Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Oct. 25, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | DMC Global Inc. | |
Entity Central Index Key | 34,067 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 14,898,543 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 11,098 | $ 8,983 |
Accounts receivable, net of allowance for doubtful accounts of $490 and $1,088, respectively | 65,618 | 49,468 |
Inventories | 56,496 | 35,742 |
Prepaid expenses and other | 6,664 | 5,763 |
Total current assets | 139,876 | 99,956 |
PROPERTY, PLANT AND EQUIPMENT | 144,697 | 121,339 |
Less - accumulated depreciation | (64,915) | (61,467) |
Property, plant and equipment, net | 79,782 | 59,872 |
PURCHASED INTANGIBLE ASSETS, net | 9,515 | 12,861 |
DEFERRED TAX ASSETS | 0 | 98 |
OTHER ASSETS | 346 | 296 |
TOTAL ASSETS | 229,519 | 173,083 |
CURRENT LIABILITIES: | ||
Accounts payable | 25,068 | 19,826 |
Accrued expenses | 10,431 | 6,884 |
Accrued anti-dumping duties and penalties | 8,000 | 3,609 |
Dividend payable | 298 | 295 |
Accrued income taxes | 9,299 | 2,939 |
Accrued employee compensation and benefits | 7,720 | 6,186 |
Contract liabilities | 4,310 | 5,888 |
Total current liabilities | 65,126 | 45,627 |
LINES OF CREDIT | 41,454 | 17,984 |
DEFERRED TAX LIABILITIES | 849 | 573 |
OTHER LONG-TERM LIABILITIES | 2,700 | 3,119 |
Total liabilities | 110,129 | 67,303 |
COMMITMENTS AND CONTINGENT LIABILITIES | ||
STOCKHOLDERS’ EQUITY: | ||
Preferred stock, $0.05 par value; 4,000,000 shares authorized; no issued and outstanding shares | 0 | 0 |
Common stock, $0.05 par value; 25,000,000 shares authorized; 14,896,043 and 14,782,018 shares outstanding, respectively | 749 | 741 |
Additional paid-in capital | 78,944 | 76,146 |
Retained earnings | 74,318 | 60,074 |
Other cumulative comprehensive loss | (33,806) | (30,819) |
Treasury stock, at cost; 82,136 and 39,783 shares, respectively | (815) | (362) |
Total stockholders’ equity | 119,390 | 105,780 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 229,519 | $ 173,083 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 490 | $ 1,088 |
Preferred stock, par value (in dollars per share) | $ 0.05 | $ 0.05 |
Preferred stock, shares authorized | 4,000,000 | 4,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.05 | $ 0.05 |
Common stock, shares authorized | 25,000,000 | 25,000,000 |
Common stock, shares outstanding | 14,896,043 | 14,782,018 |
Treasury stock, shares | 82,136 | 39,783 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Statement [Abstract] | ||||
NET SALES | $ 87,883 | $ 52,161 | $ 236,111 | $ 138,314 |
COST OF PRODUCTS SOLD | 58,155 | 34,999 | 156,855 | 96,767 |
Gross profit | 29,728 | 17,162 | 79,256 | 41,547 |
COSTS AND EXPENSES: | ||||
General and administrative expenses | 9,630 | 6,535 | 27,550 | 19,821 |
Selling and distribution expenses | 5,420 | 4,446 | 16,427 | 13,420 |
Amortization of purchased intangible assets | 769 | 1,046 | 2,365 | 3,034 |
Restructuring expenses | 192 | 0 | 553 | 458 |
Anti-dumping duty penalties | 4,897 | 0 | 8,000 | 0 |
Goodwill impairment charge | 0 | 17,584 | 0 | 17,584 |
Total costs and expenses | 20,908 | 29,611 | 54,895 | 54,317 |
OPERATING INCOME (LOSS) | 8,820 | (12,449) | 24,361 | (12,770) |
OTHER INCOME (EXPENSE): | ||||
Other expense, net | (335) | (436) | (1,039) | (965) |
Interest expense | (495) | (367) | (1,098) | (1,203) |
Interest income | 0 | 0 | 2 | 2 |
INCOME (LOSS) BEFORE INCOME TAXES | 7,990 | (13,252) | 22,226 | (14,936) |
INCOME TAX PROVISION | 3,080 | 812 | 7,024 | 1,956 |
NET INCOME (LOSS) | $ 4,910 | $ (14,064) | $ 15,202 | $ (16,892) |
INCOME (LOSS) PER SHARE | ||||
Basic (in dollars per share) | $ 0.33 | $ (0.98) | $ 1.02 | $ (1.18) |
Diluted (in dollars per share) | $ 0.33 | $ (0.98) | $ 1.02 | $ (1.18) |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: | ||||
Basic (in shares) | 14,571,155 | 14,368,225 | 14,518,765 | 14,333,452 |
Diluted (in shares) | 14,571,155 | 14,368,225 | 14,518,765 | 14,333,452 |
DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share) | $ 0.02 | $ 0.02 | $ 0.06 | $ 0.06 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 4,910 | $ (14,064) | $ 15,202 | $ (16,892) |
Change in cumulative foreign currency translation adjustment | (236) | 2,952 | (2,987) | 9,730 |
Total comprehensive income (loss) | $ 4,674 | $ (11,112) | $ 12,215 | $ (7,162) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-In Capital | Retained Earnings | Other Cumulative Comprehensive Loss | Treasury Stock |
Increase (Decrease) in Stockholders' Equity | ||||||
Adjustment for cumulative effect from change in accounting principle (ASU 2016-16) | $ (65) | $ (65) | ||||
Balances (in shares) at Dec. 31, 2017 | 14,821,801 | 39,783 | ||||
Balances at Dec. 31, 2017 | 105,780 | $ 741 | $ 76,146 | 60,074 | $ (30,819) | $ (362) |
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 15,202 | 15,202 | ||||
Change in cumulative foreign currency translation adjustment | (2,987) | (2,987) | ||||
Shares issued in connection with stock compensation plans (in shares) | 156,378 | |||||
Shares issued in connection with stock compensation plans | 232 | $ 8 | 224 | |||
Stock-based compensation | 2,574 | 2,574 | ||||
Dividends declared | (893) | (893) | ||||
Treasury stock purchases (in shares) | (42,353) | |||||
Treasury stock purchases | (453) | $ (453) | ||||
Balances (in shares) at Sep. 30, 2018 | 14,978,179 | 82,136 | ||||
Balances at Sep. 30, 2018 | $ 119,390 | $ 749 | $ 78,944 | $ 74,318 | $ (33,806) | $ (815) |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES: | ||
Net income (loss) | $ 15,202 | $ (16,892) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation (including capital lease amortization) | 4,799 | 5,030 |
Amortization of purchased intangible assets | 2,365 | 3,034 |
Amortization of deferred debt issuance costs | 268 | 359 |
Stock-based compensation | 2,662 | 2,125 |
Deferred income tax | 276 | (408) |
Loss (gain) on disposal of property, plant and equipment | 30 | (46) |
Restructuring expenses | 553 | 458 |
Goodwill impairment charge | 0 | 17,584 |
Transition tax liability | (679) | 0 |
Change in: | ||
Accounts receivable, net | (16,885) | (10,747) |
Inventories | (21,618) | (1,221) |
Prepaid expenses and other | (576) | 20 |
Accounts payable | 4,657 | 1,051 |
Contract liabilities | (1,559) | 97 |
Accrued anti-dumping duties and penalties | 4,391 | (2,965) |
Accrued expenses and other liabilities | 12,659 | 3,039 |
Net cash provided by operating activities | 6,545 | 518 |
CASH FLOWS USED IN INVESTING ACTIVITIES: | ||
Acquisition of property, plant and equipment | (26,574) | (3,299) |
Proceeds on sale of property, plant and equipment | 0 | 2 |
Net cash used in investing activities | (26,574) | (3,297) |
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES: | ||
Borrowings on bank lines of credit, net | 23,512 | 6,000 |
Payment of dividends | (891) | (880) |
Payment of debt issuance costs | (310) | (133) |
Net proceeds from issuance of common stock to employees and directors | 232 | 154 |
Treasury stock purchases | (453) | (336) |
Net cash provided by financing activities | 22,090 | 4,805 |
EFFECTS OF EXCHANGE RATES ON CASH | 54 | 416 |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 2,115 | 2,442 |
CASH AND CASH EQUIVALENTS, beginning of the period | 8,983 | 6,419 |
CASH AND CASH EQUIVALENTS, end of the period | $ 11,098 | $ 8,861 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION 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, 2017 . |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES | SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The condensed consolidated financial statements include the accounts of DMC Global Inc. (“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. Income Taxes 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. 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 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 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 realized upon ultimate resolution. We recognize interest and penalties related to uncertain tax positions in operating expense. Revenue Recognition On January 1, 2018, the Company adopted a new accounting standard, as amended, regarding revenue from contracts with customers using the modified retrospective approach, which was applied to all contracts with customers. Under the new standard, an entity is required to recognize revenue to depict the transfer of promised goods to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods. There was no cumulative financial statement effect of initially applying the new revenue standard because an analysis of our contracts supported the recognition of revenue consistent with our historical approach. In accordance with the modified retrospective approach, the comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company does not expect the adoption of the new revenue standard to have a material impact to the Company’s revenues or net income on an ongoing basis. 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, as described below. 