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Dynamic Materials Corp. (NASDAQ:BOOM)

Q4 2007 Earnings Call

March 06, 200805:00 pm EST

Executives

Mr. Yvon Pierre Cariou – Chief Exec. Officer, Pres.

Mr. Richard A. Santa – CFO, Principal Accounting Officer, VP and Sec.

Mr. John G. Banker – VP of Marketing and Sales – Clad Metal Division

Mr. Rolf Ruspek – Managing Director

Mr. Geoff High – Pfeiffer High, Investor Relations

Analysts

Avinash Kant – Broadpoint Capital

James Bank – Sidoti & Company

Michael Shonstrom – Emerging Growth Equities, Ltd.

Yvonne Varano – Jeffries & Co.

Ken Versales - Aberystwyth Asset Management

Bob Tuffy – Private Investor

Michael Bartlett - KeyBank

Operator

Good day ladies and gentlemen and welcome to the Quarter Four 2007 Dynamic Materials’ Earnings Conference Call.

(Operator Instructions)

I would now like to turn the presentation over to your host for today’s call, Mr. Geoff High of Pfeiffer High Investor Relations.

Geoff High

Good afternoon, and welcome to Dynamic Materials' fourth quarter conference call. Presenting on behalf of the Company will be President and CEO, Yvon Cariou, and Vice President and Chief Financial Officer, Rick Santa. I would like to remind everyone that the matters discussed during this call may include forward-looking statements that are based on management's estimates, projections and assumptions as of today's date and are subject to risks and uncertainties that are disclosed in Dynamic Materials' filings with the Securities and Exchange Commission.

The company’s business is subject to certain risks that could cause actual results that differ materially from those anticipated in its forward looking statements.  Dynamic Materials assumes no obligation to update forward-looking statements that become untrue because of subsequent events.  A webcast replay of today’s call will be available at dynamicsmaterials.com after the call.  In addition, addition a telephone replay will be made available for 48 hours beginning approximately two hours after the conclusion of this call.  Details for listening for today’s call or webcast are available in today’s news release.  And with that, I will now turn the call over to Yvon Cariou.

Yvon Cariou

Thank Geoff and thanks to all of you for participating in today’s call.  Before we get started, I want to introduce two additional individuals who have joined us today.  John Banker, he is Senior Vice President of Customers and Technology for our explosion welding business and our prospect is the CEO of DYNAenergetics and heads our oil field products division.  Both gentlemen will be available during the Q&A to help address any of your questions.

Q4 was another period of strong growth at DMC and it represented the final quarter of the milestone year for your Company.  In addition to posting record overview and earnings results, Fiscal 2007 was marked by major additions to our explosion welding collection capacity as well as our global market share.  As you know, we successfully completed the two-year -- to double the size of our Mt Braddock facility in Pennsylvania and we are really pleased with the benefits we are now recognizing from this program.

Last November, we made another addition to capacity, this time in Europe.  Of course, I am referring to our acquisition of Germany based DYNAenergetics.  This transaction bought together two of our industry’s largest and most respected players and served to boldly expand DMCs already dominant market share.  It also expanded our customer base, given us greater access to the Asian market, strengthened our management and production teams and added more than $21 million to our explosion welding over our backload.

The acquisition also has provided us with an important new business segment.  DYNAenergetics Oilfield products is focused primarily on manufacturing, marketing, and selling specialized oilfield perforating systems and seismic explosive systems.  Given the extraordinary demands being placed on the oil and gas industry were excited about the opportunities this new business segment brings to DMC.

We also are encouraged by the level of activity in our core explosion welding markets.  Demand from all of our target market’s remains strong and just to refresh your memory, those markets consist of oil and gas, petrochemicals and chemicals, alternative energy, hydrometeorology, power generation, aluminum collection, ship building and industrial refrigeration.  The level of industrial expansion in capital spending in many of the global economies we follow also is providing encouraging signs.  We continue to track a lengthy roster of potential contract opportunities and also we have not announced any or new last contracts in the recent month.  There are a number of large and midsized orders we are pursuing.  Excluding the impact of new backlog added from our acquisition, we finished the year with another backlog of $78.5 million.  This represents a slight increase over Q3 and reflects the continued success our sales team is having at booking new orders.  With the addition of DYNAenergetics our order backlog at year end was $100 million.

Given the demand we are seeing in our target markets, the expansion of our worldwide market share.  Our enhanced collection platform, the improving performance of our AMK wedding business and our added exposure to the oil and gas industry, we think we have good reason to be optimistic about our prospects during 2008 and beyond.

