10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

Form 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

OR

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934

FOR THE TRANSITION PERIOD FROM                   TO                   .

Commission file number 001-14775

DMC GLOBAL INC.

(Exact name of Registrant as Specified in its Charter)

Delaware	84-0608431
(State of Incorporation or Organization)	(I.R.S. Employer Identification No.)

5405 Spine Road, Boulder, Colorado 80301

(Address of principal executive offices, including zip code)

(303) 665-5700

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. 

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o (Do not check if smaller reporting company)	Smaller reporting company o
	Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 under the Act).  Yes  o  No x

The number of shares of Common Stock outstanding was 14,875,223 as of April 26, 2018.

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. We intend the forward-looking statements throughout this quarterly report on Form 10-Q to be covered by the safe harbor provisions for forward-looking statements. Statements contained in this report which are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from projected results. These statements can sometimes be identified by our use of forward-looking words such as “may,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” and other phrases of similar meaning. Such statements include projections, guidance and other statements regarding our expected financial position and operating results, the expected impacts of new accounting standards and the timing of our implementation thereof, our business strategy, expectations regarding NobelClad's end markets and activity levels, comments regarding expanding demand for DynaEnergetics' products, particularly DynaSelect^TM and DynaStage^TM, expected expansion plans in Blum, Texas, Troisdorf, Germany and Mt. Braddock, Pennsylvania, the expected amounts of AD/CVD penalties to be assessed, our liquidity position and factors impacting such position, including expectations regarding legal costs, and the outcome of pending regulatory matters and patent litigation. The forward-looking information is based on information available as of the date of this quarterly report and on numerous assumptions and developments that are not within our control. Although we believe that our expectations as expressed in these forward-looking statements are reasonable, we cannot assure you that our expectations will turn out to be correct. Factors that could cause actual results to differ materially include, but are not limited to, those factors referenced in our Annual Report on Form 10-K for the year ended December 31, 2017 and such things as the following: changes in global economic conditions; the ability to obtain new contracts at attractive prices; the size and timing of customer orders and shipments; product pricing and margins; our ability to realize sales from our backlog; fluctuations in customer demand; fluctuations in foreign currencies; competitive factors; the timely completion of contracts; the timing and size of expenditures; the timely receipt of government approvals and permits; the price and availability of metal and other raw material; the adequacy of local labor supplies at our facilities; current or future limits on manufacturing capacity at our various operations; our ability to complete our expansion plans on schedule and on budget; our ability to successfully integrate acquired businesses; the impact of pending or future litigation or regulatory matters; the availability and cost of funds; and general economic conditions, both domestic and foreign, impacting our business and the business of the end-market users we serve. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof. We undertake no obligation to publicly release the results of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

INDEX

		Page
PART I - FINANCIAL INFORMATION
Item 1	Condensed Consolidated Financial Statements	3
	Condensed Consolidated Balance Sheets as of March 31, 2018 (unaudited) and December 31, 2017	3
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2018 and 2017 (unaudited)	5
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2018 and 2017 (unaudited)	6
	Condensed Consolidated Statement of Stockholders’ Equity for the three months ended March 31, 2018 (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3	Quantitative and Qualitative Disclosure about Market Risk	32
Item 4	Controls and Procedures	32
PART II - OTHER INFORMATION
Item 1	Legal Proceedings	33
Item 1A	Risk Factors	34
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3	Defaults Upon Senior Securities	35
Item 4	Mine Safety Disclosures	35
Item 5	Other Information	35
Item 6	Exhibits	35
	Signatures	36

2

Part I - FINANCIAL INFORMATION

ITEM 1.  Condensed Consolidated Financial Statements

DMC GLOBAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in Thousands, Except Share and Per Share Data)

	March 31,			December 31,
	2018			2017
	(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	10,768		$	8,983
Accounts receivable, net of allowance for doubtful accounts of $1,269 and $1,088, respectively	57,201			49,468
Inventory, net	46,458			35,742
Prepaid expenses and other	10,764			5,763
Total current assets	125,191			99,956
PROPERTY, PLANT AND EQUIPMENT	124,577			121,339
Less - accumulated depreciation	(63,621		)	(61,467		)
Property, plant and equipment, net	60,956			59,872
PURCHASED INTANGIBLE ASSETS, net	12,121			12,861
DEFERRED TAX ASSETS	—			98
OTHER ASSETS, net	151			296
TOTAL ASSETS	$	198,419		$	173,083

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

3

DMC GLOBAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in Thousands, Except Share and Per Share Data)

	March 31,			December 31,
	2018			2017
	(unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	22,901		$	19,826
Accrued expenses	9,964			6,884
Accrued anti-dumping duties and penalties	6,712			3,609
Dividend payable	295			295
Accrued income taxes	4,603			2,939
Accrued employee compensation and benefits	4,687			6,186
Contract liabilities	5,215			5,888
Total current liabilities	54,377			45,627
LINES OF CREDIT	29,350			17,984
DEFERRED TAX LIABILITIES	265			573
OTHER LONG-TERM LIABILITIES	3,070			3,119
Total liabilities	87,062			67,303
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.05 par value; 4,000,000 shares authorized; no issued and outstanding shares	—			—
Common stock, $0.05 par value; 25,000,000 shares authorized; 14,876,190 and 14,782,018 shares outstanding, respectively	747			741
Additional paid-in capital	76,895			76,146
Retained earnings	63,634			60,074
Other cumulative comprehensive loss	(29,214		)	(30,819		)
Treasury stock, at cost; 72,104 and 39,783 shares, respectively	(705		)	(362		)
Total stockholders’ equity	111,357			105,780
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	198,419		$	173,083

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

4

DMC GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in Thousands, Except Share and Per Share Data)

(unaudited)

	Three months ended March 31,
	2018			2017
NET SALES	$	67,313		$	38,962
COST OF PRODUCTS SOLD	44,560			28,596
Gross profit	22,753			10,366
COSTS AND EXPENSES:
General and administrative expenses	8,177			7,206
Selling and distribution expenses	5,212			4,482
Amortization of purchased intangible assets	805			984
Restructuring expenses	144			—
Anti-dumping duty penalties	3,103			—
Total costs and expenses	17,441			12,672
OPERATING INCOME (LOSS)	5,312			(2,306		)
OTHER INCOME (EXPENSE):
Other income (expense), net	(377		)	421
Interest expense	(466		)	(506		)
Interest income	1			1
INCOME (LOSS) BEFORE INCOME TAXES	4,470			(2,390		)
INCOME TAX PROVISION	550			630
NET INCOME (LOSS)	$	3,920		$	(3,020	)
INCOME (LOSS) PER SHARE
Basic	$	0.26		$	(0.21	)
Diluted	$	0.26		$	(0.21	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic	14,449,915			14,270,365
Diluted	14,449,915			14,270,365
DIVIDENDS DECLARED PER COMMON SHARE	$	0.02		$	0.02

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

5

DMC GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Amounts in Thousands)

(unaudited)

	Three months ended March 31,
	2018		2017
Net income (loss)	$	3,920	$	(3,020	)
Change in cumulative foreign currency translation adjustment	1,605		1,818
Total comprehensive income (loss)	$	5,525	$	(1,202	)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

6

DMC GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Amounts in Thousands, Except Share Data)

(unaudited)

										Other
				Additional						Cumulative
	Common Stock			Paid-In			Retained			Comprehensive			Treasury Stock
	Shares	Amount		Capital			Earnings			Loss			Shares		Amount			Total
Balances, December 31, 2017	14,821,801	$	741	$	76,146		$	60,074		$	(30,819	)	(39,783	)	$	(362	)	$	105,780
Net income	—	—		—			3,920			—			—		—			3,920
Change in cumulative foreign currency translation adjustment	—	—		—			—			1,605			—		—			1,605
Shares issued in connection with stock compensation plans	126,493	6		(6		)	—			—			—		—			—
Adjustment for cumulative effect from change in accounting principle (ASU 2016-16)	—	—		—			(65		)	—			—		—			(65		)
Stock-based compensation	—	—		755			—			—			—		—			755
Dividends declared	—	—		—			(295		)	—			—		—			(295		)
Treasury stock purchases	—	—		—			—			—			(32,321	)	(343		)	(343		)
Balances, March 31, 2018	14,948,294	$	747	$	76,895		$	63,634		$	(29,214	)	(72,104	)	$	(705	)	$	111,357

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

7

DMC GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in Thousands)

(unaudited)

	Three months ended March 31,
	2018			2017
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net income (loss)	$	3,920		$	(3,020	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation (including capital lease amortization)	1,570			1,681
Amortization of purchased intangible assets	805			984
Amortization of deferred debt issuance costs	190			299
Stock-based compensation	708			571
Deferred income tax	(308		)	346
Gain on disposal of property, plant and equipment	—			3
Restructuring expenses	144			—
Transition tax liability	(268		)	—
Change in:
Accounts receivable, net	(7,360		)	(312		)
Inventory, net	(10,404		)	(1,792		)
Prepaid expenses and other	(1,455		)	(1,041		)
Accounts payable	3,767			626
Contract liabilities	(700		)	(453		)
Accrued anti-dumping duties and penalties	3,128			(3,003		)
Accrued expenses and other liabilities	3,285			(75		)
Net cash used in operating activities	(2,978		)	(5,186		)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisition of property, plant and equipment	(5,302		)	(1,649		)
Proceeds on sale of property, plant and equipment	—			2
Net cash used in investing activities	(5,302		)	(1,647		)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Borrowings on bank lines of credit, net	11,176			6,000
Payment of dividends	(295		)	(290		)
Payment of deferred debt issuance costs	—			(106		)
Treasury stock purchases	(343		)	(222		)
Net cash provided by financing activities	10,538			5,382
EFFECTS OF EXCHANGE RATES ON CASH	(473		)	88
NET INCREASE IN CASH AND CASH EQUIVALENTS	1,785			(1,363		)
CASH AND CASH EQUIVALENTS, beginning of the period	8,983			6,419
CASH AND CASH EQUIVALENTS, end of the period	$	10,768		$	5,056

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

8

DMC GLOBAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in Thousands, Except Share and Per Share Data)

(unaudited)

1.      BASIS OF PRESENTATION

The information included in the condensed consolidated financial statements is unaudited but includes all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the interim periods presented. These condensed consolidated financial statements should be read in conjunction with the financial statements that are included in our Annual Report filed on Form 10-K for the year ended December 31, 2017.

2.      SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The condensed consolidated financial statements include the accounts of DMC Global Inc. ("DMC", "we", "us", "our", or the "Company) and its controlled subsidiaries. Only subsidiaries in which controlling interests are maintained are consolidated. All significant intercompany accounts, profits, and transactions have been eliminated in consolidation.

Income Taxes

We recognize deferred tax assets and liabilities for the expected future income tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. Any effects of changes in income tax rates or tax laws are included in the provision for income taxes in the period of enactment. The deferred income tax impact of tax credits are recognized as an immediate adjustment to income tax expense. We recognize deferred tax assets for the expected future effects of all deductible temporary differences to the extent we believe these assets will more likely than not be realized. We record a valuation allowance when, based on current circumstances, it is more likely than not that all or a portion of the deferred tax assets will not be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, recent financial operations and their associated valuation allowances, if any.

We recognize the tax benefits from uncertain tax positions only when it is more likely than not, based on the technical merits of the position; the tax position will be sustained upon examination, including the resolution of any related appeals or litigation. The tax benefits recognized in the consolidated financial statements from such a position are measured as the largest benefit that is more likely than not of being realized upon ultimate resolution. We recognize interest and penalties related to uncertain tax positions in operating expense.

Revenue Recognition

On January 1, 2018, the Company adopted a new accounting standard, as amended, regarding revenue from contracts with customers using the modified retrospective approach, which was applied to all contracts with customers. Under the new standard, an entity is required to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

There was no cumulative financial statement effect of initially applying the new revenue standard because an analysis of our contracts supported the recognition of revenue consistent with our historical approach. In accordance with the modified retrospective approach, the comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company does not expect the adoption of the new revenue standard to have a material impact to the Company’s revenues or net income on an ongoing basis.

The Company’s revenues are primarily derived from consideration paid by customers for tangible goods. The Company analyzes its different goods and services by segment to determine the appropriate basis for revenue recognition, as described below. Revenue is not generated from sources other than contracts with customers and revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. There are no material upfront costs for operations that are incurred from contracts with customers. On occasion, NobelClad and DynaEnergetics may require customers to make advance payments prior to the shipment of goods. We record such payments as contract liabilities in our Consolidated Balance Sheet. Please refer to Note 5 “Contract Liabilities” for further information.

9

Our rights to payments for goods transferred to customers are conditional only on the passage of time and not on any other criteria. Payment terms and conditions vary by contract, although terms generally include a requirement of payment within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined that our contracts do not include a significant financing component given the short duration between order initiation and order fulfillment within each of our segments. Refer to Note 8 “Business Segments” for additional disaggregated revenue disclosures.

NobelClad

Customers agree to terms and conditions at the time of initiating an order. The significant majority of transactions contain a single performance obligation - the delivery of a clad metal product. In instances where multiple products are included within an order, each product represents a separate performance obligation given that: (1) the customer can benefit from each product on a standalone basis and (2) each product is distinct within the context of the contract.

The transaction price is readily determinable and fixed at the time the transaction is entered into with the customer. NobelClad is entitled to each product’s transaction price upon the customer obtaining control of the item. Such control occurs as of a point in time, which is generally based upon relevant International Commercial Terms ("Incoterms") as it relates to product ownership and legal title being transferred. Upon fulfillment of applicable Incoterms, NobelClad has performed its contractual requirements such that it has a present right to payment, and the customer from that point forward bears all risks and rewards of ownership. In addition, at this date, the customer has the ability to direct the use of, or restrict the access to, the asset. No payment discounts, rebates, refunds, or any other forms of variable consideration are included within its contracts. NobelClad also does not provide service-type warranties either via written agreement or customary business practice, nor does it allow customer returns.

For contracts that contain only one performance obligation, the total transaction price is allocated to the sole performance obligation. For less frequent contracts which contain multiple distinct performance obligations, judgment is required to determine the standalone selling price ("SSP") for each performance obligation. NobelClad uses the expected cost plus margin approach in order to estimate SSP, whereby an entity forecasts its expected costs of satisfying a performance obligation and then adds an appropriate margin for that good or service. The required judgment described herein largely is mitigated given the short duration between order initiation and complete order fulfillment.

DynaEnergetics

Customers agree to terms and conditions at the time of initiating an order. Transactions contain standard products, which may include perforating system components, such as detonating cord, or systems and associated hardware, including factory-assembled DynaStage^® perforating systems and DynaSelect^® detonators. In instances where multiple products are included within an order, each product represents a separate performance obligation given that: (1) the customer can benefit from each product on a standalone basis and (2) each product is distinct within the context of the contract.

The transaction price is readily determinable and fixed at the time the transaction is entered into with the customer. DynaEnergetics is entitled to each product’s transaction price upon the customer obtaining control of the item. Such control occurs as of a point in time, which is generally based upon relevant Incoterms as it relates to product ownership and legal title being transferred. Upon fulfillment of applicable Incoterms, DynaEnergetics has performed its contractual requirements such that it has a present right to payment, and the customer from that point forward bears all risks and rewards of ownership. In addition, at this date, the customer has the ability to direct the use of, or restrict the access to, the asset. No payment discounts, rebates, refunds, or any other forms of variable consideration are included within contracts. DynaEnergetics also does not provide service-type warranties either via written agreement or customary business practice, nor does it allow customer returns without its prior approval.

For orders that contain only one performance obligation, the total transaction price is allocated to the sole performance obligation. For orders that contain multiple products being purchased by the customer, judgment is required to determine SSP for each distinct performance obligation. However, such judgment largely is mitigated given that products purchased are generally shipped at the same time. In instances where products purchased are not shipped at the same time, DynaEnergetics uses the contractually stated price to determine SSP as this price approximates the price of each good as sold separately.

Earnings Per Share

The Company computes earnings per share ("EPS") using a two-class method, which is an earnings allocation formula that determines EPS for (i) each class of common stock (the Company has a single class of common stock), and (ii)

10

participating securities according to dividends declared and participation rights in undistributed earnings. Restricted stock awards are considered participating securities as they received 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.

	Three months ended March 31,
	2018			2017
Net income (loss) as reported	3,920			(3,020		)
Less: Distributed net income available to participating securities	(8		)	—
Less: Undistributed net income available to participating securities	(94		)	—
Numerator for basic net income per share:	3,818			(3,020		)
Add: Undistributed net income allocated to participating securities	94			—
Less: Undistributed net income reallocated to participating securities	(94		)	—
Numerator for diluted net income per share:	3,818			(3,020		)
Denominator:
Weighted average shares outstanding for basic net income per share	14,449,915			14,270,365
Effect of dilutive securities	—			—
Weighted average shares outstanding for diluted net income per share	14,449,915			14,270,365
Net income (loss) per share:
Basic	$	0.26		$	(0.21	)
Diluted	$	0.26		$	(0.21	)

Because we were in a net loss position for the three months ended March 31, 2017, potentially dilutive shares of 183,083 are anti-dilutive and are excluded from the determination of diluted EPS.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We are required to use an established hierarchy for fair value measurements based upon the inputs to the valuation and the degree to which they are observable or not observable in the market. The three levels in the hierarchy are as follows:                   

• Level 1 — Inputs to the valuation based upon quoted prices (unadjusted) for identical assets or liabilities in active markets that are accessible as of the measurement date.

• Level 2 — Inputs to the valuation include quoted prices in either markets that are not active, or in active markets for similar assets or liabilities, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data.

• Level 3 — Inputs to the valuation that are unobservable inputs for the asset or liability. The highest priority is assigned to Level 1 inputs and the lowest priority to Level 3 inputs.

The carrying value of cash and cash equivalents, trade accounts receivable and payables, accrued expenses and lines of credit approximate their fair value.

Our foreign currency forward contracts are determined using a yield curve model based on quoted market prices. As a result, these investments have been classified as Level 2 in the fair value hierarchy.

We did not did not hold any Level 3 assets or liabilities as of March 31, 2018 or December 31, 2017.

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Recently Adopted Accounting Standards

In October 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-16 which removes the prohibition against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. This ASU is effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and the Company adopted this ASU in the first quarter of 2018. The adoption of this ASU resulted in a reduction to January 1, 2018 "Retained earnings" in the Condensed Consolidated Balance Sheet of $65 and eliminated a $65 prepaid income tax recorded in the Consolidated Balance Sheet as of December 31, 2017.

In March 2017, the FASB issued ASU 2017-07 to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost within an entity's financial statements. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The Company adopted this ASU in the first quarter of 2018. The Company records its annual adjustment to its defined benefit pension obligation based upon actuarial calculations performed during the fourth quarter. The adoption of this ASU is not expected to have a material impact on the consolidated financial statements.

