SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2013 |
Accounting Policies [Abstract] | ' |
Principles of Consolidation | ' |
Principles of Consolidation |
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The condensed consolidated financial statements include the accounts of DMC 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. |
Use of Estimates | ' |
Use of Estimates |
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The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. |
Foreign Operations and Foreign Exchange Rate Risk | ' |
Foreign Operations and Foreign Exchange Rate Risk |
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The functional currency for our foreign operations is the applicable local currency for each affiliate company. Assets and liabilities of foreign subsidiaries for which the functional currency is the local currency are translated at exchange rates in effect at period-end, and the statements of operations are translated at the average exchange rates during the period. Exchange rate fluctuations on translating foreign currency financial statements into U.S. dollars that result in unrealized gains or losses are referred to as translation adjustments. Cumulative translation adjustments are recorded as a separate component of stockholders’ equity and are included in other cumulative comprehensive income (loss). Transactions denominated in currencies other than the local currency are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates result in transaction gains and losses, which are reflected in income as unrealized (based on period-end translations) or realized upon settlement of the transactions. Cash flows from our operations in foreign countries are translated at actual exchange rates when known, or at the average rate for the period. As a result, amounts related to assets and liabilities reported in the consolidated statements of cash flows will not agree to changes in the corresponding balances in the consolidated balance sheets. The effects of exchange rate changes on cash balances held in foreign currencies are reported as a separate line item below cash flows from financing activities. |
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In September 2010, our German subsidiary, DYNAenergetics, entered into a currency swap agreement with its bank to economically hedge the currency risk associated with a large U.S. dollar order ($2,700) that was awarded to it. Under the agreement, DYNAenergetics agreed to exchange $2,700 for Euros at an exchange rate of 1.269 U.S. dollars per Euros between January 18, 2011 and April 30, 2011. We did not designate this derivative as a cash flow hedge for accounting purposes and as such, gains and losses related to changes in its valuation were recorded in the statement of operations. During the year ended December 31, 2011 we recorded gains on this currency swap agreement of $87. These gains are classified as other income (expense), net in our statement of operations. |
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In September 2011, DYNAenergetics entered into a new currency hedge agreement with its bank to hedge its risk on a new $2,500 order which is similar to the order described above. This hedge agreement, which was amended in December 2011, allowed DYNAenergetics to sell $2,500 for Euros at an exchange rate of 1.425 U.S. dollars per Euros if the market rate was under 1.25 or above 1.425 at the time of settlement. If the market rate upon settlement was between 1.25 and 1.425, the market rate would be used. The only exception to this would have been if the market exchange rate dropped below 1.25 any time prior to the settlement in which case the rate upon settlement would have been 1.425 even if the exchange rate subsequently rose back above 1.25 prior to settlement. As the market rate never went below 1.25 nor exceeded 1.425 at the time of settlement, the market rate was used at settlement. This hedge agreement expired on May 3, 2012. We did not designate this derivative as a cash flow hedge for accounting purposes and as such, gains and losses related to changes in its valuation were recorded in the statement of operations. |
Cash and Cash Equivalents and Restricted Cash | ' |
Cash and Cash Equivalents and Restricted Cash |
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For purposes of the consolidated financial statements, we consider highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. |
Accounts Receivable | ' |
Accounts Receivable |
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We review our accounts receivable balance routinely to identify any specific customers with collectability issues. In circumstances where we are aware of a specific customer’s inability to meets its financial obligation to us, we record a specific allowance for doubtful accounts (with the offsetting expense charged to our statement of operations) against the amounts due reducing the net recognized receivable to the amount we estimate will be collected. |
Inventories | ' |
Inventories |
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Inventories are stated at the lower-of-cost (first-in, first-out) or market value. Cost elements included in inventory are material, labor, subcontract costs, and manufacturing overhead. As necessary, we record provisions and maintain reserves for excess, slow moving and obsolete inventory. To determine reserve amounts, 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. |
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Comprehensive reviews of DynaEnergetics' inventories were performed throughout 2013 to identify potentially excess, slow moving and obsolete inventory items. These reviews reflected management's efforts to reduce overall inventory levels and rationalize product line offerings. Additionally, our estimate for reserving, or writing-off, inventory changed from a combination of qualitative and quantitative considerations to a more specific quantitative analysis whereby inventory items which have not had sales for a certain duration are written-off after a prescribed period. |
