NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2018
(Amounts in Thousands, Except Share and Per Share Data)
1. ORGANIZATION AND BUSINESS
DMC Global Inc. (“DMC”, "we", "us", "our", or the "Company") was incorporated in the state of Colorado in 1971 and reincorporated in the state of Delaware in 1997. DMC is headquartered in Boulder, Colorado and has manufacturing facilities in the United States, Germany, and Russia. Customers are located throughout the world. DMC currently operates
two
business segments: NobelClad and DynaEnergetics. NobelClad metallurgically joins or alters metals by using explosives. DynaEnergetics manufactures, markets, and sells downhole perforating equipment and explosives to the oilfield services sector.
Restructuring
Throughout 2016, 2017, and 2018 we restructured operations within NobelClad and DynaEnergetics and eliminated positions within our corporate office. See
Note 9
"Restructuring" for additional disclosures regarding these restructuring charges.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The Company's consolidated financial statements ("Consolidated Financial Statements") include the accounts of DMC and its controlled subsidiaries. Only subsidiaries in which controlling interests are maintained are consolidated. All significant intercompany accounts, profits, and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Foreign Operations and Foreign Exchange Rate Risk
The functional currency of our foreign operations is the applicable local currency for each affiliate company. Assets and liabilities of foreign subsidiaries for which the functional currency is the local currency are translated at exchange rates in effect at period-end, and the Statements of Operations are translated at the average exchange rates during the period. Exchange rate fluctuations on translating foreign currency financial statements into U.S. dollars are referred to as translation adjustments. Translation adjustments are recorded as a separate component of stockholders’ equity and are included in other cumulative comprehensive loss. Transactions denominated in currencies other than the functional currency are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates result in transaction gains and losses, which are reflected in other income (expense) as unrealized, based on period-end exchange rates, or realized, upon settlement of the transaction. Cash flows from our operations in foreign countries are translated at actual exchange rates when known, or at the average rate for the period. As a result, amounts related to assets and liabilities reported in the Consolidated Statements of Cash Flows will not agree to changes in the corresponding balances in the Consolidated Balance Sheets. The effects of exchange rate changes on cash balances held in foreign currencies are reported as a separate line item below cash flows from financing activities.
Cash and Cash Equivalents
For purposes of the Consolidated Financial Statements, we consider highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Accounts Receivable
We review our accounts receivable balance routinely to identify any specific customers with collectability issues. In circumstances where we are aware of a specific customer’s inability to meets its financial obligation to us, we record a specific
allowance for doubtful accounts (with the offsetting expense charged to selling and distribution expenses in our Consolidated Statements of Operations) against the amounts due, reducing the net recognized receivable to the amount we estimate will be collected.
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 consisted of the following at December 31:
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Raw materials
|
$
|
26,544
|
|
|
16,255
|
|
Work-in-process
|
7,157
|
|
|
6,120
|
|
Finished goods
|
16,904
|
|
|
13,049
|
|
Supplies
|
469
|
|
|
318
|
|
|
$
|
51,074
|
|
|
$
|
35,742
|
|
Shipping and handling costs incurred by us upon shipment to customers are included in cost of products sold in the accompanying Consolidated Statements of Operations.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost, except for assets acquired in acquisitions which are recorded at fair value. Additions and improvements are capitalized. Maintenance and repairs are charged to operations as costs are incurred. Depreciation is computed using the straight-line method over the estimated useful life of the related asset (except leasehold improvements which are depreciated over the shorter of their estimated useful life or the lease term) as follows:
|
|
|
Buildings and improvements
|
15-30 years
|
Manufacturing equipment and tooling
|
3-15 years
|
Furniture, fixtures, and computer equipment
|
3-10 years
|
Other
|
3-10 years
|
Gross property, plant and equipment consist of the following at December 31:
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Land
|
$
|
3,794
|
|
|
$
|
3,560
|
|
Buildings and improvements
|
58,045
|
|
|
46,270
|
|
Manufacturing equipment and tooling
|
51,955
|
|
|
46,814
|
|
Furniture, fixtures and computer equipment
|
21,061
|
|
|
17,266
|
|
Other
|
5,762
|
|
|
3,296
|
|
Construction in process
|
20,108
|
|
|
4,133
|
|
|
$
|
160,725
|
|
|
$
|
121,339
|
|
The increase in gross property, plant and equipment in 2018 versus 2017 primarily related to construction of DynaEnergetics' new
74,000
square foot manufacturing assembly and administrative space on its manufacturing campus in Blum, Texas.
Asset Impairments
Finite-lived assets are tested for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. We compare the expected undiscounted future operating cash flows associated with these finite-lived assets to their respective carrying values to determine if they are fully recoverable when indicators of impairment are present. If the expected future operating cash flows of an asset group are not sufficient to recover the related carrying value, we estimate the fair value of the asset. Impairment is recognized when the carrying amount of the asset group is not recoverable and when carrying value exceeds fair value. Long-lived assets to be disposed of, if any, are reported at the lower of carrying amount or fair value less cost to sell.
For the years ended December 31, 2018 and 2016, no impairments were recorded. For the year ended December 31, 2017, we recognized an impairment charge of approximately
$1,241
(recorded in restructuring expenses) associated with restructuring our NobelClad operations in France, related to assets used in the explosion cladding process. The fair value of applicable French assets upon which an impairment charge was taken was primarily based upon the utilization of a third-party appraiser.
Goodwill
Goodwill represents the excess of the purchase price in a business combination over the fair value of the net tangible and intangible assets acquired. The carrying value of goodwill is periodically reviewed for impairment (at a minimum annually) and whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Examples of such events or changes in circumstances, many of which are subjective in nature, include significant negative industry or economic trends, significant changes in the manner of our use of the acquired assets or our strategy, a significant decrease in the market value of the assets, and a significant change in legal factors or in the business climate that could affect the value of the assets.
As required under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 350, “Goodwill and Other Intangible Assets”, we routinely review the carrying value of our net assets, including goodwill, to determine if any impairment has occurred. In the third quarter of 2017, activity in NobelClad’s primary end markets slowed considerably. NobelClad experienced a significant decline in its small size core maintenance bookings within the oil and gas industry. Additionally, certain large petrochemical projects previously forecasted to ship in the next twelve months were delayed, and uncertainty existed as to the ultimate timing of booking and shipping these potential orders. As a result, we determined that a potential indicator of goodwill impairment existed during the third quarter of 2017. We utilized an income approach (discounted cash flow analysis) to determine the fair value of the NobelClad reporting unit and concluded that our long-term forecasts were not materializing and needed to be revised downward. The key assumptions used in the discounted cash flow analysis included, among other measures, expected future sales, operating income, working capital and capital expenditures. The discount rate was determined using a peer-based, risk-adjusted weighted average cost of capital.