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. On occasion, NobelClad and DynaEnergetics may require customers to make advance payments prior to the shipment of goods. We record such payments as contract liabilities in our Consolidated Balance Sheet. Please refer to Note 5 “Contract Liabilities” for further information. Our rights to payments for goods transferred to customers are conditional only on the passage of 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 where the timing of revenue recognition differs from the timing of invoicing, we have determined that our contracts do not include a significant financing component given the short duration between order initiation and order fulfillment within each of our segments. Refer to Note 8 “Business Segments” for additional disaggregated revenue disclosures. For the three months ended September 30, 2018 and 2017 , we recorded reversal of $32 and $65 of prior bad debt expense, respectively. For the nine months ended September 30, 2018 and 2017 , we recorded reversal of $28 and $66 of prior bad debt expense, respectively. NobelClad Customers agree to terms and conditions at the time of initiating an order. The significant majority of transactions contain a single performance obligation - the delivery of a clad metal product. In instances where multiple products are included within an order, each product represents a separate performance obligation given that: (1) the customer can benefit from each product on a standalone basis and (2) each product is distinct within the context of the contract. The transaction price is readily determinable and fixed at the time the transaction is entered into with the customer. NobelClad is entitled to each product’s transaction price upon the customer obtaining control of the item. Such control occurs as of a point in time, which is generally based upon relevant International Commercial Terms (“Incoterms”) as it relates to product ownership and legal title being transferred. Upon fulfillment of applicable Incoterms, NobelClad has performed its contractual requirements such that it has a present right to payment, and the customer from that point forward bears all risks and rewards of ownership. In addition, at this date, the customer has the ability to direct the use of, or restrict the access to, the asset. No payment discounts, rebates, refunds, or any other forms of variable consideration are included within its contracts. NobelClad also does not provide service-type warranties either via written agreement or customary business practice, nor does it allow customer returns. For contracts that contain only one performance obligation, the total transaction price is allocated to the sole performance obligation. For less frequent contracts which contain multiple distinct performance obligations, judgment is required to determine the standalone selling price (“SSP”) for each performance obligation. NobelClad uses the expected cost plus margin approach in order to estimate SSP, whereby an entity forecasts its expected costs of satisfying a performance obligation and then adds an appropriate margin for that good. The required judgment described herein largely is mitigated given the short duration between order initiation and complete order fulfillment. DynaEnergetics Customers agree to terms and conditions at the time of initiating an order. Transactions contain standard products, which may include perforating system components, such as detonating cord, or systems and associated hardware, including factory-assembled DynaStage ® perforating systems and DynaSelect ® detonators. In instances where multiple products are included within an order, each product represents a separate performance obligation given that: (1) the customer can benefit from each product on a standalone basis and (2) each product is distinct within the context of the contract. The transaction price is readily determinable and fixed at the time the transaction is entered into with the customer. DynaEnergetics is entitled to each product’s transaction price upon the customer obtaining control of the item. Such control occurs as of a point in time, which is generally based upon relevant Incoterms as it relates to product ownership and legal title being transferred. Upon fulfillment of applicable Incoterms, DynaEnergetics has performed its contractual requirements such that it has a present right to payment, and the customer from that point forward bears all risks and rewards of ownership. In addition, at this date, the customer has the ability to direct the use of, or restrict the access to, the asset. No payment discounts, rebates, refunds, or any other forms of variable consideration are included within contracts. DynaEnergetics also does not provide service-type warranties either via written agreement or customary business practice, nor does it allow customer returns without its prior approval. For orders that contain only one performance obligation, the total transaction price is allocated to the sole performance obligation. For orders that contain multiple products being purchased by the customer, judgment is required to determine SSP for each distinct performance obligation. However, such judgment largely is mitigated given that products purchased are generally shipped at the same time. In instances where products purchased are not shipped at the same time, DynaEnergetics uses the contractually stated price to determine SSP as this price approximates the price of each good as sold separately. Earnings Per Share 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 stock), and (ii) participating securities according to dividends declared and participation rights in undistributed earnings. Restricted stock awards are considered participating securities as they receive non-forfeitable rights to dividends as common stock. Basic EPS is then calculated by dividing net income (loss) available to common shareholders of the Company by the weighted‑average number of common shares 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 such effect is dilutive. The effect of the 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 assuming nonvested shares are not converted into common shares. 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 September 30, Nine months ended September 30, 2018 2017 2018 2017 Net income (loss) as reported 4,910 (14,064 ) 15,202 (16,892 ) Less: Distributed net income available to participating securities (7 ) — (20 ) — Less: Undistributed net income available to participating securities (104 ) — (323 ) — Numerator for basic net income per share: 4,799 (14,064 ) 14,859 (16,892 ) Add: Undistributed net income allocated to participating securities 104 — 323 — Less: Undistributed net income reallocated to participating securities (104 ) — (323 ) — Numerator for diluted net income per share: 4,799 (14,064 ) 14,859 (16,892 ) Denominator: Weighted average shares outstanding for basic net income per share 14,571,155 14,368,225 14,518,765 14,333,452 Effect of dilutive securities — — — — Weighted average shares outstanding for diluted net income per share 14,571,155 14,368,225 14,518,765 14,333,452 Net income (loss) per share: Basic $ 0.33 $ (0.98 ) $ 1.02 $ (1.18 ) Diluted $ 0.33 $ (0.98 ) $ 1.02 $ (1.18 ) 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, accrued expenses and lines of credit approximate their fair value. Our foreign currency forward contracts are determined using a yield curve model based on quoted market prices. As a result, these investments have been classified as Level 2 in the fair value hierarchy. We did not hold any Level 3 assets or liabilities as of September 30, 2018 or December 31, 2017 . Recently Adopted Accounting Standards In October 2016, the Financial Accounting Standards Board (“ FASB”) issued Accounting Standards Update (“ASU”) 2016-16 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, and the Company adopted this ASU in the first quarter of 2018. The adoption of this ASU resulted in a reduction to January 1, 2018 “Retained earnings” in the Condensed Consolidated Balance Sheet of $65 and eliminated a $65 prepaid income tax balance recorded in the Consolidated Balance Sheet as of December 31, 2017. In March 2017, the FASB issued ASU 2017-07 to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost within an entity’s financial statements. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The Company adopted this ASU in the first quarter of 2018. The Company records its annual adjustment to its defined benefit pension obligation based upon actuarial calculations performed during the fourth quarter. The adoption of this ASU is not expected to have a material impact on the consolidated financial statements. Recent Accounting Pronouncements I n February 2016, the FASB issued ASU No. 2016-02 which amends the existing accounting standards for lease accounting. The standard requires a lessee to recognize, on the balance sheet, a liability to make lease payments and a right-of-use (“ROU”) asset representing a right to use the underlying asset for the lease term. Leases will be classified as financing or operating, with classification affecting the pattern of expense recognition in the statement of operations. The ASU is effective for the Company on January 1, 2019. The ASU allows for either the modified or full retrospective method of adoption. In July 2018, the FASB issued ASU No. 2018-11 which allows entities to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in the consolidated financial statements. The ASU allows entities to continue to apply the legacy guidance in Topic 840, Leases , including its disclosure requirements, in the comparative periods presented in the year the new leases standard is adopted. Entities that elect this option would still adopt the new leases standard using a modified retrospective transition method, but would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented. The Company is currently in the process of completing an analysis of our vendor contracts and anticipates that a significant majority of its leasing arrangements will be classified as operating. Additionally, management is implementing a new software system to facilitate the requirements of the new standard and will complete the implementation during the fourth quarter of this year. Management is currently evaluating the impact that this standard will have on our consolidated financial statements and which practical expedients to employ during adoption. The Company anticipates that the adoption of this standard will result in an increase in its assets and liabilities. In June 2016, the FASB issued a new accounting pronouncement regarding credit losses for financial instruments. The new standard requires entities to measure expected credit losses for certain financial assets held at the reporting date using a current expected credit loss model, which is based on historical experience, adjusted for current conditions and reasonable and supportable forecasts. The Company is required to adopt the new standard on January 1, 2020. Management is currently evaluating the potential impact that the adoption of this standard will have on the Company's financial position, results of operations, and related disclosures. |
INVENTORIES
