SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8K/A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 1, 1998
----------------
Dynamic Materials Corporation
--------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-8328 84-0608431
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employee
of incorporation) File Number) Identification No.)
551 Aspen Ridge Drive, Lafayette, CO 80026
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 665-5700
--------------
Not Applicable
-----------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Dynamic Materials Corporation (the "Company") filed a Form 8-K on December
8, 1998 reporting the acquisition of certain assets of Precision Machined
Products, Inc ("PMP") on December 1, 1998. The financial statements required in
connection with that report were omitted pursuant to the provisions of Item 7 on
Form 8-K, and are being provided herewith.
(a) Financial Statements of business acquired.
Report of Independent Public Accountants
Balance Sheet as of September 30, 1998 and December 31, 1997
Statement of Operations for the Nine Months Ended September 30, 1998 and
the Year Ended December 31, 1997
Statement of Shareholders' Equity for the Nine Months Ended September 30,
1998 and the Year Ended December 31, 1997
Statement of Cash Flows for the Nine Months Ended September 30, 1998
and the Year Ended December 31, 1997
Notes to Financial Statements
(b) Pro forma financial information.
Unaudited Pro Forma Condensed Balance Sheet as of September 30, 1998
Unaudited Pro Forma Condensed Statement of Operations for the Nine
Months Ended September 30, 1998
Unaudited Pro Forma Condensed Statement of Operations for the Year
Ended December 31, 1997
(c) Exhibits.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DYNAMIC MATERIALS CORPORATION
(Registrant)
Date February 12, 1999 By: /s/ Richard A. Santa
---------------------------
Name: Richard A. Santa
Title: Vice President, Finance, Chief
Financial Officer and Secretary
<PAGE>
PRECISION MACHINED PRODUCTS, INC.
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
TOGETHER WITH REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Dynamic Materials Corporation:
We have audited the accompanying balance sheets of PRECISION MACHINED PRODUCTS,
INC. (a Colorado S corporation) as of September 30, 1998 and December 31, 1997,
and the related statements of operations, shareholders' equity and cash flows
for the nine months ended September 30, 1998 and the year ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Precision Machined Products,
Inc. as of September 30, 1998 and December 31, 1997 and the results of its
operations and its cash flows for the periods then ended in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Denver, Colorado,
January 19, 1999.
<PAGE>
Page 1 of 2
PRECISION MACHINED PRODUCTS, INC.
BALANCE SHEETS
As of As of
September 30, December 31,
ASSETS 1998 1997
------ ------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 940,941 $ 387,230
Investments (Note 3) 314,478 910,676
Accounts receivable 585,239 595,591
Inventories (Note 2) 219,224 196,618
Other current assets 8,404 7,794
---------- ----------
Total current assets 2,068,286 2,097,909
---------- ----------
PROPERTY, PLANT AND EQUIPMENT (Note 2) 1,944,505 1,510,226
Less- Accumulated depreciation (541,374) (382,245)
---------- ----------
Property, plant and equipment, net 1,403,131 1,127,981
---------- ----------
$ 3,471,417 $ 3,225,890
========== ==========
The accompanying notes to financial statements are
an integral part of these balance sheets.
<PAGE>
Page 2 of 2
PRECISION MACHINED PRODUCTS, INC.
BALANCE SHEETS
As of As of
September 30, December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997
------------------------------------ ------------- ------------
CURRENT LIABILITIES:
Note payable- related party (Note 4) $ - $ 250,000
Accounts payable 64,090 59,861
Accrued payroll and benefits 94,087 72,625
Property taxes payable 33,723 45,800
Accrued equipment purchase 129,500 -
Other accrued liabilities 9,054 4,614
---------- ----------
Total current liabilities 330,454 432,900
DEFERRED COMPENSATION (Note 6) 223,466 151,014
---------- ----------
Total liabilities 553,920 583,914
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY:
Common stock; no par value; 50,000 shares
authorized; 750 shares issued and outstanding - -
Additional paid-in capital 40,049 40,049
Other cumulative comprehensive income (4,786) (6,049)
Retained earnings 2,882,234 2,607,976
---------- ----------
2,917,497 2,641,976
---------- ----------
$3,471,417 $3,225,890
========== ==========
The accompanying notes to financial statements are
an integral part of these balance sheets.
