Ceradyne, Inc. (NASDAQ: CRDN) reported financial results for the
first quarter ended March 31, 2011.
Sales for the first quarter 2011 were $150.1 million, compared
with $110.0 million in the first quarter 2010. Net income for the
first quarter 2011 increased to $23.6 million, or $0.94 per fully
diluted share, compared to $5.0 million, or $0.20 per fully diluted
share in the first quarter 2010. The net income for the first
quarter 2011 included an acquisition related charge of $0.6 million
or a reduction of approximately $0.01 to fully diluted earnings per
share. The net income for the first quarter 2010 included a pre-tax
charge for losses on auction rate securities of $1.9 million and an
acquisition related credit of $84,000 which, combined, resulted in
a reduction of approximately $0.04 to fully diluted earnings per
share. Fully diluted average shares outstanding for the first
quarter 2011 were 25,129,924 compared to 25,585,369 in the same
period in 2010.
Taking into consideration the strong financial results in the
first quarter of 2011 tempered by the continued uncertainty of body
armor shipments in the latter part of the second half of 2011, the
Company is increasing its 2011 full-year guidance to a range of
$3.10 to $3.50 fully diluted earnings per share and a range of $570
million to $600 million in sales. The prior 2011 guidance issued on
March 9, 2011 was $2.35 to $2.70 earnings per fully diluted share
and $505 million to $560 million in sales.
Gross profit margin was 38.7% of net sales in the first quarter
2011 compared to 23.1% in the same period in 2010. The provision
for income taxes was 32.3% in the first quarter 2011, compared to
23.5% in the first quarter 2010.
New orders for the first quarter 2011 were $231.7 million,
compared to $105.7 million for the same period last year. Total
order backlog as of March 31, 2011 was $267.4 million, compared to
$130.8 million at March 31, 2010.
Joel P. Moskowitz, Ceradyne president and chief executive
officer, commented: "We are extremely pleased with Ceradyne's first
quarter performance. Almost all areas reflected an excellent start
to 2011. New orders of $231.7 million and an order backlog of
$267.4 million indicate a strong 2011, as these numbers are double
the Q1 2010 results as well as reflect a positive book-to-bill
ratio of 1.54:1.00. Perhaps the most encouraging Q1 operating
result is the continuing increase in gross margins. These Q1
results and a cautiously optimistic outlook for the balance of 2011
are the basis for increasing our 2011 guidance."
Mr. Moskowitz further stated, "Our recently acquired VIOX
operation continued to exceed internal expectations and we have
committed to significantly increase its capacity in the field of
bio-active materials in anticipation of increasing demand for VIOX
materials as a component in consumer dental products.
"The new high purity fused silica ceramic solar crucible factory
in Tianjin, China, commenced initial shipments of its crucibles to
Ceradyne's key accounts for qualification in February and March.
All Ceradyne customers who received initial crucibles from the new
Tianjin factory have approved them for production quantities which
will begin shipping in Q2, 2011.
"While the projected Enhanced Combat Helmet (ECH) procurement
has been delayed, our outlook for the recently introduced
PetroCeram® ceramic sand screens has strengthened."
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 first
quarter ended March 31, 2011. To participate in the teleconference,
please call toll free 800-949-2163 (or 719-325-2250 for
international callers) approximately 10 minutes prior to the above
start time and provide Conference ID 7738791. 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 12:00 p.m. PDT on April 26
through 11 a.m. PDT on April 28, 2011. The playback can be accessed
by calling 888-203-1112 (or 719-457-0820 for international callers)
and providing Conference ID 7738791.
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.
