Ceradyne, Inc. (NASDAQ: CRDN) reported financial results for the
third quarter and nine months ended September 30, 2011.
Sales for the third quarter 2011 were $148.0 million, compared
with $91.8 million in the third quarter 2010. Net income for the
third quarter 2011 increased to $20.4 million, or $0.82 per fully
diluted share, compared to a net income of $4.5 million, or $0.18
per fully diluted share in the third quarter 2010. Fully diluted
average shares outstanding for the third quarter 2011 were
24,811,389 compared to 25,141,214 in the same period in 2010.
On July 26, 2011, Ceradyne reiterated its 2011 full-year
guidance of a range of $3.10 to $3.50 fully diluted earnings per
share and a range of $570 million to $600 million in sales.
Although we believe there will be a reduction in solar crucible
shipments in Q4, we anticipate this reduction will be offset with
increasing sales in other Ceradyne product lines. Ceradyne believes
it will meet its full-year 2011 guidance.
Gross profit margin was 36.3% of net sales in the third quarter
2011, compared to 25.7% in the same period in 2010. The provision
for income taxes was 34.6% in the third quarter 2011, compared to a
provision for income taxes of 10.2% in the same period in 2010.
At this time, Ceradyne anticipates some top-line growth in 2012
with continued softness in solar crucibles early in 2012, firming
as the year progresses. Due to a lack of visibility in certain
areas -- including the timing and probability of the Enhanced
Combat Helmet (ECH) award, volume and margins related to solar
crucibles, and other possible contracts -- that are expected to be
resolved within the next three or four months, Ceradyne will issue
full guidance for 2012 when it reports year-end results in
February. Among the areas expected to grow in 2012 are Ceradyne's
defense and industrial products lines. Although the following are
not expected to make a material contribution to 2012 financial
results, growth is also expected in recently introduced new
products, such as PetroCeram® oil and gas ceramic sand screens,
thrust bearings, and chemical and pharmaceutical micro reactors,
which have had significant technical and field successes at the
prototype level in 2011.
Sales for the nine months ended September 30, 2011 were $443.5
million, compared with $302.2 million in the same period last year.
Net income for the nine months ended September 30, 2011 was $63.1
million, or $2.52 per fully diluted share, on 25,029,282 shares,
compared to net income of $16.1 million, or $0.63 per fully diluted
share on 25,505,659 shares in the prior year period.
Gross profit margin was 37.2% of net sales in the nine months
ended September 30, 2011 compared to 24.8% in the same period in
2010. The provision for income taxes was 33.8% in the nine months
ended September 30, 2011, compared to a provision for income taxes
of 17.9% in the same period in 2010.
New orders for the three months ended September 30, 2011 were
$272.0 million, compared to $110.8 million for the same period last
year. For the nine months ended September 30, 2011, new orders were
$612.5 million, compared to $304.0 million for the comparable
period last year.
Total backlog as of September 30, 2011 was $354.9 million,
compared to total backlog at September 30, 2010 of $136.3
million.
Total cash, cash equivalents and short-term investments
increased to $259.0 million at September 30, 2011 compared to
$246.3 million at December 31, 2010.
Joel P. Moskowitz, Ceradyne president, chief executive officer
and chairman of the board, commented, "We are pleased with our Q3
financial performance, particularly our new orders and backlog. Our
diversification strategy is resulting in continued growth and a
'smoothing' of performance. Diversity of products, markets and
geography has resulted in our Company relying on not one but three
broad markets, namely defense, industrial and energy related
advanced technical ceramics as we implement our 5 year Ceradyne $1
Billion goal."
Mr. Moskowitz further stated, "The recently announced ESAPI
ceramic body armor order was an Indefinite Delivery, Indefinite
Quantity (ID/IQ) contract for one year, plus options for two
additional years. The first delivery order for $127 million will
primarily be shipped in 2012. We believe similar delivery orders
will be issued for shipment in 2013 and 2014.
"Our new products continue to demonstrate unusually superior
performance in the field. We have now completed over 1 1/2 years of
outstanding performance of our PetroCeram® ceramic sand screens in
the North Sea and our patented ceramic thrust bearings for oil
drilling have successfully completed tests, including horizontal
drilling, in hostile environments."
Mr. Moskowitz continued, "The development of new
state-of-the-art technical ceramic products will remain a high
Ceradyne priority with continued R&D support, particularly in
our R&D centers in Kempten, Germany and Costa Mesa,
California.
"In Q3, we purchased 742,934 shares of Ceradyne stock at an
average price per share of $29.46. This completed our initial $100
million stock buyback. On August 30, 2011, the Ceradyne Board
authorized an additional share purchase of $100 million."
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, 2011. To participate in the
teleconference, please call toll free 888-487-0336 (or 719-457-2081
for international callers) approximately 10 minutes prior to the
above start time and provide Passcode 7224733. 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 October
25th through 12:00 p.m. PDT on October 27th. The playback can be
accessed by calling 888-203-1112 (or 719-457-0820 for international
callers) and providing Passcode 7224733.