<PAGE>
PRECISION MACHINED PRODUCTS, INC.
STATEMENTS OF OPERATIONS
Nine Months Year
Ended Ended
September 30, December 31,
1998 1997
------------- ------------
NET SALES (Note 7) $3,395,558 $4,019,645
COST OF PRODUCTS SOLD 1,901,801 2,395,683
---------- -----------
Gross profit 1,493,757 1,623,962
GENERAL AND ADMINISTRATIVE EXPENSES 367,222 582,520
---------- -----------
INCOME FROM OPERATIONS 1,126,535 1,041,442
---------- -----------
OTHER INCOME (EXPENSE):
Other income 6,389 10,132
Investment income 44,182 47,752
Interest expense (12,411) (46,664)
Loss on disposal of assets (3,212) (7,836)
---------- -----------
Total other income 34,948 3,384
---------- -----------
NET INCOME BEFORE INCOME TAXES 1,161,483 1,044,826
Income tax benefit (Note 2) - 63,280
---------- -----------
NET INCOME $1,161,483 $1,108,106
========== ==========
The accompanying notes to financial statements are
an integral part of these statements.
<PAGE>
PRECISION MACHINED PRODUCTS, INC.
<TABLE>
<CAPTION>
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
Other
Common Stock Additional Cumulative
---------------- Paid-In Comprehensive Retained
Shares Amount Capital Income Earnings
------ ------ ---------- ------------ --------
<S> <C> <C> <C> <C> <C>
BALANCES, December 31, 1996 750 $ - $40,049 $ - $1,532,043
Net income - - - - 1,108,106
Change in unrealized gain (loss) on investments - - - (6,049) -
Distributions to shareholders - - - - (32,173)
----- ------- -------- -------- ------------
BALANCES, December 31, 1997 750 - 40,049 (6,049) 2,607,976
Net income - - - - 1,161,483
Change in unrealized gain (loss) on investments - - - 1,263 -
Distributions to shareholders - - - - (887,225)
----- ------- -------- -------- ------------
BALANCES, September 30, 1998 750 $ - $40,049 $(4,786) $2,882,234
===== ======= ======== ======== ============
</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.
<PAGE>
PRECISION MACHINED PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
Nine Months Year
Ended Ended
September 30, December 31,
1998 1997
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,161,483 $1,108,106
Adjustments to reconcile net income to net cash
from operating activities-
Depreciation 181,966 202,636
Loss on disposal of assets 3,212 7,849
Deferred compensation 72,452 53,478
Provision for deferred income taxes - (63,280)
Change in-
Accounts receivable 10,352 (69,267)
Inventories (22,606) 20,806
Prepaid expenses - 57,697
Other current assets (610) 2,281
Accounts payable 4,229 9,579
Accrued payroll and benefits 21,462 (10,627)
Accrued property taxes (12,077) 19,246
Accrued equipment purchase 129,500 -
Other accrued liabilities 4,440 (68,497)
----------- ----------
Net cash flows from operating activities 1,553,803 1,270,007
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (454,279) (122,253)
Net purchases of investments - (720,249)
Net proceeds from sale of investments 591,412 -
----------- ----------
Net cash flows from investing activities 137,133 (842,502)
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to shareholders (887,225) (32,173)
Repayment of note payable (250,000) (281,147)
----------- ----------
Net cash flows from financing activities (1,137,225) (313,320)
NET INCREASE IN CASH AND CASH EQUIVALENTS 553,711 114,185
CASH AND CASH EQUIVALENTS, beginning of period 387,230 273,045
----------- ----------
CASH AND CASH EQUIVALENTS, end of period $ 940,941 $ 387,230
=========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest $ 12,411 $ 46,644
=========== ==========
NONCASH INVESTING ACTIVITIES:
Change in unrealized loss on investments $ 1,263 $ (6,049)
============ ==========
The accompanying notes to financial statements are
an integral part of these statements.