INVENTORIES | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. Significant cost elements included in inventory are material, labor, freight, subcontract costs, and manufacturing overhead. As necessary, we adjust inventory to its net realizable value by recording provisions for excess, slow moving and obsolete inventory. 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 of the following: September 30, December 31, Raw materials $ 31,259 $ 16,255 Work-in-process 7,485 6,120 Finished goods 17,431 13,049 Supplies 321 318 $ 56,496 $ 35,742 |
PURCHASED INTANGIBLE ASSETS
PURCHASED INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
PURCHASED INTANGIBLE ASSETS | PURCHASED INTANGIBLE ASSETS The following table presents details of our purchased intangible assets as of September 30, 2018 : Gross Accumulated Amortization Net Core technology $ 19,436 $ (10,771 ) $ 8,665 Customer relationships 37,564 (36,714 ) 850 Trademarks / Trade names 2,086 (2,086 ) — Total intangible assets $ 59,086 $ (49,571 ) $ 9,515 The following table presents details of our purchased intangible assets, other than goodwill, as of December 31, 2017 : Gross Accumulated Amortization Net Core technology $ 20,027 $ (10,333 ) $ 9,694 Customer relationships 39,244 (36,077 ) 3,167 Trademarks / Trade names 2,149 (2,149 ) — Total intangible assets $ 61,420 $ (48,559 ) $ 12,861 The change in the gross value of our purchased intangible assets from December 31, 2017 to September 30, 2018 was due to foreign currency translation and an adjustment due to the recognition of tax benefit of tax amortization previously applied to certain goodwill related to the NobelClad and DynaEnergetics reporting units. After the goodwill was written off at September 30, 2017 and December 31, 2015, respectively, the tax amortization reduces other noncurrent intangible assets related to the historical acquisition. |
CONTRACT LIABILITIES
CONTRACT LIABILITIES | 9 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
CONTRACT LIABILITIES | 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. As of September 30, 2018 and December 31, 2017 , contract liabilities (previously known as customer advances) were as follows: September 30, 2018 December 31, 2017 NobelClad 3,854 5,804 DynaEnergetics 456 84 Total $ 4,310 $ 5,888 We expect to recognize the revenue associated with contract liabilities over a time period no longer than one year. Of the $5,888 recorded as contract liabilities at December 31, 2017 , $4,566 was recorded to net sales during the nine months ended September 30, 2018 . |
DEBT
DEBT | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
DEBT | DEBT Lines of credit consisted of the following: September 30, December 31, Syndicated credit agreement: U.S. Dollar revolving loan $ 23,279 $ 18,250 Capital expenditure loan 18,990 — Long-term lines of credit 42,269 18,250 Less: debt issuance costs 815 266 Lines of credit $ 41,454 $ 17,984 Syndicated Credit Agreement On March 8, 2018, we entered into a five -year $75,000 syndicated credit agreement (“credit facility”) which replaced in its entirety our prior syndicated credit facility entered into on February 23, 2015. The new credit facility allows for revolving loans of up to $50,000 with a $20,000 US dollar equivalent sublimit for alternative currency loans. In addition, the new agreement provides for a $25,000 Capital Expenditure Facility (“Capex Facility”) which is to be used to finance our DynaEnergetics manufacturing expansion project in Blum, Texas. The Capex facility allows for advances to fund capital expenditures of the Blum expansion project during year one of the credit facility. At the end of year one, the Capex Facility will convert to a term loan which will be amortizable at 12.5% of principal per year with a balloon payment for the outstanding balance upon the credit facility maturity date in year five. The new facility has a $100,000 accordion feature to increase the commitments under the revolving loan class and/or by adding a term loan subject to approval by applicable lenders. We entered into the credit facility with a syndicate of three banks, with KeyBank, N.A. acting as administrative agent. The syndicated credit 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. Borrowings under the $50,000 revolving loan and $25,000 Capex Facility can be in the form of one, two, three, or six month London Interbank Offered Rate (“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 rates 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% ). All borrowing and repayments under the credit facility have been in the form of one month loans and are reported on a net basis in our Condensed Consolidated Statements of Cash Flows. 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% ). The credit facility 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 ratios. As of September 30, 2018 , 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 €4,000 , of which €1,827 is available as of September 30, 2018 after considering outstanding letters of credit. Included in lines of credit are deferred debt issuance costs of $815 and $266 as of September 30, 2018 and December 31, 2017 , respectively. Upon entering into the credit facility, we wrote off $159 of previously deferred debt issuance costs and incurred $817 of additional costs. Debt issuance costs of $507 were paid directly by the administrative agent and increased outstanding amounts under U.S. dollar revolving loans, and debt issuance costs of $310 have been paid by the Company. Deferred debt issuance costs are being amortized over the remaining term of the credit facility which expires on March 8, 2023. As of December 31, 2017 , we had a $35,000 credit facility that allowed for revolving loans of $30,000 in U.S. dollars and $5,000 in alternative 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. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | 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. At September 30, 2018 and December 31, 2017, the Company was in a consolidated three-year cumulative loss position. Accordingly, we have evaluated the impact on all jurisdictions and have continued to record a valuation allowance against the corresponding net deferred tax assets as of September 30, 2018 and December 31, 2017. 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”) was enacted in December 2017. Among other things, the TCJA reduced the U.S. federal corporate tax rate from 35% to 21% beginning in 2018, required companies to pay a one-time transition tax on previously unremitted earnings of non-U.S. subsidiaries that were previously tax deferred, and created new taxes on certain foreign sourced earnings. The SEC staff issued Staff Accounting Bulletin (SAB) 118, which provided guidance on accounting for enactment effects of the TCJA. SAB 118 provided a measurement period of up to one year from the TCJA’s enactment date for companies to complete their accounting under ASC 740. In accordance with SAB 118, to the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in its financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the TCJA. For various reasons that are discussed more fully below, including the issuance of additional technical and interpretive guidance, we have not completed accounting for the income tax effects of certain elements of the TCJA. However, we were able to make reasonable estimates of the TCJA’s effects and, as such, have recorded provisional amounts related to the transition tax and the remeasurement of deferred tax assets and liabilities. The transition tax is a tax on previously untaxed accumulated and current earnings and profits (E&P) of certain of the Company’s non-U.S. subsidiaries. To determine the amount of the transition tax, we must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. E&P is similar to retained earnings of the subsidiary, but requires other adjustments to conform to U.S. tax rules. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. We were able to make a reasonable estimate of the transition tax and recorded a provisional obligation and additional income tax expense of $946 in the fourth quarter of 2017, which was reduced to $678 in the first quarter of 2018 in response to additional guidance received from the Internal Revenue Service and to $343 in the third quarter of 2018 upon completion of certain E&P calculations. The Company expects to elect to pay this liability over eight years. A payment of $76 was made during the second quarter of 2018. As of September 30, 2018 , we reflected $267 in other long term liabilities. However, the Company is continuing to gather additional information and will consider additional technical guidance to more precisely compute and account for the amount of the transition tax in the measurement period. This amount may change when we finalize the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation, finalize the calculation of non-U.S. income taxes paid on such earnings, and finalize our determination on the impact of the deemed repatriation of foreign earnings on 2017 taxable income. In addition to the transition tax, the TCJA introduced a territorial tax system, which was effective beginning in 2018. The territorial tax system may impact the Company’s overall global capital and legal entity structure, working capital, and repatriation plan on a go-forward basis. In light of the territorial tax system, and other new international provisions within the TCJA that are effective beginning in 2018, the Company is currently analyzing its global capital and legal entity structure, working capital requirements, and repatriation plans. We have not completed our full analysis with respect to the impact of the TCJA on our indefinite reinvestment assertion, and we are not yet able to make reasonable estimates of its related effects. Therefore, no provisional adjustments relative to the territorial tax system and our indefinite reinvestment assertion were recorded. Further, it is impracticable for the Company to estimate any future tax costs for any unrecognized deferred tax liabilities associated with its indefinite reinvestment assertion as of December 31, 2017 or September 30, 2018 , because the