Ceradyne, Inc. (NASDAQ: CRDN) reported financial results for the
third quarter and nine months ended September 30, 2010.
Sales for the third quarter 2010 were $91.8 million, compared
with $108.0 million in the third quarter 2009. Net income for the
third quarter 2010 was $4.5 million, or $0.18 per fully diluted
share, compared to net income of $4.9 million, or $0.19 per fully
diluted share in the third quarter 2009.
Fully diluted average shares outstanding for the third quarter
2010 were 25,141,214 compared to 25,797,988 in the same period in
2009.
On July 27, 2010, Ceradyne revised its 2010 guidance to a range
of $0.80 to $1.18 per fully diluted share on shipments of $400
million to $430 million in sales. Although the level of Q4 2010
ceramic body armor shipments remains uncertain, we believe we will
meet our guidance.
Based on the growth of sales in solar crucibles, nuclear
products and the continued turnaround at its ESK Ceramics
subsidiary, Ceradyne's 2011 guidance is for sales to range from
$445 to $515 million and earnings to range from $1.35 to $1.75 per
fully diluted share. The range in sales and earnings per share is
caused by a lack of sufficient information to project its body
armor and enhanced combat helmets business for most of 2011. This
guidance assumes a range in the annual tax rate of 27% to 29% with
fully diluted average outstanding shares of 25.3 million.
Gross profit margin was 25.7% of net sales in the third quarter
2010 compared to 26.5% in the same period in 2009. The provision
for income taxes was 10.2% in third quarter 2010, compared to a
benefit for income taxes of 22.4% in the same period in 2009.
Sales for the nine months ended September 30, 2010 were $302.2
million, compared with $303.0 million in the same period last year.
Net income for the nine months ended September 30, 2010 was $16.1
million, or $0.63 per fully diluted share, on 25.5 million shares,
compared to a net loss of $5.6 million, or $0.22 per basic share,
on 25.7 million shares in the prior year period. The loss included
special charges that had a negative impact by reducing earnings per
share by approximately $0.51 for the nine months ended September
30, 2009. The special pre-tax charges totaled $17.3 million during
the nine month period ending 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 and 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, 2010 which was the same in the same period in
2009. The provision for income taxes was 17.9% in the nine months
ended September 30, 2010, compared to a provision for income taxes
of 9.7% in the same period in 2009.
New orders for the three months ended September 30, 2010 were
$110.8 million, compared to $100.5 million for the same period last
year. For the nine months ended September 30, 2010, new orders were
$304.0 million, compared to $330.6 million for the comparable
period last year.
Total backlog as of September 30, 2010 was $136.3 million,
compared to total backlog at September 30, 2009 of $156.3
million.
Joel P. Moskowitz, Ceradyne President and Chief Executive
Officer, commented: "The third quarter continued the recent trend
of substantively reduced body armor shipments. At the same time, we
continue the trend of extremely strong growth in solar crucible
revenues and profits, as well as the major turnaround in our ESK
industrial ceramic operations. We are also pleased with recent
activities at Ceradyne Boron Products related to our neutron
absorbing boron isotopes for nuclear power plant applications.
"We believe these trends will continue into 2011 with increased
solar crucible capacity in China based on completion of our new
Tianjin 218,000 square foot facility in Q1 2011. We also anticipate
strength in the industrial ceramics being produced by our German
ESK Ceramics subsidiary with potentially new business emanating
from PetroCeram® oil and gas sand filters, directional drilling
bearings, and other oil and gas related technical ceramics."
Mr. Moskowitz further stated, "A few recent Ceradyne
developments which are of interest include:
-- The German Federal Supreme Court in Karlsruhe, Germany, has upheld ESK
Ceramics' basic 'EKagrip®' patents in a long-term battle with an ESK
competitor. EKagrip® amounts to approximately 10% of ESK's sales and
is expected to grow. The court's ruling protects ESK's position for an
additional eight years.
-- The Company's first PetroCeram® oil sand filter has been in place in
the North Sea off the Danish coast for over four months and is
performing as expected.
-- Ceradyne's proposed new Enhanced Combat Helmet prototypes are being
extensively tested and evaluated by the military with initial very
positive results.
-- Ceradyne Thermo Materials is developing next generation high purity
ceramic crucibles for photovoltaic solar applications.
-- Ceradyne Thermo Materials has been asked to respond to recent increases
for deliveries in ceramic missile nose cone (radome) requirements in
2011.
"It is interesting to note that as recently as 2007 defense
related products, primarily body armor, accounted for 74% of
Ceradyne's revenue. This percentage is now about 33% year to date
and is projected to be between 20% and 30% in 2011.
"With cash and short-term investments at approximately $258
million, we continue to maintain a healthy balance sheet with over
$10 per fully diluted share in cash. We intend to use our cash to
support our internal growth plans, particularly related to solar
expansion, periodically repurchase Ceradyne stock (494,000 shares
repurchased in Q3 2010), and to acquire companies according to our
acquisition strategy."