<PAGE>
PRECISION MACHINED PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(1) ORGANIZATION AND BUSINESS
Precision Machined Products, Inc. ("the Company") was established in 1977 and
was incorporated August 1984, as a Colorado corporation. Effective January 1,
1997, the Company, with the consent of its shareholders, elected to be taxed as
an S Corporation under the Internal Revenue Code. In lieu of corporate income
taxes, the shareholders of an S Corporation are taxed on their proportionate
share of the Company's taxable income. The Company, located in Fort Collins,
Colorado, is a contract machining shop specializing in high precision, high
quality, complex machined parts used in the aerospace, satellite, medical
equipment and high technology industries.
Subsequent to September 30, 1998, the Company sold substantially all of its
assets to Dynamic Materials Corporation ("DMC") (Note 9).
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market,
computed on an actual cost basis. Cost elements included in inventory are
material, labor, subcontract costs and manufacturing overhead. Manufacturing
overhead included in inventory at September 30, 1998 and December 31, 1997
totaled approximately $68,000 and $56,000, respectively.
Inventories consisted of the following at September 30, 1998 and December 31,
1997:
1998 1997
------- ------
Raw materials $ 11,715 $ 15,547
Work in process 207,509 181,071
-------- --------
$ 219,224 $ 196,618
======== ========
<PAGE>
Accounts Receivable
-------------------
The Company sells its products throughout the U.S. primarily to entities in
manufacturing environments. Major customers are in satellite communication, high
technology manufacturing and defense related businesses. The Company has not
recorded an allowance for uncollectible amounts at September 30, 1998 and
December 31, 1997, based on historical experience. Bad debts are written off
when they are determined to be uncollectible.
Property, Plant and Equipment
-----------------------------
Property, plant and equipment are recorded at cost. Additions, improvements and
betterments are capitalized when incurred. Maintenance and repairs are charged
to operations as the costs are incurred. Depreciation is computed using the
straight-line method over the estimated useful life of the related asset as
follows:
Vehicle 3 years
Office equipment 5 years
Production equipment 5-10 years
Inspection equipment 5-10 years
Leasehold improvements 7-15 years
Depreciation expense for the nine months ending September 30, 1998 and the year
ended December 31, 1997 was $181,966 and $202,636, respectively.
Property, plant and equipment consists of the following at September 30, 1998
and December 31, 1997:
1998 1997
-------- --------
Office equipment $ 45,799 $ 45,799
Production equipment 1,402,116 968,038
Inspection equipment 57,660 60,667
Leasehold improvements 434,775 434,775
Vehicle 4,155 947
---------- ---------
1,944,505 1,510,226
Less accumulated depreciation (541,374) (382,245)
---------- ---------
$ 1,403,131 $ 1,127,981
========== =========
<PAGE>
Income Taxes
------------
The change in tax status of the Company to a Subchapter S corporation effective
January 1, 1997, generally results in the Company no longer being a taxable
entity; federal and state income taxes related to S corporation income are the
responsibility of the shareholders . While any "built-in gain" (net excess of
fair value of assets over their tax basis) realized within ten years of electing
S corporation status would be taxable to the Company at normal corporate rates,
the Company has determined there was not net "built-in-gain" existing at the
date of electing S corporation status. Consequently, net deferred tax
liabilities of $63,280 existing at that date were eliminated from the balance
sheet and reflected as a credit to the income tax provision in the accompanying
statements of operations for the year ended December 31, 1997. However, any
distributions to the shareholders in excess of the S corporation accumulated
adjustments account subsequent to January 1, 1997, will be taxable to the
shareholders, except to the extent deemed a return of capital.
Consideration of Credit Risk
----------------------------
The Company maintains its cash in bank deposit accounts at high credit quality
financial institutions. The balances, at times, may exceed federally insured
limits.
Cash, Cash Equivalents and Investments
--------------------------------------
For purposes of the statement of cash flows, the Company considers all highly
liquid investments with original maturities of three months or less to be cash
equivalents. The investments which are classified as available for sale in
accordance with the provisions of Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
("SFAS 115"), are accounted for at fair market value and includes those
investments with original maturities of more than three months.
Revenue Recognition
-------------------
The Company's contracts with its customers generally require the production and
delivery of multiple units or products. The Company measures progress to
completion and records revenue from its contracts as completed units are shipped
to the customer. If, as a contract proceeds toward completion, projected total
cost on an individual contract indicates a potential loss, the Company provides
currently for such anticipated loss.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
<PAGE>
New Accounting Principles
-------------------------
The Financial Accounting Standards Board ("FASB") recently issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"), which is required to be adopted by affected companies for fiscal years
beginning after December 15, 1997. SFAS 130 requires that an enterprise (i)
classify items of other comprehensive income by their nature in a financial
statement and (ii) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position.
