Ceradyne, Inc. Now in Compliance with Nasdaq Listing Rules, Files Form 10-Q for Second Quarter 2006, Special Committee Completes
October 24 2006 - 7:30AM
Business Wire
Ceradyne, Inc. (Company) (Nasdaq:CRDN) announced that it is now in
compliance with the requirements for continued listing on The
Nasdaq Global Select Market, as set forth in Nasdaq Marketplace
Rule 4310(c)(14), as a result of filing its Form 10-Q report for
the quarter ended June 30, 2006 with the Securities and Exchange
Commission on October 24, 2006. As reported by the Company on
August 4, 2006, a Special Committee comprised of independent
members of Ceradyne�s Board of Directors was appointed to conduct a
voluntary review of historical stock option grants and related
accounting treatment. The Special Committee retained the law firm
of Latham & Watkins LLP as independent legal counsel and the
firm of LECG as independent forensic accounting experts to assist
the Special Committee with its review. The Special Committee has
completed its review of historical stock option grants. A summary
of the Special Committee�s findings and results of the review
follows: During the period of January 1997 through September 2003,
the Stock Option Committee of the Board of Directors approved 23
grants of stock options by unanimous written consent. The date
selected by management as the grant date and as the accounting
measurement date was the date specified in each unanimous written
consent. However, in all but one case, the unanimous written
consent was not finalized and signed until a later date. Therefore,
the use of the date specified in each unanimous written consent as
the accounting measurement date was incorrect in all but one case.
The proper accounting measurement date is the date the unanimous
written consent was finalized and signed by the members of the
Stock Option Committee. As a result of using the revised
measurement dates for options granted from January 1997 through
September 2003, the Company recorded a pre-tax charge in the second
quarter of 2006 of $3.4 million ($2.3 million after income taxes).
This includes a non-cash compensation expense of $2.2 million ($1.4
after income taxes) and $1.2 million ($0.9 million after income
taxes) of estimated additional employment and other taxes that are
expected to become payable. The total pre-tax charge of $3.4
million recorded in the second quarter compares to the estimated
$2.2 million pre-tax charge reported by the Company on August 4,
2006. As a result of the additional $1.2 million pre-tax charge,
the diluted earnings per share for the second quarter and six
months ended June 30, 2006 were $1.07 and $1.97, respectively,
compared to $1.10 and $2.00, respectively, reported on August 4th.
The Special Committee and the Board of Directors, based on
information gathered during the review by independent counsel,
concluded that the accounting errors resulting from the use of
incorrect measurement dates for options granted between January
1997 and September 2003 were not the product of any deliberate or
intentional misconduct by the Company or its executives, staff or
Board of Directors. Since September 2003, all options have been
granted at meetings of the Stock Option Committee or the
Compensation Committee of the Board of Directors, and the dates of
those meetings have been used correctly as the accounting
measurement dates. Other matters that relate to the completion of
the Special Committee�s review include: The Company has concluded
that no prior period financial statements require restatement as a
result of the charge recorded related to using revised measurement
dates for stock option grants made from January 1997 through
September 2003. All current executive officers of the Company and
members of its Board of Directors voluntarily have amended all of
their unexercised stock options which have an exercise price below
the price of the common stock on the revised measurement date by
increasing the exercise price to the closing price of the common
stock as of the revised measurement date. Four shareholder
derivative lawsuits have been filed against several current and
former directors and executive officers of the Company. The
complaints assert claims for, among other things, breaches of
fiduciary duty by directors and executive officers related to
backdating of stock options. The Company intends to take all
appropriate action in response to these lawsuits. The SEC has
informally requested information about the Company�s internal
review of historical stock option grants. The Company intends to
fully cooperate with the SEC. 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 review of its stock option grants and
developments in regulatory and legal guidance regarding stock
option grants and accounting for such grants, and risks related to
the pending derivative lawsuits. 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. Ceradyne, Inc. (Company) (Nasdaq:CRDN) announced
that it is now in compliance with the requirements for continued
listing on The Nasdaq Global Select Market, as set forth in Nasdaq
Marketplace Rule 4310(c)(14), as a result of filing its Form 10-Q
report for the quarter ended June 30, 2006 with the Securities and
Exchange Commission on October 24, 2006. As reported by the Company
on August 4, 2006, a Special Committee comprised of independent
members of Ceradyne's Board of Directors was appointed to conduct a
voluntary review of historical stock option grants and related
accounting treatment. The Special Committee retained the law firm
of Latham & Watkins LLP as independent legal counsel and the
firm of LECG as independent forensic accounting experts to assist
the Special Committee with its review. The Special Committee has
completed its review of historical stock option grants. A summary
of the Special Committee's findings and results of the review
follows: -- During the period of January 1997 through September
2003, the Stock Option Committee of the Board of Directors approved
23 grants of stock options by unanimous written consent. The date
selected by management as the grant date and as the accounting
measurement date was the date specified in each unanimous written
consent. However, in all but one case, the unanimous written
consent was not finalized and signed until a later date. Therefore,
the use of the date specified in each unanimous written consent as
the accounting measurement date was incorrect in all but one case.
The proper accounting measurement date is the date the unanimous
written consent was finalized and signed by the members of the
Stock Option Committee. -- As a result of using the revised
measurement dates for options granted from January 1997 through
September 2003, the Company recorded a pre-tax charge in the second
quarter of 2006 of $3.4 million ($2.3 million after income taxes).
This includes a non-cash compensation expense of $2.2 million ($1.4
after income taxes) and $1.2 million ($0.9 million after income
taxes) of estimated additional employment and other taxes that are
expected to become payable. The total pre-tax charge of $3.4
million recorded in the second quarter compares to the estimated
$2.2 million pre-tax charge reported by the Company on August 4,
2006. As a result of the additional $1.2 million pre-tax charge,
the diluted earnings per share for the second quarter and six
months ended June 30, 2006 were $1.07 and $1.97, respectively,
compared to $1.10 and $2.00, respectively, reported on August 4th.
-- The Special Committee and the Board of Directors, based on
information gathered during the review by independent counsel,
concluded that the accounting errors resulting from the use of
incorrect measurement dates for options granted between January
1997 and September 2003 were not the product of any deliberate or
intentional misconduct by the Company or its executives, staff or
Board of Directors. -- Since September 2003, all options have been
granted at meetings of the Stock Option Committee or the
Compensation Committee of the Board of Directors, and the dates of
those meetings have been used correctly as the accounting
measurement dates. Other matters that relate to the completion of
the Special Committee's review include: -- The Company has
concluded that no prior period financial statements require
restatement as a result of the charge recorded related to using
revised measurement dates for stock option grants made from January
1997 through September 2003. -- All current executive officers of
the Company and members of its Board of Directors voluntarily have
amended all of their unexercised stock options which have an
exercise price below the price of the common stock on the revised
measurement date by increasing the exercise price to the closing
price of the common stock as of the revised measurement date. --
Four shareholder derivative lawsuits have been filed against
several current and former directors and executive officers of the
Company. The complaints assert claims for, among other things,
breaches of fiduciary duty by directors and executive officers
related to backdating of stock options. The Company intends to take
all appropriate action in response to these lawsuits. -- The SEC
has informally requested information about the Company's internal
review of historical stock option grants. The Company intends to
fully cooperate with the SEC. 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 review of its stock option grants and
developments in regulatory and legal guidance regarding stock
option grants and accounting for such grants, and risks related to
the pending derivative lawsuits. 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.
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