Ceradyne, Inc. (NASDAQ: CRDN) reported financial results for the
fourth quarter and twelve months ended December 31, 2010.
Sales for the fourth quarter 2010 were $100.7 million, compared
with $97.6 million in the fourth quarter 2009. Net income for the
fourth quarter 2010 was $13.2 million, or $0.53 per fully diluted
share, compared to net income of $14.1 million, or $0.55 per fully
diluted share in the fourth quarter 2009. Net income in the fourth
quarter 2010 was favorably impacted by a tax benefit of $7.4
million, which included $5.4 million from the settlement of a claim
for reapportionment of state income taxes and a benefit of $2.0
million from acquisition and restructuring charges. The fourth
quarter 2010 results also include pre-tax charges totaling $5.2
million, comprised of $1.7 million for acquisition related charges
and $3.5 million in restructuring charges due to the closure of the
Company's hot press facility in Costa Mesa, California. The
after-tax net impact of these items increased net income by $2.2
million during the fourth quarter 2010 or $0.09 per fully diluted
share. Net income for the three months ended December 31, 2009 was
favorably impacted by a tax benefit of $5.1 million, which included
$3.8 million from the reversal of liabilities for uncertain tax
positions due to the settlement of audits by the IRS in the fourth
quarter and a tax benefit of $1.3 million resulting from the
closure of the Company's Bazet, France, manufacturing facility, and
losses from auction rate securities. The after-tax net impact of
these items increased net income by $2.0 million during the fourth
quarter of 2009, or $0.08 per fully diluted share.
Fully diluted average shares outstanding for the fourth quarter
2010 were 24,968,532 compared to 25,642,736 in the same period in
2009.
The Company is reiterating its guidance for the full fiscal year
2011 that was updated on January 10, 2011 to a range of $1.50 per
fully diluted share to approximately $1.90 per fully diluted share
and sales from $470.0 million to $540.0 million.
Gross profit margin was 32.8% of net sales in the fourth quarter
2010 compared to 27.0% in the same period in 2009.
Sales for the twelve months ended December 31, 2010 were $402.9
million, compared with $400.6 million in the same period last year.
Net income for the twelve months ended December 31, 2010 was $29.3
million, or $1.15 per fully diluted share, compared with net income
in the prior year of $8.5 million, or $0.33 per fully diluted
share. Net income for the twelve months ended December 31, 2010 was
favorably impacted by a tax benefit of $7.8 million, which included
$5.4 million from the settlement of a claim for reapportionment of
state income taxes and a benefit of $2.4 million from acquisition
and restructuring charges and losses on auction rate securities.
Full year 2010 results also include pre-tax charges totaling $6.1
million, comprised of $1.6 million for acquisition related charges,
$3.5 million in restructuring charges due to the closure of the
Company's hot press facility in Costa Mesa, California and $1.0
million from loss on auction rate securities. The after-tax net
impact of these items increased net income by $1.7 million during
the twelve months ended December 31, 2010 or $0.06 per fully
diluted share.
Income from operations before acquisition and restructuring
charges for the twelve months ended December 31, 2010 was $34.2
million compared to income from operations before acquisition and
restructuring charges, and goodwill impairment charges of $23.7
million in 2009.
Net income for the twelve months ended December 31, 2009 was
favorably impacted by a tax benefit of $13.5 million, which
included $3.8 million from the reversal of liabilities for
uncertain tax positions due to the settlement of audits by the IRS
and a tax benefit of $9.7 million resulting from the closure of our
Bazet, France, manufacturing facility, goodwill impairment and
losses from auction rate securities, partially offset by an
acquisition related credit. Net income for the twelve months ended
December 31, 2009 included charges for restructuring and
impairment, partially offset by an acquisition related credit, that
had a negative impact by reducing fully diluted earnings per share
by approximately $0.37 for the twelve months ended December 31,
2009. These items totaled $23.1 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, accelerated
depreciation of $1.9 million resulting from a revision of the
estimated useful lives of certain assets and losses of $5.2 million
from auction rate securities, partially offset by an acquisition
related credit of $0.8 million.
Gross profit margin was 26.8% of net sales in the twelve months
ended December 31, 2010 compared to 25.4% in twelve months ended
December 31, 2009.
New orders for the three months ended December 31, 2010 were
$151.3 million, compared to $76.7 million for the same period last
year. For the year ended December 31, 2010, new orders were $455.3
million, compared to $407.3 million for the comparable period last
year.
