Dynamic Materials Corp (BOOM)

Management’s Discussion and Analysis in the 9/30/09 10-Q says it all:

"The Company was only minimally impacted in 2008 by the global economic slowdown. However, during the first nine months of 2009, we have seen a significant slowdown in Explosive Metalworking sales to some of the markets we serve. The explosion-weld clad plate market is dependent upon sales of products for use by customers in a number of heavy industries, including oil and gas, alternative energy, chemicals and petrochemicals, hydrometallurgy, aluminum production, shipbuilding, power generation, and industrial refrigeration. These industries tend to be cyclical in nature and the current worldwide economic downturn has affected many of these markets. Despite the slowdown we have already seen in certain sectors, including chemical, petrochemical and hydrometallurgy, quoting activity in other end markets remains healthy and we continue to track an extensive list of large infrastructure projects. While timing of new order inflow remains difficult to predict, we believe that our Explosive Metalworking segment is well-positioned to benefit as global economic conditions improve."

"As a result of the 29.7% decline in our net sales during the nine months ended September 30, 2009 and the decrease in our Explosive Metalworking backlog from $97,247 at December 31, 2008 to $62,912 at September 30, 2009, we now expect our consolidated net sales in 2009 to decrease approximately 29% to 31% from the amount we achieved in 2008. In light of the slowdown in order inflow that we are experiencing, we are continuing to carefully manage expenses. We generated cash flow from operations of $23,414 during the nine months ended September 30, 2009 and expect to generate additional positive cash flow from operations over the next several quarters."

Despite the lack of sales due to drop in demand, the company has managed its cash well, sustaining operating cash flows of $23,414 mil for the nine months ending 9/30/09, versus $24,805 mil for the nine months ending 9/30/2008, despite a net income of only $7,527 mil, versus $18,683, respectively. The company accomplished this mainly through a large reduction in accounts receivable, which is an indication of improved efficiency in cash collections.

While I will continue to hold my existing shares, I think I am going to put off purchasing any more shares until economic indicators show a pick up in production, or at the very least an increase in demand for oil (though that only makes up a minority of the company’s business, which is currently operating at a loss). It’s probably going to be a rough ride for a while, but if BOOM can wait out the global economic downturn, it may be poised to see some serious growth.