During 2017, we determined that the estimated fair value of the NobelClad reporting unit was less than its carrying value primarily due to the factors described above and their related impact on expected future cash flows. During the third quarter of 2017, we adopted FASB accounting standards update ("ASU") 2017-04, which amends and simplifies how an entity measures a goodwill impairment loss by eliminating step two from the goodwill impairment test. As the carrying value of the NobelClad reporting unit exceeded the fair value by more than the book value of goodwill, we recorded an impairment charge of
$17,584
to fully impair all goodwill related to this reporting unit as of September 30, 2017.
No
impairment of goodwill was identified in connection with our 2016 annual goodwill impairment test as our estimated fair value exceeded the carrying value.
The changes to the carrying amount of goodwill at the NobelClad segment during the periods are summarized below.
|
|
|
|
|
|
|
Balance at December 31, 2016
|
$
|
16,097
|
|
Adjustment due to recognition of tax benefit of tax amortization of certain goodwill
|
(450
|
)
|
Adjustment due to exchange rate differences
|
1,937
|
|
Goodwill impairment
|
(17,584
|
)
|
Balance at December 31, 2017
|
—
|
|
Purchased Intangible Assets
Our purchased intangible assets include finite-lived core technology, customer relationships and trademarks/trade names. For purchased intangible assets, we performed an assessment of recoverability in accordance with the general valuation requirements set forth under ASC 360, “Accounting for the Impairment of Long-Lived Assets.” If impairment indicators are present, estimated undiscounted future cash flows associated with applicable assets or operations are compared with their carrying value to determine if a write-down to fair value is required. During the years ended December 31,
2018
,
2017
, and
2016
, we tested finite-lived intangibles for impairment, and found that the carrying amounts of assets at the lowest level of identifiable cash flows, in each case our reporting units, are fully recoverable.
Finite-lived intangible assets are amortized over the estimated useful life of the related assets which have a weighted average amortization period of
12
years in total. The weighted average amortization periods of the intangible assets by asset category are as follows:
|
|
|
Core technology
|
20 years
|
Customer relationships
|
9 years
|
Trademarks / Trade names
|
9 years
|
Our purchased intangible assets, other than goodwill, consisted of the following as of
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
Accumulated
Amortization
|
|
Net
|
Core technology
|
$
|
18,916
|
|
|
$
|
(10,866
|
)
|
|
$
|
8,050
|
|
Customer relationships
|
37,122
|
|
|
(36,583
|
)
|
|
539
|
|
Trademarks / Trade names
|
2,031
|
|
|
(2,031
|
)
|
|
—
|
|
Total intangible assets
|
$
|
58,069
|
|
|
$
|
(49,480
|
)
|
|
$
|
8,589
|
|
Our purchased intangible assets, other than goodwill, consisted of the following 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
December 31, 2018
was due to foreign currency translation and an adjustment due to 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 intangible assets related to the historical acquisition.
Expected future amortization of intangible assets is as follows:
|
|
|
|
|
For the years ended December 31 -
|
|
|
2019
|
$
|
1,396
|
|
2020
|
1,396
|
|
2021
|
1,050
|
|
2022
|
823
|
|
2023
|
823
|
|
Thereafter
|
3,101
|
|
|
$
|
8,589
|
|
Contract Liabilities
On occasion, we require customers to make advance payments prior to the shipment of their orders in order to help finance our inventory investment on large orders or to keep customers’ credit limits at acceptable levels. Contract liabilities (previously known as customer advances) were as follows at
December 31
:
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
NobelClad
|
$
|
922
|
|
|
$
|
5,804
|
|
DynaEnergetics
|
218
|
|
|
84
|
|
Total
|
$
|
1,140
|
|
|
$
|
5,888
|
|
We expect to recognize the revenue associated with contract liabilities over a time period no longer than one year. All of the
$5,888
recorded as contract liabilities at
December 31, 2017
, was recorded to net sales during the year ended
December 31, 2018
.
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’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.
Our rights to payments for goods transferred to customers arise when control is transferred at a point in 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 when we require customers to make advance payments prior to the shipment of their orders, we record a contract liability. We have determined that our contract liabilities 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 6
“Business Segments” for disaggregated revenue disclosures.
For the years ended
December 31, 2018
,
2017
and
2016
, we recorded
$282
,
$306
, and
$873
of 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 access to, the asset. No payment discounts, rebates, refunds, or any other forms of variable consideration are included within NobelClad 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 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.
Research and Development
Research and development costs include expenses associated with developing new products and processes as well as improvements to current manufacturing processes. Research and development costs are included in our cost of products sold and were as follows for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
DynaEnergetics research and development costs
|
$
|
5,932
|
|
|
$
|
4,335
|
|
|
$
|
3,990
|
|
NobelClad research and development costs
|
1,278
|
|
|
833
|
|
|
609
|
|
Total research and development costs
|
$
|
7,210
|
|
|
$
|
5,168
|
|
|
$
|
4,599
|
|
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.
EPS was calculated as follows for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Net income (loss) as reported
|
$
|
30,473
|
|
|
$
|
(18,853
|
)
|
|
$
|
(6,505
|
)
|
Less: Distributed net income available to participating securities
|
(27
|
)
|
|
—
|
|
|
—
|
|
Less: Undistributed net income available to participating securities
|
(666
|
)
|
|
—
|
|
|
—
|
|
Numerator for basic net income per share:
|
29,780
|
|
|
(18,853
|
)
|
|
(6,505
|
)
|
Add: Undistributed net income allocated to participating securities
|
666
|
|
|
—
|
|
|
—
|
|
Less: Undistributed net income reallocated to participating securities
|
(662
|
)
|
|
—
|
|
|
—
|
|
Numerator for diluted net income per share:
|
29,784
|
|
|
(18,853
|
)
|
|
(6,505
|
)
|
Denominator:
|
|
|
|
|
|
Weighted average shares outstanding for basic net income per share
|
14,529,745
|
|
|
14,346,851
|
|
|
14,126,108
|
|
Effect of dilutive securities
|
90,890
|
|
|
—
|
|
|
—
|
|
Weighted average shares outstanding for diluted net income per share
|
14,620,635
|
|
|
14,346,851
|
|
|
14,126,108
|
|
Net income (loss) per share:
|
|
|
|
|
|
Basic
|
$
|
2.05
|
|
|
$
|
(1.31
|
)
|
|
$
|
(0.46
|
)
|
Diluted
|
$
|
2.04
|
|
|
$
|
(1.31
|
)
|
|
$
|
(0.46
|
)
|
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, accounts receivable and payable, accrued expenses, revolving loans under our credit facility and borrowings under our capital expenditure facility approximate their fair value, and these are considered Level 1 assets and liabilities. Our foreign currency forward contracts are valued using quoted market prices or are determined using a yield curve model based on current market rates. As a result, we classify these investments as Level 2 in the fair value hierarchy.