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In 2013 we changed our inventory management philosophy and intend to aggressively reduce our investment in inventory. In connection with this philosophy, we identified certain inventories that we intend to liquidate and therefore revised our assumptions for calculating estimated inventory reserves, resulting in a change in estimate. We determined that our December 31, 2013 inventory reserves for our DynaEnergetics business segment should be increased by $1,800 to adequately provide for estimated requirements and recorded corresponding expense of $1,800 ($1,218, net of tax) in cost of products sold in our 2013 consolidated statement of operations. The impact of this change in estimate reduced earnings per share by $0.09 per share (basic and diluted) for the year ended December 31, 2013. |
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Inventories, net of reserves of $1,729 and $337 and most of which related to finished goods, consist of the following at December 31, 2013 and 2012 respectively: |
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| 2013 | | 2012 | | | | |
Raw materials | $ | 13,122 | | | $ | 16,079 | | | | | |
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Work-in-process | 10,188 | | | 12,133 | | | | | |
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Finished goods | 17,273 | | | 19,155 | | | | | |
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Supplies | 967 | | | 953 | | | | | |
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| $ | 41,550 | | | $ | 48,320 | | | | | |
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Shipping and handling costs incurred by us upon shipment to customers are included in cost of products sold in the accompanying consolidated statements of operations. |
Property, Plant and Equipment | ' |
Property, Plant and Equipment |
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Property, plant and equipment are recorded at cost, except for assets acquired in acquisitions which are recorded at fair value. Additions, improvements, and betterments are capitalized. Maintenance and repairs are charged to operations as the costs are incurred. Depreciation is computed using the straight-line method over the estimated useful life of the related asset (except leasehold improvements which are depreciated over the shorter of their estimated useful life or the lease term) as follows: |
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Buildings and improvements | 15-30 years | | | | | | | | | | |
Manufacturing equipment and tooling | 3-15 years | | | | | | | | | | |
Furniture, fixtures, and computer equipment | 3-10 years | | | | | | | | | | |
Other | 3-10 years | | | | | | | | | | |
Property, plant and equipment consist of the following at December 31, 2013 and 2012: |
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| | 2013 | | 2012 | | | |
Land | | $ | 2,864 | | | $ | 2,792 | | | | |
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Buildings and improvements | | 34,147 | | | 24,203 | | | | |
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Manufacturing equipment and tooling | | 44,286 | | | 39,073 | | | | |
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Furniture, fixtures and computer equipment | | 14,254 | | | 7,148 | | | | |
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Other | | 4,948 | | | 3,534 | | | | |
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Construction in process | | $ | 7,303 | | | $ | 13,871 | | | | |
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| | $ | 107,802 | | | $ | 90,621 | | | | |
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Asset Impairments | ' |
Asset Impairments |
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Finite-lived assets are tested for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. We compare the expected undiscounted future operating cash flows associated with these finite-lived assets to their respective carrying values to determine if they are fully recoverable. If the expected future operating cash flows of an asset are not sufficient to recover the carrying value, we estimate the fair value of the asset. Impairment is recognized when the carrying amount of the asset is not recoverable and when carrying value exceeds fair value. Long-lived assets to be disposed of, if any, are reported at the lower of carrying amount or fair value less cost to sell. |
Goodwill | ' |
Goodwill |
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Goodwill represents the excess of the purchase price in a business combination over the fair value of the net tangible and intangible assets acquired. The carrying value of goodwill is periodically reviewed for impairment (at a minimum annually) and whenever events or changes in circumstances indicate that the carrying amount of this asset may not be recoverable. Examples of such events or changes in circumstances, many of which are subjective in nature, include significant negative industry or economic trends, significant changes in the manner of our use of the acquired assets or our strategy, a significant decrease in the market value of the asset, and a significant change in legal factors or in the business climate that could affect the value of the asset. |
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We test goodwill for impairment by first performing a qualitative evaluation. The qualitative evaluation is an assessment of factors, including reporting unit specific operating results as well as industry, market and general economic conditions, to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. We may elect to bypass this qualitative assessment for certain of our reporting units and perform a two-step quantitative test. |
