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Investorpresentation2010

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  • 1. Investor Presentation August 2010 0
  • 2. Cautionary Statement Regarding Forward-looking InformationThis presentation contains, and the Company may from time to time make, written or oral "forward-looking statements" within the safe harbor provisions 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, 2009 for meaningful cautionary languagedisclosing why actual results may vary materially from those anticipated by management. 1
  • 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 readers 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 companys 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. Key Data (As of 8/4/10) Symbol: NASDAQ GS: BOOM 52-week range: $14.02 - $22.40 Average daily trading volume (3 mo.): 132,000 Approx. market capitalization: $194 million Shares outstanding: 13 million Approximate float: 12.3 million Fiscal year end: December 31 2009 revenue: $164.9 million 2009 EPS: $0.66 2009 EBITDA: $26.8 million 2009 operating cash flow: $29.5 million Cash (6/30/10): $9.8 million Quarterly dividend: $0.04 3
  • 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. Company Overview• World’s dominant provider of explosion-welded clad metal plates - Diversified base of customers in 8 primary end markets - Significant barriers to entry - International network of production and sales facilities - $40 million order backlog at end of Q2 2010• Three business segments provide diversified revenue streams• 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 5
  • 7. Financial HighlightsNet Sales Operating IncomeIn millions In millions 6
  • 8. Financial HighlightsNet Income Diluted EPSIn millions 7
  • 9. Business Segments 2009 Revenue by SegmentExplosive Metalworking Oilfield Products AMK Welding $134.1 Million $ 21.8 Million $ 9.0 Million 8
  • 10. DMC’s Global PresenceCorporate Headquarters Oilfield Products HeadquartersExplosion Welding production centers Oilfield Products subsidiariesExplosion Welding sales offices and agents Oilfield Products sales agents 9
  • 11. DMC 2009 Revenue by Region Russia North America 5% Europe 47% 23% Asia 17% Australia 2% Other Countries -– 6% 1 0
  • 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. Key Demand Drivers for Explosion Welded Plates Corrosion Industrial CAPEXExplosive Metalworking 1 2
  • 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 InternationalExplosive Metalworking 1 3
  • 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 • ZirconiumExplosive Metalworking 1 4
  • 16. Selected End Markets Served by Explosion Welding Corrosion • Oil & Gas industry • Power generation • Petrochemicals / chemicals • Hydrometallurgy • Alternative energy • Industrial refrigeration Transition Joints • Aluminum production • Shipbuilding Above are several of the many industries that utilize explosion welded products.Explosive Metalworking 1 5
  • 17. End Users Include Leading Players in Respective Fields Fabricators Morimatsu Group China End Users Chemicals Refinery Mining EngineeringExplosive Metalworking 1 6
  • 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 customersExplosive Metalworking 1 7
  • 19. Oilfield Products Segment • Manufactures explosive perforating systems and seismic devices for the international oil & gas services industry • Growing presence in critical international energy markets • Recognized within industry for product and technology innovation • Extension of DMC’s expertise in specialized explosive manufacturing processes • Generated 13% of DMC sales in 2009Oilfield Products 1 8
  • 20. Explosive Perforating The Perforation Process 1. After a wellbore is drilled and the 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 wellOilfield Products 1 9
  • 21. Financial Performance Review ($mm) 2007 2008 2009 Q2 2009 Q2 2010 Sales $165.2 $232.6 $164.9 $37.8 $38.3 % growth 46% 41% (31%) (40%) (1%) Gross profit $55.0 $70.8 $43.1 $9.2 $9.3 % margin 33% 30% 26% 24% 24% Operating profit $38.9 $38.1 $16.2 $3.0 $2.1 % margin 24% 16% 10% 8% 5% Adjusted EBITDA $43.5 $53.2 $26.8 $6.4 $5.5 % growth 36% 22% (47%) (56%) (14%) Net income $24.6 $24.1 $8.5 $1.5 $3.0 % growth 28% (2%) (65%) (76%) 100% EPS ($) $2.00 $1.91 $0.66 $0.12 $0.23 % growth 27% (5%) (65%) (76%) 92% 2 0
  • 22. Balance Sheet Highlights (In thousands)Assets 2008 2009 Q2 2010Cash, cash equivalents & restricted cash $ 14,360 $ 22,411 $ 9,794Accounts receivables, net of allowance $ 34,719 $ 25,807 $ 23,108Total current assets $ 91,049 $ 87,974 $ 75,446Total assets $ 229,586 $ 225,176 $ 206,131LiabilitiesTotal current liabilities $ 45,747 $ 42,135 $ 39,976Long-term debt $ 46,178 $ 34,120 $ 23,701Total liabilities $ 111,084 $ 93,065 $ 82,697Total stockholders’ equity $ 118,502 $ 132,111 $ 123,434Total liabilities and stockholders’ equity $ 229,586 $ 225,176 $ 206,131 2 1
  • 23. Thank you. 2 2
  • 24. Supplemental Information 2 3
  • 25. Sales and Explosion Welding Backlog Progression:Q2 2004 – Q2 2010 In millions 2 4
  • 26. Capital Expenditures (in millions) Actual ForecastExplosive Metalworking 2 5
  • 27. Progression of Adjusted EBITDA & Net Income (In millions) 2 6