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Jefferies industrials conf. aug 11 small

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Jefferies industrials conf. aug 11 small

  1. 1. Jefferies 2011 Global Industrial and A&D Conference August 2011 0
  2. 2. 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 provisions of the Private Securities Litigations Reform Act of 1995. These statements include information with respect to our financial condition and its results of operations and businesses. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "may," "will," "continue," "project" and similar expressions, as well as statements in 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 materially from 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 the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statement 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 such statement 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 language disclosing why actual results may vary materially from those anticipated by management. 1
  3. 3. Cautionary Statement Regarding Forward-looking Information Use of Non-GAAP Financial Measures Non-GAAP results used in this presentation are provided 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 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' 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. 2
  4. 4. Key Data (As of 8/8/11) Symbol: NASDAQ GS: BOOM 52-week range: $13.50 - $29.69 Average daily trading volume (10 day.): 137,000 Approx. market capitalization: $262 million Shares outstanding: 13.4 million Approximate float: 12.7 million Fiscal year end: December 31 Quarterly dividend: $0.04 3
  5. 5. Executive Management ! 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 and Oilfield Products segment 4
  6. 6. Company Overview • World’s dominant provider of explosion-welded clad metal plates • International manufacturer and marketer of advanced perforating systems for oil and gas wells • Three business segments provide diversified revenue stream • Strong balance sheet • Low Cap-Ex business model facilitates strong free cash flow • Talented management with deep industry experience 5
  7. 7. Financial Highlights Net Sales Operating Income In millions In millions 6
  8. 8. Financial Highlights Net Income Diluted EPS In millions * * Includes $2.1 mm gain on step acquisitions of joint ventures 7
  9. 9. Business Segments 2010 Revenue by Segment Explosive Metalworking Oilfield Products AMK Welding $98.6 Million $ 45.3 Million $ 10.8 Million 8
  10. 10. DMC’s Global Presence Corporate Headquarters Oilfield Products Headquarters Explosion Welding production centers Oilfield Products subsidiaries Explosion Welding sales offices and agents Oilfield Products sales agents 9
  11. 11. DMC 2010 Revenue by Region Russia North America 5% Europe 50% 26% Asia Middle East India 8% 4% 1% Africa 1% Other Countries -– 5% 1 0
  12. 12. Competing Cladding Technologies Explosion Weld Rollbond Weld Overlay • Performed by small field of international • Performed by small group competitors led by Dynamic Materials • Arc-welding process of international hot rolling Corporation typically performed by steel mills • Most versatile cladding technology metal fabricators • Thickness niche is • Only cladding process that can address • Thickness niche is generally 2” and less both compatible and non-compatible generally 6” and greater • Compatible metals only metals • Compatible metals only • Thickness sweet-spot is 1” to 6” Explosive Metalworking 1 1
  13. 13. Key Demand Drivers for Explosion Welded Plates Corrosion Industrial CAPEX Explosive Metalworking 1 2
  14. 14. Explosion Clad - a Critical Weapon in the Battle Against Rust ! “…a major industry challenge is the ‘rust crisis’ in the global energy infrastructure” ! “Worldwide energy infrastructure too old” ! Most infrastructure “far beyond original design life” From presentation at 2009 Offshore Technology Conference Matthew Simmons, Chairman - Simmons & Company International Explosive Metalworking 1 3
  15. 15. Explosion Welding – a Key Step in Pre-fabrication Process Explosion Metal Suppliers Welding Fabricators MILLS & SERVICE CENTERS Sourced Metals End Users • Carbon Steel • Nickel Alloys • Titanium • Zirconium Explosive Metalworking 1 4
