SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): July 22, 1996
-------------------
DYNAMIC MATERIALS CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Colorado 0-8328 84-00608431
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(State or Other Jurisdiction (Commission (IRS Employee
of Incorporation) File Number) Identification No.)
551 Aspen Ridge Drive, Lafayette, Colorado 80026
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (303) 665-5700
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Dynamic Materials Corporation (the "Company") filed a Form 8-K on
August 6, 1996 reporting the acquisition of the Detaclad operation of
E. I. duPont de Nemours and Company ("Detaclad"). The financial
statements required in connection with that Report were omitted
pursuant to the provisions of Item 7 of Form 8-K, and are being
provided herewith.
(a) Financial statements of business acquired.
-----------------------------------------
Detaclad Business of E.I. duPont De Nemours and Company as
of December 31, 1995
Report of Independent Public Accountants
Statements of Assets to be Acquired at December 31, 1995 and
June 30, 1996 (unaudited)
Statements of Revenues and Direct Operating Expenses For the
Year Ended December 31, 1995 and 1994 and the Six Months
Ended June 30, 1996 (unaudited)
Notes to Financial Statements
(b) Pro forma financial information.
-------------------------------
Unaudited Pro Forma Condensed Financial Statements of
Dynamic Materials Corporation
Unaudited Pro Forma Condensed Balance Sheet as of June 30,
1996
Unaudited Pro Forma Condensed Statement of Operations for
the Six Months Ended June 30, 1996
Unaudited Pro Forma Condensed Statement of Operations for
the Year Ended December 31, 1995
Notes to Unaudited Pro Forma Condensed Financial Statements
(c) Exhibits.
--------
None
2
DETACLAD BUSINESS OF E.I. DUPONT DE NEMOURS
AND COMPANY
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995
TOGETHER WITH AUDITORS' REPORT
3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Management of Detaclad:
We have audited the accompanying statement of assets to be acquired of
the Detaclad Business of E.I. duPont de Nemours and Company (the
"Business") as of December 31, 1995, and the related statements of
revenues and direct operating expenses for the years ended December
31, 1995 and 1994. These financial statements are the responsibility
of the Business's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
As described in Note 1, the accompanying financial statements were
prepared to present the assets to be acquired and the revenues and
direct operating expenses of the Business, which does not have a
separate legal status or existence, and are not intended to be a
complete presentation of the assets and liabilities or the results of
operations of the Business.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the assets to be acquired of the
Business as of December 31, 1995, and the revenues and direct
operating expenses for the years ended December 31, 1995 and 1994, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
September 19, 1996
4
DETACLAD BUSINESS OF E.I. DUPONT DE NEMOURS AND COMPANY
-------------------------------------------------------
STATEMENTS OF ASSETS TO BE ACQUIRED
-----------------------------------
(in thousands)
December 31, June 30,
1995 1996
------------ ----------
(unaudited)
ACCOUNTS RECEIVABLE $ 3,315 $ 2,143
INVENTORIES 2,221 2,109
PROPERTY AND EQUIPMENT, net 543 501
------- -------
Total assets to be acquired $ 6,079 $ 4,753
======= =======
The accompanying notes are an integral part of these
financial statements.
5
DETACLAD BUSINESS OF E.I. DUPONT DE NEMOURS AND COMPANY
-------------------------------------------------------
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
----------------------------------------------------
(in thousands)
Year Ended Six Months
December 31 Ended
------------------- June 30,
1995 1994 1996
-------- -------- ----------
(unaudited)
NET REVENUES $ 11,218 $ 7,942 $ 5,925
COST OF GOODS SOLD 8,619 6,270 4,767
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,459 1,330 671
-------- -------- --------
Excess of revenues over direct
operating expenses $ 1,140 $ 342 $ 487
======== ======= ========
The accompanying notes are an integral part of these
financial statements.
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DETACLAD BUSINESS OF E.I. DUPONT DE NEMOURS AND COMPANY
-------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(Information as of and for the Six Months Ended
-----------------------------------------------
June 30, 1996, is Unaudited)
----------------------------
1. BASIS OF PRESENTATION:
----------------------
The accompanying financial statements present, on a historical cost
basis, the statement of assets to be acquired and the statements of
revenues and direct operating expenses of the Detaclad Business (the
"Business") of E.I. duPont de Nemours and Company ("DuPont"). The
Business was part of the specialty chemicals division of DuPont and
does not have a separate legal status or existence. The Business's
results of operations have historically been commingled with the
specialty chemicals division. These statements are presented as if
the Business had existed as a separate entity during the periods
presented. The accompanying financial statements are not intended to
be a complete presentation of the assets, liabilities or the results
of operations of the Business on a stand-alone basis.