Total backlog as of December 31, 2010 was $185.8 million,
compared to total backlog at December 31, 2009 of $135.5
million.
Joel P. Moskowitz, Ceradyne president and chief executive
officer, commented: "We are very pleased with our fourth quarter
and full year 2010 financial performance. It allowed us to meet our
2010 guidance and laid the groundwork for continuing growth in
sales and earnings for 2011.
"2010 was a year of transition for Ceradyne, with reduced
reliance on defense related sales, offset by strong sales of our
high purity fused silica ceramic crucibles used for the manufacture
of photovoltaic solar cells, and a dramatic turnaround in our ESK
Ceramics, Kempten, Germany operation."
Mr. Moskowitz continued, "Several recent events are anticipated
to provide momentum to our growth in 2011 and beyond:
- On January 4, 2011, we announced the acquisition of VIOX
Corporation, located in Seattle, Washington. VIOX is heavily
focused on the solar cell market, with recent developments in
bio-glass compounds for healthcare. We believe VIOX will be
immediately accretive.
- On January 10, 2011 at a Ceradyne Investor Reception in New
York City, a preliminary growth strategy "Ceradyne $1 Billion" was
announced. This strategy is designed to increase Ceradyne sales 2.5
times, from its current $400 million annual sales level to $1
billion in a five year time frame.
- On January 18, 2011, Ceradyne opened its new 218,000 square
foot solar-related manufacturing facility in Tianjin, China. This
modern plant is designed to double solar crucible manufacturing
capacity later in 2011."
Mr. Moskowitz further remarked: "The increase in new orders and
ending backlog in the fourth quarter should give us a good start to
2011. We continue to see excellent testing results on our Enhanced
Combat Helmet (ECH) and increased interest in body armor
requirements.
"We are producing strong cash flows, with year-end cash and
short-term investments of $246 million.
"In summary, we enter 2011 as a diversified advanced technical
ceramic company with a strong focus on energy related markets,
including solar, nuclear power plants and oil and gas recovery.
Although at a reduced level, our defense sales should grow modestly
from 2010 levels, and the industrial ceramics market, particularly
at our ESK Ceramics operation, is very encouraging."
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, 2010. To participate in the
teleconference, please call toll free 888-455-2263 (or 719-325-4930
for international callers) approximately 10 minutes prior to the
above start time and provide Conference ID 9651153. 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. PST on February 24,
2011 through 11 a.m. PST on February 26, 2010. The playback can be
accessed by calling 888-203-1112 (or 719-457-0820 for international
callers) and providing Conference ID 9651153.
Information about Ceradyne, Inc.
Ceradyne develops, manufactures and markets advanced technical
ceramic products and components for defense, industrial, energy,
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, 2010,
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 table at the end of this press release includes a
reconciliation between the non-GAAP financial measures discussed in
this press release and the GAAP financial results. These non-GAAP
financial measures exclude certain items and special charges, such
as restructuring - plant closure and severance, impairment charges,
acquisition related charges, and losses on auction rate securities.