actual tax liability, if any, would be dependent on complex analysis and calculations considering various tax laws, exchange rates, circumstances existing when a repatriation, sale, or liquidation occurs, or other factors. If there are any changes to our indefinite reinvestment assertion as a result of finalizing our assessment of the TCJA, the Company will adjust its provisional estimates, record, and disclose any tax impacts in the appropriate period, pursuant to SAB 118. We remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21% under the TCJA. As our U.S. deferred tax assets are fully offset by a valuation allowance, there was no net additional tax impact related to deferred tax assets and liabilities recognized in the fourth quarter of 2017. We are still analyzing certain aspects of the TCJA, considering additional technical guidance, and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. This includes, but is not limited to, the impacts of changes to Code Section 162(m) on our deferred tax assets related to compensation, and the potential impacts of the global intangible low-taxed income (“GILTI”) provision within the TCJA on deferred tax assets and liabilities. We have not completed our full analysis with respect to the GILTI provision within the TCJA, and we are not yet able to make reasonable estimates of its related effects. Therefore, no provisional adjustments relative to GILTI were recorded. Currently, we have not yet elected a policy as to whether we will recognize deferred taxes for basis differences expected to reverse as GILTI or whether we will account for GILTI as period costs if and when incurred. The Company is currently evaluating other elements of the TCJA for which the Company was not yet able to make reasonable estimates of the enactment impact and for which it would continue accounting for them in accordance with ASC 740 on the basis of the tax laws in effect before the TCJA. |
BUSINESS SEGMENTS
BUSINESS SEGMENTS | 9 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
BUSINESS SEGMENTS | BUSINESS SEGMENTS Our business is organized into two segments: NobelClad and DynaEnergetics. 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. 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 as follows: Three months ended September 30, Nine months ended September 30, 2018 2017 2018 2017 Net sales: NobelClad $ 21,633 $ 16,841 $ 61,841 $ 54,145 DynaEnergetics 66,250 35,320 174,270 84,169 Net sales $ 87,883 $ 52,161 $ 236,111 $ 138,314 Three months ended September 30, Nine months ended September 30, 2018 2017 2018 2017 Operating income (loss) NobelClad $ 2,099 $ (17,030 ) $ 3,791 $ (14,313 ) DynaEnergetics 9,860 6,867 30,801 8,908 Segment operating income (loss) 11,959 (10,163 ) 34,592 (5,405 ) Unallocated corporate expenses (2,269 ) (1,543 ) (7,569 ) (5,240 ) Stock-based compensation (870 ) (743 ) (2,662 ) (2,125 ) Other expense, net (335 ) (436 ) (1,039 ) (965 ) Interest expense (495 ) (367 ) (1,098 ) (1,203 ) Interest income — — 2 2 Income (loss) before income taxes $ 7,990 $ (13,252 ) $ 22,226 $ (14,936 ) Three months ended September 30, Nine months ended September 30, 2018 2017 2018 2017 Depreciation and amortization: NobelClad $ 802 $ 932 $ 2,435 $ 2,927 DynaEnergetics 1,595 1,757 4,729 5,137 Segment depreciation and amortization $ 2,397 $ 2,689 $ 7,164 $ 8,064 The disaggregation of revenue earned from contracts with customers based on the geographic location of the customer is as follows. Revenues that would have been reported under previous accounting guidance would not have been materially different from the amounts shown below. Three months ended September 30, Nine months ended September 30, 2018 2017 2018 2017 United States 9,815 9,484 22,296 24,918 Canada 1,415 1,041 4,839 6,541 United Arab Emirates 346 418 737 1,100 France 508 655 3,203 1,996 South Korea 143 29 1,974 1,173 Germany 1,459 1,056 3,712 3,820 Oman 424 24 635 1,323 India 1,284 272 2,086 531 Spain 268 345 900 1,375 China 1,217 1 9,061 1,025 Italy 471 221 1,547 1,183 Hong Kong 851 638 2,662 1,400 Sweden 1,394 987 1,972 1,598 Rest of the world 2,038 1,670 6,217 6,162 Total NobelClad $ 21,633 $ 16,841 $ 61,841 $ 54,145 Three months ended September 30, Nine months ended September 30, 2018 2017 2018 2017 United States 54,281 24,740 134,575 58,002 Canada 5,904 4,583 20,245 11,425 United Arab Emirates 146 113 1,034 201 France 3 7 76 43 Oman 74 182 800 312 Germany 41 207 122 264 Russia 646 888 3,072 2,733 India 678 287 1,507 1,637 Egypt 321 901 1,397 1,784 Romania 110 498 399 1,021 Iraq — 25 318 25 Rest of the world 4,046 2,889 10,725 6,722 Total DynaEnergetics $ 66,250 $ 35,320 $ 174,270 $ 84,169 During the three months ended September 30, 2018 , two customers in our DynaEnergetics segment each individually accounted for greater than 10% of total net sales. During the nine months ended September 30, 2018 and the three and nine months ended September 30, 2017 , no customer was responsible for more than 10% of total net sales. |
DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS | 9 Months Ended |
Sep. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE INSTRUMENTS | 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 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. 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 expense, net” within our Condensed Consolidated Statements of Operations. We execute derivatives with a specialized foreign exchange brokerage firm. The primary credit risk inherent in derivative agreements represents the possibility that a loss may occur from the nonperformance of a counterparty to the 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’ ability to perform. As of September 30, 2018 , the notional amounts of the forward contracts the Company held to purchase currencies were $9,042 , and the notional amounts of forward contracts the Company held to sell currencies were $2,806 . The fair values of outstanding foreign currency forward contracts were not material at September 30, 2018 . The following table presents the location and amount of net gains (losses) from hedging activities: Three months ended September 30, Nine months ended September 30, Derivative Statements of Operations Location 2018 2017 2018 2017 Foreign currency contracts Other income (expense), net $ 36 $ (193 ) $ (265 ) $ (193 ) |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 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 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. 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, which determined certain imports, primarily used for gun carrier tubing, are included in the scope of the AD/CVD orders on OCTG from China and thus are subject to AD/CVD. 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. On March 16, 2018, the CIT issued its decision on the appeal and sustained the Commerce Department’s scope ruling. The Company did not appeal this ruling. On December 27, 2016, we received notice from U.S. Customs that it may pursue penalties against us related to the AD/CVD issue and demanding tender of alleged loss of AD/CVD in an amount of $3,049 , which had previously been accrued for in our financial statements. We filed a response to the notice on February 6, 2017. 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 in the amount of $3,049 . We tendered $3,049 in AD amounts on March 6, 2017 into a suspense account pending ultimate resolution of the AD/CVD case. We submitted a petition for relief and mitigation of penalties on May 17, 2017. On March 27, 2018, we received notice from U.S. Customs Headquarters that it intended to move forward with its pursuit of penalties. The Company engaged in discussions with U.S. Customs Headquarters regarding the scope of penalties asserted and the arguments set forth in the Company’s petition for relief and mitigation of penalties. Based on these discussions and the Company’s assessment of the probable ultimate penalty rate, the Company accrued $3,103 in the first quarter of 2018. On October 11, 2018, we received a decision from U.S. Customs Headquarters in which a mitigated amount of $8,000 in penalties was asserted. The Company expects to tender the amount in the fourth quarter of 2018. In its financial statements for the quarter ended September 30, 2018, the Company accrued an additional $4,897 of penalties. As of September 30, 2018 , the total amount accrued related to AD/CVD penalties was $8,000 . During the quarter ended September 30, 2018, the Company paid the remaining accrued AD/CVD and interest of $ 3,461 to U.S. Customs. Patent and Trademark Infringement On July 1, 2016, GEODynamics, Inc., a US-based oil and gas perforating equipment manufacturer based in Fort Worth, Texas (“GEODynamics”) filed a patent infringement action against DynaEnergetics US, Inc. (“DynaEnergetics”) in the United States District Court for the Eastern District of Texas (“District Court”) alleging infringement of US Patent No. 8,544,563 (the “563 patent”), based on DynaEnergetics’ US sales of DPEX ® shaped charges. As part of the defense of this action, 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 on March 1, 2018, PTAB issued its decision in favor of DynaEnergetics, invalidating all challenged claims of the 563 patent. In May 2018, GEODynamics filed its notice of appeal with respect to the PTAB decision but withdrew its notice of appeal in September 2018. DynaEnergetics is in the process of filing for dismissal of the District Court case. On April 28, 2017, GEODynamics filed a patent infringement action against DynaEnergetics in District Court alleging infringement of U.S. Patent No. 8,220,394 (the “394 patent”), based on DynaEnergetics’ U.S. sales of its DPEX ® and HaloFrac ® shaped charges. The 394 patent case went to trial in early October 2018, and on October 10, 2018, the jury found in favor of DynaEnergetics on all counts. 