The FASB also recently issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"), which requires that a public business enterprise report certain
financial and descriptive information about its reportable segments. The Company
adopted SFAS 131 for the year ended December 31, 1997 and has only one reporting
segment. See Note 7 for other required SFAS 131 disclosures.
(3) INVESTMENTS
Cost and fair value of mutual fund investments at September 30, 1998 and
December 31, 1997 are as follows:
As of September 30, 1998
------------------------------
Unrealized Fair
Cost Gain (Loss) Value
------- ----------- ------
Available-for-sale securities:
Mutual funds $319,264 $(4,786) $314,478
======= ====== =======
As of December 31, 1997
------------------------------
Unrealized Fair
Cost Gain (Loss) Value
------- ----------- ------
Available-for-sale securities:
Mutual funds $309,934 $(6,049) $303,885
Treasury Bills 606,791 - 606,791
------- ------ -------
$916,725 $(6,049) $910,676
======= ====== =======
(4) NOTE PAYABLE
The Company had a $250,000 subordinated promissory note due to the shareholders
as of December 31, 1997. Interest only payments at 12% were to be paid monthly
up until maturity (which was December 31, 1998) or until early payment of entire
principal balance. The note was paid in its entirety during the first half of
1998.
<PAGE>
(5) RETIREMENT PLAN
The Company has a 401(k) profit sharing plan (the "Plan"). The Plan was
established August 30, 1993 and covers all employees upon attaining age 21 and
completing two months of service. The Plan includes both an employer matching
contribution of 50% of employee contributions, up to 6% of employee's salary and
a discretionary portion. Employees vest in employer contributions to their
accounts over a period of five years.
The Company's contributions to the Plan for the period ended September 30, 1998
and the year ended December 31, 1997 were $21,705 and $28,634, respectively.
(6) DEFERRED COMPENSATION
The Company has entered into a stock appreciation rights plan ("SAR Plan") with
one of its employees. The SAR Plan provides for deferred compensation to be
accumulated for the employee based on the appreciation in the Company's net book
value. The SAR Plan does not give the employee any right whatsoever with respect
to shares of common stock of the Company.
Upon termination of the SAR Plan (including the sale of substantially all of the
assets or Common Stock of the Company), an additional calculation shall be
performed revising the amounts due to the employee based on the Adjusted Net
Proceeds of the Sale, as defined.
Subsequent to September 30, 1998, the Company sold substantially all of its
assets to DMC (Note 9). This sale resulted in a total liability due to the
employee of $418,400 to be paid based on the benefit payment terms under the SAR
plan.
(7) MAJOR CUSTOMERS
During the nine months ended September 30, 1998, three customers accounted for
approximately $1,080,000 (32%), $908,000 (27%) and $686,000 (20%) of net sales,
respectively. During the year ended December 31, 1997, the same three customers
accounted for approximately $1,150,000 (29%), $876,000 (22%) and $460,000 (11%)
of net sales, respectively. Due to the fact that a significant portion of the
Company's sales are derived from a relatively small number of customers, the
failure to perform existing contracts on a timely basis, to receive payment for
such services in a timely manner, or to enter into future contracts at projected
volumes and profitability levels could adversely affect the Company's ability to
meet its cash requirements exclusively through operating activities.
Additionally, the Company has no significant sales or other activities with
customers in foreign countries.
<PAGE>
(8) COMMITMENTS AND CONTINGENCIES
Effective August 1, 1996, the Company leases the facility it occupies from an
entity that is majority owned by the Company's shareholders. The lease is
classified as an operating lease with minimum rental commitments at September
30, 1998 as follows:
Year Ending Amount
----------- --------
1998 $ 32,045
1999 128,180
2000 128,180
2001 74,772
-------
$363,177
=======
Rent expense was approximately $99,000 and $129,000 for the period ended
September 30, 1998 and the year ended December 31, 1997, respectively.