CERADYNE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
Three Months Ended March 31,
----------------------------
2011 2010
------------- -------------
(Unaudited)
NET SALES $ 150,102 $ 110,038
COST OF GOODS SOLD 92,014 84,672
------------- -------------
Gross profit 58,088 25,366
OPERATING EXPENSES
Selling, general and administrative 18,836 13,904
Acquisition related charge (credit) 584 (88)
Research and development 3,067 2,944
------------- -------------
TOTAL OPERATING EXPENSES 22,487 16,760
------------- -------------
INCOME FROM OPERATIONS 35,601 8,606
------------- -------------
OTHER INCOME (EXPENSE):
Interest income 798 899
Interest expense (1,448) (1,586)
Loss on auction rate securities - (1,927)
Miscellaneous (87) 529
------------- -------------
(737) (2,085)
------------- -------------
INCOME BEFORE PROVISION FOR INCOME TAXES 34,864 6,521
PROVISION FOR INCOME TAXES 11,269 1,531
------------- -------------
NET INCOME $ 23,595 $ 4,990
============= =============
NET INCOME PER COMMON SHARE:
BASIC $ 0.95 $ 0.20
============= =============
DILUTED $ 0.94 $ 0.20
============= =============
SHARES USED IN COMPUTING PER COMMON SHARE
AMOUNTS:
BASIC 24,839 25,411
DILUTED 25,130 25,585
CERADYNE, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
March 31, December 31,
2011 2010
------------ ------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 49,085 $ 53,436
Short-term investments 191,855 192,860
Accounts receivable, net of allowances for
doubtful accounts of $1,060 and $685 at
March 31, 2011 and December 31, 2010,
respectively 73,099 53,019
Other receivables 20,829 17,553
Inventories 101,509 94,258
Production tooling, net 18,831 10,037
Prepaid expenses and other 33,565 38,653
Deferred tax asset 6,832 6,808
------------ ------------
TOTAL CURRENT ASSETS 495,605 466,624
PROPERTY, PLANT AND EQUIPMENT, net 251,879 243,681
LONG TERM INVESTMENTS 20,186 26,187
INTANGIBLE ASSETS, net 105,432 83,475
GOODWILL 50,781 43,219
OTHER ASSETS 2,647 2,127
------------ ------------
TOTAL ASSETS $ 926,530 $ 865,313
============ ============
CURRENT LIABILITIES
Accounts payable $ 27,536 $ 25,738
Accrued expenses 30,033 24,603
Income taxes payable 3,217 1,869
------------ ------------
TOTAL CURRENT LIABILITIES 60,786 52,210
LONG-TERM DEBT 86,489 85,599
EMPLOYEE BENEFITS 23,357 22,269
OTHER LONG TERM LIABILITIES 54,477 41,902
DEFERRED TAX LIABILITY 11,776 11,124
------------ ------------
TOTAL LIABILITIES 236,885 213,104
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 13)
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value, 100,000,000
authorized, 24,893,158 and 24,713,126
shares issued and outstanding at March 31,
2011 and December 31, 2010, respectively 250 247
Additional paid-in capital 144,755 141,973
Retained earnings 523,127 499,532
Accumulated other comprehensive income 21,513 10,457
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 689,645 652,209
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 926,530 $ 865,313
============ ============
CERADYNE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Three Months Ended
March 31,
--------------------
2011 2010
--------- ---------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 23,595 $ 4,990
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 9,749 9,178
Amortization of bond premium 375 -
Non cash interest expense on convertible debt 889 827
Deferred income taxes 382 174
Stock compensation 972 964
Loss on marketable securities 113 1,927
Loss on equipment disposal 49 4
Change in operating assets and liabilities (net
of effect of businesses acquired):
Accounts receivable, net (16,694) (7,035)
Other receivables (2,984) (8,863)
Inventories (2,502) 9,672
Production tooling, net (3,424) 1,498
Prepaid expenses and other assets 477 3,300
Accounts payable and accrued expenses 4,222 (134)
Income taxes payable 1,249 -
Other long term liability 1,086 (328)
Employee benefits 205 140
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITES 17,759 16,314
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (7,677) (6,851)
Changes in restricted cash - 3,130
Purchases of marketable securities (240) (344)
Proceeds from sales and maturities of marketable
securities 7,000 12
Proceeds from sale of equipment 1,339 284
Acquisition of business (27,673) -
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (27,251) (3,769)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock due to exercise of
options 897 24
Excess tax benefit due to exercise of stock
options 1,771 7
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,668 31
--------- ---------
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS 2,473 (963)
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,351) 11,613
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 53,436 122,154
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 49,085 $ 133,767
========= =========
CERADYNE, INC.
