SECURITIES AND EXCHANGE COMMISSION

(Exact name of Registrant as Specified in its Charter)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and ~~"emerging~~“emerging growth ~~company"~~company” in Rule 12b-2 of the Exchange

Accelerated filer ☒

~~Large accelerated filer~~ o

~~Accelerated filer~~ x

~~Non-accelerated filer~~ o

~~(Do not check if smaller reporting company)~~

~~Smaller reporting company~~ o

Emerging growth company o

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. We intend the forward-looking statements throughout this quarterly report on Form 10-Q to be covered by the safe harbor provisions for forward-looking statements. Statements contained in this report which are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from projected results. These statements can sometimes be identified by our use of forward-looking words such as “may,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” and other phrases of similar meaning. Such statements include ~~projections, guidance~~expectations regarding improvements to DynaEnergetics’ end markets, our ability to access the capital markets, expected continuing litigation costs, expected material and ~~other statements regarding~~labor cost trends, our ~~expected financial position~~ability to claim the Employee Retention Credit (“ERC”) under the Coronavirus Aid, Relief, and ~~operating results, the expected impacts of new accounting standards~~Economic Security Act, as amended, and the ~~timing~~availability of our implementation thereof, our business strategy, expectations regarding NobelClad's end markets and activity levels, comments regarding expanding demand for DynaEnergetics' products, particularly DynaSelect^TM ~~and DynaStage~~^TM~~, expected expansion plans in Blum, Texas, Troisdorf, Germany and Mt. Braddock, Pennsylvania,~~funds to support our liquidity position and ~~factors impacting such position, including expectations regarding legal costs, and the outcome of any pending litigation or contingencies.~~our expected future liquidity position. The forward-looking information is based on information available as of the date of this quarterly report and on numerous assumptions and developments that are not within our control. Although we believe that our expectations as expressed in these forward-looking statements are reasonable, we cannot assure you that our expectations will turn out to be correct. Factors that could cause actual results to differ materially include, but are not limited to, those factors referenced in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020 and such things as the following: ~~changes in global~~impacts of COVID-19 and any related preventative or protective actions taken by governmental authorities and resulting economic ~~conditions;~~impacts, including recessions or depressions; supply chain delays and disruptions; transportation disruptions; the ability to obtain new contracts at attractive prices; the size and timing of customer orders and ~~shipment;~~shipments; product pricing and margins; our ability to realize sales from our backlog; fluctuations in customer demand; fluctuations in foreign currencies; competitive factors; the timely completion of contracts; the timing and size of expenditures; the timely receipt of government approvals and permits; the price and availability of metal and other raw material; fluctuations in tariffs or quotas; changes in laws and regulations, both domestic and foreign, impacting our business and the business of the end-market users we serve; the adequacy of local labor supplies at our facilities; current or future limits on manufacturing capacity at our various operations; our ability to successfully integrate acquired businesses; the impact of pending or future litigation or regulatory matters; the availability and cost of funds; our ability to access our borrowing capacity under our credit facility or access the capital markets; and ~~general~~global economic conditions ~~both domestic~~ and ~~foreign, impacting our business~~political and ~~the business of the end-market users we serve.~~economic developments. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof. We undertake no obligation to publicly release the results of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

INDEX


				Page
PART I - FINANCIAL INFORMATION

			~~Page~~
~~PART I - FINANCIAL INFORMATION~~

Item 1	Condensed Consolidated Financial Statements		34

		Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2021 (unaudited) and December 31, ~~2016~~2020		34
		Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (unaudited)		5
		Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (unaudited)		6
		Condensed Consolidated Statement s of Stockholders’ Equity for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2021 and 2020 (unaudited)		7
		Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (unaudited)		89
		Notes to Condensed Consolidated Financial Statements (unaudited)		910

Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations		1923

Item 3		Quantitative and Qualitative Disclosure about Market Risk		3138

Item 4		Controls and Procedures		3138

PART II - OTHER INFORMATION

Item 1		Legal Proceedings		3339

Item 1A		Risk Factors		3339

Item 2		Unregistered Sales of Equity Securities and Use of Proceeds		3339

Item 3		Defaults Upon Senior Securities		3339

Item 4		Mine Safety Disclosures		3339

Item 5		Other Information		3339

Item 6		Exhibits		3339

		Signatures		3540

Table of Contents

Part I - FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements

DMC GLOBAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in Thousands, Except Share and Per Share Data)

September 30, December 31,
2017 2016
(unaudited)
ASSETS

CURRENT ASSETS:

Cash and cash equivalents $ 8,861
$ 6,419
Accounts receivable, net of allowance for doubtful accounts of $1,102 and $1,146, respectively 45,443
32,959
Inventory, net 31,489
28,833
Prepaid expenses and other 5,293
5,148

Total current assets 91,086
73,359

PROPERTY, PLANT AND EQUIPMENT 118,752
109,427
Less - accumulated depreciation (59,167 ) (52,294 )

Property, plant and equipment, net 59,585
57,133

GOODWILL, net —
16,097

PURCHASED INTANGIBLE ASSETS, net 13,980
15,827

OTHER ASSETS, net 215
139

TOTAL ASSETS $ 164,866
$ 162,555

~~The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.~~

~~Table of Contents~~

~~DMC GLOBAL INC.~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~(Amounts in Thousands, Except Share and Per Share Data)~~

September 30, December 31,
2017 2016
(unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable $ 15,794
$ 13,260
Accrued expenses 4,188
4,173
Accrued anti-dumping duties 3,585
6,550
Dividend payable 295
290
Accrued income taxes 958
548
Accrued employee compensation and benefits 5,437
3,307
Customer advances 2,772
2,619

Total current liabilities 33,029
30,747

LINES OF CREDIT 21,958
15,732

DEFERRED TAX LIABILITIES 1,040
1,448

OTHER LONG-TERM LIABILITIES 2,534
2,219

Total liabilities 58,561
50,146

COMMITMENTS AND CONTINGENT LIABILITIES

STOCKHOLDERS’ EQUITY:
Preferred stock, $0.05 par value; 4,000,000 shares authorized; no issued and outstanding shares —
—
Common stock, $0.05 par value; 25,000,000 shares authorized; 14,769,342 and 14,496,359 shares outstanding, respectively 740
725
Additional paid-in capital 75,380
73,116
Retained earnings 62,330
80,107
Other cumulative comprehensive loss (31,784 ) (41,514 )
Treasury stock, at cost; 39,783 and 2,378 shares, respectively (361 ) (25 )

Total stockholders’ equity 106,305
112,409

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 164,866
$ 162,555


	June 30, 2021		December 31, 2020
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	36,363	$	28,187
Marketable securities	144,931		25,736
Accounts receivable, net of allowance for doubtful accounts of $2,690 and $2,605, respectively	43,027		31,366
Inventories	62,478		52,573
Prepaid expenses and other	10,577		5,448


Total current assets	297,376		143,310
Property, plant and equipment	172,409		180,278
Less - accumulated depreciation	(66,820)		(70,867)
Property, plant and equipment, net	105,589		109,411


Purchased intangible assets, net	2,391		3,665
Deferred tax assets	6,097		4,582
Other assets	22,893		18,677
Total assets	$	434,346	$	279,645

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	25,122	$	17,574
Accrued expenses	6,702		5,301


Accrued income taxes	8,696		7,279
Accrued employee compensation and benefits	7,025		7,160
Contract liabilities	10,188		4,928
Current portion of long-term debt	0		3,125
Other current liabilities	1,477		1,741

Total current liabilities	59,210		47,108
Long-term debt	0		8,139

Deferred tax liabilities	1,153		2,254
Other long-term liabilities	27,946		25,230
Total liabilities	88,309		82,731
Commitments and contingencies (Note 12)	0		0
Stockholders’ equity
Preferred stock, $0.05 par value; 4,000,000 shares authorized; 0 issued and outstanding shares	0		0
Common stock, $0.05 par value; 25,000,000 shares authorized; 18,725,008 and 15,389,285 shares outstanding, respectively	965		796
Additional paid-in capital	269,375		117,387
Retained earnings	117,813		115,657
Other cumulative comprehensive loss	(24,456)		(22,962)
Treasury stock, at cost, and company stock held for deferred compensation, at par; 569,737 and 528,274 shares, respectively	(17,660)		(13,964)


Total stockholders’ equity	346,037		196,914
Total liabilities and stockholders’ equity	$	434,346	$	279,645

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

DMC GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in Thousands, Except Share and Per Share Data)

(unaudited)

Table of Contents

DMC GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~LOSS~~INCOME (LOSS)

(Amounts in Thousands)

(unaudited)

Table of Contents

DMC GLOBAL INC.

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in Thousands, Except Share Data)

(unaudited)


								Other		Treasury Stock and
				Additional				Cumulative		Company Stock Held for
	Common Stock			Paid-In		Retained		Comprehensive		Deferred Compensation
	Shares	Amount		Capital		Earnings		Loss		Shares	Amount		Total
Balances, March 31, 2021	16,399,813	$	820	$	144,094	$	116,089	$	(24,929)	(566,343)	$	(17,644)	$	218,430
Net income	—	—		—		1,724		—		—	—		1,724
Change in cumulative foreign currency translation adjustment	—	—		—		—		473		—	—		473
Shares issued in connection with equity offering	2,875,000	144		123,317		—		—		—	—		123,461

Shares issued in connection with stock compensation plans	19,932	1		252		—		—		—	—		253

Stock-based compensation	—	—		1,712		—		—		—	—		1,712

Treasury stock activity	—	—		—		—		—		(3,394)	(16)		(16)

Balances, June 30, 2021	19,294,745	$	965	$	269,375	$	117,813	$	(24,456)	(569,737)	$	(17,660)	$	346,037


								Other		Treasury Stock and
				Additional				Cumulative		Company Stock Held for
	Common Stock			Paid-In		Retained		Comprehensive		Deferred Compensation
	Shares	Amount		Capital		Earnings		Loss		Shares	Amount		Total
Balances, March 31, 2020	15,260,835	$	763	$	86,832	$	121,224	$	(26,643)	(509,593)	$	(8,487)	$	173,689
Net loss	—	—		—		(5,648)		—		—	—		(5,648)
Change in cumulative foreign currency translation adjustment	—	—		—		—		605		—	—		605
Shares issued in connection with stock compensation plans	36,456	2		261		—		—		—	—		263

Stock-based compensation	—	—		1,408		—		—		—	—		1,408

Treasury stock activity	—	—		—		—		—		(18,388)	(34)		(34)
Balances, June 30, 2020	15,297,291	$	765	$	88,501	$	115,576	$	(26,038)	(527,981)	$	(8,521)	$	170,283

Table of Contents

DMC GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in Thousands, Except Share Data)

(unaudited)

Other
Additional Cumulative
Common Stock Paid-In Retained Comprehensive Treasury Stock
Shares Amount Capital Earnings Loss Shares Amount Total
Balances, December 31, 2016 14,498,737
$ 725
$ 73,116
$ 80,107
$ (41,514 ) (2,378 ) $ (25 ) $ 112,409
Net loss —
—
—
(16,892 ) —
—
—
(16,892 )
Change in cumulative foreign currency translation adjustment —
—
—
—
9,730
—
—
9,730
Shares issued in connection with stock compensation plans 310,388
15
139
—
—
—
—
154
Stock-based compensation —
—
2,125
—
—
—
—
2,125
Dividends declared —
—
—
(885 ) —
—
—
(885 )
Treasury stock purchases —
—
—
—
—
(37,405 ) (336 ) (336 )
Balances, September 30, 2017 14,809,125
$ 740
$ 75,380
$ 62,330
$ (31,784 ) (39,783 ) $ (361 ) $ 106,305


								Other		Treasury Stock and
				Additional				Cumulative		Company Stock Held for
	Common Stock			Paid-In		Retained		Comprehensive		Deferred Compensation
	Shares	Amount		Capital		Earnings		Loss		Shares	Amount		Total
Balances, December 31, 2020	15,917,559	$	796	$	117,387	$	115,657	$	(22,962)	(528,274)	$	(13,964)	$	196,914
Net income	—	—		—		2,156		—		—	—		2,156
Change in cumulative foreign currency translation adjustment	—	—		—		—		(1,494)		—	—		(1,494)
Shares issued in connection with equity offering	2,875,000	144		123,317		—		—		—	—		123,461
Shares issued in connection with at-the-market offering program	397,820	20		25,242		—		—		—	—		25,262
Shares issued in connection with stock compensation plans	104,366	5		248		—		—		—	—		253

Stock-based compensation	—	—		3,181		—		—		—	—		3,181

Treasury stock activity	—	—		—		—		—		(41,463)	(3,696)		(3,696)

Balances, June 30, 2021	19,294,745	$	965	$	269,375	$	117,813	$	(24,456)	(569,737)	$	(17,660)	$	346,037


								Other		Treasury Stock and
				Additional				Cumulative		Company Stock Held for
	Common Stock			Paid-In		Retained		Comprehensive		Deferred Compensation
	Shares	Amount		Capital		Earnings		Loss		Shares	Amount		Total
Balances, December 31, 2019	15,117,207	$	756	$	85,639	$	119,002	$	(25,803)	(464,532)	(7,453)		$	172,141
Net loss	—	—		—		(1,493)		—		—	—		(1,493)
Change in cumulative foreign currency translation adjustment	—	—		—		—		(235)		—	—		(235)
Shares issued in connection with stock compensation plans	180,084	9		254		—		—		—	—		263
Adjustment for cumulative effect from change in accounting principle (ASU 2016-13)	—	—		—		(50)		—		—	—		(50)
Stock-based compensation	—	—		2,608		—		—		—	—		2,608
Dividends declared	—	—		—		(1,883)		—		—	—		(1,883)
Treasury stock activity	—	—		—		—		—		(63,449)	(1,068)		(1,068)
Balances, June 30, 2020	15,297,291	$	765	$	88,501	$	115,576	$	(26,038)	(527,981)	$	(8,521)	$	170,283

Table of Contents

DMC GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in Thousands)

(unaudited)


	Six months ended June 30,
	2021		2020
Cash flows provided by operating activities:
Net income (loss)	$	2,156	$	(1,493)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

Depreciation	5,530		4,716
Amortization of purchased intangible assets	612		707
Amortization of deferred debt issuance costs	112		99
Stock-based compensation	3,335		2,559

Deferred income taxes	(2,616)		(1,360)
Gain on disposal of property, plant and equipment	(283)		(1)
Restructuring expenses and asset impairments	127		3,162



Change in:
Accounts receivable, net	(11,985)		27,245
Inventories	(10,477)		(5,713)
Prepaid expenses and other	(9,076)		(1,242)
Accounts payable	7,476		(10,778)
Contract liabilities	5,345		2,477

Accrued expenses and other liabilities	3,723		(9,250)
Net cash (used in) provided by operating activities	(6,021)		11,128

Cash flows used in investing activities:
Investment in marketable securities	(123,984)		0
Proceeds from maturities of marketable securities	4,799		0

Acquisition of property, plant and equipment	(3,252)		(7,476)
Proceeds on sale of property, plant and equipment	1,004		14

Net cash used in investing activities	(121,433)		(7,462)

Cash flows provided by (used in) financing activities:

Repayments on capital expenditure facility	(11,750)		(1,562)

Payment of dividends	0		(3,749)
Payment of debt issuance costs	0		(84)
Net proceeds from issuance of common stock through equity offering	123,461		0
Net proceeds from issuance of common stock through at-the-market offering program	25,262		0
Net proceeds from issuance of common stock to employees and directors	253		263
Treasury stock purchases	(2,451)		(1,068)

Net cash provided by (used in) financing activities	134,775		(6,200)

Effects of exchange rates on cash	855		(571)

Net increase (decrease) in cash and cash equivalents	8,176		(3,105)
Cash and cash equivalents, beginning of the period	28,187		20,353
Cash and cash equivalents, end of the period	$	36,363	$	17,248

Nine months ended September 30,
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $ (16,892 ) $ (4,316 )
Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation (including capital lease amortization) 5,030
5,024
Amortization of purchased intangible assets 3,034
3,023
Amortization of deferred debt issuance costs 359
123
Stock-based compensation 2,125
1,599
Deferred income tax (408 ) (563 )
Gain (loss) on disposal of property, plant and equipment (46 ) 35
Restructuring expenses 458
1,202
Goodwill impairment charge 17,584
—
Change in:

Accounts receivable, net (10,747 ) 10,480
Inventory, net (1,221 ) 3,400
Prepaid expenses and other 20
(347 )
Accounts payable 1,051
(3,166 )
Customer advances 97
180
Accrued anti-dumping duties (2,965 ) 128
Accrued expenses and other liabilities 3,039
1,037
Net cash provided by operating activities 518
17,839

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of property, plant and equipment (3,299 ) (4,070 )
Proceeds on sale of property, plant and equipment 2
31
Change in other non-current assets —
31
Net cash used in investing activities (3,297 ) (4,008 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings (repayments) on bank lines of credit, net 6,000
(12,250 )
Payment on capital lease obligations —
(3 )
Payment of dividends (880 ) (861 )
Payment of deferred debt issuance costs (133 ) —
Net proceeds from issuance of common stock to employees and directors 154
190
Treasury stock purchases (336 ) (21 )
Net cash provided by (used in) financing activities 4,805
(12,945 )

EFFECTS OF EXCHANGE RATES ON CASH 416
274

NET INCREASE IN CASH AND CASH EQUIVALENTS 2,442
1,160
CASH AND CASH EQUIVALENTS, beginning of the period 6,419
6,291
CASH AND CASH EQUIVALENTS, end of the period $ 8,861
$ 7,451

The information included in the condensed consolidated financial statements is unaudited but includes all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the interim periods presented. These condensed consolidated financial statements should be read in conjunction with the financial statements that are included in our Annual Report filed on Form 10-K for the year ended December 31, ~~2016.~~2020.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of DMC Global Inc. ~~("DMC"~~(“DMC”, “we”, “us”, “our”, or the “Company”) and its controlled subsidiaries. Only subsidiaries in which controlling interests are maintained are consolidated. All significant intercompany accounts, profits, and transactions have been eliminated in consolidation.

Marketable Securities

We typically invest in highly rated securities with the primary objectives of preserving principal, providing access to liquidity to fund the ongoing operations and strategic needs of the Company and its subsidiaries, and achieving a yield that is commensurate with low risk and highly liquid securities.

