Greetings, and welcome to the Dynamic Materials Corporation 2015 First Quarter Conference Call. At this time, all participants are in a listen only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] I would now like to turn the conference over to your host, Geoff High, Director of Investor Relations. Please go ahead sir.

Thank you, Shaye [ph]. Good afternoon and welcome to DMC's first quarter conference call. Presenting on behalf of the company will be President and CEO, Kevin Longe and Chief Financial Officer, Mike Kuta. I’d like to remind everyone that the matters discussed during this call may include forward-looking statements that are based on management’s estimates, projections, and assumptions as of today’s date and are subject to risks and uncertainties that are disclosed in DMC’s filings with the SEC. The Company’s business is subject to certain risks that could cause actual results to differ materially from those anticipated in its forward-looking statements. DMC assumes no obligation to update forward-looking statements that become untrue because of subsequent events. A webcast replay of today’s call will be available at dmcglobal.com after the call. In addition, a telephone replay will be made available beginning approximately two hours after the conclusion of this call. Details for listening to today’s replay or webcast are available in today’s news release. And with that, I’ll now turn the call over to Kevin.

Thanks, Geoff, and good afternoon everyone. Our first quarter sales came in at $40.8 million, down 13% versus last year's first quarter. Excluding the negative impact of foreign currency translation, sales declined 5% quarter over quarter. This decline was due to the drop off in drilling and completion activity in the oil and gas industry which negatively affected demand at our oilfield products business, DynaEnergetics. Consolidated gross margin was 26% versus 32% in the year ago quarter. The decline was due a lower margin product mix at DynaEnergetics and lower sales contributions from DynaEnergetics versus our NobelClad business. Reported first quarter operating loss of $1.2 million excluding restructuring charges our operating results were negative affected by $871,000 in one-time expenses associated with our recent financial restatements and an increase in bad debt reserves at DynaEnergetics. Loss from continuing operations which excludes our former AMK Technical Service business was $1 million or $0.07 per share excluding restructuring charges. This compares with income from continuing operations of $1.8 million or $0.13 per share in last year's first quarter. Adjusted EBITDA was $2.2 million versus $7 million in the first quarter a year ago. Looking at our businesses, DynaEnergetics reported first quarter sales of $16.9 million down 24% from Q1 last year. The decline reflects more than 50% drop in the U.S. rig counts since its peak last October as well as a growing backlog of wells that have been drilled but not completed. According to the market intelligence firm, IHS producers in the United States had put up to 3500 uncompleted well into inventory while they wait for oil prices to recover. DynaEnergetics revenue was also impacted by unfavorable foreign currency exchange translations. Excluding the foreign exchange impact, revenue declined 17% during the first quarter. First quarter gross margin was 37% versus…

Thank you. At this time we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Edward Marshall from Sidoti & Company.

How are you guys doing, it is Ed Marshall from Sidoti & Company.

Hi Ed.

Hi Ed.

So I wanted to touch with the $871,000 charge that was associated with the restatement of bad debt, I assumes that is not considered in the restructuring and it is an independent expense of which you've kept in your adjusted results? Is that a going to about $4 of earnings to that number is that about right?

Yes, roughly you are in the ballpark Ed. That was and just to answer your first question, that was not included in our restructuring and it was cited as part of our normal operations.

Okay, when you look at the restructuring of the businesses I know there is some movement there. Can you kind of highlight what you anticipate, maybe some of the closures of some facilities et cetera would do for you from a cost perspective so you model that on a forward basis we can look at what the cost stream might look like, cost savings from these programs?

Yes, so I'll start and Kevin you could jump in, but we're looking NobelClad which we announced last year the restructuring program, on an annualized basis, we expect after tax cash savings of about $2 million from consolidating the facility in France and the large plates from France into Germany. And those savings should start to commence here in the second half as we get into the second quarter and mostly start to accrue to us in the second half of the year.

Okay.

And then on the DynaEnergetics side we've consolidated our Edmonton manufacturing into our Texas facilities and we've also closed several distribution centers. So we're looking in the range of fixed cost savings in the $1 million range on an annualized basis. And then some SG&A changes that we've made in our corporate office should also accrue – we should start accruing savings beginning in the second quarter for those as well.

