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Dynamic Materials Corp. Reports Operating Results (10-Q)

October 28, 2010 | About:
10qk

10qk

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Dynamic Materials Corp. (BOOM) filed Quarterly Report for the period ended 2010-09-30.

Dynamic Materials Corp. has a market cap of $202.9 million; its shares were traded at around $15.5 with a P/E ratio of 69.9 and P/S ratio of 1.2. The dividend yield of Dynamic Materials Corp. stocks is 1%. Dynamic Materials Corp. had an annual average earning growth of 24.6% over the past 5 years.BOOM is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Our net sales for the nine months ended September 30, 2010 decreased by $12,355 (10.1%) compared to the same period of 2009, reflecting a year-to-year net sales decrease of $29,482 (28.8%) for our Explosive Metalworking segment, which was partially offset by sales increases of $15,697 (119.2%) and $1,430 (21.4%) for our Oilfield Products and AMK Welding segments, respectively. Excluding incremental sales of $12,134 from the acquisitions of LRI and Austin Explosives on October 1, 2009 and June 4, 2010, respectively, and the step acquisition of two Russian joint ventures that was completed on April 30, 2010, our Oilfield Products segment reported an increase of $3,563 or 27.1% in its year-to-date 2010 net sales. Our consolidated income from operations decreased to $5,273 for the nine months ended September 30, 2010 from $13,833 for the same period of 2009. This $8,560 decrease reflects a decline in Explosive Metalworkings operating income of $12,973 which was partially offset by a $3,503 increase in the operating results reported by our Oilfield Products segment from an operating loss of $2,013 in 2009 to operating income of $1,490 for the first nine months of 2010, an increase in operating income for AMK Welding of $790, and a $120 decrease in stock-based compensation expense. We recorded net income of $3,950 for the nine months ended September 30, 2010 compared to net income of $7,527 for the same period of 2009.

As a result of our Explosive Metalworking backlog decreasing from $97,247 at December 31, 2008 to $49,584 at December 31, 2009 and relatively low booking activity during the first nine months of 2010 which further reduced our backlog amount to $41,154 at September 30, 2010, we currently expect that our 2010 consolidated net sales will decline by approximately 8% from the consolidated net sales that we reported in 2009. In light of the slowdown in order inflow that we have experienced, we continue to manage expenses carefully. Despite the significant sales and net income declines that we reported in the first nine months of 2010, we generated cash flow from operations of $10,254 and expect to generate positive cash flow from operations for the full year 2010.

Gross profit increased by 24.0% to $10,853 for the three months ended September 30, 2010 from $8,754 for the three months ended September 30, 2009. Our third quarter 2010 consolidated gross profit margin rate increased to 26.3% from the 25.2% gross margin that we reported for the third quarter of 2009. For the nine months ended September 30, 2010, gross profit decreased by 18.5% to $27,094 from $33,236 for the same period of 2009. Our year to date consolidated gross profit margin rate decreased to 24.7% from 27.2% for the first nine months of 2009.

General and administrative expenses increased by $738, or 26.8%, to $3,487 in the third quarter of 2010 from $2,749 in the third quarter of 2009. Excluding incremental general and administrative expenses of $428 that resulted from the acquisitions of LRI, Austin Explosives and the Russian joint ventures, our general and administrative expenses increased by $310 or 11.3% compared to the prior year third quarter. This increase includes an increase of $178 in salaries, an increase in accrued incentive compensation of $121 and a net increase of $11 in all other spending categories. As a percentage of net sales, general and administrative expenses increased to 8.4% in the third quarter of 2010 from 7.9% in the third quarter of 2009.

General and administrative expenses for the nine months ended September 30, 2010 totaled $9,990 compared to $9,318 for the same period of 2009, an increase of $672 or 7.2%. Excluding incremental general and administrative expenses of $924 that resulted from the acquisitions of LRI, Austin Explosives and the Russian joint ventures, our general and administrative expenses decreased by $252 or 2.7%. This decrease includes an increase of $252 in salaries that was entirely offset by an $88 decrease in accrued incentive compensation and a net decrease of $416 in all other expenses categories that reflects the impact of tight controls over discretionary spending. As a percentage of net sales, general and administrative expenses increased to 9.1% in the first nine months of 2010 from 7.6% in the first nine months of 2009.

Selling expenses, which include sales commissions of $75 in 2010 and $237 in 2009, increased by 37.7% to $3,047 in the third quarter of 2010 from $2,212 in the third quarter of 2009. Excluding incremental selling expenses of $1,260 that resulted from the acquisitions of LRI, Austin Explosives and the Russian joint ventures, our selling expenses decreased by $425 or 19.2%. This $425 decrease in our selling expenses includes increased selling expenses of $86 at our U.S. divisions that was offset by decreased selling expenses of $511 at our European divisions. The decrease in European selling expenses relates principally to staff reductions within our European explosion welding facilities and l

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