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 September 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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(Name of small business issuer 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 80026
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(Address of principal executive office) (Zip Code)
Issuer's telephone number (303) 665-5700
COMMON STOCK, $.05 PAR VALUE
(Title of Class)
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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:
2,495,022 shares of common stock as of September 30, 1995
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Transitional Small Business Disclosure Format (check one):
Yes No X
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Exhibit Index is on page 11
ITEM 1. FINANCIAL STATEMENTS.
DYNAMIC MATERIALS CORPORATION
CONDENSED BALANCE SHEETS
(Unaudited)
SEPTEMBER 30 DECEMBER 31
ASSETS 1995 1994
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Current Assets:
Cash and cash equivalents $ 8,547 $ 664,116
Accounts Receivable (Less: allowances of $70,000 &
$125,000) 3,757,864 3,602,302
Inventories (Note 2) 2,744,817 1,581,388
Deferred Tax Asset 157,300 159,300
Prepaid Expenses 33,580 75,366
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Total Current Assets 6,702,108 6,082,472
Property, Plant & Equipment 3,932,919 3,730,898
Less: Accumulated Depreciation (1,895,450) (1,665,163)
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Property, Plant & Equipment, net 2,037,469 2,065,735
Other Assets:
Deferred Tax Asset 9,700 156,700
Other (Note 3) 94,120 68,672
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Total Assets $8,843,397 $8,373,579
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note Payable $ 200,000 $ 100,000
Accounts Payable 1,635,665 1,449,609
Accrued Expenses 282,181 354,441
Current Maturities of Long-Term Debt 301,698 179,979
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Total Current Liabilities 2,419,544 2,084,029
Long-Term Debt (Note 4) 206,886 464,950
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; 2,495,000 & 2,486,000 shares Issued and Outstanding 124,672 124,672
Additional Paid-In-Capital 5,867,059 5,867,059
Retained Earnings (Accumulated Deficit) 225,236 (167,131)
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6,216,967 5,824,600
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Total Liabilities and Stockholders' Equity $8,843,397 $8,373,579
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See Notes to the Condensed Financial Statements.
DYNAMIC MATERIALS CORPORATION
CONDENSED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1995 1994 1995 1994
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NET SALES $5,680,929 $2,945,000 $12,282,723 $10,871,000
COST OF PRODUCTS MANUFACTURED 4,344,651 2,072,000 9,471,855 7,703,000
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Gross Margins 1,336,278 873,000 2,810,869 3,168,000
COSTS AND OTHER EXPENSES:
General and Administrative 260,106 257,000 809,453 981,000
Selling Expense 444,361 265,000 1,123,978 991,000
Research and Development 72,368 125,000 270,200 419,000
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INCOME FROM OPERATIONS 559,443 226,000 607,238 777,000
Interest Expense, Net 5,960 0 30,870 17,000
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INCOME BEFORE PROVISION FOR TAXES 553,483 226,000 576,368 760,000
Provision for Income Taxes 175,000 59,000 184,000 243,000
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NET INCOME $378,483 $167,000 $392,368 $517,000
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PRIMARY AND FULLY DILUTED NET INCOME PER SHARE:
Net Income per share (Note 5) $0.15 $0.07 $0.16 $0.21
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Primary and Fully Diluted (Note 5) 2,495,000 2,491,000 2,493,000 2,486,000
DYNAMIC MATERIALS CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED
SEPTEMBER 30
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 392,368 $ 517,000
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH FROM OPERATING ACTIVITIES
Depreciation 230,287 242,000
Amortization 4,378 9,000
(Increase) decrease in Receivables (169,936) 126,000
(Increase) decrease in Inventories (1,163,430) (792,000)
(Increase) decrease in Deferred Tax Asset & Prepaid Expense 178,494 40,000
Increase (decrease) in Accounts Payable 197,918 821,000
Increase (decrease) in Accrued Expenses (87,282) 230,000
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CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES (417,203) 1,193,000
CASH FLOWS FROM INVESTING ACTIVITIES
(Acquisition) of Fixed Assets (202,020) (918,000)
(Increase) Decrease in Other Assets 0 152,000
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CASH FLOWS (USED IN) INVESTING ACTIVITIES (202,020) (766,000)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowings under Bank Line 100,000 300,000
Increase in Long-Term Debt 0 408,000
(Repayment) of Long-Term Debt (136,346) (233,000)
Issuance of Common Stock upon option exercise 0 31,000
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CASH FLOWS FROM FINANCING ACTIVITIES (36,346) 506,000
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (655,569) 933,000
CASH AND EQUIVALENTS BEGINNING OF PERIOD 664,116 818,000
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CASH AND CASH EQUIVALENTS END OF PERIOD $ 8,547 $1,751,000
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See Notes to the Condensed Financial Statements.