The Business incurs certain common costs that relate to both the
Business and other DuPont operations. The accompanying financial
statements do not include any allocation of these common costs. In
addition, income taxes have been excluded from the accompanying
financial statements as the responsibility for such taxes is being
retained by DuPont.
2. SUBSEQUENT EVENT:
-----------------
On July 22, 1996, DuPont entered into an agreement with Dynamic
Materials Corporation ("DMC") to sell certain assets of the Business
to DMC for approximately $5.0 million. The purchase price is subject
to an adjustment after closing on a dollar-for-dollar basis to the
extent that the actual value of the inventory and accounts receivable
at closing are not equal to the estimates used to determine the
purchase price.
3. ORGANIZATION AND BUSINESS:
--------------------------
The Business is engaged in the explosion bonded clad metal business.
Primary end products made by these cladded metals include bi-metal and
tri-metal materials used in the superstructure of naval ships,
electronic packaging equipment and heat exchangers used in nuclear and
non-nuclear power plants.
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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
Inventories
- -----------
Inventories are stated at the lower of cost or market; cost is
generally determined by the average cost method.
Inventories consist of the following:
December 31, June 30,
1995 1996
------------ ------------
---(000s)---
Raw Material $ 533 $ 717
Work in process 1,688 1,392
--------- --------
$ 2,221 $ 2,109
========= ========
Interim Financial Statements
- ----------------------------
The financial statements as of June 30, 1996, and for the six months
ended June 30, 1996, are unaudited. In the opinion of management of
the Business, the unaudited financial statements as of June 30, 1996,
and for the six months ended June 30, 1996, include all adjustments,
consisting of only normal recurring adjustments, necessary for a fair
presentation. The results of operations for the six months ended
June 30, 1996, are not necessarily indicative of the results to be
expected for the full year.
Property and Equipment
- ----------------------
Property and equipment are recorded at cost. Additions, improvements
and betterments are capitalized when incurred. Maintenance and
repairs are charged to operations as the costs are incurred.
Depreciation is computed using the straight-line method over the
estimated useful life of the related assets as follows:
Building and improvements 3-25 years
Manufacturing equipment and tooling 3-15 years
Furniture, fixtures and computer equipment 3-10 years
Vehicles 3-5 years
8
Property and equipment consist of the following:
December 31, June 30,
1995 1996
------------ --------
---(000s)---
Building and improvements $ 299 $ 299
Manufacturing equipment and tooling 1,124 1,171
Furniture, fixtures and computer equipment 49 49
Vehicles 588 588
Construction-in-progress 49 --
--------- --------
2,109 2,107
Less- Accumulated depreciation (1,566) (1,606)
--------- --------
Net property and equipment $ 543 $ 501
========= ========
Revenue Recognition
- -------------------
The Business's contracts with its customers generally require the
delivery of several products per contract. The Business records
revenue from its contracts upon shipment of completed products to the
customer. If, as a contract proceeds toward completion, projected
total cost on an individual contract indicates a potential loss, the
Business provides currently for such loss.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and direct
operating expenses during the reporting period. Actual results could
differ from those estimates.
5. SELECTED CASH FLOW INFORMATION (in thousands):
----------------------------------------------
Year Ended Six Months
December 31 Ended
---------------- June 30,
1995 1994 1996
------ ------ ---------
Capital Expenditures $ 122 $ 44 $ 47
Depreciation 72 86 39
Provision for Bad Debts 114 4 --
6. TRANSACTIONS WITH AFFILIATES:
-----------------------------
The Business sells certain products to other DuPont businesses and
divisions. Revenues recorded for these sales approximated $20,000,
$47,000, and $580,000 for the years ended December 31, 1995 and 1994,
and the six months ended June 30, 1996, respectively. The selling
price associated with these revenues approximates the selling price
that could have been charged to unaffiliated customers.
