Dynamic Materials - November 2014 Investor Relations Presentation

© 2014 DMC. All rights reserved. INGENUITY IN ACTION.

Investor Presentation November 2014

DMCGlobal.com 2014 Investor Presentation

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

2

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

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CHAPTER 1

2014 Investor Presentation 3

DMC Overview DMC Overview

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DMC is a growth company focused on building a family of technical product and process businesses for the global energy, industrial and infrastructure markets. We serve a network of industrial customers through a family of technical businesses that currently is comprised of NobelClad and DynaEnergetics. The DMC family consists of a global network of production facilities and sales and distribution centers. Our global footprint is critical to successfully meeting the demands of our customer base.


OUR STORY

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SELECT DATA


Symbol (Nasdaq GS):

52-week price range:

Average daily volume:

Market capitalization:

Shares outstanding:

Approximate float:

Fiscal year:

Quarterly dividend:

Revenue (ttm):

Adjusted EBITDA (ttm)

BOOM

$15.91 - $24.00

48,000

$241 Million

13.9 Million

13.0 Million

December 31

$0.04

$199.9 Million

$28.4 Million

BOOM 1-Year Price & Volume

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* Reflects approximately $5.6 million in non-recurring expenses ** Reflects approximately $1.2 million in tax benefits recognized during the first quarter

2014 Investor Presentation

FINANCIAL HIGHLIGHTS

6

$ in millions Year-end numbers

9-month numbers

**

*

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DMC’S SECTOR FOCUS


BUSINESSES

SECTORS Industrial and Infrastructure Energy

DESCRIPTION

SOLUTIONS FOCUS

Explosive Metalworking Perforating Components & Systems

Products and technical processes that support industrial and infrastructure markets.

Consumables, products and systems that support the global oil and gas industry.

PRODUCTS/SERVICES

Synthetic Diamond Manufacturing

•  Plates •  Heads •  Rolled & Tacked Cylinders •  Tubesheets •  Transition Joints •  Cylindricals •  Fabricated Components

•  Perforating Guns •  Explosive Shaped Charges •  Detonating Cords •  Detonators •  Explosive Control Systems

•  Industrial Diamonds

NobelClad DynaEnergetics

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$115.3 (57%)

2013 REVENUE BY BUSINESS


NobelClad

DynaEnergetics

$ in millions

$118.4 (59%)

$83.7 (41%)

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CHAPTER 2


Opportunity

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BUSINESS OPPORTUNITY

10

DMC companies serve the world’s multi-trillion dollar industrial, infrastructure and energy industries, which are addressing major capital investments in both established and emerging markets. In North America, a resurgence in oil and gas production and a renewed focus on chemical processing capacity are creating considerable opportunities for each of DMC’s businesses. In the world’s emerging markets, demand for energy and modern industrial processing infrastructure is also leading to compelling growth prospects for DMC and its family of specialized product and process businesses.


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CHAPTER 3


Leadership Team

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EXECUTIVE LEADERSHIP


KEVIN LONGE

•  Named President, CEO and Director in March 2013

•  Joined DMC as Chief Operating Officer in July 2012

•  Former VP and and GM of Sonoco's $600 million Protective Packaging division

•  Former President of Sonoco's ThermoSafe Brands

•  Oversaw global sales, marketing, engineering and R&D for the life sciences, medical, food and industrial durables markets

•  Oversaw eight manufacturing centers in the U.S., Europe and Asia

•  Former President of three operating divisions at Lydall, Inc. (NYSE-LDL)

RICHARD SANTA

•  Named Senior Vice President, Business Development in March 2014

•  Served as DMC’s Sr. VP, Chief Financial Officer and Secretary from 2008 to 2014

•  Joined DMC as Vice President, Chief Financial Officer and Secretary in October 1996

•  Responsible for integration of seven acquisitions while at DMC

•  Former Chief Financial Officer of Scott USA, a sports equipment manufacturer and distributor

•  Former senior manager with Price Waterhouse

President & CEO, DMC Sr. VP, DMC MICHAEL KUTA

•  Joined DMC as Chief Financial Officer in March 2014

•  Former Corporate Controller at Berkshire Hathaway’s Lubrizol Corporation, a global, $6 billion specialty chemicals company

•  Was responsible for building and managing financial operations for Lubrizol’s disbursed global operations, including accounting, consolidation and financial reporting functions, and oversight of internal controls

•  Former financial positions of increasing responsibility at Lincoln Electric and Eaton Corporation

CFO, DMC

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LEADERSHIP TEAM


JEFF NICOL President, NobelClad

•  Became head of NobelClad’s newly unified global operations in 2012

•  Previously VP and General Manager of DMC Clad Metal, North America

•  Joined DMC in 2008 as VP of Sales and Marketing

•  Spent 21 years with Alcoa, where he ascended to chief metallurgist and global marketing director