Conference Call and Webcast Information
Ceradyne will host a conference call today at 8:00 a.m. PDT
(11:00 a.m. EDT) to review the financial results for the third
quarter ended September 30, 2010. To participate in the
teleconference, please call toll free 877-681-3372 (or 719-325-4886
for international callers) approximately 10 minutes prior to the
above start time and provide Conference ID 9789411. 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 telephone
playback will be available beginning at 11 a.m. PDT on October 26,
2010 through 11 a.m. PDT on October 28, 2010. The playback can be
accessed by calling 888-203-1112 (or 719-457-0820 for international
callers) and providing Conference ID 9789411.
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.
CERADYNE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
NET SALES $ 91,766 $ 107,954 $ 302,219 $ 302,993
COST OF GOODS SOLD 68,150 79,329 227,392 227,717
---------- ---------- ---------- ----------
Gross profit 23,616 28,625 74,827 75,276
OPERATING EXPENSES
Selling, general and
administrative 14,418 17,537 43,947 51,619
Acquisition related
charge (credit) 31 (795) (88) (795)
Research and
development 2,613 2,862 8,731 9,512
Restructuring - plant
closure and severance - 88 7 11,931
Goodwill impairment - - - 3,832
---------- ---------- ---------- ----------
17,062 19,692 52,597 76,099
---------- ---------- ---------- ----------
INCOME (LOSS) FROM
OPERATIONS 6,554 8,933 22,230 (823)
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest income 935 901 2,562 2,424
Interest expense (1,518) (1,520) (4,713) (5,469)
Gain on early
extinguishment of
debt - 96 - 1,881
Loss on auction rate
securities - (1,849) (978) (3,480)
Miscellaneous (917) (197) 493 (694)
---------- ---------- ---------- ----------
(1,500) (2,569) (2,636) (5,338)
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE
PROVISION FOR INCOME TAXES 5,054 6,364 19,594 (6,161)
PROVISION (BENEFIT) FOR
INCOME TAXES 517 1,428 3,504 (595)
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 4,537 $ 4,936 $ 16,090 $ (5,566)
========== ========== ========== ==========
BASIC INCOME (LOSS) PER
SHARE $ 0.18 $ 0.19 $ 0.64 $ (0.22)
========== ========== ========== ==========
DILUTED INCOME (LOSS) PER
SHARE $ 0.18 $ 0.19 $ 0.63 $ (0.22)
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
BASIC 24,960 25,681 25,329 25,737
DILUTED 25,141 25,798 25,506 25,737
CERADYNE, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
September 30, December 31,
2010 2009
------------ ------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 32,168 $ 122,154
Restricted cash - 3,130
Short-term investments 225,549 117,666
Accounts receivable, net of allowances for
doubtful accounts of $792 and $851
at September 30, 2010 and
December 31, 2009, respectively 50,136 53,269
Other receivables 16,934 11,424
Inventories, net 84,401 100,976
Production tooling, net 11,445 12,006
Prepaid expenses and other 19,140 19,932
Deferred tax asset 11,353 13,796
------------ ------------
TOTAL CURRENT ASSETS 451,126 454,353
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, net 240,661 239,322
LONG TERM INVESTMENTS 27,275 20,019
INTANGIBLE ASSETS, net 84,853 89,409
GOODWILL 43,394 43,880
OTHER ASSETS 2,506 2,721
------------ ------------
TOTAL ASSETS $ 849,815 $ 849,704
============ ============
CURRENT LIABILITIES
Accounts payable $ 23,959 $ 24,683
Accrued expenses 25,052 23,463
------------ ------------
TOTAL CURRENT LIABILITIES 49,011 48,146
LONG-TERM DEBT 84,713 82,163
EMPLOYEE BENEFITS 21,215 21,769
OTHER LONG TERM LIABILITY 38,539 39,561
DEFERRED TAX LIABILITY 8,568 8,348
------------ ------------
TOTAL LIABILITIES 202,046 199,987
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 13)
SHAREHOLDERS' EQUITY
Common stock, $0.01 par value, 100,000,000
authorized, 24,902,142 and 25,401,005
shares issued and outstanding at September
30, 2010 and December 31, 2009,
respectively 249 254
Additional paid-in capital 146,414 157,679
Retained earnings 486,346 470,256
Accumulated other comprehensive income 14,760 21,528
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 647,769 649,717
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 849,815 $ 849,704
============ ============
CERADYNE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Nine Months Ended
September 30,
------------------------
2010 2009
----------- -----------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 16,090 $ (5,566)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 26,979 28,649
Amortization of bond premium 273 -
Non cash interest expense on convertible
debt 2,550 2,817
(Gain) on early extinguishment of debt - (1,881)
Payments of accreted interest on repurchased
convertible debt - (2,956)
Deferred income taxes 1,376 (3,047)
Stock compensation 2,994 2,906
Loss on marketable securities 978 3,480
Goodwill impairment - 3,832
Loss on equipment disposal 510 425
Change in operating assets and liabilities
(net of effect of businesses acquired):
Accounts receivable, net 2,855 94
Other receivables (5,534) 1,352
Inventories, net 15,132 5,387
Production tooling, net 506 995
Prepaid expenses and other assets 483 477
Accounts payable and accrued expenses 2,480 8,985
Income taxes payable (106) 1,900
Other long term liability (1,063) (510)
Employee benefits 386 1,071
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 66,889 48,410
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (30,665) (13,588)
Changes in restricted cash 3,130 (428)
Purchases of marketable securities (119,956) (136,173)
Proceeds from sales and maturities of
marketable securities 4,489 64,051
Cash paid for acquisitions - (9,655)
Proceeds from sale of equipment 465 72
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (142,537) (95,721)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock due to
exercise of options 224 14
Excess tax benefit due to exercise of stock
options 7 24
Shares repurchased (14,837) (5,099)
Reduction on long term debt - (20,239)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (14,606) (25,300)
----------- -----------
EFFECT OF EXCHANGE RATES ON CASH AND CASH
EQUIVALENTS 268 1,047
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (89,986) (71,564)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 122,154 215,282
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 32,168 $ 143,718
=========== ===========
CERADYNE, INC.