Our investments in marketable debt securities are classified as either trading, available-for-sale or held-to-maturity based on the nature of the securities and their availability for use in current operations. The Company classifies its marketable debt securities in the Condensed Consolidated Balance Sheet as current or non-current based on related maturities and expectations of sales and redemptions in the subsequent twelve-month period. The Company may sell certain of its marketable debt securities prior to their stated maturities to manage liquidity, credit risk, or asset allocation.

As of June 30, 2021 and December 31, 2020, our investments had maturities ranging from three to twelve months, and all such investments have been classified and accounted for as trading securities.

The Company’s investments in marketable securities consisted of the following:


	June 30, 2021		December 31, 2020
U.S. Treasury securities	$	76,590	$	25,736
Commercial paper (A-1 or P-1 rated)	68,341		0
Marketable securities	$	144,931	$	25,736

The Company’s U.S. Treasury securities have annual yields between 0.01% and 0.02% and the commercial paper securities have annual yields between 0.05% and 0.1%. The Company’s investments in marketable securities are measured at fair value with gains and losses recognized in the Condensed Consolidated Statement of Operations within “Other income, net." For the three and six months ended June 30, 2021, the net gains on marketable securities were $3 and $10, respectively.

The Company measures expected credit losses for its accounts receivable using a current expected credit loss model, which is based on historical experience, adjusted for current conditions and reasonable and supportable forecasts. The Company has disaggregated pools of accounts receivable balances by business, geography and/or customer risk profile and has used history and other experience to establish an allowance for credit losses at the time the receivable is recognized. To measure expected credit losses, we have elected to pool trade receivables by segment and analyze DynaEnergetics and NobelClad accounts receivable balances as separate populations. Within each segment, receivables exhibit similar risk characteristics.

During the three and six months ended June 30, 2021, our expected loss rate continued to reflect uncertainties in market conditions present in both of our businesses due to the ongoing COVID-19 pandemic. In addition, we reviewed receivables outstanding, including aged balances, and in circumstances where we are aware of a specific customer’s inability to meet its financial obligation to us, we recorded a specific allowance for credit losses (with the offsetting expense charged to “Selling and distribution expenses” in our Condensed Consolidated Statements of Operations) against the amounts due, reducing the net recognized receivable to the amount we estimate will be collected. During the three and six months ended June 30, 2021, provisions of $58 and $96, respectively, were recorded.

The following table summarizes year-to-date activity in the allowance for credit losses on receivables from DynaEnergetics and NobelClad customers:


	DynaEnergetics		NobelClad		DMC Global Inc.
Allowance for doubtful accounts, December 31, 2020	$	2,590	$	15	$	2,605

Current period provision for expected credit losses	96		0		96

Recoveries of amounts previously reserved	(10)		0		(10)
Impacts of foreign currency exchange rates and other	(1)		0		(1)
Allowance for doubtful accounts, June 30, 2021	$	2,675	$	15	$	2,690

The Company’s revenues are primarily derived from consideration paid by customers for tangible goods. The Company analyzes its different goods by segment to determine the appropriate basis for revenue recognition. Revenue is not generated from sources other than contracts with customers and revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. There are no material upfront costs for operations that are incurred from contracts with customers.

Our rights to payments for goods transferred to customers arise when control is transferred at a point in time and not on any other criteria. Payment terms and conditions vary by contract, although terms generally include a requirement of payment within 30 to 60 days. In instances when we require customers to make advance payments prior to the shipment of their orders, we record a contract liability. We have determined that our contract liabilities do not include a significant financing component given the short duration between order initiation and order fulfillment within each of our segments. Please refer to Note 5 “Contract Liabilities” for further information on contract liabilities and Note 10 “Business Segments” for disaggregated revenue disclosures.

The effective tax rate for each of the periods reported differs from the U.S. statutory rate due primarily to variation in contribution to consolidated pre-tax income from each jurisdiction for the respective periods, differences between the U.S. and foreign tax rates (which range from 20% to 35%) on earnings that have been permanently reinvested and changes to valuation allowances on our deferred tax assets.

We recognize deferred tax assets and liabilities for the expected future income tax consequences of temporary differences between the financial reporting and tax ~~bases~~basis of assets and liabilities. Any effects of changes in income tax rates or tax laws are included in the provision for income taxes in the period of enactment. The deferred income tax impact of tax credits ~~are~~is recognized as an immediate adjustment to income tax expense. We recognize deferred tax assets for the expected future effects of all deductible temporary differences to the extent we believe these assets will more likely than not be realized. We record a valuation allowance when, based on current circumstances, it is more likely than not that all or a portion of the deferred tax assets will not be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, recent financial operations and their associated valuation allowances, if any.

We recognize the tax benefits from uncertain tax positions only when it is more likely than not, based on the technical merits of the ~~position; the tax~~ position that it will be sustained upon examination, including the resolution of any related appeals or litigation. The tax benefits recognized in the consolidated financial statements from such a position are measured as the largest benefit that is more likely than not ~~of being~~to be realized upon ultimate resolution. We recognize interest and penalties related to uncertain tax positions in operating expense.

In the U.S., tax audits for the years 2012 through 2015 were closed during the second quarter 2017, and no adjustments to the Company's tax provisions were proposed. In Germany, tax audits are currently in progress for the years 2011 through 2014. Our tax provisions reflect our best estimate of state, local, federal, and foreign taxes. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with our expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.

~~Unvested awards of share-based payments~~In periods with ~~rights to receive dividends or dividend equivalents are considered participating securities for purposes of calculating~~net income, the Company computes earnings per share (“EPS”) using a two-class method, which is an earnings allocation formula that determines EPS for (i) each class of common stock (the Company has a single class of common

Basic EPS is calculated by dividing net income available to common stockholders of the Company by the weighted average number of shares of common stock outstanding during the period. Diluted EPS adjusts basic EPS for the effects of restricted stock awards, performance share units and other potentially dilutive financial instruments (dilutive securities), only in the periods in which ~~we have net income and require the use~~such effect is dilutive. The effect of the ~~two class~~dilutive securities is reflected in diluted EPS by application of the more dilutive of (1) the treasury stock method or (2) the two-class method. For the periods presented, diluted EPS using the treasury stock method was less dilutive than the two-class method; as such, only the two-class method has been included below.


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Net income (loss), as reported	$	1,724	$	(5,648)	2,156		(1,493)

Less: Undistributed net income available to participating securities	(17)		0		(21)		0
Numerator for basic net income (loss) per share:	1,707		(5,648)		2,135		(1,493)
Add: Undistributed net income allocated to participating securities	17		0		21		0
Less: Undistributed net income reallocated to participating securities	(17)		0		(21)		0
Numerator for diluted net income (loss) per share:	1,707		(5,648)		2,135		(1,493)
Denominator:
Weighted average shares outstanding for basic net income (loss) per share	17,554,809		14,832,242		16,495,685		14,745,661
Effect of dilutive securities (1)	13,635		0		11,815		0
Weighted average shares outstanding for diluted net income (loss) per share	17,568,444		14,832,242		16,507,500		14,745,661
Net income (loss) per share
Basic	$	0.10	$	(0.38)	$	0.13	$	(0.10)
Diluted	$	0.10	$	(0.38)	$	0.13	$	(0.10)

Deferred compensation

The Company maintains a Non-Qualified Deferred Compensation Plan (the “Plan”) as part of its overall compensation package for ~~calculating EPS. Under this method,~~certain employees. Participants are eligible to defer a portion of ~~net income is allocated~~their annual salary, their annual incentive bonus, and their equity awards through the Plan on a tax-deferred basis. Deferrals into the Plan are not matched or subsidized by the Company, nor are they eligible for above-market or preferential earnings.

The Plan provides for deferred compensation obligations to ~~these participating securities and therefore is excluded from the calculation~~be settled either by delivery of ~~EPS allocated to~~a fixed number of shares of DMC’s common stock or in cash, in accordance with participant contributions and elections. For deferred equity awards, subsequent to equity award vesting and after a period prescribed by the Plan, participants can elect to diversify contributions of equity awards into other investment options available to Plan participants. Once diversified, contributions of equity awards will be settled by delivery of cash.

The Company has established a grantor trust commonly known as ~~shown~~a “rabbi trust” and contributed certain assets to satisfy the future obligations to participants in the ~~table below.~~Plan. These assets are subject to potential claims of the Company’s general creditors. The assets held in the trust include unvested restricted stock awards (“RSAs”), vested company stock awards, company-owned life insurance (“COLI”) on certain employees, and money market and mutual funds. Unvested RSAs and common stock held by the trust are reflected in the Consolidated Balance Sheets within “Treasury stock, at cost, and company stock held for deferred compensation, at par” at the par value of the common stock or unvested RSAs. These accounts are not adjusted for subsequent changes in the fair value of the common stock. COLI is accounted for at the cash surrender value while money market and mutual funds held by the trust are accounted for at fair value.

~~Computation and reconciliation~~Deferred compensation obligations that will be settled in cash are accounted for on an accrual basis in accordance with the terms of ~~earnings per share~~the Plan. These obligations are adjusted based on changes in value of the underlying investment options chosen by Plan participants. Deferred compensation obligations that will be settled by delivery of a fixed number of previously vested shares of the Company’s common stock are reflected in the Consolidated Statements of Stockholders’ Equity within “Common stock” at the par value of the common stock or unvested RSAs. These accounts are not adjusted for subsequent changes in the fair value of the common stock.

The balances related to the deferred compensation plan were as follows:


	Consolidated Balance Sheet location	June 30, 2021		December 31, 2020
Deferred compensation assets	Other assets	$	11,567	$	7,596
Deferred compensation obligations	Other long-term liabilities	$	13,942	$	11,894

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Numerator:
Net loss $ (14,064 ) $ (3,136 ) $ (16,892 ) $ (4,316 )
Less income allocated to RSAs —
—
—
—
Net income (loss) allocated to common stock for EPS calculation $ (14,064 ) $ (3,136 ) $ (16,892 ) $ (4,316 )

Denominator:
Weighted average common shares outstanding - basic 14,368,225
14,195,921
14,333,452
14,105,594
Dilutive stock-based compensation plans —
—
—
—
Weighted average common shares outstanding - diluted 14,368,225
14,195,921
14,333,452
14,105,594

Net income (loss) allocated to common stock for EPS calculation:
Basic $ (0.98 ) $ (0.22 ) $ (1.18 ) $ (0.31 )
Diluted $ (0.98 ) $ (0.22 ) $ (1.18 ) $ (0.31 )

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We are required to use an established hierarchy for fair value measurements based upon the inputs to the valuation and the degree to which they are observable or not observable in the market. The three levels in the hierarchy are as follows:

•Level 1 — Inputs to the valuation based upon quoted prices (unadjusted) for identical assets or liabilities in active markets that are accessible as of the measurement date.

•Level 2 — Inputs to the valuation include quoted prices in either markets that are not active, or in active markets for similar assets or liabilities, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data.

•Level 3 — Inputs to the valuation that are unobservable inputs for the asset or liability.

The highest priority is assigned to Level 1 inputs and the lowest priority to Level 3 inputs.

The carrying value of ~~cash and cash equivalents, trade~~ accounts receivable and ~~payables,~~payable, accrued expenses, revolving loans under our credit facility and ~~lines of credit~~borrowings under our capital expenditure facility, when outstanding, approximate their fair value.

Our U.S. Treasury marketable securities are valued using quoted prices in active markets that are accessible as of the measurement date. Our revolving loans and borrowings under our capital expenditure facility, when outstanding, reset each month at market interest rates. Money market funds and mutual funds of $7,923 as of June 30, 2021 and $4,244 as of December 31, 2020 held to satisfy future deferred compensation obligations are valued based upon the market values of underlying securities. We classify these assets as Level 1 in the fair value hierarchy.

Our commercial paper marketable securities are valued using quoted market prices in non-active markets. Our foreign currency forward contracts are also valued using quoted market prices in non-active markets or are determined using a yield curve model based on current market rates. As a result, we ~~intend to~~ classify ~~these investments~~commercial paper marketable securities and foreign currency forward contracts as Level 2 in the fair value hierarchy.

We ~~did not~~ did not hold any Level 3 assets or liabilities as of ~~September~~June 30, ~~2017~~2021 or December 31, ~~2016. The goodwill impairment charge recorded in the third quarter of 2017 was calculated using Level 3 inputs.~~2020.

~~Recently Adopted~~Recent Accounting ~~Standards~~Pronouncements

In ~~July 2015,~~December 2019, the Financial Accounting Standards Board ~~("FASB")~~ issued ana new accounting ~~standards update ("ASU")~~pronouncement regarding accounting for income taxes. The new standard removes certain exceptions to ~~change~~ the ~~measurement of inventory from lower of cost or market~~general principles in ASC 740 Income Taxes and also clarifies and amends existing guidance to ~~lower of cost and net realizable value. This pronouncement is~~provide for more consistent application. The new standard became effective for ~~reporting periods beginning after December 15, 2016, and~~ the Company ~~has adopted it as of~~in the first quarter of ~~2017. The adoption of this standard~~fiscal 2021 and did not have a material impact on ~~the Company's~~our consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment,” to simplify the method~~

Table of measuring a goodwill impairment charge in the event a reporting unit’s carrying amount exceeds its fair value. In those circumstances, the new standard requires the Company to recognize an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value. The Company adopted this standard during the third quarter of 2017 and applied it in the test for goodwill impairment described in Note 4.Contents

~~Recent Accounting Pronouncements~~

In ~~October 2016, the~~ ~~FASB issued an ASU which~~ removes the prohibition against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. This ASU is effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. ~~The Company is in the process of evaluating the impact of adopting this standard on its consolidated financial statements.~~

In February 2016, the FASB issued an ASU which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. This ASU will be effective beginning in the first quarter of 2019. Early adoption is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

In May 2014, the FASB issued an ASU to clarify the principles of recognizing revenue and to develop a common revenue standard and disclosure requirements for U.S. GAAP and IFRS. The pronouncement is effective for reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The standard can be adopted using either of two methods: (1) retrospective application to each prior reporting period presented with the option to elect certain practical expedients, as defined within the standard ("full retrospective") or (2) retrospective application with the cumulative effect of adoption recognized at the date of initial application and providing certain additional disclosures, as defined within the standard ("modified retrospective"). Management currently plans to adopt the ASU for the quarter ended March 31, 2018, as required by the standard, and plans to use the modified retrospective approach.

Currently, using internal resources, management is analyzing contracts from the NobelClad and DynaEnergetics segments to determine the technical accounting conclusions and the impact on business processes and systems of the new revenue standard. In our NobelClad business, contracts are often for unique projects, but the vast majority of contracts contain standard terms and conditions. In our DynaEnergetics business, we sell a range of products to a wide variety of customers, but the contracts also often contain similar terms and conditions. We have reviewed contracts representing a majority of NobelClad's and DynaEnergetics' revenue for the year ended December 31, 2016 and have preliminarily concluded that applying the new standard to those contracts would not have a material impact on our financial statements.

~~The Company is continuing to evaluate the impacts of our pending adoption, and our preliminary assessments are subject to change.~~

3. INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out) ~~and~~or net realizable value. ~~Cost~~Significant cost elements included in inventory are material, labor, freight, subcontract costs, and manufacturing overhead. As necessary, we ~~record~~adjust inventory to its net realizable value by recording provisions ~~and maintain reserves~~ for excess, slow moving and obsolete inventory. ~~To determine reserve amounts, we~~We regularly review inventory quantities on hand and values, and compare them to estimates of future product demand, market conditions, production requirements and technological developments.

Inventories ~~consist~~consisted of the following at ~~September~~June 30, ~~2017~~ ~~and~~ 2021:


	DynaEnergetics		NobelClad		DMC Global Inc.
Raw materials	$	16,698	$	10,675	$	27,373
Work-in-process	10,966		7,721		18,687
Finished goods	15,827		409		16,236
Supplies	0		182		182
Inventories	$	43,491	$	18,987	$	62,478

Inventories consisted of the following at December 31, ~~2016~~ ~~and include reserves of $2,985 and $4,226, respectively:~~2020:


	DynaEnergetics		NobelClad		DMC Global Inc.
Raw materials	$	13,250	$	11,903	$	25,153
Work-in-process	7,062		6,682		13,744
Finished goods	12,806		669		13,475
Supplies	0		201		201
Inventories	$	33,118	$	19,455	$	52,573

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September 30,
2017 December 31,
2016
Raw materials $ 13,383
$ 10,926
Work-in-process 5,757
5,417
Finished goods 12,093
12,146
Supplies 256
344

$ 31,489
$ 28,833

4. ~~GOODWILL~~

~~As of December 31, 2016, all of the goodwill was recorded within our NobelClad segment. The changes to the carrying amount of goodwill during the period are summarized below:~~

Goodwill balance at December 31, 2016 $ 16,097
Adjustment due to recognition of tax benefit of tax amortization of certain goodwill (450 )
Adjustment due to exchange rate differences 1,937
Goodwill impairment (17,584 )

Goodwill balance at September 30, 2017 $ —

As required under ASC 350, “Goodwill and Other Intangible Assets”, we routinely review the carrying value of our net assets, including goodwill, to determine if any impairment has occurred. A quantitative assessment was conducted at June 30, 2017, at which time, based on existing conditions and management’s outlook, we determined there was no impairment. In the third quarter of 2017, activity in NobelClad’s primary end markets slowed considerably. NobelClad experienced a significant decline in its small size core maintenance bookings within the oil and gas industry. Additionally, certain large petrochemical projects previously forecasted to ship in the next twelve months were delayed, and uncertainty exists as to the ultimate timing of booking and shipping these potential orders. As a result, we determined that a potential indicator of goodwill impairment existed during the third quarter of 2017. We utilized an income approach (discounted cash flow analysis) to determine the fair value of the NobelClad reporting unit and concluded that our long-term forecasts were not materializing and needed to be revised downward. We believe the discounted cash flow approach is the most reliable indicator of fair value. The key assumptions used in the discounted cash flow analysis included, among other measures, expected future sales, operating income, working capital and capital expenditures. The discount rate was determined using a peer-based, risk-adjusted weighted average cost of capital.

We determined that the estimated fair value of the NobelClad reporting unit was less than its carrying value primarily due to the factors described above and their related impact on expected future cash flows. During the third quarter, we adopted ASU 2017-04 which amends and simplifies how an entity measures a goodwill impairment loss by eliminating step two from the goodwill impairment test. As the carrying value of the NobelClad reporting unit exceeded the fair value by more than the book value of goodwill, we recorded an impairment charge of $17,584 to fully impair the goodwill related to this reporting unit as of September 30, 2017.