I will now turn the call over to Rick Santa who will discuss the highlights of our fourth quarter financial performance.

Rick Santa

Thanks Yvonne.  Sales in the fourth quarter increased 55% to $55.2 million versus the fourth quarter last year.  At this point $9 million of our revenue was contributed by DYNAenergetics which joined us on November 15th of last year.  Of this contribution, $4.4 million came from the DYNAenergetics explosion welding business and $2.5 million came from its oilfield products division.  Gross margin came in at 32% versus 41% in last year’s fourth quarter.  You will recall that gross margin in the year-ago quarter benefited for very favorable terms, we received at $11 million order.  Gross margin in the 2007 fourth quarter reflected a more normalized product mix from our pre-acquisition explosion welding business.  Lower gross margins on incremental sales from DYNAenergetics and the $300,000.00 purchase accounting adjustment to cost of goods sold, relating to the acquired inventory of DYNAenergetics.

From a cost perspective, the most notable quarter-over-quarter changes on our P&L were obviously the $1.2 million and amortization expense and the $800,000.00 in interest expense associated with the acquisition.  If you backed these two items out and apply our effective tax rate to the sum.  You can see how strong our fourth quarter earnings performance would have been without these expenses.

In the coming quarters we intend to provide you with the breakout of EBITDA, which will give you a better sense of our performance prior to the impact of amortization and interest expense.  Including acquisition related expenses, fourth quarter net income was $6.9 million or $0.56 per share versus $6.6 million or $0.54 per share in last year’s fourth quarter.

With regard to guidance, we expect to report 2008 revenue growth of up to 60%.  While the gross margin will experience normal quarter to quarter fluctuations, we expect our full year gross margin performance to be approximately 32%.  Factors we expect to impact gross margins include, higher proportionate of sales from our European explosion welding businesses which historically have achieved lower margins than our US business and sales contributions from our new oilfield products business which also attempts to report lower margins than our US business.

As a result of the acquisition, our full year operating income will be impacted by approximately $7.3 of amortization expense based upon year end foreign exchange rates.  Operating income will also be impacted by increased depreciation expense which we estimate will be approximately $5 million for the full year 2008.  Pretax income will be impacted by more than $5 million of interest expense.  We are expecting a 2008 consolidated tax rate in the range of 36% to 37%.

Looking at the first quarter, we are expecting revenues to be approximately 80% higher than revenue in Q1 of 2007.  Our Q1 operating income is expected to be negatively affected by lower gross margins and approximately $3 million of acquisition related amortization expense.  With the addition of higher interest expense, we anticipate that first quarter net income will be comparable to the first quarter of last year.

It is important to remember that the two most recent quarters have benefited from our deliveries on a couple of large orders from the natural gas and alternative energy sectors.  As we have discussed on past calls, these large orders can cause spikes in our quarterly revenue performance.  Since we do not expect to deliver any unusually large orders during Q1, we are expecting only modest sequential revenue growth in the coming quarter.

As Yvon noted earlier, our end markets are very active and we have not seen a letter for an overall demand.  We therefore remain optimistic about our prospects for continued long-term growth.  We are now ready to take your questions.

Question and Answer Session

Operator

(Operator Instructions)

Your first question comes from the line of Avinash Kant of Broadpoint Capital.

Avinash Kant – Broadpoint Capital

Good afternoon Rick and Yvon.  Quick question, on the 60% revenue growth that you are talking about, would you be able to give us your assumptions in terms of how much do you think from DYNAenergetics will be added and how much from the ex-DYNAenergetics business?

Ric Santa

I think we would like to add to that question of Avinash is we anticipate organic growth of 15% to 20% in 2008 and in terms of the DYNAenergetics contribution, I refer you back to the 8-K A that we filed at the end of January, you will see the historical sales of DYNAenergetics for their year ended September 30, 2007.

Avinash Kant – Broadpoint Capital

So basically, you are assuming 15% to 20% for both the businesses.

Ric Santa

No, organic growth of 15% to 20% of total combined entities, so that will imply sides of the business will experience both DMC and DYNAenergetics will experience organic growth in 2008.

Avinash Kant – Broadpoint Capital

In terms of the operating expenses, what kind of synergies should we be expecting from this acquisition and could you talk about that a little bit in terms of going in 2008 and beyond?

Yvon Cariou

You are talking about synergies of expenses?