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7. COMMITMENTS AND CONTINGENCIES:
------------------------------
The Business leases certain office space, storage space, vehicles and
other equipment under various operating lease agreements. Future
minimum rental commitments under noncancelable operating leases are as
follows for the years ended December 31 (in thousands):
1996 $ 78
1997 78
1998 68
1999 40
2000 40
Total rental expense included in operations was approximately $79,000,
$83,000 and $36,000 for the years ended December 31, 1995 and 1994,
and for the six months ended June 30, 1996, respectively.
8. SIGNIFICANT CUSTOMER:
---------------------
One customer accounted for approximately 28%, 18% and 24% of net sales
for the years ended December 31, 1995 and 1994, and for the six months
ended June 30, 1996, respectively.
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DYNAMIC MATERIALS CORPORATION
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
On July 22, 1996, E.I. duPont de Nemours and Company ("DuPont")
entered into an agreement to sell Dynamic Materials Corporation ("DMC"
or the "Company") certain assets of their Detaclad Business
("Detaclad") for approximately $5.0 million. The purchase price is
subject to an adjustment after closing on a dollar-for-dollar basis to
the extent that the actual value of the inventory and accounts
receivable at closing are not equal to the estimates used to determine
the purchase price.
The following Unaudited Pro Forma Condensed Financial Statements of
DMC illustrate the effect of the Company's acquisition of certain
assets of Detaclad. The Unaudited Pro Forma Condensed Balance Sheet
is presented as of June 30, 1996, and illustrates the effects of the
acquisition, using the purchase method of accounting, and financing as
if they had occurred on that date. The Unaudited Pro Forma Condensed
Statements of Operations are presented for the six months ended
June 30, 1996, and for the year ended December 31, 1995, and
illustrate the effects of the acquisition and the financing as if they
had occurred on January 1, 1995.
The Unaudited Pro Forma Condensed Financial Statements should be read
in conjunction with the historical financial statements of DMC
included in DMC's Annual Report on Form 10-K for the year ended
December 31, 1995, DMC's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996, and the historical financial statements of
Detaclad included elsewhere herein. The pro forma adjustments are
based on preliminary information about Detaclad's assets acquired and
results of operations. Final purchase price allocations will be based
on a more complete evaluation and may differ from those shown herein.
However, the management of DMC believes that the assumptions utilized
provide a reasonable basis for presenting the significant effects of
the acquisition and the related incremental financing and that the pro
forma adjustments give appropriate effect to those assumptions and are
properly applied in the accompanying pro forma financial information.
The Unaudited Pro Forma Condensed Financial Statements may not be
indicative of DMC's actual operating results or financial position had
the transactions occurred as of the dates indicated above, nor do they
purport to indicate operating results or financial position which may
be attained in the future.
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DYNAMIC MATERIALS CORPORATION
-----------------------------
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
-------------------------------------------
JUNE 30, 1996
-------------
(Thousands)
-----------
Excluded
Assets and
Liabilities
Dynamic and Pro Forma Pro Forma
ASSETS Materials Detaclad Adjustments Results
- --------------------------------- -------------- ------------ ------------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 2,090 $ 2,090
Accounts receivable, net 3,255 $ 2,143 $ (925) (1) 4,473
Inventories 1,478 2,109 (442) (1) 3,235
90 (3)
Prepaid expenses and other 120 120
Deferred tax assets 145 145
--------- --------- --------- ---------
Total current assets 7,088 4,252 (1,277) 10,063
Property, plant and equipment,
net 2,035 501 474 (2) 3,010
Non-current deferred tax assets 10 10
Other noncurrent assets 46 1,384 (5) 1,640
210 (6)
--------- --------- --------- ---------
$ 9,179 $ 4,753 $ 791 $ 14,723
========= ========= ========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
CURRENT LIABILITIES:
Accounts payable $ 1,368 $ 1,368
Accrued expenses 521 $ 300 (4) 1,031
210 (6)
Current maturities of long-
term debt 91 91
--------- --------- --------- ---------
Total current liabilities 1,980 510 2,490
--------- --------- --------- ---------
Long-term debt 138 5,034 (6) 5,172
--------- --------- --------- ---------
Common stock 126 126
Additional paid in capital 5,927 5,927
Retained earnings 1,008 1,008
Net assets of Detaclad -- 4,753 (4,753) --
--------- --------- --------- ---------
7,061 4,753 (4,753) 7,061
--------- --------- --------- ---------
$ 9,179 $ 4,753 $ 791 $ 14,723
========= ========= ========= =========
See the accompanying Notes to Unaudited Pro Forma Condensed
Financial Statements.