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Our reporting units for goodwill impairment testing are currently the same as our operating divisions and reportable business segments: NobelClad, DynaEnergetics and AMK Technical Services. Each of these three business segments represent separately managed strategic business units and our chief operating decision maker reviews financial results and evaluates operating performance at this level. |
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Our annual goodwill impairment testing for 2013 was completed as of December 31, 2013 for our NobelClad and DynaEnergetics reporting units (AMK Technical Services has no recorded goodwill). For NobelClad, which has been our core business segment for more than 40 years, we performed a qualitative assessment to test this reporting unit’s goodwill for impairment. For our DynaEnergetics reporting unit, which was initially established through a 2007 acquisition and has grown through subsequent acquisitions completed in 2009, 2010 and 2012, we elected to perform quantitative testing. Our quantitative testing utilized both an income approach (discounted cash flows) and a market approach consisting of a comparable public company earnings multiples methodology to estimate the fair value of this reporting unit. To determine the reasonableness of the estimated fair values, we carefully reviewed our assumptions to ensure that neither the income approach nor the market approach provided a significantly different valuation. |
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If the carrying value were to exceed the fair value for any reporting unit, we would then calculate and compare the estimated implied fair value of goodwill to the carrying amount of goodwill and record an impairment charge for any excess of carrying value over implied fair value. Our most recent impairment testing has resulted in a determination that the carrying value of goodwill did not exceed fair value and, consequently, that our goodwill was not impaired. A future impairment is possible and could occur if (i) operating results underperform what we have estimated or (ii) additional volatility of the capital markets or other factors should cause us to raise the discount rate percentage utilized in our discounted cash flow analysis or decrease the multiples utilized in our market-based analysis. While we believe our most recent estimates were appropriate based on our view of then current business trends, no assurance can be provided that impairment charges will not be required in the future. |
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The changes to the carrying amount of goodwill during the period are summarized below: |
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| NobelClad | | DynaEnergetics | | Total |
Goodwill balance at December 31, 2011 | $ | 21,637 | | | $ | 15,870 | | | $ | 37,507 | |
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Adjustment due to recognition of tax benefit of tax amortization of certain goodwill | $ | (322 | ) | | $ | (485 | ) | | $ | (807 | ) |
Adjustment due to exchange rate differences | $ | 419 | | | $ | 312 | | | $ | 731 | |
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Goodwill balance at December 31, 2012 | $ | 21,734 | | | $ | 15,697 | | | $ | 37,431 | |
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Adjustment due to recognition of tax benefit of tax amortization of certain goodwill | (353 | ) | | (598 | ) | | (951 | ) |
Adjustment due to exchange rate differences | 857 | | | 633 | | | 1,490 | |
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Goodwill balance at December 31, 2013 | $ | 22,238 | | | $ | 15,732 | | | $ | 37,970 | |
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All of the goodwill shown above, which is primarily in Germany, is amortizable goodwill for tax purposes. |
Purchased Intangible Assets | ' |
Purchased Intangible Assets |
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Our purchased intangible assets include core technology, customer relationships and trademarks/trade names. Impairment, if any, is calculated based upon our evaluation whereby, estimated undiscounted future cash flows associated with these assets or operations are compared with their carrying value to determine if a write-down to fair value is required. Finite lived intangible assets are amortized over the estimated useful life of the related assets which have a weighted average amortization period of 12 years in total. |
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The weighted average amortization periods of the intangible assets by asset category are as follows: |
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Core technology | 20 years | | | | | | | | | | |
Customer relationships | 9 years | | | | | | | | | | |
Trademarks / Trade names | 9 years | | | | | | | | | | |
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The following table presents details of our purchased intangible assets, other than goodwill, as of December 31, 2013: |
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| Gross | | Accumulated | | Net |
Amortization |
Core technology | $ | 23,391 | | | $ | (7,155 | ) | | $ | 16,236 | |
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Customer relationships | 45,269 | | | (25,813 | ) | | 19,456 | |
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Trademarks / Trade names | 2,510 | | | (1,744 | ) | | 766 | |
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Total intangible assets | $ | 71,170 | | | $ | (34,712 | ) | | $ | 36,458 | |
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The following table presents details of our purchased intangible assets, other than goodwill, as of December 31, 2012: |
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| Gross | | Accumulated | | Net |