Recent Accounting Pronouncements

In February 2016, the FASB issued an ASU which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. This ASU will be effective beginning in the first quarter of 2019. Early adoption is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

3.      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 record provisions and maintain reserves for excess, slow moving and obsolete inventory. To determine reserve amounts, we regularly review inventory quantities on hand and values, and compare them to estimates of future product demand, market conditions, production requirements and technological developments.

Inventories consist of the following at March 31, 2018 and December 31, 2017 and include reserves of $2,865 and $3,068, respectively:

	March 31, 2018		December 31, 2017
Raw materials	$	21,773	$	16,255
Work-in-process	7,678		6,120
Finished goods	16,703		13,049
Supplies	304		318
	$	46,458	$	35,742

4.      PURCHASED INTANGIBLE ASSETS

The following table presents details of our purchased intangible assets as of March 31, 2018:

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	Gross		Accumulated Amortization			Net
Core technology	$	20,498	$	(10,863	)	$	9,635
Customer relationships	39,833		(37,347		)	2,486
Trademarks / Trade names	2,247		(2,247		)	—
Total intangible assets	$	62,578	$	(50,457	)	$	12,121

The following table presents details of our purchased intangible assets, other than goodwill, as of December 31, 2017:

	Gross		Accumulated Amortization			Net
Core technology	$	20,027	$	(10,333	)	$	9,694
Customer relationships	39,244		(36,077		)	3,167
Trademarks / Trade names	2,149		(2,149		)	—
Total intangible assets	$	61,420	$	(48,559	)	$	12,861

The change in the gross value of our purchased intangible assets from December 31, 2017 to March 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 noncurrent intangible assets related to the historical acquisition.

5.      CONTRACT LIABILITIES

On occasion, we require customers to make advance payments prior to the shipment of goods in order to help finance our inventory investment on large orders or to keep customers’ credit limits at acceptable levels. As of March 31, 2018 and December 31, 2017, contract liabilities (previously known as customer advances) were as follows:

	March 31, 2018		December 31, 2017
NobelClad	5,121		5,804
DynaEnergetics	94		84
Total	$	5,215	$	5,888

We expect to recognize the revenue associated with contract liabilities over a time period no longer than one year. Of the $5,888 recorded as contract liabilities at December 31, 2017, $1,700 was recorded to net sales during the three months ended March 31, 2018.

6.      DEBT

Lines of credit consisted of the following at March 31, 2018 and December 31, 2017:

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	March 31, 2018		December 31, 2017
Syndicated credit agreement:
U.S. Dollar revolving loan	$	26,655	$	18,250
Alternative currency revolving loan	—		—
Capital expenditure loan	3,278		—
German bank line of credit	—		—
	29,933		18,250
Less current portion	—		—
Long-term lines of credit	29,933		18,250
Less: debt issuance costs	583		266
Lines of credit	$	29,350	$	17,984

Syndicated Credit Agreement

On March 8, 2018, we entered into a five-year $75,000 syndicated credit agreement (“credit facility”) which replaced in its entirety our prior syndicated credit facility entered into on February 23, 2015. The new credit facility allows for revolving loans of up to $50,000 with a $20,000 US dollar equivalent sublimit for alternative currency loans. In addition, the new agreement provides for a $25,000 Capital Expenditure Facility (“Capex Facility") which is to be used to finance our DynaEnergetics manufacturing expansion project in Blum, Texas. The Capex facility allows for advances to fund capital expenditures of the Blum expansion project during year one of the credit facility. At the end of year one, the Capex Facility will convert to a term loan which will be amortizable at 12.5% of principal per year with a balloon payment for the outstanding balance upon the credit facility maturity date in year five. The new facility has a $100,000 accordion feature to increase the commitments under the revolving loan class and/or by adding a term loan subject to approval by applicable lenders. We entered into the credit facility with a syndicate of three banks, with KeyBank, N.A. acting as administrative agent. The syndicated credit facility is secured by the assets of DMC including accounts receivable, inventory, and fixed assets, as well as guarantees and share pledges by DMC and its subsidiaries.

Borrowings under the $50,000 revolving loan and $25,000 Capex Facility can be in the form of one, two, three, or six month London Interbank Offered Rate (“LIBOR”) loans. Additionally, US dollar borrowings on the revolving loan can be in the form of Base Rate loans (Base Rate borrowings are based on the greater of the administrative agent’s Prime rates, an adjusted Federal Funds rates or an adjusted LIBOR rate). LIBOR loans bear interest at the applicable LIBOR rate plus an applicable margin (varying from 1.50% to 3.00%). Base Rate loans bear interest at the defined Base rate plus an applicable margin (varying from 0.50% to 2.00%). All borrowing and repayments under the credit facility have been in the form of one month loans and are reported on a net basis in our Condensed Consolidated Statements of Cash Flows.

Borrowings under the $20,000 alternate currency sublimit can be in euros, Canadian dollars, pounds sterling, and in any other currency acceptable to the administrative agent. Alternative currency borrowings denominated in euros, pounds sterling, and any other currency that is dealt with on the London Interbank Deposit Market shall be comprised of LIBOR loans and bear interest at the LIBOR rate plus an applicable margin (varying from 1.50% to 3.00%).

The credit facility includes various covenants and restrictions, certain of which relate to the payment of dividends or other distributions to stockholders; redemption of capital stock; incurrence of additional indebtedness; mortgaging, pledging or disposition of major assets; and maintenance of specified ratios. As of March 31, 2018, we were in compliance with all financial covenants and other provisions of our debt agreements.

We also maintain a line of credit with a German bank for certain European operations. This line of credit provides a borrowing capacity of €4,000, of which €2,783 is available as of March 31, 2018 after considering outstanding letters of credit.

Included in lines of credit are deferred debt issuance costs of $583 and $266 as of March 31, 2018 and December 31, 2017, respectively. Upon entering into the credit facility, we wrote off $159 of previously deferred debt issuance costs and incurred $507 of additional costs. Debt issuance costs incurred with the credit facility were paid directly by the administrative agent and increased outstanding amounts under U.S. dollar revolving loans. Remaining deferred debt issuance costs are being amortized over the remaining term of the credit facility which expires on March 8, 2023.

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As of December 31, 2017, we had a $35,000 credit facility that allowed for revolving loans of $30,000 in U.S. dollars and $5,000 in alternative currencies as well as a $25,000 accordion feature to increase the commitments in any of the loan classes subject to approval by applicable lenders.

7.    INCOME TAXES

The effective tax rate for each of the periods reported differs from the U.S. statutory rate primarily due to variation in contribution to consolidated pre-tax income from each jurisdiction for the respective periods, differences between the U.S. and foreign tax rates (which range from 20% to 34%) on earnings that have been permanently reinvested and changes to valuation allowances on our deferred tax assets.

The Tax Cuts and Jobs Act ("TCJA") was enacted in December 2017. Among other things, the TCJA reduced the U.S. federal corporate tax rate from 35% to 21% beginning in 2018, required companies to pay a one-time transition tax on previously unremitted earnings of non-U.S. subsidiaries that were previously tax deferred, and created new taxes on certain foreign sourced earnings. The SEC staff issued Staff Accounting Bulletin (SAB) 118, which provided guidance on accounting for enactment effects of the TCJA. SAB 118 provided a measurement period of up to one year from the TCJA’s enactment date for companies to complete their accounting under ASC 740. In accordance with SAB 118, to the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in its financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the TCJA.

In connection with our initial analysis of the impact of the enactment of the TCJA, the Company recorded net tax expense of $946 in the fourth quarter of 2017. In response to additional guidance received from the Internal Revenue Service, the Company recorded net tax benefit of $268 in the first quarter of 2018, reducing the provisional liability to $678. For various reasons that are discussed more fully below, including the issuance of additional technical and interpretive guidance, we have not completed accounting for the income tax effects of certain elements of the TCJA. However, we were able to make reasonable estimates of the TCJA’s effects and, as such, recorded provisional amounts related to the transition tax and the remeasurement of deferred tax assets and liabilities.

The transition tax is a tax on previously untaxed accumulated and current earnings and profits (E&P) of certain of the Company’s non-U.S. subsidiaries. To determine the amount of the transition tax, we must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. E&P is similar to retained earnings of the subsidiary, but requires other adjustments to conform to U.S. tax rules. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. We were able to make a reasonable estimate of the transition tax and recorded a provisional obligation and additional income tax expense of $946 in the fourth quarter of 2017, which was reduced to $678 in the first quarter of 2018. The Company expects to elect to pay this liability over eight years. As of March 31, 2018, we reflected $75 and $603 in current accrued income taxes and other long term liabilities, respectively. However, the Company is continuing to gather additional information and will consider additional technical guidance to more precisely compute and account for the amount of the transition tax in the measurement period. This amount may change when we finalize the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation, finalize the calculation of non-U.S. income taxes paid on such earnings, and finalize our determination on the impact of the deemed repatriation of foreign earnings on 2017 taxable income.

In addition to the transition tax, the TCJA introduced a territorial tax system, which will be effective beginning in 2018. The territorial tax system may impact the Company’s overall global capital and legal entity structure, working capital, and repatriation plan on a go-forward basis. In light of the territorial tax system, and other new international provisions within the TCJA that are effective beginning in 2018, the Company is currently analyzing its global capital and legal entity structure, working capital requirements, and repatriation plans. We have not completed our full analysis with respect to the impact of the TCJA on our indefinite reinvestment assertion, and we are not yet able to make reasonable estimates of its related effects. Therefore, no provisional adjustments relative to the territorial tax system and our indefinite reinvestment assertion were recorded. Further, it is impracticable for the Company to estimate any future tax costs for any unrecognized deferred tax liabilities associated with its indefinite reinvestment assertion as of December 31, 2017 or March 31, 2018, because the actual tax liability, if any, would be dependent on complex analysis and calculations considering various tax laws, exchange rates, circumstances existing when a repatriation, sale, or liquidation occurs, or other factors. If there are any changes to our indefinite reinvestment assertion as a result of finalizing our assessment of the TCJA, the Company will adjust its provisional estimates, record, and disclose any tax impacts in the appropriate period, pursuant to SAB 118.

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We remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21% under the TCJA. As our U.S. deferred tax assets are fully offset by a valuation allowance, there was no net additional tax impact related to deferred tax assets and liabilities recognized in the fourth quarter of 2017. We are still analyzing certain aspects of the TCJA, considering additional technical guidance, and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. This includes, but is not limited to, the impacts of changes to Code Section 162(m) on our deferred tax assets related to compensation, and the potential impacts of the global intangible low-taxed income (“GILTI”) provision within the TCJA on deferred tax assets and liabilities.

We have not completed our full analysis with respect to the GILTI provision within the TCJA, and we are not yet able to make reasonable estimates of its related effects. Therefore, no provisional adjustments relative to GILTI were recorded. Currently, we have not yet elected a policy as to whether we will recognize deferred taxes for basis differences expected to reverse as GILTI or whether we will account for GILTI as period costs if and when incurred. The Company is currently evaluating other elements of the TCJA for which the Company was not yet able to make reasonable estimates of the enactment impact and for which it would continue accounting for them in accordance with ASC 740 on the basis of the tax laws in effect before the TCJA.

8.      BUSINESS SEGMENTS

Our business is organized into two segments: NobelClad and DynaEnergetics. NobelClad is a global leader in the production of explosion-welded clad metal plates for use in the construction of corrosion resistant industrial processing equipment and specialized transition joints. DynaEnergetics designs, manufactures and distributes products utilized by the global oil and gas industry principally for the perforation of oil and gas wells.

Our reportable segments are separately managed strategic business units that offer different products and services. Each segment’s products are marketed to different customer types and require different manufacturing processes and technologies.

Segment information is presented for the three months endedMarch 31, 2018 and 2017 as follows:

	Three months ended March 31,
	2018		2017
Net sales:
NobelClad	$	18,192	$	16,934
DynaEnergetics	49,121		22,028
Consolidated net sales	$	67,313	$	38,962

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	Three months ended March 31,
	2018			2017
Operating income (loss)
NobelClad	$	(12	)	$	395
DynaEnergetics	8,720			40
Segment operating income	8,708			435
Unallocated corporate expenses	(2,688		)	(2,170		)
Stock-based compensation	(708		)	(571		)
Other income (expense), net	(377		)	421
Interest expense	(466		)	(506		)
Interest income	1			1
Income (loss) before income taxes	$	4,470		$	(2,390	)

	Three months ended March 31,
	2018		2017
Depreciation and amortization:
NobelClad	$	816	$	989
DynaEnergetics	1,559		1,676
Segment depreciation and amortization	$	2,375	$	2,665

The disaggregation of revenue earned from contracts with customers based on the geographic location of the customer is as follows. Revenues that would have been reported under previous accounting guidance would not have been materially different from the amounts shown below.

	Three months ended March 31,
	2018		2017
United States	5,706		5,979
Canada	1,794		2,666
United Arab Emirates	131		357
France	951		571
South Korea	1,003		448
Germany	1,613		2,031
Oman	161		1,172
India	770		208
Spain	168		222
China	3,458		40
Italy	205		536
Sweden	138		430
Rest of the world	2,094		2,274
Total NobelClad	$	18,192	$	16,934

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	Three months ended March 31,
	2018		2017
United States	36,130		14,446
Canada	5,785		2,779
United Arab Emirates	523		22
France	52		35
Oman	682		113
Germany	28		37
Russia	1,282		929
India	635		823
Egypt	542		321
Romania	244		263
Italy	—		24
Hong Kong	—		457
Rest of the world	3,218		1,779
Total DynaEnergetics	$	49,121	$	22,028

During the three months endedMarch 31, 2018 and 2017, no one customer accounted for more than 10% of total net sales. 

9.      DERIVATIVE INSTRUMENTS

We are exposed to foreign currency exchange risk resulting from fluctuations in exchange rates, primarily the U.S. dollar to euro, the U.S. dollar to Canadian dollar, the euro to the Russian ruble, and, to a lesser extent, other currencies, arising from inter-company and third party transactions entered into by our subsidiaries that are denominated in currencies other than their functional currency. Changes in exchange rates with respect to these transactions result in unrealized gains or losses if such transactions are unsettled at the end of the reporting period or realized gains or losses at settlement of the transaction. We use foreign currency forward contracts to offset foreign exchange rate fluctuations on foreign currency denominated asset and liability positions. None of these contracts are designated as accounting hedges, and all changes in the fair value of the forward contracts are recognized in "Other income (expense), net" within our Condensed Consolidated Statements of Operations.

We execute derivatives with a specialized foreign exchange brokerage firm. The primary credit risk inherent in derivative agreements represents the possibility that a loss may occur from the nonperformance of a counterparty to the agreements. We perform a review of the credit risk of our counterparties at the inception of the contract and on an ongoing basis. We anticipate that our counterparties will be able to fully satisfy their obligations under the agreements but will take action if doubt arises regarding the counterparties' ability to perform.

As of March 31, 2018, the notional amounts of the forward contracts the Company held to purchase currencies were $5,563, and the notional amounts of forward contracts the Company held to sell currencies were $7,398. The fair values of outstanding foreign currency forward contracts were approximately $11 (recorded in accrued expenses) at March 31, 2018.

The following table presents the location and amount of net gains from hedging activities for the three months ended March 31, 2018 and 2017:

		Three months ended March 31,
Derivatives	Income Statement Location	2018		2017
Foreign currency contracts	Other income (expense), net	$	208	$	—
Total gain		$	208	$	—

10.   COMMITMENTS AND CONTINGENCIES

Contingent Liabilities

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The Company records an accrual for contingent liabilities when a loss is both probable and reasonably estimable. If some amount within a range of loss appears to be a better estimate than any other amount within the range, that amount is accrued. When no amount within a range of loss appears to be a better estimate than any other amount, the lowest amount in the range is accrued.

Anti-dumping and Countervailing Duties

In June 2015, U.S. Customs and Border Protection (“U.S. Customs”) sent us a Notice of Action that proposed to classify certain of our imports as subject to anti-dumping duties pursuant to a 2010 anti-dumping duty (“AD”) order on Oil Country Tubular Goods (“OCTG”) from China. A companion countervailing duty (“CVD”) order on the same product is in effect as well. The Notice of Action covered one entry of certain raw material steel mechanical tubing made in China and imported into the U.S. from Canada by our DynaEnergetics segment during 2015 for use in manufacturing perforating guns.

In July 2015, we sent a response to U.S. Customs outlining the reasons our mechanical tubing imports do not fall within the scope of the AD order on OCTG from China and should not be subject to anti-dumping duties. U.S. Customs proposed to take similar action with respect to other entries of this product and requested an approximately $1,100 cash deposit or bond for AD/CVD.

In August 2015, we posted the bond of approximately $1,100 to U.S. Customs. Subsequently, U.S. Customs declined to conclude on the Company's assertion that the mechanical tubing the Company has been importing is not within the scope of the AD order on OCTG from China. As a result, on September 25, 2015 the Company filed a request for a scope ruling with the U.S. Department of Commerce ("Commerce Department").

On February 15, 2016, the Company received the Commerce Department’s scope ruling, which determined certain imports, primarily used for gun carrier tubing, are included in the scope of the AD/CVD orders on OCTG from China and thus are subject to AD/CVD.

On March 11, 2016, the Company filed an appeal with the U.S. Court of International Trade (“CIT”) related to the Commerce Department’s scope ruling. On February 7, 2017, the CIT remanded the scope ruling to the Commerce Department to reconsider its determination. The Commerce Department filed its remand determination with the CIT on June 7, 2017 continuing to find that the Company's imports at issue are within the scope of the AD/CVD orders on OCTG from China. On March 16, 2018, the CIT issued its decision on the appeal and sustained the Commerce Department’s scope ruling. The Company does not intend to appeal this ruling.

On December 27, 2016, we received notice from U.S. Customs that it may pursue penalties against us related to the AD/CVD issue and demanding tender of alleged loss of AD/CVD in an amount of $3,049, which had previously been accrued for in our financial statements. We filed a response to the notice on February 6, 2017 asserting our position that any decision to pursue penalties would be premature in light of the Remand Order and that penalties would not be appropriate under the applicable legal standards. 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 (“Tendered 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 asserting our position that the amount of penalties asserted by U.S. Customs is unreasonable and subject to challenge on various grounds.

On March 27, 2018, we received notice from U.S. Customs Headquarters that it intends to move forward with its pursuit of penalties. The Company has initiated discussions with U.S. Customs Headquarters regarding the scope of penalties asserted and will have the opportunity to further present the arguments set forth in its petition for relief and mitigation of penalties. Based on these arguments and mitigation factors, the Company believes that the probable ultimate penalty amount will range between $3,103 and $12,410 based on the AD/CVD of $6,205 that were recorded in the fourth quarter of 2015. As no amount within the range is a better estimate than any other amount, the Company accrued the minimum amount in the range, $3,103.

