CRDN Ceradyne, Inc. (MM)

Ceradyne, Inc. (Nasdaq:CRDN) today reported financial results for the third quarter and nine months ended September 30, 2005, including record sales and record net income. Sales for the third quarter 2005 rose to a record $94.4 million from $56.3 million in third quarter 2004. Net income for the third quarter 2005 increased to a record $13.3 million, or 53 cents per diluted share, compared to net income of $7.3 million, or 30 cents per diluted share, in the third quarter of 2004. Fully diluted average shares outstanding for the third quarter were 25.1 million compared to 24.7 million in the same period in 2004. Operations of ESK Ceramics have been consolidated since September 1, 2004, and contributed $26.2 million to third quarter 2005 sales compared to $8.7 million in third quarter 2004 sales. Gross profit margin improved to a record 36.9% of net sales in the third quarter of 2005 from 31.9% of net sales in the third quarter of 2004. During the third quarter of 2004, in connection with the acquisition of ESK Ceramics, the Company incurred expenses relating to the step up of ESK's inventory and backlog. These charges reduced gross profit margin for the third quarter of 2004 from 33.4% of net sales to 31.9%. The provision for income taxes was 35.2% in the third quarter 2005, compared to 38.7% in the third quarter 2004. Sales for the nine months ended September 30, 2005 reached a record $254.1 million, up from $132.2 million in the comparable period last year. Net income for the first nine months of 2005 increased to a record $30.7 million, or $1.23 per diluted share, on 25.0 million shares, from $18.8 million, or 77 cents per diluted share, on 24.5 million shares, for the nine-month period in 2004. New bookings for the third quarter of 2005 were $67.8 million, compared to $63.9 million for the same period last year. For the first nine months of 2005, new bookings increased to a record $242.8 million, compared to $131.7 million for the comparable period last year. Total backlog as of September 30, 2005 amounted to $189.6 million compared to total backlog at September 30, 2004 of $122.1 million. Joel Moskowitz, Ceradyne president and chief executive officer, commented: "Our record setting results for third quarter 2005 were primarily due to ceramic body armor production at an elevated rate and at high quality levels, which are directly attributable to our having increased manufacturing capacity at our Lexington, Kentucky, and California plants. We are anticipating that these factors, plus achieving record shipping rates, will result in higher order rates, as our customers gain greater comfort in our manufacturing and delivery capabilities. Further strengthening our position is the fact that our August 2004 acquisition of ESK insures a continuing high-volume, high-quality source of the boron carbide starting powders we use to manufacture body armor. "Although our lightweight ceramic body armor business is clearly the current driver of sales and earnings growth reported today, we remain focused on our industrial technology and product base as well," Moskowitz stated. "Diversification was a prime motivation for acquiring ESK, and that purchase represents a major commitment and step forward toward diversifying the Company's intermediate and longer-term growth. As part of this strategy, we are now in the process of coordinating research and development efforts in the U.S. and Germany under a newly created position of Chief Technology Officer," added Moskowitz. "In addition to our defense related efforts, R&D will focus primarily on industrial and energy related applications where the ability to perform in high temperature environments--while exhibiting excellent resistance to corrosion and erosion--are mandated." Ceradyne will host a conference call today at 8:00 a.m. PDT to discuss its 2005 third quarter results. Investors or other interested parties may listen to the teleconference live via the Internet at www.ceradyne.com or www.earnings.com. These web sites will also host an archive of the teleconference. A telephonic playback will be available beginning at 11:30 a.m. PDT on October 27 through 9:00 pm. PDT on October 30, 2005. The playback can be accessed by calling 800-642-1687 (or 706-645-9291 for international callers) and providing Conference ID 1305919. Ceradyne develops, manufactures and markets advanced technical ceramic products and components for defense, industrial, automotive/diesel and commercial applications. Additional information can be found at the Company's web site: www.ceradyne.com. Except for the historical information contained herein, this news release contains forward-looking statements regarding future events and the future performance of Ceradyne that involve risks and uncertainties that could cause actual results to differ materially from those projected. Words such as "anticipates," "believes," "plans," "expects," "intends," "future," and similar expressions are intended to identify forward-looking statements. These risks and uncertainties include the ability of Ceradyne to successfully integrate the Ceradyne and ESK business and achieve anticipated operating synergies, and fluctuations between the value of the dollar and Euro. Other risks and uncertainties are described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2004, and its Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission. Below is a summary of unaudited comparative results. Amounts in thousands except per share data: -0- *T Three Months Nine Months Ended Ended September 30, September 30, 2005 2004 2005 2004 -------- -------- --------- --------- NET SALES $94,406 $56,329 $254,100 $132,240 Cost of product sales 59,576 38,373 164,823 89,238 -------- -------- --------- --------- GROSS PROFIT 34,830 17,956 89,277 43,002 -------- -------- --------- --------- OPERATING EXPENSES: Selling 5,015 2,064 15,309 3,572 General and administrative 5,442 3,698 15,179 9,028 Research and development 2,037 858 5,641 1,881 -------- -------- --------- --------- 12,494 6,620 36,129 14,481 -------- -------- --------- --------- INCOME FROM OPERATIONS 22,336 11,336 53,148 28,521 Other income (expense): Other income 129 948 528 2,391 Interest (expense) (1,872) (382) (4,987) (382) -------- -------- --------- --------- (1,743) 566 (4,459) 2,009 INCOME BEFORE PROVISION FOR INCOME TAXES 20,593 11,902 48,689 30,530 Provision for income taxes 7,254 4,608 17,965 11,742 -------- -------- --------- --------- NET INCOME $13,339 $7,294 $30,724 $18,788 ======== ======== ========= ========= Earnings per share, basic $0.54 $0.30 $1.25 $0.78 Earnings per share, diluted $0.53 $0.30 $1.23 $0.77 Avg. shares outstanding, basic 24,586 24,303 24,530 24,095 Avg. shares outstanding, diluted 25,092 24,699 25,006 24,491 Condensed Consolidated Balance Sheets (in thousands): September 30, December 31, 2005 2004 ----------------- ----------------- Cash and cash equivalents $4,108 $4,521 Short term investments 7,830 10,041 Other current assets 140,950 120,085 Net property, plant and equipment 154,066 162,278 Other assets 19,084 19,429 ----------------- ----------------- Total Assets $326,038 $316,354 ================= ================= Current liabilities $49,556 $56,258 Long term debt 107,800 108,625 Non current liabilities 10,236 10,735 Deferred tax liability 7,031 5,695 Stockholders' equity 151,415 135,041 ----------------- ----------------- Total Liabilities and Stockholders Equity $326,038 $316,354 ================= ================= *T