Amortization |
Core technology | $ | 22,494 | | | $ | (5,749 | ) | | $ | 16,745 | |
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Customer relationships | 44,334 | | | (20,046 | ) | | 24,288 | |
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Trademarks / Trade names | 2,409 | | | (1,484 | ) | | 925 | |
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Total intangible assets | $ | 69,237 | | | $ | (27,279 | ) | | $ | 41,958 | |
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The change in the gross value of our purchased intangible assets from December 31, 2012 to December 31, 2013 is due solely to the impact of foreign currency translation adjustments. |
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Expected future amortization of intangible assets is as follows: |
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For the years ended December 31 - | | | | | | | | | | |
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2014 | $ | 6,289 | | | | | | | | | |
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2015 | 4,776 | | | | | | | | | |
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2016 | 4,776 | | | | | | | | | |
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2017 | 4,751 | | | | | | | | | |
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2018 | 3,468 | | | | | | | | | |
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Thereafter | 12,398 | | | | | | | | | |
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| $ | 36,458 | | | | | | | | | |
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Other Assets | ' |
Other Assets |
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Included in other assets are net deferred debt issuance costs of $305 and $406 as of December 31, 2013 and 2012, respectively. On December 21, 2011, we entered into a new five-year syndicated credit agreement, which amended and restated in its entirety the prior syndicated agreement entered into on November 16, 2007. In connection with this amendment, $284 of costs associated with the prior term loan and the banks which are no longer in the syndicate were expensed. The outstanding balance of deferred debt issuance as of December 31, 2011 included additional costs of $435 that were incurred in connection with our amended and restated credit agreement and $95 of deferred debt issuance costs that were carried over from the prior agreement. These deferred debt issuance are being amortized over the five-year term of the amended and restated credit agreement which expires on December 21, 2016. |
Customer Advances | ' |
Customer Advances |
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On occasion, we require customers to make advance payments prior to the shipment of their orders in order to help finance our inventory investment on large orders or to keep customers’ credit limits at acceptable levels. |
Revenue Recognition | ' |
Revenue Recognition |
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Sales of clad metal products and welding services are generally based upon customer specifications set forth in customer purchase orders and require us to provide certifications relative to metals used, services performed, and the results of any non-destructive testing that the customer has requested be performed. All issues of conformity of the product to specifications are resolved before the product is shipped and billed. Products related to the DynaEnergetics segment, which include detonating cords, detonators, bi-directional boosters, and shaped charges, as well as, seismic related explosives and accessories, are standard in nature. In all cases, revenue is recognized only when all four of the following criteria have been satisfied: persuasive evidence of an arrangement exists; the price is fixed or determinable; delivery has occurred; and collection is reasonably assured. For contracts that require multiple shipments, revenue is recorded only for the units included in each individual shipment. If, as a contract proceeds toward completion, projected total cost on an individual contract indicates a probable loss, we will account for such anticipated loss. Revenue from sales of consigned inventory is recognized upon the use of the product by the consignee or according to the terms of the contract. |
Earnings Per Share | ' |
Earnings Per Share |
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Unvested awards of share-based payments with rights to receive dividends or dividend equivalents, such as our restricted stock awards (“RSAs”), are considered participating securities for purposes of calculating earnings per share (“EPS”) and require the use of the two class method for calculating EPS. Under this method, a portion of net income is allocated to these participating securities and therefore is excluded from the calculation of EPS allocated to common stock, as shown in the table below. |
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Computation and reconciliation of earnings per common share are as follows: |
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| | For the Year Ended |
| | December 31, 2013 |
| | Income | | Shares | | EPS |
Basic earnings per share: | | | | | | |
Net income attributable to DMC | | $ | 7,495 | | | | | |
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Less income allocated to RSAs | | (119 | ) | | | | |
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Net income allocated to common stock for EPS calculation | | $ | 7,376 | | | 13,533,566 | | | $ | 0.55 | |
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Adjust shares for dilutives: | | | | | | |
Stock-based compensation plans | | | | 3,959 | | | |
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Diluted earnings per share: | | | | | | |
Net income attributable to DMC | | $ | 7,495 | | | | | |
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Less income allocated to RSAs | | (119 | ) | | | | |
