Ceradyne, Inc. (Nasdaq:CRDN) reported financial results for the
third quarter and nine months ended September 30, 2009.
Sales for the third quarter 2009 were $108.0 million, compared
with $167.7 million in third quarter 2008. Net income for the
three months ended September 30, 2009 was $4.9 million, or $0.19
per fully diluted share. The net income for the third quarter 2009
included a pre-tax charge for losses on auction rate securities of
$1.8 million that reduced earnings per share by approximately
$0.07.
The Company is adjusting its guidance for the full fiscal year
2009 from $.70 per fully diluted share to approximately $.60 per
fully diluted share and from sales of $420 to $440 million to sales
of $410 to $415 million. The forward looking estimated fully
diluted earnings per share guidance does not include the impact of
the total restructuring and impairment pre-tax charges for all of
2009, which are estimated to be approximately $0.55 per fully
diluted share.
Gross profit margin was 26.5% of net sales in the third quarter
2009 compared to 39.7% in the same period in 2008. The provision
for income taxes was 22.4% in third quarter 2009, compared to a
provision for income taxes of 36.1% in the same period in 2008.
Sales for the nine months ended September 30, 2009 were $303.0
million, compared with $541.3 million in the same period last year.
Net loss for the nine months ended September 30, 2009 was $5.6
million, or $0.22 per fully diluted share. The loss included
charges for restructuring and impairment that had a negative impact
by reducing fully diluted earnings per share by approximately $0.51
for the nine months ended September 30, 2009. The charges for
restructuring and impairment totaled $17.3 million during the nine
months ended September 30, 2009 which included a pre-tax $11.9
million restructuring charge for the closure of its plant in Bazet,
France and other severance expenses, a non-cash pre-tax impairment
charge of $3.8 million to write down the value of goodwill of its
Ceradyne Canada reporting unit to reflect the current industry and
economic environment and accelerated depreciation of $1.6 million
resulting from a revision of the estimated useful lives of certain
assets.
Gross profit margin was 24.8% of net sales in the nine months
ended September 30, 2009 compared to 39.5% in the same period in
2008. The provision for income taxes was 9.7% in the nine months
ended September 30, 2009, compared to a provision for income taxes
of 36.2% in the same period in 2008.
New orders for the three months ended September 30, 2009 were
$100.5 million, compared to $119.4 million for the same period last
year. For the nine months ended September 30, 2009, new orders were
$330.6 million, compared to $476.6 million for the comparable
period last year.
Total backlog as of September 30, 2009 was $156.3 million,
compared to total backlog at September 30, 2008 of $174.9
million.
Joel P. Moskowitz, Ceradyne president and chief executive
officer, commented: “Our target of a balanced advanced technical
ceramic company with sales approximately equally divided between
defense and non-defense markets has been achieved in 2009 with
defense sales of about 52% of the Company’s total. As we look
forward to 2010, again we see significant opportunities in the
non-defense sector, particularly in solar energy, aluminum
smelting, oil and gas drilling, and certain novel, entirely new
applications of our materials used in the manufacturing of glass
and automobile-related components.
“Although lightweight ceramic body armor programs declined
significantly in 2009, we believe that in 2010 body armor along
with other defense programs will reach a sustainable level. Future
defense opportunities include a new lighter weight generation of
body armor, body armor for our Allies, vehicle armor components for
U.S. as well as European vehicle manufacturers, and potential new
business for our recently acquired military helmet operation. We
are also more actively evaluating non-defense opportunities in
China.
“Recent examples of our progress towards 2010 product and market
objectives include:
- A recently completed successful
oil and gas drilling event in which Ceradyne’s proprietary ceramic
bearing allowed the drilling of a directional hole through a
difficult Texas formation without removing the drill and changing
the bearing. We believe this bearing is the beginning of a series
of proprietary ceramic bearing products for oil and gas
drilling.
- Our ESK Ceramics subsidiary
received its first order for its newly developed oil/particle
separator designed for removing hard erosive particles from the oil
in offshore applications, particularly in the North Sea. This
initial component is expected to be put into use early in
2010.