For purchased intangible assets, we performed an assessment of the recoverability in accordance with the general valuation requirements set forth under ASC 360, “Accounting for the Impairment of Long-Lived Assets.” The result of this assessment indicated that no impairment existed for purchased intangible assets.

5. PURCHASED INTANGIBLE ASSETS

~~The following table presents details of our~~Our purchased intangible assets ~~other than goodwill,~~consisted of the following as of ~~September~~June 30, ~~2017~~:

~~Table of Contents~~

Gross
Accumulated
Amortization
Net
Core technology $ 19,831
$ (9,924 ) $ 9,907
Customer relationships 39,028
(34,955 ) 4,073
Trademarks / Trade names 2,133
(2,133 ) —

Total intangible assets $ 60,992
$ (47,012 ) $ 13,980
2021:


	Gross		Accumulated Amortization		Net
Core technology	$	16,778	$	(14,387)	$	2,391
Customer relationships	36,799		(36,799)		0
Trademarks / Trade names	2,124		(2,124)		0
Total intangible assets	$	55,701	$	(53,310)	$	2,391

~~The following table presents details of our~~Our purchased intangible assets ~~other than goodwill,~~consisted of the following as of December 31, ~~2016~~:

Gross
Accumulated
Amortization
Net
Core technology $ 17,751
$ (8,165 ) $ 9,586
Customer relationships 36,088
(29,965 ) 6,123
Trademarks / Trade names 1,903
(1,785 ) 118

Total intangible assets $ 55,742
$ (39,915 ) $ 15,827
2020:


	Gross		Accumulated Amortization		Net
Core technology	$	17,899	$	(14,234)	$	3,665
Customer relationships	37,638		(37,638)		0
Trademarks / Trade names	2,194		(2,194)		0
Total intangible assets	$	57,731	$	(54,066)	$	3,665

The change in the gross value of our purchased intangible assets from December 31, ~~2016~~2020 to ~~September~~June 30, ~~2017~~2021 was due to foreign currency translation and ~~an adjustment due~~the recognition of the tax benefit of tax deductible goodwill amortization related to ~~recognition~~the 2007 acquisition of our German subsidiaries. Prior to the impairment of the goodwill related to the NobelClad and DynaEnergetics reporting units at September 30, 2017 and December 31, 2015, respectively, the tax benefit of tax amortization ~~previously applied to certain goodwill related to the DynaEnergetics reporting unit. After~~reduced the goodwill ~~was~~balance. After we fully impaired the goodwill, which is only written off ~~at December 31, 2015,~~for U.S. GAAP purposes, the tax benefit of tax goodwill amortization reduces ~~other noncurrent~~the gross value of the purchased intangible assets related to ~~the historical~~this acquisition.

~~6. CUSTOMER ADVANCES~~

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5. CONTRACT LIABILITIES

On occasion, we require customers to make advance payments prior to the shipment of goods in order to help finance our inventory investment on large orders or to keep customers’ credit limits at acceptable levels. AsContract liabilities were as follows:


	June 30, 2021		December 31, 2020
NobelClad	$	9,904	$	4,450
DynaEnergetics	284		478

Total	$	10,188	$	4,928

We generally expect to recognize the revenue associated with contract liabilities over a time period no longer than one year, but unforeseen circumstances can cause delays in shipments associated with contract liabilities. Approximately 54% of ~~September 30, 2017~~ ~~and~~ the $4,928 recorded as contract liabilities at December 31, ~~2016, customer advances totaled~~ ~~$2,772~~2020 was recorded to net sales during the six months ended June 30, 2021.

6. LEASES

The Company leases real properties for use in manufacturing and ~~$2,619, respectively,~~as administrative and ~~originated~~sales offices, and also leases automobiles and office equipment. The Company determines if a contract contains a lease arrangement at the inception of the contract. For leases in which the Company is the lessee, leases are classified as either finance or operating. Right of use (ROU) assets are initially measured at the present value of lease payments over the lease term plus initial direct costs, if any, with the classification affecting the pattern of expense recognition. If a lease does not provide a discount rate and the rate cannot be readily determined, an incremental borrowing rate is used to determine the future lease payments. Lease and non-lease components within the Company’s lease agreements are accounted for together.

Nearly all of the Company’s leasing arrangements are classified as operating leases. ROU asset and lease liability balances were as follows for the periods presented:


	June 30, 2021		December 31, 2020
ROU asset	$	10,393	$	10,733

Current lease liability	1,477		1,741
Long-term lease liability	9,944		10,066
Total lease liability	$	11,421	$	11,807

The ROU asset was included in “Other assets” while the current lease liability was reported in “Other current liabilities” and the long-term lease liability was reported in “Other long-term liabilities” in the Company’s Condensed Consolidated Balance Sheet. Cash paid for operating lease liabilities are recorded as cash flows from ~~several customers.~~operating activities in the Company’s Condensed Consolidated Statements of Cash Flows. For the three months ended June 30, 2021 and 2020, operating lease costs were $1,039 and $894, respectively. For the six months ended June 30, 2021 and 2020, operating lease costs were $2,010 and $1,996, respectively. Operating lease costs were included in the Company’s Condensed Consolidated Statements of Operations. Short term and variable lease costs were not material for the three and six months ended June 30, 2021 and 2020.

Certain of the Company’s leases contain renewal options and options to extend the leases for up to five years, and a majority of these options are reflected in the calculation of the ROU asset and lease liability due to the likelihood of renewal.

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The following table summarizes the weighted average lease terms and discount rates for operating lease liabilities:


	June 30, 2021
Weighted average remaining lease term (in years)	8.12
Weighted average discount rate	5.0	%

The following table represents maturities of operating lease liabilities as of June 30, 2021:


Due within 1 year	$	1,477
Due after 1 year through 2 years	2,193
Due after 2 years through 3 years	2,059
Due after 3 years through 4 years	1,831
Due after 4 years through 5 years	1,764
Due after 5 years	5,206
Total future minimum lease payments	14,530
Less imputed interest	(3,109)
Total	$	11,421

7. DEBT

~~Lines~~As of June 30, 2021 we had 0 outstanding borrowings under our credit facility. As of December 31, 2020, outstanding borrowings consisted of the ~~following at~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~:following:



Syndicated credit agreement:


Capital expenditure facility	$	11,750

Outstanding borrowings	11,750
Less: debt issuance costs	(486)
Total debt	11,264
Less: current portion of long-term debt	(3,125)
Long-term debt	$	8,139

September 30,
2017 December 31,
2016
Syndicated credit agreement:

U.S. Dollar revolving loan $ 22,250
$ 16,250
Euro revolving loan —
—

Long-term lines of credit 22,250
16,250
Less: debt issuance costs 292
518
Lines of credit $ 21,958
$ 15,732

Syndicated Credit Agreement

~~As of December 31, 2016,~~On March 8, 2018, we ~~had~~entered into a five-year $75,000 syndicated credit agreement (“credit facility”) ~~that allowed~~which replaced in its entirety our prior syndicated credit facility entered into on February 23, 2015. The credit facility is with a syndicate of 3 banks, with KeyBank, N.A. acting as administrative agent. The facility is secured by the assets of DMC including accounts receivable, inventory, and fixed assets, as well as guarantees and share pledges by DMC and its subsidiaries. The credit facility allows for revolving loans of ~~$65,000~~up to $50,000 with a $20,000 US dollar equivalent sublimit for alternative currency loans. In addition, the agreement provided for a $25,000 Capital Expenditure Facility (“Capex Facility”) which was used to assist in ~~U.S. dollars and $10,000~~financing our DynaEnergetics manufacturing expansion project in ~~alternative currencies as well as~~Blum, Texas. At the end of year one, the Capex Facility converted to a term loan which was amortizable at 12.5% of principal per year with a balloon payment for the outstanding balance upon the credit facility maturity date in 2023. In February 2021, we repaid the remaining Capex Facility balance of $11,750.

The credit facility has a $100,000 accordion feature to increase the commitments ~~in any of~~under the revolving loan ~~classes~~class and/or by adding a term loan subject to approval by applicable lenders. ~~The credit facility matures on February 23, 2020.~~

~~On March 6, 2017, we entered into a third amendment of our credit facility which, among other changes, reduced the amount of borrowings available~~Borrowings under the credit facility, increased the maximum debt-to-EBITDA leverage ratio for the first, second, and third quarters of 2017, and also waived the applicability of the minimum debt service coverage ratio for the first,

~~Table of Contents~~

~~second, and third quarters of 2017, and added a minimum EBITDA covenant for those same periods and is inapplicable thereafter. The maturity of the credit facility did not change with the amendment.~~

~~After the amendment, our credit facility allows for borrowings up to $35,000, consisting of~~$50,000 revolving ~~loans of $30,000 in U.S. dollars and $5,000 in alternate currencies as well as a $25,000 accordion feature to increase the commitments in any of the~~ loan classes subject to approval by applicable lenders. We also maintain a line of credit with a German bank for certain European operations. This line of credit provides a borrowing capacity of €4,000, of which €2,478 is available after considering outstanding letters of credit.

~~U.S. borrowings under the amended credit facility~~ can be in the form of ~~Alternate~~one-, two-, three-, or six-month LIBOR rate loans. Additionally, US dollar borrowings on the revolving loan can be in the form of Base Rate loans ~~(“ABR”~~(Base Rate borrowings are based on the greater of ~~adjusted~~the administrative agent’s Prime rates, ~~adjusted CD rates, or~~an adjusted Federal Funds ~~rates)~~rate or ~~one, two, three, or six month London Interbank Offered Rate (“LIBOR”) loans. ABR loans bear interest at the defined ABR rate plus~~ an ~~applicable margin and~~adjusted LIBOR rate). LIBOR loans bear interest at the applicable LIBOR rate plus an applicable ~~margin.~~margin (varying from 1.50% to 3.00%). Base Rate loans bear interest at the defined Base rate plus an applicable margin (varying from 0.50% to 2.00%).

Borrowings under the $20,000 alternate currency sublimit can be in euros, Canadian dollars, pounds sterling, and in any other currency acceptable to the administrative agent. Alternative currency borrowings ~~under the amended credit facility can be~~denominated in ~~Canadian Dollars, Euros, Pounds Sterling~~euros, pounds sterling, and any other currency that is ~~freely transferable and convertible to U.S. Dollars. Alternative currency borrowings denominated in Canadian Dollars~~dealt with on the London Interbank Deposit Market shall be comprised of Canadian Dealer Offered Rate (“CDOR”) Loans or Canadian Prime Loans, at our option, and bear interest at the CDOR rate plus applicable margin or the applicable Canadian Prime Rate plus an applicable margin, respectively. Alternative currency borrowings denominated in Euros shall be comprised of Euro Interbank Offered Rate (“EURIBOR”) loans and bear interest at the EURIBOR rate plus an applicable margin. Alternative currency borrowings denominated in any other alternative currency shall be comprised of EurocurrencyLIBOR loans and bear interest at the LIBOR rate plus an applicable ~~margin.~~

~~LIBOR, EURIBOR, and CDOR applicable margins vary~~margin (varying from ~~1.75%~~1.50% to ~~3.25%, and ABR and Canadian Prime applicable margins vary from 0.75% to 2.25%~~3.00%).

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~~Loan Covenants~~

On June 25, 2020, we entered into an amendment ("Amendment") to the credit facility. The Amendment set the minimum LIBOR at 0.75%. The other provisions of the Amendment, including waiver of the debt service coverage ratio, were applicable through the quarter ended March 31, 2021 and ~~Restrictions~~were no longer applicable beginning with the quarter ended June 30, 2021.

~~Our existing loan agreements include~~On October 22, 2020, in connection with the commencement of our at-the-market offering, we entered into an amendment to the credit facility to waive the requirement that we repay outstanding balances under the credit facility from the proceeds of any equity offering.The waiver applies to at-the-market offerings up to $75 million.

The credit facility, as amended, includes various covenants and restrictions, certain of which relate to the payment of dividends or other distributions to stockholders; redemption of capital stock; incurrence of additional indebtedness; mortgaging, pledging or disposition of major assets; and maintenance of specified ~~financial~~ ratios. As of ~~September~~June 30, ~~2017,~~2021, we were in compliance with all financial covenants and other provisions of our debt agreements.

We also maintain a line of credit with a German bank for certain European operations. In July 2020, the German Bank Facility was amended to increase the borrowing capacity from €4,000 to €7,000. Of the €7,000 borrowing capacity, €4,085 was available as of June 30, 2021 after considering outstanding letters of credit.

Given that we had 0 outstanding debt as of June 30, 2021, our deferred debt issuance costs of $374 were reported in the “Other assets” line item in our Condensed Consolidated Balance Sheet. Our deferred debt issuance costs of $486 as of December 31, 2020 were reported in the “Long-term debt” line item in our Condensed Consolidated Balance Sheet. Deferred debt issuance costs are being amortized over the remaining term of the credit facility which expires on March 8, 2023.

8. EQUITY OFFERINGS AND PROGRAM

Equity Offering

On May 3, 2021, the Company announced a registered public offering (“Offering”) of its stock under an automatic shelf registration statement on Form S-3ASR filed on May 3, 2021. The Company entered into an underwriting agreement with KeyBanc Capital Markets Inc. (“KeyBanc”), as representative of the underwriters (collectively, the “Underwriters”), pursuant to which the Company agreed to sell 2,500,000 shares of its $0.05 par value common stock to the Underwriters. In addition, the Underwriters were granted an option, exercisable within 30 days, to purchase up to an additional 375,000 shares of common stock to cover over-allotments, if any, on the same terms and conditions.

On May 7, 2021, DMC issued a total of 2,875,000 shares of its common stock, which included the exercise of the over-allotment option, at a market price of $45 per share resulting in gross proceeds of $129,375. Net proceeds from the offering were $123,461, after deducting underwriter fees and other expenses of $5,914. We intend to use the net proceeds from the offering for general corporate purposes, which may include acquisitions. Pending use of the proceeds as described, we invested the proceeds of the offering in highly liquid marketable securities, including commercial paper and U.S. Treasury securities. Please see discussion of our marketable securities in Note 2.

At-the-Market Equity Program

On October 22, 2020, the Company commenced an at-the-market ("ATM") equity program under its shelf registration statement, which allows it to sell and issue up to $75 million in shares of its common stock from time to time. The Company entered into an Equity Distribution Agreement on October 22, 2020 with KeyBanc relating to the issuance and sale of shares of common stock pursuant to the program. KeyBanc is not required to sell any specific amount of securities but will act as our sales agent using commercially reasonable efforts consistent with its normal trading and sales practices, on mutually agreed terms between KeyBanc and us. There is no specific date on which the ATM equity program will end and there are no minimum purchase requirements. KeyBanc will be entitled to compensation for shares sold pursuant to the program in an amount up to 1.5% of the gross proceeds of any shares of common stock sold under the Equity Distribution Agreement.

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During the three months ended June 30, 2021, the Company did 0t sell any shares of common stock through its ATM equity program. During the six months ended June 30, 2021, the Company sold 397,820 shares of common stock through its ATM equity program for gross proceeds of $25,647 at a weighted average price per share of $64.47. Net proceeds from such sales were $25,262, after deducting commissions paid to the sales agents of approximately $385. Since the inception of the program, the Company has sold 1,006,180 shares of common stock for gross proceeds of $51,779 at a weighted average price per share of $51.46.

9. INCOME TAXES

The effective tax rate for each of the periods reported differs from the U.S. statutory rate primarily due to variation in contribution to consolidated pre-tax income from each jurisdiction for the respective periods, differences between the U.S. and foreign tax rates (which range from 20% to 34%), permanent differences between book and taxable income, and changes to valuation allowances on our deferred tax assets.

We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use existing deferred tax assets. Additionally, a three-year cumulative loss at a Consolidated Financial Statement level may be viewed as negative evidence impacting a jurisdiction that by itself is not in a three-year cumulative loss position. During the six months ended June 30, 2021 and June 30, 2020, we did not record any adjustments to previously established valuation allowances, except for adjustments related to the changes in balances of the related deferred tax assets. The Company will continue to monitor the realizability of deferred tax assets and the need for valuation allowances and will record adjustments in the periods in which facts support such adjustments.

The Tax Cuts and Jobs Act (“TCJA”) provides that foreign earnings generally can be repatriated to the U.S. without federal tax consequence. We have assessed the assertion that cumulative earnings by our foreign subsidiaries are indefinitely reinvested. We continue to permanently reinvest the earnings of our international subsidiaries and therefore we do not provide for U.S. income taxes or withholding taxes that could result from the distribution of those earnings to the U.S. parent. Nevertheless, if any such earnings were ultimately distributed to the U.S. in the form of dividends or otherwise, or if the shares of our international subsidiaries were sold or transferred, we could be subject to additional U.S. federal and state income taxes. Due to the multiple avenues in which earnings can be repatriated, and because a large portion of these earnings are not liquid, it is not practical to estimate the amount of additional taxes that might be payable on these amounts of undistributed foreign income.

During the fourth quarter of 2019, our German operating entities commenced a tax audit for fiscal years 2015 through 2017. The audit concluded in the second quarter of 2021, and we are awaiting final assessments from the German authorities. We do not anticipate any material adjustments to our previously recorded accruals.

10. BUSINESS SEGMENTS

Our business is organized into ~~two~~2 segments: ~~NobelClad~~DynaEnergetics and ~~DynaEnergetics.~~NobelClad. DynaEnergetics designs, manufactures and distributes products utilized by the global oil and gas industry principally for the perforation of oil and gas wells. NobelClad is a global leader in the production of explosion-welded clad metal plates for use in the construction of corrosion resistant industrial processing equipment and specialized transition joints. ~~DynaEnergetics designs, manufactures and distributes products utilized by the global oil and gas industry principally for the perforation of oil and gas wells.~~

The accounting policies of all of the segments are the same as those described in the summary of significant accounting policies included herein and in our Annual Report on Form 10-K for the year ended December 31, 2016. Our reportable segments are separately managed strategic business units that offer different products and services. Each segment’s products are marketed to different customer types and require different manufacturing processes and technologies.