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 the German part DE 60 2004 033 297 of European patent EP 1 671 013 B1 granted on June 29, 2011, a patent related to the 394 patent (the “EP 013 patent”). This action is 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 is vigorously defending against this lawsuit. DynaEnergetics EU filed its defense at the Regional Court of Düsseldorf and a nullity action against EP 013 at the German Federal Patent Court on February 14, 2018. A trial in the infringement proceedings is scheduled for March 2019, and a trial in the nullity action is not expected before late 2019. On September 27, 2017, DynaEnergetics GmbH & Co. KG filed a revocation action in the Patents Court, Shorter Trials Scheme in the UK against GEODynamics, asserting that the EP 013 patent, as maintained in the UK, is invalid. GEODynamics filed its defense and a counterclaim alleging infringement of the EP 013 patent in November 2017 based on sales and marketing of DPEX ® shaped charges in the UK. GEODynamics discontinued its counterclaim for infringement on May 9, 2018 and has been ordered to pay costs related thereto at the close of the proceedings. Trial is currently expected to begin in late October 2018. We do not believe that the EP 013 patent or infringement claims based on the patent are valid, and we do not believe it is probable that we will incur a material loss on the EP 013 matter. However, if it is determined that the patent is valid and that DynaEnergetics EU has infringed it, 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 products manufactured in Germany, the scope of potential damages and the relevant period for which damages would apply, if any. Operating Leases During the third quarter of 2018, we signed a lease for new office space for our corporate headquarters and for NobelClad’s U.S. administrative offices. We expect to move into the new offices during the first quarter of 2019. The annual minimum commitment payments under the office lease for the next five years as of September 30, 2018 are presented below: Office Lease Commitments Year ended December 31 - 2018 $ — 2019 236 2020 286 2021 296 2022 305 Thereafter 2,267 Total minimum payments $ 3,390 |
RESTRUCTURING
RESTRUCTURING | 9 Months Ended |
Sep. 30, 2018 | |
Restructuring and Related Activities [Abstract] | |
RESTRUCTURING | RESTRUCTURING During the fourth quarter of 2017, NobelClad announced plans to consolidate its European production facilities by closing manufacturing operations in France , which it expects to complete by the end of 2018. Final approval of the proposed measures has been granted by the local workers council, in accordance with applicable French law. NobelClad plans to exit the Rivesaltes production facility, but will maintain its sales and administrative office in France. For the remainder of 2018, we expect to incur approximately $550 of restructuring expenses related to severance, equipment moving, legal fees, and contract termination costs. Total restructuring and impairment charges incurred for these programs are as follows and are reported in the “Restructuring expenses” line item in our Condensed Consolidated Statements of Operations: Three months ended September 30, 2018 Severance Equipment Moving Costs Other Exit Costs Total NobelClad $ 65 $ 119 $ 8 $ 192 Nine months ended September 30, 2018 Severance Equipment Moving Costs Other Exit Costs Total NobelClad $ 300 $ 119 $ 134 $ 553 Nine months ended September 30, 2017 Severance Asset Impairment Other Exit Costs Total DynaEnergetics $ 20 $ 143 $ 295 $ 458 During the nine months ended September 30, 2018 , the changes to the restructuring liability associated with these programs is summarized below: December 31, 2017 Expense Payments and Other Adjustments Currency Adjustments September 30, 2018 Severance $ 2,568 $ 300 $ (248 ) $ (73 ) $ 2,547 Equipment moving costs — 119 (93 ) — 26 Other exit costs 10 134 (144 ) — — Total $ 2,578 $ 553 $ (485 ) $ (73 ) $ 2,573 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS Patent and Trademark Infringement Trial on the 394 patent infringement matter resulted in a verdict on October 10, 2018 in favor of DynaEnergetics on all counts. Please refer to Note 10 “Commitments and Contingencies” for further discussion of the alleged patent infringement case. Anti-dumping and Countervailing Duties Subsequent to September 30, 2018, the Company received a written response from U.S. Customs related to penalties previously assessed. After reviewing the Company’s previously filed petition for relief and mitigation of penalties, U.S. Customs asserted a mitigated penalty of $8,000 . Based upon this decision and the Company’s decision not to appeal further, the Company has accrued an additional $4,897 during the third quarter as a recognized subsequent event. Please refer to Note 10 “Commitments and Contingencies” for further discussion of the anti-dumping and countervailing duties. |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements include the accounts of DMC Global Inc. (“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. |
Income Taxes | Income Taxes 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. 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 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 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 realized upon ultimate resolution. We recognize interest and penalties related to uncertain tax positions in operating expense. |
Revenue Recognition | Revenue Recognition On January 1, 2018, the Company adopted a new accounting standard, as amended, regarding revenue from contracts with customers using the modified retrospective approach, which was applied to all contracts with customers. Under the new standard, an entity is required to recognize revenue to depict the transfer of promised goods to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods. There was no cumulative financial statement effect of initially applying the new revenue standard because an analysis of our contracts supported the recognition of revenue consistent with our historical approach. In accordance with the modified retrospective approach, the comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company does not expect the adoption of the new revenue standard to have a material impact to the Company’s revenues or net income on an ongoing basis. 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, as described below. 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. On occasion, NobelClad and DynaEnergetics may require customers to make advance payments prior to the shipment of goods. We record such payments as contract liabilities in our Consolidated Balance Sheet. Please refer to Note 5 “Contract Liabilities” for further information. Our rights to payments for goods transferred to customers are conditional only on the passage of 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 where the timing of revenue recognition differs from the timing of invoicing, we have determined that our contracts do not include a significant financing component given the short duration between order initiation and order fulfillment within each of our segments. Refer to Note 8 “Business Segments” for additional disaggregated revenue disclosures. For the three months ended September 30, 2018 and 2017 , we recorded reversal of $32 and $65 of prior bad debt expense, respectively. For the nine months ended September 30, 2018 and 2017 , we recorded reversal of $28 and $66 of prior bad debt expense, respectively. NobelClad Customers agree to terms and conditions at the time of initiating an order. The significant majority of transactions contain a single performance obligation - the delivery of a clad metal product. In instances where multiple products are included within an order, each product represents a separate performance obligation given that: (1) the customer can benefit from each product on a standalone basis and (2) each product is distinct within the context of the contract. The transaction price is readily determinable and fixed at the time the transaction is entered into with the customer. NobelClad is entitled to each product’s transaction price upon the customer obtaining control of the item. Such control occurs as of a point in time, which is generally based upon relevant International Commercial Terms (“Incoterms”) as it relates to product ownership and legal title being transferred. Upon fulfillment of applicable Incoterms, NobelClad has performed its contractual requirements such that it has a present right to payment, and the customer from that point forward bears all risks and rewards of ownership. In addition, at this date, the customer has the ability to direct the use of, or restrict the access to, the asset. No payment discounts, rebates, refunds, or any other forms of variable consideration are included within its contracts. NobelClad also does not provide service-type warranties either via written agreement or customary business practice, nor does it allow customer returns. For contracts that contain only one performance obligation, the total transaction price is allocated to the sole performance obligation. For less frequent contracts which contain multiple distinct performance obligations, judgment is required to determine the standalone selling price (“SSP”) for each performance obligation. NobelClad uses the expected cost plus margin approach in order to estimate SSP, whereby an entity forecasts its expected costs of satisfying a performance obligation and then adds an appropriate margin for that good. The required judgment described herein largely is mitigated given the short duration between order initiation and complete order fulfillment. DynaEnergetics Customers agree to terms and conditions at the time of initiating an order. Transactions contain standard products, which may include perforating system components, such as detonating cord, or systems and associated hardware, including factory-assembled DynaStage ® perforating systems and DynaSelect ® detonators. In instances where multiple products are included within an order, each product represents a separate performance obligation given that: (1) the customer can benefit from each product on a standalone basis and (2) each product is distinct within the context of the contract. The transaction price is readily determinable and fixed at the time the transaction is entered into with the customer. DynaEnergetics is entitled to each product’s transaction price upon the customer obtaining control of the item. Such control occurs as of a point in time, which is generally based upon relevant Incoterms as it relates to product ownership and legal title being transferred. Upon fulfillment of applicable Incoterms, DynaEnergetics has performed its contractual requirements such that it has a present right to payment, and the customer from that point forward bears all risks and rewards of ownership. In addition, at this date, the customer has the ability to direct the use of, or restrict the access to, the asset. No payment discounts, rebates, refunds, or any other forms of variable consideration are included within contracts. DynaEnergetics also does not provide service-type warranties either via written agreement or customary business practice, nor does it allow customer returns without its prior approval. For orders that contain only one performance obligation, the total transaction price is allocated to the sole performance obligation. For orders that contain multiple products being purchased by the customer, judgment is required to determine SSP for each distinct performance obligation. However, such judgment largely is mitigated given that products purchased are generally shipped at the same time. In instances where products purchased are not shipped at the same time, DynaEnergetics uses the contractually stated price to determine SSP as this price approximates the price of each good as sold separately. |