We did not hold any Level 3 assets or liabilities as of
December 31, 2018
or
December 31, 2017
. The goodwill impairment charge recorded in the third quarter of 2017 was calculated using Level 3 inputs.
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, that 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 to be realized upon ultimate resolution. We recognize interest and penalties related to uncertain tax positions in operating expense.
See
Note 5
"Income Taxes" for more information on our income taxes, including discussion of the Tax Cuts and Jobs Act of 2017.
Concentration of Credit Risk and Off Balance Sheet Arrangements
Financial instruments, which potentially subject us to a concentration of credit risk, consist primarily of cash, cash equivalents, and accounts receivable. Generally, we do not require collateral to secure receivables. At
December 31, 2018
, we had no financial instruments with off-balance sheet risk of accounting losses.
Other Cumulative Comprehensive Loss
Other cumulative comprehensive loss as of
December 31, 2018
,
2017
, and
2016
consisted entirely of currency translation adjustments including those in intra-entity foreign currency transactions that are classified as long-term investments.
Recently Adopted Accounting Standards
On January 1, 2018, the Company adopted a new accounting standard, as amended, regarding revenue from contracts with customers using the modified retrospective approach. This standard provides guidance on recognizing revenue, including a five-step model to determine when revenue recognition is appropriate. The adoption of this standard did not have a material impact on the Company’s financial position and results of operations. Refer to
Note 6
"Business Segments" for the related additional disclosures.
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 Consolidated Balance Sheet of
$65
and
eliminated a
$65
prepaid income tax balance.
Recent Accounting Pronouncements
In February 2016, the FASB issued a new accounting pronouncement that requires lessees to record assets and liabilities on the balance sheet for lease-related rights and obligations and disclose key information about certain leasing arrangements. This new standard establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months.
Leases will be classified as financing or operating, with classification affecting the pattern of expense recognition in the Statement of Operations. The Company will adopt the new standard, including the related amendments, effective January 1,
2019 using the modified retrospective approach, applying the provisions of the new standard on its effective date.
Management has substantially completed its analysis and determined that the significant majority of its leasing arrangements will be classified as operating. Additionally, management has implemented new systems to facilitate the requirements of the new standard and estimates the ROU asset to be less than 5% of total assets on January 1, 2019.
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.
3. DEBT
Outstanding borrowings consisted of the following at December 31:
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Syndicated credit agreement:
|
|
|
|
|
|
U.S. Dollar revolving loan
|
$
|
17,128
|
|
|
$
|
18,250
|
|
Alternative currency revolving loan
|
—
|
|
|
—
|
|
Capital expenditure facility
|
25,000
|
|
|
—
|
|
Commerzbank line of credit
|
—
|
|
|
—
|
|
Outstanding borrowings
|
42,128
|
|
|
18,250
|
|
Less: debt issuance costs
|
(773
|
)
|
|
(266
|
)
|
Total debt
|
41,355
|
|
|
17,984
|
|
Less: current portion of long-term debt
|
(3,125
|
)
|
|
—
|
|
Long-term debt
|
$
|
38,230
|
|
|
$
|
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 has been used to assist in financing our DynaEnergetics manufacturing expansion project in Blum, Texas. The Capex Facility allowed 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 credit 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 limit 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 rate, an adjusted Federal Funds rate 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 revolving loan borrowings and repayments have been in the form of one month loans and are reported on a net basis in our 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%
). We did not make any borrowings during 2018 under the alternative currency sublimit.
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
December 31, 2018
, we were in compliance with all financial covenants and other provisions of our debt agreements.
As of
December 31, 2017
, we had a
$35,000
syndicated credit agreement 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.
Line of Credit with German Bank
We maintain a line of credit with a German bank for our NobelClad and DynaEnergetics operations in Europe. This line of credit provides a borrowing capacity of
€4,000
and is also used to issue bank guarantees to customers to secure advance payments made by them. As of
December 31, 2018
, we had
no
outstanding borrowings under this line of credit and bank guarantees of
$2,370
secured by the line of credit. The line of credit bears interest at a EURIBOR-based variable rate which at
December 31, 2018
was
3.33%
. The line of credit has open-ended terms and can be canceled by the bank at any time.
Debt Issuance Costs
Included in long-term debt are deferred debt issuance costs of
$773
and
$266
as of
December 31, 2018
and
2017
, respectively. Upon entering into the credit facility on March 8, 2018, we wrote off
$159
of previously deferred debt issuance costs and incurred
$821
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
$314
were 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.
4. STOCK OWNERSHIP AND BENEFIT PLANS
Our stock-based compensation expense results from restricted stock awards ("RSAs"), restricted stock units ("RSUs"), performance share units ("PSUs"), and stock issued under the Employee Stock Purchase Plan. The following table sets forth the total stock-based compensation expense included in the Consolidated Statements of Operations for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Cost of products sold
|
|
$
|
342
|
|
|
$
|
282
|
|
|
$
|
235
|
|
General and administrative expenses
|
|
2,862
|
|
|
2,337
|
|
|
1,755
|
|
Selling and distribution expenses
|
|
376
|
|
|
356
|
|
|
336
|
|
Restructuring expense
|
|
—
|
|
|
—
|
|
|
74
|
|
Stock-based compensation expense, net of income taxes
|
|
3,580
|
|
|
2,975
|
|
|
2,400
|
|
|
|
|
|
|
|
|
Earnings per share impact
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.25
|
|
|
$
|
0.21
|
|
|
$
|
0.17
|
|
Diluted
|
|
$
|
0.24
|
|
|
$
|
0.21
|
|
|
$
|
0.17
|
|
On November 4, 2016, our stockholders approved the 2016 Omnibus Incentive Plan (“2016 Plan”). The 2016 Plan provides for the granting of various types of equity-based incentives, including stock options, RSAs, RSUs, stock appreciation rights, performance shares, performance units, other stock-based awards, and cash-based awards. Our stockholders approved a total of
5,000,000
shares available for grant under the 2016 Plan, less the number of awards outstanding under the 2006 Stock Incentive Plan ("2006 Plan") on September 21, 2016, which was the expiration date of the 2006 Plan. As of September 21, 2016, we had granted RSAs and RSUs representing an aggregate of
1,639,881
shares of stock under the 2006 Plan, leaving
3,360,119
shares available for grant under the 2016 Plan. As of
December 31, 2018
, we have granted RSAs and RSUs representing an aggregate of
550,275
shares of stock under the 2016 Plan, and
2,809,844
shares are available for future grant.
