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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
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(Mark One)
[X] Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1995
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[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
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Commission file number: 0-8328
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DYNAMIC MATERIALS CORPORATION
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(Exact Name of Small Business Issuer as Specified in Its Charter)
COLORADO 84-0608431
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
551 ASPEN RIDGE DRIVE, LAFAYETTE, COLORADO 80026
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(Address of Principal Executive Offices)
(303) 665-5700
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(Issuer's Telephone Number, Including Area Code)
N/A
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
2,495,922 shares as of June 30, 1995
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Transitional Small Business Disclosure Format (check one):
Yes No X
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ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
DYNAMIC MATERIALS CORPORATION
BALANCE SHEETS
(Unaudited)
June 30 December 31
ASSETS 1995 1994
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<S> <C> <C>
Current Assets:
Cash and cash equivalents $1,179,194 $ 664,116
Accounts Receivable (Less: allowances of $8,000 &
$125,000) 1,870,781 3,602,302
Inventories (Note 2) 2,258,015 1,581,388
Deferred Tax Asset 185,300 159,300
Prepaid Expenses 69,114 75,366
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Total Current Assets 5,562,404 6,082,472
Property, Plant & Equipment 3,846,612 3,730,898
Less: Accumulated Depreciation (1,811,533) (1,665,163)
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Property, Plant & Equipment, net 2,035,079 2,065,735
Other Assets:
Deferred Tax Asset 156,700 156,700
Other (Note 3) 69,793 68,672
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Total Assets $7,823,976 $8,373,579
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note Payable $ 0 $ 100,000
Accounts Payable 1,304,991 1,449,609
Accrued Expenses 127,748 354,441
Current Maturities of Long-Term Debt 179,979 179,979
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Total Current Liabilities 1,612,718 2,084,029
Long-Term Debt (Note 4) 372,647 464,950
Stockholder's Equity:
Preferred Stock, $.05 par value; Authorized 4,000 shares
No shares Issued and Outstanding 0 0
Common Stock, $.05 par value; Authorized 15,000,000
shares; Issued and Outstanding 2,495,322 & 2,493,423 shares 124,672 124,672
Additional Paid-In-Capital 5,867,059 5,867,059
Accumulated Deficit (153,120) (167,131)
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5,838,611 5,824,600
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Total Liabilities and Stockholders' Equity $7,823,976 $8,373,579
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See Notes to the Condensed Financial Statements.
</TABLE>
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<TABLE>
<CAPTION>
DYNAMIC MATERIALS CORPORATION
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $3,109,036 $3,598,000 $6,601,794 $7,925,000
COST OF PRODUCTS MANUFACTURED 2,388,229 2,500,000 5,127,076 5,632,000
--------- --------- --------- ---------
Gross Margins 720,807 1,098,000 1,474,718 2,293,000
COSTS AND OTHER EXPENSES:
General and Administrative 258,159 318,000 549,347 722,000
Selling Expense 368,626 326,000 679,617 728,000
Research and Development 90,705 173,000 197,832 293,000
--------- --------- --------- ----------
INCOME FROM OPERATIONS 3,317 281,000 47,922 550,000
INTEREST EXPENSE, NET 8,415 3,000 24,910 9,000
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INCOME BEFORE PROVISION FOR TAXES (5,098) 278,000 23,012 541,000
PROVISION FOR INCOME TAXES 0 94,000 9,000 184,000
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NET INCOME $ (5,098) $ 184,000 $ 14,012 $ 357,000
========== ========= ========= =========
PRIMARY AND FULLY DILUTED NET INCOME PER SHARE:
Net Income per share (Note 5) $0.00 $0.07 $0.01 $0.14
===== ==== ==== ====
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Primary and Fully Diluted (Note 5) 2,495,000 2,491,000 2,494,000 2,485,000
========= ========= ========= =========
</TABLE>
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<TABLE>
<CAPTION>
DYNAMIC MATERIALS CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 14,012 $ 357,000
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH FROM OPERATING ACTIVITIES
Depreciation 131,730 180,000
Amortization 4,500 4,000
(Increase) decrease in Receivables 1,743,814 877,000
(Increase) decrease in Inventories (676,627) (16,000)
(Increase) decrease in Deferred Tax Asset & Prepaid Expense (6,041) 164,000
Increase (decrease) in Accounts Payable (132,756) 82,000
Increase (decrease) in Accrued Expenses (255,338) 409,000
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CASH FLOWS FROM OPERATING ACTIVITIES 823,294 2,057,000
CASH FLOWS FROM INVESTING ACTIVITIES
(Acquisition) of Fixed Assets (115,714) (543,000)
(Increase) Decrease in Other Assets (200) 77,000
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CASH FLOWS USED IN INVESTING ACTIVITIES (115,914) (466,000)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net (Repayment) Borrowing under Bank Line (100,000) 0
Increase in Long-Term Debt 0 320,000
(Repayment) of Long-Term Debt (92,302) (90,000)
Receipt of Option Exercise Price 0 8,000
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CASH FLOWS FROM FINANCING ACTIVITIES (192,302) 238,000
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INCREASE IN CASH AND EQUIVALENTS 515,078 1,829,000
CASH AND EQUIVALENTS BEGINNING OF PERIOD 664,116 818,000
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CASH AND EQUIVALENTS END OF PERIOD $1,179,194 $2,647,000
========= =========
See Notes to the Condensed Financial Statements.