For the three months endedMarch 31, 2018, the Company recorded $25 of interest on its reserve for AD/CVD and $3,103 of potential penalties, bringing the total reserved amount related to AD/CVD and penalties as of March 31, 2018 to $6,712. The Tendered Amounts were applied to reduce the reserve, and we expect to pay the remainder of the AD/CVD when they are finally assessed by Customs. The Company will continue to incur legal costs and could also be subject to additional interest.

Patent and Trademark Infringement

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On July 1, 2016, GEODynamics, Inc., a US-based oil and gas perforating equipment manufacturer based in Fort Worth, Texas ("GEODynamics") filed a patent infringement action against DynaEnergetics US, Inc. (“DynaEnergetics”) in the United States District Court for the Eastern District of Texas (“District Court”) alleging infringement of US Patent No. 8,544,563 (the “563 patent”), also based on DynaEnergetics’ US sales of DPEX^® shaped charges. DynaEnergetics denies validity and infringement of the 563 patent and has vigorously defended itself against this lawsuit. As part of that defense, on September 20, 2016, DynaEnergetics filed an Inter Parties Review (IPR) against the 563 patent at the U.S. Patent Trial and Appeal Board (“PTAB”), requesting invalidation of the 563 patent. On March 17, 2017, DynaEnergetics' IPR request was instituted by the PTAB, and on March 1, 2018, PTAB issued its decision in favor of DynaEnergetics, invalidating all challenged claims of the 563 patent. Trial on the 563 patent remains stayed at this time, and DynaEnergetics plans to file for dismissal of the District Court case at the appropriate time.

On April 28, 2017, GEODynamics filed a patent infringement action against DynaEnergetics in District Court alleging infringement of U.S. Patent No. 8,220,394 (the “394 patent”), based on DynaEnergetics' sales of its DPEX^® and HaloFrac^® shaped charges. DynaEnergetics denies validity and infringement of the 394 patent and plans to vigorously defend against this lawsuit. On August 28, 2017, DynaEnergetics filed an IPR against the 394 patent at the PTAB, requesting invalidation of the 394 patent. On March 8, 2018, PTAB issued its decision in which institution of the IPR review was denied. DynaEnergetics will proceed to trial, which is expected to occur in October 2018.

On August 21, 2017, GEODynamics filed a patent infringement action against DynaEnergetics GmbH & Co. KG and DynaEnergetics Beteiligungs GmbH, both wholly owned subsidiaries of DMC (collectively, “DynaEnergetics EU”), in the Regional Court of Düsseldorf, Germany, alleging infringement of the German part DE 60 2004 033 297 of European patent EP 1 671 013 B1 granted on June 29, 2011, a patent related to the 394 patent (the “EP 013 patent”). This action is based on the manufacturing, sale and marketing of DPEX shaped charges in Germany. DynaEnergetics EU denies validity and infringement of the EP 013 patent and plans to vigorously defend against this lawsuit. DynaEnergetics EU filed its defense at the Regional Court of Düsseldorf and a nullity action against EP 013 at the German Federal Patent Court on February 14, 2018. A trial in the infringement proceedings is not yet scheduled but expected in the fourth quarter of 2018, and a trial in the nullity action is not expected before late 2019.

On September 27, 2017, DynaEnergetics GmbH & Co. KG filed a revocation action in the Patents Court, Shorter Trials Scheme in the UK against GEODynamics, asserting that the EP 013 patent, as maintained in the UK, is invalid. GEODynamics filed its defense and a counterclaim alleging infringement of the EP 013 patent in November 2017 based on sales and marketing of DPEX^® shaped charges in the UK. DynaEnergetics denies validity and infringement of the EP 013 patent and plans to vigorously challenge the EP 013 patent and defend against this lawsuit. Trial is currently expected to occur in October 2018.

We do not believe that the 563 patent, the 394 patent, the EP 013 patent or infringement claims based on the patents are valid, and we do not believe it is probable that we will incur a material loss on the 563 matter, the 394 matter or the EP 013 matter. However, if it is determined that the patents are valid and that DynaEnergetics or DynaEnergetics EU, as applicable, has infringed them, it is reasonably possible that our financial statements could be materially affected. We are not able to provide a reasonable estimate of the range of loss, and we have not accrued for any such losses. Such an evaluation includes, among other things, a determination of the total number of infringing sales in the United States or infringing products manufactured in Germany, as applicable, what a reasonable royalty, if any, might be under the circumstances; or, alternatively, the scope of damages and the relevant period for which damages would apply, if any.

11.    RESTRUCTURING

During the fourth quarter of 2017, NobelClad announced plans to consolidate its European production facilities by closing manufacturing operations in France, which it expects to complete by the end of 2018. The proposed measures remain subject to consultation with the local workers council, in accordance with applicable French law, which is expected to be completed in April 2018. NobelClad plans to exit the Rivesaltes production facility, but will maintain its sales and administrative office in France. For the remainder of 2018, we expect to incur approximately $1,300 of restructuring expenses related to severance, equipment moving, legal fees, and contract termination costs.

Total restructuring and impairment charges incurred for these programs are as follows and are reported in the “Restructuring expenses” line item in our Condensed Consolidated Statements of Operations:

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	Three months ended March 31, 2018
	Severance		Asset Impairment		Other Exit Costs		Total
NobelClad	$	53	$	—	$	91	$	144
Total	$	53	$	—	$	91	$	144

During the three months ended March 31, 2018, the changes to the restructuring liability associated with these programs is summarized below:

	December 31, 2017		Expense		Payments and Other Adjustments			Currency Adjustments		March 31, 2018
Severance	$	2,568	$	53	$	(34	)	$	74	$	2,661
Other exit costs	10		91		(100		)	—		1
Total	$	2,578	$	144	$	(134	)	$	74	$	2,662

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ITEM 2.      Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our historical consolidated financial statements and notes, as well as the selected historical consolidated financial data that is included in our Annual Report filed on Form 10-K for the year ended December 31, 2017.

Unless stated otherwise, all currency amounts are presented in thousands of U.S. dollars (000s).

Overview

General

DMC Global Inc. ("DMC"), operates two technical product and process business segments serving the energy, industrial and infrastructure markets. These segments, NobelClad and DynaEnergetics, operate globally through an international network of manufacturing, distribution and sales facilities. 

 Our diversified segments each provide a suite of unique technical products to niche sectors of the global energy, industrial and infrastructure markets, and each has established a strong or leading position in the markets in which it participates. With an underlying focus on free-cash flow generation, our objective is to sustain and grow the market share of our businesses through increased market penetration, development of new applications, and research and development of new and adjacent products that can be sold across our global network of sales and distribution facilities. We routinely explore acquisitions of related businesses that could strengthen or add to our existing product portfolios, or expand our geographic footprint and market presence. We also seek acquisition opportunities outside our current markets that would complement our existing businesses and enable us to build a stronger and more diverse company.

NobelClad

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. While a significant portion of the demand for our clad metal products is driven by maintenance and retrofit projects at existing chemical processing, petrochemical processing, oil refining, and aluminum smelting facilities, new plant construction and large plant expansion projects also account for a significant portion of total demand. These industries tend to be cyclical in nature and timing of new order inflow remains difficult to predict. We use backlog as a primary means to measure the immediate outlook for our NobelClad business. We define “backlog” at any given point in time as all firm, unfulfilled purchase orders and commitments at that time. Most firm purchase orders and commitments are realized, and we expect to fill most backlog orders within the following 12 months. NobelClad's backlog decreased to $35,645 at March 31, 2018 from $37,529 at December 31, 2017.

Cost of products sold for NobelClad includes the cost of metals and alloys used to manufacture clad metal plates, the cost of explosives, employee compensation and benefits, freight, outside processing costs, depreciation of manufacturing facilities and equipment, manufacturing supplies and other manufacturing overhead expenses.

DynaEnergetics

DynaEnergetics designs, manufactures and distributes products utilized by the global oil and gas industry principally for the perforation of oil and gas wells. These products are sold to oilfield service companies in the U.S., Europe, Canada, South America, Africa, the Middle East, Russia, and Asia. DynaEnergetics also sells directly to end-users. The market for perforating products, which are used during the well completion process, generally corresponds with oil and gas exploration and production activity. Exploration activity over the last several years has led to increasingly complex well completion operations, which in turn, has increased the demand for high quality and technically advanced perforating products.

Cost of products sold for DynaEnergetics includes the cost of metals, explosives and other raw materials used to manufacture shaped charges, detonating products and perforating guns as well as employee compensation and benefits, depreciation of manufacturing facilities and equipment, manufacturing supplies and other manufacturing overhead expenses.

Factors Affecting Results

During the three months ended March 31, 2018, the following factors most affected our financial performance:

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• DynaEnergetics sales of $49,121 in the first quarter of 2018 increased 32% sequentially versus the fourth quarter of 2017 and 123% compared with the first quarter of 2017 primarily due to the impact of price increases, favorable product mix, higher activity levels in North America's unconventional onshore oil and gas well-completions sector and increasing customer demand for DynaEnergetics’ perforating products and systems.

• NobelClad’s sales of $18,192 in the first quarter of 2018 increased 5% sequentially and 7% versus the first quarter of 2017 due to the initial shipments related to a large petrochemical project in Asia. 

• Consolidated gross profit of 34% in the first quarter of 2018 improved from 33% in the fourth quarter of 2017 and 27% in the same period of 2017. The improvements primarily related to a higher proportion of DynaEnergetics sales relative to NobelClad sales, coupled with higher average selling prices, improved product mix, and the impact of higher volume on fixed manufacturing overhead expenses.

• Consolidated selling, general and administrative expenses were $13,389 in the first quarter of 2018 compared with $11,688 in the first quarter of 2017. The increase primarily was due to higher salaries and higher wages from headcount additions.

• DynaEnergetics recorded a $3,103 accrual in the first quarter of 2018 related to potential penalties on the anti-dumping and countervailing duties ("AD/CVD") recorded in the fourth quarter of 2015.

• Net debt of $18,582 increased $9,581 from $9,001 at December 31, 2017. The increase in net debt from December 31, 2017 primarily was attributable to borrowing to fund working capital and for the construction of DynaEnergetics' 74,000 square foot manufacturing, assembly and administrative space on its manufacturing facility in Blum, Texas. Net debt is a non-GAAP measure calculated as amounts borrowed under lines of credit less cash and cash equivalents.

Business Outlook

• To address the accelerating demand for its perforating systems, in December 2017, DynaEnergetics commenced construction of a new 74,000 square foot manufacturing, assembly and administrative space at its existing site in Blum, Texas. The facility, which is scheduled to open during the third quarter of 2018, will substantially increase DynaEnergetics' component manufacturing and DynaStage assembly capacity. During the first half of 2018, DynaEnergetics plans to add a second automated DynaSelect detonator line at its facility in Troisdorf, Germany. In the second half of 2018, the business plans to add a second automated shaped-charge manufacturing line at Blum, which will more than double its shaped charge production capacity in the U.S.

• In January 2018, DynaEnergetics announced the implementation of a global price increase applicable to all products. The increase varies by product line and generally ranges from 5% to 8%. Well completion activity is accelerating across DynaEnergetics' global markets, and as customers work to keep pace with the recovery, the business' advanced products and systems are enabling improved efficiencies, greater reliability and lower operating costs. 

• The recent decline in NobelClad’s core repair and maintenance orders from the downstream energy industry has continued in the first quarter of 2018. Despite that, fabricator customers expect improved demand for long-delayed repair, maintenance and upgrade work, although for U.S. fabricators, this may be negatively impacted by new tariff and quotas. It appears higher energy prices and renewed enthusiasm for domestic infrastructure spending may pull forward a number of these projects, which we believe may lead to a recovery in bookings activity during 2018. In October 2017, NobelClad received a $7.4 million purchase order related to a petrochemical project in Asia. This order is expected to ship entirely in the first half of 2018.

Use of Non-GAAP Financial Measures

Adjusted EBITDA is a non-GAAP (generally accepted accounting principles) measure that we believe provides an important indicator of our ongoing operating performance and that we use in operational and financial decision-making. We define EBITDA as net income plus or minus net interest, taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation, restructuring and impairment charges and, when appropriate, other items that management does not utilize in assessing DMC’s operating performance (as further described in the tables below). As a result, internal management reports used during monthly operating reviews feature Adjusted EBITDA and certain management incentive awards are based, in part, on the amount of Adjusted EBITDA achieved during the year.

Net Debt is a non-GAAP measure we use to supplement information in our Condensed Consolidated Financial Statements. We define net debt as lines of credit less cash and cash equivalents. In addition to conventional measures prepared in accordance with GAAP, the Company uses this information to evaluate its performance, and we believe that certain investors may do the same.

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The presence of non-GAAP financial measures in this report is not intended to be considered in isolation or as a substitute for, or superior to, DMC’s GAAP information, and investors are cautioned that the non-GAAP financial measures are limited in their usefulness. Because not all companies use identical calculations, DMC’s presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies.

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Consolidated Results of Operations

Three months ended March 31, 2018 compared with three months ended March 31, 2017

	Three months ended March 31,
	2018			2017			$ change			% change
Net sales	$	67,313		$	38,962		$	28,351		73	%
Gross profit	22,753			10,366			12,387			119	%
Gross profit percentage	33.8		%	26.6		%
COSTS AND EXPENSES:
General and administrative expenses	8,177			7,206			971			13	%
% of net sales	12.1		%	18.5		%
Selling and distribution expenses	5,212			4,482			730			16	%
% of net sales	7.7		%	11.5		%
Amortization of purchased intangible assets	805			984			(179		)	(18	)%
% of net sales	1.2		%	2.5		%
Restructuring expenses	144			—			144			—	%
Anti-dumping duty penalties	3,103			—			3,103			—	%
Operating income (loss)	5,312			(2,306		)	7,618			330	%
Other income (expense), net	(377		)	421			(798		)	(190	)%
Interest expense, net	(465		)	(505		)	40			8	%
Income (loss) before income taxes	4,470			(2,390		)	6,860			287	%
Income tax provision	550			630			(80		)	(13	)%
Net income (loss)	3,920			(3,020		)	6,940			230	%
Adjusted EBITDA	$	11,642		$	930		$	10,712		1,152	%

Net sales increased compared with 2017 primarily due to a 123% increase in DynaEnergetics' net sales fueled by higher market activity levels in North America’s unconventional onshore oil and gas well completions sector and increased customer demand for its advanced perforating products and systems.

Gross profit percentage increased primarily due to a higher proportion of net sales in DynaEnergetics relative to NobelClad and improved pricing and product mix in DynaEnergetics.

General and administrative expenses increased compared with 2017 primarily due to increased salaries and wages and higher stock-based compensation expense.

Selling and distribution increased compared with 2017 primarily due to higher salaries and wages.

Amortization of purchased intangibles decreased compared with 2017 primarily due to fully amortizing certain trademarks in DynaEnergetics as of December 31, 2017.

Restructuring expenses relatedprimarily to legal fees and severance costs associated with the planned closure of NobelClad'smanufacturing operations in France.

Anti-dumping duty penalties represent an accrual for potential penalties on AD/CVD recorded in the DynaEnergetics segment in the fourth quarter of 2015.

Operating income in 2018 compared to operating loss in 2017 primarily due to improved earnings in our DynaEnergetics segment.

Other income (expense), net in 2018 primarily relates to realized and unrealized foreign currency losses compared to realized and unrealized gains in 2017. Our subsidiaries frequently enter into inter-company and third party transactions that are

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denominated in currencies other than their functional currency. Changes in exchange rates with respect to these transactions will result in unrealized gains or losses if 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, generally with maturities up to one month, to offset foreign exchange rate fluctuations on certain 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 immediately in "Other income (expense), net" within our Condensed Consolidated Statements of Operations.

Interest income (expense), net decreased compared with 2017. We wrote off $159 of deferred debt issuance costs in the first quarter of 2018 versus $261 in the first quarter of 2017. The decrease was partially offset by higher interest rates on a larger average outstanding debt balance.

Income tax provision of $550 for the first quarter of 2018 on pretax income of $4,470. The effective rate was favorably impacted by discrete items recorded in the quarter, including a $122 benefit for vesting of restricted stock and a $268 adjustment to reduce the provisional Tax Cuts and Jobs Act transition tax amount originally recorded in the fourth quarter of 2017 due to new guidance issued by the Internal Revenue Service regarding the application of loss carryovers to the tax calculation. We recorded an income tax provision of $630 on a pretax loss of $2,390 for the first quarter of 2017. The tax expense in the first quarter of 2017 related to jurisdictions in which we generated pretax income, while tax benefits in jurisdictions in which we generated pretax losses were offset by valuation allowances.

Net income for the three months ended March 31, 2018 was $3,920, or $0.26 per diluted share, compared with a net loss of $3,020, or $0.21 per diluted share, for the same period in 2017.

Adjusted EBITDA increased compared with 2017 primarily due to the factors discussed above. See "Overview" above for the explanation of the use of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.

	Three months ended March 31,
	2018			2017
Net income (loss)	$	3,920		$	(3,020	)
Interest expense	466			506
Interest income	(1		)	(1		)
Provision for income taxes	550			630
Depreciation	1,570			1,681
Amortization of purchased intangible assets	805			984
EBITDA	7,310			780
Restructuring expenses	144			—
Anti-dumping duty penalties	3,103			—
Stock-based compensation	708			571
Other (income) expense, net	377			(421		)
Adjusted EBITDA	$	11,642		$	930

Business Segment Financial Information

We primarily evaluate performance and allocate resources based on segment revenues, operating income and adjusted EBITDA as well as projected future performance. Segment operating income is defined as revenues less expenses identifiable to the segment. Segment operating income (loss) will reconcile to consolidated income (loss) before income taxes by deducting unallocated corporate expenses, including stock-based compensation, net other expense, net interest expense, and income tax provision.

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NobelClad

Three months ended March 31, 2018 compared with three months ended March 31, 2017

	Three months ended March 31,
	2018			2017			$ change			% change
Net sales	$	18,192		$	16,934		$	1,258		7	%
Gross profit	3,192			3,263			(71		)	(2	)%
Gross profit percentage	17.5		%	19.3		%
COSTS AND EXPENSES:
General and administrative expenses	1,080			1,038			42			4	%
Selling and distribution expenses	1,875			1,739			136			8	%
Amortization of purchased intangible assets	105			91			14			15	%
Restructuring expenses	144			—			144			—	%
Operating income (loss)	(12		)	395			(407		)	(103	)%
Adjusted EBITDA	$	948		$	1,384		$	(436	)	(32	)%

Net sales increased compared with 2017 due to the partial shipment of a large project for the petrochemical industry in Asia during the first quarter of 2018.

Gross profit percentage decreased compared with 2017 primarily due to less favorable margins on the mix of projects in the current year.

General and administrative expenses increased compared with 2017 primarily due to higher salaries and benefits.

Selling and distribution expenses increased compared with 2017 primarily due to higher salaries and benefits as well as higher outside service costs.