Initially you said NobelClad in the second half, did you mean the second quarter?

Starting in the second quarter, correct.

And in the press release it says there's additional expenses that you're going to realize in 2Q of about $1 million or $1.2 million I think it was? Is this just carryover, is it new stuff that you're looking at?

It is about $1 million to $1.5 million and it is carryover, about $0.5 million is the cost for moving the equipment from Wurgendorf, Germany and Rivesaltes, France into our Liebenscheid, Germany facility. That is happening in April and so those costs are being expensed in April, so it related to that existing program in NobelClad. And the other costs are largely in DynaEnergetics and those relate to carryover programs related to Edmonton manufacturing and the consolidation of the deceased centers as well.

Got you, the fixed cost, the SG&A and I just want to see if I could look at this and I'm assuming there is not a lot of fixed numbers in there, but I've been noticing it has been ticking up especially in DynaEnergetics over the last couple of quarters. I'm assuming this has something to do with the rollout of the DynaStage select, first is that right? Secondly, when do you start to see those costs kind of subside at the levels of their operating it? Revenues are coming down, but costs are rising actually.

Yes, we had expenses in the first quarter of approximately $500,000 related to the rollout, education and training of our sales force for DynaStage and they will trickle down to be nonexistent quite frankly after this month as we go into field introduction.

I see. And last one, you talked about the gyration caught on the tax on a quarter to quarter basis, call it noise, call it whatever you like, when that subsides and I know you said they will last for a couple of quarters, but what does the tax rate look like on a normalized basis after all this noises is over?

It is about 35% roughly.

Yes that's fair. I was going to say somewhere between 30% and 40% depending on our mix, our geographic mix, so 35% to probably a fair estimate.

Okay great, thanks guys.

Thank you, Ed.

Yep, thanks Ed.

Thank you. Our next question comes from Robert Connors from Stifel.

Hey guys, can you hear me?

Yep, hey Robert.

Hey Robert.

Just calling from sort of [indiscernible] early this year going on in Baltimore, but on another note, I was just wondering, it sort seems like qualitatively things are sort of moving in the right direction regarding customer acceptance of some of the new products like DynaStage, I was just wondering could you give us any color around sort of the timeline when we could expect if the test files go well, statement regarding strategic alliances that could be signed possibly later this year.?

Yes, we are being selective first of all in terms of the wireline service companies that we're working with as partners on the introduction of this product line. And we're doing trials with two large and one medium sized wireline service company as we speak. Those trials are going to take place through the second quarter and we would expect to have an indication of interest that we're operating in by the third quarter.

Okay and then just given the market that we're in right now particularly in the oil field product side and the volatility on the tax rate, I think previously you guys have sort of said the run rate on cash flows should be somewhere around about 70% of the EBITDA. Are you still expecting that going forward? And then as the year progresses sort of like what does the step up look like in cash flow from here?

Yes, I mean we were negative cash in the first quarter and we'll be negative most likely in the second quarter as we make a lot of the payouts according to the previously announced restructuring. But then we expect to turn into a strong cash generator in the second half of the year and return to more those normalized free cash flows percentage of the EBITDA.

Okay great, thanks for taking my question.

Thanks Rob.

[Operator Instructions] Our next question comes from Gerry Sweeney from Roth Capital

Good afternoon guys.

Hey Gerry.

Hi Gerry.

A couple of questions on the testing that you are doing on the DynaStage product, I know it sounds like you are going to be going to the end of the second quarter, but have you gotten any type of data on maybe performance and can you compare it to what's out there, is there a value add that starts to urge, challenges you are getting some relatively enthusiastic responses, several examples of cost for that data could be relatively positive and any type of info around that front?