SEGMENT FINANCIAL INFORMATION
(Amounts in thousands)
The financial information for all segments is presented below
(in thousands):
Three Months Ended
March 31,
--------------------
2011 2010
--------- ---------
Revenue from External Customers
Advanced Ceramic Operations $ 76,630 $ 54,088
ESK Ceramics 40,123 31,748
Thermo Materials 31,111 19,847
Boron 7,940 6,519
Inter-segment elimination (5,702) (2,164)
--------- ---------
Total $ 150,102 $ 110,038
========= =========
Depreciation and Amortization
Advanced Ceramic Operations $ 2,871 $ 2,432
ESK Ceramics 3,139 3,303
Thermo Materials 1,686 1,345
Boron 2,053 2,098
--------- ---------
Total $ 9,749 $ 9,178
========= =========
Segment Income (Loss) from Operations and
Income before Provision for Income Taxes
Advanced Ceramic Operations $ 17,014 $ 2,823
ESK Ceramics 7,805 2,710
Thermo Materials 10,854 5,253
Boron - (2,157)
Inter-segment elimination (72) (23)
--------- ---------
Total segment income from operations $ 35,601 $ 8,606
Other expense (737) (2,085)
--------- ---------
Total Income before Provision for Income Taxes $ 34,864 $ 6,521
========= =========
Segment Assets
Advanced Ceramic Operations $ 453,886 $ 416,875
ESK Ceramics 185,070 192,166
Thermo Materials 161,065 107,995
Boron 126,509 128,223
--------- ---------
Total $ 926,530 $ 845,259
========= =========
Expenditures for Property, Plant & Equipment
Advanced Ceramic Operations $ 1,400 $ 1,500
ESK Ceramics 678 487
Thermo Materials 4,949 3,389
Boron 650 1,475
--------- ---------
Total $ 7,677 $ 6,851
========= =========
CERADYNE, INC.
OPERATING SEGMENT AND MARKET APPLICATION INFORMATION
(Amounts in thousands)
The tables below show, for each of our four operating segments, revenues
and operating income in the periods indicated.
Segment revenues (in millions):
Three Months Ended March 31,
-------------------------------
2011 2010 Change
--------- --------- ---------
Advanced Ceramic Operations $ 76.7 $ 54.1 41.7%
ESK Ceramics 40.1 31.7 26.4%
Thermo Materials 31.1 19.8 56.8%
Boron 7.9 6.5 21.8%
Inter-segment elimination (5.7) (2.1) 162.8%
--------- --------- ---------
Total $ 150.1 $ 110.0 36.4%
========= ========= =========
Segment operating income (loss) (in millions):
Three Months Ended March 31,
-------------------------------
2011 2010 Change
--------- --------- ---------
Advanced Ceramic Operations $ 17.0 $ 2.8 502.7%
ESK Ceramics 7.8 2.7 188.0%
Thermo Materials 10.9 5.3 106.6%
Boron - (2.2) n/m*
Inter-segment elimination (0.1) - n/m*
--------- --------- ---------
Total $ 35.6 $ 8.6 313.7%
========= ========= =========
* Not meaningful
We categorize our products into five market applications. The table below
shows our sales by market application and the percentage contribution to
our total sales of each market application in the different time periods.
Three Months Ended March 31,
-------------------------------------------
2011 2010
--------------------- ---------------------
Sales % Sales %
---------- --------- ---------- ---------
Defense $ 64.8 43.1 $ 45.7 41.5
Industrial 39.5 26.3 33.3 30.3
Energy 33.1 22.1 18.7 17.0
Automotive/Diesel 9.7 6.5 9.4 8.6
Commercial 3.0 2.0 2.9 2.6
---------- --------- ---------- ---------
Total $ 150.1 100.0 % $ 110.0 100.0 %
========== ========= ========== =========
CERADYNE, INC.
NON-GAAP FINANCIAL INFORMATION
(Amounts in thousands, except per share data)
Three Months Ended
March 31,
--------------------
2011 2010
--------- ---------
(Unaudited)
GAAP income from operations $ 35,601 $ 8,606
1. Acquisition related charge (credit) 584 (88)
--------- ---------
Non-GAAP income from operations before acquisition
charges $ 36,185 $ 8,518
========= =========
GAAP net income $ 23,595 $ 4,990
Reconciling items:
Special charges
1. Acquisition related charge (credit) 584 (88)
2. Loss on auction rate securities - 1,927
--------- ---------
Total special charges 584 1,839
--------- ---------
Total tax effect on non-GAAP adjustments (A) (231) (726)
--------- ---------
Non-GAAP net income $ 23,948 $ 6,103
========= =========
Diluted non-GAAP income per share $ .95 $ .24
Increase due to Non-GAAP adjustments $ .01 $ .04
--------- ---------
Diluted GAAP income per share $ .94 $ .20
========= =========
(A) The tax effect on pre-tax non-GAAP adjustments is calculated using
the relevant tax jurisdictions' statutory tax rates.
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