IAN GRIEVES President, DynaEnergetics

•  Joined DynaEnergetics in 2013

•  20 years of diverse operational, engineering, finance and management experience with international industrial businesses

•  Previously Senior Vice President of Lydall, Inc.s’ Performance Materials division

BIN ZHANG Managing Director, China, DMC

•  Responsible for Chinese business development and market positioning for NobelClad, DynaEnergetics and AMK Technical Services

•  Native of Beijing with 20 years of senior level business experience

•  Established an Asia Pacific sales and marketing presence for a Sheldahl, Inc., a specialized manufacturer based in Minnesota

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CHAPTER 4


Defining Characteristics Defining Characteristics

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DMC builds global companies by developing people and organizations. We institutionalize entrepreneurship and celebrate technical ingenuity. Our growth is fueled by energized, relevant and nimbly executed solutions that make a real difference to our customers. We offer a global manufacturing network with intimate localized service, so customers know they can rely on DMC companies when the stakes are high. DMC’s empowered and responsive management strategies are aimed at serving the world’s growth markets, giving investors high returns throughout varying economic cycles.


OUR CULTURE

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DMC TRAITS


The DMC family of brands share many traits that are critical to our growth and success.

Technical expertise, ingenuity and proficiency in our respective industries.

A culture of critical and creative thinking that allows us to innovate new solutions for our clients.

Empowerment to meet market demands through decisions made at the local level.

A passion for the processes that drive efficiency, dependability and ultimate value for our clients.

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CHAPTER 5


Solutions

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CHAPTER & PAGE TITLE HERE


REPRESENTATIVE: NAME & POSITION HERE

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DYNAENERGETICS OVERVIEW

19

A top-tier provider of compatibility tested perforating systems.

Acquired in 2007 as new platform business for DMC.

Unmatched global reach serving oil and gas service providers, with approximately 7% global market share.

Reputation for product safety, technical innovation and systems reliability under extreme environmental conditions.

50% of product sales from well re-perforations and work-overs.

Perforating and well completion technologies for improved productivity and lower operating cost.


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DYNAENERGETICS PERFORMANCE


9-month numbers

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DYNAENERGETICS SALES BY GEOGRAPHY

2013 Sales: $83.7 Million

United States / 42%

Canada / 14%

Russia / 7%

Iraq / 5%

India / 5%

United Kingdom / 4%

Kazakhstan / 3%

Rest of World / 20%

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DYNAENERGETICS GROWTH MILESTONES

2007 – Company acquired DynaEnergetics, a new global platform business

2009 – Acquired LRI Oil Tools (Canada)

2010 – Acquired outstanding interests in two Russian oilfield product joint ventures

– Acquired Austin Explosives (Texas)

2012 – Acquired TRX Industries (Texas)

2013  – Opened distribution centers in Bogota, Columbia and West Texas

– Opening new shaped charge manufacturing plant for Americas (Texas)

2014 – Opened distribution centers in Western Pennsylvania and Bonnyville, Alberta

– Completing new gun and shaped charge manufacturing plant in Russia (Siberia)


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PERFORATING BASICS


1. Once a wellbore is drilled and cement and steel casing are in place, a perforating gun is deployed into the well.

2.  The perforating gun is fired, sending plasma jets through the casing and into the surrounding formation creating “perforation tunnels”.

3. Oil or gas flows through the perforation tunnels and into the well.

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DYNAENERGETICS COMPETITIVE ADVANTAGE


•  Manufacturing expertise and technical proficiency using industrial explosives

•  Robust product portfolio

•  Industry leading safe and selective detonating technology

•  Global distribution expertise

•  Strong industry relationships

•  Advanced Section IV Testing Facility simulates most challenging well environments

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DynaStageTM Gun System •! Pre-assembled, customizable gun system •! No wiring connections… reduces set up time

to seconds •! Removes the potential for electrical

connection errors •! Eliminates gun loading steps •! Fully disposable and maintenance free

DynaSelect Detonators •! Integrated RF-safe & selective

technologies •! Enables concurrent perforating and

fracturing •! Reduces the risk of accidents •! Time and cost savings from sequential gun

initiation •! Improved set-up times and reliability from

40% fewer electrical wiring connections

01 02 03

Booster Transfer Module (BTM) •! Can only be initiated by a ballistic event …

will not fire due to hydrostatic or wellbore pressure

•! No moving parts •! Pressure tight after initiation to 14,000 PSI •! More cost effective to purchase and re-dress •! Simple, fast assembly and small footprint

