Ceradyne, Inc. (Nasdaq: CRDN) reported financial results for the
fourth quarter and twelve months ended December 31, 2009.
Sales for the fourth quarter 2009 were $97.6 million, compared
with $138.9 million in fourth quarter 2008. Net income for the
three months ended December 31, 2009, was $14.1 million, or $0.55
per fully diluted share compared with net income in the prior year
period of $20.7 million, or $0.79 per fully diluted share. Net
income for the three months ended December 31, 2009 was favorably
impacted by a tax benefit of $7.5 million due to a reversal of
liabilities for uncertain tax positions as well as the tax benefits
from the expenses and losses due to the closure of the Company’s
Bazet, France, manufacturing facility.
The Company is again reiterating its guidance for the full
fiscal year 2010 initially given on October 27, 2009 and reiterated
on January 11, 2010 of $0.60 per fully diluted share to
approximately $1.05 per fully diluted share and sales from $380.0
to $430.0 million.
On January 11, 2010, the Company announced that its preliminary
sales figure for 2009 would be approximately $401.0 million and
gave guidance that the full year earnings would meet or slightly
exceed approximately $0.60 per fully diluted share excluding
special items. The special items include restructuring and goodwill
impairment charges for all of 2009 and are detailed in the
reconciliation table below. Based on the final results, sales for
the twelve months ended December 31, 2009 were $400.6 million and
the full year earnings, excluding special items, were approximately
$0.73 per fully diluted share.
Gross profit margin was 27.0% of net sales in the fourth quarter
2009 compared to 37.1% in the same period in 2008. There was a
benefit from income taxes for fourth quarter 2009 of $7.5 million
compared to a provision for income taxes of $8.9 million in the
same period in 2008.
Sales for the twelve months ended December 31, 2009 were $400.6
million, compared with $680.2 million in the same period last year.
Net income for the twelve months ended December 31, 2009 was $8.5
million, or $0.33 per fully diluted share compared with net income
in the prior year of $104.5 million, or $3.91 per fully diluted
share. Net income for the twelve months ended December 31, 2009 was
favorably impacted by a tax benefit of $8.1 million due to a
reversal of liabilities for uncertain tax positions as well as the
tax benefits from the expenses and losses due to the closure of our
Bazet, France, manufacturing facility. Net income for the twelve
months ended December 31, 2009 included charges for restructuring
and impairment that had a negative impact by reducing fully diluted
earnings per share by approximately $0.40 for the twelve months
ended December 31, 2009. The charges for restructuring and
impairment totaled $18.7 million during the twelve months ended
December 31, 2009 which included a pre-tax $10.3 million
restructuring charge for the closure of our plant in Bazet, France,
$2.7 million in 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 and accelerated
depreciation of $1.9 million resulting from a revision of the
estimated useful lives of certain assets.
Gross profit margin was 25.4% of net sales in the twelve months
ended December 31, 2009 compared to 39.0% in the same period in
2008. There was a tax benefit of $8.1 million for the twelve months
ended December 31, 2009, compared to a provision for income taxes
of $56.4 million in 2008.
New orders for the three months ended December 31, 2009 were
$76.7 million, compared to $90.2 million for the same period last
year. For the year ended December 31, 2009, new orders were $407.3
million, compared to $566.8 million in 2008.
Total backlog as of December 31, 2009 was $135.5 million,
compared to total backlog at December 31, 2008 of $126.4
million.
Joel P. Moskowitz, Ceradyne president and chief executive
officer, commented: “We are pleased that the fourth quarter sales
and earnings allowed us to meet our revised 2009 guidance for Q4
and all of 2009.
“During 2009, our management took a number of actions related to
the decrease in lightweight body armor sales, as well as to reflect
the realities of the global economic downturn. As summarized above,
these 2009 restructuring and impairment charges totaled $18.7
million and were partially offset by an $8.3 million tax benefit
associated with these charges.
“Although we are still concerned regarding the global economic
outlook, the 2009 decisions should lay the groundwork for our
future growth predicated on Ceradyne’s diversified advanced
technical ceramic products and markets. We anticipate that there
will continue to be less reliance on our military lightweight
ceramic body armor, with increasing sales of our energy-related
product offerings, particularly nuclear power plant applications
and photovoltaic solar cell related components.
“Our strong year-end balance sheet with cash and cash
equivalents, and short-term investments of approximately $240
million will allow us to finance our growth or possible
acquisitions from internally generated funds.
“On January 11, 2010, Ceradyne held an investors’ reception
entitled “Ceradyne – The Global Path Forward.” The Company
displayed its military and non-military products, with the intent
to demonstrate our commitment to a balanced global product
line.
