<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
-----------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 1996
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from _______________ to _______________
Commission file number: 0-8328
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DYNAMIC MATERIALS CORPORATION
-----------------------------
(Name of small business issuer in its charter)
COLORADO 84-0608431
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
551 Aspen Ridge Drive, Lafayette 80026
-------------------------------- -----
(Address of principal executive office) (Zip Code)
Issuer's telephone number (303) 665-5700
--------------
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, $.05 PAR VALUE
(Title of Class)
----------------
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities 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
----- -----
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
2,510,923 shares of common stock as of March 31,1996.
- ----------------------------------------------------
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
DYNAMIC MATERIALS CORPORATION
CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
---- ----
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,706,440 $ 487,573
Accounts Receivable (Less: allowance of $150,000) 2,915,886 4,479,199
Inventories (Note 2) 2,065,011 2,583,126
Deferred Tax Asset 161,400 161,400
Prepaid Expenses 146,632 102,406
---------- ----------
Total Current Assets 6,995,369 7,813,704
Property, Plant & Equipment 4,167,182 4,072,932
Less: Accumulated Depreciation (2,070,364) (1,984,353)
---------- ----------
Property, Plant & Equipment, net 2,096,818 2,088,579
Other Assets:
Deferred Tax Asset 40,400 40,400
Other (Note 3) 51,098 97,985
---------- ----------
Total Assets $ 9,183,685 $10,040,668
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note Payable $ 0 $ 600,000
Accounts Payable 1,526,318 2,216,922
Accrued Expenses 636,513 446,204
Current Maturities of Long-Term Debt 89,169 86,913
---------- ----------
Total Current Liabilities 2,252,000 3,350,039
Long-Term Debt (Note 4) 156,721 184,460
Stockholder's Equity:
Preferred Stock, $.05 par value; Authorized 4,000,000 shares
No shares Issued and Outstanding 0 0
Common Stock, $.05 par value; Authorized 15,000,000 shares;
Issued and Outstanding 2,510,923 & 2,500,923 shares 125,484 125,047
Additional Paid-In-Capital 5,895,121 5,877,059
Retained Earnings 754,359 504,063
---------- -----------
6,774,964 6,506,169
---------- ----------
Total Liabilities and Stockholders' Equity $ 9,183,685 $10,040,668
========= ==========
</TABLE>
See Notes to the Condensed Financial Statements.
<PAGE>
DYNAMIC MATERIALS CORPORATION
CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
---- ----
<S> <C> <C>
NET SALES $5,995,574 $3,492,758
COST OF PRODUCTS MANUFACTURED 4,875,250 2,738,847
--------- ---------
Gross Margins 1,120,324 753,911
COSTS AND OTHER EXPENSES:
General and Administrative 349,633 291,188
Selling Expense 290,757 310,991
Research and Development 85,817 107,127
--------- ---------
INCOME FROM OPERATIONS 394,117 44,605
Interest (Income) Expense, Net (4,178) 16,495
--------- ---------
INCOME BEFORE PROVISION FOR TAXES 398,295 28,110
Provision for Income Taxes 148,000 9,000
--------- ---------
NET INCOME $ 250,295 $ 19,110
========= =========
PRIMARY AND FULLY DILUTED NET INCOME PER SHARE:
Net Income per share (Note 5) $0.10 $0.01
==== ====
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Primary and Fully Diluted (Note 5) 2,505,900 2,493,423
========= =========
</TABLE>
See Notes to the Condensed Financial Statements.
<PAGE>
DYNAMIC MATERIALS CORPORATION
STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 250,295 $ 19,110
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH FROM OPERATING ACTIVITIES
Depreciation 83,762 65,865
Amortization 2,250 2,250
(Increase) decrease in Receivables 1,563,313 662,194
(Increase) decrease in Inventories 656,014 164,307
(Increase) decrease in Deferred Tax Asset & Prepaid expense (128,229) 3,985
Increase (decrease) in Accounts payable (690,604) (759,351)
Increase (decrease) in Accrued expenses 182,965 (149,499)
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES 1,919,766 8,861
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
(Acquisition) of Fixed Assets (94,250) (83,750)
(Increase) Decrease in Other Assets 333 (200)
--------- --------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES (93,917) (83,950)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (Repayment) Borrowings under Bank Line (600,000) (100,000)
Increase in Long-Term Debt 0 0
(Repayment) of Long-Term Debt (25,482) (49,574)
Issuance of Common Stock upon option exercise 18,500 0
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES (606,982) (149,574)
--------- --------
INCREASE IN CASH AND EQUIVALENTS 1,218,867 (224,663)
CASH AND EQUIVALENTS BEGINNING OF PERIOD 487,573 664,116
--------- --------
CASH AND EQUIVALENTS END OF PERIOD $1,706,440 $ 439,453
========= ========
</TABLE>
See Notes to the Condensed Financial Statements.
<PAGE>
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 1995 Annual Report filed on Form 10KSB.