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DYNAMIC MATERIALS CORPORATION
-----------------------------
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
-----------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1996
--------------------------------------
(In Thousands, Except Per-Share Amounts)
----------------------------------------
Dynamic Pro Forma Pro Forma
Materials Detaclad Adjustments Results
------------- ------------ ------------- -----------
REVENUE $ 11,704 $ 5,925 $ 17,629
COST OF PRODUCTS SOLD 9,400 4,767 $ 46 (8) 14,213
OTHER OPERATING
EXPENSES 1,515 671 58 (7) 2,310
--------- --------- --------- ---------
66(10)
INCOME FROM OPERATIONS 789 487 (170) 1,106
OTHER INCOME (EXPENSE) 11 -- (191) (9) (180)
--------- --------- --------- ---------
INCOME BEFORE INCOME
TAX PROVISION 800 487 (361) 926
INCOME TAX PROVISION 296 -- 47(11) 343
--------- --------- --------- ---------
NET INCOME $ 504 $ 487 $ (408) $ 583
========= ========= ========= =========
NET INCOME PER SHARE $ 0.20 $ 0.23
========= =========
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 2,506,000 2,506,000
See the accompanying Notes to Unaudited Pro Forma Condensed
Financial Statements.
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DYNAMIC MATERIALS CORPORATION
-----------------------------
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
-----------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1995
------------------------------------
(In Thousands, Except Per-Share Amounts)
----------------------------------------
Dynamic Pro Forma Pro Forma
Materials Detaclad Adjustments Results
------------- ------------ ------------- -----------
REVENUE $ 19,521 $ 11,218 $ 30,739
COST OF PRODUCTS SOLD 15,281 8,619 $99 (8) 23,999
OTHER OPERATING
EXPENSES 3,134 1,459 117 (7) 4,842
132(10)
--------- --------- --------- ---------
INCOME FROM OPERATIONS 1,106 1,140 (348) 1,898
OTHER EXPENSE (44) -- (383) (9) (427)
--------- --------- --------- ---------
INCOME BEFORE INCOME
TAX PROVISION 1,062 1,140 (731) 1,471
INCOME TAX PROVISION 391 -- 151(11) 542
--------- --------- --------- ---------
NET INCOME $671 $1,140 $(882) $929
========= ========= ========= =========
NET INCOME PER SHARE $ 0.27 $ 0.37
========= =========
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 2,496,487 2,496,487
See the accompanying Notes to Unaudited Pro Forma Condensed
Financial Statements.
14
DYNAMIC MATERIALS CORPORATION
-----------------------------
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
-----------------------------------------------------------
1. Represents adjustments for certain assets for which DuPont
retains ownership.
2. Represents the adjustment to record property, plant and equipment
at its estimated fair market value.
3. Represents the adjustment to record inventory at its estimated
fair value.
4. Represents the estimated costs associated with investment
banking, legal, accounting and other out-of-pocket costs incurred
by DMC related to the acquisition of assets of Detaclad.
5. Represents identifiable intangible assets and excess purchase
price and transaction costs over the fair value of assets
acquired at the date of the acquisition.
6. Represents the issuance of approximately $5.0 million revolving
credit facility to acquire the net assets of Detaclad.
7. Represents amortization of intangible assets (trademark, covenant
not to compete, and goodwill) on a straight line basis over 3, 5
and 25 years, respectively.
8. Represents the additional depreciation expense arising from the
excess of the estimated fair value over the historical basis of
fixed assets and to convert to the estimated useful lives
assigned by DMC.
9. Represents the interest expense incurred based on current rates
related to the revolving debt used to purchase the assets of
Detaclad and the amortization of debt issuance costs.
10. Represents the additional DMC overhead costs expected to be
incurred associated with operating the Detaclad division.
11. Represents income tax expense on the pro forma adjustments and
the historical pretax income related to Detaclad based on an
estimated combined effective federal and state income tax rate of
approximately 37%.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DYNAMIC MATERIALS CORPORATION
(Registrant)
Date: October 4, 1996 By: Paul Lange
-------------------------------------
Paul Lange
President and Chief Executive Officer
16