The performance of improvement happens in two or three significant areas. There is reduced misfires if you will and greater operating efficiency at the well with the safe operating characteristics of the DynaStage and DynaSelect product line. And that has been fairly, we have some information that on DynaSelect where we've seen the operating efficiency approach 99% from mid to low 90s with wireline service companies. The other advantages to it have to do with the assembly and the lack of having to assemble components in the field. The design of the system allows us to supply a factory assembled and tested perforating gun that's then ships complete to the - and then assembled in sections in the field versus from components and there is a significant labor savings if you will to the wireline service companies. But also in essence the movement of their working capital on to our balance sheet, but we have that working capital regardless in order to support the marketplace with the components. And so we're currently quantifying these from an economic standpoint and so I think by the end of our testing program and as we have our next quarter conference call we'll be able to quantify those in a meaningful way.

Got it, okay, and then you talked about formal commercialization in the third quarter, what does that incur? I mean I believe, I mean you've closed down some distribution centers and I think you actually had some centers in the Marcellus, I think a co-locator with NobelClad, I mean are you in position to ramp up or is there going to be more work in the third quarter to get that going, because I know that DynaStage several are working on it for eight or nine months I think this was a function that you were getting ready for?

Yes, we built an assembly facility at our Mount Braddock facility to serve that region, the East Coast or Northeast region. And that was part of the delay in terms of getting this up and running. The distribution part of it we, the distribution centers we closed are mostly in and around the practice area as well some up in Canada and one down in Colombia in Latin America. And those are things that were replacing with and we call that a super hub or distribution center at our Blum manufacturing facility, Blum Texas manufacturing facility. We're actually expanding storage for explosives and handling of explosives at that facility as we speak and we are also putting in gun assembly for the, essentially the Eagle Ford and Texas region for DynaStage. But it is - those programs will not slow us down or prevent us from moving forward because of our assembly capability in Mount Braddock. The commercialization really is partnership discussion and relationship with the companies that we're working with and quantifying the benefits and entering into the partnership agreement, so that we can begin supporting their requirements in the third quarter and that's really what's taking place this quarter.

NobelClad, you talked about bringing new people on, get a little bit closer to the end-markets, you are turning over may be some new starts and the pipe side of – in the pipe business. Does this change the size of the projects you'll go after will they possibly be bigger, smaller, just curious as to how that may shake out in terms of some other projects and if there is any difference versus what you were achieving previously?

Yes there are two things that we're doing, three things that we're doing to strength the applications for explosion cladding. The pipe market, those projects are relatively larger and fewer and far between from an explosion clad standpoint, but when they come they are fairly sizable. So that's and we've hired a gentleman who came from one of the pipe companies in Germany and he's located our new facility in Germany an application engineer on the technical support person. And quite frankly we're excited about the projects that we're starting to see and then hopefully there is a couple that we can report by the next quarter. So that's one area. The other areas is we've put together as I mentioned in my last call, information on explosion clad versus roll bond and the value of that in the finished product and the savings of labor in terms of using explosion clad when you make a pressure vessel or a reactor. So the savings of reduced labor on the well being of internals and we're seeing a great deal of interest at both end users and engineering companies and actually fabricators and this is really the general market for explosion clad versus roll bond. And mostly for the engineering properties but then when we look at the labor savings it becomes compelling. And we expect this as we do more of the pull-through demand for explosion clad, we're excited about towards the end of the year seeing some applications, every day, applications start coming into place with products. And into that we've hired a chemical industry specialist who is doing luncheon learns and out grading demand at engineering companies and owner companies for explosion clad and it is really refreshing to see the attendance that we're getting from the engineering firms.

Got it. And then on the, last question, I'll jump back in line, on the second quarter you talk about being down 15% and 20% some of that was FX and some of it was DynaEnergetics. Is there any way you could break that out, how much is FX versus how much is DynaEnergetics?

Yes. So the NobelClad is going to be down slightly, so it's primarily DynaEnergetics. The currency impact is roughly half of that 15% to 20%.

Okay, that's helpful. Okay, I'll just back out, thanks guys.

Thank you. [Operator Instructions] We have no further questions at this time. I will turn the call back over to Kevin Longe for closing comments.

Yes, thank you. We appreciate everyone joining us for today's call and your continued interest in the company and we look forward to speaking with you again after the close of the second quarter. So, thank you everybody.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.