DYNAENERGETICS PRODUCT INNOVATIONS


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DYNASTAGETM GUN SYSTEM


*patents pending Top Fire DynaSelect

Detonator* Multitronic V Firing Panel

Three Stage Gun String with Bridge Plug

DynaStage Gun Module*

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CREATING A SUSTAINABLE COMPETITIVE ADVANTAGE

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COMPONENT DRIVEN SALES: •  Guns & Hardware •  Shaped Charges •  Detonating Cord •  Switch •  Detonators •  Control Systems

CUSTOMER USE REQUIREMENTS: •  Gun shop: Mix & match products

and assemble perforating systems

•  Field: Detonator wiring, gun string assembly, sub recovery

INDUSTRY CHALLENGES: •  Assembly errors lead to misfires •  Quality •  Safety •  Efficiency •  Operating Cost •  Complexity of Supply Chain

DynaSelect •  Integrated Switch Detonator

•  RF Safe •  Selective

•  Surface Tester •  Enhanced Control System

DYNASELECT ADVANTAGES •  Higher value to Service Companies

•  Less field wiring •  Fewer misfires

•  Higher priced (to value) •  Reduced detonator wiring in the field •  Customer savings accrue in operations other

than wireline perforating

DynaStage™ •  Switch detonator eliminates field wiring, improves

reliability •  Gun armed on detonator installation •  Full factory assembly of gun systems •  Delivery of complete systems to field •  Maintenance free and disposable

DYNASTAGE ADVANTAGES •  Highest level of reliability, safety and efficiency

•  No misfires •  Reduced transportation costs and field labor •  Simplified supply chain •  Reduced working capital for customers •  Improved Service and E&P profitability

•  Gun shop no longer required •  Detonator wiring eliminated •  Sub recovery eliminated

CURRENT INDUSTRY MODEL DYNAENERGETICS MODEL: PRODUCT ADVANTAGE + BUSINESS MODEL ADVANTAGE


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DYNAENERGETICS GROWTH INITIATIVES


•! Investing in new technologies to expand product offerings

•! Forging strategic partnerships to enter new markets

•! Innovating solutions that meet anticipated market demand

•! Global launch of new brand marketing and digital assets to improve customer experience and service design

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DYNAENERGETICS GLOBAL FOOTPRINT

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SELECT END USERS

30

These major energy service companies are both competitors and customers. When distribution limitations inhibit these companies’ ability to supply perforating equipment to certain international locations, they often turn to DynaEnergetics.

*


* *

* *


DYNAENERGETICS MARKET INDICATORS: RIG COUNT BY GLOBAL REGION


DYNAENERGETICS MARKET INDICATORS: U.S. RIG COUNT BY TYPE

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DYNAENERGETICS MARKET INDICATORS: U.S. HYDRAULIC FRACTURING ACTIVITY

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NOBELCLAD OVERVIEW

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NobelClad is the worldwide leader in explosion welded plate production.

Largest global supplier of explosion clad plates.

Serving a diversified roster of industrial and infrastructure end markets. Working to drive engineering specifications for clad.

Profiting from global industrial infrastructure investments.

Strong free cash flow.


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NOBELCLAD’S PERFORMANCE



9-month numbers

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2013 Sales: $118.4 Million

United States / 45%

South Korea / 10%

Germany / 6%

Canada / 5%

India / 4%

France / 3%

China / 2%

Rest of World / 25%


NOBELCLAD SALES BY GEOGRAPHY

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NOBELCLAD GROWTH MILESTONES

1965 – Company founded as Explosive Fabricators

1996 – Acquired Detaclad®, the explosion welding business of Dupont

2001 – Acquired Nobelclad (France)

2007 – Acquired Dynaplat (Germany)

2012 – Opened sales office in South Korea

2013  – Unified global explosion welding operations under NobelClad – Opened sales office in China

2014  – Acquired state-of-the art manufacturing facility in Germany – Initiated restructuring program of European cladding operations


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EXPLOSION WELDING PROCESS

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DEMAND DRIVERS FOR EXPLOSION WELDING

40

03 Design Flexibility

02 Corrosive Environments

01 Global Infrastructure Investment


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BENEFITS OF CLAD


BENEFITS OF CLAD

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NOBELCLAD’S COMPETITIVE ADVANTAGE


•! Global network of specialty metals providers

•! Permits and shooting sites in U.S., France, Sweden and Germany

•! Mastery of explosion-welding process for large-scale production

•! Strong working relationships with end-market customers

NobelClad’s dominant position in the explosion welding industry is protected by significant barriers to entry.

Explosion welding shot - NobelClad’s outdoor shooting facility near Rivsaltes, France.

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NOBELCLAD GROWTH INITIATIVES


•! Expanding market share in Asia

•! R&D focused on new clad plate applications

•! Applying process expertise to new market development

•! Global launch of new brand marketing and digital assets to improve customer experience and service design

Separating equipment – A natural gas production facility where NobelClad’s explosion welded plates were used in the fabrication of specialized pipes.