RSAs and RSUs are granted to employees and non-employee directors based on time-vesting. For RSAs or RSUs granted to employees, vesting occurs in one-third increments on the first, second, and third anniversary of the grant date. For RSAs or RSUs granted to non-employee directors, vesting occurs on the first anniversary of the grant date. Each RSA represents a restricted share that has voting and dividend rights and becomes fully unrestricted upon vesting. Each RSU represents the right to receive
one
share of stock upon vesting.
The fair value of RSAs and RSUs granted to employees and non-employee directors is based on the fair value of DMC’s stock on the grant date. RSAs and RSUs granted to employees and non-employee directors are amortized to compensation expense over the vesting period on a straight-line basis. Our policy is to recognize forfeitures of RSAs and RSUs as they occur.
PSUs are granted to employees with vesting based on performance and market conditions. Each PSU represents the right to receive
one
share of stock upon the achievement of two separate, equally-weighted performance conditions - the
achievement of a targeted Adjusted EBITDA goal and total shareholder return ("TSR") performance relative to a disclosed peer group. A target number of PSUs is awarded on the grant date, and the recipient is eligible to earn shares of common stock between
0%
and
200%
of the number of targeted PSUs awarded. The PSUs earned, if any, cliff vest at the end of the third year following the year of grant based on the degree of satisfaction of the PSUs performance and market conditions.
The fair value of PSUs with target Adjusted EBITDA performance conditions is based on the fair value of DMC’s stock on the grant date, and the value is amortized to compensation expense over the vesting period based on the relative satisfaction of the performance condition to date. The fair value of PSUs with TSR performance conditions is based on a third-party valuation simulating a range of possible TSR outcomes over the performance period, and the resulting fair value is amortized to compensation expense over the vesting period based on a straight-line basis. Our policy is to recognize forfeitures of PSUs as they occur.
A summary of the activity of our nonvested shares of RSAs issued under the 2016 Plan is as follows:
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted Average
Grant Date
Fair Value
|
Balance at December 31, 2016
|
|
—
|
|
|
$
|
—
|
|
Granted
|
|
260,095
|
|
|
15.27
|
|
Vested
|
|
(4,027
|
)
|
|
13.05
|
|
Forfeited
|
|
—
|
|
|
—
|
|
Balance at December 31, 2017
|
|
256,068
|
|
|
$
|
15.31
|
|
Granted
|
|
102,817
|
|
|
25.11
|
|
Vested
|
|
(63,288
|
)
|
|
14.89
|
|
Forfeited
|
|
(5,666
|
)
|
|
19.26
|
|
Balance at December 31, 2018
|
|
289,931
|
|
|
$
|
18.81
|
|
A summary of the activity of our nonvested shares of RSAs issued under the 2006 Plan is as follows:
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted Average
Grant Date
Fair Value
|
Balance at December 31, 2015
|
|
241,687
|
|
|
$
|
19.55
|
|
Granted
|
|
228,532
|
|
|
8.07
|
|
Vested
|
|
(144,008
|
)
|
|
15.08
|
|
Forfeited
|
|
(42,634
|
)
|
|
10.82
|
|
Balance at December 31, 2016
|
|
283,577
|
|
|
$
|
13.88
|
|
Granted
|
|
—
|
|
|
—
|
|
Vested
|
|
(130,547
|
)
|
|
12.41
|
|
Forfeited
|
|
—
|
|
|
—
|
|
Balance at December 31, 2017
|
|
153,030
|
|
|
$
|
15.14
|
|
Granted
|
|
—
|
|
|
—
|
|
Vested
|
|
(71,223
|
)
|
|
10.03
|
|
Forfeited
|
|
(18,772
|
)
|
|
8.40
|
|
Balance at December 31, 2018
|
|
63,035
|
|
|
$
|
22.91
|
|
A summary of the activity of our nonvested RSUs issued under the 2016 Plan is as follows:
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted Average
Grant Date
Fair Value
|
Balance at December 31, 2016
|
|
—
|
|
|
$
|
—
|
|
Granted
|
|
73,000
|
|
|
15.62
|
|
Vested
|
|
—
|
|
|
—
|
|
Forfeited
|
|
(500
|
)
|
|
15.60
|
|
Balance at December 31, 2017
|
|
72,500
|
|
|
$
|
15.62
|
|
Granted
|
|
36,000
|
|
|
21.88
|
|
Vested
|
|
(13,175
|
)
|
|
15.61
|
|
Forfeited
|
|
—
|
|
|
—
|
|
Balance at December 31, 2018
|
|
95,325
|
|
|
$
|
17.99
|
|
A summary of the activity of our nonvested RSUs issued under the 2006 Plan is as follows:
|
|
|
|
|
|
|
|
|
|
|
Share
Units
|
|
Weighted Average
Grant Date
Fair Value
|
Balance at December 31, 2015
|
|
87,162
|
|
|
$
|
18.33
|
|
Granted
|
|
48,855
|
|
|
6.88
|
|
Vested
|
|
(40,836
|
)
|
|
16.24
|
|
Forfeited
|
|
—
|
|
|
—
|
|
Balance at December 31, 2016
|
|
95,181
|
|
|
$
|
13.35
|
|
Granted
|
|
—
|
|
|
—
|
|
Vested
|
|
(36,450
|
)
|
|
13.30
|
|
Forfeited
|
|
(333
|
)
|
|
6.22
|
|
Balance at December 31, 2017
|
|
58,398
|
|
|
$
|
13.42
|
|
Granted
|
|
—
|
|
|
—
|
|
Vested
|
|
(32,069
|
)
|
|
10.74
|
|
Forfeited
|
|
—
|
|
|
—
|
|
Balance at December 31, 2018
|
|
26,329
|
|
|
$
|
16.69
|
|
A summary of the activity of our nonvested PSUs issued under the 2016 Plan is as follows:
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted Average
Grant Date
Fair Value
|
Balance at December 31, 2016
|
|
—
|
|
|
$
|
—
|
|
Granted
|
|
23,000
|
|
|
18.18
|
|
Vested
|
|
—
|
|
|
—
|
|
Forfeited
|
|
—
|
|
|
—
|
|
Balance at December 31, 2017
|
|
23,000
|
|
|
$
|
18.18
|
|
Granted
|
|
23,000
|
|
|
26.47
|
|
Vested
|
|
—
|
|
|
—
|
|
Forfeited
|
|
—
|
|
|
—
|
|
Balance at December 31, 2018
|
|
46,000
|
|
|
$
|
22.32
|
|
As of
December 31, 2018
, total unrecognized stock-based compensation related to unvested awards was as follows:
|
|
|
|
|
|
|
|
|
|
Unrecognized stock compensation
|
|
Weighted-average recognition period
|
Unvested RSAs
|
|
$
|
3,659
|
|
|
2.1 years
|
Unvested RSUs
|
|
1,009
|
|
|
1.8 years
|
Unvested PSUs
|
|
853
|
|
|
1.6 years
|
Employee Stock Purchase Plan
We have an Employee Stock Purchase Plan (“ESPP”) pursuant to which we are authorized to issue up to
850,000
shares of DMC common stock of which
241,365
shares remain available for future purchase as of
December 31, 2018
. The offerings begin on the first day following each previous offering (“Offering Date”) and end six months from the Offering Date (“Purchase Date”). The ESPP provides that full time employees may authorize DMC to withhold up to
15%
of their earnings, subject to certain limitations, to be used to purchase stock at the lesser of
85%
of the fair market value of the stock on the Offering Date or the Purchase Date. In connection with the ESPP,
18,100
,
26,519
, and
45,888
shares of our stock were purchased during the years ended
December 31, 2018
,
2017
, and
2016
, respectively. Our total stock-based compensation expense for
2018
,
2017
, and
2016
includes
$121
,
$92
, and
$54
respectively, in compensation expense associated with the ESPP.