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. 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 Ended Twelve Months Ended
December 31, December 31,
------------------- -------------------
2010 2009 2010 2009
--------- --------- --------- ---------
(Unaudited) (Unaudited)
NET SALES $ 100,719 $ 97,582 $ 402,938 $ 400,575
COST OF GOODS SOLD 67,686 71,239 295,078 298,956
--------- --------- --------- ---------
Gross profit 33,033 26,343 107,860 101,619
OPERATING EXPENSES
Selling, general and
administrative 17,993 14,024 61,940 65,643
Research and development 2,961 2,746 11,692 12,258
Acquisition related charge
(credit) 1,655 27 1,567 (768)
Restructuring - plant closure and
severance 3,498 993 3,505 12,924
Goodwill impairment - - - 3,832
--------- --------- --------- ---------
26,107 17,790 78,704 93,889
--------- --------- --------- ---------
INCOME FROM OPERATIONS 6,926 8,553 29,156 7,730
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income 2,793 1,667 5,355 4,091
Interest expense (1,534) (1,650) (6,247) (7,119)
Gain on early extinguishment of
debt - - - 1,881
Loss on auction rate securities - (1,707) (978) (5,187)
Miscellaneous 592 (285) 1,085 (979)
--------- --------- --------- ---------
1,851 (1,975) (785) (7,313)
--------- --------- --------- ---------
INCOME BEFORE PROVISION FOR INCOME
TAXES 8,777 6,578 28,371 417
PROVISION (BENEFIT) FOR INCOME
TAXES (4,409) (7,503) (905) (8,098)
--------- --------- --------- ---------
NET INCOME $ 13,186 $ 14,081 $ 29,276 $ 8,515
========= ========= ========= =========
BASIC INCOME PER SHARE $ 0.53 $ 0.55 $ 1.16 $ 0.33
========= ========= ========= =========
DILUTED INCOME PER SHARE $ 0.53 $ 0.55 $ 1.15 $ 0.33
========= ========= ========= =========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
BASIC 24,713 25,526 25,191 25,684
DILUTED 24,969 25,643 25,370 25,802
CERADYNE, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
December 31, December 31,
2010 2009
------------ ------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 53,436 $ 122,154
Short-term investments 192,860 117,666
Restricted cash - 3,130
Accounts receivable, net of allowances for
doubtful accounts of $685 and $851 at December
31, 2010 and December 31, 2009, respectively 53,019 53,269
Other receivables 17,553 11,424
Inventories, net 94,258 100,976
Production tooling, net 10,037 12,006
Prepaid expenses and other 38,653 19,932
Deferred tax asset 6,808 13,796
------------ ------------
TOTAL CURRENT ASSETS 466,624 454,353
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, net 243,681 239,322
LONG TERM INVESTMENTS 26,187 20,019
INTANGIBLE ASSETS, net 83,475 89,409
GOODWILL 43,219 43,880
OTHER ASSETS 2,127 2,721
------------ ------------
TOTAL ASSETS $ 865,313 $ 849,704
============ ============
CURRENT LIABILITIES
Accounts payable $ 25,738 $ 24,683
Accrued expenses 24,603 23,463
Income taxes payable 1,869 -
------------ ------------
TOTAL CURRENT LIABILITIES 52,210 48,146
LONG-TERM DEBT 85,599 82,163
EMPLOYEE BENEFITS 22,269 21,769
OTHER LONG TERM LIABILITY 41,902 39,561
DEFERRED TAX LIABILITY 11,124 8,348
------------ ------------
TOTAL LIABILITIES 213,104 199,987
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 13)
SHAREHOLDERS' EQUITY
Common stock, $0.01 par value, 100,000,000
authorized, 24,713,126 and 25,401,005 shares
issued and outstanding at December 31, 2010 and
December 31, 2009, respectively 247 254
Additional paid-in capital 141,973 157,679
Retained earnings 499,532 470,256
Accumulated other comprehensive income 10,457 21,528
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 652,209 649,717
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 865,313 $ 849,704
============ ============
CERADYNE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Twelve Months Ended
December 31,
------------------------
2010 2009
----------- -----------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 29,276 $ 8,515
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 36,148 35,146
Amortization of bond premium 620 -
Non cash interest expense on convertible debt 3,436 3,643
Gain on early extinguishment of debt - (1,881)
Payments of accreted interest on repurchased
convertible debt - (2,957)
Deferred income taxes 9,773 (1,572)
Stock compensation 3,844 3,839
Losses on auction rate securities 978 5,187
Losses on other securities 328 -
Goodwill impairment - 3,832
Loss on equipment disposal 2,992 514
Change in operating assets and liabilities (net
of effect of businesses acquired):
Accounts receivable, net (219) 12,170
Other receivables (6,056) (5,973)
Inventories, net 4,810 2,513
Production tooling, net 1,896 2,587
Prepaid expenses and other assets (18,541) 3,731
Accounts payable and accrued expenses 1,789 3,946
Income taxes payable 1,193 (213)
Other long term liability 2,280 (7,357)
Employee benefits 1,588 2,103
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 76,135 67,773
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (44,220) (14,534)
Changes in restricted cash 3,130 (428)
Purchases of marketable securities (122,927) (179,194)
Proceeds from sales and maturities of marketable
securities 39,489 73,170
Cash paid for acquisitions - (9,654)
Proceeds from sale of equipment 969 72
----------- ----------
NET CASH (USED IN) INVESTING ACTIVITIES (123,559) (130,568)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock due to exercise
of options 362 33
Excess tax benefit due to exercise of stock
options (472) 149
Shares repurchased (19,766) (9,753)
Reduction on long term debt - (20,239)
----------- -----------
NET CASH (USED IN) FINANCING ACTIVITIES (19,876) (29,810)
----------- -----------
EFFECT OF EXCHANGE RATES ON CASH AND CASH
EQUIVALENTS (1,418) (523)
----------- -----------
(DECREASE) IN CASH AND CASH EQUIVALENTS (68,718) (93,128)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 122,154 215,282
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 53,436 $ 122,154
=========== ===========
CERADYNE, INC.