Avinash Kant – Broadpoint Capital

Yes, cost synergies, could you realize some cost synergies from the acquisition over time?

Yvon Cariou

Yes.  On the oilfield product, you know, which is a new activity for us, we do not really have particular synergies, in terms of the explosion welding business, we want to utilize fully all of the divisions and sites that we have and as you know, they are located in different countries and so synergies will have a lot to do with the marketing worldwide effort and I guess more than cross cutting is going to be enhancing our access to global market.  I think that is more the way to think about this than thinking about cost cutting.

Avinash Kant – Broadpoint Capital

Okay, and then one final question is that, your margins in Europe have been very significantly lower than the ones in the US but I believe you have a very significant portion of the market now fin Europe.  Should we assume that overtime your margins in Europe will start to come up?

Yvon Cariou

Well, as you may guess, you know, our global objective is to keep improving margin and we are going to work on that.  You also realize, Avinash that we have a significant backlog of $100 million, which is locked in at what ever the commercial conditions were available at that time.  So we have to go through that and then you know, we have to, based on commercial conditions, you know, which product line, and which application, which account, we will see where we can – cut cost or improve margin in some ways.

Avinash Kant – Broadpoint Capital

And off the $100 million, how much is coming from oil and natural gas?

Yvon Cariou

This is the backlog of the clad business.

Avinash Kant – Broadpoint Capital

Okay, so the exposure, what kind of exposure do you have to upstream in that $100 million backlog.

Yvon Cariou

I am not sure I understand your question.

Ric Santa

Yes, we are combining upstream oil and gas and oil and gas refining.  That continues to be one of our strongest market segments and comprises a major portion of the backlog, the most significant portion of the backlog.

Avinash Kant – Broadpoint Capital

Will it be more than half of it?

Ric Santa

No, but we have the eight market segments that Yvon referred to earlier.  So it is the most significant of those eight but it is not more than a half.

Operator

Your next question comes from the line of James Bank of Sidoti & Company

James Bank – Sidoti & Company

Taking a look at your end market and they are certainly incredibly strong, I am just curious why your core DMC backlog is essentially flat when I strip the $21.5 million addition from DYNA.

Yvon Cariou

Well, as we referred in the previous observations, we have sustained significant recording and booking activities.  We have not recorded for a number of months – super large and unusual lot projects and of course we have an expanded production capacity so the combination of all of that gives you relatively stable backlog.

James Bank – Sidoti & Company

Now, the new oilfield products, is that going to be a new stand alone reporting segment going forward?

Ric Santa

Yes it will be.

James Bank – Sidoti & Company

The $3 million of acquisition related amortization expense, should that be more or less a good run rate for amortization expense that…

Ric Santa

Well, that is the first quarter run rate James, and we mentioned $7.3 million for the full year.  And that can change a little bit based upon changing exchange rates because we started with Euros and we convert to Dollars.  The reason the first quarter is higher, relates to the fact that we attach value to the order backlog and the value tax order backlog amortizes over the first several months, whereas the backlog that is attached to other categories of intangible assets, core technology, customer relationships and trade names and trademarks, they get amortized over several years.

So the first quarter is higher simply because it includes a fairly significant component for the order backlog amortization.

James Bank – Sidoti & Company

Can I assume though that by the fourth quarter of 2008, really that the majority of these amortization expenses should be going away?

Ric Santa

No, some of these, you will see, will follow our 10-K by the March 17th deadline.  You know, the notes for the financial statements will include disclosures regarding the intangible assets and the amortization periods.  The core technology – is amortized over 20 years.  Customer relationships, a weighted average of nine years and trademarks and trade names I think the weighted average for that category is also nine years.  So the expenses will continue after 2008 but the portion relating to the order backlog will disappear after 2008.  So the run rate will be a couple of million dollars less as we go into 2009 and beyond.

James Bank – Sidoti & Company

Okay, I do not have that 8-K in front of me, the one that you followed and regarded a pro forma purchase price adjustments but ultimately, if I remember correctly, even with the effects, are those numbers material enough to show some sort of dilution beyond 2008 when you talked about the customer relationships and the other intangibles?

Ric Santa

You know I think, we have provided good information that will enable you to prepare a range of forecast for 2008 and I think that that will help you answer the question.

James Bank – Sidoti & Company

Okay, I was just trying to look beyond 2008.

I am sorry, I think I am misreading this part in the guidance 80% top-line growth in the first quarter of ’08, but then later on you said a modest sequential increase in the first quarter revenue.