401(k) Plan
We offer a contributory 401(k) plan to our employees. We make matching contributions equal to
100%
of each employee’s contribution up to
3%
of qualified compensation and
50%
of the next
2%
of qualified compensation contributed by each employee. Total DMC contributions were
$828
,
$511
, and
$455
for the years ended
December 31, 2018
,
2017
and
2016
, respectively.
Defined Benefit Plans
We have defined benefit pension plans at certain foreign subsidiaries for which we have recorded an unfunded pension obligation of
$1,708
and
$1,374
as of
December 31, 2018
and
2017
, respectively, which is included in other long-term liabilities in the Consolidated Balance Sheets. All necessary adjustments to the obligation are based upon actuarial calculations and are recorded directly to the Consolidated Statements of Operations. We recognized expense of
$406
,
$10
and
$235
(recorded in general and administrative expenses) for the years ended
December 31, 2018
,
2017
and
2016
, respectively.
5. INCOME TAXES
The domestic and foreign components of income (loss) before taxes for our operations consist of the following for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Domestic
|
|
$
|
9,399
|
|
|
$
|
(5,942
|
)
|
|
$
|
(4,346
|
)
|
Foreign
|
|
25,208
|
|
|
(9,342
|
)
|
|
(1,362
|
)
|
|
|
|
|
|
|
|
Total income (loss) before income taxes
|
|
$
|
34,607
|
|
|
$
|
(15,284
|
)
|
|
$
|
(5,708
|
)
|
The components of the provision (benefit) for income taxes consist of the following for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Current – Federal
|
|
$
|
444
|
|
|
$
|
946
|
|
|
$
|
(888
|
)
|
Current – State
|
|
371
|
|
|
91
|
|
|
55
|
|
Current – Foreign
|
|
6,972
|
|
|
3,088
|
|
|
1,914
|
|
|
|
|
|
|
|
|
Current income tax expense
|
|
7,787
|
|
|
4,125
|
|
|
1,081
|
|
|
|
|
|
|
|
|
Deferred – Federal
|
|
98
|
|
|
(393
|
)
|
|
—
|
|
Deferred – State
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
Deferred -– Foreign
|
|
(3,751
|
)
|
|
(158
|
)
|
|
(284
|
)
|
|
|
|
|
|
|
|
Deferred income tax benefit
|
|
(3,653
|
)
|
|
(556
|
)
|
|
(284
|
)
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
4,134
|
|
|
$
|
3,569
|
|
|
$
|
797
|
|
Our deferred tax assets and liabilities consist of the following at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Deferred tax assets:
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
8,843
|
|
|
$
|
10,144
|
|
Inventory differences
|
|
695
|
|
|
570
|
|
Equity compensation
|
|
952
|
|
|
591
|
|
Investment in subsidiaries
|
|
2,861
|
|
|
3,514
|
|
Restructuring
|
|
12
|
|
|
1,389
|
|
Purchased goodwill
|
|
2,516
|
|
|
3,331
|
|
Accrued employee compensation and benefits
|
|
1,459
|
|
|
979
|
|
Other, net
|
|
57
|
|
|
144
|
|
Gross deferred tax assets
|
|
17,395
|
|
|
20,662
|
|
Less valuation allowances
|
|
(9,143
|
)
|
|
(18,063
|
)
|
Total deferred tax assets
|
|
8,252
|
|
|
2,599
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
Purchased intangible assets and goodwill
|
|
(1,566
|
)
|
|
(2,644
|
)
|
Depreciation and amortization
|
|
(2,783
|
)
|
|
(267
|
)
|
Other, net
|
|
(281
|
)
|
|
(163
|
)
|
Total deferred tax liabilities
|
|
(4,630
|
)
|
|
(3,074
|
)
|
|
|
|
|
|
Net deferred tax assets (liabilities)
|
|
$
|
3,622
|
|
|
$
|
(475
|
)
|
As of
December 31, 2018
, we had loss carryforwards for tax purposes totaling approximately
$55,062
, comprised of
$51,477
foreign and
$3,585
domestic state loss carryforwards, which will be available to offset future taxable income in certain jurisdictions. Certain losses can be carried forward indefinitely, while the remainder generally have carryforward periods of 5 to 20 years, depending on jurisdiction. We have analyzed the net operating losses and placed valuation allowances on those where we have determined the realization is not more likely than not to occur.
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 December 31,
2017
, the Company was in a consolidated three-year cumulative loss position. Accordingly, we evaluated the impact on all jurisdictions and have recorded a valuation allowance against the corresponding net deferred tax assets as of December 31,
2017
. At December 31, 2018, the Company was no longer in a consolidated three-year cumulative loss position. Accordingly,
we have evaluated deferred tax assets at the jurisdictional level and have released valuation allowances of
$5,818
in jurisdictions where we believe sufficient future taxable income will be generated to use existing deferred tax assets. We continue to record valuation allowances against deferred tax assets where we do not believe sufficient future taxable income will be generated to use existing deferred tax assets. The amount of the deferred tax assets considered realizable, however, could be adjusted in future periods if positive evidence such as current and expected future taxable income outweighs negative evidence.