(9) SUBSEQUENT EVENT
On December 1, 1998, the Company closed on the sale of substantially all of its
assets to DMC of Lafayette, Colorado. DMC, a publicly traded company, is
involved in the high energy metal working business. The high energy metal
working business includes the use of explosives to perform both metallurgical
bonding or metal "cladding," and forming. The assets sold to DMC were used by
the Company in the manufacturing, selling and marketing of extremely high
precision, complex machined parts used in the aerospace, satellite, medical
equipment and high technology industries (the "Business"). DMC anticipates using
the assets acquired for similar purposes. The assets acquired consisted
principally of inventory, accounts receivable, machinery, equipment (including
computer equipment), and certain trade names used in the Business, as well as a
lease of the facilities at which the Business is conducted.
The purchase price of $7,015,680 was paid by the delivery of $6,800,000 in cash
and the delivery of 40,000 shares of DMC's Common Stock valued at $5.392 per
share. The purchase price was subject to a post-closing adjustment based upon
subsequent accounting adjustments for inventory, accounts receivable and assumed
liabilities. This adjustment was determined to be approximately $12,800 which
effectively decreased the overall purchase price. DMC also incurred
approximately $70,000 of transaction related costs. In addition, DMC paid $2,000
at the closing for an exclusive option to purchase the real property at which
the operations of the Business are conducted at a purchase price equal to the
fair market value at the date the option is exercised (subject to certain
adjustments), which option may be exercised under certain conditions until
December 1, 2000, during which time the real property may not be sold,
transferred or conveyed without DMC's consent.
<PAGE>
DYNAMIC MATERIALS CORPORATION
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
On December 1, 1998 Precision Machined Products, Inc. ("PMP") entered into an
agreement to sell Dynamic Materials Corporation ("DMC" or the "Company")
substantially all of its assets for approximately $7,073,000. The purchase price
was paid by $6,800,000 in cash (drawn under the Company's bank line of credit
facility) and the delivery of 40,000 shares of DMC's stock valued at $5.392 per
share. The purchase price above reflects the addition of approximately $70,000
in transaction costs incurred as well as a reduction of $12,821 for post-closing
adjustments.
The Unaudited Pro Forma Condensed Balance Sheet is presented as of September 30,
1998 and illustrates the effects of the acquisition of the PMP assets and the
related financing as if they had occurred on September 30, 1998.
The Unaudited Pro Forma Condensed Statements of Operations is presented for the
nine months ended September 30, 1998 and for the year ended December 31, 1997,
and illustrates the effects of the acquisition of the PMP assets and the related
financing as if they had occurred on January 1, 1997.
The Unaudited Pro Forma Condensed Balance Sheet and Statements of Operations
should be read in conjunction with the historical financial statements of DMC
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997, DMC's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998 and the historical financial statements of PMP included
elsewhere herein. The pro forma adjustments are based on preliminary information
about PMP's assets acquired and results of operations. Final purchase price
allocations will be based on a more complete evaluation and may differ from
those shown herein. However, management of DMC believes that the assumptions
utilized provide a reasonable basis for presenting the significant effects of
the acquisition and the related financing and that the pro forma adjustments
give appropriate effect to those assumptions and are properly applied in the
accompanying pro forma financial information. The Unaudited Pro Forma Condensed
Balance Sheet and Statements of Operations may not be indicative of DMC's actual
financial position or operating results had the transactions occurred as of the
dates indicated above, nor do they purport to indicate the financial position or
operating results which may be attained in the future.
