Ceradyne, Inc. Reports Financial Results for Second Quarter and Six Months 2006; Sales, Net Income, New Orders and Backlog for
August 04 2006 - 7:30AM
Business Wire
Ceradyne, Inc. (Nasdaq:CRDN) reported financial results for the
second quarter and six months ended June 30, 2006, including record
sales and record net income. Sales for the second quarter of 2006
rose to a record $162.0 million, up from $89.9 million in second
quarter 2005. Net income increased to a record $30.0 million or
$1.10 per diluted share. This compares to a net income of $11.4
million or 46 cents per diluted share in second quarter 2005. Fully
diluted average shares outstanding for the quarter were 27,340,000
compared to 24,926,000 for the same period in 2005. The second
quarter 2006 net income includes a non-cash, after-tax charge of
$1.5 million or 5 cents per diluted share related to the voluntary
review of stock options granted during the period of 1997 through
2003, as discussed in more detail below. Provision for income taxes
was 35.3% in second quarter 2006 compared to 38.1% in second
quarter 2005. Sales for the six months ended June 30, 2006 reached
a record $298.4 million, up from $159.7 million in the comparable
period last year. Net income for the first six months of 2006
increased to a record $54.6 million or $2.00 per diluted share from
$17.4 million or 70 cents per diluted share for the first six-month
period in 2005. New bookings for second quarter 2006 were a record
$123.5 million compared to $118.5 million in the year-earlier
quarter. New bookings for the first six months of 2006 increased to
$278.2 million from last year's $175.0 million. Total backlog as of
June 30, 2006 rose to a record $256.6 million compared to total
backlog at June 30, 2005 of $215.6 million. Joel P. Moskowitz,
Ceradyne chief executive officer, commented, "We are very pleased
with the significant increase in our second quarter 2006 financial
performance. The expansion of production capacity at our Lexington,
Kentucky technical ceramic manufacturing facility this year allowed
us to ramp up in order to meet the U.S. government's continuing
requirements for lightweight ceramic body armor. The award to
Ceradyne for ESBI (side plates) in early July of a $59.8 million,
2006 delivery order, as part of a new 5-year indefinite
delivery/indefinite quantity contract with a maximum value of
$611.7 million, indicates the continued demand for our lightweight
ceramic body armor. "The exclusive agreement with Alcan, the
establishing of a manufacturing facility in Chicoutimi, Quebec,
Canada, and the acquisition of the nuclear radiation shielding
business ("Boral") which were announced in July 2006 will put
Ceradyne in the aluminum/boron carbide metal matrix composite (MMC)
business in order to produce structural elements for the
fabrication of nuclear waste containment vessels. Ceradyne intends
to develop ballistic grade aluminum compositions for armored
vehicles and use its new Canadian facility as a base for working
with the aluminum smelting industry regarding advanced technical
ceramic applications. "Additionally, the Company intends to break
ground this quarter on a technical ceramic manufacturing plant in
Tianjin, China. This 117,000 square foot factory will be Ceradyne's
first manufacturing facility in China. Although its initial ceramic
product will be related to the Chinese manufacture of silicon solar
energy cells, we anticipate it will expand our presence in China
and complement our Beijing sales office. "The above activities are
in keeping with our strategy of expanding our global efforts in
diverse, often non-military, advanced technical ceramic products."
Moskowitz further stated: "We recently commenced a voluntary review
of our historical stock option grants and related accounting
treatment. This review was initiated by Ceradyne in response to
concerns raised by several non-regulatory parties about our stock
option granting policies and wide public media coverage of stock
option grant issues involving other companies. This review is being
conducted by a Special Committee of our Board of Directors,
comprised solely of independent directors, with the assistance of
independent legal counsel. The review is focusing on stock option
grants made during the period of 1997 to the present. "Although the
Special Committee's review has not been completed, management has
concluded that the measurement dates for accounting purposes differ
from recorded dates for certain stock option grants made during
1997 through 2003. As a result of these findings, in the 2006
second quarter, the Company recorded an estimated after-tax,
non-cash charge of approximately $1.5 million pertaining to the
years ended December 31, 1997 to 2005 and the first six months of
2006. However, because the review has not been completed, the
charge we have recorded in the 2006 second quarter may be modified
or significantly changed." Ceradyne develops, manufactures and
markets advanced technical ceramic products and components for
defense, industrial, automotive/diesel, and commercial
applications. Additional information about the Company can be found
at www.ceradyne.com. Except for the historical information
contained herein, this press 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 include uncertainties
arising out of the Company's ongoing review of its stock option
grants and developments in regulatory and legal guidance regarding
stock option grants and accounting for such grants. For example,
information may be learned and analysis may be undertaken
concerning the Company's historic stock option grants and
accounting that may materially impact the Company's financial
statements or results. Additional risks and uncertainties are
described in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2005, and its Quarterly Reports on
Form 10-Q, as filed with the U.S. Securities and Exchange
Commission. Readers are cautioned not to place undue reliance on
the forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to update these
forward-looking statements to reflect subsequent events or
circumstances. Below is a summary of unaudited comparative results.
Amounts in thousands except per share data. -0- *T Three Months
Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005
--------- -------- --------- --------- NET SALES $162,016 $89,903
$298,363 $159,694 Cost of product sales 98,335 57,353 180,697
105,247 --------- -------- --------- --------- GROSS PROFIT 63,681
32,550 117,666 54,447 --------- -------- --------- ---------
Operating expenses: Selling 5,918 5,495 11,692 10,294 General and
administrative 9,135 5,192 16,131 9,737 Research and development
2,677 1,743 5,199 3,604 --------- -------- --------- ---------
17,730 12,430 33,022 23,635 --------- -------- --------- ---------
INCOME FROM OPERATIONS 45,951 20,120 84,644 30,812 Other income
(expense): Other income 1,464 35 2,542 399 Interest (expense)
(1,030) (1,744) (2,058) (3,115) --------- -------- ---------
--------- 434 (1,709) 484 (2,716) INCOME BEFORE PROVISION FOR
INCOME TAXES 46,385 18,411 85,128 28,096 Provision for income taxes
16,354 7,011 30,484 10,711 --------- -------- --------- ---------
NET INCOME $30,031 $11,400 $54,644 $17,385 ========= ========
========= ========= Earnings per share, basic $1.12 $0.47 $2.04
$0.71 Earnings per share, diluted $1.10 $0.46 $2.00 $0.70 Average
shares outstanding, basic 26,857 24,500 26,829 24,497 Average
shares outstanding, diluted 27,340 24,926 27,337 24,960 Condensed
Consolidated Balance Sheets (in thousands): June 30, December 31,
2006 2005 ------------- ------------- Cash, cash equivalents and
investments $126,976 $99,381 Other current assets 198,136 155,836
Net property, plant and equipment 174,385 153,259 Other assets
27,722 21,717 ------------ ------------ Total assets $527,219
$430,193 ============ ============ Current liabilities $66,204
$42,908 Long term debt 121,000 121,000 Non current liabilities
12,736 11,229 Deferred tax liability 4,741 4,536 Stockholders'
equity 322,538 250,520 ------------ ------------ Total liabilities
and stockholders' equity $527,219 $430,193 ============
============ *T
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