DMC Global Announces Amendment to Credit Agreement
June 26 2020 - 6:00AM
DMC Global Inc. (Nasdaq: BOOM) today announced it has amended its
credit agreement to provide covenant flexibility following a severe
downturn in its core oil and gas end market.
Michael Kuta, CFO, said, “While we expect to end
the second quarter with a net cash position and an undrawn, fully
available $50 million revolving credit facility, we obtained
temporary covenant relief to address the expected effects of a
decline in our sales and adjusted EBITDA due to the Covid-19
pandemic and its impact on oil and gas demand. The key component of
the amendment is a waiver of our 1.35x debt service coverage
ratio*. The waiver period begins with this year’s third quarter and
extends through the first quarter of 2021.
“While we have minimal long-term debt and
associated interest expense, the coverage ratio applies to the
trailing 12 months, during which time we were making capital
investments, distributing a $0.50 annual dividend, and paying
substantial cash taxes. We recently reduced our selling, general
and administrative expense by 25%; cut our 2020 capital budget by
50%, suspended our dividend and expect a sharply lower tax burden
during the balance of the year.”
Kuta added, “This covenant waiver enables us to
maintain our focus on innovation, market development, and the
commercialization of new products and applications at our
DynaEnergetics and NobelClad businesses. We appreciate the support
of our senior lenders, and the confidence they have shown in our
business strategy.”
Key elements of the amended credit agreement
are:
- A waiver of the debt service
coverage ratio for the third and fourth quarters of 2020 and the
first quarter of 2021. The agreement includes a minimum liquidity
covenant during the waiver period of $10 million, which is
calculated as total availability under DMC’s $50 million revolving
credit facility, plus unrestricted U.S. cash.
- Total lender commitments under the
revolving credit facility will remain at $50 million, and the
maturity date remains March 2023. The maximum total
leverage ratio, defined as total funded debt to consolidated
trailing 12-month adjusted EBITDA, will remain at 3.0x.
- Borrowings outstanding under the
amended revolving credit facility will bear interest at the greater
of LIBOR or .75% plus a margin of 1.50% to 3.00%; or for base rate
borrowings, the greater of 1.75% or a base rate plus a margin of
.50% to 2.00%. For both LIBOR and base rate borrowings, the
applicable margin is based on a ratio of DMC’s total funded debt to
consolidated trailing 12-month adjusted EBITDA. During the waiver
period, the applicable margin for LIBOR and base rate loans shall
not be less than 1.75% or .75%, respectively.
*DMC’s debt service coverage ratio is calculated
as the sum of trailing-12 month (TTM) adjusted EBITDA, less
dividends, capital expenditures and cash paid for income taxes,
divided by TTM principal and interest payments. The resulting ratio
must exceed 1.35x.
About DMCDMC Global is a
diversified holding company. Our innovative businesses provide
differentiated products and services to niche industrial and
commercial markets around the world. DMC’s objective is to identify
well-run businesses and strong management teams and support them
with long-term capital and strategic, legal, technology and
operating resources. Our approach helps our portfolio companies
grow core businesses, launch new initiatives, upgrade technologies
and systems to support their long-term strategy, and make
acquisitions that improve their competitive positions and expand
their markets. DMC’s culture is to foster local innovation versus
centralized control, and stand behind our businesses in ways that
truly add value. Today, DMC’s portfolio consists of DynaEnergetics
and NobelClad, which collectively address the energy, industrial
processing and transportation markets. Based in Broomfield,
Colorado, DMC trades on Nasdaq under the symbol “BOOM.” For more
information, visit the Company’s website at:
http://www.dmcglobal.com
Safe Harbor LanguageExcept for
the historical information contained herein, this news release
contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended, including our
expectation that we will end the second quarter with a net cash
position and an undrawn, fully available $50 million revolving
credit facility; our anticipation that future sales and adjusted
EBITDA will decline due to the Covid-19 pandemic; our anticipation
of a sharply lower tax burden in 2020; and our belief that we will
commercialize additional products and applications at
DynaEnergetics and Nobelclad. Such statements and information are
based on numerous assumptions regarding present and future business
strategies, the markets in which we operate, anticipated costs and
ability to achieve goals. Forward-looking information and
statements are subject to known and unknown risks, uncertainties
and other important factors that may cause actual results and
performance to be materially different from those expressed or
implied by such forward-looking information and statements,
including but not limited to: our ability to realize sales from our
backlog; our ability to obtain new contracts at attractive prices;
the execution of purchase commitments by our customers, and our
ability to successfully deliver on those purchase commitments; the
size and timing of customer orders and shipments; changes to
customer orders; product pricing and margins; fluctuations in
customer demand; our ability to successfully navigate slowdowns in
market activity or execute and capitalize upon growth
opportunities; the success of DynaEnergetics’ product and
technology development initiatives; potential consolidation among
DynaEnergetics’ customers; fluctuations in foreign currencies;
fluctuations in tariffs and quotas; the cyclicality of our
business; competitive factors; the timely completion of contracts;
the timing and size of expenditures; the timing and price of metal
and other raw material; potential supply-chain disruptions,
including as may be related to the coronavirus; the adequacy of
local labor supplies at our facilities; current or future limits on
manufacturing capacity at our various operations; the availability
and cost of funds; and general economic conditions, both domestic
and foreign, impacting our business and the business of the
end-market users we serve; as well as the other risks detailed from
time to time in our SEC reports, including the annual report on
Form 10-K for the year ended December 31, 2019. We do not
undertake any obligation to release public revisions to any
forward-looking statement, including, without limitation, to
reflect events or circumstances after the date of this news
release, or to reflect the occurrence of unanticipated events,
except as may be required under applicable securities laws.
CONTACT: |
Geoff High, Vice President of Investor Relations |
303-604-3924 |
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