~~Segment information is presented for the three and nine months ended September 30, 2017 and 2016 as follows:~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Net sales:
NobelClad $ 16,841
$ 16,915
$ 54,145
$ 68,374
DynaEnergetics 35,320
19,638
84,169
50,028

Consolidated net sales $ 52,161
$ 36,553
$ 138,314
$ 118,402

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Segment information is as follows:


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Net sales
DynaEnergetics	$	42,268	$	23,643	$	80,440	$	76,863
NobelClad	23,170		19,560		40,656		39,903
Net sales	$	65,438	$	43,203	$	121,096	$	116,766


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Operating income (loss)
DynaEnergetics	$	3,201	$	(6,895)	$	4,720	$	1,711
NobelClad	3,371		1,985		4,976		3,459
Segment operating income (loss)	6,572		(4,910)		9,696		5,170

Unallocated corporate expenses	(2,177)		(1,639)		(4,403)		(4,256)
Stock-based compensation	(1,727)		(1,441)		(3,335)		(2,559)
Other income (expense), net	108		(85)		502		32
Interest expense, net	(81)		(156)		(216)		(394)
Income (loss) before income taxes	$	2,695	$	(8,231)	$	2,244	$	(2,007)


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Depreciation and amortization
DynaEnergetics	$	2,083	$	1,772	$	4,083	$	3,544
NobelClad	945		881		1,884		1,715
Segment depreciation and amortization	3,028		2,653		5,967		5,259
Corporate and other	92		64		175		164
Consolidated depreciation and amortization	$	3,120	$	2,717	$	6,142	$	5,423

The disaggregation of revenue earned from contracts with customers based on the geographic location of the customer is as follows.

DynaEnergetics


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
United States	$	32,032	$	11,335	$	59,863	$	57,607
Canada	2,804		0		6,506		658
Ukraine	1,645		933		2,081		1,235
Kuwait	863		520		1,127		1,029
Norway	716		37		907		131
Egypt	674		943		1,727		2,254
Oman	671		514		1,452		694
India	268		4,707		661		5,023
Iraq	7		2,188		7		2,189
Rest of the world	2,588		2,466		6,109		6,043


Total DynaEnergetics	$	42,268	$	23,643	$	80,440	$	76,863

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Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Operating income (loss)
NobelClad $ (17,030 ) $ 701
$ (14,313 ) $ 6,340
DynaEnergetics 6,867
(977 ) 8,908
(2,959 )

Segment operating income (loss) (10,163 ) (276 ) (5,405 ) 3,381

Unallocated corporate expenses (1,543 ) (1,614 ) (5,240 ) (5,057 )
Stock-based compensation (743 ) (552 ) (2,125 ) (1,673 )
Other income (expense), net (436 ) (157 ) (965 ) 178
Interest expense (367 ) (265 ) (1,203 ) (826 )
Interest income —
—
2
2

Loss before income taxes $ (13,252 ) $ (2,864 ) $ (14,936 ) $ (3,995 )
NobelClad


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
United States	$	11,068	$	10,462	$	19,415	$	19,505
China	2,645		9		2,883		96
Belgium	2,176		46		2,217		410
Canada	1,707		1,693		2,731		3,461
Russia	1,046		0		2,067		0
France	570		602		1,239		2,092
Germany	569		802		959		1,788
Netherlands	530		369		1,121		915
United Arab Emirates	437		1,881		1,101		2,620
Rest of the world	2,422		3,696		6,923		9,016






Total NobelClad	$	23,170	$	19,560	$	40,656	$	39,903

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Depreciation and amortization:
NobelClad $ 932
$ 1,006
$ 2,927
$ 3,000
DynaEnergetics 1,757
1,763
5,137
5,047

Segment depreciation and amortization $ 2,689
$ 2,769
$ 8,064
$ 8,047

During the ~~nine~~three and six months ended ~~September~~June 30, ~~2017 and 2016,~~2021, no single customers accounted for greater than 10% of consolidated net sales. During the three months ended June 30, 2020, no customer accounted for greater than 10% of consolidated net sales. During the six months ended June 30, 2020, one customer accounted for ~~more than 10%~~approximately 15% of ~~total~~consolidated net sales.

9.11. DERIVATIVE INSTRUMENTS

We are exposed to foreign currency exchange risk resulting from fluctuations in exchange rates, primarily the U.S. dollar to euro, the U.S. dollar to Canadian dollar, ~~the euro to the Russian ruble,~~ and, to a lesser extent, other currencies, arising from inter-company and ~~third party~~third-party transactions entered into by our subsidiaries that are denominated in currencies other than their functional currency. Changes in exchange rates with respect to these transactions result in unrealized gains or losses if such transactions are unsettled at the end of the reporting period or realized gains or losses at settlement of the transaction. ~~During the third quarter of 2017, we began using~~We use foreign currency forward contracts to offset foreign exchange rate fluctuations on foreign currency denominated asset and liability positions. None of these contracts are designated as accounting hedges, and all changes in the fair value of the forward contracts are recognized in ~~"Other~~“Other income (expense), ~~net"~~net” within our Condensed Consolidated Statements of Operations.

We execute derivatives with a specialized foreign exchange brokerage ~~firm.~~firm as well as other large financial institutions. The primary credit risk inherent in derivative agreements ~~represents~~is the possibility that a loss may occur from the nonperformance of a counterparty to the ~~agreements, and thus we~~agreements. We perform a review of the credit risk of our counterparties at the inception of the contract and on an ongoing basis. We anticipate that our counterparties will be able to fully satisfy their obligations under the agreements but will take action if doubt arises regarding the ~~counterparties'~~counterparties’ ability to perform.

As of ~~September~~June 30, ~~2017,~~2021 and December 31, 2020, the notional amounts of the forward currency contracts the Company held ~~to purchase currencies~~ were ~~$19,297,~~$7,625 and $2,092, respectively. At June 30, 2021 and December 31, 2020, the ~~notional amounts of forward contracts the Company held to sell currencies were $2,910. The~~ fair values of outstanding foreign currency forward contracts were ~~not material at September 30, 2017.~~$0.

~~Table of Contents~~

The following table presents the location and amount of net gains ~~(losses)~~ from hedging ~~activities for the three and nine months ended September 30, 2017 and 2016:~~activities:


		Three months ended June 30,				Six months ended June 30,
Derivative	Statements of Operations Location	2021		2020		2021		2020
Foreign currency contracts	Other income (expense), net	$	12	$	(706)	$	67	$	128

Gain/(Loss) Recognized in Income on Derivatives
Amount
Three months ended September 30, Nine months ended September 30,
Derivatives Income Statement Location 2017 2016 2017 2016
Foreign currency contracts Other income (expense), net $ (193 ) $ —
$ (193 ) $ —
Total gain (loss) $ (193 ) $ —
$ (193 ) $ —

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~~10.~~12. COMMITMENTS AND CONTINGENCIES

Contingent Liabilities

The Company records an accrual for contingent liabilities when a loss is both probable and reasonably estimable. If some amount within a range of loss appears to be a better estimate than any other amount within the range, that amount is accrued. When no amount within a range of loss appears to be a better estimate than any other amount, the lowest amount in the range is accrued.

~~Anti-dumping~~Legal Proceedings

From time to time, we may become involved in various lawsuits and ~~Countervailing Duties~~

In June 2015, U.S. Customs and Border Protection (“U.S. Customs”) sent us a Notice of Action that proposed to classify certain of our imports as subject to anti-dumping duties pursuant to a 2010 anti-dumping duty (“AD”) order on Oil Country Tubular Goods (“OCTG”) from China. A companion countervailing duty (“CVD”) order on the same product is in effect as well. The Notice of Action covered one entry of certain raw material steel mechanical tubing made in China and imported into the U.S. from Canada by our DynaEnergetics segment during 2015 for use in manufacturing perforating guns.

In July 2015, we sent a response to U.S. Customs outlining the reasons our mechanical tubing imports do not fall within the scope of the AD order on OCTG from China and should not be subject to anti-dumping duties. U.S. Customs proposed to take similar action with respect to other entries of this product and requested an approximately $1,100 cash deposit or bond for AD/CVD duties.

In August 2015, we posted the bond of approximately $1,100 to U.S. Customs. Subsequently, U.S. Customs declined to conclude on the Company's assertion that the mechanical tubing the Company has been importing is not within the scope of the AD order on OCTG from China. As a result, on September 25, 2015 the Company filed a request for a scope ruling with the U.S. Department of Commerce ("Commerce Department").

~~On February 15, 2016, the Company received the Commerce Department’s scope ruling,~~legal proceedings which ~~determined certain imports, primarily used for gun carrier tubing, are included~~arise in the ~~scope~~ordinary course of ~~the AD/CVD orders on OCTG from China and thus are subject to AD/CVD duties.~~

On March 11, 2016, the Company filed an appeal with the U.S. Court of International Trade (“CIT”) related to the Commerce Department’s scope ruling. On February 7, 2017, the CIT remanded the scope ruling to the Commerce Department to reconsider its determination. The Commerce Department filed its remand determination with the CIT on June 7, 2017 continuing to find that the Company's imports at issue are within the scope of the AD/CVD orders on OCTG from China. This determinationbusiness. However, litigation is subject to ~~the CIT's review~~inherent uncertainties, and an adverse result in ~~the ongoing appeal, which is continuing.~~

~~On December 27, 2016, we received notice~~these or other matters may arise from ~~U.S. Customs~~time to time that it may ~~pursue penalties against us related to the AD/CVD issue and demanding tender of alleged loss of AD/CVD duties in an amount of $3,049, which was covered by~~harm our reserve. We filed a response to the notice on February 6, 2017 asserting our position that any decision to pursue penalties would be premature in light of the Remand Order and that penalties would not be appropriate under the applicable legal standards. On February 16, 2017, we received notice that U.S. Customs was seeking penalties in the amount of $14,783. U.S. Customs also reasserted its demand for tender of alleged loss of AD/CVD duties in the amount of $3,049. We tendered $3,049 in AD amounts (“Tendered Amounts”) on March 6, 2017 into a suspense account pending ultimate resolution of the AD/CVD case. We believe that this penalty assessment is premature and patently unreasonable in the face of the ongoing CIT appeal and that penalties are not appropriate under applicable legal standards. Further, even if penalties are found to be justified, we

~~Table of Contents~~

believe the amount of penalties asserted by U.S. Customs is unreasonable and subject to challenge on various grounds. We submitted a petition for relief and mitigation of penalties on May 17, 2017 asserting these and other points and seeking a stay of the penalty proceedings pending ultimate resolution of the CIT appeal and any further appeals.business. We are ~~awaiting a response from U.S. Customs and U.S. Customs Headquarters on this petition.~~

~~For the nine months ended September 30, 2017, the Company recorded $84~~currently not aware of interest on its reserve for AD/CVD duties, bringing the total reserved amount related to AD/CVD duties as of September 30, 2017 to $3,585. The Tendered Amounts were applied to reduce the reserve. The Companyany such legal proceedings or claims that we believe will continue to incur legal defense costs and could also be subject to additional interest and penalties. Accruals for the potential penalties discussed above are not reflected in our financial statements as of September 30, 2017 as we do not believe they are probable at this time.

~~Patent and Trademark Infringement~~

On September 22, 2015, GEODynamics, Inc., a US-based oil and gas perforating equipment manufacturer based in Fort Worth, TX, filed a patent and trademark infringement action against DynaEnergetics US, Inc., (“DynaEnergetics”), a wholly owned subsidiary of DMC, in the United States District Court for the Eastern District of Texas (“District Court”) regarding alleged infringement of US Patent No. 9,080,431 granted on July 14, 2015 (the “431 patent”) and a related US trademark for REACTIVE, alleging that DynaEnergetics’ US sales of DPEX^TM shaped charges infringe the ‘431 patent and the trademark. The 431 case went to trial in late March 2017, and on March 30, 2017, the jury found in favor of DynaEnergetics on all counts. A bench trial on related matters, including the trademark infringement action occurred on April 20, 2017, and the Court ordered cancellation of GEODynamics' REACTIVE trademark.

On July 1, 2016, GEODynamics filed a second patent infringement action against DynaEnergetics in District Court alleging infringement of US Patent No. 8,544,563 (the “563 patent”), also based on DynaEnergetics’ US sales of DPEX shaped charges. DynaEnergetics denies validity and infringement of the 563 patent and plans to vigorously defend against this lawsuit. On September 20, 2016, DynaEnergetics filed an Inter Parties Review (IPR) against the 563 patent at the U.S. Patent Trial and Appeal Board (“PTAB”), requesting invalidation of the 563 patent. On March 17, 2017, DynaEnergetics' IPR request was instituted by the PTAB, and a decision is expected in early 2018. Trial on the 563 patent has been stayed pending resolution of the IPR.

On April 28, 2017, GEODynamics filed a third patent infringement action against DynaEnergetics in District Court alleging infringement of U.S. Patent No. 8,220,394 (the “394 patent”), based on DynaEnergetics' sales of its DPEX and HaloFrac® shaped charges. DynaEnergetics denies validity and infringement of the 394 patent and plans to vigorously defend against this lawsuit. On June 9, 2017, DynaEnergetics filed a motion to dismiss for improper venue,have, individually or in the alternative to change venue, and the District Court’s decision is pending. On August 28, 2017, DynaEnergetics filed an IPR against the 394 patent at the PTAB, requesting invalidation of the 394 patent.

On August 21, 2017, GEODynamics filed a patent infringement action against DynaEnergetics GmbH & Co. KG and DynaEnergetics Beteiligungs GmbH, both wholly owned subsidiaries of DMC (collectively, “DynaEnergetics EU”), in the Regional Court of Düsseldorf, Germany, alleging infringement of European patent EP 1 671 013 B1 granted on June 29, 2011, a patent related to the 394 patent (the “EP 013 patent”), based on the manufacturing, sale and marketing of DPEX shaped charges in Germany. DynaEnergetics EU denies validity and infringement of the EP 013 patent and plans to vigorously defend against this lawsuit.

~~We do not believe that the 563 patent, the 394 patent, the EP 013 patent or infringement claims based on the patents are valid, and we do not believe it is probable that we will incur~~aggregate, a material ~~loss~~adverse effect on our business, financial condition or operating results.

13. RESTRUCTURING EXPENSES AND ASSET IMPAIRMENTS

During the 563 matter, the 394 matter or the EP 013 matter. However, if it is determined that the patents are valid and that DynaEnergetics or DynaEnergetics EU, as applicable, has infringed them, it is reasonably possible that our financial statements could be materially affected. We are not able to provide a reasonable estimate of the range of loss, and we have not accrued for any such losses. Such an evaluation includes, among other things, a determination of the total number of infringing sales in the United States or infringing products manufactured in Germany, as applicable, what a reasonable royalty, if any, might be under the circumstances; or, alternatively, the scope of damages and the relevant period for which damages would apply, if any.

~~11. RESTRUCTURING~~

~~There was no restructuring activity in the third~~first quarter of ~~2017.~~ In2021, NobelClad recorded an accrual for additional severance liabilities of $116 which were agreed to with local labor authorities for employees terminated as part of closing manufacturing operations in France in 2018.

During the second quarter of ~~2017,~~2020 the COVID-19 pandemic-related collapse in oil and gas demand led to a downturn in well completions and the corresponding demand for DynaEnergetics’ products. As a result, DynaEnergetics ~~announced~~recorded asset impairment charges of $1,181 on certain manufacturing assets that will no longer be utilized in production at its Blum, Texas and Troisdorf, Germany facilities. Additionally, both DynaEnergetics and NobelClad further reduced the ~~closure of~~respective workforces during the quarter. Finally, DynaEnergetics continued activities to prepare its ~~operations in Kazakhstan after legislative changes increased our costs to do business while the overall sales in Kazakhstan were not significant to our results.~~ Tyumen, Siberia facility for sale.

During the first quarter ~~we recorded severance expense, wrote off remaining receivables,~~

~~Table~~ of ~~Contents~~

~~prepaid assets,~~2020, DMC reduced its workforce by 264 positions to address a sharp decline in well completions in the Company’s core oil and inventory, recorded an asset impairment to mark the fixed assets down to their salable value, and recorded to the statement of operations foreign exchange losses that had previously been recorded to the balance sheet through currency translation adjustments,gas end market principally due to the ~~substantial liquidation of the entity. In the second quarter of 2016,~~COVID-19 pandemic. The workforce reduction impacted full-time, part-time and temporary direct-labor roles in manufacturing and assembly at DynaEnergetics ~~reduced headcount~~ ~~in Troisdorf, Germany~~as well as general and ~~Austin, Texas.~~administrative positions at DynaEnergetics, NobelClad, and at DMC’s corporate office.

Total restructuring and impairment charges incurred for these programs are as follows and are reported in the ~~“restructuring expenses”~~“Restructuring expenses and asset impairments” line item in our Condensed Consolidated ~~Statement~~Statements of Operations:


	Six months ended June 30, 2021
	Severance		Other Exit Costs		Total

NobelClad	$	116	$	11	$	127


Total	$	116	$	11	$	127


	Three months ended June 30, 2020
	Severance		Asset Impairment		Equipment Moving Costs		Other Exit Costs		Total
DynaEnergetics	$	121	$	1,181	$	126	$	423	$	1,851
NobelClad	191		0		0		4		195


Total	$	312	$	1,181	$	126	$	427	$	2,046

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	Nine months ended September 30, 2017									Six months ended June 30, 2020
	Severance		Asset Impairment		Other Exit Costs		Total			Severance		Asset Impairment		Contract Termination Costs		Equipment Moving Costs		Other Exit Costs		Total
DynaEnergetics	$	20	$	143	$	295	$	458	DynaEnergetics	$	828	$	1,181	$	11	$	126	$	643	$	2,789
NobelClad									NobelClad	244		0		0		0		10		254
Corporate									Corporate	119		0		0		0		0		119

Total	$	20	$	143	$	295	$	458	Total	$	1,191	$	1,181	$	11	$	126	$	653	$	3,162

Three months ended September 30, 2016
Severance Contract Termination Costs Equipment Moving Costs Other Exit Costs Total
DynaEnergetics $ (41 ) $ 370
$ 1
$ 43
$ 373

Total $ (41 ) $ 370
$ 1
$ 43
$ 373

Nine months ended September 30, 2016
Severance Contract Termination Costs Equipment Moving Costs Other Exit Costs Total
DynaEnergetics $ 684
$ 386
$ 15
$ 43
$ 1,128
Corporate 74
—
—
—
74

Total $ 758
$ 386
$ 15
$ 43
$ 1,202

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, the changes to the restructuring liability associated with these programs is summarized below:


	December 31, 2020		Net expense		Payments and Other Adjustments		Currency Adjustments		June 30, 2021
Severance	$	958	$	116	$	(28)	$	(32)	$	1,014


Other exit costs	0		11		(11)		0		0
Total	$	958	$	127	$	(39)	$	(32)	$	1,014

December 31, 2016 Expense Payments and Other Adjustments September 30, 2017
Severance $ 62
$ 20
$ (62 ) $ 20
Contract termination costs 112
—
(102 ) 10

Total $ 174
$ 20
$ (164 ) $ 30

The following discussion should be read in conjunction with our historical consolidated financial statements and notes, as well as the selected historical consolidated financial data that is included in our Annual Report filed on Form 10-K for the year ended December 31, ~~2016~~.2020.