Earnings Per Share | Earnings Per Share 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 stock), and (ii) participating securities according to dividends declared and participation rights in undistributed earnings. Restricted stock awards are considered participating securities as they receive non-forfeitable rights to dividends as common stock. Basic EPS is then calculated by dividing net income (loss) available to common shareholders of the Company by the weighted‑average number of common shares 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 such effect is dilutive. The effect of the 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 assuming nonvested shares are not converted into common shares. |
Fair Value of Financial Instruments | 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, accrued expenses and lines of credit approximate their fair value. Our foreign currency forward contracts are determined using a yield curve model based on quoted market prices. As a result, these investments have been classified as Level 2 in the fair value hierarchy. |
Recently Adopted Accounting Standards and Recent Accounting Pronouncements | Recently Adopted Accounting Standards In October 2016, the Financial Accounting Standards Board (“ FASB”) issued Accounting Standards Update (“ASU”) 2016-16 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, and the Company adopted this ASU in the first quarter of 2018. The adoption of this ASU resulted in a reduction to January 1, 2018 “Retained earnings” in the Condensed Consolidated Balance Sheet of $65 and eliminated a $65 prepaid income tax balance recorded in the Consolidated Balance Sheet as of December 31, 2017. In March 2017, the FASB issued ASU 2017-07 to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost within an entity’s financial statements. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The Company adopted this ASU in the first quarter of 2018. The Company records its annual adjustment to its defined benefit pension obligation based upon actuarial calculations performed during the fourth quarter. The adoption of this ASU is not expected to have a material impact on the consolidated financial statements. Recent Accounting Pronouncements I n February 2016, the FASB issued ASU No. 2016-02 which amends the existing accounting standards for lease accounting. The standard requires a lessee to recognize, on the balance sheet, a liability to make lease payments and a right-of-use (“ROU”) asset representing a right to use the underlying asset for the lease term. Leases will be classified as financing or operating, with classification affecting the pattern of expense recognition in the statement of operations. The ASU is effective for the Company on January 1, 2019. The ASU allows for either the modified or full retrospective method of adoption. In July 2018, the FASB issued ASU No. 2018-11 which allows entities to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in the consolidated financial statements. The ASU allows entities to continue to apply the legacy guidance in Topic 840, Leases , including its disclosure requirements, in the comparative periods presented in the year the new leases standard is adopted. Entities that elect this option would still adopt the new leases standard using a modified retrospective transition method, but would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented. The Company is currently in the process of completing an analysis of our vendor contracts and anticipates that a significant majority of its leasing arrangements will be classified as operating. Additionally, management is implementing a new software system to facilitate the requirements of the new standard and will complete the implementation during the fourth quarter of this year. Management is currently evaluating the impact that this standard will have on our consolidated financial statements and which practical expedients to employ during adoption. The Company anticipates that the adoption of this standard will result in an increase in its assets and liabilities. In June 2016, the FASB issued a new accounting pronouncement regarding credit losses for financial instruments. The new standard requires entities to measure expected credit losses for certain financial assets held at the reporting date using a current expected credit loss model, which is based on historical experience, adjusted for current conditions and reasonable and supportable forecasts. The Company is required to adopt the new standard on January 1, 2020. Management is currently evaluating the potential impact that the adoption of this standard will have on the Company's financial position, results of operations, and related disclosures. |
Inventories | Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. Significant cost elements included in inventory are material, labor, freight, subcontract costs, and manufacturing overhead. As necessary, we adjust inventory to its net realizable value by recording provisions for excess, slow moving and obsolete inventory. 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. |
Customer Advances | 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. |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Schedule of computation and reconciliation of earnings per common share | 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 September 30, Nine months ended September 30, 2018 2017 2018 2017 Net income (loss) as reported 4,910 (14,064 ) 15,202 (16,892 ) Less: Distributed net income available to participating securities (7 ) — (20 ) — Less: Undistributed net income available to participating securities (104 ) — (323 ) — Numerator for basic net income per share: 4,799 (14,064 ) 14,859 (16,892 ) Add: Undistributed net income allocated to participating securities 104 — 323 — Less: Undistributed net income reallocated to participating securities (104 ) — (323 ) — Numerator for diluted net income per share: 4,799 (14,064 ) 14,859 (16,892 ) Denominator: Weighted average shares outstanding for basic net income per share 14,571,155 14,368,225 14,518,765 14,333,452 Effect of dilutive securities — — — — Weighted average shares outstanding for diluted net income per share 14,571,155 14,368,225 14,518,765 14,333,452 Net income (loss) per share: Basic $ 0.33 $ (0.98 ) $ 1.02 $ (1.18 ) Diluted $ 0.33 $ (0.98 ) $ 1.02 $ (1.18 ) |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of components of inventory | Inventories consist of the following: September 30, December 31, Raw materials $ 31,259 $ 16,255 Work-in-process 7,485 6,120 Finished goods 17,431 13,049 Supplies 321 318 $ 56,496 $ 35,742 |
PURCHASED INTANGIBLE ASSETS (Ta
PURCHASED INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of details of purchased intangible assets, other than goodwill | The following table presents details of our purchased intangible assets as of September 30, 2018 : Gross Accumulated Amortization Net Core technology $ 19,436 $ (10,771 ) $ 8,665 Customer relationships 37,564 (36,714 ) 850 Trademarks / Trade names 2,086 (2,086 ) — Total intangible assets $ 59,086 $ (49,571 ) $ 9,515 The following table presents details of our purchased intangible assets, other than goodwill, as of December 31, 2017 : Gross Accumulated Amortization Net Core technology $ 20,027 $ (10,333 ) $ 9,694 Customer relationships 39,244 (36,077 ) 3,167 Trademarks / Trade names 2,149 (2,149 ) — Total intangible assets $ 61,420 $ (48,559 ) $ 12,861 |
CONTRACT LIABILITIES (Tables)
CONTRACT LIABILITIES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Contract Liabilities | As of September 30, 2018 and December 31, 2017 , contract liabilities (previously known as customer advances) were as follows: September 30, 2018 December 31, 2017 NobelClad 3,854 5,804 DynaEnergetics 456 84 Total $ 4,310 $ 5,888 |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of lines of credit | Lines of credit consisted of the following: September 30, December 31, Syndicated credit agreement: U.S. Dollar revolving loan $ 23,279 $ 18,250 Capital expenditure loan 18,990 — Long-term lines of credit 42,269 18,250 Less: debt issuance costs 815 266 Lines of credit $ 41,454 $ 17,984 |
BUSINESS SEGMENTS (Tables)
BUSINESS SEGMENTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
