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Dynamic Materials Corp. (NASDAQ:BOOM)

Q4 2007Earnings Call

March 06, 200805:00 pm EST

Executives

Mr. Yvon PierreCariou – 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. GeoffHigh – 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 – PrivateInvestor

Michael Bartlett -KeyBank

Operator

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

(Operator Instructions)

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

Geoff High

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

The company’s business is subject to certain risks thatcould cause actual results that differ materially from those anticipated in itsforward looking statements.  DynamicMaterials assumes no obligation to update forward-looking statements thatbecome untrue because of subsequent events. A webcast replay of today’s call will be available atdynamicsmaterials.com after the call.  Inaddition, addition a telephone replay will be made available for 48 hoursbeginning approximately two hours after the conclusion of this call.  Details for listening for today’s call orwebcast 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 intoday’s call.  Before we get started, Iwant to introduce two additional individuals who have joined us today.  JohnBanker, he is Senior Vice President of Customers and Technology for ourexplosion welding business and our prospect is the CEO of DYNAenergetics andheads our oil field products division. Both gentlemen will be available during the Q&A to help address anyof your questions.

Q4 was anotherperiod of strong growth at DMC and it represented the final quarter of themilestone year for your Company.  Inaddition to posting record overview and earnings results, Fiscal 2007 wasmarked by major additions to our explosion welding collection capacity as wellas our global market share.  As you know,we successfully completed the two-year -- to double the size of our Mt Braddockfacility in Pennsylvania and we are really pleased with the benefits we are now recognizing fromthis program.

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

The acquisition alsohas provided us with an important new business segment.  DYNAenergetics Oilfield products is focusedprimarily on manufacturing, marketing, and selling specialized oilfieldperforating systems and seismic explosive systems.  Given the extraordinary demands being placedon the oil and gas industry were excited about the opportunities this newbusiness segment brings to DMC.

We also are encouragedby the level of activity in our core explosion welding markets.  Demand from all of our target market’s remainsstrong and just to refresh your memory, those markets consist of oil and gas,petrochemicals and chemicals, alternative energy, hydrometeorology, powergeneration, aluminum collection, ship building and industrialrefrigeration.  The level of industrialexpansion in capital spending in many of the global economies we follow also isproviding encouraging signs.  We continueto track a lengthy roster of potential contract opportunities and also we havenot announced any or new last contracts in the recent month.  There are a number of large and midsizedorders we are pursuing.  Excluding theimpact of new backlog added from our acquisition, we finished the year withanother backlog of $78.5 million.  Thisrepresents a slight increase over Q3 and reflects the continued success oursales team is having at booking new orders. With the addition of DYNAenergetics our order backlog at year end was$100 million.

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

I will now turn thecall over to Rick Santa who will discuss the highlights of our fourth quarterfinancial performance.

Rick Santa

Thanks Yvonne.  Salesin the fourth quarter increased 55% to $55.2 million versus the fourth quarterlast year.  At this point $9 million ofour revenue was contributed by DYNAenergetics which joined us on November 15thof last year.  Of this contribution, $4.4million came from the DYNAenergetics explosion welding business and $2.5million came from its oilfield products division.  Gross margin came in at 32% versus 41% inlast year’s fourth quarter.  You willrecall that gross margin in the year-ago quarter benefited for very favorable terms,we received at $11 million order.  Grossmargin in the 2007 fourth quarter reflected a more normalized product mix fromour 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 tothe acquired inventory of DYNAenergetics.

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

In the coming quarters we intend to provide you with thebreakout of EBITDA, which will give you a better sense of our performance priorto 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 $6.6million or $0.54 per share in last year’s fourth quarter.

With regard to guidance, we expect to report 2008 revenuegrowth of up to 60%.  While the grossmargin will experience normal quarter to quarter fluctuations, we expect ourfull year gross margin performance to be approximately 32%.  Factors we expect to impact gross marginsinclude, higher proportionate of sales from our European explosion weldingbusinesses which historically have achieved lower margins than our USbusiness and sales contributions from our new oilfield products business whichalso attempts to report lower margins than our USbusiness.