Unless stated otherwise, all currency amounts are presented in thousands of U.S. dollars (000s).

DMC Global Inc.~~, formerly Dynamic Materials Corporation ("DMC"~~ (“DMC”), operates two technical product and process business segments serving the energy, industrial and infrastructure markets. These segments, ~~NobelClad~~DynaEnergetics and ~~DynaEnergetics,~~NobelClad, operate globally through an international network of manufacturing, distribution and sales facilities.

Our diversified segments each provide a suite of unique technical products to niche sectors of the global energy, industrial and infrastructure markets, and each has established a strong or leading position in the markets in which it participates. With an underlying focus on ~~free-cash~~generating free cash flow, ~~generation,~~ our objective is to sustain and grow the market share of our businesses through increased market penetration, development of new applications, and research and development of new and adjacent products that can be sold across our global network of sales and distribution facilities. We routinely explore acquisitions of related businesses that could strengthen or add to our existing product portfolios, or expand our geographic footprint and market presence. We also seek acquisition opportunities outside our current markets that would complement our existing businesses and enable us to build a stronger and more diverse company.

DynaEnergetics designs, manufactures and distributes products utilized by the global oil and gas industry principally for the perforation of oil and gas wells. These products are sold to oilfield service companies in the U.S., Europe, Canada, Africa, the Middle East, and Asia. DynaEnergetics also sells directly to end-users. The market for perforating products, which are used during the well completion process, generally corresponds with oil and gas exploration and production activity. Exploration activity over the last several years has led to increasingly complex well completion operations, which in turn has increased the demand for high quality and technically advanced perforating products.

Cost of products sold for DynaEnergetics includes the cost of metals, explosives and other raw materials used to manufacture shaped charges, detonating products and perforating guns as well as employee compensation and benefits, freight in, depreciation of manufacturing facilities and equipment, manufacturing supplies and other manufacturing overhead expenses.

NobelClad ~~is a global leader in the production of~~produces explosion-welded clad metal plates for use in the construction of corrosion resistant industrial processing equipment and specialized transition joints. While a ~~large~~significant portion of the demand for our clad metal products is driven by ~~new plant construction and large plant expansion projects,~~ maintenance and retrofit projects at existing chemical processing, petrochemical processing, oil refining, and aluminum smelting facilities, new plant construction and large plant expansion projects also account for a significant portion of total demand. These industries tend to be cyclical in nature and timing of new order inflow remains difficult to predict. We use backlog as a primary means to measure the immediate outlook for our NobelClad business. We define “backlog” at any given point in time as all firm, unfulfilled purchase orders and commitments at that time. Most firm purchase orders and commitments are realized, and we expect to fill most backlog orders within the following 12 months. ~~NobelClad's~~NobelClad’s backlog increased to ~~$31,994~~$45,134 at ~~September~~June 30, ~~2017~~2021 from ~~$31,634~~$39,884 at December 31, ~~2016.~~ 2020.

Cost of products sold for NobelClad includes the cost of metals and alloys used to manufacture clad metal plates, the cost of explosives, employee compensation and benefits, freight in, outside processing costs, depreciation of manufacturing facilities and equipment, manufacturing supplies and other manufacturing overhead expenses.

In the third quarter of 2017, activity in NobelClad’s primary end markets slowed considerably. NobelClad experienced a significant decline in its small size core maintenance bookings within the oil and gas industry. Additionally, certain large petrochemical projects previously forecasted to ship in the next twelve months were delayed, and uncertainty exists as to the ultimate timing of booking and shipping these potential orders. As a result, we determined that a potential indicator of goodwill impairment existed during the third quarter of 2017. We utilized an income approach (discounted cash flow analysis) to determine the fair value of the NobelClad reporting unit and concluded that our long-term forecasts were not materializing and needed to be revised downward. We determined that the estimated fair value of the NobelClad reporting unit was less than its carrying value due primarily to the factors described above and their related impact on expected future cash flows. As the carrying value of the NobelClad reporting unit exceeded the fair value by more than the book value of goodwill, we recorded an impairment charge of $17,584 to fully impair the goodwill related to this reporting unit as of September 30, 2017.

DynaEnergetics designs, manufactures and distributes products utilized by the global oil and gas industry principally to perforate oil and gas wells. These products are sold to large, mid-sized, and small oilfield service companies in the U.S., Europe, Canada, South America, Africa, the Middle East, Russia, and Asia. DynaEnergetics also sells directly to end-users. The market for perforating products, which are used during the well completion process, generally corresponds with oil and gas exploration and production activity. Exploration activity over the last several years has led to increasingly complex well completion operations, which in turn, has increased the demand for high quality and technically advanced perforating products.

Cost of products sold for DynaEnergetics includes the cost of metals, explosives and other raw materials used to manufacture shaped charges, detonating products and perforating guns as well as employee compensation and benefits, depreciation of manufacturing facilities and equipment, manufacturing supplies, freight and other manufacturing overhead expenses.

~~During the three and nine months ended September 30, 2017, the following factors most affected our financial performance:~~

•DynaEnergetics sales of $16,841 in the third quarter of 2017 were essentially flat compared to the third quarter of 2016 and decreased 17% from the second quarter of 2017. In 2017, weak capital spending in NobelClad's industrial infrastructure and energy markets has led to a downturn in both large-project orders and smaller repair and maintenance work.

•NobelClad’s sales of $23,170 in the second quarter of 2021 increased 33% compared to the first quarter of 2021 and increased 18% compared with the second quarter of 2020 reflecting increased shipments of projects out of backlog which included shipments that were pushed into the second quarter due to widespread logistical bottlenecks and shipping delays in the first quarter of 2021.

•Consolidated gross profit was 26% in the second quarter of 2021 versus 23% in the first quarter of 2021 and 15% in the second quarter of 2020. The ~~sequential~~ improvement from last year primarily relates to DynaEnergetics due to the impact of higher sales volume on fixed expenses and nonrecurring excess capacity charges that were recorded in 2020. In addition, the improvement from last year in NobelClad partly relates to improved project mix. Consolidated gross profit in the first and second quarter of 2021 also benefited from the receipt of $846 and $1,488, respectively, related to the Employee Retention Credit (“ERC”) under the Coronavirus Aid, Relief, and Economic Security Act, as amended (“CARES Act”). In the first quarter of 2021, under provisions of legislation enacted in December 2020 the Company became eligible for the ERC under the CARES Act. As a ~~higher proportion~~result of ~~DynaEnergetics sales relative~~the new legislation, the Company was able to ~~NobelClad sales, coupled with higher average~~claim a refundable tax credit equal to 70% of the qualified wages they paid to employees during the first and second quarters of 2021, limited to $10 per employee per quarter. Thus, the maximum ERC amount available to the Company was $7 per employee during the first and second quarters of 2021.

•Consolidated selling, ~~prices and improved product mix in DynaEnergetics.~~

•Restructuring expenses and asset impairments of $2,046 in the second quarter of 2020 primarily related to impairments of manufacturing assets at DynaEnergetics and costs associated with the sale of DynaEnergetics’ Tyumen, Siberia manufacturing facility.

•Cash and marketable securities of $181,294 increased ~~salaries and wages.~~

Improving economic conditions led to ~~borrowing~~increased activity in several of our end markets during the second quarter of 2021. Rising energy prices drove improved demand for DynaEnergetics’ DS well perforating systems. We expect the demand recovery to ~~fund working capital requirements from sales growth~~continue in ~~DynaEnergetics,~~our primary upstream oil and gas end markets in the ~~tender~~second half of ~~$3,049~~2021. However, despite increased well completion activity in ~~anti-dumping duty~~North America, pricing pressure for products and ~~countervailing duty (AD/CVD) amounts~~services persists, and is delaying the margin recovery of our industry. During the recent market instability, a number of machine shops have taken advantage of extreme price sensitivity by commercializing undifferentiated and lower quality pre-wired carrier assemblies. These businesses are being supported and supplied by some of our industry’s large energetics manufacturers, which have not yet fully transitioned to ~~U.S. Customs pending ultimate resolution~~their own integrated systems.

We believe many of the ~~AD/CVD case~~pre-wired carriers in the market incorporate features that violate DynaEnergetics patents, and we are taking aggressive legal action against the companies that make these products. DynaEnergetics has made significant investments in technologies and products that have improved the safety, efficiency and performance of its customers’ well

~~Business Outlook~~

In the third quarter of ~~2018 in Blum, Texas, where~~2021, NobelClad introduced DetaPipe™, a high-performance clad-pipe solution for the ~~business~~chemical and metal-processing markets. This product offering is expected to ~~double its shaped charge production capacity. A~~provide customers with a better-performing, cost-effective alternative to solid zirconium or titanium pipe in their high-pressure, high temperature processing environments.

We are in a period of rising material and labor costs at both DynaEnergetics and NobelClad; both of which could also be impacted by supply-chain bottlenecks and availability of direct labor. In March 2021, provisions of legislation modified and extended the ERC under the CARES Act through December 31, 2021 for eligible companies. Under this extension, we will be able to claim the refundable tax credit for the quarter ended September 30, 2021, but at this time there is no guarantee that we will be able to claim the credit for the quarter ended December 31, 2021. These factors could negatively impact our net sales, gross profit margin, or operating income in future quarters.

From time to time, we also may continue to use our ATM equity program, which commenced in October 2020, to raise additional capital efficiently and responsibly. We did not sell shares under our ATM equity program during the second automated DynaSelect detonator line is planned to be installed next year at DynaEnergetics’ facility in Troisdorf Germany, and the business also plans to re-open its DynaStage assembly center in Mt. Braddock Pennsylvania in the fourth quarter of ~~2017.~~

Adjusted EBITDA is a non-GAAP (generally accepted accounting principles) measure that we believe provides an important indicator of our ongoing operating performance and that we use in operational and financial decision-making. We define EBITDA as net income or loss plus or minus net interest, taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation, restructuring and impairment charges and, when appropriate, other items that management does not utilize in assessing DMC’s operating performance (as further described in the tables below). As a result, internal management reports used during monthly operating reviews feature Adjusted EBITDA and certain management incentive awards are based, in part, on the amount of Adjusted EBITDA achieved during the year.

Adjusted operating income (loss) is defined as operating income (loss) plus restructuring and impairment charges and, when appropriate, other items that management does not utilize in assessing DMC’s operating performance.

Adjusted net income (loss) is defined as net income (loss) plus restructuring and impairment charges and, when appropriate, other items that management does not utilize in assessing DMC’s operating performance. Adjusted diluted earnings per share is defined as diluted earnings per share plus restructuring and impairment charges and, when appropriate, other items that management does not utilize in assessing DMC’s operating performance.

Net ~~Debt~~cash is a non-GAAP measure we use to supplement information in our ~~Condensed~~ Consolidated Financial Statements. We define net ~~debt~~cash as ~~lines of credit~~total cash, cash equivalents and marketable securities less ~~cash and cash equivalents.~~total debt. In addition to conventional measures prepared in accordance with GAAP, the Company uses this information to evaluate its performance, and we believe that certain investors may do the same.

The presence of non-GAAP financial measures in this report is not intended to suggest that such measures be considered in isolation or as a substitute for, or as superior to, DMC’s GAAP information, and investors are cautioned that the non-GAAP

Three months ended ~~September~~June 30, ~~2017~~2021 compared with three months ended ~~September~~June 30, ~~2016~~2020


	Three months ended June 30,
	2021			2020			$ change		% change
Net sales	$	65,438		43,203			$	22,235	51	%
Gross profit	16,971			6,604			10,367		157	%
Gross profit percentage	25.9		%	15.3		%
COSTS AND EXPENSES:
General and administrative expenses	8,471			6,707			1,764		26	%
% of net sales	12.9		%	15.5		%
Selling and distribution expenses	5,544			5,488			56		1	%
% of net sales	8.5		%	12.7		%
Amortization of purchased intangible assets	288			353			(65)		(18)	%
% of net sales	0.4		%	0.8		%

Restructuring expenses and asset impairments	—			2,046			(2,046)		(100)	%


Operating income (loss)	2,668			(7,990)			10,658		133	%
Other income (expense), net	108			(85)			193		227	%
Interest expense, net	(81)			(156)			75		48	%
Income (loss) before income taxes	2,695			(8,231)			10,926		133	%
Income tax provision (benefit)	971			(2,583)			3,554		138	%
Net income (loss)	1,724			(5,648)			7,372		131	%
Adjusted EBITDA	$	7,515		$	(1,786)		$	9,301	521	%

Three months ended September 30,
2017 2016 $ change % change
Net sales $ 52,161
$ 36,553
$ 15,608
43 %
Gross profit 17,162
8,457
8,705
103 %
Gross profit percentage 32.9 % 23.1 %
COSTS AND EXPENSES:
General and administrative expenses 6,535
5,685
850
15 %
% of net sales 12.5 % 15.6 %
Selling and distribution expenses 4,446
3,832
614
16 %
% of net sales 8.5 % 10.5 %
Amortization of purchased intangible assets 1,046
1,009
37
4 %
% of net sales 2.0 % 2.8 %
Restructuring expenses —
373
(373 ) (100 )%
Goodwill impairment charge 17,584
—
17,584
— %
Operating loss (12,449 ) (2,442 ) (10,007 ) (410 )%
Other expense, net (436 ) (157 ) (279 ) (178 )%
Interest income (expense), net (367 ) (265 ) (102 ) (38 )%
Loss before income taxes (13,252 ) (2,864 ) (10,388 ) (363 )%
Income tax provision (benefit) 812
272
540
199 %
Net loss (14,064 ) (3,136 ) (10,928 ) (348 )%
Adjusted EBITDA $ 8,567
$ 1,178
$ 7,389
627 %

Net sales increased $22,235 compared with ~~2016~~the second quarter of 2020. The increase primarily was due to the recovery in oil and gas demand, which led to increased drilling and well completion activity in North America and increased sales of DynaEnergetics’ DS perforating systems. The second quarter of 2020 was severely impacted by the drop in demand for oil and gas drilling and completion activity due to the COVID-19 pandemic.

Gross profit percentage increased to 25.9% compared with the second quarter of 2020 primarily due to the impact of higher volume on fixed manufacturing overhead expenses and improved project mix at NobelClad. Additionally, gross profit percentage was also favorably impacted by a $1,488 CARES Act benefit.

General and administrative expenses increased $1,764 compared with the second quarter of 2020 primarily due to an ~~80%~~ increase in ~~DynaEnergetics' net sales from increased demand for its intrinsically-safe, addressable initiating systems, coupled with an active unconventional well-completion industry in North America.~~

~~Gross profit percentage~~ ~~increased from a higher proportion of DynaEnergetics’ net sales relative to NobelClad and better price and product mix in DynaEnergetics.~~

~~General and administrative expenses~~ ~~increased compared with 2016~~outside services costs by $1,502, which was primarily ~~due to higher outside legal expenses~~ related to patent infringement ~~defense costs, higher salaries~~litigation in which DynaEnergetics is the plaintiff and ~~wages, and higher stock-based~~the restoration of variable compensation ~~expense.~~by $686. These increases were partially offset by a $344 CARES Act benefit.

Selling and distribution expenses increased $56 compared with ~~2016~~the second quarter of 2020 primarily due to ~~higher~~increases in depreciation expense by $334, the restoration of variable compensation by $289, resumption of business-related travel by $174, outside service costs by $166, salaries by $164, and ~~wages.~~recruiting costs by $111. These increases were partially offset by reductions in provisions for expected credit losses by $907 and a $421 CARES Act benefit.

Restructuring expenses and asset impairments in ~~2016 included~~ ~~severance adjustments~~the second quarter of2020 primarily related to ~~headcount reductions announced~~asset impairment charges on certain manufacturing assets that will no longer be utilized in ~~prior quarters, lease termination costs to exit administrative offices in Austin,~~production at DynaEnergetics’ Blum, Texas and ~~costs related to relocation~~Troisdorf, Germany facilities and charges associated with the anticipated sale of ~~perforating gun~~DynaEnergetics’ Tyumen, Siberia manufacturing facility.

Operating income of $2,668 in ~~Germany~~.

~~Goodwill impairment charge~~ ~~relates to fully impairing NobelClad's goodwill balance.~~

~~Operating loss~~the second quarter of 2021 increased compared ~~with 2016~~to the same period last year primarily due to ~~the goodwill impairment charge, which partially was offset by~~ improved earnings at DynaEnergetics and NobelClad, including a total CARES Act benefit of $2,253 in ~~our DynaEnergetics segment.~~the second quarter of 2021.

Other ~~expense,~~income, net of$108in ~~2017~~the second quarter of 2021 primarily related to net unrealized and ~~2016 primarily relates to~~ realized ~~and unrealized~~ foreign currency ~~losses. Our~~exchange gains. Currency gains and losses can arise when subsidiaries ~~frequently~~ enter into inter-company and ~~third party~~third-party transactions that are denominated in currencies other than their functional currency. Changes in exchange rates with respect to these transactions will result in unrealized gains or losses if unsettled at the end of the reporting period or realized gains or losses at settlement of the transaction. During the third quarter of 2017, we began usingcurrency, including foreign currency forward contracts ~~generally with maturities up to one month,~~used to offset foreign

Interest expense, net of$81decreased compared with the second quarter of ~~these contracts are designated as accounting hedges, and all changes~~2020 primarily due to the repayment in full of our outstanding debt in the ~~fair value~~first quarter of ~~the forward contracts are recognized immediately in "Other income (expense), net" within our Condensed Consolidated Statements of Operations.~~2021.