Schedule of segment information | Segment information is as follows: Three months ended September 30, Nine months ended September 30, 2018 2017 2018 2017 Net sales: NobelClad $ 21,633 $ 16,841 $ 61,841 $ 54,145 DynaEnergetics 66,250 35,320 174,270 84,169 Net sales $ 87,883 $ 52,161 $ 236,111 $ 138,314 Three months ended September 30, Nine months ended September 30, 2018 2017 2018 2017 Operating income (loss) NobelClad $ 2,099 $ (17,030 ) $ 3,791 $ (14,313 ) DynaEnergetics 9,860 6,867 30,801 8,908 Segment operating income (loss) 11,959 (10,163 ) 34,592 (5,405 ) Unallocated corporate expenses (2,269 ) (1,543 ) (7,569 ) (5,240 ) Stock-based compensation (870 ) (743 ) (2,662 ) (2,125 ) Other expense, net (335 ) (436 ) (1,039 ) (965 ) Interest expense (495 ) (367 ) (1,098 ) (1,203 ) Interest income — — 2 2 Income (loss) before income taxes $ 7,990 $ (13,252 ) $ 22,226 $ (14,936 ) Three months ended September 30, Nine months ended September 30, 2018 2017 2018 2017 Depreciation and amortization: NobelClad $ 802 $ 932 $ 2,435 $ 2,927 DynaEnergetics 1,595 1,757 4,729 5,137 Segment depreciation and amortization $ 2,397 $ 2,689 $ 7,164 $ 8,064 |
Disaggregation of Revenue | The disaggregation of revenue earned from contracts with customers based on the geographic location of the customer is as follows. Revenues that would have been reported under previous accounting guidance would not have been materially different from the amounts shown below. Three months ended September 30, Nine months ended September 30, 2018 2017 2018 2017 United States 9,815 9,484 22,296 24,918 Canada 1,415 1,041 4,839 6,541 United Arab Emirates 346 418 737 1,100 France 508 655 3,203 1,996 South Korea 143 29 1,974 1,173 Germany 1,459 1,056 3,712 3,820 Oman 424 24 635 1,323 India 1,284 272 2,086 531 Spain 268 345 900 1,375 China 1,217 1 9,061 1,025 Italy 471 221 1,547 1,183 Hong Kong 851 638 2,662 1,400 Sweden 1,394 987 1,972 1,598 Rest of the world 2,038 1,670 6,217 6,162 Total NobelClad $ 21,633 $ 16,841 $ 61,841 $ 54,145 Three months ended September 30, Nine months ended September 30, 2018 2017 2018 2017 United States 54,281 24,740 134,575 58,002 Canada 5,904 4,583 20,245 11,425 United Arab Emirates 146 113 1,034 201 France 3 7 76 43 Oman 74 182 800 312 Germany 41 207 122 264 Russia 646 888 3,072 2,733 India 678 287 1,507 1,637 Egypt 321 901 1,397 1,784 Romania 110 498 399 1,021 Iraq — 25 318 25 Rest of the world 4,046 2,889 10,725 6,722 Total DynaEnergetics $ 66,250 $ 35,320 $ 174,270 $ 84,169 |
DERIVATIVE INSTRUMENTS (Tables)
DERIVATIVE INSTRUMENTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Gain/(Loss) Recognized in Income on Derivatives | The following table presents the location and amount of net gains (losses) from hedging activities: Three months ended September 30, Nine months ended September 30, Derivative Statements of Operations Location 2018 2017 2018 2017 Foreign currency contracts Other income (expense), net $ 36 $ (193 ) $ (265 ) $ (193 ) |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Rental Payments for Operating Leases | The annual minimum commitment payments under the office lease for the next five years as of September 30, 2018 are presented below: Office Lease Commitments Year ended December 31 - 2018 $ — 2019 236 2020 286 2021 296 2022 305 Thereafter 2,267 Total minimum payments $ 3,390 |
RESTRUCTURING (Tables)
RESTRUCTURING (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Restructuring and Related Activities [Abstract] | |
Restructuring and impairment charges incurred | Total restructuring and impairment charges incurred for these programs are as follows and are reported in the “Restructuring expenses” line item in our Condensed Consolidated Statements of Operations: Three months ended September 30, 2018 Severance Equipment Moving Costs Other Exit Costs Total NobelClad $ 65 $ 119 $ 8 $ 192 Nine months ended September 30, 2018 Severance Equipment Moving Costs Other Exit Costs Total NobelClad $ 300 $ 119 $ 134 $ 553 Nine months ended September 30, 2017 Severance Asset Impairment Other Exit Costs Total DynaEnergetics $ 20 $ 143 $ 295 $ 458 |
Changes to the restructuring liability | During the nine months ended September 30, 2018 , the changes to the restructuring liability associated with these programs is summarized below: December 31, 2017 Expense Payments and Other Adjustments Currency Adjustments September 30, 2018 Severance $ 2,568 $ 300 $ (248 ) $ (73 ) $ 2,547 Equipment moving costs — 119 (93 ) — 26 Other exit costs 10 134 (144 ) — — Total $ 2,578 $ 553 $ (485 ) $ (73 ) $ 2,573 |
SIGNIFICANT ACCOUNTING POLICI_4
SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Jan. 01, 2018 | Dec. 31, 2017 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Reversal of prior bad debt expense | $ 32 | $ 65 | $ 28 | $ 66 | ||
Reduction in retained earnings | $ (74,318) | $ (74,318) | $ (60,074) | |||
Accounting Standards Update 2016-16 | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Reduction in retained earnings | $ 65 | |||||
Reduction in prepaid taxes | $ 65 |
SIGNIFICANT ACCOUNTING POLICI_5
SIGNIFICANT ACCOUNTING POLICIES - Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Numerator: | ||||
Net income (loss) as reported | $ 4,910 | $ (14,064) | $ 15,202 | $ (16,892) |
Less: Distributed net income available to participating securities - basic | (7) | 0 | (20) | 0 |
Less: Undistributed net income available to participating securities - basic | (104) | 0 | (323) | 0 |
Numerator for basic/diluted net income per share | 4,799 | (14,064) | 14,859 | (16,892) |
Add (Less): Undistributed net income allocated (reallocated) to participating securities | $ (104) | $ 0 | $ (323) | $ 0 |
Denominator: | ||||
Weighted average shares outstanding for basic net income per share (in shares) | 14,571,155 | 14,368,225 | 14,518,765 | 14,333,452 |
Effect of dilutive securities (in shares) | 0 | 0 | 0 | 0 |
Weighted average shares outstanding for diluted net income per share (in shares) | 14,571,155 | 14,368,225 | 14,518,765 | 14,333,452 |
Net income (loss) allocated to common stock for EPS calculation: | ||||
Basic (in dollars per share) | $ 0.33 | $ (0.98) | $ 1.02 | $ (1.18) |
Diluted (in dollars per share) | $ 0.33 | $ (0.98) | $ 1.02 | $ (1.18) |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Inventories | ||
Raw materials | $ 31,259 | $ 16,255 |
Work-in-process | 7,485 | 6,120 |
Finished goods | 17,431 | 13,049 |
Supplies | 321 | 318 |
Total inventory | $ 56,496 | $ 35,742 |
PURCHASED INTANGIBLE ASSETS (De
PURCHASED INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Purchased intangible assets | ||
Gross | $ 59,086 | $ 61,420 |
Accumulated Amortization | (49,571) | (48,559) |
Net | 9,515 | 12,861 |
Core technology | ||
Purchased intangible assets | ||
Gross | 19,436 | 20,027 |
Accumulated Amortization | (10,771) | (10,333) |
Net | 8,665 | 9,694 |
Customer relationships | ||
Purchased intangible assets | ||
Gross | 37,564 | 39,244 |
Accumulated Amortization | (36,714) | (36,077) |
Net | 850 | 3,167 |
Trademarks / Trade names | ||
Purchased intangible assets | ||
Gross | 2,086 | 2,149 |
Accumulated Amortization | (2,086) | (2,149) |
Net | $ 0 | $ 0 |
CONTRACT LIABILITIES (Details)
CONTRACT LIABILITIES (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Contract liabilities | $ 4,310 | $ 5,888 |
Contract liability recorded as net sales | 4,566 | |
NobelClad | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Contract liabilities | 3,854 | 5,804 |
DynaEnergetics | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Contract liabilities | $ 456 | $ 84 |
DEBT - Schedule of Debt (Detail
DEBT - Schedule of Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Lines of credit | ||
Total lines of credit | $ 42,269 | $ 18,250 |
Less: debt issuance costs | 815 | 266 |
Lines of credit | 41,454 | 17,984 |
Capital expenditure loan | ||
Lines of credit | ||
Total lines of credit | 18,990 | 0 |
Credit Facility | U.S. Dollar revolving loan | ||
Lines of credit | ||
Total lines of credit | $ 23,279 | $ 18,250 |
DEBT - Narrative (Details)
DEBT - Narrative (Details) | Mar. 08, 2018USD ($)bank | Sep. 30, 2018USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2018EUR (€) | Dec. 31, 2017USD ($) |
Debt Instrument [Line Items] | |||||
Amortization of principal, percent | 12.50% | ||||
Credit agreement, number of banks | bank | 3 | ||||
Debt issuance costs | $ 815,000 | $ 266,000 | |||
Debt issuance costs, amount paid by company | $ 310,000 | $ 133,000 | |||
Credit Facility | |||||
Debt Instrument [Line Items] | |||||
Credit facility, term | 5 years | ||||
Write-off of deferred debt issuance cost | $ 159,000 | ||||
Additional costs incurred | 817,000 | ||||
Debt issuance costs, amount paid by administrative assistant | 507,000 | ||||
Debt issuance costs, amount paid by company | 310,000 | ||||
Credit Facility | Syndicated Credit Facility 2018 | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | 75,000,000 | ||||
Accordion feature | 100,000,000 | ||||
Credit Facility | U.S. Dollar revolving loan | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | 50,000,000 | ||||
Credit Facility | Alternate currencies revolving loan | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | 20,000,000 | 5,000,000 | |||
Credit Facility | Alternate currencies revolving loan | Minimum | London Interbank Offered Rate (LIBOR) | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable interest rate | 1.50% | ||||
Credit Facility | Alternate currencies revolving loan | Minimum | Base Rate | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable interest rate | 0.50% | ||||
Credit Facility | Alternate currencies revolving loan | Maximum | London Interbank Offered Rate (LIBOR) | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable interest rate | 3.00% | ||||
Credit Facility | Alternate currencies revolving loan | Maximum | Base Rate | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable interest rate | 2.00% | ||||
Credit Facility | Capital expenditure loan | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | $ 25,000,000 | ||||
Credit Facility | German bank line of credit | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | € | € 4,000,000 | ||||
Available borrowing capacity | € | € 1,827,000 | ||||
Credit Facility | Syndicated Credit Facility 2015 | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | 35,000,000 | ||||
Accordion feature | 25,000,000 | ||||
Credit Facility | Syndicated Credit Agreement | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | $ 30,000,000 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | Mar. 31, 2018 | |