A reconciliation of our income tax provision computed by applying the Federal statutory income tax rate of
21%
in 2018 and 35% in 2017 and 2016 to income before taxes is as follows for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Statutory U.S. federal income tax
|
|
$
|
7,268
|
|
|
$
|
(5,350
|
)
|
|
$
|
(1,998
|
)
|
U.S. state income tax, net of federal benefit
|
|
430
|
|
|
305
|
|
|
(158
|
)
|
U.S. TCJA - net impact
|
|
(604
|
)
|
|
4,435
|
|
|
—
|
|
Foreign rate differential
|
|
3,054
|
|
|
(1,728
|
)
|
|
164
|
|
Tax audit adjustments
|
|
(11
|
)
|
|
426
|
|
|
—
|
|
Equity compensation
|
|
(156
|
)
|
|
(52
|
)
|
|
339
|
|
Deemed repatriation of foreign earnings
|
|
281
|
|
|
—
|
|
|
—
|
|
Impairment of goodwill
|
|
—
|
|
|
239
|
|
|
—
|
|
Non-deductible penalties
|
|
1,686
|
|
|
1
|
|
|
—
|
|
Other
|
|
1,046
|
|
|
(95
|
)
|
|
97
|
|
Change in valuation allowances
|
|
(8,860
|
)
|
|
5,388
|
|
|
2,353
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
4,134
|
|
|
$
|
3,569
|
|
|
$
|
797
|
|
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 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, we have completed our accounting for the tax effects of enactment of the Act as further described below.
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 determined, 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 ("IRS") and to
$343
in the third quarter of 2018 upon completion of certain E&P calculations. There were no additional changes in the fourth quarter of 2018 to the amount previously calculated. The Company has elected to pay this liability over eight years. A payment of
$76
was made during the second quarter of 2018. As of
December 31, 2018
, we reflected
$267
in other long term liabilities.
In 2017, we performed a one-time remeasurement of certain deferred tax assets and liabilities based on the rates at which they were expected to reverse, generally 21% under the TCJA. As our U.S. deferred tax assets were 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.
Current year expense related to global intangible low-taxed income (“GILTI”) is included in Federal tax expense for the year ended December 31, 2018. Proposed regulations related to GILTI and the related foreign tax credits were released in 2018, and more guidance is expected to be released in 2019. We have calculated 2018 GILTI expense of
$179
based on our interpretation of the statute with the information currently available. This amount may change when final guidance is issued by the IRS. We have elected to account for GILTI as period costs if and when incurred.
DMC files income tax returns in the U.S. federal jurisdiction, as well as various U.S. state and foreign jurisdictions. In the U.S., tax audits for the years 2012 through 2015 were closed during the second quarter of 2017, and no adjustments to the Company's tax provisions were proposed. In the spring of 2016, German tax authorities commenced an examination of the tax returns of our German subsidiaries for the 2011 through 2014 tax years. During 2017, German tax authorities proposed and we agreed to a settlement, with related assessments paid in 2018. The key provisions of the settlement resulted in increases to income related to various transfer pricing matters. We recorded an additional
$251
in income tax expense and
$41
of interest in 2017 to reflect these adjustments and the impact of these adjustments. German tax authorities have announced that an examination of the tax returns of our German subsidiaries for the 2015 through 2017 tax years will commence in 2019.
Most of DMC’s state tax returns remain open to examination for the tax years 2014 onward. DMC’s foreign tax returns generally remain open to examination for the tax years 2014 onward, depending on jurisdiction.
At
December 31, 2018
and
2017
, the balance of unrecognized tax benefits was
zero
. We recognize interest and penalties related to uncertain tax positions in operating expense. As of
December 31, 2018
and
2017
, our accrual for interest and penalties related to uncertain tax positions was
zero
.
The TCJA also provides that the repatriation to the U.S. of foreign earnings can be done without federal tax consequence. We have reassessed the assertion that cumulative earnings by our foreign subsidiaries are indefinitely reinvested. We continue to permanently reinvest the earnings of our international subsidiaries and therefore we do not provide for U.S. income taxes or withholding taxes that could result from the distribution of those earnings to the U.S. parent. If any such earnings were ultimately distributed to the U.S. in the form of dividends or otherwise, or if the shares of our international subsidiaries were sold or transferred, we could be subject to additional U.S. state income taxes. Due to the multiple avenues in which earnings can be repatriated, and because a large portion of these earnings are not liquid, it is not practical to estimate the amount of additional taxes that might be payable on these amounts of undistributed foreign income.
6. BUSINESS SEGMENTS
Our business is organized in the following
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.