MARKET APPLICATION INFORMATION
(Amounts in thousands, except percentages)
We categorize our products into five 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 Twelve Months Ended
December 31, December 31,
------------------------ ------------------------
2010 2009 2010 2009
----------- ----------- ----------- -----------
Defense $ 19,151 $ 39,646 $ 117,316 $ 198,733
Industrial 36,901 29,628 138,630 102,689
Energy 33,223 18,379 99,900 62,200
Automotive/Diesel 8,754 7,203 35,900 25,151
Commercial 2,690 2,726 11,192 11,802
----------- ----------- ----------- -----------
Total $ 100,719 $ 97,582 $ 402,938 $ 400,575
=========== =========== =========== ===========
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------------ ------------------------
2010 2009 2010 2009
----------- ----------- ----------- -----------
Defense 19.0% 40.6% 29.1% 49.6%
Industrial 36.6 30.3 34.4 25.6
Energy 33.0 18.9 24.8 15.5
Automotive/Diesel 8.7 7.4 8.9 6.3
Commercial 2.7 2.8 2.8 3.0
----------- ----------- ----------- -----------
Total 100.0% 100.0% 100.0% 100.0%
=========== =========== =========== ===========
CERADYNE, INC.
NON-GAAP FINANCIAL INFORMATION
(Amounts in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------------- ------------------------
2010 2009 2010 2009
----------- ------------ ----------- -----------
(Unaudited) (Unaudited)
GAAP income from
operations $ 6,926 $ 8,553 $ 29,156 $ 7,730
1. Acquisition related
charge (credit) 1,655 27 1,567 (768)
2. Restructuring, plant
closure and severance 3,498 993 3,505 12,924
3. Goodwill impairment - - - 3,832
----------- ------------ ----------- -----------
Non-GAAP income from
operations before
acquisition,
restructuring and
goodwill impairment
charges $ 12,079 $ 9,573 $ 34,228 $ 23,718
=========== ============ =========== ===========
GAAP net income $ 13,186 $ 14,081 $ 29,276 $ 8,515
Reconciling items:
Gross profit
Accelerated
depreciation - 328 - 1,899
Special charges
1. Acquisition
related charge
(credit) 1,655 27 1,567 (768)
2. Restructuring,
plant closure and
severance 3,498 993 3,505 12,924
3. Goodwill
impairment - - - 3,832
4. Loss on auction
rate securities - 1,707 978 5,187
----------- ------------ ----------- -----------
Total special charges 5,153 3,055 6,050 23,074
----------- ------------ ----------- -----------
Provision for income
taxes:
Credit due
settlement of a
claim for
reapportionment of
state income taxes 8,286 - 8,286 -
Increase in federal
taxes due to credit
for reapportionment
of state income
taxes (2,900) - (2,900) -
----------- ------------ ----------- -----------
Net tax effect due
to reapportionment
of state income
taxes 5,386 - 5,386 -
Reversal of
liabilities for
uncertain tax
positions due to
settlement of IRS
audits - 3,823 - 3,823
Tax effect on other
non-GAAP
adjustments 2,033 1,243 2,387 9,649
----------- ------------ ----------- -----------
Total tax effect on non-
GAAP adjustments (A) 7,419 5,066 7,773 13,472
----------- ------------ ----------- -----------
Non-GAAP net income $ 10,920 $ 12,070 $ 27,553 $ 18,117
=========== ============ =========== ===========
Diluted non-GAAP income
per share $ 0.44 $ 0.47 $ 1.09 $ 0.70
Increase (decrease) due
to Non-GAAP adjustments 0.09 0.08 0.06 (0.37)
----------- ------------ ----------- -----------
Diluted GAAP income per
share $ 0.53 $ 0.55 $ 1.15 $ 0.33
=========== ============ =========== ===========
(A) The tax effect on pre-tax non-GAAP adjustments is calculated using the
relevant tax jurisdictions' statutory tax rates.
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