Operating Loss Carryforwards [Line Items] | ||||
Tax Act, transition tax for accumulated foreign earnings, provisional income tax expense | $ 946 | |||
Tax Act, provisional liability | $ 343 | $ 678 | ||
Tax Act, payment of liability | $ 76 | |||
Tax Act, transition tax, other long term liabilities | $ 267 | |||
Minimum | ||||
Operating Loss Carryforwards [Line Items] | ||||
Differences between U.S. and foreign tax rates, range (as a percent) | 20.00% | |||
Maximum | ||||
Operating Loss Carryforwards [Line Items] | ||||
Differences between U.S. and foreign tax rates, range (as a percent) | 34.00% |
BUSINESS SEGMENTS - Segment Inf
BUSINESS SEGMENTS - Segment Information (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2018USD ($)segment | Sep. 30, 2017USD ($) | |
Segment information | ||||
Number of segments | segment | 2 | |||
Net sales | $ 87,883 | $ 52,161 | $ 236,111 | $ 138,314 |
Segment operating income (loss) | 8,820 | (12,449) | 24,361 | (12,770) |
Other expense, net | (335) | (436) | (1,039) | (965) |
Interest expense | (495) | (367) | (1,098) | (1,203) |
Interest income | 0 | 0 | 2 | 2 |
INCOME (LOSS) BEFORE INCOME TAXES | 7,990 | (13,252) | 22,226 | (14,936) |
Operating Segments | ||||
Segment information | ||||
Segment operating income (loss) | 11,959 | (10,163) | 34,592 | (5,405) |
Segment depreciation and amortization | 2,397 | 2,689 | 7,164 | 8,064 |
Segment Reconciling Items | ||||
Segment information | ||||
Unallocated corporate expenses | (2,269) | (1,543) | (7,569) | (5,240) |
Stock-based compensation | (870) | (743) | (2,662) | (2,125) |
NobelClad | ||||
Segment information | ||||
Net sales | 21,633 | 16,841 | 61,841 | 54,145 |
NobelClad | Operating Segments | ||||
Segment information | ||||
Segment operating income (loss) | 2,099 | (17,030) | 3,791 | (14,313) |
Segment depreciation and amortization | 802 | 932 | 2,435 | 2,927 |
DynaEnergetics | ||||
Segment information | ||||
Net sales | 66,250 | 35,320 | 174,270 | 84,169 |
DynaEnergetics | Operating Segments | ||||
Segment information | ||||
Segment operating income (loss) | 9,860 | 6,867 | 30,801 | 8,908 |
Segment depreciation and amortization | $ 1,595 | $ 1,757 | $ 4,729 | $ 5,137 |
BUSINESS SEGMENTS - Disaggregat
BUSINESS SEGMENTS - Disaggregation of Revenue by Geographic Location (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Disaggregation of Revenue [Line Items] | ||||
NET SALES | $ 87,883 | $ 52,161 | $ 236,111 | $ 138,314 |
NobelClad | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 21,633 | 16,841 | 61,841 | 54,145 |
NobelClad | United States | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 9,815 | 9,484 | 22,296 | 24,918 |
NobelClad | Canada | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 1,415 | 1,041 | 4,839 | 6,541 |
NobelClad | United Arab Emirates | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 346 | 418 | 737 | 1,100 |
NobelClad | France | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 508 | 655 | 3,203 | 1,996 |
NobelClad | South Korea | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 143 | 29 | 1,974 | 1,173 |
NobelClad | Germany | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 1,459 | 1,056 | 3,712 | 3,820 |
NobelClad | Oman | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 424 | 24 | 635 | 1,323 |
NobelClad | India | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 1,284 | 272 | 2,086 | 531 |
NobelClad | Spain | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 268 | 345 | 900 | 1,375 |
NobelClad | China | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 1,217 | 1 | 9,061 | 1,025 |
NobelClad | Italy | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 471 | 221 | 1,547 | 1,183 |
NobelClad | Hong Kong | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 851 | 638 | 2,662 | 1,400 |
NobelClad | Sweden | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 1,394 | 987 | 1,972 | 1,598 |
NobelClad | Rest of the world | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 2,038 | 1,670 | 6,217 | 6,162 |
DynaEnergetics | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 66,250 | 35,320 | 174,270 | 84,169 |
DynaEnergetics | United States | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 54,281 | 24,740 | 134,575 | 58,002 |
DynaEnergetics | Canada | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 5,904 | 4,583 | 20,245 | 11,425 |
DynaEnergetics | United Arab Emirates | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 146 | 113 | 1,034 | 201 |
DynaEnergetics | France | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 3 | 7 | 76 | 43 |
DynaEnergetics | Germany | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 41 | 207 | 122 | 264 |
DynaEnergetics | Oman | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 74 | 182 | 800 | 312 |
DynaEnergetics | Russia | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 646 | 888 | 3,072 | 2,733 |
DynaEnergetics | India | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 678 | 287 | 1,507 | 1,637 |
DynaEnergetics | Egypt | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 321 | 901 | 1,397 | 1,784 |
DynaEnergetics | Romania | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 110 | 498 | 399 | 1,021 |
DynaEnergetics | Iraq | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | 0 | 25 | 318 | 25 |
DynaEnergetics | Rest of the world | ||||
Disaggregation of Revenue [Line Items] | ||||
NET SALES | $ 4,046 | $ 2,889 | $ 10,725 | $ 6,722 |
DERIVATIVE INSTRUMENTS - Narra
DERIVATIVE INSTRUMENTS - Narrative (Details) - Foreign Exchange Forward $ in Thousands | Sep. 30, 2018USD ($) |
Derivatives, Fair Value [Line Items] | |
Fair value of outstanding foreign currency forward | $ 0 |
Long | |
Derivatives, Fair Value [Line Items] | |
Notional amounts | 9,042 |
Short | |
Derivatives, Fair Value [Line Items] | |
Notional amounts | $ 2,806 |
DERIVATIVE INSTRUMENTS - Gain_
DERIVATIVE INSTRUMENTS - Gain/(Loss) Recognized in Income on Derivatives (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Foreign currency contracts | Other income (expense), net | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (loss) on foreign currency contracts | $ 36 | $ (193) | $ (265) | $ (193) |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Narrative (Details) - US Customs Notice of Action - Unfavorable Regulatory Action - USD ($) $ in Thousands | Oct. 11, 2018 | Mar. 06, 2017 | Feb. 16, 2017 | Aug. 31, 2015 | Sep. 30, 2018 | Mar. 31, 2018 | Dec. 27, 2016 | Jul. 31, 2015 |
Loss Contingencies [Line Items] | ||||||||
Requested payment of AD/CVD cash deposits | $ 14,783 | $ 3,049 | ||||||
AD/CVD cash deposits to be remitted or bond posted | $ 3,049 | |||||||
Amount tendered into a suspense account | $ 3,049 | |||||||
Loss contingency reserve | $ 8,000 | $ 3,103 | ||||||
Addition to reserve | 4,897 | |||||||
Payments on loss contingency | $ (3,461) | |||||||
Threatened Litigation | ||||||||
Loss Contingencies [Line Items] | ||||||||
Requested payment of AD/CVD cash deposits | $ 1,100 | |||||||
AD/CVD cash deposits to be remitted or bond posted | $ 1,100 | |||||||
Subsequent Event | ||||||||
Loss Contingencies [Line Items] | ||||||||
Loss contingency, amount mitigated | $ 8,000 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES - Schedule of Future Minimum Commitment Payments (Details) $ in Thousands | Sep. 30, 2018USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,018 | $ 0 |
2,019 | 236 |
2,020 | 286 |
2,021 | 296 |
2,022 | 305 |
Thereafter | 2,267 |
Total minimum payments | $ 3,390 |
RESTRUCTURING - Summary of Rest
RESTRUCTURING - Summary of Restructuring Charges (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring expenses | $ 192 | $ 0 | $ 553 | $ 458 |
Equipment Moving Costs | NobelClad | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring expenses | 119 | |||
NobelClad | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Additional restructuring expenses expected | 550 | 550 | ||
Operating Segments | NobelClad | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring expenses | 192 | 553 | ||
Operating Segments | DynaEnergetics | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring expenses | 458 | |||
Operating Segments | Severance | NobelClad | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring expenses | 65 | 300 | ||
Operating Segments | Severance | DynaEnergetics | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring expenses | 20 | |||
Operating Segments | Equipment Moving Costs | NobelClad | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring expenses | 119 | |||
Operating Segments | Asset Impairment | DynaEnergetics | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring expenses | 143 | |||
Operating Segments | Other Exit Costs | NobelClad | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring expenses | $ 8 | $ 134 | ||
Operating Segments | Other Exit Costs | DynaEnergetics | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring expenses | $ 295 |
RESTRUCTURING - Rollforward of
RESTRUCTURING - Rollforward of Restructuring Charges (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Restructuring Reserve [Roll Forward] | |
December 31, 2017 | $ 2,578 |
Expense | 553 |
Payments and Other Adjustments | (485) |
Currency Adjustments | (73) |
September 30, 2018 | 2,573 |
Severance | |
Restructuring Reserve [Roll Forward] | |
December 31, 2017 | 2,568 |
Expense | 300 |
Payments and Other Adjustments | (248) |
Currency Adjustments | (73) |
September 30, 2018 | 2,547 |
Equipment moving costs | |
Restructuring Reserve [Roll Forward] | |
December 31, 2017 | 0 |
Expense | 119 |
Payments and Other Adjustments | (93) |
Currency Adjustments | 0 |
September 30, 2018 | 26 |
Other exit costs | |
Restructuring Reserve [Roll Forward] | |
December 31, 2017 | 10 |
Expense | 134 |
Payments and Other Adjustments | (144) |
Currency Adjustments | 0 |
September 30, 2018 | $ 0 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Unfavorable Regulatory Action - US Customs Notice of Action - USD ($) $ in Thousands | Oct. 11, 2018 | Sep. 30, 2018 |
Subsequent Event [Line Items] | ||
Addition to reserve | $ 4,897 | |
Subsequent Event | ||
Subsequent Event [Line Items] | ||
Loss contingency, amount mitigated | $ 8,000 |