Restructuring expenses primarily related to legal fees and severance costs associated with the planned closure ofmanufacturing operations in France.

Operating loss compared with operating income in the first three months of 2017 primarily was due to the unfavorable impact of lower margins on the mix of projects in the current year, higher selling and distribution expenses and restructuring expenses.

Adjusted EBITDA declined compared with 2017 primarily due to the factors discussed above. See "Overview" above for the explanation of the use of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.

	Three months ended March 31,
	2018			2017
Operating income (loss)	$	(12	)	$	395
Adjustments:
Restructuring expenses	144			—
Depreciation	711			898
Amortization of purchased intangibles	105			91
Adjusted EBITDA	$	948		$	1,384

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DynaEnergetics

Three months ended March 31, 2018 compared with three months ended March 31, 2017

	Three months ended March 31,
	2018			2017			$ change			% change
Net sales	$	49,121		$	22,028		$	27,093		123	%
Gross profit	19,627			7,162			12,465			174	%
Gross profit percentage	40.0		%	32.5		%
COSTS AND EXPENSES:
General and administrative expenses	3,844			3,561			283			8	%
Selling and distribution expenses	3,260			2,668			592			22	%
Amortization of purchased intangible assets	700			893			(193		)	(22	)%
Anti-dumping duty penalties	3,103			—			3,103			—	%
Operating income	8,720			40			8,680			21,700	%
Adjusted EBITDA	$	13,382		$	1,716		$	11,666		680	%

Net sales were higher than in 2017 primarily due to higher average selling prices and increased sales volume from improved activity levels in North America’s unconventional onshore oil and gas well completions sector and increased customer demand for DynaEnergetics’ advanced perforating products and systems.

Gross profit percentage increased compared with 2017 due to improved product mix, higher average selling prices, and the favorable impact of higher volume on fixed overhead expenses.

General and administrative expenses increased compared with 2017 primarily due to higher salaries and employee benefits.

Selling and distribution expenses increased compared with 2017 primarily due to higher salaries and employee benefits.

Amortization of purchased intangibles decreased compared with 2017 primarily due to fully amortizing certain trademarks as of December 31, 2017.

Anti-dumping duty penalties represent an accrual for potential penalties owed on the anti-dumping and countervailing duties recorded in the DynaEnergetics segment in 2015.

Operating income wasdue to higher unit volume, favorable product mix and higher average selling prices, partially offset by accrued penalties on anti-dumping duties as well as increased general and administrative expenses and selling and distribution expenses.

Adjusted EBITDA increased compared with 2017 due to the factors discussed above. See "Overview" above for the explanation of the use of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.

	Three months ended March 31,
	2018		2017
Operating income	$	8,720	$	40
Adjustments:
Anti-dumping duty penalties	3,103		—
Depreciation	859		783
Amortization of purchased intangibles	700		893
Adjusted EBITDA	$	13,382	$	1,716

Liquidity and Capital Resources

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We have historically financed our operations from a combination of internally generated cash flow, revolving credit borrowings, and various long-term debt arrangements. We believe that cash flow from operations and funds available under our current credit facilities and any future replacement thereof will be sufficient to fund the working capital, debt service, dividends, announced expansion plans for DynaEnergetics, as well as other capital expenditure requirements of our current business operations for the foreseeable future. Nevertheless, our ability to generate sufficient cash flows from operations will depend upon our success in executing our strategies. If we are unable to (i) realize sales from our backlog; (ii) secure new customer orders; (iii) continue selling products at attractive margins; and (iv) continue to implement cost-effective internal processes, our ability to meet cash requirements through operating activities could be impacted. Also, continued heightened litigation costs or unfavorable court decisions in ongoing patent infringement litigation or AD/CVD matters could negatively impact our ability to meet future cash requirements. Furthermore, any restriction on the availability of borrowings under our credit facilities could negatively affect our ability to meet future cash requirements. In March 2017, we filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission, which has been declared effective, and on which we registered for sale up to $150 million of certain of our securities from time to time and on terms that we may determine in the future. Our ability to access this capital may be limited by market conditions at the time of any future potential offering. There can be no assurance that any such capital will be available on acceptable terms or at all.

Debt facilities

On March 8, 2018, we entered into a five-year $75,000 credit facility which replaced in its entirety our prior syndicated credit facility entered into on February 23, 2015. The new credit facility allows for revolving loans of up to $50,000 with a $20,000 US dollar equivalent sublimit for alternative currency loans. In addition, the new agreement provides for a $25,000 Capital Expenditure Facility (“Capex Facility)” which is to be used to finance our DynaEnergetics manufacturing expansion project in Blum, Texas. The Capex facility allows for advances to fund capital expenditures of the Blum expansion project during year one of the credit facility. At the end of year one, the Capex Facility will convert to a term loan which will be amortizable at 12.5% of principal per year with a balloon payment for the outstanding balance upon the credit facility maturity date in year five. The new facility has a $100,000 accordion feature to increase the commitments under the revolving loan class and/or by adding a term loan subject to approval by applicable lenders. We entered into the credit facility with a syndicate of three banks, with KeyBank, N.A. acting as administrative agent. The syndicated credit facility is secured by the assets of DMC including accounts receivable, inventory, and fixed assets, as well as guarantees and share pledges by DMC and its subsidiaries.

Borrowings under the $50,000 revolving loan and $25,000 Capex Facility can be in the form of one, two, three, or six month London Interbank Offered Rate (“LIBOR”) loans. Additionally, US dollar borrowings on the revolving loan can be in the form of Base Rate loans (Base Rate borrowings are based on the greater of the administrative agent’s Prime rates, an adjusted Federal Funds rates or an adjusted LIBOR rate). LIBOR loans bear interest at the applicable LIBOR rate plus an applicable margin (varying from 1.50% to 3.00%). Base Rate loans bear interest at the defined Base rate plus an applicable margin (varying from 0.50% to 2.00%). All borrowing and repayments under the credit facility have been in the form of one month loans and are reported on a net basis in our Condensed Consolidated Statements of Cash Flows.

Borrowings under the $20,000 Alternate Currency sublimit can be in euros, Canadian dollars, pounds sterling, and in any other currency acceptable to the administrative agent. Alternative currency borrowings denominated in euros, pounds sterling, and any other currency that is dealt with on the London Interbank Deposit Market shall be comprised of LIBOR loans and bear interest at the LIBOR rate plus an applicable margin (varying from 1.50% to 3.00%).

We also maintain a line of credit with a German bank for certain DynaEnergetics operations. This line of credit provides a borrowing capacity of €4,000. 

As of March 31, 2018, total loans of $29,933, including U.S. dollar revolving loans of $26,655 and loans under our Capex Facility of $3,278, were outstanding under our credit facility. While we had approximately $45,067 of available revolving credit loan capacity as of March 31, 2018 under our various credit facilities, future borrowings are subject to compliance with financial covenants that could significantly limit such availability.

There are currently two significant financial covenants under our credit facility, a debt-to-EBITDA leverage ratio ("leverage ratio") and a debt service coverage ratio. The leverage ratio is defined in the credit facility for any trailing four quarter period, as the ratio of Consolidated Funded Indebtedness (as defined in the agreement) on the last day of such period to Consolidated Pro Forma EBITDA for such period. For the March 31, 2018 reporting period, the maximum leverage ratio permitted by our syndicated credit facility was 3.00 to 1.0. The actual leverage ratio as of March 31, 2018, calculated in accordance with the credit facility, as amended, was 0.93 to 1.0.

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The debt service coverage ratio, as defined in the credit facility, means, for any period, the ratio of Consolidated EBITDA less the sum of cash dividends, cash income taxes and Consolidated Unfunded Capital Expenditures (as defined in the agreement) to Debt Service Charges. Consolidated EBITDA is defined above and Debt Service Charges equals the sum of Consolidated Interest Expense paid in cash (as defined in the agreement) and scheduled principal payments of Consolidated Funded Indebtedness (as defined in the agreement). Under our credit facility, the minimum debt service coverage ratio permitted by our credit facility for the March 31, 2018 reporting period is 1.35 to 1.0. The actual debt service coverage ratio for the trailing twelve months ended March 31, 2018 was 22.31 to 1.0.

Our credit facility also includes various other 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, and pledging or disposition of major assets. As of March 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 facility that allowed for revolving loans of $30,000 in U.S. dollars and $5,000 in alternative currencies as well as a $25,000 accordion feature to increase the commitments in any of the loan classes subject to approval by applicable lenders.

Other contractual obligations and commitments

Our long-term debt balance increased to $29,933 at March 31, 2018 from $18,250 at December 31, 2017. Our other contractual obligations and commitments have not materially changed since December 31, 2017.

Cash flows from operating activities

Net cash used in operating activities was $2,978 for the three months ended March 31, 2018 compared with $5,186 in the same period last year. The change was due to increased net working capital requirements from higher sales partially offset by net income in 2018 as compared to a net loss in 2017.

Cash flows from investing activities

Net cash flows used in investing activities for the three months ended March 31, 2018 of $5,302 primarily related to acquisitions of property, plant and equipment for DynaEnergetics' construction of a new 74,000 square foot manufacturing, assembly and administrative space at its existing site in Blum, Texas. Net cash flows used in investing activities for the three months endedMarch 31, 2017 totaled $1,647 and were primarily due to acquisitions of property, plant and equipment.

Cash flows from financing activities

Net cash flows provided by financing activities for the three months ended March 31, 2018 totaled $10,538 compared to $5,382 for the three months ended March 31, 2017, primarily due to higher borrowings on bank lines of credit offset by additional treasury stock purchases.

Payment of Dividends

On February 28, 2018, our Board of Directors declared a quarterly cash dividend of $0.02 per share which was paid on April 16, 2018. The dividend of $295 was payable to shareholders of record as of March 31, 2018. We also paid quarterly cash dividends of $0.02 per share in the first quarter of 2017.

We may pay quarterly dividends subject to capital availability and periodic determinations that cash dividends are in the best interests of our stockholders. Future dividends may be affected by, among other items, our views on potential future capital requirements, future business prospects, debt covenant compliance considerations, changes in income tax laws, and any other factors that our Board of Directors deems relevant. Any determination to pay cash dividends will be at the discretion of the Board of Directors.

Critical Accounting Policies

Except as described below, our critical accounting policies have not changed from those reported in our Annual Report filed on Form 10-K for the year ended December 31, 2017.

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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 or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

There was no cumulative financial statement effect of initially applying the new revenue standard because an analysis of our contracts supported the recognition of revenue consistent with our historical approach. In accordance with the modified retrospective approach, the comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company does not expect the adoption of the new revenue standard to have a material impact to the Company’s revenues or net income on an ongoing basis.

The Company’s revenues are primarily derived from consideration paid by customers for tangible goods. The Company analyzes its different goods and services by segment to determine the appropriate basis for revenue recognition, as described below. Revenue is not generated from sources other than contracts with customers and revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. There are no material upfront costs for operations that are incurred from contracts with customers. On occasion, NobelClad and DynaEnergetics may require customers to make advance payments prior to the shipment of goods. We record such payments as contract liabilities in our Consolidated Balance Sheet.

Our rights to payments for goods transferred to customers are conditional only on the passage of time and not on any other criteria. Payment terms and conditions vary by contract, although terms generally include a requirement of payment within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined that our contracts do not include a significant financing component given the short duration between order initiation and order fulfillment within each of our segments.

NobelClad

Customers agree to terms and conditions at the time of initiating an order. The significant majority of transactions contain a single performance obligation - the delivery of a clad metal product. In instances where multiple products are included within an order, each product represents a separate performance obligation given that: (1) the customer can benefit from each product on a standalone basis and (2) each product is distinct within the context of the contract.

The transaction price is readily determinable and fixed at the time the transaction is entered into with the customer. NobelClad is entitled to each product’s transaction price upon the customer obtaining control of the item. Such control occurs as of a point in time, which is generally based upon relevant International Commercial Terms ("Incoterms") as it relates to product ownership and legal title being transferred. Upon fulfillment of applicable Incoterms, NobelClad has performed its contractual requirements such that it has a present right to payment, and the customer from that point forward bears all risks and rewards of ownership. In addition, at this date, the customer has the ability to direct the use of, or restrict the access to, the asset. No payment discounts, rebates, refunds, or any other forms of variable consideration are included within its contracts. NobelClad also does not provide service-type warranties either via written agreement or customary business practice, nor does it allow customer returns.

For contracts that contain only one performance obligation, the total transaction price is allocated to the sole performance obligation. For less frequent contracts which contain multiple distinct performance obligations, judgment is required to determine the standalone selling price ("SSP") for each performance obligation. NobelClad uses the expected cost plus margin approach in order to estimate SSP, whereby an entity forecasts its expected costs of satisfying a performance obligation and then adds an appropriate margin for that good or service. 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.

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The transaction price is readily determinable and fixed at the time the transaction is entered into with the customer. DynaEnergetics is entitled to each product’s transaction price upon the customer obtaining control of the item. Such control occurs as of a point in time, which is generally based upon relevant Incoterms as it relates to product ownership and legal title being transferred. Upon fulfillment of applicable Incoterms, DynaEnergetics has performed its contractual requirements such that it has a present right to payment, and the customer from that point forward bears all risks and rewards of ownership. In addition, at this date, the customer has the ability to direct the use of, or restrict the access to, the asset. No payment discounts, rebates, refunds, or any other forms of variable consideration are included within contracts. DynaEnergetics also does not provide service-type warranties either via written agreement or customary business practice, nor does it allow customer returns without its prior approval.

For orders that contain only one performance obligation, the total transaction price is allocated to the sole performance obligation. For orders that contain multiple products being purchased by the customer, judgment is required to determine SSP for each distinct performance obligation. However, such judgment largely is mitigated given that products purchased are generally shipped at the same time. In instances where products purchased are not shipped at the same time, DynaEnergetics uses the contractually stated price to determine SSP as this price approximates the price of each good as sold separately.

ITEM 3.  Quantitative and Qualitative Disclosure about Market Risk

Foreign Currency Exchange Rates

Our NobelClad and DynaEnergetics subsidiaries operate globally through an international network of manufacturing, distribution and sales facilities and frequently enter into inter-company and third party transactions that are denominated in currencies other than their functional currency. We use foreign currency forward contracts to offset foreign exchange rate fluctuation on foreign currency denominated asset and liability positions. Foreign currency forward contracts are sensitive to changes in foreign currency exchange rates. Consistent with the use of these contracts to neutralize the effect of exchange rate fluctuations, such unrealized losses or gains would be offset by corresponding gains or losses, respectively, in the remeasurement of the asset and liability positions being hedged. As such, these forward currency contracts and the offsetting underlying asset and liability positions do not create material market risk.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report, and they have concluded that these controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There were no changes that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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Part II - OTHER INFORMATION

Item 1. Legal Proceedings

Anti-dumping and Countervailing Duties

In June 2015, U.S. Customs and Border Protection (“U.S. Customs”) sent us a Notice of Action that proposed to classify certain of our imports as subject to anti-dumping duties pursuant to a 2010 anti-dumping duty (“AD”) order on Oil Country Tubular Goods (“OCTG”) from China. A companion countervailing duty (“CVD”) order on the same product is in effect as well. The Notice of Action covered one entry of certain raw material steel mechanical tubing made in China and imported into the U.S. from Canada by our DynaEnergetics segment during 2015 for use in manufacturing perforating guns.

In July 2015, we sent a response to U.S. Customs outlining the reasons our mechanical tubing imports do not fall within the scope of the AD order on OCTG from China and should not be subject to anti-dumping duties. U.S. Customs proposed to take similar action with respect to other entries of this product and requested an approximately $1,100 cash deposit or bond for AD/CVD.

In August 2015, we posted the bond of approximately $1,100 to U.S. Customs. Subsequently, U.S. Customs declined to conclude on the Company's assertion that the mechanical tubing the Company has been importing is not within the scope of the AD order on OCTG from China. As a result, on September 25, 2015 the Company filed a request for a scope ruling with the U.S. Department of Commerce ("Commerce Department").

On February 15, 2016, the Company received the Commerce Department’s scope ruling, which determined certain imports, primarily used for gun carrier tubing, are included in the scope of the AD/CVD orders on OCTG from China and thus are subject to AD/CVD.

On March 11, 2016, the Company filed an appeal with the U.S. Court of International Trade (“CIT”) related to the Commerce Department’s scope ruling. On February 7, 2017, the CIT remanded the scope ruling to the Commerce Department to reconsider its determination. The Commerce Department filed its remand determination with the CIT on June 7, 2017 continuing to find that the Company's imports at issue are within the scope of the AD/CVD orders on OCTG from China. On March 16, 2018, the CIT issued its decision on the appeal and sustained the Commerce Department’s scope ruling. The Company does not intend to appeal this ruling.

On December 27, 2016, we received notice from U.S. Customs that it may pursue penalties against us related to the AD/CVD issue and demanding tender of alleged loss of AD/CVD in an amount of $3,049, which had previously been accrued for in our financial statements. We filed a response to the notice on February 6, 2017 asserting our position that any decision to pursue penalties would be premature in light of the Remand Order and that penalties would not be appropriate under the applicable legal standards. 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 (“Tendered 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 asserting our position that the amount of penalties asserted by U.S. Customs is unreasonable and subject to challenge on various grounds.

On March 27, 2018, we received notice from U.S. Customs Headquarters that it intends to move forward with its pursuit of penalties. The Company has initiated discussions with U.S. Customs Headquarters regarding the scope of penalties asserted and will have the opportunity to further present the arguments set forth in its petition for relief and mitigation of penalties. Based on these arguments and mitigation factors, the Company believes that the probable ultimate penalty amount will range between $3,103 and $12,410 based on the AD/CVD of $6,205 that were recorded in the fourth quarter of 2015. As no amount within the range is a better estimate than any other amount, the Company accrued the minimum amount in the range, $3,103.

For the three months endedMarch 31, 2018, the Company recorded $25 of interest on its reserve for AD/CVD and $3,103 of potential penalties, bringing the total reserved amount related to AD/CVD and penalties as of March 31, 2018 to $6,712. The Tendered Amounts were applied to reduce the reserve, and we expect to pay the remainder of the AD/CVD when they are finally assessed by Customs. The Company will continue to incur legal defense costs and could also be subject to additional interest.

Patent and Trademark Infringement

33

On July 1, 2016, GEODynamics, Inc., a US-based oil and gas perforating equipment manufacturer based in Fort Worth, Texas ("GEODynamics") filed a patent infringement action against DynaEnergetics US, Inc. (“DynaEnergetics”) in the United States District Court for the Eastern District of Texas (“District Court”) alleging infringement of US Patent No. 8,544,563 (the “563 patent”), also based on DynaEnergetics’ US sales of DPEX^® shaped charges. DynaEnergetics denies validity and infringement of the 563 patent and has vigorously defended itself against this lawsuit. As part of that defense, on September 20, 2016, DynaEnergetics filed an Inter Parties Review (IPR) against the 563 patent at the U.S. Patent Trial and Appeal Board (“PTAB”), requesting invalidation of the 563 patent. On March 17, 2017, DynaEnergetics' IPR request was instituted by the PTAB, and on March 1, 2018, PTAB issued its decision in favor of DynaEnergetics, invalidating all challenged claims of the 563 patent. Trial on the 563 patent remains stayed at this time, and DynaEnergetics plans to file for dismissal of the District Court case at the appropriate time.