<PAGE>
<TABLE>
<CAPTION>
DYNAMIC MATERIALS CORPORATION
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
Dynamic Pro Forma Pro Forma
Materials PMP Adjustments Balance
--------- --- ----------- ---------
ASSETS
------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivelents $ - $ 940,941 $ (940,941) 1 $ -
Investments - 314,478 (314,478) 1 -
Accounts receivable 6,073,261 585,239 - 6,658,500
Inventories 3,587,387 219,224 - 3,806,611
Prepaids and other current assets 536,468 8,404 - 544,872
------------ ---------- ---------- -----------
Total current assets 10,197,116 2,068,286 (1,255,419) 11,009,983
PROPERTY, PLANT AND EQUIPMENT, net 6,925,449 1,403,131 678,745 2 9,007,325
RESTRICTED CASH AND SHORT TERM INVESTMENTS 6,461,015 - - 6,461,015
INTANGIBLE ASSETS, net 1,228,379 - 4,429,705 3 5,658,084
OTHER ASSETS 663,905 - - 663,905
------------ ---------- ----------- -----------
TOTAL ASSETS $ 25,475,864 $ 3,471,417 $ 3,853,031 $ 32,800,312
============ =========== =========== ============
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Condensed Financial Statements
<PAGE>
DYNAMIC MATERIALS CORPORATION
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Dynamic Pro Forma Pro Forma
Materials PMP Adjustments Balance
--------- --- ----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C>
CURRENT LIABILITIES:
Bank overdraft $ 82,536 $ - $ - $ 82,536
Accounts payable 1,838,162 64,090 - 1,902,252
Accrued expenses 1,450,132 266,364 (21,686) 4 1,694,810
Current maturities of long-term debt and
capital lease obligations 38,330 - - 38,330
------------ ----------- ----------- ------------
Total current liabilities 3,409,160 330,454 (21,686) 3,717,928
LINE OF CREDIT 2,785,000 - 6,800,000 5 9,585,000
INDUSTRIAL DEVELOPMENT REVENUE
BONDS 6,850,000 - - 6,850,000
OTHER LONG-TERM OBLIGATIONS 76,530 223,466 (223,466) 4 76,530
------------ ----------- ----------- ------------
Total liabilities 13,120,690 553,920 6,554,848 20,229,458
STOCKHOLDERS' EQUITY
Common stock 136,184 - 2,000 6 138,184
Additional paid-in capital 6,686,940 40,049 213,680 6 6,900,620
(40,049) 7
Deferred compensation (59,062) - - (59,062)
Other comprehensive income - Unrealized
loss on investments - (4,786) 4,786 7 -
Retained earnings 5,591,112 2,882,234 (2,882,234) 7 5,591,112
------------ ----------- ----------- ------------
Total stockholder's equity 12,355,174 2,917,497 (2,701,817) 12,570,854
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 25,475,864 $ 3,471,417 $ 3,853,031 $ 32,800,312
============ =========== =========== ============
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Condensed Financial Statements
<PAGE>
DYNAMIC MATERIALS CORPORATION
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Dynamic Pro Forma Pro Forma
Materials PMP Adjustments Results
--------- --- ----------- ----------
<S> <C> <C> <C> <C>
NET SALES $ 30,543,872 $ 3,395,558 $ - $ 33,939,430
COST OF PRODUCTS SOLD 24,042,453 1,901,801 (181,966) 8 25,948,980
----------- ---------- ----------
156,150 9
(98,842) 10
73,134 11
56,250 17
-----------
Gross profit 6,501,419 1,493,757 (4,726) 7,990,450
EXPENSES:
General and administrative 2,401,618 367,222 148,644 14 2,827,484
(90,000) 16
Selling expense 1,387,822 - - 1,387,822
New facility start up costs 114,437 - - 114,437
Research and development costs 28,963 - - 28,963
----------- ----------- ----------- -----------
3,932,840 367,222 58,644 4,358,706
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS 2,568,579 1,126,535 (63,370) 3,631,744
Other income 16,714 47,359 - 64,073
Interest expense (198,811) (12,411) 12,411 12 (581,811)
----------- ----------- -----------
(383,000) 13
----------
Income before income tax
provision 2,386,482 1,161,483 (433,959) 3,114,006
INCOME TAX PROVISION (931,000) - (269,184) 15 (1,200,184)
----------- ----------- ----------- -----------
NET INCOME $ 1,455,482 $ 1,161,483 $ (703,143) $ 1,913,822
=========== =========== =========== ===========
EARNINGS PER SHARE - BASIC $ $ 0.52 $ 0.68
EARNINGS PER SHARE - DILUTED $ 0.50 $ 0.65
WEIGHTED AVERAGE SHARES
OUTSTANDING:
BASIC 2,780,238 40,000 6 2,820,238
DILUTED 2,889,732 40,000 6 2,929,732
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Condensed Financial Statements
<PAGE>
DYNAMIC MATERIALS CORPORATION
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Dynamic Pro Forma Pro Forma
