explosive Metalworking The Company's Explosive Metalworking segment reported fourth quarter sales of $50.2 million, up 48% from $34.0 million in the fourth quarter last year. Operating income increased 25% to $11.7 million from $9.4 million in the 2006 fourth quarter. The six weeks of contributions from DYNAenergetics' explosion welding business included $4.4 million in fourth quarter revenue. Order backlog at the end of fiscal 2007 was $100.0 million versus $68.8 million at Dec. 31, 2006, and $77.1 million at the end of the third quarter. The acquisition of DYNAenergetics contributed $21.5 million to the 2007 year-end backlog. AMK Welding Fourth quarter sales at the Company's AMK Welding segment advanced 49% to $2.5 million versus $1.7 million in the fourth quarter last year. Operating income was $0.8 million versus $0.5 million reported in the comparable year-ago quarter. Oilfield Products The six weeks of contributions from DYNAenergetics' Oilfield Products business included revenue of $2.5 million. The Oilfield Products business recorded a loss from operations of $0.1 million, which included the impact of acquisition-related amortization expense. Management Commentary "Our fourth quarter results represented a continuation of the strong sales and earnings growth we achieved throughout fiscal 2007," said Yvon Cariou, president and CEO. "During the quarter, we completed production and delivery on a large contract from the alternative energy sector. At the same time, our sales team did an effective job of maintaining the breadth of our order backlog." "The quarter also was marked by a strategic acquisition that served to significantly expand our production capacity, market share and geographic reach," Cariou added. "Our integration of Germany-based DYNAenergetics is proceeding smoothly, and I am especially encouraged by how effectively our management teams are working together to blend these organizations." "In addition to new explosion-welding capacity, the DYNAenergetics acquisition provided us with a highly regarded explosive-products business serving the oil and gas industry," Cariou added. "Rolf Rospek and Dr. Uwe Gessel, who previously managed the combined DYNAenergetics businesses, will now focus principally on the global expansion of DYNAenergetics Oilfield Products." Cariou said DMC's AMK Welding business is now delivering the strong results management has been anticipating. "We expect improved revenue contributions from AMK throughout 2008, as there has been a marked increase in activity associated with its ground-based turbine business." Cariou said that current explosion-welding quoting volume and end-market activity suggests the robust capital spending taking place across most of DMC's end markets will continue during 2008. "From a geographic perspective, activity in our U.S. and European home markets remains strong. We also are seeing considerable demand from global markets such as India, China, Russia and the Middle East. We therefore will continue to explore opportunities to expand our global presence." Guidance Rick Santa, chief financial officer, said management expects to report 2008 revenue growth of up to 60% versus revenue in 2007, which will include incremental revenue contributions from the DYNAenergetics acquisition. While the company expects to experience quarter-to-quarter fluctuations in gross margin, full-year gross margins are expected to be comparable to the 32% achieved in the 2007 fourth quarter. Gross margins will include the impact of higher proportionate sales from DMC's European explosion welding businesses, which historically have achieved lower margins than DMC's domestic explosion welding business. Gross margins also will be affected by the addition of the Oilfield Products business, which historically has delivered lower margins than DMC's business. Full-year operating income for 2008 is expected to be impacted by approximately $7.3 million of amortization expense associated with the DYNAenergetics acquisition. Pre-tax income will be impacted by more than $5.0 million of interest expense associated with the acquisition. Management anticipates the company's 2008 consolidated tax rate will be in the range of 36% to 37%. Santa said that revenue in the 2008 first quarter, which will include the incremental sales contributions from DYNAenergetics, is expected to be approximately 80% higher than revenue in the comparable quarter of 2007. First quarter operating