On April 28, 2017, GEODynamics filed a patent infringement action against DynaEnergetics in District Court alleging infringement of U.S. Patent No. 8,220,394 (the “394 patent”), based on DynaEnergetics' sales of its DPEX^® and HaloFrac^® shaped charges. DynaEnergetics denies validity and infringement of the 394 patent and plans to vigorously defend against this lawsuit. On August 28, 2017, DynaEnergetics filed an IPR against the 394 patent at the PTAB, requesting invalidation of the 394 patent. On March 8, 2018, PTAB issued its decision in which institution of the IPR review was denied. We will proceed to trial, which is expected to occur in October 2018.

On August 21, 2017, GEODynamics filed a patent infringement action against DynaEnergetics GmbH & Co. KG and DynaEnergetics Beteiligungs GmbH, both wholly owned subsidiaries of DMC (collectively, “DynaEnergetics EU”), in the Regional Court of Düsseldorf, Germany, alleging infringement of the German part DE 60 2004 033 297 of European patent EP 1 671 013 B1 granted on June 29, 2011, a patent related to the 394 patent (the “EP 013 patent”). This action is based on the manufacturing, sale and marketing of DPEX shaped charges in Germany. DynaEnergetics EU denies validity and infringement of the EP 013 patent and plans to vigorously defend against this lawsuit. DynaEnergetics EU filed its defense at the Regional Court of Düsseldorf and a nullity action against EP 013 at the German Federal Patent Court on February 14, 2018. A trial in the infringement proceedings is not yet scheduled but expected in the fourth quarter of 2018, and a trial in the nullity action is not expected before late 2019.

On September 27, 2017, DynaEnergetics GmbH & Co. KG filed a revocation action in the Patents Court, Shorter Trials Scheme in the UK against GEODynamics, asserting that the EP 013 patent, as maintained in the UK, is invalid. GEODynamics filed its defense and a counterclaim alleging infringement of the EP 013 patent in November 2017 based on sales and marketing of DPEX^® shaped charges in the UK. DynaEnergetics denies validity and infringement of the EP 013 patent and plans to vigorously challenge the EP 013 patent and defend against this lawsuit. Trial is currently expected to occur in October 2018.

We do not believe that the 563 patent, the 394 patent, the EP 013 patent or infringement claims based on the patents are valid, and we do not believe it is probable that we will incur a material loss on the 563 matter, the 394 matter or the EP 013 matter. However, if it is determined that the patents are valid and that DynaEnergetics or DynaEnergetics EU, as applicable, has infringed them, it is reasonably possible that our financial statements could be materially affected. We are not able to provide a reasonable estimate of the range of loss, and we have not accrued for any such losses. Such an evaluation includes, among other things, a determination of the total number of infringing sales in the United States or infringing products manufactured in Germany, as applicable, what a reasonable royalty, if any, might be under the circumstances; or, alternatively, the scope of damages and the relevant period for which damages would apply, if any.

Item 1A. Risk Factors

There have been no significant changes in the risk factors identified as being attendant to our business in our Annual Report on Form 10-K for the year ended December 31, 2017.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In connection with the vesting of Company restricted common stock under our equity incentive plans during the first quarter of 2018, we retained shares of common stock in satisfaction of withholding tax obligations. These shares are held as treasury shares by the Company.

34

	Total number of shares purchased (1) (2)	Average price paid per share
January 1 to January 31, 2018	—	$	—
February 1 to February 28, 2018	6,421	$	22.91
March 1 to March 31, 2018	8,909	$	23.16
Total	15,330	$	23.05

(1) All shares purchased in 2018 were to offset tax withholding obligations that occur upon the vesting of restricted common stock under the terms of the 2016 Stock Incentive Plan.

(2) As of March 31, 2018, the maximum number of shares that may yet be purchased would not exceed the employees’ portion of taxes withheld on unvested shares (546,711 shares).

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Our Coolspring property is subject to regulation by the Federal Mine Safety and Health Administration ("MSHA") under the Federal Mine Safety and Health Act of 1977 (the "Mine Act"). Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (The "Dodd-Frank Act"), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. During the quarter ended March 31, 2018, we had no such specified health and safety violations, orders or citations, related assessments or legal actions, mining-related fatalities, or similar events in relation to our United States operations requiring disclosure pursuant to Section 1503(a) of the Dodd-Frank Act.

Item 5. Other Information

None.

Item 6. Exhibits

31.1 Certification of the President and Chief Executive Officer pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of the Chief Financial Officer pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of the President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101The following materials from the Quarterly Report on Form 10-Q of DMC Global Inc. for the quarter ended March 31, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statement of Stockholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.*

*Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

35

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		DMC Global Inc.
		(Registrant)
Date:	April 26, 2018	/s/ Michael Kuta
		Michael Kuta, Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer)

36

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Kevin T. Longe, certify that:

1. I have reviewed this quarterly report on Form 10-Q of DMC Global Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:  April 26, 2018

/s/ Kevin T. Longe

Kevin T. Longe

President and Chief Executive Officer

of DMC Global Inc.

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Michael Kuta, certify that:

1. I have reviewed this quarterly report on Form 10-Q of DMC Global Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:  April 26, 2018

/s/ Michael Kuta

Michael Kuta

Chief Financial Officer of DMC Global Inc.

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of DMC Global Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin T. Longe, President and Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002, that:

(i) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

April 26, 2018

/s/ Kevin T. Longe

Kevin T. Longe

President and Chief Executive Officer

of DMC Global Inc.

A signed original of this written statement required by Section 906 has been provided to DMC Global Inc. and will be retained by DMC Global Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of DMC Global Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Kuta, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(i) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

April 26, 2018

/s/ Michael Kuta

Michael Kuta

Chief Financial Officer of DMC Global Inc.

A signed original of this written statement required by Section 906 has been provided to DMC Global Inc. and will be retained by DMC Global Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	Apr. 26, 2018
Document and Entity Information
Entity Registrant Name	DMC GLOBAL INC.
Entity Central Index Key	0000034067
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		14,875,223

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
CURRENT ASSETS:
Cash and cash equivalents	$ 10,768	$ 8,983
Accounts receivable, net of allowance for doubtful accounts of $1,269 and $1,088, respectively	57,201	49,468
Inventory, net	46,458	35,742
Prepaid expenses and other	10,764	5,763
Total current assets	125,191	99,956
PROPERTY, PLANT AND EQUIPMENT	124,577	121,339
Less - accumulated depreciation	(63,621)	(61,467)
Property, plant and equipment, net	60,956	59,872
PURCHASED INTANGIBLE ASSETS, net	12,121	12,861
DEFERRED TAX ASSETS	0	98
OTHER ASSETS, net	151	296
TOTAL ASSETS	198,419	173,083
CURRENT LIABILITIES:
Accounts payable	22,901	19,826
Accrued expenses	9,964	6,884
Accrued anti-dumping duties and penalties	6,712	3,609
Dividend payable	295	295
Accrued income taxes	4,603	2,939
Accrued employee compensation and benefits	4,687	6,186
Contract liabilities	5,215	5,888
Total current liabilities	54,377	45,627
LINES OF CREDIT	29,350	17,984
DEFERRED TAX LIABILITIES	265	573
OTHER LONG-TERM LIABILITIES	3,070	3,119
Total liabilities	87,062	67,303
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.05 par value; 4,000,000 shares authorized; no issued and outstanding shares	0	0
Common stock, $0.05 par value; 25,000,000 shares authorized; 14,876,190 and 14,782,018 shares outstanding, respectively	747	741
Additional paid-in capital	76,895	76,146
Retained earnings	63,634	60,074
Other cumulative comprehensive loss	(29,214)	(30,819)
Treasury stock, at cost; 72,104 and 39,783 shares, respectively	(705)	(362)
Total stockholders’ equity	111,357	105,780
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 198,419	$ 173,083

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 1,269	$ 1,088
Preferred stock, par value (in dollars per share)	$ 0.05	$ 0.05
Preferred stock, shares authorized	4,000,000	4,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.05	$ 0.05
Common stock, shares authorized	25,000,000	25,000,000
Common stock, shares outstanding	14,876,190	14,782,018
Treasury stock, shares	72,104	39,783

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Income Statement [Abstract]
NET SALES	$ 67,313	$ 38,962
COST OF PRODUCTS SOLD	44,560	28,596
Gross profit	22,753	10,366
COSTS AND EXPENSES:
General and administrative expenses	8,177	7,206
Selling and distribution expenses	5,212	4,482
Amortization of purchased intangible assets	805	984
Restructuring expenses	144	0
Anti-dumping duty penalties	3,103	0
Total costs and expenses	17,441	12,672
OPERATING INCOME (LOSS)	5,312	(2,306)
OTHER INCOME (EXPENSE):
Other income (expense), net	(377)	421
Interest expense	(466)	(506)
Interest income	1	1
INCOME (LOSS) BEFORE INCOME TAXES	4,470	(2,390)
INCOME TAX PROVISION	550	630
NET INCOME (LOSS)	$ 3,920	$ (3,020)
INCOME (LOSS) PER SHARE
Basic (in dollars per share)	$ 0.26	$ (0.21)
Diluted (in dollars per share)	$ 0.26	$ (0.21)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic (in shares)	14,449,915	14,270,365
Diluted (in shares)	14,449,915	14,270,365
DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share)	$ 0.02	$ 0.02

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 3,920	$ (3,020)
Change in cumulative foreign currency translation adjustment	1,605	1,818
Total comprehensive income (loss)	$ 5,525	$ (1,202)

XML

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Retained Earnings	Other Cumulative Comprehensive Loss	Treasury Stock
Increase (Decrease) in Stockholders' Equity
Adjustment for cumulative effect from change in accounting principle (ASU 2016-16)	$ (65)			$ (65)
Balances (in shares) at Dec. 31, 2017		14,821,801				39,783
Balances at Dec. 31, 2017	105,780	$ 741	$ 76,146	60,074	$ (30,819)	$ (362)
Increase (Decrease) in Stockholders' Equity
Net income	3,920			3,920
Change in cumulative foreign currency translation adjustment	1,605				1,605
Shares issued in connection with stock compensation plans (in shares)		126,493
Shares issued in connection with stock compensation plans	0	$ 6	(6)
Stock-based compensation	755		755
Dividends declared	(295)			(295)
Treasury stock purchases (in shares)						(32,321)
Treasury stock purchases	(343)					$ (343)
Balances (in shares) at Mar. 31, 2018		14,948,294				72,104
Balances at Mar. 31, 2018	$ 111,357	$ 747	$ 76,895	$ 63,634	$ (29,214)	$ (705)

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net income (loss)	$ 3,920	$ (3,020)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation (including capital lease amortization)	1,570	1,681
Amortization of purchased intangible assets	805	984
Amortization of deferred debt issuance costs	190	299
Stock-based compensation	708	571
Deferred income tax	(308)	346
Gain on disposal of property, plant and equipment	0	3
Restructuring expenses	144	0
Transition tax liability	(268)	0
Change in:
Accounts receivable, net	(7,360)	(312)
Inventory, net	(10,404)	(1,792)
Prepaid expenses and other	(1,455)	(1,041)
Accounts payable	3,767	626
Contract liabilities	(700)	(453)
Accrued anti-dumping duties and penalties	3,128	(3,003)
Accrued expenses and other liabilities	3,285	(75)
Net cash used in operating activities	(2,978)	(5,186)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisition of property, plant and equipment	(5,302)	(1,649)
Proceeds on sale of property, plant and equipment	0	2
Net cash used in investing activities	(5,302)	(1,647)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Borrowings on bank lines of credit, net	11,176	6,000
Payment of dividends	(295)	(290)
Payment of deferred debt issuance costs	0	(106)
Treasury stock purchases	(343)	(222)
Net cash provided by financing activities	10,538	5,382
EFFECTS OF EXCHANGE RATES ON CASH	(473)	88
NET INCREASE IN CASH AND CASH EQUIVALENTS	1,785	(1,363)
CASH AND CASH EQUIVALENTS, beginning of the period	8,983	6,419
CASH AND CASH EQUIVALENTS, end of the period	$ 10,768	$ 5,056

XML

BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

BASIS OF PRESENTATION

The information included in the condensed consolidated financial statements is unaudited but includes all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the interim periods presented. These condensed consolidated financial statements should be read in conjunction with the financial statements that are included in our Annual Report filed on Form 10-K for the year ended December 31, 2017.

XML

SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The condensed consolidated financial statements include the accounts of DMC Global Inc. ("DMC", "we", "us", "our", or the "Company) and its controlled subsidiaries. Only subsidiaries in which controlling interests are maintained are consolidated. All significant intercompany accounts, profits, and transactions have been eliminated in consolidation.

Income Taxes

We recognize deferred tax assets and liabilities for the expected future income tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. Any effects of changes in income tax rates or tax laws are included in the provision for income taxes in the period of enactment. The deferred income tax impact of tax credits are recognized as an immediate adjustment to income tax expense. We recognize deferred tax assets for the expected future effects of all deductible temporary differences to the extent we believe these assets will more likely than not be realized. We record a valuation allowance when, based on current circumstances, it is more likely than not that all or a portion of the deferred tax assets will not be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, recent financial operations and their associated valuation allowances, if any.

We recognize the tax benefits from uncertain tax positions only when it is more likely than not, based on the technical merits of the position; the tax position will be sustained upon examination, including the resolution of any related appeals or litigation. The tax benefits recognized in the consolidated financial statements from such a position are measured as the largest benefit that is more likely than not of being realized upon ultimate resolution. We recognize interest and penalties related to uncertain tax positions in operating expense.

Revenue Recognition

On January 1, 2018, the Company adopted a new accounting standard, as amended, regarding revenue from contracts with customers using the modified retrospective approach, which was applied to all contracts with customers. Under the new standard, an entity is required to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

There was no cumulative financial statement effect of initially applying the new revenue standard because an analysis of our contracts supported the recognition of revenue consistent with our historical approach. In accordance with the modified retrospective approach, the comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company does not expect the adoption of the new revenue standard to have a material impact to the Company’s revenues or net income on an ongoing basis.

The Company’s revenues are primarily derived from consideration paid by customers for tangible goods. The Company analyzes its different goods and services by segment to determine the appropriate basis for revenue recognition, as described below. Revenue is not generated from sources other than contracts with customers and revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. There are no material upfront costs for operations that are incurred from contracts with customers. On occasion, NobelClad and DynaEnergetics may require customers to make advance payments prior to the shipment of goods. We record such payments as contract liabilities in our Consolidated Balance Sheet. Please refer to Note 5 “Contract Liabilities” for further information.

Our rights to payments for goods transferred to customers are conditional only on the passage of time and not on any other criteria. Payment terms and conditions vary by contract, although terms generally include a requirement of payment within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined that our contracts do not include a significant financing component given the short duration between order initiation and order fulfillment within each of our segments. Refer to Note 8 “Business Segments” for additional disaggregated revenue disclosures.

NobelClad

Customers agree to terms and conditions at the time of initiating an order. The significant majority of transactions contain a single performance obligation - the delivery of a clad metal product. In instances where multiple products are included within an order, each product represents a separate performance obligation given that: (1) the customer can benefit from each product on a standalone basis and (2) each product is distinct within the context of the contract.

The transaction price is readily determinable and fixed at the time the transaction is entered into with the customer. NobelClad is entitled to each product’s transaction price upon the customer obtaining control of the item. Such control occurs as of a point in time, which is generally based upon relevant International Commercial Terms ("Incoterms") as it relates to product ownership and legal title being transferred. Upon fulfillment of applicable Incoterms, NobelClad has performed its contractual requirements such that it has a present right to payment, and the customer from that point forward bears all risks and rewards of ownership. In addition, at this date, the customer has the ability to direct the use of, or restrict the access to, the asset. No payment discounts, rebates, refunds, or any other forms of variable consideration are included within its contracts. NobelClad also does not provide service-type warranties either via written agreement or customary business practice, nor does it allow customer returns.

For contracts that contain only one performance obligation, the total transaction price is allocated to the sole performance obligation. For less frequent contracts which contain multiple distinct performance obligations, judgment is required to determine the standalone selling price ("SSP") for each performance obligation. NobelClad uses the expected cost plus margin approach in order to estimate SSP, whereby an entity forecasts its expected costs of satisfying a performance obligation and then adds an appropriate margin for that good or service. The required judgment described herein largely is mitigated given the short duration between order initiation and complete order fulfillment.

DynaEnergetics

Customers agree to terms and conditions at the time of initiating an order. Transactions contain standard products, which may include perforating system components, such as detonating cord, or systems and associated hardware, including factory-assembled DynaStage^® perforating systems and DynaSelect^® detonators. In instances where multiple products are included within an order, each product represents a separate performance obligation given that: (1) the customer can benefit from each product on a standalone basis and (2) each product is distinct within the context of the contract.

The transaction price is readily determinable and fixed at the time the transaction is entered into with the customer. DynaEnergetics is entitled to each product’s transaction price upon the customer obtaining control of the item. Such control occurs as of a point in time, which is generally based upon relevant Incoterms as it relates to product ownership and legal title being transferred. Upon fulfillment of applicable Incoterms, DynaEnergetics has performed its contractual requirements such that it has a present right to payment, and the customer from that point forward bears all risks and rewards of ownership. In addition, at this date, the customer has the ability to direct the use of, or restrict the access to, the asset. No payment discounts, rebates, refunds, or any other forms of variable consideration are included within contracts. DynaEnergetics also does not provide service-type warranties either via written agreement or customary business practice, nor does it allow customer returns without its prior approval.

For orders that contain only one performance obligation, the total transaction price is allocated to the sole performance obligation. For orders that contain multiple products being purchased by the customer, judgment is required to determine SSP for each distinct performance obligation. However, such judgment largely is mitigated given that products purchased are generally shipped at the same time. In instances where products purchased are not shipped at the same time, DynaEnergetics uses the contractually stated price to determine SSP as this price approximates the price of each good as sold separately.

Earnings Per Share

The Company computes earnings per share ("EPS") using a two-class method, which is an earnings allocation formula that determines EPS for (i) each class of common stock (the Company has a single class of common stock), and (ii) participating securities according to dividends declared and participation rights in undistributed earnings. Restricted stock awards are considered participating securities as they received 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.