  16. 16. Selected End Markets Served by Explosion Welding Below are the nine primary industries that utilize explosion welded products. • Chemical • Power Generation • Oil & Gas • Alternative Energy • Metals & Mining • Industrial Refrigeration • Marine • Transportation • Defense & Protection Explosive Metalworking 1 5
  17. 17. End Users Include Leading Players in Respective Fields Fabricators Morimatsu Group China End Users Chemicals Refinery Mining Engineering Explosive Metalworking 1 6
  18. 18. DMC’s Dominant Industry Position Protected by Significant Barriers 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 Explosive Metalworking 1 7
  19. 19. Oilfield Products Segment • Manufactures explosive perforating systems and seismic devices for the international oil & gas services industry • Benefiting from rapid increase in drilling activity • Recognized within industry for product and technical innovation • Extension of DMC’s expertise in specialized explosive manufacturing processes • Achieved revenue growth of 108% in 2010 Oilfield Products 1 8
  20. 20. Explosive Perforating Overview Explosive Perforating: A method of creating holes in a well casing downhole by exploding charges that propel steel projectiles through the casing wall. Such holes allow oil/gas from the formation to enter the well. 1. Wellbore Construction 2. Casing • Casing & cement temporarily isolate the • Drilling rig will penetrate rock formations down to the wellbore from the reservoir oil/gas reservoir • After casing has been cemented, drilling rig • Oil/gas may flow freely into an open hole wellbore moves off of the well Continued… Continued… Oilfield Products 19
  21. 21. Explosive Perforating Overview (continued) 3. The Perforation Process 1. Once wellbore is drilled and cement casing is in place, a perforating gun is deployed into the well 2. The gun is fired, sending steel projectiles through the casing and into the surrounding formation creating “perforation tunnels” 3. Oil or gas flows through perforation tunnels and into the well Oilfield Products 2 0
  22. 22. Positive industry indicator DYNAenergetics is well positioned to capitalize on the rapid expansion in U.S. and international oil and gas drilling activity. U.S. Rig Count Worldwide Rig Count # 1,920 rigs operating as of Aug. 5, 2011 # 3,397 rigs operating as of July 31, 2011 # Up 322, or 20%, vs. same week of 2010 # Up 365, or 12%, vs. same month of 2010 Oilfield Products 2 1
  23. 23. AMK Welding - a leading provider of precision welding services • 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 AMK Welding 2 2
  24. 24. Financial Performance Review ($mm) 2008 2009 2010 6 Mo. ‘10 6 Mo. ‘11 Sales $232.6 $164.9 $154.7 $68.6 $99.7 % growth 41% (29%) (6%) (22%) 45% Gross profit $70.8 $43.1 $37.0 $16.2 $25.8 % margin 30% 26% 24% 24% 26% Operating profit $38.1 $16.2 $6.8 $2.3 $7.4 % margin 16% 10% 4% 3% 7% Adjusted EBITDA $53.2 $29.8 $21.0* $9.0 $14.6 % growth 22% (44%) (29%) (50%) 63% Net income $24.1 $8.5 $5.3* $2.6 $4.6 % growth (2%) (65%) (38%) (59%) 76% Diluted EPS $1.87 $0.66 $0.40 $0.20 $0.35 % growth (6%) (65%) (39%) (60%) 75% * Includes $2.1 mm gain on step acquisitions of joint ventures 2 3
  25. 25. Balance Sheet Highlights (In thousands) Assets 2009 2010 Q2 2011 Cash, cash equivalents & restricted cash $ 22,411 $ 4,572 $ 7,613 Accounts receivables, net of allowance $ 25,807 $ 27,567 $ 34,798 Total current assets $ 87,974 $ 72,735 $ 97,467 Total assets $ 225,176 $ 201,393 $ 230,864 Liabilities Total current liabilities $ 42,135 $ 38,392 $ 53,382 Long-term debt $ 34,120 $ 14,579 $ 14,610 Total liabilities $ 93,065 $ 66,309 $ 81,195 Total stockholders’ equity $ 132,111 $ 135,084 $ 149,669 Total liabilities and stockholders’ equity $ 225,176 $ 201,393 $ 230,864 2 4
  26. 26. Supplemental Information 2 5
  27. 27. Sales and Explosion Welding Backlog Progression: Q2 2005 – Q2 2011 In millions 2 6
  28. 28. Capital Expenditures (in millions) Actual Forecast 2 7
  29. 29. Contact: Geoff High Pfeiffer High Investor Relations, Inc. 303-393-7044 geoff@pfeifferhigh.com 2 8

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