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 Nine Months Ended
September 30, September 30,
-------------------- --------------------
2011 2010 2011 2010
--------- --------- --------- ---------
(Unaudited) (Unaudited)
NET SALES $ 147,974 $ 91,766 $ 443,452 $ 302,219
COST OF GOODS SOLD 94,248 68,150 278,679 227,392
--------- --------- --------- ---------
Gross profit 53,726 23,616 164,773 74,827
OPERATING EXPENSES
Selling, general and
administrative 19,251 14,418 57,545 43,947
Acquisition related charge
(credit) 702 31 2,124 (88)
Research and development 2,974 2,613 9,255 8,731
Restructuring - plant closure
and severance - - - 7
--------- --------- --------- ---------
22,927 17,062 68,924 52,597
--------- --------- --------- ---------
INCOME FROM OPERATIONS 30,799 6,554 95,849 22,230
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income 1,069 935 2,744 2,562
Interest expense (1,721) (1,518) (4,838) (4,713)
Gain (loss) on auction rate
securities - - - (978)
Miscellaneous 1,081 (917) 1,671 493
--------- --------- --------- ---------
429 (1,500) (423) (2,636)
--------- --------- --------- ---------
INCOME BEFORE PROVISION FOR
INCOME TAXES 31,228 5,054 95,426 19,594
PROVISION FOR INCOME TAXES 10,819 517 32,291 3,504
--------- --------- --------- ---------
NET INCOME $ 20,409 $ 4,537 $ 63,135 $ 16,090
========= ========= ========= =========
BASIC INCOME PER SHARE $ 0.83 $ 0.18 $ 2.55 $ 0.64
========= ========= ========= =========
DILUTED INCOME PER SHARE $ 0.82 $ 0.18 $ 2.52 $ 0.63
========= ========= ========= =========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
BASIC 24,556 24,960 24,764 25,329
DILUTED 24,811 25,141 25,029 25,506
CERADYNE, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
September 30, December 31,
2011 2010
------------- -------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 31,541 $ 53,436
Short-term investments 227,477 192,860
Accounts receivable, net of allowances of
$2,408 and $685 at September 30, 2011 and
December 31, 2010, respectively 71,541 53,019
Other receivables 12,478 17,553
Inventories, net 110,473 94,258
Production tooling, net 22,486 10,037
Prepaid expenses and other 38,838 38,653
Deferred tax asset 8,636 6,808
------------- -------------
TOTAL CURRENT ASSETS 523,470 466,624
------------- -------------
PROPERTY, PLANT AND EQUIPMENT, net 246,826 243,681
LONG TERM INVESTMENTS 15,997 26,187
INTANGIBLE ASSETS, net 102,068 83,475
GOODWILL 51,019 43,219
OTHER ASSETS 2,118 2,127
------------- -------------
TOTAL ASSETS $ 941,498 $ 865,313
============= =============
CURRENT LIABILITIES
Accounts payable $ 30,281 $ 25,738
Accrued expenses 31,958 24,603
Income taxes payable 5,297 1,869
------------- -------------
TOTAL CURRENT LIABILITIES 67,536 52,210
LONG-TERM DEBT 88,341 85,599
EMPLOYEE BENEFITS 22,556 22,269
OTHER LONG TERM LIABILITY 57,589 41,902
DEFERRED TAX LIABILITY 11,164 11,124
------------- -------------
TOTAL LIABILITIES 247,186 213,104
------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 13)
SHAREHOLDERS' EQUITY
Common stock, $0.01 par value, 100,000,000
authorized, 24,163,124 and 24,713,126 shares
issued and outstanding at September 30, 2011
and December 31, 2010, respectively 242 247
Additional paid-in capital 122,120 141,973
Retained earnings 562,667 499,532
Accumulated other comprehensive income 9,283 10,457
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 694,312 652,209
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 941,498 $ 865,313
============= =============
CERADYNE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Nine Months Ended
September 30,
--------------------
2011 2010
--------- ---------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 63,135 $ 16,090
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 29,438 26,979
Amortization of bond premium 827 273
Non cash interest expense on convertible debt 2,742 2,550
Deferred income taxes 556 1,376
Stock compensation 3,150 2,994
Loss on marketable securities 87 978
Loss on equipment disposal 245 510
Change in operating assets and liabilities (net of
effect of businesses acquired):
Accounts receivable, net (15,813) 2,855
Other receivables 5,535 (5,534)
Inventories, net (13,329) 15,132
Production tooling, net (7,064) 506
Prepaid expenses and other assets (4,945) 483
Accounts payable and accrued expenses 11,043 2,480
Income taxes payable 3,532 (106)
Other long term liability 3,353 (1,063)
Employee benefits 633 386
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 83,125 66,889
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (23,833) (30,665)
Changes in restricted cash - 3,130
Purchases of marketable securities (78,607) (119,956)
Proceeds from sales and maturities of marketable
securities 47,757 4,489
Cash paid for acquisitions (27,673) -
Proceeds from sale of equipment 1,440 465
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES: (80,916) (142,537)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock due to exercise of
options 1,033 224
Excess tax benefit due to exercise of stock options 2,018 7
Shares repurchased (25,775) (14,837)
--------- ---------
NET CASH (USED) IN FINANCING ACTIVITIES (22,724) (14,606)
--------- ---------
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS (1,380) 268
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (21,895) (89,986)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 53,436 122,154
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 31,541 $ 32,168
========= =========
CERADYNE, INC.