	Three months ended March 31,
	2018			2017
Net income (loss) as reported	3,920			(3,020		)
Less: Distributed net income available to participating securities	(8		)	—
Less: Undistributed net income available to participating securities	(94		)	—
Numerator for basic net income per share:	3,818			(3,020		)
Add: Undistributed net income allocated to participating securities	94			—
Less: Undistributed net income reallocated to participating securities	(94		)	—
Numerator for diluted net income per share:	3,818			(3,020		)
Denominator:
Weighted average shares outstanding for basic net income per share	14,449,915			14,270,365
Effect of dilutive securities	—			—
Weighted average shares outstanding for diluted net income per share	14,449,915			14,270,365
Net income (loss) per share:
Basic	$	0.26		$	(0.21	)
Diluted	$	0.26		$	(0.21	)

Because we were in a net loss position for the three months ended March 31, 2017, potentially dilutive shares of 183,083 are anti-dilutive and are excluded from the determination of diluted EPS.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We are required to use an established hierarchy for fair value measurements based upon the inputs to the valuation and the degree to which they are observable or not observable in the market. The three levels in the hierarchy are as follows:                   

• Level 1 — Inputs to the valuation based upon quoted prices (unadjusted) for identical assets or liabilities in active markets that are accessible as of the measurement date.

• Level 2 — Inputs to the valuation include quoted prices in either markets that are not active, or in active markets for similar assets or liabilities, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data.

• Level 3 — Inputs to the valuation that are unobservable inputs for the asset or liability. The highest priority is assigned to Level 1 inputs and the lowest priority to Level 3 inputs.

The carrying value of cash and cash equivalents, trade accounts receivable and payables, accrued expenses and lines of credit approximate their fair value.

Our foreign currency forward contracts are determined using a yield curve model based on quoted market prices. As a result, these investments have been classified as Level 2 in the fair value hierarchy.

We did not did not hold any Level 3 assets or liabilities as of March 31, 2018 or December 31, 2017.

Recently Adopted Accounting Standards

In October 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-16 which removes the prohibition against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. This ASU is effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and the Company adopted this ASU in the first quarter of 2018. The adoption of this ASU resulted in a reduction to January 1, 2018 "Retained earnings" in the Condensed Consolidated Balance Sheet of $65 and eliminated a $65 prepaid income tax recorded in the Consolidated Balance Sheet as of December 31, 2017.

In March 2017, the FASB issued ASU 2017-07 to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost within an entity's financial statements. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The Company adopted this ASU in the first quarter of 2018. The Company records its annual adjustment to its defined benefit pension obligation based upon actuarial calculations performed during the fourth quarter. The adoption of this ASU is not expected to have a material impact on the consolidated financial statements.

Recent Accounting Pronouncements

In February 2016, the FASB issued an ASU which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. This ASU will be effective beginning in the first quarter of 2019. Early adoption is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

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INVENTORIES

3 Months Ended

Mar. 31, 2018

Inventory Disclosure [Abstract]

INVENTORIES

INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. Significant cost elements included in inventory are material, labor, freight, subcontract costs, and manufacturing overhead. As necessary, we record provisions and maintain reserves for excess, slow moving and obsolete inventory. To determine reserve amounts, we regularly review inventory quantities on hand and values, and compare them to estimates of future product demand, market conditions, production requirements and technological developments.

Inventories consist of the following at March 31, 2018 and December 31, 2017 and include reserves of $2,865 and $3,068, respectively:

	March 31, 2018		December 31, 2017
Raw materials	$	21,773	$	16,255
Work-in-process	7,678		6,120
Finished goods	16,703		13,049
Supplies	304		318
	$	46,458	$	35,742

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PURCHASED INTANGIBLE ASSETS

3 Months Ended

Mar. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

PURCHASED INTANGIBLE ASSETS

PURCHASED INTANGIBLE ASSETS

The following table presents details of our purchased intangible assets as of March 31, 2018:

	Gross		Accumulated Amortization			Net
Core technology	$	20,498	$	(10,863	)	$	9,635
Customer relationships	39,833		(37,347		)	2,486
Trademarks / Trade names	2,247		(2,247		)	—
Total intangible assets	$	62,578	$	(50,457	)	$	12,121

The following table presents details of our purchased intangible assets, other than goodwill, as of December 31, 2017:

	Gross		Accumulated Amortization			Net
Core technology	$	20,027	$	(10,333	)	$	9,694
Customer relationships	39,244		(36,077		)	3,167
Trademarks / Trade names	2,149		(2,149		)	—
Total intangible assets	$	61,420	$	(48,559	)	$	12,861

The change in the gross value of our purchased intangible assets from December 31, 2017 to March 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 noncurrent intangible assets related to the historical acquisition.

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CONTRACT LIABILITIES

3 Months Ended

Mar. 31, 2018

Revenue from Contract with Customer [Abstract]

CONTRACT LIABILITIES

CONTRACT LIABILITIES

On occasion, we require customers to make advance payments prior to the shipment of goods in order to help finance our inventory investment on large orders or to keep customers’ credit limits at acceptable levels. As of March 31, 2018 and December 31, 2017, contract liabilities (previously known as customer advances) were as follows:

	March 31, 2018		December 31, 2017
NobelClad	5,121		5,804
DynaEnergetics	94		84
Total	$	5,215	$	5,888

We expect to recognize the revenue associated with contract liabilities over a time period no longer than one year. Of the $5,888 recorded as contract liabilities at December 31, 2017, $1,700 was recorded to net sales during the three months ended March 31, 2018.

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DEBT

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

DEBT

DEBT

Lines of credit consisted of the following at March 31, 2018 and December 31, 2017:

	March 31, 2018		December 31, 2017
Syndicated credit agreement:
U.S. Dollar revolving loan	$	26,655	$	18,250
Alternative currency revolving loan	—		—
Capital expenditure loan	3,278		—
German bank line of credit	—		—
	29,933		18,250
Less current portion	—		—
Long-term lines of credit	29,933		18,250
Less: debt issuance costs	583		266
Lines of credit	$	29,350	$	17,984

Syndicated Credit Agreement

On March 8, 2018, we entered into a five-year $75,000 syndicated credit agreement (“credit facility”) which replaced in its entirety our prior syndicated credit facility entered into on February 23, 2015. The new credit facility allows for revolving loans of up to $50,000 with a $20,000 US dollar equivalent sublimit for alternative currency loans. In addition, the new agreement provides for a $25,000 Capital Expenditure Facility (“Capex Facility") which is to be used to finance our DynaEnergetics manufacturing expansion project in Blum, Texas. The Capex facility allows for advances to fund capital expenditures of the Blum expansion project during year one of the credit facility. At the end of year one, the Capex Facility will convert to a term loan which will be amortizable at 12.5% of principal per year with a balloon payment for the outstanding balance upon the credit facility maturity date in year five. The new facility has a $100,000 accordion feature to increase the commitments under the revolving loan class and/or by adding a term loan subject to approval by applicable lenders. We entered into the credit facility with a syndicate of three banks, with KeyBank, N.A. acting as administrative agent. The syndicated credit facility is secured by the assets of DMC including accounts receivable, inventory, and fixed assets, as well as guarantees and share pledges by DMC and its subsidiaries.

Borrowings under the $50,000 revolving loan and $25,000 Capex Facility can be in the form of one, two, three, or six month London Interbank Offered Rate (“LIBOR”) loans. Additionally, US dollar borrowings on the revolving loan can be in the form of Base Rate loans (Base Rate borrowings are based on the greater of the administrative agent’s Prime rates, an adjusted Federal Funds rates or an adjusted LIBOR rate). LIBOR loans bear interest at the applicable LIBOR rate plus an applicable margin (varying from 1.50% to 3.00%). Base Rate loans bear interest at the defined Base rate plus an applicable margin (varying from 0.50% to 2.00%). All borrowing and repayments under the credit facility have been in the form of one month loans and are reported on a net basis in our Condensed Consolidated Statements of Cash Flows.

Borrowings under the $20,000 alternate currency sublimit can be in euros, Canadian dollars, pounds sterling, and in any other currency acceptable to the administrative agent. Alternative currency borrowings denominated in euros, pounds sterling, and any other currency that is dealt with on the London Interbank Deposit Market shall be comprised of LIBOR loans and bear interest at the LIBOR rate plus an applicable margin (varying from 1.50% to 3.00%).

The credit facility includes various covenants and restrictions, certain of which relate to the payment of dividends or other distributions to stockholders; redemption of capital stock; incurrence of additional indebtedness; mortgaging, pledging or disposition of major assets; and maintenance of specified ratios. As of March 31, 2018, we were in compliance with all financial covenants and other provisions of our debt agreements.

We also maintain a line of credit with a German bank for certain European operations. This line of credit provides a borrowing capacity of €4,000, of which €2,783 is available as of March 31, 2018 after considering outstanding letters of credit.

Included in lines of credit are deferred debt issuance costs of $583 and $266 as of March 31, 2018 and December 31, 2017, respectively. Upon entering into the credit facility, we wrote off $159 of previously deferred debt issuance costs and incurred $507 of additional costs. Debt issuance costs incurred with the credit facility were paid directly by the administrative agent and increased outstanding amounts under U.S. dollar revolving loans. Remaining deferred debt issuance costs are being amortized over the remaining term of the credit facility which expires on March 8, 2023.

As of December 31, 2017, we had a $35,000 credit facility that allowed for revolving loans of $30,000 in U.S. dollars and $5,000 in alternative currencies as well as a $25,000 accordion feature to increase the commitments in any of the loan classes subject to approval by applicable lenders.

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INCOME TAXES

3 Months Ended

Mar. 31, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The effective tax rate for each of the periods reported differs from the U.S. statutory rate primarily due to variation in contribution to consolidated pre-tax income from each jurisdiction for the respective periods, differences between the U.S. and foreign tax rates (which range from 20% to 34%) on earnings that have been permanently reinvested and changes to valuation allowances on our deferred tax assets.

The Tax Cuts and Jobs Act ("TCJA") was enacted in December 2017. Among other things, the TCJA reduced the U.S. federal corporate tax rate from 35% to 21% beginning in 2018, required companies to pay a one-time transition tax on previously unremitted earnings of non-U.S. subsidiaries that were previously tax deferred, and created new taxes on certain foreign sourced earnings. The SEC staff issued Staff Accounting Bulletin (SAB) 118, which provided guidance on accounting for enactment effects of the TCJA. SAB 118 provided a measurement period of up to one year from the TCJA’s enactment date for companies to complete their accounting under ASC 740. In accordance with SAB 118, to the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in its financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the TCJA.

In connection with our initial analysis of the impact of the enactment of the TCJA, the Company recorded net tax expense of $946 in the fourth quarter of 2017. In response to additional guidance received from the Internal Revenue Service, the Company recorded net tax benefit of $268 in the first quarter of 2018, reducing the provisional liability to $678. For various reasons that are discussed more fully below, including the issuance of additional technical and interpretive guidance, we have not completed accounting for the income tax effects of certain elements of the TCJA. However, we were able to make reasonable estimates of the TCJA’s effects and, as such, recorded provisional amounts related to the transition tax and the remeasurement of deferred tax assets and liabilities.

The transition tax is a tax on previously untaxed accumulated and current earnings and profits (E&P) of certain of the Company’s non-U.S. subsidiaries. To determine the amount of the transition tax, we must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. E&P is similar to retained earnings of the subsidiary, but requires other adjustments to conform to U.S. tax rules. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. We were able to make a reasonable estimate of the transition tax and recorded a provisional obligation and additional income tax expense of $946 in the fourth quarter of 2017, which was reduced to $678 in the first quarter of 2018. The Company expects to elect to pay this liability over eight years. As of March 31, 2018, we reflected $75 and $603 in current accrued income taxes and other long term liabilities, respectively. However, the Company is continuing to gather additional information and will consider additional technical guidance to more precisely compute and account for the amount of the transition tax in the measurement period. This amount may change when we finalize the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation, finalize the calculation of non-U.S. income taxes paid on such earnings, and finalize our determination on the impact of the deemed repatriation of foreign earnings on 2017 taxable income.

In addition to the transition tax, the TCJA introduced a territorial tax system, which will be effective beginning in 2018. The territorial tax system may impact the Company’s overall global capital and legal entity structure, working capital, and repatriation plan on a go-forward basis. In light of the territorial tax system, and other new international provisions within the TCJA that are effective beginning in 2018, the Company is currently analyzing its global capital and legal entity structure, working capital requirements, and repatriation plans. We have not completed our full analysis with respect to the impact of the TCJA on our indefinite reinvestment assertion, and we are not yet able to make reasonable estimates of its related effects. Therefore, no provisional adjustments relative to the territorial tax system and our indefinite reinvestment assertion were recorded. Further, it is impracticable for the Company to estimate any future tax costs for any unrecognized deferred tax liabilities associated with its indefinite reinvestment assertion as of December 31, 2017 or March 31, 2018, because the actual tax liability, if any, would be dependent on complex analysis and calculations considering various tax laws, exchange rates, circumstances existing when a repatriation, sale, or liquidation occurs, or other factors. If there are any changes to our indefinite reinvestment assertion as a result of finalizing our assessment of the TCJA, the Company will adjust its provisional estimates, record, and disclose any tax impacts in the appropriate period, pursuant to SAB 118.

We remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21% under the TCJA. As our U.S. deferred tax assets are fully offset by a valuation allowance, there was no net additional tax impact related to deferred tax assets and liabilities recognized in the fourth quarter of 2017. We are still analyzing certain aspects of the TCJA, considering additional technical guidance, and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. This includes, but is not limited to, the impacts of changes to Code Section 162(m) on our deferred tax assets related to compensation, and the potential impacts of the global intangible low-taxed income (“GILTI”) provision within the TCJA on deferred tax assets and liabilities.

We have not completed our full analysis with respect to the GILTI provision within the TCJA, and we are not yet able to make reasonable estimates of its related effects. Therefore, no provisional adjustments relative to GILTI were recorded. Currently, we have not yet elected a policy as to whether we will recognize deferred taxes for basis differences expected to reverse as GILTI or whether we will account for GILTI as period costs if and when incurred. The Company is currently evaluating other elements of the TCJA for which the Company was not yet able to make reasonable estimates of the enactment impact and for which it would continue accounting for them in accordance with ASC 740 on the basis of the tax laws in effect before the TCJA.

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BUSINESS SEGMENTS

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

BUSINESS SEGMENTS

BUSINESS SEGMENTS

Our business is organized into two segments: NobelClad and DynaEnergetics. NobelClad is a global leader in the production of explosion-welded clad metal plates for use in the construction of corrosion resistant industrial processing equipment and specialized transition joints. DynaEnergetics designs, manufactures and distributes products utilized by the global oil and gas industry principally for the perforation of oil and gas wells.

Our reportable segments are separately managed strategic business units that offer different products and services. Each segment’s products are marketed to different customer types and require different manufacturing processes and technologies.

Segment information is presented for the three months endedMarch 31, 2018 and 2017 as follows:

	Three months ended March 31,
	2018		2017
Net sales:
NobelClad	$	18,192	$	16,934
DynaEnergetics	49,121		22,028
Consolidated net sales	$	67,313	$	38,962

	Three months ended March 31,
	2018			2017
Operating income (loss)
NobelClad	$	(12	)	$	395
DynaEnergetics	8,720			40
Segment operating income	8,708			435
Unallocated corporate expenses	(2,688		)	(2,170		)
Stock-based compensation	(708		)	(571		)
Other income (expense), net	(377		)	421
Interest expense	(466		)	(506		)
Interest income	1			1
Income (loss) before income taxes	$	4,470		$	(2,390	)

	Three months ended March 31,
	2018		2017
Depreciation and amortization:
NobelClad	$	816	$	989
DynaEnergetics	1,559		1,676
Segment depreciation and amortization	$	2,375	$	2,665

The disaggregation of revenue earned from contracts with customers based on the geographic location of the customer is as follows. Revenues that would have been reported under previous accounting guidance would not have been materially different from the amounts shown below.

	Three months ended March 31,
	2018		2017
United States	5,706		5,979
Canada	1,794		2,666
United Arab Emirates	131		357
France	951		571
South Korea	1,003		448
Germany	1,613		2,031
Oman	161		1,172
India	770		208
Spain	168		222
China	3,458		40
Italy	205		536
Sweden	138		430
Rest of the world	2,094		2,274
Total NobelClad	$	18,192	$	16,934

	Three months ended March 31,
	2018		2017
United States	36,130		14,446
Canada	5,785		2,779
United Arab Emirates	523		22
France	52		35
Oman	682		113
Germany	28		37
Russia	1,282		929
India	635		823
Egypt	542		321
Romania	244		263
Italy	—		24
Hong Kong	—		457
Rest of the world	3,218		1,779
Total DynaEnergetics	$	49,121	$	22,028

During the three months endedMarch 31, 2018 and 2017, no one customer accounted for more than 10% of total net sales.

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DERIVATIVE INSTRUMENTS

3 Months Ended

Mar. 31, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS

We are exposed to foreign currency exchange risk resulting from fluctuations in exchange rates, primarily the U.S. dollar to euro, the U.S. dollar to Canadian dollar, the euro to the Russian ruble, and, to a lesser extent, other currencies, arising from inter-company and third party transactions entered into by our subsidiaries that are denominated in currencies other than their functional currency. Changes in exchange rates with respect to these transactions result in unrealized gains or losses if such transactions are unsettled at the end of the reporting period or realized gains or losses at settlement of the transaction. We use foreign currency forward contracts to offset foreign exchange rate fluctuations on foreign currency denominated asset and liability positions. None of these contracts are designated as accounting hedges, and all changes in the fair value of the forward contracts are recognized in "Other income (expense), net" within our Condensed Consolidated Statements of Operations.

We execute derivatives with a specialized foreign exchange brokerage firm. The primary credit risk inherent in derivative agreements represents the possibility that a loss may occur from the nonperformance of a counterparty to the agreements. We perform a review of the credit risk of our counterparties at the inception of the contract and on an ongoing basis. We anticipate that our counterparties will be able to fully satisfy their obligations under the agreements but will take action if doubt arises regarding the counterparties' ability to perform.

As of March 31, 2018, the notional amounts of the forward contracts the Company held to purchase currencies were $5,563, and the notional amounts of forward contracts the Company held to sell currencies were $7,398. The fair values of outstanding foreign currency forward contracts were approximately $11 (recorded in accrued expenses) at March 31, 2018.

The following table presents the location and amount of net gains from hedging activities for the three months ended March 31, 2018 and 2017:

		Three months ended March 31,
Derivatives	Income Statement Location	2018		2017
Foreign currency contracts	Other income (expense), net	$	208	$	—
Total gain		$	208	$	—

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Contingent Liabilities

The Company records an accrual for contingent liabilities when a loss is both probable and reasonably estimable. If some amount within a range of loss appears to be a better estimate than any other amount within the range, that amount is accrued. When no amount within a range of loss appears to be a better estimate than any other amount, the lowest amount in the range is accrued.

