Mail Stop 0510
May 4, 2005
By U.S. Mail and facsimile to (303) 604-1897
Mr. Yvon Pierre Cariou
Dynamic Materials Corporation
5405 Spine Road
Boulder, Colorado 80301
Re: Dynamic Materials Corporation
Form 10-K for the year ended December 31, 2004
File No. 1-14775
Dear Mr. Cariou:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2004
Financial Statements for the Year Ended December 31, 2004
Consolidated Statements of Cash Flows, page 34
1. Please tell us where the amortization of your capitalized debt
issuance costs and intangible assets which are included in Other
Assets appear on your cash flow statement. Also tell us what is
being captured in your investing activity labeled "change in other
non-current assets".
Note 2-Summary of Significant Accounting Policies
Revenue Recognition, page 39
2. We read in the description of your business that your clad
metal
products are produced, and your welding services are provided, on
a
project-by-project basis based on specifications set forth in
customers` purchase orders. Given this disclosure, it is not
clear
if your sales have customer acceptance provisions. Please tell us
and revise future filings to describe the nature of any customer
acceptance provisions and address how they impact your revenue
recognition.
3. We read that you recognize revenue using the completed contract
method. Based on your description of this method, it is not clear
to
us how your revenue recognition policy differs from a policy of
recognizing revenue as it is realizable and earned as indicated by
the four criteria specified in SAB Topic 13A. Furthermore, based
on
your description of the business and the contracts into which you
enter, it is not clear to us that your sales qualify for the use
of
the completed contract method of revenue recognition as that
method
is defined in SOP 81-1. Please educate us further on your revenue
recognition policy and revise future filings to clarify this
issue.
4. We note that you provide services through both a long-term
contract for shock synthesis of industrial diamonds and your AMK
Welding segment. Please tell us and revise future filings to
describe your revenue recognition policy for these services.
Supplementally tell us the revenues generated by the long-term
contract for shock synthesis for each year presented on your
operating statement. Also tell us how you determined that you did
not need to provide the disclosures related to receivables and
inventories associated with long-term contracts as required by
Rule
5-02(3) and (6) of Regulation S-X.
Net Income (Loss) Per Share, page 39
5. In future filings please disclose any securities that were not
included in your computation of diluted EPS because to do so would
have been antidilutive for the periods presented. Refer to
paragraph
40(c) of SFAS 128.
Note 3-Debt, page 44
6. We read that your French bank term loan allows the bank to
demand
early repayment of any outstanding loans if Groupe SNPE`s indirect
ownership of Nobelclad falls below 50%. Please explain to us in
more
detail why this is a clause in your loan agreement. Please tell
us
if Groupe SNPE has guaranteed your repayment of this loan to the
French bank.
Note 7-Commitments and Contingencies, page 53
7. We note that you took your insurance coverage into account when
concluding that the outcome of any pending actions will not have a
material adverse effect on your financial statements. We have the
following comments:
* We remind you that SFAS 5 does not allow you to record any
expected
insurance recoveries until they have been realized. Refer to
paragraph 17. Please confirm to us that you are not netting any
expected insurance recoveries against liabilities for pending
claims.
Also confirm to us that, regardless of the expected impact of your
insurance coverage, you have disclosed pending actions that are
reasonably possible and recorded an accrual for pending actions
that
are probable and reasonably estimable.
* In future filings, please disclose your accounting policy for
recording insurance recoveries.
Note 8-Discontinued Operations, page 53
8. We note your discussion of the divestiture of your Spin Forge
division in 2004 and that you have reclassified the assets,
liabilities, and results of this division as discontinued
operations
in your financial statements. We read that you sold the inventory
related to this division, that you are leasing to a third party
the
manufacturing equipment and tooling related to this division
through
an initial lease term of January 1, 2007, and that you are also
subleasing to this third party the real estate associated with
this
division. Given that the majority of your Spin Forge division`s
assets were leased or subleased to a third party at December 31,
2004, and are recorded as assets on your books at December 31,
2004,
it does not appear that the assets of this division were disposed
of
during 2004. Based on our review of the related leases, your Spin
Forge division does not appear to qualify as held for sale as
defined
in paragraph 30 of SFAS 144. As indicated in paragraph 42 of
SFAS
144, the classification of a component of an entity as
discontinued
operations is only appropriate if that component has been disposed
of
or is classified as held for sale. Please help us to understand
how
you determined that it was appropriate to classify this division
as a
discontinued operation at December 31, 2004, and tell us the
accounting guidance that you relied upon.
* * *
Closing Comments
Please respond to these comments within 10 business
days,
or tell us when you will provide us with a response. Please
provide
us with a supplemental response letter that keys your responses to
our comments and provides any requested supplemental information.
Detailed letters greatly facilitate our review. Please file your
supplemental response on EDGAR as a correspondence file. Please
understand that we may have additional comments after reviewing
your
responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please provide, in
writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in their filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement has access to all information you provide to the staff
of
the Division of Corporation Finance in our review of your filing
or
in response to our comments on your filing.
If you have any questions regarding these comments, please
direct them to Jennifer Thompson, Staff Accountant, at (202) 824-
5259
or, in her absence, to the undersigned at (202) 824-5373.
Sincerely,
John Cash
Accounting Branch Chief
Mr. Yvon Cariou
May 4, 2005
Page 1 of 4
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0510
DIVISION OF
CORPORATION FINANCE