“In line with this strategy, we will begin construction this
month of a new 218,000 square foot manufacturing facility at an
estimated cost of $34.0 million in Tianjin, China, to primarily
support our Asian solar customers. Additionally, for the first
time, we will also put in place Chinese manufacturing capacity for
Ceradyne’s ESK Ceramics’ industrial, fluid handling, silicon
carbide seals and bushings.
“Early in 2010 we have seen strong demand in China for our
ceramic solar crucibles, which supports our decision to increase
capacity. Also, we continue to see increasing interest related to
nuclear power plant requirements for our neutron absorbing 10B
isotope, spent fuel rod storage products and special proprietary
ceramics for nuclear fuel fabrication.
“In summary, we enter 2010 cautiously as our Company continues
to evolve. Although we have accelerated our defense related
technical and marketing efforts, additional body armor orders are
uncertain. However, we are also focusing our efforts on a wide
product base, with particular emphasis on solar, nuclear as well as
oil and gas opportunities.”
Conference Call and Webcast
Information
Ceradyne will host a conference call today at 8:00 a.m. PST
(11:00 a.m. EST) to review the financial results for the fourth
quarter and the year ended December 31, 2009. 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 55208513. 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. PST today
through 11:00 a.m. PST on February 25, 2010. The playback can be
accessed by calling 800-642-1687 (or 706-645-9291 for international
callers) and providing Conference ID 55208513.
Information about Ceradyne,
Inc.
Ceradyne develops, manufactures and markets advanced technical
ceramic products and components for defense, industrial,
automotive/diesel and commercial applications.
In many high performance applications, products made of advanced
technical ceramics meet specifications that similar products made
of metals, plastics or traditional ceramics cannot achieve.
Advanced technical ceramics can withstand extremely high
temperatures, combine hardness with light weight, are highly
resistant to corrosion and wear, and often have excellent
electrical capabilities, special electronic properties and low
friction characteristics. 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, 2009,
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.
To supplement the consolidated financial results prepared in
accordance with Generally Accepted Accounting Principles ("GAAP"),
the Company uses non-GAAP financial measures that exclude certain
items and special charges, such as restructuring – plant closure
and severance, and impairment charges. Management does not consider
the excluded items part of day-to-day business or reflective of the
core operational activities of the company as they result from
transactions outside the ordinary course of business. Management
uses non-GAAP financial measures internally for strategic decision
making, forecasting future results and evaluating current
performance. Certain guidance is provided on a non-GAAP (or
"underlying") basis that excludes special charges and impairment
charges. By disclosing non-GAAP financial measures, management
intends to provide investors with a more meaningful, consistent
comparison of the Company's core operating results and trends for
the periods presented. Non-GAAP financial measures are not prepared
in accordance with GAAP; therefore, the information is not
necessarily comparable to other companies and should be considered
as a supplement to, not a substitute for, or superior to, the
corresponding measures calculated in accordance with GAAP.
CERADYNE, INC. CONSOLIDATED STATEMENTS OF
INCOME (Amounts in thousands, except per share data)
Three Months
EndedDecember 31,
Twelve Months
EndedDecember 31,
2009 2008 2009 2008
(Unaudited) (Unaudited) NET SALES $ 97,582 $
138,939 $ 400,575 $ 680,197
COST OF GOODS SOLD 71,239
87,381 298,956 414,885
Gross profit 26,343 51,558 101,619 265,312
OPERATING
EXPENSES Selling 6,508 6,265 27,151 31,231 General and
administrative 7,516 8,681 38,492 43,889 Acquisition related charge
(credit) 27 41 (768 ) 9,824 Research and development 2,746 3,803
12,258 14,782 Restructuring - plant closure and severance 993 -
12,924 - Goodwill impairment - -
3,832 - 17,790 18,790
93,889 99,726
INCOME FROM
OPERATIONS 8,553 32,768
7,730 165,586
OTHER INCOME (EXPENSE):
Interest income 1,667 1,280 4,091 7,553 Interest expense (1,650 )
(1,985 ) (7,119 ) (7,876 ) Gain on early extinguishment of debt - -
1,881 - Loss on auction rate securities (1,707 ) (2,325 ) (5,187 )
(5,870 ) Miscellaneous (285 ) (191 ) (979 )
1,511 (1,975 ) (3,221 ) (7,313 )
(4,682 )
INCOME BEFORE PROVISION FOR INCOME TAXES
6,578 29,547 417 160,904
PROVISION (BENEFIT) FOR INCOME
TAXES (7,503 ) 8,878 (8,098 )
56,424
NET INCOME $ 14,081 $ 20,669
$ 8,515 $ 104,480
BASIC INCOME PER
SHARE $ 0.55 $ 0.79 $ 0.33 $ 3.95
DILUTED INCOME PER SHARE $ 0.55 $ 0.79 $ 0.33
$ 3.91
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC 25,526 26,082 25,684 26,446
DILUTED 25,643
26,291 25,802 26,689
CERADYNE, INC.
CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except
share data)
December 31,2009
December 31,2008
(Unaudited) CURRENT ASSETS Cash and cash equivalents
$ 122,154 $ 215,282 Restricted cash 3,130 2,702 Short-term
investments 117,666 6,140
Accounts receivable, net of
allowances for doubtful accounts of $851 and $686 at December 31,
2009 and December 31, 2008, respectively
53,269 64,631 Other receivables 11,424 5,316 Inventories, net
100,976 101,017 Production tooling, net 12,006 14,563 Prepaid
expenses and other 19,932 24,170 Deferred tax asset 13,796
11,967
TOTAL CURRENT ASSETS 454,353
445,788
PROPERTY, PLANT AND EQUIPMENT, net 239,322 251,928
LONG TERM INVESTMENTS 20,019 24,434
INTANGIBLE ASSETS,
net 89,409 84,384
GOODWILL 43,880 45,324
OTHER
ASSETS 2,721 2,669
TOTAL ASSETS $ 849,704
$ 854,527
CURRENT LIABILITIES Accounts payable $
24,683 $ 22,954 Accrued expenses 23,463 21,999
TOTAL CURRENT LIABILITIES 48,146 44,953
LONG-TERM
DEBT 82,163 102,631
EMPLOYEE BENEFITS 21,769 19,088
OTHER LONG TERM LIABILITY 39,561 41,816
DEFERRED TAX
LIABILITY 8,348 7,045
TOTAL LIABILITIES
199,987 215,533
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY Common stock, $0.01 par value,
100,000,000 authorized, 25,401,005 and 25,830,374 shares issued and
outstanding at December 31, 2009 and December 31, 2008,
respectively 254 259 Additional paid-in capital 157,679 163,291
Retained earnings 470,256 461,741 Accumulated other comprehensive
income 21,528 13,703
TOTAL SHAREHOLDERS’
EQUITY 649,717 638,994
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY $ 849,704 $ 854,527
CERADYNE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Twelve Months
EndedDecember 31,
2009 2008 (Unaudited) CASH FLOWS
FROM OPERATING ACTIVITIES: Net income $ 8,515 $ 104,480
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES: Depreciation and amortization 35,146
36,668 Non cash interest expense on convertible debt 3,643 3,883
Gain on early extinguishment of debt (1,881 ) - Payments of
accreted interest on repurchased convertible debt (2,957 ) -
Deferred income taxes (1,572 ) (3,136 ) Stock compensation 3,839
3,109 Loss on auction rate securities 5,187 5,870 Goodwill
impairment 3,832 - Loss on equipment disposal 514 257 Change in
operating assets and liabilities (net of effect of businesses
acquired): Accounts receivable, net 12,170 20,830 Other receivables
(5,973 ) 333 Inventories, net 2,513 (6,623 ) Production tooling,
net 2,587 2,018 Prepaid expenses and other assets 3,731 (10,825 )
Other assets - (427 ) Accounts payable and accrued expenses 3,946
(16,285 ) Income tax payable (213 ) (232 ) Other liabilities - 114
Other long term liability (7,357 ) 9,667 Employee benefits
2,103 6,269
NET CASH PROVIDED BY OPERATING
ACTIVITIES
67,773 155,970
CASH FLOWS FROM
INVESTING ACTIVITIES: Purchases of property, plant and
equipment (14,534 ) (44,047 ) Changes in restricted cash (428 ) (42
) Purchases of marketable securities (179,194 ) - Proceeds from
sales and maturities of marketable securities 73,170 21,738 Cash
paid for acquisitions (9,654 ) (27,208 ) Proceeds from sale of
equipment 72 84
NET CASH USED IN
INVESTING ACTIVITIES (130,568 ) (49,475 )
CASH
FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of
stock due to exercise of options 33 366 Tax benefit due to exercise
of stock options 149 769 Shares repurchased (9,753 ) (44,705 )
Reduction on long term debt (20,239 ) -
NET
CASH USED IN FINANCING ACTIVITIES (29,810 )
(43,570 )
EFFECT OF EXCHANGE RATES ON CASH AND CASH
EQUIVALENTS (523 ) (2,746 )
(DECREASE)
INCREASE IN CASH AND CASH EQUIVALENTS (93,128 ) 60,179
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD 215,282
155,103
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 122,154 $ 215,282
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW ACTIVITIES: Interest paid $ 2,952 $
3,484 Income taxes paid $ 733 $ 63,545
CERADYNE, INC.NON-GAAP
FINANCIAL INFORMATION(Amounts in thousands, except per share
data)
To supplement the consolidated financial results prepared in
accordance with Generally Accepted Accounting Principles ("GAAP"),
the Company uses non-GAAP financial measures that exclude certain
items and special charges, such as restructuring – plant closure
and severance, and impairment charges. Management does not consider
the excluded items part of day-to-day business or reflective of the
core operational activities of the Company, as they result from
transactions outside the ordinary course of business.
