Upload
dynamicmaterials
View
386
Download
1
Tags:
Embed Size (px)
DESCRIPTION
Citation preview
0
Investor Presentation
May 2011
1
Cautionary Statement Regarding Forward-looking Information
This presentation contains, and the Company may from time to time make, written or oral "forward-looking statements" within the safe harbor prov isions of the PrivateSecurities Litigations Reform Act of 1995. These statements include information with respect to our financial condition and its results of operations and businesses. Wordssuch as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "may," "will," "continue," "project" and similar expressions, as well as statementsin the future tense, identify forward-looking statements.
These forward-looking statements are not guarantees of our future performance and are subject to risks and uncertainties that could cause actual results to differ materiallyfrom the results contemplated by the forward-looking statements. These risks and uncertainties include:
• The ability to obtain new contracts at attractive prices;
• The size and timing of customer orders;
• Fluctuations in customer demand;
• 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;
• The availability and cost of funds;
• General economic conditions, both domestically and abroad;
• The successful integration of acquisitions; and
• Fluctuations in foreign currencies.
The effects of these factors are difficult to predict. New factors emerge from time to time and we cannot assess the potential impact of any such factor on the business or theextent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-lookingstatement speaks only as of its date and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of suchstatement or to reflect the occurrence of unanticipated events. In addition, see "Risk Factors" for a discussion of these and other factors.
You are encouraged to read the SEC reports of DMC, particularly its Form 10-K for the Fiscal Year Ended December 31, 2010 for meaningful cautionary languagedisclosing why actual results may vary materially from those anticipated by management.
2
Cautionary Statement Regarding Forward-looking Information
Use of Non-GAAP Financial MeasuresNon-GAAP results used in this presentation are prov ided only as a supplement to the financial statements based on U.S. generally accepted accountingprinciples (GAAP). The non-GAAP financial information is prov ided 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 themost directly comparable GAAP measures to non-GAAP measures are prov ided 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 stock-basedcompensation and, when appropriate, other items that management does not utilize in assessing DMC’s operating performance (as further described in theattached financial schedules). None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative tonet 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, believ ing that it is useful to eliminate certain items in order tofocus 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 rev iews feature the adjusted EBITDA. Management also believes that investorsmay find non-GAAP financial measures useful for the same reasons, although investors are cautioned that non-GAAP financial measures are not asubstitute for GAAP disclosures. EBITDA and adjusted EBITDA are also used by research analysts, investment bankers, and lenders to assessoperating 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-titledmeasures of other companies. However, these measures can still be useful in evaluating the company’s performance against its peer companies becausemanagement believes the measures prov ide users with valuable insight into key components of GAAP financial disclosures. For example, a companywith 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, amortizationof purchased intangibles and stock-based compensation) or (ii) items that management does not consider to be useful in assessing DMC’s operatingperformance (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 thecompany’s operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect DMC'ability to generate free cash flow or invest in its business. For example, by adjusting for depreciation and amortization in computing EBITDA, users cancompare operating performance without regard to different accounting determinations such as useful life. In the case of the other items, managementbelieves that investors can better assess operating performance if the measures are presented without these items because their financial impact does notreflect ongoing operating performance.
3
Key Data
Symbol:
52-week range:
Average daily trading volume (3 mo.):
Approx. market capitalization:
Shares outstanding:
Approximate float:
Fiscal year end:
Quarterly dividend:
NASDAQ GS: BOOM
$13.50 - $29.69
108,000
$346 million
13.3 million
12.7 million
December 31
$0.04
(As of 5/2/11)
4
Yvon Pierre Cariou - President and CEO
Richard A. Santa - Sr. Vice President,CFO and Secretary
John G. Banker - Sr. Vice President,Customers and Technology
Rolf Rospek - CEO, DYNAenergetics andOilfield Products segment
Executive Management
5
Company Overview
• World’s dominant provider of explosion-welded clad metal plates- Diversified base of customers in 9 primary end markets
- Significant barriers to entry
- International network of production and sales facilities
- $59 million order backlog at end of Q1 2011
• Three business segments provide diversified revenue stream
• Strong operating cash flow and balance sheet
• Low Cap-Ex business model facilitates strong free cash flow
• Talented management with deep industry experience
• Long-term growth strategy
6
Financial Highlights
Net SalesIn millions
Operating IncomeIn millions
7
Financial Highlights
Net Income Diluted EPSIn millions
*
* Includes $2.1 mm gain on step acquisitions of joint ventures
8
Business Segments
Explosive Metalworking Oilfield Products AMK Welding
$ 10.8 Million$98.6 Million $ 45.3 Million
2010 Revenue by Segment
9
DMC’s Global Presence
Corporate Headquarters
Explosion Welding production centers
Explosion Welding sales offices and agents
Oilfield Products Headquarters
Oilfield Products subsidiaries
Oilfield Products sales agents
1 0
DMC 2010 Revenue by Region
North America
50%Europe
26%Asia
8%
Russia
5%
Other Countries -– 5%
Africa
1%
India
1%
Middle East
4%
1 1
Competing Cladding Technologies
Weld OverlayRollbond
• Performed by small groupof international hot rollingsteel mills
• Thickness niche isgenerally 2” and less
• Compatible metals only
Explosion Weld
• Performed by small field of internationalcompetitors led by Dynamic MaterialsCorporation
• Most versatile cladding technology
• Only cladding process that can addressboth compatible and non-compatiblemetals
• Thickness sweet-spot is 1” to 6”
• Arc-welding processtypically performed bymetal fabricators
• Thickness niche isgenerally 6” and greater
• Compatible metals only
Explosive MetalworkingExplosive Metalworking
1 2
Key Demand Drivers for Explosion Welded Plates
Explosive MetalworkingExplosive Metalworking
CorrosionCorrosion
IndustrialIndustrialCAPEXCAPEX
1 3Explosive MetalworkingExplosive Metalworking
Explosion Clad - a Critical Weapon in the Battle Against Rust
“…a major industry challenge is the‘rust crisis’ in the global energyinfrastructure”
“Worldwide energy infrastructuretoo old”
Most infrastructure “far beyondoriginal design life”
From presentation at 2009 Offshore Technology Conference Matthew Simmons,Chairman - Simmons & Company International
1 4Explosive MetalworkingExplosive Metalworking
Explosion Welding – a Key Step in Pre-fabrication Process
Metal SuppliersExplosion
Welding Fabricators
End Users
MILLS & SERVICE CENTERS
Sourced Metals
• Carbon Steel
• Nickel Alloys
• Titanium
• Zirconium
1 5Explosive MetalworkingExplosive Metalworking
Selected End Markets Served by Explosion Welding
• Chemical
• Oil & Gas
• Metals & Mining
• Marine
• Defense & Protection
• Power Generation
• Alternative Energy
• Industrial Refrigeration
• Transportation
Below are the nine primary industries that utilize explosion welded products.