As a result of the acquisition, our full year operatingincome will be impacted by approximately $7.3 of amortization expense basedupon year end foreign exchange rates. Operating income will also be impacted by increased depreciation expensewhich 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 areexpecting a 2008 consolidated tax rate in the range of 36% to 37%.

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

It is important to remember that the two most recentquarters have benefited from our deliveries on a couple of large orders fromthe natural gas and alternative energy sectors. As we have discussed on past calls, these large orders can cause spikesin 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 andwe have not seen a letter for an overall demand.  We therefore remain optimistic about ourprospects for continued long-term growth. We are now ready to take your questions.

Question and AnswerSession

Operator

(Operator Instructions)

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

Avinash Kant –Broadpoint Capital

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

Ric Santa

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

Avinash Kant –Broadpoint Capital

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

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 andDYNAenergetics will experience organic growth in 2008.

Avinash Kant –Broadpoint Capital

In terms of the operating expenses, what kind of synergiesshould we be expecting from this acquisition and could you talk about that alittle 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 synergiesfrom the acquisition over time?

Yvon Cariou

Yes.  On the oilfieldproduct, you know, which is a new activity for us, we do not really haveparticular synergies, in terms of the explosion welding business, we want toutilize fully all of the divisions and sites that we have and as you know, theyare located in different countries and so synergies will have a lot to do withthe marketing worldwide effort and I guess more than cross cutting is going tobe enhancing our access to global market. I think that is more the way to think about this than thinking aboutcost cutting.

Avinash Kant –Broadpoint Capital

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

Yvon Cariou

Well, as you may guess, you know, our global objective is tokeep improving margin and we are going to work on that.  You also realize, Avinash that we have asignificant backlog of $100 million, which is locked in at what ever thecommercial conditions were available at that time.  So we have to go through that and then youknow, 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 orimprove margin in some ways.

Avinash Kant –Broadpoint Capital

And off the $100 million, how much is coming from oil andnatural 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 toupstream 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 gasrefining.  That continues to be one ofour strongest market segments and comprises a major portion of the backlog, themost 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 referredto earlier.  So it is the mostsignificant of those eight but it is not more than a half.

Operator

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

James Bank – Sidoti& Company

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

Yvon Cariou

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

James Bank – Sidoti& Company

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

Ric Santa

Yes it will be.

James Bank – Sidoti& Company

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

Ric Santa

Well, that is the first quarter run rate James, and wementioned $7.3 million for the full year. And that can change a little bit based upon changing exchange rates becausewe 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 taxorder backlog amortizes over the first several months, whereas the backlog thatis attached to other categories of intangible assets, core technology, customerrelationships and trade names and trademarks, they get amortized over severalyears.

So the first quarter is higher simply because it includes afairly 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 theMarch 17th deadline.  You know, the notesfor the financial statements will include disclosures regarding the intangibleassets and the amortization periods.  Thecore technology – is amortized over 20 years. Customer relationships, a weighted average of nine years and trademarksand trade names I think the weighted average for that category is also nineyears.  So the expenses will continueafter 2008 but the portion relating to the order backlog will disappear after2008.  So the run rate will be a coupleof 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 thatyou followed and regarded a pro forma purchase price adjustments butultimately, if I remember correctly, even with the effects, are those numbersmaterial enough to show some sort of dilution beyond 2008 when you talked aboutthe customer relationships and the other intangibles?

Ric Santa

You know I think, we have provided good information thatwill enable you to prepare a range of forecast for 2008 and I think that thatwill 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 theguidance 80% top-line growth in the first quarter of ’08, but then later on yousaid a modest sequential increase in the first quarter revenue.

Ric Santa

That is versus what we reportedin the fourth quarter of 2007.

James Bank – Sidoti& Company

Okay, I just want to doublecheck.

Ric Santa

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

James Bank – Sidoti& Company

Right, I just wanted to doublecheck the language.  And the long-termdebt you now have on your balance sheet, you had great success in generatingcash.  How fast do you think you would beable to pull that down?