- Ceradyne together with its
Fortune 500 customer have developed several new products used in
the fabrication of a new glass system.
- Our long-time research efforts
in the field of aluminum smelting are beginning to show promise.
Recent orders in North America and interest expressed in China for
our cathode product are encouraging.
- The U.S. Marines have requested
that our Ceradyne/Diaphorm division further develop the ECH
(Enhanced Combat Helmet) design based on our original submission.
Although we expect this will delay final evaluation by several
months, we continue to expect a decision by early 2010.
Because of the uncertainty concerning some of our programs, we
are establishing a wide range for our initial guidance for 2010 as
follows:
- Sales range from $380 million to
$430 million
- Earnings range from $0.60 to
$1.05 per fully diluted share
This assumes an annual tax rate of 31% with fully diluted
average shares of 25.8 million.”
Ceradyne will host a conference call today at 8:00 a.m. PDT
(11:00 a.m. EDT) to discuss its third quarter 2009 results. To
participate in the teleconference, please call toll free
877-717-3046 (or 706-634-6364 for international callers)
approximately 10 minutes prior to the above start time and provide
Conference ID 35999659. 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 11:00 a.m.
PDT on October 29, 2009. The playback can be accessed by calling
800-642-1687 (or 706-645-9291 for international callers) and
providing Conference ID 35999659.
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, 2008,
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.
CERADYNE, INC. CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2009 2008 2009 2008
(Unaudited) (Unaudited) NET SALES $ 107,954 $
167,746 $ 302,993 $ 541,258
COST OF GOODS SOLD 79,329
101,082 227,717 327,504
Gross profit 28,625 66,664 75,276 213,754
OPERATING
EXPENSES Selling 6,758 8,443 20,643 24,966 General and
administrative 10,779 11,703 30,976 35,208 Acquisition related
charge (795 ) 9,783 (795 ) 9,783 Research and development 2,862
4,527 9,512 10,979 Restructuring - plant closure and severance 88 -
11,931 - Goodwill impairment - -
3,832 - 19,692 34,456
76,099 80,936
INCOME (LOSS)
FROM OPERATIONS 8,933 32,208
(823 ) 132,818
OTHER INCOME (EXPENSE):
Interest income 901 1,772 2,424 6,273 Interest expense (1,520 )
(1,977 ) (5,469 ) (5,891 ) Gain on early extinguishment of debt 96
- 1,881 - Loss on auction rate securities (1,849 ) (2,958 ) (3,480
) (3,545 ) Miscellaneous (197 ) 382
(694 ) 1,702 (2,569 ) (2,781 )
(5,338 ) (1,461 )
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES 6,364 29,427 (6,161 ) 131,357
PROVISION
(BENEFIT) FOR INCOME TAXES 1,428 10,609
(595 ) 47,546
NET INCOME (LOSS)
$ 4,936 $ 18,818 $ (5,566 ) $ 83,811
BASIC
INCOME (LOSS) PER SHARE $ 0.19 $ 0.72 $ (0.22 ) $
3.15
DILUTED INCOME (LOSS) PER SHARE $ 0.19 $
0.71 $ (0.22 ) $ 3.12
WEIGHTED AVERAGE SHARES
OUTSTANDING: BASIC 25,681 26,272 25,737 26,568
DILUTED 25,798 26,563 25,737 26,888
CERADYNE, INC.