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Net income allocated to common stock for EPS calculation | | $ | 7,376 | | | 13,537,525 | | | $ | 0.54 | |
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| | For the Year Ended |
| | December 31, 2012 |
| | Income | | Shares | | EPS |
Basic earnings per share: | | | | | | |
Net income attributable to DMC | | $ | 11,696 | | | | | |
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Less income allocated to RSAs | | (211 | ) | | | | |
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Net income allocated to common stock for EPS calculation | | $ | 11,485 | | | 13,264,636 | | | $ | 0.87 | |
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Adjust shares for dilutives: | | | | | | |
Stock-based compensation plans | | | | 4,077 | | | |
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Diluted earnings per share: | | | | | | |
Net income attributable to DMC | | $ | 11,696 | | | | | |
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Less income allocated to RSAs | | (211 | ) | | | | |
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Net income allocated to common stock for EPS calculation | | $ | 11,485 | | | 13,268,713 | | | $ | 0.87 | |
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| | For the Year Ended |
| | December 31, 2011 |
| | Income | | Shares | | EPS |
Basic earnings per share: | | | | | | |
Net income attributable to DMC | | $ | 12,491 | | | | | |
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Less income allocated to RSAs | | (246 | ) | | | | |
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Net income allocated to common stock for EPS calculation | | $ | 12,245 | | | 13,089,691 | | | $ | 0.94 | |
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Adjust shares for dilutives: | | | | | | |
Stock-based compensation plans | | | | 9,430 | | | |
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Diluted earnings per share: | | | | | | |
Net income attributable to DMC | | $ | 12,491 | | | | | |
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Less income allocated to RSAs | | (246 | ) | | | | |
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Net income allocated to common stock for EPS calculation | | $ | 12,245 | | | 13,099,121 | | | $ | 0.93 | |
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Fair Value of Financial Instruments | ' |
Fair Value of Financial Instruments |
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The carrying values of cash and cash equivalents, trade accounts receivable and payable, accrued expenses, lines of credit and long-term debt approximate their fair value. |
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We had two foreign currency hedge agreements, which expired on April 30, 2011 and May 3, 2012, that were recorded at fair value. 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: |
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· 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. |
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· 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. |
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· Level 3 — Inputs to the valuation that are unobservable inputs for the asset or liability. |
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The highest priority is assigned to Level 1 inputs and the lowest priority to Level 3 inputs. |
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Our foreign currency hedge agreements were not exchange listed and were therefore valued with models that use Level 2 inputs. |
Income Taxes | ' |
Income Taxes |
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We recognize deferred tax assets and liabilities for the expected future income tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities based on enacted tax laws and for tax credits. We recognize deferred tax assets for the expected future effects of all deductible temporary differences. Deferred tax assets are then reduced, if deemed necessary, by a valuation allowance for the amount of any tax benefits which, more likely than not based on current circumstances, are not expected to be realized (see Note 6). |
Concentration of Credit Risk and Off Balance Sheet Arrangements | ' |
Concentration of Credit Risk and Off Balance Sheet Arrangements |
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Financial instruments, which potentially subject us to a concentration of credit risk, consist primarily of cash, cash equivalents, and accounts receivable. Generally, we do not require collateral to secure receivables. At December 31, 2013, we had no financial instruments with off-balance sheet risk of accounting losses other than the derivative discussed above. |
Other Cumulative Comprehensive Loss | ' |
Other Cumulative Comprehensive Loss |
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Other cumulative comprehensive loss as of December 31, 2013, 2012, and 2011 consisted entirely of currency translation adjustments. |
Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements |
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In February 2013, the Financial Accounting Standards Board issued an accounting standards update which requires an entity to disclose amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present either on the face of the statement of operations or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For amounts not reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. This accounting standards update is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2012. The adoption of this update did not have a material impact on our financial statements. |
Reclassifications | ' |
Reclassifications |
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Certain prior year balances in the consolidated financial statements and notes have been reclassified to conform to the 2013 presentation. |