Anti-dumping and Countervailing Duties

In June 2015, U.S. Customs and Border Protection (“U.S. Customs”) sent us a Notice of Action that proposed to classify certain of our imports as subject to anti-dumping duties pursuant to a 2010 anti-dumping duty (“AD”) order on Oil Country Tubular Goods (“OCTG”) from China. A companion countervailing duty (“CVD”) order on the same product is in effect as well. The Notice of Action covered one entry of certain raw material steel mechanical tubing made in China and imported into the U.S. from Canada by our DynaEnergetics segment during 2015 for use in manufacturing perforating guns.

In July 2015, we sent a response to U.S. Customs outlining the reasons our mechanical tubing imports do not fall within the scope of the AD order on OCTG from China and should not be subject to anti-dumping duties. U.S. Customs proposed to take similar action with respect to other entries of this product and requested an approximately $1,100 cash deposit or bond for AD/CVD.

In August 2015, we posted the bond of approximately $1,100 to U.S. Customs. Subsequently, U.S. Customs declined to conclude on the Company's assertion that the mechanical tubing the Company has been importing is not within the scope of the AD order on OCTG from China. As a result, on September 25, 2015 the Company filed a request for a scope ruling with the U.S. Department of Commerce ("Commerce Department").

On February 15, 2016, the Company received the Commerce Department’s scope ruling, which determined certain imports, primarily used for gun carrier tubing, are included in the scope of the AD/CVD orders on OCTG from China and thus are subject to AD/CVD.

On March 11, 2016, the Company filed an appeal with the U.S. Court of International Trade (“CIT”) related to the Commerce Department’s scope ruling. On February 7, 2017, the CIT remanded the scope ruling to the Commerce Department to reconsider its determination. The Commerce Department filed its remand determination with the CIT on June 7, 2017 continuing to find that the Company's imports at issue are within the scope of the AD/CVD orders on OCTG from China. On March 16, 2018, the CIT issued its decision on the appeal and sustained the Commerce Department’s scope ruling. The Company does not intend to appeal this ruling.

On December 27, 2016, we received notice from U.S. Customs that it may pursue penalties against us related to the AD/CVD issue and demanding tender of alleged loss of AD/CVD in an amount of $3,049, which had previously been accrued for in our financial statements. We filed a response to the notice on February 6, 2017 asserting our position that any decision to pursue penalties would be premature in light of the Remand Order and that penalties would not be appropriate under the applicable legal standards. 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 (“Tendered 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 asserting our position that the amount of penalties asserted by U.S. Customs is unreasonable and subject to challenge on various grounds.

On March 27, 2018, we received notice from U.S. Customs Headquarters that it intends to move forward with its pursuit of penalties. The Company has initiated discussions with U.S. Customs Headquarters regarding the scope of penalties asserted and will have the opportunity to further present the arguments set forth in its petition for relief and mitigation of penalties. Based on these arguments and mitigation factors, the Company believes that the probable ultimate penalty amount will range between $3,103 and $12,410 based on the AD/CVD of $6,205 that were recorded in the fourth quarter of 2015. As no amount within the range is a better estimate than any other amount, the Company accrued the minimum amount in the range, $3,103.

For the three months endedMarch 31, 2018, the Company recorded $25 of interest on its reserve for AD/CVD and $3,103 of potential penalties, bringing the total reserved amount related to AD/CVD and penalties as of March 31, 2018 to $6,712. The Tendered Amounts were applied to reduce the reserve, and we expect to pay the remainder of the AD/CVD when they are finally assessed by Customs. The Company will continue to incur legal costs and could also be subject to additional interest.

Patent and Trademark Infringement

On July 1, 2016, GEODynamics, Inc., a US-based oil and gas perforating equipment manufacturer based in Fort Worth, Texas ("GEODynamics") filed a patent infringement action against DynaEnergetics US, Inc. (“DynaEnergetics”) in the United States District Court for the Eastern District of Texas (“District Court”) alleging infringement of US Patent No. 8,544,563 (the “563 patent”), also based on DynaEnergetics’ US sales of DPEX^® shaped charges. DynaEnergetics denies validity and infringement of the 563 patent and has vigorously defended itself against this lawsuit. As part of that defense, on September 20, 2016, DynaEnergetics filed an Inter Parties Review (IPR) against the 563 patent at the U.S. Patent Trial and Appeal Board (“PTAB”), requesting invalidation of the 563 patent. On March 17, 2017, DynaEnergetics' IPR request was instituted by the PTAB, and on March 1, 2018, PTAB issued its decision in favor of DynaEnergetics, invalidating all challenged claims of the 563 patent. Trial on the 563 patent remains stayed at this time, and DynaEnergetics plans to file for dismissal of the District Court case at the appropriate time.

On April 28, 2017, GEODynamics filed a patent infringement action against DynaEnergetics in District Court alleging infringement of U.S. Patent No. 8,220,394 (the “394 patent”), based on DynaEnergetics' sales of its DPEX^® and HaloFrac^® shaped charges. DynaEnergetics denies validity and infringement of the 394 patent and plans to vigorously defend against this lawsuit. On August 28, 2017, DynaEnergetics filed an IPR against the 394 patent at the PTAB, requesting invalidation of the 394 patent. On March 8, 2018, PTAB issued its decision in which institution of the IPR review was denied. DynaEnergetics will proceed to trial, which is expected to occur in October 2018.

On August 21, 2017, GEODynamics filed a patent infringement action against DynaEnergetics GmbH & Co. KG and DynaEnergetics Beteiligungs GmbH, both wholly owned subsidiaries of DMC (collectively, “DynaEnergetics EU”), in the Regional Court of Düsseldorf, Germany, alleging infringement of the German part DE 60 2004 033 297 of European patent EP 1 671 013 B1 granted on June 29, 2011, a patent related to the 394 patent (the “EP 013 patent”). This action is based on the manufacturing, sale and marketing of DPEX shaped charges in Germany. DynaEnergetics EU denies validity and infringement of the EP 013 patent and plans to vigorously defend against this lawsuit. DynaEnergetics EU filed its defense at the Regional Court of Düsseldorf and a nullity action against EP 013 at the German Federal Patent Court on February 14, 2018. A trial in the infringement proceedings is not yet scheduled but expected in the fourth quarter of 2018, and a trial in the nullity action is not expected before late 2019.

On September 27, 2017, DynaEnergetics GmbH & Co. KG filed a revocation action in the Patents Court, Shorter Trials Scheme in the UK against GEODynamics, asserting that the EP 013 patent, as maintained in the UK, is invalid. GEODynamics filed its defense and a counterclaim alleging infringement of the EP 013 patent in November 2017 based on sales and marketing of DPEX^® shaped charges in the UK. DynaEnergetics denies validity and infringement of the EP 013 patent and plans to vigorously challenge the EP 013 patent and defend against this lawsuit. Trial is currently expected to occur in October 2018.

We do not believe that the 563 patent, the 394 patent, the EP 013 patent or infringement claims based on the patents are valid, and we do not believe it is probable that we will incur a material loss on the 563 matter, the 394 matter or the EP 013 matter. However, if it is determined that the patents are valid and that DynaEnergetics or DynaEnergetics EU, as applicable, has infringed them, it is reasonably possible that our financial statements could be materially affected. We are not able to provide a reasonable estimate of the range of loss, and we have not accrued for any such losses. Such an evaluation includes, among other things, a determination of the total number of infringing sales in the United States or infringing products manufactured in Germany, as applicable, what a reasonable royalty, if any, might be under the circumstances; or, alternatively, the scope of damages and the relevant period for which damages would apply, if any.

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RESTRUCTURING

3 Months Ended

Mar. 31, 2018

Restructuring and Related Activities [Abstract]

RESTRUCTURING

RESTRUCTURING

During the fourth quarter of 2017, NobelClad announced plans to consolidate its European production facilities by closing manufacturing operations in France, which it expects to complete by the end of 2018. The proposed measures remain subject to consultation with the local workers council, in accordance with applicable French law, which is expected to be completed in April 2018. NobelClad plans to exit the Rivesaltes production facility, but will maintain its sales and administrative office in France. For the remainder of 2018, we expect to incur approximately $1,300 of restructuring expenses related to severance, equipment moving, legal fees, and contract termination costs.

Total restructuring and impairment charges incurred for these programs are as follows and are reported in the “Restructuring expenses” line item in our Condensed Consolidated Statements of Operations:

	Three months ended March 31, 2018
	Severance		Asset Impairment		Other Exit Costs		Total
NobelClad	$	53	$	—	$	91	$	144
Total	$	53	$	—	$	91	$	144

During the three months ended March 31, 2018, the changes to the restructuring liability associated with these programs is summarized below:

	December 31, 2017		Expense		Payments and Other Adjustments			Currency Adjustments		March 31, 2018
Severance	$	2,568	$	53	$	(34	)	$	74	$	2,661
Other exit costs	10		91		(100		)	—		1
Total	$	2,578	$	144	$	(134	)	$	74	$	2,662

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

The condensed consolidated financial statements include the accounts of DMC Global Inc. ("DMC", "we", "us", "our", or the "Company) and its controlled subsidiaries. Only subsidiaries in which controlling interests are maintained are consolidated. All significant intercompany accounts, profits, and transactions have been eliminated in consolidation.

Income Taxes

Income Taxes

We recognize deferred tax assets and liabilities for the expected future income tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. Any effects of changes in income tax rates or tax laws are included in the provision for income taxes in the period of enactment. The deferred income tax impact of tax credits are recognized as an immediate adjustment to income tax expense. We recognize deferred tax assets for the expected future effects of all deductible temporary differences to the extent we believe these assets will more likely than not be realized. We record a valuation allowance when, based on current circumstances, it is more likely than not that all or a portion of the deferred tax assets will not be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, recent financial operations and their associated valuation allowances, if any.

We recognize the tax benefits from uncertain tax positions only when it is more likely than not, based on the technical merits of the position; the tax position will be sustained upon examination, including the resolution of any related appeals or litigation. The tax benefits recognized in the consolidated financial statements from such a position are measured as the largest benefit that is more likely than not of being realized upon ultimate resolution. We recognize interest and penalties related to uncertain tax positions in operating expense.

Revenue Recognition

Revenue Recognition

On January 1, 2018, the Company adopted a new accounting standard, as amended, regarding revenue from contracts with customers using the modified retrospective approach, which was applied to all contracts with customers. Under the new standard, an entity is required to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

There was no cumulative financial statement effect of initially applying the new revenue standard because an analysis of our contracts supported the recognition of revenue consistent with our historical approach. In accordance with the modified retrospective approach, the comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company does not expect the adoption of the new revenue standard to have a material impact to the Company’s revenues or net income on an ongoing basis.

The Company’s revenues are primarily derived from consideration paid by customers for tangible goods. The Company analyzes its different goods and services by segment to determine the appropriate basis for revenue recognition, as described below. Revenue is not generated from sources other than contracts with customers and revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. There are no material upfront costs for operations that are incurred from contracts with customers. On occasion, NobelClad and DynaEnergetics may require customers to make advance payments prior to the shipment of goods. We record such payments as contract liabilities in our Consolidated Balance Sheet. Please refer to Note 5 “Contract Liabilities” for further information.

Our rights to payments for goods transferred to customers are conditional only on the passage of time and not on any other criteria. Payment terms and conditions vary by contract, although terms generally include a requirement of payment within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined that our contracts do not include a significant financing component given the short duration between order initiation and order fulfillment within each of our segments. Refer to Note 8 “Business Segments” for additional disaggregated revenue disclosures.

NobelClad

Customers agree to terms and conditions at the time of initiating an order. The significant majority of transactions contain a single performance obligation - the delivery of a clad metal product. In instances where multiple products are included within an order, each product represents a separate performance obligation given that: (1) the customer can benefit from each product on a standalone basis and (2) each product is distinct within the context of the contract.

The transaction price is readily determinable and fixed at the time the transaction is entered into with the customer. NobelClad is entitled to each product’s transaction price upon the customer obtaining control of the item. Such control occurs as of a point in time, which is generally based upon relevant International Commercial Terms ("Incoterms") as it relates to product ownership and legal title being transferred. Upon fulfillment of applicable Incoterms, NobelClad has performed its contractual requirements such that it has a present right to payment, and the customer from that point forward bears all risks and rewards of ownership. In addition, at this date, the customer has the ability to direct the use of, or restrict the access to, the asset. No payment discounts, rebates, refunds, or any other forms of variable consideration are included within its contracts. NobelClad also does not provide service-type warranties either via written agreement or customary business practice, nor does it allow customer returns.

For contracts that contain only one performance obligation, the total transaction price is allocated to the sole performance obligation. For less frequent contracts which contain multiple distinct performance obligations, judgment is required to determine the standalone selling price ("SSP") for each performance obligation. NobelClad uses the expected cost plus margin approach in order to estimate SSP, whereby an entity forecasts its expected costs of satisfying a performance obligation and then adds an appropriate margin for that good or service. The required judgment described herein largely is mitigated given the short duration between order initiation and complete order fulfillment.

DynaEnergetics

Customers agree to terms and conditions at the time of initiating an order. Transactions contain standard products, which may include perforating system components, such as detonating cord, or systems and associated hardware, including factory-assembled DynaStage^® perforating systems and DynaSelect^® detonators. In instances where multiple products are included within an order, each product represents a separate performance obligation given that: (1) the customer can benefit from each product on a standalone basis and (2) each product is distinct within the context of the contract.

The transaction price is readily determinable and fixed at the time the transaction is entered into with the customer. DynaEnergetics is entitled to each product’s transaction price upon the customer obtaining control of the item. Such control occurs as of a point in time, which is generally based upon relevant Incoterms as it relates to product ownership and legal title being transferred. Upon fulfillment of applicable Incoterms, DynaEnergetics has performed its contractual requirements such that it has a present right to payment, and the customer from that point forward bears all risks and rewards of ownership. In addition, at this date, the customer has the ability to direct the use of, or restrict the access to, the asset. No payment discounts, rebates, refunds, or any other forms of variable consideration are included within contracts. DynaEnergetics also does not provide service-type warranties either via written agreement or customary business practice, nor does it allow customer returns without its prior approval.

For orders that contain only one performance obligation, the total transaction price is allocated to the sole performance obligation. For orders that contain multiple products being purchased by the customer, judgment is required to determine SSP for each distinct performance obligation. However, such judgment largely is mitigated given that products purchased are generally shipped at the same time. In instances where products purchased are not shipped at the same time, DynaEnergetics uses the contractually stated price to determine SSP as this price approximates the price of each good as sold separately.

Earnings Per Share

Earnings Per Share

The Company computes earnings per share ("EPS") using a two-class method, which is an earnings allocation formula that determines EPS for (i) each class of common stock (the Company has a single class of common stock), and (ii) participating securities according to dividends declared and participation rights in undistributed earnings. Restricted stock awards are considered participating securities as they received 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.

	Three months ended March 31,
	2018			2017
Net income (loss) as reported	3,920			(3,020		)
Less: Distributed net income available to participating securities	(8		)	—
Less: Undistributed net income available to participating securities	(94		)	—
Numerator for basic net income per share:	3,818			(3,020		)
Add: Undistributed net income allocated to participating securities	94			—
Less: Undistributed net income reallocated to participating securities	(94		)	—
Numerator for diluted net income per share:	3,818			(3,020		)
Denominator:
Weighted average shares outstanding for basic net income per share	14,449,915			14,270,365
Effect of dilutive securities	—			—
Weighted average shares outstanding for diluted net income per share	14,449,915			14,270,365
Net income (loss) per share:
Basic	$	0.26		$	(0.21	)
Diluted	$	0.26		$	(0.21	)

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We are required to use an established hierarchy for fair value measurements based upon the inputs to the valuation and the degree to which they are observable or not observable in the market. The three levels in the hierarchy are as follows:                   

• Level 1 — Inputs to the valuation based upon quoted prices (unadjusted) for identical assets or liabilities in active markets that are accessible as of the measurement date.

• Level 2 — Inputs to the valuation include quoted prices in either markets that are not active, or in active markets for similar assets or liabilities, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data.

• Level 3 — Inputs to the valuation that are unobservable inputs for the asset or liability. The highest priority is assigned to Level 1 inputs and the lowest priority to Level 3 inputs.

The carrying value of cash and cash equivalents, trade accounts receivable and payables, accrued expenses and lines of credit approximate their fair value.

Our foreign currency forward contracts are determined using a yield curve model based on quoted market prices. As a result, these investments have been classified as Level 2 in the fair value hierarchy.

Recently Adopted Accounting Standards and Recent Accounting Pronouncements

Recently Adopted Accounting Standards

In October 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-16 which removes the prohibition against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. This ASU is effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and the Company adopted this ASU in the first quarter of 2018. The adoption of this ASU resulted in a reduction to January 1, 2018 "Retained earnings" in the Condensed Consolidated Balance Sheet of $65 and eliminated a $65 prepaid income tax recorded in the Consolidated Balance Sheet as of December 31, 2017.

In March 2017, the FASB issued ASU 2017-07 to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost within an entity's financial statements. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The Company adopted this ASU in the first quarter of 2018. The Company records its annual adjustment to its defined benefit pension obligation based upon actuarial calculations performed during the fourth quarter. The adoption of this ASU is not expected to have a material impact on the consolidated financial statements.

Recent Accounting Pronouncements

In February 2016, the FASB issued an ASU which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. This ASU will be effective beginning in the first quarter of 2019. Early adoption is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

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 record provisions and maintain reserves for excess, slow moving and obsolete inventory. To determine reserve amounts, we regularly review inventory quantities on hand and values, and compare them to estimates of future product demand, market conditions, production requirements and technological developments.

Customer Advances

On occasion, we require customers to make advance payments prior to the shipment of goods in order to help finance our inventory investment on large orders or to keep customers’ credit limits at acceptable levels.