CONSOLIDATED BALANCE
SHEETS
(Amounts in thousands, except
share data)
September 30,
2009
December 31,
2008
(Unaudited) CURRENT ASSETS Cash and cash equivalents
$ 143,718 $ 215,282 Restricted cash 3,130 2,702 Short-term
investments 78,739 6,140
Accounts receivable, net of
allowances for doubtful accounts of $840 and $686 at September 30,
2009 and December 31, 2008, respectively
65,618 64,631 Other receivables 4,094 5,316 Inventories, net 98,751
101,017 Production tooling, net 13,620 14,563 Prepaid expenses and
other 24,100 24,170 Deferred tax asset 15,290 11,967
TOTAL CURRENT ASSETS 447,060 445,788
PROPERTY, PLANT AND EQUIPMENT, net 247,363 251,928
LONG
TERM INVESTMENTS 24,978 24,434
INTANGIBLE ASSETS, net
90,380 84,384
GOODWILL 44,096 45,324
OTHER ASSETS
2,512 2,669
TOTAL ASSETS $ 856,389 $ 854,527
CURRENT LIABILITIES Accounts payable $ 30,577 $
22,954 Accrued expenses 23,400 21,999 Income taxes payable
2,142 -
TOTAL CURRENT LIABILITIES 56,119 44,953
LONG-TERM DEBT 81,338 102,631
EMPLOYEE BENEFITS
21,071 19,088
OTHER LONG TERM LIABILITY 46,406 41,816
DEFERRED TAX LIABILITY 6,967 7,045
TOTAL
LIABILITIES 211,901 215,533
COMMITMENTS AND
CONTINGENCIES (Note 15) SHAREHOLDERS’ EQUITY Common
stock, $0.01 par value, 100,000,000 authorized, 25,680,354 and
25,830,374 shares issued and outstanding at September 30, 2009 and
December 31, 2008, respectively 257 259 Additional paid-in capital
163,089 163,291 Retained earnings 456,175 461,741 Accumulated other
comprehensive income 24,967 13,703
TOTAL
SHAREHOLDERS’ EQUITY 644,488 638,994
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY $ 856,389 $ 854,527
CERADYNE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Nine Months Ended
September 30,
2009 2008 (Unaudited) CASH FLOWS
FROM OPERATING ACTIVITIES: Net (loss) income $ (5,566 ) $
83,811
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH
PROVIDED BY OPERATING ACTIVITIES: Depreciation and amortization
28,649 30,122 Non cash interest expense on convertible debt 2,817
2,887 Gain on early extinguishment of debt (1,880 ) - Payments of
accreted interest on repurchased convertible debt (2,956 ) -
Deferred income taxes (3,047 ) (656 ) Stock compensation 2,906
2,233 Loss on marketable securities 3,480 3,545 Goodwill impairment
3,832 - Loss on equipment disposal 425 125 Change in operating
assets and liabilities (net of effect of businesses acquired):
Accounts receivable, net 94 22,680 Other receivables 1,352 (3,597 )
Inventories, net 5,387 (5,079 ) Production tooling, net 995 2,597
Prepaid expenses and other assets 476 (18,129 ) Accounts payable
and accrued expenses 8,985 (5,456 ) Income taxes payable 1,900 549
Other long term liability (510 ) 10,350 Employee benefits
1,071 1,014
NET CASH PROVIDED BY OPERATING
ACTIVITIES
48,410 126,996
CASH FLOWS FROM
INVESTING ACTIVITIES: Purchases of property, plant and
equipment (13,588 ) (35,938 ) Changes in restricted cash (428 ) (39
) Purchases of marketable securities (136,173 ) - Proceeds from
sales and maturities of marketable securities 64,051 21,700 Cash
paid for acquisitions (9,655 ) (26,855 ) Proceeds from sale of
equipment 72 24
NET CASH USED IN
INVESTING ACTIVITIES (95,721 ) (41,108 )
CASH
FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of
stock due to exercise of options 14 302 Excess tax benefit due to
exercise of stock options 24 287 Shares repurchased (5,099 )
(34,919 ) Reduction on long term debt (20,239 ) -
NET CASH USED IN FINANCING ACTIVITIES (25,300
) (34,330 )
EFFECT OF EXCHANGE RATES ON CASH AND CASH
EQUIVALENTS 1,047 (2,175 )
(DECREASE)
INCREASE IN CASH AND CASH EQUIVALENTS (71,564 ) 49,383
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD 215,282
155,103
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 143,718 $ 204,486
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW ACTIVITIES: Interest paid $ 1,555 $
1,744 Income taxes paid $ 692 $ 62,692
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