~~Interest income (expense), net~~ ~~increased compared with 2016 due to higher interest rates on a higher average outstanding line of credit balance.~~

Income tax provision of ~~$812~~$971 was recorded on income before income taxes of $2,695. Our most significant operations are in the United States, which has a 21% statutory income tax rate, and Germany, which has a 33% statutory income tax rate. The mix of income or loss before income taxes between these jurisdictions is one of the primary drivers of the difference between our 21% statutory tax rate and our effective tax rate. We recorded an income tax benefit of $2,583 on loss before income taxes of $8,231 for the ~~third~~second quarter of 2017 compared with a provision of $272 for the third quarter of 2016. We currently are unable to recognize tax benefits associated with losses incurred in certain jurisdictions due to valuation allowances recorded against deferred tax assets in those jurisdictions.2020.

Net ~~loss~~ income for the three months ended ~~September~~June 30, ~~2017~~2021 was ~~$14,064,~~$1,724, or ~~$0.98~~$0.10 per diluted share, compared ~~with $3,136,~~to net loss of $5,648, or ~~$0.22~~$0.38 per diluted share, for the same period in ~~2016.~~2020.

Adjusted EBITDA increased compared with ~~2016~~the second quarter of 2020 primarily due to the factors discussed above. See ~~"Overview"~~“Overview” above for the explanation of the use of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.


	Three months ended June 30,
	2021		2020
Net income (loss)	$	1,724	$	(5,648)
Interest expense, net	81		156
Income tax provision (benefit))	971		(2,583)
Depreciation	2,832		2,364
Amortization of purchased intangible assets	288		353
EBITDA	5,896		(5,358)

Restructuring expenses and asset impairments	—		2,046



Stock-based compensation	1,727		1,441
Other (income) expense, net	(108)		85
Adjusted EBITDA	$	7,515	$	(1,786)

Adjusted Net Income and Adjusted Diluted Earnings per Share increased compared with the second quarter of 2020 due to the factors discussed above. See "Overview" above for the explanation of the use of non-GAAP measures. The following is a reconciliation of the most directly comparable GAAP measures to Adjusted Net Income and Adjusted Diluted Earnings Per Share.


	Three months ended June 30, 2021
	Pre-Tax		Tax (Benefit)		Net		Diluted weighted average shares outstanding	Diluted EPS
Net income, as reported	$	2,695	$	971	$	1,724	17,568,444	$	0.10










Adjusted net income	$	2,695	$	971	$	1,724	17,568,444	$	0.10

Three months ended September 30,
2017 2016
Net loss $ (14,064 ) $ (3,136 )
Interest expense 367
265
Interest income —
—
Provision for income taxes 812
272
Depreciation 1,643
1,760
Amortization of purchased intangible assets 1,046
1,009
EBITDA (10,196 ) 170
Restructuring expenses —
373
Goodwill impairment charge 17,584
—
Stock-based compensation 743
478
Other (income) expense, net 436
157
Adjusted EBITDA $ 8,567
$ 1,178

Table of Contents


	Three months ended June 30, 2020
	Pre-Tax		Tax (Benefit) Provision		Net		Diluted weighted average shares outstanding	Diluted EPS
Net loss, as reported	$	(8,231)	$	(2,583)	$	(5,648)	14,832,242	$	(0.38)
Restructuring expenses and asset impairments:
DynaEnergetics	1,851		728		1,123		14,832,242	0.08
NobelClad	195		65		130		14,832,242	0.01







Adjusted net loss	$	(6,185)	$	(1,790)	$	(4,395)	14,832,242	$	(0.29)

~~Nine~~

Six months ended ~~September~~June 30, ~~2017~~2021 compared with ~~nine~~six months ended ~~September~~June 30, ~~2016~~2020


	Six months ended June 30,
	2021			2020			$ change		% change
Net sales	$	121,096		$	116,766		$	4,330	4	%
Gross profit	29,884			31,070			(1,186)		(4)	%
Gross profit percentage	24.7		%	26.6		%
COSTS AND EXPENSES:
General and administrative expenses	16,400			14,831			1,569		11	%
% of net sales	13.5		%	12.7		%
Selling and distribution expenses	10,787			14,015			(3,228)		(23)	%
% of net sales	8.9		%	12.0		%
Amortization of purchased intangible assets	612			707			(95)		(13)	%
% of net sales	0.5		%	0.6		%

Restructuring expenses	127			3,162			(3,035)		(96)	%


Operating income (loss)	1,958			(1,645)			3,603		219	%
Other income, net	502			32			470		1,469	%
Interest expense, net	(216)			(394)			178		45	%
Income (loss) before income taxes	2,244			(2,007)			4,251		212	%
Income tax provision (benefit)	88			(514)			602		117	%
Net income (loss)	2,156			(1,493)			3,649		244	%
Adjusted EBITDA	$	11,562		$	9,499		$	2,063	22	%

Nine months ended September 30,
2017 2016 $ change % change
Net sales $ 138,314
$ 118,402
$ 19,912
17 %
Gross profit 41,547
28,750
12,797
45 %
Gross profit percentage 30.0 % 24.3 %
COSTS AND EXPENSES:
General and administrative expenses 19,821
15,522
4,299
28 %
% of net sales 14.3 % 13.1 %
Selling and distribution expenses 13,420
12,352
1,068
9 %
% of net sales 9.7 % 10.4 %
Amortization of purchased intangible assets 3,034
3,023
11
— %
% of net sales 2.2 % 2.6 %
Restructuring expenses 458
1,202
(744 ) (62 )%
Goodwill impairment charge 17,584
—
17,584
— %
Operating loss (12,770 ) (3,349 ) (9,421 ) (281 )%
Other income (expense), net (965 ) 178
(1,143 ) (642 )%
Interest income (expense), net (1,201 ) (824 ) (377 ) (46 )%
Loss before income taxes (14,936 ) (3,995 ) (10,941 ) (274 )%
Income tax provision 1,956
321
1,635
509 %
Net loss (16,892 ) (4,316 ) (12,576 ) (291 )%
Adjusted EBITDA $ 15,461
$ 7,499
$ 7,962
106 %

Net salesincreased $4,330 compared with ~~2016~~the first six months of 2020 primarily due to ~~a 68% increase~~the recovery in ~~DynaEnergetics' net sales due~~oil and gas demand, which led to increased ~~onshore unconventional~~ drilling and well completion activity in North America and ~~strong~~increased sales of DynaEnergetics’ DS perforating systems. The first six months of 2020 was severely impacted by the drop in demand for ~~DynaEnergetics' intrinsically-safe, addressable initiating systems. This increase~~oil and gas and related drilling and well completion activity due to the COVID-19 pandemic.

Gross profit percentage decreased to 24.7% compared with the first six months of 2020 primarily due to lower average selling prices at DynaEnergetics. The decline was partially ~~was~~ offset by ~~a 21% decline~~excess capacity charges and inventory reserves that were recorded at DynaEnergetics in ~~NobelClad's net sales from a recent decline in core repair and maintenance orders from the downstream energy industry and absence of large-project bookings in 2017. In~~ the second quarter of ~~2016 NobelClad shipped a large semiconductor-related project.~~

~~Gross profit percentage~~ ~~increased from higher average selling prices and improved product mix in DynaEnergetics, combined with better~~2020, as well as favorable project mix in ~~NobelClad.~~NobelClad, and a $2,334 CARES Act benefit in the first six months of 2021.

General and administrative expenses increased $1,569 compared with ~~2016~~the first six months of 2020 primarily ~~due to higher outside legal expenses related to patent infringement defense costs as well as higher salaries and wages.~~

~~Selling and distribution expenses~~ ~~increased compared with 2016 principally~~ due to an increase in ~~salaries and benefits and higher~~ outside services ~~expenses.~~costs by $1,469 mostly related to patent infringement litigation in which DynaEnergetics is the plaintiff and the restoration of variable compensation by $724. The increases were partially offset by a $679 CARES Act benefit.

Table of Contents

Selling and distribution expenses decreased $3,228 compared with the first six months of 2020 primarily due to reductions in provisions for expected credit losses by $3,168 and an $816 CARES Act benefit. The decreases were partially offset by the restoration of variable compensation by $323.

Restructuring expenses ~~for 2017~~ and asset impairments of $127 in the first six months of 2021 primarily related to ~~the announced closure of DynaEnergetics~~additional severance accruals for employee terminations associated with closing manufacturing operations in ~~Kazakhstan. In 2016, restructuring expenses~~ France in 2018. Expenses in 2020 primarily related to ~~severance~~downsizing our direct labor workforce at DynaEnergetics in response to declining crude oil prices and corresponding demand for ~~headcount reductions at~~ ~~DynaEnergetics locations in~~ ~~Troisdorf, Germany and Austin, Texas, lease termination costs to exit administrative offices in Austin, Texas, costs related to relocation of~~well perforating ~~gun manufacturing in Germany, and~~ ~~the accelerated vesting of stock awards in connection with the elimination of certain positions.~~

~~Goodwill impairment charge~~ ~~relates to fully impairing NobelClad's goodwill balance.~~

~~Operating loss~~ ~~increased compared with 2016~~systems due to the ~~goodwill impairment charge. However, the charge was offset by higher sales volume~~COVID-19 pandemic.

Operating income of $1,958 in 2021 reflect improved earnings at DynaEnergetics and ~~favorable product mix~~NobelClad during 2021, including a total CARES Act benefit of $3,829 in ~~DynaEnergetics.~~2021.

Other income, ~~(expense),~~ netof$502 in ~~2017~~the first six months of 2021 primarily ~~was made up~~related to a gain on the sale of ~~realized~~a fully depreciated fixed asset by DynaEnergetics combined with net unrealized and ~~unrealized~~realized foreign currency ~~losses. In 2016, other income (expense), net principally consisted of realized~~exchange gains. Currency gains and ~~unrealized foreign currency gains. Our~~losses can arise when subsidiaries ~~frequently~~ enter into inter-company and ~~third party~~third-party transactions that are denominated in currencies other than their functional ~~currency.~~

~~Table of Contents~~

Changes in exchange rates with respect to these transactions will result in unrealized gains or losses if unsettled at the end of the reporting period or realized gains or losses at settlement of the transaction. During the third quarter of 2017, we began usingcurrency, including foreign currency forward contracts ~~generally with maturities of one month,~~used to offset foreign exchange rate fluctuations on certain foreign currency denominated asset and liability positions. None of these contracts are designated as accounting hedges, and all changes in the fair value of the forward contracts are recognized immediately in "Other income (expense), net" within our Condensed Consolidated Statements of Operations.

Interest ~~income (expense),~~expense, net ~~increased~~of$216decreased compared with ~~2016~~the first six months of 2020 primarily due to ~~expensing $261~~the repayment in full of ~~deferred~~our outstanding debt ~~issuance costs~~ in ~~conjunction with amending our credit facility in March 2017 combined with higher interest rates on a higher average outstanding line~~the first quarter of ~~credit balance.~~2021.

Income tax provision of ~~$1,956~~$88 was recorded on income before income taxes of $2,244. Our most significant operations are in the United States, which has a 21% statutory income tax rate, and Germany, which has a 33% statutory income tax rate. The mix of income or loss before income taxes between these jurisdictions is one of the main drivers of the difference between our 21% statutory tax rate and our effective tax rate. The effective income tax rate was impacted favorably by discrete stock-based compensation windfall benefits of $793. The rate was also impacted unfavorably by geographic mix of pretax income, state taxes, and certain compensation expenses that are not tax deductible in the U.S. We recorded an income tax benefit of $514 on loss before income taxes of $2,007 for the ~~nine~~first six months of 2020. The effective income tax rate was impacted unfavorably by the geographic mix of pretax income, state taxes, and certain compensation expenses that are not tax deductible in the U.S. The effective rate was also impacted favorably by discrete items of $315.

Net income for the six months ended ~~September~~June 30, 2017 compared with $321 for the same period of 2016. We currently are unable to recognize tax benefits associated with losses incurred in certain jurisdictions due to valuation allowances recorded against deferred tax assets in those jurisdictions.

~~Net loss~~ ~~for the nine months ended September 30, 2017~~2021 was ~~$16,892,~~$2,156, or ~~$1.18~~$0.13 per diluted share, compared to ~~$4,316,~~net loss of $1,493, or ~~$0.31~~$0.10 per diluted share, for the same period in ~~2016.~~2020.

Adjusted EBITDA increased compared with ~~2016~~the first six months of 2020 primarily due to the factors discussed above. See ~~"Overview"~~“Overview” above for the explanation of the use of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.


	Six months ended June 30,
	2021		2020
Net income (loss)	$	2,156	$	(1,493)
Interest expense, net	216		394
Income tax provision (benefit))	88		(514)
Depreciation	5,530		4,716
Amortization of purchased intangible assets	612		707
EBITDA	8,602		3,810

Restructuring expenses and asset impairments	127		3,162



Stock-based compensation	3,335		2,559
Other income, net	(502)		(32)
Adjusted EBITDA	$	11,562	$	9,499

Adjusted Net Income and Adjusted Diluted Earnings per Share increased compared with the first six months of 2020 due to the factors discussed above. See "Overview" above for the explanation of the use of non-GAAP measures. The following is a reconciliation of the most directly comparable GAAP measures to Adjusted Net Income and Adjusted Diluted Earnings Per Share.

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Nine months ended September 30,
2017 2016
Net loss $ (16,892 ) $ (4,316 )
Interest expense 1,203
826
Interest income (2 ) (2 )
Provision for income taxes 1,956
321
Depreciation 5,030
5,024
Amortization of purchased intangible assets 3,034
3,023
EBITDA (5,671 ) 4,876
Restructuring expenses 458
1,202
Goodwill impairment charge 17,584
—
Stock-based compensation 2,125
1,599
Other (income) expense, net 965
(178 )
Adjusted EBITDA $ 15,461
$ 7,499


	Six months ended June 30, 2021
	Pre-Tax		Tax Provision		Net		Diluted weighted average shares outstanding	Diluted EPS
Net income, as reported	$	2,244	$	88	$	2,156	16,507,500	$	0.13
Restructuring expenses and asset impairments:

NobelClad	127		—		127		16,507,500	0.01







Adjusted net income	2,371		88		2,283		16,507,500	0.14


	Six months ended June 30, 2020
	Pre-Tax		Tax (Benefit) Provision		Net		Diluted weighted average shares outstanding	Diluted EPS
Net loss, as reported	$	(2,007)	$	(514)	$	(1,493)	14,745,661	$	(0.10)
Restructuring expenses and asset impairments:
DynaEnergetics	2,789		882		1,907		14,745,661	0.13
NobelClad	254		78		176		14,745,661	0.01
Corporate	119		25		94		14,745,661	0.01






Adjusted net income	$	1,155	$	471	$	684	14,745,661	$	0.05

Business Segment Financial Information

We primarily evaluate performance and allocate resources based on segment revenues, operating income and adjusted EBITDA as well as projected future performance. Segment operating income is defined as revenues less expenses identifiable to the segment. Segment operating income will reconcile to consolidated income before income taxes by deducting unallocated corporate expenses, including stock-based compensation, net other expense, and net interest ~~expense, and income tax provision.~~expense.

~~Table of Contents~~DynaEnergetics

~~NobelClad~~

Three months ended ~~September~~June 30, ~~2017~~2021 compared with three months ended ~~September~~June 30, ~~2016~~2020


	Three months ended June 30,
	2021			2020			$ change		% change
Net sales	$	42,268		$	23,643		$	18,625	79	%
Gross profit	10,676			1,967			8,709		443	%
Gross profit percentage	25.3		%	8.3		%
COSTS AND EXPENSES:
General and administrative expenses	4,012			3,157			855		27	%
Selling and distribution expenses	3,300			3,595			(295)		(8)	%
Amortization of purchased intangible assets	163			259			(96)		(37)	%
Restructuring expenses and asset impairments	—			1,851			(1,851)		(100)	%

Operating income (loss)	3,201			(6,895)			10,096		146	%
Adjusted EBITDA	$	5,284		$	(3,272)		$	8,556	261	%

Three months ended September 30,
2017 2016 $ change % change
Net sales $ 16,841
$ 16,915
$ (74 ) — %
Gross profit 3,560
3,112
448
14 %
Gross profit percentage 21.1 % 18.4 %
COSTS AND EXPENSES:
General and administrative expenses 1,210
907
303
33 %
Selling and distribution expenses 1,696
1,409
287
20 %
Amortization of purchased intangible assets 100
95
5
5 %
Goodwill impairment charge 17,584
—
17,584
— %
Operating income (loss) (17,030 ) 701
(17,731 ) (2,529 )%
Adjusted EBITDA $ 1,486
$ 1,707
$ (221 ) (13 )%

Net sales were ~~flat compared with 2016.~~$18,625 higher than the second quarter of 2020 due to a recovery in oil and gas demand, which led to increased drilling and well completion activity in North America and increased sales of DynaEnergetics’ DS perforating systems. The second quarter of 2020 was severely impacted by the drop in demand for oil and gas and drilling and completion

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activity due to the COVID-19 pandemic. The year-over-year increase in net sales was partially offset by lower international sales.

Gross profit percentageincreased to 25.3%compared with ~~2016~~the second quarter of 2020 primarily due to ~~better margins~~the impact of higher sales volume on ~~the mix of projects~~fixed expenses, higher average selling prices, excess capacity charges and inventory reserves that were recorded in the ~~current year.~~second quarter of 2020, and a CARES Act benefit of $1,009 in the second quarter of 2021.

General and administrative expenses increased $855 compared with ~~2016~~the second quarter of 2020 primarily due to ~~higher salaries and employee benefits.~~an increase in outside services costs by $1,382 mostly related to patent infringement litigation in which DynaEnergetics is the plaintiff. The increase was partially offset by a CARES Act benefit of $112.

Selling and distribution expenses decreased $295 compared with the second quarter of 2020 primarily due to reductions in provisions for expected credit losses by $907 and a CARES Act benefit of $267. These decreases were partially offset by increases in depreciation expense by $336, restoration of variable compensation by $186, outside service costs by $137, and resumption of business-related travel by $104.

Restructuring expenses and asset impairments in 2020 primarily related to asset impairment charges on manufacturing equipment that was retired and charges associated with the sale of the Tyumen, Siberia manufacturing facility.

Operating income increased $10,096compared withthe second quarter of 2020 primarily due the impact of higher sales volume on fixed expenses, higher average selling prices, and a CARES Act benefit of $1,388.