Ric Santa

That is versus what we reported in the fourth quarter of 2007.

James Bank – Sidoti & Company

Okay, I just want to double check.

Ric Santa

If you look back to 2007, you will see that our first quarter was the weakest quarter in 2007 and that is the reason why you see an 80% quarter-to-quarter increase, when you compare it to the first quarter, but much lower increase sequentially.

James Bank – Sidoti & Company

Right, I just wanted to double check the language.  And the long-term debt you now have on your balance sheet, you had great success in generating cash.  How fast do you think you would be able to pull that down?

Rick Santa

To a certain degree, it depends on future business development activities.  We have six repayment requirements of 10% of principal in year 1, 15% in year 2 and 3, but there is also a piece of requirement to pay additional principal with excess cash flow as defined in the debt agreement.  So, it is a little bit hard, this point in time to forecast.

James Bank – Sidoti & Company

I would not assume you would be eager to jump in to another acquisition at this point.  Would that be a really a primary use of cash, would be debt pay down?

Rick Santa

That pay-down capital expenditures and business development activities.  We are always looking another number of ways to grow the business.

James Bank – Sidoti & Company

Fair enough, thank you very much.

Operator

(Operator Instructions)

Your next question comes from the line of Michael Shonstrom of Emerging Growth Equity.

Michael Shonstrom – Emerging Growth Equities, Ltd.

Just a couple of short questions here, in general, in the industry, many of the industries you are selling into are quite strong, but the credit markets are in turmoil and I am just curious if you have seen any weakness, any cancellation of projects or push-backs or anything from that side affecting your atmosphere?

Yvon Cariou

We are not seeing directly any of the effects of the credit crisis  that you are referring to.  We are not seeing that, we are seeing a list of project agreements.  We do hear from the industry that it is difficult to find professional talents to execute the designs, manufacturing, the explanation and a number of projects.  We do hear about some, looking at the situation and there has been some inflation in the cost of projects.  Although, we have heard about that, we have not seen any direct impact and we are actually our list of projects remains very healthy.  Maybe I will give the flow to John Banker.  He can comment on that.  What do you think John?

John Banker

We are certainly not seeing any evidence in their project list of things being cancelled or any slowing down of new things showing up on the list.  We are tracking things that are relatively close to purchase.  We are generally are looking things forward only 4 to 6 months in great detail, but again no evidence of any trends present.

Michael Shonstrom – Emerging Growth Equities, Ltd.

When you are looking at your business, often they have the comment that the fact that refiners are really increasing capacity and therefore, that is where your domestic demand is coming from not necessarily New Green Field Refinery Construction and I am just curious, whether or not as new refineries are built, or as new refinery capacity is built that there are greater applications within a given amount of capacity for your product and whether or not the corrosion resistant quality has to be higher.  Are there other trends in the manufacturing side that increasingly benefits a greater use of a higher quality of a corrosion resistant?

Yvon Cariou

Yes, your observation is totally correct as sulfer crudes, high sulfur crudes are being use more and more.  Hydrometallurgy is required to posses those crudes and then again I like John comment to that.  He can do it better than I can do it.

John Banker

You definitely defined one of components that are helping us out.  There is a lot of refinery expansion and modeling that can go on in this country.  It is moving in an unbelievable pace.  When new capacitors are being added, they are being added to be able to handle a very broad slate of crudes.  Everything from nasty stuff coming from Canada to nasty stuff, coming from Venezuela and the plans are this equipments has got to last for years and got to handle a slate of things, lets build it to be extremely hardy.

Things that ten years ago would have been bottom-end 304 stainless steel are now 317 stainless.  Things that ten years ago would have 317 or up in the Incanels and Incaloys it drives up the cost of metal, it drives the benefits of clad and it drives it all into our sweet spot.

Michael Shonstrom – Emerging Growth Equities, Ltd.

One other question, in the competitive landscape until DYNAenergetics acquisition, the major competitor we heard about was in Japan.  Are there other companies similar in size and capacity to DYNA out there that still exist?

YvonCariou

Not in the western world, not really, our Japanese friends are good competitor of high quality, like us they are pretty busy.  We have not seen sign of them expanding their reach beyond their local region.  The case of China, we have talked a number of times with investor is a different situation.  In China, they do not have the home borne capacity that western and Japanese steel makers have to produce to make clad metal.  And so, they are doing a low-end product with explosion welding and some of those them have reached significant size, doing that.  It is typically a low-price type of a game and although, they are significant, they have not yet projected on the outside world, in most sophisticated metallurgy and so, essentially the response to your question is no, or as the competitors like the one in Japan and of that size, there will be quite a bit smaller or quite unique in that order activity in China.