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SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Schedule of computation and reconciliation of earnings per common share

	Three months ended March 31,
	2018			2017
Net income (loss) as reported	3,920			(3,020		)
Less: Distributed net income available to participating securities	(8		)	—
Less: Undistributed net income available to participating securities	(94		)	—
Numerator for basic net income per share:	3,818			(3,020		)
Add: Undistributed net income allocated to participating securities	94			—
Less: Undistributed net income reallocated to participating securities	(94		)	—
Numerator for diluted net income per share:	3,818			(3,020		)
Denominator:
Weighted average shares outstanding for basic net income per share	14,449,915			14,270,365
Effect of dilutive securities	—			—
Weighted average shares outstanding for diluted net income per share	14,449,915			14,270,365
Net income (loss) per share:
Basic	$	0.26		$	(0.21	)
Diluted	$	0.26		$	(0.21	)

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INVENTORIES (Tables)

3 Months Ended

Mar. 31, 2018

Inventory Disclosure [Abstract]

Schedule of components of inventory

Inventories consist of the following at March 31, 2018 and December 31, 2017 and include reserves of $2,865 and $3,068, respectively:

	March 31, 2018		December 31, 2017
Raw materials	$	21,773	$	16,255
Work-in-process	7,678		6,120
Finished goods	16,703		13,049
Supplies	304		318
	$	46,458	$	35,742

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PURCHASED INTANGIBLE ASSETS (Tables)

3 Months Ended

Mar. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of details of purchased intangible assets, other than goodwill

The following table presents details of our purchased intangible assets as of March 31, 2018:

	Gross		Accumulated Amortization			Net
Core technology	$	20,498	$	(10,863	)	$	9,635
Customer relationships	39,833		(37,347		)	2,486
Trademarks / Trade names	2,247		(2,247		)	—
Total intangible assets	$	62,578	$	(50,457	)	$	12,121

The following table presents details of our purchased intangible assets, other than goodwill, as of December 31, 2017:

	Gross		Accumulated Amortization			Net
Core technology	$	20,027	$	(10,333	)	$	9,694
Customer relationships	39,244		(36,077		)	3,167
Trademarks / Trade names	2,149		(2,149		)	—
Total intangible assets	$	61,420	$	(48,559	)	$	12,861

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CONTRACT LIABILITIES (Tables)

3 Months Ended

Mar. 31, 2018

Revenue from Contract with Customer [Abstract]

Schedule of Contract Liabilities

As of March 31, 2018 and December 31, 2017, contract liabilities (previously known as customer advances) were as follows:

	March 31, 2018		December 31, 2017
NobelClad	5,121		5,804
DynaEnergetics	94		84
Total	$	5,215	$	5,888

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DEBT (Tables)

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Schedule of lines of credit

Lines of credit consisted of the following at March 31, 2018 and December 31, 2017:

	March 31, 2018		December 31, 2017
Syndicated credit agreement:
U.S. Dollar revolving loan	$	26,655	$	18,250
Alternative currency revolving loan	—		—
Capital expenditure loan	3,278		—
German bank line of credit	—		—
	29,933		18,250
Less current portion	—		—
Long-term lines of credit	29,933		18,250
Less: debt issuance costs	583		266
Lines of credit	$	29,350	$	17,984

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BUSINESS SEGMENTS (Tables)

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

Schedule of segment information

Segment information is presented for the three months endedMarch 31, 2018 and 2017 as follows:

	Three months ended March 31,
	2018		2017
Net sales:
NobelClad	$	18,192	$	16,934
DynaEnergetics	49,121		22,028
Consolidated net sales	$	67,313	$	38,962

	Three months ended March 31,
	2018			2017
Operating income (loss)
NobelClad	$	(12	)	$	395
DynaEnergetics	8,720			40
Segment operating income	8,708			435
Unallocated corporate expenses	(2,688		)	(2,170		)
Stock-based compensation	(708		)	(571		)
Other income (expense), net	(377		)	421
Interest expense	(466		)	(506		)
Interest income	1			1
Income (loss) before income taxes	$	4,470		$	(2,390	)

	Three months ended March 31,
	2018		2017
Depreciation and amortization:
NobelClad	$	816	$	989
DynaEnergetics	1,559		1,676
Segment depreciation and amortization	$	2,375	$	2,665

Disaggregation of Revenue

The disaggregation of revenue earned from contracts with customers based on the geographic location of the customer is as follows. Revenues that would have been reported under previous accounting guidance would not have been materially different from the amounts shown below.

	Three months ended March 31,
	2018		2017
United States	5,706		5,979
Canada	1,794		2,666
United Arab Emirates	131		357
France	951		571
South Korea	1,003		448
Germany	1,613		2,031
Oman	161		1,172
India	770		208
Spain	168		222
China	3,458		40
Italy	205		536
Sweden	138		430
Rest of the world	2,094		2,274
Total NobelClad	$	18,192	$	16,934

	Three months ended March 31,
	2018		2017
United States	36,130		14,446
Canada	5,785		2,779
United Arab Emirates	523		22
France	52		35
Oman	682		113
Germany	28		37
Russia	1,282		929
India	635		823
Egypt	542		321
Romania	244		263
Italy	—		24
Hong Kong	—		457
Rest of the world	3,218		1,779
Total DynaEnergetics	$	49,121	$	22,028

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DERIVATIVE INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Gain/(Loss) Recognized in Income on Derivatives

The following table presents the location and amount of net gains from hedging activities for the three months ended March 31, 2018 and 2017:

		Three months ended March 31,
Derivatives	Income Statement Location	2018		2017
Foreign currency contracts	Other income (expense), net	$	208	$	—
Total gain		$	208	$	—

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RESTRUCTURING (Tables)

3 Months Ended

Mar. 31, 2018

Restructuring and Related Activities [Abstract]

Restructuring and impairment charges incurred

Total restructuring and impairment charges incurred for these programs are as follows and are reported in the “Restructuring expenses” line item in our Condensed Consolidated Statements of Operations:

	Three months ended March 31, 2018
	Severance		Asset Impairment		Other Exit Costs		Total
NobelClad	$	53	$	—	$	91	$	144
Total	$	53	$	—	$	91	$	144

Changes to the restructuring liability

During the three months ended March 31, 2018, the changes to the restructuring liability associated with these programs is summarized below:

	December 31, 2017		Expense		Payments and Other Adjustments			Currency Adjustments		March 31, 2018
Severance	$	2,568	$	53	$	(34	)	$	74	$	2,661
Other exit costs	10		91		(100		)	—		1
Total	$	2,578	$	144	$	(134	)	$	74	$	2,662

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SIGNIFICANT ACCOUNTING POLICIES - Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Numerator:
Net income (loss)	$ 3,920	$ (3,020)
Less: Distributed net income available to participating securities - basic	(8)	0
Less: Undistributed net income available to participating securities - basic	(94)	0
Numerator for basic/diluted net income per share	3,818	(3,020)
Add: Undistributed net income allocated to participating securities	94	0
Less: Undistributed net income reallocated to participating securities	$ (94)	$ 0
Denominator:
Weighted average shares outstanding for basic net income per share (In shares)	14,449,915	14,270,365
Effect of dilutive securities (In shares)	0	0
Weighted average shares outstanding for diluted net income per share (In shares)	14,449,915	14,270,365
Net income (loss) allocated to common stock for EPS calculation:
Basic (in dollars per share)	$ 0.26	$ (0.21)
Diluted (in dollars per share)	$ 0.26	$ (0.21)

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SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2018	Jan. 01, 2018	Dec. 31, 2017
Accounting Policies [Abstract]
Potentially dilutive shares excluded from EPS	183,083
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Reduction in retained earnings		$ (63,634)		$ (60,074)
Accounting Standards Update 2016-16
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Reduction in retained earnings			$ 65
Reduction in prepaid taxes				$ 65

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INVENTORIES (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Inventory Disclosure [Abstract]
Inventory valuation reserves	$ 2,865	$ 3,068
Inventories
Raw materials	21,773	16,255
Work-in-process	7,678	6,120
Finished goods	16,703	13,049
Supplies	304	318
Total inventory	$ 46,458	$ 35,742

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PURCHASED INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Purchased intangible assets
Gross	$ 62,578	$ 61,420
Accumulated Amortization	(50,457)	(48,559)
Net	12,121	12,861
Core technology
Purchased intangible assets
Gross	20,498	20,027
Accumulated Amortization	(10,863)	(10,333)
Net	9,635	9,694
Customer relationships
Purchased intangible assets
Gross	39,833	39,244
Accumulated Amortization	(37,347)	(36,077)
Net	2,486	3,167
Trademarks / Trade names
Purchased intangible assets
Gross	2,247	2,149
Accumulated Amortization	(2,247)	(2,149)
Net	$ 0	$ 0

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CONTRACT LIABILITIES (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Contract liabilities	$ 5,215	$ 5,888
Contract liability recorded as net sales	1,700
NobelClad
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Contract liabilities	5,121	5,804
DynaEnergetics
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Contract liabilities	$ 94	$ 84

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DEBT - Schedule of Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Lines of credit
Total lines of credit	$ 29,933	$ 18,250
Less current portion	0	0
Long-term lines of credit	29,933	18,250
Less: debt issuance costs	583	266
Lines of credit	29,350	17,984
Alternative currency revolving loan
Lines of credit
Total lines of credit	0	0
Capital expenditure loan
Lines of credit
Total lines of credit	3,278	0
German bank line of credit
Lines of credit
Total lines of credit	0	0
Credit Facility | U.S. Dollar revolving loan
Lines of credit
Total lines of credit	$ 26,655	$ 18,250

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DEBT - Narrative (Details)		3 Months Ended
	Mar. 08, 2018 USD ($) bank	Mar. 31, 2018 USD ($)	Mar. 31, 2018 EUR (€)	Dec. 31, 2017 USD ($)
Debt Instrument [Line Items]
Amortization of principal, percent	12.50%
Credit agreement, number of banks | bank	3
Debt issuance costs		$ 583,000		$ 266,000
Credit Facility
Debt Instrument [Line Items]
Credit facility, term	5 years
Write-off of deferred debt issuance cost	$ 159,000
Additional costs incurred	507,000
Credit Facility | Syndicated Credit Facility 2018
Debt Instrument [Line Items]
Maximum borrowing capacity	75,000,000
Accordion feature		$ 100,000,000
Credit Facility | U.S. Dollar revolving loan
Debt Instrument [Line Items]
Maximum borrowing capacity	50,000,000
Credit Facility | Alternate currencies revolving loan
Debt Instrument [Line Items]
Maximum borrowing capacity	20,000,000			5,000,000
Credit Facility | Alternate currencies revolving loan | Minimum | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Basis spread on variable interest rate		1.50%
Credit Facility | Alternate currencies revolving loan | Minimum | Base Rate
Debt Instrument [Line Items]
Basis spread on variable interest rate		0.50%
Credit Facility | Alternate currencies revolving loan | Maximum | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Basis spread on variable interest rate		3.00%
Credit Facility | Alternate currencies revolving loan | Maximum | Base Rate
Debt Instrument [Line Items]
Basis spread on variable interest rate		2.00%
Credit Facility | Capital expenditure loan
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 25,000,000
Credit Facility | German bank line of credit
Debt Instrument [Line Items]
Maximum borrowing capacity | €			€ 4,000,000
Available borrowing capacity | €			€ 2,783,000
Credit Facility | Syndicated Credit Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity				30,000,000
Credit Facility | Syndicated Credit Facility 2015
Debt Instrument [Line Items]
Maximum borrowing capacity				35,000,000
Accordion feature				$ 25,000,000

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INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017
Operating Loss Carryforwards [Line Items]
Tax Act, provisional income tax expense (benefit)	$ (268)	$ 946	$ 0
Tax Act, provisional liability	678
Tax Act, transition tax for accumulated foreign earnings, provisional income tax expense		$ 946
Tax Act, transition tax, current accrued income taxes	75
Tax Act, transition tax, other long term liabilities	$ 603
Minimum
Operating Loss Carryforwards [Line Items]
Differences between U.S. and foreign tax rates, range (as a percent)	20.00%
Maximum
Operating Loss Carryforwards [Line Items]
Differences between U.S. and foreign tax rates, range (as a percent)	34.00%

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BUSINESS SEGMENTS - Segment Information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($) segment	Mar. 31, 2017 USD ($)
Segment information
Number of segments | segment	2
Consolidated net sales	$ 67,313	$ 38,962
Segment operating income	5,312	(2,306)
Other income (expense), net	(377)	421
Interest expense	(466)	(506)
Interest income	1	1
INCOME (LOSS) BEFORE INCOME TAXES	4,470	(2,390)
Operating Segments
Segment information
Segment operating income	8,708	435
Segment depreciation and amortization	2,375	2,665
Segment Reconciling Items
Segment information
Unallocated corporate expenses	(2,688)	(2,170)
Stock-based compensation	(708)	(571)
NobelClad
Segment information
Consolidated net sales	18,192	16,934
NobelClad | Operating Segments
Segment information
Segment operating income	(12)	395
Segment depreciation and amortization	816	989
DynaEnergetics
Segment information
Consolidated net sales	49,121	22,028
DynaEnergetics | Operating Segments
Segment information
Segment operating income	8,720	40
Segment depreciation and amortization	$ 1,559	$ 1,676

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BUSINESS SEGMENTS - Disaggregation of Revenue by Geographic Location (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
NobelClad
Disaggregation of Revenue [Line Items]
Revenue by geographic location	$ 18,192	$ 16,934
NobelClad | United States
Disaggregation of Revenue [Line Items]
Revenue by geographic location	5,706	5,979
NobelClad | Canada
Disaggregation of Revenue [Line Items]
Revenue by geographic location	1,794	2,666
NobelClad | United Arab Emirates
Disaggregation of Revenue [Line Items]
Revenue by geographic location	131	357
NobelClad | France
Disaggregation of Revenue [Line Items]
Revenue by geographic location	951	571
NobelClad | South Korea
Disaggregation of Revenue [Line Items]
Revenue by geographic location	1,003	448
NobelClad | Germany
Disaggregation of Revenue [Line Items]
Revenue by geographic location	1,613	2,031
NobelClad | Oman
Disaggregation of Revenue [Line Items]
Revenue by geographic location	161	1,172
NobelClad | India
Disaggregation of Revenue [Line Items]
Revenue by geographic location	770	208
NobelClad | Spain
Disaggregation of Revenue [Line Items]
Revenue by geographic location	168	222
NobelClad | China
Disaggregation of Revenue [Line Items]
Revenue by geographic location	3,458	40
NobelClad | Italy
Disaggregation of Revenue [Line Items]
Revenue by geographic location	205	536
NobelClad | Sweden
Disaggregation of Revenue [Line Items]
Revenue by geographic location	138	430
NobelClad | Rest of the world
Disaggregation of Revenue [Line Items]
Revenue by geographic location	2,094	2,274
DynaEnergetics
Disaggregation of Revenue [Line Items]
Revenue by geographic location	49,121	22,028
DynaEnergetics | United States
Disaggregation of Revenue [Line Items]
Revenue by geographic location	36,130	14,446
DynaEnergetics | Canada
Disaggregation of Revenue [Line Items]
Revenue by geographic location	5,785	2,779
DynaEnergetics | United Arab Emirates
Disaggregation of Revenue [Line Items]
Revenue by geographic location	523	22
DynaEnergetics | France
Disaggregation of Revenue [Line Items]
Revenue by geographic location	52	35
DynaEnergetics | Germany
Disaggregation of Revenue [Line Items]
Revenue by geographic location	28	37
DynaEnergetics | Russia
Disaggregation of Revenue [Line Items]
Revenue by geographic location	1,282	929
DynaEnergetics | Oman
Disaggregation of Revenue [Line Items]
Revenue by geographic location	682	113
DynaEnergetics | India
Disaggregation of Revenue [Line Items]
Revenue by geographic location	635	823
DynaEnergetics | Egypt
Disaggregation of Revenue [Line Items]
Revenue by geographic location	542	321
DynaEnergetics | Romania
Disaggregation of Revenue [Line Items]
Revenue by geographic location	244	263
DynaEnergetics | Italy
Disaggregation of Revenue [Line Items]
Revenue by geographic location	0	24
DynaEnergetics | Hong Kong
Disaggregation of Revenue [Line Items]
Revenue by geographic location	0	457
DynaEnergetics | Rest of the world
Disaggregation of Revenue [Line Items]
Revenue by geographic location	$ 3,218	$ 1,779

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DERIVATIVE INSTRUMENTS - Narrative (Details) - Foreign Exchange Forward $ in Thousands	Mar. 31, 2018 USD ($)
Derivatives, Fair Value [Line Items]
Fair value of outstanding foreign currency forward	$ 11
Long
Derivatives, Fair Value [Line Items]
Notional amounts	5,563
Short
Derivatives, Fair Value [Line Items]
Notional amounts	$ 7,398

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DERIVATIVE INSTRUMENTS - Gain/(Loss) Recognized in Income on Derivatives (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) on foreign currency contracts	$ 208	$ 0
Foreign currency contracts | Other income (expense), net
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) on foreign currency contracts	$ 208	$ 0

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COMMITMENTS AND CONTINGENCIES (Details) - US Customs Notice of Action - Unfavorable Regulatory Action - USD ($) $ in Thousands			1 Months Ended	3 Months Ended
	Mar. 06, 2017	Feb. 16, 2017	Aug. 31, 2015	Mar. 31, 2018	Dec. 31, 2015	Dec. 27, 2016	Jul. 31, 2015
Loss Contingencies [Line Items]
Requested payment of AD/CVD cash deposits		$ 14,783		$ 3,103		$ 3,049
AD/CVD cash deposits to be remitted or bond posted		$ 3,049
Amount tendered into a suspense account	$ 3,049
Addition to reserve					$ 6,205
Loss contingency reserve				6,712
Threatened Litigation
Loss Contingencies [Line Items]
Requested payment of AD/CVD cash deposits							$ 1,100
AD/CVD cash deposits to be remitted or bond posted			$ 1,100
Interest expense
Loss Contingencies [Line Items]
Addition to reserve				25
Minimum
Loss Contingencies [Line Items]
Requested payment of AD/CVD cash deposits				3,103
Maximum
Loss Contingencies [Line Items]
Requested payment of AD/CVD cash deposits				$ 12,410

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RESTRUCTURING - Summary of Restructuring Charges (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Restructuring Cost and Reserve [Line Items]
Restructuring expenses	$ 144	$ 0
NobelClad
Restructuring Cost and Reserve [Line Items]
Restructuring expenses	144
Severance
Restructuring Cost and Reserve [Line Items]
Restructuring expenses	53
Severance | NobelClad
Restructuring Cost and Reserve [Line Items]
Restructuring expenses	53
Asset Impairment
Restructuring Cost and Reserve [Line Items]
Restructuring expenses	0
Asset Impairment | NobelClad
Restructuring Cost and Reserve [Line Items]
Restructuring expenses	0
Other Exit Costs
Restructuring Cost and Reserve [Line Items]
Restructuring expenses	91
Other Exit Costs | NobelClad
Restructuring Cost and Reserve [Line Items]
Restructuring expenses	91
NobelClad
Restructuring Cost and Reserve [Line Items]
Additional restructuring expenses expected	$ 1,300

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RESTRUCTURING - Rollforward of Restructuring Charges (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($)
Restructuring Reserve [Roll Forward]
December 31, 2017	$ 2,578
Expense	144
Payments and Other Adjustments	(134)
Restructuring Reserve, Translation and Other Adjustment	74
March 31, 2018	2,662
Severance
Restructuring Reserve [Roll Forward]
December 31, 2017	2,568
Expense	53
Payments and Other Adjustments	(34)
Restructuring Reserve, Translation and Other Adjustment	74
March 31, 2018	2,661
Other exit costs
Restructuring Reserve [Roll Forward]
December 31, 2017	10
Expense	91
Payments and Other Adjustments	(100)
Restructuring Reserve, Translation and Other Adjustment	0
March 31, 2018	$ 1