</TABLE>
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DYNAMIC MATERIALS CORPORATION
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. The information included in the Condensed Financial
Statement is unaudited, but includes all adjustments which are,
in the opinion of management, necessary for a fair presentation
of the interim periods presented. These Condensed Financial
Statements should be read in conjunction with the Company's 1994
Annual Report filed on Form 10KSB.
2. INVENTORIES
This caption on the Condensed Balance Sheet includes the
following:
June 30 December 31
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1995 1994
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Raw Stock, net $ 176,762 $ 176,746
Work-In-Process 1,923,909 1,256,204
Supplies 157,344 148,438
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$2,258,015 $1,581,388
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3. OTHER NON-CURRENT ASSETS:
This caption on the Condensed Balance Sheet includes the following:
June 30 December 31
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1995 1994
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Non-Current Receivables, net $31,980 $31,980
Other Deposits 20,454 17,203
Intangibles, net 17,359 19,489
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$69,793 $68,672
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4. LONG TERM DEBT AND CURRENT MATURITIES
This caption on the Condensed Balance Sheet includes the following:
June 30 December 31
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1995 1994
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Colo, Nat'l of Denver - Equip./R.E.
Prime +.50% $247,572 $293,558
Concord Financial - Equipment, 8.375% 305,055 351,371
Less: Current Portion (179,980) (179,979)
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$372,647 $464,950
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5. NET INCOME PER COMMON SHARE:
Primary Earnings Per Common Share has been calculated based upon
the approximate weighted average number of Common Shares
outstanding during the periods 2,495,000 shares (1995) and
2,493,000 shares (1994).
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The term "liquidity", as used herein, is defined as the ability
of the Corporation to generate adequate amounts of cash to meet
its needs for cash. The interpretation is broad in that both
internal as well as external sources of liquidity over the short
and long term are considered. Capital resources represent those
assets currently available to the Corporation that may be used to
satisfy both liquidity as well as other requirements for funds,
such as anticipated capital expenditures. As noted in the
Statements of Cash Flows (see financial statements), cash flows
from "operating activities" during the six month period ended
June 30, 1995 totaled $823,294 in comparison to $2,057,000 during
the same period of 1994. The decrease in 1995 is primarily due
to an increase in inventories and a lower level of Net Income.
The current ratio was 3.5 at June 30, 1995 in comparison to 2.9
at December 31, 1994.
Cash flows used in "investing activities" were $115,914 through
June 30, 1995 versus $466,000 in 1994. During the 1994 period,
the Corporation had increased its investments due to a previously
disclosed major asset acquisition.
Historically, and currently, the Corporation has secured the
major portion of its operational financing from three sources:
(1) internally generated funds; (2) an asset-based revolving line
of credit and (3) trade credit. At June 30, 1995 no amounts were
outstanding under the revolving line of credit, in comparison to
$100,000 outstanding at December 31, 1994. Trade accounts
payable made up 81% and 70% of total current liabilities at
June 30, 1995 and December 31, 1994 respectively. At June 30,
1995 the Corporation had $2,000,000 of unused borrowing
availability under its new revolving line of credit facility
entered into on June 1, 1995, in comparison to $1,400,000 at
December 31, 1994. The line of credit is secured by qualifying
trade receivables and inventory. The line is renewable annually
on June 1 (commencing June 1, 1996), subject to bank approval.
The Corporation has used a commercial line of credit since 1989.
If the line were not extended or similar financing secured, such
event could negatively affect the Corporation's ability to meet
its future cash requirements. Long-term debt consists of: a) an
equipment and a mortgage note, with a bank, with an original
principal balance of $1,000,000, and a remaining non-current
balance of $139,673 as of June 30, 1995, and b) an installment
loan with a balance at June 30, 1995 of $232,974, with a
financial institution, secured by specific equipment (See Note 4
to the financial statements).