Management uses non-GAAP financial measures internally for
strategic decision making, forecasting future results and
evaluating current performance. Certain guidance is provided only
on a non-GAAP (or "underlying") basis that excludes certain items
and special charges, due to the inherent difficulty in forecasting
such items. By disclosing non-GAAP financial measures, management
intends to provide investors with a more meaningful, consistent
comparison of the Company's core operating results and trends for
the periods presented.
Non-GAAP financial measures are not prepared in accordance with
GAAP; therefore, the information is not necessarily comparable to
other companies and should be considered as a supplement to, not a
substitute for, nor superior to, the corresponding measures
calculated in accordance with GAAP.
The items described below are excluded from the GAAP financial
results in the reconciliations that follow:
Gross Profit – In the fourth quarter 2009, the Company increased
by $328,000 its non-GAAP gross profit to exclude the impact of the
accelerated depreciation on equipment used in its Bazet, France
manufacturing operations which the Company closed during the fourth
quarter of 2009. For year ended December 31, 2009, this increase to
its non-GAAP gross profit amounted to $1.9 million. Given the
magnitude and nature of this adjustment relative to the operating
results for the period presented, the financial impact has been
excluded from non-GAAP net income.
Special Charges – The Company incurred certain special charges
in 2009 related to the following:
- Restructuring, plant closure and
severance – In the fourth quarter 2009, the Company increased its
non-GAAP pre-tax income by $1.0 million of special charges for
restructuring, plant closure and severance expenses incurred for
the closure of its Bazet, France, manufacturing plant and severance
expenses incurred with reducing its workforce in France, Germany
and North America. For year ended December 31, 2009, this increase
for these items to pre-tax income amounted to $12.9 million. Given
the magnitude and nature of these special charges relative to the
operating results for the periods presented, these items have been
excluded from non-GAAP pre-tax income.
- Goodwill impairment – In the
second quarter 2009 and for the year ended December 31, 2009, the
Company increased its non-GAAP pre-tax income by $3.8 million of
goodwill impairment charges for the goodwill associated with our
Ceradyne Canada operating segment. The Company determined that the
demand for its Boral® product line, which was a large part of the
revenue of the Ceradyne Canada operating and reporting unit,
continued to decline and that this condition required a goodwill
impairment charge.
Provision for Income Taxes - The Company recorded tax provisions
of $4.0 million and $8.3 million in the quarter and year ended
December 31, 2009, respectively, from the special charges
identified above. Given the magnitude and nature of the tax event
relative to the periods presented, it has been excluded from
non-GAAP net income.
CERADYNE, INC.
NON-GAAP FINANCIAL INFORMATION (Amounts in thousands,
except per share data)
Three Months
EndedDecember 31,
Twelve Months
EndedDecember 31,
2009 2008 2009 2008
(Unaudited) (Unaudited) GAAP net income $ 14,081 $
20,669 $ 8,515 $ 104,480 Reconciling items:
Gross profit Accelerated depreciation on plant
closure 328 - 1,899 - Special charges 1. Restructuring,
plant closure and severance 993 - 12,924 - 2. Goodwill impairment
- - 3,832 - Total special charges
1,321 - 18,655 - Provision for
income taxes - - Tax effect on non-GAAP adjustments (A)
3,959 - 8,322 - Non-GAAP net income $ 11,443 $
20,669 $ 18,848 $ 104,480 Non-GAAP earnings per share: Basic
non-GAAP income per share $ 0.45 $ 0.79 $ 0.73 $ 3.95 Diluted
non-GAAP income per share $ 0.45 $ 0.79 $ 0.73 $ 3.91 Non-GAAP
weighted average shares outstanding: Basic 25,526 26,082 25,684
26,446 Diluted 25,643 26,291 25,802 26,689
(A) The tax effect on non-GAAP adjustments is calculated using
the relevant tax jurisdictions’ statutory tax rates.
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