SEGMENT FINANCIAL INFORMATION
(Amounts in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Revenue from External Customers
Advanced Ceramic Operations $ 25,949 $ 60,591 $ 116,832 $ 169,453
ESK Ceramics 32,134 27,971 94,843 75,636
Semicon Associates 2,328 1,834 6,908 5,854
Thermo Materials 26,458 16,446 69,818 47,970
Ceradyne Canada 1,903 300 3,275 618
Boron 7,291 5,748 19,878 19,200
Inter-segment elimination (4,297) (4,936) (9,335) (15,738)
--------- --------- --------- ---------
Total $ 91,766 $ 107,954 $ 302,219 $ 302,993
========= ========= ========= =========
Depreciation and Amortization
Advanced Ceramic Operations $ 1,984 $ 2,583 $ 6,646 $ 7,851
ESK Ceramics 3,158 3,818 9,417 10,905
Semicon Associates 85 84 252 270
Thermo Materials 1,522 1,160 4,559 3,411
Ceradyne Canada 343 347 1,026 988
Boron 1,648 1,298 5,079 5,224
--------- --------- --------- ---------
Total $ 8,740 $ 9,290 $ 26,979 $ 28,649
========= ========= ========= =========
Segment Income (Loss) from
Operations
Advanced Ceramic Operations $ (9,676) $ 7,751 $ (11,261) $ 17,371
ESK Ceramics 6,351 (1,997) 13,704 (20,503)
Semicon Associates 365 114 1,020 587
Thermo Materials 8,938 3,815 21,925 11,614
Ceradyne Canada (15) (680) (1,482) (6,323)
Boron 1,055 (62) (985) (3,714)
Inter-segment elimination (464) (8) (691) 145
--------- --------- --------- ---------
Total 6,554 8,933 22,230 (823)
Other Income (Expense) (1,500) (2,569) (2,636) (5,338)
--------- --------- --------- ---------
Income (Loss) before Provision
for Income Taxes $ 5,054 $ 6,364 $ 19,594 $ (6,161)
========= ========= ========= =========
Segment Assets
Advanced Ceramic Operations $ 394,276 $ 399,021 $ 394,276 $ 399,021
ESK Ceramics 185,682 214,064 185,682 214,064
Semicon Associates 5,732 5,724 5,732 5,724
Thermo Materials 135,995 107,104 135,995 107,104
Ceradyne Canada 17,285 17,038 17,285 17,038
Boron 110,845 113,438 110,845 113,438
--------- --------- --------- ---------
Total $ 849,815 $ 856,389 $ 849,815 $ 856,389
========= ========= ========= =========
Expenditures for Property,
Plant & Equipment
Advanced Ceramic Operations $ 1,841 $ 629 $ 4,993 $ 2,761
ESK Ceramics 429 (356) 1,416 2,568
Semicon Associates 44 49 485 124
Thermo Materials 8,708 795 21,374 7,512
Ceradyne Canada 33 (44) 153 119
Boron 297 184 2,244 504
--------- --------- --------- ---------
Total $ 11,352 $ 1,257 $ 30,665 $ 13,588
========= ========= ========= =========
CERADYNE, INC.
MARKET APPLICATION INFORMATION
(Amounts in thousands, except percentages)
We categorize our products into four market applications. The tables below
show the amount of our total sales of each market application and the
percentage contribution in the different time periods.
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Defense $ 18,660 $ 56,637 $ 98,165 $ 159,087
Industrial 61,037 41,642 168,406 116,882
Automotive/Diesel 9,458 6,779 27,145 17,948
Commercial 2,611 2,896 8,503 9,076
--------- --------- --------- ---------
Total $ 91,766 $ 107,954 $ 302,219 $ 302,993
========= ========= ========= =========
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Defense 20.4% 52.4% 32.5% 52.5%
Industrial 66.5 38.6 55.7 38.6
Automotive/Diesel 10.3 6.3 9.0 5.9
Commercial 2.8 2.7 2.8 3.0
--------- --------- --------- ---------
Total 100.0% 100.0% 100.0% 100.0%
========= ========= ========= =========
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