The nature of the Corporation's business is contract specific
(versus standard products). Thus, failure to complete contracts
on a timely basis or failure to obtain future contracts at an
adequate price could adversely affect the Corporation's ability
to meet its cash requirements exclusively through internal
sources.
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RESULTS OF OPERATIONS
The following table summarizes certain items included in the
Corporation's Statements of Operations for the second quarter
ending June 30:
AS A PERCENTAGE OF REVENUES
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QUARTER ENDED JUNE 30
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1995 1994
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Net Sales 100% 100%
Cost of Goods Sold 76.8% 69.5%
Gross Margin 23.2% 30.5%
R & D 2.9% 4.8%
Selling Expenses 11.9% 9.1%
General & Admin. 8.3% 8.8%
Interest Expense, Net .3% .1%
QUARTER ENDED JUNE 30, 1995 COMPARED TO JUNE 30, 1994
The Corporation's net sales in the June 30, 1995 quarter declined
by 14% over the comparable quarter of 1994. In addition, gross
margins declined due to lower sales of formed products leading to
lower manufacturing efficiency in the 1995 quarter; and lower
pricing in the primary bonding market. The Corporation's backlog
of orders scheduled for shipment in 1995 is at a record level of
$8 million as of June 30, 1995.
Selling expense increased by 13% over 1994's level due to the
recruitment, relocation and compensation of a new Vice President
of Marketing and Sales in 1995. General and Administrative
expense decreased by $59,841 or 19% in 1995's quarter. In
comparison to 1994, the 1995 quarter reflects lower staff levels,
and in 1994 the Company incurred relocation costs associated with
the retention of a new President.
Research and Development costs were $82,295 lower in the 1995
quarter than in the comparable 1994 quarter. This reduction was
due to a specific Research and Development project in 1994
designed to result in a new product line. These expenditures
were completed in 1994, and accordingly were not incurred in the
1995 quarter. Net interest expense increased due to the payment
of a commitment fee on a new line of credit in the 1995 quarter.
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SIX MONTHS ENDED JUNE 30, 1995 COMPARED TO JUNE 30, 1994
The following table summarizes certain items included in the
Corporation's Statements of Operations for the six months ending
June 30, 1995 and June 30, 1994.
AS A PERCENTAGE OF REVENUES
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SIX MONTHS ENDED JUNE 30
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1995 1994
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Net Sales 100% 100%
Cost of Goods Sold 77.7% 71.1%
Gross Margin 22.3% 28.9%
R & D 3.0% 3.7%
Selling Expenses 10.3% 9.2%
General & Admin. 8.3% 9.1%
Interest Expense, Net .4% .1%
The Corporation's net sales in the 1995 period declined by 17%
compared to the same period in 1994. Gross margins declined 36%
due to lower production volumes; lower shipments of formed
products; and lower pricing in the primary bonding market.
Selling expense declined by 7% over the 1994 level but have
increased as a percent of Net Sales. General and Administrative
expense decreased by $172,653 in 1995 due to lower staffing
levels and reduced costs associated with the recruitment and
relocation of a new President in the 1994 period.
Research and Development costs were $95,168 lower in the 1995
period than in the comparable 1994 period. This reduction is due
to a specific Research and Development spending in 1994 for a
project which was concluded in 1994, which did not contribute to
research and development costs in the 1995 period. Net interest
expense increased in 1995 due to increases in outstanding long-
term debt, as well as the payment of a commitment fee for a new
revolving line of credit in 1995.
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PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The Annual Meeting of Shareholders was conducted on
July 21, 1995
(b) The following Directors, representing all of the
Directors of the Corporation, were elected at the Annual Meeting
of Shareholders:
Edward A. Keible
Paul Lange
Dean K. Allen
Michael C. Hone
George W. Morgenthaler
(c) In addition to the election of Directors, the firm of
Arthur Andersen LLP was approved as independent accountants of
the Corporation by the following vote:
For 1,341,814
Against 240
Abstain 2,434
(d) None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) None.
(b) A Form 8-K was filed on July 10, 1995, reporting the
execution of Indemnity Agreements between the Corporation and
each of its officers and directors.
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SIGNATURES
In accordance with the requirements of the Exchange
Act, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DYNAMIC MATERIALS CORPORATION
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(Registrant)
Date: August 7, 1995 Craig N. Evans
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Craig N. Evans, Vice President Finance
and Chief Financial Officer