Rick Santa

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

James Bank – Sidoti& Company

I would not assume you would beeager 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 capitalexpenditures and business development activities.  We are always looking another number of waysto grow the business.

James Bank – Sidoti& Company

Fair enough, thank you verymuch.

Operator

(Operator Instructions)

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

Michael Shonstrom – Emerging Growth Equities, Ltd.

Just a couple of short questionshere, in general, in the industry, many of the industries you are selling into arequite strong, but the credit markets are in turmoil and I am just curious ifyou have seen any weakness, any cancellation of projects or push-backs oranything 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 ofproject agreements.  We do hear from theindustry that it is difficult to find professional talents to execute thedesigns, manufacturing, the explanation and a number of projects.  We do hear about some, looking at thesituation and there has been some inflation in the cost of projects.  Although, we have heard about that, we havenot seen any direct impact and we are actually our list of projects remains veryhealthy.  Maybe I will give the flow toJohn Banker.  He can comment onthat.  What do you think John?

John Banker

We are certainly not seeing any evidence in their project list of thingsbeing cancelled or any slowing down of new things showing up on the list.  We are tracking things that are relativelyclose to purchase.  We are generally arelooking things forward only 4 to 6 months in great detail, but again noevidence of any trends present.

Michael Shonstrom – Emerging Growth Equities, Ltd.

When you are looking at yourbusiness, often they have the comment that the fact that refiners are reallyincreasing capacity and therefore, that is where your domestic demand is comingfrom not necessarily New Green Field Refinery Construction and I am justcurious, whether or not as new refineries are built, or as new refinery capacityis built that there are greater applications within a given amount of capacityfor your product and whether or not the corrosion resistant quality has to behigher.  Are there other trends in themanufacturing side that increasingly benefits a greater use of a higher qualityof a corrosion resistant?

Yvon Cariou

Yes, your observation is totally correct as sulfer crudes, high sulfur crudesare being use more and more.  Hydrometallurgyis 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 andmodeling 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 beable to handle a very broad slate of crudes. Everything from nasty stuff coming from Canadato nasty stuff, coming from Venezuelaand the plans are this equipments has got to last for years and got to handle aslate of things, lets build it to be extremely hardy.

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

Michael Shonstrom – Emerging Growth Equities, Ltd.

One other question, in thecompetitive landscape until DYNAenergetics acquisition, the major competitor weheard about was in Japan.  Are there other companies similar in size andcapacity to DYNA out there that still exist?

YvonCariou

Not in the western world, not really, our Japanese friends are goodcompetitor of high quality, like us they are pretty busy.  We have not seen sign of them expanding theirreach beyond their local region.  Thecase of China, we have talked a number of times with investor is a differentsituation.  In China, they do not have the home borne capacitythat western and Japanese steel makers have to produce to make clad metal.  And so, they are doing a low-end product withexplosion welding and some of those them have reached significant size, doingthat.  It is typically a low-price typeof a game and although, they are significant, they have not yet projected onthe outside world, in most sophisticated metallurgy and so, essentially theresponse to your question is no, or as the competitors like the one in Japanand of that size, there will be quite a bit smaller or quite unique in thatorder activity in China.

Michael Shonstrom – Emerging Growth Equities, Ltd.

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

Richard Santa

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

Operator

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

Yvonne Varano – Jeffries & Co.

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

Yvon Cariou

The situationremains steady and stable, it is relatively tense to get the special kind ofsteel alloys that we need.  I think thecladding materials, the situation is a little more relaxed, but there are nonegative change, but still relatively tense. Again, I will invite John maybe to put color that statement, anythingyou would like to add?

John Banker

I cannot really add to that, the steel supplies are still alittle challenging, but my boys seem to be very successful at beating thechallenge.  Most of the cladding metalsare 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 anadditional at the amortization to the $2.2 million that the rest of thebusiness was running at.

Rick Santa

We did have amortization at DMC before theseintangibles.  Maybe a very small amountof that issuance cost, perhaps showed up at amortization, but now that has beenclassified differently in cash flow statement. So, we are really talking about $7.3 million of incremental acquisitionrelated amortization and approximately $5 million of depreciation that includesboth 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 AberystwythAsset Management.