Adjusted EBITDAincreased compared with ~~2016 primarily from higher salaries and benefits due to increased investment in business growth resources.~~

~~Goodwill impairment charge~~ ~~relates to fully impairing NobelClad's goodwill balance.~~

~~Operating loss~~ ~~was $17,030primarily due to~~ the ~~goodwill impairment charge.~~

~~Adjusted EBITDA~~ ~~declined compared with 2016 primarily~~second quarter of 2020 due to the factors discussed above. See ~~"Overview"~~“Overview” above for the explanation of the use of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.


	Three months ended June 30,
	2021		2020
Operating income (loss)	$	3,201	$	(6,895)
Adjustments:
Restructuring expenses and asset impairments	—		1,851


Adjusted operating income (loss)	3,201		(5,044)
Depreciation	1,920		1,513
Amortization of purchased intangibles	163		259
Adjusted EBITDA	$	5,284	$	(3,272)

Six months ended June 30, 2021 compared with six months ended June 30, 2020


	Six months ended June 30,
	2021			2020			$ change		% change
Net sales	$	80,440		$	76,863		$	3,577	5	%
Gross profit	19,111			21,442			(2,331)		(11)	%
Gross profit percentage	23.8		%	27.9		%
COSTS AND EXPENSES:
General and administrative expenses	7,587			6,988			599		9	%
Selling and distribution expenses	6,442			9,435			(2,993)		(32)	%
Amortization of purchased intangible assets	362			519			(157)		(30)	%
Restructuring expenses and asset impairments	—			2,789			(2,789)		(100)	%

Operating income	4,720			1,711			3,009		176	%
Adjusted EBITDA	$	8,803		$	8,044		$	759	9	%

Net sales were $3,577 higher than in the first six months of 2020 due to a recovery in oil and gas demand, which led to increased drilling and well completion activity in North America and increased sales of DynaEnergetics’ DS perforating systems. The year-over-year increase in net sales was partially offset by lower international sales. The first six months of 2020

Three months ended September 30,
2017 2016
Operating income (loss) $ (17,030 ) $ 701
Adjustments:
Goodwill impairment charge 17,584
—
Depreciation 832
911
Amortization of purchased intangibles 100
95
Adjusted EBITDA $ 1,486
$ 1,707

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~~Nine months ended September 30, 2017 compared with nine months ended September 30, 2016~~

Nine months ended September 30,
2017 2016 $ change % change
Net sales $ 54,145
$ 68,374
$ (14,229 ) (21 )%
Gross profit 11,885
13,728
(1,843 ) (13 )%
Gross profit percentage 22.0 % 20.1 %
COSTS AND EXPENSES:
General and administrative expenses 3,206
2,754
452
16 %
Selling and distribution expenses 5,123
4,348
775
18 %
Amortization of purchased intangible assets 285
286
(1 ) — %
Goodwill impairment charge 17,584
—
17,584
— %
Operating income (loss) (14,313 ) 6,340
(20,653 ) (326 )%
Adjusted EBITDA $ 6,198
$ 9,340
$ (3,142 ) (34 )%

~~Net sales~~ ~~decreased compared with 2016~~was severely impacted by the drop in demand for oil and gas and drilling and completion activity due to ~~a recent decline in core repair and maintenance orders from~~ the ~~downstream energy industry and absence of large-project bookings in 2017. Additionally, during the second quarter of 2016, NobelClad shipped a large semiconductor-related project.~~COVID-19 pandemic.

Gross profit percentage ~~increased~~ decreased to 23.8%compared with ~~2016~~2020 primarily due to ~~better margins on the mix~~lower average selling prices in 2021 compared with 2020, which also contributed to lower fixed cost absorption. The decline was partially offset by a CARES Act benefit of ~~projects in the current year.~~$1,446.

General and administrative expenses increased $599 compared with ~~2016~~2020 primarily due to ~~higher salaries and employee benefits.~~an increase in outside services costs by $1,555 mostly related to patent infringement litigation in which DynaEnergetics is the plaintiff. The increase was partially offset by a CARES Act benefit of $233.

Selling and distribution expenses decreased $2,993 compared with 2020 primarily due to reductions in provisions for expected credit losses by $2,856 and a CARES Act benefit of $521. These decreases were partially offset by increases in depreciation expense by $546 and restoration of variable compensation by $291.

Restructuring expenses and asset impairments in 2020 primarily related to measures taken in response to the COVID-19 pandemic-related impact on oil and gas demand. We downsized our direct labor workforce in response to declining crude oil prices and corresponding demand for well perforating systems and recorded asset impairments. We also incurred costs associated with the anticipated sale of the Tyumen, Siberia manufacturing facility.

Operating income increased $3,009compared with 2020 as increased sales volume, a CARES Act benefit of $2,200, and a reduction in the provisions for expected credit losses more than offset lower average selling prices.

Adjusted EBITDAincreased compared with ~~2016 primarily from higher salaries and benefits due to increased investment in business growth resources and higher outside services expenses.~~

~~Goodwill impairment charge~~ ~~relates to fully impairing NobelClad's goodwill balance.~~

~~Operating loss~~ ~~was$14,313primarily due to the goodwill impairment charge combined with lower project volume and higher general and administrative as well as selling and distribution expenses.~~

~~Adjusted EBITDA~~ ~~declined compared with 2016 primarily~~2020 due to the factors discussed above. See ~~"Overview"~~“Overview” above for the explanation of the use of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.


	Six months ended June 30,
	2021		2020
Operating income	$	4,720	$	1,711
Adjustments:
Restructuring expenses and asset impairments	—		2,789


Adjusted operating income	4,720		4,500
Depreciation	3,721		3,025
Amortization of purchased intangibles	362		519
Adjusted EBITDA	$	8,803	$	8,044

Nine months ended September 30,
2017 2016
Operating income (loss) $ (14,313 ) $ 6,340
Adjustments:
Goodwill impairment charge 17,584
—
Depreciation 2,642
2,714
Amortization of purchased intangibles 285
286
Adjusted EBITDA $ 6,198
$ 9,340
NobelClad

~~Table of Contents~~

~~DynaEnergetics~~

Three months ended ~~September~~June 30, ~~2017~~2021 compared with three months ended ~~September~~June 30, ~~2016~~2020


	Three months ended June 30,
	2021			2020			$ change		% change
Net sales	$	23,170		$	19,560		$	3,610	18	%
Gross profit	6,460			4,802			1,658		35	%
Gross profit percentage	27.9		%	24.6		%
COSTS AND EXPENSES:
General and administrative expenses	889			797			92		12	%
Selling and distribution expenses	2,075			1,731			344		20	%
Amortization of purchased intangible assets	125			94			31		33	%
Restructuring expenses and asset impairments	—			195			(195)		(100)	%

Operating income	3,371			1,985			1,386		70	%
Adjusted EBITDA	$	4,316		$	3,061		$	1,255	41	%

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Three months ended September 30,
2017 2016 $ change % change
Net sales $ 35,320
$ 19,638
$ 15,682
80 %
Gross profit 13,668
5,399
8,269
153 %
Gross profit percentage 38.7 % 27.5 %
COSTS AND EXPENSES:
General and administrative expenses 3,186
2,739
447
16 %
Selling and distribution expenses 2,669
2,350
319
14 %
Amortization of purchased intangible assets 946
914
32
4 %
Restructuring expenses —
373
(373 ) (100 )%
Operating income (loss) 6,867
(977 ) 7,844
803 %
Adjusted EBITDA $ 8,624
$ 1,159
$ 7,465
644 %

Net sales ~~were higher than in 2016~~increased $3,610 compared with the second quarter of 2020 primarily due to ~~increased demand for its intrinsically-safe, addressable initiating systems, coupled with an active unconventional well-completion industry in North America.~~the timing of shipment of projects out of backlog.

Gross profit percentage of 27.9% increased compared with ~~2016~~the second quarter of 2020 primarily due to a favorable project mix, higher ~~average selling prices, improved product mix and the favorable impact of higher~~sales volume on fixed ~~overhead expenses.~~expenses and a CARES Act benefit of $479.

General and administrative expenses increased $92 compared with ~~2016~~the second quarter of 2020 primarily due to ~~higher outside legal expenses related to patent infringement defense costs as well as increases in salaries and employee benefits.~~restoration of variable compensation by $41.

Selling and distribution expenses increased $344 compared with ~~2016~~the second quarter of 2020 primarily due to ~~higher salaries~~a bad debt expense recovery of $178 in the second quarter of 2020 and ~~employee benefits.~~a restoration of variable compensation by $103.

Restructuring expenses and asset impairments of $195 in ~~2016 included~~ ~~severance adjustments~~2020 related to ~~headcount reductions announced~~severance costs associated with the past closure of a manufacturing facility in ~~prior quarters, lease termination costs to exit administrative offices in Austin, Texas, and relocation of perforating gun manufacturing in Germany~~.France.

Operating income ~~was$6,867~~increased $1,386 compared with the second quarter of 2020 primarily due to a favorable project mix, the impact of higher ~~unit~~sales volume ~~favorable product mix~~on fixed expenses, and ~~higher average selling prices,~~a CARES Act benefit. The increase was partially offset by ~~increased~~higher general and administrative ~~expenses~~ and selling and distribution expenses.


	Three months ended June 30,
	2021		2020
Operating income	$	3,371	$	1,985
Adjustments:
Restructuring expenses and asset impairments	—		195

Adjusted operating income	3,371		2,180
Depreciation	820		787
Amortization of purchased intangibles	125		94
Adjusted EBITDA	$	4,316	$	3,061

Three months ended September 30,
2017 2016
Operating income (loss) $ 6,867
$ (977 )
Adjustments:
Restructuring expenses —
373
Depreciation 811
849
Amortization of purchased intangibles 946
914
Adjusted EBITDA $ 8,624
$ 1,159

~~Table of Contents~~

~~Nine~~Six months ended ~~September~~June 30, ~~2017~~2021 compared with ~~nine~~six months ended ~~September~~June 30, ~~2016~~2020


	Six months ended June 30,
	2021			2020			$ change		% change
Net sales	$	40,656		$	39,903		$	753	2	%
Gross profit	11,077			9,954			1,123		11	%
Gross profit percentage	27.2		%	24.9		%
COSTS AND EXPENSES:
General and administrative expenses	1,702			1,771			(69)		(4)	%
Selling and distribution expenses	4,022			4,282			(260)		(6)	%
Amortization of purchased intangible assets	250			188			62		33	%
Restructuring expenses and asset impairments	127			254			(127)		(50)	%

Operating income	4,976			3,459			1,517		44	%
Adjusted EBITDA	$	6,987		$	5,428		$	1,559	29	%

Nine months ended September 30,
2017 2016 $ change % change
Net sales $ 84,169
$ 50,028
$ 34,141
68 %
Gross profit 29,863
15,187
14,676
97 %
Gross profit percentage 35.5 % 30.4 %
COSTS AND EXPENSES:
General and administrative expenses 9,713
6,510
3,203
49 %
Selling and distribution expenses 8,035
7,771
264
3 %
Amortization of purchased intangible assets 2,749
2,737
12
— %
Restructuring expenses 458
1,128
(670 ) (59 )%
Operating income (loss) 8,908
(2,959 ) 11,867
401 %
Adjusted EBITDA $ 14,503
$ 3,216
$ 11,287
351 %

Net sales were $753 higher ~~than in 2016~~compared with 2020 primarily due to ~~increased onshore unconventional drilling and completion activity in North America and strong demand for DynaEnergetics' intrinsically-safe, addressable initiating systems.~~the timing of shipment of projects out of backlog.

Gross profit percentage of 27.9% increased compared with ~~2016~~of 2020 primarily due to ~~higher average selling prices, improved product mix and the favorable impact~~a CARES Act benefit of ~~higher volume on fixed overhead expenses.~~$888.

General and administrative expenses decreased $69 compared with 2020 primarily due to a CARES Act benefit of $56.

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Selling and distribution expenses decreased $260 compared with of 2020 primarily due to a CARES Act benefit of $295 partially offset by a restoration of variable compensation by $32.

Restructuring expenses and asset impairments of $127 in 2021 related to additional severance liabilities for employees terminated as part of closing manufacturing operations in France in 2018. Expenses of $254 in 2020 related to severance costs.

Operating income increased $1,517 compared with 2020 primarily due to CARES Act benefits of $1,239.

Adjusted EBITDAincreased compared with ~~2016~~2020 primarily ~~due to higher outside legal expenses related to patent infringement defense costs.~~

~~Restructuring expenses~~ ~~in 2017 related to the announced closure of operations~~ ~~in Kazakhstan. In 2016, restructuring~~ ~~related to severance for headcount reductions in Troisdorf, Germany and Austin, Texas and~~ ~~the accelerated vesting of stock awards in connection with the elimination of certain positions.~~

~~Operating income~~ ~~was$8,908due to higher unit volume, favorable product mix and higher average selling prices, partially offset by increased general and administrative expenses.~~

~~Adjusted EBITDA~~ ~~increased compared with 2016~~ due to the factors discussed above. See ~~"Overview"~~“Overview” above for the explanation of the use of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.


	Six months ended June 30,
	2021	2020
Operating income	4,976	3,459
Adjustments:
Restructuring expenses and asset impairments	127	254

Adjusted operating income	5,103	3,713
Depreciation	1,634	1,527
Amortization of purchased intangibles	250	188
Adjusted EBITDA	6,987	5,428

Nine months ended September 30,
2017 2016
Operating income (loss) $ 8,908
$ (2,959 )
Adjustments:
Restructuring expenses 458
1,128
Depreciation 2,388
2,310
Amortization of purchased intangibles 2,749
2,737
Adjusted EBITDA $ 14,503
$ 3,216

Liquidity and Capital Resources

We have historically financed our operations from a combination of internally generated cash flow, revolving credit borrowings, and various long-term debt arrangements. The COVID-19 pandemic drove a sharp decline in DynaEnergetics' core oil and gas end markets and corresponding well-completion activity and demand for its perforating systems late in the first quarter of 2020. In April 2020, DMC announced several cost-containment actions to reduce our activity-based cost structure, limit spending and protect our balance sheet. These actions included reducing our workforce by 32%, implementing reduced work weeks at DynaEnergetics, significantly cutting selling, general and administrative expenses, reducing our capital expenditures budget by 50% and suspending the quarterly dividend. While the decline in crude oil prices and oil and gas demand accelerated early in the second quarter of 2020, sales volume has improved in the four consecutive quarters through the second quarter of 2021. Though NobelClad customers in the downstream energy industry have delayed various projects, NobelClad’s order backlog increased to $45,134 at June 30, 2021 from $39,884 at December 31, 2020.

We have also taken action to allow flexibility in accessing the capital markets. On October 22, 2020, we commenced an at-the-market equity program under a shelf registration statement filed in May 2020, which allows us to sell and issue up to $75 million in shares of our common stock from time to time, and since the inception of the program during the fourth quarter of 2020 we have sold 1,006,180 shares of common stock for net proceeds of $51,002. In connection with the commencement of the at-the-market equity program, we also amended our credit facility to waive the requirement to repay outstanding amounts under the credit facility with proceeds from the program. Our ability to access remaining capital may be limited by market conditions at the time of any future potential sale. While we were able to sell shares during the fourth quarter of 2020 and first quarter of 2021, there can be no assurance that any future capital will be available on acceptable terms or at all.

Additionally, on May 3, 2021, the Company announced a registered public offering of its stock under an automatic shelf registration statement on Form S-3ASR filed on May 3, 2021. The Company entered into an underwriting agreement with KeyBanc Capital Markets Inc. (“KeyBanc”), as representative of the underwriters (collectively, the “Underwriters”), pursuant to which the Company agreed to sell 2,500,000 shares of its $0.05 par value common stock to the Underwriters. In addition, the Underwriters were granted an option, exercisable within 30 days, to purchase up to an additional 375,000 shares of common stock to cover over-allotments, if any, on the same terms and conditions. On May 7, 2021 DMC issued a total of 2,875,000 shares of its common stock, which included the exercise of the over-allotment option, at a market price of $45 for gross proceeds of $129,375. Net proceeds from the offering were $123,461, after deducting underwriter fees and other expenses of $5,914. We intend to use the net proceeds from the offering for general corporate purposes, which may include acquisitions. Pending use of the proceeds as described, we invested the proceeds of the offering in highly liquid marketable securities, including commercial paper and U.S. Treasury securities. Please see discussion of our marketable securities in Note 2 to the Condensed Consolidated Financial Statements.

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These measures enabled us to improve our net cash position from $42,659 at December 31, 2020 to $181,294 at June 30, 2021, maintain our fully undrawn and available $50,000 revolving credit facility, and repay our capital expenditure term loan in full.

We believe that cash and cash equivalents and market securities on hand, cash flow from operations, ~~and~~ funds available under our current credit facilities and any future replacement thereof, and potential proceeds from our at-the-market offering, will be sufficient to fund the working capital, debt ~~interest~~ service, ~~dividend payments,~~if applicable, and other capital expenditure requirements of our current business operations for the foreseeable future.

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We may also execute capital markets transactions to raise additional funds if we believe market conditions are favorable. Nevertheless, our ability to generate sufficient cash flows from operations will depend upon our success in executing our strategies. If we are unable to (i) realize sales from our backlog; (ii) secure new customer orders; (iii) ~~sell~~continue selling products at ~~attractive~~profitable margins; and (iv) continue to implement cost-effective internal processes, our ability to meet cash requirements through operating activities could be impacted. ~~Also, continued heightened litigation costs could negatively impact our ability to meet future cash requirements.~~ Furthermore, any restriction on the availability of borrowings under our credit facilities could ~~also~~ negatively affect our ability to meet future cash requirements. ~~In March 2017, we filed a shelf registration statement on Form S-3 with~~We will continue to monitor the ~~Securities~~continuing unprecedented financial and Exchange Commission, which has been declared effective, and on which we registered for sale up to $150 million of certain of our securities from time to time and on terms that we may determine in the future. Our ability to access this capital may be limited by market conditions, atincluding the ~~time~~impacts COVID-19 will have on credit availability and capital markets. We also continue to pursue potential acquisitions; the completion of any ~~future potential offering. There can be no assurance that any such~~acquisition may significantly increase our capital ~~will be available on acceptable terms or at all.~~requirements.