income is expected to be negatively affected by lower quarter-over-quarter gross margins and approximately $3 million of acquisition-related amortization expense. The added impact of higher interest expense is expected to result in first quarter net income that will be comparable to the first quarter last year. Santa said, "Our two most recent quarters benefited significantly from our deliveries on certain large orders. As we have previously mentioned, these orders can lead to spikes in our quarterly performance. Although we currently are pursuing several significant order opportunities and overall demand remains strong, we do not expect to deliver on any unusually large contracts during the first quarter, and this is expected to result in only a modest sequential increase in Q1 revenue. Nevertheless, our order backlog is at an all-time high and we remain optimistic about our growth prospects during 2008 and beyond." 2007 Full-Year Results For the full fiscal year, sales increased 46% to $165.2 million compared with $113.5 million in 2006. Gross margin was 33% versus 37% last year. Income from operations increased 29% to $38.9 million compared with $30.1 million in the prior year. Net income for 2007 was $24.6 million, or $2.00 per diluted share, versus net income of $20.8 million, or $1.70 per diluted share, in the same period last year. Net income in 2006 included a gain from discontinued operations of $1.5 million, or $0.12 per share, net of tax. The Explosive Metalworking segment reported full-year sales of $155.4 million, up 43% versus sales of $108.4 million in 2006. Operating income increased 31% to $38.9 million compared with $29.6 million in the prior year. Full-year sales at AMK Welding increased 41% to $7.2 million compared with sales of $5.1 million in 2006. Operating income was up 22% to $1.4 million compared with $1.2 million in the prior year. Conference call information Management will hold a conference call to discuss fourth quarter and full-year 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 888-713-4215 (617-213-4867 for international callers) and entering the passcode 74258348. 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 Mar. 8, 2008, by calling 888-286-8010 (617-801-6888 for international callers) and entering the passcode 28518624. 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 oilfield perforating equipment and explosives; and AMK Welding, which utilizes various technologies to weld components for use in power-generation turbines, as well as commercial and military jet engines. For more information, visit the Company's websites at http://www.dynamicmaterials.com and http://www.dynaenergetics.de. Safe Harbor Language Except for the historical information contained herein, this news release contains forward-looking statements, including our guidance for 2008 revenue, margins, income, expenses and tax rates, that involve risks and uncertainties. These risks and uncertainties include, but are not limited to, the following: our ability to realize sales from our backlog; our ability to successfully integrate and operate the recently-acquired DYNAenergetics businesses; our ability to obtain new contracts at attractive prices; the size and timing of customer orders and shipments; fluctuations in customer demand; 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 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, 2006.
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Share Data)
(unaudited)
Three months ended Twelve months ended
December 31, December 31,
---------------------- ----------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
NET SALES $ 55,211 $ 35,691 $ 165,175 $ 113,472
COST OF PRODUCTS SOLD 37,426 21,170 110,168 71,439
---------- ---------- ---------- ----------
Gross profit 17,785 14,521 55,007 42,033
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
General and administrative
expenses 2,630 1,854 8,049 5,802
Selling expenses 1,962 2,953 6,875 6,128
Amortization expense of
purchased intangible
assets 1,191 - 1,191 -
---------- ---------- ---------- ----------
Total costs and expenses 5,783 4,807 16,115 11,930
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS OF
CONTINUING OPERATIONS 12,002 9,714 38,892 30,103
OTHER INCOME (EXPENSE):
Other expense (162) (75) (158) (115)
Interest income (expense),
net (601) 272 (24) 620
Equity in earnings of joint
ventures 24 - 24 -
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES
AND DISCONTINUED OPERATIONS 11,263 9,911 38,734 30,608
INCOME TAX PROVISION 4,334 3,476 14,147 11,341
---------- ---------- ---------- ----------
INCOME FROM CONTINUING
OPERATIONS 6,929 6,435 24,587 19,267
INCOME FROM DISCONTINUED
OPERATIONS, net of tax - 141 - 1,497
---------- ---------- ---------- ----------
NET INCOME $ 6,929 $ 6,576 $ 24,587 $ 20,764
========== ========== ========== ==========
INCOME PER SHARE - BASIC:
Continuing operations $ 0.57 $ 0.54 $ 2.03 $ 1.63
Discontinued operations - 0.01 - 0.12
---------- ---------- ---------- ----------
Net income $ 0.57 $ 0.55 $ 2.03 $ 1.75
========== ========== ========== ==========
INCOME PER SHARE - DILUTED:
Continuing operations $ 0.56 $ 0.53 $ 2.00 $ 1.58
Discontinued operations - 0.01 - 0.12
---------- ---------- ---------- ----------
Net income $ 0.56 $ 0.54 $ 2.00 $ 1.70
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING -
Basic 12,249,681 11,924,467 12,083,851 11,841,373
========== ========== ========== ==========
Diluted 12,455,468 12,206,704 12,293,158 12,213,075
========== ========== ========== ==========
ANNUAL DIVIDENDS DECLARED
PER COMMON SHARE $ - $ - $ 0.15 $ 0.15
---------- ---------- ---------- ----------
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
ASSETS 2007 2006
--------- ---------
Cash and cash equivalents $ 9,045 $ 17,886
Restricted cash 371 3,059
Accounts receivable, net 39,833 21,549
Inventories 41,628 19,226
Other current assets 3,853 2,127
--------- ---------
Total current assets 94,730 63,847
Property, plant and equipment, net 35,446 20,260
Goodwill, net 45,862 847
Intangible assets, net 61,914 -
Other long-term assets 2,947 19
--------- ---------
Total assets $ 240,899 $ 84,973
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 22,590 $ 13,572
Accrued income taxes 1,212 1,892
Other current liabilities 19,394 9,451
Lines of credit - current 7,587 -
Current portion of long-term debt 8,035 382
--------- ---------
Total current liabilities 58,818 25,297
Long-term debt 61,530 382
Deferred tax liabilities 20,604 1,512
Other long-term liabilities 1,668 202
Stockholders' equity 98,279 57,580
--------- ---------
Total liabilities and stockholders' equity $ 240,899 $ 84,973
--------- ---------
DYNAMIC MATERIALS CORPORATION & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2007 AND 2006
(Dollars in Thousands)
(unaudited)
2007 2006
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 24,587 $ 20,764
Adjustments to reconcile net income to net cash
provided by operating activities -
Income from discontinued operations, net of tax - (1,497)
Depreciation and amortization 3,347 1,369
Amortization of capitalized debt issuance costs 30 50
Stock-based compensation 1,301 660
Provision for deferred income taxes (357) 2,115
Equity in earnings of joint ventures (24) -
Change in working capital, net (10,200) (6,904)
-------- --------
Net cash provided by operating activities 18,684 16,557
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of DYNAenergetics, net of cash acquired (81,224) -
Acquisition of property, plant and equipment (8,979) (8,650)
Sale of marketable securities - 1,950
Loan to related party - (1,206)
Repayment on loan to related party - 1,206
Change in other non-current assets (87) 290
Payment received on other receivables related to
discontinued operations - 576
Cash flows provided by investing activities of
discontinued operations - 3,089
-------- --------
Net cash used in investing activities (90,290) (2,745)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowed under syndicated credit agreement 65,480 -
Repayments on lines of credit, net (524) (48)
Payments on long-term debt (655) (2,084)
Payments on capital lease obligations (34) -
Payment of dividends (1,821) (1,766)
Payment of deferred debt issuance costs (1,534) -
Net proceeds from issuance of common stock 891 585
Excess tax benefit related to stock options 402 1,154
Other cash flows from financing activities 87 (19)
-------- --------
Net cash provided by (used in) financing
activities 62,292 (2,178)
-------- --------
EFFECTS OF EXCHANGE RATES ON CASH 473 489
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (8,841) 12,123
CASH AND CASH EQUIVALENTS, beginning of the period 17,886 5,763
-------- --------
CASH AND CASH EQUIVALENTS, end of the period $ 9,045 $ 17,886
-------- --------
CONTACT: Pfeiffer High Investor Relations, Inc. Geoff High 303-393-7044 SOURCE: Dynamic Materials Corp. |
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