Ken Versales -Aberystwyth Asset Management

I just want to talk about GNA and I apologize if you wentover this already, so when I look at sequentially between September andDecember, roughly $700,000.00 increase for half a quarter of DYNA, is that agood 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 thatway?

Rick Santa

Well perhaps, for half, because some of the increasesequentially would relate to some additional legal, tax-consulting fees that weexperienced in the fourth quarter, relating to setting up the organizationalstructure in Europe. We set up a couple of Luxemburg Holding Companies and a new German GMBHand some of these expenses are not part of the acquisition, so they cannot becapitalized 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 about60%, 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 OilfieldProducts division, which is about 60% Euro, 10% Canadian dollars and 30% USdollars.

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 thathave been signed recently, but in general, you would indicate that biddingactivity and the general level of activity out in the market place is similarto what we have seen over the last couple of years or have there been anydeterioration at all, in terms of activity or it is just more of a timingissue, in terms of “no large contracts recently”?

Yvon Cariou

It is more of atiming issue.  We do not see anysignificant degradation or any degradation in the level of activity.  Again, John do you want to say something onthat?

John Banker

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

Yvon Cariou

The contribution to uswould be the same though.

John Banker

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

Operator

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

Bob Tuffy – Private Investor

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

Yvon  Cariou

I think we arestarting doing that in the conference call today by naming our key market segmentsand as you have noticed, we officially recognized alternative energy as a keymarket segment.  We can say that is asector that is developing.  We haveinteresting opportunities and again now those we have our goal here of theindustry at the table, let him speak to that and main application there ishaving to do with the solar in the alternative energy world, John.

John Banker

We appreciate yourquestion; it is a real interesting one. The demand for equipment for solar cells is very strong.  The high purity silicon is needed for solarcells.  I think virtually, all of it isproduced in high alloy equipment and most of it is clad and we got a reallyfascinating range of expensive alloys there that most of them, are big fractionare explosion clads are one of the only option. Solar is really neat for us now, but looking at other things, geothermalhas been a very good customer to us.  Atspikes 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, celluloseethanol, which we all hear a lot about. The projects that are out there are using some really nice high in corrosionresistant alloys.  It is really a neatsegment for us for the present.

Bob Tuffy – Private Investor

You talked aboutyour CAPEX spending next year, most of that is going to Europe.  Canyou say if that specifically for DYNAenergetics?

Yvon Cariou

It is spread over fourEuropean entities, including the Oil Field Products.  Fraction of it obviously is going toDYNAenergetics, but it is not only there.

Bob Tuffy – Private Investor

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

Rolf Ruspek

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

Bob Tuffy – Private Investor

Actually, one lastquestion, in regards to the inventory adjustment on cost to goods sold, is thatgoing to carry into next quarter as well?

Rick Santa

Yes that is a goodquestion, some will carry into the first quarter of 2008 and it will disappearafter that and the first quarter of 2008 impact will be comparable to that inthe fourth quarter.

Operator

(Operator Instructions)

Your next questioncomes from the line of Mark Carr of KeyBank.

Michael Bartlett - KeyBank

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

Rick Santa

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

Michael Bartlett - KeyBank

Okay, I know that itwas only in the quarter for a few weeks, but I guess even since that time, haveyou 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, wecannot say that, we both cannot comment on this side but you know, you can seeour customer names like some of the big names associated to the two businessesbut the procurement of the capital equipment on one end and products for theservicing the oil wells on the other end are not getting the same entities.

Michael Bartlett - KeyBank

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

Operator

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

Yvon Cariou

Thank you again forjoining us today, we are very encouraged by the continued demand we are seeingwithin our global end markets and by the steps we have taken to position DMCfor continued growth.  We look forward tokeeping you abreast of our progress during the coming year.  Take care see you soon.

Operator

Thank you for yourparticipation in today’s conference. This concludes the presentation. You may now disconnect.  Have agreat day.

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