Debt facilities

As of ~~December 31, 2016,~~June 30, 2021 we had no outstanding borrowings under our credit facility. On March 8, 2018, we entered into a five-year $75,000 credit facility which replaced in its entirety our prior syndicated credit ~~agreement (“~~facility entered into on February 23, 2015. The credit ~~facility”) that allowed~~facility allows for revolving loans of ~~$65,000~~up to $50,000 with a $20,000 US dollar equivalent sublimit for alternative currency loans. In addition, the agreement provides for a $25,000 Capex Facility which was used to assist in ~~U.S. dollars and $10,000~~financing our DynaEnergetics manufacturing expansion project in ~~alternative currencies as well as~~Blum, Texas. At the end of year one, the Capex Facility converted to a ~~$25,000~~term loan which was amortizable at 12.5% of principal per year with a balloon payment for the outstanding balance upon the credit facility maturity date in 2023. In February 2021, we repaid the outstanding Capex Facility balance of $11,750.

The facility has a $100,000 accordion feature to increase the commitments ~~in any of the loan classes subject to approval by applicable lenders. The credit facility matures on February 23, 2020.~~

~~On March 6, 2017, we entered into a third amendment of our credit facility which, among other changes, reduced the amount of borrowings available~~ under the credit facility, increased the maximum debt-to-EBITDA leverage ratio for the first, second, and third quarters of 2017, and also waived the applicability of the minimum debt service coverage ratio for the first, second, and third quarters of 2017, and addedrevolving loan class and/or to add a minimum EBITDA covenant for those same periods and is inapplicable thereafter. The minimum EBTIDA coverage covenant requires Consolidated Pro Forma EBITDA (as defined in the agreement) of at least $6,500 for the September 30, 2017 reporting period. The maturity of the credit facility did not change with the amendment.

After the amendment, our credit facility allows for borrowings up to $35,000, consisting of revolving loans of $30,000 in U.S. dollars and $5,000 in alternate currencies as well as a $25,000 accordion feature to increase the commitments in any of theterm loan ~~classes~~ subject to approval by applicable lenders. We ~~also maintain a line of~~entered into the credit facility with a ~~German bank for certain DynaEnergetics operations. This line~~syndicate of three banks, with KeyBank, N.A. acting as administrative agent. The syndicated credit ~~provides a borrowing capacity~~facility is secured by the assets of ~~€4,000.~~ DMC including accounts receivable, inventory, and fixed assets, as well as guarantees and share pledges by DMC and its subsidiaries.

Borrowings under the $50,000 revolving loan can be in the form of one-, two-, three-, or six-month LIBOR loans. Additionally, US dollar borrowings on the revolving loan can be in the form of Base Rate loans (Base Rate borrowings are based on the greater of the administrative agent’s Prime rates, an adjusted Federal Funds rate or an adjusted LIBOR rate). LIBOR loans bear interest at the applicable LIBOR rate plus an applicable margin (varying from 1.50% to 3.00%). Base Rate loans bear interest at the defined Base rate plus an applicable margin (varying from 0.50% to 2.00%).

Borrowings under the $20,000 Alternate Currency sublimit can be in euros, Canadian dollars, pounds sterling, and in any other currency acceptable to the administrative agent. Alternative currency borrowings denominated in euros, pounds sterling, and any other currency that is dealt with on the London Interbank Deposit Market shall be comprised of LIBOR loans and bear interest at the LIBOR rate plus an applicable margin (varying from 1.50% to 3.00%).

On June 25, 2020, we entered into an amendment ("Amendment") to the credit facility. The Amendment set the minimum LIBOR at 0.75%. The other provisions of the Amendment, including waiver of the debt service coverage ratio, were applicable through the quarter ended March 31, 2021 and were no longer applicable beginning with the quarter ended June 30, 2021.

As of ~~September~~June 30, ~~2017, U.S. dollar revolving loans of $22,250 were outstanding under~~2021 our ~~credit facility. While we had approximately $12,750 of~~ available ~~revolving credit loan~~borrowing capacity ~~as of September 30, 2017 under our various credit facilities, future~~was $50,000. Future borrowings are subject to compliance with financial covenants that could significantly limit such availability.

~~There are currently~~As of June 30, 2021, there were two significant financial covenants under our credit facility, a debt-to-EBITDA leverage ratio ("(“leverage ~~ratio"~~ratio”) and a minimum ~~EBITDA covenant~~liquidity ratio. The leverage ratio is defined in the credit facility ~~as amended,~~ for any trailing four quarter period as the ratio of Consolidated Funded Indebtedness (as defined in the agreement) on the last day of such period to Consolidated Pro Forma EBITDA for such period. For the ~~September~~June 30, ~~2017~~2021 reporting period, the maximum leverage ratio permitted by our ~~2015~~ syndicated credit facility ~~as amended,~~ was ~~3.50~~3.00 to 1.0. The actual leverage ratio as of ~~September~~June 30, ~~2017,~~2021, calculated in accordance with the credit facility, as amended, was ~~1.40~~0.0 to 1.0.

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The ~~minimum EBTIDA~~debt service coverage ~~covenant requires~~ratio, as defined in the credit facility, means, for any period, the ratio of Consolidated Pro Forma EBITDA less the sum of ~~at least $6,500~~cash dividends, cash income taxes and Consolidated Unfunded Capital Expenditures (as defined in the agreement) to Debt Service Charges (as defined in the agreement). The minimum debt service coverage ratio permitted by our credit facility for the ~~September~~June 30, ~~2017~~2020 reporting ~~period.~~period is 1.35 to 1.0. The actual ~~Consolidated Pro Forma EBITDA~~debt service coverage ratio for the ~~September~~trailing twelve months ended June 30, ~~2017 period, calculated in accordance with the~~2020 was 4.8 to 1.0.

Our credit facility, as amended, ~~was $16,982.~~

~~Our credit facility~~ also includes various other covenants and restrictions, certain of which relate to the payment of dividends or other distributions to stockholders, redemption of capital stock, incurrence of additional indebtedness, and mortgaging and pledging or disposition of major assets. As of ~~September~~June 30, ~~2017,~~2021, we were in compliance with all financial covenants and other provisions of our debt agreements.

We also maintain a line of credit with a German bank for certain European operations. This line of credit provides a borrowing capacity of €7,000.

Other contractual obligations and commitments

Our long-term debt balance ~~increased~~decreased to ~~$22,250~~$0 at ~~September~~June 30, ~~2017~~2021 from ~~$16,250~~$8,139 at December 31, ~~2016.~~2020. Our other contractual obligations and commitments have not materially changed since December 31, ~~2016.~~2020.

Cash flows ~~from~~(used in) provided by operating activities

Net cash used in operating activities was $6,021 for the six months ended June 30,

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~~Net~~ 2021 compared with net cash provided by operating activities ~~was $518 for~~of $11,128 in the ~~nine months ended September 30, 2017 and the decline~~same period last year. The decrease primarily was ~~primarily~~ due to ~~increased~~an increase in cash used for working capital, which included higher accounts receivable, higher inventory build in anticipation of increased sales activity in the second half of 2021 and ~~tendering $3,049~~higher prepaid expenses and other assets related to payments to fund our Non-Qualified Deferred Compensation Plan and other prepaid service contracts. The increases in ~~AD/CVD amounts to U.S. Customs in March 2017 pending ultimate resolution of the AD/CVD case.~~

~~Net cash provided by operating activities was $17,839 for the nine months ended September 30, 2016. Net~~ working capital ~~improved $11,712 in the nine months ended September 30, 2016 as reduced~~were partially offset by higher accounts ~~receivable~~payable and ~~inventory outweighed increases in accounts payable~~accrued expenses resulting from increased purchasing activity.

Cash flows ~~from~~used in investing activities

Net cash flows used in investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017 were $3,297~~2021 of $121,433 primarily related to investment in marketable securities of $123,984, made with the proceeds from our May 2021 equity offering, and ~~were primarily due to~~ acquisitions of property, plant and ~~equipment.~~equipment partially offset by proceeds from maturities of marketable securities of $4,799 from U.S. treasuries that were converted to cash upon maturity. Net cash flows used in investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2016 totaled $4,008~~2020 were $7,462 and ~~were primarily due~~related to the acquisitions of property, plant and ~~equipment.~~equipment at DynaEnergetics.

Cash flows ~~from~~provided by (used in) financing activities

Net cash flows provided by financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017 totaled $4,805, which primarily~~2021 of $134,775 included net ~~borrowings on bank lines~~proceeds from our equity offering of ~~credit~~$123,461 and our ATM equity program of ~~$6,000, payment~~$25,262 partially offset by repayment in full of ~~quarterly dividends~~the Capex Facility of ~~$880~~$11,750 and treasury stock purchases of ~~$336.~~

$2,451. Net cash flows used in financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2016 totaled $12,945, which primarily included net~~2020 of $6,200 was due to dividend payments, treasury stock purchases, and repayments on ~~bank lines of credit of $12,250 and payment of quarterly dividends of $861.~~ the Capex Facility.

Payment of Dividends

~~On August 30, 2017, our Board of Directors declared~~We paid a quarterly cash dividend of ~~$0.02 per share which was paid on October 16, 2017. The dividend of $295 was payable to shareholders of record as of September 30, 2017. We also paid quarterly cash dividends of $0.02~~$0.125 per share in the first ~~and second~~ quarter of ~~2017 and $0.02 per share in~~2020. In April 2020, we suspended the ~~first three quarters of 2016.~~

~~We may continue~~quarterly dividend indefinitely due to ~~pay quarterly dividends in~~ the ~~future subject to capital availability and periodic determinations that cash dividends are in compliance with our debt covenants and are in~~uncertaineconomic outlook caused by the ~~best interests of our stockholders, but we cannot assure you that such payments will continue.~~COVID-19 pandemic. Future dividends may be affected by, among other items, our views on potential future capital requirements, future business prospects, debt covenant compliance considerations, changes in ~~federal~~ income tax laws, orand any other factors that our Board of Directors deems relevant. Any ~~decision~~determination to pay cash dividends ~~is and~~ will ~~continue to~~ be at the discretion of ~~our~~the Board of Directors.

Critical Accounting Policies

Our critical accounting policies have not changed from those reported in our Annual Report ~~filed~~ on Form 10-K for the year ended December 31, ~~2016~~.2020.

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ITEM 3. Quantitative and Qualitative Disclosure about Market Risk

~~Foreign Currency Exchange Rates~~

Our NobelClad and DynaEnergetics subsidiaries operate globally through an international network of manufacturing, distribution and sales facilities and frequently enter into inter-company and third party transactions that are denominatedThere were no material changes in currencies other than their functional currency. We use foreign currency forward contracts to offset foreign exchange rate fluctuation on foreign currency denominated asset and liability positions. Foreign currency forward contracts are sensitive tomarket risk for changes in foreign currency exchange ~~rates. Consistent with~~rates and interest rates from the ~~use of these contracts to neutralize the effect of exchange rate fluctuations, such unrealized losses or gains would be offset by corresponding gains or losses, respectively,~~information provided in Item 7A – Quantitative and Qualitative Disclosures About Market Risk in the ~~remeasurement of~~company's Annual Report on Form 10-K for the ~~asset and liability positions being hedged. As such, these forward currency contracts and the offsetting underlying asset and liability positions do not create material market risk.~~year ended December 31, 2020.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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Our Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report, and they have concluded that these controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There were no changes that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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Part II - OTHER INFORMATION

Item 1. Legal Proceedings

~~Information regarding legal proceedings is contained in~~Please see Note 1012 to the Condensed Consolidated Financial ~~Statements contained in this Report and is incorporated herein by reference.~~Statements.

Item 1A. Risk Factors

There have been no significant changes in the risk factors identified as being attendant to our business in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In connection with the vesting of Company restricted common stock under our equity incentive plans during the ~~first~~second quarter of ~~2017,~~2021, we retained shares of common stock in satisfaction of withholding tax obligations. These shares are held as treasury shares by the Company.


	Total number of shares purchased (1) (2)	Average price paid per share
April 1 to April 30, 2021	—	$	—
May 1 to May 31, 2021	307	$	54.00
June 1 to June 30, 2021	—	$	—
Total	307	$	54.00

Total number of shares purchased (1) (2) Average price paid per share
July 1 to July 31, 2017 —
$ —
August 1 to August 31, 2017 1,877
$ 13.10
September 1 to September 30, 2017 —
$ —
Total 1,877
$ 13.10

(1) ~~All~~Share purchases in 2021 included 307 shares ~~purchased in 2017 were~~withheld to offset tax withholding obligations that ~~occur~~occurred upon the vesting of restricted common stock under the terms of the ~~2006 Stock~~2016 Equity Incentive Plan.

(2) As of ~~September~~June 30, ~~2017,~~2021, the maximum number of shares that may yet be purchased would not exceed the employees’ portion of taxes withheld on unvested shares ~~(548,800 shares).~~(299,565) and potential purchases upon participant elections to diversify equity awards held in the Company’s Amended and Restated Non-Qualified Deferred Compensation Plan (185,933) into other investment options available to participants in the Plan.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Our ~~Coolsprings~~Coolspring property is subject to regulation by the Federal Mine Safety and Health Administration ~~("MSHA"~~(“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the ~~"Mine Act"~~“Mine Act”). Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (The ~~"Dodd-Frank Act"~~“Dodd-Frank Act”), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. During the quarter ended ~~September~~June 30, ~~2017,~~2021, we had no such specified health and safety violations, orders or citations, related assessments or legal actions, mining-related fatalities, or similar events in relation to our United States operations requiring disclosure pursuant to Section 1503(a) of the Dodd-Frank Act.

Item 5. Other Information

None.

Item 6.

Exhibits

31.1 Certification of the President and Chief Executive Officer pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of the Chief Financial Officer pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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32.1 Certification of the President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101The following materials from the Quarterly Report on Form 10-Q of DMC Global Inc. for the quarter ended ~~September~~June 30, ~~2017~~,2021, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statement of Stockholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.*

*Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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SIGNATURES

In accordance with 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, thereunto duly authorized.



		DMC Global Inc.
		(Registrant)


Date:	~~October 26, 2017~~July 22, 2021	/s/ Michael Kuta
		Michael Kuta, Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer)



Delaware						84-0608431
(State of Incorporation or Organization)						(I.R.S. Employer Identification No.)


Large accelerated filer ☐		Accelerated filer ☒

Non-accelerated filer ☐		Smaller reporting company ☐

~~Large accelerated filer~~ o		~~Accelerated filer~~ x

~~Non-accelerated filer~~ o ~~(Do not check if smaller reporting company)~~	~~Smaller reporting company~~ o

	Emerging growth company o ☐



	September 30,			December 31,
	2017			2016
	(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	8,861		$	6,419
Accounts receivable, net of allowance for doubtful accounts of $1,102 and $1,146, respectively	45,443			32,959
Inventory, net	31,489			28,833
Prepaid expenses and other	5,293			5,148

Total current assets	91,086			73,359

PROPERTY, PLANT AND EQUIPMENT	118,752			109,427
Less - accumulated depreciation	(59,167		)	(52,294		)

Property, plant and equipment, net	59,585			57,133

GOODWILL, net	—			16,097

PURCHASED INTANGIBLE ASSETS, net	13,980			15,827

OTHER ASSETS, net	215			139

TOTAL ASSETS	$	164,866		$	162,555



	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
NET SALES	$	52,161		$	36,553		$	138,314		$	118,402
COST OF PRODUCTS SOLD	34,999			28,096			96,767			89,652
Gross profit	17,162			8,457			41,547			28,750
COSTS AND EXPENSES:
General and administrative expenses	6,535			5,685			19,821			15,522
Selling and distribution expenses	4,446			3,832			13,420			12,352
Amortization of purchased intangible assets	1,046			1,009			3,034			3,023
Restructuring expenses	—			373			458			1,202
Goodwill impairment charge	17,584			—			17,584			—
Total costs and expenses	29,611			10,899			54,317			32,099
OPERATING LOSS	(12,449		)	(2,442		)	(12,770		)	(3,349		)
OTHER INCOME (EXPENSE):
Other income (expense), net	(436		)	(157		)	(965		)	178
Interest expense	(367		)	(265		)	(1,203		)	(826		)
Interest income	—			—			2			2
LOSS BEFORE INCOME TAXES	(13,252		)	(2,864		)	(14,936		)	(3,995		)
INCOME TAX PROVISION	812			272			1,956			321
NET LOSS	$	(14,064	)	$	(3,136	)	$	(16,892	)	$	(4,316	)

LOSS PER SHARE
Basic	$	(0.98	)	$	(0.22	)	$	(1.18	)	$	(0.31	)
Diluted	$	(0.98	)	$	(0.22	)	$	(1.18	)	$	(0.31	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic	14,368,225			14,195,921			14,333,452			14,105,594
Diluted	14,368,225			14,195,921			14,333,452			14,105,594

DIVIDENDS DECLARED PER COMMON SHARE	$	0.02		$	0.02		$	0.06		$	0.06



	September 30, 2017		December 31, 2016
Raw materials	$	13,383	$	10,926
Work-in-process	5,757		5,417
Finished goods	12,093		12,146
Supplies	256		344

	$	31,489	$	28,833




Goodwill balance at December 31, 2016	$	16,097
Adjustment due to recognition of tax benefit of tax amortization of certain goodwill	(450		)
Adjustment due to exchange rate differences	1,937
Goodwill impairment	(17,584		)

Goodwill balance at September 30, 2017	$	—



	Three months ended September 30, 2016
	Severance			Contract Termination Costs		Equipment Moving Costs		Other Exit Costs		Total
DynaEnergetics	$	(41	)	$	370	$	1	$	43	$	373

Total	$	(41	)	$	370	$	1	$	43	$	373



	Nine months ended September 30, 2016
	Severance		Contract Termination Costs		Equipment Moving Costs		Other Exit Costs		Total
DynaEnergetics	$	684	$	386	$	15	$	43	$	1,128
Corporate	74		—		—		—		74

Total	$	758	$	386	$	15	$	43	$	1,202



	December 31, 2016		Expense		Payments and Other Adjustments			September 30, 2017
Severance	$	62	$	20	$	(62	)	$	20
Contract termination costs	112		—		(102		)	10

Total	$	174	$	20	$	(164	)	$	30



	Total number of shares purchased (1) (2)	Average price paid per share
July 1 to July 31, 2017	—	$	—
August 1 to August 31, 2017	1,877	$	13.10
September 1 to September 30, 2017	—	$	—
Total	1,877	$	13.10