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GLOBAL PRODUCTION & SALES FOOTPRINT

•

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PRIMARY END MARKETS SERVED


•! Chemical

•! Oil and Gas

•! Metals and Mining

•! Marine

•! Power Generation

•! Alternative Energy

•! Industrial Refrigeration

•! Transportation

•! Defense and Protection

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BOOKINGS BY END MARKET: 2008 REVENUE PEAK TO 2013 TROUGH


0

20

40

60

80

100

120

140

160

180

200

2008

Misc. / 10%

Shipbuilding / 2%

Ind. Refrigeration / 3%

Hydrometallurgy / 4%

Power Gen. / 7%

Aluminum / 11%

Alt. Energy / 13%

Oil & Gas / 22%

Chemical / 27%

2008 Bookings: $198.9M

0

20

40

60

80

100

120

140

160

180

200

2013

Misc. / 5%

Shipbuilding / 4%

Ind. Refrigeration / 3%

Hydrometallurgy / 0%

Power Gen. / 6%

Aluminum / 8%

Alt. Energy / 0%

Oil & Gas / 39%

Chemical / 35%

2013 Bookings: $108.4M

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CLADDING METAL PRICE CHANGES: 2008 REVENUE PEAK THROUGH 2013 TROUGH


Stainless Steel 304

Stainless Steel 316

Titanium Gr1 Inconel 625 Alloy 825 516-70 (Mill) 516-70 (Service Center)

2008

2013

30% 38% 26% 40% 20% 12% 5%

Charts show decline in average price per pound paid by DMC. Metals make up 45% - 50% of the value of a typical explosion welding order.

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SELECT END USERS

48

Chemicals Refining Mining Engineering


NobelClad provides value to its industrial and infrastructure customers by collaborating at every stage of development. During design phases, NobelClad is a key resource for process architects and engineers who often write NobelClad plates into their manufacturing specifications.

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ENGINEERING PROCUREMENT & CONSTRUCTION (EPC) COMPANY BACKLOG INDEX

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EPC COMPANIES, SELECT COMPANY PERFORMANCE – BACKLOG

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CHAPTER 6


Financial Overview

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FINANCIAL PERFORMANCE REVIEW


($MM except per share amounts) 2011 2012 2013 9 Months 2013

9 Months 2014

Sales % growth

$199.0 38%

$192.7 -3%

$202.1 5%

$152.7 7%

$150.6 -1%

Gross Profit % margin

$52.2 26%

$57.7 30%

$58.1 29%

$45.3 30%

$45.5 30%

Operating Profit % margin

$15.8 8%

$16.0 8%

$11.0 5%

$9.9 6%

$10.2 7%

Adjusted EBITDA % margin

$29.9 15%

$31.7 16%

$26.6 13%

$21.2 14%

$23.0 15%

Income from Continuing Operations % Growth

$10.7 219%

$10.7 0%

$7.2 -33%

$6.8 0%

$7.1 -3%

Net Income % growth

$12.5 137%

$11.7 -6%

$7.5 -36%

$7.2 -18%

$7.0 4%

Diluted EPS % growth

$0.93 133%

$0.87 -6%

$0.54 -38%

$0.52 -20%

$0.50 -4%

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BALANCE SHEET HIGHLIGHTS


Assets ($MM) Dec. 31, 2012 Dec. 31, 2013 June 30, 2014

Cash, cash equivalents $8.2 $10.6 $14.9

Accounts receivables, net $35.2 $37.8 $30.9

Inventory $48.0 $41.2 $41.8

Total current assets $104.8 $103.7 $106.5

Total assets $235.4 $240.6 $229.6

Liabilities ($MM) Text here Text here

Total current liabilities $24.8 $31.6 $24.1

Lines of credit $37.8 $26.4 $26.0

Long-term debt $0.1 $0.0 $0.0

Total liabilities $73.0 $67.8 $60.7

Total stockholders’ equity $162.5 $172.8 $168.9

Total liabilities and stockholders’ equity $235.4 $240.6 $229.6

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CHAPTER 7


Summary

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DMC’S PERFORMANCE TENETS


Through share ownership, DMC management has closely aligned its interest with independent shareholders, and all management decisions are made to maximize shareholder value.

DMC has adopted three tenets to guide superior share price performance:

1.  Maximize free cash flow through financial discipline

2.  Maximize return on invested capital by achieving operational excellence and making discerning investment decisions

3.  Invest in new technology, product and market development to drive sustained growth and increased profitability

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CONTACT INFORMATION


DMC 5405 Spine Road Boulder, Colorado 80301, USA T 800-821-2666

Geoff High Investor Relations Director of Investor Relations E [email protected] T 303-514-0656

Contact Primary Contact

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APPENDIX: USE OF NON-GAAP FINANCIAL MEASURES

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10/30/14 Presentation Title 57