The accounting policies of both segments are the same as those described in the summary of significant accounting policies. 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 as of and for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Net sales:
|
|
|
|
|
|
DynaEnergetics
|
$
|
237,448
|
|
|
$
|
121,253
|
|
|
$
|
67,290
|
|
NobelClad
|
$
|
88,981
|
|
|
$
|
71,550
|
|
|
$
|
91,285
|
|
Net sales
|
$
|
326,429
|
|
|
$
|
192,803
|
|
|
$
|
158,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Operating income (loss):
|
|
|
|
|
|
DynaEnergetics
|
44,476
|
|
|
15,470
|
|
|
(5,381
|
)
|
NobelClad
|
$
|
6,499
|
|
|
$
|
(17,360
|
)
|
|
$
|
8,878
|
|
Segment operating income (loss)
|
50,975
|
|
|
(1,890
|
)
|
|
3,497
|
|
|
|
|
|
|
|
Unallocated corporate expenses
|
(9,971
|
)
|
|
(7,395
|
)
|
|
(6,371
|
)
|
Stock-based compensation
|
(3,580
|
)
|
|
(2,975
|
)
|
|
(2,400
|
)
|
Other income (expense), net
|
(1,202
|
)
|
|
(1,376
|
)
|
|
633
|
|
Interest expense
|
(1,620
|
)
|
|
(1,651
|
)
|
|
(1,070
|
)
|
Interest income
|
5
|
|
|
3
|
|
|
3
|
|
Income (loss) before income taxes
|
$
|
34,607
|
|
|
$
|
(15,284
|
)
|
|
$
|
(5,708
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Depreciation and Amortization:
|
|
|
|
|
|
DynaEnergetics
|
6,308
|
|
|
6,879
|
|
|
6,768
|
|
NobelClad
|
$
|
3,212
|
|
|
$
|
3,687
|
|
|
$
|
3,999
|
|
Segment depreciation and amortization
|
$
|
9,520
|
|
|
$
|
10,566
|
|
|
$
|
10,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Acquisition of property, plant and equipment
|
|
|
|
|
|
DynaEnergetics
|
41,041
|
|
|
4,025
|
|
|
4,448
|
|
NobelClad
|
$
|
2,281
|
|
|
$
|
1,584
|
|
|
$
|
1,217
|
|
Segment acquisition of property, plant and equipment
|
43,322
|
|
|
5,609
|
|
|
5,665
|
|
Corporate and other
|
1,773
|
|
|
577
|
|
|
54
|
|
Consolidated acquisition of property, plant and equipment
|
$
|
45,095
|
|
|
$
|
6,186
|
|
|
$
|
5,719
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Assets:
|
|
|
|
DynaEnergetics
|
151,001
|
|
|
98,640
|
|
NobelClad
|
$
|
59,831
|
|
|
$
|
57,906
|
|
Segment assets
|
210,832
|
|
|
156,546
|
|
|
|
|
|
Cash and cash equivalents
|
13,375
|
|
|
8,983
|
|
Prepaid expenses and other assets
|
8,530
|
|
|
6,058
|
|
Deferred tax assets
|
4,001
|
|
|
98
|
|
Corporate property, plant and equipment
|
3,680
|
|
|
1,398
|
|
Consolidated assets
|
$
|
240,418
|
|
|
$
|
173,083
|
|
The geographic location of our property, plant and equipment, net of accumulated depreciation, is as follows at December 31:
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
United States
|
$
|
59,862
|
|
|
$
|
23,620
|
|
Germany
|
27,442
|
|
|
25,876
|
|
Russia
|
7,256
|
|
|
9,323
|
|
France
|
377
|
|
|
837
|
|
Kazakhstan
|
—
|
|
|
15
|
|
Canada
|
198
|
|
|
193
|
|
Rest of the world
|
5
|
|
|
8
|
|
Total
|
$
|
95,140
|
|
|
$
|
59,872
|
|
All of our sales are from products shipped from our manufacturing facilities and distribution centers located in the United States, Germany, Canada, and Russia. The following represents our net sales based on the geographic location of the customer for years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31,
|
|
2018
|
|
2017
|
|
2016
|
United States
|
$
|
221,847
|
|
|
$
|
116,083
|
|
|
$
|
78,999
|
|
Canada
|
30,126
|
|
|
23,377
|
|
|
16,021
|
|
United Arab Emirates
|
4,093
|
|
|
1,768
|
|
|
7,449
|
|
France
|
4,581
|
|
|
3,032
|
|
|
3,744
|
|
South Korea
|
2,263
|
|
|
1,173
|
|
|
1,690
|
|
Germany
|
4,067
|
|
|
5,397
|
|
|
5,979
|
|
Russia
|
4,117
|
|
|
4,504
|
|
|
3,731
|
|
India
|
4,291
|
|
|
2,927
|
|
|
5,066
|
|
Egypt
|
2,419
|
|
|
2,721
|
|
|
1,942
|
|
Spain
|
1,083
|
|
|
1,126
|
|
|
1,500
|
|
Iraq
|
314
|
|
|
77
|
|
|
13
|
|
China
|
12,503
|
|
|
3,673
|
|
|
7,012
|
|
Italy
|
1,730
|
|
|
1,582
|
|
|
2,577
|
|
Hong Kong
|
496
|
|
|
255
|
|
|
699
|
|
Sweden
|
2,339
|
|
|
2,009
|
|
|
2,124
|
|
Rest of the world
|
30,160
|
|
|
23,099
|
|
|
20,029
|
|
Total
|
$
|
326,429
|
|
|
$
|
192,803
|
|
|
$
|
158,575
|
|
During the years ended
December 31, 2018
and
2016
,
no
single customer accounted for more than 10% of total net sales. During the year ended
December 31, 2017
,
one
customer in our DynaEnergetics segment was responsible for approximately 10% of total net sales.
7. DERIVATIVES
We are exposed to foreign currency exchange risk resulting from fluctuations in exchange rates, primarily the U.S. dollar to the euro, the U.S. dollar to the 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. During the third quarter of 2017, we began using 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 income (expense), net" within our 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, and thus 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
December 31, 2018
and
2017
, the notional amounts of the forward currency contracts the Company held were
$7,008
and
$20,291
, respectively. At
December 31, 2018
and
2017
, the fair values of outstanding foreign currency forward contracts were
$0
and
$79
, respectively, and were recorded in accrued expenses.
The gain or loss recognized on derivatives is as follows for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type
|
|
Income Statement Location
|
|
2018
|
|
2017
|
|
2016
|
Foreign currency contracts
|
|
Other income (expense), net
|
|
$
|
(77
|
)
|
|
$
|
(157
|
)
|
|
$
|
—
|
|
8. 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 for our position that 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 duties.
In August 2015, we posted bonds of approximately
$1,100
to U.S. Customs. Subsequently, U.S. Customs declined to conclude that the mechanical tubing the Company had been importing was 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, and during the quarter ended September 30, 2018, the Company paid the remaining accrued AD/CVD and interest of
$3,461
to U.S. Customs.
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. In its financial statements for the quarter ended September 30, 2018, the Company accrued an additional
$4,897
of penalties. On December 7, 2018, we submitted a supplemental petition requesting a waiver of the penalty under the Small Business Regulatory Enforcement Act in lieu of tendering the penalty amount. We expect to receive a response to this waiver request by the end of the first quarter of 2019.
Patent and Trademark Infringement
On April 28, 2017, 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 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 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”). 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.
On September 27, 2017, DynaEnergetics 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 in November 2017.
On November 9, 2018, DynaEnergetics entered into a global settlement agreement with GEODynamics, which resolves all outstanding claims and legal disputes between the parties concerning reactive shaped charge technology. All actions in the UK and Germany and other related actions have been dismissed. The settlement had no negative financial impact on DynaEnergetics.
Operating Leases and License Agreements
We lease certain office space, equipment, storage space, vehicles and other equipment under various non-cancelable lease agreements. Additionally, during 2008, we entered into a license agreement and a risk allocation agreement related to our U.S. NobelClad business. These agreements, which were amended in 2018, provide us with the ability to perform our explosive shooting process at a second shooting site in Pennsylvania.