Michael Shonstrom – Emerging Growth Equities, Ltd.

One final question for Rick, do you have a capital spending number for the current year?

Richard Santa

Well we have,it turned out to be somewhat higher than we expected and perhaps what we have conveyed to this point in time.  The capital budget is $10 million and most of the spending will be in Europe to expand some of the manufacturing facilities, some building expansion and also some equipment additions.  Its spread between all of our business units, but the majority of the spending in 2008 will be in Europe.  There is also in terms of cash flow, there is also a couple million dollars of carry-over from the $14 million budget that we had for 2007.

Operator

Your next question comes from the line of Yvonne Varano of Jeffries & Co.

Yvonne Varano – Jeffries & Co.

I know raw materials or the problem awhile back, can you just comment on the situation there and if there is any difficulty getting anything?

Yvon Cariou

The situation remains steady and stable, it is relatively tense to get the special kind of steel alloys that we need.  I think the cladding materials, the situation is a little more relaxed, but there are no negative change, but still relatively tense.  Again, I will invite John maybe to put color that statement, anything you would like to add?

John Banker

I cannot really add to that, the steel supplies are still a little challenging, but my boys seem to be very successful at beating the challenge.  Most of the cladding metals are becoming a little easier, supply wise and shortening of some.

Yvonne Varano – Jeffries & Co.

I just want to clarify, Rick, the $7.3 million that is an additional at the amortization to the $2.2 million that the rest of the business was running at.

Rick Santa

We did have amortization at DMC before these intangibles.  Maybe a very small amount of that issuance cost, perhaps showed up at amortization, but now that has been classified differently in cash flow statement.  So, we are really talking about $7.3 million of incremental acquisition related amortization and approximately $5 million of depreciation that includes both DMC’s depreciation and the added depreciation from DYNAenergetics.

Yvonne Varano – Jeffries & Co.

So, we are looking at a $13.3 million D&A for the year?

Rick Santa

No, I think 5 and 7.3 adds up to a little over $12 million.

Operator

Your next question comes from the line of Ken Versales of Aberystwyth Asset Management.

Ken Versales - Aberystwyth Asset Management

I just want to talk about GNA and I apologize if you went over this already, so when I look at sequentially between September and December, roughly $700,000.00 increase for half a quarter of DYNA, is that a good way for me to think about how GNA might look going forward?

Rick Santa

DYNA was included for 6 weeks roughly, November.

Ken Versales - Aberystwyth Asset Management

So about $700,000.00 sequential increase for 6 weeks.  Am I over-estimating if I look at it that way?

Rick Santa

Well perhaps, for half, because some of the increase sequentially would relate to some additional legal, tax-consulting fees that we experienced in the fourth quarter, relating to setting up the organizational structure in Europe.  We set up a couple of Luxemburg Holding Companies and a new German GMBH and some of these expenses are not part of the acquisition, so they cannot be capitalized as transaction cost. It’s a little bit high there.

Ken Versales - Aberystwyth Asset Management

Does DYNA do most of their business in dollars or in Euro?

Yvon Cariou

Actually it is about 60%, 40% roughly …

John Banker

I think we have to answer that in two ways.  There is DYNA plat explosion welding side, which I think it is principally Euro and then, there is the DYNA Well Oilfield Products division, which is about 60% Euro, 10% Canadian dollars and 30% US dollars.

Ken Versales - Aberystwyth Asset Management

Okay, so majority Euros?

John Banker

Majority are Euros, because virtually all of the explosion welding is Euros.

Ken Versales - Aberystwyth Asset Management

Finally, this is my last question.  You talked about no very large contracts that have been signed recently, but in general, you would indicate that bidding activity and the general level of activity out in the market place is similar to what we have seen over the last couple of years or have there been any deterioration at all, in terms of activity or it is just more of a timing issue, in terms of “no large contracts recently”?

Yvon Cariou

It is more of a timing issue.  We do not see any significant degradation or any degradation in the level of activity.  Again, John do you want to say something on that?

John Banker

There are quite a number of relatively large projects, sitting out there that seem to be cuing up to come through the shoot, as we are going forward.  It really does not appear to be much different than the last year.  There were a few big orders that were spiked unusually big by the very, very high nickel prices of a year ago that would be lower today, simply because nickel is a lot lower.