1 6Explosive MetalworkingExplosive Metalworking
End Users
Chemicals Refinery Mining Engineering
Fabricators
End Users Include Leading Players in Respective Fields
Morimatsu Group China
1 7Explosive MetalworkingExplosive Metalworking
DMC’s Dominant Industry Position Protected by SignificantBarriers to Entry
Global network of specialty-metals suppliers
Permits and shooting sites in U.S., France, Sweden & Germany
Mastery of explosion-welding process in large-scale production
Strong working relationships with end-market customers
1 8Oilfield ProductsOilfield Products
Oilfield Products Segment
• Manufactures explosive perforating systems and seismicdevices for the international oil & gas services industry
• Growing presence in critical international energy markets
• Benefiting from rapid increase in global drilling activity
• Recognized within industry for product and technologyinnovation
• Extension of DMC’s expertise in specialized explosivemanufacturing processes
• Achieved revenue growth of 108% in 2010
• Generated 29% of DMC sales in 2010, up from 13% in 2009
19Oilfield ProductsOilfield Products
Explosive Perforating Overview
Explosive Perforating: Explosive Perforating: A method of creating holes in a well casing downhole by exploding charges that propel steel projectiles through the casingwall. Such holes allow oil/gas from the formation to enter the well.
Wellbore Construction
• Drilling rig will penetrate rock formations down to theoil/gas reservoir
• Oil/gas may flow freely into an open hole wellbore
Casing
• Casing & cement temporarily isolate thewellbore from the reservoir
• After casing has been cemented, drilling rigmoves off of the well
ContinuedContinued……
1. 2.
2 0Oilfield ProductsOilfield Products
Explosive Perforating Overview (continued)
The Perforation Process
1. Once wellbore is drilled andcement casing is in place, aperforating gun is deployed intothe well
2. The gun is fired, sending steelprojectiles through the casing andinto the surrounding formationcreating “perforation tunnels”
3. Oil or gas flows through perforationtunnels and into the well
3.
2 1
AMK Welding - a leading provider of precision welding services
AMK WeldingAMK Welding
• Serves ground-based turbine and
commercial & military aircraft engine markets
• Key service provider to GE Energy
• Achieved 20% sales growth in 2010
• Generated 7% of DMC sales in 2010, up
from 6% in 2009
2 2
Financial Performance Review
($mm)
2008
2009
2010
Q1 2010
Q1 2011
Sales $232.6 $164.9 $154.7 $30.4 $45.6
% growth 41% (31%) (6%) (39%) 50%
Gross profit $70.8 $43.1 $37.0 $7.0 $10.3
% margin 30% 26% 24% 23% 23%
Operating profit $38.1 $16.2 $6.8 $0.2 $1.5
% margin 16% 10% 4% 1% 3%
Adjusted EBITDA $53.2 $29.8 $21.0* $3.5 $5.1
% growth 22% (44%) (29%) (70%) 47%
Net income $24.1 $8.5 $5.3* $(412) $0.8
% growth (2%) (65%) (38%) (108%) 282%
Diluted EPS $1.87 $0.66 $0.40 $(0.03) $0.06
% growth (5%) (65%) (39%) (108%) 300%
* Includes $2.1 mm gain on step acquisitions of joint ventures
2 3
Balance Sheet Highlights
Assets
Cash, cash equivalents & restricted cash $ 22,411 $ 4,572 $ 4,760
Accounts receivables, net of allowance $ 25,807 $ 27,567 $ 28,700
Total current assets $ 87,974 $ 72,735 $ 80,506
Total assets $ 225,176 $ 201,393 $ 213,723
Liabilities
Total current liabilities $ 42,135 $ 38,392 $ 42,296
Long-term debt $ 34,120 $ 14,579 $ 14,616
Total liabilities $ 93,065 $ 66,309 $ 70,630
Total stockholders’ equity $ 132,111 $ 135,084 $ 143,093
Total liabilities and stockholders’ equity $ 225,176 $ 201,393 $ 213,723
2009 2010 Q1 2011
(In thousands)
2 4
Supplemental Information
2 5
Sales and Explosion Welding Backlog Progression:Q1 2005 – Q1 2011
In millions
2 6
Capital Expenditures
(in millions)(in millions)
ActualActual ForecastForecast