Materials PMP Adjustments Results
--------- --- ----------- ----------
<S> <C> <C> <C> <C>
NET SALES $ 32,119,585 $ 4,019,645 $ - $ 36,139,230
COST OF PRODUCTS SOLD 24,459,168 2,395,683 (202,636) 8 26,851,572
----------- ---------- ----------
208,200 9
(129,355) 10
97,512 11
75,000 17
(52,000) 16
-----------
Gross profit 7,660,417 1,623,962 3,279 9,287,658
EXPENSES:
General and administrative 2,338,355 582,520 198,192 14 2,911,067
(208,000) 16
Selling expense 1,963,707 - - 1,963,707
Research and development costs 68,029 - - 68,029
----------- ---------- ----------- ----------
4,370,091 582,520 (9,808) 4,942,803
----------- ---------- ----------- ----------
INCOME FROM OPERATIONS 3,290,326 1,041,442 13,087 4,344,855
Other income 55,959 50,048 - 106,007
Interest expense (117,372) (46,664) 46,664 12 (627,372)
----------- ---------- ----------
(510,000) 13
----------
Income before income tax
provision 3,228,913 1,044,826 (450,249) 3,823,490
INCOME TAX PROVISION (1,221,000) 63,280 (219,993) 15 (1,377,713)
----------- ---------- ----------- ----------
NET INCOME $ 2,007,913 $ 1,108,106 $ (670,242) $ 2,445,777
=========== ========== =========== ===========
EARNINGS PER SHARE - BASIC $ 0.75 $ 0.90
EARNINGS PER SHARE - DILUTED $ 0.70 $ 0.84
WEIGHTED AVERAGE SHARES
OUTSTANDING:
BASIC 2,681,943 40,000 6 2,721,943
DILUTED 2,875,703 40,000 6 2,915,703
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Condensed Financial Statements
<PAGE>
DYNAMIC MATERIALS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
1. Represents assets not acquired by DMC in the acquisition transaction.
2. Represents the adjustment of the PMP fixed assets to fair market value in
in conjuction with the acquisition transaction. The allocation of the
purchase price to machinery and equipment was based on an appraisal of
those assets. DMC intends to depreciate those assets over 5 to 15 years.
3. Represents goodwill of $4,329,705 and covenant not to compete of $100,000
recorded in conjunction with the acquisition of PMP assets.
4. Represents liabilities not assumed by DMC as part of the acquisition
transaction including $21,686 in miscellaneous accrued liabilities and
$223,466 in deferred compensation to a PMP employee.
5. Represents borrowings under DMC's revolving credit facility that were used
to finance the acquisition transaction.
6. Represents the issuance of 40,000 shares of DMC stock (valued at $5.392 per
share) as part of the consideration paid in connection with the purchase of
the assets of PMP.
7. Represents the elimination of the historical balance of PMP's shareholders
equity.
8. Represents the elimination of historical PMP depreciation expense.
9. Represents the pro forma depreciation expense resulting from the DMC
acquisition transaction.
10. Represents the elimination of historical PMP facility rent expense.
11. Represents the pro forma rent expense that DMC is obligated to pay in
connection with the lease of the facility real property.
12. Represents the elimination of historical PMP interest expense.
13. Represents the pro forma interest expense at current rates related to DMC's
borrowings on its acquisition line of credit that was used to finance the
acquisition transaction.
14. Represents the pro forma amortization of goodwill and covenant not to
compete that resulted from the acquisition transaction. DMC intends to
amortize the goodwill and the covenant not to compete over 25 and 4 years,
respectively.
<PAGE>
15. Represents income tax on the pro forma adjustments and the historical
pretax income of PMP based on an estimated combined effective federal and
state income tax rate of 37%.
16. Represents the historical salaries and bonuses of the former officers of
PMP. DMC does not intend on replacing those positions. Note that in 1997
PMP allocated a portion of these salaries to cost of products sold wheras,
in 1998 the entire amount of these costs were reflected in general and
administrative expenses due to changes in the Officers focused efforts in
1998.
17. Represents amounts that DMC is obligated to pay under a two-year consulting
engagement with a former owner of PMP. The consulting is expected to be
directly attributable to PMP production and, as such, is reflected as an
adjustment to cost of products sold.