Yvon Cariou

The contribution to us would be the same though.

John Banker

The contribution would be the same, but the appearance of being a $7 or $8 million order, versus a $5 or $6 million order would certainly have transpired purely, because of nickel prices.

Operator

Your next question comes from the line of Bob Tuffy – Private Investor.

Bob Tuffy – Private Investor

Is there a point in the future that you think you might be able to give a little more color on the alternative energy contract and whether or not you see additional opportunities in this space?

Yvon  Cariou

I think we are starting doing that in the conference call today by naming our key market segments and as you have noticed, we officially recognized alternative energy as a key market segment.  We can say that is a sector that is developing.  We have interesting opportunities and again now those we have our goal here of the industry at the table, let him speak to that and main application there is having to do with the solar in the alternative energy world, John.

John Banker

We appreciate your question; it is a real interesting one.  The demand for equipment for solar cells is very strong.  The high purity silicon is needed for solar cells.  I think virtually, all of it is produced in high alloy equipment and most of it is clad and we got a really fascinating range of expensive alloys there that most of them, are big fraction are explosion clads are one of the only option.  Solar is really neat for us now, but looking at other things, geothermal has been a very good customer to us.  At spikes in the past and I expect in the future.  Coal gasification, which I guess it gives somewhat alternative.  It is certainly non-traditional hydro carbon, but coal gasification appears to be something neat on the horizon, cellulose ethanol, which we all hear a lot about.  The projects that are out there are using some really nice high in corrosion resistant alloys.  It is really a neat segment for us for the present.

Bob Tuffy – Private Investor

You talked about your CAPEX spending next year, most of that is going to Europe.  Can you say if that specifically for DYNAenergetics?

Yvon Cariou

It is spread over four European entities, including the Oil Field Products.  Fraction of it obviously is going to DYNAenergetics, but it is not only there.

Bob Tuffy – Private Investor

Finally, is there some seasonality to the oilfield products segment?  Let us let Rolf talk about that.

Rolf Ruspek

Well, as seasonal in the year, I think it is not, no, but they have a cycle over the oil price and over the years.  We have the typical cycle issue in the oil industry, but by in the moment we observed for a very high, also in the oil price and we have not have that before, so I do not see in a moment that the cycle is going down, really.  Winter is pursued on demand, but because we are appropriating, for use the winter is not such a good thing, more like is a stable situation through the year.  I cannot see that as seasonal.

Bob Tuffy – Private Investor

Actually, one last question, in regards to the inventory adjustment on cost to goods sold, is that going to carry into next quarter as well?

Rick Santa

Yes that is a good question, some will carry into the first quarter of 2008 and it will disappear after that and the first quarter of 2008 impact will be comparable to that in the fourth quarter.

Operator

(Operator Instructions)

Your next question comes from the line of Mark Carr of KeyBank.

Michael Bartlett - KeyBank

I had a question on the oilfield services segment.  I remember reading in the 8-K filed in late January that, I guess by my math EBIT margins were around 17% and so I was trying to figure out, I guess if you will note disclose it.  How much of the amortization expense in the fourth quarter was attributed into that segment just to kind of – with those margins would have been excluding that amount.

Rick Santa

Let us see the fourth quarter was about $350,000.00 for the six-week period.

Michael Bartlett - KeyBank

Okay, I know that it was only in the quarter for a few weeks, but I guess even since that time, have you had any, or do you have any anecdotes about kind of the oil field services, you know, being paired together with your oil and gas customers.

Yvon Cariou

Not really, we cannot say that, we both cannot comment on this side but you know, you can see our customer names like some of the big names associated to the two businesses but the procurement of the capital equipment on one end and products for the servicing the oil wells on the other end are not getting the same entities.

Michael Bartlett - KeyBank

I also have to say that they oilfield products we are supplying mainly the service industries like the Schlumbergers,  Bakers, Halliburtons where by the setting side is applying the refineries of upstream and the big producers like the Shells, Exons and what is behind there and so that is a different, completely different clientele.

Operator

It appears there are no further questions.  I will now turn the call over to Yvon Cariou.

Yvon Cariou

Thank you again for joining us today, we are very encouraged by the continued demand we are seeing within our global end markets and by the steps we have taken to position DMC for continued growth.  We look forward to keeping you abreast of our progress during the coming year.  Take care see you soon.

Operator

Thank you for your participation in today’s conference.  This concludes the presentation.  You may now disconnect.  Have a great day.

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