2. INVENTORIES
This caption on the Condensed Balance Sheet includes the following:
March 31 December 31
1996 1995
---- ----
Raw Stock, net $ 310,144 $ 261,024
Work-In-Process 1,581,954 2,096,802
Supplies 172,913 225,300
--------- ----------
$2,065,011 $2,583,126
========= =========
3. OTHER NON-CURRENT ASSETS:
This caption on the Condensed Balance Sheet includes the following:
March 31 December 31
1996 1995
---- ----
Non-Current Receivable, net $ 20,833 $ 23,333
Other Deposits 18,808 60,968
Intangibles, net 40,400 40,400
------- -------
$ 80,041 $124,701
======= =======
4. LONG-TERM DEBT AND CURRENT MATURITIES
This caption on the Condensed Balance Sheet includes the following:
March 31 December 31
1996 1995
---- ----
Concord Financial - Equipment, 8.375% $ 245,890 $ 271,373
Less: Current Portion (89,169) (86,913)
--------- ---------
$ 156,721 $ 184,460
========= =========
5. NET INCOME PER COMMON SHARE:
Primary Earnings Per Common Share has been calculated based upon the
weighted average number of Common Shares outstanding during the
periods: 2,505,900 (1996) and 2,496,487 shares (1995).
<PAGE>
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 generated by "operating activities"
during the three month period ended March 31, 1996 totaled $1,919,766
in comparison to an increase of $8,861 during the same period of 1995.
The significant increase in 1996 is due to a reduction in Accounts
Receivable and Inventory since December 31, 1995, as well as an
increase in the amount of Net Income generated on higher Sales in the
1996 quarter. The current ratio was 3.1 at March 31, 1996 in
comparison to 2.3 at December 31, 1995.
Cash flows used in "investing activities" were $93,917 through March
31, 1996 versus $83,950 for the quarter ended March 31, 1995. The
spending levels for these periods reflect normal operating activities
and accordingly should be expected to continue.
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 March 31, 1996 no amounts were
outstanding under the revolving line of credit, in comparison to
$600,000 outstanding at December 31, 1995. Trade accounts payable
make up 68% and 66% of total current liabilities at March 31, 1996 and
December 31, 1995, respectively. At March 31, 1996 the Corporation
had $2,000,000 of unused borrowing availability under its revolving
line of credit, in comparison to $1,400,000 at December 31, 1995. The
line of credit is secured by qualifying trade receivables and raw
materials inventory. The line is renewable annually on June 1,
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 may negatively affect the Corporation's
ability to meet its future cash requirements. Long-term debt consists
of an installment loan with a balance at March 31, 1996 of $245,890,
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 rate could
adversely affect the Corporation's ability to meet its cash
requirements exclusively through internal sources.<PAGE>
RESULTS OF OPERATIONS
The following table summarizes certain items included in the
Corporation's Statements of Operations for the third quarter ending
September 30:
AS A PERCENTAGE OF REVENUES
---------------------------
QUARTER ENDED MARCH 31
-----------------------
1996 1995
---- ----
Net Sales 100.0% 100.0%
Cost of Goods Sold 81.3% 78.4%
Gross Margin 19.7% 21.6%
R & D 1.4% 3.1%
Selling Expenses 4.8% 8.9%
General & Admin. 5.8% 8.3%
Interest (Income) Expense, Net (.7%) .5%
QUARTER ENDED MARCH 31, 1996 COMPARED TO MARCH 31, 1995
The Corporation's Net Sales in the March 31, 1996 quarter increased by
72% over the comparable quarter of 1995. However, Gross Margins
increased by only 49% due to competitive conditions in the bonding
market in 1996.
Selling expense declined in 1996 by 7% over 1995's level due to
certain non-recurring recruitment and relocation costs which were
included in the 1995 period. General and Administrative expense
increased by 20% in 1996's quarter due to increased staffing, and
certain consulting costs which were not incurred in 1995's quarter.
Research and Development costs were $21,310 lower in 1996's quarter
than in the comparable 1995 quarter. This reduction was due to more
of the total engineering effort being directed to manufacturing
activities versus new product or process development.
Interest expense declined from $20,752 in 1995 to $8,517 in 1996 due
to the reduction in short-term borrowings in 1996. Further, Interest
Income increased to $12,695 in 1996 from $4,258 in 1995 by investment
of surplus cash in short-term investments during the 1996 period.
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) None.
(b) None.
(c) None.
(d) None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a.) None.
(b.) None.
<PAGE>
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
-----------------------------
(Registrant)
Date: April 30, 1996 Craig N. Evans
-------------- ----------------------------------------
Craig N. Evans, Vice President Finance
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S AUDITED FINANCIAL STATEMENTS FOR THE QUARTER
ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 1706440
<SECURITIES> 0
<RECEIVABLES> 3065886
<ALLOWANCES> 150000
<INVENTORY> 2065011
<CURRENT-ASSETS> 6995369
<PP&E> 4167182
<DEPRECIATION> 2070364
<TOTAL-ASSETS> 9183685
<CURRENT-LIABILITIES> 2252000
<BONDS> 0
<COMMON> 125484
0
0
<OTHER-SE> 6649480
<TOTAL-LIABILITY-AND-EQUITY> 9183685
<SALES> 5995574
<TOTAL-REVENUES> 5995574
<CGS> 4875250
<TOTAL-COSTS> 5601457
<OTHER-EXPENSES> (12695)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8517
<INCOME-PRETAX> 398295
<INCOME-TAX> 148000
<INCOME-CONTINUING> 250295
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 250295
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