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:
SEPTEMBER 30 DECEMBER 31
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1995 1994
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Raw Stock, net $ 176,812 $ 176,746
Work-In-Process 2,418,131 1,256,204
Supplies 149,874 148,438
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$2,744,817 $1,581,388
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3. OTHER NON-CURRENT ASSETS:
This caption on the Condensed Balance Sheet includes the following:
SEPTEMBER 30 DECEMBER 31
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1995 1994
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Non-Current Receivables, net $58,647 $31,980
Other Deposits 20,363 17,203
Intangibles, net 15,110 19,489
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$94,120 $68,672
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4. LONG TERM DEBT AND CURRENT MATURITIES
This caption on the Condensed Balance Sheet includes the following:
SEPTEMBER 30 DECEMBER 31
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1995 1994
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Colo. Nat'l Bank - Equip./R.E.
Prime +.50% $224,355 $293,558
Concord Financial - Equipment, 8.375% 284,229 351,371
Less: Current Portion (301,698) (179,979)
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$206,886 $464,950
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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 2,493,000 shares (1995) and 2,486,000 shares (1994).
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 used in operating activities during
the nine month period ended September 30, 1995 totaled $417,203 in
comparison to an increase in cash flow from operating activities of
$1,193,000 during the same period of 1994. The decrease in 1995 is
due to a significant increase in inventories, coupled with a
significantly smaller increase in trade accounts payable. The
increase in inventories was caused by an increase in business volume
during the quarter ended September 30, 1995. This increase in
business volume was reflected in revenues during the quarter, and the
fulfillment of orders in-process for completion in the fourth quarter
of 1995. Trade accounts payable rose by a comparatively small amount,
and actually declined as a percent of total liabilities. The current
ratio was 2.8 at September 30, 1995 in comparison to 2.9 at
December 31, 1994.
Cash flows used in investing activities were $203,020 through
September 30, 1995 versus $766,000 in 1994. During the 1994 period,
the Corporation had increased its spending due to a previously
disclosed major asset addition.
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 September 30, 1995 $200,000 was
outstanding under the revolving line of credit, in comparison to
$100,000 outstanding at December 31, 1994 and accounts payable
increased from $1,449,609 at December 31, 1994 to $1,636,665 at
September 30, 1995. Trade accounts payable made up 68% and 70% of
total current liabilities at September 30, 1995 and December 31, 1994
respectively. At September 30, 1995 the Corporation had $1,800,000 of
unused borrowing availability under its revolving line of credit, in
comparison to $1,400,000 at December 31, 1994. 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 September 30, 1995 of $206,886, 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.
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
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QUARTER ENDED SEPTEMBER 30
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1995 1994
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Net Sales 100.0% 100.0%
Cost of Goods Sold 76.5% 70.0%
Gross Margin 23.5% 30.0%
R & D 1.3% 4.2%
Selling Expenses 7.8% 9.0%
General & Admin. 4.6% 8.7%
Interest Expense, Net .1% .0%
QUARTER ENDED SEPTEMBER 30, 1995 COMPARED TO SEPTEMBER 30, 1994
The Corporation's net sales in the September 30, 1995 quarter
increased by 93% over the comparable quarter of 1994. In addition,
gross margins increased by 53% due to lower pricing in the primary
bonding market and lower levels of sales of forming products in 1995.
The Corporation's backlog of orders scheduled for shipment during the
remainder of 1995 was $6.0 million as of September 30, 1995.
Selling expense increased by 68% over 1994 levels due to the
recruitment, relocation and compensation of a new Vice President of
Marketing and Sales in 1995 as well as other staff additions in 1995.
General and administrative expense increased by 1.2% in the 1995
quarter. The 1994 quarter reflected certain relocation costs that
were not incurred in 1995.
Research and development costs were $52,632 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 1995.
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO SEPTEMBER 30, 1994
The following table summarizes certain items included in the
Corporation's Statements of Operations for the nine months ending
September 30, 1995 and September 30, 1994.
AS A PERCENTAGE OF REVENUES
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NINE MONTHS ENDED SEPTEMBER 30
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1995 1994
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Net Sales 100.0% 100.0%
Cost of Goods Sold 77.1% 71.0%
Gross Margin 22.9% 29.0%
R & D 2.2% 3.8%
Selling Expenses 9.1% 9.1%
General & Admin. 6.6% 9.0%
Interest Expense, Net .3% .2%
The Corporation's net sales in the nine months ended September 30,
1995 increased by 13% compared to the same period in 1994. Gross
margins declined due to lower shipments of formed products, and lower
pricing in the primary bonding market.
Selling expense increased by 13% over 1994 levels but remained stable
as a percent of net sales. General and administrative expense
decreased by $171,547 in 1995 due to reduced costs associated with
recruitment and relocation expenses in 1995.
Research and development costs were $148,800 lower in the 1995 period
than in the comparable 1994 period. This reduction was due to a
specific research and development project in 1994 which was concluded
in 1994, and did not contribute to costs in the 1995 period. Net
interest expense increased in 1995 due to payment of a commitment fee
for a new revolving line of credit in 1995.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The results of the Company's Annual Meeting of Stockholders
held on July 21, 1995, were reported in the Company's Form 10-QSB for
the quarter ended June 30, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a.) None.
(b.) None.
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: October 18, 1995 Craig N. Evans
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Craig N. Evans, Vice President Finance
and Chief Financial Officer
EXHIBIT INDEX
Exhibit Sequential
No. Description Page No.
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27 Financial Data Schedule 12
Page 11 of 12