Ceradyne, Inc. (Nasdaq:CRDN) reported financial results for the
second quarter and six months ended June 30, 2007, including record
six month sales and record net income. Sales for second-quarter
2007 rose 14.4% to $185.4 million from $162.0 million in
second-quarter 2006. Net income for second-quarter 2007 increased
by 31.5% to $38.3 million, or $1.38 per diluted share, compared to
$29.1 million, or $1.07 per diluted share, in the second quarter of
2006. Fully diluted average shares outstanding for the third
quarter were 27.8 million compared to 27.3 million in the same
period in 2006. Gross profit margin was 41.7% of net sales in
second-quarter of 2007, up from 39.3% in second-quarter of 2006.
The provision for income taxes was 35.9% in second-quarter 2007,
compared to 35.5% in second-quarter 2006. Sales for the six months
ended June 30, 2007 reached a record $373.8 million, up from $298.4
million in the same period last year. Net income for the first six
months of 2007 increased to a record $76.4 million, or $2.77 per
diluted share, on 27.6 million shares, from $53.7 million, or $1.97
per diluted share, on 27.3 million shares, for the same six-month
period in 2006. New bookings for the second quarter of 2007 were
$55.3 million, compared to $123.5 million for the same period last
year. For the first six months of 2007, new bookings were $231.7
million, compared to $278.2 million for the comparable period last
year. Total backlog as of June 30, 2007 was $202.4 million,
compared to total backlog at June 30, 2006 of $256.6 million. Joel
P. Moskowitz, Ceradyne president and chief executive officer,
commented, �We have expressed over some period of time our longer
range strategy of global diversification in advanced technical
ceramic products and markets focused on non-defense applications as
well as remaining committed to lightweight ceramic personnel armor
and emerging vehicle armor requirements. I am pleased to report
that several second quarter 2007 events demonstrated Ceradyne�s
strategic direction. �On June 20, 2007, we opened a modern
manufacturing facility in Tianjin, China, for the production of
high purity ceramic components utilized by manufacturers of
photovoltaic silicon solar cells. We anticipate initial shipments
to begin from this Chinese factory in the third quarter 2007 and
ramp up over the next 12 months. Due to the demand in China for
solar energy and particularly Ceradyne products, we have decided to
immediately expand the new factory�s projected throughput. �On June
27, 2007, we announced that we had signed an agreement to acquire
EaglePicher Boron, LLC for approximately $69 million cash. This
acquisition will provide Ceradyne a source of the isotope B10 for
use in nuclear power plants and nuclear waste containment systems
in order to utilize B10�s neutron absorption properties. This boron
material is also used in the fabrication of semiconductor grade
silicon. Pending necessary regulatory approvals, we expect the
acquisition to close in third quarter 2007. EaglePicher Boron has
had a strong profit record and we expect the acquisition to be
accretive. �On July 11, 2007, we announced the acquisition of our
long-term raw materials supplier Minco, Inc. of Midway, Tennessee,
for $27.5 million cash. Minco supplies our Ceradyne Thermo
Materials operation in Scottdale, Georgia, with the raw powder
materials used to make our solar related product line and is
intended to insure a reliable flow of raw materials for our new
China operation. Much like our 2004 acquisition of ESK Ceramics in
Kempten, Germany, which provided vertical integration for our
ceramic armor products, the Minco acquisition provides vertical
integration of Ceradyne�s solar effort. Minco has been
manufacturing raw materials for 30 years and serves many
non-traditional ceramic industrial uses, such as precision
investment casting. Minco is a profitable entity which is expected
to be immediately accretive. �On June 7, 2007, Ceradyne announced
the introduction of a high-threat resistant armored vehicle
designated the �BULL.� This recently introduced vehicle is designed
to meet MRAP II (mine resistant ambush protected) requirements,
including IED (improvised explosive devices) threats. We also
believe, based on government testing on our initial vehicles, that
Ceradyne�s �BULL� will provide protection against lethal EFPs
(explosively formed penetrators). Ceradyne does not currently have
orders for the �BULL,� but we believe there is substantial
congressional and military interest in this unique vehicle. �On
June 15, 2007, we announced that Ceradyne had been notified by the
U.S. Army Tank Automotive Command (TACOM) that our alternative
lightweight armor materials, submitted in response to the Army�s
Long Term Armor Strategy (LTAS) requirements for advanced armor
solutions for application on the tactical wheel vehicle fleet, had
been accepted for formal evaluation by TACOM�s LTAS team. We
believe that this selection of our LTAS solution could lay the
groundwork for future military vehicle requirements that must
conform to LTAS. �Ceradyne has embarked on a 20 million Euro
expansion of our ESK operation in Kempten, Germany. Production
capacity will be substantially increased in the manufacturing of
boron nitride powders, marketed under our brand name, BORONEIGE�,
for cosmetic applications and silicon carbide seals for industrial
motors, pumps and related uses.� Ceradyne will host a conference
call today at 8:00 a.m. PDT (11:00 a.m. EDT) to discuss its 2007
second 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 11:00 a.m. PDT today through 9:00 p.m.
PDT on July 26, 2007. The playback can be accessed by calling
800-642-1687 (or 706-645-9291 for international callers) and
providing Conference ID 7014363. 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 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 and uncertainties are described in the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2006, 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 thereof. Below is a
summary of unaudited comparative results. Amounts in thousands
except per share data: Three Months Ended Year to Date as of June
30, June 30, � 2007 � � 2006 � � 2007 � � 2006 � � Net sales $
185,359 $ 162,016 $ 373,802 $ 298,363 Cost of product sales �
107,975 � � 98,335 � � 219,306 � � 180,697 � Gross profit � 77,384
� � 63,681 � � 154,496 � � 117,666 � Operating expenses: Selling
6,447 5,916 12,745 11,690 General and administrative 9,161 10,377
18,938 17,373 Research and development � 4,395 � � 2,677 � � 7,881
� � 5,199 � � 20,003 � � 18,970 � � 39,564 � � 34,262 � � Income
from operations 57,381 44,711 114,932 83,404 Other income
(expense): Other income 3,411 1,464 6,493 2,542 Interest (expense)
� (1,035 ) � (1,030 ) � (2,060 ) � (2,058 ) 2,376 434 4,433 484
Income before provision for Income taxes 59,757 45,145 119,365
83,888 Provision for income taxes � 21,454 � � 16,016 � � 42,973 �
� 30,146 � Net income $ 38,303 � $ 29,129 � $ 76,392 � $ 53,742 � �
Earnings per share, basic $ 1.41 $ 1.08 $ 2.81 $ 2.00 Earnings per
share, diluted $ 1.38 $ 1.07 $ 2.77 $ 1.97 � Avg. shares
outstanding, basic 27,237 26,857 27,194 26,829 Avg. shares
outstanding, diluted 27,786 27,325 27,585 27,323 Condensed Balance
Sheets (in thousands): � June 30, 2007 December 31, 2006 � � Cash
and cash equivalents $ 38,980 $ 13,547 Short term investments
216,431 190,565 Other current assets 219,173 197,863 Net property,
plant and equipment 190,697 183,011 Other assets � 28,983 � 28,829
Total assets $ 694,264 $ 613,815 � Current liabilities $ 56,065 $
69,912 Long term debt 121,000 121,000 Non current liabilities
21,513 13,274 Deferred tax liability 1,883 3,018 Stockholders'
equity � 493,803 � 406,611 Total liabilities and stockholders'
equity $ 694,264 $ 613,815
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