Future minimum commitments under are as follows:
|
|
|
|
|
|
|
|
|
For the years ended December 31 -
|
Operating Leases
|
|
License and Risk Allocation Agreements
|
2019
|
$
|
2,234
|
|
|
$
|
300
|
|
2020
|
1,724
|
|
|
300
|
|
2021
|
969
|
|
|
300
|
|
2022
|
685
|
|
|
300
|
|
2023
|
214
|
|
|
300
|
|
Thereafter
|
210
|
|
|
1,275
|
|
Total minimum payments
|
$
|
6,036
|
|
|
$
|
2,775
|
|
Total rental expense included in continuing operations was
$2,840
,
$2,988
, and
$2,510
for the years ended
December 31, 2018
,
2017
, and
2016
, respectively.
9. RESTRUCTURING
NobelClad
During the fourth quarter of 2017, NobelClad announced plans to consolidate its European production facilities by closing
manufacturing operations in France
. During the third quarter of 2018, final approval of the proposed measures was granted by the local workers council, in accordance with applicable French law. NobelClad completed the closure of the Rivesaltes production facility in the fourth quarter of 2018, but will maintain its sales and administrative office in France. NobelClad has entered into a sales agreement with a buyer for the manufacturing plant, and the sale is expected to close during the first quarter of 2019. Except for the sale of the manufacturing plant, the restructuring activities, including severance, equipment moving, legal fees and contract termination were completed as of December 31, 2018.
DynaEnergetics
In 2017, DynaEnergetics announced the closure of its operations in Kazakhstan after legislative changes increased our costs to do business while the overall sales in Kazakhstan were not significant to our results. In conjunction with the announcement, we recorded severance expense, wrote off remaining receivables, prepaid assets, and inventory, recorded an asset impairment to reduce the fixed assets to their salable value, and recorded within the Consolidated Statements of Operations foreign exchange losses that had previously been recorded within the Consolidated Balance Sheets through currency translation adjustments, due to the substantial liquidation of the entity.
In 2016, DynaEnergetics reduced headcount
in Troisdorf, Germany and Austin, Texas,
consolidated administrative offices to Houston, Texas and wrote-off certain assets after relocating perforating gun manufacturing operations from the previous leased facility in Troisdorf, Germany to the new facility in Liebenscheid, Germany.
Corporate Restructuring
In conjunction with the cost reductions announced in 2016, we eliminated certain positions and incurred restructuring charges associated with the accelerated vesting of stock awards.
Total restructuring charges incurred for these programs are as follows and are reported in the Restructuring expenses line item in our Consolidated Statements of Operations for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
Severance
|
|
Contract Termination Costs
|
|
Equipment Moving Costs
|
|
Other Exit Costs
|
|
Total
|
NobelClad
|
$
|
637
|
|
|
$
|
43
|
|
|
$
|
249
|
|
|
$
|
185
|
|
|
$
|
1,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
Severance
|
|
Asset Impairment
|
|
Other Exit Costs
|
|
Total
|
NobelClad
|
$
|
2,513
|
|
|
$
|
1,241
|
|
|
$
|
71
|
|
|
$
|
3,825
|
|
DynaEnergetics
|
$
|
20
|
|
|
$
|
143
|
|
|
$
|
295
|
|
|
$
|
458
|
|
Total
|
$
|
2,533
|
|
|
$
|
1,384
|
|
|
$
|
366
|
|
|
$
|
4,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
Severance
|
|
Contract Termination Costs
|
|
Equipment Moving Costs
|
|
Other Exit Costs
|
|
Total
|
DynaEnergetics
|
684
|
|
|
386
|
|
|
15
|
|
|
43
|
|
|
1,128
|
|
Corporate
|
74
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
74
|
|
Total
|
$
|
758
|
|
|
$
|
386
|
|
|
$
|
15
|
|
|
$
|
43
|
|
|
$
|
1,202
|
|
The changes to the restructuring liability within accrued expenses associated with these programs is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
Expense
|
|
Payments
|
|
Currency and Other Adjustments
|
|
December 31, 2018
|
Severance
|
$
|
2,568
|
|
|
$
|
637
|
|
|
$
|
(1,980
|
)
|
|
$
|
(120
|
)
|
|
$
|
1,105
|
|
Contract termination costs
|
—
|
|
|
43
|
|
|
(43
|
)
|
|
—
|
|
|
—
|
|
Equipment moving costs
|
—
|
|
|
249
|
|
|
(241
|
)
|
|
—
|
|
|
8
|
|
Other exit costs
|
10
|
|
|
185
|
|
|
(153
|
)
|
|
—
|
|
|
42
|
|
Total
|
$
|
2,578
|
|
|
$
|
1,114
|
|
|
$
|
(2,417
|
)
|
|
$
|
(120
|
)
|
|
$
|
1,155
|
|
10. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected unaudited quarterly financial data were as follows for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
Quarter ended March 31,
|
|
Quarter ended June 30,
|
|
Quarter ended September 30,
|
|
Quarter ended December 31,
|
Net sales
|
|
$
|
67,313
|
|
|
$
|
80,915
|
|
|
$
|
87,883
|
|
|
$
|
90,318
|
|
Gross profit
|
|
$
|
22,753
|
|
|
$
|
26,775
|
|
|
$
|
29,728
|
|
|
$
|
31,439
|
|
Net income
|
|
$
|
3,920
|
|
|
$
|
6,372
|
|
|
$
|
4,910
|
|
|
$
|
15,271
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.26
|
|
|
$
|
0.43
|
|
|
$
|
0.33
|
|
|
$
|
1.02
|
|
Diluted
|
|
$
|
0.26
|
|
|
$
|
0.43
|
|
|
$
|
0.33
|
|
|
$
|
1.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
Quarter ended March 31,
|
|
Quarter ended June 30,
|
|
Quarter ended September 30,
|
|
Quarter ended December 31,
|
Net sales
|
|
$
|
38,962
|
|
|
$
|
47,190
|
|
|
$
|
52,161
|
|
|
$
|
54,490
|
|
Gross profit
|
|
$
|
10,366
|
|
|
$
|
14,018
|
|
|
$
|
17,162
|
|
|
$
|
17,845
|
|
Net income (loss)
|
|
$
|
(3,020
|
)
|
|
$
|
189
|
|
|
$
|
(14,064
|
)
|
|
$
|
(1,958
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.21
|
)
|
|
$
|
0.01
|
|
|
$
|
(0.98
|
)
|
|
$
|
(0.13
|
)
|
Diluted
|
|
$
|
(0.21
|
)
|
|
$
|
0.01
|
|
|
$
|
(0.98
|
)
|
|
$
|
(0.13
|
)
|