SEGMENT FINANCIAL INFORMATION
(Amounts in thousands)
The financial information for all segments is presented below (in
thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2011 2010 2011 2010
--------- --------- --------- ---------
Revenue from External Customers
Advanced Ceramic Operations $ 74,041 $ 28,277 $ 217,308 $ 123,740
ESK Ceramics 39,904 32,134 125,907 94,843
Thermo Materials 24,229 26,458 84,635 69,818
Boron 13,356 9,194 32,716 23,153
Inter-segment elimination (3,556) (4,297) (17,114) (9,335)
--------- --------- --------- ---------
Total $ 147,974 $ 91,766 $ 443,452 $ 302,219
========= ========= ========= =========
Depreciation and Amortization
Advanced Ceramic Operations $ 2,364 $ 2,069 $ 7,749 $ 6,898
ESK Ceramics 3,249 3,158 9,665 9,417
Thermo Materials 2,078 1,522 5,853 4,559
Boron 2,071 1,991 6,171 6,105
--------- --------- --------- ---------
Total $ 9,762 $ 8,740 $ 29,438 $ 26,979
========= ========= ========= =========
Segment Income (Loss) from
Operations and Income Before
Provision for Income Taxes
Advanced Ceramic Operations $ 14,622 $ (9,311) $ 45,677 $ (10,241)
ESK Ceramics 6,973 6,351 23,979 13,704
Thermo Materials 5,966 8,938 22,886 21,925
Boron 2,106 1,040 2,832 (2,467)
Inter-segment elimination 1,132 (464) 475 (691)
--------- --------- --------- ---------
Income from Operations 30,799 6,554 95,849 22,230
Other Income (Expense) 429 (1,500) (423) (2,636)
--------- --------- --------- ---------
Income before Provision for
Income Taxes $ 31,228 $ 5,054 $ 95,426 $ 19,594
========= ========= ========= =========
Segment Assets
Advanced Ceramic Operations $ 462,544 $ 400,008 $ 462,544 $ 400,008
ESK Ceramics 178,058 185,682 178,058 185,682
Thermo Materials 173,245 135,995 173,245 135,995
Boron 127,651 128,130 127,651 128,130
--------- --------- --------- ---------
Total $ 941,498 $ 849,815 $ 941,498 $ 849,815
========= ========= ========= =========
Expenditures for Property, Plant
& Equipment
Advanced Ceramic Operations $ 1,495 $ 1,885 $ 4,971 $ 5,478
ESK Ceramics 1,722 429 3,704 1,416
Thermo Materials 1,687 8,708 11,353 21,374
Boron 1,831 330 3,805 2,397
--------- --------- --------- ---------
Total $ 6,735 $ 11,352 $ 23,833 $ 30,665
========= ========= ========= =========
CERADYNE, INC.
MARKET APPLICATION INFORMATION
(Dollar amounts in millions)
We categorize our products into five market applications. The
tables below show our sales by market application and the
percentage contribution to our total sales of each market
application in the different time periods.
Sales by Market Application (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2011 2010 Change 2011 2010 Change
-------- -------- ------- -------- -------- -------
Defense $ 59.1 $ 18.7 216.8% $ 179.9 $ 98.2 83.2%
Industrial 42.5 31.3 35.4% 126.8 96.8 30.9%
Energy 33.2 29.7 11.8% 98.2 71.6 37.3%
Automotive/Diesel 10.2 9.5 8.3% 30.2 27.1 11.3%
Commercial 3.0 2.6 13.6% 8.4 8.5 (1.4%)
-------- -------- ------- -------- -------- -------
Total $ 148.0 $ 91.8 61.3% $ 443.5 $ 302.2 46.7%
======== ======== ======= ======== ======== =======
Percentage Contribution:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2011 2010 2011 2010
--------- --------- --------- ---------
Defense 40.0% 20.4% 40.5% 32.5%
Industrial 28.7 34.2 28.6 32.0
Energy 22.4 32.3 22.2 23.7
Automotive/Diesel 6.9 10.3 6.8 9.0
Commercial 2.0 2.8 1.9 2.8
--------- --------- --------- ---------
Total 100.0% 100.0% 100.0% 100.0%
========= ========= ========= =========
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